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The Papers of Charles Hamlin (mss24661)
365_06_001-
Hamlin, Charles S., Scrap Book — Volume 222, FRBoard Members
205.001 - Hamlin Charles S
Scrap Book - Volume 222
FRBoard Members
0
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To
The Files
From
Mr. Coe
•
Date
August 5, 19/11
Subject:
After correspondence with Mrs. Hamlin (see letters of May
June
4, 1941) the items attached hereto and listed below,
25 and
possible confidential character, were taken from
their
because of
Hamlin's scrap book and placed in the Board's
Mr.
Volume 222 of
files:
VOLUME 222
Page 17 - Memo to Mr. Hamlin from Mr. Van Fossen re Paper secured by
bonds and notes of the War Finance Corporation discounted by the
F.R. Banks.
Page 29 - Memo to Board from Mr. Smead re Preliminary statement of net
earnings, dividend payments, etc., of F.R. Banks in 1931.
Page 39 - Memo to Mr. Harrison from Mr. Smead attaching a table showing
Cafeteria Expense First Half 1931.
Page 43 - Telegram to Mr. Calkins, San Francisco, from Gov. Meyer re
situation with respect to contest for control of the holding corporation that owns stock of the Bank of America, N.T. & S.A.
Page 54 - Resolution adopted by the Conference of Governors of the
F.R. Banks held on Monday, January 11, 1932.
Page 64 - Memo to Mr. Hamlin from Mr. Goldenweiser re Mr. Stockton's
proposal that member banks be permitted to count Gov. securities
deposited with F.R. Banks as a part of their reserves.
Page 66 - Memo to Mr. Hamlin from Mr. Goldenweiser re Allied Debts.
Page 79 - Memo to Mr. Hamlin from Mr. Goldenweiser re Walsh-Keller Bill.
Page 88 - (X-7059) Appointment of Mr. Paulger.
Page 89 - Memo to Gov. Meyer from Mr. Hamlin re permitting the issue
of Treas. notes against Gov. bonds.
Page 91 - Memo to Mr. Hamlin from Mr. Smead attaching statement showing
the earnings of the F.R. Banks on all foreign transactions during
1931.
Page 103 - Discounted Bills Held by each F.R. Bank and Total Bills and
Securities Held by the System. (Marked Confidential)
Page 107 - (X-7062) Depreciation on Securities Held by State Member
Banks.
Pages 118 & 119 - Letter to Mr. Hamlin from Pres., First Nat. Bk. of
Boston, and reply thereto re permitting banks to substitute for
their noninterest reserves on deposit with the Reserve Banks, Gov.
bonds Page 125 - Memo to Mr. Hamlin from Mr. Goldenweiser re French Balances.
LeA /10
Form No. 131
'Office Correspontence
'To
FEDERAL RESERVE
BOARD
_MT. Hamlin
411P
Date_
January
5, 1931
Subject:Paper secured by bonds and notes
From Mr. Van Fossen
of the War Finance Corporation
discounted by the F. R Banks
2-8495
ore
kM.44A4A?
40 1444
•
Mr. Wyatt has advised us that you desire information as to the anount of
paper secured by bonds and notes of the War Finance Corporation discounted by
the Federal reserve banks.
The original War Finance Corporation Act, approved April
5, 1918, provided
that the War Finance Corporation should have a capital stock of $500,000,000,
all of which was to be subscribed by the United States of America. Section
12 of the Act authorized the Corporation to issue and have outstanding at any
one time its bonds in an amount aggregating not more than six times its raidin capital. Section 13 authorized the Federal reserve banks to discount the
direct obligations of member banks secured by bonds of the Corporation, and
to rediscount eligible paper secured by such bonds and vendorseci by a member
bank. Section 13 also provided that no discount or rediscount under Section
13 should be granted at a less interest charge than 1 per cent per annum
above the prevailing rates for eligible commercial paper of corresponding
maturity.
Under date of August 24, 1921, the War Finance Corporation Act
was amended to authorize the Corporation to issue and have outstanding at
any one time its notes or bonds in an amount aggregating not more than three
times its paid-in capital, also authorizing the Federal reserve banks to discount the direct obligations of member banks secured by such notes or bonds
and to rediscount notes or other negotiable instruments secured by such notes
or bonds and endorsed by a meaiber bank.
As amended, Section 13 also provided
that discounts or rediscounts under Section 13 should be at an interest rate
equal to the prevailing rate for eligible commercial paper of corresponding
maturities.
VOLUME 222
PAGE 17
01
•
-2
The only War Finance Corporation bonds issued was "series JWI Which
were one year five per cent gold bonds, dated April 1, 1919, and maturing
April 1, 1920. The amount of "series A!' bonds issued was $200,000,000. By
November 30, 1919, $70,154,000 of these bonds had been repurchased by the
Corporation and retired.
In April, 1919, immediately after the issuance of the "series AY gold
bonds, the Federal Reserve Board approved a discount rate on paper secured by
War Finance Corporation bonds of 1 per cent in excess of the rate applicable
to commercial paper of corresponding maturity for each Federal reserve bank.
These rates were established on April
on April
9
4
for eight of the Federal reserve banks,
for San Francisco, on April 11 for New York and Philadelphia and on
April 12 for Boston. Inasmuch as the "series A" gold bonds matured on Anril 1,
1920 these rates were automatically discontinued on that date.
The War Finance Corporation did not at any time issue any notes which
were authorized under the Auguat 24, 1921, amendment.
At the end of November 1920 the Corporation had $374,000,000 on deposit
with the Treasurer of the United States and on November 30, 1324 $496,000,000.
This indicated, of course, that the War Finance Corporation was actually
utilizing only a small part of its $500,000,000 capital supplied by the
United States Government and had no occasion to obtain additional funds
through the sale of bonds or notes. On January
5,
1925, the Corporation
cancelled and retired $499,000,000 of its capital stock leaving $1,000,000
out
From April 1919 to April 1920, the only period during which obligations
-3
IWO
of the War Finance Corporation were outstanding which could have been used
as security for paper discounted by the Federal reserve banks, the Federal
reserve banks were requAred to report each day on the reverse side of their
balance sheets the amount of paper secured by War Finance Corporation bonds
held by them, and at no time was any material amount of such paper repbrted.
The fat that such paper was subject to a diferential of 1 per cent over the
rate applicable to commercial paper of the same maturity and the further
fact that the War Finance Corporation began to repurchase the bonds shortly
after their issuance no doubt accounts for the fact that very little paper
secured by such bond
acquired by the Federal reserve banks.
The only paper secured by Viar Finance Corporation bonds discounted by
the Reserve banks were member bank own promissory notes so secured and the
maximum amount of such paper held at any time was $400,000. During the twelve
months during ihich War Finance Corporation bonds were outstanding the average daily amount of paper secured by such bonds held by the Reserve banks was
as follows:
April, 1919
MaY
June
July
August
Sept.
$29,000
4s,oco
39,000
s4,000
52,000
18,000
Oct., 1919
Nov.
Dec.
Jan., 1920
Feb.
March
$42,000
16,000
19,000
6,000
1,000
29,000
T/1
Iforttino-13
.‘i
P
Mr
HEX:1 n
Office CorresporAnce
T9
Federal Reserve Board
FEDERAL RESERVE
BOARD
IR
January 5, 1931
Subject: Preliminary statement of net
earnings, dividend payments, etc.
_of Federal reserve banks in 1931
o
2-8495
Attached hereto is a statement showing preliminary figures of gross and
net earnings and of dividend payments of each Federal reserve bank for 1931,
the amounts of depreciation reserves set aside on United States bonds and the
amounts charged to surplus account. As no Federal reserve balk had net earnings sufficient to cover dividend payments, no franchise tax was paid at the
end of the year. The paid-in capital of the Federal reserve banks declined
from $169,640,000 on December 31, 1930 to $160,569,000 at the end of 1931 and
their surplus accounts from $274,636,000 to $259,420,000.
VOLUME 222
PAGE 29
SAA-44
C37FIDENTIAL
B-bd(
PRELIMINARY FIGURES OF GROSS AND YET EARNINGS AND DIVIDEND PAYMENTS OF EiCH FEDERAL
T?,S7,RVE BANK
FOR 1931 AND AM0UNTS CHARGED TO SURPLUS ACCOUvT
Federal
Reserve
Badk
Gross
earnings
Net
earnings
Dividends
paid
Franchise
tax
Depreciation
reserve on
U. S.
bonds
Ch rged
to
su] plus
Subscribed capital
in excess of surplus
Jan. 1, 1932
$1,801,000
-$140,oDo
$7o9,000
$411,000
$1,260,000
$3,459,000.
New York
7,555,000
1,532,000
3,892,000
3,139,000
5,49s,000
48,200,000
Thiladelphia
2,714,000
86)4,000
1,005,000
459,000
579,000
6,714,000
Cleveland
3,038,000
79,000
937,000
473,000
1,331,000
1,620,000
Richmond
1,389,000
-157,000
340,000
134,000
631,000
*527,000
Atlanta
1,449,000
-
313,000
95,000
4o9,000
*132,000
Chicago
4,144,000
610,000
1,171,000
965,000
1,525,000
*2,356,000
St. Louis
1,189,000
-61,000
289,000
186,000
537,000
*638,000
410nneapolis
937,000
46,000
lgo,000
-
653,000
788,000
*454,000
Kansas City
1,555,000
-185,000
254,000
-
138,000
577,000
245,00o
Dallas
1,214,000
112,000
255,000
-
1,168,000
1,311,000
646,000
San Francisco
2,716,000
253,000
685,000
-
337,000
768,000
4,972,000
29,701,000
36,424,000
2,972,000
7,963,000
10,030,000
10,269,000
8,156,000
15,216,000
2,296,000
61,717,000
Ilksten
Total, 1931
"
1930
. DIVISION OF BANK OP7RATIONS
YO7RAL R7S7RVE BOARD
A
JANUARY 5, 1932.
1
^
F17,000
*Surplus in excess of subscribed caoital.
6
2
.-1 1
64,647,000
m No. 131
ffic'e Corresponance
To
FEDERAL RESERVE
BOARD
MI.. Harrison
614
El!! January 2, 1932
Subject:_
From Mr. Smead
•it 4
2-8405
COPY
Attached hereto is a copy of Form E and of the Manual of Instructions as
requested.
On November 18, 1925, the Federal Reserve Board authorized. the Fed.eral
'Reserve Bank of 7Tew York to absorb $100,000 of the cost of operating its
cafeteria and on January 16, 1928, in reply to letter dated January 6 from
Mr. licGarrah, the Board stated that it approved a proposal of the directors
of the 1.Tew York bank that they absorb annually approximately S85,000 of the
expense of operating the cafeteria. The cost of operating the cafeterias
for the first six months' of 1931, together with the costs absorbed by the
Federal reserve banks are shown in the attached staterner_t.
VOLUME 222
PAGE 39
COPY
CAMTERIA F.XPErSE FIRST HALF 1931
(Source Form 3)
Federal
Reserve
Banks and Branches
Boston
New York
Fhilade4hia
Cleveland
RiChmond
Atlanta
Chicaeo
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Buffalo
Baltiol,re
Denver
Omiciha
Los Ar4e1es
Portland
Salt Lake City
Seattle
Total
lnense
Receipts
Net
Ex;Irse
$11,480
99,970
17,884
19,112
8,211
8,566
35,663
10,688
6,692
13,756
11,321
10,285
$9,431
64,781
13,869
14,861
5,564
6,281
25,865
8,910
4,519
11,889
7.128
7,707
t2,049
:T5,189
4,015
4,251
2,647
2,285
9,798
1,778
2,173
1,867
4,193
2,57E5
663
5,699
59
70
8,324
2,715
1,886
2,097
3,909
663
1,790
59
70
2,036
810
645
678
6,238
1,905
1,241
1,419
Per cent of
Total cost
absorbed
17.85
.35.20
22.45
22.24
32.24
26.68
27.47
16.64
32.47
13.57
37.04
25.07
31.41
24.46
29.83
34.20
32.33
•
•
TMEGRALI
January 8, 1931.
Calkins — San Francisco
At its meeting today the Federal Reserve Board discussed the situation
with respect to the contest now going on for control of the holding
corporation that owns substantially all of the stock of the Bank of America
National Trust & Savings Association.
The feeling of the Board is that
the publicity that has taken place and. the court actions that have been
instituted have already adversely affected not only the welfare of the
bank but, because of its magnitude, also the banking and business interests
generally of the territory served and. have been a disturbing factor in
general bamking confidence through the country.
The Board feels that the Federal Reserve Bank of San Francisco would
be not only justified in sing its friendly offices to the fullest extent
in this situation. even though it be not a part of its official duties, but
that the public has a right to expect that the officers and. directors of
the Federal Reserve Bank of San Francisco should so act in the circumstances.
While the Board. appreciates that you are in the best position to determine
what should be done, it nevertheless suggests that the Federal Reserve Bank
of San Francisco at the -oroper time and. in the diucreticti of the management
of that bank may properly call into conference the represntatives of
the two factions and make every effort to compose the existing differences
as promptly and as conclusively as possible; to endeavor to renove existing
or prospective adverse actions affe cting the welfare of the bank.
If such
conferences fail of satisfactory result, the Federal Reserve Board would
like to hear from the Federal Reserve Bank of San Francisco and suggests
VOLUME 222
PAGE 43
r
2
-
f
Ami•
• •
2.
as further passible action that a group of men commanding public
confidence be invited to confer upon the situation.
These men should
be of outstanding character, having no partisan in:erest in the
factional aifferences, and should be asked to intervene because of
the grave public interests involved, and they may be properly asked
to use their good offices to compose such differences.
The Board takes this action solely in the public interest and the
suggestials herein- made have neither been initiated nor sagested by
either of the parties to the controversy referred to.
Meyer.
••11
649
RESOLUTION ADCPTED BY THE CONFERENCE OF GOVERNORS
OF THE FEDERAL RES :RITE BANKS HELD ON MONDAY
TANUARY 11, 1932
RESOLVED, That the passage of the Reconstruction
Finance Corporation Act at the earliest possible date is
most desirable in the interest of the financial and business
situation which now exists in all of the Federal Reserve
Districts;
and that in order to expedite the operation of
the Reconstruction Finance Corporation, if and when authorized, the assistance of the operating facilities and services
of the Federal reserve banks should be available to the
Corporation, with the understanding that the Corporation
should reimburse the Federal reserve banks for such facilities
and services in such manner as may be agreed upon.
VOLUME 222
PAGE 54
Form No. 181
Office Correspondence
To
Mr. Hamlin
From
Mr • Goldenweise
FEDERAL RESERVE
BOARD
Date
January 13, 1932
Subject:
2-8495
Referring to the letter from Mr, Stockton.
Mr. Stockton's proposal is that the member banks be permitted to
count Government securities deposited with the Federal reserve banks
as a part of their reserves.
He says that "the immediate effect et-
of this on the reserve system would be to run down their liability on
members' deposits as their liability for reserve notes ran up."
This
is on the assumption that the member banks would withdraw the balances
released in Federal reserve notes.
No such procedure would be likely
to be followed, because the banks have no demand for the notes.
That
they would do would be to leave the reserves with the reserve banks as
excess reserves.
Whether they would use them or not as a basis of ex-
pansion would depend on their state of mind.
In recent months that
state has not been each as to lead them to make additional loans or investments.
Mr. Stockton's next conclusion is that "The effect of this measure
on the banking system as a whole would be similar to having part of the
hoarded money exchanged for Government bonds."
This conclusion is based
on the preceding one and is erroneous for the same reason, namely, that
he assumes that his proposal would result in paying out more Federal reserve notes.
For these reasons I am inclined to think that Mr. Stockton's proposal is based on a lack of understanding of the machinery of the Federal
reserve system.
VOLUME 222
PAGE 64
Office Correspolgence
To
FEDERAL RESERVE
BOARD
Date
Subject:
Mr. Hamlin
1,14,
•
Form No. 131
January 14, 1932
Allied_Debts_
From Mr_,Golienweiser.
GPO
2-8495
On the basis of the Debt Funding Agreements, the Allied Governments were
to pay the United States $11,522,354,000.
These agreements were made between
May, 1923 and May, 1926, when prices were considerably higher than at the
present time, i.e. when purchasing power of the dollar was considerably less.
In the table below the amounts due from each foreign country have been reduced in proportion to the decrease in the wholesale price index of the Bureau
of Labor Statistics between the time the agreement was made and the present.
(In thousands of dollars)
Amount payable under
Debt Funding Agreements
Great Britain
Finland
Hungary
Lithuania
Poland
Belgium
Latvia
Czechoslovakia
Estonia
Rumania
Italy
France
Yugoslavia
Total
VOLUME 222
PAGE 66
Equivalent amount after
allowance for decline
in prices
4,600,000
9,000
1,939
6,030
178,560
417,780
5,775
115,000
13,830
44,590
2,042,000
4,025,000
62,850
3,132,600
6,030
1,361
4,239
123,028
274,481
3,812
75,785
9,114
29,429
1,333,426
2,745,050
42,738
11,522,354
7,781,093
Ab4,
,or?
Iso 1 If4,
Office Correspontence
To
Mr. Hamlin
From
Mr. Goldenweiser
FEDERAL RE-SERVE
BOARD
110
Date
January
14, 1932
Subject:
ctre
I am sending you a copy of a letter which I am submitting to the
Board as a reply to Senator Walsh's inquiry about the Walsh-Keller bill,
which, as you know, is really Senator Owen's proposal.
T think the pro-
posal has no merit; would in all probability be entirely ineffective, and
to the extent that it was s04 effective would be extremely dangerous.
VOLUME 222
PAGE 79
2—M9
COPY
January 14, 1932
Honorable David I. Walsh
United States Senate
Washington, D. C.
My dear Senator Walsh:
I have your letter of January
9,
requesting the views of the
Board relative to Senate Bill 2675, "A bill providing for an emergency circulation and for other purposes."
This bill would appear to benefit in the first instance the
holders of United States bonds.
In effect, it would enable such
holders to have the use of nine-tenths of the face value of any
United States bonds in their possession, at the cost of
5
per cent
per annum, without reference to the market value of the bonds, and
without the necessity of taking a loss by selling them at a time
when their market value may be less than when they were acquired.
In view of the unauestioned quality of United States bonds, however,
and the fact that their holders can in the great majority of cases
obtain loans from banks on the basis of these bonds as collateral,
the proposal would seem to offer advantages only to such holders of
United States bonds as may be unable by reason of local banking conditions to obtain credit on the basis of any collateral.
It is un-
likely that such cases are numerous or representative.
The other phase of the proposal is the direction to the Secretary of the Treasury to issue Treasury notes to be used in making
loans on United States bonds.
Since the demand for currency reflects
Honorable David I. Walsh, - #2
January 14, 1932
conditions independent of any probable effects of this proposal, this
demand would remain unchanged by its enactment, and the currency paid
out under its provisions, in so far as it is not hoarcled, would find
its way to the banks.
If this currena./ were to be redeemable in gold,
the notes would be presented for redemption and the Treasury would have
to borrow money from the public to redeem them.
The resultine with-
drawal of funds from the market would absorb funds released by the initial loan transactions.
The proposal, therefore, would brine about no
increase in funds or currency in the hands of the public.
If, on the other hand, it is intended to have the proposed notes
be irredeemable, as would appear on the face of the bill, then any considerable amount of them issued would cause the hoar'clThe or redemption
in gold of all other kinds of currency, so that the tendency would be
for this irredeemable unsecured paper currency to become the sole circulating medium of the country.
This would constitute an abandonment
of the gold standard within the country, and would necessitate an embargo on gold in order to prevent the inevitable withdrawal of foreign
funds that would follow such a condition of the currency.
In view of these considerations, the Federal Reserve Board deems
it its duty to express its unqualified disapproval of the bill.
Sincerely yours,
Governor
Y77
FEDERAL RESERVE BOARD
WASHINGTON
•
ADDRESS OFFICIAL.CORRESPONDENCE TO
THE FEDERAL PelSERVE BOARD
X-7059
January 15, 1932.
Dear Sir:
This is to advise you that the Federal Reserve Board
has appointed Mr. Leo H. Paulger Chief of the Division of
Examinations of the Board.
Mr. Paulger, who has been connected with the Federal
Farm Loan Board in a similar capacity, will assume his new
duties on January 16, 1932.
Under the direction of the Chief of the Division of
Examinations, Mr. Frank J. Drinnen will continue in immediate
charge of the examining forces of the Federal Reserve Board.
Very truly yours,
Chester Morrill,
Secretary.
TO GOVERNORS AIM AGErTS OF ALL F. R. BANKS.
VOLUME 222
PAGE 88
p.
COPY
Form No. 131
Office Correspon ence
_ftvernor Meyer
To
From
FEDERAL RESERVE
BOARD
410
Date__ Jan. 16, 1932
Subject:
Mr. Hamlin
u
2-84115
Dear Governor Meyer:
Ex—Senator Owen has just called me up and argued i. favor
of his new bill to permit the issue of Treasury notes against
,Government bands.
I told him personally I Could see no speoial
advantage from such a bill, because if these notes are money, the
money would get into circulation and then into the banks, and then
into the Fedena reserve banks, and that anyone could borrow,
conceivably, from any bank by depositing United States Government
bonds.
He finally admitted that the effect of his bill would be
largely /psychological.
I asked him whether these Treasury notes
were to be redeemable in gold, stating that if they were not so
redeemable, it would plunge the whole country into confusion if
any large number of them should get into circulation, and
would be
a conclusive reason why people should hoard — not money,but gold
itself.
He said his understanding was that these would be exchangedple
for gold just as Lay other form of currency under the parity clause.
He finally stated he trusted the Board would very carefully consider
Senator Walsh's bill,Lnd in its reply state specifically its
grounds
for approval or rejection, as the Whole country was ihtensely
interested in the matter.
I told him I would convey this message to you.
Sincerely yours,
VOLUME 222
PAGE 89
1.•
• •
.
•
Form No. 131
Office Correspoaence
To
itc.Hamlin
Frozn
Mr,Sme ad
FEDERAL RESERVE
BOARD
LeA-- /241
•
Date
January 19, 1932
Subject:
•IPO
In compliance with your request of January 18, I am attadhing hereto
a copy of a statement furnished us by the Federal Reserve Bank of New York
showing the earnings of the Federal reserve banks on all foreign transac—
tions daring the year 1931.
You will note from this statement that engagement commissions on
foreign credits, amounted to $188,248.07
•
VOLUME 222
PAGE 91
2-8495
e
•
•111
•
CONFIDENTIAL
EARNINGS ON FaREIG:N BUSINESS
(January
1 to Decenber 31, 1931.)
EARNINGS
Boston
Discount earned on
investments through
foreign banks
Interest on balances
held abroad
philadelohia
$147,281.87 $194,405.57
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneaoolis!
Kansas
City
San
Dallas
Francisco
New York
Total
$155,383.21 $59,681.68 t56,040.36 t265,115.45 $48,632.45 $31,941.86 t6,120.48 $57,062.99 $129,570.51 $678,669.10 $1,919,905.53
4,997.43
6,596.51
6,401.82
2,535.52
2,281.88
8,995.49
258.11
169.50
1,838.25
1,901.49
4,310.33
38,631.81
78,978.14
14,841.08
19,590.23
19,470.53
4,692.71
4,510.48
26,713.94
3,854.25
2,532.79
5,590.55
5,647.39
12,800.74
68,003.38
188,248.07
Profit on sale of
foreign exchange
685.96
905.47
923.77
365.85
177.32
1,234.74
320.12
210.36
265.24
274.39
. 621.94
3,161.04
9,146.20
Interest on foreign
loans on gold
363.83
480.31
490.02
110.47
174.67
654.98
169.80
111.63
140.67
145.55
329.91
4,729.77
7,901.61
7,373.82
/
27,651.83
7,168.99
4,711.04
5,940.02
6,144.85
13,928.33 67,38E.52
Exp. 193,445.9
398,274.33
75,579.36 70,558.53 330,366.43 60,403.72
39,677.18
69,895.21
Engagement commission on
foreign credits
Commission on bills bought
for foreign banks
Total earnings
15,362.13
20,278.01
20,687.67
183,532.30
242,256.10
243,357.02
8,193-13
71,176.66 161,561.76 1,054,089.61 2,602,453.88
LOSSES
Discount loss on sterling
bills sold
$361.96
$477.78
$487.44
$193.04
$154.96
$651.52
$168.91
$111.00
$139.96
$144.78
$328.17
$1,606.56
$4,826.08
16,965.34
22,394.26
22,846.66
9,048.18
8,143.37
30,537.62
7,917.16
5,202.71
6,559.93
6,786.14
15,381.91
74,421.31
226,264.59
Total losses
17,327.30
22,872.04
23,334.10
9,241.22
8,298.33
31,189.14
8,086.07
5,313.71
6,699.89
6,930.92
15,710.08
76,027.87
231,030.67
Net earnings
for year
166,205.00
219,384.06
220,022.92
66,338.14 62,260.20 299,177.29 52,317.65
34,363.47
63,195.32
Depreciatitin on sterling
balances
*In addition to the above earnings the Federal Reserve Bank of New York, 7. Y.
collected custody charges amounting to $2,194.58 on securities and gold held
for accounts in which the other Federal reserve banks do not participate.
FERAL
RSMIVE BOARD
DI VISION OF BANK OPERATIONS
JANUARY 19, 1932
64,245.74 145,851.68 978,061.74 *2,371,423.21
1•014‘.
CONFIDENTIAL
For use of Federal
Bo9.rd only
DISCOUNTED BILLS HELD BY :110:i TED:TaAL RES:T2,1.7-2, BANK AHD TOTAL BILLS AiTD S.17,CUTJTI:S ITLD BY 'LT, SYSTEE
(In. r.illions of dollars)
Drily 2.ver%7e hIldings
1930
J-.1fluary
0
24
Februiry
*23
::-.1-1- ch
21
April
15
June
july
Se-iAcr..ber
October
Nover.-1,:r
1931
January
T'cbri7r-,,Aki.ii.r.).rch
..-Eiv
June
Aubust
Se-?terrber
Oc tober
3\Toveniber
December
112
*71
*54
54
Phila. Cleve. inch. Atla. Chien,,,o
17
*13
*57
44
*54
9_
_
*37
2,1
3o
0*24
12
0
.)
12
32
37
43
*95
1,
;
17
20
27
*12
11
10
73
*53
*31
25
21
32
25
22
*19
28
30
*29
- 25
31
*22
17
*15
17
20
*20
15
25
27
*33
20
19
22
33
28
25
27
3o
23
15
3.4
*14
is
16
lg
16
13
*15
19
17
•
87
*63
35
23
21
*18
19
Louis
lann.
18
*17
14
*14
16
18
16
7
*3
2
*3
4
11.
4
U. S.
Tot-9.1
IC.C. 1Dallas S.Tran. Discount-iPurchas- securi- bills and
$1
ed bills lo -1 bills
ties socv_riticsfr
2g
*23
15
13
:15
14
io
13
*12
8
*7
9
10
12
23
15
*15
13
12
11
10
5o1
37g
274
231
247
251
226
182
141
154
4g5
4go
540
530
529
571
583
J
1)4
*0
.)
,r)0
14
15
19
26
18
17
17
14
4
1.i
4
J
io
14
16
*13
io
8
7
e,
0
7
9
34
21
15
13
*14
15
12
16
04
*5o
yo
g7
9
8
g
*7
g
9
11
12
*1s
26
27
4
/4
/3
1 4
4
4
5
4
6
7
8
14
ii
9
*1o
12
io
13
13
*24
34
30
6
7
s
*s
10
ii
13
14
*21
23
18
*20
16
15
9
41.3
25
25
25
3g
*82
90
71
314
2s5
246
-{
:"
c_ DO
1 ,313
1,156
1,059
1,06
966
r
ope
)
)
57o
2114
153
1S9
196
221
338
197
is5
184
257
557
6o2
599
544
S.
I.
1,oio
1,243
253
216
175
155
163
188
169
222
23'0
513
695
774
:;a).:
,
102
123'
173
144
547
SO3
So4
0oo
559
79
135
259
692
56o
34o
574
712
736
733
727
777
1 ,io9
022
.,
904
92g
9o0
.,
93o
1 ,076
1,2S.')
I.
1.4
2
3.:2
.2
,-.43
41
*11
11
9
9
8
*37
33
a)
24
21
3.3
*19
'
19
16
51
32
36
23
22
13
11
ii
13
14
20
25
26
47
12•
0
16s
lt,8
117
9•
9
iii
4o
39
*51
52
*Discount rate chanc,ecl.
N.Y.
T
i
1
St.
Boston
'Innclucies "other securities".
1
F.'3=1.AL :=1TE BOARD, DIVISION 02 BAK:: 0:?E:.ZAT IONS.
VOLUICE 222
PAGE 103
•
La.-444
•
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7062
January 18, 1932.
SUBJTCT:
De-oreciation on Securities Held by State
Eember Banks.
Dear Sir:
There is enclosed herewith, for your information and
guidance, com. of a letter addressed by the Federal Reserve
Board to the Federal Reserve Agent at Minneanolis in resl?onse
to an inquiry received from his office, coloy of which is also
enclosed, with regard to depreciation on securities held by
State member banks.
Very truly yours,
Chester Yorrill,
Secretary.
Enclosurea.
TO ALL FEDERAL T.
:SERVE AGENTS.
(Except Minnea-)olis)
VOLUME 222
PAGE 107
C
0
P
X-7062-a
January 14, 1932.
Mr. John R. Mitchell,
Federal Reserve Agent,
Federal Reserve Bank of Minneal3olis,
Minneapolis, Minnesota.
Dear 111r. Eitchell:
This refers to Mr. Eailey's letter of December 23, 1931, inquiring as to the attitude of the Federal Reserve Board toward depreciation
on securities in State member banks of the Federal 'Reserve System, in the
light of the instructions issued to national bank examiners by the Comptroller of the Currency, under date of December 18, 1931, that, while
bonds should be rated and appraised as heretofore, no part of the denreciation, except that unon defaulted bonds, should be re&arded as a
loss and Shown as such on -page 11 of the form for re-oorts of examinations
of national banks.
The Board believes that, in making examinations of State member
banks and in analyzing re)orts of examinations of these institutions made
by State authorities, it would be desirable for the Federal reserve
banks
to set forth the entire amounts of depreciation on securities, grouped
according to the ratinas of the issucs.
Tlle amounts of depreciation on
stocks and on defaulted bonds only should be shown as losses.
Of course, in negotiations with State member banks and State
authorities relative to corrective action, all depreciation on
stocks
•
•
X-7062-a
- 2
and bonds should be .L:iven consideration and no favorable opportunity to
obtain action calculated to strenEthen banks whose de-2reciation on stocks
and bonds exceeds or nearly equals the amount of their sur-plus and undivided profits Should be overlooked.
Such banks also should be im-pressed
with the advisability of deferring the -oayment of further dividends until
all losses and all depreciation on stocks and bonds and other doubtful
assets have been charged off or otherwise eliminated or until adequate
reserves have been created.
A helPful and tolerant attitude should be
preserved at all times, however, and care should be exercised to avoid
doing or saying anything which might needlessly destroy or imnair the
morale of bank directors and officel's.
Very truly yours,
Chester Morrill,
Secretary.
COPY
X-7062-b
FERTIAL RES7RVE BANK OF YI77APOLIS
December 23, 1971.
Board,
fl
w'
-asnin,,on, D. C.
Gentlemen:
A few months ago the Comtroller of the Currency
adoDted a nlan and issued instructions to all Chief 7xaminers
relative to setting ul bond de-)reciation in examination rePorts.
Under that llan the da)reciation on bonds rated B3 or better
was disre:arded, deloreciation on bonds rated under B3 was set
11-9 in the reca-)itulation 75 -oer cent doubtful and 25 -per cent
loss, and all depreciation on defaulted bonds was set un as a
loss&
In the examination of state member banks, we have
attemoted to follow as closely as possible the Comntrolleris
Plan relative to bond depreciation. This, however, a-o-)ears
tI differ widely from the policies of the various State Superintendents, and in fact, we find no two Su7Derinten5ents in areement on this important subject. Recently we have been advised
that the Cormtroller has greatly liberalized his original bond
depreciation policy, and from now on will classify as a loss
only the depreciation on the defaulted issues.
e would like
very much to have the Board's idea on this subject, with advice
as to how we should handle the bond depreciation in future in
the examination of state member banks.
Yours very truly,
(Signed)
F. M. Bailey
F. M. Bailey
Asst. 7ederal aeserve AEent
d
•
11
THE FIRST NATIONAL BANK OF BOSTON
BOSTON. MASSACHUSETTS
PHILIP STOCKTON
PRESIDENT
January 11, 1932
Honorable Charles S. Hamlin
Federal Reserve Board
Washington, D. C.
Dear Mr. Hamlin:
I have from time to time addressed communications to various officials
s, Chairin Washington (including Secretaries of the Treasury and their assistant
men of Committees on Banks and Finance, Chairman of the Federal Reserve Board,
intelliSenators, and Congressmen) but do not remember ever having received any
my
gent answer to my suggestions- this because I live in a country town and
in
opinion is supposed to be worthless compared to that of prominent financiers
New York and elsewhere.
Being of stubborn disposition, however, I am going to
try again and try through a friend such as you have always been.
The underlying reason that hoarding causes money stringency is because
the earning assets of the reserve banks must be increased directly with the
amount hoarded.
The stringency so caused is uneconomic, being brought about by
fear and not by business conditions.
A suggestion to ameliorate this is a simple one.
Permit banks to
substitute, for their non-interest reserves on deposit with the reserve bunks
Government Bonds to a certain percentage of these deposits; this percentage to
be regulated by the Reserve Board and to be such that the amount of Government
Bonds used as reserve shall always be less than their estimate of the total
hoarding.
VOLUME 222
PAGE 118
.
•
•
oil.
•
THE FIRST NATIONAL BANK 1111r0STON
Honorable Charles S. Hamlin
-2-
1-11-32
The immediate effect of this on the reserve system would be to run
down their liability on members' deposits as their liability for reserve notes
ran up, thus keeping their ratio on an even keel.
The effect of this measure on the banking system as a whole would be
similar to having part of the hoarded money exchanged for Government Bonds.
In essence, the Reserve Board would be saying
Ye shall not let this
hoarding affect our whole method of doing business; we shall simply see that
the banks hold Government Bonds in trust against this form of outstanding
currency instead of having it backed by gold."
Hoarding makes for deflation.
for inflation.
The return of hoarded funds will make
The above method will not only relieve the strain caused by with-
drawals but will automatically take up the slack when hoarded money returns,
thus counteracting a quite possible unfortunate inflationary tendency.
It till,
of course, increase the market for Government Bonds and indirectly for other '
bonds.
Si
-ely yours,
-
a9-04)
20
President
C 0P Y
•
January 137932.
Personal and Confidential.
Dear 1,1r. Stockton:
I have carefully gone over your note of January 11th.
.k.3 I understand
it, you would permit the member banks to count Government securities
deposited with the Federal reserve banks as part of their reserves.
are of the o)inion that the result of this
You
ould be to run down the Federal
reserve banks' liability on member bank deposits, and to increase their.
liability on Federal reserve notes. Yo u also draw the conclusion that
the effect of this would be similar to hawing part of the hoarded money
exchanged for Government bonds.
You -ssume that the result of your suggestion ':ould be a large increase
oo9see how such a procedure
of Federal reserve note holdings, but I_ dg n.
would necessarily result, from the fact that the banks have no demand for
the notes.
I am inclined
0 thtitk that they
ould leave the reserves
with the Reserve banks as cmcess reserves. ':aether they would use these
Or.
excess reserves or not as a basis of expkInsion, would deoend on their
state of mind,
nd, as you know, their state of mind durin,T the past
months has not been such as to lead them to make additional loa‘mJ-or
investments.
If thereowere no increase in Federal reserve notes, your second
40.
conclusion that the_result would be similar to having part of the hoarded
money exchanged for Government bonds, would not follow.
I should be very
glad indeed to hear from you again on this subject,
and go into it more deeply.
Thanking. you for writing me, I am
Sincerelyyouxs,
idr.17thilip Stockton, Pres.,
(Signed) C. S. Hamlin.
The First llational Bark,
VOLUME 22?
Boston, Mass.
PAGE 119
Form No. 131
CONFIDINAL
Office Corresponarence
To
Mr. Ilanalin
111
FEDERAL RESERVE
BOARD
Date January 21. 1932
Subject:
From
GPO
In accordance with your request, I asked the New York Lank
about French balances, and I aive below the questions and their
aliz7;ors:
1. The amount of bElances held by the Bank of France with
the Federal Reserve Bank.
As of January 19, 1932, approximately $334,000,000.
2.. The anaunt of balances held by the Bank of France with
outside banks in this country.
We are confidentially informed that tbe total fun - s of
the Bank of France.in this country at mid-January were approximntely $600,000,000, which would make their balances outside of
the Federal reserve system aoroximately $266,000,000.
3.
Balances held by the Federal reserve banks with the Bank
of France.
The equivalent in francs of $1,040,552.
4.
Balances held by French commercial banks with our commer-
cial b
No segregated figures are available but, in view of figures given us for Bank of France balances in all markets in this
country and our own figures on total French balances in New York,
the amount of French commercial balances in this country must be
quite small.
5. Balances held by our co:rmercial banks with French commercial banks.
No exact figures are available. Confidential reports of
New York banks and bankers to this bank Show total short term funds
in France on January 13, 1332 as approximately $33,000,000.
The term "balances" includes all short term funds (one year or
less), whether in form of free balances or loaned or invested at
short term.
1.4.4#"4
VOLUME 222
PAGE 125
C4.4...*A41
04u
2-8495
@FedFRASER