The farmer and mechanic., 1915-09-28
THE FEDERAL RESERVE SYSTEM
TN IT'S RELATION TO THE FARMER

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guest at the annual dinner Of the
chief commercial body Of the Capital
of the Old North State,-a State rich
in traditions of Colonial and RevOlu-
tionary times and which has taken
conspicuous part in the making OF our
national history. At no time has your
State enjoyed greater national pres
tige than ii has at present. The Pres
ident Of the United States lived in
North Carolina when he was boy,
and in his Cabinet sits, as Secretary OF
the Navy, a distinguished citizen or
your State and city. One OF your
Senators is Chairman of the Senate
Committee on Rules and the other is
Chairman Of the great Finance Com
mittee Of the Senate. A Representa-
tive from your State will soon be
called to assume the duties of Chair
man of the Ways and Means Commit
tee of the House and Of majority
leadership in that body, response
bility which has for the past four
years been so ably discharged by
Representative from my own State of
Alabama, who now has been given
by the people of that State a seat in
the Senate. The important chair
manships held by your Senator'S and
Representatives will give your State
a commanding influence in legislative
affairs during the term of the next
Congress.
One of the most important measures
enacted by the last Congress is the
Federal Reserve Act, which has pro-
vided for the currency and banking
reform which has been demanded by
the people of this country for more
than twenty years. Only ten months
have elapsed since the twelve Federal
Reserve banks were opened and ready
for business, and while the banks have
not yet attained their full develop
ment, 1 think it will be conceded that
they have. during their brief exist
ence, accomplished all that could have
been reasonably expected of them.
The masses OF the American people
are engaged in agricultural, industrial
or commercial pursuits, and it was
assumed from the start that under
the operations of the Federal Reserve
Act the great commercial and indus
trial interests of the country would
be directly benefited Events have
proved that this assumption was not
unwarranted. and / shall therefore
discuss tie Federal Reserve system in
it's relaI IN to the agricultural ele-
ment
Two Kinds of Bankers.
1t s3Auld be remembered that there
are two distinct sections in the bank
ing 6eld d:-o1- is commercial bank
~
ing. An investment banker as a rule
operates with funds belonging to him
self and to his associates or to those
who bave placed funds with him fol
the sNecihc purpose of investment. A
commercial banker. on the Other
hand, receives deposits from all classe:
Of people and holds them under agree
ment to repay them on demand o.
upon comparatively short notice. I
is necessary, therefore, that his invest
ments should be of such a characte
as to enable them to be readily Ii
Quidated and the bulk Of his loan
should have only a short time to rul
before maturity. The member bank
Of the Federal Reserve system ar
commercial banks and their reserve
are carried on deposit with the Fed
eral Reserve banks. The wisdom o
Congress, therefore, in limiting the in
Vestments of these Federal Reserv
banks which carry reserves of com
mercial banks, to short time paper o
self-liquidating character, is be
yond dispute, and it is clearly the dut
of the Federal Reserve Board and Q
the Directors Of the Federal Reserv
banks to throw every possible safe
guard around the operations of tn
Federal Reserve banks.
While section "a of the act pre-
vides that National banks may in
vest limited portion OF their asset
I'm farm mortgages having not Ionge
than five years to run, no permissio
Is given for the rediscount of thi
mortgage paper with the Federal Re
serve banks, and it is probable there
fore, that National banks will not len
money on farm mortgages to an
great extent except in those section
of the country where such loans II
favorably regarded by the investin
n a md yh hnv ho II
disposed of in case of need
Provides For Farmers.
While the Federal Reserve Act hs
not created a rural credit system,
has provided, as far as is consistel
with safety under a system which ca
mes the reserves Of commercial bank
Tor the requirements of those engage
in agricultural pursuits. For il
stance, in section Is, in which IL
powers of the Federal Reserve banl
are enumerated, authority is given f
the discount Of notes. drafts and bil