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STABILIZATION

HOUSE OF PEPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Monday, March 19, 1928.

The committee met at 10.30 o'clock a. m., Hon. Louis T. McFadden airman) presiding.

The CHAIRMAN. The committee will come to order.

This is a hearing on H. R. 11806, a bill introduced by Representatre Strong of Kansas, under date of March 6, 1928, proposing to and the act approved December 23, 1913, known as the Federal serve act: to define certain policies toward which the powers of the Federal reserve system shall be directed; to promote the maintenance a stable gold standard; to promote the stability of commerce, astry, agriculture, and employment; to assist in realizing a more sabe purchasing power of the dollar, and for other purposes.

This is really a continuance of the hearings that were consummated the spring of 1927 on H. R. 7895.

The bill under consideration is as follows:)

BILL. To amend the act approved December 23, 1913, known as the Federal reserve at to define certain policies toward which the powers of the Federal reserve system mi be directed; to further promote the maintenance of a stable gold standard; to priate the stability of commerce, industry, agriculture, and employment; to assist in masing a more stable purchasing power of the dollar, and for other purposes

bit enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the act approved December 23, 1913, w: as the Federal reserve act, as amended, be further amended as follows: Al to section 14 the following paragraphs:

The term Federal reserve system,' as used in this act, shall mean the Bral Reserve Board, the Federal reserve banks, and all committees, coms, agents, and others under their direction, supervision, or control.

* 11 The Federal reserve system shall use all the powers and authority now ir hereafter possessed by it to maintain a stable gold standard; to promote the acy of commerce, industry, agriculture, and employment; and a more me purchasing power of the dollar, so far as such purposes may be accompated by monetary and credit policy. Relations and transactions with foreign hanks shall not be inconsistent with the purposes expressed in this amendment.

Whenever any decision as to policies is made or whenever any action is by the Federal reserve system tending to affect the aforesaid purposes amendment, such decision or action and reasons therefor shall be her published by the governor of the Federal Reserve Board at such place, and in such detail as may be deemed by him to be most effective thering such purposes, and at least once each year in the Annual Report e Federal Reserve Board to the Congress."

2. After section 28 add the following:

284. The Federal Reserve Board and the Federal reserve banks are by authorized and directed to make and to continue investigations and des for the guidance of the system's policies, at least to the extent and in uber described in paragraphs 1, 2, 3, 4, and 5 of this section, and to such extent as they may deem to be desirable; namely,

*(1) of the manner and extent to which operations of the Federal reserve affect (a) the volume of credit and currency, (b) the purchasing power

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of the dollar, (c) the general level of commodity prices and of other rel prices, (d) the prices of stocks and bonds, and (e) business activity; th changes of rates of discount, purchases, and sales of securities in the open m relation and transactions with other banks of issue, or through any other "(2) Of the influence of activities of agencies of the Government United States or of domestic or of foreign banks not under the control or ence of the Federal reserve system, or of any other agency or agencies up" purchasing power of the dollar; and of the influence exerted upon the r and affairs of the member banks, and of their customers by means of representations, by publicity, or otherwise; and of the effect of such oper as are conducted by the Federal reserve banks with foreign banks.

"(3) Of the effect upon the purchasing power of the dollar of changes supply of and demand for gold, either actual or prospective.

"(4) Of existing means and proposed plans, both national and interna having for their aim the stabilization of agriculture, industry, commer ployment, and the purchasing power of money.

"(5) Of existing or proposed index numbers of prices or other measu the purchasing power of money, which are used or might be used, singly combination, by the Federal reserve system as a guide in executing its polic

SEC. 28B. The Federal Reserve Board shall report to the Congress time to time, and at least annually, the methods pursued and the concl reached, either final or otherwise, resulting from the aforesaid investig and any legislation which will, in its judgment, best promote the purp this amendment to the Federal reserve act.

"SEC. 28C. Acts and parts of acts inconsistent with the terms of this 2 hereby repealed."

The CHAIRMAN. I may say at the opening of these hearings at the request of Representative Strong, the chairman of this mittee called this meeting this morning, and prior to the calli the meeting he sent invitations to certain people whom we desir have heard at this hearing. Among them were Governor Benj Strong, of the Federal Reserve Bank, of New York; Prof. O. M Sprague, of Harvard University-who, by the way, has not been located, he being out on a trip through the Middle West as soon as the invitation can be gotten to him he will be invite appear before the committee on this subject matter; Prof. Joh Commons, of the University of Wisconsin, at Madison; and Owen D. Young, a director of the Federal Reserve Bank of York, were also invited. An invitation was also extended to governor of the Federal Reserve Board and members of the b to appear before the committee.

I understand that at the meeting this morning there are pr Governor Strong, of the Federal Reserve Bank of New York: ernor Young, of the Federal Reserve Board; Mr. Goldenwe director of research, of the Federal Reserve Board; Doctor Bur of the Federal Reserve Bank of New York; Mr. Platt, of the Fed Reserve Board; and Prof. John R. Commons, of the Universit Wisconsin. In order that we may have a record of those that appearing, is there anyone else here that I have missed? There was no response.)

The CHAIRMAN. At this point I would like to read the reply w I have received to the invitation extended to Mr. Owen D. Youn be present at this hearing.

Hon. Louis T. MCFADDEN,

NEW YORK, March 16, 19

Chairman Committee on Banking and Currency,

House of Representatives, Washington, D. C.

DEAR MR. MCFADDEN; I regret that I am leaving New York to-night will be absent for about five weeks, and so I can not without great pers

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