The Washington herald., 1914-10-27
new BANKLAW
EFFECTIVE NOV. IS
Secretary McAdoo Decides on
Date When Reserve System
Becomes Operative.
RELEASES 100000, 900
Statement Issued by Head of Treas
ury Department Shows He Hopes
to Aid the South.

Announcement was made yesterday by
Mr.. McAdoo. Secretary Of the Treasury.
that the new banking system win be-
come operative throughout the United
States November 1s On that date the
twelve Federal reserve banks located by
the organization committee in New York,
Chicago. Philadelphia, Boston, st. Louis,
Richmond, San Francisco, Cleveland.
Kansas City, Minneapolis, Atlanta and
Dallas, will be established. At the same
time the new reserve requirements for
national banks as prescribed by law will
become effective, thus releasing. accord
ing to Secretary McAdoo, more than
500, 100000 of reserve money and increas-
ing the credit facilities of the banks Of
the United States by that amount
In the opinion Of Mr.. McAdoo the early
establishment OF the new banking system
will ease up the money situation in the
United Seates, strengthen its credits, and
put the country in better shape to cope
with the problem involved in the indebt-
edness Of this country to Great Britain.
Against Advice of Directors.
In directing that the new reserve sys-
TEN should be instituted November l6
Secretary McAdoo acted contrary to the
wishes Of the directors OF the reserve
banks expressed at the recent E=eeting
held here
In a statement issued last night an
nouncing November l6 as the date upon
which the Federal reserve act should be-
| come effective, Secretary McAdoo ex-
planned that he was persuaded to his
| decision because OF the emergent condi-
| tions in the South brought on by the in
ability Of that section to market its
cotton. The Federal reserve act imposes
on the Secretary of the Treasury the
duty Of deciding when the new system
shall become effective. After consideTa-
ton Of all the facts, Secretary McAdoo
decided to select November l6. despite the
vote Of the reserve banks directors
against that date.
Statement of Secretary McAdoo.
In his statement Secretary McAdoo said
in part:
THE Federal Reserve act imposes upon
the Secretary OF the Treasury the duty Of
announcing 'in such manner as he may
elect the establishment Of a Federal Re
serve bank in any district In the dis
charge Of that duty l have determined 10
announce on the 18th day Of NOvember.
1914, the establishment OF the Federal
Reserve banks in all the Federal Re-
serve districts. On that date the new re-
serve requirements for national banks, as
prescribed by the act, will become opera
tive.
II am impelled to this decision particu-
larly because OF the emergent conditions
In the South and the confident belief that
the prompt opening Of the reserve banks
will be very helpful to the cotton situa-
ton and to general business, in all sec
tons OF the country.
Hope in Revenue Blu.
"As the result OF the enactment of
the war revenue measure the parity be-
tween receipts and disbursements OF the
Treasury will soon be happily restored.
This will make 1t possible for the Treas
ury to render still greater service than
II has already rendered in helping the
financial situation in the South. and in
other parts OF the country where the
need has appeared. The prompt open
ing OF the Federal reserve banks will
make the assistance of the Treasury
dOubl ypOwerful because the Federal Re
serve act authorizes the Secretary OF the
Treasury. in his discretion, to deposit a
large amount OF the moneys held in the
general fund in the Federal reserve
banks, and to require such banks 10 act
as fiscal agents Of the United States; and
also, in his discretion. to deposit the
revenues Of the government, or any part
thereof, in the reserve banks, and to
make disbursements by checks drawn |
against such deposits.
"As soon. therefore. as the reserve !
banks are in operation I shall transfer |
to them as large an amount of gov |
ernment funds as possible: this will, |
in turn. enable them to extend en-
Iarged credits to national banks and |
State banks which may become mem
bers Of the Federal reserve system. |
which they, in turn, may extend to |
their customers"
May Avert cold Shipments.
The opinion is quite general that the !
action OF Secretary McAdoo will have
a favorable influence on the negotia-
tions now in progress between Sir
George Paish and Basil B. Rlackett,
the British treasury. and
the Federal Reserve Board looking to
the adoption of a plan that will avert
heavy withdrawal of gold by England
from the United States.
With the prospective increase in
credits available for the South and
the cotton pool Of S135. 100000 Endorsed
by the Federal Reserve Board Sat
urday. the authorities are hopeful that
means will be devised to tide over the
Southern cotton planters until a re-
sumption OF export shipments of that
product.