Evening star., 1933-09-10
Aggressive Tone With Bank.
ers Shows Determination
of Managers.
DANGER OF STAMPEDE
TO INITIATION FEARED
Administration Believed Unwilling
to Interfere, However, With
Recovery Machinery.
BY CHARLES F. SPEARE.

NEW YORK, September 9-The N.
r. A. movement now has reached the
dead center" phase 1t needs to be
helped up over the hill Of economic
resistance. This explains the more
combative tone with which its man.
ayers have addressed the bankers Of
the country this week and their atti-
tude toward those who have accepted
the spirit Of the recovery act, but may
have violated some of its clauses.
With the test Of the scheme immi-
nent, 1t is natural that business should
be more hesitant and that speculative
commitments should diminish. Conse-
Quently. trade statistics have been less
favorable than those of a month ago
and there has been a tendency on the
part Of all markets to yield some of
the ground gained earlier in the Sum-
mer
There is no other position to take
than that the plan will succeed. This
does not mean that it should be swal-
lowed whole or that the public should
become enraged and discriminate
against Henry Ford or any other man
ufacturer If he meets or exceeds the
requirements of the recovery act that
assist employment and purchasing
power, though not subscribing to all
OF its technical features.
Danger Of Stampede.
The demand for quick and positive
results of the recovery plan is greater
than the urgency for them. The trans
formation in business and in public
sentiment now being effective is as great
as IN 1917. after the United States
declared war on Germany Yet it was
nearly a year before trained troops
were landed in France Just now the
country. faces the danger of being
stampeded into action for which it IS
not sufficiently prepared Its leaders
and Congress may become impatient
and begin to cut the corners to de-
sired goal by means of the most OBJ
jectionable forms Of imitation.
There is still. fortunately, no sign Of
this. In fact, there is opposition to it,
otherwise the sharp decline In COM
modlt1es and the tapering of Of rail-
road car loadings. steel ingot production
ana electric power output, as well as
the slack in many other lines Of trade,
would have produced the order to go
ahead at fuller speed In the manufac-
ture of credit.
The persistent strength Of high-erade
corporation bonds, the rise of Treas
ury issues and their demand at low in
come yields supplements other evidence
that the administration is letting the
recovery take natural course This
ooes not satisfy the speculator but it is
acceptable to the majority.
More important than the Ford in
cldent, IN its bearing on the success of
the recovery act, was the clash this
week at Chicago between officers of the
American Bankers Association and
heads Of the R. F C. and of the Fed
eral Reserve Board. In other days rem
resentatives of the Treasury went to
conventions to praise the delegates;
tniS tlme their message was highly
crltlcaI OF the latters' response to the
N. Il. A: program. In considerable
measure this was just and desirable.
Deposit Guarantee Studied.
After making a study of the results
OF bank guarantee of deposits in those
trans- Mississippi States that adopted it
some years ago, one cannot regard it as
tne best means for protecting the de-
poSltor against loss. 1t is natural that
Strong banks should resist assuming new
puroen to bolster up the weaker mem
oeIs OF tnelr order. The proposed law
pIaces premium on ineficiency in
pliment to wise banking administrator
The fact is, however, that the nuhlic
SINCE March has come to look upon ali
pankS 14 much the same light. II has
experienced months Of delay in OBJ
tanning any portion of funds locked in
odnkS known to have available lio1id
assets and losses of IS to so per cent
OF It's funds. It has lost much of it's
Ialth In the leaders of the BANKING
world. Under the circumstances il is
not surprising that this public and its
representatives in Congress Should in
slst that after January deposits of a
certain amount should be guaranteed
loo per cent and others in lesser pro-
portlons. II they are not then, or as
soon as the examinations for member
ship In the deposit Corporation are
completed; there will be a renewal of
the boarding that eliminated in the
panic of last March.
The fault of the guarantee act is that
1t has involved degree of preliminary
work that cannot be fairly Completed
IN the next four months. And if this
Is carried out to the letter, hundreds of
State banks will go into liouidation
They cannot pass the test of suficient
capital and surplus to deposit Ii
abilities.
Financing Of Industry.
The complex Of the commercial
banker being that of liquidity of assets.
that Of the investment banker is one
OF fear. He hesitates to make any new
commitment that may some day entrap
MIN In legal suit by a customer, So
he does nothing to assist recovery by
the nomal sale of corporation securi-
ties: Some of the inhibitions under
which he must operate are silly. But
they have major importance to him.
as they may be so easily violated.
The threat to the investment banker
Is the loss of his trade to the r. F. C.
II he does not get busy and assume
some fresh risks. Treasury certificates
that expire in 1885 are quoted on less
than lbs per cent basis. An un-
limited amount could today be sold
at 1.50 per cent or better. So the
r. F. c. could afford to employ these
funds, for industry at 3 per cent,
though it would consider it had made
ample concessions in charging per
cent. These are rates that neither the
commercial and investment bankers
could approach. considering the risk
Government financing of industry may
not be so remote. therefore, as it seems
Copyright. 1889