The Rock Island Argus and daily union. (Rock Island, Ill.) 1920-1923, 1920-12-17
|l||lOSED TO
llNKERING
(IHRATES
lr,l Reserve Board In,
lrtson Power to Reg
ulate Discount.

SsOY DAVID LAwRENCE.)
Especial to The Argus.)
vmhington, Dec. 1.-THE feder-
reserve board is unalterably op-
- to the measures pending in
| nersss which in any way at
| nnpt to limit the power Of the
|isfd or federal reserve banks to
|uslate the rates Of discount
IA those banks may charge.
Dsastor Harris Of Georgia, has
|rpposed that the maximum rate of
hkarsst which federal reserve
|tonks could charge member banks
lid be i've per cent. A similar
nuposal was knocked out of the
6uana- Norris resolution the other
| ~ but II has been revived separ-
f ~ BY the senator from Georgia.
NJ federal reserve board views
III alarm the attempts of some
nnbers Of congress to tinker with
/ e. credit machcinery Of the coun-
~ and has not hesitated there
Nh to express its views so expli-
| nv that responsibility for DAM
II done may be easily placed By
~ public.
| N board insists that it is es-
entiL to the functioning Of any
aet5al banking system that the
hlks Of discount shall have COM
~ control over their rates. This
Qtrol b regarded as the most
GDcivs means of protecting the
~ reserves Of a country against
va4dnwals from foreign account.
n Instance, the discount rate Of
= bank Of England is seven per
~ and II Americas were fixed at
hs per cent, foreigners would
snrslly seek to discount their
~ here and gold would flow out
dtls United States. The objec-
~ 10 the fixing of any maximum
SMnoimum rate and the necessity
= hssping the rates within the
| oseton of the federal reserve
~ re these:
Objections To Rate.
LII . maximum rate Of dis
NJ we're fixed, the federal re-
M hanks would find 1t impos-
~ % protect their gold re-
bsvsl
I The federal reserve system
vugM In q short time cease being
irsssrve system and would become
anDU An instrument for the
eesding up Of expansion.
! A scramble for funds of the
neesA reserve banks would ensue
- The reserve banks would have
, alternative except to lend their
fnds 1t rates below the market
nlee until their reserves had been
9aAusted. Banks would be oblig-
q % refuse to make further re-
cseosnts no matter how meritor-
M the claim and they would be
@apelled to start a waiting list
ntl old loans had been paid back
Hew funds obtained.
Oaly three states - Illinois
AsiAana and Michigan--have q
"a rate Of interest as low as five
- can't and in each state q higher
~ y permissible. In 81 states
~ legal rate is six per cent and
9 eeven states the legal rate is
va per cent while in six other
ntee and In the District Of Co.
neia the legal rate Is eight pei
uak Ten states allow a legal rate
tsn per cent and ten others per
y contract rate Of twelve PEI
Temptation to Banks.
therefore II is argued by mem.
OF the federal reserve board
~ \ the discount rate were fixed
I've per cent by law, there would
temptation indeed a stimulus
member banks to use all the
nsccunt facilities of the federal
e system because with. thu
40 market at eight per cent
would be a handsome prof,
uss per cent available to mem.
ssnn in rediscount transac'
Where rates as high as Ter
we've per cent are permitted
~, the profit would be ever
Fear Depression.
" ae other hand. past expert
n indicate that the lowering O
~ ,uancoent rates to ave per cen
not IN the judgment of tn,
~. ~. bring down the prevailing
~ rates a. the latter are fixet
~ isws Of supply and demand
: ssd the discount rate be ffxet
PEI cent. 1t appears to b,
-, saefal reserve boards viey
Hu unit Of credit expansion
= reached quickly and tha
Msor-nve billions Of dollar,
- Essament obligations avail
.s eollaterAl would b. ex
~H Then, 1t Is feared h!
sss cf the board that a con
~. q depression much NOR,
Va.sd and serious than tha
- " y sought to remedy'woul'