Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1920-10-18
INTEREST RATES
CAUSE PART Of
BIC SHR|NKACE
Comptroller of the Currency
CritiCiSeS New York Banks
for Practice Which He
Says Injuries Business.
By The Associated Press,

Washington, oct lnJuStl-
fable interest eXacted on demand
loans" by New York city banks has
been an active contributing cause
of the huge shrinkagc" in all Sc
curity values during the past year,
Comptroller of the Currency
williams declared tonight in a
statement. He charged that call
money rates in New York were the
highest in the world and that ere
newal" rates, fixed daily by a small
"coterie" of stock exchange
brokers. governed the interest
charged on brokers' loans in nearly
all New York banks"
ManipulatOrs May Profit.
1.-THE raising or lowering Of the
renewal rate on the exchange,
said Mr. Williams, lis frequently
accompanied by upward or down
ward movement in stocks and Sc
curitieS: and those responsible for
the fixing of the rate therefore
have the opportunity, whether eX'
ercised or not, of profiting largely
by operations on the stock market
which is so often and directly eff
v
do not, of course undertake to
say that informal money commit
tee does take improper advantage
of their fore knowledge. Certainly
all prudent and thinking business
men will agree that there is dan
ger in the concentration of such OPP
portunity and power in the hands
of few persons. Temptation to
use this power for individual profit
must arise. and human nature IS
not changed by high position in the
financial world.
Grip On Heart of Commerce.
Power to fix money rates for all,
or nearly all, of the banks in New
York city, and to change them
daily, is a grip on the heart of our
commerce. 1t permits such inter-
ferences as fallible human judg-
ment. within or interest may direct
with the natural and orderly move
ments of money the life blood OF
business. The matter of arbitrarily
fixing money rates at the money
center, possibly reversing the nat
ural and healthily flow, and affect
ing, directly or indirectly billions
of dollars Of security values and
other property, is left TO a small
and varying number of private citI-
zens without official responsibility,
Ceciding IN a moment and in secre;.
Dangers OF Such Methods.
'"The evils and dangers OF suCh
methods could be recited indefinite
~. They reach to the remotest cor
ncrs of the union and its posses
sions, and touch harmfully every
class of people. The direct tend
ency is to reverse one of the funda-
mental purposes of the federal re-
serve act, which is to promote or
derby distribution of money through
the country to meet the needs or
commerce and agriculture. EN-
cessive interest rates offered IN
New York artificially draw money
away from outside communities
through their banks, and often
leave Legitimate enterprises starved
or pinched, while feeding speCula-
tive movements which may be add
ing nothing to real industrial or
commercial wealth.
Depress Securities Prices.
Il reiterate that excessive rates
on call money, arbitrarily fixed and
tolerated in New York, in my opin-
ion, have been a potent influence
in depressing seriously the prices
of all investment bonds and stand
ard shares, the shrinkage in which
in the past twelve months has
amounted, including the deprecla-
ton in liberty bonds, to several
billion dollars"
AS to remedy for the situation,
Mr. Williams saw only the nope
that public sentiment will be
strong enough to bring about re-
forms" and expressed the belief
that the tremendous responsible
ties of the New York banks and
financiers sooner or later would De
realized by those who carry those
responsibilities He said that some
of them honestly and conscientl-
ously' observe the obligation to the
general public now and that they
realize the direct and distinct
duties" which they owe to all com
munities.