Evening star., 1941-01-06

monetary system had been RELATED
there should be other methods-tax-
alton and control of monopolistic
"bottlenecks" in industry and labor
in order to prevent imitation.
Mr.. Eccles told me that in his
opinion we had reached the stage
when we ought to apply the brakes.
He said that in 1882 the national
income was S40000.000 900 II will
run close to 100000 900, 900 in 194l.
Pump -priming" is now being car
ried by the defense program instead
of the relief program. Bank de-
posits are at an all-time high Of
S43 900 100000 over double what
they were in 1923 on the eve of the
Hoover panic. Excess reserves and
Government borrowing through the
banks are simply driving down the
interest rate and expanding the base
of credit. And the Federal Reserve
lacks the authority to control this
situation.
Surprised at FurOr.
Mr. Eccles was surprised at the
furor created by his report to Con-
gresS He said it contained nothing
which had not already been made
public in his speeches. He said that
the Reserve System had been seek
ing congressional action since 1888,
but in 1889 the bankers we're op-
posed to an investigation and in
1910, when the bankers were willing,
the politicians we're reluctant to
drag monetary policy-that catnip
of public opinion-into the election.
The proposals in Mr. Eccles report
are designed to prevent runaway
initiation of prices, so far as none
tary policy can do so. He was very
frank in saying that without further
taxation and Federal control of high
prices induced by bottlenecks. it
would be impossible to exert that
control.
What he has chiefly in mind is
the transfer of Government bor-
rowing from the banks to the public
Bank borrowings merely enlarge the
credit base and create excess re-
serves which force down interest
rates to an uneconomic level. These
low rates, among other things. force
the banks to recoup from private
borrowers. BY the public. Mr.. Eccles
means such large corporations as
General Motors, with $500 100000 in
cash reserves. G. M could advan-
tageously put these funds in short
term Treasury notes at a per cent
yield, whereas the Government now
pays the banks per cent or more
on long-term bonds. Thus, under
the Eccles plan. the excess reserves
would be absorbed into the public
short-term debt at distinct saving
to the Treasury and to the great
advantage of the individuals and
corporations involved
Infiationary Influences.
The Eccles report suggested repeal
of the Presidents infiationary pow-
ers, with respect to dollar devalua-
ton. silver purchase and issuance
Of greenbacks. He regards these
powers as infiationary influences,
but, since they have not been ex-
tensively employed since the early
days of the New Deal. the repeal
is not an essential part of the
Eccles program. Mr.. Eccles told
me that he did not discuss his report
extensively with the President, but
that the White House was entirely
conversant with its contents and
helped to high light its publication.
He did not see any possibility of a
quarrel between the Reserve System,
the Treasury and the White House.
His whole point was that the de-
cision lay with Congress and that
it was necessary to remove the i'm
preston that the Reserve Board, by
itself, had the powers needed to
control imitation.
In other New Deal circles the
fundamental criticism of the Eccles
program is that there is no prospect
of imitation, outside of defense bot
tlenecks, so long as we have millions
of men unemployed, large unsold
inventories of goods and large un-
used plant capacity and other po-
tentials of production. So the prob
lem of monetary checks on price in
flation is one of discrimination as
we'll as balance-and the Eccles plan
is only one of a number of methods
Of approach to what has not yet
become more than possibility
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