Evening star., 1921-10-02
THE PROGRESS OF RECOVERY;
BANKERS ON RESERVE ACT
Real Evidences of Improvement Reported
by Unbiased Acknowledgements FL
nancier's Views on Discount Rates.

me september NUMBER OF Trust
Companies contains the result of this
questionable.
That sturdy Scotch veteran. James
b. Forgan, president of the First Ma
tional Bank of Chicago, heads the
symposium. He holds to the opinion
Should proceed very slowly in lower
ing present rates. 1t seems to me
that there is considerable danger, in
case rates are lowered precipitately,
Gf renewed imitation, with a conse-
qrent reaction more violent than the
one. through which we are now pass
ing. In general it is a complete mis-
take to have the rediScount rates
lower than the general market rates
Tor commercial loans, for If banks are
able to rediscount their paper at a
lower rate than they themselves re-
ce1Ve. obviously a continued initiation
Is profitable to them.
Especially should this be en-
phasized. that our large gold reserve
IS. after all, due only to the fact that
present moment. and that much of
this gold is liable to flow out of this
country as soon as there is a change
IN the balance of trade. This gold is.
therefore, held in trust for Europe-
anm this Is not an overstatement."
u. ID. Hurlburt. another Chicago
veteran. head of the Merchants Trust
Company. declares that he would like
to see "nany of the war amendments
to the reserve act repealed
AS 1T stands today. nothing but
the courage and the wisdom Of the
management prevents it from becom-
ing disastrous engine of defiation.
oei1eve the amendment practically
demonetizing gold and making a
credit on the books of the reserve
banks the only lawful reserve is most
dangerous in normal times. A claim has
10 hn
tricts have been Disseminated against.
While l believe the reverse hos ho~,
the case, 1 also believe that the fed
eral reserve system has worked a
great injury to the country as we'll
as lnestimable benefits. In a time of
1t nullified the effect of the usual nor
NAL remedies we have for such con-
dltlons. If 1t had not been for the
federal reserve banks the farmers
would have been compelled to sell
their crops year ago and paid their
deots This would have saved the
country and the farmers from the
disaster that has overtaken both. Also.
II it had not been for the federal re-
serve banks. manufacturers and mer-
chants would not have been able to
accumulate or carry the heavy inyen-
tories entailing losses in a single year
that 1t will take a generation to re-
place. l believe the solution to this
will be to keep the rediscount rates
about the market rates. so that there
Will be no temptation on the part of
member banks to Drofiteer through
the federal reserve banks
1t seems to me that most of the
things that now are being pressed in
Washington for the relief of agricul-
ture and otRer industries are an at
tempt to force the government to do
things which are too unsound to be
done by the banks. This is literally
an attempt to lift ourselves by the
bootstraps.' but the results are far
more disastrous.
Il wish." said Mr.. Hurlburt in clos
ing his remarkable interview. that
the Federal Reserve Board could see
its way clear to make a public state
nent of what its future policy will
be regarding rates. / believe that
the confidence of the county in the
board is such that any clear state
ment of fundamental principles made
by it would be acQuiesced in"
Francis H. Sisson. head of tine Guar
enty Trust Company. said: We
should remember that the federal
reserve rate is an effect and not d
'ause. high rate results from a
heavy demand for funds; obviously
4 high rate does not create the de-
| mand. and similarly a low rate can
not directly create easy credit condi-
tions."
Oliver c. Fuller. president Wiscof-
sin National Bank of Milwaukee:
The main point made by those op-
| posed to the lowering of the Federal
| Reserve discount rates is that the
cediscount rate should always be
above the market. This is laid down
as general principle. from which
here are no exceptions. Federal re-
serve funds are emergency funds.
and it should not be possible for banks
to make profit by rediScOuDtinp at a
over rate than the market"
Percy H. Johnston. president Of the
Chemical National Bank. says: 81 am
=. Of the opinion that the recent reduc-
ton in rates was wise. am convinc-
ed that, under normal conditions. it is
'ogical that the reserve rate should
oe higher than the prevailing COM
worldwide conditions of today. I be-
lieve that the adoption of any ar
.ificial means to accelerate the proc
esS of readjustment would be a dan
yerous course to pursue"
George S. Mumford. president of the
Commonwealth Trust Company of st.
Louis: ut was never intended that
the federal reserve banks should use
heir power and authority either to
encourage or discourage business
The chief purpose should be to assist
commercial banks and to fix the rates
Of discount so as best to accomplish
this and at the same time protect
their own position from any over
|. strain. 1t seems to be that one of the
greatest dangers the federal reserve
system can be subjected to is from
the attacks and maneuverings of
politicians in order to make the sys-
tenn serve political ends."
John v. Farwell, the big merchant
of Chicago, declares that the federal
-