The Washington times., 1935-02-14

is simply that
each bank loan - - nTls.
is to be specific Lewis nancy
ally made on the basis of care
full consideration of the security
Of that loan, that loans are to be
limited to cases in which repay
1nent can be made with reason
able certainty and in reasonable
time, and that real reserves are
to be maintained against deposit
credits Ooans).
Instead of this, Eccles would
subordinate the banks CONNER
cial loans to loans made to the
Government as a result of "open
market operations" He would
allow and encourage banks to
make 20-year loans on real estate.
He would allow note issues which
have no definite limit and no
definite reserves, thus endanger-
ing any reserves for deposits.
The whole scheme as now
proposed represents central
banking" run riot. It would
mean complete abandonment of
aiquidity, and reduce banking
to Government operation. 1t
would mean no distinction be-
tween money and credit, which
means "fIat" money. 1t would
mean a very long step toward
socialism in finance.
The only semblance Of plausi-
bility in Eccles' argument is that
existing mess in our banking and
credit. This, he says, is a reality,
so we must go ahead and per-
petuate it. This would be"real-
ism"
He says that notes are not now
issued in connection with many
commercial loans, and that note
issues are not now comfortable.
He points out, however, that the
requirement Of collateral security
for notes has in the past, and
may in the future, restrict the
Government borrowing. "Old-
fashioned" banking may thus pre-
vent the Administration from
writing up deposits" on the
banks books and thus making
them carry the Governments
deficit as their liability.
In short, because we are already
debtridden to the point of ma
tional insolvency, and are now
violating all rules of commercial
banking, he says let us be "realiS"
tic" and give up all pretense to
Equidity and real money.
Eccles says that the volume
of Reserve Bank notes outstand-
ing is not comfortable.
Eccles says that collateral adds
nothing to the value of such
notes. because they are merely
an obligation of the Govern
ment." He adds that any in
crease in notes must be accom-
panied by an increase in Reserve
Bank assets - meaning Govern
ment bonds, which are Govern
H1nent debt.
In short, he wants to be rid
of ali restrictions on Govern
ment borrowing. He wants to
make the sky the limit for his
"open market operations.
The whole scheme heads up
in Government, which means po-
litical control. Cd Banking is
to be largely divorced from par
ticulal business transactions, and
put on the basis of general as
sets" without regard to liquidity.
So the Government must come in
1T doesn't have to be liquid!
. ~ Money is to be just credit,
with no definite reserves. So
the Governments credit must
be the basis-its credit is mex
haustible, because it never has
to pay"
~ Banks must finance pub
lie works housing" plans, and
pension and insurance schemes.
So they must be reduced to con-
troll, and become fiscal agencies
for facilitating flotatiOns of
Government debt through "Open
market operations"
All this is sheer financial social.
ism. First, money is turned into
credit. Then credit is turned into
political debt. Without counting
costs, or b alancing expenses
against revenues, the general as.
sets" of the Nation are to be
pledged.
I ask you, whose assets are the
assets of the Nation? Are they
not yours and mine? Are We go
ing to allow any financial adven-
turer the President takes up with
to debaSe our currency, milk our
banks, and pledge" our assets
all to keep afloat until 1886 a
financially rotten New Deal politi.
cal machine?
OUTPUT OFF