Evening star., 1949-11-18
Banker Urges U. 5.
To Control Open Sale
OF Government Bonds
By J. A. O'LeoY

By }. A. o'LeoY
The best way to prevent booms
and busts in this country Is to
let the Federal Reserve System
regulate the flow of money and
credit by fluctuating the discount
rate and open market buying and
selling of Government bonds. a
leading New York banker told
Congress today.
w. Randolph Burgess, chairman
of the executive committee Of the
National City Bank of New York,
told a House Senate Economic
Subcommittee that he agrees with
President Truman that danger Of
a recession has passed.
He said however, there are
both depressing and inf1ationary
factors in the current situation
and that the unbalanced Federal
budget is the foremost inflationary
element. At teh moment, he said.
the inflationary pressures are a
little stronger than the depressing
elements.
Testimony Disputed.
In urging that the Federal Re-
serve system be allowed to use its
power to regulate the price and
volume of credit as a means OF
stabilizing the economy of the
country, MIR. Burgess took issue
with testimony yesterday by Ma
pie T. Harl, Of the Federal Deposit
Insurance Corp. that it would be
a breach of faith with the banks
that bought Government bonds
during the war to reduce or dis
continue support of Government
bonds.
Mr.. Burgess did not advocate
withdrawing all supports, but said
there is a difference between peg
ging the price and maintaining an
orderly market.
He said he had read the Harl
testimony and does not think the
Treasury is under obligation to
hold the price of Government
securities at par.
II can assure you that as q
salesman for the Treasury during
the war I made no such commit
ment," Mr.. Burgess said.
Small Bonds Guaranteed.
Mr.. Burgess emphasized that
the bonds affected by Federal Re-
serve open market operations are
those that were sold to large in
vestors during the war, and not
the savings bonds sold in small
denominations to individuals. He
said the Government guaranteed
the small savings bonds against
depreciation by agreeing to re-
deem them at a fixed rate ac-
cording to how long they are
held.
He argued, however, that the
purchasing power of these small
savings bonds was reduced by
commodity price rises after the
war and indicated that a some
what more vigorous control OF
credit through the Federal Re-
serve system two or three years
ago could have held down thas
loss in the buying power Of small
savings bond holders.
Harvey J. Gunderson, q Re-
construction Finance Corp. di-
rector, yesterday defended the
agency's recent $44, 4,400, 900 loan to
the Kaiser Frazer automobile COM
pany on the ground it would con-
tinue the jobs Of $4,000 workers
In that industry, including 11,000
at the Willow Run plant.
Confident on Loan.
Questioned at length about the
controversial Kaiser-FraZer loan
yesterday afternoon by the SUBJ
committee chairman, Senator
Douglas, Democrat. of Illinois. Mr..
Gunderson said he is confident
the loan is good and will be re-
paid.
Equity Capital Held Inadequate.
Mr.. Gunderson testified that
definitely there is not an ade-
quate supply Of equity capital for
business expansion today. In sup
port Of his statement he said that
out Of 1 ,273 RFC loans in the last
quarter, % were for more than
81 ,000, 900 each, and that the ag-
gregate amount borrowed by the
% was $122,000,000. Ordinarily.
Mr.. Gunderson said, RFC business
loans range between $4,000 and
$4,000.