The Daily Missoulian. [volume] (Missoula, Mont.) 1904-1961, 1917-01-14
Since Start of War, Former
Economic Conditions
Have Been Upset.
u. S. MONEY MUST BE
PUT ON SOLID BASIS
Amendments to Federal Re-
serve Act Will Be Sought
From Congress.

washington. Jan. l3.-AmendmcntS
to the federal reserve act, designed to
place the United States on thor
oughly sound basis of financial pre-
paredness 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 reserve board and soon will
be introduced in congress.
The chief unforeseen financial prob
lens which the country has faced
since the war started have resulted
board officials believe. from the huge
gold importations which have tended
to upset former economic and finan-
>cial conditions and the rccommenda :
tions for new legislation are aimed
principally at controlling loan extern
si0ns based on these gold accretions
Amendment Is Necessity.
Amendment of the act,,,' said a
statement issued by the board today.
"seems necessary to enable us to deal
effectively with the new international
problems. which seem to play so i'm
portant part in our domestic life
The banking system of the United
States should be prepared to meet ef-
fectively two conditions Of opposite
character-one, the excessive and un-
controlled inflow of gold: the other,
the excessive and unregulated outflow
of gold.
The amendments proposed are de-
signed to provide means for controll-
ing an over-extension Of loans based
on new accretions to our gold stock
and to provide for the mobilization
and concentration 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 ar
ranged without forving~ any violent
contraction of loans or causing undue
disturbance to legitimate business"
Protect Our Gold Supply.
OF necessity. technical and detailed
In their wording, the amendments. the
statement continues, 'are designed to
enable the federal reserve banks to
withdraw 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 amendments are based upon the
theory that all Of the individual banks
should strengthen the gold holdings of
the federal reserve banks.
THE country's holdings of gold arc
not used most effectively when they
are in the vaults OF large number of
banks scattered all over the country.
but it's greatest use would come from
concentrating to greater degree in
the vaults OF the federal reserve
banks. where 1t can be effectively pro-
tected when not required and effec-
lively used when needed. The men,
her bank does not require gold with
which to supply the ordinary demands
Of its depositors nearly SO much as il
does currency.
The Object Sought.
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
On November II, 1916, the cash hold.
ings of all member banks were about
$S15, 100000. Under the proposed
amendment, $25O,0O0.O0O of this amoun'
would be transferred to the fedora
reserve banks. Hence the board be.
licves that ultimately the law SHOULD
require of member banks no mor'
than tnat they should maintain {
specified balance with the federal re
serve banks in amounts adequate t.
supply the necessary reserve basis
and that the federal reserve bank
must have sufficient reserves of gol'
with which to protect all obligations
but that there should, however be n,
legal requirement as to the amount o
currency that a member bank shoul
carry in lis own vault.
Decision Left to Member Banks.
This is matter of business judg
ment that might well be left to tn
discretion of each member bank
was thought. however that il thi
principle were carried into full effeC
at this time the step might be consid
cred too extreme. particularly unde
present conditions. and nothing shoul
be done that might tend to furthe
release of reserve money.
"a minimum amount of currenc
that the member banks should