The Manitowoc pilot. [volume] (Manitowoc, Wis.) 1859-1932, 1922-10-26

5 wt9@. SaS bank had loaned 9ooo'OVV'-
I ~ Y 600 in the years 1921 and had
made net profits of SlolloOo'
~ These federal reserve banks are
going up all over the couniry-a
fact which shows the magnitude and Importance
of fine system In response to a public demand Tor
Information about the Federal Reserve banking
system and its operations the following oHlcla
statement is prcsented
A federal reserve bank does for banks almost
exactly what banks do for their customers
receives money on deposit from such banks aS
have become members Of the Federal reserve
system. and lends to them All natlohal oallNS
ore members of the Federal Reserve system ana
many state banks and trust companies nave
become members also, Every member DahN Is
Obliged by law to keep with its federal reserve
bank an amount of money which bears certain
prcportlon to the deposits it has received from
it's customers This is called reserve ana as
the federal reserve banks keep the reserves OF
their members they are called reserve banks
Ar times member banks borrow from their federa
reserve bank Just as individuals borrow from thelr
own bank individuals cannot deposit money
with a federal reserve bank or borrow from III
their relation with 1t Is through the member
banks.
Before the Federal Reserve system was IN oper'
alton onch individual bank stood virtually alone
This was safe enough as long as things went wen
IN the business world but even then the machinery
of banking was so cumbersome that II olleh
worked badly.
In order to meet the requirements OF IA" anu
TO nay depositors, all banks used to Keep large
amounts Of gold and currency on hand ana most
Of Them also kept money on deposit with other
hanks in the larger cities When all went well,
fine money on deposit with the city banks could
no withdrawn in currency whenever 1t was
wanted But when as sometimes happened DUST
ness or banking conditions were disturbed ana
suspicion was in the air the banks were anxious
TO increase the amount of cash on hand lest an
unusual number Of dcpostors might want to with
draw their money And It was at those times that
the city banks were least able to furnish cash.
For the available supply Of currency was limited
and there was no quick way Of increasing It,
The limited supply Of currency led to the panic
of 1907 For, moved by apprehension almost every
one of the twenty-four thousand banks sought for
it's own protection, to withdraw such currency as
IT could from other banks and pay out as little as
nossIMe TO its deposors. Though emergency
measures were finally taken, they were too late
70 preycnt the coming of trouble, and the existing
banking machinery fell apart into thousands OF
separate units.
Each bank had to trust largely to its own cash
resources because. however willing, the other
banks felt they could not give up much OF Their
cash for by doing they might impair their aDlI-
ity to meet the possible needs or their own Gus
toners Each bank in seeking 20 protect itself,
necessarily weakened the entire banking struc-
ture. The defenses were weakest when the
danger was greatest
The result was that every few years money
manic occurred bringing disaster and depression,
These money panlcs from which the United States
suffered and which the organization Of the Fed
arol Reserve system now prevents were, of course
uuite different from the commercial! crises from
which every country occasionally suffers
Under the Federal Reserve system there Is
quick, certain, automatic way by which the banks
tbot orc members of the system help one another
I'm good times and bad. This is important to every
bpsincss man, every farmer every working man,
oynrv citizen II Is the result Of organzation-tho
Mind of organization that makes system Of
reservoirs in a community better than many sep
urate wells.
n Is ourroprate TO think Of the Federal Reserve
evetnp, os exnCtIy that-a system Of reservoirs,
v,,pre gre twelve Of these reservoirs, the federal
rpseryr hanks Of Boston, New York. Philadelphia,
Cleveland Richmond Atlanta, Chicago st. Louis,
NIlnucnpuis. Kansas City Dallas and san Gran
,isco- eoch serving the needs of the member
banks I'm rs own federal reserve district. In each
az These reservoirs credit ls stored up, ana from It,
ma tbo need arises credit Is supplied to the meme
nor hanks and through them to their customers,
including not only business men and farmers but
other banks MS well The process Is much Hike the
storing mp Of water in city reservoir from which
n IA supplied 10 houses and their occupants
/ II mny he thought strange that such thing as
credit, which in this sense is the power to make
loans can be stored up But the fact Is, great
deal of II Is stored up in the federal reserve reser
voIrs For. MS we have seen, the member banks
deposit in the Federal Reserve banks most Of the
gold they formerly kept in their own vaults and
some Of the money they used to keep on deposit
with other banks. And It Is the gold which fed
eral reserve banks require in this aud other ways
! tbat gives them the ability to make loans and
I issue currency.
The provisions Of the law are such that the
/ federal reserve banks can make loans to an
amount between two and three times much as
the gold they have. So, having supply OF gold