Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1914-01-07
aEMAToR EXPLAINS TO RETAIL
MERCHANTS ACCOMPLISH.
MENTs OF STATUTE.
INTERESTING insight INTO
WORKINGS OF NEW LAW
Greater Elasticity in Currency System
PosaibIs-National Banks Compelled
to Deposit Part Of Reserves IN Re
aionaI Banks, Along With Govern
nnent's Surplus Funds.

Des Moines, Jan. 1.-THE new bank
ing and currency measure and the ell
feet it will have on the financial sSs-
tenn of the United States could hardly
have a more lucid or more Satisfying
exclamation than was given it by Sena-
ator Cummins last night III an ADDRESS
before members Of the Des Mones Re-
tail Merchants Association meeting Tor
their annual banquet.
In previous addresses since his re-
turn to Des Moines the senator had
touched upon the new law, he had eN-
planned briefly the main features or It.
and he had announced the reasons he
had for voting against it. Last night,
however, he described the law in de-
tail. in conjunction with an elaborate
but easily understandable exposition OF
the general working Of the banking
system Of the country, analyZtnS It's
provisions in so logical and interesting
a manner that the audience of over zoo
men followed his speech with the clos
est interest and, apparently, with the
keenest understanding and apprecia-
ton.
Our Present System.
ITO begin with l wish to discuss
some of the details OF the system We
now have Our currency is made up
of gold, Silver. nickel ard copper coins,
gold and silver certificates, bank notes,
and greenbacks, and negligible
amount of short time treasury notes.
-
imately $500, 100000 sum almost in
conceivable to the human mind. In
many respects 1t Is the best and most
plentiful currency in the world. The
United States has more money in pro-
portion to population and in proper
ton to its business than any other
country.
TT has long been recognized that we
need certain changes to make our
money perform at all times the func-
ton that money Is intended to perform
in the. Commercial world.
There are in the United States some
$4,000 banks. Tonight we are dealing
mainly with the 1000 Of these that are
national banks They have a capital
of a billion dollars and a surplus Of
three-quarters as much more. Their
deposits are between six and seven bill
lions
Country banks are required to
maintain in their vaults or in the banks
of reserve cities 10 per cent of their
deposits; banks in reserve cities to
keep in their vaults or in banks Of the
central reserve cities 20 per cent of
their deposits. and banks in the central
reserve cities to keep in their vaults
IS per cent Of their deposits.
Two Great Defects.
''In this system there are two great
defects. First Of ali, there is too great
rightly in the volume Of the currency.
The currency can not expand. The
amount of green cks is limited by
law, the certificates can not be in
creased in volume except by deposit Of
the gold or silver to back them, and the
national bank notes can not expand be-
cause they are based on the per cent
bonds Of the United States which the
banks must purchase and deposit in
the treasury as security for their notes.
AS a result Of this condition. the cur
rency is rigid instead Of being respon-
sive to the business or credit of the
country.
In the second place, there is not
proper distribution of the reserve. The
ling the reserves Of the country in
. New York City, because there they can
be loaned on call. When stringency
arises, or the people become uneasy,
these loans can theoretically be
called in. but in actual practice it is
very difficult to do this without great
sacrifice on the part of the borrow
ers. The country banks under such
conditions have difficulty in getting
their deposits back when they need
them. 1t Is necessary that way be
had Of distributing the reserves amons
a number of cities.
Deals With Committee.
CAS- I take up the new banking ant
currency law 1 will call attention frs
to the organization committee. 1t Is
composed of the secretary of the treas
ury, the secretary of agriculture ant
the comptroller Of the currency. They
have the duty Of organizing the fedora
reserve banks. They will divide tht
country into from eight to twelve
regional districts, each of which viii
have federal reserve bank. The mini
mum capital of each bank is to b.
~ 100000 and there will be no maxi.
mum.
Each ma tional bank in the distric
IS cCmpeleQ under pain OF forfeiture o
its charter to contribute per cent OF
q its capital and surplus to the fedora
reserve bank and receive like amour
of the institutionis capital stock. !
must signify within sixty days wheth
e: {. vii! accept CT reject the p-cpcsi
ton.
State Banks May Enter.
Every state bank whose capita
would warrant it's organization as
national bank is permitted to subscrib
an amount equal to 6 per cent of tn
stock, the public may subscribe for tn
stock. II all Of these should refuse
then the government must take tn
stock and pay for 1t out of its treasury
1.-THE stock bears cumulative divi
dends, providing they are earned, o
per cent. None Of the stock excep
that Of the banks has voting power.
Each federal reserve bank has min
directors. six to be elected by the bank
and three to be appointed by the gov
erfment federal reserve board. Thre
Il; n u the men elected by the banks MUS
be In some other business than bank
ing.
Tie federal reserve banks hay
ano0nP IN buv 1,ef cent bonds ~ III