West Virginia argus. [volume] (Kingwood, W. Va.) 1877-1946, 1914-02-05

An Explanation o. the New Law Rs-
'stins to National Banking State
Banks Are also Permitted TO Join
s,stem-covernment Supervision
OF Banking

unit the dollar. Bat our gold, almost IN
its entirety, lies stored in the impregna.
BILE vaults al our Treasury. sub-treasuries
and our banks The real medium Of cir
culation Is gold aud silver certificates.
treasury notes and bank notes. The for
mer are issued against gold and silver
held in reserve 10 redeem their certif-
Gates. which are payable on demand.
The latter are the obligations OF our ma.
tional banking associations, and to secure
their payment Con demand) government
bonds are deposited with the comptroller
OF the currency. These notes are easier
to handle and much more adaptable foi
use as currency than gold coin or bullion;
also, they have essentially the same Elf
cacy AZ gold, since they are backed up by
reserves OF this metal-our basic money.
Under the old system, these notes, with
some gold coin and the familiar "chicken
feed" comprise our nations currency
its medium Of exchange. Under this
system, currency is fixed i'm volume and
there can be no contraction or expansion
to meet the ever changing needs and
demands of the people. When demand
is light the country is swamped with cur
rency and the interest rates are inordi
nately low-here it will be remembered
that interest rates affect the depositor ~
well as the borrower. On the other
hand, when extensive credit is asked or
when panic symptoms appear, there is At
ahnOrmal HamanH for -.
owing to the rigidity OF volume, cannot
be supplied-there is mad scramble for
money and the devil gets the hinderinost
The blow always falls most heavily on
the producer and consumer. 1t is az
everlasting disgrace TO the old system
that the farmers of the west, after having
produced bumper crops, and thus adding
materially to the wealth of the nation,
lost half OF the profits they earned and
deserved because they had to pay exorbi-
tant rates for the currency necessary t.
market their crops. This was an inelastic
currency, one in no way related to the
commerce which it should serve.
Another defect, greater than the one
mentioned, is the ever-impending danger
of a panic. This is shown, not 80 much
by an investigation OF the old currenc,
laws themselves, which it taxes mint
trained in economics to properly appre
ciate, but by the indisputable, evidence
furnished by our own experience, whicli
has witnessed the frequent recurring
panics of the past, ones which racked tn,
country to its very foundations. This i,
evidence that all men can understand o.
the effect that our laws we're imperfect,
or, at least, incomplete.
To remedy the above defects, as 'to
afford means for rediscounting CONNER
cial paper, to establish a more effective
supervision of banking i'm the United
States, and for other purposes" con
gress has passed the new currency bill.
officially entitled the Federal Reserv,
Act"
By this bill the continental United
States, except Alaska, is to be divided
into not less than eight nor more than
twelve portions, known as Federal Re
serve districts; these districts need no,
necessarily be coterminous with statc
or states. This division is to be made b
the Reserve Bank Organization Commit
tee, composed of the secretary of the
treasury, the secretary of agriculture and
the comptroller of currency. When th,
districts have been apportioned the com
mittee shall designate one city in each a.
tho location g
shall proceed to organize these several
banks.
The capital of each federal reserve.
bank shall be divided into shares of 500
and the aggregate thereof shall not b..
less than $4,000. 900. This capital stock
is to be subscribed i'm the manner follow
ing: Each national banking association
in the federal reserve district is required
TO subscribe thereto i'm an amount equal
to six per centum of its capital stock and
surplus; each state bank, if it so desires
and can fill certain requirements specified
In the Act, may subscribe thereto i'm a
like amount; il the amount OF stock so
subscribed be inadequate then the stock
''''''' " N"SiSN iOi puOlIC subscription,
provided that no individual, copartner-
ship or corporation shall he permitted 10
subscribe for, nor hold, at any time
more than $25, 900 par value; and If the
amount subscribed still remain made.
quate the committee is authorized 10
allot any amount deemed necessary l.,
the United States, TO be paid for ont OF
the treasury and to be sold by the Secr,.-
tarY OF the Treasury in such manner as he
deems most beneficial, at a price not les.
than par
Tie banks subscribing to this stock
shall be known as member banks and
shall not transfer or hypothecate their
stock in federal reserve bank Stock
not owned by member banks shall not he
entitled to vote. Under this Act every
national bank must become q member in
its particular district or forfeit us charter
The outstanding stock Of the several
federal reserve banks shall be increased
as the member banks increase their capi-
tai and surplus or as new member banks
are added, and shall be decreased "a the
member banks decrease their capital and
surplus or cease 10 be members. When.
ever the stock Of a federal reserve bank
is increased or decreased the directors
thereof shall cause 10 b. executed Ger
ufcate 10 the comptroller Of currency
showing the amount OF incroase ar da.