New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-09-28
Banks Told to
Stop Earmarking
Gold in Vaults
Federal Reserve Board
Says Practice Defeats
Purpose of Embargo

Further steps TO conserve the gold
resources Of the country during the
period of the war have been taken, &C
cording TO an announcement yesterday
by the Federal Reserve Bank OF New
York. Benjamin Strong governor Of
the bank, acting on instructions re-
ceved from the Federal Reserve Board
at Washington, has sent request to
all tho financial institutions in TINS
district, including private bankers, that
| they refrain from earmarking gold in
their vaults for the account of foreign
countries, except with the approval OF
the Reserve Board.
The reason assigned for this action
was that the practice OF earmarklhe
gold is tantamount to the expectation
of the metal and in effect defeats In
a considerable degree the purpose OF
the Presidents embargo. In order to
| learn how much gold has already been
earmarked here for foreign account the
! Reserve Bank requests that the amount
already thus set aside be reported.
Gold Payments Permissible
The letter sent to banks by Governor
Strong bearing upon the request of the
Federal Reserve Board makes il clear,
however. that restrictions placed on
either exporting or earmarklng gold
must in no way affect the payment OF
! obligations due in the United States
either to domestic or foreign holders,
excepting enemy aliens. The text or
the latter follows:
In connection with the regulations cover
ing the expectation of coin. bullion and
currency from the United States, the board
desires that you request all national banks.
state banks, trust companies, private banh-
ing firms or other fiduciary institutions
likely 20 have earmarked gold sor foreign
account 10 give you a full statement Of the
gold which is held in custody by them, in
dicating under what stpulations 1t was
received with the assurance that the infor-
nation furnished will be held in strict con-
fdence Please inform these institutions
that the board regards the earnarking of
gold for foreign individuals, firms, cor
porations or governments rs being tanta-
noun, to the expectation Of gold. and that
in the public interest il requests that no
more gold be earmarked for foreign sc-
count except upon the approval of the
board IL must he understood. however.
that any restrictions which may be placed
upon the expectation earmarkinR OF
gold must in no way affect the payment in
gold whenever required of any obligations
payable in gold within the United States,
whether due 70 domestic foreign holders,
. excepting enemy holders. the regulations
affecting only gold which is TO be shipped
| outside Of the United States or TO be ear
marked for foreign account, AS stated
| above.
Withdrawals Affect Reserves
II has been common practice for
| banking institutions in this city to
withdraw gold from the SubTreasury
and deposit il in their own vaults for
| foreign account. This week a transac
| ton of this character took place, in
which s2,000,000 was placed in the
vaults of the Guaranty Trust Company
| for South American country. In this
way that government, by not taking the
gold out of the United States, could
still use it as reserve against its note
| circulation On the other hand, the
withdrawal of this gold from the Sub
! Treasury here prevented il from being
used as part of the bank reserves.