The Washington herald., 1920-07-31
Tendency Toward Liquida-
ton Also Shown in Ma
tional Bank Reports.
DECLINE IN DEPOSITS
Aggregate of Bank Re.
sources at Present Time
Still at High Level.

SAID yesterday: 'Oncial reports to
this ONCE from all national banks
on the call OF June 80 show that
In about two-thirds of the reserve
and central reserve cities of the
country there has been a distinct
tendency towards liquidation and
reduction in bank loans. the cities
showing loan increases being con-
nned almost exclusively to the
Eastern and Cleveland districts.
The reduction in loans has nat
urally been accompanied by a dt-
cline in deposits, but the aggregate
OF bank resources at this time is
sun at high level and the national
banks Of the country are in a par
ucularly strong and well fortified
position.
alarming state Of affairs in parts
OF the old world, for which, l am
convinced, this country's refusal to
ratlfy the peace treaty is largely
responsible, there is absolutely no
Justification for the spirit Of
pessimism and uneasiness prevalent
many sections of the United States
today
The action of the Federal reserve
banks in restricting extension Of
credit for Unessentials and luxuries
and in encouraging increased pro-
duction OF commodities most needed.
mas been distinctly beneficial and
mas It Is believed, been a material
innuence in reducing the high cost
OF living far and wide. Although
the application of the brakes seems
10 nave had a jarring effect upon
some nervous systems, and has oc-
casloned unfOunded fears of a
money panic and commercial crisis,
there are in our country abundant
reasons for confidence and en-
couragement as to the future.
Those inclined to pessimistic
views as to our financial situation
probably do not know. or do not
appreciate the immensely sisnfi-
cant fact that our Federal reserve
banks have. at this time an unused
lending power Of S75O0OO. 900, and
that II occasion required the board
could. by waving reserve REQUIRE
mCnts on deposits and notes only 10
per cent, increase the unused lend
Ing power to S2.5OO.OOO. 900. which is
twenty-five times as much as all
the national banks of the country
(Which constitute a large majority
or the membership of the reserve
system) were ever borrowing at any
ono time on bills payable and re-
discounts prior to 1913. the maxi
mum Of such borrowings at any
time up to 1913 having been only
100000 900.
IN the face of such figures and
facts as these the fear expressed
In some sections that there may
not be money enough available to
r70ve the crops seems manitestIy
absurd. 1t will be recalled that in
1913. before the establishment of
tho Federal reserve system. the
s.rinEency and uneasiness which
prevailed at crop moving time was
instantly relieved by the announce
mcnt Of Secretary McAdoo that the
government was prepared TO deposit
sIO.OOO.OOO of cash in the banks in
the South and West to help move
the crops. The Federal reserve
banks can at this time. as have
shown above. based upon their
present gold reserve. supply fifteen
times as much as the s5O,O00, 900
which was so effective in 1918,
wholly without waving or reduc-
ing their reserve requirements
1t is also reassuring to know
that this unused lending power Of
the Federal Reserve banks is twice
as great as the aggregate amount
of all the Emergency currency is
sued in 1914. upon the outbreak of
the European war. involving the
greatest financial crisis in the
worlds history. Such figures as
these ought to be sufficient to al
lay fears entertained by pessimists
as to the financial condition Of this
country at this time.
with a sane settlement of pres
ent labor troubles and the restora-
tion Of the old-time efficiency Of la
Dor, and the stabiliZation which 1t
is hoped the forthcoming rate de-
cision Of the Interstate Commerce
Commission, together with more
scientific administration and less
stock juggling in railroad manage |
mept will bring about, the business
outlook for this country will be |
extremely bright.
Il will also add that there is not. !
and has not been in my judgment, |
the least justification for the ex-
CeSSlNe ana OurdenSOme interest /
rates. running up to 10. IL and Is I
per cent and higher which have |
been exacted by some of the banks |
In New York City. the principal f. |
nanCial center OF our country New
York is the only city of conse-
quence in the world where such in
terest rates exist and are tolerated |
They do not prevail in London or |
Paris. Berlin or Rome, Peking Hong |
Kong or Tokyo, or in any OF the |
leading cities Of our own country, !
San Francisco. st. Louis. Kansas
city, New Orleans, Atlanta, Dallas, |
Chicago. Minneapolis, Cleveland, |
Richmond, Baltimore, Philadelphia |
or Boston.
These excessive rates and the |
publicity given them have Increased |
the uneasiness in financial circles {
and have been a contributing cause
rather than a consequence of the |
upsetting Of security values, and of /
The excessive and unjust rates |
which corporations and others have |
been required to pay for money in |
kecent months. The banks which |
Nave charged their customers these /
Excessive rates-at times as high as /
Is per cent or more-have them /
eelves at the same time been liber-
Tally accommodated with millions of /
dollars by the Federal Reserve |
banks at average rates of consider