Evening star., 1918-01-22
NEED CREDIT SAVING
TO CHECK PRICE RISE
Federal Board Sees in Ex-
pansion important Impedi-
ment to War Activities.

Effect Of credit expansion on the gen
eral rise Of prices and the part the
American people can play in counter
acting imitation by wartime economies
were emphasized today by the Federal
Reserve Board in its annual report to
Congress.
Explaining that even though credit ex-
pansion is not entirely responsible for
increase in prices, the board said "it
regards it as one of its most important
duties to prevent, as far as practicable,
expansion Of banking credit from run
ming an uncontrolled course.
Goods and credit" said tho report.
must be saved to the utmost Of our
ability in order to check the upward
movement Of prices and in order to free
for the use Of the government the goods
and savings required for the winning
of the war"
Must Reduce Investments.
The present condition of greatly ex-
panded currency will be improved, the
board believes, 'as tho public performs
loans out of savings" Before the third
liberty loan, the report adds. federal re-
serve banks must reduce their invest
ments to strengthen reserves and avoid
the last two liberty loans. The board
does not say specifically how 1t pro-
poses to do this.
Among the many radical influences Of
the war on the money markets, the
board explained that one Of the most
pronounced had been the effort OF cor
tain interests to have the federal re-
serve system absorb ninety-day notes
or other short-term paper accepted
with the privilege of repeated renewals.
such effort to destroy liquidity Of the
bankers assets, on which the system
was based. the report said. but 1t ad-
mitted that the difficulties of private
and corporate financing was SO great as
The most serious problem, corporate
financing, has been removed by govern
ment operation of railroads, says the
boards report, but the situation is still
serious.
Suggests Action by Congress.
THE board. therefore. respectfully
suggests consideration by Congress OF
the problem Of corporate financing. in
the belief that no satisfactory solution
will be found that does not involve
some degree Of governmental Interven-
ton. The board is Of the opinion that
some plan for government Intervention
or aid can be worked out which would
meet the requirements Of the situation
satisfactorily
Referring to tho enormous strain on
finances during the past past year ~, OF shs ne
given by the federal reserve system,
the report says:
THE federal reserve note will more
speedily attain the position originally
intended for it. From being occasional
emergency currency used to supple
ment deficiencies in the supply OF other
existing forms OF currency it is be-
coming tho most important constituent
Of our circulating medium, responding
promptly and naturally to currency re-
quirements from whatever source pro-
ceeding, this giving to our whole cur
rency a kind and degree of elasticity it
has never before possessed"
Bank Earnings for 1917.
Earnings Of tho twelve federal reserve
500, 900 gross and $1,000. 900 net. with
declared dividends Of about $1,000, ,000-
The boards expenses have been little
less than $25o.0oo. and the cost Of ad-
ministering the gold settlement fund has
been only $500. or l 1-3 cents per $1,000.
The entrance Of state banks and trust
companies during the year strengthened
the system greatly. says the report. Al
though the gold reserves increased enor-
mousl in quantity. the proportion OF re-
serves to deposits fell in proportion to the
expansion OF credit. s-, a.
No radical amendment of the reserve
act are suggested, although a few minor
changes are recommended. They include:
Election OF directors Of reserve banks by
a simpler method: provision for printing
bigger denomination Of federal reserve
notes: provision for Incorporation of for
eign trade banks under federal reserve
charter and permission for national