"Before this article is published", declared Mr. W. P. G. Harding, Governor of the Federal Reserve Bank of Boston, "the Federal Reserve Board will probably have announced its decision concerning the proposed branch of the Boston Bank in Havana, Cuba. The question which it must decide involves both the rivalry between the Federal Reserve Banks and the problem of whether or not Federal Reserve Banks should be permitted to compete actively with commercial banks".
"In 1915", continued Mr. Harding, "a similar difficulty came before Mr. McAdoo, then Secretary of the Treasury. The proposition, which was for the creation of Federal Reserve branches in the South American countries, was turned down because of the peculiar circumstances arising from war conditions, but that action should in no way serve as a precedent for the settlement of this question, except in that making the decision in 1915, the Board then assumed that the Reserve Banks had a perfect right to establish branches. At that time the sole factor considered was expediency, and there is no reason, as some people have believed, for now questioning the legality of Reserve Bank branches in foreign countries".
Cuba Holds Unique Position
"There are several features", Mr. Harding said, "concerning a Reserve Bank branch in Cuba which grow out of the intimate connection between Cuba and the United States. It is, in the first place, the only foreign country in which all transactions are carried on in dollars, and whose circulating medium and legal tender are entirely American currency. Moreover, the government of the United States exercises a quasi-guardianship over the island which makes it entirely different from any other available banking field".
"New England", concluded Mr. Harding, "exports more goods to Cuba than does any other section of the United States, and the sole purpose of the Boston Bank in proposing this branch, is to take advantage of the peculiar political relations existing between the United States and Cuba, and of the already large investment of American capital in the island, for the further developing of American trade and American banking".