The Washington herald., 1920-05-19
.RESERYEBOARD
PLANS
Harding Urges Adoption ol
Sound Banking 80
Policy. s
RESOLUTION ADOPTED
Class "A" Directors Sup
port Increase in Dis
count Rates.
RESOLUTION ADOPTED

banking operations OF the eoun.
try must be placed upon > soundef
and more conservative basis. n se-
rious consequences are 20 be
averted," Governor Harding. Of the
Federal Reserve Board. yesterday
told directors OF the Federal Re.
serve banks in meeting with the
board 60 discuss the present trend
/ Of financial operations. The Fed
eral Reserve bank directors meet
ing with the board yesterday were
those oficial representatives. OF the
business and financial interests OF
each Federal Reserve district
Governor Harding pointed out
TO the reserve bank directors the
necessity OF drawing a sharp dis
tinction between essential and lest
essential industries in the distribu-
tion Of the banks credit resources.
adding: IF bank credit is to be
kept within reasonable bounds. the
bulk OF the available credit OF tbs
banks must be furnished essential
Industries in preference 70 those in
dustries OF a less essential char
acter. II efforts are made TO serve
all industries. regardless Of the es-
sentiality Of the customer. imitation
is the only result II IL this result
4
determined 20 reduce"
Timely action by the banka in
adopting and carrying out the new
policy OF conservation" Governor
Harding further declared. is essen
tiaL. At this time, when signs of
the beginning OF a resdjUstmept Of
prices in all lines Of commodities
are apparent. the need for, n stable
basis Of finance Is manifest The
sensible apportionment OF the avail
able bank credit. among essential
enterprises. IT is believed. would do
much TO lessen the shock OF price
reductions
Support was given by Class
| "a directors generally for a fur
ther increase in discount rates for
| the purpose of restoring more stable
credit conditions. This action will
be taken by the Federal Reserve
banks wherever necessary. IL was
indicated by members attending the
! conference.
The other plan suggested BY
which a healthy bank credit sItua-
ton could be attained and preserved
was that Of the progressive line Of
bank credit recently enacted into
law by Congress upon the sugEes-
tion Of the Federal Reserve Board.
This course of action and that of
| further increases in discount rates
were agreed upon as means Of ac-
complishing the two purposes of the
meeting. dehstion and the distribu-
tion OF bank credits TO essential tn
dustries.
Pledges were given by the bank
ers to the board of fullest co-opers-
ton in the adoption and carrying
out Of plans looking 10 more con-
servstive bank policies. A formal
| resolution to this effect was adopted
by the bankers and presented to
! the board.
Immediate action is expected 70
be taken by the Reserve Banks N
| increasing discount rates to the ex-
! tent needed in each district IL was,
| indicated.
Opposition to further advances in
discount rates developed prior TO
the conclusion of the meeting. and
| il appeared that the arguments
made on this point would deter any
general action by the Reserve banks
toward raising of the rates above
present levels
Spokesman against further In
! creases in discount rates expressed
the view that any disturbance OF
I present rates would serve only TO
aEitate conditions rather than aid in
the return of credit conditions to a
! safer basis. The logic Of this view
/ apparently was accepted by the
conferences as a whole.
| Confidence was expressed by the
bankers that q continuance OF the
present course OF action would
bring about satisfactory conditions
within thirty days at the longest.
A check has been applied to the ex-
tension Of bank credits. IL was said
preventing further imitation from
this source. and that a general
liquidation Of credits could be ex-
pected within the next month or six
weeks.
| Suggestions and advice Of tho
! Federal Reserve Board as to the
( future conduct Of banking business
Of the country. will he accepted and
put in force generally. SpokSsmeA'
for the bankers addressing the con-
| ference expressed their agreement
with the views on the present bank
credit situation Of Governor Herd
ing. and announced their Intention
! TO follow the course outlined BY the
board at the morning conference.