Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1921-05-28
BANKERS POLICY
Wins AT CAPITAL
Administration Persuaded to
Extend Credit Rather Than
Restrict Foreign Loans
EXPECT INDUSTRIAL BOOM
9 BY CLINTON w. GILBERT
Utsf Correspondent % the Evenins Public
upftxef

Washington. May 2S.--The bankers
persuaded the Administration to adopt
q cheaper money policy, rather than
the Administration persunding the
bankers to restrict the use of foreign
lcHns. in the White House conference
of Wednesday night. This much is evi-
dent from what has been revealed at the
White House and elsewhere since the
meeting.
The fuanciers were of the opinion
that relief for agricultural and indus
trtnl conditions in this country lay in a
domestic financial policy, rather than in
the restriction of the proceeds of for
eign loans to the purchase of American
commodities. and the White House an :
nouncement that the amendment to the
Federal Reserve law providing for pro-
gressive discount rates might be re-
pealed, indicates that the Administra- .
ton has been persuaded to try tine ex Z.
tension of credit in this country as the
first step toward recovery, rather than a
Limitation on the use of foreign loans.
1t was said in the highest quarters
that there was much merit in the hank
ers' contention that industry and farm
inK In this country profted from the
granting of foreign loans. even il it was
not required that the proceeds Of those
loans should be directely invested in
American products.
Bankers to Aid Farmers
Moreover, so far as any program came
Dot Of the conference, il was that the
bankers should directly aid the farmers
W financing government agencies for
relief Of the farmers, such as the pro-
posed corollary Of the Farm Loan
Board, whose purpose is to loan on farm
in ~
export corporations, and that the Gov.
ernment should, on its side, admit that
the process of detlation had gone far
enough, repeal perhaps the progressive
discount amendment, which penalties
the swelling of loans, and relax in some
degree the banking limit upon the length
of term of paper that is discounted.
The bankers said that only in this
way lay the relief of the agricultural
situation. And while the Administra :
ton has not officially abandoned its
IDEA that the use of the proceeds OF
foreign loans should be restricted, and
the bankers did not definitely refuse 70
cooperate with the Government in Sc
restricting them, il is significant that
the Administration is turning in the
direction indicated by the bankers
rather than emphasizing its original
idea of regulating foreign loans.
Both Want Cheaper Money
Both the bankers and the Administra
tion want cheaper money. The position
of the Treasury Department has been
recently that dehation In most lines had
been carried as far as il should be
There still remain lines in which
defation is necessary. But the dis.
position of both sides in the conference
was to trust the discretion, both of ths
Individual banker and the reserve
banker to carry on this parallel process
of dehation where necessary and ex
pansion where necessary, feeling conf
dent that he would be able, by the ust
Of his judgment, to prevent speculation
and the abuse of credit. The repeal Of
the progressive discount rate law woulC
have a moral rather than mandatory
effect. This law is merely permissive
But its enactment was sign that
defiation was due. Its repeal would bt
similarly a sign that detlation was ended
and that easier money was in order
A change of policy such as the Off
cial ending of defiation would probably
lead. not only to ending of punitiv,
rates, but to a lower basic rate of dis
count. This appears not to bave beeI
definitely mentioned in the conference
but il is undoubtedly the underlying
idea of the program which is emerging
4 Should Restore Trade
Viewed in the largest aspects th,
bankers judgment was that arbitrar!
barriers to the free flow of credit abroaC
such as the Administration proposed
while apparently extending immediate
relief to the agriculture and industr.
Of this country, would slow up th
economic recovery of the world and n
q consequence in the final result Operat,
against our interests rather than il
their favor.
The bankers recognized the serious
situation in which American agricultur,
finds itself and were aware of the pO
litical exigencies which led the Admin
istration to appeal to them to att8Ci
conditions to their loans from which
farmers would see or expect immedut
benefits. To reassure the farmers the!
suggested easier money for the farmers
which would enable them to carry owe
their stock and their foOdstutfs in ware
houses while the foreign market i'm
proved through the use of money raiset
here on foreign loans.
The instances employed to illustrate
the operation of the unrestricted bor
rowing Of foreign governments were tn
recent Belgian and Danish loans men
fioned in this correspondence. The bank
ers actually traced for the Administra
ton the money borrowed by Belgium
and spent in Argentine for wheat bacl
10 this country, showing how it wa
spent for American manufactured prod
ucts and in a similar way the none,
borrowed by Denmark and spent in Ger
many back to this country, showing hoy
Il was spent in farm products.
The theory is, and there is goo
deal of sound economic experience baC
Of il. that the American money follow
ing this roundabout course back to thi
country did more to stimulate busines
and the demand of the world for prod
: ucts than it would have il it had bee
Denmark had been compelled to bu
here. II followed It's natural channC
where opportunities for profits wer
greatest. In each case it beneite
three countries instead of only two.
VIII Loosen Loan Market
Cheaper money will not only aid ag
riculture and industry directly by en-
abling them TO pass successfully owe
the present crisis. il will loosen up III
international loan market. Foreig
borrowers will obtain accommodate
here more readily. Foreign recover
Win thus occur quickly. And the for
eign demand for American product
will be stimulated. And thus an op
portunity will be created for America
agriculture and industry equal TO, an
Sn the opinion of the bankers create
than, that which might be created b
the artificial restraints upon loan
which the Administration sought
impose, u, A.,