Evening journal., 1914-11-16


by The United Press
WASHINGTON. NOV. lG.-The big
gest bank the world has ever seen,
the Federal Reserve Bank. capital stock
S20. .O0O. 600 900, designed to prevent pan
les and give elasticity TO om currency,
opened its doors for business today. In
twelve cities, Boston, New York, Phil
adelphia, Cleveland, Richmond, Atlante.
Chicago. ST. Louis, Minneapolis, Kansas
City, Dallas and San Francisco. the re-
gional banks formally began their work
IN every city and most every town of
the country. banks formally became
members of the Federal Reserve Bank
system.
The Inauguration of the Federal Re-
serve bank today marks complete
revolution ir Uncle Sans currency sya
tenn. Its builders claim it will kcep
too much money from flowing into Wall
Street to the detriment Of the rest OF
the country. enable ono section of the
country TO better aid the business OF
another section in time OF need,
strengthen credit in times OF stress, ana
thus, by Keeping the money supply |
evenly distributed and more easily |
available, cure the country Of the panic
disease which has been recurring about
every 20 years for the past century.
The way it is going to affect the
average person is something like this: !
If John Smith in Kansas has a wheat
crop that he wishes to move and i'll
Kansas is short cf money. then the |
Federal Reserve Board win aid the Kan
sas City regional bank in getting money
..f IS NI.. al oil
gional banks. II may be that Atlanta
hasn't the money to spare, OF that New
York may be financing foreign ship
ments, or that Boston needs her money
for the mills. but San Francisco may
have plenty of cash TO spare. If so,
| then the San Francisco money will be
used to move the wheat crop in Kan
sas, the entire system of credit being
so co-ordinated and linked together as
to have banks act as a unit in helping
each other. so that there should never
be stringency of currency as has hap
pened many times in the past but that
the entire resources of the whole coun'
try should be ready on demand to helr
any needy section.
The new banking currency act. ap-
proved by the President on December
%, 1913, replaces the system known
as the national banking system, in
augurated towards the end of the
Civil War Under the old system,
the national bank note currency was
based upon government bonds de-
posted in the Treasury and the cur
rency thus issued has been classed
by economists as bonds secured cur
rency. This plan was evolved. not
only to nationalize and to unity the
currency-which had heretofore con-
sisted of notes issued by State banks
, but as well to create a market for
United States bonds, and In this way
: to sustain their value. II was sue
! cessful entirely in the latter purpose,
but it outwore it's usefulness as a
banking system because Of its entire
lack of elasticity
. Every national bank is a member
I of the Federal Reserve Bank system
5 and many State banks took advan-
:. tage of the opportunity to become
I members. The largest district, the
e Chicago district. has 952 member
. banks, and the smallest district, At
4 lanta. has 372 member banks. Each
4 member banks has obtained its mem
bership by subscribing to the Fed
). eral Reserve Bank OF its district IN
the amount equal to six per cent. OF
4 its paid up capital stock and surplus
{ The Federal Reserve bank does moi
do business with the public in the
: sense that banks usually do; 1t may
d better be described as a bank OF
= banks" It is a depository for a Ger
e tain proportion of the reserve Of al
e the member banks. and in addition
e may also be a depository for gov
y ernment funds.
c One of its most important functions
!. is as a bank of issue and redemption
u of currency. for II may secure
t from the Treasury government
c notes known as Federal Reserve
notes, which II is authorized to is
I, sue against commercial paper will
n a minimum gold reserve Of forty pei
y cent. Besides this. Federal Reserve
!. banks are granted certain powers il
n the matter of operations in the opeI
e market such as the purchase of com
e mercial paper. foreign exchange, an'
in a general way are expected TO per
form important functions as clearing
d houses between their member banks
For instance: San Francisco owe
e Atlanta a million dollars on som'
commercial paper; Atlanta owes bos
n ton a similar amount. and Bostol
owes San Francisco a million. b.
y having the board act as clearing
house, these indebtednesses and in
y ter-relationships can be simplihed
just as the clearing house in New
York simplifies the drawing of check
between New York banks.
e Each Federal Reserve banks ma
IS nine directors. three of whom repre-
f sent the member banks, three repre-
le sent commercial. agricultural o
sr other industrial pursuits these 81
s. being chosen by the member banks
and three government directors chos
'e en- by the Federal Reserve Board
e, The whole system is under the Super
S. vision of a central board in Wash
" ington-the Federal Reserve Board
"a consisting of Secretary Of the Treas
S. ury McAdoo and Comptroller of tn
L, Currency Williams. acting ex-ot1ciC
be and five other members appointed b
lie the President and approved by IN
S. Senate, namely. Charles S. Hamiir
governor; Frederic A. Delano, vice