There can be but little question of the safety of such acceptances, and their use will tend to equalize interest rates the country over and help to broaden the discount market.

(4) Permission should be granted to national banks to establish branch offices within the city, or within the county, in which they are located.

(5) In order to enable member banks to obtain prompt and economical accommodations for periods not to exceed fifteen days, the Federal Reserve Banks should be permitted to make advances to member banks against their promissory notes secured by such notes, drafts, bills of exchange, and bankers' acceptances as the law at present permits to be rediscounted or purchased; or against the deposit or pledge of United States Government bonds, the purchase of which is now permitted under the law.

(6) The Board furthermore recommends that the power of national banks to make loans on farm lands as provided in section 24 be extended so as to permit any national bank not situated in a central reserve city to make loans secured by improved and unenc.u.mbered farm land situated within its Federal Reserve district, or within a radius of 100 miles from the place in which such bank is located, irrespective of district lines. It also recommends that the powers of national banks be further extended to permit any such bank to make loans on any improved and unenc.u.mbered real estate located within 100 miles of the place in which such bank is located, irrespective of district lines; provided, however, that the aggregate of farm land loans and other real estate loans made by any national bank shall not exceed 25 per centum of its capital and surplus or one-third of its time deposits; and provided further, that no such real estate loan, as distinguished from a farm land loan, shall exceed a period of one year nor exceed 50 per centum of the actual value of the property offered as security.

It is believed that the enactment of these amendments will, besides enlarging the usefulness of the national banks, result in greatly strengthening the operation of the Federal Reserve Act, and more completely realize the purposes of its framers. The text of the amendments designed to carry out these recommendations will be submitted by the Board at an early date. The Board has under consideration other suggestions for amendments to the Federal Reserve Act concerning which no conclusions have yet been reached, and regarding which the Board will take occasion to submit its views to the Congress at an appropriate time in the future.

STATEMENT OF CONDITION OF FEDERAL RESERVE BANKS.[312]

_Combined resources and liabilities of all Federal Reserve Banks as at close of business on the last Friday of each month during 1915._

RESOURCES.

[In thousands of dollars.]

---------------------------+---------+---------+---------+---------+---------+ | Dec. | Jan. | Feb. | Mar. | Apr. | | 31. | 29. | 26. | 26. | 30. | | 1914. | | | | | ---------------------------+---------+---------+---------+---------+---------+ Gold coins and certificates| | | | | | in vault | 228,641 | 235,417 | 248,256 | 241,344 | 237,278 | Gold settlement fund | | | | | | Gold redemption fund | 428 | 488 | 653 | 824 | 950 | +---------+---------+---------+---------+---------+ Total gold reserve | 229,069 | 235,905 | 248,909 | 242,168 | 238,228 | Legal tender notes, silver,| | | | | | etc. | 26,578 | 20,882 | 29,085 | 23,098 | 26,518 | +---------+---------+---------+---------+---------+ Total reserve | 255,647 | 256,787 | 277,994 | 265,266 | 264,746 | Commercial paper | 9,909 | 13,955 | 18,577 | 22,001 | 22,774 | Bankers' acceptances | | | 1,892 | 9,682 | 13,812 | United States Bonds | 205 | 2,015 | 5,406 | 6,639 | 6,813 | Munic.i.p.al warrants | 734 | 11,165 | 12,011 | 14,940 | 18,656 | Federal Reserve notes, | | | | | | net a.s.sets | 5,418 | 3,179 | 3,215 | 6,091 | 6,909 | Due from other Federal | | | | | | Reserve Banks, net | 7,930 | 7,421 | 8,088 | 5,573 | 9,468 | All other resources | 5,931 | 7,712 | 4,550 | 3,019 | 4,425 | +---------+---------+---------+---------+---------+ Total resources | 285,774 | 302,234 | 331,733 | 333,211 | 347,603 | ---------------------------+---------+---------+---------+---------+---------+ LIABILITIES.

---------------------------+---------+---------+---------+---------+---------+ | Dec. | Jan. | Feb. | Mar. | Apr. | | 31. | 29. | 26. | 26. | 30. | | 1914. | | | | | ---------------------------+---------+---------+---------+---------+---------+ Capital paid in | 18,051 | 20,440 | 36,069 | 36,105 | 39,669 | Government deposits | | | | | | Reserve deposits, net | 263,948 | 279,516 | 290,336 | 288,217 | 294,832 | Federal Reserve notes, | | | | | | net liability | 3,775 | 2,278 | 5,328 | 8,889 | 11,038 | All other liabilities | | | | | 2,064 | +---------+---------+---------+---------+---------+ Total liabilities | 285,774 | 302,234 | 331,733 | 333,211 | 347,603 | ---------------------------+---------+---------+---------+---------+---------+

RESOURCES. (continued) [In thousands of dollars.]

---------------------------+---------+---------+---------+---------+---------+ | May. | June | July | Aug. | Sept. | | 28. | 25. | 30. | 27. | 24. | | | | | | | ---------------------------+---------+---------+---------+---------+---------+ Gold coins and certificates| | | | | | in vault | 219,187 | 222,746 | 212,988 | 211,145 | 229,972 | Gold settlement fund | 23,426 | 31,360 | 52,140 | 55,930 | 59,050 | Gold redemption fund | 1,027 | 1,081 | 1,064 | 1,104 | 1,202 | |---------+---------+---------+---------+---------+ Total gold reserve | 243,640 | 255,187 | 266,192 | 268,179 | 290,224 | Legal tender notes, silver,| | | | | | etc. | 31,989 | 47,848 | 22,092 | 19,878 | 22,920 | +---------+---------+---------+---------+---------+ Total reserve | 275,629 | 303,035 | 288,284 | 288,057 | 313,144 | Commercial paper | 24,747 | 25,996 | 29,102 | 29,275 | 31,373 | Bankers' acceptances | 9,204 | 10,379 | 11,625 | 13,564 | 13,058 | United States Bonds | 6,947 | 7,601 | 7,923 | 8,836 | 9,328 | Munic.i.p.al warrants | 23,094 | 11,509 | 16,107 | 25,808 | 24,945 | Federal Reserve notes, | | | | | | net a.s.sets | 7,765 | 9,124 | 11,029 | 12,491 | 14,866 | Due from other Federal | | | | | | Reserve Banks, net | 7,435 | 8,311 | 7,078 | 6,990 | 7,409 | All other resources | 5,426 | 5,501 | 5,904 | 4,962 | 3,577 | +---------+---------+---------+---------+---------+ Total resources | 360,247 | 381,456 | 377,052 | 389,983 | 417,700 | ---------------------------+---------+---------+---------+---------+---------+ LIABILITIES.

---------------------------+---------+---------+---------+---------+---------+ | May | June | July | Aug. | Sept. | | 28. | 25. | 30. | 27. | 24. | | | | | | | ---------------------------+---------+---------+---------+---------+---------+ Capital paid in | 54,158 | 54,200 | 54,181 | 54,689 | 54,748 | Government deposits | | | | | 15,000 | Reserve deposits, net | 292,050 | 311,349 | 306,183 | 316,989 | 329,941 | Federal Reserve notes, | | | | | | net liability | 10,921 | 12,617 | 14,965 | 16,738 | 15,348 | All other liabilities | 3,118 | 3,290 | 1,723 | 1,567 | 2,663 | ---------------------------+---------+---------+---------+---------+---------+ Total liabilities | 360,247 | 381,456 | 377,052 | 389,983 | 417,700 | ---------------------------+---------+---------+---------+---------+---------+

RESOURCES. (continued) [In thousands of dollars.]

----------------------------+---------+---------+--------- | Oct. | Nov. | Dec.

| 29. | 26. | 30.

| | | ----------------------------+---------+---------+--------- Gold coins and certificates | | | in vault | 218,224 | 245,986 | 266,546 Gold settlement fund | 61,960 | 73,830 | 77,293 Gold redemption fund | 1,222 | 1,252 | 1,124 +---------+---------+--------- Total gold reserve | 281,406 | 321,068 | 344,963 Legal tender notes, silver, | | | etc. | 37,058 | 37,212 | 13,525 +---------+---------+--------- Total reserve | 318,464 | 358,280 | 358,488 Commercial paper | 30,448 | 32,794 | 32,368 Bankers' acceptances | 13,619 | 16,179 | 23,013 United States Bonds | 10,505 | 12,919 | 15,797 Munic.i.p.al warrants | 25,014 | 27,308 | 12,220 Federal Reserve notes, | | | net a.s.sets | 19,723 | 19,176 | 21,910 Due from other Federal | | | Reserve Banks, net | 8,533 | 14,053 | 20,767 All other resources | 3,645 | 4,633 | 6,547 |---------+---------+--------- Total resources | 429,951 | 485,342 | 491,110 ----------------------------+---------+---------+--------- LIABILITIES.

----------------------------+---------+---------+--------- | Oct. | Nov. | Dec.

| 29. | 26. | 30.

| | | ----------------------------+---------|---------+--------- Capital paid in | 54,838 | 54,846 | 54,915 Government deposits | 15,000 | 15,000 | 15,000 Reserve deposits, net | 343,554 | 397,952 | 400,012 Federal Reserve notes, | | | net liability | 13,918 | 13,385 | 13,486 All other liabilities | 2,641 | 4,159 | 7,697 ----------------------------+---------+---------+--------- Total liabilities | 429,951 | 485,342 | 491,110 ----------------------------+---------+---------+---------

FOOTNOTES:

[287] O. M. W. Sprague, _The Federal Reserve Act of 1913_, _The Quarterly Journal of Economics_, Vol. 28, No. 2, February, 1914, pp.

213-254.

[288] [The country has been divided into twelve districts in each of which a Federal Reserve Bank began operations November 16, 1914.]

[289] After the Reserve Banks have been in operation long enough to be running smoothly, not a few branches will doubtless be organized.

Branches are to have boards of directors, three of the members of which are to be chosen by the Federal Reserve Board, and four by the directors of the parent Reserve Bank. Branches are to be operated under rules and regulations approved by the Federal Reserve Board.

[290] State banks and trust companies are eligible for membership, if they have a sufficient capital to ent.i.tle them to become national banks in the places where they are situated. On becoming member banks, they must comply with the provisions of the national banking law regarding reserves, examinations (the state examinations may be accepted), and various other general provisions of the national banking law.

[291] In case subscriptions by the banks of a district are inadequate, stock is to be offered to the general public; and if the response of the public is inadequate, the stock is to be taken by the Government of the United States. Neither privately owned nor government stock is ent.i.tled to voting power. [In no district were subscriptions by the banks "inadequate."]

[292] The inability of the Pujo money trust committee to secure desired information from the banks evidently occasioned the following clause: "No bank shall be subject to any visitatorial powers other than such as are authorized by law, or vested in the courts of justice, or such as shall be or shall have been exercised or directed by Congress, or by either House thereof, or by any committee of Congress of either House duly authorized."

[293] [Several of the more important regulations of the Federal Reserve Board are contained in Appendix B.]

[294] The law regarding the examination of national banks is recast. The only important changes are that hereafter all examiners are to be paid salaries, and that the Federal Reserve Banks are empowered to conduct special examinations of member banks.

[295] Adapted from Joseph French Johnson, _Fundamental Weakness of the Gla.s.s-Owen Bill_, an address delivered before the Economic Club of New York City, Monday evening, November 10, 1913.

[296] Although the address in part here reproduced was delivered as a criticism of the Gla.s.s-Owen Bill, one of the measures that led up to the pa.s.sage of the Federal Reserve Act, that criticism, as a result of a few slight changes made, applies with almost equal force to the Federal Reserve Act itself. The preceding article by Professor Sprague answers with striking directness Professor Johnson's trenchant argument.--EDITOR.

[297] [It is commonly held that ample controlling power has been conferred upon the Federal Reserve Board by the act as finally pa.s.sed.

It is of interest that Senator Owen listened to the address of which an adaptation is here given.]

[298] John Skelton Williams, Comptroller of the Currency, "Democracy in Banking," an address delivered before the annual convention of the North Carolina Bankers' a.s.sociation in the House of Representatives at the capitol at Raleigh, May 13, 1914. Printed in _Congressional Record_, 63d Congress, 2d Session, Vol. 51, pp. 10150-53.

[299] F. M. Taylor, _The Elasticity of Note Issue under the New Currency Law_. _The Journal of Political Economy_, Vol. 22, No. 5, May, 1914, pp.

453-463.

[300] _Second Annual Report of the Federal Reserve Board_, p. 16. 1916.

[301] _First Annual Report of the Federal Reserve Bank of New York_, pp.

19, 20. 1916.

[302] Thomas Conway, Jr., _The Financial Policy of the Federal Reserve Banks_, _The Journal of Political Economy_, Vol. 22, No. 4, April, 1914, pp. 319-331.

[303] _First Annual Report of the Federal Reserve Bank of New York_, pp.

34-36. 1916.

[304] Second Annual Report of the Federal Reserve Board, pp. 313, 314.

1916.

[305] _Ibid._, pp. 134-6.

[306] _Ibid._, pp. 23-25.

[307] [For regulations issued by the Federal Reserve Board see Appendix B.]

[308] _Second Annual Report of the Federal Reserve Board_, pp. 134. 135, 1916.

[309] _Ibid._, pp. 14-17.

[310] _Ibid._, p. 18.

[311] _Ibid._, pp. 21, 22.

[312] _Ibid._, pp. 45, 46.

CHAPTER x.x.xII