The Birmingham age-herald., 1916-02-22
StrOng's Trip Abroad Part of Programme of Prep
 aratiOn for Future
USE EXCHANGE TO
 MEET OBLIGATIONS
Reserve Board Said to Consider Ii Highly Important to Keep Gold Supply Unimpaired-NOth-
 ing New in Plan
By HOLLAND


 About the time, a few weeks ago, Paul Warburg of the federal reserve board al Washington, addressed an association of business men, Benjamin Strong, IT,, gov ernor of the federal reserve bank for the district of which New York Is the cen ter, sailed for Europe. He had as a companion J. P. Morgan. Some things to which MT. Warburg carefully alluded in his address are now recalled in view of the fact that information has reached this country which relates to the pur- Paris at this time
 Mr. Warburg intimated that it will be expedient, even necessary, that the United States retain as much as possible of the gold which it has already received from Europe and Great Britain, and also retain as much as possible of the gold which is still to come The intimation was that the United States will need all of the financial strength possible in view of the exigencies which are likely to arise after the close of the war in Europe.
 Already some of those who are es- teemed leaders in the world of finance have ventured to say that immediately after the war Is ended the nations across the sea, and especially Great Britain will make desperate and prolonged effort to get back some part of the gold which in the war days was exported to the United States. That is the view of some of the leading business men. George w. Per kins, in several of the addresses he has recently made, has asserted that the Eu- ropean nations and Great Britain will make desperate effort to regain some part of the gold which was sent to the United States to pay for commodities and will, as a part of this programme, try to market vast quantities of their products in the United States by means of low prices.
 There appear to be good reasons for surmising that MT. Strong's visit to Eu- rope at this time reflects one of the pur- poses of the federal reserve board at Washington. This board regards it as a sound policy in the way of preparation for the future for the federal reserve board to perfect such measures as will serve greatly to protect our gold sup ply.
 Chief among these measures would be the buying of foreign exchange in large quantities. And in order to be prepared for transactions of that kind it may be deemed advisable to establish agencies in Europe of the federal reserve banks. The .surmise is general in the financial district that one of the purposes of the visit of MT. Strong to London and Paris at this time is to find out if it be feas- ible to establish agencies of that kind.
 If it is feasible and if the agencies be established then the United States will De In the market-through the facilities offered by the federal reserve banks-to fnrnipV1 arvn f., Irx- Possession of exchange Will make it pos sible for the United States to meet de- mands for goh by using foreign ex- change and in that way retaining the gold in this country. There undoubtedly will be an enormous amount of foreign exchange drawn by England, especially after the war is ended.
 NOTHING NEW IN PLAN
 Aside from the fact that the federal reserve board at Washington is now con- templating the establishment of agencies of federal reserve banks in Europe to fa- cilitate the purchase of exchange, the plan is not new. Certainly it had one conspicuous and highly important prece- dent. For when President Cleveland ne- gotiated with what was called the Nor gan Belmont syndicate toward the close of the forn5 ITS second administration for the purpose of replenishing with gold the empty treasury at Washington by about $60, O00,0O0, MT. Morgan, speaking for himself and the syndicate, agreed to pre- vent the withdrawal of this gold from the treasury and in that way keep it in the United States for at least six months. Almost all of the withdrawals of gold in Cleveland's second administration were made at the demand of foreign creditors of importers and others in the United States for payment in gold of the amount due them.
 In order that this gold might be pro- tected, it was necessary for MT. Morgan to undertake to secure foreign exchange so that he might offer it to those who sought to make payments to their credi- tors across the sea. It was stupendous undertaking even for the late J. P. Mor- gan. Some of those who were in intimate association with him have said that for the first time in his career as a banker. or as he was fond of terming himself, a merchant-banker, he stood with his back to the wall for weeks He was des- perately defending the gold which was in the United States treasury. He and those associated with him secured the country for exchange and the syndicate incurred liabilities abroad against which it could draw exchange. This defense was suc- cessfully maintained for about six months, and at the end of the time, dur ing which MT. Morgan pledged himself to protect the gold in the federal treas ury, he had bought and utilized approxi- mately s6O. 00,000 of foreign exchange. In like manner, the agencies in Europe and the federal reserve banks in this country will If the contemplated plans of the federal reserve board are perfected buy foreign exchange and continue to buy it, so that there will be sufficiently large accumulation of it to make 1t possi- ble to prevent Great Britain and the European continent from securing any considerable amount of this gold. It is a step in the direction of financial and com mercial preparedness. and the visit ol MT. Strong to Europe is one of the evi- dences that the first step has already been oire7a