The Washington herald., 1918-01-16
BANKS URGED
TO HOLD GOLD
Administration Advises the
Hoarding Of Metal to Con-
serve U. S. Supply.

ler's window Of one Of the large trust
institutions Of New York this morn
ing, a customer whose balance Is ex-
ceIlent and always well maintained.
He placed before the paying teller
Federal reserve note for SEQ and asked
that it be exchanged for a so gold
piece.
The teller declined to make the ex-
change, and the customer was at first
astonished and then indignant He
asked whether the Federal reserve
banks were refusing to redeem their
notes in coin, and the reply was that
the notes were as good as gold. He
then asked why, IL that was so, the
trust company could not exchange q
Federal reserve note for a gold coin,
and the reply was that the govern
ment at Washington and the Federal
reserve bank had requested all banks
to refrain as far as possible from
paying out gold.
How then was he to get the gold
for which he had especial need? He
was told that probably II he ex-
changed the Federal reserve note for
legal tender, commonly called green
back. and presented that at the Sub
Treasury for redemption in gold, and
insisted that he receive the gold, he,
might secure it.
Banks Heed Advice.
The incident is here reported be-
cause 1t affords a concrete illustra-
tion Of the energy and care with
which the banks OF the United
states are needing the request of
the Treasury Department and the
Federal Reserve banks that they
keep their gold, paying out paper
money in exchange for drafts or
checks.
On Tuesday of last week, the ma
tional banks of New York held their
annual meetings. When those who
took part in these proceedings were
offered their fees, sometimes ten
dollars and sometimes twenty, they
discovered that, not as always in
the past, was the fee in the form
Of gold coin. but instead was in pa
per money.
So far as can be learned, every
national bank in New York, and
probably a majority. il not all, of
the corporations which paid fees
for services last week. did SO by
Offering Federal Reserve notes in
stead Of gold. This is the first time
in many years that this method of
paying fees has been in this form.
The Federal Reserve Board at
Washington and the Treasury De-
partment are anxious that there shall
be no more distribution Of gold than
Is absolutely necessary. That desire
is partly due to the fact that we are
now receiving no new gold from
abroad. All the fresh gold that is
coming Into the possession of thu
gopernment represents the output of
American mines
There are several reasons for the
desire Of the Federal Reserve Board
that the gold now held in the United
States as well as that which will be
: received within the next twelve
months from American mines be
shoarded by the Federal reserve banks
zor by the Treasury Department.
One of these reasons is to be found
in the certainty that hereafter we
shall receive little or no gold from
foreign countries. Payments which
must be made by other nations to the
United States will be in the form Oh
credits and will involve on the whole,
bookkeeping of very large extent
We have i'm the United States now
in money gold little over 5000, co.,
600 That is about $3OI. 900, 900 more
than We possessed a year ago. but
there seems TO be little or no chance
that our stock of gold will be in
creased excepting by the output of
American mines in the year 1913.
The Federal Reserve Board regards
IT as Of the utmost Importance that
our stores of gold be thoroughly
modified so that they can be made
available as a basis for credit and for
new issues of paper money. Such
past year on the part of some of the
people to hoard gold, and some ap-
prehension has prevailed lest If the
war be prolonged this disposition in
crease.
Then and Now.
The present-day situation in re-
spect to gold, is radically different
from that which prevailed during
the administration of Lyman J.
Gage, as Secretary of the Treasury
under Presidents Mckinley and
Roosevelt.
The extraordinary and sudden
change in our international trade
conditions following McKinley's in
auguration. and the moral effect
Occasioned by the adoption of the
single gold standard in the first
a
phenomenal flow Of gold into the
United States.
This happened also at a time
when the American mines were in
creasing production of gold and
when the Alaska development be-
gan In the opinion of Secretary
Gage, it was the wiser part to force
a large proportion of this gold into
general circulation
He urged banks to pay gold out
through the paying teller's window
and in other ways, referring to the
prevalence in England of the use of
gold in denominations below five
pounds for every day purposes. But
earnestly as Secretary Gage urged
and strenuously as he advised the
distribution of gold among the peo-
pie, he found it impossible to Sc
cure a large distribution.
Almost everybody preferred paper
money to gold. and 1t frequently hap
pened that when a paying teller pass
ed gold through a window to a Gus
toner who had offered his check, the
customer declined to receive it. saying
that he preferred paper. He knew
that the paper Of the United States
was just as coed as gold. The Secre-
tary was obliged to abandon the ef-
fort and there followed gold Icertif-
Gates In small denomination, the kind
Of paper money which is commonly
called ''yellowbacks."
Now In a little over half a genera
tion Of time. the government and the
Federal reserve bank are taking pre-
ctsely the opposite stand from that
which characterized Secrefarv Gage