Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1914-01-06
REGIONAL BANK NOTES
Explanation of How They May be
Reuulariy Issued.

he9uldrly ISSueQs
The regional reserve bank notes, the
printed evidence of the establishment
of a new order Of banking, says a
Washington correspondent, may not
be any easier 10 get hold OF than any
other form of money, but when once
obtained the holder will possess pa
per which has gone through process
something like this:
When a merchant, grain dealer,
farmer or other business man sells
goods and does not receive money ne
accepts either the promissory note OF
Sthe man to whom the merchandise Is
sold or carries the obligation on open
account. If he is a commission mer-
chant or jobber he may draw drafts
against the shipment. These forms
of paper are valuable because they
may be discounted, banks paying Out
money or giving the depositor creolt
10 the amount of the paper discount
ed. less interest. This system OF OBJ
tanning money from banks on paper
based on commercial TRANSACTIONS
moves along smoothly in times Oh
prosperity. ..,. >,
Then when money becomes tight,
when interest rates advance ana men
everywhere lack confidence IN the Iu-
ture, tending to keep a tight hoio on
money, this system OF credlts comes
to a sudden stop. The usual avenues
of money transactions are olocKeo anu
there is a congestion OF trafhc. Inc
result is business depression or less
frequently, actual panic.
The answer to this trouble, 1t Is de-
clared. is the regional bank note.
Under the new system the promis-
sorry note, draft or other form OF oDil-
cation will be presented at the bank
by the owner Of the paper. Tnereup,,
ON the bank discounts it. But instead
- of being compelled to bear the strain
of furnishing money or credit, the
strain is shifted along to the reglonal
reserve bank. The paper now pears
sfte. endorsement Of the ownership anu
of the bank to which 1t was nrst pre-
sented. The regional bank reols-
counts the paper, segregates 4o per
cent of the face value of the paper In
gold. to be held as a reserve agalnst
the notes 10 be issued, and then senos
hack TO the small bank an account OF
regional reserve notes equal In amount
to the commercial paper Whlcn mas
been discounted. The man VINO nelo
the note receives the regional reserve
bank notes. .
This is theoretically the case; as
matter Of fact, he will be pald lot ms
note in any form of money the panh
has on hand when the paper is pre-
sented for discount and the pank wiz
reimburse itself with the reglonal re-
serve notes which, for ordinary pur-
poses will be used interchangeapiy In
commerce with all other forms or pa
per currency.
In the course of ninety da ys, in some
cases six months, the promlssory note
on which all this TRANSACTION is paseu,
comes due. 1t must be paid. 1t must
be paid in money. Consequently the
bank holding the paper draws from
the business men an amount OF mon
ey equal to the amount whlcn II loah-
ed him on the discounted paper.
In this way the amount Oh lhoheS ~ -
circulation is reduced as each note
becomes due and the danger or con-
stantly adding to the amount or cur.
rency in circulation-the danger OF
.'infiating" circulation - is aVoloeo:
This, in a simple way, is the roa1 rSi
which the regional bank note VIII
travel. There are a number OF Varla-
tions to be played on this theme put
the mass of notes will flow from the
reserve banks and back to them In tne
manner outlined. 49,
The 40 per cent Of gold whlcn lhe
reserve bank must put up TO guaran-
tee the reOeHlpllOll VA thS
serve notes. is to be obtained from the
capital of the reserve banks and the
reserve deposits which member n6sr oafks IN IS
will be required by law 10 make. II -
on reserve deposits that the reserve
banks must chiefly depend, however
If the national banks enter the sys-
tenn the reserves will exceed $6oo,Ooo,-
900. The reserve bank itself must
hold 35 per cent Of this amount, SO
that the free reserves will be approx
mately s4OO. 100000. This whole ,soIa sum
If employed for no other -purp0se,
would provide reserves for one piilloh
dollars of regional reserve notes;
Before the notes can be Issued now
ever, the business man OF the coun-
try must have felt the need or more
money, the individual banks mus
have decided that they cannot pront-
ably meet the demands from theiI
own resources and the paper mus
meet the approval of both the lnol.
yidual bank and the Federal reserve
bank.