Full text: Referendum on the report of the Special Federal Reserve Committee

Juides tor 
Credit Policy 
(c) Attention should be directed to the development of skill in 
management of the system of regional banks in preference to changes 
in the structure or credit powers of the system. 
The federal reserve system has not been provided with greater 
resources than on occasion may be needed, nor have the administra- 
rive bodies of the system been vested with too broad discretion as 
regards regulation of the volume of reserve credit and currency. 
This, however, does not appear to be the view of those who 
advocate the adoption of precise guides for reserve credit policy. 
A number of such guides have been suggested. 
Some urge an amendment to the Act whereby the reserve banks 
would be directed to employ their powers primarily for the pur- 
pose of realizing stability in commodity price levels. Others insist 
that the reserve ratio should be the predominant factor in the detér- 
mination of reserve policy. Still others believe that principal effort 
should be exerted to regulate the course of speculation. There is 
also a school of thought which emphasizes the importance of adapt- 
‘ng federal reserve policies to credit developments in the world 
it large. 
Price Level 
nf Commodities 
As to price stability, there may arise situations in which it would 
he generally agreed that the movement of prices might constitute 
the most important single factor. Considerable changes in price 
levels might serve to indicate whether credit is excessive or deficient 
in volume. But the significance of moderate changes in prices, either 
in an upward or downward direction, is difficult to diagnose. On 
some occasions they may be attributable to other than credit factors, 
and to the extent that this is true, harm would be occasioned by using 
credit manipulation as a correction. A downward drift of prices, for 
instance, might be due primarily to technical improvements in in- 
justry. When the cause of these fluctuations is not clear and uniform 
in its influence, a requirement in the Act that maintenance of the 
stability of prices be a primary obligation upon the administration 
of the system would be uneconomic and would inevitably invite 
reprisals both public and political. 
Even mild price movements in one direction if persisted in for 
a long period of time must make considerable changes in the pur- 
chasing power of the dollar. To require the system to attempt to 
keep the price level substantially unchanged would present an ad- 
ministrative problem impossible of solution. There can be no una- 
nimity upon the precise causes of such a price trend or upon its 
desirability or upon the many forces other than the credit supply that 
may operate to alter it. 
(Continued on page 

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