Evening star. [volume] (Washington, D.C.) 1854-1972, 1914-12-08
FEDERAL RESERVE ACT
MAY SOON Be AMENDED
Bankers Consider That System Will
Be Changed to Admit Redis-
count Of Securities.
As a Means to Enlarge Activities
and to Increase Business in
Normal Times.


General opinion in financial circles
favors the probability of an amend
ment or amendments to the federal re-
serve act at the present session of Con-
gress.
1t Is within the powers of the reserve
board to mako a ruling that member
banks shall borrow only from their re-
gional reserve bank, but such a ruling
could not be made effective with the
present limitations on the dIscounting
powers of the reserve system without
injury to bankers. Only strictly COM
merciaI paper is acceptable.
But banks have many collateral loans
secured by bonds and stocks that are
actually more desirable than much Of
the so-called strictly commercial paper
in that they are readily salable and
that the loan is fully secured. frequent
ly with large equity. whereas CONNER
cial paper is not always as safe.
This class Of business, barred because
1t savored Of Wall street. is currently
frequently the security is high-grade
municipal bonds or the stocks or bonds
OF some local enterprise or utility.
In our own city Capital Traction So are
worth los, Gas IS 104 and many other
one Of these is sufficiently good collat-
eral back of a note for the latter
to be rediscounted. Similar conditions
might be cited in every city of size
and many towns and villages.
II the reserve system Is to make tho
ruling referred to. regarding borrow
ing only from regionals, this class of
securities must be made acceptable
II looks as II the ruling might be ex-
system as constituted can be made to
employ the cash in vaults and to make
the cumulative dividends promised to
subscribers to the capital stock.
AS at present. although the system
Is but yet few weeks in operation,
the reserves carried and the capital
stock locked up does not appear to be
available for general use, save in the
restricted way noted.
bankers meet this problem every
they report loanable funds practically
out But" says the would-be bor-
rover, you can rediscount this note
IN the reserve system, can't you?' mo,
not not this note" is the frequent answer.
You do not require the proceeds for
strictly commercial purposes"
II is Tor the reasons named that some
or the leading local bankers consider
tnat amendments are sure to be under
taken at this session of Congress-.
Then. too. it is considered that These
matters and probably others will have
10 De undertaken in the way of amend
ments to make the system attractive to
the savings banks. state banks and
trust companies. that they may be in
duced to enter the system
Ihere must be amendments before
trust companies can avail themselves
TO any extent Of the rediscount priyi-
leges. for the majority of these cor
porations will not make loans save on
collateral security. stocks and bonds
always preferred because of their H.
possible. at price
The Cotton Pool,
w. j. Flather. chairman of the Clear
ing House Association, visited the local
banks this morning securing official
signatures. and with seal of each bank
attached, to the cotton pool amended
agreement. This document, differing in
no essential point from the original,
bears date November 80, 1914
This doesn't look as il the cotton pool
was off and the relief of bankers in
cotton states left to Congress, as
stated in morning paper.
1t is within the probabilities that
the activities of the pool may be re-
stricted. but the local action indicates
that it will be used to give whatever
relief work is to be done in this di-
rection.