The record. [volume] (St. Maries, Idaho) 1913-1918, 1913-12-26
New Currency Law
A Great Benefit
PANlCS VIII PR0BABLY BE IMPOSSIBLE
Meets With General Approval From Bankers As
Well As Business Men

Lack of space prevents as from
publishing the new currency law
which was sign d by President VIII
son, on Tuesday Even if we should
publish 1t in fnli, we believe that
majority of our readers, ike our
selves, would be unable TO give 10 the
study Necessary 10 understand it and /
TO determie It's effect uDon tloc1uniry /
Among bankers, hnanciers and bust
ness meu who have given Go this sub .
jeot prolonged thought aud iuyestiga /
tlont, the conviction runs strong how /
ever, that the new law Will be vast
improvement over our present made
quate, unsoieutiho aud antlqua.ed /
system. There Is every reason to /
believe that Senator Shafrothi & sub /
stautially right in his opinion that
under it"there will be no such thlug
as the closing OF the doors of a solelt
bank". By what means will that he
made impossible under the new lawg
The new system provides for not
fewer than eight nor more than twelve
federal reserve banks, to be located at
advantageous points throughout th e
United States. Que of these wtl
doutless be located at San Franciscn
and If the larger number is establish
ed, probably another at Spokane, Port
land or Seattle.
Advocates of the larger number
have said in The senate shat they
should be SO looar as Go make ii
physically possible for au officer rl
aug member bank Co hoard a train
after banking hours and he iu bis
federal reserve city the next mornine
As one witness before the senate com
mittee put it, it shoudl made posi-
bls for the president of sound nanh
who had reasons Go fear a run on bic
deposits, the followinR day. Co gat het
the commercial paper he wished, 60
cash take the train for be federal ies
erve city and be alle t1 WiIe by t.e
time Of tue opening ~ his hauA the
folluwiug morning hat be had caanl4
sufficient securities 20 neea cue ae.
mands of all depositors That action
and It's resulting telegram would stor
The run.
In what manner Is this made feas-
ibleY II rs expected that an tine u4-
tiouel banks aul a large rum0er If
the state banks will become members
of the 8 orsl2 regional federal reserve
banks. National banks must join
OF forfeit their national charters Uu
der the new law. rs under the old,
banks are required to hold 10 reserv q
a fixed percentage of their cash asset.
beyond which they must not mIake
loans Under the new law these res.
erves will be largely held IN the ed
eral reserve banks These reserves
Will be. 4oaned to member banks that
may JIsad them on their giving, a'
security. the requisite quantity OF
their notes or bills receivable that
Is, notes given them by their custom
ers When member bank makea q
loan to a merchant, for example, that
act is termed the discountiug OF hii
note. When. .it takes that note to The
federal reserve bank as seclrity ioI
needed currency, the process Is term
ed re-discountinR of its Commercial
psklr.
This makes liquid the credit of th
entire district served by a federal re
serve nank; that is It will readil.
flow from one point t1 another, 81
loual needs arise.
Under tue new law a member BAN
that Is sound and has In Its note DOT
tfolio good commercial paper viii b'
emitted as a right to rediscount tina
''parer" aud receive temporary loan
OF currency. Under the OH law al
indivual bank wanting more curreuc
had TO seek 1t as a favo. from som
other bank, and TO offer It's CONNER
oial paper for rediscount was regard
ed as a desperate measure which /
itself threw the bank under supiscio
aud had a tendency still further
weaken its standing
Bloader mobility Of credit an
reserves is provided 10 the section q
the new law which authorizes th
central reserve board at Washington
on a vote Of five Of its seven member
to compel one central reserve Dank
loan currency TO another centarl II
serve bank For example, il ourrel
cy we're abundant in the San trai
cisco district, while the nurthwesteI
district stood in need OF an extrl
ordinary supply TO move its crops
market, flve of the seven members
the central reserve board could con
pell the San Francisco district
ship the stipulated quantity Of CA
ren6y 90 the central reserve bank /
the northwest. And conversely, %
board at Washington could, on occa
Ion. require the northwest Go help @
southwest tide over lts exlraordi
airy currency raquirem enta.