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April 12, 1957.

ill announcements of the Federal Reserve System, including statements by the Chairaan, have emphasized the policy
of continuing easy aoney conditions.
In its announcement of January 50th of the final increase of reserve requirements, the Board stated*

"In announcing the previous increase in reserve requirements, the Board said:
"'The prevailing level of long-time interest
rates, which has been an important factor in tha
revival of the capital market, has been due
principally to the large accumulations of idle
funds in the hands of individual and institutional
investors. The supply of investment funds is in
excess of the demand. The increase in reserve requirements of member banks will not diminish the
voluae of deposits held by these banks for their
customers and will, therefore, not diminish the
voluae of funds available for investment. The
maintenance of an adequate supply of funds at
favorable rates for capital purposes, including
mortgages, is an important factor in bringing about
and sustaining a lasting recovery•*
"The same considerations apply with equal force at the
present time. The Board's action does not reduce the large
volume of existing funds available for investment by depositors, and should not, therefore, occasion an advance in
long-term interest rates or a restrictive policy on the part
of institutional and other investors in meeting the needs for
sound business, industrial and agricultural credit."
In his statement of March 15th, Chairman Eccles stated:
•I have been and still am an advocate of an easy aoney
policy and expect to continue to be an advocate of such a
policy so long as there are large numbers of people who are
unable to find employment in private industry, which means
that the full productive capacity of the nation is not being

"In other words, the supply of money to finance increased production at low rates is ample. Furthermore, with


the ample reserves of the Federal reserve banks additional
supplies of money can be made available when needed to
finance expanded production at reasonable rates by the purchase of government securities in the open market**

"What, then, is the function of the monetary authorities of the Government? It is to help bring about and maintain the essential element of an adequate supply of funds at
reasonable rates to call forth and facilitate production and
distribution. A policy of easy aoney in order to aa&ke available an adequate supply of capital at reasonable rates, cannot, however, of itself succeed in isaintaining a stable econosry.
The Federal Reserve System, which is an aria of the Government,
is powerless to maintain a stable economy unless other essential non-monetary factors necessary to stability are brought
into line either by private interests or by the Government*
The Federal Beserve System has exerted the greatest possible
influence to bring about and maintain easy money conditions
as a necessary integral part of the recovery aoveaent. An
ample supply of funds at reasonable rates exists and will
exist after the increased reserve requirements take full
effect on Hay 1* So far as I am concerned, I as convinced
that such a supply of funds should continue to be made
available At rates that will encourage full recovery and
help to maintain it*
•Under present conditions of an accelerating recovery,
a continued easy aoney policy to be successful in achieving
and maintaining a balanced recovery must be accompanied by
a prompt balancing of the fod&TBl budget and the subsequent
retirement of public debt by the Government in relationship
to the expansion of private credit.*