The Leon reporter. (Leon, Iowa) 1887-1930, 1915-07-01
Federal Reserve Board.
Washington, June 7, 1915.

Washington, June 7, 1915.
| Membership of State Banks
A unified banking system, embrac-
ing in it's membership the wellman-
aged banks of the country, small and
large, State and National, is the aim
of the Federal Reserve Act. There
can be but one American credit sys-
TEN of nationwide extent, and it
will fall short of satisfying the bust
ness judgment and expectation of
the country and fail of attaining its
full potentialities if it rests upon an
incomplete foundation and leaves
out of it's membership any consider
able part of the banking strength Of
the country. The way must therefore
be opened for State banking insti-
tutions to contribute their share to
the capital and resources of the Fed
eral Reserve Banks, in harmony
with the intent of the Federal Re-
serve Act and in accordance with it's
provisions State banks, trust COM
panies and national banks have their
distinctive characters and places in
the American banking organization,
and these should be represented in
co-ordinating them in the Federal
Reserve System. The problem pre-
scented is to find a basis upon which
these different types of banking in
situations may thus be associated
which shall be fair to each and which
will not require greater uniformity
Of operation than may be necessary
to the attainment of the purposes Of
the Federal Reserve Act.
| Approaching fully that the
strength of the Federal Reserve sys-
tenn is to be measured by the quality
and character of its members rather
than by their number, the Federal
Reserve Board is prepared to use
the broad discretionary power vested
| in it by the Federal Reserve Act to
bring about this coordination on the
basis of equity and practibility. The
Board has sought, in the regulations
governing the admission of State
| banks and trust companies hereto APP
pended, first, to establish only such
reasonable standards of admission as
| will be generally recognized as neces-
sary to protect the Federal Reserve
system and the national banks,
whose membership in the system is
obligatory, against the admission OF
any bank which would be a source OF
weakness rather than of strength,
and, second, to prescribe such regu-
lations governing their conduct as
will insure a reasonable conformity
to fundamental principles deemed es-
sential to the success of the new
banking system.
Membership in the Federal Re-
serve system carries with it privi-
mt ixAS. nf
not only to the banks themselves,
but to their customers as we'll. 1t
may be confidently expected that
system and the fuller appreciation
by the public of it's meaning and
value, membership will come to he
regarded as evidence of banking sol
idity, and that the access afforded by
membership to the facilities and re-
sources of the system will add to the
prestige of even the strongest instl-
tutions: so that in time the public
will recognize in the new banking
organization which is in progress OF
realization two principal classes OF
banks-those which belong to the
Federal Reserve system and those
which do not, or Member Banks
and "Non-member Banks
TIE Board realizes, however, that
membership also carries with 1t OF
necessity obligations as we'll as prlVl-
leges. The Federal Reserve Act I'M
poses certain fundamental conditions
governing the membership of State
banks in the Federal Reserve sys-
TEN, and prescribes that banks not
organized under Federal law must
comply with the capital and reserve
requirements relating to national
banks, and must conform to the pro-
visions of law imposed upon nation
al banks respecting the limitations
of liability which may be incurred
by any person. firm, or corporation
to such banks, the prohlDltlon
against purchases of or loans upon
stocks of such banks, the Withdraw
al or impairment of capital. and the
payment of unearned dividends, and
must conform to other provisions OF
the Federal Reserve Act applicable
to member banks, such as restrlc-
tions on the amount of acceptances
by such banks and on transactions
between such banks and their dlrec-
tors, and to such rules as the FEEDER
al Reserve Board may prescribe.
With respect to loans on real es-
tate or mortgages, the Board is not
disposed to assume as matter OF