The Topeka state journal., 1913-12-23

but IS per cent Of these reserves 80
that in case Of emergency. millions OF
cash can be brought out into circula-
ton quickly. The banks will have to
pay for these loans. however. as in
dividuals have to pay for these loans.
from a local bank, and this charge Is
expected to prevent the too free use of
the reserves held by the regional banks.
A new form Of currency paper is also
provided for, to come out in case of en-
ergency and which is expected to go
back into the hands of the governm ent
when times are normal. These treasury
notes will be printed by the govern
reserve bank, and will bear the guar
antee both of the regional hank and the
government. If the demand for cur
rency in any section CT the country
exceeds the supply of circulating mon
ey. a regional bank can secure this
new money from the government and
put It into circulation; but a gold re-
serve Of 40 per cent, and commercial
paper equal to the full value Of the note
note so issued. This provision is ex-
pected to be the influence that will
drive the new money back into retire.
nent when 1t is no longer ueecet.
New Law Analysed.
Tne following analysis presents the
details OF the new law without adher-
Ing closely to the technical division or
language Of the measure. At the head
CT the system will stand a federal re-
serve board at Washington appointed
by the president and to consist Of the
secretary of the treasury, the comp
troller Of the currency and five other
members. Two Of these shall be ex-
pert bankers. but none shall have bank
ing Affiliations or own stock during
their services. This board will exercise
general control over the entire system.
The temporary Organization commit
tee or the federal reserve board will
select from eight to twelve cities where
regional reserve banks shall be located,
and will divide the entire country geo.
graphically with these cities as the CEN
ters of districts. All national banks
in district will be required to SUBJ
scribe for the stock Of the regional re-
serve bank in that district and to keep
| portion OF their reserves there. Lo-
| cal banks will be known as member
| banks" because they will own the
| stock of the regional reserve bank of
their district. Each member bank will
be required to take capital stock Of the
| regional reserve bank equal to 6 per
cent. Of the member banks capital
and surplus. The capital Of the re-
gional bank will increase or decrease SO
! that 1t always represents per cent. OF
the combined capital and surplus Of all
! sAc O0uAS Va tu0 OlSlTlCt LHdL nave
Joined the system. National banks are
compelled to join and state banks are
! permitted to join IL they bring their re-
serve requirements up to the standard
set for national banks and submit tC
national examinations.
Public ownership of the stock of re-
gfOnal reserve banks is permitted only
in case enough banks do not Join in any
! district to provide a capital stock OF
$4000.oo0. In such event the public may
purchase the stock in quantities linn
| tied to $25, 600 for each individual; but
the voting Of this stock will be placed
in the hands Of government representa-
tives on the board of directors of the
regional reserve bank.
Regional Reserve Banks.
the regional reserve banks may dc
business only with the member banks
not with the public except that certain
+. "open market operations. such as the
purchase and sale of gold, government
or municipal bonds and certain form:
Of bills of exchange are permitted
These banks will make their earning.
from the loans made to member bank:
bonds and foreign bills cf exchange
Member banks will be compelled to pu
up in cash only one-half of their sub
scriptions to the capital of the new
banks; the rest can be called for Il
needed by the regional banks.
1 Dividends of per cent. will be paii
on this stock to the member banks ant
the stock will be non-taxable. Aftel
these dividends are paid one-haH o.
the surplus net earnings goes to ere
ate a regional surplus fund, and wher
this has reached 40 per cent. of the re
gional banks paid-in capital. these earn
ings are to go into the United State.
treasury. The balance Of the net earn
ings are to be paid into the Unitet
States treasury as q franchise tax.
With the machinery thus created
for a new banking system. that i:
supplementary to the commercia
banks OF the country, the law pro.
vides for a gradual transfer of par
1 Of the banks reserves to these new
reservoir banks. In order not to d1B
turb business conditions or Withdraw
too suddenly the heavy deposits q