Middletown transcript., 1914-01-03

viii 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 a portion Of their
reserves there.
Known as "Member Banks"
Local banks will be known as mem
Der banks" because they viii 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
6 per cent. Of the member banks CAPT
tai and surplus, The capital of the re-
gional bank win increase or decrease
SO that it always represents 6 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 for ma
tional banks and submit to national
examinations.
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 of 100000. 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 banks 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
ernment, or municipal bonds, and GER
tain forms Of bills cf 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.
Must Put 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 regional surplus fund, and
when this has. reached 40 per cent of
the regional 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 new banking system that is sup
Elementary to the commercial banks
Of the country, the law provides for
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 heavy deposits of country banks in
the large cities, the law provides that
three years may be consumed in shift
ing these balances and that, If neces-
sary, part of the reserves transferred
to the regional banks may consist of
commercial paper.
The amount of reserve required
from every bank under the new law,
and the place where it must be kept,
are as follows:
Country banks-Total reserve requir-
ed, II 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-twelfth
each six months thereafter until it
reaches ive-twelfths of the total re-
serve. For three years the unallotted
part of the reserve may be kept in
the banks of reserve cities. After
that lime it must be kept either in
the country banks and vaults or in the
regional reserve bank.
Reserve city banks-Total reserve
required, Is per cent. of demand and
5 per cent Of time deposits. Six-tif-
teenths must be kept in the banks
vaults for the first two years and five
f1fteenths after that time. Three-fif-
teenths must be kept in the regional
reserve bank for the first year, in
creasing one-hfteenth every six
months thereafter until it reaches six
fifteenths. For three years the un-
allotted portion of the reserve may be
kept in other banks, in its own
vaults, or in the regional bank; after
that time in one of the latter two
places.
Regional Reserve Banks.
These immense funds of reserves
from member banks" together with
government moneys, will make up the
deposits of the regional reserve banks.
Each of these banks viii be admins