Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-04-29
RESERVE BOARD ON .
CREDIT CURTA|u|NG
Rates of Discount in Sliding
Scale to Fit the
Need.
BY I. A. FLEMING.

BY i. A. FLEMING.
The Federal Reserve Board this
morning addressed the various re-
gional banks of the institution on the
recent amendment to the federal re
serve law. which permits the enforce
ment of the so-called sliding scale of
discount rates as follows.
Every federal reserve bank shall
have power TO establish from time to
time, subject to the review and deter
nination OF the Federal Reserve Board,
rates of discount to be charged by
the federal reserve bank for each
class Of paper. which shall be fixed
with view of accommodating COM
mcrce and business and which shall
be subject to the approval. review and
determination of the Federal Reserve
Board, and may be graduated or pro-
gressed on the basis of the amount of
the advances and discount accommo-
dations extended by the federal re-
serve bank to the borrower.
That part of the section in single
quotation marks is the clause added
to the original act.
brief explanation of the workings
of the sliding scale is given as fol-
lows:
TT Is a recognized function of the
federal reserve system to exercise
control over the volume of credit and
currency whenever necessary by
raising discount rates to check eX-
pansion or effect contraction. During
the period since our entry into war,
expansion has become rapid and has
become so huge in volume that 1t has
finally reached a danger point. where
it is recognized to be unsafe to go
- - VII q
such dangerous heights. The banks
of the country acting as separate
units have gone on lending. as II
there was no limit to this process
They have used up their reserves
and are borrowing heavily from re-
one of the chief causes of high prices,
and prices thus pushed up have re-
ouifed more and more credit to finance
a small volume of industry.
War Burden Recognized.
1T serves no purpose to have the
banks explain this expansion by call
ing attention to the large volume of
paper secured by government war is
sues that they are obliged to carry.
That is recognized. There was no
other way to win the war.
ION several occasions there have
been increases in discount rates made
by all the federal reserve banks al
MOST simultaneously. OcSduSc VI inc
fact that the same condition existed
in all twelve banks. as the reasons
for expansion were general in their
nature and not confined to any one To-
cality or district.
These increases in rates had the
effect Of halting expansion for time.
but 1t is recognized that still further
checks may be needed to exercise a
needed restraint upon those banks
which either do not recognize the dan
ger of continuing to expand their
credit, OF. recognizing it. feel the
pressure to grant additional credit, in
order to increase production. which is
the foremost need of the country and
the world
Attention is called to the disposition
of some bankers to lean too heavily
on the reserve banks and not enough
on their own resources: in other
words, using their credit out Of ratio
to their contribution to the lending
lower of the system and without the
claim of necessity or emergency
therefor.
The amendment then allows each
federal reserve bank to apply a scale
of discount rates to deal with the
situation arising in its own district.
to establish discount rates that would
affect only banks borrowing in ex-
cess of fixed sums to be determined
by. rule applicable to all banks
alike.
On Check Collections.
The federal reserve bank of Rich
mond has issued circular letter to
the banks in this district calling at
tention to rules OF the New York
City Clearing House Association, ef-
fective May 1.
'1n cities where immediate credit
is given and where such items be-
come available one day after receipt
the charge shall be discretionary; for
such items available two days after
receipt the charge shall be onefor-
tieth of one per cent: for items avail
able after four days from receipt.
netwentieth of one per cent. and if
available after eight days the charge
shall be one-tenth OF one per cent"
Checks drawn in this district on
banks of Washington. Maryland Bal
tionary: Virginia and West Virginia,
one-fortieth of l per cent. and North
and South Carolina, one-tenth of /
per cent.
list" while the Carolinas are not on
the par list of the federal reserve
system.
It is expected that other cities will
! follow the New York example and
give recognition to banks whose
system.
James A. Cahill vice president OF
the Commercial National Bank, is
spending a few days at Atlantic City.
Guy A. Ham. president of the Citi-
zcns' National Bank of Buffalo and a
director in the Commercial National
of this city, is visiting in Washing
ton.
Mt. Pleasant Building Association.
The following officers and members
of the board of directors were elected
by the Mount Pleasant Building and
Loan Association at the annual cleo
ton held in the offices of the asso-
citation. 1923 14th street. "Wednesday
evening. April IS: Frederick j. Rice
president: DR.. Seneca b. Balm. w.,
president: Harley v. Speelman. treas :
urer: Adam II. Gaddis. secretary; Rob-
ert NJ. Tolson, assistant secretary.
Gustave l.. Bittner, DR.. Seneca 3
Balm. Roy c. Claffiin. Daniel j. Cox
Francis j. Ford. Adam II. Gaddis. Paul
F.. Grove. George T. Harrell. Herve
w Kitzmiller. DIR. Harry A. Loeb
boeler. Frederick J. Rice. Harley v
Speelman, Ambrose r. Swan. Robert
NJ Tilson and Bernat Weiss were
chosen directors.
The following committees were
elected: Appraising, Paul F. Grove
Roy c. Clafiin and Francis j. Ford
auditing. James e. Hustler, James e
Smith and T. J. Holzberg.