Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-22

A general discussion Of the policies Of
the Federal Reserve Board in dealing
with the credit situation and the pos
sibility Of a congressional investigation
followed the increase Of the rediscount
rate of the New York Reserve Bank and
its immediate effect on the stock mar
ket.
1.-THE board has been much criticized
lately" according to the Chicago Daily
News, "for the low salaries paid its
members, for the secrecy with which 1t
transact It's business, and for various
other things. II the board is right 1t
can survive an investigation. II the
boards critics are right an investiga-
ton is needed. But the cry of foreign
devil is silly. OF course, the board
watches foreign financial conditions and
governs itself accordingly. Financial
isolation is myth, and the activities OF
money and stocks abroad quickly affect
money and stocks at home. Price levels
and the health Of industry throughout
the world respond quickly to develop
mentS In any important financial CEN
ter. The board would be guilty of gross
negligence If 1t did not determine its
policies partly according to conditions
elsewhere. To ignore these conditions
would be to jeopardize the economic
welfare of the United States"
up to the end of 1927 the plethora
of American capital and gold reserve
had kept our money rates exceptional
scale from America TO Europe was
determining influence on international
exchange" explains the New York
Times. with the added information that
enormous extension of Speculat ton in
America during 1928 and 1929 changed
all that. From the cheapest of great
money markets." continues the Times.
New York became the dearest. Wall
Street was bidding to IS per cent for
demand loans and as high as per cent
for time loans on the Stock Exchange.
The inevitable result was not
only recall of American funds previous
~ loaned to Europe, and q great de-
crease In American purchases of for
eign securities, but movement of Euro
pean money on large scale into Wall
Street. Speculative excitement
In America has. II anything, been slim
ulated, and Wall Street is bidding rates
for money such as have seldom been
reached in our history outside Of
financial crisis"
Its critics have charged the board
with having completely lost control Of
the credit SITUATION" says the Hartford
Courant, land with having permitted
the control of the money market to be
vested In Stock Exchange operators.
II the Reserve Board has a.
last found itself and has formulated a
definite policy for It's future guidance,
the result cannot but be beneficial,
even though market speculation may
have received only a momentary set
"Unquestionably there will be
great deal Of debate In Congress about
ton Leader, with the comment: "Legiti-
mate business certainly should be pro-
tected, and the draining away of vast
sums of money into the speculative
market be prevented, II the credit
structure is weakened thereby. Policies
ana methods, however, are subjects
open to debate, and about which even
the experts may honestly differ"
1.-THE Reserve Board will be blamed"
In the opinion Of the Chicago Daily
Tribune, for any untoward conse-
quences of the rate increase, and will
receive little credit for any beneficial
for failure to take the public into It's
confidence" The Rock Island Argus
also asserts that 1.-The confidence Of the
public has always been reposed In the
board, but the board does not take the
public into Its confidence"
\ X n
The St.. Louis Times contends: when.
a group of men, anywhere, can, over.
night, wreak upon security holders
such losses as were sustained, they
should at least be controlled Business
interests which dislike to be assegaied
from behind, when they are not lock-
ing, may feel quite ready to put their
influence alongside demand for con-
gressicnal investigation"
"1S the Federal Reserve Board "a lla.