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At a special meeting of the Federal Reserve Board held in the Asse,nbly Roori of the Board in the Metropolitan Balk Building, Fifteenth Street, Washington, D. C. at 10.30 A. M., or Thursday, Noveniber 8, 1917. PREST Mr. Hardinir, presiding, Mr. Mr. Warburg Mr. Delano Mr. H.,mlin Mr. Willis, Secretary. Present also, Governors oC F. R. Banks as follows: Mr. Aiken, Boston, !!r. Trellan (Deputy Governor of tne F. R. B. of Hew York), Mr. Rhoads, Philadelphia, Mr. Fu ncAer, Cleveland, Mr. Seay, Richilond, Mr. !:cCord, Atlanta, :Jr. McDougal, Chicago, Mr. . Vold, Minneapolis, St. Louis, U, Mr. Miller, Kansas City, Mr. Van l,andt, Dallas, Mr. Lynch, San Francisco. Governor Harding opened the meeting with introductory remarks regarding the general situation and the str%in imposed upon the banking resources of the country. In order to equal- ize resurves he proposed a redistribution of bills among the Federal reserve banks, whereby various barks would take froa the F. R. B. of New York, epecified amounts of bills (;-Jr- respondinr changes in their reserve percentmes, as indicated in the followinfr table: Reserve Nov. 5-6 Takings from New York Boston Phi1e6ciphia Cleveland Richmond Chicago St. Louis Minneapolis Dallas San Francisco $ 5,000,000 '10,000,000 10,000,000 5,000,000 5,000,000 5,000,000 5,000,000 10,000,000 . Percentige New percentage 74.6 81.1 71.f3 :?(1.A 70.7 73.5 65.8 74.9 7(1.2 'i'0. 73.8 86.1 64.3 64.1 67.6 All the Govfrnors affected by the proposed transfer concurring, the Secretaiy w-s directed to prepare the necessary telerrams for transmission to the several banks in order to carry out the proposed arragelent; whereupon he so prepared them, submitted them for approval and transmitted them. Governor H.Lrding statedthat the Board would be pleased to have the governors of the Federal Reserve banks attend an informal smoker et eight-thirty this evening in a privite room at the Metropolitan Club, rhere various topics under discussion could further be considered. Topics were then taken up and discussed in their order ar follows: 1. Relations with Treasury and fiscal agency matters. Genera discussion ensued is to whether or not Treasury certificates of indebtedness could be f1o'.1ted in the future at 4'% Governor PcDougal of Chiceg , stated that the situation in Chicago during the last two issues of certificates of indebtedness vas that the Chicago, banks were running very close on their reserves, a number of them borrowing. ",ie toyed it very difficult," he said, to place these certluicates as we would like to 'nave done, but we followed a plan rrhereby every incorportted bank in the district was communicated with at once, and follewed that up with a circulrr letter e day or two later. 4.e only succeeded in selling about one hundred and forty million dollars. The interest rate was not attractive and there is no question but what a half percent more would h,ve stimul-ted the sale." Governor Harding: "ViIrtt do you think would be the proper dif- ferential as bet‘een the Treakury certificate and commercial paper offered through q note broker!" Mr. reDougal: "That is a hard question to answer. 1 think a half percent -ore on certificates would beattractive." Mr. tarburg: "On the whole, Chicago, has not taken enough of these certificates." r.!!cDougal: "Thrt,, is what I feel." Governor !!arding: "hat has been your commercial paper rte for the last sixty days?" . MoDeugal: "Five and one-half percent." Governor. McDougal further stated that the banks in his district were actuated more by patriotism in subscribing to the certificates of indebtedness. PJ Ur. Warburg: "The trouble is in your district that you did not go far enough with your pitriotism. New York has taken more than 50;: of the whole thing; if you include the last one, nearer a) or 70. not s.cticf-ictory. That is a thing wnich is he navc ,_rot to distribute those certi- ficates on a basis wnich will spread the burden over the country. Unless we find a basis which will produce a more satisfactory riistrib•Itio't vie cannot Governor TIT'. Aiken: Harding: o the business "Ho-, about Borton?". "I think they woud ,,ave to haven higher rate to secure a more satisfactory amoun. he have been pretty poor and have ,:xercised a great deal of prersure upon the banks." Governor Harding: "Do you think that there is any par- ticular relation between the short time Treasury bill and a long tine bond?" It • Mr. Aiken: . "I do not think they are related." Governor Harding: Vr. Se-1y: "How i it in Le Richmond district?" "Cur distriet is not as muci disposed to take the certificates as I would like to see. One considt,ra- tioa which keeps banks frcl buying the ot.rtific:It s is after they have all bought then and after they have cone along and subscribed for the loon they have invested in . tha certificates what they were going to put into tne loan. They put out their money in advance, whereas if they had not done it they could subscribe for the lonn and pay for it by credit upon their books. I do not know whether other districts have met with that." Mr. McCord: us. "What Governor Seay trly,9 is about true with There is a possibility however, of selling more Treasury certificates in the future than in the past." M-. Williams: "How many have you pllced heretofore!" Governor McCord: "Between nine and ten millions." Mr. McCord thought that it made lo diffcreuce what preferential rate there ITIf71 his district, and Mr. Trealan thought that it made little or no difference in the New York District, although he said that in his opinion after the fifteenth of November the New York district would have a stiffening of rates beyond what now exists, and that there is a feeling on the pat of his board that the rate on the next issue of certificatHs ought to be 4i%. Mr. Miller stated that the banks in the Kansas City district. are overloaded and will be until the fifteenth of January. "We have a peculiar situation in our district. In Kansas City alone 1300,000,000 of cattle paper originates., which sells all over the country, north, east, south and west and the locql banks in Kansas and Nebraska. Since condition have chnged, the banks v;hich have been buying th.t paper as secondary reserve, are declining to take ron-Yals of paper in place of it and it is putting pref-sre on banks in that territory that is slmoly terrific. At a recent clearing house meeting the senti- !gent '!.as expre-sed that that industry should receive some c ,2nsideration at the hands of the government. Mr. Wold stated that he uid not think the rate has had any bearing upon the sale of Treasury certificates so far in his district, as it has been entirely a matter of patriotism. vtates are firm at 6. Mr. Rhoads stated that more certificates could be sold in his district at 1 than at 4'1). hr. Vanandt stated that in his 6 strict about as rreny certificates could be sole, at 1, as at 4.5 at the present ti te. honey conditions are very easy, generally speaking. The question of war savings certificates (Subdi- ViFi0:1 C of Subsection 2, under Section 1) coming u, at the request cf the chairman, hr. Del-no made a brief f:t te',lent of the meeting and of the plans of thw 1 ar Savings Committee, and he distributed to the Governors, a draft of a letter of explanation issued to the Federal reserve banks under date of Novenber 12, X-489). S moles of war savings ft certificates F.nd stamps were also passed around for inspection. LH. :diler inquired whether the certifIcatos Tould be FOI, as such or -s strived, and Mr. Delano re- plied tir,t the certificLer wouid be of no v-iue until stamps had been pl,iced on then. Under Section II, Subsection 1 (Cooper.:tion by Subtreasuries in the Concentr-tion of (old,) Governor liar:ling submitted to the Conference the following letter recently sent by Secretary of Treasury LeffingwelI to the Treasurer of the United .1tates. CONFIDEuTIAL. November 7, .117. Ny dear Governor Luke: Please cause the following instructions to be issued to all subtreasuries and mints: FIRST: Require the Treasury offiet. to discontinue Lse use of gold certificates to meet current disbursements e;:cept when absolutely no other paper currency is availaule. (.1-.1COND: 2,equire Federal Reserve ilanks to transfer to the various Treasury offices, as directed by the Treasurer frAn time to time, such sums in paper currency (other thin gold certi.ficate) as may we required o take c-re of the e cers payments of such offices. Such tr-, Isfers uill be charged as a transfer of funds against the Treasurer's general account, -11,i 'ray consist of United States notes, silver certifie.ites, national bank notes, Federal Reserve b'enk notes or Federal Reserve not--s. 1,) _ Such notes, in all ctes, .clust_ be fit for circulation, nnd of the denominations required. THIqD: Cold certificates, awies of lc.)00, ane (old certificates, Department series, would still be issued for deposits of gold is required by law. Cold certificates mule still be redeemed in gold ns heretofcre if gold is nsked for 'aid the payments for unfit United States currency presented for redemption would still he nr,de in like kind -s frir is possible, but the use of gold certificit, s to meet current disbursements (representing tne rrenter part of t'ne rfreasJry payments) would be prnctically discontinued. These, of course, -re confideAinl instructi_,ns for the Trensury, subtreasurier -nd Very truly yours, (Signed) R. C. LFWCELL ASSISTAflT SEG'1ETARY. Hon. John Lurke, Treasurer of the United States. .pressed Discussion ensued, r.nd the opinion wns c;, by members of the board that it would be veil to send out as few open or circular letters with reference to the witnholding of gold by banks, Under Subsection as possible. of Section II, Co Ternor Hnrdinr called attention to ti-!e Po-rd's recent circular letter on unfit currency. Under Subsection 3 is to light weight gold coin, Governor Hirding cftlid attention to the Board's circular letter of September 22, and thought tnat there was need of 4t but little further discussion on the subject. Indivi6ual opinions were called for, nd M1. Lynch expressed the view that the San Francisco Lank was getting in gold coin slowly, encountering some few o obstacles due to adverse custom. The loss by nbrasion wns shoat A2 per A1000. Mr. !!cDougal reported that the 'edervil Reserve flank of Chicric was getting the role, in by the aid of member banks, and was preparing now to send out , general lef:ter to ail banks. He could not say wh.t the net loss 'ins. Mr. Void thought that the Ninneapoiis lyink hd got in about 911 the gold of full weig:. there was to be had. He thought there was about ,10,000,000 of abraded coin, and the loss might run to l. The amount thus outstanding, he said, "runs below the limit of tolera4ce, a loss of about 0.0 a thousand:* Mr. McCord stated that there is only a very small proportion of gold abrasion in his district, the majority of the gold coins being fullweight. Oovernor Harding then suggested that this discussion bf p-Issed over for the time being, to be contin— ued at the informal discussion this evening. 7i€1' The (Atestion of the embargo on gold was then tnken up nnd Governor Harding outlined the .Tonrd's policy in grnntinr applic-tions for exportations of gold. The Bo, rdis recent ac,reement with the Canadian Bankers' Association for the exportation of monthl; amounts of gold was 'llso exnlained to the governore. Gov-,:rnor Harding asked to be informed as to what pronortion of the exports of gold to Mexico and Canada are likely to come back. Mr. Van Zoindt stated that so far there has been to evidence of any return of gol'i from 11 r. 7iold stated that he has seen no eviuenc4 of a return o: gold froA Canada, / exico. RS did also tne Gov- ernor of the Cleveland Bank. Mr. Treman stated "it is pretty 'lard to tell whether there will be a return movement. Some will naturally drift back." Govern r Hnrdin-T ,-uggested to the governors th-A. they /Itch the situation closely 'tnd report any apparent -iloation of the regulations. It was stated by several of the governursthat shilments of Canadian currency were being held up by collectors of custo-Is at the border, and Governor Harding replied that this should not be the case, but he would take stops to see that the custo'ls authorities were properly advised. The topic of Discounts and .knvest,lents" w-s then considered and general discussion ennued as to the importance of "Yember banks refraining from discounting their own aecopt.Inces. The suspension of commodity rates was then discussed, Governor Hard tug stating that there seems to be no particular need for co qmodity rates any longer. After informal discussion, Governor Harding asked for n vote as to whether a special coulodity rnt was rel!uire, but none of the Governors voted in favor of it. Brief informal discussion with reference to preferential rates on paper secured by Government bonds ensued. Governor Harding raisad the question of rates intended to stimulate cattle raising, and there Was a brief interchange of ideas 7:ith reference to cattle raising conditions in !Ir. Van Zandt reported the loss as serious, but Texas. thought there would be no bankinc. losses on cattle paper. Discussion of Subsection 5(a) of Secti'n III, Advance in liscount Rates, was passed over until subsequent meeting. Topic No. IV was then considered, and it was agreed '714' at conclusion that, consideration of this topic be postponed until the meetinF at three o'clock. Reports on Axisting 1ranch,2s, Subsection 1, Section IV, were passed over with su,r,equent meeting. Governor Harding tne discussed the question of branches in general, end read the drft of the proposed uylaws for new branches of the Cincinnati type, which had been worked out by the board, explaining the saqe in some detail, Brief informal comment ensued. At 12:55 P. this iiay. AppRO1r;O: chairvIn. the Board adjourned to meet -t 3
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