The purpose of this proposed Act is to establish a publicly controlled agency in charge of men with tested mercantile experience, who shall administer the bank in the interest of American commerce, of American importers and exporters, of American manufacturers and producers, in the interest of American consumers, and not merely in the interest of bankers, but in co-operation with the bankers, as the Bank of England or the Bank of France co-operates with other banks while being influenced also by the general public interest.

Such a bank would buy and sell international bills of exchange and acceptances from and to American and foreign banks who desired to sell or buy such bills.

Such a bank would in this way serve the interests of other banks handling international exchange, but such a bank being publicly controlled would furnish American importers and exporters, manufacturers and producers with credits abroad, with banking facilities and accommodations at a standardized fair rate of profit, which would serve the common interest of American business men.

Such a bank publicly controlled would not expose an importer’s business or an exporter’s business to trade rivals,—a practice known to exist in certain foreign exchange departments where Germans systematically conveyed such valuable information to rival German firms.

Such a bank would furnish foreign exchange without profiteering or speculating.

Such a bank would be concerned to keep the American dollar at par and in co-operation with the Government of the United States would take the essential steps necessary to that end, a function which no private bank could exercise.

Such a bank through the Federal Reserve Banks could become a means of extending to every member of the Federal Reserve System foreign banking facilities and information for the benefit of the local importers and exporters, so that a member bank could take a draft of a local exporter on any part of the world and have it cashed whenever the local bank desired the money.

Such a bank could place these bills with other Federal Reserve Banks and with member banks who had unemployed money.

Such a bank as a bank of deposit could utilize some of the very large deposits now placed at two per cent. and could furnish American importers and exporters banking accommodations at as cheap a rate as does Lombard Street. Lombard Street in London now finances the commercial bills of the world, running into thousands of millions at three and one-half per cent. per annum, while the current New York and Boston rate is a minimum of four and one-half. The international exchange business of the world cannot be brought to America unless America extends accommodations on as favorable terms as London, which is now the commercial and financial center of the world. America has the power.

America, as a matter of fact, has loaned Great Britain and Allies since we entered the war, April, 1917, many billions besides taking over many billions in foreign securities placed in America—buying billions of American securities held in Europe, in addition to the gigantic financing of the war by the United States itself.

Such a bank publicly controlled by having gold deposits in Europe and Asia could make it unnecessary to incur the economic loss of transferring gold back and forth across the Atlantic and Pacific.

Such a bank could not only bring the American dollar to par, but what is more important could fix the American dollar at commercial par and maintain it there as a standard measure of value for international contracts throughout the whole world. Unless this is done America cannot become the financial center of the world.

Unless this is done the gigantic mercantile marine, which America is now building at great cost, will not be adequately served and supplied with the export and import business necessary to maintain these ships under the American flag.

Such a bank would not only furnish foreign banking facilities to every part of the United States, but would be in a position to furnish reliable credit information to American importers and exporters, manufacturers and producers as to foreign buyers and foreign sellers; reliable information and accommodation with regard to shipping conditions, storage, insurance and other questions essential to the convenient, economical and safe transaction of international business.

Such a bank publicly controlled is the mechanism through which international exchange can be stabilized, the American dollar maintained at par, American commerce furnished with credit facilities and adequately promoted throughout the world. It is the one thing needed to perfect the Federal Reserve System of the United States, now acknowledged by the banks themselves as enabling them to serve their customers as never before, enabling them to conduct their business with a sense of security they never felt before, and enabling them to make better returns upon their capital than ever before.

I have felt justified in preparing this brochure that I might call the attention of American business men and of American bankers to the importance of thus perfecting the Federal Reserve System, in the hope that with their approval and co-operation, public opinion might sufficiently crystallize to make itself effective in legislative enactment. Congress does not go very far ahead of public sentiment. This question must be determined by public opinion and this booklet is justified as one of the steps to attract attention and inform the public on this question.

Some of the banks with foreign exchange departments seem to imagine that such a bank would compete with them. The fact is the competition for international bills has taken the very great body of these bills to Lombard Street, and some American banks give their customers the Lombard Street rate by sending their bills to Lombard Street instead of to New York. The bills are issued to the extent of many billions and no bank need fear not getting all of such business as they may really need or desire. The trouble is we have not available the capital required to handle foreign bills and we should take immediate steps to make American banking capital more available for such purpose.

The available capital of American banks with foreign branches at present is inadequate to handle international bills. The imports and exports of the United States alone the last year exceeded nine billions, and the imports and exports of the world business handling international bills are very much larger yet. A number of the best foreign exchange experts engaged in handling such bills have declared themselves warmly in favor of this measure; they do not fear the Federal Reserve Foreign Bank; they welcome it, realizing it would serve the banks in the same way in the foreign field which the Federal Reserve Banks serve in a domestic way.

Importers and exporters who have studied the question strongly favor the publicly controlled Federal Reserve Foreign Bank. Preparedness now for after-war peace problems is urgent—other nations are vigorously acting. The United States cannot be a Great Leader of the world in Commerce and Finance unless it leads in fact by concrete steps and by wise laws providing the mechanism for such leadership.

THE END

Transcriber’s Note:

Typographical errors have been silently corrected.