Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-08-26
MELLON TAKES Up
FINANCE PROBLEMS
High Money and Future Gov
eminent Interests Probable
Topic of Conference.
BY DAVID LAWRENCE.

Secretary Mellon has conferred with
! Gov. Young of the Federal Reserve
Board and taken up the thread of
events since his departure from Europe
and while no linking has been given OF
| their conversations the assumption is
general that the high money rates and
| the future of government financing has
/ been discussed.
The Treasury view is that while q
widespread impression exists that the
/ Federal Reserve Board Is primarily re-
, SponSible for the present high rate OF
money the law Of supply and demand
would have forced the same result
even if there had been no Federal Re-
serve policy of urging the restriction
of broker loans.
Withdrawals by France Cited.
The viewpoint also is that relatively
! high money rates will prevail until the
! end Of this year at least and that
Withdrawals Of large French balances,
estimated to have been in the neigh
| borhood of billion dollars has had as
! much an effect on the money market as
/ any other single factor. In other
! words. the easy money conditions which
! led to so much financing and borrowing
! was paradise whose true foundation
was not at the time suspected.
/ The French did not establish credit
on this side with the Federal Reserve
] banks as did Great Britain. nor was
any credit sought from q private bank
ing house as in the case of Italy. but
nevertheless the same effect was pro-
duced by building UP balances while
the franc was being stabilized.
View of French Finance Minister.
Incidentally the remarks of Finance
Minister Caillaux on his visit to America
in connection with the debt settlement
now are recalled He did not think
France would be able to provide the
foreign exchange to accomplish trans
fer Of $4,000 900 year, which was the
annuity for five years suggested in the
Mellon Berenger agreement but France
has had an abundance OF exchange
ever since.
It is believed here that France is get
ting ready 10 make q substantial pay
ment on the S400. 000,o 900 debt on war
supplies and might even paw the whole
sum. feeling that this would separate
the war stock Indebtedness from the
general war debt and allow the Mellon
Berenger agreement to drift on without
action or at least compel negotiations
for a more favorable agreement.
Treasury Plans New Financing.
Meanwhile the Treasury here is plan
ming new financing to take care of
about one billion dollars of third Liberty
loan bonds, which come due on Sep
ten1ber 15 Inasmuch as this is tax
paying date. the Government can ex-
pect about S400 00o. 000 and there is
about S250.000 900 In the general fund,
The expectation is that an issue Of
about a half billion dollars will be
forthcoming and that it will be short
term certificate. probably nine months.
All sorts of rumors are in circula-
ton as 10 what the interest rate would
be- but Ii would not be bit surprising
20 find the Treasury sticking TO 33s
per cent rate. or possibly trffie higher
Notwithstanding the high money rates
prevailing
Reasons Given for Rate Fixing.
This is because of a feeling that
while there may not be lots OF funds
available for commercial and specula-
tive purposes there always Is plenty OF
money with which to buy the easily
negotiable and easily sold Government
certificates.
In spite of the optimism about the
forthcoming issue of Government Ger
tificates, the impression at the Treasury
is that high money for other purposes
will continue for some time. but that
the peak in money rates has been
reached and future fluctuations Of a
major character are apt to be down.
ward instead of upward, with an easy
money condition again after the first
/ Of the year.
fCopyright, 1921