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Mr. Owen. No, not entirely but the reserve notes are now con

that the farmers, of course; and the thing to do is try, seriously and

Mr. McFADDEN. If I may ask you one other question, I was interested in your reference to the fact that we are issuing a commodity dollar now. Have not we changed the plan a bit by the

Mr. McFaddEN. By permitting the Federal Reserve Board, itself, to go into the open market and buy paper, and issue money, rather than have money going up and down, and the notes of the Federal

Mr. OWEN. It would be much better to have a system based upon the flow of commodities; but when you have your credit system pars. lyzed, as at present, it is worth while to use the credit powers of the Government to correct what has been done, temporarily, at least.

Mr. McFADDEN. With the increased use of Government bonds to Government obligations for the issuance of reserve notes.

Mr. OWEN. The Glass-Steagall bill authorized a limited use of

Mr. McFADDEN. The point I was making was that their commodity prices are not the controlling factor entirely in the issue of Federal

by their stocks, look at the effect upon the value of the stock of the
Seimal City Bank, for example, diminished to one-tenth of what it
Th. It was overvalued, in the first place, of course, and now under-
theged; but they have suffered too, and they are only human beings

148
STABILIZATION OF COMMODITY PRICES

Mr. MCFADDEN. To the extent that we place Government secuMr. McFadden. What was your suggestion?

stes back of the Federal reserve notes, are we increasing or diminishMr. OWEN. My suggestion was that they should sequester the gold

z the value of the dollar? certificates as they passed over their counters, and replace them with

Mr. Owen. To the extent that we emit notes and put them in reserve notes, and then redeem the certificates and have that gold put

arculation, it would have a tendency to increase commodity values. to the credit of the reserve banks in the Treasury of the United States.

Mr. MCFADDEN. And decrease the value of the dollar? Mr. McFADDEN. That would mean that the Federal reserve would

Mr. Owex. Yes, unless hoarded. acquire the $1,600,000,000 of gold certificates and hold them?

Mr. GOLDSBOROUGH. Now, I want to make this statement for the Mr. OWEN. Yes, sir; in lieu of Federal reserve notes.

record: The $900,000,000 of gold certificates that I referred to were Mr. McFADDEN. I notice, in the past few months, that the Treas.

$900,000,000 which were in circulation, and not now in the vaults of ury has received between $200,000,000 and $300,000,000 of gold

the Federal reserve banks. certificates. What effect has that had?

Mr. Owen. Yes; I understood the statement, I understood disMr. OWEN. It has had the effect of retiring this gold from circulation, and ultimately, expanding commodity values.

Mr. GOLDSBOROUGH. Now, Senator Owen, have you any further Mr. McFadden. What is the purpose or aim of the Treasury in

catement? doing that?

Mr. Owen. No; I think I have nothing further. Mr. Owen. I would not venture to say what the purpose of any.

Mr. GOLDSBOROUGH. The subcommittee, Senator Owen, has been body is; I would simply say what would seem to be the effect of the

Tery much inspired and helped by the wonderful explanation that you transaction.

sve made of the Federal reserve system and the present condition in Mr. McFadden. Is not that quite in conflict with the present which we find ourselves, and on behalf of the subcommittee I extend hoarding program?

you our most profound thanks. Mr. OWEN. Yes.

Mr. Owen. I am deeply obliged to the committee for its courteous Mr. McFADDEN. To get the people to stop hoarding, and the

Filation to comment on the bill. I wish to say, in this connection, Treasury operation is taking gold certificates out of circulation.

that I have done so as an American citizen exclusively, and as a friend, Mr. Owen. No; they are taking the gold certificates out of circu; lation, but what they are doing is diminishing the monetary demand

1 true friend, of all of our interests

, the biggest banks in the country

as well as the smaller banks in the country, and for our people, and on gold, and leaving the gold in the Treasury. Mr. McFaddEN. I recognize that.

Tiether they are Democrats or Republicans, because we are all sufferMr. OWEN. Yes, sir.

z alike from the economic condition, although comparatively only a Mr. McFadden. Increasing the free gold supply.

a thousands know how it was brought about, and about which there Mr. OWEN. It will have the ultimate effect of increasing the com.

has been very general confusion in the public press. As I say, I modity values, which I am sure the administration

would like to do,

ave seen the enumeration

of thirty different reasons given, but there because it has its economic value, as well as a political value.

s only one subsantial great reason, and that was the excessive exansion of credit in the stock market (1927-1929) and the tragic sreshing" of credit on the stock market, by calling broker's loans

the billions of dollars, the violent shrinking in the values of stocks, Glass-Steagall bill, and did not we change the plan

sunds
, and all

property throughout the country, which imposed its
ferestating effect everywhere as between debtors and creditors.
Many creditors have suffered greatly as well as the debtors. Most
nosiness men are both debtors and creditors.
ve Goldsborotgu

. Do you not

, as a matter of fact, think that, reserve going up and down?

2 the 1926 level of prices was resumed, that the creditors of this counse taken as a whole, would be just as much relieved as the debtors

M: Owen. Possibly more so. You can look at the values of the se snities held by the savings banks, and by the insurance companies,

the great insurance companies, wonderful institutions as they are; the issuance of Federal

sok at their bonds, look at the farm mortgages and mortgages on real state; look at the effect upon our great

banks

, magnificent instituwas , but look at the effect upon their securities, look at the effect

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Mr. OWEN. Slightly, yes.

notes to-day. tracting

Mr. MCFADDEN. To the extent that we place Government securities back of the Federal reserve notes, are we increasing or diminishing the value of the dollar?

Mr. OWEN. To the extent that we emit notes and put them in circulation, it would have a tendency to increase commodity values.

Mr. MCFADDEN. And decrease the value of the dollar?
Mr. OWEN. Yes, unless hoarded.

Mr. GOLDSBOROUGH. Now, I want to make this statement for the record: The $900,000,000 of gold certificates that I referred to were $900,000,000 which were in circulation, and not now in the vaults of the Federal reserve banks.

Mr. OWEN. Yes; I understood the statement, I understood distinctly.

Mr. GOLDSBOROUGH. Now, Senator Owen, have you any further statement?

Mr. Owen. No; I think I have nothing further.

Mr. GOLDSBOROUGH. The subcommittee, Senator Owen, has been very much inspired and helped by the wonderful explanation that you have made of the Federal reserve system and the present condition in which we find ourselves, and on behalf of the subcommittee I extend to you our most profound thanks.

Mr. OWEN. I am deeply obliged to the committee for its courteous invitation to comment on the bill. I wish to say, in this connection, that I have done so as an American citizen exclusively, and as a friend, a true friend, of all of our interests, the biggest banks in the country as well as the smaller banks in the country, and for our people, and whether they are Democrats or Republicans, because we are all suffering alike from the economic condition, although comparatively only a few thousands know how it was brought about, and about which there has been very general confusion in the public press.

As I say, I have seen the enumeration of thirty different reasons given, but there is only one subsantial great reason, and that was the excessive expansion of credit in the stock market (1927-1929) and the tragic

smashing” of credit on the stock market, by calling broker's loans by the billions of dollars, the violent shrinking in the values of stocks, ponds, and all property throughout the country, which imposed its levastating effect everywhere as between debtors and creditors. Many creditors have suffered greatly as well as the debtors. Most business men are both debtors and creditors.

Mr. GOLDSBOROUGH. Do you not, as a matter of fact, think that, f the 1926 level of prices was resumed, that the creditors of this country, taken as a whole, would be just as much relieved as the debtors would? Mr. OWEN. Possibly more so.

You can look at the values of the securities held by the savings banks, and by the insurance companies, our great insurance companies, wonderful institutions as they are ook at their bonds, look at the farm mortgages and mortgages on real estate; look at the effect upon our great banks, magnificent institutions, but look at the effect upon their securities, look at the effect upon their stocks; look at the effect upon the value of the stock of the Vational City Bank, for example, diminished to one-tenth of what it was. It was overvalued, in the first place, of course, and now undervalued; but they have suffered too, and they are only human beings ike the farmers, of course; and the thing to do is try, seriously and

XHIBITS TO THE REMARKS OF ROBERT L. OWEN BEFORE SUBCOMMITTEE OF BANKING AND CURRENCY COMMITTEE ON STABILIZATION Bills MARCH 18, 1932

EXHIBIT 1

Pracipal items of resources and liabilities of all reporting banks in continental l'nited States as compared with similar data for member banks of the Federal Fekete system, on or about June 30, 1931

[P. 140, Report of the Comptroller of the Curency]

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earnestly, to understand what it is that has happened, and take the needed steps to make sure that it can not happen again.

Think of the future. This country ought to have complete stability in credit at low rates, and when it has, our manufacturers in this country, with their mass production; our industrial populations, with its skill and industry; our great railways and our farmers, will all make this country blossom like a rose and we will, indeed, lead the world in every way, financially, commercially, and spiritually; but you can not have spiritual progress in the face of deadly misery. It is enough to turn a heart of stone to tears, to see what is transpiring in this country.

(The charts and tables referred to are as follows:)
1. Resources and liabilities of all banks reporting, June 30, 1931.
2. Resources in comparison for 1927–1931.
2a. Specified resources Federal reserve banks.
3. Circulation statement United States money.
3a. Gold and silver in United States and in Europe.
4. Imports and exports, 1914-1931 merchandise.
5. Purchasing power of the dollar, 1913–1931.

Exchanges by checks. 5a. Chart showing purchasing power of the dollar, 1914-1931. 6. Paper currency of United States by denominations, new issues. 7. Stock and bond averages, 1929–1931. 8. Stock price index chart, 1922–1931. 9. Wholesale prices chart, 1924-1931. 10. Brokers' loans, 1926-1931. Chart. 11. Volume of manufacturing production, 1927-1931. 12. Factory employment and pay rolls, 1920–1931. 13. Comparative earnings, 550 industrial companies, 1927–1931. 14. Freight car loadings, 1924-1931. 15. Brokers' loans in detail-Table, 1926–1931. 16. Brokers' loans in detail--Table, 1926–1931. 17. Reserve bank credits and factors, 1917–1932. 18. Building contracts, 1919-1931. 19. New corporate issues, 1919–1931. 20. Transactions daily New York Stock Exchange October, November, 1929. 21. Loans reporting member banks and investments, 1919–1931. 24. Gold surplus chart. 25. Reserve bank credit chart. 26. Physical volume of Industrial Production. 27. Price level chart.

These tables show by chart (Exhibit 10) and in detail (Exhibit 15) the brokers' loans on call and how they were contracted October, 1929. The fact that coincidently with the calling of these brokers' loans, bank credits, deposits

, and discounts went down in billions (Exhibit 2), stock prices violently fell (Exhibit 8), and within two years fell 75 per cent (Exhibit 7), that wholesale prices then steadily declined (Exhibits 9 and 27), that the volume of production then fell (Exhibits 11 and 26), that factory employment and pay rolls then fell (Exhibit 12), that corporation incomes fell to one-third (Exhibit 13), that freight-car loadings then fell (Exhibit 14), that building contracts then tell heavily (Exbibit 18). That then the purchasing

power of the dollar violently rose in terms of stocks (Exhibit 7) and in terms of commodities (Exhibit 5 and 27) proves the cause sod effects of credit contraction.

The gold surplus appears, chart 24, and the reserve bank resources are shown (Exhibit 25; 2a, 17).

72.04

61.30 59.96 64.83

75. 46 6,051, 133 78.03 4,475, 169 62.96

38, 229 72.17 76.35 1, 133, 538 75.03 10,034, 842 77.31 | 11, 191, 788

44, 581 16,934 1,056 6,842 6, 429 59,083 82, 145

Exclusive of banks in Alaska and insular possessions,
seaded in all reporting banks in column 1.
ending overdrafts.

EXHIBIT 2

Rezources and liabilities of all reporting banks on or about June 30, 1927–1931

[P. 139, Report of the Comptroller of the Currency)

In thousands of dollars)

1927 (27,061 1928 (26,213 1929 (25,330 1930 (24,079 1931 (22,071 banks) banks)

banks)

banks) banks)

bota betina botue, furniture and fixtures. In tata owned other than banking

RESOURCES sed discounts(ineluding rediscounts). 37, 270, 378 39, 542, 067 41, 376, 289 40,460, 670 35, 164,850

43, 450
50, 407 56,857 49, 438

45, 650 17, 255, 093 18, 771, 814 17, 348, 738 17, 944,728 20,060, 153 1,580, 105 1,663, 696 1, 754, 454 | 1,810, 357 1,808, 254 399, 473 403, 967 390,816 425, 151

446, 488 Inne with Federal reserve banks or

1,007, 896 887, 846

819, 928
865, 970

884,327 2, 932, 954 3, 105, 840 3, 192, 200 3,433, 102 3, 402, 189 Lupte les clearing house and other

3,967,448 3,616, 408 3,567, 525 3,994, 325 4, 133, 720 2, 181, 167 1,753,098 1,691,772 2,884, 635 1, 946, 709 1, 494, 594 1,779, 186 1,973, 946 2,151, 748 2,316, 809 68, 132, 558 71,574,328 72, 172, 505 74,020, 124 70,209, 149

EXHIBITS TO THE REMARKS OF ROBERT L. OWEN BEFORE SUBCOMMITTEE OF

BANKING AND CURRENCY COMMITTEE ON STABILIZATION Bills MARCH 18, 1932

EXHIBIT 1

Principal items of resources and liabilities of all reporting banks in continental

United States as compared with similar data for member banks of the Federal reserve system, on or about June 30, 1931

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Resources and liabilities of all reporting banks on or about June 30, 1927–1931

(P. 139, Report of the Comptroller of the Currency)

(In thousands of dollars)

1927 (27,061 1928 (26,213 1929 (25,330 1930 (24,079 1931 (22,071

banks) banks) banks) banks) banks)

RESOURCES

35, 164, 850

45, 650 20, 060, 153 1, 808, 254

446, 488 884, 327

Loans and discounts(including rediscounts). 37, 270, 378 39, 542, 067
Overdrafts.

41, 376, 269 | 40, 460, 670

43, 450 50, 407 56, 857 Investments.

49, 438

17, 255, 093 18, 771, 814 17, 348, 738 | 17, 944, 728 Banking house, furniture and fixtures.

1, 580, 105

1,663, 696 1, 754, 454 Real estate owned other than banking

1, 810, 357 house.

399, 473 Cash in vault.

403, 967 390, 816 425, 151

1,007, 896 887, 845 819, 928 Reserve with Federal reserve banks or

865, 970 other reserve agents.

2, 932, 954 Due from banks.

3, 105, 840 3, 192, 200 3, 433, 102

3,967, 448 3,616, 408 3, 567, 525 3,994, 325 Exchanging for clearing house and other cash items.

2, 181, 167 1, 753, 098 1, 691, 772 Other resources.

2,884, 635

1, 494, 594 1, 779, 186 1, 973, 946 2, 748 Total.

68, 132, 558 | 71, 574, 328 72, 172, 505 74,020, 124

3, 402, 189 4, 133, 720

1,946, 709

70, 209, 149

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