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Commercial and Financial Chronicle o f September 3, 1932 (page 1588) ^ S S BY GOV. MEYER OF FEDERAL RESERVE BOARD AT PRESIDENT HOOVER'S ECONOMIC JgJ-IEHENCE — PART PLAYED BY RESERVE SYSTEM IN MEETING FINANCIAL STRAIN THROUGH "^CH COUNTRY HAS PASSED. (August 27, 1 9 3 2 . ) The P r e s i d e n t has given you a comprehensive and graphic p i c t u r e o f the ev ©nts o f a d i f f i c u l t and almost d i s a s t r o u s character through which we have G e n t l y passed and the Secretary of the Treasury has brought you up to date *ith regard t o many o f the steps t h a t have been taken to meet them. The Federal ^ s e r v e System n a t u r a l l y was c a l l e d upon t o play a c o n s i d e r a b l e p a r t i n a l l t h Q se events. With the breakdown o f two o f the f o u r g r e a t f i n a n c i a l powers o f the world summer, the Federal Reserve System was c a l l e d upon t o withstand shocks ^ i c h experience had n o t taught us the way to meet, f o r which t h e r e vras no p r e sent, and f o r which t h e r e was no charted p a t h . The System, however, had been so w e l l grounded and f o r t i f i e d t h a t , through it s a b i l i t y t o expand currency and supply the needs o f member banks, i t was able ^ d i l y t o meet a s i t u a t i o n o f u n p a r a l l e l e d c h a r a c t e r and p r o p o r t i o n s , namely, th 8 e x p o r t o f more than $700,000,000 o f gold and the hoarding o f over $400,000,000 ^ home during the f i v e weeks f o l l o w i n g the suspension o f the gold standard in ^Kland, by the expansion o f Federal Reserve c r e d i t t o the extent o f more than Si *°00,000,000 through the purchases o f b i l l s ^ e r in the open market and d i s c o u n t s for banks. This s i t u a t i o n , o f c o u r s e , throw a tremendous s t r a i n on our whole banking £P i c t u r e , as has already been i n d i c a t e d , and the c r e a t i o n o f the N a t i o n a l Credit ° r P o r a t i o n t o a s s i s t the Federal Reserve System and o t h e r o r g a n i z a t i o n s in meet£ t h a t s t r a i n was determined upon. The bankers o f the- country , as alwavs w -2^hen c a l l e d upon in the ptiblic i n t e r e s t , responded most promptly and most P a t r i o t i c a l l y and most e f f e c t i v e l y . Their a c t i o n c a r r i e d the s i t u a t i o n u n t i l the Congress met and passed the Act c r e a t i n g the Reconstruction Finance C o r p o r a t i o n , which was c a l l e d 9 *Astenco t o meet continuing and i n c r e a s i n g d i f f i c u l t i e s . into I t s immediate o p e r a - tion was made p o s s i b l e by the very hearty c o o p e r a t i o n o f the Federal Reserve W k s , which l e n t t h e i r personnel and f a c i l i t i e s t o aid in the establishment ^ operation o f the f i e l d o r g a n i s a t i o n o f the C o r p o r a t i o n . "While i t was n o t the f u n c t i o n o f the Federal Reserve banks to administer Reconstruction Finance Corporation A c t , they w i l l i n g l y stepped in and ^ t i i s h e d temporary a s s i s t a n c e and management in the f i e l d in o r d e r t o enable th e agencies t o go i n t o a c t i o n with the speed t h a t was v i t a l l y n e c e s s a r y . The problem, however, c a l l e d f o r more adjustments as time went o n , and I ^ i n k the a b i l i t y o f tho .American people t o make needed adjustments as circumstances develop i s the t e s t o f the a b i l i t y o f our p o l i t i c a l system in tho broadest 5 e ^se o f the \o rd t o f u n c t i o n e f f e c t i v e l y in times l i k e t h e s e . A number o f measures in a d d i t i o n t o the c r e a t i o n o f the R e c o n s t r u c t i o n -^''mce Corporation were n e c e s s a r y , and the Congress cooperated w i t h the Administration by passing them promptly. The Pbderal Reserve powers were i n c r e a s e d so ^ a t when member banks lacked e l i g i b l e p a p e r , loans were a v a i l a b l e t o them, e *ther i n d i v i d u a l l y o r in groups, on the s e c u r i t y o f otherwise i n e l i g i b l e p a p e r . In a d d i t i o n , the Federal Reserve System was a u t h o r i z e d , f o r a l i m i t e d t o s u b s t i t u t e Government bonds f o r e l i g i b l e paper or g o l d as s e c u r i t y Federal Reserve n o t e s . This measure, which was agreed upon and promptly ^ s s e d , has been a v i t a l f a c t o r in our a b i l i t y promptly t o meet a second s e r i e s °J-> hoardings a t homo and withdrawals o f gold f o r oiq^ort. Through the e x e r - cise o f theso powers and the fundamental s t r e n g t h o f the System, a l l such ^mands have been met. I think i t i s f a i r t o say now t h a t in the l i g h t o f the two great c r i s e s those in Germany and in England — there vras a general opinion abroad that ^kis country would not be able t o meet the t e s t ; t h a t we would have t o surronder to 4-U "the s t r a i n as they d i d . And I am sorry to say that a good many Americans, ^ o , X hope, know b e t t e r now, f o l l o w e d that l i n e o f defeatism and surrender in thQir thoughts. I t h i n k , however, that the great bulk o f the American people b e l i e v o d in thfi lQ fiiselves, as we did here, and never gave way t o the idea t h a t we would be ^ a b l e o r unwilling t o stand the s t r a i n . C e r t a i n l y no one in the Federal Reserve Astern ever surrendered in thought or deed, T he main guiding p r i n c i p l e in the operation o f the Federal Reserve System through t h i s p e r i o d has beon t o maintain i n t a c t the a b i l i t y o f the Federal itj serve banks t o s e r v e , through t h e i r member banks and through open-market °P©rations, the needs o f American commerce, industry and a g r i c u l t u r e . th I t has been able t o do so "under e x c e e d i n g l y d i f f i c u l t c o n d i t i o n s , and w i t h a d d i t i o n a l powers t h a t have beon granted by Congress, i t i s our firm b e l i e f ^hat i7o w i l l in the f u t u r e , as we have in the p a s t , with a b s o l u t e c o n f i d e n c e in 0llr rosources and our p e o p l e , stand by our i n s t i t u t i o n s and through them main- ^ i n and support, t o the utmost o f our a b i l i t y , our commerco, industry and ture. Of WEitNOu's
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