Evening star., 1920-05-22
RELIANCE PLACED !
. ON PUBLIC OPINION
TO CURB CREDITS
Bankers and Business Men
Expected to Consent to
Needed CurtaiIment.
ny DAVID LAWRENCE.


encing an economic readjus,mcni.
which the Treasury Department ana
the Federal Reserve Board regard as
inevitably for the better Reliance is
based upon the aIertness OF public
opinion and the readiness of the bank
ing and business public to consent to
curtailment of unnecessary and uu-
productive credits. But the view al
the executive end of the avenue is nor
altogether shared by members Of Com
sress. some of whom. like senator
Robert l.. Owen of Oklahoma fear
that curta ailment of production VIII
result and that the prices of all COM
moditleS viii tend To rise because OF
the scarcity OF stocks.
other members of Congress feet that
the federal reserve board aud Secrc-
tarY Houston are pursuing A conScr-.
Natlve policy and hat their program
viii influence the Who'll" business
world. Incidentally Secretary Heus-
ton letter TO Chairman FordneN al
me House ways and means commit
tee is intended as warning that
Congress had better. cease thinking
about soldier honus and give seri-
Gus consideration to the prospect of
increasing taxes to meet current gov
ernment expenses. And altogether
both Congress and the executive de
partments are today more deeply ab-
Sorbed in the economic situation than
they have been since the close of the
war.
tongressmen Anxious to Leave.
This renaissance comes at a time
when Congress is anxious To get away
for the political summer, but tel..-
grams already pouring IN from con
stltuents indicate that back home
business men. bankers. mere hants and
ma anufacturerS are watching Wash
Ington for any moves that may at
feet what has been referred to so
often as essential and "non-esscn-
tial lines of business"
The effort to curtail the amount of
borrowing by insisting that member
banks of the federal reserve. system
actually discriminate in the classes Of
loans that they make is expected 10
produce results. In fact, the Treas
ury believes results are ALREADY iu
evidence But on Capitol Hill senator
owens suggestion that instead of in
creaslng the interest rates. they
! should he loweved TO or 1 per cent
has unquestionably encouraged vari-
Gus borrowers TO believe that if they.
get behind the movement they can
Drins about reduction instead of an
increase in interest rates Senator
owen argues. for instance that there
should be discrimination on the part
of the federal reserve banks in ap-
plying their interest rates and that
loans for speculative and unnroduc-
tive purposes should pay the highest
interest rates and production should
be encouraged in other enterDrises bv
correSpond1ngly lower rates. He ad
vocateS uniformity of discrimination.
winch means that cattlemen in Texas
should be able to borrow their money
Tor the same rate as cattlemen in
Montana.
Houston Does Not Agree.
Secretary Houston is inclined to
look upon Senator Owens economies
as FAULTY and contends that ninety
nine out of a hundred economists
would not agree with the Oklahoma
senator's contention. The head of the
Treasury Department declares that
the interest rates fixed by the Federal
Reserve Board must bear some rela-
tIonship to the uses of money outside
of the government circle. He asserts,
Tor example, that if money Were loan
ed by the government at , or per
cent, the resources of the federal re-
serve system would not only be
drained. but would be used to make
extensive profits in other lines For
instance. he points out that there
would be nothing to prevent the bor-
rowing OF money from federal re-
serve banks at 3 and per cent and
loanIng that same money to railroads
and other enterprises paying as high
as and per cent and then collect
ing the difference as "a handsome
profit.
The whole question really rcvolves
not merely around the question of
what is an essential or non essential
line of business but what is an es-
Sential or non-eSSential loan in par
ticular business. Fhe Treasury be-
lieves the member banks in their re-
spective communities can exert the
only influence that can be at all ap-
piled in Americas complex economic
structure and that the cooperation of
the public alone will successfully
carry the whole economic load. lm-
pressions that may have gone out
concerning an arbitrary restriction of
credit are unwarranted.
Caution Is introduced.
The Treasury's view is merely that
legitimate and essential credits should,
he advanced and that the high inter
est rates will drive speculative ia
vestments from the borrowing mar
ket and release money for productive
purposes. q ....
Nobody. of course. can say what
factors will be controlling in the re-
adjustment that has been begun, bus
a check to expansion of credits has
been applied. Senator owen and his
school of thinkers believe restriction
is psychologically bad and PRODUCES
depression. Secretary Houston and
the Federal Reserve Board are con-
vlnced that IL means the Introduction
of conservatism and caution. All par
ties are convinced that at the core
America is sound, but they differ n
to the best way to help Surmount the
difficulties and embarrassments of an
expanded credit system of one thing
the business public may rest assured,
The Federal Reserve Board and the
Treasury are going ahead with Llc
policy mapped out by Gov. Har6IrS
of the Federal Reserve Board becauA
they have the power under the lar to
raise the interest rates and fix
through the member banks the redi.,-
count rates. Congress has very ii.sgs
TO do with the matter. though Senator
Owen. who is candidate for the
presidency. may make several
speeches on the subject in the. nenr
future and his supporters are aiready
organizing business mems leagues to-
advocate his doctrines.