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STATJSMENT FOR I H2 P R E S S. X-1706 839 FEDERAL RESERVE BOARD. Release morning papers, October 2$, 1919. Summary of Address by W.P.G. Harding before I n t e r n a t i o n a l Trade Sonference, A t l a n t i c City, N.J. October 24, 1919* W,P. G. Harding, Governor of the Federal Reserve Board, c a l l e d a t t e n t i o n to the f a c t t h a t the Federal r e s e r v e system could do but l i t t l e i n the present circumstances towards f i n a n c i n g our trade with Etiropeati c o u n t r i e s . The Federal Reserve Act provides that the m a t u r i t i e s of a l l paper discounted with Federal Reserve Banks be not longer than n i n e t y days, except i n the case of a g r i c u l t u r a l paper, or paper based on l i v e stock, which may be taken when i t has not longer than s i s months t o r u n . He s a i d " I t i s the view of the Federal Reserve Board t h a t the need of Europe i s for long c r e d i t s , and that the S i t u a t i o n , t h e r e f o r e , i s one which appeals to the investment market". Many of the problems which now confront European c o u n t r i e s a r e p r e s e n t i n an acute form i n t h i s country, and there i s a great need f o r l a r g e r production, reduced consumption, more economy and t h r i f t * The l i q u i d wealth of the world a s r e p r e s e n t e d by goods and commodities has been reduced to an alarming extent by reason of the war, and the volume of c r e d i t . throughout the world i s out of a l l proportion to the volume of goods. In order to b r i n g about more normal c o n d i t i o ns, i t w i l l be necessary to r e s t o r e the proper balance between c r e d i t s and goods. This process w i l l n e c e s s a r i l y be a slow one, but i t i s e s s e n t i a l t h a t a beginning should be made and the r e s t o r a t i o n can be mslde only by r i g i d a p p l i c a t i o n of the p r i n c i p l e of work and s a v e . " "The United S t a t e s Government, beginning s h o r t l y a f t e r i t s entrance i n t o the war, a u t h o r i z e d advances to the governments of the n a t i o n s a s s o c i a t e d with -2- 3ML?06 8 3 0 C i i t i n the war a g g r e g a t i n g ten b i l l i o n d o l l a r s * n e a r l y till of which h a s now been a l l o t t e d and u s e d . There i s no reason whatever t o b e l i e v e t h a t our Government w i l l , nor, indeed, could i t without the most harmful i n f l a t i o n , continue to make advances out of i t s t r e a s u r y to f o r e i g n c o u n t r i e s , and I am convinced, t h e r e f o r e , that the problem of f i n a n c i n g Europe, a s f a r a s America i s concerned, i s one f o r p r i v a t e i n i t i a t i v e and i n d i v i d u a l e n t e r p r i s e . " " I t i s to the mutual i n t e r e s t of Europe and America t h a t any c r e d i t s which may be extended s h a l l be employed in the purchase of necessary a r t i c l e s , raw m a t e r i a l s , machinery, and such manufactured goods a s a r e necessary t o r e l i e v e d i s t r e s s and enable the c o u n t r i e s of Europe to resume productive o p e r a t i e n s . Credits f o r the purchase of l u x u r i e s should be discouraged, but i t i s m a n i f e s t , of course, that action i n t h i s r e s p e c t should be i n i t i a t e d in Europe r a t h e r than in t h i s country. * " I t should be borne i n mind t h a t while the United S t a t e s now occupies r e l a t i v e l y a stronger p o s i t i o n in. the f i e l d of world f i n a n c e than i t has even held, our bankers have had comparatively l i t t l e experience i n extending long time c r e d i t s in f o r e i g n c o u n t r i e s . Their t r a n s a c t i o n s have h i t h e r t o been i n the d i r e c t i o n of d e a l ings in short b i l l s and i n p l a c i n g American s e c u r i t i e s i n f o r e i g n c o u n t r i e s , end i t i s important t h a t the judgment and cooperation of European bankers be e n l i s t e d when we undertake the new r o l e of purchasing long time s e c u r i t i e s , e s p e c i a l l y of p r i v a t e e n t e r p r i s e s , with which we cannot be expected to be f a m i l i a r . " "The Federal Reserve Board a p p r e c i a t e s very deeply the importance from every point of view of promoting our f o r e i g a t r a d e , and b e l i e v e s t h a t the banks of t h i s country generally understand t h a t longer c r e d i t s than can s a f e l y be granted by backs a r e necessary i f we d e s i r e to export our s u r p l u s of e s s e n t i a l commodities." Under the Federal Reserve Act n a t i o n a l banks having a c a p i t a l and s u r p l u s of not l e s s than one m i l l i o n d o l l a r s are authorized ei.ther t o e s t a b l i s h branches i n f o r e i g n c o u n t r i e s or t o take stock to the e x t e n t of t e n p e r c e n t , of t h e i r c a p i t a l and Digitized surplus for FRASER i n banks or corporations p r i n c i p a l l y engaged i n f o r e i g n banking, and under ~3~ x-1706 a r e c e n t amendment to the Act a l l n a t i o n a l banks.* r e g a r d l e s s of t h e i r s i z e , are authorized to subscribe not more than f i v e per cent of t h e i r c a p i t a l and surplus to the stock of corporations p r i n c i p a l l y engaged i n such forms of f i n a n c i a l operations as are necessary or conducive to the export of goods* The Edge B i l l , which has r e c e n t l y passed the Senate and which has been r e p o r t e d favorably by the House Committee on Banking and Currency, provides f o r the Federal i n c o r p o r a t i o n of f o r e i g n banks and of corporations to finance f o r e i g n business* The l a t t e r are authorized under the terms of the b i l l to issue t h e i r awn o b l i g a t i o n s or debtentures against, s e c u r i t i e s acquired abroad which they may o f f e r to the i n v e s t i n g public* These corporations w i l l be under the general supervision of the ^Federal Beserve Board* ana as t h e i r funds w i l l be drawn d i r e c t l y from the investment market, t h e i r operations w i l l not impair the l i q u i d i t y of the a s s e t s of the Federal Reserve Banks**
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