The Bridgeport evening farmer., 1916-02-15

lnents to the Federal Reserve Act
were recommended to Congress today
in the report of the Federal Reserve
Board for the first full year of opera
ton OF the new banking system.
"A years experience in the opera
ton of the Federal Reserve Act" says
the report, has confirmed the Board
In its profound conviction that the
Act has been one of the most benefit
cfal pieces of legislation ever adopted
by Congress- Not only have it's fun
! damenta1 principles been fully vindi-
Gated but in most details the working
OF the measure has been successful
The amendments recommended
would:
&, Permit National banks to subscribe
and hold stock in banks organized for
the special purpose OF doing a banking
business in foreign countries
Permit, with the approval of the
board, the issue of Federal Reserve
notes to Federal Reserve banks either
against the deposit of commercial pa
per or gold, provided that the gold
so deposited shall count part of the
required reserve of the bank
Extend the acceptance system to the
domestic trade so far as it relates to
documentary acceptances secured by
shipping documents or warehouse re-
ceipts covering readily marketable
commodities or against the pledge of
goods actually sold
branch offices within the city or coun-
ty in which they are located
Permit advances to member banks
against the member banks secured
pjronaissory notes or against the the
deposit or pledges of u. S. govern
ment bonds.
Authorize wide discretion in the
making of farm loans by national
banks so that q Federal Reserve bank
might make proper loans OF this kind
lac
Of its place of business whether in its
district or another district
cit is believed says the report,
that the enactment of these amend
ments will besides enlargtng 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 its
framers.''
The board announces that it does
not consider that 1t can direct the
business operations Of Federal Reserve
banks IN respect to foreign loans. but
that its 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 com a1ies-
In speaking of foreign boTr rowing in
the United States board points out that
it has received many inquiries on this
subject and has given them careful at
tentfon- It has reached the conclu-
AlOm, III Says Supporter Dy competent
legal advice, that the purpose for
which goods are sold or exported, or
the use to which such goods are ul-
timately put does not fall within its
province or jurisdiction.
TT the report adds stthe transac-
tons which have given rise to such
sales or shipments are OF a true com
u1ercia1 nature, if the basis upon
which they rest is such as to comply
with the requirements of the Federal
- 49, 80
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 viii be dis
counted by Federal Reserve banks,
and must be regarded as falling with
in the legitimate sphere of their oper-
atoms The Federal Reserve Act
makes no provision for collateral
bond or stock loans or for the pur-
chase OF foreign governments obhga-
tions by reserve institutions. Neither
such obligations. therefore, nor loans
to member hanks based thereon. are
eligible as investments for Federal
Reserve banks.
The operation of the reserve sys-
tenn is matter of business to be con-
Quoted in accordance with the terms
of the Reserve Act and the regu1a-
tons of the board. 1t is not the
province of the board to deal with
problems involving internati onaI rela-
for the purpose of restricting of ex-
tending expectations in one direction
or another The eligibility of paper
for reserve banks is determined by
considerations which are as valid I'M
der one set of international relation
ships as another; the function of pass
ing upon and dealing IN such paper
under these regulations belongs to the
several reserve banks The board
however. believes that the financing OF
~
present time one of the most impor-
tant financial problems with which
the nation has to deal; and 1t is o1
the opinion that Federal Reserve
banks cannot, even il they would
avoid the responsibility of assisting IN
this process of financing what Iegiti
rnately and properly devolves upor
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 it may
grant certain Judiciary powers to ma
tionaI banks, announces it's intention
70 have its counsel intervene in these
cases and says that every effort vii
be made to have the question settled
by the Supreme court at an early date
1t is pointed out that only 80 state
banks have been admitted to the sys-
tenn and "a others have come in by
conversion into national banks
s'It is regrettable.'' continues the re-
port, that in not a few states reserve
requirements for state banks and trust
companies have been materially low
cred by legislative enactment since
the adoption of the Federal Reserve
tAct.h The only justification for the
reducti on of the reserve requirements
for national banks is the fact that the
national banks are members of the
Federal Reserve System and that the
Federal Reserve banks hold part Of
the consolidated reserve of the ma.
tionaI banks and are therefore in posi-
ton to come Immediately with all OF
their resources to the support of ma
tiona1 banks in case of necessity OF
emergency
On the other hand it is stated. state