Norwich bulletin., 1916-01-01
WHAT FEDERAL.
 BANKS HAVE DONE
(contInusd from Page 12, ssotIon D


 commercial interests of the country to any necessary extent. and that instead of violent contraction ofrcredit with which we have always been confront ed In time of serious business dist1r- bance there would be large fund should present itself. thus providing a sort of credit insurance for the corin- tryss business. A further purpose of the act was to provide flexible cur rency system which would be available for prompt expansion when the need matically provide for the retirement of the circulating notes when the demand | for them had ceased
 l One pay of the act, about which less was said at the time of it's pass age than 1t deserved was that which authorized national banks to accept bills of exchange drawn upon them in connection with exports or imports Of merchandise-a privilege specifically denied under the National Bank Act but one essential for the satis1actory financing of foreign trade.
 First Years Work. The successful operation of the fed eraI reserve bank for the first year of their existence must be measured by the extent to which they have full flled the purposes embodied in the act and in measuring the results 1t should be borne in mind that the work for ! the first year was. of necessity, large ] Iv one .eG organization. for only few weeks before the date of the actual opening of the banks most of them consisted of newly elected board of directors. armed only with a, copy Of the federal reserve act as basis for |-begiuning their operations. The se- lection of CfEicers and the routine mat ters of organizing a staff. and the selection of proper quarters with suit able vaults was in itself, much meSe formidable undertaking than might be imagined.
 The first step in the actual opera tions of the banks was the first pay ment of capital and transfer of re- serves from the member banks to the federal reserve banks. which resulted in placing in the hands of the federal reserve banks $203, 100000 gold. Since the initial payment of capital and re- serves, two additional payments of. capital have been made to the reserve banks, and many of the city banks have deposited with the federal re- serve banks considerable additional amount of gold because of the fact that they were permitted to carry ex- cess reserves with the federal reserve banks. By these additions to the orig inal resources of the banks they have increased their gold holdings in their own vaults to approximately $500, ,000,- coo. in addition to which they have invested in bills and notes discounted and in bonds of the United States and municipal warrants to the amount of SIS, ,000,00 and in addition to this the federal reserve banks have deposited gold with the federal reserve agents in their respective banks to cover their liability on note issues to the amount of $133, 500, ,000 making a total accu- mutation of gold by the federal re- serve banks, during the first year of their operations. of between $400, ,000, -1 900 and $500,000,000. This is probably the largest concentration of gold that this country has ever seen as a basis for credit and is good evidence of the success of the federal reserve banks In this direction.
 Confidence ReestabIshed.
 In the last twelve months business confidence throughout the United States has been very generally rees- tablished. No one can measure how important factor the federal reserve banks have been in their psychological effect, but it seems beyond dispute that the establishment of these banks and the accumulation of the great re- sources immediately available as a basis for credit, should emergency arise, has had a powerful influence in establishing confidence in business circles and the business community has felt that it could without hesi- tation accept the great volume of bus mess flowing from Europe because of the assurance given by the resources of the federal reserve banks that such credit as was necessary would be pro- vfded, and provided promptly, to meet any needs that might arise, or to take care of any emergencies that might be precipitated by the varying fortunes of war in Europe. The effect of the es- tablishment of the federal reserve banks in this connection Should not be exaggerated, because many other things were important factors in this reestablishment of general business confidence. but it cannot be denied that the federal reserve banks contrib uted their full share in making pos- sible the rapid recovery that we have experienced from conditions existing a year ago.
 Since the compilation of the figures quoted above "a second payment of reserves and further issues of federal reserve notes has increased the gold holdings of the banks to approyinate- ly $4S2,0Q0,0 900. Further transfers of reserves afe to be made in 1915 and by the time this process is completed the United States should have in it's federal reserve banks a fund of gold not only sufficient as basis for cred- 1t for our own business but to enable us to extend credit in large amounts to foreign countries heretofore financed by some Of our European friends. This process of foreign financing has al- ready been undertaken to a large ex- tent in the form of governmental loans like the recent Anglo French loan of $500, ,co0.000 and other various smaller governmental loans, and through bank ers' credits. It is doubtful whether the United States would have found itself able to so easily assume this position of financial importance in the worlds business had not the federal reserve banks been established and this great reserve fund of gold bem1 made available. In this respect the federal reserve banks been established and this great reserve fund of gold been made available. In this respect the federal reserve banks seem to have well justified the expectations of their sponsors and to have made excellent progress in performing a function never heretofore possible under our -in- dependent bank system.
 Facilities for Redisceunt.
 The next activity to be undertaken by the federal reserve banks after the initial accumulation of gold was to provide facilities for re-discounts for the member banks which contributed their reserves to the federal reserve banks. By the time the federal re- serve banks were prepared to do this, because of the reduced reserve re-