Word: discountable
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Dates: during 1950-1959
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...bank areas. This freed $500 million from reserves, and since each such dollar can generate up to $6 in loans, it could add close to $3 billion to the credit supply. The move should give business a bigger lift than the Fed's two recent cuts in the discount rate, which actually created no new credit...
Bankers have long clamored for the cut in reserves (TIME, Jan. 20) as the logical follow-through to the discount-rate reductions. But last week they grumbled that the cut was not big enough. Said President George Champion of the Chase Manhattan Bank, second biggest in the U.S.: "This is only a token adjustment and not as much as will be needed. The time is ripe to loosen up much more on reserve requirements...
...seven-man Federal Reserve Board went a request for help last week from the Federal Reserve Bank of Philadelphia. Philadelphia's President Alfred H. Williams argued that a tonic was in order for the nation's recession. Could Philadelphia cut the discount rate it charged member banks for loans? The FRB promptly approved a ¼% cut (down to 2¾%), the second in two months. In quick succession, six Federal Reserve banks across the U.S. dropped their rates, and the remaining five were expected to follow soon. Said a top FRB money manager: "Look at the news ticker...
Psychology & Reserves. Actually, bankers viewed the discount cut as a cautious psychological move, like the cut in stock margin requirements (TIME, Jan. 27), rather than any real easing of credit. Said Board Chairman John Sibley of the Trust Co. of Georgia: "The impact is on the public mind, not the economy as such." Over the last few months, the Fed's only real attempt to pump more credit into the economy has been to allow bank reserves (and thus their lending ability) to increase by some $500 million, partly through open market purchases of Treasury securities...
Businessmen found less cheery news on the credit front. Money was about as tight as in November, when the Federal Reserve Board cut its discount rate from 3½% to 3%, and there was a growing grumble of complaint about it. Last week Harvard Economist Sumner Slichter added his voice. Tight money, said he, is actually defeating the Fed's purpose of fighting inflation. Wrote Slichter in Business Scope, a biweekly published by professors: "The present recession is largely the result of overdoing credit restraint, and is causing us to consume valuable inventories of goods and to reduce...