The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1913-12-23


nations new financial system Will be
through an organization committee.
consisting of the Secretary of the
Treasury. Secretary of Agriculture and
Comptroller of tho Currency. Banks
have sixty days within which TO flo
their applications for membership in
the new system; and one years time
is allowed tefore the government will
compel the dissolution of any national
bank that refuses to join.
..rakc Up the Slack,
The new law will make little direct
change in the operation of the pres
ent national banks. except TO allow
them TO loan certain amount Of their
funds upon farm mortgages Its chief
purpose is TO add a new piece of ma
chincry TO the banking system that
viii take up the slack" during the
changing business conditions OF each
year; that will give the banks q place
10 quickly convert their assets into
cash In time OF need, and that will
bring out new Federal currency when
II is needed and retire Il when money
becomes cheap"
Banks arc now required to keep a
certain percentage OF their deposits
as reserves" part in cash In their
own vaults AMI part OF which may he
redeposite.i in the banks of New York,
cd cities In times of sudden financial
demands. when banks have loaned up
to tho full limit OF their resources
these reserves furnish little relief, be-
cause If they re paid out to meet de-
mands. the banks are left In a precari-
ous condition.
The basic principle OF the new law
is TO get these reserve funds out into
circulation when necessary, without
lcsseninS the :afety OF any bank: and
to provide q place 10 which local
banks may rush in q crisis and get
cash for the prime commercial puDer'
they hold III their vaults.
Chnin of Ucscryc Banks.
This Is TO he accomplished through
Il chain Of regional reserve banks, or
reservoirs OF reserves" in which all
banks shall deposit IL stated part of
the money they arc required to hold
as reserves. Under the new system
when financial furry comes. The
banks can take commercial paper, such
as notes, drafts end bills Of exchange
To these "rese-voirs'' and secure tho
uso OF their own reserves or If neccs-
sary. even the reserve of other banks
by depositing this security.
The new regional banks will receive
about one-half OF the bank reserves
or tho country. They. I'm turn. will bo
permitted to loan back to the banks
all but 35 per cent Of these reserves.
so that in case OF emergency, millions
oil cash can be brought out into circu-
iation quickly. Tho banks will havo
10 pay for these loans. however, as
individuals have to pay for loan
from any local bank: and this charge
Is expected TO prevent tho too-free use
Of tho reserves held by the regional
banks.
new form OF paper currency Is also
provided for. to come out In case of
emergency, and which is expected to
go back into tho hands of the govern
inent when times are normal These
Treasury notes Will be printed by the
government, and issued through each
regional reserve bank. and will bear
tho guarantee both of the regional
bank and the government
" the demand for currency I'm any
section of the country exceeds the sun
ply or circulating money, a regional
bank can secure this new money from
the government and put 1t into circu
lation; but n gold reserve OF 40 per
cent. and commercial paper equal to
tho full value OF the note. must be
held as reserve behind each note
so issued This provision is expected
| To DO the influence that will drive the
new money back into retirement when
it IL no longer needed
Details of New Inv.
The following analysis presents the
details OF the new law without adher-
Ing closely to the technical division or
language Of tho measure:
AT the head of the system will stand
Federal Reserve Board at Washing
ton, appointed by the President, and
TO consist of tho Secretary Of the
Treasury. the Comptroller of the Cur
rcncy, and Ave other members. Two
OF these shall DO expert bankers. but
mono shall have banking Affiliations OF
4 cwn bank stock during their service
This board will exercise general control
over tho entire system.
The temporary Organization commit.
! tee" or the Federal Reserve Board
, Will SOLICIT from eight to twelve cities
where regional reserve banks shall be
located. and Will divide the entire
country geographically with these
cities as tho centres OF districts All
national banks in district will be re-
quired TO subscribe for the stock OF
tho regional reserve bank in that dis.
trict, and to keep a portion of their re.
serves there.
Local banks will be known as "mem
Der banks" because they will own the
stock OF the regional reserve bank OF
.their district. Each member bank will
! DO required to take capital stock of the
regional reserve bank equal to per