Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1913-12-23

held as a reserve behind each note 80
issued.
This provision IS expected 10 be the
influence that will drive the new
money back into retirement when IL
is no longer needed
The following analysis presents the
details OF the new -aw without adher-
ing closely 10 the technical division or
language OF the measure:
At the head o. the system will stand
a federal reserve board At Washing
ton, appointed by the president, and
TO consist OF the secretary OF the
treasury. the controller OF the cur
rency. and five other members. Two
OF these shall be expert bankers, but
none shall have banking Affiliations
vice. This board vii exercise general
control over the entire system.
The Temporary organization com
miuee." or the federal reserve
board. will select from eight or
twelve cities where regional re-
serve banks shall be located and
viii divide the entire country geo
graphically with these cities as the
csnters OF districts All national banks
in a district will be required 20 sub
scribe for the stock Of the regional
reserve bank in that district and to
keep a portion OF their reserves there.
Local banks viii be known as mem
Der banks" because they will own the
stock % the regional reserve bank Of
their district. Each member bank viii
be required 20 take capital stock Of
the regional reserve bank. equal to 8
per cent of the member banks capital
and surplus. The capital Of the re-
gionaI bank will increase or decrease
cent OF the combined capital and sur
plus OF all the banks Of the district
that have Joined the system.
National banks are compelled 10
join and state banks are permitted TO
if they bring their reserve require
ments up 10 the standard set for ma
'ional banks and submit 10 national
examinations.
Public ownership of the stock Of the
regional reserve banks Is permitted
only in case enough banks do not join
stock OF $4,000, 900. In such event the
public may purchase the stock IN
quantities limited TO $4,000 for each
individual, but the voting OF this stock
will be placed in the hands OF govern
ment representatives on the board of
directors OF the regional reserve bank.
The regional reserve banks may do
business only with their member
banks. not with the pubic. except that
certain open market operations"
such as the purchase and sale of gold.
government. or municipal bonds, and
certain forms of bills OF exchange.
are permitted. These banks will make
their earnings from the loans made 10
member banks. and from the purchase
and sale of bonds and foreign bills of
exchange
Member banks viii be compelled TO
put up i'm 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. Divi-
bends OF 8 per cent will be paid on
the stock 70 the member banks. and
the stock will be nontaxable.
After these dividends are paid one
half OF the surplus net earnings goes
10 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 paid to
the United States as a franchise tax.
Wrh the machinery thus created
for a new banking system that is sup
Elementary 10 the commercial banks
Of the country. the law provides for a
gradual transfer OF part OF the bank
reserves 10 these new reservoir
banks
In order not 10 disturb business con-
ditions. or 10 withdraw TOO suddenly
the heavy deposits 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 reserves trans
-errsd 70 the regional banks may con-
sis. OF commercial paper.
The amount OF reserve required
from every bank under the new law.
and the place where it must be kert
are as follows:
Country banks-TotaI reserve re- 7
luired. i per cent OF demand deposits f.
and per cent OF time deposits. Five
'we.fths must be held in the banks
own vaults for two years and four.
" elfths afJer that For the first vas-
."o-tweifths must be kept in the re- 4
sional bank. increasing oue-twelfrh .