Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-11-17
NEW YORK SECURE
AS BANKING CENTER
international Bank Is Not
Expected to Affect U. S.
Financial Status.
BY JOHN r. SINCLAIR.


NEW YORK, November 16.-The
banking and financial center of tho
world will not move from New York,
either now or in the future, as o
direct result Of the organization Of the
new Bank of International Settlements.
Nor will the bank AFFECT In any i'm
portant way the course Of world trade
or commerce This much, at least, Is
evident now.
Much has been said and more has
been written about the position which
the United States Government has
taken in the matter. Some American
citizens believe the Government should
enter Fundamentally in building up
this new bank by having the Federal
Reserve officials act for the United
States. This was the plan In mind at
the beginning
Stimson's Challenge.
But Secretary of State Stimson chal-
lenged this position in most emphatic
language. After saying that the United
States had no interest in German repR-
rations, other than those small sums
which were received In settlement Of
claims judicially ascertained by the
Mixed Claims Commission Omitted
States and Germany, and for the ex-
pense Of the occupation army, which
both the allies and Germany asked for,
the Secretary Of state made this state
ment:
"The Government of the United
States will not permit any ofhcials Of
the Federal Reserve system, either
themselves to serve or select American
representatives as members OF the pro-
posed international bank"
The Government Of the United States,
therefore, is out of 1t. So is the power
full Federal Reserve system. This Is
hard blow for those who believe that
this new international bank Is neces-
sary for stabilizing reparations and
world credit conditions.
After all, for what is this new bank
created2
Its official spokesman have stated
that 1t was created primarily for. the
in transferring German annuities to the
countries receiving the same, and, Sec
ond, to allow the investment In German
reichSmarks, currently accruing, 10 the
account OF the allies deposited In the
bank.
Gist Of Agreement.
Putting 1t BADLY, Germany has
agreed to pay from 1000, OOO, 900 gold
marks to $500, 000,0 gold marks an
nually to the allies This was agreed
to under the Dawes plan. The director
general of reparations, . position now
flled by young American, 8. Parker
Gilbert, was then created as the col.
lection agency for the allies within
Germany.
The Young plan, which succeeded the
Dawes plan, was signed by Belgium,
France, Great Britain, italy. Japan and
Germany on June Z. This plan provided
for Bank Of International Settlement.
to take over the duties Of the repara-
rations commission. Naturally, the po-
Sition Of director general Is abolished.
Two questions arise in connection
with the bank and its possible effect on
the United States: First, will the bank
be able to help Germany pay any more
reparations than she could without it?
Second. will the bank take the world
leadership In financial matters from the
Federal Reserve system and the Bank
of England?
Answering the FIRST question, Ger.
many will be able to pay as much in
reparationS as her total trade balance
plus her outside borrowings come TO.
No more. No international bank can
affect the problem. The same rules for
settling international balances will con-
tinue as they did before this new bank
was created
Sound Settlement Needed.
Lewis @. McFadden, chairman Of the
House of Representatives banking and
currency committee, takes this position.
He says that the international bank is
an intellectual funk hole 10 employ
the words Of Q well informed British
economist, for the commission did not
want TO feel Immediately the high ex.
plosives sure to on when the real
problem of reparations is attacked"
Mr.. McFadden continues: Given q
sound reparations' settlement, IL should
be possible to carry 1t out without it,
no new bank will help either Germany
or her creditors"
But the international bank will soon
De set up In the beautiful City of Basel,
switzerland. 1t will have a capital OF
lOO,O00,O 900, governors, comprising the
governors of the six central banks of
Great Britain, Belgium, France, Ger
many, Italy and Japan. In addition 10
Will have two governors chosen hy the
nxed governors from the United States.
ana six more governors, each selected bv
one OF the big six from his country. as
a representative Of local business and
industries
Nine other governors from other eoun-
tries In the world can be added bv the
directors. The chairman Of the board.
the most powerful figure in the orran-
izatlon, Is to be elected by the governors
lor term OF years and 1t is expected
mat an American, probably Melvin A.
Irayior. now president of the First Ma
'ional Bank of Chicago, may be chosen.
Important Point Settled.
Already one ticklish point has h..r
disposed Of. The new bank has aaresd
lot to issue notes or create credit And
nat IL shall merely act TO receive.
mobilize, transfer and distribute renara
ions. Aep~A@-
So IL will be q clearing house far
'eparation payments. not an interna-
,ional bank Of issue. and not q compete
world "a N'As
But to return to the first suass,or.
nation-and this applies 10 Germany
n this Situation-can pay to the out
'ide world only as much as her surplus
eltng exceeds her buying.
temporarily, she can borrow, IL abe
buys more than she sells, But over q
ong period, no nation can 70 on huy-
ng more goods from the world than
he sells to the world. This problem
Germany Is facing now. II her total
he year amounted, let us say, 70 81 900.
100, 900, and her imports amounted, let
is say, to $1,000, 0O0, 900, GERMANY
ions.
Then she could pay her reparatfonS
md keep from defaulting only by bor-
owing from other nations an amount
quail to what she owes for the wear.
BY way OF passing, II should be noted
hat In no year since the close of the
var has Germany's exports even eaualed
Ter imports.
Carries On by Borrowing.
She has carried on only by borrow
ag. But this condition cannot 90 ON
brewer. When bankers refuse to loan
1ore money then her problem becomes
cute. The international pank cannot
1AAt this NPOhiaVSN Ia $50, ,,,@,, 49,