12
THE SUNDAY OREGOXIAX, PORTLAND, NOVEMBER
o -r
1917.
ELASTICITY OF
IS PROVED
From Very Commencement Usefulness Has Been Demonstrated in Meeting Demands of Increased Business and
Acting as Distributor for Government Bands to Make Carrying On of War Possible.
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: BT H. PARKER WILLIS.
Secretary of the Federal Reserve Board.
NO great service is ever rendered
and no great task performed
without a long period of prepara
tion. Individuals who meet emergen
cies successfully have been trained and
have accumulated the experience
which enables them to meet the de
mands upon them when these arise.
Systems must have been organized,
must. have perfected their detail of op
eration, and must have accumulated
the strength .and resources to -do what
is demanded of them. So when it' is
asked, what the Federal .Reserve Sys
tem has done in the European war and
how it has served the Nation wecan
not .a-nswer without a retrospect" that
goes back for a considerable period.
Creation and organization . of the
Federal Reserve System were very
nearly contemporaneous ; with the
breakinjr out of the war against Ger
many. The act Itself, was igtied on
December 23, 1913, and the process of
preparing for the opening of the banks
was going on during the .first half of
the ensuing year. The Federal Reserve
Board was appointed on August 10.
1914, ten days after the conflict, actu
ally .began. , .The banks themselves
were-opened on November 2, 1914, and
began their actual service as banking
Institutions soon after. Even before
the banks had been opened, however,
the organization was being used- as
fast as it was brought into, being in
order to meet the unprecedented de
mands brought to bear upon this
country as the result of the war. The
Federal Reserve Board had an import
ant share in devising and putting into
effect the special measures of relief
which the exigencies of the time called
for. The 100.000,000 gold fund which
aided in the restoration of normal ex
change relationships between the
United States and Great Britain,- the
cotton loan fund created to relieve the
very serious situation in the South re
sulting from the temporary stoppage
of foreign trade, the plan for the re
tirement of emergency currency issued
In order to enable National banks, and
through them state, banks and trust
companies, to continue payments dur
ing the Autumn of 1914, are among the
most striking examples' of the' work
done by the Federal Reserve System,
then in its earlier stages, to relieve the
business and financial community of
the shock of war and to render possible
the great - industrial .transformations
which were to follow. So much that is
noteworthy in commerce, finance and
Industry has occurred since the actual
beginning of the war that these even
now seem almost like ancient ' history,
but they must be regarded as the first
contribution of the system to the sup
port of the Nation in a period of stress
and crisis that might otherwise have
wrecked its business, or might at. least
have so seriously crippled it as to limit
it in a most serious way in subsequent
activities.
I'sefulness Felt From Start.
Between these early undertakings
And the moment when the United States
Itself became a participant in the war
against German aggression is a space
of about two and one-half years. That
period proved to be a time of enormous
business activity and resulting pros
perity in the United States. Few per
rons who review the events of that time
probably consider that had it not been
for the development of an efficient
banking system affiliating together the
scattered financial units of the country,
strong and weak, our experience must
have been very different. With the aid
r. the new system, which thus came
into existence in the very nick of time,
however, American business men and
financiers were able to make to the
conduct of the war abroad that great
contribution, which is usually ignored
or entirely forgotten.
During that time we exported $6,000,-
000,000 of merchandise in excess of
FEDERAL RESERVE SYSTEM
CONCLUSIVELY BY WAR STRAIN
what we Imported and we advanced in
loans to foreign countries probably
$2,500,000,000. besides repurchasing
something like an equal amount of our
own securities which they had been
holding. We thus in no small measure
assisted in financing and carrying on
the War from the very beginning and
from some points of view this aid was
perhaps- greater and more effective
than would have been possible -had we
ourselves : at . that time been active
sharers in the conflict. That this could
not have been done without the exist
ence of some strong banking organiza
tion able -to create the "necessary- con
fidence and to assist' the banks of the
Nation iri applying their resources, to
the unprecedented task before, them
is merely the statement of an opinion.
No one. can say with., certainty in any
crisis of the kind what - would have
happened had events been other than
they were. Doubtless American enter
prise and resource would have found a
way of meeting and overcoming the
various novel difficulties that were of
fered to them, as . they, had- in times
past. It is, however, as certain as any
thing humanly can be that the Federal
reserve system did in fact afford this
means of uniting the financial resources
of the country,, ot insuring support to
institutions which stood in need of it
and of providing the new and indis
pensable methods and mechanism with
out which our increasing production
and trade, necessary as these were to
the conduct of the war. could not have
been ffnanced.
Ao BuHlnesa TTpset.
The low rates for money which pre
vailed throughout these years, the ab
sence of any serious banking disturb
ances or failures, the continuous and
efficient supplying of the needs of. the
OREGON FRESHMAN CLASS ACCOMPLISHES UNUSUAL TASK OF KIDNAPING FAMOUS "IRON WOMAN
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AGGIE IDOI, AVHICIi WAS TAKEN FROM THE O. A. V. CAMI'US.
UNIVERSITY OF OREGON, Eugene, Nov. 24. (Special.) This year's freshman class accomplished what every
university class for the past 15 years has attempted kidnaped and brought to Eugene the "Iron Woman." the Aggie
idol, for the grand rally which-always precedes the annual Oregon-O. A. C. football game. The "pep" feast, held
Monday afternoon as the opening gun of the campaign for the Aggie scalp in the Thanksgiving game at Port
land, saw the stolen idol as the center of attraction. The rivalry between the two schools, while friendly,
is unusually keen this year. Tuesday a delegation of university seniors returned the statue to the Corvallis cam
pus where it was replaced on Its pedestal.
agricultural districts, thereby enabling
them to move their crops without fric
tion or difficulty, are perhaps the most
important, if the least showy of the
services rendered by the new banking
system up to date. During the years
in question, moreover, American banks
for the first time began to establish
branches abroad, undertook the inau
guration of the system of bankers' ac
ceptances, essential to the growth of
foreign trade, which had so long been
employed by leading European na
tions, and took over in no small degree
the functions of a- general financial
market, formerly performed by Great
Britain, but " now necessarily trans
ferred in' part to the United States.
It was an important feature of the
work of these years - that those who
were charged with the direction of the
Federal Reserve System fully recog
nized the possibility of a sudden and
severe strain upon our resources which
might make itself felt practically at
any moment, and endeavored through
out the early years of the system to
shape its policy in such a way as to
preserve and increase its banking
strength. Governor Harding, of the
Federal Reserve Board, in a statement
reviewing the work of the system in
connection with the war. described the
culmination of this policy as follows:
"During the month prior to the
entry of the United States into the
European war the Federal Reserve
Board. - recognizing the unsettled and
disturbed condition of foreign affairs
and the unusual influences to which
domestic and financial conditions were
subject, devoted special attention to
the problem of immediately placing and
of maintaining the Federal Reserve
Banks in a strong and liquid condition.
To this end the reserve banks were
encouraged to refrain from makinsr
r w Srwr
more than very moderate investments
in securities. Even with respect to the
purchase of commercial paper they
were counseled to observe a policy of
conservation. As a result of the adop
tion of this plan of action the entry of
the United States into the war as an
active participant found the Federal
Reserve Banks and, in consequence,
the banking system of the whole coun
try, in an extremely satisfactory and
strong position. On the 30th of March
the reserve banks held against deposits
a reserve of S2.1 per cent, while the
combined National, banks of the coun
try held, on March 6, J813, 028,000 of
vault reserve, an excess of reserves
over legal requirements of $227,861,000.
"In another way the Federal Reserve
System has endeavored to make ex
ceptionally careful preparation for any
possible demands that might be brought
to bear upon it. The opening . of the
year had found it with a large stock
of Federal Reserve notes on hand, but
it was deemed a measure of prudence
almost to treble the available supply,
$761,000,000 of new notes being
ordered. Moreover. In order to render
these notes easily available they were
distributed throughout the country at
the various mints and subtreasuries,
where they were held subject to release
by telegraph from Washington upon
application of the Federal Reserve
Bank nearest situated. Not only a
note currency but a ready means of
distributing that currency without de
lay to the points where it was most
needed was thus provided for."
The opening of the war, however,
brought its own special problems, and
almost Immediately it became neces
sary to decide upon and put Into oper
ation a financial organization for the
purpose of performing the actual work
of placing the new bonds. Many prob
lems of a general nature had to be dis
posed of, and an immense amount of
detail work must be quickly and effi
ciently accomplished. The British War
Mission to the United States had in
cluded In its membership a distin
guished financial representative In the
person of Lord Cunllffe, governor of
the Bank of England. -During the stay
of Lord Cunllffe in the United States,
many problems of International finance
were discussed both with him and the
Secretary of the Treasury, and with
the Federal Reserve Board as- a whole.
Lord Cunliffe visited a number of the
Federal Reserve Banks, and many con
ferences were held with a view to better
mutual understanding of the work to
be done, from the international point
of view. A photograph which is here
reproduced for the first time, repre
sents a group In the Federal Reserve
Bank of Chicago, which includes Presi
dent Forgan, of the Federal Advisory
Council; Lord Cunllffe, President
George M. Reynolds, of the Continental
& Commercial National Bank, a- direc
tor of the Federal Reserve Bank of
Chicago: Charles S. Hamlin, the first
governor of the Federal Reserve
Board, and other officers of the system.
Bond Distribution linderiakH.
These preliminary discussions and
conversations were followed by the
visit of a party, headed by the Secre
tary of the Treasury and Including
Governor Harding of the Federal Re
serve Board, to many of the Federal
Reserve Banks, as well as other places.
This visit laid the foundation for the
general co-operation of the financial
community in the great operation
which was to be undertaken, for the
Secretary of the Treasury had deter
mined to employ each Federal Reserve
Bank as the head of a district organ
ization designed for the distribution of
the new bonds, and in each Federal Re
serve District such an organization waB
quickly developed about the local re
serve bank as a center.
Local bankers and financiers freely
gave of their time and assistance to
the furtherance of the work and in
each case the Federal Reserve Bank
proved an efficient basis of organiza
tion. The several banks, under in
structions issued by the Secretary of
the Treasury, received subscriptions to
the loan atid carried on the immense
work of detail resulting therefrom, be
sides taking charge of the deposits in
banks and general banking relation
ships growing out of the operation.
The Federal Reserve Board itself,
besides co-operating closely with the
authorities of the Treasury Department
in efficiently conducting the loan opei
ations of the Federal reserve banks,
further sought to develop a general
policy that would support and aid the
banking community at large in taking
and distributing the new issue of
bonds. For this purpose It first estab
lished a special rate of 3 per cent per
annum for the discount at Federal re
serve banks of the direct 16-day ob
ligations of member banks secured by
temporary certificates of indebtedness
which were issued in order to antici
pate the proceeds of the sale of the new
bonds.
Buyers Are Aided.
Carrying further this same policy, it
later established a 3 per cent rate
of discount at Federal reserve banks
intended for the 90-day paper or ordi
nary bank borrowers, thereby enabling
the member banks of the system to ex
tend accommodation to bond buyers in
the assurance that they would be able
to obtain accommodation from the
Federal reserve banks by rediscounting
these notes. In order to aid the cus
tomers of banks not members of the
Federal reserve system, it further au
thorized the member banks to act :is
agents for nonmember institutions by
rediscounting the notes of bond buyers
who desired to obtain assistance from
their own banks without being obliged
to transfer their business to member
banks. Savings banks and trust com-
AH
i
The Best of Music for the
A $950 "Natural"
Steger Player
Piano during fac
tory Clearance Sale
?9fl 525 Cash, $15
DJAdJ Monthly.
ning after Jan. 1, 1918. No
interest for 2'i years.
lVgin- SHALL, ' WF! DELIVER O'E TO
The Natural Player Piano The Steger Player Piano
Come to Our Player-Piano Salons and hear these truly natural player-pianos demonstrated. No need to buy so-called
"hurdy-gurdy player-pianos" now. Come, play the Steger, feel your tone with the pressure of your pedaling as with
the pressure of your fingers, and then buy it at prices and terms during this factory clearance sale that you need pay
regularly for greatly inferior cheaper grade player pianos.
Gl'ARAN'TEED PIANOS A NO PLAYER-PIANOS. NEW RERIILT DISCONTINUED MODELS AND USED PIANOS.
Here Is a Partial LUt of Final Factory Sale Offerings:
9550 Steger. 1916 Model S370
50O Reed & Son. I01 Model... 8320
450 Decker Bros. Upright 8165
330 Kaelael, 1015 Model S235
MSO Stelniray A Sons ...8 65
6S3 Steger, 1015 Model S380
9750 Singer Player Piano S 135
129 Lor log A Blake Ora-an....S 28
ties Eater A Co. Organ $ 65
S350 X. P. B. Cnrtls, So.. Piano.. 8 35
9SSO Angelna Plnyer 8 25
lOO Lorina- A Blake Organ 8 20
New York Pinno Forte Grand 81-15
S6SO Thompson Player I'iaao 8-135
S375 Krakaner Upright 8195
150 Kimball Organ 8 -iS
SIMM) Electric Player Piano 86SO
S17.-.0 Derrywood Electric Player..S475
S7SO Bennett Baby Grand 8325
3SO Knelael Upright 8195
CHRISTMAS TERMS $5 CASH $6
PIANOS DELIVERED
wr ' 1
Urder Your riano by
your boy or girl working can save J. cash and J6 monthly, without interest, ana secure a musi-ai raui-niwi "V"-.
OVT-OK-TOW N BCYEKS WB PREPAY AM) MAKE FKEK DELIVERY OK PIANO X Olll HOME within oOO
lies, and the piano will be shipped subject to exchange within one year, we allowing the full amount paid. This vir
tually gives you a one-year trial of the piano you order.
Every piano or player-piano purchased carries with It the Schwan Flano Co. guarantee of satisfaction. n also
the usual guarantee from each manufacturer of these new musical instruments. Open Monday, Wednesday and batur
day evenings during this sale. THE STORE THAT CHARGES NO INTEREST.
Manufacturers
Coast IMstrtbutors,
111 Fanrlk Street
at Washington.
panles were assured that the board
would in every way co-operate with
them In avoiding shock or disturbance
to existing conditions and that the Fed
eral reserve system stood ready to-extend
them reasonable accommodation
In the event oC necessity resulting
from withdrawals made by depositors
In order to purchase or invest in Gov
ernment bonds.
No account of the service of the Fed
eral reserve system would, however, be
complete without a reference to the
process by which the actual work of
floating the bonds of the new liberty
loan was carried out. Such undertak
ings are always best described by those
who have had to bear the brunt -of
them. William McC. Martin, chairman
of the Federal Reserve Bank of St.
Louis, who. In common with other Fed
eral reserve agents, bore an Important
part in the task of locally placing the
new loan In the several districts, has
sketched this undertaking in a hitherto
unpublished statement as follows:
Time Limited to 30 Days.
"On the night of May 2 the Secretary
of the Treasury . issued to the press a
statement giving such details of the
loan as had beei agreed upon up to that
time. At the same time he advised the
Federal reserve banks that he had de
cided to use them as the central agen
cies for handling the Issue.
-On May 12 the full prospectus was
telegraphed the banks to be made pub
lic on Monday, the 14th. The subscrip
tions had to close on June 15, so the
Federal reserve banks had Just one
month in which to perfect an organiza
tion for the sale of the proportion of
$2,000,000,000 of bonds allotted to the
respective districts and for the han
dling of details of the subscriptions.
"It took 20 days to perfect the pros
pectus and one month was left in which
to try to get into personal touch with
the people in a country so large as ours.
With these facts, even though one has
faith to believe that our Nation can do
anything, he cannot help wondering
whether in so short a time the bonds
could have been sold without the Fed
eral reserve banks. Few people, unless
they have had actual experience, realize
the multiplicity of detail involved in
distributing subscription blanks, re
ceiving them back properly filled, enter
ing them on the records, answering
questions and receiving the first cash
deposit. No district handled less than
$49,000,000 in subscriptions, many were
in small amounts, and It must not be
forgotten that a subscription for $50
takes as much detailed work as one
for $1,000,000. It must also be remem
bered that in so large a loan $50 sub
scriptions are very desirable. It will
be even more necessary to get them in
the next offering. All this office work
the Federal reserve banks had to at
tend to in 30 days. When the allot
ments were announced, after June 15,
the books had to make the adjustments
and receive the installment payments.
Labor Well Divided.
"Multiplicity of detail can be handled
only by division of labor, and fortu
nately there were 12 Federal reserve
banks, well organized, working to
gether under the supervision of the
Federal Reserve Board, with officers
locally known to the public served.
Each bank had a definite district in
which it had established practically
daily relationship with the other banks.
It is believed that no bank, group of
banks or all the banks in any city in a
given territory could have had the un
selfish co-operation of all elements in
the community that was given to the
Federal reserve banks. They were
above the possibility of any suspicion of
serving selfish ends. They could not
possibly have any purpose other than
to make the liberty loan a great suc
cess, and banker, broker, manufacturer,
business man and laborer could Join to
gether under the leadership of an in
stitution for which there could be no
business Jealousy.
"The working out In 20 days of a
prospectus covering so large an Issue,
without a precedent in this country to
guide, and the placing of $2,000,000,000
SHALL ' WF! DELIVER OM
YOl'R HOME .NOW OR F
CHRISTMAS VEI
C in Records purchased delivers one
of these models to your home.
CC 75 cent
0C i-oo
veekly.
eekly.
We Chsrge No Interest
OR MORE MONTHLY AFTER JAN.
mo sag Jllisl "i
-
NOW OR STORED HERE FOR CHRISTMAS DELIVERY
H It iRrad, study and compare onr
Maiim'a-:'0-drrdhov;;:d' -nd -
Scliwao Piano
of bonds, oversubscribed approximately
$1,000,000,000. in a month's time, is a
remarkable achievement, but now the
trail is marked for the remaining
$3,000,000,000 of the $5,000,000,000 au
thorized. We may not. in fact cannot,
accomplish a more satisfactory result,
but we can probably do It with less la
bor and less lost motion. We know
more certainly how to move."
Viewing the first and second loan op
erations generally as a banking mat
ter, without reference to the local de
tails of selling and distributing the
securities themselves, there can be no
doubt of the efficiency and service of
the Federal reserve system. Not only
has there been no disturbance of any
kind to interest rates beyond the nec
essarily gradual increase which fol
lows upon the withdrawal of such
great quantities of funds from the
market, but the process has been ac
complished with wonderful technical
ease. In former times, under the old
Subtreasury system, the withdrawal of
subscribed funds in various parts of
the country, or even the operations in
cident to the transmission of these
funds from one part of the country to
another, created unavoidable and seri
ous difficulties, due to shortage or ple
thora of money at various points, while
exchange rates and conditions were
serlousiy disturbed. All this has been
avoided through the operation of the
central gold settlement fund, conducted
under the supervision" of "the Federal
Reserve Board at Washington. By
the use of this fund the thousands' and
millions of dollars Involved in current
Government operations have been re
ceived In the form of local bank cred
its and the proceeds have been trans
ferred to the point where Government
payments had to be made. As these
payments have been effected local
banks at those places have increased
their deposits and the proceeds have
again been gradually shifted to differ
ent parts of the country where produc
tion and manufacture were in progress
and where payments for material and
labor had eventually to be liquidated.
Little money has passed from one part
of the country to another under this
system and the matter has been smooth
working, effective and satisfactory
throughout. All this is now fully ac
Even the Renter Buys a House
Only He Doesn't Get It!
What would you think of a man who paid his good, hard
earned money for an article and then didn't get it ? '
That's exactly your position, if you are a renter.
There are families in Portland who have paid, many times
over, in rent, the purchase price of the house they live in.
But they are no nearer owning it than they were the day they
moved in.
Take your own case. A few minutes' figuring with pencil
and paper will show the surprising amount of rent you have
paid. ' Or hunt up your old rent receipts and add them up.
Enough to buy a pretty fine home, isn't it? Yet, at the
present rate, you won't own a home 10 years from today.
But why keep on at the present rate ? There isn't another
thing you would be willing to pay for and not get. Why
follow this absurd plan with your home?
Established, reliable Portland real estate firms are offer
ing splendid homes in these pages; many of them are pay
able "same as rent."
Make one of them "your home." You are paying for a
house, anyway you might as well own it.
PORTLAND REALTY BOARD.
Entire Family
Father's Christmas
present to the fam
ily, insuring enter
tainment, m u s i cal
evenings and a
s p 1 e n d id musical
education for all.
9550 Bennett Upright 8235
630 Steger Upright $395
475 Kroeger Upright 8195
94-5 Thompson I'pright 8290
? 1 0.-.O Steger Orand 8-195
9425 Smith t Barnes 8145
910OO Steger Player Piano 8580
9550 Steger Upright 8355
9.175 Hallet A Davis Upright 8115
9250 Collard Upright 8 -15
Singer. 1017 Model 83-15
9375 Davis & Son Upright 8260
9375 Thompson Upright S2SO
9350 Detrarr I'pright 8125
9550 Heine Player Piano 8290
9475 Thompson Upright S2S5
9550 Gerhard Player Piano 8315
9550 Steger I'pright 8360
9375 Davis V Son I prlght 8235
91 IOO Stelnway Grand 8-195
S375 Thompson Upright 8245
1, 18 NO INTEREST FOR 2' YRS.
quality, prices ana no inirrrni mr - -a
w,u lwa why we hYe -jad"d" ot
Co.
WARRANTEE
HACKED HY
MANY MILLIONS
IN CAPITAL
knowledged and even thoso who at the
beginning doubted the workable quali
ties of the Federal reserve system now.
in most cases, freely concede them.
Continuous Necessity Predicted.
This Is not a time in the world's his
tory when predictions can safely be
made very far in advance. One such
prediction that seems safe. is. however,
that the Federal reserve system will
continue to be of invaluable service to
the Nation and that the necessity for
its service will grow greater and
greater as time goes on and financial
pressure of the war increases, as it
must. When the war is over there
will be many financial readjustments,
both National and international, before
even our own industrial system and
that of the world at large can recover
Its equilibrium. Much would have to be
done in the way of extension and im
provement of all banking methods and
much in the direction of the further ex
pansion and strengthening of our in
ternational trade. Without the Federal
reserve system it would be difficult in
deed to accomplish these results; with
it they will be as easy as the tremen
dous strain which the financial world
has been undergoing will naturally
permit. We may look with confidence
and reliance to the future of the Fed
eral reserve system and its service to
the community, expecting that it will
be able tc mitigate the difficulties by
which this Nation, iti common with
others, is necessarily faced, and to en
able the successful carrying of cares
and burdens otherwise beyond our
strength. Good managament, conser
vatism and avoidance of the dictates
of mere expediency will be necessary
now. as always, but that is true of the
administration of every human insti
tution and every forecast of the future
is necessarily based upon the assump
tion that these essentials to financial
progress can be secured.
Chelialis Man ComniUioncd.
CHEHALIS. Wash.. Nov. 24. (Spe
cial.) Word has been received In this
city that L. V. Corklns. formerly of
Chehalis, has been commissioned First
Lieutenant in the signal department of
the Aviation Corps and has been
ordered to France immediately.