The board has tried to induce the state banks to join by meeting their objections and removing the obstacles. For instance, the expense and bother of examinations by both state and national examiners have been saved by co-operative arrangements. Only such reasonable standards of admission are enforced as will protect the national banks, whose membership is obligatory; and only such regulations govern their conduct as will insure a reasonable conformity to the fundamental principles of the system. To meet the wishes of the state banks, the board had most of its regulations enacted into law on June 21, 1917, so as to give them permanent stability.

It is not expedient to admit all state institutions. Very small banks, though great in number and in the combined amount of their resources, would prove an element of weakness, for too large a part of their funds is loaned on real estate or other noncommercial security. Likewise savings banks are non-commercial institutions, as are trust companies that do no commercial bank business. Private banks are excluded because of the character of their business or their lack of regulation. Mutual savings banks without capital stock are excluded because they can make no subscription to federal reserve bank stock.3

3 Effort was made in 1919 to get Congress to authorize the admission of mutual savings banks and, in lieu of the capital stock subscription, to require them to deposit 3 per cent of their surplus fund, to be adjusted annually, and an additional sum of not exceeding 3 per cent upon call, upon which they were to be paid 4 1/2 per cent interest. This measure was favored by the American Bankers' Association the United States Council of State Banking Associations, and others, but failed to pass.

The following are some of the positive objections that have been offered to membership in the system, objections which have not been or cannot be eliminated by amendments to the act:

1. Extra Clerical Expense.

2. Lack of rediscountable paper and want of provision for loans by the reserve bank on securities collateral.

3. Too Much Regulation, Interference, And Federalization.

4. Loss Of Exchange Under "Par Collection" System.

5. Loss Of Interest On Reserve Balances.

6. Limitations On Loans.

7. Losses On Dividends On Federal Reserve Bank Stock.

8. Political character of the Federal Reserve Board and of the Comptroller of the Currency.

9. Higher Reserve Requirements.

10. Less Ready Access To The Comptroller Than To The State Banking Department.

11. Personnel Of The Board And Comptroller.

An examination of these objections will show that some of them are trivial and sentimental and that others have been disproved by the facts. For instance, the objection that a great deal of red tape is involved in doing business with the federal reserve bank is not true; the federal reserve banks are conducted upon a strictly business basis, and transactions with them involve little if any more red tape than with another bank.