Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-21
RENEWED CREDITS
CRUX OF i. S. PLAN
German Aid Program Put Up
to Nations With Main
Bank Centers.
Continued From First Page

Continued From First Page)
| Concretely the proposal of the Amer
lean Government suggests the appoint
ment OF a committee by the Bank Of
International Settlements, or by some
other appropriate agency, to secure CO.
operation on the following questions:
In consultation with the banking in
terests in the different countries to pro-
vide for the renewal of the presnt vol
ume OF outstanding short-term credits
from those countries.
In making an inquiry into the i'm
mediate further credit needs of Ger
many.
In the development during the course
| OF the next six or eight months OF
plans for a conversion of some proper
ton Of the tshort-term credits into long
term credits.
Two Sides to Problem.
The American Government recog-
nizeS in its proposal two sides to the
problem in Europe and the rest of the
world, one political and the other eco
nomic. Reference in the proposal to
the political side is brief, but important
It says:
"On the political side, the United
States hopes that, through mutual good
will and understanding, the European
nations may eliminate all friction. so
that the world may rely on the political
stability Of Europe"
AS for the economic side, this Gov
eminent declares The present emer-
gency Is strictly short time credit
crisis" 1t points out that fundamental
pressure upon German economy has
been relieved by the joint action Of the
Nation, under the Hoover plan, in
suspending all payments upon govern
mental debts for the period of one year.
Germany, however, has financed her
economic activities to a very great ex
tent by short term foreign credits. This
Government takes the position that
there is no reason to doubt the sound
ness OF the basis upon which these
credits rest. but adds that the general
uncertainty which has prevailed for
| the last few weeks has resulted in
loss of confidence Subjecting the Ger
man banking and credit structure to
a very severe strain.
This strain took two distinct forms,
both of which resulted in a drain on
banking resources and a depletion Of
German gold and foreign exchange
holdings. The first form was a flight
from the mark within Germany. The
second form was a withdrawal OF for
eign deposits and a curtailment on the
part of foreign banks Of outstanding
lines of credit. This Government de-
clares:
Fundamentally there is nothing to
justify these movements, and, If.
through cooperative action. they can
be arrested, there is no reason why the
present emergency cannot be imme-
diately and definitely surmounted."
Credits Total $1,000, 900, 900.
This Government expresses confidence
that il the proposed program is followed
effectively, it would result in a restora-
ton of confidence and in a short time
avoid the necessity for restriction and
normal conditions would once more
prevail.
Acting Secretary of State Castle,
when he announced the proposal of
the American Government, pointed out
that already Germany has been greatly
assisted by relief from the payment Of
reparationS for one year amounting to
about $400, 900 under the intergov-
ernmental debt suspension plan. He
pointed out also that Germany's trade
balances are favorable and on the in
crease. He said German authorities
have already taken steps to protect
the mark and to regulariZe the internal
banking situation.
Mr.. Castle declared the next step was
to stabilize and assure the continue nee
Of the volume of Short-term credits,
now held by foreign bankers and insti-
tutions The total amount of these
short-term credits is estimated to be
$1,000, 000.0 900.
These short-term credits are lazy
in ordinary foreign trade bills. 1ney
are offset by German deposits and
credits.
The acting Secretary Of State said
the Presidents new proposal is that the
bankers and institutions in all coun-
tries should, in the aggregate that al
ready prevails in each country. main
tain the present volumes of credit to
Germany. The proposal also involves a
strict enforcement by the German gov
eminent through the ReichSbank and
complete control Of all foreign exchange
so that there will be no arbitrary action
favoring any bank or group Of banks,
thus protecting all of the country.
Plan Not for Moratorium.
Mr.. Castle expressed a.e opinion that
a system Of cooperation Of this kind
will put an end to the drain on Ger
many from abroad, and by restoring
confidence make 1t possible for Ger
many to secure additional credits as she
may require jim the normal course OF
business.
It was pointed out by the Acting Sec
rotary of State that President Hoover's
new proposal is not for moratorium,
but merely for the maintenance OF the
| large volume of credits to Germany
which already exists. If the program is
carried out in the opinion Of Mr.. Castle,
1t will permit the world to return to
normal conduct of business through as
surfing stability of the German credit
| structure.
Mr.. Castle looked upon this as a
necessary first step to give time for the
development of any plans for long-term
loans which may be submitted for
short-term credits. He expressed the
opinion that the interest France has
taken in the provision of such long
term loan Is good evidence OF Frances
desire for a cooperative solution of
the present situation.
Received in Friendly Spirit.
The proposal of President Hoover, it
was said here this afternoon, had been
received by the representatives Of the
other powers meeting in London in
very friendly spirit.
| Some of the suggestions contained in
| the proposal had already been preached
to the French and Germans by Secre-
tary Stimson while he was in Paris.
| Oficially the United States Govern
ment has no control. other than super
visory. over American banking insti-
tutions. It would not be in a position
/ to order these institutions to maintain
the German credits. it was explained.
But undoubtedly officials of the Gov
eminent would be in position to use
their friendly offices with American
banking institutions to encourage the
maintenance of these credits II the pro-
gram is generally adopted. 1t was said.
The effort is to prevent Germany
from being submerged financially and