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-m JLfS-r vJ* Ji_ COPY X-3S44 November 1C, lyZL. Dear Mr. H a r r i s o n : I e n c l o s e h e r e w i t h copy of c i r c u l a r l e t t e r which I am s e n d i n g o u t , by d i r e c t i o n of t h e Board, t o t h e Governors of a l l Federal Reserve banks. This l e t t e r i s i n t e n d e d t o g i v e t h e f o r c e and e f f e c t of a r u l i n g by t h e Board on v a r i o u s m a t t e r s which your minutes show were agreed t o by t h e Governors a t t h e c o n f e r e n c e . The Board d e s i r e s a d d i t i o n a l i n f o r m a t i o n on t h e f o l l o w i n g point s: Topic 1 - 3 - 1 . Scope of E l i g i b i l i t y Committee. I t a p p e a r s from t h e minutes t h a t i t was voted by t h e c o n f e r e n c e t h a t t h e f u n c t i o n of t h e E l i g i b i l i t y Committee of each Federal Reserve bank should be ( l ) t o p a s s upon t h e t e c h n i c a l e l i g i b i l i t y of p a p e r p r e s e n t e d f o r d i s c o u n t , and (2) t o p a s s upon tne d e s i r a b i l i t y of such p a p e r from a c r e d i t s t a n d p o i n t . I s i t i n t e n d e d t h a t t h e E l i g i b i l i t y Committee should supersede t h e Discount or Executive Committee, or i s i t one and t h e same t h i n g ? Topic I-E. R e d i s c o u n t i n e Non-ne&otiable n o t e s . The m i n u t e s show t h a t i t was t h e sense of t h e Conference t h a t Governor C a l k i n s should o b t a i n an o p i n i o n from h i s a t t o r n e y a s t o t h e n e g o t i a b i l i t y of a n o t e which b e a r s evidence t h a t i t is. s e c u r e d by a c h a t t e l or o t h e r mortgage, and t h a t Governor Calkins should p r e p a r e d r a f t of a c i r c u l a r , based on t h a t opinion, t o be forwarded by a l l Federal Reserve banks t o t h e i r members. The Board would l i k e t o have a copy of t h e proposed c i r c u l a r f o r submission t o i t s Counsel b e f o r e i t i s sent out by t h e Banks. Topic I I - A . Report of C o l l e c t i o n Committee. The Board d e s i r e s t h a t t h i s r e p o r t , when complete, be submitted t o i t f o r c o n s i d e r a t i o n and if approved a formal r u l i n g w i l l be made g i v i n g e f f e c t t o t h e r e commendations. Topic I-A-U. Uniform P r a c t i c e i n h a n d l i n g b a n k e r s ' a c c e p t a n c e s t a k e n from b r o k e r s under r e p u r c n a s e a g r e e m e n t s . The Board has some doubts a s t o t h e p r o p r i e t y of a c o n t i n u a n c e of t h e p r e s e n t p r a c t i c e and w i s h e s t o c o n s i d e r t h e m a t t e r from a l e g a l s t a n d p o i n t , a s w e l l a s one of p o l i c y . I t would, t h e r e f o r e , a p p r e c i a t e h a v i n g c o p i e s of Governor S t r o n g ' s correspondence w i t h t h e F e d e r a l Reserve Banks of S t . Louis, Boston, San F r a n c i s c o , Chicago and Cleveland, on this subject. Topic VI-D- S e c u r i t i e s l e f t i n custody.The Board r e q u e s t s t h a t i t be f u r n i s h e d w i t h a copy of Mr. H a r t ' s r e p o r t on t h i s s u b j e c t . -a • JL r*^xri:' ''l.Jff-tj -2- X-3244 The Board r e q u e s t s t h a t t h e c i r c u l a r t o be p r e p a r e d by t h e Leased Wire Committee, g i v i n g i n s t r u c t i o n s t o a l l F e d e r a l Reserve banks w i t h r e f e r e n c e t o t h e method of h a n d l i n g t e l e g r a p h i c t r a n s f e r s and t h e r e p o r t of t h e Committee r e v i e w i n g c i r c u l a r s which have a l r e a d y been i s s u e d by t h e F e d e r a l Reserve banks on t h e q u e s t i o n of l i a b i l i t y f o r w i r e t r a n s f e r s be sent t o t h e Board f o r review b e f o r e b e i n g t r a n s m i t t e d t o t h e b a n k s . The Board has taken no a c t i o n on tne p r o p o s i t i o n (page 41 of t h e minutes) t h a t a general committee of twelve should be a p p o i n t e d , one from each Federal Reserve bank, which " s h a l l meet as o f t e n and f o r a s long a s may be n e c e s s a r y t o work out a g e n e r a l program, which s h a l l be r e p o r t e d t o t h e Governors f o r t h e i r a d o p t i o n . " Action on t h i s w i l l be d e f e r r e d u n t i l t h e f i r s t meeting of t h e B o a r d ' s E f f i c i e n c y Committee w i t h the supplementary committee c o n s i s t i n g of Chairman W i l l s , of t h e Federal Reserve Bank of Cleveland, and Governors Morris and Calkins, The Board i s anxious t h a t p l a n s f o r e f f i c i e n c y i n t h e conduct of i n t e r - b a n k o p e r a t i o n s of t h e Federal Reserve banks should not be complicated with too much machinery and deems i t important t h a t a l l t h e s e p l a n s be c o o r d i n a t e d w i t h c e r t a i n g e n e r a l p l a n s which t h e Board i s working o u t , of whicn due n o t i c e w i l l be g i v e n . Very t r u l y y o u r s , (Signed) W. P. G. HARDING, G o v e r n o r . Mr. George L. H a r r i s o n , S e c r e t a r y , Governors 1 Conf erence, Federal Reserve Bank, New York, N„ Y. (COPY TO ALL GOVERNORS)
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