BANKS: Hold The Line

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Warriors & Recruits. Chairmanned by the familiar figure of General Electric's Owen D. Young, the committee was composed partly of warriors who had been fighting the bankers' Battle of Depression for nearly three years, and partly of new recruits from business. The banking fraternity was represented by New York Trust's Buckner, National City's Mitchell, Guaranty Trust's Potter, First National's Reynolds, Bankers Trust's Tilney, Chase National's Wiggin. New faces in the line-up were Floyd Leslie Carlisle of Consolidated Gas, Alfred Pritchard Sloan Jr. of General Motors, Walter Clark Teagle of Standard Oil of New Jersey, Clarence Mott Woolley of American Radiator & Standard Sanitary. These businessmen were to canvass their fields for worthy borrowers and present such applications for credit as they could find to their banking colleagues on the committee.

The formation of this new committee ("the Twelve Apostles" they were soon called) seemed to indicate that Governor Harrison and the Federal Reserve did not take at face value the New York banks' explanations of their inability to make more loans. The member banks in the New York district had, between March 30 and May 18, cut their loans down by $195,000,000 while their demand deposits (on which they were paying less than ½ of 1% interest) were rising by $278,000,000 (to $5,092,000.000). The Committee of Twelve's greatest weapon to make these banks up their loans and investments was the threat, hazy yet real, that the Federal Government might step in to finance industry directly and thus steal their best loan markets.

Governor Harrison's action brought prompt applause from Washington. "I am much gratified," declared President Hoover. "I am in hopes that similar action may be taken in other Federal Reserve districts. ... As soon as the chairmen of such [other] committees are known I shall be glad to invite them to Washington in order that the whole program may be set up on a national basis."

Goldsborough Bill. Though the practical results of the Federal Reserve's credit-expansion policy had so far been disappointing, the economic principle behind it still found enthusiastic favor among a large group of Washington legislators. Their ideas were incorporated in a bill sponsored by Maryland's Thomas Alan Goldsborough which the House, much to Europe's alarm, passed early this month (TIME, May 16). The Goldsborough bill directed the Federal Reserve to inflate commodity prices about 50% to the 1926 level by deflating the dollar through redoubled credit expansion.

Last week Governor Meyer went before a Senate committee to repeat his objections to the Goldsborough bill. The gist of his opposition was that the measure imposed an impossible order upon the Federal Reserve because prices depend on many factors beyond its control. He defended the Board's present policy as a discretionary measure but insisted a mandate of execution "can't do any good and might do harm." Said he: "I don't think any small group of men should be entrusted with fixing price levels. I wouldn't want to be entrusted with such a power."

The Federal Reserve's credit policy is only one ram with which the Hoover Administration is battering away at Deflation. Others, past & present, are: