The Federal Reserve Act of 1913 introduced two new kinds of paper money into our currency system: reserve bank notes and Federal reserve notes. The Act contemplates the gradual retirement of the national bank notes and the substitution therefor of an equal amount of notes issued by the several Federal reserve banks. These reserve bank notes are the obligations of the Federal reserve banks and are issued and redeemed under the same terms and conditions as national bank notes, except that they are not limited to the amount of the capital stock of the reserve bank issuing them, but only by the amount of bonds deposited as security. Under the Act national banks are not required to retire their outstanding circulation, but may do so at any time within twenty years after December 23, 1915. In this way there probably will be a gradual shifting of the bonds held by the national banks to the Federal reserve banks and a substitution of Federal reserve notes for national bank notes. These new reserve bank notes, however, will give no elasticity to the curreney system, since they are based upon bonds, just as are national bank notes.