Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-11-07
BY I. A. FLEMING.

|
though its twelve regional banks, COM
pete with it's member banks for busi-
ness?
| Should it enter the field and buy
Investments?
| Should funds accumulated In the
federal reserve banks remain there.
until such time as an emergency
creates sufficient demand to bring the
funds into use?
These are vital questions and the
banking fraternity at large Is greatly
| interested in their solution.
| Changes in the federal reserve act
are sure to be recommended to Con-
gress. The question of profit making
| by the regional banks Is sure to be
discussed.
Washington bankers hold that the
federal reserve system Is an emer.
gency act; that the full resources OF
the system will never be brought into
for heavy rediscounts of banking as
sets.
They Furthermore hold that the federal
reserve system should not come INTO
the member banks. that the system IS
not dependent on pronts TOT It's ex-
penses, that this falls entirely on the
banks in the system and they would
rather pay their fun snare OF lesit -
mate expenses than be called upon 10
enter into competition with the re-
gional banks.
The reserve system pays no interest
whatever on the money IN It's vautts ~.
So far as known, it will not pay the
government for funds deposited under
it's care in the different regional In
situations. Ultimately, under the law
as 1t stands, the various regional banks
of the system will hold per cent OF
the aggregate reserves of the 1000 odd
banks In the United States. aggregat-
ing many millions of dollars, upon
which many banks can obtain per
cent interest and on which tney Will
not receive 1 cent interest.
If, in order to make profits, they
enter the bond market, the regional
banks compete with their MEMBER
banks with money that costs them not
nav interest on deposits, and the COM
petition would naturally stinen the
bond market, and, in so far as all rec
cords go, exceed the purpose Tor winch
the system was created.
One of the strongest arguments as
to the intent of the lawmakers that
created the law is the very fact that
the Expenses of the reserve system are
to be pro rated. according to capital
and surplus, upon the member banks
No indication in this that the system
was expected to be even partially self
supporting.
bankers also fear the expressed de-
sire of some of the members of the
federal reserve board to force member
banks to carry all their reserves with
the regional bank of which they are
members. Deposits carried by banks
with member banks in central reserve
cities, to certain extent, may be
counted as bank reserves. On these
the member bank Is paid interest by
the holding institution and In return
a large number of checks are sent to
the bank making the deposits for col
lection on which there is also proht.
If the reserve board is empowered 70
hold all reserves the member banks
will lose the interest and also the profit
on collections.
TT looks" said one banker. ''as II
the federal reserve board was trying
to injure the banks which Congress
has placed under it's care"
amendments to the federal reserve
act along the lines indicated show also
an intent to drive the member tnstltu-
tons into the intradistrict clearings
system, which up to date have been
adopted by but one or two banks In
the city.
Bankers wish to continue old meth
DDS that have been tested by years OF
practical banking; they require, In
these days Of easy money ana enor-
ing of the requirements under the re-
serve law, every source of profit to meet
the taxes imposed on them; ON their
circulation; on gross earnings. realty,
etc, and to make moderate returns TO
the shareholders whose money mas
furnished the capital of the bank.
In a word, bankers desire that the
federal reserve system snaH De Wnat
its founders planned. an accommooa-
ton to the members OF the system; an
eency. not of necessity a profit-ma ker.
because all expenses are paid by the
banks under the law. and lastly they
do not want to be deprived OF their
legitimate sources Of income. nor OF
their rights to do business where they
can do it the cheapest and with the
best profit.
They claim tho law was made to aid.
not to in5ure.
Becoming Burdensome.
Washington bankers are also COM
planning Of the added work placed on
ca shiers and other members Of their
clerical forces by the increasing in
ouiries on methods, facts and figures
coming from the controller OF the cur
rency There are those who consider
that some Of these facts are to be
used as a basis for further amend
ments to the federal reserve act. but
the most general complaint IL on the
added labor and the increased cost in
publishing the periodical statements.
1T is all right for the controller to
be inquisitive. We have nothing to
hide" said one banker, but It does
seem as II he might avoid delvfng 80
deeply into mere details. with which
his examiners in every district are per-
fectly familiar and which are OF no
great importance in considering the
question Of solvency or the honest ad-
ministration Of the affairs Of a bank.
IF our tellers and bookkeepers had
nothing else to do 1t would be all right
to employ their time for the govern
ment, but their days arc full on tho
banks business. Moreover. we turn
our bank over to the national bank ex-
aminer. on request, and he should make
1t his business to dig up statistics de-
sired, at the expense of his department.
which. after all. is paid by the banks
in the system"
For time the speculator In securities
will go on and on with faith in rumors.
faith in estimated statistics. believing in
the reports that are SO generously spread
around-and then no will oakland de-
mand to be shown.
For months Wall street has listened to