The daily banner. (Cambridge, Md.) 1897-2008, 1921-07-21
Financial And Business Survey

There has lately been manifested i'll |
many quarters the mistaken idea |
that the credit situation alone is the /.
fundamental cause of the present re- |
tardation of business activities geIl-
orally. according to The Guaranty
Survey. issued by the Guaranty Trust |
Company of New York. Instead OF |
concentrating on the primary task Of |!
readjusting underlying industrial |
conditions, it is pointed out that Il |
number Of legal measures are being |
proposed which would render this |
adjustment more difficult.
y bill has been introduced in the |
House of Representatives. for in i
stance. which would prohibit Fed |
Cr1I Reserve banks from charging
member banks in any transaction
with them a greater rate of interest
than five per cent per annum. The
passage Of this bill would autOmat-
iCally deprive the Federal Reserve
banks Of the power they now possess
for controlling imitation. The inevi-
table result would be to recreate con-
ditiOns under which money panicS
might be precipitated; and one of the
chief purposes for which the FEEDER
al Reserve system was designed is
the prevention of such panics.
Likewise. it has been proposed to
amend the Federal Reserve Act with
a view 10 restricting the authority
of the Federal Reserve Board in
cUrtailing credit. Such an arbit-
rary legal regulation would be
fraught with possibilities for mis-
chief. and worse. The advance no.
tice OF a forthcoming restriction up
on eligible paper, under conditions
which this proposed amendment
would create, would induce rush
of demands upon the member banks
for credit accommodations. PreSpec-
tive borrowers would wish to obtain
Accommodations before the restriction
would become effective. Instead of
aiding in q sterilization of credit
coalition, therefore, the effect To
such an amendment would be TO
weaken the Federal Reserve system
as 4 preventive of financial panlcs.
Whatever Its shortcomings, the
Federal Reserve Act has proved TO
be prOyidential for the United States.
1t provided banking system which
was strong enough to Withstand the
greatest credit strain ever experience
ed in this country, and which not on
ly successfully functlOned during the
dangerous imitation period, but also
has subsequently met the acid test
of the even more dangerous detiation
period with equal success. 1t can
not continue to operate SO helpfully
if in every detail the power Of the
~ ID 10
credit is infinitely prescribed by law.
Numerous efforts have been direct
ed also in recent weeks, in and out
of Congress, toward the provision OF
additional farm credit. There IS
cause for qualification in the fact
that definite progress has been re-
corded in the organization of mach1I-
cry of a private nature for this pur-
pose. with corresponding lessening
of the probability of further reliance
upon direct governmental activity.
Among the bills before Congress
designed to aid farmers and live
stock producers generally or partlcu-
lar classes of these are: The bill
authorizing the Treasury to furnish
$50. 100000 to the War Finance
Corporation for advances on live
stock; proposed loan by the
Treasury of $50,OOO,000 to the FED
eral Farm Loan Board in order to in
crease the working capital of the
Fedeal Land banks; and the propos-
ed formation of a Government cor
poratiOn. to be supplied with $1OO.-
600 900 from the Treasury. for tina1-
cling eXortS of agricultural products.
The wisdom of the proposed dl-
rect participation by the Govern
ment in the provision of credit,
either through an expansion of the
activities of the War Finance Corpora
ton, is doubtful. Such credit as
may be extended oft-a-pdfeiy basis
may be had through existing credit
agencies of a private nature or those
which may be formed under laws
now in force. The granting of credit
through Government bodies can scar
cely be more broadly effective than
that by private agencies-save at the
expense of the taxpayers, represent
ing unwarranted distribution OF
favOrs and burdens. The favorable
response which bankers have given
to the suggestion that they organize
the necessary machinery fOr~prOvid-
ing additional credit accommodations
to live stock growers is evidence
that private sources of credit may be
made adequate to meet the demon
Strated needs.