The Brattleboro daily reformer. (Brattleboro, Vt.) 1913-1955, 1922-05-04

steps she herself. must take before the
confidence and funds of the American |
investor can flow in her direction.
Government Can't Loan.
For many days the impression has
gotten abroad that the federal reserve
board, by sending representative to
the congress of banks of issue to be held
as sequel to the Genoa conference,
would be able to participate in a huge
consortium for the hotation of new
loan or FOR the regulation of interna-
tional exchange Officials here have
been examining the law to see if by
some stretch of the imagination Euro
peaps had found some powers in the
/ federal reserve act which permitted
such participation. There are no such
/ psWers. The most that the member
| banks in the federal reserve system can
do is to purchase short time acceptances
| of not more than 80 days maturity
| They can use their gold coin for such a
| purpose and the American banks are
! doing more and more OF that every day.
! This process has been encouraged by the
recent simplification by the federal re
serve board of the rules governing such
transactions. But the bills of exchange
must he Endorsed by at least two re-
sponsible parties and the evidence must
/ be presented to show the existence of
contracts covering the expectation or
| importation of the goods which are the
| basis of the credit
Gold Reserves MOrtgaged.
Any idea. therefore, that the gold
| supply of the federal reserve system can
be used to purchase securities ftoated by
| European governments is based on a
| miscOnception of the limits of federal re-
serve laws. The gold reserves are abso-
| lutely mortgaged by the legal require
ments concerning domestic deposits. The
gold in the federal reserve system be
| longs to the people who deposit it there
If. on the other hand, the depositors
wish to ship gold to Europe by purchas-
ing the securities of foreign governments
the federal reserve board has no objec-
! ton For every dollar used III the pIIr-
chase of a foreign bond reduces the
amount of the federal reserve banks
liabilities 1t is within the province OF
private banking syndicates and interests
alone to get together and lend to Euro
pean governments the sums they need
and it Is the business of these same con
Germs to endeavor to get individual de
positors to draw their gold from the
banks and give ii TO European govern
ments in exchange for the new bonds
. | But the federal reserve board can { dc
anything toward that end.
Europe Must Balance Budgets.
The prevailing opinion among officials
|, of the federal reserve board here is thai
] the trouble in Europe is fundamental
| that until the European governments bal
ance their budgets, reduce their armies
: and solve their political quarreIs whiel
: are doing 80 much to distrub the tran
, guilty of Europe, very little, if any
thing. can be done by outside agencies
And the moment political stability L
! achieved, these same officials say their
: kwill be no difficulty in floating loans il
7 the United States or anywhere else. A
! an example of what political stability
( means. officials point to the recent loans
of $4,000 .000 fioated here by the CZecho
T SIovaki government. 1t was oversub
seribed 10 times because investors OF
this side of the Atlantic have been ap
. prised through reputable inyestmen
= concerns that the professionalism. gov
= eminent is on a firm foundation.
The American emissarles to the Lon
Ion conference will tell their colleague
the federal reserve board can t hell
Them much but that if American opinion
i sought, the same views are held to
lay as were expressed a dozen times b.
Secretary Hughes and Secretary Hoove
If the Harding administration am
Secretaries Glass and Houston Of tn
Wilson administration. namely, that tn
dav of governmental beans IS over, an'
that Europe must set her own financia
house in order and deserve the conf
derce Of American investors before tn
gold supply win flow across the Allan