Part 1 - The Institute Libraries - Institute for Advanced Study

two grest central banking systers~ as they struggled with the problems
of international finance in the post-war period were those of the power-
Eul American and British private bankers, Both banks were privately
owned, and their owners were dedimted to the conviction that mcnetary
conrrols belonged by right in their hznds, snd were not within the pur-
vfew of g~ve-nts. Thus sterling was returned to the gold standard
in 1925 at its pre-wsr value by their mrtual agrem,ent. The pound could
not mintnin its position if interest sates in the United States were
zllowed to equzl or exceed British rates. Support of Britain in these
circm.stances required Strong on occasion to adopt domestie policf es
which were said to conflict with the best'interests of the Arnerfcan
economy.
Notable in such case w2s Stron.gvs action in easing credit In
the United States in mid-1927, which aided Englznd in the crisis but,
contributed to American inflation and to the orgy of stock-narket specu-
lation culminating in the crash of October, 1929, for which he was much
criticized on grounds both of substance and method, l9 No believers in
political remedies for derang-nts in the econorrry, Strong and his ad-
visers either cauld not think of any speeiffc controls to Limit wrkt
speculation, specifically, or were unvifling to propose measures for
legislation giving the Federal Reserve Board more power. Thus it re-
mained ta New Deal advisers, notably two of Mr. Frankfurter's young lau-
ycrs, acting in cooperation with Dr. Riefler and other financfal experts,
to devise one specific: f.e., prescription of margins in brokersm loam
by the Federal Reserve Board. 20 It wgs not long after the conference
leading to the mid-1927 actfan that the nmor spread thzt Malter Stewart