Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1914-01-14

per with their banking correspond
ents at the reserve or central re-
serve cities. While considerable of
this rediscounting is done, there has
always been a prejudice against it
on the part of the banks, on the
ground that it showed weakness to
have to borrow. Then, too, at just
the time when the country OF smaller
city banks have needed more funds,
the large city banks have themselves
been pressed for resources, and the
process of rediscounting has been a
matter of more or less ruction for
years.
"Our credit machinery has been
of the crudest kind. Millions of dol
lars worth of perfectly good COM
mercial paper, one of the most liquid
assets known to commerce, is locked
up and frozen In bank vaults, wait
ing until 1T fails due and is paid,
meantime unavailable for CONVEX
sion into cash IL needed. as is pos
sible in all other countries except
ours.
Under the provision OF the new
bill the Federal reserve banks may
discount for any of its member banks
commercial paper, with not more
than ninety days to run. This is de-
fined to mean notes, drafts and bills
of exchange, issued or drawn for ag-
ricultural, Industrial or commercial
purposes, or the proceeds of which
have been used for such purposes.
Kind of Paper Available.
THE class of paper available for
rediscount at the Federal reserve
banks must be of liquid character
The maturity of ninety days does
not, of course, mean that only paper
made for that length of time can be
used. On the contrary, no matter for
how long originally drawn, what is
required is that the obligation must
fall due within ninety days. The
tendency among banks, in order to
be equipped with plenty of available
paper, will be to encourage their GUS
toners to avoid renewals. Loans
which are not liquid, even though
well secured, will not be looked upon
with as much favor. All this will,
of course, tend to make the banking
assets of the country sounder. And,
too, the influence upon merchants
and others by encouraging prompt
ness and more liquidity in financial
arrangements. will, in the end, be
beneficial for all business.
Greater Facilities but Not Easy Credit.
There is some belief prevailing in
regard to the new measure that 1t Is
| intended, as it is called, to make credit
easier. This calls up a vision OF
| loosening up on the part of the banker
as to the character of loans which will
pass muster. Nothing of the kind is
| in contemplation and no such effect
will follow. Credit is one of the func-
| tons which can only be safely deter
mined on business principles, and
| legislation which attempts to make 1t
unnaturally liberal is sure to bring
disaster. The bill does not affect the
status in this respect. 1t only sup
plies greater facilities for extending
safe credits. This will result In am
pie, but legitimate expansion. This
does not mean imitation. The two are
as different as gold and gas. The
effect, with the banking situation free
from annual contraction of loanable
funds, will be to stabilize business.
I'VE have enormous banking re-
sources in this country, but they have
never been availed of to legitimate ex-
tent. Also, the reserves of the banks
divided up into thousands of small
units, have never given real assurance
of safety in case of trouble, and this
has put a universal restraint upon
business progress, which was entitled
to much further extension, and would
have had it if the proper machinery
for the use OF credit had been In
operation.
THAT machinery will now be set ur
for use.
Under the present system, with the
gold scattered among thousands oil
banks, the country has been at the
mercy of panic. In the Federal Re-
serve banks a great sum of gold will
be gathered together, and under wise
control of the federal board will act as
a universal and unassailable protec.
ton to all the banks its magnitude by
it's very existence allaying all thai
gruesome fear, which is the beginning
of panics."
Prominent men in the business ant
industrial world are attending th'
convention.
Colonel Lewis T. Bryant Stat
commissioner of labor. made an ad
4 dress on Fire Prevention and Pro
lection" Nat. Duke. assistan