Evening star., 1932-06-18
BANKERS REJOICE
OVER GOLD EXODUS
Withdrawals Remove
Cloud From Financial In
stitutions of U. S.
BY CONSTANTINE BROWN.

The Federal Reserve and the New
York bankers are Jubilant because. with
the purchace of s55.oOooOO gold by
the Banque de Trance this week, the
last of the foreign dollar balances has
been withdrawn from this country
Thus heavy cloud which has been
hanging over the financial institutions
of this country has disappeared
The ease with which the United
States has been able to refund within
less than years $4,000, 100000 to
foreign investors and depositors withou,
feeling the slightest economic shock
will remain an outstanding feature in
Americas financial history.
Ever since 1926 when the economic
! stability of Europe began to be doubtful,
and especially since 1929 when the
States reached its height. European
spectators, bankers and even govern
! ment banks sent money to the United
States to be loaned as call loans to the
stock brokers or to be invested in the
soaring American securities.
Money Like Immigrants.
The Federal Reserve was never too
happy about this new form of immi :
1
, migration of individuals, but the bank
| ers and the spectators accepted it on
the assumption that money has ne
nationality.
/ With the slump in the American
stock market the majority of private
individuals from Europe began with
drawing their money from the United
States. When the brokers ceased paw
ing IA per cent for call money there
was no inducement for the European
| investors to keep their money in New
York.
The other foreign countries and espe-
cially the Banque de France which
possessed some ST 200 0OO,0 either in
the form of deposits or short term
| credits in the United States, did not
withdraw them at once. Last Summer
during the negotiations over the Hoover
moratorium, when the French and the
United States Government could not
reach compromise and the relations
between the two countries had become
somewhat strained, the French govern
| ment indicated informally through its
New York agent that France was in a
position to worry the United States con-
siderably if it decided to withdraw its
short term credits and deposits. It was
veiled threat of the French at the
| time when they believed that Mr.
Hoover was trying to force them to
accept his plan for a temporary sus
pension Of the intergovernmental debts
Withdrawals Are Begun.
After the collapse. of the British
pound sterling the French private citi-
zens and the Banque de France became
| worried about their deposits in tile
United States and began Withdrawing
large amounts of gold every month
While the money was available, this
sudden move of the French, who were
| followed by the Belgians, the Dutch
and the Swiss. worried the Federal
Reserve and the American bankers con-
siderably They did not know how
much money in gold would be required
from them at any time and the bankers
were forced to keep permanently large
quantity of gold liquid.
Premier Laval came to Washington
and agreed with President Hoover that
| the haphaZard policy of withdrawing
was harmful to everybody. The French
financial experts who accompanied
Laval got together with the officials of
the Federal Recerve and the New York
! bankers and agreed to withdraw all
their deposits in gold at regular inter-
| walls so as not to provoke unnecessary
confusion.
Shipments Of gold have been going
out of New York every week; this week
the Banque de France transformed its
| last short term credits in bullion gold.
Altogether there are at present in the
United States some $500 900 900 belong
! ing to foreign countries. This amount
is however, earmarked as belonging to
IL 1~yNr
taken into consideration by anybody in
the computation of Americas gold re-
serves.
Accomplished in Short Time.
America has paid. d.consequently within
a short time practically every cent de-
posted in this country by foreign in
vestors. 1t has accomplished this feat
| without batting an eyelash. without
the money market of this country.
Speculation as to when America
| would abandon the gold standard has
been ripe in Europe for the last few
months. 1t was pointed cut that with
the Withdrawals of gold, with its in
| ability of balancing the budget. with
| the possibility of heavier deficit next
year. it will be impossible for this
country not to follow the footsteps of
Great Britain. "Well informed" econo-
mists in Europe were predicting that the
| United States will go off gold" in the
| course of the Summer. Spectators,
encouraged by these statements and by
articles in the European press. indulged
/ in wild speculation. selling the dollar
short The dollar fell a few fractions
and this was interpreted in the specu-
| lative centers of Amsterdam and Paris
| - fl,n n
The last purchase of gold for foreign
accounts was made last Wednesday. As
! a result of it, and to the great dlsap-
pointment of the spectators, the dollar
gained the fractions 1t had lost during
| the last few weeks. and after II months
| of uncertainty it has become once more
the yardstick of the world markets.
! The Federal Reserve and the leading
! bankers in this country sigh with relief.
| After all foreign accounts have been
liuuidated there is enough gold in the
country to face most any future de-
yelopments. The withdrawal of foreign
deposits enables now the bankers to be
more liberal with the much needed
| credits for American business and in
dustry. because they need no longer to
keep dollars idle in the vaults for un-
expected calls from any foreign de-
| positor.
In official quarters it is hoped that
F., this country will not be faced with a
similar situation again. But in certain
banking circles fear is expressed that
| if the European political and economic
situation does not improve within the
next few months the migration of gold
from Europe to America will be resumed
once more, with no possibility on the
mart of the Federal authorities to stem It.
1