The Birmingham age-herald., 1921-07-17

the federal reserve banks to their member banks, stating that without such an understanding the loans would prove of no benefit, as the southern banks are so tied up with loans carried from last year that they are unable to function in their usual manner and make loans for current business out of their present resources.
 Tn reply I would advise you that such loans are already authorized. and all feredal resrve banks in the cotton sections are carrying paper of this character for their member banks, and have been doing so for many months past. There is no ques- tion of the ability of the federal re- serve banks to rediscount paper to the amount named, or more, If neces- sary, under the terms prescribed by the federal reserve act. While the federaF reserve banks of Richmond and Dallas would be considerably be- low their required reserves today If put upon their own footing, they are maintaining them by rediscounting with other federal reserve banks, and will have no difficulty in rediscount- ing such additional amounts as will be needed. The federal reserve bank of Atlanta has for some time past maintained it's required reserve with out rediscounting with other federal reserve banks, although it is quite likely that it will be rediscounting Tn Ia short while.
 St. Louis Bank
 'The federal reserve bank of St. Louis has stronger reserve than any of the other banks in the cotton sec tions, and does not anticipate any difficulty in meeting all legitimate demands out of it's own resources.
 The federal reserve bank of Kan sas City also has a strong reserve, which stands but a few points below that of the St. Louis bank. The fed eral reserve banks of Richmond, At lanta, St. Louis and Dallas all have a flat rate of 6 per cent The only bank in the system which still main tains the progressive rate is the fed eral reserve bank of Kansas City. which has a normal rate of per cent, an intermediate rate of per cent and a maximum rate of per cent.
 There seems to be a good deal of misapprehension and confusion as to the functions and powers of the federal reserve board and the federal reserve banks Some people seem to be under the impression that we have central bank in this country. This Is not the case. The powers of the directors of the federal reserve banks are defined in Section of the federal reserve act, while those of the fed eral reserve board are defined spe- officially in Section Il. Section l3 gives the board the right to deter mine the meaning of the act and the l limitations of that section. The di- rectors of the federal reserve banks oI,a wit 2 n c ttnn | of their respective institutions. They have the sole power to pass upon | eligible paper offered their respect | i've banks for rediscount, and the | board cannot force them to take pa | per which may be in their opinion unsafe or undesirable. The lending power in is the hands of the banks and not of the board. Each federal reserve bank is body corporate and, as such each bank, among oth- | CT things, is authorized to exercise | by it's board of directors or duly au- thorized officers or agents all pow CTS specifically granted by the pro- visions of this act and such incidenta, l powers as shall be necessary to carry on the business of banking within the I limitations prescribed by this act |
 Under Board of Directors
 "'Every federal reserve bank shall | be conducted under the supervision and control of board of directors | The board of directors shall perform the duties usually appertaining to the office of directors of banking associa- tions and all such duties as are pre- scribed by law
 Nowhere in the act is the federal reserve board given power to pass on credits, and the board maintains
 no credit files. The board itself i:
 not organized as a banking insti-
 tuition, but merely as a supervisors
 body, having general supervision sub
 ject to tts express reservations 1T
 Section of the federal reserve act
 Tn your letter you touch upor one of the difficulties in the presen
 situation. You say that the south
 ern banks are so tied up with loan.
 carried over from last year that the, are unable to function in their usua
 manner and make loans for curren
 business out of their present re
 sources A considerable number o
 the member banks in the cotton dis
 tricts are not rediscounting at all
 and of those that are rediscountins
 more than one-half are rediscountins
 very heavily. Many member bank
 are carrying loans in larger volume