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The Papers of Charles Hamlin (mss24661) 369_03_001- Hamlin, Charles S., Scrap Book — Volume 254, FRBoard Members 11.11:04S1-Et% 205.001 - Hamlin Charles S Scrap Book - Volume 254 IRBoard Members Form F. R. 131 BOARD OF GOVERNORS OF THE • FEDERAL RESERVE SYSTEM Office Correspondence To The Files From Mr. Coe Date August 12, 1941 Subject: kec After correspondence with Mrs. Hamlin (see letters of May 24 and June 41 1941) the items attached hereto and listed below, because of their possible confidential character, were taken from volume 254 of Mr. Hamlin's scrap book and placed in the Board's files: VOLUME 254 Page 16 (X-7923) Applications for membership of trust companies doing substantially no banking business. Page 35 Memo to Mr. Hamlin from Mr. Smead re expenses and profits of the Cuban Agency. Page 63 Memo to Mr. Hamlin from. Mr. Goldenweiser re changes in cost of living in France and the United States during the depression. Page 82 Memo to Mr. Hamlin from Mr. Smead re report of Bureau of Agricultural Economics on. World Wheat Prospects. Page 119 (B-995) Working Capital for Industry. Page 153 Earnings and Expenses of F.R. Banks, June 1934. • • 34_4.44 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL C0RRESPONDEP4ICE TO THE FEDERAL RESERVE BOARD X-7923 June 20, 1934. SUBJECT: Applications for Membership of Trust Companies Doing Substantially No Banking Business. Dear Sir: During the past several years the Board has taken the position that it would not admit to membership in the Federal Reserve System trust companies which do substantially no commercial banking business, but recently it reviewed the question and decided that it should give consideration to applications for membership from trust companies of this type. If there is any trust company in your district that has been advised that it would not be admitted to membership because it was doing substantially no commercial banking business, the Board desires that you inform it that the Board will give consideration to its application for membership if it desires to file one. Very truly yours, )/1)rtilitf Chester Morrill, Secretary. TO ALL FEDERAL RESERVE AGENTS. VOLUME 254 PAGE 16 Form No. 131 Office Correspottence TO idr._ Hamlin FEDERAL RESERVE BOARD Date ime_74_1934, Subject: •e o 16-852 In response to your telephone inquiry as to how much gold the United States has given Cuba in exchange for Federal Reserve notes and the expenses and profits of the Cuban Agency since it was established, as you know Federal Reserve notes are paid out in Cuba as a result of transfers to Cuba purchased in the United States, and the Havana Agency receives currency in Cuba in exchange for cable transfers sold by the Agency. No gold dhipments to and from Cuba are, therefore, involved in the currency operations in Cuba of the Havana Agency of the Federal Reserve Bank of Atlanta. Most of these cable transfers are effected, however, through the Federal Reserve Bank of New York and, as a result, Atlanta gets gold from New York in payment for Atlanta Federal Reserve notes and other currency paid out in Cuba and, likewise, the Atlanta Federal Reserve bank gives the Federal Reserve Bank of New York gold *hen currency is deposited in the Cuban Agency and transfers on the United States are sold in payment therefor. To the extent that currency turned in to the Havana Agency consists of currency other than notes of the Atlanta bank the Federal Reserve Bank of Atlanta obtains gold for it when it is sent to the Treasury or to the issvirg Federal Reserve banks for redemption. From the attached statement Showing gold imports from and exports to Cuba, from January 1923 to December 1933, you will note that imports of gold from Cuba are reported as $10,043,623 and exports of gold to Cuba as only $1,220, indicating a net gold movement from Cuba to the VOLUME 254 tAGE 35 3 Mr. Hamlin - #2 United States of something over $10,000,000 during the period. From January 1, 1914, or just prior to the establishment of the System, to the end of 1922 gold exports to Cuba exceeded gold imports from Cuba by approximately $29,000,000. With regard to the earnings and expenses of the Havana Agency, the attached statement shows that since the Havana Agency of the Atlanta Bank was established its earnings have been $345,355.93, or approximately $134,000 less than operating expenses and the cost of furniture and equipment (including vault), which aggregated $479,159.95. However, from 1923 to 1927 the Agency had no income, all earnings on cable transfers during that period going to the Agency then maintained in Cuba by the Federal Reserve Bank of Boston. During the three years and four months in which the Boston Federal Reserve bank maintained an agency in Cuba its operating expenses as shown by the attached statement amounted to $52,021.58, and its earnings to $229,759.78, or approximately $177,000 in excess of operating expenses. Since the System established agencies in Cuba, therefore, the earnings of the agencies have amounted to approximately $43,000 in excess of their operating expenses and the cost of furniture and equipment. There is attached a table showing the amount of cable transfers bought and sold by the Havana, Cuba agencies since they were established in 1923. It is noted from this statement that cash paid out in Cuba on transfers purchased amounted to the end of 1933 to $215,774,098, and that cash received by the agencies for which transfers were sold on the United States amounted to $346,113,135, indicating that currency receipts by the agency exceed currency payments by approximately $1300000,000. This is due in large part to the fact that tourists going to Cuba carry currency into the island. Mr. Bamlin - #3 In this connection, you may be interested in an article appearire in the New York Times for Tuesday, June 5, 1934, in which it is stated that "According to recent statistics the total money circulation in Cuba does not amount to more than $50,000,000, of which half is Cuban silver and gold. 'While the original issue of gold was $20,000,000 it is believed not more than $6,000,000 in gold remains, the balance having been melted and paid on foreign obligations by former governments and clandestinely taken out of the country." This article would indicate that not more than $25,000,000 of paper currency is in circulation in Cuba. This, I believe, is a considerable under estimate. In addition to currency in circulation in Cuba, the Cuban Agency on May 31 held $10,494,000 of notes of the Atlanta Federal Reserve bank and $303,855.95 of other cash. The other cash is made up as follows: Gold certificates Legal tender notes Silver certificates National bank notes Federal Reserve notes of other Federal Reserve banks Subsidiary silver - nickels and cents $31000.00 4,000.00 255,000.00 1,500.00 40,000.00 355.95 • • CABLE TRAITSFTES BOUG7T Lrn SOLD BY HAVAYA, CUBA, AGENCY OP THE FEDERAL RESERITT Ezx OF ATUITTA** Transfers sold (Cash received by Agency including commission) Transfers purchased (Cash paid out by Agency) $17,2e6,270 25,933,408 26,979,953 66,533,070 $7,200,000 21,682,675 16,778,000 47,500,000 1930 41,92s,766 26,475,449 28,243,215 47,678,631 22,534,800 13,738,000 21,595,000 27,139,000 1931 1932 1933 22,865,843 17,886,869 24,298,661 8,010,000 3,550,000 26,046,623 346,113,135 215,774,098 1923* 1924 1325 1926 1927 1928 1929 Total *Beginning September 1, when the agencies were established. **Prior to 1927 the cable transfers were purchased and sold by the Havana Agency of the Federal Reserve Bank of Boston. EXPEYSES AM EARNINGS OF THE HIJA274:1, cum, AGENCIES HAVANA AGMTCY OF THE FMERAL RESTME BA/TIC CF ZLAI1TA Current expenses 1923* 1924 1925 1926 Earnings S11,264.07 34,995.go 21,914.13 25,716.87 1927 1928 1929 193o 33,452,67 40,680.4li 5o,238.94 lig,475.65 $67,434.68 43,382.4o 54,571,84 79,212.2e 1931 1932 1933 48,742.5o 4o,h73.16 38,678.50 33,391.00 21,614.90 45,248.83 394,632,85 345,355.93 Total FUrniture and eruipment Vault 13,274.10 71,253.00 HAVANA, AGZNCY OF TEE FEDERAL RESERVE BATT 07 BOSTOY** 1)23* 1924 1925 1926 Total 24,469.00 8,796.40 13,648.23 13,306.43 16,210.52 47,590.18 43,731.00 113,969.60 52,021.58 229,759.78 *Beginnine September 1, when the ki.emicy opened for business. **Discontinued at the end cf 1926. • GOLD MOVIIIENTS BETWEMT THE UNITED STATES AND CUBA FROM jANUARY 1923 TO DECFM13ER 1333. Exyorts to Cuba $15 49 •••••• 825 .111.••• gnome 35 296 Total 10,043,023 1,220 Form -N91 131 Office Corresportence To Mr. Hamlin From Mr. Goldenweiser FEDERAL RESERVE BOARD • Date June 15, 1934 Subject: OPO I transmit herewith- a memorandum on changes in cost of living in France and the United States during the depression, prepared by Mr. Gardner. VOLUME 254 PAGE 63 2-8493 Porm No.131 Office Corresporiknce FEDERAL RESERVE BOARD Date June 114., 19311. To Dr. Goldenweiser Subject: ahaages in cost of livinc in From Mr. Gardner France and the United States during the depression. 16-852 aro During the sepression, French retail prices have fallen comparatively little, while prices in the United States have declined sharply even taking into account the rise since the winter of 1933. Chart 1 compares changes in the cost of living of a French workingman in the period 1927-1934 with changes in the cost of living of an American workingman. In terms of francs the Frenchman had higher living ex-penses in the early years of the depression than in 1927-1929, and the moderate decline that has since occurred has served to bring his costs back only to the pre-depression level. In terms of dollars his costs have not only failed to decline but have risen considerably; for 100 francs, which were formerly equivalent to $3.92, are now equivalent to $6.63. The movement of French prices on a dollar basis is shorn by a dotted line on the chart for the period in which there has been substantial increase in the dollar-franc rate. The main constituent of the cost of living is food Prices. Retail prices for food in France and the United States are shown on Chart 2 with the dotted line again representing French prices converted to a dollar basis. Prices for a number of individual commodities represented in this index are given in the attached table. The commodities in the table have been selected as those most nearly comparable in the two indexes. There is hardly one in which the Ftench product is exactly like that consumed in the United States; but the group will serve to give a rough indication of comparative prices. The period before our de- parture from the gold standard was marked by a moderate decline in price of most of the French commodities and sham declines in the United States. During • • .• Dr. Goldenweiser June 14, 1934 Page 2 the period of dollar depreciation, Prices rose in the United States; but dollar prices in France rose much more sharply. Not too much significance, however, should be attadhed to this second period in which price increases in France represented largely the altered rate for converting francs into dollars. The table raises a number of questions, some of which are difficult to The Price of a pound of wheat flour in France has consistently been answer. higher than that of a pound of bread, which is presumably mpde from the same flour. The explanation appears to be that the flour emnloyed in the bread is purchased wholesale at very much lower prices than retail flour, comparatively little of which is purchased in France. The price of wheat has been sustained in France considerably above the world level by restrictions on the foreign nroduct; but the cost of turning wheat into bread and selling it is far less in France; and even today, with allowance for the depreciated dollar, a pound of bread costs the Frenchman less than it does the American. This is also true of fresh milk, which by its nature cannot be shipped internationally and is governed largely by local conditions. The other commodities on the list were cheaper in the United States even in February the gap. 1933, and the subsequent depreciation of the dollar has widened Indeed the gap has become so wide that several of the commodities are selling in France for more than twice their price in the United States. Such price differentials are Possible only because of measures that severely restrict the sale of foreign goods in France. On lard, for instance, there is a heavy tariff, a quota tax, and subsequently a turnover tax. Although lard in Paris has been selling recently for nearly two and a half times its • Dr. Goldenweiser Page 3 June 14, 1934 price in the United States, the combined duties and taxes quite eliminate any Profit in the shipment of American lard to France. Had there been a profit, the quota would still have operated as an absolute limit. The same factors in varying combinations remove any possible Profit in the shipment of American rice to France or of Cuban sugar to France rather than to the United States. Beans, coffee, and butter are also subject to substantial tariffs as well as quota restrictions; but in these cases there is some question as to the comparability of the commodities. The French consume sweet butter, for instance, in contrast to the salted butter of the Americans. Potatoes, too, are diffi- cult to staneardize and to ship in good condition across the ocean. Fresh eggs are definitely a local product. Discussion of these individual commodity prices directs attention to the somewhat artificial character of a number of the comparisons, particularly those influenced by the depreciated dollar. The Frenchman earning his wages and spending them in francs is not concerned with a computed increase in the dollar value of the things he buys. him, and these have not risen. It is their franc prices which concern On the other hand they have fallen little-- undoubtedly far less than his income has fallen if unemployment be taken into account. The much greater decline in cost of living abroad contrasts with the pre-depression level maintained in his own country. And furthermore the de- preciation of foreign currencies as exemplified in the dollar is significant where international trade is involved. The French exporter paying wages in francs that must bear some relation to the cost of living finds it extremely difficult to sell abroad in competition with foreign producers whose costs • Dr. Goldenweiser Page 4 are in depreciated, currencies. June 14, 1934 To maintain his cometitive Position at the existing exchange rates the French exporter must reduce his costs in France. The sustained level of the cost of living impedes this process. It is the exporting and financial interests in France, dependent as they are upon the flow of international transactions, who are Probably most affected by the relatively high French prices. • • RETAIL PRICES OF CERTAIN FOODS IN FRANCE AND UNITED STATES (In United States cents) 1929 Commodity February 1933 Anril 1934 Unit France U.S. France U.S. France U.S. 24.9 10.3 Wheat flour lb. 5.8 5.1 4.g 2.9 Bread lb. 3.7 9.0 3.1 6.4 Lard lb. 24.7 lg.3 20.5 7.7 Butter lb. 40.4 55.1 39.9 24.829.3 Eggs S. 46.6 49.0 41.3 21.4 44.9 24.o Milk qt. 6.3 14.0 5.9 10.3 s.4 11.1 Rice lb. g.1 9.7 5.9 5.g 9.6 7.9 Beans, white lb. 15.3 14.0 6.5 4.1 14.1 5.8 Sugar lb. 7.g 6.6 6.9 5.0 12.0 5.5 Coffee lb. 4g.1 49.1 36.4 27.g 58.3 27.5 Potatoes lb. Note: Ftench prices are for Paris alone; United States prices are averages for 51 cities. CHART]. COST OF LIVING Ii FRANCE AND UNITED STATES, 1927-1934 U.S. (191 (Ratio scale: equal distances up and down represent same percentage chances) France, (Jan.—June 19o= 100) 18 • • _170 • , _ 160 / (French prices -150 in dollars)/ / / 140 / i / _130 / / 120 / i 110 / 20 19 L France 18 17 16 0 United States 15 - 9) 13 L 12 "..... 1927 1929 1930 1931 NOTE: Index for France, reprventing prices in basis by Commission dietude relatives au United States, representing prices in 51 for other items, compiled on semi—annual tics. 1932 1933 19 Paris, compiled,on quarterly cout de la vie a Paris; that for cities for food and in 32 cities basis by Bureau of Labor Statis— CHART 2 RETAIL FOOD PRICES IN FRANCE AND UNITED STATES BY MONTHS, 1927-1934 U.S. (191 = 100) (Ratio scale: equal distances 1.130 and down represent same percentage changes) Jul A I I 1 / 170 (French / prices I in eJ dollars) I France i6o I : / t I i / 410110P i, 150 130 . . ' 130 120 . 110 1C0 United States 120 90 110 10$ 90 ........_ 1927 NOTE: 192g 1929 1930 1931 1932 1933 ....„, 19311- Index for France compiled by the Statistique Generale de la France covering 13 commodities in Paris; that for the United States compiled by the Bureau of Labor Statistics covering 7g commodities in 51 cities. .S4i/ 441 Form 4o.131 • Office Correspontence FEDERAL RESERVE BOARD To Mr. Famlin • Date July 9, 19314 Subject: From Mr. Smead epo With further reference to our conversation and the memorandum I gave you on July 7, you will note from tables 1 and 2 on pages 3 and 5 of the attached summary report of the Bureau of Agricultural Economics on World Wheat Prospects tgit the production of wheat in Argentina is substantially less than in France. For the years 1931 to 1934 inclusive the figures are as follows: Francel Argentina • (In millions of bushels) 1 A 1931-32 26)4 220 1932-33 334 235 1933-34 362 283* 1934-35 276* 235* Figures for France as shown in the attached summary arP for ' the "Harvest Year". Estimated. VOLUME 254 PAGE 82 • W-852 • • FEDERAL RESERVE BOARD WASH!NGTON July 5, 1934. ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD B-995, SUBJECT: Working Capital for Industry. Dear Sir: Section 13b, added to the Federal Reserve Act by the Act approved on June 19, 1934, provides in subsection (e) that in order to enable the Federal Reserve banks to make the loans, discounts, advances, and purchases provided for in such section, the Secretary of the Treasury is authorized to pay to each Federal Reserve bank not to exceed such portion of the sum of $139,299,557 as may be represented by the par value of the holdings of each Federal Reserve bank of Federal Deposit Insurance Corporation stock, and it is understood that the Secretary of the Treasury will make such payments to the Federal Reserve banks from time to time as they make the loans, discounts, advances and purchases authorized by Section 13b. It is also provided that, within the moaning of such section, the sum so paid to each bank by thfi) Secretary of the Treasury shall become a part of the surplus fund of the Federal Reserve bnnlr. In the weekly condition statement, however, the amount of surplus derived from net earnings of the Federal Reserve banlx will be shown against the caption "Surplus (Section 7)", and the amount of surplus resulting from payments by the Secretary of the Treasury against the caption "Surplus (Section 13b)". The amount of loans, discounts, advances and purchases under Section 13b of the Federal Reserve Act will be shown in the weekly condition statements of V1LUME 254 PAGE 119 • a the Federal Reserve banks against the capon "Industrial advances", immediately following the item "Bills bought in. open market". Inasmuch as Section 12B of the Federal Reserve Act provides that Class B stock in the Federal Deposit Insurance Corporation held by the Federal Reserve banks shall not be entitled to priyment of dividends, and as payments received from the Secretary of the Treasury to enable the Federal Reserve banks to make industrial advances will be included in the Federal Reserve banks! surplus accounts, the Board feels that, beginning with July 1, 1934, the reserves set up at the time the Federal Reserve banks made their final payment on the subscription to the stock of the Federal Deposit Insurance Corporation should be connidered as valuation reserves and deducted from the book value of the stock inself. Accordingly, the item "Fed.Dep.Ins. Corp. stodk" will be eliminated from the weetly condition statement of the Federal Reserve banks, the amount of reserves set up on such stock will 5-S from the item "Reserves stock, self insurance, etc.)", and the latter caption will be changed to read "Reserves for contingencies". Yau will note from subsection (e) of Section 13b that before payments are made to the Federal Reserve banks they must execute agreements to hold the stock of the Federal Deposit Insurance Corporation unencumbered and to pay to the United States all dividends, all payments on liquidation, and all other proceeds of such stodk, for Wilich dividends, payments and proceeds the United States shall be secured by stch stodk itself up to the total amount paid to each Federal Reserve bank by the Secretary of the Treasury under such section, and, that each Federal Reserve bank, in addition, shall agree that in the event such dividends, payments and other proceeds in any calendar year do not aggregate two per centum of the total payments made by the -3 - Secretary of the Treasury under such section, it will pay to the United States in such year such further amount, if any, up to two per centum of the said total payment as shall be covered by the net earnings of the bank for that year derived from the use of the sum so paid by the Secreta ry of the Treasury. It will be necessary, therefore, for the Federal Reserve banks to keep all income received from the use of the sun so paid by the Secretary of the Treasury, and all expenses and losses incurred in connect ion therewith, under Section 13b of the Federal Reserve Act, aeparat e and distinct from the other earnir„Ts, expenses and losses of the bank, in order to determine what, if any, pavri.onts shall be made to the Secretary of the Treasury in the event the dividends, Payments and other proceeds of the Federal Deposit Insurance Corporation stock do not aggregate in any calendar year two per centum of the total payments made by the Secretary of the Treasur y under Section 13b. You will be advised at a later date in regard to the manner in which the net earnings of the Federal Reserve banks, derived from operati ons under Section 13b, are to be compiled and reported to the Federa l Reserve Board and to the Secretary of the Treasury. On Form 34 please report "Industrial advances", code TURK, following item Federal Land Bank bonds; item "Surplus (Sectio n 13b)", code TALC, following the item Surplus (Section 7); and "Industrial comritm ents", code MT, on the reverse side of the form. Very truly yours, Chester Morrill. Secretary. TO ALL FEDERAL RESERVE CHAIRMEN* • C ONFIDENTIAL Not for publication B-811 EARNINGS AND EXPENSES OF FEDERAL RESERVE 3AnCS, JUNE 1934 Federal eserve 410 Jank Current ex-oenses Earnings from Discounted bills Purchased bills U.S.Govt. securities Other sources Total 2oston New York Philadelphia Cleveland $1,391 20,174 15,323 2,551 892 613 132 121 $240,691 1,256,363 253,273 324,221 $2,329 5,130 17,042 7,507 $244,503 1,290,840 291,375 334,400 Richmond Atlanta Chicago St. Louis 6,637 5,233 31,531 339 47 43 161 12 157,519 135,944 653,043 142,365 2,631 9,366 17,055 4,409 166,834 150,586 702,560 147,625 3)4 3/4 5,619 14,672 1,495 12,517 117,716 157,300 123,231 266,437 99,822 71,336 160,430 Minneapolis KAWs City D/Ws San Francisco TOTAL June 1934 May 1934 June 1933 Jan.-June 1934 1933 1,532 2,615 1,227 678 87 110,557 139,979 120,475 253,155 97,806 180,677 618,321 1,389 1,768 29,689 3,794,350 3,939,187 3,277,821 120,703 23,078,671 966,211 6,842,801 1,097,263 16,871,477 Exclusive of cost of .R.currency January - June 1934 Current net earnin:s Less accrued Ratio dividends and to paidnet charges Total in (current) to 'capital profit and loss 1934 June nonth Total $165,4:8 $166,696 55,093 610,712 192,730 198,913 245,626 252,112 Current net earninfrs Total Ratio to paia-in capital rer cent 3.8 $77,307 680,125 13.0 32,462 7.3 82,283 7.9 Per cent 3.5 $503,276 4,620,571 15.7 9.9 765,022 9.9 618,903 10,,C 126,985 183,245 2,196,210 193,224 5.1 8.4 34.9 10.1 -11,673 65,603 2433,331 50,379 20,731 3,760 26,052 54,430 8.3 1.1 8.0 6.2 127,879 32,501 162,614 360,835 4.5 8.4 0.8 -i0,-TOU 3,993,407 4,192,968 4,086,261 2,383,616 2,432,843 1,560,564 2,419,120 2,474, 834 1,718,134 2,171,168 2,315,431 1,770,830 12.9 13.8 14.5 610,619 24,776,204 829,598 25,641,139 14,258,674 1)4,819,939 9,956,265 13,447,465 14,983,462 10,652,677 13.8 14.3 9,956,265 ;10,652,677 13.8 14.3 6,653,798 6,035,204 27,833 6.: 104,501 282,325 110,763 135,001 106,210 237,651 111,397 44,376414,909 35,723 40.1 96,536 152,315 96,165 210,551 96,925 153,540 97,179 212,007 13.7,c77 12.3 FEDERAL RESERVE 20ARD DIVISION OF 2ANK OPERATIONS JULY 12, 1934 $227,145 3,250,332 355,943 272,771 VOLUME 254 PAGE 153 52,644 106,848 76,441
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