Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1922-09-24

Washington, D. c., Sept. 21.-A
banking fight of nearly 10 years dura-
ton has flared up again as the result of
the issuance by the Chamber of Com
merce of the United States of a refer
endum on the question of the par col
lection of checks through the federal
reserve system.
Since the war In Europe turned pub
lie thought into international channels,
a great deal has been read in the press
about foreign exchange. 1t SO hap
pened that IL was just about the same
time that domestic exchange began to
disappear and so that feature of fl
nance has been practically forgotten by
business men and others who have
checks to cash.
In reality there is no theoretical diff
ference between foreign exchange and
domestic exchange. Exchange Is the
difference in debts of two communities.
In domestic exchange. these communi-
ties are cities, counties, or, perhaps,
states. in foreign exchange they are
countries and continents.
There are many business men who
will remember that when they received
a check drawn on a bank In any city but
their own they could not cash il with
out paying an exchange fee. The
charge on q 500 check would run any
| where from 10 cents to % cents. This
was supposed to result from the fact
that the owings of one community to
another were not balanced and there
fore exchange must be paid. As a mat
ter of fact it was more often merely a
collection charge imposed by the bank
which caShed the check.
When the federal reserve act was
- - a~~Er,rnI N ~-n-fetCn Incyvy1
ed to do away with this charge on the
public. 1t provided a par check collec-
ton system. This system was put into
Operation almost Immediately and has
been working successfully in nearly
every section Of the country ever
since.
Par collection of checks is operated
bv means of what is known as the gold
settlement fund. This fund is actual
gold in the form of bullion or coin. Each
federal reserve bank pays into this fund
an amount of gold in relation to its
volume of business. 1t Is a pool joint
lv owned by all the l. federal reserve
banks.
Formerly an EIaborate Process
In the days before this system oper-
iated. the balancing of accounts or the
clearing, as it was called, was an ella.
borate matter. Take, for instance, the
relations between New York and Chi
~lcago. On a given day a certain amount
of money would be drawn on Chicago
banks and the checks would be cashec
in New York. On the same day ar
Iamount of money would be drawn or
New York banks and the checks casheC
in Chicago. On a given day Chicago
would cash more New York checks thar
New York would cash Chicago checks
THE accounts would not balance. Con
lsemeptly. New York owed money Il
lChicago. The New York banks actually
would be required ia bundle up and shir
notes. gold or any kind of available
legal tender by express.
As the accounts were changing from
lday TO day, not only between New Yorl
and Chicago but between all cities IL
: the United States. there was a con
stant criss-cross of shipments of golt
and money. II was the hey-day of the
train robbers. 1t will be seen tina
while this actual money was in process
of shipment. subject to all the delay
and risks of transportation, 1t was no
in use. This money in transit is know
! in banking p~arlance as the float Tn
! float has been estimated at as much a
, S.. 600. 900. 900. The interest on 50,
6 DOC, 00O.UUU constantly out OF use Is
big item-at 5 per cent it is $3.50,
o0nO0O a year. This was a dead loss
Under the gold settlement fund plar
the general pool of gold is kept a
Washington. 1t now amounts to nearl
So 600. 900. 1000. Now when New York
at the end of the day, finds she owe
Chicago S1O,00O.0O0 as the differenc
in the balance, a Geographic instruc
tion is sent TO the federal reserve boar
at Washington. 1t tells the boards OF
ficers in charge of the fund to max
an entry on the books of the fun
transferring S10.000,000 of New York
gold TO the credit Of Chicago. Tn
very next day the situation may b
reversed. in which case Chicago wi
telegraph instructions to shift the owr
/, ership back to New York.
) Telegraphic clearances are mad