The Washington herald., 1913-12-11
. The Currency Problem.
V.-How the New System Would Work.

The way the banking system would work follows The
Federal banks receive money for deposit from the MEMBER banks
romth government but from
They gold coin and bullion and sell notes and bills
arising of commercial being specifically PROVIDED
they lend for SELL notes and bills OF
exchange based upon dealing in stocks and bonds except the b
United States They may discount and redscou notes Tor the
may desired of staple agricultural
other goods merchandise But all the notes and s
admitted to discount under this classification must have ~ w
than general the Federal reserve
almost business for the member banks They may
from determination of the Federal re-
of which shall
and of these rates of discount will in different sections
government Federal banks the new Federal
application banks duly approved by the Federal
and primarily the sort OF collateral
security as REQUIRED for the Federal reserve banks dung
provided that whenever Federal
dbure of the kind thus issued " "
government therefor special reserve OF gold or
money equal these notes. this being IN
addition collateral security of and bills offered for re-
discount by the member banks The Federal reserve money nere
bill Of exchange of the individual borrower dorsed by
the original member bank and backed by gold or lawful money reserve Oh
There is this question of
1.-THE against these and the exact manner OF their redemption
THE Owen report provides that the reserve at the Federal reserve oah S
consist of gold lawful money and that the notes shall o De re-
the Treasury gold The Treasury Department OF course
the of Federal bank is Immediately to
Hitchcock
provides for redemption gold alone the Treasury and at the
also and therefore also provides that the regional BANK reserve Iu |
of held against the notes
per cent against 80 Is provided the original bland in the
owen report The report obviously the much conservative
calculated banking and that OF all the sound money
interests in the country for the measure m
course quite call these Federal reserve notes nat
money called by various critics They have security when
certainly something than that behind nat money although m
experiences ingenious devices get
improperly secured issues of paper money put out oy m %
United States and is justly suspicious OF any nat tendency me new noe
obligations of the United States lhs not
fact obligations of the regional banks ha
sue them the government only performing the mecnah u hI
regional banks through the Federal reserve ao
be any question where just what manner the new notes
redeemab and particularly to whether they are redeemaOe s
all times or not that itself
to be clauses the bill referring
the redemption public sentiment able get this
he NOT to have
pointed right this that nowhere in the bill IN
shape does there seem provision but
provision for cancellation Federal definite fixing
remain outstanding All that seems to be
regional bank shall out the notes any bank e
shall redeem its notes upon demand But con-
issued by regional bank might be returned to the bank
same d which immediate cancellation and
issue of the note really nugatory
question that will is what to become OF the
of government bonds now held BY the nai0n Oa
upon outstanding national bank notes based clear that
TO them is withdrawn will ossh something
fore banks owning the bonds 1t is also clear That the
with the national banks purchasing the bonds that
circulation privilege should indefinitely attach to these securities cannot
withdraw this privilege compensation for the
~ been DEFINITELY decided upon but the matter gone that
whereas few proposition make compensation
been agreed by everybody that the government must see
tina bonds kept to their par value
general talked of is convert these per cent bonds into per
cent bonds replace national bank and exnguh
the upon based The support given to the
bonds for circulating is to be gradually taken away
of the bank currency The Owen report the
provides OF the per cents into per cent
wentear gold bonds the ZONE year of not more
of the banks The bonds
would he taken by the objection naturally
TO this plan bonds not hold at and
branch of the Senate committee
the issue one-year renewable from for twenty
The assumption gold
would readily be held by
To people who have studied
the matter the desirable Secretary of the
branch of the
plan seems to Federal the security the
But gold
no connection of States including those not worth count
banker in financial ing