"Unmitigated Gloom"

London Correspondent Harold E. Scarborough of the New York Herald Tribune cabled last week:

"If London last week viewed the international situation with misgiving, 'unmitigated gloom' would be the only phrase to characterize this week's mood. Only on one or two occasions since the war has the British capital indulged so openly in alarmist talk.

"On Thursday afternoon the city of London gave itself up to a perfect orgy of gloom, and one friendly financier warned his newspaper friends that they had better draw what cash they were likely to need for some time, as the Bank of England was going to close its doors on Monday! This was merely a prize specimen of the crop of rumors."

Within three weeks $160,000,000 in gold had been drawn from the vaults of the Old Lady of Threadneedle Street, chiefly for France. This drain on the Old Lady slowed down but did not stop entirely fortnight ago when the bank raised its discount rate to 4 1/2%. British bankers well knew that France still had credits of over $630,000,000 in Great Britain. If she wanted to, France could draw out every bar of gold in the bank. The Daily Herald, organ of the Labor Government, minced no words: "We are in the presence of a deliberate and considered attempt on the part of certain French interests to break down British credit on the continent."

Then Sir Robert Kindersley went to Paris and more stories began. Sir Robert is a director of the Bank of England and of the French banking firm of Lazard Bros. & Co., Ltd., in London. Was he going to Paris to beg aid from the French for the proudest bank in the world? Scot MacDonald, about to leave Berlin for London, attempted to deny the rumor:

"The old saying 'Sound as the Bank of England' is as true today as it ever was. I'm not worried a bit."

French editors quite calmly asserted that Sir Robert Kindersley was in Paris to borrow money, and preached a little sermon to French voters blaming Great Britain's money troubles entirely on the "reckless spending" of the Labor Government. They hinted that this was what might happen to France if the Laval cabinet should fall and a government of the Left should take power.

The whole affair was bitter to British pride. Sir Robert returned to London. An announcement appeared: "Sir Robert Kindersley went to Paris to discuss hypothetical possibilities and not immediate steps." Three days later he was back in Paris again. There was no denying his intentions this time. Telephone wires to the U. S. were busy all night. The Bank of France and the Federal Reserve Bank of New York jointly extended the Bank of England a credit of -L-50,000,000 ($243,000,000) for three months at 3 3/8%, secured by prime commercial bills, i. e. paper of British firms, endorsed by the Bank of England.

After the announcement of the credit, news leaked out that the reason Sir Robert had returned to London in the midst of the negotiations was that France was as usual demanding as the price of a loan, political concessions which he had no power to grant.

Last week's credit was the first the proud Bank of England has needed since 1925, when with the return of Great Britain to the gold standard a gold credit of $200,000,000 was placed at the Bank of England's disposal by the Federal Reserve Bank of New York. Announcement of that loan was enough. It was never drawn on. British bankers devoutly hoped last week that actual use of this new credit would be unnecessary too.

Wiggin. Another indirect promise of help for Britain came from the U. S. last week. Albert Henry Wiggin, board chairman of Chase National Bank (world's biggest) sailed for Europe to take his place as U. S. representative on the Bank for International Settlements' committee to study Germany's credit needs and the possibility of turning short term credits into long terms. Great Britain's troubles are interwoven with Germany's. Chairman Wiggin will have to ponder them as well. Englishmen remembered last week that as long ago as January Chairman Wiggin urged a general reduction of War debts as a simple matter of "good business."

Budget Slash. At the time of the German loan discussions in Paris three weeks ago, British Foreign Secretary Arthur Henderson blurted out a statement that nearly caused his resignation from the Cabinet: "If Germany declared a moratorium, England will be forced also to declare a moratorium."

That blunt remark, truer than most statesmen liked to have known, not only frightened the British cabinet but frightened the great house of Rothschild, whose wealth is as much in Great Britain as on the continent. Through their Paris and their London houses the Rothschilds exerted every pressure to stop the French run on British gold, to push through the Franco-U. S. credit to the Bank of England. But if Britons needed any further knowledge of their country's precarious finances it came at Westminster when on the day that Parliament adjourned the Government's Economy Commission, appointed last spring, presented its recommendations for an immediate slash of $469,370,000 in the budget.

"The nation cannot go on borrowing to meet its current requirements," said the report. "Unless some way is found by which party leaders can modify their election pledges, democracy will suffer shipwreck." Recommendations:

1) A reduction of 20% in all doles, an increase in contributions by workers and employers to the dole fund.

2) Reduction of school teachers' salaries by 20%, police salaries by 12 1/2%, soldiers and sailors' pay to the 1925 level.

3) Cut of at least 50% in Government grants for research and education.

4) Postponement of $40,000,000 worth of road construction and maintenance.

5) Sale or scrapping of the expensive airship R-100; limit of expenditures on airships to $100,000.

6) Publication of a comprehensive review of the country's financial position more often than once a year at the introduction of the budget.

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