Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-08-14
RY I. \. FLEMING.

BY !. \. FLEMING.
Under the Federal reserve act the
first line of reserves OF MI member
banks must be deposited with the
regional bank III the district to which
the member bank belongs
When the law was enacted the
reserves we're reduced so that banks
we're required to maintain on deposit
at all times 10 per cent of their de-
posts payable on demand and per
cent of their time deposits.
on this, very large aggregate banks
receive no interest payment whatever.
For the banks in the cities this re-
serve is the base of operations for the
speedy collection and payment Of
checks. and with the capital of the
various regional banks of stabliizing
monetary conditions.
ANY bank infringing on its reserves
is at once notified that there is
4 deficit against their reserve and that
penalties start at once and Will he
continued until it is fully re-eStab-
tished
Deficiencies "Sore Spot"
w. w. Hoxon, chairman OF the
board of directors Of the Richmond
regional bank, this district. comments
on "a sore spot or serious criticism
that occurs to me is the matter of
deficiencies in the reserves of member
banks.
1T was not contemplated by the
Federal reserve act that banks re-
serves should he used for other than
exceptional conditions or that the
penalties for the deficiency in reserves
source of revenue. Reserves were
established at the very lowest possible
point consistent with safe and sound
banking in this country.
Il was shocked when reading the
report of the Federal Reserve Board
for last year to find heavy fines and
penalties for deficient reserves. They
we're as follows: Boston, $500; New
York, $4,000; Philadelphia. $11 600;
Cleveland, $50 600: Richmond, $50 900;
Atlanta. $4,000; Chicago. $50, 900; st.
Louis, $22,O00' Minneapolis, 10000;
Kansas City, S24 600; Dallas, $35, 600
and San Francisco, S29 900
The Richmond regional paid the
highest penalties and with two ex-
ceptions it has the smallest number
of member banks"
holders at their annual meeting this
year and was referred to the advisory
committee of which Victor b. Deyber
is chairman. for consideration
Washington Probably Not Guilty.
1t is probable that, as Washington
did not figure in the aggregate fig
ures of failures in this regional dis
trict, nor has 1t for years. that it did
not participate In paying penalties for
deficiencies of reserves.
1t is n fact that many of our largest
banks have not found it even neces-
sary to take advantage of their normal
rediscOunt privileges while many have
not borrowed from Richmond for
years.
Maryland and the District of Co
lumbia are the strong sisters in the
Richmond regional. In these localities
business is always reasonably good:
they have few crop difficulties, none
of the weaklings in the banking line,
and they have not depended on
charges for check collections as an
important part of their revenue.
How to Increase Income.
It has become a serious matter TO
several tax assessments, dividends. in
terest and expenses, as there is such
an abundance of cash competing for
use at fair return.
This has been accentuated by the
life insurance companies in their ef-
forts to safely place their millions on
millions of dollars and the falling off
of operations in the building and real
estate lines.
Merchants are still going STOW on
carrying large stocks, fearing unsea-
sonable weather and liquidating sales
at losses and are not large borrowers.
The Richmond Regional Bank ad.
mits that it is having a hard time
this year in efforts to make expenses
and earn the dividend which must he
paid to member banks, 6 per cent on
their stock holdings. For the first
TOUR months of the current year earn
lngs were short by 500 Of furnish
ing the required funds
The latter part of the year is the
best for the regional banks. when thew
usually make up any deficiencies and
lay by little surplus
Interest Counts Heavily.
The largest single item in the mat
ter of expense in operating banks is
found in the item. interest paid to
depositors. Records show that the
average expenditure under this item.
by all national banks. totals one-third
of all the annual expenses.
Savings banks usually pay larger
interest than national banks and they
may put into effect clauses as to de.
lays in paying depositors-but only in
emergencies. But they have consider
able advantage over national institu.
tons in the matter of taxes and also
in reserves required
National banks are limited in the
amount OF loans that may be made
on property and up to recently have
been unable to make loans for more
than one year Interest accrues on de-
poslts in savings departments of ma