Evening star., 1933-02-26
Confidence Is Unsettled by
Troubles in Michigan and
Elsewhere.
FIRM COMMODITY INDEX
is BRIGHT SPOT OF WEEK
Business Now Hopes for Stimulat-
ing Note in Roosevelt Inau-
gural Message.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

special DlSpatcn 10 Inc oIdr
NEW YORK, February 25.-This has
been the most trying week the banking
community has faced since last Spring.
The atmosphere in Wall Street has been
as deeply charged with pessimism as 1t
was then. Securities have been under
great pressure, resulting in decline in
the average of stocks to the level of
last August, though it still holds well
above the low for the depression
reached in July.
Foreign exchanges have gone against
the dollar. Government bonds are from
3 to points lower than they were in
January, which renders impossible any
early attempt at long-term Treasury
financing at reasonable rate of in
terest.
It IS into such topsy-turvy domes-
tic situation, and one aggravated by
the japanese episode in Manchuria,
that the new administration steps in
another week and which it must i'm
mediately set about to correct. There
Is great hope that Mr.. Roosevelt will
attack the main problems in realistic
way and in manner that will strike
the imagination of the American people
and quiet their present state Of unrest.
1t is obvious that the latest outbreak
OF liquidation in securities has been
brought on by the banking troubles in
Michigan, and that these, in turn, have
reacted on and brought to a focus un-
sound banking conditions elsewhere
The facts brought out at Washington
in connection with the stock market
operations of the second largest bank
in the country came at an unfortunate
time. They increased the public sus-
picion Of banks in general and gave a
sorry picture of what took place in high
banking circles in 1929
The momentum toward putting up
barriers against the withdrawal of bank
deposits has grown as necessity has
compelled it. The State of New JERSEY
this week rushed through a measure
that saved one large institution from
closing by invoking a 90-day notice of
intention to withdraw savings accounts
and limiting checking depositors from
taking out more than fixed percentage
OF their deposits Of existing liquid
assets,
New Freezing" Method.
During the past two years the drain
on deposits of interior banks has
SOAAARSAACo Ol d large
percentage Of their quick assets.
Consequently, many institutions have
reached the position of the Detroit
group. or one in which they could not
sufficiently realize on their remaining
assets to meet the demands of de-
positors. The new banking method.
which has been borrowed from some of
the European countries, Is one of "freez-
ing" the existing deposits during an
mdeterminate period, while assets that
are not now marketable may become
more readily salable and the proceeds
Of them be applied to the liquidation of
outstanding obligations.
This Is a step in advance of the
procedure, common since 1880, of clos
ing institutions when the Withdrawals
reached point that involved the Sc
curity Of the institution. The effect
of it, however, IS to tie up large fund
of money and increase the tendency
toward boarding. 1t is also compromised
by the fact that State and national
banking laws are not uniform and
what may give protection to the one
group does not, at present, benefit the
other.
It is not surprising, therefore, to find
a growing movement toward some form
VI AAoeAoAAoA S0oA ollly VI ulSuI dIlCc VI
bank deposits. 1t IS significant to find
to measure of this sort.
Public Confidence Needed.
The chief need in the present situa-
ton is to re-establish public confidence
in the banks such as developed last year
out of the protection given them by the
Reconstruction Finance Corporation.
Until this has been brought about there
can be no general improvement in the
business world. Involved in it may be
an entire reframing of the banking
structure.
Not the least benefit would be in
lifting pressure from the market for
securities. So long as there is ap-
prehension among depositors there will
be a steady transferring of quick as
sets into cash. This means further
deflation In investments and prolong-
ing OF the vicious cycle. Enterprises
that require new financing in order
to carry on and give employment will
find their markets closed. 1t will not
be possible for the United States Gov
eminent to refund the Treasury obli-
cations that are maturing this year
except on a short-term basis and at
higher rates of interest.
Imitation Danger Lessened.
Had attention not been so closely
fixed on the banking situation more
encouragement would have been drawn
from evidence produced this week that
the danger Of currency imitation is
decreasing. William H. Woodin, the
new Secretary of the Treasury, is a
sound money advocate. With Senator
Glass leading the sound money forces
in the Upper House of Congress, it
will be difficult to put through any
measure inimical to the currency.
There is the expectation that Presi-
dent-elect Roosevelt in his inaugural
message will make his position known
on this question and that it will stimu-
late business and banking interests.
Unevasive and uncompromising atti-
tudes on questions of this sort are the
need of the hour.
A favorable influence in the general
business situation has been the resist
ance Of many commodities to the de-
pressing effect Of decline in securities.
This, in the case Of silver, has been
due to special reasons. For some weeks
there has been evidence that the de-
dation In commodities has been COM
pleted. In all other periods of dis
turbance in stocks and bonds COM
modities have sympathised with them.
ryct.k