Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-09-10
RESERVE BOARD
SCORED BY GLASS
Senator Urges Curb on Pow
ers Used in Chicago
Rate Cut.
By the Associated Press.

LYNCHBURG, Va, September 3
While the Federal Reserve Board at
Washington is conceded to have the
power to fix rediscount rates at Fed
eral reserve banks, Senator Carter
Glass of Virginia, co-author OF the
Federal reserve act. said at his nome
here Yesterday that in his opinion 1t
was never the intention of Congress
that such authority should be used
except in exceptional circumstances,
such as maintaining dangerously
low" rate or a rate so high as to Mn
der commerce.
Mr.. Glass said he was apprehenslve
that the action in the present case
lis and was intended to be long
stride in the direction, making the
Federal Reserve Board a central
bank, with the reserve banks as mere
branches" He thinks the inference Is
justified from this and previous ac-
lions Of the board, that cit is the de-
liberate purpose of the board, as now
constituted, to appropriate arbitrary
authority which Congress never. IN
tended IL should exercise, and think
Congress should promptly and per-
emptoriiy cure this situation by legls-
lation which nobody will misinter'
pref"
Arbitrary Power Denied.
"While in a desperate postwar ex-
igency," said Senator Glass, eX-
dressed the conviction that the feo,
eral Reserve Board was given oroau
movers by the Federal reserve act IN
tbe matter Of reviewing and determin-
ing rediscount rates at the Federal re-
serve banks. It never was and is not
now my opinion that Congress ever IN
tended or that the act itself authorizes
the Federal Reserve Board arbitrarily
TO establish a rediscount rate at d
Federal reserve bank. AS Indicated
in the report of the banking cur
rency committee to the House OF Rep.
resentatiyes when the currency Dill
was presented, it was very dehniteiy
the thought of Congress that TINS
power was to be exercised by the teo.
eral Reserve Board only in exceptional
circumstances, such as when a feoera'
reserve bank should persist in estab'
fishing a dangerously low rate OF IN
terest or fixing a rate so high as TO
be a negation of that provision OF the
act which requires textually that re-
discount rates shall be fixed with q
view Of accommodating commerce ano
business It was the obvious spirit
of the act to conf1de to each Federai
reserve bank initial authority to estap-
fish rates because of the banks neces-
sarily superior knowledge of regional
conditions. and neither the spirit nor
text of the act sanctions interference
by the central board except In extraor-
binary circumstances.
Ear From Intent OF Law"
UNLESS I am mistaken, the Federal
Reserve Board has not found it de-
sirable within the 10 years of its ex.
istence to exercise this power untli
now. If the redisccunt rate or the
Chicago Federal Reserve Bank liz
either dangerously low or so unrea-
sonably high as that the bank fails
in the requirement that 1t shall &C
commodate commerce and business
then the board at Washington may
find justification in the law Tor It's
action.
IT am not sufficiently familiar with
the conditions at Chicago TO form any
opinion on this point. However. am
decidedly apprehensive that this ac-
ton of the Federal Reserve Board 49,
and was intended to be. long stride
in the direction of making the Fed
eral Reserve Board central bank,
with the reserve banks as mere
branches, which is as far from the
real intent Of the law as anything
could possibly be.
Considering this attention OF the
Federal Reserve Board in connection
| with a previous attention with respect
| to Federal reserve agents, as pro
claimed with apparent authority in
press, one is justified in the inference
| that it is the deliberate purpose OF
the board as now constituted to ap
propriate arbitrary authority which
Congress never intended it should eX.
ercise, and / think Congress should
promptly and peremptorily cure this
situation by legislation which nobody
will misinterpret."