The weekly tribune and the Cape County herald. (Cape Girardeau, Mo.) 1914-1918, 1915-01-29
RESERVE BANKS
have REVIVED
BUSINESS IN U.S.,
Government Board in First
Report Says New Scheme
Benefits Nation.
INSTITUTIONS TO AID
FARMER IN FUTURE
Money Will be at Disposal Ofany
Business in Need, Say
Commissioners.

Washington, Jan. 27-In its first
annual report issued here today, the
Federal Rerserve Board takes a most
optimistic view of the Federal Re-
serve Banks achievements in the few
months of their existence. and of the
position they are to hold in American
commercial life. 1t described the quick
recovery from the financial chaos
caused by the outbreak of the war as
due to the new banking system.
In outlining the financial emergen-
cy of the country when the members
of the board took the oath of Office
Aug. 10th last, the report says the
situation demonstrated to a striking
degree the dependence of the Ameri-
can banking system upon the call-loan
market because of the large proper
tion of the country's banking reserves
invested in call-loans protected by
stock exchange collaterals.
The opening of the new banking sys-
TEN was hurried on account of war
emergencies, the report states, but
events have since shown that the OPEN
ing of the institutions was wisely
timed to synchronize with the restOr-
iation of activity in our export trade.
The Federal Reserve Banks were able
to begin business with substantially
the whole of their deposits in gold and
without pressure on the general busi-
ness or credit conditions.
The change in reserve requirements
on the establishment Of the new sys-
TEN releasd throughout the country,
the report notes a very considerable
amount of funds which previously had
had to be held idle BY the banks. Pre-
cisely how much was released prob
ably cannot be told, says the board but
the release of actual cash and the in
crease of lending power were very
large. Rates on commercial paper in
New York City fell from above six
per cent to 3l2 to per cent, within
two weeks after the new banks opened
on November 16.
The board, believes, however, that
the reduction in interest rates was
largely due to the basic elements of
confidence inspired in addition to the
actual release of reserves.
The report describes the operations
of the gold exchange fund and the cot
ton loan fund. Of the latter it says
that its formation rendered material
service by restoring confidence, thus
stabilizing values and establishing a
basis for extension of credit on cot
ton as collateral. The board asks it
self the question: What is the proper
place and function of the Federal Re-
serve Bank? and answers as fol-
lows:
On the one hand, it is represented
that they are merely emergency
banks to be resorted to for assistance
only in time of abnormal stress; while
on the other, it is claimed that they
are in essence simply additional banks
which should compete with the men,
ber banks, especially with those of the
greatest power. The function of a re-
serve bank is not to be identified with
either of these extremes, although oc-
casions may arise when either of such
course may be imperative. It's duty
plainly is not to await emergencies
but by anticipation, to do what it can
to prevent them. So also, at any time,
commerce, industry or agriculture, are
. in the opinion of the Federal Reserve
Board, burdened unduly with excessive
interest charges, it will be the clear
and imperative duty of the Recerve
Board acting through the discount
rate and open market powers, to Sc
cure a wider diffusion of credit facil-
tiles at reasonable rates. The Federal
Reserves of the nation, the founda-
ton of its banking structure. Nothing
should be permitted in the operation
of the Reserve Banks which would
weaken this foundation. The resources
of Reserve Bank, to be useful for
its peculiar purposes, should always
be readily available. 1t follows, there
fore, that they should be mainly in
vested in such q short-term liquid ia
vestments as can be easily converted
inte cash as occasion may require.