The Raymer enterprise., 1914-01-01
New Money Law Displaces 122-
Year-0Id Code.
IS FAR REACHING IN SCOPE
Most Important Law Relating to FL
nance Passed In Many Years-Es-
sentiai Features Of the Meas
ure Explained In Nontech-
nicaI Language.

hhfNAAh6 eNf
finances OF the country is one of the
most far-reaching measures relating to
finance that have been enacted In
many years,
The magnitude of the subject, the
diversity OF interests affected and the
length Of the debates In both branches
Of congress has to follow the changes
and grasp the essentials OF this highly
technical measure In its important
bearings on money. finance. banking
and the entire range Of fiscal subjects,
public and private, which II affects.
Summary of the Bill.
With a view, therefore. OF present.
Ina succlnetly and In non.technieal
language an epitome OF the salient fea-
tures Of the measure as finally framed.
the following summary is given Of the
bill as whole and OF lis principal de-
tails:
Generally speaking. the first steps
to be taken 20 bring into operation the
nations new financial system will be
through an organization committee
consisting OF the secretary OF the
treasury. secretary of agriculture and
controller OF the currency.
Banks have so days within which to
fle their applications for membership
In the new system. and one years
time is allowed before the government
will compel the dissolution OF any ma
tionsi bank that refuses to join.
Will Take Up the Slack"
Tile new law viii make little direct
charge in the operation OF the pres
eBt national banks, except to allow
them to loan a certain amount Of their
funds upon farm mortgages.
ItB chief purpose is to add new
piece Of machinery to the banking
system that will take up the slack"
during the changing business condi-
tons Of each year; that will give the
banks place to quickly convert their
assets into cash In time of need. and
that will bring out new federal cur
rency when 1t Is needed. and retire ii
when money becomes cheap"
Banks are now required to keep a
certain percentage of their deposits as
reserves part in cash In their own
vaults and part OF which may be re-
deposited in the banks of New York.
Chicago. st. Louis and other designat-
ed cities.
In times Of sudden financial de-
mands. when banks have loaned up to
the full limit OF their resources, these
reserves furnish little relief. because
X they are paid out TO meet demands
the banks are LEFT in precarious con-
cition.
Basic Principle Of Law.
The basic principle Of the new law
Il TO get these reserve funds out into
circulation when necessary without
lessening the safety of any bank. and
TO provide place to which local
banks may rush In crisis and get
cash for the prime commercial pa
per" they hold in their vaults.
This Is 10 be accomplished through
q chain OF regional reserve banks. or
reservoirs Of reserves" in which all
banks shall deposit a stated part OF
the money they are required to hold
ss reserves.
Under the new system, when a
financial furry comes the banks can
take commercial paper. such as notes,
drafts and bills Of exchange. to these
reservoirs" and secure the use of
their own reserves, or, If necessary,
even the reserve OF other banks, by
depositinE this security.
The new regional banks will re-
ceiye about onehalf Of the bank re-
serves Of the country. They In turn
will be permitted TO loan back to the
banks all but 81 per cent. Of these
Reserves, so that in case OF emergency
millions of cash can be brought out
into circulation quickly.
The banks will have to pay for these
loans, however, as individuals have 10
pay for loan from any local bank.
and this charge Is expected to prevent
the too free use of the reserves held
by the regional banks.
New Paper Currency.
A rew form of paper currency is
also provided Tor. TO come out in case
OF emergency, and which is expected
10 &c back into the hands OF the gov.
ernment when times are normal
These treasury notes" will be printed
by the government and issued through
eaen regional reserve bank. and will
bear the guarantee both OF the re-
gional bank and Of the government.
II the demand for currency In any
section Of the country exceeds the
supply OF circulating money a regional |
bank can secure this new money |
from the government and put Il into
but gold reserve of 40 |
per cent. aud commercial paper equal
o the full value OF the note must be !.
ield as a reserve behind each note
ssued.
This provision is expected to be the
influence that will drive the new
money back into retirement when IL
Q no longer needed.
Clearly Explained.
The following analysis presents the