America's Money Machine

70 PART I / THE ROOTS OF REFORM
suggestions ofthe American Bankers Association relating mainly to technicalities
of the note issue were incorporated in the draft bill. Chief
among these was the provision that the notes issued by any reserve bank
would bear their owndistinctive letter and serial number, and when these
notes were paid into any other reserve bank they would not be again paid
out but would be returned to the issuing bank. A Federal Reserve note
would thus be treated exactly like a bank check, which always returns to
the bank upon which it is drawn. This was an anti-inflation deterrent since
the note would automatically disappear when it had done its work.
Another amendment accepted by the Administration was one to provide
for 33 1/3 per cent reserve against the note issue, to be kept entirely
in gold rather than in gold and lawful money as was provided in the draft
of the.bill. The question of the political control of the institution remained
in contention. Meantime, the idea ofa currency based upon trade
rather than monetization ofthe public debt began to acquire new respect
and one of the proposals that gained some attention was for three kinds
of money-$300 million to be called "commercial currency"-a generous
nod to the commercial interest; $200 million to be called "industrial
currency," to be issued to States and Territories on the security of their
bonds and to be used for building roads, bridges, and paying the costs
of other public improvements; and a third class called "agricultural currency"
in the amount of$200 million, which would rest upon the security
of farmers' warehouse receipts for their cotton, wheat, and corn.
In the Senate Banking and Currency Committee Senator Owen carried
on a running battle with banking opinion. He introduced a bill, which he
described as a supplement to the existing bill rather than a substitute for
it, which would have defied the bankers by basing the proposed note issue
almost entirely upon government bonds. Banking opinion now became
more vocal and at a banking conference in Chicago towards the end of
August strong resolutions were adopted in opposition to the proposed
bill. A good deal of the merchant sentiment of the country rallied to the
bankers, provoking the Committee to agree to a wider exchange ofviews
on the proposed measures.
On August 29, Carter Glass introduced a new version ofthe bill. It was
reported from his committee on September 9, and passed the House
September 19.
In the Senate, the bill languished in the Senate Banking and Currency
Committee. The Administration could not muster more than half the
members ofthe Committee to report a bill. Wilson, though he frequently
pleaded his ignorance of monetary questions, threatened to carry the