Word: frb
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...root of inflation, Eccles and Sproul agreed, is the vast increase in credit money which has bid up the prices of goods. Although FRB had restricted consumer credit, Eccles said that FRB's powers to control overall credit are "much more limited than is generally believed." The reason, said Eccles, is that U.S. banks, heavily loaded with Government securities, can sell them at any time to the Federal Reserve Banks. As long as the Reserve Banks are compelled to buy them and keep prices pegged at a level, the operation virtually guarantees banks against any loss. For every...
...stop this, FRB has been pushing for higher interest rates on Government securities, to induce banks to hold them. Since a rise in the Government rate would also boost private rates, an increase would also make private loans more expensive and cut them down. Last summer, FRB, by a tricky maneuver, boosted the rate on short-term Government securities (TIME, Sept. 4) and hoped to do the same for long-term bonds. But a fortnight ago, Secretary Snyder, who had lost last summer's battle, announced that he had won the war. He had won the President...
...FRB action was mainly a political move to show that, after cracking down on housing and retail credit, it was playing no favorites. Actually, there was comparatively little credit in the market. On Jan. 1, the amount of borrowing on stocks by New York Stock Exchange members was only $698 million, less than 1% of the total market value of listed stocks. Such credit was actually lower than in July, when the market itself was far lower. In short, the market's rise had been caused almost entirely by cash buying-notably by pension funds, investment trusts, etc. Last...
What was needed, said McCabe, was not a lessening of credit controls but a tightening. FRB was already considering a clampdown on charge accounts, bank loans and other inflationary influences...
Holler & Spurt. There was plenty of evidence last week that such a tightening could not come too soon. Despite FRB's credit pinching, bank loans kept right on rising to new alltime highs. And even though builders had hollered at Regulation X (TIME, Oct. 23), housing starts in 1951 might well be higher than FRB intended. Furthermore, the auto dealers were using old figures when they talked of slumping sales. With a threatened cut in auto output, car sales have recently spurted upward again. Nevertheless, FRB thought that tougher credit controls might check inflation-if given a chance...