The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1913-07-14

be issued.
When 1t is borne in mind that the
government has been the principal
beneficiary as a result of the low rate
or interest at which these bonds have
been f1oated, because of their required
use by national banks as security for
their circulating notes. thereby en-
abling the government to save millions
of dollars of interest annually, T think
all fair-minded people will feel that
there is an obligation On the part of
the government to protect the banks
against loss IN the bonds SO held.
Careful consideration of this sub
Ject since my return from Washington
leads me to believe that any plan of
currency legislation which is provided
for should either employ these bonds
upon some basis which will protect the
banks from loss, or it should take
them up and pay them off, or refund
them into bonds which will be worth
a In a normal market for securities.
"The bill also provides for a issue
of federal reserve treasury notes not
to exceed $500, 900, 900, and in addition
thereto a sum equal to the difference
between the total amount of national
bank notes outstanding at a given
time and the amount Of such notes
outstanding at the time Of the passage
of the bill. .u
"It ulso provides that these notes
shall purpor on their faces to be the
obligations of the United States and
shall be issued at the discretion Of the
federal reserve banks. 1t provides
that they shall be receivable for all
taxes, customs and other public dues,
and shall be redeemed in gold, on de-
mand, at the treasury department in
the city of Washington, D. c., Or at
any federal reserve bank.
How Notes Would Be Issued.
THE mode. of procedure through
which these notes would be put into
circulation would be that n federal
reserve, bank could, upon a vote of it's
directors, make application to the fed
eral reserve board through the local
federal reserve agent, for such amount
of the treasury notes as it might deem
best. such application to be accom-
panied with a tender to the local fed
eral reserve agent Of collateral securi-
ty to- protect the notes for which appli-
cation is made, equal in amount to the
sum thus applied for, the collateral
security thus offered to be notes and
bills accepted for rediscount; and If
| deemed advisable the federal reserve
board would be authorized at any time
to call upon a federal reserve bank for
additional deposits of like security.
Whenever any federal reserve bank
shall pay out or disburse federal re-
serve treasury notes it shall segregate
in it's own vaults, and shall carry to a
lawful money equal in amour to 81 ID
per cent of the treasury notes so paid
out by it. The federal reserve board
shall have power, in it's discretion, to
require federal reserve banks to main
tain on deposit in the treasury of the
United States a sum in gold or lawful
money equal to IS per cent of such
n mount nf foSpra1 reserve trP2 S11rV
notes as may be issued to them from
time to time; out such 5 per cent shall
be counted and included as part of the
33 1-3 per cent reserve ~reinbe
required.
"In addition to the pIedging of COM
mercial paper to the extent of the par
value Of the amount of notes thus re-
ceived by any federal reserve bank,
such notes when paid out by that
bank would become a first and para
mount lien on all Of Its assets. Thus
you will see that these notes would be
secured. first. by the credit of the gov
eminent. and. second, by a specific de-
post by the federal reserve bank OF
commercial paper equal to the amount
of notes received, and, third when palo
out for a federal reserve. bank they
become a first and paramount lien on
all of the assets of that bank.
Believing that the banknote issue
as proposed in the bill, is neither
sound nor scientific from the stand
point of modern banking, the commit
tee of bankers who called upon the
president suggested an entire change
in the manner Of issue and a some.
what different method of securing these
notes. We held hat the government
should not guarantee nor undertake
the responsibility of the redemption OF
the notes issued, for since they would
even under the plan proposed in the
to us entirely unnecessary that they
should bear the promise Of the govern
ment to redeem them in gold; espe-
cially so. since under the proposed
plan the real burden and responsible
ty of maintaining the necessary gold
reserve against them is placed upon
the federal reserve banks. Our e
ons for this were based upon the the
DRY that it would be putting an unnec-
essary responsibility n burden upon
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