The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1937-10-14

Washington.-It may be, as I have
frequently been told, that the aver
age person-Mr.
Federot John @. Public
Reserue has very little in
tereSt in the do
ings of the federal reserve system.
It may be true that the average
citizen accepts the federal reserve
banks as a thing apart and of little
or no concern to him because they
are so far removed and, further,
because they indulge in what the
demagogues used to call ''high fl
nance"
Whether my information is cor
rect and regardless of the public
concept of the federal reserve sys-
tenn, am devoting some space this
week to a discussion of certain de-
velopments in the federal reserve
banking structure in an attempt to
show the trend of money conditions
in this country at the moment.
Lately, the federal reserve board
of governors announced revision
of its regulations governing dis
counts and advances by federal re-
serve banks. Now, it may be said
that these regulations affect only the
banks that are members of the re-
serve system. That is true but it
is not the whole truth because ev-
erything that the federal reserve
board of governors and the federal
reserve banks do affects you and
me and everyone else whether we
are little fellows and, therefore, un-
important individually, or whether
we are trustees of great sums of
money such as is the case with cor
poration presidents.
The board of governors, in the
revision of it's regulations, has
made it possible-if not obligatory
for the reserve banks to take al
most any kind of paper that is an
evidence of debt. That is, the re-
serve banks are now empowered to
receive from the member banks
that paper upon which you and I
borrow, any paper that shows that
citizen owes the bank money, and
to give that bank money in ex-
change for the evidence of that debt.
Everyone, of course, is familiar
with note or mortgage on
piece of real estate. Most people
understand about installment paper
which is simply note providing
for payment of the amount due over
a period of months. But there are
many other kinds of evidence of
debt that is in frequent use among
business men from the smallest
storekeeper in a rural village to the
greatest banker in the world. I'm
der the regulations now operative
in the federal reserve system there
seems to be almost no paper which
the local banker cannot send to the
federal reserve bank and receive
cash in exchange. Of course, that
obligation must be paid off some
time and the arrangement simply
permits the federal reserve banks
to carry the debt until its maturity.
All of this obviously sounds as
though the federal reserve system
is at last to be helpful to us little
fellows. That is true. 1t is going
to be helpful in increasing the num-
Der of us little fellows who get our
selves in debt. It is going to do
that because it makes getting into
debt easier.
I think no one should object to
the reserve board regulations in all
details. There must be credit given
where credit is needed; that is to
say when you prohibit borrowing
money you choke off eighty-five per
cent of all of the business done in
the United States. Yet, credit is
dangerous, a double-edged sword
and must be handled with extreme
caution by the borrowers as well
as by the lenders. AS we have seen
from the inglorious debacle of 1929,
there can be too much credit ex-
tended, and when I say that, I refer
not only to loans by banks but the
sale of goods, wares and merchan-
disc that enter into everyday life.
And, going bit further on that
line, there can be too much cred
it extended by the manufacturer
and jobber to retail merchandising
establishments just as easily as
there can be too much credit ex-
tended by the retail merchants to
you or to me. One can get into
debt over his head just as easily
by purchasing at retail or wholesale
as by buying more land than we can
afford to own or a home larger than
we need.
So, discussion of what the board
of governors of the federal reserve
system has done can lead in this
instance only to a conclusion that
danger flags are waving.
do not want to eXaggerate pres
ent conditions or signs as l see them.
This is no time to
Don't Get become excited.
Excited There are, how
ever, boundaries
beyond which we cannot 60 in the
matter of credit without facing an
other tailspin of the type of 1929.
That is the thing l fear may result
from an accumulation of federal
policies of which the late action by
the federal reserve board is only
one.
1t is perfectly human and natural
for each one of us to aspire to better
things, to have more of this worlds
goods for our enjoyment and to
equip ourselves by way of greater
resources for the future. We will do
those things sometimes when we
ought not to do them simply be-
cause the instruments are available
and we do not stop to count the ul-
innate cost. To the extent, then, that
the federal reserve hoard rrobah1v