The Republican journal. [volume] (Belfast, Me.) 1829-current, 1922-03-16
THE FEDERAL RESERVE SYSTEM

THE FEDERAL RESERVE SYSTEM
The act establishing the Federal Re-
xerv. system was passed by Demo-
cratic House and Senate and was ap-
proved by Mr.. Wilson during his first
term as President There has been of
late much vehement condemnation of the
system in the Senate of the United
States, notably by certain Democratic
members. Public denunciatlon of it has
been rife in the South and tn some sec
ions in the West. Self seeking poll
.,cians and agitators all over the country
have sought to magnify this criticism
and spread it broadcast. This has caused
many people to suspect, if not to actually
believe, that the Federal Reserve System
had been operated for the few and against
evel ybody else, and they want to know
the facts. The machinery by means OF
which the Federal Reserve System oper-
lates consists of IL regional banks" To-
rated in IL of the great business centers
,of the United States, as follows: Boston,
New York, Philadelphia. Cleveland. Rich
mond, Atlanta, Chicago, ST. Louis, Min
neapolis, Kansas City, Dallas and San
Francisco, one in each city. Each of
these banks has a defined territory and
no one of these banks has authority to do
business outside its own pre- cribed terri
tory. Each bank has board of directors
and is otherwise equipped to do a banking
business. They are not owned by the
Government, as many suppose, but are
owned by member banks" in the terri
tory of the t'regional banks" The capital
of the regional banks is furnished by its
m tmber banks which are many and are
all national banks. Their capital is.
in bonds or certificates of Indebtedness
of the national government and these
securities are deposited in the national
treasury in Washington, as security for
the reserve bank notes issued by the
regional banks as currency. The gov
eminent dos not own a dollar of stock
in any regional bank, and no taxpayer is
assessed a penny in connection there
with. No regional bank can loan dollar
to any person, firm or corporation. These
banks en- loan only to member banks.
A very simple illustration will show
how business is done under the Federal
System. Suppose member bank of the
city of Portland or any other city in the
Boston reserve district has accommodated
its customers with Ioa S to the full ex-
: tent Of its resources allowable under
State and national banking laws, that
more money is needed to carry on leaiti-
mate business enterprises and customers
ask for additional loans Offering ample
and good collateral security. The men,
~ber bank accepts the loan, endorses the
note to the Federal Reserve Bank in Bos-
ton, sends the note with the collateral to
that bank and the customer gets the
money in Reserve Bank currency which
10 perfectly good money because the
collateral security in the vaults of the
regional bank in Boston and the securi-
ties in the national treasury make it good.
When the n te is paid the money returns
to the regional bank and remains there
until further needed. The Reserve Sys-
TEN thus gives the country an elastic
currency which enlarees when needed
and which retires automatically when
not needed.
The Federal Reserve System enabled
the people of the United STATES to raise
about s23 600. 00O, 600 for our own war
depreciating our currency a penny at
homo or in Europe. Without it we be-
lieve the Liberty loans could not have
been made promptly and as required and
they could not possibly have been made
ct rate of interest as low as four and a
quarter per cent. Scores of people in
Belfast and hundreds of people in Waldo
county had no ready money with which
TO buy Liberty bonds when the drives
were in progress, but they were able to
subscribe literally through the agency of
the Federal System. They gave their
notes, put the bonds subscribed for with
the notes. - collateral, and through q
member bank the note was rediscounted
and only Q fair rate of interest was
echsTged. The regional bank furnished
r;he money and when the notes were paid
k:y1T.Zl LADIES'