Show CURRY BILL BECOMES A L LAW AW most far reaching measure relating to finance enacted in many years SALIENT POINTS REVIE REVIEWED essentials of new law summarized in language I 1 makes little change in operation of present national banks regional re serve erac banks provided for washington dec 23 the now new bill affecting the currency banking and finances of the country is ono one of the most far reaching measures relating to finui finance iee that havo have been enacted in III many years the tha magnitude of the subject the diversity of interests affected nad and the length of the debates in both bran branches c h em of congress has haa to follow tho the changes atrid grasp tho the essentials of this highly highl y technical measure in its important bearings on money finance banking and tho the entire range of fiscal subjects public and private which it affects summary of the bill with a view therefore of presenting succinctly and in non technical language an epitome of the salient features of the measure as finally framed the following summary Is given of the blip bilt as a whole and of its principal details 11 generally speaking the first stops steps to be taken to bring into operation the nations now new fir uncial system will be ba through an organization committed commit tea consisting of the secretary of the treasury secretary of agriculture and controller of the currency banks have 60 days within which to file their applications for or membership in the now new and one years time la Is allowed before the government will compel the dissolution of any national bank that refuses lo 10 join will take up the slack the new law will make little direct change in the operation of the present national banks except to allow them to bloant loan certain amount of their funds upon farm mortgages its chief purpose Is to add a new piece of machinery to the banking system that will take up tho the slack during the changing business conditions of pach each year that will falve hf banks a place to quickly convert conart their assets into cash in time of peed need ard that will bring out new federal car cur rency when it Is needed and retire retiro it when money becomes cheap banks are now required to keep a certain percentage of their deposits as reserves part in cashin cash in their own vaults and part of which may be in the banks of new york chicago st louis and other designated cities in times of sudden financial demands when banks have loaned up to tho the full limit of their resources these reserves furnish little relief because it if they aro are paid out to meet demands the banks are leftin left in a precarious condition basic principle of law the baste basic principle rIn ciple ot of the new law Is to get these reserve funds out into circulation when necessary without lessening the safety of any bank and to provide a place placa to which local banks may rush in a crisis and get cash tor for the prime commercial paper they hold in their vaults this Is to be accomplished through I 1 a chain of regional reserve banks or reservoirs of reserves in which all banks shall deposit a stated part of the money they are required to hold as aa reserved reserve under the new system when a financial flurry comes the banks can take commercial paper such as antes drafts and bills of exchange to these reservoirs and secure the use of their own reserved or it necessary even tile the reserve of other banks by depositing this security I 1 the new regional banks will receive about one halt half of the bank reserves of the country they in turn w will 11 be per permitted bitted to loan back to the banks all but 35 per cent of these reserves so BO that in case of emergency millions of cash can be brought out into circulation quickly T the e banks will hime have to pay tor for abeso loans however as individuals have to pay for or a loan from any local bank nd this charge Is expected to prevent the too free use of the reserves es held by the tha regional banks new paper currency A new form of paper currency it Is also provided for to come out in III case of emergency and which I 1 Is a expected ogo to go back into the hands of the government when times tire are normal these treasury notes will be printed by the government ment and issued through each regional reserve bank and ali bear the guarantee both of the regional bank und and of the government it the demand for currency in any ally section of the country exceeds the supply of circulating money a regional bank can secure this now new money wa 1 the government and put it into circulation but a gold reserve of 40 iber er cent and commercial paper equal to 0 tile the full value of the note must be hold as a reserve behind each note ji this provision lit 11 expected to bo be the ce that will drive the new money back into retirement when it ia no longer needed I 1 clearly explained the following analysis presents the details of the now new law without ad hering closely to tile the technical division or lang language ungo of tile the measure 1 at the head of the system will stand 1 a federal reserve board at washing alton toll appointed by the president and i io to consist of the secretary of the treasury the controller of the curron curren icy y and five other members two of these shall bo be expert bankers but bione tione none shall have hao banking affiliations or awn awn bank stock during their service this i board will exercise general control ol 01 over the entire system the tempo temporary organization committee cittee or the federal reserve board will select from eight to twelve cities whore regional reserve banks shall be located and alid will divide the entire country geographically with these felti telti cities e a as a 5 the centers of districts all nati national banks in a district will be required to subscribe for the stock of the regional reserve bank in that district and to keep a portion of their reserve there known as member banks local banks will be known as icem member banks banka because they will own the stock steel of the regional reserve bank of their district each member bank will bo be required to take capital stock of the regional reserve bank equal to G per cent of tile the member banks capital and surplus the capital of the regional bank will increase or decrease BO that it always represents 6 per cent of the combined capital and tur hur plus of all tho the banks of thu the district that have joined the system national banks ade aco compelled to loin join and state banks are permitted to tf it they bring their reserve requirements up to the standard set for national banks and submit to national examination public can buy stock public ownership of the stock of the regional reserve banks Is permitted only in banks do not join in any district to provide a capital stock for in such event the public may purchase the stock in quantities nuan limited to tor for each individual b but ut tile voting of this stock 4 V vill ill be ba placed in th thi b hands of govern intent representatives on the board ot of t of the regional reserve bank I 1 the regional reserve bank may do business only with their member banks not with the public except that cert certain bLin open market operations such as 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 from the loans made to member banks and from the p purchase lchase and sale of bonds and foreign bills of exchange must pay up cash member banks banka will be compelled corpel led to put up in III cash only one halt half of their subscription tp to the capital of the now new banks the rest can be called for it if needed needed by the regional bank dividends of 6 per cent will be paid on this thin stock to the member banks and the stock wail be nontaxable non taxable after these dividends are paid one halt half of the surplus net earnings goes to create a regional surplus fund and when this las has reached 40 per cent of the original banks paid in capital these earnings are to go into the united states treasury the balances of the net earnings are to be paid to the united states as a franchise tax with tl the 1 e machinery thus created for far a new banking system that Is supplementary tary to the commercial banks of the country the law provides for a gradual bradu al transfer of part of the bank reserves 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 effies the law provides that three years may bo be consumed in shifting these balances and that it if feces sary part ot of the reserves transferred to the regional banks may consist ot of commercial paper reserve required the amount of reserve required from every bank under the new law and the place where it must bo be kept are as follows country banks total reserve required 12 per cent of demand deposits and 5 per cent ot of time deposits five twelfths must be 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 hank bank iper increasing cusing one twelfth each six thereafter until it teaches five twelfths of the total reserve for three years cars the part of the reserve may be kept hept in the banks of reserve cities after that time it must be ba kept either in tile tho country banks and vaults or in the I 1 regional reserve bank reserve city banks total reserve required 15 per cent of demand and 6 5 per cent of time deposits six alf must be kept in the banks vaults for the first two years and five fifteenths after that time three afif must be kept in the reginal reserve bank for the first year increasing one fifteenth every six months thereafter until it teaches six fifteenths for three years the un all otei portion of the reserve may bo be kept in other banks in its own vaults or in the regional bank after that time in one of tile the latter two to places feg regional lonal reserve banks banka these immense funds ot bf re reser kery 66 from member banks together with government moneys will make up the deposits of the regional reserve banks banka E each ach of t these eso banks will be administered by a board ot of nine directors six of whom will be ejected sleeted by the banks and three appointed by the federal re serve board the regional reserve bank may redistrict that Is buy at a discount from its member banks prime commercial paper when the member banks desire to convert these assets into money character of paper the exact terms of title this important provision as to the character of paper upon which the regional reserve reserve banks may furnish cash are as follows upon the endorsement indorsement Indor Indof of any of its member banks with a waiver of demand notice and protest by such banks and federal rei regional lonal reserve banks may discount notes drafts and b bills 11 a 1 of f exchange arising out of bt actual commercial comme iclal transactions that Is notes drafts and bills of exchange issued or drawn tor for agricultural industrial or commercial purposes or the proceeds of which have been used or are to be used for such purposes the federal reserve board to have the right to determine or define the character of the paper thus eligible for discount within the meaning of this act eligible for discount nothing ih in this act contained shall be construed to prohibit such notes drafts and bills of exchange secured by staple agricultural products or other goods wares or merchandise from being eligible f for or such discount but such definition shall not include nott notta a drafts or bills covering n rarely investments or issued or drawn for the purpose of carrying or trading in stocks sto aks bonds or other investment securities curi ties except bonds and notes or of the government of the united states the El elastic zatle element the new treasury dolce which are to furnish the elas elastic tiet element in the currency system and to add to tho the count rys circulating money in fit tithe time of need will borne bome into use in the following way the notes will b be 0 printed by the government ern ment merit with a distinctive style for each regional reserve bank one of tile the three directors named by the federal reserve board for fee each regional bank will be known as the federal reserve agent for that bank and a sup ply of tile notes will bo be placed in baw custody should a regional bank desire desaro to pay out more money than its ita casu cash rv resources will permit tho iho law provide provi desa that it may put some of ita IN f td d commercial paper into the liandi at 0 the federal doral fc reserve ngong and ana rw received la in return the now tre laura notes for each note that it puts puta out inley circulation tile tha regional reserve baix must set abade in gold 40 per cent or oc tho the value of the tha noto note as a guarante for its ita redemption this gold amu tho the commercial paper hold held by that federal reserve agent is the art protection behind tho the now new money maney imal these notes will also bo be guaranteed ay iy t mafua in gold in tha united states reserved Reser required i each bach regional bank under trig the act must keep a reserve of 35 per cent oc CC tho deposits it has received 4 the 40 per cent cant gold reserve behina bo the treasury notes it labuoy it 11 the gold reserve behind the notes fallabel low 40 per cent a heavy tax to io bruf posed on tile the bank which tm turn add tile tho tax to the rate it chargee ch argeri member banka for re discounts this was da signed to stop an over expansion oc cc currency in times of sudden the federal reserve board can these thesa reserve provisions in to td furnish quick relief to any comina anity take up bonds j none of the existing forms forma of ciar ronar except the national bank sates will be disturbed by the now new law united states bonds now use gaedt to siss secure th the issue it e cf national bank botev aro are to bo be taken up at tho the rate of ZAO a year by the regional reserve banks and briw new treasury notes nates or short term three per cerit cent bonds will take their place national laate currency to Is expected gradually to retire the federal reserve board will a L else cise final control over the operation of tho the system it can coro poiS ono one regional bank to loan to in fit time of need con can su suspend 4 c nd all restrictions Etric tio ions ns surroundings tue reserves which regional banka must holat aas can remove directors of creglon 1 i reserve banks whenever it is beI loveS necessary banks in control while the banks retain control ost oc the boards of the regional reser voi banks their connection with the fed oral eral reserve board is only gUs an advisory board Is only an ad advisory counell council mado up o a of ro f on fsr representative from each federal rv r berau district this council will ravet in to confer with alth ther federal reserve board on general buzz ness conditions and to make recommendations ions and suggestions ing discount rotes rates note issues and ro serve serva condit conditions loil s an important change in nat fonaS banking methods embraced in tho the law will permit all national banks except those in new york st louis to make direct loans on avat year farm mortgages up to 25 irnez of their capital and surplus or up as to in ono one third of their time deposits |