Evening star., 1920-01-06
HARDING WARNS.
BANKERS SESSION
Time to Restore Reserve Sys-
TEN to Old Basis, He Says.
Rates Discussed.

Representative bankers Of clearing
house cities from all sections of the
country met this morning for the pur-
pose of discussing the relation to tho
federal reserve discount rates OF the
rate of interest paid by banks in the
l;lsger cities on balances OF out-of-
tvwn banks and individuals. The
American Bankers Association was
represented by a special committee
appointed by tits president.
The conference opened at lV:"t n
the auditorium of the Interior De-
partment, 18th and f streets, with
an address by W. y. G. Harding. gov
ernor of the Federal Reserve Board,
who outlined in detail the boards po-
sition on the subject matter OF the
discussion.
Credit Structure Expanded.
Gov. Harding explained that the
credit structure of the country was
greatly expanded at present. and,
while no one was to blame In partic-
ular. the war being responsible FOR
the infiations of currency and cxpan-
sion Of credits all over the world, the
time had come for the restoring OF
the federal reserve system back 70
the basis that the authors had IN
mind when the law was enacted.
He said that ne wished to call at
tention to the banks OF the country
that the resources of the federai re-
serve were not infinite. and In case
that the rates Of the federal reserve
banks should be advanced it did moi
mean that wild scramble OF raising
Of rates by individual banks through.
out the country for the purpose or
securing deposits should follow.
Also Serves warning.
He also served warning that the
Federal Reserve Board did not recoS-
nize any relations between the redis-
count rates of federal reserve banks
and the interest rates paid by men,
Der banks on deposit. and gave no.
tice that the board would be free to
raise or lower it's rediscount rates
whenever the industrial or CONNER
cial situation might require such
action.
Gov. Harding predicted that
further increase over the present re-
discount rate of Az per cent at the
federal reserve bank of New York
would be necessary, but again ne pro
tested against "a scramble Tor oe-
posits."
He did not "see why a raise in re-
discount rates should bring about
such q scramble" he said The fed-
eral reserve bank rate increases are
only temporary; whereas relations OF
the bankers with their customers are
supposed to be permanent.
b. Deposits het0 LI0Uu1tys
mo customer should be led to LOOK
upon deposits as an investment, and
the banks should not hook upon oe-
posits other than as liability.
Connection by bankers win ine
Investment market was not conducive
to sound banking" Governor daruihs
said.
.While we have turned our backs
on the period of war financing, ne con-
finued. I'VE cannot expect in the I'M
mediate future q condition. such as was
considered normal under pre-war
Standards. We will reach normal only
when obligations of the government are
greatly reduced and the remainder ab-
sorbed by the investing public
Non essential loans should De ois-
couraged. Federal reserve banks must
BE- kept in condition to meet industflsi
and commercial demands and ready to
provide for any emergency. In ordi-
nary times a raise In redfscount rates
is the natural corrective OF undue ex-
mansion. but now We cannot add to our
gold holdings by raising rates. nor
must we do anything to discourage
production" .
When Gov. Harding had concluded
his address the room was cleared O.
newspaper men, and The visiting bankers
went into secret 2assion. William Wood
ward, president of the Hanover Bank
Of New York, was elected chairman oil
the bankers meeting. The conferencs
will end this afternoon.