Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1914-10-09

~ ne hoard which viii direct operation VI
the Federal reserve Bank Of PhllhdClphia Il
Is hoped TO make the new currency l'ElS'"-
tion effective about November l.
Primarily. this legislation was enacted
TO make the national currency so flexible
that in times OF stress, such as Ne have
at present instead Of the hnancial units
Of the country trying to cope with the
situation independently, the problem IS
put up to national body known as a
Federal Reserve BOARD with govern
mental authority and the sinews W war
to properly cope with the situation.
The -Vreelani Law, which was
enacted in 1908. after the weakness of the
currency system was reflected by the
panic Of 1901. has ccned with the situa-
ton admirably. and at present smer-
gency currency is being issued under that
act. But there was demand for more
comprehensive legislation which would
not only take care OF emergency cur
rency, tutt would also adjust the many
other complexities Of the financial world.
Hence the present act.
POSITION OF THE GOVERNMENT
BOND.
Up to the time Of the Aldrich-vrce-
were permitted to proffer FOR the au-
thority to issue bank notes were United
States Government bonds. This tended
to make our Government securities sell
at figure far above those of any other
nation, yet in time of need all of the
other vast assets of the banks must
needs lie idle when they had a market
able value far in excess Of any financial
necessity This was the apparent weak
ness, and the legislation referred to took
coEnizance of IT.
The principle of having the banks
notes secured by specific collateral was
retained, hut the scope of the security
was broadened. state and municipal
bonds up to 90 per cent. of their value
and commercial paper TO the extent Of
- per cent. Of its value We're permitted
to be used as the basis for the issu-
Ance Of emergency currency to the OK
tent of $500 @rn,o0) II also provided for
the formation of currency associations
The newer plan goes still further. how
ever. II not only provides for emer-
gency currency, but also by a system
OF banking controls the distribution Of
funds throughout the country
OBJECT OF NEW SYSTEM.
The new system. by reason of its SUI
pervision and control by the Federal
Reserve Board at Washington. has four
great purposes, viz: Furnishing elastic
currency; affordng means for the redis
counting Of commercial paper: more ef
fective supervision of the banking, sys-
tenn, and the issuing Of Federal reserve
notes up to full value Of commercial
paper deposited as collateral All tbis
Is to be carried out by the establish
ment of L banks throughout the country.
known as Federal Reserve Banks
IFNsa oh
ana makes an abrupt departure from old
systems, comparison would not be sat
isfactory. As the subject covers a wide
neld. II Ia only possible 10 give the main
points of the legislation
The law provides for two departments.
the Federal Reserve Board the control.
and the Federal Reserve Bank. the op-
orator
The Federal Reserve Board consists Of
seven members, including the Secretary
of the Treasury, Comptroller of the cur
rency and fve members appointed by
the President.
This board is vested with full author
tty TO examine the Federal reserve banks
and member banks; 10 permit ono Fed.
eral Reserve Bank 10 rediscount the COM
mercial paper Of another, 70 suspend for
a period Of 50 days the reserve require |
ments; 10 supervise the issue and control |
of Federal reserve notes.
NAMING THE RESERVE DISTRICTS.
The first step taken was to divide the
country into y districts, in each OF which
the following named cities will be the
centre and in which reserve banks are 10
be established: Boston, New York, Phil
adelphia. Cleveland Richmond Atlanta
Chicago ST. Louis. Minneapolis Kansas
City Mo. Dallas and san Francisco.
Federal reserve banks. whose capital
will have been subscribed BY the national
banks in the area represented. managed
by six directors elected by the national
banks contributing the capital and three
appointed by the Federal Board at Wash
ington, are now baing organized al these
points.
The Federal Reserve Bank IS to be the
banker for national banks IN its dis
trict A bank in Pennsylvania which
formerly kept large reserve balances in
New York city, will now keep such funds
In the Philadelphia Reserve Bank The
object is not 10 have money CO. as at
present. In stringent periods 10 points
where highest rates are paid but 70 rn@
locality where II rs most needed The
Federal Reserve Board In Washington
has the power. by the provision permit
ting one Federal Reserve district 70 re-
ceive deposits nom another. TO transfer
funds 20 any point where the strinEency
Is felt more keenly than in another,
BANKS MAY REDIsCOUNT PAPER.
Each Federal reserve bank is permit
ted to rediscount the commercial paper
for the banks in its district which makes
security Of this class worth. not 70 per
cent. Of its value IN times Of crisis but
fun value, and this paper MAY in turn be-
used as collateral for an equal amount
of Federal reserve treasury notes. which
are to be an obligation of the United
States
Thus IL is claimed that an advantage
OF Is per cent. in value of the vast hold
inEs OF the banks in commercial paper
Is gained. The location Of banks In the
real ESTATE FOR RENT