JULY, 1921
The Commoner
Asks Congress to Consider Williams'
Statements on Reserve Board
(Editorial from the Manufacturers Record of
May 5, 1921.)
TO MEMBERS OF THE UNITED STATES SEN
. ATE AND HOUSE OF REPRESENTATIVES .
You have seen the chaos created in business
by the drastic deflation brought about through
the determined action of the Federal Reserve
Board during the last eighteen months to two
years. You have seen your constituents suffer
losses which are staggering. You have seen
a decline in the value of output of farm, factory
and mine products and of securities during the
last twelve or fifteen months to the extent of
$25,000,000,000 or more, or an amount in ex
cess of the cost of, the war to this country. - '
Moreover, the money expended In the war
helped to create activity and give employment
to many people, but the loss of $26,000,000,
000 in the value of products and securities has
been wiped out of existence.
You see over 500,000 railroad cars lying idle
on the tracks. You see the whole railroad sit
uation in despair because of the lack of busi
ness; and the reasons for this you must neces
sarily face and investigate to the limit of your
ability, in the interest of the nation's business
life, for there are millions of men walking the
streets in idleness because work cannot be r'rd;
and the idle body and the empty stomach create
a very bolshevistic feeling in a brain which is
not engaged in productive work.
Even though the nfiw administration niay be
able to change this situation and stimulate the"
business interests of the country by a" loosening
up of the drastic restrictions on credit, our fu
ture welfare demands a very careful study of the
causes of the present troubles in order that the
future may be safeguarded.
By reason of this fact we are taking the lib
erty of inviting your serious consideration to
some of the statements recently made by' Mr.
John Skelton Williams, former Comptroller of
the Currency, and member Of the. Federal Re
serve Broad, in regard to the operations of that
board. The statements made by Mr. Williams
prompt us to ask, is there any senator or Rep
resentative who will excuse or overlook the
things upon which Mr. Williams has turned the
light in his recent address before the People's
Reconstruction League?
The points made by Mr. Williams in tils
speech prompt us, therefore, to ask every mem
ber of the. Senate and House of representatives
the following questions based upon Mr. Wil
liams' statements and which we take for
granted are correct, as he states them on his of
ficial knowledge.
No. 1. DO YOU defend the exaction, (by a
Reserve iBank) of interest as high as 87 per
cent per nnmun from a small country bank, 85
per cent of whose loans were to farmers?
No. 2. DO YOU defend the exaction of about
200 per cent per annum interest which was
charged last summer for about six months on a
large loan to a manufacturer by a member
bank to which the Federal Reserve Bank of his
district was lending money at Gper cent per
annum or less?
No. 8. DO YOU defend the plan which an
"important official" of the Federal Reserve
Bank of New York says was under consideration
of "putting on still more pressure to clean up
the after-war mess in a hurry and get it over"
even though it involved "many forced failures"
and "a long time in picking up the pieces?"
No. 4. DO YOU defend the huge loans made
to certain individual banks conspicuous for their
speculative operations and the speculative opera
tions of their officers while numerous banks and
other merchants and farmers were being starved
or deprived of credit greatly needed?
No. 5. DO YOU defend the absurd excuse of
fered by the Reserve Board that the "average"
rate was all right when, favored banks were
borrowing millions at 5 and 0 per cent, while
other banks were being clinrged in some cases
all the way from 7. per cent to .87 per cent for
funds sorely needed? '
No. G. DO YOU defend the action of the board
in rejecting the resolution offered by Mr. Wil
liams, then Comptroller and a member of the
board, that In no case should a member bank
be required to pay (to a Reserve Bank) in ex
cess of 10 per cent per annum interest; the
Comptroller's resolution to limit the interest
rate to 0 per cent having also been voted down?
No. 7 DO YOU approve of having the Reserve
Banks, which are already earning over 100 per
cent.pcr annum, add to their profits by exacting
0 per cent or 7 per cent per annum interest on
loans secured by Liberty bonds, which only
pay 2j per cent and 4U per cent interest-and
wh'fi, in many cases, were subscribed to at
par with the definite assurance that they would
he carried at 44 or 4 per cent per annum in
terest? No. 8. DO YOU defend the method by which
from five to eight brokers on the New York
Stock Exchange artiflcally fixed from day to day
tfic rate of interest on hundreds of millions of
dollars of call oans, thereby enticing to New
"York for speculative uses funds sorely needed
My business men and farmers in other sections
of the country?
No. O. DO YOU think the Federal Reserve
Board justified in boasting- of a high rat?o of
"reserve," indicating, under existing conditions,
a useless impounding of the funds of the system,
when business men and farmers arc suffering
and complaining as they still are doing, of the
lack of funds for essential needs the unused
lending power of the Reserve Bunks at this rime
being one and a half billion (91,500,000,000)
dollars?
No. 10. DO YOU defend the Board's apathy
and inertia, its refusal, during the past six
months, in the face of repeated and emphatic
warnings to revise its deflation policy, so as to
case a shrinkage which, in the absence of meas
ures of relief which it could have aided in pro
viding, has become a disastrous collapse?
No. ,11. DO YOU think the management of
the eminently respectable xrentlemen, sitting, or
"setting," on the Federal Reserve Board jluWng
the past six months prior to March two college
professors, two bankers, one lawyer and a
PouKjhkeepsic newspnner man, who in addition
to the Comptroller of the Currency (who dif
fered with them radically) constituted its mem
bership and controlled our financial levers has
been particularly successful in this period?
No. 12. Or, DO YOU think that more liberal
policies, advocated by loading thinkers and suc
cessful men of all classes in our own and other
countries including among the latter former
Chancellor of the Exchequer McKcnna, now head
of one of the world's largest banks; Lord Lcver
hulme, one of Britain's greatest manufacturers
and business men, and the statcsman'ike Gov
ernor of the Bank of France would, if they had
heen pursued by the board, have been more suc
cessful, and might have saved us billions of dol
lars of losses and untold suffering?
No. 13. DO YOU believe that a system, how
ever wise in many respects it may be, should
give to any seven men the most autocratic pow
er ever given to an equal number of men In
the world's history, over the financial, and thus
over the entire business operations of a great
country such as the United States?
No. 14. DO YOU not believe that regardless
.of what has happened, and the change that may
take place under what will probably be a much
wiser administration of the Federal Reserve
Board than that of the last few years, there
should be some change which would enlarge the
membership of the board by an adequate rcpc
setation of the industrial, commercial and ngri-
cultural interests of the country?
No. 15. DO YOU not believe that an organ
ization having such limitless power over the
welfare of the nation, despite nil the protests
that may be made to the contrary, should hold
its meetings open to tho public so that, the peo
ple of the entire country might know the rea
sons advanced for any action taken, and the vote
of the members thereon? If, for instance, It
had been known to the public that the Comp
troller of tho Currency was constantly, vigorous
ly protesting against the methods of deflation,
it is. not conceivable that the Federal Reserve
Board would ever have been allowed to carry
but the plans which have brought such poverty
to millions of people.
No. 10. DO YOU believe that any financial
organization, controlled by the government or
by private financial Interests, should have tlie
right to turn on or turn off the supply of credit
at its will, and deflate or inflate tho products of
the country with an autocratic power such as
never before cxlsjcd in the world?
These are questions which tho country at large
is asking. It will demand a reply. Never again
will this nation permit Its entire business inter
ests to be sacrificed in the way they have been
sacrificed, by tho power held by a limited num
ber of men who at their will can deflate or in
flate, canvbuild up or destroy. That Is a power
too great to be committed to any seven men on
earth.
Tho Federal Resorvo System has vast poten
tialtlea. for good. It Is a wonderfully constructed
mach'no. But It la a machine the operations of
which, and the reasons therefor, the public has
a right to understand, and to know of any move
ment made, and reason thorofor.
SENATOR SMITH DENOUNCES THE RE
SERVE BOARD
A Washington dispatch, dato July 1, says?
Declaring that ho had boen Informed' by tho
treasury that the federal reserve system has a
surplus of about one billion dollars "In excess
of all requirements," Senator Smith, Domocrat,
South Carolina, declared today In tho Senate
that there should be an Investigation of the
re-discount rates maintained by the reserve
board. '
"Why should we have rediscount rates of 0
and 7 per cent when we have one billion dol
lars of unused gold?" he asked.
Charging that the Federal Reserve Banks
were calling loans and forcing farmers and busi
nessmen into bankruptcy although there w,aflt
ample funds for commerce, the South Carolina
senator declared this was "the most monstrous .
showi ever made In the midst of the agrlcul- ,
tural and bus'ness distress."
Senator Smoot of Utah said there were "two
sMea.to, this question." ;
"This is a world condition," he declared,,
"The trouble Is that foreign countries cannot'
buy our agriculturaland other products."
"There is danger in the piling up" of gold
in America, ho asserted, adding that there was
too much gold here. v
The statistical bureau say's that retail prices
are now only 85 per cent higher than they were
before the war. This must be comforting in
formation to farmers, who are getting about 10
per cent less for what they produce than they
did in 1914. The farmer is justified in demand
ing that bus'ness men take their losses as
promptly and thoroughly as they were compelled
to do.
General Dawes, a former Nebraskan, is In
charge of the job of making up a budget for the
administration that is expected to save many riiiL '
lions a year in the cost of government. Hit
chief qualification for the position is that he
doesn't give a ' snap for the politicians. And
snaps are what the politicians think most of In"
this lite:
If the proper solution of the problem of whaf
to do with our ex-presidents, Is to make theni
members of the fodcral supreme court, as indi
cated by the selection of Mr. Taft, President
Harding will doubtless not overlook the claims
of Attorney Woodrow Wilson of New York. .,;
THE STILL APPLAUSE
Highmiiidness.a jealously for good,
A loving-kindness for the great man's fam
Dwells here and there with people of no nam
In noisome alley, and in pathle3s wood:
And when we think fhe truth least understo
Oft may be found a "singleness or aim"
That ought to frighten into hooded shame
A money-moving ring, pitiable brood?
How glorious this affection for the cause
Of steadfast genius toiling gallantly!
What when a stout unbending champion aw..
Envy and Malice to their native sty?
Unnumbered souls breathe out a still applau
Proud to behold him in this country's e
Keats.
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