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

serve. For three years the unallotted
part OF the reserve may be kept in the
banks OF reserve cities. After that
time il must be kept either in the coun-
try banks and vaults or in the regional
reserve bank.
Reserve city balks-Totai reserve
required. 10 per cent OF demand and
5 per cent OF time deposits. Six-fif-
teenths must be kept in the banks
vaults for the first two years and five
fifteenths after that time. Three-fif-
teenths must be kept in the regional
reserve bank for the first year. in
creasing one-fifteenth every six months
thereafter until il reaches six-fif-
teenths. For three years the unallot-
ted 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 CNew
York, Chicago and ST. Louis Total
reserve required. IS per cent of de
mand and > per cent of time deposits.
Seyen-eighteenths in the regional re-
serve banks and the remaining five
eighteenths in either place the bank
may choose.
These immense funds OF reserves
from member banks" 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 viii be elected by the banks,
and three appointed by the federal
reserve board.
The regional reserve banks may re
discount-that is, buy al a discount
from its member banks-"prime COM
mercial 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 the regional reserve banks
may furnish cash are as follows:
Upon the Endorsement of any
of its member banks, with a
waiver Of demand notice and pro-
test by such bank. any federal
GegiOnaD reserve bank may discount
notes. drafts, and bills of exchange
arising out of actual commercial trans
of exchange issued or drawn for agri-
cultural. industrial or commercial pur-
poses, or the proceeds OF which have
been used. or are TO be used. for such
purposes. the federal reserve board to
have the right 20 determine or define
the character of the paper thus eligi-
BILE for discount, within the meaning
of this act.
Nothing IN this act contained shall
be construed 10 prohibit such notes,
drafts and bills of exchange. secured
By staple agricultural products. or 9th
er goods. wares OF merchandise, from
being eligible for such discount: but
such definition shall not include notes,
drafts or bills covering merely invest
ments or issued or drawn for the pur-
pose OF carrying or trading in stocks,
bonds or other investment securities.
except bonds and notes OF the govern
ment OF the United States.
Notes, drafts and bills admitted 10
discount under the terms of this para
graph must have a maturity at the
time of discount OF not more than 80
days; provided, 'kat notes. drafts and
bills drawn or issL>sza for agricultural
OF based on live stock and
having a maturity not exceeding six
months may be discounted in an
amount 10 be limited to a percentage
Of the capital of the federal (regionaD
reserve bank, TO he ascertained and
fixed by the federal reserve board"
The regional banks may also dis
count "acceptances based on the i'm
pCTtaJion or expectation OF goods"
The new treasury notes. which are
10 furnish the elastic" element in the
currency system. and TO add 70 the !
country's circulating money in time OF
need, will come into use in the follow |
ing way:
The notes viii be printed by the
government. with distinctive style
FOR each regional reserve bank. One
Of the three directors named by the I
federal reserve board for each region I
al bank will be known as the federal
reserve agent" for that bank. and a
supply of the notes Will be placed in 4
his custody.
Should a regional bank desire TO pay .
put more oney than its cash re- .
will permit. the law provides .
that II may put some of its rediscount-
ed commercial paper into the hands .
Of the federal reserve agent" and re I
ceive IN return the new treasury notes.
For each note that II puts out into
circulation. the regional reserve bank
must set aside in gold 40 per cent of .
he value of the note as a guarantee
'or its redemption. This gold. with
he commercial paper held by the
federal reserve agent is the protec-
ion behind the new money: bur these
notes will also be guaranteed by the
government and may be redeemed in
gold at the United States treasury.
Each regional bank. under the act,
must keep a reserve Of % per cent Of
he deposits Il has received, besides the
10 per cent gold reserve behind the
reasury notes IL issues. IEThe gold
'eserve behind the notes falls below 10
per cent, a heavy tax is imposed on
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