Newark evening star and Newark advertiser., 1914-10-14
NATIONS BANKS
ARE SUPPORTING
RESERVE BOARD
So Declares President of Amer
ican Bankers Association
at Convention.

RICHMOND. Va, Oct. 14.-The
fortieth annual convention of the
American Bankers Association,
which met here today. brought the
American bankers together in large
numbers for the first time since the
Federal Reserve. act was passed by
Congress,
Arthur Reynolds, of Des Moines,
president of the association, devoted
the greater part of his opening adj
dress to the Federal Reserve scheme.
He gave assurances that the country
might rely upon the bankers to do
their part toward making the system
a success, Notwithstanding their oppo-
sition to it in just the form adopted.
lie noted some of it's fine points and
its weaknesses, and advised bankers
how to adjust themselves to the
change.
National bankers had submerged
their opinions, he said, and We're cor
daily coming to the support of the
Federal Reserve banks, as required
by the act, and a limited number of
banks and trust companies organized
under State laws had come into the
system, but not to the extent neces-
sary to warrant the anticipation of
that complete unification of our entire
banking system so long desired"
The rule of the banker must be
safety first" he said, in considering
the difficulties the Federal Reserve
banks would have in keeping i'm
pounded all the means necessary to
relieve sudden distress, and at the
same time to rediscount freely enough
to avert contraction of credit. 1T will
require rare wisdom indeed" he said,
ito meet so contradictory situa-
ton"
If there were any assurance that
the Federal Reserve banks would hold
largo deposits, aside from those fixed
by provisions of the act, he thought
there m.gAt be a workable margin,
but he saw no inducement for mem
Der banks to keep active accounts
with the Federal Reserve banks be-
yond the amount of the required re-
serve. Their commercial relations
with the other banks of the country
will always be more productive, and
at the same time conform with the
natural trend of buGiness, he said.
He continued:
with the practicability of the plan
HQnllIIeu, lDe QucSliOH lllcil lAeilhi oiiJ
propounds itself to those engaged in
banking is, how will its operation af-
feet the profits of their business?
Reasoning from the fact that the
Federal Reserve banks will not enter
into competition for the commercial
business of the country, and for the
reason that they will be obliged to
quote a rate of discount at least as
high, if not higher, than commercial
rates, in order to maintain the re-
sources necessary to enable them to
extend help in need, / believe the con-
cIusion is warranted that in the fu-
ture. as in the past, rates of interest
will be governed by the law of supply
and demand.
''The Federal Reserve banks have
no way of increasing the supply of
actual money in existence; IL they
had, they might reduce rates. Their
most efficient help in that connection
may at times result from raising rates
to stabilize conditions.
1T is only necessary to cite the fact
that in those countries which depend
upon central banks to maintain the
stability of conditions which in their
experience has prevented those panics
to which we have been subjected, we
find these central banks maintaining
a discount rate always higher than
the commercial rate in the same
country.
1.-THE experience in Germany has
been that the advice of its council in
the conduct of the Reichs bank is
rarely refused and generally followed.
The fundamental features of the bill
organizing the Federal Reserve banks
are in the main sound, and the eStab-
lishment of the advisory council may
furnish the balance. without which
the system might be deficient.
None more than the bankers have
for years been earnestly demanding
some change in our former system,
and ii may be confidently predicted
that their efforts to make it success
ful win be at the command of those
in charge of its operations"