Evening star., 1920-02-23
CREDIT TO Be HELD
IN CHECK BY BOARD
Reserve Officials in Report
Announce Effort to Aid
Trade and Industry.

The full power of the Federal Re
serve Board will be exerted to regu
late and control the credit situation.
it was disclosed in the annual report
of the board. made public today.
The course determined upon by the
board is designed to aid commerce
and industry in restoring a pre-war
equilibrium.
With this as it's announced peace
time policy. the board. the report said,
was prepared to test the ability of
the system to check expansion and to
! induce healthy liquidation" The re-
port explained that the board was
| the condition which confronts the
country. This power followed the au-
ifhority for and employment of an
felastie system OF reserve credit ana
kpote issue, it was added.
F. = Naximum Credit Lines.
Recommendations alec we're made
to Congress for amendment Of the re-
| banks. with approval OF the Federal
Reserve Board. to establish normal
maximum lines of credit accommoda-
ton for member banks An ascend
ing scale Of rates would be provided
in the event money were borrowed above
the maximum line. This, the board
believed. would induce banks to hold
their own large borrowers in check
and thus work to the end that credit
expansion on large scale would be
stopped.
Warning was given that the country
must guard against too rapid defiation.
While the board was in entire SYM
pathy with measures to overcome this
evil, 1t pointed out that remedies en-
ployed to correct imitation might cre-
ate conditions worse than imitation it.
self.
productive industry is profoundly af-
fected by credit conditions. Modern
business is done on credit. One of it's
life-giving principles is credit The
ultimate test of a credit system must
be found in what 1t does to promote
and increase the production Of goods.
True, in general the truth of this OBJ
servation deserves to be particularly
emphasized in the present deranged
state of world industry and trade.
when production is the crying need of
the hour everywhere"
Discount Rates Explained.
In explanation of it's increase in dis
count rates, the board said that this
had been the traditional method of
credit control. It's use, however. pre-
suppsses normal conditions, and these.
1t was pointed out, do not all exist at
this time. While high reserve bank
rate was shown to act as restraining
influence upon borrowings. it may op-
crate as we'll to attract supplies of
credit from other centers. 1t is this
condition. among others. that was said
by the board to make imperative the
use of it's power in controlling credit
and starting deflation.
In setting forces to work to check
expansion the board declared much
ness and the community generally.
There is, however. no need for
drastic or precipitate action" the re-
port continued. There need be no
apprehension as to our ability to eff
feet the transition from wartime to
safeguards against the abuse of credit
are respected. Our economic and
financial position is, at the bottom.
safe and sound. Extremes must be
avoided. the processes of adjusting
the volume Of credit to a normal basis
should be effected in an orderly man
ner and it's rapidity must be governed
entirely by conditions and circum-
stances as they develop. Much will
depend upon the cooperation of busi-
the general community progress can
be neither rapid nor substantial"
Production and Distribution.
The specific Of greater production
\ was urged again as one of the methods
! by which the proper balance" might
be materially aided. But the board d.
rected attention to dangers which lie
| in the path Of great production unless
| that production is Immediately followed
by distribution and avoidance OF waste
full consumption. 1t emphasized that
boarding must not be practiced or the
| stimulant of production will avail moth
ing.
The board took occasion to restate
| its opposition to the financing Of exports
which require long-term credits through
banking operations as distinguished from
appeals to the securities market OF
Americas balance Of trade for the calen-
dar year$4, OF. .745, 45,000-approximately
81. .000, ,000, 900 was declared to have fall
en- as credit transactiins on the COM
mercial banks. Treasury advances dur
ing tho year amounted to $1,757.9S9.-
900, but this was not regarded as sufii-
cient to offset the corresponding measure
Of expansion necessitated by the carry
ing of the credit balance.
z, 500 Russian Refugees at Cairo.
CAIRO Eehruarv % fHavosN N-Tuo