Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-02-08
RESERVE WARNING
PROBE IS URGED
Representative Black and
Senator HefIin Suggest In
quiries Into Trading.
BY the Associated Press.

BY the Associated Press.
Resolutions were introduced in both
the Senate and House today seeking in
formation about the recent warning of
the Federal Reserve Board against loans
for speculative purposes.
Representative Black, Democrat, Of
New York, asked that the House bank
ing committee investigate the boards
statement which was given out We'd
nesday night.
Senator Hef1in, Democrat, of Alabama,
introduced a resolution requesting the
board to give the reasons for the recent
increase in rediscount rates and to sug-
gest legislation which would tend to
correct the evils in speculation COM
planned of in the boards statement
The Alabama Senator asked immediate
consideration of his measure but it went
over when Senator Curtis of Kansas,
the Republican leader, suggested that
/ the regular rules be observed.
Under the Black resolution the bank
ing committee would be directed to
summon before it Officers and employees
of the Federal Reserve Board and such
other persons as the committee Ieems
to have information concerning the
causes and conferences leading up to
the public warning, issued by the Fed
eral Reserve Board on February 8, 1929,
against brokers' loans"
The committee also would be directed
ito make inquiries of such witnesses for
| the purpose of advising the Congress as
| to the necessity for legislation to pre-
vent the board using its powers to arti-
| ficially raise or lower the markets In
securities"
! Black declared later in statement
| that the warning of the Federal Re-
serve board was IAN unparalleled ex-
ample of governmental intrusion into
| the conduct of American business"
THE New York Stock Exchange anc
various commodity exchanges" Black
said, have adopted rigorous rules which
may adequately reflect an intrinsic value
of securities coupled with an antici-
pated value due to future earnings
These markets exert steadying effect
on American credit and business anc
represent the crucial points in applica-
| ton OF the law OF supply ana ueHlanu
Great Loss Caused"
1.-THE Federal Reserve Board and itl
| tremendous powers can seriously inter.
| fere with the price list of securities, a:
such lists indicate true values" he con-
tinued.
When the board was given its tre'
mendous power over the credit situation
it was hoped that 1t would afford facil
| tiles for a normal flow Of money to re-
inforce the course of trade.
ut was not anticipated that it woult
so use its credit power as to accelerate
or depress trade securities, which, aftel
all, only represent the trend of al
American business.
Its recent warning has caused .
great loss to investors in the securities
market. 1t was a violent and radica
step for a responsible Government
agency to take. The Federal Reserve
Board owes it to the country to appea
before our committee and explain, stel
by step, its processes leading up to it
warning against member banks, SO tina
the American people will know as near
ly as possible the exact economic condi
ton of the country and build Its busi
ness accordingly.
ITO my mind this recent warning
was an unparalleled example of gov
ernmental intrusion into the conduct o
American business and Congress Shoul'
take steps to prevent its recurrence"
There was some discussion of tn
Reserve Boards statement among mem
bers of the Senate banking committee
but the subject did not get before tn
committees regular meeting.
Glass Making Study.
Senator Glass Democrat, of Virgins
Secretary of the Treasury during tn
Wilson administration, has been maxim
special study of the relation of Re
serve bank loans to market fiuctuation
There was almost a unanimous opinio
among Senate leaders that it would
impossible for Congress to enact an
legislation during the remainder Of TIL
session dealing with brokers' loans.
far, there has been no argument ths
| legislation could remedy the situation
A bill introduced by Senator Gla:
seeking to cut down the amount {
! Continued on Page g. Column 81