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Itay 5, 1955 Sr. Rudolf , t , Presidr The Am- richn linkers Aseo. i t i n C/o ibernia l i t 1(1—1 Bank few rl'f.r.s, ;~n* r e~r r r. '.-c; tt The Associated Press a r t i c l e which you r i t h yuT l e t t e r ti , «.nd rhich y u s*y hta stirred up quite & lot of discussion in New )rleans, seems to htre MMMi , t in y ur city ^nly, but thro^jgh >ut the country, aor - urbtnce th&n any other i c ce of ailsinf ^rmttl »n— and there has been isuch of it— red about the banking bill. Since the a r t i c l e has been :ated dlscassed, &Jid iince i t flagrently misrepresent& the ffect£, ink tfaftt i t BtJ propriate and advistible for r«ef ic answering ^ o v l e t t f r , to make ay cosiaents ublic us ^ far as -ossible to the •isehief the a r t i c l e done &nd the confusion i t IMM Wtifetedin the laincls of MO, liiiVe read i t . Wiy the a r t i c l e sho^d give rise to so ;auc Lt»rl ent froa the headlines in the n clip] ing that | sent to «e. Thii> headir ich accurately • ets the contents of he ferticle urf the int ^n subsequently nut on I t by editorial wlt«ri ftr r coiaaent6t o r s , is LS fol ows: „ BACKS WOOM "ROPOS1L TO RULE INDUSTRY Authorisation for I D lann#d <n myf Ins« r t e d In WtML or LOANS Mftf W PROGRAM Credit Hould Be Withheld from Fielde of Ov rproduction The s i m p l e s t and most a c c u r a t e *ty for -.;« t o cii<.racter- ize nis i s to day th&t i t i s eheer fiction^ Like j ur^elf and others T;L r« I d i t , I :iad I ^f such & >R t -until I r ad &bout i t in the nevftpsp r s . id any time ever entered into &nj" discUJsi MB it the ban : in which I have end i t . i n occurred to am p that try |1M b i l l night be susceptible of such &L interpret&ti on• 1st of who a r t i c l e i s that "fresiuentitl *ppr v i l ia clained," by iMloMdf T o r » 'planned economy1 i n which rjonfgr and crodit KOULC; be ted from lachortrlet alr«*47 -roduci xses ai d^Telo^ fltJLAi js&nd exceeds do:'.ieatic supply•• In support of thi£ the a r t i c l e 3 the stfcteaerxt of the objective of Fedoral Reserve policy that, on ay suggestion, v- : i the banking b i l l by the House Cosralttee on Btftkir ency. A r t a i i a g of t h i s pro I &ed et^teiaent of o b j e c t i v t ah a&ke i t e v i d e n t t o any d i s c e r n i n g i n t e d with .matters that the i n t e r p r f t f i t i n1 iaced on i t i n the newspaper t r t i n l e In qii«3tion has nothing t o support i t . The t e x t of t 3tate»eRt of o b j e c t i v e i s a s foliowet -s"It shtll he the duty of the Federal Reserve Botrd exercise such cowers &s it possesses in such manner as to :e conditi r.s conducive t :esa rtabillt M l V: -te by its laflnsatS UB*tt)bf ti i fluctuations ir: the general lev*••JCtisn, tr&de, prices and employment, so far as may be possible within the of Boatttvy action and credit i . ir&tion.* That an objective of this kind is a M U -c tary policy *JBSt be directed lay any responsible authority would seen to be self-evident. I think that no B ttioa t i iion of the Federal Reserve Syetem to atks every effort to ribute as nwch as it possibly can to thfl iffMtt^ &nd naainteo*nce of satisfactory tnd stable tiiwHII ill in the fid. a of . ss «nt . e amd employment* The prapoMi st&tercent of f.his objective is designed to Assert in the b&nking law the broad constituti ^ 1 authority of netsry policy, and to give to the Federal Reserve . :ea *t elfcar-cutrttiftlitlSMof the Wkj** zu for which it 11 use the pMMS*f delegated to it bj Congress* But neither at&teiient of objective, nor any other section if ending I, id authorise either the Federal Reserve Eotrd or the Fedrve banks to determine the tiaount of credit that asmber baaki might, extend to any branch of industrial, coramc-rcial, or tural activity. Under the existing law, the Federal i^SjeSTPS banks have authority to BSfcs loans to ^eaber bt.nK8 on such aper as the reserve banks may find satisfactory within the r strictions prescribed by law. The only change that the pending bill would make in this respect is tfefttj in lieu of the inflexible restrictions scribed by law, the Federal Heaervt: Board would be given U SSSell TSTjr authority to prescribe in general terms the regjlaII Mi under rhich the Federal MserVl banks night make advances to ^enibfr bfjiks on their sound aiS' ts. These regul&tio&s would of cotrse be applicable to ell classes of borrov re alike* The BOiirc *ould have no ftdaitional S4NM rs, unaer the pro posed new law, over credit policies of the eserve banks in relation to aeaber banks. On the coutrfctry, the P.es'rve banks would UN o hav^ the response-ilitj of deciding wbe^ber or not an individual ass«t uttmwt by a -neab^r bank was sound and f.ccept«ble . 4 ~ It should be recalled in this co 1% is not tor. Jle-serve fc extend credit to *.ny iaem'0 r bank on any aas t* The- Pe&erve hank merely has authority to Ro change In this respect ti i«d In the ptajing bill. ! or :.ed nei rould give either the ?ed 3erve Board or the Ft serve banks additional authority over the loan &ni investment policies of iieabcr banks. The- Federal Peserv^ . Mr the existir^; l&ir, has a 1 sibiiity for ^ti :nd tit *nd banki ; . , ithin the ILmit of .oyndness •••hi r banks would romairs free under U n to to tbst y* m&xl.ng9 such loens auci 1 limit in 11 i*«d to rwtMc unir obi o%ere» T sd law voiud in f&ct reaove so?oe of th Active rovici m& of the existing with regard to real estate loans. It will be evident, therefore, th«t, to intpi lie proposed st&te^aent of the objective of Fe^er*i ic-.serve policy as a grant of po<wer to the Federe., rve Eo^rd to concer with the cor.diti ri3 of a particular line of industry fcs t.^inat other lines, is to attribute to it purposes and cor.sequences thfct are foreign to both the letter I rf the banking bill. Lnd regards and &p- tioa of your interest, I aa Sincerely y urs, H. S. 1 ecles, or
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