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BDARD DF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence Tn Mr* Eccles CjT*ntn Mv Date, jmung, 1950 Subject: - Carpenter At the j o i n t meeting of the Presidents and the Board t h i s morning, President Gidney handed me copies o f the r e p o r t o f the Comm i t t e e on Correspondent Bank R e l a t i o n s made by Mr. Gelbach, Chairman of the Committee, a t the l a s t meeting of the Reserve C i t y Bankers 1 Association. Mr. Gidney suggested t h a t the r e p o r t be read by each o f the members o f the Board. A copy o f the r e p o r t i s attached. THE THIRTY-NINTH ANNUAL MEETING REFORT OF COMMITTEE ON CORRESPONDENT BANK RELATIONS 3y Loring L . Gelbach, Chairman At the meeting o f the D i r e c t o r s o f the Association h e l d i n San Francisco l a s t October, the Committee on Correspondent Bank R e l a t i o n s was i n s t r u c t e d t o r e p o r t t o t h i s Convention on the competitive a c t i v i t i e s o f the Federal Reserve Banks as r e l a t e d t o correspondent bank r e l a t i o n s * A survey o f the competitive a c t i v i t i e s o f the Federal Reserve Banks r e veals to i n c r e a s i n g l y aggressive a t t i t u d e throughout the past y e a r on the p a r t o f some o f the Federal Reserve D i s t r i c t Banks. The a c t i v i t i e s range from d i r e c t s o l i c i t a t i o n of non-member banks t o j o i n the system, t o the rumored s o l i c i t a t i o n o f member banks f o r a l a r g e r share o f t h e i r excess reserve balances. To e s t a b l i s h a c l o s e r banking r e l a t i o n s h i p w i t h both member and nonmember banks, the F e d e r a l Reserve Banks have i n s t i t u t e d many a d d i t i o n a l banking services a t l i t t l e o r no cost t o the p r i v a t e banks• Included among the services o f f e r e d p r i v a t e banks a r e the f o l l o w i n g : 1. Activity solicitation. Federal has aggressively s o l i c i t e d a c t i v i t y p a r t i c u l a r l y among the country banks. I t has been made c l e a r t o tho member banks t h a t by using F e d e r a l ' s f a c i l i t i e s they can cut down on the compensating balances which they would otherwise have t o carxy w i t h c i t y correspondents. Federal j u s t i f i e s t h i s s o l i c i t a t i o n on the ground t h a t they have a r e s p o n s i b i l i t y t o serve member banks i n every way. Federal Reserve Banks are i n a much b e t t e r p o s i t i o n than p r i v a t e banks i n s o l i c i t i n g t h i s a c t i v i t y as they a r e to a c e r t a i n e x t e n t the supervisory a u t h o r i t y o f the p r i v a t e banks through r e g u l a t i o n s and p e r i o d i c examinations. I t i s submitted t h a t the a c t i v e account o f a correspondent bank i s more p r o f i t a b l e than a complimentary a c c o u n t j — t h i s , almost w i t h o u t exception. Proof l i e s in a n a l y s i s o f correspondent bank accounts. 2 . The absorption o f forwarding costs on items shipped t o o t h e r Federal Reserve C i t i e s . This i s a subject w i t h which a l l a r e f a m i l i a r and has r e s u l t e d i n l o s s o f check clearance a c t i v i t y , and i n numerous cases has r e s u l t e d i n major d e c l i n e s i n balances c a r r i e d by correspondent banks. 3 . The almost system-wide e l i m i n a t i o n o f s o r t i n g requirements on l e t t e r s up t o , say 250 items and the a p p l i c a t i o n o f one-day a v a i l a b i l i t y on the t o t a l amount. U* Currency shipments. Members o f the Association are thoroughly f a m i l i a r w i t h t h i s service o f f e r e d t o banks on a d i s c r i m i n a t o r y b a s i s . This s e r v i c e i s not o f f e r e d by the Federal Reserve Banks t o banks l o c a t e d i n the same c i t y . And, o f course, i t i s worthy o f comment t h a t c i t y correspondents, when shipping currency t o o u t - o f - t o w n banks, are not p e r m i t t e d t o absorb forwarding costs because o f Regulation Q. - 2 5 . Custody o f s e c u r i t i e s . discriminatory basis. This safekeeping service i s rendered on a 6 . Government bond t r a n s a c t i o n s . Federal Reserve Banks provide f a c i l i t i e s f o r the purchase and sale of governments as agent f o r member banks. They apparently do n o t take these t r a n s a c t i o n s i n t o t h e i r own p o r t f o l i o but pass the t r a n s a c t i o n s along t o government s e c u r i t y dealers* 7* Non-member c l e a r i n g s . Federal Reserve s o l i c i t s the c l e a r i n g s o f non-member banks and a f t e r the services have been accepted by the non-member banks, suggests and obtains balances from the non-member as an o f f s e t a g a i n s t Federal c l e a r i n g costs. 8 . Federal Reserve Banks - a t l e a s t a few of them - are g i v i n g assistance t o member banks on o p e r a t i n g problems - p a r t i c u l a r l y proof and bookkeeping. I n f o r m a t i o n has been received t h a t a Federal Reserve Bank i s now cons i d e r i n g the employment of management consultants t o render such service and are planning to r e c r u i t the support of s t a t e bankers associations f o r such a program. Obviously, t h i s would be a d i r e c t p a r a l l e l t o the survey service which Reserve C i t y Banks have o f f e r e d f o r a number of y e a r s , and which i s provided by many banks i n varying degrees. 9 . C e r t a i n o f the Federal Reserve Banks have embarked on a program o f group meetings f o r country bankers vhich are h e l d i n the d i s t r i c t banks, i t s branches or i n the f i e l d . C e r t a i n of the banks have r e c r u i t e d a s t a f f o f economists, engineers, and agronomists, making t h e i r services a v a i l a b l e t o member and non-member banks a l i k e . Recently i n the Cleveland D i s t i n c t , group meetings of country bankers have been h e l d by the Federal Reserve Bank on dates and i n places t h a t were competitive w i t h s i m i l a r meetings scheduled by the S t a t e Bankers Association, as w e l l as a Reserve C i t y Bank. No doubt other services have been o f f e r e d t o the country banks i n competition f o r correspondent bank balances and i t i s apparent t h a t the Federal Reserve Banks are borrowing every idea developed by the c i t y correspondents and thereby weakening the correspondent banking r e l a t i o n s h i p s . I f the Federal Reserve System c a r r i e s through t o i t s u l t i m a t e goal o f g r a n t i n g immediate a v a i l a b i l i t y f o r a l l items i n t r a n s i t , an important f u n c t i o n o f the Reserve C i t y Banks w i l l have been supplanted. But more about t h i s l a t e r . I t i s apparent from our information t h a t v h i l e t h i s competitive a c t i v i t y i s more pronounced i n c e r t a i n Federal Reserve D i s t r i c t s than i n o t h e r s , the problem i s n a t i o n a l i n scope. These competitive a c t i v i t i e s are introduced gradually over a p e r i o d o f time and are not announced as an o v e r a l l p o l i c y of the System* I t i s also apparent t h a t many Reserve C i t y Bankers a r e not aware of the nature and seriousness o f the t h r e a t and t h i s i s i n d i c a t i v e o f the magnitude of the problem. I t i s evident t h a t the monetary a u t h o r i t i e s regard the use of increased reserve requirements as an important t o o l i n the e f f e c t i v e management o f our economy. The Federal Reserve considers i t imperative t h a t a l l banks be brought tander i t s c o n t r o l s * Since l e g i s l a t i v e a c t i o n t o compel a l l f e d e r a l l y insured banks t o conform t o reserve requirements has f a i l e d , a concerted e f f o r t i s now ^ 3 being ntade t o get c o n t r o l s by inducement. A l l banks throughout the country should be made aware of t h i s s i t u a t i o n . They could then c o l l a b o r a t e on a common policy. Now we come t o the subject of immediate a v a i l a b i l i t y . We have had telephone c a l l s and l e t t e r s asking why t h i s subject becomes important a t t h i s t i m e . I t i s not a new subject and r e f e r e n c e i s made t o t h i s Committee f s r e p o r t i n 1943 a t Coronado. I n t h a t r e p o r t Dick Aishton said: "With a change i n economic conditions i t i s a l t o g e t h e r probably t h a t c o n s i d e r a t i o n w i l l be given t o e l i m i n a t i o n of f l o a t . We should be aware t h e r e f o r e of the r a m i f i c a t i o n s o f t h i s problem," On January 30, G i l Perkins and your Chairman were informed i n the o f f i c e o f the Federal Reserve Board of Governors t h a t the question of immediate a v a i l a b i l i t y was under c o n s i d e r a t i o n . As a consequence a r e p o r t was made t o t h i s Committee a t a meeting i n New l o r k February 6 , f o l l o w i n g which a r e p o r t was made t o the Board of D i r e c t o r s o f the A s s o c i a t i o n . It was then suggested t h a t a form o f questionnaire be prepared. A f t e r conside r a b l e d i f f i c u l t y i n developing a q u e s t i o n n a i r e , a form was decided upon and forwarded t o approximately 215 banks represented i n t h i s Association. Additional questions were propounded, but a f t e r study i t was decided t o confine the q u e s t i o n n a i r e to the form used. The response to t h i s questionnaire was g r a t i f y i n g and your Chairman has received r e p l i e s from something b e t t e r than 50% o f the banks. I n a g r e a t number of instances the returned q u e s t i o n n a i r e was a c companied by comments or l e t t e r s expressing a broad range o f ideas on t h i s subj e c t o f immediate a v a i l a b i l i t y . The m a j o r i t y of the comments were opposed t o immediate a v a i l a b i l i t y , and i n some few instances the bankers i n d i c a t e d t h a t they were i n f a v o r of the Federal g r a n t i n g immediate a v a i l a b i l i t y and t a k i n g on the work o f handling a l l cash items. Following the m a i l i n g of the questionnaire t o the banks and i n d i s cussions w i t h the President o f a Federal Reserve Bank, i t was learned t h a t the System proposed a shortening of a l l a v a i l a b i l i t y schedules t o a maximum o f two days, e f f e c t i v e about May 1 s t , Subsequently we were informed t h a t a t the meeting of the presidents o f the 12 Federal Reserve Banks the two-day maximum a v a i l a b i l i t y proposal was presented t o the presidents and a f t e r discussion the two-day maximum schedule was approved and adopted by the Board t o become e f f e c t i v e as soon as new schedules a r e prepared and mechanical adjustments accomplished. Discussions w i t h Federal Reserve Bank a u t h o r i t i e s i n d i c a t e t h a t the m a j o r i t y o f t h e p r e s i d e n t s of the System a t the present time are opposed t o the immediate a v a i l a b i l i t y p l a n . The same conversations, however, i n d i c a t e t h e r e i s but one short step from two-day maximum a v a i l a b i l i t y schedules t o one-day a v a i l a b i l i t y and the Board apparently i s f o r f u r t h e r shortening o f schedules. I t i s a f a c t t h a t the matter of reducing deferment and e x p e d i t i n g c o l l e c t i o n o f checks has been submitted to the presidents o f the 12 banks f o r study and r e p o r t t o the Board of Governors, I t i s s t a t e d t h a t these r e p o r t s when r e c e i v e d v i l l be passed along to the t e c h n i c a l s t a f f f o r study w i t h t h e i r conclusions and recommendations t o be presented to the Board and the Federal Advisory Council. We are informed t h a t t h e r e i s a standing committee o f o f f i c e r s o f the System on t h i s s u b j e c t , which includes immediate a v a i l a b i l i t y , w i t h a s p e c i a l committee o f research men i n Washington doing the work. I t appears t h a t - 4 t h e i r present ideas are unformulated, butt the study and the work do go forward. Now, as to the f i g u r e s on the questionnaires t h a t have been r e t u r n e d t o the Committee: - The f i g u r e s have a l l been t a b u l a t e d and an attempt made t o analyze them. I t became apparent a f t e r studying the f i r s t 30 or 4-0 r e t u r n s t h a t t h e r e was g r e a t variance i n the t h i n k i n g on the question and t h a t i t would be extremely d i f f i c u l t and hazardous t o develop any conclusions from the f i g u r e s themselves. T h i s was borne out tgr a d d i t i o n a l r e t u r n s I f we attempt t o i n t e r p r e t t h e t h i n k i n g t h a t was i n d i c a t e d i n the r e p l i e s we must conclude t h a t the smaller banks would experience r e s u l t s e n t i r e l y d i f f e r e n t from the r e s u l t s expected by the l a r g e r i n s t i t u t i o n s . I t developed then t h a t the problem i s too complex t o be solved by t h i s approach alone because the q u e s t i o n n a i r e i s r e s t r i c t e d to the e f f e c t on earnings. A number of banks have pointed out t h a t what appears on f i r s t a n a l y s i s to be a p r o f i t may, when broader and more d e t a i l e d study i s made of t h e i r computations, prove to have been elusory and w i l l be found t o have been f a l s e when a l l the other phases of the problem have also been thoroughly analyzed and studied, t h e r e f o r e , we b e l i e v e i t would not be advisable to c i r c u l a t e t o the members or t o those responding t o the questionnaire a compilation o f these f i g u r e s and I have recommended t o the Committee end t o the Board of D i r e c t o r s t h a t these f i g u r e s should not be reported even though the l e t t e r accompanying the questionnaires promised such a r e p o r t . The q u e s t i o n n a i r e has, however, provoked widespread i n t e r e s t i n the subj e c t and has developed much t h i n k i n g and study among the banks• We b e l i e v e i t has focused serious a t t e n t i o n on the subject of a v a i l a b i l i t y ; has developed questions t h a t had not h e r e t o f o r e occurred t o your Committee, and t h i s Committee hopes t h a t as the r e s u l t o f these questionnaires the Association w i l l see f i t to immediately undertake a program of study of t h i s question by men having f u l l time and the a b i l i t y to cover the subject thoroughly. We would l i k e t o quote from some of the comments r e c e i v e d by our Committee. One - "Oddly enough, t h e r e are some commercial banks which advocated t h a t t h e i r l o c a l Federal Reserve Banks accept cash l e t t e r s , e l i m i n a t i n g s o r t i n g r e q u i r e ments. Presumably they had i n mind passing on some of t h e i r c l e r i c a l work t o the Federal and e l i m i n a t i n g some expense on t h e i r own account. I f e e l t h a t the Reserve C i t y members should r e a l i z e t h a t i f they make such requests of the Fed, they w i l l be working against t h e i r own i n t e r e s t s i n the event they do a c o r r e s pondent banking business." Another - "This subject arouses i n my ^ i n d many thoughts, one of the most serious i n connection w i t h a l l banks having correspondent r e l a t i o n s h i p s and again* a l l banks i n t h i s country i n connection w i t h one more step towards government c o n t r o l . Another - "They t e l l me t h a t immediate a v a i l a b i l i t y of cash l e t t e r s deposited w i t h the Federal Reserve Eank has a tendency t o put non-member banks i n t o the F e d e r a l Reserve System and w i t h the Federal Reserve and the RFC i n the small lending business and the country banker growing more conscious t h a t he can use Government agencies t o handle excess c r e d i t l i n e s , our present correspondent bank r e l a t i o n s h i p could evolve merely i n t o a s o c i a l r e l a t i o n s h i p . " Another - " I t i s our opinion t h a t i f the Federal Reserve System does - 5e s t a b l i s h t h i s p l a n , i t w i l l immediately set i n motion c e r t a i n forces t h a t could a f f e c t many phases of Reserve C i t y Bank operations. The r a m i f i c a t i o n s o f these e f f e c t s could be f a r - r e a c h i n g , and, furthermore, these e f f e c t s are d i f f i c u l t to measure, as they touch a t the v e r y foundation stones of the present system of banking." Another - "Your form l e t t e r of March 3rd has challenged us t o f o r m a l i z e our t h i n k i n g regarding the p o s s i b i l i t y of immediate a v a i l a b i l i t y on e l l cash items deposited and i t s possible e f f e c t on t h i s bank." Again - "Most of our correspondents have been sending t h e i r cash l e t t e r s t o the Federal f o r some time so t h a t the immediate e f f e c t i s not h&ra to judge. The i m p l i c a t i o n s beyond t h a t a r e , of course, muny, but as long as some degree of i n d i v i d u a l i t y remains i n t h e human race t h e r e w i l l be room f o r the storekeeper who serves b e s t , even though he does not provide a bargain sale every o t h e r day." Another - " I t must be borne i n mind t h a t these f i g u r e s of ours nay i n some way be d i s t o r t e d from others of s i m i l a r s i z e i n t h a t , w h i l e our bank i s a reserve c i t y bank t h e r e i s no Federal Reserve Bank or branch l o c a t e d here and the volume of items drawn on our bank i s l a r g e and important enough f o r a g r e a t many i n s t i t u t i o n s throughout the country to maintain r e l a t i o n s h i p s v i t h us so t h a t they w i l l o b t a i n one day's quicker a v a i l a b i l i t y on t h e i r iteras by sending them d i r e c t to u s . I t would appear to us, t h e r e f o r e , t h a t should the FED grant immediate a v a i l a b i l i t y on a l l cash items we would be faced w i t h e loss of a s u b s t a n t i a l p o r t i o n of our correspondent bank balances." There i s a thought f o r those Reserve C i t i e s t h a t do not have a Federal Reserve Bank or branch. However, as many of you know, there hr:s been suggested t h a t the c l a s s i f i c a t i o n s " C e n t r a l City," "Reserve C i t y " , and "Country" be e l i m i n a t e d and a l l member banks placed on the sane reserve requirements. Another l e t t e r - "There would be very l i t t l e savings i n the cost of operations; however, t h a t does not complete the p i c t u r e , f o r the next move the Board w i l l make w i l l be the absorption of postage on a l l cash l e t t e r s of the member banks sending t h e i r items d i r e c t t o the F e d e r a l . When t h a t i s done, the c i t y banks w i l l lose 90% o f t h e correspondent bank accounts, f o r everything w i l l go d i r e c t to the Federal Reserve Bank with the exception o f non-cash and o f f par par items. I t i s j u s t another step toward the e l i m i n a t i o n o f our present banking system." Another - "One t h i n g t h a t has bot been mentioned, uhich i n my opinion i s v e r y i m p o r t a n t , i s t h a t should they adopt t h i s immediate a v a i l a b i l i t y scheme the r e s u l t would be t h a t the reserve of many banks would consist l a r g e l y of f l o a t . Should we ever have a f i n a n c i a l panic or r e t u r n t o a v e r y t i g h t or nervous c o n d i t i o n , such as we have had i n the past, I b e l i e v e the F e d e r a l Reserve Banks would have t o immediately go back t o a c o l l e c t e d balance b a s i s . " -6Another banker w r i t e s as f o l l o w s : , f I n the business area any u n r e a l i s t i c treatment of a c t u a l f a c t s sets i n motion a s e r i e s of forces which u l t i m a t e l y adversely a f f e c t everyone. I t seems to me t h a t F e d e r a l ' s d e f e r r e d schedule should r e f l e c t the a c t u a l f a c t s of check c o l l e c t i o n . We should not r e l y on t h e Reserve System f o r a temporary convenience which i s proposed u n r e a l i s t i c p r o cedure may provide. High support p r i c e s f o r commodities i n the face of cont i n u e d expanding surpluses, immediate a v a i l a b i l i t y f o r checks and a h a l f m i l l i o n unnecessary employees on Government p a y r o l l s are a l l p a r t of the seduction of c i t i z e n s h i p by which f r e e e n t e r p r i s e has been attacked. Several years ago the Reserve C i t y Bankers Association was much exercised over the socialism of banking from other areas. The adoption of — - and I am s t i l l quoting ^— immediate a v a i l a b i l i t y by mandate of the Reserve System merely because i t i s a quasi Government agency and regardless of the f a c t t h a t t h e r e i s no immediate a v a i l a b i l i t y of a check except i n the bank on which i t i s drawn, walks the F e d e r a l Reserve System w i t h a f i r m t e n t a c l e i n t o the operating department of every member of the System i n the U n i t e d S t a t e s . This backdoor approach I regard as not i n the public i n t e r e s t and a most unfortunate procedure since i t i s not based on the f a c t s of c o l l e c t i n g experience. A l l of the above i s exclusive of any c o n s i d e r a t i o n of the propositions as to whether the banks of the country ought t o l e t the F e d e r a l Reserve do anything more i n any way f o r them when developments seems to show t h a t the System has l o s t i t s autonomy and i s today r a t h e r more than l e s s a branch of the Treasury. 1 1 Here i s a banker who suggests, -r and I now quote: " I am p o s i t i v e t h a t we would e l i m i n a t e a l l but t h r e e of our present correspondent accounts. These three accounts would be reduced t o a minimum balance which would allow us t o c l e a r our transfers New York, Chicago and on the *,est Coast. I t i s also our b e l i e f t h a t the correspondent accounts which we have i n two s t a t e s and who are members of the F e d e r a l Reserve System would do l i k e w i s e . " One banker has i n j e c t e d the question of s e r v i c e charges and w r i t e s as follows: "Although not mentioned i n the questionnaire, another c o n s i d e r a t i o n would be the loss of s e r v i c e charge income r e s u l t i n g from the e l i m i n a t i o n of f l o a t and producing a higher income c r e d i t allowance on accounts against which charges are now being made." A banker i n t h e Southwest w r i t e s t h a t i t seems t o him "the t r e a s u r e r s of most of the l a r g e corporations are r a t h e r astute gentlemen and i f they become aware of the f a c t banks do not have to t a k e i n t o c o n s i d e r a t i o n f l o a t w i t h the F e d e r a l Reserve Banks, they might keep t h e i r funds more c l o s e l y i n v e s t e d and not m a i n t a i n the s u b s t a n t i a l balances they have i n the p a s t . And t h e r e are a number of other l e t t e r s . Here i s a banker who says "there i s sharp d i s t i n c t i o n between commercial banks g i v i n g immediate c r e d i t where the only problem i s t o discourage the use of u n c o l l e c t e d funds by a customer, and reserve banks g i v i n g immediate c r e d i t f o r c o l l e c t i o n s . I n the l a t t e r case, the c r e d i t s are used as reserves. I t has been a long accepted p r i n c i p l e of banking t h a t reserves of banks should be i n c o l l e c t e d funds # The proposed a c t i o n of the Reserve System does violence t o t h i s p r i n c i p l e . " - 7Another banker f e e l s t h a t i n f i v e or s i x l a r g e accounts, and he mentioned n a t i o n a l names, would immediately reduce balances w i t h h i s bank to take advantage of the immediate c r e d i t which i s AOW c a r r i e d i n the form of f l o a t . And there are many other l e t t e r s r a i s i n g other questions. Then, I t u r n t o the r e l a t i v e l y few l e t t e r s from bsnicers who have no p a r t i c u l a r o b j e c t i o n t o immediate a v a i l a b i l i t y and i n f a c t would welcome it. One banker w r i t e s : "We would do j u s t what the F e d e r a l does, and i f past experience i s any c r i t e r i o n , do i t b e t t e r , " He does n o t t h i n k t h e r e would be any m a t e r i a l d i f f e r e n c e s i n the bank balances maintained w i t h Reserve C i t y Banks because of the value of these s p e c i a l s e r v i c e s given to t h e country banks, services the F e d e r a l Reserve Banks cannot o f f e r . He expressed the opinion, and I quote " t h a t i t would be i l l - a d v i s e d f o r us as bankers t o oppose the proposed change i n p o l i c y , which we must admit i b d e s i r a b l e from the standpoint of improvi n g the c l e a r i n g f a c i l i t i e s , s o l e l y on the basis t h a t we might lose a p o r t i o n o f our correspondent bank balances. Rather, i t behooves us t o strengthen our p o s i t i o n w i t h the country banks through s p e c i a l s e r v i c e s , i n c l u d i n g two-way p a r t i c i p a t i o n i n o v e r - l i m i t loans, thus welding more c l o s e l y the t i e s t h a t bind our correspondents t o u s . " And he goes on t o say - and I s t i l l quotes " I f I seem r a t h e r complacent about the e f f e c t of t h i s change on Reserve C i t y Banks, i t i s because I can remember so many times before when we bankers have become upset over s i m i l a r matters only t o f i n d by experience t h a t we have been harmed n o t one w h i t by the specter t h a t has been r a i s e d before u s . I n f a c t , we have found t h a t the very r e g u l a t i o n we have looked upon w i t h t r e p i d a t i o n has resolved i t s e l f I n t o a beneficent t h i n g n o t oialy f o r us but f o r the banking system as a whole. , The o l d order changetfa 1 , and w i t h the a b i l i t y we have demonstrated i n the past t o adapt ourselves t o change, we should have no t r o u b l e g e t t i n g over the hurdle once more." So gentlemen, you see t h a t the Committee i s perplexed by the comments and questions and suggestions of many members of the Association and we have come t o the conclusions t h a t your Committee does not have the t o o l s a t i t s comraajad t o answer these questions; 1. I s the g r a n t i n g o f immediate a v a i l a b i l i t y sound? (a) I s a reserve based on u n c o l l e c t e d items sound? (b) W i l l immediate a v a i l a b i l i t y bring increased reserve r e q u i r e ments? 2. What w i l l be the e f f e c t of immediate a v a i l a b i l i t y on the banking system as a whole? 3. What e f f e c t w i l l i t have on our o v e r a l l economy? i n f l a t i o n a r y or i s i t d e f l a t i o n a r y ? 4. What e f f e c t w i l l immediate a v a i l a b i l i t y have on the balances o f corporations. 5. What e f f e c t w i l l immediate a v a i l a b i l i t y have on correspondent bank r e l a t i o n s h i p s ? Is it - 8This Committee i s opposed t o shortening of deferment schedules beyond a c t u a l c o l l e c t i o n time and recommends t h a t the Association tnd your Comnittee f o r the ensuing year immediately embark on a program of study and a n a l y s i s of t h i s complex and important s u b j e c t .
@FedFRASER