Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1920-10-01
GEORGE w. NORRIS
On Currency and Credit

A SMALL corner room, plainly furnished
\ with fiat top desk. four chairs, coat
cupboard and filing case, IL the once OF
George W. Norris, governor OF the tederal
Reserve Bank of Philadelphia--a bank with
resources of $500 900 900 and one OF the
twelve Federal Reserve Banks whose com
bined resources have grown in six years
to exceed $4,000, 600 900.
Mr.. Norris's activities in life have been
varied. Six years as newspaper reporter
six as n practicing lawyer. eighteen as an
investment banker, four as Il member OF
Mayor Blankcnburg's cabinet and four III
the service of the federal government as farm
loan commissioner, have given him chance
to see things from good many dltereht
angles and left him good deal OF sympathy
for the ncwspaperman in search OF ihior-
nation.
1t was, therefore, in n spirit of hopeful
ness that a representative of the EVENING
PUBLIC LEDGER asked him what was going
to be the future course Of prices. Were
the recent drops sporadic or symptomatic!
Would they go further, or go back?
IL cannot give you a direct answer he
replied 'fOr two reasons In the hrst
place. | do not know. That makes the
second reason supertiuous, but l will add
it. nevertheless. 1t is the policy OF 0thcers
of the Federal Reserve Banks not to dis,
cuss the future of prices, or to hazard
gucsSrs on the subject.
Facts, Not Deductions
1--WE collect facts with great care from
manufacturers, jobbers and retailers. Once
| n month we report these facts in bulletin
which bankers and business men may have
for the asking We summarize these facts,
| so that busy men may get In few minutes
| a bird = eye view of business and financial
| conditions, but we do not undertake to inter
pret them or to draw deductions from them.
| Readers must do that for themselves
\vLoI fnr hn rpoSous for this nolicy
| he said:
| "Bccausc, primarily, we have TO do only
| with currency and credit. We deal only
| with member banks, not with the public
| IL our policies affect prices, that effect is
only incidental and unintentionai. Interest
rates-thc price of CREDITS the thing
| most directly affected, but even there we
| urc not so potential as is popularity sup
| posed.
| IF the Reserve banks raise their redis
count rates. they DO not do 1t for the pur
pose Of raising the price which the individ
| ual borrower must pay to the commercial
| bank but for the purpose of reducing the
| volume of redscOunts which those bank'
| call upon the Reserve banks to make. an(
the rate that they pay the Reserve banks OF
redscounts of > per cent of their loani
ought not necessarily to control the rat,
which they charge their customers upon thu
other % per cent.
| 1T is true that for nearly year ther
has been an effort to reduce the volume o
rediscounts with the Federal Reserve banks
1t is confusing cause with effect, however
to imagine that this has been because tn
reserves of the Reserve banks were too Low
and were going lower.
"As the sponsors for n large part of ou
currency, as the agencies of reGscoun
and as the custodians of the ultimate bank
| ing reserves of the country 1t is importan
that these banks should be kept so stron
that they would be in a position to tax
care of any emergency that might aris
without any possible doubt or question u
to their ability to do it.
Contraction Of Credits
lit is for this reason that the officers an
directors of these banks have urged upo
member banks the advantage Of so limitin
their demands upon the Reserve banks tina
these latter banks might get back into til
position of obvious impregnabilty tina
they occupied before the war had reduce
their reserves,
1T is also true that the member bank
could not materially reduce their redis
counts with the Reserve banks without re
ducing their own loans and discounts I
their customers, but this was secondar
effect, not an original objective"
'Is that not a contraction ~ credit
and does not a contraction of credit for,
goods on the market and inevitably smas
, | prices?" he was asked. ".
'iNot necessarily he replied. "a con