The Bismarck tribune., 1931-12-08

to Hoover, was elected to the speaker
ship Of the house. Garner is pic
tured above while Representative
Whatever the causes may be, the
vast liquidation and readjustment
which have taken place have left us
with a large degree of credit paraly-
sis, which, together with the situa-
ton in our railways and the condi-
tions abroad, are now the outStand-
ing obstacles to recuperation. II we
can put our financial resources to
work and can ameliorate the finan-
cial situation in the railways, I am
confident we can make large meas
ure of recovery independent OF the
rest of the world A strong America
is the highest contribution to4world
stability.
Hoarding Is Menace
One phase Of the credit situation
is indicated in the banks. During the
past year banks, representing three
per cent of our total deposits, have
been closed. A large part Of these
failures have been caused by with
drawals for boarding, as distinguished
from the failures early in the depreS-
sion where weakness due to misman-
agement was the larger cause of fall
ure. Despite their closing, many of
them will pay in full. Although such
Withdrawals have practically ceased,
yet 81, 100, 100000 of currency was
previously withdrawn which has still
to return to circulation. This repre-
sentS large reduction of the ability
Of our banks to extend credit which
would otherwise fertilize industry
and agriculture. Furthermore, many
OF our bankers, in order to prepare
themselves to meet possible with
drawals, have felt compelled to call
in loans, to refuse new credits. and
to realize upon securities. which in
turn has demoralized the markets.
The paralysis has been further aug
mented by the steady increase in re-
cent years of the proportion of bank
assets invested in long term securi-
ties, such as mortgages and bonds.
These securities tend to lose their
liquidity in depression or temporarily
to fall in value so that the ability Of
the banks to meet the shock of sud-
den withdrawal is greatly lessened
and the restriction of all credit is
thereby increased. The continuing
credit paralysis has operated to ac-
centuate the deflation and liquidation
Of commodities, real estate, and Sc
curities below any reasonable basis
OF value.
Tends to Stiflc Business
All Of this tends to stifle business,
especially the smaller units, and fl
nally expresses itself in further de-
preston of prices and values, in re-
striction on new enterprises, and in
increased unemployment.
The situation largely arises from
, an unjuStified lack of confidence. We
have enormous volumes of idle money
in the banks and in boarding. We
do not require more money or work
ing capital :. We need to put what
we have to work. The fundamental
difficulties which brought about fl
nancial strains in foreign countries
do not exist in the United States. No
external drain on our resources can
threaten our position, because the
balance Of international payments is
in our favor: we owe less to foreign
countries than they owe to us; our
industries are efficiently organized;
our currency and bank deposits are
protected by the greatest gold reserve
in history.
Reestablish Confidence
Our first step toward recovery Is
to reestablish confidence and thus
restore the flow Of credit which is the
very basis of our economic life. We
must put some steel beams in the
foundation of our credit structure II
Is our duty to apply the full strength
Of our government not only to the
immediate phases, but to provide Sc.
curity against shocks and the repeti.
ton Of the weaknesses which have
been proven.
The recommendations which I here
lay before the congress are designed
to meet these needs by strengthen.
ing financial, industrial, and agri
cultural life through the medium o
our existing institutions, and thu
avoid the entry of the govern
|ment into competition with private
business.
federal GOVERNMENT FINANCE
| The first requirement Of confidence
and Of economic recovery is financia
stability of the United States gov
ernment. shall deal with fisca
questions at greater length in tn
budget message. But I must at thi
time call attention to the magnitud
Of the deficits which have develope,
and the financial necessity for de
termined and courageous policie:
u These deficits arise in the main fror
the heavy decrease in tax receipt
due to the depression and to the in
J crease In expenditure on constructio
in aid to unemployment, aids to agri
culture, and upon services to veteran!
During the fiscal year endin