Republican farmer., 1920-05-28
GOV. HARDING OFFERS REMEDY
 FOR SITUATION
Economy, Increased Pro duction, Improved Trans
 portation.

Washington, May 27.---Econorny in individual expenditures, reduction of none essential loans by banks, in creased production and improved transportation are needed to reduce the cost of living and defate credits, Governor Harding of the federal re- serve board declared today in re- spending to a Senate resolution of inquiry.
 The board is not prepared to de- fine what are essential and non-es- sential loans, Governor Harding stated. This, he said, is a problem for local bankers familiar with local needs.
 Governor Harding's letter, present ed to the Senate today by Vice Presi- dent Marshall, came in response to the resolution of Senator Mccormick, Republican, Illinois, adopted recently requesting information regarding what steps the board contemplated 'sto meet the existing imitation of cur rency and credits and consequent high prices, and what measures were proposed to mobilize credits for movement of the 1920 crop" Reviewing the boards warnings to federal reserve members against ex- tending credits and it's increase of discount rates, Governor Harding said the board for months has recognized that the expansion of bank credits was proceeding at rate not warranted by the production and 1 consumption of goods.'' The dis count rate advances, Governor Hard l ing said, have checked credit trans | actions somewhat but 'thave not been entirely effective in bringing about l the reduction in loans desired and l which might normally have been ex- l pected during the early months of the year."
 ! "On the contrary he said, "com- l mercial loans have steadily increased. Thus it appears that the public has anticipated demands for banking 1 credit which usually are made later 1 on in the year.
 The average reserves of federal
 reserve banks now are a little over l AZ 1-2 per cent-,'' he added "as l against 5 per cent. at the beginning
 of the year and about 51 per cent. 12 l months ago.
 Governor Harding told of the re- Il cent conference here of the federal
 reserve advisory counsel and it's rec
 concentrations for curtaifment of
 credits together with the opinion that the congestion of transportation facilities is tying up great quantities of foodstufs
 ;1 NThe board is convinced,'' Cover
 nor Harding continued, tfthat if the
 unsold portions of last years crop
 can be brought to market before the
 new crop natures, the Nhquidation of credits which are now tied up in car
 rying the old crops will be sufficient
 to offset to considerab1e,sd degree the
 credit demands in moving
 the crop of 1e2o.~
 l In the efforts to reduce non-essen-
 ta1 loans, Governor Hard7ng said. banks were cautioned against drastic
 entertainments and advised to seek , liquida tion and to grant loans stimu-
 lating essential production. 'tThe problem of the banking sys- tenn of the country, ~'' ''he-c continued, '-is to check further expansion and to
 bring about normal and healthy . liquidation without curtailing essen
 tiaI production and without shcck to
 industry and legitimate commerce..
 ''It is the view of the board that
 while the federal reserve banks may
 properly undertake in their transac- tions with member banks to ~discrim- mate between essential and non-es- sentia1 loans, nevertheless that dis
 crimination might much better be
 made at the source Haoy the, smember banks themselves
 Regarding congestion Of -nerchan-
 disc and traffic, Governor Harding ; said:
 . "It is true that under existing ] conditions the vofune of credit re- 3 quired in any transaction is much , greater than was the ease in 11re-war times, but it is also true that the resources of the member and non e member banks would be ample to l take care of the essential business of the country and to a large extent of s non-essentials as we'll if there were 9 freer flow of goods and credit. If frozen loans" were iQuff1ed and if $ commodities which are held back 3 either for speculative purposes or be y cause of lack of transportation facili-
 ties should go to the markets, and if large stocks of merchandise should be reduced the resultant release of
 credit would have most beneficial
 effect upon the general situation. In
 done to expedite the release of these r criits and to restrict non-essential '' credits in future
 e -~The board will not hesitate so far a as may be necessary to bring to bear = all it's statutory powers in regulating s the volume of credit :, Much will depend upon the re- Il storaton of the normal efficiency of f railroad and steamship lines. If ade- U quate transportation facilities can be
 provided the board sees no occasion e for apprehension in connection with - the movement of crops now being | grown"