The Washington times., 1916-12-26
Far-Reaching Results Expected
From Arrangement With
Bank Of England.
NEW FIELD FOR INVESTMENT
Reserve Board Order Opens
Way to Check Gold Flood
to This Country.

washing ton financial experts said
today the new order of the Federal
Reserve Board authorizing the Fed
eral Reserve Bank of New York to
appoint as one OF its foreign cor
respondents and its agent the Bank
of England. marked the beginning Of
n new era In American financial re-
1ations to the world.
Far-reaching results are expected to
grow out OF the new order. That IL
WITH tremendously strengthen the
American financial position In the
international field and at home is
fully anticipated.
Possibilities Of system.
The issuing OF the new order 10
looked on here as tending TO indicate
that the Federal Reserve Board has
awakened to the fact that In the new
banking system the United States has
the machinery TO make itself n great
force in the world of finance and also
that the board In impressed with the
odvisability OF utilizing the author
jty given Il.
Under the new order. as a matter
OF fact American banking houses can
reach out with ease and Invest In
British commercial paper and the
Federal Reserve banks can do so. They
are expected to do so. This paper
will be a, quick. convertible asset and
good security. Investment in such
paper OF American funds viii tend
20 hold back the flood OF gold over
which there Il apprehension.
A bank now can purchase CONNER
cial paper through the Federal Re-
serve Bank OF New York and the
Bank, OF England.
blocked Loan Plan.
Not long since the Federal Reserve
Board blocked plan OF Morgan a
Co, fiscal agents or the allies. 20 float
jn this country through banks and
private investors n large amount OF
British treasury notes. These notes
on their face were short-term. but In
fact were renewable indefinitely.
Also they were not secured. except by
gold In ottawr. which only partially
backed them.
AZ the time. Il was declared the
policy OF the Federal Reserve Board
would let In gold indefinitely.
Tho board made u plain Il did not
want American banking funds or
even funds OF private investors tied
up In a British security that In fact
might run indefinitely.
Nsseh Wouid he Liquid.
But under the new plan, with In.
vestmcnts In British commercial pa.
per, American funds viii not ba tied
up indefinitely. American money will
be available In British financing. hut
IL Will be socurod by liquid. assets.
This will not jeopardize the welfare
OF American business.
When peace comes. II IL considered
certain that the new arrangement OF
financial relationship will accelerate
business between the two nations.
Negotiations are on with France
and other countries for a like ar.
Jangement.
The only reason why the plan has
not been taken up with Germany and
this country II impossible at present.
IL vii lbe taken up later.
Closer relations with Latin AmerI.
can countries are possible as the re.
suit or tho new arrangement, Il II
said.
Open % All Reserve banks.
Under n section OF the Federal Re.
serve act the board authorized the APP
pointment OF the Bank OF England Is
n foreign correspondent OF the Fed
eral Reserve Bank OF New YORK.. and
announced that the eleven other re-
serve banks might participate In the
agency relations.
Connection with other foreign gov
vrnmeNt institutions, such as the
Bank OF France, Is foreshadowed, ont /
cials say. by this action. The Bank !
OF England IL the first foreign CORE |
spondent whose appointment has been
authorized since the operation OF the
new financial system in this country. |
Hoard Issues Statement.
In its statement announcing the &C
tlon. the board said; i
"The Federal Reserve Board has
authorized the Federal Reserve Bank
OF New York TO appoint as one OF its
foreign correspondents and agents the
Bank OF England, or London, England,
under the terms OF the Federal re-
serve act.
section IL OF the act permits any
Federal reserve bank with the con
sent OF the Federal Reserve Board TO
open and maintain banking accounts
In foreign countries, appoint CORE
spondents and establish agencies In
such countries wheresoever IL may
deem proper for the purpose OF sell
ing and collecting bills OF exchange,
and to buy and sell with or without
Endorsement through such CORE
spondents' or agencies bills OF sxr
change arising out of actual CONNER
cial transactions, so that broad held
OF operation Is possible under IL.
'In granting the authority to estab'
liahIthis agency the board has author |
ICED the Federal Reserve Bank OF New
York to maintain accounts either for |
or with the Bank OF England, so that