The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1913-12-23

mand. and per cent of time deposits
Six eigh teenths must be kept in the
banks own vaults: three e1ghfeenphS
in the regional reserve bank for the
first six months, and the slx-e1ght-
eenths may be kept in the banks own
vaults, or in the regional reserve bank.
These immense funds of reserves
from member banks" together with
government moneys, win make UP the
deposits of the regional reserve banks.
Each of these banks viii be admins
tered by a board of nine directors, six
OF whom viii be elected by the banks,
and three appointed by the federal re-
serve board
The regional reserve banks may re-
dhscount-that Is, buy at a discount
from it's member banks-sprfme COM
mercial paper" when the member
banks desire to convert these assets
into money. The exact terms of this
important provision as to the charac-
ter Of paper upon which the regional
reserve banks may furnish cash are as
DfscoUNTfNc NOTES.
Upon the Endorsement of any OF its
member banks. with a. waiver OF de-
mand notice and protest by such bank,
any federal Cregiona) reserve bank
may discount notes. drafts and bills
Of exchange arising out of actual com
mercial transactions; that is, notes,
drafts. and bills of exchange issued or
drawn for agricultural. industrial or
Of which have been used, or are to be
used for such purposes, the federal re-
serve board to have the right to de-
terInane or define the character OF the
paper thus eligible for discount, within
the rzssnzng of this act.
Nothing in this act contained shall
be construed to prohibit such notes,
drafos ami bills of exchange, secured
by staple agricultural products, or
other goods. wares or merchandise
from being eligible for such discount;
but such definition shall not include
notes, drafts or bulls covering merely
investments or ISSUED or drawn for the
purpose OF carrying Or trading in
stocks, bonds or other investment Sc
curttfes, except bonds and notes OF the
government of the United States.
Notes, drafts and bills admitted to
discount under the terms Of this para
sraph must have a maturity at the
time Of dfgcounG Of not more than go.
days: Provided, that notes, drafts and
bills drawn or issued for agricultural
purposes or based On live stock and
having maturity not exceeding six
months may be discounted in an
amount TO be limited to a percentage
of the capital OF the federal (regionaD
reserve bank, to be ascertained and
fixed by the federal reserve board"
The regional banks may also dis
count "accsptances based on the i'm
portat1on or expectation or domestic
shipments Of goods"
new RE.ftSOnN M E0s
The new treasury notes, which are
to furnish the "elasttc' element in the
currency system, ard TO add 20 the
county's circulating u1oney in time
Of need. will come into use IN the fol-
The notes will he printed by the gov
ernnnent. with a distinctive style for
each regional reserve bank. One of
the three directors manned by the fed
eral reserve board for each regional
bank will be known as the federal
reserve agent" Cor that bank. and a
supply of the notes will be placed in
his custody.
Should a regional bank desire to pay
out more money than it's cash re-
sources Will permit, the law provides
chat st may put some of it's rediScount-
ed commercial paper into the hands of
the federal reserve agent" and re-
calye In return the new treasury notes
For each note that it puts out into
circulation the regional reserve bank
must set aside in gold 40 per cent of
the value of the note, as a guarantee
commercial paper held by the federal
reserve agent" iS the protection be-
hind the new money, but these notes
VIII also be guaranteed by the govern
mlent, and may be redeemed in gold at
the United States treasury.
Zach regional bank, under the act,
must keeq a reserve of 35 per cent of
the deposits it has received, besides the
treasury notes it issues. If the gold
deserve behind the notes falls below 40
per cert, a heavy tax is imposed on
the bank, which in turn adds the tax
for rediscounts. This was designed to
stop an over -expanSion of currency.
In times Of sudden stress, the federal
reserve board can suspend these re-
serve provisions. in order to furnish
quick relief to any community
One regional bank cannot again nav
out the notes of another, except un-
der a heavy tax. These notes are ex-
pected TO return to the regional banks
and be withdrawn from circulation
when the need for their use passes.
The federal reserve board will exer-
else final control over the entire op
Grafton Of the system. 1t can compel
one regional bank to loan to another
StrdCtfons surrounding the reserves
which regional anks must hold: and
can remove directors Of regional re-
serve banks whenever it is believed
necessary.
While the banks retain control of
the boards Of the regional reserve
banks, their connection with the fed
eraI reserve board Is only through an
advisory council, made UP of one rep
resentative from each federal reserve
district. This council will meet In
Washington, TO confer with the federal
reserve board ION general business
datdons and suggestions concerning
discount rates, note issues and reserve
An Important change in national
banking methods, embraced in the new
law. will permit all national banks ex-
cept those in New York, Chicago and
St Louis, TO make direct loans on
hve-year farm mortgages, up to 25 per
cent OF their capital and surplus, or up
to one-third of their time deposits An
nfhAT 1Ha
tonal banks having a capital of ST.
100000 or more, to open foreign
branches. Similar authority is given
to the regional reserve banks, the pur-
pose being 20 facilitate the develop
1nent OF American trade abroad.
IklllI ATTEND A