Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-16
CHANGE IN CREDIT
CONTROL IS URGED
DecentraIized System Advo-
Gated in Possible Amend
ments to Reserve Act.

The three essential detectives which
should be kept in MIND in making any
amendments to the Federal Reserve act
are protection Of depositors, provision
of more adequate and elastic credit ia
cilities for industry and trade in all
parts of the country and promotion of
a more democratic a1d decentralized
system OF credit control, says the Bust
ness Week..
All these purposes were in some
measure implicit in the establishment
of the Reserve system. but they were
inadeuuately supplemented in the Re
serve act and have been submerged.
sidetracked or frustrated by the e%-
traordinary developments during the
years since 1914 That they are OF the
Utmost importance to the stable progress
Of American business has been demon
stratcd by the experiences of this de-
preston.
It is evident to every business man
now that the smooth, continuous con-
sumption of commodities upon when
industrial stability and profits depend
can be wrecked by a sudden sharpening
If the sense Of insecurity 9m0ng con-
suulers. Wage reductions and dlseln-
security. but these sources CT disturb
ance of normal buying habits are lnslg--
,,ihcant compared with a collapse OF
confidence in the safety Of savings.
When this confidence is shaken by VIDE
" spread bank suspensions, rot only is
business paralyzed. but the whole crcait
structure upon which modern economic
society rests is threatened II protec-
ton against unemployment is important
to maintain consumption, assurance
against less Of savings is far more so.
Importance to Business.
But business itself is directly con-
oerned with the stability and smooth
functioning of our banking system. The
sense of insecurity which banking m
stability creates is not confined to the
consumer Business concerns can also
lose confidence in our banking lnstltu-
items. corporations can hoard as well as
individuals and such boarding can para
1--we economic astivity as effectively as
any other kind. 1t prevents intelligent
PLANNING, intensifies unemployment and
wage reductions. dries up demand for
raw materials and retardS replacement
and improvement of productive equip
ment.
All this arises at bottom from the in
adequacy, inelsSticity, uncertainty ana
uneven distribution Of the credit faclll-
ties required for continuous production
end distribution Of goods. Although the
Reserve system was designed to allevi-
ate these alterations of financial feast
End famine. credit stringency and sur
plus from time to time and place to
place. it has not done So
1t has not been able to because a
great proportion of the banks themselves
have suffered from the same sort of in
security to which their business custom
ers and their depositorS alike have been
subject. They have not had equal OPP
portunity or privilege of access to Re-
serve resources, because of artificial and
often arbitrary discrimination against
the assets they have held, due to differ
ences in the nature Of the local indus
try and trade out of which their buSi-
ness arose They have therefore be-
GENE increasingly dependent upon the
larger, more liquid metropolitan mem
Der banks which have performed the
real functions of the Reserve banks in
this respect and exercised effective
control over general credit conditions
and policies.
Centralized System.
This control has not always been in
the real interest of general business sta
bility or of the individual banks them
selves, and it has left many Of them
only the alternative OF extinction or alb
Sorption. In any case, it has made for
a more highly centralized, less demo-
cratic system of independent banking
than is adapted to the diverse and dy-
manic needs of modern business in a
country like this.
The reconstruction of our Reserve
system must be keyed to these basic
considerations.