Middletown transcript., 1914-01-03
MAKES REFORMS IN CURRENCY SYSTEM
New Money Measure Most Important Law Relating to Finance
Enacted in Many Years-SaIent Features of the Code
SucCinCtIy Explained.

Washington, Dec. 2S.-The new bill
aReeting the currency. banking ana
0nances OF the country is one OF the
most far-reaching measures relating 70
finance that have been enacted IN
many years.
The magnitude Of the subject. tne
diversity Of interests affected ana tne
length of the debates IN both branches
OF congress has to follow the changes
and grasp the essentials Of this highly
technical measure in its important
bearings on money, finance, banking
and the entire range Of fiscal subjects
public and private, which 1t af1ects.
Summary Of the Bill.
With a view, therefore, of present
ing succinctly and in non-techn1cal
language an epitome Of the salient fea-
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 viii De
through an organization committee
consisting Of the secretary OF the
treasury, secretary Of agriculture and
controller of the currency.
Banks have so days within which to
nle 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.
VIII "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 a new
piece of machinery to the banking
system that will take up the slack
during the changing business condi-
tions of each year; that will give the
banks 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 a
certain percentage of their deposits as
reserves" part in cash in their own
vaults and part of which may be re-
deposited in the banks 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
If 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
@ 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 35 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
ernment 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
The following analysis presents the
details of the new law without adj
herring closely to the technical division
or language of the measure:
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 controller of the curren-
cy and five other members. Two Of
these shall be expert bankers, but
none shall have banking affiliations or
own bank stock during their service
This board will exercise general con-
troll over the entire system.
The temporary Organization com
mittee." or the federal reserve board,