FEDERAL BANKS AND I'lNAXCIAL ORGANIZATION 67 



arising out of home trade, a form of paper which both the legislature and 

 the Federal Reserve Board prefer unhesitatingh- to simple bills payable on 

 order, whether these have only one signature or are endorsed by the signa- 

 tory's bank. But since commercial acceptances of this kind are few in num- 

 ber, business of this kind has hitherto been insignificant. Banking accep- 

 tances have on the other hand been most important. The development 

 of these transactions is due above all to the rapidit}' with which the Fede- 

 ral Reserve Banks have bought such acceptances at a moderate rate. In 

 February' 1915 the rate oscillated from 2 to 4 per cent, but most purchases 

 were made at 2 % and 2 ^/^ per cent. They comprise a large quantity of 

 foreign paper for which the normal market is London. At the date mention- 

 ed their total amount was §64,953,000. All the Reserve Banks except 

 that at Dallas had part in them ; but they were chiefly undertaken by the 

 banks of New York, Philadelphia and Boston. 



On 10 November 1916 the liabilities of the Federal Banks amounted 

 to 8650,000,000, represented as to one tenth by the paid-up capital stock 

 and as to nine tenths by the deposits of stockholding banks. Their own 

 bills have hitherto circulated little, circumstances not rendering them ne- 

 cessaries. Their assets amounted to $400,000,000 in gold, 8110,000,000 

 in paper, a certain quantity of their bills, and accounts with neighbouring 

 banks. 



The unification which the federal reserve system was designed to effect 

 was shown first by the adoption of a method of weeklj' settlements of ac- 

 counts among the various federal banks, the difference between the debit 

 and credit sides of such accounts being rectified by a remitment of specie 

 or bills. The deplacement of assets from one district to another is thus 

 reduced to the minimum. In the second place since 15 June 1916 the re- 

 covery without charge of cheques and bills has been enforced by the Fede- 

 ral Reserve Board. Every stockholding bank now sends to its Reserve 

 Bank its cheques and bills on other stockholding banks — who are bound 

 to pay them without deduction — and also on other banks which have 

 accepted this condition. The number of the establishments outside the 

 sphere of the Reserve Banks which already practised this method was 

 very considerable. This system may be considered to be almost general. 

 A commission which strictly covers the costs is charged on each transac- 

 tion. The procedure is expected to strengthen the banking machiner^'^ 

 of the whole country, and to place it in this particular under the control 

 of the Federal Reserve Banks. 



The attraction of the new financial organization seems not yet to have 

 been full)- felt by the vState and other banks, of wliich onh' some ha\'e be- 

 come stock holders of the Reserve Banks, either transforming themselves 

 into National Banks or keeping their particular charters. 



It should be mentioned that most of the Federal Reserve Banks in 

 their first ^'•ear of activity did not succeed in realizing sufficient profits to 

 cover their co.sts and distribute the anticii)ated dividend of 6 per cent. ; 

 but these initial difficulties are disappearing. 



