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The article presents a discussion of Arthur I. Bloomfield's research paper on a survey of central banking in developing countries. The reviewer said that his research was lucid and comprehensive and the author is in general agreement with Bloomfield on the various issues he discusses. The author adds to Bloomfield's paper by describing the various steps taken by the monetary authorities in India in the late 1940s and throughout most of the 1950s. The steps were taken to strengthen the banking and credit system.

The author comments on articles by economics Greenbaum and Haywood (G&H) and Bloch concerning the major factors that must be considered in analyzing changes in the financial sector and their resulting impact on the economy. He states that G&H argue that demand for financial assets is dependent on standard variables, income, interest rates, and more. He suggests that G&H didn't delve far enough into government policy on the financial sector and states his belief that the introduction of large quantities of U.S. Treasury Bills is the most important financial innovation from 1940-70. He states that Bloch's view of the U.S. Federal Reserve's behavior is instructive, and said that while he doesn't question Bloch's analysis, he does question if the reasons are correct.

This article presents information on the Langton Papers that are a collection of letters written during the years 1831 to 1838 to Joseph Langton, manager of the Bank of Liverpool. Apart from highlighting the views of a leading banker on some of the monetary problems of the 1830s, the Langton Papers reveal a rift in the management of the Bank of England. They expose the dangers in the use of such phrases as "the Palmer regime" when referring to this period. About half of the Bank directors did not agree with scholar J.H. Palmer's views as to the extent of the Bank's responsibilities during an internal pressure. Given the lack of uniformity amongst contemporary economic theorists, these differences are what one would expect. Scholar George Carr Glyn's proposed solution meant a fundamental change in the structure of the Court and its relationship to the government. As Bank directors, his parliamentary commissioners were to represent and safeguard the public interest: a theme, albeit in a different form, to be discussed again in the 1860s. But this solution could only be useful in the context of a generally accepted meaning to the term public interest when applied to monetary policy. A third point worthy of note is that, in conducting their policy towards the American trade, the Bank directors were conscious of the crisis conditions that policy was sure to produce on both sides of the Atlantic, even though it was carried through by only a bare majority.

Since the outbreak of the European war, the flow of rupee coins back from circulation to reserves, which has been going on for many years, has been reversed. The stock of rupee coin in the Reserve Bank of India has decreased, while circulation has increased, between September 1939 and July 1940. This increase of coin circulation has been due partly to the proportional increase of note circulation and to some tendency to hoard coins in preference to notes. To avoid exhaustion of the Reserve Bank's supply of coin, the government of India began the issuance of 1-rupee notes. In December 1940, it announced a reduction in the fineness of the rupee from 11/12 to 0.300. It remains to be seen whether this section will be acceptable to the population.

The article addresses the democratization of money. The author equates the economic importance of the use of checks or deposit currency with the ability to physically distribute goods through railways. The author considers government intervention into the regulation of deposit currency, as it is beginning to replace the use of currency and coins, which are provided to the public free of charge. The author argues against the criticism that this is a socialization of the banking system by stating that this subsidy would take the place of the costs of generating paper currency and coins, and would strengthen the banking system by the increase in individual bank business.

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]

The article analyzes the factors that helped Canada escape from the effect of prolonged silver agitation in the U.S. despite a strong commercial dependence of the nation on the U.S. The silver agitation was aimed at abolishing the silver certificate currency notes to save money on paper. Financial causes like solidarity of the banking system is held responsible for the reproduction of the same commercial and financial conditions in the two countries. Emergence of local branches of the banks in Canada has not only ensured security to the community, but also resulted risk management at local level.

The article criticizes the U.S. banking system for its failure to adapt to the present requirements of the country. The banking system failed to provide uniform bank note currency throughout the country. The banking system failed to provide a return flow of notes under the effective plan of redemption due to circumstances under which the laws pertaining to the national banks were passed. The lack of investments in U.S. bonds and confining capital in a non-banking security are serious problems in the functioning of the banking system.

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 comments on the papers "The Changing Role of U.S. Banks in International Financing," by George H. Chittenden, "The International Money Market: Structure, Scope and Instruments," by Fred H. Klopstock, and "The Integration of European Capital Markets," by Oscar L. Altman, all published within the issue. The author looks at changes occurring in European capital markets, international money markets, and commercial bank lending. The movement toward better organized markets for long-term capital in Western Europe is discussed.

This article presents a comment on the paper "Deposit Insurance in the United States -- Evaluation and Reform." The author discusses some of the proposals that are presented in the paper and offers suggestions related to these policy measures. Some of the concerns that are raised by the author include the complexity of risk assessment and the responsibilities that the Federal Deposit Insurance Corporation and the U.S. Federal Reserve are given in the paper. The author discusses bank failure and the role that large investors play in the success of small banks. The author also offers some policy suggestions of his own.

The article presents commentary from Robert Lindsay about a paper by Donald P. Jacobs and Almarin Phillips (J&P), "The Commission on Financial Structure and Regulation: Its Organization and Recommendations," which appeared in the May, 1972 issue of the "Journal of Finance." He briefly outlines his understanding of the Commission's report as reported by J&P, and then notes several questions it raises. He wonders why the Commission would permit nonbank institutions to encroach upon certain markets that are traditionally the province of banks, but not others. He is also surprised at how little the Commission's report had to say about monetary policy.

In the article, the author comments on the paper "Private Sector Asset Management and the Effectiveness of Monetary Policy: Theory and Practice," by Hyman P. Minsky, published in this issue of the journal. The author comments on the separate sections of Minsky's paper such as whether a capitalistic economy is inherently unstable or not, and whether mild inflation is accepted as a satisfactory trade-off against a deep depression. The author argues that there is no complete system for analyzing the behavior of the economy and the U.S. Federal Reserve System. The author states that Minsky's framework did not present evidence for the 1966 credit crunch or the threats to the financial integrity of mutual savings banks and savings and loan associations in the U.S.

A conference paper is presented that examines the distribution of bank deposits in the U.S. and the implications this has for the flow of funds analysis. A study was conducted in southern California in an attempt to examine how the funds from this region moved throughout the surrounding area. The author was interested in examining the validity of the growth center concept. The author's findings support the idea of a funds flow; however, he suggests that further analysis is needed.

The purpose of this paper is to present a case study of this type--the holdings of short-term foreign assets by the German banks. The ratio of short-term foreign asset to the total asset is explained by various yields on alternative assets. In addition, the effect of short-term constraint variable on the adjustment of actual stock to the desired stock of asset holdings is incorporated in the analysis. The variables included perform rather well in explaining the monthly fluctuations of the asset ratios. This paper presents a case study of the international movements of short-term banking funds with the application of the asset portfolio approach which has been so fruitful in the investigation of demand for domestic financial assets. The study demonstrates that when a balance-sheet framework can be clearly defined, the portfolio balance analysis provides a very effective approach to the study of capital flows between countries. The experience of the holding of short-term foreign assets of the German banks is investigated. With the holding of foreign assets treated as one of many assets (and liabilities) in a well-defined balance sheet for the German banks, the portfolio approach is applied with some success. The importance of such variables as total asset holdings (LA), yields on alternative assets (r[sub 1]), and flows of liquid funds (CBM) in affecting the asset holdings is borne out by the results obtained. Some 70 per cent of the fluctuations of the ratios of foreign assets to total liquid assets are explained by the variables r[sub L], r[sub LA[sub d]] - r[sub FA], and CBM/LA[sub t-1]. The estimated coefficients are all significant. The incorporation of variables LA and CBM also helps improve the estimation of interest rate variables, giving us a very satisfactory result for the estimated coefficients for interest rates. The scope of the paper is obviously limited. Those problems such as the need for non-linear equation, the importance of adopting simul... [ABSTRACT FROM AUTHOR]

The article presents comments on the papers "The Changing Role of Banks in the Market for Equities," by A. James Meigs, and "Life Insurance Companies and the Equity Capital Markets," by Orson H. Hart, both published within the issue. The author discusses four separate points presented within the papers: the expected growth in the volume of institutionally managed funds, intensification of competition between institutions, innovations in the form of new services offered to firms or individuals, and the investment preferences of equities.

The article sheds light on commercial banking in the United States during the sixties. The article makes the conclusion that if the trends emerging in the late 1950s and in 1960 are not reversed by major changes in economic conditions or tax and regulatory policy, then the commercial banks will be unable to play as important a role in financing the 1960s as they have done in previous years. The article's conclusion is based on the expectation that in all years, except those of recession, bank deposits will continue to expand at a slower rate than the growth of the gross national product.

A central question of many previous monetary studies has been the determination of the effects of various forces upon the actual supply of money in the economy. One of a number of competing monetary supply hypotheses (Brunner and Meltzer) has focused on the relationship between bank reserves and deposit creation. This theoretical structure was first suggested in earlier works by Phillips and Crick. Recent studies of similar nature, including those of Mellon and Orr, Morrison, and Brown and Lloyd, have employed the techniques of inventory theory to examine the factors influencing bank credit expansion. Similar inventory treatments of other cash balance and portfolio adjustment models are presented in the works of Baumol, Eppen and Fama, Lloyd, and Chitre. In the present paper, the effects of various forces on the optimal expansion of credit and the holding of reserves are investigated using the techniques of dynamic programming (see, for example, Bellman and Dreyfus). Discussed in the paper are the effects on bank credit expansion of uncertainty about reserve losses, various types of penalty costs, costs of adjustment, uncertain future interest rates, and of various institutional structures under which the bank must operate. This latter topic is important because of the Federal Reserve policy change of September 1968. Prior to that time, required reserves and actual reserves were computed over the same reserve period. Since that time, however, the required reserves in any period are known with certainty at the beginning of the period and depend upon deposit levels two periods earlier. For purposes of mathematical convenience, this latter structure is treated here as a one-period lag. [ABSTRACT FROM AUTHOR]

The interdependence of loan cost and tangible bank activity is an aspect of the cost of bank debt that has not been treated in the literature. Understanding this interdependence is important for banks in pricing their services, especially as banks adopt more flexible pricing policies. This understanding is crucial for a firm in establishing the true cost of bank borrowing, in comparing bank borrowing with other sources of funds, and in evaluating the firm's banks. It is also important for understanding the firm-bank relationship in general and the cost of capital in particular. This paper investigates this interdependence and determines the effective cost of bank borrowing as a function of useful loan size when banks: (1) impose compensating balance restrictions in addition to interest charges in obtaining compensation for loans, (2) allow the firm to earn credits on average net collected balances in the firm's account that can be applied to payment for tangible bank services, (3) allow the same balances that earn credits for tangible services to be used to satisfy the compensating balance requirements associated with borrowing, and (4) impose constraints on the percentage of charges for tangible services that can be paid for by cash payments. Conditions 1 to 4 and the necessity of providing for transaction balances are typical of most firms. This paper (1) defines the concept of both the effective interest rate and the effective rate of compensating balances, and (2) derives the effective cost of bank borrowing as a function of useful loan size at a given bank. We find that the marginal effective loan cost versus useful loan size is a step function of three steps at a single bank and is a step function of many steps for a firm with many banks. [ABSTRACT FROM AUTHOR]

Commercial bank portfolio models developed by Hester [6], Porter [11], and Kane and Malkiel [7], among others, relate the structure of an asset portfolio to variation in the level of deposits. Similarly, in a recent application of linear programming to asset management, Cohen and Hammer [3] specify a liquidity constraint based upon deposit fluctuations. However, there have been few empirical studies of the determinants of demand deposit fluctuations. The purpose of this paper is to extend the work of Gramley [4], Rangarajan [12], and Wilkerson [14] on the determinants of deposit variability. In this paper, the analysis will be confined to demand deposit variability. [ABSTRACT FROM AUTHOR]

The article discusses the evaluation of bank performance and comments on the paper, "A Canonical Analysis of Bank Performance" by Donald R. Fraser, Wallace Phillips Jr., and Peter S. Rose. The author reports on the statistical aspects of the multivariate canonical analysis conducted by Fraser and his colleagues. The canonical analysis reduces the problematic dimensions of examining the relationship between the components of performance and determinants in commercial banks in Texas. Also, the correlation coefficients have their variances kept constant through this analysis.

The article discusses the wooden money of Citizens Bank of Tenino, Washington. On December 7, 1931, the Citizens Bank of Tenino closed its doors. This was only one of 1,055 bank suspensions in the fourth quarter of 1931. The issue of paper scrip has been resorted to by other communities under similar circumstances in order to stimulate local trade and hence was in no sense unique. When the bank closed, the buying power of the depositors was at once frozen. The receiver of the bank estimated that a liquidating dividend of 25 per cent could be paid within a few months. Thousands of autos pass through the town daily, especially during the tourist season. Every Main Street service station, hotel, and restaurant advertised wooden money. More than one gasoline tank has been filled or meal served in recent months because the tourist had heard of wooden money and wanted to obtain samples. The extent to which the community will profit from outside sales of wooden money cannot be determined until the liquidation is closed.

The subject under discussion is, to say the least, a peculiar one-or perhaps it is more accurate to say that it is a familiar subject that has been given a peculiar twist. At the beginning of his paper, Professor Johnson says, "the question has nothing to do with the optimal conduct of short-run stabilization policy. Instead it belongs to the pure theorists' world of continuous full employment of resources; as such, its policy relevance is to the framework of monetary organization and the long-run environmental objectives of monetary policy." However, this view of the problem can be traced to the context in which Milton Friedman took it up in his important paper on the subject. Viewed in a different light, the issue is of more immediate significance and does, as I shall show, have relevance for the conduct of short-run stabilization policy. The problem is that unless money yields a positive rate of return to holders of it, the quantity of real cash balances held will be less than the welfare-maximizing amount, and an inordinate amount of real resources will be employed in economizing the use of bank deposits and currency which cost virtually nothing to create. [ABSTRACT FROM AUTHOR]

The paper purports to test two alternative hypotheses regarding commercial bank portfolio behavior, the "accommodation principle," that "the demand for bank loans determines bank portfolio behavior," and the "profit maximization principle," that "commercial bank responses to market forces determine their portfolio behavior." What is intended by the first is broadly the old commercial loan precept that proper banking practice is to accommodate legitimate (i.e. nonspeculative) business demand for short-term credit, in which case investment holdings are residually-determined. What is intended by the second is, I believe, the Markowitz-Tobin-Sharpe theory of asset management under uncertainty. The qualification is necessary because profit rather than utility maximization is explicitly postulated as the goals of the banking firm. But although the terms risk or uncertainty surprisingly never once appear (which is itself something of an accomplishment for a paper on portfolio behavior) one is able in places to scent their presence between the lines. [ABSTRACT FROM AUTHOR]

This article presents the authors' comments on the article "Major Developments in the Financing of Residential Construction Since World War II," by M. Carter McFarland, that posits that the growing market share of conventional loaning is one of the major developments in residential financing during the postwar period. The author discusses postwar financial developments such as the easing of mortgage terms, the rise in housing market risk, the relationship between housing production and mortgage funds, and the change in federal mortgage lending objectives.

The Robinson paper directs itself to the discussion of the research that may be done by the Bank Administration Institute on the subject of measuring the risk dimension of investment performance. It did not itself involve any empirical testing--at least at this stage of the paper. There is little one can say concerning any model or testing procedures. However, the thrust of the paper seemed to be to suggest that we should apply modern methods of measuring investment performance to specific types of portfolios--particularly pension funds and profit-sharing portfolios and to other situations as well. Secondly, although the paper states they intend to forge new frontiers in risk measurement, there appears to be a hint at a desire to fill the gap between theory and implementation. Little effort seems directed precisely at measuring risk (once the academy agrees on how it should be defined). [ABSTRACT FROM AUTHOR]

In periods of frequent realignment of foreign exchange rates, interest focuses understandably on the causes of capital movements. The difficulty with studies of such movements usually lies in obtaining data sufficiently disaggregated so as not to force too many types of motivation into one all-encompassing specification. This was the problem M. Porter as well as W. H. Branson and R. D. Hill faced when studying capital movements of OECD countries. C. F. Ou started from a much more narrowly defined asset category but failed to distinguish between demand balances held for transactions requirements and interest earning assets. Despite the attention that capital flows have received of late, their importance for the present system of international exchange rates and the conduct of monetary policy as well as the shortcomings of the studies to date may justify another inquiry. Specifically, the present paper will review briefly the theoretical underpinnings for German banks' decisions to hold short term assets abroad. The main purpose is twofold: 1) to determine which interest rates and scale variables yield the best explanation of actual changes in the stock of such assets held by German banks; 2) to obtain an estimate of changes in the short term capital account of the German balance of payments that can be attributed to banks' portfolio adjustments in the face of interest rate changes at home and abroad. [ABSTRACT FROM AUTHOR]

During the ten-year period 1961 through 1970, commercial banks actively competed for time and savings deposits which became an increasing share of total bank deposits. Time deposit growth was facilitated by a number of upward adjustments in interest ceilings. Interest paid on time deposits became an increasing share of bank costs, and the interest cost per dollar of total bank deposits grew appreciably. During the same period, banks raised their gross earnings on assets, and during the first half of this period the increase occurred while market interest rates were relatively stable; that is, portfolio adjustments tended to raise the ratio of gross earnings to bank assets. Most observers would agree that there is a close relationship between deposit costs and gross earnings on bank assets. However, there appears to be somewhat less agreement on the precise nature of this relationship during periods when interest ceilings on deposits are imposed or changed. In this paper we will attempt to develop a general framework for linking changes in bank deposit costs to portfolio policies and risk-taking (Sections II, III, and IV). In Section V aggregate bank experience in the 1960s will be related to this framework, and in Section VI we will look at individual bank data. [ABSTRACT FROM AUTHOR]

The article discusses financial intermediation. Essential to the work of intermediaries is the issuance of claims for funds, and the use of those funds to purchase other financial assets The current paper examines the conditions under which an intermediary will accept savings deposits and purchase mortgages. After developing a three-security model for intermediation, the author applies it to a specific instance that incorporates a mean-variance preference function. The key insight is that for both assets and liabilities, portfolios cannot be selected independent of yield parameters.

This article examines the difference between reserves and free reserves as they relate to open market operations (OMO) by the Federal Reserve System. There are two types of OMOs: defensive operations, being those transactions which are designed to offset disturbances in member bank reserves, and dynamic operations, which seek to change reserves to permit monetary expansion or contraction. The author uses regression methods to estimate the changes affecting reserves and free reserves. The paper builds upon previous research by W.G. Dewald.

This paper presents data which describe the extent to which ownership and control have been separated among the 200 largest member commercial banks. Management control has become the more common form of control among the large banks. The large banks were classified as owner controlled or if 10% of their voting stock was concentrated in a single party. If not, then they were classified as management controlled. The two major categories then were divided into subcategories reflecting levels of owner and management control.

The purpose of Part I of this paper is to place the contribution of Guttentag-Lindsay in historical perspective and in particular to relate the entire controversy concerning the uniqueness of commercial banks to the nineteenth century dispute regarding the uniqueness of the Bank of England. My objective will be accomplished primarily by showing how closely the Guttentag-Lindsay model parallels the framework used by Bagehot. Bagehot's objectives in Lombard Street (1873) were to disabuse the politicians and the financial community of the view that the Bank of England was not unique (i.e., that it was "like any other bank"), to show in what ways the Bank was unique, and to draw the implications of the Bank's uniqueness for Bank policies. [ABSTRACT FROM AUTHOR]

The article focuses on the development of the concept of "automatic stabilizers." The purpose of this financial research paper is to extensively evaluate the research dealing with the alleged automatic stabilizers with the precise hope of tracing the history and origin of this economic concept. Also included will be a brief definitional analysis and some concluding statements on suggested improvements in the stabilizers that still exist. Additional stabilizers will also be proposed in this article.

A conference paper is presented that examines several issues that are related to postwar bank lending policies in the U.S. The author investigates whether or not bank lending policies are the cause of price increases in markets such as real estate and consumer goods, if these policies lead to the deterioration in the quality of the debt structure and how to prevent these policies from leading to inflationary expansion of demand deposits.

The article presents commentary on the reports "Risk, Return and the Morphology of Commercial Banking," by John T. Emery and "The Pricing of Bank Deposits: A Theoretical and Empirical Analysis," by Michael A. Klein and Neil B. Murphy, both included within the issue. Both models of systematically describing banking market and firm behavior are complimented and contrasted with each other, particularly in regards to the use of rent and portfolio theories.

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 throws light on the papers of James Harvey Rogers "The Absorption of Credit." Rogers paper was a mathematical development showing that an addition to its reserve bank didnot result in increasing that individual bank's deposit liabilities by ten fold. The increase of reserve and increase of deposits were substantially equal and that the pyramiding occurred through the overflow from the individual bank to the other banks. Rogers demonstrates that such overflow from the banks receiving the funds would, in turn, cause an overflow from these to which the funds were communicated, and so on. He demonstrated that, as a result of such converging series, equilibrium would be reached when the additional deposit liabilities of the banks as a whole had become ten times the additional aggregate reserve. All of this was developed on the assumption that the general expansion of loans and deposits led to no outflow of cash to circulation. Rogers also showed a substantially similar result as to loans and discounts. He further applied the theory reversely to deductions of funds instead of additions. In other words he showed how both inflation and deflation work cumulatively and how different was the initial effect on the individual bank from the final effect on banks as a whole.

The article discusses the continued existence of bank-notes as a part of United States currency and the question of rights of their issue in the 1890s. According to the author, for several years past the majority of the Americans and their political representatives have observed with great equanimity the gradual disappearance of national bank-notes, and the approach to the point where the trifling profits upon circulation and the extinction of the national bonded debt would leave no paper in use except the notes and coin certificates of the United States. A sudden change of ground like this, involving a proposed revolution in the system of paper currency and in much besides, may betoken a decisive and durable alteration in the lines on which the bank-note question is to be discussed hereafter, or it may only be one more instance of the facility with which large numbers of Amercians are ready for a brief space to seize upon the last new idea, especially in matters of finance. The author remarks that, so far as the legislation of the several states still retains its provisions for the issue of notes, there is the same variety which existed before the Civil War.

The article presents comments on the papers "The Changing Role of Banks in the Market for Equities," by A. James Meigs, and "Life Insurance Companies and the Equity Capital Markets," by Orson H. Hart, both published within the issue. The author cites both papers as competent surveys of institutional and economic forces at work in their respective areas. The author notes that the life insurance industry's stock segment has shown a better growth rate than the mutual segment. Meigs' discussion of the development of common trust funds by city banks is mentioned.

In this article Nelson W. Aldrich, Senator, U.S. suggests the plan for monetary legislation. The plan of Senator Aldrich contains a valuable provision designed to meet contingencies. By special vote of the executive committee and with the approval of the secretary of the guaranteed by the local association and secured by the deposit with it of securities taken at two thirds of their market value. Under the terms of this clause it will be possible to assist threatened banking institutions, following the precedents established by European central banks and our own clearing-houses. If the Reserve Association is to serve a useful purpose it should be clearly understood by the public generally as well as by bankers that it is not to be one of its functions to contribute largely to the aggregate amount of credit regularly at the disposal of borrowers. It is, however, most doubtful whether the resources of the Bank proposed by Senator Aldrich would be adequate even for this purpose. Far from tending toward any considerable amount of credit expansion it may prove that its resources will be so limited that practically all of them will be held in reserve to meet emergencies.

This article presents information on the plan presented by the U.S. senator Nelson W. Aldrich on bank Co-operation. Senator Aldrich has presented to the National Monetary Commission a plan by which banks may cooperate much as they have on occasion cooperated through their clearing houses, but far more generally and effectively. The national banks are to organize the Reserve Association of America, with certain banking functions. Bankers who wished to get out of the Reserve Association could liquidate, collect for their stock and organize new banks that would not join the Association. One half only of the subscription is to be paid in at the outset, the rest is subject to call. The plan clearly provides adequately for such representation. The boards of directors will be thoroughly representative of the stockholding banks, for three fifths of the directors are to be chosen by majority vote of the member banks, each bank, large and small, casting a single vote. The remaining two fifths of the directors, however, are to be chosen by stock representation, each bank casting as many votes as it holds shares in the Association. The chief function of a local Association is to guarantee for a commission the commercial paper its members may wish to rediscount at the district branch of the Reserve Association.

The article presents a comment on a paper by Daniel Orr and W.G. Mellon in which they present an analysis of expansion of bank credit that introduces uncertainty into the model of bank decision-making. According to the author, certain aspects of their model and discussion of it are subject to criticism. First being that their results depend upon the assumption that the return on funds that are lent out or invested does not exceed the charge a bank incurs when it borrows funds to cover losses. The applicability of Orr and Mellon's model to banks in the U.S., where the Federal Reserve frowns on borrowing reserves to make a profit, is unclear. Even more important, is the fact that banks in various other countries where no prohibition against borrowing to make a profit is in effect, have never been observed to expand credit indefinitely though the rate on loans has exceeded the bank rate on many occasions. Orr and Mellon's discussion of what uncertainty implies about the creation of money by a many-bank banking system is also unsatisfactory.

The article presents a critical discussion of the papers by Seymour E. Harris and John V. Van Sickle on interregional competition and economic adjustments. According to the author Harris has developed his topic in a most interesting and stimulating fashion. He is to be complimented for this able presentation of the difficulties facing the Northeast in its attempt to maintain its competitive position in the U.S. Harris appears at the outset to favor the regional adjustment process of classical economics. After a brief description of this process, he contends that the expected adjustments do not take place or do so only after costly delays. Some policies of government such as banking policy and government relief and spending policies hamper adjustments, other policies that are classified as favoritism toward developing regions add to the burden of adjustment in the older regions. Harris' paper represents an important addition to interregional economic analysis, with particular reference to an area in which much investigation already has been undertaken.