The midland journal., 1914-01-02
AXES REFORMS IN CURRENCY SYSTEM
New Money Measure IS Most important Law Relating to Finance
Enacted ii Many Years Salient Features Of the Code
SucCinctN Explained.


located and win divide the entire
country geographically with these
cities as the centers Of districts. All
national banks In district will be
required to subscribe for the stock OF
the regional reserve bank In that dis
trict and to keep a portion Of their
reserves there.
knownSas aMember 5anks.p
Local banks viii be known as mem
ber banks because they win own the
stock OF the regional reserve bank
OF their district. Each member bank
viii be required to take capital stock
Of the regional reserve bank, equal to
per cent. OF the member banks capt.
tai and surplus. The capital Of the re-
gional bank win increase or decrease
SO that it always represents 8 per
cent. Of the combined capital and sur
plus Of all the banks of the district
that have joined the system.
National banks are compelled to
join and state banks are permitted to
II they bring their reserve require
ments up to the standard set for ma
tional banks and submit to national
examinations.
Public Can Buy Stock.
Public ownership Of the stock OF the
regional reserve banks is permitted
only In case enough banks do not join
in any district to provide capital
stock Of $4,000. 900. 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 govern
ment representatives on the board of
directors Of the regional reserve bank.
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 CT exchange, are
permitted. These banks viii make
member banks. and from the purchase
and sale Of bonds and foreign bills OF
exchange.
Must Put Up Cash.
Member banks will be compelled to
put up in cash only one-half of their
subscription to the capital Of the new
banks, the rest can be called for if
needed by the regional bank. Divi-
dends of per cent. will be paid on
this stock to the member banks, and
the stock will be non-taxable.
After these dividends are paid one
half of the surplus net earnings goes
to create regional surplus fund and
when this has reached 40 per cent of
the regional banks paid in capital
these earnings are to go into the
United States treasury The balances
of the net earnings are to be paid to
the United States as franchise tax.
With the machinery thus created
for a new banking system that Is sup
| Elementary to the commercial banks
| of the country, the law provides for a
gradual transfer of part of the bank
reserves to these new reservoir"
4 banks.
In order not to disturb business con
ditions, or to withdraw too suddenly
the heavy deposits Of country banks in
the large cities, the law provides that
three years may be consumed In shift
ing these balances and that, If neces-
sary, part of the reserves transferred
to the regional banks may consist Of
commercial paper.
The amount Of reserve required
| from every bank under the new Law,
and the place where it must be kept,
| are as follows:
| Country banks Total reserve reqhir-
! ed. IL per cent. of demand deposits
and per cent. of time deposits Five
twelfths must be held in the bank's
own vaults for two years and -FOUR
twelfths after that. For the first year
two-twelfths must be kept in tlRs re-
\ gional bank, increasing one-tHelfth
each six months thereafter until 1t
reaches five-twelfths of the totas re-
serve. For three years the unallbtted
part OF the reserve may be kept in
the banks of reserve cities. gAfter
that lime it must be kept either in
the country banks and vaults or inXthe
regional reserve bank.
Reserve city banks-Total reserve
required, is per cent. of demand and
per cent. OF time deposits. Six-ff-
teenths must be kept in the banks
vaults for the first two years and five
| fifteenths after that time. Three-fif-
teenths must be kept in the regional
reserve bank for the first year. in
| creasing one-fifteenth every six
months thereafter until 1t reaches six
fifteenths For three years the un-
allotted portion of the reserve may be
kept in other banks. in its own
vaults. or in the regional bank; after
that time in one OF the latter two
! places.
Regional Reserve Banks
These immense funds Of reserves
from member banks" together with
government moneys, win make up the
deposits of the regional reserve banks.
/ Each rf fhnce ho he mill ha oAx,n;nfc-