New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-01-04
Federal Reserve Banks
Haze Helped Country
New System Has Yet to Take Up All Its Powers-Fas
Improved Lending Conditions and Made
Money Rates More Stable
By HENRY PARKER WILLIS.
of the Federal Reserve Board.

Secretary of the Federal Reserve Board.
While there has technically beer
about q year Of experience with the
Federal Reserve system there has been
considerably less than year OF active
operation OF the banks. Some fune-
lions assigned to them By law have not
vet been undertaken at all. The time,
however. has been sufficient 10 indi-
cate many things that may be expected
of the new system, to show where GER
tain Of its principal problems will lie.
and to suggest the nature Of its further
development in sundry directions, both
in law and in business practice
Predictions made BY opponents or the
Federal Reserve system with reference
TO the probable character o. the per
sonnet of the new institutions have
been without foundation. The Fed~al
Reserve Board itself has never been
governed BY partisan considerations pr
its choice Of employees. The personnel
Of the several banks. so far as rs Sc
lection lay within the power Of the
board has also been chosen upon It's
merits. In the business transactions
Of the banks there has been no oppor-
UNITY for the exhibition OF party pref
erence; and, so far as can now be seen
no such opportunity Is likely 70 De
afforded
This policy has resulted in the choice
by the several banks of their own
stats, wholly free Of interference on
the part Of the Federal Reserve BOARD.
although the board has. in the case OF
the higher officers, freely given ITS al
vice when requested. The board ma
not only, as already noted. chosen us
own staff without reference 20 politlcai
considerations, but has made the cholcS
under system Of selection as rigld
and careful as that employed by the
Civil Service Commission.
Standsrdizing Paper.
Students of banking in its theoretical
aspects. however. will be only secondar-
liz concerned with the practical me-
chanics Of. the reserve system. Ihey
will naturally ask what has been done
nv the Federal Reserve Board toward
the Standardization Of commercial paper
and the Improvement Of lending condi-
tions in the United States. This was
one of the first problems to be at
tackled.
The Federal Reserve act provided for
the acceptance Of bills Of exchange BY
member banks and for the discountlhg
of their bills by Federal Reserve banks
thereby introducing a practice when
had been impossible under the national
banking system. The example thus set
in the Federal Reserve act mas oeeh
copied by many states, and to-day sew,
eral of them have already INTRODUCED
similar provisions into their laws: = II
der Circulars IL and II. Series or i9lo,
the board has practically standardized
these acceptances by providing thelr
content, the character OF security Dy
which they must be accompanied ana
the nature and number Of the indorsee,-
ments required in connection WIN
them. -. -,
In other circulars there has been an
attempt TO describe and provide ioi
different types Of commercial paper
with a view 70 encouraging the INTRO,
duction OF new business practices ana
the improvement Of old ones. IN we
circular relating . trade acceptance,
Circular IL, Series OF 1919 inc oOato
has pointed way TO iurther deVelop-
ment Of the kind OF two-name paper
which is most widely used IN Europe
and has endeavored to encourage the
use of such double-name drafts Dy ara
ing in the establishment OF specidiiy
favorable rates for them at Federal Re-
serve banks. r.i
Under the provisions Of the Fedora
Reserve act IL is required that loans
be made upon paper protected BY ware
house receipts. and such provisions
have been made by the board IN the
circular relating 10 commodity paper
Circular Il. Series Of 1879, where II
is sought TO meet the requirements OF
the section of the act referred 10. II!
way Of rendering this circular and me
provisions on which II - based reailE
effective. II has been necessary TO 90 a
considerable amount OF accompanying
work designed 20 promote the adoption
of Uniform warehouse legislation. ana
the issue Of warehouse receipts against
staple products in satisfactory form.
Effect on Rates.
Perhaps no one feature OF the req
eral Reserve act had received so much
attention prior TO the organization OF
the new banks as its provisions regard
ing the rate Of discount During the
agitation for the Aldrich, or monetary
commission. bill much vas said OF the
supposed necessity OF developing UNI
form rate Of discount, applicable 10 inc
whole country. The Federal reserve
act was framed upon the theory that
such "A uniform rate or dlscouh. was
ncitber practical nor desirable for a
country possessed of so great an e1-
tcrt Of territory as the United States
and containing within itself so many
GiFerent industrial conditions and such
widely varying demand FOR and supply
of capital. r n
The organization OF the Federal Re
serve vsicm has changed tho situation