New-York tribune., 1919-12-31

for credit is very great On the conf
trary, with the banks being gradually
relieved of the volume Of governm en-
securities which, directly or indirectly,
they had TO assume, the released credit
should be devoted. as far as practi-
cable, to the reduction of Indebtedness
to the Federal Reserve banks, in order
gradually to reduce the present credit
expansion"
Governor Strong's letter begins:
"You are advised that this bank has
established the following rates Of dis
count effective Immediately and until
further notice, and supers seding all ex-
listing rates:
For advances not exceeding fifteen
days and redscounts not exceeding
ninety days, AZ per cent
"'For rediscounts of agricultural
paper having a maturity at timo of re-
discount of more than ninety days, but
not more than six months, ; per cent
'lt seems appropriate at this time to
make a brief statement to the member
banks in regard to the discount pol
icy Of this bank.
Discount Policy
During the period Of active borrow
ing upon an increasing scale by the
government of the United States the
demands for credit for war purposes
exceeded the amount Of the savings fund
OF the nation available for nve stment
in government securities, so that the
discount facilities Of the Federal Re-
serve Bank were necessarily employed
to supplement the normal volume Of
credit created by savings. 1t was nee
essary, therefore, during this period
for the Federal Reserve Bank Of New
York 70 give consideration in its dis
count policy to the interests not only Of
the government and Of business, but
also OF those patriotic citizens who an
ticipated their future savings in order
to subscribe to war loans
Nov happily the income Of the gov
ernment has orertaken its expenditures
and in the month OF September there
was all actual decrease in the govern
ment debt Of about $500 600 900; the
loans which banks have made to their
customers on government securities are
steadily being reduced, and Secretary
Glass, in announcing the current offer
ing of Az per cent Treasury certifi-
Gates of Indebtedness, states that the
success Of the, issue will assure the
consummation ST the Treasury's plan
for financing the unfunded portion of
the war debt"
unexpected in Wall Street Despite
some decrease in Stock Exchange bor-
rowings since November 3, as result
Of the credit policy of the Reserve
Bank, it is said that speculation out
side of the security market in such
things as land. commodities. and the
Ike, has continued without abatement,
and as result the reserves of the
Federal Reserve Banks have been sub
stantially lowered. In the consolidated
statement Of The Federal Reserve Banks
issued last Saturday, the ratio of total
reserves to net deposits and Federal
Reserve note liabilities combined fell
to the new low level Of 4a.3 per cent
compared with AIS per cent week
ago and 500 per cent year ago.
The call money rates, winch reacne d
as high as 25 per cent Monday and
yesterday, were signals of the over
expanded credit situation.
The raise IN rates Of December II
was designed to remove the differential
IN rates IN favor Of war paper and
against acccptances. The increase an
nounced yeste rday continues the
equality Of rates. but Increases those
on advances secured by both classes Of
collateral one quarter Of / per cent