Evening star., 1935-02-24
Administration and Con.
greSS Likely to Map None
tary Plans Cautiously.
H00VER'S PLEA SPURS
STERILIZATION FACTION
Treasury Prepares for Financing
Uncertainties in Congress Have
Effect on Business.
BY CHARLES F. SPEARE.

Special Dispatch TO The Star
NEW YORK. February 23-The
financial and legal history of this
country contains few chapters that
have aroused so much discussion and
had such bearing on future none
tary and political events as the de-
cisions this week by the United States
Supreme Court in the gold clause
cases.
The tenor of these opinions will un-
doubtedly play part in the presi-
dental campaign of 1886 and affect
the more immediate money policies of
the administration, as well as those
of the inf1ationist group in Congress.
The American public is already
sharply divided over the decision on
the Liberty bond payment. One ele-
ment regards it as just and legally
right and as meeting an unprecedented
situation in a practical and common
sense manner. Another considers it
as dishonest and a blot on the ma
tional honor.
1t is not too much to say that the
cleavage has a certain amount Of
political significance, that it further
separates the PHILOSOPHERS of those
favoring the New Deal and those who
cling to the eXactionS of the Consti-
tuition.
Money Tinkerers Warned.
AS time goes on, it will be difficult
to reconcile the two points of view
This has an important bearing on the
in,
There may, however, be some good
coming from the episode. For one
thing, the closeness of the decision
and the clear-cut judgment of the
majority of the court that certain
debtor rights under the Constitution
are not to be meddled with are likely
to make the administration and Con-
gress more cautious in setting up
monetary program that may be torn
down by the courts.
1t is believed the decision has
already stiffened official Washington
against further dollar devaluation.
And it has brought from former Presi-
dent Hoover the most important state
ment yet issued on the necessity of an
early stabilization of the dollar, re-
gardless of the feelings of European
countries concerning their own cur
rencies.
Fortunately. there has not been the
degree of initiation that has been
feared. so the holder of bonds who is
denied the right to receive Sl69 for
each S1.00 of interest or maturing
principal has experienced no loss. He
can buy practically as much with the
proceeds of his 4l4 per cent Govern
ment bond, his 4 and S per cent
corporation mortgages or his 5 or 6
per cent on real estate holdings as
was possible several years ago.
The case of the foreign bondholder
IS different. His cry of Republication"
however, sounds harsh in the ears OF
an American public that has wit
messed a wholesale default on over
10 billions of war obligations. Incl
dentally, it is difficult for the layman
to see the equity of preserving the
rights of the holder of a Government
bond and dissolving those of the pri-
vate bondholder who has much the
larger investment at stake.
HOOVcT ITReS SLdDltILdtlOns
Mr.. Hoover's proposition Is that "all
threat, actual or potential, of further
devaluation should be removed" He
would make the dollar at once "con-
vertible at the present SO cents OF
gold. making it payable in gold bull
lion-the modern method of specie
payment" This is a practical and
statesmanlike suggestion. The dollar
has always been worth more intr1n-
sically than the debaSed level at which
it was fixed. 1t is as much too cheap
as sterling and francs are too dear,
The difficulty in the future will be to
maintain the present discount.
There has been enough writing
down of debts to equaliZe the rela-
ton between debtors and creditors.
What is now needed is to regain the
former poiSe of the international cur
rencies. Mr.. Hoover believes this Gov
ernment should take the StabillZatlon
step regardless of Europe. as he is
confident that they would fall into
line. They would be compelled to do
so. They are now facing another
crisis. with Italian exchange at new
low point and the other members OF
the gold bloc beginning to suspect that
France is looking out for herself to
the detriment of her associates.
The most important market effect
of the decision in the gold cases was
an advance in prices of nearly all the
Treasury issues to the highest on rec
ord. This might appear to be q
strange sequel to an opinion that took
from holders of some of these bonds
what they regarded as their lawful
right of appreciation of principal.
1t was only further evidence that the
majority of the public has faith in the
Government and in its credit. (Some
of those who have most bitterly as
sailed the majority opinion Of the
court were among the earliest to ex-
port their gold or to countenance
this act when the credit of the Gov
ernment was in the balance.)
Refunding Operations Due.
Next month the Treasury must en-
gage in one of the largest refunding
operations on record. With even its
indirect obligations, as those of the
Federal Farm Credit Administration
and Home owners Loan Corp, SELL
ing on about a 2A per cent basis, it
should have had no difficulty in f1nanc-
ing with a 3 per cent long-term
bond, but the decision Is to continue
financing with discount bills. The
declining tendency of official interest
rates shows no sign of ending here or
abroad, though there is strong reluc-
tance among private lenders to make
a concession to their borrowers.
Congress has been In session nearly
two months and has failed to enact
legislation from which business might
lContinued on Third Pagel