The Washington times., 1915-04-09
No Idle Dollars Planof
Federal Reserve Board
Perfected System of Clearing Balances Likely To Be
Put Into Effect to Make Every Dollar Do
Its Maximum of Work.
By JUDSON C. WELLIVTR.

sending cash, but by reducing the New
fork's bank Interest In the reserve FUND
increasing the Kansas City banks In
terest by that same figure.
Seasonal Movements.
1t is recognized that in the seasonal
movements Of business there are per-
iods when one regional bank may for
a long time have a persistent movement
Of these balances In its favor, with the
result that the debtor institution might
serve fund. In that case II would be nec-
essary actually to transport some gold
to make good the holding fer that bank
But this would be a very insignificant
that would meanwhile have been trans
acted by balancing off of credits.
One Of the greatest accomplishments
under this system Is expected t. be the
many years the business OF supplying
cash to move the crops" of the West
has caused a great drain on the cash
reserves of Eastern banks at the season
But this year. with the new System
working. an entirely new operation Will
be executed.
Issue New Currency.
II the supply Of cash in the West is
BTCdt enouSn 10 heeI
needs. the banks may issue new cur
rency. under the issue provision of the
| new law. Last year, following the dis
organization Of business incident to the
| wars outbreak, no less than $3.50, 900 ,o0c
| Of currency was thus put out. Then
with the first crop-movlng rush ended
and with business getting settled down
to more normal conditions following the
| war panic. that currency began to be
retired. and almost all of it is now can.
| celled again.
| This coming autumn it is expected
| that there viii be another bulge in the
| issues Of currency to move crops, fol.
| lowed again by its retirement as soor
as the immediate need for IL Is past. Al
the same time the clearance system will
be at work. making the balancing OF
credits do work that under less scien
| tif1c system would be done more or less
! by actual cash.
The system of cancelling credit.
back and forth in this way of course
highly developed but the Fedora
/ system is expected to perfect tn,
scheme, 10 accomplish the results
more perfectly, and at less expense
IT Is slso suspected that the advant.
ages OF membership in the system
VIII beCom" so apparent that banks
not now in the reserve system vii
be moved to enter It in order to avail
themselves of it's advantages.
Competing System.
It is realized that organization o
this system will divide the banktne
forces cf the country more distinct,
than ever before into two groups
one composed Of national banks anc
Others that are in the reserve system
the other composed of Institution.
not in the SNStem Each of tbes.
groups will therefore have its owl
Independent clearing system. and tn,
two will compete with each other.
It is the effort of the Federal Re
Serve authorities TO make the expens,
| of clearing under their system so sntal
ducement to bring in outside banks I,
the system. Much interest IL felt in tn,
developing attitude of outside bank
toward this plan of segreKating tn
banking system. There has been som
manifestation of hostility by the stat
institutions toward the Federal Re
serve organization, on the ground tina
the latter was disposed somewhat to in
wade the realms heretofore ocCupie
! by the State institutions.
| Doubtless there will be soma accen
| tuation OF this feeling as the new pla
, Of separate clearance system for tn
rserre banks develops. It has bee,
made apparent by some recent utter
ances on behalf OF the Reserve Board
notably a statement by Paul Warbur
some days ago-that the board realize
the feelings of the state institution:
and is anxious to avoid every possibl
occasion for hostirties. while at IN
, same time being minded to move ahea
| along the lines laid down by the Law
which contemplate making it desirabl
, for the state institutions ultimately [
come under the reserve system.