Congress later amended the Federal Reserve Act, at the request of the Federal Reserve Board, and gave the Federal Reserve Board authority to require the Federal Reserve Banks to establish foreign branches, but practically nothing has been done under this authority granted by Congress. Senate Bill 3928 proposes to add a new Section to the Federal Reserve Act as Section 25 A., creating a Federal Reserve Foreign Bank of the United States, under the supervision of the Federal Reserve Board to be located in the City of New York, with a capital of one hundred million dollars, with an initial capital of twenty millions, the stock to pay five per cent., to be non-taxable, to be offered to the public and to the banks at par and if not taken by them to be taken by the United States Government.
The powers proposed for this bank are practically the same as are given to the Federal Reserve Banks, but the management of the bank is put into the hands of directors, nine in number to be designated by the President of the United States. The proposed Act directs that the members of the board shall be men of tested mercantile experience and fairly representative of the various parts of the United States. It does not say that they shall not be bankers, but if they are bankers they must be bankers who have had tested mercantile experience, such as is required of the Governors of the Bank of England.
THE PURPOSE OF THE BILL
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.