The Washington times., 1915-04-02
Reserve Board Plans
To Admit State Banks
Prepares to Issue Regulations and Conditions by
Which They May Enter Federal System-Remov-
ing Restrictions on Field of National
Institutions.
Bx JuDSON C. WELLIYER.

measure, but because ii is the obvious
thing to do. and the thing that Con-
gress had In mind. the Reserve Board
Is now removing the restrictions against
national banks, and giving them all the
chance possible within the intent Of the
laws.
The Federal Reserve system is de-
clared to have disproved already an
other bugaboo that at one time was re-
garded seriously. While the act was
under discussion there was much un>
certalnty whether the reserve banks
would be able to do enough business to
to restrict their investment field in
order to avoid possibility that they
would crowd out commercial banks;
and with this restriction 1t was feared
that their capital might not be profit
ably employed.
Fears Are Groundless.
This fear is already shown ground
less. The reserve banks have now an
aggregate paid-up capital of about
$40, ,OO0. 900. and hold cash of about $500.
100000, of which $270. .OO0. 900 10 in gold.
They are investing In bank acceptances
and in municipal warrants and the de.
velopment Of the business of dealing in
acceptances is so rapid as to make very
certain that these reserve institutions
will always have ample field for usins
their money. 1t is already assured thai
most Of the reserve banks will pay divi.
dends on July /, which is distinctly bet.
ter than was expected by many even OF
the devoted friends of the new legisla'
ton.
The reserve banks at Richmond. Dal
las and Atlanta. as everybody fully ex
pected. have proved the most profitable
because they have had opportunity tt
provide funds for the South at time
when It was especially in need of cash
All the Northern banks are full o.
| money, and not SO attractive opportuni
ties for profit-making have been giver
to the reserve institutions in this sec
ton.
Expansion of Currency.
The most remarkable achievement o
! the reserve system. In the opinion o
! fnanciers. is the expansion Of the coun
| try's currency at the time the wa
brought something like panic, and tn
quick retirement Of that currency q
| soon as something like normal condi
complishment credit is lhiefiy due. an
1t Is freely given, to the workings o
the new system.
| It will be remembered that in 1907. a
the time Of the bank panic, a srea
volume Of what was practically emerg
| ency currency was issued; the nationa
banks forcing their note issues UP t
| the highest possible point under tn
laws then existing. 1t was easy enoug
| to get this imitation started, but hard I
| stop II. Once issued. the banks coul
not get the notes in and cancel then
The country had to stand imitation t
| that extent. and grow up to 1t.
| But under the reserve act II has bee
found possible to put out emergenc
circulation when needed, and to get
withdrawn almost Immediately It wa
not needcd. This is told in mos
Illuminating way by the figures.
| = In Cushioning Panics.
When the war started and bushes
all over the world found itself 1
trouble. emergency circulation was is
sued through the new system, up TO
total OF $3.50. 900 900. The maximum G
issues was reached about November
last, at that point. Then with our fol
e.gn- trade growing at leaps and bounds
with normal conditions being restored
with the balance of business powerful
; In our favor. there was no need of tn
emergency circulation.
1t was brought in and Cancelled Q
easily and quickly as II was issued. q
that at this time there Is only abo,
~ 900 900 OF II left outstanding
This h considered the complete den
onstration Of the reserve systems CT
pacity to do Just exactly what wa
: wanted Of 1t, in cushioning panics.