St. Johnsbury Caledonian. [volume] (St. Johnsbury, Vt.) 1867-1919, 1913-09-24
The Currency Bill

The House of Representatives on
Thursday last by a vote of 2S6 to
"a passed the currency bill drafted
by Congressman Glass, a democrat,
assisted by other democrats and par
ticularly Pres. Wilson and Sec. Nc
Adoo. 1t is the second piece of con-
structive legislation undertaken by
the new administration and is es-
sentially Pres. Wilson's bill as his
approved draft of the bill was sub
serviently adhered to by the demo-
cratic majority in the house
The bill sa passed is revolution
airy in its character. First it would
eliminate American bank notes issu-
ed according to the amount of gov
eminent bonds bearing two per cent
interest held by the national banks,
and in it's place establish a currency
issued by twelve federal reserve
banks according to the amount of
sound commercial paper held by
them. These notes are redeemable
by the government in gold or other
lawful money. National banks are
obliged to join the federal reserve
banks and are assessed twenty per
cent Of their capital stock for the
capital of the federal reserve bank
of which they are-members. Prac-
tically every phase of banking is
placed under control of a federal
reserve board consisting of seven
members appointed by the president
and a council of bankers which
can act only in advisory capacity.
The advocates of the bill claim
that will mobilize the bank reserves,
give a more elastic currency, develop
a discount market for commercial
paper and give the government
greater control of the banking bus
mess. So desirable were these OBJ
jects that partisan lines were not
strictly observed in the passage of
the measure.
That the bill may be quite mater
tally changed in the senate is prob
able as there seem to be very valid
objections to some of it's provisions.
First the scheme will compel nation
al banks to become members of the
federal reserve banks or go out of
business or change into state banks.
1t should be a plan that the banks
would voluntarily adopt rather than
be forced into. 1t seems probable
that it will bring about a great deal
of reorganization and confusion in
the banking business with a result
ant stringency of funds.
The redemption of these federal
reserve notes by the government
may prove a very troublesome mat
ter to the government. AS the
maker of the note it will be appeal
ed to to pay it and should the banks
be in trouble, as they have in the
past, and unable to realize on the
security they have given the gov
eminent for the notes the govern
ment must redeem the notes with
it's own supply of gold or lawful
money. The supply Of money to
the government is secured taxation
or the issue of government bonds.
1t has nothing it can quickly con-
vert into cash and often times its
supply of cash is very low. The
notes are issued for the accommoda-
ton of the banks without reward
to the government and the issuance
of demand notes on such terms does
not look like sound finance on the
part of the government. The value
of a government obligation in 10Th
er lawful money" may be seriously
affected should it get abroad.
Another objection is the unequal
results the measure will have on
country and city banks. This bill
requires an assessment of twenty
per cent of capital stock of all
member banks for the capital of
federal reserve bank. Now a banks
capital stock does not represent all
the workable or loanable funds of
a bank. In a country bank with a
small surplus it does represent a
very large proportion Of the loan
able funds, but in the large city
banks where the surplus often
equals or exceeds the capital stock
it represents only half OF the banks
loanable funds. In effect it is an
assessment of ten per cent on the
loanable funds OF the large banks