New-York tribune., 1920-05-26
Harding Urges
Liquidation of
Frozen Loans
Release of Commodities
= Held Back for Speculative
Purposes Also Would I'M
prove Situation. He Says
transportation a Factor
Head of Reserve Board
Advocates Reduction of
Non-Essen9ial Borrowings

WASHINGTON, May 25.--Economy
in individual expenditures, reduction of
non-essential loans by banks, increased
production and improved transporta-
zion are needed to reduce the cost of
living and defate credits, Governor
Harding of the Federal Reserve Board
declared to-day, in responding to a
Senate resolution of inquiry.
The board is not prepared to define
what are essential and non essential
loans, Governor Harding said. This,
he said, is problem for bankers
familiar with local needs
Governor Hardings letter came in
Mccormick, Republican, of Illinois,
adopted recently, requesting informa-
ton regarding what steps the board
contemplated "to meet the existing in
dation of currency and credits and
consequent high prices, and what meas
ures were proposed to mobilize credits
ior movement Of the 1920 crop"
Governor Harding said the board or
months has recognized that the ex-
pansion Of bank credits . was
proceeding at a rate not warranted by
the production and consumption of
goods The discount rate advances,
Governor Harding said. have checked
credit transactions somewhat but
nave not been entirely effective in
bringing about the reduction in loans
desired and which might normally have
been expected during the early months
o. the year.
Bank Reserves Show Decline
"Cn the contrary" he said, com
merclal loans have steadily increased
Thus, it appears that the public has
anticipated demands for banking credit
which usually are made later on in the
fh~ average reserves Of Federal
Reserve banks are now little more
t-an ID per cent, he added, "as
against 10 per cent at the beginning of
tao year and about 81 per cent twelve
months ago
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 credits
which are now tied up in carrying the
old crops viii be sufficient to Offset to
considerable degree the credit de
mands IN moving the crops Of
1920
in the effort to reduce non-essential
loans, Governor Harding said, banks
were cautioned against drastic curtail-
nen;a and advised to seek gradual
liquidation, and to grant loans stimu
lallng essential production.
Must Check Further Expansion
The problem of the banking system
Of the country" he continued "is to
check further expansion and to bring
about normal and healthy liquidation
without curtailing essential production
and without shock to industry and
innate commerce.
ir is the view OF the board that
while the Federal Reserve banks may
properly undertake in their transac
IONS with member banks to discrimi-
h@tc between essential and non-essen-
>!al loans, nevertheless, that discrimi-
nation might much better be made at
the source by the member banks them
selves"
REGARDING congestion of merchandise
and traffic, Governor Harding said
lit Is true that under existing con-
oluons the volume Of credit required
An any transaction is much greater
tlaa was the case in pre-war times, but
il is also true that the resources of
The member and non-member banks
would be ample to take care of the
essential business of the country and
70 large extent Of non essentials as
we'll If there were a freer flow of goods
and credit.
IF frozen loans were liquefied and
lI commodities which are held back
either Tor speculative purposes or be-
cause of lack of transportation facili-
ties should 50 to the markets, and if
large stocks of merchandise should be
reduced, the resultant release of credit
would have a most beneficial effect
upon the general situation.
Much viii depend upon the restora-
tion of the normal efficiency of railroad
and steamship lines"