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y
Hay 27, 1935
Ur*
•. • Lovet/t
Bro'*n brothers !iarrt:aan & Qon:;flny
Tall Street
New York City, New York
.Jr. Lovetti
Hiade t o your l e t t e r of Hap 1 Ln regard t o fce*
•
'
.1
i
-.cribed belovs, ^o t h e Fcdc]?al Reserve Act Ls coa—
'.:»; Aot of . . .
Thi
^ed aaend
IQX ( l ) author
MI -her t a -
.
•
, i n a.
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•
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•
*ve
. beaker
.
r m i t t e d under
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ire
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| <*© Ban ell
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F e d e r a l 1&TJ,
U.
•.•;?
H e r of t h e
Ltad banking practice©
•.
Ing
.>iaj «u
o-
lay be fou
Lst
alon Is included in Section V)VL I
(B« .7817)
I
i—Tin
..
.-!i» power •
-fi/, value and nay a t t i a e s
if i ,
. . .
itk)c8 a<c
Ll
.
•
m banks 9 whrrofit :\onae-ib€r iMUril
tccourv
legal
;2Oe9 ami would b« in
r1
a &t any tiaa*
'^deral acflem
ttlataiD
.
aiai-aua
?
Any pilley
aubstantlal balanoec in the Federal
. ••-.
m balances on
.
IMMTVI
M o »tion
^nf
bttfiki w\
viin*
at
I 0, Lovett Lou3ly
irt
|
• the Cy«tes f s a b i l i t y to sake effective i t c
,
substantial excese
up of deposit L
t times l i k e trie present, when member b^nks harm
vea **ith the federal reserve b*r~-. , i
building
I to the credit of non*e&bor b&.nks anJ bankers would
not incro^se in uny MB
8 of the Federal Bsjgai f
would increase their 9x;^en.aei .
proposed ch.-.
al
In ti^e li r iht oi c MM oonb.
risir.
;
b^nks, but
i
,ons, the
Pt banks to rece^.
from nonaieaber tMudcs and bankers does not appear to be anc
-^e
I
i-
eral Keservo Boe>rd could rwMMHMli
. rftfl>1 i s Uii.t aeaioor banka be permitted to deduct
their b&l&ncfcs i I
deposits in ••%!
ruooaber banks and bankers fi-oa their
theii ro>,uirea reserve bal&nc«t«
roca uecvuid
*hile the deduc-
tion of ibe&» in process of c o l l e c t i o n froa gf#M deaana aeposits lor the
purpose of determining deposit I W o i i i t i e s on which reserves e-re computed
would seem fully j u e t i i i o d , t/itre i s doubt as to the wisdom or ocraitting
the deduction of e o i i
fund btlanoes with any banks• ino tiie t^xtent th&t
deposits are Bade by asm -:aeaboi bank vdth m
., however, tho net deposit
l i a b i l i t y or a l l M*JM? balM as a whole i s not ch^n, ed andlg therefore, the
priviAege oi deduct
lances due from a^aber banks «*y be J u s t i f i e d .
Under the present 1&« &nd regulations neaber b&nks may also uadiict b^l^nces
due from nonaembers in determining the asount of demand deposits subject to
reserve • To extend this privilege to balances duo irom ^ii
oiks ^ould b#
a further aep&rtuio from the sound principle th&t only items in process of
c o l l e c t i o n (for which iam.xiiate deposit credit h&i been jiven subject to
actual collection) should be deducted in determining net deposit l i a b i l i t i e s .
Furthermore, i t ai--ht have a tendency to encourage amber banks to carry
llr«
. L
.v -
4
I
v
nces v-'ith corres;>on<ients oU
5 member banks*
» e n i f the eff3ct of the proposed c*u.n es on the business of member
b&nks were no l i i b l e , the federal Tie serve Board would find i t . i
licult
to justify on principle tfct <?;<ta»ision8 to nonaeabora of privileges without
tho iapoaition of conditions corr-sx>niin^; to thor^e im.x>&ed on. a©ab
:a.
The fact thftt the BPfJfMfjdflWl^Wgtfwould not enable nonmoai
t fall
MM p r t T t i a f i i c
.uh-
. l a from re •
., mtd tjtmi
ship la
fc
i>3bd not M
rllj 1
, loes no
^n-
ciple involved.
- Tiiies
eonckuctin., th
. . : . , . .
,
« outsiic tikm PMMnr
. . i t in t.hich your sv.
not believe
nor with
ELS/1T;
titarvi
e Systeo,
»j bat 1 - d0M
. . ', ,
\mrml
DJU,
.
••.^> t o F M O H M W
r / truly yours,
\/
I
iiks,
. ient«
@FedFRASER