Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1914-11-16
ON MODERN ideas
OF SOUND ECONOMICS
New Banking Law Is Designed to
Provide Elastic
Currency.
DETAILS TO BE WORKED OUT
Has Taken Organization Committee
and Federal Reserve Board AL
most Twelve Months to Bring Plan
to Point Of Beginning Business.

10 FOlnC OF beginning BUSINESS.
With the opening to-day of tho
twelve Federal reserve banks tho ma
tIon will begin actual operation of its
new currency system designed to pro-
vide an elastic circulating medium
based upon modern ideas OF finance
and economics
1t has taken the reserve bank or
Eanization committee and the Federal
Reserve Board almost twelve months
to work out details of organization to
the point where an opening date was
chosen. notwithstanding careful de-
alterations which preceded every pre-
not for many weeks take up and ex-
ercise all the functions bestowed upon
them by Congress-. Such evolution rs
VIII result from the old national bank
respects be slow The Reserve Board,
the guiding spisit OF tho new system. is
itself feeling It's way over strange
ground. and the men in charge of tho
twelve banks probably will feel the
same desire to work slowly, and with
sureness rather than be renturesomc.
CHIEF ATTRACTION Is
IN ELASTICITY OF CURRENCY
The new system Is generally con-
ceded TO be compromise between n
central bank and the present system
with its thousands or units, scattered
reserves and fixed limits of currency
It's chief attraction and value, those
IT VIII give to recognized paper cur
rency. Under the present law national
bank currency Is almost fixed guam
fifty based upon national bank capi-
tai. Issued upon United States bonds
and unrcsDonsive to the chill of hard
times or the exultation OF boom days.
Its use led. the experts say, to un-
restricted loans and speculation, In
the days when money was easy and TO
n boarding OF resources and tighten
Ing OF the purse strings OF credit when
times were hard. 1t ls said to have
bred the panic OF, 1907 when solvent
banks with large credits In reserve.
and central reserve cities. were help
counters none OF the millions they
had placed with their large and strong
er correspondents.
NATIONAL BANK NOTES
AItE TO BE REPLA CED
Under the new system the Federal
reserve notes. which, In time. prob
ably Will entirely replace the ma
tionai bank notes. now 80 familiar,
VIII be issued upon commercial paper
arising out OF actual business trans
actions. 1t seems plain that they will
rise and fall In amount az the tides OF
business rise and fall, and that there
will be no plethora OF money to lie
United States government, which ma
tionai banks notes arc not, and will
have back OF them n large reserve OF
go1d In the regional banks. Through
them tho reserve banks are expected
to come to the aid OF any needy mem
Der bank. which has plenty OF good
paper. but needs cash. To further In
sure the How OF money, reserve banks
themselves may be required to re-
discount the discounted paper of other
More. than s250,o0o.oOo of the now
notes have been ordered by the Comp
troller OF the Currency for the twelve
banks. They are In So. $40. $50. $50
and 500 denominations, and are to be
accepted by all member banks and for
all customs taxes or other dues. The
Federal reserve agent of every bank
IN tho system, who is the government
representative there. has these notes
In custody ready for the application
of member banks.
DOES NOT PILE UP VAST
SUMS IN RESERVE CITIES
Next to the elasticity OF the new cur
rcncy, officials value the "mobiliza-
tIon" but no concentration of reserves
which 1t will insure Fhis, they point
out, does not mean the concentration
or vast sums from country banks In
reserve cities and central reserve ci-
ties as under the national banking
act but their appearance In largo part
on the debit balances OF tho twelve re-
serve banks In widely scattered parts
OF the country. These reserves will be
as near as possible to the door OF the
member bank to which they belong in
times OF need, and there ean-bc no re-
fusal from reserve bank to return
them In case OF eXigency.
remnant OF the present system
still remains In the provision by which
banks may keep certain proportion
of their reserves with other member
banks in cities now known as reserve
and central reserve cities. At the end
Of three years. however. that will be
changed and all reserves Will be held
either In q banks own vaults or with
"a Federal bank. An effort was made
in Congress a few weeks ago to per-
NIT member banks to deposit all their
reserves with their reserve bank at
once. AS the law stands their process
is to be spread over n period of thirty
months. If II is renewed successfully
next winter II will mean marked in
crease in the available funds of the re-
serve banks. AS 1t stands, the twelve
banks will start out with total cash
Of about $243.000,000.
WILL RELEASE ENORMOUS
RESERVES NOW LYING IDLE
Another point not forgotten by adj