Special cash reserves are customary

1 Vide Federal Reserve Bank Notes, page 250.

As a final assurance to the noteholder mention may be made of the possibility of a guarantee of the notes by the government itself. The United States government, for example, guarantees the immediate redeemability of the reserve bank and national bank notes. The new federal reserve notes are indeed direct obligations of the United States government. In view of the other measures of protection thrown about bank notes in the United States a government guarantee would seem almost to be a work of supererogation. But the guarantee is there, and it undoubtedly clinches absolutely the complete acceptability of the notes throughout the country. There is no such guarantee in France, Germany, or England; nevertheless, in these countries the notes are issued by the big central institutions whose relations with the government are so intimate that there has naturally grown up a feeling of comfortable assurance that if the worst should come the government is "behind the bank."

Government guarantee

1 See Robert E. Chaddock, The Safety Fund System in New York, Report of the National Monetary Commission.

Selected References

C. A. Conant, Principles of Money and Banking (1905), Book IV, Chapters II, III, and IV; Book V, Chapters II and VII.

Report of Monetary Commission of Indianapolis Convention, Part II, Sections 84-96 inclusive, and Sections 230-232 inclusive.

H. Parker Willis, American Banking (1916), Chapters V and VIII.