The Washington herald., 1917-10-20
RESERVE BANKS
ARE INCREASED
Holland Says More Institu-
tions Joining Strength
ems the System.
BY HOLLAND.

A few days ago Frank A. Vanderlip
went from Washington to New York
for the sole purpose of speaking to a
group of bankers and some of the
leaders in large industries about GER
tain features Of the governments
financial operations. and especially the
new liberty loan. Mr.. Vanderlip then
then said, among other things, that II
might be found necessary in case the
government Is to secure the full
amount-some 1900. .OOO. .OOO-which will
he needed between this time and next
June. to conscript the credit resources
Of the banks of the United States. He
did think that 1t would be necessary
for the government to take action OF
that kind. It would be an emergency
measure, held in reserve in case of a
need OF utilizing It.
The government would not, in Mr..
Vanderlip's view, be compelled TO
adopt this extreme measure IL the
banks of the United States acted in
thorough cooperation, co-ordfnating
their resources and credit as though
they all were a single, central bank.
The banks. Mr.. Vanderlip said. pos
sess the resources somewhat in excess
of s36. .Ooo, ,Oo0, 900. The credit resources,
through thorough operation. would. In
his opinion. greatly exceed this
amount.
Effect of Statement.
OF course. considerable discussion
followed the publication Of Mr.. Van
derlilp's statement. Not all OF the
bankers appeared thoroughly to have
grasped the meaning behind Mr.. VAN
derlip's remark. Very likely 1t was
in part due to this somewhat vague
idea Of what Mr.. Vanderlip meant
that Benjamin Strong. jr., governor
Of the Federal Reserve bank of New
York City, a few days later, made a
statement which surves fully to ex-
plain Mr.. Vanderlip's. meaning.
Gov. Strong has always been per-
suaded that under the operation Of
the Federal reserve system it would
be possible to finance all of the gov
ernment's needs as long as the war
lasted He is quoted as having said
that. II 1t were necessary, then the
banks of the Unitel States could be
relied upon to furnish all the facilities
needed for floating the Second Liberty
Loan. although for the best moral ef-
feet it would be far better If the loan
were fully subscribed by individual
subscriptions. many which. OF course,
would be aided by the banks
The President and Secretary McAdoo
have, according to the understanding
Of the New York bankers, as well as
that Of some OF the leaders OF the
large industries, been very anxious
that the Second Liberty Loan should
be even. TO a greater extent than the
FIRST one was. a genuine and a spon-
taneous popular Offering. The moral
effect Of subscriptions received in this
way would be much greater than any
favorable influence that might follow
the financing of the loan by the banks
Of the United States.
Some Stupenduous Statistics-l,
It Is evident that Gov. Strong Is
gkeatly rejoiced that some of che
larger trust institutions in New York
have, within a few days, made appli-
cation for membership IN the Federal
reserve system. No wonder, bankers
say, that Gov. Strong is elated over
this action, for there are two reasons
Why he should have contemplated it
with very great satisfaction. One of
the reasons Gov. Strong gives in his
statement. saying that the trust COM
panies of New York City which have
applied for membership in the Federal
sources of a little over 81 800, 900. 900.
When they are admitted to the Fed
Cral reserve system, they will be able
to increase the cash reserve of the
Federal Reserve Bank from $3.50, ,000,-
90 to s720,OO0,O 900. These are figures
that compare fayorably with the re-
ports of the strength of four or five
of the greatest banks in England, By
reason of this increase in the cash
reserve the Federal Reserve Bank of
New York may, if it be so disposed
and II the action be deemed expedient,
increase its loans by S1,1O0, 100000, and
an action of that kinw would increase
the capacity of the banks in the sec
ond Federal reserve district to $3,O0O,-
10000 more than they were able to
lend before the six trust institutions
a few days ago applied for member
ship in the Federal reserve system.
Gov. Strcng sounded a note of eau
tion which is evidently meant for the
ears Of those who might be disposed to
take advantage of TINS increased lend
ing capacity to borrow money with
which to make investments, or pos
sibly with which to operate in the
securities market. The increased
strength o. the Federal reserve sys-
tenn, by means of the mobilizing with
Ii of the six State-chartered institu-
tons, must be so conserved as to pro-
tect the government and facilitate its
stupendous financing propositions.
Another reason why Gov. Strong
speaks with qualification of the new
membership in the Federal reserve
system of six great trust institutions
Is due to his belief that the example
thus set will speedily be followed by
many other State-chartered institu-
tons and banks, so that in due time
all of the banking resources of the
United States. national and State. may
be mobilized and concentrated to the
end that the government will be per-
fectly protected ana assured that its
enormous program Of financing will
be adequately responded to by the
American banks.
one way in which the resources Of
the Federal reserve system, and of
the banks that are members of ID, can
be made of great serevice in the clos
ing days Of the subscription to the lib
erty loan is through the utilization of
the credit of these banks, whereby in
iividual subscribers can borrow the
funds needed to pay their installments
upon their subscriptions. For it is
deemed of the highest Importance that
Individual subscriptions should be paid
not out Of the principal, not by with
drawing savings bank deposits, but
.ut of earnings. The terms are so lib
sraI that 1t should be easy for any in