The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-11-11
Washington
Merry-Go-
Round
BY DREW PEARSON and
ROBERT S. ALLEN.

w spectre Of initiation, stand
ing grimly behind the scenes. has
begun seriously to disturb the
peace Of mind Of the Administra-
ton.
OElinous signs Of a strong in
flationary undertow are unmistak-
able. Real estate values are BOOM
ing. commodity prices are on the
wing. and the stock market Is as
restless as a boy with the hives.
Added TO these is the presence Of
an unprecedented total of S3,000,-
100000 in bank reserves.
The situation is as explosive as
a cache of INT. and TO say that
Administration master minds are
worried is putting it mildly.
Reason for their uneasineSS is
that they are undecided just what
policy to pursue. They can clamp
down at the start and risk nip
ping the briskly blooming pros
perity rose in the bud. Or they
can let matters take their course,
with the danger of a runaway
market and a crash just as the
presidential campaign is getting
under way.
The temptation to keep hands
of is very strong. A lively stock
market, active real estate values
and commodity prices on the up
grade are potent electioneering
medicine. But on the other hand,
a boom followed by crash in the
midst of the campaign would have
disastrous political repercusSions.
So the New Dealers are scratch
ing their heads in perplexity-torn
between the tempting urge to take
a flyer and gnawing fear that if
their luck fails they will be caught
short In the very vortex of the
1886 campaign.
THE unique factor in the situ-
- alton is that the New Deal
ers can take either course they
choose. The government now has
the complete whip hand to crack
down on an inflationary trend.
The 1893 and 1885 banking laws,
plus the securities and stock ex-
change acts, give it power to ex-
ercise full cOntrol-provided there
is the will and courage to do so.
The CnHIIritinc
Commission can stop stock ma
nlpulation by suspending suspect
ed spectators.
1t has already taken such &C
ton against one prominent Wall
Street broker, Michael j. Meehan.
1t has sent out confidential orders
to its eight branch offices TO be
on guard for signs of stock
rigging. SEC insiders whisper that
certain market movements re-
Gently had all the earmarks Of
forced pressure stoking."
THE new banking statutes sup
- plemented the SEC with other
powerful measures. They prohibit
corporations from lending their
surplus funds for stock market
operations. In 1928-29 millions of
dollars from this source stinu-
lated the frenZied gambling of the
Coolidge Bull market. The bank
ing statutes also provide for strict
curbs on loans by banks to brok-
ers.
In addition, the Federal Re-
serve Board now has the power to
TX marginal requirements. BY the
stroke of a pen it can raise them
SO high as to break the back Of
a runaway market instantly. This
authority is so sweeping that the
board may, if it sees fit, COM
pletely eliminate marginal trad
ing.
Finally, the Reserve Board has
the means at hand to cope with
the trouble brewing problem of
excessive bank reserves. Although
the banks are free to lend to any
borrower they consider a sound
risk, or to buy securities them
selves, the Reserve Board still has
two mighty levers to bring the
banks to heel.
First, it can double reserve
requirements, thus wiping out !
most of the banks lending pow
er. Second, the board can sell its
s2,430, 100000 of government secur-
tiles in the open market. Either
operation if fully carried through
would practically mop up excess
bank reserves.
Such a drastic dosage would al
most certainly be enough to cut
the heart out Of any initiation
move. But If even this surgery did
not suffice, the treasury is in a
position to throw its tremendous
restraining weight into the ball
ance.
Copyright. 1888, by United Feature
Syndicate. IncJ