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BOARD DF GOVERNORS OF THE FEDERAL RESERVE SYSTEM August 14, 1959. Memorandum for Mr. Eccles: Attached for your information is a copy of a memorandum from Mr. Van Fossen regarding expenses incurred by Federal Reserve banks for the Treasury Department and other governmental departments and agencies- The text of the memorandum sets forth succinctly the situation as to each class of activity. The last sheet is a tabulation showing total expenses incurred; amounts reimbursed; and the deficiency. From this you will observe that in the aggre- gate the Federal Reserve banks fall approximately $1,000,000 per annum short of full reimbursement. If after examining the material attached there are any questions in your mind which should be investigated further, we shall be glad to go into them more fully. Secretary CM yd August I I , 1939 Mr. Horrlll Fiscal Agmcy Fossen Reference i s made to jour telephone request on August 9 for information regarding fiscal agency expenses of Federal Reserve b&ito, particularly with respect to what expenses »re reimbursable end what mtfmMm ar© sot reistars&ble• In general, the Federal Heservs bf~rucs now receive full r e imbursement for expenses incurred by thea for the jterious uoverasent itojMlliuiiil i &»<$ agencies o c t p t the Tl— nary Department* The expenses for which the Feder&l Reserve bsnka receive r^laburscKBcnt include both ^diroet* WK§tmt9B§ I . e . , salsri©6 of Mp&flp*M sucl other tiqpflMNNI incurred directly i1l the Fiscal Agency function, and "indirect 11 expenses or "service charges *, !•••• expenses incurred for the Fiscal Agency ftt&ttlaa Is unito «ucb as Protection, Mall, Filin*-, Auditing, etc, Th4 Federal Reserve baaks ali?o receive raiabursement for the cost of •itaiaing space assigned directly to DM Fiscal %wcy function ur< to & saxiaiueL of -12.00 a s^ta&r© foot* Eeiabarseaent is reeeired for t ths unifora rate of $1.50 a cubic foot per annua. ith respect to tne TltnHIJ Deimrteeat, the operations perforsed by the ?ed©r?^l Reeerre baaki msy be divided into the followiug cliliiil 1. Operations performed in connection with B« S, Govamaeat issues • 2« Ordinary depositary iiflWltillti 3# Baisdlliig work relief checks* 4» Other operations* gfilt^d S^a^es .Q^y^raBieat l a ^ e s * The Federal fteeerre bunks recelTe rallb&rse&ent fros the Traasur/ Departsent for the MMi itaaa of expense «s frosi other Governssent departments &ad agencies when such expenses er* lacurred in perforsini': o:eratiotia incident to ^'« S. Government securities issued during .tbe .current qr iaawdiately s*reIn other «OFda« the Federal Reserve boHEj receive for expesses incurred when a ne^' issue of securities i s offered by the ?r@&f?ury Department and they al^.o receive relsUarsement for ony expenses incurred in connection with this issue u s t i ! the end of the following fiscal year. After that time* any @.xr»eos©s incurred, by the Federal Hsasrire banks* d - exchsB. d r©desptl At the pfftMSt tis®, store than 200 eaplo/ees of the Federal Reserre b&n^s are eagsged ia performing vork. incident to the issuance and rede«pti'm of United Ststsu Savings Bondr,, Bit cost of issuing these boisda i s reimbursable bat tbe cost of red*oal&£ the bonds 1B not Tot i r . Sorrill • t • mlabars&ble unless they war© issued during tM current or ias«diatel> [H—ttnj fiscal y»&r. Sales of Baited States Savings Bonds &re increasing MMl i t follows that th« redaaptions id 11 increase frosi yacr to year* Unless a eh&ags i s made la the present arrnngeoent, the Federal Kerervefcaakawill absorb nor© expense e^eh year in connection with th« redea?tina of United States Savings Band?, The Better of obtaining reiafceraaaant for expenses incurred in redeemi&g ^uocurreat* t*« S, Saviaga Bond^ h^s Nwi i l l r i up ^Itb tbe ffMflBy Dtpi letter to the Reserve hsaka da1 July 8, 1939, the Dip»fti Md ttiat ••••the poeelMHt^ of ioritj froa ttajIHl) to ral»burs*» ' M n l Reserve ten auch irrjiMftl la under consideration". Curing th? fiscal year md&d Slum . n u l l bftflkfl I i ' C r r r s d | , E i » i t a United v i n g e Bc»iad?, o f l f 3 O I . Other Treasury !••»•• Nfft handled b^ the Fedsral ileaerve . cost of |76^0O0 teria . i filial y ii«i June 30, J9« Of this &js0unt |49 , »Mi r&iabursrble ta 7,000, incurred in coan®efctoii with "uncurrent 1 M M 0 * | m not rrdisl5U2\Hrble. The Federal Reserve tettfa , .. I mat t9 perfc-ai (sawciily tfea MM vork in :;,.:\;cint;. •Btiuagef M 4 r*MBftlOBI tf ^uncurrent11 issues M thej do for wcnrreiitn issues. rritimiUjj both "current" ma ^ancttrreEit11 MBM «re received frow aamber b&iaks in ttMi MM lUpMBi Md i t i s very difficult to determine IMS such mpmm i s t i l l ixl tl ttMMM tb&t tft fl €urr©at w and h®w asweh i s I n c u r r e d i n h a a d l i s t h a t ar@ * u n e u r r « a t * . The diistiisction bt4VMJi " c « r r e a t i M w uncurx*©=. ptfely arbitrary tmi in not based oa tty Ion or ssp&r^tJ } .it the Federal Reserve banks* Except for l4glsl*t&v* restrictions, there sees^ to be so real reason why t Federal EasttfW bt . . I tot be r^i'mbursed for expenses inby UfeM In connection with both "currenJ. »• Md "uncurrent Prior to July If 193S» the Treaettry Depei t m t i in:*isdte &ppropriatioa froa vhieh i t could rtiiitiigM thpvi for •O^MMIM la coiuisctloa with 6«v«mM«lt I M onlj l i m i t a t i o n .Lc.wU? ofil;/ t0 n curront i I July 1, 1938f COB^SV " rant t h s t can foe &$znt I Indefinite . ri&tloi .or a l l pneti—1 purp^m* the imti • ; --a, the *ich it n, tt if -sjteoedod^ t defieiencj Rp| ia i s MC**Mfy« iiTthsr cu> i matter of r^lssbur^ement and mill .uite likely result in the Reserve teaks absorbing sore expense than herttofors* tot Mr. M e r r i l l • %m The Federal ftaaerv© bams are also now absorbing the cost of redeenlng Adjusted Service Bonds* Daring the fiscal year ended Jua© 30* 19.39 the Reserve bi-nks absorbed $111,000 expense 1st this connection* Prior to July 1, 1938 such e&p&na©© were depoaltftry .ODgrstioguu The ordinary depositary perfttiwed "bgr the Federal SMMMWt fceafcf c o n s i s t of the «? of Government cheeky paying Government coatona* &»d I 1 M g the TvMMfW^I General Account* feqp*M#f lncarred in this j connection amounted to about $500,000 duri»E; thf fiscal year ©r»ded ! Ivae 30f 1939• sione of «hlch vea reiabareabla* th« Treasury Depert * ll^s il«ayfl t^Xen th© pnettton that the Federal Reserve bftoiKf. should ptffeiB the Ahov^Hseationed depositary e y w t i u a i ultbout !.Ti rlev sf the Denartatent's bKl»nce with ork Relief €!aeca,s> The Feder&l Tit for handlin ; rk Relief Checks, except that no charge ss^.cts for 0thec Oafrationa> Oth^r operetieaM performed Igr th© Federal Reserve banka for the Trenaiary SepArteent for Khich fwbitittnMMMit I s i recsi^^d comprise the following* 9k incident to elulilain | iselT^Bfi wA mpnitlif r@ls.tlve to forsiim irr^ilgT trans actions, la with the Preeideat*! Executive Orders, ( u n t i l iarch 1, 193S.) fork tjM&tttt to Ihe eermieatlea of rater- in accorcUuice aith Ike provisloiiB of tiie Tariff Act of 1930. lucideat & ' o the f f i e e l l g , of ras@nt egeneiss. to the euata4/ of tecuritiee jlilj for vialatts Governneat agencies by direction of the Btigttety of Hie T i e i i i f Ifk iacldent to m& ^x^eution sale orders for Oovernmejit securltiess for -the account of p &oar*i&t%ur&able expmaea of the eawe uaits aiaoyLat^d to about for the fiscal ys&r ending June 30, 1939* The Co^t of opura performed by t'ie ;Federal Keserve Bank of ! « • 3Lor^ l a MMMttio m t l N of t ^^ Stebllismtlofl Fund in relabursable so Is Tot Mr. Storrill the cost of vork performed hj th&t bank for the Insolvent Banks Division of the Office of the Comptroller of the Curroecy in connection with the liquidation of seearitle^ of failed Satioa&l Th@r« i s attached a statetteatriMNdUlgthe- emoant of f i s c a l ftf ais^y ®3fpesa@s Inctirred bj the Federal Reserve banks during th@ f i s c a l year ending June 33, 1939 for Ui© TrmimTy Bep&rtaeat and each of the other Governaent departttents and ageaacies showiiag aawont reimbursed and the saount not reimbursed* Total 495,156 113*102 431,933 $307,23* 6 97 f 2U 73,799 97,214 73,79) Total depositary «f - Qwrnwamt Of i l d a l a SftXa of Securities of the •i,QU CorpomUoc; ^6Q»3#382 1,573,3^7 30,055 BCMMI 1,053 21 21,' 13,157 XntcmMdiftts CMdULt Credit Gor?<m.tloa J o i a t Stock ,949 3,564 19100,941 t Bftoicft 3,4^7 618 77 99 1,257 F1IM»B1 functlcss In the e&«« of th« Reooa«tractl:r t Fin&uce eg«»el««, oot lnclttctlos the trtwimvy y »e#5S spseti eo»fe, ! « « . , &pft«§ costs in of |2«00 e ®qu«ris foot or In excarw »f loweot pate •Anounts jiho^ «s not end oth«r of
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