The New York herald., 1921-08-05

FEDERAL RESERVE
POLICIES DEFENDED
Governor Harding Testifies of
Attitude of Board on
Credits.
URGES MORE OPTIMISM
'You Can't Talk to a Banker
Like You Do to Tax AS
sessor,' He Says.
URGES MORE OPTIMISM

WAsH1NGToN, Aug. f.-Credit policies
of the Federal Reserve system continued
under examination OF a Congressional
stormy atmosphere. with Gov. Harding
OF the Reserve Board as the sole wit
ness
''The Federal Reserve Board didn't
Harding exclaimed toward the end OF
the day. 1T saw 1t coming and got
ready to protect things. and people ought
to be grateful it did so. Now all we
need is cessation of pessimism, which
marks bad times as foolish optimism
marks good times. We all know now
everybody was going crazy in the boom
during the fall of 1919.
This situation is going to work out.
There's no comparison between the con-
dition a year ago and conditions to-day.
Take cotton. with low yield. and ex-
ports picking up. Banks everywhere are
fully justified now in carrying loans.
"All we've got to do Is to get out of
everlasting pessimism and quit saying
everything Is going to the dogs. Why.
a man has to put up a good. cheerful
face il he wants credit. You can't talk
to the banker like you do to the tax as
SCISSOR"
Previously sharp passage had taken
place, in which Representative Funk
In), Representative Mills IN. Y.) and
later Gov. Harding participated.
I'm keenly disappointed" Represen-
tative Funk said. because the reserve
system has been challenged, complained
of, criticised and charged on one ground
that it has Disseminated against ag-
ricuture. And we've not heard one
word from this witness"
Representative Mills leaped to the
fray, asserting that the commission had
allowed John Shelton Williams. for
mer Comptroller of the Currency, DUR
ing two days to make charge after
charge against the Reserve Board" and
that Gov. Harding was entitled to
common Justice" in the privilege of a
detailed response. Mr. Funk told Mr..
Mills to handle your affairs and TIL
handle mine" while Chairman Ander-
son ruled that the Governor was with
in his rights
HAS the Reserve Board called in
farm credits?" Mr.. Funk demanded
later.
mo, sir: it never has" Gov. Harding
retorted.
.'How about the circulars of the San
Francisco Reserve Bank?" Mr.. Funk
continued. concerning the price OF
wheat in 1920?''
II never heard that before Gov.
Harding said. Did it cause break
in wheat prices?'
1T had some effect" Mr.. Funk re-
sponded.
'"The board has cautioned reserve
banks not to issue circulars" Gov. Har-
ding continued. Its the Job OF banker
to look to the value of his collateral. but
10 do 1t in a quiet way. 1t Is not the
function OF the reserve system to regu-
late price, up or down. but to maintain
credits"
In general. Mr.. Harding said, "the
attitude of the reserve board toward
agriculture has been greatly misunder-
stood and grossly misrepresented."
THE whole trouble with the reserve
system in meeting agricultural demands
is that reserve banks do not and cannot
lend to individual borrow srs." he added.
"The paper OF borrowers must get into
hands of member banks Lefore 1t gets
to the system"
Gov. Harding gave detailed explana-
ton of the restraints imposed on credits
during what he referred to as the
''crisis," declaring that their principle
was that OF penalizing borrowers who
took out of the reserve system sums dis
proportionate to their own resources.
Tables. charts and explanations were
left to be dealt with tomorrow.