Evening star., 1932-02-18
Changing a State of Mind.


Changing a State of Mind.
The remarkably Illuminating debate
IN the Senate yesterday over provisions
of the Glass-Steagall banking bill, passed
already by the House, served to en-
phasize more adequately than any re-
cent discussion that condition Of the
depression that shows credit frozen by
nothing more than state of mind.
On the one hand we have been wit
Messing the various efforts by the ad-
ministration, supported by bipartisan
lineup in Congress, to restore conf
dence and loosen the flow Of credit by,
generally speaking, broadening the
credit base and making available as
collateral new class of basically sound
securities. On the other hand, Senator
Glass exposition Of the purpose Of his
bill in the Senate yesterday was IN part
devoted to a description Of the enormous
surplus Of money and securities re-
posing in the banks today, available for
loans, but practically unused. The Fed
eral Reserve member banks are in a
position, according to the figures quoted
by Senator Glass. to make loans In ex-
cess of those outstanding Of nearly four
billion dollars. who will say" asked
Senator Glass, "that II we might ex-
pand today to the extent Of $4,000 ,000,-
600 the situation would not be cured?"
The twelve Federal Reserve banks Sena-
tor Glass explained, have usable paper
b1 the immense volume Of ss,561 ,628, ,o0o."
They have approximately $4,000 900
free in eligible assets, "f they will only
use them" Out of the 1900 member
banks of the system, there are only
ninety-one banks without eligible assets
for rediscount at the Federal Reserve
bank
And yet one Of the provisions OF the
Glass -Steagau bill that has already
shown such tangible ability to bring
about new confidence is that one that
would broaden the base" for eligible
paper and. in the words Of Senator
Glass, authorizes "banks, in certain
exigencies and under certain restric-
tions. to use ineligible assets in redis-
count operations"
How is one to Justify the need for
further credit expansion when there
already exists the tremendous super
fluffy, in gold and in good paper, Of the
means for extension Of credit?
Senator Glass explanation is this:
The trouble Is that the banking COM
munity Of the country is frightened to
death. The banks have ceased to func-
ton. They have discarded the idea,
without warrant, that the Federal Re-
serve system was intended for situa-
ton like this. They do not seem to
realize that they can and should get
this accommodation. But it Is not
within the province Of the Congress to
compel bank to borrow money If it
will not borrow money. The chief
psychological advantage OF this meas
ure-and 1t Is perhaps valuable psy-
Geological advantages that it gives
assurance to these frightened and timid
bankers throughout the country that
II they will only respond to the require
ments of commerce. if they Will only
help in relieving themselves and the
country from this depression and in
doing SO exhaust their eligible assets,
then and only then may they make use
Of their ineligible assets.
Whether this fear on the part Of the
bankers is justified is neither here nor
there. The fact is, it exists. And, as
Senator Robinson explained, ''in order
10 restore their courage they want back
Of the large amount Of the paper that
they have and the enormous amount OF
money that they have on deposit, an
assurance that If they loan their money,
II they rediscount their eligible paper,
they will still have a resource of paper
on which to draw. 1t is most remark
able condition, an astonishing situation,
that with only few member banks in
the United States that have exhausted
their eligible paper it should be made
to appear that the whole system is in
danger"
The purpose of the proposed legislation
which, Senator Glass says, win do
more In ten minutes to stimulate re-
deposits In the banks than these mass
meetings that are now being held
throughout the country will do to drive
them out" is to afford assistance to the
few banks that are without eligible
paper and to stimulate confidence in
those who have eligible paper but are
afraid to use 1t because Of threatened
stampedes by depositors.
As the Glass figures show, the Presi-
dents campaign against boarding is
aimed at condition and not q theory
and the depression will continue pro-
gressively worse until boarding Is
stopped and courage supplants coward
Ice They relegate to absurdity the fears
Of those who have intimated that the
bill is in preparation for starting up the
printing presses and that its underlying
principle is the principle Of imitation.
There is gold enough to withstand the
threatened drain by foreign depositors
and there is cash enough to loosen once
again the extension Of normal credit
for industry and commerce. Only fear
renders it worthless.