The Birmingham age-herald., 1915-05-25
Governor Strong Has Said Reserve Banks Have Not
 Yet Done So
FRENCH WILL OFFER
 ABOUT $500, 100000
Action Is Taken to Mean That She Will Continue to Buy Enor- nous Supplies in the
 United States
Ry HOLLAND

New York, May 24-tSpecial.) l.)-Benjamn Strong, Jr., governor of the reserve bank for the New York district. Is reported to have said that the banks of the federal reserve system have not rediscounted any Hcceptances or paper which represents loans made either to foreign governments or their municipalities. The statement was made in answer to a criticism inti- mating that the reserve banks would ex- ceed their authority if they were to redis- count paper of this kind. All that Cover TOT Strong is uraerstood to have said whatever he may have kept back-is tha; none of the federal reserve banks has IS yet rediscounted paper of this kind
 One of the greatest of world authorities In handling foreign exchange. who has su- pervised or directed the passing of millions of exchange through one of the great in- stitutions of New York which represented transactions of the very large corporation with which he is associated, put his finger Immediately after his attention had been called to Governor Strong's statement upon what he regarded a A significant fact in connection with that statement. He said that all that Governor Strong had said was that none of the reserve banks has rediscounted paper of this kind, but there is no intimat tion that hereafter these banks may not find it proper and expe- dient to do this
 Whether the federal reserve banks do rediscount paper or not is regarded by the leaders in foreign exchange as matter of no great importance. They also agree yt1t tha anit hat naAn pfa lpi Q by which the great credit winch lies in the power to accept paper can be utilized so that all the more easily the United States may finance these instruments of credit.
 A few days ago dispatches from London reported that the Bank of France which is really the French treasury, was to issue the equivalent of $500 00o,0 600 American money in notes and that these notes were to be indorsed or guaranteed or discounted by authority of the English treasury de- partment. There was also intimaton-at least that is the understanding in the financial district-that much the greater part of this sum is to be utilized in pay ing for supplies of all kinds which France is now buying and will continue to buy in the United States. Some who are of eX- oellent authority say that these French notes, after having been guaranteed or otherwise protected by the British treas ury, are presumably to be sent here for the purpose of establishing in the United States the great credit which France needs. It has also been the surmise that should these notes come here they may be offered for rediscount to tn federal re- serve banks.
 The transaction is on it's face the largest one of the kind, so far as anyone knows, which any of the beligerent nations has perfected with view of obtaining the funds to pay for war supplies, at least perfected in cooperation with another ai- ley. It leads to the inference that France expects to continue to buy supplies in enormous amounts in the United States.
 A Technical Question
 One of the leading authorities in foreign exchange said this morning that very narrow technical question may ariss should these French notes be offered for rediscount at the federal reserve banks. The authority given to the federal reserve banks, this man said, to rediscount was presumably based upon the proposition that nothing but domestic mercantile paper should be offered for that purpose. Behind mercantile notes are. or should be actual commodities. therefore real and vis ible wealth. But these French notes are issued for the purpose of paying Ameri- can merchants and manufacturers for sup plies and the question which may arise will be this Does not this characteristic bring the notes within the acknowledged purpose of Congress when it authorized federal reserve banks 70 redsrount paper9
 However, the incident-which has been much discussed in some circles here-is spoken of as Illustrating the manner in which the United States has already per fected wonderfully skillful and sys- tematc mechanism of artificial financ- ing whereby political or admnistrat tion objections to making loans to belliger-