Iowa County democrat. [volume] (Mineral Point, Wis.) 1877-1938, 1916-11-30
j. S. WARNS BANKS
INSTITUTIONS ARE TOLD OF
DANGER TO INDUSTRY IN
WAR LOAN NOTES.
MANY MILLIONS INVOLVED
Federal Reserve Board Sees Peril in
Purchase of Short-Term Notes
Formal Statement Issued From
Washington-BIow to Financiers.

Washington, Nov. 2S.-The federal
reserve board issued a statement
warning banks and the public against
the purchase Of shOrt-term foreign
notes.
The statement will be a severe blow
to the financierS who were planning to
float these loans in the United States.
Formal Warning Given.
The statement says in part:
I'm view of contradictory notes
which have appeared in the press re-
garding it's attitude toward the pur-
chasing by banks in this country of
treasury bills Of foreign governments,
the board deems it a duty to define it's
position clearly.
I'm making this statement the board
desires to disclaim any intention of
discussing the finances or Of rejecting
upon the financial stability of any ma
ton.
'The board does not share the view
that further impOrtatiOns of gold must
prove source of danger or disturb
ance to this country. That danger, the
board believes, will arise only in case
the infOWing gold should be permitted
to become the basis of undesirable
loan expansions and imitation. There
are means, however, of controlling ac-
cessions Of gold by proper and volun-
tary cooperation of the banks, or if
need be by legislation.
Advises Much Caution.
'"The board believes that at this
time banks should proceed with much
caution in locking up their funds in
long term obligations which are short
term in form or name, but which,
either by contract or through force of
circumstances, may have to be re-
The boards concern and responsibility
lies primarily with the banking situ-
alton.
'1f, however, our banking institu-
tons have to intervene because for
eign securities are offered faster than
they can be absorbed by investors
that is, their depositOrs-an element
would be introduced which, if not kept
under control, would tend toward in
stability and ultimate injury to the
economic development Of this country.
Loans Are Identified.
''While the loans may be short in
form and severally may be collected at
maturity, the object of the borrower
must be to attempt to renew them col
lectively, with the result that the ag-
gregate amount placed here will re-
main until such time as it may be ad-
vantageously converted into a long
term obligation. It would, therefore,
seem that funds of our banks, which
should be available for short credit
facilities to our merchants, manufac-
turers and farmers, would be absorbed
for other purposes to a disprOpOrtion-
ate degree, especially in view of the
fact that many of our banks are al
ready carrying foreign obligations
which they are under agreement to re-
new.
"The board deems, therefore, it's
duty to caution the member banks that
it does not regard it in the interest of
the country at this time that they in
vest in foreign treasury bills of this
character.
"The United States has now attained
a position of wealth and of interna-
tional financial power, which in the
natural course of events it could not
have reached for generation. We
must be careful not to impair this po-
sition of strength and independence"