Under the Federal reserve system it is expected that both Federal reserve banks and member banks will have greatly improved facilities for engaging in foreign exchange and for promoting international trade. In the section of the Act relating to open market operations, Federal reserve-banks are authorized to "purchase and sell in the open market cable transfers and bankers' acceptances and bills of exchange of the kinds and maturities made eligible for rediscount, with or without the indorsement of a member bank." The right to deal in cables, which are orders for the immediate delivery of gold, will give to the reserve banks a considerable degree of control over the international flow of gold.

Any member bank may accept drafts or bills of exchange drawn upon it and growing out of the export and import of goods having not more than six months to run. Federal reserve banks are permitted to discount such acceptances when indorsed by at least one member bank and when within three months of maturity. They may also buy from member banks and sell commercial bills of exchange; they may deal in gold coin or bullion at home or abroad, and in government bonds and certain types of state and municipal securities; and, finally, they may establish foreign agencies to deal in foreign bills of exchange arising out of actual commercial transactions. By these and other provisions of the Act of 1913 the management of foreign exchange operations will be greatly improved; exchange will be furnished at less cost to the business community; gold movements will be brought under more effective control; American banks will be given opportunity to compete for foreign business on even terms with European banks; and American foreign trade will be afforded ample assistance.

Reading References

Clare: A B C of the Foreign Exchanges.

Escher: Banking Practice and Foreign Exchange, Pt. II.

- Elements of Foreign Exchange.

Goschen: Foreign Exchanges.

Johnson: Money and Currency, Ch. V.

Laughlin (Ed.): Banking Reform, Chs. XIX, XXII.

- : Principles ot Money, Ch. X.

Margrait: International Exchange.