The Meridian times. (Meridian, Idaho) 1909-1938, 1914-01-02
MAKES CHANGES IN
CURRENCY SYSTEM
New Money Law DispIacss l22-
Year~0Id Code.
Is FAR-REAcHlNG IN SCOPE
Most Important Law Relating 70 FL
nance Passed In Many Years--Es-
ssntial Features Of the Meas-
IRE Explained in Nontech-
nIcsi Language.


Washington. Dec. 23.-The new bill
affecting the currency. banking and
finances OF the country IL one OF the
most far.reaching measures relating 70
finance 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 It's important
bearings on money, finance, banking
aud the entire range OF fiscal subjects,
public and private, which II affects.
Summary Of the Bill.
With vlaw. therefore, OF present
Ing succinctly and In non-technlcal
language an epitome Of the salient fea-
lures OF the measure as finally framed,
the following summary Ia given OF the
bill as whole and OF It's principal de-
tails:
Generally speaking, the first steps
10 DO taken to bring into operation the
uations 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 so days within which to
file their applications for membership
IN the new system. and one years
time IL allowed before the government
will compel the dissolution OF any ma
tional hank that refuses to Join.
VIII "Takc Up the Slack"
THIS new law will make little direct
change In the operation OF the pres
nt hational banks. except to allow
theta 70 loan certain amount OF their
funds upon farm mortgages.
Its chief purpose IL to add new
piece of machinery to the banking
system that win take up the slack"
during the changing business condi-
lions OF each year; that win give the
banks a place to quickly convert their
assets Into cash In time OF need. and
that Will bring out new federal cur
renoy when II Is needed. and retire II
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. Sc. 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
Il they are paid out to meet demands
the banks are left in precarious con.
dition.
Basic Principle Of Law.
The basic principle of tho new law
IL TO get .hese reserve funds out into
circulation whom necessary without
lessenliig the safety OF any bank, and
TO provide place to which local
banks may rush In crisis and get
cash for tho prime commercial pa
per" they hold in their vaults.
This Is to DO accomplished through
q chain OF regional reserve banks, or
reservoirs OF reserves In which all
banks shall deposit n stated part OF
the money they are required to hold
as reserves.
Under the new aystem. when
financial furry comes the banks can
take commercial paper. such as notes,
drafts and bills Of exchange. 70 these
reservoirs" and secure the use OF
their own reserves. or, II necessary.
even the reserve OF other banks, by
depositing this security.
The new regional banks will re-
ceive about one-half OF the bank re.
serves Of the country. They In turn
will be permitted to loan back to the
banks all but IS per cent. Of these
reserves. SO that In case Of emergency
millions OF cash can be brought out
into circulation quickly.
The banks will have TO pay for these
loans. however, as individuals have to
pay for loan from any local bank.
and this charge is expected to prevent
the too free use OF the reserves held
by the regional banks.
New Paper Currency.
A new form of paper currency Is
also provided for. to come out In case
Of emergency, and which Is expected
TO go back into the hands OF the gov
eminent when times are normal.
These treasury notes" viii be printed
by the government and issued through
each regional reserve bank. and will
bear the guarantee both OF the re-
gional bank and Of the government.
II the demand for currency In any
section Of the country exceeds the
supply Of circulating money regional
bank can secure this new money
from the government and put it into
circulation: but gold reserve OF 40
per cent and commercial paper equal |
TO the fun value of the note must be
held as reserve behind each note
Issued.
This provision is expected TO be the |
influence that will drive the new
money back into retirement when It
Is no longer needed.
Clearly Explained.
The following analysis presents the