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ALL U. S. JOINS BANK HOLIDAY
Nation's Leaders Lay Plans to Restore Financial Normalcy.
(Continued From Page 1.)
orders and gave checks for the balances. Railroad companies took emergency action, announcing broadened credit and stating that travelers would not be left stranded anywhere because of banking difficulties.
FINANCIAL MECHANISM OF U. S. STANDS STILL
By Claude A. Jagger.
Associated Press Financial Editor.
New York, March 4.—(AP)—The great financial mechanism of the United States stood still Saturday. While a new president took office promising drastic and courageous emergency action, the banks of New York and Chicago, as well as the New York stock exchange, the Chicago board of trade and other security and commodity exchanges of the nation, were closed.
Financial and government officials in New York, Washington and other cities bent their efforts towards development of procedure to permit resumption of financial transactions and business settlements next week.
The banking holiday movement which started in Michigan February 14 finally embraced the big financial institutions of Wall Street and La Salle street early Saturday.
End Tuesday in N. Y.
The holiday period was scheduled to end on Tuesday in New York, on Wednesday in Chicago, and to terminate on either Tuesday or Wednesday in most other large states.
Reports from over the country depicted a nation accepting with fortitude 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 a number of localities provided cash to meet payrolls. Business and commerce functioned with little interference, with the practice of extending credit or accepting checks widespread.
The New York clearing house and associations of banks in other cities met to develop methods of resuming banking operations next week.
Affects World.
The effect of the virtual standstill in banking in the United States, world's richest nation with more than a third of the world's supply of monetary gold, brought international financial transactions to a 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 well as quotations on gold. As a result, foreign exchange transactions were at a standstill in Paris and many other capitals. It was the first time the dollar had not been quoted in a number of leading capitals since the Civil war.
The New York and Chicago federal reserve banks, as well as most of the other 10 reserve institutions, closed, owing to general bank holidays, although no formal order was issued from the federal reserve board at Washington. The reserve banks of Cleveland, San Francisco and Richmond were open, however, and the Kansas City reserve institution 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 hoarding and export which had developed. The sub-treasury in New York was open and redeemed treasury certificates for gold as usual, although it paid out metal only in $5,000 bars, doing no business in coin.
Bankers Hold Meetings.
Leading New York bankers held meetings at the New York clearing house and elsewhere Saturday after seasons through Friday night and early Saturday morning, resulting in Governor Lehman's proclamation ordering a two-day legal holiday, which came at 4 a. m.
The net demand deposits of the 27 clearing house banks were reduced by $409,944,000 in the week ended Saturday the weekly clearing house statement showed, still leaving the huge total of $5,463,124,000.
Bankers explained that the rush to convert bank deposits into currency had reached a point which taxed physical facilities to meet it, although the resources of the large banks and the federal reserve system remained enormous.
A statement by the clearing house declared that the New York banks were in such condition that they "could, through facilities of the federal reserve bank, pay on demand every dollar of their deposits," but that it had been decided to call a temporary halt for the benefit "not of New York primarily, but of the nation as a whole."
No Lack of Currency.
Banking authorities said there was no lack of currency issuing facilities, or of actual currency, but that it had become imperative to check the rush for cash, to preserve the long established and efficient practice of doing business through bank checks clearances, and prevent an excess of currency which would not be needed when hysteria had subsided.
The people received the news of the holiday calmly, realizing that the steps taken were in the interest of the general welfare and that the big banks here 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 amounts of currency this week, encountered no difficulties.
Financial authorities explained that 90 per cent of the nation's business was normally transacted through the medium of bank checks and pointed out that total currency in circulation, even at the record figure of $6,720,000,000 shown in this week's report, was only a fraction of the total of more than $40,000,000,000 in bank deposits in the country, so that it was apparent the hysterical movement to convert deposits into cash had to be checked unless 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 a 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 reflecting chiefly a lack of confidence, rather than a lack of currency, or a lack of banking facilities. If currency were brought out of hoarding, it was explained, there would be more than enough, for the amount issued is now far above that outstanding in the halcyon days of 1928 and 1929.
A statement was issued by the federal reserve bank, supplementing yesterday's statement, which resulted in a sharp reduction of the gold decrease reported Friday. Friday's report, showing transactions up to 3 p. m., had indicated a loss of $116,439,600, through earmarkings for foreign account and exports, the largest reduction ever reported for a single day. It was revealed Saturday, however, that after 3 p. m., there had been a decrease in gold held for foreign account of $39,754,500, resulting in the addition of that amount to American stocks of metal.
This left the nation's gold stock at the end of the week at about $4,245,000,000, more than a third of all the monetary gold in the world, and about $336,000,000 above the level reached last June 15, as a result of the large loss of metal during the spring of 1932.
Saturday's holiday was the first emergency action which stopped gold transactions since exports of the metal were restricted in the war years, from October, 1917, to June, 1919.
The closing of the stock exchange was the first time trading has been halted in this market by economic circumstances since 1914, when the war scare forced suspension, although the bull market of 1928 and the selling panic late in 1929 forced restriction of trading hours to permit clerical forces to catch up with the work. Extended week-ends were also taken in November of 1929 to give rest to clerks who had been working night and day.
After the closing of the exchange at the end of July, 1914, no trading was permitted until November 28, when restricted dealings in bonds were resumed, and December 12, when trading was again started in stocks.
TERMS OF ILLINOIS HOLIDAY LISTED
Chicago, March 4.—(AP)—Illinois dug down in its jeans for cash Saturday to pay its way while banks shut down for a three-day holiday decreed by Governor Henry Horner.
The drastic order outlawed all checks and drafts made before Saturday unless already cleared and shut down effectively all banking in Chicago, second financial center of the country.
Downstate, here and there, bankers defied the decree and opened for business as usual, declaring themselves ready to pay the full demands of depositors. But these were exceptions.
Governor Horner remained in close touch with leading bankers. Terms of the holiday proclamation, briefly, were:
All banks in Illinois directed to close Saturday, Monday and Tuesday.
Upon reopening Wednesday for a seven-day period the banks must set aside 5 per cent of deposits as of the close of business March 3 to be paid depositors on demand.
During the period March 8 to 15 any deposits made shall be segregated and held as in trust, subject to withdrawal in full if demanded.
Any checks, drafts, etc., dated prior to March 4 shall not be honored.
Unless the holiday is extended, all restrictions cease at midnight March 15.
In the last fortnight $350,000,000 had been drained from Chicago banks alone, while the federal reserve bank's weekly report showed withdrawals of $846,515,000 by 141 banks in 36 leading cities of the seventh reserve district for the week ended March 1.
The board of trade closed along with the Chicago stock and curb exchanges, stopping trading in grain and cotton futures. Immediate steps were taken, however, to maintain a cash market for grain.
At the world's greatest packing center, the farmer still was able to sell his livestock for cash. Shipments Monday and Tuesday to the Chicago stockyards will be paid for by checks on the packers. Banks will be reopened in time to redeem the checks. After an extended conference at the Chicago livestock exchange, another conference on future plans was called for Tuesday.
The Mercantile exchange, mammoth market for futures trading in butter and egg futures, also closed its doors, but wholesale dealers were ready to transact business with the sources of supply for fresh produce. Arrangements were made to extend personal credit.
LONDON PRAISES U. S. BANK MOVE
By Associated Press.
Dollar transactions were suspended in the European capitals as a result of the American bank holidays. Tourists unable to cash checks were accommodated by hotels, travel agencies and some banks.
London — All foreign exchange quotations were suspended and there was no quotation on gold. Currency rates in Europe are based on the dollar and there was some talk of the possibility of adopting the French franc or some other currency backed by gold as basis for exchange rates. The foreign exchange policy for Monday was not certain. American branch banks were open; the bankers praised the declaration of bank holidays in the states as a move in the right direction. The stock market closed dull after a quiet session.
N. Y. CLEARING HOUSE TO ISSUE CERTIFICATES
New York, March 4.—(AP)—Plans for issuing clearing house certificates as a medium for the conduct of trade at the expiration of the state banking holiday on Tuesday were worked out Saturday by the New York Clearing House association.
At a meeting that lasted throughout the afternoon the large New York city commercial banks decided on this temporary arrangement as a means of facilitating commerce and providing a currency medium.
Mortimer N. Buckner, president of the association, said the certificates would be printed over the week end and would be ready for distribution on Monday. The only previous occasion on which these certificates have been employed here was in the panic of 1907 when about $500,000,000 of such paper was in circulation.
Clearing house certificates are paper based on bank deposits and in effect constitute currency jointly issued by a group of banks. They can be issued in small amounts.
In the present situation it was pointed out workers may find it possible to have small checks honored in trade provided those checks bear a clearing house endorsement. Adoption of this plan, it was explained, would avoid issuance of an excessive amount of currency.
RICH EXPLORER WEDS.
London, March 4.—(AP)—Philip M. Chancellor, 25-year-old millionaire explorer, was married today to Frau l
