The Birmingham age-herald., 1921-07-31
EASTERN RESERVE HAS MORE MONEY
 THAN IS NEEDED
Four Southern Member Banks Loaned Up to Capacity, With Money Extremely
 Tight in District
By HARDEN COLFAN special Correspondent of The Age Herald llOnYriRhf. 1Qel hy The r.n- Her

Copyright, 1921, by The Age Heraid)
 Washington, July S0.-(Special.)--- Locked and idle in the coffcrs of the four eastern reserve banks at Bos- ton, New York, Philadelphia and Cleveland is more than $500, Ooo. GOO in unused gold reserves. This money Is potentially capable of furnishing credit to the extent of S1O,0OO. 900, ,OO0, but there is so little demand for it in the cast that rediscount rates have dropped twice within few weeks.
 Loaned up to capacity-and in one case beyond it-are the four federal reserve banks in the centers of Rich mond, Atlanta, Minneapolis and Dal- las. The farmers in the great ter ritory supplied with credit by those four institutions find the money mar ket so tight that it is extremely dit- acul to get credit on any reasonable terms.
 The east, with it's great industrial centers still travelling at a conserve ative pace, has more money than 1t can lend: the west and south. need Ing money as seldom they have needed 1t before, can hardly get it at any figure
 Such is the showing of the federal reserve boards latest statement The condition, admittedly, is seasonal and bit unhappy. Some way should be found, many bankers believe. whereby eastern gold can suprly western and southern wants. The iederal reserve board is studying the situation and steps may be proposed
 Southern Reserve Banks
 True, the reserve banks at Rich mond, Atlanta. Minneapolis and Dal- las could borrow gold from their wealthy colleagues the reserve banks at Boston, New York, Phila . delphia and Cleveland, but the inter. est rate charged by the four banks with surplusages are such that ther e would be virtually no profit in the transactions for the borrowing banks, This, too, is recognized as sound banking practice on the part of the lending hank-to charge a reason able interest rate, which in this case happens to be what the borrowing banks would have to charge their customers--but it doesn't lend itself to correcting the situation in the az ricultural communities.
 Notwithstanding the lack of profit, there has been much borrowing re- gently. Atlanta and Dallas, needing funds. have borrowed about $23, ,OO0, = GOO from Boston and Cleveland thereby making available minimum of about $115,000,000 in credit for borrowers in the Atlanta and Dallas districts Richmond and Minneapolis went to New York and borrowed $3S,000, 0,000--enough to enable ther1 to pass on to the farmer in their sec tion about 200,000, 900 in loans. The total borrowings of the south and west from the east, the statement shows, is about $61, ,000, 900, or less than one-fourteenth part of what is available to lend
 Boards Statement
 study of the reserve boards statement shows that the four banks have the following amounts of so- called free gold-gold not working which could be loaned to the agricul- tural banks to help out the farmers, If such a policy were deemed desir- able:
 Boston. s1as,ss7, 900; New York. s465. 9sS.000; Philadelphia, $93, ,439.- 900, and Cleveland. $1O4, ,000 The total is $SOS,ss2.oOo. The reserve bank at San Francisco also has money to lend.
 This free gold is expanded about 12 times in actual practice when it who goes to his bank to borrow money. Thus. the federal reserve bank expands 1t two and one-half times in rediscounting the paper Of the member bank borrowing from it. On that basis the free gold would provide for rediscounts totaling more than $2.000, 000,0
 The member bank borrowing from the federal reserve bank theoretical ly could expand the rediscount value of the free gold 10 times. In actual practice it is generally expanded five times. Thus the two billions of redis- counts could be expanded to ten bill lions In loans through member banks.
 Members of Reserve system
 All national banks and great many state institutions and trust companies are members of the fed eral reserve system. Theoretically all the surplus reserves of the federal reserve system are available to DOT rowers, regardless of geographical location, but actually 1t doesn't work out that way. When the federal re- serve bank in Dallas, for instance, Is loaned up to capacity, the Texas farmer simply can't borrow, regard less of whether there is an enormous supply in athe federal reserve bank at New York or not unless the Dal- las bank borrows from the New York bank and that nets no profit to the Dallas bank under existing prac- tices. .,.
 The advisability of changing the situation so that Dallas could Dor row freely from New York and at a reasonble profit is one Of the prop lems confronting the bankers con earned and is receiving their atten- ton.
 
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