New-York tribune., 1920-05-30
Reserve Banks
Discount Rate
Raised to 7P. G..
New York District Leads i'm
Applying Brakes on In
iiasion in an Effort to
Check Credit Expansion
Advance Charge Raised
Bankers Acceptances Will
BE Handled at Increase
of I p. c. by New Policy

The Federal Reserve Bank of New
York. in its fourth major effort since
last November to check further credit
expansion, yesterday announced a
higher scale of discount rates. In an
nouncing another increase in the cost
OF credit, j. Fl. Case, acting governor,
explained that the action was taken
that bankers, their customers and the
public generally may find in the dis
count rates of this bank a reflection of
existing credit conditions"
The new scale, effective Tuesday, will
make borrowing at the Reserve Bank
on the part Of national banks and trust
companies in this district more expen-
slve than it has ever been before. More
over. New York is taking the lead in
applying the brakes on imitation bv
means of vertical raises in discount
rates.
Member banks will have to pay per
cent Tor advances and rediscounts Sc
cured by all classes of eligible CONNER
claI paper, except bankers acceptances.
me old rate was 6 per cent Moreover
the rate on advances and rediscounts'
secured by Liberty bonds and Nictory
notes, has been boosted from IA per
cent to per cent The rate on bank
ers' acceptances has been advanced from
. to per cent, and that on United
states Treasury certificates of indebted
ness from to 51a per cent.
Two Methods to Curb Credit
Two different kinds of strategy have
been adopted by Federal Reserve banks
to keep the national crdeit situation
Well IN hand. The first is the New
ork method, on the success of whic h
the pollcy OF seven other regional banks
Will to large extent depend. The
second mode Of action is to establish a
siding scale of rediscount rates, charp-
ing those institutions which lean heav
lest on the reserve banks the highest
rate.
This penalzing of those who borrow
beyond an arbitrary limit has been
authorized by Congress in a recent
amendment to the Federal Reserve act.
Inc change in the law makes the svs-
TEN OF progressive rates optional in
each district, The New York bank has
determined not to exercise the option at
present, but the Kansas City bank and
the Dallas bank already have installed
the new arrangement, and two other
reglohal banks will do so forthwith, if
they get the consent of the Federal
reserve Board at Washington.
The action of the directors of the
local bank in establishing unprecedent-
ed high discount rates is looked upon
IN the financial district as repercus-
sion of the conference at the CAPITAL a
week ago Tuesday between Glass A di-
rectors of the reserve banks and mem.
! bers of the Reserve Board. At that
Interchange of views on the credit sit
uation difference of opinion was cx-
pressed as to the need of higher rates,
but it became known that James S. AL
eXander, president of the National
Bank of Commerce and director of the
Federal Reserve Bank of New York,
and other representatives from this
district advocated per cent rate on
commercial paper-a rate identical to
the present discount rate of the Bank
Of England.
Would Check Further Expansion
Officers Of the New York bank do not
look forward with confidence to any
immediate defation in the form of sub
(Connuod on paQe four)