Carolina watchman. [volume] (Salisbury, N.C.) 1871-1937, 1933-03-10
Banks Can
Now Issue
UnderLaw
Would Total
Three Billions
Glass-SteagaM Bill Gaze Authority
For Issuance OF Bank
Notes =
Do Not Believe Use OF Scrip viii
Become Necessary At Present
Time

Banks of the country can issue
$1,000, 900, 900 in new currency
without the shifting of a single
comma in present laws.
This realization emerged forcibly
from a profusion of talk about
banks, money, and scrip, and more
especially from President Roose-
velt's belief that general resort to
scrip will prove unnecessary.
Authority for nos of the huge
expansion in cash has existed for
more than a year, has been used by
the banks to a limited extent, and
can be used further when members
of the Federal Reserve system and
national banks choose.
1t was given in the Glass-Steagall
amendment to the Federal Reserve
act and in the Borah rider to the
Home Loan bank law, amending
the national banking act.
Commercial PAPER Used
Originally, Federal Reserve notes
had to be secured by a 40 per cent
gold minimum and 80 per cent in
eligible commercial paper. The
Glass-Steagall resolution permitted
the substitution of government OBJ
legations for commercial paper,
which the depression made scarce.
When the resolution was enact
ed, member reserve banks had ST.
920.000,000 in currency outstand-
ing. In the treasury and with the
Federal Reserve agency to secure
this currency was 100000, 900
in gold, or more than 20 per cent
of its value. Then there also was
s1,O0o,oo0,00o backing in COM
mercial paper.
On March 3, 1888, after the
Glass-Steagall amendment had
been effective approximately a year,
outstanding Federal Reserve notes
totaled 1886, 100000 and were
secured by $2,1So,ooo,ooo in gold,
or more than s. per cent of their
value, $1,032, O0O,00O in CONNER
cial paper and $662,o0o,O 900 in
government bonds.
Had More Gold
Then besides, the reserve member
banks had $500, o00,o 900 in gold
which could have been used to Sc
cure more currency, making an
aggregate of $2,400,o 0o,o in
gold.
This meant that by using this
$4,000, 900, 600 as The 40 per cent
minimum gold security and put
ting up $3,600,000,O00 for the 50
per cent required in commercial
paper and government bonds, men,
Der banks could issue an aggregate
.of $4,000, 100000 in currency, or
more than $2,000,o0o,00 900 in ex-
*cess of outstanding notes.
Aside from this huge figure, ma
tional banks still could do some ex-
panding of their own. They have
authority to circulate national bank
notes up to the total value Of their
capital stock.
Needed U. S. Paper
Formerly, for every bank note
circulated, the national banks had
to put up at the treasury a like
amount Of two per cent govern
ment obligations-consols or Pan
anna canal bonds. 81 this basis they
had issued $666,O00,O 900 in bank
notes out of $780, 100000 in to-
tai capital stock. They still could
have issued $4,000, 900 in ma
tional bank notes but were limited
by the scarcity of two per cent
obligations.
Then last July the Borah provi-
sion extended the circulating priv
ileges to government bonds bear
ing up to 3 3-8 per cent interest.
In less than a year national banks
increased their note circulation
$l56,000,00o
But that leaves more than three
quarters of a billion in capital stock
of which they still can take ad-
vantage to issue more currency
whenever they want.