The herald-advance. (Milbank, S.D.) 1890-1922, 1914-01-02
MAKES CHANGES N
CURRENCY SYSTEM
New Money Law DispIaces l22-
Year-0Id Code.
IS FAR REACHING IN SCOPE
Most important Law Relating to r.
n Passed in Many Years-Es-
sential Features Of the Meas
ure Explained in Nontech-
nical Language.

UiCdi Language.
Washington, Dec. 23.-The new bill
affecting the currency, banking and
finances of the country Is Il OF the
most f~ar-reachiEg measures relating to
finance that have been enacted IN
many years.
The magnitude of the subject. the
diversity OF interests affected and the
length Of the debates in both branches
OF congress has to follow the changes
and grasp the essentials of this highly
technical measure in its important
bearings on money, finance, banking
and the entire range of fiscal subjects,
public and private, which it affects.
Summary Of the Bill.
With a view, therefore, of present
Ing succinctly and in non-technical
language an epitome of the salient fea-
lures OF the measure as finally framed,
the following summary is given Of the
bill as q whole and of it's principal de-
tails:
Generally speaking, the first steps
to be taken to bring into operation the
nations new financial system will be
through an organization committee
consisting of the secretary of the
treasury, secretary of agriculture and
controller of the currency.
Banks have 60 days within which to
file their applications for membership
In the new system, and Il years
time is allowed before the government
will compel the dissolution OF any ma
tional bank that refuses to join.
Will take Up the Slack"
The 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.
Its chief purpose is to add a new
piece Of machinery to the banking
system that will take up the slack
during the changing business condi-
tions of each year; that will give the
banks a place to quickly convert their
assets into cash in time Of need, and
that will bring out new federal cur
.ency when it Is needed, and retire 1t
when money becomes cheap"
Banks are now required to keep a
certain percentage Of their deposits as
reserves" part in cash in their w
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
II they are paid out to meet demands
the banks are left in a %precarious on
di.ion.
Basic Principle Of Law.
The basic principle of the new law
Is to get these reserve funds out into
circulation when necessary without
%lessening the safety Of any bank, and
to provide a place to which Local
banks may rush in a 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 a stated part Of
the money they are required to hold
rs reserves.
Under the new system, when a
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 IS per cent. of these
reserves, so that in cas- 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 cas-
OF emergency, and which is expected
10 20 DACk lulO luc ndnuO VI lilo gov
eminent when times are normal.
These treasury notes" will be printed
by the government and issued through
each regional reserve bank, and will
zeal 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 q regional
bank ran secure this new money
from the government and put It into
circulation; but a gold reserve OF 40
per cent. and commercial paper equal
% the full value Of the note must be
held a. I reserve behind each note
issued.
This provision Is expected to be the
influence that will drive the new
money back into retirement when It
IL no longer needed.
Clearly Explained.
The following analysis presents the
A>al1 - tHn nav, Low Withna1t al.