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316 4t a joint conference between the ?ederal Reserve Board and the Governors of Federal eserve Banks held in the office of the Board on Thursday, April 5, -at 3 p.m., PaESEET: Mr. Harding, presidins., Mr. Hamlin, Mr. Delano, 1.1r. Willis, Eecretary. Mr. darburg, Present also, Mr. iken, Yr. ?anchor, !!,r. McCord,' Mr. L:cDoal, Mr. Calkins, Mr. Treman, 7.:r. Van Zandt, Mr. Ahoads, Mr. Feay, Mr. Wold, Mr. Curtis. Governor Harding opened the meeting by stating that the Board would receive reports from the Governors with reference to their deliberations, and called upon Governor .A.ken for a statement. Mr. iken said that the Governors had spent most of their tire In discussing the subject of Federra reserve drafts. rr. Harding thereupon made a brief statement with reference to his views on the use of drafts and checks, sketching the prevailing practice on the subject, and emphl:.sizing the development of the person...1 check. He then called for expressions from members of the Board, and 7.7r. Delano made a brief state- 347 ment with reference to the best mode of developing the draft business, explaining that he was in general sympathy .1.t11 the plan which would be proposed by the qovernors, but suggesting as a possible modification the use of a special draft form, perhaps differentiated in color, to be used by depositors in m_king small drawings. :r. Aiken said there had been mach discussion of the situation among the governors, and that the report they had agreed upon was the expression of m,jority conclusions, there being dissent on a number of points. The matter was one that would have to be decided by the Board. ue then read _t report of con- clusions arrived at by the governors as follows: vfter consideration of the reports of the committee appointed to consider this subject, this Conference recommends the adoption of the following plan: (1) That the privilege of drawing "Federal reserve exchange" drafts should be limited to the country banks, or, in other words, to those banks carrying a twelve per cent reserve. . (2) That the drafts should be drawn by member banks upon their o,:ai Federal reserve bank and made receivable for immediate availability at par subject to final payment at any one Federal reserve bank specified in the draft. (3) That a special uniform form of draft be adopted by all the Federal reserve banks, such drafts when drawn upon this form to be the only ones which are receiva,ble for immediate credit at par. (4) That the drawing bank be recuired to give immediate advice to its Federal reserve bank of all 'Federal reserve exch,nge' drafts drawn, and, in the case of drafts made receiv_Lble at another Federal reserve bank, to forward a duplicate advice forthwith to the Federal reserve bank at which such drafts are made receivable; and that all such drafts be ,immediately charged to the member bank's account on receipt of advice by the Federal reserve bank on which they are drawn. That the Federal reserve bank on which the draft is drawn shall credit by telegraph in the Gold Settlement Fund the Federal reserve bank at which the draft is to be received eadh,day the total amount of such drafts in round amounts of ten thousand dollars; such advices to be sent in time to reach the Federal Reserve Board not later than 3 o'clock p.m. of each da (6), That this plan become operative on the 1917, and be made available to day of such member banks as may agree to terms formulated by their Federal reserve banks. (7) That under existing conditions and the terms above recited there will be no, necessity for daily settlements through the 'old Settlement Fund at the present time, nor any necessity for establishing a silver and legal fard, as sixgestcd In the Glancy plan. Treman said Ms views were the o .n banl. officers. SIAM ac those of TI,e thourtt the drafts should be made receivable at any k'eder'll reserve ba ,hoads said that he assamed that 1,11 of such draftswo.dd come to the reserve bank with a local member bank endorsement. They should be made payable only to the oraer of a bank 2an her said the plan was an experimeit and mast 349 be tried on a •modest scle. If the proposed drafts should be made both p.,yable and receivable at any 7ederal reserve bank, it "would involve a great deal of worry." colloquy between 'larding and 7r. .a.ncher with reference to the various ideas on the proposed drafts ensue!, :71-. larding urging the necessity of popularizing the clearing system . nd keeping in h-rmony with the prevailing drift toward the extension of the use of the personal cneck. General comment was offered by members of the conference, and the idea was expressed that free transfers between ';'ederal reserve banks dould result in cutting reserve balances. This idea was rebutted by r. TI-Arding „aid others. -t this point Y.r. 7-rding left the room, and Vice Governor .;arbarg took the chair. general discussion as to methods of remitting and cashing drafts was undertaken, and the statement of views, district by district, was then resumed. nr. t;alkins said that there should be neither an exchange charge nor a lirit to the amount of the proposed draft. ro such expedient was necessary in order to protect the bank. nr. Seay thought the action tken should be conserv- ative. In the main he agree' with r. Fancher. th....t'reserve banks ottght not to hoagh furnish exchan when rernber banks could buy it. desirble to rove sloly. wrang in his belief that ed in the future. wa trardthgW4S he personal check oizld be ex- draft proposed by the 'overiors factory to him. eentered the room and It this res r 7e hirelf believed it would be The for' curtiled re thoiht It was ed the chair. TC su)plementary stat rent of informal charac an advanta member setting of his points which had been sh that there would be definite statcent fro e 'tade with respect to two of the nder di sion, ) the question whether daily telegraphic advice sent by the origin_ting bank was desirable, and (2) the luestion whether it was dusiraule to make drafts pjable only to the order of bank or bank I, ed cheiue.". as in the case of the English On these points expressions of opinion resulted as follows: ncher opposed to telegraphic advice, but not to crossed checks. aoads fvorble to telegraphic advice and to 351 crossed cheq.aes. r.beay opposed to telegraphic advice, out not to crossed checks. • :cord favorable to telegraphic advice, bat not opposed to crossed checks. • :,:Doagal opposed to telegraphic advice; crossed cheves annecessar7. Er. .old the same. Y.r. Van -andt opposed to telegraphic advice, favorable to crossed checks. • Jalkins opposed to telegraphic advice, not Op- posed to crossed checks. :r. Jartis of 7ew York favorable to telegraphic advice, crossed check not objectionable. 1Jartis farther said thut the ?edeml reserve bunk of any district coald be protected a7Ainst excessive transfers by the use of a modest exchange charge. Je thought the holder of the draft would be best pleased if the draft was made payable rather than receivable at • a given reserve bunk. Harding summarized the discussion in a closing . statement, and then said that it was desirable to undertake the consideration of the government bond auestion. 0 In reply Mr. iiken stated that the subject had been only informally considered, and that no report was as yet ready in writing. "r. Harding said that the Secretary of the Treasury would probably make a statement as to his policy tomorrov, and that it was desirable to obtain at once the general substance of the lovernor's views as to bonds. Mr. ,,iken stated that the lovernors believed the Issue of bonds should be not less than .q,000,000,000, whereupon lovernor Harding stated that Secretary :c4doo had stated that requirements of 3,400,00J,000, approved by the ?resident, had been trans‘Aitt(d to the Ippropriations Committee of Congress. Continuing Mr. Uken said that working on the :Th000,000,00 estimate it had been agreed by the lovernors that 3:1! would carry the loan, although perhaps the larger output of bonds would result in modification of the interest rate. Harding invired thether the lovernment had better purchase the bonds of the filled ::ations or guarantee them, or hold aloof from their finances. Mr. Aiken responded that the lovernors thought we had better float our own bonds and make the proceeds payable to the for- eigners. Upon being questioned, .11 present agreed to this view, except 7:r. Treman, who said that he would prefer not to express an opinion. !:r. flken stated that the Governors believed the bonds should be redeemable in five years from issue, with a provision for redemption thereafter. One of the most serious matters in regard to the whole situation would be the mode of sale. It was be- lieved that this should be done through Federal reserve banks. ls to payments, he thought they should be certainly made through the reserve banks to the Government. 77.r. Harding 'said the Secretary of the r'reasury was . somevhat inclined to keep the funds on deposit with national banks, and Mr. Delano suggested that the Bo-rd look carefully into the English rule during the recent loan of five billion which was designed to discourage banks from subscribing, while leaving subscriptions on deposit with the banks which had received them. fA this point discussion of the bond question was suspended, and Mr. Harding called the attention of the Governors to the question of a reserve statement for the use of member banks reporting to Federal reserve banks, suggesting that it , would be ;;e. 1 to h4ve the governors express a opinion on this subject. On motion at 4.57 to meet on ?riday, April 6, ;LPPa0VLD: the joint s-ssion tdjorned
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