Evening star., 1935-04-20
HOUSE FIGHT SEEN
ON BANKING BILL
Federal Reserve Control
Over Open Market 0p-
erations Opposed.
BY WILL p. KENNEDY.


Absolute control by the Federal Re-
serve Board over open market opera
tions in an attempt to unity the Ma
tons banking system. as written into
the omnibus banking bill on which
the House Banking Committee has
been engaged for nine weeks, will be
stubbornly fought when the bill comes
up in the House. An effort to strike
out the whole Of Title II, carrying
this proposal, will be made by Repre-
sentst tive Hollister of Ohio, ranking
Republican member of the committee.
Chairman Steagall has permission
TO file the majority favorable report on
this bill up to midnight tonight, and
that will be accompanied by mi
nority report written by Hollister.
This is must" measure on the ad-
ministration's program, and the House
leadership expects to have it up a
week from Monday.
In the meantime. a special rule will
be sought from the Rules Committee
providing for at least 20 hours debate.
Hollister would prefer 80 or 40 hours
debate, and will argue for an open
rule.
The Senate Finance Committee has
Just started hearings on an identical
bill. 1t was drafted by a committee
from the Federal Deposit Insurance
Corp. and the Federal Reserve Board
with other Treasury ofiicials.
Title is for perfecting the ma
chinery Of the Federal Deposit Insur-
ance Corp. The committee has made
few changes and none of material
value. The principal change was to
increase the assessment from one
twelfth Of per cent to one-eighth Of
/ per cent and make it applicable on
the total deposit instead Of on the
insured portion, leaving it In the dis
eretion Of the board what levy should
be made against savings banks. The
bill makes the broadest possible pro-
vision to allow State banks to become
members Of the Federal Reserve Sys-
tenn and thereby enjoy the privileges
Of the Federal Deposit Insurance Corp.
Powers to Board.
Title III gives three broad powers
to the Federal Reserve Board, and
makes 1t distinct authority respon-
system and policy Of the Nation. The
three powers are: % to initiate,
enforce and carry through open mar
ket operations, Its decisions being
mandatory on all the II Federal Re
serve banks, which are bankers
banks" and through them on all the
member banks; (2) Of fixing the dis
count rate. and 90 ordering the Re-
serve requirements of member banks
Title III carries perfecting amend
ments to various sections Of the Fed
eral Reserve act.
There Is no controversy over Titles
and III, and the minority admits
they should be passed and are in
excellent shape" But Title II, they
say has no place in this bill and
should be considered as an entirely
distinct measure.
Somewhat the same view was ex-
pressed yesterday by Chairman Glass
of the Senate Banking Subcommittee
who is also an opponent Of the Re-
serve Board section. He is seeking
action first on the authority for the
deposit insurance corporation and the
non controversial national bank law
endments-allowing the highly
controversial proposed authority for
the Federal Reserve Board to take its
chances later-as Hollister will insist
President Roosevelt has indicated
he desires action on the bill as q
whole and House party leaders say
they can get such action.
The amendment urged by Repre-
sentative Goldsborough of Maryland,
ranking Democrat on the House COM
mittee, making 1t mandatory on the
Federal Reserve Board to stabilize
prices at the 1926 level-has been
eliminated.
Control to President.
The object to Title II is principally
this: Cd 1t gives any President "po-
litical control" Of the Federal Reserve
System through authority to oust the
Governor Of the Federal Reserve
Board; (2) 1t might permit the whole
banking system to be used by the
Government to finance its borrowings.
It would give the Federal Reserve
Board authority to require all the IL
Federal Reserve banks to buy or sell
Government securities and bankers
acceptances, where heretofore any one
or more of these banks could refuse
to cooperate.
There was a clash in the committee
over this. The majority sentiment is
explained by Representative Ford of
monetary and credit system Of the
country should be directly under the
control Of Congress in order that
Congress may exercise broad Consti-
tutional mandate to coin money and
regulate the value thereof.
Hollister emphasizes the opposition
to Title II is that "by series of steps
it builds up q closer connection with
and control by an administration of
credit resources of the Federal Re-
serve banks. 1t makes 1t possible for
the Federal Reserve Board to compel
Federal Reserve banks and even
against the better Judgment Of the
best bankers, to 60 ahead and buy
Government bonds though the market
might be Quilted by them.
THE Federal Government should be
placed in no better position than any
other seller OF securities with respect
to its market. One way in which
warning signals arise when the Gov
ernment is continually running a
deficit is when 1t begins to be dinicult
to float loans. If the Government is
In . position where 1t could make a
forced loan, you 60 by the warning
signal before you know it. If loans
actually become forced there Is no
difference In the Government f1nanc-
ing in that way and the Government
issuing fat money. When we see the
Government spending each year sew
eral billions more than it takes in
and continuing to pass legislation
calling for more expenditures than it
can take in for several years, 1t be-
comes all the more less wise to put the
temptation before any one to use q
power to compel the Federal Reserve
- 49, ha nnt q