Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-08
BOND LEGISLATION
IS HELD NECESSITY
Action by Congress Regarded
Just as imperative as
New Bank Laws.
by MARK SULLIVAN.

That the strictly banking part OF the
situation should me- nopolize attention
now is natural. The arrangements for
use Of scrip and for the opening of
banks are going forward with great
speed and along lines universally re-
garded as good.
Equally imperative, however, and de-
manding almost equal speed, is action
having to do with Government bonds.
The matter of bonds will become acute
on March Is, when the Government
will be called upon to pay or refund
1854, 100000 of maturing notes.
In order to make that possible, legis-
1ation looking to the safety of Govern
ment bonds will be as necessary when
Congress meets tomorrow as legislation
looking to the opening of banks. The
particular legislation which it will be
necessary for Congress to enact will be
legislation reducing Government ex-
penditures. Specifically, it seems i'm
perative that Congress. after long avoid
ance, will be obliged to act on the mat
ter OF reducing veterans compensation.
Developments about Government
bonds had as much to do with bringing
on the crisis as developments about
banking. To single out from the tan
gled chain any one cause for what has
happened can never be more than a
loose approach to accuracy.
Background Traced.
A tenable statement might say that
about last December, when Congress
met, the financial centers of Europe as
well as financial minds in America be-
gan to watch closely whether Congress
would be willing to take the steps neces-
sary to reduce Government expenditures
to a point within its income. They OBJ
served that President Hoover recon-
mended many reductions, among them
q reduction of s127 0O0,0 in veterans
compensation. They observed that Con-
greSS ignored the recommendation and
made not even gesture toward reduc-
ton. They observed, in sum. that Con-
greSS continued to permit the Govern
ment to pile up a deficit at the rate of
some 100000 day They observed
that, to meet the deficit, the Govern
ment was borrowing more and more,
and they realized that the interest on
the borrowings would yet further in
crease the deficit
Observing all that, the financial CEN
tiers Of Europe and many persons in
xAiiCAASa SO14S4uOCO, W put IL pluuCly,
that Congress was going to permit the
Government to fall into a position in
which it was becoming doubtful whether
the Government could pay the bonds it
was issuing.
In this state of mind, spectators in
Europe began to sell dollars and banks
and individuals in America began to
sell Government bonds. This condition,
as much as any other, was fundamental
in causing what happened From this
flowed the bank closings, the boarding
Of currency, the flight of gold. 1t was
on February Is. one day before the
Michigan holiday started the cards fall
ing, that Bernard M. Baruch testified
propaetically before Senate commit
tee that delay in balancing the bud
get is trifing with disaster. The sus-
picton is growing that We do not really
intend to balance it."
Interest Charge Advances.
The index of what happened between
December and February Is to be found
in two rates of interest. In December,
the Government was able to borrow
short-term money at the nominal inter-
est rate Of one-eighth Of l per cent a
year. Last week the Government. in
borrowing S75,000,00 for 81 days, was
The difference was caused largely by
the fact Congress was coming to an
end without taking steps to keep the
Governments Expenditures below its
income.
Looking forward, the immediate con-
dition is that the Government has
1894 100000 of short-term notes due
for payment next Wednesday. In that
situation it is imperative that Congress,
when It meets tomorrow, must take the
step which will overcome its long neg
lect, and show the world the Govern
ment is going to keep within its income
1t would seem that legislation reduc-
ing veterans compensation and bring
ing about other economies is as neces-
sary as legislation about banking. Vet
Grams compensation is only one item, but
is the largest item in which reduction
can be made. Action upon veterans
compensation is further made necessary
by President Hoover's pocket veto dur
Ing the closing days, of the bill in which
Congress, against Mr.. Hoover's recon-
mendation, kept veterans compensation
where it had been before.