The Hopeful Outlook 265 
Finally, when the long bull market asserted itself 
in the high levels of 1927-1929, the Reserve Sys- 
tem still wished to prevent an exodus of gold back 
from Europe to the United States; it kept the redis- 
count rate low, partly for this purpose and partly to 
maintain ‘“‘easy money” for business. This easy 
money encouraged speculation, despite the efforts to 
discriminate against brokers’ loans. 
The Reserve authorities tried in vain, when specu- 
lation was in full swing, to discourage it by discrim- 
ination against brokers’ loans at quarterly periods, 
when the “bootleg” lenders, to get cash for their 
quarterly dividends, withdrew their loans tempora- 
rily from the market. Perhaps a once-for-all sharp 
increase in the rediscount rate two years ago might 
have hurt business to some extent then, but it might 
have prevented the overgrowth of brokers’ loans, 
and might have prevented the market crash later. 
This is not the first instance of how the age-long 
prejudice against high interest rates has done 
harm. 
But, of course, it is easy to be wise after the event 
and to criticize what was done. The Federal Re- 
serve System has, in general, acted with great wis- 
dom and even in this particular problem of the stock 
market we must not forget that it kept the banks 
liquid and strong so as to prevent tight money and 
bankruptcies when the crash came. In that emer- 
gency the whole banking machinery of the country 
from the Federal Reserve Board down to the mem- 
ber banks worked splendidly.