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P Y X-7043 K JFA MCC December 2, 1931. Mr. Fred P. Ressoner, Receiver, Peoples National Bank, Pulaski, IT. Y. Dear Sir; You have been telegraphed today as follows: "Where pursuant to provisions of Uniform Bank Collection Code or similar State law, Federal Reserve Bank, or other agent c o l l e c t i n g bank e l e c t s within a reasonable time to t r e a t as dishonored by nonpayment items which have been charged against balances in your bank and remittance, d r a f t f o r which has e i t h e r not been issued, o r , if issued, has not been paid, you are authorized to surrender the o r i g i n a l items involved to the forwarding bank as you found them without a f f i x i n g or canceling paid stamps or p e r f o r a t i o n s , provided forwarding bank agrees to f u r n i s h you without cost p h o t o s t a t i c copies of such items f o r your records. Where items to be r e turned were charged to depositors' accounts, but not stamped or p e r f o r a t e d paid by bank, the following legend signed by you a s Receiver of your bank or as Examiner in Charge, as the case may be, should be placed thereon by rubber stamp, or otherwise, before surrendering, quote, I c e r t i f y that the books and records of t h i s bank evidence that t h i s item was charged to the drawer r s account p r i o r to suspension. Unquote. Do not reverse charges made to drawers' accounts. Where electing banks desire items protested l o c a l l y you are authorized to have t h i s done as t h e i r agent and at t h e i r expense." This telegram i s hereby confirmed. Very t r u l y yours, (Signed) F. G. Await F. S. A^ALT, Deputy Comptroller. C 0 P X-7043-a Y Ptiti&UL R f i s W i . Bmt OF RICHMOND November 21, 1931 Federal Heserve Board, Washington, D. C. Attention: Mr. Walter ffyatt, General Counsel. Dear Mr. Wyatt: I should have been much more prompt in replying to your l e t t e r of November 6th upon the subject of legal and p r a c t i c a l problems a r i s i n g under the Bank Collection Code. My reason f o r delaying was t h a t when your l e t t e r was received we had already w r i t t e n l e t t e r s to other Federal reserve banks asking them to l e t us know what course they were following in handling such matters, and I thought i t best to delay my reply to you u n t i l I could send you copies of t h e answers which we received, knowing that you would be i n t e r e s t e d in having a complete p i c t u r e of what the d i f f e r e n t Federal reserve banks were doing in t h i s matter. We have not as yet received r e p l i e s from a l l banks and the recent developments will probably of necessity make the r e p l i e s which we have received of l i t t l e interest. At the same time that we wrote to the other banks I wrote to Mr. Await, Deputy Comptroller, s t a t i n g in substance that I agreed with h i s o f f i c e in thinking that the provisions concerning preferences in the Bank Collection Code could not apply to national banks, although, of course, I would not commit myself to any irrevocable admission of t h a t proposition. I also agreed with h i s o f f i c e in thinking that possession of the check was of no material consequence in any s u i t between the p a r t i e s to i t , as possession could c o n s t i t u t e only a prima f a c i e evidence of r i ^ i t , which could be rebutted by e i t h e r side, and the ultimate decision must always depend upon the acts which were done and the a p p l i c a b i l i t y of the code to such a c t s . Since the Comptroller had o f f e r e d to have p h o t o s t a t i c copies made of a l l checks at the expense of Federal reserve banks I requested Mr. Await as a t e n t a t i v e course to allow a l l checks to be returned to us upon the agreement that we would have the p h o t o s t a t i c copies made in our o f f i c e and r e t u r n the o r i g i n a l s to the r e c e i v e r s . This suggestion was made, of course, only because many receivers are operating in towns where p h o t o s t a t i c copies cannot be made at a l l or where the charges by local photographers would be excessive, and since t h i s bank has machinery f o r making p h o t o s t a t i c copies in i t s own o f f i c e , i t can make them a t very s l i g h t expense. I also requested Mr. Await to consider t h i s proposition: That since the possession of the check was, as a matter of law, not e s s e n t i a l , the receiver would be as well off with a photostat as with the o r i g i n a l , but the business public were in the habit of attaching much importance to actual possession of the instrument and t h a t consequently the sending of a photostat to a commercial bank or a business man would not be as s a t i s f a c t o r y as returning the o r i g i n a l , and I t h e r e f o r e asked 606 Mr. Walter Wyatt, Federal Reserve Board., Washington, D. C. X-7043-a - 2 - November 21, 1931 him to consider modifying h i s p o s i t i o n to the extent of allowing us to return the photostats to the r e c e i v e r s f o r t h e i r f i l e s , surrendering the o r i g i n a l s to our endorsers. We have today received a telegram from the Comptroller's o f f i c e , which I understand has "been sent to a l l Federal reserve "banks, s t a t i n g t h a t in f u t u r e the o r i g i n a l checks will "be returned to the forwarding banks when the r e t u r n i s requested with reasonable diligence and p r o t e s t will be made if requested by the forwarding banks, but the forwarding banks w i l l be required to agree to have p h o t o s t a t i c copies made at t h e i r own expense and to r e t u r n such p h o t o s t a t i c copies to the receivers. This arrangement i s n a t u r a l l y as s a t i s f a c t o r y to us as if the checks were returned unconditionally, as the expense of making p h o t o s t a t i c copies in our own plant f o r the use of the receivers i s too t r i v i a l to be of moment. I t seems to me t h a t t h i s concession made by the Comptroller i s an exceedingly happy solution of the operating problems a r i s i n g out of the Bank Collection Code. I have suggested to the o f f i c e r s of t h i s bank that in f u t u r e they either immediately e l e c t to t r e a t as dishonored and demand the return of a l l checks in the case of a f a i l u r e of a national bank, or, if they f e e l t h a t they should allow endorsers some opportunity of expressing t h e i r wishes, that on the f a i l u r e of any national bank they n o t i f y endorsers that we will elect to t r e a t a s dishonored and procure the return of a l l checks unless d e f i n i t e i n s t r u c t i o n s to the contrary are received by us on a s p e c i f i e d date. Personally, I f e e l quite sure t h a t the adoption of the l a t t e r course will mean t h a t very few, if any, i n s t r u c t i o n s w i l l be received to prove claims, as nearly a l l endorsers w i l l e i t h e r do nothing or p r e f e r to have the checks returned. Referring p a r t i c u l a r l y to your suggestion as to the conference with Counsel, i t seems to me when I received your l e t t e r that matters had not reached a point a t which a conference would be desirable because there were too many questions involved which could not be s e t t l e d by such a conference. I t now seems to me that a conference i s unnecessary as claims of t h i s character against s t a t e banks are of necessity so involved with local conditions that I do not believe a uniform course of procedure could be successfully adopted. As f a r as national banks are concerned I believe t h a t a l l operating d i f f i c u l t i e s w i l l be eliminated by the new r u l i n g of the Comptroller's o f f i c e , and the only important questions involved are those of pure law; that i s to say, whether or not the code i s valid and applicable to a national bank. That question cannot be f i n a l l y s e t t l e d except in a s u i t by a holder against the drawer or an endorser, and when the question i s so r a i s e d the f i n a l word would only be spoken by c e r t a i n august gentlemen at the other end.of the avenue and any resolution of our conference upon i t would probably not be very seriously regarded. Very t r u l y yours, (SIGNED) M. G. Wallace MGrW H M. G. Wallace, Counsel.
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