4 
Reductions 
Opposed 
Minor Ad- 
justments 
Legislative Review 
Cash in Vault 
Rural Banks 
‘tems Due 
From Other 
Banks 
Country Banks 
Reserve Required 
of Country Banks 
COMMITTEE REPORT 
of other banks whose lending powers would be similarly increased. 
Attention has already been directed to the fact that reserve percent- 
ages are now much less than they were prior to the enactment of the 
Federal Reserve Act. Just as the Committee has been opposed to 
general reductions in the reserves required of member banks when 
such reductions were proposed solely for the purpose of lowering 
the lending powers of reserve banks, so, too, it is opposed to such 
zeneral reductions when they are suggested solely for the purpose of 
ncreasing the lending powers of member banks. This is not to main- 
‘ain that we are opposed to any change in the reserves required of 
nember banks. We favor some early minor adjustments as indicated 
>elow and support a thorough legislative review of the whole sub- 
lect. 
There is room for minor adjustments in the existing reserve re- 
juirements if made for the sole purpose of removing existing in- 
equalities in the schedules applying to the various classes of banks. 
One such apparent discrepancy is due to the fact that banks in rural 
sections are now obliged to carry in till relatively larger amounts 
of cash than banks in reserve and central reserve cities. Inasmuch 
as this cash in vault does not now count as reserve money, the coun- 
try banks are obliged to keep larger actual percentages of reserve 
than the nominal requirements of the law. It seems only just, there- 
fore, that member banks, in computing the deposits against which 
reserves must be carried, be permitted to deduct cash in vault from 
net demand deposits. This would result in no serious expansion of 
the lending powers of member banks such as would be occasioned by 
a proposal sometimes advanced, namely, that cash in vault should 
be counted as legal reserve—a proposal we do not support. 
There is another respect also in which country banks now feel 
that they are discriminated against. No bank may now utilize items 
due on demand from other banks to accomplish anything more than 
‘0 offset amounts due to other banks. Banks which have an excess of 
‘due from” items over “due to” items, can under present law receive 
10 credit for the excess. This difference in the financial practices of 
country and of city banks has persisted to a greater extent than an- 
icipated when the present reserve requirements were established. 
On this account it is recommended that banks be permitted to deduct 
tems “due on demand from other banks” from gross demand de- 
posits instead of merely from amounts due other banks. 
There is on the other hand one respect in which country banks 
10ld a present advantage over reserve city and central reserve city 
banks. Banks which hold an excess of items due on demand to other 
>anks over items due from other banks must observe the reserve per- 
“entage applying to their particular classification. On this account 
(Continued on page 36)