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TUESDAY, JUNE 7. I960
MEDFORD MAIL TRIBUNE. MEDFORD, OIE.
Federal Reserve System's
Method of Operation Explained
recent
By ELMER C. WALZER
UPI Financial Editor
New York-IUPll-We are en
tering a period of easier
money Judging from
actions of ther,,
F e d e ral Re
serve System
money m a r
ket generally.
And this
brings up the
intricacies
the m o
market which
so few peopl
unders t a n d. Elmer Waller
iey-V5l
cede a lower cost of credit
as does the current one, ac
cording to money experts.
Reserve requirements are
set by the Federal Reserve.
They are a certain percent
age of customers deposits that
must be set aside for reserves.
Say the reserve require
ment Is 10 per cent. That
means $100 must be in re
serves for each $1,000 of de
posit. Now if the bank has
$250 in total reserves, it has
$150 of excess reserves, the
difference between its total
reserves and the $100 set
Market men look for a cut
to at least 70 per cent and
possibly to 50 per cent be
cause use of credit In the mar
ket currently is very low and
a stimulant is thought to be
In order.
Hloney of nations always has aside. When the reserve re
been a mystery and in the old quirement is 10 per cent, the
days the rulers wanted it that excess reserves can be blown
way to give them a free hand up 10 times. Thus $150 of
in jiggling the coinage. excess reserves makes $1,500
in our aay, tne problem of of bank credit-ability,
eiumiiaung economic inner- II Boosted
acy in sucn tilings as money Now if the reserve require
lias been hampered by the ments are boosted to 20 per
inability of the experts to put cent, the required reserves on
their vast knowledge into un- $1,000 of deposits becomes
derstandable form for the lay- $200. If the bank's total re
man to understand. serves are at $250 it has only
Now, of all places, the $50 of excess reserves which
down-to-earth story of our in this case can be blown up
money comes from a top au- oniy live times to a mere
thority, the Federal Reserve
Bank of New York.
In languarge that all can
understand, and in a form
embellished with pictures,
cartoons, and simple charts,
the New York bank's publi
cation, "Keeping Your Mon
ey Healthy" tells how the
Federal Reserve System tight
ens and eases the money mar
ket with its three instruments.
The Levers
These instruments
serve requirements of com
mercial banks, buying and
selling government securities,
and the discount rate.
If we seem to be heading
Into inflation, the 16-page
booket notes, the Fed would
restrict credit by raising re
serve requirements, selling
government securities, and
raising discount rates.
$250 of credit-ability
Nothing has been done as
yet about reserve require
ments. Editorially, the cur
rent Business Week urges
that the differential between
central reserve city banks is
18 per cent and for reserve
city banks it is 16V4 per cent.
tor country banks the rate
is 11 per cent.
The Federal Reserve's op
eration of buying and selling
are re- government securities raises
or lowers bank deposits and
thus affects credit-ability.
If the Fed sells government
securities, the buyer with
draws money from his bank
to pay for them and thus de
posits are reduced and credit
ability of the bank is reduced,
Check for Payment
If it buys governments, it
makes out a check for pay.
If the economy is sliding ment. The check is deDOsited
the Fed would increase cred- in a bank by the seller of the
it by the reverse of these securities and thus increases
processes. It would lower re- deposits and credit-ability,
serve requirements, buy gov- Recently the Fed has been
ernment securities ana lower buying governments and in-
the discount rate. creasing the money supply.
ii nas hciuu on me iabi wall Street expects one
Item by reducing the discount more move by the Fed short-
rate in some centers. All are y. And that is on stock mar-
expected to lonow. Tne dis
count rale is the rate the Fed
eral Reserve charges member
banks when they borrow
from the Fed to keep their
reserves at the legal limit.
What Change Means
By changing the discount
rate, the Fed may signal its
view on current policy to all
money lenders, the booklet
notes. A high discount rate
may precede a higher cost
of credit for all borrowers.
A low discount rate may pre-
ket margins which it has to
control. The current margaln
of 90 per cent has been in
operation since Oct. 16, 1958,
Small Worlds
Around Us
By Lynn M. Watkins
from bread, o
He got himself to the point
where he tried to bite his own
feet and legs, and later tore
mouthfuls of hair from his
own sides.
And the little female in the
other cage became cross, irri-
OSC Bulletin
Tells of Ponds
Good news for Oregon trout
fishermen - the more they
fish, the better trout they'll
catch. At least this holds true
for farm trout ponds.
This suggestion is one of
many offered by Andrew S.
Landforce, Oregon State col
lege extension wildlife man
agement specialist, in a new
Oregon State College publica
tion, "Managing Oregon Trout
Ponds."
Spring is the logical time to
buy trout for stocking farm
ponds, the bulletin suggests,
since this is the season when
fish are most likely available
from private growers.
Trout won't thrive In all
farm ponds, Landforce points
out. To grow trout year after
year, a pond should have
steep, deep sides, a depend
able supply of controllable
clean water, a screened over
flow or outlet, a minimum
depth of 10 feet, and an ade
quate draining system. Best
water temperatures for rain
bow trout are 96 to 65 degrees.
How large a pond? The bul
letin notes that ponds as small
as one-third acre and 6 feet
deep have produced trout
fishing in Oregon. However,
one-acre ponds produce more
satisfactory year-round family
fishing. Ponds much larger
than three acres can grow
more trout than most families
and friends can catch and use,
The bulletin answers ques
tions about how many trout
to stock, pond fertilizer, drain
ing the pond, and legal considerations.
Copies of "Managing Ore
gon Trout Ponds may be ob
tained on request from county
extension offices or from the
OSC bulletin clerk, Corvallis
Test With Rati Indicates
Female Is Stronger
I had always heard that
Nature set up some sort of
an arrangement, whereby the
female of any animal species
-bug, fish, bird, reptile or
mammal, was inherently
stronger, hardier and per
haps more dangerous than the
male.
Females, of all animal ord
ers, human as well as othor-
Local Men Go
To PCA Meeting
Officers and directors of the
So. Oregon Production Credit
association attended a four
state production credit con
ference in Spokane, June 2-3,
Irvin Patten, secretary-treas
urer, said.
Patten said the Spokane
meeting attracted around 200
directors and secretaries from
the 30 associations in Idaho,
Montana, Oregon and Wash
ington. Highlighting the agen
da were addresses by Rob
ert B. Tootell, governor of
the Farm Credit administra
tion, Washington, D.C., and
John Knox, farm credit's fis
cal agent in New York City.
Special features of the 1960
conference, Patten said, were
panel discussion on the
gricultural outlook partici
pated in by the heads of the
departments of agricultural
economics at the four state
colleges. Two west coast bank
ers were speakers and the
presidents of the three dis
trict farm credit banks in
Spokane took part in
panel discussion on functions
and operations of their banks.
Those attending from the
So. Oregon association includ
ed Lawrence Michaels of Days
Creek, Lawrence Luy of Med-
ford and Patten, secretary
treasurer. The delegates were
accompanied by their wives.
PUBLISHER TO RETIRE
Los Angeles -0IPB- Hugh A.
(Bud) Lewis, publisher of the
Los Angeles Mirror News,
will retire July 15.
AVCO DIRECTOR DIES
New York -flJPII- Thomas A.
O'Hara, 80, a member ot the
executive committee and
director of the Avco Corp.,
died Sunday.
wise, seem to have a biologi
cal superiority guaranteeing
the survival of the individual
species.
But I wanted to "see for
myself, so I selected rats; a
male and a female. Each was
placed in a separate cage, and
for the first day all food was
withheld.
Tempting Ham
Then I placed a piece of
freshly cooked smoked ham,
under a cheesecloth cover.
outside each pen. To the
healthy, sensitive nose of the
animal it was a tantalizing
odor. Both rats scurried
around their separate cages
in a mad frenzy to locate the
food. I placed pieces of dry
bread in each cage, but at
first both rats refused to eat.
Even when the pangs of
hunger became acute they
only nibbled daintily at the
bread; all the time I kept
the delicious smell of ham or
bacon in the air. Their little
noses twitched; the tiny
tongues darted in and out.
They became alert, eager and
exceedingly active, dashing
around the pen in a frenzy,
searching for food that was
smelling so good.
The male broke first-sud-
denly he went berserk. He
dashed around the cage, fell
over on his back, panted,
gasped and finally fell over
on his side and twitched like
an agitated lump of jelly.
Within a few hours he had
worked himself to such a
state that, even though a
piece of ham was placed be
fore him he failed to locate
it. The poor little guy had be
come a nervous wreck. His
was not the proper tempera
ment to stand continued frus
tration.
Flipped His Lid
Another male rat was sub
stituted. He too underwent
the same perplexing prob
lem, and he too reacted in
the same way. He blew his
top; he flipped his lid, and
wallowed alone in a little sea
of despondency. Number
three took his place, and the
experiment went on. He too
became so hopelessly con
fused and mixed up that he
couldn't tell bacon or ham
table, and highly exasperated,
but never did she lose her
emotional balance or her
decorum. She, loo, desired to
eat the ham and was appar
ently just as unhappy because
she couldn't, but she retained
her mental balance. She be
came irritable, but never un
balanced. I revived them all later, but
two of the males couldn't take
it and died. The female re
sponded b(iiitlful!y, and
quickly. I'm not sure whether
or not any of this proved a
single thing, but the results
were startling, and tended to
bear out what I had so often
heard, that "the fomale is
more dangerous (and stronger)
than the male."
(Released by The Register
and Tribune Syndicate, 1960)
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