Word: frb
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Tightening Up. Last week FRB, which had been tightening up on credit since last summer, thought the time had come to tighten up some more. Bank loans, which expand credit and to some extent feed the fires of inflation, rose $108 million in the New York City area, to an all-time high of $5.7 billion (topping the previous peak of 1948). There was little doubt that loans around the nation were also...
...fortnight ago, Treasury Secretary John Snyder reaffirmed his cheap money policy. He announced that the Government would keep its interest rate at 1¼% when it refunds $13.5 billion in Government securities in September and October, biggest refunding at one time in history. In turn, FRB approved a boost in the discount rate in the New York area from 1½% to 1¾% as a warning to Snyder (TIME, Aug. 28). Last week Federal Reserve Banks across the U.S. upped their discount rates, thus putting pressure on bankers to raise their interest rates on commercial loans...
...necessary, FRB could go even further and order an increase in the cash reserves that banks are required to hold against their deposits; this would cut down funds available for loans. Nevertheless, the Treasury seemed in no mood to back down on its policy. Officials argued that a slight increase in interest rates would not check inflation; it was not enough to scare off borrowers. At the same time, a slight increase in Treasury's rate would add considerably to the burden of carrying the national debt-i.e., an increase of ⅛ of 1% in the Treasury...
Meanwhile, the Federal Reserve Board, which wants to fight inflation with credit curbs rather than price controls, started putting them into effect last week. By boosting the discount rate in the New York area from 1½% to 1¾%, the FRB, in effect, raised interest rates on commercial loans, thus made it harder to borrow money. Since the New York rate usually sets the pattern for the country, bankers expected a general rate rise soon...
Giannini argued that the FRB had known of the deal for months, and should not have waited until the last minute to object. The federal court thought differently: it convicted Giannini and Transamerica President Sam H. Husbands of contempt, ordered them to jail within 30 days and their companies each to pay fines of $2,500 a day unless the sale was called...