Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1916-02-15
FARM LOANS FOR
RESERVE BANKS ARE
FAVORED BY BOARD
Six important Amendments
Are Proposed for Federal
Reserve Bank Act in First
Annual Report


recommended to congress today in the
report Of the federal reserve board for
the first full year of operation of-the
new banking system
"A years experience in the operation
of the FEDERAL reserve act" saws the re-
port has confirmed the board in its
profound conviction that the act has
been one OF the most beneficial pieces or
legislation ever adopted by congress. Not
only have its fundamental principles
been fully INDICATED, but in most de-
tails the working OF the measure mas
heer successful"
The amendments recommended would;
Permit national banks to, subscribe
and hold stock in banks organized Tor
the special purpose of doing a banking
business in foreign countries
Permit, with the approval OF the
board. the issue of federal reserve notes
C federal reserve banks either against
the deposit OF commercial paper or gold.
provided that the gold so deposited shall
count as part OF the required reserve
OF the bank.
Extend the acceptance system TO the
domestic trade so far as IL relates 70
documentary acceptanees secured by
shipping documents or warehouse re-
ceipts. covering readily marketable COM
modIties or against the pledge OF goods
actually sold
Permit national banks 70 establish
brzu-h offices within the city or county
Ia which they are located.
Permit advances 10 member banks
against the member banks secured prom
fssory notes or against the deposit or
pledge OF United States government
bonds.
Authorize a wide discretion in the
- making OF farm loans by national banks
so that a federal reserve bank might
make uroper loans OF this kind within a
= radius OF 100 miles Of its place OF bust
ness whether In its district or another
district
1T IS believed" says the report. that
the enactment of these amendments viii,
besides enlarging the usefulness OF the
national banks. result in greatly
STRENGTHENING the operation OF the fed
eral reserve act. and more completely
realize the purposes OF its trainers.
MORE MEMBERS URGED.
The board announces that il does not
consider that II can direct the business
operations OF federal reserve banks IN
respect TO fOreisn loans. but that hs
function is 10 oversee these banks A
plea is made in the report for the en-
trance into the system of more state
banks and trust companies.
In speakfne of foreign borrowing in
the United States the board points out
that il has received many inquirieseon
this subject and has givensthem careful
attention K mas reached the conclusion.
II saws, supported by competent legal
ADVICE. that the purpose for which
Goods are sold or exported, or the uso
10 which such goods are ultimately put,
does not fall within its province or 1uris-
diction-
IF" the report adds. 1.-The transac-
lions which have given rise 10 such sales
or shipments are OF a true commercial
rature, il the basis upon which they
rest is such as 70 comply with the re-
euirements of the federal reserve act,
and il the maturity Of the loan falls
within the limitation OF the law, then
me paper growing out OF them, no mat
ter BY whom or for what drawn, may
At will be discounted by federal reserve
hanks. and must be regarded as railing
within the legitimate sphere Of their OPP
erations-- The federal reserve act makes
no provision for collateral bond or stock
loans or for the purchase Of foreign gov
ernments' obligations by reserve fnstitu-
lions. Neither such obligations. there
fore nor loans to member banks based
thereon. are eligible as investments fos
federal reserve banks
THE operation Of the reserve system
i a matter Of business TO be conducted
in accordance with the terms Of the re-
serve act and the regulations Of the
board. II is not the province OF the
board to deal with problems involving
international relationships OF the Unit
ed states. either for the purpose of re-
stricting or extending expectations IN
one direction or another. The eligibili-
" of paper FOR reserve banks is deter
mined by considerations which are as
valid under one set Of international
relationships as another; the function OF
passing upon and dealing in such paper
under these regulations Belongs to the
several reserve banks. The board, how
ever. believes that the financing Of the
country's export trade fk at the present
time one OF the most important financial
problems with which the nation has 10
deal; and II Is OF the opinion that fed
eFal reserve banks cannot. even IL they
would, avoid the responsibility OF assist
ing in this process OF financing what L.
Ultimately ana properly devOlves upon
them"
The board expresses regret that in
some states suits have been instituted
TO test the validity OF the provisions OF
the reserve act by which IL may grant
certain fiducfary powers TO national
banks. announces its intention to have
tts counsel intervene in these cases and
says that every effort will be made 20
court at an early date. II is pointed
out that only thirty-two state banks
have been admitted 10 the system and
eighty-four others have come in by con-
version into national banks
1T is regrettsble." continues the report
that in not few states reserve re-
quirements for state banks and trust
companies have been materially lowered
by legislative enactment since the adop-
tfon of the federal reserve act. Tie
only justification for the reduction Of
the reserve redhirements for national
banks is the fact that the national
banks are members Of the federal re-
serve system and that the federal re-
serve banks hold part OF the consolidated
reserve Of the national banks and are
therefore in position 20 come immediate
u with all Of their resources to the
support OF national banks in case Of
necessity or emergency"
ELEMENT OF DANGER
on the other hand, IL is stated. state
banks have reduced their reserve re-
uuirenents without the support of the
reserve system. This" says the re-
uort, 'is an element of danger in our
banking system. because the weakening
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