Evening star. [volume] (Washington, D.C.) 1854-1972, 1916-06-09
Board Member Says System
Strengthens U. S. in In
| ternationaI Finance.
REGARDED AS GREAT AID
TO AMERICAN BUSINESS
Advises Careful Watching of Elk
pansion and Urges Accumulation
of Floating Gold Supply.

ATLANTIC CITY. y. j., June 8
Strengthening of the position of Amer
lean bankers in international finance
was declared to have been one of the
most important results of the federal
reserve system, by Paul NJ. Warburg.
member of the federal reserve board
who addressed the New York State
Bankers Association here today. The
federal reserve act, he asserted. not
only has removed many obstacles
which hampered bankers and mer-
chants in dealing with other countries,
particularly those of South America.
but has provided a positive method by
which the country's financial inter-
ests may be unified in seeking foreign
business.
Predicting that the American bank
erS acceptance business would con-
-tinue to grow even after the war ends
he criticised many importers. particu-
larly of New York. for what he said
was their folly in not using American
exchange. He recommended that all
republics of the continent adopt uni
form monetary standard on the basis
of a gold coin equivalent to one-f1fth
of an American dollar.
Discussion of Discount Rates.
With our increasing financial
strength" he said. land with the daily
diminution of Europe's saving power.
II stands to reason that, for long
time to come, our discount rates will
compare favorably with those of Eu-
rope. Our friends in South America
consider the. creation of the federal
reserve system as one of our greatest
- Nl,a.,-
rely upon our ability to provide-to a
certain extent at least-such financial
aid as Europe gave them in the past
is predicated upon the confidence that
our new system inspires"
Mr.. Warburg cited recommendations
for legislation made by the federal re-
serve board to Congress, and suggested
that the recommendations lead in two
directions.
The one is an increase of the reserve
banks general strength and lending
power and an enlargement Of their
scope of usefulness in dealing with
their members" he said. The other is
the removal of limitation heretofore
placed upon the operation of national
banks. The board feels keenly that as
Q matter Of equity national banks
should be placed on a parity with state
banks and trust companies, wherever
this can be done consistently with safe
ty and conservative banking principles
banking systems there must not be any
competition to secure more members
BY lowering of banking standards
The whole country would suffer if this
took place"
Warns Against Pyramiding Rates.
Mr.. Warburg warned against the
practice Of pyramiding reserves and of
considering so-called excess reserves
the basis for loan expansion.
The process of absorption of our
securities returning from abroad should
be conducted on such a basis and scope
rs to turn the individual depositor into
an investor, so as to free our gold re-
serve rather than increase our loans on
an enlarged floating supply of seeuri-
ties. he said.
= Wise statesmanship. to my mind.
therefore. would indicate that every
thing should be done by the federal re-
serve system and by all the banks that
are interested in our strength to watch
carefully further expansion at this time.
ana TO accumulate the floating gold
supply in the hands of the federal re-
serve banks so as to enable them when
the time comes. II necessary, to spare
large sums without thereby Gripping
their lending power"