Evening star., 1933-03-06
NEW YORK BANKS
READY TO REOPEN
Action Expected Tomorrow
as Financiers Complete
Scrip Plans.
Continued From First Page.)

Continued From First Page.)
open. with STATS standing by but ex-
change officials could reach no decision
as to when trading could be resumed
pending further developments in re-
storing banking operation.
The banking system bent its efforts
toward perfection Of a plan to resume
modified operations to finance the Ma
tion's commerce, pending the conven-
ing OF Congress for emergency legisla-
tion on Thursday.
Preparations were rushed to take ad-
vantage OF President Roosevelts proc
lamation declaring a four-day bank
holiday starting today but permitting
the resumption of banking activity with
clearing house certificates in place OF
currency.
Huge supplies Of certificates had al
ready been printed by the American
Bank Note Co., in denominations OF IS,
$40, $40 and $50, and every effort was
being made to put the new system into
operation as quickly as possible. The
mechanical difficulties were enormous,
but by Wednesday at least, or possibly
earlier, it was hoped that banks in
number Of cities would be paying out
the new money"
Gold Windows Closed.
In the meantime, gold windows at
the Federal Reserve banks, the Treas
ury and subtreasuries were closed, in
keeping with the Presidents proclama-
ton. and all dealings in foreign ex-
change and international dealings IN
gold. silver or currency were at
standstill in the United States. The
principal foreign financial centers
struggled with the problem of trying to
resume international payments. which
were completely disrupted with official
quotations on the dollar lacking
Some financial authorities were in
clined to regard the United States as
Technically" of the gold standard, al
though this was denied by Treasury
Secretary Woodin in Washington.
The Wall Street security and COM
modify markets and the Chicago wheat
pit remained closed under the second
day of the banking holidays proclaimed |
by the New York and Illinois Governors
early Saturday.
The security and commodity ex-
changes were not included in Presi- !
dent Roosevelt's proclamation and con-
sideration was given in financial quar- |
ters to the desirability of resuming !
trading before the national holiday cx-
pires. 1t was recalled that the New
York Stock Exchange continued to
function during the banking crisis in
1907, when clearing house certificates |
were used.
If trading were resumed, and the |
United States were regarded as off the
gold standard, or likely to devalue its
currency. financial experts argued that
commodity and share prices should |
boom, but Secretary Woodin's emphatic |
denial that the country was leaving the |
gold standard tended to dash that |
theory.
Given Special statuA
A country generally IS considered ON !
Q gold standard when its currency can |
be redeemed in gold on demand, al |
volve many technicalities. Although |
during the holiday American paper !
money Is clearly not redeemable in gold, |
some bankers pointed out that 1t was !
merely . special situation during the |
four day holiday, such as exists on
Christmas day or any other holiday in
which gold was not being paid out. SO
that it was idle to conjecture As to
whether the country was technically |
''on gold"
The situation differed from Great |
Britains suspension Of gold payments
in September of 1881, for that was a |
definite suspension for an unlimited |
time, while the current suspension in !
this country is specifically for q four |
day special holiday period, pending the
enactment Of q measure, as yet unre-
vealed, to restore stability.
The British suspension Of gold pay |
ments was followed by immediate for
eign exchange dealings, permitting the
pound sterling to depreciate sharply |
in terms Of other currencieS, which in
turn decreased its purchasing power
and brought an upturn In prices in
terms Of that currency. No enduring
advance in commodity prices In terms
of sterling has resulted. because world
commodity prices have continued to
decline Sterling prices have remained
In France and the United States are
substantially lower than when Great
Britain left the gold standard.
SuSpending gold payments, however,
does not necessarily mean q deprecia-
tion OF the currency. Germany has re-
strtcted gold payments to a degree
amounting almost to suspension since
her banking crisis in the Summer of
1881. yet with rigid control Of foreign
exchange transactions the level Of her
currency has been kept virtually stable
When the international gold trans
actions in this country were stopped last
Saturday by the banking holiday in
New York, which was observed by the
New York Federal Reserve Bank, which
handles these transactions. the country
still had some 81, 800, 600, 900 of none
tary gold. or more than third of the
entire supply in the world. This was
well above the level reached as recently
as last June.
Confidence Necessary.
Bankers point out therefore that
once confidence is restored. the United
States has much more than enough |
gold to function as before on the in
ternational gold basis In ordinary
national means of settling balances.
But for the first time in generation,
the recent banking crisis prompted
Americans to seek gold coin, and even
gold bullion. and in the last week mil /
lions Of dollars in the yellow metal |
were paid out by the Federal Reserve
banks, and put into safe deposit boxes !
by hoarders. aggravating the severe
drain of gold abroad
The recent reduction in the Federal |
Reserve banks gold reserves would not |
have been particularly serious, had it |
not come at a time when currency in |
circulation was rising at an unprece-
dented rate. The reserve system must, |
rs q general rule, maintain a 40 per |
cent gold reserve against its notes, SO |
with each dollar Of gold that goes out |
Is removed the backing for $3.50 In :
currency. The reserve ratio of the
system. when last reported as of the !
close of business on Wednesday. was |
531a per cent. or well above the 40 per !
cent minimum, although since then
and the close of business Friday the |
ratios Of the New York Reserve Bank /,
alone and some of the others are under !
stood to have Slipped under the 40
per cent level. The Federal Reserve ;
act provides. however, that the reserves
may be permitted to run below 40 per
cent under special arrangements