Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1920-08-22
Shaking business Confidence

\Y/HEN Robert l.. owen, United States
w Senator from Oklahoma. discusses
steps undertaken by the Federal Reserve
Board toward the defation of credits, and
| reviews the general situation resulting
therefrom it must be granted even by tho
most ardent proponents of the boards course
| that he speaks with the authority of knowl-
edge. Senator Owen. second only to Sem
ntor Glass, was responsible for the creation
of the Federal reserve system, and for this
reason. il no other. his earnest protest
against the destruction of legitimate bust
ness by the boards arbitrary raising of the
credit rates to prohbitive height, must
be taken seriously by those authorities in
charge OF the nations financial affairs
Before the board raised the interest rates
so drastically. Senator Owen protested that
such action would have the effect of raising
the rates OF interest OF all bank loans, muni-
cpal loans, farm loans and private loans
throughout the United States. and thereby
greatly increase the cost OF living; would
slow up production and distributions and
bring about period of industrial depres-
SION The protest went UNDECIDED. and
what the Senator predicted has come to pass.
Iii his words, borne out by conditions 1.-The
confidence Of the country has been shaken,
period of depression has taken place in
some parts OF the country. and is threatened
in all parts of the country
There has been and still is abuse OF credit,
but, as The Times-Dispatch repeatedly has
pointed out and as Senator Owen now sug-
gests, the remedy for such abuses of credit
should be applied individually by the banks,
requiring large margins for those speculat-
ing in stocks and requiring gradual liQuida-
ton The same should be a remedy for
those buying for monopoly and prolteering."
The member bank unquestionably is best
htted TO be the Judge OF industrial condi-
tons IN its own community. Its contact is
close and intimate. it knows the needs, the
assets and the liabilities of its clients it
Knows the business situation II can dif-
fercntiate between the essentials and the
noncssentials, the legitimate and the specu-
!ative. II can, with definite knowledge,
rather than financial theory, decide when
loans should and when they should not be
made. With this discretionary power grant
ed 10 the banks. the money stringency for
legitimate enterprise would disappear, in
dustry be restored TO normal, and cause for
unrest would be dissipated in contented
rcmunerative employment. Such a broad
visioned. constructive policy, the board has
refused 10 adopt, and with what result? Let
The Senator answer: 1T has resulted in
breaking down the price or the market value
OF all sorts OF securities, especially indus
trial securities. and not even excepting gov
eminent bonds
Senator Owen, as one OF its authors,
knows that the Federal reserve act was
framed for the purpose OF giving stability
TO the credit system OF America. and giving
reasonable and stable rate OF interest"
Instead, ii is being used for the astound-
ing purpose OF debating credits, breaking
down confidence, aud il is bringing on an
industrial depression that may be extremely
harmful unless properly checked" There
Is no sense whatever" the Senator continues,
in retiring credits which are employed in
production and distribution processes. That
IS to check business and 10 stop these pro-
cesses just TO the extent such a policy is
carried out"
These arguments are not new. They
have been voiced insistently in these columns
and they repeated here to emphasize the
conclusion, in which Senator owen is al one
with The Times Dispatch that the policy OF
dehation Is based on a false conception, and
already is having effects so harmful that
any citizen OF average intelligence can clearly
perceive"