Word: rediscounted
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...Federal Reserve System also moved toward deflation when nine of its twelve district banks raised their rediscount rates (i.e., the rates which member banks pay on loans from the Reserve Banks) from 1¼% to 1½%. Their strategy was the same: to raise the cost and thereby lower the amount of borrowing...
Deflation. As expected, the Federal Reserve Banks took a tiny step to curb credit. With Federal Reserve Board approval, the rediscount rate (the interest which member banks must pay on advances from Federal Reserve Banks) was raised from 1% to 1¼% in nine of the twelve FRB districts...
...TIME said: "The proposed rise in the rediscount rate . . . was too small to be more than psychological in effect...
Modest Steps. Next day, Eccles had a second thought. He announced that FRB would inch up the rediscount rate from 1% to 1¼% "in the not too distant future." Then Allan Sproul, president of the Federal Reserve Bank of New York, prodded Eccles. FRB has the power to make Central Reserve banks (those in Chicago and New York) increase their reserves another 6%. Why didn't it do so? As for Eccles' new plan, Sproul gave it the back of his hand. Said he: "It would expose us to grave monetary disorders. ... A program of modest steps...
...that Federal Reserve banks be required to back their currency notes by 40% in gold, the same ratio as prewar (it had been dropped to 25% as a war measure). This would have no immediate effect; reserves are actually at 49% now. Nor would the proposed rise in the rediscount rate; it was too small to be more than psychological in effect...