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formerly embodied in the classic phrase, " What do we care for abroad? " Just at this juncture what we think about foreign matters and policies implies, however, a very definite point of view with respect to our own affairs. If we part with more gold, or if we increase our credits very much, we shall necessarily have to adjust our domestic banking policy accordingly. Perhaps we ought to do just that—it may be that the "stabilization" of foreign monetary systems is of so important a significance as to make credit questions in this country quite secondary. The point is not whether this may or may not be true, but is simply that whatever we do with regard to foreign countries in these particulars we are really doing with regard to ourselves.

The conferences which are to take place abroad between the heads of central European banks are therefore, as this newspaper stated a few days ago, a continuation of those that have been carried on in the past, and particularly of the one which occurred last summer, at which time the discount policy for this country was arranged for the coming half year.

The CHAIRMAN. Governor Hamlin, the committee will be very glad to hear from you now.



Mr. HAMLIN. Gentlemen, I come here in response to the request of the committee, and I assume the committee desires to have me express my opinion on this present bill; to state whether in its present form I approve it, and to give my reasons for approval or disapproval.

The CHAIRMAN. YOU are quite correct. We shall be very glad to have you proceed in that way.

Mr. HAMLIN. I shall be very brief. I know how busy the committee is.

First, I want to say that in its present form I do not approve of the bill; but I have formulated some suggestions, in the desire to be helpful, and in those suggestions I think will be found removed many of my objections, perhaps all of my objections to the bill.

The first point I want to raise is as to section 2&-C, the repealing act. There is a repealing act now in section 26 of the Federal reserve act which I think is in much better form than this; and, of course, if this bill becomes law, it becomes part of the Federal reserve act, and the old section 26,1 assume, will apply. So I think there is no need of that section at all. But, personally I would prefer to have this section modified so as to state that this amendment is merely declaratory of the present law as Congress understands it.

That is, I understand it has been stated over and over again that there is no intention to change the present law or to add to or subtract from the duties and responsibilities of the Federal Reserve Board, and I think it would clarify the matter very much if instead of putting in this repealing clause we merely state that this act is declaratory of the law as Congress understands it to-day.

Then, turning to page 2, paragraph (g), we are defining the Federal reserve system. Of course, for the purposes of this act, that definition is correct; but as this will become part of the Federal reserve law, I merely suggest that you add the Federal advisory council. You are merely describing the whole system. I t is not material, but I think that will be unobjectionable.

Then, coming to paragraph (h) of the present bill, defining the duties of the bo^rd, I have redrafted that paragraph, changing it, I think, very slightly. If I may, I will read it. I t is very short.

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Mr. HAMLIN. I merely put it in the other form. It amounts to the same thing.

I will pass now to paragraph (i), the publicity clause. And let me add in parentheses that, speaking personally, whatever law Congress passes I shall do my best to carry it out faithfully, in substance and in spirit. It is hardly necessary to say that.

As to the publicity policy, I have some doubts. It will be very difficult to state all the reasons for action. As you gentlemen know, the Federal reserve banks, for example, establish a rate of discount.

That is approved or disapproved by the Federal Reserve Board.

The primary judgment is the judgment of the directors. I think that in order adequately to give the reasons for action the board would have to have a poll of every director of the reserve bank who votes to establish a rate. Then, coming to the reserve board, the board has affirmatively to approve or deny and prevent that rate being established. There may be a very close vote in the board.

In my judgment it would be necessary to poll every member of the board, because some members might say that they voted to establish the rate for reasons other than those given by the directors of the banks. They might say they did not believe in the reasons given by the directors of the banks, but for other compelling reasons they voted to establish the rate.

I think it would be intensely difficult at times to give out any statement to the public that would not be misunderstood and that would not lead to very great confusion. For example—I hesitate to bring this up—take the case 'where the board on September 6 put in a rate of 3% per cent at Chicago on its own initiative. Now, there were so many issues there that it would require almost a book to state the exact facts to the public, and I think they could hardly be stated in such a way that they would not be misunderstood and would not have to be reexplained.

So I have some doubts about that. If Congress decides, however, that that is the proper thing to do, I shall most cheerfully accept it and carry it out.

For example, in the Chicago rate case there were several questions involved. The meeting was held on Tuesday. On Friday we knew that the rate would be reduced by the directors. Some or the members felt that the rate should be put in on Tuesday and that \we should not wait until Friday. Others felt that we ought to wait until Friday and then settle the question. Some felt that the rate ought to be reduced, but that the members would hesitate to override the mature judgment of the board of directors, who were on the spot, who knew all of the conditions and did not want that rate reduced. You might state four or five distinct issues. To present to the public a clear conception of that would be very difficult and almost impossible. I think the board now, as a rule, publishes as far as it can, or as far as it deems wise or necessary, everything in connection with discount rates in its annual report and from time to time in the Federal Reserve Bulletin.

It would take some space to take up the question of the reduction of the rate last summer from 4 to 3% per cent. There were several questions there discussed. That, however, is not as difficult a question as the other that I cited. But I feel that a decision on a rate question involves not only the present and the past but it neces

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The CHAIRMAN. The committee will come to order. This is a resumption of the hearings on H. E. 11806 with Mr. Hamlin, of the Federal Reserve Board. Do you remember where you left off yesterday, Mr. Hamlin?

Mr. HAMLIN. Yes, sir. I had nearly finished.

The CHAIRMAN. We will be glad to have you proceed.

STATEMENT OF CHARLES S. HAMLIN—Continued Mr. HAMLIN. I would like to ask the permission of the committee to substitute a new form for my substitute for paragraph (h). I have merely phrased it in a little better language.

Mr. STRONG. What change did you make?

Mr. HAMLIN. I put in the word " commensurate." I think yesterday I used some other word. That is in the record. I thought the word " commensurate " expressed the idea better.

Mr. STRONG. It now reads, "Shall furnish credit facilities commensurate with the requirements," and so forth ?

Mr. HAMLIN. Yes. I think that is the only change, except, possibly, in punctuation.

The CHAIRMAN. Without objection, this substitute of Mr. Hamlin's will be placed in the record.

(The matter referred to is as follows:)


The Federal reserve system shg.ll use all the powers and authority now or hereafter possessed by it to maintain a stable gold standard and shall furnish credit facilities commensurate with the requirements of credit stability of agriculture, industry, employment, and of the purchasing power of the dollar, so far as such purposes can be accomplished by monetary and credit policy.

To this end the Federal reserve system is authorized to enter into relations with foreign central banks not inconsistent with the purposes of this amendment.

Mr. HAMLIN. I want to make one addition to my testimony of yesterday. It is immaterial. It is in connection with the Chicago rate case, t merely want to say that one member at least of the board opposed any reduction. I did not quite complete my statement.

I want to say also that I approve thoroughly the investigations which this bill calls for. I should like very much to have them made, and to profit by them when made.

There is one further suggestion I wish to make. In the fifth clause of section 28-A you direct us to make inquiries as to the various index numbers; but under the bill, if they is any mandatory force in the bill, we have to begin at once. The question is, What indexes have you in mind? I assume that you mean the wholesale price indexes.

Mr. STRONG. Yes.

Mr. HAMLIN. But I wanted to point out that there is great difference. For example, in the period from 1925 to 1927 the Bureau of Labor wholesale indexes show a price decline of about 12 per cent;

but if you take the curve of the cost of living, the decline was barely 2 per cent. If you take a composite index like Mr. Snyder's, there was hardly any decline at all. Now, I understand that you have confidence in the board and trust them to make a proper selection.

Mr. STRONG. I certainly have, Mr. Hamlin. My purpose is to direct that all of the powers of the bbard be used to stabilize the purchasing power of the monetary unit, the dollar, which I believe

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having reached that conclusion, I am now prepared to say that, with the suggestions I have made, my objections to the bill are practically removed.

That is all I care to say, Mr. Chairman.

Mr. STRONG. There are one or two questions that I would like to ask you. Do you think increased efficiency in industry will necessarily bring about a corresponding lower price level ?

Mr. HAMLIN. I think it might. It might produce a lower price level and a higher wage level.

Mr. STRONG. DO you think that increased efficiency in agriculture will naturally produce a fall in the general price level?

Mr. HAMLIN. It might.

Mr. STRONG. DO you think there ought to be a reduction of our general price level to meet European conditions ?

Mr. HAMLIN. NO. I think the reduction in the general price level should be brought about by improved processes, as I have stated, as frequently happens, due to savings, elimination of waste, and so forth.

Mr. STRONG. But we should not endeavor to reduce our price level in order to help conditions in Europe?

Mr. HAMLIN. No; I should not care to use that as a reason. On the other hand, I should not care to keep up an artificially high-price level, which would mean that our exports would practically be driven out of the field and our imports tremendously accelerated.

Mr. STRONG. Of course, our exports represent approximatey 8 per cent of the commerce of the Nation. Ninety-two per cent, approximately, is commerce inside the Nation.

Mr. HAMLIN. Yes.

Mr. STRONG^ I was wondering whether you felt that in order to meet the conditions that might arise in maintaining the 8 per cent of foreign commerce, the price level that would affect the 92 per cent of our domestic commerce should be lower. Let me put it a little more clearly. Do you think that we ought to have a recession of the price level in this country toward a pre-war level ?

Mr. HAMLIN. NO. That had never occurred to me, if you mean it in the sense of deflating prices.

Mr. STRONG. Yes.

Mr. HAMLIN. Not at all. But I do not believe that the recession of prices brought about by improvements in productivity and manufacturing processes, elimination of waste, and gain to the consumers, is a disadvantage that in any way affects stable conditions of commerce or agriculture.

Mr. STRONG. Some authorities believe that the beneficial conditions brought about by that increased efficiency will alleviate any attempt to reduce the price level. But, leaving that out of the question, I wanted to get your idea as to whether or not we should have a lower price level; because there has been some suggestion that this action directing the Federal reserve system to maintain the price level was untimely, and some suggestions have been made to me that we ought not to put that kind of a mandate into the law until the price level has receded—which, to my mind, would be a very bad thing to do, because I want to stabilize now, and not when the country has been deflated and the price of money and gold appreciated.

Mr. HAMLII^. YOU would say, if not now, when ?

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The CHAIRMAN. There was mention made here the other day, I think when Doctor Miller was on the stand, of a conference of statisticans recently held in Paris; men representing the various banks of issue, at which conference Mr. Goldenweiser, of the Federal Reserve Board, was present. It was left rather in the air as to what this conference was, and in that connection, also, these various conferences that are taking place abroad, either participated in with the authority of the Federal Reserve Board or without that authority.

I wonder if you would not tell the committee this morning, just briefly, what this conference was that Mr. Goldenweiser attended.

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