Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1913-12-26
The New Currency System.
rom the Baltimore Sun.


President signs the new Banking and Cur
rency bill. Bankers. business men an,
those familiar with the subject have lonI
realized the inadequacy of the existing
: system.
From time to time during recent year
efforts have been made to reform the sys
TEN.
In the last Presidential campaign thu
Democratic party was victorious on plat
form which pledged, among other things
tariff reform and the reformation of the
banking and currency system. Tariff re.
form is already an accomplished fact, and
the second step in the program will be
completed in few days, when the new
Banking and Currency bill becomes law
The House passed on September Is the
Owen-Glass bill by vote of 286 to a.
This bill was Immediately referred to the
Senate, where, as a result of full consider
alton and discussion. an amended bill was
passed last Friday by vote of Sd to 81.
The bills now 60 to the conference commit
tee of the two houses, following which the
mutually agreed upon bill will be passed
by both houses and then will be signed by
the President.
What is the real significance of the new
banking and currency system? OF what
practical benefit is it to the citizen. to the
business and professional interests of the
country and to the nation as a whole
While the new law is intended to be of
great value to every citizen, the average
layman is not particularly interested in a
technical analysis of the detailed provisions
of the bill. Every citizen should. however.
know the general organization of the sys-
tenn and the basic banking and currency
principles involved in the new measure.
For the purpose Of general analysis, the
bill may be considered under three heads:
O The organization of the system, includ-
ing the question of control and ownership,
(2) banking provisions and (3) currency
provisions. The organization of the sys-
tenn consists Of ~ the Federal Reserve
Board, (2) the Federal reserve banks. (3)
the member banks and (4) the Federal
advisory council.
The Federal Reserve Board, located in
Washington. consists Of seven members,
including the Secretary of the Treasury
as member ex-officio. The six members
appointed by the President and confirmed
by the Senate serve for terms of six years
each. only one member being appointed
from any one Federal reserve district
They receive salaries of $4,000 year.
and must give their undivided time to the
work Of the board. The law requires at
least two members to have banking ex-
perience, but it is likely that most, il not
all. of the members will be trained in finan-
cial affairs. This board has general con-
troll over all the regional reserve banks
and is the governing body of the entire
system.
The organization committee of the sys-
tenn, consisting Of the Secretary of the
Treasury and two members of the Federal
Reserve Board, shall as soon as practicable
divide the entire continental United States,
including Alaska, into not less than eight
nor more than twelve reserve districts and
select one city within each district as the
Federal reserve city In this Federal re-
serve city there shall be organized the
Federal reserve bank. having charge of the
system within that district
Each Federal reserve bank is controlled
by board of nine directors. Six of these
directors are chosen by the member banks,
three directors representing the banks and
three representing non-banking interests.
The other three directors are named by the
Federal Reserve Board.
The member banks are such national or
State banks within the respective Federal
reserve districts as choose to become men,
bers of the system by complying with the
requirements imposed. The law requires
all national banks desiring to join the sys-
TEN to signify their intention within so
days. or they forfeit their privileges as re-
serve agents. Unless national banks join
the system within one year they are re-
quired to forfeit their charters as national
banks
The capital of each of the Federal re-
serve banks shall be at least 100000.
Every national bank is required. and every
eligible State bank is permitted to sub
scribe to this capital stock sum equal to
per cent. Of its paid up capital and sur
plus. per cent. to be paid, the other 3
per cent. being subject to call. Should the
subscriptions by the bank be insufficient.
the stock may be offered for public sub
scription at par. II both bank and public
subscriptions are insufficient. the unsub-
scribed portion shall be allotted to the
United States Government.
The capital stock of the Federal reserve
banks is entitled to per cent cumulative
dividends, after which One-half Of the net
earnings will 60 into a surplus fund until
the amount reaches 40 per cent. Of paid
in capital; Of the remaining half, so per
cent is paid to the United States as a fran
chise tax, and so per cent. is held by the
Government as trustee for the benefit of
depositors of failed member banks. this
constituting a depositors' insurance or
guarantee fund.
The Federal Advisory Council, consist
ing of one member from each district, Sc
lected by the board Of directors Of each
Federal reserve bank. is empowered to
confer with the Federal Reserve Board on
General business conditions and make rec
concentrations regarding discount rates
note issues. and the general affairs Of the
banking system.
One Of the worst features Of the bank