The Fargo forum and daily republican., 1913-08-28

F., OF the treasury, and that three of the
other six members be elected by the
directors of the federal reserve banks,
with the dropping of the provision for
| an advisory board which was adopted
at the suggestion of bankers might be
an improvements; but there seems to
be little probability of it's acceptance.
The same may be said of proposed
changes in the composition of the
boards of directors of reserve banks
1t would certainly be an improvement
to withdraw all mandatory authority
in the discounting between banks.
That is also a matter in which coer-
cion is inadvisable. We think the bank
ers are right in asking for the elimina-
ton Of the savings department provi-
sion from the bill. There are other
minor suggestions which should be
carefully considered; but the two of
the most essential importance Of all
are those relating to note issues and
to reserves. .,"- .
We believe it would be better to
have the circulating notes issued by
the reserve banks, under permission
OF the reserve board, and made their
direct obligations rather than issued
TO the banks as ultimate, obligations
Of the government, and, to drop the
designation "trea Sury reserve notes."
Thls change, however, is not likely to
be made and is not essential. The
notes are made sufficiently obligations
OF the reserve banks by the security
provided for and means for their
redemption. This provision would be
improved by dropping the phrase cor
lawful money" from the designation
OF the reserve for redeeming notes.
Nothing but actual money in standard
coin should be used for the redemption
OF any form of credit currency for
general circulation. What is meant
by lawful money" is the government
notes. or ''greenbacks," which are re-
deemable in gold and ought all to have
peen redeemed and withdrawn long
before this time. Now there is ample
gold for the security of all forms of
credit currency and the supply can be
easily maintained. The suggestion
that the gold reserve for the redemp-
tlon OF notes should have normal
limit or 40 per cent of the issues OUT
standing, with a graduated tax upon
the deficiency down to 33 1-3 per cent
with no tax upon notes against which
the full reserve is maintained, is q
good one.
There is less to be said for the pro-
posed changes in the provisions reIat-
Ing to reserves of the banks generally
against deposits. Under the new
system properly strengthened, it
would no doubt be safe to reduce the
reserve requirement of country banks
70 L per cent, reserve city banks to
10 per cent and central reserve city
banks to 20 per cent. But it is not
desirable to maintain permanently or
lndefnlteiy one of the chief weak
nesses or the present system by allow
ing one-third of the required reserves.
except for central reserve CITY banks
70 take the form of credits in other
Danks, or deposits in them upon which
interest Is paid and which are used
IN the banking operations of the re-
serve agents, There may be profit in
TINS both for the banks which are
allowed to weaken their reserves in
TINS way and for those which have
the use of part of their reserves,
put these credits are not real reserve
money, and times come when their
sudden withdrawal is disturbing and
perllous. This is a point at which the
selI interest of the banks should give
way, even at some temporary sacri-
nee. A proper time should be allowed
Tor the adjustment, and Is allowed in
tne administration. bill, but as a per-
manent arrangement the reserves ofaI
All the member banks should bes held
IN Que proportions in their own vaults
and With the reserve banks only. 1t
IS We'll to have one third constantly on
hand one-third with the reserve bank
OF the district and the other third
between the two according
10 the requirement. of conditions which /
are constantly changing. This is
point upon which in our opinion the
trainers of the bin are right.