The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-03-02


Vanderlip, who said he was looking
Some call me an infationist,"
he said with a smile. Initiation is
completely out of my range. My
purpose 1t to set up safeguards
against initiation. There are many
bankers who inveigh against it, but
they don't guard against it"
Mr.. Vanderlip believes we should
look to a scientific price index sys-
tenn as the objective in regulating
the value of our currency. First, he
said, it is necessary for Congress to
assume the duty it has under the
Constitution to regulate the value
of money.
Price Level Urged
Congress should choose a stated
index price level-be it that OF
1926 or any other year that is de-
sirable as a goal-and a Federal
monetary authority should be es-
tablished to regulate the value Of
the dollar so that it will have an
unvarying purchasing and debt
paying quality with respect to the
index he said.
The present Administration bank
ing bill does not take this first
essential step of fixing the policy
and objective of currency manage
ment. 1t sets up no limits, takes
the Federal Reserve banks out OF
the hands of bankers and repoSeS
their powers in the hands of five
men who, by the nature OF their
appointment, would be subject to
business and political pressure"
Mr.. Vanderlip's plan for a Federal
monetary authority would preserve
the Reserve banks present function
of being a bank for bankers, he
said. He described the mechanics
of the plan as follows:
The authority to be established
would be branch of the govern
ment such as the Treasury, but 1t
would be as securely insulated
against political and business pres
sure as is the Supreme Court.
The authority would have eXclu-
sive power over currency issue; it
would receive no deposits and it
would have no printing press. 1t
would issue notes only against five
forms of assets. 1t would buy and
sell gold, governmental obligations
having not more than one year to
mature. foreign exchange and bank
ers' acceptances. and It would be
under obligation to rediscOunt for
Federal Reserve banks rediscOunted
notes of member banks secured by
f-liquidating commercial loans.
Procedure Improper"
At present these powers are con-
trolled by the Treasury, a most
improper procedure" against which
the banks are afraid to speak out.
The transfer of these powers
which used to be the exclusive prov
ince of the Federal Reserve-to the
non-political authority of Mr.. Van
derlip's conception would not alone
make it possible to regulate the
value of money so as 10 hold the
price index level.
A control must also be exercised
directly over bank deposits because
of their predominating Importance
as a portion of the medium of eX-
change. Therefore Mr.. Vanderlip
recommends that the authority
have power to vary the percentage
of cash reserves held by banks
against their total deposits, but this
control would only be used if a
runaway loan initiation threa, ened.
An important feature of the plan
would be the compulsion placed on
the authority by Congress to hold
the price level steady. There would
thus be erected a sound barrier
against uncontrolled imitation.
In conclusion Mr.. Vanderlip
warned that if Congress continues
to abdicate the function of none
tary regulation and to leave these
powers in the hands of the Treas
ury, the country would drift into
naturalization of the banks.
I'm no crusader" he remarked.
But there's the plan constructed
out Of tried and established parts
by man with experience in and
out of the banking business who has
no AK to grind"