Manchester Democrat. [volume] (Manchester, Iowa) 1875-1930, 1913-12-31
| AN ACT Of 81 NAN iAL tDELavER

comparable IN financial Importance to
the Nation only. TO the creation Of
the misunderstanding system during
the civil war. 4. a ia 4. 4
The three great reforms accomp-
lished by this bill are:
l. "A true and elastic national cur
rency, based not upon Government
fiat or Government debt but upon
the commercial resources of 100, OO0-
900 people. This currency is defin-
itely established on the gold stand
ard. .s IS
2. The complete separation Of the
organized banking system Of the coun
try from the New York Stock Elk
change and Wall street gambling.
8. The destruction Of the central
lied control Of money and credit
the so-called Money Trust-and the
extinction of a centralized bank,
both in principle and practice III
The Federal reserve banks to be
created by this act will disturb in
no wise the commercial banking oper
atoms now conducted by 1900 nation.
al and $4,000 State banks and trust
companies. They will disturb in no
wise the identity and independence
Of these banks
The. reserve banks will be banks OF
bank banks owned by banks, con.
Quoted primarily by banks and do.
ing business only with banks. They
will be what the name implies bankI
!! TO mobilize and guard and better
utilize the reserves Of banks
Not less than eight nor more than
twelve cities will first be designated
by committee named in the bill
for the locations OF the Federal re-
serve banks. These cities will be
representative Of as many sections
of the continental United States,
which sections will be marked off as
Federal reserve districts. whose
lines will have regard to the con
venience and customary course OF
bus mess. n s5 {s
National banks within each Gis.
| trict will be required to take stock
and carry reserves in the Federal re.
serve bank Of the district or sur.
render their charters. State banks
can come in or stay out as they
please. ~ Subscribing II or member
banks will buy shares in the reserve
banks to the amount Of e per cent
OF each member banks capital and
surplus. This stock will pay s pei
cent. dividends. All other earnings
will go to surplus and then to the
| Government, which will deposit its
free funds without interest in I the
reserve banks. a !s ss5:F
The great particular eyil> first cor
rected by this act relates to the re
deposited and centralized reserves o.
country banks. The country nationa
bank is now required to maintain 81
in gold, silver or greenbacks ('slaWfu
money'') for every $500 of deposit
liabilities or credits against which
checks are drawn by its customers.
But SO of the SIS may be, and is
sent to a New York City or some
other central reserve city bank This
bank in turn uses this money as par
Of its own reserves to create foul
times as much demand credit already
put out by the country bank. This
is the .::pyramiding" of reserves
which has caused so much Wal
street speculation and panic and
severity of panic. @
Under the new system the coun,
| try bank will be obliged to maintain
SIP in cash reserve on every 500 Of
| demand deposits or credits, of which
81 must be in it's own vaults; IS in
gold must be kept with the Federal
reserve bank, and the remaining SO
may be carried either with the re
serve bank or it's own vaults.
AS matters now stand with this
typical bank it can in times of
stress scramble for its reserve money
in New York, but usually cannot get
it. It is tied up in loans on Stock
n OF ri 4 ioop he
released without causing a. stock:
market panic and then general
bank and business collapse,
Under the new system, however,
the reserve money held In the re-
be recalled or scramb led for in time
Of stress. But it, sis open to emer-
gency use and in one way most de
sired at such a time by the mem
Der bank through issues Of circulat-
ing notes bearing the Endorsement
Of the United States and given out
to the member bank, under the pro-
lection of a 40 per cent gola reserve
on such prime notes and bills OF ex-
change Of early maturity as the mem
Der bank has to put up. Nh.
These circulating notes cannot
issue on bills protected by Stock Ex-
change collateral. They COMP etely
exclude Wall street speculation from
the next credit system. Banks ac-
commodating Stock Exchange gam
bling can use only their own money.
and not the money Of the. country at
large, as now. Al. ii Z
But is there not still a pyramid
ing Of reserves under the new sys-
tenn through circulating notes instead
OF deposit credits? Here is the whole
crux of the question of initiation.
There is such a pyram1ding," but not,
all the time, as now; not easily at
any time save when money is tight
as in the crop-moving season; and
then only to the extent Of two and
one-half times the reserve held in
the Federal reserves now carried for
other banks in our central reserve
cities. &c.. VI 4, 81
1t is necessary, moreover, to re-
member that there is no essential diff
ference between bank credit given
to business man on his discounted
note as deposit to ~be checked
against and bank credit given to
him in the form of circulating notes |
the more conveniently to pay wages.
Nations and businesses within ma
lions differ in preferences for the one
or the other form of bank credit. In
England and the United States the
check-deposit form is preferred, part
y by compu,s ion. In France and Ger
many the circulating note form is
preferred.
This act of Congress opens to bust
less in the United States an exercise
# the preference for the circulating
note form, which is especially need
I'd by farmers. To say that this
means initiation is to say that bust
less men are going to double up on
heir debts to banks by using the
wo forms of credit in full instead
# yielding the one in whole or part
preference for the other.
But if business men were so reck-
essly disposed, this new system
provides the restraint of the self
t-y L