Sec. 9. #Changes in national banks.# There is here created a national system of reserves, but it will be observed that membership in the new system of the Federal reserve banks is not limited to national banks, but is open on equal terms to banks organized under state laws.  While in most respects the general banking law remains as it was, certain changes are of importance.  The percentage of reserves henceforth required of all member banks (as above indicated) is a substantial reduction of the former requirement for national banks.  In some other respects the powers of national banks are enlarged.  One with a capital and surplus of $1,000,000 may with the approval of the Board establish foreign branches, and one not situated in a central reserve city may loan on farm lands for a term not longer than five years, but not to exceed one third of its time deposits or 25 per cent of its capital and surplus.  National banks may now be granted permission by the board to act as trustee, executor, administrator, or registrar of stocks and bonds, thus having the rights that have proved in many cases to be of advantage to trust companies organized under state laws.

Sec. 10. #Operation of the Act#.  It was fortunate that this act was nearly ready to be put into operation when, August 1, 1914, the great European war broke out.  The able appointees to the Federal Reserve Board commanded the confidence of the bankers and of the public.  The knowledge that the reserve banks would early begin operations was reassuring during the grave financial stress of the next three months, and the opening of the district banks in November, 1914, at once made possible the release for commercial uses of cash reserves and credits to meet the needs of reviving business.[11] Only an extended experience can show how this enormous new banking organization will operate as a whole and in its details.

Because of the very wide discretionary powers given to the board in the administration of the act much depends on the character and ability of the members of the board as well as on a sound public opinion that will keep this great power from use in partisan and selfish ways.  No doubt amendments of the act will appear necessary, but there can be no question that the Federal Reserve Act has inaugurated a new epoch in the banking and financial history of our country.[12]

[Footnote 1:  See ch. 8, sec. 1.]

[Footnote 2:  The law provided that an organization committee should designate not less than eight nor more than twelve cities as Federal reserve cities and should divide the continental United States, excluding Alaska, into districts each containing one such city.  Twelve districts were designated.  Wherever, therefore, the act speaks of “not less than eight nor more than twelve,” or of “as many as there are Federal reserve districts,” we may, for convenience, speak of twelve.]

[Footnote 3:  On agreeing to comply with reserve and capital requirements of national banks and to submit to Federal examination.]