The Washington times., 1916-11-28
RESERVE BOARD AND FOREIGN
Loans

~
The caution issued by the Federal
Reserve Board to the member banks,
regarding large investments In the
paper Of foreign governments, will
be generally regarded as wise and
moderate. II Is not in any wise an
effort to dissuade American investors
from buying the very attractive
looking investments that foreign. ma
tons are Offering here; but II 10 a
warning that these should not be
taken in large quantities as bank in
vestments.
II must be kept in mind, first,
that the Federal Reserve Board he's
jurisdiction over only the national
banks and that minority Of other in
stitutions that have entered the Fed
eral system About one-haf the
banking power Of the country has
thus been enlisted IN affiliation with
the Federal system. The State and
savings banks and trust companies
in general are left free TO sct As they
please. and while they are likely 10
be influenced by the caution Of the
Federal authority, yet they are left
free to make such investments as
they please, within the authority
granted by their various charters.
There will be little difference Of
opinion as to the desirability to keep
the assets of banks in as liquid q
condition as possible. Nobody can
do more than conjecture the strain
that will be imposed on our finance
between now and the wars end; nor,
indeed. the force Of the shock that
will be projected TO every area Of
world finance when the rcadjhst-
ment Is suddenly brought into view
by the re-establishment Of peace. Il
Is altogether desirable that our
great power, gained through the
Of gold TO these shores,
shall not be made In reality q weak
ness, through imitation and the in
vestment Of vast sums In slow paper.
While the Reserve Boards caution
is general and protests that II dis
credits the securities Of no nation,
yet its application Is to those offered
by the entente nations, which are
the only ones In position to offer, |
and actually offering. great guam
titles Of securities here. The Re-
serve Board intimates that II these
nations want TO raise money here.
they have yet great quantities Of |
securities. which they are |
at liberty to mobilize and sell back |
10 our investors.
The real point TO the boards state |
ment is that II does not want banks |
10 become investors with their de-
positors' funds. The investment |
public, of course. is at liberty 70
buy what II likes with It's own
but when that money Is list
I'd rs deposits in banks, and then
turned into securities that may re-
uuire TO be renewed. and finally to be
into bonds. there In danger
II congestion Of undigestible
securities. II seems altogether res-
,onable to assume that those banks
which are not in the Federal system,
plus the general investing public,
will be able to absorb as much Of
his class Of securities as will be
good for the country.
This would be a cheerful enough
,iew. but for the fact that II looks
ike taking away from the great and
powerful national banks, many Of
hem now large figures in interna-
,ional finance, access to an important
Ind promising field Of investment.
The State institutions have hereto
ore shown little enthusiasm about
the Federal Reserve sys-
EN-, feeling that It imposes restric-
ions upon them, which, so long as
hey remain independent, they will
Tot feel. II is quite belfevable that
hey will have less disposition to
mite in the Federal scheme, in view
# this development in the Reserve
!.