National Affairs: R. F. C.

To inflate or not to inflate was no longer a question last week. The only question: Will inflation succeed? Upon the answer (which many think will soon be apparent) depends the immediate economic future of the U. S. If it succeeds the downward spiral of deflation will be definitely checked. If it fails, historians may well look back upon 1932 with a shudder. In prospect, however, was not the wind of wild printing-press inflation which afflicted Germany and France but rather a rescue of credit from its enemy, deflation. Success required large plans, bold men.

Forces for inflation worked busily last week in congress where the House whipped through a bill to create a Reconstruction Finance Corp., keystone of Presi dent Hoover's whole relief program. The vote was 335-10-55. By a vote of 63-10-8 the Senate a week before passed a similar measure. The thumping big Congressional majorities echoed the nation's great expectations. What opposition there was came from literal-minded gentlemen who could not find the word "food"' in the re lief bills. Yet to be settled in conference were secondary differences between the House & Senate measures. With R. F. C. as good as law, the Stock Exchange began moving up hopefully while President Hoover, impatient, made ready to sign the legislation before this week is out. The new agency was scheduled to be in operation by Feb. 1. What would happen thereafter was anybody's guess.

President Hoover took the first step toward organizing R. F. C. when he began to name its seven directors, four of whom must be Republicans, three Democrats. By law the Secretary or Undersecretary of the Treasury, the Governor of the Federal Re serve Board (Eugene Meyer) and the Farm Loan Commissioner (Paul Bestor) are R. F. C. directors, accounting for three of the four Republican places. About the White House last week it was generally assumed that two of the Democratic directors of R. F. C. would be Bernard Mannes Baruch, New York financier and onetime chairman of the War Industries Board, and Edward Nash Hurley, Chicago banker and onetime chairman of the Shipping Board. For active president of R. F. C. was needed a man with a repu tation for vigor as well as for banking. Mr. Hoover chose his week-end visitor, Charles Gates Dawes.

Once organized, the R. F. C. directors will begin immediately to accumulate operating capital. Congress, as a starter, will vote a direct appropriation of $500,000,000 from the Treasury. Then R. F. C. will move to raise $1.500,000,000 from the public by the sale of its bonds, debentures, short-term notes. R. F. C. securities will be underwritten by the U. S. Government. Much depends upon this public sale which Wall Street envisages as a sort of Liberty Loan drive. President Hoover hopes that plain citizens, rather than banks and trusts, will be heavy investors. To pave the way for this great flotation the Fed eral Reserve has already started pumping money out into the market to create the necessary buying power. Last week in New York it whittled down its buying rates for bankers' acceptances.