Evening star., 1918-02-02
'MR. M'ADO0 URGES
WAR FINANCE BILL
Secretary of Treasury Points
Out Necessity for United
States Corporation.
WILL BRIDGE WIDE GAP

Immediate enactment of the proposed
law to create a war finance corporation
| is urged in a statement today by Sec
retary McAdoo, in which the Secretary
| of the Treasury points out the urgent
necessity for creation of the corpora
| tion as means of making proper cred
| its for war industries more readily
available. Creation of the corporation
with the powers with which it is vest
ed in the pending biIl.- Secretary Nc
Adoo states, will bridge the gap at
present existing between the govern
ment and the federal reserve banks. on
one hand, and borrowers on the other.
1T is confidently believed that the
mere existence of the machinery which
this act would establish" said Mr. Nc
| Adoo, would of itself maintain conf
dence to such an extent that the aid OF
the corporation would only in relative
| ly few cases be called for, and that the
| banks would be able to take care of the
requirements of this class of borrowers
and be ready to do it, knowing that in
case of need loans of this character
would be available for rediscount.
THE provisions of the federal reserve
law which permit member banks to re
discount and purchase paper secured
i by the governments obligations and
commercial paper have had the effect
| of driving the banks to discriminate
against loans on Ineligible paper even
where such loans were vitality necessary
! for war purposes, and in favor OF COM
| mercial paper even though of compa-
nies whose activities were not related
| to the war, and which might well be
curtailed during the period of the war.
1.-The proposed act to incorporate war
| finance corporation should be regarded
primarily as a measure to enable the
| banks, both national banks and state
| banks and trust companies. to continue
to furnish essential credits for Industries
and enterprises which are necessary or
contributory to the prosecution of the
| war.
| Pre-Empt Credit Facilities.
| 1.-THE governments borrowings. partic-
ularly during the period Immediately pre-
ceding and following each liberty loan
have tended to pre-empt the credit facili-
| ties of the banks and often to prevent
| them from giving needed and customary
help to quasi-public and private enter
prises. Many instances have been brought
| to the attention of the Secretary of the
Treasury and of the Federal Reserve
Board. where railroads, public utilities.
power plants, etc, have been prevented
! from obtaining the necessary advances to
enable them to perform vital services in
/ connection with the war because the bank
| credits ordinarily available to them. are
being absorbed by the government itself.
/ "In Europe central banks are permit
! ted to grant 10 banks ana bankers
0pans upon stocks and bonds upon GER
| tain we'll defined terms. The federal
reserve act does not provide for these.
and the war finance corporation is de-
| signed to fill this gap as war emer-
gency. The provisions of the federal
| reserve law which permit member
banks to rediscount and purchase paper
secured by the governments obliga-
| tions and commercial paper have had
the effect of driving the banks to dis
criminate against loans on ineligible
paper. even where such loans were
vitality necessary for war purposes.
and in favor of commercial paper even
though of companies whose activities
were not related to the war and which
migat we'll be curtailed during the
perio5 of the war.
Conceived as War Measure.
TT is believed that the proposed bill
has been wisely and conservatively
conceived as war measure to give re-
lief from this condition during the
period Of the war. The banks of the
country would, no doubt, scrutinize
with the utmost care both the loans
themselves and the security therefor,
and would exercise their individual
judgment upon the borrowers credit
before assuming a liability for the
amount of the loan, and also because
they would be under the necessity of.
advancing, out Of their own resources,
25 per cent of the amount loaned. The
bill would authorize advances to bank
of only Ia per cent of the amount
loaned by the bank to a war industry.
"As a corollary to the provision for
the extension of credits. the bill pro-
ivides for approval by the corporation,
Through system of licenses. of issues
of securities with a view to preventing
1.-THE use of capital in Unnecessary ex-
lpenditures during the period of the war
This is of great importance to the coun-
try in order to conserve the supply of
new capital and make it available for
government loans and essential war
purposes
Asked for Submission.
""rhe Secretary of the Treasury has
already asked for the voluntary sub
mission to the federal reserve hoard Of
any projected capital issue and has
asked the federal reserve board to pass
upon such issues The federal reserve