Bismarck daily tribune. [volume] (Bismarck, Dakota [N.D.]) 1881-1916, 1915-06-18

a portion Of the loans and discounts
Of each such bank legally available
for r%ediscount.
(d) To link member banks togeth'
er and to give them the support Of a
powerful nationwide system, afford
ing the advantages of the banking
mechanisms of the older countries OF
Europe.
The hrst essential in providing bet
ter safety and protection to the bank
ing business 0 fthe country and In
preventing periods of panic and stress
was to establish a system Of redis'
count, which is q common feature OF
the banking systems of the old
World. An able English authority
once remarked that the quickest way
to check a panic is to smother it with
gold. If this is to be done, it means
that each bank must have a place
where it can quickly rcplenish its
cash and that there must be a method
which will provide every bank with
a reservoir upon which it can freely
draw whenever there is necessity.
,Rediscount Is comparatively simple
and means that a bank has converted
some of its best paper into cash to
meet local demands. This right has
been legalized and extended to every
national bank in the United States
1T has been extended to every state
bank, if they will utilize it-for state
banks have been given permission tC
become members o fthe new federal
system, and many of them have al
ready joined, coming in either as
State banks or first Matchmaking.
"The rediscount provisions of the
Federal Reserve Act contemplate that
a member bank shall have the right
to present notes and bills at the fed
eral reserve bank of it's district and
there exchange them for new federal
reserve notes, OF take the proceeds
in tn form Of credit on the books OF
the reserve bank.
Federal reserve banks are not per
mitted to accept for rediscount, notes
which are payable on demand, notes
given for land, notes given for carry
ing or trading in stocks. and bonds
notes on which the proceeds are to
be used for fixed investments or per
manent improvements, or notes Civ
en- for investments Of q speculative
character.
Notes and bills Of any member bank
hay be rediscounted at the federal
reserve bank Of the district when
they comply with the following regu
lations:
All such notes must have a fixed
maturity.
"All such notes or bills must orig
mate in the current activities Of mer
chandising, manufacturing, industrial
operations, the livestock business, OF
farming. Paper given for the purpose
of carrying on business is available
for rediscount. Notes given for the
purpose Of adding to the permanent
value OF the business or farm are no,
available.
"All business paper (notes giver
for conducting any one of the com
mon kinds Of commercial or industri
al business) must be within 80 day!
of maturity, or less, when presented
for %rediscount. The rate Of reds
count varies slightly in proportion tt
the length Of time such paper is tt
run to its due date. Notes and bill
due to mature in less than 80 day
are given a slight advantage in rate
Paper given by the farmer, the dairy
man, the livestock breeder, the shee
raiser, or the cattleman is availabl
for rediscount il. on the date Of il
presentation at the reserve tDanK, i
10 then within six months OF it's ma
turity. When noise based on agricul
ture or live stock are secured by chat
tel mortgage, they are available fol
r~ediscount on the same basis IS 9th
er paper, but a certified copy of thu
chattel mortgage must be attached
when they are presented at the fed
eral reserve bank.
Each note or bill SO presented must
be endorsed by the member bank
making the rediscount, and such en-
dorsement will be taken as sufficient
evidence that the bank has exercised
due care in selecting, for %presenta
ton at the reserve bank, the kinds
of paper that are admissible for re.
discount under the act. "
The Advantage.
What are the advantages of the
new system? | think it Is a fair
question, and if we cannot say to the
state, as we'll as the national banks,
that there are PRACTICAL and actual ad.
vantages under this system, we can
not expect that many state banks will
come in. l am Of the opinion that
there are advantages that are i'm.
portant, and as | see them, they are
as follows:
Il. A we'll managed member bank
has absolute protection in times of
stress or panic, and has been provided
with resources to fall back upon.
-. Member banks have the abil.
ity to obtain currency almost imme.
diately upon demand, without the
necessity of taking out bonds to Sc
cure circulation.
"3. The federal system so sup.
ports its members that it would be
practically impossible for a run on g
sound bank to cripple it or compel II
to close. ais .'
"a. Member banks have been pro
vided with a reservoir upon which
they car draw for any funds that are
needed to meet a legitimate expansion
Of credit demands.
IS. Member banks have beer
brought into closer andSmore practical
working relations with the fedora
government than before, and their