Evening star., 1933-03-10
Remedy for Present
Banking Situation
To the Editor of The Star.

To the Editor Of The Star.
The present acute emergency in the
banking situation Of the country Is the
direct result Of lowered public conf
dence In financial institutions. This
confidence, already shaken by events OF
the past few years, has been jolted by
recent disclosures OF shameful betray-
ais Of trust on the part Of men aigh
In banking and financial circles. Pub
lie confidence Is the greatest asset OF
sound and safe banking institutions,
and when confidence goes below par"
these institutions suffer in direct pro-
portion to the shrinkage in confidence
value. Hence, the remedy for sunken
confidence-value Is q solution Of the
salt Of fresh, virile confidence; more Of
the same ingredient to replace that
which is lost and to revive that which
Is weakening.
The remedies which have been in
voked In the past few days Of the epi-
demic are emergency specifics, born of
the drastic need Of the hour, but 1t is
conceded that they are far from salts
factory rs permanent cures. Indeed, 1t
Is not at all unlikely that continued
treatment Of the sort now being admin
istered-"bank holidays" legislative
guardianship Of banks, clearing house
suspensions Of Withdrawals and many
similar makeshifts-may prove an over
dose of emergency remedy, and kill
the banking patients. Why? Because
any expedient that discloses to the pub
lie the weaknesses Of their banks de-
stroys that valued asset, confidence in
banks. Consequently, any rule or law
that establishes bank holidays puts an
autocratic protectorate over all banks,
or places an embargo on their func-
tions, regardless of their condition. clas-
SITES them all at once, In the minds OF
the public, as doubtful institutions in
the general scheme OF business welfare,
and we have taken q long step back
ward In helping to restore confidence
and prosperity. It may be that the i'll
effect of hasty action may never be
entirely overcome by the banking fra
ternity.
This article is not meant as a de-
structive criticism, for there is appar-
ent need Of hasty and drastic measures
to bolster up the falling banking struc-
ture in this country. Here Is an in
quiry
Is 1t feasible and workable for Con-
gress to authorize the banks to issue
scrip money In a proportion to their
assets, liquid and/or frozen? These
may be guaranteed by the Government
under proper arrangements. whereby
the assets will be hypothecated to Sc
cure the guaranty. They will be given
legal tender status When depoSitor
issues q check. the bank may pay in
scrip. Scrip will pass current as cash.
As the scrip Is redeemed the guaranty
Of the Government is reduced pro
tanto. This arrangement would at once
allow all banks to meet demands in an
emergency without bank holidays
without curtailing Withdrawals and
possibly without closing their doors,
thus obviating discontinue and loss to
the community. 1t may be inquired.
how may scrip be made to take the
place Of coin? II the Government guar
antees payment Of the scrip In coin of
the realm. and If the guaranty is Sc
cured by a good margin of the banks
assets, and II safe limit Is put upon
the issuance of such scrip, with short
periods Of redemption. 1t is conceiv-
able that such an arrangement would
at least answer for an emergency
measure" And 1t would preserve the
public confidence asset of the banks.
GEORGE c. SHINN.