Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1914-02-20

D.
quirement by providing for the organi-
zation Of no less than eight nor more
than twelve bankers banks to be
known as Federal reserve banks, which
plus reserves Of the national banks,
which shall be endowed with large
powers Of credit extension in the form
Of notes and book accounts and which
will offer to the individual banks a
market where they can exchange bills
and notes which they have discounted
for Immediately available cash. 1t is
Furthermore proposed to nationalize
,, and bind together these separate dis
trict institutions through the agency
of a government committee Of seven to
be known as the Federal reserve board
which is to have lmost unlimited
power over the business and resources
Of the independent reserve banks.
There can be no question that the
Act will help to prevent general bank
suspensions, stoppages Of domestic ex-
change and other features of panics
with which we have long been too ia
miliar and which from time to time
have brought industry and trade to a
standtsill and caused untold suffering
to countless people.
The reserve banks will be in perma-
nent operation and will not have to be
contrived in moments Of emergency as
have the clearing house committees in
the past. They will be endowed with
legal powers and will not have to trans
gress the law as the clearing house
committees generally have done. And
more important than all this, for the
first time in our history the reserves Of
more than single locality will be
modified. This generally reduces the
likelihood Of panics and If the move
ment could only have gone little fur
ther and eliminated all sectional lines
in banking, 1t would have excluded
panics altogether from the range Of
possibility. So long as the banks Of
different localities are separated into
Independent groups we shall still be
liable to some Of the dangers of Sec
tional Jealousy and fear, but the oblit-
Grafton of all Of the smaller local
boundaries is vast step in the right
direction. It is to be hoped, too, that
the Federal reserve board, which is en-
dowed with almost unlimited power
over the reserve banks will act with
such discretion as to overcome what
ever sectional divergencies are left un-
der the present Act.
A Great Expansion of Credit.
There can be no doubt as to the pos
sibility Of great expansion Of credit
under the terms Of the statute, but 1t
is of the very essence Of the Act that
new reserves of lending power are to
be created The required cash reserves
Of the reserve city banks are to be re-
duced from 12a per cent Of all deposits
to per cent Of the demand deposits or
by nearly one hundred and fifty mil
lions of dollars The required cash re-
serves Of the country bank are to be
reduced from to per cent, or by per-
haps seventy-five millions Of dollars.
With the release Of this great mass Of
cash, vast potentialities Of lending
power will be unsealed If 1t finds it's
way into the, reserve banks it may be
used as 35 per cent reserve against
credit extended in the form Of ledger
balances, OF as 40 per cent reserve
against credit extended in the form Of
circulating notes. In either case, 1t
could form the basis Of new credit to
the public in excess of a thousand mil
lions.
If we now ask how the use Of these
potentialities Of credit Is to be prevent
ed in normal times we find that prac-
tically the only check upon such, rests
in the powers granted to the Federal
reserve board. There is no restriction in
the statute upon the amount Of bills
and notes that can be rediscounted by
the reserve banks except that they
must have no more than ninety days to
run and in the case Of paper secured
by live stock or used for agricultural
purposes not more than six months. The
reserves required to be held by the re-
serve banks are so low as to allow Of
great expansion both in notes and led
ger balances before the minimum is
reached and even these reserves can be
used at the option Of the Federal
board.
The Board All Important.
In fact from whatever viewpoint we
regard the pi DIVISIONS Of the Federal Re-
serve Act and no matter which Of it's
features we have under consideration
it is evident that the Federal reserve
board Is the crux OF the entire system.
It will be charged with the supervision
Of the many thousand member banks
and virtually with the administration
of the reserve banks. 1t will designate
the chairman, deputy chairman and
one third Of the directors Of all Of the
reserve banks and Of each Of their
branches and 1t will have power to re-
move or suspend any or all Of their di-
rectors or officers without appeal. 1t
will re-arrange the boundaries Of the
districts as it deems wise, and it will