FIFTY MILLION STRONG 



currency. The second had been in existence since the close 

 of the Revolutionary War, and differ in the several states, 

 since they are organized under charters granted by the states, 

 although in recent years the tendency has been to model the 

 state laws after the federal laws. The third had their origin 

 at the close of the War of 1812 and have been until recent 

 years little hampered by law in their management. Building 

 and loan associations came a decade or so after the establish- 

 ment of private banks, and have been a boon to thousands 

 of people in enabling them to purchase homes by mortgaging 

 future savings. 



In December, 1913, a federal banking law was passed pro- 

 viding for twelve federal reserve banks, with which all other 

 banks of the country may become affiliated on complying with 

 the conditions imposed. The new law corrects two evils that 

 in the past half century have led to the loss of billions of 

 money, viz., an inelastic currency and an immobile reserve. 

 The federal reserve banks eliminate the two major defects 

 in the nation's banking system through the issuing and retir- 

 ing of federal reserve notes in response to the demands of 

 the business world, and through the opportunity offered 

 member banks of strengthening reserves by negotiating loans 

 based on commercial paper. 



The removal of these two defects in the banking system 

 of the nation has been a very great help to Rural America, 

 since the banks of Rural America had, before the passage 

 of the Act of 1913, been largely at the mercy of the city 

 banks, most of their reserve having been kept in city institu- 

 tions. Hence, if trouble arose in the cities and there is 

 where panics always started the reserves of the country 

 banks became more or less unavailable, owing to the distress 

 of the city banks, and the country banks were dependent on 

 the small amount of cash they had in their vaults to satisfy 

 the needs of their depositors. Now, with all the assets of the 

 country banks constantly liquid, regardless of urban condi- 

 tions, the country has been placed on a sound financial basis. 

 In addition, national banks are permitted under the law to 



