Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-09
MONEY EXPANSION
ALREADY POSSIBLE
50, 900, 000,O 900 in New Cur
rency Could Be Issued
Under Present Laws.
By the Associated Press.

By the Associated Press.
Banks of the country can issue So
0OO. 600 900 in new currency without the
shifting Of q single comma in present
laws.
This realization emerged forcibly yes
terday from . profusion Of talk about
banks, money and scrip, and more espe-
cially from President Roosevelt's belief
that general resort to scrip will prove
unnecessary.
Authority for most Of the huge ex-
pansion in cash has existed for more
than year, has been used by the banks
to . limited extent and can be used
further when members of the Federal
Reserve system and national banks
choose.
1t was given In the Glass -Stesall
amendment 10 the Federal Reserve act
and in the Borah rider to the home
loan bank law, amending the national
banking act.
u. 8. Securities Allowed.
Originally. Federal Reserve notes had
to be secured by 40 per cent gold
minimum and so per cent in eligible
commercial paper. The Glass Steagall
resolution permitted the substitution of
Government obligations for commercial
paper. which the depression made
scarce
When the resolution was enacted
member Reserve banks had 81, 920, 0O0-
OO0 In currency outstanding In the
Treasury and with the Federal Reserve
agency 70 secure this currency was $2,-
0oo,000OO0 in gold, or more than 10
per cent Of its value. Then also there
was 81 900 900 900 backing In COM
mercial paper
On March g. 1893. after the Glass
Steagall amendment had been effective
approximately year outstanding Fed
eral Reserve notes totaled 1886, 900 900
and were secured by s2.l8O0OO. 900 in
gold, or more than SIS per cent of their
value, 81 ,032 600, 600 in commercial pa
per and $662,000, 900 In Government
bonds.
Then besides. the Reserve member
banks had 100000, 900 in gold which
could have been used to secure more
currency. making an aggregate Of
81 400, 00O. 900 in gold.
This meant that by using this
$2.400, 900 900 as the 40 per cent mini
mum gold security and putting up
$500, 600, 900 for the so per cent re-
qulred In commercial paper and Gov
eminent bonds, member banks could
issue an aggregate of $4,000, OOO, 900 in
currency, or more than $4,000, 900 900
In excess Of outstanding notes.
Added Expansion Possible,
Aside from this huge figure, national
banks still could do some expanding of
their own. They have authority to cir
culate national bank notes up to the
total value Of their capital stock.
Formerly. for every bank note cir
culated. the national banks had to put
up at the Treasury a like amount of
per cent Government obligations
conSols or Panama Canal bonds. On
this basis they had issued 5000, 900 900
IN bank notes out Of $1,000, 900, 900 in
total capital stock They still could
have issued $934,000, 900 in national
bank notes. but were limited by the
scarcity Of 2 per cent obligations.
Then last July the Borah provision
extended the circulating privileges to
Government bonds bearing up to 33s
per cent interest. In less than a year
national banks increased their note
circulation $156.0O0,O00.
But that leaves more than three
quarters Of billion in capital stock. Of
which they still can take advantage
to issue more currency whenever they
want.