The state herald., 1914-01-02
MAKES CHANGES IN
CURRENCY SYSTEM
New Money Law Displaces 122-
Year-0ld Code.
is FAR-REAcHING IN SCOPE
Most Important Law Relating to f.
nance Passed In Many Years-ts-
sentiai Features Of the Meas
ure Explained In Nonteeh-
nical Language.

Washington, Dec. 23.-The new Dill
Affecting the currency. banking and
nnances of the country Is one OF the
most far-reaching measures relating 70
nnance that have been enacted IN
many years.
The magnitude of the subject, the
diversity of interests affected and the
length Of the debates in both branches
Of congress has to follow the changes
and grasp the essentials OF this highly
technical measure in its important
bearings on money, finance. banking
and the entire range Of fiscal subjects.
public and private. which 1t Affects.
Summary Of the Bill.
With q view, therefore, OF present
Ing 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
bill 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 be
through an organization committee
consisting of the secretary of the
treasury. secretary of agriculture and
controller of the currency.
Banks have 60 days within which to
ole their applications for membership
In the new system, and one years
time is allowed before the government
will compel the dissolution Of any ma
tional bank that refuses to join.
VIII "Take Up the Slack"
The new law will make little direct
change In the operation OF the pres.
ent national banks, except to allow
them to loan a certain amount OF their
funds upon farm mortgages.
Its chief purpose is to add new
piece of machinery to the banking
system that will take up the slack"
during the changing business condi-
tions of each year; that will give the
banks a place to quickly convert their
assets into cash in time Of need. and
that will bring out new federal cur
rency when It is needed. and retire 1t
when money becomes cheap"
Banks are now required to keep a
certain percentage OF their deposits as
reserves" part in cash In their own
vaults and part of 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
II they are paid out to meet demands
the banks are left In precarious con
ditlon.
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 place to which local
banks may rush In crisis and &c,
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
a. reserves.
Under the new system. when q
financial furry comes the banks car
take commercial paper. such as notes
drafts and bills OF exchange. to thes,
RESERVOIR" and secure the use oi
their own reserves. or. n necessary
even the reserve OF other banks. by
depositlng this security.
The new regional banks will re-
eeiye about one-half OF the bank re
serves OF the country. They In turr
will be permitted to loan back to IN,
banks all but 35 per cent. OF thes,
reserves, 80 that In case OF emergenc,
millions OF cash can be brought ou
into circulation quickly.
The banks will have TO pay for thes,
loans. however. as individuals have Z,
pay for loan from any local bank
and this charge is expected TO pr.ven
the too free use Of the reserves hel,
BY tho regional banks.
New Paper Currency.
A new form OF paper currency Il
also provided for. TO come out In cas-.
OF emergency. and which Ia espec,.,
to 10 back into the hands OF N. gov
ernmcnt when times are normal
These "trensury notes" will be- pfinte,
by the government aud issued through
each regional reserve bank. ana vii
bear III. gusrante. both OF the re
gionai bank and OF the government
II the demand for currency In an,
section OF the country exceeds III,
supply OF circulating money a r-siona
bank can secure this new none,
from the government and put II int
circulation. but n gold reserve OF u
per cent and commercial paper oaua
70 the full value OF the note must b,
hold as reserve be.iad each not,
issued.
This provision In expected to be III,
influence that will drive the new
money back into retirement when Il
is no longer needed.
Clearly Explained,