The Anderson daily intelligencer. [volume] (Anderson, S.C.) 1914-1915, 1914-11-12
CEy. Assocint,-l p,cu1

of the operations of the twelve feder-
al reserve banks, to he opened for
business next Monday, was defined for
the first few months OF their existence
in circular issued today by the fed
eral reserve board. For the present
the banks will not exercise all func-
uons given them by Congress. The
board concurring with the bank di-
rectors and government Endorsed this
plan.
Acceptance of deposits OF reserves
from member banks.
Discount of bills of exchange and
commercial paper.
Acceptance OF deposits OF checks
drawn by member banks on any re-
serve bank or member bank in a re-
serve or central reserve city within
their federal reserve districts.
Other powers may be called into
play as the establishment uf safe and
efficient organization permits.
In its circular the board gave the
long expected definition OF CONNER
cial paper. which is to be the life
blood OF the new system, the tasis
for the new federal reserve currency,
and the means through which the ma
TONS circulating medium Is expected
10 meet the expansions and contrac-
tions of trade and industry.
The rate of discount was not an
nounced and probably will not be un-
til Monday. 1t will be uniform in all
banks
The definition of commercial paper
Is broad and relies to q large degree
upon the language of the currency
act. The board declined at the present
time to discuss the question of double
and single name commercial paper.
II did make II clear. however, that
1t had q preference for the two name
sort, and left no room for banks to
doubt that it expected careful inquiry
into one name paper presented for re-
discount.
The circular discussed the condi-
tions that have arisen here through
the war and gave some insight into
the economic changes which might be
expected to result.
1T should be borne in mind" It said
that although our exports are show
Ing gratifying increase, there is still
large cash balance due to Europ-
can countries for which gold may be
demanded. and that a large quantity
OF American securities held abroad
may be returned to the United States
while more than S300,000.00 emer-
gency currency must be gradually re-
tired. No one cant estimate the dura-
tfon OF the war or predict what its
effect will be ssOat TiEancial. or COM
merciai conG!tions3 when peace, shall
be restored. Itsis probable at the end
OF war interest rates in Europe will
be higher than In the .ast aud great
er investment returns will be yield
ed. The tremendous destruction of
property and waste of capital will not
only check the flow of European saw
ings to the United States bat may dis
pose foreign investors ito reutrn the
securities they now hold. Lower mon
ey rates in this country would be like
ly to accentuate this tendency, while
higher interest rates and large in
vestment returns on our side would
| check 1t. @
"Tho function of the federal re-
serve banks is, therefore, of a two
fold purpose. They should extend cred
| 1t facilities. particularly where pres
ent abnormal conditions have created
emergencies demanding prompt ac-
| commodities, and on, the other hand,
they must protect the gold holdings
OF this country insiorder that such
| holdings may remain adequate to meet
demands that may be made upon them
while the most acute statge OF the
recent financial emergency appears to
have passed, the conditions in other
| countries make 1t Unnecessary that the
united States should organize and
make available its own resources, in
! order that 1t may provide for its own
| needs and replace the facilities sud
denly destroyed by the closing OF 30
many OF the accustomed channels of
credit and trade"
In defining commercial naner the
board announced these basic princi-
pies:
That no bill shall be permitted to
re-discount by reserve hank the pro-
ceeds of which have been or are to be
applied to a permanent investment.
Maturlties OF discounted bills should
be well distributed so that reserve
bank should be insG position to lioui-
date third of all its investments
within thirty days. f3c
Bills presented for re-tliscount
should he Essentially self-liquidat-
ing which, the board explained,
means that they SHOULD represent
some distinct step in the productive
or distriSutiye procesa and be OF such
character that it Is reasonably sure
they can be collected Mt maturity
In addition, the hoard requires that
such paper be indorEed by the member
hank Offering 1t for Pediscount; that
the indorser baak waive demand mo-
tice and protest; that such paper be
issued or drawn for agricultural. In
dustrial 0r commereiaf purposes or
the proceeds OF which have been 30
used; that IL Ia the form Of accept
ance3, they must be- based on tram
sactions Involving the importation or
expectation OF goods aziG have ma
turity OF not longer. than .hreo montiis.
Aceeptances must Be Jndorsed by q
memher bank and the total emount