Evening star., 1920-12-02
Protests Increases for Pur-
pose of ''BroadIy Deflat-
ing Credits"
SAYS RESERVE BANKS
EARN $50 PER CENT
Places Government in Position of
Profteering;;" in Some Cases
Stopped Legitimate Production.


tor from Oklahoma. and one of the
chief sponsors of the federal reserve
act, has written long letter to Gov.
Harding of the Federal Reserve Board,
in which he appeals strongly for a
| lowering of the discount rates of the
twelve regional banks. in the interest
of more orderly defation. while
protesting against what he calls i'm
discriminate defiation."
Senator Owen frequently refers in
his letter to the profits that the banks
of the nation have been able to make
al the high discount rates, to the ad :
vantage of their shareholders, but also
calls attention to the fact that the
shareholder also has been injured in his
business interests by the high rates.
Necessity for the strong hand of
the Federal Reserve Board in check
ing speculation and in directing credit
channels to the greatest good of the
necessities is admitted and cordially
approved of by Senator Owen, but the
policy of the board in raising rates
of interest for the purpose of .broad-
ly debating credits is criticised, as
making such high rates throughout
the country as to be responsible for
in some cases. Absolutely stopping
legitimate production and Legitimate
Of usury.'
Decries Tales Of Instability.
Senator Owen refers to the smash
ing of Wall street and the depression
of government bonds. while the total
resources of the banks of the country
June 80. 1920. reached the gigantic
total=ef~ $50. 0I9, ,10S,0O0, and he admits
his distress lat the propaganda be-
s,,.r f6I To.
try with the idea that the federal re-
serve banks were in condition of
instability
In other parts of his communication
Senator Owen expresses criticism of
/. the enormous profits of the federal
reserve system. claiming that they are
now earning at the rate of $50 per
cent per annum on their capital. and
as the profit goes to the government.
it puts the latter in the position of
profiteering."
Senator Owen declared that 'the
talk of the reserve banks being
alarmed, under the circumstances, is
stupid"
Senator Owens letter written on
November Is follows. in part:
Senator's Letter.
81 wish to again appeal to you and
to the Federal Reserve Board to low
er the rates of interest charged by the
federal reserve banks, and expand the
loans of the federal reserve banks to
the extent which may be required for
purposes of legitimate production
and distribution.
American banks are justified in
charging 6 and per cent. be-
cause they pay and 3 per
cent for deposits, and they are en-
titled to make profit of and
3 per cent above their overhead
81 rif Ii toll, -
handle as merchants of credit.
"The federal reserve banks earned
last year over 100 per cent and
are earning now at rate in eX-
cess of $50 per cent per annum on
their capital. contrary to sound pub
lie policy. This excess profit is all the
more reprehensible because it goes
to the Treasury, is made by a govern
mental instrumentality and puts the
government in the position of prof.
teering, and setting national bad
example.
''The federal reserve banks under
these high interest notes are meas
noting Industrial depression under
the arbitrary high interest rates
which the reserve banks are charg-
ing.
Agrees ON Loan Restrictfons.
81 fully agree with the board in it's
policy of advising restrictions of
loans employed in stock speculations,
in commodity speculations, in hoard
ing and in profteering. This advice
of the board is wise. 1t can only be
applied advantageously by the indi-
yidual banks exercising an Individual
discrimination against loans for such
nurposes Such credits when released.
however, should be extended to those
who are engaged in legitimate pro-
duction and distribution.
"It seems to be the policy of the
board to raise the rates of interest
for the purpose of broadly debating
credits 1t has been pursuing this
policy for year. with the result of
this policy of high interest charges
being extended generally throughout
the country. which has thus brought
on a condition of Industrial depres-
sion resulting in checking. and in
some cases absolutely stapping. legiti-
mate production and legitimate distribu-
ton. This is the evil OF usury.
sneculation. boarding and profiteer-
ing. but 1 very vigorously .disapprove
and protest against the breaking
down of legitimate production and
distribution by this course.
Lack Of Vision.
.orhe error of the policy of indis-
criminate deftauon Is largely due, in
INV opinion. to the lack of vision of
the big New York city banks. Be
.rinuine a year ago, the men who con-
troll the policy of the big banks deal
ing in stock exchange loans began
to nut the interest rates up from 10
to 80 per cent. instead of requiring
such loans to be gradually liquidated
on some reasonable basis.
..The New York city banks have.
above all others. pursued the policy of
indiscriminate defiation. and have de-
- ,..,.,,,,.rt ..y, iSap.A CaIuG,,n >