Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1922-07-12
RESERVE BOARD
POLICIES REST
WITH HARDING
BY FREDERIC j. HAsKIN

bA EREDERlC d. HAShiN
Washington. D. c., July 10
Bankers, business men and farm
ers in all sections of the United
States are awaiting with almost
breathless impatience whether or
not President Harding will reap
point w. =. G. Harding of Bir-
mingham. Ala, as member OF
| the Federal Reserve Board. Inc
/ reason for this interest is that
the act of reappointing Mr.. Har-
ding, or failing TO do so, Will IN
dictate what the policy of the
Federal Reserve Board for the
next few years is likely to be.
1t is seldom that the appoint
ment of one official occupies
such a key position in relation to
q broad national policy. the
reason is that Governor Harding
stands for definite credit pol
icy and that factions which are
opposing his reappointment stand
for an opposite policy. Governor
Harding's term expires on August
10 and so far the President has
declared that he has not yet TAX
en- up the matter. 1t is known
that bankers and business men
have written him urging that he
name Mr.. Harding and that ag-
ricultural interests have written
him opposing the reappointment
Of the Alabama banker.
The issue is one of unlimited
currency issues and extensive
credit for farmers versus restrict
ed currency hello absolutely to
the gold standard and restricted
credits. The farmers want the
former and Governor Harding
stands for the latter.
The events which brought the
issue before the American people
are familiar to most citizens but
have been presented under the
color of the opposing prejudices.
There has been bitterness be-
tween the factions which on
some occasions has led almost
to blows on the floors of Con-
gress and in committee rooms.
The boom years of 19l9-l920
brought about a tremendous ex-
pansion of credit through the Re-
serve banks which are regulated
by the Federal Reserve board of
which Mr.. Harding has been
governor during and since the
war. During the war the dis
count rates at Federal Reserve
banks were kept low by the in
fluence of the secretary of the
Treasury. The treasury had bonds
to sell and desired to sell them
at the lowest possible rates of
interest. The secretary is eX Of
ficio chairman of the Fedora
Reserve board. His influence was
strong enough to keep the dis
count rates down. He exerted il
because he knew that If these
rates were increased the interest
rates the government would have
to pay on bonds would have to be
. increased also. With low bank
rates, business men, farmers ant
- others borrowed more none,
than they would if rates hat
been high and therefore circula
ton of paper currency rose high
err and higher and the volume o
= the loans on the books of tn,
banks increased progressively.
i A Change of Policy
In the winter of 1920 Gov
ernor Harding announced tn,
emancipation of the board iron
the treasury influence sayin
II that rates would be regulated in
y dependently of the treasury BON
y rate. Rates were increased wit
% the result that within two o
squeezed out of the stock mar
lie ket. This billion had been Dor
- rowed by stock market trader
l. to speculate on the. exchange
t. When their interest rates wer
j. raised they paid back the none
ID and reduced their operations. Thi
lie was the first effect of the nev
= policy. The billion dollars wa
freed to be lent to farmers an
productive borrowers.
: Next the board intimated to tn
member banks that they Shout
increase rates and reduce loan
to profiteers in food and othe
essentials. Especially was it de
sired that people who stored u
food to hold for higher price
and had borrowed money to en
able them 10 make this specu
lation should be brought to terms
n If these spectators in necessitie
+ could borrow no more none
they would have to sell thei
4 food at reduced prices. This re
z suited and it constituted the frs
successful step taken by any gov
ernmental agency to reduce tn
cost Of living.
q But the time had come for
= reaction. The Japanese silk mar
ket collapsed and the beginnin
Is of depression extended to thi
" country. A Philadelphia and Ne'
Is York merchant, foreseeing a pric
l. recession, overnight reduced ever
n article in his store 20 per cen
le The buyers strike spread and tn
It overall movement came into evi
i dence, people wearing overalls i
j, preference to paying the hig
t clothing prices.
e 1t was inevitable that all price
$. should fall speedily. This include
S. food prices. AS the summer wor
on food products became cheape
and cheaper.
:, DoSnrros UT,,o TI,,oo &o,,ol