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Hamlin, Charles S., Scrap Book — Volume 252, FRBoard Members 205.001 - Hhmlin Charles S Scrap Book - Volume 252 FRBoard Members Fora. F. R. 131 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence The Files To From Date August 12, 1941 Subject: Mr. Coe *PC , 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 252 of Mr. Hamlin's scrap book and placed in the Board's files: VOLUME 252 Page 1 Governor Black's memo to Mr. Pecora on bill. Page 33 Letter to F.R. Board employees on Retirement System. Page 35 Memo setting forth Board's views re Securities Exchange Act of 1934. Page 87 Earnings and Expenses of F.R. Banks, March 1934. Page 109 Memo to Mr. Hamlin from Mr. Goldenweiser re Problem of Price Raising. Page 121 Memo to Mr. Hamlin from Mr. Goldenweiser giving comparison of the proposed Bank of Canada with the Federal Reserve System. Page 126 Confidential Memoranda re Advances to Member Banks under Section 10(b) of the Federal Reserve Act. Page 131 Memo to Mr. Hamlin from Mr. Smead re gold reserves as of October 231 1929. • /, ‘ie r)4 " W(P4A7 frt 4,-(1 0 .A.40•".4. The Board is in thorouh accord with the followinf; purposes of the bill: (1) To regulate National Securities Exchanges to the end that they may operate under fair practices only. (2) That speculation be properly curbed and dishonest speculation be eliminated. (3) That exchange credit be properly restrained and the undue use of credit in speculation be prevented. (4) That necessary penalties be enacted to guarantoe the accomplishment of these purposes. The Board is not primarily concerned with the features of the bill 1-Jith resard to the policinE or regulating of the exchanges, but feels that these features should be fair and in accord with established American business principles. If it is desired the Board will be glad to undertake the responsibilities of the bill regardinE the fixation of marginal requirements upon loans based upon exchange equities, whether the loans are made by brokers or banks, provided pow.rer is vested in the Board to handle this subject in the public interest and to the protection of the investor. This function would usefully supplement the con- siderable powers vested in the Loard under the Banking Act of 1933 to prevent the undue use of credit for speculative purposes and would in the judgment of the Board furnish effective protection against the econorac evils of speculation. VOLUME 252 PAGE 1 4 • • it14. • TO FEDERAL RESERVE BOARD EMPLOYEE MEMBERS OF THE RETIREMENT SYSTEM As members of the Board of Trustees of the Federal Reserve Bank Retirement System, Mr. James and the undersirned attended the organization meeting of the Board of Trustees held at the Federal Reserve Bank of Chicago on March 14 and 15, 1034, and I have to report in regard to the action taken at the meeting, as follows: Preliminaries. The meeting was called to order at about 10 A.M., March 14, by Mr, Rounds, Chairman of the Organization Committee, which had been appointed by the Chairman of the Governcrst Conference to organize the retirement system in accordance with the Rules and Regulations adopted by the Federal Reserve banks with the approval of the Federal Reserve Board, and which had charge of the enrollment of the membership, the election cf trustees of the retirement system, and the arrangements for the first meeting of the Board of Trustees. Followinr the roll call, to which all of the twenty-six trustees responded, the Board of Trustees elected Governor Wm. B. Geery of the Minneapolis Federal Reserve Bank temporary Chairman, and then received an oral report from Mr. L. R. Rounds, Chairman of the Organization Committee, in regard to the work of that committee as referred to above, In his re- port Mr. Rounds stated that, cn the basis of reports received up to that time, it appeared that more than 99 percent of the officers and employees of the Federal Reserve banks and the Federal Reserve Bcard had enrolled as members of the Retirement System. VOLUME .252 PAux, 2 Election of Of4'icers. Permanent officers to serve until the next annuel meeting of the Board of Trustees were elected as follows: Chairman Vice Chairman Secretary Treasurer Asst. Secy. and Treas. Wam B. Geery Robert B. Coleman H. F. Strater J. W. Jones Mrs. Dalerie Miller Appointment of Retirement Committee. Minneapolis Dallas Cleveland New York New York A Retirement Committee, to act as an Executive Committee in administering the detailed provisions of the Rules and Regulations governing the operation of the retirement system, as provided for in the Rules and Regulations, was appointed as follows: Chairman L. M. J. W. C. APPoirtment of Investmont Committee. R. J. S. G. R. Rounds FlP'cling I,c(Teedy Camp New York Cleveland Richmond PhilFldelphia Atlanta An Investment Committee, charged with Jte duty of investing the funds of the Retirement System within the limitations as to classes of securities end as to amounts of particular classes of securities prescribed by the Rules and Regulations and by the Board of Trustees, was appointed as follows: Chairman Location of Permanent Office, etc. C. R. PcKay W. W. Paddock Wm. B. Geery C. A. Worthington Wm. A. Day A. H. Haill M. C. Smyth Chicago Boston Minneapolis Kansas City San Francisco St. Louis Dallas The Boerd of Trustees voted to locate the permanent office of the retirement system at the Federal Reserve Bank of New York; to fix the last day of February as the date on which the cal year of the retirement system shall end; and to fix the third Tuesday . 4.. • • 3 in April as the date for the annual meeting of the Board of Trustees to be held at the Federal Reserve Bank of Chicago. Term of Office of Trustees. As reauired by Section 6 of the Rules and Regulations, the Board of Trustees determined by lot the initial terms of office of the various trustees, except Mr. James whose term of office as a trustee is at the pleasure of the Federal Reserve Board. The term of office of the twenty-five trustees whose term of office was determined by lot is as follows: Two years Three years L.R. Rounds, New York C.R. McKay, Chicago C.A. Worthington, Kans.Cy Win.A. Day, San Francisco Wm.G. McCreedy, Phila. C.E. Daniel, Kansas City M.C. Smyth, Dallas C.E.Earhart, San Francisco W.W. Paddock, Boston M.J. Fleming, Cleveland O.M. Attebery, St. Louis R.B. Coleman, Dallas Wm.A. Heinl, New York H.F. Strater, Cleveland A.H. Haill, St. Louis M.E. Lysen, Minneapolis Adoption of Declaration of Trust. One year J.S. Sinclair, Philadelphia J.S. Walden, Richmond H.F. Conniff, Atlanta Wm. B. Geery, Minn. E.G. Hult, Boston Hugh Leach, Richmond C. R. Camp, Atlanta A. M. Black, ChicEgo J.R. Van Bossen, Board A form of Declaration of Trust was adopted, binding the trustees and their successors and defining the trust relationship existinc, between the Board of 'Trustees and the employee members of the Retirement System, the Federal Reserve banks and the Federal Reserve Board, by reason of management of the funds of the Retirement System vested in the Board of Trustees. This Declaration of Trust will be signed by each trustee. Adoption of By-Laws. By-Laws adopted by the Board of Trustees provide for the filling of vacancies in the Board of Trustees, in its official staff, and in the Retirement and Investment committees; provide for the calling of special meetings of the Board of Trustees; fix the date of the annual meeting of the Board of Trustees as the third Tuesday in April; specify that a majofity of the Trustees or of the Retirement or Investment Committees shall constitute, respectively, a auorum of such board or committee; provide for the election by the Board of Trustees of a Chtirman, a Vice-Chairman, a Secretary, a Treasurer and such other officers as they may deem appropriate; direct the SecretEry to furnish promptly to each member of the Board of Trustees a copy of the minutes of each meeting of the Board of Trustees and of the Retirement and Investment Committees; and provide that the receipt and disbursement of the funds of the Retirement System shall be handled by the Treasurer, or an Assistant Treasurer, under the control and supervision of the Retirement Committee. Certificate of Membership. The Retirement Committee was authorized tv have prepared and to issue a certificate of membership to each member of the Retirement System. Method of providing benefits. Determination of the method of providing death benefits, disability retirement allowances, and service retirement allowances was left for the preseat to the discretion of the Retirement Committee. Securities eligible for purchase by the Retirement System. The Rules and Regulations provide, in respect to the investment of the fynds,that in no event shall such funds be invested in securities other than those in which the funds of life insurance companies doing business in the States of Massachusetts, Connecticut or New York may be invested under I -5the laws of such states, respectively. Within these limitations, the Board of Trustees authorized the investment of the funds of the system in obligations of the United States, in obligations of agencies of the United States guaranteed by the United States, in obligations of States or cities, or in railroad, public utility or industrial bonds rated not lower than "AY by at least two reco,mized investment services regularly engaged in the rating or grading of securities: Provided, that not more than 25 percent of the funds of the System may be invested in any of the three classes of corporate bonds nor more than $50,000 in the obligations of any one corporation. Rules with respect to the receipt and disbursement of funds. Detailed rules with respect to the receipt and disbursement of funds were adopted, under which disbursements of the funds of the System for each specified purpose may be made only by the persons designated (by title) in the rules, and only on proper authorization by the persons specifically designated by the rules. Clerical and other staff. The Retirement Committee was authorized to en- gage and fix the compensation of such clerical and other staff as may be necessary, includihg an actuary, counsel as necessary, three physicians to act as a.Medical Board, and other physicians as needed from time to time, and was directed to arrange for the bonding of the Treasurer, the Assistant Treasurer, end the clerical staff in minimum amounts specified. Tnveline expenses of members of the Board of Trustees tind Committees. The Secret:ry of the Board of Trustees WRE directed to reouest the Federal Reserve banks and the Federal Reserve Board to defray the traveling ex- S 6 • penses of the two trustees representing each, incident to attendance at meetings of the Borrd of Trustees or of Committees thereof, such arrangement to continue during the present year end the subject to be again considered at the next annual meeting of the Board of Trustees. Printing of the Rules end Regulz- tions, etc. The Retirement Committee was instructed to print end furnish to each Federal Reserve bank and to the Federal Reserve Board,for issuance to any member requesting a copy thereof, the Declaration of Trust signed by each Trustee, the Rules end Regulations, end the By-Laws. All other. Other matters considered by the Board of Trustees were either of minor importance or decision thereon was deferred to P subsequent meeting of the Board of Trustees, COMMITTEE ACTIVITIES Or GENERAL INTEREST Investment Policy. The Chairmen of the Investment Committee advised the Board of Trustees that, under existing conditions, a very conservative investment policy would be pursued, and that the rate of return on the funds of the Retirement System would, therefore, in the beginning be relatively low. In this connection the fact should be borne in mind that funds available for investment during the first year of operation will be comparatively small and P low rate of return thereon will, therefore, have little bearing on the rate that will subsequently be yielded by the invested funds of the system. Retirement Committee. The Retirement Committee is undertaking the pre- paration of annuity tables from which it will be possible to ascertain approximately the annuity that can be purchased with a given amount of money at specified ages, Copies of these tables will be furn ished each Federal Reserve bank and the Federal Rese rve Board. The Retirement Committee also provisionally adopted the rule that any additional contributions by members, as permitted by Section 5 of the Rules and Regulations, must be not less than one percent of the member's salary if a percentum contribution, and a multiple of $100 if a lump sum contribution, with the proviso that such contribution s when made, or when initiated if a percentum contribution, shall not appear to be more than sufficient to purchase an additional annuity at age 65 eoual to 50 percent of the employee's salary. Respectfully submitted, //ex/VI_ J. R. Van Fossen. VASHINGTON, D. C. MARCH 23, 1934. met • 14,. et/tom 2.2 beAkA4 The staff of the Federal Reserve Board conferred for a week with representatives of the Treasury and with Mr. Pecora, Mr. Corcoran and Mr. Cohen, Attorneys, in reference to the provisions of the National Securities Exchange Act of 1934. Governor Black participated in some of these conferences, was in close touch with all of them, and kept the members of the Board fully advised. During these conferences the attitude of the Board was requested and the following expression of this attitude was given: "The Board is in thorough accord with the following purposes of the bill: (1) To regulate National Securities Exchanges to the end that they may operate under fair practices only. (2) That speculation be properly curbed and dishonest speculation be eliminated. (3) That exchange credit be properly restrained and the undue use of credit in speculation be prevented. (4) That necessary penalties be enacted to guarantee the accomplishment of these purposes. The Board is not primarily concerned with the features of the bill with regard to the policing or regulating of the exchange, but feels that these features should be fair and in accord with established American business principles. If it is desired the Board will be glad to undertake the responsibilities of the bill regarding the fixation of marginal requirements upon loans based upon exchange equities, whether the loans ere made by brokers or banks, provided power is vested in VOLUME 252 PAGE 35 Ole # - 2the Board to handle this subject in the public interest and tc the prctection of the investor. This function would usefully supple- ment the considerable Dowers vested in the Board under the Banking Act of 1933 to prevent the undue use of credit for speculative purposes and would in the judgment of the Board furnish effective protection against the economic evils of speculation." During these conferences very many changes in the original bill were recommended by the Federal Reserve staff. These recom- mendaticns were followed in substance and changes were made in the bill, and the bill was greatly improved in crder to properly effectuate its purposes. The bill known as H. R. 8720 introduced in the House by Mr. Rayburn embraces these recommended changes. It is the feeling of the Reserve Board that the revised bill H. R. 8720 is workable, is right in principle, and will accomplish the purpose of regulating National Securities Exchanges under fair practices and that undue and excessive speculation will be properly curbed, and that exchange credit will be properly restrained and the undue use of credit in speculation be prevented. The Board is therefrre prepared to approve the bill as revised. The Board requests the privilege of making such further constructive suggestions as to the bill as may appear necessary or desirable as the result of the further study of the bill, and this request applies especially to questions affecting technical operations of the exchanges covered by the bill. 1.14 C ONFIDENTIAL Not for publication B-811 EARNINGS AND EXPE7SES OF FEDERAL RESERVE BANKS, MARCH 1934 January - March 1°34 1934 March of Month Current net earnings net re lCur Federa expenses nt Current Earnings from Ratio Less accrued earnins dividends and to to Ratio Exclusive Reserve net charges paidpaidTotal Total Total of ,cost Total Pur- U.S. Govt. Other Disto (curi‘ent) capin in of F. R. sources chased securicounted Bank and profit loss ital capital curency ties bills bills Per cent Per cent $137,091 9.6 $252,739 $98,656 10.9 $162,963 $171,545 $270,301 $3,590 $3,163 $260,535 $3,013 Boston 1,781,153 822,495 16.4 2,454,444 16.9 604,720 634,686 897 1,392,219 12,601 1,457,181 51,464 vew York 177,434 9.1 120,818 9.2 207,410 196,327 358,199 328,228 289 281,205 931 45,303 Philadelphia 190,698 10.9 337,922 11.2 120,951 248,510 240,939 369,461 8,791 351,038 1,366 8,266 Cleveland III Richmond Atlanta Chicago St. Louis 7,242 5,430 2,305 2,665 545 587 1,546 525 153,974 138,305 673,135 154,644 12,281 6,225 19,500 3,584 174,042 150,547 696,486 161,438 136,583 111,168 318,086 125,426 137,370 113,289 326,110 130,713 36,672 37,258 370,376 30,725 8.7 9.9 34.1 9.2 46,559 58,349 1,008,333 97,001 3.8 5.3 32.0 10.0 -9,543 6,449 1,042,458 51,998 Minneapolis s City as San Francisco TOTAL Mar, 1934 Feb. 1934 Mar, 1933 2,894 2,761 229 2,737 453 579 4,130 1,863 118,832 144,542 127,332 274,094 3,399 49,552 1,516 8,917 125,578 197,454 133,207 287,611 95,222 145,195 98,269 204,653 99,512 148,700 101,097 210,864 26,066 48,754 32,110 76,747 10.8 14.1 9.7 8.5 62,455 53,266 80,301 190,537 8.8 5.3 8.4 7.3 32,146 8,016 38,089 69,842 16,565 4,069,655 130,245 35,070 3,521,233 99,191 403,749 2,752,284 150,117 4,351,534 3,619,707 6,083,4_32 334,018 12,450,921 3,525,841 2,764,180 4ir Jan.-Llar, 1934 1.4,849 164,213 2,777,282 565,747 100,761 11,450,395 659,746 7,319,762 410,767 12,654,435 1933 4,264,140 FEDERAL RESERVE BOARD DIVISION OF BATK OPERATIONS APRIL 13, 1934. 2,439,551 2,529,906 1,821,628 2,280,728 2,425,564 1,394,143 2,478,731 3,167,153 2,916,279 14.7 12.5 22.9_ 5,000,105 13.9 5,000,105 13.9 6,6o5,600 7,573,386 5,081,049 13.7 5,081,049 13.7 7,048,489 7,450,816 VOLUME 252 MB- 87 4 Form No. 131 Office Correipontence To Lir. izteinlin_ From Mr— Goldenw FEDERAL RESERVE BOARD 111 Dale February 3, 1934_ Subject:__ GPO Referring to your memorandum of February 2, I believe that your statement is accurate. I should be inclined to add, however, that so long as the dollar is depreciated and foreign countries do not adopt corresponding devaluations of their currencies, there will be gradual pressure for American prices to rise until their level will be equal to that prevailing in other countries. This process, however, is likely to be a slow one, and, as you indicate, it wiIiMeeffect first among commodities entering into international trade and will only gradually spread from them to other commodities. VOLUME 252 PAGE 109 16-852 Februar, 1934. SP& PROBLEM OF PRICE RAISING. Comparing 1926 with 1934, a dollar will purchase in the United States much more today than it would have purchased in 1926; that is to say, prices of commodities have greatly fallen. The problem on Which the administration is working, is to bring about an increase in commodity prices up to the level of 1926, so that a man may pay debts contra cted say in 1926 - with the same amount of labor. When we vent off the gold standard in April, 1933, the purcha sing power of the dollar decreased; that is to say, prices in the United States rose. There was no economic reason for this increase except the uncert ainty of the future monetary policy of the United States, couple d with some speculative activity in exchange. This increase, very marked last July, has fallen off, althou gh prices are still a little higher than a year ago. The falling off in the purchasing power of the dollar was more pronounced in our exports than in domestic exchanges, and it was hoped that this decline in purchasing power would spread to domest ic commodities, but it has done so only to a very limited degree. The administration tried to increase prices by purchasing the newly mined gold, and then extending this to the purcha se of foreign cold, but although this latter may have opervted to put up prices of our exportable products, it has not lifted 11-0 domest ic -orices generally, for the reason, among others, that our foreign trade exchanges were only atout 10,0 of our domestic excharges, and the influe nce of increased orices for the former could not lift up the latter. The Government has • just devalued the dollar at a ratio of a little under 600, but the purchasing power of the dollar in domestic exchanges is nearly 800, that is to say, the dollar appears to be uniervalued. While this devaluation will affect at once prices of our exports, the question arises whether this will exercise a similar influence on our domestic exchanges. Professor Warren claims that devaluation will at once, or in the near future, put up all domestic prices. Other economists claim that there is no direct cause or relation between gold and prices. Should domestic prices not increase as the result of this devaluation, it is feared that there will be a demand either for further devaluation, or possibly for deliberate inflation along the lims of greenback issues. The question really comes down to this: A dollar today will buy more commodities in the United States than it will buy abroad of foreign commodities, and administration efforts are being exerted to lower the purchasing power of the dollar in the United States to these foreign levels. S.44. ilor 4 Form.No. 131 Office Corresportence T. Ir. Hamlin From FEDERAL RESERVE BOARD Ehae March 20, 1934 Subject: Mr. Goldemveise •PCs I have asked Mr. Barton to prepare the attached memorandum, vhich you asked for., comparing the proposed Bank of Canada. with the Federal Reserve System. VOLUME 252 PAGE 121 2-8493 Form No. 131 'Office Corresponitence FEDERAL RESERVE BOARD 411 Date March 19, 1934 To Mr. Goldenweiser Subject:_ Comparison of proposed Bank of From Mr. _Bart° Canada 'with Federal Reserve System GPO 16-852 The Powers of the ProPosed Canadian central bank about which Mr. Hamlin inquires were not specified in full detail in the Macmillan Report. A bill to incorporate the Bank of Canada, however, was intro- duced by the Minister of Finance on February 22, 1934 in the House of Commons. The bill embodies in specific form the general recommenda- tions of the Macmillan Committee. It empowers the Bank of Canada to "accept from the Dominion Government or the government of any province or from any chartered bank deposits which shall not bear interest" and to act as depository for foreign central banks and the Bank for International Settlements. I find no other affirmative provisions relating to the acceptance of deposits and infer that they may not be received from persons in general. The bill provides that the Bank may make loans or advances to chartered banks, the Dominion Government, and the government of any province, but makes no Provision for any other direct loans. It may, however, "for the purpose of its open market operations, buy and sell in the open market from or to any person securities, cable trans- fers, bankers' acceptances, promissory notes and bills of exchange with or without the endorsement of a chartered bank." Presumably the Bank might, under this Power, enter into lending activities which would be in competition with the chartered banks. The Minister of Finance, on the other hand, stated on the floor of the House that "The Bank of Canada is not to be regarded as a competitor with our chartered banks." • • la.. This, I think, answers Mr. Hamlinfs particular questions. A com- parison of the features proposed. for the Bank of Canada with the corresponding legal requirements of the Federal Reserve System is made below. • Marche, 1934 2. Federal Reserve System Bank of Canada 1. One central bank at Ottara. 1. Twelve regional banlcs. 2. Branches and agencies attached to central bank. 2. Branches and agencies attached to regional bRnka. 3. Capital subscribed by member tanks. 3. Capital subscribed by ind uals or corporations. But no share of the camital stock of the Bank shall be held by or fS r the benefit of any chartered bank or any director, officer, clerk or employee of sueh bank. 4. Board of Directors comnosed of 4. Federal Reserve Board appointed by a Governor, DePuty Governor, and seven directors. Directors are elected by stockholders and appoint Governor and DTPuty Governor with the approval of the Governor General in council. :Dower to issue 5. To take ove. Dominion notes. Notes of chartered banks to be gradually reduced to 25 per cent of their unimpaired Paid-up capital, with further reduction at discretion of Parliament. the President with the advice and consent of the Senate. Boards of Federal Reserve banks partly appointed by Federal Reserve Board and partly elected by member banks. 5. Note issue right shared with Treasury and national banks. 6. Franchise tax until Banking Act of 6. One-thied of all net Profits 1933. Then subscription to Fedin excess of a 6 per cent cum- dend to be Paid ulative into surPlus and the remainder to the Government until surplus equals paid-up capital; afterwards 10 Per cent of such Profits shR11 be paid into surolus and the remainder to %bI the Government until is do-dole Paid-up capital; and tVereafter all such Profits shall be paid to the Government. eral Deposit Insurance Corporation stodk and payment of net profits in excess of 6 per cent cumulative diviI end requArements to surpluz. • March 19, 1934 3. be fiscal agent of Dominion 7. Fiscal agents for Federal Gov7. To II Government. Upon request of Minister of Finance, shall act generally in resoect of the manageirPnt of the Canadian public debt. May also act as banker or fiscal agent for provincial governments. 8. Commercial banks to keep on deposit reserves equal to 5 per cent of their deposit bilities within Canada. 9. Specie and exchange powers: (a) Buy and sell gold, silver, nidkel, and bronze coin and gold and silver bullion. Gold may be sold only in bars of about Imo fine ounces (b) Effect transfers of funds (c) Buy and sell trade acceptances, bankers' acceptances, and bills of exchange drawn in or on places outside Canada and maturing not more than 3 months from purchase date. 10. ernment when required by Secretary of the Treasury. 8. Member banks keep 7, 10, and 13 per cent reserves against demand deposits and 3 ner cent against time deposits. 9. Specie and exchange Powers: (a) Gold may be sold only to holders of Treasury licenses (b) Effect transfers of funds (c) Buy and sell bills of exchange eligible for rediscount and 90-day bankers' accePtances. Investment nowers--to buy and 10. Investment powers--to buy and sell: sell: (a) United States Government se(a) Securities issued or curities guaranteed by Dominion of Canada or any orovince maturing not more than 2 years from date of purchase (b) Certain local Government ob(b) A limited amount of seligations issued in anticipacurities issued or guartion of assured revenues anteed by the Dominion of Canada or any province maturing more than 2 years from date of purchase (c) Snecified obligations of cer(c) Certain foreign governtain Federal agencies maturing ment securities not more than 6 months from date of purchase S March 19, 1934 (d) Bankers' acceptances and acceptances of certain Federal agencies (d) A limited amount of United Kingdom or United States Government securities mat,iring more than 6 months from date of purchase (e) Commercial and industrial bills of exchange and promissory notes, endorsed by a chartered bank, and maturing not more than 3 months from date of purchase (f) Bills of exchange and promissory notes for agriculture, mining, lumbering and fishing, endorsed by a chartered bank, and maturing not more than 6 months from date of purchase. 11. 12. Discount and rediscount powers: (a) Same as 10(a) (b) Same as 10(e) (c) Same 11. Discount and rediscount powers: (a) For member banks--commercial, agricultural, and industrial paper of specified maturities. (b) For Federal Intermediate Credit Banks--agricultural paper of specified maturities unless endorsed by a State bank or trust company eligible for membership in the Federal Reserve System (c) 'Tor regional agricultural credit corporations—agricultural Paper of specified maturities (d) For any bank—promissory notes with no more than 9 months to run secured by adjusted service certificates (e) For individuals, partnerships, or corporations--in unusual and exigent circumstances—with the approval of the Federal Reserve Board, paper suitably secured and eligible for rediscount for member banks 12. Loans and advances: (a) To member banks for not more than 90 days on their promissory notes secured by paper eligible for rediscount 10(f) Loans and advances: (a) To chartered banks for 3 months or less on any of the foregoing instruments or Canadian municipal securities or specie (e) 90-day bills of exchange and secured sight and demand bills eligible for rediscount S • March 19, 1934 (b) To member banks for not more than 15 days on their promissory notes secured by Federal Government issues, certain obligations of specific Federal agencies (c) To member banks, or groups of member 10-Inks1 in exceptional circumstances on their properly secured time or demand notes (b) To the Dominion or any provincial government when properly secured (c) To the Dominion Government an amount not more than one-third of anticipated yearly income and to be repaid before the end of the first quarter of the fiscal year following that in which the loan was made (d) To the Government of any province an amount not more than one-fourth of anticipated yearly income and to be repaid before the end of the first quarter of the fiscal year following that in which the loan was made (d) To individuals, partnerships, and corporations--in exceptional circumstances for not more than 90 days on their promissory notes secured by direct obligations of the United States. 13. Open-market operations: For the purpose of its openmarket operations, the Bank is to buy and sell in the onen market from or to any person any credit instrument, with or without the endorsement of a chartered bank, in which the Bank mey deal for exchange, investment, or rediscount purposes except "United Kingdom and United States Government securities maturing more than six months from date of purchase." 13. 14. To concentrate gold holdings of the country. 14. (This done by the Treasury.) 15. To keep a 25 per cent gold reserve against note and deposit liabilities plus an unspecified amount of silver bullion and foreign exchange. 15. Open-market operations: Any Federal Reserve bank may Purchase and sell in the open market cable transfers; bankers' acceptances and bills of exchange of the kinds and maturities eligible for rediscount, with or without the endorsement of a member bank; obligations of the Federal Government; certain securities of local governments issued in anticipation of assured revenues; and specified obligations of certain Federal agencies. Must keep a 4c per cent reserve in gold certificates against notes in actual circulation and a 35 per cent reserve in gold certificates or lawful money against deposits. 6. ts, a more The Proposed Bank of Canada would be, in some resoec . typical central bank than is the Federal Reserve Syntem Its cen- more exclutralized location, greater concentration of authority, gold reserve sive note iSSUR Powers, and possession of its country's are attributes typically found among such institutions. r inThis is not to say, however, that it would have any greate Refluence on Canadian bankilig and business than does the Federal serve Systm in this country. The absence at the Present time of an iveorganized money market in Cana.da would Probably reduce the effect methofts of ness of its open market oPerations and rediscount rates as credit control. Regulation of exchange rates would, therefore, be of correspondingly greater importance. d The bill to incorporate the Bank of Canada is now being debate in the House of Commons. Of the constitutional provisions outlined above, that of the private ownership of the Bank appears to have aroused the most controversy. • 00IDErTIAL IMIORATTA I. ADVA7.7CES* TO MEMBER BANKS UNDER SECTICT 10 (b) OF T17.11 F. R. ACT Advanced Feb. 27, 1932 to Apr. 18, 1934 Federal Reserve Bath-. Outstanding on Apr. 18, 1934 Boston row York Philadelnhia Cleveland 4,062,000 47,258,000 13,957,000 37,101,000 $6,413,000 943,000 896,000 Richmond Atlanta Chiccgo St. Louis 4,939,000 22,947,000 13,335,000 1,467,000 195,000 126,07:0 733,0°0 9,000 544,000 9,142,000 1,003,000 11%6,370,000 2,000 (a)302,125,000 9,317,000 Minneapolis Kansas City Dallas San Francisco Total Woe:: ending Anril 18, 1934 Paid Advanced during week during week IWO $S75,000 t1,552,000 35,000 150,000 6,000 5,000 1,829,000 II. BILLS DISCOU7TED* BY F.R.BANKS FOR IwDIVIDUALS, PARTTERSHIPS AND CORPORATIONS Advanced July 21, 1932 to Apr. 18, 1934 All Secured by U.S. Govt. obligations other Federal Reserve Bank Boston New York Philadelphia Cleveland 116,000 440,000 275,000 76,000 Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Total $1,000,030 95,000 135,000 35,000 Outstanding April 18, 1934 All Secured by U.S.Govt. other obligations $10,000 $35,000 507,000 108,000 $335,000 - * $75,000 $72,000 118,000 25,000 ••• 5,000 113,000 204,000 4,000 2,000 339,000 77,007 22,000 1,215,000 (b)#3,416,000 (01,385,000 DIVISION OF BANK OPERATIONS APRIL 27, 1934. Tech ending April 18, 1934 Paid Discounted during during week week 99,000 35,000 *Exclusive of renewals. #Includes $57,550 to building and 300,000 to a Federal land bank associations, loan b.anks (including nonmember and $2,319,210 to $1,(r0,000 to a Mutual Savings Bank.) (a) Advanced in 1932; $28,965,000; In 1933, $265dOl5,000; In 1934 to ''.ate $7,712,000 75,000 3,341,000; In 1934 to date (b) 1932; 1 In 1933, II 14,000 511,m; In 1934 to date 1932; 860,000; In 1933, (c) VOLUME 252 PAGE 126 S.LA- aft Form /et). 131 Office CorrespoAtence To FEDERAL RESERVE BOARD Mr. Hamlin lk April 9,1934 Subject: Mr. Smead .P0 16-852 Following is the information requested in your memorandum of April 2: 1. On October 23, 1929, the weekly statement date preceding the stock market crash gold reserves of the Federal Reserve banks totaled $3,0351000,000, Reserve bank credit outstanding was $1,374,000,000, and loans and investments of reporting member banks $22,895,000,000. On October 4, 1929, the nearest date for which figures are available, loans and investments of all member banks totaled $35,914,000,000, and of all banks in the United States $58,835,000,000. 2. Cash reserves of the Federal Reserve banks at this time averaged about :31150,000,000 and the reserve ratio about 74 percent. 3. That the Federal Reserve banks easily sustained the amount of credit outstanding in October 1929 is evidenced by the reserve ratio of about 74 Percent. 4. Answered in No. 1. 5. Gold reserves of the Federal Reserve banks on April 4, 1934, totaled $4,343,000,000, which is equivalent to about $2,565,000,000 on the basis of the gold content of the dollar prior to devaluation. This latter amount is less than the amount of gold reserves held by the Federal Reserve banks in 1929 prior to the stock market crash. The total monetary gold stock on April 4, 1934, amounted to $7,703,000,000 equivalent to $4,549,000,000 on the basis of the gold content of the dollar prior to devaluation. This latter amount is in excess of the monetary gold stock at any time before the 1929 collapse, but not VOLUME 252 PAGE 131 Mr. Hamlin - #2 in excess of the gold stock at the end of 1930 or throughout the greater part of 1931. 6. Following is a comparison of bank credit outstanding at the present time and prior to the 1929 stock market crash: Latest available date Reserve bank credit $2,509,000,000 4-4-34 Loans and investments of-Reporting member banks 17,472,000,000 3-28-34 All member banks *25,220,000,000 12-30-33 All banks *40,089,000,000 6-30-33 Nearest date to Stock market crash $1,374,000,000 10-23-29 22,895,000,000 10-23-29 35,914,000,000 10-4-29 58,835,000,000 10-4-29 *Licensed banks 7. Loans "For others" made to brokers and dealers in securities by reporting member banks in New York City amounted to $3,823,000,000 on October 23, 1929. The peak figure for such loans on any weekly statement was $3,941,000,000 on October 9, 1929.
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