The Washington times., 1913-06-20

)ngresS. Issue OF new feQeraI re.
xceed $500, 100000.
S after its enactment
situated as country banks at its dis
Cg, To require the removal of officials
potency. dereliction Of duty. fraud. or
deceit.
Ch) To require the writing off of doubt
full or worthless assets upon the books
and balance sheets Of Federal reserve
banks.
D To suspend the further operations
of any Federal reserve bank and APP
point a receiver therefor.
Cd To perform the duties. functions.
or services specified or implied in the
act.
Federal Reserve Banks.
The bill is based on the belief that no
one should participate in the control
of the system unless he is financially
interested himself, or chosen hv those
who are. except in so far as the Gov
thority of the whole community. with
this in mind, the system has been de-
vised SO as to provide for the continua-
tion of existing national banks with
their organization. powers. and function
tablished system Of Federal reserve
banks, which, are Incorporated institu-
tions holding Federal charters and in
all respects managed like national
banks, except as to the election Of d.
rectors.
AS stated, there are twelve of these
Federal reserve banks, each managed by
a board Of nine directors, three of whom
will be expert bankers selected by the
banks, three will be members selected
IN, fhn ma hyrf rad n
resent the commercial, industrial, or
agricultural interests of the district. and
subject to removal by the Federal re-
serve board in case they do not fairly
represent hesesinterests. The remain
ing three directors are to be chosen by
the Federal reserve board, and one Of
them is to be designated by said board
as chairman of the board Of directors Of
the Federal reserve bank Of the district
to which he is appointed and Is to be
The national banks are compelled to
be stockhoiding members of the Fed
eral reserve bank of their respective
districts, and State banks and trust
under certain well-defined regulations.
All the domestic transactions OF the
Federal reserve bank must be with
member banks and the Government, ex-
cept that 1t may purchase bankers bills
and bills of exchange in the open mar
domestic or foreign banks
Division of Business.
The object of the bill is to effect
moderate division and classification Of
banking business along Indicated lines,
the net result, presumably. being sum-
med up as follows:
Cd National reserve banks will be
strictly limited to rediscounting actual
;-1 rio1 fra n
evidenced by very short term paper and
on rare occasions, under carefully pre-
scribed conditions, to financial opera
tions protected by collateral. They will
also be able to engage in foreign ex-
change operations, sales OF Government
securities, etc, as already explained.
CD National banks will be subjected
to precisely the same restrictions as at
present with a relaxation in favor OF
a moderate amount of real estate loans
by country banks under carefully guard
ed conditions.
(3) BY a revision of the administra-
tive features Of the national banking
act provision will be made for close
oversight Of national institutions with.
a view to holding them strictly up to
the requirements Of legitimate bank
ing business.
a. In order to possess themselves Of
the kind of paper emitting them TO re-
discounts, national banks Will nnd them-
selves obliged to keep a reasonable pro-
portion of their assets in the FORM OF
paper eligible for rediscounting, and this
will mean very considerable emphasis
upon the strictly commercial aspects OF
the business done by national instltu-
tions.
Relations With Treasury.
It is believed that the present sub
treasury system is unsatisfactory,
clumsy, injurious to business. and DIFF
ficult to manage in time of stress. Inc
bill therefore provides for
% The placing of all current funds
of the Treasury in Federal reserve
banks and the payment OF Government
creditors by check thereon.
(2) The equalization of the puolc
funds between the different reserve
banks by direction of the Secretary OF
the Treasury and subject to rate or
interest to be fixed by the Federal re-
serve board.
(S) The trust funds Of the Treasury
are to be held as at present In the
vaults of the Treasury.
Division of Earnings.
Under the terms Of the bill the Fed
eral reserve banks, after the payment
of all expenses and taxes. are entitled
to pay an annual cumulative dividend
of per cent on paid-in capital to Its
stockholding members. One-half the
net earnings of the bank must be PAID
into the surplus fund until said fund
shall amount to 20 per cent Of the paid
in capital of the bank. The remaining
one-half of the banks earnings shall
be paid to the United States. and
whenever and so long as the surplus
fund of each Federal reserve bank
amounts to 20 per cent Of the paid-in
capital. the shareholders having re-
ceived their permissible dividend OF 5
per cent, all excess earnings shall be
paid to the United States. Every Fed
eral reserve bank is exempt from Fed
eral, state, and local taxation, except
in respect to taxes upon real estate
Reserves.
In the belief that the present reserve
system is antiquated and unsatisfac-
tory, that to the massing of funds In
New York and other financial centers,
of which SO much has been said m
recent years. is largely due to the pres
ent reserve requirements of national
banks, and that In order to get the
real benefit from the system of redis-
count which has been proposed as a