Today in Washington

Washington, October 26, 1933.

From various parts of the country is coming the complaint that the left hand at Washington does not know what the right hand is doing.

A case in point is the insistence by the administration on a liberalizing of credits by the banks and also an appeal to business to increase wages and buy now its materials and requirements. But concurrently the bank examiners are going up and down the land competing with each other in zealous attempts to find assets in banks that should be written off. Indeed, many banks consider it necessary to call loans they have been carrying and the customers are being told that banks have to be put into good condition so as to qualify for the insurance deposit scheme which goes into effect on Jan. 1.

Now the Reconstruction Finance Corporation is ready to lend to banks and to buy their preferred stock if they need it to carry loans, but the banks which might be willing to do what the R.F.C. suggests are finding it difficult to meet the wishes of another branch of the government which conducts the examination of banks.

These conflicts probably will be in due time ironed out but they constitute deflationary influences which are preventing a demand for goods and products from achieving natural growth--something that would bring the price level up faster than any tinkering with gold prices by buying and selling bullion.

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Another deflationary influence is the failure of the business concerns of the country which need refinancing of their long term securities to find such funds. The banks will not lend them money to pay off such securities and the channels of investment banking have been practically inoperative ever since the securities law was passed. The administration as yet shows no signs of relenting and virtually every criticism on this point is brushed aside as so much Wall Street comment.

But a condition and not a theory faces the government. The investment banking market is closed for all practical purposes and the banks will not furnish capital credit. Large blocks of capital are going abroad to seek investment. It is far from a healthy situation, even if Wall Street is expressing self-interest in failing at this time to engage in much underwriting.

The President's announcement of gold policy has renewed the investor's uneasiness at a time when it was believed the conversion policy of the treasury had constituted a reassurance to long-time capital. But it is too early to tell what corrective influences will be brought to bear to improve investor psychology. Certainly there are people inside the administration who feel that, unless capital owners see safety ahead, much of their money will join the billions that have gone abroad already to await there definition of American purposes and policies.

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Unquestionably too much emphasis has been placed on gold policy in relation to prices. The government here is being slowly forced to keep commodity prices on the exchanges from sinking, hence we may expect stabilization efforts through purchases for relief purposes and through the granting of commodity loans.

The administration would prefer to have observers consider the whole picture rather than any single factor such as the buying of gold bullion. The' experiment being tried in 'endeavoring to regulate gold prices is not for a few weeks but for a relatively long period certainly until well after Congress ha reconvened, and perhaps the President will wish even then not to interrupt who will have begun to be an exchange stabilization fund for the American govern ment analogous to that established by Great Britain.

The chief difference of course is that the British have balanced their budget and are not borrowing vast sums, while the American government is running in the red at what may be between two and three billion dollars this fiscal year, even assuming large returns from the liquor taxes