Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-06-03
EASIER MONEY SEEN
by RESERVE BOARD
Turning Point in Business
Conditions Predicted as
Result of Warning.
By DAVID LAWRENCE.

The Federal Reserve Board considers
hat the epoch which began with It's
warning last February has come to Q
turning point and that from now On the
economic situation Of the country will
adjust itself TO q new set OF creuni-
stances.
AS illustrative of the boards view
that the results of the last few weeks
have fully justified the caution and
prudence suggested in February, the
purchase of bills or bankers accept
ances in gradually increasing quantities
will become evident, thus tending to
make money conditions easier.
This does not mean that o return to
speculative excuses will be permitted,
but that the tension can be relaxed and
member banks will find through the
expansion of credit by bill buying the
corrective they have been thinking
would come through q rise In the re-
discount rate.
Rediscount Rate Cut Probable.
The maintenance Of the rediscount
rate at per cent for the indefinite
future is assured. with the possibility
that as conditions grow easier q few
months hence it may even be reduced.
In other words, the Federal Reserve Is
able by purchase or sale Of bankers
acceptances to exercise a control Of
credit and If banks do not separate the
wheat from the chaff In handling loans
related TO speculation the contracting
process can be invoked again. What Is
happening now is testing of the new
conditions in the hope Of determining
how soun6ly the credit world can adjust
itself to the relaxation Of the tension
which has been imposed for several
months
It is interesting to note that the rec
ommendation Of the advisory council
of the Federal Reserve system that the
rediscount rate be advanced TO 8 per
cent has been tabled because 1t did not
fit, In the opinion Of the board, the
new conditions. The coming depres-
sion In the agricultural area, due TO
the expected dininution Of returns
from those industries dependent on
agriculture has been a corrective In
fiuence, which has made unnecessary
the application of the rediscount In
crease, something which the board con-
sidered should be only q last resort
measure anyhow.
Misunderstanding Prevails.
The story Of the discussions and
arguments that have been going on for
several months as to the wisdom OF the
Federal Reserves policy includes much
misunderstanding, due to the fact that
the board has not participated Ia the
public debate. It Is known, however, that
while the banking elements were not
at first disposed to cooperate with the
board in its warning against specula-
tive excuses, they soon discovered an
attack from behind; namely, the with
drewal Of deposits In order to engage
in that speculation. Then came the
stage in which many of the leading
bankers recommended an increase IN
the redtscount rate, but the view neld
here was that this would mean a violent
COLLAPSE and perhaps general danger
to the BUSINESS situation. This Is why
friends Of the board in Congress are
preparing to point out that nothwtth-
standing the criticism that It was at
tempting to restrain business, the board
was in fact attempting to avert
serious alternative break down IN
business.
There is every reason to believe Presi-
dent Hoover, while fully aware OF all
the ramifcations Of the Reserve Boards
policy, did not himself take any part
in the evolution of the policy, although
he concurred with the steps that were
taken and believes the board has saved
the country from an inordinate era OF
speculation with its consequent dangers
to the commercial credit structure.
Board Diselaims Market Interest.
The board Is insistent that 1t has no
feeling one way or the other about the
stock market as such and Is only con-
cerned with the original purposes OF
the Federal Reserve act; namely, to see
adequate supply Of credit at reason
able rates.
with the end of the first stage in
the boards policy Of helping the coun-
try readjust itself this year to the i'm
plications of the 7-yeaf cycle that be-
gan In 1922, the expectation OF easier
money for business and particularly the
building industry is counted upon TO
offset some of the Ill effects Of the
agricultural depression.
tCopyrisht. 1929