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Ill , Uarch ?0, Mr. C. R. Dewey, President, Grace National Bank of New York, Hanover Square, Hem xork, Wew Zork. Dear Mr» Dewey: It was kind of you to write me in regard to ray address before the Ohio Bankers1 Association and your comment* about it are appreciated* Certain provisions of the proposed bill ure highly debatable and there is undoubtedly room for an honest difference of opinion upon tiieou The provisions relating to rediscounting are not intended to condone unsound banking practices, it is recofcui^ed that the confining of the rediscount to coia&erci&l loans taM not prevented trouble in the pa3t, the restrictions have bad to be rel&red in tiiaes of ei but only =.xter Bath hava bad baaH ta»t The liquidity of any class of' bank assets cornea doan to a viicstion of shiftsbility. In periods when all banks are contracting loans and invectoents ana hence rjre suffering loaaM of deposits, no type of taaa%j whether it be Governiaent bondst investment securities, r^ai estate loans, or the so-called self-li uidating coisaaercinl loan, can be tixraed Into cash without loss* In faet, the letter type has often proved the most difficult f all for the individual bank to liquidate. The proposed bill seeks to provide a machinery that will prevent a rapid losa of deposits by the banking ^ystea as a whole and to enable the individual beak which is suffering a drain of deposits from having to Ji3pose quickly of: sound assets which could be paid off or n&rkbted over a longer period of tiiae. In the aatter of monetary control the bill proposes to remedy the diffusion of re.sponsibi .ity and authority ^rhich is now present in the reserve syston and to centralize control in a responsive boc^r which can be expected to take f- national viewpoint with regard to aonetary policy*, Simply because the , J Mr* B« H« Dewey, President - 2« the Board moabirs ar<; appo ntod by the Provident doet, not mean political domination in a sinister sense* Too often in discussing "tite need of am independent centra!? b?.nkin£ authority we are apt to hold that fiscal needs cf th© Government should not !• I k*n into account in the formulation of monetary lo/« This se^me to r.& to be an orroiioouff viewpoint. Government finance sad bua.-.nesa finance WP% parti of ft single fi lancial organisation ftad it is impossible to divorce them. Certainly an independent re^orve administration should place fiscal needs on a parity with other conoideratiansi Indeed in tines of war or economic MfergMmyj considore tl >nr- of pul 31 c finance are of paramount ianortrmce to the proraotion of heedthy busin«ae conditions* Vary truly yours, V* B« Kccles, Governor*
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