Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-01-19
BUSINESS LEADERS
WAR ON DEFLAT|0N
Reconstruction Finance Cor
poration Is Big Gun in
Present Campaign.
BY JOHN L. COOLEY,
Associated Press Financial Writer.

NEW YORK, January 19.-War
against def1ation has been declared
along a wide front and behind the
scenes in banking and business circles
groups of men are working quietly and
intently to direct the campaign which
they hope will defeat the common
enemy of Main Street and Wall Street
The big gun in the drive is, of course,
the Reconstruction Finance Corpora
ton. Authorized to make loans to
banking institutions, insurance compaA
MES agricultural and live stock credit
organizations and to railroads Con
recommendation of the Interstate Com
merce Commission), this 100000, 900
piece of machinery will direct its fire
against frozen credit, aiming to demol-
ish the barriers that have imprisoned
purchasing power.
Operation Facilitated.
Although the measure to accomplish
this important objective has not yet be-
come law, steps have already been taken
to facilitate its operation. The Federal
Reserve System. through its most pow
erful unit, the New York Bank, has in
creased the price it pays for bankers
acceptanceS, thus tempting owners OF
such paper to dispose of them to the
central bank InaSmuch as banks are
the chief holders of acceptanceS, 1t IS
now possible for them to sell at profit
acceptanceS bought before the price
rise. Funds so obtained would in theory
at least, be partially invested in Gov
eminent obligations, thus contributing
to a more attractive market Tor such OF
| Uncle Sans securities as may be issued
| to launch the Reconstruction Corpora
ton.
The next step in the easier money
| program, it is expected. will be low
! ering of the New York banks rediS-
count rate from the 81 per cent estab-
! lished during the gold run" Of last
| Autumn. There is widespread belief
/ in Wall Street that the reduction will
/ be made soon, perhaps on Thursday OF
| this week.
Meanwhile, active support is accruing
/ to the rehabilitation plan made public
/ last week, after long study, by group
of prominent economists, headed by DR.
Warren M. Persons.
Program Endorsed.
Aleardy some twoscore economic au-
| tkorities in and out of Academic circles
| have Endorsed this program which ia
vorS the Reconstruction Corporation,
economy in all governmental budgets, a
| liberal reserve credit policy and a COM
mercial banking program which will
permit cooperation of the large banks
with the Federal in checking credit de-
fation. Steps are being taken toward
the enlistment of leaders in many lines
of endeavor, including industry, for
active participation in this drive toward
business revival restoration of values,
employment increase and the strength
ening of banks.
1t has been apparent in the last week
! that sections of European opinion have
regarded this new American drive as an
! inflationary move. Proponents of the
plan believe. however that there is a
difference between anti-deflation" and
active imitation, pointing out that the
shrinkage in values, particularly those
of securities. had exceeded justifiable
limits, that fear had gone beyond rea-
son, and that much good should be &C
complished by at least taking in the
slack.