The Caldwell watchman. (Columbia, La.) 1885-1946, 1914-01-02
MAKES CHANGES IN
CURRENCY SYSTEM
New Money Law DispIaCeS 122-
Year-0ld Code.
IS FAR-REACHING IN SCOPE
Most important Law Relating to RI
nance Passed in Many Years-Es'
sentiaI Features Of the Meas
ure Explained in Nontech'
nical Language.

washington, Dec. 10 nv III" ~
affecting the currency, banking ana
finances Of the country is one OF the
most far-reaching measures relating 10
finance that have been enacted III
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 hlghiy
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 succinctIy and in non-technlcai
language an epitome Of the salient TEA
lures of the measure as finally framed,
the following summary is given OF the
bill as a whole and Of its 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.
Bank have 60 days within which to
file their applications for membership
In the new system, and one 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 O. new
piece of machinery to the banking
system that will take up the slack"
during the changing business condi-
tons 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
rency when it is needed, and retire it
when money becomes cheap"
Banks are now required to keep
certain percentage of their deposits as
"reseEges:-2-na mart In cash. -. = taair. own
vaults and part Of which may be re-
deposited in the bsSks 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 con-
dition.
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
as 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 case 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 case
OF emergency, and which is expected
to go back into The hands of the gov
eminent when times are normal.
These treasury notes" will be printed
by the government and issued through
each regional reserve bank, and will
bear the guarantee both of the re-.
gional bank and Of the government
If the demand for currency in any
section of the country exceeds the
supply Of circulating money regional
bank can secure this new money
from the government and put it into
circulation; but 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. :..,