Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1914-11-16
RESERVE BANKS
IN FULL SWING

Continued from First Page)
the money supply evenly distributed
and more easily available, cure tho
country of the panic disease which
has been recurring about every
twenty years for the past century
How the system Works.
The way it is going to affect the
average person is something like this:
II John Smith in Kansas has !
wheat crop that he wishes to move
and if Kansas is short Of money,
then the Federal Reserve Board will
aid the Kansas City regional bank
in getting money at any or all of the
other eleven regional hanks. 1t may
be that Atlanta hasn't the money to
spare, or that New York may be
financing foreign shipments, or that
Boston needs her money for the mills,
but San Francisco may have plenty
of cash to spare. II SO, then the San
Francisco money will be used to
move the wheat crop in Kansas, the
entire system of credit being so CO.
ordinated and linked together as to
have banks act as unit in helping
be a stringency of currency as has
happened many times in the past,
but that the entire resources of the
whole country should be ready on
demand to help any needy section.
The new banking currency act, APP
proved by the President, on Decem-
Der %, 1913, replaces the system
known as the national banking sys-
tenn, inaugurated towards the end IF
| the Civil War Under the old sys-
| tenn, the national bank note currency
was based upon government bonds
| deposited in the treasury and tae
currency thus issued has been classed
by economists as bonds-secured cur
roncy. This plan was evolved, not
only to nationalize and to- unity the
| urrency-which had heretofore con-
sisted of notes issued by State banks
la-but as well to create market for
| United States bonds, and in this way
/ to sustain their value. 1t was sue
cessful entirely IN the latter purpose.
but it outwore its usefulness as a
banking system because of it's entire
lack of elasticity
Every National Bank a Member.
Every national bank is member
of the Federal Reserve Bank system
and many State banks took advan-
tage of the opportunity to become
members. The largest district, tho
| Chicago district, has 9b2 member
| banks, and the smallest district, At
| lanta, has 372 member banks. Each
member bank has obtained its mem
berslrip by subscribing to the Fed
eral Reserve Bank of its district in
| the amount equal to six per cent. OF
| it's paid-up capital stock and sur
plus. The Federal Reserve Bank
does not do business with the public
| in the sense that banks usually do;
| it may better be described as a
bank of banks" 1t is a depositary
| for q certain proportion of the re-
serve of all the member banks, and
| in addition may also be depositary
| for government funds.
| One of its most important functions
| is as a bank of issue and redemption
Of currency, for 1t may secure from
| the treasury government notes know
as Federal reserve notes, which 1t is
authorized to issue against conner
cial paper with a minimum gold re-
serve of 40 per cent Besides this
| Federal reserve banks are granted
certain powers in the matter. of opera
| tions in the open market, such as the
|
| eign exchange, and in a general way
are expected to perform important
| functions as clearing houses between
| their member banks. For instance,
San Francisco owes Atlanta a million
| dollars on some commercial paper:
| Atlanta owes Boston similar
amount, and Boston owes San Fran
cisco a million. BY having the board
act as a clearing house these indebt-
ednesses and interrelationships can
| be simplified, just as the clearing
house in New York simplifies the
drawing of checks between New York
banks.
Each Federal reserve bank has nine
directors, three OF whom represent
| the member banks, three represent
commercial, agricultural or other in
dustrial pursuit (these six being
chosen by the member banks). and
three government directors, chosen
nv the Federal Reserve Board. The
whole system is under the supervision
| of a central board in Washington, the
Federal Reserve Board, consisting of
Secretary of the Treasury McAdoo
and COMPTROLLER of the Currency
Williams. ex-off1cio, and five other
members appointed by the President
and approved by the Senate. namely
Charles S. Hamlin, governor; Fred
eric A. Delano, vice-governer; Paul
M. Warburg, w. p. 6. Harding and
A. C. Miller.
with the opening of the Federal
reserve banking system today. it IS
estimated that nearly $60O,0OG000 of
reserve funds, no longer required
under the new law. was released. The
amount released by districts was:
Boston, $50, 900 900; New York. $685.
GOO. 900; Philadelphia, $700O0000; Cleve-
land. $1,000, 900: Richmond, s21 ,000.-
600: Atlanta, $4,000, 900; Chicago, $685.
600 900: st. Louis, s1S.0OO,0O0; Minne-
apoiis. $43,000.000 Kansas City, s57.-
O0O, 900; Dallas, s24,0O0,oOO; San Fran