Evening star., 1921-08-02
WILLIAMS SCORES
GOVERNING POLICY
OF RESERVE BANKS
Former Controller of Cur
rency Criticises Gov.
Harding and Loans.
HITS INTEREST RATES
AND CREDIT DIVISION
Tells Joint Congressional Commit
tee Money Was Used for Specu-
lation-Favoritism Charged.


John Skelton Williams. former Con-
troller of the Currency. appeared today
before a joint congressional committee
considering agricultural problems. to
criticise administration Of the Federal
Reserve banks. Gov. Harding Of the
ence.
Il did not agree with the policy Of
the reserve board in Unfortunately
raising interest rates in 1919" Mr.. Will
liams said, nor did agree with it pre-
viously in a policy of making prodigal
the disadvantage Of the west and south.
II found that the board in 1919 was
advancing directly and indirectly total
sum Of s130,o00.0 900 to a single institu-
ton in New York city"
Cites Statistics.
Mr.. Williams read statistics which
he said showed New York. Chicago
and other city banks were getting
more reserve loans than all the coun-
try banks at the period. When asked
that he present 1921 figures. too. Mr.
i
The New York Reserve Bank. Mr..
Williams said. always was a tremen-
dous borrower. ito the extent OF four
times its capital for use in specuia-
tive operations and promotions.
Representative Mills. republican. of
New York, moved to strike out the
testimony. but the commission voted
him down.
without any reference to the assets
and deposits of the borrowing bank"
Mr. Mills asked.
Il prefer to have the board. whose
members 1 see here, ask questions as
to their administration" Mr.. VIII
liams replied. adding that the board
adopted general rules which con-
trolled the amount OF credit granted
| to individual banks and that these
rules varied with varying conditions
| in the different reserve districts.
1t was developed that the reserve
! board established basis lines com
pounded from resource totals OF
banks which controlled amount OF re-
discounts.
Pretests Credit.
Returning TO his statement Mr.
| Williams said:
showed the New York Federal Re-
serve Bank had lent to one New York
bank sl30.00O.000
Mr.. Williams said he had protested
| to the board at the extent OF the
| credit because the bank was con-
| ties
This was not a national bank
| Chairman Anderson asked.
1T was not" Mr.. Williams returned.
II asked a special examination OF It's
| condition, but * was not allowed. on
the ground that the boards interven-
tion might alarm the state banking
authorities"
Senator Harrison, democrat Mis-
sissippi. asked II the reserve law did
not forbid speculative borrowings.
Mr.. Williams said IL did.
But that does not prevent an In
stitution from borrowing $l0.0oo.000
in liberty bonds" Mr.. Williams added.
land rediscounting II with the reserve
system and then lending the money
| to its president for speculative op-
| erations"
Isn't 1t true that that institution
is largely engaged in lending money
| for export of grain. al other farm
products and manufactures to Eu-
| roper Mr.. Mills asked.
| Il presume il is largely SO engaged"
Mr.. Williams replied. Its funds were
largely loaned to its executive Of
fcers for speculative operations"
Power to Control.
| The reserve board has always loan
ed largely and at low rates Of inter-
est" Mr.. williams continued. ito GER
tain New York institutions. and main
tained the practice in good times and
| hard times alike, when the board was
| forcing liquidation at immense sacrf-
| fees to borrowers in Richmond, At
| lanta and Dallas districts"
Effectual power is in the reserve
board to control all the conditions he
criticised. Mr. Williams asserted dur
| ing an argument.
TT can remove any reserve bank Of
ficer found incompetent" Mr.. Will
| liams added, land 1t can tell any bank
| to go SLOW"
I'm informed that country banks
| send large sums to New York to be
loaned on call, for speculative pur-
poses," Chairman Anderson said. do
you recommend that these country
banks be subject to restrictions also?'
Il do" Mr. williams said.
| Criticises Loans.
I'VE find that these speculative
loans in New York banks in question
are studiously camoufiaged." Mr.. will
liams continued, "by means of con-
cealed loans to officers. who partici-
! pate in syndicates and promotions"
DO you think the lending power Of
the Federal Reserve Board ought to
be used to compel compliance with
banking laws on the part Of member
banks? Mr.. Anderson asked.
| II do," Mr.. Williams replied.
| do you contend any federal re-
serve bank has violated the law?" Mr.
Mills asked.
II make no such charge" Mr.. Will
liams said.
| He read more of the resource sta
tistics of the New York bank, which
showed, he asserted, that in Decem-
ber, 1918. it was lending huge sums
to certain institutions" while the
board was curtailing credit elsewhere.
At Issue With Harding.
Mr.. Williams, reading testimony
from congressional bearings took
issue with statements Of Gvv.' Has.s-
ing. who followed the witness intent
ly, but did not~seek to interrupt.
Mr.. Williams testified from q mass
of papers, bank reports and docu-
ments. which he sorted out with aid
of q secretary. Reserve lendings to
AGRICULTURAL interests were less than
Gov. Harding said during 1920 and
the early part Of 1921. he said.
There IL ground for the farmers
complaint Of discrimination in credit
given" Mr.. Williams concluded his
analysis of the point, 'ffAGov. Hard
fng's statements are true"
"Are you under the impression that
loans Of country banks have con-
tracted since 1892" Chairman Ander-
son asked. There was general bank
ing contraction since then. Mr.. Will
jliams agreed, but he expressed no con-
clusion as to the participation In cen.