Northern Wisconsin advertiser. [volume] (Wabeno, Wis.) 1898-1925, 1921-08-12
PANIC PREVENTED
BY RESERVE BOARD
Function of U. S. Money Reser-
voirs Told by Governor.
GENERAL CRASH STOPPED
Harding Tells Congressional Commits
sion That Restriction of Credit
Saved Financial Collapse
Bankers passed Buck"

Washington, Aug. 6.-The ebb and
flow of monetary credits through the
federal reserve system was further de-
scribed before a congressional COM
mission by Governor Harding of the
reserve board.
I'VE have twelve reservoirs of
money in the reserve banks he said,
"and we can put a pipe line from one
to another of them when needs be-
come too great for local money sup
ply, always remembering that the
loans come in and are secured by local
member banks.
"The federal reserve board can out
line credit policy, but it is very diff
cult to enforce it because of this mem
Der bank proposition. There are 3d.
600 of them and they take the respon-
sibility in the first instance.
Some Credits Dangerous.
''Some of them hold unused lending
power, while others in credit string
gency go into the Federal Reserve
bank and get wider, even dangerous
extensions. That was why we had TO
establish the progressive rate, to pen
alize the heaviest borrowers, but we
hope We'll never have to put progress
sive rates in effect again.
There is prevailing impression
that the break in general prices dur
ing 1920 was due to the restriction OF
credit, and that the reserve board was
responsible for the restriction" Rep
resentative Mills (Rep.), New York
said.
There is nothing in it" Governor
Harding replied. Our efforts were
devoted in 1920 to preventing a col
lapse of our banking system.
1T isn't our duty to enhance or re-
duce prices, but credit is based on
prices, and in 1920 we had most sig
nificant signs that break was COM
ing
Collapse Would Have Come.
''What do you think would have hap
pened if you had not adopted a re-
striction policy?' asked Senator Len
root (Rep.), Wisconsin.
"You can tell what happened in
Cuba Governor Harding replied.
s'There would have come collapse ag-
gravated by banking insolvency"
Suppose the board had restricted
earlier" Senator Lenroot said. Would
not the rise in prices been lessened?"
That's probable Governor Hard
ing said. "I'll be frank with you.
Had interest rates been put up earlier,
the runaway movement of prices and
speculation might have been checked.
And it might have been better
Representative Summers (Dem.) of
Texas, suggested that "the word has
been passed out from the reserve
banks during 1919 and 1920 telling
bankers to beware of prices and cred
it's on farm products particularly.
Saws Bankers Passed Buck"
Nothing went out from the reserve
board that is inconsistent with my
statements Governor Harding re-
piled, "but ] want you to understand
that in human psychology a country
banker declining to loan wants to re-
tain friendship Of the customer if he
can. No bank wants to make a per-
sonal enemy The banker passes the
buck, and says the reserve bank has
called in all loans and he can't lend.
That lets him out, but creates that
widespread sentiment you cite.'
Governor Harding insisted it had
not been the policy of the reserve
board, or its idea to reduce prices, or
to spread the idea they are going to
fall.
"You must know the pressure which
came upon us to issue general state
ments." Governor Harding said, "but
we never issued one unless silence
would have made matters worse"