, 1922-10-30
Records Fix Responsibility

Mr.. HARDING was well within the record when
u he spoke in his letter to Mr.. MondeIl of the
"too rapid deflation" and the mistaken program
of drastic deflation adopted by those who were
then in control of government policies" Spokesman
for the opposition have undertaken to question the
accuracy of this reference TO a policy of the Wilson
administration, but unfortunately for them. the
Harding language is fully justified by the official
reports of the federal reserve board when the
Democratic party was in full control. The records
have been frequently quoted in the past, but since
the Democrats still deny their responsibility it is
in order to quote the record oncs more.
The Democrats were in full control of the federal
reserve board until some time after the Inaugural
ton of President Harding in 1921. In their report
for 1920 the members of the board reviewed their
activities in the control and regulation of credit
explained that they had expanded credit in order
to provide funds needed by the government and
that the checking Of credit vas under constant con-
sideration during the year 1919. The report of the
board, on page eleven, says that ait was hoped that
the banks of the country would themselves see the
wisdom of working back toward a more normal con
dition.n Warnings from the board "were given only
momentary attention" and in pursuance of its plan
10 check initiation, the board says it resorted 40
the well known method of advancing the rate of
discount"
The New York Times, an independent Democratic
paper, undertakes in an answer to President Hard
ing, to show that the banks themselves rather than
rates which brought about the deflation. The
statements quoted above leave no doubt on that
question, for the federal reserve board SAYS that
its warninsS were given only momentary atten-
tion" and it finally resorted to the we'll known
method of increasing the rate of discount
BY a strange slip of which other Democrats have
been guilty; the Times gives away its own conten-
tion. After denying that the federal reserve board
brought about deflation it says, aft there was any
blame to be imputed to the federal reserve bank il
was for not having acted sooner" This is an infer.
entail If not an express admission that the federal
reserve bank system did, in fact, bring about the
deflation to which President Harding alluded.
From the very beginning of the Republican ad-
ministration there was a change of policy in the
matter of credits. A Republican congress had
passed, over President Wilson's veto, a bill leviv-
ing the war finance corporation. The Republican
administration as soon as it came into control of
the administrative departments, put that %institu.
tion into effective action. Moreover, additional
funds were provided for the. farm loan board. and
the federal reserve banks reduced their rate of re-
discount. All of these incidents in the Republican
policy had the effect of restoring cinfidence and
bringing out of hiding large sums of private funds
which very rapidly restored industrial and com.
mercial activity. ~t
Our Democratic friends will not make much
progress with their attempt to deny that the fed
reral reserve board, under Democratic control.
brought about deflation, when at the same time
they say that "if there was any blame to be i'm
puted to the reserve bank, it was for not having
acted sooner"