The midland journal., 1914-01-02

Meeting tine CuTTSuCyys ueAAnAAee9s - e-r
nances Or the country Is one oI sne
mrst far.reaching measures relating %
fSnance that have been enacte0 y
many years.
The magnitude Of the subject, the
diversity OF interests affected ana tns
Length of the debates In both Drancnss
of congress- has to follow the changes
ana grasp the essentials Of this highly
technical measure in its Important
bearings on money, finance, DankAns
and the entire range Of fiscal suD1ects'
pubic and private, which It affects.
Summary Of the Bill.
with view. therefore, Of present.
ang succinctly and in non-technical
language an epitome Of the salient fea-
tures Of the measure as finally framed,
the following summary Is given OF the
bin as a whole and OF its principal de-
tails:
Generally speaking, the first steps
TO be taken to bring into operation the
nations new financial system will pc
through an organization committee
consisting OF the secretary Of the
treasury, secretary Of agriculture ana
controller OF the currency.
Banks have so days within which 20
file their applications for membership
iii the new system. and one years
time is allowed before the government
win compel the dissolution Of any ma
sional bank that refuses to Join.
VIII "Take UP the Slack"
The new law will make little direct
change in the operation Of the pres
eht national banks, except to allow
thbm to loan a certain amount Of their
lnds upon farm mortgages.
Its chief purpose is to add new
iece of machinery to the banking
system that viii take up the slack
during the changing business condi-
tions of each year; that will give the
banks aSplace to quickly convert their
assets into cash in time of need, and
that will bring out new federal cur
xency when 1t is needed, and retire IT
when money becomes cheap"
Banks are now required to keep a
certain percentage of their deposits as
reserves partt In cash in their own
vaults and part 3of which may be re-
deposited In the banks Of New York,
Chicago, St Louis and other designat-
ed cities.
In times Of sudden financial de-
mands. when banks have loaned up to
the full limit of their resources, these
reserves furnish little relief, because
If they are paid out to meet demands
the banks are left In q precarious con-
dition.
Basic Principle Of Law.
The basic principle of the new law
Is to get these reserve funds out into
circulation when necessary without
lessening the safety of any bank, and
to provide a place to which local
banks may rush in crisis and get
cash for the prime commercial pa
per- they hold in their vaults.
This Is to be accomplished through
= chain Of regional reserve banks, or
reservoirs Of reserves in which all
banks shall deposit stated part Of
the money they are required to hold
as reserves
Under the new system, when a
financial furry comes the banks can
take commercial paper, such as notes,
drafts and bills Of exchange. to these
reservoirs. Z and secure the use Of
their own reserves, or, il necessary,
even the reserve Of other banks, by
f~depUsitiEfgg this security.
The new regional banks will re-
Ceive about one-half of the bank re-
serves Of the country. They in turn
will be permitted to loan back to the
banks all but 35 per cent. of these
reserves, so that in case Of emergency
millions OF cash can be brought out
into circulation quickly.
IIpe banks will have to pay for these
however. as individuals have to
pr d loan from any local bank,
us charge Is expected to prevent
y the TOD free use of the reserves held
BY theregional banks.
New Paper Currency.
A new form of paper currency is
also provided for, to come out in case
rof emergency, and which Is expected
to go back into the hands of the gov
ernment when times are normal.
These treasury notes. win be printed
by the government and issued through
each regional reserve bank, and will
bear the guarantee both Of the re-
gional bank and Of the government.
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, the controller OF the curren-
cy and I'VE other members. Two Of
these shall be expert bankers, but
none shall have banking Affiliations or
own bank stock during their service.
This board will exercise general con-
troll over the entire system.
The temporary Organization com
mittee,p or the federal reserve board,