Evening star., 1935-02-22
MOVEFOR CENTRAL
BANK ATTACKED
Business Week Sees Plan to
4 Achieve Economic
Dictatorship"
Special Dispatch to The Star.


NEW YORK, February 22.-That
the administration is about to achieve
economic dictatorship in this country
by the simple procedure of confiscat-
ing complete control of our banking
and credit structure, is the declara-
ton made in an editorial to appear in
toporrow'S issue of Business Week,
which protests against the seizure by
Government Of these potent powers.
THE Federal Reserve has always
been one of the soundest and most
efficient banking systems in the world"
1t Is stated In the editorial, "and its
failures have always been those Of
management" Improvement in bank
control should come through improve
ment in central bank management, it
continues, and the appointment Of
competent central bankers, which 1t
now lacks. to the Federal Reserve
Board.
The editorial adds:
Mariner S. ECCleS, the new COVER
nor of the Federal Reserve Board, who
has accepted the assignment of deliv-
ering control of American banking and
credit to the administration, has issued
plea of justification which begins
with these words: The banking sys-
TEN of this country has been put to a
severe test and has not stood that
test The test and the failure are
both obvious. Let us see wherein the
system failed and why.
Declares Evils Ignored.
''If Mr.. Eccles refers to the COL
lapse of thousands Of individual banks
he must know that these failures were
occasioned by four principal evils,
no one Of which his new banking act
does the least to cure and one Of which
1t dangerous aggravates. The first
and most potent evil was that, under
the encouragement and often under
the lash of the politically controlled
Federal Reserve Board, banks put a
dangerously large part of the COM
mercial credit of this country into
capital employment, where it must
inevitably and did become frozen and
Deprecated.
THE second was the widespread and
dangerous laxity surrounding the issu-
ance of bank charters by virtue of
tration fee and borrow few dollars
could hang out a shingle and call him
self bank, this resulting in scandal
GUS excess Of banking facilities in this
country. The third was the competi-
ton between the State and national
banking system whereby political trad
ing resulted in constant weakening
Of the safeguards of sound banking
The fourth was lax, incompetent and
frequently dishonest bank examina-
tions under political control. Mr..
Eccles offers nothing to cure these
evils.
1T seems probable that Mr.. Eccles
has ignored these four evils as being
unworthy of the mettle of the real
jefepolitico of banking reform. In
stead he seems to allude only to gen.
eric situation whose evils are illus
trated by the indisputable fact that
from 1926 to 1929 inclusive our bank
ing system" went blindly about the
business of manufacturing a colossal
volume of fictitious capital in the
name of commercial credit and as a
result found itself frozen and impotent
when the collapse came.
Past Control Blamed.
zone can assume he takes such an
attitude because he says: Experience
shows that, without conscious control,
the supply of money tends to expand
when the rate of spending increases
and to contract when the rate of
spending diminishes.' That is precise
ly what happened from 1925 to 1885.
Mr.. Eccles may be presumed to be in
telligent enough to know that the re-
suit was not accomplished without
conscious control On the contrary,
1t was accomplished, by the conscious
control of one administration after
another, deaf to the pleas OF sound
bankers and business leaders.
Does Mr.. EccleS deny and If he
does there is overwhelming evidence
to prove that up to the very last day
of the late CHASTITY period of new
economy senseless imitation was manu-
factured in Washington and individual
Federal Reserve banks were coerced
and dubbed into carrying out the ad-
ministrations plans. This went on un-
til the reserves of the Federal Re-
serve banks were dangerously near
the legal limit, and there was nothing
left on which money could be bor-
rowed and credit manufactured.
I..."Then came the time when the
reserve system should have been ready
to initiate and to meet the shock Of
the depression. Instead of that, under
direct orders from the Federal Reserve
Board, agents with all the manners
Of house detectives went through the
country frightening and damning
bankers and creditors and forcing
collections and foreclosures. All that
was under conscious control of ma
tional administration at least as well
grounded in the principles of banking
and economy as the administration to
which our banking system is now to
be surrendered