Vernon Parish Democrat. (Leesville, La.) 1917-193?, 1921-12-15
Concluded from last week)
Loan to System Director

Federal Reserve System extensively
loaned to banks whose executive offic-
ers and directors were big borrowers.
but the records show that one of the
banks borrowing most heavily from its
Reserve Bank was lending last au-
tumn to a certain large borrower, who
at that very time was also a director
of the Federal Reserve Bank of New
York, over five millions dollars Tin
Guiding a dummy loan of over $3,000,-
O0O)-mostly on highly speculative
securities, while farmers and the
''country" banks were even then beg
ging for relief and enduring ruinous
losses because of the credit restrictions
of the Reserve System.
E. The official figures show that in
September, 1920, the Reserve System
was actually lending to the IS nation
al banks in the three big cities of New
York, Chicago and St. Louis about
three hundred million dollars $780,
000, 000) more than the System was
lending at the same time to the 1873
country" banks in all the As states of
the Union.
7. At the beginning of August, 1920,
national banks in New York City which
were borrowing heavily from the Fed
eral Reserve Bank were lending for
correspondents on so-caIled Wall Street
Loans, largely for stock speculations.
over $500,0O0,000 coaxed thither by
the high rates SPECTATORS would pay.
8. In addition to the money the New
York national banks, members of the
Reserve System, exclusive of the state
banks and trust companies, were lend
ing on call for their correspondents
and customers, they also had on depos-
it to the credit of their correspondent
banks in all parts of the country APP
proximateIy $9O0,OO0,O0O more, al
though the total sum which the New
York national banks were lending to
Eall otAer banks throughout the country
Was considerably less than one-fourth
of Nthat sum.
9. The Federal Reserve Bank of
New York, in the summer of 1920,
loshed at s percent or less to mem
Der bank, which about the same time
loaned customer, the head of large
manufacturing Company, on his per-
sOnal note. well-secured by the stock
of his company, several hundred thou
sand dollars for which accommodation
the member bank exacted in interest
and commission the equivalent of
about 200 percent per annum on the
net amount loaned by it. The loans
were paid within SIX months.
System Debates" Liberty Bonds
10. Contraction policies of the Re-
serve Board have been largely respon-
sibIe for the forced sales of Liberty
Bonds and Victory Notes and the ensu-
ing depreciation in their market value.
The shrinkage in value of these secur-
tiles since the board put into effect its
deflation policies is estimated at more
than a thousand million dollars ($I,-
600, 600, 00O) and has caused ruinous
losses to many of the twenty million
patriotic men, women, and children
who subscribed to the bonds upon the
understanding that they would be an
acceptable collateral at banks for loans
at low interest rates.
II. In November, 1915, a deliberate
effort was made by certain members
of the Federal Reserve Board to close
up or remove the Federal Reserve
Banks in three or four important dis
tricts, but the execution of this scheme
was prevented by the prompt action
of President Wilson. Secretary McAdoo
and the Department of Justice.
II. About January /, 1920, the
New York Reserve Bank was lending
an amount equal to nearly six times its =,
own capital-that is. six times the cap
ital of the Reserve Bank of New York,
to one member institution. This one
borrower was thus getting nearly twice
as much from the Reserve System as
the aggregate amount of loans and dis
counts which the Federal Reserve
Bank of Dallas at that time was lend
ing to all of its member banks in that
great district, including Texas and
parts of louisiana. Oklahoma, New
Mexico and Arizona.
The newspapers say that Governor
of the Reserve Bank of New
York tried, before the Congressional
Committee. to explain the loan of
$l30.000,000 to this institution on the
ground that the borrower held $ll2,-
100000 Government securities, but
this excuse will not do, for in my let
kar - khn Fnvy.~,.z- Il al Eli D.