Evening star., 1921-08-04
DEFENDS HIS RULE
0F.RESERvE BOARD
Gov. Harding Answers Critics
Before Congressional
Commission.

Gov. Harding of the Federal Re-
serve Board. began today a defense OF
his administration before the con-
gressional commission. which has
heard series of criticisms against
the board, including those Of John
Shelton Williams. former comptrol.
Ter of currency.
Workings of the national credit
system. Gov. Harding said. are in the
hands of the reserve banks. and over
these the board has general super
vision" adding that this did mean
control"
I'm law. the reserve banks are pri-
vate corporations" he continued
controlled by their directors. Con-
gress did not attempt to establish a
central bank. but did furnish a means
Of mobilizing credit"
VESTS Feeling in 1920.
Representative Funk, republican
Illinois. said that in 1920 there had
been a feeling in the west that re-
serves were not being made available
for their banks"
"The feeling was not warranted.
Gov. Harding said, land 1 want to dis
cuss it later. The difficulty was in
the unsuitability of some of the avail
able paper"
The question of individual credit
extension clearly. Is up to the reserve
banks" Gov. Harding said. Now. II
through prejudice or other cause. the
district bank refused a rediscount, the
member bank might appeal to the re-
serve board. but up to that point, we
could not interfere.
1T is true that the reserve board has
power to change an interest rate on
rediscounts after 1t has been put into
effect by a district bank. But that
has never been exercised"
Mr.. Sumners' Question.
Representative Summers, democrat,
Texas, questioned Mr.. Harding .
statement that general supervision"
was not equivalent to, control"
II have no doubt that the reserve
board tomorrow can effectually re-
move from ONCE every director and
Pmesf Haesine .. ..is but mai powsr i, sub
tect to the rule Of reason. and can
not be exercised without adequate
cause"
'"The Federal Reserve Board has no
power to force district bank to
make rediscount which its directors
do not consider reasonable and safe"
Limits of a member banks right to
borrow through the reserve system,
the governor explained, were set by a
basic line" charted out of computa-
tions of banking resources, but he said
the determination was NOW no longer
important. since progressive rates Of
interest have been abolished"
There's no pse denying very large
accommodations were granted in the
fall of 1920" Gov. Harding continued,
II was sitting at my desk, getting
kilograms from one reserve bank ask
ing for rediscounts from another 1t
was pretty close figuring. trying to
keep up the reserves. but there never
was a time when one of those requests
was turned down."
Chart In Presented.
Presenting a chart. he said the cur
rency circulation was being increased
during 1920. and the loan accounts,
too. remarking this was the period
striction are now being made.
1t looked as though our gold re-
serves would fall below the legal re-
quirements." he said, "and It was
necessary not to alarm anybody as
to the value of our currency. If the
per basis. that is the business of Con-
gress. not of the reserve board"
Gold reserves. Gov. Harding said
should be allowed to drop in emer-
gencies. but kept up in normal pc
RODS. and increased.
Il don't want to suggest that Con-
troller Williams ever got any views
from me-. Gov. Harding remarked
but there was no great difference in
our views in September. 1920. Tn Gu
rious to know what has caused SO
great a change in the opinions of a
man.
IT have nothing to palliate or con-
ceal." Gov. Harding said at another
point, but in considering the boards
action during the economic crisis we
have weathered just imagine the state
of the United States had our currency
and banking system collapsed as that
of Cuba did"
Near Clash Averted.
Gov. Harding vigorously denied
charges against the system made by Mr.
Williams yesterday. and was forcibly
restrained from a physical encounter
with his adversary.
Rising from the audience at the
hearing. Gov. Harding demanded au-
dience on personal grounds to deny
allegations concerning himself made
by Mr.. Williams. During the bar
rage of heated interchanges he
charged across the committee room
swinging his fist. He was halted by
struggling associates just in front
of his adversary, who remained cool
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