The Birmingham age-herald., 1918-02-06
HANDLING OF
 FOREIGN EXCHANGE
ny HOLLAND

l change with intent to sell them in the New York market, or the wheat opera | tor at Minneapolis whose bills of ex- change for the most part pass through New York will certainly be interested to know that every transaction of that kind Iis hereafter to be scrutinized by the di- rector of foreign exchange, a recently created official. In fact. everywhere in the United States from San Francisco to the Atlantic where bills of exchange which represent sales of American com modities to customers abroad are drawn and marketed, there will surely be in- terest felt in the activities of the new director of foreign exchange.
 | All of this new undertaking can be ! traced back to the discoveries made months ago that American commodities tensibly to customers in neutral nations were finding their way In large amounts into Germany and to some extent into Austria. For long time much wonder was expressed that Germany should be receiving supplies which repienished her own exhausted supplies. especially those which were of service in feeding the peo- pie and also in providing the raw ma terial whereby munitions of war could be manufactured At last the evidence was conclusive that customers who lived lin neutral nations, chiefly Switzerland, and also the Scandinavian peninsula, and to some extent Denmark were buying 1 great amounts of various commodities \ in the United States and then, after these commodities arrived at their desti- nation in neutral countries, they were reshipped furtively to Germany and to Austria.
 Immediately the question arose: How could we. having now become one of the belligerents, put stop to this method of aiding Germany and ] Austria with certain supplies?"
 After careful consideration the de- cision was made to cause all the Amer 1 representing shipments to neutral na- tions to make reports to the federal reserve banks once week whereby would be disclosed the nature and the I money value behnd these foreign ex- 1 change documents. The government had excellent reasons for presuming that cotton which had been sold in good faith by American planters to customers in neutral nations was find ing it's way in large amounts into Germany. So also other Americans
 who, in perfect good faith, sold food l products to customers in neutral coun- 1 tries were in that way unintention- ally enabling Germany and Austria l to receive many needed supplies of I that kind
 The reports which were made by | the banks or individuals who dealt in | foreign exchange made it possible aft CT careful scrutiny to establish the fact that some part of the commodities 1 behind which stood this foreign ex- change was finding it's way into Ger many.
 Measures were taken by the gov
 ernment so to scrutinfze these bills oi foreign exchange upon commodities shipped to neutrals as to make it cer-
 tain that the goods which these drafts
 represented would hereafter, for the
 most part, be excluded from Germany I PLAN WORKED WELL
 On the whole this plan worked yer,
 We'll There came reliable evidence
 that after 1t was put in effect the sup plies which came from American ant
 which neutral countries were secretly
 delivering to Germany and Austria 1 were beginning to be limited to thu
 real needs of the neutral nations.
 mere was, however still some danger that in this way Germany would mee some of her needs. It seemed. therefore
 expedient to expand the rule so tha every Dill of exchange, whether repre
 senting commodities shipped to our al nes or to the neutral nations, should b, placed under the scrutiny of the fedora
 reserve banks. This method is now f,
 pc adopted and enforced by the new al rector of foreign exchange. Every deal
 CT in negotiable paper of this kind i
 compelled to make a report once a weel T of the aggregate amount of his dealing,
 Tor the week This Is true of every par | or the country where foreign exchang IS dealt in These reports are closet,
 scrutinized by competent employees in tn
 federal reserve bank and will hereafte
 De even more carefully scrutinized h,
 the new director of foreign exchange
 Fred I. Kent. Scrutiny of that kind vii
 serve to show whether an unusual O
 abnormal amount of commodities is be ing shipped abroad. or the presumptio, would be that If this were the case th,
 excessive amount would ultimately fint
 it's way into Germany and Austria. Tn, 4 government at Washington intends a S far as possible thoroughly to enforc
 the embargo upon the shipment of Amer
 ican products in such manner as to mak
 it impossible for any part of the com
 modities to reach Germany The reason
 are excellent for believing that the rul
 which some months ago was put in fore
 whereby the government officers wer
 able to scrutinize bills of exchange whicl
 represented commodities shipped to tn
 neutrals resulted in considerable embar
 rassment to Germany. No longer coult
 the German authorities receive as easil,
 as they had, since we entered the war
 been receiving American supplies whicl
 had been in good faith sold to customer
 in neutral nations.
 This latest method may seem some
 what drastic. It will make it possibl
 for the director of foreign exchange if he is suspicious. to cause the book
 of any dealer in foreign exchanges to b. carefully examined with intent to dis cover every detail behind the drawing O the bills of exchange and their sales
 In that way 1t is expected that Ger many will be to great extent deprived lo of those supplies upon which her gov ernment confidently relied through under standings with merchants and others il neutral nations, who had bought com lmodities in the United States.
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