The Washington herald., 1921-08-05
TAXATION TOMEET
INTEREST ON DEBT
EXCESSIVE,
McDougal Urges Exercise
OF Economy in Federal
Expenditures.
ANALYZES PROBLEM
Contributing Factor Is Un-
sound Financial Policy Dur
ing War, He Declares.

PHILADELPHIA. Aug. 4.-TaxA-
tion necessary TO pay the interest
on our net government debt need
not be nearly so heavy as IL is, pro-
vided reasonable economy he eNer-
cised in all Of our national cxpen-
ditures. according TO Z. C. McDou-
gal, president Of the State bank d.
vision Of the American Bankers As
ISOLATION, speaking before the Ma
tional Association Of Supervisors Of
State Banks, at their convention
here today.
Analyses Conditions.
Mr.. McDougal, in analyzing pres
ent conditions, said that one con-
tributing factor was the unsound
financial policy of the government
during the war in issuing bonds
bearing fictitiously low rates Of in
terest. These, he said. were not at
tractive to the average investor. but
nevertheless. under pressure from
the government. the Federal Re-
serve Bpsrd kept its loaning rates
about 2 per cent below sOrmaL Con-
tinuing, Mr.. AcDOugal said:
Good bankers knew that this
was wrong, that IL would bring
about imitation, which, in turn,
would intensity the present depres-
sion, and that the resultant cost TO
the government and loss to the
public would be greater than did
the government pay the market
rate for the money il wished to
borrow. The government would not
I LIST
Federal reserve banks IL practically
forced the bankers of this county
TO force their customers to buy lib
erty Bonds. and TO loan them st nc-
titioUsly low rates, money to buy
the bonds. Then when the govern
ment had no more bonds TO sell. its
pressure was withdrawn. the Fed
eral reserve banks raised the rates
! to the figures which should have
been established at the beginning
of the war, and the public were
compelled either TO carry the bonds
at a yearly loss Of interest or to
sell them at a serious loss of prin-
| cipSl. In the meantime the govern
ment has been buying back from
time to time. at heavy discount.
| bonds that it had forced the public
TO take at par. at the same time
boasting Of the saving. This comes
very near TO plain dishonesty.
Government HInders.
should the government continue
10 interfere in our banking business
except for the enforcement of law
and the protection OF depositors, it
inevitably will make the same rec
ord Of inefficiency and failure as in
] .Nw L.
and operating ships and in oper-
| tape, banks will not be able 20 give
the public good service. Strict su-
rervision, criticism and correction
should be maintained. but the gov
eminent should not pass the Iins
that separates these proper func-
tions from actual management
Credit without which this country
never could have developed and out
stripped all others, cannot thrive
when shsckled by politics and bu-
reaucracy.'
Mr.. McDoUgal constitutes his an
alysis of the reasons for our pres
ent condition. touching on infistiou
and its various evils. and in sug.
gesting the remedies therefor. said.
should a business man be told
that his bank will carry him
through, providing he will follow
tie policy Of gradual contraction
and liquidation, and should he be
stubborn and refuse. as unfortu-
nately some do. then he would hav,
no right to complain should tho
bank force liquidation. but ever
then the liquidation should be grad,
ual.