New-York tribune., 1917-06-19
Federal Reserve
Act Strengthened
By Amendments
Landslide of State lnstitu
tions to Join System Is
Anticipated

Washington, June 1S.-Amendments
70 the Federal Reserve act, designed
to strengthen the financial system OF
the country by the concentration oil
gold reserves in Federal Reserve oanHS
and to open wide the doors OF the reu-
eral Reserve system to the state banks
and trust companies, were sent TO the
President to-day for his signature. Inc
Senate finally accepted conference re-
port previously approved by the House
The first effect of the changes, II Is
believed. will be the shifting OF more
than 5000 900 900 in reserves from the
hanks of the country TO the Federai
Reserve banks, where the great store
of gold will be in a position to achieVe
its maximum efficiency. The effect OF
this shift. officials believe, will be OF
incalculable benefit to the financial sys-
tenn Of the country at this time, when
thc strain of heavy Withdrawals from
the money markets to meet instalments
on the Liberty Loan impends.
Diversion of Gold Ordered
Under the existing law, the banks
had until next November TO divert tnat
norton of their reserves with other
hanks 10 the Federal Reserve banks
The amendments advance the date, and
the diversion of this gold to the Re
serve banks is ordered at once.
Hundreds Of large trust companies
and state banks which heretofore nave
remained outside the fold are expected
IN come in under the amendments.
These institutions will bring into the
Reserve system many HUNDREDS OF
millions of additional reserves. " ith
their addition officials believe that the
financial system of the country VIII De
az nearly impregnable as human IN
genuity can make IT.
Accession of trust companies ana
state banks will be brought about IN
two wavs: The institutions may JON
the system outright, with the privilege
of Withdrawing at any time, upon d
year's notice-a privilege not granted
them by the unamended law-or they
NAV. bv depositing a. portion or their
reserves with a Federal Reserve bank,
become members of the Federal Reserve
Clearance system, the most effective IN
the country
The proportion of the reserves TO be
donosited. in the latter case, has yet 10
ne determined upon by the board. IL Is
l;kely that the minimum will be 90 per
cent.
State Banks Ready to Act
officials anticipate a landslide OF
state banks and trust companies to the
system within the next few weeks.
MANY Of the largest financial instltu-
tions at present outside the. system
have signiiied their intention of joining
upon the passage OF the amendments.
In one state. it is said. virtually every
state bank has declared its intention OF
joining.
The Federal Reserve system at pres
ent includes in its membership less
than 100 state banks and trust com
panies. The remaining banks, approx
mately 1900 in number, are national
banks. which automatically became
members upon the passage OF the re-
serve law Resources OF the system
approximate $4,000, 100000. or about
one-half of the total banking resources
of the country. II is expected that this
figure will be increased perhaps as
much as 50 per cent during the coming
year.
Another amendment facilitates the
establishment of branches of Federal
Reserve banks by simplifying the or
ganization of the branches and de
creasing the expense. II Is thought that
this amendment will result IN the es.
tablishment. within a short time, OF
branch banks at Baltimore, Louisville
and Denver. and possibly other cities.
Collection Charges Modified
The so-called Hardwick amendment.
which nroyided for the legallZatlon. un-
der certain conditions. of collection
charge on checks cashed by member
hanks on out-of-town banks was modi-
fed so that such a charge cannot be
collected except with the approval OF
the board
Whether the incoming state banks
will have TO diyest themselves OF di-
rectorates interlocking with other in
stitutions is moot question, under
the amended law. Some of the trainers
Of the law believe that such action viii
not have to be taken. II is possible
that the courts will be called upon
finally to decide this question, IN case
of conflict.
The Federal Reserve Board has ad-
vocated the passage OF these amend
ments for more than a year Their
final massage is regarded as one OF the
most important steps taken 10 strength
en- the country's financial system since
the massage of the act itself