The Washington herald., 1913-11-19
CURRENCY BILL
AGAIN CHANGED
Currency Contraction Sought
to Be Prevented When
Transfer Is Made.
CONDITIONS SET FORTH
Member Banks May Pay so Per Cent
of Required Reserves in
Rediscount Paper.

The administration Democrats on the
Senate Banking and Currency Commit
tee are considerably concerned ovsr the
problem of preventing the contraction
OF currency as the result of the shifting
of reserves from the present reserve CEN
ters to the proposed regional reserve
banks
This became apparent yesterday when
the six Democrats made drastic changes
in the administration bill affecting the
reserves.
Many other important changes were
made by both wings of the Senate COM
mittee. For one thing, the bars erect
ed against the use of the words law
full money" in connection with the re-
demption fund, were let down a little
further by the Democrats
The most important action, however,
was the efforts to avoid a possible con-
traction of the currency.
Member Bank Agreement.
Among the Democrats a tentative
agreement was reached that member
banks, instead of transferring money to
the regional association at once, may
pay so per cent of the reserves required
by the regional association in rediScount
paper to the value of twice the amount
of the reserve required. 1t also was
agreed that the Federal reserve bolrd, in
its discretion, may accept the notes of
the reserve associations, or any form of
bank notes temporary, with the under
standing that the reserve board will not
extend this privilege to the banks be-
yond the temporary conditions created
by the shifting Of reserves
But even with this action members OF
she committee were far from being GER
tain that they had solved the problem
presented by the complaints of Western
bankers, as to the possibility of a con
traction of currency and the calling OF
loans due TO the shifting of reserve
money. This is admittedly a very seri-
Gus problem and does not seem to have
been entirely comprehended until Chair
man Owen presented figures that startled
his colleagues.
These figures had been compiled by Mr..
Owen, acting with the Treasury Depart
ment experts. They dealt with the re-
lation of the reserves as they are now
held in central and reserve cities to the
new regional reserve plan.
The chairman has maintained all along
that if the member banks found the drain
too heavy on them because of the shift
ing of reserves they would not be driven
10 the extremity Of calling loans, but
could turn to rediscounts, to replenish
their stock of cash. The chairman's fig
ures, however, indicated that the banks
probably would be driven to the point of
rediscounting at once from one-third to
one-half of all their commercial paper in
order to meet the requirements of the
regional reserve associations. A serious
question was raised as to whether the
banks would not hesitate before max
ing such extensive rediscount claims and
turn to the alternative of calling loans
in order to get the money.
Another discovery had a diSQuieting
effect on the Democratic Senators who
are working on the administration bill
This was that under the rigid reserve
requirements of the new system it
might turn out that there would be a
greater demand on the banks for
money than they possibly could meet
in view of the ratio of actual money
to credit currency. 1t was rumored
that this question was raised directly
by the Treasury Department itself,
and to meet it the six administration
Democrats adopted the expedient out
lined above of allowing the banks to
pay so per cent of the reserve require
ments in commercial paper, rediscounts
to be on the basis of 81 for ST. and
as to the other 80 per cent of the re-
serve required the Federal board was
given discretion to accept almost any
kind of money temporarily.
Gold Redemption Required.
The bill as it will go to the Senate
from the six Democrats will require