The Manning times. [volume] (Manning, Clarendon County, S.C.) 1884-current, 1914-11-18
SYSTEM outlined
scope OF THE OPERATION OF THE
new RESERVE BANKS
TO Open next week

Federal Reserve Board Issues Circu.
lar Explaining Working of New
System-Commercial Paper is De-
ined-Broad Definition Given But
Depends Largely Upon Act Itself.
The scope of operations of II fed
eral reserve banks to be opened for
business next Monday was defined for
the first few months of their exist
ence in circular issued Wednesday
by the federal reserve board. For
the present the banks will not exer-
else all the functions given them by
congress. The board, concurring
with bank directors and governors,
indorsed this plan:
Acceptance of deposits of reserve
from member banks.
Discount of bills of exchange and
commercial papers.
Acceptance of deposits Of checks
drawn by member banks on any re-
serve bank or member bank in re-
serve or central reserve city within
their federal reserve district.
Other powers may be called into
play as the establishment of safe and
| efficient organization permits.
In its circular the board gave the
long expected definition Of CONNER
cial paper, which is to be the basis
for the new federal reserve currency,
and the means through which the ma
tons circulating medium is expected
to meet the expansion and contrac-
tions of trade and industry.
The rate of discount was not an
nounced and probably will not be un-
til Monday. 1t will be uniform in
! all banks.
The definition of commercial paper
is broad and relies to large degree
| upon the language of the currency
act. The board declined at the pres
ent time to discuss the question Of
double and single name commercial
paper. It did make it clear, however.
that it had a preference for the two
name sort, and left no room for
banks to doubt that it expected care
full inquiry into one name paper, pre-
sented for rediScount.
The circular discussed the condi-
tions that have arisen here through
war and gave some insight into the
economic changes which might be ex-
pected to result.
st should be borne in mind" it
said, "tnat although our exports are
showing gratifying increase there is
still large cash balance duo to Eu-
ropean countries for which gold may
be demanded, and that large quaint
ity of American securities held
abroad may be returned to the Unit
ed States, while on the other hand
more than s300,O00,0 of emer-
gency currency must be gradually re-
tired.
''No one can estimate the duration
of the war or predict what its effect
will be on financial or commercial
conditions, when peace shall be re-
stored. Our own industrial develop
| ment should be greatly facilitated by
foreign capital.
"It is probable that at the end Of
the war interest rates in Europe will
be higher than they have in the past
and great investment returns will be
yielded. The tremendous destruction
of property and waste of capital will
not only check the flow of Europe's
savings to the United States but may
dispose foreign investors to return
| the securities they now hold.
Lower money rates IN this coun-
| try would be likely to accentuate this
tendency, while, on the other hand,
! higher interest rates and large invest
ment returns on our side would
check it.
''The function of the federal re-
serve banks is, therefore, of a two
fold character. They should extend
credit facilities, particularly where
the abnormal conditions now prevail
ing have created emergencies de-
manding prompt accommodations and
! on the other hand they must protect
the gold holdings of this country in
order that such holdings may remain
| adequate to meet demands that may
be made upon them.
''While credit facilities should be
| literally extended in some parts OF
the country, it would appear adyis-
able to proceed with caution in dis
tricts not in need of immediate relief
and to await the effect of the release
of reserves and of the changes which
the credit mechanism of the country
is able to experience before estab-
fishing a definite discount policy.
while the most acute stage Of the
recent financial emergency appears to
have passed, the conditions in other
countries make it necessary that the
United States should, to the utmost
degree of efficiency, organize and
make available its own resources in
order that it may provide for its own
needs and replace the facilities sud-
denly destroyed by the closing Of sc
many Of the accustomed channels OF
credit and trade
In defining commercial paper. the
board announced these basic princl-
pies:
That no bill shall be admitted to
rediscount by reserve bank, the pro-
ceeds Of which have been or are to be
applied to permanent Investment
Maturities of discounted bills
should be we'll distributed so that a
reserve bank should be in position
to liquidate one-third of all its invest
nlents within 80 days.
Bills presented for rediscount
should" be essentially self-liquidat-
ing" which, the board explains,
means that they should represent
some distinct step in the productive
or distributive process and be of such
character that it is reasonably sure
they can be collected at maturity.
In addition, the board requires
that such paper be indorsed by the
member bank offering it for redis'
count; that the indorsed bank waive
demand notice and protest; that such