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BDARD DF

GOVERNORS

O THE
F
FEDERAL RESERVE

SYSTEM

Office Correspondence
Tn

Mr* Eccles

CjT*ntn

Mv

Date, jmung, 1 5
90
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 .