The New York herald., 1921-01-30
Stronger To-day Than for
Many Months, According
to Federal Reserve Head.
BUSINESS RECOVERING
Whatever. Danger of Crisis
There May Have Been Is
Passed Now.
OPTIMISM is JUSTIFIED
Extravagant Tendencies Are
Checked and Normal Attitude
Sets In, He Asserts.
BUSINESS RECOVERING
OPTIMISM is JUSTIFIED

Sets In, He Asserts.
By DONALD MACGREGOR.
. ct>ecial Despatch 30 THE NEW YosK TTEs.Ip
New York Herald Bureau.
Washington, ID. G., Jan. 90.
Our banking system is sounder and
stronger to-day that it has been for
many months. Business, at first over
exhilarated and then unduly depressed,
has recovered its normal state of mind
The significance of this fact is ap-
parent to us all, and we are warranted
in looking to the future with feel
Ing Of conservative optimism, with re-
newed courage and restored conf
dence, which will make easier our task
OF overcoming the problems which are
ahead of u.s.
This is the encouraging opinion of
W. p. G.. Harding, Governor of the
Federal Reserve Board, based upon
the most intimate knowledge Of the
banking situation throughout the
world. The view is Of vital impor-
tance ct this time of reconstruction,
when the United States and all other
nations, shaken to their very founda-
tions by the war. are struggling to get
back to normal basis.
Governor Harding is the executive
head of the gigantic Federal Reserve
,-{ct,, he ftrA T-aff
States, with a membership of 9.672
banks and trust companies Almost all
OF the most important banking institu-
tions of the country are on the rolls.
Their condition. as whole. is known
in intimate detail by the official who.
more than anybody else. voices the gen.
eral policies that are adopted
Every Tremor Recorded.
1t is for this fact that Governor Har-
dings statements on financial condi-
tions command the attention of the en-
tire banking and business community.
He may be regarded as sort of seis-
mograph. recording the slightest finan-
cial tremor.
whatever danger of crisis there
may have been has passed." Governor
Harding declared when l visited him in
his office in the Treasury Department.
'"There were some people In this coun-
try. and perhaps there still are some.
although 1 don't believe a great many.
who took a very gloomy view of the
future. Some did not hesitate TO ex-
press their dissatisfaction with the
functioning OF the Federal Reserve sys-
tenn.
II believe il is now quite generally
conceded that our present banking sys-
tenn. which has been put TO the severcst
tests during the last few years, has met
them ALL 1t has demonstrated it's ability
70 extend credit In volume sufficient TO
meet the requirements Of the country in
time OF war and curing the last year
has shown its ability 20 hold expansion
in check and ward off any danger Of a
money panic"
Governor Harding sat back in his
chair. fumbling sub-consciously with a
cigar the wrapper OF which was gradu-
ally separating itself from the filler
After q brief pause--characteristic OF
a banker-he continued:
prices In this country began to rise
early in 1915. with the abnormal and
urgent demands made upon us by the
belligerent nations OF Eprope for supplies
OF all kinds. not only the necessities
which are required in times OF peace
and war alike. but also for arms. mu-
naval equipment
Demand sends Up Prices.
"Quick deliveries were essential and
costs OF secondary Importance. I'roduc-
tion could not keep pace with the COM
blned domestic and European demand,
and naturally prices began to s.ar sky
ward. Gold began to flow into the
United Statcs--during 1915 and 1916
We imported gold to the amount OF
about $1,000. 100000.
This gold rapidly found It's way into
the Federal Reserve banks. The amount
Of gold held by the Federal Reserve
banks has varied In the last two and a
half years from about s1940 100000 10
about $4,000. 100000. Gold, as you
know. is the base OF our banking and
credit structure.
FOLLOWING the arnnistice Il will he
recalled. there was a period OF uncer-
tainty and hesitation. running for three
or four months--a period during which
the world took inventory and ascer-
tained TO some extent It's immediate
needs. This period terminated when the
world set out to satisfy the needs thus
determined and its postwar demands
were made largely upon the United
States
IL WIS dlOnE eidyF lSlTs WtitH lilt
boom times set in. Prices naturally
clin1bed--the market was dominated by
the buyer and not the seller. In the
autumn Of 1919 speculation became ram
pant and Il was evident 10 some that the
country was losisg its sense OF proper
ton. great many persons had ceased
10 rely on sound business judgment and
were prone TO regard conditions that cx-
isted as being more or less permanent.
"From September. 1919, 10 January.
1929. a period embracing about four
months, the invested assets Of the Fed
oral Reserve banks including loans
maze by them 70 the banks which are
menfbers of the Federal Reserve system.
and which In turn made loans to indi-
viduai borrowers, Increased almost
$1,000. .000, 900, an advance from about
s2.35O.O 900. 900 to s3,3oo, 100000.
Reserve Percentage DecItnes.
"This was reflected In the reserves OF
the Federal Reserve banks tho percent
age OF gold and lawful money TO circu-
lation and deposit liabilities combined
hAinr per cent. lower than the percent
age IN January, 1919. a factor which
contributed to this reduction IN the re-
serve percentage OF the Federal Re-
serve banks was the lifting, except with
respect to Soviet Russia. OF the restric-
tIons imposed during the war on the
shipment OF gold out OF the country"
at was then.' ] asked, that the