New Britain herald., 1916-02-14
SIX AMENDMENTS
 TO RESERVE ACT
Recommended to Congress in Re-
 port of Federal Board

l were recommended to congress toudy
 in the report of the Federal Reserve
 Board for the first full year of opera
 tion of the new banking system.
 1 "A years experience in the opera tion of the Federal Reserve Act" says the report, "has confirmed the Board 1 in it's profound conviction that the 1 Act has been one of the most benefi- l cial pieces of legislation ever adopted 1 bv Congress. Not only have it's fun
 damental principles been fully vindi- l cated but in most details the working l of the measure has been successful .'
 Amendments Recommended
 The amendments recommended 1 would:
 1 Permit National banks to subscribe 1 and hold stock in banks organized for
 the special purpose of doing bank l ing business in foreign countries; Permit, with the approval of the 1 Board, the issue of Federal Reserve
 notes to Federal Reserve banks either l against the deposit of commercial ! paper or gold, provided that the gold so deposited shall count as part of 1 the required reserve of the bank; Extend the acceptance system to | the domestic trade so far as it relates to documentary acceptances secured 1 by shipping documents or warehouse receipts, covering readily marketable | commodities or against the pledge of goods actually sold:
 Permit national banks to establish l branch offices within the city or county in which they are located. Permit advances to member banks against the member banks secured promissory notes or against the de- posit Or pledge of II. $. government bonds;
 Authorize a wide discretion in the making of farm loans by national banks so that a Federal Reserve bank might make proper loans of this kind within a radius of one hundred miles of it's place of business whether in it's district or another district.
 Greatly Strengthen Operation.
 Tt is believed," says the report, that the enactment of these amend ments will, besides enlarging the use- fulness of the national banks, result in greatly strengthening the operation of the Federal Reserve act, and more completely realize the purposes of it's framers.''
 The Board announces that it does not consider that it can direct the business operations of Federal Reserve Banks in respect to foreign loans, but that it's function is to oversee these banks A plea is made in the report for the entrance into the system of more state banks and trust companies.
 Foreign Borrowing.
 In speaking of foreign borrowing in f he C+oto 70 points that it has received many inquiries on this subject and has given them care full attention. It has reached the conclusion, it says, supported by com potent legal advice, that the purpose for which goods are sold or exported, or the use to which such goods are ultimately put" does not fall within it's province or Jurisdiction.
 'sIf," the report adds, the transac- tions which have given rise to isuch sales or shipments are of a true com- mercial nature, if the basis upon which they rest is such as to comply with the requirements of the Federal Reserve Act, and if the maturity of the loan falls within the limitation of the law, then the paper growing out of them, no matter by whom or for what drawn, may at will be discount ed by Federal Reserve Banks, and must be regarded as falling within the legitimate sphere of their operations. The Federal Reserve Act makes no provision for collateral bond Or stock loans or for the purchase of foreign governments obligations by reserve institutions. Neither such obligations, therefore, nor loans. to member banks based thereon, are eligible as invest ments for Federal Reserve Banks. Matter of Business.
 Tho operation of the reserve sys- tenn is matter of business to be con- ducted in accordance With the terms of the Reserve Act and the regula- tions of the Board. It is not the province of the Board to deal with
 problems involving international re- lationships of the United States, either for the purpose of restricting or ex- l tending exportations in one direction | or another. The eligibility of paper l for reserve banks is determined bv considerations which are as valid under ] one set of international relationships 1 as another; the function of passing upon and dealing in such paper under | these regulations belongs to the sev- l eral reserve banks. The Board, how 1 ever, believes that the financing of the 1 country's export trade is at the present l time one of the most important finan | cial problems with which the nation l has to deal and it is of the opinion 1 that Federal Reserve Banks cannot | even if they could avoid the respon-
 sibility of assisting in this process of
 financing what legitimately and prop l erly devolVes upon them"
 The Board expresses regret that Tn l some states suits have been instituted
 to test the validity of the provision of
 the Reserve Act by which it may
 grant certain judiciary powers to na-