The Penn's Grove record., 1914-01-02


bills drawn or issued for AGRICULTURAL
purposes or based Oh live stock and
having a maturity no exceeding six
months may be discc~9ted In an
amount to be llmiteds.o a percentage
OF the capital Of the FEDERAL (regional)
reserve bank. to be ascertained and
fixed by the fedora. reserve board"
The eElastr" Element.
The new treasuay notes, which are
to furnish the @elasic' element in the
currency system, and to add to the
country's c~irculatin5 money In time OF
need, will come mo use In the follow
ing way:
The notes viii be printed by the gov
eminent, witt a distinctive style for
each regiona reserve bank. One Of
the three electors named by the fed
eral reserve board for each regional
bank will be known as the federal re-
serve agent for that bank, and a sup
ply of the notes will be placed in his
custody.
Should q regional bank desire to
pay out more money than its cash re-
sources will permit, the law provides
that it may put some of its r~ediscount-
ed commercial paper into the hands
Of the federal reserve agent, and re-
ceived in return the new treasury
notes.
For each note that it puts out into
circulation, the regional reserve bank
must sea aside In gold 40 per cent. OF
the vake Of the note as a guarantee
for its redemption. This gold, with
the . hmercial paper held by the
"fedet reserve agent" is the pro
tectiody behind the new money; but
these btes win also be guaranteed by
the kyvernment and may be redeem
ed i3gold in the United States treas
ury
Reserve Required.
each regional bank, under the act.
must keep 3 reserve Of S5 per cent. Of
the deposits 1t has received. besides
the 40 per cent. gold reserve behind
the treasury notes it issues. Ii the
gold reserve behind the notes falls be-
low 40 per cent. a heavy tax is i'm
posed on the bank, which In turn adds
the tax to the rate it charges member
banks for -rediscounts. This was de-
signed to stop an over-expansion Of
currency. In times OF sudden stress
b fedeEalxeserye board e-an,susnend
these reserve provisions, in order to
furnish quick relief to any commu-
nifty.
One regional bank cannot again pay
out the notes Of another. except under
a heavy tax. These notes are expect
ed to return to the regional banks and
be withdrawn from circulation when
the need Of their use passes.
Take Up Bonds.
None OF the existing forms Of cur
rency except the national bank notes
will be disturbed by the new law. The
United States bonds, now used to Sc
cure the issue of national bank notes,
are to be taken up at the rate OF $780,
100000 a yea by the regional re-
serve banks and new treasury notes
or short term three per cent. bonds
will take their place. National bank
currency is expected gradually to re-
tire.
The federal reserve board will exer-
else final control over the entire OPP
81 alton Of the system. 1t can compel
OLE regional bank to loan to another
ID time Of need; can suspend all re-
stdctions surrounding the reserves
wxich regional banks must hold. and
caa remoye directors Of regional re
se.ve banks whenever 1t is believed
necessary.
Banks In Control.
While the banks retain control OF
tbs boards Of the regional reserve
banks, their connection with the fed
eral reserve board is only through
ali advisory council, made up Of one
representative from each federal re-
saxve district. This council will meet
IN Washington to confer with the fec
e1al reserve board "on general bust.
meas conditions" and to make rec n
mandations and suggestions ice
iug discount rates, note issues. and re-
serve conditions.
An important change in national
banking methods embraced in the new
low will permit all national banks ex-
capt those In New York, Chicago and
81 Louis to make direct loans on i've
ysar farm mortgages up to rs per cent.
OF their capital and surplus. or up to
one-third OF their time deposits.
Another provision in the law per
mits national banks having q capital
Of $1,000. 600 or more to open foreign
branches. Similar authority is given
to the regional reserve banks, the pur
psse being to facilitate the develop