Evening star., 1932-04-29
SENATOR WALSH
LAYS DEPRESSION
TO BIG BANKERS
Trade Board Told Operations
Since War Have Been Ruth
less and Unethical.
GOVERNMENT BLAMED
IN LACK OF FORESIGHT
Washington Organization Is in
Sounder Financial Shape Than
Ever-Directors Chosen.

Investment and international bankers
were charged with primary response
/ bility for the depression in the United
! States by Senator David l. Walsh at
| the forty-flrst annual meeting OF the
Washington Board of Trade last night
! in the Willard Hotel.
These groups were accused of p1rsu-
ing "unsound and unethical methods"
| for the 10 years following the World
| War by the Massachusetts Senator,
who said that the stock market crash
was the direct result of predatory
| practices by financial interests mad
| with Cesire to accumulate wealth
through gambling with the money of
Others"
There were three principal results of
| the stock market crash, he said They
were described as unemployment, which
Is increasing undated; the threatened
| collapSe OF the country's financial struc-
I ture, which has been temporarily
checked by the Reconstruction FINANCE
Corporation, and the Federal deficit.
which Congress Is now 1aboring to
wipe out.
After the war; Senator Walsh told
ms audience. came a period of gam
ping unprecedented and unparalleled
IN the history Of this or any othe.
country. 1t set a record for reckless
speculation. From the prevalent flnan-
clal practices there could have been no
other erect than the stock crash and
the resultant depression. 1t was Ike
child blowing up balloon to the burst
ing point. The extent to which securi-
ties were inflated and expanded was
appalling.
Reckless Disregard.
The period was marked by the most
reckless disregard of all economic laws
by ruthless get-rich-quick manipulators
investment bankers made q practice of
Duyng and consolidating well known
ana prosperous industries and then re-
organizing with an excessive issue of
stock. I knew of one industry in
| Massachusetts which was reorRanized
hve times, and after the fifth reor
ganization had $45,000, 600 of stock out
standing and only $4,000, 900 of physi-
| cal assets"
The harm that these practices must
unavoldably have done the country
snoulo nave been foreseen by the Gov
ernment, Senator Walsh charged. and
SAID there was responsibility on the
Government to take steps to prevent
unethical business operation.
1 claim a government cannot give q
corporation charter and then permit
IL 10 pursue methods injurious to in
veStors and resulting in economic COL
lapse" he declared.
/ am strongly Of the opinion" he
continued, that there must be rigid
and strict regulation of the artificial
person Of corporation"
The speaker said the formulation of
such regulation is one of the most
serious current problems and must be
satisfactorily worked out If the capital
lstic system In this country Is to be
preserved.
Unemployment Result.
OF the three principal results of the
stock market crash, unemployment first
manifested itself. Senator Walsh as
serted. When the wave of unemploy-
ment will stop its forward surge no
man knows or can predict" he added.
He said the expenditure of public
money to provide employment so far
has afforded but temporary relief and
has not bettered the situation in any
permanent way.
whether further large expenditures
for public works by the Federal Gov
ernment will stop the wave Is a mooted
| question" he stated.
40 0SNONo anu OeIldLOT
Walsh declared, public unemployment
relief expenditures has caused an added
tax burden on small property owners.
many Of whom are themselves un-
employed, and for this reason has been
abandoned in most cases.
| He said that no adequate solution for
the unemployment problem has yet
been evolved.
The second effect of the stock collapse
the failure OF many financial insti-
tutions-followed close on the heels of
the wave Of unemployment. Senator
| Walsh told the trade board members
| The situation became more critical
| than 1 dare tell you" he asserted mo
| newspaper would publish it and 1t was
! just as we'll"
Bank after bank failed, until last
year $500 were forced to close their
doors as their securities became illiquid
| and they were unable to realize money
on them to pay their depositors, the
Senator stated. One of the most dis
| couraging effects of the crash. he ne-
clared, was the decline In real estate
values and in the values of real estate
bonds and mortgages. He said real
estate Is now almost worthless asset
SO far as raising money on it is con-
| cerned
Action Of Government.
your Government finally acted to
check this decline" the Senator said,
through establishment of the Recon-
Structlon Finance Corporation. Whether
1t should have acted before 1t did is a
| political question which I will not dis
cuss here
He said there has been scarcely a
bank failure of significance since the
establishment of the finance corpora
tlon. He attacked as unfair the criti-
clsm that the finance body is helping
! banks. but doing nothing for the un-
/ employed.
We voted to save the deposits of the
people, not the salaries of bank Off
Gals, the Massachusetts, Senator ex-
| planned.
| In concluding his discussion of the
second phase of the depression, Senator
| WalSh said he did not claim that the
| reconstruction Finance Corporation
/ settled the matter permanently.
The third effect of the stock collapse.
ne declared, has just now become ap-
parent and Congress has now turned
It's attention toward the finances of the
Federal Government.
The one criterion of the sound
financial standing of any Government
| - "4ieVAAcl ~ ID pdldnCulg lIS DuuBeL.
senator Walsh asserted Since this
Government has not been doing so, he
continued, immediate steps must be
taken, no matter what the sacrifice, to
] decrease expenses and increase revenue.
Two billion dollars more revenue Is
needed and Congress is now faced with
the problem of how to raise it. Senator
Walsh said that all are agreed that the
tax on the incomes of the wealthy and
on corporations should be materially
increased, but that it is probable that
these increases, due to greatly decreased
earnings, will result in little more