Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1913-12-25


follows:
The new bill affecting the currency,
banking and finances of the country,
which has now been passed by both
branches of congress and goes before
President Wilson for his signature, is
one of the most far-reaching measures
relating to finance that has been enact
cd in many years. The magnitude or
the subject, the diversity Of interests
affected, and the length Of the debates
In both branches Of congress, has made
It difficult for the ordinary observer to
follow the changes and grasp the
essentials of this highly technical
measure in It's important bearings on
money, finance, banking and the entire
range of fiscal subjects, public and
private. which it affects. With view,
therefore, of presenting succinctly and
in non-technical language, an epitome
of the salient features of the measure
as finally framed, the following sum-
mary is given of the bill as whole
and of it's principal details:
Generally speaking the first steps to
be taken to bring into operation the
nations new financial system will be
through an organization committee OF
President Wilson. Banks have sixty
days within which to file their appll-
cations for membership in the new
system; and one years time ls allow
ed before the government will compel
the dissolution of any national bank
that refuses to join.
The new law will make little direct
change in the operation of the present
national banks, except to allow them
to loan a certain amount of their funds
upon farm mortgages. Its chief pur-
pose is to add a new piece of machin-
cry to the banking system that Will
take up the slack during the chang
ing business conditions of each year;
that will give the banks a place to
quickly convert their assets into cash
In time of need, and that will bring
out new federal currency when 1t is
needed, and retire it when money be-
comes Cheap"
Banks are now required to keep a
certain percentage of their deposits as
reserves part in cash in their own
vaults and part of which may be re-
deposited in the banks Of New York.
Chicago, St. Louis and other designat-
ed cities. In times Of sudden financial
demands, when banks have loaned up
tc the full limit of their resources
these reserves furnish little relief, be-
cause II they are paid out to meet de-
nands, the banks are left in a pre-
carious condition.
The basic principle Of the new law
Is to get these reserve funds out into
circulation when necessary, without
lessening the safety of any bank; and
to provide place to which local banks
may rush in a crisis and get cash for
the prime commercial paper" they
hold in their vaults.
Member banks will be compelled to
put up In cash or One-half of their
subscription to the capital of the
banks; the rest can be called for If
needed by the regional bank. Dvid-
ends of six per cent will be paid on this
stock to the member banks, and the
stock will be non-taxable. After these
dividends are paid, one-half Of the sur
plus net earnings goes to create re-
gional surplus fund.- and when this has
reached forty per cent of the regional
banks paid-in capital. these earnings
are to go into the United States treas
ury. The balance of the net earnings
are to be divided between the payment
of a United States franchise tax, and
the creation of a fund to guarantee the
payment of depositors in member
banks that may fail.
With the machinery thus created for
q new banking system that is supple
mentary to the commercial banks OF
the country, the law provides for a
gradual transfer of part of the bank
reserves to these new reservoir
banks. In order not to disturb bust
ness conditions, or to withdraw too
suddenly the heavy deposits of country
banks in the large cities, the law pro-
vides that two years may be consum,
cd in shifting these balances, and that
If necessary, part of tho reserves trans
ferred to the regional banks may con,
sist Of commercial paper.
The amount of reserve required from
every bank under the new law, and
the place where 1t must be kept are
as follows:
Country bank-Total reserve requir'
ed, IL per cent of demand deposits and
i've per cent Of time deposits. Four
twelfths must be held In the banks
own vaults; two-twelfths In the region
al reserve bank for the first six
months, increasing cne-twelfth each
six months until it reaches five,
twelfths. After two years the remain
Ing three-twelfth of the reserve must
be kept either In the country banks
vaults or in the regional reserve bank,
Notes, drafts and bills admitted to
discount under the terms of this para
graph must have maturity at the
time of discount or not more than
ninety days; provided, that notes
drafts and bills, drawn or issued for
agricultural purposes or based on live
stock and having maturity not ex.
ceeding six months may be discounted
In an amount to be limited to per.
centage of the capital of the federal
(regionaI reserve bank, to be ascer'
tanned and fixed by the federal reserve
banks
The regional banks may also dis
count acceptances based on the impor'
tation or expectation or domestic ship
ments of goods
The new treasury notes. which are
to furnish the elastic element in the
currency system, and to add to the