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"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.