The Birmingham age-herald., 1916-12-10
CALL MONEY PANIC FAILS
 TO DISCREDIT RESERVE BANK
Only the Wall Street Crowd Was Hit When Interior Banks Began to Withdraw Their Funds Under Instructions
 From Federal Reserve Board

ed at home. The piling up here of such funds naturally encouraged speculation and that speculation would continue to grow in volume until a dangerous situa- ton was created. On occasions the re- suit was actual panic.
 It was to prevent just such conditions from arising that the P federal reserve banks were formed throughout the coun- try. But as many people supposed, John Jones cannot go to a federal reserve bank and borrow money. Only national bank can borrow from a federal reserve bank. This is what happens: When money becomes scarce in any section of the country due to overextending of leans, the national banks serving that section can take commercial, industrial, O. Agricultural paper on which money has been advanced, to the nearest federal reserve bank and that bank will re- discount such paper, thus again placing the national bank in funds, which in turn can be loaned to the merchant, the manu- facturer, or the farmer. Tn brief, the F federal reserve banks act as national res ervoirs of credit
 That is all right as far as the mer- chant or manufacturer or farmer goes; but under the new banking law, stock exchange collateral Is not accepted by the federal reserve banks. Thus the fed- eral reserve banks are absolutely no
 
 is concerned. Moreover, the new bank ing law provides that after November of 1917 interior banks can no longer Keep part of their legal reserves in New York banks. And what is more, in it's recent warning to national banks against buy ing too many short-term unsecured for- eign war loans, the federal reserve board at Washington advised the in terior federal banks to begin at once to anticipate the law regarding the With drawal of legal reserve from New Eofk banks which becomes effective in No vember of 1917. That advice was prompt ly accepted by the intreior banks, as shown by the heavy withdrawals that fol- lowed of New York deposits by interior banks. It was those heavy withdrawals from New York by interior banks for the benefit of their local merchants, manu- facturers and farmers, that had much to do with this weeks panic on the part of stock exchange brokers in finding call money to finance speculation.
 Part of this weeks Wall street panic in call money was also due to the long standing animosity of the Wall street banks against the federal reserve sys- tenn and it's banking reforms. While the Wall street banks could not get help from the federal reserve bank right around the corner by putting up stock ex- change collateral, those banks could have ANNAt|NONAhHNN' But that they refused to do, being more than willing to make it appear on the surface that the federal reserve system, at the first real test, had broken down. That, however, was far from the truth. Thanks to the new banking law, the rest of the country Is going to be spared from a money panic such as was expert enced this week by Wall street stock exchange brokers.
 After November of 1917 interior banks with idle funds can forward such funds to New York to find employment in the call money market. But such de- posts can no longer be counted by the interior banks as part of their legal re- serve against deposits, as they are at present. and as they were very exten- sively under the old national bank act The legal reserve which interior banks must keep at home will protect home borrowers. R. l.. B.