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DECEMBER, 1920
The Commoner
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Sfnator Own Calls Upon Reserve
-:"'; Board to Cut Discount Rate
Senator Owen's letter, written to Governor
Harding' of tho Federal Roserve Board, on No
vember 18, follows, in part:
"I wish to again appeal to you and to the '
Federal Reserve Board to lower the rates of in
terest charged by tho federal reserve banks, and
and expand tke loans of the federal reserve banfts
to the extont which may be required for purposes
of legitimate production and distribution.
"American banks are justified in charging C
and 8 per cent, because they pay 2 and 3 per
cent for deposits, and they are entitled to make
& profit of 2 and 3 per cent above their over
head charges on the deposits which they handle
aa'merchants of credit.
"The federal reserve banks earned last year
over 100 per cent and are earning now at a
rate in excess of 160 per cent per annum on
their capital, contrary to a sound public policy.
This excess profit is all the more reprehensible
because it goes to the treasury, is made by a
governmental instrumentality and puts the gov
ernment in the position of profiteering, and set
ting a national bad example.
w"M7he federal reserve banks under thesa hicrh
interest notes are measurably destabilizing cred
its and promoting industrial depression under
the, arbitrary high interest rates which the re
serve banks are charging.
AGREES TN LOAN RESTRICTIONS
V'i fully agree with the board in its policy
of t advising restrictions of loans employed in
stock speculations, in commodity speculations, in
.hoarding and in profiteering. This advice of
the board is wise. It can only be applied
advantageously by the individual banks exer
cisiBg an individual discrimination against loans
forsuen purposes. Such credits when released,
however, should be extended to those who are
sgaged in legitimate production and distribu
tion ,
"It seems to be the policy of the board to
raise the rates of interest for the purpose of
broadly deflating credits. It has been pursuing
this, policy for a year, with the result of this
policy of high interest charges being extended
generally throughout the country, which has
thus brought on a condition otjlndustrial depress
sion resulting in checking and in some cases
absolutely stopping, legitimate production and
legitimate distribution. This is the evil of usury.
"I heartily approve the checking of specula
tion, hoarding and profiteering, but I very vig- ,
yously disapprove and protest agafnsjt he break
ing down of legitimate production and distri- .
tmtkm by thi course.
LACK OP VISION
"The error of the policy of indiscriminate
deflation is largely due, in my opinion, to tho
lack' of vision of the big New .York city banks.
Beginning, a year ago, the men who control the
policy of the big banks dealing in stock ox
change loans began to put the Interest rates up
from 16 to 30 per Cent, instead of requiring such
loans to bo gradually liquidated on somo reason
able basis.
"The New York city banks have, above all
others, pursued the policy of indiscriminate de- .
flatlon, and have deflated their own deposits ac- .
cordingly. The balance of the country's banks,
therefore, increased their deposits: exclusive of
New York about $5,000,000,000. '
"The total resources of the banks or tne
United States increased $4,045,-64,000 for the
fiscal year ending June 30, 1920, reaching the
gigantic total of $53,079,108,000.
RESOURCES OF BANKS
"My dear governor, I im protesting-to the
reserve board against the policy of indiscriminate
deflation, and I am praying the board to recon
sider its attitude, and to withdraw from support
ing" he-policy cf indiscriminate deflation by high
interest rates and by refusal of create I tc legiti-mate'-industry,
which the reserve bank can weH
afford to make to whatever extent actually re-auired-by
the country. , ,
"T4afe heeri distressed, by the propaganda ,
being'c&ied on to Sl
ideaSt the federal reserve banks were in &
condition' oFinstability, J . .
" ' .
English people are UBing gold very eco
nomically and the United States is using gold
vory uneconomically.
"The federal reserve banks have in gold, in
cluding a small amount of legal tondor, $2,180,
000,000. Tho banks of the United States had in
cash in their vaults $626,000,000 on Juno 30,
1920. There is. in tho United Stales treasury
over $300,000,000 of free gold and Bilver, and .
there is outstanding outside of tho federal re
serve banks and outside of tho treasury $670,
000,000 in gold and $414,000,000 of silver,
making a total of ovor $3,000,000,000, or about
$30 per capita, while tho total amount of gold
in the British Isles is about $800,000,000 or
seventeen and a fraction dollars per capita. Tho
world owes the United States $15,000,000,000
and wo can command tho gold of the world,
SAFEGUARDS ITS BUSINESS
"The Bank of England, acting as tho reserve
agent of all the banks of Great Britain, is safe
guarding a world-wide business, probably equal
to that of the United States, with a cash supply
on hand of only $75,000,000, consisting of tho
Bank of England notes (irredeemable at. this
time) and including less than$10, 000,000 ac
tual gold, while the federal reserve banks, serv
ing a similar office for American banks, have
$2,180.00,000 of gold, so that tho reserve banks
have over twenty-five times as much as gold as
the banking department of the Bank of England.
"The federal reserve act contemplr d tho re
serves against the federal resorve notes going be
low 40 per cent, and made provision for it by
a moderate and small penalty. The Federal
Reserve Board has refused to allow the reserves
to do down when the very purpose of the reserve
as contemplated by the act is that it should bo
used when tho national welfare requires it.
"1 respectfully pray the board to now give
consideration to the question of reducing the
. rate of interest and of extending tbo powers of
the federal resorve banks to tho full accom
modation of our legitimate commerce and indus
try in order that the gigantic stiidos of America
along the road to prosperity may continue unimpaired.'
A PANGEROU8 INTERIM:
Senator Norris proposes an amendment to the
constitution to do away with the electoral college
a debatable proposition. We think it more im
portant to do away with the four months' delay
between election and inauguration. The sole rea
son for this passed away with the post chaise and
the sailing packet. Less than a week is now
necessary for the most remote congressman to
reach the capital. Of course, a reasonable time
should be provided for the retirement of an ad
ministration, but not four months.
The experience of the nation at the outbreak
of the civil war should have been enough to
bring a change. The four months between the
election and inauguration of Lincoln were a cost
ly period for the north. Tho southerners in
Buchanan's administration were able to got pre
pared for secession to an extent that made sup
pression of the rebellion impossible and cost the
.nation a ghastly waste of life and almost its
unity.
The government chosen by the people should
not be compelled to wait for four months in in
action while tho government to which the people
have refused a vote of confidence remains in
power. We hope there never will be traitors again
in any administration as there were in 1860, but
what has happened may happen again. But the
. case need not bo put in this extreme form.
Granted that the outgoing administrations will
always be as loyal as the incoming and as
anxious to serve the best interests of tho nation,
still they cannot function efficiently. They must
necessarily confine themselves to closing up. It
is not in human nature to begin things for others
to take over, and, indeed, if an outgoing adminis
tration were to attempt It there would be waste
and confusion, since the incoming would often
undo what its predecessors and political oppon
ents had begun. -fi
In short-, the four months between election
and inauguration must be a period In which the
' executive departments run down and even the
-if
i mj.
legislative branch of government, where party
changes have taken place, must confine ital,
virtually to unfinished business. In ordinary
times this Involves a great low. In critlsa!
times It Is dangerous. Mr. Taft after his ddfeat
felt obliged to mark time on the Mexican situa
tion, wishing not to commit the government or
force 'Mr. Wilson's hand. If Mr. Hughes had
boon elected In 1916 a vory serious embarrass
ment would have occurred, for he could not hare
takon charge of our critical relations with Ger-'
many during tho very period in which, as It
turned out, thoy were culminating.
The present situation is about aa undesirable
as it could be and emphasises sharply the need
for change. Mr. Wilson's party has been defeated
on issues of international policy which are of
urgent momont. Mr. Wilson must either mark
tlmo, as we assume ho will do, or act Inconsist
ently with his own convictions or in disobedience
of tho popular decision, neither of which is prob
able. Our foreign affairs, to say nothing of our
domestic, must thoroforo wait for deflnlto and
vigorous handling during a porlod of great strain
and momentous possibilities.
This Is Inefficient government, and congress
should net at once to initiate amendment.-:
Chicago Tribune.
CANNOT AID DISARMAMENT
. A Washington dispatch, dated Doc. 8, says:
President Wilson today declined tho invitation
of the leaguo of nations to send delegates to tako
part In tho discussions of the disarmament com
missions. The President informed tho leaguo of nations
council that Inasmuch as the United States was
not a member of tho leaguo ho did not feel just!-'
fled in appointing a commission "to tako eve
a do facto participation."
Tho United States, however, the president de-1
claYes, Is In sympathy with any. plan for World
disarmament.
The reply of tho president to tho Invitation
of tho league council was transmitted today'
through tho state department to Paul Hymans,
president of tbo council. It follows:
"I have the honor to acknowledge the receipt
of your cablegram of December 1, invitlnsr the
government of the United States to namo repre
sentatives to sit with the mlltary, naval end air
commissions of the leaguo in a consultative
capacity during tho discussion by thz commis
sion on the reduction of armamonts, the consid
eration of which is to bo undertaken by it forth
with at tho request and on behalf of the 3Q$nci!
"The government of the United States is most
sympathetic with any sincere effort to evolve a
construction plan for disarmament which Is
necessary for tho economic rehabilitation, peace
and stability of the world. The President of
tho United States Is deeply interested in this
question and is most desirous of co-operating to
this end, but as the government of the 'Unite
States is not a member of the league he doe. not
feel justified in appointing a commission to take
even a de facto participation in the deliberations
of the council or of commission acting oh be
half of the council in the execution of provisioas
in the covenant of the league of nations."
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MR, BRYAN'S STATUS
Is Mr. Bryan within or without the Democratic
household? The question grows out of sugges
tions that the Nebraskan may present a program
for the reorganization of the Democratic party.
Mr. Bryan claim to he within the household.
He has never left it True, he made no speeches
for Gov. Cox. He could not consistently do so.
He had advised against his nomination, and upon,
receiving tho nomination Gov. Cox had pitched
his appeal for election in a key Mr, Bryan could
not sound. But he voted the ticket. Not only
voted the ticket, but traveled from Miami, PJa.
to Lincoln, Neb., in order to cast bis ballot. That
stamped him with the seal of regularity, Wash
ington Star.
GAMBLING GAMES NOT NECESSARY
On another page will be found an interesting -'
article from the Jacksonville (Fla.) Times-Union
calling attention to the fact that the Atlanta Fair
had been conducted successfully without gamea
of chance. It is a step In advance, and now that
women vote there will be many such advance
steps. MORALITY PAYS as communities find
when thoy have the courage 10 iry u, X5usmei
does not require gambling any more than it didi
the saloon.
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