The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1913-12-27

"HE United States is about to en-
bark upon an entirely new regime
= in banking. 1t will begin the
since the adoption of the constitution, the
first covering the period of the old United
States banks, the second the period of
wildcat state banks, ana the third the
period of our present national banks
which began so years ago.
Speaking broadly, the United States re-
turns to the original system of a gov
eminent controlled bank after lapse of
three-quarters of century. The new
central bank, but will have not fewer
thar eight nor more than 70 federal re-
serve banks.
These federal banks will, however, all
BE- under the direct control of the United
States government. That control will be
exercised through most potent body OF
seven men, all selected ny the President.
of these seven, the Secretary of the
Treasury and the comptroller of the cur
rcLcy will be members ex-oificio, and the
terms of the other members will be 10
Years and their salary $4,000.
The federal reserve board will sit in
Washington and one Of its members Will
be designated by the President to be the
gov ernor. From its seat at the national
capital this body of seven men will con-
troll the eight or more federal reserve
banks and through them the 1860 national
banks throughout the United States.
ha, will Ia
known by number and by name, as the
federal reserve bank Of Philadelphia"
and perhaps mo. g."
Every federal bank shall have a capital
of not less than 100000 but as much
more as required To raise that capital,
national banks in any given district are
required to subscribe an amount equal
to per cent of their combined capital
ana surplus.
If in any district the banks do not
buy this new federal bank stock, it shall
be offered at par in shares of 500 each
to the public If the public also fails to
buy it, then the United States will pur-
chase 1t.
National banks must either buy the
stock or forfeit within year their ma
tional charters.
Each of the federal banks shall have
nine directors. Three of them will be
chosen from among the bankers them
selves and they shall be bankers. Three
others shall be chosen by TIE bankers in
the district, but they shall not be officers
or directors in any bank. and they must
represent the agricultural interests of that
district.
The other three directors shall be Sc
lected by the federal board in Washing
ton, No director in this latter class. c,
as it is designated. shall be an officer,
director or even stakeholder in any bank.
Here arises a difficulty because the law
specifically says that one of the Glass
C directors shall be designated as the
federal reserve agent and he shall be of
tested banking experience.
It is difficult to see how he can have
acquired this expefience and have re-
manned outside the banking business. The
federal reserve board has the power to re-
move from office any of the directors.
Each federal reserve district will also
elect one advisory councillor, who. with
the others from the remaining districts,
snail meet in Washington at least four
times every year. They will act in the
capacity of advisers to the federal reserve
board.
The public will not deal directly with
any federal bank. All deposits and all
borrowing will be done with individual
banks as they exist today.
I'm Of no cd
reserve banks will be to issue money
These new bank notes in denominations
of Sc and upward will be legal tender and
must be accepted for the payment of
every debt.
National banks for so years have issued
notes based upon United States govern
ment bonds. Hereafter the federal bank
notes will be based upon two-rame COM
mercial paper. discounted previously by
the individual banks. Behind each note
there shall be 100 per cent of such paper
and an additional gold reserve of 40 per
cent
To protect the deposits in these federal
banks there will be a reserve of IS per
cent, but this reserve may be in lawful
money" that is, in federal bank notes.
Federal banks will be United States
repositories. There the Secretary of the
Treasury will place the nations cash.
In addition to that, these federal banks
will also hold nearly all the reserves for
the existing individual banks. Hence,
each federal bank will doubtless build up
a big line of deposits. AS before stated,
the reserve behind these deposits may be
lawful money in the shape of bank
notes.
A distinctive feature of the new system
is that any bank not located in any of
the existing 50 reserve or central reserve