Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-07

Clear indication that the Federal
Reserve Board sees need for reforms
in the banking laws of the country is
seen in its annual report. The board
withheld specific recommendations, be-
cause the Glass financial inquiry is go
ing into the same subject.
What revisions the board has in
mind were not disclosed in the re-
port. It is known, however, that it
has in the system various committees
making studies, including those into
eligible paper. reserve requirements and
group and branch banking.
Concluding its discussion of the bank
and credit situation, and the Reserve
systems operations, during the de-
preston, the board states:
For the banks of the country the
period of is months ended in December,
$780, was one of readjustment and
liquidation. Through the experience of
this period and of the preceding few
years many important problems con-
nected with the structure and func-
tioning of our banking system are be-
coming more clearly defined. These
problems at present are receiving con-
sideration by Congressional commit
tees. Since these committees are con-
Quoting investigations with a view to
determining the need Of legislative and
administrative reforms, the Federal Re
serve Board refrains in this annual re-
port from making recommendations to
Congress"
Gold Near Peak.
With regard to the gold situation dur
ing 1880 the board said that $4,000
600 was added to the stock of monetary
gold in the United States, bringing the
weekly average figures at the close OF
the year to $4,590, 900 900. This amount
was within less than $100,000,000 Of
the peak figures Of May, 1927.
During the year 157,000000 was re-
ceived from Japan, $88,000,0 900 from
Brazil, $23,000,000 from China, $21,-
900, 900 from Mexico. $20,000,000 from
Argentina and $36,000,OO0 from other
Central and South American countries.
In general the influx OF gold from out
lying countries producing raw mate
rails whose difficulties arose over the
decline In the value Of many Of their
most important commodity exports. In
Japan the immediate cause Of the loss
of gold was the removal on January ii,
1880, of the embargo on exports of
the metal--a necessary final step IN
the return Of the country TO the gold
standard.
Demand for Bank Credit.
The year was marked by reduced de-
mand for bank credit from trade and
industry, and by decreasing commodity
prices and money rates, all character
istic of period of declining activity in
business, the board said in discussion
of domestic conditions. In these cir
the Federal Reserve sys-
tenn pursued a policy of monetary ease,
expressed through the purchase at in
tervals of additional United States
Government securities, and in progress
sive reductions Of reserve bank dis
count and acceptance rates.
Money rates, which for more than q
year prior to October, 1929, had been
on a rising level-owing largely to the
rapid growth In the demand for credit
to finance speculative activities IN many
lines and In different sections Of the
country-declined after the Autumn
break In the financial market OF the
country.
BY successive steps holdings of United
States securities had been increased to
$500 900, 900 by the Summer of 1880,
and remained at about that figure until
December, when additional purchases
of q temporary nature were made,
partly for the purpose of counteracting
the tightening effect Of seasonal credit
and currency demands upon the money
market and partly in connection with
disturbances IN the DanKlng SITUATION.
Easy Money Policy.
The easy policy of the system was
extended to the acceptance market, and
at the end of the year reserve bank
holdings of acceptances were at about
the same figure as at the end OF 1929.
Rates on acceptances fell to 1K per
cent at the close of 1880 from 51s per
cent in the Autumn of 1929; rates on
commercial paper to 27s per cent from
81 per cent, while call money was
around per cent, frequently falling
below that level in the six months OF
the year.
Between October, 1929, and the early
days of 1881, discount rates at the
reserve banks were reduced to 2 per
cent from 6 per cent at the Federal
Reserve Bank of New York; to 212 per
cent from per cent at Boston; to 3
per cent from 5 per cent at Cleveland,
Chicago, st. Louis and San |
and to 31a per cent from 5
per cent at Philadelphia, Richmond, |
Minneapolis, Kansas City and Dallas.
A principal factor affecting changes |
In the demand for reserve bank credit |
Is the course of domestic demand for |
money in circulation, the board states. |
In 1880 the rapid decrease in currency |
in circulation and its maintenance in |
the Autumn months at a level about |
$500, 000, 900 below that Of 1929 reflected |
the effects of the slowing down in
business activity. BY the end of 1890 |
factory pay rolls had declined by IS |
per cent from the peak in 1929, and |
retail trade also was in smaller volume
as result of a decline both in physical
volume of trade and in retail prices.
Little Change In Reserve Balances.
Taking the year as whole there was
relatively little change In the aggregate
volume of reserve balances held by the
member banks with reserve banks-the
,ther important factor in the demand
or reserve bank credit-and the fac
or that is directly related to changes
n the volume of member bank credit.
II the relation of the decrease in nom
member bank credit and in member
bank credit may be assumed to have
remained approximately the same dur
ing the last quarter of 1890, the total
decrease in bank credit outstanding for
The 15-month period was In the neigh
oorhood of $4,000, 900, 900. A part of
This has been due to bank suspensions
during the period, and represents the
elimination from the aggregate re-
sources of active banks Of the resources
IF failed banks that have not been
gradually absorbed in one way or an
1ther by other banks. In addition to