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(d) Such reduction must be reported to Comptroller and must be approved by him and Federal Reserve Board.

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If any part of this act is judged invalid, such judgment not to invalidate the remainder.

SECTION 30. AMENDMENT OR REPEAL

Right to amend or repeal this act expressly reserved.

1 Introduction, Paine's National Banking Laws (7th Ed.) p. 14, 2Ibid, page 15.

3 Paine's New York Banking Laws, (7th Ed.) pp. 164, 179, 245 and 254.

FOREIGN AGENCIES AND BRANCHES

The twenty-third day of December, 1913, may be termed our economic Independence Day, because on that day the Federal Reserve Act came into being. It is a step of great financial importance in the right direction. After one hundred and thirty-eight years of National existence we are rid of the financially dangerous features of our banking system. Such features were anachronisms.

In the report on the bill providing for the establishment of federal reserve banks, etc., it was stated that it had long been a ground of complaint that the National banking system provided no adequate means for the establishment of American banks in foreign countries. The committee stated that every good purpose of the Monetary Commission design could be attained by the adoption of a plan which consisted essentially of a provision for the establishment of foreign branches by the existing National banks when such banks have an adequate capital for the kind of work in which they propose to engage and are found by the Federal Reserve Board to be in proper condition for undertaking such an enterprise. It was also stated that with the extension of National bank powers provided in the new law, such branches of National banks would be amply able to meet the requirements of their clientele wherever it might be necessary for them to operate.

Section 25 of the Federal Reserve Act authorizes foreign branches of National banks. Bills drawn on London have had universal supremacy. That city acted as a clearing house of the world's trade because all other countries owed Great Britain and such bills could be surely collected in gold. The English credit and currency system collapsed because mainly of its weakness by reason of its unlimited

bill discount and acceptance market and also because of its branch bank plan. Sections 13 and 16 hereinafter mentioned are so carefully drawn that such a collapse will be impossible.

The creation by Parliament of what is called a moratorium was an authorized repudiation of debts for the time mentioned. Right here it may be stated that Congress could not enact such a measure because it would violate the provision of our constitution against impairing the obligation of contracts. The action of the Bank of England raising the rate of discount to ten per cent. threatened bankruptcy to the greatest extent ever known. It is not irrelevant to state that in each of the three decades before the year 1870 that bank suspended the statute enacted July 19, 1844 (chap. xxxii) and assumed the power, it did not exercise its authority, to stop payment of specie.

Section 16 of the Federal Reserve Act enacts that every bank under that law shall maintain reserves in gold or lawful money of not less than forty per cent. against the federal reserve notes in actual circulation. This is in addition to an amount equal to such notes in bills receivable and domestic and foreign bills of exchange and of acceptances accepted for discount as provided by section 13. The last-named section has a notable provision which prohibits such banks from accepting bills to an amount equal at any time in the aggregate to more than one-half the paid-up capital stock and surplus. The whole credit of the member and regional banks is pledged to sustain such rediscounted paper. board has the privilege at any time to call for additional security.

The

The Federal Reserve Act with trade obtained may cause the monetary unit of the United States to be used necessarily as the basis of international exchange.

England attained her grasp on international finance not so much by the primitive device of hoarding gold as by keeping the gold at work elsewhere, and at call, always.

That country was and is a dealer in credit and her banking system has been built up on that basis.

In the year 1793, before the beginning of the war with France, the British National debt was two hundred and forty-four million pounds. After the battle of Waterloo it was eight hundred and twenty-six million pounds, a sum equal to two billions nine hundred and ten million dollars, or an increase of about 240 per cent. in a little more than twenty years.

This is in marked contrast with an increase of more than 100 per cent. in one year of modern war. During the Napoleonic wars as now, Great Britain assumed the giant's share of the financial burden. Her pay came because of the resultant tremendous increase in her manufactures and commerce. At that time there was no great non-European neutral like our country to supply the combatants. The fact that supplies are to be obtained from the United States in immense quantities makes the fighting much more costly than was the case a century ago.

With the inauguration of the federal reserve system, which gives wide latitude for extension of credit, its mobilization and also its creation, this country can handle the maximum of trade without disarranging domestic markets. The credit of Europe basically and through accumulation of wealth is still sound. Its gold reserves do not by any means measure the extent to which Europe may ask accommodation. Indeed, Europe wishes to retain her gold as the basis of her present and future necessity. The United States has a superabundance of gold. But while gold is the measure of value, the whole stock of gold in the world is a drop in the bucket compared with the total of trade transactions based on it. Therefore, our banks by the extension of credit and by the practice of banking methods that have been tested for many years, can finance the needs of foreign dealers without recourse to the primitive bartering of specie for goods in transit.

The situation is made easier because of the fact that many millions of our own securities are held in Europe, and while these holdings are not governmental, and, therefore, are not in a national sense collateral, they are available for the settlement of American debts either through their sale here for the creation of a credit fund, or as collateral underlying credits given by our banks. The power of the federal reserve banks to deal in securities, to buy and sell foreign exchange of short maturity, and other privileges which these banks have been given, open a door to an almost unlimited amount of new credit needed by our foreign customers.

Our banks can create credits which may outrun present estimates as to maximum, without upsetting domestic finance, and without endangering a dollar of their funds. At the same time there will be profits for themselves and the Nation. Banking like this may make America supreme in the world's money market, and we may thus hold permanently commercial markets heretofore closed to us.

The statement is made in the Introduction to Paine's Banking Laws that the stock of gold in the United States is the greatest on earth. It may also be stated that we hold almost one-quarter of all the gold money and that within twenty-two years our stock of gold has almost trebled.

May 1, 1915, the war loans of the following named countries were as follows:

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April 1, 1914, and April 1, 1915, respectively, the demand liabilities in the form of note circulation and deposits, of the following named banks and their gold holdings were as follows:

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