Evening star., 1933-09-24
BY WILLIAM HARD.

The vital fight in Washington at this
week end is between the inflationists Of
credit and the inflationists of money.
The administration Is energetically
striving to initiate credit. 1t is not in
appropriate to use the word Initiate"
in connection with the efforts Of the
Federal Reserve System to create ex-
cess potential credit in the hands Of
bankers through purchases Of govern
mental securities in the open market,
nor Is 1t inappropriate to use the word
initiate" again in connection with the
efforts Of the Reconstruction Finance
Corporation to provide financial facili-
ties to bankers for making Of loans
which they normally and naturally
would not make.
Both of these lines Of endeavor are
In the strict, old-fashioned, orthodox
sense artificial" and they are being
pursued by the administration with a
zeal which presently may imbue the
whole credit apparatus of the country
with an outrightly governmental color.
A member OF the Federal Reserve Board
not long ago said:
Many great economists in the past
have predicted that private capitalism
would come to its greatest final crisis
In the matter Of credit. We begin to
see that prophecy fulnlled.
X
The crisis in question manifests it
self most openly now in the activities
of Jesse Jones, chairman OF the board
of directors of the Reconstruction FL
nance Corporation. Mr.. Jones Is deter.
mined that our private bankers shall
lend more money to borrowers, and ne
is driven faster and faster from merely
exhorting them to do 1t into also SUD-
sidizing them to do it. He thus brings
On a stern combat between the admin
istration. as an agency Of credit inf1a-.
ton and certain numerous members OF
the Senate and the House OF Repre-
sentatives as advocates OF imitation
through issues Of actual new money.
The left wing inflationist members OF
the Senate and Of the House OF Repre-. :.
sentatives are almost wholly skeptlcai
of the success Of the credit nnatlon
idea and methods OF the Federal Re
serve System and the Reconstruction
Finance Corporation.
With regard to the Federal Reserve
System, they are able to quote sta
tistics which seem convincing, Inc
Hoover administration initiated the
present spacious buying OF governmental
securities by the Federal Reserve BANK
managers. The Roosevelt admlnistra, ,
tion has continued it. 1t has continued
it for the sole ultimate purpose OF H. n,
creasing the volume of private loans py
private bankers to private borrowers
But what are the results?
The Federal Reserve System now
holds 10 times the quantity Of govern
mental securities that 1t held IN 1917,
and the private loans by private bank
ers to private borrowers are now some
so per cent less in quantity than tney
were then. This writer can remember
yiyidly the eminent economist VINO
visited Washington to inform the HOO
yer administration apd subsequently 70
inform the Roosevelt administration
that governmental purchases OF gov
ernmental securities would almost auto-
matically engender a vast release OF
funds from private banks to new PIT
yate business developments. But tneil
assurances have been overwnelmlnsly
faIsified. Governmental holdings OF gov
ernmental securities have gone mas-
nificently up, and private pank loaLn
have simultaneously gone dHastrouSiy
down.
The left wing indationists confidently
foretell an equally unhappy experience
for Mr. Jones in his attempted stlmu-
Iations Of private bank loans tnrougn
reconstruction Finance Corpofat'on
Senator Thomas Of Oklahoma the
other day remarked: IA -,,..
st have no association VIII PlMaHyu
banks. I am not interested nnanc.ary
the1ess sympathize with the private
bankers II, their resistance to the SORT
of SUGGESTION now made to them by the
Government. .+,
"The Government in efiect suggests
that the private bankers should Iecos1,
nize the existence Of great natlonai
emergency and should thereuDon maxi
loans which 90 beyond the limit OF
regular secure banking practice. How
can the private bankers accede properly
w "They are handling the money o.
their depositors. The Government NOUS
them responsible for the safety OF tnai
money. They are guilty OF crimlna
negligence II they risk it unduly. Inc
controller Of the currency, through hiE
examiners, insists upon their ioenihs n
conservatively and solvently: NOW tne
Reconstruction Finance CorporaGot
urges them to loan adventurously ano
dangerously. This demand by the re
construction Finance Corporation Is eH-
treme. and it will be futile. Our pri-
vate bankers are not going to loan N
that way; and in my Judgment they are
wholly right in their refusal"
In other words. Senator Thomas
despairs of credit expansion IN pfesen.
circumstances and ali the more pins his
faith to economic revival through Gov
ernment expansions Of money itself. Al
often as Cato ever said Carthage
must be destroyed" Senator Thomas
says, There must be more money II
the hands Of the people"
X ~
In practice, though Senator Thomas
has never specifically said so, the only
sure way of putting more money intt
the hands of the people is to cause the
Government to print more paper money
or to coin more metal money and ther
use it for paying its bills either to 1T