FINANCIAL PURGE

Poverty Bay Herald, Volume LX, Issue 18068, 20 April 1933, Page 10

FINANCIAL PURGE

U.S. STAGGERED BANK EXPOSURES NEW YORlv, March J. A great drive for the purging from her hanking system of unsound practices is about to take place in the United. States. The recent revelations resulting from the cross-examination of Mr. C. E. Mitchell, who a few days ago resigned from the chairmanship of the National City Hank, have staggered the country. Wall Street takes the view that, the resignation of Mr. Mitchell ami tho exposure of unsound practices have been fat more important factors making for a worsening of the banking situation in the/past few days than tho events in Michigan and other States which have had to declare nioratotia. The truth of the. last days of Mr. Mitchell’s chairmanship is now revealed. CREATED NEW SYSTEM After his admission before the Senatorial Banking Committee that he had sold short of National City stock, and adopted, other practices in order to avoid payment of income tax, Mr. Mitchell’s position was discussed by tho new Secretary of the United States Treasury and Air. Roosevelt at a week-end meeting. Air. Roosevelt expressed the belief that it would be best for Air. Mitchell to resign, and his resignation was actually written on Sunday evening while he was on route for Washington to givq .further evidence before, the committee.

The resignation of Mr. Mitchell ends a regime which mixed up the selling of securities with normal banking operations. He opened retail stores throughout America for the sale of securities.

This step added over 200,000 new investors to the books of the National City Company, which was the security flotation concern affiliated with the bank.

Bond salesmen toured the country, and the time arrived when securities were created for them to sell, so great was the. public appetite in times of rising markets. £5,000,000 OFFER When the crash came in AD. A fit oh dl came out with the assurances that the depression would be shortlived, and made an tfff’er of £5,000,000 to distressed borrowers at HI per cent Interest.

In October 1920 lie said: “I see no reason for the ond-of-the-ycar slump which some people are predicting, and markets are in a sound and healthv condition.”

At the recent inquiry it was stated that over £500,000 of the bank’s money had been advanced to officials of the bank to help them in their speculations when the crisis came. These advances had been made free of interest and in many cases without security, and only 5 per cent, of tho loans had been repaid.

Mr. Aiitehcll admitted that over a period of three years he had a .sum of £700,000 as bonuses on security flotations and banking. The magnitude of the activities of tho National City Company can be gauged by the fact that in a period of .10 years it, issued securities to the total value of £4,000,000,000.