The plan for retiring the national bank notes is closely tied up with the disposal of the 2 per cent bonds. As noted above, the Federal reserve banks may be required to purchase annually $25,000,000 of the 2 per cent bonds now held by national banks and may issue against them reserve bank notes. If, however, the reserve banks do not wish to keep these notes out, they may retire them as national banks now do and get in exchange from the Secretary of the Treasury onehalf of the amount in one-year 3 per cent gold notes of the United States and one-half in thirty-year 3 per cent gold bonds without the circulation privilege. But at the time of making the exchange the Federal reserve banks must agree to purchase at the maturity of these notes an equal amount, if so requested by the Secretary of the Treasury, and to renew the obligation annually for thirty years. As stated, the Federal reserve banks have the option of exchanging the notes for more 3 per cent bonds without the circulation privilege. By this arrangement "the burden of the additional one per cent per annum interest charge will fall upon the Government, an arrangement that is entirely proper, since for years it has borrowed at rates lower than are available for any other Government in the world, and has done it by requiring the national banks to buy the bonds as a prerequisite to securing a charter and issuing notes."1 The substitution of the one-year treasury notes for long-time bonds will open a way to reduce the national debt if the Government has funds to apply to such reduction. The notes will also provide the Federal reserve banks with "a readily marketable asset, the sale of which abroad may prove serviceable in periods of strain, and the domestic sale of which will enable the reserve banks to make their discount rates effective in the money market."2