Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1914-02-10
PRAISE FOR new
U. S. BANKING ACT
A. F. Dawson of Davenport
Predicts Benefits Will Ac-
crue Under the Law.
IN AFTER-DINNER ADDRESS
Says This Country viii Be Placed on
an Equality With Other Com
merciaI Nations.

J The federal reserve banking act
passed recently by congress was clear
| " explained and warmly commended
| by a. F. Dawson, president of the First
National bank of Davenport and for
mer congressman from the Second
Iowa district, speaking before the Mo-
line After-Dinner club last evening.
''The passage of the federal reserve
act he said, marks a new epoch in
the history of financial legislation in
the United States. If the new law
performs the things for which it is de-
signed, it will place this country on
an equality with the other great COM
mercial nations of the world with a
banking and currency system that will
meet the demands of business at all
seasons. The system created by this
act does not differ greatly in principle
from that of the most progressive ma
tions of Europe. They have a central
bank with branches; this law will |
give us a number of regional banks |
under one central control.
Wanted for Years.
"The new law contains the funda- |
mental principles for which bankers |
and business men have contended for |
years, chief of which are an elastic !
currency, the concentration of bank |
reserves, and greater cooperation |
among the $4,000 banks in the United |
States 1t creates a central system,
which does not displace the system we
now have, but which is superimposed |
upon the present organization of bank
ing and credits. This central institu-
ton will do business only with the
government and the member banks
which subscribe to its capital stock.
It is established to give stability to the
commerce and industry of the United
States, to prevent financial panics to
enable men of good credit everywhere
to secure money at all times for their
legitimate needs, and to put an end to
the use of bank reserves for stock ex-
change transactions
The speaker explained the division
of the United States into districts, the
function of regional reserve banks and
the powers of the federal reserve
board.
The law provides" he said, ''for
the issue of federal reserve treasury
notes under provisions which will
make them both safe and elastic /
Every dollar of these new notes must
have behind it a dollar of good com.
mercial paper, a 40 per cent gold re-
serve held by the regional bank, and
will be first lien on the assets of
the bank issuing the same. They are
also made a direct obligation of the
government and will be receivable for
taxes, customs and other public dues.
THE element of elasticity seems as
sured under the provisions for the is
sue of these notes. AS they are based
on the business of the coun-
try. as represented by short-time COM ,
mercial paper they can be issued in
larger volume as the legitimate needs :
may require, and retired when the !,
necessity for their issue is past
THE present national bank notes
will be gradually retired, beginning
-wo years hence. This will be done
1y the regional banks purchasing from
national banks the government bonds 1
low used to secure these notes. The
'egional banks may then issue the {
lew federal reserve notes to take j
heir place"
Foreign Trade Stimulus. r
The speaker pointed out that for
ign trade should receive a stimulus
rom the provision enabling banks to l
establish branches in foreign coun- +
ries. He expressed the opinion that
interest rates throughout the country {
you'd be steadied and eventually re- /
uced by the publication from week h
o week of the government rate of dis
cunt. He predicted that many of the A
tate banks would find it to their ad Il
antage to become members of the 7
ew system.
The main criticism leveled against Y
he law is the possibility of political p
ontrol, under the provision which
ermits the president to appoint all .
ne members of the central board. IT
confidently expected that President G
'ilson appointees will be men of the
ighest type. but danger turks in the =
over of any future president to an.
ONT four of the seven members dur
ls his first term -