Plentywood herald. [volume] (Plentywood, Mont.) 1908-current, 1931-01-22
RESERVE SYSTEMS
DIVIDENDS ANALYzED
Bankers Find Increased Pay
ments to Member Banks Would
Be Small Inducement.

Various proposals that member
banks In the Federal Reserve System
should participate more largely in its
net earnings through an increase In
the dividend rate above the present
fixed s per cent would be q very
small financial inducement" to them,
1t Is declared In a recent study of this
subject by the Economic Policy Com
mission Of the American Bankers As
ISOLATION. This Is shown, the commits
sion says, by a theoretical forecast, on
the basis Of the past six years, Of adj
ditional earnings that would be dis
bursed to member banks during the
next six years under two plans intro
duced in bills before the United States
Senate.
1.-THE Fletcher bill provides that
Federal Reserve Bank earnings, after
present 6 per cent dividends to mem
bers and completion Of a 100 per cent
surplus, should all be distributed az
extra dividends to the stakeholder
banks" the report says. III the earn
ings Of each Federal Reserve bank
we're distributed among its own men,
bers there would be no extra divi-
dends in the Boston, New York, Phila-
a~delphia, Cleveland, Chicago and San
Francisco districts during the next
six years, but the other six Federal
Reserve Banks would pay annual ex-
tras at the following rates: Richmond,
sos per cent; Atlanta, 400 per cent;
St. Louis, $50 per cent; Minneapolis,
9.51 per cent; Kansas City, 5.48 per
cent; Dallas, 4.83 per cent.
IF the earnings were pooled and
paid out to all members In all districts
each member would receive an aver
age annual extra dividend of rs per
cent Under this plan no franchise
tax as now would be paid by the Fed
eral Reserve Banks to the Federal
Government.
Another Plan Analysed
"The Glass bill would provide that,
after present 6 per cent dividends,
one-half the remainder should be paid
to member banks as an extra divi-
dend with the residue going to sur
plus and Federal Government as fran
chise tax. The average annual extras
to members would be as 1Urows: Bos-
ton District, 2.51 per cent; New York,
.4S per cent; Philadelphia, EOS per
cent; Cleveland, 2.09 per cent; Rich
mond, 1926 per cent; Atlanta, 4.67 per
cent; Chicago, 800 per cent: st. Louis,
200 per cent; Minneapolis, Ate per
cent; Kansas City, 3.74 per cent; Dali
las, 3.31 per cent; San Francisco, 1.87
per cent.
III these extra funds were pooled the
result would be an extra average an
nual dividend Of 1.73 per cent for each
member. Under this plan the system
would still pay as now an annual fran
chise tax, amounting to $1,941sss on
the average"
By way Of concrete instance. the
report says, a member bank having
capital and surplus Of $200,0 00, there
fore holding Federal Reserve Bank
stock amounting to $4,000 on which 1t
is receiving $3.50 under the present 8
per cent dividend arrangement, would
with the addition OF each 1 per cent
to the dividend rate receive an add
tional income OF $50 a year.
1T each member bank VIII figure
out for itself the dollar-and-cents gain
Il would enjoy we are confident 1t
will be agreed that the gains are small
as against the economic disadvantages
which can be pointed out" It con-.
clu6es.