Evening star., 1932-12-25

| Then 55 years OF age ana une Demo-
cratic chairman of the Banking and
Currency Committee OF the House OF
Representatives, Carter Glass was at
Woodrow wilson's right hand in at
fecting this reorganization of the bank
ing machinery.
Now. near his seventy-fifth BIRTH
day, which comes on January 4, but
with no lessening of his fire and vigor,
/ a Senator instead of Representative
and his background broadened by serv-
ice as Secretary of the Treasury and
eX-officio chairman of the Federal Re-
serve Board, he has devoted nearly two
years of intensive effort to far-reach-
ing revision of the law which he spon-
sored
Associated with him on the subcom-
mittee which framed the legislation 10
years. ago was young Ohican serving
his second and final term in the House
Robert j. Bulkley. The Demccra
victory in Ohio in 1880 brought Mr.
Bulkley, after years of successful law
practice, to the Senate and member
ship on its Banking and Currency Com
mittee.
OF all the Representatives and Sena-
tors who participated in the formula
ton of the Federal Reserve act in 1918
as members of one Or the other of the
! WV oolAhlIlS dlld SuI iCllCy
only Glass and Bulkley are now in Con-
greSS.
Opposed by Bankers.
! Leading banking interests of the
country were arrayed against them
when Representatives Glass and Bulk
| ley helped to place the Federal Reserve
act on the statute books.
/ The bankers and the spokesmen of
organized business, now satisfied with
the operation Of the law, protested
against what Senators Glass and Bulk
ley. as the dominating factors in a sub
| committee of the Senate Banking and
Currency Committee, first proposed
early in 1882. These protests have be-
come less vehement as the product of
the efforts of Senators Glass and Bulk
ley and their colleagues have been re-
vamped by the deletion Of provisions
labeled by its critics as deflationary and
unnecessarily severe.
! BY special order of the Senate what
is known as the Glass bill will come up
4 for consideration on January S. Recent
compromises relative to branch bank
ing and other provisions are believed
to assure passage by the Senate. II
various obstacles in the House can be
overcome without much oelay there is
chance of the enactment of the legis-
lat1on before March 4. By such action
there will be assurance that the name
OF Senator Glass will be associated with
the new banking law. While Senator
Glass can become even more potent in
! banking legislation in the new Demo-
cratic Senate, there have been reports
that he may be invited by President
elect Roosevelt to return to his former
post as Secretary of the Treasury.
The teeth in the present Glass bill
in, itr iv,tf; ;ol
out Its purposes remain the same It
is intended, first, to prevent another
such speculative orgy as that of 1923
and 1929 and. second, to strengthen
| the banking structure of the Nation
for the protection of depositorS.
The discussions centering around the
Glass bill have served to focus atten-
ton on the workings of the Federal
Reserve act. Two questions have been
raised. Have bankers who encouraged
tloW of credit into Wall Street in
1928 and 1929 learned their lesson. or
will there be recurrence Of similar
situation unless Congress sets up new
barriers against improper use of funds
of the Federal Reserve system?
Secondly, with shocking record of
about 5000 bank failures within and
without the system in 1880, 1881 and
1882, what amendments to the Federal
Reserve and national banking acts will
tend to insure greater safety to deposi-
tors?
Through Two Major Crises.
The Federal Reserve act. approved in
December, 1918, early in the admins
tration of President Wilson, became ef-
fective in August, 1914. In the period
of more than 18 years it has passed
through two major crises. The first
was that of the World War and the
postwar readjustment, while the Sec
ond was that incident to the stock mar
ket crash of October, 1929. which
marked the beginning of the present
depression of unprecedented proper
tions.
European nations already were in
volved in war when the II regional
banks of the Federal Reserve system
were set up. The new system had been
in operation for two and one-half years
when the United States entered the
war.
The original purpose of the act was
to provide an elastic credit system. the
need of which had been apparent in
banks resorted to the issuance of
scrip. That the act served its intended
purpose during the war was evident.
The floating of billions of dollars Of
Liberty bonds by the Treasury was ac-
complished successfully. BY the end
of 1919. however, the credit possibili-
ties had been about exhausted. Infla-
tion had accompanied the wartime
credit operations and 1t was necessary
to call halt sharply in 1920.
The def1ation process, which followed
conference in Washington in May,
1920. at which it was determined that
there must be contraction of credit,
produced some painful results. It bore
heavily upon agriculture and the agi-
tation by certain Senators who protest.
ed against the methods employed was
largely responsible for the decision of
the late President Harding not to re-
appoint the late w. P. G. Harding as
governor of the Federal Reserve Board.
In spite of it ALL the system passed
through that strain safely. The United
States was the only great nation in
volved in the World War which was
not forced to reorganize its monetary
system afterward.
The more recent crisis affecting the
Federal Reserve system involved the
flow of credit into the stock markets
in 1923 and 1929, with all the ramifica-
tons of the speculative boom and it's
subsequent reactions on business and
industry.
Dates Back to 1927.
The story Of the experience Of the
Federal Reserve system with the prob
lem of speculation dates back to 1927.
1t is linked with European finance. It
is concerned with the two principa,
methods of control of credit, changes
in rediscount rates and open market
operations.
Business, had slackened in the Sum-
mer of 1927. There was considerable
unemployment although in the light of
what has happened in the past three
years the total was insignificant. Eu-
ropean countries were trying to re-
establish the gold standard and wanted
to shift the direction of the flow of gold,
which in the years just preceding had
been toward the United States. From
1922 to 1927 the gold stocks in this