Lincoln County times. (Jerome, Idaho) 1911-1919, 1914-01-08

purposes or based on live stock and
having a maturity not exceeding six
months may be discounted in an
amount to be limited to a percentage
of the capital of the federal (%regional)
reserve bank, to be ascertained and
fixed by the federal reserve board"
The "Elastic" Element.
The new treasury notes, which are
to furnish the elastic" element in the
currency system, and to add to the
country's circulating money in time OF
need, vii: come into use in the follow
ing way:
The notes will be printed by the gov
eminent, with a distinctive style for
each regional reserve bank. One of
the three directors named by the fed
eral reserve board for each regional
bank will zee known as the federal re-
serve agent for that bank, and a sup
ply of the notes will be placed in his
custody.
Should a regional bank desire to
pay out more money than its cash re-
sources will permit, the law provides
that it may put some of its ~rediscount-
ed commercial paper into the hands
of the federal reserve agent" and re-
ceived In return the new treasury
notes.
For each note that it puts out into
circulation, the regional reserve bank
must set aside in gold 40 per cent. of
the value Of the note as a guarantee
for It's redemption. This gold. with
the commercial paper held by the
federal reserve agent" is the pro-
lection behind the new money; but
these notes will also be guaranteed by
the government and may be redeem
ed in gold In tit United States treas
III.
Reserve Required.
Each regional bank, under the act,
must keep a reserve of S5 per cent of
the deposits it has received, besides
the 40 per cent gold reserve behind
the treasury notes it issues. If the
gold reserve behind the notes falls be.
low 40 per cent. a heavy a is inn
posed on the S9nk, which in turn adds
the tax to the rate it charges member
banks for r~ediEcounts. This was de-
signed to stop an ove-expars!cn OF
currency. In times OF sudden stress
the federal reserve board car suspend
these reserve provisions, in order to
furnish quick relief to any commu.
nifty.
One regional bank cannot again pay
out the notes of another, except under
a heavy tax. These notes are expect,
ed to return to the regional banks and
be withdrawn from circulation when
the need of their use passes.
Take UP Bonds
None of the existing forms of cur
rency except the national bank notes
will be disturbed by the new law. Ths
United States londs, now Used to Sc
cure the issue of National bank notes
are to be taken up at the rate of s25.
000. 900 a year by the regional re
serve banks and new treasury notes
or short term three per cent. bonds
will TAKE their place. National bank
currency is expected gradually to re
tire.
The federal reserve board will exer
else final control over the entire op
Ell alton Of <he system. 1t can compe
L regional bank to loan to another
In time Of need; can suspend all re
st actions surrounding the reserves
which regional banks must hold. anC
cal remove directors Of regional re
Sc. We banks whenever 1t is believed
necessary.
Banks In Control.
While the banks retain control .
th~. boards Of the regional reserv,
banks, their connection with the fed
erIl reserve board is only through
all advisory council. made up OF on
representative from each federal re
selve district. This council will NEE
IL Washington to confer with the fec
eial reserve board ION general bust
meas conditions" and to make rec L
mendations and suggestions concern
in discount rates, note issues, and re
serve conditions.
An important change in nationa
banking methods embraced in the new
low will permit all national banks ex
csft those in New YORK., Chicago a n
s.. Louis to make direct loans on hv'
yUsr farm mortgages up to 20 per cent
OF their capital and surplus. or up t.
one-third of their time deposits.
Another provision in. the law pei
mits national banks having a capita
OF $1,000. 900 or more to open foreigl
branches. Similar authority is give
to the regional reserve banks. the pull
pnse being to facilitate the develop
ment ct American trade abroad