Evening star., 1932-05-11
AMPLE EMERGENCY
CURRENCY AVAILABLE
ON AN HOURS NOTICE
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rency shortage Banks we're giving de-
positors clearing house certificates in
lieu of the cash they had on deposit.
Actual currency was short Much of it
had gone into boarding as in the
present situation. New supplies of cur
rency seemed the best remedy for such
situation so the -Vreeland
emergency currency act was drawn by
the best minds of the period.
Extended for One Year.
The 1907 panic soon was aIloyed and
the Nation entered period of extraor-
dinary prosperity. The law was not
invoked. and optimistic people pre-
sumed-if they thought of it at all
that it had become a dead letter. Then
came the Wilson panic of 1874. Aft
er five years of neglect this idle ma
chinery was uncovered and brought into
play. Unemployment was becoming
serious, there were breadlines in the
larger cities, and boarding had set in
with its periodic viciousness.
The original act provided that the
Aldrich-Vreeland emergency currency
measure should expire by limitation on
June 80, 1914. Finding that, for the
first time, this law was needed, Con-
gress speedily extended the life of the
act one year. During that year it played
its part nobly. Then it expired, and
this has been the first occasion since
when it has been needed Congress
can revive the measure in an hour.
The blue prints Of the machinery are
all there. The banks of the country
have had practice in using it. There
are no obstacles in the way of utiliZa-
ton of this ingenious method. The
supply of money can be augmented
without recourse to appropriation or to
any fiat.
Briefly, the Northumberland emer-
gency currency act provides that ma
tional banks may issue currency to the
extent of 125 per cent of their COM
bined capital and surplus on the Sc
curity of acceptable collateral, as speci-
fed in the act. The scheme bears some
resemblance to the system of putting
out new Federal Reserve currency pro-
vided in the Glass-Steagall amendments
to the Federal Reserve act. which were
app owed in the early Spring of this
year. Use is made of collateral Sc
curity, for currency purposes, which
otherwise would lie dormant and unpro-
ductive.
The collateral security which was put
up TO secure the -Vreeland
emergency currency consisted of State,
city, town or county bonds acceptable
to the Secretary of the Treasury. These
bonds were acceptable by the United
States at 80 per cent of their market
value. There is a vast body of munich
pals in the United States today. Here
and there defaults have lowered the
market value, but generally speaking
the market value of such securities has
held up better than the average Of Sc
curities because of the tax exemption
feature which they enjoy.
Could Lower Allowances.
Next, issues may be made on any
bonds Of domestic origin, such as in
dustrial, railway bonds, commercial
paper and city and town warrants is
sued in anticipation of taxes, under the
special arrangements provided by the
act. These securities are acceptable at
rs per cent Of market value. Com
merclal paper of the general type ac-
ceptable for rediscount at Federal Re-
serve banks is eligible to the extent of
rs per cent of face value. Finally, and
this is of the utmost Importance in
such period, notes secured by ware