Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-19
Prices Of Securities Appar-
emily Determined by Ger.
man Credit Crisis.
DELAYS IN SETTLEMENT
CAUSE UNEASY MARKETS
Prospect Of Action Lessons Pres
sure to Sell, but Traders Are
CautiousA
By CHARLES r. SPEARE.


cial crisis in Germany and its roper.
cussion throughout Europe have occu-
pied the attention of American bankers
and business men this week. Naturally
the European situation has been the
chief factor in directing the prices o.
securities. At the same time 1t has
had blighting effect on trade, undolne
a part Of the good that had been &C
complished through the acceptance Of
the Hoover "debt holiday"
Stocks at one time this week nae
lost about half of the gain that mao
taken place between June and June
~. Material concessions occurred III
in second grade bonds whose rally hao
been sympathetic with common stocks
The storm center, however, was IN Ger
man dollar issues, which came down
in price and went up in yield after
the manner Of the obligations OF the
South American Republics when they
were in throes of revolution or anticl-
pating default. The $3.50, 900 900 OF
German Government, municipal and
corporation bonds outstanding IN Amer
lean currency were at one time at
discount Of about 40 per cent from
par, representing shrinkage Of $40,
DOC, 900.
Credit Crisis In Reich.
The delay in bringing the debt
agreement to q head obviously added
to the credit crisis in Germany. France
played her usual game of politics
while the fear that she might not In
the end make the necessary concessions
caused foreign lenders to withdraw
their funds from Germany and ma
tionals to send their money out Of the
country or exchange it for dollars. Not
even after the failure Of the third
largest German bank, with its re-
yerberations all over the continent
were the French people willing to admit
that Germany was facing conditions
that might pull down the entire bank
ing system. Whatever progress had
been made in creating a more cordial
relationship between the two political
rivals on the continent was lost in the
episodes Of the last few weeks.
Toward the end Of the week. with
Germany displaying a great determine
ton to pull herself out Of the crisis
and France exhibiting q more tolerant
attitude in the face OF the financial crt-
sis threatening some Of her allies, both
stocks and bonds displayed a stronger
tone. The market remained quiet,
however, pending the negotiation in
Paris and London. 1t was still consid-
cred possible that Frances demands
might be unacceptable to Germany.
Stocks recovered about S points. on
the average, which meant that about
one-third OF the loss from the June high
level had been retraced. German dol
lar bonds recovered sharply in thin
trading, and ended the week with about
a quarter Of their heavy losses recovered.
German Banking Faults
Not all of the troubles Of the German
banks have been due to recent events.
They are Of longer standing. They arise
from a basic weakness in the German
banking system and, for that matter, In
the policy that controls most continent
tai institutions. The seriousness OF tne
Creditanstalt affair In Vienna was that
1t involved nearly two-thirds OF the IN
dustries Of Austria. The president OF
the closed Darmstaedter Bank in Berlin
was a member Of the executive board OF
90 German industrial companies.
German banks and German industries
are overlapping in th:ir interests. Inc
banks carry large percentages OF the
securities Of these industries in their
portfolios and dominate their analrs.
In good times the profits from Sucn con-
nections are enormous; in bad times the
strain Of loans and depreciating securl-
ties Is great. For the past six months
the extreme degree Of liquidity OF Amer
lean banks has contraSted with the
illiquidity Of the German institutions,
whose position has been growing more
serious as foreign capital, drawn TO Ger
many by q high rate on loans Wnen
funds commanded less than an earning
wage elsewhere, began to be Withdrawn.
This phase Of the German SITUATION
may account for the lack OF sympathy
and cooperation that characterized the
negotiations early this week when Ger
many was endeavoring to obtain long
term credits. Bankers here, as well as
Government officials, have taken the
position that, having been renewed OF
her political debts for year, II was
GermanyiS business to put her mouse IN
order by her own efforts. Not only Is
she suffering from her faulty banking
system, but from the extravaganceS
that took place during the years when
American money was easy TO OBTAIN.
Some Of the bankers who are now
standing or and watching Germany
struggle ought not to forget how they
encouraged her to borrow In the period
between 1924 and 1928. Those VINO
bought the bonds which they ols-
tributed in those happy times remem,
Der how the underwriters aoanooneo
them when they needed support
Il6S USCiA AAS
banking crisis as grave as tne preSsMII
one since the barring failure IN the cary
nineties. This year has Deen conSpncu,
Gus for the development OF. nnancial
difficulties in many parts OF tne WorIo'
France had her share OF them cary.
Even before that there had been creolt
troubles in South America. Tnen came
the closing Of the largest savings nank
in Australia, followed by the Crisis IN
Vienna. which uncovered or aggravated
weak banking situations IN Holland:
Rumania and Hungary. AS seque1 OF
the change Of government In SPAN mas
come SERIOUS failures Of long chartered
banks in that country. Switzerland, to
which flows most Of the expatr1ated
funds Of Europe, has also felt the
strain The gravity Of the German
sit,,afion has been that any further
weakeninp az the banking position there
rni0ht lead 70 q loss of faith among Eu-
Korean bank depcsitors In the institu-
tions Of their own countries.
It "A indicative Of the present tension
q, Gerrnanv that banks. that went
throS,oh the 1924 crisis solvent
shos,Id now be compelled to close; also
that there should have been such TAR
reachinS effects Of this in bank nol-
riavs,, o,itside Of Germany, q measure
~ nrecalItion that was not employed
tc sch an extent In the earlier situation.
WreH a. takinR place this month In
Wsy~anv corresponds to the troubles
fhrn,,sh whinh France was passing In
T,iv ie2S. Then French government
CONTINUED On hird Pagel