Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1916-12-15
Wall Street and
The Reserve System.

The Federal Reserve system was strikingly vim
dicated some days at the hands of its severest
critics when a group of the great New York banks,
facing monetary disturbance rediscounted in the
Reserve bank of that city million dollars
worth of commercial paper.
Wall Street banks did their utmost to defeat the
Wilson program of banking and currency reform,
and they have never become quite reconciled TO
the changes that deprived them of their old domi-
nation. In the matter of rediscounts they have
held aIoof from the privileges open them
members of the Reserve system and have coun-
seIed their affiliated banks in other parts of the
country to do likewise. Apparently, there has
been studied effort TO discredit belittle the
usefulness OF the system.
But at last the Wall street giants themselves
have found use for the facilities and safeguards
which they disparaged. Between Monday and
Wednesday of last week, call money in New York
went as high as seven, ten and even fifteen per
cent Whatever the causes of this sensational ad-
vance NAV have been its effects were plainly dis
oufeting 1t was essential that something be done
promptly to restore normal conditions. In those
circumstances four of New Yor5's most powerful
financial houses-the National City Bank. the Ma
tionaI Bank of Commerce, the American Exchange
National Bank and the Libery National Bank
turned to the Federal Reserve bank for assistance
which was speedily forthcoming. Awaiting them
system, they turned seven million dollars worth of
approved commercial paper into cash. Other
banks followed this lead. AS result, call loans
were made the next day at from two to five per
cent. Time money rates also became easier.
This is an interesting example of how the Fed
eraI Reserve system operates to relieve strin-
gency. It would operate just effectually to pre-
vent a panic 1t cannot be used as the tool of any
special interest but it will and protect the
common interests wherever and whenever the need
arises II has freed the South and West from de-
pendence on Wall Street, and has proved equally
responsive TO the legitimate needs of Wall Street
itself The New York Commercial quotes one of
the bankers of the group which discounted the
seven millions of commercial paper as saying:
Financial history is being made now
it never was made before, and 1 believe this
is one of the landmarks. The smaller banks
as we'll as the larger ones have been slaves
to custom. They thought that redscounting
in the Federal Reserve bank might reflect
weakness Now that the custom has been
properly initiated. the practice of rediscount-
ing will be considered a regular banking rou-
tine. If we haze danger of a panic at any flu
ture time. banks will be so accustomed to
ing the Federal Reserve facilities that relief
will be almost automatic"
This is a wholesome change from the hostile
attitude which Wall Street once held toward the
Federal Reserve system and from the supercilious
air it later assumed. That the system has yet at
tanned or approached perfection its stanchest
advocates would not contend But that it is cap
able of meeting grave emergencies as well
binary needs the example of its one-time oppon-
ents amply, attests.