The Arvada enterprise., 1914-01-01
MAKES CHANGES IN
CURRENCY SYSTEM
New Money Law Displaces 122-
Year-OId Code.
IS FAR-REACHING IN SCOPE
Most important Law Relating 10 ~
nance Passed in Many Years-ts-
sential Features Of the Meas
ure Explained In Nonteeh-
nicaI Language.

,noctirq the currency, banking ana
finances OF the country Is one Oh the
most far.reaching measures Feiatihs W
6nance that have been enacted III
many years. 49,
The magnitude Of the subject, the
diversity of interests affected anu 'ne
length of the debates In both prahche'
Of congress has to follow the changes
and prasp the essentials of this hlBhiy
tecbnical measure In It's important
bearings on money finance, banking
and the entire range of fiscal subjects
public and private, which 1t Affects
Summary Of tho Bill.
with a view, therefore, of present
in, succinctly and in non-technical
language an epitome OF the salient tea-
tures OF the measure as fnally irahe"'
the following summary Is given OF the
bill as whole and Of its principal de-
taila:
Generally speaking. the tirbt steps
TO be taken 70 bring into operation the
nations new financial system VIII be
through an organization committee
consisting OF the secretary of the
b''i'Naip Va
controller of the currency.
Banks have so days within which to
file their applications for membership
In the new system. and one years
time is allowed before the government
will compel the dissolution of any ma
tionel bank that refuses to join.
viii Take Up the Slack"
Tie 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.
Itp chief purpose Is to add a new
piece Of machinery to the banking
system that viii take up the slack"
during the changing business condi-
tons OF each year, that will give the
banks place to quickly convert their
assets into cash in time of need. and
that will bring out new federal cur
rency when 1t is needed, and retire it
when money becomes cheap"
Banks are now required to keep
certain percentage of their deposits as
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
X they are paid out to meet demands
the banks are left in IA precarious con
dition.
Basic Principle Of Law.
The basic principle OF the new law
IL to get these reserve funds out into
circulation when necessary without
lessenlng the safety of any bank, and
to provide place to which local
banks may rush in crisis and get
cash for the prime commercial pa
per" they hold in their vaults.
This is to be accomplished through
q chain of regional reserve banks. or
reservoirs of reserves" in which all
banks shall deposit stated part of
the money they are required to hold
rs reserves.
Under the new system, when n
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, If 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 a 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.
ernment when times are normal
These treasury notes" will be printed
by the government and issued through
each regional reserve bank, and will
bear the guarantee both OF the re.
gional bank and OF the government.
II the demand for currency in any
section OF the country exceeds the
supply of circulating money regional
bank can secure this new money
from the government and put It into
circulation; but gold reserve OF 40
per cent and commercial paper equal
TO the full value OF the note must be
held as reserve behind each note
issued
This provision is expected to be the
Influence that will drive the new
money back into retirement when II
is no longer needed
Clearly Explained.
The following analysis presents the
details OF the new law without nd