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GrahamHardy (talk | contribs) added Category:1939 in economics using HotCat |
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* Including demand deposits of individuals, partnerships, corporations, the United States Government, and States and their political subdivisions; and also cash letter of credit, certified, travelers’, and officers’ checks outstanding, and amounts du Federal Reserve Banks.
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Thus, under the proposed arrangement, the banks would need only $3,7 billions of new cash or Government bonds to satisfy a 100% reserve requirement. We could, therefore, today introduce the 100% reserve system and stabilize our banking situation, without causing any very disturbing changes in bank earnings from interest on federal bonds. While, under the plan proposed, those new funds would be distributed among banks automatically, as needed, to raise reserves, in practice almost three-fourths of the required new money would be needed at this time by the large banks in [[New York]], which function as the “[[Bankers' bank]]s” for the small country banks. For New York State alone “interbank deposits” exceeded “interbank balances” by $2,8 billions (December 31, 1938). A similar situation exists in the large banks in the rest of the country. The problem is thus largely one of putting interbank deposits on a 100% reserve basis. The Federal Reserve Board has repeatedly considered taking this
The amount of Government bonds which the banks would be permitted to hold on their own volition, as part of their reserve behind demand deposits, should be limited to the amount they held on the day when the 100% reserve requirement went into effect. As to any future additions to that volume (or subtractions from it as the bonds matured) the Monetary Authority would decide from time to time solely on the basis of the legal criterion of stability under which it was operating. The banks would be permitted to sell their reserve bonds to the Monetary Authority at any time, thus converting their reserves into cash.
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