Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-12-23
New Law Is Not Expected to
Upset Business of Coun-
try, However.
ORGANIZATION committee
HAS ITS WORK OUTLINED
Measure, When It Is Signed by
President Wilson, Becomes Eff
fective Immediately.

The new currency law. which is TO be-
come effective as soon as President Will
sons signature is affixed to the currency
BILL while it will make sweeping changes
in the currency system is not expected
TO upset the banking business or the COM
mercial business of the country in the
slightest degree. 1t is, of course, de-
signed to help all business.
The business of the banks will run along,
1t is said. without any perceptible imme-
date change. The national banks will
continue to operate in the same manner
as they have for years.
The first step which is to be taken will
be the formal appointment of an organi-
cation committee for the new system.
consisting of the Secretary Of the Treas
ury. the Secretary of Agriculture and the
controller of the currency. This organiza-
ton committee will proceed to divide the
country up into not less than eight nor
more than twelve regions. with considera-
tion both as to geography and as to COM
merce, and in each of these regions VIII
be organized a regional reserve oank,
whose duty il will be to rediscount the
commercial paper of all its member
banks. These regional reserve banks
will be capitalized at not less than
100000 each, and the capital stock
will be subscribed to by the member
banks The banks eligible for member
ship are all the present national banks.
state banks and trust companies In the
District of Columbia organized under the
law of October !, 1891. which meet the
requirements as TO reserves and which
submit to government examination.
Board to Have Control.
The control of the entire system, after
&c MI rod In,
the hands of the federal reserve board.
which will have it's headquarters in
Washington. This board will consist of
seven members, including the Secretary
of the Treasury and the controller of the
currency, and five members appointed by
the President and confirmed by the SEN
ate. The terms of the five appOintees
are for ten years each. one expiring
every two years after the system has
been started.
Each of the regional reserve banks will
be controlled by a board of nine directors.
three of whom shall be appointed by the
federal reserve board. and the other six
will be elected by the member banks
There is provision for federal advisory
council also. consisting of as many men,
bers as there are federal reserve districts.
Its functions however. are purely ad-
visory. 1t will meet at least four times
q year in Washington with the federal
reserve board.
The present national banks have sixty
days in which to file applications for
membership in the system. National
banks which decide not to join the sys-
tenn will be allowed to continue their
business as at present for one year. when
they will be dissolved as national banks.
They may, of course, after losing their
national charter. continue to do bank
ing business under state laws If they see
fit
Converting Of Commercial Paper.
The object of the new system is to give
TO the banks an opportunity at all times
OF need to convert their prime commercial
paper into currency. This currency will
automatically be retired, it is expected.
as quickly as the need for 1t has passed.
because of the interest which the banks
will be compelled to pay for its use and
because Of the reserve requirements which
must be maintained against this currency.
When a bank needs currency, for in
stance to meet the demands made upon
IL by its customers in crop-mOving times.
the bank will be able to go to the regional
reserve bank Of which 1t is a member and
present its commercial paper. such as
notes. drafts and bills of exchange for
rediscount. The directors OF the regional
banks will pass upon this paper. and II
IL Is acceptable II Will issue the new cur
rency against 1t. This new currency Is
secured by the regional banks from the
government, which will guarantee these
notes. The regional reserve banks must
maintain a reserve of 40 per cent of
gold against every one Of these notes
issued by 1t to the member banks. and
commercial paper equal to the entire
value of the note. The regional banks,
on the other hand. have as security
against this currency the credit of the
member banks and of the makers of the
notes.
When a regional reserve bank is or
ganized the national and state banks
which come into the system must con-
tribute a certain per cent of their CAPT.
tai TO the capital stock of the regional
bank. Each Of these banks Will be To-
Gated in city of Importance in the re-
gion which it supplies. All national banks
will be compelled to subscribe to the
stock. and all other banks which come
into the system must do the same. They
Will be compelled also to keep part OF
their reserves in the regional banks.
Subscription to Regional Bank.
Each of the member banks must Sub
scribe per cent of its combined capital