Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1914-11-16
the FEDERAL
RESERVE BANKS
TO OPEN TODAY
Uncle Sans New Cur
rency System Will
Begin Actual Opera
tons, Based on Mod
ern Ideas of Finance
and Economics

Washington, Nov 15.-With the
opening tomorrow of the twelve Fed
eral-Reserve banks, the nation will
begin actual operation of its new cur
rency system designed to provide an
elastic circulating medium based upon
modern ideas of finance and economics.
1t has taken the Reserve Bank Or
ganization Committee and the Federal
Reserve Board almost twelve months
to work out details of organization to
the point where an opening date was
chosen. Notwithstanding careful de-
alterations which preceded every pre-
liminary step, the twelve banks will
not for many weeks take up and exer-
else all the functions bestowed upon
them by Congress. Such evolution as
will result from the old national bank
ing system of necessity will in most re-
spects be slow. The Reserve Board,
the guiding spirit of the new system,
is itself feeling it's way over
strange ground and the men in charge
of the twelve banks probably will feel
! the same desire to work slowly and
with sureness rather than be venture
some.
The new system is generally con-
coded to be a compromise between a
central bank and the present system
with its thousands of units, scattered
reserves and fixed limits of currency.
Its chief attraction and value, those
who interpret 1t find in the elasticity
it will give to recognized paper cur
| rency. Under the present law national
bank currency is almost a fixed guam
tity based upon national bank capital
issued upon United States bonds and
unresponsive to the chill of hard times
or the eXultation Of boom days. It's
use led the experts say, to unrestrict-
ed loans and speculation, in the days
when money was easy and to a hoard
ing of resources and a tightening of
the purse strings of credit when they
were hard. 1t is said to have bread
| the panic of 1907 when solvent banks
with large credits in reserve, and CEN
trail reserve cities, were helpless and
could get back to their own counters
none of the millions they had placed
with their larger and stronger CORES
! pondents.
Under the new system the federal
reserve notes, which, in time, probably
will entirely replace the national bank
notes, now so familiar. will be issued
upon commercial paper arising out of
actual business transactions. 1t seems
plain that they will rise and fall in
amount as the tides of business rise
and fall, and that there will be no
plethora of money to lie idle. They
will be obligations of the United States
government, which national bank notes
are not, and will have back of them
a large reserve of gold in the regional
banks. Through them the reserve
banks are expected to come to the
aid of any needy member bank which
has plenty of good paper but needs
cash. To further insure the flow of
money, Reserve banks themselves may
be required to rediscount the discount
ed paper of other reserve banks.
More than $3.50, 100000 of the new
notes have been ordered by the Comp
troller of the Currency for the twelve
banks. They are in 81, $40, $40, $50
and 500 denominations, and are to be
accepted by all member banks and for
all customs taxes or other dues. The
Federal Reserve Agent of every bank
in the system, who is the government
representative there, has these notes
in custody ready for the application of
member blanks.
Next to the elasticity of the new
currency, officials value the 'mobili-
zation" but no concentration of re-
serves which it will insure. This, they
point out, does not mean the concen-
tration of vast sums from country
banks in reserve cities and central re-
serve cities as under the national
banking act. but their appearance in
large part on the debit balances of the
twelve reserve banks in widely scat
tered parts of the country. These re-
serves will be as near as possible to
the door of the member bank to which
they belong in times of need and there
can be no refusal from reserve bank
to return them in cases of exigency.
A remnant of the present system still
remains in the provision by which
banks may keep certain proportion
Of the reserves with other member
banks in cities now known as reserve
and central reserve cities. AT tile end
of three years, however. that will be
changed and all reserves will be held
either in banks own vaults or with
federal bank. An effort was made
in Congress i few weeks ago to per-