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NEW

ORLEANS

BRANCH

__

FEDERAL RESERVE BANK OF ATLA NTA
P R IV A T E W I R E S Y G T E M

IN C O M IN G

ORIGINAL
FROM

ELLIOTT

' r °

WASHINGTON DC I0 3 4 A NOV 13 1935

THURSTON,
S P E C I A L ASST TO CHAIRMAN E C C L E S ,

ROOSEVELT HOTEL, NEWORLEANS

YOUR W IRE . FOLLOWING I S TEXT OF PRESS RE LEA SE S AUGUST 21 AND AUGUST 24;
PRESS RELEASE AUGUST 21 , 1935;
STATEMENT OF GOVERNOR EC CL E S ON T I T L E I I OF THE BANKING ACT OF 1935 AS
REPORTED BY THE BANKING AND CURRENCY COMMITTEE OF THE SENATE.
T IT LE I I OF THE BANKING B I L L OF 1935 AS RECOMMENDED BY THE A DM IN IS TR A TI ON
PROPOSED TO PLACE R E S P O N S I B I L I T Y FOR THE E X E R C I S E OF THREE E X I S T I N G ,
BUT, BADLY SET UP, MONETARY POWERS IN ONE BODY REMOVED FROM THE PRESSURES
OF P A R T IS A N , P O L I T I C A L OR PR IVA TE BANKER INFLUENCES. I T S FUNDAMENTAL
PURPOSE WAS TO VEST THAT BODY WITH FULL AUTHORITY TO USE THESE POWERS IN
FOSTERING RECOVERY AND THEN IN M A I N T A I N I N G S T A B I L I T Y OF B U S I N E S S AND
EMPLOYMENT. FURTHERMORE, EX P E R IE N C E OVER A LONG PERIOD OF YEARS HAD DEMONSTRAT­
ED THE NEED FOR VARIOUS A D M I N IS T R A T I V E IMPROVEMENTS AND FOR THE REMOVAL OF
C E RT A IN HAMPERING R E S T R I C T I O N S .
AS REWRITTEN AND REPORTED BY THE SENATE COMMITTEE ON BANKING AND CURRENCY,
T I T L E I I REPRESENTS A S I G N I F I C A N T AND IMPORTANT RECOGNITION OF THE FUNDAMENTAL
P R I N C I P L E S AND PURPOSES OF THE BANKING B I L L AS PROPOSED. THEREFORE, I B E L IE V E
THAT IN I T S MOST V I T A L ASPECTS I T I S A D I S T I N C T ADVANCE IN THE D IR E C T I O N OF



RECEIVED BY

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NEW

ORLEANS

BRANCH

FEDERAL RESERVE BANK O F A TLA NTA
PRIV A TE W IR E SY STE M

ORIGINAL

INCOMING
2ND SHEET 7FS WASHINGTON

I0 3 4 A NOV 13 19 35

FROM

CEN T RA LI Z ED R E S P O N S I B I L I T Y AND AUTHORITY FOR THE E X E R C I S E OF MONETARY
POWERS.
F I R S T , OPEN MARKET POWERS ARE CONCENTRATED IN A CENTRAL BODY COMPOSED OF
THE E N T I R E FEDERAL RESERVE BOARD TOGETHER WITH F I V E GOVERNORS OF THE RESERVE
BANKS WHO MUST BE REPRE SENTA TIV E OF THE VARIOUS SE C T IO N S OF THE COUNTRY.
COMPLETE AUTHORITY I S GIVEN TO THIS BODY TO I N I T I A T E AND ENFORCE OPEN MARKET
OPERATIONS ; WHEREAS, AT PRESENT THE BOARD HAS NO POWER E I T H E R TO I N I T I A T E
OR ENFORCE, AND ONLY THE NEGATIVE POWER OF VETO.
SECOND, THE BOARD I S GIVEN A BROAD AUTHORITY TO CHANGE RESERVE REQUIREMENTS
OF MEMBER BANKS. UNDER E X I S T I N G LAW, T H I S POWER CAN ONLY BE USED AFTER THE
DECLARATION BY THE P R E S I D E N T OF AN EMERGENCY EVERY TIME A CHANGE I S NECESSARY
FOR ALL PR A C T IC A L PURPOSES AN UNWORKABLE ARRANGEMENT.
THIRD, THE POWER TO DETERMINE AND MAKE E F F E C T IV E DISCOUNT RATES REMAINS WITH
THE BOARD.
IT I S E V ID E N T THAT THIS PRESENTS A SUBS TA NTI AL IMPROVEMENT OVER THE E X I S T I N G
S I T U A T I O N . IT WOULD MAKE IT P O S S I B L E FOR THE BOARD AND THE OPEN MARKET
COMMITTEE TO FUNCTION IN THE NAT ION AL IN TEREST BY US ING THESE POWERS SO FAR
AS THEY MAY BE E F F E C T I V E TOWARDS THE ACHIEVEMENT OF S T A B I L I T Y IN OUR ECONOMIC
SYSTEM AND THE AVOIDANCE OF DIS ASTROUS INFLA TIO NAR Y AND DEFLATIONARY
CYC LES . T H I S I S A LONG STEP IN THE D IR E C T I O N OF IN T E L L I G E N T MANAGEMENT OF



RECEIVED BY

FW €
NEW

ORLEANS

F E D E R A L R ESER VE

BRANCH

BANK O F A T L A N T A

P R IV A T E W I R E S Y G T E M

ORIGINAL

INCOMING
3RD SHEET 7FS WASHINGTON

I034 A NOV >3 1935

FROM

OUR M O N ET A R Y SYSTEM.
FURTHERMORE, THE B I L L AS REPORTED BY THE SENATE COMMITTEE RECOGNIZES THE
NEED FOR BROADENING AND L I B E R A L I Z I N G THE E L I G I B I L I T Y P R O V I S I O N S OF E X I S T I N G
LAW WHICH ARE E N T I R E L Y UNSUITED TO MEET PRESENT DAY C O N D I T I O N S . L I K E W I S E ,
THE REAL ESTATE LOAN P R O V I S I O N S OF THE NATIONAL BANKING ACT ARE SUBSTANTIALLY
IMPROVED.
IN A D D IT IO N , THE BOARD WHICH NOW HAS NO VOICE IN THE SE LE C TI ON OF THE
GOVERNORS OF THE RESERVE BANKS I S GIVEN THE AUTHORITY TO APPROVE OR DISAPPROVE
OF THEIR APPOINTMENT.
IN LESS FUNDAMENTAL RESPE CTS I B E L IE V E THAT T IT LE I I , AS REPORTED BY THE
SENATE COMMITTEE, COULD AND SHOULD BE IMPROVED UPON IN THE INTEREST OF
P R A C T I C A L A D M IN IS TR A TI ON AND GREATER E F F I C I E N C Y . AS BETWEEN THE B I L L AS
ENACTED BY THE HOUSE AND AS PROPOSED BY THE SENATE COMMITTEE, I HAVE EVERY
REASON TO B E L I E V E THAT A REASONABLY SATISFACTORY MEASURE W IL L BE WORKED OUT.




RECEIVED BY

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NEW

ORLEANS

FED ER AL RESERVE
.

,

P R IV A T E W I R E S Y S T E M

ORIGINAL
FROM

BRANCH

BANK O F A T L A N T A

INCOMING

4TH SHEET 7FS WASHINGTON I034 A NOV 13 35
------------------------------------------------------------------------------------------

PRESS RELEASE AUGUST 24.
STATEMENT OF GOVERNOR E C C L E S .
ON S I G N I N G OF THE BANKING ACT OF 1935.
IN MY JUDGEMENT THE BANKING B I L L NOW SIGNED BY THE PR ES ID EN T MARKS AN
IMPORTANT ADVANCE IN THE DEVELOPMENT OF THE COUNTRYS BANKING SYSTEM AND
THE ADAPTATION OF MONETARY A D M IN IS TR A TI ON TO PRESENT DAY CO ND IT IO NS AND
NAT IONA L NEEDS. IT WAS R E A L IZ E D AT THE OUTSET THAT THE MEASURE WAS FAR
FROM BE I N G THE LAST WORD IN CR EATING A PERFECT BANKING SYSTEM. IT WAS
ALSO R E A L I Z E D THAT WIDESPREAD CONTROVERSY WAS UNAVOIDABLE, AS IT ALWAYS
HAS BEEN, WHENEVER PROPOSALS HAVE BEEN PUT FORTH INVOUVING M A TER IAL CHANGES
IN THE BANKING AND MONETARY SYSTEM. THE FUNCTION OF BANKING AND MONEY
I S PERHAPS THE MOST IMPORTANT OF ALL IN OUR EN T IR E ECONOMY. IT I S AT THE
VERY FOUNDATION OF OUR INTER-DEPENDENT I N D U S T R I A L S O C I E T Y . THE SUBJECT
I S COMPLICATED I S D I F F I C U L T TO UNDERSTAND. IT ALWAYS HAS BEEN AND PRESUMABLY
ALWAYS W IL L BE BESET BY SHARPLY CO N F LI C T IN G THEORIES AND O P I N I O N S .
IN VIEW OF THE I N E V IT A B L E CLASH OF DIVERGENT VIEW P O IN T S , AND THE I N I T I A L
O PP O SI TI O N TO ANY FEDERAL RESERVE L E G IS L A T IO N AT TH IS TI M E , THE RESULTANT
MEASURE SEEMS TO ME TO BE A MOST SAT IS FACTORY ACCOMPLISHMENT UPON WHICH
THE MEMBERS OF THE BANKING AND CURRENCY COMMITTEES OF THE SENATE AND HOUSE
AND THE CONFEREES, WHO HAVE WORKED T I R E L E S S L Y AND CO N S CI EN T IO U SL Y TO
RECONCILE DI FF ER EN T PO IN TS OF VIEW IN ACCORDANCE WITH WHAT THEY B E L I E V E D



RECEIVED BY

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NEW

ORLEANS

FED ER A L RESERVE

BRANCH

BANK O F A T L A N T A

/*

5

P R IV A T E W I R E S Y S T E M

ORIGINAL

INCOMING
5TH SHEET 7FS WASHINGTON

I03 4A NOV 13 35

FROM

TO BE IN THE PUBLIC IN T E R E S T , ARE TO BE CONGRATULATED.
C O N S ID E R IN G THE O B J E C T IV E S AND PURPOSES OF THE L E G IS L A T IO N AS O R I G I N A L L Y
PROPOSED AND AS FI NA LL Y ENACTED, I AM VERY WELL S A T I S F I E D WITH THE OUTCOME.
BY P R O V ID I N G FOR A CEN T RA LI Z ED AUTHORITY OVER AND F IX E D R E S P O N S I B I L I T Y FOR
MONETARY MANAGEMENT, FOR A BROADENING OF THE B A S I S FOR CR E D IT EX TE NS IO N
BY THE BANKING SYSTEM, AND FOR BETTER ORGANIZATION OF THE FEDERAL RESERVE
SYSTEM. A LARGE CONTRIBUTION HAS BEEN MADE TO THE SOLUTION OF ONE OF THE
MOST IMPORTANT PROBLEMS CONFRONTING THE COUNTRY TODAY.
AM U S IN G T H IS METHOD OF TRANSMITTAL SI N C E NO AIR M A I L LEAVING WASHINGTON
TODAY ACCOUNT R A I N S .




LAWRENCE CLAYTON,
ASST

RECEIVED BY

TO THE CHAIRMAN.
I ID33 A