Wausau pilot. [volume] (Wausau, Wis.) 1896-1940, 1921-12-08
RESERVE BANKER
SPOKE MONDAY
ADDRESSED KIWANIS CLUB
AND GUESTS LAST
MONDAY

was given to about 100 WauSau buSl-
ness men on Monday by j. B. Nc
Dougel, governor of the Chicago
branch of the Federal Reserve sys-
tenn.
Mr.. McDougel was guest of the
sixty Wausau Kiwanians who also en-
tertained nearly a hundred other bus
mess men at a luncheon at the Wau-
sau club, following which Mr.. Nc
McDouge1 made his address.
The speaker briefly but clearly
gave his listeners a history of the
Federal Reserve system which is in
dependent of the others, although all
branchs have business relations with
each other much the same as local
/. banks. He stated that the Chicago
Federal Reserve bank is made up of
the national and state banks and is
doing a regular business, receiving
deposits, discounting and rediscount-
ing.
Not Govt. Institution
He laid particular emphasis on the
fact that the Federal Reserve banks
are not government institutions and
that he, as governor of the Chicago
bank, is not a government employe.
The banks are operated under federal
laws similar to those which govern
the national banks. The directors are
chosen from among the bankers by
the banks which are members of the
system and in the Chicago bank there
are several hundred member banks.
The stock of the Chicago bank is
held by member banks. Each bank in
the district, to become member bank,
ic i1.od ihxys1 10 IN, fob CT in 10
Federal bank, the maximum being six
per cent of the member banks COM
bined surplus and capital. Thus far
only three per cent has been called
for and Mr.. McDougel added that it
was his belief that no more. than
three per cent of any banks appor-
tionment would ever be called.
The speaker explained advantages
of the Federal Reserve bank system.
When a local bank has loaned out all
its available funds it may or loan
from the Federal Reserve bank up to
a certain amount, depending on the
stock held by that bank in the Re-
serve bank. If the amount thus avail
able is not sufficient to tide over its
customers further loans from the
Federal Reserve can be made by the
local bank by depositing collateral of
it's customers with the Reserve bank.
Greatest Test
Mr. McDougel said that the great
est possible test of the Federal Re-
serve was made during and after the
recent war and that this has proved
the value of the bank in emergencies,
for which it was organized. The speak
er showed also the loaning power of
banks in that the Reserve banks are
permitted to loan money up to thirty
five per cent of their deposits and
against forty per cent of their circu-
latlon.
The federal banks, in turn, can re-
plenish their credits by turning over
notes to Federal Reserve agents, who
issue Federal Reserve notes paper
money!. These notes are guaran-
teed by the government, by the Fed
eral Reserve bank and protected by
100 per cent collateral. Forty per
cent of the notes so issued is based
on gold.
Explaining to his hearers just how
far the banks can go in the matter of
credit, Mr.. McDougel said that at one
time the Chicago bank had issued
Federal Reserve notes to the amount
of S3,400, 100000 and that that sum
has been reduced gradually as stocks
were liquidated so that the amount of
reserve notes now outstanding were
$4,000, ,000,000
Leased Wire
A complete leased wire system con-
meets all the Federal Reserve banks
not only with each other but with the
federal reserve agent in Washington
and enables each bank to "clear" daily
without transporting gold or curren-
cy from one city to another. This is
accomplished by the fact that the IL
Reserve banks of the country maintain
about 100000 in gold jointly, and
deposits or Withdrawals are made by
wire each day from the amount of
that sum owned by each bank. This
system also enables local member
banks to carry on a vast amount of
business with other banks by tele-
graph the same day, which before the
inception of the federal reserve sys-
TEN required the transporting of the
currency and often several days to
complete a deal.
Favor Agricultural Sections
After concluding his talk he invit-
ed questions from those present. To
the question, what is the Federal
Reserve doing for the farmer?' Mr..
McDougel explained that the banks in
agricultural districts are receiving far
greater aid now than the industrial
sections. He cited one case in partic-
ular in which it was shown that a
bank in an agricultural section had
been loaned nearly eight times as
much Tin proportion to its capitaD
as the biggest bank in Chicago. That
agriculture had been favored all along
because Of its Importance to the ma
ton. was the conclusion of Mr.. Nc
Dougers answer to that question.