Evening star., 1927-09-22

A controversy which finds it's parallel
only in the earlier days OF the Repub-
lie has developed over the challenge
to the powers of the Federal Reserve
Board by Chicago bankers. 1t is
charged that the board at Washington
acted arbitrarily in forcing a reduc-
ton in the discount rate of the Chi
cago Federal Reserve Bank. Opinions
differ as to the intent of tn" law and
as to the wisdom of permitting fight
over Capitalization to be thrown into
Congress.
1T is one thing for the Bank of
England or any other central bank in
Europe to adjust it's own country's
money rates, even arbitrarily. ac-
cording to the Wall Street Journal,
land another for a Washington board,
not necessarily made up of bankers,
to attempt such dictation. This ques-
ton may involve even the integrity
of the Federal Reserve system itself.
If the question can be settled without
the aid of politicians, so much the
better for the business of the
country"
The Dayton Daily News argues that
"the Supreme Court of the United
States has enormous power, but the
Supreme Court is hedged in by law
and is able but rarely to exercise any
thing like arbitrary power" The
Daily News adds that there has long
been an opinion to the effect that
body with the power to initiate or de-
fate money values should be circum-
scribed by rules Of action analogous
to those limiting the Supreme Court"
u 4 X X
"The real question is whether the
Nndn
power" declares the Milwaukee Jour.
nal, which adds that "if it has. there
is a job for Congress-" and voices a
warning that "the revelation at some
more critical time than this that the
Federal Reserve Board has been Sc
cretly made master of the country
might bring a smash whose cost would
be terrific"
The Newark Evening News quotes
from a statement by former Gov.
Harding of the board that "in law the
reserve banks are private corpora
tions, controlled by their directors"
and that, while the board has gen
eral supervision" over them, there is
no warrant for stretching this to
mean control" The Evening News
sees evidence of damage done to the
boards prestige"
Decentralization, within limits, was
intended in the reserve act" main
tains the Indianapolis News, while the
Baltimore Sun says that, "conceding
that the Reserve Board ha the power
it claims. there are weighty reasons
why it should not be exercised except
in case Of an exigency of generally
recognized seriousness. The banking
fraternity should have little trouble
in agreeing when such a condition
exists" adds the Sun. The Sioux City
Tribune holds that Senator Carter
Glass is right, obviously, in demand
ing that the powers of the Federal
tailed"
An interesting feature of the con- ,
troversy pointed out by the Springfield
Illinois State Journal Is that the
boards action was taken by a 4.tO-3
vote, and that the four who voted for
it are from the Middle West, and that
the three who opposed it are from the
East" The Journal also remarks
that while the Eastern Federal re. |
serve banks had reduced their dis
count rate to 31a per cent and be-
lieved that Chicago should follow suit, |
yet they are united in the opinion |
that the entire Federal Reserve sys- |
tenn has been placed in jeopardy by |
this bit of bureaucratic despotism."
The Richmond News-Leader feels that |
"it is better to take the remote |
chance that a regional discount bank |
will keep it's rediscount rate too high |
than it is to establish a financial die |
at Washington.
The system amply has demon
strated it's value to the country's COM |
and industrial interests and |
in maintaining stable financial condi |
tions,' states the Chicago Daily News. |
Nevertheless, 1t is wholly desirable !
that Congress clear away all ambigui- |
ties in the law and thus prevent a |
majority of the board |
from destroying the independence of |
the regional banks" The Omaha |
Herald AYERS that 'if the belief |
should become prevalent that the !
board is responsible for an unwise in
flation policy, engineered to boom the
stock market and also to protect for.
eign Investments criticism and sus-
picion are likely to be famed to the
point that the system and its control
may become a very lively campaign
ISSUE"
In opposition to legislative action,
the Springfield Union contends that
Congress will act unwisely If 1t at
tempts in the next session to write a
definition of an emergency for the
guidance of the Reserve Board" The
Yakima Daily Republic believes that
the Federal Reserve system has
proven itself to be far too valuable an
adjunct of~the Nations financial ma.