The Washington herald., 1918-02-06
BALKS PLAN TO
AID GERMANY
New Foreign Exchange Sys-
tern Restricts Neutrals,
Il Says Holland.


pass through New York will certainly
be interested to know that every
transaction Of that kind Is hereafter
to be scrutinized by the director OF
foreign exchange, recently created
Official.
In fact, everywhere in the United
States from San Francisco to the At
lantic where bills of exchange which
represent sales of American COM
modities to customers abroad are
drawn and marketed. there will sure
ly be interest felt in the activities OF
the new director Of foreign exchange.
All Of this new undertaking can De
traced back to the discoveries made
months ago that American comnodi-
ties which were shipped abroad and
sold ostensibly to customers in neu-
tral nations were finding their way
q in large amount into Germany, and
TO some extent, into Austria.
For a long time much wonder was
expressed that Germany should be re-
ceiving supplies which replenished
her own exhausted supplies, especial
ly those which were Of service In
feeding the people and also in provid-
ing the raw material whereby muni-
tions Of war could be manufactured.
At last the evidence was conclusive
that customers who lived in neutral
nations, chiefly Switzerland, and also
the Scandinavian peninsula. and to
some extent Denmark, were buying
great amounts of various commodities
in the United States and then after
these commodities arrived at their
destination in neutral countries they
were re-shipped furtiveIy to Germany
and to Austria.
Immediately the question arose:
How could We. having now become
one of the belligerents. put a stop
to this method Of aiding Germany
and Austria with certain suppIies?"
The Question Answered.
After careful consideration the de-
cision was made to cause all the
Americans who dealt in foreign ex-
change representing shipments to
neutral nations to make reports to
the Federal Reserve Banks once a
. week, whereby would be disclosed
the nature and the money value be-
hind these foreign exchange docu-
ments.
The government had excellent rea-
sons for presuming that cotton which
had been sold in good faith by Amer
lean planters to customers in neutral
nations was finding its way in large
amounts into Germany. So also other
Americans who in perfect good faith
sold food products to customers in
neutral countries were in that way
unintentionally enabling Germany and
Austria to receive many needed sup
plies OF that kind.
The reports which were made by
the banks or individuals who dealt
in foreign exchange made it possible
after careful scrutiny to establish the
fact that some part of the commodi-
ties behind which stood this foreign
exchange was finding its way into
Germany.
Measures were taken by the gov
eminent so to sCrutinize these bills
OF foreign exchange upon commodities
shipped to neutrals as to make r.
certain that the goods which these
drafts represented would hereafter,
for the most part, be excluded from
Germany.
Plan Worked Well
On the whole this plan worked very
well. There came reliable evidence
that after IL was put into effect the
supplies which came from America
and which neutral nations were Sc
cretly delivering to Germany and Aus
the real needs OF the neutral nations.
There was, however. still some dan
ger that in this way Germany would
meet some Of her needs. 1t seemed,
therefore. expedient to expand the
rule so that every bill of exchange,
whether representing commodities
shipped to our allies or to the neu-
trail nations, should be placed under
the scrutiny Of the Federal Reserve
Banks.
This method Is now to be adopted
and enforced by the new director OF
foreign exchange. Every dealer in
negotiable paper OF this kind Is COM
PEELED to make a report once a week
Of the aggregate amount of his deal
ings for the week. This Is true of
every part Of the country where for
eign exchange is dealt In.
These reports are closely scrutinized
by competent employees in the Federal
Reserve Bank and will hereafter be
even more carefully scrutinized by
the new director Of foreign exchange,
Fred /. Kent.
Scrutiny Of that kind will serve TO
show whether an unusual or abnor-
NAL amount Of commodities Is being
shipped abroad. For the presump-
ton would be that IL this were the
case the excessive amount would
ultimately ind its way into Germany
and Austria
The government at Washington in
tends as far as possible thoroughly
to enfors the embargo upon the ship
ment OF American products in such
manner as to make 1t impossible for
any part Of the commodities to reach
Germany.
The reasons are excellent for be-
lieving that the rule which some
months ago was put in force whereby
the government officers were able
to scrutinize bills of exchange which
represented commodities shipped
to the neutrals resulted in consid-
cradle embarrassment to Germany.
No longer could the German
authorities receive as easily as they
had, since we entered the war,
: been receiving American supplies
! which had been in good faith sold
to customers in neutral nations.
This latest method may seem
somewhat drastic. 1t will make It
possible for the director Of foreign
exchange. IL he is suspicious, to
cause the books of any dealer in
foreign exchange to be carefully
examined with intent to discover
every detail behind the drawing of
the bills Of exchange and their
sales.
In that way II Is expected that
OerR1any will be to q great extent
deprived OF those supplies upon,
which her government confidently
relied through understandings with
tperchants and others in neutral