Show MAKES CHANCES N system me new money law displaces year old code IS FAR REACHING IN SCOPE mot most important law relating to fl nance passed in many years essential enolal features of the measure explained in language washington spec ec 23 the now new bill affecting tho currency banking and finances of the tha country la Is one of the most tar far reaching measures relating to finance cnance that have hava been enacted in many years the magnitude ot of the subject euble ct the diversity of interests teresta In affected and the length ot of the debates in both branches ot of congress has to follow the changes end and grasp the essentials of 0 this highly technical measure in ia its important bearings on money finance banking and the entire range ot of fiscal subjects public and private which it affects summary of the bill with a view therefore ot of presenting succinctly and in non technical language an epitome ot of the salient lea tures lures of the measure ruea sura as finally framed the following summary to Is given of the bill as a whole and of its principal details generally speaking the first steps stepa to be taken to bring into operation the nations new financial system will be through an organization committee c consisting of the secretary of the treasury searA secretary tary ot of agriculture sad and controller of t MA currency banks have 60 days within which to td file ale their applications tor for membership in uis the new system and one years time li id allowed before the government will compel the dissolution of any national hank bank that refuses to join will take up the slack the new law wil make little direct climme chaase in the operation of the present national banks except to allow them theia to loan a certain amount ot of their funds upon farm mortgages mortgage B its chief purpose Is to add I 1 a new piece ot of machinery to the banking 11 system that will take up the slack during d the changing business conditions of each year that will give the banks a place to quickly convert their assets into cash in time ot of need and that will bring out new federal currency when it Is needed and retire it when wb en money beco roea i chaap OM I kanka fanks are now required to keep a certain percentage of their deposits as reserves reB orves part in cash in their own v vaults and part of which may mav be in the banks ot of new york chicago st SL louis and other designated cirlee in D times of sudden financial demands when banks have loaned up to the full limit 0 ot their resources these reserves furnish little relief because it 11 they are paid out to meet demands the banks bank dare are left in a prec arloua condition basic principle of law tue the basto balo ba lo principle of the new law I 1 la Is to g gt got t ther here 3 reserve funds out but into circulation when hn necessary without the safety of any bank and to provide a place to which local banks may rush in a crisle crisis and get cash for the prime commercial paper they hold in their vaults this Is to be accomplished through a chain ol olA regional reserve banks or reservoirs ot of rese reserves ryes in which all banks hall chall deposit a stated part of the money they are required to hold bold as reserves new a financial flurry cornea comes the banks can take commercial paper such as aa notes drafts and balla bill of exclia exchange to these reservoirs and secure the use uee ot of their own reserves or it if necessary even the resl reserve erve of other banks by depositing this security the new regional banks will receive about one halt half of 0 the bank reserves ser i ves of tha tb cou country atry they in turn will be to loan back to the banks all but 35 per cent of these reserves so that in case ot of emergency millions of cash cart can be brought out into circulation quickly 4 the banks will have to pay tor for these loans howe however veras as individuals have to pay for a loan from any local bank and alila charge chang L la Is expected to prevent the tto too free use of the reserves held 4 by tho the regional banks i new paper Cu choncy currency oncy A new w tonn form ot of paper currency la is also provided for to come out in case of emergency and which is expected to go back into the hands ot of the government wh when en times are normal niese ese treasury tta sury notes will be printed by the govern government trient and issued through each regional reserve bank and will bear the guarantee both of the regional bank and of the it the demand tor for currency in any ecklon 7 ot of the country exceeds the supply ot af circulating money a reg regional tonal lank bank can secure this now new oney money from the government and put it into circulation but a gold reserve ot of 40 per pei cent and com hercial ner cial paper equal to the full value ot of the note must be held as a reserve behind each note issued this provision is expected to bo be the influence tint that will drive tia tale new money back into retirement a hen ahert it 0 s no longer needed clearly cleady jbv following fallowing fal lowing analysts presents presenta the itkis iu alla ot of the tha new law without adhering closely to tb technical division vr er lari language page 01 p the measure mea auro at tho the head bead of the th system will stand a federal reserve board at washington appointed by the president and to consist of 0 the secretary of the treasury the controller of the currency and five dye other members mem bere two ot of these shall be expert bankers bat none shall have blinking banking affiliations or own bank stock during their service this board will exercise general control over the entire system the temporary organization committee orthe federal reserve board will select from fram eight to twelve cities where regional reserve banks shall be located and will divide the entire country geographically with these cities as aa the centers centera of districts all national banks in a district will be required reaul red to subscribe tor for the stock ot of tn ane illonal ir lonal reserve bank in that district and to keep a portion of their reserves there known as an member banks 11 local banks will be known as member banks because they will own the stock of the regional reserve bank of their district each member bank will be required to take capital stock of the regional reserve bank equal to 6 per cent of the member banks capital and surplus the capital espital of the regional hank bank will increase or decre itse so that it always represents 6 per cent of the combined capital and surplus of all the banks of the district blat have joined the system national banks are compelled to join and state banks are permitted to it they bring their reserve requirement s up to the standard set tor for na lional hanks banks and submit to national examinations public can buy stock public ownership of the stock of the regional reserve banks Is permitted only in case enough banks do not join in any district to provide a capital toa stock r to A r of in such event the public may purchase the stock in quantities limited to tor for each individual but the voting of 0 this stock will be placed in the hanla hands ment representatives on the board of directors of the regional reserve bank the regional reserve banks may do business only with their member banks not with the public except that certain open market operations such au ag the purchase and sale of gold government ern ment or municipal bonds and certain forms of bills of exchange are permitted these banks will make their earnings from the loans made to member banks and from the purchase and sale of bonds and foreign bills of exchange must put up cash member banks wll will be compelled to put up in cash only one halt half of their subscription to the capital of the now new banks the rest can be called tor for it if needed by the regional bank dividends de ads of 6 pr per cent will be paid on this stock to the tha member banka all ii pei after these dividends aap are paid one halt half of the surplus net earnings goes to create a regional surplus fund and when this has reached 40 per cent of the regional banks paid in capital these earnings are to go into the united states treasury the balances of the net earnings are to ha be paid to the united states as a franchise tax with the machinery thus thua created for a new banking system that Js Is supplementary tary to the commercial banks of the country the law provides for a gradual transfer of part of the bank reserves to these new reservoir banks in order not to disturb business conditions dit ions or to withdraw too suddenly the heavy deposits of country banks in the large cities the law provides that three years may be consumed in shifting these balances and that it if necessary part of the reserves transferred to the regional banks may consist of commercial paper the amount of reserve required from every bank bundar the now new law and the place where it must by bo kept are as as follows country banks total reserve required 12 per cent 0 of demand deposits and 6 per cent of time tiina deposits flye five twelfths must be hold held in the banks own vaults for two years and four twelfths after that for the first year two twelfths must be kept in the regional bank increasing one twelfth each six months thereafter until it reaches five twelfths ol of the total reserve for F or three years the part ot of the reserve may be ba kept in the hanks banks ot of reserve reserva cities after that ime it must be kept either in the country banks and vaults or la in the regional reserve bank Ite deseive serve city banks total reserve required 16 15 par cent of demand and 5 per cent of time deposits six fit must be kept in the banks vaults for the first two years and ave fifteenths after that time three alf must be kept in the tha regional reserve bank for the first year increasing one fifteenth every six months the tatter vatter until it reaches six fifteenths for three fears ears the portion of the reserve may be kept in other banks in its own vaults or la in the regional bank after that time in ID one of the latter two places central reserve city banks new york chicago and st louis total reserve required 18 per cent of demand and 5 per cent of time deposits seven eighteenths in the tha regional reserve banks and the remaining live five eighteenths in either place the tha bank may choose regional reserve banks bank these immense funds of reserves from member banks together with government honeyc will make up the deposits of the regional reserve banks each of these banks will be administered by it a board of nine directors six of whom will be elected by the banks and three appointed by br the federal reserve board the regional reserve banks may redistrict that is buy at a discount dISCo dat from its member banks prime commercial paper when the member banks desire to convert these assets into money character of paper the exact terms ot of this Impo implant lm poian ant provision as to the character of paper upon which the regional reg lonal reserve banks may furnish cash are as aa follows followay foll owai upon the endorsement indorsement Indor of any of its member banks with a waiver w of dei de mand notice and protest by such banks and federal regional reserve bank may discount notes drafts and bills of exchange arising out of actual c commercial transact transactions lons I 1 that is notes drafts and bills of ex n e is att tl 6 al rm MO 11 proceeds of which have been bee used e or 0 r are 0 o to be used tor for suh such phrases ph roses the federal reserve board to have tle the right to determine or define the char ac acter ter of the paper thus ell eligible gible for discount within th tha a meaning of this act eligible for discount nothing in this act contained shall be construed to prohibit ro hibit such notes drafts and bills of exchange secured by staple agricultural products or other goods marego wares or merchandise from rom bein being g eligible tor for such discount but such definition shall not include notes drafts or bills bill covering merely investments or issued or drawn tor for the purpose ot of carrying or trading in fit stocks bands or other investment securities curi curt ties lell except bonds tend land notes of the government 0 the united states notes drafts and bills admitted to discount under the terms of the paragraph must have a at the time of discount of not more mora than 90 days provided that notes bratta and bills drawn or issued tor for agricultural purposes purposes or based on live stock and having a maturity not exceeding six months may be discounted in an amount to be limited to a percentage pe of the capital of the federal regional reserve bank to be ascertained and fixed by the federal reserve board the elastic element the now new treasury notes which are to furnish the elastic element in the currency cyst system em and to add to the count rys circulating money in time of need wl WE come into use in the following way the notes will be printed by the government ern ment with a distinctive style tor for each regional reserve bank one of the three directors named by the fe fed d eral reserve board tor for each regional balkwill bank will be b e known as the federal reserve agent for that bank and a supply of the notes will bo placed in hla his custody should a regional bank desire to pay out more money than its cash resources sources will permit tho the law lav provides that it may put some of its rediscount ed commercial paper into the hands ol of the federal reserve agent and received in return the new trea treasury r Y notes for note aota that it puts out circulation the regional reserve 1 pu fiust st set bet aside in gold 40 cel ceisl i raW Ty hell by ri federer reserve reserva agent Js ia tho the arc 0 lection behind the now new money chit ut these notes will also be ba guarantee by the tha govern government find and may be ba red rede med in gold la in ats ha united states t artias as ury regeria required e each regional bank under the act must keep a reserve of 35 per cent of the deposits it has bas received besides the 40 per cent gold reserve behind ua ua treasury notes it issues it if the tha gold eod reserve behind the notes tails falls bolow below 40 per cent a heavy tax la Is imposed on the t tink ank which in turn adds the tax to the rate it charges member banks for red lacounts this was waa do to stop an over ot of currency in times ot nf stress the federal reserve blaid A ci cun i n is these reserve provis lobs in ordet order to furnish quick relief to any community one regional bank cannot again pay out the notes of another except under a heavy tax these notes are expected to return to the regional banks and bo be withdrawn from circulation the need of their ruse use passes take up bonde none of the exiA existing ting forms forma of currency except the jhb national bank notes will be disturbed by the new law the united states bonda bonafe now wied to secure the issue of national bank notes are to be taken up at the rate of a year by the peg regional ional reserve banks and new treasury notes or short term three per cent bonds bonda will tako take their place national bank currency Is expected gradually to retire the federal rese reserve rye board will I 1 exercise final cottrol over oer the entire op ei alon or of he dhe system it can compel ela LC regional bank to loan to another LL ta time of need can suspend all re evictions surrounding the tha reserves regional tanks banks must bold and remove reise oT directors of regional re sove BOVO banks whenever it la Is believed hanks banks in control nalle the banks retain control ot of aba tb boards of the regional reserva buzko their connection with the tha fed erli reserve bo ardla only through nit an advisory council made up of one representative from each federal r ra tt BOVO district this council will meet me tri ID washington to confer with the fei ie bial reserve |