Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1913-12-25
COMPLETE AND DETAILED SUMMARY OF
THE NEWLY ENACTED CURRENCY BILL

| For each note that it puts out into cir
culation, the regional reserve bank
must set aside in gold forty per cent
of the value of the note, as guaran-
tee for it's redemption This gold, with
the commercial paper held by the fed
eral reserve agent" is the protection
behind the new money; but 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 reserve of 35 per cent or
the deposits it has received, besides
the forty per cent gold reserve behind
the treasury notes it issues. If the
: gold reserve behind the notes falls be-
/ low forty per cent a heavy tax is I'M
posed on the bank which in turn adds
the tax to the rate it charges member
! banks for rediscounts. This was de-
signed to stop an over expansion or
currency. In times Of sudden stress,
the federal reserve board can suspend
these reserve provisions, in order to
! furnish quick relief to any community.
! One regional bank cannot again Day
out the notes of another, except under
! a heavy tax. These notes are expected
/ to return to the regional banks and be
withdrawn from circulation when the
need for their use passes.
! None of the existing forms Of paper
currency will be disturbed by the new
! law. Provision is made, however, that
! the government two per cent bonds,
upon which national banks now secure
the issue Of their bank notes. may be
purchased by the government at par,
through the regional banks. This pro-
vision is expected to result in the grad
ual retirement of most of the national
bank currency.
The federal reserve board will exer-
else final control over the entire opera
ton of the system. 1t can compel one
regional bank to loan to another IN
time of need; can authorize banks to
use the treasury notes or even nation
al bank notes as part OF their legal
reserves: can suspend all restrictions
surrounding the reserves which region
al banks must hold and can remove
directors of regional reserve banks
whenever it is believed necessary.
While the banks retain the control
of the boards of the regional reserve
banks. their connection with the fed
| eral reserve board is only through an
advisory council, made up of one rep
resentative from each federal reserve
district. This council will meet in
WASHINGTON to confer with the federal
reserve board ION general business
conditions," and to make recommended
tons and suggestions concerning dis
count rates, note issues and reserve
conditions. :,
/ An important change in national
banking methods. embraced in the new
law. will permit all national banks ex-
cept those in New York, Chicago ana
| St. Louis, to make direct loans on i've
year farm mortgages, up to twenty
| five per cent of their capital and sur
plus, or up to one-third Of their time
deposits. Another provision in the law
permits national banks having a cap
! ital of 100000 or more, to open
foreign branches Similar authority Is
given to the regional reserve banks,
the purpose being to facilitate the de-
velopment of American trade abroad.
Reserve city banks-Total reserve
required, IS per cent of demand, and
five per cent of time deposits. Six
ffteenths must be kept in the banks
own vaults: three-ffteenths in the re-
gional reserve bank for the first six
months, increasing one-fifteenth each
six months until it reaches six-fif-
teenths. After two years, the remain
ing three-f1fteenths of the reserve must
be kept either in the banks own vaults
or in the regional reserve bank.
Central reserve city banks (New
York. Chicago and st. Louis) Total
reserve required, 10 per cent Of de-
mand, and five per cent of time de-
posits. Six-eighteenths must be kept
in the banks own vaults; three-eigh-
teenths in the regional reserve bank
for the first six months, and six-eigh-
teenths thereafter. After six months
the remaining siX-eighteenths may be
kept in the banks own vaults, or In
the regional reserve bank.
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 board of nine directors, six
of whom will be elected by the banks,
and three appointed by the federal re-
serve board.
The regional reserve banks may re-
discount-that is. buy at discount
from it's 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 charac-
ter of paper upon which the regional
reserve banks may furnish cash are as
follows:
Upon the Endorsement of any of it's
member banks, with a waiver of de-
Dland notice and protest by such banks
any federal (regional, reserve bank
may discount notes, drafts and bills OF
exchange arising out of actual COM
mercial transactions; that is, notes,
drafts, and bills of exchange issued or
drawn for agricultural. industrial or
commercial purposes, or the proceeds
OF which have been used, or are to be
used, for such purposes, the federal
reserve board to have the right to de-
tcrmine or define the character Of the
paper thus eligible for discount, with
in the meaning of this act.
Nothing in this act contained shall