The Washington herald., 1910-05-29
HUGS GOLD RESERVE
Bank of France Essentially
a Public Institution.
IT SACRIFICES MUCH PROFIT
Piles Up 500, 900 of Yellow Metal
Directly Against Interests of
Standardization Process Affects
Finances of United States and In
tcrnatiOnaI Credit.

a striking study Of the part which the
Bank Of France plays In the interna-
tional money market has Just been made
public by the national monetary commits
sion, in the form Of a translation Of the
work OF Maurice Patron on The Bank
OF France in It's Relation 70 National
and International Credit
Il IS pointed out that the bank acts es-
sentially as a public institution, pursuing
the essential objects Of building Up and
protecting the national gold reserve
rather than seeking profits for It's share
holders. BY increasing its gold reserve
the bank, 70 is declared by NJ. Patron, Is
working against the interest OF its share
holders and consequently against its own
interests. There are TWO reasons for this:
First. the expense OF maintaining an ad-
diuonal reserve and the cost Of issuing
notes against IL represent e clear loss 20
the shareholders.
II the holdings OF gold were smaller,
tho amounts OF assets and Liabilities
would decrease without interfering with
the profit and loss account In the sec
ond place. smaller holdings Of metal
would lead 20 frequent rises in the rate
Of discount. which are the main source
OF profit FOR a bank Of issue.
Reserve Rises to 500, 900, 900.
IE spite Of these obvious advantages 10
the bank IN getting rid OF a part Of its
great stock Of yellow metal. the gold re-
serve has been allowed 20 increase until
it amounts TO about S700.oo0 COO. and IS the
largest stock held in any bank IN the
world. Even the advance IN the rate OF
discount which IS occasionally made. IL
IS pointed out, IS not for the purpose OF
safeguarding the reserve but 70 avoid
the decrease Of the money m circulation
which would have resulted from the
tempting and persistent. offers from
abroad where discount rates ruled much
higher
With these great resources at its com
maud, the Bank OF France has. in the
opinion Of VI. Patron. become practically
the reserve reservoir Of gold for the
financial world. AS far back as 1899 the
bank lent to the Bank OF England e2OO0.- r.
0o0 IN gold and asain in 1890. at the time
Of the Barring failure, E2Cr0.0o0. The
Bank Of France had just endured with
out nlnchinE the downfall OF the Comp
toir D'Escompte, one OF the oldest OF the
joint stock banks OF Paris. but the Bank
OF England. confronted by Ike conditions.
found il necessary not only 10 raise its
discount rate 20 c per cent, but TO ask
for foreign help.
The Rank Of France was severely crItl-
cised In the Chamber Of Deputies for
making this loan. but this criticism did
not deter il from extending similar aid
IN the autumn Of 1896 and in the crisis
Of 1857 20 the amount OF S0Oc0000 francs.
which were forwarded TO London in
American gold eagles, II answer TO a
mere telegram.
Bearing on United States.
The bearing OF this course upon the
crisis in the United states gives special
interest 20 the narrative Of VI. Patron
OF these events, which he sums UP thus
1T was at the time OF this developing
crisis that the Bank OF France was un-
reasonably reproached with its indiffer-
ence TO the monetary situation in the
United states and with its refusal 70 give
aid. The critics forgot that the bank
was prevented by its statutes from the
direct shipment OF sums for which the
Federal government refused 10 become
responsible, and that. nevertheless. # for
warded S0.OC000O francs IN American coin
which merely passed through London.
Certain negotiations took place at that
time between the American government