Evening star., 1920-05-25
HEAD Of RESERVE
BOARD DISCUSSES
H. c. |. REMEDY
Individual Economy and
Greater Pr. duction Among
Suggestions to Senate.

Economy in individual expendi-
lures. reduction of non-essential
loans by banks. increased production
and improved transportation are
needed to reduce the cost of living
and deflate credits. Gov. Harding of
the Federal Reserve Board declared
today in responding to a Senate reso-
luton of inquiry.
The board is not prepared to de-
sential loans, Gov. Harding stated.
This, he said, is problem for local
bankers familiar with local needs.
Gov. Harding's letter. presented to
the Senate today by Vice President
Marshall. came IN response to the
publican. Illinois, adopted recently
requesting information regarding 6
what steps the board contemplated
ito meet the existing imitation of
currency and credits and consequent
nigh prices" and what measures were
proposed to mobilize credits for
movement Of the 1920 crop.
Review of Boards Warnings.
Reviewing the boards warnings to
tending credits and it's increase of
discount rates. Gov. Harding said
the board for months has recos-
nized that the expansion of bank
credits was proceeding at a
rate not warranted by the produc-
discount rate advances, Gov. Harding
said, have checked credit transac-
tions somewhat, but "have not been
entirely effective in bringing about
the reduction in loans desired and
which might normally have been ex-
pected during the early months of
the year"
"On the contrary" he said COM
mercial loans have steadily increased.
Thus 1t appears that the public has
anticipated demands for banking
credit which are usually made later
on in the year.
The average reserves Of federal
reserve banks are now a little over
42h per cent" he added. "as against
As per cent at the beginning of the
year and about 81 per cent twelve
months ago"
ference here Of the federal reserve
advisory council and its recommenda-
tion for curtailment of credits, to-
gether with the opinion that conges-
ton of transportation facilities is
tying up great quantities Of foodstuffs
Hardnp board eaninsa is capyinGed tpst ;f ~. Gov
sold portions of last years crops can
be brought to market before the new
crop natures. the liquidation of
credits which are now tied up in
carrying the old crops will be suf-
ficient to Offset to considerable de-
gree the credit demands in
moving the crop Of 1920"
In the efforts to reduce non-essen-
tia1 loans, Gov. Harding said. banks
were cautioned against drastic our
tailments and advised to seek grad
stimulating essential production.
1.-The problem of the banking system
Of the country" he continued. "is to
check further expansion and to bring
about a normal and healthy liquida-
ton without curtailing essential pro-
duction and without shock to industry
and legitimate commerce.
"It Is the view of the board that
while the federal reserve banks may
properly undertake in their transac-
tions with member banks to discrimi-
nate between essential and non-es-
sential loans. nevertheless that dis
might much better be
made at the source by the member
bank themselves"
Trafic Congestion Discussed.
Regarding congestion of merchan-
disc and traffic, Gov. Harding said:
"It is true that under existing condi-
tions the volume of credit required in
any transaction is much greater than
was the case in pre-war times; but it
Is also true lndI INC TcSOuTC6S OF the
member and non-member banks would
be ample to take care of the essential
business of the country, and. to large
extent, of n-essentials as well, If
there we're a freer flow of goods and
credit. If frozen loans were liquified
and if commodities which are held
back either for speculative purposes or
because Of lack of transportation facili-
ties should go to the markets, and If
large stocks of merchandise should be
reduced, the resultant release of credit
would have. a most beneficial effect
upon the general situation. In the
to expedite the release of these credits
and to restrict non-essential credits in
future.
"The board will not hesitate SO far
as may be necessary 60 bring to bear
all it's statutory powers in regulating
the volume of credit.
much will depend upon the restora-
ton of the normal efficiency of rail-
road and steamship lines. i adequate
facilities can be pro-
vided the board sees no occasion for
in connection with the
movement OF crops now being grown"