Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-16
DEBT AGREEMENT
|. grasses u. S. BANKS
German and Hungarian
Credits Extended Through
Series of Conferences.
BY CARLTON A. SHIVELY.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, August disagreement
was reached this week at series of
banking conferences on details Of the
plan for extending the maturity of
eating $500, 100000. Local bankers as
a result are feeling more comfortable
on the foreign outlook and their posi-
ton in foreign investments. The fact
that several senior officers of the city's
most important banks found 1t neceS-
sary to spend so much time in the
past fortnight at the Federal Reserve
Bank, where the conferences were held.
emphasizes the problems which had to
be solved.
Most of the foreign banking groups
have now agreed to the general princi-
Piles of the plan for dealing with Ger
man credits as drawn up by John
Cannon, London vice president of the
Chase National Bank, and F. G.
TiarkS of the j. Henry Schroeder
banking house of London. This plan
was submitted to Hans Luther, presi-
dent of the Reichsbank, and trans
mitted, as amended by German bank
ers, to the American banking group.
1t was found to be an acceptable basis
for congealing German credits for six
months, while maintaining without in
terruption current business Of financing
German business.
Federal Reserve Role.
The Federal Reserve Bank has care
fully refrained from doing more than
to offer it's facilities for the use Of
commercial member banks in settling
the problem of frozen loans. However,
1t has boldly participated in credits to
foreign central banks. 1t joined in an
Austrian National Bank credit, IN
another to the German Central Bank
and in a third to the Bank Of England.
Doubtless 1t viii help in others II
necessary. These credits amount to
$125. 00o, 900 for Bank of England, $685.
600, 900 for the Reichsbank and prob
ably $5, oo0. 900 for Austria. All, it is
understood, have been used in part and
the German credit quite extensively.
Foreign credits extended by CONNER
cial banks, based upon merchandise
transactions or outright Short-term aq-
vances, differ from central bank credits
When a central bank needs credit, 1t Is
because its gold and other liquid re-
serves have been drawn down by tempo
rary influences at rate faster tnan lLS
less liquid assets can be mobihzeo
Sometimes it is not desirable for such
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There might be, as there was IN the
case of Germany, transfer difficulties FOL
which the central bank needed foreign
credits.
The Austrian credit furnishes a good
example. The troubles of the Kredit
Anstalt. largest Austrian commercial
bank, became acute very suddenly. It's
losses, due to bad loans and deprecia-
ton in investments. were found 70 be
over S2O, 000, 900. The goVernmentAde -
cided to save the bank, but needed VINE
to sell long dated treasury bills. The
immediate need for cash was met by the
Austrian National Bank, and 1t was the
latter which in turn had to be strength
ened by rediscounting its prime bills
with other central banks.
Good But Slow.
The transfer problem bulks much
larger than does the character Of the
credits. Bankers regard all credits now
under discussion as good, but slow. They
are slow chiefly because when an inter-
national bank run" develops. the liquid
reserves Of gold and foreign exchange
held by both central and private banks
are quickly exhausted. Then pops up
the transfer problem. for the stability
Of a country's currency is at once
threatened. A German Moratorium was
necessary to s6ve the reichsnhaEk from
going the WY Of the old paper mark
Long continued adverse tides IA a
country's fcfeign trade also bring 10
the transfer problem. To prote0tuthe
peso Chile had to suspend foreign -
mittances on debts. as did Bolivia. PERU
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