Montpelier examiner. [volume] (Montpelier, Idaho) 1895-1937, 1914-01-02


section OF the country exceeds the
supply of circulating money a regional
bank can secure this new money
from the government and put it into
circulation; but a gold reserve Of 40
per cent. and commercial paper equal
to the full value Of the note must be
held as a reserve behind each note
issued.
This provision is expected to be the
influence that will drive the new
money back into retirement when 1t
is no longer needed.
Clearly Explained.
The following analysis presents the
details of the new law without ad-
herring closely to the technical division
or language of the measure:
At the head Of the system will stand
q federal reserve board at Washing
ton, appointed by the president, and
to consist of the secretary DE- the
treasury, the controller of the Gurren-
cy and five other members. Two of
these shall be expert bankers, but
none shall have banking Affiliations or
own bank stock during their service.
This board will exercise general con-
troll over the entire system.
The temporary Organization com
mittee," or the federal reserve board,
will select from eight to twelve cities
where regional reserve banks shall be
located and will divide the entire
country geographically with these
cities as the centers of districts. All
national banks in a district will be
required to subscribe for the stock of
the regional reserve bank in that dis
trict and to keep portion oil their
reserve there.
Known az "Member Banks"
Local banks will be known as Nmem-
Der banks" because they will own the
stock of the regional reserve bank
of their district. Each member bank
will be required to take capital stock
of the regional reserve bank, equal to
per cent. of the member banks capt.
tai and surplus. The capital of the re-
gional bank will increase or decrease
so that 1t always represents 8 per
cent. of the combined capital and sur
plus of all the banks of the district
that have joined the system.
National banks are compelled to
join and state banks are permitted to
If they bring their reserve require
ments up to the standard set fpr ma
tional banks and submit to national
examination.
Public Can Buy Stock.
Public ownership of the stock Of the
regional reserve banks is permitted
only In case enough banks do not join
in any district to provide a capital
stock for $4,000,000. In such event the
public may purchase the stock in
quantities limited to $4,000 for each
individual, but the voting of this stock
will be placed in the hands OF govern
ment representatives on the board of
directors Of the regional reserve bank.
The regional reserve bank may do
business only with their member
banks, not with the public, except that
certain open market operations" such
as the purchase and sale of gold, gov
eminent, or municipal bonds, and GER
tain forms of bills OF exchange, are
permitted. These banks will make
their earnings from the loans made to
member banks, and from the purchase
and sale of bonds and foreign bills of
exchange. y
Must Pay Up Cash.
Member banks will be compelled to
put up in cash only one-half of their
subscription to the capital of the new
banks, the rest can be called for If
needed by the regional bank Divi-
dends of per cent. will be paid on
this stock to the member banks, and
the stock will be non-taxable.
After these dividends are paid one
half OF the surplus net earnings goes
to create a regional surplus fund, and
when this has reached 40 per cent. OF
the original banks paid in capital
these earnings are to go into the
United States treasury. The balances
of the net earnings are to be paid to
the United States as a franchise tax
With the machinery thus created
! for a new banking system that is sup
! Elementary to the commercial banks
| Of the country, the law provides for q
| gradual transfer of part of the bank
reserves to these new reservoir
banks.
In order not to disturb business con
ditions, or to withdraw too suddenly
|
the large cities, the law provides that
three years may be consumed in shift
ing these balances and that If heces
sary. part of the reserves transferred
to the regional banks may consist oil
commercial paper.
Reserve Required.
The amount OF reserve required
from every bank under the new law
and the place where 1t must be kept
are as follows:
Country banks.-Total reserve requir
ed. ~ per cent of demand deposits
and per cent. Of time deposits. Five
twelfths must be held in the banks
own vaults for two years and four
twelfths after that. For the first year
two-twelfths must be kept in the re
gional bank, increasing one-twelftf
each six months thereafter until i
reaches five-twelfths of the total re
serve For three years the unallottet
part of the reserve may be kept IL
the banks of reserve cities. Aftel
that time it must be kept either IL
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This Age of Luxury.