The Penn's Grove record., 1919-05-09
THE FEDERAL
RESERVE BARK
BY CARTER GLASS,
Secretary of the Treasury

nanclal storms ragged in vain during the
entire period Of the great ~worid-war.
For fifty years we chung to the
most unscientific banking and cur
rency system in the world. Five times
within the thirty years preceding The
passage Of the Federal Reserve Act
financial catastrophe came upof. H.
in the very midst Of apparent bus ness
prosperity ana eontenfmpnf. These q 3
asters en>ued from two f mdam,n-aId-
fects of the old system. one an inelas-ic
bond-secured eurrrrcy and the o.hcr
an utterly fictitious bank rt>crvr.
Under the old system VI preep d
ed upon the assumption thaf the conn.
try always needed u volume % cur
rency equal to its bonded indebted
ness, and never m any tuIe required
less. whereas We frequently dHl no
need near as much rs was o us anding
and just a often could have absorbed
vastly more than was available.
THE business Of the country was
made to suffer by this r.ed currency
system i'll times Of stirring drYeioD-
ment II enterpris'ng activity. II
could not begin 10 meet the ommcr
cial and industrial rpqIirempn.s of
''f"i 'aI'i'' Hats'I
VI 'ie i't'''''a 'E'nhs, Nllltf III" Oh
''g'H'ieu mn '"i '"p''.t|
to respond 10 the currency require
ments Of the country.
mus. III 'iihT o lf'iie' sun is
Ia "iH'" ''HN o'Sea me r"in y II
''ot' ,nese ""ilN> I3uil' II iHll'assao.e
~ u'iii|e t'ei' s'i1t,-'' SHORT me
'oiiiiiel'iai paper Ill eN'hah3e IoF cur
'ei'a "HeIe"t1h 10 IeSp'hi ~ {He
Tqa.i eiieH,s u BUSINESS, ~ifactea1E
10 ~ 9aeks VIZ III ~ SIM ae-
pefate plight. every one, with rare tx
ceptlons. looking out for itself, with
no other source of supply.
Inc federal reserve Act reyolu-
tiohlzed this wretched currency sys-
TEN 1t substituted for a rigid bond
secured circulating medium, unrespon-
slve at any time to the commercial re-
quirements OF the nation. a perfectly
elastic currency. based on the sound,
llquld commercial assets Of the Il
Try, responsive ar all times and to
the fullest extent TO every reasonable
dehiahd OF legitimate enterprises.
II IS a currency which comes forth
when required and is Cancelled when
not needed. The amount is ample
business is active and only
enough When business is lax. Every
dollaf or II IS based on Il stable ON
merclal transaction whether or q mer-
camille industrial or agricultural ma
ture, fortified by a 40 per cent I'D
reserve, by the assets of a great bank
ing system by the double liability of
member banks, and by the pliglited
rain OF a government OF a hundred
million free citizens.
The Federal Reserve Act correct
ed the old vicious bank reserve sys-
TEN by establishing regional reserve
banks ana making them, instead of
private banks in the money centers,
the custodlanS OF the reserve funds of
the United States; by making these
lCeiouui Jams hiolchu VI PilNotc CpI-
respondent banks, the great r~ediscount
agencies of the country; by requiring
these regional banks to minister TO
commerce and industry rather than TO
the schemes of speculative adventure.
"Under the old regime we had been
taught TO believe that the balance of
the country was dependent on the
money centers. Under the new dis
pensation the fact was quickly re-
vealed that the money centers are
dependent on the balance of the coun-
try. Under the old system the coun-
try banks were subservient to the
money centers. for only there could
they resor for rediscount favorS. Tn
der the new system it is no longer a
question of favor; it is purely a ques-
ton of business.
"The whole startling contrast be-
tween the old system and the new
may be summed UP in the single state.
ment that in 1907. under the old Sv.-
TEN, the failure of two banks in New
York city precipitated the greatest
financial panic that ave afflicted the
nation. Under the new system. the
cuo, +o.+ ,-,y ~ rnnnrJnI hi-+.r,- s. IL