The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1921-02-16
SOLvENCY OF
WORLD HINGES
UPON AMERICA
Declares Governor Harding,
in Federal Reserve Board
Report Says u. S. Must
Preserve Credit.
We MUSTARD EUROPE
(By Associated Press)


flcauons of the country's economic
system make it imperative, Governor
Harding informed congress today. in
the annual report Of the federal re-
serve board, that the utmost care be
taken to conserve our credit and pre-
serve the basis of our prosperity" to
avoid the extreme conditions prevail
ing in other countries.
Upon the United States in large
measure. the governor declared, "the
solvency and financial stability of
many other countries depend. This
fact greatly increases the responsible
ity which rests upon the American
banking system and calls for the
exercise of sound judgment and the
strict observance of sound financial
and economic principles"
t.t Crisis Is Passed.
In readjustment of business, the
country, Governor Harding asserted,
is generally recognized as having
PASSED the crisis and in looking to the
future "a spirit of greater confidence
prevails
AS the year closes, he said, there
were many indications that business
generally was beginning to adjust it.
pairing to proceed on a sounder and
saner basis"
Because of the accumulation of
foreign commodities. however for
which there is no market" Governor
Harding continued, countries which
have been sending US their surplus
products find they have nothing
marketable with which to pay for
their imports from us.
Must Restore Credit.
I'VE find ourselves therefore" he
maintained, with a large export trade
which is being paid for only in part
by great portion of the world, and
this trade is fast approaching a point
where it may be cut drastically to the
most vital essentials unless the normal
credit and buying power of Europe
can be restored
This restoration he added is only
POSSIBLE If American raw materials go
forward steadily over an extended
period against long time credits. Food
stuffs, he said. should be promptly.
raid for as they go into immediate
consumption.
Face BIG Problem.
I'VE are therefore brought face to
face Governor Harding continued,
with the problems of how we can
best extend longtime credits to F'u-
ropean countries in order to enable
them to reconstruct their industries
and how we can extend credit to
other countries in order to enable
them also to make shipments TO Eu-
rope which otherwise would be made
to the United States and glut our
domestic market"
BY means of corporations under the
Edge Act for financing foreign trade
the governor contended long time
credits may be granted to finance ex-
PORTS not only from the United States
but from foreign countries as well. All
of these operations he described as
necessary for the solution of the pres
ent world problem.
Financing Exports.
Financing exports to Europe through
credits extended by the government
was considered by Governor Harding
to be a wartime expedient.
''Subsequent to the armistice" he
explained, export trade amounting to
about $2,500.000,000 was financed
through credits extended by the treas
ury department. These credits were
an important factor in the :nainten-
ance of our foreign trade during the
first half of the year 1919. but it was
recognized that methods of financing
adopted under the stress of war
should not be continued as a per1nan-
ent peace policy, for the funds neces-
sary to make such credits available
must be raised either by taxation or
through loans"
Earnings Increase.
Gross earnings of all federal re-
serve banks combined the governor
nnn
in 1919 to 1881 100000 in 1920. Over
81 percent of these earnings came
from paper discounted for member
banks, the AVERAGE dailv holdings of
which aggregated $4,000 OOO 600 dur
ing 1920 as compared with 81 1,9OS, ,OOO,-
900 in 1919.
Operating expenses of the member
hanks continued to increase during
the year he explained. chiefly be-
cause of the increased volume of busi-
ness transacted.
Rediscounts Increase.
Rediscount operations between fed
eral reserve banks including bills
purchased from other federal reserve
banks during the year amounted to
S3.576,729 coo as compared with So
65S 254,000 in 1919 and $500 063S,000
during the year 1918.
Adding to these TRANSACTIONS the
bills purchased and allotted to other
federal reserve banks by the federal
reserve bank of New York the gov,
ernor said the total inter-district
movement of bills during the year ag-
gregated S4,402 .6S6,000 as compared
with $3.597,753O0 for 1919 and $685.
$4,000 for 1918.
No Amendments.
The board has no further amend
ments to the Federal Reserve act to
suggest to congress at this time Gov
ernor Harding announced.
1T desires, however" he concluded,
"tO express its opposition to any leg
islation which would impair the abil-
ity of the federal reserve banks to ex-
ercise the proper control over their
credit transactions as well as legisla-
tien tending to remove the wide limi-
ta.ions now imposed by the federal re-
Continued on Page Nine)