Saturday news. (Watertown, S.D.) 19??-19??, 1914-01-01
CURRENCY LAW
Continued From Page /.

May Discount Acceptances.
The regional banks may also dis
count "acceptances based on the i'm
portation or expectation of goods
The new treasury notes. which are
to furnish the elastic" element in The
currency system, and to add to the
country's circulating money in time
of need, Will come into use in the fol
lowing way:
The notes will be printed by the
government. with a distinctive style
for each regional reserve bank. One
of the three directors named by the
federal reserve board for each region,
al bank Will be known as the federal
reserve agent" for that bank, and a
supply of the notes will be placed in
his custody.
Currency is Guaranteed.
Should a regional bank desire to pay
out more money than its cash resour.
ces will permit, the law provides that
1t may put some of its rediscounted
commercial paper into the hands of
federal reserve agents. and receive
in return the new treasury notes. For
each note that it puts into cicula-
ton the regional reserve bank must
set aside in gold, 40 per cent of the
value OF the note as a guarantee for
its redemption. This gold, with the
| pn ~ ~, n ,.nipl 80 ~ Il1l r.. H. .,c-I- .1
reserve agent" is the protcctiCn be
hind the new money; but these notes
will also be guaranteed by the govern
ment and may be redeemed in gold
at the United States treasury.
Tax Low Reserves.
Each regional bank, under the act,
must keep a reserve of 35 per cent in
the deposits it has received, beside
the 40 per cen gold reserve behind
the treasury notes it issues. If the
gold reserve behind the notes fall be
low 40 per ent a heavy tax is i'm
posed on the bank, which in turn adds
the tax to the rate it charges member
banks for r~ediscOunts. This was de
signed to stop an overeXpansion of
currency. In times Of sudden stress
the federal reserve board ear sus-
pend these reserve povisions in order
TO furnish quick relief to any com.
munity.
One regional bank cannot again pay
out the notes Of another except under
a heavy tax. These notes are expect
ed to return to the regional banks
and be Withdrawn from circulation
Nhen the need for their use passes.
Retire Eank Currency.
None of the existing forms of cur
rency except the national bank notes
viii be disturbed by the new law. The
States bonds, now used to Sc
the issue Of national bank notes.
are to be taken up at the rate of
,25, coo, 600 a year by the regional re-
banks and new treasury notes or
hort term 3 per cent bonds will take
heir place. National banks currency
s expected gradually to retire.
Board Has Final Control.
The federal roserve board viii eN-
final control over the entire
'peration of the system. 1t can com-
eel n regional bank TO loan to an
ther in time Of need; can suspend
I'll restrictions surrounding the re-
erves which regional banks must
Iold, and can remov directors of re-
ional banks whenever it is believed
Necessary.
While the banks retain control OF
he boards of the regional reserve
,anks, their connection with the fed
reserve beard is only through an
council, made up of one rep
esentative from each feredal reserve
This council will meet in
Washington to confer with the federal
.eserve board ION general business
conditions" and to make recommends
ions and suggestions concerning dis
,ount rates. note issues and reserve
conditions.
May Open Foreign Branches.
An important change in national
methods, embraced in the
lew law, will permit all national
banks, except those in New York, Chi
sago and st. Louis, to make direct
on lvayear farm mortgages,
Up to rs per cent of their capital and
surplus. or up to one-third of their
ime deposits. Another provision in
The law permits national banks having
4 capital of 100000 or more to open
branches. Similar authority
is given to the regional reserve banks,
the purpose being tG facilitate the de-
Of American trade abroad
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HIS STOMACH TROUBLES OVER.