The Barre daily times. (Barre, Vt.) 1897-1959, 1913-12-24

six per cent. VIII be PAID ON thls stoch
to the member banks, and the stock VIII
be non-taxable. After these dividends
are paid, one-half of the surplus net
| earnings goes to create a regional sur
plus 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 bal
ance of the net earnings are to be paid
| to the United States as a franchise tax.
Gradual Transfer to Reserve Reservoirs.
With the machinery thus created for
new bank system that is supplementary
TO the commercial banks of the country,
the law provides for a gradual transfer
of part of the bank reserves to these
new reservoir" banks. In order not
| to disturb business conditions, or to
withdraw too suddenly the heavy depos-
its of country banks in the large cities,
the law provides that three years may
be consumed in shifting these balances,
and that il necessary part OF the re-
serves 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 it must be kept, are as fol-
! lows:
| Country banks: Total reserve required,
| IL per cent. of demand deposits and five
| per cent. of time deposits. Five
twelfths must be kept in the banks
vaults for two years and four-twelfths
after that time. For the first year, two
twelfths must be kept in the regional
bank, increasing one-twelfth each six
months thereafter until it beaches FIVE
t1uaIffhg pf hn fatal fhrna
years the malloted part of the reserves
may be kept in the banks of reserve
cities; after that time it must be kept
either in the country banks vaults, or
in the regional reserve bank.
Reserve city banks: Total reserve re-
quired, Is per cent. Of demand and five
per cent. of time deposits. Six-ffteetnhs
must be Kept in the banks vaults for
the first two years, and fiye-tfteenths
after that time. Three-ffteenths must
be kept in the regional reserve bank for
the first year, increasing one-fifteenth
every six months thereafter until it
reaches six-ffteenths, For three years
the unalIotted portion of the reserve
may be kept in other banks, in its own
vaults or in the regional bank; after
that time in one OF the latter two
places"
Central reserve city banks New York,
Chicago and st. Louis): Total reserve
required, Is per cent. of demand, and
five per cent. OF time deposits. Six
eighteenths must be kept in the banks
own vaults; seven-eighteenths in the re-
gionsl reserve banks; and the remaining
five-eighteenths in either place the bank
may choose.
These immense funds of reserves from
member banks" together with govern
ment moneys, will make up the deposits
Of the regional reserve banks. Each of
these banks will be administered by a
board of nine directors, six of whom will
be elected by the banks, and three APP
pointed by the federal reserve board.
The regional reserve banks may reds
count-that is, buy at discount from
its member banks-"prime commercial
paper" when the member banks desire
to convert these assets into money. The |
exact terms of this important provision
as to the character of paper upon which |
cash are as follows:
"Upon the Endorsement of any of its |
member banks, with waiver of de- |
mand notice and protest by such bank, |
any federal (regional) reserve bank may |
discount notes, drafts and bills OF ex-
change arising out of actual commercial |
transactions; that is, notes, drafts, and |
bills Of exchange issued or drawn for |
agricultural, industrial or commercial |
purposes, or the proceeds of which have |
been used, or are to be used, for such |
purposes. the federal reserve board to
have the right 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,
drafts and bills of exchange, secured by |
staple agricultural products, or other
goods. wares or merchandise from being
eligible for such discount; but such def
milton shall not include notes, drafts or
bills covering merely investments or is
sued or drawn for the purpose of carry
ing or trading in stocks, bonds or other
investment securities, except bonds and
notes of the government of the United
States.
Notes, drafts and bills admitted to
discount under the terms of this para
graph must have a maturity Mt the time
of discount of not more than 90 days:
Provided that notes, drafts and bills
drawn or issued for agricultural pur-
poses or based on live stock and having
a maturity not exceeding six months
may be discounted in an amount to be
limited TO percentage of the capital
of the federal tregionall reserve bank
to be ascertained and fixed by the fed
eral reserve board"
The regional banks may also discount
"acceptances based on the Importation
or expectation of goods"
The New Treasury Notes.
The new treasury notes, which are to
furnish the "elastic" element in the cur
rency system, and TO add to the coun-
try's circulating money in time of need,
will come into use in the following
way;
The notes viii be printed by the gov
with distinctive style for
each regional reserve bank One of the
three directors named by the federal re-
serve board for each regional bank will
be known as the federal reserve agent"
for that bank. and a supply of the notes
will be placed in his custody.
Should a regional bank desire to pay
put more money than its cash resources
will permit. the law provides that it
may put some of its rediscounted COM
nercial paper into the hands of the sled
sral reserve agent" and receive in re-
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