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full billion dollars of their money constantly at work merely to pay their 

own expenses in normal times.

"The best illustration of what the System has done and not done is 

offered by the experience 

 

 

 

 

which the country was having with 

speculation, in May, 1929. Three years prior to that, the present bull 

market was just getting under way. In the autumn of 1926 a group of 

bankers, among them one of world famous name, were sitting at a 

table in a Washington hotel. One of them raised the question whether 

the low discount rates of the System were not likely to encourage

speculation.

"‘Yes’, replied the famous banker, ‘they will, but that cannot be 

helped. It is the price we must pay for helping Europe.’

"It may well be questioned whether the encouragement of 

speculation by the Board has been the price paid for helping Europe 

or whether

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it is the price paid to induce a certain class of financiers to help 

Europe, but in either case 

 

European conditions should not have had 

anything to do with the Board’s discount policy. The fact of the matter 

is that the Federal Reserve Banks do not come into contact with the 

community.

"The ‘small man’ from Maine to Texas has gradually been led to invest 

his savings in the stock market, with the result that the rising tide of 

speculation, transacted at a higher and higher rate of speed, has 

swept over the legitimate business of the country.