The daily telegram. [volume] (Clarksburg, W. Va.) 1901-1926, 1916-02-14

WIN VIC lO4utAOhUAs6 VI bhS ANANs -
reserve act, and IL the maturity o
the loan falls within the Limitation
OF the law. then the paper growing
out OF the loan falls within the llmi
tatlon Of the law, then the pape'
growing out Of them. no matter BY
whom or for what drawn, may, a.
will be discounted by federal reserve
banks, and must be regarded as fall
ing within the legitimate sphere Of
their operations. The federal re,
serve act makes no provision for col
lateral 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 investments
for federal reserve banks.
1.-THE operation VI the reserve sys-
TEN is q rlatter OF business to be con-
Quoted In accordance with the terms
Of the reserve act and the regulations
of the board. It Is not the province
of the board to deal with problems
involving international relationships
Of the United States, either for the
purpose OF restricting or extending
expectations in one direction OF in
another. The eligibility of paper for
reserve banks Is determined by the
considerations which care as valid
under one set OF international rela-
tionships as another; the function OF
passing upon and dealing in such pa
per under these regulations belongs
to the several reserve banks. The
board. however, believes that the A.
nancing OF the country's export trade
Is at the present time one of the most
important financial problems with
which the nation has to deal; and II
is Of the opinion that Federal Reserve
banks cannot, even If they would
avoid the responsibility of assisting
In this process Of financing what lie.
Ultimately and properly devolves upon
them"
The board expresses regret that in
some states suits have been instituted
to test the validity OF the provisions
Of the federal reserce act
by which 1t may grant certain fdu-
ciary powers to national banks, an
nounces its intention to have its coun-
sci intervene in these cases and says
that every effort will be made to have
the question settled by the supreme
court at an early date. It is pointed
out that only thirty-two state banks
have been admitted to the system and
eighty-four others have come in by
conversion into national banks.
ut is regrettable," continues the
report, that in not few states re-
serve requirements for state banks
and trust companies have been ma
terally lowered by Legislative enact
ment since the adoption of the fed
eral reserve act. The only justiAca-
tion for the reduction of the reserve
requirements for national banks is
the fact that the national banks are
members Of the federal reserve sys-
TEN and that the federal reserve
banks hold part Of The consolidate re-
serve OF the national banks and are
therefore in position to come imme-
dlately with all of their resources to
the support OF national banks in case
Of necessity or emergency"
On the other hand it is state, state
banks have reduced their reserve re-
quirements without the support of the
reserve system. "This," says the re-
port, IFS an element OF danger in our
banking system, because the weaken
ing Of the reserve Of the state banks
and trust companies makes them more
vulnerable 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 national banks and
the federal reserve system for sup
port when they would not be entitled
to 1t because they had not contribut-
ed to the strength Of the federal re-
serve system by taking membership
in it. The board Is giving serious
thought to this question and to the
action that may be taken to guard
against the consequences Of this sit
uation."
This part of the report is conclud-
ed with an expression Of opinion that
the credit resources Of the country
would be greatly enlarged and
strengthened with corresponding bene-
fit to business and the people If state
banks and trust companies we're to
enter the system.
The report declares that condition
of remarkable ease was the outstand-
ing feature OF the country's money
market during the year. 1t says the
nations export trade has reached high
water mark, that manufacturing in
nearly all lines is active and that it
has been the part Of wisdom for re-
serve banks to conserve their re-
sources" and hold themselves in readi-
ness to meet any Unexpected develop
ments In the situation" An increase
OF almost billion dollars in the COM
blned 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 sit
uation.
These facts the report says,
"woud seem to Indicate that it Is
prudent to be prepared for a time
when the reserve resources of the
country will be subjected to severe
test and when the leadership and
operations Of the federal reserve
banks will become CORRESPONDENCE
more influential
The discount policy OF the board
during the last year is declared to
have been the proper one under the
existing circumstances but 1t is point
ed out that as time goes on there
will be a disposition to make these