Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1917-01-16
ACT To Be
AMENDED To MEET
POSTWAR SITUATION
Federal Reserve Board Plans
Amendments That Will Place
u. S. on Sound Basis of Fl
nanCiaI Preparedness
IBy A,sac,l.e: Prsss.)

WASHINGTON, Jan. i3.-Amend-
ments TO the federal reserve act. design
ed 10 place the United States Oh a thor
oughly sound basis of financial prepared
ness for whatever the future may bring
during the continuance Of the war and
after its termination. have been put
into definite form by the federal re-
serve board and soon will be introduced
in congress.
The chief unforeseen financial prob
lens wfEch the country has faced since
the war started have resulted. board Of
ficials believe, from the huge gold inn
portations which have tended to upset
former economic and financial condi-
tions and the recommendations for new
legislation are aimed principally at con-
trolling loan extensions based on the
gold accretiOns.
Amendment OF the act, said a state
ment issued by the board today, seems
necessary TO enable US to deal effectively
with the new international problems
which seem destined to play so impor-
tant a part in our domestic life. The
banking system of the United States
should be prepared to meet effectively
two conditions of opposite character
one. the excessive and uncontrolled in
flow of gold; the other, the excessive
and unregulated outflow of gold.
The amendments proposed are design
ed to provide means for controlling an
over-extension of loans based on new
accretions to our gold stock and to pro-
vide for the mobilization and concen-
tration of the gold holdings OF the
United States so that the flow of gold
back into Europe, or to South America,
or to the Orient may be arranged with
out forcing any violent contraction Of
loans or causing undue disturbance to
legitimate business.
WOULD RELEASE GOLD.
OF necessity technical and detailed IN
their wording. the amendments, the
statement continues, are designed 10 en-
able the federal reserve banks to with
draw gold from actual circulation while
enabling member banks at the same time
to release gold which at present is tied
up in their own vaults. The amend
ments are based upon the theory that all
Of the individual banks should strength
en- the gold holdings of the federal re-
serve banks.
The country's holdings of gold are not
used most effectively when they are in
the vaults of large number of banks
scattered all over the country, but its
greatest use would come from concen-
trating il TO a greater degree in the
vaults OF the federal reserve banks.
where it can be effectively protected
when not required and effectively used
when needed. TIL member bank does
not require gold with which to supply
the ordinary demands of dts depositors
so much as currency.
1T is from this point of view that
the federal reserve board has proposed
that congress increase the required re-
serves TO be maintained by member
banks with the federal reserve banks.
"a
inEs of all member banke were about
ssl5. 200. 0Oo. Under the proposed
amendment $3.50, 00o. 900 of this amount
would be transferred to the federal
reserve banks. Hence the board be-
lieves that ultimately the law should
require of member banks no more than
that they should maintain specified bal
ancss with the federal reserve banks
in amounts adequate TO supply the nee
essary reserve basis, and that the fed
eraI reserve banks must have sufficient
reserves of gold with which TO protect
all obligations, but that there should,
however. be no legal requirement as to
the amount of currency that a member
bank should carry in its sown vault.
WOULD BROADEN POWERS.
This is a matter of business judg-
ment that might well be left to the
discretion of each member bank. 1t
was thought however, that III this
principle were carried into full effect
at this time, the step might be con-
sidered too extreme, particularly under
present conditions and nothing should
be done that might tend to a further
release of reserve money.
"A minimum amount of currency that
the member banks should be required
TO keep in their vaults is, therefore,
prescribed. The amount suggested is
5 per cent of the demand deposits, so
that the total requirements-cash and
reserve-wiIl remain practically I'M
changed"
Nine other amendments, of minor i'm
portance, most of which are related to
operation of the one outlined above and
designed to broaden the powers OF the
board in times of emergency, are in
cluded In the recommendations. Among
them are measures which would per-
init non-member state banks and trust
companies to utilize the clearance sys-
TEN of reserve banks, and admit to as
sociate membership mutual savings
banks without capital stock, under GER
tain conditions.