Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-03-29
BY DAVID LAWRENCE.

BY DAVID LAWRENCE.
The Federal Reserve Board has
reached the crisis of its career of Is
years. Originally designed as a pro-
lection against money control by Wall
Street, the Federal Reserve Board now
faces a challenge by the spectators,
aided by important banks-and that
challenge will be met by drastic action
if necessary, to compel conformity to its
policies.
The board has been disturbed not so
much by the action of Charles E. Mitch
ell, president of the National City Bank,
in pegging, so to speak, the call money
rate at is per cent by willingness to
lend s25,Oo0,o0o, but by the quoted
statement Of Mr.. Mitchell in which he
said: I'VE feel that we have an obliga-
ton which is paramount to any Federal
Reserve warning or anything else to
avert, so far as lies within our power,
any dangerous crisis in the market"
Naturally Mr.. Mitchell had to bor-
row the $25,000,0O at the Federal Re-
serve Bank in New York and by agree
ing to lend this money the New York
institution by inference acquiesced in
his action. for the Federal Reserve Board
was only interested in breaking down
speculation and not in forcing q situa-
ton in which money could not be had
by anybody at any price.
Statement Held Unfortunate.
The words Of Mr.. Mitchell. however.
have been studied here for their sig
nificance in relation to the prestige of
the Federal Reserve Board Mr.. Mitch
ell is director of the Federal Reserve
Bank of New York, having been elected
by member banks. To the extent that
the board Of directors of the Federal Re-
serve Bank of New York are presumed
to have been acting in harmony with
the Federal Reserve Board in Washing
ton, which has the power of review of
its actions, the statement by Mr.. Mitch
ell is regarded as unfortunate In that
1t may be construed by the banking
world as criticism on his part Of the
famous Federal Reserve Board warning
Of February IA.
dent of bank with deposits of more
than billion dollars makes the situa-
ton one that it is difficult for the Fed
eral Reserve Board here to overlook,
though In the interest of harmony and
In its desire to avoid anything that
might appear as personal issue, it is
possible no action will be taken as to
this specific incident.
The statement by Senator Glass of
Virginia. one of the principal authors
Of the Federal Reserve act, calling for
Mr.. Mitchell'S resignation as a director
of the Federal Reserve Bank of New
York, Is looked upon as foreshadowing
further controversy in Congress when
the special session convenes. Being
made by Senator Glass, who was so
intimately identified with the origin of
the Federal Reserve system and who
is known to guard zealously the pres
tige Of the board, it may have the same
effect as If the board itself were to
say something publicly about the in
cident.
Not Likely to Raise Issue.
1t was not what Mr.. Mitchell did but
what he said that caused discussion in
official quarters here, and for that rea-
son the board itself is not likely to
raise an issue at this time. In fact,
Mr.. Mitchell's point of view was out
lined at Thursdays meeting of the di-
rectors of the Federal Reserve Bank in
New York, which was attended by rep
resentatives of the Federal Reserve
Board of Washington.
In situations like these the Federal
Reserve Board gets in personal touch
with the directors of the Federal Re-
serve banks In New York and elsewhere
In order to save time and get first-hand
information and impressions. Cooper
alton from other money centers has
been forthcoming in the last 10 DAYS
to such an extent that the board now
feels the necessity of preserving the
ground that has been gained, and II
the Mitchell statement does not start a
reversal OF sentiment among banks, so
to speak, the board will feel that prcg-
ress Is being made.
Determined to Go Limit.
There is nevertheless in the back
ground determination on the part of
the board to go the limit of its powers.
IN discussions thus far no decision has
been reached as to the next step. 1t
is known, however. that the board
points to the language of the Federal
ASSSSt 'C 0Sts W1lACA says TdLeS OF QlS-
count shall be fixed to accommodate
business and commerce" Is specula-
ton within that category? The board
has been advised that It is not. Com
gress, 1t Is asserted, set up a banking
system for commercial credits and not
Tor stock market gambling. The rais-
ing OF the rediscount rate is the normal
weapon used. but in situation like the
present. which Is abnormal, something
more drastic than a mere raising Of
the rediscount rate Is talked about. It
Is. In nutshell, the ordering of the
Federal Reserve banks and branches
to refuse to rediscount at all the paper
OF member banks when presented to
get funds to aid speculation.
1t is difficult. o. course, to draw the
line between a loan for speculative pur-
poses and commercial credit, but the
burden OF proof would be on the bank
Ing institution and the mere announce
ment OF the order or regulation, IL is
felt here, would be sufficient to tell thu
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