Daily Kennebec journal., 1913-12-23

expected to prevent the too-free use
of the reserves held by the regional
LaRks.
A new form of paper currency is
also provided for, to come out in case
of emergency. and which is expected
to go back into the hands of the gov
ernment when times are normal. These
treasury notes" will be printed by
the government, and issued through
each regional reserve bank, and will
bear the guarantee both of the re-
gicnal bank and the government.
If the demand for currency in any
section Of the country exceeds the
supply of circulating money, a region
al bank can Secure this new money
from the government and put it into
circulation; but gold reserve of 40
per cent, and commercial paper equal
10 the fun value of the note, must
be held as a reserve behind each note
so issued. This provision is expected
to be the influence that will drive the
new money back into retirement when
it is no longer needed.
The following analysis presents the
details of the new law without ad-
herring closely to the technical division
or language of the measure.
AT the head of the system will stand
federal reserve board at Washing
ton, appointed by the President, and
to consist of the secretary of the
treasury, comptroller of the currency,
and five other members. Two of
these shall be expert bankers, but
none shall have banking affiliations
or own bank stock during their ser
vice This board will exercise general
control over the entire system.
The temporary organization COM
mittee," or the Federal Reserve Board,
will select from eight to twelve cities
where Region Reserve Banks shall be
/ located, and will divide the entire
country geographically with these
cities as the centers of districts. All
National Banks in a district will be
required to subscribe for the stock OF
! the Regional Reserve Bank in that
district and to keep a portion of their
reserves there.
Local banks will be known as
member banks" because they will
own the stock of the Regional Re-
! serve Bank OI tIleiI OiotilCl iNo -
member bank will be required to take
capital stock of the Regional Reserve
Bank, equal to per cent. of the mem
ber- banks capital and surplus. The
capital of the Regional Bank will in
crease or decrease so that it always
represents per cent. of the combined
capital and surplus of all the banks or
the district that have joined the sys-
| tenn.
National banks are compelled to
| join, and state banks are permitted to
if they bring their reserve require
ments up to the standard set for ma
tional banks, and submit to national
examinations.
Public ownership of the stock OF
the Regional Reserve Banks is per-
mitted only in case enough banks DO
not join in any district to provide a
capital stock of s4,000,000. In such
event the public may purchase the
stock in quantities limited to $4,000
for each individual; but the voting or
this stock will be placed in the hands
of government representatives on the
board of directors of the Regional Re-
serve Bank.
The Regional Reserve Banks may
do business only. with their member
banks, not with the public, except that
certain open market operations
such as the purchase and sale of gold,
government or municipal bonds, and
certain forms of bills of exchange. are
permitted. These banks will make
their earnings from the loans made to
member banks, and from the purchase
and sale of bonds and foreign bills
of exchange.
Member banks viii be compelled te