Section 31. That vacancies in any one of the three boards as organized in this Act may occur by death, resignation, or expulsion, and shall occur whenever a member of any of the boards shall be a director or officer of a suspended, insolvent, or failed bank. All such vacancies shall be filled by the respective boards in which they occur until the first Monday in the month of May following, except those appointed by the President of the United States.
Section 32. That the term of office of each member of the three boards herein described shall begin at the time elected, but shall continue from the first Monday in the following May as if that day were the beginning of the time for which they were severally elected.
Section 33. That on the first Monday in May each year after one full year of service has expired the bankers of each commercial zone shall meet at the city in which the financial centre is located to fill any vacancies that may have occurred in any one of the boards described in this Act, and also to elect any members to said boards where terms of members have expired.
Section 34. That each commercial zone shall have all the attributes and powers of a body corporate and may sue and be sued in the United States courts having jurisdiction of the action brought; it may receive deposits from banks and act in every capacity of a bank for other banks, but shall not allow or pay any interest on such deposits; it shall have power to receive, collect, and forward bank notes; it shall have power to buy and sell commercial paper and bills of exchange from and to the banks which are members of such zone; it shall have power to act as the agent or attorney in fact of the banks which are members of any of the commercial zones, so far as it may be necessary to do so to carry into effect the purposes of this organization; it shall have the power to do and perform any and all acts that may be necessary for the proper performance of its duties in the supervision of all banks under it, and in the conduct and operation of the commercial zone.
Section 35. That each commercial zone shall maintain and keep in operation at its financial centre a clearing house where all the bank notes, checks, drafts, bills of exchange, and other instruments of credit, drawn upon any bank located in the zone, may be cleared, and for any other purpose that may come within the purview of this Act; and all such instruments of credit shall be accepted and settled for at par at such clearing house, under and in accordance with such rules and regulations as may be established from time to time by the board of directors of the American Reserve Bank.
Comment:—Mr. Manufacturer: You have now completed the functions of the zone, it seems to me; and everything that you have proposed is based upon the approved practices of the American Clearing House.
The free check zone, provided for in this last section, is identical with that at Boston, where, ever since 1899, every New England bank check has been at par at the centre.
Atlanta, Nashville, Kansas City and several other cities are working out the same plan. This plan is also identical with the plan that New England worked out before the war, with respect to the redemption of bank notes, when bank notes were the chief form of bank credit then used.
From 1818 to 1865, you will remember, the Suffolk Bank acted as a clearing house for all New England bank notes which were par at Boston, precisely as checks are today.
Here we are getting back to the simple fundamental principle of current redemption of bank credit without charge to commerce in whatever form the people may choose to use it.
It is bank notes and checks in France, Scotland, Ireland and all over Canada. Why should it not be bank notes and checks all over the United States just as well, in order that the people may have bank credit in the most convenient and cheapest form possible?
Then, you have extended to every commercial zone the same organization for supervision and administration that the most advanced clearing houses have; the Board of Control to examine them and the Bankers' Council as a court of appeal to settle all difficulties that may arise.
Mr. Merchant: Is it practical to have the zones conform to State lines?
Mr. Banker: Such a thing should not be thought of. Economic laws do not follow State lines. There is not a single State in the Union that is a natural economic zone. Some States should have several financial centres; some none. To attempt to make a commercial zone conform to State lines would be absurd. Bank credit flows to centres as water rushes to the ocean, and we should not violate a great economic law to the irreparable injury of commerce. Sense and not sentiment should control our action.
St. Louis and Kansas City are natural financial centres, but Jefferson City is not. St. Louis draws its bank credits from eastern Missouri, southeastern Iowa, northeastern Arkansas and southern Illinois.
Kansas City draws its bank credits from western Missouri, southwestern Iowa, southeastern Nebraska, all of Kansas and some of Oklahoma. These cities illustrate the principle that must not be violated or we may do more harm than good.
Vermont has no economic centre, and it would do violence to trade and commerce to make one arbitrarily.
Tennessee has three such centres. Indiana and several other States have but one.
Section 36. That the American Reserve Bank shall have all the attributes and powers of a body corporate and may sue and be sued in any United States court having jurisdiction of the action brought. It shall have power to buy and sell gold bullion and gold coin; to buy and sell United States Government securities; to loan money to the United States Government, and to act as banker, fiscal agent, representative and attorney in fact for the United States Government; to buy and sell bills of exchange, domestic and foreign; to act as fiscal agent, attorney in fact, for all members of the respective commercial zones, and shall have full power to carry into effect the object for which this organization is created; it may receive deposits from banks and act in every capacity of a bank for other banks, but shall not allow nor pay interest upon any deposits that may be made with it.
Section 37. That the board of directors of the American Reserve Bank shall define from time to time the nature and character of the promissory notes, checks, drafts, and bills of exchange that may be purchased by the respective zones and the length of time they may have to run: Provided, however, That every piece of paper purchased by any commercial zone shall bear the unqualified indorsement of some national bank in its zone.
Comment:—It would be unwise to fix now arbitrarily by statute just what kind of paper the banks of every zone should buy. This ought to be left to the board of the American Reserve Bank. They will meet it wisely as it arises.
Section 38. That the United States Government is hereby authorized and empowered to prepare, upon the passage of this Act, bank notes for the respective banks applying for them without the following superscription upon them: "This note is secured by bonds of the United States or other securities," but in all other respects like the bond-secured bank notes now in use: Provided, however, That the notes delivered to any bank for issue and circulation shall have in bold type, first, and to the left of the centre, the number of its zone, and, second, to the right of the centre, the number of the bank by which it is identified in its zone.