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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

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.


CM yd

August I I , 1939
Mr. Horrlll

Fiscal Agmcy


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
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


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 M l 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
M ttiat ••••the poeelMHt^ of
ioritj froa ttajIHl) to ral»burs*» '
M n l Reserve
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 |
» 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 I S 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
ptfely arbitrary tmi in not based oa tty
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 Ue 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
July 1, 1938f COB^SV
rant t h s t can foe &$znt
I Indefinite .
.or a l l pneti—1 purp^m* the
• ;
--a, the
*ich it n,
if -sjteoedod^ t defieiencj Rp|
ia i s MC**Mfy«
iiTthsr c >
i matter of r^lssbur^ement and mill
.uite likely result in the Reserve teaks absorbing sore expense than


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 & 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
orders for Oovernmejit securltiess for -the account of
&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


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*





97 f 2U

Total depositary


- Qwrnwamt Of i l d a l a
SftXa of Securities
of the

CorpomUoc; ^6Q»3#382





XntcmMdiftts CMdULt
Credit Gor?<m.tloa
J o i a t Stock








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