New-York tribune., 1918-03-11


York Leaf Tobacco Trade)
r Under the Federal Reserve bank
ing system the banking power
of the nation is being coordi-
mated and unified. The nations golC
reserves are carried by the Federal Re.
servo banks, and their consolidated
statements reflect the credit and cur
rency position Of the country. The re-
serves of the member banks are repre-
sented primarily by credits on the
books Of the Federal Reserve Bank
Their secondary reserves consist Of
paper eligible for rediscount with the
Federal Reserve Bank.
1t is evident, therefore, that the
amount of credit which the banks can
extend depends upon the liquidity OF
their assets, the availability of those
assets for 1ediscount and the policies
of management of the Federal Reserve
Board.
The Federal Reserve banks thus torn1
a great centralized reservoir of avail
able commercial credit, behind which
are the government and national re-
sources. This constitutes the greatest
reservoir of available credit existing in
the world.
The Federal Reserve banking system
has been the salvation of this country
in this crisis. l may go further and
say it is the salvation of the world, for
upon it depends the marshalling of our
resources, upon the effective admins
traton Of which depend the destnics
of all mankind.
Equal to Hugo Tasks
If our tasks are huge. we may feel
reassured by our basic conditions to
meet them. We have about one-thlrd
Of the gold money of the world, abso-
Lutte control Of gold exports, an assured
heavy balance Of trade in our favor
full employment of labor. ineXhaustiblc
raw moterials and natural resources to
make US practically self-supportine
and inestimably greater than those OF
any other country; agricultural prod
ucts of an estimated value of nearly
twenty billions Of dollars annually, an
annual income estimated at fifty bill.
ions of dollars and the position on
a large scale of creditor nation. Oul
Federal Reserve Bank position indi-
Gates present reserves of approximate
ly S1,750,0OO,OO0 gold, or approximate
ly 65 per cent against circulation anc
621z per cent against deposits, with g
floating gold supply roundly of morn
than one billion dollars. which could
be made available as a further basis
of credit These things combine tc
make our credit and economic position
incomparably stronger than that of any
other country.
Therefore, our credit base can be
credit as may be necessary to the
vital needs Of the nation. At the same
time, further expansion of credit at
this time must be along lines deter
mined by the policies Of management
Of the Federal Reserve Board.
Bearing in mind these basic condi.
tions, our" immediate problems are
those of good methods and good man.
agement, making it incumbent upon Us
all to ecectively cooperate with the
Federal Reserve Board We need tc
highest efficiency in order to make
commercial credit as liquid as possible
cut out lost motion, arrange our whole
credit system for effective cooopcra-
tion with our main credit reservoir
through the Federal Reserve Banks
clearing credit against credit, in order
to accomplish a maximum of business
on minimum of credit, to the enc
that legitimate commercial credit may
contraction and liquidation. We must
bear in mind that through force OF
circumstances this nation is projected
largely into the position of the worlds
banker, the worlds workshop, and a
main reliance for food and rawmate-
rials, which, combined, will require an
almost incalculable volume of credit
1t is very apparent that credit must
somewhere be curtailed, for the Moor
nous borrowing needs of the govern
ment must first be supplied, taking
precedence over everything else. Next
in order come the most essention indus
trial and commercial operations. Con-
siderations of broad public policy will
govern the Federal Reserve Board in
the administration of banking credit
curtailng as fully as may Re necessary
credit for non-esental operations
Where and how the line will be drawn
will have to depend upon the exig-
encies of the tremendously complicated
situation ahead.
Control of Corporate Needs
1t is inevitable under present cir
cumstances that the needs for cor
porate industrial capital requirements
on large scale must be supplied
through centralized control, in which
this discrimination will be exercised
If the bill creating the $50O,00O ,0OC
war bank becomes a law, with a pos.
sible credit expansion Of $4,000, 10000
supported by the Federal Reserve bank.
ing system, it may mean an encroach-
ment of great magnitude upon avail.
able credit rcservcs--how great we car
only conjecture. 1t is inevitable, also
that the banks will have to abhorE
from now on government obligations to
an extent which will require the ut.
most liquidity Of resources in order tc
be in position to adequately provide
for legitimate commercial needs.
With this in mind, therefore, we
must concentrate our attention upon
these fundamental facts:
/. An unmatured commercial credit
in negotiable form is valid asset
convertible at once through our pres
cnt banking machinery into cash or
available credit.