The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1914-10-14
HI PARKER WILLIS SPEAKS
( ON NEW Federal SYSTEM
Expert Who Aided in Drawing Law
Discusses Its Provisions in
All Their Bearings.
FUTURE OF STATE INSTITUTIONS
Outlines Obstacles to Immediate
Entry az State Banks and Trust
Companies Into Federal Reserve
System-Bankcrs Arc Interested.


The Federal reserve system. accord
ing TO II. Parker Willis, secretary of
the Federal Reserve Board and associ-
ate editor OF the Journal of Commerce..
New York, ono OF the leading authori-
ties on the reserve act in the country,
offers the banks Of the United States
AN opportunity for Standardization.
and for the Improvement of practice.
Mr.. Willis was the expert advisor of
Congressman Carter Glass and the
House Committee in the drafting of
the act providing for the new banking
and currency system
Mr.. Wills was the principal speak
or al the joint session yesterday of
the trust company and savings bank
sections OF the American Bankers AS
sociation. Addressing himself to the
subject The Future of state Institu-
tons Under the Federal Reserve
Act" Mr.. Wills said, in part:
OUTLINES OBSTACLES TO
ENTRY OE STATE; BANKS
The two principal obstacles to the
entry OF state institutions into the
Federal reserve system are as fol-
lows:
"d) The existence OF a large eIe-
ment of real estate loans in the port
foios of the institutions.
t:l2) The existence of what are
called Excessive loans" by which is
meant loans to single persons or in
uividuais. greater. than tho amount
permitted under tho national banking
law.
1T has been rightly assumed by the
State institutions. that they -ought to
eliminate these two grounds of crlti-
cism if they expect to enter the system.
y good many have suggested that
they be given n reasonable amount of
Limo to comply with the requirements
Of tho system, it being recommended
faint such time should include a period
ranging from six months to three
gears. II * probable that a good
many institutions could, if they chose,
get ready to enter in much less than
. year, while there are others that
could not successfully prepare them-
selves without n much longer period
than that. Some able bankers have
told me that If they were given a
Very reasonable extension Of time
within which to bring their assets
into conformity with the requirements
OF the national law and of the Federal
reserve act there would be no doubt
that they would enter the system in
large numbers, either at once, or rs
soon as the new banks are placed In
practical operation. Whether they
would do so or not is. OF course.
simply matter OF opinion. but In
t';c absence OF definite information OF
the subject, it may be assumed that
they would do so since this Is mani
testify the Wow of many able State
bankers who are entirely independent
OF one .anQtier ami WHO come from
sections of the Country so widely,
separated that 1t cannot he assumed
that they have merely taken thei.
ideas from one another
SSS'rEst ESSENTIALLY
FOR COMMERCIAL. BANKS
1T viii be observed. however. that
all that has been said thus far has been
h;i1cd upon the assumption that the
banks thus seeking 10 enter the sys-
tenn arc banks oil the same general kind
or description AS those which now con-
sttute the rank and file of the mem
her banks to-day. That is to say, it
is assumed tina; they are commercial
banks. on even that point | think
there is some confusion OF thought in
some parts of the country, ana pos
sibly among certain groups of bankers
elsewhere. The Federal reserve sys-
TEN is essentially intended as Il COM
mercial banking system. Ii is, there
fore, not desirable that any bank should
enter the system unless it is doing or
intends 10 do commercial business
All those institutions which are en-
gagged in operations that render it
unnecessary or undesirable for them to
corply with the commercial require
incnts arc, ipso fpcto, outside the range
of Banks that will lie much benefited
by membership.
Although. technically speakinp.
every State banking institution willing
10 comply with the law may bH&omc ~
lhcmbcr of th"~l'cdcr;,l reserve, svstcni
1T Is not desirable that those should do
so whose business is essentially OF "A
different tNpc from that OF the com.
.rcrcial banks of the country and which
are. consequently, either forced 10 make
q sacrfhcc. thereby subicctinr their
customers To discomfort or inconvcni-
enco 10 come in. or which are in some
other way subjected to difficulty as a
result OF il. In word, no state insti-
luton .ough: to. think of cntcruc the
Federal reserve system unless its bust
ness IL OF 4 distinctly commercial tyne
Granted that, there is every reason Why
II should come in; but granting that its
business is of 4 diffeicnt type the case
changes.
Not NECESSARY TO ENTER
TO GET SOME BENEFIT
IT seems 10 have been supposed by
some banks that trey must enter the
Federal SYSTEM To get the benefit of it,
THAT is only partially true. If the
hcdcrai rcEerv" system att;tins the OBJ
iects for Which ii is intended, ii will
40 so because OF the fact tllat IL inodi-
flies tho whole banking situation. ut
Will proviaa a market for commercial
paper and, Will tend 10 bring discount
rates TO deErco OF uniformity that
has Aever before beer possible When
the condito ns arc such throughout the
county That commercial paper OF
known Ha)ne can he marketed. ana
when. through the development of the
principle Of combined reserves, panic
dangers are largely eliminated, every
institution, whether a member of tho
reserve system on not. willgct the ben
cHt OF the improved situation OF
course this result cannot Ne reached
unless n SUFFICIENT number OF scommer-
eiai hunks are Joined together in Tie
system. Enough are already members
practically q insure this State of
tiinss. but the assurance VIII become
moro and MOI & distinct MS more ma
rlol@ vi the commercial banks join.
SHOULD they all enter, the system viii
gain 40 additional strength by the in
corporation ~ membcrs whose business
" OF 2 primarily invesnncn; character,
even though they technically comply
with the scrve.IcquircmeBts Neither
viii the Institutions themselves profit
particularly b.. auch membership They