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As fiscal agents of the Government, the federal reserve banks rendered the nation services of incalculable value after our entrance into the war, services in connection with the issuance of our large Liberty loans and our ad-interim treasury notes, with a minimum disturbance to our money markets.

They aided greatly in the conservation of our gold resources, in the regulation of our foreign exchanges, and in general in the centralization and efficient utilization of our financial energies. In this time of great emergency the federal reserve system was a bulwark to our national finance. One shudders when he thinks what might have happened if the war had found us with our former decentralized and antiquated banking system. Think of pouring the crisis of 1914-1918 into bottles that broke with the crisis of 1907!

The post-war situation demands in financial matters the maximum of efficiency. If we are to do our part in solving the tremendous financial problems of world reconstruction, we must make every dollar count to the utmost. This means the coordination of all parts of our banking system. It means integration under a responsible central control, and it means administration with sole regard to national welfare. Upon this subject we may conclude this book with the

words of President Wilson, made public October 13, 1917. They apply to the period of reconstruction as truly as they did to the period of

the war:

“It is manifestly imperative that there should be a complete mobilization of the banking reserves of the United States. All who are familiar with financial operations must appreciate the importance of developing to the maximum our banking power and of providing financial machinery adequate for meeting the very great financial requirements imposed upon our country by reason of the war. A vigorous prosecution and satisfactory termination of the war will depend in no small degree upon the ability of the Government not only to finance itself, but also to aid the governments associated with it in the war, which must be kept supplied with munitions, fuel, food, and supplies of all kinds. The banking problem involved is one which concerns all banks alike. Its solution does not depend upon the national banks alone, nor upon the state banks. The burden and the privilege must be shared by every banking institution in the country.

“The extent to which our country can withstand the financial strains for which we must be prepared will depend very largely upon the

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strength and staying power of the federal reserve banks.

"Many of the largest state banks and trust companies are now becoming members, realizing that to win the war we must conserve all of the physical, financial, and moral resources of our country—that our finances must rest on the firmest possible foundation, and that they must be adequately and completely conserved so as to respond instantly to every legitimate demand. How can this necessary condition be brought about and be made permanently effective better than by the concentration of the banking strength of our country in the federal reserve system? .

“I believe that cooperation on the part of the banks is a patriotic duty at this time, and that membership in the federal reserve system is a distinct and significant evidence of patriotism.'

APPENDIX A

COMBINED BALANCE SHEET OF TWELVE FED. ERAL RESERVE BANKS, FEBRUARY 20, 1920, AND BRIEF EXPLANATIONS OF THE

VARIOUS ITEMS

Resources

$200,973,000

Gold coin and certificates in vault?...
Gold settlement fund—federal reserve

board?
Gold with foreign agencies: .

396,138,000 112,822,000

[blocks in formation]

Bills discounted :

Bills secured by government war obliga

tions?

All others.
Bills bought in open markets.

1,525,203,000

833,321,000 532,703,000

Total bills on hand....
U. S. Government long-term securities'.
U, S. Government short-term securities10.
All other earning assets11

2,890,227,000

26,838,000 268,610,000

0,000,000

Total earning assets.

3,185,675,000

11,144,000

Bank premises12...
Uncollected items and other deductions from

gross deposits13.
Five per cent redemption fund against fed-

eral reserve bank notes 14 All other resources15

1,029,653,000

12,724,000 3,851,000

Total resources

6,278,487,000

Liabilities

Capital paid in 18
Surplus17

90,531,000 120,120,000

Government deposits18
Due to members—reserve account19
Deferred availability items20
All other deposits, including foreign govern-

ment credits21

75,587,000 1,828,891,000

815,606,000

95,366,000

Total gross deposits

2,815,450,000 Federal reserve notes in actual circulation22 2,977,124,000 Federal reserve bank notes in circulation, net liability23

240,858,000 All other liabilities24

34,404,000

Total liabilities

6,278,487,000

1 This represents reserve money held in the vaults of federal reserve banks against deposits and federal reserve notes. See text, pp. 52, 58-60; and Act, sec. 16, par. 3.

2 This is a gold fund held in the United States treasury by the federal reserve board, in trust for the federal reserve banks, and the money it contains is transferred from one federal reserve bank to another or to or fr the treasurer of the United States by means of debits and credits on books kept by the federal reserve board in Washington. Gold held in the fund to the credit of any federal reserve bank is counted as lawful reserve money against federal reserve notes or deposits. See text, pp. 75-76; and Act, sec. 2, 3d, and 4th pars. from last.

8 Federal reserve banks have established agencies in a number of foreign countries, and, as a matter of convenience as well as

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