The Rock Island Argus and daily union. (Rock Island, Ill.) 1920-1923, 1922-09-23

U4nk1n8 aGQt OF ne4fU ~ yeA<t
duration has cared up again Is the
result Of the issuance by the cham
Der Of commarcs rot the United
States Of . rsfeTendum on the ques-
ton Of the par collection Of checks
through the federal reserve system.
Since the war in Europe turned
public thought into International
channels, q great deal has been read
in the press shout foreign ex-'
change. It 90 happened that it was
jus: about the same time that do
mestic exchange began to disappear
and 20 that feature Of finance has
been practically forgotten by busi-
ness men and others who have
checks to cash.
In reality there ID no theoretical
difference between foreign ex-
change and domestic exchange. Ex-
change is the difference in debts of
two communities. In domestic ex-
change these communities are
cities, counties, or. perhaps. states.
In foreign exchange they are coun-
tries and continents.
There are many business men
who viii remember that when they
receive a check drawn on a bank in
any city but their own they could
not cash it without paying an ex-
change fee. The charge on 800
check would run anywhere from 10
cents to Is cents. This was sup
posed to result from the fact that
the owings Of one community to an
other were not balanced and there
fore exchange must be paid. AS a
matter of fact it was more often
merely a collection charge imposed
by the bank which cashed the
check.
| When the federal reserve act was
passed. it contained a provision de-
+: signed to do away with this charge
on the public. It provided a par
check collection system. This sys-
TEN was put into operation almost
Immediately and has been working
successfully in nearly every Sec
ton of the country ever since.
Par collection Of checks is oper-
ated by means of what is known as
the gold settlement fund. - This
fund is actual gold in the form of
bullion or coin. Each federal re-
serve bank pays into this fund an
amount of gold In relation to its
volume OF business. 1t is a pool
jointly owned by all the IL federal
reserve banks.
Formerly an Elaborate Process.
In the days before this system
operated, the balancing of accounts
or the clearing, as it was called,
was an elaborate matter. Take for
instance the relation between New
! York and Chicago. On a given day
a certain amount of money would
be drawn on Chicago banks and the
lchecks Would be cashed in New
York. On the same day an amount
iof money would be drawn on New
York banks and the checks-cashed
lin Chicago. On given day Chicago
would cash more New York checks
than New York would cash Chicago
ichecks. The accounts would moi
balance. Consequently. New York
lowed money to Chicago. The New
York banks actually would be re.
quired to bundle up and ship notes
gold or any kind Of available legal
tender by express.
As the accounts were changing
from day to day, not only between
New York and Chicago but between
all cities in the United States, there
was a constant criss-cross of ship
ments Of gold and money. 1t wa!
the hey-day Of the trainNrobbers. 1
will be seen that while this actua
,, money was in process of shipment
subject to all the delays and risk
. Of transportation, it was not in use
This money In transit Is known il
banking parlance as "the float
The float has been estimated at a
much as $4,000, 100000. The in
tterest on $4,000. 00O, 900 CONSTANT.
lout of use is a big item-at pc
cent it is $25,ooo,0oo a year. Thi
was a dead LOGS.
Under the gold settlement fun
iplan, the general pool Of gold i
kept at Washington. 1t no,
amounts to nearly $4,000, 000, 00(