[Footnote 4:  Except that until the surplus of any reserve bank amounts to 40 per cent of its paid-in capital stock, one half of its net earnings shall be paid into a surplus fund.]

[Footnote 5:  These notes are all secured by the deposit of bonds of the United States, a large share of them bearing interest at the very low rate of 2 per cent.  Two per cent is less than the market rate for government loans, for 3 per cent bonds without this privilege sell above par.  Therefore these 2 per cent bonds were held almost exclusively by banks, and would have lost a good share of their value had the note-deposit privilege been withdrawn.]

[Footnote 6:  Through the Federal Reserve Board or they may do it voluntarily, sec. 4.]

[Footnote 7:  The Act does not explicitly say by whom the notes are issued:  it says that they are “to be issued at the discretion of the Federal Reserve Board”; that “the said notes shall be obligations of the United States.”  Further on the notes are spoken of as “issued to” a Federal reserve bank, and again as “issued through” a Federal reserve bank, but not by it.  But the phrase occurs (sec. 16) “its [i.e., the Federal reserve bank’s] Federal reserve notes.”  The notes thus are technically issued by the United States, but not as ordinary political (fiat) money, for they are not given a forced circulation by the Government in paying its indebtedness.  But the banks “shall pay such rate of interest on” the amounts of notes outstanding as may be established by the Federal Reserve Board (i.e., to the Government of the United States).  Practically the notes (as respects choice of time of issue, amounts, profits from them, commercial assets to secure them and to redeem them) are asset currency issued by the several Federal reserve banks.]

[Footnote 8:  This may be shown in the following table: 

When reserves against notes are        the tax rate upon the total
are—­                               deficiency shall be—­

Below 40.0 to 32.5 per cent 1.0 per cent " 35.5 to 30.0 " " 2.5 " " " 30.0 to 27.5 " " 4.0 " " " 27.5 to 25.0 " " 5.5 " " " 25.0 to 22.5 " " 7.0 " " " 22.5 to 20.0 " " 8.5 " " " 20.0 to 17.5 " " 10.0 " " " 17.5 to 15.0 " " 11.5 " " " 15.0 to 12.5 " " 13.0 " " " 12.5 to 10.0 " " 14.5 " " " 10.0 to 7.5 " " 16.0 " " " 7.5 to 5.0 " " 17.5 " " " 5.0 to 2.5 " " 19.0 " " " 2.5 to 0.0 " " 20.5 " "

]

[Footnote 9:  The complete application of the new rule is deferred for a period of three years from the passage of the act.]

[Footnote 10:  See on “piping” provision, sec. 2, above.]

[Footnote 11:  See sec. 7 above.]