The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1920-05-25
IN BANK WARNING
CurtaiIment of Credit Must Be
Made Gradually.
Gov. Harding of Reserve Board
Makes Statement.
HINGES ON CROP MOVEMENT
Must Get 1919 Grain to Market
at Once.
Declares Federal Reserves Are
Very Greatly Depleted.
HINGES ON CROP MOVEMENT

Washington, May 25.-Economy in
individual expenditures, reduction of
non-essential loans by banks, in
creased production and improved
transportation are needed to reduce
the cost of living and deflate credits,
Governor Harding of the federal re-
serve board declared today in respond
ing to a senate resolution of inquiry.
The board is not prepared to define
what are essential and non-essential
loans, Governor Harding stated. This,
he said. is a problem for local bank
ers familiar with local needs
Governor Harding's letter, present
ed to the senate today by Vice Presi-
dent Marshall, came in response to
the resolution of Senator Mccormick,
Republican, Illinois, adopted recently,
requesting information regarding what
steps the board contemplated ito
meet the existing initiation of currency
and credits and consequent high
prices" and what measures were pro-
posed to mobilize credits for move
ment of the 1920 crop.
Expansion of Credit Unwarranted.
Reviewing the boards warnings to
federal reserve members against ex-
tending credits and its increase of dis
count rates, Governor Harding said
the board for months has recognized
that the expansion of bank credits
was proceeding at a rate not war
TanteQ Dy the proQuctlOn ana con-
sumption of goods
THE discount advances" Governor
Harding said, have checked credit
transactions somewhat but have not
been entirely effective in bringing
about the reduction in loans desired
and which might normally have been
expected during the early months of
the year.
"On the contrary" he said, "com-
mercial loans have steadily increased.
Thus. it appears, that the public has
anticipated demands for banking
credit which are usually made later
on in the year.
Reserves Badly Depleted.
1.-The average reserves of federal re-
per cent" he added, "as against 40
per cent at the beginning of the year
and about 81 per cent twelve months
ago.
Governor Harding told of the recent
conference here of the federal reserve
advisory council and. its recommends
tions for curtailment of credits, to-
together with the opinion that conges-
ton of transportation facilities is ty-
ing up great quantities of foodstuffs.
1.-THE board is convinced" Governor
Harding continued that if the unsold
portions of last years crops can be
brought to market before the new
crop natures, the liquidation of cred
its which are now tied up in carrying
the old crops will be sufficient to Off
set to a considerable degree the credit
demands in moving the crop of 1920"
Banks Arc Cautioned.
"In the efforts to reduce non-essen-
tiaI loans, Governor Harding said
banks were cautioned against drastic
curtailments and advised to seek grad
ual liquidation, and to grant loans
stimulating essential production.
The problem of the banking sys-
tenn of the country" he continued, 'is
to check further expansion and to
bring about a normal and healthy
liquidation without curtailing essential
production and without shock to in
dustry and legitimate commerce.
1.-The board will not hesitate so far
as may be necessary to bring to bear
all it's statutory powers in regulating
/ the volume of credit. Much will de-
pend upnl the restoration of the nor
NAL efficiency of railroad and steam
ship lines. If adequate transportation
facilities can be provided the board
sees no occasion for apprehension in
connection with the movement OF
crops now being grown"