Evening journal., 1919-08-21
URGE ALL BANKS
TO JOIN RESERVE
State Bankers Association
Hears System Explained
by Experts
ENDORSE TRADE
ACCEPTANCE PLAN

Following the address OF John s
Rossell, president OF the State Banker.
Association, before The members Of IN
committees on the Federal Reserve sys
I'm and Trade Accepiances. at the Fed
eral Reserve Bank. Ninth and Chestnu
streets, Philadelphia. yesterday after
noon, which was printed in The Eve
nins Journal yesterday Mr.. Rossen
predicting that in five years State mem.
bership in the Federal Reserve system
will include the majority, if not an Of
me truly progressive banks and trusl
companies IN the country, William IT,
HUT. deputy governor OF the Federal
Reserve Bank, after cordially welcom-
ing the guests. spoke in a very interest
ing manner OF the bank and the rapid
growth Of that institution since IFS es-
adjustment under the Federal Reserve
agency, which became a law December
2o, 1913, and gave some Of the import
ant functions Of the Reserve Bank as
follows:
Prior 10 the establishment OF ibe
Federal Reserve System. the reserves
Of banks were only 10 a very linn ted
'NN'hts hfNh III lNfE NlulIN Tor lfle
mediate use. The banks were permitted
TO deposit In other institutions and il
was almost impossible 10 determine
what money was Immediately avail
able IN the event Of a money stringency
or panic. Today our situation is very
different The siatment Of the cOmbin-
ed resources Of the Federal Reserve
Banks shows total cash reserves on
July is, 1919 Of s2,i77, isi 900, and Of this !
s2ii2OOOOO was in gold This gold !
represented two-thirds Of the gold coin 1
bearing the stamp Of the United States.
Although 'this gold was owned by the
y separate Federal Reserve Banks, II
was funded In such a way in the Gold
settlement Fund and elsewhere that
Tor all practical purposes it was a
single gold fund. available for The needs
of the individuol banks and their depos-
itors. This gold fund represented the
required Old reserve against deposits
and the legal gold reserve securing
Federal reserve notes. ] tkink ! am
safe in making the statement that no
sold fund Of this size has ever before
been modified TO secure and stabilize ,
the banking system or systems Of any {
country.
AS YOU know. the notes issued by I
the Federal Reserve Banks. over and
above the Treasury Departments issue, ,
are Of two kinds. Federal Reserve notes. F..
which are secured by commercial I
paper. accepiauces and gold; and Fed
ersl Reserve bank notes, secured by a
deposit OF u. $. securities having the
circulation privilege. The Federal Re
serve notes now issued amount 20 81 n
X ID,
bank notes SlS7 100000 Federal Re
serve bank notes really take the place
OF the old National Bank currency and /
arc secured by the same kind Of col /
lateral, but are issued by the Federal n
Reserve Banks Of the several districts I
instead Of by the member banks You
will note the comparatively small Il
AMOUNT Of the Federal Reserve Bank ii
notes. The chief currency Of the n
country is the Federal Reserve note and
he amount OF this in circulation con .,
racts and expands In accordance with M
he needs Of the business in the cOun- N
ry. It's operation is so exact and in IA,
tantaneous as TO make the question Of L,
or imitation, because Of "a
Is volume, hardly worth considering. IN
'hese circulating notes, both kinds, are
at the Treasury Of the r,
'nited states or the Federal Reserve s,i
anks in gold but, OF course, every cit nr
en should carefully refrain from the 10
use Of gold coin. The use t,y
gold coin I'm every day businss is a In,
asteful practice. Even the abrasion m,
ordinary use makes a considerable or
IS, and in addition 10 This the fun ler
lssibilities i'm connection with the new 90
irrency s interfered with. or,
Under the plan now IN operation in grl
9 Federal Reserve banks. Out-of-town tul
nix items become available in a spec me
ed number Of days and credit is al ten
we'd the member banks by each Fed be
al Reserve Bank in accordance with Of
definite time schedule: a schedule as
al Is so liberal in its provisions that cor
g amount Of the items deposited for spC
lection are now available in about lut
II the time previously consumed. The ma
ne saved in credit availability and cen
e adoption OF a method whereby the the
posting bank may know exactly ten
len the amount OF It's deposit is lon
ailable. is most useful and profit and
Ne change. The clearing system Of hav
e Federal Reserve Banks handles over Of
daily and the amount Of be
ese daily items, in the aggregate, ap- in
oXimate sj00O00O0O siru
you will note that the reserves re- Con
Tired TO be deposited by the member has
nks are in nearly every instance as 7
wer than those required by the stale cd ,
nix laws and the reason why this can or n
done with safety is quite clear. Prior bcrs
the Federal Reserve Act. a bank I'm hay
e event Of an unusual demand for as
nds had to hoard monies deposited reae
q proceed 10 ilquldate It's assets or bers
pend upon its correspondents. This "C
is not always an easy mat gres
: II may have 10 be done at con- aeel
erable loss, whereas the member her
* in the Federal Reserve System can nee,
nediately go 10 the Federal Reserve sbo,
TX Of its district for rlief II a bank mer
be careful 10 see mat its invest and
ITS are largely confined to eligible ordi
er or bonds, II may, without any eral
iety. aid its depOsitors 10 a degree thes
in former times would have ap- men
red unsafe, knowing mat any inn leeni
ment Of its reserve can be Instant seco
DIRECTED by a loan from the Reserve issu
K or by obtaining a redisoount from gold
n eligible paper The system has vidil
a most severe test during the war matt
J the Central Powers The proof Of b
it has been effective is most clear Ferle
Illustrated by the fact that all dur nate,
the war member banks Of this dis and
have zeen able to secure loans or "T
seounts for short periods at per mem
j. Az no time during the war did a Is o,
a .ar..1 8 IL !