The Washington herald., 1913-06-22

one OF Whom must nave mad previous
banking experience. Division would
the Secretary of the Treasury.
the Secretary OF Agriculture, and the
Comptroller of the Currency.
This plan proposes that the six MEM
bers Of divisions A and B would grad
ually become life tenure appointees. or
a tenure terminated by an.age limit. This
plan. its proponents believe, would ele-
vate the board to the same plane of po-
itical and sectional freedom as is en-
Joyed by the United States Supreme
Court. Other plans along much the
same lines are proposed. some providing
for life tenure without bank participa-
ton and some with bank participation
without life tenure.
Boards Powers Arbitrary.
As for the powers Of this board. there
are some which. whatever the form and
manner Of Its composition, are considered
extremely arbitrary. Bur the degree Of
opposition to the powers of the board
VIII decrease in inverse proportion to the
extent OF its removal from possible sec
uonal and political influence.
The actual or potential power Of the
board, expressed and implied through va
rious sections Of the bill. extend its su-
pervision 10 the minutest detailed opera
ton of bank member of a Federal
reserve bank, and although the ostensible
intent of the bill is to give appointees
OF the Federal reserve board only a min
GRITTY membership on the directorates of
the regional reserve banks, the power is
vested in the Federal board. by indirec-
ton, to absolutely CONTROL by a majority
of six to three. the board of directors OF
any or all regional reserve banks.
Oppose Fixing of Rates.
The two expressed powers to which the
strongest opposition will be attracted
are ID TO require or. on application.
10 permit, Federal reserve bank to dis
count the paper Of any other Federal re-
serve bank" and. inversely. to prohibit
any reserve bank from discounting the
paper of another, and 90 ITO establish
each week, or as much oftener as re-
quired. a rate OF discount which shall be
mandatory upon each Federal reserve
bank and for each class of paper pro-
vided that said rate of discount need
not be uniform for all Federal reserve
banks. but shall be made with a view
TO accommodating the commerce Of the
country and promoting a stable price
level
OF the witnesses called before the Car
ter Glass subcommittee OF the House
Banking and Currency Committee at the
last session. Victor Morawetz, a New
York corporation attorney, and a recog-
nized authority and writer on the cur
rency problem. was heard with more
than usual attention II is generally be-
Geved that in framing his bill Mr.. Glass
was more generally influenced by Mr.
Morawetz's theories than by those Of any
other once man. Moreover, the New
Yorker is in hearty accord with the pur-
poses and many of the methods of the
Glass bill. His criticism Of these two
features may be recognized as from a
sympathetic source.
Victor Morawetz's Criticism.
In an authorized interview yesterday
Mr.. MOrawetz voiced the following
criticism of the plan to empower the
Federal reserve board to require the dis
counting by one Federal reserve bank
Of the paper of another:
NO central board, and especially no
political central board. can safely be
entrusted with such a power. Only the
board OF directors of a bank Is in a po-
sition to determine whether IL can safely
part with any of its reserves To give
to political board sitting in Washington
the power TO transfer reserves from one
bank to another would surely result in
unsound banking. in sectional differences
and would introduce politics into the
OF the plan to empower the Federal
board to fix varying rates Of discount
for Federal reserve banks, he said:
No bank can be managed wisely and
kept in a safe condition unless its ow-
board of directors has power to fix its
discount rate. II is only through its
discount rate that bank can protect its
own reserves and its own solvency."
Great Indirect Powers.
The power of the Federal board Of con-
troll TO dictate the selection of a ma
jority on any or every board of direc-
tors Of regional reserve banks is not ex-
pressed in the section of the bill that is
supposed to summarize the powers of ths
board. 1t comes as the result of pro-
visions In several unconnected sections
of the bill.
Section provides for the organization
of the Federal reserve banks or associa-
tons. II provides a board of directors
of nine members for each Federal reserve
bank. OF these nine directors. three are
to be elected by directors OF membe-
banks, as direct representatives OF tht.
bank directorates. Three are to be elect
ed by the same electors, but they shall
be fairly representative of the CONNER
cial, agricultural, or Industrial interests
Of their respective districts" The third
group Of three is to be appointed di-
rectly by the Federal reserve board.
May Remove Directors.
Apparently, thus, the member banks
are insured a majority of three in the
directorates Of the Federal reserve banks.
But the same paragraph which provides
for the selection of the second class also
provides: THE Federal reserve board
shall have power at its discretion to re-
move any director of Glass B in any Fed
eral reserve bank. IL it shall appear at
any time that such director does not
fairly represent the commercial. agri-
cultural. or industrial interests of his
district"
The very Indebtedness of the causes
for removal in this section invite a COM
plete domination of the Federal reserve
banks through the exercise OF this power
Of removal. In addition, the Federal Re-
serve Board is expressly empowered TO
require the removal OF officials OF Fed
eral reserve banks for incompetency,
dereliction of duty, fraud. or deceit" All
Of these causes are sufficiently indefinite
to give the Federal board wide latitude
in the exercise Of its discretion.
Those who believe in the general plan
of currency reform outlined in the Glass
bill would not consider these powers SO
dangerous: some would consider them
desirable If the Federal board itself were
removed from possible sectional or po-
litical influence. and II. in its makeup,
the presence of at least a strong minor
ity of men with previous banking expert
ence were insured. or II the bank menu
bers Of the Federal reserve banks were
given a voice in the selection Of part