Full text of Mimeograph Letters and Statements of the Board : Circular Letter, Dated Jan. 15, 1917, From Governor, Federal Reserve Board, re Unfit Federal Reserve Notes Forwarded to the Treasurer of the U. S. for Redemption by a Federal Reserve Bank Other Than the Federal Reserve Bank of Issue, Number 974, Volume 4, Page 1922

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1922
W . P . G . H A R D I N G , GOVERNOR
P A U L M . W A R B U R G , VICE GOVERNOR

EX-OFFICIO MEMBERS

F R E D E R I C A. DELANO
ADOLPH C. MILLER
C H A R L E S S . HAMLIN

WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN

FEDERAL RESERVE BOARD 974

J O H N SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY

WASHINGTON

H . P A R K E R W I L L I S , SECRETARY
S H E R M A N P . A L L E N , ASST. SECRETARY
AND FISCAL AGENT
A D D R E S S REPLY TO
FEDERAL

RESERVE

J a n u a r y 15, 1917.

Dear S i r :
In r e UNFIT FEDERAL RESERVE NOTES FOFtfARDED TO THE
TREASURER OF THE UNITED STATES FOR REDEMPTION BY A FEDERAL
RESERVE BANK OTHER THAN THE FEDERAL RESERVE BANK OF ISSUE:
In J a n u a r y , 1916, a p l a n was f o r m u l a t e d t o p e r m i t
F e d e r a l r e s e r v e banks t o f o r w a r d t h e i r own u n f i t F e d e r a l r e s e r v e
n o t e s d i r e c t t o t h e T r e a s u r e r of t h e U n i t e d S t a t e s f o r redemption.

That p l a n , however, d i d n o t p e r m i t a F e d e r a l r e s e r v e bank

t o s h i p t o t h e T r e a s u r e r , F e d e r a l r e s e r v e n o t e s i s s u e d by any
o t h e r Federal r e s e r v e bank.
t

S e c t i o n 16 of t h e F e d e r a l R e s e r v e Act p r o v i d e s i n
p a r t t h a t , whenever a F e d e r a l r e s e r v e bank r e c e i v e s F e d e r a l r e s e r v e n o t e s i s s u e d by a n o t h e r F e d e r a l r e s e r v e bank such n o t e
s h a l l be r e t u r n e d t o t h e F e d e r a l r e s e r v e bank of i s s u e f o r
c r e d i t or redemption.

In o r d e r t o avoid a r o u n d - a b o u t s h i p m e n t

of F e d e r a l r e s e r v e n o t e s , f i r s t ,

from a r e c e i v i n g F e d e r a l r e s e r v e

bank t o t h e r e s e r v e bank of i s s u e , and t h e n from t h e bank of i s s u e on t o Washington f o r r e d e m p t i o n , t h e f o l l o w i n g p l a n which perm i t s a r e c e i v i n g F e d e r a l r e s e r v e b a n k , u n d e r power of a t t o r n e y ,
t o f o r w a r d u n f i t F e d e r a l r e s e r v e n o t e s of a n o t h e r F e d e r a l r e s e r v e
bank d i r e c t t o t h e T r e a s u r e r f o r r e d e m p t i o n , h a s been approved by
t h e T r e a s u r y Department and t h e F e d e r a l R e s e r v e Board»




BOARD

198-3

974
—2—
1.
Each F e d e r a l r e s e r v e bank s h a l l g i v e t o e a c h o t h e r F e d e r a l r e s e r v e bank a power of a t t o r n e y a u t h o r i z i n g such o t h e r bank
t o a c t as i t s a g e n t i n f o r w a r d i n g any of i t s u n f i t F e d e r a l r e s e r v e
n o t e s t o t h e T r e a s u r e r of t h e U n i t e d S t a t e s f o r r e d e m p t i o n . This
power of a t t o r n e y may be i n any form a g r e e d upon by t h e r e s p e c t i v e F e d e r a l r e s e r v e banks and may d e f i n e t h e s t a n d a r d t o g u i d e
t h e f o r w a r d i n g bank i n d e t e r m i n i n g what F e d e r a l r e s e r v e n o t e s of
t h e i s s u i n g bank s h a l l be c o n s i d e r e d u n f i t . The f o r w a r d i n g bank
s h a l l , a t t h e time of s h i p m e n t , n o t i f y t h e i s s u i n g bank t h a t t h e
s h i p m e n t has b e e n mad6 f o r and i n i t s name t o t h e T r e a s u r e r , and
s h a l l c h a r g e t h e a c c o u n t of t h e i s s u i n g bank f o r t h e amount of
n o t e s t h u s s h i p p e d . The i s s u i n g bank s h a l l t h e n c r e d i t t h e a c count of t h e f o r w a r d i n g bank, and s h a l l i n c r e a s e on i t s books
t h e i t e m , " M u t i l a t e d Currency f o r w a r d e d f o r r e d e m p t i o n " j u s t as
i f i t , i t s e l f , had s e n t u n f i t n o t e s d i r e c t t o t h e T r e a s u r e r f o r
redemption.
2.
The T r e a s u r e r , on r e c e i v i n g such n o t e s , w i l l a d v i s e t h e
f o r w a r d i n g banks of t h e i r r e c e i p t .
3.
The T r e a s u r e r w i l l t h e n complete t h e t r a n s a c t i o n j u s t as
i f t h e n o t e s had b e e n f o r w a r d e d t o him f o r r e d e m p t i o n d i r e c t by
t h e bank of i s s u e , u n d e r t h e p l a n approved by t h e T r e a s u r y D e p a r t ment and t h e F e d e r a l Reserve Board i n J a n u a r y , 191&. In accord—
anca w i t h t h e p r o v i s i o n s of t h a t p l a n , t h e T r e a s u r e r w i l l iimieS i a t e l y a d v i s e b o t h the F e d e r a l r e s e r v $ b a n k of i s s u e and i t s Fede r a l r e s e r v e a g e n t of t h e r e c e i p t of t h e n o t e s s e n t t o him f o r
r e d e m p t i o n , and w i l l redeem the n o t e s f o r t h e a c c o u n t of t h e bank
of i s s u e , n o t f o r t h e a c c o u n t of t h e f o r w a r d i n g b a n k .
•**»
A f t e r t h e n o t e s have been redeemed t h e T r e a s u r e r , a c t i n g u n d e r t h e powers of a t t o r n e y p r o v i d e d f o r i n t h e plan,, g o v e r n i n g t h e r e d e m p t i o n of u n f i t n o t e s s h i p p e d d i r e c t by t h e F e d e r a l
r e s e r v e bank of i s s u e , w i l l f o r w a r d such n o t e s t o t h e C o m p t r o l l e r
of t h e C u r r e n c y f o r c a n c e l l a t i o n and d e s t r u c t i o n , a d v i s i n g t h e
F e d e r a l r e s e r v e a g e n t of t h i s a c t i o n .
B
By way of i l l u s t r a t i o n , a s p e c i f i c t r a n s a c t i o n would be
conducted as f o l l o w s :
(a)
The F e d e r a l Reserve Bank of Richmond r e c e i v e s from
one of i t s member banks a d e p o s i t of u n f i t n o t e s of t h e F e d e r a l
R e s e r v e Bank of C h i c a g o .
(b)




A c t i n g u n d e r t h e power of a t t o r n e y g i v e n t o i t by t h e

974
-3Chicago bank, t h e Richmond bank forwards t h e s e u n f i t n o t e s t o
t h e T r e a s u r e r f o r redemption f o r and i n b e h a l f of t h e Chicago
bank,
(c)
As soon as t h e Richmond bank makes t h e shipment d e s c r i b e d in p a r a g r a p h (b) f t charges t h e account of t h e F e d e r a l
r e s e r v e bank and so n o t i f i e s Chicago.
(d)
Upon r e c e i p t of t h e n o t i c e forwarded u n d e r p a r a g r a p h
( c ) Chicago c r e d i t s the account of t h e Richmond bank and i n c r e a s e s on i t s books t h e item " M u t i l a t e d c u r r e n c y f o r w a r d e d f o r
redemption".
(e)
The T r e a s u r e r , on r e c e i p t of t h e n o t e s s h i p p e d by
Richmond, w i l l acknowledge r e c e i p t t o Richmond, w i l l a d v i s e b o t h
Chicago and i t s F e d e r a l r e s e r v e a g e n t s i m u l t a n e o u s l j j t h a t t h e
n o t e s have been r e c e i v e d f o r t h e account of t h e Chicago
bank, and w i l l redeem such n o t e s j u s t as i f t h s y had boon s e n t
by t h e F e d e r a l Reserve B^nk of Chicago d i r e c t t o t h e T r e a s u r e r
f o r redemption.
(f)
Upon r e c e i p t of the a d v i c e forwarded by t h e T r e a s u r e r ,
as p r o v i d e d in p a r a g r a p h ( e ) t h e F e d e r a l R e s e r v e Bank of C h i c a g o
and i t s F e d e r a l r e s e r v e agent w i l l r e c o r d t h e t r a n s a c t i o n i n t h e
manner o u t l i n e d i n a c i r c u l a r l e t t e r from t h e Board d a t e d March
24, 1916, h e r e t o a t t a c h e d ,
(g) When the n o t e s have been redeemed t h e T r e a s u r e r w i l l
d e l i v e r them t o t h e C o m p t r o l l e r of the Currency in t h e name of
t h e F e d e r a l r e s e r v e agent a t Chicago and f o r h i s c r e d i t .
(h)
The C o m p t r o l l e r of t h e Currency, upon r e c e i p t of t h e
n o t e s from t h e T r e a s u r e r , w i l l n o t i f y t h e F e d e r a l r e s e r v e a g e n t
t h a t t h e y have been r e c e i v e d f o r d e s t r u c t i o n , w i l l a r r a n g e fox
t h e i r c a n c e l l a t i o n and d e s t r u c t i o n , and w i l l c r e d i t the a c c o u n t
of t h e F e d e r a l r e s e r v e a g e n t of Chicago w i t h t h e amount of t h e
n o t e s when d e s t r o y e d .
Very t r u l y y o u r s ,

Governor-

Inclosure.