Indiana daily times. [volume] (Indianapolis [Ind.]) 1914-1922, 1921-07-01
CREDIT ALONE
MOT TO BLAME
= IN DEPRESSION
IHeckling Tactics of Congress
Partially Responsible,
Saws Banker.
NEW BILL INVITES PANIC

There has lately been manifest in
many quarters the mistaken idea thar
the credit situation alone is the funda-
mental cause of the present retardation
of business activities generally" states
s the Guaranty Survey. a monthly review
! of worldwide business and financial con-
ditions issued by the Guaranty Trust
Company of New York. The necessity
for readjusting underlying Industrial
conditions. seemingly, is not thoroughly
understood. Instead of a proper concen-
&tration Of effort on this primary task, a
Number Of legal measures are being pro-
posed which would render this Teadjust-
ment more difficult. Some of these pro-
posals have as their purpose the arbitrary
limitation of tie discretionary powers Of
the Federal reserve board
There has been introduced in the
kHonse Of Representatives, for instance. 3
- which would prohibit Federal
81 reserve banks from charging member
<anks in any transaction with them a
6 reater rate Of interest than per cent
Ter annum. The passage Of this bill
rould automatically deprive the Federal
wreserve banks OF the power they now
possess for controlling initiation. The
Inevitable result would be to recreate
conditions under which money Panics
might be precipltated; and one Of the
! chief purposes for which the Federal
rserve system was designed is the
prevention OF such panics.
TAKES POWER FROM
FEDERAL BANKS.
Likewise, 1t has been proposed to
amend the Federal reserve act with a
view to restricting the authority Of the
Federal Reserve Board in curtailing
] credit. The suggested amendment reads
as follows The Federal Reserve Board
shall have no power or authority to re-
strict the amount or class OF eligible
paper a member bank may rediscount
so long as it complies with the law that
applies TO member banks. except by an
order adopted by two-thirds Of the mem
bers of the Federal Reserve Board, copy
OF which shall be mailed 10 all banks
G affected thereby. Said resolutions shall
4 not take effect until thirty days after its
receipt by member banks"
such an arbitrary legal regulation
would be fraught with possibilities for
mischief, and worse. The advance no
tice Of a forthcoming restriction upon
eligible paper, under conditions which
this proposed amendment would create.
would induce a rush of demands upon
the member banks for credit accom-
Asftions Prospective borrowers would
wish to obtain accommodations before
the restriction should become effective
Instead of aiding IN a sterilization OF
credit conditions, therefore. the effect Of
such an amendment would be to weaken
the Federal reserve system as 4 pre-
ventive Of financial panics
Whatever its shortcomings, the Fed
eraI Reserve act has proved 10 be provi-
Dental for the United States. Il pro-
vided a banking system which was strong
enough to withstand the greatest credit
strain ever experienced In this country,
and which not only successfully func-
tined during the dangerous imitation Pc
Rod, but also has subsequently met the
acid test OF the even more dangerous de-
hatton period with equal success. It can