The Washington herald., 1913-12-21

liabilities and per cent Of time deposits;
reserve city banks shall carry a reserve
equal 70 Is per cent Of demand liabilities
and per cent OF time deposits; central
reserve city banks shall carry a reserve
equal to Is per cent Of demand haoihties
and per cent OF time deposits.
Therefore Immediately after a Federal
reserve bank begins its operations its
members may reduce the reserve now
carried as follows: Country banks, from
Is to Il per cent of demand liabilities,
and per cent OF time deposits; reserve
city banks, from Is to Is per cent OF de-
mand liabilities, and per cent OF time
deposits; central reserve city panks'
from % to IS per cent of demand liaoili-
ties, and s per cent of time deposits; a
country bank, instead OF carrying per
cent reserve In It's own vaults Will
carry approximately per cent
a reserve city bank instead OF carry
ing l21-2 per cent reserve In Its own
vaults will carry approximately per
cent; a central reserve city bank VIII
carry only 6 per cent In Its own vauits'
instead Of Is per cent as heretofore
Funds to BE Distributed.
The disposition Of the remainder OF
reserve requires an adjustment which ID
interesting.
The object OF the reserve feature Of
the act seems to be to drive reserve
funds OUT of the reserve cities and COM
pei them to be kept, ultimately, either In
the vaults OF member banks or with the
Federal reserve banks. II is not intend
ed, however, that this shall be done I'M
mediately.
Country banks will Immediately trans
fer 2-l2 of their required reserve to
Federal reserve bank and maintain that
amount for six months. Each succeeding
six months that amount shall be in
creased liz until 5-12 of the required re-
serve shall have been transferred, which
shall thereafter be maintained as a per-
manert deposit In Federal reserve banks.
For a period Of twenty-four months
after a country bank mas Joined the sys-
tenn the remainder Of its reserve funds,
not specifically provided for by the act,
may be carried In its own vaults or win
a bank in a reserve or central reserve
city. After twenty-four months the re-
serves, other than the permanent deposit
in a Federal reserve bank. may De heia
in the member banks vault or deposlted
in the Federal reserve bank OF "nlch II
is a member. or In both. at its option.
The same requirement is made OF banks
IN reserve cities except that the amount
reuuIred TO be transferred at once is 3-l5
ana the pernanent deposit 6.15 Of the re-
quired reserve.
Central reserve city banks shall deposit
Immediately BIS. and after six months
increase II to 6-ls which shall be the per-
mAnent deposit required.
Paper eligible for discount, properly IN
dorsed and acceptable TO the Federal
reserve bank. may be received by the
reserve bank in payment OF said reserves
not exceeding one-half OF each INSTALL
ment.
M hank which is a member Of the sys-
tenn il 10 keep on deposit with any bank
which In not a member a sum In excess
Of 10 per cent OF its own paid-up capital
and surplus, and no member bank shall
extend directly or indirectly the DEMENT'S
OF this system to a nonmemoer pankN
except upon written permission OF the
Federal reserve board, under penalty or
suspension.
Reserves to he Checked.
The reserves carried by member banks
on deposit with a Federal reserve bank
may be checked against under the reguia-
tions and penalties prescribed by the
Federal reserve board, provided. now
ever. that no bank shall make new loans
or nav any dividends unless the total
reserves required be fully restored
This provision makes the deposit OF re-
serve a fixed contribution to the Federal
reserve bank.
National banks which enter the system
NAV ask the Secretary OF the Treasury
10 sell for their account their per cent
bonds and redeem their circulating notes
The Secretary of the Treasury requires
the Federal reserve banks to purchase
said per cent bonds at par and lodge
them with the Comptroller OF the Cur
rency and receive the same amount oi
circulation as that redeemed for the bank
member of the system. That Is done &c
as to prevent a decrease Of the amount oil
circulating medium.
This reserve provision extends only tc
national banks which enter the system.
Others must redeem their circulauon anc
hold or sell their bonds.
VIsional powers with respect TO ma
tional bank members of the system now
vested by law in the Comptroller OF the
Currency and the courts of justice arr
enlarged to include the Federal reserve
board, Congress OF the United States, or
either House thereof, or any committed
thereof.
Any country bank member Of the sys'
tern may make a loan on improved, unin'
numbered farm land located In its Fed
eral reserve district for not more than q
per cent of the actual value Of said land
and for perlod OF not more lhan HNe
years This privilege is not extended &c
| banks in reserve cities.
State banks and trust companies may
enter the system provided the amount oi
| their capital stock entities them to be
come a national bank under existing
laws. A State bank or trust company de
string to avail itself of this privilege mus
conform also to many of the rules and
regulations set forth in the national bank
act. In fact, they must transact their
| business as national banks, even though
they are Incorporated under State
| law.