Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-01-08
SHORT-TERM BILLS
OF j. S. CRITICIZED
Chicago Banks Oppose Pres
ent Method of Financing
by Treasury.
Special Dispatch to The Star.

Special Dispatch to The Star.
CHICAGO, January big Chicago
banks, which reVolted against Federal
Reserve dictation of cheap money
policies prior to the stock market in
fiation Of 1928 and 1929, now are up
in arms against another Reserve
policy-that of short-term Government
fnanc 3g by huge bill issues.
To q low their attitude, the large local
instit IONS are cutting Sharply their
subscriptions to Short-term Government
paper. bidding for no more than their
actual wants. One bank has stopped
its purchases altogether. Bankers here
feel that the Federal Reserve practice
of buying up huge quantities of Gov
eminent paper, and the Treasury prac-
tice Of financing its deficit by issuing
great quantities of Short-term notes,
create an artificial and dangerous
situation
Want Debts Funded.
They want a start made at funding
the floating Federal debt on q sound
basis, with the Government getting its
money In free competition with other
borrowers. The present practice is
hkened by local bankers to the Farm
Board attempt TO stabilize wheat prices
dAtAA0Aeli ILLS tililC Vic al INCSCk VIC
Is pictured as trying to maintain arti-
fcially cheap money prices.
The last time Chicago banks bucked
the Federal authorities they won out
Then the Chicago Reserve Bank, at the
instance of the local bankers, protested
against the attempt of the Federal
authorities to force a regional unit of
the system to cut its rediscount rate
As a result Of consideration of the
issue the Reserve Board upheld the
Chicago inSistence upon continuance of
the regional nature of the banking
system.
This time the outcome is uncertain
although 1t Is pointed out that the
loaded up with Treasury notes and
Government bonds. with the saturation
point in sight. Rates of interest on
the short-term issues are so low that
banks contend the clerical work in
volved in handling them costs more
than the return from interest
Besides the criticism Of short term
financing. the bankers are opposed to
the Federal Reserve accumulation OF
huge quantities Of Government bonds
to back Federal Reserve notes. as they
are empowered to do under the provi-
sions of the GlaSs-Steagall act, put on
Nle StdtuIe DOCKS laSC feDTuaTy.
Bank Executives View.
"The present situation is ridiculous"
commented one bank executive. Poll
ticians assail the banks for not lending
more money to deserving loan seekers.
and at the same time they take our
own money and invest it in Govern
ment short-term paper through the
Federal Reserve
They've got the cart before the horse
again. When they should be holding
Government bonds they don't have any
Now when they should be getting in a
position 10 extend credit to business by
curtailing their purchases Of Govern
ment bonds they keep loading up with
them"
There Is an expectation among some
bankers here that the change in ad-
Mliniseration of the Treasury Depart
ment next March will result in an
altered Treasury policy. Whether it
would conform to the ideas Of the Chi
cago financierS is uncertain, but they
have not been backward in letting their
views be known.
tcopyrisht, 1o33)