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X-683

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:MEMORANDUM in re

SILVER CERTIFICATES
f• M.·w. Jan.zs, 'U1.

1,

The object of the Silver Certificate Auendrrant is to ~rcv1de
tr.eans f Of the payn.ent of things (which we and. our Allies bu.y in the

Orient) withcut being ~bliged to shl~ go~dL

tf the consequence of the contemplated legislation should be the
tying up of a large arr.ount of gold 1 the object of tbe legisla.t'ion would
06 defeated to that extent.

not

t,ree~ng

The

a.m~nt

of

s~lver

~r

silver

~st

theretore
65~ of

ot QUr g9ld to the extent of

be accompanied by the tying up

the amwnt so treed ..,. a conetition

ot

~t

~

would

brought about if for the

certificates withdrawn we should issue Federal Reserve

Notes.

If that were the case the entire legislation would not be wotth

while.

lt wculci be upsetting things without producing adequate results.

1

Unless 1

therefore~

the Governrrent should care to issue greenbacks

for the tirra being to the equivalent amount of
is only one way QUt 1 and that is

It has been

eugg~sted

~he

that we
'

si~yer certUicates~

there

Re~erve ~

notes.

issue of Fedefal

~ssue

Federal Reserve &lnk notes in

,.

'

amounts of fives and tens and rely upon the ability of the
,·
:'

with~raw

a sufficient amount of greenbacks
.
'
":

a~d

twos.

an~

to cut ihemup into ones
.

There are several objections to this procedure:

t.~e

We would be

speed with which silver certificates can ·be wi thdra.wn,
,

.

I

'

and tnio withdrawal would have to be synchronized
. ,




First 1 i.:t will

As to tl'le speed wi:th which

the prQcess would progress, we would be tied up twice.
to

:tp

'

'

double the xr.echaniqal operations necessary.

l~ted

~reasury

.

,,

'

w~th
•

an
•

,

•'

'

e~u~va.lent
'

r

If'

I

- 2Secdnd, both the greenbacks and thp silver certificates have to be
cancelled and in 6ffect be reissued; for the silver certiiicates of one
.

.

and two .. dollars~ one and two-dollar greenbacks are to be issued; for the
greenbacks withdrawn, five and ten-dollar Federal Reserve Bank pates have
to be issued in orier to replace the currepc.y now in use.

We have~ . to

print twice, therefore, and we _ha,ve t.o wait twice·, and we have to aiJk.
,

the banks to sort wt currency twice .•
In

ad~i tion,

~

. ' ..

'

we are destroying reserve money - at' this 'tin:a a· process

very undesirable under present circumstances .• (We drive it into circulation and substitute F. R. notes in the vaults of F..

R~

ballks and member

banks).
More.over# if Federal Reserve Banks issued Federal Reserve Bauk notes
in fives and tens without any direct connection with the ones and twosthat have been withdrawn and substitu~ed by the Treasury~ it would be
'

'

very difficult to separate ihe item "Federal Reserve .Bank Notes" in 'our·
. .
.
~

state~ent

culation.

in such a way as to eliminate it from the general reserve cal-

Ottr note issue would appear to have increased by $l50 1 000 1 000J

while if we issued the ones and twos direct we could establish a separate

"

item in our weekly stateu:ent, calU.ng it "One and Two-Dollar Federal Re·
serve .Ba.nk Notes", a.nd everybody would know tllat this ,l tom has nothing
to do with

0\lX'

Reserve Bank

tbat it

~s




general banking transactions for whiah $8,000,000 Federal

~otes

are a+ready !n circulation- everybody would .know

simply a temporary item to be kept

~t

just a.s long as our

~~

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one and two-dollar notes saould be outstanaing in substitution for the
silver certificate$.

···

Jn that aase the five per cent reserve and redemp-

tion fund would fonn a separate item against these notes and would probably bQ considered adequate

and not draw anr

When'we cone to reissue the silYer

crit~cism.

certtf~cates.,

ani if we had

is~sd

one and two-dollar Fe d.eral {teaervs Sa.nk notes our process of redemption
would be sirnple; there would ·oe a reissue on the ,Part 9f the Treasury of
the ones and twos anti an equivalent withdrawal on our part of the bank
notes.

If the Treasury nO!o'V puts out ones and twos by cutting l.J.P the green-

backs., there will later on not be any redemption of the ones and twos issued, a.s. the greenba..
.cks are not redeemble, anq,
to

t~ Trea~1,1ry.

®Y have

-~~

'

issue silver certificates in fives and tens in competiti<m with the

Federal Rese'"'e Banks because 1 as conceivable 1 the country

wil~

have

been saturated with ones and twos.
I do not see why we should

:~.
.

c~mplicating

the proposi-

As long as we are willing to issue fede.ral Reserve 13a.nk notes

~ainst
\

insist upon

Government bonds and

certi~icates

of j.n(S.ebte4ne.ss., :the.re is no

'

t.

~tJ,erence

wbeth8r they a.re fives and tens or ones ana :twos.., provided
.t ..
:J;e_r: ape to be Withdrawn as soon as silver cert~fi~ates vy~l,l be Teise.ue~.
I strongly believe that the proper, modus .for us would 'be to begin
to print the Fed._eral Reserve :Bank note
is pa.s!3ed. and leave the greenbaeks

Ol'leS

and twos .:·"s-· soo~ "s the law
...

undis~d

at this

we woul unnecessarUy -ad.d to the burden of :'the .member

..



-~~.
l;tank~~

otherwise
We have

X-683

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to appeal to them etten enough nowadays to help us

~n

gold certificates. We will have t9 ask them to help
the silver

cer·tifi~atesJ

anO. I do

any more inconvenienQe than ie

JlOt

thj.nk :it

absol~t~ly ~~easary.

'

W.

,

*

l - ?~ .... l~l

..
.. .

.~

,

.




~s ~n

setting in

~ti ~4vieabla·

!

~. M.

getting in tbe

-·

,

to create

73

X-683 a

An Act to

co~1sen·e

the gold supply of the United States; to pern·it the

settlen.ent in silver of trade- balances advorse to the United States; to pre·vide silver for subsidicl..ry ccir•.age a:rld for co,.:n.ercial
State~~;

Allies of the tr:r:itE:d

usf:l~

and for the above purposes,.

t~>

t.-:J assist the
stab1lize th.;

price and encourage the production of silver.

BE IT ENACTED BY THE

SENA~E

AND BOUSE OF

REPBESENT~TIVES

OF

TH~

UNITED STATES OF AME!:\ICA IN CONGRESS ASSEMBLED:
Sec. 1.
to

ti~.e

The Secretary of the Treasury is hereby authcrtied from tirre

to r.:el t or break up and sell as bullion any Stand2.rd SHve-r Dollar·s

now or hereafter held :,i.n the, 'l'reasury of the United Stat'3c to a total of
$150,000,000,. Of such Ddle.rs on th~ sirr.uli.a::lf'O'.lS retire:::r:ent of siJ.ver
certificates (if any be ~1tstanding against such Standard Silver Dollars)
at the rate of One Dollar face a.rr.ount of such Certificates for each Stand·
ard Silver Dollar sold as bullion for any of the purposes of this Act
terms as to price and otherwise

to

0~

be established from tirr.e to tirr:e bJ the

Secretary of the Treasury.
Sec. 2.
of this

Act~

Upon the saie as builion fro~ tirr.e to tirr,e under the provirio~s
of any St:.r.d.ard Silver Dollars~ the Secretary of the Trec...sury

sl1all imrnd.eiately direct the Ditector of the !flint to purchase etn amount of
silver equal to 37ll grains of fine silver in respect of every St~~dard
Silver Dollar so sold, such _purchases to be in accordance with the existH!'';
re~lations

silver 1,000

of the
fine~

~int

and at the fixed price of One Dollar per

oun~8

de:tivered at the option of the Director of the Vlint at

'
New York, Philadelphi<;t,




of

Denver.~

or San Francisco.

Silver so sc,ld or so

X-683a
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purchase£ r;my be sold or resold for any of the purposes of thJ.s Act under
rules and

re~lations

to be established by the Secretary of the Treasury 1

and any.excess of silver so purchased over and abova the needs for the

puc~

poses recited in this Act, shall be recoined into Standard Silver Dollard r.r
held !or the purpose of such coinage.

The net amount of silver purchase•t

shall notJ after rr.aking allowance for resales 1 at any tirr.e exceed the aiLvtmt
needed to recoin any Standard Silver Dollars theretofore sold as bullion
u:pder the provisions of this Act and such purchases shall continue until
an amount of silver shall have been

purchased~

sufficient 1 after naking

allcma.nce for resales, to reco:i.n all Stanclard Silver Dollars theretofore
sold Under the provisions of this Act.

PROVIDED, HOWEVER. that whenever the

Sec.retary has sold silver bullion tg the extent of $10,000,000 he shall dis~
gontinue
egual
th~

§UCh sal~§

arr~Mnt

h~

bas 11urchased or contracted to Rurchase an

of such bullion for coinage PMrpose§ at a prige not to

excee~

price at which such bullion was sols by hiw.
SecA 3.

for

until

th~

Silver rray be sold as bullion under authority of this Act,

purpose of conserving the gold supply of the United States; of..

. facilitating the settlerr.ent in silver of trade balances adverse to the
United States; to provide silver for subsidiary coinage 1 and for comr.er.cia.l
use, or to assist the Allies of the United States.

The allocation to the

Director of the Mint for subsidiary coinage of any silver shall 1 for the
purposes of this Act, be regar4ed as a sale or resale.
1/28/18




SUBMITTED TO BOARD> January 28
by Mr. Strauss. through Governo~ Harding.
An act to conserve the gold supply of the United.· Sta·tes;
to perudt the settleu~nt in silver of trade balances adverse to
the United States; to provide silver for subsidiary coinage and
for comnercial use; to assist the Allies o:f the United Statef'; and
f~r the above purposes 1 to stabilize the price and encourage the
Pl'Qduction of silver.

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF
THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED.
Sec. 1. The Secretary of the Treasury is hereby authorized from
tina to tina to melt or break up ano sell as bullion any Standard Silver
Dollars now or hereafter held in the Treasurr of the United States to a
tota.l of $1501 0001 000, of such Dollars on the retirezr.ent of Silver certificates (if any be outstanding against such Standard Silver Dollars) at the
rate of One Dollar face amount of such Certificates for each Standard Silver
Dollar sol4 as bullion for any of tbe purposes of this Act on te~s as to
·price and otherwise to be established from tine to tirre by the Secretary of
the Treasury.

,/

Sec. 2. Upon the sale as bullion fro.m tizr~ to tirr.e under the provisions
of this Act 1 of any Standard Silver Dollar, the Secretary of the Treasury
shall irr~diately direct the Director of the Mint to purchase an amount of
silver equal to 37lt grains of fine silver in respa~t of every Standard
Silver Dollar so sold, such purchases to be in accordance with the existing
re~lations of the Mint and at the fixed price of One Dollar per ounce of
silver 1,000 fine~ delivered at the option of the Director of the Mint at
New York, Philadelphia, ~nver 1 or San Francisco. Silver so purchased nay
be resold for any of the purposes of this Act under rules and regulations
to be established by the Secretary of the Treasury, and any excess of silver
so purchased over and above the needs for the purposes recited in this Act,
shall be recoined into Standard Silver Dollars or held for the purpose of such
coinage. The net amount of silver purchased shall not, after n::aking allowance for resales, at any ti~e exceed the a~ount needed to recoin any Standard
Silver Dollars theretofore sold as bullion under the provisions of this Act
a.nd such purchases shall continue until an amount of dlver shall have been
purchaseo~ suf!icie~t, after rraking allowance for resales, to recoin all
Standard Silver Dollars theretofore sold und~r the provisions of this Act.




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Sec. 3. ·silver ·rray be .sold as bullion under authority of this Act~
for the purpose o'f conserving the gold sup'ply of the- United States; of
facilitating the settlen;ent in silver of trade balances adverse to the
United States; to provide silver f.or subsidiary coinage~ and for couzr.ercial
use·~ or· to assist the Allies of· the United States.
The allocation to the
Director .of the Mint for subsidiary coinage of any silver shall 1 for the
purposes ·of this Act 1 be regarded as a sale or resale.
sec. 4. In order to prevent contraction of the currency~ Federal Re ..
serve Banks rray be permitted or required by the Federal Reserve Board 1 to
issue Federal Reserve Bank Notes 1 in any denou~nations authorized by the
Federal Reserve Board, against the security of United States Certificates
of Indebtedne$s, or of One Year United States Gold Notes, in an aggregate
an;punt not to exQeed the arr.ount ot Silver Dollars rr~lted or broken up and
sola as bullion under authority of this Act.

The Secretary of the Treasury nay, at his option# extend the
. titre .of J)ayu:ent of uaturing Certificates of Indebte4ness held as security
f,9r Federal ~serve Bank Notes for a period of not exoeeding one year at any
on~ extensic;>f.l 1 and the deposit of Certificates of Indebtedness br Federal_Re,..
serve Banks as security for Federal Reserve .Bank Notes ·UDde.r authority o:f
this Act., shall be deerr.e4 to constitute an agreemmt on the part of the Fed•
eral Reserve l3auk tra.king such deposit., that the Secretary of the Treasu·ry
ttay so extend the tine of pay~~nt of such Gertificates of Indebtedness or
may pay such Certificates of Indebtedness in advance of maturity.
As and when Silver Dollars are coined out of bullion pu.rchased
under authoritr of this Aci, or S~lver Certificates are issued agains-t pullion held for- such coinage.,. Federal Reserve. Banks rray be required by the Federal Reserve Board to retil'e Federal Reserve Bank Notes in an amount equal to
the amount. of Silver Dollars coined 1 or Silver Certificates issued, hereunder,
and, in the discreticm of the Secretary of the Treasury., Certifi~ates of
Indebtedn~'s oeposited as security for Federal Reserve Eank Notes nay at
such tiD:e ,_be ~id off and canceled.
i•
When Federal Reserve Bank Notes are issued under authority of
this Act, against the security of Certificates of Indebtedness or One Year
Gold Notes of the United ~ates 1 the tax on aueh Federal Reserve Bank Notes
shall be so adjus~ed that the net return on such Certificates of Indebtedness,
or One Year Gold Notes, ca~culated at par, shal~ be equal to the net.return
on United States Two Per Cent Bonds_ when used to secure Federal Reserve
Bank Notes.




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Nothing ~n this Act shall be construed as repealing
. o~ restricting the tigh~ of Federal Reserve· Banks· to ·is·s\le Federal .
Reserve Ba.rik Notes under authority of Section 4 of the Fede:raJ. ijesarve
Act.
·
Except as. herein provided, Federal Reserve Bank Nqtes · ·
issued under authority· o1 this Act, shall be subject to all existing
laws relating to the iss~e; redemption, and retirenant of Federal
Re:~erve Bank Notes issuecl under authority of the Federal Reserve Act •

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