The West Virginian. [volume] (Fairmont, W. Va.) 1914-1974, 1916-02-14

serve Act. The only justification for
The reduction OF the reserve require
menta for national banks 10 the fact
that the national banlss me members
Iot che Federal Reserve System and
that the Federal Reserve banks hold
mart Of the consoI dated iraseryeyofkf the
national banks aud are Therefore In
.positton % come fmme diately8 with all
OF their RESOURCES to the supp ort OF
national banks In case Of necessity or
emergency 4 ..S q u
On the other hand e Is stated. B state
banks have reduced their reserve re-
'quirements without the support, Of the
reserve system. This says the re.
port, SIS an element of danger in our
banking. system: because the weaken.
ing Of the reserves of the state banks
and trust companies makes them more
valuable in times OF emergency and
It is conceivable that situation
might arise IN the affairs Of such
state banks and trust companies
where they might have to call upon
the credit structure of the nation al
banks and the Federal Reserve sys-
tenn for support when they would not
be entitled to It because they had not
contributed to the strength OF the
Federal Reserve system by taking
membership in 1T. The Board Is CIV
ing serious thought to this question
and to the action that may be taken
to guard against the consequence OF
this situation" 4
This part Of the report is concluded
with an expression Of opinion that he
credit resources OF. the country would
be greatly enlarged and strengthened
with corresponding benefit to business
and the people II state banks ana
st=ust companies were to enter the
system.
The report declares that a condition
of remarkable case was the outstand-
ing feature OF the country's money
market during the year. It says that
the nations export trade has reached
highwater marx, that manufacturing
in nearly all lines is active and that
1t has been the part of wisdom for re-
serve banks to conserve their resour'
ces" and hold themselves in readiness
to meet any unexpected deyelopm ents
in the situation" An increase of al
most billion dollars In the combined
loans of national banks In the year
and an increase OF deposits Of nearly
two billion dollars are pointed to as
pertinent in considering the situation.
These facts" the report says,
would seem to indicate that 1t is pru-
dent to be prepared for time when
the reserve resources Of the country
will be subjected to a severe test and
when the leaders hip and operations
Of the Federal Reserve Banks will be-
come correspondingly moro influen-
tial."
The discount policy of the Board
during the past yea Is declared to
have been the proper one under the
existing circumstances but tits point
ed out that as time goes on there will
be disposition to make these rates
as nearly equal in all parts of the
country as is possible. The Reserve
banks have not been greatly encour-
aged to indulge in such commercial
banking operations as the law permits.
open market operations as the act
terms them, the Board says, because
thereby the danger of imitation might
have been increased. and money rates
further depressed. More active par
ticipation in such transactions by re-
serve banks may be expected in the
future
F; The Board. the report announces, Is
considering the establishment of
branch agencies Of reserve banks in
cities other than those where. such
banks are located and for the present
does not expectNto approve the estab-
lishment OF branch ;reserye4 banks.
The clearing operations Of the banks,
it says, have proved a success but too
few OF the banks have taken advant'
age Of this function.