Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1920-09-19

,asioI ne writer OF the edl-
Reserve Board will h"a relax axe It's s" iron
grasp on the country's credit 10 an
sHn.. Il, that Will permit something
and INDUSTRIAL activity"
further on the writer states:
~ the reserve board really has
ana injustice OF its contraction o:
credit, 80 rigid that II failed to d!5-
criminate between essentials and NON :
essentials. and has determined 10 vest
the banks with Il iitte more diacre-
torary authority. II Is Il hopeful stem
III the right direc,!on."
Tho writer of the editorial Is most
ton. both OF the attitude OF the Fed
eral Reserve Board and the facts in
the case. 1t Will probably be a sur
prise to the write. Of the editorial.
that there has been no contraction OF
the aggregate amount of bank credit !:
oas' on the contrary. there has been
standing Efforts To exercise n reason :
able aud sane control over bank
loans.
Hoard HIM Little Power.
, As matter oc fact. the Federal
Noservc Board has very little direct
credit.
The board has the power. under tho
tenerai reserve act. la review and
atcd by tho Federal reserve banks
hut having the power. under the act
TO coordinate The wording OF ,hs
TEN. and having tn: most intimate
knowledSc of the banking conditions
n the whole country. the advico and
tho suggestions OF n. hoard cx.r,
.erests IN the country In proportion
TO tho dignity OF that body and the
respect md confidence in which It is
The board has no control over tho
ioans which the member banks OF the
foderal RESERVE system make 10 their
customers, although IL determines by
rule. under tho sanction OF law. the
character OF paper which IN eligible
Tor discount when presented by the
member banks TO the Federal reserve
does not attempt 20 exercise any CON
iro! over the discount powers Of the
Federal reserve banks or member
paoks othtr than AS specified above
-Iroa Grasp" lmpossIbIe.
All OF the Federal reserve banks
have discount com mittecs. composed
or officers and directors. who de-
tsrmine what aper. eligible under
board, Ii accept BILE for discount, ana
VINO make such discounts a. TIC aecds
ana circumstances and condition OF
It's member banks may require and
ne IteStFVe bOnfu. tners-
fore. could not have an iron grasp"
on the couniry's credit The rncrnb.r
banks arc lending To their customers
VI 500, 100000. and are borrowing
only about S:.70u.000,coo %. this di-
recently from the Federal reserve
banks. They control their own
funds.
In the matter of discrimination he
tween essential and nuncSscntial crcd-
itS. the board has publicly expressed
I hn
matters must be determined by the
me nber banks In making their own
loans TO their Gust No general
attempt has ever bean made by Fed
srnl reserve banks TO discriminate
between essential and noneasential
industries 10 the exclusion OF one and
tho acceptance OF the Other. All loans
ere made according 10 the circum-
stances OF the case. The Federal! Re
servc Board has. according TO It's own
deemed il It's duty TO
exert lis power in the direction OF
cnrhinS the expansion OF credits used
Tor speculative or noneSsential pur-
poses. without Interfering with the
lines. AS TO determining between tho
essential aud nonessential. however.
the board has left that To the banka
OF the country.
ENpnnnion stili Continuer.
SO much mas been written about
'dena,ioD" tina, there IL n very popu-
lar idea that the bank loans OF the
country to industry have been con
tracted rs part OF 4 concerted plan.
TO the contrary. the Seports OF the
national banks show that there has
heen continuous expansion OF loans
and discounts. There has been. Mt
the same time. an almost continuous
expansion OF loans made by Federal
reserve banks to their member
hanks. and such loans are now about
at their maximum. Your particular
attention is invited 10 the following
statement:
on December &C. 1919. tho amount
eral reserve banks made for COM
tnercial and agricultural purposes.
taken from their member banks, was
1851 .oo"'ooo. On September IL, 1870.
Federal reserve banks had Increased
TO 1886. 100000. This shows an en-
pansion of loans by Federal reserve
banks represented by this character
OF paper Of $G?a.0Oo, 900. Judging
from the character OF criticisms which
appear from time to time, part of tho
public is under the impression that
loans have been con
tracted during this period.
Character OF Paper ChanEes.
There has been. 70 some extent, n
shifting in the character OF paper
hold by Federal reserve banles, that
Is, a liquidation OF soync classes OF
paper and an Increase in other classes.
'fhere MAD to be such Il shifting in
order TO supply the demands of in
dustry. and since the excess credit
SUPPLY was getting more and more
limited: the banks Of the country
themselves made such discrimination
as seemed wise to them. For In
stance the Federal reserve banks
nave certain transactions with the
banks OF the country known as open
market transactions. that is, they
buy from tho hanks tchiefly from
their member banks) bankers accent
ances, new class OF paper created
under the Federal reserve act. The
amount of this paper held by tho
Federal reserve banks on Decsm-
well known that very large amount
OF bank credit was used for the pur-
pose OF holding goods off the market
Tor an increase In price, and part
ana perhaps considerable part--ot
hank credit used for such purposes
vas represented by bankcrs' accept
ances. We find, therefore. that for
this reason. or Cor other reasons. tho
amount OF bankers acceptance held
ny the Federal reserve banks had
decreased to $a17.oD0.000 on Scptem-
Der II. decrease of S26S.O00. 900.
The amount of paper secured by
government war obligations h1ld hy
the reserve banks decreased between
the dates mentioned. :hat Is. Deccm-
her 90. 1919, mid September IL. 1920.
$2l0.0nh.00o. But please note that tho
commercial and agricultural purposes
curing the perid was S6s2Q00, 900.
Most OF the large member banks
OF the country make weekly renCrts