National banking under the Federal Reserve System

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Monograph

Identifikator:: 1757542345

URN:: urn:nbn:de:zbw-retromon-135097

Document type:: Monograph

Title:: National banking under the Federal Reserve System

Place of publication:: New York

Publisher:: The National City Bank of New York

Year of publication:: 1927

Scope:: 154 S.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Circulation

Collection:: Economics Books

CIRCULATION Fes nearly half a century it was obligatory upon every national bank to keep a certain amount of government bonds on deposit with the Treasurer of the United States, regardless of whether or not the bank desired to issue circulation. But with the passage of the Federal Reserve Act, this requirement—hitherto an outstanding feature of the national banking system—was eliminated, except where a bank desired to issue circulating notes. Although the Federal Reserve Act provides for the issuance of currency by the Federal Reserve Banks (secured by either govern- ment bonds or by other collateral), there is nothing in the Act as it now stands which would abrogate the right of the national banks to issue currency secured by government bonds. It appears that the purpose of those who drafted the Federal Reserve Act was that the Federal Reserve Banks should ultimately share with the Government the sole right of currency issue, but up to the present there has been only one official step to bring about this situation. Under Section 18 of the Federal Reserve Act, the volume of 2%, gold bonds eligible for national bank circulation has been reduced by $56,256,500. Bonds to this amount have been acquired by the Federal Reserve Banks, and converted into 89, bonds and 39, one year notes, without the circulation privilege. Every national bank is entitled to issue circulating notes to the amount of its paid in capital. These notes are secured by United States interest bearing bonds which are deposited with the Treasurer of the United States. Circulation is issued not on the basis of the market value of these bonds, but on the basis of their par value. There are at the present time two classes of government bonds which are acceptable as security for national bank circulation, viz.: 29, consols of 1930. 207 Panama Canal bonds. Nearly all of these bonds outstanding at the end of 1926 were on deposit with the Treasurer to secure national bank notes. Bonds to secure national bank circulation cannot be procured from the Treasury Department, but may be purchased in the open market through 4 ds

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