The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1913-06-20
STUDY CURRENCY
Attention Drawn From Tariff
to Proposed Banking Law.
How to Maintain Government
Control Leading Question.
HOPE TO GAIN ELASTICITY
RediScOunting Feature Method
to Secure Desired End.
Plan Based on Emergency
Money From Collateral.

washington, June ZO.-COngreSS turn
ed its eyes away from the tariff today
and scrutinized the adminstrat atoms cur
rency bill.
While the measur will not be intro
duced in both houses next week, the
tentative draft brought about informal
discussion generally by which Presi-
dent Wilson and the Democrat leaders
hoped to develop complete harmony,
when the bill is launched for debate
and amendment. While it has been
known for some time that the farmers
of the mea measure-Secretary McAdoo,
Senator Owen, Representative Glass
and the president-contempla a sys-
tenn of twelve regional reserve banks
in districts whose areas are not neces-
sarily equal geographically but follow
ed the lines of trade and domestic COM
merce, interest conferred today in the
powers of supervision to be exercised
by the federal reserve board of nine
members over the reserve banks.
Question of Control.
Though originally it was planned to
give the banks representation on the
federal reserve board, 1t was argued
that the banks would practically have
the entire management Of the federal
reserve banks, and by placing the
board entirely in government control a
check on the operations of the reserve
banks might be assured.
The underlying idea of the bill in
the minds of the trainers for months
has been to effect all easy and unem-
barrassing change from the banking
system by using the machinery now in
existence.
Expect Amendments.
The bill is expected to be the sub
ject of liberal amendment even by its
authors. Provision for the retirement
of 2 per cent. bonds by which $780,,
100000 of national bank notes now are
secured, so as to provide against de-
probation, will be one of the fore
most problems. The provision for note
issue, administration quarters hope will
not be changed. 1t is said to be the
result of a careful canvass not only by
prominent bankers, but business men
who thought it practicable and sound.
The operation of the plan is explained
in this way:
Explain Operation.
whenever a state or national bank
desires to obtain currency, 1t applies
first to the federal reserve bank in its
region, accompanying with it's appli-
cation a tender of collateral security.
The security thus offered must be
notes and bills adopted for rediscount
under rules laid down by the federal
reserve board, which may issue up to
$5OO,0OO, 900 in notes. The federal re-
serve banks must hold 80 1s per cent.
in gold of the amount of notes ad-
vanced. The notes also become a first
and paramount lien on all the assets
of the federal reserve banks.
Elasticity Obtained.
The element of elasticity is obtained
according to administration officials in
the levying of an interest charge on the
note issued. This rate is to be estab-
lished by the federal reserve board
with due regard to the prevailing charge
in the money market. It is calculated
that a fall in the demand for money
rate of interest would furnish an in
centive for the retirement of the treas
ury notes.
Act as Clearing House.
In permitting the federal reserve
board to direct the transfer of funds
among federal reserve banks, the board
NAV at its own discretion, act as
and can require the federal reserve
banks in turn to act a clearing
house for share holding banks.
Based on Rediscounting.
Attention was centered today in the
feature as one of the
fundamentals on which the entire
nIan is based. The power of the re-
gional reserve bank is specifically
broadened to discount notes and bills
Of exchange arising out of commercial
1t is this power which in
times of stress, administration officials
think will alleviate money stringency.
While the federal reserve board through
is agent in the federal reserve bank |
would have the right to determine and
lefine the character of the paper eligi- |
Die for discount, that definition will
not include notes or bills drawn for
he purpose of carrying or trading in |
stocks and bonds or other investment !
,nfC ON II
, maturity of not exceeding four /
months and secured by United States, |
state county or municipal bonds Notes |
and bills generally arising out of COM !
nercial transactions must have a ma |
.urity of not more than 45 deays.
Effective in Ninety Days.
The Glass bill proposes that the new |
currency law shall become effective |
10 days after it's passage though a |
,ar-iod of IS months is allowed for shift