San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-01-01


Peculiar problems undoubtedly must
be faced by the Federal Reserve sys'
TEN and its member banks during the
coming year. The fact that condi-
tions have developed on the whole
more satisfactory during 1922 than
had been expected and that the bank
ing system as n whole is now in an
exceptionally strong position is made
clear by an analysis of current re-
ports 10 the Federal Reserve Board,
as well as by the definite statements
TO that effect found in the report OF
the Secretary of the Treasury. Mr..
Mellon points out that there has been
a very substantial increase in liquid.
! ity, long term and frozen obligations
being reduced, while the Federal Re-
serve banks themselves have shown
remarkable power TO contract, just as
they have previously shown unusual
capacity 10 expand.
Bank Service Unquestioned.
The year 1922 has also been n period
Of much happier and better relation
ships than was 1921. Few or none
have questioned the adequacy of the
banking service that has been rem
dered to the community. Money rates
have been low and credit has been so
abundant TO all legitimate borrowers
that it was not even necessary for
reserve banks TO rediscount among
themselves, as they have been in the
habit of doing during the past three
years. This ought to have brought
! about n much more satisfactory legis-
lative situation, but instead of that
is is probably true that there has
never been so great a multitude of
| hostile bills in Congress as there are
today. Indeed. with the session just
opening work has already been be-
gun upon rural credits measure
which may result in something al
most approaching disaster should it
be allowed TO become law on the lines
already indicated. Whether it will do
50 or not is still uncertain. but in
the meantime las already stately the
year 1922 has been n period Of un-
questioned efficiency in banding SER
vice in practically all parts of the
country.
! System Faces Dangers.
There is undoubtedly recognition in
official circles of dangers by which
the banking system is confronted, and
as n result n strong disposition evil
IDENTIFY exists among politicians TO try
to placate the general public, which
leans towards initiation. With this at
titude prevalent the question whether
rates can be raised in the near future
is very serious. Undoubtedly they
ought TO be raised. and that without
much delay, since the prevailing mar
ket rate is now distinctly ahead of the
reserve rate. But the question
whether they can be disposed of
scientifically is a problem of growing
difficulty, especially in view of the
widespread belief that low rates at Re,
serve Banks mean low rates in the
market, although no such connection
has ever been established in our bank,
ing system. Grave danger is thus
seen to confront our financial institu.
tons, not mrely from the standpoint
of new legislation, but also in the mat,
ter of administration policy, due to the
unsettled political situation which now
prevails at Washington.
Scattering Of Gold.
The question whether it is wise and
right to allow the vast gold accumu
latiOns to beome scattered through
the country merely in order TO pre-
vent IAN unduly high ratio" from
showing itself at Reserve banks does
not seem on the surface to admit Of
two answers. If the gold were nor
malIy ours and could be expected Il
remain here indefinitely there nigh
be argument for this policy. but thu
, gold is not ours in any true sense
> and it may be very reasonably ex
I pected that the time will come in tn,
early future when we shall be callel
{ on TO transport a substantial part O
Q it TO foreign countries in order to &c
: back to a footing Of gold redemption
I. That being the case, the plan of seek
= ing TO pay out the metal now DeinI
:. applied by the Treasury appears in
= creasingly questionable. The gOlt
t quetsion is probably one that will hav
r to be dealt with in some statesman
like way in She near future. 1t Ia
, not been dealt with in that way thu
far. During the war we pursued tn
!, policy of accumulation or "conserv
!. ing" gold, and since the war our polio!
A has been such as TO compel foreigl
countries to nay us in gold as much n
. POSSIBLE. The recent Fordney-Mc
i Cumber tariff has carried this polio!
J. 10 an extreme limit. and should it b.
a kept in effect will undoubtedly re
i suit in still further charging our golI
r holdings. At the same time, however
u we seek TO pay out the gold, although
! We all recognize that a good deal Of i
must 90 back TO Europe IL European
+ countries are to be able 10 get bacl
: to the specie standard at any time il
the near future.
: Membership Of Federal Reserve System
:, The hazards Of the coming year ar
/, not entirely international. nor do the
: relate wholly 10 legislative matters
Z Tehre is undoubtedly a growing fcelin
I Of dissatisfaction with the Federal Re
4 serve system. This is seen in moderate
>. withdrawal "t members and failure t,
expand membership further. but II i
h more evident in the dissatisfaction
IS which has led 10 efforts to break dow
q the par collection system and is lfkel.
y TO lead eventually to demand oil
the part Of country banks for legisla
! ton looking in that same direction
y Apart from this. is the fact that not
!, few members Of the system have beef
y repealed by the political attitude Of tn
% administration towards it and are 10
y. day inclined TO withdraw. in the alb
!, Sence of general revision of pnlicie
.e and also Of methods on the part o
V those who are now in authority. I
nj seems likIly that a very considerable
I revision Of our banking policy may be
come needful in the near future.