FINANCE AND BANKING The Federal Reserve System and the Public By H. V. CANN MORE 76mbers of the Federal Re [ORE than 7600 banks in the United serve System. Every one of these thousands of banks has its own group of depositors, borrowers, and shareholders, altogether millions of people, who are more or less directly benefited by such membership. Those much discussed and carefully planned institutions, the federal reserve banks, began business on November 16, 1914, in a time of great stress, when everybody was anxious about the financial outlook, and soon became the most important factor in the restoration of general confidence. Their functions have been developed with such speed that the system already fills its intended place as a strong and dependable underpinning of the national banking structure, besides being a powerful force. behind the business machinery of the country. Ever since the expiration of the charter of the second Bank of the United States in 1836 there has been general recognition of the need for a bank of issue which would supply extraordinary demands for currency and credit. Several years stand out as memorable times when the old banking system as a whole failed to serve the legitimate needs of business, when inadequate supplies of currency and scarcity of credit resulted in wide-spread losses. After the trying experience in 1907 a number of the States revised their banking laws, and the Federal Government appointed a monetary commission to investigate banking systems at home and abroad and submit a plan for the improvement of conditions here. The report of that commission is the most comprehensive work on world banking ever compiled. It described the operations of the great central banks of all the leading nations, and recommended a system of banking which formed the groundwork for a thorough dis cussion of the whole subject throughout the country and in Congress. The Government rejected the idea of one central bank, and finally decided to establish twelve regional reserve banks in the cities of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. These banks were chartered for a term of twenty years by the Federal Reserve Act, the most constructive and far-reaching financial legislation in the history of the United States. Each bank serves its own district primarily. Six of its nine directors are elected to represent the stockholding member banks and the agricultural, commercial, and industrial interests in that district. As the need arises, these banks may open branches in other cities within their districts or in foreign countries. A branch of the Federal Reserve Bank of Atlanta has already been opened in New Orleans. The whole system is under the guidance and control of the Federal Reserve Board, which is appointed by the President of the United States and sits in Washington. The law requires all national banks to be members of the Federal Reserve System, and permits state banks and trust companies to join the system under certain restrictions. A number of important state institutions have already taken advantage of this privilege. To provide the capital of the reserve banks. member banks must subscribe for shares of its stock a sum equal to six per cent. of their capital and surplus. Payment of only one half the subscription, or three per cent., is called for. The stock certificates provide for cumulative dividends thereon at the rate of six per cent. per annum. Net earnings of a federal reserve bank in excess of the dividend (Continued on page 56 following) THE DE VINNE PRESS, NEW YORK IN LIGHTER VEIN Compulsory Service in Ballygullion' By LYNN DOYLE PEAKIN' of this conscriptin' in Ire "SPE land," said my friend Mr. Patrick Murphy, pressing a few burning strands of tobacco down into his pipe with a horny forefinger and fetching half a dozen rapid puffs, "it would be hard for any man to say how it would go. An Irishman is aisy enough to coax, but he 's a thrawn divil if ye go to push him. There's no rule, though. If you 're thrying to guess what an Irishman 'll do, the only thing ye can be sure of is that the divil himself could n't tell what he 'll do. If he 's put up again' conscription he may fight again' it or he 'll maybe fight undher it; but, anyway, ye may take your oath upon it he 'll fight." "Even if he was conscripted, Pat?" I asked. "No matter how ye get him. Look at the Sinn Feiners. The one half of them went up to Dublin on Easter Monday thinkin' it was for a day's outin's, an' yet when the row started the same boys fought like Trojans. I'm tellin' ye this," said Mr. Murphy, with emphasis: "if ye take fifty thousand Irish soldiers, conscripted or not conscripted, an' put them down fornent double as many Germans, the lives of the same Germans won't be safe." "But if they were conscripts, would they not have a grudge against the English, Pat?" said I. "They might," admitted Mr. Murphy; "but even so, still they 'd fight. An' I'll tell you a story about that. My brother Joe's son Michael is a reporter on a newspaper, and when the rebellion broke out in Dublin the proprietor sent him off to collect news. Two days' expenses he give him, an' tould him if he could n't pick up as much information in the time as would keep him writin' from that to the next rebellion then he ought to go back to the farmin'. "So there was poor Michael runnin' about Dublin like a dog at a fair, thryin' to gather as many lies in the time as he could manage, an' gettin' as much ould snash from the sodgers on the one side an' the Sinn Feiners on the other as made him wish he was a German an' could knock the divil out of them both. "About the middle of the first day, when he was near asthray in the mind between writin' in his wee note-book and duckin' bullets, an' bein' turned back out of "I want to get the length of Clontarf, Sergeant,' says he, pullin' out a two-shillin' bit. 'I hear there 's big fightin' out that way.' 1 Copyright, 1917, by Leslie A. Montgomery. All rights reserved. Finance and Banking (Continued from page 960) requirements shall, according to the law, be equally divided between the reserve bank and the Government until the amount retained by the bank shall have accumulated into a reserve or surplus fund equal to forty per cent. of its capital stock; all excess profits thereafter are payable to the Government. The combined capital of the twelve federal reserve banks is $55,000,000. Besides contributing to the capital stock of its district federal reserve bank, every member bank must deposit therein a certain percentage of the money which it is obliged to carry against outstanding deposits. This percentage varies from five per cent. of countrybank deposits to seven per cent. of city-bank deposits. It is as custodians of that portion of the legal reserves that the federal reserve banks fulfil the duties implied by their name. The twelve banks receive large deposits as fiscal agents of the Government. From all sources the funds gathered into the federal reserve banks now exceed eight hundred million dollars. This vast sum was accumulated not to earn large profits for private interests, but solely to aid commercial banks in developing and supporting the agricultural, commercial, and industrial interests of the United States and to make general banking conditions as sound and safe as possible. One need not be versed in banking to appreciate the great power and influence of this new system in the economic life of the country. Apart from its actual operations, the psychological effect of the mere existence of the new institutions has been very apparent during the last two years. Much distrust has been dispelled, and people generally display greater confidence in the banking situation than ever before. Federal reserve banks have been aptly called financial fire-engines, fed by great reservoirs of liquid capital, each standing ready for local calls, and all prepared to answer a general alarm. Most people will recall how difficult it was during the last currency famine to obtain money for pay-rolls or even for ordinary daily requirements. The first work of the Federal Reserve System was to provide a supply of circulating notes of five, ten, twenty, fifty, and hundred dollar bills that would be sufficient for all emergencies, no matter how great the demand. Over two hundred million dollars of these fully secured notes are now in circulation, with great additional supplies held in the treasury at Washington ready for instant use whenever the business of the country needs more. Currency panics are things of the past. It is a common experience to be subjected at times to the uncertainty and anxiety of having obligations to meet without the immediate means of meeting them except through credit with a bank. Under former conditions demands might be so great that banks could not extend loans, no matter how valuable the farm of the prospective borrower or how sound his mercantile business. Now, however, members of the Federal Reserve System have the statutory right to obtain loans from a federal reserve bank upon all good notes given for agricultural or business purposes. In this way the banks of the country are in a much stronger position to care for the proper needs of bor rowers. Instances are many where depositors, needlessly alarmed, started in a body to withdraw their funds from a bank. Facing such a run upon resources, banks have been obliged to close their doors. Although assets were good, there was no place of rediscount where commercial paper could quickly be converted into cash to meet such unlooked-for demands. Here, under the new conditions, the Federal Reserve System, by making loans to tide over the strain against the normal every-day business paper of the bank, can lend its powerful protection alike to the depositors and shareholders of banks. Many notes already rediscounted are for less than a hundred dollars and not a few for smaller amounts. Farmers' notes given for agricultural purposes are taken by the system when they have a maturity not exceeding six months; but notes made by people engaged in commercial business cannot be rediscounted there if they run for longer than ninety days. Prior to the passage of the Federal Reserve Act national banks could not accept bills of (Continued on page 58) "She did not, then," said Mr. Murphy. "Ever since the rebellion she 's turned against Redmond, walkin' out with a Sinn Feiner, and would n't look at the side of the road a sodger was on. I tell you what it is, Mr. Doyle, Ireland is a queer country. If they bring in this conscription it'll be hard to say how things will turn out." "But if Ireland refuses conscription, maybe the English won't give her Home Rule," said I. "Do you hear me now," said Mr. Murphy, with a droll look: "if they make us all sodgers here in Ireland by conscription, the question might be whether we 'd give the English Home Rule." The White Gods (With due apologies to Kipling's "Feet of the Young Men") By F. GREGORY HARTSWICK WOW the four-track way is open, now the questing auto honks, NOW And we weary of the wood and hill and plain; Now the young men's throats are troubled for the tasting of a Bronx, And the red gods' bubble 's pricked and burst again. Who hath bathed in citronella? Who hath felt the wood-ticks' baiting? Who hath lain awake and cursed the night owls' cries? Who hath worked the shallow water where the 'skeeter-squads are waiting We must go-go-go away from here! Upon the avenue we're overdue; Send that nothing long may hold you till the city's arms infold you; So for one the white foam cresting o'er the seidel's curving rim, And for one the slip of pump-soles on the floor; And for one the week-end station where a lady waits for him, And for one the cheery golfers crying "Fore!" Who hath smelt the smells of Broadway? Who hath seen her lights a-burning? Who is fain to spend in revelry the night? Let him follow with the others, for the young men's feet are turning To the camps of laundered, civilized delight. He must go-go Do you know the upper Thirties? Do you know that narrow street, And the bar of polished walnut where a man may take a seat To the clicks as warring dominoes contend? It is there that we are going, with our pipes and steins and chorus, To a jolly, rosy tapster that we know; To a chair of age-worn leather, with the foaming mugs before us, We must go-go Do you know that glowing ball-room where the floor is smooth and fair, Do you know the joy of waltzing to a sobbing string-wrought air It is there that I am going, with a partner all-entrancing, Just a smiling little princess that I know. She can mingle with the others while I 'm dancing, dancing, dancing; For the white gods call me back, and I must go! I must go-go Do you know that marble palace where the busses clang and boom? Do you know the velvet stillness of a palm-embowered room Where the blazoned, bird-clad people go and dine? It is there that I am going, where the lights are dim and pleasant, To my pint of golden Medoc, to my hothouse grapes and pheasant, I must go-go— Do you know the city's roof-tree? Do you know that windy height Do you know the day's excitement in the eddying market-fight, It is there that I am going, where the big ones egg the lamb on, I have sworn an oath, to keep it on the horns of golden Mammon, I must go-go— Now the four-track way is humming, now perfecto smokes arise- Now the theaters are open, now the Joys doff all disguise, And the young men fly to them on wingèd shoes. Who shall meet them in the city? Who shall light them in the dark? Unto each his need and pleasure, unto each his sign and mark- Poor or wealthy, young or aged, she awaits you to console her Dust of auto, shriek of railroad, clack of 'plane Where the lights gleam on wet asphalt, where the taxi hails the stroller, Where the young men go to battle in pursuance of the dollar, Where the riot runs till daylight-James! Ah, help me with my collar! For the white gods make their medicine again! We must go-go-go away from here! Upon the avenue we 're overdue; Send that nothing long may hold you till the city's arms infold you, |
