Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-02
Washington Ticker

BY the Associated Press.
Three sharply contrasting points of
view on Federal Reserve Board credit
restriction over the security markets
are now set forth by leading spokes-
men who have sought to form views of
the National Chamber of Commerce
meeting in Washington. All of them,
however, imply the notion that congress
sional legislation or investigation is
hardly likely to help anywhere. The
first view, most completely dealt with
by o. M. w. Sprague of Harvard Uni
versity, Is that the board hasn't borne
hard enough on stock speculation and
attendant increasing credits; the Sec
ond. stressed by bankers like Fred Kent
Of the New York Bankers Trust Co.
and w. F. Gephart of the st. Louis
First National, is that the board should
be let substantially alone; while the
third, perhaps representative of Wall
Street, as emphatically stated by Wad-
dill Catchings, economist for one of the
great investment trust groups, is that
the board has gone much too far.
Imposition of credit pressure by
slight raises of rediscount rates and
sales of bills to the open market was
ineffective, because too slow and peo-
pie get used to it." said Mr.. Sprague.
Direct action to reduce bank borrow
ingS at the central reserve was reSorted
to, but this again was too slow. Both
measures went to establish the opinion
that q speculative movement of major
proportion is beyond Reserve Board con-
troll until terminated by business de-
preston.
"A different line of sharp advance
OF Reserve rediscount rates to per
cent, with the spread of the intimation
that they might go higher, could have
been followed. There is need to set
precedent here. that any prolonged, alb
normal demand for unusual amount of
credit Will encounter effective OPPOSE
ton"
People are imputing to the Reserve
Board powers that it does not have and
should not have" Mr.. Gephart assert
ed. 1t has no business to try and
determine prices. don't think we
know how much credit is proper or
whether prices are too high or too low.
You will find informed men who saw
rediscount rates are too high and men
who say they are too low in present
circumstances"
Mr.. Kent. too. pleading that credit
problems should be left in the hands
of those who are dealing with them"
had kind words for the stock situation
in pointing out that listed values of
New York Exchange securities were
$4,000, 100000 on January /, while
loans were but $6,oo0,0o0,O00 against
that total
There is much that is sound in the
value the public has accorded good
Stocks" he declared. 1T is the proper
banking purpose to see that prices meet
the strain of high money as they pass
over the peaks to which they have
arisen"
"In the last year the Reserve Board
has based its policy upon opinion, in
stead of upon fact, in regulating credit
volume" said Mr.. Catchings in opening
fire. 1T has sought to establish the
idea that rediscounting is a privilege
which might be withdrawn from banks
at its will. It has changed its open
market policy and cut down its hold
ingS of Government securities and COM
mercial bills from $500,000,0 900 to SAL
100000, thus reducing the supply of
commercial credit by $7.500,0OO, 900.
That is little hard to follow, but in
banking theory it is well established
that the withdrawal of reserve funds
contracts credit at the rate of Is to /.
"All these measures were taken not
upon the presence of imitation, but upon
the opinion that stock prices were too |
high. They have contravened the |
American tradition that the individual |
should be allowed to estimate his stu |
alton in banking or anything else, and |
act with holiness and Judgment In ia |
vor of bringing about compliance with |
centralized notions. don't like specu-
lation, but do you know that a Cana
dian life insurance company Is now the
greatest stockholder listed by the big
eest American industrial corporations?
THAT is the fact. The board should
act on the basis of conditions, not on
opinion of anybody"