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EXECUTIVE COMMITT2E FEDERAL ADVISORY COUNCIL June 20, 1919 Executive Committee of the Federal Advisory Council met in with the Federal Reserve Board at Washington, D.C*, (in Gov ernor Harding's o f f ic e in the Treasury Departmant) , on Friday June 20th, 1919, at 11 A M. in response to the follow ing l e t t e r from Governor Harding received by Mr* James B Forgan, P resid en t. jh e co n fe re n ce "Federal Reserve Board, Washington, D C “Office of Governor June H , 1919 "Dear Mr. Forgan: The Board is now engaged in a comprehensive study of European conditions with a view of form ulating a sound p o lic y to govern in our foreign trade d e la tio n s . It may s a fe ly be assumed that there w ill be nolegislation looking to further loans by the government of the United States and our foreign trade must henceforth be financed through private channels. It seems im p ossib le, and in f a c t , undesirable that the volume of our exports hs expressed in d o lla rs should continue on the basis which b&s prevailed during the past three years and the Board concurs in Mr Hoover's view as stated in the newspapers yesterday that the American people should not be expected to feed in d e fin ite ly an id le population in Europe. The Board'3 view is so far as i t may be necessary to finance our foreign trade through the purchase o f foreign s e c u r itie s or by means of long time loans that care should be taken that European purchases should be confined to ma chinery and raw m aterials nscessary for putting back ths populations of Europe on a productive basis in order that they may be enabled to re sto rs the mater ial wealth which has been destroyed or consumed and eventually to produce a surplus of goods for s a l s . The Board is unanimous in the view that care should be taken not to deceive ourselves and that cre d its nominally o f short term but which are subject to be renewed in d e fin ite ly should be avoided as i t is most important not to encumber the member banks or the Federal Reserve Banks with unliquid assets. We should face the situ ation frankly and recognize at the beginning that long credits belong to the fie ld of investment banking rather than to thttof commercial banking. The Board has in view the c a llin g at an early date of a conference here in Washington of leading international bankers and exporters but before issuing the c a ll would lik e very much having an opportunity of discussing the situation with the Executive Committee of the Federal Advisory Council. Owing to engagements o f some of the members of the Board it seems desirable that we should have th is preliminary discussion sometime next week, with a view of callin g the larger conference early in July. W ill Friday, June 20th, be a convenient date for youf Yours very tru ly (Signed) W P G Harding, Governor H No 2 present: Members of the ISxecutive Committee: Messrs. James B Forgan, j,ro»ident; L 1* Rue» V ice-P resid en t; D G Wing, W S Rowe and Merritt H Grim, 5#cretary. Abfffft; A B Hepburn and F 0 W atts. present: Members of the Federal Reserve Bocrd: Messrs. W P G Harding, jovernor; Albert Straus, Vico-Bvvernor; A C M ille r , C S Hamlin, J S Williams jai J A Broderick, Secretary. Governor Harding called the aeeting to order and said the Conference f0uld be purely inform al. A number of matters were thus discussed on which BO action was taken. Governor Harding presented to the meeting the follow ing proposed amendment to Section 25 of the Federal Reserve A ct, which the Board intended to have introducedin Congress: "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled: "That Section 25 of the Act approved December 23, 1913, known as the Federal Reserve Act, as amended by the Act approved September 7, 1916, be further amended by strik in g out the period at the end of the third para graph thereof and adding in lie u th ereof the follow ing: H>,or, u n til January 1 s t , 193., any national banking a ssociation , without regard to the amount of i t s cap ital and surplus may upon approval by the Federal Reserve Board invest an amount not exceeding in the aggregate five per centum o f i t s p a id -in cap ital and surplus in the stock of one or more corporations chartered or incorporated under the laws of the United States or of any State thereof and regardless of i t s lo ca tio n , p rin cip ally engaged in such phases of international or foreign financial operations as may be necessary to f a c ilit a t e the export of goods, wares or merchandise from the United States or any of i t s dependencies or insular possessions to any foreign country; provided that in no case sh all the t o ta l investment by a national bank in stock of banks or corporations engaged p rin cip a lly in international or foreign banking of any kind or description exceed ten per centum of i t s capi tal and surplus . *" The proposed amendment was fu lly considered and received the unanimous approval of the Executive Committee as well as of the entire conference. The subject for which the Conference was primarily called , as indicated in Governor Harding’ s le t t e r , above referred to , v a t fu lly considered, a fte r which the conference unanimously decided that th is matter should be l e f t to the bankers interested, a committee of which had already been appointed in New York, and that therefore the proposed larger conference of bankers and Exporters was not necessary. The Conference adjourned at 4 P M . Secretary
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