Speculation and Brokers’ Loans 233 
in prime condition to provide ample credits for trade 
and industry. 
Federal Reserve Policy 
Useful as the Federal Reserve System has proved 
during the emergency in furnishing ample credit facil- 
ities to replace the tremendous withdrawals of “boot- 
leg” loans from “others,” representing corporations 
and individuals who had helped inflate the totals of 
brokers’ loans, the Federal Reserve Board had not 
functioned so acceptably during the prior period that 
led up to this abnormal development. 
In a statement issued February 6, 1929, it looked 
as though the Reserve Board had assumed an aggres- 
sive policy. It issued a warning with respect to the 
accumulation of speculative credits that was, in a 
sense, epoch-making. For the first time it asserted 
its responsibility and authority to manage the credit 
facilities of the system in the interests of commerce 
and business. It said: 
“When it [the Board] finds that conditions are 
arising which obstruct Federal Reserve Banks in the 
effective discharge of their function, of so managing 
the credit facilities of the Federal Reserve System as 
to accommodate commerce and business, it is its duty 
to inquire into them and to take such measures as 
may be deemed suitable and effective in the circum- 
stances to correct them; this, in the immediate situa- 
tion, means to restrain the use, either directly or indi- 
rectly, of Federal Reserve credit facilities in aid of 
the growth of speculative credit.”