Evening star. [volume] (Washington, D.C.) 1854-1972, 1914-12-06
LOCAL AND OTHERWISE.
BY I. A. FLEMING.

lA--=
The federal reserve board IS daily
adjusting the problems that are pue Up
to it for solution by members OIL INC
banking fraternity, just as the revenue
department is solving questions
lating to the war tax. Between the e"o
new acts the bankers OF Washihe 'o,
and elsewhere are kept busy OH .nei
own account and in the interests VI
| their customers. many OF Whom are
woefully uniformed regarding stahip
taxes.
| A ruling is expected from the Ieoefdi
reserve board in few days reearo-
| ing the cashing of drafts drawn oil
regional banks by member bahks II"
one district, when said drafts ha
been received by member banks OF an.
other district. To illustrate A iocai
bank received a fve-thousano-ooiia
draft from a member of the Aeiah. :.
regional bank for deposit. the orah.
was sent to a national bank IN view
York city to the credit of the local
bank. and was at once returned as uh-
collectable there.
dition, and the board will solve II py
a ruling in a day or two.
But in the meantime the federal re,
serve bank Of New York city has acteo
| in the matter.
November 13 this bank announced
that it would receive checks and drafts
drawn on any federal reserve bank, OF.
| deposit for collection and credit OF
for the payment of drafts such as
specified on presentation nor for the
| interest in transit. and as this Would
mean an actual loss it was not ac-
ceptable.
| Now, however, an announcement has
| been made that the federal reserve
| bank Of New York city will accept
| checks and drafts on any regional re-
serve bank at par and with Immediate
| credit
! This ruling solves the problem SO
| far as the New York reserve bank is
concerned, but the situation with re-
| gard to other regionals waits on the
| reserve boards ruling.
No checks or drafts can be drawn
on regional banks save by member
lbanks-that is, legitimately, as the pub
lie has no relations of business
| character with a regional bank. All
| drawn by a member bank, and the
cash must be in the regional bank to
the credit of the maker of the draft, so
no loss can fall to the reserve bank
cashing drafts on another regional
Must Collect at Par.
1t is specifically provided in the fed
eral reserve act that any federal re-
serve regional bank must receive and
collect free of charge any drafts or
checks drawn by a customer of a fed
eral reserve bank. when said checks
or drafts are RENTED by a federal re-
serve bank. or drafts and checks drawn
by any regional bank. This would
seem to be sufficient cause for ruling
on the point in question.
On the Reserves Released.
The December circular of the National
City Bank, in discussing the large
amount Of money released for use, II
needed, by the reserve requirements of
the new law. as compared with the re-
quirements of the old national bank
law. suggests that it would be unwise
to permit such an expansion as ABB
normal and unhealthy
The following is an excerpt:
ut Is, of course, true that with the re-
discounting privileges now available,
1t will be unnecessary for the member
banks to carry as large reserves as
formerly, but it is obvious that herein
lies provision for credit expansion on
a very large scale. These reserves
have been released for use. in the dis
erection of the bankers. and it may be
assumed that ultimately they will come
into use. but it Is clearly desirable that
they shall not be used freely at present.
Such degree of expansion-suddenly
made-would be abnormal and I'M
healthy at any time, and In the early
operations Of the reserve banks might
bring embarrassment to them. While
these surplus reserves are being alb
sorbed the reserve banks will have lit
tie control over the money market, and
in the present unsettled state OF the
81 ~
considerable mischief could be done be-
fore they obtained effectual control.
If, for example, these surplus reserves
were used in such a manner as to create
balances against US in the foreign ex-
changes, the effect would be to cause
demands upon the reserve banks for
gold for export. This might come
about from general relaxation in the
money market without being directly
traceable or foreseen.
Credit Position Improves.
States is enormously improved by hav-
ing the reserve banks in operation, but
the gold reserves of these banks are
not yet SO large that they can view
adverse foreign balances with indif-
ference We are still weak in our in
Iternational relations by reason of the
fact that so large part of our gold
stock is scattered in $4,000 banks and
In circulation, while demands for ex-
port in the future, as heretofore, will
fall on New York.
1T would be highly desirable, if
practicable. that these released reserves
of the member banks were turned over
to the reserve banks to be held and
used by them for the support of the
general situation until the financial
conditions superinduced by the war had
become more settled Since this is inn
practicable there remains nothing to
say except that i. Is the duty of every
banker, whether in the new system or
out of it, to cooperate with that sys-
TEN and do his part to make it's pol
icies effective.
Foo Construction, $451, TEE, 900.
From it's organization the United
States Steel Corporation has probably
expended not far from $500, 600. 900, prac-
tically eliminating water from it's cap
italization. The exact expenditures up
to the current year were $451,725.0 900,
and the Independent manufacturers
have kept pace with the corporation,
SO that it Is estimated that not less
than q billion of dollars has gone into
construction work for steel makers in
the last thirteen years.
Many times in periods of depression
in the industry this work has given
employment to thousands of men who
prOha bly would not have