The New York herald., 1921-08-10
STR0NG'S BANK DATA
ANSWER WILLIAMS
Reserve Governor Shows How
N. Y. Institutions Were SUI
pervised After Loans.

WASHINGTON. Aug. 9.-New York
banks which obtained great sums IN
Federal reserve loans during the money
stringency last fan were closely super
vised. Gov Strong of the New York
Reserve Bank, testified to-day before
a Congress commission. He introduced
the confidential ard almost daily reports
at the time upon Bank No g." which
he identified as an institution which
kept $3.50. 100000 in reserve loans. and
vas engaged largely in speculative
operations" John SHELTON Williams,
former Comptroller of the Currency and
chief of the reserve systems critics,
when called before the commission re-
cecently referred to such bank as
having been unduly favored
I'VE ascertained the cause of credit
demands because we wanted TO know
whether loans were justified" Gov.
Strong saiu, "and If the money was
necessary to legitimate needs OF the
business of the country we furnished it.
If the stock exchange loan accounts Of
banks appeared 10 be rising we would
warn bankers that reserve money was
not lent FOX that purpose. One of these
institutions estimated for US that 1t
! merely TO handle export shipments of
cotton
Now the Comptroller CHR. Wiuams)
didn't known these things. 1t didn't
concern him, and l for one never dis
cussed it with him."
Gov. Strong said he "hestitated to
make the stateMent'' that Sto.k EN-
change loans would be restricted in the
emergencies. because it isn't or func-
ton to control Stock Exchange move
ments, and market places
where speculative risks are assumed
have a place in the great economic fab
ric of the country"
He repeated denials that Increase of
reserve interest rates forced breaks IN
commodity prices and said the reserve
system had foetered and Increased the
sentiment that producers and business
enterprises should be carried through
ths emergency. He pointed to expan-
sion of reserve loans which took place
during the peripd as proving that the
New York bank. far from restricting
loans. extended credits TO the point
which has drawn criticism upon u.s."
Governor Strong asserted that the lend
ing in 1890 of s244, 900. 900 from the reserve
system for agricultural credits indica ted
that, by the multiplication OF bank cred
Its, probably $1,000, ,090000 in first hand
loans TO producers were extant at the
period.
Panic interest rates" on the New
York stock Exchange OF 30 per cent.
and higher signify always that money is
being drawn from the financial centre
for use in the country Gov. Strong re-
peated. In general, he said. operation
of the reserve system has tended to de-
crease money and credit available for
speculative use and increase amount
and flexibility II credit for industrial.
trade and agricultural use
In the recent crisis. we were forced
TO get together small group of bank
ers,' he said, about ten in all. to in
sure sufficient supply or money. fear
ing that unless this was done there
would be collapse of security values.
and gyrating interest rates. which would
add 10 general uneasineSs and inse-
curity.
AT first, some ten banks agreed to
find Sl00, 900, 900 with other contingent
amounts. This first took place in 1877.
when war financing began to strain
credit structures. We found at the time
about $3.50. 00O. 600 was being ient con-
tinually on tie Stock Exchange. N
In my opinion, IL would be lmposse
TO control markets. Members oSot :
New York Stock Exchange we< ac-
permitted 70 increase their Tthey !,
counts. and, let fne say Tor " T
did not seek 70 do So IN which y,
Gov. Strong said the axtcessary to u
the financiers worked way Loan val Q
the maintenance Of LiFThursday :,
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