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61ST CONGRESS )
3d Session
J
SENATE
^
{ DocUMENT 784
I
Part 2
SUGGESTED PLAN
FOR
MONETARY
LEGISLATION
SUBMITTED TO THE NATIONAL MONETARY
BY
HON. NELSON W. ALDRICH
REVISED EDITION
OCTOBER, 1911
WASHINGTON
1911
COMMISSION
To the Members of the National Monetary Commission:
When I submitted to the commission in January last
the outline of a plan for monetary reform based upon the
formation of a National Reserve Association, I was not
prepared to offer definite suggestions with reference to
several important phases of the subject. Among the
questions then left for further examination were:
(i) What relation should State banks and trust companies sustain to the Association?
(2) What practical method could be devised by which
the 2 per cent bonds of the United States held by national
banks could be purchased and held by the National
Reserve Association without prejudice to the best interests either of the Government, the national banks, or the
Reserve Association?
(3) What means could be adopted to insure the maintenance of adequate reserves by the association and otherwise to provide such effective regulation of discounts and
note issues as would enable the organization to respond
promptly at all times to normal or unusual demands for
credit or currency without danger of undue expansion or
inflation ?
As the plan was originally offered at your request to
serve as a basis for discussion and criticism when the
constructive work of the commission was taken up, it
seems to me desirable before the commencement of this
work that the plan should be presented in as complete a
form as possible. I therefore respectfully submit herewith for your consideration a revision which contains
suggestions covering the points to which I have referred.
NELSON W. ALDRICH,
Chairman National Monetary Commission.
WASHINGTON, October 14,1911.
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THE NATIONAL RESERVE ASSOCIATION OF THE UNITED
STATES.
CHARTER CAPITAL AND LOCATION.
i. It is proposed to charter the National Reserve Association of the United States, which shall be the principal
fiscal agent of the Government of the United States.
The authorized capital of the National Reserve Association shall be 20 per cent of the capital of the banks
eligible for membership (approximately 300 millions).
The length of its charter shall be 50 years. The head
office of the association shall be in Washington, D. C.
MEMBERSHIP.
2. All national banks and all State banks and trust
companies which comply with the requirements for membership hereinafter set forth (sees. 60-64) m a Y subscribe
to the capital stock of the National Reserve Association.
(The word "bank, " when used hereinafter, shall be understood to refer to all such national banks, State banks, and
trust companies as shall comply with the requirements for
membership hereinafter defined.) A bank having a minimum capital of $25,000 may subscribe to an amount of
capital stock of the National Reserve Association equal
to 20 per cent of the stock of the subscribing bank, and
not less, and each of such subscribing banks shall become
a member of a local association as hereinafter provided.
Fifty per cent of the subscriptions to the capital stock of
the National Reserve Association shall be called in cash;
the balance of the subscriptions will remain a liability of
the subscribers, subject to call.
3. Shares of the capital stock of the National Reserve
Association shall not be transferable, and under no cir-
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cumstances may they be owned by any corporation other
than the subscribing bank nor by any individual, nor may
they be owned by any bank in any other amount than in
the proportion herein provided. In case a subscribing
bank increases its capital, it shall thereupon subscribe for
an additional amount of the capital stock of the National
Reserve Association equal to 20 per cent of the bank's
increase of capital, paying therefor its then book value, as
shown by the last published statement of the Association.
A bank applying for membership in the Association after
its formation must subscribe for a proportional share of its
capital stock, paying therefor its then book value. In case
a subscribing bank reduces its capital, it shall surrender a
proportionate amount of its holdings of the capital stock
of the National Reserve Association. If a bank goes into
liquidation, it shall surrender all of its holdings of the
capital stock of the National Reserve Association. The
shares surrendered shall be canceled and the bank shall
receive in payment therefor a sum equal to their book
value.
EARNINGS AND DIVIDENDS.
4. The earnings of the National Reserve Association
shall be distributed in the following manner:
After the payment of all expenses and taxes the stockholders shall receive 4 per cent. Further earnings shall
be divided, one-half to go to the surplus of the National
Reserve Association until that surplus shall amount to
20 per cent of the paid-in capital, one-fourth to go to the
Government of the United States, and one-fourth to the
stockholders; but when the stockholders* dividends shall
reach 5 per cent they shall receive no additional distribution. After the stockholders receive 5 per cent the earnings shall be divided, one-half to be added to the surplus
of the National Reserve Association and one-half to go
to the Government. After the stockholders receive 5
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per cent per annum and the surplus of the National
Reserve Association amounts to 20 per cent of the paid-in
capital, all excess earnings shall go to the Government.
The minimum dividends to the stockholders shall be
cumulative.
ORGANIZATION.
5. All subscribing banks shall be formed into associations of banks, to be designated as local associations.
Every local association shall have corporate powers and
shall be composed of not less than 10 banks, and the
combined capital and surplus of the members of each local
association shall aggregate not less than $5,000,000. The
territory included in the local associations shall be so
apportioned that every bank will be located within the
boundaries of some local association. Every subscribing
bank shall become a member of the local association of
the territory in which it is situated.
6. All of the local associations shall be grouped into
divisions, to be called districts.
The country shall be divided at first into 15 districts,
and a branch of the National Reserve Association shall be
located in each district, the location to be determined by
the directors of the National Reserve Association. The
districts may be readjusted from time to time, and new
districts and new branches may be created by the directors.
7. The National Reserve Association and its branches
and the local associations shall be exempt from State and
local taxation, except in respect to taxes upon real
estate.
OFFICERS AND DIRECTORS.
(A) DIRECTORS OF LOCAL ASSOCIATIONS.
8. Each local association shall elect annually a board of
directors, the number to be determined by the by-laws of
the local associations. Three-fifths of that number shall
be elected by ballot cast by the representatives of the
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banks that are members of the local association, each
bank having one representative and each representative
one vote, without reference to the size of the bank. Twofifths of the whole number of directors of the local association shall be elected by these same representatives of
the several banks that are members of the association,
but in voting for these additional directors each representative shall be entitled to as many votes as the bank
which he represents holds shares in the National Reserve
Association. At such elections there shall be no proxies.
The authorized representatives of a bank, as herein provided, must be either the president, vice president, or
cashier of the bank he represents.
(B) DIRECTORS OF BRANCHES.
9. Each of the branches of the National Reserve Association shall have a board of directors, to be elected in
the following manner:
The board of directors of each local association shall
elect by ballot one member of the board of directors of
the branch of the National Reserve Association. In this
manner there will thus be elected as many directors of the
branch of the National Reserve Association as there may
be local associations in the district in which that branch
of the National Reserve Association is located.
10. In addition to that number there shall be elected in
the following manner a number of directors equal to twothirds of the number of local associations in the district
where the branch is located. There shall be chosen by
the banks composing each local association a voting representative or proxy holder. In choosing such voting
representative each bank shall be entitled to as many
votes as it holds shares in the National Reserve Association. The voting representatives of the several local associations which form a district shall elect an additional
number of directors of the branch equal to two-thirds of
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the number elected directly by the local association; that
is, equal to two-thirds of the number of local associations
composing the district. Each voting representative at
such election shall have a number of votes equal to the
number of shares in the National Reserve Association
held by all the banks composing the local association
which he represents.
11. The board of the branch as thus constituted shall at
once add to its numbers by the election of an additional
number of directors equal to one-third the number of
local associations situated in the district. Such additional directors shall fairly represent the industrial, commercial, agricultural, and other interests of the district,
and shall not be officers of banks. Directors of banks
shall not be considered as officers.
12. The manager of the branch shall be ex officio a
member of the board of directors of the branch and shall
be chairman of the board.
The board of directors of a branch of the National Reserve Association will thus be composed of—
First. A group of directors equal in number to the number of local
associations composing the district, and this group shall be elected b y
t h e local associations, each association having one vote.
Second. A group of directors equal to two-thirds of the foregoing
group and elected b y stock representation.
Third. A group of directors equal in number to one-third of the first
group, representing the industrial, commercial, agricultural, and other
interests of the district, and elected b y the votes of the first two groups,
each director thus voting having one vote.
Fourth. The manager of the branch shall be ex officio a member of
t h e board of directors of the branch and shall be chairman of the board.
13. All the members of the board of directors of the
branch, except the ex officio member, shall at the first
meeting of the board be classified into three classes, and
the terms of office of these three classes shall be, respectively, one, two, and three years. Thereafter members
of the board shall be elected for a term of three years.
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(C) DIRECTORS OF THE NATIONAL RESERVE ASSOCIATION.
14. The board of the National Reserve Association
shall at first consist of 45 directors, and shall be constituted in the following manner:
First. Six ex officio members, namely, the governor of
the National Reserve Association, who shall be chairman
of the board; two deputy governors of the National
Reserve Association, the Secretary of the Treasury, the
Secretary of Commerce and Labor, and the Comptroller
of the Currency.
15. Second. Fifteen directors to be elected, one by the
board of directors of each branch of the National Reserve
Association. In case the number of districts shall be
increased hereafter, each additional district shall be
entitled to elect an additional director.
16. Third. Twelve directors, who shall be elected by
voting representatives of the various districts, each of
whom shall cast a number of votes equal to the number
of shares in the National Reserve Association held by all
the banks in the district which he represents.
17. Fourth. The twenty-seven directors thus elected
shall in turn elect twelve additional members, who shall
fairly represent the industrial, commercial, agricultural,
and other interests of the country, and who shall not be
officers of banks. Directors of banks shall not be considered as officers.
18. Not more than three of the directors elected under
paragraphs 16 and 17 shall be chosen from one district.
19. At the first meeting of the board all the members
of the board, except the ex officio members, shall be
classified into three classes, and the terms of office of
these three classes shall be, respectively, one, two, and
three years. Thereafter members of the board shall be
elected for a term of three years.
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20. No member of any national or State legislative
body shall be a director of the National Reserve Association, nor of any of the branches, nor of any local association.
(D) COMMITTEES OF THE NATIONAL RESERVE ASSOCIATION.
21. The directors of the National Reserve Association
shall annually elect from their number an executive committee and such other committees as the by-laws of the
National Reserve Association may provide. The executive committee shall consist of nine members, of which
the governor of the National Reserve Association shall be
ex officio chairman and the two deputies and the Comptroller of the Currency ex officio members, but not more
than one of the elected members shall be chosen from one
district.
2 2. The executive committee shall have all the authority
which is vested in the board of directors, except such as
may be specifically delegated by the board to other committees or to the executive officers, or such as may be
specifically reserved or retained by the board.
23. There shall be a board of supervision elected by the
board of directors from among its number, of which the
Secretary of the Treasury shall be ex officio chairman.
(E) EXECUTIVE OFFICERS OF THE NATIONAL RESERVE ASSOCIATION.
24. The executive officers of the National Reserve Association shall consist of a governor, two deputy governors,
a secretary, and such subordinate officers as may be provided by the by-laws. The governor shall be selected by
the President of the United States from a list submitted
by the board of directors, and shall be subject to removal
by a two-thirds vote of the board of directors for cause.
The term of office of the deputies shall be seven years,
but the two deputies first elected shall serve for terms of
four years and seven years, respectively. The deputies
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shall be elected by the board of directors and may be
removed for cause at any time and their places filled by
the board. In the absence of the governor or his inability
to act, the deputy who is senior in point of service shall
act as governor.
(F) EXECUTIVE OFFICERS OF BRANCHES.
25. Each branch shall have a manager and a deputy
manager appointed by the governor of the National Reserve Association, with the approval of the executive
committee.
26. The powers and duties of the manager and deputy
manager and of the various committees of the branches
shall be prescribed by the by-laws of the National Reserve Association.
(G) EXECUTIVE OFFICERS OF THE LOCAL ASSOCIATIONS.
27. The directors of the local association shall annually
elect from among their number a president, a vice president, and an executive committee, whose powers and
duties and terms of office shall be determined by the
by-laws of the local association, subject, however, to the
provisions of this Act.
28. The local associations, the branches, and the
National Reserve Association shall each have by-laws
which shall provide, among other things, a method of
filling vacancies on their respective boards of directors.
The by-laws of the local associations and of the branches
shall be subject to the approval of the National Reserve
Association.
[The Act will provide a preliminary organization for the
Reserve Association, to remain in effect until the permanent organization created by the foregoing sections can
be perfected.]
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FUNCTIONS OF THE LOCAL ASSOCIATIONS.
29. Any member of a local association may apply to
such association for a guaranty of the commercial paper
which it desires to rediscount at the branch of the National
Reserve Association in its district. Any such bank receiving a guaranty from a local association shall pay a
commission to the local association, to be fixed in each
case by its board of directors. The guaranty of the local
association, in the event of loss, shall be met by the members of the local association in proportion to the ratio
which their capital and surplus bears to the aggregate
capital and surplus of the members of the local association,
and the commission received for such guaranty, after the
payment of expenses and possible losses, shall be distributed among the several banks of the local association
in the same proportion. A local association shall have
authority to require security from any bank offering paper
for guaranty, or it may decline to grant the application.
30. The total amount of guaranties by a local association to the National Reserve Association shall not at any
time exceed the aggregate capital and surplus of the banks
forming the guaranteeing association.
31. Any local association may by a vote of threefourths of its members and with the approval of the
National Reserve Association, assume and exercise such
of the powers and functions of a clearing house as are not
inconsistent with the purposes of this Act. The National
Reserve Association may require any local association to
perform such services in facilitating the domestic exchanges
of the Reserve Association as the public interests may
require.
32. The local associations shall appoint examiners, who
shall have authority to examine into the condition of the
banks composing the association under such regulations
as may be adopted by the local association, with the approval of the National Reserve Association. Copies of the
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reports of these examinations shall upon request be furnished to the executive officers of the National Reserve
Association and of its branches.
33. A local association may by a vote of two-thirds of
its members suspend a bank from the privileges of membership for a failure for thirty days to maintain its reserves,
or to make the reports required by this Act, or for misrepresentation in any report or examination as to its
condition or as to the character or extent of its assets or
liabilities.
FUNCTIONS OF THE NATIONAL RESERVE ASSOCIATION.
34. All of the privileges and advantages of the National
Reserve Association shall be equitably extended to every
bank of any of the classes herein defined which shall subscribe to its proportion of the stock of the National Reserve Association and shall otherwise conform to the
requirements of this Act.
35. The Government of the United States and those
banks owning stock in the National Reserve Association
shall be the sole depositors in the National Reserve Association. All domestic transactions of the National Reserve Association shall be confined to the Government
and the subscribing banks, with the exception of the purchase or sale of Government or State securities or securities of foreign Governments or of gold coin or bullion.
36. The Government of the United States shall deposit
its cash balance with the National Reserve Association,
and thereafter all receipts of the Government shall be
deposited with the National Reserve Association, except
that when necessary the Government may designate
national banks for that purpose in cities where there is no
branch of the National Reserve Association. All disbursements by the Government shall be made through
the National Reserve Association.
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37. The National Reserve Association shall pay no
interest on deposits.
38. The National Reserve Association may rediscount
for and with the indorsement of any bank having a
deposit with it, notes and bills of exchange arising out of
commercial transactions. (This language, whenever used,
is intended to apply to all notes and bills of exchange
issued or drawn for agricultural, industrial, or commercial
purposes, and not for carrying stocks, bonds, or other
investment securities.)
Such notes and bills must have a maturity of not more
than 28 days, and must have been made at least 30 days
prior to the date of rediscount. The amount so rediscounted shall in no case exceed the capital of the bank
applying for the rediscount. The aggregate of such notes
and bills bearing the signature or indorsement of any one
person, company, corporation, or firm, rediscounted for
any one bank, shall at no time exceed 10 per cent of the
capital and surplus of said bank.
39. The National Reserve Association may also rediscount, for and with the indorsement of any bank having a
deposit with it, notes and bills of exchange arising out of
commercial transactions as hereinbefore defined, having
more than 28 days, but not exceeding 4 months, to run,
but in such cases the paper must be guaranteed by the
local association of which the bank asking for the rediscount is a member.
40. Whenever, in the opinion of the governor of the
National Reserve Association, the public interests so
require, such opinion to be concurred in by the executive
committee of the National Reserve Association and to
have the definite approval of the Secretary of the Treasury,
the National Reserve Association may discount the direct
obligation of a depositing bank, indorsed by its local association, provided that the indorsement of the local association shall be fully secured by the pledge and deposit
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with it of satisfactory securities, which shall be held by
the local association for account of the National Reserve
Association; but in no such case shall the amount loaned
by the National Reserve Association exceed three-fourths
of the actual value of the securities so pledged.
41. The rates of discount which the National Reserve
Association shall have authority to fix from time to time
shall be published when fixed, and shall be uniform
throughout the United States.
42. The National Reserve Association may, whenever
its own condition and the general financial conditions
warrant such investment, purchase to a limited amount
from a subscribing bank acceptances of banks or houses
of unquestioned financial responsibility. Such acceptances
must have arisen out of commercial transactions, must
have not exceeding 90 days to run, and must be of a
character generally known in the market as prime bills.
Such acceptances shall bear the indorsement of the subscribing bank selling the same, which indorsement must
be other than that of the acceptor.
43. The National Reserve Association may invest in
United States bonds and in short-term obligations—that
is, obligations having not more than one year to run—of
the United States or its dependencies, or of any State, or
of foreign governments.
44. The National Reserve Association shall have power
at home and abroad to deal in gold coin or bullion, to
grant loans thereon, and to contract for loans of gold coin
or bullion, and to give therefor, when necessary, acceptable
security, including the hypothecation of any of its holdings of United States bonds.
45. The National Reserve Association shall have power
to purchase from its subscribers and to sell, with or without its indorsement, checks or bills of exchange payable
in England, France, or Germany, and in such other foreign
countries as the board of the National Reserve Associa-
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tion may decide. These bills of exchange must have
arisen out of commercial transactions, must have not
exceeding 90 days to run, and must bear the signatures
of two or more responsible parties, of which the last one
shall be that of a subscribing bank.
46. The National Reserve Association shall have power
to open and maintain banking accounts in foreign countries and to establish agencies in foreign countries for the
purpose of purchasing and selling and collecting foreign
bills of exchange, and it shall have authority to buy and
sell, with or without its indorsement, through such correspondents or agencies, checks or prime foreign bills of
exchange which have arisen out of commercial transactions, which have not exceeding 90 days to run, and
which bear the signatures of two or more responsible
parties.
DOMESTIC EXCHANGES.
47. It shall be the duty of the National Reserve Association or any of its branches, upon request, to transfer
any part of the deposit balance of any bank having an
account with it to the credit of any other bank having
an account with the National Reserve Association. If a
deposit balance is transferred from the books of one
branch to the books of another branch, it may be done,
under regulations to be prescribed by the National Reserve
Association, by mail or telegraph at rates to be fixed at
the time by the executive committee of the branch at
which the transaction originates. (See also sec. 72.)
FUNCTIONS OF NATIONAL BANKS.
48. In addition to the rights now conferred by law,
national banks shall be authorized to accept commercial
paper drawn upon them, having not more than four
months to rim, properly secured, and arising out of commercial transactions. The amount of such acceptances
outstanding shall not exceed one-half the capital and
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surplus of the accepting bank, and shall be subject to the
restrictions of section 5200 of the Revised Statutes.
49. The organization of banks to conduct business in
foreign countries and in the dependencies of the United
States shall be authorized. The stock of such banks maybe held by national banks, but the aggregate of such
stock held by any one bank shall not exceed 20 per cent
of the capital of that bank.
The bank so organized may have an office in the United
States, but shall not receive deposits in the United States
nor compete with national banks for domestic business
not necessarily related to the business being done in foreign countries or in the dependencies of the United States.
50. National banks shall be given the right, under proper
restrictions and regulations to be defined in the Act, to
establish separate savings departments, and to lend,
under proper restrictions, not more than 40 per cent of
their savings deposits upon productive real estate, such
loans not to exceed 50 per cent of the actual value of the
property.
RESERVES.
(A) RESERVES OF SUBSCRIBING BANKS.
51. All subscribing banks must conform to the following requirements as to reserves to be held against deposits
of various classes, but the deposit balance of any subscribing bank in the National Reserve Association and any notes
of the National Reserve Association which it holds may
be counted as a part of its required reserve.
52. (1) Demand deposits.—There shall be no change in
the percentages of reserve required by law to be held
against demand deposits by national banks in different
localities, and hereafter the same percentages of reserve
against demand deposits shall be required of all subscribing banks in the same localities.
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53. (2) Time deposits.—All time deposits and moneys
held in trust payable or maturing within 30 days shall be
subject to the same reserve requirements as are demand
deposits in the same locality.
All time deposits and moneys held in trust payable
or maturing more than 30 days from date shall be subject to the same reserve requirements as demand deposits
for the 30 days preceding their maturity, but no reserves
shall be required therefor except for this period. Such
time deposits and moneys held in trust must be represented by certificates or instruments in writing and be
payable only at a stated time not less than 30 days
from date of deposit, and must not be allowed to be withdrawn before the time specified without 30 days' notice.
54. (3) Savings deposits.—Savings deposits to be defined in the Act, shall be subject to notice of 30 days or
more and shall be covered by a reserve amounting to 40
per cent of that required of demand deposits in the same
locality.
(B) RESERVES OF NATIONAL RESERVE ASSOCIATION.
55. All demand liabilities, including deposits and circulating notes, of the National Reserve Association shall
be covered to the extent of 50 per cent by a reserve of gold
(including foreign gold coin and gold bullion) or of other
money of the United States which the national banks are
now authorized to hold as a part of their legal reserve;
provided, however, that whenever and so long as such
reserve shall fall and remain below 50 per cent the
National Reserve Association shall pay a special tax upon
the deficiency of reserve at a rate increasing in proportion
to such deficiency as follows: For each 2)4 per cent or
fraction thereof that the reserve falls below 50 per cent
the percentage of taxation shall increase at the rate of
1 y2 per cent per annum.
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56. In computing the demand liabilities of the Association a sum equal to one-half of the amount of the United
States bonds held by the Association which have been
purchased from the national banks, and which had previously been deposited by those banks to secure their
circulating notes, shall be deducted.
REPORTS.
57. The National Reserve Association shall make a
report, showing the principal items of its balance sheet,
to the Comptroller of the Currency once a week. These
reports shall be made public. In addition, full reports
shall be made to the Comptroller of the Currency coincident with the five reports called for each year from the
national banks.
58. All reports of national-bank examiners in regard to
the condition of banks shall hereafter be made in duplicate, and one copy shall be filed with the National Reserve
Association for the confidential use of its executive officers
and branch managers.
59. All subscribing banks shall, under regulations to be
prescribed, make a report monthly, or oftener if required,
to the National Reserve Association showing the principal
items of their balance sheets.
STATE BANKS AND TRUST COMPANIES.
60. A bank or a trust company which is incorporated
under the laws of any State may subscribe to the capital
stock of the National Reserve Association in the same
manner and under the same conditions as prescribed for
national banks, and such subscribing bank shall become
a member of a local association and have the same rights
and privileges therein as if it were a national bank;
provided—
61. (1) That (a) if a bank, it shall have a paid-in capital
of not less than that required for a national bank in the
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same location; and that (b) if a trust company, it shall
have an unimpaired surplus of not less than 20 per cent
of its capital, and if located in a city of 25,000 inhabitants
or less, shall have a paid-in capital of not less than $100,000,
and in a larger city a proportionately greater capital up
to $500,000 in a city of 500,000 inhabitants or more.
62. (2) That it shall have and agree to maintain against
its demand deposits a reserve of like character and proportion to that required by law of a national bank in the same
location; provided, however, that deposits which it may
have with any subscribing national bank, State bank, or
trust company in a city designated in the national banking laws as a reserve city or a central reserve city shall
count as reserve in like manner and to the same extent as
similar deposits of a national bank with national banks in
such cities.
63. (3) That it shall have and agree to maintain
against all other classes of deposits the percentages of
reserve required by this Act.
64. (4) That it shall agree to submit to such examinations and to make such reports as are required by law and
to comply with the requirements and conditions imposed
by this Act.
NOTE ISSUES.
65. There shall be no further issue of circulating notes
beyond the amount now outstanding by any national bank.
National banks may, if they choose, maintain their
present note issue, but whenever a bank retires the whole
or any part of its existing issue it shall permanently
surrender its right to reissue the notes so retired.
66. The National Reserve Association must, for a
period of one year, offer to purchase at a price not less
than par and accrued interest the 2 per cent bonds held
by subscribing national banks and deposited to secure
their circulating notes. The National Reserve Association
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shall take over these bonds and assume responsibility for
the redemption (upon presentation) of outstanding notes
secured thereby. The National Reserve Association
shall issue, on the terms herein provided, its own notes
as fast as the outstanding notes secured by such bonds
so held shall be presented for redemption, and may issue
other notes from time to time to meet business requirements, it being the policy of the United States to retire
as rapidly as possible, consistent with the public interests,
bond-secured circulation and to substitute therefor notes
of the National Reserve Association of a character and
secured and redeemed in the manner provided for in
this Act.
67. All provisions of law requiring national banks to
hold or to transfer and deliver to the Treasurer of the
United States United States bonds other than those
required to secure outstanding circulating notes and
Government deposits shall be repealed.
68. All note issues of the National Reserve Association
must be covered to the extent of at least one-third by
gold or other lawful money, and the remaining portion
by bankable commercial paper as herein defined or obligations of the United States, but no notes shall be issued
whenever the lawful money so held shall fall below onethird of the notes outstanding.
69. Any notes of the Reserve Association in circulation
at any time in excess of $900,000,000l which are not
covered by an equal amount of lawful money held by the
association shall pay a special tax at the rate of \% per
cent per annum, and any notes in excess of $1,200,000,000
not so covered shall pay a special tax at the rate of 5 per
cent per annum.
70. The notes are to constitute a first lien upon all the
assets of the National Reserve Association, and shall be
*The $900,000,000 and $1,200,000,000 are to be understood as including any national-bank
notes which may be outstanding at the time.
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Suggested
Plan for Monetary
Legislation
redeemable in lawful money on presentation at the head
office of the National Reserve Association or any of its
branches.
71. The notes of the National Reserve Association shall
be received at par in payment of all taxes, excises, and
other dues to the United States, and for all salaries and
other debts and demands owing by the United States to
individuals, corporations, or associations, except obligations of the Government which are by their terms specifically payable in gold, and for all debts due from or by one
bank to another, and for all obligations due to a bank.
72. The National Reserve Association and its branches
shall at once, upon application and without charge for
transportation, forward its circulating notes to any depositing bank against its credit balance.
UNITED STATES BONDS.
73. Upon the application of the National Reserve Association the Secretary of the Treasury shall exchange the
2 per cent bonds bearing the circulation privilege purchased
from the banks for 3 per cent bonds without the circulation privilege, payable after fifty years from the date of
issue.
74. The National Reserve Association shall pay to the
Government a special franchise tax of \% per cent annually during the period of its charter upon an amount
equal to the par value of such bonds transferred to it by
the subscribing banks.
75. The Reserve Association shall agree to hold the 3
per cent bonds so issued during the period of its corporate existence, provided that after five years the Secretary
of the Treasury may at his option permit the Reserve
Association to sell not more than fifty millions of such
bonds annually; and provided further that the United
States reserves the right at any time to pay any of such
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National
Monetary
Commission
bonds before maturity, or to purchase any of them at
par for the trustees of the postal savings, or otherwise.
[The effect of this exchange and agreement will be to
enable the United States to provide permanently for a
large part of the public debt at a net interest charge of
i X P e r cent.]
o
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@FedFRASER