Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1911-10-20

commercial transactions is further de-
veloped in the line of preventing the
IgraHiing of loans upon securities. The
notes and bills eligible for discount
Iby the association are restricted to
| such notes and bills of exchange as
are ISSUED or drawn for agricultural,
industrial or commercial purposes, and
not fer carrying stocks, bonds or 9TH
er investment securities" This inter
probation will exclude brokers notes
for carrying stocks Banks under this
provision. it is said, will be encour-
aged to carry their auxiliary reserves
| in commercial paper. instantly con-
vertible into cash. instead of in call
loans On the stock market
National banks viii have the right
to establish savings departments and
to lend not more than 40 per cent. OF
such deposits upon productive read es-
tate. i'm loans not exceeding so per
cent of the value of the property The
national bank act now prohibits such
loans but there is a constant demand
for them, especially in the West Saw
ings deposits in any of the banks in
the association shall be subject to 20
days notice before Withdrawal. and
shall he covered by reserve of 40
per cent. of that required for demand
deposits in the same locality.
For the reserves OF the association. il
is proposed that 30 per cent. of its de-
mand liabilities. including deposits and
note issue shall he covered by gold or
other lawful money. with. provision
that whenever the reserve falls below
so per cent, the association is bound
to. pay To the government a special
tax which increases in rate in proper
ton 20 the deficiency.
The operation of this in such in
stances is expected to stimulate any
inel ease in the rate Of discount and
to bring in gold until the reserves
a gain become normal.
Another new provision specifies that
any local association may assume and
exercise the power and functions Of
n clearing house In this respect some
existing clearing houses are expected
to become local associations. All To-
cal associations will be required TO ap-
point examiners. one criticism Of the
first plan WAS that there was no way
to remove n bank from any asSocia~
ton II has been provided that local
association may suspend bank which
fails to maintain its reserves o. COM
ply With other requirements of the
law.
It is also provided that the note IS
sue of the association shall at all
times he covered hy at least one-tl1ird
in gold or other lawful money. ANY
notes. however issued in excess OF
5000 ooo Geo must either be covered by
lawful money in full or pay special
tax at the rate of IL per cent. year
Any notes issued in excess of Sl,20O,-
O0o GOO not covered by lawful money
will pay a tax OF ) per cent.
In transmitting the plan to the COM
mission. Mr. AIdrich said the system
of reserves and taxes provided is ex-
pected ITO insure the maintenance OF
reserves by the association
and otherwise to provide such effective
regulation of discounts and note Is
sues as would enable the organization
to resnond promptly at al times to
normal or unusual demands for credit
or currency without danger Of undue
expansion or initiation
The features outlined are the only
substantial changes in the plan as 1t
was submitted tentatively to the COM
mission last January bv Mr.. Aldrich.
although detailed qualifications arc In
.traduoed in many other respects.