Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1913-10-09
ELASTIC CURRENCY


Representative Prouty Of Iowa en-
deavored to show that the reserve
features Of the law would tend to tie
up the money of the country instead
Of making 1t elastic. He said in part:
1T will be noted that the money
that the banks are required to deposit
with the federal reserve banks is not
allowed to draw interest, while the
governments does. These deposits
by the banks are not, in fact. reserve
of the banks subscribing. They are
not like the reserve now held by such
banks in correspondent banks. They
can not draw on them. Under no cir
cumstances can they use them. So
far as being available for the use Of
banks in time OF emergency they might
as we'll be locked up In safety vaults
and the key thrown in the river. This
bill expressly provides that they shall
not be diminished Therefore they
become as much part of the actual
capital Of the reserve banks as the
subscription to the capital stock. We
then have 100000, 900 &of the money
belonging to the subscribing national
banks tied up dis working capital In
these reserve banks.
The national banks last year earned
1.66 per cent on their capital. think
It perfectly fair to say that these re-
serve banks could earn at least per
cent on the total amount Of their work
Ing capital, and will, for convent
ence, use that rate for figuring. do
not claim that these figures are abso-
lutely correct, but they are sumciently
J accurate to reveal the point for which
I am contending. Figuring on this
basis the total earnings for these re-
serve banks would be $20,000,0OO a
wear. OF this amount $5,O00,000 would
20 to the paying Of the S per cent on
the 800, 100000 capital subscribed by
the banks. That would leave $15, OO0,-
900 to be divided as follows: Seven
million Ave hundred thousand dollars
to the surplus fund until that fund
had reached 20 per cent Of the capital
and 81 800, 600 to. be divided, 40 per
cent to the banks and so per cent to
the federal government That would
make the banks receive during the
timA SAat the surplus was being accu-
md2ed 100000 as a pro rata divt-
deAd which. added to the regular divi-
dend Of $5,0o0,000, would make $4,000
900 q year for the $500, 100000 capital
furnished, or 1.6 per cent interest on
the amount so furnished. The govern
ment during the same time would re-
ceive yearly $4,500,000 without having
contributed q dollar either to the ex-
pense, the capital, or the risk OF the
reserve banks At the rate have as
sumed the surplus would reach 20 per
cent within three years. After that
time there would be $15,000,0 600 each
year to divide between the banks and
the government. The banks would get
$6,O00,OO0 and the government $4,000
600. During that time the banks would
get yearly $5,OOO,0oO Of dividends and
$4,000, 900 OF the pro rata dividends, or
q total Of $11 100000 for the furnishing
of $5OO,0OO,000 capital, or rate OF 20
per cent interest per annum. The
government during the first three
years would receive $4,500,000 each
year, or $13,500. 900 for the three years.
For the remaining II years of the 20
year period provided In the bill the
government would receive 100000
q year, OF. $153, 100000 for the period.
The $2O,Oo0,00O surplus by section Z
becomes the property Of the United
States. This would make a total of
s1s8,5O0,000 which the government
would make out Of that transaction,
and the banks would make an average
OF eli per cent interest on the CAPT
tai that they furnished to the reserve
banks. Under this law this $186.500,-
300 goes to the direct benefit Of the
United States, and 1t is set apart by
the act itself as fund from which to
pay off and discharge the outstanding
bonded Indebtedness Of the United
States" E