FOU1V
THE FARMER: FRIDAY, FEBRUARY 27, 1920
FEDERAL RESERVE HAS
ANNOUNCED ITS PEACE
ME CREDIT
WILL EXERT FULL POWER OF RESERVE
BANKING SYSTEM IN REGULATING AND
CONTROLLING CREDIT SYSTEM TO
AID COMMERCE AND INDUSTRY.
.5.
Washington, Feb. 23 Deter
mination of the federal reserve
board to exert the full powei
of the reserve banking system
in regulating and controlling
the credit situation a course
designed to aid commerce and
industry in restoring a pre
war equilibrium was disclos
ed in the board's annual re
port, made public today.
With tliia as its announced peace
time policy, the board was prepared
to "test the ability of the system to
check expansion and to induce healhy
liquidation." The board explained it
Was aware of the implied power to
rectify the condition which confronts
the country. This power necessarily
followed the authority for and em
ployment of an elastic system of re
serve credit and note issue, it was
added.
Recommendations also were made
to congress for amendment of the re
serve act which would permit reserve
banks, with approval of the federal
reserve board, to establish normal
maximum lines of credit accommoda
tion for member banks. An ascending
scale of rates would be provided it
money was borrowed above the max
imum line. This, the board believed,
would induce banks to hold their own
large borrowers in check and thus
work- to the end that credit expansion
On a large scalo would be stopped.
Warning was given that the country
must guard against too rapid defla
tion. While the board was in entire
TmTahv witTi moniirpfl to nverCOllie
this evu, it pointed out that reme-1
dies employed to correct uuuuui
might create conditions worse than
deflation itself.
