Responsability for federal reserve policies: 1927-1929

It has been stated that mistakes committed by the federal reserve system from 1927 to 1929 were due to the Federal Reserve Board. The 1927 easy money policy was initiated by the New York reserve bank to encourage domestic business and strengthen European exchanges. The policy was successful in achieving these objectives, but it gave a dangerous impetus to stock market speculation. In the first half of 1928 the reserve banks took vigorous action to restrain speculation with some success, but in the last half of the year. they relaxed their efforts and bought a large amount of acceptances. Early in 1929 the Reserve Board took the lead and recommended "direct action" to restrict speculative loans. The reserve banks then recommended rate increases. Differences were not as to aims but as to methods. The lesson from this experience is that authority and responsibility for na- tional credit policies should be concentrated in a single, independent, disinterested public body having a national viewpoint.