The Hopeful Outlook 265
Finally, when the long bull market asserted itself
in the high levels of 1927-1929, the Reserve System
 still wished to prevent an exodus of gold back
from Europe to the United States; it kept the rediscount
 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 speculation
 was in full swing, to discourage it by discrimination
 against brokers’ loans at quarterly periods,
when the “bootleg” lenders, to get cash for their
quarterly dividends, withdrew their loans temporarily
 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 Reserve
 System has, in general, acted with great wisdom
 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 emergency
 the whole banking machinery of the country
from the Federal Reserve Board down to the member
 banks worked splendidly.