234 The Stock Market Crash—dAnd After

This statement had been preceded by a letter to
the Reserve Banks, dated February 2, defining their
obligations as to what credit should and should not
be granted at that time. The statement noted the
record of six years of remarkable economic activity,
and their unprecedented volume of production and
consumption of goods. It declared:
“The economic system of the country has functioned
 efficiently and smoothly. Among the factors
which have contributed to this result an important
place must be assigned to our credit system, and,
notably, to the steadying influence and moderating
policies of the Federal Reserve System.”
As the guardian of business, therefore, the Reserve
 Board assumed responsibility for credit control
in efficient and smooth functioning of the nation’s
economic system. The New York Reserve Bank was
reported as urging an advance in the rediscount
rate to 6 per cent from its § per cent level. This the
Federal Reserve Board declined to sanction. The
measure would have brought the rediscount rate close
to general market rates, thus making it effective. But
the Board at Washington, torn by differing opinions,
backed and filled during the Spring and Summer, trying
 to isolate one part of the money market by discriminatory
 measures against brokers’ loans. It was
urged that a rise in the discount rate would “hurt
business” and would deprive Europe of needed gold.
But had this aggressive policy been pursued from the
beginning it would have been found that business
could have stood the higher rate during a period of