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Show HOW THE NATION IS PROTECTED FR3M SERIOUS DISASTER City Without a Reserve Water Supply Against Destruction by Fire Likened by Bankers' Committee to Business Situation Situa-tion Without Federal Reserve System. A vital element in everybody's prosperity Is that mysterious sounding "something or other" called bank reserve, says the Committee on Public Education of the American Bankers Association, adding: "It Isn't an easy matter to make simple and interesting, but Its Importance to every man, woman and child in the country makes the effort worth while." The Committee Com-mittee continues: Money on deposit must always be ready for depositors when they desire It Banks must also be ready to loan money, when needed, to their customers, or business would be hampered. In other words, prosperity depends largely on the ability of the banks to meet these demands that Is. depends on the "bank reserves." The problem of handling reserves has been difficult The Federal Reserve System has met the problem more satisfactorily than any other method ever tried in this country. The Great 8olutlon Our banks are managed by officers and directors, elected by their own stockholders. They are interested In helping the town to grow and prosper. But just as a local telephone station is valuable to tha interchange of thought because it belongs to a system whose wires reach to all partb of the nation, so the local bank Is valuable to the Interchange of business busi-ness because of Its connections with other banks In the United States, finding its strength and Its usefulness in being part of a system. For many years a plan was sought whereby our thousands of separate' and Independent banks could get together to-gether and cooperate for the Improve- each bank carried In its own vault the cash required by law as a legal reserve so that it would be ready tc pay depositors on demand. The gold supply of the country was thus scattered scat-tered among thousands of Independent banks. When Fire Rages This situation may be likened to the old-time water supply lo a town. Each house had to depend on Its individual in-dividual well, tank, or cistern. Picture Pic-ture such a town attacked by fire. If the water was low In one well, from drought or excessive use, water would have to be borrowed from a neighboring welL Suppose the water in that well also was at a low level. ment of our banking methods, and for mutual protection In emergencies, both for themselves and customers. We had periodical money panics, dangerously dan-gerously disturbing to business, and chargeable, In large part, to defects In our banking and currency system. There was no central bank from which the Individual banks could get assistance In time of trouble. Panlo conditions caused weak banks to fall, and even strong and sound institutions to be Imperilled. Bankers, business men, and leaders in Congress for years made a careful study of banking and finally Congress passed a law providing for the establishment of twelve great Federal Reserve Banks, each designed to serve as a sort of central bank for such banks In Its allotted territory as might become members of the Federal Reserve System. It retained the American plan of Independent banks doing business under un-der tha management of their own directors di-rectors and officers. About 10.000 banks have become members of the Federal Reserve System. The member mem-ber banks In each district own the entire stock of the Federal Reserve bank there, and elect two thirds of the directors. The other directors are appointed by the Federal Reserve Board at Washington, the Govern-mental Govern-mental body having supervision over the Reserve banks, though it does not operate them. Its members are appointed by the President of the United States. The Federal Reserve banks bold member banks' reserves. Formerly Thus the safety of all was sacrificed because no RESERVE water supply was at hand. The fire would become a conflagration. Under the Federal Reserve System, we have a series of modern reservoirs, located In various parts of the country, coun-try, each serving the needs of the banks In Its own district In each of these reservoirs credit is stored np to be supplied to the various banks, as the need arises. Each reservoir Is In turn connected with all the others so that when the supply In one becomes be-comes low, the others may be temporarily tem-porarily drawn upon. By gathering the gold reserves of the member banks Into the twelve Federal Reserve Re-serve banks, a result has been obtained ob-tained like . that yielded by the construction con-struction of a great city water supply. Each member bank formerly had to depend almost entirely upon Its own resources In making loans to its customers. cus-tomers. When It had loaned all of Its own money, It could do no more, even though the merchant manufacturer, or farmer customer had great need of more credit, and was seeking It for highly Important and necessary purposes. Hence arose what was called a "tight money" situation. Now the member bank can, and frequently does take the notes of Its customers to the Federal Reserve bank, and borrows there In much the same way as the customer borrows from the member bank. This reserve-storing and loaning work of "the Reserve System Is only part of the wonderful protection and service it is rendering the nation. Large Radio for ShanQhai. An American company villi PrPf.t one of the world's largest radio Mn-tlons Mn-tlons nt Shunghai, powerful etmiigh to send uiessuges across the I'-iclUe with-jut with-jut reluylug. |