The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1931-10-09
HOOVER PLAN
ACTS AS TONIC
FOR BUSINESS
Confidence Rises as Giant
Bank Prepares to Free
Frozen Assets.
BANS EXTRA SESSION
Talk Diversion of Federal
Reserve Profits to
Permanent Pool.
BANS EXTRA SESSION
BY THOMAS L. STOKES
United Press staff Correspondent

BY THOMAS L. STOKES
United Press staff Correspondent
WASHINGTON. Oct. "a spirit
of confidence and optimism is man
ifest in the Hoover administration
on the eve of formal launching of
its plan to inject vitalizing stream
of money and credit into the slug
gish veins of business, industry and
finance.
The 5OO,O0o,0OO banking pool,
characterized as prosperity pool,
is expected to be incorporated by
Saturday, within two weeks it
should be ready to operate through
the twelve federal reserve districts
of the country, attacking the weak
spots which unduly have affected
the whole financial structure.
While the government sponsors
this temporary instrument of pri-
vate bankers, treasury and federal
reserve officials and members of
congress are formulating legisla-
tive proposals so that the federal
reserve system itself can meet
future situation through the same
methods.
Democrats Take Action
So eager are some Democrats to
get at this problem Immediately
that they have started a campaign,
promoted by Senator Joseph E.
Robinson, minority leader, and
Senator Walsh (Mont), to call
congress into extra session inn
mediately. President Hoover, it can
be said, has no intention of acced-
ing to their demands.
He is depending upon the private
bankers to do the immediate job.
Beyond liberalizing of the federal
reserve act, the administration pro-
gram calls for increased capital for
farm land banks to aid agriculture,
and, if necessary, formation of a
mi-governmental agency, like the
war finance corporation, to supple
ment the private banking pool and
the other financial relief agencies.
The private banking plan,
essentially, is simple. The pool.
operating like a gigantic bank, will
take from other banks those
frozen" assets-mortgages, bonds.
and stocks-which are inherently
good and sound, but deprecated in
value at this time.
Fresh Credit for Banks
In their place, the banks will get
credit by the action of the giant
bank in taking over these assets
and discounting them. This credit
will strengthen their position.
It will halt the throwing of such
assets upon. the market, in a des-
perate effort to get needed cash.
The banks in some cases, have had
to restrict loans for business activ-
ity because of the need to keep
large cash reserves in recent
months, and the new plan will re-
lieve the pressure.
1t is visualized also as bolstering
confidence so that the billion dol
lars which it is estimated in hoard
ed in safety deposit boxes, mat
tresses, and in tin boxes will find
their way back to the banks and be
put into circulation.
Two proposed changes in the fed
eral reserve act which are being
considered by treasury and federal
reserve officials are drawing both
support and criticism.
Revolving Fund Considered
One is to create within the fed
eral reserve system a revolving fund,
out of which depositors in failed
banks could be paid. The proposal
is to create this fund, ranging from
$100,000,000 to $500,000,OOO, out of
earning of the federal reserve sys-
tenn.
The other proposal is of a more
radical nature. 1t would extend the
rediscount privilege of the federal
reserve banks to sound stocks and
industrial bonds not now included in
the law.
Rediscounting now is restricted
to notes. drafts and bills of ex-
change covering actual commercial
transactions of maturity not over
ninety days, or seasonal agricultural
requirements of a maturity not
greater than nine months, as well as
paper secured by government bonds,
treasury certificates, and United
States notes, provided maturity is
not over ninety days.
Seek to Halt Gold Flow
The action of the federal reserve
bank OF New York in raising its re-
discount rate from the record low
Of IL per cent, to 21s per cent,
caused little reaction here, though
officials declined to discuss it.
Privately, they said it represented
an adjustment to meet present
market conditions. In financial
quarters it vas regarded as a move
to check the outward flow of gold,
which has begun to make a slight
dent in the huge stocks of this
country and to give bankers,
apparently anticipating demand
for money, a chance to make more
profit IN u = lending operations.
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