New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-03-09
November Warning Misun.
derstood, 1t Says in
New Statement
Cold Here Ample
For Broad Credit
Investment in Foreign Sc
curities Now Urged for
Economic Advantage

p..srvs Board issued tonight an un-
,v,seted statement, which will be con-
,,rued as an attempt 10 restore public
,orsdence in European war loans and
,hsrsbv cancel the unfortunate effect
,roduced BY its co-called warning OIL
November 27 last
At that time J. P. Morgan & Co.
r.-s preparing 70 print in this coun-
,rv and feat among commercial banks
sn ,ndeterminate or unlimited amount
# British Treasury bills in place Of
,hs short term notes previously placed
hotb with banks and private investors.
The Federal Reserve Board was
startled By this proposal Of the Allies
bankers. and put forth a statement
u7ing that in It's opinion IL would
bs unwiss for the banks 20 invest
in foreign treasury bills of this char
tcter."
That was Tor the benefit Of banks
Then the board went on 20 address
Itself to the private investor. and sug-
s.sted that he demand full and au-
,hori.ative data before buying the war
loans Of foreign countries. "partic-
ulsrly in the case of unsecured loans
What resulted was that J. p. Morgan
Co. withdrew the offering Of Brit
al Treasury bills; that the thought Of
trngirg out large unsecured loan for
hsAllies was abandoned, and that in
us.srs generally thereafter were less
enthusiastic toward war loans. All OF
them have since declined IN value,
though not without other reasons
The Boards Statement
In It's statement tonight the board
tsplores the Misunderstanding With
which is November utterance was re-
esivsS. and says:
Prom statements which have been
published from time 20 time. both In
me American and foreign press, there
appears 70 be a Misunderstanding OF
tie attitude of the Federal Reserve
Board with respect TO investments IN
foreign loans in the United States.
has been made 20 remove this misun-
Outstanding. So far from obJectng
70 the placing OF foreign loans in the
American market, II regards them as
avery important, natural and proper
means of settling the balances Great
ed in our favor by our large export
trade. There are times when such
loans should be encouraged as An es-
ssntial means Of maintaining and
protecting our foreign trade.
"The board has already stated that
its announcement OF November %
1915. did not deal with the finances
nor the credit Of any particular coun-
Try. but only with banking principles,
which u seemed desirable TO empha-
size under the conditions existing al
that time. The objection then made
~ the board was 20 the undue en-
ploymeut oy our banks Of their funds
in the purchase OF foreign loans, and
rot % the merits Of foreign loans as
investments The board was then. and
= nov, OF the opinion that the liquid
condition Of our banks should not be
impaired through undue or unwise
use OF their resources for investment
operations
"The position Of the board with re-
spect 20 this principle has not
changed. Il still takes the view that
foreign borrowings should appeal pri-
msrily 70 the investor and not involve
the Dse Of banking resources beyond
me limits Of sound practice. In view,
however, % existing conditions. espe-
cally a. they affect our foreign trade,
tne board deems IL desirable and in
ne public interest 70 remove any
mlseonception that may be left in the
minds o. those who read the state
nsnt issued on November p. 1915.
Gold Reserves Strength
Since that date the country's gold
reserve has been further materially
,rengthened. and supplies a broad
ossis for additional credit. The board
eorHcers that banks may perform a
useful service IN facilitating the dis
Intuition cf investments, and in
carrying out this process they may,
WIN advantage. invest n reasonable
amount of their resources IN foreign
'sequties. So long ss this does not
.sso N An excessive tying up Of funds
Nno ooes not interfere with the LIQUID
condition % the banks there cannot
any objection 10 this course.
ne board did not. Of course. un-
afrtske ~ give advice concerning any
particular loan. n desires. however.
make clear that ~ did not seek 20
f's'e ~ unfavorablc attitude on the
Isrt - American investors toward
firsnie foreign rccuritics, and 20
snPnANze fhe point that American
...9s available Tor Investment may,
la advantage ~ the country'a for
~ irade s0d the domestic economic
ion. b. employed I'm the pur-
1t' o. such securities"
ne point ilee in the suqgcstion that
''.. freely iu these foreign securi-
w b. 10 fhe advantage 81 the
r,..fth foreign trade and the do
49, economic situation. Partly ON
ine Increasing difficulty 81 find
~ h'f' ne credit With which 10 pay
'Ai good there has been y decline
profff. Dhich is beginning ~.
,sSH shoN. both in foreign trade
t., me "domestic economic situs-
n@sh,iions plants. - they come 10
,.,I4no 81 their orders boz hand. are not
ssP.'N Niih new Ones The bankeTr
ss.. .p1i new contract are not forth
~, n and remind their interrogators
f,,.,,D r. m selling var goods the
lsy should have Rad ~ 10 on bug
4 u lDaps ~ ~ undiminirhed rate,
die not Do
- plants that have been working
wp ~ capacity On var orders
- 'safhing The end Of them, snd
~ happens their forces are re-