Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1935-02-21


bers Of the Federal Reserve board.
| The two remaining members would
come from Federal Reserve banks.
From this 1t is seen that the Reserve
board becomes the dominant body. 1t
takes no stretch of the imagination to
recognize the possibilities Members of
the Reserve board, while they are APP
pointed for term Of ten years, some
times resign or die of. It Immediately
becomes possible, therefore, to make
the Federal Reserve board purely
political body dominated by the Presi-
dent Of the United States.
The function of the open market
committee, as proposed in the bill, is
to order the purchase or sale Of govern
ment securities In the open market. If
these securities are bought, the Re
| serve banks issue currency for them
and they increase the amount of money
in circulation, thereby easing credit. If
the banks sell bonds which they have
In their portfolios, the currency paid
for those bonds obviously is taken out
of circulation and that action results
in contraction or reduction Of the
amount of credit available.
If. for example, the occupant Of the
White House at any time happens to
be an out-and-out infiationist, 1t is
easy to see how government bonds can
be absorbed by the Reserve banks and
new currency put In circulation In
whatever volume the administration
policies require.
Another phase of the bill would al
low national banks and state banks
that are members of the Federal Re-
serve system to make loans on real
estate for a twenty-year term. Five
years is the present limitation. One
has only to go back for an examination
Of causes of hundreds Of bank failures
in recent years to discover that the
five-year limitation probably increased
the mortality among otherwise sound
banks to a greater extent than any
other factor. In other words, to grant
a bank the privilege of making loan
for twenty years means that such a
bank ties up an equal amount Of depos-
itor's money in place from which 1t
cannot be suddenly recalled If the de-
positors take a sudden notion to with
draw substantial sums from that bank.
There is another section of the meas
ure which l think is worthy of close
Federal Reserve
Worthy OF examination. 1t pro-
Examination poses to combine the
jobs Of governor and
agent, and that the bank policies should
be executed by. the governor who is
selected by the bank board of directors.
This provided something of a dual
control, a check and balance on the
exercise of power. Now, however, the
effort is to be made to combine the
jobs and make the head of the bank a
strictly government representative.
That course naturally is in line with
the Roosevelt program Of extending
and expanding federal authority. The
! President has constantly increased the
scope of power and influence exercised
from Washington. The current Offering
Is accepted everywhere as bringing
under federal domination completely
the banking system of this nation. It
does so because none can deny that the
Federal Reserve banks hold club
over the heads of private bankers wher-
ever they may be.
So believe it Is fair statement to
say that Mr.. Roosevelt, or those who
are responsible to him, is reaching out
to amplify the control of credit from
Washington which was initiated
through the Reconstruction Finance
corporation, the Home Owners Loan
corporation, and other leading agen-
cies. The Federal Reserve system was
set up, according to the debate on the
measure in congress at that time, to
decentralize credit control and break
the grip which New York exercised
over the volume Of credit. Now, appar-
emily, 1t is all coming back to Wash
ington, probably to be exercised by pol
iticians instead of men with banking
training.
| In connection with the administra-
TONS attention to domestic affairs and
the consequent legislative changes, at
tention might well be centered on the
meaning of some of the moves. One
Washington observer wrote in his news
paper the other day that the admins
tration was renewing its notes at the
bank. What he referred to was the ex-
tension of life Of the Reconstruction
Finance corporation and the pumping
Of more blood into the veins of the
Home Owners Loan corporation.
Something similar has occurred with
respect to the Reconstruction Finance
corporation which has been given new
life and about $350.OOO,OO0 in new mon.
ey by an act of congress.
Then, President Roosevelt has asked
for renewal of the life of the National
Recovery administration and for re-en-
actment Of the National Industrial Re-
covery act, both of which expire next
June 16.
AS result of these maneuvers a
good many observers are of the opin.
ion that the recovery efforts have not