The Bemidji daily pioneer. [volume] (Bemidji, Minn.) 1904-1971, 1913-11-21
EXPLAINS RESERVE
BANKING PLAN
Congressman Buckley Tells Tavenner
Advantages of New Legislation
Benefit to The Country
$500, 100000 WILL BE TAKEN
This Amount Will be Distributed
Throughout The United States
In IL Reserve Districts

By Congressman Clyde H. TaVenncr.
Washington, Nov 21,-How will
the regional reserve banking plan
benefit the country, and are it's adj
vantages over the present banking
system? Congressman Robert J.Bulk-
ley, of Ohio, one of the trainers of the
Glass currency bill, explained some
OF the advantages of the new legis-
lation to me in way that can be
understood.
I'm the first place" he said, "the
distinction between fixed invest
ments and liquid assets must be kept
in mind. Corporation stocks and
bonds, lands and buildings are fixed
Investments. Their conversion into
cash depends upon finding someone
who believes that it will be profit
able for him to buy them as an in
-vestment. Growing crops, goods in
process of manufacture or in transit,
and mercantile stocks, are liquid as
sets, because their sale does not de-
pend on finding willing investor
and does not have to be forced, but
comes about naturally in response to
the ordinary demand arising from
the necessities of mankind.
Under the present law there are
three cities, New York, Chicago and
St. Louis, known as central reserve
cities, and AZ reserve Cities Banks
outside of these cities are known as
country banks. Under the present
law banks in all sections of the coun-
try have developed the customs Of
keeping balances in the central re-
serve cities and especially in New
York. Usually they are paid interest
All the rate of per cent. But in order
to make a profit on the transaction
the reserve banks must keep the
money actively employed. This, to-
gether with the necessity to keep the
investments available at call, has re-
suited in an overdevelopment of New
Works call loan market, where the
principal business is that of carryin g
speculative transactions, largely on
the New York Stock Exchange
'The theory advanced is that such
loans are liquid. Undoubtedly this is
true of a single loan, because it is
payable on call and secured by COL
lateral for which there is a ready
market. But when a sufficient num-
Der of these loans are called at the
same time, situation develops in
which the loans are not liquid at all,
because the very calling of a large
number of loans knocks the bottom
out of the market and spoils the sale
Of the collateral. A panic follows this
condition.
Reserve money should be invest
ed in bills of short maturity based on
liquid assests. Under the terms of the
pending legislation, the annual fall
stringency in money, for instance,
would be relieved by the issue of gov
eminent notes through the federal
reserve banks. These notes would be
secured by the reserve money invest
ed in the active life of our commerce
in the safest and most liquid assets
namely, the agricultural, industrial
and commercial paper
ut is estimated that between 250
and 800 millions of dollars will be
taken from New York to be distribut-
Ell throughout the United States in
the II reserve districts. Yet because
Of the manner in which this money
is held today, only few men will be
hurt by the distribution, but the
country at large will be greatly
benefited by coming into it's own.
with the reserves modified, the
federal reserve banks are an absolute
power to stop panics; they will haze
the basis of an elastic currency, and
the funds to support a broad market
for agricultural, industrial and COM
mercial paper In times of emergen-
cies money can be shifted from one
part fthe country to another, pro-
vjding quick relief. The federal re-
serve notes must be Immediately re-
deemable in lawful money on de-
mand. The security behind our cura
rency must be such that it can be
readily liqudated without forcing
sales and without depending upon
the willingness of investors to buy.
In other words, the security behind
our currency must be liquid assets
not fixed investments.