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This article examines the practice of the federal reserve banks in requiring eligible or near-eligible paper as so-called "marginal" or "additional collateral," to paper discounted by them, in contradistinction to advances on member bank' notes payable collateraled by United States securities or eligible paper. As a setting for collateraled discounts, the history and purposes of collateraled advances are stated, as well as the reasons for the ascendancy of such advances over discount. In their publications the federal reserve authorities fail to acknowledge any difference between (1) rediscounting and (2) allowing advances against eligible paper pledged; nor do they report separately the absolute or relative amount of discounts to which "additional collateral" is required, nor the "margin" required, nor the number of members putting up such margins, nor any other data relative thereto. There are no provisions in the Federal Reserve act or regulations for the practice; and yet it is no mean method of credit control. The reasons offered by the reserve banks for the practice are: (1) to repress excessive borrowing by the applicant member, in the Interest of the reserve bank, of the applicant member, or of the system as a whole, using this device as a supplement to credit rationing, discount rate variation, and moral suasion; (2) to increase the protection to the reserve banks themselves for credits granted; (8) to compensate for the less rigid insistence by the reserve banks on technical qualifications in credit granting and thus to make possible greater extensions of credit to members than can be had on the strict merit of the paper offered for discount; and (4) to acquiesce in greater degree to the traditional methods of Inter-bank finance and to break down the isolation of the reserve banks from the business and financial world. Each of these reasons is examined and criticized. [ABSTRACT FROM AUTHOR]

When the federal reserve system was established, elaborate precautions were taken to provide for the elasticity of the federal reserve note. The original plan of issue ailed for the use of rediscounted paper as collateral, and the process of issue and retirement was tenuously connected to member bank borrowing. The original plan has been almost entirely abandoned through statutory changes made in response to alterations in monetary and banking practices and structures. The tremendous growth of the gold stock has been of particular significance. The collateral requirements have been modified, and note issue has been divorced from member bank borrowing. The elasticity of the federal reserve note has not been impaired, which suggests that the correct explanation of note elasticity is to be found in the rôle which cash plays in the monetary system rather than in collateral requirements. Vestiges of the original plan of note issue remain and constitute a potential source of embarrassment to the monetary system. [ABSTRACT FROM AUTHOR]

The article presents a diversity of recommendations of monetary policy. Several policies ended by one speaker are rejected by another. Most of the policies followed by U.S. President Franklin D. Roosevelt Administration are rejected. There is little sympathy with the stagnation doctrine, with government spending on a long-time basis, with promoting recovery by easy money or with giving monetary policy a dominant role in control of national economic activity. With the total volume of eligible paper in the portfolios of the Federal reserve banks amounting to only 3 million dollars, out of total assets of 19 billion for the Federal reserve banks and of 74 billion for the banks of the country and with excess cash and bank balances of 16 billion dollars and no likelihood of members borrowing from the reserve banks in the near future, it is difficult to see how any control can be exercised by qualitative considerations. To enforce the rule that banks match their total demand deposits by cash and self-liquidating paper and dispose of the non-self-liquidating loans and investments in excess of their savings deposits would be ruinous to the banks. Finally, it is becoming increasingly clear that unless taxation and labor policies, in particular, are harmonized with public investment policy, the latter can do but little to promote a higher level of private investment.

The article discusses the discount policy in the light of recent experience. The accord of March 1951, U.S. Treasury and Federal Reserve officials agreed that the Federal Reserve would lower or stop purchases of short-term securities and allow the short-term market to adapt to a position at which banks would depend upon borrowing at the Federal Reserve to create necessary adjustments in their reserves. This contemplated a level of short-term interest rates which, in response to market situations, would fluctuate around the Federal Reserve discount rate.

The article focuses on the sales of government securities to federal reserve banks under repurchase agreement. The author asserts that expansion of the U.S. national debt requires the U.S. Federal Reserve to re-examine ways of conduction open-market operations. The author notes the extensive use of repurchase agreements with dealers in government securities during previous years, a reappearance of a practice predating the Great Depression. He claims the reappearance is noteworthy because the open-market operations are more important in the 1950s than in the 1920s. Monetary authorities see these transactions, according to the author, as releasing them from money market responsibility without giving the appearance of using their open-market powers to control the price of government securities.

Prior to the present decade, the deficiencies of the financial system gave rise to uneconomical lending terms and to excessive rates of interest on home loans. The pronounced and continued upward sweep of the secular trend during the twenties deferred the inevitable consequences, but the ensuing crisis brought the shortcomings into sharp focus. The repercussions were national in scope and set into action various measures of reform to give relief to home owners. This paper presents a summary of the activities of the Federal Home Loan Bank System, the Home Owners' Loan Corporation, the Federal Savings and Loan System, and the Federal Housing Administration. The influence of these agencies on interest rates is discussed, followed by an analysis of the justification of the existing rate level. It is shown that present rates are no longer the result of free market activity but are governed primarily by the rate established on FHA insured loans. There is now some question of the adequacy of rates to cover the attending costs of home-financing institutions. [ABSTRACT FROM AUTHOR]

The article focuses on state bank withdrawals from the federal reserve system in the U.S. Since May, 1919, approximately 60 state banks have withdrawn from the federal reserve system. Great significance has been attached to these withdrawals by certain writers. Some regard them as an indication of general dissatisfaction with the management of the federal reserve system. The author focuses on reasons for these withdrawals and to attempt to answer the question which has been raised as to what they signify. The Federal Reserve act as originally passed made no provision whereby state bank members could withdraw. This was one of the reasons why only 11 state banks had taken out membership by May 1, 1913. The Federal Reserve Board realized from the beginning that some provision for withdrawal would have to be made, if the reluctance of state banks to join was to be overcome. When, therefore, the Board issued its regulations governing membership of state banks on, June 7, 1915, it stated that withdrawal upon twelve months written notice would be permitted, but that no more than 10 per cent of the capital stock of any federal reserve bank should be canceled for. this reason in any one year.

The article focuses on the actual efficacy of changes in the discount policies of central banks in the United States and Europe. For many, this policy has confused the public opinion rather than clarifying it. The differences of opinion that arise are usually due to divergent views as to the stability of the current business situation and the probable developments of the immediate future. The discount policy of central banks may be discussed either from the point of view of actual efficacy, or conceding that, of general expediency and temporal wisdom. The effective opponents of advances in central bank rates of discount were usually as hostile to the idea of further credit inflation as were the spokesmen for higher rates. Two methods of contracting the money are, the amortization of government and municipal debt, and the other is the rationing of credit under the guidance of the bank of issue. Trained opinion in this country would seem to harbor a belief in the potency of the discount rates of the federal reserve banks, as an instrument of credit control.

Examines the value of U.S. federal reserve banks. Practicability of the federal reserve; Problems affecting the system; Factors contributing to its success; Provisions of the Federal Reserve Act; Operation of the federal reserve system.

The article analyzes the Banking Act of 1935 in the United States. The author discusses the political aspects of the banking market in the country. The Administration banking bill is also summarized. The provisions of the Act is analyzed, as well as its impact on the financial markets and the factors that led to its passage. According to the author, the Banking Act incorporated some of the previous amendments and supplanted others, thus clarifying somewhat the legal status of the Federal Reserve Board and the federal reserve banks.

The U.S. Federal Reserve system has settled down upon, or at least appears about to settle down upon, certain usages, conventions, and working principles, related to banking operations, which may be outlined as follows, first, there is a general tendency for member banks to keep themselves loaned up to limits set by their lawful or deposited reserves and thus to throw upon the reserve banks the main weight of the duty to care for emergencies. Second, it is understood that the member bank shall discount and borrow at its Reserve bank only to meet seasonal and emergency reserve requirements. This, the convention against "continuous borrowing," means simply that a member bank is not to employ Federal Reserve funds as a permanent capital in its business. Member banks are inclined as a matter of private equity to regard this as the only fair practice among themselves in using the community funds which were set up by their own stock payments into the regional central banks. Third, the rediscount rate charged member banks is not the factor which really puts limits upon the demand of these banks for accommodation.

The article presents information on a popular theory of credit applied to credit policy. An attempt was made to show that rate changes per se had not been efficacious, and it was furthermore pointed out that many obstacles lay in the way of the development of an efficacious system of rate control by the federal reserve banks. Since the date of writing much additional evidence has been afforded of the lack of connection between the rates charged by the federal reserve banks to member banks, and the rates charged by the latter to their customers. It was observed that during the period when reserve bank rates were being advanced, many member banks were unaffected by the rise, because their charges were already far above the rediscount rates. Subsequent reductions in rediscount rates likewise have had little or no influence upon the charges of many member banks located in sections of the country where 8, 10, or 12 per cent is a customary rate. Implicit in all discussion of credit policies are theories as to the nature of capital, credit, and interest. To avoid confusion, these concepts need to be expressly defined and consistently adhered to, as the most serious obstacles to a lucid treatment of discount and credit policies have grown out of the tendency to use the terms in one sense for purposes of discussing money market phenomena and then to shift over to certain esoteric concepts for purposes of general economic theory.

Examines the discount policy of the U.S. Federal Reserve banks in the 1910s. Analysis of fundamental monetary and banking principles which affect the structure of the reserve system; Effects of the establishment and operation of the reserve banks; Use of credit in financing U.S. participation in World War I; Discount rate of the reserve banks; Reduction in the loans of banks to the public.

The article discusses the primary purpose of the Federal Reserve Act of 1913 for banks in the U.S. The primary purpose of the Federal Reserve Act of December 23, 1913, is to make certain that there will always be an available supply of money and credit in this country with which to meet unusual banking requirements. Banks of a new class, to be known as Federal Reserve Banks, are to be established and upon these banks is to rest the heavy responsibility of supporting the structure of credit in periods of financial strain. To meet the heavy responsibilities placed upon the Federal Reserve Banks, two things are absolutely essential, good management and ample powers and resources. Good management cannot be secured with certainty by means of legislative provisions, however carefully designed with that end in view. In the particular instance of the Federal Reserve Act, an ingenious combination of government and banking influence in selecting the management is provided. Purely banking operations are very largely to be handled by boards of directors, a majority of the membership of which is to be chosen by banks.

Over the past several years, a prodigious research effort has created several operational models depicting significant features of the monetary-economic process. The FRB-MIT and Federal Reserve Bank of Saint Louis models come most readily to mind, though there are others. Now that these models are on line, the research effort has shifted in two directions. The paper proposes a modest departure from the research that has gone into and appears to be coming from these models of the monetary-economic process. Despite the concurrence with the spirit of the recent research, one would argue that the work poses several problems, first it is conducted exclusively at an aggregative level and second it assumes Federal Reserve policy actions to be exogenous. But perhaps the ultimate misconstruction results from the general failure of the profession to take explicit account of the interaction between monetary actions and banking system responses. One continues to wallow in the longstanding and widespread habit of assuming Federal Reserve actions to be exogenous-actions manifested in changes in the monetary base, total reserves, unborrowed reserves, Federal Reserve credit. Such practices enmesh in simultaneous equations bias and related difficulties.

The purpose of this article is to clarify some of the issues concerning administration of the discount function by providing a historical perspective of group and individual patterns of member-bank borrowing from the Federal Reserve System during the past decade, with particular reference to the problem of continuous borrowing, and to explore the factors influencing differences among banks in regard to duration of indebtedness. [ABSTRACT FROM AUTHOR]

This article looks at the need for a federal reserve system in the United States. The author proposes the removal of compulsory legal reserve requirements. He also believes that membership in the Federal Reserve should be completely voluntary. While state-chartered banks can decide to become members of the Federal Reserve System, banks chartered by the Federal authority are required by law to become members. This distinction between banks according to the source of charter was first imposed due to concerns that the Federal Reserve Act's purposes could only be carried out if a number of the commercial banks' cash reserves were mobilized in the Federal Reserve District Banks.

The article examines reserve settlement periods of U.S. Federal Reserve banks and their defensive open market operations. It is believed that the government regulations controlling settlement may in fact harm banks by making it more difficult to operate and that the regulations lead the Federal Reserve to interact with the private market contrary to its own aims. A table is included with the article that tracks how the daily changes in particular factors affected the reserves and how that compares to the monthly changes and other factors that affect the balances of federal reserve banks. The article suggests that the reserve settlement period be lengthened and that reserves be averaged over the course of a month.

The article comments on the claim that the Pigou effect could not do more than stop a deflation involving a decline in output, employment, income and the price level. The author explains that the Pigou effect is the wealth effect on consumption during a decrease in prices. The article cites a contemporary monetary theory that was discussed by Alvin Hansen in an article in which he questioned whether the Pigou effect itself could do more than obstruct a deflation that includes a decrease in output, employment, income, and price level. Several figures are presented to help illustrate the study.

The article discusses the flows of funds between reserve districts or zones in the U.S. as of 1955. The article examines the theory of international trade as a balancing mechanism under an international gold standard. The author explains that net interregional flows of funds within the U.S.usually come in the form of shifts in member bank reserves. The article also discusses the patterns of flows of funds, analytical uses of the interregional moneyflows data, and interregional flows and bank reserves. Several tables are presented to help illustrate the study.

The article focuses on the impact of public debts on credit control in the U.S. Many people think debt hinders economic expansion, while others believe it can make monetary and credit policy more effective. The author attempts to answer these questions and concludes that large public debt limits the Federal Reserve's option yet it extends its influence and makes the overall economy more responsive to its actions. To ensure the positives outweigh the negatives, he advises that the Treasury be able to meet its requirements within a proper budget policy.

Would uniform reserve requirements for all deposit institutions significantly increase the effectiveness of the Federal Reserve policy and end adverse discrimination against commercial bank deposits? This article says it's not likely and shows why. [ABSTRACT FROM AUTHOR]