tal 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had the note-deposit privilege been withdrawn.]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