Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-02-11
: OPEN|NCOF BANKS
IS POLITICS ISSUE
Bill Menaces Supervision of
Savings by Local Of
ficiaIS.
BY DAVID LAWRENCE.

- in Washington for manipula-
tim or shall the officers of the
banks in every community continue
as the responsible trustees of the
earnings and savings of the American
people?
This is the simple issue presented
by the new bill introduced in beth
houses of Congress looking toward a
complete revolution in the operation
Of banks, the issuance of currency
and the granting of credit.
The draft of the measure is techni-
cal but fortunately Gov. EccleS of the
Federal Reserve Board has explained
it in a statement which is so sensa-
tional in its implications that with
out exaggeration it may be said to be
the most startling development in
connection with Americas financial
institutions since the bank holiday
Of nearly two years ago.
Business Rise Objective.
The objective. of course, is to i'm
prove the credit system, break down
what have seemed to the administra-
ton to be annoying controls and re-
straints, and create an upward rise in
business.
With the purpose there can be no
quarrel Bank credit must flow more
readily and America must avoid, If
possible. the severe contractions md
expansions Of credit which alter
nately produce depressions and booms
But does the new bill accomplish
the detectives? Does it not substitute
the political whims of a single Gov
eminent agency for the matured eX-
perience and unaffected judgment of
the bank officers who must face the
scrutinizing eyes of depoSitors first
hand and meet the tests that their
fellow citizens put upon them in
community?
To completely transform the Fed
eral Reserve System from what it has
been more than 20 years-a system in
which private management and Gov
eminent sit in a kind of balanced
partnership or association-and intro
duce a board of a few men. all re-
sponsible to the President and re-
movable at will, is to go to the other
extreme of Government domination
Politicians Are Politicians.
Yet this is what the new bill plainly
sets out to do. Whether one has faith
In the high purposes of the Roosevelt
administration or whether one con-
cedes that some day even the wicked"
Republicans may reform and get back
into power, the fact remains that
politicians are politicians. No political
board in Washington will ever arrest
a boom by a policy of systematic de-
f1ation of prices, and no political
board will ever do the obviously I'M
popular things that have to be done
when liquidation of credit must be
undertaken.
One has only to note the pressure
put upon the President recently to
parade of Southern Senators left their
imprint on executive policy, or to
note the way Western Senators from
wheat States do the same thing, to
realize that a political board in charge
Of bank credit, prices, credit opera
tons and the actual quantity of money
would be subject to the rule of con-
gresSional log rolling This is in
evitable, instead of the necessarily dis
passionate rule of disinterested judg-
ment exercised BY those who spend
their lives studying the risks and vicis-
STUDIES Of modern credit
Under the new plan, we would no
longer be able to rely on the restraints
that come from an independent Fed
eral Reserve Board and an independ-
ent board of directors in each Of the
IL Federal Reserve Banks and their
branches. The new board would have
complete power to assist in the vicious
circle of continued borrowing by the
Government to pay deficits and in the
continued issuance of currency based
on assets, some of which are not very
much different from those which
brought on the famous imitation in
France and the more recent collapse
OF German marks.
Dollar Value Important.
There is nothing so serious to the
American citizen as the worth of the
dollar bill and whether it will buy
l street car ride or 20. It may be
q worthless piece of green paper or
1t may be the equivalent of goods.
But the quantity Of goods that can
be bought for dollar depends upon
the real worth Of the Governments
promises or the real value Of the as
sets back Of that dollar bill.
For generations the backing has
been gold. And to remove all doubts,
the American people were able to
demand dollar of actual gold If
they wished the coin itself in ex-
change for the paper dollar. Now
they cannot legally have gold. They
must be content with the pledge that
back of every dollar bill is 40 per
cent gold in the Treasury. But what
is back of the rest? Heretofore it
has been necessary for Government
bonds to make up the remaining so
per cent; that is, for every hundred
dollars in currency the Federal Re-
serve Bank which issued the paper
dollars had to set aside a certificate
showing it had $40 worth of gold on
deposit at the Treasury and also
$50 Of Government bonds.
Now, however, under the new bill,
If it becomes law, the Federal Re-
serve Banks need not put up any
Government bonds as collateral. or
anything else for that matter, and
the Federal Government also can at
any time change the price of gold
and put as little or as much gold
back of the $40.
This makes currency issuance
matter of discretion and even political
whim. For there is one school of
thought, usually known as imitation
lists, which never seems to be able
to understand that it is not the Gov
ernment's printing presses which give
value to the paper dollar. but the
assets which lie back Of the money
issued
Under the proposed bill practically
everything that the Government wants
to call sound asset will become one
by executive order, though the citizen
may doubt it and feel that the bank
officers who use his deposits so extrav-
agantly are betraying their trust. AS
for the bank officers, they can protect
themselves, because If the Federal