Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-01-24
SENATOR OWEN OFFERS BILL
TO LIMIT CALL LOAN RATE
Committee Asks Bank Board to Report
on Restriction for Reserve Banks
Other Measures

Senator Owen of Oklahoma. ranking
democratic member of the Senate bank
| ing and currency committee and chair
| man of that committee when the federal
reserve act was put through, is now
seeking to amend the federal reserve act
so that member banks of the reserve
system shall not be permitted to charge
| more than 6 per cent on call loans ="
based on collateral stocks. or on loans Of
| term less than thirty days.
A bill for this purpose has been intro
! duced by Senator Owen and referred to
the banking and currency committee.
. Chairman Mclean has asked the Fed
eral, Reserve Board to submit report
on the measure. He may hold hearings
| on the bill.
Proposes to Stop Fluctuations.
Senator Owen has stated it is his pur-
! pose to stop the violent and arbitrary
fluctuations of the interest rates by the
| banks in New York and other leading
cities on call loans. This interest on
call loans has run as high as 80 per
| cent recently, and Senator Owen con-
| tends that these rates have the result
OF lnJuriously affecting the commercial
and ordinary banking rates. and that
they impose an unfair tax on manufac-
! turerS. merchants and consumers, who
| nave " COIIlpete, III d way, Will tHcSC
rates when they want to borrow money,
and that they interfere with the sta
bility of the business world.
! 1t has been alleged that the high rates
charged for call loans are justified by
, the desire to stop speculation. Senator
Owen insists that they do not check
speculation. but that they really pro-
mote a bear market and create a Situa-
! ton that permits the ''insderS" to sell
short at a profit.
| Banks desiring to check speculation"
SAID Senator Owen, discussing the mat
ter, can withhold loans on investment
securities and expand loans on produce
tive enterprises. They can raise the
margin requirement and check specula-
ton without interfering with the normal
business rate
''The banks ought to be content with
fair rate of interest and avoid usury.
They should respect the spirit of the
statutes, which put a limit of per cent
as fair basis. The national banks
earned at fair rates of interest a billion
dollars last year. and the public is en-
titled to fair rate of interest. 1t would
be better for the country to lower the
rate Of interest for productive and dis
tributive purposes, and thus lower the
high cost of living
The high rates charged for call money
tends to draw to Wall street. too. money
which could well be used in other COM
| munities, it is said.
Text of Measure.
The text OF the bill introduced by SEN
ator Owen follows:
THAT no member bank Of the federal
reserve system shall charge a rate of
interest in excess Of per centum per
annum on loans secured by stocks or
bonds as collateral and made subject to
call or having term of less than thirty
days"
Nj
federal reserve act are proposed in
bills introduced in Congress this
week.
Senator Frelinghuysen of New Jer-
sey is the author Of bill to authorize
national banking associations to eS-
tablish and maintain branches. This
is not new proposition but it is one
that has met with considerable oppo-
sition in the past.
Under the Frelinghuysen bill it is
provided that any national bank To-
Gated in any city having a. population of
not less than 100000 may. with the ap-
proval OF the controller of the currency.
establish and maintain branches in the
city. in which 1t is located. 1t is fur
Their provided that the capital of the
| parent bank shall be increased with
| the establishment of each branch
within the city in which it is located
in an amount equal to not less than
| so per cent of the minimum capital
| which would be required under then
! existing law for the organization of
| a national bank in that city. The bill
| limits the number of branches which
may be established by any one bank
| to twelve.
Interest on Reserve Balances.
Senator Gore of Oklahoma has in
! troduced a bill providing for the pay
| ment of interest on reserve balances
in, ho
proposes that section 10 of the fed
eral reserve act shall be amended by
adding at the end of that section the
following paragraph:
Each federal reserve bank shall
pay to each member bank interest on
reserve balances maintained with
such federal reserve bank. to be COM
puted on the daily balance of the
member bank, at the current rate pre-
vailing on demand deposits in the re-
serve or central reserve city in which
the reserve bank is located" 1t is pro-
vided further that in case the earn
ings of the federal reserve bank. after
ali necessary expenses have been paid
or provided for and the dlVldendS on
the paid-in capital stock nave been
fully met as provided IN sectlon Z,
are not sufficient to pay such rate OF
interest as provided for in the bill.
then interest shall be paid on the
reserve balances at such rate as the
earnings will permit
All banks and trust companies In
cornorated or organized under the
laws Of any state which "a are IN members Ss
DESIGNATED by the Secretary OF the
treasury, shall be depositaries of
public money. under the provisions of
a bill offered by Representative NC
Fadden of Pennsylvania. These
hanks also may be employed as finan-
cial agents of the government. 1t is
provided that the Secretary of the
treasury shall require these banks
and trust companies to give satisfac.
tory security by the deposit of United
, states bonds "or otherwise" for the
safekeeping and prompt payment of
the public money deposited with them
and for the faithful performance of
their duties as financial agents of the
government.
Proposes Roosevelt Coin.
Senator Mclean of Connecticut,
chairman of the banking and currency
committee, has introduced a bill to
authorize the United States mint to