Iron County news. [volume] (Hurley, Wis.) 1913-1950, 1914-01-03


bank can secure this new money
from the government and put it into
circulation: but a 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 it
is no longer needed.
Clearly Explained.
The following analysis presents the
details OF the new law without ad-
herring closely TO the technical division
or language of the measure:
At the head of the system will stacd
a federal reserve board at Washing
ton, appointed by the president, and
to consist OF the secretary OF the
treasury the controller of the curreu-
cy and five other members. Two Of
these shall be expert bankers, but
none shall have banking affiliations or
own bank stock during their service
This board will exercise general con
t~ol over the entire system
The temporary organization com
mittee, - the federal reserve board,
will select from eight to twelve cities
where regional reserve banks shall be
located and Will divide the entire
country geographically with these
cities as the centers of districts All
national banks in a district will be
required to subscribe for the stock of
the regional reserve bank in that dis
trict and to keep a portion of their
reserve there.
Known as "Member Banks"
Local banks will be known as mem
Der banks" because they will own the
stock of the regional reserve bank
Of their district. Each member bank
will be required to take capital stock
of the regional reserve bank. equal to
8 per cent. of the member banks CAPT
tai and surplus. The capital Of the re-
gional bank will increase or decrease
so that it always represents per
cent. Of the combined capital and sur
plus of all the banks of the district
that have joined the system
National banks are compelled to
join and state banks are permitted to
if they bring their reserve require
ments up to the standard set for ma
tional banks and submit to national
examination
Public Can Buy Stock.
Public ownership of the stock OF the
regional reserve banks is permitted
only in case enough banks do not join
in any district to provide capital
stock for 81 100000 In such event the
public may purchase the stock in
quantities limited to $4,000 for each
Individual but the voting OF this stock
Will be placed in the hands OF govern
ment representatives on the board OF
| directors Of the regional reserve bank.
The regional reserve bank may do
/ business only with their member
/ banks not with the public, except that
certain open market operations such
/ as the purchase and sale of gold. gov
! eminent, or municipal bonds, and GER
/ tain forms of bills of exchange, are
! permitted These banks will make
/ ,heir earnings from the loans made to
/ member banks, and from the purchase
/ and sale of bonds and foreign bills OF
exchange
/ Must Pay Up Cash
/ Member banks Will be compelled to
/ put up in cash only one-hah OF their
subscription to the capital Of the new
! banks. the rest can be called for if
needed by the regional bank. Diyi-
/ dends of 6 per cent will be paid on
! this stock to the member banks, and
/ the stock will be non-taxable.
After these dividends are paid one
half of the surplus net earnings goes
! to create a regional surplus fund, and
j when this has reached 40 per cent. of
the original banks paid in capital
these earnings are to go into the
United States treasury. The balances
OF the net earnings are to be paid to
I The United States as a franchise tax.
With the machinery thus created
! for a new banking system that is sup
/ Elementary to the commercial banks
+ Of the country, the law provides for
I gradual transfer of part OF the bank
/ reserves to these new reservoir
banks
In order not to disturb business con
ditions, or to withdraw too suddenly
i the heavy deposits of country banks in
the large cities, the law provides that
three years may be consumed in shift
ing these balances and that if neces-
/ sary, part of the reserves transferred
! to the regional banks may consist Of
commercial paper.
Reserve Required
The amount Of reserve required
from every bank under the new law
and the place where it must be kept,
are as follows.
Country banks--Total reserve requir-
ed, y per cent of demand deposits
and per cent Of time deposits Five
twefths must be held IN the banks
/ own vaults for two years and four
/ twelfths after that For The first year
/ two-twelfths must be kept IN the re
. gioral bank increasing oHe-tWelfth
each six months thereafter until Il