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Argus (Melbourne) Tuesday 28 February 1933
MR. FORD TO RESCUE MICHIGAN BANKS.
LOAN OF £1,600,000.
Huge Advances Granted.
NEW YORK. Feb.26.
The banking situation in Michigan which
was regarded as extremely serious, appeared
to be at least partially solved to-night when
Mr Henry Ford offered to lend his vast
liquid financial assets to assist in over-
coming the difficulty. He personally sub-
scribed his entire capital stock of about
8,000,000 dollars (normally about £1,600,000)
in two large banks at Detroit, the weak-
ness of which has involved the whole bank-
ing system of the State. With the promise of
Mr Ford's help the Reconstructing Finance
Corporation at Washington has agreed to
lend the First National Bank 54,000,000dol-
lars (normally about £10,800,000) and the
Guardian National Bank 24,000,000 dollars
(normally about £4,800,000.)
The exact effect of the loans upon the
complicated financial condition of the
States cannot be predicted, but it is esti-
mated that it will make about 35 per cent
of the deposits in the two banks avail-
In making his offer Mr Ford stipulated
that he must have complete control of the
two banks and that he must be allowed to
appoint the directors. Furthermore, he
must have power to merge them if that
seemed to be desirable.
In the meantime the "wave of bank
moratoriums" which have been applied in
Michigan and Maryland has reached else-
vvhere in other forms. Many States have
passed or they are considering passing laws
granting State banking officials almost dic-
tatorial discretion to close banks, limit
withdrawals, and arrange reorganisation,
liquidation, or reopening. In a few iso-
lated cases action has been taken which
appears to be illegal. For example, the
Ohio Town Council has declared a banking
"holiday" on its own authority. Officials
in Maryland are said to be trying to devise
a concrete plan which will allow the banks
to be reopened on Wednesday.
The Governor (Mr. Ritchie) said to-day
that unusually heavy withdrawals had
made his decree closing the banks for three
days necessary. A bill providing for the
control of withdrawals would be rushed
through the State Legislature.
Loss of Public Confidence.
Many bankers attribute the unstable con-
ditions not only to the vast "frozen assets"
held by the banks, but to the loss of public
confidence caused by the publication of de-
tails of loans granted by the Reconstruc-
tion Finance Corporation and by the evi-
dence given at the lnquiry by the Senate
Committee into the affairs of several large
banks which has revealed irregular prac-
As the Couzens Bill, which was passed by
Congress on Saturday, in effect gives Fede-
ral officials the same control over national
banks as that given State officials over
State banks it is obvious that the Govern-
ment is preparing to take drastic steps to
protect depositors. At the same time it is
recognised that the widespread closing of
banks will seriously interfere with normal
business. The Hoover Administration's
policy of supporting the banks w¡th the Re-
construction Finance Corporation's funds
has clearly not been completely successful,
and there is sure to be much agitation in
the next session of Congress for the limi-
tation of the corporation's activities.
The period immediately preceding the
change of Administrations has been marked
by much nervousness in the financial com-
munity, and it is hoped thnt Mr Ford's
action will help to counteract it. Never-
theless there has been a considerable flow
of capital into banks in New York, which
are admittedly the strongest in the country.
Surprise was created to-night when Mr.
Charles Mitchell, chairman of the New
York National City Bank, one of the largest
banks in the United States offered to re-
sign. He said that evidence given at Wash-
ington before the Senate Committee ap-
pointed to inquire into activities on the
Stock Exchange had aroused much criti-
cism. The committee had ascertained,
among other things, that banks had specu-
lated in their own stock, sometimes selling
it short. It had also been rumoured that
there had been a considerable flow of capi-
tal into Canadian banks.
[About a fortnight ago the Governor of
Michigan (Mr. Comstock) declared a
"public holiday" for eight days for banking
institutions in that State. This "tied up"
1,510,3866,767 dollars (about £300,000,000) in
the 550 banks and trust companies in the
State. Mr. Comstock took action in new
of the acute financial emergency in the City
of Detroit and other parts of the State.
Last Friday the Governor of Maryland
(Mr. Ritchie) declared Saturday, yesterday,
and today legal "holidays" for all the bank-
ing and financial institutions in Maryland.
This step was taken to give the banks an
opportunity of taking measures against
Withdrawals by Depositors.
Restrictions in More States.
WASHINGTON. Feb. 27.
Thirty-six hours after the United States
Government had armed itself with sweep-
ing powers to protect the national banks
against public hysteria, bankers in parts of
Ohio and Indiana followed the lead of those
in other States in which restrictions have
already been placed on withdrawals by de-
positors. The situation in Michigan seems
to be clearing as a result of Mr Henry
Ford's coming to the aid, but the imposi-
tion of banking restrictions is spreading in
Ohio, and banks in Indianapolis (Indiana)
have announced the placing of restrictions
upon withdrawals until further notice.
The Governor of Ohio (Mr. White) has
promised that legislation will be introduced
at an early date to prevent the declaration
of a Statewide banking "holiday."
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