Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-06-06
CREDIT RAT|ON|NG
IS RESERVE POLICY
Central Bank Is Declared
Aim of Federal Board in
Present Program.
BY JOHN F. SINCLAIR.

Special Dispatch to The Star.
NEW YORK, June 6.-"What is the
Federal Reserve system trying to do?"
is a question often asked today. For
the full meaning of the Federal Reserve
policy is not yet realized in the United
States
A definite program Is being developed,
and when II is understood It will show
the Federal Reserve Board as the pow
err behind the credit structure of the
United States.
Naturally. the Federal Reserve system
did not operate nominally during the
war, or for a decade after the war. be-
cause there was a sympathetic handling
of credit to meet refunding of United
States Government obligations.
But those happy-go-lucky days are
over A few factors already are in evil
dence. % The Federal Reserve Board
and not any of the IL banks is to direct
credit policy in the future, as central
banking authority; az the board a.
Washington ultimately will Ak arbitrar-
lily the volume Of credit each Of the IL
Federal Reserve banks will be permitted
to have outstanding. the proper amount
for each member bank being determined
by its position in the matter of lend
ing money on call"
This program is already being put
into execution. No member bank lend
ing heavily on call can get accommoda-
tons today at the Federal Reserve, no
matter how much eligible paper 1t has
to discount
What does this mean? 1t means that
the Federal Reserve banks, working
under the Federal Reserve Board, are
ratiOning credit and that they will con-
tinue to handle credit In this way. Their
aim is to reduce the rediscount rate,
say to 4 per cent, but when the board
has completed its work that lower rate
Will have no effect on the volume of
available credit in the speculative mar
ket, it is said.
Why? Because, with the control Of
credit absolutely under the board, it Is
the ratloning and not the rate that will
count
Perhaps the founders of the Federal
Reserve never contemplated such a de-
velopment of Federal Reserve banking
policy. However the eventual aim of
the board is to keep adequate credit
supplies in areas which create it and
need it. In other words the boards
purpose is to keep money working at
home, and thereby equalize the spread
OF prosperity throughout the Nation.
Until this policy is put under thor
ough control by the board there will be
many headaches and'heartaches in the
stock market.
There seems little question that this
is the program the Federal Reserve
Board has determined upon.
E. H Simmons, head of the New York
Stock Exchange, although vigorously op-
posing Federal Reserve credit policies
at this time, is against any legislation
which will restrict the Federal Reserve
In its movements.
There are numerous students Of Fed
aNA1 ,,,t..
many of the difficulties under which the
Federal Reserve is laboring would have
dissolved If a more complete policy of
publicity had been followed.
"SecretiveneSS Is inevitably the par
ent Of confusion, fear and suspicion, -
says Mr.. Simmons.
Whether one agrees with Mr.. Sim
mons in his opposition to the Federal
Reserve policies or not, 1t is undoubt-
edly true that one Of tbs crying needs
Of the Federal Reserve at this time is
frank and open approach to fiscal
problems in order that the confidence
Of every citizen Of the United States
In the Federal Reserve system be main
tanned.
The year 1925 was an epochSmaking
period for the British empire, accord
ing to Sir Esme Howard. British Am
bassador, for It represented "a mo-
mentous and astounding political revo-
luton, accomplished in perfect amity
around a table in London"
Sir Esme gives Cecil Rhodes credit
for developing the first conception Of
the British empire as commonwealth
of free states.
Today each independent part of the
British empire speaks for itself. Can
ada does, Australia does, New Zealand
does so do all the other dominions.
Therefore it is accurate to say that only
Great Britain, but not the British
commonwealth. is committed to the
Lausanne treaty with Turkey. It Is
likewise true to say that the dominions
are not committed TO the treaty OF
Locarno by the signature Of Great
Britain.
The future? We slow. unimagina-
tive Englishmen do not worry much
over the future" said the British Am
bassador we are essentially political
opportunists. We cannot pretend to
arrange matters for our children. It
is often hard work to do SO for our
selves"
Such a statement coming from Brit
ish lips a generation ago would have
been nothing short of blasphemy.
NAUs-