Evening star., 1919-12-31
NATIONS FINANCIAL
| SITUATION ACUTE
| IN HOLIDAY SEASON
Reserve Board Believes
Crisis Past, But Urges
People to Economize.
BY DAVID LAWRENCE.

which is largely responsible-has not
been acutely conscious OF the dell
cate financial situation IN which the
nation found itself in the holiday sea-
Board believes the crisis has passed,
it is, nevertheless. determined to
check speculative activity and use
it's powers and influence to cause the
American people to economize.
So many persons have thought tnat
because the federal reserve system
was constructed to bear the strains
that had previously been placed upon
our national banking system, any
burden whatsoever could be imposed
and the structure would not sag. But
the board has been compelled for the
nations good to restrict the amount
of money which member banks could
borrow of the federal reserve banks
and otherwise use its powers to check
the extensive issue of credit paper
for speculative, purposes.
Before the federal reserve act was
passed, a national bank could not
borrow more money than it's capital
stock. This infleXibility was in one
sense good thing. but in many
other cases an obstacle to business
expansion. The federal reserve sys-
TEN has permitted banks to borrow
as long as the funds were avallaoIe
in the reserve banks. In some cases
member banks have borrowed ten and
fifteen times their capital stock. Now
the federal reserve board has called
a halt. 1t is determined to prove
that the federal reserve system not
only was designed to expand upon
emergency, but to act as a check
and restraining force, too.
Cause of Uneasiness.
There is no denying the fact that the
approach of Christmas, with its tre-
mendous buying in the retail trade,
caused some uneasiness. 1t will be
remembered that the armistice came
so suddenly that the public generally
was not prepared either as purchasers
mas trade a year ago. All the pent-up
dsires Of the American people, however,
resulting from the war period OF invoi-
untary economy were let loose this year.
1t was the first great after-the-war
test. And the federal reserve system
southern banks are in excellent condi-
ton with piles of reserves. Dallas, for
instance, has IS per cent reserve. AS
rapidly, however, as the retailers OF the
west and south, who sold tremendous
stocks of goods during the holidays, be-
gin to pay their eastern balances, the
flow of money. eastward will begin.
Money is fully expected by the Federal
Reserve Board to be easier in the month
of January. But that doesn't mean
that the discount rate will be lowered
or that advances to member banks will
be resumed in unlimited quantities. 1t
does mean that the opportunity will be
at hand to take up the slack-the out
standing federal reserve notes and 9TH
er credits which have been drag on
the situation.
Much good is expected by the Federal
ton of the Edge law, which would per-
nit export organizations to be formed
to finance exports. The public gener-
ally may not realize that the United
States has a trade balance in It's favor
of nearly three billion dollars, and yet
is shipping out gold in unprecedented
bulk.
Drawing ON American Banks.
This means simply that American ex-
credit and that America is paying for
her own imports in gold in the hope Of
stabilizing the exchange market. But
while that big trade balance continues,
American concerns are drawing heavily
on our own banks for money to pay
overhead and other expenses. These
loans are serious drain.
Cannot Continue Long.
How long can they continue? Not
on her feet again in order to begin
paying her bills to America. 1t would
be serious thing for America If the
bottom dropped out of European af-
fairs. and 1t became apparent that
Americans couldn't hope to get their
money for outstanding bills, and that
production would have to be curtailed
because of stringency of credit. The
Edge law is designed to save the
country to certain extent from that
particular situation. Senator Edge
may not have intended to build up
public sentiment for the peace treaty
by his proposal to distribute foreign
securities to the American people, but
very practical argument for protec-
tion of American investments in Eu-
rope is bound to arise as soon as the
public begins buying in large Quanti-
ties the investments offered by the
new export finance organization.
II instead of few large business
orally begin to acquire credit paper
and securities that depend for their
value on the maintenance of q politi-
cal equilibrium their interest in Eu-
rope is exl ected to increase, and pres
sure upon Congress for an early defini-
ton of Americas participation in
world affairs Will come to the surface.
America Standing Strain.
There seems to be no question Of
the judgment of federal reserve off,
Gals that America Is weathering her
financial storm very well. but that she
would be immensely relieved If the
treaty OF peace were in operation and
the moral protection of orderly gov
ernments in partnership with each
other could be thrown around the ex-
port and import market.
The nation has gotten through the
Christmas season with its extraordi-
nary demands on the pocketbook in
excellent fashion. and the prophesy on
every side here is one of optimism
coupled with the expectation that the
treaty of peace when ratified will be
stimulating factor to credits and
world business.
(C0nvpi&ht 1910