ARGUMENTS IN THE NEGATIVE 
000,000. After reasonable allowance has been made for all of the other factors which 
might have had influence, such a record of failures suggests the federal reserve system 
as it now exists was not able to apply preventatives and correctives where they were 
most needed in the banking situation. 
In order that member banks may obtain the maximum of assistance from reserve 
banks, they should be in a position to utilize the facilities of reserve banks to make 
‘ediscounts. ‘The portion of the loans of member banks that is eligible for rediscount 
at reserve banks, however, has been declining. This decline raises a question if, even 
for the purposes of a “decentralized banking system,” there should not be a recon. 
sideration of the whole situation. The statistics for national banks—all of which have 
to be members of the reserve system—appear to show a marked trend. In 1923 thirty 
percent of the loans of national banks were eligible for rediscount at reserve banks, in 
[926 twenty-six percent, in 1927 twenty-four percent, in 1928 nineteen and seven 
:enths percent, and in 1929 twenty and eight-tenths percent. For each year the per 
centage is as of June 30. 
The principle of one central bank for modern conditions has 
never been considered by Congress on its merits. The present reserve 
system does not follow the principle of regional banks with auton- 
omous powers, and the experience which has now been had with the 
present system suggests that the time may have come for transition tg 
a single central bank, under a control that is definite and thus free 
from that division of responsibility which promotes confusion. 
The setting up in the United States under modern conditions an institution 
which would be a central reserve bank for the country was avowedly not even con: 
sidered in the formulation of the bill which, in the fall of 1913, was brought forward 
and which became the basis for the Federal Reserve Act of December 23, 1913. On 
September 10, 1913, the Chairman of the House Committee stated to the House: “It 
is sufficient to say that those members of the Banking and Currency Committee 
peculiarly charged with the responsibility for recommending legislation felt precluded 
‘rom considering the so-called Aldrich bill by reason of the fact that the platform of 
the Democratic Party adopted at Baltimore explicitly denounced that proposed legisla- 
tion.” ‘The so-called Aldrich bill was not debated in Congress. It is not necessary to 
approve of all of the provisions of the Aldrich bill in order to point out that political 
considerations had much weight in adoption of the plan now in use for a series of 
regional central banks and in order to suggest that there would today be a very muck 
better opportunity than in 1911-1913 for widespread understanding of the true func 
tions and purposes of central banking. 
Indeed, the legislation of 1913 created the appearance rather than the substance 
of autonomous regional banks. It went so far toward recognizing the principle of the 
central control which its authors condemned that foreign observers have not perceived 
in the result twelve regional banks with autonomous powers but, in the words of two 
recent writers for whose book the governor of the Bank of England wrote a foreword, 
‘twelve regional reserve banks so federated under the Federal Reserve Board as to form 
an organic banking system and to work with a unity of purpose.” One of the out- 
"Continued on page 17) 
Eligible Paper 
One Central Bank 
Act of 1913 
Regional Banks Not 
Autonomous