Harris Praises Federal Reserve For Courageous Financial Action

Seymour E. Harris '20, professor of Economics, yesterday admonished the Republican administration for its criticism of the Federal Reserve's "dear money" policy.

Intimating that such criticism might be due to election year politicking, Harris, in a letter to the New Times, wrote, "It is difficult to understand this opposition unless it results from a fear that the high-money rates introduced in order to cope with inflationary tendencies may prove embarrassing in November."

"In 1955 a mild dose of anti-inflation medicine seemed to be called for," Harris said. He felt that the Federal Reserve deserves praise for showing courage in dealing with inflationary trends. He said that, should the present situation change, the Reserve could reverse its direction.

Harris pointed out that if the Administration is concerned about a possible recession, it could recommend a tax cut. However, administrative leaders "seem disposed to cut taxes only if this is consistent with a balanced budget."

The economics professor said that in the past the Reserve had been generally reluctant to use its authority for "fear of stepping on toes." Harris pointed out that bank loans, consumer and housing credit, wages and prices had all risen out of proportion to all expectations, by December, 1955.

"Security prices and profits also seemed to be at inflationary levels," Harris stated as an explanation of the Reserve's subsequent action.

The Reserve kept individual bank reserves low, and the banks had to borrow moderate sums from the Federal Reserve. This, according to Harris, was "a mild warning," but was, nevertheless, exactly what was needed. "The Federal Reserve ought to be praised for using limited powers with courage and finesse," Harris concluded.