The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1935-02-22
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National Topics Interpreted ~ G1nAl99
by William Bruckart TTTTITG
ationalP ressB lding D.

SohuittcC, as pIopoScu III TIC Jill, 10
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 II
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 a 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. / have heard many
comments point to definite dangers re-
speeding this proposition.
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
bank ties up an equal amount Of depos-
itor's money in a place from which 1t
cannot be suddenly recalled If the de-
positors take sudden notion to with
draw substantial sums from that bank.
One member of the house told me the
other day that he could foresee hum
dreds of millions Of dollars frozen" in
real estate loans If this provision be-
comes law.
There is another section of the meas
ure which I 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 dual
control, 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
strictly government representative.
That course naturally is in line with
the Roosevelt program of extending
and expanding federal authority. 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. 1t
does so because none can deny that the
Federal Reserve banks hold a club
over the heads of private bankers wher-
ever they may be.
So 1 believe it is a 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
e,af 70 ha tn
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, it 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 it's 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 $3.50, 100000 in new mon
ey by an act Of congress. Chairman
Jesse Jones of the Reconstruction FL
nance corporation has not let us in on
the secret yet of where he expects to
lend the additional money. 1t is in
tended by the law to make new loans
to railroads but the railroads, like the
horse, can be led to water but they
cannot be made to drink. Hence, Mr..
Jones has had little to say.
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.
Under the National Recovery admin
istration the President has extended to
June 16 the life of the code for the
automobile manufacturing industries
Some minor changes were made in that
code by the President and in doing so
he aroused a perfect storm of protest
from the American Federation of La
Dor. Apparently, however, organized
labor is not as much on the inside with
the administration as it was year ago.
Even it's former friend, Donald Rich
berg, number two man In the admin
istration has taken several nasty
cracks at the union leaders.
AS a result of these maneuvers a
good many observers are Of the opin-
ion that the recovery efforts have not