South Bend news-times. (South Bend, Ind.) 1913-1938, 1916-12-26
BANK Of ENGLAND
WILL SERVE J.. 5.
Named Foreign COrreSpon'
dent of Federal Reserve
Bank of England.

WASHINGTON. Dec. IS. - The
government Monday took its first
formal step through the federal re-
serve board looking 20 the establish
ment OF financial connections abroad
through which IL hopes 20 strength
en- the position Of the United States
as a world banker and 10 maintain
the American dollar as the standard
OF exchange.
1der a section of the federal re-
serve act the board authorized the
appointment Of the bank Of England
as a foreign correspondent Of the
federal reserve bank Of New York
and announced that eleven other
reserve banks might participate in
the agency relations.
Connections with other foreign
governmental .stitutions such as
the bank OF France, is foreshadOw-
ed. officials say, by Mondays action.
The bank OF England is the first
foreign correspondent. whose ap-
pOintnent has been authorized
since the operation Of the new tinan-
cial system in this country.
In its statement announcing the
action the board said:
'The federal reserve board has
authorized the federal reserve bank
Of New York 20 appoint as one OF
its foreign correspondents and agents
the bank OF Engand Of London. Eng
land. under the terms OF the federal
reserve act.
Section IA Of the act permits any
federal reserve bank with the con-
sent Of the federal reserve board to
open and maintain banking &C
counts in foreign countries. where
soever IL may deem best for the pur-
pose OF purchasing. selling and col
lecting bills OF exchange and 10 buy
and sell with or without its endorse
ment through such correspondents
or agencies bills OF exchange arising
out Of actual commercial trans
actions. so that a broad field Of op-
erations is possible under il.
I'm granting the authority 10 es-
tablish this agency the board has
authorized the federal reserve bank
of New York TO maintain accounts
either for or with the bank of Eng
lard so that operations both in Eng
land and in the United States are
possible"
other federal reserve banks may
participate in the agency relation
ship with the bank OF England upon
the same terms and conditions that
will govern the federal reserve bank
of New York. if they so desire
In addition 10 being the first step
by the government toward going
after foreign business. it is UNDER
stood that authorization Of this APP
pointment is a part Of general plans
for establishing financial connections
that will strengthen the United
States a creditor nation In the COM
mercial competition which probably
will result when the war closes. and
10 provide a ready means 10 offset
any tendency on the part of foreign
bankers 10 withdraw the great sup
Ply Of gold accumulated here during
the war.
The action marks a radical de-
parture from the previous financial
policy Of the country inasmuch as il
Alaces the government OF the United
States and Great Britain for the
fest time. I'm direct, continual fnan-
Cial relationship.
The first effect. il is thought will
be noticeable in transactions which
might otherwise involve the exporta-
tion Of gold from this country as the
connection with the bank Of Eng
land Will afford a channel through
which American banks can readily
purchase British notes and securi-
ties TO meet any tendency toward
gold expectation. IL also will tend.
officials believe, 10 bring about
better feeling and understanding be-
tween the bankers of the two coun-
tries. Whether operations through
the connections will be extensive Of
hcials admit is difficult Of forecast
ing They might be on a tremendous
scale. il was said. and on the other
hand. might be comprehensively
light in volume. The effect Of the re-
lationship will be studied carefully
before similar authorizations are
made i'm the case Of other govern
mental controlled banks abroad.