Atlanta Georgian. [volume] (Atlanta, Ga.) 1912-1939, 1913-10-18

Ilere are 2 reserve tllAtS Ii tuf
United States The per cent re
serve is treated by the city bank
as mere deposit against which *
need hold as reserve only u IL
per cent in cash and y Il per cent
as a deposit in bank in a central
reserve city.
There are three central reserve
cities-New York, Chicago and St.
Louis. The - 1-2 per cent of the
per cent is treated by the bank OF
the central reserve city as deposit,
and 1t is necessary to hold as a re-
serve only 25 per cent of the same.
Thus a very small base IS made to
bear the great superstructure Of de-
posits That is called the pyramid
ing Of deposits
When Trouble Comes.
In times Of panic the country ma
tional bank attempts to draw upon
Ito reserve in the reserve city bank,
which in turn attempts to draw upon
its reserve in the central reserve city
bank There is thereupon a tighten
ing of money all along the line. Each
bank. in self preservation. holds as
much money az possible to meet runs
upon it's own deposits. When the
New York bank can not pay out
money to the reserve city bank, that
bank, of course can not meet the
demands of the country bank. This
condition can often occur when all
the banks are solvent
The twelve reserve banks created
by the owen Glass bill will be To-
Gated at twelve convenient centers
each having a prescribed district over
which it has bank control There
will be paid into the same capital Of
at least O5,0O0,OOO and there will
be deposited with them reserves of at
least $500, 900, 900. The general bal
ance OF the United States Treasury,
which amounts to about s25,OOO,G00
must be deposited with them.
Thirty three and one-t third per
cent of the amounts deposited by the
national banks with the twelve re-
serve banks must be kept in cash.
Upon the order Of the Central Re
serve Board the funds OF any of the
twelve reserve banks can be used
to assist any other reserve bank shor;
Of funds. The twelve reserve banks
with such enormous amounts at their
command. will be able to assist any
national bank in distress
Elasticity of Currency.
our circulating medium under the
present law is fixed, that is, limited
to about the same amount whether
times are good or bad. In times of
stringency each bank attempts to
gather and keep in its own vaults for
its own own protection as much cur
rency as possible. That very action
intensifies the stringency and creates
the panic. Each bank has large
amount of prime commercial paper
which. however not being currency,
can not be used for the cashing Of
checks of depositors
ut is in such emergencies that the
power granted in this legislation be-
comes effective TO prevent panics. The
bill provides that when a national
bank desires more money, It may
district commercial drafts or notes
due in thirty, sixty or ninety DAYS
guaranteed by it. The reserve bank
will then pay from its deposits the
amount of such drafts and notes.
when its deposits are exhausted
the Government will issue to the Ma
tional bank new currency secured by
the paper hypotheca;ed, which must
be guaranteed by the national bank
and by the United States Reserve
Bank. This new currency is by law
made receivable for all taxes Gus
toms and other public dues
When the drafts and notes ny
pothecated mature they will be paid
to the United States Reserve Bank
and the currency issued thereon or
currency Of a corresponding amount
will be cancelled
1.-THE exercise of this power in the
bill will prevent the CLOSING Of every
solvent bank. The knowledge upon
the part OF the public that this power
can be exercised will prevent those
nnenetary disturbances which cause
such an enormous destruction Of the
value OF property"