Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1915-10-01
SEES CRAVE MENACE IN
BIG FICTITIOUS RESERVE
George j. Seay Urges Important
Change I'm Reserve Act to
Avert Imitation.
WOULD PUT ACT IN FULL EFFECT
Governor Of Local Institution Would
Require Transfer ut Once to Fed
eral Reserve Banks OF Reserves TO
Be Paid Otherwise i'm Two Years.

Require Transfer ut Once to Fed
eral Reserve Banks OF Reserves TO
Be Paid Otherwise i'm Two Years.
Asserting his belief that the enor-
nous and continuous piling up Of bank
reserves under the combined effect of
the now system and the overlapping
operation Of the old. have produced Il
financial situation from which the
country may hardly hope TO emerge
without repetition Of some of the
evils which have been the outcome Of
similar situations in the past. Governor
George J. Scay, of the Federal Reserve
Bank Of Richmond. made public ycster-
day a plan designed to correct the sit
uation and rob it of its menace.
The plan is supported by an elabo-
rate argument, illustrated By a series
OF tables intended to show that 1t
would be highly advantageous TO the
banking system of the country to put
into Immediate operation all of the
provisions of the Federal reserve act
which relate TO bank resources.
PART OF RESERVE BALANCE
Is FICTITIOUS. SAYS sEtf
According TO Mr.. Scay's tables.
sl,752.57l 900 arc now held as reserves
by the national banks of the country,
under the requirements Of the Federal
reserve act. An enormous amount of
this reserve balance is fictitious. ars-
Ing from the fact that the reserve act
at present allows banks 10 count as
reserves their credit balances in other
banks. which. In turn. count the same
balances into their own reserves.
The amount OF this fictitious" re-
serve 10 estimated by Mr.. Scay TO be
about s7oo.ooo.00o Under the read
justmcnt proposed by him. approx
mately half Of this would be wiped out.
The menace. II is stated. lies In the
fact that the enormous "fcutiour re-
aerve. plus the normally available sup
ply Of money, affords a supply OF bank
credit far beyond any sum ever before
made available in this country. offer
ing an inviting field for speculation
and imitation.
ACT PROVIDES TWO YEARS
For TRANSFER OF RESERVES
The act provides approximately two
more years within which the proper
ton OF reserves required TO be de-
posted by member banks may be
transferred TO the Federal reserve
banks. Mr.. scays plan calls for the
transfer AT once to the evcral reserve
banks OF all the remaining reserves
that Will eventually be due. Member
bank balances amounting to SI2T Sci
600 u Is claimed, would be eliminated
from reserves II My. Scay's plan We're
adopted and the act put into inmc-
dia,e and full operation.
The rcndjustmcnt suggested by Mir.
seay could be accomplished only by
an amendment OF the Federal reserve
act through congressional action II
would necessarily have To have the APP
al 81 h. '.In al Pa I'd
Mr.. Scay has spent several months
collecting material for his treatise.
which occupies. tables ana text. TWEEN
ty-fvc more pages OF large folio
size. Copies have been forwarded TO
the governors Of the twelve Federal
reserve banks and to The prncipa!
financial institutions OF the country.
WILL MODIFY OPERATION
OF RESERVE ACT
Tho plan. II adopted, Will materially
modify ,hc Immediate operation OF ~"
Federal reserve act. ana vii! bring its
creator TO the front as Il national figure.
Mr.. Seay disclaimcd any purpose OF
bringing the plan 10 the attention OF
the Federal Reserve Board declaring.
that he prepared the u"Sumen; pri-
mnrily for its appeal 10 bankers who
share his concern about the present
certain. nevertheless. that MIR Scay's
suggestions VIII attrac, the Federal
Reserve Boards attention and prob
ably it's serious consideration
1t was provided In the Federal re-
serve act ihat it's provisions should
he put in operation gradually. cover
ing period Of tire. years from the
inauguration OF the system This pro-
vision WAS made in order TO prevent
financial disturbance which might pos
sibly come from the transfer Of huge
sums =: bank reserves from the vaults
OF the banks of the country. big and
little, but particularly from the big
banks. TO the Federal reserve banks.
HOW ACT PROVIDES
FOR TRANSFERS 70 he MADl;
The first transfer of reserves was
made at the time OF the opening OF
the bank on November l6. 1911. and the
Federal reserve banks now hold about
$500, 100000 OF the bank reserves OF
the country. The next transfer Of re-
serves will occur on November Ii of
this year. This transfer viii involve
only about Sso.oOOO00. Another trans
fer of approximately the same amount
will be required on May ID. 1916, and
still another transfer on November l6,
1916. involving approximately the same
amount.
The object Of Mr.. Seay's argument is
to show the Advantages TO the Federal
reserve system and TO the general
credit situation OF the country to have
all OF these transfers made at once.
The following extracts are taken from
Mr.. Seays argument: