Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1914-11-20
10 More Hard Times With New Bank Law

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This new system does not displace
the system we now have, but 1t super
imposed upon the present organiza-
ton of banking and credits. This new
institution will do business only with
the government and the member
banks which subscribe to its capital
stock. II is established to give sta
bility TO the commerce and industry
of the United States, to prevent finan-
cial panics, to enable men of good
credit everywhere to secure money
at all times for their legitimate needs.
and TO put an end to the use of bank
reserves in the financial centers for
stock exchange transactions.
To attain these ends the United
States is divided into IL districts, in
each of which will be established a
federal reserve bank, with a capital
stock equal to per cent OF the capt.
tai and surplus of all the banks in
such district Each regional reserve
bank will be conducted by a board of
nine directors. six elected by the
stockholder banks and three chosen
by the federal reserve board. The
entire system is under the supervis-
DRY control of this federal reserve
board of seven members. appointed by
the president. at the head of which is
the secretary of the treasury. The
members of this central board will
hold office for 10 years and receive
salary of $4,000 per year.
Law Must Be Amended.
Each national bank is required to
become a member of the federal re-
serve system. State banks may be-
come members if they choose. No
state bank in Iowa has joined the sys-
tenn. and will not be able to do SO I'M
til the state law is amended so as to
permit such action.
The state of Iowa is a part of the
Chicago district, and so our interest
naturally turns to the federal reserve
bank of Chicago, which starts out with
a capital paid up in gold OF almost
S12, 500. ZOO. When this bank opens
for business tomorrow it will have in
its vaults in gold almost S36,000,000,
this amount being made up of the cap
ital stock above referred to, plus $685.
100000 which member banks have
deposited with it as reserves, under
the terms of the law.
lie tulCdEO Ddlh Will Dt TIE
direction of the following officers and
directors. Governor, James B. Nc
Dougal: deputy governor, Charles R.
Mckay; cashier. Bentley G. McCloud;
directors-C. II. Bosworth. Chicago;
w. L. McLaIlen, Columbia City; E. T.
Meredith. Des Moines; G. NJ. Reynolds.
Chicago: J. B. Fergan, Chicago; E. L.
johnson, Waterloo. Henry B. JOY. De-
trcit; NJ. B. Hutchinson, Ottumwa and
A II. Vogel. Milwaukee.
Let us examine in detail the meth
DDS by which this new system is to
correct the defects in the old; and.
what is of more direct interest to the
business man and the farmer. how its
benefits are TO be made available to
the borrower when he is in need of
credit.
Power of Rediscount.
The one great new power which this !
federal bank will possess, is the pow
er of rediscount. AS a matter of fact |
the federal reserve bank of Chicago |
is in reality a bank of discount for the /
22S national banks in this district. |
The federal bank can accept from
member banks for rediscount. COM
mercial paper of q certain standard, |
and against this paper can issue cur
rency.
SUPPOSE a member bank in Daven-
port desired $4,000 of additional cur
rency at crop-moving time; or sup
pose this same bank desired $4,000 |
Of additional credit to meet a legiti-
mate demand for loans. The Daven-
pert bank could take $4,000 of the
notes of it's customers,
place the banks endorsement on the
back of them, send them to the fed
sral reserve bank of Chicago and re-
,eive the amount either in currency
,r in the form of a credit with the
federal bank.