The Washington times., 1918-02-02
Important Statement By
Secretary McAdOO
War Finance CerpOraton
VIII Hep Banksin
War Credits.

sscrstary 1EeAdoo auths rized toda,
he following statement:
The proposed aet TO incorporate
Q war ApAncs corporhtiou should
De regarded primarily - . meas
ure TO enAblS the bHnke. both IA
tional banks and State banks and
trust companies. to eontinus 60
furnish eseenkfal credits for In
dustrles and snterpFises which are
heeAsSAry or soltfthntofy to the
prosecution Of the war.
The Geverument's. Borrowings,
particularly during the period I'M
medistely preceding ana follow
Ing each Liberty loan, hate tend
ed 70 Aprofppe the credit facilities
of the banks and often to prevent
them from giving needed and GUS
tomary help 10 quasi-pubhe and
private enterprises. Many IN,
stances have been brought to the
attention Of the Secretary OF the
Treasury and Of the FederA Re
serve Boerd where railroads pub
lie utilitiee. power plants, etc,
have BEEN preveAted from obtain
fnG the neoessary advances 70 an
able them 70 perform vital service
"a connection with the var be
cause the bank credit1, ordinarily
available to them, are being ee-
Oofekd By the CovernpaAnt itnelf.
In Europe central beniks are
permitted to grant 70 banks and
bankers loans upon stoeko ana
bonds upon certain wen eenned
terms. The Federal Reeefve Act
does not pfoytds for these and the
War Finance Cooperation u de-
signed. TO an this zap ~ . var
emergeney. The Provisiops Of the
Feferal Reserve law which per-
NIT member banks % rediseetnt
ana pnrchase payer secured ~
the GovernpentS cbiigattqrs ana
comuirceirl paper have h11 the
effect of diving the banks 70 ais
eliminate Ngainst leans on IN
eligible paper even; where suen
loans Wtre vitality necesasrY Tor
war purScees. and IN fayor o.
commercial payer even though
Of companies whose aetiylftes
were not reiatsd 70 the war ana
which might well be rurtshed
curing the period OF the war. y
70 Believed that the Broposed Dill
has been wisely and conservative
~ coneslved a. q war measure 70
Gtve reiief from this eoncitlop
during the period Of the war. The
banks Of the country EoQlo. no
doubt. scrutlnize with the utmost
care both the loans themselves
and the security thsretef ene
would exercise their indiytquel
judgmsnt upon the bofrowsrs
credit before assuming anAeinty
fof the amount Of the loan ana
also becsuss they woulf ne nnaer
the neeessity OF adyaneinG. OUT q
.thstr. own rseourees, 70 Har cent
Of ne amount loaned The pm
would aa1thoriEs advances TO =
bank 90 oplx - peg cent q; hs
amount loaned by the bank TO
eonfidentIy believed that
th1 mere existence OF. the machir-
cry which this act would estapIisn
would Of itself maintain eonn-
d0ncs 70 such an extent tnat tne
aid Of the corporatlon would 9nly
In relatively few cases be eetied
for, and that the baBks would BE
ahie to take care Of the require
nknfs Of this eiaes Of borrowers
and Be ready to DO II knowing
that IN case OF need loans OF that
eharSetsr would be ayailabls for
rSdIseount-
The provision permitting direct
loans by The corporation in ex-
eeptIonai cases 10 INTENDED to pro-
vide for those rare csssS whore IL
may Be made TO appear 20 the cor
poFation that q nerftorious bor-
rover Il being unwisely diBcrim-
mated against BY the eenka.
Under tae terms OF the bill -
drafted. the rediscornt and pur-
chase OF member ha1lH paRer Sc
cured By the noteS AAl obi 5ationg