Operation Of Gold Settlement Fund

The inter-district clearings of Federal Reserve banks are brought about by the "Gold Settlement Fund." The provisions in the Act relating to this function of the system requires each Federal Reserve bank to keep on deposit, with the Treasury at Washington, or the nearest sub-treasury of the United States, for credit, to the amount of the "Gold Settlement Fund" one million dollars in gold or gold certificates, and, in addition, an amount equal at least to its indebtedness due to all Federal Reserve banks.

How Settlements Are Effected

The settlement of balances between Federal Reserve banks is effected daily through the instrumentality of telegrams sent to the Board at Washington, where transfers of deposits and credits on the books of the "Gold Settlement Fund" are effected. This has brought about a decided advantage to the banks of the country. It has lowered the actual amount of funds required for clearing purposes and has greatly reduced the cost of transporting large sums of money from one place to another to effect such settlements.