The Beaver Herald. (Beaver, Okla.), Vol. 27, No. 31, Ed. 1, Thursday, January 8, 1914 Page: 3 of 4
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New Money Law Displaces 122-'
IS FAR-REACHING IN SCOPE
Mctt Important Law Relating to Fi-
nance Pasted In Many Years E-
1 irntlal Feature of the Meat
ure Explained In Nontech- '
Y.'oshlngton Doc. 23. Tho new bill
affecting tho currency banking nnd
flnanccs of tho country Is ono of tho
most far-roachlnr measures relating to
finance that havo been enacted In
The magnitude of tho subject tho
diversity of interest affected and tho
longth of the debates In both tranches
of congress hns to follow the chanpes
and grasp the essentials of this highly
technical measuro In its Important
bearings on monoy. finance banking
and tho entire range of flecal subectB
public and pitvate which It affects
Summary of tho Bill
With a vlow thorefore of present-
ing succinctly nnd In nontechnical
language an epltomo of the salient fea-
tures of the pleasure as Anally framed
the following summary Is given of tho
bill as a whole and of Its principal de-
tails: Generally speaking tho first steps
to be taken to bring Into operation tho
nation's now financial syBtem will be
through an organization committee
consisting of the secretary of tho
treasury secretary of agriculture and
controller of the currency.
Danks havo CO days .within which to
Bio their applications for membership
In tho aow system nnd one yenr's
tlmo 1b allowed before the government
will compel the dissolution of any na-
tional bank that refuses to Join.
Will "Take Up the Slack."
The new law will make lltllo dlroct
change In tho operation of tho pres-
ent national banks excopt to allow
them to loan a certain amount of their
funds upon farm mortgages.
Its chief purpose Is to add a new
piece of machinery to tho banking
system that will "tnko up tho slack"
during tho changing business condi-
tions of each year; that will glvo tho
banks a place to quickly convert their
assets Into cash In time of need nnd
that will bring out new federal cur-
rency when It Is needed and retlro It
when money becomes "cheap."
Hanks aro now required to keep a
certain percentage of their deposits as
"reserves" part in cash in their own
vaults nnd part of which may be re-
deposited In the banks of New York
Chicago St. Louis nnd other designat-
In times of sudden financial de-
mands when hanks have loaned up to
the full limit of their resources these
reserves furnish Uttlo relief becauso
If riioy are paid out to meet demands
(lie banks aro loft In a precarious con-
dition. Basic Principle of Law.
Ths basic principle of tho now law
Is to get these reservo funds out Into
circulation when necessary without
losscnlng the Bafcty of any bank and
to provide a placo to which local
banks may rush In a crisis and get
cash for tho "prlmo commercial pa-
por" they hold In their vaults.
This Is to bo accomplished through
a chain of regional reserve banks or
"reservoirs of reserves" In which all
banks shall deposit a stated part of
tho money they aro required to hold
Under the new system when a
financial flurry comes tho banks can
take commercial paper such as notes
drafts and bills of exchange to these
"reservoirs" and secure tho use of
their own reserves or. If necessary
oven tho reserve of other banks by
depositing this security.
Tho new regional banks will re
ceive nbout one-half of the bank re-
eerves of the country. They In turn
will be permitted to loan back to the
banks all but 35 per cent of these
reserves so that In caso of emergency
millions of cash can be brought out
Into circulation quickly.
The banks will havo to pay for these
loans however as Individuals have to
pay fot a loan from any local bank
and this charge Is expected to prevent
tho too free uso of the reserves held
by tlie regional banks.
New Paper Currency.
A new form of paper currency is
also provided for to come out In case
of emergency and which is expected
to go back Into the hands of the gov-
ernment when times are normal.
Theso "treasury notes" will be printed
by the government and issued through
each regional reservo bank nnd will
boar the guarantee both of the re-
gional bank and of the government.
If tho demand for currency In any
section of the country exceeds the
supply of circulating money a regional
bank can secure this new money
from the government nnd put It into
circulation; but a gold reservo of 40
por cent and commercial paper equal
to the full value of the note must be
held as a reserve behind each note
This provision is expected to be the
Vnfluenco that will drive tho new
money back Into retirement when It
Is no longer needed
The following analysis presents the
details of the new law without ad-
hering closely to the technical dlvlaloai
or Ianguago of the measure
HOW DISPUTED POINTS WERE ADJUSTED
Tho following changes affecting points at dlfforonco between the
sonato and house wero made In conference:
Comptroller of currency and secretary of agriculture retained as
members of organization committed.
Comptroller of currency made ex-ofllclo member of federal rosorvo
board and total membership retained at seven and tho term of offlco flxod
nt ten years.
Alaska excluded from provisions of act.
rinfinnihiT1 rC8nrJ dl;trlcfl -'WIhed. national banking asso-
ciations shall navo 30 days in which to subscrlbo for capital stock of re-
servo banks. .
Individuals may purchase up to $25000 stock In federal reservo bank
instead of $10000 ns provided In houso bill.
Stock not hold by member banks shall not bo entitled to any voting
Number of regional reserve banks to bo "not less than olght nor more
than twelve" as provided by tho senate.
too minimum capital of regional reserve banks fixed at $4000000.
so senator or representative enn hn an nffi i
or representative can be an officer of a federal reservo
No director of Class C directors of federal reserve board shall be an
officer director employe or stockholder of any bank.
Each member bank Is permitted to nomlnato ona candidate for Class
A and ono for Class D directors.
Subscription of membor banks 6 per cent of capital and surplus of
Senate provision for the guarantee of national bank doposlts ellm-
lnated U.o of federal reserve notes as part of resorves of member banks
At lenBt one-third of the rerrrvea of the country banks must bo held
In the vaults of local bRnks.
House provision for collections at par practically restored banks to
bo permitted to collect only actual expenses.
Retirement of 2 per cent bonds aggregating $300000000 within 20
yenrs provided for as against retirement of $125000000 In senate bill.
Cold reserve behind the notes remains nt 40 per cent. with a gradu-
ated tax pcainALany depl. : n.
SalnrrfoEfflRimburs of tho federal board Increased from $10000 to
Mem. oMGfPicierve board shall serve two four six eight and ton
years Inpf ftd ?t doe to Ovo years.
ItoeervH'bfird can liquidate or reorganlzo reservo banks
Ccmpjwfcns for directors officers and employes of federal rosorvo
banks shall b llbjjjct to tho npproval of the federal rcaorve board
Recess apnentraents to reserve board shall expire 30 days after thu
following sfisiQ of congress opens.
Net bah oco f amounts due to nnd from other banks shall bo tnkon
as tho baBls or acertalnlng the deposits against which reserves shall bo
i federal reserve bttrd at Washing-
ton appointed by U president and
to consist of tho -rotary of tho
treasury tho control! 0f tho curren-
cy and fivo other me bars Two of
these Hhall bo oxnoi bankers but
nono shall havo banVln affiliations or
own bank stock dui'nl their service
This board will oxerell gennral con
trol over mo enure syivtn.
The temporary "orgiuatlon com-
mittee" or tho federal laqrvo board
will select from eight tqWlve cities
whero regional reserve i4ks gb.ill be
located and will dlvldo" entire
country geographically vn . these
cities as the centers of dlctB. AH
national banks In a dlstrV. will be
required to subscribe for rt stock of
tho regional reserve bank tVthat ills-
trlct nnd to keep a portldiw their
reserves there. S V
Known as "Member BanKV .
Local banks will bo known aaniauv
ber banks" becauso thoy will o the
stock of tho regional reserveunk
of their district. Each meinbernn
win no required to take capital
of tho regional reserve bank equi
0 por cent of tho member bank's
tal and surplus. The capital of tho
gional bank will Increase or deere
so that It always represents fi
cent of tho combined capital and a'
nltis nf nil dm ti.inkn nf the rllatr
that have Joined tho system.
National banks are comDolUul tj
Join and state banks are permitted
If thoy bring their reserve renulr
monts up to the standard set far naj
tional banks and submit to national
Public Can Buy Stock.
Public ownership of the stock of tho
regtonnl reservo banks Is permitted'
only In case enough banka do not Joln
In any district to provldo a capital
stock of $4000000. In such event the
public may purchase the stock Vt
quantities limited to $25000 for each.
Individual but tho voting of this stoclt
will be placed In the hands of govern
ment representatives on the board of
directors of tho regional roservo bank.
Tho regional roservo banks may do
business only with their member
banks not with the public except that
certain "open market operations" such
as the purchase and sale of gold gov-
ernment or municipal bonds and cer-
tain forms of bills of exchange aro
permitted. These bankB will mako
their earnings from tho loans made to
member banks and from the purchase
and sale of bonds and foreign bills of
Must Put Up Cash.
Member banks will bo compelled to
put up In cash only one-half of tholr
subscription to tho capital of the new
banks the rest can be called for If
needed by tho regional bank. Divi-
dends of C per cent will be paid on
this stock to tho member banks and
the stock will bo non-taxable.
After these dividends are paid one-
half of the surplus net earnings goes
to create n regional surplus fund nnd
when this has reached 40 per cent of
the regional bank's paid in capital
these earnings are to go Into the
United States treasury. Tho balances
of the net earnings aro to be paid to
the United States ns a franchise tax.
With tho mnchlnory thus created
for a new banking system that Ib sup-
plementary to the commercial bankB
of the country the law provides for a
gradual transfer of part of the bank
reserves to theso new "reservoir"
In order not to disturb business con-
ditions or to withdraw too suddenly
the heavy deposits of country banks In
the largo cities tho law provides that
three years may be con" '- "
Tho amount of reserve required
from every bank under tho new law
and tho place whoro It must be kept
aro as follows:
Country bankB Totnl reserve requir-
ed 12 per cent of demand deposits
and 5 per cent.' of tlmo deposits. Klvo-
twelfths must bo held In tho bank's
own vaults for two years and four-
twelfths after that. For tho first year
two-twolfths rouBt bo kept In tho re-
gional hank. Increasing one-twelfth
each six months thereafter until It
reaches five-twelfths of tho total re-
serve. For threo years tho unallotted
part of tho reservo may bo kept In
the banks of rcuerve cities. After
that time It must bo kept either in
tho country banks nnd vaults or In tho
regional reserve bank.
Reserve city banks Total reserve
required. 15 per cent of demand nnd
5 per cnL of time deposits. Six-fifteenths
must be kept In tho bank's
vaults for tho first two years iind five-
fifteenths after that time. Three-fifteenths
must be kept In tho regional
reservo bank for tho drat yoar In-
creasing one-fifteenth every six
months thereafter until It reaches six-
Ifteeaths. For three yearB the un-
xllotOsd portion of the roserve may b&
opt In oUer banks. In Its own
nulls or In tho regional bank; after
at tlmo In ono of tho latter two
'entrnl reserve city bankp (New
k. Chicago and St Louis) -Total
!jrvo rnqnired 1R per cent of do-
iand and 5 nor cent of tlmo denos-
llSoveivelghteonths In tho regl"
ghfuonths In either ' '"6 llve-
oy'ehoose. .aco the bank
huso ' j Reserve Banks.
tU "1 ..... n9 rfloArvnl
l. ". lIHIIltIlBH lUllua Ul ..u. --
Limember banks" together with
i&rnment moneys will mako up the
OF THE CURRENCY BILL
Issue of currency guaranteed by
the government based upon notes
and bills reprecentlng commercial
transaction and backed by a geld
reserve. Tho new currency Is ex-
pected to contract and expand to
meet the varied demands of trade.
Concentration of the bank re-
serves of tho country In regional
Institutions capitalized by the
banks of tho country and con-
trolled by directors elected by the
Creation of a market for the ne-
gotlablo commercial paper which
forms tho bulk of the assets of the
banks where In tlrrm of stress
those assets my be easily and
without loss transformed Into cash.
Establishment of from eight to
twelve great regional banks
throughout the country which will
Issue currency rediscount paper
and centralize and mobilize the re-
serves of the local banks.
Creation of a federal reserve
board of seven members appointed
by the president with final powers
of control and supervision over the
jeSTUs of the regional reserve banns.
&) or theso banks will bo admlnls-
"'u hii n hA-ir.l nf nine directors six
and im will be elected by the banks
80JLv.ertf appointed by the federal ro-
'rlfr'ei'lonal reserve banks may re-
from lli.-. i. i.iv nt n discouut
hat is buy nt
FARM LOANS WE HAVE PLLN'JA ox
MONEY TO LOAN ON FARMS. TI1L
UIGU S$. THE LOWEST INTEREST
AND THE QUICKEST MONEY.
WRITE PHONE OR SEE US.
Confectionery and Lunch Goods
I havo just opened up for business with a now clean
stock of fresh
Candies Fruits Groceries Cigars
llanRBV paper" when tho membor
vtD "beijro to convert theso assots
4TiWar termg ot tng important
Vrft lo the character of paper
nVt tcja'he regional reservo banks
aracter of Paner.
i-o i. 11.....
mclnbWfgi ndorsomont of any ot Its
mabd HfWSkB. with a waiver of de-
banl aij nnd protCBt uy BUch
bank1.maj-g-erai (regional) roserve
bills tit iejl ount notc drafts and
ual comtrfgirge. nrjging out of act-
notCjS dirW transactions: that Is
sued orOl d bIg ot exChange Is-
trial or cl wii0r agricultural Indus-
proceeds Unvfrcia! purposes or the
aro to be wjjJ have beon usedi or
federal rJj0 Ar 8Uch purposes the
right to de.sfiboa.nl to havo tho
acter of tlrtj!Wn or define the char-
discount wolpmr thus eligible for'
Bct- ftnTSffno meaniug ot thk
Nothing (glble for Discount
be constrvn thlafict contained shall
drafts nndu(1 .q?pilblt such notes
by staple ft .wifaftftcxcbange. secured
or goods Ori products or oth-
being ollg JigSrearjiorchandlso from
BUch dcflnlMJSfor "Siieh rilBcoiint: but
araria or d mmrtSot lnciU(Jo noteB(
monts r.'Hfcnnrt&; merely Invest-
purposo of tj n? 'rnun nr )h
siociis wswwarryfcg or trading in
u" '" - nt snift-
sarv nn' 0!iIa?ces and that If ncces-
th. head of jjm ' to the SSSSi
fe cr other Investment se-
. .o vicepb. bonds and notes of tho
government? tlje Unltod States.
"Notes drafts and bills admitted to
discount under tho terms ot the para-
cranh must hitve a maturity at the
days; provided that notes drafts and
bills drawn or Issued for agricultural
purposes or based on llvo stock and
having a maturity not exceeding six
months mny bo discounted In an
amount to bo limited to a percentage
oi me capital of tho federal (regional)
reservo bank to bo ascertained nnd
fixed by tho federal reservo board."
The "Elastic" Element.
The new treasury notes which are
to furnish the "elnstlc" element In tho
curroncy syBtem and to add to tho
country's circulating money In tlmo of
need will como Into uso In tho follow.
Tho notes will bo printed by tho got
eminent with n dlstlnctlvo stylo tor
each regional reservo bank Ono of
the three directors named by tb fed-
eral reserve board for each regional
bank will be known ns tho "federal ro-
sorve agent" for that bank and a sup-
ply of tho notes will bo placed In his
Should a regional bank doslre to
pay out moro money than Hb cash re-
sources will permit tho law provides
that It may put some ot Its rediscount-
ed commercial paper Into tho hands
of the "federal reservo agent" nnd re-
ceived lu return tho new treasury
For each note that II nnfn nut intn
circulation tho regional reservo bank
must set aside In gold 40 per cent of
the vnluo uf the note as n guarantee
for Its redemption. This gold with
tho commercial paper held by th
"federal reservo agent." Is tho pro-
tection behind tho now money; but
theso notes will also be gtiarantred by
the govornmcut and may bo redeem-
ed In gold In tho United States trea
Each regional bank under tho act
must keep a reserve of 35 por cent of
tho deposits It has received besides
tho 40 por cent gold reservo behind
tho treasury notes it Issues. If the
gold reservo behind tho notes falls he-
low 40 por cent a heavy tax la Im-
posed on tho bank which In turn adds
tho tax to the rato It charges member
banks for rediscounts. This was de-
signed to Btop an oVercxpansIoa ot
currency. In times gt sudden atrosa
tho federal reservo toard can. Suspend
theso rosoJ-Tg provisions In ordor to
furp'lii quick relief tq auy commu
Ono regional bank cannot again pay
out the notOB of another except under
a heavy tax. Theso .notes aro oxpect-
od to return to tho regional banks and
bo withdrawn from circulation whea
the need of their uso passes.
Take Up Donds.
None of the existing forms of cur
rency except tho national bank notes
will bo disturbed by the now law. Tho
United States bonds now used to so-
ouro tho Usue of uatloual bank notes
nro to be takon up at the rato of 25-
000000 n yoar by tho regional re
serve banns nnu now treasury notes
or Bhcit term threo per cent bonds
will tako their place. National bank
currency Is expected gradually to re-
tire. Tho federal reserve board will exer-
cise final control over the cntiro op-
eration of the Bysteni. It can compel
ono regional bank to loan to another
In time ot need; can suspend nil re-
strictions surrounding tho reserves
which regional banks must hold and
can removo directors of regional ro-
servo banks whenever It Is believed
Banks In Control.
While the banks retain control of
the boards of tho regional reserve
banks their connection with tho fed-
eral reservo board Is only through
an advisory council made up of one
representative from each federal re-
servo district. This council will moot
In Washington to confer with tho fed-
eral reservo board "on general busi
ness conditions" and to make recom-
mendations nnd suggestions concern-
ing discount rates note Issues and re-
An Important change in national
banking methods embraced in the now
low will permit all national banks ex-
cept those In New York Chicago nnd
St. Louis to make direct loans on flvo
year farm mortgages up to 26 per cent
uf their capital and surplus or up to
ane-thlrd of their time deposits.
Another provision In the law por-
mlts national banks having a capital
of Jl 000000 or more to open foreign
branches Similar authority is given
o the regional reservo banks tho pur-
Dose being to facilitate the develop
ment ot American trade abroad.
Everything in the Bakery Line
SHORT ORDERS and
Will appreciate your patronage.
COY CAI! E
a vsnori Lraer oLKery
We cater to your needs in Good Things to Eat
and Drink. Our stock is complete and choice-
-COAE IN AND SEE US-
GEO. H. RUSH
Can alio supply ;our IOE needs.
Scandrett & Fuest
Iileii i'jii lliii
ELLWOOD and ROYAL
J. W. STEFFEN 'High $ Auctioneer
GENERAL SALES AND LIVE STOCK
I respectfully solicit your business and will guaran
tee to please and satisfy you.
For Dates'and Terms Write me or Phone No. 61
at My Gxpcnse. LaKEAlP OKLA.
We Will Welcome You In
You will never get a FROWN when you come
Into our bank whether you want to deposit or
BORROW monoy. Como in. Wo will welcomo
you. Wo will also welcome your account.
Make OUR Bank YOUR Bank
The BANK OF BEAVER CITY
All Deposits in this Banlr aro Guaranteed by the
Bunk Guaranty Fund of tho State of Oklahoma.
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The Beaver Herald. (Beaver, Okla.), Vol. 27, No. 31, Ed. 1, Thursday, January 8, 1914, newspaper, January 8, 1914; Beaver, Oklahoma. (gateway.okhistory.org/ark:/67531/metadc68984/m1/3/: accessed September 18, 2018), The Gateway to Oklahoma History, gateway.okhistory.org; crediting Oklahoma Historical Society.