Evening star., 1914-08-20
bank to have avs-twelfths Of its reserve


in its own vaults and two-twelfths trans
Thereafter. at the end Of two six-month
periods, 1t IL to transfer a further one
twelfth Of its reserve to the reserve bank.
After the thirty-sixth month the act re-
quires that the country bank shall have
four-twelfths Of Its reserve in its own
vaults and f1ve-twelfths In the vaults of
its federal reserve bank This leaves an
optional three-twelfths. which 1t may keer
either with its reserve bank or in ite
own vaults. Thus until the completion OF
the three-year period the country bank
VIII probably maintain at least three
twelfths Of its legal reserves with its
present reserve agents.
The reserve Of the city reserve bank
VIII be reduced from % to Is per cent
At the end Of three years this reserve
will be divided in specified percentages
bank and six-ffteenths in the vaults Of
It's reserve bank. with q remaining four
fifteenths that may be kept at will in the
banks own vaults or in the reserve
bank. The central reserve city bank IL
to have it, reserves reduced from 25
eighteenths must be kept in its own
vaults, after the final adjustment, and
seven-eighteenths in the vaults Of its re-
serve bank, and fve-eighteenths, at It's
option. In its own vaults or in its reserve
bank.
The provisions Of the federal reserve
act, which lower the reserve reo,ire-
ments will
Lowering Reserves be Of great
Will Free Large Sums to . = ~. .n nsnts
In aiding them to make the required
redistribution with the least possible dis
turbance to their present business rela-
tons. This lowering Of reserves Will set
free large amount Of money which NAV
be devoted to the financing Of payments
to the reserve banks, and may be 80
used. as to decrease the strain upon the
reserve city and the central reserve CITY
banks.
II has been estimated that the provf-
non Tor a mere per cent reserve
against time deposits. win release more
snan xR0oO.ooo from the reserve Of
however. will work no such sisnifica nj
benefit In behalf Of the reserve CITY and
ehe central reserve city banks, as the
nauona! banks IN these two classes have
never ,,,ns dsI;. done an extensive savings and
reserves held against demand deposits
VIII be an added advantage for decreas-
ing the strain Of establishing the sys-
tenn. At best. however, the strain will
be 50 severe as to call for the full CO.
operation Of all national banks for the
successfui financing Of the reserve re-
distribution. This cooperation will un-
doubtedly be forthcoming. If one may
judge from the generous public efforts
OF national banks in the past
Banks In the central reserve cities will
be put to the hardest test In financing
tho new reserve organization, They
carry In their vaults and use in their
business an enormous quantity of coun-
try and reserve city money which In
now counted by the Treasury Depart
ment as part Of the reserves of the
banks crediting them. There was much
endeavor made by the bankers to pre-
serve the existing system, on the grounds
that such radical reorganization as
represented by the act would work se-
rious damage. The country bankers
were one in agreement on this view
with the reserve city and central city
bankers. They objected that 1t would be
necessary for them In all events to keep
certain balances with the larger financial
centers for the purpose Of collections
and against which to sell exchange to
their patrons On the other hand. the act
provides that the reserve banks are to
undertake clearing and collections. How
far this will free the country banker
from the necessity Of maintaining large
correspondence accounts in the centers
with which his community does the most
business remains largely to be deter
mined by the federal reserve board.