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Monetary Caw:tan

DMY

07

Aupetit, Albert, 0/0 La Banque de France, Paris, Prance.
Beaulieu, ?it. Paul Leroy, Editor, "Economist Francais", Paris, Prance.
Canovi, Comm. Tito, Banca d'Italia, Rome, Italy.
Conrad, Prof. Johannes, Unive -nity of Halle,

e

Go -many.

Ferraris, Carlo V., Camera del Deputati, Rorie, Italy.
Flux, A. W., Gwydyr House, Whitehall, Lon(lon, D'nr7land.
-*
Poxivell, H. 1., I Harvey Road, Cambfidge, England.
Franz, Robert, c/o "Der Deutsche Oekonomist, Burgotrasne, 3, Br:A.1n
Ge many.
Prowen, Moreton, Brede Place, Sussex, .F.nr;land.
Georges-Levy, M. Raphael, 3 Rue de 1.Toisel XVI e, Paris, France.
Governor, The, Bank of Belgium, Brussels, Belgium.
Grenfoll, Edward C. Esq., tf 3. P. Morgan & Co„ 22 Old Bridge St.,
London, :igngl.and.
let, London, E.C. Englandt
Higginson & Co., 3. Bank Buildins, Price's Str,
Hirst, Francis W., 4 Arundel St., Strand, London, En;:land.
Holland, Robert 11., Poet Office Court, Lombard Stret:t

7
London, En, 1and.

!Corporation den Kaufmannschaft von B(;rlin (Bibliothek der) Berlin,
.
C 2, Bares, St. Wolf :anstr.
Landmann, Dr. Julius, Swiss National Bank, Berne, Switfcrland.
Lefevre, M., Credit Lyonnais, Boulevard des Italians, Paris,Prance.
Lexie, Prof. W., University of Goettingen, Goetiingen, Germany.
Liesse, N. Andre, 18 Rue Denfert-Rochereau, Pa1s, Prance.
Neymarok, Alfred, 33 Rue St. Augustin, Paris, France.
Patch, George, Bditor, "The Statist", Cannon St.., London, England,
Palgraveoeir. ROL, I.R.S., Henstead Hall, Virenthilm,Suffolk, England.
PLUain, M. Georges, pi La Banque de France, Paris, France.
Baffalovich, A., Ministers des Finances, De Russie, Paris, France.
Blesser, Dr. 3., Liohtenstein-A13.ee,3, Berlin, 0,:rmany.



Search, H.

Bank of Elv;land, London, Ew.:land.

Vidal, E., 3 Place de la Bourne, Paris, Prance.
von Bohm Bawerck, Prof. E., Uni%re'sity of Vienna, Vienna, Austria.
von Lumm, D.. Karl, Dirctor of t'qe Rcichsbank,
Whalley, R. W., Esq., Gen'l Mangr. Parr's Bank, Ltd., London,En;71and.
.thers, Hartley, 6 Linden Gardens, London, Enrr,lund.
Wittner, Max, Dorotheenstrasse, 3, Blin, Gmany.
Au Recteur l'Universite, Moscow, Rus5ia.
Schetthaetsor, Dr. I., Spoyorer Strasse 14, B' 'ling,

7:11nY•

Rheinstein, E., 3, Akademies Strasse, Munich, Gcrlany,
Knobloch, Miss Bertha, dMittledeutsche Privatbank, Harriburp:,Griany.
Wewborg, M. 60 Broadway, New York, N. Y.
Obet, D. Georg, Weetfalische Str. 61, Berlin, Germany.




the property,

which property shall be situated in the vi-

cinity or in the te-ritory directly tributary to the bank;
Provided, That this privilece shall not be extended to other
banks acing as reserve agents."
Section 56.

It was a;reed to embody all the orovisions

under the title "Foreign Baoks" into one scction numbered
56, with certain correctio:s of riinor importance.
Whereupon, the Commission,

at 1 o'clock p.m.

took a recess until 2:30 p.m.

AFTER
The Commission

RECESS.

reassembled at 2:30.n.
-

Present,
Prsent, Messrs. Aldrich (Chairman), Vreeland (ViceChairman), Burrows, Money, Burton, Weeks, BonyniTe, and Padgett.
.reed to adjourn after today's seL;sion until
It was aF
January 2, 1912.
It was decided, after strikini7 out the third paragraph
of section 39, relating to savings deposits, to make the
the
matterpuhject of a supplemental repert.
The CozImission thereupon adjourned to meet 10:30 a.m.
Tuesday, Januar:




1912.




linite6 States Senate,
WASHINGTON.D.C.

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Hon. T. J. Rut1ed7e, State Bank Rxamirer, Montgomery, Ala.
William L. Mcquire, Secly,Board of Bane:Co i3ioners,
Crocker 3.tuilding, San Francisco, Cal.
Mr. E. W. Pfeiffer, State Bank Commissioner, Den-vir, Colo.
Mr. Cliorles H. Noble, Bank Examine:', New Milftni, Conn.
Hon. C'iarles H. Mault, Insurance Commissioner,
Hon. A.

Delwar(J.

— Croon, Comptroller, Treasury Dept., Tallahas3en, Fla

Hon. J. P. Brown, Atlanta, Georgia.
Mr. William G. Cruse, Bank Co,missioncr of Idaho, Boise, Idaho.
Hon. J. ,, McCullough, Auctitor of Public Accounts, Springfield, Illinois.
Hon. .
Hon.

Bi.11heimer, Auditor of State, Indianapolis, Ind.
rt-V,
L. Bleakly, Audir of State, Des Moines, Iowa.

Hon. William S. Albriht, Bank Commisioner, Topeka, Kansas.
Hon. Ben L. Bruncr, Frankfort, Ky.
le f
Hon. W. L. Young, Exani, . of State Banks, Shrevept, La.
Hon. Wil jam B. Skelton, Bank Examiner, Augusta, Maine.
Hon. Murray Vandiver, Treasurer of Maryland, State Treasurrts
-Ar;:land.
Office, Annapolis, M,
Cliarles L. Burrill., Esq.,Secsy. Office of the Banking Com1isione:7s, Boston, Massachusetts.
Hon. H. M. Zimmerman, Commisioner of Rankin, Lansing, Mich.
Hon. A. Schaefer, Public Examiner, St. Paul, Minn.
Hon. .— J. r;mith, Jackson, Missis:lip:)i.
Hon. P. H. Ray, State Examiner, Helena, Montana.
Hon. E. Royse, Secrtary state Bankinl Board, Lincoln, Nebr.
Gov.?;.nor D. S. Dickerson, Chairman, State Banking Board of
Nevada, C:-trson City, Nevada,
Hon. M. M. Van Fleet, Carson City, Nevada.
Hon. Richard M. 3camrion, Bank Commi33ioner, Concord, N. H.




Han. Vivian M. Lewis, Commissioner, Department of Banking aid
Inurance, T ..-enton, New Jersey.
.
.
C. V. Safford, Trav, 311in : Auditor, Santa Fe, New Mexico.
- k, Office of Travelling
Mr. A. L. Mo.rison, Jr., Chief C1,, 1.
Santa Pe, New Mexico.
Audir,
Hon. Clark Williams, Supt. of the Banking Dept., Albany, N. Y.
Mr. George I. Skinner, 1st Deputy Supt. of Banks of New York,
Albany, N. Y.
H. C. Brown, Esq., Clerk of the Corporation Commi.ssion of
N. C., Raleigh, N. C.
o
Hon. Olivr Khud3, n, State Bank Examiner, Michigan City, N. Dak.
Hon. B. B. Seymour, Suprintendent of Banks and Banking,
Columbus
Hon. A. M. Young, Commissioner of Banking, Guthrie, Okla.
Hon. James Stel, Salem, Or7on.
Hon. John W. Mbr- son, Deputy Commissioner, B ,kin7 Department,
Ha-:isburg, Pa.
Hon. Wil'iam P. Goodwin, Bank Commissioner, State House,
Providence, Rhode Island,
Hon. Gils L. Wilson, State Bank Examiner, Spartanburg,

S. C.

Hon. T. G. Croft, Aiken, S. C.
Ron. John L. Jones, Pv.blir! Examiner, Madison, S. 7ak.
Hon. TfIllum W. Goodloe, Secrit.

of State, Nashvilte, Tenn.

Charles V. Johnson, Esq., Austin, Texas.
Hon. Thomas B. Love, Cummissione of Insurance a!id Banking,
Austin, Texas.
Hon. Charles S. Tingy, Sucr(:tary of State, Salt Lake City, Utah,
Hon. F. C. Williams, Bank Commissioner, Newpor4,, Vt.
Mr. Richard T. Wilson, Clrk, State Corporal)n
Richmond, Virginia.
Hun. Robert R. Prentis, Chairman, State Corporation Owlmission,
Richmond Vir 7inia.




Hon. S. V. Matthews, Commis2ioner of Banking, Charleston,
West Virginia.
Hon. M. C. Bergh, Banking Co1mis:3ioner, Mad'..son, Wisconsin.
Hon. Harry B. Henderson, State Examiber, Cheyenne, Wyoming.

I 1-0-111




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A SKETCH OF A PLAN
for a BANK
THAT SHALL PROVIDE THE biE FACILITLFb
as the
BANK CF ENGLAND
BANK OF FRANCE
BANK OF GERMANY

SKETCH of a plan for a Bank that shall provide
the same facilities as the Bank of

mgland, Bank of France,

and the Bank of Germany.
1.

The Capital shall be $260,000,000. or such smaller amount
as may be decided upon.

2.

Branches to be located same as the present Wb-Treasuries
of the United States,
14ith power to locate other branches in cities having a population in excess of one
hundred thousand (100,(00).

3.

The Bank to be the depository of the United States Government. (The Lub-Treasury system to be abolished)

The

present buildings to be taken over by the Bank at a
valuation.
46

The Bank may issue its notes up to such an amount as they
may have gold or U. b. Government Bonds on Wald.
In time of need they may upon the consent of three-fourths
of the directory of the Central or Main 0ffice issue
their notes to the extent of :500,000,00G. in excess
of the gold and Government Bonds they may hold, but
upon this over-issue they shall pay a tax to the
Treasury of the United btates at the rate of five per
cent. (k.,) a year.
It would not pay to have this
currency out except in times
of stress.

6.

The Bank to be a joint stock corporation in shares of 0.W.
or multiples of same.

Any one may hold stock, but no

one shall hold in excess of 0(4d,O(Ad. - Five hundred
thousand.
7.




Banks in the City of New York to be limited in the amount
of circulation thqy may issue to the amount they had
January 1, 1907.

8.

The Bank to have 24 directors, all resident in New York,
where the main office shall be, a 25th director to be
nominated by the becretary of the Treasury.

The di-

rectors to be chosen
let

By the Clearing House as to

8

2d

By the Chamber of Commerce

8

3d

By the btockholders as to

8

No officer of a national bunk shall be a director.
All directors shall own at least ,5G,(,Lu. of the
stock

in

their own right and free from or not used

for loans.
9.

The Bank to handle all Government business without charge
and to be free from all taxation.

10.

In any city 'Where a branch is located

ne local Board of

7, who are to be of an advisory character, shall be
nom*nated by the Clearing House of that City in connection with the Board of Trade.
11.

The Government to receive no more gold and issue their
notes against same.

All gold in the future to be

handled by the Bank, except for coinage, which, as
now, to be in the hands of the Government, but only
as manufacturers.
12.

The present issue of the legal tenders to be continual.
The Treasury to retain the ,,150,000,040. gold reserve.
The same also applies to the silver and notes wainst
the same.

13.

The present system of national banks to be

14.

The Bunk to be the custodian of the 5,„
redemption funds for
the banks.

lb.

The na- profits of the Bank to the extent
of 5, on the




retained as now

Capital to be paid to the btockholders,
the excess
of fe; to be divided into two parts as
l
follows:
lit

Cm -half t(J the surplus fund account till
the
same shall amount to 2C4 of the Capital
--then
after at the discretion of the officers.

2d

One-half to go to a special fund till it shall
amount to .'5Q,0(0C,000. which is to be a fund
from which the shortage in assets of failed
national banks may be paid.

Ihis fund to be

kept as near this amount as possible.

The

assets of failed bunks to include the liabilities of the stockholders.

4Len this fund

amounts to the i,50,QQC,00c,. then the excess
or surplus to go to the Surplus
16.

ccount or .bund.

If I am correctly informed, the banks in ;Algland hLve founi
that about 121 of their deposits for reserve is enough
.
in all ordinary times; anything about this is a
mutter of extra precaution.
Banks may keep 40/., of their reserve in this bank as a
deposit.

17.

The Bank may lend on or discount

ood commercil paper,

with a signature and two endorsers.

Nc paper to be

longer than four months Gate.
Preference us to short time paper.
18.

The Bank to buy all gold offered to it A a standard price
and may sell it at such price as they may consider
wise.

le.

The Bank may make an official rate for discountin( paper,
advancing or decreasing this us they may consider wise,
to enatle them to ;,rotect the money miarket.

20.




In making loans the Bank shall vive preference to lonns
made on commercial paper as is done by the Bank of
Yrance.
The basic idea is that this bank shall at all times
help the commercial community in prefelence to loaning on the stock exchunce

as ir

France and that of Germany.

aone by the

ttnk of

THE REGULATION OF CURRENCY.
The original Greenback Theory was: *Money Equal to the Wants of
Trade".

This theory, which was never sound in principle, was persist-

:ntly resisted by the banks.
,

Now the banks as persistentl:, fav. or it.

Proposals for determining what the "Wants of Trade" require varied
then as they vary now.

Some proposed the issue of currency on land.

The

original Greenbackers proposed to have greenbacks issued on any"good
security" to the extent i
Lawism.

might be called for.

This is, in substance,

John Law, a Scotchman, in 1705 published his proposal for supply-

ing Scotland with cheap money.
was this:

Its value".

The fundaraental principle in his scheme

"Any thing that has value in money' may be made money equal to
Land, be said, has undisputed value and is, therefore, the

safest of all things to base money on.

France was captivated by this

scheme for making money abundant, and three years after its first publication adopted it, and the Mississippi Bubble was the result.
Sixty-nine years later the National Assembly, not satisfied with
their first attempt at making money abundant and cheap by basing its
issue on land, made a second attempt, under the influence of Mirabeau,
and had their experience in the French Assignats, which, according to
Mirabeau, could not depreciate "because they represented real property the solidest of all possessions - the land upon which we tread".

But the

result was, if possible, worse than the Mississippi Bubble.
The present banking principle of regulating currency by basing it on
bonds is at bottom the same principle, although its application is hedged
about by checks and limitations that prevent the excesses that have
proveu
so

disastrous in this and other countries.
Ricardo, in his testimony given before the Secret Committee of the

House of Commons of 161), states
(
very clearly and forcibly the defect in
all schemes for making
currency issues safe by making final pizin
secure, without any
regulating principle by which the ,quantity - upon

which their value depends is governed.

He says:

"Plans for an improved system
laid before the public, which rest of currenc:: are frequently
entirely upon this
fallacy. The exclusive object of these
systems is to obtain
fcr the paper currency to be issued
under them a greater




-

degree of security than that which is supposed to attach at
present to the notes of the Bank of England. This end the
authors of these schemes generally propose to accomplish by
contrivances which they deem to be extremely ingenious, but
which always resolve themselves into the simple plan of making
property of some kind or other the basis of circulation.
Sometimes the plan suggested proposes to issue a paper
currency against the security of tkimazkitaxibilax land
sometimes against the security of the public debt, and
sometimes against merchandise in the docks; but, having
provided for the securit2 of the notes, the plan generally
terminates at this point: the projector apparently conceiving
iimatza that he has satisfied all the desiderata of a good
paper currency, although he has introduced no specific
measure for regulating the amount of that currency and
maintaining its value relatively to the currency of the other
countries of the world."
The various plans for currency reform talked of in the press are all
like those described in the above quotation from Ricardo.

They look only

to security of final payment without regard to ,quantity, upon which the
value of the currency they propose t..o issue depends, and seeLl oblivious
as to the effect of such currency on price levels.

But the necessary

effect of such issues of currency is to raise prices and thereby increase
the Ammuut need for more currency to do the same business.

Double prices

and, of course, the demand for currency to do the same business will
doubled.

It is impossible, therefore, to satisfy the demand for a cur-

rency the effect of which is constantly to carry prices up, for the higher prices go the larger the volume of money required.
The price level for the world in little more than a decade, (not
taking into account sudden changes in certain stocks on the stock
exchange) according to tables given by

he London Economist and our own

Bureau of Statistics - due to the increased producion of :,c)1( and the
currency issued on top of the gold - has been 2t per cent. or more for
England, and

33 per cent. for the United States.

In other words, money

has depreciated in that ratio, for a rise of prices and the depreciation
of money are absolutely one and the same fact.

The Presicunt, in his

Message to Congress, gives the per capita of currency in lb
and now as 433..

And in this connection too much stress cannot be laid

on this fundamental principle:
permanentl

that the money of a country cannot be

increased, beyond the increase of populaticn and weaLh,

without raising prices and depreciating the money.




as

Among the plans presented to Congress for increasihg the currency
volume, that most talked of is what is known as the "Fowier Bill".

This

plan proposes the issue of an "emergency currency"; this currency to go
into use the same as other currency, circulate the same, pay debts the
same, but under the imposi.ion of an increasing tax which is to continue
until all of this particular class of notes are returned to the Treasury
to be cancelled.

Suppose, under this plan, a bank puts out 0.00,000.00

of such "emergency currency".
circulation.

Of course it will be loaned out and go into

Some of it will go, perhaps, to distant parts of the

country, get into other banks, and into the hands of the people, who will
have no interest in its return.

They do not pay the tax.

They have paid

for the money when they borrowed it, and one kind of money is as good to

•ri

pay their debts when they fall due as another.

Hence there is no certain-

ty when the ban4 will get back the currency it issued - some of it possibly not for years - but the bank must pay interest on any part that
remains out until it is returned to the Treasury and cancelled.

It

therefore does not seem possible that this plan will ever be agreed to
even by the banks.
HOW CURRENCY CAN BE MADE ELASTIC.
What then can be done to supply currency for that larger voll;LIL of
business at certain seasons over the needs for oher seasons; that is,
provide for a larger number of transactions at one time than at another,
without at the same time permanently raising prices ard increasing the
cost of living?

(
i

We know of no way, nor do we believe any way has ever

been found in any country, except that embraced ir the principle of the
Peel Act of 1e,44, and modifications of this act as embraced in the State

Vand Imperial Banks of France and Germany.
A CEYTRAL NATIONAL BANK.
Establish a Central National Bank, to be under the control of the
Government, but with representation on the Board of Control for the banks
and the people.
Authorize National Banks, when extraordinary demands are made upon
them for credit or currency, to deposit acceptable securities with the
Central National Bank and thereby obtain such credit as they may need to
meef exigencies, or satisfy the larger demand for money at one sez_son as




-4compared with smother.

For this credit, the banks should. be required

pay interest, as in France and Germany, on a rising scale corrmonding
to the amount askod for.

A large part of such credit would be midgemitt

offset in clearing house settlements and in that way be extinguished,
but to such extent as might be necessary, the Central National Bank should
be authorized to issue lawful money.

When the emergency which calls for

this credit or currency passes by, banks can stop interest - beginning
with the highest rate - by sending to the Central National Bank lawful
money, - gold, silver, gold and silver certificates, greenbacks, or other
forms of current money.
In that way, and in no other that has ever had the approval of
conservative economists, cam' a currency volume be #ade "elastic" without
permanently affecting prices.
As, in the Bank Act of 1844, an amount of "uncovered" currency, declared to be not more than the trade of the country would prefer in that
form to gold, was allowed to remain; so in this country an amount of
legal tender currency, under the law as laid down by Albert Gallatin,that such volume should never be allowed to exceed the volume of gold and
silver that would come here and stay here if there was no other currency might safely be allowed to remain in circulation permanently and be dncreased from time to time as population and wealth increases.

But in

measuring wealth, care must be taken not to allow the measure of wealth
to be lowered in value; for wealth can no more be increased by depreciating the dollars that measure wealth

than territorial dimensions can be

Increased by shortening the links in the surveyor's chain.

The lack of

Lttention to this fact by our Bureau of Statistics has led already to
large over-estimates of our national wealth.

In other words, as John

Locke said, "the change is in the measure and not in the goods".

And

certainly the question of highest importance in dealing with the problem
of currency is to secure the greatest possible stability of value, for
nothing produces greater wrong to a people than an alteration in the
value of money.




•
P

CURRENCY CO:EUSSIOIT OF Ti ALIERICAN BA=RS' ASSOC IATIOLT

2

ADDITIONAL RECauMDATIONS
ADOPT-7 1D AT THE MEETING AT THE NEW WILLAXO HOTEL
.
WAS7-1LITGTON, D. C.
MONDAY, MARCH 27, 1911,
70 BE PRESENT:FM TO TILT MONETARY coma c;sior.

Moved by Mr. Talbert, seconded by Mr. George M. Reynolds,
and agreed to:
That under the heading "Charter and Location", the second
paragraph should read:
"The country shall be divided into fifteen districts to be
named in the bill prepared by the Monetary Commission, and a
branch of the reserve association shall be located in each
district, the location thereof to be determined by the directors of the national reserve association."
Moved by Mr. Wade, seconded and agreed to:
That to the section under the heading "Directors of Local
Associations", there be added the following paragraph:
"That each local association, branch and the nationL1 reserve
association itself, shall have by-laws which, among other
things, shall provide a method of filling vacancies on the
respective boards of directors,"
or words to that effect.




Moved by Er. McCord, seconded and agreed to:
"That the clause be interlined providing in effect that

2
local associations shall have corporate powrs."
Suggested by Mr. Talbort:
It is suggested that the directors of each district shall
elect one director of the central reserve association, and at
the same time shall nominate one votin

re)resentative l thereby

creating a voting representation of fifteen, who shall have
the power to nominate the twelve directors jcovided for in
paragraph 3.
Suggested by Mr. Tlbert:
Zhat tie eighth paragraph, under the heading "Directors of
the Reserve Association" be amended by inserting the words
"from their nuMber",

so that it will read:

"The directors of the reserve association shall annually
elect from their number" an executive coraraittee and such other
committees as the by-laws of the reserve association may ;:)-rovide," etcetera.
Moved by Mr. Talbert, seconded by Mr, George

i. Reynolds,

and agreed to:
"Tht it be suggested to the Monetary Comiaission that in
regard to the ap.pointment of the executive officers of the
reserve association, the power to appoint and to remove t:le
governor and deputy governors be left in th,1 hands of the
board of directors.
Er. Wexler:

That means, of course, a majority of the

Board of Directors?




The Ch7Lirnan:

Certain17.

3
Sugp:ested and agred to that under the heading

"Functions

of National Banks", in the second paragraph on page 17, the
words "a new" be stricken out and the word "another" 13

in-

serted, so that the paragraph will read:
"There shall be established another class of national banks,
to be known by a specifically designated name," etc,2tera.
Suc7ested by Mr. Drake, seconded and a,7reed to, t..:-La-t under
.
the heading "Note Issues" in the second lin

the words "of

b,
.Lnk notes by national banks" be amended to read "of bank
notes by any national bank", so that the parilLrah will red:
"There is hereafter to be no further issue, beyond the
amount now outstanding, of bank notes by any ritionc'.1 bank."
Suggested by Mr. Wexler and Mr. Tlbert, and ai- reed to:
"That we regard it as a menace to the future 1
,rospectE, o -r
the Reserve Association if it should take over -Th_e enormous
amount of bonds proposed, at the price stated therein, unles
some definite plan for the refuniin6 of those bonds shall have
and th?. Government definitel; comboon worhcd out. bcfor.Thand,
mitted to that plan.
"Swrzested by Mr. Talbert and agreed to:
That the third paragraph, under the headin

"Mote Issues"

be amended by inserting after the words "of outst.ndinp. notes
secured thereby", the words "circulatinE; notes issued to

re-

place existing national bank notes shall be free of all taxation," so that it will read:




4
"rhe reser7e Association shall taxe over these bonds with
the equivalent currency privilege attached and assume responsibility for the redemption (upon )re9entation) of outstanding notes secured thereby.

;
Circulating. not.s issued to

replace existing national bank notes shall be free of all
taxation.




In conformit:r with the sw:gestion made at, the last meetin

of

the 7,tional Monetary Comnission I have prepared a tem.ta.lve cutline
of

plan for the revision of our national bunking lec,islation,

which I be,,; herewith to

to the rommission.

In dein,: this

it has been my aim to suest changes in the national b-nicin, act
which will make it responsive to the demands of modern business.
_-7
he study which the rommission h.
-3.s given to this s-lbject has, I be-1
lieve
tA,

led irresistibly to the conclusion tat our present banking
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,

,
. !.t,• 4.: t,- --.1
,..

Q.-A.A.-0

pi
l
-''',- 0
--

' 2.•.t.,.t.•t..

system not only fails compitely'under stress and in the presence
of unusual d_emandc upon its resources, but has been found inadequte

ndilnrespollsive even uncle,
-

e ordin;.xv condit,ions of busi-

ness.

The su7,estions submitted herewith are 4.4444‘44.4a4ls

e

tIle Vow years of study
has ;'i.ven this subject, and are formulated in the lizht o: the
great mass of information which it has : 7,nerd respecting both our
-Ei,own bankinf7 s:rstm

trld needs and the experience and practices of

foreign countries.

If T aa right in belieqing

no (0414 tat 1:1- e present law
!
hs becoe obsolete, there is,

hen, no romq for arment in regard

to the necesli'y for modernizing the law.




Assuming snch to be

the case it must be our aim to accomplish the result by means which

will, in the

largest degree possible, leave undisturbed existing

conditions.

It sLould be our aim to liberalize the present na-

tional banking act and to add to it such features as are d,emed

essential, rather than to forlaulate any plan which will fundainen-

tally canf7e our lyresent system.

In the lig-

of our experience it is obvious that one af

the

principal needs is to find some method for the unification of our

preseit banking institutions into one comprehensive system.

In

other countries de have found that reserves are concentrated and

used freel7 in any dirnction where needed.

Under our faulty sys-

teil reserves are so sc4ttered as to -0(. unavila.ble in tiLiO of trouble

eiter for u,ir-oses of cc,isistance or defence.

The resAlt of our law 11,s been to crt,ate a banking system rrLtde
up of a p:reat nqrabor of isolated units, each working within a li-

mited circle, and each of nece9ity govnrned by il

own immediate

interests without reference to what would be for the greatest good
of all.

"q1i1

intelligent managers of individual bunks may

fully recognize tlie necessity of greater cooperaton, they are,
under -The li, powerless to effect it.

If we can so amend the present national banking act as to per-

mit the formation of an association of all the banks of the country




to meet these needs, we shall have gone a long way towards solving
the broble

whirh is befo-e us.

a inor6 scientific
,

is for bank note cirr771ation so that the vol-

ue of oircolLA,tion

be resoonsi7e to the ne-:ds of business, we

salt, I belie-.,c, 11tve

'.ory solution.

If then in addition we provide

In addition Lo

- iscount mark,
!t in this count-

two rlain requirements of a stisfacat, if .;(2. cen aid in crea-

simil-r to

discouni, Li.tri:ets in

Europe, so that theliquid portion of our bum( funds !rill not
of necessity be forcd to such a large degree as at prose ,t into th:
making of call loans upon stock exchange collateral, but will instead be available for the needs of commercial business, ';!E
have so broadened our banking methor's as to bring incalculr.ble
benefit to

Je commercial life of the country.

I believe that the r'.onclusions which I present herewith meet
those

conditions, and that the organization ve-lich it is proposed to

create will hrin

tt e benefits which we seek without runling any

risk of creating a finaHcial institution which can be controlled
by ambitious monetary interests or dominated by political influenc
e.
While we have found much that is admirable in the operdtion of
the various governnent banks of Europe none of them is applicable
to our needs 1
,-re.

The good results which they obtain c -u, T be-

lieve, be rearhed 4ithout the creation of such a central hank.
f-el tt. the plan which is proposed reachls those results
without




being open to t:he objctions

ich my well be brouzht agui -u:t such

an institiltior.

771!e nl.n wh-;(.1-1 i6 1!(:re presented makes no claim to being workc:d

out to a definitiye form.

T reco,Tnize that can be done only after

it hus received the consideration of the Comraission and has been

studies with c.re in all parts of the country.

-fliscussion

viLl

certainly modify ,Lnd improve its details.
In its main features, lowever, it will,in my opinion, meet
the necessary reqpirerients, and I offer it to you for that further

,Thioh it must now 11;tve.
consideration '




Gentlemen:

1

We are a delegation appointed by The Land nur-ency

League to present for your consideration
rect theory of currency.

what we believe to be a cor-

Our purpose in seeking this audience is to

impress you with its importance, and to convine you if possible that ,
at last, we have the true solution of the currency problem.
Our conclusions are the result of an extended investigation of the
subject, covering a period of many years, prosecuted along new lines of
research.

They prove conclusively that the knowledge of the most en!.

lightened legislataks of the age concerning the science of money is of
the most superficial character.

This conclusion is in a measure justi-

fied by the fact that after a national existence of upweird of 116 years
we find ourselves embarrassed with a fiscal system that is unequal to
the task of employing our full powers of production, of equitably distributing the fruit of industry, or of preventing a frequent recurrence
of disastrous financial panics.
We cannot hope in a single interview to convince you of the validity of our theory.

To elucidate it requires a great deal of argument

or our part and a great deal of reflection on the part of those to wham
It is presented, but with your permission I will briefly outline the new
philosophy and give the reasoning upon which our most remarkable claim
is based.
•••••II,

We claim that society needlessly pays interest for the use of a
circulating medium; and that the compulsory prqctice of compensating the
individual for the use of currency, as an exchange medium, is avoidable.
Our contention is that owners of wealth should not compel themselves
to compensate the individual for the use of a legal-tender representative of wealthiand that they would avoid the present interest charge
could they obtain from Government, on application, a legal-tender representative of the weitlth they now pledge as security to the usurer.



2
We claim that our every economic ill is due to the fact that we
unduly restrict the volume of money.
Instead of supplying ourselves with a currency volume equal to our
requirements, we so restrict the issue that a private substitute for
money is required to assist in effecting our exchanges.

Statistics show

that fully 95: of nutorded exchanges are made with a credit substitute.
'
g
All money provided by Government for commercial purposes is supplieJ
to the recipients without interest, while the coot to society of the
credit substitute (which we are compelled to use because of the money
shortage-) actually absorbs the surplus earnings of industry.
Our failure to apply the true remedy is largely due to a common
belief that the value of money, like that of a commodity, is determined
by the economic law of supply and demand, and that to materially increase the money volume is to Impair the value of the money unit.
An unwarranted fear of a depreciated currency prohibits a sufficient volume of money and thus prevents a just division of product.
Our investization satisfies us that absolute money - paper or specie - does not, in fact, fluctuate in value, but that it at all times
accurately reflects and represents the fluctuating value of the articles for which it is exchanged.

Yence if legal-tender paper is issued

for currency purposes only against individual wealth, the supply may
equal our commercial needs without fear of depreciation.
It is true that an advance in prices frequently follows amaterial
Increase in the volume of the circulating medium.

The result however is

not due to a cheapening of the money unit, but to a natural increase in
the value of certain commodities - commodities for which there is an
increased demand; a demand born of a new ability to purchase.




The in-

3
crease in value is not only confined to articles for which there is an
increased demand, but it is temporary, for the secondary effect of a
new money issue is to so stimulate the production of articles whose
value is enhanced that prices will become normal when the new demand is
satisfied.

We claim that quality, not quantity, determines the value of

money.

gardless however of what is known as the "quantitative" theory
of money, we claim that the currency volume may safely be increased to
the ext mt we propose because the measure we suggest would simply sub,
stitu-m one form of tirculating medium for another (cash for credit) without aur;mentinc the volume of that with which our business is now tran,
j
sacted, and therefore would not disturb prices.

The only persons who can now call new money into existence to meet
the demands of an expanding commerce are owners of wealth in the form of
gold bullion and U. S. bonds.

All other wealth-owners are unwiHely

denied the essential privilege of monetizing their wealth for currency
purposes b.: the certificate process.

The result is an enormous curren-

cyb as showy_
deficit of not less than twelve billion dollars,

y the last

Report of the Comptroller of the Currency.
This report shows that our circulation now consists of public money
and bank-credit - about one part money and five parts credit.

We prol)os

to cure our financial ills by substituting cash for the credit constituent of our circulating medium.

This can be done we claim without de-

parting from the present method of suppling, currency for commercial
purposes.

We propose to extend the privilege of calling new ioney into

existence (which is now exercised exclusively b; owners of gold bullion
and national bonds) to the owners of productive real estate - our most
stable form of wealth.




Ours is not a proposition to "loan money on land", nor to "base"
money on real estate.

It is an automatic method of providing just the

wnount of durrency required by a direct issue to money users, on demand,
of a legal-tender representative of their wealth.
The underlying principle of the proposed system is that 411 forms
of wealth are equally entitled to a currency representative in the nation's circulation on application of the owner.

We claim however that

the interests of society will be as well served, and the system simplified, by confining the currency issue to owners of stable or permanent
forms of wealth.

To monetize land values we claim will destroy the ex-

isting curency monopoly, qnd the indirect benefit to all will equal
the direct benefit inuring to the currency recipient, because the terms
upon which legalized certificates will be issued to land owners, on
emand, will determine the usurer's charge for private funds

the

credit substitute, should there he a demand for it.

The new system assumes that the legal-tender function alone sustains the value of noney, and that coninoditj value has nothinj whatever
to do in sustaining the money value; that money is a legislative device
whose value as qn exchange medium necessarily equals its value for hischarging comtract obligations.

Evidence of the validity of this principle is found in the fact
that gold coin would not circulate at par for a moment were it divested
of its debt-paying power, and that our standard silver coins circulate
at par for the reason alone that they are invested
tender quality.

with the lagal-

It is obvious therefore that the legal-tender attril ute
-

is the money attribute of a nation's currency - whether gold, silver or
paper,




5
As our congressional representatives, and as members of the recently appointed Monetary Commission,

ask you to thoroughly investi-

gate this new theory, and especially our claim that real money does not
fluctuate in value.

To realize this momentous truth is to perceive

that a legal-tender representative of wealth may with advantage and
entire saety be issued, on application, to the owners of stable forms
of wealth at cost of issue.

I cannot but -6elieve that the appointment at this time of

P.

7one-

tar./ Canlission to whose searching scrutiny this revelation in economics
can be submitted will prove of the greatest possible benefit to the
human family.
We trust that upon reflection you may see your way clear to commend this promising theory and the simple remedy we suggest as worthy
the serious consideration of the Monetary Commission.

We have formulated a measure of which we will furnish you copies
embodyin7 our recortienciations which sets forth the 'Aim for carrying
them into effect.




vs

THE NEW CURRENCY LAW
Proposed by
THE LAND CURRENCY LEAGUE OF THE UNITED STATES
TO PROVIDE A VOLUME OF NATIONAL CURRENCY EQUAL TO THE NEEDS OF COMMERCE:
TO SUBSTITUTE CASH FOR THE CREDIT INGREDIENT OF OUR CIRCULATING MEDIUM:
TO ABOLISH THE CUSTOM OF PAYING "INTEREST" FOR THE USE OF A MEDIUM OF EXCHANGE:
AN ACT TO MONETIZE LAND VALUES FOR CURRENCY PURPOSES
BY THE CERTIFICATE PROCESS.
Be it enacted by the Senate and House of Representatives of
the United States in Congress assembled
SECTION 1. That from and after the passage of this act,
any person having possession and ownership in fee simple of any
improved real estate in any state of the United States, by a clear,
obvious and perfect title, and who is competent to convey the
same, shall, upon the conditions hereinafter prescribed, be entitled
to receive on demani fro.n the Treasurer of the United States an
issue of full legal-tender paper moaey to an amount not exceeding
the present assessed valuation of the lot or tract upon which such
issue shall be desired; provided that such assessment is made on the
basis of lesa than forty per cent of the value of the property
assessed; the rn.mey so issued to constitute the legalized representative of the value thus m metize I for currency purposes, and to
be a legal-tender at its face value in payment of all debts, public
and private.
SEC NON 2. To carry into effect the provisions of this act,
the president, by and with the consent of the senate, shall appoint
in each congreasioaal district a resident commissioner, learned in
the law, and duly entitled to practice in the supreme court of the
state in which he resides, who, as fiscal agent of the national
treasury, shall transact the basiness required of him by this act,
and to wham applications for an issue of currency on real estate in
his district shall be made; and he shall receive as compensation for
his services a salary of two thousand and four hundred dollars
annually.
SECTION 3. To obtain an issue of currency under this act,
the applicant must file with the commissioner for the district within which his realty is located an application in writing, setting
forth: (1) The name in full and post offiee address of the applicant
—aril of consort, if married; (2) the legal description of the lot or
tract of land for which a curse ley representative is desired; (3)
the county and state in which the same is located; (4) the nature
and value of the imorovem eats; (5) the value of the land exclusive
of improvements; (6) the official valuation of the premises for
taxation for the year 1957 as evidence by the public records of the
csanty within which it i3 situated; (7) the amount of currency
desired. A written abstract, certified by the proper custodians of
the records of the same, showing the applicant to have such title
to the real estate described as is required by the first section of
this act, shall accompany each application.
SECTION 4. It shall be the duty of the commissioner to examine, ia the order in which they are received, all applications and
the real estate described therein; he shall verify the corrections,
truth and sufficiency of the representations made, and the sufficiency of the respective titles; he shall reject all cases of unproductive real estate, and all cases of excessive valuation, and
certify to the Treasurer of the United States such applications,
with the acco.npaaying title abstract as he finds to conform with
the provision 3 of this act; and where it shall appear from an examination of the premises against which an issue of currency is
applied for, that the value of the improvements exceeds the value
of the land, the issue of currency thereon shall not exceed such a
proportion of the asaease.I value of the premises as the value of the
realty, exclusive of improvements, bears to the total assessed value.
SECTION 5. It shall be the duty of the United States Treasurer to cause all applications regularly submitted to him to be
examined by expert examiners qualified to pass upon the validity
of the same, and to endorse his approval upon such as are in accordance with this act. Such Treasurer shall file and keep a
record of applications thus approved, and shall transmit to the
proper commissioner, and to the applicant, official notice of such
approval or disapproval.

SECTION 6. The commissioner, upon receiving official notification of the Treasurer's approval of any application made to
him, shall, if the condition of the title remains unchanged, take a
written obligation, or mortgage on the real estate, duly executed
by the applicant, and jointly with the husband or wife of the applicant, if married, in favor of the United States, with conditions
and provisions as follows: 1. That a sum equivalent to the currency received by the applicant shall be returned to the United States
Treasury when the same shall no longer be desired for use as a
circulating medium. 2. That until such currency is returned the
applicant, his heirs or assigns, will pay to the national treasury on
the first day of each year a tax, or charge equal to two per cent
per annum on the amount of currency received. 3. That the
obligation thus executed shall constitute a first and primary lien
upon the realty described, until the conditions of the same are
duly complied with. 4. That so long as the payment of said tax
of two per cent per annum on the currency received by the applicant shall be promptly made, the obligation shall not mature; but
in ease of default of any such annual payment at the maturity
thereof, such obligation shall be subject to foreclosure for the full
amount thereof, and the premises upon which the obligation is a
lien may be sold to satisfy the same.
SECTION 7. Immediately upon the execution of such obligation the commissioner shall make, and keep in his office for
public inspection, a registry of the same, duly indexed, which
registry shall impart notice to all persons of the contents thereof;
and the title and right so acquired by the United States shall be
prior and superior to any lien or claim of the state or any municipality thereof, and of all persons whatsoever subsequently acquired.
SECTION 8. Upon the registration of such obligation the
commissioner shall return and certify the same to the Treasurer
of the United States who shall thereupon place to the credit of
the applicant on the books of the national treasury a sum equal to
the amount of his obligation; which credit shall be payable on demand in a national currency to be provided by the Treasurer, of
denominations and designs corresponding to the present authorized
issue of United States Treasury notes. The Treasurer shall transmit to the applicant a certificate of deposit, payable to his order,
for the amount of such credit, and in case of demand for the currency, the same may be transmitted by registered mail at the risk
of the person entitled thereto.
SECTION 9. Any owner of real estate against which a currency representative shall have been issued as herein provided,
may, at his option, at any time after one year from the issuing of
the same, return the same into the national treasury, in sums equal
to one third, two thirds, or the full amount of the original issue, and
upon the sum so returned the annual charge of two per cent shall
cease from the first day of the calendar month succeeding the date
of such payment. Upon repayment of the full amount of the obligation, the Treasurer shall execute a discharge thereof which
shall be entered in the registry of the proper county by the commissioner of such district. Currency so returned may be reissued
under the provisions of this act, and when not needed for such reissue the Treasurer of the United Staes shall cause the same to be
destroyed.
SECTION 10. The revenues derived from the operation of this
act shall constitute a fund from which the expenses of maintaining
the system shall be paid, and should the receipts exceed the expenditures, the surplus shall become available for the general expenses of the government.

WHAT IS OUR CURRENCY DEFICIT?
It is a sum equal to the credit constituent of our present circulating medium---- which consists of cash and credit—about one
part cash and five parts credit—as shown by the report of the Comptroller of the Currency, viz:
Total bank "deposits" (cash and credits)
Estimated cash not deposited in banks
Total circulating medium
Estimated amount of coin and paper currency extant
CURRENCY DEFICIT

$13,000,000,000
1,700,000,000
$14,700,000,000
2,700,000,000
$12,000,000,000

The purpose of the foregoing measure is to supply this deficit—to perfect our currency system by providing
national currency
direct from the government at actual cost of issue, in lieu of the bank-credit checking accounts now
provided by financiers at current
interest rates. The measure enacted into law
make Money abundant WITHOUT AFFECTING ITS VALUE. Only the uninformed will
question this momentous truth. Products of .bor fluctuate in value in response to the law of supply
and demand, but the full legal-tender
money unit—paper or specie—is always worth A DOLLAR, whether employed as a debt-paying
device, as an exchange medium, or for
conserving individual woalth.
THE DISTURBING FACTOR Al HUMAN AFFAIRS—By James D. Heide's, An Illustrated
Pamphlet El.scidating The Land
Currency Theory sent poet-paid on receipt of 25e. Address Secretary THE LAND CURRENCY LEAGUE
213-14 Kittreds‘ Bldg.Denver,Colo.




CURRENCY COMISSION OF THE AMERICAN BANKERS' ASSOCIATION
.11.111.1.111111111111101,CHAIRMAN, PRes

CHASE

FESTUS J. WADE

MYRON T. HERRICK

PRES. MERCANTILE IR

ST

LOUIS

JOSEPH T. TALBERT

CHAIRMAN SOC. FOR SAVINGS. CLEVELAND

V. P. WHITNEY -CENT.

jet.* RL'ES$4. 14-4UTTIG

PRES

cr3,141/1-

PRES. PEOPLES NAT

JOHN PERRIN

, NEW ORLEANS

BK

INLJIANAPOLI

HAFS

NAT. BK

KANSAS CITY

MCCORD

VICE-PRES. THiRO

NAT

BK

, ATLANTA

W. V. COX
BK , PITTSBURGH

PRES. SECOND

ARTHUR REYNOLDS
NAT'L

FIRST

JOSEPH A
BK

ROBERT WARDROP

;FRES.,
'HARD NAT'L WANK, 09.

EiRS1,.. ATIONAL BANK, CHICAGO
N

46•44•1111WIPPWant

SOLOMON WEXLER

vICE-PRES

AMERICAN

JAMES S. FORGAN, VICE-CHAIRMAN, PRES

NATIONAL SAN N. N

NAT

BK

WASHiNGTON

JOHN L. HAMILTON

DES MO,NES NAT. BK

DES IHOINES

V

P. HAMILTON

CUNNINGHAM. HOOPESTON. ILL.

LUTHER DRAKE
PRES. MERCHANTS NAI. BK




OMAHA

FREDERICK E. FARNSWORTH, SECRETARY, S

NASSAH

AND

II

PI,

STREETS.

N

5 NASSAU AND 11 PINE STREETS
YORK,
L

"'embers Ex—Officio
F. O. Watts, President American Bankers' Association,
President First National Bank, Nashville, Tenn.
Wt. Livingstone, Vice President American Bankers' Association,
President Dime Savings Bank, Detroit, Mich.
C. H. Huttig, Chairman Ex, Council American Bankers' Asmociation,
President Third National Bank, St. Louis, Mo.

.Geo. M. Reynolds, Presidont Continontal & Comil National Bank, Chicaco.

PL&L 6La a




CONFIDENTIAL.
TO EDITORS: The following matter furnished by the National
Monetary Commission is released without further notice for
publication in the • afternoon papers of
mornin g
MELVILLE E. STONE,
General Manager,
The Associated Press.
CONFIDENTIAL.
TO EDITORS: The faith of the International News Service and
of the National News Association is pledged that no part of this
matter furnished by the National Monetary Commission shall be
published until

R. A. FARRELLY, General Manager,
International News Service.
National News Association.
CONFIDENTIAL.
EDITORS: The faith of the New York Sun Press Association
is pledged that no part of this matter furnished by the National
Monetary Commission shall be published until

E. A. FOWLER,
Washington Correspondent.
CONFIDENTIAL.
EDITORS: The faith of the United Press Associations is
pledged that no part of this matter furnished by the National
Monetary Commission shall be published until
ROY W. HOWARD,
Gen'l News Mgr. United Press Ass'ns.
CONFIDENTIAL.
TO EDITORS AND CORRESPONDENTS: The following
matter is furnished to you by the National Monetary Commission
on the express condition that no portion of or reference to it shall
be published before

ARTHUR B. SHELTON, Secretary,
National Monetary Commission.
52103-10

Messrs. John Claflin, Frank A. Vanderlir, Charles Conant, Oscar S.
Straus and Professor Johnson:Gentlemen:As your Committee has been appointed to devise a
plan to prevent excessive fluctuations in interest rates, and to
secure stability in rates of discount, I would like to submit for
your consideration the following Amendments to our Banking Laws,viz:
1st. Authorize the issue of Class "A" Treasury notes to
the holders of any series of Govervnent Bonds to the par or face
value of the Bonds, upon the deposit of said 3onds with the Secretary of the Treasury.

The deposit to be for a p€riod of not less

than thirty (30) days; interest on said Bonds during the time of
deposit to revert to the Government.

Treasury notes Class "A" to be

a full legal tender.
2nd. The Bonds so deposited to be reclaimed at any time
after thirty (30) days upon payment to the Secretary of the Treasury
of their face value in Treasury notes Class "A", together with interest accrued durinc period of deposit.
3rd. Authorize National Banks to hold any part of their
25:/: legal Reserve against deposits, in Government Bonds, inasmuch
as said Government Bonds will be exchangeab1e14 Treasury notes
Class "A" upon demand, md may therefore be counted as cash.

The first point to be considered in any chance in our
Currency Laws would seem to be the absolute and unquestionad
value of the security behind the new issue.

This is fully covered

In the issue of these Class "A" Treasury notes, inasmuch as Govern-.
merit Bonds are behind every note so issued.



The question of security havinr: been eliminated, the question of elasticity must be consiclered.
It can readily be seen that any naterial advance in rates
would result in the holders of Government Bonds depositing them,
and securing legal tenders, thus increasing the currency, and preventing excessive rates.
The 3rd Amendment authorizing ilational Banks to hold their
(25,) twenty-five per cent lec:al reserve in aoverament Bonds, would
immediately release a large sum of money(apero;:imately
from Banks in the :Jew York Clearing House alone) woull result in
an
expansion of the currency very much to be desired if it can be
done
with safety, and would at the same time enable the City Banks
to obtain some interest on their Reserve, which they now have to
hold
without interest, at the same tine paying interest to
the Country
Banks upon the entire amount of their deposits.
The ideas above are respectfully submitted to your Committee for consideration, and the writer would urge that the socalled "Asset-Currency" proposition be not seriously considered,
inasmuch as the basis of any currency system must be confidence,
absolute confidences

Unfortunately confidence is a plant of very

tender Growth, and the failure of four or five Bank.; simultaneous
ly
might result in a wide-spread panic if "Asset-Currency" is adnpte
d,
whereas with a Oovernment Bond behind every note, confidence
would
not be shaken. The securii:y of the currency should not be sacrif
iced
either to elasticity or expansion.




Very respectfully yoqrs,

\i\iV

1

NN

The monetary situation is, we must admit, both difficult and
delicate, at least for great states.

they hesitate to retrace

their steps they do not dare to venture far on a new path.
to be done in this dilemma?

What is

The answer is very simple: to have re-

course to palliatives without number, ulliatives of which no one
would have dreamed under otter circumstances: to postpone all action
until a more propitious moment and prolong treaties which otherwise
might become too embarrassing.

Such, in substance, is the monetary

politics of our day, and such is the condition in which the monetary
question has been for almost eight years.
We must, however, mention here a fact which seems to attenuate
the gravity of the situation, at least in the eyes of a great many
people.

This very curious fact itself is of a nature to mislead not

only the ignorant, but it seems that it makes this same situation to
appear in a plausible light to the test informed.

We might almost

say that it lends that situation a real raison Vetre.

And be it re-

markeo that this same fact is observable almost everywhere, despite
the economic laws which such an administration of monetary affairs
overthrows, by dealing a heavy blow at the fundamental principle of
the creation of money, a principle which requires that its nominal
value should be a faithful picture of its intrinsic value.

We re-

fer to the new role given to the white metal in the actual order of
things.

To perform the function of money, that is of international

money,. if the term had ever been understood in any other sense,- that
was no longer in season: to do away with it entirely was impossible:
to degrade it to the rank of simple divisional coin with legal tender




power to a small amount could rot be done; hence it became necessary
to invent something new.

People went hunting in all directions and

at last came on the luminous idea of henceforth designating it by the
name of "Internal" money.
It is in this order of iaeas that there is now, first, international money, that is gold money of which all countries at all times
have endeavored to attract as great a quantity as possible to themselves,
and which may be legal tender to any amount.

Next comes "internal"

money, that is current silver coins, essentially the same as the other
with this exception that it cannot travel from 2alais to Dover without
becoming sea sick, and without becoffing in fact completely incapable
of serving as money at the place of its destination.

To say nothing

of a sea voyage of so short a distance, this valiant money cannot even
go over a much more convenient road between Nancy and Strasburg, tr between Liege and Aix-la-Chapelle, for instance; for no country any long-'
er recognizes the silver money of the other.

Lastly we have the small

silver coin with restricted legal tender power, to which we must add
nickel and bronze or copper, all these coins playing, of course, a very
modest part in monetary systems.
This internal money scared a great many minds.

High science fwe

need scarcely say] rejected it entirely, and routine theory woula havt
nothing to do with it.

But, nevertheless, in practice it worked well.

And this will last a long time more.

It will last to the day when, for

some reason or another, serious perturbations will be produced in the
great commercial centres, till the day when one of the countries under
the famous regime of the "Limping Standard", not possessing a sufdicient quantity of international coin will see itself exposed on that
account to demands which it will not be able to meet.




Then vigorous

action will have to be taken, and in this way an intense crisis must
break forth in the financial and commercial world.

It is still time

to combat it and even conjure it forever by the common action of the
most important countries.

But it is absolutely necessary that the

great countries, that is 'ngland, as well as France, Germany ana the
United States, shoulo take part in it.

Any other solution of the

monetary problem is impossible, and no attempt in future shoule be
mace to solve it in any other way, for such an attempt would most certainly fail.
And just here arises the question whether France, Germany and the
United States woulc not suffice to constitute an international timi(tallic union, powerful enough to bring the restoration of silver to
a happy end.

These countries would certainly succeed in it; but we

must ask ourselver what stability and what probability of success a
conference resulting from such a union would present, if the greatest
commercial country of the worth, the country which by reason of its
colonial possessions is most interested in the
England should take no part in it.
it.

matter, if, in a word,

To ask the question is to answer

A union consisting of three would not continue in existence even

a year; it would break long before that, by the irresistible force of
events much more powerful than men.
Let us cast a glance at the ageregate of monetary affairs in the
world as they present themselves in reality, and let the reader follow
us in an examination of the monetary systems which come into play there.
It soon becomes apparent that they contain, by reason of their provisions, the germ of serious obstacles, which, from tne very first day
of the formation of a bi-metallic union, would take a form so unmistakeable that no body among those familiar with all these details coulc




4

be mistaken in their bearing.

In lookinp at the monetary question in

this manner, we take as our starting point the restoration of the ratio
of 1-1F

inserted in the program of tte fraction of the bi-metallic

party which produces the chimerical combination to which we have just
alluded.

This ratio, you know, accords with the rate of about 61 pence

per standard ounce at London 1.71

fire7, and it woulo therefore be

necessary by a coup l'etat• both brutal and gigantic to bring the actual
price of 46 1 2 pence to the level lost almost thirteen years ago.
/
,

Let

us admit, however, for a moment that the three countries attain this by
very clever and well-Combined manoeuvres.

rdhat would be the result?

Simply this: several countries, such as nhina with a ratio of 1-16.7.9,
equal to F-77

, pence per ounce; Japan with its ratio of 1-16.17, or

7/4 pence; Mexico with that of 1-1F

or F pence; Turkey, where
,
"7

/
they have now as a basis the ratio of 1-1.97, equal to F,9 78 pence;

above all Bolivia where the ratio is 1-17 4, representing a rate of
exchange of F4 pence per ounce standard; and other states which have
for a long time manifested very decided tendencies to go over to the
gold standard; woulo seek, at the first favorable opportunity, to profit by the change made, and woulo thus place obstacles to the working
of the bi-tetallic union consisting of three parties.

These obstacles

would be all the more embarrassing, as people in these regions would
be always more disposed to take the word of command rather from London,
the greatest commercial centre of the wor10, than from other places
where a certain and regular market of the white metal has never been
able to establish itself.

It would be useless to seek for support, this

time, in the fact that London would naturally have to bend before the
rates dictated by the mints of Paris, Perlin and America, and to translate these prices pure and simple into its own money.




But to sap nothing

of a lack of proper arrangements, a lack almost inevitable considering
the presence of so many considerable factors, the sligntest defect might
greatly compromise the working in question which should naturally be
maintained even in its minutest details.
Besides, whence would come, under these circumstances, the power
necessary to carry all the quotations of values made in silver to London, where the arbitrage between the paper rupee and the Indian loans
and sterling is always on the qui viva, and to the bourses of the continent?

These milliards of rupees and Austrian florins would never be

able to follow with equal pace the iactitious rise of the white metal,
and the consequence would be extravagant speculation to lower these
values, against purchases of those of the same category issued in gola
coin.

Now such a speculation might very easily extend to silver bul-

lion, and the bankers of India, China and the other silver-standard
countries might even become parties to it, by eventually furnishing
silver from their own stock to the Fnglish or Americans who, either
directly or on their own account would have sold silver to be delivered at a future time to the bi-Metallic union of three.

To these opera-

tions which offer, so to speak, no risk and are besides very legitimate,
there would be joined large drafts of 7ngland, on India, on the Straits
Settlements, on China, and indeed on all the countries in which speculation on exchange or on the white metal itself might be combined in
one shape or another.

These drafts renewed every three or six months

would certainly take, to a great extent, the place of the remittances
to be made in silver, so that the metal would in fact be divertea from
its principal destination and would flow to the bi-metallic union of
three.

Add to all this, that a great deal of capital in silver money

invested in the Indies would be withdrawn, if only for a while, by the




6

English, who would certainly profit by the manna which would thus fall
into their hands, so to speak, from heaven; that the companies having
their capital in rupees, in dollars, in piastres, in tales, or in other
silver coins would convert it without loss of time into sterling; that
the Hindoos themselves would grasp the mohurs, the bars and objects of
gold in general, suddenly placed within their reach by the formidable
decline of about ?4 per cent, and that without looking any furtAer.
Many people in Europe itself would stipulate that long-term loans should
be payable in gold, thus carrying mistrust into their own camp and
counteracting the arrangements made by the bi-metallic union of three.
Let no one accuse us of being too timorous in this respect.
Silver has been falling for thirteen years continually from 51
to 46 ih pence per ounce.

It would he ctrange,indeed, if, by a stroke

of the pen, it would be possible to put it back to its old level and
to keep it there without the co-operation of the greatest commercial
country in the world, the country which has toe greatest interest in
its restoration and which will reap the greatest benefit from it.
Witn England tnere is absolutely nothing to fear; India itself
might very well be included in such a union of four, and all speculation in the white metal or on exchange would, from the start, lose its
importance and its scope.

Undertaken alone, the operation would be in

reality fated to receive a check, and would serve only to prove tnat
the bi-metallic union which would effbrace England, France, Germany and
the United States,-'to which naturally the majority of otner countries
would then ally themselves,- was invincible.

While it might not per-

haps constitute a perfect work, perfection not being of tnis world, it
certainly would give full satisfaction within the limits of the possible.
Be this as it may, we assert once mcre energetically that it is in this




7

direction that the solution of the tronetary question must be sought
for, if we wish to avoid an end fatal and disastrous to all interests.




.• '

National Iginatut

deposits as 4. reserve and they may count their 5-per cent redemption
fling as a part of the same, and the banks located in reserve cities
may deposit 50 per cent of the remainder of their reserve in banks
in .central reserve cities. There are three central reserve cities—New
York, Chicago And St. Louis. There are about _forty other reserve
cities. According to the report of the condition of national banks on
Aug. 22, 1907, the amount of reserves held by all the national banks
,Jrn the country, was $1,121,358,395."
SUGGESTIONS REGARDING CREDIT FUNDS FROM COLORADO.
C. D. Gurley, president of the Gurley Investment Company, of Denver, Colorado, has sent to Senator Teller the following suggestions to
submit to the senate committee on banking and currency. The suggestions made by Mr. Gurley are of a somewhat radical character, but
are designed along safe lines to prevent recurrences of money stringency and panics.
The suggestions are as follows:
To authorize banks to discount notes payable and to be paid in
"Credit Funds," as well as at present under law to discount notes payable in cash or current funds.
This would give two kinds of "funds" or deposits: Cash and Credit,
which may be kept in one account.
Credit Funds would be simply the borrowing of the bank's credit
for deposit, with the names and collaterals demanded by the banker.
whereby the customer "A" may transfer by check all or any part of
such credit deposits to "B" and "B" to "C" and so on in an endless
chain or circle.
Cash funds to consist solely of all forms of current money now
accepted by banks, and checks calling for cash.
Checks for credit funds to never be subject to payment in cash. but
always payable in credit. The words "Credit Funds" or "Cash Funds"
stamped on the face of the checks or drafts would state the "kind" of
funds drawn against. The bookkeeping would be simple.
In addition to the above:
At the request of the bank customer, and, solely at the option of
the banker, permit the conversion of credit funds into cash funds and
-rice versa; charges (if any) to be under the supply and demand law
for such conversions.
At least, the volume of credit funds discounts of a bank to be
based upon the total capital and surplus, and not on the volume of
deposits as at present. The former are steady, the latter fluctuating,
at times wildly.
The maximum volume of credit discounts for a bank is a detail.
safely fixed at from six to eight times the combined capital and surplus.
The end of the law for credit funds to be through the clearing
houses, similar to the enforced method at this writing resorted to,
because of its public safety, but as yet not sanctioned by law. Time
and experience would improve on this. If effective in storm why not
adopt it to prevent storm?
As the law stands no bank can pay 100 on urgent demand with
but 25 on hand in reserve cities and 15 on hand in non-reserve towns
and cities. We are now facing a condition when something akin to
100 may be needed to meet legal demands of depositors.
The statistics of the clearings show that 95 per cent in New York

21.

City, and 90 per cent average in the United States is credit banking
up to the moment of financial fear, but now the law says that the
depositor may instantly demand cash for his credit balance and hence
bank panics.
I call your attention to the fact that if the reserves required for
all deposits average 20 per cent, it would take every dollar of legal
tender, and of credit money not legal, to comply with the law, leaving
no currency whatever for ninety millions of population. In other
words the total deposits in the United States approximate $15,000,000,000. The total of all kinds of legal and credit money is $3,000,000,000, or 20 per cent of the deposits. The deposits in 1890 were but
one-third of the present total; what will become of us a few years
hence at the past rate of increase in deposits?
I recite the statistics to show that under thee in 1.4,1 'net em proposed, 9Cito 95 per cent of the banking would continue to be credit
banking, but not subject to withdrawal in cash. This, in effect, is equivalent to 100 per cent or a total elimination of bank panics.
If these suggestions were enacted into law, the present requirement
of "confidence' in order to do banking, would be forever abolished;
bank panics would be impossible; bank failures, under honest management, unknown; financial fear would become a thing of the past; bank
liquidation, whenever desired, could be effected through the clearing
houses without a ripple of interest to the public; values would be
steady, and expansion of the country would be boundless.
It might be termed an evolution in banking, but upon right and
safe lines. The devices called money would then be restored to their
primitive intent, as an economical means of effecting exchanges and .
for use as a legal tender.
BIG CEMENT DIVIDENDS.

The prosperity of Southwest cement plants and the dividend paying
possibilities of those industries is again demonstrated by the recent
dividend declared on the stock of the Western States Portland Cement
Co., located at Independence, Kansas, says the Mid-Continent. Two
hundred and five thousand dollars is now being distributed through
the Citizens National Bank of that place to stockholders who are
fortunate enough to have an interest in the great concrete works at
Independence. The works have been in existence a little over a year
and over $400,000 has been earned by the plant and given to the owners.
The company, besides the dividends distributed to its stockholders,
has accumulated a surplus which places it in an enviable financial
position. It is stated by a report of the company that the concert
has earned a net profit on its cost of over fifty per cent, or in oth(
words, it has earned more than half of its original cost in a litt
over a year's time of operations.
The rapid increase in the demand for Portland ccrnent and the
margin between its cost of production and selling price will make
that industry to investors a very profitable field in which to invest
money. With careful and judicious managers at the head of concrete
manufacturing plants their earning power will be greater for many
years to come on the capital invested than the same amount of money
could earn if invested in any other direction, and it would seem from
present indications that profits which come from the manufacture oi:e
cement will in the future increase instead of diminish.

C. B. HANSON 11-4a4c0ta Avo-Aitici/c4 JOHN BLOODGOOD
NEW SALEM, N. DA4:.
DICKINSON, N. D.
To Net 6%.
Farm Loans and Inbestments
We negotiate first mortgage loans on
I am in a position to place funds of non- improved Farms in Emmons County, N. I).

resident investors on Gilt-edge first mortgages on improved Farms in this locality to
/
net investors 51 2 to 6%. Security the
BEST. 100,000 acres of land for sale.
Write for information. References furnished. Correspondence solicited.

DLNVLR, COLO.
The W. E. Moses Realty
& Investment Co.
ESTABLISHED 1880

First Mortgage Loans on Irrigated
Landx a. Specialty.
City Property and Ranches for Sale.




Business of non-resident investors solicited.
We can net you 6% with gilt-edge security.
Correspondence invited.

LINTON STATE, BANK,
OF LINTON, NORTH DAKOTA.

I. N. AULD

REAL ESTATE & L ANS
If you want a safe investment 'on can
get it in this district in first mortga e Farm
It)ans.
I can negotiate loans for non-rekdents
to net investors 5 1 '2 to 6%1
Security Gilt-edge. Large list of wild
and Unproved land for sale. 20 years ev,
pc rie n ce. Correspondence invited.

ATTORNEY AND REAL ESTATE
BROKER,

7%NETTOYOU7%,
FIRST MORTGAGE LOANS

OACOMA,SOUTH DAKOTA

In Lyman Co. S. D.

First Mortgage Loans on farm lands in Lyman
County to net the investor ti'; annual interest or
5 Y'A semi-annual interest.
First class opportunities for investments along the
new lines of Railroad, between Chamberlain and
Rapid City.
Ten thousand acres of land on the Rosebud
Reservation for sale at price that will make money.
the County Seat of Lyman County.
.iiries cheerfully answered.

ZAVITZ & CARPENTER
MURDO, SO. DAKOT.
REAL ESTATE—LOANS—LAW
COLLECTION S

National 3rtsumer
THE CAPITALIZATION OF RAILWAYS.
The danger in unrestricted management of railroad properties and
the necessity for government control to prevent discrimination in rates
have been urged by Gov. Hoke Smith, of Georgia.
Governor Smith says there is no more important and difficult problem to be solved by the people of the United States than that of
transportation.
"Left without restraint," he says, "the railroad companies can fix
the value of lands. They can determine the profits of merchants.
They can control the business of the manufacturer. They can make
and unmake towns and cities. The condition of dependence by the
pu]iup;)Ti them ;:.ncreases from day to day.
"A few years ago the transportation companies were controlled by
many and varied interest. Now they are largely consolidated, and
several interests control nearly three-fourths of the entire railroad
mileage of the United States.
"These interests may be designated as syndicates under the names
of Harriman, Morgan and Hill, the Vanderbilts, the Moores, Gould,
the Pennsylvania and Rockefeller. While they conflict at times, their
struggles are in the matter of acquiring properties, not in the operation
of properties, and their conflicts result, not in better or cheaper transportation, but in more stocks and bonds, upon which the public must
furnish money to pay dividends.
"The control of the railroads of the country has passed from
trained railroad operators to bankers, who speculate in railroad stocks.
A notable result of this condition is the withdrawal of authority from
the local management and local superintendence, the reduction of
salaries to those actually doing the work of transportation and the
dwarfing of the power and capacity of the men upon whose management the public must immediately depend.
"The railroad properties of the United States are capitalized at
over $13,000,000,000. Careful estimates of their actual values show them
to be worth less than $6,000,000,000. The public, therefore, are being
called on to pay excessive rates for transportation to make interests
and dividends on $7,000,000,000 of watered stocks and bonds. These
bonds and stocks rest like a permanent mortgage on the industries of
those engaged in the various vocations of life.
"The transportation company is a public enterprise. The railroad
is built by the use of the State's power of eminent domain. The public
is entitled to a voice in the charges which are made by the railroad
Impany for carrying passengers and freight. These charges must be
asonable and free from discriminations.
"The duties of a railroad company are dual; first, to the public;
Dnd, to its stockholders.
'The public must look to the States and to the nation to protect
.their rights. When we realize that over half the socks and bonds issued
by the railroad companies of the United States are speculations and
not based upon money actually invested in the properties, we see how
recklessly the rights of the public have been disregarded.
"Instead of exhausting the capacity of our transportation companies
to pay dividends on watered stocks and bonds, the public is entitled to
}lave all the money realized from the sale of stocks and bonds invested
in the properties. Thereby the facilities of the transportation corn.

MANITOBA
W. A. DONA1,1)
Barrister, etc.

J. NI. FRASER
Manager Bank of Toronto

7

panies should have been improved. The public is, furthermore, entitled
to a reduction in transportation charges as the volume of business
increased and the cost of service lessened.
"The remedy immediately before us must necessarily be to perfect
the legal authority in properly constituted agents to regulate and control, and then to enforce, through these agents, the rights of the public.
"The ratemaking power has been given to the National Railroad
Commission. We should not be afraid to place upon that commission
men sufficient in number to handle these questions. Their pay should
be ample, and a seat upon the National Railroad Commission should be
regarded as one fully as exalted as a seat upon the Supreme Court
bench of the United States.
"Additional powers should be given to the commissioners. Bonds
and stock issues upon interstate railroads should be submitted for their
approval, and none should be permitted unless the money derived from
their sale is to be spent upon the properties made liable for them.
"Transportation companies should not be permitted to load down
their properties with stocks and bonds for speculative purposes. The
railroad commission should have the fullest power to compel proper
facilities to be furnished. Any effort by railroad companies to retaliate
with a reduction of service or by.cutting pay of employes should be
met by severe personal punishment to the guilty officers. State commissions should be empowered with full authority in matters of
interstate transportation. Public sentiment should sustain State and
national commissions in the most vigorous enforcement of the duties
confided to them."
MR. CORTELYOU'S SUGGESTION TO CONGRESS.
Secretary Cortelyou, in presenting the financial situation to Congress
as he observes it through the workings of his office, contents himself
with a most general, though emphatic, recommendation that action be

A 0/

BANK ACCOUNT

(4/r COUPON CM

Safety Assured by capit:!;..S.u.rp,10110s08c.00Profits
Write for free Booklet No. 31
— BANKING BY MAIL"

PITTSBURG TRUST CO.,

J. A. WINTER,
Offers non-resident investors unusual and attractive opportunities for
placing funds safely and profitably in gilt-edge first mortgage loans in this
section of Ohio and the City of Dayton. Correspondence desired.
References: Any bank in Daytcn.

PER CENT TO YOU

7 Real Lstate and Loans

DONALD & FRASER
FINANCIAL AND LOAN AGENTS
PILOT MOUND, MAN.

JOHN ROSS & SON

MORTGAGE LOANS

Kennebec Land Co.

References—Merchants Bank, Bank
of Nova Scotia or any of the thirteen
Banks doing business in the City
P. O. Box 871.
G. W. White.

EDMONTON, ALTA.
D. M. Parrick

Loans Negotiated on Farm Mortgages
WHITE

PAR_RICK

J. M. DEVLRS, Manager

Lyman Countp Lanbo
KLNNLBLC,
'OUTH DAKOTA
IMPROVED AND UNIMPROVED
FARMS ANI) RANCHES

yman County Farms and
Ranches




PITTAttEIURG,

General Manager Dayton Real Estate & Investment Co.,
DAYTON, OHIO.
611-612 U. B. BUILDING,

First mortgage loans on Farm and
City property.

We can negotiate exceptionally safe first mortgage loans, amply secured by the best Manitoba
farm lands, to net the investor 5% annually.
During an active experience of twenty-seven years,
we have never suffered a loss in one of our farm
,oans. We refer to Dun & Bradstreets and the
local banks. Correspondence invited.

E
C
IZOITT
T

VIVIAN. SOUTH DAKr TA.

Why leave your money in the bank and only
get three or four per cent when we can place it for
you where you can get nearly double the interest.
We can lend your money here on farm property on
first mortgages which is the safest security possible
to get. The best security on earth is the earth
itself. We have for sale 100,000 acres virgin soil
in this district. Bank references. Write us for
maps and information.

Saltcoats Land & Debelopment Co.
Saltcoats, Sask., Canada

Rapid City, S. D.
Farrar & Jepsen
Dealers in Timber Farm 0 Mineral
Lands
1st Mortgage Loans Negotiated
We are offering the best Portland Cement
proposition in the world. Those desiring
safe and permanent investments, will find
it to their interest to communicate with us.




/4teritc,v(A.,

Ii

•

,(4.,
• 7;
6 i'r

'

NS;

CHARTER

AND

LOCATION.

It is pfoposed to charter the Reserve Association of
America, which will be the princip:11 fiscal agent of the
of the United States.

CoAernnent

The authorized capital of the Reserve Asso-

cidion Aka be three hundred million dollars.
charter shall be fifty years.

The length of its

The head office of the Association

shall be in Washington, P.C.

The country shall be divided into fifteen Districts, and a
W•
' arch of the Reserve Association shall be located in each District.

The 1e

rye Association and its Brunches shall be exempt frori

State and local taxation, except in respect to taxes tipon real estate owned b:! it.

CAPITAL.

Only national banks of the 4M. classes hereinafter provided for may subscribe to the capital stock of the Reserve Association.

A national bank having a minimum capital of at least

25,000, may subscribe to an amount of capital stock of the Reserve Association equal to twenty per cent of the stock of the
subscribinc-, national bank, and not less, and each of Euch subscribin7 banks shall become a member of a Local Association as hereinafter provided for.

Fifty per cent of the subscriptions to the cap-

ital stock of the Reserve Association shall be called in cash; the
balance of the subscriptions will remain a liability of the stockholders subject to call.




--

2.

be transThe capital stock of the Reserve Ass elation will not
any corpor1
ferable, and under no circumstances may 4-4 )e owned by
ation, other than the subscribing national bank, no

179 any indi-

other
vidual, nor may 40 be owned by any naticnal bank in any
Tn the case of a

amount than in the proportion here provided.

s a subnational bank increasing its capital after it once become
al bank
scriber to the stock of tbe Reserve Association, the nation
the capital
shall thereupon subscribe for an additional arount of
of the
stock of the Reserve Associatian equal to twenty per cent
then book
,
national bank's increase of c A)ital, paying therefor its
will be
value, but only one-half of this additional subscription
called in cash, as hereinbefore provided.

In the event of a na-

Reserve
tional bank wbich is a holder of the capital stock of the
Associatial decreasin

its capital, it shall surrender a propor-

Reserve
tionate alount of its holdi7igs of the capital stock of the
Associatial;

or if a national bank goes into liquidation, or de-

it shall
sires to withdraw, which it may do upon one year's notice,
Reserve
surrender all oC its holdings of the capital stock of the
AFsociatiom.

ny capital ptock of the Reserve Association so sur-

surrenderrendered sball be cancelled, and the national bank thus
t
ing stock in the Reserve Asociation shall receive in payren
therefor a sum equal to the then book value, as shown on the bal6cred.
ance sheet of the Reserve Arsociation, of the stock so surren

EARNINGS
The earnincr,s of

AND

DIV IT'.

1‘: DS .

Reserv-: Association shall be distributed

in the 'ollowin- ma ner:
After the payment of all expenses and taxes the stockholders
shall receive four per cent.

Further earnins shall be divided,

one-half to go to the surplus of the Reserve Association until that
surpl

shall ai.Jount to twenty per cent of

he paid in capital;

one-fourth to go to the Government, and one-fourth to the stock-




.
3

holders;

but l‘i'en the stoc_eholders' dividends shall reach five

per cent they

fic—aill777ional distribution.

all

After the

stockholders receive five per cent the earnings shall be divided,
_1
oee-half to be added to the surplus of the Reserve Association and
one-half to p-,o to the Government.

After the stockholders receive

five per cent per annum and the surplus of the Reserve Association
amounts to twenty per cent of

he paid in capital, all ;OC excess

earnilgs shall go to the Government.

The minimum divieends to the

stockholders shall be cumulative.

LOCAL

ASSOCIATIONS

NATIONAL

OP

. BANKS.

a

44
te-pc, ,4

te

,ct

f'

,
Talkii-trarrigtt—r-r-e--"t-r—stri Fr..44-(f

associations

of national banks to be desi7nated as Local Associati ons.

Every

Local Associatioe .4.3.-1. be composed of not less than ten banks,
:-ffLocal
and the corbired capital and surplus of the nembers oftv4' 4
Association shall agfre,7ate not less than five million dollars.

All the Local Associations shall be frouped intc fifteen divi ei ens, to he called nistricts.

The territory included in the

Local Associations shall be so apportioned that every national bank
will be located within the boundaries of some -Local Associatiaa
subscriinr7 national lank shall become a member of the Local
Aesociation cf the ter -itory in which it is situated.

DIRECTORS

OF

LOCAL

AS

Each Local Association shall elect aenually a board of directors in the Coll owince manner;
The number of the directors may be de 4 ermined by 1.1-,e bylaws of 'he Local Aesociations.

Three-fifths of that number shall

be elected -r.y ballot cast by the representatives of the banks that
are members of the Local A; occiaticn, each bank having one repre-




.(

4.

sentative, and each representative one vote, without reference to
Two-fifths of the whole number of directors

the size of the bank.

of the Local Association shall be elected by these same representatives of the several banks that are members cf 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 Reserve Association.
shall be no proxies.

At such elections there

The al,thorized representative

of a bank, as

herein provided, must be either the prerident, vice-president
or cashier, of the banl, he represents.

DIRECTORS

0 F

4I=L;#

B It A TT C

heretofore provided, all the Local Associations shall be
nto fifteen divisions, and each of
be designated a District.
a Branch of the

these divisions stall

There shall be located in each District

eserve Association.

Each of the fifteen Branches

of the Reserve Association shall have a board of directors and
those directors

.

be elected in the followink mariner:
,

The board of directors of each lccal Association shall
elect by ballot one member of The board of directors of the Branch
of the Reserve Association.

In this manner there will thus be el-

ected as many directors of the Branch of the Reserve Association
as there may be local Associations in the District in which that
Branch of the Reserve Association is located.

In addition to that

number - here shall be elect.d a number of directors equal to twothirds or the number of Local Associations in the District where the
Branch is located; such additional directors shall be elected in the
fol!owinc manne-:
There shall be chosen by the banks composing eac-,
Arsocia tion a voting representative or proxy holder.

Local

In chool.ing

such votirr, representative each bank shall be entitled to as many
votes as it holds shares in the Reserve Association.

Th

voting

representatives of the several local Associations which form a




•/

5.

District shall then meet at the office of the Branch and elect an
additional number of directors of the Branch

equal to two-thirds

of the number elected directly by the Local Arsociations; that is,
equal to two-thirds of the number of Local AF-sociations composing
the District.

Each votin:77 representative at such election shall

have a nurlber of votes equal to the number of shares in the Rescrvn Association 11016 by all the banks composing the Local Association which he represents.
The first business of the board of th(. Branch, as thus cons7,ituted, shall be to add to its nunbc;rs by the election of an
additional number of directors equal to one-third the number of
Local Arsoniations situated in the District.

Such additional di-

rbpresent the industrial, commercial, agrinultural

rectors s

ad other int..rests of the District, and shall not he of -icers of
banks.
e I
,

The board of directors of a Branch of the Reserve Association
will thus be composed of,
Yirst, a group of directors equal in number to the number of local Associations cmposing the District, and this group
shall be elected by the directors of the Local Association, each
director having one vote;
Second, a F:roup of directors equal to two-thirds of the
foregoing g,oup, aid elected by stock representation;
Third, a group o

directors equal in number to one-third

of the first group, representing the industrial, ca.1:.ercial, agricultural and other interests of the District, and elected by the
votes of the first two groups, each director thus iotin,77 having one
vote;
7urth, :r7e manager of the Branch shall be ex officio a
ci1
/
'member of the board of directors of the Branch, and shall "oe
cilairnan of the




soard.

.

6.

All the members of the board of directors of -tie, Branch except the ex officio Timber, shall, at the first rfetine of the
board, -ee classified into three classes, and the terms of office
of these tree classes shi;21 be, respectivelj, one, two, and three
years.

Thereafter members of the board

Hall he elected for a term

of three years.

DIRFC TORS

OF

THE

RESERVE

ASSOCIA-

TIONS.

The Board of the Reserve Association shall consist of fortyfive Dire6tors, and it shall be composed in the following manner:
First, six ex officio members, namely the Governor of
the Reserve Association, who shall be Chairrean of the 'Board, t7To
D, put: Governors of the Beserve Association, the Secretary of the
Treasury, the secretary of -iummerce and Labor, and the Comptroller
of the Currency;
Second, Fif.-en Directors to be elected one by the board
of directors of each Branch of the Reserve Association.

They shall

be elected by ballot, each nether of the Branch board havin,c: one
vote;
Third, twelve Directors, who shall he elLcted by voti

r".
•

representatives, one representing the banks el;ibraced in each DisCA42—
trict. Each votinc7 representative shall IluAre a number of votes
equal to the number of shares in the Reserve Aeeociaiion 'Ield by
all the backs in the District which he represents;
Fou-th, the Board as th s constituted shall select twelve
additional members, who shresent the industrial, comHercial,
agricultural and other interests of the country, and who shall not
be officers of 'eanks.

At the first meetine: of the Board all the members of The Board,
empit the ex officio members, shall be classified into three
classes, and the terms of office of these three classes shall be,




7
.

Thereafter members of the

respectivel, one, two, and three years.

Board e11 be elected for a term of three years.

No member of any national or State le7islative body sleall be
a Director of the Reserve Association, nor of any of the Branches,
44.

4 0041

The Directors of the Reserve Association shall aneually elect
an Executive Co

ittee, and such other commitees as the by-laws of

the Reserve Association may provide.

The Executive Committee shall

Governor of the Reserve As4
two MikA.A.1.6. AAA-)
socation shall be ex officio Chairman and theA Comptroller of the
consist of :.142wi

members, of which th

Currency ex officio sp memberS.
The Ekecutive Committee shall have all th

authority which is

vested WIR=ftwi.in the Board of Directors,
lath
cifi ad_ele7ated by the Board ,.0
4rtitift',"^n4.1!* et: L
4"
a Board of Supervision elected ry the
Directors from anion

its number, of which the Secretary of

Treasury shall be e-

Board of
be

officio Chairinan.

EXEPUTIVE

OPPICERS

OF

THE

RESERVE

ASSOCIATION.

The Executive CY'ficers of

•

12.e Reserve Ae.sociaion shall con-

sist of a Governor, two Duty Goernors, a Secretary, and such
ST
(
ry-tri4.4,e ca.. 4a= 15
0
atr,*r officers as may be provided by the by-laws. The Governor,
.te-er-0642
t\
and Ti puty Governors, shall be elopplimaxid by the President of the
United States, from a list submitted by the Board of Directors, -arrid
.

The Governor shall be subject

to renoval by the President of the United States for cause.

;I:L
".0

term of office of the Deputies shall be seven years, but the ilisege
,
44E4
APIA/
Deputies
appointedWor terms of four years and seven years,
respective




8
.

In the absence of thf

governor or his inability to act, the

Deputy who is senior in point of service shall act as Governor.

EXECUTIVE

OFFICERS

OF

BRANCHES.

•
Each Branch shall have a manager and a deputy znanager.

They

shall be appointed by the. Governor of the Reserve Asrociation with
the approval of the 14.ccutive Conmittee.

The po':!ers and d•ties of the

manager and d.eputy manager and

of the various con ittees of the Branches shall be prescribed by
the by-laws of the Reserve' Association.

FUNCTIONS

OF

TTTI:
T. I 0 N

LOCAL

ASSOCIA-

.

Any merlb er of 1 :meal Aw-o c ia,tion
4,
4
'ion i
ll
ye

r.7uarantee

eftre Associa

c a.ii:ercial paper whicTi it desires to red'-1
.t
,

r

at the Branch of the Reserve Association in

4.4

District. 7, :j
44

rccivinT a guarantee from a Local Ak;sociation

-

pay a com-

mission to thilteAs:;ociation, to be fixed from time to time by its
board of directors.

The guarantee of the members of the Associa-

tion,in the event of loss, shall be met by the members of the Association in the proportion to the ratio which their capital and
surplus bears to the afr-re -ate capi 4
;a1 and surplus of the Local
Association, and the commission recei litd for such p:ugran,tee, after
the pa.ynent of losses and expeimes,

s-1,ribli ,,(-4 ar,:on,7 the
4

several banks of the Local Asociation in

sax:le proportion.

GA local Association/ shall have authority to require widitional se(*Al
0 ',I CA.,. • .ty
cus:
. fromf,lanici offerin;:, pay): r for
,
or may de-line to grant thp applination,~44ec.
LI/




te-t-4A

9.

FUNCTIONS

OP

ASSOCIA-

SERVE

THE
TION.

All

of the privileges and advantages of the Reserve Associa-

tion shall be equitably extended to every national bank of ti4.44.4ar
of the clusses herein defined, who shall subscribe to its proporotne

tion of the stock of the Reserve Association and sall
now ,
e

net-te---ifirottey-

C, /4,411fe bt,tie
t

A

1'47
The Government of the Urli j d. Stat-Js, and t:-Iose national banks
owninp: stock in the Reserve Association, shall be the sole depositors in the Reserve Association.

All domestic transactions w‘ibis

tlie Reserve Association shall be confined to the Government and the
sul;scribin7 banks, with the exception'of the purchase or sale of
•
secrities or sec:Irities of foreign governments,
Government or State
al
age of 7old coin or bullion.

The Government of the United States F.•!w14--(leiJoit its cash
balance with the Res'.3rve Association and thereafter all receipts of
he deposited with the Reserve Association, or

the Government
suc

via ional banks as the Government desiimates for 'hat purWhere there is no Branch

pose in

of the Reserve Association.

All disburseents by the Government shall be made throu

he Re-

Association.

serve

The Reserve k,ssociation shall pay no interest

on deposits.

The Reserve Association may rediscount notes and bills arising
out of comLlercial transactions, for and with the endorsement of

3

any bank having a deposit with it.

shall in no case exceed the capital of the bank applying for the
rediscount.

j.

The amount .so rediscounted

Such notes and bills must have a maturity of not more

than 'wenty-eight days and mlst have been made at least thirty days




10.

re

date of rediscount
nor to. the i

A- •

pe.#41

V-14i44,4*

IL. A

.regate
line. The a .
from
A
/4
amount of such notes and bills bearin:7 the signature or endorsement
of any one person, company, cerporation or firm, redscounted for
any one bank, shall at no tie exceed ten per cent of the capital
and surplus of said bank.

The Reserve Armciation mar rediscount :or an

depositin ,- bank

A
notes and bills, arivin7 out of co T-ercil tr.fc,actions, having
more than twenty-eight days to run, but in that event the paper
must be guaranteed by

Local AJ-scciation of which the bank

ing for the rediscount is a member.

A
Whenever in te opinion of theGovcr, or of 'Le hescrve Associat
iet•Aqvi
t
tion the public interests require, 1.s4,44,41 opiniGi mmmild, be concurred
in by the Executive CoLuA.ttee of the heserve Associal;ion and have
If-e definite approval of the Secretary of the Treasury, the Reserve Association may discount the direct obligation of a depositin

bank, endorsed by its Local Asociation, provided that the en-

dorsa:rent of the Local Association

shall IDJ seOured by the pledge
tk

and deposit with it of satisfactory securities, which shall be held
by the Local Associatiop for account,,of the Reserve Association;
t
Lik
ri-i-jook
tSimeet in,rloAcasc shall the ailount loaned 44

;
eprii.:;,44
t2, IA.,. , i ;- i7 4,w.aii4, exceed two-thirds
,p lvr-nuJi-...4,
.

,

t_i,

.
..4., , .0,,..er

,
4.,,.. *..:5; • e .
•
.
44,C

of the actual value of the

•

SI)

(:c ,rities pledged.

The amount of a4ko..4.1 iTuarantees by a Local Arsocion witk4eh
AAow
exceed the a-,:rethe Reserve Association 1.41#6-4erke shall

04-7

.

,
frAte capital of the bankkforminr the ,1;uaranteeing Association.

OlArPv
The Reserve Association may, whenever its condition pd. c:ener.,1
financial conditions warant such inveslnent, purchase to a limited
arrount from a depositirw bank acceptances of banks or houses of
-nqeeslioned financil responsibility.




Such acceptances raust arise

11.

from co mercial transactions and have a maturity not exceeding
b\.4t,arL4
ninety days, an.el'2111141. be of a chara ter kliowh in the market as
t
A
bills. Sucl? acceptances slqall bear t e endcrsement of the
depositing hank selling the same, which endorsement must be other
than that of the acceptor.

The Reserve Association may invest in United States bonds and
in short term obligations, that is, obligations having not more
er1
than one year to run, of the United States, maad of any State, or
14.4
0
of certain foreign governments to be named 4,7 the Act.

The Reserve Association

have power at home and abroad

to deal in gold coin or bullion, to grant loaf-Ls thereon, and to
contract for loans of gold coin or bullion, giving, when necessary,
acceptable see;Irity for t-eir repayment.

The Reserve Association shall have power to purchase from its
depositors, and to. sell with or without its endorsement, checks
4, 1
1 4-44/6
r4
..aett bills of excYtan, A in Fnr;land, FraLce, or (lelany, and in such
n
/
other forein countries as the oard of the lieserve Association may
decide.

These bills of

excange must arise from coY'rercial trans-

actions and be of a maturity not exceedin7 ninety days, and shall
bear the signatures of at least three res;onsible parties, of which
the last one shall be that of a depositing hank.

The Reserve Associaion shall have power to open and maintain
1 )ankin7 accounts in fGfc.L7n countrif,s, and to establish agencies
'
in for in countries, for the purpose of purchasin7 and sellin7
and collecting foreicrn hills of exchange, and it shall have authority to buy and sell, through such acencies, prime foreign 'bills of
exchange arising from comrereial
iod no

eceedinr7 ninety days, and hearing the signatures of res-

ponsible parties.




transactions, run inr for az p-r-

1

12.

EXCHANGES.

DOMESTIC

A.'

(llitA,J04-4,4
il
It shall be the duty of the Reserve Association Upon reuest,
to tra:i.sfer any part of tho deposit balance of aily national bank
havin7 an accrunt with it, to the credit of any other bank having
an ac aunt 7:ith the

eserve Association.

If a deposit balance is

transferred from the boo's of one Tiranh of the Reserve Arsociation
to the books of aother Branch, it ilay be done by nail or telegraph
upon terms to be fixed from time to time by the rxecutive Committee.

CHARTER

RIGHTS

OF

NATIONAL

BANKS.

In addition to the rights now conferred by law, 114,;wwiwoomobimpt.
najional banks shall be authorized to accept commercial paper
,
on them, havinr not more than ninety days to run, properl
and arising out of co f ercial transactions.

secured,

The amount of such ac-

ceptances shall not exceed one-half the capital of the accepting
bank.
1,
)4.
a±moWational banksdeu.Thority to establish branches in the
cit7 or town in w'rlich they are located.

orwization of tanks to conduct business in

w 44,

i .-41iV4
akit e

forei , rn countries. The sock of such baqcs may be held by national
`
fg
The bank so orranized may have an office in the United
44-(xLC
States, but 'Peer nof comp-te with national banks for domestic business not necYssarily related to the business beim- done in foreirrn countries.

There shall be established,. new class of national banks, to
be known amommit by a specifically desig7nated name. such banks
iN004440
-ts and maykke properly secured
nay c-.6411,44.40h savin7s departyve;
444,_t-4; Ar-gt, LAO
1
loans on real estate', L4N*N.W6p.maiWillWMPIMON444. be rertricted to
a certain proportion of the a- -rer-ate time and savings deposits in
the bank.



The reserve requirement in :;ch banks will be less ap:ainst

1

13.

savings and time deposits than against demand deporits.

There

E hull

ityqs
1,L

be no change in the percer.tage of re.s rye t ‘
require.

11-f
,

ikgAttka.AA-1

6 11 )'-t
,,

"be held a-a, ins t deoosits

vt

-*Ir national hank, isi.dikaaspokfiged by!
.
kv_
sa.t4.injw4 ...1 ,1„Akt.1.1,===........=1" ttl=alm4imidftiliskim4g, but A national ban
, 1
.
,
:
to

A
rttt-,, -r+rr-rfrIt in the Reserve As1;ociation
Zgliwialat-e—

t..13. Lk v• 'I'
,
,-1
{....1
r3 /1,PTROLLER'S

RTPORTS.

The Reserve Association shall make a report, showin7 the principal it rs

of its balance sheet, to the Comptroller of the r'ur-

rency once a week.

These reports shall be made public.

tion, full r ports shall he

In addi-

made to the Comptroller of the Cur-

re cy coincident with the -ive reports called for each year from
national banks.
All reports of national bank examiners in rer7ard to the condition of national banks shall hereaft, r be made in duplicate, and

c4t-wt.t_acig.44.4.
one copy shall be filed with the Reserve Association foriithwse
of its Exec .tive Officers.

All r4-.415-e..9kis.a na4io aL banks
report

6-4

o the

ereafte r make a weekly

LAA.frs,,- vidt,AA;
,

the principal items of
A-4)

their balance sheetI AA.Lak ,
ti

NOT -7.
t#4
'14
Tl.ere R4-7rtl liereaft
EvO
national ..Ink

i„

Coe ,
--" 44

ISSUES.

V
i, sue, sof bank notes by
u,
"'Xf `rftry-e-l+tose , maintain

their present not- issue, but wli.en ever a -1-ank retires an:: part of
it

oxistin-

ipsue it will permanently surrender it

ri -ht

asseit—vvetIll.
C "
iki

14
04Et ;Mt' Sti7 7Wfiq
7.

-

441440.! k

(11,ire

The Reserve Association 4.04404ialEcies. 'buy ifoot par and ac




4,4:1
Ai inter-

14.

est the

held
74144

per cent bonds

by any subscribinc bank to senlre
,
41
4.
circulation..1.4-44:-2,4-=.4.44-r-s-4‘444-4.40.4 he Reserve AsF,ociation. takl
over these bonds with

he existini7 currency privilege
-jd. ter
066
,
c.,„ Ak/W14..
4
j.,
-;:00640po and assume/ responsibi itv -P 9r the -ectoym don of ou
_
A4

notes secured "-er
'4, 1W4U;TN:

1 '

The Leserve Assoclation ap;r('es to hold,,Inct4ev.-4,M4Htuidap.
for a period of not leEe than ten years,,
plita.amiiimeel the bonds so purchased, or an:7 Government security which
may be exc7- a.-.ed for them by refundine: or otherwise
.
lippr urrrierrrt-erret—"Wo.

the Govern' ent should adopt

*111.Phe policy of

i.suim7 securities at a higher rate of interest than two per cent
to Reserve Asociation shall 'nave the ri711.t to exchange,.9uch securitiec.
•
"

t na:yfC:H. ronds
,
a

\
,

4

intert at a rate not ex-

ceE.ding three per cent, but in that event t'le a ount of :trinHal taxes
1
to be paid on notes based ;;;)en such now securities s(al] be as much
greater as the interest rate of the new securities shall exceed
two per cent.
To illustrate: If tl-!e (iovernment should cleciee hereafter Lo
issue a two and one-half per cent bond, the rate of taxation on
currency .i;:laed by the Reserve Association thereon would be one
per cent, instead of one-hal' of one per cent as on the existing
twos.

-4
' I
I

t1/

h-fh.t..a ,L, 0-itt „LA._

..
et, ,. i lk ,

/
;e*t ,
it 1;- 4.-- ,
.

L4r419"".1444WIWilliglidomatliWalit

ric,ht, with the approval of the

, %..,,)

c...c.

;
f_._,.......t

.
t-7
Ito....04 iv ik'd.• to.

Reserve As.ociation fliiim+ 1

...10000116

have the

ecretary of the 'easury, after

two 7! ears , itiki..s.ii...4a.r.si.c44.4.../a*.a.aw, to aQu.ally

isposeNto

of $50,000,000 of the bends held hy it, to secure circula'io
ettat.1,k4
b.441.4.4-4
Govrnment neet., ,4.44.7 the rinht to purchase at par, throuf7h the
,
,
trustees of the postal savin5:s bank or otherwise, any or all of
fu:ch 'bonds so

:DJ.

The Reserve i.ssociation shall issue, on the

terms hrrein provided, tbie+T

notes as fast as the outstanding

notes secured by such bonds so held shall be presented for redemption, it bein:7 the policy of the United states to retire as rapidly




1F •

as possible, consis'ent with the public interests, bond secured
circulation, and to substitute therefor notes of the Reserve Association of a character, and secured and redeemed in the manner,
provided for in this Act.

bank su-rkidv.er.- its is:.ue (LI

When a naticila
serve Association

ill arsAlme '.-ii i\ms.me and will i

o ,s the R
own

u.

he heserve
redemption.
•
,
- LL C
Association may. i:-,T,ue pdfaitional 'rotes as follows: Up to
(")'
tk
$100,000,000 upon the payment cf an annual tax of three per cent;
in their stead

sthey are p..

ented f

up to an additional 0.00,0CC,000 upon the payment of an annual tax
of four per cent; ip to an a0ditional

1.00,000,000 upon the payment

of an annual tax of five per cent; and additional notes upon the payment of an annual tax of six per cent.

All note issues of the Reserve Association :Trieml. be covere4
41 4,4) cr A/4.-1,<
et.LAA"-• • • .
to the extent of one-tird ity lawful money and th47.4N..Q.14o44.)470
A
bonds of the United States or bankable ligialres-or both. (It should
be either provided that the Reserve Association may also hold in
its reserve forefin

coin, or that the Treasury will issue gold cer-

tificates a:ainst foreign coin.)

The notes are lo constitute a

first 'ien upon all of the assets of th
v...4.
.56.1\40A- OLQ

t

11,A'

Refsf rve AS ac
0 )A

6'1
1

."r
,
&j P...4/tra7i4- it,

4014 dt•-•.

The notes of the Reserve ::ssociation shall be received at par

4

4
10
in paypient of all taxes, excises and other duos to the United States'
and for all salaries and other debts and. demands °winr by the United rtatt s to i:idividual s

corporations or associations, except

4zeti

obligations of the Government which are by their terti payable in

A

gold, and for all debts due from or by one national bank to another,
and for all obligations due to a na - ional bank.
r.
e
The Reserve Association s'iall, upon application and. without
9
, dnositin. bank/
car7e for transportation, forward its nots
ar7a ins t *44.64.4. credit




••44

1."

1
!"1 " '
,
NA__--1r71•11 P4"11,"'
1

T

:4
24
the suestion made at tbe last meeting of
conformity
In
for a
the Yational Yonetary Colalission I have prepared 4a-outline
/\
/
1
.1,V"-•%14 I..4.
:
be herewith
revisionofourruttionall
to sub ,it t. -19. -4.1

to

In doing this it has

been my aim to sui7gest changes in the national banking act which
3
aill take it responsiv, to the deands of 9r ilodern :)usiness.
believe that the study which tile Commission has given to this subj-ct lib.s led irresistibly to tl- e conclusion t

t our present rte4-

tiom..1 banking system not only fails comulotely under ttressud
in tl- e presenoe of unusual demands upon its resources, b t
even uncln-tile ordir,

7r

iitiols of business t lt 'Has been found
con,

r4).
inadequate and unrsponsi,

The su7gestions submitted herewith are the deductions which
I have made as the result of the two years of study 4hich the Com-

mission has

7

ven this Er7bjert, und are formulated in the light of

the great mass of information which

h_x gathered

respecting not only our own banking system and needs but also the

experience




prctices of foreiEn countris.

Wh'le we have found much that is ctdmirable in the °pent ion

)' C13 40,04mika.

t'('

o

•-ev-

Ow.

- • nip_,

'41.4

40 0
,.1. .4

1211,-.nro

.

•

At'

•
6 44

I believe
et. tip Lb" 114-4
t:bu.t the
,

good results which they obtain c

be reached without the

.
64. t
0

creation of

central

trw-ic
"a syt4,4 , isin
44
tnd I feel that the plan which

is proposed reaches those results without beinc open to the objecfiL
tion w'qich may well be brou 'L. against
t
;:17.10
-10k T' e plan

_ isAgi
+21410 6
,

Vinstitutions

QP400iW

is' ere presented makes no claim to being

worked out to a definitive for.l,

discussion will cerSi...

improve arld modi-Py its details.

.

to flz.,Itte

t406
ye

Iiten

.de

rer:Ognize

.,,
that tt (,,n oniyybe dont*'aftr it ,k,-;•4s rieceivad the considion
.
..
E
.
,
,
of mtlny minds ! d Itas been studied vith ci.
-I
,re from liny points of
•

In its main features, however, it uill, in my opinion meet
the necessary requirements, and I offer it to you for that further
consideration wl-ich it must now have.




I t%link the stud: vrhichithe commission h
,

ziven the subject

leaves lit 1.9 room to doubt that the present law in regard to the
management

id control of ntioni-,t1 banks a,nd the regulations re-

p7.arding the conduct of their business

become obsolete.

There

is att,e present tiie, I conceive, no roorA for argument in regard
‘'e-ta
t.-0_,....1e;a..fai.4
1114. 434411
rt
e
l
=t .. Trrth
. 7
e"
" 4.Z . 1
. 44
444

nteni14"0"41,-

41414...444401 lr'Alet
'

neces1A. t y hi:Ls

b en demonstrated too frequelly in aidespread loss to the people
of this country,

derangem nt of busines; that extends even out-

side of our own borders, mmt:A4almi recognition Allawk is now general
that our banking system isdanR:erousij inadequate to meet modern
deAands.
4,04.a.Ad.4.-., )
-(
e1LLIWtemik***MWer

Ct4

it must

Tbe our aim to ac-

0.41.
f-:--r3c,•: by means which will dis-

complish

'y

turb

the smallesta
7;kposEible c.xist.ta;_goxid_itions„
r

I think

It should be our aim to liberalize the present national banking
7ti
act ,
znd add to it such features as are deemed essentialvtu—nAN‘4112A,
.
rather tLan to formIll‘te any plan which
#07
would r4

chane

In the lic:;1;i of nur experience it is obvious t'ht one of the
principal needs i6 sone r+em for the unification of our present
baking institutons into one comprehensive system.
opalript,,we he




oisa

I

actual

Ye e'tfrid pt6iieit1c* ipregard tp the

be forced to such large degree as tialopimimpArc at present into the
makiniT of call loans upon stock exchanr!:e collateral, but frill in-

,4.ge
stad be available for the needs of co ,derciul business, we w441
have

30

broadened our b%tnkini.: methods as to bring incalculable

',pundit to the comaerciLl life of the country.

I believe that the conclusions which I present h9nvith meet
f:ose conditions, and that the or7anizaton which it is proposed

to create will bring the benefits which we seek lithout running

.6.AAL

et.

40
. 420 401

any d4c=r of creating E4w4*moamairmal financial instituton which loigia
be controlled

by political




44stazar by ambitious monetary interests

or domin:Ad

3
)164-1"00C...
., ,
.
,
holdin' an0 use of/rpservoilha7W ID.41popelacomill e*(rethv14,, detrpg.ental
f
/ 1
I
/
/ 1
In other countries we have found that
i
pub 4c /l nter4ats.
to
-,,....,
rserves are concentrated .1.0 use tt in aiiy direction where needed.
under or faulty system reserves are so scattered

time of troubi:

vlowN
1,5r defence.
as to be av:dlab14"'"either for purposes of assistance 1
The result of our law has been to create u banking s7ste. of a
reat number of isolated units, each working within a limited
circle and each of ')ecesnity governed by its own iia,aediate interests without reference to what would be for the greatest :rood of all
-hile the intelligent managers of individual banks may fully recognize te necessity of greater cooperation, they are, under the law,
powerless to effent it.
can so 144.7.144a* the present national banking act as
asso(!iation of all the bunks of the (.ountry to meet
4.14.0
.?se needs, Wt,
tY ,
problem which is befo:

ve

•-()'e a long way towards solving the

us.

If we then, in addition, provide a

'ore scientific basis for bwik note circulation, so tl!at its voiume aill be responsive to the needs of business we

4, I beliv-,
If,

have net the two 1:in requirements of a satisfactory soliton.
In addition to that, we can aid in creating a discount market

in

tnis (.ountry similar to the discount narkets in Europe, so that
the most liquid portion of our bunk funds




not of necessity

_410044
‹.‘

Wh'le we have found much tat is ,dmir.tble in the opent
ion
qc.
of the va.rious ermOrtattl- -government "o;1nia3 of T',1).repfl

;zA

/liot

. 1

t ,4*,0-4,1A 7GY

.

I.Wk!Ta

I bell.we

that the good results 4hich they obtAJI c n be reach
ed w i%hout the

-IN

(4"A-4
cration of a 46mAtimor central b,rik, and I feel that
iihe plan which
is proposed reaches those rcsu1t3 withm.it beinp:
open to
tion NT)ich m:ly well be brou
,!tr-41.20144/Itt 'fano plan ' Mich.
,
Worked mit to

is

;:ainst such

• •• •

tnstiton.

I-10-

here presented riuk,
!t3 no ciu1.i to J0 !.fl

definitive forn.
••

.1-1e objec-

44410hitirraiiscussion

•.

,

t,Linly iiprove and modi ''y its details.
-

I

•.

trrrt-4rere--tre

••

to prer.Pnt it in

like

ttr-turrttlrIff trr "tt.-1.4—reffr.Vel
,

"bf a whoiteriew .

I recognize

that that can only be done after it h4s received the
consideration
•

41441.
,
.

A.

and

,

as been studied 41th cre

, r--140-4,444.43-4f

In its main features, however, it will, in my0op
inion meet
the r- c,
i :3sar2/ requirenents, and I offer it to you for
thn.t further
consideration 7/1. iel' it must now have.




r

CHARTER

AD

LOCATIOTT.

It is proposed to charter the Reserve Association of
America, which will be the princip 1 fiscal agent of the
of the United rtates.

The authorized capital of the Reserlv; Asso-

ciddon shall be three hundred million dollars.
charter shall be A.fty years.
c in Washin7ton,

shall

Government

The length of its

The head office of th

Association

.C.

and a
The country &lull be divided into fifteen Districts,
ct.
branch of the Reserve Association shall he located in each Distri

from.
The Reserve itociation and its 73ranches shall be exempt
real esState and local taxation, exeopl in respect to taxes upon
tate owned ey it.

CAPITAL.

Only national banks of the two classes hereinafter proA
vided for may subscribe tc the capit:il stock of the Reserve
ciation.

A national bank havinr a minimur

capital of a

HO-

least

.!'.2b 1 000, may subscribe to an amount of capital stock of the Rethe
,
ser:e Association equal to twenty per cent of the stock of
ibsubscribinp7 national bank, and not less, and each of :i.ch subscr
inr ba!Acs

become a member of a Local Assoailtion as hereinaf-

ter provided for.

2ifty per cent of the subscriptions to the cap-

ital stcck of the Reserve Association shall he called in cash; the
balance of the subscriptions will rain a liability of the stockholders subject to call.




2.

not be transThe capital stece of the Reserve Association will
ferable 7 and Under nc cireuristances 11'3.y

be owned by an' corpor-

indiatjon, other 'ban the subscribing national bank, nor by any
vidual, nor nw7 4.4.. be cmled by uny naticeal bank in any other
ameunt than in the proportion here provided.

in the case of a

nat1one.1 bank increasinp: its ca'Atal after it once becomes a subbank
,
scriber to t.he stock of ' e Reserve Association, the national
shall 'hereupon subscribe for an addi7ional arount of the capital
stock of the Reserve Aseociation equal to 'wenty per cent of the
book
national bank's increase of cepital, payin7 therefor its then
be
value, but onl.: on -half of this additional subscription will
called in cash, as hereinbefore provided.
h

tional bank which is a holder of

In the event of a na-

cApititl stock of the Reserve

Association decreasine its capieal, it s'eall surrender a proportionate avount of its hold i ,gs of the capital stuck of the Reserve
Association;
Rifer

to

or if a national bank goes into liquidation, or de-

:;11.hdraw, welch it r,ae do upon one year

no,ice, it fall

surrender all oF its 'fieldings of the capital stock of the Resurve
A sociatian.

The capital ?Joel:. of ;he Re;c rye Association so sur-

rendered shall be cancelled, and

the national bank thus surrender-

1.
ing stock in the Reserve Asociation shall receive in paymfn
therefor a Felm equal to the then book value, as shown on the balance sheet of the

<eserve Association, of the stock so surrendered.

EARNINGS

AND

DIVIP7 11)r).

The earnings of the Reserve Aeseciation shall be distributed
':
in the followin, maener:
After the payment of all expenses and
shall receive four per cent.
one-half to n,o

taxes tte

stockholder

further earnine:s shall eu divided,

o ft.e surplus of the leserve Association until that

s7Jrpl e eall a ount

o twenty per cent of the paid in capital;

one-forth to ,7o to gle Government, and one-fourth to the stock-




holders;

but wliun the stocli.holders' dividends shall reach five
all rec-ive nc anditional distribution.

:r cent they
pe-

After the

stoe'lthc,ldert reccivu five per cent the LarningE shall be divided,
o-e-half to be added to the nurplus of the Reimrvt. Associaion and
one-half to

r,c) to the Government.

After the stockholders receivc

five per cent per annum and the surplus of

1-1'

Reserve Association

amounts to twenty per cent of The paid in capital, all the excess
earnizs shall go to the Government.

The minimum dividends to the

stockholders shall be cumulative.

LOCAL

,
ASS('CIATIONr

OF

NATIONAL

The law will provide for the formation of associations
of national 1)anks to be dev,inated as Local Associations.
Local Association shall be composed of not 2.-s than

7very

Vn banks,

and the corilined capital and surplus of 'he ,cr.b(rs of this Local
Associa',ion

-ate Lot loss than five million dollars.
ha11 a'
,7re,;

All the Local Associations shall he Erouped into fafeen divisions, to be callyd r)itricts.
Local Aseciations shall

ne terriiory incli)ded in thu

e t:o a)por1ioned that cvcry na iond bark

0
will he lecatd within thc 1 oundaries of sorx: -Local kliociatioa.
Yvery sltbscribirn7 nationL41 bank shall become a member of the Local
Aseciation of the territory in which it is ihtuated.

DIRECTORS

OF

LOCAL

ASSOCIATIONS.

Each Local AsnociatiOn shall elect annually a board of direciors in the followin - na:mer;
The nur,:bur of
laws of

he directors may be determined by the by-

he Local Anociations.

Three-fifths of that number shall

-s
be elected by ballot cus by 1h,. representativ, of the banks that
Ab •
-are members of the Local Asociation, each bank having one repre0

1 .r'



"UM

4.

sentative, and each representative one vote, wdthout
the s z e of the bank.

reference to

?wo-fifths of the '01°10 nuriber of ei reel ors

of the Local Arsociation shall be elected by these same re;.resentatives of the several banks that are menbers of the Aseeciation,
but in voting for these additional direcors each representative
shall ,e entitled to an Tiany votes as the bank rhich he represents
holds shares in the .1-eserve Association.
shall be no proxies.

At euch elections there

The w.thorized represenative

of a bank, as

herein provided, must be either the Fres ident, vice-president,
or cashirr, of the hank he represents.

D I R

TORS

OF

A 1T r, TI r: Se

As he-etefore provided, all the Local tuseciatione W -all he
divided inie fifl en divisions, and each of
be desinated a

istrict.

a Branch of the

eserve Association.

these diviione

There shall be located in each District
of thcf3 fifteen P.ranches

of the 1- enerve Association shall have a board of directors and
those directors sall be elected in the followine ma nor:
The board of directors of each local Aeecciation shall
elect by ballot one member of the board of directors of the Branch
of the Reserve Anscciation.

In this ranner there will thus be el-

ected as many directors of the Branch of the Reserve Association
as there may be Local Arsociations in the Pitrict in which that
Branch of the Reserve Association is located.

In addition to ehat

nunber 'here shall be elect.d a number of directors equal to twothirds of the number of Local Associations in the Ditrict where the
'ranch is located; such additional directors shall be elected in the
folowing manner:
There shall be chosen by 'he banks compoeini7 each
Associa tion a voting representative or proxy holder.

Local

In choosing

such votinr: representative each bdrik shall be enitled to as many
votes as it holds shares in the eserve Association. Th voting
a•
representatives of the eeveral local Aeeeciations v.ich ferm a




5.

TA.strict sh.11 ten mcet at th

additional mu-!-her of (irectors of
of

hi Branch ad elect an

office or

h. Branch

equal +o two-thirds

-:at is,
he number elected directly by thr! Local k4mciations; t.

equal to two-thirds of the nunber of Local Af4iociations composing
the Li2trict.

Each votin.7 representative at such election shall

have a nurber of vot.-s equal

the numbr of f:hares in the Re-

scrvc Association hcl,, by all ti!. barn.s composin

the Local Ao-

ciation whi'2h he represents.
The firs' buiness of the board of Lht. Branch, as thus constituted, shall be to add to its nimbe:r

by 12-le clection of an

additional number of directors e4ual to one-third the number of
Local A. sociutionE situatd in the District.

7Q

Such additional di-

'1jAf

rec(rs s &LlArPreeent the industrial, cor

CCia1, aricultural

a-444 other interests of the District, and shall not be c; 'icers of
1)anks.

The board of directo -s of a 7ranch of the Reservr. Association
will thus be c'omposed of,
First, u :roup of directors equal in number lo the num':er or local Acsociations coin

the District, and this group

shall be elected by the directors of the Local A-sociation, each
director 11avini7 one vote;
Second, a group of directors equal to two-Lhircs of Lhe
forep7oin.:

-oup, anri elected by stock rei:rcsentu:ion;
Third, a

of the first

1.oup a

directors equal in number to one-third

roup, representim; the indostrial, cour,ercia , u..;ri-

cul'ural and other interests of the District, and elected by the
vatts of the first two 7,roups, cacil director I

s votilv havinr: one

vote;
P(urth, The r%anager of tilc - ,ranch sail be ex officio a
r.umber of the board of directcrs of




of the ''oard.

J

Tranch, and :1111 be

All the members of the beard of directors of th. 17ranch except the

at the first rrt•etinr7, of the

-!x officio nember,

hoard, be classified into .f hree claes, and the terms of office
of these three classes shall be, respectively, one, two, and
years.

three

:rs of I.hc board shall be elected for a term
Thereafter memb,

of three years.

DIRFC TORS

THE

OF

II ESERVY

T I 0

,IAASF70 0

S .

Th;'card of the heservc k-lsociation shall consist of forty
five Directors, and it shall bc cgriposed in the follon: manner:
:First, six ex officio members, namely the Govt-rnor of
the Reserve Association, who shall be (7, -lairi-r.,an of the Poard, two
Deputy governors of the Reserve Association, the Secretary of the
Treasury, the secretary of -ionmerce and Labor, and the riomptroller
)rrency;
of the r!,
T)iyectors to be elected one
of directors of each Branch of the Reserve As:locia.tion.
be elected by ballot, each nember of

th- board
They shall

he 7-.?rn,nch board havinF: one

vote;
Third, twelve Direc!ors, who shall be .acted by voting
;
representatives, one representin ,- the banks embraced in each Dis-trict. Each votin, representative shall iv.:Lve a number of votes
equal to the nlimbr of shares in the Res, rve Assoc ialion held by
all Lhe banks in ihe District which he represents;

.

;lve
)8 constituted shall f.. ..lect twcs th;
,
0 APSA1
aditional members, who shall i represent the inoustrial, cot .:rcial,
1Pou -th, the Board

agricultural and other interests of the country, and who shall not
b(

o!'fi curs of banks.

At the firs

meetinr- of the :loarri all the members of the Board,

expect the ex officio members, shall be classified inf- c 4 hrec
classes, and the terms of office of these




three clasves shall be,

7
.

respectively, one, two, and three ycars.

Thereafter memb(;ro of the

l be el-cted for a. term of !*ree years.
-

,
Thard

Io m(w:br of an

1
nalional or ;77 :ate leisltivd body sall be

a Director of the Reserve Arr9cj,ation, nor of any of the Branches,
rkLir

fr, • •

AA,1

1r'

The Directors of the lieserve A:Alociaticn shall an,
,ually elect
an Fxecutive Co

itfee, and such other coumiftees us the by-laws of

the liesrve As:7ociation ray provide.

The Executive Committee shall

consist of gov.4.4; rembers, of which th

GovernoF of the hes,erve As0,4)
(.4,4
soc at- ion s'!Iall be (.)( officio Chair7an and thOAComptroller of the

ClIrrency ex orficdolitmemberS',
The Fecu'iv ,:

floyit c;
.-111

vested by law in the Board of

have all th

authority xt.tich is

irectors, except such a:- may be spe-

cifically de1e7ated by the -Roard to other committees.The rate of discount

be fix, d fro

time to tinc by

There shall be a 13card of

the ];xec-a -Live

upervi,,i(,n elected

Pirec!ors fror ton

it

Treasury W'all be e-

iftee.
Beiard of

officio clqairran.

number, of which ihe Secretary of +lie

EXY(7LITIV

I

OP

T7R

RE'EV'E

ArS OCIATION.

The Execilive Officers of the Rserve Ae,sociation rlhall consist of a r:overnor, two Deputy rlo. ernor;F), a Secretary, and such
other cf''.i.ers as ray be provided by the by-laws.
and D puty Governors,

The Governor,

shall be apointd by the President of

United Svates, from a lint sub:nitcd by t.7.1shll be confirmed by the Senate.

':-!t2

3c).trd of "Aivecturs, and

The Governor shetil '})e el.kbjecl

'o r.eixval by the Prnident of '11c. United states for caLse.

The

term of crfice pf the Deppticashall bG seven years, but the fairms4
4-S.
0

Deputies
respectively'




Jbe appointed for terms of four years and seven years,

A

8.

In the absence of the Governor or his inability to act, the
Deputy who is senior in

EXECUTIVE

oint of service shall act as ''.overnor.

CFFICERS

OF

BRANCTIFS.

Each 1
3ranch 10all have a manager and a deputy manager.

They

shall be appointed by the Governor of the Reserve Asnociation
with
the approval of the Executive Committee.

The powers and d ties of the

manager ano d

of the various con it Lees of the '1 anche8
.
.

puty manager and

hall Ic prescribed by

the -?)y-laws of the Reserve Aeecciation.

"q't.inC TIOT 7

T.00AL

AS .00IA-

T I 0

Any member of a Local As:ociation may apply to this Associa-,
tion to eliarantee coreercie...1 paper which it desires to redisc
ount
at -t- he 'ranch of the Rserve Aseociaion in ite Distri
ct.
t:t5L

A bank

receiving a euarartee fror a 14cal Aeecciation will pay
a car.
-

mission to that Aeecciution, to be fixed from time to time
by ite
board of directors.

'Ll7e euaeantee of the members of the Associa-

lion t in the event of loss, shall be met -y the members of

AE-

sociation in the: proportion to the ratio which their capita
] arid
surplus bears to the weereeate capital and surplus of
the 1,eal
Aeeociation, and

commiscion received for such guarantee, after
,t4,4.1,4-^••••

the 1, arren t of losses and axpenees, w414.
-4-e dietributed am.r•
several banks of the Local Association,in Lh

'se proportion.

Local Associations shall have authority Lc require aediti
onal secerity from banks offering paptr for rediscount, if :hey
1
nee fit,
or ra7: de line to grant the •_tpplicatien for euarantee.
.




1).

9.

FUNCTIONS

0

;'; E T, v

T
T I 0 N .

A. ncia-

All of the privi1e7,es and acivantaL;es
tion shail be equitably exrended

.iLr

to every mat i(..-rr..11

of the classes hrein 6c,fined, :h( shall subscribe to i.t

propor-

tion of the stock of the Reserve Asociation and sall sell

o

L11,

Reserve Assciciation the (.;overnnien1 'bonds nc7/ held by it to secure
note issue, as hereinafter provided.

.
,
TheGc) ernr.ent of thc Uni e.d Statc;s, and these nation.A. 1- )an.ks
owninp: stock in the Reserve Association, shall be the sole deposAll domestic transactions with

itors in The ,-.serve Association.
the

eserv

At;sociation shall

•c: confined to the (.1-overnnent and the

subscribin7 bard;.3, with tile exception of the purchase or ,13.1e of
Government or State secArities or

see

rities of foreizn governments,

and of 7( ld coin or bullion.

The Government of

United States shall depo it its cash

balance with the icserve A, :ociation and tereaftr all receipts of
the Covernment shall Pc deosited with the Reserve Association, or
such na ional banks as the Government desitmates for

A

ties Where there is no branch
pose in ci.
Al

di sbursetkentfi

hat pur-

of the Reserve Association.

by the lovernment shall be 11.ade thro

he Re-

Association.

serve

vortit.
The .:f.ervo Association snail pa,

no interust lzpon oepcsits.

The iwv.erv(; AsBociaticri may rediscount note

and bills arising

.
out of coldlercisil tram.actions, for and with the cncierseL:ent of
any bank having a deposit with it.

The amount

60

shall in no case exot.:ed the capital of t 1 e bank
rediFIcount.

rediscound
f(fr the

Such notes and bills must have a maturity of not more

than iwenty-ei71-1t: thiy:: and must have been made at least thirty days




10.

prior to ..the Mkt° çfiediscount. Suci redi_countshall be made
:•
at a unionrlfra e to be announced from time to time. The a-Treratc
amount of such notes and bills bearing the signature or

rldorseent

of any one person, company, corporation or firm, red]scountd for
s':larl at

any cne

ri0 71.

e ezeed tun per cent of the capital

surplus of said bank.

The leserve Aspciation may rediscount for an:. depositin
notes and

i1ls, arising ou4 of co

bank

erCLaL transactions, having

Llore than twenty-cit. days to run, but in that event the pap r
rust be P:uaranteed by 1 -t, Local A sociar,ion of which the bank asing for the rediscount is a member.

Whenever in the opinion of the Governor of the ieserve Amlociation the public inl,erests require, which opinion must be concurred
in by the Executive Corclittee of the iwserve Afq-iociation and have
t'f! Oefinit€, approval of the Secretary of the Treasury, the Reserve Asociation nay discount thc: direct obligation of a depositin7, bank, endorsed by its Local A-fJ)ciation, provided that the endorserent of the Local Association shall be secured by the pledge
and deposit with it of satisfactory securities, which sa1l be held
by the Local Association for account of the Reserve Association;
and provided further, that in no case shall the ai.ount loaned to
the borrowing bunk exceed two-thirds of the actual value of the
sec,)rities pledged.

The amount of

guarant(cs by a Local AciciaLion which

the heserve Association T ..ay take shall
cAte capital of

he barikSf

no case exceed Lh

a - - re-

in,r.* the Tuaranteeing Association.

The Reserve Association may, whenever its condition or gene

.1

fir.ancial con.ditions wa rant h..ch invesizient, purchase to a limited
amount fos
;r1(pf • S




a dcpositinr7 bank acceptances of bankn or houses of

ioned financiAi responsibility.

ch acceptances musl arise

11.

from coiziercial transactions and, have a matu *,y not exceeding
ditt,.g.".

ninety days, and

37oall be of a charackeknowil in thti market as

Suc.i acceptances shall bear t-e fndorsement of the
depositing bank: selling the same, which endorsement must be other
than that of

acceptor.

The Reserve Assocftation ma:! invest in Unit-d states bonds and
in short term 0blif7ations, Vqat is, obligations havinr
than one year to run, of the United

not more

Itates, and of any Fiate, or

mts to be nar.,ed by .he Act.
of certain forei-n ,7overrr,

The

enerve

-L1 1.1,,v0 power at home arri abroad

to deal in f7,old coin or bolli, to r;runt 1oa!A3 thereon, and to
contract for loans of ,7e1d coin or bAllion, :7,1vin;7, When necessary,
a ceptable secLirity for teir repayment.

..ion shall tiav
The Res,?rve A. ocial.

po.ver to purchase f roL; itP

)
delositors, and to sell with or without it,;A endorticent,
7
and. bills or.' exc anfteAin England, .-orce, or 'er:any, an.(1 in sch.
other foreir:n countries as the /3oard of the iiew:rve Atmociation may
decide.

These bills of

exchange must arise from coercial trans-

acticnr and be of a maturity not excendirp: ninety days, and

all
ich

bear t7le signatures of at least three rerv.onsible parties, of
last one '3'1E111 be tliat of a cif.poclitini-7, bank.

The

xserve AEsocia'ion shall havL power to open an

1aintain

bankinrl: accounts in foreirm countri,.s, and 1,0 establish agencies
in for' in countrdes, for tYr, purpose of purchasing and selling
and collecting ferein hill': of (:xcanre, o.nd it shall have authority to buy and sell, throwth such
exchand:o aris'.inp from corsecial

print: forei(7n bills of
transacions, run inc for

no' cxcedinf ninety , ays, and Ilearin!: 'Alt_ signatures
ponsible parties.




or

res-

12.

DOMESTIC

EXCHANGES.

3 e
cr,
It shall be the duty of the Reserve Association, upon revest,
A
to transfer any part of thr deposit balance of ay national bank

havinc; an account with it, to the credit of any other bank having
an account with the Reserve A8sociation.

If a deposit balance ie

transferred feom the boos of one 7irandh of the Reserve ise,
lsociation
to the books of another }ranch, 1

nay be done by nail or telegraph

upon terms to be fixed from tie to time by the T:xecutive Committee.

CIART7..ii

RIGHTS

NATIONAL

BA1TYS.

In addition to the rirhts now coriferrcl by law, -pm1mpe..4~
na'ional banks

he authorized lc

uceel.t connercial paper drawn

on them, havine net more than ninety (11,ee to run, peoporl
and arininr: out ef co!ercial traneactions.

;ecured,

The amount o f :etch ac.

ceptances shall not exceed one-half the capital of the accepting

61
ionl bankwuhority to establish branches in the
tilwn in which they are located.

city

the.oran4ation of ')anks to condect business in
, „..eis op, aiA14,.
444,11
foreien countries. The stocrof such barks may be held by national
'anks.

The bunk so ore:anized nay ha.ve an office in the United

States, but now ncl came .ete .eith national banks for donestic bueinese not nec'sraril:; related to the buninene beine done in roreie:n countries.

There shall be establiehed a new class of naeional banks, to
be known as such by a specifically desienated name.

Such barks

nay establish savinee departmeets and may make properly seel;red
bane on real estate.

Loans on real (state will be reericted to

a certain eroportion of 'he aeereeate time and savinr7s deposits in
the bank.



The reserve requirement in nuc

banks will be lese agaimA

13.

-:an a 7ainst derand depo: its.
savinc;s and tine deposits t:

:evir d

of roe rv

.
.a:
V.tere shall be no change in t"

lo ayains L Adeposits by the national bane, as provided by

to b.

sections 5191 and 5192 of the Revised Sta.tat:13, but a nationAl bank
.A.61)c iat ion all or any portion of ite, Xe4

rn,clefio6it in the hetierv
reserve

',
11,
1,
0
-1-4 4444.1 air"*Pr" 4614L-4464.6.4n41118•44144.-••••124 912

'

0 1., L

fl 0 L. P T i

P 0 ii

R

"•
0

The Renervn Al:sec ation &a1l rla'lie a report, showirr the principal itlr:vik of its balance slmet, to Ch.
rency once a week.
tien, full

These reportF
e

r i.orts ra1l

re cy coincident with t1

nomptrol .

‘,:f

of the -ur-

rthall be L.,ad(. public.

In addi-

made to the Comptroller of the Cur-

-ive reports call(!ci for each year from

',a' local baniis.
All reports of national bank exarin:rs in re 7ard to the condition of rational banks shall hereafl,r be LAI,: in duplicate, and
s.
one copy fl..111 be flied wih the Reserve Association feir . helk.Jse
of its Exeetive Cfficers.

na+iona.1 b.1; shall hereafter make .1 weekly
-A/
.A.AncAA:
5e041 showinf the principal items of
,
rport t o the lia,144-ertr*e-.-A.i4ifi,o.G.
A

C

their balance sheet i2

14

.
J N.J4

•

os-,1
(jirçj
.41
NOT'

TJES.

Mere nhall hereafter be no aeditional i sue of kapk noten by
national banks.

‘
7ationa1 . anks may, AX they choose, maintain

their present no
it

existim7 not•:

issue, but whenever a hank retires any part of
p,manentl

surrender it

to

reiFslic r ch nr)t-s.

The .cserve Association at.rees to buy a' par and ace



er-

14.

.
eat the two per cent bonds held by any Bubsci.iliin,- bank to secure
circulation.

It I,: u -Acrstood that qv; Reeervf; talociation takes

over these bonds zi.tb

h:: existin: currency privilege attached to
-!dr_;fiption of outstandinr!

then, and as:iunes reponsibility for tt

notes secn.red !hereby, a.nd t'iat 1.1 will substitute its own notes
for the secured national baiia.c. nots as fast as they are redeemed.
The Reserve Association agrees to hold, under these eqnditions,
than ten years, except as hereinafter

for i period of not lc

provided, the bonds sc purchased, or any Government scci..)r ity which
may be excl.-.anc,ed for theri by refund in

or otherwise, it beinc fur-

ther understood that if the Goverment should adopt thc pr.- licy of
securities at a higher rate of interest than two per cent
t e Reserve As:-;ociation

ha.11 have the rL71-Tt to exchange,Fuch se-

curitiesQtt par, for any bonds bf:arinr; inter:t i;..t a rate not ex-ding three per cent, but in that: event the a. cunt of Annual taxes
.:43 based 1:pon such now securities rhall be as much
to be 1..aid on siot,
greater as the interest rate of the new securities shall exceed
two per cent.
To illustrate: If the Iovernment should !ecid.e hereafter to
J

issue a two and one-half per cen 4, bond, tt

cf taxation on

currency irsued by the i{esorve Associa-.. ion the coon wel

be one

.
per cent, instead of one-half of one per cer as en the (.'xistinr
twos.

It 12

have the

undenz.Lod that the Reserve

right, with the

p oval of the

eoretary of

two yt:arn, unless etfrwic provided by

1.1:! Treasury, after
tc a:noalldisperwie

1
'
of . 50,000,000 of the bends held by it to secure circula4 ion, the
Ccv rnxien t reremin: the :-1.••h.l.
,
trustees o• the pol
ch bonds so hc:ld.

.:h
.
purchase Et.; ;Jar, 4. hrou , the

savings bank or otherwi se , ar3i Cr all of
;z.
T7- he:lc:rye .":ssociation shall i::7sue, on the

lerms herein provi:j.ed, tiopertiai owe notes an fast as t1.-to outstanding
notes secured by such bonds so held
tion, it bein.I the policy of th: UnitcA
.T,




be presented fo:- redempto retire as rapidly

15.

as possible, cons.'s • ent with the public interests, bond sedured
circulation , and -to subs ti Lute therefor notes of the Reserve Assocda Lion of a character, and oecured and

redeemed in the manner,

provided for in this Act.

When a na ional bank s'..1 -render: its is; ue of notes the Reserve Association will areure 'he same and will issue its own n. tee
in their stead as

,ey

are p resented for redenption.

Association nay issue additional notes as follows:

The Reserve
Up to

100,000,000 upon the parent of as annual tax of three per cent;
up to an additional LloO,000,OCO ..)pon Lhe payment of an annual tax
of four per cent; up to an additional

Ll.f.)0,000,000 upon the payment
-

of an annual tax of five per cent; and additional notes upon the paynent of an annual tax of six per cent.

All note ienues of the Reserve Association shall he covered
to the extent of one-third by lawful Toney and the rerainder by
bonds of the United States or banka'ele bills or both.

(It should

be either provided that the Reserve Assoc iaeion may also hold in
its reserve fordn

coin, or 1 hat the Treasury will is: ue [7old
-

ficates aainet foreis coin.)

The notes are to constitute a

first lien !Ton all of the assets of th

The notes cf

Reserve Aseocia ion.

eserv, Association shall be received at par
-

in pay: en t. of all taxes, excises an(A other dues to th

United Ftates,

and. for all salari S and other debts and demands owin7 by the
United 7.tat.. s '•o i ,dividuals, corporations or aseociations, except
oblications of the rlovernment which are by their terns pae. able in
and for all debts due from or by one national bank to another,
and for all °blies.' ions (iue

s a na ional bank.

The Iteservy Association n':a.) 1

upon application and without

cear•-e for transportation, forward its notes to deposit:in:7
banks
aeainst their credit..





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102