Evening star. [volume] (Washington, D.C.) 1854-1972, 1948-08-10
Treasury Increases
.Short-Term Interest
To Curb Bank Credit
By Chalmers M. Roberts

making IL more expensive te
borrow money. The step came
as Republican and Democratic
leaders snapped you're to
blame" statements on high
prices.
Secretary of the Treasury Snyder
announced last night the Govern
ment Is going to raise the interest
rate it pays on short-term securities
from rs per cent to IL, q move
many economists believe will lead to
higher bank interest rates, which in
turn will take a lot of money out
of circulation.
In dollars, the move means it will
cost the Government $3.50 to bor-
row every $1,000 rather than the
SLIPS it now pays.
Taft, McGrath Swap Statements.
The action, which will 60 into
effect September Is and October ]
when some $10,500, 000, 900 in Gov
eminent notes fall due, followed by
few hours statement by Senator
Taft of Ohio, the Republican
spokesman on domestic affairs, that
the administration now has ''tradi-
tional methods of preventing inf1a-
ton" He did not specifically men
ton the short-term interest rate, but
he did say President Truman can
through the Treasury and Federal
Reserve Board, limit the expansion
of bank credit and the creation OF
more currency"
The Taft statement brought an
immediate response from Demo-
cratic National Chairman McGrath
that the Democratic Party does
not share the traditional Republican
indifference to depressions. Sena-
tor McGrath referred to the Sick
ening crash of 1929 and the cruel
Hoover depression" adding:
To-day the Hoover depression has
become nightmare of the past and
most Americans have come to take
for granted our present Democratic
prosperity with production and en-
ployment at all-time highs.
Possible Defiation Seen by Taft.
apparently even Senator Taft
has forgotten the Hoover depres-
sion or he would not now try to
make political capital out of the
charge that the Democratic Party
is trying to avoid a repetition of the
breadline and apple peddlers and
bank failures and mortgage fore
closures that were the fruit of Re-
publican 'normalcy'"
The political exchange served to
make certain that the cost of living
issue will be prime subject of the
coming presidential campaign.
New Truman Blast Expected.
President Truman is expected to
issue another blast at the Repub-
licans for failure to pass his anti
imitation program at the special
session of Congress.
White House sources have indi-
Gated Mr.. Truman will issue such
statement when he signs the
limited two-point bill which the
Republicans sent him instead of his
own price control and rationing
scheme.
Both the two points, if put into
effect, will tend to limit credit
just as the Treasury announcement
last night is expected to do. One
provision permits the Federal Re-
serve Board to raise bank reserve
requirements, thus causing. banks
to be less generous in making loans
which have an infiationary effect.
The board has given no indica-
ton as yet what it intends to do
on the bank reserve matter, assum-
ing Mr.. Truman approves the bill.
During congressional hearings,
board officials asked for the power
to increase bank reserve require
ments, but did not state how much
an increase they would order.
The second power granted by the
Republicans is the return of the one
third down payment and shorter in
stallment periods for purchases of
such things as automobiles. stoves
and refrigerators and a fifth down
ON house furnishings. A board Of
fetal told The Star yesterday the
power probably would be used in
about MONTH after President
Truman approves the bill. 1t may
be longer before the buyer feels
the difference in retail store.
Thus. it appeared today, three
moves to contract or at least limit
credit will go into effect about the
same time-perhapS around october
l, a month before edection.
Security Price Support to Remain.
On one other controversial fiscal
move, the Government policy of
supporting the price of its long term
securities, the Administration has
indicated no change will be made.
For months there have been re-
ports that the Government might
raise interest rates on these bonds,
paying 21a per cent, while some per-
sons have suggested they should be
allowed to seek their own level
without Government support.
Another financial move expected
shortly is rise in the bank re-
discount rate, move suggested by
many Republicans on Capitol Hill
last week. This also would tend to
make money more expensive" to
the borrower. Thus, less would be
borrowed to expand business, for ex-
ample, and the effect presumably
would be to lessen the demand on
scarce materials and labor.
May Curb Bank Loans.
The rise in short-term interest
rates is expected to have this result: