The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1914-05-14
OF FEDERAL
RESERVE BOARD

DOu1 lol VI COMMERCE. 1LSE6 ID Ing
Fly to be general satisfaction with the
names announced for the members OF
the Federal Reserve board. to be ap-
pointed by President Wilson; but few
yet realize how important to the sue
cess of the new banking and currency
system the composition Of this board
Is to be. 1t may safely be said that its
successful organization and operation,
in at least its early stages, depends
absolutely Upon the competency, the
discretion and wisdom of the five men
who, with the secretary of the treas
ury and Comptroller of the Currency,
are to constitute this board. We can
only regard it as unfortunate that Mr..
Olney felt obliged to decline the APP
pOintment offered to him. 1t is to be
hoped that some man equally well
qualified may be found to take the
position offered TO him. Paul M. War
berg is well known as one of the most
competent authorities on practical
banking in this country. Mr.. Harding,
as a representative Of the south, and
Mr.. Wheeler of the middle west, are
also bankers of high position and as
sured integrity, while MI. Miller of the
Pacific coast is distinguished as a
student and scholar in economies and
finance. 1t would have been difficult
to find more competent men for the
task they are to assume in organizing
and putting in operation the reserve
banking system.
One Of h chief points Of criticism
in the framing Of the federal reserve
act was the power and discretion lodg-
ed in this board; and whether that
criticism was justified is yet to be
determined by experience, and it will
depend upon the capacity and charac-
ter maintained in it's composition.
During the delay, while the organiza-
ton committee has been deciding up
on the reserve districts and reserve
cities. the duties Of the reserve board
and their Importance have been fall
ing out of mind. The mex task will
be the organization Of the twelve fed
eral reserve banks, assuming that the
new board makes nc readjustment or
change in the number of districts,
which it has authority to do. The
board will choose three Of the nine
directors Of each of these reserve
banks, one of whom will be it's own
agent and chairman of the board Of
directors, and it will also have the
power to suspend or remove any Of
fiCer. OF director Of any one of these
institutions, including those which it
does not name. This will give it a
powerful hold over their management
SO far as the personnel is concerned.
1t may also change the reserve and
central reserve cities as now CLASH
fled to their number of reclassifying
them or terminating the designation
Of any Of them. 1t can also grant per-
mits to national banks to exercise the
functions of trust companies as trus-
tees, executors, administrators and
registrars of stocks and bonds, and it
can suspend the operation of any
federal reserve bank for violation Of
any provision of the federal reserve
act, administer it's affairs during sus-
pension and put it into liquidation or
reorganize it when deemed advisa-
BILE"
Besides this power and those Of gen.
eral supervision over these institu-
tons, it will have control over some of
the most important banking opera
tons. In regard to the transfer OF
funds from one federal reserve dis
trict TO another, for instance, it may
permit or by an affirmative vote Of
at least five of its members require
federal reserve banks to rediscount
the discounted paper of other federal
reserve banks at rates of interest to
be fixed" by itself. This is a discre-
tiOnaTy power of great Importance,
which might be abused in incompetent
or untrustworthy hands with disastr-
Gus results. 1t is also to have authori-
ty to suspend any reserve require
ment for thirty days and renew the
suspension for periods of fifteen days
Indefinitely, meantime establishing q
prescribed graduated tax upon the de-
f%iciency, the amount of which must be
tdded to the interest and discount rates.
The degree of control and direction
over the reserve banks which may be
exercised by this board, together with
its relation to the treasury department
Of the government, will make it per-
haps the most influential financial
body in the world.
By no means the least important Of
its functions will be that exercised in
connection with the issue of the new
currency in the form of federal reserve
notes and the gradual transition by
which the bond secured circulating
notes of the individual national banks
are to be suspended. The new notes
are to be issued lat the discretion Of
the federal reserve board for the pur-
pose Of making advances to federal
reserve banks through the federal re-
serve agents." and for no other pur-
pose" These will have to be applied
for through the federal reserve agent
d. ILS jain ueSlIlug lH6 uOteS,, ON u0-
post Of the prescribed security OF
commercial paper and with a 40 per
cent reserve in gold or lawful
money" The board may grant or deny
the application or grant it in part and
its agent must pass upon the col
lateral. A change in the collateral
may be required at any time. AS the
notes are made obligations of the
United States and may be redeemed
at the public treasury, the reserve
board shall require" each federal re-
serve bank to maintain on deposit
there gold sufficient in the judgment
of the secretary of the treasury for
the redemption of the notes issued to
such bank but in no event less than 8
per cent. 1t will be for the board to
rnn ALnt 4hIr L. pnnintainnd &c rntnlI On