The Birmingham age-herald., 1913-09-27
FOREIGN EXCHANGE
DEALINGS GREAT AID
IN HANDLING CROPS
Change in State Law of New
York Requires Report
on the Items
HOW OPERATIONS
ARE CONDUCTED
Large Figures of Banks at Present
Justify Impression That Crops
This Year Are as Large
as Last
by HOLLAND


New York, September 26.-(Special)
Reference was made in this letter several
days ago to the publication of an item in
an official statement of the resources of
one of the great trust institutions of the
United States to the effect that as part
of it's resources this institution possessed
In round numbers foreign exchange of
the value of ssOO00,o0O. This item was ex-
ceptiona1 and there was much interest in
financial circles in the statement and
especially in the reasons which had made
it expedient for this institution thus to
itemize its foreign exchange as a part of
it's resources.
There was as was pointed out in the
article, a much more important feature
in the publication than the mere fact that
it was unique. not having been done be-
fore. The figures themselves told story
of the ma gnitude of the financing which
the great crops of this year have made
necessary. The figures also tended to re-
fute an impression which has prevailed
over some parts of this country that the
financial institutions of New York have
been withholding aid from crop sections.
For If a single institution has bought
foreign exchange recently of the value of
$50, 100000, there can be no doubt that
other large institutions have also bought
foreign exchange in large amounts behind
which stand agricultural products. The
purchase of foreign exchange is one Of
the ways by which the harvests are
financed
Change in Laws
The publication of this item in the list
of the resources of the Guarantee Trust
institution was, it now appears, made
necessary by a change in the regulation
of the New York state banking depart-
ment which was recently made. Hereto
fore state chartered institutions have not
been instructed by the state banking le-
partment to set forth in detail their for
eign business, but have been permitted to
lump that business all under one head.
Hereafter these institutions must enum-
crate in their list of resources the foreign
exchange which they possess and must,
on the other hand set forth in their state
ment of liabilities what the obligations
against them created by their foreign
business amount to.
These rules will not affect more than
three or four state-chartered Institutions
for only the largest institutions make a
speciality of dealing in foreign exchange
Some of the national banks handle large
amounts of foreign exchange and the pri-
do large business of this kind.
Some Figures of Magnitude
The publication, however, of this item
of $S0o00,000 of foreign exchange now pos
sessed by a single institution led to In
quiries which have been fruitful in their
results. Max May who came from Chi
cago to New York some years ago to take
chagre of the foreign exchange business
of this institution and who is regarded
in Europe as well as in this country, as
one of the geratest, if not the greatest,
master of the principles of foreign ex-
change-at least since the late j. z. Nor
gan demonstrated years ago his wonder
full mastery of this science-was asked i
few days ago by the executive officers
of the institution If he could reduce to
dollars and cents the transactions of this
institution in the year 1912. which repre-
sented its financing of American crops II
that year.
Much the greater part of this financ-
ing was done through the purchase of
bnls of exchange behind which commodi-
ties stood. Almost all of these commodi-
ties represented the 1912 fruits of the soil
Cotton bills We're largely represented in
these transactions, and so was grain of
all kinds. In order to reduce to dollars
and cents these foreign exchange and
transactions a good deal of complicated
mathematical computation was necessary
But that is a feature of the foreign ex-
Grange business which must be mastered
by those who have handled this business.
They are necessarily expert mathc-
maticians. Mr.. Morgan himself was rec
ognized in his early life as master of
ma thematics both practical and pure or
abstract as we'll.
Mr.. May made his computations and a
few days ago put the results of them be-
fore the officers of the trust institution
They reveal that this one institution in
the year 1912 financed American agricul-
tural products which were for the most
part harvested in that year to the ex-
tent of $7,S00,000, round numbers
Harvest of 1912
The harvests of 1892 were roughly esti-
mated as having been of tire money value
of somewhere between $4,000, 1900 and
$4,000. 900. II we take the smaller amount,
the nit can be demonstrated that a con-
siderable percentage of this amount Is
represented by the financing done by
single great institution
From another point of view the analy-
sis of interest is of Importance. Using
round numbers for convenience, the totaI
exports of agricultural products in the
year 1892 We're in the neighborhood of
81 900, goo money value. Foreign exchange
behind which stand agricultural commod-
tiles is the chief medium by which these
commodities are financed. Therefore this
single institution must have financed COLI
siderably more than one-half of the en-
tire expectation of agricultural products
in the year 1872
These figures also throw some light
upon the manner in which the somewhat
berilous and certainly difficult financial
situation in the fall of last year was over
come. The magnitude of the crops. COM
bined with renewed activity in business
of all kinds. brought very heavy demands
to the bankers. The situation was com
plicated by the sudden outbreak of the
war in the Balkan peninsula and by the
consequent dumping of American securi-
ties upon this country by Europe 1t was
apparent in the fall of last year that some
enc or two financial institutions which
possessed large resources both in this
country and in Europe had seen the way
clear to meeting the demands of the
farmers This institution was evidently
one of the American banks which re-
lieved the situation from the great strain.
1t was able to do that because it pos
sessed large capital and an equally large
surplus and because it's strength had en-
abled it to secure heavy lines of deposits
in various corporations, many of them be-
ing of the kind commonly called big busi-
ness. These resources, the high credit
established by the institutions abroad,
the confidence in ii which attracted TO,