Omaha daily bee., 1920-03-07
UNITED STATES
NEARING LEGAL
LIMIT OF CREDIT
indications Cause Reserve
serve Board to Consider
Question Of Restoring
Gold Embargo.
By ARTHUR SEARS HENNING.
fhlAa1A Y%RShuua- -0va aha r>A 7 n~sAd vHirA

ChleAGo 1f1buDe-OmahA Bee Leased Wire.
Washington, D. C., March O.
With the gold stores OF the nation
slowly sbbing and indications multi
plying that the country is approach
ing the legal limit OF the use of
credit the federal reserve board is
giving serious consideration to the
question OF restoring the embargo
on the export OF gold or OF adopting
alternative stabilization measures.
Some treasury officials view with
disquietude the continued exporta-
ton Of gold and frankly advocate
the reimposition of the embargo to
prevent any possible arrangement of
the credit structure through de-
pletion of the gold basis.
The reserve board was instru-
mental in lifting the wartime en-
barge on gold expectation last sum
mer and has steadily opposed its
restoration. At recent meetings
when the matter was under consid-
Grafton nearly all the members
have taken a position adverse to an
embargo and the indications are
that unless the situation becomes
more serious the board will pursue
the alternative course of regulating
credits and curbing speculation.
Gold Exports Large.
Latest figures available show
that from January to February 10,
States totaled S63,769,203 Imports
OF gold during same period amount
ed to only $12,2O3,00O. OF the
gold exports during that period
S2S. 100000 went to Argentina, SILL
26S,342 to Hong Kong, So,302, LOG
to other points in China; $500 ,30l
to Japan and $3,744,532 to Mexico.
The embargo opponents assert
there is no cause for apprehension
as there is $2,000.0000OO worth of
gold in the. control of the federal re-
serve system, the greatest supply of
gold ever held in any nation in all
history.
Ali Of the federal reserve banks
have maintained their full 40 per
cent in gold upon notes issued as
well as IS per cent in gold upon re-
serve deposits, with the exception
OF the New York b,...k, which last
week dropped>to $50 per cent on its
gold reserves on deposits. This in
cident has created some apprehen-
sion and is considered a warning
that the nation is approaching the
legal limit in the use OF credit,
Propose Change in Law.
The federal reserve board within
recent weeks increased discount
-ates with a view to restricting the |
rediscount of member banks at the
federal reserve banks. The board |
has caused to be introduced i'll con-
gress an amendment to the federal,
reserve act to limit the member
banks from borrowing for any cause
Or reasonable purpose of the funds |
,f the federal reserve banks. This |
sill which permits federal reserve
banks to fix graduated rediscounr
-ates for borrowing banks, has been
approved by committees of both
,enatc and house, and will be acted
,pon in one house or the other with
n the next few days.
The bill pending in congress pro7
,ides that when a borrowing bank
yoes above its rightful share it
'liould be taxed and increased by
higher rates in the discretion of the
ederal reserve banks, subject to the
,pproval of the federal reserve
,oard. Use of this additional au-
hority ON top of the present law
which permits changes in discount
'ates applying similarly to all banks
will be another step toward the reg
,lation OF rationing OF the use Of
:redit.
Conservative bankers opposing
my embargo on gold feel that this
8 4 proper approach to the solution
Il the situation. A far more impor-
ant step however, in their view is
hat people should learn to use as
title currency as possible, to be eco
,omical in their spending and to be
,aving and thrifty in order to pro-
ect the whole credit structure.
'ifeater economy and thrift, finan-
.iers say, would affect the gold re-
crve to a far greater extent then
most people imagine.