Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-06-27
NAY USE BANKS GOLD.
Caillaux Triunphs In Battle Over
Financial Policy.
Ry GERVILLE REACH.

BY Radio to The star.
PARIS, June 26.-The cabinet crisis
lust resolved by the formation or a
Rria nd.Caillaux ministry, was caused
hv the refusal of the Bank of
France-despite it's previous prom
ises-to permit use of the S100.O00,eoo
Morgan loan for supporting the franc
Rao11l Peret. the former finance min
lister. found himself in a blind alley
as a result, and resigned, dragging
the whole cabinet down.
During the crisis. the Bank or
France pushed forward men on Wnom
II could count - first, Raymond
Poincare, friend of Gov. Robineau;
next, Edouard Herriot, whose hands
were tied by his bad balance sheets
for 1926, and finally Paul Doumer'
who promised to eliminate the eA
perts' commission.
But the Bank of France lost the
battle. None of it's men could ge: the
finance portfolio, and Premier BRAND
finally choose it's worst enemies, Jo-
seph CaillauX. NJ Pietri and NJ. No
caro-. all favoring free exchange Oh
national notes against bank notes ana
stabilizing the franc by using metallic
reserve if necessary.
State Has Appointments.
The governor of the Bank of
France and his assistants are appoint
ed by the state. If the directorate,
which is elected by 200 of the biggest
stockholders, should resign in protest
against dismissal of the present man
agement. the state would designate
provisional successors
Americans may be startled by such
apparent restrictions of the banks in
dependence, but actually 1t will re-
main neither more nor less indie
pendent than before.
Concerning gold reserves, 1t is
worth while to mention how these
were acquired.
During the war, since forced circu-
lation was decreed on August 5. 1914.
F'renchmen were called upon patriot
ically to exchange their gold against
bank notes. A total of S5OO,0O0,C0O
In gold was thus accumulated, and
was used to support the exchange
market Indeed, nearly all this gold,
which private citizens brought volun-
tarily to the bank. was sent to Eng
land as pledges for loans.
Banks Claim on Gold.
The banks claim on this gold, there
fore is small and indeed the bank
only asks that 1t be repaid by the
state in bank notes at nominal val
ue. while the state would reaD the
benefit of the difference between the
nominal and the exchange value.
AS for the $500, 000, 900 in gold and
silver remaining in Paris this was
amassed through the bank note-ts-
suing privilege, accorded by the state.
Is the state, therefore, warranted
in demanding that it be used to de-
fend the franc? That is the question
which now arises.
Chancellor of the British Excheq-
uer Winston Churchill recently said
to NJ. Peret: France is the only coun-
try in the world which does not use
its gold reserves"
And, indeed, what is the use OF
France having reserves more than
sufficient to guarantee the franc at
it's present value-a considerably
larger ratio than the Bank of Eng
lands reserves-if 1t does not use
them? Is it not the secret wish of
the Bank OF France that the state
reimburse it for advances by almost
any means, and leave it with its re-
serves intact to become the mistress
Of Frances finances? 1t looks SO,
judging from the banks policy since
the war.
Must Aid Sterilization.
In any case. the bank-with new
nlanagers-will be summoned to con-
tribute to the sterilization of the
franc by discount measures appropri-
ate to check the exodus of capital and
to facilitate capitals repatriation.
The experts commission as we'll as
the government will take that posi-
ton.
It remains to be determined whether
such sterilization shall be effected by
Frances own resources alone, or
whether to fall back on foreign cred
its, as the experts probably will rec
ommend. This decision cannot be
reached until the. government-takeSra