The herald-advance. (Milbank, S.D.) 1890-1922, 1914-01-02

- otI0 oORCIVt0tOU OvCT kIIC u
entire system.
days; provided, that notes, drafts and
bills drawn or issued for agricultural
purposes or based on live stock and
having a maturity not exceeding six
months may be discounted in an
amount to be limited to a percentage
OF the capital Of the federal (regional)
reserve bank. to be a~scertained' and
fixed by the federal reserve board"
The elastic" Element.
The new treasury notes, which are
to furnish the elastic element in the
currency system, and to add to tile
country's circulating money in time Of
need, will come into use in the follow
ing way:
The notes will be printed by the gov
eminent, with a distinctive style for
each regional reserve bank. One OF
the three directors named by the fed
eral reserve board for each regional
bank will be KIN swn as the federal re-
serve agent for that bank. and a sup
ply Of the notes will be placed in his
custody.
Should a regional bank desire to
pay out more money than its cash re
sources will permit, the law provides
that it may put some Of it's ~rediscount.
ed commercial paper into the hands
of the federal reserve agent" and re.
ceived In return the new treasury
notes.
For each note that it puts out into
circulation, the regional reserve bank
must set aside in gold 40 per cent. of
the value OF the note as q guarantee
for its redemption. This gold, with
the commercial paper held by tle
federal reserve agent" is the pro-
lection behind the new money; hut
these notes will also be guaranteed by
the government and may oe redeem.
ed in gold in the United States treas
ury.
Reserve Required.
Each regional bank, under the act,
must keep a reserve Of 35 per cent. OF
the deposits it has received, besides
the 40 per cent. gold reseFve behind
the treasury notes it issues. II the
gold reserve behind the notes falls be.
low 40 per cent. a heavy tax is i'm.
posed on the bank, which in turn adds
banks for rediscounts. This was de.
signed to stop an over-expansion 'of
currency. In times of sudden stress
the federal reserve board can suspend
these serve provisions, in order to
furnish quick relief to any commu
nifty.
One regional bank cannot again pay
out the notes Of another, except under
a heavy tax. These notes are expect.
cd to return to the regional banks and
be withdrawn from circulation when
the need of their use passes.
Take Up Bonds.
None Of the existing forms of cur
rency except the national bank notes
will be disturbed by the new law. The
United States bonds, nov used to Sc
cure the issue of Aational bank notes,
are to be taken up at the. rate OF ~-1.
0oo 900 a year by the regional re
serve banks and new treasury notes
or short term three per cent. bonds
will take their place. National bank
currency is expected gradually to re-
tire.
The federal reserve board will exer
else final control over the entire op-
Grafton of the system. 1t can compel
one regional bank to loan to another
in time Of need: can suspend all re
strictions surrounding the reserves
which regional banks must hold. and
can remove directors OF regional re.
serve banks whenever it is believed
necessary. =
Banks in Control.
While the banks retain control OF
the boards Of the regional reserve
banks, their connection with the fed
eral reserve board Is only through
an advisory council, made up Of one
representative from each federal re
serve district. This council will meet
in Washington TO confer with the fed.
eral reserve board ION general bust
ness conditions" and to make recon.
mendations and suggestions concern
ing discount rates, note issues, and ~
serve conditions.
An important change in national
banking methods embraced In the new
low will permit all national banks q.
cept those in New York, Chicago and
st. Louis to make direct loans on five
year farm mortgages up to 25 per cent
OF their capital and surplus. or up e
one-third Of their time deposits.
Another provision ins the law per.
mits national banks having q capital
Of $1,000. 900 or more to open foreign
branches. Similar authority IL given
to the regional reserve banks. the pur.
pose being to facilitate the develop
ment Of American trade abroad.