CIRCULATION
dealers in securities, such as The National City Company and others.
Where a bank determines to issue currency, it purchases in the
open market bonds having a par value equivalent to the amount of
circulation to be issued, and sends these to the Comptroller of the
Currency for deposit with the Treasurer of the United States. Only
registered bonds are eligible as security for circulation, but where
coupon bonds of either of the eligible issues are presented, they will
be exchanged by the Comptroller for the registered bonds. The
Comptroller authorizes payment of interest on the bonds of the bank
depositing them, and the Treasurer of the United States will pay the
interest, by check, to the order of the depositing bank.
All details in connection with the issuance of bank circulation are
cared for by the Comptroller’s office. This includes the engraving
of plates, printing, ete. Ordinarily a period of about 30 days is
required to engrave the plates and print bank notes, but at present
(1927) about two months is required. No order for circulation is
acted upon until bonds have been deposited to secure the proposed
circulation and advanced payment of the cost of engraving ($130 per
plate) has been made.
The issue of national bank notes is authorized in denominations of
$1, 82, $5, $10, $20, $50, $100, $500 and $1,000. Up until late in 1917
banks were prohibited from circulating notes of less denomination
than $5, but, as the law now stands, the only limitation upon such
denominations is that no bank may have in circulation at any one
time more than $25,000 in $1 and $2 notes. However, up to the
present time, no plate designs for notes of $1 and $2 denominations
have been approved, consequently no national bank notes of these
denominations have thus far been printed.
The Comptroller of the Currency will supply detailed information
as to forms that should be observed in ordering circulation and as to
the mechanical details of which it is necessary to take cognizance in
this connection.
The profit which a bank makes upon its circulation is determined
chiefly by two factors: the average rate of interest in the money
market, and the price at which bonds to secure the circulation are
purchased.
Circulation secured by the 29, bonds is subject to a semi-annual
tax of }4 of 19; circulation secured by bonds bearing a rate of
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