Evening star., 1930-05-02

governors. mayors and other authorities
have everywhere been doing their full
part, The result has been the placing
Of contracts of this character to the
value of about $500, ,000, 900 during the
first four months of 1880, or nearly
three times the amount brought into be-
ing in the corresponding four months OF
the last great depression of eight years
ago. All Of which contributes not only
to direct employment but also long
train of jobs in the material and trans
portation industries. We are suffering
from a decrease in residential construc-
ton, but despite this we have reason
to believe that the total construction
will still further expand and we should
during 1890 witness larger gross vol
ume of improvement work than normal.
For the first time in the history OF
great slumps we have had no substantial
reductions in wages and we have had
no strikes or lockouts which were In any
way connected with this situation.
The accelerated construction has nat
urally not been able to absorb all the
unemployment brought by the injuries
of the boom and crash. Unfortunately
we have no adequate statistics upon the
volume Of unemployment. The maxi
mum point Of depression was about the
first Of the year, when, severe rs the
shock was, the unemployment was much
less proportionately than In our Two
last major depressions. A telegraphlc
canvass of the governors and mayors
who are cooperating so ably Win US IN
organizing public works brings with one
exception the unanimous response OF
continuously decreasing unemployment
each month and the assurance OF
further decreases again in May.
All these widespread activities OF our
business men and our institutions offer
sharp contrast with the activities of pre-
vious major crashes and our experiences
from them. AS q consequence we nave
attained q stage Of recovery within tnls
short period greater than that attained
during the whole year or more following
previous equally great storms.
Lessons to Be Needed.
While we are today chiefly concerned
with continuing the measures, we have
in process for relief from this storm, and
in which we must have no relaxation,
we must not neglect the lessons we have
had from it, and we must consider the
measures which we can undertake both
for prevention of such storms ana ior
relief from them. Economic health IKE
human health requires prevention OF IN
lection as well as cure Of It,.
I take it that the outstanding PROB
lem and the ideal of our economic Sys-
tenn is to secure freedom Of initiative
and to preserve stability in the economic
structure IN order that the door OF op-
portunity and equality of opportunity
NAV be held open to all our citizens;
that every business man shall 60 about
his affairs with confidence In the
future; that it shall give assurance TO
our people of q job for every one who
hal -
Improvement through research and In
verition. advance standards Of living to
the whole Of our people. That will con-
stitute the conquest of poverty, which
Is the great human aspiration OF our
economic life.
And these economic storms are the
most serious interruptions to this prog
ress which we have to face. Some OF
YOU will recollect that following the
great boom and slump Of eight years
ago, as Secretary Of Commerce, 1 mitl-
ated a series of conferences and investi-
cations by representative men into the
experiences Of that occasion and to
make therefrom recommendations Tor
the future. It Is worth q moment to
examine our conclusions at that time
as tested in this present crisis.
The first Of the conclusions At that
time was that our credit machinery
should be strengthened to stand the
shock of crash; that the adjustment OF
interest rates through the Federal Re-
serve System should retard destructive
speculation and support enterprise dur
ing the depression.
Our credit machinery has proved it
self able to stand shock in the CONNER
cial field through the Federal Reserve
System, in the industrial field through
the bond market and the investment
houses, in the m-mortgage field to
some extent through the Farm Loan
| System; and in the installment- buying
| field through the organization OF pow
erful finance corporations.
But If we examine the strains during
| the past six months we shall find one
area Of credit which Is most made
quately organized and which almost
ceased to function under the present
stress. This Is the provision of a steady
| flow Of capital to the home builder.
From q social point Of view this Il
one Of the most vital segments of credit
and should be placed in such q def
nitely modified and organized form a.
would assure its continuous and stable
flow. The ownership of homes, the i'm
provement of residential conditions To
our people, Is the first anchor in social
stability and social progress. Here Il
the greatest field for expanded organi-
zation of capital and at the same time
stimulation to increased standards OF
living and social service that lies open
| to our great loan institutions.
The result of the inability to freely
secure capital has been a great diminu-
ton in home construction and O large
segment of unemployment which could
have been avoided had there been q
more systematic capital supply organ
lied with the adequacy and efdciency
| of the other segments of finance. We
| need right now an especial effort Of ouI
loan institutions in all parts Of the
country to increase the capital available
for this purpose as part Of the remedy
Of the present situation.
Reserve Systems Service.
There can be no doubt of the service
of the Federal Reserve System In not
only withstanding the shock but also In
promoting the supply of capital after
the collapse. We have, however, q new
experience in the effect of discount
rates and other actions of the system In
attempts to retard speculation. The sys.
tenn and the banks managed throughout
the whole Of the speculative period to
maintain interest rates on money for
commercial use at to 6 per cent per
annum, and by their efforts they segre-
gated the use of capital for speculation
In such fashion that the rates upon
such capital ran up to or over 18 per cent
per annum. But even these high rates
on speculative capital offered little real
retardation to the speculative mania OF
the country. They served, in fact. to
attract capital from productive enter
prise, and this was one Of the secondary
| factors in producing the crash itself
The alternative, however, Of lifting
commercial rates still higher in orde" X
check speculation by checking business
| is also debatable. The whole bearing OF
interest rates upon speculation and
stable production requires exhaustive
consideration in view of these new ex-