Evening journal., 1919-08-21

benefits that accrue from membership.
among which are increased security. the
greater ability OF a member bank to
grant accommodation TO its customers
ability TO rediscOunt. easy transfer of
funds by draft or telegraph free OF
! cost transportation of currency with
out cost and free check collection ser
vice. Through its function as cen
| trail reserve holding agency and
through the power Of re-tliscOunting
bills and issuing Federal Reserve notes.
all Federal Reserve banks can come 10
The assistance Of every well-managed
member bank in time OF need
The additional security reaches 10
The stockholders. the depositors and I'd
the borrowers. The borrower feels sure
of accommodation, the depositors of
the return of their money. and the
stockholders Of the safety of their in
vestment. With membership i'm thc>
Federal Reserve System viewed wholly
as insurance 10 would be worth while
even II IL entailed additional expense
The reserves OF the Federal Reserve
Banks are always available in time of
need, while under Our old National
Bank Act they were not TO bear this |
out. ] need only again refer 90 condi. /
tions in 1907. A member bank can de- |
plete its Reserve I'm a Federal Reserve
bank but under the State system the
reserve must be maintained. and thus.
is not available at the very time
needed. Moreover. reserves carried az
deposits with other banks are in part
loaned by these banks, with the result
that frequently i'm the old DAYS. they
were not in position TO return the de-
pOsiis. Pyramiding Of reserves is a /
recognized evil which is obvlated by ,I
.he reserve principle OF the Federal Re
iQrve System
Through its ability 10 redlscount :
is eligible paper a member bank is ,
always sure Of securing needed funds
The Federal Reserve banks provide
against financial panics. Il
S not necessary for a member bank 10
AIRY a secondary reserve because its
'aper eligible for re-discount is its
ccOndary reserve and every well-man.
ged bank viii carry enaugh OF such
aper TO enable it 10 meet al! sudden
emands by the conversion OF this see
ndsry reserve.
AS an additional accommodation. the
lw requires the maintenance Of a re
erve propOrtionate TO deposits. Ex-
erience shows that increased loans
lean increased deposits. which in turn
lean larger reserves. BY rediscOunt-
* bank can at once build up its
,serves and thus Increase its lending
'pacity. The ability 10 rediscount
tth Federal Rerserve banks is both
lrer and cheaper than borrowing from a.
correspondent. As TO loss Of interest w
balances. the deposit with the Fed y,
al Reserve bank can generally be -,
ade from cash now carried i'm vault 80
hich does not draw interest. Excess
ult reserves arc no longer necessary
be sure of maintaining the minimum
quired by Stale law and the Federal
serve banks can be relied upon to
pply currency at any time. Member
nks can safely carry much smaller 4,
cess reserve and have a part of the
esent excess reserve for lending or
'estment. If invested IN paper eligible
? rediscount it serves every purpose
a reserve. since it can Immediately
made available.
As stated before, paper eligible for
liscount has come TO be regarded as =
member banks emergency reserve.
mber banks can borrow at the Fed
4 Reserve banks at lower rates and :,
In greater certainty than from cor y
pondent. =
BY using the check collection serv- ul
a member bank can effect saving u sy q,
two ways
First-Balances carried with CORE 'eu s".',
'ndents solely for the purpose of ' ao,'
'ck collection may be discounted and ~ ~,
balance loaned at current rates. Sell @
ICE checks on IS per cent Of The @ ooll
lks in the United STATES can be col Son
ted at par and without cost this is DS
arly the desirable thing TO do ~ ~
Second-Checks can be collected ~,
ough the Federal Reserve hanks in ~.
shortest possible time since au ass'
'cks are routed direct. The fund r'
IS, become available for lending NOR ser' s,sr
ckly than under the old system of Ii,s, cls
rect routing The experience of WIZ WIZ
mber banks who use the system 10 woI
fullest extent is that the saving a. a.,
added benefits Offset the loss Of u'iS IT.,
rest on balance carried" co-,
discussion Of these nspsrs Gov
buttons were read by Mr. Rossen, at