Banque & Blow

In Paris last week, against a backdrop of grenadine velvet, the Bank of France staged its first meeting since Premier Blum enfranchised the Bank's 40,000 hitherto voteless stockholders. Sole control previously rested in the potent hands of the 200 largest shareholders-"the 200 Families of France" (TIME, May 18, et seq.). With a turn-out of no less than 1,300 excited Parisian and provincial shareholders, the meeting was as raucous as a stormy session of the Chamber of Deputies. It took Governor Emile Labeyrie three hours to get through his scholarly 90-minute report, so often was he interrupted by catcalls, loud expressions of dissent and ironic cries of "Vive la Banque!" Wide open was the governor to shareholders' jokes, for his report, written a while before, was crammed with cheer, confidence and numerous vows to defend the franc and the low rediscount rate. At the moment the franc was sinking, the Bank of France had just hiked the rediscount rate from 2% to 4% and the state of the franc required Britain's aid in the form of a $250,000,000 loan (see p. 24).

Meantime in Wall Street the franc's turn for the worse intensified the current jitters over the outlook for U. S. money rates. Another boost in bank reserve requirements to sop up potential credit had been expected for months. That the move would mean a reversal in the long downward trend of interest rates was by no means a remote possibility, and bond prices accordingly tumbled.

Moreover, in Washington there were going on an astonishing number of mysterious money meetings. The heads of the twelve Federal Reserve Banks were in conference, the Federal Reserve's open market committee was closeted all one day, the Reserve Board itself was in frequent session. At the Treasury, Secretary Morgenthau was meeting with such oddly assorted people as State Department experts, President George L. Harrison of the New York Federal Reserve Bank and old Oliver Mitchell Wentworth Sprague, the onetime Treasury adviser who quit the New Deal in a huff.

What Mr. Morgenthau was up to remained unexplained but at week's end Chairman Marriner Stoddard Eccles of the Federal Reserve Board cleared the atmosphere by announcing the long-awaited increase in reserve requirements. The raise was 33 1/3%, which coming on top of the 50% raise last summer was the full limit allowed by law. One-half of the increase will go into effect March 1, the other half May 1. .

'Net result will be to reduce excess reserves from the current figure of $2,200,000,000 to an estimated $500,000,000, an amount, in the opinion of Mr. Eccles, "ample to finance further recovery and to maintain easy money conditions." Since the Treasury is now "sterilizing" gold imports by putting them in cold storage instead of letting them seep into the credit system (TIME, Jan. 4), the threat of a further expansion in excess reserves has been largely removed. And with the present total shaved to a figure within the reach of the standard tools of credit control--the rediscount rate and open market operations in government bonds--Chairman Eccles is now battened down for a boom blow.

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