The New York herald., 1921-06-28

AANkO In the United States operate IN a manner
quite different from those Of most other important
~ countries. We have than 900 banks in this
country Of which are moderate-sized institutions
owned by people of their immediate neighborhood and
which conhne their operations single city In
of the European countries and in Canada the banking
business carried by few large banks having many
branches scattered throughout the country.
The American system of individual banks each serving
its field, has much recommend it, because
close between the bank and clients and
enables the officers of banks be in close touch with the
affairs of the business and other depostors whom the
bank However until the Federal Reserve System
put into operation in system ofseparate banks suf
ered from very serious difficulty in times of when
the demands for banking accommodations exceeded the
capacity Of the banks.
bank, of course, does keep hand all the money
that has been deposited with it. Modern industry and the
carrying business require the of the credit which
based the deposits in the banks which simply
that the banker is able lend of the funds left in
his borrowers whose sovency and ability repay
he has confidence.
Under the old regime, each bank had stand alone
in times of money strngency and there strong
a reservoir of credit which could be tapped supply
unusual requirements for credit The money panic of 9o7
tend there plenty wealth and plenty of consunabe
goods in the country, but the machinery lacking by
which these goods could be made the basis for sound credit
and the issuance Of sound currency.
Fortunately the Federal Reserve System into ex-
stence before the outbreak Of the European and pro-
vded the by which all of the banks of the country
able pool their strength that in effect the united
strength of the banks in the country back of the system
H.
banks may shift their limited and liabilities strong
Reserve Bank which, in addition its other functions has
the power to issue lawful money.
Restrictions ON Note-lssMing Power
IS power the banks issue reserve notes carefully
restricted by law and such currency be put into
circulation unless it amply secured by gold and
by prime commercial paper arising from actual transactions
That I protects the United States from any fiat money
scheme which the attempted manufacture money
by of printing press The stability of Americas
banking system today compared with Of the Eur
opean countries due the fact that adequate Of
prime commercial paper stands behind every dollar
of currency in circulation while in Europe devices
for providing governments with money have only resulted
in such serious depreciation of their curence that the ends
attempted have been defeated.
But the Federal Reserve Banks intended to
make easy great expansion of credit such had in
this country during the recent period The primary
purpose of the System make possible the substitution
in easy and sound of kind of credit by
placing with another just sound 1t does this by rcplac
ing the sound credit obligations of SMALL local banks with
the obligation Of strong Reserve bank having the
backing of the national government In fact the
which issued by the Federal Reserve Banks
cofth theT TJn;te