The Washington herald., 1920-10-24
sen. OWEN HITS
.RESERVEBOA
Deflation Policy Denounced
As Leading to Serious
Consequences.
HE URGES MORE NOTES
Says Credits Of America De-
stabilized by Policy
Of Members.
HE URGES MORE NOTES

Charging that the Federal Re-
serve Board has all resources nee
cssary TO relieve the country Of its
financial stringency. Senator Robert
L. Owen. of Oklahoma, one OF the
originators of the Federal Reserve
system, in a letter to w. p. G. Hard
ing, governor of the Reserve Board,
Friday denounced the boards
terrible policy OF defation" and
urged the adoption of a remedy to
relieve the situation.
His remedy calls for the issuance
OF additional reserve notes to the
amount Of $4,000 100000. Unless the
remedy is adopted. he said, some
unhappy consequences will occur
which the board may not be able
to correct and for which Gov. Hard
! ing will be held responsible. His
letter, in part follows:
Imitation Denied.
Il do not wish to emphasize the
distressing effect Of the so-Called
| policy OF defiaticn' adopted by the
] OOdlu III llo AOloNlOl " Nht
ers, the manufacturers and the
/ because you have heard enough OF
this.
The need for the alleged policy
| of dehation rests on the premise
that the entire country is suffering
| from imitation. which is funda-
mentally untrue. Legitimate bor-
rowing and lending for Legitimate
purposes is not imitation.
Holds Board to Blame.
when New York bankers estab.
lished the policy of imitation and
raised the interest rates to 20 and
/ 80 per cent on call loans. and the
I Federal Reserve Board supported the
policy of high interest rates by rails.
| ing the rate to six and seven per
cent to member banks, thus exciting &
! the banks to raise the rates to eight
and ten per cent on the industries
/ OF the country, the Reserve Board
became responsible to the country
/ for the psychological effect of its
action.
The result of the action of the
Board has been to destabilize the
! credits Of America. and to assist in
| producing the industrial unrest anc
lack of confidence. necessarily check
| ing production and breaking the
commodity values below the point 81
which legitimate supply and demand
would fix the price.
Cotton Example Used.
Last Saturday. in the town OF
Muskogee, where I live. ! was ad
vised that there were no buyers fol
cotton at any figure. This is tenn
I porary, but illustrates the state ot
mind produced in the United State:
| by the action Of the New York bank
ers and the cooperative action Of
the Reserve Board.
we have the greatest crop II
| the history of the country. rht
productive and machine power ot
America and its capacity for orsani'
zation is greater than ever before
I in its history The tremendous de.
mand for credits is justified by these
conditions. and the credits ought tc
be extended.
The banks are exercising, nat
urslly and properly, a dtscrimina'
ton against the speculator and the
prohteer, but the man who produce
and the man who distributes is en-
titled to credit against the value OF
the commodities which he handles.
Board Purpose Told.
The purpose Of the reserves in
the Federal Reserve bank is to pro-
vide credits in case of an exigencY
You have the power under the
reserve act to suspend the reserve
requirements.
without suspendng the reserve
q
you could issue additional reserve
notes equal to the amount outstand-
ing without violating the statute
In other words, you could increase
the credits of the reserve banks
and the member banks $4,000, O,o0O,0 600
Immediately not only without harm
but with the beneficial effect OF
Immediately restoring the conn
dence of the country, which has
been impaired by the terrible policy
Of so-called defation.
Has Power to Remedy.
Il remind you that except for the
$4,000. 100000 of government loans
held by the reserve banks as Sc
curity they would have immedi-
ately an expansion power for com
merce of $4,000. 900, 900 more.
You have all the resources nee
essary to relieve this country. If
you do not exercise your power to
correct the harm which has been
done, I shall be profoundly disap-
pointed, and some unhappy conse.
quence will occur in the country
which you may not be able to rem
edy. and for which you will be held
responsible"