The daily times., 1922-01-30

!, ever dreamed of, all the particula
3 favors ever, conceived will not avoi
: all the distresses nor ward of all tn
t losses"
: But, while the great majority O
the ills from which agriculture sui
, fers today are in the main world
iSwide both in cause and scope, never
theless it cannot be denied that som
OF the incidents to this sufferin,
might have been avoided, or at leas
!, mitigated.
1t would lead too far to elaborat,
upon the extent to which organic de
fects in the System, such as the con
formation of the district.
played part, or how fal
the war finance policy adopted by
the Treasury and Congress were
directly responsible for this suffer.
ing. 1t is said with some justification
that the oBard condoned initiation
too long and that it should have rails
ed discount rates sooner, but in fair.
ness one must admit that in the cir
cumstances that prevailed it would
nave been very difficult for it to as
sert its views and establish higher
rates as long as Congress and the
treasury insisted on financing the
Governments requirements on an
artificially low basis. Finally, as a
consequence, initiation of credit be-
came SO excessive as to require the
brakes to be firmly applied,-an un-
grateful undertaking but carried
through, on the whole, with ability
and discretion, in spite of errors here
and there in the administration of
the rate policy in certain districts.
One need only visualize what
would have happened without. the as
s1stance of the Federal Reserve
Banks in order properly to judge the
value of the work done. Hundreds of
banks and thousands of borrowers
nave been conserved and are being
carried today that otherwise would
have gone to the wall. The lack of
understanding as to how the Federal
reserve System operates is so gen
eral that many bankers in all parts
OF the country, desiring to reduce or
put some limit on the loans which
their customers were demanding,
themselves by stating that
their Federal Reserve Bank had dir-I
ected such action.
iC
emily the public does not understand
even today, after the Federal Reserve
System has been in existence for more
than seven years, that the Federal
reserve Board, as such, does not |
make any loans, and. has no money
to lend; that all extensions of Fed |
eral Reserve credit are carried out
by the Federal Reserve
Banks, and that they, in turn, are
restricted to transactions with their
own member banks and have no
power whatsoever to direct member
banks as to what Individual custo-l
mers they should make loans.
1t has also been generally stated
that the Federal Reserve Banks cur
tailed credit to the farmer in the
autumn of 1920, Whereas exactly the
reverse is true. The loans of the Fed
era1 Reserve System reached their
highest point in November, 1920, at
which time the reserve banks in in
1ustrial sections were lending to re-
hor be in,
S267, 100000. The testimony before
he Joint Commission of Agricultur-
Il Inquiry showed that between May
1, 1920, and April %, 1921, the
oans of the Federal Reserve System
20 member banks in non-agricultural
counties decreased 28.5 per cent, and
hose to member banks in semi-agri-
cultural counties decreased OF per
,ent., while loans to member banks
n agricultural counties actually in b,
.reased 56.6 per cent. During the +,
same period the loans by the 9,5OOI
banks to their own custo- +,
ners decreased $s82,OOO,OOO. Nine
y-four (94a per cent. of this de- I
'rease took place in the loans made
~ banks situated in non-agriculturall +!
'onnties and only per cent. in
,anks situated in agricultural and /,
counties.
Nevertheless the events of the past
wo years convince the Council that !
he. machinery of agricultural credit
s mot Complete In two resnecfs esne-
tally it needs strengthening:
In the first place there are about
wenty, thousand State banks and Il
rust companies nearly two-thirds of
he total number of the banks of the
country, which through their unwill +