The Meridian times. (Meridian, Idaho) 1909-1938, 1914-01-02

1 Wy tn0 pTcbiuSntI Wilt iindl powers
Of control and supervision over the 4
entire system.
days; provided, that notes, drafts and
bills drawn or issued for agricultural
purposes or based on live stock and
having maturity not exceeding six
months may be discounted in an
amount to be limited to a percentage
of the capital of the federal (regional)
reserve bank, to be ascertained and
fixed by the federal reserve board"
The ELASTIC" Element.
The new treasury notes, which are
to furnish the elastic element In the
currency system, and to add to the
country's circulating money in time of
need, will come into use in the follow
ing way:
The notes will be printed by the gov
eminent, with distinctive style for
each regional reserve bank. One of
the. three directors named by the fed
eral reserve board for each regional
bank will be known as the federal re-
serve agent" for that bank, and sup
ply Of the notes win be placed in his
custody.
Should a regional bank desire to
pay out more money than its cash re-
sources will permit, the law provides
that II may put some Of it's rediscount-
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 set aside in gold 40 per cent. Of
the value of the note as guarantee
FOR It's redemption. This gold, with
the commercial paper held by the
federal reserve agent" is the pro
lection behind the new money. but
these notes will also be guaranteed by
the government end may be redeem
ed in gold In tk1 United States treas
ury,
Reserve Required.
Each regional bank, under the act
must keep a reserve of 35 per cent. of
the deposits 1t has received, besides
the 40 per cent. gold reserve behind
the treasury notes it issues. If the
gold reserve behind the notes falls be.
low 40 per cent 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 ove--expansicn Of
currency In times of sudden stress
the federal reserve board can suspend
these reserve provisions, in order To
furnish quick relief to any commu.
nifty,
One regional bank cannot again nav
out the notes of another, except under
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be withdrawn from circulation when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
VIII be disturbed by the new law. The
United States bonds, now used to SCI
cure the issue of national bank notes.
are to be taken up at the rate of SOS.
ooo'oo0 a year by the regional re-
serve banks and new treasury notes
or short term three per cent, bonds
VIII take their place. National hant |
currency is expected gradually to re-.
tire.
The federal reserve board will eyer.
else nnal control over the entire IN.
81 alton OF The system. II can CONNIE,
DIE regional bank to loan to another
IN time OF need: can suspend ali ra.
stfctions surrounding the reserves
Wslcn regional banks must hold, and
ca3 remove directors of regional re-.
seye banks whenever it is believed
necessary.
hanks In Control.
While the banks retain control Of
.hs boards of the regional reserve
banks, their connection with the fed.
sfai reserve board is only through
sn advisory council, made I'm of ono
representative from each federal RI
'a<ve district. This council will moo.
= tf~"NN1eNh W COAIGT with the far /
nal reserve board ION general busi.
lass conditions" and to make rec Il.
nendatons and suggestions concern.
nE discount rates. note issues. and re-.
eTve conditions.
an important change in national
'anking methods embraced in the new
ow will permit all national banks ex.
sft those in New York, Chicago and
!. Louis to make direct loans on five
var farm mortgages up to s5 per cent
{ their capital and surplus, or up to
he-third Of their time deposits
Another provision in the law per.
aits national banks having capital
s1,O00,000 or more to open foreign
ranches. Similar authority is given
, the regional reserve banks, the pur.
Use being to facilitate the develop
lent of American trade abroad.