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C 0 P X-6401~a Y October 22, 1929. Dear Mr. Secretary: I am addressing this l e t t e r to you, a t your request, with reference to the discussion we had in your o f f i c e several days ago, in order to set out my understanding of the situation which was explained to me, and the proposals which you made to meet that situation. Briefly, the situation, as I understand i t , is that due to the condition of the appropriations of the Bureau of Engraving and Printing for the current f i s c a l year, ending June 30, 1930, i t has teen found necessary to furlough a number of employees of the Bureau, and unless increased orders for Federal reserve notes, to be delivered and paid for during the remainder of the current f i s c a l year, are received, i t will be necessary to materially increase the present periods of furlougjja, which you regard as wholly undesirable. This situation, I understand, is due in p a r t to the f a c t that the estimates upon which the Bureau's appropriations for the current f i s cal year were based, were prepared with the thought that the Federal Reserve Board would order for the Federal reserve banks, the p r i n t i n g and delivery of 22,000,000 sheets of Federal reserve notes during the year; whereas, in l i n e with the practice of building up a year's reserve stock of Federal r e - v serve notes of the various denominations, and based upon estimates as to the amount of that reserve stock made by the Federal reserve agents of the various banks, the Board's order for the current f i s c a l year was but 17,000,000 sheets of completed notes. As the Department was advised in a l e t t e r dated July 2, 1929, the Federal reserve banks began the f i s c a l year 1930 with new size Federal reserve notes om hand or under order, amounting to something over 22,000,000 sheets, which was their estimate of thetii&ximumamount of the new size notes which they would require to medt demands during the currency turnover, as against a normal y e a r ' s requirements of approximately 17,000,000 sheets. The Bureau's estimate of an order of 22,000,000 sheets for the f i s c a l year 1930, made in 1928, i t i,s Understood, was based upon the f a c t that the order for turnover purposes aggregated t h i s amount and no d e f i n i t e information as to the probable requirements for the year had been furnished by the Board, due to our i n a b i l i t y to determine so f a r in advance, a suitable basis for estimating. The proposition f i r s t suggested by you during the course of our conference was an order for the printing and delivery during the current f i s c a l year of 5,000,000 sheets of Federal reserve notes, in addition to the order for 17,000,000 sheets already f i l e d . I t i s understood that such special order, a t a total cost of $447,500 to the Federal reserve banks, would provide additions to the appropriations of the Bureau which are necessary to continue operations for the balance of the f i s c a l year without a furlough increase. -2- X-6401-a During the discussion, howover, i t was brought out that i t would bo highly desirablo for the Federal reserve banks to have, say, a three months' supply of Federal reserve notes in process a t the Bureau, which would provide the necessary seasoning before delivery to meet order d. placed at the beginning of a new f i s c a l year. On the b a s i s of a normal year's requirements of 17*d00,000 sheets, a three months' reserve in process would amount to 4,250,000 sheets* The Bureau submits that of t h i s amount 2,125,000 sheets should be worked up In the form of backs and 2,125,000 sheets as backs arid faces (in trimmed form). This would involve a t o t a l investment by Federal reserve banks of $241,738,75, necessitating, in order to increase the appropriations to the amounts needed to prevent further furloughs, the placing of an order f o r 2,950,000 sheets of completed notes during the f i s c a l year, in addition to the order for 17,000,000 shoots already f i l e d . The l a t t e r item represents a cost to the Federal reserve banks of $264,025.00. The t o t a l expenditure by the Federal reserve banks in the a l t e r native l a s t mentioned would be $505,763.75, against $447,500, involved in an additional order for 5,000,000 sheets of completed work. However, the alternative would seem to be preferable in that i t would provide a revolving fund for the Bureau which would be replace*! each year as the notes in process were delivered in completed form against current orders. Detailed figures, furnished by the Director of the Bureau of Engraving and Printing, which have been used in this l e t t e r , a r e attached. It i s understood that with the establishment of the revolving fund referred to and an undertaking on the p a r t of the Board to estimate aggregate Federal reserve note printings a year in advance, the Bureau will be able to so adjust i t 3 ions that in the f u t u r e special orders similar to the one under discussion will not be requested. An estimate of 17,000,000 sheets of Federal reserve notes for the f i s c a l year ending June 30, 1931, has already been furnished and i t is understood that the Bureau, during the f i s c a l year ending June 30, 1932, and therea f t e r , will be in a position to adjust i t s e l f to whatever advance printing estimates may be made by the Board, based upon minimum requirements as estimated by the Federal reserve banks* Before submitting t h i s matter to the Federal Be servo Board and the Federal reserve banks, i t i s requested that you confirm my understanding of the situation which eaclsts and the proposals which have been made. Yours rospoctfully, B. A. Young, Governor. Honorable Ogden L. Mills» Undersecretary of the Treasury, Washington, D. 0. X-6401-13 Data Relative to federal Reserve Notes Showing cost (A) of finishing 5,000,0(30 sheets and (B) of a reserve stock of three months' supply (based on a year's supply being 17,000,000 sheets) or 4,250,000 sheets, 2,125,000 sheets being backs and 2,125,000 sheets faces in trimmed form and of finishing 2,950,000 sheets* Componsation Plate Printing Materials, etc. Total (A) Cost of 5,000,000 finished sheets $236,000.00 $101,900.00 $109,600.00 $447,500.00 (B) Cost f o r 4,250,000 sheets in process 2,125,000 backs; *.. $19,656;25 2,125,000 backs and faces (in trimmed 76,925.00 form) 96,581.25 $20,187.50 $ 36,357.50 $ 76,201.25 42,818.75 63,006.25 45/793.75 82,151.25 165,537.50 241,738.75 Cost for 2,950,000 finished sheets 139,240.00 60.121.00 64,664.00 364,025.00 $235,831.25 $123,127.25 $146.815.25 $505,763.75 COPY X-6401-C i 1? THE UNDERSECRETARY OF THE TREASURY WASHINGTON October 23, 1929. My dear Governor Young: I. have your l e t t e r of October 22d, with reference to the s i t u a t i o n of the Bureau of Engraving and P r i n t i n g as a f f e c t e d "by the orders f o r Federal Reserve notes received and to be received from the Federal Reserve Banks. Your understanding of the s i t u a t i o n and of the propositions submitted to you "by the Treasury Department i s e n t i r e l y c o r r e c t . In so f a r as requests i n the f u t u r e for special orders a r e concerned, we are quite w i l l i n g to undertake to discontinue the p r a c t i c e . I "believe, however, that Federal Reserve Banks should submit t h e i r orders f o r the ensuing year i n f i n a l form p r i o r to the submission of the Bureau of Engraving and P r i n t i n g estimates to the Bureau of the Budget, and t h a t i n r e t u r n f o r our undertaking not to request additional orders, the Federal Reserve Banks should endeavor not to change t h e i r s onco our estimates have boon submitted to Congress. You w i l l r e a d i l y appreciate how d i f f i c u l t a s i t u a t i o n i s created when the estimates for the Bureau of Engraving and P r i n t i n g halre been based on an order f o r a c e r t a i n number of notes from |he Federal Reserve Banks and subsequently, a f t e r f the appropriations have actually been made, t h i s order i s r e duced. Hon. Roy A. Young, Federal Reserve Board, Washington, D. C. Very sincerely yours, (S) Ogden L. Mills, Undersecretary of the Treasury. yyg
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