The Washington herald., 1917-03-04
WAR WILL CAUSE
NO MONEY PANIC
Federal Reserve Board Note
Issue Power Totals
ST, 200, ,000, 900.

Government obligations must be sac
rificed to commercial ones in the opera
tion of the twelve Federal Reserve
Banks, according to a policy announced
yesterday by the Federal Reserve Board.
The Board declared that banks should
rot invest heavily In obligations of the
nation. OF states, cities and counties
in times when there Is q brisk demand
for Federal Reserve funds by ordinary
to the purchase of warrants by Federal
Reserve Banks. These short-time obliga-
tions, issued principally by cities and
states. should not be invested in. the
Board says, IL the funds SO used are
needed in discount and rediscount op-
erations arising from private business.
The policy was announced in connec-
ton with a general statement, outlining
banking conditions in the present period
OF strained international relations. The
Board pointed out that there have been
financial fiurries in some cities because
of the withdrawal by foreigners of Their
bank deposits. In this conpection, the
Board said that the potential note-issu-
ing power of Federal Reserve Banks now
amounts to 81 900, 900 900, and that, there
fore. there is no need to fear financial
panic or stress as the result Of at
tacks on banks or chaos in the COM
mercial money market.
Plenty of Currency.
Emergency currency now available for
any crisis that may develop, Is double
the amount which has been available at
any previous time in the nations bank
ing history. according to the board.
The Federal Reserve Board also took
official cognizance OF what is believed to
be England's efforts to keep the United
States flooded with gold. presumably to
be used as a basis for future heavy bor-
rowing In this country. The board does
not rOfer specifically to Great Britain.
but States that there IL evidenced on the
part of small European countries, par
ticularly Spain and Sweden, a distinct at
tempt to discourage importations Of gold
from this country. despite the fact that
there are heavy balances of trade In IA
vor of the United States.
Despite the trade balance present for
eign exchange rates with these countries
are unfavorable to the United States. and
while the Board has been appealed to
to remedy this situation. 1t admits that
it does not now see its way clear to work
any alteration. The same situation pre-
walls. the board states. as to South Amer
lea 1t is generally known that England
mas pTdCllCdlIy IOTDlQQen south American
countries to accept gold from the United
States. lt .sgW
Big Gold Gain.
The board says that between January
10 and February 16 last the United States
gained $43, 13s, 900 in gold, and that the net
gold'gain for the United States during the
pendency OF the European war has
amounted to the colossal total OF
1851, ,172,ooO.
So far as general business condition:
in the United States during the last month
are concerned. the board says that re,
ports from the twelve Federal Reserve
districts show that the car shortage, lack
of fuel and the hampering effect Of em.
bargoes on general traffic have been de-
terring elements. which, although harass-
ing, have been sufficient to make the
period anything but an active and pros.
porous one. Labor Is reported scarce
with good wages prevailing. The busines,
outlook Is declared to be fundamentally
sound, but some hesitancy over the for.
eign situation Is reported. However, a
generally favorable outlook is conceded
Although a lack OF moisture is reported
from the Middle West. crop conditions
and outlook are declared for the mos
part to be favorable.