Norwich bulletin., 1915-02-09

States. The swings of the commercial pendulum from complete complacency to complete panic have brouckt wide spread disaster and loss to the whole business community, and have been entirely without a scientific DankinS control, such as prevails abroad. 10 regulate and reduce these extremes We have had 7.500 national banks and l 0G0 state banks, isolated units, without a scientific coordination, many Of which, in time of stress, have taken counsel of their fears and, by the l1oarding of their funds and con traction of their credits, have made worse the conditions they should have st-iyen to regulate and control.
 Reduce Harm from Panios.
 This large number of isolated banks, each holding tight to it's own cash re- serves, each with a pocketbook full of notes that it could not convert into either cash or credit in time of need. and each obliged by law to avail itself of a. singularIy inelastic bond-SecureC currency, have contributed but little to stay conditions that should have organization. No banking system can prevent panics, but a sound banking system can reduce the harm that they do to a minimum, for it can. II wisely administered, check overexpansion. one of the chief causes of panic, and check
 
 effects of 1t.
 The federal reserve act. and all of | the best proposed legislation in the past, has proposed to effect this con- | trol CD by a concentration of the gold reserves of the country instead of hay | ing this held in 7,500 independent res 1 ervoirs; @ by creating a real dis 1 count market, so that banks may | promptly and surely convert their lr1- 1 mobile assets into cash or credit as | nsT and (S0 hV inc 1 establishment of an elastic currency l easily taken out and automatically re- 1 tired as the needs for 1t increased or ! dFcreaS Sed, instead of the old bond l secured currency, which was slow to i issue and slower still to retire, and | involving a chance of loss to the is | suing bank because of the huctuation
 in the price of bonds used to secure it. l Plan of Organization.
 | Time will not permit me to more than touch on the organization Of the | banks. The central control lies in the 1 Federal Reserve board, consisting or ] seven members-lVe appointed by the president, and the secretary of the trea sury, and the comptroller of the i currency. IEx- -officio members are ap- | pointed for ten years and their terms are so arranged that one ends every | two years. In this way is prevented any radical change in the makeup or ] the board. This board exercises a very 1 definite control over the twelve re- serve banks-located at Boston, New York. Philadelphia, Cleveland, Rich moud Atlanta. Chicago. St. Louis, i Kansas City. Minneapolis, Dallas and l San Francisco. Each of these banks l is autonomous; all the stock IS own l ed by the National banks in the dis trict in which the bank is located, and these banks elect six Of the nine di- rectors. the other three being appoint ed by the Federal Reserve board These i directors elect a governor, who Is the ] chief executive officer Of the bank and corresponds to the president Of tire ] National bank and his subordinate of- 1icers. One of the three directors ar- pointed by the Federal Reserve board ] is designa ted as the chairman of the 1 board and federal reserve agent, and is the Federal Reserve boards repre- ! sentative in each bank-presides at the 1 meeting of the beard of directors, and is custodian of the unissued notes of the bank and of the collateral de- posted with him 10 secure those ls- sued for the use of the bank
 I would call your attention paTtic- uIarly to the fact that all the stock of these banks is owned by the Ma tional banks. and none by the gov ernment, and that a, majority Of the board are representatives of the banks and not of the government.
 i Banks Are Bankers Banks.
 These banks are bankers banks. and receive deposits only from banks, and do no business, either of deposit or
 discount with any individual or firm
 or corporation. Their deposits are part
 of the reserves of the National banks
 of the country and are almost entire
 Iy in gold, and effect the concentra-
 tion of gold reserves Of the country in
 F centers, where it can be immediate
 " available as a basis for credit for
 off,rr. hanks This is e{fpcrpl by the
 rediscount at a published rate for the
 account of member banks notes that
 they have in their vaults having not
 more than 90 days to run to maturity;
 and in this way will make possible the
 immediate conversion into cash or
 credit notes which heretofore have
 been inmobile and useless for emer-
 gency in the vaults of the banks of
 the country, supplying the currency
 through the issue of Federal Reserve
 notes, which can be issued to any ap-
 plying bank at any time, and. so can be