The Birmingham age-herald., 1913-09-30
National Banks Can Have
Foreign Branches Under
New Currency Bill
ENGLAND STIRRED
OVER PROSPECTS
London Bankers Make Vast Profits in
Handling American Business
Which They May Lose
Under New Law
BY HOLLAND


New York, September 29-(SpecialD
The American invasion of England" is
the laconc description of a situation
which may be created by the passage of
the currency bill which Is now before
Congress. The term originated in Lon
don and has found it's way into some of
the London newspapers. 1t was speedily
caught up in this city and has been pass
ing from mouth TO mouth for several
days
Whatever criticisms bankers may have
seen it to make respecting features of
the pending currency bill none has been
leveled against the section of the bill
which provides for the establishment of
foreign branches Of national banks
Under this section any national bank
whose capital is al least 81, 100000 may, in
case the federal reserve board approve,
establish branches in foreign countries
for the furtherance of the foreign COM
merce of the United States, and to act,
when required to do So as fiscal agents
of the United States. These branches are
to make detailed reports to the comptrol-
Ter of the currency of their condition and
must submit to special examinations The
accounts of each foreign branch must be
handled Independently of other foreign
branches esta blished by any one bank and
also must be handled Independently of the
home office. Among the other details pf
the accounts each branch must at the end
of every fiscal period transfer to its gen
eral ledger the profit or loss accruing at
each branch, setting this forth as a sep
arate item.
In London the feeling pervails that this
permission to establish branches of the
national banks of the United States in
foreign countries may be designed to cap
ture for American banking institutions a
large part of the very profitable business
which banks and bankers of London have
done with Americans.
Clearly the purpose is to facilitate COM
mercial transactions and to bring to the
United States profits hitherto gained by
the bankers of other lands.
An Enormous Business
There is no actuary or auditor in New
York or in Washington who can furnish
any information excepting some of very
general character, which would give any.
idea of the business of a financial kind
done by Americans in the great financial
centers across the seas, and particularly
in London. It's business outside of
that which relates to the floating of rail-
road or industrial securities or the under
writing of large loans 1t is a purely
commercial business. It's growth has
been gradual, but within the past 10 or Il
years has undoubtedly reached very large
proportions.
A single concrete illustration may suf-
flee to explain the general nature of this
business. merchant of manufacturer
or any one engaged in large commercial
Undertakings in the United States of a
mercantile character makes requests of
London banks or bankers for a CONNER
cial credit, as 1t is called His own credit
Is high. His business standing is unim-
peached. The great jobbers of the United
States typify this class of business The
London banks or bankers to whom an ap-
plication is made reply that they will
grant credit of certain amount against
which the American business man NAV
draw. Whether collateral security is re-
quired or not depends upon crcum-
stances. These credits are called COM
mercial letters of credit and while they
in some respects resemble travellers let
ters of credit. yet they are in important
respects entirely different. When the
credit has been exhausted and made good
then new commercial credit may be
asked for and is likely, to be granted
The commissions upon these transactions
IN sthe aggregate amount to very large
sums and it all remains in London and
tic OlutTi teHlcTS. Inc money thus OBJ
tanned enables the American business
man to secure funds needed in his bus-
ness and to do that without asking for
increased accommodations on his home
banks.
There is one banking institution in New
York whose commercial banking business
in the year 1912 reached the enormous ag-
gregate of little over $3.O0o,OO0 No small
part of this business was of a kind which
!, a,,l-x tt.,,,
lean business men, If. one banking insti-
tuition is able to transact purely CONNER
cial business, meaning by that that there
is nothing like underwriting securities or
the financing of railroad or other large
loans. but business which is done in the
interest of American mercantile or manu-
Featuring activities, aggregating s3,O0O,-
GOO, 600 In single year. then it is easy to
see that the aggregate business of that
kind done by all institutions must be
enormous, and no small part of 1t is done.
In London. where, in fact, the banking in
stitution just referred to main stains
what Is equivalent to branch. 1t can
DO this because 1t is a state-chartered in
stitution.
Vast Profits Each Year
The London bankers have gained each
year vast profits in the aggregate through
their discounting of foreign exchanges
"iieH oiiSlHdled IN the United states
through their handling bills receivable
and acceptances and through the COM
mercial letters of credit of American
business men.
1t haS long been spoken of as a situa-
ton to be regretted that so pauch at this
business which the United States is able
to do is done in London and to less
extent on the continent of Europe
Apparently the London bankers are ap-
prehensive that the establishment Of
branches of the national banks of the
United States will tend Immediately and
by and by greatly to divert business of
this Kind from the London bankers to
these American bank Institutions.
Yet in any event foreign branches Of
the United States national banks cannot
be Of very large number, for no national
bank may establish branches unless II
has capital of at least 81. 100000 Except
in the larger cities of the United States,
capital of that kind is unusual 1t must
be an institution great in resources and
capital, its management must be of unim-
peachable credit and 1t should have n
very large line of deposits
That one institution in the United States
should have transacted in single year
in 1872 purely commercial business rep
resenting almost exclusively the under
takings of business men of the United
States and the farmers. an aggregate Of
$S.000 600, seems to be sufficient proof Of
the vital Importance to American busi-
ness interests Of the establishment Of
banking institutions which are capable of