232 The Stock Market Crash—And After 
enabled them to take over one billion dollars of mar- 
ket loans that had been made by outside lenders. 
This action Mr. Roberts justifies, although he admits 
that ‘‘it might be said to be for a purpose not con- 
templated in the Reserve Act.” He adds: 
“It is to be considered, however, that the ultimate 
purpose of the Reserve system is to stabilize and 
protect the general credit situation. In pursuance of 
this purpose the action was amply justified, and on 
the basis of this justification it is possible to go even 
further and say that intervention would be warranted 
for the purpose of averting an impending disaster. 
This would be admitting that the exercise of judg- 
ment would be warranted in a critical situation, 
which, of course, would mean that opinions might 
differ among the Reserve authorities as to the gravity 
of a situation.” 
Mr. Roberts defends the restriction of use which 
member banks could make of Federal Reserve funds 
against financing transactions in stocks and bonds. 
These funds were, according to the intentions of 
those who framed the Federal Reserve Act, to be 
used only for short loans, to aid in financing seasonal 
turnover of trade. This financing is limited and the 
funds are soon released, whereas “there is no end 
to the amount of credit which might be tied up in 
financing stocks and bonds,” and this would not be of 
short duration. The Reserve banks had kept out of 
a situation that involved an increase in brokers’ loans 
from three billion dollars to eight and one-half bil- 
lion dollars within two and one-half years and were