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.