Evening star., 1928-03-27
j. S. RESERVE BANK
AIDS WORLD CREDIT
Board Uses Movement of
Gold as Key to Guide
Policies.

Using the movement of gold in in
ternational channels as a key the Fed
eral Reserve Board during the past
year mad a definite, helpful effect on
the annual board report published to-
day.
The international movement of gold
was permitted by the board to have its
normal effect on credits the report
said, or 1t was Offset by the purchase
OF securities in the open market. rs the
board believed trade conditions ilsti-
fed.
The board did not confne it's ac-
tiyities to credits, however, but through
its power as controller Of virtually one
half OF the worlds monetary stocks
aided foreign countries in stabilizing
their currency and returning to a gold
standard basis
These operations represented changes
in the Federal Reserve policy As set
forth in tho report the Reserve Bank s
policy In the early part of the year.
when gold imports were eXcrting an
influence toward easier money. was TO
toward the market.
Methods Explained.
I'm the Spring and Summer. in the
absence OF considerable net gold move
ments the systems policy was expressed
In easing the money market through the
purchase of securities and the reduction
Of discount rates In the early Autumn,
when an outward movement of gold be-
gan. the system offset in part the effect
of gold Withdrawals through purchase in
the open market and finally. i'm the
closing months Of the year the systems
policy, in view of the rapid expansion OF
member bank credit. was TO permit the
continued outflow of gold to exert its
customary tightening influence on credit
conditions"
The gold flow into and out OF the
country. which was thus a major fac
tor in the credit situation in 1927" the
report added. has eXerted an important
influence on banking conditions In the
United States since the beginning of
the Federal Reserve System. Between
June 30. 1914. and December 81, 1927
the stock OF monetary gold In the
United States increased from 81 89l .
100000 to s4.376 900 900. an increase Of
81. .485. .000. 900. OF which S2.07l 900 900
represented reported net imports less
amounts earmarked for foreign account
and $4,000 900 additions to gold stock
from other sources, chiefly excess Of do
meStic production over consumption by
industry and the arts.
Effects of Policy.
THE influence of the Federal Reserve
System during the year In so far as 1t
has been consistent with the require
ments OF the domestic situation. has
been exerted toward conditions favor
able TO the maintenance and further
progress OF the gold standard" the re-
port continued. The policy of main
tanning easy conditions i'm the money
market which was pursued by the sys-
tenn throughout a large part OF 1927 has
encouraged the fiotation Of foreign
loans In the United States and facil-
tated the expectation of gold 10 coun-
tries undertaking monetary reforms
In adopting policy of international
cooperation in support of the gold
standard. the Federal Reserve System
has acted in recognition Of the RESPONSE
biltty resting upon this country as the
holder Of nearly one-half Of the worlds
stock of monetary gold and of the i'm
p0rtanee OF sound monetary conditions
throughout the world to the prosperity
OF industry and trade in the United
States
BY the congressional action in grant
ing indeterminate charters 10 Federal
reserve banks, the board said the banks
ARE now In position 10 formulate
longterm policies TO be pursued unde"
mere normal coalitions in a world that
has made great progress during the
past year toward economic and finan-
cial reconstruction.
Earnings Reduced.
In 1927 the Federal reserve banks
earned S43 024 900, a reduction Of S4,-
$40 600 under the year before. due
largely. the board said. to decline Of
Ss4. III 900 in the daily average OF the
banks holding OF bills and securities
and a decline in earnings Of the hold
ings The banks handled $4,000 900
checks in 1927 compared with 823 600 e
600 In 1926. discounted S32 900 000, 900
of paper for member banks purchased
81. 100 900 900 of bills in the open mar
ket. paid SIS 100000 OF Government
coupons. collected S6.700 900 900 OF nom
cash items for member banks and han
died new issues. redemptions and ex-
changes aggregating $4,000 ,000,00 for
the Treasury Department.