Evening star., 1952-03-23

On Proper Role Tor
u. 5. Monetary Policy
BY ihe Assoeioied Pres.
Two weeks OF congressional
digging into Federal monetary
policy and how best to steer clear
|of imitation or depression have
made it clear the Nations top
experts are sharply divided on
many broad and vital issues.
A Senate House subcommittee
so far has heard from 10 Gov
ernment officials, private econo-
mists and university professors.
More than a dozen others remain
to be heard.
All the witnesses thus far have
agreed that monetary policy
the Governments program for
regulating the supply of money
can be one of the keys to pre-
venting or softening the booms
and busts that have pockmarked
Americas economy in the past.
But beyond that the authorities
have split. Chairman Patman Of
the subcommittee told reporter
yesterday the legislators will wait
until all views are in and then
consider recommendations.
There is growing talk of a pos
sible resolution expressing the
views of Congress on issues which
at times have brought conflict be-
tween the Treasury and the Fed
eral Reserve System.
One issue is whether the Fed
eral Reserve System should keep
its independent position as "the
Supreme Court Of finance"
Cause of Conflict.
In Tightening the money supply
to restrain imitation, the Reserve
Board tends to make it harder
and more costly-for the Govern
ment to borrow money. This has
brought the board into conflict
with the White House and the
Treasury in the past.
Some witnesses, notably politi-
cal scientists. have said it would
be more efficient to place the
power of decision in a definite
chain of command from the
White House. But by far the ma
jority have opposed any such
change.
A second point of difference is
whether the Reserve Board should
give considerable weight to the
Treasury's problems in managing
the huge Federal debt.
Here the conflict is sharper.
Some witnesses contended the Re-
serve Board should be free to
Tighten money supplies and credit
when inf1ationary dangers loom,
without having its hands tied by
debt considerations.
Others Favor Meshing.
Others insisted. the Reserve
Board can't operate in theoreti-
cal vacuum. that it should mesh
its policies in with those OF the
Treasury and help preserve a
stable market for Government
securities.
Another head-on conflict was
lover just how important monetary
policy is in the overall economy.
Leon Keyserling. chairman OF
president Truman's Council OF
Economic Advisers, rated none
Itary policy as seventh among eight
factors he said caused lull in
inf1ationary pressures over the
past eight months.
Most of the witnesses. however,
have given monetary policy
paramount role. They received
Istrong support from Senator
douglas, Democrat, of Illinois, a
subcommittee member.
Malcolm Bryan, president OF
the Atlanta Federal Reserve Bank,
told the subcommittee that those
depreciating monetary policy are
like a man who divorced an other
wise perfect wife just because she
couldn't lift the piano.
4 Cant Lift the Piano.
Mr.. Bryan said he doesn't think
monetary policy "can lift the de-
preston piano all by itself. One
of the best ways of avoiding the
next depression lies in preventing
a preceding imitation. A good way
of avoiding a hangover is to be
less boisterous the evening be.
fore"
4 Another major center of contro-
versy is a proposal by Secretary
Of the Treasury Snyder for a new
council of high Government off,
cials to try to nip in the buo
future conflicts over monetary
Ipolicy.
Some witnesses feared such g
council would crirnp the indie
Ipendence of the Reserve Board
Beardsley Ruml, New York econo-
mist. mentioned dangers of defia-
tion or recession as the defense
program tapers off, mot later
than 1885," and suggested crea-
ton OF some such council soon
to chart ways to keep the econ
omy out of a taiispin.