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X-6592 COPY FEDERAL RESBRV3 BA.UK OF BOSTON December 7» 1929 Federal Reserve Board, Washington, D. C. Dear Sirs: In reply to your letter of November 27, 1929 (X-6429), relative to the suggested change in recent amendment to Regulation J, and you are advised that we agree with the General Counsel in his opinion expressed in a letter to the Board of November 13, 1929 (X-6429-t>) and believe that i t would not "be desirable to make the further amendment to Regulation J suggested in the correspondence you enclose (X-6429-a). Yours very truly, (S) W. W. Paddock, Deputy Governor. COPY X-6592-a FEDERAL RESERVE BAM OF NEW YOBK December 4, 1929. Federal Reserve Board, Washington, D. C. Sirs: Receipt i s acknowledged of your l e t t e r of November 27, 1929 (X-6429), enclosing copy of l e t t e r dated October 22, 1929 (X-6429-a) from Mr. Blair, Deputy Governor of the Federal Reserve Bank of Chicago, and copy of memorandum of Mr. Wyatt dated November 13, 1929 (X-6429-b), a l l with reference to a change suggested by Mr. Blair in the recent amendment, to be effective January 1, 1930, to paragraph 6 of Section V of Regulation J, this change being designed to protect the Federal Reserve Banks against claims arising out of the f a i l ure of a bank other than the drawee bank to which checks have been forwarded by the Federal Reserve Banks for collection. We have considered the suggested change and agree with Mr. Wyatt that i t is not advisable. Very truly yours, (S) George L. Harrison, Governor. COPY * X-6592-b £ 1G FEDERAL RESERVE BASK OF RICHMOND November 29, 1929. SUBJECT: Suggested. Change in the Recent Amendment to Regulation J. Federal Reserve Board, Washington, D. C. Dear Sirs: We are in receipt of the Board's l e t t e r X-6429, November 27, under the above caption. So far as this bank i s concerned, i t will he immaterial whether the recent amendment to Regulation J he l e f t in i t s present form or changed in the manner suggested, "but i t would perhaps he desirable to have the regulation in such form as to cover a l l the transactions or practices of Federal Reserve* Banks of this character. Since the regulation i s intended to prescribe the exact form of contract into which Federal Reserve Banks may enter with their member banks, in order to preserve the fundamental relationship of agency i t would, perhaps, be better for the form of regulation to cover a l l transit operations of whatever kind, as alluded to above. The object i s not so much to afford further protection to Federal Reserve Banks, as intimated in the last paragraph of the Board's General Counsel, as to make the regulation uniformly applicable in a l l transit operations with member banks, and avoid giving any preference to the holder or owner of the checks in the assets which Federal Reserve Banks may chance to hold for those banks through which checks are sent for collection when they happen not to be drawee banks. Yours very truly, GJS-CCP (S) GEO. J. SEAT, Governor X-6592-c FEDERAL RESERVE BANK OF CHICAGO 230 South LaSalle Street November 30, 1929 SUBJECT: Suggested Change to Recent Amendment of Regulation J. Mr. E. M. McClelland, Assistant Secretary, Federal Reserve Board, Washington, D. C. Dear Mr. McClelland:I have your letter of the 27th instant enclosing copy of Board's letter X-6429 concerning amendment to paragraph 6, Section 5, Regulation J. This "bank favors the proposed amendment of the amendment, so that paragraph 6 will read as set out in your l e t t e r addressed to Governors of a l l the Federal Reserve Banks, included in X-6429. After reading l$r. Wyatt's letter included in X-6429, I am inclined to the opinion that he did not quite understand my suggestion as to fhe correction of paragraph 6. I am enclosing herewith copy of letter which I have just written Mr. Wyatt on the subject. Vejry truly yours, (S) k J. H. Blair, Deputy Governor. (Copy) X-6592-d i Hovember 30, 1929 Mr. Walter Wyatt, General Counsel, Federal Reserve Board, Washington, D. C. Dear Mr. Wyatt I have just read your letter to the Board included in Board's l e t t e r X-6429 in regard to the suggested change in recent amendment to Regulation J, and it seems to me that you did not quite get the f u l l reasons for further amendment of paragraph 6 suggested in my l e t t e r to the Board of October 22nd. It i s possible I did not make myself quite clear in that l e t t e r . I do not think the Federal Reserve Banks need any further protection in the selection of a collecting agent. We already have that protection in paragraph 2, Section 5 of Regulation J and in paragraph 6, Section 5 as i t originally read, and which authorizes us to charge back to the forwarding bank the amount of any check for which payment in actually and finally collected funds i s not received, regardless of whether or not the check i t s e l f can be returned. It is my understanding that the purpose of the original amendment to paragraph 6 was td protect us against claims that might be made by depositing banks upon any funds in our possession belonging to the closed bank in which their items were involved. Such closed bank might be either the drawee bank or any other collecting agent bank and the need for such protection is just as great in one case as in the other. For instance, the forwarding bank might conclude that the member bank to which we forwarded the checks for collection and which actually collected the checks from the payee bank, but which closed before remittance was made to us, might be liable for some reason for the amount of such checks and proceed against us by attachment of the reserve account or other property of the closed bank in our hands. In such an event, I think we would need the same protection against the collecting bank as we would against the drawee bank. Very truly yours, Deputy Governor. X COPY X-6592-e FEDERAL RESERVE BANK OF ST. LOUIS ' December 7, 1929. Federal Heserve Board, Washington, D. C« Gentlemen: The sugject of your letter X-642S, tearing date of November 27, 1929, has been discussed in this o f f i c e and also presented to our Counsel for his views. Copy of Counsel's memorandum on the subject is enclosed. IShile from a legal standpoint i t makes l i t t l e difference iri this district whether the change suggested by Chicago i s of i s not adbpted, the concensus of opinion of the officers i s that i t i s desirable a$td Advisable to make the change suggested. Yours very truly, (S) Wm. McC. Martin, Governor. COPY X-6592-f December 6, 1929. Mr. Fm. McC. Martin, Governor, Federal Reserve Bank of St. Louis, St. Louis, Missouri. Dear Governor: EE: Suggested changes in wording of Paragraph 6, Section V, Regulation J. I have before me the l e t t e r of Mr. J. H. Blair, Deputy Governor of the Federal Reserve Bank of Chicago and the Federal Reserve Board's l e t t e r X-6429, Subject: Suggested changes in recent amendment to Regulation J, and your verbal request for any comments I cared to make on the subject. I can offer no objection to the suggested change since i t would c l a r i f y the intention of Paragraph 6, Section V, Regulation J, and would take care of a case where the collecting bank was not the drawee and where the owner might successfully claim that the Regulation, as worded, did not apply and that the Reserve bank was negligent in not appropriating the member bank's balances and/or capital stock returns in payment for the unremitted for items. However, I do not believe in the States included in the 8th Federal Reserve District the Reserve Bank w i l l be called upon to respond under such circumstances for the Massachusetts rule prevails in practically a l l these State making the collecting bank the agent of the owner of the item instead of the agent of the Reserve Bank. Further, in States included in the District, the owner would have a preferred claim against the collecting bank whether the collecting bank be a State or National' Bank, and in a l l probability would be paid in f u l l ; consequently, as far as the wording i s concerned i t would make no difference whether the amendment be l e f t as i t i s , or changes as suggested, for there i s l i t t l e likelihood that the owner of the item w i l l suffer any l o s s . Very truly yours, (Signed) Jas. G. McCorikey Counsel. COPY X-6593- PBDSHAL RESERVE BANK OF MINNEAPOLIS December 3, 1929. Federal Reserve Board, Washington, D. C. Gentlemen: Referring to yours of November 27th (x6429), our Counsel has gone over the suggestion of Mr. Blair for a change in Paragraph 6, Section V of Regulation J, and we concur with Mr. Blair• s views* believing that the change he recommends i s desirable. Yours very truly, (S) W. B. Geery Governor WBG-C COPY I 4 X-6592-h FEDERAL RESERVE BAUK OF DALLAS December 4, 1929. Federal Reserve Bank, Washington, D. C. Gentlemen: Attention Mr. 2. M. McClelland, Asst. Secy. Reference i s made to Board's letter X-6429, dated November 27, 1929, on the subject "Suggested Change in Recent Amendment to Regulation J." We referred this matter to our Counsel for an opinion and they have advised that they do not feel that the point raised i s of sufficient importance to justify another amendment to Regulation J. They state further that i t i s extremely important that Regulation J be amended as l i t t l e as possible, and that therefore i t i s their view that a further amendment should not be made to cover Deputy Governor Blair's point. Yours very truly, (S) Igrnn P. Talley, Governor COPY X-S592-i FEDW1 RESERVE BASK OF SAN FRANCISCO December 3, 1929. Federal Reserve Board, Washington, D. C. Subject: Suggested change in Regulation J. X-6429. Dear Sirs: It is our belief that the question raised by Deputy Governor Blair, of the Federal Reserve Bank of Chicago, regarding the recent amendment to paragraph 6 of Section V, Regulation J, i s well taken. Regulation J, Section V, paragraph 2, states; "A Federal reserve bank may present such checks * * * direct to the bank on which they are drawn * * * or in i t s discretion may forward them to another agent" * * * Regulation J, Section 7, paragraph 3, states: "A Federal reserve bank may at i t s discretion * * * either directly or through an agent, accept * * * bank drafts in payment * * * for such checks, and shall not be held liable for any loss resulting from the acceptance of bank drafts in l i e u of cash * * * nor for the nonpayment of any draft accepted in payment or as a remittance from the drawee bank or any agent." Regulation J, Section V, paragraph 6, should be amended by inserting the words "or other agent," as follows: "Die amount of any check for which payment in actually and f i n a l l y collected funds is not received shall be charged back to the forwarding bank regardl e s s of whether or not the check i t s e l f can be returned. In such event, neither the owner nor holder of any such check, nor the bank which sent such check to the Federal reserve bank for collection, shall have any right of recourse upon, interest in, or right of payment from, any funds received, collateral, or other property of the drawee bank, or , other agent, in the possession of the Federal reserve bank." X-6592k Federal Reserve Board - - 2 This change will harmonize with the intent of the other provisions of Section V, Regulation J, and w i l l afford the Federal reserve banks the nbcessary protection when selecting agents other than drawees in effecting collection of checks. Yours very truly, (s) J* U. Calkins, GOVERNOR.
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