Evening journal., 1921-08-09
SAYS INITIATION
WASN'T FORCED
Governor Strong Defends
Reserve Bank Against
Attack
WAR NECESSITY
FACTOR CONTROL

WASHINGTON. Aug. s.---An ex-
PLANTATION OF banking and monetary
principles. which. he said. have con-
trolied tho federal reserve system
since Its inception, was given yester-
day before congressional commits
sion by Governor strong. Of the New
York Reserve Bank. in defense Of
charges that in its operations it has
Disseminated against agricultural
-redit needs. Deliberate imitation
OF credit by lowered interest rates.
with consequent increased prices was
resorted to during the war as mill
tary necessity. he said, but defiatiOn
and price drops in recent months,
he declared. were not forced by the
board. but were inevitable and world
vide higher interest rates by the
reserve system he described as more
or less incidental.
New York. far from being favored,
Mr.. Strong asserted. had been sub
jecfed ito pressure by interest rates
TO iquidate greater than in any
other part of the country" Al
though describing collapse OF prices
In 1920 as the most serious in
modern time" he told the commits
ZION he considered the business situs-
ton well embarked now on a 'cycle
Of recovery" and cited industrial re-
sumption. advancing prices OF high
grade securities and lower interest
rates as symptoms.
Discussing charges that high call
money rates in New York drew
money away from the interior. Gov
ernor Strong said they were rather
an evidence that money had FIRST
been withdrawn from New York for
use in the interior. In spite OF
thirty per cent interest there at
periods of the stringency. he said
the New York banks had to be
begged at times to make call loans
In 1917, ne added. a money COM
mittee" had been set up through the
reserve bank to supply stock ex-
changes funds.
1T is the desire of the bank 70
AXE UP the series OF charges and
assertions made before you by John
Shelton Williams. ex-comptroller OF
the tJeasury." said Governor Strong
Ito }meet him on his own ground
snff to dispose Of them finally and
cqkclusiveiy
'Mr. Williams has said it was the
policy Of the reserve bank TO diver
the supply Of money. funds OF
credit-he doesn't distinguish be
= Ft.~
nish funds to show what the poll
cies actually were."
Governor Strong at length describ
ed the credit movements since tn
founding OF the bank. declaring tina
from 1917 to 1913, Imitation wa
unavoidable to the degree tina
people of the United States did nc
could not-finance the war out q
savings"
To supply 10000. 900
rear, he said, In order that arfnse
might Eight, 'it was necessary eth
er to take 20 per cent Of all tn
labor and all the material Of th'
United States. or TO manufacture
sredit, and by high prices. stimulate
production to the point.
War necessitates the choice OF
evils" he declared, mot the selec.
ton Of the best policy. Expansion
was unacceptable. Economy. sought
by every variety OF organization
that might help educate the people
Of the United States. was not at
tainable to the degree OF necessity.
Rediscount and credit rates nigh
have been raised and prices possibl
held down. Governor Strong agreed
but ne held that war necessity con
trolled.
'rhe policy Of the New York ban
was to limit expansion in ever
way" he said, "but first Of all I
meet the governments necessities