The Bridgeport evening farmer., 1913-12-24

bank of their district. Each mem
 ber-bank will be required to take cap 1 ital stock of the regional reserve bank | equal to per cent. of the member | banks capital and surplus. The cap 1 ital Of the regional bank will increase | or decrease so that it always repre-
 sents per cent. of the combined cap
 ital and surplus of all the banks or 1 the district that have joined the sys- | tenn.
 l National banks are compelled to | join and state banks are permitted 10 | if they bring their reserve requ1re- rnents up to the standard set TOT na- tional banks, and submit to national examinations.
 Public ownership of the stock Of the regional reserve banks is permitted l only in ease enough banks do not join in any district to provide a caplral stock of $4,0OO,O00. In such event, the public may purchase the stock in qua ntities limited to $1o,00o for each individuals; but the voting of this stock will be placed in the hands of government representatives on the board of directors of the regional re- serve bank.
 Business Is Limited.
 The regional reserve banks may do business only with their member banks, not with the public, except that certain "open- market operations such as the purchase and sale Of gold. government or municipal bonds ana certain forms of bills of exchange are permitted. These banks will make their earnings from the loans made to mem ber- banks, and from the pur= chase and sale of bonds and foreign And domestic bills of exchange.
 Member-banks will be compelled to put up in cash only one-half of their subscription to the capital of the new banks; the rest can be called for if needed by the regional bank Dtvi- | dends of 6 per cent. will be paidd on this stock to tho memIber-banks, and the stock will be non-taxahle. .Af- ter these dividends are paid, one-half of the surplus net earnings goes to create a regional surplus fund. and when this has reached 40 per cent. of the regional banks paid-in capital. these earnings are to go into the United States treasury. The balance of the net earnings are to be divided between the payment of United of fund to guarantee the payment of depositors in member banks that may fail.
 With the machinery thus created for a new banking system that is sup p1ementary to the commercial banks of the country, the law provides for gradual transfer of part of the bank reserves to these new reservoir banks. In order not to disturb busi- ness conditions, or to withdraw too suddenly the heavy deposits of coun- try banks in the large cities, the law provides that two years may be con stunned in shifting these balances, and that, if necessary, part of the reserves transferred to the Regional banks may consist of commercial paper.
 The amount of reserve required from every bank under the new law, and the place where 1t must be kept, are as follows:
 quired, 12 per cent. of demand de- posits and five per cent. of time de- posits F'ive-tWe1fths must be held in the banks own vaults; two-twelfths in the regional reserve bank for the first six months. increasing one-twelfth each six months until it reaches five twe1fths. After two years the re- rnaining three-twelfths of the reserve must be kept either in the country banks vaults. or in the regional re- serve bank.
 Reserve city banks: Total reserve required, 1 5 per cent. of demand, and five per cent. of time deposits. Six afteenths must be kept in the banks own vaults:. -hfteenths in the re- giona1 reserve bank for the first six months. increasing one-hfteenth each six months until 1t reaches six-df- teenths. After two years, the remain ing three e-fifteenths of the reserve must be kept either in the banks own vaults or in the regional reserve bank.
 These immense funds Of reserves from "memher-banlzs." together with government moneys, will make up the deposits of the regional reserve banks. Each of these banks will be admins tered by a board of nine directors, six of whom will be elected by the banks. and three appointed by the federal re- serve board.
 May RedisoOunt.
 The regional reserve banks may re- discount-that is, buy at a discount from it's member-banks- primo com mercial paper" when the member banks desire to convert these assets into money. The exact terms of this important provision as to the charac- ter of paper upon which the regional reserve banks may furnish cash are as follows:
 "rUpoh the indorsement of any of it's member banks, with a waiver of demand notice and protest by such bank, any federal (regiona1' reserve | bank may discount notes, drafts and bills of exchange arising out of actual commercial transactions; that is, notes 1 drafts, and bills of exchange issued or 1 drawn for agricultural, industrial or commercial purposes. or the proceeds | Of which have been used, are to | be used, for such purposes the feder- | al reserve board to have the rights to | determine or define the character of ! the paper thus eligible for discount, | within the meaning of this act.
 Nothing in this act contained shall | be construed to prohibit such notes, l drafts and bills of exchange, secured | by staple agricultural products, or | other goods or wares or merchandise l from being eligible for such discount, i but such definition shall not include | rotes,S drafts or bills covering merely | investments or issued or drawn for