The Jasper weekly courier. [volume] (Jasper, Ind.) 1858-1922, 1921-08-12
RESERVE BOARD
AVERTED PANIC
Gov. Harding Further Describes
Working of U. S. Money
Reservoirs.
STOPPED GENERAL COLLAPSE
Congressional Commission Is Told Re-
strictions Of Credit Saved Finan-
ciaI Crash-country's Bank
ers PASSED the Buck"

Washington. Aug. S.-The ebb and
flow OF monetary credits through the
federal reserve system was further. de-
scribed before congressional COM
mission by Governor Harding of the
reserve board.
I'VE have twelve reservoirs of
money I'm the reserve banks" he said,
"and we can put 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 i'm and are secured by local
member banks.
THE federal reserve board can out
line q credit policy. but it Is very dill
cult 10 enforce il because of this mem
Der bank proposition. There are 3O'-
900 OF them and they take the respon-
sibility in the first instance.
''Some of them hold unused lending
power, while others in credit strln-
gency go into the Federal Reserve
bank and get wider. even dangerous
extensions. That was why we had 10
establish the progressive rate, TO pen
alize the heaviest borrowers, but we
hope Wen never have 10 put progress
i've 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 i'm 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 i'm 1920 we had most sig
nificant signs that a break was COM
ing"
What do YOU think would have hap
pened if you had not adopted re-
striction policy" asked Senator Len
root Rep). Wisconsin.
'You can tell what happened in
Cuba" Governor Harding replied.
There would have come collapse az
gravated by banking Insolvency"
Suppose the board had restricted
earlier" Senator Lenro0t said. would
not the rise in prices been lessened?'
That's probable" Governor Hard
ing said. "In 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 Oem) Of
Texas, suggested that "the word has
been passed out from the reserve
banks" during 1919 and 1920 telling
bankers 10 beware Of prices and cred
It's on farm products particularly.
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 10 re-
tain friendship of the customer if he
can. No bank wants TO make per
sonal enemy. The banker passes the
buck, and says the reserve bank has
called i'm all loans and he can't lend.
That lets him out. but creates that
widespread sentiment you cite
Governor Harding insisted ii had
not been the policy Of the reserve
board. or IT'S idea. to reduce prices. or
to spread the idea they are going to fail
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"