THE PRESIDENT: It is very good to see you all. My hope is that these conferences are going to be merely enlarged editions of the kind of very delightful family conferences I have been holding in Albany for the last four years.
I am told that what I am about to do will become impossible, but I am going to try it. We are not going to have any more written questions; and, of course, while I cannot answer seventy-five or a hundred questions because I simply haven't got the time, I see no reason why I should not talk to you ladies and gentlemen off the record in just the way I have been doing in Albany and in the way I used to do in the Navy Department down here. Quite a number of you, I am glad to see, date back to the days of the previous existence which I led in Washington.
And so I think we shall discontinue the practice of compelling the submitting of questions in writing before the conference in order to get an answer. There will be a great many questions, of course, that I won't answer, either because they are "if" questions—and I never answer them—and Brother Stephenson will tell you what an "if" question is—
MR. STEPHENSON (Reporter): I ask forty of them a day.
THE PRESIDENT: And the others, of course, are the questions which for various reasons I do not want to discuss, or I am not ready to discuss, or I do not know anything about. There will be a great many questions you will ask that I do not know enough about to answer.
Then, in regard to news announcements, Steve (Early, Assistant Secretary to the President) and I thought that it would be best that straight news for use from this office should always be without direct quotations. In other words, I do not want to be directly quoted, unless direct quotations are given out by Steve in writing. That makes that perfectly clear.
Then there are two other matters we will talk about: The first is "background information," which means material which can be used by all of you on your own authority and responsibility, not to be attributed to the White House, because I do not want to have to revive the Ananias Club. (Laughter)
Then the second thing is the "off the record" information which means, of course, confidential information which is given only to those who attend the conference. Now there is one thing I want to say right now about which I think you will go along with me. I want to ask you not to repeat this "off the record" confidential information either to your own editors or to your associates who are not here; because there is always the danger that, while you people may not violate the rule, somebody may forget to say, "This is off the record and confidential," and the other party may use it in a story. That is to say, it is not to be used and not to be told to those fellows who happen not to come around to the conference. In other words, it is only for those present.
Now, as to news, I don't think there is any. (Laughter)
Steve reminds me that I have just signed the application for Associate Membership in the Press Club, which I am very happy to do.
Q. Will you go to Congress or send your message?
THE PRESIDENT: Send it.
Q. When will it be available here for us?
THE PRESIDENT: Judging by the fact that I haven't started to write it, I should say at the very last minute possible. I shall let you have it as soon as I can. Of course it will be for release when transmitted. I doubt very much if you will get it very much more than half an hour before it is taken to the Capitol.
Q. Will it be brief?
THE PRESIDENT: The situation demands brevity.
Q. On the Hill they say you only recommend emergency stuff, and that Congress will possibly adjourn next Monday or earlier and reconvene a short time after, and take up permanent stuff as well as your complete program. Is that your idea of it?
THE PRESIDENT: I think I can put it this way—and this comes under the second category, "background information" and "not off the record," because there is no reason why you should not use it in writing your stories. The general thought at the present time is that it is absolutely impossible by tomorrow to draft any complete or permanent legislation either on banking, or on budget balancing, or on anything else, because the situation, as you all know, is changing very much from day to day, so much so that if I were to ask for any specific and detailed legislation it might be that the details will have to be changed by a week from today. Therefore it is necessary—I think you can make a pretty good guess—that I shall have to ask for fairly broad powers in regard to banking-such powers as would make it possible to meet the changing situation from day to day in different parts of the country. We cannot write a permanent banking act for the Nation in three days. That is about the size of it.
Q. Do you favor national scrip or scrip issued by clearing houses?
THE PRESIDENT: Well, there again you are getting down to details and a very good illustration of why you cannot ask for too detailed legislation. About Monday, the day before yesterday, a very, very wide use of scrip seemed necessary; and by last night it looked possible to avoid such a general use of scrip. But it does not mean that scrip will be eliminated by any means. Scrip may be used in many localities, pending the working out of a sounder plan and more permanent. plan to get additional currency into use. Now, I can't tell you any more about that, because we are still working on the details, but essentially it means an addition to the available currency. . . .
Q. You mentioned in your greetings to the Governors on Monday that you favored a unified banking system. Is that in your emergency plan?
THE PRESIDENT: That wasn't quite the way I put it to them. What I said to them was that it was necessary to treat the State and national banks the same way in this emergency, so there would not be two different classes of banks in this country; and the other thing I said was to try to avoid forty-eight different plans of putting this into effect.
Q. Do I understand you are going to keep hold of this banking situation until permanent legislation is enacted?
THE PRESIDENT: Off the record answer, yes.
Q. Your idea is that after getting through the emergency you may get a breathing spell until the permanent program is in form.
THE PRESIDENT: Yes, I was coming to that. This is what might be called the "present thought" because everything is subject to change these days within twenty-four or even twelve hours. The general thought is that we would try to get through the two or three emergency matters as quickly as possible, and that then—and, mind you, I haven't even talked to the Congressional leaders about this, so there is no agreement on it—Congress should recess for I don't know how long a time but not for very long—for a matter of two or three weeks—to enable me to work out and draft more permanent legislation. . . .
Q. What is going to happen after Thursday night, Mr. President, when the holiday ends? Are you going to call another one?
THE PRESIDENT: That depends on how fast things move.
Q. Depending on what Congress does too?
THE PRESIDENT: (Nods) Of course, in regard to certain phases of the financial situation, undoubtedly there will be necessary some additional proclamations. That includes, for example, the question of control of gold. That is obvious. As long as nobody asks me whether we are of[ the gold standard or gold basis, that is all right, because nobody knows what the gold basis or gold standard really is. If you want a definition of the gold standard, read my friend Robey's story in the New York Evening Post of last night. I think it is about as good a definition as there is. It is quite short and if you would like to hear it, I will read it to you. It is a pretty good document.
AUDIENCE: If it really tells us what the gold standard is —
THE PRESIDENT: It is pretty good. It doesn't say whether we are on or off it. (Reading)
"Declaration of the national moratorium has raised the question in many minds as to what constitutes a gold standard. More specifically many people have wondered whether the United States by this action has suspended the gold standard in a true sense. The Treasury officials and some of the bankers maintain that we have not. Obviously, the answer to the question rests upon one's conception of what it is necessary for a country to do in order to maintain a metal standard.
"This is a problem which can be answered with definiteness. Over a long period four things have come to be recognized as requisites of a gold standard. When a country is complying with these it is on the standard. When it does not it is off the standard.
"The first of these requisites is that there shall be a coin of definite weight and fineness. This, of course, is established by law. In the United States the standard unit is the dollar, consisting of 25.8 grains, 9-10 fine, or 23.22 grains of pure gold."
Well, of course on that first requisite we are on the gold standard.
"The second requisite is that there be free and unlimited coinage. In a country upon a gold standard one may take any amount of the metal to the Government and it will be coined into dollars of the established weight or rate. Whether a brassage charge is made is of no significance. Put in other words, this means that the Government will buy gold at a set price. In the United States this is about $20.67 an ounce."
Well, we are still on the gold standard, and the more people who bring gold to have it made into money the better.
"The third requisite is that there be convertibility of paper money into gold. This, in a sense, is the reverse side of free and unlimited coinage. In other words, just as one can take any amount of gold metal to the mint and get money in return at a definite rate, so he can take any amount of currency and get gold at a definite rate. In the United States we have seven kinds of paper money, some of which are not directly redeemable in gold according to the law but all of which under the gold standard act of 1900 must be kept at a par with gold."
Well, you can draw your own conclusions as to that.
"The final requisite is that there must be free movement of gold. This is of significance in the exportation of gold. It is through the enjoyment of this freedom that the currency of one country is kept at an approximate equilibrium with the currency of other Nations. Only when there is not such freedom of import and export of gold does the currency of one country fall to any substantial discount in relation to another currency."
Well, of course on that question of the foreign trade in gold, for a good long time as a matter of actual fact the United States has been the only country on the gold standard. France has been theoretically on a gold standard, but nobody in France can take a bill to the bank and get gold for it; and, as far as imports and exports go in France, they have been Government-controlled. The same thing holds true in Switzerland and Holland. Only up to last Sunday night we have had free trade in gold; and now we haven't. . . .
Q. May I ask if the long-time settlement of the banking situation is intermeshed with the World Economic Conference?
THE PRESIDENT: I should say on that—background information—so far as banks go within the United States, no; so far as international exchange goes, yes. I think that is the easiest way of putting it. In other words, the opening of banks and the maintaining of banks once they are opened are not connected with the World Economic Conference.
Q. In your Inaugural Address, in which you only touched upon things, you said you are for sound and adequate . . .
THE PRESIDENT: I put it the other way around. I said "adequate but sound."
Q. Now that you have more time, can you define what that is?
THE PRESIDENT: No. (Laughter.) In other words—and I should call this "off the record" information—you cannot define the thing too closely one way or the other. On Friday afternoon last we undoubtedly did not have adequate currency. No question about that. There wasn't enough circulating money to go around.
Q. I believe that. (Laughter.)
THE PRESIDENT: We hope that when the banks reopen a great deal of the currency that was withdrawn for one purpose or another will find its way back. We have got to provide an adequate currency. Last Friday we would have had to provide it in the form of scrip, and probably some additional issues of Federal Bank notes. If things go along as we hope they will, the use of scrip can be very greatly curtailed, and the amounts of new Federal Bank issues, we hope, can be also limited to a very great extent. In other words, what you are coming to now really is a managed currency, the adequateness of which will depend on the conditions of the moment. It may expand one week and it may contract another week. That part is all off the record.
Q. Can we use that part-managed?
THE PRESIDENT: No, I think not. . . .
Q. Now you came down to adequacy; but you haven't defined what you think is sound. Don't you want to define that now?
THE PRESIDENT: I don't want to define "sound" now. In other words, in its essence—this is entirely off the record—in its essence we must not put the Government any further in debt because of failed banks. Now, the real mark of delineation between sound and unsound is when the Government starts to pay its bills by starting printing presses. That is about the size of it.
Q. Couldn't you take that out and give it to us? That's a very good thing at this time.
THE PRESIDENT: I don't think so. There may be some talk about it tomorrow.
Q. When you speak of a managed currency, do you speak of a temporary proposition or a permanent system?
THE PRESIDENT: It ought to be part of the permanent system that is off the record—it ought to be part of the permanent system, so we don't run into this thing again. . . .
Q. Can you tell us anything about guaranteeing of bank deposits?
THE PRESIDENT: I can tell you as to guaranteeing bank deposits my own views, and I think those of the old Administration. The general underlying thought behind the use of the word "guarantee" with respect to bank deposits is that you guarantee bad banks as well as good banks. The minute the Government starts to do that the Government runs into a probable loss. I will give you an example. Suppose there are three banks in town; one is 100 percent capable of working out, one 50 percent and another 10 percent. Now, if the Government assumes a 100 percent guarantee, it will lose 50 percent on one and 90 percent on the other. If it takes on a 50 percent guarantee, it will lose nothing on the first and second, but will lose a lot on the 10 percent solvent bank. Any form of general guarantee means a definite loss to the Government. The objective in the plan that we are working on can be best stated this way: There are undoubtedly some banks that are not going to pay one hundred cents on the dollar. We all know it is better to have that loss taken than to jeopardize the credit of the United States Government or to put the United States Government further in debt. Therefore, the one objective is going to be to keep the loss in the individual banks down to a minimum, endeavoring to get 100 percent on them. We do not wish to make the United States Government liable for the mistakes and errors of individual banks, and put a premium on unsound banking in the future.
Q. That is off the record?
THE PRESIDENT: Yes.
Q. Couldn't you make it background? There is a demand for the guarantee proposition.
THE PRESIDENT: As long as you don't write stories to give the average depositor the thought that his own particular bank isn't going to pay. That is what I want to avoid, because, when you come down to it, the great majority of banks are going to pay up. There will be many other banks which won't pay out the whole thing immediately, but will pay out 100 percent in time. There will be a very small number of banks that will probably have to go to the Examiner; but I don't want anybody to get the idea in reading the stories that the average bank isn't going to pay one hundred cents on the dollar, because the average bank is going to pay it. . . .