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1_81. X-!~34 Any attempt to control credit by refusing to rediscount is subJect to seriuus administrative difficulties. If the :ps.per. offe!'ed is eligible and good, it would be better for a reserve bank to grant accorornodation at a price rather than to refuse it entirely, but the act, subdivision (cl)t section 14, :provides that a Federal Reserve J3EU1J.( shall have power to establish from time to time, subject to review and determination of the Federal Reserve Board, rates of discount to be charged by the Federal R~~erve Bank for each class of paper, which shall be fixed with a view of accommodating cornri,e:•ce md business. There is no authority, however', for establishing graduated rctes based upon the total borrowings of a member bank, and consequentl;y when it becomes nece~;;sary to ad.va:r.i.ce the discoulit rate in order to curb the demnnds of those banks rediscotalting with the Federal Reserve Banks in very large amounts, the same rate would nave to apply to the moderate requiremmts of other meruber banKs who may rediscount with the Federal ReHerve :Banks infrequently and never excessively· Thus the application of rate as a corrective or deterrent to certain banks tends to raise the level of current rates to all. .. The Board, therefore, recommends to Congress that an additional power be granted it, by adding to subdivision (d), section 14, a :proviso that each Federal Reserve Bank may 7 with the approval of the Federal Reserve Boam, determine by uni:l:' orm rule, a:pplicab le to all its member banks ali..IS:e, the normal maximum rediscount line of ea.cb member ba.n.tt: nnd that it may submit for the review and determination of the Federal Reserve :Board graduated rrtes on an ascending scale to appJ.y e,:::.uaHy ancl ratably to all its member banks rediscounting amounts in excess of the normal line so determined. In this vlay, in the opinion of the Board, it would be pos,;ible to reduce excessive borrowings of member banl~s and to ir..d.uce them to :nold their ovm large borrowers in check ~,·.rithout raising bas:l.c rates.
@FedFRASER