Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-01-27
Report Covering First Two
Months of Operations Sub
mitted to Congress.
MUCH YET TO BE DONE
TO PERFECT THE SYSTEM
Numerous State Banks and Trust
Companies Awaiting Regula-
lions for Entry.

The first report of tho federal reserve
hoard, covering the developments winch
preceded the opening Of the twelve re-
gionsI reserve banks last November
aud the two months in which they NAVE
been III actual operation. was sent 10
Congress today 1t announces thdt
noteworthy results already have been
accomplished. and that the system no"
cannot bc regarded as experimental
in the sense that there is any unccr-
tainty as to the outcome No icgisla-
ton is asked for, the board dcvot'1ig
l.s report chiefly to an outline of now
the new system has strengthened inc
nations financial situation.
Less than five months have elapsed,
SAYS the report, "since the introduction
into our financial system of the most
far-reaching change that has been
made in the field of American banking
since the passage of the national bank
ing act. Less than two months nave
gone by since the federal reserve banks
actually opened for business. me s rs
lem, however, is in operation, and has
already produced results of the most
noteworthy character
Much Yet to Be Done.
There is much yet to be done, but
the work cannot be regarded as expert
mental in the sense that there is any
uncertainty as to the outcome. The
only question is as to how rapidly 1t
will be possible to develop the full
capa bilities and resources of the fed
eral reserve system. Its potentlalltles
are vast, and should contribute I'M
measurably in the future to the soildl-
ty, stability and fleXibility OF the Amer
lean credit systems.
The question, however, naturally
suggests itself, and must be frankly
faced: What is the proper place ana
function of the federal reserve banks
in our banking and credit system: On
the one hand. it is represented that they
are merely emergency banks to be re-
sorted to for assistance only in time OF
abnormal stress, while on the other
hand it is claimed that they are In cs-
scncc simply additional banks Whlch
should compete with the member banks,
especially with those of the greatest
power. The function of :, reserve bank
is not to be identified with either or
these extremes. although occasions may
arise when either of such courses may
he imperative. Its duty plainly is not
TO await emergencies, but by ant1cipa-
tion to do what it can to prevent them
To Publish Regulations.
The board refers briefly to open mar
ket operations of the reserve banks,
and announces that regulations gov
crning the purchase of acceptances Will
soon be made public. With the issue of
these regulations, the report says, there
will be ample employment for all funds
Of these banks. which experience dem
onstrates they may safely and properly
invest at times when such funds are
not absorbed in responding to the de-
mands of commerce, industry and aSrl-
culture.
The board points out that another
pressing problem, that of admission OF
state banks and trust companies 10
the system, is receiving consideration,
and that at least a tentative solution
of the problems at issue may be arrived
at in the near future.
The report shows that ninety-three
state banks and trust companies. with
aggregate capital and surplus OF w.
I513O6, have been converted into ma
tional banks and entered the system
since the passage of the act Nine state
banks and four trust companies, with
capital and surplus of S1.,Ss4,0o0. have
been admitted under their own char
ters with the understanding that they
will accept regulations for the conduct
OF business made by the board. April
cations from fifty-one other such m
stitutions which prefer TO wait tor the
issuance of regulations governing their
ADMISSION are ptiOiit btiOiC thS pONAN -.
Opening Wisely Timed.
Events have since shown" says the
report. that the opening of the institu-
tons was wisely timed to synchronizc
with the restoration of activity in our
export trade When the financial anxi-
ETY. which prevailed during the latter
part of the past summer and the diff
Guilty which was then experienced IN
getting banking accommodations at
reasonable rates. even upon security
of undoubted solidity. are recalled, the
substantial Improvement which has
taken place since becomes evident, and
is remarkabl tribute not only to the
recuperative power of American COM
Inerce and industry. but also and large
Iy to the beneficial operation of the
new banking system.
aaAv nnnn COTTON HlIMn