Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-03-30
HOOVER WATCHES
| SPECULATION WAR
Fight With Federal Reserve
Board Closely Studied
by Leaders Here.
By DAVID LAWRENCE.

Members Of Congress and President
Hoover are showing concern over the
battle between the Federal Reserve
Board and the SPECTATORS. Proposals
for legislation to enlarge the powers Of
the Federal Reserve Board are being
discussed on Capitol Hill. Mr.. Hoover
Is staying out of the controversy him
self. but he is keeping informed Of what
Is going on. $50. '..-..
The concern of all is whether the
business situation will be affected by
the high money rates that prevail.
Thus far industrial and business &C
tivity have continued on a satisfactory
basis, and 1t is the picture Of possible
rise in the expense to commercial Dor
rowers that Is being constantly pro-
jected as the chief reason for the Fed
eral Reserve Boards warnings to the
specializing element.
Spectators Cripple Credit.
Congress Is generally sensitive to any
change in business conditions. The
cost of borrowing money for construc-
ton of buildings has already gone up,
and it Is said that in cities like New
York, for instance, second mortgage
money Is obtainable only at such dis
counts or bonuses as to make the total
cost something above 10 per cent and
as high as 25 per cent.
just what this may do toward slowing
down the construction industry can be
conjectured, but in measure the same
difficulty may apply to othr bust
nesses requiring a constant use OF boz
rowed funds.
Corporations which have been lend
ing their funds In the New York mar
kets are finding uses for such funds
at home to take the place of funds
they have been borrowing heretofore
at low rates from the banks. Some of
these institutions have been gradually
raising the interest rates even on large
accounts and old customers. This is
not vet widespread, but it is a symptom
of the general situation. The Federal
Reserve Board takes the position that
all this Is largely due to the fact that
the spectators are absorbing credit that
should 90 to commercial users or, to
put 1t another way, they are making
credit so scarce as to force its cost
higher and higher.
When Congress reconvenes the ciamor
from different parts Of the country for
an easing of the situation will become
acute. There is always a sort OF anti
Wall street feeling here when any diff
ficulties about money control arise and
fear that If the tendency is permitted
to grow so that the situation must be
handled by Congress some other things
may be injected into the legislation
which would be dangerous for the fu-
ture.
Rigid System Opposed.
The Federal Reserve act has in Is
years been amended and changed to
some extent, but the friends of the law
have succeeded in resisting major at
tcmpts to make the system too rigid. At
present the board has wide discretion
arv powers
Shall some of these powers be made
Shall Congress in effect
direct by law how emergencies shall be
handled and give the board really no
alternative but to enforce the laws COW
ering specific transactions in the COM
plicated world of credit?
The alternative, of course, Is that the
board be allowed to work out the Sit
uation itself without outside interior
ence or pressure, for in this case par
ticularly the board is trying to carry
out what appears to be the sentiment
of those most active in Congress for
specific legislative change.
To the extent that the New York
SPECTATORS render the Federal Reserve
Board helpless either by defiance or
outright resistance will congressional
sentiment for action mandatory In char
acter be crystallized.
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