The Birmingham age-herald., 1917-03-09
FEDERAL RESERVE BOARD ENCOURAGES F FOREIGN LENDING Issues Statement Further Explaining the Warning
 Given in November GOLD POSITION IS NOW MUCH STRONGER While It Is Still Desired to Keep Funds in Liquid State, Yet
 Situation Gives Broader
 Basis for Credit

WaShlngton, Marcn o.-ln a statement tonight reiterating that it's warning to American banks not to invest too heavily in foreign securities had been misunderstood, the federal re- serve board said 1t regarded the placing of foreign loans as a natural and proper means of settling balances, and gave notice that the country's gold reserve now "has been ma terially strengthened and SUD- plies a broad basis for addi- tional credit"
 When the warning was issued last November the board explained that it was directed to the tying up in- definitely in foreign treasury bills of capital which should be available to meet domestic demands. Its imme- diate result was the withdrawal from sale in this country of many million dollars worth of British securities by J. P. Morgan & Co. and no little un- favorable criticism in the allied coun- tries.
 STATEMENT OF BOARD
 The boards statement tonight says:
 Prom statements which have been published from time to time, both in the American and foreign press, the~ ap- pears to be misunderstanding of the attitude of the federal reserve board with respect to investments in foreign loans in the United States. The beard has en- deavosed to remove this misunderstood ing. So far from objecting to the placing of foreign loans in the American market, it regards them as very important, natural and proper means of settling the balances created in our favor by our large export trade. There are times when such loans should be encouraged as an essen tial means of maintaining and protecting our foreign trade.
 MUST REMAIN LIQUID
 "The board has already stated that it's announcement of November 2S, 1916, did not deal with the finances or the credit of any particular country. but only with banking principles which it seemed de- sirable to emphasize under the conditions existing at that time. The objection then made by the board was to undue employ ment by our banks of their funds in the purchase of foreign loans and not to the merits of foreign loans as investments The board was then and is now of the opinion that the liquid condition of our banks should not be impaired through undue or unwise use of their resources for investment purposes.
 NO CHANGE IN VIEW
 .The board, with respect to th.s prin- ciple, has not changed. It still takes the view that borrowings should appeal pri- marily to the investor and not involve the use of banking resources beyond the limits of sound practice. In view, how ever, of existing conditions, especially as they affect our foreign trade, the board deems it desirable and in the public in terests to remove any misconception that may be left in the minds of those who read the statement of November, 1916
 GOLD RESERVE STRONGER
 Since that date the country's gol6 reserve has been further materially strengthened and supplies a broad bass for additional credit. The board considers that banks may perform useful service in facilitating the distribution of invest ments and in carrying out this process they may, with advantage, invest req sonable amount of their resources in for eign securities. So long as this does not lead to an excessive tying up of funds ant does not interfere with the liquid condi ton of the banks, there cannot be ans objection to this course
 ."rhe board did not of course, under take to give advice concerning any par tieular loan. It desires, however. to make clear that 1t did not seek to create al unfavorable attitude on the part of Amer 1 jean, investors toward desirable foreigr securities