Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-12

ana the nnal reception OF fu:idS.
Two, that it has been found advis-
able to carry stage further the proc
ess begun by the Dawes plan of re-
moving the problem from the political
sphere "and an institution is therefore
necessary which justifies and makes
logical the liquidation Of all political
controls and substitutes for the ma
chinery essentially commercial and
financial in character which carries
with 1t all the support and at the same
time all the responsibilities that the
economy of engagements imply"
Three, that such an institution Gre
ated to carry on essential functions
out Of those previously performed by
political or semi-political agencies
Should be used as an organization for
dealing with the whole work of ex-
ternal administration. including the re-
ceipt and distribution of payments.
conmercialization of the annuities and
the exercise of such functions as will
on the one hand aid Germany to pro-
tect her exchange"
Beyond Political Influences.
Four, that, as it has been stated, an
organization such as the International
Bank must be aSsimilated to ordinary
commercial and financial practice, lit
Is therefore to be so organized as to
be outside the sphere of political inf1u-
enceS and have powers and facilities
sufficiently broad to enable it to deal
freely and promptly with problems in
volved in the settlement of Germany's
financial obligations
Five, that Germany'S economic life
may be expected to be subject to GER
tain fluctuations. Therefore the fixa-
ton of her obligations on the aSsump-
ton that the point OF minimum ca
pacity of each change is constant
governing factor Is quite as derogatory
to an acceptable settlement as the OPP
posite assumption that point of maxi
mum efficiency can always be main
tanned. Therefore the International
Bank should be equipped with ma
chinery containing an elastic element
between the payments to be made by
Germany and their distribution for the
purpose Of giving the creditors the
additional assurances that the effects
of such changes will be minimized as
far as possible In the flow of payments.
Six, that It is quite natural that the
International Bank should have powers
wide enough to allow its activities Ito
extend beyond the field Of Germany's
obligations and to provide facilities for
international settlements in general"
Two Main Sets of Functions.
Seven, that as result the bank will
have two main sets of functions: (a) Its
essential or obligatory functions and
(b) its secondary or permiSSive func-
tons. These permiSsive functions are
to be regulated according to the ex-
tent they may strengthen and make
easier the banks essential functions
and to the extent that experience
demonstrates the corporation as q whole
may benefit therefrom.
The essential and permisSive func-
tons Of the bank are defined thuSly:
The banks essential functions "are
those which are inherent in the re-
ceipt, management and distribution of
annuities." 1t Is pointed out that the
character Of the annuities and the mag
n1tude OF the payments to be trans
ferred make it desirable to supple
n1ent with additional facilities the ex-
iSting machinery for carrying on inter-
national settlements and for support
ing through credits the development of
international trade" This and the fol-
lowing paragraph are of distinct i'm
portance.
I'm addition the institution may in
the course Of its development meet more
general needs, such for example as
Offering an agency for international
settlements; and within the limitations
or sound use of its credit it may con-
tribute to the stability of international
nnance and the growth of world trade.
Wnne there Is no hard and fast line
between essential and auxiliary func-
tons and the two will often be linked
together it may be convenient at this
stage to adopt this distinction in what
follows and refer unequivocally to the
institution as the bank"
Matters to Be Handled.
Part two Of the bank plan as now
drawn deals with "a preliminary sur
vey OF matters to be dealt with by the
bank," giving an outline of the mat
tiers to be handled, as follows:
!: 1t Is stated that Germany's obi
. cations as contemplated in the Young
plan faH into two general cIaSsifica-
tons: (A) The part payable in cash
which is transferable Internationally.
and CD The part payable in cash the
transfer OF which is conditional. These
oongatlons are thereafter referred to in
the report as class l and class 2. A
third category may later be envisaged.
relative to obligations held by the bank
whose proceeds in marks are not inme-
diately transferable into foreign cur
rencieS. The only distinction between
the obligations of class l and those of
class is that the service of the obli-
cations Of class 2 may be postponed on
certain conditions for a limited period
! In Reichmarks, instead of foreign ex-
: change"
2. For the transitory period and for
decreasing amounts the creditor ma
. tons will undertake to apply certain
amounts to the payment of deliveries
in kind.
3. 1t is pointed out that the bank in
certain circumstances may possess GER
tain funds belonging to the creditor
governments. 1T will be necessary to
make use OF these dormant funds for
tne dement, OF the creditors, while af-
1ording protection to the German ex-
change. The facilities offered by the
bank may be utilized within discretion
airy limits to accomplish this double
purpose. Operating in agreement with
the Relchsbank it will have a certain
power TO invest these funds.
Empowered to Issue Securities.
Against these investments held by
the institution as trustee, the institu-
ton will have the power to issue in
foreign markets securities of specified
type in substantially equivalent amounts
and Of maturities suitable to its pur-
pose. From the proceeds of such OF
these obligations as existing conditions
and correct financial practice permit
to be sold, funds will beconle available
for distributing toward maintenance Of
the schedule of the flow Of payments
even of that portion represented in the
service of class obligations
4. 1t is evident that the bank, IL il
is TO be an elastic link in the chain OF
payments and receipts, will require CAPT.
tai funds and the power to give anC
obtain credits. THE funds of the bank
will be derived from Germany in one
form or another from the sale OF some
portion of its capital stock, from the
sale of bills drawn in eurrencies Other
than Reichmarks. and partly secured