Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1914-11-14
DEFINE SCOPE OF
new BANKING ACT
Statement Is Issued by Federal
Board Outlining Plan of
Operation.

| Washington, Nov. 1.-THE scope of
! the operations of the II federal re-
serve banks to be opened for business
next Monday was defined for the first
| few months of their existence in a
circular issued yesterday by the fed
eral reserve board. For the present,
the banks will not exercise all the
functions given them by congress.
| The board, concurring with the direc-
! tors and governors of the IL in recent
conference here, endorsed this plan
of operations:
Acceptance of deposits of reserve
from member banks.
Discount of bills of exchange and
commercial paper.
Acceptance of deposit of checks
drawn by member banks on any re-
serve bank or member bank in a re-
serve or central city within their fed
eral reserve districts.
Other powers may be called into
play as the establishment of safe and
efficient organization permits.
I'm its circular the board gave its
long expected definition of commercial
paper, which is to be the life blood
of the new system, the basis for the
new federal reserve currency and the
means by which the nations circulat-
ing medium is expected to meet the
expansions and contractions of trade
and industry.
The rate of rediscount was not an
nounced. This step probably will not
be taken until Monday. The rate will
not be uniform in all the banks
The definition of commercial paper
is broad and relies to large degree
upon the language of the currency
act The board declined at the pres
ent time to discuss the question of
double and single name commercial
paper 1t did make it exceedingly
clear, however. that it had a prefer
ence for the two name sort and left
no room for the authorities of the
banks to doubt that it expected care
full inquiries into one name paper
presented to them for rediscount
The circular said:
The functions of the federal re-
serve tanks is of a two-fold charac-
ter. They should extend credit ia
cilities particularly where the abnor-
NAL conditions now prevailing have
created emergency demanding prompt
accommodations and on the other
hand, they must protect the gold
holdings of this country in order that
such holdings may remain adequate |
to meet demands that may be made |
upon them. While credit facilities
could be literally extended in some |
parts of the country it would appear
advisable to proceed with caution in
districts not in need of immediate re- |
lief and to await the effects of the |
release of reserves and of the changes
which the credit mechanism of the |
country is about to experience before !
establishing a definite discount policy.
while the most acute stage of the |
recent financial emergency appears TO
have passed, the conditions in other
make it necessary that the
United States should, to the utmost
degree of efficiency, organize and
make available its own resources in
order that it may provide for its own
needs and replace the facilities sud
denly destroyed by the closing of so
many of the accustomed channels of
credit and trade"
In defining commercial paper the
board announced certain basic prin-
ciples. In brief, they are:
THAT no bills shall be admitted to
by a reserve bank the pro-
ceeds of which have been or are to
he applied to a permanent investment.
Maturities of discounted bills the
board holds should be well distributed
so that a reserve bank should be in
a position to liquidate one-third of all
It's investments within 80 days. Bills
presented for rediscount should be
essentially selfliquidating, which
he board explained means that they
should represent some distinct step in
he productive or distributive process
and be of such character that it is
sure that they can be col
ected at maturity