Saturday news. (Watertown, S.D.) 19??-19??, 1914-01-01

, be the influence that will drive the
new money back into retirement when
it is no longer needed.
Reserve Board Created.
At the head Of the system will stand
a federal reserve board at Washing
ton, appointed by the president, and
to consist of the Secretary of the
Treasury, the comptroller Of the cur
rency and five other members. Two
of these shall be expert bankers, but
none shall have banking Affiliations
or own bank stock during their serv.
ice. This board will exercise general
control over the entire system.
The temporary Organization com.
mittee" or the federal reserve board
Twill select from eight to twelve cities
where regional reserve banks shall be
located, and will divide the entire
country geographically with these cit
les as the centers of districts. All ma
tional banks in a district will be re-
quired to subscribe for the stock of
the regional reserve bank in that dis
trict, and to keep portion of their
reserves there.
Banks Must Own Stock.
Local banks will be known as mem
Der banks" because they will own
the stock of the regional reserve bank
Of their district. Each member bank
will be required to take capital stock
OF the regional reserve bank, equal
to per cent of the member banks
capital and surplus. The capital of
the regional bank will increase or de-
crease SO that it always represents 6
per cent of the combined capital and
surplus OF ali the banks Al sthe dis
trict that have joined the system.
National banks are compelled to
Join, and state banks are permitted
to if they bring their reserve require
ments up to the standard set for ma
tional banks, and submit to national
examinations.
Public May Buy Stock.
Public ownership of the stock of the
regional reserve banks is permitted in
case enough banks do not join in any
district to provide capital stock of
$4,000,000. In such event the public
may purchase the stock in quantities
limited to $4,000 for each Individual;
but the voting of this stock will be
placed in the hands of government
representatives of the board of the
directors of the regional reserve banks
Do Business Only With Banks.
The regional reserve banks may do
business only with their member
banks, not with the public, except that
certain "open-market operations" such
as the purchase and sale of gold, gov
ernment or municipal bonds and GER
tain forms of bills of exchange are
permitted. These banks will make
their earnings from the loans made
to memberbanks, and from the pur-
chase and sale of bonds and foreign
bills of exchange.
Member-banks will be compelled to
put up in cash only one-haf of their
to the capital of the new
banks; the rest can be called for If
needed by the regional ban,1s. Divi-
dends of s per cent will be paid on.
this stock to the member-baDks and
the stock will be nontaxabie.
After these dividends are paid, one
half of the surplus net earnings goes
to create a regional surplus fund and
when this has reached 40 per cent OF
the regional banks paidsin capital,
these earnings are to go into the
United States treasury. The balance
of the net earnings are to be paid to
the United States as a franchise tax.
With the machinery thus created for
a new banking system that is supple
mentary to the commercial banks of
the country, the law provides for a
gradual transfer of part of the bank
to these new reservoir.
banks. In order not to disturb busi-
ness conditions, or to withdraw tool
suddenly the heavy deposits of country
banks in the large cities, the law pro-
Eides that three years may be consum-
I'd in shifting these balances, and that
T necessary part of the reserves trans
erred to the regional hanks may con-
'ist of commercial paper,