Signed & Sealed

Seventeen minutes flat was the time it took Germany's famed "Iron Man," Dr. Hjalmar Horace Greeley* Schacht, to read entirely through before he would sign, last week, the Charter and Statutes of Europe's new Bank for International Settlements (TIME, Sept. 23 et seq.). The official text, adopted after a six-week negotiation by world potent bankers at Baden-Baden, is in English. Delegates from the U. S., Britain, France, Italy and Japan signed without conning over a document with which all, including Dr. Schacht, were excessively familiar. That made six signatures. The seventh--Belgium's--was not affixed last week. The Belgian delegates huffed and withdrew (TIME, Nov. 18) when Basle, Switzerland, was selected instead of Brussels as the bank site.

Last week's pen-squiggling was provisional. Potent though they are, the bankers must submit their handiwork to statesmen of the Great Powers and small Belgium at a Second Hague Conference, expected to convene within six weeks. Last week, however, the Baden-Baden bankers did what they could to make their signatures imposing. They had no Great Seal. They could not use the seals of their own banks, sacred to commerce. But the smart Chicagoan secretary of the conference, Dr. Lichtenstein, had a watchcharm seal: "W. L." Pressing this upon a hot red splotch of wax, Mr. Lichtenstein* sealed with humorous pomposity a business paper more vital than many a treaty. In effect it is the blueprint design for a giant cash register through which Germany will pay some nine billion-dollars in Reparations over 58 years.

Thirteen Padlocks. On every drawer of the new Cash Register are U. S. padlocks. Thirteen of the 60 articles in the Statute were drawn wholly or in part to protect the U. S. Federal Reserve, which, under Article Twenty, has power to veto any dollar transactions contemplated in any country by the Bank. Getting this clause adopted was the major triumph at Baden-Baden of the two U. S. representatives, short, stocky Jackson Eli Reynolds and lanky, drawling Melvin Alva ("Mel") Traylor, presidents of the First National Banks of New York and Chicago, respectively.

Some of the U. S. safeguards are one-way padlocks. Thus, the U. S. will not be officially a party to the founding of the Bank, but may at any future time receive all the rights of a Founder Power by assuming responsibilities which the Hoover Administration declines to undertake. Most of the rights in question are secured to the U. S. anyway by the "Veto Clause" (Article Twenty).

"Messrs. X and Messrs. Y." Capital of the Bank will be $100,000,000. The share of Japan and the U. S. will not be subscribed by their central banks--as in the case of Britain, France, Italy and Belgium--but, according to Article Six, by "Messrs. X, acting in place of the Bank of Japan, and Messrs. Y of New York." Of course "the Messrs. Y" will be J. P. Morgan & Co. Thus without putting up a cent the Federal Reserve--traditionally in closest touch with the House of Morgan --will have a major "phantom stake" in the Bank. The same arrangement appealed to cautious, bespectacled Emperor Hirohito of Japan, who, by advice of Prime Minister Yuko Hamaguchi, prefers like President Hoover to keep-the-government-out-of-business. Japan's "Messrs. X" will be a consortium of 14 banks, led by the Bank of Japan, the Mitsui Bank and the Yokohama Specie Bank.*

Direction, Procedure, Powers. On these three points the Statute released last week merely confirmed earlier official announcements (TIME, Oct. 28). The Chairman of the Bank will be elected by a Board composed of representatives of the central banks and of Messrs. X and Y. Mere ownership of shares carries no voting rights. These rest permanently with the members of the Board "in proportion to the number of shares subscribed in each country" according to Article 15.

In founding the Bank, 44% of the stock will be reserved for future purchase (at the discretion of the Board) by minor nations such as, for example, Czechoslovakia.

Rules of procedure allow the Board to meet anywhere in Europe, though they must gather at least four times a year in the Bank headquarters at Basle. Monthly statements and an annual report must be made public.

Finally the Bank is to have nearly all the powers of a clearing house for funds and credits of every kind,* but scarcely any of those exercised in general business financing by an ordinary bank or bank-of-issue./- Jealously decreed these prohibitions. They were forced upon the Baden-Baden bankers by the European banks of issue--especially the Bank of England-- which feared the competition of anything like a "World Bank." The new Cash Register thus does not measure up to the original grand conception of Owen D. Young and the drafters of the Young Plan (TIME, Feb. 18 to June 10). They advised that the Bank--chief organ of the Plan--should provide "useful instruments for opening up new fields of commerce and of supply and demand," should contribute to the "stability of international finance and the growth of world trade."

Chairman? Chairman? As the delegates left Baden-Baden, New York's Jackson Eli Reynolds, though he had served as Chairman of the Conference with brilliant, driving power, was not mentioned as prospective Chairman of the Bank. Taciturn in the extreme with correspondents, he had earned their ire. He would not even give out the text of the Statutes, forced them to get it from Germany's offish Schacht, usually the closest oyster at any conference. Perhaps in irritation the newshawks made little of the fact that Mr. Reynolds went straight from Baden-Baden to Paris for a conference with representatives of the House of Morgan. The reporters favored instead as prospective chairman Chicago's drawling "Mel" Traylor.

Certainly Mr. Traylor acted as if he would find it hard to say no to the nomination. Earlier in the day he visited Basle, 80 miles south of Baden-Baden, inspected a building offered by the Swiss Government to the Bank, discussed with Swiss officials the project of a treaty which would exempt all funds and operations of the Bank from Swiss taxation. Also he talked to correspondents in a way which must have pleased the Governors of Europe's central banks who will elect the Chairman. Said he "... These governors of central banks are probably the most conservative group of bankers in the world and have a clear knowledge of the dangers of mixing politics and banking. . . .

"[The Bank's] primary purpose, at least for some time, will be that of trustee for the payment of German reparations. . . .

"I feel, in fact, that no country and no central bank or other institution has grounds for fearing competition."

Kept secret last week, though signed by the Baden-Baden bankers and made ready for consideration by the Second Hague Conference, was the so-called Deed of Trust under which payment of German Reparations will actually be conveyed to the Bank for distribution to the Allied Powers under the Young Plan. Last week, while this and indeed the whole Bank project awaited tinkering at The Hague, it seemed certain only that "Messrs Y" of No. 23 Wall Street will decide whether Mr. Reynolds. Mr. Traylor or perhaps a Mr. Z. will punch as chairman the Biggest Cash Register.

Omen of Harmony: on leaving the conference last week Leader Lichtenstein sped to Brussels, approached with soothing words the huffy Belgian delegates who had refused to sign at Baden-Baden last fortnight, offered his fountain pen, got their signatures. Before signing. Governor of the Bank of Belgium Louis Franck added a reservation that, while approving everything else in the Statutes and Deed of Trust, he does not approve location of the Bank at Basle.

* Not to be confused with H. S. H. Prince Franz of Liechtenstein, sovereign of the least populous principality in Europe, Liechtenstein (pop. 11,500) adjoining Switzerland. Seller Lichtenstein, born in Germany, took his A.B., A.M. and Ph.D. at Harvard, stayed on as Curator of Harvard's Hohenzollern Collection (books) until after the War, then went, aged 38, to Chicago's First National Bank, where he is Executive Secretary.

* Together the 14 banks will buy Japan's $8,000,000 allotment of shares in the Bank for International Settlements, will be represented on its board by Mr. Tetsujiro Tanaka, London representative of the Bank of Japan.

* Under Article 22 powers of the Bank include: buying and selling of gold for its own account of the central banks; holding gold for its own account under the earmark of the central banks; accepting custody of gold for the account of the central banks; making advances to or borrowing from the central banks against collateral of prime liquidity; buying and selling of exchange for its own account or that of the central banks; buying and selling of negotiable securities other than shares, and maintaining of current or deposit accounts with the central banks.

/- Under Article 25 acts forbidden the Bank include: issuing currency; acceptance of bills of exchange; making advances to governments; opening of current accounts in the names of governments; acquiring predominant interest in any business concern; owning real estate, except when unavoidable.