The Washington herald., 1914-06-20
SPEAKS
BEFORE BANKERS
Virginia Association Hears
Director Of the Mint on
Gold Movement.
OUTLINES NEW SYSTEM
How New Currency Law Will Affect
United States Is Explained
by Official.
OUTLINES new SYSTEM

today addressed the Virginia Bankers
Associatiop IN session here. His speech
was an important one. in view Of the
present heavy gold expectations. and the
new currency systems being inausu-
rated about August l.
| Mr. Roberts in part said:
such is the recognized Importance OF
the discount rate as an agency for con-
trolling the movements of gold. that the
Bank. Of England frequently enters the
London money market as a borrower
competing with the public IN oroer 70
raise the outside rate to the leveisof the
bank rate.
."There is seldom afforded more
striking comparison OF the efficiency OF
4 two systems than was given at tnat
time. The Treasury of the United States
| held over $500, 100000 of gold. but II was
held simply as a reserve against cur
rency in circulation, and was compietey
effectual for that purpose. NOBODY
questioned the character OF our money
| in that panic But the Bank OF Eng
| land held less than se0oooo.ooO OF gold
as a reserve, not only for the currency,
but for practically all the bank deposits
and commercial credits of the United
| Kingdom. And In the United states from
the Atlantic to the Pacific. cash pay
ments SFere suspended, and London was
shipping gold to New York
Plan Likely In Futsre.
Another method by which a central
banking Institution may protect its gold
| reserve Is by carrying ordinarily con-
| siderable amount of foreign bills. Wheh
the exchanges turn unfayorabie u can
allow these bills to run on, thus re-
plenishing its foreign balances. II is
likely that in the future. under the Fed.
| eral reserve system, this country will
carry to maturity more Of the foreign
bills created by our exports than we
have been accustomed to in the past.
Heretofore they have been sold promptly
abroad, because they were carried there
at lower rates than they could be mere.
but the reserve banks will care less
| about rates than about having precisely
this kind of paper, which represents
staple commodities moving to market.
! is certain to be paid when due. ana
gives call on gold in foreign markets.
There has been much speculation as
| to how these reserve banks viii earn
any dividends or can pay expenses in
| ordinary times when the member VIII
not care for re-discounts. But 1t Is tc
be remembered that our exports of
merchandise now amounts to about
&, 900 0OO, 600 a year. and that the bills Of
exchange. created by this trade. are
nearly all carried abroad. Here Is field
that the reserve banks may have prac-
tically to themselves, so far as domestic
competition Is concerned.
VIII Level Rates.
ION the other hand. the new system
by creating a reliable discount market
in this country. is likely to bring our
rates on commercial paper SO nearly TO
the level of the foreign market. that the
notes of first-class American firms may
find an outlet on the other side. That
is to say. paper of the class which can
be readily marketed through the reserve
system. may at time be an attractive
purchase to bankers on the other side.
1t will have the effect of bringing rates
nearer together. The greater the inter-
mingling of Investments. the more COM
pIetely the international money market
will be merged. and the smaller the
transfers of gold will be.
From time to time suggestions have
been made looking to some form of an
international gold certificate that would
obviate the shipment of gold bars or
coin. When gold isJwanted for bank
reserves it is not likely that anything
else will take its place. but when its
transfer from one country to another is
simply in settlement Of balances and
international bill of exchange Is an in
terest-bearing form of gold certificate
that answers the purpose for short
period and a high-class bond answers the
purpose Of long period. Both are like
ly to be more and more in use as the
means of settling international balances.
'The Prussian minister Of finance, in a
speech last year in the Chamber Of Depu-
ties, upon a motion looking to placing
further restrictions upon the listing of
foreign securities in Germany, said that
1t was advantageous to Germany to hold
a considerable amount Of foreign securi-
ties. and illustrated his statement by re-
ferring to the financial crisis of 1872. when
Germany was able to hold down foreign
exchange rates, which were approaching
a dangerously high level, by liberal sales
Of American railway stocks. These sales
abroad created credits against which
German bankers were able to sell ex-
change, thus meeting the necessary de-
mands of trade.
System Is Changed.
In the past the United States has been
without any effective agency for control
ling its own credit situation or dealing
with the foreign exchanges. It has been
at disadvantage as compared with
other countries. When VI have had to
have gold as in 1907, and have gone out
to get it regardless OF cost, we have been
able to get it by sheer weight Of our
resources. but we have had to go about
it in very clumsy and costly manner.
Now all that is to be changed Our
banking system is to be organized and
have responsible head. There s.to be
a centralized control of the discount
rate. There is to be intelligent super
vision over the credit situation. There
may be disappointment in some quarters
over the operations Of the new system
at first. 1t may seem strange to some
people that the country banker can con-
tinue to borrow of his old-time reserve
city correspondent at lower rates. than
he can Of the new reserve bank. but that
may tbe often true The reserve banks
must keep their resources largely in re-