Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1921-08-02
Remedial Steps to Allow In
terchange of Gold Supply
at Profit Is Considered by
Board
Ely HARDEN COLFAX
Ueased Wire Service to The Journal.)
(Copyright, 1921

NOOpylISHIS 4OHI'J
WASHINGTON, July 30.-Locked
and idle in the Golfers Of the four
eastern reserve banks at Boston,
New York, Philadelphia and Cleve-
land is more than $S00,0OO,OOO In
unused gold reserves. This money
is potentially capable of furnishing
credit to the extent Of ten billions
of dollars, but there is so little de-
mand for it in the east that redis-
count rates have dropped twice
within a few weeks.
Loaned up to capacity-and In
one case beyond it-are the four
Federal Reserve banks in the agri-
cultural centers of Richmond, At
lanta, Minneapolis and Dallas The
farmers in the great territory sup
piled with credit by those four IN
Situations find the money market
so tight that it is extremely diff
cult to get credit on any reason
able terms.
The east, with it's great industrial
centers still travelling at a con-
sentative pace, has more money than
it can lend; the west and south,
needing money as seldom they nave
needed it before. can hardly get it
at any inquire.
Such is the showing Of the fed
eral reserve boards latest state
ment. The condition, admittedly, is
seasonal-and a bit unhappy. Some
way should be found, many bankers
believe, whereby eastern gold can
supply western and southern wants.
The federal reserve board is study
ing the situation and remedlal steps
may be proposed.
True, the reserve banks at Rich
mond, Atlanta, Minneapolis and pal
las could borrow gold from their
at Boston, New York, Philadelphia
and Cleveland, but the interest late
charged by the four BANKS with
surpIusages are such that there
would be virtually no profit in the
transa ctionS for the borrowing banks.
banking practice on the part o. the
lending bank-to charge a reason
able interest rate, watch i'll this
case happens to be what the Dor
rowing banks would have to charge
their customers-but it doesn't lend
itself to correcting the situation in
the agricultural communities.
Some Loans Secured
NotWithS tanding the lack of prof
it, there have been such borrowings
recently. Atlanta and Dallas, need
ing funds, have borrowed about S23,.
100000 from Boston and Cleveland.
thereby making available minimum
of about $115, 100000 in credit Tor
borrowers in the Atlanta and Dali
las districts. Richmond and Mlnne-
apolis went to New York and Dor
rowed $4,000, 00O-enough to en-
able them to pass on to the farm
ers in their section about $2OO,0OO,-
600 in loans. The total borrowings
of the south and west from the
east, the statement shows, is abu,
teenth part of what is available to
lend.
A study Of the reserve boards
statement shows that the four banks
have the following amounts of So
called free gold-gold not working
which could be loaned to the aGri-
cultural banks to help out The, farm
desirable:
Boston, s189, $4,000; New York,
$465, 968,0O0; Philadelphia, $93,439,-
600, and Cleveland 500, S9S,OOO. The
bank at San Francisco also has
money to lend.
This free gold is expanded about
twelve times in actual practice when
it is converted into credit 20 tbs
man who goes to his bank to hor.
serve bank expands it two and one.
half times in rediscounting the IA
per of the member bank borrowing
from it. On that basis the fire. gold
would provide for rediscounts to-
falling more than two billions Of
dollars.
Big Expansion
The member bank borrowing from
the Federal Reserve bank theoreti-
cally could expand the redIscount
value Of the free gold ten times. In
actual practice it is generally e<-
banded five times. Thus the two
billions of rediscounts could be tx
banded to ten billions in lo2ns
through member banks.
ALI national banks and a grea.
many state institutions and trust
companies are members of the fed
eral reserve system. Theoretically
all the surplus reserves of the fed
eral reserve system are available to
borrowers, regardless of geographic
al location, but actually it doesn't
work out that way. When the Fed
eral Reserve bank in Dallas. for
instance, is loaned up to capacity,
the Texas farmer simply can't Dor
row, regardless of whether there is
an enormous surplus in the Federal
Reserve bank at New York or not
unless the Dallas bank borrow
from the New York bank, and that