Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1915-01-28

eral Reserve Banks actually opened
for business The system, however, is
in operation and has already produced
results Of the most noteworthy char
aCter.
There is much yet to be done, but
the work cannot be regarded as ex-
perimental in the sense that there is
any uncertainty as to the outcome.
The only question Is as to how rapid
ly it will be possible to develop the
full capabilities and resources Of the
Federal Reserve System. It's poten-
tialities are vast and should contribute
immeasurably in the future to the
solidity. stability and flexibility Of the
American credit systems.
Tho Question
The question, however, naturally
suggests itself and must be frankly
faced: What is the proper place and
junction OF the Federal Reserve
Banks in our banking and credit sys-
tenn? On the other hand, it is repre-
sented that they are merely emergen-
cy banks to be resorted to for assist =
ance only in time Of abnormal stress;
While on the other it is claimed that
tney are In essence simply additional
banks which should compete with the
member banks especially with those
OF the greatest power. The function
OF reserve bank is not to be identi-
ned with either Of these extremes, al
though occasions may arise when eth
er of such courses may be Imperative.
Its duty plainly is not to await emer-
gencies but by anticipation to do what
it can to prevent them.
SO also If. at any time, commerce. IN
oustry or agriculture are. in the opinion
OF the Federal Reserve Board, burdened
unduly with excessive interest charges.
1t Will be the clear and Imperative duty
OF the reserve board acting through the
discount rate and open market powers to
secure a wider diffusion of credit facilt
ties at reasonable rates.
Resource Availability
THE ready availability Of its resources
is OF supreme importance in the conduct
OF reserve bank. Only then will it con.
stantly carry the promise of being able
to protect business against the harmful
stimulus and consequences Of ill-advised
expansions OF credit on: the one hand, or
against the menace of unnatural restric-
lions and unnecessary contractions on the
other, with exorbitant rates of interest
and artificial stringencies It should at
all times be a steadying influence, leading
when and where leadership Is requisite
but never allowing itself to become an
instrument for the promotion of the self
1sh interests of any private or sectional
group, be their aims and methods open
or disguised
Time and experience will show what
the seasonal variations in the credit de-
mands and facilities in each OF the re-.
serve banks of the several districts will
be and when and to what extent a re.
serve bank may. without violating its
special function as a guardian Of bank.
Ing reserves, engage In banking and cred
1t operations.
Complex Structure
THE vast and complex structure of
modern banking and credit systems is
one of extreme delicacy OF balance and
adjustments, and it must never be over
looked that it is highly sensitive to all
manner of disturbances as recent events
have painfully demonstrated The bank.
ing systems Of the larger nations are
closely related to one another, and finan.
cial distress or collapse at one point
quickly permits shock to all others
Safety for US in critical times will de.
pend on the confidence our system com.
mands. the strength OF its reserves and
its power to bring them into action
promptly and effectively If needed
I'm dealing with new districts and en-.
tirely changed banking methods, time
and experience alone can supply the data
necessary for charting the course to be
pursued. This consideration, If nothing
else. would suggest the greatest patience
and prudence even If the European hori-
ION were less clouded than it is today
None the less. the board realizes that
where extraordinary conditions warrant
extraordinary measures, it Is the fore
most duty Of the board and the banks
to act promptly and boldly"
Open Market
The board refers briefly to open
market operations of the reserve
banks and announces that regulations
governing the purchase of acceptances
will soon be made public. With the
issue Of these regulations, the re-
port says, there will be ample employ
ment for all funds Of these banks,
which experience demonstrates they
may safely and properly invest at
times when such funds are not alb
sorbcd in responding to the demands
Of commerce, industry and agricul-
ture.
The board points out that another
pressing problem, that Of admission
Of state banks and trust companies
to the system, is receiving cnosidera-
ton and that at least tentative So
luton Of the problems at issue may
be arrived at in the near future" o..
The report shows that SO state banks
and trust companies with aggregate
capital and surplus Of $9,151 .306, have
been converted into national banks