The Washington times., 1915-01-27
RESERVE B0ARD.TO
FIND MIDDLE GROUND
First Report Of Its Members on
New Federal Banking Sys.
tenn Submitted to Congress.

A safe middle ground carefully ex-
plored will be pursued by the Federal
reserve board in charting the future
course Of the Federal reserve bank
Ing system. A promise to this general
effect is given in the first report OF
the board submitted to Congress at
noon today.
The report details the Inauguration
Of the system and the trying situation
caused by the European war. which
was successfully met. 1t says tnat
on a safe course between the extreme
claims on the one hand that the
banks are only emergency banks TO
come to the front in time OF emerg-
must enter into active competition
with their member banks. The board
concludes that Thine and experience
alone can supply the data necessary
su.a. for sshart'ns the course to be Dur-
Possibilities of the System.
Reviewing at length the future pos
| sibilities Of the reserve system the
report says:
Its duty plainly is not to await
emergencies, but by anticipation to do
what IT. can to prevent t them; ind; SO also II; H.
agriculture are, in the opinion Of the
Federal Reserve Board. burdened un-
| duly with excessive Interest charges. II
| Will be the clear and imperative duty
Of the reserve board, acting through
powers. to secure wider diffusion OF
credit facilities at reasonable rates
The Federal reserve banks are the
OF Of s sson sf the
Of its banking structure. Nothins
should be permitted in the operation OF
tho reserve banks which would weaker
this foundation. The resources of
culiar purposes. should always be
readily available. 1t follows. therefore
that they should be mainly invested II
such short-term liquid investments a.
can be easily converted into cash as oc
reserve bank. moreover. implies that III
Investments should be marshaled In
steady succession OF maturities, 81
that 1t may at all times as nearly al
possible prove equal to the situation.
Points Out Dangerous Policy.
1T should not, however. be assumed
that because a bank Is q reserve bani
its resources should be kept idle for us'
only in times Of difficulty. or. II use'
at I'll in ordinary times. used reluctant
ly and sparingly. Neither should It D. D.
assumed that because q reserve banl
Is a large and powerful bank all Its re
sources should be in use all the time o
that 1t should enter into keen competi
ton with member banks. distributing
accommodation with a free and lavisl
hand in undertaking to quicken unwisel
the pace Of industry. Such polio
would be sure, sooner or later. to In
vito disaster"
With respect to the clearing OF check
the report says that it was the genera
opinion OF the directors OF the severa
reserve banks at a recent conferenc
that transit and clearing operation
| should be restricted to easily manage
able proportions in the beginning.
few OF the reserve banks have In great
er or lesser degree widened the scop
Of their clearing activities. At thi
time the whole matter Is still to be re
| garded as in condition OF develop
tion going on to materially assist tn
board in reaching sound conclusions.
Other Points Discussed.
Other important points made in tn
report arc as follows:
Establishment Of the gold excha ng
fund had a good effect on banking con
time Federal reserve banks were opened
. danger Of immediate gold exports ha
, passed.
The cotton loan, fostered unofficially
but to meet an urgent situation. was o
; immeasurable benefit in its effect o.
the cotton market, which can not b
judged by the amount OF actual loans
Patience with the system should b
exercised until 1t has had opportunity t
a demonstrate its usefulness.
Safety in critical times will depend o
, the country's confidence In the system
The report is signed by Secretary Nc
| Adoo, Comptroller Williams. and tn
| r,,u ha nH tha hOQ rl