The evening herald. [volume] (Albuquerque, New Mexico) 1914-1922, 1915-01-27
RESERVE BANKS NO
EXPERIMENT SAYS
BOARD REPORT
In Light of Events to Date,
Success Of New System Is
Assured, Declares Federal
Commission In Charge.

regional reserve banks last Novem-
Der and The two months In which
they have been In actual operation.
was sent 70 congress today. Il an
nounces that noteworthy results al
ready have been accomplished aud
that the system now cannot be re-
garded as experimental In the sense
that there u any uncertainty as 10
the outcome No legislation IL asked
for. the board devoting It's report
chiefly TO an outline OF how the new
system has strengthened the nations
financial situation.
Less than Ave months have
elapsed" says the report. since the
Introduction into our financial sys-
Of the most far-reaching change that
has been made In the field OF Amer
lean banking since the passage of the
national banking act. Less than two
months have rome by since the fed
eral reserve banks actually opened
for business. The system. however.
In in operation and has already pro-
duced results OF the most noteworthy
character.
"-nar 10 much yet TO be done, but
sc wsrp N'no be regarded as exc
per ne - - he nenae that there Is
n-y .t6sns..,. as TO the outcome.
N CT, Iaeb.s,a n as to how rap
A.. T. -, ~ s'ss.ble 10 develop the
- ttaA.'.-r AID OF the
ssGe.ss r-sSrve system. Its poten-
tat" . so, and should contrib
ute - sae1s nLiy In the future to tho
%soi:uity. "a st.fy and flexibility OF
the Anne. An credit systems.
laNHkA ag.aN H.
suggests itself and must he frankly
faced; What Is the proper place and
function OF the federal reserve banks
In our banking ma credit system ?
on the one hand Il iE represented
that they are merely emergency
banks TO be resorted To only In time
OF abnormal stress. while on the 9TH
er Il Is claimed that they are In es-
sence simply additional banks which
should compete with the member
banks. especially with those OF the
greatest power. The function OF a
reserve bank is o 10 be identified
with either OF these extremes. al
though occasions may arise when
either Of such courses may be imper-
alive. Its duty plainly Is not to await
emergencies hut by anticipation 60 do
what II can TO prevent them.
: also II. al any time. mme
Industry or agriculture Ars.i IN .rls
opinion OF the federal reserve board.
burdened unduiy with excessive in
terest charges, It will be the clear and
imperative duty or h reserve board.
acting through the discount rate and
open market powers. To secure n
wider diffusion OF credit facilities at
reasonable rstos.
The ready availability OF rs re-
sources ~ uf supreme importance In
the conduct OF a reserve bank. only
then will II constantly carry the
promise Of being able 20 protect bust
ness against The harmful stimulus
aud consequences of ill-adviscd re-
strictions and unnecessary contrac-
tions on the other. with exorbitant
rates 90 interest and artificial strln-
genc.cs. II should at an times he a
steadying Influence, leading when and
where leadership Is requisite. but
never allowing itself 10 become an
instrument for the promotion OF the
selfish intorestS " any private or Sec
tional group, bt their aims and meth
DDS open or disguised.
Time and experience will show
what the seasonal variations In the
credit demands and facilities In each
OF the reserve banks OF the several
districts with be and when and 10
what extent a reserve bank may,
without violating Its special junction
ms a guardian OF banking reserves,
engage In banking and credit opera
| tions.
1.-THE vast and complex structure
Of modern banking and credit sys-
TENS In one OF extreme delicacy or
balances ana adjustments, and Il
must never he overlooked that u IN
/ highly sensitive to all manner OF dis
turbances as recent events have pain
fully demonstrated. The banking
systems Of the larger nations are
| closely related TO MI another, ana
financial distress or collapse AZ n
point quickly permits shock TO all
others. Safely fcr us In critical times
will depend on the confidence our
system commands. the strength 81 its
reserves, and lts power to bring them
INTO action promptly ana effectively
Il needed.
In dealing with new districts and
entirely changed banking methods.
time and experience alone can sup
ply the data necessary for charting
the curse "a he pursued. This con-
sideration, II nothing else, would
suggest the greatest patience and pru-
dence. even II the European horizon
We're less cioudsd than u rs today.
None the less, the board realizes that
whore extraordinary conditions war
rant extraordinary measures. Il is the
foremost duty of the board and the
banks 20 act promptly n boldly"
Tine board refers briefly To open
market operations Of tho reserve
banks and announces that regulations
governing the purchase OF accept
Ances viii sOo be made public. with
the issue OF these regulations, the
report says. there will be ample em-
ployment for an funds OF these banks
which experience demonstrated they
may safely and properly invest at
times when such funds are NOT ABB
sorbod In responding 10 the demands
OF commerce. industry ana agricui-
ture
The board points Qua that another
pressing problem, that OF admission
Of state banks and trust companies
20 the system, IL receiving consider
alton and that az least a tentative