The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-02-16
FINANCIAL REVIEW
OF THE PAST WEEK
Factors for World Ease in
Money Include the Fed
eral Reserve Act.
BANK POSITIONS STRONG
Possibilities Of impairment
Which Make the Prospect
Somewhat Uncertain.
BANK POSITIONS STRONG

gether absurd the statements which are
being made both in this country and IN
Europe that our new currency legislation
sponsibls for the worldwide weakening
Of the money market Sound reform Of
the American banking and currency sys-
TEN has long been regarded by the imam
cal world rs something indispensable to
the economic welfare Of civilization. The
Federal reserve act 10 a measure OF re-
form. but how sound It Is remains 20
be proved. II II works well or In made
to work we'll 1t will relieve Europe Of
recurrent strain on American account. 1t
will enable the United States TO take
place with European nations In financing
the growth Of newer and less resource
full countries. Just now. though. It would
appear that the relief which II has af-
forded to Europe is furnished by its
prospect Of releasing a large quantity
Of gold for export to the Old World.
The European purpose clearly demon
strsted last year and Just as resolutely
maintained AZ present Is TO increase the
gold reserves Of European banking sys-
TENS. II would not be altogether fortu-
nate for w II before the new Federal
reserve systan 10 operating with some
degree Of snoothness Europe should with.
draw q large amount Of sold ON tho the
DRY that we are not going TO need n un-
der the new law. Europe has assumed
that. because we have held the largest
stock Of gold in the world and because
our banking and currency system as II
IN haa a mot ooh S.stA a..
ideal. much Of the gold In the United
States was idle. The fact is that while
the most effective possible use was not
! made OF this gold 1t had been kept
pretty actively at work by the perfec-
ton OF q credit system which employ ed
bank checks In the settlement OF the COM
mercial exchanges to far greater ex-
tent than Europe. The transition from
the old American banking and currency
system to the new might be made at con-
siderable inconvenience to ourselves II.
before the Federal reserve system is in
fair working order. the American supply
Of gold available for bank reserves should
he materially depleted for Europes bene-
Mt
Certain valuable compensations would
accrue In this process no doubt. Not the
least OF them would be the fact that
inflationary decisions which the Federal
reserve act has created must be materially
shrunk. II our stock OF reserve money
should fall somewhat In proportion with
tn. low ering of reserve requirements there
would be less likelihood OF starting the
new banking system on a scale OF credit
and currency expansion, but this view
contemplatcs the comparatively early
establishment Of the new financial ma
chinery. Easy money market calculs-
tons which have included the Federal
reserve act might have to be summary
la, th.. 90 t.txs he
IL 1t should appear that a year or two
must clapse before the regional bank
scheme can become satisfactorily incor-
porated into the American business and
financial routine. Undoubtedly part Of
the Federal reserve system can be eX-
temporized by or before the autumn of
tho present year. but this Is not the
same as saying that the new system will
be OF any particular advantage to the
country at an early date.
One OF the gratifying items of informa-
ton in the last week was the report
OF the Comptroller of the Currency giving
the condition of the national banks as OF
January ~ last. The return showed the
combined effects OF liquidation. the winter
depression Of business and the artificial
augmentation Of resources by the Federal
Governments special crop moving deposits
last autumn. As was pointed out by the
Comptroller the report demonstrated that
tho country was In excellent shape to
make the transfer from the old banking
system to the new. but the transfer il
not going to take place soon and IL
would seem TO be advisable for the
Government to hasten the withdrawal OF
its surplus deposits from the banks. There
Is no particular reason why the export
Of gold should be facilitated through a
redundancy of cash in bank vaults, and IL
the European money market should begin
to harden while rates remained easy here
a gold export movement might be &C
celebrated. The Treasury In now show ing
a current deficit which would warrant
the curtailment OF its deposits IN the
banks. and because a long interval must
elapse before the new Federal reserve
machinery can do much work II would
be an excellent thing for the Treasury
to put itself In as strong position as
possible to assist In making the con-
version Of the banking system when the
time comes
Naturally the national bank return con-
firms the supposit.on' that money is to
stay easy for credit purposes, especially
As the prospective Federal reserve act is
thought to hold out a promise OF more
permanent cheapness. At the same
time allowance must be made for the
present slackness Of general business and
for the possibility that a moderate re-
vtval In business activity might show
that the comfortable bank position was
owing chiefly to the temporary diminu-
ton OF business requirements. Unques-
tionably the position denoted by the ma
tiOua1 bank reDOrt like that shawn In