Evening star. [volume] (Washington, D.C.) 1854-1972, 1948-07-30
Truth About Initiation
Is Revealed in EccIes
Warning 70 Truman
Presidents Power Held
Ample to Begin Moves
Toward DefIotion
By David Laurence

AIRY situation is slowly emerging,
and 1t isn't q pleasant story.
The Federal Reserve Board last
January warned the President
Mariner Eccles, former chairman,
has now testified-that the boom
could be and should be controlled
and credit curbs applied but Mr..
Truman deleted the recommends
ton from his message to Congress
and denoted Mr.. Eccles.
Many people in Washington sus-
pected this at the time. Basically
there was o substantial amount Of
agreement with Mr.. Eccles' ideas
but every one knew also that curb
on credit would start depression
and perhaps a severe one.
This being a presidential year,
naturally the President and his ad-
ministration didn't want to start
deflation and bring on depres-
sion.
Powers Called Ample.
Mr.. Truman has ample powers
now to set defiationary moves into
operation. But he doesn't want to
accept the responsibility for un-
employment and bankruptcies that
may ensue. He presumably wants
the boom to continue during the
campaign while he seeks political
benefit at the polls for high wages
and high farm income but places
responsibility on the Republicans
for the high cost of living.
The Republicans are going to
use their opportunities at the pres
ent session to bring out in public
hearings the failure of Mr.. Truman
to use the control powers he al
ready has. What is the use, they
ask, of passing more legislation
when the President refuses to use
what powers he already possesses?
Mr.. Eccles put damper on
housing legislation-one Of Mr..
Truman's pet projects. He pointed
out that easy credit for housing
was infationary. 1t was causing a
shortage OF building materials, the
prices for which were being bid
up by the artificial demand aris-
ing from easy credit.
The Republicans are pointing to
the export controls already granted
by Congress to the President. Mr..
Truman hasn't used those con-
trolls for the simple reason that he
doesn't want to start a depression
before election anyway. Yet, apart
from the Marshall Plan subsidy,
exports are booming.
Mr.. Truman's "anti-inf1ation"
proposals are going to be thoroughly
riddled before Congress gets through
with its 15-day session. The talk
of credit controls is already making
the financial markets somewhat I'M
easy. But the fact is that the bank
ers are strenuously opposed to any
increase in the reserve requirements
and favor instead a raising of the
rediscount rate. This, in turn, might
force commercial interest rates up
somewhat.
Argument on Rates.
The argument for increasing the
rediscount rate at which banks may
borrow from the Federal Reserve
System is that this power doesn t
require any legislation and that the
trouble with the credit structure is
that 1t is artifcially sustained by
&hs Government itself. To the sug-
gestfees tf1ata.As rise in redlscount
rates may result, in a falling OF
rates on Government bonds because
these may be sold to get the funds
to meet a tighter credit situation
the answer is made that the Gov
eminent itself can stabilize the bond
market and will do so.
The bankers feel that to increase
reserves may operate unevenly In
impairing the Nations lending sys-
tenn at a time when high lnven-
tories and payrolls require most
businesses to use more working cap
ital than ever before. Certainly the
whole credit situation is fraught
with the greatest delicacy and 1t
can be understood why, just before
national election, Mr.. Truman
doesn't want to exercise any drastic
powers he already has and yet
WOulu ike W UldlIlC VIC 4bCPdOA4SoAic
for failing to give him more power
The debate in Congress will bring
out a good many things that have
hitherto been more or less soft
pedalled about the credit situation
Also 1t will focus attention on the
manner in which wage rises have
forced prices upward. 1t is sig
nificant that Mr.. Truman's recon-
mendations on wage control are
limited to few items that would
be placed under price ceilings. OBJ
viously. unless there is comprehen-
sive wage control, there cannot be
much influence in keeping prices
down. But again Mr. Truman
doesn't want to appear as favoring
wage controls because he is anxious
to hold the labor union vote. So
It's just politics that is being played
now as the economic problems OF
the Nation grow more and more
complex.
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