New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1913-12-07

business only with its member banks
that is, with such banks as have con-
tributed TO its capital State banks may
enter the scheme by complying with GER
tain provisions of the act.
The district banks may rediscount
commercial paper for member banks, and
so be of assistance TO any bank in time
of stress. To make the currency elastic
the bill provides that these district banks
may obtain banknotes from the govern
ment upon deposit of prime commercial
paper. This means. of course. a second
rediscount Of some of the commercial
paper which the member banks have de-
posted with the district banks as security
for advances. The bill reduces somewhat
the reserve requirements of national
banks. Every national bank must keep
a certain amount OF cash on hand and
carry a certain credit balance on deposit
with its district bank.
TO COMPEL MONEY LENDING.
In order that one part OF the country
may be made to help another part in an
emergency, the Central Board in Wash
ington, TO be appointed by the President
Of the United States. is given power to
compel one OF these district banks to lend
money TO another. Thus. IL in the opin-
ion OF the Central Board. New Orleans
needs more money, New York or Chicago
may be forced TO part with some OF its
supply.
is TO be in the hands OF nine directors,
atNy all 49, ho
three appointed by the Central Board.
One OF these three'is TO be known as the
Federal Reserve Agent and is to be the
district representative of the Federal
Board. II is TO him that each OF the dis
trict banks will go when It wishes to take
out an issue of federal reserve notes. lie
will have TO pass on the quality Of the
commercial paper offered as security,
making daily or frequent reports to the
Central Board.
In order that the federal reserve notes
may be retired quickly from circulation
when there is no longer need for them.
as banknotes are in Canada, the bill
provides that the notes shall be redeem
able in lawful money at any district bank
and at the United States Treasury. A
district bank is prohibited from paying
out the notes OF any other district bank.
1t must redeem them and send them in to
Washington or to the district bank by
which they were taken out or issued.
DEFECTS OF BANKING SYSTEM.
Such are the main features OF the
Owen Glass bill. Let us refer to the four
defects of our present banking system
which / mentioned in the beginning OF
this article. AS TO elasticity, the plan
makes elaborate provision for an elastic
currency. 1t aims to correct the second
defect by massing a large part of our
banking reserves in twelve different
reservoirs which are connected with one
another by pipes through which money
can be driven by force pump operated
In Washington.
II aims to give liquidity 20 bank assets
by making 1t legal for national banks to
accept time drafts arising out OF our
trade with foreign countries; also by
making II incumbent on the district banks
to rediscount prime commercial paper for
the subscribing banks.
The fourth weakness of our system, the
lack of leadership and power to control
the movement of gold, the trainers OF this
bill apparently believe to be capable OF
correction by the creation of central
reserve board. Certainly no single district
bank. IL twelve are created. will be strong
enough for the task. The Federal Re-
serve Bank established in New York City
under this plan would be inferior In re-
sources and influence to some OF the
banks now in existence.
l will not undertake to call attention to
ALI the Objectionable features OF the
Continued on seventh pass.
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