The chronicle=news. (Trinidad, Colo.) 1898-current, 1914-10-14

1
the federal reserve banks would hold
large deposits aside from those fixed
by provisions Of the act. he thought
there might be a workable margin.
but he saw no inducement for mem
Der banks to keep active reserve.
Their commercial relations with the
other banks of the country will al
ways be more productive and at the
same time conform with the natural
trend OF business" he said.
He continued:
with the practicability OF the
plan admitted the question that nat
urally propounds itself to those en-
gagged in banking is, how will its op-
Grafton affect the profits of their
that the federal reserve banks will
not enter into competition for the
commercial business OF the country
and for the reason that they will be
Obliged to quote rate of discount at
least as high, II not higher. than
commercial rates in order to main
tain the resources necessary to en-
able them to extend their help in
need, believe the conclusion Is war
'ranted that in the future. as In the
past, rates of interest will be govern
ed by the law Of supply and de-
mand.
THE federal reserve banks nave
no way Of increasing the supply Of
actual money in existence: II they
had, they might reduce rates. Their
most efficient help in that connec-
nection may at times result from
raising rates to stabilize conditions.
at is only necessary to cite the
fact that In those countries which de-
pend upon central banks to main
tain the stability OF conditions which
in their experience has prevented
those panics to which we have been
subjected. we find those central banks
discount rate always
higher than the commercial rate In
the same country.
THE benefits of the new system
will become apparent with the lapse
of time The change will &c grad
ual and should be regarded as an
evolution in the banking business.
during which the bankers themselves
must rely upon their own resources
and conservation should be the
.watchword. Any effort to utilize
the rediscounting privilege primar-
lily for profit should be discouraged
ut must always be kept in mind
that to realize the chief object which
congress had in view the federal re-
serve banks must always be ready
to extend help: they cannot main
tain this position II the member
banks keep them drained OF their re-
sources in ordinary times"
He saw a great advantage from
the new act in the maintenance OF
a foreign exchange market, and
thought the federal reserve banks
should invest in foreign bills. instead
of solely in rediscounts to domestic
banks. 1t was this class OF bust
ness. he said. that was sought by the
bankers OF Great Britain and its
extending all over the
world had made London its financial
center.
He said 1t was a popular miscon-
ception that with the opening OF the
federal reserve banks, government
funds would be deposited in those
banks and the Independent treasury
system of the United States and its
consequent expense to the govern
ment and to the business of the
would become a thing OF the
past "A careful reading of the law"
lie said, "discloses the fact that its
authors had no such intention, and
that If the government funds are
deposited in those banks 1t will be
at the discretion of the secretary Of
the treasury alone.
1T is just criticism of the meas
ure.' he continued. Ito say that 1t
does not take the government out of
the banking business. and that it
confers upon one of our government
an extraordinary power and
discretion unwarranted by the spirit
of our institutions and repugnant to
Republican principles.
The power conferred upon the
secretary of the treasury to control
money and credit, If attempted by
the members of this association.
would probably call for special act
of congress to curtail their activi-
ties"
He referred to the failure Of the
bankers to have their say in the
modification of the federal reserve
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