The Durham recorder. [volume] (Durham, N.C.) 1879-19??, 1911-01-27
-RESERyE ASSOCIATION
AMERICA


reform plan, Is, as has been said, an
attempt to graft upon the existing nat
ional system of independent banking
the office of central institution. IN
stead of establishing an independent
United States bank and working down
into the general banking field from
that point OF departure, it begins with
the existing national system and
works up 20 central bank. But the
result is a bank performing central
bank functions, and while Mr.. Aldricn
seems TO think II makes difference
whether the central institution Is CALI
ed a bank or reserve association.
an essential difference will not be dis
cernible to the general observer.
This. however, Is OF no particular
consequence. II IL Is a good scheme
II is equally good whether put UNI
der the name OF central bank or a
reserve association. And banking dis
cussion Of the plan in its general fea-
ture has not thus far taken hostile
turn. The details OF the plan so far
as given out have been published. and
need not be gone into. Generally
speaking. the proposed reserve asso-
citation will act as fiscal agent OF the
government and as bank OF dis
count or rediscount for the national
banks. which will be federated into
many local groups and Is general
groups. all banks in which will own
stock In the reserve association and
come into reserve Il is scheme OF
immense detail. and with its elabor-
ate provisions designed to keep the
association out OF politics and out OF
,he control of Wall street powers, and
10 give not only the government. but
industry outside Of banking represen-
,a;ion In the management, IL appears
TO be extremely cumbersome But II
Il viii work. this again Is not mat
ter 70 dwell upon.
The central bank or reserve asso-
cistion will start OF. We will say,
win the specified s3Oo.00o,0O0 Of cap
fsl, all contributed by the national
banks in proportion to their stock
subscriptions; and I; will have. be-
sides, the cash balance OF the govern
iDent now amounting TO about $780,
100000 It's first use Of this capital
evidently will BE- in the purchase OF
per cen; bonds nov held by the nat-
ional banks 20 secure circulation. As
the bonds are taken over responsible
ny for the circulation outstanding
against them follows, and as ths
notes drift into the reserve associa-
ton In the course OF business, is own
notes. will be pus out instead After
two years the government, through III
postal savings banks or otherwise. Il
70 b@gin the purchase Of these bonds
and gradually commercial paper VII
replace them as protection for the cir
calaiion notes.
Meantime paper Is supposed 70 b
floating Up for rediScouni from tn
local associations and genera
branches-notes and bills Of erchang
70 run no more than % days for an,
rith the indorSement Of any bang hay
ing deposit with The association: an
commercial bills running from ?
days 70 four months and guarantee
by the local associations The -
sDcisiion may also purchase from d
posting tanks acceptance Of bank
o. houses Of undoubted responsible
~ The rate Of discount Is 70 Be Ii
same she country over; no lnieres
is % BE- paid on deposits; the pfesef
cash reserve laws for national bank
are 70 remain: and banks may dspos
their required reserves. apparently
their full extent with the association
There l. no lack Of contradiction !
banking power here. II she scheme
employed % tie fun measure u j
provisions. A. the central Institute
viii 10, pay interes, % deposits. the
would apparently b. no danger u !
usdus concentration u minimum cai
reserves Such concentration il y
wanted A chief trouble with Il
przes, system what may BE- call
the one cause % the great acu,ene
Of our pauics-is the centfallzafil
Of large proportion Of minimum n
,ional bank reserves In New York !
commitment ~ call loans on stock !
change collateral.
How expeditlous such an elabori
and widespread mechanism can