Evening star., 1933-03-10
ROOSEVELT GIVEN
CURRENCY CONTROL
Power Invested by Congress
Extends Beyond Bank
Management.

Felt not only lull COItTol over Iile DdHkS
of the Nation, but management of its
currency as well
His is now the power to decide which
banks shall open. and to what degree
and which shall keep their doors shut
His is the authority to decide how far
the currency Of the country shall be
expanded over the broadened base pro-
yided by the emergency measure.
His Secretary of the Treasury has
been empowered to demand that all
citizens and corporations surrender to
the Government whatever gold coin.
gold bullion or gold certificates they
may possess. His Controller of the
Currency has the power to use a sur
geon's knife on cancerous groWths
within separate banks. instead of hav-
ing to resort to the guillotine or keep
hands of.
Banks Left Out.
To some extent the extraordinary
legislation left out in the snow the ma
jority of the Nations banks-that is.
the banks formed under State charters
which are not members of the Federal
Reserve System. To these most Of them
unit banks In small communities, the
bill, however, has made available new
frozen assets may be thawed, by which
they, too, indirectly may get share of
the new circulating Reserve Bank cur
rency or in extreme cases, sell new
capital stock or borrow from the Fed
eral Reserve banks on promissory notes
backed by Government obligations.
So far as the pocketbook Of the
ordinary citizen is concerned. the most
powerful provision In the bill-aS
many observers interpret its that
which provides for currency expansion.
From now until such time as the Pres
tdent may proclaim the emergency at
an end, ANY notes, drafts. bills of ex-
change or bankers acceptances" de-
posted by the Federal Reserve banks
with the Secretary Of the Treasury will
be good enough stuff upon which to
issue paper money-not dollar for dol
"of the estimated value of the prof
erred security" These circulating
notes, the bill provides. shall be re-
deemable "in lawful money Of the
United States" Against direct Govern
ment obligations presented at the
Treasury by the Federal Reserve Banks
the new circulating notes may be is
sued dollar for dollar on the face value
of the Government securities.
Help Nom Members.
Indirectly. those provisions will help
non-member banks as we'll as member
banks out of the present financial
freeze. The non-member banks may
discount their paper with correspond
ents which are member5, and the latter
may then rediscount the paper with the
Federal Reserve banks
Nrn of
revolutionary-prov of the bill is
that which provides that banks may
rebuild or strengthen their capital
structures by the issuance of preferred
stock Hitherto the capital structure
of almost every banking institution In
the country has consisted OF common
stock. surplus and undivided profits.
But from now on any national bank
may, with the Controllers approval
and by majority vote Of those holding
q majority of shares. issue preferred
stock to such an extent as the Con-
troller may approve. This can be done
on five days notice. The holders OF
such preferred stock shall be entitled
to 6 per cent cumulative dividends and
will not be liable, as are the holders OF
common stock. to assessments to re-
store capital impairments.
and the Secretary of the Treasury, any
State bank or trust company. as we'll
as anv National bank, "in need OF funds
for capital purposes. either In connec-
ton with the organization or reorganl-
gation" of such institutions. henceforth
NAV request the Reconstruction Finance
CORPORATION to subscribe for their pre-
ferred stock.
The measure authorizes the R. F. c.
10 comply with such requests. thus
making that organization a purchaser
and seller Of securities. as well as a
lender to corporations in distress.
The act permits the r. F. G., with
the Treasury's approval. to sell sucn
preferred stock of banks In the open
market.
Amount Increased.
"The amount of notes, bonds. de-
bentures and other such obllgatlons
which the Reconstruction Finance Cor
poration is authorized and empowered
to issue and to have outstanding at
anv one time under existing law the
measure read, lis hereby increased oy
an amount sufficient to carry out tne
provisions of this section"
To the member banks "in excep.-,
tional and exigent circumstances.
with no further eligible and acceptani1e
assets available for rediscounttng with
the Federal Reserve. the new Congress
has thrown out still another lifeline
II has provided that Federal Reserve
bank, under rules of the Federal Re-
serye Board. may make advances 10
such member bank on its time or oe-
Ynand notes secured to the satisfaction
of such Federal Reserve Bank.
To insure against abuses OF this lie
kaver, the act provides that notes OIL
fered against such advances snal pear
interest at least per cent higher tnan
'the highest discount rate IN eHect at
such Federal Reserve Bank on the GATE
OF such note"
The emergency act offers succor not
onlv to the banws. but under certain
unannounced conditions, to lnolVlCuaiS,
partnerships. and corporations OF al
kinds-provided they have government
obligations to put up. ..-
Subject" the measure says, 10
G1ch limitations. restrictions and regu,
lations as the Federal Reserve Boaro
NAV prescribe. any Federal Reserve
hank may make advances to any IN
diyidual partnership, or corporation on
the promissory notes Of such Individual
partnership, or corporation secured by
direct obligations of the United states.
Ninety days will be the limit on these
latter advances. for which the interest
rates shall be fixed from time to time
bv the Federal Reserve banks making
such loans.
BY looking through new pair OF
rosy spectacles at securities which, un.
der the old laws did not look gooo
enough for rediscounting purposes. to-
days Congress automatically improved
the standing and the degree Of liquidity
of hundreds of bank portfolios. one
of the factors that brought many banks
to the door of the refrigerator in recent
weeks, it was remarked last night at the
Treasury. was the fact that 1.-The Re
construction Finance Corporation al
ready had taken over nearly all OF their
good assets" as security for loans
Through the kindly eyes of the new
measure. many security that looked
weak and immobile last week Will ap-
pear strong enough to walk into the
Federal Reserve Bank and get itself
swapped for brand new money. Fos