The Farmington times. (Farmington, St. Francois County, Mo.) 1905-1926, 1914-01-02
MAKES CHANGES IN
CURRENCY SYSTEM
New Money Law Displaces 122-
Year-0ld Code.
IS FAR-REACHING IN SCOPE
Moat important Law Relating TO r.
nance Passed In Many Years-Es-
sentIal Features Of the Meas
ure Explained In Nonteoh-
nical Language.

Washington, Dec. 23.-The new bill
affecting tho currency, banking and
finances OF tho 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 lecal subjects,
public and private, which It affects.
Summary OF the Bill.
With a view, therefore, OF present
ing succinctly and in non-technical
language an epitome OF the salient fea.
lures Of tho measure as finally framed,
the following summary is given Of the
bill as a whole and Of Its principal de-
tails:
Generally speaking, the first steps
v, DO taken to bring into operation the
tation's new financial system will be
Though an organization committee
cohsis ing of the secretary OF the
treasury, secretary OF agriculture and
controller OF the currency.
Banks have so days within which to
file their applications for membership
in the new system, ind one years
time is allowed before the government
will compel the dissolution OF any ma
tional bank that refunes to join.
VIII "Take Up the Slack"
The new law will make little direct
change in the operation OF the pres.
ent national banks, except TO allow
them to loan a certain amount of their
funds upon farm mortgages.
Its chief purpose is TO add n new
piece of machinery to the banking
system that will take up the slack"
during the changing business condi-
lions Of each year; that will give the
banks a place to quickly convert their
assets into cash in time OF need. and
that will bring out new federal cur.
rency when It is needed, and retire It
when money becomes cheap"
! Banks are now required to keep a
certain percentage OF their deposits az
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
If they are paid out TO meet demands
the banks are left In a Precarious con.
dt!on.
Basic Principle OF Law.
The basic principle OF she new law
Ia to get these reserve funds out into
circulation when necessary without
lessening the safety of any bank, and
to provide n place TO which local
banks may rush in a crisie and get |
cash for the prime commercial pa. |
per" they hold in their vaults.
This Ia to be accomplished through |
a chain OF regional reserve banks, or |
reservoirs of reserves" IN which all |
banks shall deposit q stated part OF |
the money they are required to hold |
rs reserves.
Under tho 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. II necessary
even the reserve OF other banks, by |
depositing this security.
The new regional banks will re.
ceive about one.half OF the bank re-
serves OF the country. They In turn
will be permitted to loan back to the
banks all but 80 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 TO
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 new form OF paper currency is
Also provided for, to come out In case
Of emergency, and which Is expected
TO go back into the hands of the gov
eminent when times are normal.
These treasury notes" will be printed
by the government and issued through
each regional reserve bank. ana will
bear the guarantee both of the re.
sional bank and of the government.
II the demand for currency in any
section OF the country exceeds the
iupply of circulating money n regional
,ank can secure this new money
rom the government and put It into
but a gold reserve of 40
Ter cent. and commercial paper equal
o the full value OF the note must be
Ield as reserve behind each note \
ssued. II
This provision is expected to be the II
influence that will drive the new
honey back into retirement when 1t II
J no longer needed H
Clearly Explained. II
The following analysis presents the II
etails OF the new law without ad. II
ering closely to the techli:a, division II
r language OF the MEASURE: II