Principles of political economy by Carver Thomas Nixon 1865-1961

Author:Carver, Thomas Nixon, 1865-1961
Language: eng
Format: epub
Tags: Economics
Publisher: Boston, New York [etc.] Ginn and Company
Published: 1919-03-25T05:00:00+00:00

much the same purpose as the Bank of England; that is, the United States Bank was in a sense the banker of the Federal government. It went out of existence, however, in 1836, having failed to secure a new charter, partly through the opposition of President Jackson.

The national banking system. In 1863 the foundation of our present national banking system was laid, and a series of national banks was created, partly as a means of making a market for the bonds which the Federal government was offering for sale in order to get money with which to carry on the Civil War. Any bank chartered under this act was permitted to deposit bonds of the United States with the Secretary of the Treasury, and in return for these deposits it was permitted to circulate bank notes up to 90 per cent of the value of the bonds deposited. Thus, if the bank failed, the government had possession of enough of its property to redeem all the notes which it had issued. In a sense, the bank had pawned valuable property (that is, government bonds), and received a kind of pawn check in return. These '* checks," called bank notes, it was permitted to circulate. This is essentially the characteristic of our bank notes to the present day. Subsequent acts have made some changes in the system, particularly the act of 1908, which permits a national bank to deposit certain other securities besides United States bonds as a basis for its note circulation.

The Federal Reserve system. The most important piece of banking legislation in this country since the National Bank Act of 1863 was the Federal Reserve Act of 1913. Under this act there was created under the Treasury Department of the United States a Federal Reserve board consisting of five members, besides the Secretary of the Treasury and the Comptroller of the Currency, charged with the general administration of the national baiiking system. The country was then divided into twelve districts, and within each district a city was selected, to be called a Federal Reserve city. The cities chosen .were Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta,

Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. In each of these cities was organized a Federal Reserve bank. This bank was to be the central bank of the Federal Reserve system in the district within which it was located. All the national banks, and all the state banks which' wished to become national banks, by coming in under the Federal Reserve system were to become member banks and in a sense tributary to the Federal Reserve bank. They have a voice in the control of the Federal Reserve bank of their own district. Each member bank is required to subscribe to the capital of, and to keep all of its required reserves on deposit with, the Federal Reserve bank of its district. The Federal Reserve bank thus becomes, in a sense, the bank of the member banks of its own district.

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