Evening star., 1914-11-22
NEW BANKING PLAN
HAILED WITH Joy
Federal Reserve Institutions
Mean Financial and Eco
nomic Emancipation.
OPENING DAY SENDS
MONEY RATES LOWER
Early Resumption of Stock Trading
Is Expected-Cotton and Curb
Markets Open.


Markets Open.
NEW YORK, November 21.-Monday,
November 16, wrote an important page
in the financial history of the United
States. For with the actual opening OF
the doors of the twelve federal re-
lserve institutions in as many monetary
centers of the United States; with the
resumption of active and unrestricted
trading on the New York Cotton Ex-
change and the New York curb mar
kets and the announcement that one
by one the restrictions against regu-
lar trading on the New York Stock Ex-
change were being permanently re-
moved, there was ample justihcatlon
for Paul warburg's happy designation
of this day as 1.-The great Fourth OF July
in the economic life of the United
States" Coming generations will IN
deed hail this day as marking tne
foundation of our financial and eco
nomic emancipation.
Attention has already been called in
this review to the general plan OF Or
ganization Of the new reserve sss-
tenn and to the economic advantages
1
ness and banking transactions. IT IS
too early at this time to predict with
any degree of certainty to what ex-
tent it will be able to fulfill these ex,
description of its methods and accom-
plishments In New York, for ex-
ample. only small proportion OF
the minor officials and clerks have yet
been selected, the detail work thus FAR
being conducted by temporary star,
| borrowed" from accommodating neigh
bors We can at this time. however.
get a fairly good idea OF the poncies
destinies of the new organism so as
to be of greatest good to the greatest
number.
First Wilson Task.
One of the first great tasks undertaken
by the Wilson administration was the
imperative duty of remodeling and re-
constructing our banking and currency
system Eighteen months have passed
since the first steps were taken toward
the fulfllment of this great duty and
nearly eleven months since WOODROW
Wilson put the federal reserve act on the
statute books December %. 1913. The
| wide open door Of the new federal BANKS
representing the conSummatlon OF the
plans and efforts of two years, Is re-
garded as the beginning of the end OF
States of America.
The paramount feature of the new sys-
tenn is that it centralizes the banking
power of the country into twelve dis
| tricts in each of which is a federal re-
serve bank These Institutions hold part
of the reserves of the member banks and
their chief function will be the redis-
counting of paper. thus giving to the
United States what it never had before.
a proper discount market, along the lines
of the old-established institutions OF
Europe. The ultimate result of this func-
ton will be to supply the country with
an entirely fresh supply of money, the
life blood of new enterprise and ex-
pansion.
The periodical commissions in the money
market for some time past had indicated
very clearly that there was something
wrong with the currency medium of the
country which was shown to be the lack
of elasticity in the circulation. The new
system is designed to fulfill this purpose.
1t possesses an inherent expansion over
the old system: which has been ny Hariously
5O0,000,000. This. 1t would seem. will
take care Of all commercial and indus
trial expansion in the United States for
some time to come
Rediscount Rules.
Since the rediscounting of paper is
to be the principal function of the CEN
board at Washington recently devoted
itself to the question of properly de-
fining this commodity, and issued an
extensive and extremely comprehensive
jstatement on this subject. 1t ruled that
the notes handed in for rediscount may
be single or double name paper, and
must be issued or drawn for definite te
such notes must not exceed ninety
days. except that paper drawn for agri-
cultural purposes or based on live
stock may have a maturity Of not ex-
ceeding six months. Notes or drafts
covering or for the purpose OF trading
|, in stocks. bonds or other investments
, are not rediscountable. The federal re-
serve banks may discount acceptances
, based ION the Importation or exporta-
tion of goods having a maturity of not
exceeding three months.
Among the other functions OF the
federal reserve bank are the clearing
; of checks for members. buying and
selling of foreign exchange. receiving
of government deposits and acting as
!. The federal reserve banks may open
branches within their own district
! Each branch must be operated by a
board of directors possessed OF the the
parent bank. These powers will be
, gradually adopted.
An official Of the Treasury Depart:
E ment at Washington recently outlined
the method of doing business under
: the new system. from which the fol-
/ lowing summary may be of interest:
merchant purchases a bill of goods
: and pays for them with his note. This
. note will be taken to the local bank
i (which will honor this class of COM
! mercial paper and advance the money
The bank will not be compelled to cur
f tail such an investment. because whel
the occasion demands the paper cal
be converted into cash by rediscount
Z lat the reserve bank.
Realizing that it may be desirable t.
!. | reconvert its commercial paper int
a | cash, the member bank has an adde
. incentive in making only such loans
as are conservative and sound. On th'
:, other hand, the reserve bank has eacl
, member bank as customer, and i
!, is therefore interested in the transac
= | tions of each member bank and in thu
class of paper that each accepts.
reserve bank in turn may desire to cal
upon the government, when occasion
! arises, for an issue of federal reserv,
= notes Commercial paper held by tn,
v reserve bank must be placed with th
t government in order to secure sucl
8 an issue.
d New Currency Plans.
g The occasion can hardly arise whei
= a member bank calls upon reserv