New-York tribune., 1919-04-03
Warburgg Suggests
Investment Trust
To Aid Commerce
Full Protection Must Be
Given Small RondhOIders
to Induce Them to Help
Finance Trade

Paul M. Warburg, former vice-gov-
ernor Of the Federal Reserve Board,
in an address last night before the
Council of Foreign Relations at the
Metropolitan Club urged the creation
of large investment trust to aid in
the financing of Americas foreign
trade. The proposed trust would buy
foreign securities, and, instead of re-
selling them to American investors,
would offer their own obligations, Sc
cured by the foreign stocks and bonds,
to the public here.
"A large investment trust" he as
serted, might offer the two-fold ad-
vantage of, on the one hand, bridging
the interval necessary for the better
understanding and further develop
ment of foreign propo ositions and for
the creation of better market, while
on the other hand it would enable the
small investor to buy the obligations
Of such investment trust, representing
diversified holdings closely examined
by the most competent people and
guaranteed by very substantial paid
IN capital stock.
This, however, is predicted upon
the thought that such investment trust
would be started upon a sufficiently
broad basis to permit Of wide dversi-
fcation and thorough investigation. 1t
is obvious that no small concern could
be liberal enough in incurring the
heavy cost Of thorough studies and
examinations, and of employing the
best experts. No investment trust
would be safe or successful that would
be forced to stint this item of ex-
pense"
Victory Loan First
After calling attention to obstacles
that exist, Mr.. Warburg, continuing,
said:
"The time for immediate operation
OF such trust has not yet come. With
us the Victory Loan must first be
placed and fully absorbed before we
may find the basis for our future in
vestment operations; the transporta-
tion question must be solved. reastab-
fishing $18,000, 100000 of railroad Sc
curities on their proper level, and the
sale of the ships now held and being
constructed by the government must
be finished, before investment funds
may become available for the purposes
| have outlined on terms attractive
enough to permit comprehensive oper-
ations. In order to reach a sound and
solid level it will be important, more
over that England, as soon as her
large governmental borrowings are
completed, free her money market from
of the peg in the sterling market ap-
n 10 hot RI
rection and to forbode the next step
long advocated by Lord Cunliffe, OF
establishing higher discount rates.
While thus the oment for COM
prehensivc foreign operations seems
still remote, let us hope that the in
terval may pass sooner than most OF
US think. In any case, it is none toe
soon to prepare for that eventuality
1t is easy enough to run along with
the crowd that buys at top prices
when things are booming, but the true
art is to be able to discriminate ant
to discern the objects of permanent
value when the outlook seems dark
est. When the political horizon viii
clear up, American business genius
and courage will find the greatest op-
portunity it ever had.
Ample Safeguards Needed
Il am fully conSclou, OF the fact
that it must be our ultimate ambition
to create a direct wide market fol
foreign securities, and to use the in
direct method of an investment trust
merely as a useful auxiliary. If such
broad market is to be developed
the fullest protection of our people
is a prerequisite. 1t means that, or
the one hand, it is essential that VIC
may confidently rely upon the unre-
served sympathy and support of the
government in protecting our rights
in foreign lands; on the other, that
measures must be taken to protect
the small investor from the lures OF
reckless promoters, such as now over
run the country Offering worthless Sc
curities in exchange for Liberty
| bonds"