Albuquerque morning journal., 1914-11-12
Scope Of Operations in Effect
Monday Not So Great as
Expected When System Is
Fully Matured,
COMM ERCIAL PAPER
GENERALLY DEFINED
Rigid Rules Regarding Reds
counts and Securities That
VIII Have Approval Of Gov
eminent,

luf MORNING JOURNAL SPECIAL ttfttu WiHtl
Washington. NV il.--Thc scope
Of the operations Of the twelve federal
reserve banks. 10 be opened for busi-
ness next Monday were defined for
the first few months OF their exist
ence Ia a circular issued today by the
federal reserve hoard. For the pres
ent the banks viii not exercise all the
functions given them by congress.
The board. concurrlng with the di-
rectors and governors Of the twelve
in recent conferences here Endorsed
this plan of operntions
Acceptance Of deposits Of reserves
from member banks
Discount OF bills Of exchange and
commercial paper
Acceptance Of deposits Of checks
drawn by member banks on any re-
serve bank or member bank in a re-
serve or central reserve city within
their federal reserve districts.
other powers may be called into
play as the establishment OF safe and
efficient organization permits.
Defines Commercial Paper.
In its circular the board gave the
long expected definition OF CONNER
clal paper which IL TO be the life
blood Of tho new system. the basis for
the new federal reserve currency and
the means by which the nations cir
tculating medium Is expected 70 meet
the expansions and contractions OF
trade and Industry
The rate of re-discount was not an
nounced. This step probably will not
be taken until Monday The rate win
not be uniform in all the banks.
The definition of commercial pa-
per ls broad ana relies to large de-
gree upon the language OF the cur
rcney act. The board declined at pres
ent TO discuss the question OF double
and single name commercial paper.
lt did make 1t exceedingly clear. how
ever that Il had a preference for the
two-name SORT, and left no room for
the authorities of the hanks to doubt
that Il expected careful inquiry into
one-name paper presented to them for
re-diseount
Present Conditions.
The circular discussed the condi-
tons that have arisen mere and
throughout the world through the
war, and gave some insight into the
economic changes which might be
expected az result
1T should be borne In mind that
/ Il said. although our exports are
showing gratifying increase there is
stll largo cash balance due to IEu-
ncan countries for which gold may
be demanded and that a large quanti-
~ OF American securities held abroad
may be returned 20 the United states.
while on the other hand, more than
$3a.000,O00 of emergency currency
must be gradually retired.
mo ono can estimate the duration
of the war or predict what Will be The
financial or -commercial conditions
when peace shall be restored. our
own industrial development has been
greatly facilitated by foreign capital
and we have been accustomed TO bor-
row large sums in Europe and to sell
American securities there which at
tracted foreigners because OF their
higher rate Of return compared with
European Investments. 1t is proba-
hle that at the end of the war inter-
est rates in Europe win be higher
than they have been in the past and
greater investments will be yielded.
"Lower rates in this country would
be likely to accentuate this tendency
while. on the other hand higher in
terest rates and larger investment re-
turns on our side would check il.
Federal Reserve Ranks.
The function OF the federal re-
serve banks Is therefore OF two
fold character They should extend
credit facilities particularly where the
abnormal conditions now prevailing
have created emergencies demanding
prompt accommodations, and on the
other hand, they must protect the
gold holdings of this country in order
that such holdings may remain ade-
duate TO meet demands that may be
made upon them While credit fa-
cilities should be literally extended
In some parts Of the country. it would
iappear advisable 70 proceed with cau-
tion IN districts not in need Of imme-
diate relief and to await the effect OF
the release OF reserves and of the
changes which the credit mechanism
OF the country is about To experience
before establishing definite discount
policy.
while the most acute stage OF the
recent financial emergency appears TO
have passed the conditions in other
countries make II necessary that the
United States should, to the utmost
degree Of efficiency organize and
make available its own resources IN
order that 1t may provide for its own
needs and replace the facilities sud-
denly destroyed by the closing OF SO
many Of the accustomed channels OF
credit and trade"
Basic Principles.
In defining commercial paper the
beard announced certain basic prin-
clples In brief they are.
That no bill shall be admitted to re-
discount By reserve bank, the pro-