The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1914-04-18
Assistant Attorney General Ex.
plains Reserve Proposition.
Speech Before Political Science
Club OF Washburn.
NEED WAS ELASTIC MONEY
Funds for Country When De-
mand Was Greatest.
History Of the Early Attempts
ct Question in Country.

One Of the most concise and easily |
understood explanations OF the ma |
tional federal reserve act was brought
about recently when Assistant Attor- |
ney General Hawkes. spoke before the
Political Science club Of Washburn
college. He began his discourse with
flying banks as banks Of deposit.
banks OF discount and banks Of issue. |
He said in part:
Under the law the banks OF dis
count had the right to issue their own
notes which became currency. There
were banks OF issue In all states. State
banks issued currency without super
vision and there was no law regulating
this currency. hence there arose the
expression wildcat currency In 1868,
during the Civil war, congress passed
the national banking law creating ma
ttOnal banks, which authorized the
establishment Of q bank when five
people formed the corporation. They
United States bonds and were allowed
to invest in United States bonds an
amount equal to its stock. BY deposit
Ing bonds with the government they
could issue currency on these bonds.
I'm 1866 congress passed law tax
Ing notes OF state banks 10 per cent
and this drove them out OF existence.
From this beginning banking has de-
veloped into a large business and there
are about 400 national banks. The
total number of banking institutions
are about $4,000. At one time the
government was obliged to pay as high
as IL per cent interest on bonds. but
now it has dropped to per cent.
AT different times the country is in
need of varying amounts OF money to
carry on its business. For example
when the crops are to be moved the
claim is made there is not enough
and when there is not SO great a need
1t Is used in Wall street speculation.
What is needed ID an elastic currency
which will increase as the needs of
business demands and decrease when
the demand is not SO great. 1t Is to
provide for this need that SO much
thought has been expended on currency
legislation. eliminating in the passage
of the federal reserve act which was
signed by the president and went into
effect December %, 1913.
Reserve Bank Organization.
THE Law creates a Reserve Bank
Organization Committee, consisting of
the Secretary of the Treasury. the
Secretary of Agriculture. and the
Comptroller Of the Currency. This
United States into not less than eight
and not more than twelve Districts,
designating in each district q city to be
known as a Federal Reserve city in
which shall be organized a Federal
Reserve Bank.
"A Federal Reserve Bank must have
a capital stock of not less than four
million dollars. Every National Bank
ing association in the United States is
required to be a member. State Banks
and Trust Companies may be become
members on complying with the gen.
eral requirements of the Federal Re-
serve Act, and the National Banking
law. Within sixty days after the pas
sage Of the Act every eligible bank In
the United States is authorized to
signify in writing its acceptance OF
the terms of the act. Within thirty
days after notice has been received
from the Organization Committee that
a city has been designated in which a
Federal Reserve Bank Is to be organ
lied and the district outlined, every
National Bank is required to subscribe
to the capital stock of the Federal Re-
serve Bank. Should any National Bank
fail to signify it's acceptance of the
terms of the act within sixty days,
such bank shall cease to act as a Re-
serve Agent upon thirty days notice,
and should it fail within one year
after the passage of the act, to be-
come a member or fail to comply with
any of the provisions of the act, all the
rights. privileges and franchises Of
such bank under the National Bank
act, or the Federal Reserve Act shall
be forfeited.
These banks have three classes Of
directors, two classes being elected by
| the member banks, known as classes
A and b. Those in class A may be
| bankers and are intended to represent
the banking interests. while those in
class B cannot be officers or in any
| way connected with banking interests.
but must be actively engaged in their
district. in commerce. agriculture. or
some other Industrial pursuit. The d.
! Yertnrs In Ola 80 - fNv =
Federal Reserve Board and none can
| be an sOfficer. director, employee. or
stockholder Of any bank.
| Powers of Reserve Bank.
"The general powers of a Federal
Reserve bank are: First, To adopt a
corporate seal; second. to make con-
tracts: third, to sue and be sued;
fourth. to appoint by its board of di-
rectors, its officers: fifth, to enact by
laws; sixth. to exercise by its board
Of directors and officers, all pow
lers specifically granted by this act, and
such incidental powers as shall be nee
essary to carry on banking business
within the limitations of this act; eight,
upon deposit with the treasury Of the
United States of any bonds of the Uni
ted States. as other national banks. to
receive circulating notes equal in
amount to the par value Of the bonds
under the same conditions az national
bank notes except that the amount II
not limited to the capital stock Of the
Federal Reserve bank. Its powers have
been SO specified and defined that II
i really becomes a bank of bankers and
not bank for the general public.
THE responsibility for the constant
supervision Of what is likely to become
the greater part Of all banking trans
actions In the country, rests upon 9
federal reserve board and great powers
are given to this board. It is com
posed OF seven members, the secretary
of the treasury and the comptroller Of
the currency are two OF these and
the other fve are appointed by thu
President Of the United States. OF the
dve to be appointed. their terms shall