Evening star. [volume] (Washington, D.C.) 1854-1972, 1955-12-27

we're asserting our independ-
'lence. Our function is to control
the supply of money and credit
land. through the way we con-
troll credit. to fight mutations and
idefiations. Our function is not
to help you borrow money or to
keep interest rates low so you
lcan get cheap and easy loans.
From now on. you in the Treas
Jury are on your own--and we
ARE not coming to your rescue.
Treasury Agrees
In effect, the Treasury has
replied to the Federal Reserve:
So be it. You stick to your
sphere of credit management.
Well stick to our sphere of debt
management. Well both be
independent.
| 1t is mid-November, 1855. For
months. the Federal Reserve has
been clamping down on the sup
ply Of credit to fight imitation.
1t has just given interest rates a
strong push up to the highest
levels since the early sos. Money
is tight" Every borrower
from the Treasury DOWNS
finding it tougher and more
expensive to get cash.
/ It is late November. The
Treasury has stupendous total
of Sl2.2 billion of loans coming
due. 1t has to offer the holders
of these loans new securities
because. of course. it hasn't any
thing like this amount of money
on hand to pay of the loans.
1t is November %. The
Treasury offers two issues carry
ing the highest rates in years to
holders of its $12.2 billion of
maturties.
1t is the morning of November
%. Something is going badly
wrong in the Government Sc
Icurities market. Despite the at
Itractive coupons on the new
United States securities, lots of
banks and corporations are de-
Gliding not to exchange but, in
stead, to ask for cash. The pos
Isibility arises that the Offering
might be a stunning failure and
the Treasury might be faced
with the task of paying out a
huge chunk of cash-cash which
lit Just doesn't have.
1t is the afternoon of Novem-
Der 20. Suddenly, buying orders
running INTO the tens of mil
lions of dollars pour into the
Government securities market.
Prices perk up. Holders who
had been indifferent to the
|Treasury's offering change their
minds. decide to exchange.
Offering Is Successful
It is midnight November 80.
The Treasury closes the books
on its Offering. In early De-
cember it announces that re-
quests for cash from holders of
its December loans totaled less
than $3.50 million.
1t is late afternoon December
Is. The New York Federal Re-
serve Bank releases figures
showing the Federal Reserves
Operations during the period of
the Treasury's offering. The
statistics disclose that the Fed
eral Reserve itself had been the
great buyer of Treasury secu-
rites during the crucial period
and 1t had turned the trend.
1t is the last week of the year
1855.
The Treasury is paying its bills
without trouble-but only be-
cause. despite all its pronounce
ments and pledges to the con-
trary. the Federal Reserve did
come to the Treasury's rescue.
The Federal is restricting it
self to mo comment"-and OBJ
viously it is hoping the behind
the-scenes maneuvers will so
battle reporters that they'll duck
the whole story.
But what happened is that a
realityr-the Treasury's desper-
ate need-came In the door. A
theory-the idea that the Fed
eral Reserve could stand by and
properly let a major Treasury
operation become a dismal
failure-went out the window.
Independence" in our world
is a flexible word.
Copyright 1855, The Hall Syndicate. Inc,