Evening star., 1933-03-05
FINANCE MACHINE
Of NATION HALTED
Swift Movement to Convert
Credits Ends With Ten
sion EaSed.
By the Associated Press.

New York. Washington and other cities
bent their efforts toward development
Of procedure TO permit resumption Of
financial transactions and business set
Elements next week.
The banking moratorium movement
which started in Mi gan February IA
finally embraced the big financial in
stitutions Of WaK Street and La Sale
Street early today and the swift move
ment to convert bank credits into cash
was quickly checked in most OF the re-
mainder OF the country.
The holiday period was scheduled to
end on Tuesday in New York, on We'd
nesday In Chicago, and to terminate on
either Tuesday or Wednesday in most
other large States.
Cash Shortage Eased.
Reports from over the country de-
picted Nation accepting with forti-
tude and good cheer an unparalleled
experience in the modern industrial era
in the United States.
In the meantime. shortages Of cash
to meet ordinary living expenses failed
to develop to any extent, and banks In
number Of localities provided cash to
meet pay rolls. Business and commerce
functioned with little interference. with
the practice of extending credit or &C
cepting checks widespread.
The New York Clearing House and as
sociations of banks in other cities met
to develop methods Of resumtng banking
operations next week. Plans similar to
those adopted in the money shortage Of
1907, in which clearing house certifi-
Gates were used in the place Of cash,
were widely discussed
The effect Of the virtual Standstill in
banking in the United States. worlds
richest Nation with more than third
OF the worlds supply of monetary gold,
brought international financial transac-
tions to standstill over much OF the
world
In London, long the world center Of
international finance, quotations on
American dollars and all other foreign
exchanges were suspended. as we'll as
quotations on gold. AS result, foreign
exchange transactions were at stand
still in Paris and many other capitals.
1t was the first time the dollar had not
been quoted in number OF leading
capitals since the Civil War.
Withdrawals Checked.
The New York and Chicago Federal
Reserve Banks, as we'll as most OF the
other 10 reserve institutions, closed owing
to general bank holidays. although no
formal order was issued from the Fed
eral Reserve Board at Washington. The
Federal Reserve Banks OF Cleveland,
San Francisco and Richmond were open.
however, and the Kansas City Reserve
mstitution transacted business for banks
In its territory that were open.
The closing of the New York Reserve
Bank checked the large Withdrawals Of
gold for boarding and export which had
developed The Subtreasury in New
York was open and redeemed Treasury
certificates for gold as usual, although
it paid out metal only in $4,000 bars,
doing no business in coin.
Leading New York bankers held meet
ings at the New York Clearing House
and elsewhere today, after sessions
through last night and early this morn
nation ordering a two-day legal holiday,
which was at a m.
The net demand deposits Of the 27
clearing house banks were reduced by
S409 .944 900 in the week ended today
the weekly clearing house statement
showed. still leaving the huge total OF
IS, ,4G3 $4,000
Bankers explained that the rush to
convert bank deposits into currency had
reached a point which taxed physical
facilities to meet it. although the re-
sources Of the large banks and the Fed
eral Reserve system remained enor-
nous.
National Gain Seen.
A statement by the clearing house
declared that the New York banks
were in such condition that they could.
: of q Eadaral Reserve
Bank. pay on demand every dollar Of
their deposits" but it had been decided
to call a temporary halt for the benefit.
not of New York primarily, but OF the
Nation as whole"
Banking authorities said there was
no lack Of currency-iSsuing facilities or
of actual currency, but that 1t had be-
come imperative to check the rush for
cash to preserve the long established and
efficient practice Of doing business
through bank-check clearances and
prevent an excess OF currency which
would not be needed when hysteria had
subsidized
The metropolis received the news Of
the holiday calmly, realizing that the
steps were taken In the interest OF the
general welfare and that the big banks
are actually in strong condition. One
bank honored blanket payroll checks
until the noon closing hour. and persons
who sought access to safety deposit
boxes, which had swallowed up large
tered no difficulties. Gov. Lehman said
he did not object to such Withdrawals.
Transacted by Checks.
Financial authorities explained that
90 per cent of the Nations business
was normally transacted through the
medium of bank chacks. and pointed
out that total currency in circulation,
even at the record figure Of $6,720, ,000,-
900 shown in this weeks report, was
only a fraction of the total of more
than $4,000 100000 in bank deposits
in the country, SO that 1t was apparent
the hysterical movement to convert de-
posits into cash had to be checked. un-
less currency were to be extended to
ridiculous levels.
Suggestions for resuming banking
business dealt chiefly with methods of
increasing check circulation, and the
records Of 1907, when real shortage OF
money necessitated various expedients,
were closely scrutinized. At that time.
clearing house associations in New York
and other leading cities issued clearing
house certificates. which were used to
settle transactions and to some extent
circulated as currency.
The present problem was seen as re-
flecting chiefly lack of confidence
rather than a lack of currency, or a
lack Of banking facilities. II currency
were brought out of boarding. it was
explained, there would be more than
enough, for the amount issued Is now
far above that outstanding in the hal
cyon days of 1923 and 1929.
A statement was issued by the Fed
eral Reserve Bank, supplementing yes
terday's statement, which resulted in
sharp reduction of the gold decrease
reported yesterday. Fridays report,
showing transactions up to pm, had
indicated loss of $l16,439 600, through
earmarkings for foreign account and
exports, the largest reduction ever re-
ported for a single day. 1t was re-
vealed today. however, that after 3 pm