Evening star., 1951-02-02
Victory for Snyder
Security Interest
May Rekind|e Feud

/
May Rekind|e Feud
A White House announcement
that in effect freezes interest rates
on Government securities sold on
the open market today appeared
to have rekindled a long standing
feud between the Federal Reserve
Board and Secretary of the Treas
ury Snyder.
The White House announce
ment made it plain that market
prices of these securities will be
stabilized to yield a top interest
return of 2l2 per cent for the
duration of the emergency"
That carried broad economic
implication: The President has
turned proposals that, as an addi-
tional step to curb imitation, in
terest rates be allowed to rise on
the theory that higher rates would
discourage borrowing.
Snyder Warns of Debt.
The Reserve Board long has ad-
vocated such an limitation
step and one of its members, Mar
riner S. Eccles. has described
stabilization of interest rates as
a cheap money policy"
In support of a rate freeze.
however, Secretary Snyder has
warned that higher interest on
securities would cost the Govern
menC billions on the national oebt.
Joseph H. Short, White House
press secretary, told reporters the
Reserve Board had pledged sup
port to President Truman to
maintain stability of prices on
Government securities as long as
the emergency lasts. While that
was intended as a declaration OF
truce between the board snd
Mr.. Snyder, it appeared the cp-
poslte was true. There were i'm
mediate charges of presidential or
political interference with Reserve
Board operations, in violation of
long standing custom of leaving
the board free to act on its own.
Fixed on Face Values.
A Treasury spokesman said the
announcement of Mr.. Short
means the market for Federal Sc
curitieS will be stabilized at pres
ent levels and these levels will be
maintained until the emergency
is over.
tThe interest rates on Gov
ernment securities are fixed in
relation to the face value of the
securities. But If the market
prices of the securities were per-
mitted to decline. the effective
rate of yield would rise. Then,
the next time the Government
issued new securities, it would
have to increase its interest
rates to take account of the
market situation)
The White House announcement
was equivalent to proclamation Of
al victory for Mr.. Snyder in his
program of holding down interest
cost on the Governments $256
billion debt.
At least one of the seven Re-
serve Board membership. Eccles
disagreed openly with Mr.. Sny-
der's policy less than a week ago
He testified publicly before the
Senate House Economic Commit
tee that he did not agree with
Mr.. Snyder and that he feels a
realistic anti-inf1ation program
requires a rise in interest rates.
Supported by Sproul.
While Board Chairman Thomas
B. McCabe has avoided collision
with Mr.. Snyder, he, too, indorsed
In a speech last week a statement
by 400 economists advocating
"some rise of interest rates" tc
combat imitation.
Allan Sproul, president of thu
New York Federal Reserve Bank
has in substance supported Mr.
EccleS' basic statement on anti
imitation policy in several recen
public talks.
The White House, however, evi
IDENTIFY had good basis for tn,
statement that the Reserve au
thorities will support Mr.. Snyde,
down the line for the duration.
!; President Truman called in yes
terday the seven board member
plus Mr.. Sproul and the four othe
Federal Reserve Bank president
who make up the Reserve system
= 12-man open Market Commit
: tee" which wields power enough
I to set market rate levels.
The Federal Reserve pledge O
support mentioned in the Whit
House announcement evidentl
was given at that .conferenc
when, informed sources said, tn
President declared his support o
| Mr.. Snyder. his close persona