Bismarck daily tribune. [volume] (Bismarck, Dakota [N.D.]) 1881-1916, 1914-01-02
SEES Safeguard
IN new CURRENCY Law

lawful money at any reserve bank,
and in gold only at the treasury Of
the United States. They can be is
sued only through the reserve banks,
and in order to get them a reserve
bank must deposit with the govern
ment collateral equal in amount to
the notes applied for. and the gov.
eminent may demand additional col
lateral at any time it sees fit. These
notes will be a first lien on the as
sets of the reserve bank through
which they are issued. TAe reserve
banks must carry reserves in gold
or lawful money equal to 35 per cent
Of their deposits and federal reserve
notes in circulation, and must have
at all times gold equal to 40 per cent
of their circulation. ~.
Win Classify Banks.
For reserve purposes banks joining
the system will be divided into the
same classes that national banks are
at present, namely, central reserve
city banks, e city banks, and
country banks. All reserves must
consist Of Of lawful money in the
banks vaults and credits with the re-
serve bank. The banks are given
three years in which to make this ad-
justment, and after that no balance
due from any bank except the re.
serve bank can be counted as re-
serve. Central reserve banks and re.
serve city banks will be required to
carry IS per cent reserve against de-
mand deposits, and all three classes
OF banks will be required to carry
but 5 per cent against time deposits.
The bill provides that in time of
stress the federal reserve board may
suspend all reserve requirements for
a limited time.
Some of the provisions of this act
are unsatisfactory to the banks, but
opposition to it is steadily growing
less. Some Of the opposition a
based on lack of knowledge of how
the bill had been written. Many
prominent tinanciers, including ex-
Senator Aldrich and Mr.. Vanderlip,
charged that some of the fundamen-
tai features Of the bill had been die
tated by Secretary of State Bryan,
and that the bill embodied some of
his so-called financial heresies. A
careful analysis OF the act, however,
fails to confirm this theory.
The general plan of federal reserve
districts is obviously an evolution
from the plan of federal clearing
house districts which has been un.
der consideration for years. So far
as any n man is responsible for it,
the odium, if any, will have to fall
on Professor J. Laurence Laughlin
of the University of Chicago. Nearly
two years ago Professor Laughlin,
in consultation with J. V, Farwell,
elaborated a plan for federal reserve
banks under the control of a federal
reserve board at Washington. Pro.
lessor Laughlin was in frequent con.
sultation with Mr.. Glass while the
bill was being written, and it seems
quite obvious that the general plan
was inspired by him.
The feature of the bill making the
notes the direct obligation of the
government was fiercely assailed by
Mr.. Aldrich, and in a milder, but no
less positive way, by Mr.. Vanderlip,
as a Bryan heresy. This seems to
have been sufficiently answered by
Mr.. Glass, when he pointedd out that
this form of money had been recon-.
mended to congress by J. B. Forgan.
George NJ. Reynolds and Joseph +.
Talbert, who doubtless were not in.
fuenced by Mr.. Bryan's views.
1t may be noted in this connection
that we have really had nothing but
government obligations in our cur
rency for the last so years. Our so.
called banknote is nothing but a gov.
eminent issue with a bank advertise
ment printed on it. While, to read
the law, n might think it was a
banknote secured by government
bonds, the government has recogniz.
ed for years that these notes must
be treated as a direct obligation, and
they are 50 treated. r..
Subte-fuge Is Avoided.
No one ever thinks of presenting a
banknote to a bank for payment, ana
the government long ago ceased to re.
quire banks to carry any reserve for
that purpose. While they are requir.
ed to keep a so.called redemption
fund of 5 per cent in Washington, the
government pays all these notes in
demand, without reference to the
fund. That redemption fund is usual.
ly overdrawn from $30,0OO.0 900 to $40,.
0O9, 900. The trainers Of the new bill,
knowing all these facts, have dropped
the subterfuge and propose to make
the notes in law what they long have
been in fact, and at the same time
make them safer and freer from all
faint of fiat money.
The notes will be issued by eight
banks instead of 1000; they will be
backed by a reserve of 40 per cent
of gold instead of 5 per cent in any
kind of lawful money; they will be a
first lien on all the assets of the re-
serve banks, and will be ~redeemable
in gold.
The feature of the bill most oh.
jectionable to the banks, and perhaps
the least defensible, is that compel.
ling national banks to purchase stock
III the reserve banks or surrender
their charters. This, however, was
advocated by President Wilson be-.
fore he became president, or was in
any way associated with Mr.. Bryan.
Senator Roots charge that the bill
was an imitation measure was found.
ed on a provision in the bill which
gave the federal reserve board power
to authorize the use of federal re-.
serve notes as bank reserves. This
was stricken out in the conference,
n nd sr p0k IT, --- |