PREVENTING BOOM IN U.S.

Press, Volume LXXIII, Issue 22005, 1 February 1937, Page 9

PREVENTING BOOM IN U.S.

INCREASE IN RESERVE REQUIREMENTS THIRD STEP IN CURBING CREDIT EXPANSION ItNITLD PI'ESS ASSOCIATION— COpyiUGIIT.) (Received January 31, 11.50 p.m.) WASHINGTON, January 30. The Federal Reserve Board announced that it will increase by a third the reserve requirements of member banks, to become effective between March 1 and May 1. The move is to prevent a possible "injurious credit situation" similar to that of 1929. This is the third action in eight months to prevent a credit boom. The last step -is expected to have eliminated 1,500,000,000 dollars of excessive reserves, leaving 500,000,000 dollars of such excess, which is believed to be ample to finance further recovery and maintain easy money conditions. The previous steps were a 50 per cent, increase in reserves on July 14 last and gold stabilisation policy begun by the Treasury last month. [As a means of curbing the widelypredicted boom after Christmas, which, it is said, would rival that preceding the 1929 market collapse, Mr Henry Morgenthau, jun., Secretary of the Treasury, announced on December 21 a new policy by which the Treasury was to purchase outright and sterilise j newly-mined and imported gold,! which it would not allow to become the basis of new bank credits. Through the Federal reserve system the Trea- ( sury would issue its own securities' and the public would use the proceeds to buy gold at the present rate, but instead of issuing gold certificates, the reserve banks would set the metal aside in an inactive account, where it could not form the foundation of credit.]