Evening star., 1922-05-07
STERILIZATION OF EUROPE TO
t RESULT IN BENEFIT TO u. S.
Federal Reserve Board Head Discusses
Subject Before New York F;;nanciers..
Strong Banking System Urged.

W. p. G. Harding, governor OF the
Federal Reserve Board, speaking De-
fore the heads Of the various reserve
banks and other bankers at the spring
dinner of the American acceptance COM
mittee in New York, said he had no
doubt that the financial interests OF
this country recognized the great
benefits which would accrue to Amer
lean agriculture, commerce and IN
dustry from the economic and politi-
cal stabilizatien of Europe. But, he
added, after all. the destinies OF
European nations are in their own
hands"
Gov. Harding emphasized that the
federal reserve banks must always be
prepared to rediscount for their men,
ber banks, and, as their name impnes::
they are essentially reserve oanHs'
Erroneous Belief Set mt Rest.
1.-THE erroneous belief that our 1ed,
eral reserve banks can directly lehu
gold to foreign governments or LOT:
eign corporations. etc" comments tne
Wall Street Journal on the governor
address. was set at rest when tne re-
serve bank head said: Reserse
banks are not permitted to invest IN
long-term securities. except notes ana
bonds of the government OF the Cnit-
ed States nor are they authorized 10
invest in obligations of foreign gov
ernments. The essential prlncipie u
the federal reserve act is l1Qulolt9.
Gov Harding went on to say tnat
the federal reserve system can render
effective aid to foreign countries oS
maintaining strong banking posi-
tion. "The marketing of foreign rs
sues in this country is enected 1ar
more readily in the present clrcum-
stances, when the position of the feo-
eral reserve banks is strong. than was
the case two years ago, when the si'-
uation was the reverse
Comment ON Large Gold Holdings
Dwelling on our large gold holdings,
he said:
"A large part, probably 40 per cent.
of the worlds gold stock is held IN
this country, and much interest nat
nrally attaches everywhere to any
question as to how the banking re-
sources Of the country can be utilized.
without detriment to domestic inter-
ests, in bringing about gradual res
toration of more normal conditions
abroad.
Such a subject is entirely too
comprehensive to admit of any dis
cussion on this occasion, and l must
content myself. therefore. with say
ing that the Federal Reserve Board
has a full appreciation of the i'm
portance and magnitude of the work
that must be done. ! may add, how
ever, that both the Federal Reserve
Board and the federal reserve banks
must observe the limitations imposed
upon them by the statutes under
which they operate. and that the
Board are mainly supervisory rather
than administrative. The powers of
the federal reserve banks. with re-
spect both to domestic and foreign
transactions. are clearly defined In
the federal reserve act.
Privileges of the Banks.
'Subject to the approval and reg
ulations of the Federal Reserve
Board, each federal reserve bank has
power to deal in gold coin and bull
lion at home or abroad. to make
loans thereon and to contract for
therefor, when necessary, acceptable
" security, including the hypotheca-
tion of United States bonds or other
securities which federal reserve
to open and maintain accounts in
foreign countries, appoint corre-
spondents and establish agencies in
such countries whereSoever 1t may
be deemed best for the purpose of
purchasing. selling and collecting
bills of exchange, or acceptances
arising out of actual commercial
transactions which have not more
than ninety days to run. exclusive of
days of grace. and which bear the
parties, and to open and maintain
banking accounts for such foreign
correspondents or agencies."
Gov. Harding gave lengthy sur
ceptance in domestic and interna-
tional trade. He spoke Of the growth
of this credit instrument in America
and told how such paper will figure
in future operations with foreign
customers.
International Trade. Topic.
Paul NJ. Warburg. president of the
spoke on the Importance of the bank
ers and trade acceptance in promoting
international trade.
His remarks in part follow:
Just now the world is as full Of
conferences present and prospective as
1t Is of troubles. No single conference
will be able to devise a "cure all' for
our ills. A thousand steps will have
to be taken in removing obstacles and
rebuilding bridges before we shall find
c our way out from the present wilder |
ness, and the more these steps lead
back to individual initiative and away
from artificial measures, the more rapid
will be our progress and the more solid
our ground for permanent improvement.
''In it's process of convalescence the
r world will reach the turning point
when the force of the economic thought
will have conquered the sway of the
political point Of view. While, in some
respects, things appear to look dark
er than ever, there is no doubt that
the forward march of the economic
thought has been very marked and
determined and that in the end we may
confidently expect it to prove irresis- |
tible.
I'VE are apt to overlook progress
made under the discouraging impress
sion of the many needless and waste
full delays that impede an immediate
dnal advance. We have to look back
Into the complete darkness whence we
! begin to emerge to remember that we
need no longer dread bolshevism as a
social menace endangering the world,
that unnatural distractions in the way
OF trade are fast crumbling down and
that all sorts of wild theories are max
ing room again to old, sound and ira
ditional thinking.
Need Of Gold Basis.
} TN this healthy development the
much maligned conferences have played
q most helpful. If not a decisive, role.
One Of the outstanding results has
been the fairly complete elimination of
plans urging the emancipating of the
world from the domination Of gold as
che ultimate basis of our monetary
systems, schemes which were so much
in evidence not long ago.
"The stronger the worlds will to
return to the gold basis. the more
! Inevitable will be Americas duty to
! cooperate in devising plans that
hv;y he 1,,1D 60