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Banks (FEDERAL RESERVE were to be)

FEDERAL RESERVE were to be formed, also controlled by the local banks which were members.

This measure assigned to the National Reserve Bank-which should hold a reserve from all the banks, and rediscount the paper of the local associationsthe function of controlling the credit of the whole system and thus limiting local panics. It also has the power to issue notes on general assets to promote elasticity of the currency. It can also take up the bonds of the local banks which the government will gradually refund in 3 per cent. bonds that will find buyers in the general market. The National Monetary Commission offered a bill the year following which was essentially the same. The measure was taken up by the Special Session of Congress in 1913, and discussed in all its bearings till it was finally passed with some change on Dec. 23, 1913.

Under this enactment the United States is divided for facilitating the banking inter-relations of the country into twelve districts whose headquarters are in twelve principal cities of the country under the control of a Central Reserve Board. This board is composed of the Secretary of the Treasury (exofficio), the Comptroller of the Currency (ex-officio), and five bankers appointed for terms of ten years by the President.

A Federal Advisory Council is also provided for, consisting of twelve members, one elected by each of the twelve district Reserve banks, to confer when necessary with the Board.

Each district bank is governed by a directorate, three of whose members are the appointees of the Federal Reserve Board; the others appointed by the bank itself. Every National bank is required, and every State bank is permitted, under certain conditions, to subscribe to the stock of the Federal Reserve bank in its district to the extent of 6 per cent. of its own capital and surplus. In this way the paid-in capital of the twelve Federal Reserve banks at the date of our entering the war with Germany was about 56 millions; the largest bank, New York, having very close to twelve millions; the smallest, Atlanta, $2,414,000. The district banks have the power to create branches for dealing in Government and other securities, and to rediscount commercial paper for their associate members. They may also be called on by the Federal Reserve Board to rediscount paper for other Federal Reserve banks.

The district banks are empowered to purchase from members Government bonds held for circulation, and take out