The Barre daily times. (Barre, Vt.) 1897-1959, 1921-08-06
FEDERAL RESERVE
BANK CREDITS
Described by Governor Harding of Fed
eral Reserve Board Before In
vestigating Committee.

Washington, d. c., Aug 6..--The ebb
and flow of monetary credits through
the federal reserve system was fur
Their described yesterday before Con
gressional commission by Governor
Harding of the reserve board.
I'VE have IL reservoirs of money in
the reserve banks" he said And we
can put pipe line from one to an
other of them when needs become too
great for the local supply, always re-
membering that the loans come in and
are secured by local member banks.
''The federal reserve board can out
line credit policy, but it is very diff
cult to enforce it because of this mem
Der bank proposition. There are 10000
of them, and they take the response
bility in the first instance.
Some of them hold unused lending
power, while others, in credit stringen-
cy, go to the federal reserve bank and
get widely, even dangerously, extend
ed. That was why we had 10 establish
the progressive rate, TO penalize the
heaviest borrowers, but we hope well
never have to put progressive rates in
effect again"
There is prevailing impression that
the break in general prices during 1920
was due to the restriction of credit,
and that the reserve board was respon-
sible for the restriction" Representa-
tive Mills, Republican, New York, said.
There is nothing in it," Governor
Harding replied "Our efforts were de-
voted in 1920 to preventing a collapse
of our banking system.
at isn't our duty to enhance or re-
duce prices, but credit is based on
prices, and in 1920 we had most signi-
ficant signs that a break was coming"
What do you think would have
happened if you had not adopted
restriction policy?' asked Senator
Lenroot.
You can tell what happened in
Cuba" Governor Harding replied.
There would have come collapse, ag-
graysted by banking insolvency"
Suppose the board had restricted
earlier" Senator Lenroot said, would
not the rise in prices have been les
sened ?"
That's probable" Governor Hard.
ing replied. "I1l be frank with you
had interest rates been put up EARL
er, the runaway movement of prices
and speculation might have been
checked, and it might have been bet
ter"
Representative Summers, Democra.
Texas, suggested that "the word had |
been passed out from the reserve
banks" during 1919 and 1920, telling |
bankers TO beware of prices and cred |
its on farm products particularly.
Nothing went out from the reserve |
board that is inconsistent with nv |
statements" Governor Harding re-
piled, but / want you to understand
that in human psychology a country
banker declining TO loan wants TO re-
-ain friendship of the customer if h
an. No bank wants to make a per.
,onal enemy. The banker passes the
buck, and says the reserve bank has
allied in all loans and he can't lend
That lets him out, but creates rhat
sentiment you cite"
Governor Harding insisted that IL
lad been the policy of the reserve
BOARD, or its idea, to reduce prices, OF
o spread the idea they we're going L.
all.
you must know the pressure which
anne upon us TO issue general state
nents,' Governor Harding said. ''but
We never issued one unless silence
you'd have made matters worse