Evening star., 1933-07-02
BASIS FOR BUSINESS
RECOVERY Is SOUND;
, CONFIDENCE IMPROVES
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S0Sl lOGNSG t"s tiSv ~
Continued From First Page)
cent places that industry en- exactly
the same terms as two years ago. Rail-
road car loadings, electric output, cot.
ton mill activities and building con-
struction have at last forged ahead of
the records of the previous IL months.
Initiation Policy Rules.
Meanwhile. the United States. as
fixed principle OF its imitation policy, has
gone off the gold standard. The dollar,
expressed in foreign currencies, has de-
pTecieted about 20 per cent. Contracts
payable, as nominated in the bond"
in gold. have been abrogated to the
humiliation of some and to the salts
faction of others. A dozen or more
measures. giving the President war
time authority, have been enacted by
of development. They affect the issu-
ance of securities, the operation Of the
banks, the prices to be paid for farm
products and the output of such prod.
uctS. control of the railroads by an ad-
ministrator cloaked with supreme pow
ers, the rates of interest to be paid by
owners CT farms and urban and sub
urban homes, relief programs for
States and municipalities, and the de-
velopment of the Tennessee Valley.
They enter into the inner life of nearly
all forms of industry, stopping little
short of dictatorship. If not as ex-
treme as those in force in Italy or in
Germany. they have gone further along
the road to State Socialism than the
present generation of Americans could
year ago have imagined as possible.
The national Government and the
State authorities together have sur
rounded many of the activities that had
operated under modified restrictions,
and with varying degrees of success.
with all kinds of inhibitions that must
result in the destruction of individual
initiative. In the present crisis this
may be necessary for the good of the
greatest number. In three months
time we have entered new era in our
industrial life that promises to have
a great influence on all corporation af
fairs for years to come. It is safe to
say that from now on the Government
will replace the individual in the direc-
ton of policies that have to do with
output. wages, hours of labor, combina-
TORS and even the development of do
mestic and foreign markets sufficient
to absorb our present factory capacity.
{
going ahead differs little from that ex-
plotted during the Coolidge and Hoover
administrations. namely, that to pros
per we must produce freely and buy as
readily: raise prices that the producer
may realize a profit and pay high wages,
and turn the high wages back into
markets, causing them to expand still
more. Just what will hapen when the
price level returns to that of 1926, when
the cost of living has made a corre-
spending advance and there are still
many millions of permanently unem-
ployed, no one today is able to appre-
hend.
Aid Given Railroads.
Some results of the new national
program on which he have embarked
are quite clearly defined. They apply
most prominently to the railroads and
to be dealt with. after the loans to the
banks by the Reconstruction Finance
Corporation year ago had temporarily
checked the runs on them, was that Of
the steam transportation carriers. 1t
was the loss of their earnings and their
inability to cover their fixed charges
that threatened to destroy a portion
of the investment in them made in be-
half of the banks and the insurance
companies.
To avoid the cost of receiverships
and expensive reorganiZationS, a bank
ruptcy bill, was passed by Congress
under which several of the important
Southwestern carriers, such as The Mis-
souri-Pacific, Frisco and the Rock Is
land. have already taken refuge. Their
case is one that must be treated from
the STANDPOINT of an excessive amount
of bonded debt even in normal times.
This must be reduced to sum that
will guarantee ample earnings for re-
manning debt.
Next in order is revision of operat-
ing conditions that will eliminate many
expenses without affecting the value of
them. All this would have been re-
quired had there been no broad Gov
ernment policy seeking general business
recovery. The time had come. when
if the railroads were to remain SOL
vent. they were required to adopt pol
icieS representative of this age and not
completed a decade ago. before the new
agencies of transportation came into
existence.
Steps in Bank Crisis.
The weakness of the banking situa-
ton was not appreciated by the de-
posting public until after the holiday
The fact that over 5000 banks had
closed in the three years prior to that
episode, and that twice that number
had been adjudged insolvent in the last
decade, was believed to have been a
sufficient cutting away OF the decayed
parts of the banking structure to bring
the number of solvent institutions to
the requirements of the country.
The holidays" declared in Louisiana.
then in Maryland. but particularly in
Michigan and California, in February
and during the first few days in March.
developed an irresistible panic among
depositors that could have been checked
in no other way than by national
suspension of banking facilities. What
this uncovered was the fact that many
large metropolitan banks had invested
a high percentage of their resources in
lone-tsrm securities or in real estate
for which there was no market, and
that they were unable to pay out but
a small portion of the claims of their
customers. The period of easy money,
of intense speculation and of competi-
tion for deposits. based on high interest
rates, had filled their portfolios with
securities and loans that were Of little
avail when the necessity arose to raise
cash with which to meet their
demands.
Nearly 5000 of the banks that were
functioning prior to March 4 are still
A1OSad nv orc oDeratjno Under reStriC-