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The Papers of Charles Hamlin (mss24661)
Hamlin, Charles S., Scrap Book — Volume 202, FRBoard Members
205.001 - Hamlin Charles S
Scrap Book - Volume 202
FRBoard Members
BOARD OF GOVERNORS
OF THE
•
FEDERAL RESERVE SYSTEM
Office Correspondence
To
The Files
From
Mr. Coe
Mae
August 1, 1941
Subject:
After correspondence with Mrs. Hamlin (see letters of May
25 and June 4, 1941) the items attached hereto and listed below,
because of their possible confidential character, were taken from
Volume 202 of Mr. Hamlin's scrap book and placed in the Board's
files:
VOLUME 202
Pages 11 & 12
Draft of memo on "Direct Pressure".
Page 26
Memo to Mr. Hamlin from Mr. Smead re Hedging by millers and
cotton manufacturers.
Page 29
(X-6555) Conversion of Canadian Currency.
Page 31
(X-6556) Revision of Open Market Procedure.
Page 45
Letter to Board on establishment of Branch at Wichita.
Page 92
Letter to Governor Young from Governor Harrison re Bank for
International Settlements.
Page 108
Request for Opinion of Attorney General re B. I. S. Statutes.
Pages 110 & 111; 112 & 113
Memoranda and correspondence re Bank for International Settlements.
Includes cablegram from Mr. McGarrah to Mr. Harrison in
Paris, letter from Mr. Mills to Gov. Young, analysis of Mr.
Mills' memorandum, etc.
Page 114
Memo re trust agreement between the signatory creditor Governments and Bank forInternational Settlements. - (Draft)
Pages 115; 116 & 117
Resolution re B. I. S. Statutes.
Page 119
Letter to Governor Young from Governor Harrison re Bank for International Settlements.
Page 156
Total Bills & Securities, by Classes, Members' Reserve Deposits,
Monetary Gold Stock.
)7
,
4440; 7404,0$444-All
At-e..4.44. '4440
)4-6
>,
/14.
04
The year 1929 opened with brokers loans and security loans
of member banks in record volume and total Reserve batik
credit in
larger volume than in any year since the post-war crisi
s.
Collateral
indications uerived from the intense activity of the
securities markets and the unorecedented rise of security price
s gave unmistakable
evidence of an absorption of the country's credit ia specu
lative security operations to an alarming extent.
There was nothing in the
position of commercial credit to cause concern.
The dangerous ele-
ment in the whole credit situation was the continued
growth of the
volume of speculative security credit in the year
1928.
The measures taken by the federal reserve banks in the
year 198 to firm money conditions by sales of open
market investments and by Successive increases of discount rates
from 3-1/2 per
cent at the opening of the year 1928 to 5 per
cent in mid-year 1928
had not proved adeauately effective.
The second half of the year
1928 witnessed an aggravation of the conditions
that had called forth
the firm money policy of the Federal reserve banks
in the first half
Of the year.
The credit situation confronting the Federal Reser
ve System
at the opening of the year 1929 still
stood in need of correction;
the problem was to find suitable means by
which the growing volume
of speculative security credit could be brought
under restraint without occasioning avoidable pressure on comme
rcial credit.
-:;ith the System's portfolio of Government secur
ities depleted
by the sales made in the first half of the
year 1928, the main or
VOLUME 202
PAGE 11
TnTfITOI:ra crOLTAGCT, T.LOTX
rosLaem, AoTrIme .p7ol1
O.
13;empr;;. p7T:
T7
.rjo Tr.ceneo g(IcTAT.r.'LJ
7.7,A
OL cpmG
fT0
;0:7Y
LI/OOL(F AOTTJ7JG
y7,
59?GLAG
Pm17 7 ("0(IT
7
77i7BTCi .r.T!=7 PL07!01.$3 /0731? r.7 .Jr.i
tTJYr
exclusive reliance in a further firming of money conditions
must be
by marking up of discount rates and bill rates unless
some other
expedient could be brought to bear in the situation.
Advances of buying rates on bills were approved by the
Federal Reserve Board in the early part of the year 1929, which carried them above the prevailing 5 per cant discount rate.
These ad-
vances resulted in a rapid and great reduction of the
System's holding of bills and
sustained pressure on the banks through rediscount-
ing, and in a further firming of conditions
in the open money market particularly the market for call loans.
The Board was not, however, disposed to regard favorably
further increases of the discount rate as the appropriate method
of
correcting the untoward features of the existing credit situat
ion as
it involved the Federal Reserve
ystem.
It set forth its views of
how the Federal reserve banks should deal with the matter in
a letter
to them under date of February 2nd, in which it stated that "A
member
bank is not within its reasonable claims for rediscount
facilities
at its Federal reserve bank when it borrows either
for the purpose
of making speculative loans or for the purpose
of maintaining speculative loans."
A further elaboration of its position was contained
in a statement issued to the public February 7th,reading as follow
s:
14.404,t4 • 44.4444k4.i.
444444,04
24
ri do -1(44.4
1444-14. P-6
4t.,A,4;
-
ONO
to estimate the
It is not for the Federal Reserve Board
uences of its intergeneral expediency and the larger public conseq
vention by "direct pressure" in the comple
situation existing at
the time the above statement was callea forth.
2
(5 °'
It may be remarked,
Board resulted
however, that the course of action adopted by the
ntial conservation
witnin four months of its application in a substa
000
f the country, and
of the credit resources of the banking
4e essential needs
particularly of tne Federal reserve banks, for
which arose later in the year.
It may be remarked further that
pressure" ark-a-4road-this experience with the application of "direct
s as a method
fti-e demonstrated its practicability and effectivenes
,
&61
firmness and its reasonof Reserve banking control when applied with
in certain cirablenes4s a method of Federal Reserve intervention
Its potentialities an
4t
anizadisorg
credit
of
types
n
certai
its availability in dealing with
cumstances)when applied with discretion.
tion can no loner be seriously doubted.
,
.0
1 1,44 40
/444,..2.k -d-i-4--
)11r,t44(„A
,;(4444 tittudia
11.)
++/DO
e.4.,•.••••
Au. i ott,....
1
1-0e
.
1
-
12 11-11V146f. a, -
Id
%
-
4
‘1.
- 4441 /0, a.
02,AW, 2.,
2.
DS*/e 1t /a/
ya
,
2.42-
,
- 2.0
c,6
bãc 4 mA. C, A-6.4,
/
-(44
y
L LI2t co /73 j-cA4e
14A
.
i
-4—
4- 7_9
,L4rat.4,&.1
4e.e-dr--)24.4.
0.-•-•.‘
v-0 ks,--4-01
1....4.--r.4.40-1-4
• 4-...-4.4.4•4•14
*21
Y-
-24
at-L-c-t
VOLUME 202
PAGE 12
0.3
"1-••'"'L
orna No. 131
Office Correspontence
To
Mr. Hamlin
From
Mr. Smead
FEDERAL RESERVE
BOARD
Date_
April 2, 1930
Subject: He4aing by millers and cotton
manufacturers.
•PCI
2-8496
In accordance with your request of yesterday I an giving you herewith
illustrations of the use of hedging by flour mills and manufacturers of
cotton goods.
A considerable interval must necessarily elapse between the time Wheat
is purchased by a flour mill and the grain is milled and the flour ready for
market. Since the price of flour at any time is based largely upon the price
of Wheat at that particular time, the manufacturer protects himself against
fluctuations in the price of wheat by the sale of an equal amount of wheat
for future delivery. For example, if wheat is purchased in say January he
may sell July wheat and cover his short sales by the purchase of July Wheat
from time to time as the flour is actually sold. If wheat should be selling
at a substantially lower level at the time the mill sells its flour, the
miller will be in a position to cover his Short sales by nurchasing July
wheat at a reduced price, utilizing the profit thereby realized to make up
the loss on his flour. On the other hand if,at the time of the sale of the
flour, wheat is at a substantially higher level the miller will be obliged to
cover his short sales at a loss but will offset such loss by the higher price
which he will be able to realize on the sale of his flour. In other words a
flour miller may protect himself against a loss occasioned by a decline in
the market price of flour after he has purchased his Wheat by means of short
sales of wheat. In adopting this practice, however, the miller loses any
opportunity he might otherwibe have of making a profit by reason of an increase
in the market price of flour between the time he purchases the wheat and the
time the flour is marketed. The sale of futures, therefore, transfers the
speculative risk from the miller to the wheat speculator.
In the case of cotton the situation is somewhat different, inasmuch as.
the manufacturers of cotton goods frequently sell their product considerably
in advance of manufacture. Accordingly with a known price for the manufactured
product the mills can only be protected against fluctuations in the price of
cotton either by buying at once for actual delivery the cotton they will need
or by buying cotton futures with a view to the subsequent sale thereof from time
to time as cotton is actually purchased in the market. This practice is known as
"buying hedging" and is emrloyed when the product of the mill has been sold
before the raw material to be used has been purchased. Selling hedging is em—
ployed, just as it is by flour millers, when the mill accumulates a stock of
raw material for use in producing goods for sale at some subsequent date. In
this case the Short sales are covered by the purchase of corresponding futures
as soon as orders for the goods are received.
VOLUME 202
PAGE 26
•
5.44, /144
FEDERAL RESERVE BOARD
WASH!NGTON
X-6555
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 31, 1930.
SUBJECT:
Conversion of Canadian Currency.
Dear Sir:
Under date of November 7 the Board advised you that
it had approved the report of the Committee on Canadian
Currency, and enclosed vith its letter, X-6413, a copy of
the Committee's re)ort, also a co:py of the letter to be
addressed to member banks and of the statement to be released to the press.
On November 15 the Board sent you a telegram modifying somewhat the press statement and the letter to be sent
to member banks and on November 13 it advised you that it
had voted to postpone the effective date of the plan for
the conversion of Canadian currency into U. S. funds.
This matter has again been reviewed and the Board has
decided to make the effective date of the plan Tuesday,
Aril 15, 1930. The press statement will be released by
the Board at 2 o'clock on that date and it will be appreciated if you will release the statement at the same time at
your bank and, if you think advisable, at each of your
branches, if any. You may find it advisable to amplify
somewhat the letter to 'Le sent to member banks but the
Board would suggest that no changes be made in the statement
to be riven to the press.
Co-lies of the revised press statement and of the letter
to be sent to member banks are attached hereto.
Vex.; truly yours,
E. M. McClelland,
Assistant Secretary.
Enclosures.
GOVERNORS OF ALL F. R. BASKS.
VOLUME 202
PAGE 29
•
X-6555—a
, 1930.
SUBJECT:
Canadian Currency.
To Member Bank Addressed:
Enclosed herewith is a statement which the Federal
Reserve Board and the Federal reserve banks and branches
have given to the press, relating to the conversion into
U. S. funds of Canadian paper currency spent in this
country.
In accordance with this statement, you may include
Canadian paper currency in your shipments of United
States currency -provided the two kinds of currency are
properly segregated within the package.
Credit for such currency will be ,,
- iven for its face
value and when the cost of conversion into U. S. funds
is determined it will be charged to your reserve account.
As brought out in the accompanying press statement, the
average cost during the past three years of converting
Canadian paper currency into U. S. funds, including both
exchange and shipping charges, has averaged less than 1
per cent.
X-6555-b
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For release
Tuesday, April 15, 1930.
SUBJECT:
Canadian Currency.
The Federal Reserve Board announces that a plan has
been worked out and will be put in operation for handling
Canadian currency deposited with Federal reserve banks, at a
minimum of the actual collection charges incurred by them.
The discount on Canadian currency brought into the
United States by travelers has frequently ranged as high as
10 and sometimes even as high as 20 per cent, at places remote from the border line. This is regarded as excessive and
has given rise to some feeling in Canada, especially as United
States currency is generally accepted at par in Canada.
The Federal Reserve Board has taken the subject up
with the Federal reserve banks and they have agreed to offer
their facilities to member banks for the collection and conversion of Canadian paper currency into United States currency
at the curre_I_L.L.g/L21_flc_change. The Federal reserve banks
will absorb -the cost of shipping Canadian paper currency from
the member banks to their-FMective Federal reserve banks
but will deduct an allowance to cover the actual exchange
charges, gri7-177717737=Shipping charges, if any, from the
Federal reserve banks to the points of conversion into United
States currency. The average cost during Yne -past three years
of converting Canadian paper currency into U. S. funds, includinF.r both exchange and ship-Ding charges, has averaged less
than 1 ner cent.
This method of handling Canadian currency by the
Federal reserve banks, will it is hoped, result in substantial
reductions in the cost of collecting this currency. The Board
feels that if member banks cooperate in this matter by extending
a similar service to their customers, Canadian tourists traveling in this country will find American merchants willing to
accept Canadian currency at or near -oar.
•
Loo.
FEDERAL RESERVE BOARD
X-6556
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
.7
March 31, 1930.•j
Revision of Open Market Procedure.
Dear Sir:
Under date of January 23, 1930, a letter was addressed to each
Federal reserve bank advising of adoption by the Board of a revision of
the open market procedure made effective in April, 1923. This letter expressed the belief of the Board that the procedure adopted contained the
essentials of a workable plan designed to give expression to the common
interests of the Federal reserve banks in matters of open market policy
and to provide a reasonable and practicable method for joint action. It
requested that after each bank had had time to consider the plan its views
•
thereon be forwarded toBoard.
On March 24th and 25th, a meeting was held for the consideration
of open market Policy attended by representatives of the twelve Federal reserve banks. At the conclusion of the rear business, a thorough discussion was had regarding cnen market procedure in the light of letters which
had been received by the Board from the directors of eleven of the Federal
reserve banks. Following this liscussion the representatives of the Federal reserve banks, with the Governor of the Federal Reserve Board, were
appointed a committee to -pre-)are a further revision of the Plan acceptable
to them. This revision was then thoroughly discussed by the Board and the
representatives of the Federal reserve banks, with the result that some
further changes were made.
The revised procedure in its final form, copy of which is attached, was unanimously agreed to by the representatives of the Federal
reserve banks. It has since been considered by the Federal Reserve Board
and was a...12pted by the Board without change, to become effegliya_ltaz_Eatoards2f_clit,eziaLaeof the twelve Federal.. reserve banks.
Please, therefore, submit the matter to the Board of Directors of your
bank at its next meeting and advise the Board whether your directors accept participation in the Open Market Policy Conference under the plan as
revised.
In the Board's letter of January 23, 1930, it was pointed out
that certain working arrangements which might be necessary would best be
determined by the conference itself when organized.
In this connection,
the representatives of the Federal reserve banks at the meeting on March
24th and 25th voted it to be the sense of those present at the meeting
that the representative of the Federal Reserve Bank of New York on the
Open Market Policy Conference should be elected chairman for one year;
VOLUME 202
PAGE 31
-2-
X-6556
that the Executive Co,umittee, provided for in the procedure, Should consist of the chairman and the representatives of the Federal Reserve Banks
of Boston, Cleveland, Philadelphia and Chicago for one year; and that the
conference adopt a principle of reasonable rotation in the membership of
the Executive Committee after the first year.
By order of the Federal Reserve Board.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
(Enclosure)
•
X-6556-a
f/
(Draft of open market procedure as revised at the meeting of the
Federal Reserve Board with representatives of the
Federal reserve banks on March 25, 1930,
and adopted by the Federal Reserve Board.)
"(1) The Open Market Investment Committee, as at present constituted, is
hereby discontinued and a new committee, voluntary in character, to be
known as the apen Market Policy Conference, is set up in its place.
(2) The Open Market Policy Conference shall consist of a representative
from each Federal Reserve Bank, designated by the Board of Directors of
the bank.
(3) The Conference shall meet with the Federal Reserve Board upon the
call of the Governor of the Federal Reserve Board or the Chairman of the
Executive Committee, after consultation with the Governor of the Federal
Reserve Board.
(4) 'The function of the Open Market Policy Conference shall be to
consider, develop and recommend policies and plans with regard to open
market
OiI.
(5) The time, character and volume of purchases and sales shall be
governed with the view of accommodating commerce and business and with
regard to their bearing upon the credit situation.
(6) The conclusions and/or recommendations of the Open Maricet Policy
Conference, when ap,proved by the Federal Reserve Board, shall be submitted
to each Federal reserve bank for determination as to whether it will participate in any purchases or sales recommended; any Federal reserve bank
dissenting from the -pronosed policy shall be expected to acquaint the
Federal Reserve Board and the Chairman of the Executive Committee with the
reasons for its dissent.
(7) An Executive Committee of five shall be selected from and by the
members of the Conference for a term of one year, with full power to act
in the execution of the policies adopted by the Open Marl,cet Policy
Conference and approved by the Federal Reserve Board, and to hold meetings
with the Board as frequently as may be desirable.
(8) Each Federal Reserve Bank participating in the Open Market Policy
Conference dhall be considered as waiving none of its rights under the
Federal Reserve Act; each Federal Reserve Bank shall have the right at its
option to retire as a member of the Open Market Policy Conference, but each
bank while a member of the Conference shall respect its Conference obligations."
FEDERAL RESERVE BRANCH BANK JOINT-COMMITTEE
REPRESENTING BANKS IN
COLORADO, OKLAHOMA, TEXAS AND KANSAS
WICHITA, KANSAS
Geo. H. Hamilton
Chairman
To the Federal Reserve Board:
This Joint Committee has received notice of your disapproval of
its Petition to require the Federal Reserve Bank of Kansas City to establish a Branch at Wichita, Kansas. On September 14th and again on December
20, 1923, a similar Petition was denied for the reason, as we understand,
that the Board had decided not to establish any more Branches.
After the denials in 1923 of a Branch at Wichita, this Board in
February, 1927, established two Branch Banks, one at San Antonio, Texas,
the other at Charlotte, N. C. The action as to San Antonio and Charlotte
caused this Joint Committee to renew its Petition for a Branch at Wichita.
This was done because the Committee assumed that its Petition would be considered on its merits and would be granted if as good a showing was made
for Wichita as had been for Cherlotte or an Antonio. At the close of the
first Hearing on December 16, 1929, and since the second Hearing on January
20, 1930, the Committee has been assured by members of the Board that the
showing made by this Committee was the best made by any group of Banks that
had petitioned for a Branch. The 507 Banks situated in the 71 counties
that authorized this Committee to 15resent its Petition are disappointed, but
not uiscouraged.
This territory in Southwest Kansas, Eastern Colorado, Northwestern
Oklahoma, and the Panhandle of Texas constitutes a ccmmunity whose banking
business is principally conducted within such territory. This Committee,
as part of its evidence, made a count of all transit items mailed out for
collection by twenty representative Banks during fifteen days in December,
1929, on points within and without the territory represented by this Committee. The result showed that about seventy-five per cent (75%) of the
items in amount and number were on banks in this territory and only about
twenty-five per cent (25%) on points without this territory. A question
was raised as to the reliability of this survey inasmuch as it did not include a large number of banks. To meet this criticism, another survey was
made of one hundred other representative Banks in this territory for thirty
days in January and February of this year. The result of that survey was
not known until after our Petition was disapproved. The result, however, is
now available and shows that the survey made last December was substantially
correct. The survey of the one hundred other banks shows:
VOL. 202
PAGE 45
Items on Points
In Petitioning
Territory
Out-of-Territory
Items on points
West of K. C. Mo.
Out-of-Territory Items
on K. C. Mo. and points
East of K. C. Mo.
Per Cent
of Amt.
Per Cent
of Amt.
Per Cent
of Amt.
70.4%
Per Cent
of Number
74.9%
16.1%
Per Cent
of Number
13.1%
13.5%
Per Cent
of Number
12.%
This last survey proves that the territory in which the 507 Banks are
situated constitutes a community whose principal banking business is done
within and not without that territory.
The Committee must have failed to present all the facts to the
Board or the Petition would have been granted. The development and progress
in the territory in which the 507 Banks are located is not temporary, but
permanent. This territory produces more wheat than any other equal area
in the United States. Kansas produces on an average more wheat than any
other State. The wheat production of this territory equals that of Kansas.
The flour mills in the Wichita trade territory together with the mills
located in Wichita represent a milling capacity of 54,690 barrels of flour
per day. A Federal Reserve Branch established in Wichita would, because of
its location, render a much needed financial service to the farmers, grain
dealers and millers of this very important agricul-airal area.
This Branch Bank is not asked to help build up Wichita, but because the 507 petitioning Banks can be better served by a Branch in that
city rather than by the parent Bank. There is a community around each
existing Branch that is better served by such Branch. If that were not so,
such Branch would be discontinued. Wichita is the banking center of such
a community. The Banks and the people that they serve are entitled to as
good service as those who live in the territory surrounding existing Branch
Banks. The Branch at Charlotte serves 65 counties; at Helena 56; at San
Antonio 55; at Houston 40; at El Paso 37; at Spokane 28; a Branch at Wichita
if this Petition is granted, would serve 71 counties. A Branch Bank should
not be located in a city because of its size or importance, but to serve the
Banks in the surrounding territory. Under such a rule, is not Wichita and
the 507 petitioning Banks as much entitled to a Branch as the Banks surrounding the existing Branches above referred to? This Committee recognizes
an obligation imposed upon it by the 507 Banks and the business and agricultural interests that have so loyally supported it. This obligation will
not be discharged until its Petition is finally granted. For that reason
it is its purpose to continue its organization and renew its Petition at an
opportune time in the future. It has an abiding confidence that when the
entire situation is made plain to the Board, it will grant its Petition.
Respectfully submitted,
THE JOINT COMMITTEE
Representing 507 Banks in Southwestern Kansas,
Eastern Colorado, Northwestern Oklahoma, and
the Panhandle of Texas.
March 15, 1930.
COPY
FEDERAL RNSERIM
BArx
NEW YORK
A pril 17, 1930.
Dear Gawernor Young:
Referring to my discussion yesterday eith the Federal Reserve
Board concerning a cable from Mr. McGarr/419 dated April 11, a copy of which
I left with the Board our board of directors have today voted "sUbject to
the approval of the Aderal Reserve Board, to authorize the officers to open
and maintain a bankinc acconnt on our books for the Bank for International
Settlerents and to carry out operations in this market for the Bank for
International Settlmments along the WWW3 general lines and subject to the
eame terms and conditions as we do for foreign central banks having accounts
ritbvs." I shall very mneh aleerecieto your advising we whether the foregoing action of our direetora moeto with the approval of the Federal Reserve
Board.
You will no doubt recall that the first three paragraphs of Mr.
McGareehle cable ask whether Vie Federal Reserve Bank of New York wishes to
object to certain propored acts of the Ban7e for Inteeeationel ettlements
in this mareot, relnttn1 pr'eentenlly te the Nale and voting of its stock,
I understood from ey conversation with the Doard that the trensactions referred to ie .teen three 2araara-ehs eere not of el character concerning which
the Board would care to have an opportunity formally to express its objection and that this bank should feel ':'ee, eithoet ferther reference to the
Federal Reserve Board, not to voice any dissent in our reply to these paragraphs of Mr. McGarrahls cable. I mention this now merely to be sure that
there is no question concerning my understanding of our conversations yesterday.
In this conneetiun our directors at their meeting to day were of
the opinion that there is no reason for this leullc to erprese any dissent to
the qetions mentioned in these three paragraphs.
I am planning, as agreed with the .Twara, to go to '
,Oehington
Monday further to discuss the procedure to be followed by this bank vis-a-vis
the ?lidera' neserve Board, if and when we are given at. opportunity to express
our dissent to a reparation bond issue in this market and hope that in view of
the discuseion which I have today had with our directors, following my meeting
with the Federal Reserve Board yesterday, we Shall be able to agree upon some
mutually matisfactory formula.
PaithiUly yours,
(Signed) George L. Harrison,
Governor.
Honorable R. Ale Young,
Governor, Federal Reserve noard,
Washington, D. C.
VOLUME 202
PAGE 92
O
411ril 23, 1930.
Reauest for Opinion of Attorney General.
B. I. S. Statutes.
C.S.H. does not deem it necessary to ask an opinion, but if
an opinion is asked for, in his opinion it should assume a form
somewhat as follows:
VOLUME 202
PAGE 138
1.
Has the Federal Reserve Bank of New York authority
to answer affirmatively or negatively any questions
which have been, or may be, submitted to it by the
B. I. S. under Section 20 of the B. I. S. Statutes
with relation to the offering of securities in the
United States, except after securing the consent
or approval of the Federal Reserve Board under its
power of regulation and general supervision of
the Federal reserve banks?
2.
Has the Federal Reserve Bank of New York, acting under
authority of the Federal Reserve Board, or the
Federal Reserve Board itself, any power under the
Federal Reserve Act to pass upon by way of dissent
or approval any issue of securities, domestic or
foreign, as a condition precedent to their offering
in the United States?
4.44
folk
(co)
fpril lls 1930
Federal Reserve Bank of !ew York
,Ce-s, York
First Lloetin-, of loard definitely set for 4ril 22. Believe it
would be helpful if boforo that date you could adviso no formlloridurther:
You haw) any abjoetion to the selection of the First
/
National Tim% New York as the financial institution to exercise
votiag ri,;hts a-iplioable to the In for International 5ettlaments 'Mares placed in Amorioas this selootion to be effeative
for one year or until a successor is amointedo
T.0
4hother undor Artiolu 20 you objoet to the private dis-
trtbrttrn in your market by the bmting group haft*
.orran
^,
1141,,
Co. of 16000DISsbares.
..hether you hove ar4y objoeti4 to Bank tor International
:iettlemants instruo%11c,
Eergan
goo to employ in the
Anwiean rosIest the proceeds af the silo of shares uhioh will anolot
to a.7:)roximately 04000,07k about lig of *Leh in early mcturing long
torts investments to be selected by them and delivered toyo. for
nur ea Ain't the rot:Abider to be raid in cash to yln for cu?
;Mother you ITS williag to tteeept the mistraty r4f these
secoxitie s and to invest this cash in priLe billto
FIV- •
.hother ym are agreeable to the Bank for International ,ettlo-
Notts open1n4
SIX
0
general aocount with you an the t.sual central bn41. term.
It sos would this exttind to your eating as scent and clorros-
pendent for the Bank for In4ornational 3ett1emonts under rerfTr41i L
of rtiole 22
status should oeeasian 'Jake it desirable or do yuu
prefor that question of agfinaY be dotOrred?
VOLUME 202
PAGE 110
Vigkirrah
4--44441/,a444-44• 4.
OZAA /
adJi
1140.444,1
144-44g4i .24.44 ,3
44
of
ov.
14. Z C.,
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6--ci
THE UNDERSAICRETARY OF THE TREASURY
WASHIAGTON
April 14, 1930.
dear Roy:
I enclose herewith aemorandum which I have 7)reDared
on the question of operations to
e undertaken by the Bank for
Internatiobal Settlements on the limerican market.
It may serve
to clarify the issues and to furnish a basis for acreeMmat among
all concerned.
Sincerely yours,
(Signed) Ogden L. Mills,
Undersecrotary of the Treasury.
Hon. Roy A. Young,
Governor, Federal eserve Board,
Washington, D. C.
Enclosure.
VOLUME 202
PAGE 111
COPY
The proposed onerations of the 13/kn,
'
. for International Settlements
in the United States market may fall within the jurisdictions of (I)
the State and Treasury Jsepartments in so far as auestions of international -nolicy are concerned: (0 the New York Federal Reserve Bank
as the Federal Reserve Bank located in the principal financial center
of the country and as such designated in the statutes of the B.I.S.
and in the so-called Deed of Trust as the agency to be consulted; and
(3) the Federal Reserve Board by virtue of the general supervision and
direction which it exercises over the credit policies of the Federal
Reserve System.
The ultimate responsibility for making a decision on questions
of important international or financial policies should be definitely
fixed and, if possible, a conflict of authority should be avoided.
It seems to me that the questions likely to arise naturally fall
into three main groups, and that the character of the questions indicates
rather definitely which of the three agencies should assume the responsibility as a matter of principle for making final decisions in each
case.
The offering of reparation bonds in the United States market.
(a) Subsection (c) of Article XII of the Trust kzreemsnt between the
creditor governments and the Bank for International Settlements provides
t-at no issue of an international character may be made in the
market of any of the countries the government of which has signed the
Trust Agreement without the apnroval of that government both as regards
the amount of the issue and as regards the conditions on which it
shall be authorized.
This is in addition to the provision requiring
the B. I. S. to ascertain Whether the central banks concerned, have any
objection.
If the governments of the other principal countries affected
are to have the right to veto, the United States Government should
likewise have such a right.
Indeed, it already exists and is recognized
by virtue of the practice of consultation with the Secretary of State
on the part of bankers before foreign governments are permitted to
offer their obligations in our market.
Given the existing practice
and the above mentioned provision in the Trust Agreement, the New York
Batik might well take the position, and so inform the B.I.S., that it
'mild not exercise its prerogative as provided for in the Deed of Trust
and the statutes of the Bank in so far as it applies to reparation bonds
without consultation with the United States Government.
The question
then arises as to whether the New York Bank should consult with the
State or Treasury Departments and the Federal Reserve Board as well.
The reference of this question to the New York Bank, to the Secretary
of State, and to the Federal Reserve Board is altogether too camnlicated
a procedure, particularly in view of the fact that if the Secretary of
I
State and the Federal Reserve Board disagree, the decision of the Federal
Reserve Board would probably be controlling in so far as the New York
Bank is concerned and the Board is not in a position to give due weight
3-
to the international policy involved.
It can fairly be argued that
the State Department is primarily responsible for the foreign policies
of the country and in view of the existing practice should he the one
to have the final decision.
On the other hand, the Federal Reserve Board may
contend that a bond issue is necessarily a credit operation, and this
being so, that it should have the right to exercise jurisdiction over
the decision of the New York Bank, on the ground that such a loan is
bound to affect the credit situation in the United States.
Under these circumstances, might it not be well to have the New York
Bank refer the matter to the Secretary of the Treasury, representing
the Administration, who is also Chairman of the Federal Reserve Board?
H. could then advise the New York Bank, after consulting with the Secretary of State and with his colleagues on the Federal Reserve Board.
(b)
Under exceptional circumstances it is conceivable that a
short-term credit operation undertaken by the B. I. S. in the American
market might be of equal importance to the United States from the standpoint of international pOlicy as a reparation bond issue.
I do not an-
ticipate the likirlihood of this question arising, but I think provision
should be made that in the event it Should arise it Should be treated
under the procedure above outlined applicable to reparation bonds.
AS to both of these classes of oases I think the umdirstanding could be
covered by an exchange of letters between the Secretary of the Treasury
and Chairman of the Federal Reserve Board and the Governor of the New
York Federal Reserve Bank.
-4-
The other classes of questions which may arise do not appear
to concern the State and Treasury Departments, but refer to the
degree of supervision and control to be exercised by the Federal
Reserve Board over the New York Federal aeserva Bank in its dealings
with the B.I.S.
In order to understand what questions are likely
to arise, it is necessary to consider the nature of the operations
to be undertaken by the B.I.S.
The Bank may:
(a) buy and sell gold coin or bullion for its own account or for
the account of central banks;
(b) hold gold for its own account under earmark in central banks;
(c) accept the custody of gold for account of central banks;
(d) make advances to or borrow from central banks against gold,
bills of :exchange and other short-term obligations of prime
liquidity or other approved securities;
(e) discount, rediscount, purchase or sell with or without its
endorsement bills of exchange, cheques and other shortterm obligations of prime liquidity, including Treasury
Bills and such other Government short-term securities as
are currently marketable;
(f) buy and sell exchange for its own account or for the account
of central banks;
(g) buy and sell negotiable securities other than shares for its
own account or for the account of central banks;
(h) discount for central banks bills taken from their portfolio
and rediscount with central banks bills taken from its own
portfolio;
(i) open and maintain current or deposit accounts with central banks;
(j) accept:
(I) deposits from central banks on current or deposit
account;
(II) deposits in connection with trustee agreements
that may be made between the Bank and governments in
connection with international settlements;
(III) such other deposits as in the opinion of the Board
come within the scope of the Bank's functions.
The Bank may also:
(k) adt as agent or correspondent of any central bank;
(1)
arrange with any central bank for the latter to act as its agent
or correspondent. If a central bank is unable or unwilling
to act in this capacity, the Bank may make other arrangements,
provided that the central bank concerned does not
object.
(m)
If in such circumstances it should be deemed advisable that
the Bank should establish its awn agency, the sanction of
a two—thirds majority of the Board will be required;
enter into agreements to act as trustee or agent in connection
with international settlements, provided that such agree—
ments shall not encroach on the obligations of the Bank
towards third parties; and carry out the various operations
laid down therein.
In carrying oat these functions in the American:market the 13.I.3.
may act through the New York Federal Reserve Bank as its agent or
correspondent, or through private bankers. Moreover, it appears that
the 13.I.3. may act as agent or correspondent of the New York Bank.
Thus our second main problem may be subdivided into two classes:
The first covering the operations of the B.I.S. with the New York
Federal Reserve Bank acting as its correspondent or agent; the second,
covering operations of the M.S. tlirctigh private bankers, but where
the New York Bank is to be consulted as to Whether it has any ob—
jections under the terms of the B.I.S. statute.
As to class one, I see no reason why the B.I.S. should not be
treated as any other central bank of issue, or any other foreign
correspondent, and, therefore, the New York Bank in its direct re—
lationships with the B.I.S. should conform to existing practice
and the terms of Section 14 of the Federal Reserve Act in so far
as supervision and direction by the Federal Reserve Board are concerned.
If, in its direct relationships with the New York Federal Reserve
Bank, the B.I.S. is in exactly the sane position as any central bank
of issue, this situation seems to be fully covered by existing law,
and I should think that the T:ederal leserve Board w)uA be satisfied to have the rules governing relations} pa with other central
banks apply in this case.
The second class, namely, that covering operations undertaken
through private ban'7ors, but requiring the consent of the Lew York
Bank, is obviously not covered by either law or practice.
a new situation.
This is
The statute of theB.I.S., by definitions names the
New York Bank as the institution whose consent must be obtained
before any financial operation is carried out by or on behalf of
the B. I. S. an the United States market or in United States currency.
The New York Bank is under no legal obligation to consult the Federal
Reserve Board before dissenting or before withholding a dissent.
But
inasmuch as the rederal Reserve Board represents the Federal Reserve :ystem
as a whole and is charged with the supervision of credit conditions
in the country as a whole, and inasmuch as the operations of the B. T. S.
might under certain circumstances affect credit conditions, it is
clear that in some eases at least the Lew York Bank should not dissent or withhold dissent except with the approval of the Board.
It seenls equally clear that it should not be required to do so in.
the case of ro.ttine transactions, particularly when consultation with
the New York Bank would largely be in the nature of a formality.. For
instances in looking over the powers of the B.I.S. we find that it may
buy or soli gold coin or bullion; may buy or sell bills. It doss
-7not seem to me that the Pederal Reserve Board should. be given the
right
to veto transactions of this character any more than it would
in the
case, let us say, of the Bank of France or of the Bank of England,
or
for that matteri any other foreign institution that cares to
invest its
funds in the American market.
And. in so far as the purchase and sale
of gold are concerned, clearly, as long as we have a free gold
market,
we cannot impose restrictions on the B. I. S. or any other
institution
or individual.
Indeed., in so far as transactions of this character
are concerned I assume that the assent of the New York Bank would be
largely a formality.
On the other hand, it is apparent that some of
the c?erations that might be undertaken by the B. I. S. in our market
might be in the nature of credit operations.
In these cases the
attitude of the New York Bank would be an inportant one, and. I feel that
the federal Reserve Board. should be consulted.
After considering in detail the various operations that might
be undertaken by the B. I. S. in the American market, I have reached
the conclusion that the principle to be applied in determining whether
as to a particular operation the New York Bank may act independently, or
whether its position should conform to the wishes of the Board, is
whether the operation in question, by its nature, is a credit operation.
If this test be applied to the various questions that can fairly be
expected to arise, I think it will be found that it will furnish a satisfactory dividing line and that no difficulty will be experienced in
adopting a working rule based on this principle.
To summarIzz, I believe (1) that proposed reparation bond. tomes,
of short—term credit operations directly or indirectly governmental in
character, arhould not receive clearance by the New York Nderal Reserve
Bank without the approiml of the Secretary of the Treasury, the latter
to consult the Secretary of State and his colleagieu on the Federal
Reserve,Boardr(2) that the New "York Bank in its direct relationships
with the B. I. S, as agent or correspondent should conform to existing
law and established practice affecting its relationships with central
baillrs of issue; and (3) that in so far as operations undertaken by the
B. I. Si in the New York market are concerned, if those operations can
fairly be described. as credit operations, the New 'York Bank should not
dissent or withhold dissent without the aporoval of the redere.1 Reserve
Board.
•
441116, 1930•
•
dr
al-wft.ty.t4;4.
.4,4,414 /“.44•44,4•44A4.40.
1.
Trust agreement
All signatory Governments to approve every issue of an
international character,
,4 06.41, 4,, 4,444.04,644,,,,A4
44.4.4.444,4444A
0600114.
2.
United States not a signatory but should have same right.
3.
Administration has long exercised similar rights as to foreign loans.
4. Federal Reserve Bank, New York, also given right to approve or reject
uI der Statutes of B.I.S. 6.400 40.444.064•44.44,47
IN
dd.+ Cipt• 4"-# 19.4
5. Federal Biserve Bank, New York, Should not approve or disapprove without
consultation with the Government.
6.
Too compliulted to consult with Secretary of State, Treasury, and
Federal Reserve Board.
7. If Board disagreed, e.g. with State Department, Board would control
by virtue of its general control over Feieral Reserve Bank,
New York.
8. Board not in position to gtve decisive weight on question of internationll
policy involved.
9. State Department is primarily responsible.for foreign policy, and, in
view of its existing practice, should have final decision.
10. Federal Reserve Board, however, may feel that proposed loan might have
serious effect on credit situation in United States.
11. Proposed procedure:
Federal Reserve Bank of New York to refer question to
Secretary of Treasury.
Secretary of Treasury to decide after consulting, —
(a) Secretary of State
(b) Federal Reserve Board
12.
Any short tenn credit operation involving international poliw.
Treated same as 11 above.
13. Suggests exchange of letters to cover this.
14.
VOLUME 202
PAGE 112
Agency or correspondent relation.
Same as any other central bank. Federal Reserve Board to govern.
2.
. qr.
15.
Only exception — routine transactions such as dealing in gold
or bills, not involving credit operations.
(C..H. su,44ests Board give general authority to Federal
Reserve Bank of New York to act, just as it does now.)
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4.4..
•
MaIORANDUM
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E 7.4...4.01 4444.44444•4
4,441- i04064,644
1.
Article 12, Sub-section C of the trust agreenent between the
signatory creditor Governments and the Bank:of International Settlements,
provides that no issue of an international character may be made in the
markets of any of the signatory Governments, unless the Bank of International
Settlements considers, on examination, that conditions on these markets
pennit such an operation, after making sure that the central banks concerned
have no objection.
No issue of an international character to be made in any of the
signatory countries without the approval of that Government, both as regards
the amount of the issue and as regards the conditions on which it shall be
authorized.
Chapter 3, Article 20 of the Statutes governing the bank, provides as
follows:
The operations of the bank shall be in conformity with
the monetary policy of the central banks of the countries concerned.
Before anyfinancialoperation is aarried out by or on behalf of the
bank on a given market, or in a given currency, the Board shall afford to
the central bank,or central banks, directly concerned, an opportunity to
dissent.
VOLUME 202
PAGE 114
In the event of disapproval being expressed within such reasonable
go•
•
2.
•
such reasonable time as the Board shall specify, the proposed operation
shall mit take place.
A central bank may make its concurrence subject to
conditions, and may limit its assent to a specific operation, or enter
into a general arrangement permitting the bank to carry on its operations
within such limits as to time, character, and amount as may be specified.
This Article shall not be read as requiring the assent of any central bank
to the withdrawal from its market of funds, to the introduction of Which no
objection had been raised by it, in the absence of stipulations to the
contrary by the central bank concerned at the time the original operation
was carried out.
Article 58 of the Statutes provides as follows:
Por the purposes of these statutes:
1. Central bank means the bank in any country
to which has been intrusted the duty of regulating the
volume of currency and credit in that country; or Where a
banking system has been so intrusted, the bank forming
part of such system which is situated and operating in the
principal financial market of that country.
2. The governor of a central bank: means the person
who, subject to the control of his board or other competent
authority, has the direction of the policy and administration
of the bank.
3. A two-thirds majority of the board means not less
than two-thirds of the votes (whether given in person or by
proxy) of the whole directorate.
Apriir 19130.
i40
RESOLUTIOU.
1.
The Congress of the United States, in enacting the Federal Reserve
Act, granted to the Federal Reserve System, whether acting through the
Federal Reserve Board or through the individual Federal reserve banks, no
specific power to determine the propriety of proposed offerings of either
foreign or domestic securities in the markets of the United States as a
condition precedent to such offerings, whether
on grounds of international
policy or strictly domestic considerations.
2.
Since the dissolution of the Capital Issues Committee, - on August 30,
1919, - the markets of the Uniued States have, in fact, been open, at least
so far as the Federal Reserve System is concerned, to offerings of all
security issues, whether domestic or foreign.
3.
The fact that the Statutes governing the B. I. S. provide, - Article 20,-
that before any financial operation is carried out by, or in behalf of, the
B. I. S. in a given market, or in a given currency, its Board shall afford
to the central bank or central banks dinectly concerned an opportunity to
approve, conditionally or otherwise such an operation, or to dissent therefrom within such reasonable time as the Board of the B. I. S. shall specify,
still leaves undertenmined the right of the Federal Reserve System to take
any such action under the terms, express or implied, of the Federal Reserve
Act as amended.
4.
VOLUME 202
PAGE 115
The Board deems it unnecessary at this time to consider the
2.
•
question of power., for it is of opinion that, assuming it to have the
power, the approval, conditionally or otherwise of such an operation
might hamper the Federal Reserve Systen in its future credit policy.
b, NOW, TKEREF0113, Bit IT RESOLVTD:
That the Federal Reserve Board hereby =proves the proposed
reply of the Federal Reserve Bank of New York to the B. I. S. as follows:
Tnat while it will not avail itself of the opportunity
afforded under said Statutes to express dissent to the proposed operation,
it is on the express understanding that such failure to dissent shall not
be construed as a determination or approval of the merits, amount, terms,
or conditions of any such offering or offerings, nor shall it in any way
affect the power of the Federal Reserve Sys ten under the Federal Reserve
Act as amended, to take appropriate action at any time to protect and.
stabilize credit conditions in the United States.
•
April", 1930.
APO
RESOLUTION.
WHEREAS, the Federal Reserve Badk of New York has consulted the
Federal Reserve Board in the matter of the proposed offering or offerings
by the B. I. S. of reparation bonds in the markets of the United States;
AND WHEREAS, Article 20 of the Statutes governing the B. I. S.
provide that, before any final operation is carried out by, or in behalf
of the B. I. S. in a given market, or in a given currency, its Board dhall
afford to the central bank or central banks direct4 concerned, an opportunity
to ariprove, conditionally or otherwise, such operation, or to dissent
therefrom within suCh reasonable time as the Board of the B. I. S. shall
specify;
NOW,THER1FORE, BE IT RE-SOLVED:
That the Federal Reserve Board hereby approves the proposed reply
of the Federal Reserve Bank of New York to the B. I. S. as follows:
That while it 511 not avail itself of the opportunity afforded
under said Statutes to express dissent to the proposed operation, it is on
the exoress understanding that such failure to dissent dhall not be construed
as a determination or sporoval of the merits, anount, terms, or conditions
of any au& offering or offerings, nor dhall it in any way affect the power
of the Federal Reserve System under the Federal Reserve Act as amended, to
take appropriate action at any time to protect and stabilize credit conditions
in the United States.
VOLUME 202
PAGE 116
110
COPY
14.4.
/ 3o
Gu4
s4v,-04- % Alt
McGarrah
Replying your cable April 11th.
One.
P.R. Bank of N. Y. will, be pleased to open an account
for B. I. S. and to carry out operations for it along same general
lines and subject to same terms and conditions as it does for foreign
central banks having accounts with it.
Two.
We shall forward letter defining these terms and conditions
in detail but in meantime you are advised that they would include
transactions referred to in your paragraph four, as well as acce:ting
cash balance mentioned latter part your paragraph three.
Three. Rega_ding specific inquiries in first three paragraphs of
your cable you are advised that inasmuch as the P.R. Bank of N.Y. is
not in a position itself to accept say responsibility concerning the
issue or voting of 16,000 shares of the B. I. S. in this market it can
of course interpose no objection to the selection of some other
institution or institutions in this country to exercise the voting rights
an such shares, and the private
issue
of such shares and the investment
of their proceeds in this market are transactions of a character
Ic
concerning which the F.R. Bank of ri.Y. can have no grounds upon which
to express any dissent.
(1 Harrison.
C41e.4,".404:;%:44.44
A-44,4411 ,t_L
VOLUME 202
PAGE 117
44044.
044040444.,
•
COPY
FIDEIAL RESIVE BANK OF NEW YORK
April 17, 1930.
Dear Governor Young:
Referring to my discussion yesterday with the Federal Reserve Board
concerning a cable from Mr. McGarrah, dated April 11, a copy of Which I
left with the Board, our board of directors have today voted "subject
to the approval of the Federal Reserve Board, to authorize the officers
to open and maintain a banking account on our books for the Bank of
International Settlements and to carry out operations in this market
for the Bank for International Settlements along the same general lines
and subject to the same terms and conditions as we do for foreign central
banks having accounts with us."
I shall very much appreciate your
advising me whether the foregoing action of our directors meets with the
approval of the Federal Reserve Board.
You will no doubt recall that the first three paragraphs of
McGarrahls cable ask whether the Federal Reserve Bank of New York wishes
to objcoct to certain proposed acts of the Bank for International Settlements
in this market, relating principally to the sale and voting of its
stock.
I understood from my conversation with the Board that the transactions
referred to in these three paragraphs were not of a character concerning
which the Board would care to have an opportunity formally to express its
objection and that this bank should feel free, without further reference
to the Federal Reserve Board, not to voice any dissent in our reply to
VOLUME 202
PAGE 119
2.
•
•
/
these paragraphs of Mr. McGarrahls cable. I mention this now merely
to be sure that there is no question concerning my understanding of
our conversations yesterday.
In this connection our directors at their meeting today were
of the opinion that there is no reason for this bank to express any
dissent to the actions mentioned in these three paragraihs.
I am planning, as agreed with the Board, to go to Washington
Monday further to discuss the procedure to be followed by this bank
vis-a-vis the Federal Reserve Board, if and When we are given an
opportunity to express our dissent to a reparation bond issue in this
market and hope that in view of the discussion which I have today had
with our directors, following my meeting with the Federal Reserve Board
yesterday, we shall be able to agree upon some mutually satisfactory
formula.
Faithfully yours,
(S) George L. Harrison,
Governor.
Hon. R. A. Young,
Governor, Federal Reserve Boar4,
Washington, D. 0.
•
TOTAL BILLS AND SECURITIES, BY CLASSES, MEMBERS RESERVE DEPOSITS, MONETARY GOLD STOCK,
AND AMOUNT OF MONEY IN CIRCULATION, OCTOBER 31, 1923 TO APRIL 30, 1930
Pills discounted
Bills bought in open market
U. S. Government securities
III
Total bills and securities
Member bank-reserve account
Monetary gold stock
Money in circulation
(In millions of dollars).
Oct.31 Oct. 31 Oct. 3110ct. 31 Oct. 31 Oct. 31 Oct. 31 Apr. 30
1924
192
1925 i 1926 L 1 27
1P28
192
0
884
264
616
412
912
1,000
233
690
205
347
200
323
342
44o
210
355
5g4
92
327
301
522
227
321
530
1,181
1,052
1,296
1,316
1,276
1,603
1,701
982
1,895
2,138
2,214
2,223
4,167
4,925
2,324
4,509
4,942
2,371
4,4o7
4,969
4,473
5,021
4,541
4,946
4,143
4,g07
2,666* 2,385
4,386 4,491
4,838 4,477
INCREASE OR DECREASE
Bills discounted
Bills bought in open market
U. S. Government securities
Total bills and oecurities
Member bank-reserve account
Aft Monetary gold stock
Money in circulation
-620
+352
+74
-278
+520
- 5
+492
+147
-257
-24
+ 19
+ 98
+68
-85
-767
-145
-26
+221
-295
+94
+209
-129
+244
+20
-
4o
+327
+98
-719
+243
+342
+ 17
+ 76
-102
+ 27
+
9
+66
+101
+ 6g
- 75
+ 47
-398
-139
+295*
+243
+ 31
+105
-361
+52
-281
*Reserve balances on October 31 were approximately $300,000,000
above
normal due to abnormal conditions in New York money market.
DIVISION OF BANK OPERATIONS
MAX 10, 1930
r
morvi No. 133
OffiCe Correspontence
. To
From
Mr. Hamlin
Ur. Smead
FEDERAL RESERVE
BOARD
Date
April
4, 1930
oeculative activity
Subject:_Recent s,
in New York
•P o
In response to your memorandum et' April 3, Ae have prepared and
are transmitting herewith four statements which it is hoped will serve
your purpose in discussing the recent increase in speculative activity
in New York. The statements are as follows:
1.
Weekly figures from October 1523 to date of loans to brokers
and dealers made by weekly reporting member banks in New York
City -- for own account, for out-of-town banks and for others.
This statement also shows the net dhange from the high point
of total brokers' loans on October 2 to the low point on December
24, and the net change since December 24.
2.
A classification of loans and investments of all reporting
member ban%s, of reporting member . banks in New York City, and
of reporting member banks outside New York City, as of October
2, 1923 -- the peak date of total brokers' loans, December 24,
1329 -- the low point of total brokers' loans, and at the end
of January, February and Mardh of 1930.
This statement also Shows the net.change between October 2
and December 24, and the net change that has taken place .since
December 24.
3. A daily index of stock prices (the Standard Statistics Compeny
index caverinc,;1 90 common stocks) from the teginning of October
1929 to date.
4.
A statement showing the number of shares of stock sold on the
New York Stock Exchange daily from the beginning of October 1929
to date.
2-8495
LOANS TO BROKKRS RDEALERS MADE BY WEEKLY MPORTING MEMBER BANKS
IN NEW YORK CITY
On milli ns of dollars)
For account of banks
Total
Own
Total
account
1
Date
2,810
1,077
3o
6,5o4
6,713
6,5o1
6,634
5,538
3,074
2,069
Nov. 6
13
4,882
4,172
2,483
1,968
27
3,587
3,45o
1
1,520
1,156
.557
1,469
853
4
la
3,392
3,425
1,472
1,516
792
so6
18
24 (low)
31
3,386
3,328
3,424
1,582
1,561
1,876
832
845
1,167
3,352
3,365
1,710
1,73o
ss6
853
1929 - Oct. 2 (peak)
9
16
23
20
Dec.
1930 - Jan. 8
22
15
2,597
2,772
2,926
Out-oftown banks i
1071
973
1,095
831
3,341
1,688
814
29
3,345
1,695
s23
Feb. 5
12
19
26
3,4o2
1,555
S.
3,450
39h94
3,489
1,913
1,949
924
962
1,933
953
For
others
3,907
3,941
3,875
3,823
2,464
963
2,399
812
704
638
2,204
2,031
1,982
6so
710
75o
716
709
1,921
1,9°9
1,804
1,767
1,54s
524
877
574
875
1,642
1,636
1,653
1,64s
927
989
S.
9so
1,547
1,536
1,545
1,556
5
3,583
2,o3s
1,006
12
19
26
3,720
3,841
3,820
2,225
2,437
2,542
1,146
1,266
1,424
1032
1079
1,171
1,118
1,545
1,494
1,404
1,27s
Apr. 2
3,968
2,651
1,547
1,104
1,316
-3,476-22b
-1,110
-2,140
+7o2
+355
-451
Mar.
Net change
Oct. 2 to Dec. 24
(low)
Dec. 24(low) to
Apr. 2
+64o
+1,090
•
LOANS AND INVESTMENTS OF WEEKLY REPORTING MEMBER BArKS,
OCTOBER 1929 - MARCH 1930
Date
(In millions of dollars)
Loans on securities
Total 7-To brokers
loans
•
Total
and. dealers
and
To
investr_utside others
In
ments
1
NY
e.
All
other
loans
Investments
cL
ALL REPORTING MEMBERS
1929
1930
Oct. 2*
Dec. 24**
22,329
7,828
1,455
363
5,509
' 9,600
22,390
7,931
5,401
1,091
700
6,140
9,374
5,5E55
Jan. 29
Feb. 2 6
Mar. 26
22,205
22,003
22,563
7,681
7,641
8,14
1,202
632
5,847
8,995
1,40
2,076
583
593
5,649
5,5114
3,736
3,702
5,529
5,575
5,678
+ 61
-327
+103
+253
-364
+985
-163
-107
+631
-626
-226
-672
+1g4
4- 93
211.1r2E2
Oct. 2 to Dec. 24
Dec. 24 to Mar. 26
REPORTING MEMBERS IN NEW YORK CITY
1929 Oct. 2*
Dec. 24**
7,563
7,892
2,947
3,045
1,025
794
40
51
1,376
2,929
1,687
2,200
2,861
1,986
1930 Jan. 29
Feb. 26
Mar. 26
7,567
7,412
7,756
2,866
2,890
3,280
773
906
1,367
49
47
57
2,043
1,937
1,856
2,775
2,609
2,530
1,927
1,914
1,946
+329
-136
+ 98
...91
+235
+573
+ 5
+6
-63
-371
- 40
Change
Oct. 2 to Dec. 24
Dec. 24 to Mar. 26
+324
-344
+7q0
REPORTING MEMBERS OUTSIDE NEW YORK CITY
1929 Oct. 2*
Dec.24**
15,266
14,998
4,881
430
817
3,633
6,671
4,336
3,714
297
649
3,940
6,513
7,599
1930 Jan. 29
Feb. 26
Mar. 26
14,633
14,591
14,807
4,815
4,751
4,904
429
503
709
583
3,804
6,220
536
536
3,712
3,658
6,177
6,172
3,60?_
3,61
-268
-191
+ 5
+ l
-133
-163
+307
-158
+412
-112
-282
-341
Change
Oct. 2 to Dec. 24
Dec. 24 to Mar. 26
3,732
4
-115
+133
*High point date of total loans to brokers and dealers by retorting member banks
in New York City
**Low point date of total loans to brokers end dealers by reporting
member banks
in New York City.
DIVISION OF BANK OPERATIONS
•
•
IN11.1 OF STOCK PRICES
STANDARD STATISTICS COMPANY DAILY INDEX OF 90 COMMON STOCKS
October
1 9 29
November
1
2
238.1
239.8
-
3
L.
229.9
227.5
182.1
175.1
173.7
178.3
180.5
_
_
December
-
166.4
171.9
5
238.1
6
7
8
9
241.7
240.9
240.4
164.1
170.1
168.6
_
10
11
12
13
14
244.7
244.3
242.6
158.0
148.8
140.3 .
152.9
15
16
240.6
161.3
174.4
_
17
18
19
232.2
236.0
229.2
222.6
159.6
169.4
171.2
170.1
2o
_
164.4
168.9
165.6
3.60.1
21
22
23
24
25
26
27
28
29
30
31
220.4
224.7
211.3
204.7
207.5
206.1
180.7
162.2
182.7
192.2
171.6
171.0
169.0
164.1
166.1
_
_
_
163.2
160.9
161.9
165.5
160.1
164.1
165.9
170.3
L_
177.9
179.2
177.7
168.1
172.3
1 9 30
January I February I March
168.2
168.6
170.6
170.7
169.2
169.1
171.7
171.7
170.3
_
170.9
171.2
171.9
170.4
169.2
169.7
170.0
171.6
171.8
173.4
175.0
176.5
-
182.1
180.6
182.7
185.1
183.1
182.4
183.9
183.6
185.2
185.5
185.4
183.7
184.7
184.9
183.2
179.8
182.0
180.1
180.2
183.5
176.4
175.5
177.5
178.4
181.0
183.3
184.8
_
-
186.2
185.5
186.9
185.5
187.3
187.3
187.4
188.0
188.4
180.3
187.4
186.2
185.2
188.0
189.8
190.8
191.7
192.8
190.9
192.8
192.6
195.5
195.1
197.3
198.7
199.6
April
201.5
199.4
199.8
202.8
NUMER OF SHARES OF STOCK SOLD ON NEW YORK STOCK EXCHANGE
(In thousands, i.e., 0001 s omitted)
October
19 29
November
_
19 3o
December
January riebru.ary
1
2
4,525
3,368
-
3
4
5
6
7
g
9
lo
11
4,747
5,624
2,452
4,262
3,758
3,157
4,000
3,964
_
6,233
5,915
7,184
3,215
3,367
3,309
4,437
4,377
4,715
3,003
12
-
6,43
4,505
874
-
13
14
15
16
17
19
2,756
3,107
4,oss
3,864
3,508
3,488
7,701
5,569
4,340
2,747
2,718
4,387
1,654
2,592
2,285
3,412
I 1,453
2,630
3,1411.
2,679
1,331
-
20
21
22
6,098
4,130
2,829
5,546
3,139
1,735
1,693
2,233
2,306
18
2
25
26
27
2,513
5,018
3,647
3,897
2,929
6,375
12,895
5,923
3,020
2,088
2,634
_
2,432
3,492
1,996
2,577
3,354
28
29
30
9,213
16,410
10,727
_
-
1,635
4,160
31
7,149
-
2,678
,933
2
2,073
1,315
_
2,172
2,029
1,639
2,397
2,386
3,229
3,481
1,526
3,458
2,913
3,246
3,646
3,739
March
1,925
1,807
3,798
3,225
4,362
3,709
3,391
1,925
3,456
3,715
3,350
3,635
1,691
3,166
3,322
3,669
3,514
1,697
3,994
2,636
4,470
3,854
3,951
1,531
3,289
3,795
3,485
3,661
2,567
3,640
4,241
4,336
4,263
4,629
2,320
2,633
4,126
4,526
3,310
3,210
5,029
4,707
5,065
2,791
••••
5,151
April
5,384
5,304
4,627
5,932
@FedFRASER