A Program for Monetary Reform: Difference between revisions

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During the period March to November, the Chicago economists received comments from a number of individuals on their proposal and in November 1933 another memorandum was prepared. The memorandum was expanded to thirteen pages, there was a supplementary memorandum on "Long-time Objectives of Monetary Management" (seven pages) and an appendix titled "Banking and Business Cycles" (six pages). Evidently written by [[Henry Simons]] the memorandum was again supported by Paul Douglas.

The collective recommendations of these memorandum have come to be known andas the [[Chicago plan]]. The memorandum generated much interest and discussion among lawmakers but the suggested reforms, such as the abolition of the fractional reserve system and imposition of 100% reserves on demand deposits, were set aside and replaced by watered down alternative measures. The [[Banking Act of 1935]] institutionalized Federal deposit insurance and the separation of commercial and investment banking; it successfully restored the public's confidence in the banking system and ended discussion of banking reform until the [[Recession of 1937-1938]].<ref>{{Citation|first=Ronnie J.|last=Phillips|title=The 'Chicago Plan' and New Deal Banking Reform,Working Paper No. 76|publisher=The Levy Economics Institute.|year=1992|month=June|url=http://www.levyinstitute.org/pubs/wp/76.pdf}}</ref>

The July 1939 draft proposal, coauthored by Paul Douglas and five others, resurrected proposals for banking and monetary reform from the Chicago plan but did not result in any new legislation.