The Idaho recorder. [volume] (Salmon City, Idaho) 1886-1927, 1914-01-08


section of the country exceeds the
supply OF circulating money a regional
bank can secure this new money
from the government and put II into
circulation; but a gold reserve OF 40
per cent. and commercial paper equal
TO the full value OF the note must be
held as a reserve behind each note
issued.
This provision is expected to be the
influence that Will drive the new
money back into retirement when It
is no longer needed.
Clearly Explained.
The following analysis presents the
details of the new law without ad-
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 beard,
will select from eight to twelve cities
where regional reserve banks shall be
located and will divide the entire
country geographically with these
cities as the centers OF districts. All
national banks in a 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
reserve there.
Known as Member Banks"
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
6 per cent. of the member banks CAPT
tai and surplus. The capital OF the re-
gional bank will increase or decrease
so that it always represents 6 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
If they bring their reserve require
ments up to the standard set for ma
tional banks and submit to national
examination.
Public Can Buy Stock.
Public ownership Of the stock OF the
II -. !
only in case enough banks do not join
in any district to provide a capital
stock for $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 govern
ment representatives on the board OF
directors of the regional reserve bank.
The regional reserve bank 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
eminent, or municipal bonds, and GER
tain forms of bills OF exchange, are
permitted These banks will make
their earnings from the loans made to
member banks, and from the purchase
and sale OF bonds and foreign bills of
exchange.
Must Pay 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 II
| needed by the regional bank. Diyi-
| 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 a regional surplus fund, and
| when this has reached 40 per cent of
| the original 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 a 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"
| 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. IL neces-
| sary. part OF the reserves transferred
/ to the regional banks may consist OF
/ commercial paper.
Reserve Required.
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 requir-
| ed, IL per cent OF demand deposits
| and per cent. OF time deposits. Five
| twelfths must be held in the banks
| own vaults for two years and four
| twelfths after that. For the first year
! two-twelfths must be kept in the re
/ gional bank, increasing one-twelfth
each six months thereafter until II
| reaches five-tvelfths OF the total re
| serve. For three years the unallotted
/ part OF the reserve NAV be kept in
/ the banks OF reserve cities After
! that time 1t must be kept either in
This Age Of Lusu-y.