Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-15
RED|SCOUNT RATE
PUZZLES NATION
Boards Action in Making In.
crease Possible Is Prov
ing BeWiIdering.

Judging by reports from different
parts of the country, the latest action
of the Federal Reserve Board in max
ing possible an increase in the redis-
count rate from 5 to per cent mas
caused a good deal of bewilderment.
While it is taken for granted that the
action of the Federal Reserve Bank OF
New York in raising the rate will be
followed by most of the other Reserve
banks thus making uniform rate. II
is not vet thoroughly understood what
the true effect of the boards policy Is
going to be. The conspicuous increases
in the buying Of bankers acceptanceS
or bills have led to general peneI tnaC
plenty of money will be available 10
move the crops and there is no appre-
hension at the interior points. The
battle. however, to keep the additional
money from being used for speculative
purposes has by no means suosloeo ana
already questions are being asked from
the outside whether the Federal Reserve
Board would consider further increase
in the rediscount rate.
Six Per Cent Probable Limit.
There are many reasons why 1t is
generally felt in Washington that 8
Der cent discount rate is the propaple
limit to which the board would go.
First of all, any rediScount rate above
per cent would tend to increase the
rates of interest for commercial busl-
ness, and, secondly, If the raising OF
the rediscount of per cent fails TO
stop the speculative trend 1t Will be
considered that relief cannot be found
by continuously raising the redtScount
rate and that resort must be had once
more to the direct pressure policy.
whereby the Federal Reserve banks
we're told not to accept Tor reolScount
requests for loans from member banks
that we're based on speculative trans
actions.
indications here are that the redis-
count method of regulating credit will
be scrutinized very carefully in the next
few weeks. and that If it does not affect
the speculative elements the school
of thought which believes in direct
pressure will win more adherents.
Naturally there is luIl at this time
In the discussion because members OF
the Federal Reserve Board are on vaca-
ton, but at the same time they are
watching the effect of the compromise
recently reached whereby an expanded
bill policy was put into effect stimuli
taneously with the raising of the rediS-
count rate. It is believed that the full
effect will not be known for another
month, and that about the middle OF
September further steps in the evolution
of Federal Reserve policy will be under
consideration.
Inquiry May Be Asked.
Members of Congress who are watch
ing the situation will be back here early
next month, and the chief interest in
what is happening will be manifested by
the Senate, where 1t is foregone con-
cluSion that some sort of resolution OF
inquiry will be adopted. Several Sena-
tors have plainly stated that they wish
to find out what influences are con-
trolling the supply of money and what
Is being done by the Government to
curb speculation.
The House of Representatives is not
likely to take much Of a part in the
Investigation, although demand for
closer scrutiny of investment trusts has
been suggested in the House. The finan-
cial world does not look with favor on
congressional Investigation, because 1t
has little confidence that it will be con-
Quoted by experts who would know how
to reach the heart of the difficulty.
It IS, nevertheless, probable that the
Senate Investigation would take on such
a publicity aspect as to direct public
attention to all phases Of the money
problem, and there are some Senator's
here who are not interested especially
In attacking any particular groups In
the banking world, but who conscien-
tiously believe that 1t is the Federal
Governments duty to adopt more str1n-
gent measures to prevent Federal Re
serve credit from being used to aid
stock market speculation. D. L.
Copyright. 1927