Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1920-08-05
Menace to Reserve System

. ETURN OF the Republicans to power in
~ November would be the signal for al
assault and probably the destruction Of the
Federal reserve system. That assault would
be made from within. unseen by the public
until Wall Street had fastened its selfish
grasp on the nations financial reserves and
could manipulate them TO the will of those
malign interests which fought against the
establishment of the system and have never
ceased in their efforts to divert its activities
from Legitimate channels. II is no secret
that the Republican party is bitterly hostile
10 the reserve system and with victory
at the polls the sinister influences already
at work would speedily undermine ii and
convert it into a partisan machine Such an
overthrow of the system which has pre-
served Americas financial stability through
its gravest crisis would be an unrvalcd ma
tioual calamity.
The reserve board must know that the
popular dissatisfaction and unrest growing
out of the depreciation OF Liberty and Vic
tory bonds and the resultant strain on bust
ness, are surely contributing to Republican
success and its own disintegration. Yet it
has taken no step to right the economic
wrong and restore confidence. The reserve
system must be kept above politics at all
hazards, yet it is painfully apparent that
the boards failure to remove from the
Democratic administration the stigma OF
having sold bonds TO the people below the
fair market value for money at that time.
and of having depressed the value of those
securities by approving the increase on dis
count rates on those securities at reserve
banks, thus forcing drastic liquidation,
aside from the strain it is putting on bust
ness, is having significant political in
fluence which indirectly threatens the in
tegrity of the system itself. Return OF the
bonds to par is only common justice to the
millions OF loyal American citizens who hold
them but it is necessary if commercial fail
ures in alarming number are to be avertcd
and the country enabled properly to con-
duct it's business and move its crops.
Depression of bonds, it is argued, is but
incidental TO the desirable detiation Of the
currency. But is it necessary? The best
banking brains OF the nation answer. No"
The banks are cordial in their support of
the boards efforts to restrain improper
credits but they are being heavily penulized
and their clients sacrificed by the arbitrary
ruling that has shut off credit, the continu-
ance of which was at least implied when
the banks, at the governments urgent plea,
became the agents Of bond-seling cam
paigns. The situation could have been
averted in the beginning, and it can be met
even now by a constructive change OF the
policy on the part Of the board Two es-
sential steps suggested arc: first, loans by
the reserve bank to member banks on all
original subscriptions TO Liberty and Victory
bonds hold by them at not more than tho
market price of bonds and at Il discount rate
no more nor less than the bonds themselves
draw. Second permit Federal reserve note
issues secured by government bonds ana
member banks obligations upon 90 per cent
OF the obligations secured by bonds and
10 per cent of gold
Tho 6rst ctnn would r,,o H. L,,,t..,
10 unburden themselves OF their bond hold
iESs as rapidly as possible since no profit
would accrue to them, while the second
would release gold for legitimate expansion
of credit and enable business TO keep going
ON Il steady and even keel Old bank notes
whose safety always has been above Ques-
ton, are carried on a per cent gold reserve
basis. Why, then, should the reserve board,
which has full authority to reduce H. insist
on tying up the countrys gold through re-
qnirement OF 4 maximum reserve on its war
bonds. Let tho board take these steps and
there is every reason to believe that public
confidence will he restored through the
keeping OF the governments faith with the
banks, and through them TO the people.
business Will at once respond and go for
ward under stabilized conditions, and, what
perhaps is equally important. the reserve
board Itself will be removed from the field
OF political attack.