Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-04
Deposits and Currency.

Accompanying announcement of the
declaration by Gov Lehman of a two
day bank holiday in New York State is
a statement issued last night by the
Clearing House of New York City to
this effect:
The unthinking attempt of the pub
lie to convert over forty billion dollars
OF deposits into currency at one time is,
on its face, impossible.
This wildly describes in a nutshell
the situation that is today confronting
the country. A state of hysteria has
been prevailing in different parts of
the United States for several days 1t
began in Michigan and spre3d to other
States, Bank holidays" were declared
pending the enactment of protective
legislation and the adoption of measures
by the banks themselves. State after
State has followed suit, with one and
another form of defensive provisions to
stem the tide of Withdrawals of deposits,
until this morning nearly forty had in
terpo3ed some form of check upon the
current of demand for cash which could
not be Immediately supplied without en-
dangering the security of the entire sys-
tenn of banking.
1t is reassuring that yesterday Con-
gress adopted joint resolution giving
the controller of the currency authority
to regulate receipts and Withdrawals
from the banks of the District of Co.
lumbia whenever in his Judgment such
actlon is necessary or advisable. This
does not mean that the percentage rule
of Withdrawals, which has already been
adopted by some of the local banks, will
be forthwith applied to all of them or
10 any OF them. 1t means that if cir
cumstances justify the fear that need
less Withdrawals imperil the security of
any institution it may be given the pro-
lection of such a rule.
In any event there will be no COM
plete stoppage of funds for the trans
action of business. Emergency meas
ures for the provision of a form of
currency can and will be adopted in
case Of general curtailment of with
drawals, and this currency, presumably
in the form of clearinghouse certif-
Gates, which have been used on previous
occasions, will supply all the essentials
of currency circulation.
1t cannot be too strongly urged that
there should be a calm consideration by
all the people of the fundamental char
acter of a bank, which receives the
funds of depositors and lends them to
others. The bank must lend the money
of which it is thus made the custodian,
else it cannot subsist. 1t lends upon
sound security, the credit of the bor-
rover, supported by the Endorsement of
another, or upon the deposit of invest
ment securities of higher value than
the amount of the loan. No bank can,
without curtailing its legitimate and
necessary activities as lender, retain in
it's vaults the total amount of the funds
deposited with it. To do so would be to
lessen the amount of money in circula-
ton below the point of business needs
ard to restrict its own earnings to the
point at which it would be unable to
maintain itself.
A simultaneous demand by depositors
for their funds is, as the New York
Clearing House says in its statement,
an "unthinking attempt of the public to
convert billions of deposits into currency
at one time" Success Of such an at
tempt is impossible. This truth must
be realized by the people of all COM
munitieS.