The Washington times., 1913-06-20

II retirement by future act of C
serve Treasury notes not to e
Law to become effective ninety day
cases only Indirectly connected with
| the objects sought: to furnish new
class of institutions for the perform
ance of some functions which cannot
I well he ;ntrus.ed to existing banks, or
/ at all events can better be performed
! by others and to alter the present re-
serve system to a very material de-
gree.
The scope of the bill can best be I'M
! derstood by an analytical review of its
| contents
Present Situation.
The present banking situation in the
| United States rests upon the national
| bank act proper as slightly modified
| from time to time and upon the So
called Aldrich- vreeland act tact Of Mao
| g. 1e0S). OF these acts the latter is
completely superseded on the ground
probably will not become operative
except under extreme stress, and was
never satisfactory. The national bank
/ act itself is modified in numerous es-
| sential particulars. In n separate
measure a general revision Of the nd
ministrative provisions of tie nation
al-bank act will be provided.
New Class Of Banks.
Fundamental to the idea of the bill is
the creation of new class of banks
! to be known as Federal reserve banks,
the chief points about which are as
follows:
~ The number is to be twelve. with
possible Increase later as provided.
CD The ownership Is to be in the hands
of the stockholding banks of the twelve
! districts in which the reserve banks are
situated. The national banks are COM
PEELED to be members and State banks
members.
90 The capitalization is to be 20 per
, cent of the capital of the stockholding
| banks, one-har paid in and one-half
90 The business of these Federal re-
serve banks is to be as follows:
(a) Rediscounting Of paper presented
by stockhoiding banks under specified
conditions. provided such paper grows
out of actual agricultural, commercial.
or industrial transactions, and does not
run more than a specified number Of
days.
d. Buying and selling Government
securities, gold and silver bullion. and
foreign coin, foreign exchange. and
open-market bills of given maturity.
(c) Government fiscal operations
Issue of Notes.
Every national bank is allowed to con-
| tinue its note issue exactly as at pres
ent, and in addition, Federal reserve
| Treasury notes are authorized to be is
sued to an amount not exceeding $780,
100000. These notes will, upon appli-
cation, be issued to the Federal reserve
banks upon prime short-ume CONNER
cial paper and other liquid collateral.
While the notes will, on their faces.
purport to be the obligations of the
United States. they are required to be
secured by a gold reserve of 50 1-S per
cent provided by the Federal reserve
! bank and are first and paramount
lien on all the assets of these banks
and are redeemable in gold on demand
at the Treasury Department OF the city
of Washington or at any Federal re-
made against counting any Of these
notes as a part Of bank reserves and
the system Is guarded against imitation
by lodging power with the Federal re-
serve board to exact an interest charge
upon Treasury notes in order to insure
their prompt redemption. The notes
are not made legal tender. but are re-
! ceivable by the Government and every
bank of the system at par without ex-
change. No change Is made In the
elements of protection afforded existing
bank notes.
Government Control
Overseeing the whole system is Great
ed a Federal reserve board. consisting
OF seven members. including the Sec
retary of the Treasury, the Secretary
of Agriculture, and the Comptroller of
the Currency as members ex officio.
Four other members are chosen by the
President of the United States. by and
with the advice and consent OF the
Senate, for term of six years each
alaar htrc ad
the President is to be governor of the
Federal reserve board. one vice COVER
nor, and one secretary. Their term OF
office Is for eight years except that OF
those first appointed one is to serve
two years, one four. one six and one
eight years At least one Of the MEM
bers appointed by the President Is to
be a person of banking experience,
Thus II will be noted that the Govern
mefit will have absolute control Of the
system. The salary of each member Of
the board except the two Cabinet OFF,
GERS, who are ex officio members, Is
fixed at $4,000. the Comptroller of the
Currency to receive 5000 in addition
TO the salary which he receives under
existing law.
The powers of the Federal reserve
board are as follows:
(a) To examine at it's discretion the
accounts and books OF each Federal
reserve bank and TO require such state
sary.
tb) To require, or on application to
permit, a Federal reserve bank to re-
discount the paper Of any other Federal
reserve bank.
tc) To establish each week. or as
much oftener as required, rate OF dis
count which shall be mandatory upon
each Federal reserve bank and for each
class of paper. provided 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 pro-
noting a stable price level.
Id To suspend for a period not ex-
ceeding thirty days and to renew such
suspension for periods not to exceed
fifteen days. any and every reserve re-
ouirement specified In this act.
(e) To supervise and regulate the is
sue Of Treasury notes to Federal re-
serve banks.
"a To add 10 the number Of cities
classified as reserve and central re-
serve cities under existing law IN which
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