Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1922-07-12

ed under the color OF the opposing
prejudices. There has been bitterness
between the factions which on some &C.
casions has led almost to blows on the
floors of congress and in committee
rooms.
The boom years of 1920 brought
about a tremendous expansion Of credit
through the Reserve Banks which are
regulated by the Federal Reserve
Board, of which Mr.. Harding has
been governor during and since
the During the war the dis
count rates at Federal Reserve
ence of the secretary of the treasury.
The treasury had bonds to sell and de-
sired to sell them at the lowest posi-
bl rates of interests. The secretary is
ex-officio chairman Of the Federal Re
serve Board. His influence was strong
enough to keep the discount rates down.
He eXerted it because he knew that If
these rates were increased the interest
rates the government would have to
pay on bonds would have to be in
creased also. With low bank rates,
business men, farmers and others bor-
rowed more money than they would il
rates had been high and therefore cir
culation OF paper currency rose higher
and higher and the volume of the loans
on the books of the banks increased
progressively.
A Change Of Policy
In the winter of 1890 Governor
Harding announced the emancipation of
the board from the treasury influence
|, saying that rates would be regulated
independently of the treasury bond rate
Rates were increased with the result
that within two or three months ST.
OOO.0O0.OOO was squeezed out of the
stock market. This billion had been
borrowed by stock market traders to
speculate on the exchange. When
their interest rates were raised they
paid back the money and reduced their
operations. This was the first effect
of the new policy. The billion dollars
was freed to be lent to farmers and
productive borrowers.
Next the board intimated to the mem
Der banks that they should increase
rates and reduce loans to profiteers in
food and other essentials. Especially
was it desired that people who had
stored up food to hold for higher prices
and had borrowed money to enable them
to make this speculation should be
brought to terms. If these spectators
in necessities could borrow no more
money they would have to sell their
food at reduced prices. This resulted
and 1t constituted the first successful
step taken by any governmental agency
to reduce the cost of living.
But the time had come for reaction
The japanese market collapsed ant
the beginning of depression extended tt
this country. A Philadelphia and New
York merchant. foreseeing ap rice recess
cession. overnight reduced every article
in his stores 20 per cent. The buyers
strike spread and the overall movement
came into evidence, people wearing ov.
erals in preference to paying the high
clothing prices.
1t was inevitable that all price:
should fall speedily. This include,
food prices. As the summer wore on
food products became cheaper ant
cheaper.
Reserves Were Threatened
Food comes from the farms. i
taxes a year to make a crop. Wber
the farmers had bought their seed ant
hired their planting and cultivating Ia,
Dor. the high prices were still prevail
ing. When the time came for them t.
sell their crops. the prizes had beer
u III WV lItN SOUGHT TO borrow
money at the banks to enable them Il
hold their crops in the hope of anothe,
rise IN the price. The banks extended
credit up to the point where reserve re
guirements were threatened. Then ,
halt was called.
To go beyond this reserve rcouire
ment by lending more money to farm
ers and others-for business generall
also was demanding loans-woul
mean to take the American currenc
or a gold basis. The reserve boar
had before 1t the spectacle of the Ger
man and Polish marks and the Rus
sian rubles, as well as other forejg,
cu%rrencies. They saw what happene
IN those countries when the gold basi
was lost by the issuance of currenc
beyond the reserve requirements an
decided that it would be better for tn
United States to draw in its bel
for a few months than to put the dol
lar in the same class with the mar
and the ruble. Reserve requiremen mi
were not suspended. although none
was lent right up to the point wber
further loans would have meant sus
picion.
Hundreds of millions of dollars wer
sent out of Wall street 10 be lent (
western farmers ana business mPI
Credits were extended as far as Their
was real credit to extend. but the en-,
came. There was no more credit. n
more money. Farmers and others bs
in their possession more borrowe
money than ever before in the histor
of the country.
This raised the storm. The farm
ers said they should have more cred
at n cost. 1t was said that the
were willing to have the dollar cntp
the mark and ruhlc class. The fec
eral reserve board stood by the col
standard and insisted it should h
maintained inviolate. The result wa
the formation of the agricultural bic
in congress. a group of men dete,
mined to change the law regardin
farm credits and other farm matter
The country's belt is still draw
tight. but it is loosening and bein
gradually filled out to its former prt
portions. Also the gold standard sti
stands. The vast volume of loans
being paid back steadily and the n;
tional currency has a strong go
backing.
But now has come the expiration
Governor Harding's term. The farm
ers are determined that he shall n,
be given a chance TO handle the stu;
ton again as he did during the depre.
sion. Bankers and other bushes
; men throughout the country. who d,
e tLa -&Il .I--