The Delta independent., 1914-11-20
FEDERAL RESERVE BANKS
NOW IN OPERATION


banks, the nation begins actual oper-
alton of its new currency system
designated to produce an elastic cir
culating medium based upon modern
ideas of finance and economics.
1t has taken the reserve bank or
ganization committee and the federal
reserve board almost twelve months
to work out details of organization to
the point where an opening date was
chosen. Notwithstanding careful de-
liberations which preceded every
preliminary step, the twelve banks
will not for many weeks take up and
exercise all the functions bestowed
upon them by congress. Such evolu-
tion as will result from the old ma
tional banking system of necessity
will in most respects be slow. The re-
serve board, the guiding spirit of the
new system, is itself feeling it's way
charge of the twelve banks probably
feel the same desire to work slowly
and with sureness rather than be ven
turesome.
The new system is generally con-
ceeded to be a compromise between a
central bank and the present system
with its thousands of units, scattered
reserves and fixed limits OF currency.
I Its chief attraction and value, those
who interpret it find in the elasticity
it will give to recognized paper cur
rency. Under the present law nation
al bank currency is almost fixed
quantity based upon national bank
bonds and unresponsiye to the chill
of hard times or the exultation of
boom days. Its use led, the experts
say, TO unrestricted loans and specu-
lation in the days when money was
easy and to a boarding OF resources
and a tightening of the purse strings
of credit when they were hard. 1t is
said to have bred the panic of 1907
when solvent banks with large credits
( in reserve, and central reserve cities,
were helpless and could get back to
their own counters none of the mil
lions they had placed with their larg-
er and stronger correspondents.
Under the new system the federal
reserve notes, which. in time probably
will entirely replace the national bank
notes, now so familiar. will be used
upon commercial paper arising out of
actual business transactions. 1t seems
plain that they will rise and fall in
amount as the tides OF business rise
and fall, and that there will be no
! plethora of money to lie idle. They
will be obligations OF the United
States government, which national
bank notes are not. and will have
back of them a large reserve of gold
in the regional banks. Through them
the reserve banks are expected to
come TO the aid of any needy member
bank which has plenty of good paper
but needs cash. To further insure the
flow of money. reserve banks them
selves may be required to rediscount
the discounted paper of other reserve
banks.
More than s25O,OO0.O0O of the new
notes have been ordered by the comp
troller of the currency for the twelve
banks. They are in So, $40, $50, $50.
and 500 denominations, and are TO be
accepted by all member banks and for
all customs taxes or other dues. The
federal reserve agent of every bank
bank in the system, who is the gov
ernment representative there. has
these notes in custody ready for the
application of member banks.
Next to the elasticity of the new
currency. officials value the 'mobil-
ization" but no concentration of re
serves which il will insure. This.
they point out, does not mean the con-
centration of vast sums from country
banks in reserve cities. as under the
national banking act, but their appear
ance in large part on the debit bal
ances of the twelve reserve banks in
widely scattered parts of the country.
These reserves will be as near as
possible to the door of the member
bank to which they belong in times
of need and there can be no refusal
from reserve bank to return them
in case of eNigency.
A remnant of the present system
still remains in the provision by
which banks may keep certain pro
portion OF their reserves with other
member banks in cities now known as
reserve and central reserve cities. At
the end OF three years. however. that
will be changed and all reserves will
be either held in banks own vaults