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T H e C i t i z e n s Ba n k a n d T r u s t C o m p a n y D vea t u r C o u n t y 's F r i e n d l y B (in k B a in b r i d g e ,G e o r g i a April 14, 1951 Mr. Marriner S. Eccles Member of the Board of Governors Federal Reserve System Washington, D.C. Dear Mr. Eccles: In reading the American Bariker this morning I ran across a statement of yours'fo the" effect that tighter credit con trols were coming. Among those contemplated were require ments that member banks invest all of their idle cash in short term securities. Another one was that if a bank na kes a new loan it must "salt away" an equivalent amount in resierve. Of course I am the President of a small country member bank and I have not the facilities for observation that you have nor do I have the ability to observe to the extent that you have if I had the facilities. It occurs to me though that great care should be taken in the imposition of further credit controls. Of course regulations such as "X" and "W" can be imposed on all people who extend credit but the matter of impounding our reserves can only b e applied to member banks, unless you have some remedial legis lation 1*1 ich I doubt your being able to get. That would mean that State non-member banks could go right ahead on their "wild goose chase" making loans and you would be powerless to stop them. Now, in our vicinity we have within a radius of about 75 miles several large non-menfcer banks - larger than we are. In fact there is one large bank just 26 miles from us which is not even a member of the FDIC, but it is an old bank, with an outstanding record and was founded and operated for a long time by a very rich man who got in on Coca Cola when it first got out of the hands of the Candlers. I am enclosing for your information a credit report which is taken from thepublic records of Decatur County, and I invite your attention to it. From this you will see that a small percentage of the credit that was extended in Decatur County was extended by the two member banks. Consequently, the re— T h e C i t i z e n s Ba n k a n d T r u s t C o m p a n y D e c a t u r C o u n t y 's F r i e n d l y B a n k B a in b r i d g e Mr. Marriner S. Eccles ,G e o r g ia April 14, 1951 Page 2 quirements which you contemplate would work a hardship on us and would place us at a disadvantage in competition with our neighbors above referred to, and would not reach, effectively, the people who are really running "wild" in the extension of credit. I realize the necessity of controlling inflation. I cannot help bub realize it when I go to a restaurant and pay $2.75 for a steak that I could get for 50$ ten years ago. All of the things we have worked for in this country are about to go out of the window as a sacrifice to the god of inflation, and so I hope you will not consider me guilty of any lese majesty when I ask that you give serious thought to the problems that confront member banks as compared to the people whom you cannot reach under existing laws. I remember meeting you personally at the Federal Reserve Bank of Atlanta many years ago at the opening of the remodeled building of that institution,and have always considered you a valuable member of the Board of Governors. Incidentally, I am imnediate past President of the Georgia Bankers Association. Cordially yours EF7:M E.F. VICKERS President Kay 11 , 1951 Mr* £• F» Vickers, President, The CltlUBi Bank and Trust Company, Bairibridge, Georgia. Deer Mr. Vickers: Let ae thank you for your letter of April 14. it is a pleasure to bear from people like yourself who recognize and understand the difficult problems which mart he faced in fight ing the battle against inflation and against farther depreciation of the dollar. • As you know, the Board of Governors has for some tine studied the problem of hov best to curb Inflationary bank credit expansion in the event that loans end investments of the banks should continue to Increase in the future. There have been several proposals under consideration in dealing with this problem, includ ing the loan reserve plan and the special reserve plan, which sight be applied vith or without an increase in primary reserve require ments of the ccsnercial banks* You will find the special reserve proposal discussed more fully in my enclosed statement of November 25, 19^7, before the Joint Coamittee on the Economic Beport. There has been no decision as to which one of these various plans would be recommended by the Board to Congress at the present time. It is the view of the Board that any new reserve plan should be applied to all commercial banks, and not to the member banks alone. I agree with you that to do otherwise would be dis criminatory and would tend to drive member banks out of the Beserve System. It is essential that the Government do everything possible at the present time to prevent further inflationary developments through dealing with their basic causes instead of their effects. These basic causes are largely monetary and fiscal. An effective Mr. E. P. Vickers - 2 - tax program designed to produce a balanced budget is therefore required under present inflationary conditions, supported in full by a restrictive credit policy* I appreciate greatly your interest in this natter. Please do not hestitate to call upon us again if there is any further information with which we can furnish you. Very truly yours, M. S. Eccles Enclosure.
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