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Ex *O f f ic io
Mem bers
W. P . G . HARDING, GOVERNOR
PAUL M. WARBURG, VICE G o v e r n o r
FREDERIC A. DELANO
ADOLPTf
CHARLES
WILLIAM G. McADOO
S e c r e tar y of the Tr e a su r y
C h a ir m a n
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H . PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
and
WASHINGTON
Fis c a l A g e n t
A D D R E SS R E P L Y TO
FEDERAL RESERVE BOARD
July 3, 1917.
Dear Sir:
It is desired to send letter of inquiry to a small
number of representative banks, and an equal number of rep
resentative business men, placing before each group appro
priate questions with reference to the use of the trade acceptance.
This is for the purpose of obtaining data for use in connection
with the work the Board is now doing with reference to commercial paper.
Will you in order to further this work, be kind
enough to transmit to the Board at your early convenience:
(1)
A list of about fifty member or non-member banks
in your district divided about equally between large
city banks, banks in places of moderate size, and
country banks, selecting in each case those that are
representative and likely to furnish good information.
(2)
A list of fifty representative business men in your
district divided about evenly between manufacturers,
jobbers or wholesalers, and retailers, each separately
classified* These names should be those of represent
ative concerns, selected without any reference to whether
they are or are not known to be employing the trade ac
ceptance, and chosen siinply as active representative
concerns. It would be well to furnish names identified
with the various sections and industries of the district
as far as possible.
Yours very truly,
Secretary.
WAR FINANCE AND THE FEDERAL RESERVE BANKS.
A. C. Miller.
Address before the Join. Conference of the
WESTERN ECONOMIC SOCIET. AND THE CITY CLUB
Hotel La Salle, Chicago, June 22, 1917.
r>i'
X-259.
*
We are at war, and have already taken the first steps in its
financing*
If all the nany succeeding siops that we shall have to take
in tho field of finance and elsewhere are as successful as this first
stop in our financing we shall find ourselves in fortunate circumstances.
Good financing can not win a war, but modern wars can not
good finance.
bb won
without
No country within So short a time after entering upon war
has ever undertaken or succeeded in placing a long-term loan of such
magnitude as tho first of our war loans, the Liberty Bond Loan of $2,000,000,000.
Not only has the loan been fully subscribed, but the indications
aro that it is oversubscribed by perhaps as much as $1,000,000,000.
It
shows that tho country is alive to tho hoavy responsibility it has as
sumed in ontoring tho war, and that financially it is in a stato of ex
ceptional readiness.
Many factors havo contributed to tho success of our first war
loan, and mdriy more will be nocosSafy to tho success of the lbdns which
will folio#*
The banking powor of tho country ha3 novor boon more of-
factively utilized in a great financial transaction than ih connection
with the negotiation of the Liberty Lban.
Of necessity! Sind before the
development of a more complete and ade^u&te program of war finance, this
loan had to be carried through as a banking operation*
The banks of the
country have performed a great service not only in facilitating individual
subscribers to the loan and in assuming the function of distributors of
Government bonds to ultimate investors, but also in offering to take a
considerable part of the loan on their own account in anticiaption of
future sales to their customers, and without any thought of advantage or
profit to themselves.
That the whole process of placing the loAh has
been carried through so far with such smoothness, ease, and with so little
disturbance of the money markets of the country, is due to the brilliant
sagacity of the Secretary of the Treasury in planning the several steps
of this collossal operation, and to the reassuring presence and ready
support, at every stage of the process, of the Federal Reserve banking
system.
Effective use has been made of successive issues of short-term
certificates of indebtedness.
Pending the flotation of the Liberty Loan,
these certificates were used to provide the Treasury with funds for meet
ing its current disbursements, particularly in the shape of advances to
the Allies.
Being issued in an aggregate amount of $1,OCX),000,000 and in
definite anticipation of replacement by long-term Liberty Bonds, they have
done much to mitigate the pressure on the money markets by the shifting of
funds incident to the negotiation of a $2,000,000,000 loan.
Indeed, a con
stant feature of the Treasury's policy has been the vigilant care oxercisod
to seo that tho funds received by the Government in payment of its obliga
tions should bo returned as promptly as possible to the money market, in
order to minimize, or
if possible altogether to avoid, the disturbance
ordinarily incident to the transfer of funds on so huge a scale.
It is
remarkable that the rate for call money, which is a highly sensitive barom
eter of money conditions in tho leading money market of tho country, has
.
at no time since the inauguration of the Liberty Loan operation shown any
disquioting firmness or alarming increase, 6
being the highest rate thus
far reached.
The Federal Reserve Banks, as the country's foremost and most
x 159
- 3 -
fundamental banking agency, have naturally had an important part in facil
itating the transactions growing out of our first war loan, and it is of
course to bo expected that they will have much to do with the successive loan
issuea which will be brought out later.
Indeed,
it is to be expected that
their status and the range and extent of their activities may be profoundly
affected by the financing both of a public and private character which will
follow in the train of war conditions, should the war run on for a year or
more.
It is two and a half years since the Federal Reserve Banks wore
set in operation*
iheir activities, unti|. recently, however, have been of
restricted dimensions.
Established primarily for the service that they
could render to tho financing of trade and industry and as a protection
against tho vicissitudes of the modern credit system, their chief valuo thus
far has beon to give to tho countryfs banking and businoss affairs an under
tone of strength and a fooling of security, and at times to exercise a re
strain! ng and prudontial effect on the course of tho country*s banking pol
icies and affairs.
Although no such serious responsibility as that which now
confronts the nation in tho fiold of public finance could have been forcsoen
by tho framers of the
of tho Federal Reserve Act, provision was nevertheless,
mado by which the Federal Re servo Banks could bo used as instrumentalities in
support of Government finance, and we may therefore expect to see thorn becom
ing moro and more, as the war goes on, a powerful auxiliary factor in the fi
nancial operations of the nation.
How much their position and character may
be changed under the weight of the now and varied obligations which may bo
imposod upon thorn by reason of tho fact that war is to become tho principal
x 25&
- 4 -
business of the nation for a yoar or moro> is a question that
cannot but be viewed with anxiety by those who have believed
that these great institutions should always find their primary
and normal field of activity in serving the needs of the coun
try’s industrial and commercial enterprise.
some day be over.
For the war will
If, therefore, it should result that, as a
consequence of undue reliance upon the resources of the Federal
Reserve System in financing the war,
i$se System was transformed
and its ability to assist in the recuperation of American indus
try and its readjustment to the altered conditions of the whole
world of commerce which may safely
bo predicted to fbllcw the
close of the war, impaired, the consequences would be of the
most serious character.
It should also not bo overlooked that
there will be many readjustments of our internal trado and indus
try during ti\B war in the process of adapting our economic organ
ization to the necessities of our now situation.
Many industrios
may be expected to experience a slackening of domand for thoir
output and will need the consorving fiaro of a well administerod
credit system to tide them through the poriod of the war.
Ifeny
othors will bo under stiff and urgent pressure rapidly to oxpand
themselves to meet the intensified demands for thoir output, oc-
_9 n,o
casionod "by the war, and will need tho use of the Reserve Banks*
credit facilities*
These things may not "bulk largo in our calcu
lations at the moment, .when our minds are preoccupied with ques
tions of Government finance.
But as tho deep disturbance which
will bo wrought in our whole industrial organization, as tho war
proceeds, develops, these needs will make themselves felt.
Proper
concern and provision for tho credit needs of our industry and trade
•both during th* war and
th* war ought not, therefore, to be
prejudiced or foroclosod by undue or improper use of tho resources
of tho Fodcral Rosorvo System, - vast and inexhaustible as they
may
appear to many to bo at tho momont - in tho financing of tho
war.
Whon the amendments which havo just passed Congress, pro
viding for a groator concentration of the gold holdings of tho coun
try in tho Fcdoral Reserve Banks, become offoctivo, tho twolvo Fed
eral Rosorvo Banks will havo a normal crodit-londing and note-issu
ing power in tho aggrogatc of about $2,000,000,000.
Thus far, loss
than ono-fourth of this power has boon utilized in extending accom
modation to tho money markets of tho country, whether through tho
member banks of tho Fodoral Rosorvo System, or otherwise through
opon-carkot operations.
Tho Systom possossos, thoroforo, an un-
X -
259
— 6 —
touched margin of lending power of some $1,500,Q0Q,000.
is
When
it
recalled that a dollar of reserve Credit extended to a member
bank by a Federal Beserve Bank may multiply itself by five fold
or
more in the lending power of ihe irefaiber bank, it is at once
apparent that the banks composing the Federal Reserve Sysietc member banks and Federal
tial! credit
\
000,000.
Reserve
capacity for the
Banks together - have a poten
borrowing community
of
sofee $7,500,**
This is an enormous potential credit $0Wef*.
Rut is is
important that we should recognise that such power has its dangers
and temptations as well as its protective strength and teassufanCe*
To the expansionist it opens alluring vistas of inflation.
By
its wise use, however, it is capable of becoming at critical times
a factor of decisive importance in the credit operations which will
have to be undertaken during the period of the war - a bedrock of
strong and wise finance.
What the Federal Reserve Ranks can do usefully to help
the financing of the country in its present crisis is one thing,;
what they may find' it necessary to do against their best judgment
and to the prejudice of the System*s healthy devellpment, is an
other.
X-259
-
1 -
How much the Federal Reserve System cafi be the maker of its
cwra destiny during the period of the war is at
beet
tfncertain*
the Federal Reserve Banks are, after all, but one part, however,
important a part, of our national machinery of finance, and
that machinery will work to poor purpose, if any important part
of it does not mesh in with other essential parts.
The making
of a national financial policy f.or the conduct of the w a r is
mot,
in the hands of the Federal Reserve System.
The System oc
cupies, it is true, by reason of its control of money rates, a
position of strategic strength in the general credit affairs; of
the country.
But the extent to which the Federal Reserve Sysfc&m
will feel justified in using its powers of control to affect,
the direction or alter the course of the nationfs financial pol
icy will almost of necessity depend upon the extent to which its
advice is sought in the shaping of our national financial poli
cies, and the degree of support accorded its judgment and action
by the country at large.
It may well be ti]at our experience in
this respect will repeat that of the leading European belliger
ents, and that the banking policy of the Federal Reserve System,
like that of the English, French, and German banking systems,
X-259
-
8 -
will be what the general financial policy of t&e Government,
and nation make it.
If our general policy of finance is cour
ageous, ,sound, and strong, our banking policy can be sound and
strong.
But i f .our general financial policies are weak or
vacillating, our general banking policy, and that of the Bedera! Reserve System in particular, is likely of necessity to
be weak.
As yet the general plan of finance for conducting
the war has not been determined.
Ihere is still much discus
sion in and out of Congress as to
the relative parts of the
burden of war outlay to be assumed by taxation and by loans,
discussion proceeds, the more
and the more_/h.pparent it is also becoming thd; no plan for mo
bilizing the financial resources of the nation on the scale of
magnitude in contemplation will be adequate, which is not but
tressed at every critical point, by an effective mobilization
of the country's economic resources.
Of necessity, the first
steps in providing for Government outlays and the inmediate
advances needed by our Allies, will have to be furnished by
loans.
The first of these, the Liberty Loan, is now being
carried to completion, and in its negotiation the Federal Re
serve Banks have had their necessary and important part to
play.
A loan of $2,000,000,000, even in a country as rich
X-259
-
as ours tofi
9 -
prosperous in a pecuniary sense as ours has
been during the past two years, is probably to be regarded
as in excess of the current funds of the country immediately
available for investment*
Extensive banking accommodation
was therefore to be presumed to be necessary, at least in
the first steps of its placement*
How much of the $2,000,-
000,000 loan is being taken by the ultimate invester, and
how much by the banks and other intermediate agencies, is
not yet
known*
It may be assumed, however, that a consid
erable part of it will be some time in finding lodgment in
the hands of the permanent invester, and that this amount,
together with much that has nominally been taken by investers, will have required the
banking assistance*
extension of some temporary
In these circumstances, it has been
the policy of the Federal Reserve Banks to give to their
members and to the banks of the country generally, and
through them to their customers, who were subscribing to
the Liberty Loan, credit facilities on liberal terms-
The
Eederal Reserve Banks have been authorized to make prefer
ential rates of 3% upon 15-day paper of member
banks, and
3-1/2 % ( the rate carried by Liberty Loan bonds)
to the
banks - member, non-member, and savings - and to their cus
tomers, who are borrowing on their 90-day
x-259
-10-
notes for* the purpose of effecting payment of their
bond subscription*
authorized
The Federal Reserve Board'has also
a special one^day rate, as low as 2$, ixi
order to enable the banks in the country’s greatest
financial centers to prevent undesirable
in the market for call money.
disturbances
For under conditions
like the present, the state of the call money market
has a very
definite influence upon the general finan
cial situation.
The marked effect which these
policies have
had in promoting a spirit of confidence among the banks
of the country and the people generally in taking
hold of the Liberty Loan, cannot be doubted, in view
of the unprecedented success of this whole vast opera
tion.
Whether these liberal policies will beget
a
false sense of security and excessive reliance upon
banking credit, and especially upon the resources of
the Federal Reserve System, to finance the war loans
of the Government
it is too early to say.
Banks can,
perhaps, safely undertake the financing of wars of
ordinary financial magnitude, but a war calling for
expenditures and advances estimated, as they are by
the Secretary of the Treasury, at $10,000,000,000 for
the first year, clearly calls for more fundamental
financial provision than can be provided by the banks
of this or any other country.
Indeed,
rich and power
ful both in a financial and an economic sense as the
United States is, it cannot hut awaken earnest solicitude
how we should best proceed in undertaking to finance
a war that is to cost $10,000,000,000 a year.
The wealth of the United States was estimaipi
o-d before the war at about $180,000,000,000.
It is now
estimated as high as $2 2 5 ,000 ,0 0 0 ,0 0 9 / andsome oiren
venture to place it as high as $250,000,000,000.
If
we take the Iasi named figure, it is three times the
estimated wealth 6f Great Britain or Germany, and the
inference has been hastily drawn by some that we, there
fore, as a people possess three times the contribuiive
capacity of Great Britain or Germany, which have been
the heaviest spenders among the European belligerents.
Such comparisons, however, are apt to be misleading.
It is not so much the assessed wealth of a country, but
its realizable wealth that counts in war time as an
index of financing capacity, and there are great dif
ferences between countries with regard to the propor
tion of their total wealth on which they can realize
for the purposes of war financing - England, among
the present belligerents, being manifestly far the
most fortunately circumstanced in this respect.
of far more importance even than realisable
But
wealth
x-259
-Is-
as an index of a nation's financial or contributive
capacity, is current income or the current product
of industry, especially for a country which has to
he taken hy itself and do all its financing from
within, and without external assistance - for such
is the position of the United States.
We shall have
to pay as we go, out of our own unaided resources;
that is, out of current income or the current product
of industry.
How much of our current income and pro
duct is to he regarded as effective income - that is,
as made up of things available for Government use is the question that must he answered in attempting
to estimate the financial and contrihutive capacity
of the nation for war purposes.
By effective income
is meant that portion of the total gross income of
the nation which is in excess of a reasonable and pro
per provision for the living requirements of the people.
It is that excess which, in war time, is to he regarded
as the nation's available or spare income - that is,
the income that can he spared or withheld from individ
ual consumption and turned over for the use of the
Government.
Obviously the wider this margim of sur
plus or disposable income,.the greater the effective financial
strength of a country.
x-259
*13 -
What, theft, is our effective incoine?
OuJr gross annual income was estimated "before
the war at $30,000,000,600.
The growth of our indust
rial and productive power and the rise of prices which
have gone on apace during the past two years are esti
mated to have carried our gross national income up
to from $35,000,000,000 to $U0,000, 000, 000.
If the
latter figure may he taken as approximately correct,
it is clear that the expenditures in contemplation
for the war ($10,000,000,000) will absorb about onefourth of our gross national income, and call for a
considerable addition to the annual savings of the
nation.
How much this amount is in excess of the
present annual savings or investment
fund of the
American people - that is, the proportion of its in
come annually set aside and withheld from consump
tion - can only be conjectured; but our present actual
savings fund is almost certainly less by one—half,
than the amount which it is proposed to raise for the
purposes of the war.
It was competently estimated
that the annual savings fund of Great Britain before the
war amounted to $2,000,000,000.
It is doubtful
whether ours amounts to more than twice as much as
Great Britain's, but even if we take an optimistic
view of the situation and allow that ours may amount
X-259
-1Uto as much as $5,000,000,000, i t i s c le a r th at the
fin a n c in g o f the war co n fro n ts ug w ith the problem
of c o n v e rtin g an a d d it io n a l $5,000,000,000
o f the
g r o s s income of the American people in to sa v in g s
to be turned over fo r the v.se of the Government.
The undertaking may well seem stupendous
and to involve for many classes of the consuming pub
lic very drastic revisions of their customary mode
of living.
The more the situation is pondered, how
ever, the clearer it becomes that we cannot success
fully undertake the financing of the war except by
putting it on' a foundation of economic concrete by
the practice of thrift on a scale which has not been
our national habit for many decades.
There are no
mysteries in sound finance; no short-cut and easy me
thods by which we can make something out of nothing.
We shall be dealing in self-deception, therefore, if
we attempt to avoid facing the fact that the war,
on the scale which is projected, will call for a di
version of about one-fourth of the annual incomeor let it be stated more fundamentally, one fourth
of the annual productive power of the nation - from
individual use to Government use.
Thus stated, it
is clear that saving on a scale of unprecedented in
tensity will be an essential preliminary under any
x-259
- 15 -
effective scheme of national finance we may adopt,,
and the question, which is much discussed, as to
whether taxation or loans should, he our chief re
liance, or the proportions in which the two should he
combined, gets its chief meaning from the effect that
the one or the other, or any given combination of the
two, may he expected to have either in stimulating
or in forcing national thrift and the growth of our
annual savings*
The danger of the loan policy is that by
deluding itself with a notion that it is putting the
burden on to the future, it will,
through resort to
fatuous and easy expedients, put the burden both on
the present and on the future.
This will happen if
the loan policy, failing to induce
a commensurate
increase in the savings fund of the nation, degener
ates, through the abuse of banking credit,
into
inflation — raising prices against the great body
Of consumers
as well as against the Government, thus
needlessly augmenting the public debt, and increasing
the cost of living just as taxes would.
The policy of
financing war by loans, therefore, will be but a frag
ile aiid deceptive and costly support unless every
x-253
36
-
.
dollar obtained by the Government is matched
by a
dollar of spending power relinquished by the commun
ity; in other words, will fail and develop into
inflation unless the dollars which
are
subscribed
to the bonds of the Gove nament are real dollars, the
re.sult of real savings and of real retrenchment.
The danger to be feared in undertaking to finance our
war by credit is that sophistry and financial leger
demain may lead us to attempt to carry the operation
through as
of
an operation in banking finance instead
as an operation in saving and investment.
The
doctrine is already current in the country, with
the sanction of some leading bankers, that our war
cannot be financed except by credit expansion running
to the limits of inflation.
Being dealers in banking
credit, they naturally take the view that the expan
sion of credit in question will properly have to be
an inflation of banking credit;
for this is the new
and most recent form of inflacion which the gigantic
war in Europe has been bringing to the front
as a de
vice in war finance.
Inflation as
an expedient of public finance
has long been practiced, although it has never had
the sanction and approval of those whose business
it
has
been to
lay
down
canons of finance
rather
■ &»259
~17~
than ta engage in the practice of finanea*
The record of
our own great wars and the records of the groat wars
of
other nations in modern times show pretty uniformly that
timidity in facing the seriotts realities of war finance has
usually developed a situation from which escape was finally
sought through the desperate and costly expedient of Govern
ment currency inflation*
Such was our disastrous experience
in the Civil War* when resort was taken to the greenback
currency, which was nothing but a device of inflationism,
and some $500,000,000 thereby added to the cost of the warwhich might have been avoided had the Government’s finan
cial operation been maintained on a strong and healthy
basis - to say nothing of the demoralisation wrought in
business and the hardships and iniquities inflictod upon
the groat body of defenseless working men and consumers.
Clear and specific as the teachings of that experience
are to those who can learn from history, it will remain
for this war to demonstrate whether or not the lesson
has been fully taken to heart*
Inflation is full of
seductive potentialities to the pundits of paper finance*
Even if wo do not avowedly repeat the costly mistakes of
our Civil War by ventures in the field of Government
currency inflation, we may yet reach a similar result and
land the community in a similar plight through the more
subtle and less vulgar process of banking inflation.
X 259-18The average business man, end even the majority
of bankers, have been very slow to appreciate the fact
that in such a country as ours, with a highly organized
system of mobile banking credits, banking credit is 'ie
most common form of purchasing medium used by the busi
ness community.
When an ordinary commercial bank opens
a credit on behalf of any of its customers for $10,000,
it creates by a stroke of the pen an addition to the
supply of the purchasing media of the country of $10,000
less discount, just as unmistakably as if it had issued
$10,000 in bank notes or had paid out any of the other
forms of conventionally recognized currency or money.
Banking credits which originate in connection
with actual operations in industry or commerce, and which
are protected against over over-extension by effective
reserve requirements, are of course a highly desirable
substitute for currency in a community which is habit
uated to modern banking practices.
The superior con
venience of the check as against the bank note as a form
of remittance and payment is altogether obvious, and
explains the well-established preference of the American
business community for it*
Hor is it liable to the
*X-259abuse of inflation as long as the hanking credit which is
circulated by means of the check is bottomed upon genuine,
that is to say productive, operations in industry and trade,
resulting in an increased supply of goods.
Inflation takes
place whenever the supply of the purchasing media is in
creased more rapidly than the supply of goods produced
and to be exchanged.
Prices then rise#
Their rise is
inevitable under the operation of the general law of de
mand and supply, to which the value of money is no ex
ception but rather the most exact case.
The power to
purchase and pay is the pov.er to bid, and when the supply
of the means of purchase and
payment- no matter what
their forms, whether gold certificates, bank notes, Fed
eral reserve notes, or bank deposit-credits circulated
by means of checks- outruns the increase in the supply of
goods available for purchase, there will be increased bid
ding for the gnods, with the inevitable resultant of in
creased prices. The evidence and the meausre of a state of
inflation proceeding from inflation of money, currency, or
credit, is the rise of prices*
When, therefore, banking
credits are opened for any oth^r purpose than to facilitate
transactions which result in an increase in the production
and supply of goods, banking credit is being used to lay the
foundation of inflation'*
-X-259-
-20We have a marked advance of prices in this country
since the beginning of the European
estimated at U5
war* The rise is
Wo have also had in the same time
an increase in the supply of the country’s purchasing
media, consisting of money, currency, and most of all*
hanking credits, of some $5 *5 0 0 ,0 0 0 ,0 0 0 , or
An
examination of the resources of the hanks of tho country
so far as that is possible, indicates moreover, that a
very considerable volume (U5^) of the hanking credits
created since the beginning of the European war in 191^
is offset by socuritics of an investment, not a commercial,
character- consisting largely of Government obligations*
That is to say, a large part of the new banking credit
which has. been created in tho past two and half years has
not boon used to finance tho increased production of
goods, but to finance the transfer of ownership and
uso of a part of the existing production to the hands of
borrowing Governments* Tho conclusion is irresistible
that inflation has been in progress to a marked degree
in this country during tho past two years and a half;
and that the steady forward march of prices which has
cramped and pinched
the average consumer has boon
caused, for tho most part, by the rapid expansion of
banking crodit and currency without a commensurate
expansion
of nroductiVc industry*
-X-259-20«u
The same process., only in a vastly intensified degree,
has been going on in the belligerent countries of Europe and
has given rise repeatedly to the gravest expressions of solic
itude by those who are engaged in looking through the tissues
of paper finance to the inexorable economic facts.
All of the
belligerent countries of Europe, in one degree or another,
have undertaken to finance the war by borrowing, with infla
tion results that, for the most o; them, make a tragic record
of hardship, for the, masses and needless augmentations of the
nations1 debts, and will leave behind, at the close of the
war, and for the next generation a heritage of unspeakable
financial confusion.
Inflationism may not be the ultimate term in
weak or bad finance, and situations and conditions may
from time to time present themselves to us which will
make a d^grow of' temporary inflation unavoidable*
But
inflation is so nearly always bad, and so nearly always
avoidable - if ther^ be but will and courage enough
on the part of th^ community and its governors is
that it/ pretty nearly an ultimate test
X-259
- 21 -
of the character and workings of a country1s credit and finan
cial system.
I repeat, therefore, that if our loan policy
through an undue reliance upon banking credit, degenerates"
into inflationism, it means that the loan policy is failing,
and therefore that the system of undertaking to induce the
people to save for the use of the Government - in brief, the
voluntary system of finance - must give way to some other
more rigorous method or system - the.system of compulsion
or financial draft.
That nay mean either (l), taxation car
ried to the limit, that is, conscriptive taxation, as some al
ready propose, or (2), conscriptive borrowing - a less drastic
form of financial draft - as the only acceptable alternatives
to inflation.
For let it not for a moment be overlooked that in
flation, in its effects, amounts |o conscriptive taxation of
the masses.
It is,indeed, one of the worst and the mcst un
equal forms of taxation, because it taxes men not upon what
they have or earn, but upon what they need or consume.
The
only difference, for the masses between thi§ kind of disguised
and concealed taxation and taxes which are levied and collected
openly, is that in the case of the latter the Government gets
the revenue', while in the former case it borrows it, and those
* 22. •-
to whom it is eventually repaid are not those, for the most
. part, who have been mulcted for it.
Inflation, therefore,
produced a situation akin to double taxation in that the
great mass of the consuming public is hard-hit, by the rise
of prices induced by the degenerated borrowing policy, and
later has to be taxed in order to produce the revenue requi
site to sustain the interest charge on the debt contracted and
to repay the principal.
The active business and speculative
classes can usually take care of themselves in the midst of
the confusion produced by inflation, and recoup themselves
for their increasing outlays.
Indeed, inflation frequently
makes for an artificial condition of business prosperity.
That is why war times are frequently spoken of in terms of
enthusiasm by the class of business adventurers-
But it is
a prosperity that is dear-bought and at the expense of the
great body of plain-living people„
It would be a monstrous
wrong if, in financing our present war, we should pursue
methods that would land us in a sea of inflation in which, the
great body of the American people, who are called upon to con
tribute the blood of their sons to the war, were made the vic
tims of a careless or iniquitous financial policy.
In w arn in g thus e m p h a tic a lly a g a in s t the dangers to
our whole •ponouy that will ffellow the financing of our war
by an inflation of banking credit, I would not for a moment
wish to be understood as implying that the war could be fi
nanced without the extensive cooperation of banking ins.itutions and our system of banking credit.
Loans in such amounts
as the Government will place cannot be raised to any important
extent out of past savings, for those have already been crys
tallized into fixed fores of investment.
Bor can they come
entirely out of inmediately present savings.
some degree anticipate future savings.
They must in
We have just completed
the negotiation of our first war loan of $&,000,000,000.
Our
ordinary savings may be at the rate of $4QQ,000,000 a month,
and if this has already been increased by one-half (it will
have to be doubled in order properly to finance the war) it
will have yielded, in the months during wbich the negotiation
of the Liberty Loan is being carried to completion barely
enough to effect the payment of the loan.
In those circum
stances^ it was clearly necessary that the great financial in
stitutions of the country should make advances, either to
their customers in aid of the payment of their subscriptions
to Liberty bonds, or directly to the; Government in payment
of their own subscriptions, in the expectation that they could
X-259
- 24 -
subsequently place the bonds so acquired
with the investing
public.
H o t long a tine might reasonably be allowed Liberty
Loan subscribers who have sought accommodation from the'r
banks in order to complete their subscriptions, tb take up
these loans, or how long a title should be Allowed the banks
which have made direct
subscriptions in order to work off
their bonds on the saving and investing public, in other
words, how
far we might safely go in anticipating future
savings, is a question upon which opinions may well differ.
Competent opinion ia England, where a similar problem has had
to be faced in connection with their great
$5> 000, QOO, 000 war
loan, has assumed that a year is the normal limit beyond which
banking accommodation should not be extended in carrying buyers
of Government loans.
Our situation and circumstances are prob*-
ably more favorable to a shortening of this process.
Ehgland1^
whole trade and industry have been seriously dislocated by the
war.
Her producing power has been much impaired, and therefore
the source on which her saving power has to operatehas been much
diminished.
Ours is a contrary situation.
never come ®o near
We have, as a nation,
realizing our full productive capacity; our
potential savings fund, therefore, never been so large; and the
circumstances seldom so favorable for the rapid conversion of
potential savings
of wealth
into actual savings.
Moreover, the stream
out of which savings are to be made is a pretty con-
X-.153
— 25 —
tinuous flow in this country,
A much shorter period of
time than what has "been thought necessary in England in
order to assist the anticipation of future savings would,
therefore, seem to be necessary in this country, and 't
seems doubtful to me whether, as
situation, more than
a statement of the normal
six months should, on the average, be
allowed in which to take Up credit extended to individuals
in order
to enable them to buy Government bonds, and they
should be pressed hard to complete their prepayments of
borrowed funds in four months, if we are to avoid the danger of inflation.
The banks ought to be put under pressure
to work off their own bonds, that they do not as a matter
of banking policy mean to hold as a
part of their permanent
investments, within a period of not more than from four to
Six months.
Otherwise they will not be in a position satis
factorily to assume their obligations in connection with the
subsequent loans which will be placed by the Government under
a program of providing $10,000,000,000 a year, or over
$800,000,000 a month.
But when all is said, and every reasonable and
proper provision for the legitimate use of the banking and
credit machinery of the country is made, in order to mobil
ize the nation's money savings, let us not make the mistake
— 2-£x*“'
of supposing that the saving
ent exigency is merely
X-255
which is called for in the pres—
a saving of dollars.
It is a saving
of the productive power of the conmunity from the service of
private consumption for the service of public needs which is
called for, said the saving of money is of consequence only so
far as it results both in a transfer and in an iflCfease of the
effective industrial power of the nation for Government use.
Taxation, and even loans which are bottomed upon
real money savings can at best only provide the Government
with buying power.
But the Government will need more than
buying power in order proper.'y to finance the war.
As the
war goes on, it will become clearer that this is a war of econ
omic strength and resources, and that victory will lie with the
nations which are best able to diminish the processes of econ
omic waste and best able to resist the processes of economic
exhaustion.
More than buying power will, therefore, be needed
for the effective prosecution of the war and its successful
issue, no matter how orthodox and carefully guarded in a fi
nancial sense, the methods of providing the Government with
the needed buying buying power are.
Napoleon summed up his
experience as the greatest soldier of his age in the statement
”An army marches on its belly."
B ® experience of the present
X-259
- 27 -
war is every day reinforcing the doctrine that a successful
army is carried on the hack of industry.
It cannot: therefore
be too emphasized, in the discussion of plans for the mobili
zation of the financial resources of the country, that, much
as the Government will need buying power, it will need some
thing far more potent and fundamental than buying power.
It
will need arm power, tool power* nature power; - and.brain
yower and will power to organize and vitalize and direct these.
Nature power we have in unlimited abundance.
Our present prob
lem is to combine with it the undeveloped potentialities of our
arm power, our brain power, our saving power, and our will power;
the power to do, and the power to do without - the power to do,
that means producing more, and the power to do without, that
means saving more.
Can we, then, reorganize our life during the period of
the war so as to increase the productive power of the nation
and so to increase our savings
as to provide a quarter of this
productive power for the use of the Government?
We can if we
will, but only by an heroic exercise of our national will to en
force the necessary economic sacrifices and saving.
To make our
saving effective, we must find and impose upon ourselves a sub
stitute for the English blockade of Germany and the German sub
marine blockade of England in forcing economy and saving.
have been told upon trustworthy authority that when
I
the policy
of the submarine warfare against England was under discussion
x-a.5
-
m. -
in Berlin, one: of the most eminent of Germany*s economic strat
egists argued vigorously against it, not on the ground of its
violation of the established rules of international practice,
but on the ground that it would help England
hurt her.
more than it would
"Keep the submarine away from England’s shores and
England will eat herself into-bankruptcy quicker than the sub
marine can bring her to starvation."
So I believe it is coming to be recognized, by those
who appreciate that this war is an economic endurance contest,
that England’s blockade of Germany has been one of Germany’s
greatest aids in the financing of her war.
It has forced the
most rigid sort of economy, and through bringing the whole na
tion appreciably near the point of starvation, has led them to
accept the most drastic control of living that the world has
ever seen, and so has measurably offset for the great mass of
the people the terrible and iniquitous injuries that would
otherwise have been inflicted upon them by the financial poli
cy of inflation which Germany has followed in this war.
Those
who are puzzled because of the scanty use that has been made
in Germany of war taxation to finance the war - her whole re
liance being placed substantially upon loans - have here, I
believe, the explanation
of this strange phenomenon.
It
shows that inflation can only be absorbed on an empty stomach
X-2.59.
- 29
and where ’'rationing”' is established as a supplementary pro
cess of public finance.
We must of our own choice impose a "blockade upon
ourselves against the seductions of luxuries and the tempta
tions to waste.
That means we must save, save, save.
More
than this, we must study how to make our saving most effect
ive.
Effective saving in war time means much more than
simply cutting down the number of dollars which we spend and
turning them over to the Government
for its use.
as taxation lendings
Savings of dollars is good as far as it goes,
but it is a mere beginning and does not go far enough.
Much,
In many instances very much, depends upon what I economize
in the process- of making my savings.
Some economies are
much more effective than others, and the test of effective
saving must be whether that which I refrain from consuming,
in the process of saving dollars, results- in leaving unused
Equivalent value of the kinds of commodities which the
Government needs.
Suppose my income is $10,000 a year, and
that my family and myself have been in the habit of spending
all of it.
We now decide to economize to the extent of
$1,000 in order to subscribe to the bonds of the Government.
X-259
. * **
3Q -
How can we make that saving most effective; that is, most effect
ive when tested by what it enables the Government to get in the
way of needed articles and service?
If my family cuts down its
consumption of plain food - beef, bacon, beans, potatoes, etc.; plain clothing, gasolene, fuel, transportation, domestic service,
etc., all of these, things that the Government needs for the war
my family^ saving is very much more effective than if it simply
nut down the purchase of expensive dress, a box at the opera, an
annuity to an aged relative, a contribution to a school or club,
etc.
In either case, I am putting the Government in possession
of the buying power of a thousand dollars which I had previously
been accustomed to spend.
But in the former, in addition to hand
ing over to the Government one thousand of dollars, I am leaving
on the shelves of shopkeepers, etc., one thousand dollars worth
of goods and services of the kind which the Government wants and
needs,
and which it can buy with the $1,000 I have turned over
to it.
My saving has been effective because I have gone with
out the use of goods and services which it is important for the
Government to have, and turned over
with which it can buy them.
to the Government $1,000
In the second case, where my fam
ily economizes on costly dress, fancy foods, and other products
of the luxury trades which get their value not so much from the
quantity of labor it takes to produce them as from the rarity of
X-259
- S I
skilly Ifltfy saving of a thousand dollars is not nearly so ef
fective as in the fonr.er case in turning over
to the Govern
ment a commensurate value of the kind of commodities or the
kind of labor it requires.
Saving luxuries doubtless accomplishes s&mething,
but much less than is frequently supposed.
If I am in the
habit of spending $100 a ye^r for a suit, of evening clothes^
and decide, in view of the war, to forego that expenditure and
turn over the $100 to the Government in payment of a subscrip
tion for a bond, what have I turned over in the way of effec
tive industrial power?
The $100 which the suit of evening
clothes costs, represents, after all, a comparatively moderate
amount of labor and a comparatively moderate amount of mater
ial.
The high cost of the suit to me is mainly for the skill,
the taste, and workmanship of the designer.
Perhaps I .pay «a
good deal vfor the fashionable label that goes tinder the collar
or the magnificent rooms into which I am ushered in the procesSi
of relieving
price
me of $100 for a suit of clothes.
In brief, the
which I pay is made up largely of what the economists
call "prestige value"; that is to say, in the instance chosen,
I am paying the extravagant orice for dress rather than for
clothing, paying the high price net to get comfortable protec
tion for my body in the cold winter evenings, but to get some
thing which gives me a feeling of correctness - style, fit,
fashion, etc.
X-25C
>
- 32 If these illustrations are suggestive, they
point to the Conclusion that we must put intelligence and
discrimination into our economies if they are to be made
effective savings.
The test we must apply
how many dollars have we saved, but
is not merely
how much productive
power and material have we released for the use of the Gov
ernment and those industries which are producing the kinds
of things the Government requires.
Indeed, not only must
we put intelligence and discrimination into our economies
and saving, but we must do it with something of a religious
zeal.
The man who saves most effectively for his Govern
ment will be the man who, in the course of his daily life,
says, "Here is something the Government can use as well if
not better than 1' can.
and consumed it.
Ordinarily I would have bought it
I am not yoing to buy it now.
. to leave it for the use of the Government.
needs are more important than my desires."
I am going
The Government^
Thus, while we
must, press our economies in all directions, we must recog
nize that it is not the man who saves upon his costly ex
travagances, but the man wh«, in addition, saves upon the
basic materials or necessities of life,whose dollars count
most when they reach the hands of the Government.
It is no part of my present purpose to discuss
the economic value, in war time, of the doctrine of "Busi-
:&-2Z0
~ 33 -
ness, as usualn, but I believe certain inferences are clear
from the preceding analysis.
Much business will be speeded
up during the war and its condition will be one of unusual
activity*
Other business cannot be as usual, if we are to
pursue a program of effective national thrift, and public
opinion should not permit it to be so.
As we go along, and
the necessities of the war become more exacting, we shall
learn how to reorganize the industrial and consumptive econ
omy of the whole nation and every class in the nation, so
as to make it contribute
most to the Efficiency of the na
tion, as a nation that is organized for the business of con
ducting the war.
Ihe health and working efficiency of the
nation must not be allowed to suffer impairment; but when a
reasonable allowance is made for these ends, the nation*s
needs must take the right of way as against the desires and
wants of its individual members, even though some business
languishes here and there, and i^ not ”as usual,f. In brief,
economic and industrial principles rather than "business"1 or
"money-makingW principles must be our guide in reshaping our
economic organization for the business of war.
No plan of
finance, therefore, which is conceived simply in terns of
dollars, however real the dollars be, unless also conceived
in terms of the goods and productive power thereby set free
for public use, can hope to succeed in the fact of the pres-
X- 259
34 enfc national exigency.
Hew spuch tore serious, therefore,
will b© our national self-deception if, by a
process of
credit-mongering, the dollars which are turned over to the
»
Government are not real dollars, the results Of acts of
saving, but more or less fictitious dollars, created by
acts of inflation.
Saving will never be as easy for the nation as
during the period of this war, if we know why we are in
this war.
The war and all that it implies in the way of
high and chivalrous national endeavor should be our sub
stitute for our customary luxuries and individual
the war.
during
This is a time for national, not individual, in
dulgences.
We can afford to be generous in a national in
dulgence of the character wnich has carried us into this
war.
Indeed, when we consider the vast consequences for
civilization and the democratic principle that hang on the
issue of the war, we cannot afford to be other than gener
ous in support of the cause which we hold true and dear,
even though it involves the severest self-denial for us as
individuals.
Wars, it has been said, except those waged in na
tional defense, are luxuries-.
If ours is such a war, it rep
resents a luxury that has become an imperative necessity.
We
are not fighting a war of defense, but unless we put into the
X-25.9
*—35 "
prose cution of our war a will that is ablate with passion,
it may become a war of defense.
We are fighting a war in
defense of our principles; the sane principles for which the
fathers .gave their blood.
From one point of view such a fight
nay be a luxury, from the other point of view it is a necessi
ty.
But whether it be regarded as the one or the other, it
■means that for the time being we must give generously of our
substance and devotion as well as of our lives, as for a thing
that we cherish as more than life.
War against the Imperial. German Government "to make
the world safe for democracy'1 means to me, primarily, war to
break the stubborn will of the most stiff-necked, iron-blooded
oligarchy that, since the breakdown of feudalism in Europe, has
ever taken possession of the life and destiny of a powerful and
docile people, and sought to impose its will upon them and
through them upon the world.
Drunk with power, and with a will
that is mad with lust for dominion, the will of the Junker oli
garchy of Prussia must be broken.
But it will not be, unless
wo match its will with a will of our own as strong for the
things we know to be right as theirs is for the things we know
to be wrong.
It is a big and difficult, but heroic and noble,
enterprise on which we have entered.
for munitions, it calls for money.
It calls for men, it calls
But more than these, it
calls for will power, for this is a war of wills.
Ex-Officio Members
W . P. G . HARDING, G O V E R N O R
P A U L M. W a r b u r g , V i c e g o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAM LIN
W ILLIAM G. McADOO
S ECR ETAR Y OF TH E TREASU R Y
C H A IR M A N
JOHN SKELTON W ILLIAM S
CO M P TR O LLER O F TH E C U R R E N C Y
FEDERAL RESERVE BOAF^D>62
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
WASHINGTON
a d d r e ss
r e ply
to
F E D E R A L RESERVE B OARD
DIVISION OF REPORTS AND STATISTICS
July 6, 1917 *
Dear Sir:
Through oversight codo word "BLOT" was
assigned to new assot item ’’Gold with Federal Re
serve Agent”, this code word already figuring
against item ’’Exchanges for Clearing House."
Kindly use code word "BLIK" to desig
nate item "Gold with F. R. Agent," which item
should go into the "reserve" block, preferably
over or below item "BELT”, Due from Treasurer of
U. S., Gold Redemption Fund ( F. R. Notes)
Very t r u ly yours,
S e c re t a r y .
Ex-Officio
W . P, G. HARDING. GOVERNOR
PA U L m J w * S u )w . » V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
members
W ILLIAM G. McADOO
SECRETAR Y OF TH E TREASURY
Chairman
JOHN SKELTON W ILLIAM S
C O M P TR OLLER O F TH E C U R R E N C Y
FEDERAL RESERVE BOARD
H . PARKER W IL L IS . S E C R E T A R Y
SHERMAN P. A LLE N . A S S T . S E C R E T A R Y
and
WASHINGTON
F is c a l A g e n t
ADDRESS REPLY TO
F E D E R A L RESERVE B O ARD
Dear Sir:
This letter is being sent to a limited, number of bank
officers.
In order to ascertain the present position of the trade
acceptance as an element in the commercial pa.per of the country,
the Federal Reserve Board would consider it a favor if you would
reply briefly to the following questions, answers to which are de
sired for its information:
(1) How many and what proportion of your jobbing and
manufacturing customers are now requesting those to whom
they sell goods to sign trade acceptances?
(2) How many of those included under (l) are also giv
ing trade acceptances to those of whom they buy?
(3) How many or what prcportion of those included under
(l) and (2) are in the habit of discounting trade acceptances
with you?
(4) What rates, if any, were in effect by your bank on
July 2, 1917, for the discount of tr-de acceptances?
(5) Is your rate for such trade acceptances lower than
the rate you would charge in discounting the direct note of
the concern offering you such acceptances? If so, how much
lower?
(6) Would you grant a greater aggregate line of accom
modation to the concern offering you trade acceptances than
you would to the same concern on its own direct obligation
accompanied by a satisfactory statement of condition? If so,
how much larger (in percentages)?
(7) What can be done by the £|oard or by others to
encourage the use of the trade acceptance?
Enclosed is a copy of th^ Board’s Regulations for 1917
on page 6 of which will be found the definition now in force with
regard to trade acceptances.
Very truly yours,
2615
W . F . a . H A R B IN S , SOVRRROR
P A U L M. 'W ARBURR. VICE SOVRRROR
FREDERIC A..
ADOLPH
CHARLES S . HAM LIN
E X -O F F IC IO .MEMBERS
W ILL IA M S . HCADOO
SECRETARY OF THB i l U I I H
C h a ir m a n
,c«*iO§5.
k
JOHN SKELTON W IL L IA M S
COHFTROLLIR OF THR CURRENCY
L -
FEDERAL RESERVE BOARD
WASHINGTON
. H . PARKER W IL L IS , SECRETARY
SHERM AN P . A L L E N . A*ET.SECRETARY
AND FISCAL AOERT
FEDERAL RESERVE WOARO
n.
Dear Sir:
This letter is being sent to a limited number of’ busi
ness men.
In order to ascertain the present position of the trade
acceptance as an element in the commercial paper of the country,
thel Federal Reserve Board .would consider it a favor-if you would
reply briefly to the following questions, answers t.o which are
desired for its information.
(1) Do you at present ask your customers to give you
trade acceptances for goods bought from you?
(2) Do you at present give trade acceptances when you
buy goods?
1
(3) Do you find that the trade acceptances furnished
■ you by custoners are more promptly paid than open accounts
(with or without "cash discount") for like amounts?
(4)
Do you discount trade acceptances at your bank,
and> if so, what rate is charged you7 Is this less than
the rate on your straight pa^er? If so, hew much?
. (5) Does your banker give you a larger aggregate
line on trade acceptances than on your straight paper? If
so, how much larger (in percentages)?
(6)
What.can be done by the Board or by others to
encourage the use of the trade, acceptance?
Enclosed is a copy of the Board’s regulations for 1917,
on page 6 of which will be found the definition now in force with
regard.to trade acceptances.
Very truly yours,
Secretary.
Ex-Officio Members
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG, VICE Governor
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
Secretary
of the
T reasury
C H A IR M A N
JOHN SKELTON WILLIAMS
Comptroller
of the currency
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
and
x-266
WASHINGTON
F is c a l a g e n t
ADDRESS REPLY TO
FE D E R A L RESERVE B O AR D
Dear Sirs:
There are being sent to you to-day under separate
cover three hundred copies of form 83a>, blank application
for stock for use by State banks and trust companies; and
also three hundred copies of a supplement to form 83a, out
lining information to be filed as exhibit 3 with each appli
cation.
Kindly destroy any of the old application forms
that you may have on hand.
The Board will continue to receive applications made
out on the old forms, but it is desired that no more of these
forms be .given out.
Very t r u l y y ou rs,
A s s is t a n t S e c re ta ry .
Ex-Officio
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG, VICE Governor
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
members
WILLIAM G. McADOO
S ecretary of the treasury
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
C O M P TR OLLER O F TH E C U R R E N C Y
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
and
WASHINGTON
LY tO
FEDERAL RESERVE BOARD
Dear Sir:
There is "being sent to you., under separ
ate cover, a supply of fora No.
plication for additional stock.
F is c a l A g e n t
5 6
(Revised), ap
Kindly discard
the old forms you may have on hand.
Very truly yours,
Assistant Secretary
x - 269
July II, 1917.
To Members ol the Staff of the Federal Reserve Board:
By direction of the Federal Reserve Board, I hand you the
following suggestions transmitted by Mr. Herbert Hoover:
’’Enlist in the food economy campaign.
’'tTidbtisgto aid my
country during the war I promise:
1.
To eat one wheatless meal a day,
2.
To eat beef, mutton or pork, not more than once a day
3*
To economise in the use of butter,
4.
To cut my daily allowance of sugar in tea or coffee
and in other ways,
5.
To eat mere vegetables, fruit and fish,
6.
To urge in my own home' or the restaurants I frequent
the necessity o.t economy,"
V ery t r u l y y ou rs,
Secretary.
w.
EX-OFFICIO MEMBERS
p .y > .
m im n iG ,
governor
p a u l ^ m T w v r B'URg ,
WILLIAM G. McADOO
SECRETAR Y OF TH E TREASURY
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
Vice Governor
FREDERIC A. DELANO
ADOLFH C. MILLER
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
WAS HIN GTO N
REPLY TO
F E D E R A L RESERVE B O A R D
July 12, 1917.
Dear Sir!
The Federal Reserve Board has, during the past few
weeks, received communications from several Federal Reserve
hanks asking if any action could he taken looking toward the
exemption of their employes from the operation of the Federal
draft for military service.
%
The Treasury Department has more recently referred to
the Board letters and telegrams from the governors of most of
the Federal Reserve hanks asking if this exemption could he se
cured on the ground that the hanks are fical agents for the
Government and are doing a large amount of additional work in
cident to their duties as such, and in connection with the hona
issues.
While the Board appreciates the importance of protect
ing the organizations of the Federal Reserve hanks, it is unable,
after very careful consideration, to find any grounds upon which
to base a request for the exemption of employes of Federal Reserve
hanks. The law does not authorize specific exemption in favor of
the employes of Federal Reserve hanks or of the Federal Reserve
Board, and while the banks will doubtless suffer some inconvenience,
just as member hanks, insurance companies, and mercantile concerns
will, the Board believes that the executive officers of the Fed
eral Reserve hanks should, as a rule, release cheerfully any
employes who may he drawn under the selective draft, filling their
places either with men who are beyond the draft age, or with com
petent women, as has been done to such a great extent in all bellig
erent countries. The Board does not see how it can take the position
that Federal Reserve hanks are so much in a class by themselves that
general exemption in their favor should he requested, and it does
not believe that such a request could he granted if made.
The
Board realizes the possibility that some employes may be drawn
whose services are especially valuable to the banks, and in such
specific cases, it would suggest that application be made for ex
emption.
Very truly yours,
Governor.
Ex-Officio Members
W. P. G. HARDING, GOVERNOR
PAUL m . w a r b u r g , v ic e Go ve r n o r
FREDERIC A. DELANO
ADOLPH CL M ILLER
C H *R l 4 SSf a . HAMLIN
W ILLIAM G. MCADOC
SECR ETAR Y OF THE TREASU R Y
C H A IR M A N
JOHN SKELTON W ILLIAM S
com ptr oller of th e
FEDERAL RESERVE BOARD
Currency
WASHINGTON
H. PARKER W IL L IS , S E C R E T A R Y
SHERMAN P . ALLE N . A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
ADDRESS REPLY TO
FE D E R A L R ESERVE BOARD
July 12, 1917
Dear S ir:
The Federal Reserve Act empowers the Federal Reserve
Board "to add to the number ot cities classified as reserve and
central reserve cities under existing law in which national
banking associations are subject to the reserve requirements
set forth in Section 19 of this Act; or to reclassify existing
reserve and central reserve cities, or to terminate their desig
nation as such."
A committee of the Board has had under consideration
for some tins past the suggestion that certain cities which are
now the domicile of"country banks" should be given the status of
reserve cities.
The committee has prepared a list of cities as
shown on the list enclosed herewith, which might, by reason of
their population, be classed as reserve cities.
From this list
of 27 cities, the committee has recommended that 8 cities be
named as reserve cities, to wit:
Buffalo, N. Y.
Toledo, Ohio.
Peoria, Illinois.
Memphis, Tennessee.
Jacksonville, Florida.
Grand Rapids, Michigan
Evansville, Indiana.
Oakland, California.
X—271
-
2
-
In all but on© of these 8 cities, amounts due to
banks exceed 23 per cent of the total deposits.
In the city
which constitutes the single exception - Buffalo - the bank
deposits aggregate only 13.4 per cent of the total, but the
sum total of these (more than $12,000,000), the population
of the city and its importance as an industrial center, would
seem to justify the reclassification proposed.
You are requested to bring this letter to the atten
tion of your Executive Committee or Beard of Directors, and to
acquaint the Board at your earliest convenience of the consensus
of opinion regarding the proposed action, at the same time mak
ing any suggestions which you may deem proper.
Very truly yours,
Governor
W. P. G. HARDING, G O V E R N O R
PAU L M. WARBURG, VICE G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
E X -O FFIC IO M EMBERS
WILLIAM G. McADOO
S e c r e t a r y o f th e T r e a s u r y
C H A IR M A N
JOHN SKELTON W ILLIAM S
FEDERAL RESERVE BOARD
C O M P TR O LLER O F T H E C U R R E N C Y
WASHINGTON
H. PARKER W ILLIS , S E C R E T A R Y
S H E * M A X * . f ALLE N . A S S T . S E C R E T A R Y
-k -A iw f ijlt A L A g e n t
AD D RESS R EP LY TO
FEDERAL RESERVE BOARD
July 13, 1917.
Dear SirtThis morning I wired you as follows, which I now confirm:
"You may discontinue daily statements "by
wire until July twenty-seventh; resume
them July twenty-eighth to thirty-first
inclusive; then discontinue; resume
again August fourteenth to seventeenth
inclusive; then discontinue and resume
again August twenty-eighth to September
second inclusive."
The Board appreciates the additional work that these
statements entail upon your force, but deems it important
that it keep in close touch with the situation during those
periods when payments are being made on account of Liberty
bond subscriptions.
The Board requests that care be ta
ken to resume the telegraphic advices on the dates above
indicated.
Very truly yours,
Governor.
X-2/6.
PRESS
S T A T E M E I T.
July 13, 1917.
The Federal Reserve Board today announced that arrange
ments had been completed for the organization of a branch of the
Federal Reserve Bank of San Francisco at Spokane, Washington* The
branch will be under the control of a board of five directors,
three of whom have been designated by the Federal Reserve Bank of
San Francisco and two by the Federal Reserve Board,
those designated
on behalf of the Federal Reserve Bank are as follows:
Mr. E» T* Coman is President of the Exchange National Bank
of Sookane '
Mxn, D♦ W. Twohy is President of the Old National Bank of Spokane
-Mr- Charles A* McLean is at present Manager of the Spokane
Clearing House.
Those designated on behalf of the Federal Reserve Board
are as follows:
Mr. Peter McGregor is a farmer and stock raiser living near
Spokane.
Mr. G. I* Toevs has had long experience in the milling and
banking business and is now Vice President and Manager at Spokane
for the Centennial Mill CompanyMr. McLean will be Manager of the Branch and Chairman of its
Board*
The Board has been advised that the eligible state banks
in the territory adjacent to the Spokane branch will take the neces-
X-276- 2
Press Statement*
sary steps toward becoming members of the Federal Reserve System as
soon as possible and it is understood that the local barbing community
will freely use the new branch, while there will be close working ar
rangements between it and the Spokance Clearing House*
mEx*Officio Members
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG, V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
S iC R E T A R Y O F T H E T R E A S U R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
WASHINGTON
H . P A R K E R W I L L I S . SECRETARY
SHERMAN P.
and
X-279 ADMFEDERAL
E“ REPLYRESERVE
TO
BOARD
July 14, 1917,
Dear Sir:
The Federal Reserve Board is desirous to learn
the amounts of accommodation extended by your bank to nonmember banks in your district in connection with Liberty
Loan operations.
As your schedules BD-4 fail to specify
the amounts of nonirember bank paper discounted for your mem
bers, will you be good enough to send us these data distri
buted by 15-day, 30-day and 90-day maturities at the time
of discount by your bank,
lay I also request that in the
future all nonmember bank discounts be specified on sched
ules BD-4 by prefixing letter "N" to the items in question.
A L L E N , ASST. SECRETARY
Fi s c a l Ag e n t
Respectfully,
Secretary.
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex-Officio Members
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
C h a ir m a n
JOHN SKELTON WILLIAMS
CO M PTR OLLER O F T H E C U R R E N C Y
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
and
WASHINGTON
ADDRESS R E P L Y TO
X 28fEDERAL RESERVEBOARD
DI VISION O F REPOR TS A N D ST AT IST IC S
F is c a l a g e n t
July 17, 1917.
Dear Sir:
15ay we ask that you kindly state the amount
of dividend declared during the past month of June and
amount paid on or before June 30; also amount paid af
ter that dat»| As it is desired to reproduce this infor
mation in the forthcoming August Federal Reserve Bulletin
you will greatly oblige us by sanding us the data at your
earliest convenience.
Very truly yours,
Secretary.
W. P . G. HARDING. GOVERNOR
PAUL M. WARBURG, V ic e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex-Officio Members
WILLIAM G. McADOC
secr etar y
of th e
T reasury
C h a ir m a n
JOHN SKELTON WILLIAMS
Co m p tr o ller o f th e C u r r e n c y
FEDERAL RESERVE BOARD
X-283
WASHINGTON
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
and
Agent
FEDERAL RESERVE BOARD
July 17, 1917-
Desir Sirs:
Your attention is directed to the follow
ing paragraph from a letter addressed to the Treasury
Department by the Director of the Bureau of Engraving
and Printing under date of July 11, 1 9 1 7 , in relation
to deliveries of Federal reserve notes:
f is c a l
ADDRESS R E P L Y TO
nThe balance due on orders calls for 9,782,000
sheets with a face value of $325.> 9^0 000, and on ac
count of which 185,000 sheets have been printed and
delivered daily.
The New York bank particularly , ...
wanted increased deliveries on its orders. On ac
count of the work of the Bureau now being placed on
an eight-hour basis, the daily schedule of deliveries
of these notes and of other work will have to be con
siderably reduced, and the date of the completion of
the orders in hand for these notes will be advanced
from the first to the latter part of September."
j
Very r e s p e c t fu lly ,
Governor,
W. P. G . HARDING, G O V E R N O R
PAUL M. WARBURG, V I C E G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex-Officio Members
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
Co m p tr o ller o f th e c u r r e n c y
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
WASHINGTON
A N D F IS C A L A G E N T
286
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
DIVISION OF REPOR TS A N D STATIS TIC S
July 18, 1917*
Dear Sir:
Referring to our telegraphic request of even date
that you resum© the sending of daily telegrams showing bills re
discounted by members (item FEND), collateral notes secured by
U* S. securities (MAZE) and by commercial paper (FISH), bills
bought in the open rrarket (FORD) and totals of bills discounted
and bought (TACK), I desire to state that these data are to
take the place of the fuller telegram giving condensed statement
of condition of your bank, temporary discontinuance of which was
authorized on June 13*
These loan statements should be sent to
us every evening, beginning to-night.
On the dates indicated in Governor Harding’s instruct
tions of June 13 the fuller telegraphic statements are to take
the place of the daily telegram of bills discounted and bought.
Respectfully,
Secretary
Ex-Officio Members
W. p. G . HARDING. G O V E R N O R
PAUL M. WARBURG, V i c e G o v e r n o r
©U-DERIC A. DELANO
AtfOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
SECRETARY OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
Co m p tr o ller o f th e Cu r r e n c y
FEDERAL RESERVE BOARD
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
WASHINGTON
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
July 18,
1917
.
Dear Sir!
In view of joint custody and control on the
part of Federal Reserve age.ts and Federal Reserve banks
over unissued Federal Reserve notes, and certain funds as
provided by the Federal Reserve Act as amended June 21, l^TJ,
the Federal Reserve Board has decided that it will not
require bonds of Federal Reserve agents and assistant Federal
Reserve agents in as large amounts as heretofore-
It has
prescribed as minimum bonds:
for Federal Reserve agents
$100,000
for Assistant Federal Reserve agents
$ ^0,000
Should the, directors of any Federal Reserve bank
deem it desirable to require larger bonds., no objection will
be made by the Board to such action*
Very truly yours,,
Governor
July 18, 1917.
PRESS
STATEMENT,
The Federal Reserve Board today announced the per
sonnel of the Board of Directors of the branch of the Federal
Reserve Bank of Kansas City which is shortly to be established
at Omaha, Nebraska.
The branch will be operated by a board of five directors,
of whom three have been selected by the Federal Reserve Bank of
Kansas City, as follows:
Luther Drake, Omaha., Nebraska*
President, Merchants National Bank*
J. C* McNish, Omaha, Nebraska.
Owner, McNish Ca/ttle Loan Company*
W. B* Hughes, Omaha, Nebraska*
Manager, Omaha Clearing House*
The Federal Reserve Board has designated two directors
as follows:
P. L. Hall, Lincoln, Nebraska*
President, Contra! National Bank*
R* 0* Marnell, Nebraska City, Nebraska*
The Manager of the branch will be Mr- W* B. Hughes,
and it is understood that many of the functions heretofore
exercised by the Omaha Clearing House Association in connection
with the examination of banks will be transferred to the new branch,
The State of Wyoming will probably be included in the
territory assigned to the Omaha branch*
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex-Officio Members
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
C h a ir m a n
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
CO M P TR O LLER O F T H E C U R R E N C Y
WASHINGTON
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
A^FgCX^I^G1
A gent
AD D RESS R EP LY TO
FEDERAL RESERVE BOARD
July 19, 1917.
Dear Sir:With reference to Section 13 of the Federal Reserve Act
as amended “by the Act approved June 21, I917 , providing in
part that
"Any Federal reserve hank * * * solely
for the purpose of exchange or of collection,
may receive from any nonmemher hank or trust
company deposits of current funds in lawful
money, national hank notes, Federal reserve
notes, checks and drafts payable upon presenta
tion, or maturing notes and hills: • PROVIDED,
Such nonmemher hank or trust company maintains
with the Federal reserve hank of its district
a balance sufficient- to offset the items in
transit held for its account by the Federal re
serve hank."
The Board has adopted an opinion of its counsel on this
provision of the law, which takes the position that the Fed
eral reserve hanks should require nomemhet- hanks desiring to
make deposits with Federal reserve hanks to maintain a sub
stantial balance, sufficient to offset during time of transit
checks or other items drawn against the depositing hank and
presented by the Federal reserve hank for payment, as well
as items received from the depositing hank.
This opinion will be published in full in the forthcom
ing issue of the Federal Reserve Bulletin.
Very truly yours,
Governor.
Ex-Officio Members
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EAS U R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
Co m p tr o ller o f th e C u r r e n c y
'
FEDERAL RESERVE BOA^kfS1
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
and
WASHINGTON
F is c a l A g e n t
ADDRESS REPLY TO
FEDERAL. RESERVE BOARD
July 19, 1917*
Dear Sir:
♦
On June 28th a letter, X-236, was sent you,
on behalf of the Federal Reserve Board, in relation to
further progress in check clearing and collection. The
Board not having heard to the contrary assumes that you
are making arrangements to carry its suggestions into
effect. It would, however, like to be informed as to
the progress you are making in this matter, and to
receive copies of such circulars as you may have issued
to your nomber banks.
The Board has in contemplation a general
circular to all member banks covering the subject of
charges which they may make against their own customers.
It is thought, however, that it is not desirable to issue
this circular immediately, nor until the Federal Reserve
banks have made more progress in the development of
clearing operations*
It seems proper to take this opportunity of
calling attention to the suggestion of the Board sane
months ago that the Federal Reserve banks arrange in the
near future to collect maturing notes and drafts for their
member banks. A committee of governors was appointed to
look into this subject, but so far as we have been advised,
this committee has made no report. One of the Federal
Reserve banks has asked if it may proceed with its own
arrangements, and there seems to be no reason why it should
not do so; for while uniformity is desirable, it is not
necessary that all the banks should adopt identical methods
simultaneously. The Board would like to see the Federal
Reserve banks develop this function as early as possible
because this is one of the important ways in which Federal
Reserve banks may be of.service to their country members,
and suggests that each bank proceed to do so independently.
Very truly yours,
Governor
Form 44-a
(1917 ed)
X-293
Federal Reserve notes outstanding and funds held jointly
by the Federal Reserve Bank and Agent at_____________
as security for outstanding Federal Reserve notes,, also
gold held by the Federal Reserve Bank with the Treasurer
of the United States for redemption of outstanding Federal
reserve notes.
________ _________
- 191
(p5j^)
~
(mtir-
CODE WORD:
RACE
Federal reserve notes outstanding at end of month $ _ — — —
Funds held as security for outstanding Federal reserve notes
RAFT
RAID
RARE
RASH
REEL
RENT
ROPE
Gold coin
Gold certificates
Silver dollars
Silver certificates
United States notes
Subsidiary silver
TOTAL FUNDS on hand
ROLF
REIN
Credit balances
With Federal Reserve Board
________
In Gold Redemption Fund
________ _
RICH
$.....
..
„ _________ _
......
...
__________ __
„_________
_______ _____
$_____
TOTAL
$_----
ROOT
.Total funds held jointly by Feueral
Reserve Bank and Agent as security
for outstanding F. R. notes
RUSH
Gold held by the Federal Reserve Bank with the
Treasurer of the United States for redemption
of Federal reserve notse.
RYZE
Total funds held against outstanding F. R. notes
BEET FEDERAL RESERVE NOTES (own) held by F.R. Bank
$.
$.
Signature____ ,
____ _________ _______
Federal Reserve Agent,
Figures for the above items to be telegraphed to the Federal
Reserve Board at and as at close of business on the last day
of each month.
Signed report to be mailed.
Ex-Officio Members
W . P. G. HARDING, GOVERNOR
PAU L M. WARBURG, VICE G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
X O l g ^
S . H A M L IN
W ILLIAM 6 . McADOO
SECRETARY OF THE TREASURY
Chairman
JOHN SKELTON W ILLIAM S
Comptroller
of the
Currency
FEDERAL RESERVE BOARD
H. PARKER W IL L IS . SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
and
WASHINGTON
Fi s c a l A g e n t
ADDRESS REPLY TO
FED E R AL RESERVE BO ARD
July 24, 1917.
Dear Sir:
The Board, has had frequent inquiries since the passage
of the Act approved June 21, 1917, amending the Federal Reserve
Act, as to the proper construction of Section 22 as amended, which
requires the vote or written consent of a majority of the hoard of
directors of a hank for loans to directors. Inquiry is made whether
specific authority must he presured in each case where a loan is made
or whether this assent may he given for all loans up to a specific
amount.
In the opinion of the Federal Reserve Board and of its
consel, the assent may he given by a resolution of the board
of directors fixing a specific amount hut all loans made under such
authority should he reported and ratified at a subsequent meeting
of the hoard of directors.
It is suggested that a resolution of the board of directors
of a member bank might he adopted substantially as follows:
"RESOLVED, That the president, cashier, or assistant cashier
of this bank he, and he is hereby 'authorized to discount notes, drafts,
or bills of exchange f o r ______.
__________
, a director of this
bank, on the same terms and conditions as other notes, drafts, hills
of exchange or other evidences of debt are discounted for customers
of the bank, Provided, the aggregate amount of such notes, drafts and
bills of exchange discounted for ouch director and remaining unpaid
shall at no time exceed the sum of $_______________. Provided, further
that in any case in which any. note, draft or bill of exchange is dis
counted under authority of this resolution, a report shall be made
thereof at the next subsequent meeting of the Executive and Discount
Committee of the Board and such report shall show the aggregate amount
of liabilities of ouch director to this bank,"
You are requested to advise any of your member banks which
may be interested, of thi3 ruling of the Board.
Very truly yours,
Governor.
X-297
T R E A S U R Y
D E P A R T M E N T
WASHINGTON
July 23, 1917.
The Governor,
Federal Reserve Board.
Sir:
By direction of the Secretary you are advised that the Department
has referred to the Auditor for the Treasury Department for settlement
the account of the Bureau of Engraving and Printing for preparing Fed
eral reserve notes during the period June 19 to 30, 1917, amounting to
$72,688.32, as follows:
$5
22,000
763,000
4,000
52,000
96,000
4,000
36,000
99,000
54,000
41,000
H
H
O
o
o
Boston__ ___ _
New York;....
Philadelphia..
Cleveland.....
Chicago......
St. Louis.....
Minneapolis...
Kansas City...
Dallas.......
San Francisco,
1;
$10
6,000
417,000
34,000
20,000
77,000
12,000
• ♦0•
♦ #*m
23,000
3.000
592,000
$20
$50
3,000
125,000
13,000
22,000
71,000
* *•#
m «*-♦
9,000
# mm»
48,000
291,000
5,000
....
12,000
6,000
12,000
*«««
, ,,,
1,000
36,000
$100
Total
47,000
1,318,000
63,000
100,000
256,000
16,000
, ,,,
36,000
110,000
1,000
77,000
92.000
25,000 2,115,000
11,000
13,000
. ...
....
....
2;,115,000 sheets @ $34,368 per M .............. . $72,688.32
The charges against the several Federal reserve banks are as follows:
Bureau appropriations
Compen
Plate
Sheets
sation.
Printing:. Materials.
Total.
Boston.....
47,000
$441.09
$512.58
$661.62
$1,615.29
New York.....1, 318,000 14,374.11
18,553.49
12,369.43
45,297.03
Philadelphia
63,000
687.08
886.85
591.26
2,165.19
Cleveland... 100,000 1,090.60
938.50
1,407.70
3,436.80
Chicago....
256,000 2,791.94
3,603.71
2,402,56
8,798.21
St. Louis...
16,000
174.5C
549.89
225.23
150.15
Minneapolis.
36,000
392.61
506.77
1,237.24
337.86
Kansas City.
110,000 1,199.66
1,548.47
1,032.35
3,780.48
Dallas......
77,000
839.76
1,083.93
722.64
2,646.33
San Francisco
92.000 1,003.35
1.295.09
3,161.86
863.42
2^ 115,0Q0$23,066.19 $29,772.86 $19,849.27
$72,688.32
X -297.
-
2
-
The Bureau appropriations will be reimbursed in the above amount
from the indefinite appropriation, "Preparation and Issue of Federal
Reserve Notes, Reimbursable," and it is requested that your Board cause
such indefinite appropriation to be reimbursed in like amount.
Respectfully,
B, R, NEWTON.
Assistant Secretary.
Ex-Officio Members
W . P . G . H A R D I N G , GOVERNOR
PAUL
W IL LIA M
G. M c A DO O
M. W A R B U R G , VICE GOVERNOR
J ^ ».tfP @ E R IC
ADOLPH
SECRETAR Y OF TH E TR EA S U R Y
JOHN SKELTON W IL L IA M S
CO M P TR O LLER O F T H E C U R R E N C Y
A. DE LAN O
C. M I L L E R
CH A RLE S S. HA M L IN
C H A IR M A N
FEDERAL RESERVE BOARD
H. P A R K E R W I L L I S , S E C R E T A R Y
S H E R M A N P . A L L E N . ASST. S E C R E T A R Y
and
WASHINGTON
F is c a l A g e n t
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
DIVISION OF A U D IT A N D EXA M IN AT IO N
July 25, 1917.
Dear Sir:
On June 28th the Federal Reserve Board addressed a
letter (X-236) to the chairmen and governors of all Federal Reserve
banks, outlining further steps in the development of the clearing and
collection system. Acknowledgments have been received from most of the
banks, which show that no progress has been made in the direction
indicated, and. express in some cases a desire to defer action pending a •
discussion of the subject at a conference of governors of Federal Reserve
banks.
The Board, however, wishes to expedite the matter and sees
no necessity for any further discussion or delay, and accordingly rules:
(1) For the time being, any Federal Reserve bank may, at
its discretion, extend to each member and clearing bank an exemption
from service charges upon a maximum of 250 checks per month. The Board
believes that this exemption will encourage direct dealings on the part
of the smaller banks, with their Federal Reserve bank.
(2) In cases where checks are not sent to the Federal
Reserve banks but are sent direct from one member bank to another for
credit of the sending bank on the books of the Federal Reserve bank,
these transactions should be mutually agreeable to the tanks concerned;
for the Board cannot prevent the receiving bank from making a reasonable
charge (as between banks) for the transfer as provided in Section 13 as
amended. An opportunity is afforded all member banks to clear their
checks at par by sending them to the Federal Reserve bank. If, for the
purpose of saving time, or for any Other reason, a bank desires to send
its checks direct, it should make its own arrangements.
(3) As the Federal Reserve Act as amended provides that
no form of money in the vaults of member banks can be counted as reserve,
it may be expected that their stock of gold and lawful money will be
diminished, and that there will be a corresponding increase in their
stock of national bank notes and Federal Reserve notes. Therefore,
pending the further development of the clearing system, Federal Reserve
banks should receive from banks which are obliged to make shipments of
cash to keep their balances good, any form of United States currency
-2
fit for circulation on the same terms which have been heretofore extended
to shipments of gold certificates and legal tenders •
In connection with the collection of "maturing notes and
bills11, to which reference was made in the letter of July 19th, the
Board wishes to point out that
(4)
Section 15 as amended permits a Federal Reserve b
receive from member banks for collection maturing notes and bills; and,
for purposes of exchange or of collection, from other Federal Reserve banks
maturing notes and bills, payable in its district; or, solely for purposes
of exchange or collection, from any non-member bank, maturing notes and
bills. Each Federal Reserve bank therefore, should give notice that it
will undertake the collection of maturing notes and bills which are payable
at any town or city where1 the Federal Reserve bank has satisfactory
arrangements for collecting checks through banks, and a similar notice
should be sent to every other Federal Reserve bank that such collection
will be made for other Federal Reserve banks on satisfactory banking points
in its own district* The banks should announce that these collections will
be made subject to the usual liiajtati ons as to liability, the actual cost
of collection to be deducted when the proceeds are accounted for, and for
their protection may exact a service charge of say 25^ for each unpaid
item.
In the opinion of the Board, action as indicated above is
essential for the development of the collection system, and the plans
outlined should be made effective at the earliest possible moment, or
in any event not later than August 15, 1917. Other features and the
elaboration of details can be considered later *
Very truly yours,
Governor,
r.
W.
* . HAEDINN. (M O M M
M U M. WAKBUM, VICE OOVKNNM
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMUR
K * O m a o M B M IM
WILLIAM « . MCADOO
iie u n n or tw n u im r
JOHN SKELTON W1LLUMS
C N O T M U n o r INC CttEUNCV
FEDERAL RESERVE BOARD
WASHINGTON.
ADDUCES REPLY TO
FKDKRAL RESERVE HOARD
July
25,
1917'
Mr. J- F- Curtis,
Secretary Federal Reserve Bank,
New York*.
Dear Mr* Curtis*
The Board has received and considered your letter of July 2 tyth advising
it that a meeting in Washington of the governors of Federal reserve tanta
had, been called for August 1 5 th and succeeding days. The meeting not having
been called by the Federal Reserve Board, and it not being clear from y°ur
letter by whom it had been called, X assumed from your statement that x
would be devoted to a discussion of procedure in handling the next liberty
Loan campaign, that it must have been called at the instance of the Secretary
of .the Treasury*. When your letter however, was brought to his attention he
stated that he had not asked for such a conference, and that as a matter of
fact, in the present circumstances he did not desire such a meeting*. In
order that you may be fully advised,as ~o the viewpoint of the Treasury on
this subject, X enclose herewith copy of a letter addressed to the Board by
Assistant Secretary of the Treasury Crosby#
In view of the foregoing, and there being no matters relating to the
Federal Reserve System on which the Board wishes to advise with the governors
of the Federal reserve banks at this time, it has concluded that plans for
the proposed meeting should be abandoned, or at least held in abeyance
pending information as to the need for it0
*
*
*
There is no question as to the powers of Federal reserve banks, as
defined by statute, within their respective districts; but in matters which
concern inter-bank relations and the operations of the Federal reserve banks
as a system, authority is vested by law solely in the Federal Reserve BoardAccord ingly, it must take the position that conferences of governors o
Federal reserve banks can with propriety be held only when called by x,
in harmony with this view, the Secretary of the Treasury has informed t
*
Board that whenever it appears desirable that fiscal agency
0
be considered at a conference, he will communicate his wishes through x e
Federal Reserve Board.
*
Should the governor of any Federal reserve bank, or any group of gov
ernors, feel at any time that a conference should be held, the suggestion
should be made to the Board for its determination-
Very truly yours,
Governor-
TREASURY DEPARTMENT
WASHINGTON
Assistant Secretary.
July .25, 1917,
My dear Governor Harding:
- Referring to the note, addressed to you and signed
by Mr. Curtis, Secretary of the Federal Reserve Bank of
New York,, dated July 24, in which it io stated that a con
ference of all the governors of Federal Reserve Banks had
been called to nset in Washington August 15th and succeed
ing days, I beg to state that this undertaking is quite un
known to me; nor does it seem to me desirable that initia-.
tive of this sort should be taken save through you, in case
the Treasury Department should desire such a conference.
It may, indeed; be desirable before the actual campaign of
the npxt Liberty Loan shall take place, that certain officials
of the Federal Reserve Banks should be asked, through your
Board, to assemble in Washington,
The initiative in that
matter, however, it appears to me, should re3t either with
you or the Treasury Department.
Only in this way can there
be any assurance that the subject matters desired by the
Secretary of the Treasury to be discussed will be prepared
for discussion on a given date.
A conference of governors
of Federal Reserve Banks held in Washington would have so
distinctly the air of an official conference called by the
Secretary of the Treasury that it seems to me quite necessary
that his authority should be had before such conference should
occur.
Sincerely,
OSCAR T. CROSBY
Assistant Secretary.
Hon. W. P„ G„ Harding,
Governor, Federal Reserve Board.
Ex-Officio Members
W . P. G. HARDING, GOVERNOR
PAU L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAM LIN
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
a n d f is c a l a o e n t
WASHINGTON
TO
FEDERAL RESERVE BOARD
July 27, 1917.
Dear Mr.
Under authority of the Federal Reserve Act as amended
on June 21, 1917, "Subject to the approval of the Federal Reserve
Board, the Federal reserve agent shall appoint one or more assist
ants. Such assistants, whc shall he persons of tested banking
experience, shall assist the Federal reserve agent in the perform
ance of his duties and shall also 'have power to act in his name
and stead during his absence or disability."
There is inclosed a signature card, which you will please
have your assistant sign and return. This signature should be cer
tified by you.
In case you are to be absent at any time, you are requested
to advise the Board in advance of such absence, so that the Board may
be advised of the authority of the Assistant Federal Reserve Agent to
sign Gold Settlement Fund telegrams. He should sign as indicated
below:.
"R, L. Austin,
Federal Reserve Agent,
By____________________
Assistant Federal
reserve agent."
For your information, the Board has held that assistants
may also sign,as above indicated, in the absence of the Federal re
serve agent, reports and other coranunications usually sent to the
Federal Reserve Board by the agent.
Very truly yours,
Governor
302
0 A T H
S ta te o f
of
BRANCH BANKS
0 ?
•
D I R E C T O R .
)
) SS.
)
( C it y or County)
I,
the undersigned., h a v in g been elected a D i r e c t
t o r of the * .......... ................B ran ch of the F ederal Reserve Banic o f
....................................lo c a te d in the C it y of
S ta te o f . . . . ...................
and in D i s t r i c t N o ...’. ....... .
a s defined by the Reserve Bank d r g a n iz a tio n Committee, b e in g a c it iz e n
of
the United S t a t e s , and re sid e n t of the S ta te o f . . . . . . . . . . . . . . . . . . .
i
do solem nly swear (a ffir m ) th a t I w i l l , so fa r as the duty devolves
upon »e, d i l i g e n t l y and h o n e stly a d m in iste r the a f f a i r s of s a id branch,
f a i r l y and im p a r t ia lly , and w ithout d is c r im in a t io n in fa v o r of or
a g a in s t any member bank or banks; th a t I w i l l not know ingly v io la t e ,
or w i l l i n g l y perm it to be v io la t e d , any of the p r o v is io n s of th e s t a t
u tes o f the U nited S t a te s which r e la te to F e d e ral Reserve Banks and
t h e ir branches.
Su b scrib ed and sworn (a ffirm e d ) to before the undersigned, a
Notary P u b lic in and fo r the S ta te and . . . . . . . . . . . . . . . . . . . .afo res aid ,
t h i s . . . . . . . . . . . . . . . . . . . . . .day o f . . . . ....... ......... 191 .
Notary Public
W . P. G. HARDING, GOVERNOR
PA U L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
Ex-Officio Members
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS , SECRETARY
SH fR h jM ltyR ALLE N , ASST. SECRETARY
^ ~ S I M * ? is c a l A g en t
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
July 27, 1917.
Dear Sirs:
On April 27, 1917, the Federal Reserve Board directed to
you a letter (X-113) in reference to the difficulties arising from the
form of punch which Federal Reserve Banks are using in cancelling
Federal Reserve notes to be forwarded to Washington for redemption.
Some of the replies received from the various Federal Reserve
Banks indicated that some of the banks are already using punches of the
kind employed by the subtreasuries, while others held that the difficulty
caused by the use of the 36 hole punch could not be eliminated merely by
punching fewer notes at one operation as suggested in the Federal Reserve
Board's letter, but that they would be willing to change the dies on
their punches to correspond to those in use by subtreasuries, provided
the Treasury Department would rale that half notes punched in that
manner would be redeemed, for Feeoral Reserve Banks only, at full face
value in case of the loss of the other halves.
Thereupon a request was made by the Reserve Board upon the
Treasury Department to modify its former ruling of May 9, 1916, which
applied only to notes cancelled by the 36 hole punch, so as to include
notes punched in the manner employed by the subtroasuries.
As a result the Board has now been advised that the Treasurer
of the United States will in future redeem for Federal Reserve Banks only,
half notes cancelled by punches similar to the subtreasury punches,
provided proper affidavits of loss of the other halves have been filed
with the Treasurer.
In view of this ruling it follows that those Federal Reserve
Banks now using the 36 hole punch may change their dies to correspond
with those in use by subtreasuries and at the same time retain their
right to redeem half notes at full face value in case of the loss of the
other halves supported by affidavit in proper form.
Very truly yours,
Governor.
X-309
July 19, 1917.
To the Federal Reserve Board and
The Comptroller of the Currency.
’ Gentlemen :
As joint counsel for the Federal Reserve Board and
the Comptroller of the Currency, this office has teen requested
to file an opinion on the subject of what, if any, deductions
may be made from the liabilities of member banks in determining
the amount against which reserve must be carried*
Section 19 of the Federal Reserve Act, as amended
by the Acts approved August 15, 19lU, and June 21, 1917, defi
nitely fixes the amount and character of reserve to be maintained.
Each member bank is required to maintain with the Federal reserve
bank of its district an actual net balance equal to not less than
a fixed per cent of the aggregate of its demand deposits and a
fixed per cent of its time deposits. The amount fixed varies
according to whether the banks are located in reserve, central
reserve, or non-reserve cities, but with the exception of the
variations in the amount the requirements are identical in each
case.
Demand deposits are expressly defined as all deposits
payable within thirty days.
Time deposits, under the terms of the Act, comprise
all deposits payable after thirty days, all savings accounts and
certificates of deposit which are subject to not less than thirty
days* notice before payment, and all postal savings deposits.
•
Demand deposits may include (a) Individual deposits.
(b) Government deposits.
(c) Bank deposits.
(a) No provision of the Act can be construed as auth
orizing any deduction from individual deposits or time deposits. The
depositor may be indebted to the bank for money borrowed but no off
set is allowed on account of such indebtedness.
(b) Government deposits are exempt from all reserve
requirements under authority of the Act of April 2H, 1917, and “the
total amount of such deposits may be deducted from demand deposits
in computing reserve.
2(c)
-X-J05-
In the case of bank deposits, the let provides "In estimating the balances required
by this Act, the net difference of amounts
due to and from other banks shall be taken
as the basis for ascertaining the deposits
against which required balances with Federal reserve banks shall be determined. n
This language has heretofore been construed
as authorizing member banks to deduct the aggregate amount
due from other banks from the aggregate amount due to other
banks, and to carry reserve only against the net balance
due to other banks#
The circumstances under which this provision
was incorporated in the Act, which will be later referred to,
clearly indicates that this construction is consistent with
the intent of Congress.
In determining the amount due from other
banks, it has been customary, for years past, to permit
national banks to treat the total amount of items placed
in the mail and charged to the account of a correspondent
as part of the balance due from such correspondent* In
conformity with this custom member banks are still permit
ted to treat out-of-town items in this way.
In order that items payable in the same city
in which the member bank is located may be placed on a par
ity with items payable elsewhere, member banks are likewise
permitted to treat checks on other banks in the same place
and exchanges for clearing houses as balances due from other
banks, and to deduct the aggregate of such items from the
aggregate balance due to other banks* This ruling of the
Department seems also to be consistent with the purposes of
the Act as indicated by the history of this legislation.
Prior to the Act of May JO , I9 O 8, generally
known as the Aidrich-Vreeland Act, no deductions were allowed
by statute. In order, however, to afford some relief from the
rigid reserve requirements which at that time necessitated
the maintenance of a much higher reserve than is required at
present, the Department permitted national banks to deduct
from liabilities against which reserve must be carried (a) Government deposits.
(b) Balances due from other banks, includ
ing
(1) Checks on other banks
in the same place;
(2) Exchange for clearing houses(c) National bank notes.
It is not entirely clear under what authority these deduc
tions were allowed. National hanks, however, were required at that
time to maintain a certain reserve against "deposits". The Act was
not specific as to what should he treated as deposits and so this
language was prohahly construed to mean deposits which were not off
set hy assets which could he used for the immediate discharge of
such liabilities.
The Aldricb-Vreeland Act ratified in effect the ruling of
the Department in so far as it related to Government denosits. The
Act expired hy limitation on June
l9l6» hut the Act of April 2U,
1917, above referred toj he-enacted the provisions exempting Govern
ment deposits from reserve requirements.
The Federal Reserve Act specifically authorizes the deduc
tion of balances due from other hanks.
This office is advised of no other provision of law
authorizing any deduction from the amount against which reserve
must he carried hy member hanks and no discretion is vested either
in the Federal Reserve Board or the Comptroller of the Currency to
permit such deductions.
Without passing upon the question whether or not the
deductions allowed prior to the passage of the Federal Reserve
Act were justified, it seems clear that since Congress has spe
cifically defined deposits against which reserve must be carried,
and has specifically authorized certain deductions to he made,
there is no present justification for reading into the Act any
intention on the part of Congress to allow other deductions not
specifically mentioned.
Notwithstanding the liberal interpretation that has been
placed upon the Act in defining balances due from other banks, it
has been claimed that the amount against which reserve must be
carried should be still further reduced (a) By permitting checks on other banks in
the same place and exchanges for clearing houses to
be deducted from gross demand deposits rather than
from balances due to other banks*
(h)
By permitting cash on hand to be deducted
from gross demand deposits.
The argument advances in favor of the allowance of these
deductions should, in the opinion of this office, have been addressed
to Congress rather than to the Federal Reserve Board or the Comptrol
ler of the Currency. As above stated, neither the: Federal Reserve
Board nor the Comptroller are vested with any discretion to permit
deductions not specifically authorized hy the Act and could not, in
the opinion of this office, justify a ruling that banks might deduct
cash or other items from their gross demand deposits in computing
their reserve.
Respectfully,
M. C. ELLIOTT
Counsel.
Ex-Officio
W. P, G. HARDING, G O V E R N O R
PAU L M. WARBURG, V i c e G o v e r n o r
^ E D M ^ Q a . DELANO
ADOLPH
M ILLER
CHARLES S. HAMLIN
members
C.
W ILLIAM G. McADOO
SECRETAR Y OF TH E TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S
C O M P TR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS . S E C R E T A R Y
SHERMAN P. ALLE N . A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
ADDRESS R E PLY TO
FE D E R A L RESERVE B O A R D
August 3, 1917
Mr. Frederic H, Curtiss,, Federal Reserve Agent,
Boston, toss.
Dear Mr. Curtiss:
Attention has been given your letter of July 20 j previously
acknowledged, in which you state the difficulty surrounding re
imbursement for a shipment of the notes of the Federal Reserve
Bank of Boston, amounting to $450, by the New'-Orleans Branch of
the Federal Reserve Bank of Atlanta to the Treasury Department
for redemption.- This transaction, as explained by you, resulted
from advice from the Treasury Department to you of the receipt of
notes to the amount of $450, when it became necessary for you to
take from your vault a $10,COO gold certificate to make payment
to the bank, you receiving $1,550, which you are now carrying.au
cash.
After consultation with the Rational Bank Redemption Agency
in the Treasury Department, it is suggested that the Federal re
serve bank making a shipment of other bank’s notes to the Treasury
Department for redemption could charge them on its books to the
Gold Redemption Fund with the Treasurer Of the United States and
receive credit in that Fund on the books of the Treasurer. The
Treasurer would then charge the Gold Redemption Fund of the Fed
eral Reserve Agent of the bank whose notes were sent in for .re
demption and deliver the Abtes to the Comptroller of the Currency
for credit of the Federal Reserve Agent of the issuing bank.
Should the Gold Redemption Account of any Federal Reserve
Bank become unduly large because of such credits, transfer can
be made, upon proper request, for credit in the Gold Settlement
Fund. If the bank sending in notes of other banks for destruction
prefers to have immediate credit in the Gold Settlement Fund, the
Treasurer can charge the notes against the Gold Redemption Fund
of the Federal Reserve Agent accredited to the bank of issue., and
transfer a like sum to the Gold Settlement Fund for credit of the
Federal reserve bank sending in the notes for redemptionIn order to have this plan effective the consent of all banks
concerned to this method would have to be obtained. Copy of this
letter has been sent to all Federal Reserve Banks and Agents.
Very truly yours,
Assistant Secretary.
Ex-Officio
W. P, G. HARDING. G O V E R N O R
P AU L M. WARBURG. V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
members
W ILLIAM G. MCADOO
SECRETAR Y OF TH E TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S
C O M P TR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS . S E C R E T A R Y
S H E R $ & H -S © @ .E N . A SST. SEC R ETA R Y
and
F is c a l A g e n t
AD DRESS R EPLY TO
FE D E R A L RESERVE B O AR D
August 3, 1917,
My dear Mr, Treman:
Reforring to your letters of July 31st and August 1st
addressed to Governor Harding in regard to the natter of clearing.
Governor Harding wrote to you concerning one of those on August 1,
but when ho wont to Now York last evening ho passed the file to mo.
It nay bo of sonic into rest to you to know that I had a
throe hour conference With five mongers of the Committee of Twentyfive,, including the Secretary of that Committee, oh Wednesday last.
In that debate the concensus of opinion expressod by the Committee
was that one of two things must bo dons to popularize the Federal
Reserve Collection System and bring in the non-itetobor non-assenting
banks; either that they must be allowed a por thousand or per item
charge which would cover their actual out-of-pocket oxpenso for
making remittances, or that the Federal Roservo Bank nsjst accept
offsetting items without charge if it expects tho member bank to
remit without charge. At the samo time, tho Committee took tho
position that banks in reserve and central resorve cities did not
need this help because they had other means of protecting thomsclvoo;
yet they also admitted in tho discussion that it was difficult for
•tho Board to make a rulo which would not apply equally to tho big
bank in the largo city and to tho little bank in tho small town.
While I listcnod attentativoly to all tho Committoo had
to say and askod a good many questions to dovolop their position,
I did not toll thorn what tho Board had promulgated on this subject;
but it is interesting to noto that two ideas which tho Board sug
gested to the Federal Reserve Banks would go a long way toward ac
complishing the very purpose which this Committoo considorcd es
sential, to wit: The paying of postage to the mombor bank and tho
exemption of charges on a sufficiant number of itoms por day to
enable tho country bank, without oxpenso to itself, to offset com
pletely, or to a large extent at loast, items sent to it for col
lection. You arc familiar with the objections which havo boon
raised by officers of tho Federal Resorve Banks to those suggestions
of the Board. The principal argument in each ease has boon that it
f
X-309
- 2
would be too expensive; that it would be unusual and contrary to
general practice; and yet it requires no argument to point out
that the partial exemption ’
of service charges, which admittedly
would redound to the benefit chiefly of the country bank, would bo
far loss expensive than the complete exemption of such chargos;and
I think I could contend with considerable forco that wo might begin
with an exemption of ten itoms per day for each of the banks and
gradually work up to twenty-five, fifty or oven one hundred items
per day, and perhaps finally agroc to absorb tho charges for all
collections.
I agree with you, and also with Mr. Jay and others that
the dcsirablo, indeed, the essential, thing to accomplish is to get
non-member banks to clear their itoms through tho Federal Resorvo
Bank, or at least at par. The best way to do this is to got them
in as clearing members, but in some districts it will tako not only
moral suasion, but an appeal zo their self-interest to accomplish
this. That it is important to make progross in the matter, however,
I entirely agree with you, because if substantial progress has not
boon mado and if tho System has not made more friends beforo next
December an effort will bo mado in tho next Congross to get an
amendment which will be more effective in accomplishing its purpose
than tho Hardwick amendment.
Dospite possible opinions to tho contrary, I have tried
to keep an open mind on tho entire subjoct, and have viewod it, not
only from tho standpoint of tho general public, but also from tho
standpoint of tho banker in the snail town and in the big city.
1 cordially invito criticism and suggestions as to how to meet tho
situation. I believe that the scheme of offering exemption of
charges on a given number of checks daily (which orginated with
Governor H^rdingC is a good suggestion and should be givon an..honcst
and thorough trial, I believe that tho self-addressed, stamped
envelope, which is a schomc in common uso in many largo collecting
banks, and which is being omployod by several of our Fodoral Rcservo Banks, is a reasonable and not improper concession to bo mado
to tho country banks; but if any of our Federal Reserve Bank of
ficers have bettor suggestions, I shall bo pleased to receive them.
Yours very truly,
(Signed) F. A. Delano.
Chairman of
Committee on Clearing.
Mr. R. H. Trcman,
Deputy Governor, Federal Reserve Bank,
Dew York City.
Ex-Officio Members
W. P. G. HARDING, G O V E R N O R
PA U L M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. MCADOO
SECRETAR Y OF TH E TREASURY
C h a ir m a n
JOHN SKELTON W ILLIAM S
Co m p tr o ller o f th e c u r r e n c y
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
WASHINGTON
ADDRESS R E P L Y TO
FED E R AL RESERVE BO ARD
August 9, 1917*
Dear Sir:
The Federal Reserve Board transmits
herewith a ruling covering the joint custody and
control of gold> lawful money and Federal reserve
notes held hy Federal reserve agents, as provided
in the act approved June d l , 1917 .
7er
truly yours,
Gove m o r*
(Enclosure)
Ex-Officio Members
W. P. G . HARDING, G O V E R N O R
V
o i p6 UL M* W ARBURG* V,CE Go ve r n o r
A ~ O iF S E C E R IC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETAR Y OF THE TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S
Co m p t r o l l e r o f th e Cu r r e n c y
FEDERAL RESERVE BOARD
H. PARKER W ILLIS . S E C R E T A R Y
SHERMAN P. ALLEiN, A S S T . S E C R E T A R Y
and
WASHINGTON
F is c a l A g e n t
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
August 8, 1917,
Dear Sir:
On July 25 a letter was sent, out from the
Federal Reserve Board covering the designations of 'ViceChairman' of your Board of Directors, such designation
to extend to the close of the present calendar year.
The designation should have been ’Deputy
Chairman' as indicated by the quotation from the amend
ments of the Federal Reserve Act given below:
Section 4 of the Act, as amended June 21, 1917:
"One of the directors of Class C shall be ap
pointed by the Federal Reserve Board as deputy
chairman to exercise the powers of the chairman
of the board when necessary."
Please note this change*
Yours very truly,
Assistant Secretary
W. P. G. HARDING, G O V E R N O R
PAU L M. WARBURG, V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
Ex-Officio Members
W ILLIAM G. McADOO
Secr etar y of th e tr ea su r y
c h a ir m a n
JOHN SKELTON W ILLIAM S
FEDERAL RESERVE BOARD
Co m p tr o ller o f th e C u r r e n c y
H. PARKER W IL L IS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
and
WASHINGTON
f is c a l
FEDERAL RESERVE BOARD
DIVISION OF REP OR TS A N D STAT IST IC S
August 8, 1917 *
Dear Sir:
With the view of enabling our Statistical Division
to prosont in tho monthly Bulletin classified figures of
acceptances hold by all Fodoral Reserve Banks a.s nearly up to
date as practicable, you are requested to send us your semi
monthly statements of acceptances grouped by acceptors as
promptly as possible.
It is particularly desired that
statements giving tve holdings of acceptances as of the
15 th
of each month reach us not later than tho
22nd,
so
that v/o may have sufficient time to consolidate the figures
a.nd sond them to tho printers on the da.y following.
Agent
ADDRESS R E P L Y TO
Very truly yours,
Assistant Secretary.
W. P. G. HARDING, G O V E R N O R
PAU L M. WARBURG, V i c e g o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
Ex-Officio Members
W ILLIAM G. McADOO
SECRETAR Y OF TH E TREASU R Y
C H A IR M A N
JOHN SKELTON W ILLIAM S
C O M P TR OLLER O F TH E C U R R E N C Y
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
and
WASHINGTON
F is c a l A g e n t
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
DIVISION O F REPOR TS A N D STATIS TIC S
August 8, 1917 •
Gec.r Sir:
At the sug~ostion of the Office of the Secretary of the
Treasury a slight change has been mad3 in Form UU-a (1917 - Ed.)
through the substitution of item BEET (Federal Reserve notes held
by the Federal Reserve Bank) for item GIST (Federal Reserve notes
in actual circulation.)
Accordingly, I hand -ou herewith
25
copies of newly
revised Form UU-a and would request that you use henceforth the
new form when reporting your monthly Federal Reserve note account,
discarding copies of the form previously sent to you.
Very truly yours,
Assistant Secretary.
25
copies sent under
separate cover.
X-316.
THE LAW OF AVERAGES AND CREDIT GRANTING.
So far, credit granting has produced only one law of measure
ment that is used as a standard in credit granting.
This has come
about more as the result of subconscious experience, than as resulting
from any basic analytical study. The law referred to, is well known
current asset ratio of two for one. The fact that this ratio of 200^
has become so generally used as to be almost axiomatic, has suggested
that it might be well to make some real studies of the mathematics of
credit from a fundamental standpoint.
There is a law that is universal and which can be invoked as
an aid to the study of credit from a fundamental standpoint. This is
the law of averages and it can be applied in the study of credit, in a
manner parallel, to although, because being used on a non-exact and vary
ing science, not with the same exactness as the insurance actuary uses
it in the construction of his mortality tables.
Before going into the explt nation of haw the law of averages
might profitably be used in the creation of a table on basic conditions
and so as to bring to your consideration, one weakness in the present
200^ axiom,let us consider, a little at length, the true condition that
exists in the actual use of the current ratio test. All good credit men
insist, more or less emphatically, that merchandise in the property state
ment be figured at cost. ■ The reason is almost too obvious, but for fear
of possible misunderstanding, and in order to get the premises for our
argument correct, we will presume that this is done to prevent premature
taking of profits and also, by keeping down the valuation, to prevent an
undue inflation of the current ratio. This is good sound conservative
judgment and is deserving adoption by such credit men as are not already
following this precept. But this is really only part of the story, be
cause, while we have demanded that merciiandise be figured at cost, we
have not made the same demand for accounts and bills receivable. These
represent cost plus profit and we are tolerating an inflation of the cur
rent ratio by the difference between the cost of manufacture and sale
and the billing price. If merchandise must be figured at cost, why not
receivables,and for the same reasons or nearly so.
X -316.
- 2 -
However, this is not a briei for the cause of receivable
at cost, but is an argument to prove if possible the need for a more
fundamental analysis than we have been in the habit of using.
The
analytical treatment, necessary for a more perfect understanding of
the current ratio, consists in an analysis of the ratio that exists
between receivables and the merchandise items, so as to determine the
true balance and so as to know when the current ratio.will be thrown
out of proper proportion. If from year to year we take a percentage
observation of the current ratio and find it stationary and at the
same time find a rising ratio, between receivables and merchandise,
then we surely are confronted with a potential weakening in the cur
rent ratio, that should be properly explained by the maker of the
statement. In parallel a stationary current ratio: supplemented by
a falling receivable to merchandise ratio, is in fact a strengthened
current condition, of course providing that it is not carried to a
ridiculous extreme.
Actual usage has established the use of the current ratio as
a barometer of credit conditions and the present argument has at least
injected the possibility of there being a necessary supplementary study
of this current ratio. As a further supplementary study of a statement,
it might be well to analyse in a similar manner from other angles. The
following ratios seem logical and are advanced for consideration and
the two already under discussion are tabulated with them so that
group may be complete at this place.
1.
2.
3.
4.
5.
6.
7.
8.
Current Assets to Current Liabilities
Receivables to Merchandise
Net Worth to Plant
Total Debt to Net Worth
Sales to Receivables
Sales to Merchandise
Sales to Net Worth
Profits to Sales
And now with this as a groundwork and a premise, we can ap
proach more understandingly, the real fundamental or basic study. It
is customary to transfer onto special comparative sheets the year after
year statements of any company, so that they may be compared and the in
creases or decreases in any item shown, But mere increases or decreases
indicate little unless taken in comparison with something else. It is
the changes in the proportions of the statement from year to year that
indicate the relative strength, weakness, progress or retrogression,
which is another argument for a percentage analysis. But the comparison'
X316,
-
3 -
idea is a good one, only it, like the use of the unsupported current
ratio, has not been carried out to a logical development.
We should not be content to compare the statements of a com
pany with those of previous years of the same company alone. We should
be»- in a position to compare our ratios with ratios that would indicate
the general trend of the whole of any kind of business, or at least with
as big a fraction of the whole business as we can secure. How many
credit men know actually, not subconsciously, the actual ratio. of the
current items alone, even on a totaled group of one hundred groder, shoe,
hardware or other trade names. In order to secure this kind of funda
mental information why not adopt some plan of the following nature?
Let a proper form be devised upon which can be entered the
necessayy amounts for the procuring oi the ratios mentioned. Let each
sheet or card have space for entering ten or a dozen full sets of in
formation. Let sots of forms be made in some manner designated from
each other for grocers, hardware houses, cotton names, etc.
Send
these cards out to such banks throughout the country as will bo willing
to cooperate. Do not have individual names of companies reported. The cards
being filled out and returned would have the name of the city, the kind
of business and the figures. This would make for no breach of confidence.
It would establish no possible black list.
Let us now presume that such a set of statistics has been as
sembled and the machinery perfected for consecutively adding to it year
by year;, with this information at hand, we could make the following
studies and provide ourselves with statistical information by which we
could measure not only individual tascs, but the general condition of
a whole business. The following application of these figures is sug
gested, taking for example the wholesale grocery trade. First, by add
ing ail the amounts for every name together, we would arrive at a set of
national figures that would give us national ratios, which when compared
year by year, would indicate the general trend of the whole of that kind
of business. In the national analysis, it would be well to introduce
what might be called a stabilized ratio by making the study cumulative
year by year. Under this method, after several years, the ratios would
not fluctuate too rapidly. In addition to this, a new set o' figures
should be started each year, showing tne current year condition. This
could be compared with the stabilized ratio and with the yearly ratios
of proceeding years, showing year to year changos for the whole of any
line of business. Then in addition to this, we could contrivo a
X-316.
- 4 -
scientific economic division of the country and compile these figures
hy district so as to differentiate between economic conditions and
trade practices of the various parts of the country. And at last hav
ing these fundamental ratios, we can make an analysis of an individual
statement and have something more tha.. inspiration or a hunch to stack
it up against.
Supplemental to the creation of these ratios will come an
insight into the character of a whole business that will make it pos
sible for separate departments to originate series of questions for
the individual borrower to answer that will be more flexible and funda
mental than those we now have,, because they will be based on an accurate
knowledge of trade conditions. These same fundamental ratios will make
it possible when assembled as a whole total, to estimate pretty closely
the basic condition of the whole country, supplementing and proving
the several very good business barometers now issued.
All of this deals only with the mathematics of credit and
must not be put into the hands of the credit babe for him to use without
discretion. The personal, element must be largely used in the final
decision and because of its management, a company that shows radically
contrary to nearly every ratio, may be a good risk. Character must
still be considered, but with this system in use, we can attach the
proper importance to the figures because we will have a_truer knowledge
of their real and relative meanings, for the law^averages is inexorable
and will show basic changes and weakness with a certainty far above
temperamental guess work.
8 /9 /17
X-317 •
Washington, D. C»,
August 9, 191/*
RULES GOVERNING
CUSTODY OF GOLD, LAWFUL MONEY, AND FEDERAL RESERVE NOTES
held by
Fe d e r a l r e s e r v e a g e n t .
These funds should be kept in safes, preferably with
two locks each with a different combination, one in the
control of the Federal Reserve Agent and his representa<tive and the other in the control of the o'fficers of the
bank.
As the Federal Reserve Bank is jointly liable for
the safe keeping of funds, a joint record should be kept
of ail transactions.
CUSTODY OF PAPER PLEDGEE AS COLLATERAL SECURITY.
While the law does not require the joint custody of
the commercial paper and other eligible securities pledged
as collateral for Federal reserve notes, it is desirable
that such collateral also be held in this manner*
In
this case there would be no objection to having the Federal
Reserve Agent designate a senior employe in the discount or
credit department as his representative, and to the bank's
appointing a similar representative to act as joint custo
dians of paper pledged.
AUDIT.
Whenever possible, it would be well to have the auditor
of the bank maintain a continuous audit.of the gold, lawful
money and Federal reserve notes held in joint custody.
At
least once in each two months a complete examination should
be made of the accounts of the Federal Reserve Agent and a
copy of the report sent to the Federal Reserve Board.
W. P. G- HARDING
Governor.
SHERMAN P. ALLEN
Assistant Secretary.
X-318
RESOLUTION OF THE FEDERAL RESERVE BOARD
ADOPTED AT A MEETING HELD
AUGUST 9, 1917.
BE IT RESOLVED, that any member bank which
has heretofore applied for and received permission of
the Federal Reserve Board to accept drafts and bills
of exchange in an amount not to exceed one hundred per
centum of it3 capital and surplus, be, and it is heroby
authorized and empowered under the authority of the
Act of June 21, 1917, to accept up to one hundred per
cent drafts or bills of exchange drawn upon it having
not more than six months’ sight to run, exclusive of
days of grace, which grow out of transactions involv
ing the importation or exportation of goods or which
grow out of transactions involving the domestic ship
ment of goods, provided shipping documents conveying
or securing title are attached at the tip© of accep
tance; or which are secured at the time of acceptance
by a warehouse receipt or other such document convoy
ing or securing title covering readily rnarkotable
staples.
fective
tion by
notice,
ject to
The authority horein grantod shall be ef
from this date, subject, however, to revoca
the Board at any time, upon ninety days'
as to any or all of the banks which are sub
the provisions of this resolution.
RESOLVED, further, that a copy of this
resolution bo sent to oach bank vhlch has heretofore
been grantod permission by the Board to accept such
drafts and bills of exchange to an amount not to
exceed ono hundred per centum of its capital and
surplus.
X-320
LETTER FROM A FEDERAL RESERVE AGENT.
"A certain natter has coma up in the last few days
in connection with the handling of Federal Reserve notes which,
while unimportant, has occasioned, it seems to me, so much un
necessary work that some change ought to be made in the procedure.
The Board’s circular letter No. 974 allowed Federal
reserve banks to ship unfit Federal reserve notes of another
Federal reserve bank direct to the Treasury Department for re
demption.
The New Orleans branch of the Federal Reserve Bank of
Atlanta shipped $450.00 of this bank’s currency to the Treasury
Department for redemption and cabled upon the Federal Reserve
Bank of Boston to reimburse it to chat amount, which they did,
upon advice from the Treasury Department that the above amount
of bills had been destroyed.
The Treasury Department advised me, as the Federal
Reserve Agent of this bank, that the bills had been destroyed
and I, in turn, reimbursed the bank for this $450.00. As my
department carries no till money, it was necessary for me to
get two officers from the bank to join with me to go down to
our main, vaults, open up my cash vault, take out a $10,000 .
gold certificate and have the bank give me in exchange $9,550
which 1 am now carrying in my cash.
Apart from the inconvenience of carrying petty cash
of this character, you Can see what this transaction will mean
to my department if it comes every day or at frequent intervals,
as is very possible if ];he ether Federal reserve banks follow
similar methods of handling these notesa In other redemption
transactions as, for instance, where a member bank sends in uh-*
fit Federal reserve notes to the Treasury Department, these are
charged by the Treasurer to the Redemption Fund of the Federal
reserve agent and the bank is reimbursed. If a method of this
sort could be carried out in connection with the redemption of
unfit bills coming from Federal reserve banks, this natter
would be simplified and, I believe, save the Federal reserve
agents a great deal of extra work in the performance of their
duties.tt
X-320
THE BOARD8S REPLx.
In further reference to your letter of July 20th, the
Board is of the opinion that the difficulties incident to the
shipment of small amounts of your unfit notes from the New
Orleans branch of the Federal Reserve Bank of Atlanta to the
Treasury Department at Washington may properly be met in any
one of three ways.
First: As you know the only legal justification for
shipment of unfit Federal reserve notes of the Federal Re
serve Bank of Boston from the New Orleans branch to Boston
for redemption is that the New Ccleans branch acts under
power of attorney as agent of the Boston Bank in making the
shipment in the name of and for the account of the Boston
Bank. The New Orleans branch could not, under the terms of
the law, make this shipment for its own account, so that
if, when the Boston Bank authorizes the New Orleans branch
to make shipments of this character, it should specify that
no shipment be made in a sum less than one thousand dollars,
the New Orleans branch would be bound by these instructions,
This would necessarily eliminate the possibility of requir
ing you, as Federal Reserve Agent, to make transfers of
small amounts to your bank.
Second: Another way ;n which the difficulties you
mention may be avoided is by making a settlement or ad
justment of accounts through the books of the Gold Set
tlement Fund rather than making cash transfers fhom the
Federal Reserve Agents1 vault to that of the bank. As
you are aware, the Federal reserve agents and the Federal
reserve banks may make transfers of any amount through
the Gold Settlement Fund so that even if New Orleans
should make a shipment of less than $1,000, you nay prop
erly direct the Federal Reserve Board to transfer the
sum involved, however small, to the account of the Fed
eral Reserve Bank of Bosvon on the books of the Gold Set
tlement Fund (in even hundreds).
X-32Q
- 2 -
Board1s Reply.
Third:
Both the Federal Reserve Agent and
the Federal Reserve Bank of Boston, in order to avoid
transfers of snail amounts of cash in Boston, nay, if
they so desire, authorize the Treasurer to make adjust
ments on the books of the Gold Redemption Fund so that
if the New Orleans branch, for instance, should ship
to Washington for redemption, a small amount of Fed
eral reserve notes of the Boston Bank, the Treasurer
will immediately charge the Gold Redemption Fund of the
Agent with the amount of the shipment and credit the
Gold Redemption Fund of the Federal Reserve Bank with
the same amount. This method has already been auth
orized by four of the Federal reserve banks and it is
operating very satisfactorily.
It is suggested that these are the only three
ways in which the situation you describe may be satis
factorily settled without in any way violating the
provisions of the law.
August 10, 1917.
X-331
P R E S S
S T A T E M E N T .
A u gu st 10, 1917.
The President has re-designated
W, P. G, Harding as Governor and Paul M.
Warburg as Vice Governor, of the Federal
Reserve Board for the ensuing year.
Ex-Officio Members
W. P. G. HARDING, GOVERNOR
PAU L M. WARBURG,
GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAM LIN
VICE
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
Co m p tr o ller o f th e C u r r en c y
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P . ALLE N , A S S T . S E C R E T A R Y
X-3 2 2
and
F is c a l A g e n t
ADDRESS REPLY TO
FE D E R A L RESERVE BO ARD
August 10, 1917*
Ur. Pierre Jay,
Chairman Federal Reserve Bank>
New York*
Dear Mr* Jayl
I acknowledge receipt of your letter of the 8th instant,
giving a digest of expressions of opinions of a number of Federal
reserve agents on the subject of audit of Federal reserve agents1
funds held in trust by the United States Treasurer, and note the
various comments.
The Board is decidedly of the opinion that it would be a
waste of time and money for the Federal reserve agents to send an
auditor to Washington to check these accounts, the state of which
is clearly shown each day by the balance. It would suggest,
however, that if any Federal reserve agent deems it his duty to
have some independent information regarding the status of his ac
counts, he might communicate direct with the Treasurer of the
United States, or he could have a formal statement sent him period
ically by the fiscal agent of the Board over his signature, or he
might do as national banks do in the matter of destruction of
unfit notes - secure the services of a professional bank agent
here in Washington which could be had at a nominal sum, say $5 or
$10 per annum. Perhaps this last suggestion is the best of the
three, as it would carry out the idea of an independent audit
without entailing any great expense. The agent selected could
present his credentials to the Treasurer of the United States,
and could, at stated intervals, ascertain the balance from the
Treasurer’s books and report it to the Federal reserve agent.
I am sending a copy of this letter to all Federal
reserve agents.
Very truly yours,
Governor
Ex -Officio
W. P. G. HARDING. G O V E R N O R
PAU L M. WARBURG, V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C, M ILLER
CHARLES S. HAMLIN
members
W ILLIAM G. McADOO
SECRETARY OF TH E TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S
C O M P TR OLLER O F TH E C U R R E N C Y
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
and
W ASH ING TO N
3
L
- ^
F is c a l A g e n t
AD D RESS R EFLY TO
FE D E R A L RESERVE B O AR D
August 10, 1917•
Dear Sir:
For your information, I hand you here
with copy of a letter I am sending today to Mr* Pierre
Jay, Federal Reserve Agent at Yew York, with reference
to the audit of Federal reserve agents’ funds held in
trust "by the United States Treasurer.
Very truly yours,
Governor.
Ex-Officio
W . P. G. HARDING, G O V E R N O R
PAU L M. WARBURG, V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
members
W ILLIAM G. McADOO
Secr etar y o f th e T r ea sur y
C H A IR M A N
JOHN SKELTON W ILLIAM S
Co m p tr o ller o f th e C u r r en c y
FEDERAL RESERVE BOARD
WASHINGTON
W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
a n j*
F is c a l A g e n t
ADDRESS REPLY TO
FE D E R A L RESERVE B O A R D
August 11, 1917.
Dear Sir:The Board deems..it advisable that there should be a thorough
understanding (da the part of the Federal reserve banks and of the
member banks of its attitude' in relation to the collection of
"maturing notes and bills,11 and wishes to invite your attention
to the distinction between the par Clearing and collection of
checks and drafts drawn on member banks and the collection of
notes and drafts made by or drawn upon individuals, firms, or cor
porations other thah banks.
Section 13 of the Federal Reserve Act* as amended by the Act
approved June Bl, 1917, provides in part that:
"Provided, further, that nothing in this or
any other section of this Act shall be construed
as prohibiting a member or nonmember bank from
making reasonable charges* to be determined and
regulated by the Federal Reserve Board, but in nocase to exceed 10 cents per $100 or fraction there
of, based on the total of checks and drafts pre
sented at any one time, for collection or payment
of checks and drafts and remission therefor by ex
change or otherwiseJ but no such charges shall be
tradd against the Federal reserve banks."
The question has been raised whether this provision of the
law would prohibit a member bank from charging a Federal reserve
bank.for collecting and remitting for a note or bill of exchange
forwarded to it by a Federal reserve bank for that purpose.
In other words, does this provision of the law apply to promissory
notes and bills of exchange as well as to checks and drafts on
member banks?
The Federal Reserve Act in several sections clear
ly distinguishes between "checks and drafts" on the one hand and
"notes and bills" on the other.
For instance, the first paragraph
Of Section 13 authorizes Federal reserve banks to receive from mem
ber banks deposits of "checks and drafts," without limiting the
purpose for which the deposit oust be made.
The same paragraph •
authorizes a Federal reserve bank to receive "maturing notes and
bills," but "for collection" only.
So also, Section .16 of the
Act requires a Federal reserve bank to receive deposits of "checks
and drafts drawn upon any of its depositors," (i. e,, upon member
banks and upon banks carrying balances with Federal reserve banks),
but nowhere is there any requirement that "maturing notes and bills"
X.-3J5.
-2-
_
must be received, at par, and it is obvious that such items were
eliminated for the reason that no bank can properly be fbreed to
credit at par an unmatured or uncollected note or bill. Not being
in the nature of a cash item, such an instrument is necessarily
subject to a discount. In other words, Congress in this section
distinguishes between the ordinary check and bank draft, and the
note and bill of exchange.
With these lights before us, a proper construction of the socalled "Hardwick amendment" to Section 13 which in terms, provides
that
"nothing in the Act shall be construed as
prohibiting a member or nonmember bank from
unking charges * * * for collection or payment
of checks and drafts and remission therefor by
exchange or otherwise, but no such charges shall
be made against the Federal reserve banks"
«
must necessarily draw a distinction between checks and drafts Con
banks) and promissory notes and bills of exchange.
Both the wording
of this amendment and the purposes for which it was enacted
necessarily lead to the conclusion that it was not intended to pro
hibit a member bank from charging a Federal reserve bank for services
rendered in collecting bills and notes which the Federal reserve bank
sends to it for that purpose. The phrase, "but no such charges
shall be made a-gainst the Federal reserve banks" is construed by the
Board as being intended solely for the purpose of preserving the
check clearing and collection system inaugurated by the various
Federal reserve banks; and there was no intention, either express or
implied, to prohibit member banks or nonmember banks from making
reasonable charges against Federal reserve banks for services render
ed in collecting maturing notes and bills.
The Board holds therefore, that charges for transactions of
this kind may be made now with the same propriety as before the
passage of the Act of June 21, 1917. Such charges would seem to
be permissible upon the hypothesis that notes and bills thus sent
to a member bank by the Federal reserve bank for collection, are
not drawn on the member bank, but upon some third p_.rty; and it
would be unreasonable and unfair to permit a Federal reserve bank
to select any particular member or nonmember bank to c .c t as its
interne diary or agent for the purpose of collecting ..nd remitting
free of charge all of the notes ..ad bills held by it for collection
and payable in any p-.rticular city or Xoc_lity. Such service must
be performed by the member or nonmember bank only as a matter of
2-325.
—3—
contract, and not because of any legal or moral obligation upon
such bank to make collections gratis for the Federal reserve bank
or for the banks for whom it acts as agent*
In the Case of "checks and drafts drawn upon any of its de
positors" (i. 04, banks) however, the law provides that no charge
for the service of collection, and payment and remission by exchange
or otherwise, should be assessed against Federal reserve banks. The
Bbard holds that the reason for this is that the Federal reserve banks
are affording all member banks certain reciprocal advantages in the
collection and clearance ol checks, and because the Feddral reserve
banks are obligated to receive cheers at par they may properly expect
remission therefor on the same basisi In other words, the prohibition
in the Hardwick amendment relating to the Charges on the collection
of ehecks and drafts on banks for Federal reserve banks,* is merely
an equalizing element in perfecting the check collection system;
which must afford reciprocal privileges and advantages with the
least possible expense to all concerned.
The paragraph of Section 15 which immediately follows the one
which requires Federal reserve banks to receive on deposit checks
at par, authorizes the Federal Reserve Board at its discretion,
to exercise the functions of a clearing house for Federal reserve
banks, or to designate a Federal reserve bank to exercise such
functions, and to require each Federal reserve bank to exercise the
functions of a clearing house for its member banks.
In clearing
house cities checks on member banks properly go to the clearing
house, but promissory notes and drafts or bills of exchange payable
by third parties, are not sent to the clearing house but are col
lected independently by tlpe holding bank.
For these reasons the Federal Reserve Board is of the opinion
that not onjy is it clear that the Hardwick amendment does not ap
ply to the right of a member bank to charge the Federal reserve
bank for the service of collecting notes and bills of exchange,
but also that there is no sound reason or policy which would re
quire that the Federal reserve banks should be immune from such a
charge.
While the Board must insist upon a strict compliance by
the member banks with the law requiring par collection of checks
for Federal reserve banks, it has no desire to deprive any bank of
any compensation allowed by the law and to which the bank may be
reasonably entitled.
Because of competition, banks are perform
ing many services free of charge which involve them in expense and
-u -
for which they are justly entitled to remuneration.
In the opinion of the Board, it should he the aim of the
Federal reserve hanks in developing plans for the collection of
”maturing notes and hills,” to offer efficient service, hut they
should he compensated and protected against any abuse or expense
in performing this service, and this principle applies, of course,
to member hanks.
It seems that some apprehension exists on the part of many
member hanks that the clearing of checks at par is hut a prelude to
a requirement that they make no charge for checks and drafts re
ceived by them for deposit and credit, or for collection and
remittance from others than a Federal reserve hank* It appears,
however, that the provisions of the so-ceiled Hardwick amendment
clearly preserve the right of any member hank to make a reasonable
charge against depositors or hanks other than Federal reserve hanks,
not to exceed one— tenth of one per centum^ for such services, the
amount of such charge to he determined and regulated by the Federal
Reserve Board*
The Board would request that this letter he brought to the
attention of your directors at tie next meeting, and you are at
liberty to communicate the views c.f the Board to any of your member
hanks which may he' interested.
Very truly yours,
Governor<
Ex-Officio Members
W. P. G. HARDING. G O V E R N O R
PA U L M . WARBURG. VICE G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
Secr etar y o f th e T r easur y
C H A IR M A N
JOHN SKELTON W ILLIAM S
FEDERAL RESERVE BOARD
Com ptr o ller o f th e C u r r en cy
WASHINGTON
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N . A S S T . S E C R E T A R Y
£-327
and
F is c a l A g e n t
ADDRESS REPLY TO
FE D E R A L RESERVE BO AR D
August 13, 1917♦
Dear Sir:
The Board has received the fallowing communication
from the Secretary of the Treasury}
nIt seems important that close attention he given
to shipments of gold and to remittances to foreign
countries, and I am therefore requesting that the Federal
Reserve Board communicate with the Federal reserve hanks
urging that they keep in touch as closely as possible
with transactions of this character and report them to
the Board for my information as well as for the use of
the Board.”
You are accordingly requested to continue the close
supervision that you have hitherto exercised over shipments of
gold and remittances to foreign countries.
It seems especially
desirable that you request the hanks and foreign exchange houses
of your district to keep you advised of transactions of this kind,
in order that you may tabulate them and report them to the Board.
Legislation is pending which, if enacted, will give the Federal
reserve hanks the legal right to call for this information®
Very truly yours,
Governor.
Ex-Officio Member*
r.9.
W.
HARD1N6, SOVERROR
PAUL M. WARBURO, Vice 0 OVRRN0 R
FREDERIC A. DELANO
ADOLPH C. MILLED
CHARLES S. HAM U N
W ILU AM 6 . MCADOC
SECRETARY OF TOE T i l U t n
CNAMMM
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS, SECRETARY
SKERNAN P. ALLEN. AMT. SECRETARY
ANO FWCAL AOEMT
AB D R E U REPLY TO
__
FEDERAL RESERVE BOARD
x-331.
August 15, 1917*
*
Dear Sir:
Tho Board is advised that several of. the
Federal rosorve banks havo recently requested the Federal
Reservo Rank of Hew York to buy acceptances for thoir
account# That particular institution is very wisely,
in tho opinion of tho Board, not investing its funds in
tho market at this time, but is on tho contrary liquidating
its maturities* In order to fill tho orders which have
been received from othor Federal reserve banks, tho Hew'
York Bank has boon selling to them from its own portfolio*
From tho standpoint of tho Board, tho re is no objection
to this, bocause tho cash and ros^rvo position of the
system as a w ’
-ole, is not affoctod* Tho Federal reserve
banks, however, should not request the Federal Reserve
Bank of How York, or any othor Fodsral reserve bank to
make purchases in the market for their account, at a
time liko the present, when the intermediary bank is not
buying for its own account; in other words, while there is
no objection to having Federal reserve banks participate
if mutually agreeable, in tho purchases which hav~ already
boon made by the two or thr^o banks which hold the bulk of
acceptances, tho Board does not feel that additional
purchases should be oncouragod at this timo, and believes
that tho Fodoral rcservo banks should adopt tho policy of
strengthening their position while money is oasy, and that
they should not seek investments for the sako of tho income
to be dorived therefrom* The banks will have amplo
opportunities to increase their earnings during tho periods
of payments for government loans*
- Very truly yours,
/
Governor-
Ex-Officio
W. P. G. HARDING, G O V E R N O R
P AU L M. WARBURG. V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
members
W ILLIAM G. McADOO
SECRETARY OF TH E TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S*
•
CO M PTR OLLER O F T H E C U R R E N C Y
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N . A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
A N D F IS C A L A G E N T
WASHINGTON
ADDRESS R E PLY TO
RESERVE B O A R D
August 15, 1917..
My dear Mr*.
I am enclosing proof of an analysis of the
State laws regulating the reserves required of State
hanks and trust companies.
This analysis will probably be published
in the next Federal Reserve Bulletin for the informa
tion of tlje banks*
To prevent any inaccuracies, I
will be greatly obliged if you will let me know if it
is correct, in so far as it affects the States in your
Federal Reserve District.
Jf not, please call atten
tion to any changes that should be made.
The Bulletin
goes to press about August 28th and if it possible I
should like to have it ready for that issue.
Sincerely,
Counsel
W. P . G . HARDING. G O V E R N O R
PAU L M. WARBURG. V I C E G O V E R N O R
FREDERIC A. DEb
ADOLPH C. M IL L *
C HARLES S. HAMLIN
Ex-Officio Members
EX°335.
W ILLIAM G. McADOO
SECRETAR Y OF TH E TR EAS U R Y
C H A IR M A N
JOHN SKELTON W ILLIAM S
FEDERAL RESERVE BOARD
C O M P TR O LLER O F T H E C U R R E N C Y
W ASH ING TO N
H. PARKER W ILLIS . S E C R E T A R Y
SHERMAN P . ALLE N . A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
ADDRESS R E P L Y TO
F E D E R A L RESERVE B O A R D
August
14, 1917.
S i r :
The attached papers raise sundry questions with
reference to the proper interpretation of the recent amend
ment to Section 22 of the Federal Reserve Act. These ques
tions may he briefly summarized as follows:
(l)
Is it necessary that the Board of directors
should authorize the receipt on deposit of checks, drafts, or
other items payable on demand from officers, or directors of
the bank?
(2) Where an officer or director is a member of the
firm or a stockholder in a corporation which is a customer of
the bank, is it necebsary that a. majority of the directors
should approve loans made to such firm or corporation?
(3) Would it be consistent with the purposes of the
Federal Reserve Act to substitute for the resolution proposed
by the Federal Reserve Board a written form of assent to be
signed by a majority of the board of directors?
In reply to these several inquiries, it is respect
fully submitted that the Board should adhere to its established
policy of not undertaking to determine in advance whether a
given transaction constitutes a violation of Section 22. In
asmuch as a violation of the provisions of this Section is made
a criminal act subject to a severe penalty, the Board has no
jurisdiction in the matter, and, as 'an administrative body,
should not undertake to prejudge any case that may arise.
While the Board should not for reasons stated en
deavor to express definite opinions on concrete cases arising,
there would seem to be no objection to its advising the banks
as to its understanding of the general purpose of this amend- .
ment, just as it approved in a former instance an opinion of
this office dealing with the general purpose of Section 22. In
this view, considering the context and the circumstances under
which this amendment was added, it seems that Congress intended
to remove any doubt as to the right of banks to receive deposits
from directors under the same terms and conditions as it re
ceives deposits from their customers and to pay such rate .of
X-325.,
2
-
interest as it pays to other customers. It also intended to
remove any doubt as to the right of any bank to make loans to
directors on the same general terms and conditions that it
makes loans to their customers, it being provided in the latter
case that as a condition precedent the directors, by an affir
mative vote or written assent of at least a majority of the
members of the Board, shall authorize such loan. The receipt
of deposits with interest would seem to contemplate the receipt
of checks, drafts, and other demand items on deposit, as well
as the receipt of money or currency, but whether or not giving
immediate credit to a director for such items nay be construed
as a loan until the item is actually collected involves a
question of law upon which the Board should not express a defi
nite opinion.
If the counsel for the bank should reach the conclu
sion that the courts might construe such a deposit to be a loan,
the bank could by resolution of the Board authorize the receipt
of such items, but this is a question which should be determined
by the bank's counsel* In like manner, a loan to a firm or
corporation in which the director is interested might or might
not be construed by the courts to be a loan to the director
within the meaning of this act; and so counsel for the bank
should determine whether these transactions should be included
within the resolution referred to. While this statute, a penal
statute, would in all probability be liberally construed by the
courts so as to avoid the possibility of including transactions
not contemplated by Congress, the Board should not undertake
tb rule on the substance of any transaction or to express an
opinion as to whether it would or would not constitute a viola
tion of law. It should confine its attention to a consideration
of those acts which are designed to make it a matter of record
on the minutes or records of the bank that the officers have
taken the affirmative action called for, and, to this end, the
Board has heretofore suggested a form of resolution to be
passed by the directors of the bank giving their assent to
loans to directors,
In this connection it might be stated that
the substitution of the written assent of a majority of the
directors for the affirmative vote of a majority would seem to
be in accordance with the terms of the Act.
Respectfully,
M. C. ELLIOTT,
Counsel.
Hon. W. P. G. Harding,
Governor, Federal Reserve Board.
W. P.
PAU L M. WARBURG. VICE G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETARY OF TH E TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S
FEDERAL RESERVE BOARD
C O M P TR O LLER O F T H E C U R R E N C Y
H. PARKER W ILLIS . S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
and
W ASH ING TO N
F is c a l A g e n t
ADDRESS R E P L Y TO
F E D E R A L RESERVE BO AR D
August 21, 1917.
Dear Sir;
Some time ago the Federal Reserve Board received
communications from a number of banks in Wyoming asking that
they be included in the territory to be assigned to the Omaha
branch of the Federal Reserve Bank of Kansas City,
The Board
has since determined to authorize branches both in Omaha and
in Denver, and it would appreciate an expression of your opin
ion as to the question, to which branch the State of Wyoming
should be attached.
The Board would probably ndt be willing
to divide it between the two.
Very truly yours,
Secretary.
P. S.
Please telegraph reply marking telegram:
"Charge Federal Reserve Board, Government rates".
MEETING - AUGUST 24, 1917 .
Subjects Suggested for Consideration and Discussion
1*
Division of Loams and Currency*
a.
b.
c.
d«
e»
f.
g.
2.
Discussion difficulties in connection with the First Loan.
Liberty Loan - Receipts - Transfers - Registration
Subscriptions (Application Blanks
(Daily Reports
(Final Summary
(Allotments
Temporary Receipts - 1st Payment
Interim Certificates
Issue - Cancellations - Transfers
Part paid Certificates
Full paid Certificates - Registration1
Return of unused and cancelled certificates
Definitive Bonds - Registration
Certificates of Indebtedness
Issues
Payments - cash - credit
Public Moneys.
Government Deposit Department
a.
b.
c.
3»
Discussion of forms used. Suggestions as to changes.
Designation of Qualified Depositories.
Redistribution of Government Funds with depository banks.
Treasurer’s Office.
Discussion as to proper method of reporting government
transactions.
a»
bv
c.
d.
4.
Certificates of Indebtedness - Form 912.
General, Liberty Loan and other Deposit accounts.
Computation of pnterest - Deposit accounts - Liberty Bonds
Qualified Depositories.
Audit of Liberty Loan Expenses.
Manner in which the bills and vouchers are to be presented
_ in order to comply with the Treasury Department Regulations.
5*
Federal Reserve Board.
a.
b«
c.
d,
Form 101 - General Ledger Record - New Accounts, etc.
Organization:
Management - Incoming subscriptions
Correspondence - Accounting Records - Reports
Reconcilements - custody and control of Interim
Certificates and Definitive Bonds - Deliveries
Auditing.
Certificates of Indebtedness,
Method of handling which will insure prompt presentation
and payment at maturity.
Audit.
Liberty Loan Accounts - after final payment
Government Deposit Department
Interim Certificates and Definitive Bonds
6
.
F e d e ra l Reserve Banks
Accounting-Forms and Records - Liberty Loan Department.
1.
Application Blank - Part Paid -*■ Full Paid Subscriptions.
2.
Initial payment.
a. Cash Record
b. Certificates of Indebtedness, applied
c. Counter receipts or acknowledgments
d. Subscription Records
e. Ledger Record
f. Reports to Treasury
g. Summary of Bank applications.
3»
Allotment
a. Adjust on Records
b. Notice to Subscribers
c. Return of Excess payments
U.
Subsequent payments
a. Cash
b. Certificates of Indebtedness
c. Credit on books of qualified depositories.
d. Reconcilement of bank accounts before deliveries.
5*
Custody of Interim Certificates and Definitive Bonds
a. Control
b. Record of Receipt from Treasury
c. Signatures
d. Delivery to delivery clerk
e. Cancellations - Reissues.
'6.
Deliveries
a.
b.
c.
d.
e«
Authority to deliver
Record of deliveries
Registered mail record
Signed acknowledgments returned by subscribers,
checked by AuditorSpecial delivery record definitive bonds.
Ex-Officio
members
W. P. G. HARDING, G O V E R N O R
P A U L M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
S ecr e tar y o f th e T r e a s u r y
C H A IR M A N
JOHN SKELTON W ILLIAM S
Co m p t r o lle r o f th e C u r r e n c y
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
and
W ASH ING TO N
F is c a l A g e n t
AD D RESS R EP LY TO
X—335®DEBA1“RESERVE board
August 22/ 1917»
Dear Sir;
The Board, has received a letter from the food administrator,
Mr. Hoover, stating that he is just beginning a campaign to secure
a larger amount of cattle feeding in this country, and that his in
vestigation shows that -the interest charge represents between thirty.five and forty per cent of the total costs of this industry*
The
legal rate of interest in many of the cattle raising states is 8f> or
more, and the food administrator' suggests that if banks would make
loans to the cattle people at a rate of interest not exceeding 7$
(which he thinks they can afford to do in view of the 5$ rediscount
rate on six months* paper based on Jive stock, available at most of
the federal reserve: b§,nks) a stimulus would be given to the cattle
raising industry, which all will agree is greatly needed at this
time*
The Board appreciates, of course, the limitations upon its
powers in th\s respect, and does not wish to put any pressure upon
the b^nks to induce them to charge less than legal rates, but it is
informing you of the suggestion made by Mr. Hoover in order that*
should you deem it expedient, you may point out to your member banks
this opportunity of rendering yery effective help in the present food
crisis*
Very truly yours,
Governor*
X-340
1.
Internal Auditings
"While allowance is irade for the trerrendous increase in
the volume of work due to the Liberty Loan and to the scarcity of
senior bank men capable of assuming responsibility, still the fact
that the Reserve Bank officials permitted the Auditing work to be
neglected and in sorne instances almost entirely dropped, can not
be justified. Auditors and their assistants were assigned to
other duties. At the time when there was greater need for ef
fective checks and safeguards than ever before the necessary
care and vigilance were relaxed.
"Few Reserve Bank officials realize the importance of an
internal auditing system.
As a ruld the present Auditors are
capable, but they have not a sufficient number of competent assist
ants to enable them to keep at all times an effective check upon
every department of the bank. There is a disposition to make
the Auditor subject to the directions of the junior officers of
the institution, whereas he should conduct his work independently,
reporting only to the Board of Directors, the Governor and the
Chairman of the Board*
"'In some institutions a tendency is shown to assign admin
istrative duties to the Auditor. While in the past, in the
interest of economy, such a course was excusable, at the present
time the organizations are so very large that the administrative
and auditing departments should be separate.
In each bank the
auditing department should have at- thorough organization.
The
V
- 2 -
X-340
tank should have as Assistant Auditor an experienced can capable
of supervising the work of the department, in the event of the
absence or disability of the Auditor.
In addition the depart
ment should have as many audit clerks as are necessary to main
tain at all times the proper control over dll departments.
Care
should be exercised in the selection of men for this work.
In the
past the weakness has been due to the failure to employ the right
class of men.
"For the proper protection of the bank the auditing work
must be kept up to date and the Auditor should be held to a
strict accountability for the work of his department.
In case
branches are established, the internal auditing system should be
installed by him and the audits cade under his direction.
It is
the duty of the Chairman, as a representative of the Directors,
and the Governor, as the Executive ifomager of the bank, to see
that the work is properly done*
2.
Staff:
"The tremendous increase in the work of the various
departments of the Reserve Banks, due partly to the Liberty Loan,
has shown the need for strengthening the staffs of Reserve Banks
by addition of experienced bank men.
Senior employes capable of
assuming responsibility are needed in practically every bank.
In some institutions there is room and need for additional officers.
Reserve Banks should guard against the tendency apparent in
some quarters, of centalizing duties and responsibilities in such
i
a manner that the absence, disability or resignation of one or
two officers would seriously hamper the business of the institution*
n,In each bank and branch office there should be a good work
ing organization.
For every important position, whether official
or clerical, there should be at least one competent assistant
available to perform the duties in the event of the absence or
disability of his immediate superior.
There is a tendency on
the part of nany junior officers to handle work which should be
delegated to their subordinates.
"It would be well for each Reserve Bank to have an organiza
tion chart prepared, the work of the different departments out
lined, and the duties of officers and senior employes defined.
Competent utility xren should be available to assist
in depart
ments where their serviceB are needed.
"It will be noted from the individual reports that a large
percentage of the employes are women clerks*
At first women
were employed as stenographers, later in the transit department.
At present, in some banks, they are employed in practically every
department.
It is apparent that it is to this source that the
Reserve Banks mustlook to fill the positions made vacant by
employes entering the military and naval service.
"The demand for bank clerks is so great that practically
all banks are in competition for experienced men.
The scale of
salaries has risen at least fifteen to twenty-five per cent during
the past year.
The Reserve Banks must be prepared to pay higher
X-340
- 4
salaries in the future.
3.
Liberty Loan Department.
"Considering the volume of work handled,, the difficuly
in getting competent clerks, the lack of time in which to perfect
a working organization, the inadequacy of the accounting forms
suggested for use, the work of this department was handled fairly
well*
"Some banks were fortunate in securing temporarily, the
services of officers and senior employes of some of the largest
institutions in the respective districts.
Other banks hired public
accountants to supervise the accounting details.
In a few in
stances, the department was operated by bond seen. The best re
sults were obtained where an officer or officers of the Reserve
Bank were in immediate charge of the banking and technical details.
Through failure to understand instructions considerable confusion
arose, in connection with reports and information furnished to the
Treasury Department.
future.
The experience gained will be useful in the
There is need for a better general understanding as to
the duties of Reserve Banks in acting as fiscal agents, the informa
tion which the Treasury Department requires in connection with the
Liberty Loan operations and a detailed explanation of the proper
use of the forms now used.
"It is expected that at the conference in Chicago, August
34th and 25th, which will be attended by technical representatives
of the Treasury Department and Federal Reserve Board, and the Auditor
X-340
-
5
-
and representative of the Litery Loan Department of each Federal
Reserve Bank, a tetter understanding will he established*
It
is quite apparent that the work of the Reserve Banks would be
greatly simplified if there were issued by the Treasury Depart
ment, for the information and use of the staff of the Reserve
Banks, a pamphlet giving detailed instructions covering the rela
tions of the fiscal agent with every division of the Treasury
Department.
"In the opinion of your examiner the handling of the bank
ing and technical details of the Liberty Loan is essentially a.
banking matter and the work of this department should be super—
vised by an offleet* of the Reserve Bank^ not by a bond can.
Selling and publicity
campaign
The
should be directed by the Liberty
Loan Committees but as the Reserve Bank is actually responsible for
subscriptions, receipts and securities, the work should be super
vised by properly designated officers of the bank, directly respon
sible to the Executive officers of the institution.
The officers
should have competent men in charge of the principal subdivisions
of the work.
"Some Reserve Banks fail to realise that it is necessary to
give to the securities in their possession as fiscal agents, the
same care as to their own securities.
Interim receipts are bearer
instruments and should be treated similar to currency.
As a
general rule when the interim receipts and definitive bonds are
received from Washington they should be placed under dual control.
The amount necessary for each day’s business should be released to
X-340
-
the delivery clerk.
6
-
It will be necessary for each bank to
account for all securities received from the Treasury Depart
ment.
"The acknowledgment of delivery signed by the subscriber
should be returned to the Auditor or his representative in the
Liberty Loan Department and Checked against the delivery record.
After the final payment has been made on August 30th, a complete
audit should be made under the direction of the Auditor of the
bank. A periodical check should be trade of the securities held
in the Government Deposit Department."
Ex-Officio Members
W . P. G. HARDING, GOVERNOR
PAU L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
Comptroller of the currency
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AGENT
W ASH ING TO N
ADDRESS REPLY TO
-•FEDERAL RESERVE B O ARD
August 23, 1917
Dear Sir:
Chief Examiner Broderick has filed with
the Board a report concerning the special visit
which he recently made to your hank; a copy of the
memorandum of suggestions which he made to the officers
of your hank; and he has made in addition a general
report to the Board in which he discusses important
matters relating to auditing and accounting*
For your information and guidance copies
of these reports are transmitted herewith.
Very truly yours,
Governor*
(Enclosures) •
ex-officio
Members
W . P. G. HARDING, G o v e r n o r
P A U L M. WARBURG. V ic e GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
X.3H2
W ASH ING TO N
H. PARKER W IL L IS , SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
August 23 , 1917»
Dear Sir:
The Board wishes to invite your attention again to the importance
of increasing the gold holdings of the Federal reserve banks-.
About ten days ago one of the Federal reserve banks sent to all
of its members (except those located in its own city., to whom a
personal note was sent) a letter asking their cooperation in building
up its gold holdings. The Board is informed that this bank has already
received more than two hundred and fifty replies, all favorable, and
that numerous shipments of gold certificates are being received*
If you have not already done so, the Board suggests that you send
letters to your member banks urging their cooperation and pointing out
that under the recent amendment to the Federal Reserve Act, a bank can
carry as vault money any kind of United States coin or currency, in
cluding Federal reserve notes; and that there are over $500 ,000^000 of
gold and gold certificates in general circulation which could be re
placed to advantage ’by Federal reserve notes, thereby diverting the
gold to the Federal reserve banks, thus increasing their strength and
consequently the strength of all banking institutions*
The bank to which reference is made requested its member banks to
set aside the gold certificates received, not paying out such certifi
cates over their counters unless specially requested,' but to forward
them instead to the Federal reserve bank* It offered to pay transporta
tion charges on such gold certificates whether fit or unfit for circi>*
lation, and to
(a)
furnish therefor, free of expense. Federal reserve notes
in such denominations as may be desired, or
(b)
to place the amount to the credit of the remitting bank
in the Federal reserve bank, or in any designated bank in
the city*
Many of your banks will no doubt have need for currency of par
ticular denominations for payroll or crop*-moving purposes, and the
present, therefore, seems to be an opportune time for attracting a
substantial part of the gold certificates in general circulation into
the vaults of the Federal reserve banks*
Very t r u l y y ou rs,
Governor*
Ex-Officio Members
W. P. G. HARDING. G O V E R N O R
PA U L M. WARBURG, V I C E G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. MCADOO
SECRETARY OF TH E TREASURY
C H A IR M A N
JOHN SKELTON W ILLIAM S
Comptroller of the Currency
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , S E C R E T A R Y
SHERMAN P. ALLE N , A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
W ASH ING TO N
ADDRESS REPLY TO
*
FE D E R A L RESERVE B O AR D
August 24, 1917.
i
Bear Sir*
The Board is of the opinion that it is important that Federal
reserve banks should, at this time, keep themselves in as strong a
position a3 possible, without declining to meet legitimate demands made
upon them in their own districts,
the statements of August 17th show
that the reserves of the banks range from 68. 2% to 91.1%.
The view of
the Board is that for the present the Federal reserve banks should
endeavor to maintain a reserve position against note issues and de
posits combined of between 75% and 85%, and that whenever this reserve
should fall below 70% in any case, the Federal reserve bank should
dispose of some of its bills to other banks which are in a stronger
position.
The Board has concluded, therefore, that the proper policy
for a Federal reserve bank to pursue at this time would he for it to
discontinue any participation in open market transactions outside of
its own district whenever its reserve falls below 75% of its deposit
and note liability.
This policy, of course, is subject to modification
as conditions change, and the object of this letter is merely to out
line a proper course of action for the next few weeks.
The Board
will advise the banks whenever any change in this policy appears to
be expedient.
Very truly yours,
Gove rnor.
Ex-officio Members
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
-----
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
A
P A R K E R W IL L IS , SECR ETAR Y
SHERMAN P. ALLEN,
and
W A S H IN G T O N
A SST. S EC R ETA R Y
F is c a l A g e n t
A DDRESS REPLY TO
FEDERAL RESERVE fOARD
August 24, 1917,
Dear Sirs
The Federal Reserve Board has obtained a copy of an enabling act
recently passed by the Legislature of the State of Pennsylvania, per
mitting State banks and trust companies to come into the Federal Re
serve System,
In response to inquiries from some of the Federal Re
serve Banks, this Act will appear in the next member of the Federal
Reserve Bulletin.
The act in the form adopted by the State of Penn
sylvania is so satisfactory that it constitutes a good standard for
enabling acts in those States where these acts are needed*
Respectfully,
Governor,
Ex-Officio Members
W. P. G. HARDING. G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
Secretary of the T reasury
CHAIRMAN
JOHN SKELTON WILLIAMS
Comptroller
of the currency
FEDERAL RESERVE BOARD
H. X
o tg 3
and
W A S H IN G T O N
A $ U . I S , SECRETAR Y
SHERMAN P. ALLEN,
ASST. SEC R ETA R Y
F is c a l a g e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
August Z5, 1917.
Sir:
In order that the Board nay compare the
rates under which exchange is bought and sold in the
various districts., and the methods in which exchange
on other Federal Reserve Cities is handled, I shall
be obliged if you will send me the latest rules and
instructions which you have issued on this subject.
Respectfully,
Secretary
Ex-Officio
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
members
WILLIAM G. McADOO
SECRETAR Y OF TH E TREASURY
C h a ir m a n
JOHN SKELTON WILLIAMS
Co m p tr o ller o f t h e C u r r e n c y
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
X 34^DF,SCALAGENT
AD DRESS R EPLY TO
FEDERAL RESERVE BOARD
August 25, 1917.
Dear Sir:
In the future you will receive five
copies of all mimeograph letters sent you from
the Board for the use of the officers of your
bank.
Very truly yours,
Secretary
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex-Officio Members
WILLIAM G. McADOO
SECRETAR Y OF TH E TREASURY
C H A IR M A N
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
Co m p t r o l l e r o f t h e C u r r e n c y
W A S H IN G T O N
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
and
A DDRESS REPLY TO
FEDERAL RESERVE BOARD
X-351
Dear S i n
Your letter of
relative to increasing
the supply of one dollar bills, has been received and
will be brought to the attention of the Federal Reserve
Board.
At the present tin© the supply of bills of this
denomination is being increased at the rate of about
one million dollars per week by converting large legal
tender notes into those of the one dollar denomination.
You and other bankers can materially assist in relieving
the situation by sending in the large notes for conver
sion in this way.
Yours very truly,
Secretary
F is c a l A g e n t
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
e x OPF1CIQ MEMBKI
CARTER GLASS
S ECR ETAR Y O F T H E TR EASU R Y,
C h a ir m a n
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
CO M P TR OLLER O F TH E C U R R E N C Y
W A S H IN G T O N u s t ^
J. A. BRODERICK. SECRETARY
W. T. CHAPMAN. A S S IS T A N T S E C R E T A R '
W. M. 1MLAY, FISCAL AGENT
^
^DDR ESB REPLY TO
^IcVeDERAURESERVEBOAR1
Dear Sir:
Section
9
of the Federal Reserve Act as amended by the
Act of June 21, I9 I7 , contains the following provision:
"Whenever the directors of the Federal Reserve
Bank shall approve the examinations made by the State
authorities, such examinations and the reports thereof
may be accepted in lieu of examinations made by exami
ners selected or approved by the Federal Reserve Board:
♦ * * 4c * W
In the opinion of Counsel for the Federal Reserve Board
it will be necessary for the Board of Directors of your bank to
approve or disapprove the acceptance of examinations by State
authorities of State member institutions in your- district, includ
ing institutions in those states in which the Federal Reserve Board
has heretofore authorized such acceptance.
Will you therefore please bring this matter to the atten
tion of your Board of Directors at as early a date as possible,
with a view to securing the required action, and advise the Federal
Reserve Board of the result thereof.
For your information it may be stated that this Board has
heretofore authorized the acceptance of examinations in the follow
ing states:
Alabama
Illinois
Indiana
Kansas
Louisiana
Massachusetts
Ohio
Michigan
South Carolina
Minnesota
Texas
Missouri
Virginia
New Jersey
Wisconsin
North Dakota
Nebraska
Very truly yours,
Secretary.
Ex-Officio
W. P. G. HARDING. G O V E R N O R
PAUL M. WARBURG. VICE G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
members
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
CO M P TR O LLER O F T H E C U R R E N C Y
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
A DDRESS REPLY TO
W A S H IN G T O N
September
191/
Dear Sir:
The large increase in the value of discounts and accept
ances handled by the Federal Reserve banks, especially during
the more recent period, suggests the advisability for the
Board's Statistical Division of adopting the use of mechanical
devices in the compilation and tabulation of the statistical
data received from the Reserve Banks.
This may add somewhat
to the work of the Washington office, but, it is hoped, will
materially reduce the amount of statistical work done at pres
ent by the several Federal Reserve banks and branchesFor the present no changes are contemplated in the group
ings and classifications of the Monthly Bulletin, unless such
changes are recommended by the banks themselves.
It is suggest
ed, therefore, that y-ou go over the several tables of the Bul
letin and write us at your early convenience whether the monthly
information regarding discounts and acceptances as given in the
Bulletin is sufficient for your purposes, and if not, what
changes or additions would be desirable.
Respectfully,
Secretary.
W. P. G. HARDING. G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
X — 3 C A R L E S S. HAMLIN
Ex-Officio Members
WILLIAM 6. MCADOO
SECR ETAB Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
H . PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
and
W A S H IN G T O N
ADDRESS REPLY TO
F E D E R A L RESERVE BOARD
September 6, 1917.
To the Federal Reserve Board.
Gentlemen:
On July 9th, 1917, your Committee to whom
has been referred the matter of designation of additional
reserve cities made a report recommending to the Board
that the following eight cities be named as reserve cities:
Buf faio,
Toledo,
Peoria,
Memphis,
Haw York
Ohio
Illinois
Tennessee
Jacksonville,
Grand Rapids,
Evansville,
Oakland,
Fla.
Mich.
Ind.
Cal.
On July 12th a letter was sent by the Governor
of the Board to all Federal Reserve Banks suggesting that
this matter be brought to the attention of the Executive
Committee, and that recommendations be made to the Board
in regard to these cities.
Replies to these letters have been received
from all of the Federal Reserve Banks who are interested
in the matter, which indicates-that these cities, with the
exception of Jacksonville, Florida, should be designated
as reserve cities
F is c a l A g e n t
X-357
- 2 -
In the meantime your Committee has had a
protest from the bankers of Evansville, as well as
objections with respect to Jacksonville, and we now
recommend that the original recommendation stand
with respect to all the cities except Jacksonville.
In this connection it should be pointed out that '
Evansville has a population of approximately 70,000
and has upwards of 30 per cent of banking deposits.
Jacksonville on the other hand has a smaller population
- 57,000 - and bank deposits of only 23 per cent.
Your Committee would suggest that the ef
fective date when the above seven cities shall be
named as reserve cities be fixed as of October 1st,
1917, if action .by the Board is taken immediately,
and that the bankers of Evansville be informed that
if by a reason of the operation of the law the per
centage of bank deposits should very considerably
diminish the Board would be glad to reconsider its
action, but at the present time the Board is warranted
in the conclusion that Evansville should be added to
the list of reserve cities.
Respectfully submitted
(Signed)
F. A. DELANO.
(For F. A. Delano and A. C. Miller)
j
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG, V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
Ex-Officio Members
WILLIAM G. MCADOO
—u a m i r c
T reasury
CHAIRMAN
c
U A 111 IM
secretary of the
FEDERAL RESERVE BOARD
JO HN S K E L T ON W I L L I A M S
comptroller of the currency
H. P A R K E R W I L L I S , S E C R E T A R Y
S H E R M A N P. A L L E N . A S S T . S E C R E T A R Y
and
f is c a l
a d d r e s s r e p l y to
W A S H IN G T O N
FEDERAL RESERVE BOARD
September 8, 1917.
Dear Sir:
The following letter has been received from the
Director of the Bureau of Engraving and Printing indicating
an increase in the cost of Federal Reserve Notes from July 1,
1917, and is transmitted for your information:
Ag en t
"On account of changing conditions as to labor and
material costs, and in compliance with the decision of
the Comptroller of the Treasury, dated August 3, 1917,
requiring the amount of reimbursement for work dona by
this Bureau for other branches of the Government service
to include the amount of the five and ten per centum in
crease of compensation under the sundry civil appropria
tion act of June 12, 1917 (Public Act No. 21), it will
be necessary to increase charge for furnishing of Fed
eral reserve notes from $34,368 to $36.56 per 1,000
sheets, effective July 1, 1917,"
Very respectfully,
Fiscal Agent.
W. P. 8. HANDIN8. eoviBHOB
PAUL M. WARNUN8. VIC* 80VIRN0I
FREDERIC A. DELANO
ADOLPH C. MILLER
KX-OFPICIO members
WILLIAM 8. McADOO
SRCRITARY o r T H I T M A I U I T
CHAIRMAN
JOHN SKELTON WILLIAMS
COMFTROLLIR O f T H I ClIRRIHCY
X-36W“ *•HAHU"
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SlCHTARV
SHERMAN P. ALLEN. ACIT. SICRITART
AND FISCAL AORHT
WASHINGTON
ADDRR8B RRPLY TO
FID B R A L RESERVE BOARD
September 8., 1917.
Dear Sir:
Inasmuch as the term of office of one class A director
and one class B director of your bank, will expire on December 31,
1917, arrangements should be made to hold an election of directors
to succeed those whose terms expire; such new directors to serve
for terms of three years each.
The Board has fixed November 20 as the date for open
ing the polls. You should accordingly arrange to have' printed:
(a) Certific?t3 of election of District Reserve Elector.
(b) Certificate of nomination for Class "A1*;Director.
(c) Certificate of nomination for Class "B" Director.These certificates, as printed last year, contain form
of resolution to be adopted by the member banks. A sufficient
number should be prepared and mailed to each member bank in the
group which elected the director whose tern expires on December
31, 1917. It will be necessary, therefore, for you, as chairman
of the board, to group the banks in your district in accordance
with the Act, following the general lines of the plan set forth
in the circular of the Organization Committee. When these cer
tificates have been returned by the banks the electors should be
listed and the preferential ballot prepared.
Under the provisions of Section-Id this ballot need not
show the name of the bank placing in nomination any.candidate, but
if not on the ballot a separate list should be prepared -showing by
whom each candidate is nominated. If this is done,.the ballot form
used, will be somewhat simplified, smce the voting columns, showing
the first, second, and third choice*.Of the elector, can appear on
the same page as the name of the candidate.
369?
i
X-360
-
2
-
Section 4 of the Federal Reserve Act provides that: §
"Every elector shall/.within 15 days after the
receipt of the said 1-ist.,. certify to the chairman his first,
second, and other choices.1'
The polls for the election of directors would, therefore,
close 15 days after November 20, and in consequence, arrangements
■should be made to have the ballots in the hands of the electors
not later than November 20.
Very truly yours...
Governor,
LIST OF OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS
WHOSE TERMS EXPIRE IN 1917.
District No.
Class A
Class B
Class C
1. Boston.
- T. Pi Beal, Boston, Mass.
- Charles A. Morss, Boston, Mass.
- Frederic H. Curtiss, Boston, Mass*
District No, 2. New York.
Class A - R. H. Treiran, Ithaca, New York.
Class B - W, B, Thompson, Yonkers, New York.
Class C - W rL. Saunders, .New York, N. Y.
District No. 3. Philadelphia.
Class A - C. J. Rhoads, Philadelphia, Pa.
Class B - E. S. Stuart, Philadelphia, Pa.
Class C - Richard L. Austin, Philadelphia, Pa.
District No. 4. Cleveland.
Class A - Robert Wardrop, Pittsburgh, Pa.
Class B - T. A. Combs, Lexington, Ky.
Class C - D. C. Wills, Bellevue, Pa.
District No.
Class A
Class B
Class C
5. Richmond.
- Edwin Mann, Bluefield, W. Va.
- D. R. Coker, Hartsville, S. C.
- Caldwell Hardy, Norfolk, Va.
District No.
Class A
Class B
Class C
6. Atlanta.
- W. H. Toole, Winder, Ga.
- Edgar B. Stern, New Orleans, La.
- M. B. Wellborn, Anniston, Ala.
District No.
Class A
Class B
Class C
7. Chicago.
- E. L. Johnson, Waterloo, Iowa.
- M. B. Hutchison, Ottumwa, Iowa.
- W. F. McLallen, Columbia City, Ind.
District No.
Class A
Class B
Class C
8. St. Louis.
- Walker Hill, St. Louis, Mo.
- Leroy Percy, Greenville, Miss.
- John W. Boehne, Evansville, Ind.
X~3ftL,
- 3 ..
i
district Ho*
Glass A
Clausa B
Glass C
9> Minneapolis,
- L. B. Banna, Fargo, N. D*
-N* B* Hrul+er, Helena, Mont*
- John K, Rich. Redwing, Minn*
District Ho* 10, Kansas jSilZx.
Claes 4 - G. E. Burnham, Norfolk, Nebr*
Class B - Harry W. Gitscn, Muskogee, Okla«
Class. 0 “•Charles M.* Sawyer, Kansas City, Mo*
Class A - E. s. Smith, Shreveport, Da.
Class B - J, Jk Culbertson, Paris, Texas.
Class 3 ~ W. F. Ramsey, Dallas, Texas.
District Ho*
Class A
Class B
Class 0
i
13- San Francist-o.
- J„ K. Lynch, San Francisco, Cal*
~ A . j3. C. Dchxnan, Sa*n Francisco, Cal. *
- John Perrin, Pasadena, Cal*
To the Federal Reserve Board:
Mr. Jerome Thralls of the Committee of Twenty-five, has
forwarded to me at my request some information in regard to the
daily sendings of checks for collection by typical banks, varying
in capital and located in towns with population ranging from 700
to 134,900. This data, furnished by Mr. Thralls is, as I under
stand it, based upon the information gathered by the Committee of
Twenty-five in support of its argument before Congress in favor of
an exchange charge.
You will note from this report that the proposed exemption
of service charges on twenty checks per day, or five hundred per
month, as suggested by the Federal Reserve Board’s Committee on
Clearing, would operate to give free service to banks having a capi
tal of $25,000 or thereabout^; would, in geheral, cut in two the
service charge for banks of double that capital, and would make a
substantial reduction say 25% in the service charges of banks with
capital as high as $100,000. With banks having a larger capital
than this, however, (and they are chiefly banks in reserve cities)
the exemption of charges for twenty checks per day or five hundred
per month, amounting to an exemption in service charge of Say, $7.50
per month in the aggregate, would of course, result in a diminish
ing proportion of reduction amounting to a negligible sum in the
case of very large city banks.
It appears that at the present time, under the operation
of the clearing system as it exists, there are, even in the largest
districts, only relatively small numbers of banks availing themselves
of tho privilege of sending their checks to the Federal Reserve' Banks
direct for collection. Most of the checks reaching the Federal Re
serve Banks come through not to exceed fifty banks, even in districts
with many member banks; and the overwhelming proportion of these are
received from, say twenty banks.
It is a source of satisfaction to find that the further
investigation and study of the subject seems fully to justify the
Board in urging the Federal Reserve B^nks to adopt the recommenda
tions of the Board’s Committee, tho objects of which were:
X-363
-
2
-
First. To make a reduction in the service charge against
member banks.
Second. To make that reduction in such a way as to cause it
to appeal particularly to the small banks, becuase they have,
thus far, profited least from membership in the Federal Re
serve System and have lost most by reason of the loss of ex
change .
Third; To bring about, if possible, or at least to encourage
direct relations between the member banks and the Federal Re
serve Banks.
As has already been pointed out, the principle of ex
emption for a small volume of business is recognized in the income
tax laws of our own aedLall other countries, and 3eems to be justi
fied in this case, not only in principle, but because it accomplishes
the object which we wi*h to accomplish, as above explained.
Furthermore, the sending of a self-addressed, stamped
envelope with all items sent for collection would seem not only
justified by common banking usage, but is also consistent with
the theory that we are asking the banks to remit at par, just as
if the checks were presented by a messenger.^in thi3 case the
letter carrier) at their own counters*
This subject was first iakefi Up with the Federal Reserve
Banks on June 28, 1917, and again on July 19 and July 25, 1917,
and the Board ha3 Since received circulars covering the subject
from the following banks:
n
St. Louis,Federal Reserve Bank, dated July 251
Kansas City "
"
"
" ,August 101
Atlanta
"
"
«
”
Sept/' li
Providing for the exemption of charges on 500 check*
monthly**.
Respectfully submitted.
9/10/17
a
Jr
MEMORANDUM OF DATA INCLUDED IN REPLIES TO QUESTIONS SENT BY THE COMMITTEE OF
TWENTY-FIVE TO A NUMBER OF REPRESENTATIVE BANKS IN VARIOUS STATES.
Popula
tion
Capital
700
800
1,600
1,800
2,000
2,180
2,781
2,800
3,700
4,000
4,500
5,000
6,000
7,000
15,000
20,750
23,000
30,000
134,917
134,917
Daily average
number of checks
Deposits rec'd on deposit
$
25,000
60,000
50,000
25,000
50,000
$
151,110
405,000
458,000
186,000
712,000
23
75
45
36
1,000
50,000
400,000
886,890
75,000
50,000
275,000
50,000
465,000
25,000
175,000
60,000
741,000
100,000
700,000
100,000
816,000
150,000 1,200,000
150,000 1,650,000
250,000 2,000,000
100,000 1,475,000
300,000 3,060,000
600,000
1*000,000
400,000 13,399,500
100
190
200
100
82
160
117
75
300
1,000
1,500
240
1,400
4,805
9,000
Daily avers:
age volume
of checks
rec’d on
deposit
collectible
thru F.R.Bank
$
$
1,100.
20
1,259.66
5,350.
50
8,000,00
1,250.
2,250.00
25
1,020.
2,160,00
17
10,OOO.OO(Abnormal) 600{A/c gum- 6,000.
mer Resort)
5,000.00
30
2,000,
7,500.00
Not a member
« •*i
25,000.00
7,500.
50
4,000.00
2,400.
60
9,200.00
2,300.
20
5,400.
8,300.00
100
7,800,00
7,600.
115
4,500.00
2,750.
45
24,000.00
100
10,000.
100,000.00
800
95,000.
100,000.00
500
50,000.
35,376.14
13,241.39
77
100,000.00
800
55,000.
960,000.00
920
435,000
1,750,000.00 (From
5,000 tc
( 800,000 to
6,000)
1, 000,000)
Daily average
number of checks
rec'd on depos
Daily average
it, collectible
volume of checks through the
rec'd on deposit Fe d. Re a- Bank.
X-363
X-364
DEPARTMENT
OF
JUSTICE
WASHINGTON
September 10, 1917.
The Honorable
The Secretary of the Treasury*
Sir:
I have the honor to acknowledge the receipt of your
letter of the August 3rd. enclosing a letter of the 2nd
instant from ihe Governor of the Federal Reserve Board
to you and requesting my Opinion upbn the question pro
pounded by him, as to whether State banks joining the
Federal Reserve System become subject to the provisions
of the Clayton Act (approved October 15, 1914; 38 Stat.
730; amended by Act of May 15, 1916) relating to interlock
ing directorates.
The pertinent provisions of the Clayton Act are found
in Section 8, as follows:
..... no person shall at the same.time be a director
or other officer or employee of more than one bank.
banking association or trust company, organized or
operating Under the law3 of the United States, either
of which has deposits, capital, surplus, and undivided
profits aggregating more than $5,000,000; and no privvate banker or person who is a director in any bank
or trust company, organized and operating under the
laws of a State, having aepoaits, dapital, surplus,
and undiyided profits, aggregating more than
$5,000,000, shall be eligible to be a director
in anv bank or banking association organized or
operating under the laws of the United States .....
X-364.
-
2
-
Mo bank, banking association or trust company,
organized or operating under the laws of the United
States, in any c i t y .... of more than two hundred
thousand inhabitants .... shall have as a director
or other officer or employee anv private banker or
anv director or other officer or employee of any
other bank, banking association or trust company
located in the same place.
The prohibitions of this section relate to banks which
are "organized or operating under the laws of the United States".
Obviously, the section does not apply to State banks merely as
State banks, but applies to them, if at all, only in consequence
of membership in the Federal Reserve System.
The Federal Reserve System embraces (l) National baulks,
whose membership is compulsory, and (2) banks organized
under the "laws of any State or of the United States", which
aro eligible for membership under conditions prescribed in
Section 9 of the Federal Reserve Act (approved December
23, 1913; 38 Stat. 251)
Besides banks organized under
State laws and doing business in the Stat,es (hereinafter
called State banks), the latter class includes (a) banks
organized under State laws but having offices and receiving
deposits in the District of Columbia, as described in Section
713 of the Code of the District of Columbia, and (b) banks
and trust companies, other than National banks, organized
under the laws of the United States, i. e.,banks and trust
companies organized under Sub-chapters 4 and 11 of Chapter
18 of the Code of the District of Columbia (31 Stat, 1189).
National banks and banks w.!, trust companies organised
under the Code of the District of Columbia are clearly
•within the prohibitions of Section 8 of the Clayton Act.
They are not only organized under the laws of the United
States but of necessity operate under those laws as the
laws of their existence.
Banks organized under State laws and carrying on busi
ness in the District of Columbia also fall within the pro
hibitions of Section 8 as "banks operating under the laws
of the United States"; for, in carrying on business in
the District, over which Congress exercises exclusive
legislation, they are not only subject generally to the
X-3 54.
- 3 -
Iaw3 of th© United States in force within the District,
hut by specific enactment they are required to make re
ports to the Comptroller of the Currency and are subject
to be examined and taken possession of by him as provided
with respect to National banks. (Act of June 25, 1906,,
amending Sections 713 and 714, Code D. C.; 34 Stat. 458).
State banks which join the Federal Reserve System
do not, however, operate under the laws of the United
States as the laws of their existence, nor in territory
over which the United States exercises exclusive legisla
tion, These banks have merely voluntarily accepted the
terms and provisions of the Federal Reserve Act (including
regulations cade pursuant thereto) in becoming members of
the Federal Reserve System, from which they are at liberty
to withdraw. Yet, since upon being admitted they become
subject to the terms and provisions of the Federal Reserve
Act, they may also be aptly described as "operating under
the laws of the United States". Accordingly, Section 8
of the Clayton Act standing alone might reasonably be
construed to include State member banks within its pro
hibitions.
Section 8 of the Clayton Act npist be considered, how
ever, in the light of the provisions of Section 9 of the
Federal Reserve Act relating to membership of State banks.
Unlike National banks, State banks are not compelled,
but in effect are invited to join the Federal Reserve
System. In Section 9 as originally enacted Congress speci
fied the provisions of law to which State banks must con
form as conditions of membership, including in the specifi
cation certain provisions of preexisting law. The con
ditions of membership for State banks having thus been
specified it could be argued not without reason that if
Congress had intended by Section 8 of the Clayton Act to
prescribe further conditions of membership it would have
affirmatively expressed that intention, which it has not done.
But, whatever the original intention of Congress may
have been in this respect, the present intention seems
plainly to appear from the following provisions of Section
9 of the Federal Reserve Act as amended and reenacted by the
Act of June 2l, 1917, after the passage of the Clayton Act:
X-354.
- 4 -
Banks becoming members of the Federal Reserve
System under authority of this section shall be
subject to the provisions of this section, and to
those of this Act which relate specifically to mem
ber banks, hut shall not he subject to examination
under the provisions of the first two paragraphs of
section fifty-two hundred and forty of the Revised
Statutes as amended by section twenty-one of this
Act. Subject to the provisions of this Act and to
the regulations of the board made pursuant thereto.
anv bank becoming a member of the Federal Reserve
System shall retain its full charter and statutory
rights as a State bank or trust company, and may
continue to exercise all corporate powers granted
it by the State in which it was created and shall
be entitled to all privileges .of member banks.
As thus amended, State member banks are made "subject
to the provisions of this section and to those of this
Act which relate specifically to member banks". Accordingly,
they would appear not to be subject to the prohibitions of
Section 8 of the Clayton Act under the rule of construction
embodied in the maxim, "The express mention of one thing
impliedly excludes all others".
The intention of Congress, however, is not left to
appear by implication alone. Section 9 as amended goes
further, and by positive provision declares that State
member banks shall retain their "full charter and statutory
rights" as State banks, "subject to the provisions of this
Act and to the regulations of the board made pursuant
thereto". Since the rights existing under State laws as
to selection of directors seem clearly among the "charter
and statutory rights" thus retained in full by State mem
ber banks, they must be held free in that regard from the
restrictions imposed by Section 8 of the Clayton Act.
Respectfully,
(Signed)
JOHN W. DAVIS.
Acting Attorney General.
Ex -O f f ic io m e m b e r s
W. P. G. HARDING. G O V E R N O R
PAUL M. WARBURG. V I C E G O V E R N O R
DERIC A. DELANO
toLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
X-3&&
SECRETAR Y OF TH E TREASURY
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
WASHINGTON
A DDRESS REPLY TO
FEDERAL RESERVE BOARD
September 11, 1917.
Dear Sir:
The Board wishes to call your attention to the
importance of enforcing rigidly the regulations regarding
penalties for impairment of reserve accounts. Last June
there was some demand for accommodation at some of the
banks, and it is anticipated that this pressure will be
much greater within the next two or three months than it
was then.
If the policy of penalizing impaired reserve
balances is not vigorously enforced by all Federal Re
serve B a n k a w e may have to deal with a troublesome situa
tion because of the reluctance of member banks to discount
paper or to borrow money.
In order that it may be informed as to the situa
tion, the Board requests that you advise this office of the
practice of your bank in regard to impaired Reserve accounts,
both as to the penalties imposed, and as to the statements
you receive from your member banks with respect to their
deposits and reserves. Please forward copies of these
statements.
Very truly yours,
Governor.
X-368
STATEMENT SHOWING MIFIinff! AMOUNT OP NOTES TO 3E KEPT ON FAIT) IN WASHINGTON
FOR EACH FEDERAL RESJPVE B*-NK, AMOUNT AT PHESEWT 01 ITaD IN
’
.^SJ-IUGTON, AND AMOUNT B^IAG PRINTS
(Deficit shovn m red)
omitted
Federal
Reserve
Bank of
OOP
**
BOSTON
On hend
agreed Minimum
Being printed
DEFICIT
5s
10s
17,700
16 640
20s
50s
100s
Total
5,360
4,000
2,800
46,500
NEW YORK On hand
Agreed Minimum (No specific amount is kept for Nev1York, the bank
Being printed
reruesting printing of notes as needed)
DEFICIT
****PHILADELPHIA On hand
Agreed Minimum 15,000
Being Printed
DEFICIT
20,000
20,000
ib,000
10,000
75,000
18,200
29,040
5,400
2,800
70,900
RICHMOND
On hand
Agreed Minimum 10,300
Bern? Printed
DEFICIT
12,160
l6,960
1,600
1,600
36,620
ATLANTA
On hand
*Agreed Minimum 10,000
Being Printed
DEFICIT
10,000
20,000
5,000
5,000
50,000
***CHICAGO
On hand
Agreed Minimum 5^,700
Being Pnnted
TV~t7Tnrm
62,230
CL1"VIA IT) On hand
Agreed Minimum 15,460
Being Printed
DEFICIT
'
65,520
15,500
13,600 207,100
*Letter of receral Reserie A "exit wellborn d 'ed September 6, 1917,
reruestipg that this amount be kept on ht-nc? m 1 shipgton.
** Letter of Federal Reser\e Agent Curtiss dcLec1 October 19, 1917, re~
cuestmg
ditionrl su^ly of notes.
z j
***letter of Federal Reserve Apent I-eatb dater October 22, 1917, and
tel^crun of October 18, 1917, rec/uesti^g cc^itionul notes.
Letter of Federal Reserve ^npnt
http://fraser.stlouisfed.org/
rf»ru°stin'* additional rctee
Federal Reserve Bank of St. Louis
. u s t m date
o °rber 3, 1917,
r*
X-368
- 2 -
Federal
Reserve
Bank of
10s
20s
50s
ST LOUIS
On hand
Agreed Minurum
9,QQU
Being Printed
DEFICIT
9,600
4,000
1,200
800
24,600
MINNEAPOLIS
On hand
agreed Minimum
9,800
Being Printed
DEFICIT
8,000
6,566
400
1,200
25,960
KANSAS CITY
On hand
Agreed Minimum
18,800
Being Printed
DEFICIT
13,000
13,000
2,000
1,600
48,400
DALLAS
On hand
Agreed Minimum
5,480
Being Printed
DEFICIT
8,200
5,480
3,200
3,600
29,960
SAN FRANCISCO On hand
* Agreed Minimum
5,000
Being Printed
DEFICIT
13,000
10,000
2,000
2,000
32,000
Sc
53
100s
No orders afe to be placed for San Francisco unless requested
by the bank*
Total
2709
X-369,
2nd.
P. M. W.
Sept. 11 '17.
SOME SUGGESTIONS CONCERNING
THE GOLD EMBARGO PROBLEM .
It appears to ns that the following principles should be
observed by the Federal Reserve Board in granting or refusing licenses
for the export of gold:
Shipments of gold should not be permitted unless it is clearly
shown that the gold is used for the payment of goods.
In other words,
the transaction must be run down to a discovery of the purchaser and
seller and the ultimate destination
before
the granting of a license
for shipment will be considered.
In each case the applying concern should be requested to state
exactly the name of the consignee and the nature of the underlying
transaction.
This will, generally speaking, exclude shipments by banks,
local and foreign, for their own account.
When information as complete as possible has been obtained,
if the fact of American purchase and consumption has been established,
a presumption will arise in favor of allowing the proposed shipment.
If, however, it should appear that the proposed shipment of gold in
volves payment for goods bought in one foreign country and destined
for another, the presumption will be against the proposed shipment.
Such presumptions will in neither case be conclusive.
Thus the pre
sumption in favor of a shipment may still be overcome by the character
or quantity of the articles imported considered in relation to
their
y\
4
X~c59.
- 2 -
utility in the present war condition?,or political or international
considerations nay dictate a course at variance with commercial indica
tions.
A ruling of this kind would at once throw back upon foreign
countries the burden of shipping gold insofar as it is neaded-ifor
their purchases in other countries, and will enable each country in
turn to deal with its own nationals in regulating their purchases in
foreign lands, involving shipments of gold.
It will thus become the duty of each country, including our
own, to scrutinize the character and quantity of goods that are being
paid for by gold remittances.
Whenever it is a. question of excessive purchases of articles
which are not necessaries, licenses for gold exports should be refused.
This function might be exercised to better effect by an import council,
similar to the export council, which will control importations.
Any hardships involved in this procedure might be mitigated
if the banks in foreign countries which would be unfavorably affected
through these measures, instead of exacting fold would either buy their
own or-Other securities held in the United States or buy our securities be it existing securities or Government securities to be issued for
that purpose - tor if, as in some cases they might, they would take
our circulating notes.
In this connection, it may become necessary for the Secretary
of the Treasury or the Board, or both, to circularize the banks of
?
i.
X-369
- 3 -
the country in order to advise them that they must hot ear-mark any
more gold for foreign concerns.
Reserve Banks.
This applies also to-1 the Federal
Ear-marking has in every respect the same effect as
exportation and it might be advisable to ask all banks to state,-for
the confidential use of the Government, what amounts they have ear
marked at this time and for whom.
It might become advisable at some
later date to ask banks, except so far as bound by definite contract
to the contrary, to Undo these transactions by tendering the gold to
their foreign correspondents and bffetihg to keep the amount on deposit,
It is urged that an understqnding be sought with allied
countries
lem.
- particularly England and France - dealing with this prob
The so-called foreign exchange problem can be solved if, as far
as consistent with war requirements, each country involved will try
to adhere to the policy of not permitting its nationals to buy in a
foreign country a larger quantity of goods than the purchasing country
can pay for by shipping goods or selling securities, or fog which
the selling count./ is willing to grant an extended credit.
Respectfully submitted:
X-370
w.P. G. HARDING, Governor
Ex -O fficio Members
PAUL M. WARBURG. V I C E
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
Co m p tr o ller o f the c u r r e n c y
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
and
W A S H IN G T O N
GO VERNO R
f is c a l a g e n t
A DDRES8 REPLY TO
FEDERAL RESERVE BOARD
September 12, 1917.
Federal Reserve Bank,
Gentlemen:
The following letter has been received by the Board:
”lf the Federal reserve banks have any standard
method of computing discount, I should be glad to learn
what it is. Do you use a three hundred and sixty day
discount table, or a three hundred and sixty-five day
discount table? Do you count actual days, or do you
assume thirty days per month? To make the inquiry
more specific, will you kindly tell me what the dis
count at six per cent would be on various notes of
$1000 each, bearing the following dates and running
for the time specified:
Note of
$1,000 dated February 1 tt
1)
1,000
1 u
It
1,000
1 tl
It
1,000
1 tt
It
1,000
1 It
tt
1,000
1 -
due in 30 days;
tl
"
1 month;
II
March 1;
tt
in 150 days;
It
” 5 months;
It
July 1.
I should like to know particularly the day on
which you would consider each of the above notes
matured."
The Board would appreciate information a3 to your
practice in this matter, accompanied by statements of interest
in each of the cases mentioned in the foregoing letter.
Yours very truly,
Secretary.
X-372.
MEMORANDUM ON INTER-NATIONAL EXCHANGE
FOR INFORMATION OF THE SECRETARY OF THE TREASURY.
The inf oriel committee which met today to discuss the subject
of inter-national exchange begs to submit the following memorandum
of its views:
The committee consists of the following gentlemen:
Mr. Benjamin Strong
Mr. J. E. Gardin
Mr. D. G. Wing
Mr, J. E. Rovensky
Mr. James Brown
Mr. Albert Strauss
Mr. J. F. Curtis
GENERAL POLICY.
The committee recommends that an announcement be made by the
Secretary of the Treasury to the effect that while there will be no
hinderance on the export of gold, silver, or currency for legitimate
purposes arising out of commercial transactions, as limited by a proper
regard for war conditions, all applications for the export of coin, bul
lion or currency will be subjected to close scrutiny, to the end that
such exports shall be made only when compatible with the public interests.
The committee recommends that upon the passage of the Trading with
the Enemy Bill, imports into this country be so regulated as to curtail
the importation of luxuries and other articles not essential for the
public welfare. Such control forms a necessary step in the proper
regulation of exchange, and will .Automatically reduce the demand for
the export of gold; but it can be ultimately effective only if similar
control is exercised by our Allies in cooperation with us.
The committee is informed that considerable amounts of gold and
gold.certificates are being carried from the country by individualtravellers and by steamship officials; and it is suggested that due con
sideration be g.i.en to this aspect of the situation.
MACHINERY FOR REGULATION.
The committee recommends that committees be appointed in each Fed
eral reserve district, to serve under the general direction of the Fed
eral Reserve Board.
These committees should examine into all financial transactions
between residents of this country and residents of foreign countries,
American financial transactions between foreigners, and financial opera
tions that may appear to be incompatible with the public interests.
Under the supervision of such committee only such concerns as shall
be licensed shall be permitted to conduct foreign exchange transactions,
and they should be required to report daily to the committee all opera
tions for and between all foreign accounts; such reports to include a
statement of all credits and debits to such account, with full details
X-372
- 2 -
giving names of individuals affected; also the sale and transfer of
securities for foreign account, and any other information that in the
opinion of the committee nay be necessary, fill dealers in inter-national
exchange should be required to obtain from their customers full informa
tion as to the details of all transactions to be reported.
Every
resident within each district,(whether or not a licensed dealer in
foreign exchange) should be required to report to the committee the
amounts due from enemies or allies of enemies, and also all property
owned by him in enemy or ally of enemy countries; also all property
held in any way, directly or indirectly, for enemy account or allies
of enemy account.
Every member of a committee should take an.cath at the time of
qualification to the effect that he will not use for personal advantage,
directly or indirectly, any information acquired as a member of the
committee, nor reveal any information obtained by him in that capacity
except to the proper officials.
The central organization should work in close cooperation with
the export and import commissions, as soon as appointed, and the simi
lar foreign exchange organizations of our Allies; and should have the
benefit of all information acquired through the Departments of State,
Justice and Commerce; the censorship of the mails, Cables, and tele
graphs, and all other available Governmental agencies.
The appropriation for the expenses of administering this section
of the law should be increased to $350,000.
The propriety of charging nominal fees for licenses to deal in
inter-national exchange should be considered.
METHOD 0? CONTROLLING INTERNATIONAL-EXCHANGE,
The committee is unanimously of the opinion that the quotation
for the pound Sterling in the United States should not be allowed to
decline, as such a decline, apart from the moral damage to the cause
of the Allies, would, without relieving the United States, place an
additional burden upon its allies in the increased cost to them of
commodities purchased in other markets; but this end must be accom
plished in cooperation with the Allies and without any material dim
inution of the gold supply o'f the United States, which must, in the
interest of the other Allies as well as of the United States, be re
tained here as a basis for our important credit operations.
X-372.
- 3
The committee is also of the opinion that if demands on the
United States for gold for shipment to other countries are not
promptly controlled through an agreement with our Allies concern
ing the trade underlying these transactions, the only effective
method of controlling the export of gold will be through restriction
or prohibition of arbitrage operations. The effect of such restric
tion or prohibition will be to limit exchange transactions between
the United States and foreign countries to such direct operations as
are necessary to liquidate the direct trade between each country and
the United States.
Any hardships which may be involved in this procedure would be
mitigated if banks in foreign countries which are unfavorably affected
by these measures would employ their funds in loans or investments in
this country, instead of exacting gold.
In this connection, stepd must be taken to prohibit our own banks
for the future, from ear-marking gold or taking it into custody. Such
ear-marking or custody has in every respect the same effect as exporta
tion and it may be advisable to ask all banks to state, for the con
fidential use of the Government, what amounts they have ear-marked or
held in custody at this time and for whom, and to report any future
applications to ear-mark or hold in custody.
SILVER FOR SUBSIDIARY COINAGE AND FOR EXPORT.
The Committee recommends that the silver now lying inert in the
Treasury for the redemption of silver certificates, be rendered avail
able for use through the redemption of silver certificates and the sub
stitution in their place of Federal Reserve Notes. The silver bullion
so released should be used so far as required for subsidiary coinage
and the balance will be available for export in place of gold. Silver .
certificates to the amount of about $456,000,000 are now outstanding.
The result of such steps will be the permanent substitution of gold
for silver as the support of a substantial part of our currency and the
immediate exportation of silv.er which is not needed in this country in
substitution for_,|j£Ld which is urgently required. Legislation will
probably be required to accomplish this. Steps must also be taken to
expedite the printing of small- bills by the Bureau of Engraving ^nd
Printing.
Respectfully,
EENJ. STRONG
JOHN E. GARDIN
D. G. WING
ALBERT STRAUSS
JOHN E. ROVENSKY
JA
JAMES
BRCWN
J. F. CURTIS.
Washington, Sept. 13, 1917.
X-375.
PAUL
WILLIAM
C O M P TR OLLER O F TH E C U R R E N C Y
M. W A R B U R G , V I C E G O V E R N O R
F R E D E R I C A. D E L A N O
A D O L P H C. M I L L E R
G. Mc A DO O
SECRETAR Y OF TH E TREASURY
C H A IR M A N
J OH N S K EL T O N W I L L I A M S
CHARLES S. HAML IN
FEDERAL RESERVE BOARD
H. PARKER WILL IS , S E C R E TA R Y
S H E R M A N P. A L L E N , A S S T . S E C R E T A R Y
and
F is c a l A g e n t
ADDRESS REPLY TOFEDERAL RESERVE BOARD
W A S H IN G T O N
September* 14, 1917,.
Dear Sir:
The Board has received through the Secretary of the
Treasury an opinion by the Acting Attorney General of the
United States regarding the charter and statutory rights of
those State banks and trust companies which become members of
the Federal Reserve System,
A copy of this opinion is transmitted to you herewith
and your attention is especially directed to the quotations from
Section 8 of the Clayton Act which appear at the bottom of the
first and the top of the second page. You will note that the
conclusion is reached that National b~nks and all banks and trust
companies in the District of Columbia come within the prohibition
of Section 8 of the Clayton Act; but that, those State bank3 and
trust companies which join the Federal Reserve System and which
do not operate "under the laws of the United States as the laws
of their existence, nor in ^territory over which the United States
exercises exclusive legislation" are held to be free from the
restrictions imposed by Section 8 of the Clayton Act as quoted
in the opinion.
You are informed that the Federal Reserve Board will
be governed by this opinion, and that its regulations relating
to interlocking directorates will be modified accordingly.
Please bring this to the attention of the St^te banks and trust
companies of your district.
Very truly yours,
Governor.
Inclosures.
t ,
W . P. G . H A R D I N G , G O V E R N O R
Ex -O fficio Mem bers
X-376
MEMORANDUM FOR CONSIDERATION,
It seems highly desirable that we should take advantage at
this time,, and perhaps make a virtue of our country’s necessities in
a careful study looking to a possible readjustment of our currency and
coinage, the relations of our Treasury and subtreasuries to the issuance
and redemption of various kinds of currency and coinage. The very large
demands which the requirements of the war are making upon our currency
and banking system, make this study both opportune and desirable, and
there is reason to believe that there are opportunities for vastly in
creasing the efficiency of our methods, to the great advantage of the
Treasury and the nation.
It is suggested that this study should embrace the following:
First. A consideration of various forms of currency which should be
maintained;
Second.A consideration of the denominations of this currency;
Third. A consideration of the various forms of coinage to be maintained;
Fourth.The denominations of that coinage;
Fifth. A study of the methods and facilities for the redemption of cur
rency and coinage;
Sixth. How far canlhe subtreasury system and the Federal reserve banks
effectively cooperate in facilitating the above operations and
at the same time coordinate these operations with meeting the
needs of the Treasury in selling and distributing bonds, savings
certificates, and the like, or in accumulating gold?
Seventh.To what extent and how may the Federal Government take advantage
of the now existing high price of silver to revise its silver
coinage and currency or sell some of its silver for gold?
Eighth. How far can Federal reserve notes be substituted for other
circulation (e. g. gold or silver)?
Ninth. What legislation, if any, would be necessary to carry out the
more desirable provisions?
Washington, Sept. 13, 1917.
Sweden, Norway, Denmark, H olland and S w itz e rla n d ,
a ll
con
tiguous to Germany and of necessity entertaining intimate relations with
the latter, are playing a role in the present difficulties that cannot
he ignored hy the United States.
Our government through the powers being
exercised by the President is doing the proper thing in placing an embargo
on food and other products going into these countries and this control can
not be exercised too rigidly.
Similar steps should be taken with financial
transactions as we have good reason to believe that Germany is using any one
or all of its neighbors as financial agents for the world at large.
The
Scandinavian countries in particular through freights mainly have accumulated
vast credits in the United States, which in a measure are at the disposal of
Germany through coercion or otherwise, and it is the duty of the .American
Banker to close up all avenues through which this money can be made available
to German interests.
Cases are known where transfers have been attempted to
Spain, Holland and Switzerland and vice versa and the writer has in mind one
particular transaction of five million dollars that was transferred from Sweden
for Swiss account to parties in New York.
This particular transfer was referred
back for an explanation, which after considerable delay was forthcoming to the
effect that it was intended as cover for a loan that Switzerland had made in the
United States but which did not mature until 1919*
This on the face of it was
such a specious reason that it was apparent that steps had to be taken to place
an embargo on this money to insure its being used for that purpose only.
This
has been done most effectively, but I understand that the action was a source
2 - x-377
of grave disappointment to all parties concerned*
Undoubtedly numerous
sinister cases have occurred which have defied detection and radical
steps will have to be taken to insure that all transfers through neutral
accounts be properly explained and passed upon by any commission having
the control of the exchanges in charge.
Deposits are rapidly increasing
in the United States, for which neutral countries have at the present time
no use and as a result the United States is at a severe discount in
these countries.
This is merely academic and is of no advantage to the
countries in consequence of the embargo now existing.
Some of this money
is seeking investment here, particularly in shipbuilding and loans on ves
sels flying the American flag.
The Norwegian Government has taken up in
toto a loan made in this country in 191*+ and Switzerland has made provision
for a loan of five million maturing in 1919 , although this was rather com
pulsory.
Owing to the fact that the rate of exchange on the dollar is such
not
an adverse one, it is/iikely that these funds will be withdrawn in the
near future; consequently; the United States will continue to have the bene
fit of these deposits for some time to come - only proper steps must be
taken that they are not made available for the use of the enemy, which in
my opinion will not be such a difficult matter to prevent.
X-378
JAPAN*
Gold shipments to this country arise from five
sources*
1.
The Bank of Japan has always made a practice of
maintaining a large proportion of its gold reserve in foreign
countries.
At the beginning of the war they held a total gold
reserve of 175 million dollars of which 109 millions was held
abroad*
On July 31st, 1917> they held a total gold reserve of
460 million dollars, of which 274 millions was held abroad.
l*o figures are available as to what part Of this 274 million
is held in the United States, but it is certain that a consider
able proportion is held on deposit in Hew York City.
2.
Out imports from China, Koiea and Formosa are to
some extent financed through Japan —
the Japanese banks being
purchasers in those countries of drafts on the United States.
3-
Japan has been a heavy seller in this market of
foreign exchange —
sterling, and roubles transactions being
the most important.
4.
Japanese concerns have obtained considerable credits
in the United States.
These credits have been in various forms;
time import credits, straight loans, over draft
5.
credits, etc.
Our imports from Japan of silk, tea, etc., have been
quite heavy; freights on Japaneje steamers have risen as the
result of advance in freight rates and in general our indebtedness
to Japan on commercial transactions has been greater than formerly.
2 ^ X-378
It is obvious that each of these classes must be treated
separately.
1.
It would be inadvisable to place any embargo on the
gold reserves of the bank of Japan.
The amount held here
should be ascertained and placed at their free disposal.
Care should be taken, however, that the Bank of Japan be not
used as a channel for draining us of our gold.
2.
Imports from China, Korea and Formosa as well as those
from Japan should be paid for by gold exports if necessary.
A large part of these imports, however, are not necessary to the
successful prosecution of this war and should, therefore, be
restricted.
When proper restrictive measures have been adopted
the volume of gold exports would be proportionately reduced.
3*
Balances arising in this country from the sale to us
of sterling and roubles (i.e. arbitrage operations), and from
borrowing operations should not be paid out of our gold reserves.
Applications for permits to ship gold to Japan should
disclose fully the transactions giving rise to such proposed
shipment and licenses should be issued only in conformity with
the above.
The fact that some of the gold exported by us to Japan
is re-exported by them to India really has no bearing on
the subject before us.
Japan's exports of gold to India are
made in settlement of her own transactions.
X—379
INDIA.
Our direct commercial relations with India
result in a large balance of trade against us.
Our imports of
jute,, burlap, hides, etc., by far exceed the merchandise that
we ship to that country.
The balance of trade thus created cannot Under present
conditions be settled through the medium of foreign exchange
as India’s exports to England (the customary deitlixig point)
to such extent exceed the imports from that country that ex
change is unobtainable.
The situation is further complicated by the character
of India’s population and their deep aversion to any change
in their financial methods.
It has been found extremely
difficult to induce the Indian population to accept any
but metallic money.
The British Government is now engaged
in an attempt to force paper money into circulation, but
to this date their efforts have not been successful to any
considerable degree.
The Government is fully alive to the
situation; they have a full knowledge of international as
well as local conditions and they have adopted all the meas
ures that they deem advisable (such as regulating the import
and export of bullion; acquiring all gold upon arrival at a
certain rate; etc.) to meet the present situation.
After all
their efforts the existing condition is that our Imports can .
only be paid for by our exporting gold or silver bullion.
X-3 7 9 .
It would "be "by far preferable that we shipped silver
to India.
Silver, however, is very scarce at present, and this
method of settling our trade balance will only be feasible after
some plan has been found that will increase the available sup
ply of that metal.
The advisability of putting to this practi
cal use our large hoard of silver dollars is self apparent. Any
metal exported to India will disappear permanently from cumu
lation in spite of the efforts of the British Government.
Ship
ping gold to India means a permanent loss to the financial
world of just that much of the precious metal that is so badly
needed for the purpose of forming the basis of the credit ex
pansion that is necessary for the conduct of this war. Steps
therefore
should/be taken to release at least a part if not all of the
silver back of our silver certificates and put this metal
which is new practically useless to use.
Until some method has been devised to accomplish the
above object it will be necessary that we make shipments
of geld.
The nature of our business with India is such that
it is feasible to couple each gold shipment with the com
mercial transaction or transactions giving rise thereto.
Applications for permits to export gold to India should
therefore be always accompanied with full facts regarding
the character, destination and utility -, of the commodities
to be imported into the United States as the result of such
gold shipment.
EX-OFFICIO MEMBER9
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
3FREDERIC A. DELANO
'ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. MCADOO
X-383£!
SECRETARY OF THE TREASURY
Chairman
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
and
W A S H IN G T O N
Fis c a l A g en t
ADDRESS REPLY TO
F E D E R A L RESERVE B O AR D
Septa nibor
17,
1917
Dear Sir
In view of the anticipated heavy demands upon Federal Reserve banks,
the Board looks with approval upon the suggestion that the practice be
encouraged of having 3hort time commercial paper run for not longer than
four months instead of six months as is frequently the case today.
It
seems desirable that the commercial banks of the country should have in
their portfolios a maximum amount of paper that can be rediscounted with
Federal reserve banks. As the Federal reserve banks can rediscount only
paper which ha3 not more than ninety days to run, it follows that if in
vestments of member banks are in six months p^-par, on an average of only
50$ of such paper is available at any one time for rediscount; but should
the investments be in paper having four months or less to run, at least
75$ would on an average have not more than ninety days to run to maturity
and would therefore be immediately available for U30 at the Federal reserve
bank.
The Board is of the opinion that the suggested change would greatly
improve the banking condition of the country, as the banks would make a
turn-over three times a year instead of twice, and the credits which they
would provide would come up for consideration three times instead of twice
a year.
The borrower in good credit would have no reasonable grounds for
complaint and the borrower in doubtful credit would be strengthened by
frank conversations with
bankers at more frequent intervals than at
present. It is suggested that if the bankers of the covintry will
undertake thia change in methods of borrowing and insist upon four
months paper instead of six, the credit situation will be greatly
improved within a short time; responsible borrowers would have greater
assurance of credits and the banks themselves would be in position to
meet contingencies with at least 50$ more confidence than under the
existing borrowing conditions.
hi3
Very Respectfully,
Governor,
X-384,
i
WHEREAS., it i3 necessary, in due course of
business, for this bank to arrange with the Federal
Reserve Board to transfer funds standing to its credit
in the Gold Settlement Fund, upon telegraphic request
rather than upon delivery of an order duly executed by
an officer of the bank whose authenticated signature is
on file with the Federal Reserve Board;
NCW, THEREFORE, BE IT RESOLVED, that all tele
graphic requests, addressed to the Federal Reserve Board,
for the transfer or payment of funds standing to the credit
of this bank in the Gold Settlement Fund, shall be authen
ticated by including therein the code or test word fur
nished to this bank by the Federal Reserve Board for this
purpose., and that the Federal Reserve Board be requested
to honor all requests containing such code or test word,
it. being understood and agreed that this bank assumes
full responsibility for all transfers nade pursuant to
telegraphic orders which include such code or test word.
.RESOLVED, FURTHER, that a copy of this resolu
tion be forwarded to the Federal Reserve Board for its
files.
EX-OFFICIO MEMBERS
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPHF Cf^MCECER
CHARLftSi9W*ft.tN
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
C h a ir m a n
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
W A SH IN G TO N
ADD R E SS R E P L Y TO
FEDERAL RESERVE BOARD
September 18, 1917,
Dear Sirs!
Reference ia mad® to the letter of your
Assistant Cashier, Mr* Davis, dated September 12;
invfcieh information is requested as to whether Fed*
oral reserve banks may make transfers from the Cold
Settlement Fund; for the credit of member banks ih
the 5$ Redemption Fund hold by the Treasurer of the
United States.
The Treasurer’s office is agreeable to thi3
arrangement, and such transfers can bo made.
It is,
of course, desirable that they be made in as large
amounts as possible.
Very truly yours,
Assistant Secretary.
Federa.1 Reserve Bank,
Cleveland, Ohio.
Ex -Off ic io Mem bers
WILLIAM G. MCADOO
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
'
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H. PARK
SHERMAN P. ALLEN.
and
W ASH IN G TO N
ASST. SECRETARY
Fiscal A gent
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 18, 1917
Dear Sir:
Inclosed you will find a copy of a resolution relative
to tho us 3 of test words in connection with orders for trans
fers and payments through the Gold Settlement Fund maintained
by the Federal Reserve Board.
Please acknowledge receipt, giving the date of the next
meeting of the board of directors of your bank, and at that
time have the matter brought to the attention of the board
for its action.
Copies of the resolution have been sent to the Governor
of your bank.
Since you also have transactions with the Gold Settle
ment Fund and are supplied with test words, wo will be glad
if you will write a letter to the Board stating the substance
of tho resolution and your agreement thereto.
Very truly yours,
Governor.
Inclosure
W. P. 6. HARDING. GOVERNOR
PAUL. M..WARBURG, VICE GOVERNOR
FREIlfeind ®.CDBLANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
WILLIAM S. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
W ASH IN GTO N
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AOENT
ADDRESS REPLY TO
FEDERAL, RESERVE BOARD
%
Dear Sir:
Rccoipt is acknowledged of your application for the
i3sue of a license authorizing the following shipment:
Consignee
Consignor
Per
Amount
Character of shipment
You are hereby informed that after due consideration
of your application the Board has reached the conclusion
that on the facts presented by you it does not find it com
patible with public intorest to authorize the exportation.
The Bo~rd will consider any further evidence that you nay
wish to submit.
Respectfully,
FEDERAL RESERVE BOARD.
BY
i
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -O ffic io m em b e rs
WILLIAM G. McADOC
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
/
WASHINGTON
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
X-386-a
FEDERAL RESERVE BOARD
Dear Sir:
Receipt is acknowledged of your application f o t
the issue of a license authorizing the following shipment:
Consignee
Consignor
Per
Date of Exportation
Amount
Character of shipment
In response you are informed that a license in accord
ance with your application has been duly issued and that the Col
lector of Customs at _______ —
_____________ ■
has been
instructed to grant clearance for the shipment.
Your attention is directed to the fact that the issue
of a license in this instance must not be taken to imply that
a license will be granted on future applications under similar
state of facts.
Respectfully,
THE FEDERAL RESERVE BOARD
By
Governor.
TREASURY DEPARTMENT
(date)
Collector of Customs at
___ __ _ -... ......... irail
Instructed by telegraph.
Chief Division of. Customs.
X-391
UNITED STATES SENATE.
Committee on Banking and Currency.
September 7, 1917.
Hon. Wm. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. C.
My dear Governor:
I have just; received your favor of the 5th instant returning
me the letters of R. A. McCormick and P. P. de Francisco Flores. Please
oblige me with copy of the actions 'taken by the foreign governments in
fixing arbitrarily prices for American gold.
Great Britain, with a balance of trade against her, maintains
the relative parity of the pound sterling in New York by buying at $4.71
plus, and in this way prevents the pound sterling from going below that
fixed point.
Thi3 would not be necessary by the United States where the
balance of trade is in her favor.
People prefer to transact their busi
ness in sterling bills for this very reason that it is stabilized by the
British Government and they prefer for the s..me reason not to transact
business in dollars when the dollar is not stabilized#
I regret that I can not see the force of the observation "in
order to maintain the parity of the American dollar abroad, it would be
necessary for American b-nks to export gold in sufficient quantities to
offset not only American purchases abroad, but the purchases in neutral
countries of a l l ‘the nations with which we are associated in the war."
The shipment of American good3 to Spe*in, $50,000,000 in excess of
X-391*
-
2
~
the shipment of Spanish goods to America, is a mathematical demonstration
that Spain owes us $50,000,000 which it must pay either in doliar-exchange
or its equivalent, therefore they having demand for $50,000,000 for trans
mittal to the United States are in actual need of $50,000,000 United States
exchange in dollars or the equivalent, and if we did business with them di
rectly instead of indirectly, the American dollar would be above par in its
purchasing power in Spain, because of the Spanish need for the American
dollar.
This looks to me as a case of mathematical demonstration.
X
should be pleased to know what answer you make to this.
I understand, of course, that Great Britain, with a balance of
trade against her in Spain of 88 million dollars is in a position by causd
ing the exchange to pass through London in pound sterling, to offset the
balance in our favor of $50,000,000.
But, if we did the business directly
through our own agencies, Great Britain could not use our assets to dis
charge her liabilities.
It is this which I protest.
Your suggestion that "Purchases of foreign bills on a large scale
by the Federal reserve banks would not reduce the volume of exchange of
fered" I do not see the point of.-,The American exporters need the Spanish
bills and the Spanish exporters need the American bills.
I am suggesting
that the Act of Congress of June 21, 1917/ be put into effect so that
through the Federal reserve banks these exchanges could be accomplished
at a minimum cost, without unfair profit to speculators in Spanish ex
change, and on a scale sufficient to meet our import-export requirements.
x-39i
- 3Our business men absolutely need the Spanish exchange and must
have it.
The Spanish merchant needs American exchange and must have it,
and this volume, while large, makes almost a complete offset.
But, during
the year, the Federal reserve bank agency at Madrid would have a total of
50 millions of dollars, an average of a million dollars a week of Ameri
can exchange to sell to Great Britain at a profit to meet her require
ment in Spain.
This is perfectly obvious to me«
It.anly requires the medium
which was provided for by the amendment to the Federal Reserve Act, ap
proved June 21, 19 17 , in which the Federal reserve banks were authorized,
and the Federal Reserve Board was empowered to order and to direct, the
establishment of these agencies in foreign nations for the purpose of
handling this exchange.
I remind you that the demand of the American business men for
Spanish exchange goes to the local bank, and the local bank ought to be
authorized to buy and sell Spanish exchange to the American exporter or
importer, and place his exchange through the New York Federal Reserve
Bank where the large part of this business would be transacted, in ef
fect, by a cross entry.
The volume of our import business is very large, amounting to
$2 ,659*000,000, and a discount of dollar exchange of 10$ on this amount
would net a loss to American exporters of sufficient amount to make this
an unendurable condition and the amount of cash money that would be re
quired to handle the actual balance would be small, since they adjust
x-39i
- U thenselves from day to day.
And since this fund would in reality be
provided by banks in the United States transmitting to the New York Fed
eral Reserve Bank the funds entirely coverning their requirements for
Spanish exchange, for example, outside of their ordinary reserve balances.
For this reason I do not clearly apprehend the force of your ob
servation that "it does not now appear wise that the resources of the Fed
eral reserve banks,
which now hold the entire legal reserves of nearly
eight thousand member banks, should be weakened by over-investments in
foreign bills."
The remitmento of a member bank for foreign exchange are more
than overbalanced by the amounts which the agents of the Federal reserve
banks would receive in exchange from foreign countries to be transmitted
to America, about three and a half billion dollars annualy just now.
And, it would be an asset in the hands of these agente in very
large amounts, not a liability.
For example, if the Federal Reserve Bank
of New York had an agent with a desk and a safe in Madrid, representing
the Federal Reserve Bank of New York, he would have received, if he trans
mitted all this business, an average of a million dollars a week for
transmittal to New York, above the amount to be remitted back from New
York to him*
I do not follow your reasoning that this would require the use
of the reserves of the member banks.
I certainly agree that if the pur
chases of the Allied Governments abroad could be drawn against in dollar
exchange, the volume of sterling bills would be decreased to a correspond-
x-391
- 5ing degree and the large banks in this country could engage in the pur
chase of these bills, carry them for 60 or 90 days, payment being made
at maturity out of the notes advanced to foreign governments by the
United States Government, and that the Federal reserve banks could re
discount these bills for member banks or could buy them in the open
market and they would be safe in engaging in an operation of this kind
as they would be conducted on our own soil and in our own country.
I think the Government should do what it properly can to have
this practise pursued of using the dollar exchange against credits which
we extend to foreign Governments as a condition of the credit in order
to give greater dignity to dollar exchange.
But, I see no reason why
all that you say might not be done, whether it is dollar bills or ster
ling bills, as they are precisely the same except that one is in- pound
sterling and the other is in dollars.
And the pound sterling is kept
at a stable figure by Great Britain.
Your observation "The Board has received a number of letters
insisting that we establish a foreign exchange bureau, but in no case
has it been demonstrated just what good would result from such action”
would seem to imply that the exchange bureau depended upon the discount
ing of bills drawn against purchases of foreign Governments in this
country.
My opinion is that this machinery ehc*ld be put in action
in accordance with the contemplation of the act of Congress of June 21,
1917^ in order that the American importer may have a means of trans
mitting his payments through his member bank and the Federal Reserve
x-391.
- 6
Bank against credits in pesetas in the hands of Madrid agents of the
Federal Reserve Bank of New York,, and the exporters need the same facil
ities*
It is obvious, since Spain owes $50.-.000,000 more than she re
ceives she has got to make her payments in pesetas, and therefore, the
peseta would go into the hands of the Federal reserve agent and it would
be at a discount
and not at a premium as at present*
This is true, regardless of whether gold is a
legal
Spain and regardless of the action of the Spanish Government*
tender in
If what
you think is true is a fact, that the new pesetas have a larger relative
value measured in dollars, buyp more than it did before because of this
fact, certainly the condition would not be as bad as it appears to be.
But, I do not believe this is true, and a letter which I sent you shows
that it
it
not true, and I observe you make no answer whatever to the
letter of Francisco Flores which I sent you.
He does not explain that
the peseta buys more, he apologizes that the dollars buys less, and that
is the very point which I make.
I should be glad to have the evidence
upon which you make this statement that the new peseta buys more and
therefore that the dollar does not buy less.
This is the very point
at issue, and you deny the fact that the dollar does buy less by
necessary implication of the last paragraph of your letter*
I sympathize with your concluding word,"There appears to be
a great deal of misinformation and lack of knowledge o» this subject."
But, I think that it is intolerable that we should permit this condition
X-391
- 7of misinformation or lack of knowledge to continue, and I am determined
not to leave myself in thi3 position.
X am anxious on my part to do what
I can to protect the American interests as I am sure that you are, and
I. should he very much obliged if you would he good enough to point out
any error of the suggestions which I have offered.
The few National Banks handling foreign exchange are,limited
to an amount equal.to their capital and surplus in handling this exchange
and have a monopoly besides in this business.
What I wish to see is that
the 7>500 National banks should all have free access to this business
through the Reserve Systems as Congress intended.
This would enlarge
the ability of the United States to handle easily all the import and
export business which now reaches $8,900,000,000 annually, or an aver
age of nearly $30,000,000 a day, or approximately $1 ,500,000,000 on a
60-day basis.
The Commissions and profits on this business should be dis
tributed and made available for all our banks and of easy access and on
reasonable terms to all our importers and exporters wherever located.
The interests of American producers and of American consumers of foreign
goods require this.
Tours very respectfully,
ROBT. L, OWEN.
Ex -Officio
members
W ILLIAM G. McADOO
SECRETARY
w.
TREASURY
JOHN SKELTON W L lI A M S
COMPTROLLER OF THE CURRENCY
•G overnor
P AU L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 19, 1917*
Hoc. Robert L. Owes,
United State Senate,
Washington, D. C.
Dear Sir:
The Board has given very careful consideration to your letter of
the 7 th instant and directs me to assure you that while it is desirous
of doing anything in its power to relieve the situation of which you
complain* it ii still unafcfce to see how, under existing conditions,
the desired result can be accomplished by requiring the Federal reserve
banks to establish agencies in neutral countries for the purpose of
buying and selling bills of exchange.
For several months past the Board has made a close study of the
subject of foreign exchange, with the view particularly of ascertaining
the steps which should be taken to protect our gold reserves.
Our
situation is complicated by reason of the fact that the United States is
now at war, so that we can no longer consider the problem from our own
standpoint only, but are obliged to take into account the interests 0i
the other nations with which we are associated in the war.
The British Government is, as you say in your letter, stabli?-ing sterling in Few fork by purchasing bills in the open market, but it
maintaining rates for
is not
sterling '
in other countries. The financial aid
extended by our Government has enabled it to continue these purchases,
X-392.
- 2 -
which it contends are necessary to protect it against higher commodity
prices*
At the same time, the allied Governments and their nationals
are c o n sta n tly buying goods in n e a rly a l l the n e u tr a l c o u n trie s o f the
world, and in most of these countries the trade balance is running against
nor
them* As neither tlie British .. French Government is making any effort
to maintain exchange rates in neutral countries, the result is that bills
resulting from their purchases seek a market in New York, where they
are bought at fixed rates for British Government account.
Consequently,
purchases made by British subjects or French citizens in Spain or Sweden,
may be settled by credits in London or Paris.
Bills against these credits
are offered for sale in New York, although neither the Government of the
United States, nor any citizen of the United States may have been concerned
at all in the original transaction.
In this way our own favorable trade
balances have been wiped out, and our banks have been obliged to. make large
shipments of gold fcr ftvedish, Dutch, or Spanish account, an the case may
be, thus indirectly settling British, French, or Italian transactions
in these countries.
I enclose herew ith a memorandum (E x h ib it A) showing th a t shipments
of g o ld from the U nited S ta te s to Sp ain from January to August 1917 have
amounted to $88,866,000.
The Sp an ish Government p erm its the Bank of
Sp ain to se t i t s own p ric e on American go ld , which i s taken at a fig u r e
c o n sid e ra b ly below i t s a c tu a l valu e.
Se v e ra l months ago the Board sought
to e s t a b lis h r e la t io n s between the Bank of Sp ain and the F e d e ral Reserve
Bank of New York, and by d ir e c t io n o f the S ta te Department the American
2U392
- 3 -
Ambassador at Madrid broached the subject to the Bank of Spain, but
that institution declared its unwillingness to enter into the pro
posed arrangement. (See copy of cable sent by Department of State to
American Ambassador at Madrid, and copy of the Ambassador’s reply en
closed confidentially).
The attitude of the Spanish banks, in which
they appear to be sustained by their Government, has all along been
so hostile to any reciprocal arrangement that it is evident that a
Federal reserve bank agency would be permitted to do business in
Spain only upon terras agreeable to the Spanish interests, if at all*
The situation is further complicated by reason of the fact that there
is cause to believe that some of our exports of gold may have been
for German account.
The order of the President of the United States
dated September Jth, which became effective September 10th, a copy
of which is enclosed herewith (Exhibit C), authorizes and empowers
the Federal Reserve Board, subject to the approval of the Secretary
of the Treasury, to pass upon all applications for exports from the
United States or any of its territorial possessions, to any foreign
country named in the proclamation, of any coin, bullion, or currency,
and directs the Board that if, in its opinion, the exportation in
question appears to be compatible with the public interest to permit
it, otherwise to refuse it.
Since the order has become effective the
Board has received applications for the shipment of several million
dollars of gold to Spain, all of which it has declined to grant, for
x -392
-li
the reason that the applications do not show that these shipments are
essential for the public welfare# hut appear,, on the other hand, to he
the result'll arbitrage operations, or an attempt to transfer funds for
foreign accoimt.
It will he interesting to note the effect of this policy,
hut it is certain that we will no longer be required to furnish the gold
for the settlement of transactions with which we have no concern, and
it seems probable that European nations will be obliged to settle their
balances among themselves, or else that Spain may increase the list
of articles upon which she has placed an embargo*
I enclose herewith copy of a press dispatch to the Journal of
Commerce of New York (Exhibit D) which relates to an announcement made
by the Department of Commerce, from which it appears that the Spanish
Government has prohibited the exportation of olive oil.
The Board is
informed that the "Trading with the Enemy Bill" now pending in Congress,,
contains a provision giving the Presiderit of the United States the seme
control over unports that he now has over exports, and it seems prob
able that the importation of many articles for which we have substitutes
or which can be produced in this country will be prohibited*
The whole foreign exchange situation is so unsettled at present,
both from economic and political viewpoints, that the Board feels it
would be unwise for the Federal reserve banks to establish agencies in
countries like Spain and Sweden at the present time for the purchase
and sale of bills of exchange.
In the Federal Reserve Bulletin for
x -392
?■ >4
-5 August 1917/ page 582, and for September 1917* page
683,
are tables which
show that since measures have been taken to stabilize exchange in Hew York
around the present rates, Hew York and London rates of exchange on neutral
points have run practically a parallel course, dollar exchange rates in
nearly all cases showing less depreciation than the coresponding sterling
proves
rates* (Copies of these bulletins are enclosed, Exhibits E and F)* This J
that American currency is more highly regarded abroad than any other, in
cluding British*
Your letter was submitted to Mr. Albert Strauss, an exchange expert
of JSt-tersationai reputation, who is here in Washington as the advisee of
the Secretary of the Treasury on foreign exchange matters, and I take
pleasure in enclosing a letter from him (Exhibit G) in which he comments
upon the points which you have raised.
Your attention is asked partic
ularly to that part Of Mr. Straaes1 letter, (page U) where he points out
that it is unlikely that upon the establishment of an agency in Spain,
the daily or weekly demands for the purchase and sale of Spanish exchange
would about balance each other; but that, owing to seasonal demands there
would be involved a large investment in pesetas at one time, or the heavy
borrowing of them at another.
You will notice that he states that in
normal times peseta exchange was regarded as unstable and dangerous,
and that it is now especially so by reason of arbitrary governmental
action which is liable to be changed at any time.
The Board haa seen no evidences of any widespread demand that Fed
eral reserve banks should be required to deal in foreign exchange*
X— 392
76Interior banks have, as a rule, connections of long standing through
which they handle their foreign exchange transactions, and I cannot
recall any request made by any bank for additional facilities.
The
Board has indeed, received a great many communications from a certain
importer of olive oil who claims to handle about twenty per cent of
the olive oil that is brought into this country; but it has not heard
from other importers of olive oil, although it has
received occa
sional letters from wholesale grocers throughout the country, all
in
practically identical language and which bear every evidence of having
been inspired^ asking that it establish "a foreign exchange bureau,"
although no suggestion has been made as to the functions of such a bu
reau.
Mr. Strauss is, and has been for the past ten days, in daily
communication with members of the Board and sits with its executive
committee as the representative of the Treasury when applications for
gold exports are considered.
If the functions of "a foreign exchange
bureau" are those of investigation and regulation, they are now being
performed by this committee.
The Board is of the opinion that the subject of paramount importance
just now is the conservation of our gold reserves, to which considera
tions of individual profit and convenience should h<J subordinated.
I am, Sir,
Very respectfully,
(Signed)
W.
p. a. Harding.
Governor,
X-392
EXHIBIT
’’A”
September 15, 1917.
Memorandum for
Governor Harding:
Gold exports from the United States to Spain during the present
calendar year are shown by the Bureau of Foreign Commerce as follows
January, 1917 - $4,444,463
February
"
3,616,827
March
"
4,266,566
April
"
4,400,300
May
"
21,010,802
June
B
15,983,400
July
"
20,327,950
A ugust
ft
14,815,700
- - -
$88,866,008
Tntal
Respectfully submitted,
(Signed) M. L. JACOBSON.
Statistician.
MU-McL
X-392
EXHIBIT "B"
CONFIDENTIAL.
Copy of cablegram cent by DepartKent of State to American Ambassador
at Madrid, Spain.
, January 25, 1917.
At request of Governor of Federal Reserve Board
communicate to Bank of Spain through Spanish government
following: quote: Federal Reserve Board has suggested,
in view of difficulty of sending gold to Spain and con
sequent derangement of foreign exchange market, that it
might be helpful if Bank of Spain would consent to es
tablish relations with New York Federal Reserve Bank,
acting as its agency in Spain and New York Federal Reserve
Bank opening reciprocal account here, offering to earmark
gold, keeping it under joint custody and supervision with
representative designated by Bank of Spain, until normal
shipments are resumed. Unquote.
Copy of cablegram received by Department of State in reply to above
from the American Ambassador at Madrid:
February 21, 1917.
Bank of Spain thanks Federal Reserve Board and regrets
that it cannot accept offer.
X-361
a
A
EXECUTIVE ORDER.
REGULATIONS RELATING TO THE EXPORTATION OF COIN, BULLION & CURRENCY,
By virtue of the authority vested in me, I direct that the regulations
orders, limitations, and exceptions
prescribed in relation to the exporta
tion of coin, bullion, and currency shall be administered by and under the
authority of the Secretary of the Treasury; and upon the recommendation of
the Secretary of the Treasury I hereby prescribe the following regulations
in relation thereto:
1*
Any individual, firm or corporation desiring to
export from the United States' or any of its territorial pos
sessions to any foreign country named in the proclamation
dated September 7, 1917, any coin, bullion, or currency,
shall first file an application in triplicate with the
Federal Reserve Ba|pc of the district in which suCh indi
vidual, firm or corporation is located, such application
to state under oath and in detql the nature of the trans
action, the amount involved, the parties directly and in
directly interested and such other information as may be
of assistance to the propeh authorities in determiriihg whether
the exportation for which a license is desired will be compatible
with the public interest.
2.
Each Federal Reserve Bank shall keep a record copy
of each application filed with it under the provisions of
this regulation and shall,forward the odginal application
and a duplicate to the Federal Reserve Board at Washington
together with such informaiion or suggestions as it may be
lieve proper in the circumstances and shall in addition make
a fdrmal recodlmendation
to whether or not in its opinion
the expdrtaiilh should be permitted'.
as,
3.
The Federal Reserve Board, subject to the approval
©f the Secretary of the Treasury,
is hereby authorized and
empowered upon receipt of such application and the recommen
dation of the Federal Reserve Bank to make such ruling as
it may deem proper in the circumstances and if in its opinion the
exportation in question be compatible with the public
interest, to permit said exportation to be made; otherwise
to refuse it.
The White House,
September
7 , 1917
#2
- X-361A
• A
(Certain exports in Time of War Unlawful)
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
A PROCLAMATION
WHEREAS Congress has enacted, and the President has on the fifteenth day of
Juxie, 1917, approved alaw which contains the following provisions:
"Whenever during the present war the President shall find that the public
safety shall so require, and shall make proclamation thereof, it shall be unlawful
to export from or ship from or take out of the United States to any country named
in such proclamation any article or articles mentioned in such proclamation,
except atsuch time or times, and under such regulations and orders, and subject
to suCh limitations and exceptions as the President shall prescribe, until
otherwise ordered by the President or by Congress: Provided, however, theft no
preference shall be given to the ports of one State over those of anothers
v
"Any person who shall export, ship, or take out, or deliver or attempt
to deliver for export, shipment, or taking out, any article in violation of this
titled or of any regulation or order made hereunder, shall be fined not more
than $10*000, or, if a natural person, imprisoned for not more than two years,
or both; And any article so delivered Or exported, shipped, or taken out,rca .sou*,
attempted to be so delivered or.exported, shipped, or taken out, shall be seized
and forfeited to the United States; and ahy officer, directtr, or agent of a
corporation who participates in any such violation shall be liable to like fine
or imprisonment, or bdth#
reasonable
"Whenever there is
cause to believe that any vessel, domestic
fftreigh, is abbut to carry out of the United States1any article or articles; in
violation of the provisions of this title, the collector of customs for the distrist in which such vessel is located is hereby authorized and empowered, subject
to review by the Secretary of Commerce, to refuse clearance to any such vessel,
domestic or foreign, for which clearance is required by law, and by formal notice
served upon the owners, master, or person or persons in command or charge of any
domestic vessel for which clearance is not required by law, to forbid the de
parture of such vessel from the port, and it shall thereupon be unlawful f<*r such
vessel to depart. Whoever, in violation of ax^y of the provisions of this section
shall take, or attempt to take, or authorize the taking of any such vessel out of
port or from the jurisdiction of the United States, shall be fined not more than
$10,000 or imprisoned not more than two years, or both; and, in addition,such
vessel, her tackle, apparel, furniture, equipment, and her forbidden carg& shall
be forfeited to the United States."
c.<.
J 3 '-
X-35TA
$
c *
AND WHEREAS the President has heretofore by proclamation, under
date of the twenty-seventh day of A ugust in the year One Thousand Nine
Hundred and Seventeen, declared
certain experts in time of war unlawful,
and the President finds that the public safety requires that such pro
clamation be amended and supplemented in respect to the articles here
inafter mentioned;
N O W ,THEREFORE, I, WOODROW WILSON, PRESIDENT OF THE UNITED
STATES OF AMERICA, DO HEREBY PROCLAIM to all whom it may concern that
the public safety requires that, except at such time »r times, and un
der such regulations and orders, and subject to
such limitations and
exceptiohs as the President shall prescribe, Until otherwise ordered
by the President or by Congress, the following articles, namely: coin
bullion and currency: shall not, on and after the* tonth day
of September in the year One Thousand Nine Hundred and Seventeen,
be exported "from or shipped from or taken out df the United States
or its territorial possessions to A Ibania, AuStria-Hungary, Belgium,
Bulgaria, Denmark, her colonies, pdssessxons dr protectorates,
Germany, her colonies, possessions or protectorates, Greece, Leichtenstein, Luxembourg, The Kingdom of the Netherlands, Norway, Spain, her
colonies, possessions or protectorates, Sweden, Switzerland or Turkey,
Abyssinia, Afghanistan, Argentina, Bolivia, Brazil, China, Chile,
Colwnbia, Costa Rica, Cuba, Dominican Republic, Ecuador, Egypt, France,
her colonies, possessions or protectorates, Guatamala, Haiti, Honduras,
Italy, her colonies, possessions or protectorates, Great Britain, her
colonies, possessions or protectorates, Japan, Liberia, Mexico, Monaco,
Montenegro, Morocco, Nepal, Nicaragua, the colonies, possessions or
protectorates of The Netherlands, Cman, Panama, Paraguay. Persia, Peru,
Portugal, her colonies? possessions or protectorates, Roumania, Russia,
Salvador,
San Marino,
Serbia, Siam, Uraguay, or Venezuela.
4
#4 - X361A
The regulations, orders, limitatoms and exceptions prescribed will
be administered by and under the authority of the Secretary of the Treasury,
from whom licenses in conformity with said regulations, orders, limitations
and exceptions will issue.
Except as hereby amended and supplemented, the above mentioned pro
clamation
under date of August 27, 1917, shall ccntinue in full force and
effect.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal
of the United States of America to be affixed.
Done at the City of Washington, this seventh day of September
in the year of our Lord One Thousand Nine Hundred and Seven
teen and of the Independence ef the United States of America
the One hundred and Forty**second.
By the President,
Secretary of State.
EXHIBIT ”D”
NO SPANISH OLIVE OIL EXPORTS
Royal Order Prohibits Shipments of All Classes
Washington, Sept. 12 (Special) —
Spain has imposed further
restrictions on olive oil, according to an announcement made by the Depart
ment of Commerce today. The Department published the following cable from
the American Consulate at Barcelona:
"Spanish Government by royal order published September 7
prohibits exportation Of all Claeses of olive oil, excepting that
already billed at point of origih
for
railway transportation
arid that invoiced for maritime shipment, both exceptions con
forming to export requirements of royal order reported in this
consulate’s cablegram of August 13".
(Journal of Commerce, Sept. 14, 1917, p. 2.)
X-392
EXHIBIT "Gn.
September 15, 1917*
HonOratle W. P. G. Harding,
Governor, Federal Reserve Board.
Dear Governor Harding:
I have read with great Care your letter of September *>, to
Senator Owen and his answer to you Under date of the 7th, in regard
to which you have asked me to express my views*
I think Senator Owen is entirely right in his conterition that
i f we took steps to confine exchange operations between Spain and the
United States to the settlement of commercial transactions between those
two countries that the Spanish exchange in the United States, and as a
consequence dollar exchange in Spain, would rule around normal; which is
to say that so long as both countries interposed no obstacles to the free
shipment of gold out of each, the exchange rate would fluctuate around
the gold value of the peseta by a margin not exceeding in either direc
tion more than the cost of the shipment of the gold.
In fact, with the
balance of trade between Spain and the United States running heavily in
favor of the United States, it is altogether likely that the peseta
would se ll in the United States at less than the normal gold value of
x-392
- 2 -
Exhibit "G”.
the peseta.
Had these Conditions obtained between Spain and the United
Spates, it is altogether unlikely that Spain would have declined to re
ceive .American gold except at a discount, because no gold would have
moved to Spain from the United States and there would have been nb point
in any such regulation*
We must not lose eight, however, of the important eonseqtiences
that would follow from the steps necessary to bring ab6ut the above condi
tion of affairs*
These steps wohld involve the absolute prohibition
of arbitrage in exchange.
Such arbitrage is in effect the sale in New
York of cash balances held in France and England, and the remittance to
Spain of the proceeds of the sale of such foreign balances.
While it is
true that such transactions are undertaken by banks and bankers for the
.profit involved in the transaction^ the transactions would not be pos
sible except for the fact that the underlying transactions respond to a
real need of the situation.
These underlying facts are that we are at
the present time paying to Spain in gold, debts due to that country by
England and France*
tfhese payments are made by us out of the advances
made by us to our Allies, and they are made in gold because of the fact
that neither France nor England are permitting the export of gold at the
present time.
France, I believe, has an absolute prohibition on the ex
port of gold; and England, without a formal prohibition, is preventing
the export by the concerted action of its bankers and the influence of
the Bank of England*
I believe both France and England feel that they
x -392.
- 3Exhibit WG".
can not at present, with due regard to the safety of their own financial
structures, part with gold, and yet they must pay for essential pur
chases made in Spain.
I understand, though I have no direct knowledge
of the subject, that their purchases are for materials absolutely needed
for the support of their populations or for the prssecutidn of the war.
The Spanish Government is unwilling to receive .American gold and mint
it into pesetas except at a discount of some six or seven per cent.
This is a suspension of the free coinage of gold and amounts in effect
to a change by the Spanish Government in the mint value of the peseta.
This is, of course a hardship on persons owing money in Spain, where it
appreciates the value of the coin in which they are obliged to make
payment.
Apart from the question of fairness in thus changing their
standard of Value, the position of the Spanish Government is probably
wise, as the effect of this prohibition is to prevent, to a certain
extent at least, an inflation and a consequent rise in domestic prices.
I am told that the price of olive o il in Spain is now only twenty-five
per cent higher than it was before the outbreak of the war.
Such a
rise, of course, is very moderate compared with the rise in commodity
prices that has taken place during the last four years with us and in
other countries that have suffered price inflation.
I see no remedy for this situation except such control of a ll
operations in foreign exchange as w ill reduce our exchange relations
with every country to the settlement of our direct trade balances with
that country.
It may be that the increasing complexities of inter-
X-3°2
- u Exhibit "G"
national intercourse may gradually force us to take such drastic action.
i
In the meantime, however, there are certain other steps which might help
this situation, such as an effort to make it profitable for the Spanish
banks or Spanish Government to invest or to leave in the banks of this
country the large credit oalances that are arising here in their favor.
I ..know that this whole subject is engaging the constant attention of
your office and of yourself.
I do not think that Senator Owen's suggestion that the Fed
eral reserve banks establish an agency in Spain would remedy the situation
unless at the same time steps were taken to prevent arbitrage transactions
through sterling and francs; and i f such steps are taken I think that the
effect which the Senator has in mind would be brought about without the
establishment of an agency in Spain.
Senator Owen assumes that with
«the establishment of an agency in Spain the daily or weekly demands for
the purchase and sale of Spanish exchange would about balance each other.
Without having myself any detailed knowledge of the subject, I believe
it is more likely that there would in certain seasons of the year be a
large demand to pay for certain imports and at other periods of the year
a large supply for the purpose of collecting the proceeds of the sale
of exports, and that there would be involved a large investment in
pesetas at one time or heavy borrowing of them at another.
Even with
an agency in Spain, I doivbt whether the Federal reserve bank would find
it wise to carry heavy balances or to borrow large amounts.
In normaj
X- 392.
-5 Exhibit "G",
times, before the war, peseta exchange was most unstable and dangerous,
and it is so now where commercial conditions may be complicated by arbitrary
Governmental action*
My understanding has always been th«.t the provision in the
Federal Reserve Act empowering the Federal Reserve Banks to deal in
foreign exchange arid establish foreign agencies, was for the purpose
of permitting the Federal Reserve Banks to employ their funds in foreign
markets with a view to their control of the discount rate and to put them
in a position where through their holdings in foreign b ills they might
be able to minimize the movements of gold between New York and foreign
markets.
I do not understand that this provision is intended to put the
Federal Reserve Banks into the exchange business in competition with
private banks and bankers.
tion in the exchange field*
As a matter of fact, there is ample competi
There is no business that operates normally
on a smaller margin of profit*
The margin of profit is so small that
over ten years ago my firm stopped dealing in foreign exchange, as they
did not thimk it worth while to continue*
Of course, at tljte present tine>
the margin of profit is often very considerable, but this margin arises
out of the unusual risks connected with the business, such as fluctuat
ing insurance rates, interference with cables,(so that it is impossible
X-392.
6
-
Exhibit 11Gl?
to c l039 transactions on both ends with any degree of certainty) and the
arbitrary actions of Governments in restricting gold movements as well
as changing mint regulations, so that the margin where large, represents
in effect a speculation*
Yours very 3incerely>
ALBERT STEAUSS.
W. P. G. HARPING, GOVERNOR
PAUL M. WARBURG. VlC* GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
WILLIAM G. McADOC
SECRETARY OF THE TREASURY
C h a ir m a n
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
j^ g ^ S ^ lL Afi ENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 20, 1917.
Gentlemen:The Board haa prepared rules governing the administration of the
regulations relating to the exportation of gold coin and currency, as
laid down in the President’ s order dated September 7, 1917.
Copies
w ill be sent you for distribution as soon as they are received from
the printer.
In the meanwhile the foilowing excerpt is sent for
your confidential information:
ADMINISTRAT
PROCEDURE
I VE
METHOD OF MAKING APPLICATION.
Individuals, firms, and corporations desiring to obtain licenses
for the exportation of coin, bullion, and currency, must file an ayplication with the Federal reserve bank of the district in which the
applicant resides, or where the transaction requiring the shipment
originates.
These applications must be made on a standard form which
hu,s been furnished to a ll Federal reserve banks.
EXPORTS OF GOLD.
It w ill be the general policy of the Bo<*rd not to authorize the
exportation of gold unless the shipment applied for is shown to be
connected in a direct and definite way with a corresponding importation
of merchandise for consumption in the United States, but in any case,
authorization w ill be granted only where the exportation of gold in
payment for such merchandise i3 found to be comp^tible with the public
interest.
In reaching its conclusions however, the Board w ill
consider a l l attending circumstances in each particular case.
SHIPMENTS OF CANADIAN NOTES AND SILVER COIN.
Until further notice the Board w ill approve a ll applications for
the exportation of Canadian notes and silver coin without limitation.
The Treasury Department has instructed collectors of auctome to pass
such shipments into Canada when approved by the Federal reserve bank
-V— *
-2
of the d istrict from which the shipments are made.
Continuous pennitfcs
for shipments of Canadian silver coin and currency, without requiring
an application in each case, may he granted by Federal reserve hanks
upon condition that each transaction w ill he reported to it without de
lay.
The Federal reserve hanks w ill transmit to the Beard weekly
reports of a l l applications of every kind passed upon hy them, show
ing the amount of each shipment.
EXPORTS OF SILVER BULLION AMD SILVER COIN OF FOREIGN
MINTAGE.
Applications for the exportation of silver bullion and silver
coin of foreign mintage w ill in general he approved by the Federal
Reserve Board upon recommendation of the Federal reserve hank with
which the application is filed.
UNITED STATES NOTES, NATIONAL BANK NOTES, SILVER COIN AND FEDERAL
RESERVE NOTES.
Applications for the exportation of United States notes, national
bank notes, silver coin and Federal reoefve notes w ill as a rule he
approved hy the Federal Reserve Board, hut each application must
come before the Board for its determination before shipment is made.
TRAVELERS LEAVING- THE COUNTRY.
Instructions have been issued hy the Treasury Department to col
lectors of customs to permit travelers leaving the country to carry
on their persons or in their baggage
(a )
United States notes, national hank notes, silver cer
tificates and Federal reserve notes not to exceed
$5,000 for each adult;
(b)
American silver dollars and subsidiary silver coins not
to exceed $200 for each adult;
or gold certificates
Gold coin/not to exceed $200 for each adult.
(c )
Collectors of customs have been informed that in dealing with travelers
they may act in accordance with these regulations, without communicat
ing wiii the Federal Reserve Beard or with the Federal Reserve B-nk of
-Z + -
their d istrict.
GENERAL.
Shipments of coin or currency which appear to be or suspected of
being for enemy account or for the benefit of the enemy, w ill not be
permitted.
These regulations are issued subject to change without notice,
and no application granted w ill be regarded as constituting a precedent*
Very truly yours.
Governor.
Federal Reserve Bank,
Ex-Officio
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC
A. DELANO
FRED1
C. MILLER
CHARLES S. HAMLIN
members
WILLIAM G. McADOO
X-396-i
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H . PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
W A S H IN G T O N
FEDERAL RESERVE BOARD
September 20, 1917
Dear Sir:
In connection with the regulations covering the exportation of
coin, bullion, and currency from the United States, the Board desires
that you request all national banks, state banks, trust companies,
private banking firms, or other fiduciary institutions likely to have
earmarked gold for foreign account, to give you a full statement of
the gold which is held in custody by them, indicating under what sti
pulations it was received, with the assurance that the information
furnished will be held in strict confidence. Please inform these
institutions that the Board regards the earmarking of gold for foreign
individuals, firms, corporations, or governments, as being tantamount
to the exportation of gold, and that m the public interest it requests
that no more gold be earmarked for foreign account except upon the ap
proval of the Board. It must be understood, however, that any re
strictions which may be placed upon the exportation or earmarking of
gold must in no way affect the payment in gold whenever required, of
any obligations payable in gold within the United States, whether due
to domestic or foreign holders, excepting enemy holders, the regulations
affecting only gold xvhich is to be shipped outside of the United
States or to be earmarked for foreign account, as stated above»
Gold which was already earmarked before the president's order
became effective may be considered by the Board as exempt from its
terms, subject, however, to the stipulations under which the gold was
taken into custody.
^
Very truly yours,
Governor.
X-397.
Ex*Officio
members
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
C h a ir m a n
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A SH IN G TO N
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
and
Fis c a l A g e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Dear Sir:
Replying to your letter of
•
X would state that the
Federal Reserve Board is raking a careful study of the foreign exchange
situation but L*ms not up to Inis tin© been able to find any way of overcoming certain'obstacles which mist be overcome before the desired re
sults could be attained by the establishment of foreign agencies by
Federal Reserve Banks.
The whole natter is complicated by reason of
Our. participation in the war, as we cannot longer consider the interests
of the United States alone,, but mast consider the whole question from a
partnership standpoint.
Our foreign exchange transactions are not at
present related entirely to our own imports and exports, but are affected
also by the transactions of other cations with which v»e are associated
in the war and by the loans which our Gove meant is making to these
nations.
Very truly yours
Governor
W. P. 6. HARDING, GOVERNOR
PAUL M . W A R B U R G , VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO M E M B E R *
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A SH IN G TO N
H.
PARKER WILLIS. SECRETARY
IRMAN P. ALLEN. ASST. SECRETARY
z-39*
AND FISCAL A fiE NT
JRESS REPLY TO
September 22, 191?'F
ed eral reserve board
De~r Sir
The Bcurd hue already had eonb correspondence with Federal reeerve ••Danxs
on the subject of the gold, which ie held by member and nonmember banks
throughout the country, and has pointed out the desirability of getting this
gold into the vaults of the Federal reserve b_.nks, several of which have
taken energetic steps to accomplish this result by offering not only to p-*y
the transfer charges on the gold, but in some cases to assume the loss on
light weight <*oin.
While the gold holdings of the Federal reserve banks
have been greatly increased during the last six months, they still control
less than one*half of the gold in the country, -aid the Board is anxious that
their holdings be augmented still further.
It realizes, however, that
an unrestricted offer.on the p-rt of Federal reserve banks to receive At its
face Value all of the light weight gold, might ent-.il upon the Federal reserve
banks a very considerable loss.
The suggestion is made therefore, to those Federal reserve banks which
have not already adopted this policy, that they nuke to the banks of their
district a proposition about as follows:
(1)
To pay transportation charges on United States gold coin delivered
at their own counters or at the ne-rest sub-treasuryj
(2)
To pay .transportation charges on United States gold coin and to
receive it at the face value in all c-ses where the loss by re-son of
abrasion does not exceed an average of 3ix-tenths of one per cent, with the
'.* * * s (
X-399
-2.
underslanding that all coins showing a greater loss through abrasion or
sweating, be returned to the sending banks.
It i ; believed that many of the banks remitting gold will be willing to
stand any loss in excess of sixntenths of one per cent, in which Case any
light weight coin received from them could be sent to the nearest sub-treasury
for condemnation and proper reimbursement.
The experience of two of the
Federal reserve bunks which have freely accepted gold coin from their member
banks has been that .they buve sustained only _n insignificant loss-
Before
taking any action it migfrt be advisable for the Federal reserve banks to
communicate informally with the larger banks of their districts, with the
view of ascertaining the probable loss on the gold which has been sent in.
An officer of one of the Federal reserve banks states that he has reason
to believe that there is a bank in his district which has about $500,000
of gold on which there would be a loss of from ten to twelve thousand dollars.
Even though this estimate be correct, the bank in question might be willing to
stand the loss in excess of six-tenths of one per cent, or three thousand dol.ja*
The Board has been advised by the Comptroller of the Currency that his office
proposes in the futurq to give particular attention to light weight gold coin
held by national banks.
It is suggested that any offers on the part of Federal reserve banks to
receive gold at their own expense might be more effective if ma.de for limited
c
periods only.
The Board requests that you bring this letter to the attention
of your executive committee or of your board of directors and that you advise
it of the policy which may be decided upon.
Very truly yours,
Federal Reserve Bank,
Governor.
Ex-Officio
members
W. P. 6. HARDING, GOVERNOR ‘
PAUL m . w ar b u r g , V ic e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRM AN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL
RESERVE
ARKER WILLIS.
SECRETARY
22, l 9 f f~l AN P. ALLEN,
and
W A S H IN G T O N
ASST. SECRETARY
Fis c a l A g e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Dear Mr*
The Treasury Department is retiring gold certificates in de
nominations smaller than $50., and the Treasurer of the united
States has advised the Board that he is desirous of obtaining from
time to time Federal reserve notes in five and ten dollar de
nominations (mostly tens) for use by the cashier of the Treasury
in making ordinary payments* An opportunity is thus afforded of
increasing the gold holdings of the Federal reserve banks by mak
ing this exchange of Federal reserve notes for gold, and the Board
feels that all the Federal reserve banks should participate pro
rata, in their proper proportion* There will be available eventual
ly about $300,000,000 of ten and twenty dollar gold certificates
which can be exchanged for Federal reserve notes in this way* The
Board understands that these exchanges will be made at the rate of
about $3,000,000 per week. So far, one million dollars each for
districts one, two, three and four, have been exchanged. The
Treasurer has not yet advised the Board of the amount of certificates
that he will have available for exchange during the coming week, but
the Board will advise you as soon as an allotment is made your
bank. Upon receipt of the Board's advice a telegram as follows
should be sent to the Board:
Federal reserve bank has deposited $____________ as
collateral for issue of Federal reserve notes. Please request
Comptroller of the Currency to deliver to the Treasurer of
the United States Federal reserve notes aggregating $________
in_______________ denominations, such delivery to be
made upon deposit by Treasurer of the united States of _____
in gold settlement fund to credit of Federal Reserve Bank of
Signed ___________________
Federal Reserve Agent.
Your bank can deposit with the Federal reserve agent coin,
gold certificates or eligible commercial paper as may be most
convenient.
Very
truly yours,
G o v e rn o r
FOR RELEASE IN MQBK1H6 PAPERS THURSDAY. SEPTEMBER 27. 1917
STATE BANK MEMBERSHIP IN THE FEDERAL RESERVE SYSTEM
Address by W. P. G- HARDING,
GOVERNOR OF THE FEDERAL RESERVE BOARD
Before the
STATE BANK SECTION AI.IERICAN BANKERS ASSOCIATION,
ATLANTIC CITY, N.J.,
Wednesday afternoon, September 26th
X-400
The double entiy principle is the foundation of the
science of accounting.
There must be an alignment of debits
qnd credits, and on all balance sheets resources are grouped
on one side and liabilities on the other.
In considering
the merits of any banking system we must observe* this prin
ciple of debit and credit.
The advantages and the draw
backs must all be taken into account, — a balance brought
down, and its amount and the side upon which it falls will
determine the merits of the system.
The Federal Reserve Act is the fourth important banking
law of wide application, which lias been enacted by Congress.
At the outset, bank charters were granted by the states and
not by the general government.
Centralized control of credits
X-400
- 2-
was recognized to be dangerous and was regarded as being
contraiy to the spirit of our institutions.
Yet the need
for a strong bank with extended powers of note issue and of
discount, was felt so keenly, that as early as 1791, congress
granted a charter to a dominant banTHng institution owned in
part by the government, known in history as the first Bank of
the United States.
This bank appears to have been wisely
managed and it undoubtedly served a useful function.
There
is no evidence of any flagrant abuse of its powers, but it
was unable to secure an extension of its charter and was
obliged to go into liquidation at the end of twenty years.
The demand for a large bank of discount and issue how
ever, continued to find expression, and five years later the
second Bank of the united States was chartered by Act of
Congress.
The s t o n y career of this institution is familiar
X-400
—
3—
to all students of financial history;
and vhile it afforded
through its note issues, a satisfactory Circulating medium,
and was useful in many respects, its arbitrary control of
credits and i4c participation in politics created so strong a
prejudice against it in the public mind that upon the expira
tion of its charter, it too was unable to SOciiTe ah extension,
and after a few years additional of existence as a state bank
it was finally forced into liquidation.
In the ledger of
public opinion the balance was found to be on the wrong side,—
the evils connected with the bank exceeded the good.
so
strong were the prejudices \nhich it aroused that no bank
modeled upon similar lines has since been allowed to exist in
this country and probably none will ever be.
For more than twenty-five years after the fall of the
second Bank of the United States, the state institutions in
X-400
this country had the financial field to themselves.
Most
of them were permitted to issue circulating notes under the
laws of their respective states but these laws were not
uniform, and in most cases were entirely inadequate for the
protection of the note holder.
State bank currency was local
in its character, and when circulated away from its place of
issue the discount upon it increased in a degree corresponding
to the distance, and no financial authority has ever contended
that the experience of this country with' state bank notes was
qt all satisfactory.
In 1863 Congress legislated for the third time in a
comprehensive way on the subject of banking, and the National
Banking system was the result.
One of the underlying
principles of this Act was the diffusion of banking power —
X-400
-5-
the absolute autonoby of each bank chartered.
"A national
currency, with localized banking,” Was the theory of the
system’s sponsors.
The ls&v subjected the banks to whole
some restrictions and regulations, and required that their
operations be supervised by a bureau chief of the Treasury
Department, known as the Comptroller of the Currency.
The
national banks were authorized, upon the security of united
States bonds, to issue circulating notes, which were free from
the principal objections to state bank notes, in that adequate
provision was made for their redemption, they were receivable
at par in all parts of the United States , and their value was
not affected by the insolvency of the issuing bank.
A dual
system of reserves was established for these banks, the law
providing that part be kept in lawful money in the vaults of
X-4Q0
the hanks and that part he kept with other hanks approved as
reserve agents.
Experience has shown that the national banking system
was defective in three vital particulars:
(1)
The currency provided hy the hanks while sound and
stable, was absolutely inelastic;
its volume did not depend
upon the needs of trade, hut was regulated rather hy the price
of the government bonds against which the national hank notes
were issued.
(2)
weakness.
The pyramiding of reserves was another source of
Banks in the larger cities acting as reserve
agents for the countiy hanks would have a plethora of funds
at certain seasons of the year, while at other times, es
pecially when crops were moving, their deposits would decrease
X-400
~7-
and they would be called upon to rediscount heavily for their
country bank correspondents.
There was no rediscount market
in this country available to the larger banks, nor was there
any way of making adequate additions to the volume of currency
in times of stress.
(3)
A third defect in the national banking system lay
in the lack of coordination and cooperation.
There were no
means of compelling banks to stand together for the common
welfare, to mobilize their resources;
and in all of-our fi
nancial crises the trouble was aggravated by the desire of
frightened banks to build up their own reserves without regard
for commercial needs, and without any thought for the general
banking situation.
The state banks and trust companies were
affected in the same way as the national banks.
X-400
-8-
These defects in the banking system were painfully
evident during the severe financial panics of 1873, 1693, and
1907;
and while perhaps not entirely responsible for the
weakness of our credit structure, they rendered it impossible
to restore confidence, to provide for the requirement of
business, or to minimize the effects of too drastic liquida
tion.
After the memorable panic of 1907, serious consideration
was given to the subject of banking and currency reform, and
the law which was approved on December 23, 1913, known as the
Federal Reserve Act, the,result of an arousod public sentiment
sensed by a few strong personalities, was the outcome.
In
stead of one central bank, provision was made for the division
of the country into twelve districts and the establishment of
a Federal Reserve bank in each.
This law has been amended
X-400
-9-
in certain important particulars which the experience of
actual operation has shown to be desirable;
and, without at
tempting to discuss the reasons for the changes which have
been made, let us consider some features of the Act as it
stands today.
The Federal Reserve banks are owned by the national and
state banks which constitute their membership.
Each member
bank is required to subscribe an amount equal to six per cent
of its own capital and surplus to stock of the Federal Reserve
bank of its district.
One-half of the amount subscribed
must be paid in, the other half being subject to call.
After
all necessary expenses of a Federal reserve bank Jjave been
provided for, the stockholder;.? banks are entitled to receive an
annual dividend of six per cent on the paid-in capital stock,
which dividend is cumulative.
After dividend claims, have
X-400
- 10-
be en fully met all the net earnings must be paid to the
United States as a franchise tax, except that one-half of the
net earnings must be paid into a surplus fund until that
fund amounts to forty per centum of the paid-in capital stock
of the Federal reserve bank.
Stock in a Federal reserve
bank is not transferable, but upon the liquidation or retire
ment ef a member bank, its stock must be surrendered to the
Federal reserve bank for cancellation, and payment will be
made to the retiring bank equal to its cash pain-in subscrip
tions on the shares of stock surrendered, plus one-half of
one per centum per month from the period of the last dividend,
provided the payment does not exceed the book value of the
stock.
While profit is a minor consideration with the Federal
reserve banks, their current earnings are such that they will
X-400
-11before a great while be able to pay all accumulated dividends.
Although carlying reserves of about 60 per cent against all
deposit and note liabilities, the average net earnings of the
twelve banks for the first eight months of the present year
have been at the rate of 12.1 per cent per annum.
The average
net earnings for the month of August of the present year were at
the rate of 17.3 per cent.
The objection therefore, which was
raided frequently during the first year of the operation of the
Federal Beserve banks, that the stock would prove to be a dead
investment, is no longer a valid one.
Each Federal Be
serve bank is an autonomous institution, with nine directors,
six elected by the stockholding banks, and three appointed by
the Federal Beserve Board.
one of these three is chairman
of the board and Federal Beserve agent.
the law to appoint one
He is authorized under
X-400
*•12-
oi* more assistants, subject to the approval of the Board.
With this exception, all officers and employes of Federal re
serve banks are chosen by thoir own directors, the Federal
Beserve Board being given power to approve salaries and to
make removals for cause#
The Federal Beserve banks do not come into competition
for deposits with the commercial banks which conpose their
membership.
They are not allowed to receive deposits from
individuals, firms, corporations, or municipalities.
While
they may receive United States deposits, they are given no
monopoly of such deposits.
They receive deposits from their
member banks and from such non-member banks as may desire to
carry balances with them for exchange or collection purposes,
and ne interest is paid by Federal reserve banks on deposits.
X-400
-13-
A glance at the statements which have "been issued by national
banks during the past two years —
enormous gains in deposits —
which show generally
will demonstrate the absurdity
of the fears formerly expressed so often that the Federal Re
serve banks would reduce the deposits of their member banks.
There is no occasion here for an extended review of the
powers of the Federal reserve banks, or for a discussion in
detail of rediscounts, open market operations, and note
issues.
It is now admitted by all, except a few irreconcil-
ables, that the Federal Reserve banks do furnish an elastic
currency, one capable of responding to the needs of the
country by expanding in times of stress or of great commercial
and industrial activity, and by contracting in periods of
dullness, the limitations being the amount of gold obtainable
X-400
-14-
for reserves against the notes outstanding and the eligible
paper available as security for the notes*
Even though there
may be no reduction in the amount Of Federal reserve notes
outstanding, actual contraction may be effected by increasing
the gold reserve held against them.
The gold reserve against
the Federal Reserve notes now outstanding is 81 per cent, al
though the normal reserve required by law is 40 per cent.
The operations in which the banks can engage are clearly de
fined by law, and there is no centralization of credits.
Discount rates are fixed by the Board of directors of each
Federal Reserve bank, subject to the approval of the Federal
Reserve Board, and applications for rediscounts of eligible
paper are passed upon at each bank without reference to any
other authority.
One Federal Reserve bank mey rediscount
X-400
~ 15-
paper for another, either voluntarily, or by direction of
the Federal Reserve Board upon the affirmative vote of five
members.
In this way we have a diffusion of credit but a
concentration of resources^
All national banks were required by the law to become
members and only a very few of them chose as an alternative
to surrender their charters.
The original Act provided
for the admission of state banks as members, but during the
first two years of the operation of the system few chose to
exercise this privilege.
The Act did not state in sufficient
detail the terms and conditions for state tank membership,
but left much to regulation by the Federal Reserve Board;
and
vdiile the Board’s interpretation wf the section relating to
state bank membership was satisfactory to officials of most
of the state banks which contemplated becoming members, it was
r
X-400
-16-
felt that the banks would, be on safer ground if the terms were
stated more clearly and definitely .in the Act itself.
The
Adt approved June 31, 1917, amended in several particulars
the Federal Reserve law, and one of the most important amend
ments is. that relating to the admission of state banks and
trust companies.
Section 9, as amended and reenacted pro
vides that "any bank becoming a member of the Federal Reserve
system shall retain its full charter and statutoiy rights as
a state bank or trust company, and may continue to exercise
all corporate powers granted it by the state in which it was
created, and shall be entitled to all privileges of member
banks.'*
So fully does this clause protect the charter powers
of a state bank that the Attorney General of the United states
has recently ruled that it exempts a state bank from tho re-
X-400
-17-
strictions of Section 8 of the Clayton Act which relates to
interlocking directors.
Other clauses of Section 9 as
amended provide that IVhile state hank members shall be sub
ject to examinations made by direction of the Federal Reserve
Board or of the Federal reserve bank by examiners selected or
approved by the FederalReserve Board, incases where the di
rectors of Federal reserve banks shall approve the examinations
made by state authorities, such examinations and reports may
be accepted in lieu of examinations made by examiners selected
or approved by the Federal Reserve Board.
This removes the
objection that state banks are subject to double examinations»
Another objection frequently urged, was that the law made
no provision for the retirement of a state bank from the
Federal Reserve system unless it should be expelled for
X-400
-18-
violation of sotee regulation.
The Act as amended provides
that "aiy State batik or trust cotepany desiring to withdraw
from membership in a Federal reserve batik taay do so, aftei*
six months’ written notice shall haVe beefa filed with the
Federal Reserve Board, ppon the stirrender and cancellation
of all of its holdings of capital stock in the Federal Reserve
bank;
Provided, however. That no Federal Reserve bank shall,
fexcept tinder express authority of the Federal Reserve Board,
cancel within the same calendar year more than twenty-five
per centum of its capital stock for the purpose of effecting
voluntary withdrawals during that year.”
Many state banks otherwise favorably inclined toward
membership, have been deterred from making application because
of the limitations upon their loans which would be imposed.
The Act now provides that a state bank or trust company which
X-400
-19-
becomes a member of the Federal reserve system, shall retaih
the full statutory rights which it eh joys under the laws of
its own state, so that the question of excess loans is deter
mined entirely by state law.
But, in order to avoid giving
state bank members an undue advantage over national banks, it
is provided that "no Federal Beserve bank shall be permitted to
discount for any state bank or trust company notes, drafts or
bills of exchange of any #ne borrower who is liable for borrowed
money to such state bank or trust company in an amount greater
than ten per centum of the capital and surplus of such bank or
trust company, but the discount of bills of exchange drawn against
actually existing value and the discount of commercial or
business paper actually owned by the person negotiating the same
shall not be considered as borrowed money within the meaning of
X-400
- 20-
this section.
The Federal Reserve hank, as a condition of the
discount of notes, drafts * and bills of exchange for such state
bank or trust company, shall require a certificate or guaranty
to the effect that the borrower is hot liable io such bank in
excess of the amount provided by this section, and will not be
permitted to become liable in excess of this amount while such
notes, drafts, or bills of exchange are under discount with the
Federal Reserve bank.”
Therefore, should a state bank member
have in its portfolio large loans which would be excessive for a
national bank, but which are permitted under the laws of its
state, no objection can be raised from the standpoint of amount,
by the Federal Reserve bank against such a loan;
but in offer
ing rediscounts to a Federal Reserve bank, the member bank
should offer paper vhich comes within the 10 per cent limit.
X-400
- 21-
Our countiy is now passing through one of the most critical
periods of its existence.
It is engaged in the most frightful
and costly war of all history.
Totally unprepared sir months
ago for a serious conflict, it has now in training a vast army,
and within the span of a few months will have completed preparat
i o n s for war on land and sea, beneath the sea, and in the air,
which ordinarily would have required years.
It is advancing
enormous sums to other nations with vhich it is associated in
this war.
The amounts necessary for financing our undertakings
and for taking care of our conmitments will aggregate £18,©60,008,000
for the first year, —
day.
$1,500,000,000 a month, or £50,©00,00® a
Our actual expenditures since last April have far ex
ceeded the total for the four years of the Civil war.
In such
circumstances our old banking system would have proved totally
X-400
-22-
inadequate.
It could not, 5,n point of fact, have withstood
the shock which we felt in 1914 when the war broke out between
three great European powers on one side, and two on the other.
The Federal Reserve Act, even before the Federal Reserve barks
were fully organized, was the means of carrying us safely
through that crisis, for the Act extended for one year the life
of the Aldrich-Vreeland notes and made their issue practicable.
Revival of confidence and a return to normal conditions were
coincident with the establishment of the Federal Reserve banks.
Their operation has given to every element in this country, — -
the national banks, the state banks, the manufacturers, the
merchants, and the individual depositors, —
a sense of security
which otherwise would have been totally lacking.
Within a few months four million subscribers have absorber!,
an issue of $2 ,000,000,000 of 3-1/2 per cent government bonds.
X-400
- 23-
the most gigantic financial operation this country has ever
known.
Yet there has been no financial stringency, iio violent
fluctuations in call money rates nor ih discount rates;
there
has been no general calling of loans, no forced liquidation.
At a crucial time during the month of June, the Federal Reserve „
banks discounted $663,196,000 0f member banks’ short time col
and bankers' acceptances,
lateral notes/and the money situation was kept completely under
control.
The country is now about to engage in a campaign
for the sale of the second issue of United States Liberty bonds.
The amount of the offering will be, at the very lowest, 50 per
cent greater than the first.
The crops of the country will be
moving at the same time, and we should remember that before the
establishment of the Federal Reserve banks money stringency dur
ing the crop moving period was a matter of annual recurrence.
The twelve Federal Reserve banks are the fiscal agents of the
X-400
-24-
go verncent .
Through the facilities afforded by them and by
means of the organizations which they have effected, the Govern
ment of the United States expects to gather up the funds
necessary for its support in the present crisis, and by reason
of their knowledge of the ability of the Federal reserve banks
to rediscount for them, the member banks look forward without
fear to the impending demands upon them.
More than 7600 national banks are members of the Federal
Reserve system, —
members perforce at first, but most of them
now by choice, and of the 20,000 state banks and trust companies
in the United States, of which perhaps eight or nine
thousand
are eligible for membership, how many are standing shoulder to
shoulder with the national banks in sustaining these Federal
Reserve banks v.hich all agree are our financial bulwarks in the
present emergency?
Just eighty-four;
but in this number are
X-400
~25and more important
included many of the larger/state banks and trust companies.
The capital of the state bank and trust company members of the
Federal Be serve systeia amounts to more than $61,000,000;
their
surplus to more than $62,000,000, and their to$ol resources to
more than $1 ,200 ,000,000 , and new applications for membership
are being received every day, from small banks as well as large.
The following table shows the movement of state banks into the
system has not been confined to localities, but that their
membership has extended to all Federal Beserve districts
except the third.
The banking laws of Pennsylvania formerly
prohibited the stock ownership which is necessary for the ad
mission of a .bank, but they have very recently been amended in
this respect;
X-400
-26-
state
DISTRICTS
HUMBER BANKS
member
BANKS.
TOTAL RESOURCES
CAPITAL
Boston
7
$ 10,300,000
$10,275,000
$232,528,223
New York
5
5,600,000
8,246;165
199,490,595
Cleveland
3
4
,?oo*obo
4;700,0b0
112,078,100
Richmond
8
1,740,700
412,90®
8,572,391
Atlanta
6
2,405,300
2, 309,750
33,219,162
Chicago
24
20,485,00®
18, 647,000
393,981,964
St. Louis
6
10,750,000
14,500,00®
149,087,326
Minneapolis
7
1,825,0®0
543,50®
13,919,808
Kansas City
7
2,855,000
2,310,000
63,975,595
10
835,000
155,650
9,117,321
1
50.000
100.000
1,493,790
84
$61,545,700
$62,199,965
$1,217,464,272
Dallas
San Francisco
TOTALS
X-400
-27-
I am confident that in
few
a/~weeks more the resources of the state
member banks and trust companies will amount to more than
£2 ,000,000,000, and I cannot but feel that if the state banks
and trust companies of America will give earnest consideration Jo
the contingencies ahead of us, motives of self-interest, as well
as a patriotic desire to cooperate will determine them to apply
for membership, and that '
in time
_the number of state
bank members will be nearer eighty-four hundred than eighty-four.
In making up your balance sheet on the Federal Beserve
system, in grouping the assets and liabilities of membership, ask
yourselves these questions:-
worth while?
Are the Federal Beserve banks
Would you care to have them abolished ?
If they
are worth sustaining, should they be supported almost entirely
by one class of banks, or should all unite
upbuilding them?
Will their strength be augmented, and the financial welfare of
X-400
the country further safeguarded, by your membership?
Ash those
state banks which are already members whether their charter
powers have been hampered or curtailed by their membership;
whether the regulations of the Federal Reserve Board have inter
fered with their business or methods of doing business;
■whether the Federal reserve banks have been arbitrary in their
dealings;
ask them if they have had difficulty in getting from
the Federal reserve banks any accommodations to which they were
entitled, or if they have had no occasion to ask for accommoda
tion, what the knowledge is worth that the accommodation can be
had when wanted.
The answer to these questions I have no doubt
must be placed on the asset side.
balance sheet make this entry:—
balances carried, —
On the liability side of your
loss of interest on reserve
and there is another entry which may appear
on both sides of the sheet, —
the effect of the Federal Reserve
collection system, for some of the banks will object to the loss
#
X-400
-29-
of earnings Occasioned, by remitting for checks at par to the
Federal Eeserve bank.
Others, and a constantly growing number,
will make this entry on the asset side because of the facility
which the Federal Beserve bank offers for the collection of their
own outside items*
And make this extension on the asset side:-
Every dollar of reserves carried with the Federal Reserve banks
adds to their power to maintain sound and healthy banking con
ditions, to respond to any demands which may be made upon them,
and to help our country win its fight for liberty and a safe and
lasting peace.
Then add 15) the figures, - strike a balance,
and your application for membership will follow!
Ex-Opficio Members
W . P. G. HARDING. GOVERNOR
P A U L m . WARBURG, v ic e Go v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS . SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
a n d F is c a l A g en t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 22, 1917.
Dear Mr.
The Treasury Department is retiring gold certificates in de
nominations smaller than $50., and the Treasurer of the United
States has advised the Board that he is desirous of obtaining from
time to time Federal Reserve notes in five and ten dollar de
nominations (mostly tens) for use by the cashier of the Treasury
in making ordinary payments.
An opportunity is thus afforded of
increasing the gold holdings Of the Federal reserve banks by mak
ing this exChahgd of Federal reserve notes for gold* and the Board
feels that all the Federal reserve banks should participate pro
rata, in their proper proportion.
There will be available eventual
ly about $300*006*000 of ten and twenty dollar gold certificates
which can be exchanged for Federal reserve notes ih this way.
The
Board understands that these exchanged will be made at the rate of
about $3,000*000 per week.
BO faf* one million dollars each for
districts One* two* three and fourj have been exchanged*
The
Treasurer has not yet advised the Board of the atoouht of certificates
that he will have available for exchange during the coming week, but
the Board will advise you as soon as an allotment is made your
bank.
Upon receipt of the Board’s advice a telegram as follows
should be sent to the Board:
Federal reserve bank has deposited $________________ as
collateral for issue of Federal reserve notes, please request
Comptroller of the Currency to deliver to the Treasurer of
the United States Federal reserve notes aggregating $____________
in _____________________denominations, such delivery to be
made upon deposit by Treasurer of the united states of $_________
in gold settlement fund to credit of Federal Reserve Bank of
Signed _________________________
Federal Reserve Agent.
Your bank can deposit with the Federal reserve agent coin,gold certificates or eligible commercial paper as may be most
convenient.
Very truly yours,
Governor
X-401
Ex -Officio Members
W . P. G. HARDING. GOVERNOR
P A U L M. WARBURG. VICE Go ve r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 24, 19X7.
Federal Reserve Agent,
* ,
Dear Sir:
I am oending you today
copieo of the new regulations
just issued by the Federal Reserve Board, with the approval of the
Secretary of the Treasury, regarding the shipment of coin, bullion,
and currency.
You will note that in the regulations it is stated that
action hac been taken by the Treasury Department with reference to
money to be carried by outgoing travelers.
1 am advised that these
instructions have not yet been issued in fact, and you are, therefore,
requested to hold the copies of the general regulations now mailed to
you in confidence until such time as they are released by telegraph.
It is the opinion of the Board that it will hardly be worth
while to mail these regulations to - 1 1 member banks, particularly as
they will be reprinted in the forthcoming number of the Federal Re
serve Bulletin.
You will, therefore, use your own judgment in dis
tribution, and in the event that you have need for more copieo, please
advise the Board.
Yours very truly,
Secretary
Ex-Officio Members
WILLIAM Q. McADOO
X-404
SECRETARY OF THE TREASURY
Ch a ir m a n
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W . P. G. HARDING, GOVERNOR
PA U L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
H. PARKER W ILLIS , SECRETARY
SHERMAN P . A LLE N , ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS R E P L Y TO
FEDERAL RESERVE BOARD
September 25, 1917
Dear Sir:
I urn sending you herewith, for your information, a copy of a
letter which I wrote to Mr. Wills under date of September 21st on
the subject of branches with modified and limited powers.
It is
likely' that we shall develop something along these lines to meet
the situation at Cincinnati and Pittsburgh; and I feel sure there
are other cities in the country where such branches would be entire
ly adequate and far more economical than a so-called "full fledge!"
branch.
I see no reason why a branch of this kind could not be
operated successfully for ten to twelve thousand dollars per year,
not including the cost of operating the Transit Department which
should be practically self-sustaining through the assessment of a
service charge plus a fair contribution by city banks,, if the city
and .country clearing house operations are merged with those of the
Federal Reserve Bank Transit Department.
Yours very truly
Ex-officio
W . P. 6 . HARDING. GOVERNOR
P A U L M. w a r b u r g . V ic e Go v e r n o r
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
members
WILLIAM 6 . McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
J O H N ^ K T O N W ILLIAM S
com T r o l l e r OF THE CURRENCY
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
a n d F is c a l A g en t
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 21, 1917-
Mr. D. C. Wills,
Federal Reserve Agent;
Cleveland/ Ohio*.
My dear Mr. Wills:
Referring to letter and conversation I have had
with both you and Mr. Fancher in regard to branches at Cin
cinnati and Pittsburgh,
t had a very pleasant chat with
Mr. Rowe, who was here to attend a meeting of the Advisory
Council.
As might have been expected, Mr. Rowe takes a
bread and unselfish view of the matter.
He recognizes that
it is not only the local interests of Cincinnati which should
be considered, but the interests of the entire district; and
he was quite willing to admit that if it was to cost fifty or
sixty thousand dollars to operate a full fledged branch and
he could be shown that the facilities which the community ;
needed could be provided by an agency (let us call it a
branch with limited powers) for a much lowe.r figure, he was
perfectly willing that it should be given a trial.
I told
him I felt quite sure the Board would go further than that
and say that if after six months 1 trial such an agency was
not found to answer the requirements we would concede that
x-'-c
- 2 -
a full fledged branch should be established.
As you know, however, I believe that a branch with,
say three directors including your1 agent, could perform practi
cally all necessary functions, such for example, as acting as a
collection agency :n 3 ion of the local and country clearing house,
and secondly, would be prepared to meet the currency demands under
a system of concurrent orders approved by the home bank.
Thus,
commercial paper sene to Cleveland by Monday night’s train could
be approved and the currency released throtigh the agent on Tues
day forenoon, or in case of even greater emergency the agent at
Cincinnati could describe to the home bank the character of the
paper offered to him and obtain authority by wire for rediscount
ing it.
With the safeguards which could be thrown around these
operations, I feel sure that such an arrangement could be made
safe and effective, and far less expensive than a full sized
branch.
Without going into elaborate detail; it is of course
understood that your representative, who would be the local
manager, would be a man of the caliber that you would put in
charge if you ha.d a full fledged branch.
The essential dif
ference between the braneti described and that heretofore con
sidered, rests in the most modest scale of organisation, and
directly limited powers, because the branch would be near
X-U05
- 3 -
enough to be in close communication with the home bank.
Not
only can a supply of Federal reserve notes be held in the local
subtreasury to be released by telegraphic orders from Washington,
but we might go further and provide that an emergency stock could
be held in a suitable safety deposit box under such dual or triple
control as might be approved.
If such a branch should take over the transit or clear
ing functions for Southern Ohio and Eastern Kentucky it would
be handled under such directions as your bank may give;. and if
the local banks should turn over the city and country clearing
functions to it they should, as was done in Boston, make some
direct contribution to support the facilities substituted for
the existing clearing house.
I have talked this matter over with Governor Harding
and he believes that it would be perfectly feasible to work out
such an arrangement, so as to be satisfactory not only in Cin
cinnati but at several other points, for example, Pittsburgh,
Detroit, and Birmingham.
The argument is made, for instance,
in the case of Pittsburgh and Birmingham, that being very large
pay-roll centers the banks are not justified in running down
low on reserves, and while banks in Federal reserve cities can
safely take full advantage of the reduced reserves, those in
x-Uoh
- U -
larger pay-roll cities away from the Federal reserve cities;
can not safely do so.
The more we study the subject the more clearly do we
See that there are two things in which banks in important cities
away from the Federal reserve cities
First,
ate interested:
A liberal supply of Federal
reserve notes which can be
released quickly in an emer
gency; and
Second,
In some cases at least, a col
lection agency to operate as
a local and country clearing
house.
If the officers of your bank can work out this pro
blem in a satisfactory way in Cincinnati, you will have per
formed an important service, not only at that point, but you
will be effecting a solution of the problem for a number of
other points.
There are perhaps ten or fifteen cities in the
United States which are justified in having such branches of limited power, but which are not justified in incurring the ex
pense of full fledged branches. It is not a Sufficient argument
to say that the local banks arree to furnish enough paper for re
discount to support a branch.
What we are concerned with is to
render the necessary service at a minimum of cost.
Very truly yours,
(Signed) F. A. DELANO.
Ex-Officio Members
W. P. G . HARDING, GOVERNOR
PAUL M. WARBURG, VICE G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
^H^S.HAMUN
C h a ir m a n
JOHN SKELTON WILLIAMS
Co m p t r o l l e r o f t h e c u r r e n c y
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
D IVISIO N OF R EPORTS A N D STA TISTIC S
September 25, 1917•
Dear Sir:
With reference to inquiries from certain banks as to
whether any changes are contemplated in the I9 I8 editions of
Forms 38 and F. R.
A* - 5> there are enclosed herewith copies
of the two forms with changes proposed by our Statistical Divi1
sion. We shall be under obligation, if you will have these forms
examined and advise us of further changes that might be made with
advantage.
In case you wish us to order a supply of these forms,
please state also how many copies are desired for your own and
your branches' tise for the coming year.
As soon as all replies to this letter are received we
shall send our order to the Government Printing Office*
It will
probably take from four to five weeks to havq the order filledand inasmuch as some banks have but few copies of these forms
left, your early advice in the matter will be appreciated.
In this connection, it is also sriggested that your ac
counting and auditing departments give us their early views re
garding desirable changes in the other statistical forms, especially
Form 3U.
Respectfully,
Assistant Secretary.
Federal Reserve Agent
Ex-Officio
members
W. P. 6. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
WILLIAM 6. MCADOO
v
A-DELAN0
A T « i d i « J I * C . MILLER
SECRETARY OF THE TREASURY
CHAIRMAN
***"
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRES8 REPLY TO
FEDERAL RESERVE BOARD
September 25, 1917.
My dear Mr. Burket
Referring to our conversation this morning I wish to say that the
Board has received assurances from the Federal Reserve Bank of Cleveland
that it is anxious to carry out the Board's wishes with reference to the
establishment of a branch in Pittsburgh, but it will probably be neces
sary to establish a branch also at Cincinnati, and it is felt that if
two branches are established in the fourth district, with an independent
territory assigned to each, the business of the Federal Reserve Bank of
Cleveland will be greatly curtailed, and the unity which is essential
for the conduct of
large financial operations, to a great degree de
stroyed.
In addition, the expense is a factor which must be considered.
Our estimates are that it will cost not less than $50,000 a year to op
erate a branch. For two brunches this would amount to $100,000, which
would be a very severe drain upon the income of the Federal Reserve Bank
of Cleveland. The Board recognizes however, and we believe that the
Federal Reserve Bank of Cleveland agrees, that it is important that the
banks of Pittsburgh, - a great industrial center and one of vital interest
to the Government during war times especially - should be able to conduct
their business with absolute assurance of safety.
The Board has now under consideration a tentative plan which it
desires to discuss a little later with the directors of the Federal Re
serve Bank at Cleveland, for the establishment of a branch at Pittsburgh
to be operated under bylaws which will not provide for the division of
th® fourth Federal reserve district into any specific territory for each
branch or for the carrying of reserves at any place other than the Federal
Reserve Bank of Cleveland, The plan is to give the branch at Pittsburgh
full powers, except that of making daily rediscounts; to carry an adequate
supply of Federal reserve notes in Pittsburgh, in the clearing house vaults
or in son® way satisfactory to the banks of Pittsburgh and to the Federal
Reserve Bank of Cleveland, and to provide that in cases of emergency dis
counts may be made in Pittsburgh so that these notes may be released im
mediately to the banks without risking any delays in transportation. At
the same time it is suggested that the branch bank operate a transit de
partment and that all banks in Pittsburgh as well a3 those in other portions
of the district nay send their checks for collection to this branch. For
instance, banks in Youngstown, could send to the headquarters bank in
Cleveland such checks as would naturally go to Cleveland for collection
and could send to Pittsburgh the checks which would naturally go to that
point. Items in process of collection are not available as reserves, so it
X-408*
nakes no difference either to the banks or to the Federal Reserve Bank
where the float is carried, but as soon as the items are collected they
would be placed to the credit of the member banks and the headquarters
bank at Cleveland advised. The Cleveland bank could require the Pitts
burgh branch to make remittances from time to time of the balances which
have been actually collected.
It seems to the Board that the operation
of a branch along these lines would be a comparatively simple matter and
the expense involved would not be nearly so great as would be the case if
we attempted to assign banks to a separate territory and to give the branch
the privilege of making daily rediscounts, which would require a more elab
orate machinery.
At the same time, the benefits to Pittsburgh will be just
as great, for the.banks would feel secure in knowing that they had within
immediate reach in case of need a supply of notes equal, at least, to the
amount of reserves which they are carrying in Cleveland, and the associated
banks of Pittsburgh would no doubt be able to dispense with many clerks
now employed in their transit departments as they could send most of their
items to the branch bank.
In addition, they could make their own local
transactions by transfers 'of credits on the books of the branch bank. The
Board would suggest however, in view of the saving that would be made by
the associated banks of Pittsburgh, that they consider contributing for the
first year, or two, until the branch was shown to be self-sustaining, say,
50$ of their saving in clerk hire to the support of the branch bank, as
suming that the associated banks of Pittsburgh would save $30,000 a year
by conducting the bulk of their transit operations through the branch bank,
could they not afford to contribute one-half of this, or say, $15,000 a
year to the expense account of the branch*
As I told you this morning, I can aggange to be in Pittsburgh on
Friday, the 5th of October, and it is possible Mr. Delano, who is my col
league on the committee which is considering the establishment of branches,
will be able to meet me there on that date.
If agreeable, we would like
very much to have a conference with the banking interests of Pittsburgh at
that time, with the view of talking the situation over with them and of
ascertaining just what arrangements can be made for the proper location
and management of a branch. We would of course, expect to ask Mr. Wills,
Federal Reserve agent at Cleveland, to meet us there at the same time.
Please let me know if it would be agreeable to the Pittsburgh bankers to
discuss these matters with Mr. Delano and myself on the date indicated.
Very truly yours,
(Signed) W. P. G. Harding.
Hon. James Francis Burke,
Pittsburgh, Pa.
Governor.
Ex -Officio Mi m
W . P . 6 . HARDING, GOVERNOR
P A U L M. WARBURG, VICK GOVERNOR
FREDERIC A. DELANO
iim
W ILLIAM 6 . McADOO
SECRETARY O r THK TREASURY
Chairman
JOHN SKELTON W ILLIAM S
Comptroller
FEDERAL RESERVE BOARD
op the currency
WASHINGTON
H. PARKER W IL L IS . SECRETARY
SHERMAN P. ALLE N . ASET. SECRETARY
AND FISCAL AOKNT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
September 26, 1917i
Dear Sir:
I sent you yesterday a copy of a ietter which
I had written to Mr. Wills, Chairman of the Board of the
Federal Reserve Bank of Cleveland, in respect to the estab
lishment of branches with limited powers.
Governor Harding has written a letter to Mr^ James
Francis Burke of Pittsburgh, who represents the clearing
house banks of that city, in which he states the plan in his
own words.
Mr,. Burke has been at Washington several times to
urge the establishment of a branch at Pittsburgh, but has ex
pressed himself as entirely agreeable to the plan outlined by
Governor Harding.
Yours very truly.
Chairman, Committee on Clearing.
Inclosure
X-U15.
Washington, D C.
October 1, 1917*
M E M O R A N D A .
1.
Arrange for the design and inscription to appear on the War
Savings Certificate large stamps. Four different seasonal stamps
in four colors.
2
Arrange for the design and inscription to appear upon the War
Savings Certificate snail stamps, only one denomination, of 250*
3.
Arrange for the design and description of the series of 1918
certificate with spaces for 20 of the large adhesive stamps,de
scribed in (l).
4
Arrange for the design and inscription to appear on a small
savings card, capable of taking 16 of the savings stamps of the
25^ denomination described in (2).
5.
Arrange for the design and inscription to appear on.an envelope
which will take either the snail savings card (for the 250 stamps)
or the regular War Savings Certificate described in (l).
This
envelope should be of neat design, but should carry upon its face
or on the back the simple and essential rules to be followed by
every individual investor in the savings fund.
6.
Arrange to print enough of 1, 2, 3, 4, and 5 before December
first, 1917, to have 20 million separate pieces of each distributed
in different post offices all over the United States approximately
m proportion to population.
The monthly quantity required there*
after will probably not exceed one half the above quantity.
October 2, 1917-
SUBJECT: Eight of the Federal Reserve
Board to grant to national bank ^ m
N e w Tork permission to act as trustee ,
executor, administrator, and registrar
of stocks and bonds.
M y dear Governor*
The Federal Reserve Board has heretofore declined
to grant to national bdnks in New Ydrk permission to exer
cise any of the powers enumerated in Section 11 (k) of the
Federal Reserve Act except the right to act as registrar of
stocks and bonds.
Section 11 (k) authorizes the Federal Reserve
Board "To grant by special peimit to national banks ap
plying therefor, when not in contravention of State or
local law, the right to act as trustee, executor, ad
ministrator, or registrar of stocks and bands under
such rules and regulations as the said board may pre
scribe".
In acting upon applications filed under authority
of this section, the policy of the Board has been to refuse
the application of any bank which is located m a state the
laws of which expressly or b y necessary implication prohibit
a national bank from exercising any of the powers enumerated
in the statute.
* Section 223 of the New York Banking Laws provides
as follows:
"No corporation other than a trust company organ
ized under the laws of this State shall have or exer
cise m tnis State the power to receive deposits of
money, securities or other personal property from any
person or corporation m trust, or have or exercise in
this State any of the powers specified in subdivisions
one, four, five, six, seven and eight of section one
hundred eighty-five of this article (” iz% to act as
fiscal or transfer agent, as trustee under any corpo
rate mortgage, as trustee or agent for married women,
as guardian, receiver or trustee of the estate of any
"minor and as depositary of any moneys paid into
court, to act under court appointment as trustee
guardian, receiver or committee of the estate of
a lunatic, etc , or as receiver of any person in
insolvency or as executor or trustee under a will
or as administrator, or to act as trustee of any
estate), nor have or maintain an office in this
state for the transaction of, or transact, direct
l y or indirectly, any such or similar business,
except ohat a federal reserve bank m a y exercise
the povers conferred by subdivision one of such
section (fiscal or transfer agent) if authorized
so to do by the laws of the United States and any
domestic corporation legally exercising any of the
povers conferred b y such subdivision at the time
this act takes effect m a y continue to exercise such
powers, and a trust company incorporated in another
state may be appointed and may accept appointment
and may act as executor of, or trustee under, the
last will and t ?stament of any deceased person in
this state, provided trust companies of this state
are permitted to act aS such executor or trustee m
the state where such foreign corporation has his
domicile * * + ■ * * * * * * «*
It is because of this statute that the Federal
Reserve Board nns declined to g r a m to national banks the
right to exercise any of the powers specified in Section
11 (k) except the power to act as registrar of stocks and
bonds.
This action of the Board was predicated upon the
assumption (l) that Section 11 (k) vested in the States
the right to determine b y appropriate legislation whether
or not national banks should exercise such powers, and (2)
that it was the intention of the legislature of Ne* York
to prohibit all corporations (including national banks)
other than trust companies organized under the laws of New
York, from exercising such po.ers,
At the time that the Board adopted the policy
above referred to the language of Section 11 (k) had not
been construed b y the courts. Since then it has been con
strued b y the Supreme Courts of Illinois and Michigan and
b y the United States Supreme Court.
In the case of Grant
Fellovs, Attorney General, vs. the First National Bank of
Bay City, Michigan, the S ^ r e m e Court of Michigan held that
since no statute of Michigan prohibited national banks from
exercising trust powers the laws of that State would not be
contravened by the exercise b y a national bank of such pow
ers but tnat the Act of Congress giving national banks this
right was unconstitutional and void. This case was appealed
-3-
to the United States Supreme Court which held that the
Michigan Court had erred in holding that Section 11 (k)
was unconstltutional, and the judgment of the lower
court was reversed*
In discussing the opinion of the Michigan
Supreme Court the United States Supreme Court,through
Mr. Chief Justice White, said*
"In view of the express ruling that the enjoy
ment of the powers m question h y the national hank
would not he m contravention of the state law, it
follows that the reference of the court helow to the
state authority over the particular subjects which
tne statute deals with must have proceed
erroneous assumption that because a particular xunction was subject to be regulated by the state law,
therefore Congress was without power to give a na
tional bank the right to carry on such functions.
But if this be what the statement signifies, the
conflict between it and the rule settled in McCul
loch v. Maryland and Osborn y. Bank, is. manifest,
What those cases established was that although a
business was of a private nature and subject to
state regtilaticn, if it was of such a character as
to cause it to be incidental to the successful dis
charge by a bank chartered by Congress of its pub
lic functions, it was competent for Congress to give
the bank the power to exercise such private business
m cooperation with or as part of its public author
ity. Manifestly this excluded tne power of the State
m such case, although it might possess in a general
sense authority to regulate such business, to use
that authority to prohibit such business frcn being
united by Congress with the banking function, since
to do so would be but the exertion of state authority
to prohibit Congress from exercising a power which un
der the Constitution it had a right to exercise. From
this it must also follow that even although a business
be of such a character that it is not inherently con
sidered susceptible of being included by Congress in
the powers conferred on national banks, that rule
would cease to apply if b y stats law state banking
corporations, trust companies, or others which b y rea
son of their business are rivals or quasi-rivals of
national banks are permitted to carry on such business
This must be since the state m a y not by legislation
create a condition as to a partlcular business which
would bring about actual or potential competition with
the business of national banks and at the same tine
-u -
■
"deny the power of Congress to meet such created
condition by legislation appropriate to avoid the ■
injury which otherwise would he suffered by the
national agency.
Of course as the general sub■ ject of regulating the character of business just
referred to is peculiarly -within state administra
tive control, state regulations for the conduct of
such business if not discriminator.y or so unreason
able as to justify the conclusion that they necessa
rily would so operate, would be controlling upon
banZrs chartered by Congress -.Then they came in virtue
of authority conferred upon them by Congress to exert such particular powers. Aiid these considera
tions clearly were in the legislative mind when it
enacted the statute in guest ion. This result would
seem to be plain when it is observed (a) that the
statute authorizes the exertion of the particular
functions by national banks when not in cohtraven7
tion of the state law, that is, where the right to
perf onh them is expressly given-by the state law or
what is equivalent is deducibla from the state law
because that law has given the functions to state
banks or corporations vrtiosa business in a greater or
less degree rivals that of national banks, thus en
gendering from the state law itself an implication
of authority in Congress to do as to national banks
that which the state law has done as to other corpora
tions; and (b) that the statute subjects the right to
exert the particular functions which it confers on
national banks to the administrative authority of the
Reserve Board giving besides to that Board power to
adopt rules regulating the exercise of the functions
conferred, thus affording the means of coordinating
the functions when permitted*to be discharged by na
tional banks with the reasonable and non-discrin:inating provisions of state law regulating their exercise
as to state corporations,- the whole to the end that
harmony and the concordant exercise of the national
and state power might result".
It therefore, becomes necessary for the Federal
Reserve Board to reconsider, in the light of this decision
of the United States Supreme Court the question whether
national banks in New York should be granted the powers
specified in Section 11 (k).
It will be observed that while the Court recog
nizes the right of a State to regulate the conduct of trust
business, it holds that such regulations must not be "dis
criminatory or so unreasonable as to justify tbe conclusion
that they necessarily would so operate".
£811
-5-
Upon reconsideration of the question of the
right of the Federal Reserve Board to .grant permits to
national hanks in New York to exercise trust powers,
the Board must not, in view of this decision, assume
that Section 11 (k) vests in the States the unqualified
right to determine by appropriate legislation whether
or not a national hank may exercise such powers. The
power of the State to enact such legislation is clearly
subject under the opinion of the United States Supreme
Court, to the qualification that such legislation must
not he discriminatory against national hanks. The Court
expressly holds that a "state m a y not hy legislation
create a Condition as to a particular business which would
bring about actual or potential competition with the busi
ness of national hanks and at the same time deny the power
of Congress to meet such created condition h y legislation
appropriate to avoid the injury which otherwise would he
suffered hy the national agency."
It is manifest, therefore, that in determining
whether the exercise of trust powers hy national hanks will
contravene State laws, the Board must consider vriiether the
State law is one which discriminates against national hanks.
The United States Supreme Court has in terms pre
scribed the rule by'which such laws must he tested- In dis
cussing Section 11 (k) the Court says "the statute authorizes the exertion of the par
ticular functions hy national hanks when not in con
.
traventicn of the state law, that is, where the right
to perform them is expressly given hy the state law,
or what is equivalent is deducible from the state
law because that law has given the functions to state
banks or corporations whose business in a greater or
less degree rivals that of national hanks, thus en
gendering from the state law itself an implication
of authority in Congress to do as to national hanks
that which the state law has done as to other corpora
. tions".
Applying this test to Section 223 of the New York
Banking Laws it is apparent that the legislature of New York
has granted to trust companies organized under the laws of
New York the right to exercise these powers and it is only
necessary for the Board to consider whether such trust com
panies come into actual or potential competition with nation
al hanks.
If the 3oard concludes that such companies are
"rivals or quasi-rivals of national banks", it must interpret
Section 223 of the New York Banking Laws as permitting na
tional hanks to exercise these powers.
In other words, it
P R -f
-6 must construe that part of Section 223 which provides
that "no corporation other than a trust company organlzed under the laws of this state shall have or exer
cise in this state the power to receive deposits of
money, securities or other personal property from any
person or corporation in trust etc 11 as relating to
corporations other than national hanks
In view oi the fact that the records before
the Board are sufficient to show that trust companies
organized under the laws of New York compete with na
tional banks m comrercial deposits and loans, and m
many otner activities engaged m by national banks, it
is respectfully recommended that no application of a
national bank located and doing business m New York
for permission to exercise the power of trustee, exec
utor or administrator be refused by the Board on the
ground that the exercise of such powers will contravene
the la as of New York
Respectfully,
AT C
Elliott,
Counsel
Hon W P G
Harding,
G o v e r n o r
E X -O FFIC IO M EMBERS
•
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. P. 6. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
FEDERAL RESERVE BOARD
AND FISCAL AGENT
WASHINGTON
ADDRESS R E P L Y TO
X 419
FEDERAL RESERVE BOARD
D IVISIO N OF A U D IT A N D EX AM IN ATIO N
October 5, 1917.
Dear Sir:
As you are aware, the Federal Reserve Board
has lately authorized sundry shipments of gold into
Mexico, acting in each case upon a specific application
for a given amount, the exportation to occur within
a designated period.
In addition, however, to the
action taken, I aiL instructed to say that the Board is
willing to consider applications for the exportation
of the equivalent in gold of any gold that nay be im
ported into the United States during the same period,
in ore or unrefined products.
Yours very truly,
Secretary.
w. p. g/hardino. krauwi
EX'OrnciO MEMBSNG
PAWL M. WARBURG, VlC* GOVSRMOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES 8. HAMLIN
WILLIAM G. McADOO
SECRETARY o r THE TREMEtf
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER Of TNt CURRENCY ,
CCHCDAI
OCT C C D X / C P A A D H
rC,UC,rX/\L n C O C K V C. D U A r X U
•
h . PARKERw il l is , stcaitart
SHERMAN P. ALLEN. AMT.SRCARTARY
X U2tS°nscALA<MT
W ASH ING TO N
’
*
AODIMM*REPLYTO
FEDERAL RESERVE BOARD
October 5> 19*7*
Dear Sirs :
The Board wishes again to bring to the attention of the Fed
eral Reserve banks the desirability of their arranging the propor
tions of gold and commercial paper held by the Federal Reserve
agent in such a way as to keep the lawful money reserve against
deposit liabilities and the gold reserve against Federal Reserve
notes approximately, equal, and your cooperation in carrying out
.
this* policy is earnestly requested. Details appear to be simple
if Federal Reserve banks will compute the total reserve against net
deposit and Federal Reserve note liabilities combined, and then make
the necessary adjustment. The figures as now given by the various
banks are entirely misleading and are calculated to produce a harm
ful impression; as an illustration, the total reserves arainst net .
deposit and Federal Reserve note liabilities combined for all the
banks on September 28th were *77*l£» the reserve against net depos
i t s was
while the gold reserve against Federal Reserve notes •
in actual circulation was 81. l£. To illustrate the point more clear
ly, reference is made to the statement of the Federal Reserve Bank of
Richmond of September 28th, which showed reserve against net deposits
of 83-2$; against Federal Reserve notes 57,• > while its reserve
against the combined liabilities was 73*l‘
/». The Federal Reserve Bank
of Atlanta on bhe same date showed a reserve against deposits of UU.5^;
against Federal Reserve notes $4-5’
/», and its reserve a ainst the com
bined liabilities was 73-9PThe public, which does not see the combined reserve percentages,
but only the separate reserve percentages a-ainst each it 3.', is not
properly informed by such statements. The true index to the banks’
position is the total reserve against combined deposit and note liabil
ities, and the Board believes that the two separate reserve percentages
should be equalized as nearly as possible.
.
Very trvl**-".yours,
Governor.
W. P. 6 . HARDING, GOVERNOR
PAUL m . War b u r g , vice Governor
FREDERIC A. DELANO
ADOLPH C, MILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
WILLIAM 0. McADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS, S E C R E T A R Y
^ —SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
A N D F IS C A L A C E N T
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October 10, 1917-
Dear Sir:
The Treasury Department is retiring gold certificates
in denominations smaller than $50, and the Treasurer of the United
States has advised the 3oard that he is desirous of obtaining from
time to time Federal Reserve notes in five, ten, and twenty dollar
denominations, for use by the cashier of the Treasury in making
ordinary payments.
An opportunity is thus afforded of increasing
the gold holdings of the Federal Reserve hanks by making this ex
change of Federal Reserve notes for gold, and the Board feels that
all the Federal Reserve banks should participate in their proper
proportion.
There vd.ll be available eventually about $3 0 0 ,0 0 0 , 0 0 0
of ten and twenty dollar gold certificates which can be exchanged
for Federal Reserve notes in this way.
The Board understands that
these exchanges will now be made at the rate of $6,000,000 per weak,
or $2,000,000 every other day, 10% of the amount in notes of the
five dollar denomination,
50%
in tens, and U-0% in twenties.
If your bank is willing to take a part in these exchanges,
please telegraph the Board to that effect and the Board will advise
you in like manner when and as the Treasurer is ready to make ex
changes with ytur bank.
Upon receipt of such advice f ran the
Board, a telegram should be sent to it as follows:
X-h 25
-2 -
Federal reserve 'bank has deposited $____________ _
as collateral for issue of Federal reserve notes. Please
request Comptroller of the Currency to deliver to the
Treasurer of the United States Federal reserve notes aggre
gating $____________________ , $_________________ _in fives,
$_____________________ in tens and $
_______________ _
in twenties, such delivery to be made upon deposit by
Treasurer of the United States of $
__________________
in gold settlement fund to credit of Federal Reserve Bank of
Federal Reserve Agent.
Tour bank can deposit with the Federal reserve agent
coin, gold certificates or eligible commercial paper as may be
most convenient,
Very truly yours,
Governor.
Governor, Federal Reserve Bank,
Ex-Officio Members
W. P. 6. HARDING. G O V E R N O R
PAUL M. Wa rb u rg , V i c e G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
Charles s . ham lin
WILLIAM 6. McADOO
SECRETAR Y OF TH E TR EASU R Y
x-426
Chairman
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
CO M P TR O LLER O F T H E C U R R E N C Y
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN, ASST. S E C R E T A R Y
A N D F IS C A L A G E N T
WASHINGTON
October 10,
I
9I /
ADDRESS REPLY TO
*
FEDERAL RESERVE BOARD
Dear Sir:
In order to facilitate the redemptipn of unfit currency
shipped to the Treasurer of the United States by various member and non
member banks, and in order to provide a means for concent rating the gold
supply by eliminating as far as possible the issue of gold certificates
in exchange for unfit currency presented for redemption, the Treasury
Department and the Federal Reserve Board have agreed upon the following .
plan:
(1) The Treasurer, upon receipt of unfit currency for
redemption, will place to the credit of the appropriate Federal reserve
bank in the gold settlement fund an equivalent amount of gold or gold
certificates and will advise the Federal reserve bank of the amount of
that credit stating for whose account the deposit is made, and will also
advise the member or nonnamber bank for which:the redemption is made to
that effect. In certain cases the Treasurer, instead of making the credit
.through the gold settlement fund,, cay ship currency direct to the Federal
reserve bank for the credit of the bank desiring the redemption.
.
(2) The Federal reserve bank shall advise the member or
nonmember bank for which the redemption is made that its account has been
.v edited with the appropriate amount and that it stands subject to its
order. If the creditor bank desires currency and not merely a book credit,
the Federal reserve bank will make the shipment at the expense of the
creditor bank, deducting from the amount of the shipment all charges
involved, in the same manner now employed by the Treasury Department in
making such shipments.
The Board understands that this plan is not intended to, and
does not revoke or supersede existing Treasury regulations relating to the
redemption of unfit currency; but in view of the fact that it will tend to
shorten or even eliminate many shipments of currency, it is earnestly
hoped that all banks will cooperate in its development., The Treasury
Department will make redemptions in the manner outlined herein unless a bank
presenting currency for redemption specifically states that it desires
the shipment to be made direct from the Treasury Department in the same
manner as at present.
•
co
No change can be made in the matter of deposits by national
banks for reimbursement of their 5f° redemption fund unless and until the
Treasury Department decides to issue new regulations on that subject.
-
"Very truly yours,
•
C-overror.
Ex -Off ic io m em b e rs
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. McADOO
SECRETAR Y OF TH E TREASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
CO M PTR OLLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. ASST. S E C R E T A R Y
and
WASHINGTON
F is c a l A c e n t
ADDRESS REPLY TO
X-423.
Your letter of
in reference to
foreign exchange addressed to the Secretary of the Treasury,
has been referred to this office for reply*
Foreign exchange transactions are affected just
now by several complications growing Out of the war. Trans
actions with France and England, with which countries we are
associated in the war, must be taken into account, so that
it is no longer possible to handle the foreign exchange
situation from a purely American standpoint. The embargoes
ih force in Various countries and in the United States
complicate the matter still further, and in view of the
lirbitatioiis which have been platted upon exportations of
gold from this country by the President’s order Of September
7th, it is difficult to see hoW the Federal Reserve Board can
do anything at this time to ease the situation in foreign
exchange.
.
fed eral reserve board
Very truly yours,
Governor*
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
WILLIAM G. McADOO
.
> secretary of th e Treasury
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P . ALLEN, A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
and
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
X-429 *
Your letter of
in reference to
foreign exchange addressed to the Secretary of the
treasury/ has Seen irefetred to this office for replyt
Foreign exchange transactions are affected
just now by several complications growing out of the
war. Transactions with France and England, with which
countries we are associated in the war, must be taken
into account, so that it is no longer possible to
handle the foreign exchange situation from a purely
American standpoint. The embargoes in force in various
countries and in the United States complicate the matter
still further, and in view of the limitations which have
been placed upon exportations of gold from this country
by the President’s order of September 7th, it ie
difficult to see hop the Federal Beserve Board can do
anything at this time to ease the situation in foreign
exchange.
Your letter does not state just how the
present situation affects you, and the Board would be
pleased to have you state in specific terms any complaint
that you wish to make.
F is c a l a g e n t
Very truly yours,
Governor,
W. P. G. HARDING, GOVERNOR .
PAUL m . w ar b ur g , vice Governor
Ex-Officio Members
ttE D & U C A. DELANO
WILLIAM 6. McADOO
4tTO¥P*H-e. MILLER
CHARLES S. HAMLIN
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
CO M PTR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P . ALLEN, A S S T . S E C R E T A R Y
and
F is c a l a g e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October 15, 1917.
Dear Sir:
The Board is sending you a number of printed circulars
which contain a statement by the President of the United States,
upon the opportunity which is now afforded the nonmember state
banks and trust companies to render distinct public service by
becoming members of the Federal Reserve System.
You were requested a few' days ago to prepare a list of
the state banks and trust companies in your district which are
eligible for membership and the Board asks now that you have
these circulars addressed properly to each institution in your
district which appears prima facie to be eligible.
V ery t r u l y you rs.
Governor.
Ex-Officio
W. P. 6. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
members
WILLIAM 6. McADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
CO M PTR OLLER O F T H E C U R R E N C Y
C H A R L ^ S ^ Iftg L lN
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October 16, 1917.
Dear Sir:
Attention is called to tho notice in the
front of tho Federal FL>3«rve Bulletin for October as
to tho publication of a second edition of the Ind^xDigest of tho Federal Reserve Act and Amendments.
As it is nocessary to know about how many copies will
be desired in each district before a complete order
for printing is given, you are requested to forward
to the Board immediately all orders for the book as
iast as received by you.
Announcement will shortly be made ad to
when the publication will be ready for distribution.
Very t r u l y yours,
Secretary
W. P. 6. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
Ex-Officio Member#
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
CHARLES S. HAMLIN
C H A IR M A N
JOHN SKELTON WILLIAMS
CO M P TR O LLER O F T H E C U R R E N C Y
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
and
Fiscal Agent
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October l6, 1917
Dear Sir
The Federal Reserve Board is about to begin the preparation of
its annual report for the year 1917> to which reports from the Federal
Reserve Agents will be added as a supplement.
It is desirable that
the reports of the Federal Reserve Agents bfe received in Washington
not later than December 20, aslminot alterations or additions covering
developments or operations for the last ten days of the year, together
with such changes in statistics as may be necessary, may be made either
by mail or telegraph a.t any time not later than January 7-
It is
preferable that no entirely new matter be sent in after December 20,
and that changes and additions be transmitted by mail rather than by
telegraph wherever practicable*
It is believed that this end can be
accomplished by providing in the first draft of the report dummy or
skeleton tables which will he completed when actual figures for the full
operations of the year are available.
for
1916
The general lines of the reports
are satisfactory, although in seme individual cases special
suggestions will he made with the view of obtaining a standardization
and harmony to a greater degree than was practicable in the reports of
last year when the plan of uniform treatment was first attempted*
X-U3*+
-
z-
It will "be necessary however to add in the reports for 1917, a
new section relating to the operation of the hanks as fiscal agents of
the Government, which will treat of their functions in connection with
the flotation of Treasury certificates of indebtedness, transfers for
Treasury account, and of their organization for receiving subscriptions
in payment for the United States Liberty Loans.
It is desired that
the treatment of this subject be careful, moderate, and uniform in all
the districts.
The following outline of points to be covered in this
section is suggested:
(a)
Hist ory of Liberty Loan organisation; salient dates and
names, for record purposes;
.
(b)
Compilations showing total amount of bonds subscribed for
in district; total number of subscribers; and as far as
practicable; the distribution among individuals, corpora
tions, momoer and nonmember banks;
(c)
Amount of Treasury certificates of indebtedness which
were subscribed for through the Federal Reserve Bank;
(d)
Extent of Federal Reserve Bank1s ownership of Treasury
certificates and Government bonds; and loans made by
Federal Reserve Banks upon United States bonds or Treas
ury certificates as collateral;
(e)
.
(f)
Statement of expenditures in the conduct of Liberty Loan
operations; number of new employes engaged in the bond
departments; salaries, and the extent of the bank*s re
imbursement by the Treasury Department for the outlay.
General discussion of conditions growing out of the loans
and the effect upon the banking institutions, industries,
and commerce of the district. Exceptional care should
be taken in writing this part of the report. No special
praise or thanks should be extended to particular
X -!^- 3 individuals mentioned by name, nor should there be included in
the report any suggestions relating to legislation or changes
in administratioiio These may of course be made by letter to
the Board, but should not be incorporated in the material for
publication. The treatment throughout should be objective and
historical, and accompanied by as little expression of opinion
as possible.
It is also suggested that there be another new section dealing
with the attitude of state banks and trust companies.
In this section
there should be a reference to the number and character of institutions
in your district eligible for membership! the number which have become
members or which have applied for membership; a discussion of the signs
of interest in the matter of membership which have been manifested by
others, with some analysis of your local situation as it may be affected
by the ultimate position taken by the banks which are remaining out of
the system.
Special attention may be directed to the question of earnings,
showing how they have been affected by the unusual activities of the
year, together with a forecast of the future reserve position and earn
*
ing power of your bank*
Very truly yours,
Governor
e x -o f f ic io
Mem bers
W. P. G . HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
sec retary of the
Treasu ry
c h a ir m a n
JOHN SKELTON WILLIAMS
Co m p t r o l l e r o f t h e C u r r e n c y
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
and
WASHINGTON
f is c a l
Agent
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
•
October 17, 1917•
x L36
Dear Sir:
Under separate cover there are forwarded to you a few copies
of form 10U for reporting transactions under the second Liberty Loan.
The regular supply will go forward tomorrow or on Friday.
.
It is requested that you continue to report all transactions under
the first Liberty Loan on form 101. This will necessitate two daily re
ports to the Board for the present, but it is thought that much less
trouble will be experienced if all transactions tinder the two issues are
kept separate from each other.
With regard to the second subdivision on form IOU for reporting U, S.
Certificate of Indebtedness transactions it is requested that all balances
under the respective accounts now reported on form 101 be transferred to
the new form 104 and all operations under certificates now outstanding,
as well as under all future certificate allcsnents, be reported on the
new f orm.
In this connection may I ask that liability item 5 "U, S, Treasury
Certificates of Indebtedness - Allotted" show total amounts of Certifi
cates allotted less amounts redeemed by the U, S. Treasurer and that cor
responding asset items ITos, 5 and 6 show amounts deposited under the sev
eral issues of Certificates of Indebtedness still outstanding and not yet
redeemed. Accordingly, sum of asset items 5 and 6 should equal sum of
liability items 5 and 6, Whenever an issue is redeemed you will reduce
asset item 5 by the total receipts deposited from the respective issue; .
similarly, in case of such redemption, amounts of liability items 5 and 6
scould be reduced by the amounts of the allotment and interest on the
respective issue.
Reports on the new form (10L) should be made out and forwarded be
ginning with Monday, October 22.
Respectfully,
Acting Assistant Secretary.
Federal Reserve Agent,
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -O ff ic io m em b e rs
WILLIAM G. MCADOO
SECRETARY OF THE TREASURY
C h a ir m a n
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
WASHINGTON
H . PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
A D D R E SS R E P L Y TO
FEDERAL RESERVE BOARD
X-U37-
October 17, 1917-
Dear S i r :
(
A p p lic a n ts f b r p erm issio n to export coin, b u llio n
and currency, who wish to make shipment b y m a il, should
e x p l i c i t l y so sta te in th e ir a p p lic a t io n s ,
in order th at
p roper n o tic e may be issu e d to the Postm aster lo c a te d
a t the p o in t at which shipment w i l l be e ffe cte d .
Very r e s p e c t fu lly ,
Se c re ta ry .
2827
W.
B x - o m e ie members
P . O . H A R D IN G , G O V IR N O R
P A U L M . W A R B U R G . V l C I G O VIR N O R
F R E D E R IC A . D E L A N O
W I L L IA M « . N C A D O O
■
S lC R E T A B Y O P THB T B E M O R Y
AD O LPH
C . M IL L E R
C H A R L E S S . H A M L IN
J O H N S K E L T O N W IL L IA M S
COMPTROLLBR O P THB CURRENCY
FEDERAL RESERVE BOARD
WASHINGJCJgg
H . P A R K E R W I L L I S , SECRETARY
SHERM /kN P . A L L E N . A R IT . SECRETARY
AND n i C A L A S E N T
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October 5, 1917«
My dear Governor:
You have asked that consideration be given
to the following questions:
(l)
Whetner a Federal Reserve bank acting as
fiscal agent for the Government is subject to the
general supervision of the Federal Reserve Board.
(2)
Should its expenses as fiscal agent be shown ^
in reports to the Board as part of the expenses of the
bank, and should sums paid to the Federal Reserve bank
by the Government for the performance of such services
be included in its reports as part of the earriings of
the Federal.reserve bank*
*
Section 15 of the Federal'Reserve Act pro
vides in part that Federal reserve banks .
‘'when required by the Secretary of the Treas
ury; shall act as fiscal agents of the United States".
,
in part
Section
provides/that the Federal
Iteserve Beard shall be authorized and empowered # "(a) To examine at its discretion the ac
counts, bocks and affairs of eqch Federal reserve
bank and of each member bank and to require such *
statements and reports as it may deem necessary".
*********
(j)
To exercise general supervision over
s&iil Federal reserve banks".
.
in acting as fiscal agent for the Government
a Federal reserve bank is performing one of the func
tions for which it was created; and while it
acting
in the capacity of agent for the Government and as such
is subject to the directions of the Secretary of the
Treasury, it is, nevertheless, under the general super
vision of the Federal Reserve Board.
When the Secretary selects a Federal reserve ■
bank as fiscal agent it is,, of course, within his prov
ince to specify the duties that the bank will be called.
upon to perform and the powers it will he expected to
■
/
X-438
'
■
-2 .
exercise an behalf of the United States Government
in the conduct.of its fiscal a ffa irs.
-
?heo the bank undertakes.- however, to per
form these duties and to exercise those powers, it is
subject to the supervision of the Board, and while
the Board*s regulations should be designed to carry.
out, and not' to defeat, the purposes of the Act, .and,’
should, 'therefore, not restrict the proper performance,
of any duties that the Government through -the Sene'retary may require, the Board should by regulation im
pose' any safeguards it deems necessary and proper
.
which are consistent with the purposes of the Act*
.
.
■*
In this view it would clearly have the right
to require any reports It may deem necessary showing
the activities of the bank as fiscal agent, it may iuad
should require an examination pf the fiscal agent's
books, arid m y approve or disapprove salaries of em
ployees e*iga£ed in this particular work of the bank in
the same manner that i:i approves or disapproves the
salaries o f .othor 'employees.
'
i
Siik-.e i t " i :s conceivable that the estate of a
.Federal* reserve bank might become lia b le on account of
seme ille g a l transaction engaged in as fiscal agent, it
is, of course, necessary that the Board should know
that the ssr/ices rendered as fisc al agent are being
performed in strict accordance with the provisions of
law*
"■ ■
,.
■.
.
'
'
in the opinion of this office it would also'l
be* entirely consistsnt with the purposes of the Adt for
the Board to require such banks to show a ll expenses
jfopufrad. in acting as fiscal agent
fihsiwcf the eX.pji&3 es' of the bank, and to show all. sums paid by the
Government for the performance ..of ..such services as part
of the earnings of such banks.
.
!..J
'
.
.
•
Respectfully,.
(Signed)
.
M. C. ELLIOTT.
Counsel
Hon. W. F* G. Harding,
. . Gover nor ,
Ex -O ffic io m em b e rs
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
.
WILLIAM a. MCADOO
SECRETARY OF THE TREASURY
.
CHAIRMAN
.
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
^
^ A N D F IS C A L A C E N T
X-440
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October 19, 1917.
(CONFIDENTIAL)
Dear Sir:
Enquiry has been made concerning the desirability of accept
ance by Federal Reserve Banks of Russian bonds.
In response to
such enquiries, substantially the following answer is being giv
en to Federal Reserve Banks:
Concerning the acceptance of Russian bonds as collateral for
special government deposits, the view here is that it would- not
be desirable to discriminate against these bonds as such and
that Federal Reserve Banks should deal with the natter using
their discretion and protecting-themselves by adopting the fol
lowing policy.
As to all securities, except United States Gov
ernment bonds, no one bank or trust company should be permitted
to secure its deposits by more than a reasonable amount of any
one security,
particularly in the case of securities which are
not selling on a conservative interest basis, the object being
to have the collateral pledged by each depositary well diversefied.
This will enable the Federal Reserve Banks to deal with
the problem cautiously.
This is intended for your confidential use.
Yours very truly,
Governor.
.
W . P . 9. HARDIMO, OoVIIMOR
PAU L M. WARBURO, VtCR SOYIRROR
PBKOKRIC A. ORLAMO
ADOLPH C. HILLER
.
CHARLES S. HAMLIN
Bx-onncio m im u m
WILLIAM 0. McADOO
secretary
or t m b
treasu ry
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER O P TH E CURRENCY
WASHINGTON
H . PARKER W ILLIS. SECRETARY
SHKRMAN P. ALLEN. AMT. SECRETARY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October 19, 19*7•
Dear Sir:
.
With the view of ascertaining in some detail the
expenses of the Federal Reserve Banks and branches caused
by the Fiscal Agent operations you are requested to report
for the month of October and each ; onth thereafter, amounts
of salaries in your Fiscal Agent Department under the sev
eral heads shown on Form 97 and such other specific items
of monthly expense in that Department as can be conven
iently stated, also amounts received from the Government
during each month in reimbursement of said expenses.
Cumu
lative figures are desired of Fiscal Agent Department ex
penses and reimbursements since the opening by your in sti
tution of a special Fiscal Agent expense account.
‘
•
Respectfully,
Secretary.
X-L-Ex -Officio Members
W. P. Q. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
'
CHARLES S. HAMLIN
WILLIAM « . McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H . P A R K E R W IL U S , SECRETAR Y
S H E R M A N P . A L L E N . ASST. SECR ETA R Y
and
WASHINGTON
F is c a l A c e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
October
20, 1917.
Dear Sir:
Fran inquiries received at this office it appears
that the Officers of some normember State banks and trust com
panies are under the misapprehension that such banks and trust
companies becoming members of the Federal Reserve System are
subject to the limitations imposed by Section 5^00 Revised
Statutes which limit the total liabilities to a national bank
of any one person, firm or corporal!ion to an amount not to ex
ceed ten per Cent of the capital and surplus of the lending bank*
Where this misapprehension exists attention should be
called to the fact that under Section 9 of the Federal Reserve Act
as amended, State banks and trust companies becoming members of the
Federal Reserve System are not subject to the limitations of Sec
tion 5^00 but are subject only to such limitations as are inposed
by State laws.
Such banks may, therefore, make loans to the same
person, firm or corporation in any amounts permitted by the State
laws. Loans to one person in excess of ten per cent are, however,
not eligible for rediscount with a Federal Reserve Bank.
The provision of Section 9 of the Federal Reserve Act
bearing on this point is as follows:
"That no Federal Reserve Bank shall be permitted to
discount for any State bank or trust company, notes, drafts,
or bills of exchange of any one borrower who is liable for
borrowed money to such State bank or trust company in an
amount greater than ten per centum of the capital and surplus
of such State bank or trust company, but the discount of bills
of exchange drawn against actually existing value and the dis
count of commercial or business paper actually owned by the per
son negotiating the same shall not be considered as borrowed
money within the meaning of this section."
Respectfully,
Governor.
X-4-47
P R E S S
S T A T E M E N T
October 20, 1917.
The Federal Reserve Board today made public a statement shov
ing the number of state institutions admitted to the FccLcra.1 Reserve
System from October 1 to October 19, and lists of state institutions
whose applications for membership arc in hand, as follows:
STATE B A M S ADMITTED DURING OCTOBER.
Capital
Canal Bank & Trust Co.
£ 2,000,000
New Orleans, La.
1,000,000
Spokane & Eastern Tr. Co.
Spokane, Nash.
Chicago Savings Bk. & Tr.Co . 1,000,000
Chicago, 111.
Union Bank of Pike
25,000
Summitt, Miss.
Guaranty Trust Co.
25,000,000
New York, N. Y.
Sioux Falls Saving Bank
200,000
Sioux Falls, S. D.
First Savings & Trust Co.
50,000
of v/hitman County,
Colfax, Wash.
Bank of Williston,
50,000
Williston, N. D»
100,000
Live Stock State Bank,
North Portland, Ore.
Genesee Exchange Bank,
25,000
Genesee, Idaho.
800,000
Lafayette.South Sido Bank,
St. Louis, Mo.
Central Trust Co.
5,000,000
New York, N. Y.
11j250,000
Bankers Trust Co.
New York, N. Y.
TOTALS
£46,500,000
£
Surplus
Total Re sour
500,000
£ 21,210,371
200,000
20,078,866
200,000
12,733,891
4,000
165,516
25,000,000
613,535,033
23,000
3,852,236
15,000
369,711
•
• • •
113,071
10,000
872,846
12,500
482,091
400,000
12,604,870
15,000,000
214,715,020
11,250,000
327,011,784
£52,614,500 £1,227,745,306
One hundred and two State institutions arc now members of
the system, having a total capital of £108,855,700, total surplus of
£115,282,465, and total resources of £2,454,996,995.
X— 1-47-2 .
LIST OF APPLICANTS FOR ADMISSION TO MEMBERSHIP IN THE FEDERAL RESE
SYSTEM RECEIVED FROM OR AUTHORIZSD BY THE BOARDS OF
DIRECTORS OF THE FOLLOWING STATE BANKS
AND TRUST COMPANIES.
DISTRICT NO. 1 - BOSTON.
Applications received from:
Newton Trust Co.,
Industrial Trust Co.,
Worcester Bank & Trust Co.,
Metropolitan Trust Co.,
DISTRIST NO 2. - NEW YORK,
Applications received from:
New York Trust Co.,
Metropolitan Bank,
Pacific Bank,
Metropolitan Trust Co.,
Buffalo Trust Co.,
Manufacturers Trust Co.,
Franklin Trust Co.,
Newton, Mass-;
Providence, R.I.
Worcester, Mass.
Boston, Mass
New York, N. Y.
New York, N. Y.
New York, N. Y.
New York, N. Y.
Buffalo, N. Y.
Brooklyn, N. Y.
Brooklyn, N. Y.
Applications have been authorized by the Boards of Directo
of the following banks:
Brooklyn Trust Co*,
Brooklyn, N. Y.
Peoples Trust Co-,
Brooklyn, N. Y.
Equitable Trust Co.,
New York, N. Y.
Bank of SKiriik America
New York, N. Y.
W. R* Grace & Sompany’s Bank
New York, N. Y #
Mercantile Trust Ss.# Deposit Co.
New York, N. Yl
Utica Trust & Deposit Co.,
Utica, N. Y.
DISTRICT NO. 3. - PHILADELPHIA.
Application has been received from:
Girard Trust Co.,
Philadelphia, Pa
Applications authorized by Boards of Directors of the
following banks:
Williams Valley Trust Co.,
Williamsport, Pa
Commercial Trust Co., Philadelphia , Pa.
Dime Deposit Bank,
Wilkesbarre, Pa.
DISTRICT NO. 4. - CLEVELAND.
APPLICATIONS RECEIVED FROM:
Lawrence Savings & Trust Co.
Neweastle, Pa.
X-447 - 3.
Applications authorized by Boards of Directors of the
following banks:,
Exchange Bank, of Kentucky
M t . Sterling* Ky.
Hillsboro Bank & Savings Co.
Hillsboro, 6*
Citizens Trust & Savings Bank
. Columbus, 0.
DISTRICT NO. 5. - RICHMOND.
Applications authorized by the Boards of Directors of the
Maryland Trust Co.
'fe&.ltimore, Md«
Baltimore Trust Co.
Baltimore, Md«
Baltimore Commercial Bank,
Baltimore, Md.
DISTRICT NO. 6. - ATLANTA.
Applications authorized by the Beards of Directors of the
following banks:
Ma lion Central Bank
Marion, Ala.
DISTRICT NO. 7. - CHICAGO.
Applications received from:
St. Clair County Savings Bank,
Citizens Bank,
Dansard & Sons State Bank,
Citizens Commercial & Savings Bank,.
Eaton Co. Savings Bank,
Lapoor Savings Bank,
Austin State Bank,
Grana Rapids Savings Bank
Port Huron, Mich.
Clinton, Wis.
M°nroe, Mich.
Flint , Mich.
Charlotte, Mich.
Lapoor, Mich.
Chicago, Ills.
Grand Rapias, Mich*
Applications authorized by the Boards of Directors of the
following banks.
Kent State Bank,
Grand Rapids, Mich.
First Trust & Savings Bank,
Chicago, Ills.
Union Bank
Jackson, Mich*
Detroit Savings Bank,
Detroit, Mich,
Cdhtral Savings Bank,
Detroit, Mich.
Highland Park State Bank,
Highland Park, Mich.
Dime Savings Bank
Detroit , Mich.
Wayne Co. & Home Savings Bank,
Detroit, Mich.
Peninsular State Bank,
Detroit, Mich.
Michigan State Bank,
Detroit, Mich^
Lansing State Savings Bank,
Lansing, Micht
Genessee Co. Savings Bank,
Flint , Mich.
Citizens Bank,
Clinton, Wis.
’
St. Clair, Cc. Savings Bank,
Port Huron, Mich.
X~477 - 4
*
DISTRICT NO. 8, ST. LOUIS.
Applications received from
German American Bank,
Franklin Bank,
Paoli State Bank,
St, Louis, Mo,
St. Louis, Mo.
Paoli, Indiana,
Application executed by the Board of Directors of the
Union and Planters Bank & Trust Co»,
Memphis, Tenn.
DISTRICT NO. 12 - SAN FRANCISCO,
Applications received f roml
Lumbermans Bank,
Bank of Rosalia,
Hoquiam, Wash.
Rosalia, Wash.
X-448
THE AMERICAN BANKERS ASSOCIATION
Los Angeles, Calif.
October 9, 1917.
*
Hon. W. P. G. Harding, Governor,
Federal Reserve Board,
Washington, D. C.
Dear Sir:
I havo just returned from Atlantic City, where I attended
the convention of the American Bankers’ Association. I am the Vice
President of the Clearing House Section of the Association.
One of the questions that the Section is very much interested
in is the question of the examination of banks by examiners employed
by Clearing House Associations.
The employing of special examiners by Clearing House Associ
ations, as you know, was first inaugurated in Chicago about ten years
ago and as a result of the failure of the banks known as the Walsh banks,
The Chicago Clearing House banks, in order to save a situation, and
fearing the possible result of allowing the Walsh banks to close their
doors during such a. critical period in the banking -world as was 1907,
took the Walsh banks over and liquidated them* It was found that the
banks were in
and had remained in a condition that should have been
regarded as untenable*
To avoid further experiences along the same
line, the Clearing House Association Of Chicago employed an examiner of
its own, and at the cost and expense Of its member banks, to make regular
examinations of all banks in the city of Chicago ohjoyittg the privileges
of the Clearing House.
The plan inaugurated by the Chicago Association has proven so
satisfactory that it has been followed by Clearing House Associations
in other cities adopting the plan, until now there are nineteen cities
that havo Clearing House examiners. There would undoubtedly have been
many more, had it not been for the feeling of uncertainty that existed
as to what was to be the future policy of the Government in regard to
examinations under the Federal Reserve System. No determined effort has
been made during the past two years to got Clearing Houses in other
cities to adopt the plan, awaiting any plan for examination that might
develop with the Federal Reserve Board or banks, and to avoid too many
examinations.
’
X-448
— 2 ^
The Clearing House Associations" that have employed examiners
are well pleased with the result, and are vei-y lOath to abandon the
system, a-t the same time they feel they Are not justified in incurring
too much expense for examinations. They feel that Under the Clearing
House Examiner they have the advantage of the local coloring that the
Clearing House Examiner has to a far greater degree than can be had by
a F ederal Bxaminer Who covers ar much larger territory, and are also
in a position to act more promptly on information received from the
Examiner than would be possible if the information were to come from a
Federal Exaamer.
The whole question was a matter of discussion at a- meeting of
the Executive Committee of the Clearing House Section, held in Atlantic
City, It was the consensus of opinion that our efforts to extend the
Clearing House Examination System should depend very largely on the
attitude of the Federal Reserve Board and Backs toward it. If it is
to be ihe policy of the Federal Reserve Banks to employ examiners to
examine all member banka, fn addition to the examinaions now made by
the Comptroller'8 office, it may, and probably will, cause the banks in
Clearing House Cities to feel that to maintain in addition a Clearing
House Examiner, thus providing for three separate examinations, instead
of for two as at present, will entail an unwarrantable burden of expense,
If the Federal Reserve Banks would accept the examinaions made
by Clearing House Examiners, except of course where need for special
examinations' was indicated, it would justify our efforts to extend the
system and perpetuate it. In the matter of examination, both the Federal
Reserve Banks and th# Clearing Houses'are working to the same end, viZ2 •*
to see that the banks are conducting their business in a proper and safe
manner and obeying the law.
Another advantage we feel we have under the clearing house system
of examinations isthat not only the banks, members of the Clearing House
Association, but all other banks, National or State, that clear through
member banks, are regularly examined and are under the espionage of the
Clearing House Examiner. While, if the plan were to be discontinued, the
Federal Reserve Banks would only examine member banks and other banks"
would be left under State examiners alone.
X-448
- 3 -
X was appointed as a committee of one to present the matter
to the Federal Reserve Board through you and ascertain the attitude and
wishesr of the Board on the question of Clearing House Examiner service.
If the Federal Reserve Banks would be allowed to , and would,
accept the reports of examinations made by Clearing House Examiners, in
cities where Clearing House Examiners are empl6yed, an effort would be
made to extend the system to other cities. If, on the other hand, such
reports would.not be acceptable to, and accepted by the Federal Reserve
Banks, and to maintain Clearing House Examiners would only result in
duplication of effort and increased expense, it might be deemed best
not to mab any effort to extend the system and might tend to discourage
Clearing House Associations now maintaining examiners and cause them to
discontinue doing so.
Ah expression as'
the attitude of the Federal Reserve Board
on the question w$ll be very greatly appreciated by the Executive Com
mittee, as it will be by
Yours? respectfully
STODDARD JESS
Vice President.
W. P. 6 . HARDING. GOVERNOR
PAUL m . WARBURG. VICE Governor
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
E x -o r n c io m em b e rs
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
C H A IR M A N
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P . ALLEN. A S S T . S E C R E T A R Y
A N D F IS C A L A C E N T
ADDRESS REPLY TO
WASHINGTON
FEDERAL RESERVE BOARD
X44?
October 20, 1C17.
Dear Sir:
’
I enclose herewith a letter from Ur. Stoddard Jess,
of L'js angeles, California, who .is Vice president of the
Clearing House Section of the American Bankers a s s o c iation„
with the request that you advise me of the views of y.ur
directors and your executive committee on the subject.
The Board is aware of the very heavy additional work which
is now imposed upon the federal Heservo banks in the bond
selling campaign and in the discharge of their duties as
fiscal agents, and is inclined to the opinion that while
the suggestions of Mr. Jess might be carried out at some
future time, the banks might desire to defer undertaking
the new functions suggested until the end of the war, or
at least until a larger number of state banks have cone
into the system.
Very truly youts
governor.
W. P. 6. HARDING. GOVERNOR
PAUL m . w ar b ur g . vice G o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -O ffic io m em b e rs
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
yHlPMHKER WILLIS, SECRETARY
ALLEN, ASST. SECRETARY
^ r * f E F j)l- A 'N P .
and
WASHINGTON
f is c a l
Agent
AD D R E SS R E P LY TO
October 22, 1917-
Dear Sir:
You are requested to furnish the Federal Reserve Board
at your earliest convenience with the data asked for on the 'en
closed form concerning your holdings of gold, gold certificates
and gold order certificates.
Your particular attention is called to subheads under
caption "Gold Certificates" requiring segregation of gold certif
icates of the larger denominations($50 and over) from certificates
of the smaller denominations ($20 and less). These data are desired
to ascertain in conjunction with the Treasury Department the proper
distribution of gold and gold certificates held by the Treasury and
each of the Subtreasuries for redeeming gold order certificates out
standing and held by Federal Reserve Banks in the respective local
ities, also to make sure of the sufficiency of gold reserve held in
vault by the Reserve Banks and Agents to meet eventual demands on
the banks for redemption of Federal Reserve Notes.
*
FEDERAL RESERVE BOARD
Very truly yours,
Secretary.
X-453
*
Preliminary Draft of
Regulations to be issued under authority
of Trading With the Enemy Act.
* * ■*
The accompanying draft of regulations to be issued
under authority of the Trading With the Enemy Act has been
prepared by direction of the office of the Secretary of
the Treasury by Counsel for the Federal Reserve Board mere
ly as a tentative form for the consideration of the office
of the Secretary and of the Federal Reserve Board.
To expedite preparation of revised draft please indi
cate such alterations, additions or eliminations as you
think should be made and return one copy with your sugges
tions to Counsel for the Federal Reserve Board.
* * *
X453
-IREGULATIONS GOVERNING THE EXPORT OF COIN, BULLION
AND CURRENCY, TRANSACTIONS IN FOREIGN EXCHANGE, AND TRANSFERS
OF FOREIGN CREDITS.
EXECUTIVE ORDER.
By virtue of the authority vested in me, I hereby
prescribe as a supplement to the regulations contained in
Executive Order, dated October 15, 1917, the following reg
ulations in relation to transactions in foreign exchange,
export or ear-markings of gold or silver coin, or bullion,
or currency, transfers of credits in any form (other than credits
relating solely to transactions to be executed wholly within the
United States) ad transfers or evidences of indebtedness or of the
ownership of property between the United States and any for
eign country, whether an enemy, ally of an enemy, or btherwise,
or between persons of one or more foreign countries by any
person within the United States.I
I hereby revoke any regulations heretofore pre
scribed by me in so far as they may be inconsistent with the
regulations herein contained.
X453
- 2 -
DEFINITIONS.
The term -.erson as used in these regulations shall be
held to include individuals, firms, partnerships, corporations,
and all associations of persons.
The term dealer shall be held to include any person
engaged in the business of buying, selling or dealing in foreign
exchange.
The term foreign exchange shall be held to include
checks, drafts, bills of exchange, cable transfers, or any other
form of negotiable or assignable instrument or order used to
transfer credit or to order the payment of funds in any foreign
country, insular possession or dependency of the United States,
or other territory not included \vithin the geographical limits
of the Continental United States.
The term customer shall be held to include any person
other than a dealer who is resident or domiciled in the United
States, regardless of nationality, and who seeks to purchase or
acquire foreign exchange or to arrange for the transfer of funds
or of credits, or for the establishment of a credit in any form
outside of the Continental United States.
The term registration certificate shall be held to
mean certificate authorizing a dealer to engage in foreign ex
change transactions not prohibited by law.
•
The term special license shall be held to mean a li
cense or permit issued to an applicant authorizing such appli
cant to export gold or silver bullion or currency, or to engage
in a particular foreign exchange transaction otherv/ise prohibited
by law.
The term general license shall be held to mean a li
cense or permit issued to an applicant authorizing such applicant
to export gold or silver bullion to certain designated countries
or to engage in certain classes of foreign exchange transactions
for a fixed period of time or until such license is revoked.
3'
X453
EXPORTATION OF COIN, BULLION OR CURRENCY
Any person desiring to export from the United States
or any of its territorial possessions to any foreign country
named in the proclamation dated Setpember .seventh, nineteen hun
dred and seventeen, any coin, bullion, or currency, shall first
file an application in triplicate with the Federal reserve bank
of the district in which such person is located for a special
or general license. Applications filed must contain statements
under oath and showing in detail the nature of the transaction,
the amount involved, the parties directly and indirectly inter
ested, and such other information as may be of assistance to
the proper authorities in determining whether the exportation
for which a license is desired will be compatible with the pub
lic interest. All such applications should be made on the stan
dard fora prescribed by the Federal Reserve Board.
Each Federal reserve bank shall keep a record copy of
each application filed with it under the provisions of this reg
ulation and shall forward the original application and a dupli
cate to the Federal Reserve Board at Washington together with
such information or suggestions as it may believe proper in the
circumstances and shall in addition make a formal recommendstion as to whether or not in its opinion the exportation should
be permitted.
The Federal Reserve Board, subject to the approval of
the Secretary of the Treasury, is hereby authorized and empowered
upon receipt of such application and the recommendation of the
Federal reserve bank to make such ruling as it may deem proper
in the circumstances and if in its opinion the exportation in
question be compatible with the public interest, to permit said
exportation to be made; otherwise to refuse it.
4'
X453
FOREIGN EXCHANGE TRANSACTIONS
REGISTRATION CERTIFICATES.
Every dealer in foreign exchange shall within _________
days from this date, file with the Federal reserve bank of the dis
trict in v/hich such dealer is located, an application for a reg
istration certificate.
Such application shall be in form approved by the Fed
eral Reserve Board and shall show (a) the character of the busi
ness engaged in, (b) whether or not any enemy or ally of an ene
my of the United States, has any interest directly or indirectly
in such business, (c) any additional information that may be
required by the Federal Reserve Board.
The Federal Reserve bank, with the approval of the
Federal Reserve Board, may issue to such applicant a registra-'
tion certificate in form approved by the Federal Reserve Board,
entitling the holder to engage in foreign exchange transactions ,
not prohibited by law. Such certificate may be revoked at any
time by direction of the Secretary of the Treasury or the Federal
Reserve Board.
LICENSES.
Any person desiring to deal in any foreign exchange
transaction and having reason to believe that such transaction
may involve the payment of funds to or the establishment of
credits in favor of any enemy or ally of an enemy, within the
meaning of the act of October 6, 1917, shall file with the Federo
reserve bank an application for a special or general license to
consummate this transaction. Such application shall be in form
approved by the Federal Reserve Board and shall contain a full
and complete statement, under oath, of all facts known to the
■
-5-
3846
:
X453
applicant which may assist or enable the Board to determine
whether such transaction may be permitted without prejudice to
the interests of the United States. The Board may grant the
license applied for if, upon investigation, it is satisfied that
such a grant will be compatible With the best interests of the
United States.
BOOKS AND RECORDS.
All dealers in foreign exchange shall keep a redord in
books kept for that purpose, of all exchange purchased or sold by
such dealers, in such manner as to show ,
1. The name, address and business of the customer
buying and selling such exchange)
2* The drawer, drawee, payee, date and amount of all
exchange items bought and sold;
3. The purpose for which such exchange is bought
or sold by the dealer;
•
4. A statement to be furnished to the dealer by
the customer of his purpose in purchasing or selling exchange,
with full details of any transaction for the liquidation of,
or in connection with which such purchase or sale is made;
5. Any other information which in the opinion of the
Federal Reserve Board may be necessary to enable it to de
termine whether the transaction engaged in involves any
violation of the laws of the United States or regulations
made pursuant thereto;
£-453. '
- 6 -
EXAMINATION :
*
All books and records of dealers in foreign
exchange shall be open to inspection by the Secretary
of the Treasury, the Federal Reserve Board, the Federal
Reserve Bank issuing the registrationpertificate or
such person or persons as nay be desijkated by the Fed
eral Reserve Board, with the approval of the Secretary
of the Treasury.
.
4
SPECIAL REPORTS:
When required by the Secretary of the Treasury,
the Federal Reserve Board or the Federal Reserve Bank
issuing the registration certificate, each dealer in
foreign exchange shall make a report on forms approved
by the Federal Reserve Board of any and all transactions
in foreign exchange engaged in by said dealer and shall
produce the original or transcript of any books or re
cords that nay be called for.
GENERAL REPORTS:
Every person resident or domiciled in the
United States shall, without previous request for such
information, make a full report to the nearest Federal
Reserve Bank of all facts in connection with any trans
action engaged in with any foreign Government, or with
any person resident or domiciled outside the United
States, whenever such transaction involves or may in
volve, (a) The payment to or receipt from
any such Government or person of any money;
(b) The delivery to or receipt from
such Government or person of any securities;
(c) The establishment of any foreign
credits for or on behalf of such Government
or person;
(d) The purchase or sale of any security
for, to, or on account of such Government or
person;
,
3847
£848
X-453
-7-
(e) The hook transfer of cash or security to
or from the account of any such Government or person;
(f) The transfer or assignment of claims or
evidences of indebtedness to or from any such Govern
ment or person.
SUSPENSION OF FOREIGN EXCHANGE TRANSACTIONS AND
TRANSACTIONS INVOLVE THE EXPORTATION OF tC0IN
BULLION OR CURRENCY.
Whenever the Secretary Of the Treasury shall have
Reasonable cause to believe that the consuinmation of any transac
tion in foreign exchange or the export of any coin, bullion, or
currency may result in a violation of the laws of the United
States or* regulations made puRsuaht thereto, he may give notice
to the parties in interest to suspend such transaction for a peri
od of ninety days pending an investigation and any person or per
sons designated by him shall for the purpose of investigation,
be authorized to subpoena and examine witnesses under oath and
to require the production of any books of account, contracts,
letters, or other papers in connection with the transaction under
investigation which are in the custody or control of the person
examined.
GENERAL STATUTORY PROVISIONS.
An act to punish acts of interference with the^foreign
relations, the neutrality, and the foreign commerce of the
United States, to punish espionage, and better to enforce the
criminal laws of the United States, and for other purposes,
approved June 15, 1917.
TITLE VII.
*
Section 1. Whenever during the present war the Presi
dent shall find that the public safety shall so require, and
shall make proclamation thereof, it shall be unlawful to export
from or ship from or take out of the United States to any country
named in such proclamation any article or articles mentioned in
such proclamation, except at such time or times, and under such
regulations and orders, and subject to such
#
X-453
2849
- 8 -
limitations and exceptions as the President shall prescribe,
until otherwise ordered by the President or by Congress:
PROVIDED, HOWEVER, That no preference shall be given to the
ports of one State over those of another.
Trading with the enemy act, approved October 6, 1917.
Section 2. That the word "enemy" as used herein,
shall be deemed to mean, for the purpose of such trading and
of this Act, - '
(a) Any individual, partnership, or other body of
individuals, of any nationality, resident within the ter
ritory (including that occupied by the military and naval
forces) of any nation with which the United States is at war,
or resident outside the United States and doing business with
in such territory, and any corporation incorporated within such
territory of any nation with which the United States is at war
or incorporated within any country other than the United States
and doing business within such territory.
(b) The Government of any nation with which the United
States is at war, or any political or municipal subdivision
thereof, or any officer, official, agent, or agency thereof.
(c) Such other individuals, or body or class of individuals
as may be natives, citizens, or subjects of any nation with
which the United States is at war, other than citizens of the
United States, wherever resident or wherever doing business, as
the President, if he shall find the safety of the United States
or the successful prosecution of the war shall so require, may,
by proclamation, include within the terra "enemy".
The words "ally of enemy", as used herein, shall be
deemed to mean, (a)
Any individual, partnership, or other body of indi
viduals, of any nationality, resident within the territory
(including that occupied by the military and naval forces) of
any nation which is an ally of a nation with which the United
States is at war, or resident outside the United States and
X*453
I
'
,
'
'
,
-9doing business within such territory, and any corporation in
corporated within such territory of suCh ally nation, oi* in**
corporated within any country other than the United Status and
doing business within such territory,
(b) The Government of any nation which is an ally of as-,
nation with which the United States is at war, or any political
or municipal subdivision of such ally nation, or any officer,
official, agent, or agency thereof,
(c) Such other individuals, or body or class of individ
uals, as may be natives, citizens, or subjects of any nation
which is an ally of a nation with which the United States is at
war, other than citizens of the United States, wherever resi
dent or wherever doing business, as the President, if he shall
find the safety of the United States or the successful prosecu
tion of the war shall so require, may, by proclamation, include
within the term "silly of enemy".
Section 5 (b) That the President may investigate,
regulate, or prohibit, under such rules and regulations as he
nay prescribe, byrmeans of licenses or otherwise, any transac
tions in foreign exchange, export or oar-narkings of gold or
silver coin or bullion or currency, transfers of credit in any
form (other than credits relating solely to transactions to be
executed wholly within the United States), and transfers of
evidences of indebtedness or of the ownership of property be
tween the United States and any foreign country, whothor enemy,
ally of enemy or othorwiso, or between residents of one or more
foreign countries, by any person within the United States; and
he may require any such person engaged in any such transaction
to furnish, under oath, complete information relative thereto,
including tie production of any books of account, contracts,
,
letters or other papers, in connection therewith in the custody
or control of such person, either before or after such transac
tion is completed.
■
X-456
H. Parker Willis, Esq.,
Secretary, Federal Reserve Board,
Sir:
In consideration of the payment to me of the sum of
Dollars ($ <
) per month, I hereby undertake and agree
to perform such services for the Federal Reserve Board as may be
assigned to me.
It is understood that this contract may be termi
nated on the first or fifteenth day of any month upon ten days
prior notice by either party thereto.
'
Respectfully,
The foregoing proposal or agreement is hereby accepted.
FEDERAL RESERVE BOARD.
By___________________
%
lr
EX-OFFICIO MEMBERS
W. P , G. HARDING, GOVERNOR
PA U L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
Comptroller
of the currency
FEDERAL RESERVE BOARD
H. PARKER W ILLIS . SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
a n d F is c a l a g e n t
W A S H IN G T O N
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
X459
Dear Sir:
You have already been advised that the Federal Reserve Board
desires certain information included in your annual report, with regard
to the amount of Treasury Certificates of Indebtedness which have been
allotted to subscribers through the Federal Reserve bank.
It is now de
sired to add to this data as to how the distribution was effected in each
district, giving for each issue the number of subscribers that took $25,000
and less; how many took between $25,000 and $50,0.00; how many took between
$50,000 and $100,000, etc.
Will you kindly include information on this point with the other
matter already asked for, using the following classification:
Amou.it allotted to
Number of subscribers
subscriber:
in each group:_______
$25,000 and less
Over .*$25,000 to $50,000
"
$50,000 to $100,000
" $100,000 to $250,000
" $250,000 to $500,000
" $.500,000 to $1*600,000
.
Total.'.......
Total amounts
alloted to each group/
Very truly yours,
*
Secretary.
-1 -
X463
BY-LAWS
___________ BRANCH BANK
FEDERAL RESERVE BANK O F ______________
•
ARTICLE I.
■
Section I. By permission of the Federal Reserv. Board, in ac
cordance vith th^ provisions of :ha Federal Reserve Act, the Federal
Reserve Bank of________________ , by resolution of its Board of Directors
duly adopted on thcl____day of_____ 191 , has established a branch bank
in the city of__________ ,State of,_______ , wit&i^n the Federal Reserve
District served by said Federal Reserve Bank of_________ , and has
designated and assigned to said branch bank all banks which now are,
or may hereafter become, member banks -within that portion of the State
of___________ comprised in Federal Reserve District No.__ and within the
Counties of________________________________________________
_
.
c*
'
-•
---------------- -—
______
-------------------- v----------------- —-------- -
In the State of____ , in said Federal Reserve District, as member banks
of branch bank so established.
Section 2.
The name.of this bank, shall be _________ Branch
Federal Reserve Bank of___________ ; and its place of business
shall be. in the city of______ ■
Section 3.
, Stats of____________
.
The reserve deposits of member banks assigned to said
branch bank shall be maintained .with the Federal Reserve Bank of________
and payments and repayments on account of the increase or decrease in the
capital stock of the Federal Reserve Bank of________ has provided by la.v
shall be made to said Federal Reserve Bank of_______________
Section 4. Nothing contained herein shall bo construed in any
manner to abridge or modify th^ rights and powers of the Federal
' Reserve Bank of
____ to diruCt and control th^ operations of
said____________ Branch Bank; or to curtail the use by ^aid Federal
Reserve Bank of
. whenever, in its judgment, it may be deemed
necessary, of any and all funds received by said__________ Branch B»nk.
Section 5.
The said______
Branch Bank shall be authorized -and
required to maintain a department for the clearing and collection of
checks and drafts payable upon presentation, and also maturing notes and
bills, and a department for the receipt and payment of money as author
ized by law in respect of a Federal Reserve Bank, under such conditions
and restrictions as may be from time to time provided by the Federal
Reserve Bank of
. or under the direction of the Federal
Reserve Board.
ARTICLE II.
Section 1:
NUMBER AND QUORUM: The number of directors
shall be five, of whom the manager shall be
one. A majority of the directors shall con
stitute a quorum for the transaction of busi
ness, but less than a majority may adjourn
from time to time until a quorum is in attend
ance.
Section 2.
VACANCIES: Vacancies in tile membership of the
Board shall be filled and successors selected
in the manner providediby law.
Section 3.
MEETINGS:
There shall be a regular meeting
of the Board on the Thursday next preceding
the first Friday of each month at 10 o'clock, *'
A.M., or if that day be a holiday, on the first
succeeding full business day. The manager shall
be empowered to call a special me ting at any
time, or shall do so upon the request of the
head office or the written request of any two
directors. Notice of said meeting if by mail,
shall bermailed at least one day prior to date
of meeting; and if given by telegraph or tele
phone, at least two hours before the time of meeting.
* Suggested,
subject to
determination.
Section 4:
POWERS: (<*) Tne Board of Directors shall
supervise tne operation of the branck bank
unaer direction and control of tne Federal
Reserve Bank of________ , subject to such
regulations as tne Federal Reserve Board
may prescribe.
(b) Branch bank say clear and collect cnecks
and receive for collection maturing notes and
bills for member and depositing non-member
banks in all parts of tne________ Federal Re
serve District and for all Federal Reserve
Banks*
In order to facilitate crediting of pro
ceeds of eligible collateral notes ana redis
counts for sucn member banks as Lay be convenienced thereby, the nead office a.u y from time
authorize tne branch to receive sucn paper from
said member bank for credit, upon terms and
conditions to be prescribed by the nead office.
Section 5:
Directors wnen present at directors’ meetings
shall receive a compensation of____
dollars
per aay for eacn day tne Board is in session,
and an allowance to cover actual necessary ex
penses incident to attendance at regular or
special meetings of tne Board.
Section 6:
Tne Head Office shall fix tne compensation of
officers, clerks and employes of tne Brancn
Bank, subject to tne approval of tne Federal
Reserve Board.
Section *]:
All expenditures of tne Brancn Bank shall be
subject to the approval of tne Head Office.
Section <5:
ORDER OF BUSINESSfollowing shall be the
order of business at eacn meeting of the Board:
(1) Readin& »nd disposition of .minutes of the
last regular i^eetin^,.
(2) Report of tne ^anu&er, incluairio inf oration
o once mint, banking and business conditions in tne Brancn
Bonk territory, as well as detailed sugary of all busi
ness transacted siace last re^ul^r s^eetin^ and state
ment of present condition, tne latter to include:
(a) Statements concerning clearing operations*
(b) All official correspondence received fran
tne Head Office.
.
(3)
Report of Committees.
(d) Unfinished business.
’
(5)
Approval of reports and r-coLmendations to
Head Office.
(6)
New Business.
X-46 3.
ARTICLE III
OFFICERS.
Section 1:
The officers, who shall be chosen by the Board
of Directors of the Head Office, shall be a
manager, who shall be one of the directors of
the Branch Bankj and a cashier. They shall hold
office during the pleasure of the Head Office.
Section 2:
MANAGER: The Manager shall preside at all direct
ors’ meetings and shall have general dharge of
the Branch and shall be officially designated as
“Manager.
...... . Branch .Bank". The Manager
shafli, jointly with the cashier, have charge of
all moneys received or paid out on account of the
Branch Bank and shall sign all checks for the pay
ment of money. He shall have custody of all moneys,
investments and collateral held by the Branch Bank,
subject to such rules as the Board may adopt as to
their safety. In all cases where duties of sub
ordinate officers of the Branch Bank are not spe
cifically prescribed by the by-laws or the Board
of Directors of the Branch Bank or the Head office,
they shall be fbeuduties prescribed by and the in
structions of the Manager.
Section 3:
ACTING MANAGER: In the absence or disability of
the Manager, the Head Office may appoint an Acting
Manager, who shall exercise the powers and dis
charge the duties of the manager] and for such
services shall receive a compensation to be fixed
by the Head Office.
.
Section 4:
CASHIER: The Cashier shall have/j oa.nt custody
of all moneys, investments and collaterals as may
be delegated to him by the Manager, subject to such
rules as the Board may adopt as to their safety.
He shall countersign all checks for the payment of
money signed by the Manager. He shall keep the
minutes of all Board meetings and all committees of
the Board and perform such other duties as may be
assigned to him by the Manager, subject to the
approval of the Board of Directors.
Section 5:
ACTING CASHIER: In the absence or disability of
the cashier, the Board of Directors of the Branch
bank may appoint an Acting Cashier, who shall
exercise the powers and perform the duties of the
cashier and shall receive a compensation to be fixed
by the Head Office.
ySUQh
-5~
X-463
ARTICLE IV
COUNSEL.
Section 1:
The General Counsel of the Head Office shall
act as counsel for the Branch Bank, and shall
represent the Branch Bank in such matters as
may be assigned to him and Shall approve all
legal documents; and said general counsel may
appoint a local . . . . . attorney as associate
counsel^ with a retainer to be approved by the
riedd Office*
4RtfiCLE Vj
AUDITOR.
Section 1:
The A‘<Hitcr of the Head Office Shall afct as
Auditor of the Branch Bank*
ARTICLE VI
BUSINESS HOURS.
Section 1:
The Bank shall be open for business from 9:00
a. m. to 2:t)0 p„ m., on each day except Saturdays
and Sundays or days or parts of days established
as legal holidays. 'On Saturdays the bank shall
•pen at 9:00 a. m., and cl#se at 12:00 noon.
ARTICLE IX
AMENDMENTS.
These by-laws may be amended at any regular
director’s meeting by a majority vote of the
entire Board of the Head Office, subject to
the approval of the Federal Reserve Board.
G.
W . P.
HARDING. GOVERNOR
P A U L M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
Ex -O f f ic io m e m b e r s
W ILLIAM S . McADOO
SECRETARY OF THE TREA8URT
CHAIRMAN
JOHN SKELTON W ILLIAM S
-
¥
— , —, —
_
-
_
_
FEDERAL RESERVE B O A R D
comptrollerofthecurrency
H. PARKER W IL L IS . SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
W A S H IN G T O N
FEDERAL RESERVE BOARD
X-465
October 31, 1917.
Dear Sir:
,
The Board is in receipt of a request for the des*
ignation of a code word to be used by Fedei'dl Reserve
Banks in advising other Federal Reserve Banks of Federal
Reserve transfer drafts, the body of which will doincide
with Form X-96, attached 4o circular letter X-102, dated
April 25, 1917*
The word CULP id designated f#r this purpose.
V e ry t r u l y y o u r s ,
Secretary.
X-466
ex -o f f ic io m em bers
W . P . G. HARDING. GOVERNOR
P A U L M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM « . McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
Co m p t r o l l e r o f t h e c u r r e n c y
FEDERAL RESERVE B O A R D
W A S H IN G T O N
H. PARKER W ILLIS . SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AOENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 1, 1917
Gentlemen:
In connection with applications for the exporta
tion of coin, bullion, and currency, I inclose herewith a
form of bond.
The Board suggests that the execution of
this bond be required of applicants in thoso cases in which
there is any uncertainty on your part as to thS responsibility
of such applicant, or where you desire additional assurance
that the purposes for which the application is granted will
be fulfilled*
Very truly yours,
Secretary
Inclosure.
Released for put1 ±rat'on in th~ evening papers of
Saturday,
No remiber 3rd, 1917.
> * + * * *
"WAR
FINANCE
AND
INFLATION"
*
Address of A. C
Miller,
Member, Federal Reserve Board,
before the
National Conference on Financing the War
of the American Academy of Political and Social Science
Philadelphia,
Saturday morning, November 3rd, 1917,
at
10
o 1clock.
a *,
i_
A-*46f
.
"The beginning of wisdc:n in the financing of this war"
said Mr. Miller "is the full appreciation of the fact that the
ultimate term in our finance must be, not dollars but ufliat dollars
will buy.
If the war goes on, it will become clearer and clearer
that this war is an economic endurance contest and that victory
will lie with the nations which are best able to resist the
processes of economic disintegration.
Indeed this war will not
,
end until all the power of America is developed to its highest
pitch of efficiency and then delivered as fighting-power and gunpower at the far-flung battle fronts of Europe.
Every nan, woman,
or child, capable of doing anything, must regard themselves as
part of the great fighting machine vtfiose purpose is to transmute
the productive power, the saving power, and the will power of the
people at home into gun-power at the front.
The winning of this
war presents a problem of economic and financial strategy as well
as of military strategy.
Indeed our economic and financial strategy
must work hand in hand with our military strategy if we are to make
ourselves most effective in coordinating our own activities and
those of the other nations forming the grand alliance, into one
great whole so as to bring the war to an early and successful
termination.
11
.
Continuing Mr. Miller said "Many are the contributions that
time and circumstance will show America must make toward the success*
ful prosecution of the war.
But perhaps none will in the end prove
more important than that of supplying leadership and mastery in co
ordinating the activities of herself and her associates along the
larger lines of economic and military strategy.1*
Turning to the more immediate aspects of the financing of
the war Mr. Miller called attention to the financial and economic
principles that were laid down by the President in his War Message,
and later expanded in his Proclamation of April 15, on war economics«
"All that this or any conference on finance can do" said Mr. Miller
"is to translate the President's principles into details of finan
cial administration and organization."
The President called upon
Congress and the country to 'exert all its power and employ all its
resources to bring the Government of the German Empire to terms and
end the war'.
He pointed out what this would involve in the way of
financial and economic preparation in these statements:
'It will involvo, of course, the granting of adequate
credits to the Government, sustained, I hope, so far as
they can equitably be sustained by tha present generation,
by well-conceived taxation. 1
'I say sustained so far as may be equitable by taxation,
because it seems to me that it would be most unwise to base
X-46?
■-3 i-
the credits which will now be necessary, entirely on money
borrowed. It is our duty, I most respectfully urge,to protect our people, so far as we may, against the very ./ser
ious hardships and evils which would be likely to arise
out of the inflation which would be produced by vast loans. 1
It will involve the organization and mobilization of all
the material resources of the country to supply the materials
of war and serve the incidental needs of the nation in the
most abundant and yet the most economical way posdble. 1
This is the time for America to correct her unpardonable
fault of wastefulness and extravagance. Let every man and
every woman assume the duty of careful, provident use and
expenditure as a public duty, as a dictate of patriotism
which no one can now expect ever to be excused or forgiven
for ignoring1."
”The interpretation I place upon the President's reference
to the relation of loans and taxation in the finaneirig of our war,
suggests the following rule - that taxation should be carried to the
point ufoere the remainder of the needed income of the Government
can safely be provided out of the proceeds of loans, that is be
provided without producing inflation of credit and prices.
The
clear inference I dzaw is that sound finance requires that the
limits of taxation oust be extended as borrowing reaches the
limits of inflation.
11
•
"Briefly summarizing the economical and financial prin
ciples contained in the President's observations, I would state
them as follows:
(1)
well-conceived taxation;
(2 ) avoidance of inflation;
(3)
strict economy through saving;
(4)
organisation and mobilization of all the country's
economic resources. 11
"I beg you to observe that the President has pointed out
the necessity of mobilizing, not a part of the country's economic
resources, not so much as could be conveniently spared from private
use, but 'all the economic resources'."
Mr. Miller stated his opinion that it would require all
of the economic, resources of the country to bring the war to a
speedy and victorious conclusion.
In confirmation of this view,
he stated some underlying facts bearing upon the economic costs
of the war in terms of the man-pOwer which it would require. "I
have it on competent authority" said Mr. Miller "that it takes the
labor of four men, working in industries of one kind or another
producing military and other needed supplies, to maintain one sol
dier at the front.
This means that an American army of one million
men will require the output of four million men, working in factory,
field, and foundry.
If we should need to maintain an army of two
million men at the front, eight million men will be needed, work
ing at home to maintain, provision and equip them.
I also have
X-463
- 5 -
it
09
competent authority tha* the munitions, provisions and other
maintenance that the armies and civilian populations of our Allies
in Europe roust have from us, will require the output of more than
ten million laborers working in this country.
If we accept as.
approximately accurate, the estimates of our present available labor
supply as amounting to thirty million workers, the magnitude of the
economic problems with which we are confronted is suggested by the
requirement that one-ha],f or more of our existing labor supply
mist, during the period of the war, be devoted to the producing
of materials and supplies to be consumed by our own and the armies
of our Alii6 s and the civilian populations of the nations in Europe,
which are dependent on us for part of their necessary keep.
This
means that the civilian population of our own country will have to
rearrange its mode of living so as to be able to get along with the
products of the remaining labor power of the country - that is, about
one-half of what has been customary - unless happily the labor forces
of the country can be effectively recruited and augmented by the
introduction of men and women who are not now to be reckoned among
the productive classes of the community.
In brief, as a nation
more of us must work,, and all of us must do more work and then
consume less in order
that we may
have the
requisite margin
28B6
X-469
- 6 -
■
•
of disposable goods for the use of our army and our Allies.
We can do this if we will; and it ia doubtful whether we can win
the war., or at any rate win it in short order, uni ess we raise our
will power to a point where we compel ourselves to do it."
.
Turning to the subject cf the money side of the war,
Mr. Miller called attention to the nineteen billions; which Congress
has authorized to be spent or advanced to our Allies for the fiscal
year ending June 1913.
"Never has any nation; either in this
or any war, undertaken 30 vast an obligation in the sane period of
time.
We are undertaking to spend in a single year almost two and
•a half times as much as any of the leading belligerents of Europe
have spent since the beginning of the war."
"Can we manage this vast expenditure?
What have we got to
offset it in the way of the requisite financial resources?
It
must be clear to anyone who givec any serious attention to the
financing of the war that the expenditures of the Government must
come out of the income of the community.
The limits within which
any part of the burden of war costs can be shifted to- posterity;
are so narrow, especially for a country in our position with no
countries from which it can borrow; that we must regard the whole
X-46S
'
.
- 7 -
.
burden as one that has get to be assumed and paid for as we go
along, out of the product of the nations current industries - that
is, out of its income.
Unfortunately, no official and authoritative estinate of
the nation's present income has been made.
Some widely used estimates
at the beginning of the war placed the annual money income of the
nation ekt forty billions or thereabouts.
Such information and in*
quiry as I have been able to make, however, leads roe to believe
that this is an under-statement of the actual situtation.
It is .
ny present opinion that the current annual product of the country's
business and industry or its current annual industrial and business
income reaches to not less than fifty billions of dollars.
How
.
■ gnuch of this stupendous amount may properly be regarded as surplus
income - that is to say over and above what the people of the
country roust spend in order to keep themselves in a state of health,
strength, and cheer - is a matter upon which opinions would prob
ably differ.
Our annual savings fund at the beginning of the war
was variously estimated at from'four to six billions of dollars that means that out of the income of the country at that time, some
four to six billions was not consumed by the owners of the income but was in
X-469
8
vested in extensions of industry - in other words, was an
addition to the financial and industrial capital of the
country.
I do not offer it as anything more than my con
jecture, but I am of the opinion that the momentous increase
in the money income of the country in the past two years owing
to the intensified demands for our products and uniformly high
prices, has possibly increased the potential savings
fund of the country by as much as ten billions of dollars - in
other words that the country as a whole may be in a position to *
lay aside three dollars now for each one dollar that was laid
aside or saved two or three years ago.
This means that the annual
actual and potential savings or investment fund of the country
taken together may amount to as much as fifteen billions of dollars.
The war taxes which were imposed by the recent
session of Congress, contenplated
the raising of some two and a
half billions, though there is some reason for believing
that the yield of these taxes may considerably outrun the
estimates.
Obviously the Government can r.oi borrow that
which it takes by taxation.
Current income is the source out
of which both tax revenue and loan revenue is derived.
If
three billions are taken out of the annual surplus income of
i
the country, which I have estimated as possibly fifteen billions,
then it would appear that twelve billions could be raised by loans.
The authorized expenditures for the year, however, ran
close to twenty billions and leave us with the problem of how the
additional five billions or thereabouts are to be obtained.
To my mind, two extremely important considerations are
i
presented by this situation; (l) can the vast sums which it is
proposed to raise from loans be raised without causing an infla
tion of credit and prices, and (2) is it at all possible that the
war should be carried on as an 1extra1 - that-is to say, that
"business can be as usual" during the period of the war.
No one
who looks beneath the surface appearances to the hard and inex
orable economic realities, can for a moment maintain the position
that the war can be carried as an 'extra1. We can not carry this
war as an extra and business can not be as usurl c-urlng the period
of the war if we mean to win."
*
"I can not believe", said Mr. Miller "that those who are
sponsoring the doctrine of "business as usual" can appreciate the
economic significance of the doctrine.
This v'ar, as the President
told Congress and the people with rare prevision, will involve
the'organization and mobilization of all the material resources
of the country to supply the materials of w ar1.
The man who
tompingly preaches the doctrine of "business as usual" at this
time is, therefore, proposing that private advantage should be
10
X-469.
set against Sr ahead of public necessity. At this crisis
in the Nation's life, every business, no matter what it's nature,
is affected with a public interest and the public
has the right,
indeed owes it to itself, to determine within what limits
that business shall be circumscribed in the interest of the
war, or to what extent it shall be helped and fostered in the
same interest.
this war.
The American business system is on trial in
No one doubts its technical proficiency and it should not
allow anyone in its renks to raise a question regarding its com*
potency to exeficise vision and imagination seeing clearly what must
be doi» by the nation in the way *r change in our business and
economic organization during the war, thus proving that it has
the courage to make whatever individual sacrifices in the way
of restraining private advantage that may be entailed.
If it
fails in rising to the occasion through cowardice, weakness or
selfishness, it will have gone a long way toward sounding its
death-knell and surrendering to other agencies the right of
leadership in the great processes of economic re-construction
which must take place at the close of the war.
X-469
- 11 -
.
Mr. Miller next took up the discussion of the question »
Do Government loans cause inflation?
.
"Inflation from Government borrowing", said Mr. Miller, re
sults when the Government undertakes to borrow faster
are willing or able to save.
than the people
The loans of the Government must then be
forced upon the banks, the banks pay for the loans with their credit,
and thus there ensues an expansion of banking credit and currency. The
inevitable effect on commodity prices is to raise them.
It needs no
extended argument in this day in America to demonstrate that banking
credit in any of it3 forms is purchasing power, exerting the same
effect on prices when used in payment for goods or purchases, as any
other form of purchasing media.
When purchasing media are produced
faster than good3 are produced - in brief, when the supply of currency
and credit in its increase outruns the supply of purchasable goods the prices of goods must rise.
Whether such a condition is properly
to be described by the invidious word inflation, the fact remains that
the rise of prices of purchasable goods in such a situation is closely
connected with the increased supply of purchasing media.
Moreover, when
the increase of purchasing media in the community, occasioned by the ex
pansion of banking credit, follows upon the investment of banking credit
in Government loans, the conclusion is irresistible that the expansion
of credit and its resulting consequences, vis. - increased commodity
X-469.
- 12
prices are induced by bank lendings to the Government,
The process by *hich Government loans produce inflation is
disclosed in the financial history of all the great European bellig
erents.
All of these Governments, notably Germany, have made extensive
use of banking sredit in the flotation of their loans.
Not only the
great central banks, but the banks generally in the several European
Governments, have been put under pressure to invest their credits largely
in the purchase of Government securities.
The London Economist character
izes the situation thus produced as 1financing forced on the banks by
the Government1• An examination of the changes of condition of the banks
of Great Britain, exclusive ox the Bank of England, shows what the process
has been.
Their deposit liabilities, that is to say their checking ac
counts, have increased from 1913 to 1916 about 408 million pounds Sterling
an increase of from 30 to 40 per cent.
Their bills discounted on the
other side of the statement show only a negligible increase, an increase
of 7.7 million pounds Sterling.
Their investments on the other hand,
show an increase from 211 million pounds Sterling to 437 million pounds
Sterling, an increase of over 225 million pounds Sterling, or 167 per
cent.
be
In view of all the circumstances
said that
the
increase
is
made
and known facts,
up chiefly,
it may
if not
X-469'.
13
almost entirely of Government obligations, such as Treasury Bills,
Exchequer Bonds, etc.
In brief the expansion of banking sredit
in England is clearly disclosed by these figures to have been occas
ioned for the msst part by the expansion of bank investments in
Government obligations.
A similar process has been at v/trk in
the other countries of Europe.
The expansion of banking credit
in France and Germany, however, has been mainly in the form of bank
notes, rather than in bank deposits. Note circulation in France
1289.9
was increased from/LSsSSNO million dollars in A ugust, 1914, to
417® millions in ictsber 1914, an increase ftr the period of over
223 per cent.
risen from
The circulation of the Reichsbank of Germany has
693 million dollars in August 1914, to 2,235 millions
in October 1917, an increase of 230 per cent in the course of a
little more than 3 years.
This increase in the note circulation of the great central banks
of France and Germany has been occasioned largely by investments of
credit in the obligations of their Government, and seem clearly to
indicate that Government borrowings from banks have been a very
great factor in the expansion of their note circulation.
Doubtless
other causes have contributed to the ixrf: loan expansion of bank
liabilities in Europe, but
no one cause has been a greater
factor than the investment of bank credit in Government loans.
14
X-469.
Y/hether a similar result is to bo:expected here in connect
ion with our greater Government borrowings, and if so hov/ soon, will large
ly depend upon whether all the people who have income enough to save
will save, or whether they can be or v/ill be mode to save enough out of
their incomes to absorb such loans of the Government as may be put out
in excess of the current savings fund of the nation*
*
The obligations of a Government, such as the United States,
when considered purely from an investment point of view, are unquestionably
the most eligible sort of investment*
,
A commercial bank in a country like ours, making daily use
of mobile banking credits is not to be likened to an investment
institution in the ordinary sense of the word.
is but a small part of its investment power*
Its capital
J.t invests its credit
butthe safe investment of credit necessarily restricts its choice of securitir:
to those which are of unquestionable liquid character.
The objection to
considerable investments by banks of their credit in investment secutities,
such as Government bonds, arisescnot out of any question as to the quality
and solidity of such securities, but rather because of their lack of liquiditfr-/ The history of modern banking has demonstrated over and over again that a
distinction must be made between security and liquidity, or value and availibility in determing the kind of
investments fitted for banks which deal in
P8^;r
X-469
- 15 -
their credit.
There are many forms of investment paper which from the
point of security leave nothing to he desired, but which are unsuitable
as a basis for the creation of a great body of curre.cny or of banking
credit.
'
The doctrine set forth in the famous English Bullion report,
which came in the znidst of the controversies growing out of th3 manage
ment of the Bank of England1s circulation during the Napoleonic
Wars,
whose truth has been attested by the experience of every modern nation,
ie that two things are necessary to protect banking currency and baxnking credit against the danger of undue expansion.
One of these is the
naintenance of adequate reserves; the other is the maintenance of adequate
liquidity of investments.
By liquid investments, is meant bank paper
which liquidates itself in short periods of time out of the procaede of
the transactions 'which have given rise to the paper.
That is to say,
paper which grows out of transactions in trade and industry connected
with the production or distribution of goods, which as.they come to
maturity in tho normal movements of trade and industry supply the funds
out of which the borrowings of credit at bank3 can and will be repaid.
Self-liquidating paper being, therefore, paper which is connected with
productive operations in industry, that is to say, operations which
result in an increase in the supply of salable goods, it follows that
the same transaction, which giving rise to an increase in the supply
ppiy 6
of purchasing media by the expansion of the bank’s credit, also gives
rise to an increase in the supply of purchasable goods, * in brief, the
two go pari passu.
But when a bank invests its credit in the purchase of Govern
ment bonds which are issued for the purposes of war, - in brief for
operations that result in the consumption and destruction and, there
fore, the diminution of goods,-we have a condition in which there has
been an additionf^to the volume of outstanding banking credit and pur
chasing media with nothing to offset it on the shelves of the shop
keeper, or the ware-houses of manufacturers.
In brief, transactions in
credit of this sort are not connected with operations affecting the pro
duction of goods.
In war time Governments borrow not for the purpose of
producing goods, but for the purpose of getting poss-jjsion of goods al
ready produced, or being produced, wdiose production is otherwise financed.
There is much misconception with regard to the meaning of ’bank
resources’ and the significance of increases of banking resources.
From
the point of view of the lending bank, an obligation of the solvent debtor
is a resource; from an economic point of view, however, only that is a
resource which in its existing state', either is or is in the process of
becoming a usable good.
When, therefore, banks are investing their
very
credit extensively in Government securities, there may be a /great increase
17
X469
in the banking resources of the country, without any increase in the country's
actual and economic resources.
Since prices, that is to say commodity prices, depend upon
the ratio of purchasing power to purchasable resources in the shape of
consumable goods, it follows that an increase of bank resources not offset
somewhere by an increase of economic resources, must and will lead to a rise
of prices*
It can hardly be doubted, in viev/ of the known facts, that
the great increase of prices, which is being experienced throughout the bel
ligerent countries'-of Europe is, in a large measure, due to multiplication
of means of purchase and payment, by their banking systems,
than the multiplication of the goods available for purchase*
more rapidly
For can it be
doubted that a considerable part of the rise of prices, that we have ex
perienced in our own country since the beginning of the European War, has
been largely induced by the great body of new banking credit created, v/hich
has outrun in its expansion the productive output of the Country.
the rise has continued since our entry into the war.
Moreover,
The index figures for
wholesale prices show that while wholesale prices in A pril 1917 were 74 per
cent higher than in July 1914, they were Q9% higher in July 1917;
Doubtless if
later figures were available they would show that the forward march of
prices continues.
The rise of prices therefor in this country is slight
when compared with what it has been in the countries of Europe*
The
a
9
X-469.
- 18 -
price index compiled by the London Economist shews an increase up to
September 1917 of 120 per cent, as compared with July 1914.
Causes*
not dissimilar, have been operating to produce the rise in those countries.
It is estimated that bank deposit credits in the United States since our
entry into the war, have increased from about 30,7 billions to .34 billions
an increase of three billions three hundred millions.
The increase in
loans and investments for the same period is $3*500,000,000.
I am forced
to think in view of these facts that inflation is already at
work in the
country, and that in this matter of inflation we are confronted by a
condition and not a theory.
If we examine the condition of the Federal
Reserve Banks for the same interval of time* we get some light upon one
s
of the factors that has sustained the expansion of banking credit. Be
tween the 6th of April and the 26th of October, Federal Reserve Banks
have increased their holdings of bills discounted and purchased by
the amount of $475,000,000.00.
When you recall that the Reserve banks are
bankers banks, and that* therefore, investments of the Re serve*'Banks in
discounted or purchased bills .shown on the books of the Reserve banks
as reserve credits* appear on the books of the member banks as reserves
it is at once evident that the $475*000,000 increase in Reserve bank
investments at a rati# of $1.00 of reserve credit extended by a Reserve
bank to $7#00 of credit loaned by the member bank to its customers
would raise the bank deposits of commercial banks by about $3*300*000,000
for the same period of time.
If this rise continues* it is not unreasonable
19
& -4 6 0
to expect that before long the Deserve System will be made into a great
engine of banking inflation.
Its possibilities in this direction are vast.
The twelve banks composing the Federal Deserve System have an aggregate
capacity of credit expansion of about two billion dollars.
If we assubb
that one dollar of Deserve bank credit increased seven fold uftien transmuted
into credit of a member bank extended to its customers, it is clear as a
proposition of bookkeeping arithmetic that the Federal Deserve banks and
member banks of the Federal Deserve System $ave an additional credit capacity
of some fourteen millions of dollars.
The question which I believe the
Country must soon face is whether it will be *3 the part of financial
prudence for us to finance our Government loans by an expansion of banking
credit with accompanying inflation or whether it will be better to pursuer
the course of converting the potential savings fund of the nation '
into an actual savings fund of sufficient magnitude to absorb the loans
of the Government.
This survey establishes the following conclusions:
(1) The ultimate terms of our war financing must be, not money, bat
what money will buy.
(2)
Vast as our proposed expenditures and advances are, there is reason
to believe that they can be met without the U3e of any doubtful or wasteful
expedients of finance; for there is reason to believe that our annual
income may amount to as much as fifty billions a year and be capable of
yielding a saving fund which can be appropriated by the Government through id
- f-
20
X-w 469.
.
’ loans and taxation to the amount of fifteen billions of dollars.
.
(3) The war cannot be carried as an extra and business cannot be as usual*
(4) Any attempt to carry the war as an extra would pave the way for an
abuse of loans and a certain inflation of credit and prices which in the end
would increase the probable cost of the war by as such as twenty-five per
cent, through the enhanced prices which the Grovemment would have to pay for
all supplies purchased.
(5)
ings.
Government bond-'issues,to be safe, must be bottomed upon real sav
Intensive and discriminated savings and methods of promoting is?*'
thrift are necessary ingredients in any effective program of war finance.
(6)
A similar necessity exists for the effective mobilisation of the in
dustrial power of the country.
The right of way must be given.to industries
thatare tributary to the war needs of the Government.
Priority cf industry
is therefore definitely indicated as an essential part of a good financial
policy.
•
(7) Working to the same end, is priorty of credits, the different
industries of the country having priority upon the fluid credit of the
Federal Reserve System in the order of their importance (embargo of credit
to non-essential enterprises)
Such a priority is consistent with the spirit
of the Federal Reserve Act vriiich in one of .
its most fundamental clauses
directs that rates "shall be fixed with a view of accomodating cornrerce and
business".
War now being the nationrs business, it would be proper for
the federal Reserve Board and Banks to fix discounts., rates with a view of
31
X-469.
accomodating commerce and business to the degree in which it contributes
to war production.
(8)
The need of a well informed economic strategy for the purpose
of co-ordinating the industrial activities of the United States and those
of our Allies so as to weld the population of all these countries into
one great whole as a fighting machine^ through the conversion of the
needed raw materials and manufactured supplies into gun powder at the
front.
This is a war of blood and iron«
W . P. G . HARDING, GOVERNOR
.
P AU L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS . SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
AND FISCAL AGENT
ADD84€<iPLYto
FEDERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
November 1, 1917*
Dear Sir:
With reference to inquiries from several Federal Reserve
banks as to proper description on Form 104 of certain transactions
in connection with the loan operations of the Government, it is suggsted that the following changes and additions be made in the form:
.Under liability item 9 "U. S. Treasury Certificates of In
debtedness received from Treasury Department" add a new liability
item as follows. "Reserve Bank temporary receipts issued". This
new item should be used as an offsetting account against asset item
"Reserve Bank temporary receipts delivered to subscribers". These
two items will be gradually extinguished, as the outstanding certifi
cates are returned for cancellation.
After item 9 on the asset side
S. Treasury Certificates
cT Indebtedness
add the words "oh hand". This is intended for the
use of those banks which have issued their own receipts to some of
their customers and are holding the Certificates of Indebtedness in
their'own vaults,
With referehce to the second block of the form it is re
quested that liability item 5 "U. S. Treasury Certificates of Indebt
edness *- Allotted" show the gross amount of Certificates beginning
with the issue of August 9.
This modifies somewhat our previous instruction of Octo
ber 17, that this account show total amounts of certificates allotted
less amounts redeemed by the United States Treasurer.
Yours Very Truly,
Secretary.
Federal Reserve Agent,
Duplicate to preceding letter of Hot* 1, 1917
Stencil £-468
X-471
KNOW ALL MEN BY THESE PRESENTS:
as suret__, are held and firmly bound unto the UNITED STATES OF
AMERICA in the full and just sum of __________________________
_______________ _
dollars ($_____________ ) lawful money of
the United States; for which payment, well and truly to be made
we bind ourselves, jointly and severally, our joint and several
heirs, executors, and administrators, successors and assigns,
firmly by these presentsSealed with our seals, and dated this ____________ day of
_____________ , in the year .one thousand nine hundred and _____ ,
The condition of the above obligation is such, That whereas
under authority of an Act of Congress approved ____ .
___________
_______ , 19.17, the said ___________________________________ _ _
has filed an application with the Secretary of the Treasury,
through the Federal Reserve Board, for a license to export the
sum of $________________________
in gold to _________________
to be used for the following purposes:
X-471
- 2 WHEREAS, upon the recommendation of the Federal Reserve
Board, the Secretary of the Treasury has authorised the issuance
of such license, upon the condition, however, that the applicant
shall file with the Federal Reserve Board a bond running to the
United States in the penal sum of $__________________________
executed by the applicant as principal and by a surety approved
by the Federal ReseiVe Board and abnditionsd upon the submission
to the Federal Reserve Board within ninety days from date of sat
isfactory evidence that said gold has been used for the purposes
above enumerated in tfye application.
NCW, THEREFORE, if the said ___________________________ _ _
_________________ shall, within ninety days from date, furnish
to the Federal Reserve Board through the Federal Reserve Bank sat
isfactory evidence that the gold exported under the license
refer
red to has been used for the purposes indicated in the application
and above set forth and for no other purposes, such evidence to be
in the following form,to wit: •
Then this bond shall be void and of none effect, otherwise it shall
remain in full force and effect.
Signed, sealed and delivered in
the presence of -
'
X-472.
SUGGESTED TOPICS FOR DISCUSSION BY
THE FEDERAL ADVISORY COUNCIL, NOVEMBER 19, 1917.
I.
DISCOUNTS AND INVESTMENTS:
1.
Should member banks make a practice of discounting
their own acceptances.
2.
Suspension of commodity rates and reasons therefor.
3.
Is it desirable and necessary that preferential
rates be established for customers’ paper running
not longer than ninety days, which is secured en
tirely by United States bonds or Treasury certificates.
4.
General discussion of assistance to banks and savings
banks especially in carrying investments in railroad
and corporate bonds.
(a) Vihat means, if any, »re there of affording
adequate relief. under the present law.
(b) Should the Federal Reserve Act be -.mended
so as to permit the rediscount by Federal
Reserve Banks of notes secured by bonds of
railroad or industrial corporations.
(c) Discussion of an alternative plan.
II. CAPITAL AND RESERVE REQUIREMENTS.
1.
'
Should the Federal Reserve Act be amended so as to
allow state banks which were in existence on •
November 16, 1914, to become members of the Fed
eral Reserve System, although their capital be
less than national bank requirements.
X-47 2.
- 2 -
2.
Should the Board be given authority to exempt from the
reserve requirements imposed upon banks in reserve
and central reserve cities, banks not located in the
business centers whose business is largely local, and
which do not receive accounts from other banks.
(Note) -■ The Board has received numerous requests that it ask
Congress to modify the existing law in the manner
above indicated, but so far has reached no conclusion
in the matter. What would the Council advise?
III. GOLD EMBARGO:
(Note) -• The Board has been charged with the duty of
advising the Treasury in matters relating to
foreign exchange, and to exportations of gold,
and it would like to have the opinion of the
Council in the following matters:
1.
To what extent, and for what purposes should gold
be released for shipment to other countries.
2.
Should the stabilization of sterling exchange by pur
chases of sterling bills in this country be continued.
3.
Effect of the stabilization of sterling upon dollar exchange
4.
Should any attempt be made to stabilize dollar exchange
in countries of continental Europe, such as Sweden,
Holland, Switzerland, and Spain.
5.
Should an effort be made to bring the dollar back to
its parity in South American countries*
6.
Exchange relations with Canada.
*-i
Should unrestricted shipments of gold to Canada
be permitted, or if limited what arrangements
can be made to continue normal trade relations
with Canada and to facilitate the movement of
Canadian crops.
.
A
IV.
TREASURY CERTIFICATES OF INDEBTEDNESS;
1.
What means should be availed to secure a more general
distribution of Treasury certificates of indebtedness.
♦
X-473
, TOPICS FOR DISCUSSION AT THE CONFERENCE WITH
GOVERNORS OF FEDERAL RESERVE BANKS, NOVEMBER 8, 1917.
1.
RELATIONS WITH TREASURY AND FISCAL AGENCY NATTERS:
1.
Liberty Loan Bonds.
2.
(a)
Report of experiences in each district.
(b)
Brief outline of organization and suggestions
for the next campaign.
(c)
Member banks as depositaries for proceeds of
loan.
Treasury Certificates of Indebtedness.
3.
(a)
Extent of participation in each district.
(b)
Suggested plans for underwriting future issues
of these certificates and necessity of efforts
to secure more general distribution of them.
(c)
War savings certificates and stamps.
Payment of coupons by Federal Reserve banks.
CONCENTRATION AND. CONSERVATION OF GOLD:
1.
More effective cooperation by subtreasuries.
(a)
'
Steps to be taken for providing them with
currency other than gold certificates, in
exchange for gold coin and certificates', in
order that subtreasurias may make their pay
ments in other forms of currency.
•
2.
Board's circular letter (X-426) October 10th with
reference to the redemption of unfit currency.
3.
Light weisht gold -ooin.
(a)
Board's circular letter (X-399) September
22, 1917
♦
X-473
- 2 4.
III.
Gold embargo.
(a)
Its effect upon foreign exchanges.
(b)
To what extent should gold be released for
shipment to other countries; and for what
purposes.
(c)
To what extent are the regulations being evaded.
(d)
Facilities in each district for passing
intelligently upon applications.
DISCOUNTS AMD INVESTMENTS:
1.
Importance of member banks refraining from discounting
their own acceptances.
2.
Suspension of corrmodity rates and reasons therefor.
3.
Member banks’ fifteen-day collateral notes secured
(a)
By eligible paper
(b)
By United States Bonds and Treasury Certificates
4.
Stamp tax on notes secured by United States bonds.
5.
Advance in discount rates.
(a)
IV.
Whether desirable or necessary, and should
preferential rates be established for redis
counts running not longer than ninety days,
secured by United States bonds and Treasury
certificates.
BRANCHES OF FEDERAL RESERVE BANKS:
1.
Reports on existing branches.
2.
Discussion of new type of branch agreed upon in the
Cleveland district and considered in other districts.
X-473
-
V*
3 -
CHECK CLEARING AND COLLECTION
1*
TRANSFERS AND EXCHANGE*
Discussion of the development of clearance of checks
through Federal Reserve Banks*
(a)
Are any modifications in the per item charge
desirable*
(b)
Should there be daily settlements in the Gold
Clearing Fund.
2*
Should time allowance shhedule be readjusted to
prevent accumulation of float.
3.
Limit to which Federal Reserve Banks should invest
their funds in floAt.
(a)
4.
What statistics necessary for keeping this item
under close supervision.
Use of Federal Reserve transfer checks*
(a)
Charges on transfers of this kind in moderate
amounts; charges on large transfers by mail and
by telegraph*
V!. REPORTS, EXAMINATIONS, AND STATISTICS:
1*
Equalization of reserves against notes and deposits*
(a)
2.
3*
4.
Proper method of effecting same.
V/eekly ..reports by all member banks in the larger cities
and discussion thereon.
(a)
Uniform cardls to be used by ail Federal Reserve
Banks for thdse reports*
(b)
Importance of these statistics which the Board
proposes to publish henceforth.
Reports and examinations of member state banks and trust
companies*
Extent to which clearing house examinations may be
merged w i t h Federal Reserve examinations.
men or andum on this subject).
(Mr. Broderick’s
X-473
- 4 5.
Importance of devising proper system of tabulation of
member state bank and trust company reports in each district.
Should these reports at present be limited to banks in the
larger cities?
6.
Form of report vtfaich must be made to Federal Reserve Banks
by member state banks and trust companies three times a year,
(Date of these calls to correspond with three of
the Comptroller’s calls for national banks,)
7.
Circulars to member banks issued by Federal reserve agents
and by governors of Federal Reserve Banks*
(a)
8.
The Board should have for its files copies of
all circulars sent out by the Federal Reserve
agents and by the Federal Reserve Banks, and
in cases where circulars are issued by banks
two copies should be given to the Federal Re
serve agent, one for his files and one for
transmittal to the Federal Reserve Board.
Railroad and corporate bonds held by member and nonmember
banks, especially by savings banks.
(a) General discussion of this situation, with sug*gestions as to means, if any, of affording relief.
VII.
CAPITAL AND RESERVE REQUIREMENTS:
1.
Should the Federal Reserve Act be amended so as to allow
state banks which were in existence on November 16, 1914,
to become members of the Federal Reserve System, although
their capital be less than national bank requirements,
2.
Should the Board be given authority to exempt from the
reserve requirements itepbsed upon banks in reserve and
central reserve cities, banks not located in the business
centers whose business is largely local, and which do not
receive accounts from other banks.
•
X-473.
-
5 -
-Ill - STATE BANK MEMBERSHIP:
XX.
1.
American Bankers Association committee to promote
membership.
2.
Names of friendly state bankers to go on committee
in each state.
'
DIVIDENDS:
1.
X.
Policy to be pursued in view of decline in market
value of bonds held.
NOTE ISSUES:
1.
Should additional order be entered for printing of notes.
2.
Discussion as to pledge of commercial paper with Federal
Reserve agent, and endorsement back to bank by him of such
paper for collection.
X-474.
F E D E R A L
R E S E R V E
WASHINGTON
B O A R D
Memorandum:
In re - Clearing House Examinations.
In nineteen cities members of the Clearing House
Association and nonmembers with clearing privileges are sub
ject to examination by the Clearing House Examiner, usually
once each year.
The examination is thorough, particular at
tention being paid to the loans, discounts and credits of the
bank.
After each examination a copy of the examiners report is
delivered to the bank for the information of the directors.
In
case an unsatisfactory condition is disclosed, the report is
called to the attention of the Clearing House Committee.
Clearing House Examinations have proven very effective
in the elimination of unsatisfactory assets and the correction
of unsound tendencies in institutions under criticism.
While
no disciplinary power is vested in the Clearing House Committee,
still it was in a position to recommend the discontinuance of
clearing privileges which in itself would be a public notice of
unsatisfactory condition.
X-474.
- 3In Spokane the Clearing House Examinations are no-'/
being made under the supervision of the Federal Reserve Branch,
the manager being the Clearing House Exaiminar.
In Portland, it
is apparently the intention to have the examinations under the
supervision of the Portland Branch of the Reserve Bank.
The
Clearing House Association at Seattle is desirous of having the
local branch undertake the examination of Clearing House member
banks in that city.
In view of the fact that Reserve Banks or Branches are
located in at least two-thirda of the cities where Clearing House
examinations are now conducted, and further that a majority of the
Clearing House members in those cities are members of or maintain
clearing balances with the Reserve Bank, it is quite likely that
the question of the Reserve Bank undertaking the supervision of
the Clearing House Examinations is likely to be suggested to the
Board in the near future for consideration*
If the Clearing House Examinations are to be undertaken
by the Reserve Banks with the approval of the Federal Reserve >loard,
it should be definitely understood that the responsibility for 3uch
examinations shall be vested solely in the Federal Reserve 3ank and
X-474
—3 t
not in the Clearing House Committee.
will prove very unsatisfactory.
Dual control or supervision
In the appointment of examiners,
while it would he well to consider the suggestions of the Clearing
House Association, still the Reserve Banks, subject to the approval
of the Reserve Board, should appoint the examiners and have the super
vision of all examinations.
With reference to the expense of maintaining the examining
department, there seem3 to be no reason why the present joint fee
system should not he continued if agreeable to the Clearing House
Banks, otherwise the cost of examination should he assessed upon
the hank examined, as provided for in the Federal Reserve Act.
The Reserve Bank should he free to assign men in the examining
division to other duties or assign them to make examinations of
institutions in other cities.
Reports of examinations should he
filed with the Federal Reserve Bank and if an unsatisfactory
condition is disclosed, the matter should he handled by the Re
serve Bank officials and not the Clearing House Committee.
Banks are now examined efficiently twice each year.
National
If a further
investigation is to be made, it should be limited to loans, credits,
and investments, unless a complete examination is requested by the
X-474.
- 4
bank under examination.
Unless it is possible to nake an arrangement as out
lined above, the Clearing House examinations should not be under
taken by the Reserve Banks.
The Reserve Banks should have in its
files information as to the condition of all state banks and of
banks maintaining clearing accounts with it.
-
For that reason in
the event of the examinations not being undertaken by the Reserve
Bank, it would be well to arrange a system of cooperation with the
Clearing House Associations whereby copies of reports of examinations
should be given to the Reserve Bank for its files.
Under such a
plan it would be possible and desirable to designate a local Clear
ing House Examiner to act as Special Federal Reserve Examiner in
the
examination of State Member Banks and State Banks maintaining
clearing accounts with the Reserve Banks, so that examinations made
by him might be accepted in lieu of special examinations made by
examiners of the Board or of the Federal Reserve Bank.
This is
desirable particularly in instances where it has not been possible
to make satisfactory arrangements with the State Banking Conmisioners,
or where the report of the Clearing House examination would be prefer
able to that of the State Banking Commissioner.
X-474
- 5 -
Reserve Banks should have definite data as to condition,
before permitting a nonmember bank to open a clearing account for
the reason that the public is likely to assume that the Reserve
Bank is satisfied with financial condition of such nonmember bank.
Respectfully submitted,
(Signed)
J. A. BRODERICK.
N
W . P . 6 . HARDING. GOVERNOR
P A U L M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
W ILLIAM 6 . MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE B O A R D
H. PARI
SHERM)
and fiscal
SECRETARY
. ASST. SECRETARY
Agent
ADDRESS REPLY TO
W A S H IN G T O N
FEDERAL RESERVE BOARD
November 6, 1917
Dear Sir:-r
For some weeks past the Board has been making an analysis
of the items constituting the "float" and has ascertained in
the case of each Federal Reserve bank the percentage that this
flo at bears to total earning assets and to deposits.
Reference
is made to the table attached hereto, from which it w ill be seen
that these percentages are by no means uniform, but that there
are wide variations.
In some instances the amount of the
float is entirely out of proportion to what it should be and it
should be remembered that investments in float weaken the loaning
power of the Federal Reserve bank because it is a nominal or
unavailable asset which cannot be uCed as security for the issue
of Federal Reserve notes.
However, the present figures cannot
fa ir ly be used as a basis for defihite conclusions, because of
the abnoimaliy large transfers which are now being made for
government adCount)
and normal Conditions are naturally ob
scured or affected by the loan subscriptions now in prbcess of
'
settlement.
But the Board prcpasds to continue its analysis,
which w ill, in the course of time, show more clearly the real
conditions at each tank*
The attached sheet is sent you for
the purpose of directing the attentidn of your officers and ex
ecutive committee to the problems involved, and with the reunest
that careful consideration be ^iveil to the best methods of re
ducing the bank's investment in floatt
The Board wishes to be
advised at your early convenience as to the interest rates ad-*
Opted by your bank ih dealing with transfers» purchases Of checks
dr b ills for collection and similar items Which constitute float.
In the opinion of the Board this rate of interest should ap
proximate the fifteen day interest rate, and in cases where the
bank is inclined to invest too large a proportion of its funds
in float, it might be even higher.
.
Very truly yours
Governor.
Chairman.
Federal Reserve Bank
RATIO OF "FLOAT* OF EACH FEDERAL RESERVE BANK TO EARNING ASSETS AND DEPOSITS
OCTOBER 12, OCTOm 19, AND NOVEMBER 2, 1917.
■~* >
FEDERAL
RESERVE
BANK
Boston,
BLOT
: BAIT
:
Clearing :
:
:
:
i House
fx changea:Trans f ers : A ll other
—2--- ----------- 1October 12
514
385 :
14,909
October 19
3,050
1,181
18,698
November 2
2,190
14,111
882
: Total
: Total
:
:uncollect>ed: collected :
; Items
:
Items
:
:
Dr.
:
Cr.
:
Total
:
"Float® :
Futio of
"Float" to
total earn
ing assets
:
Ratio of :
: "Float" to :
:
Govt, and :
:bank deposits:
15,808
22,929
17,183
13,785
21,433
12,494
2,023
1,496
4,689
4.9
3.9
12.1
2.6
1.9
5.5
131,918
62,343
81,000
35,198
43,597
49,351
96,720
18,746
31,649
41.7
8.6
8.8
15,6
3.3
4.5
October 12
October 19
November 2
90,395
14,647
36,722
% - •»
m« •
41,523
47,696
44,278
Philadelphia,
October 12
October 19
November 2
3,601
7,850
2,547
» •» #
• » •1
,%
■ *«
27,080
33,420
31,817
30,681
41,270
34,364
26,139
32,663
29,072
4, 542
8, 607
5,292
14.9
30.7
16.4
6.0
11.8
6.6
Cleveland,
October 12
October 19
November 2
650
1,267
818
750
720
.1,142
13,433
17,268
15,777
14,833
19,255
17,737
12,470
15,790
13,680
2,363
3,465
4,057
5.2
8.3
7.5
2.2
3.7
3.7
Richmond,
October 12
October 19
November 2
484
1,679
2,751 .
• * •«
« * •♦
*. * • • ‘
15,959
21,261
17,365
16,443
22,940
20,116
13,952
15,494
14,692
2,491
7,446
5,424
11.3
37.0
25.1
6.2
18.2
9.7
October 12,
October 19,
November 2,
815
1,825
2,519
• •«
♦ ««t
13,096
19,634
14,986
13,911
21,459
17,505
8,890
11,432
8,885
5,021
10,027
8,620
26.4
46.6
32.6
16,0
29.5
23.1
New York,
A'tX&QtEi
~
2 1 .2
9.1
30.2
2 2 .2
1 2 .2
1 2 .6
523
6,129
4,955
24.6
16.0
11.3
9.0
4,445
4,587
4,516
3,863
9,145
10,179
28.1
60.6
49.3
2 0 .6
9,840
11,715
10,027
4,498
7,459
6,075
13.7
22.4
12.4
6.4
9’.9
19,544
5,019
6,192
5,664
7,534
15,829
13,880
35.0
67.7
55.9
19.1
36,8
26.4
6,323
10,058
10,187
9,735
22,447
18,544
6,433
9,984
9,971
3,302
12,463
8,573
13.0
49,5
26.7
4.7
16.3
9.8
185,158
232,918
212,935
322,205
332,302
317,901
173,825
210,048
191,811
147,380
122,254
126,090
25.3
21.8
16.0
10.6
9.1
October 1 2 ,
October 19,
November 2,
2,725
591
737
15,628
21,678
21,937
17,054
22,684
19,353
35,407
44,953
42,027
19,861
23,511
19,330
15,546
21,442
22,697
St. Louis,
October 12,
October 19,
N0vett.ber 2 ,
126
325
385
1,790
4,366
3,155
15,354
15,088
15,544
17,270
19,779
19,084
17,793
13,650
14,129
Minneapolis,
October 12,
October 19,
November 2,
479
..,
mm
m
3,202
7,395
5,749
4,627
6,337
8,946
8,308
13,732
14,695
October 12,
October 19,
November 2,
26
194
71
5,568
6,632
5,269
8,744
12,348
10,762
14,338
19,174
16,102
October 12,
October 19,
November 2,
9
90
103
5,488
13,505
9,632
7,056
8,426
9,809
San Francisco, October 12,
October 19,
November 2,
692
2,804
1,464
2,720
9,585
6,893
35,531
66,931
55,967
Chicago,
Kansas City,
Dallas,
TOTAL
October 12, 100,516
October 19, 32,453
. November 2, 48,999 '
22,
553
2 2 ,0 2 1
9.0
17,8
8 .0
8 .0
x-477
F E D E R A L
Sll S E R V E
WASHINGTON
In re - Interest charge*
B O A R D
Transfer Drafts Bought cind Sold*
Reserve banks receive from member banks for deferred credit
bank (transfer) drafts, at face value. If immediate availability is
desired the drafts are purchased at tne so-called market rate; and
credit is given upon the books of tne reserve bank. If purcnased from
a nonmember bank which does not niaixitvA,lii a clearing account with. th&reserve bank payment is made by cashiers cneck.
In the purcnase of transfer drafts, the reserve bank is
investing a portion of its available funas, the discount is the interest
return upon the funds so invested- As a general rule the so-called
market rate is based upon the 2$ interest received on daily balance
maintained by the drawing bank with its out of town bank correspondent.
A second element is the cost of snipping currency which acts as an
automatic check upon the discount or premium on transfer drafts- In
Dallas for instance at certain periods of the year, a premium is paid
for transfer drafts on hew York mid Chicago, tne demand apparently being
greater than tne supply.
Transfer draft transactions nave been a source of considerable
profit to a number of the reserve banks, but an analysis will show that
the rate of return upon tne average sum invested has been extremely low*
For instance in San Francisco, prior to the adoption of the new schedule
of charges, a' large amount was invested in transfer drafts at 20 cents
discount. As it takes at least 5 days to collect hew York items, this
figure was equivalent to an interest charge of about l-f$ per annum. It
was more profitable for a bank to sell drafts against its uncollected
items in transit at this rate and so replenish its reserves rather than
to discount its promissory note. It was preferabld for a member bank
to sell part of its float rather than a telegraphic transfer. Under
the new schedule, the rate for tne present will be 10 cents per day per
$1,000, equivalent to 3~5/8$£ per annum. This rate will be raised if
the volyme offered seriously affects available funds necessary to meet
the discount demands of member banksGeneral Comment
In tne opinion of the undersi0ned tne reserve bank must be
prepared at all times to purcnase both telegraphic and mail transfers
and transfer drafts from its members, as this is one of tne principal
means a bank nas of replenishing its reserve with the Federal reserve
bank. However, the rate of interest charged on mail transfers and transfer
drafts should be sufficiently hi^n to encourage tne use of discount
facilities.. Tne purcnase of a transfer draft is an extension of credit
witnout security and for tnat reason, it would be w&ll to adopt tne
X-4-77
principle of limiting the purchases from any one bank to a sum equal
to the collected or reserve balances carried by such bank vdth the
Federal reserve bank.
In the past heavy purchases were made of non-member banks.
In the future it would be well to make no purchases from any non-member
bank unless such bank carries a clearing account with the reserve bank,
the outstanding uncollected drafts so purchased not to exceed at any
one time the collected or reserve balance Garried with the reserve bank.
J. A. BRODERICK.
November 1, 1917
X-477
-3:-
October 31, 1917.
AVERAGE AMOUNT OF TRANSFERS HELD BY THE FEDERAL RESERVE BANKS;
EARNINGS AND RATE OF EARNINGS THEREON FOR THE MONTH OF SEPTEMBER,
1917,
.
M I N N E A P O L I S
Earnings for : Annual rate
the month : of earnings
Daily average
holdings for the
month
Total of daily holdings
for the month, as
shown on Form 34
4
♦
$109,719,624,26_______ $3,657,320.81
D A L L A S
13.6(533,47 2.74
:
$7,1.39*00______ 2.27 I
’
4,551,115.76
:
2,453.05
:
.658^
:
12,969.55
:
1.48%
:
3,782.27
:
2.94$
C H I C A G O
320,591,833.75
:
_S T.
46,868,543.41
:
10,686,394.46
L O U I S
1,562,251.45
KANSAS,
114,779,474.88
206,535,000.00
:
CITY.
(only)
3,825,982.50
:
1,637.03
:
.521%
6,884.500.00
:
6.877.00
:
1.22;,,
F E D E R A L
R E S E R V E
WASHINGTON
B O A R D
Merr.orandu.ir: for the Board:
In re - Weekly Reports cf Condition of Member Banks.
• It is respectfully recomrsnied that the Board consider the
advisability of having nameer banks doing business in the cities listed
in the attached memorandum, furnish weekly reports of material items as
f ollows:
.
1. United States Securities owned.
2. Loans secured by United States bonds and certificates.
3. All other loans ar.d investments.
4. Cash in vault.
5. Net Deposits:
(a) Demand
(b) Tims
6. Reserve with Federal Reserve Bank.
These reports would be received iron, banks doing business
in 82 cities, the number of banks reporting would probably be between
550 and 600.
It is intended that the figures be reported to the local
Federal Reserve Bank at the close of business Friday of each week and
that a summary be nade and telegraphed to the Reserve Beard for publica~
tion at the time of the issuance of the 'weekly statement on the follow
ing Saturday.
The point nay be raised that the clearing house figures
published weekly in a number of cities give the information which the
suggested report calls for.
published in but few cities.
That is partly true, but figures are
What is desired is a composite picture
X-478
- 2 -
of current banking conditions in the principal cities of all of the
Federal Reserve districts; figures which will be .available within
one week of the day of report and which will by a weekly comparison
of material items, give a good index to the trend of business in the
country.
After the plan has teen in operation say three or four
months, it might be deemed advisable to extend it so as to include
all member banks, but in such a case, a monthly report from member
banks outside of the cities referred to will suffice.
Respectfully submitted,
J. A. BRODERICK
There is attached hereto
1.
2.
3.
List of cities.
Copy of suggested report.
Sundry other forms suggested i
for use in compilation of
the figures.
November 3, 1917.
-3 ~
X-478
WEEKLY REPORT OF MEMBER BANKS.
Federal Reserve Bank of ______ .
________
Statement of Condition of _______ ■
Bank of '
as shown By books at the close of business
'
(Thousands only)
1.
United States Securities owned
2.
Loans secured by U. S. Bonds
and certificates,
3.
All other loans’and Investments.
4.
Reserve with Reserve Bank.
5.
Cash in vault.
6.
DEPOSITS
_____
191 .
$
Net
Demand Deposits *
Time
Deposits
Total Deposits
i.
e. Net amounts on which reserve is computedI
I certify that the above statement is correct.
Cashier.
NOTE.
This report is to be signed by an officer of the
Member Bank, and forwarded to the Head office of the Federal
Reserve Bank after the close cf business on Friday of each week.
(Report in thousands)
-4 ~
X*478.
WEEKLY REPORTS SHOULD BE REQUIRED OF
BANKS DOING BUSINESS IN CITIES LISTED
BELOW:
District.
RESERVE CITIES.
OTHER LARGE CITIES.
No. 1
Boston, Mass
Hartford, Conn.
Providence, R. I.
New Haven, Conn.
Springfield, Mass.
No. 2
New York, N. Y.
Brooklyn, N. Y .
Albany, N. Y.
Buffalo, N. Y,(Jan. 1,1918)
Newark, N. J .
Rochester, N. Y.
Syracuse, N. Y,
Jersey City, N. J.
Bridgeport, Conn.
No. 3.
Philadelphia, Pa.
Scranton, Pa.
Camden, N. J.
Wilmington, Del.
No. 4.
Cleveland, 0.
Pittsburgh, Pa.
Cincinnati, 0.
Columbus, 0.
Toledo, 0. (Jan. 1,1918)
Erie, P a .
Canton, 0.
Youngstown, 0.
Dayton, 0.
No, 5.
Richmond, Va.
Baltimore, Md.
Washington, D. C.
Charleston, S, C.
No. 6.
Atlanta, G a •
New Orleans, La.
Nashville, Tenn.
Chattanoogp, Tenn.
Birmingham, Ala.
Savannah, Ga.
No. 7.
Chicago, Ills.
Joliet, Ills.
Detroit, Mich.
Milwaukee, Wis.
Indianapolis, Ind.
Des Moines, Ind.
Sioux City, Iowa.
Cedar Rapids, Iowa.
Dubuque, Iowa.
Grand Rapids, Mich. (Jan. 1,1918)
Peoria, Ills.
(Jan. 1,1918)
Jacksonville,
Fla.
Knoxville, Tenn.
X-478
-i-
District
RESERVE CITIES
No. 8.
St. Louis, Mo.
Evansville, Ini,
Louisville, Ky.
Memphis, Tenn. (Jan. 1, 1918)
No. 9,
Minneapolis, Minn,
St. Paul, Minn.
Duluth, Minn.
No. 10.
Kansas City, Mo.
Omaha, Nebraska.
Denver, uolo,
St* Joseph, Mo.
Lincoln, Nebr.
Kansas City, Kansas.
Topeka, Kansas.
Wichita, Kansas.
Pueblo, Colo.
Muskoge, Okla.
Oklahoma City, Okla.
Tulsa, Okla.
no.
Dallas, Texas.
Houston, Texas,
Ft. Worth, Texas.
San Antonio, Texas.
Waco, Texas.
Galveston, Texas.
n
NO. 12.
OTHER LARGE CITIES.
San Francisco, Cal.
Los Angeles, Cal.
Portland, Oregon.
Seattle, Washington.
Spokane, Washington.
Tacoma, Washington.
Salt Lake City, Utah.
Ogden, Utah.
Oakland, Cal. (Jan.1,1918)
/
Ex - O f f i c i o m e m b e r s
W. P. 6. HARDING. GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN .
WILLIAM 6. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOAR *)482
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
and
WASHINGTON
Fis c a l A g en t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Dear Sir:
Your letter of
addressed to the Secretary
of the Treasury in reference to foreign exchange has been referred
to this office for reply.
In the opinion of the Board the conditions of which you
complain are dUe not so much to the depreciation of American gold in
foreign countries ds to the decline in the value of dollar exchange
in those countries? which decline, however, has been less than the
drop in francs ahd sterling exchange in the same countries.
It should be bo file in mind that the transfer to the United
States of large amounts held to the credit of foreign drawer* in
neutral countries with the banks of the natxbiis which are associated
with us in this war, such as Franco and Engiaildj has resulted in an
accumulation of funds and credits in this country subject to the
order of foreign drawers, which far exceeds ihe Credits available
for American banks in the leading nbutral cbUhtPies. This situation
might be relieved tb a Certain extettt by rodUcing to the minimum
our imports of goods ffCm these neuibal countries, aid it could be
entirely relieved,
(1)
By the Shipment of goods in feutficiexrt volume to
neutral countries, which goods, however, are badly nfeeded here at
home, As well as by oUh allies} and
'
(fe) fey the shipment Of gold in sufficient amounts to
offset foreign cfeeditd hefet
Provided the shipments of goods and gold were in sufficient
volume to cover not only our own purchases in foreign countries, but
also the adverse trade balance of the countries allied with us.
The embargo which was declared in the President's
proclamation of September 7th is designed to nnke available for our
own purposes and for our Allies, a maximum amount of food stuffs,
munitions, and supplies'; and to prevent these commodities from falling
into enemy hands; and the embargo on gold shipments is likewise
designed tcrprevent any depletion of our gold reserves in the United
States, which must be built up as a basis for opr constantly expanding
volume of loans and credits, as well as to prevent this gold from
finding its way through neutrals into enemy hands, thereby strengthening
the financial structure of the nations with which we are at war*
X-482
- 2 -
The Board has no doubt that your orgaization approves
of the object of the President’s embargo proclamation* It is
obvious that foreign exchange cannot be created out of nothing,
but that it is the result of trade which, for the best intrrest
of our own and of the other countries involved, is now being
controlled and directed as above outlined. In these circumstances
the mere creation of a Federal reserve exchange bureau could not
bring about any change, and could not possibly remedy conditions
as they now exist.
It appears to the Board that your organization, in
adopting the resolutions which you sent to the Secretary of the
Treasury, was not fully informed of all the facts bearing upon
the presont situation.
Very truly yours,
Go vernor*
X-484.
i• .
BY-LAWS ____________________
BRANCH BANK OF FEDERAL RESERVE BANK OF
Ponding the promulgation by the Federal Reserve Board
of rules and regulations, under authority of Section 3, govern
ing the operations of branch banks, the following by-laws have
been adopted by the Federal Reserve Bank of _____ . . .
„
with the approval of the Federal Reserve Board.
ARTICLE I.
Section 1 - Name and Plac3 of Business.
This branch shall have its principal place of business
in the city of _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ State of
and shall be known as the _
_
_
the Federal Reserve Bank of
_
.
_
branch of
.
Section 2 - Functions.
Under the direction of the Federal Reserve Bank, here-
•
“ ♦
fc.
' ’ '
•.m «
inafter referred to as the head office, its functions shall be:
(1)
To receive from any member bank within the collection
zone assigned to it under Section 3, Article I,of these
by-lvws, and from the United States, for credit with the
head office, deposits of current funds in lawful money,
national bank notes, Federal reserve notes, or checks
and drafts payable upon presentation, and for collection,
maturing notes and bills.
-
(2)
When tendered by such member banks within its zone as
may elect to deal directly with the branch, to receive
applications for rediscount under authority of Section
13 of the Federal Reserve Act, and to transmit such ap**
plications to the head office with the recommendation
X'-484
- 2 -
■
of the local board or of the discount conmittee selected
by th3 loCbkl board.
(3)
To pay checks drawn against the head office by member
banks within its collection zone out of funds deposited
with the branch by the head office for that purpose.
(4)
To act as a clearing house for member banks within its
zone and such nonmember banks as may qualify as clearing
members.
.
(5)
To provide, for the custody of unissued Federal reserve
notes under appropriate safeguards and to deliver Fed*
eral reserve notes when authorized to do so by the head
office to member banks within its collection zone.
(6)
To receive from any member banks or Federal reserve banks
for collection and remittance, or for collection and credit
with the head office, or with any other Federal reserve banks
through the head office, items drawn against any bank within
its collection zone.
(7)
To receive from any nonmember bank or trust company within
its collection zone solely for the purpose of exchange or
collection, deposits of current funde in lawful money,
national bank notes, Federal reserve notes, checks and
drafts payable upon presentation, or maturing notes and
bills, provided, such nonmember bank or trust company main
tains with the head office a balance sufficient to offset
the items in transit held for its account by the head of
fice and its branches.
Section 3 .
Theccol?.ection zone for
■
be known as the _______________________________
the following cities:
branch shall
zone, ani shall* include
•
- 3 '■
Section 4. - Re ports.
The
branch shall make a cUily report
to the head office on forms to be prescribed showing (a)
(b)
(c)
(d)
Amounts received on deposit for credit .with the head office.
Checks paid for the head office.
Discounts recontended.
.
Items received for collection and forwarded, and for which
credit should be given by the head office at the expiration
of the time allowed in collection schedule.
Section 5. - Reserve Account.
The balance appearing to the credit of a member bank on the
books of the head office shall constitute its reserve, but member banks
depositing with the branch may charge the Federal reserve bank with all
items on day of deposit unless drawn against banks for which allowance
is provided in collection schedule, in which case such banks may take
credit at tne expiration of such time allowance.
Member banks may
likewise take credit for the proceeds of discounts recomnended by the
local board on the date that the local, board or its discount committee
recommends the granting of such discounts, provided, the notes, drafts,
re
or bills of exchange offered for/discount, or the note of the applying
bank secured by eligible collateral, have been actually received by
the branch.
The head office reserves the right to return through the
branch any items which nay be determined to be ineligible or which, for
any reason the head office is unwilling to accept, in wflnich case* vfcems
so returned will be charged to the reserve account of the bank receiv
ing credit therefor.
11/16/17
X-484
ARTICLE II.
.
.
Section 1
NUMBER AND QUORUM: The number of directors shall
be five of vrherr. the manager shall be one.- A majority
of the directors shall constitute a quorum for the
transaction o: business,, but loss than a majority
ngr adjourn from time to time until a quorum is in ■
attendance*
.
Section 2
VACANCIES: Vacancies in the membership, of- the Board
shall be filled and successors selected in the manner
provided by lavy,
.
Section 3:
MEETINGS: There shall be a' regular meeting of the
■
Board on the Tuesday next preceding the first Friday
of oach month at 10 o*clock A. M . , or if that day be
a holiday, on the first succeeding full business day.
The manager shall be empowered to call a special meet”
ing at any time, or shall do so upon the request of the
Federal Reserve Bank of
•
, or the written re
quest of any two directors.
Notice of said meeting if
any by mail, shall be mailed at least one day prior to
date, of meeting and if given by telegraph or telephone,
at least two hours before the tim3 of meeting.
'
Section 4;
POWERS:
(a) The Board of Directors shall supervise
the operation of the branch under direction and control
of the Federal Reserve Bank of
„ subject to
such regulations as the Federal Reserve Bsard may pre
scribe and shall exercise the functions prescribed in
Article I, Section 2, of these By-Laws.
Section 5:
Directors whon present at directors' meetings shall
receive a compensation of _________ dollars per day
for each day the Board is in session, and an allowance
to cover actual necessary expenses incident to attendance
at regular or. special meetings of the Board.
Section 6:
The directors of the Federal Reserve Bank of
'
shall fix the compensation of officers, clerks and em
ployes of the Branch, subject to the approval of the
Federal Reserve Board.
Section 7:
All expenditures of the Branch shall be subject to the
approval of the directors of the Federal Reserve Bank
of
'
’
.
X--484
- 5 -
■
if
Section 8:*
1ORDER GF BUSINESS-' The following shall be the order .
of business at each meeting of the Board.of Directors
of the Branch.
.
(l) Reading and disposition of minutes of the last
last regular meeting..
'
C*2) Report of the manager, including information con
cerning banking and business conditions im the Branch
territory, as well.as detailed summary of all business
transacted since last regular meeting and statement of
present condition, the latter to include*
.
.
(a)
(b)
Statements concerning clearing operations.
All official correspondence received from the
Federal Reserve Bank of 1
.
''
(3) Reports- of committees.
.
'
’
' .
(’■*) Unfinished business.
■
. (5) Approval of reports arid recommendations to Federal
. Reserve Bank of r
■
.
(6) New Business.
'■
• .
ARTICLE III.
'
Section 1:
Section
2:
.
‘
OFFICERS. ‘
The officers, who shall be chosen by the Board of
Diroctors of the Federal Reserve Bank of
■*
shall be nsranager, who shall be one of the directors
of the Branch., and a cashier.
They shall hold office.,during the pleasure of the directors of the Federal Rer
serve Bank of
*
MANAGER.: The manager, shall preside at all directors'
meetings and shall have general charge of the Branch
and shall be officially designated as "Manager,
Branch". The Manager shall, jointly with the cashier
have charge of all moneys received or paid out on ac
count oi the Branch, and shall sign all checks for the
payment of money, as cay be authorized by the Fedexal
Reserve Bank of
.
-Ie shall have custody of
all moneys, investments and collaterals held by the
Branch, subject to such rules as the Board cay adopt
a3 to their safety. In all cases where duties of sub
ordinate officers of the Branch are not specifically
2916
X-484
- b -
■ .
prescribed by- the by-laws or the Board of Directors
of the Branch or the Federal Reserve Bank of .
they shall be the duties prescribed by and the instruc
tions of the Manager.
In the absence or disability of the
'Section 3 : ACTING MANAGER:
Manager, the Federal Reserve Bank of
tay
appoint an Acting Manager, who shall exercise the
powers and discharge the duties of the manager; and
for such services he shall receive a compensation to
be fixed by the Federal Reserve Bank of
■
'Section 4 :
CABKIER: The Cashier shall have such joint custody
of all coneys, investments and collaterals as may be
delegated to h i m by the Manager,, subject to such rules
as the Board may adopt as to their safety. He shall
countersign all checks for the payment of money signed
by the Manager. He shall keep the minutes of the Board
meetings and of all committees of the Board and perform
such other duties as may be assigned to him by the .Mana
ger, subject to the approval of the Board of Directors.
Section 5
ACTING- CASHIER: In the absence or disability of the
cashier, the Board of Directors of the Branch cay ap- .
point an Acting Cashier, vdio shall exercise the powers
and perform the duties of the cashier and shall receive
a compensation to be fixed by the Federal Reserve Bank
of
'.
.
ARTICLE IV.
COUNSEL
Section 1,
\
■
' ■
The General Connsel of the Federal Reserve Bank of
shall act as counsel for the Branch, and shall
represent the Branch in such matters as may be assigned
to him aud shall approve all legal documents; and said
general counsel nay appoint a local attorney as associate
counsel, with a retainer to be approved by the Federal Re
serve Bank ■ of .
•
i
X-484
9 >
- 7 -
ARTICLE V.
AUDITOR
Section 1,
The Auditor of the Federal Reserve Bank of
shall act as Auditor of the Branch.
ARTICLE VI*
BUSINESS HOURS
Section 1.
The Bank shall he open for business fron 9:00 A.M.
to 2*30 P. M., on each day except Saturdays and
Sundays or days or parts of days established as
legal holidays.
On Saturdays the bank shall open
at 9*00 A. M. and close at 12*00 noon
ARTICLE VII.
amendments.
These by-laws ray be amended at any regular director^'
meeting by a izajonty vote of the entire Board, subject
to the approval of the Federal Reserve Beard.
P-918
X-484
By-Laws_______________________
BRANCH Ba NK OF FEDERAL RESERVE Ba NK OF
pending the promulgation b y the Federal Reserve Board
of rules and regulations, under the provisions of Section 3 of the
Federal Reserve *.ct governing the operations of branch banks, the
following by-laws are hereby adopted by the _________ Branch of the
Federal Reserve Bank of
. and approved by the Federal
Reserve Bank of __ __________ , under authority of the Fedeial Reserve
Board:
ARTICLE I
Section 1
- Name aid place of Business,
This branch shall bavo its principal place of business
in the city of __________ , State of
. anu shall bo known
as t h e ___________ Branch of the Federal Reserve Bazik o f __________
Section 2
- Branch Territory.
The territory apportioned to said
shall be that part of t he State of
Branch
comerlsed m
t h e ______
Federal Reserve District and the Counties of
—
.
_________________ , in the State o f __________, within said Federal
Reserve Bistrict.
Section 3
-
Powers and Functions,
Subject to such rules and regulations as the Federal
Reserve Board may prescribe, and under the direction of the Federal
Reserve Bank of
Bahk shall be as follows
. the powers and functions of this Branch
X-484
(a) To receive from number banks, and from non-member
banks and trust companies, deposits and to sake payments
of money for and in behalf of the Federal Reserve Bank
of ___________ to the same extent and in the same manner
as now or hereafter: authorised by law in respect of a
Federal Reserve Bank;
(b) To maintain and operate a department or departments
for th$ clearing and collection of checks and drafts
payable upon presentation, and also for the collection
of maturing notes and bills, for the account of said
Federal Reserve Bank of
. as fully as may be
from time to time authorized by law for Federal Reserve
Banks;
.
(c) To receive from member banks within said Branch
Bank territory applications for discount of eligible
notes, drafts, bills of exchange and acceptances, and
promissor, notes for periods not exceeding fifteen days
secured by satisfactory collateral, and offers for sale
of cable transfers, bankers1 acceptances and bills of
exchange eligible for purchase by a Federal Reserve Bank,
in accordance with law, and to transmit such applications,
promissory notes and offers, with recommendations, to
the Federal Reserve Bank of _ _ _ _ _ for final action
and credit or other disposition as may be desired by the
applying member banks; provided, that nothing herein
contained shall be construed as to abridge or modify the
rights and powers of member banks to deal directly with
the.Federal Reserve Bank of
with reference to
all relations of member banks with their Federal Reserve
Bank.
(d) To perfonxt such other duties'and services as m a y be
specifically required of it by the Federal Reserve Bank
of _ _ _ _ _ _ _ _ or the Federal Reserve Agent for said
District.
Section 4 - ReportsThe s a i d ______.
Branch shall make daily reports
of operations to the Federal Reserve Bank of
be prescribed showing - -
.
on forms to
X*484
-
3
T
(a) Amounts received on deposit for credit
with the head office.
(b) Checks paid for the head office(c) Discounts recommended.
(d) Items received for collection and forwarded,
and for which credit should be given by the
head office at the expiration of the time
allowed in collection schedule.
and shall also make such other reports as.may beirequired by the
Federal Reserve Bank of _ _ _ _
or the Federal Reserve Board.
Section 5 - Reserve Account
The balance appealing to the credit of a member bank on
the books of the head office shall constitute its reserve, but
member banks depositing with the branch nay charge the Federal Reserve
Bank with all items on day of.deposit unless drawn against banks for
which allowance is provided in collection schedule, in which case
such banks nay take credit at the expiration of such time allowance.
Member banks may likewise take credit for the proceeds of discounts
reconmended by the :local board on the date that the local board or
its discount committee reconmends the granting of such discounts,
provided, the notes, drafts, or bills of exchange offered for re**
discount, or the note of the applying bank secured by eligible
collateral, have been actually received by the Branch.
The head office
reserves the right to return through the Branch any items which nay
be determined to be ineligible or which,for any reason the head
office is unwilling to accept, in which case items so returned will
be charged to the reserve account of the bank receiving credit there
for.
X-4S4
— 4 'T
ARTICLE II.
Section 1 :
NUMBER AND QUORUM:. The number of directors shall be
five of whom the manager shall be one. A majority
of the directors 3hall constitute a quorum for the
transaction of business, but less than a majority
. may. adjourn from time to time until a quorum is in
attendance.
Section 2 :
VACANCIES: Vacancies in the membership of the Board
shall be filled and successors selected in the manner
provided by law,
Section 3 :
MEETINGS: There shall be a regular meeting of the
Board on the Tuesday next preceding the first Friday
of each month at 10 o'clock ■*. M . , or if that day be
a holiday, on the first succeeding full business day.
The manager shall be empowered to call a special
meeting at any time, or shall do so upon the request
of the Federal Reserve Bank of ___________ or the
written request of any two directors. Notice of said
meeting if sent by mail, shall be mailed at least one
day prior to date of meeting and if given by
telegraph or telephone, at least two hours before the
time of meeting,
Section 4 : POWERS:
(a) The Board of Directors shall supervise
the operation of the branch under direction and control
of the Federal Reserve Bank of __________ subject to
such regulations a s the Federal Reserve Board may ’
prescribe and shall exercise the functions prescribed '
in Article I, Section 2, of these by-laws.
Section 5:
Directors vrfien present at directors1 meetings shall
receive a compensation of
dollars per day for
each day the Board is in session, and an allowance to
cover actual necessary expenses incident to attendance
at regular or special meetings of the Board.
Section 6:
The directors of the Federal Ressrve Bank of
shall fix the compensation of officers, clerks *nd
employes of the Branch, subject to the approval of the
Federal Reserve Board.
Section 7:
All expenditures of the Branch shall be subject to the
approval of the directors of the Federal Reserve Bank
of ______________ .
2921
X-484
■
iifi
Section 8;.
“ 5 ^
■
iORDER OF BUSINESS: The following shall he the order
of business at each meeting of the Board.of Directors
of the Branch.
(1) Reading and disposition of minutes of the last
last regular meeting..
•
(2) Report of the manager, including information con
cerning banking and business conditions in the Branch
territory, as well.as detailed summary of all business
transacted since last regular meeting and statement of
present condition, the latter to include:
.
.
(a)
(b)
•'
Statements concerning clearing operations.
All official correspondence received from the
Federal Reserve Bank of '
(3) Reports of committees.
.
■
'
.
(-t) Unfinished business.
.
(5) Approval of reports and recommendations to Federal
Reserve Bank of '
(6) New Business.
.
'
ARTICLE III.
.
.
'
OFFICERS.
Section 1:
Section 2:
The officers, who shall be chosen by the Board of
Directors of the Federal Reserve Bank of
shall be asmanager, who shall be one of the directors
of the Branch, and a cashier.
They shall hold office*.-'
during the pleasure of the directors of the Federal Rer
serve Bank o f . .
*
MANAGER: The manager, shall preside at all directors1
meetings and shall have general charge of the Branch
and shall be officially designated as "Manager,
Branch".
The Manager shall, jointly with the cashier
have charge of all moneys received or paid out on ac
count of the Branch, and shall sign all checks for the
payment of money, a3 may be authorized by the Federal
Reserve Bank of
He shall have custody of
all moneys, investments and collaterals held by the
Branch, subject to such rules as the Board may adopt
as to their safety. In all cases where duties of sub
ordinate officers ol the Branch are not specifically
X-484
r 6 •
■ .
prescribed by- the by-laws or 'the Board of Directors
of the Branch or the Federal Reserve Bank of ..
they shall be the duties prescribed by and the instruc
tions of the Manager.
.
In the absence or disability of the
Section 3 : ACTING MANAGER:
Manager, the Federal Reserve Bank of
- r-ay
appoint an Acting Manager, who shall exercise the
powers and discharge the duties of the manager; and
for such services he shall receive a compensation to
be fixed by the Federal Reserve Bank of
■
'
Section 4 :
CABHIER: The Cashier shall have such joint custody
of all moneys, investments and collaterals as may be
delegated to him by the Manager, subject to such rules
as the Board nay adopt as to their safety. He shall
countersign all checks for the payment of money signed
by the Manager. He shall keep the minutes of the Board
meetings and of all committees of the Board and perform
such* other dut5.es as nay be assigned to him by the Mana
ger, subject to the approval of the Board of Directors*
Section 5
ACTING CASHIER: In the absence or disability of the
cashier, the Board of Directors of the Branch nay ap
point an Acting Cashier, who shall*exercise the powers
and perform the duties of the cashier and shall receive
a compensation to be fixed by the Federal Reserve Brnk
of
.
.
ARTICLE IV.
* .
COUNSEL
Section 1
■The General Counsel of the Federal Reserve Bank of
shall act as counsel for the Branchy and shall .
represent the Branch in .such matters as may be assigned
to him and shall approve all legal, documents; and said
general counsel may appoint a local attorney as associate
counsel, with a retainer to be approved by the Federal Re
serve Bank of i
'
"
• X-484.
-
7
v
■\
ARTICLE V.
‘
AUDITOR
Section 1.
The Auditor of the Federal Reserve Bank of
______________ ehall act as Auditor of the Branch,
ARTICLE VI.
*
BUSINESS HOURS.
Section 1.
The Bank shall be open for business from 9:00 A.U .
to 2:30 P. M.j on each day except Saturdays and
Sundays or days or parts of days established as
legal holidays. On Saturdays the bank shall open
at 9:00 A. M. and close at 12:00 noon,
%
‘
'
ARTICLE VII
AMENDMENTS,
These by-laws nay be amended at any regular
directors1 meeting by a majority vote of the
entire Board of directors of the Federal
Reserve Bank of
. subject to the
approval of the Federal Reserve Board,
X - 4 *S r 6 '
F E D
.L r
a
l
.r E S E R V
WASHINGTON.
B O A R D
Memorandum for the Feaerul Reserve Board.
In re - State Bank Reports.
Section 9 of the Federal Reserve Act provides:
(State banks) "Shall be required to make reports of con
dition and of the payment of dividends to the Federal Reserve Bank of
which they become a member. Not less tnan three of such reports shall
be made annually on cu.ll of the Federal Reserve Bank on dates to be
fixed by the Federal Reserve Board."
1.
Reports of the Payment of Dividends.
It is recommended that tne report used by the office of
the Comptroller of tne Currency be adopted for use by State Member Banks
in reporting to the Federal Reserve Banks.
2.
Reports of Condition.
The law provides that not less than three of sucn re
ports be made annually to tne Federal Reserve Bank on dates to be fixed
by the Federal Reserve Board.
It is recommended that during tne year of 1918 five
calls be made for reports of condition on dates corresponding to those
fixed by the Comptroller of the Currency for National Banks.
These reports to be made to tne Federal Reserve Bunk
in duplicate, one copy to be retained by tne Federal Reserve Bank ana the
other to be sent to tne Federal Reserve Board. Compilation of statistics
will be made by tne statistical division of tne Federal Reserve Board.
3.
Form.
Form of report attached to this memorandum is submitted
for tne consideration and approval of the Board*
.
The foim of the report is sufficiently uniform with that
used by the Office of the Comptroller of tne Currency as to permit of the
consolidation of tne more important items for all members of tne Federal
Reserve system*
4*
Publisher*s Certificate.
Form of the published Certificate submitted for the con
sideration ana approval.
'
It is recommended that when a call is made simultaneously
by the State Banking Department and Federal Reserve Bank, that the State
Member Banks be permitted to forward a copy of the Publisher's Certificate
furnished the State Banking Department in lieu of the one suggested by
the Board.
Respectfully,
.
November j>1 I 9I 7 .
(Signed) J. A. Broderick
X-486.
.
November 6,■ 1917.
.
Memorandum for the Board:
With reference to attached -memorandum and form of Publishers’
Certificate for nonnational member banks,, the following suggestions
are made:
While on general principles it would be desirable to have copies
of the reports to the Board reproduced In the local press, it may be
questioned (l) whether such publication can be legally ordered by the
Board under the Amended Act (Counsel seems to doubt it); (2) whether
the publication of reports, prepared in a different izvfr from that used
by the State banking department, would not cause confusion in the minds
of the readers and prove a source of trouble to the banks-
It should
also be borne in mind that in case the dates of call made by the Board
are not the same as those of the State banking department, some of the
non-national members may have to publish as many as 8 - 9 statements a
year.
Under the circumstances it might be possibly better not to insist
upon the publication of reports other than those required by the State
authorities.
In cases where the State laws do not require publication
of reports in the local newspapers the Board might very properly sug
gest t# reporting non-national banks the advisability of publishing
their reports to the Board and to use attached form for the purpose.
Respectfully,submitted,
Ivi. JACOBSON.
Statistician.
X-488
TREASURY DEPARTMENT TELEGRAM.
WHERE WRITTEN
Mr. Leffingwellrs office*
Washington, November 6, 1917
N I G H T
L E T T E R .
To Governors, Federal Reserve Banks
Boston, Mass.
New York, N.'Y.
Philadelphia, Pa.
Cleveland, Ohio.
Richmond, Va.
Atlanta, Ga.
Second Liberty Loan.
Chicago, Ills.
St. Louis, Mo.
Minneapolis, Minn.
Kansas City, M O •
Dallas, Texas.
San Francisco, Cal
Any qualified depositary may make payment by
credit of amounts which correspondent banks and trust companies would other
wise pay by chdck upon the qualified depositary* Stop.
This may be done
whether the qualified depositary and correspondent bank or trust company are
in the same district ®r in different districts. Stop.
In cases where they are
in different districts, the federal reserve bank of the district where the
subscription is made must be notified by telegraph by the reserve bank of the
district where payment is made, and the reserve bank of the district where pay
ment is n£tds must credit the war loan deposit account with the amount so paid
but indicating that the payment is made on account of subscriptions in the
other district,stop.
Thus, if a bank or irust company in the Chicago district has payments
which it does not intend to make in Treasury certificates nor by credit, and
would otherwise make by check or by telegraphic transfer upon its New York
correspondent, such bank or trust company may telegraph or write its New York
bank or correspondent to pay a specified ambunt in cash or b$> credit to the
-2-
X-488,
Federal Reserve Bank of New York as fiscal agent of the United States
Deposit
War Loa n/k ccount, and to notify the Federal Reserve Bank New York
that such payment is made for account of the Chicago bank or trust company
in payment of or on account of a subscription of the latter filed with the
Federal Reserve Bank of Chicago*
Stop,
In case of payrant by a subscribing
bank or trust company through a qualified depositary in the same district,
the procedure is substantially the same except of course only the reserve bank
of the district need be notified of the transaction* Stop*
Subscribers desiring to avail themselves of this method must give
ampl^ notice to the correspondent bank or trust company which they expect to
Call upon to make payment in order u
pared and qualified* Stop*
that such bank or trust company may be pry
It is essential that steps should be taken in
ample
time to avoid possibility of payment not reaching one or the other federal
reserve bank
on time. Stop* The object from the point of view of the Treasury
Department in sanctioning this procedure is to avoid unnecessary dislocation
of funds and to reduce float as far as practicable. Stop* The procedure is of
course wholly permissive and applies only to such funds as the subscribing bank
or trust compajgy would withdraw from its correspondent bank or trust company
i■
_
t
,
whether in its district or out of its district* Stop ‘Please notify banks
and trust
companies
in your district accordingly.
(Signed)
Leffingwell.
(Charge Liberty Loan.)
EX-OFFICIO MEMBERS
W . P . 6 . HARDING. GOVERNOR
PAU L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM 6 . MCADOC
SECRETARY OF THE TREASURY
C h a ir m a n
JOHN SKELTON W ILLIAM S
Co m p t r o l l e r o f t h e Cu r r e n c y
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , SECRETARY
SHERMAW p ASST. SECRETARY
AjpP“F KtCQ&LrAfi ENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Novsaber 8, 1917.
Dear Sir:
Under an Act of Congress, passed September 24, 1917,
provision was made for the issuance by the Secretary of the Treas
ury of two billions of war savings certificates in snail denomina
tions, payments for which were to be evidenced by stamps.
The
Secretary of the Treasury was given a wide latitude and discretion
in making the arrangements for the issuance and sale of these war
savings certificates.
Under thetterms of this Act, the Secretary of the Treasury
has appointed a Committee to organise the work of selling these war
savings certificates and has named Mr. Frank A, Vanderlip, President
of the National City Bank cf New York, as Chairman, and Mr. Delano
of this Board as one of the members, (for -full list of Committee see
page 730 of the October Bulletin).
The plans thus far developed are stated in considerable
detail in Treasury Department Circular of November, 1917, a copy of
which is inclosed herewith; but in addition to the information there
in contained, it is proper to explain that the Secretary of the Treas
ury will desire to employ the Federal Reserve Banks as Fiscal Agents
for the Government distribution of these certificates.
It is not expected that this will throw any large amount of
additional labor on the Federal Reserve Banks for the reason that it
is thought that the sale of cumulative $5.00 certificates will, to a
very great extent do away with the necessity of the selling of "baby11
bonds in denominations of $50.00, and also take the place very largely
of the part-payment plan of selling bonds. The main object is that
the Federal Reserve Banks shall serve as centers of distribution and
supply for these war savings certificates stamps, literature, etc.,
and it is the thought of the Board that the Federal Reserve Banks can
readily utilize a part of their Liberty Loan bond facilities for hand
ling the new certificates. This will be especially possible for the
reason that the brunt of the campaign for the selling of the war
savings certificates will cone in December and January in the interim
between the major campaigns for selling Government bonds.
X-489
- 2 -
As w i l l be seen from the Treasury Da partner, t C ir c u la r '
.
a lre a d y referred- to, the Se cre ta ry of the Troaaury ’w i l l u t i l i z e
the p ost o f f i c e s fo r the d is t r ib u t io n of the war sa v in g s c e r t i f
icates,, stamps and lit e r a t u r e .
Furthermore, through the courtesy
of the American Bankers' A e s o c ia t io n . it i s expected to in t e r e s t not
' only a l l the n a tio n a l banks but a l l the S ta te banks in the enter
p rise .
The r e s u lt w i l l be th a t w hile the Federal Reserve Banks w i l l
not them selves be expected to take a c tiv e p art in the s a le of war
sa v in g s c e r t if ic a t e s , i t i s desired th a t they s h a ll be the main
depots from which banks, la r g e employers of la b o r, r a ilr o a d s , mer
chants, m anufacturers, and others, who have consented or may here
a ft e r consent to a c t a s s e l l i n g agents, w i l l receive t h e ir supply.
The Federal Reserve Banks a s F is c a l Agents of the Govern
ment w i l l receive c e r t if ic a t e s and stamps in su ita b le pamphlet form
and in la r g e consignments and w i l l account fo r them to the Treasury
Department as r a p id ly a s they cake s a le s .
I t i s not the d e sire of
the Boa.rd th a t they s h a ll be c a lle d upon to make r e t a i l s a le * , but
only th at they s h a l l deal in consid erab le or w holesale q u a n titie s
in su p p ly in g banks, r a ilr o a d s , merchants, m anufacturers, and other
• e rp oration s who may s a i l upon them.
A l i s t of the su p p lie s which w i l l be sent d ir e c t t o the
Federal Reserve Sinks i s as fo llo w s:
1.
Form of a p p lic a t io n fo r a u th o rity to a c t
a s au th orized " s a le s a ge n t".
2.
An illu m in a te d p o ste r or s ig n to be giv e n
only to duly au th orised age n cie s.
3.
A la r g e envelope co ntainer fo r c e r t if ic a t e s ,
stamps, etc.
4.
The standard war sa v in g s c e r t if ic a t e blanks
s iz e 8" x H * .
5.
The envelope co n tain e r f o r the c e r t if ic a t e
blank, siz e 4" x 83-"
X-489
- 3 -
6,
The war sa v in g s c e r t if ic a t e stamp ($5.00
m a tu rity v a lu e ) in standard p ack ages.
7,
The t h r i f t card, to be used c h ie fly by
sch o o l ch ild re n .
8,
Tw enty-five &ent t h r i f t stamps in standard
packages; to be used c h ie fly by school
ch ild re n -
Po st o f f i c e s through which s a le s of c e r t if ic a t e stamps and
t h r i f t stamps w i l l la r g e ly be made; w i l l make rem ittances to designated
-member banks who w i l l in tu rn remit to the Federal Reserve Bank of t h e ir
d i s t r i c t fo r the c r e d it of the Treasurer of the United S ta te s.
'These
rem ittances should be accompanied by a dep osit s l i p in t r ip li c a t e * one
copy to be re tain e d by the Federal Reserve Bank* one copy to be sent to
the re m ittin g bank and one copy to be sent to the T reasu rer of the
•United S ta te s.
•
o b lig e .
You are requested to k in d ly acknowledge the above* and
Yours very tru ly *
Governor.
X tc lo su re .
Ex-O fficio m em be rs
W. P. 6 . HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES 'S. HAMLIN
WILLIAM 0. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
X-4&1
November 9, 1917.
Hear. S i n
In all cases where applications for permission to
export gold in any form to Mexico are presented to you,
the Board requests that you ask the applicants to indi
cate separately the amounts of gold which they desire
for
Use in paying duties to the Mexican Government, and
the amounts which they require for payroll use.
This
will facilitate the Board^s action in a nUmbei* of cases.
Very truly yours,
Secretary
Federal Reserve Bank,
X-493
PRINCIPAL MATURITIES FROM
DECEMBER 1, 1917, THROUGH 1918.
DECEMBER 1917.
$
500,000
1.000. 000
Case (J.I.) Threshing Machine Co. 1st Serial 6s
Dec. 1, 1917
Huntington Land & Improvement Co. Coll. Tr.
Serial 6s
Dec. 1, 1917
1.000. 000
2,500,000
Reading & Columbia R.R.
bfo Debentures
Dec. 1, 1917
JANUARY 1918.
$4,790,000
:},135,000
686,000
750,000
1,500,000
1,700,250
Arkansas & Memphis Ry. Bridge & Terminal Co.
,
3 Yr. 6^ Gold Notes
City- Water Co. of East St. Louis & Granite City,
111. Consol. 6s (extended)
Cumberland Telephone & Telegraph Co., Inc.
1st 5s
.
Ellsworth Collieries Co. (Lackawanna Steel Co.)
Coll. Purchase Money 5s
Hudson River Pulp & Paper Co.(int. Paper Co.)
Gold 6s
Kansas Natural Gas Co. Sinking Fund Second 6s •.
*J>
Jan. 1, 1918
Jan. 1, 1918
Jan. 1, 1918
Jan. 1, 1918
J a n . 1, 1918
1918
Jan.
*
,691,000
750,000
2,000,000
1,000,000
1,-95,867
625.000
797,100
1.125.000
500.000
550.000
750.000
500.000
1.250.000
LI,000,000
900.000
750.000
500.000
Mechanical Rubber Co.(Rubber Goods Mfg. Co.)
1st 6s
Minneapolis, St. Paul, Rochester & Dubuque Elec
tric Trac.Co.lst Lien 6$ Coll.Tr.Notes
N. Y. Central Lines 4^- $ Equip. Trust of 1910
N. Y. Central Lines 4g- % Equip. Trust of 1912
N. Y. Central Lines 42,.$ Equip. Trust of 1913
Chio Cities Gas Co. 6
$ Serial Notes
Perkiomon R. R. First Series 5s
Perkiomen R. R. Second Series Gold 5s
Riila. Baltimore & Washington R. R. Serial 4 $
Debentures (Series BB B to "J")
Remington Typewriter Co. 1st Convertible 6s
United Light & Rys. Co. 6$ Coupon Notes
Western Maryland R. R. Terminal Co.
1st Mtge. 6$ Notes
Canadian North’n Ry. 6$ Secured Notes
Grand Trunk Ryi of Canada 3 Yr. 52$Secured Notes
Pacific Lt. & Power Corpi Gen. Mtge.
Serial Cohv. 6s
Winnipeg Electric Ry. 2 Yr. 6$ Notes
World Film Corp. 2 Yr. 6$ Conv. Notes
lan. 1, 1918
Jan.
Jan.
Jan.
kH *
Jan.
Ja n .
Jan.
1,
1,
1,
Xj
1,
1,
1,
1918
1918
1918
1918
1918
1918
1918
Jan. 1, 1918
Jan. 1, 1918
Jan. 1, 1918
Jan. 1, 1918
Jan.10, 1918
Jain. 14, 1918
Jan.15, 1918
Jan .15, 1918
J a n .15, 1918
X-493
- 3 FEBRUARY 1918
$2,000,000
Alabama Power Co. 1st Mtge. 3 Yr. 6s
Feb. 1,
1918
50,000,000
American Telephone & Telegraph Co.4g$ 3 iYcNotes
Feb. 1,
1918
1.000. 000 Baltimore & Ohio R.R.Equip.Tr.4f$ Ctfs. of 1912
Feb.
1, 1918
600.000
Central Maine Power Co. 3 Yr. 6$ Notes
Feb.
1, 1918
650.000
Great Northern Power Co.3 Yr.6$ Coll. Tr. Notes
Feb.
1, 1918
International Paper Co. First Consolidated
Feb.
1, 1918
Feb.
1, 1918
8.291.000
6s
3.000. 000 Iowa Telephone Co., 2 Yr. 4f$ Notes
500.000
Lehigh Valley R.R. Coll. Tr. Gold 4s
Feb.-I,
1918
8.000. 000 Missouri & Kansas Telephone Co. 4g$ Notes
Feb.
1, 1918
2.500.000
Feb.
1, 1918
Feb.
1, 1918
,
Feb.
1, 1918
Mount Vernon-Woodbury Mills,Inc.3 Yr.6$ Deb.Notes
4.000. 000 Nebraska Telephone Co. 4f$ Yi3 Yc.-Notes
500.000
10,000,000
Norfolk & Western Ry.Equip.
Series lof 1914
1r.40o Ctfs.
Northwestern Telephone Exchange Co.4f$ 2 Yr.Notes
5.000. 000
•
Southwestern Telegraph & Telephone Co. 4g$
2 Yr. Notes
Feb. 1, 1918
Feb. 1,
1918
7.013.000
Toledo Traction, Light & Power Co.1st Lien 5 Yr.6s Feb. 1, 1918
1.200.000
Toledo Traction,Light & Power Co.2nd Lien Coll.i
Tr. 6s
500.000
17,269,000
Waltham Watch Co.
5.001.000
International Harvester Corp.
1.000. 000
Wisconsin Central Ry.3 Yr. 5$ Secured Gold Notes
1918
Feb. 1, 1918
Gold Notes
International Harvester Co.of N.J.3g- Yr.5$ Notes
128,023,000
.o
Feb. 1,
Yr.
Notes
Feb.15, 1918
Feb.15,
1918
Feb.15,
1918
X-493
- 4 -
MARCH 1918.
$
8p0,000
1,000,000
986.000
2.350.000
645.000
875.000
1.012.000
16,000,000
Aurora, Elgin & Chicago R. R. 3 Yr. 6^
Coll. Tr. Notes
March 1 , 1918
Ayer • Mills (American Wollen Co.)Construction
& Equip, bfc Notes
March 1, 1918
March 1 , 1918
Doe Run Lead Go.. 3 Yr. 6$ Notes
&
Eastern Power/Light Corp. 5 Yr. Conv. 5s
March 1 , 1918
Lewiston, Brunswick & Bath. Ft. Ry.(Lewiston,
Augusta & Waterville St,Ry)lst 5s
March 1, 1918
Pittsburg,Shawnut & Northern R.R. 2 Yr.
6$ Receivers’ Ctfs.
March 1, 1918
Southern Pacific Co. Equip Tr. 4g-s, Series "A"
March 1, 1918
Winchester Repeating Arms Co. 2 Yr.
5% Notes
March 1, 1918
$23,868,000
X-493
- 5 APRIL 1918
$
750,000
American Rolling Mill C*. 6/o Notes
April 1, 1918
1,000,000
Baltiiiore & Ohio R..R* Equip, Tr. 4gs of 1S13
April 1, 1918
2,000,000
Eangor & Aroostook R.R. 2 Yr* b% Notes
April 1, 1918
9,116,000
Cuban-American Sugar Co. Coll* Tr, 6s
April 1, 1918
Gaston, Williams & Wigmore S.S. Corp. First
Mtge. & Coll. Tr. Bonds
April 1, 1918
Goodrich Transit Co. First 3 Yr. 6s
April 1, 1918
Louisville Gas & Elec.Co. (of Ky)3# Yr.6fo Notes
April 1, 1918
Mansfield Ry.Lt.& power Co.(Mansfield Public
Utility & Service Co.) Gen. Gold 5s
April 1,, 1918
Massachusetts Electric Cos. 3 Yr. b$> Notes
April 1, 1918
500,000
.500,000
1,500,000
742,000
3,000,000
4,935,000
Morgan’s La. & Texas RR & SS Co.Main Line 1st 7s April 1, 1918
Series
1,970,000 Pa. Gen.Freight Equip. 4-g-s,Issue of l9l3/"A"tonT" April 1, 1918
2,000,000
Sloss Iron & Steel Co. (Sloss-Sheffield Steel
& Iron Co) Gen.42-3
April.1, 1918
Union Natural Gas Corp.Coll.Tr. 6s
Series "A” to "L"
April 1, 1918
1,200,000
U.S. Public Service Co.
April 1, 1918
2,305,000
Wilmington & Chester Trac. Co.Coll. Tr. 5s
2,000,000
Ctanibus Cable Co.(United RRs of San Fran.)lst 6s April 1, 1918
1,000,000
Gaston, William & Wigmore Inc. 6$ Serial Notes
500,000
$35,018,000
Coll. Lien Notes
April 1, 1918
April 1, 1918
X-493
- 6 MAY 1918
$
500,000
1.494.000
778.000
10,000,000
3.970.000
500.000
Baltimore ft Ohio RB Equip. Tr. 4g-s of 1916
May 1, 1918
Chic.R.I.& Pac.Ry.Gold 4s of 19Q2,Series"N"to"P"
May 1, 1918
Chic.St.Paul & Minn.Ry.(Chic.,St.Paul,Minn. &
Qoaha) First Gold. 6s
May 1, 1918
Commonwealth Power,Ry.& Lt. Co.5Yr.Conv. 6s
May 1, 1918
Elk Horn Fuel Co.(ElkHom Coal Corp.) 1st Mtge.
5$ Conv. Notes
May 1, 1918
Fountain Valley Land & Irrigation Co* lot 6s
May 1, 1918
7$> Notes
1,125,900
Indian Refining Co. 2nd Mtge.
1.501.000
Metropolitan Tel.ft Tel.Co.(N.Y.Tel.Co.) 1st 5s
May 1, 1918
2,062,750
Missouri ft No. Arkansas RR 6°
jt>Receivers’ Ctfs.
May 1, 1918
575.000
New Haven & Derby RR(N.Y. New Haven ft Hartford
RR) Consol, (now first) 5s
May 1, 1918
Pa. Gen.Freight Equip.4s,Issue of 1910 Series
"A” to "K"
May 1, 1918
Philadelphia Bourse First 5s
May 1, 1918
1,000,000
Potter Gas Co. First Refunding 6s
May 1, 1918
3.800.000
Sutter Basin Co. 5 Yr. 6$ Coll. Tr. Notes
May 1, 1918
1,000,000
Sutter St.Ry. (United RRs of Sar. Fran. )lst 5s
May 1, 1918
1,561,700
Union Lifeht, Heat ft Power Co. First 4s
May 1, 1918
United Fruit Co. 4 Yr. 5$ Notes
May 1, 1918
3.500.000
Detroit United Ry. 5$ Coll. Tr. Coupon Notes
May 5, 1918
3,000,000
Cleveland Telephone Co. 2 Yr. 5$ Notes
MayID, 1918
1,100,000
800,000
10,000,000
$ 48,268,350
May 1, 1918
X-493
ft
- 7 JUNE 1918.
$ 2,000,000
4,000,000
. 614,000
1,000,000
3,250,000
700,000
2,999,500
2,500,000
3,500,000
Federal Dyestuff & Chemical Corp, First Mtge.
2 Yr. 6$ Notes
*
June 1, 1918
International Cotton Mills 5 Yr. 6^- Notes
Juno 1, 1918
Lewiston, Augusta & Waterville St.Ry. 3 Yr.
5$ Notes, Series "C"
June 1, 1918
Manchester Trac, Lt. & Powwr Co. 3 Yr*
5$ Coupon Notes
June 1 , 1918
New Orleans Ry & Light Co. 2 Yr.6$ Dehen.Notes
June 1, 1918
Pa. Gen. Freight Equip. 4s Issue of 1912
Series "A" to "G"
June 1, 1918
Puget Sound & Willapa Hhr. Ry.(Chic. Milw. &
St.P. Ry.)5 Yr.5$ Trust Certificates
June 1, 1918
Tennessee Ry. Light & Power Co. 2 Yr.
5$ Secured Notes
June 1, 1918
Union Depot RR (United Rys. Co. of St. Louis)
Consolidated 6s
June 1, 1918
$20,563,500
X-493
- 8 -
>
m
$ 1,000,000
500.000
h
250,000
2.170.000
57.735.000
1.500.000
042,200
y i9i 8 .
Alabama Central R.R. (So.Ry) 1st Gold 6s
Associated Simmons Hardware Co. Serial
Secured Notes
Betz(John F. )& Sons Brewery,Ltd .bfo
July 1
1918
5fo
July1,1918
Deb.
1st Mtge/Stock July 1, 1918
Boston & Providence RR Copp. 4$ Plain Bonds
July1,1918
Brooklyn Rapid Transit Co.6 Yr.5$ Gold Notes
July1,1918
Buffalo & S.W. RR (Erie RR) 1st 5s (ext.)
July1,1918
Burlington &
Uo. River RR in Nebr. Cons. 6s
July1,1918
1,000,000
Erie RR,Buffalo & S.W.Div, 2nd Lish 5s (extended) July 1, 1918
3.000.
000 Central & Peninsular RR(Seaboard Air Line
Fla,
Ry.) 1st Gold 5s
July1,1918
Frick (H.C) Coke Co.(U.S.Steel Corp.)PittsburghMonongahala 1st lien Purchase Money 5s
July1,1918
Industrial Securities Co. Coll. Trust 6s
July1,1918
600.000
600,000
7.922.000
Kansas City Ry Co. 3 Yr.
9.000.
000
Lbuisville
Gas & Elec;Co,(of Ky) 1st
July 1, 1918
Notes
& Refdg.6s
July 1, 193.8
600,000
McKeesport & Belle Vernon RR 1st 6s
July 1, 1918
647,074
Nakusp & Slocan Ry. 1st 4s
July 1, 1918
625.000
Qiio Cities Gas Coi
500.000
Oklahoma fty. C0« Juriioh Mtge,
500.000
Producers’ Oil Co. Purchase Money 6s
July 1, 1918
Providence Gas Co.3 Yr. 4$ Conv. Debentures
July 1, 1918
St. Paul Gas Light Co.Consolidated extended 6s
July 1, 1918
1.662.000
Toledo, Saginaw & Muskegon Ry. 1st 5s
July 1, 1918
1.121.000
Oakland Transit Co.(San Fran.-Oakland Terminal
Rys.) 1st Consolidated 6s
July 7, 1918
1.400.000
600.000
3.000.
6$ Serial Notes
6% Notes
000 Canadian Northern Ry.6$ Secured Geld Notes
$97,774,274
July 1, 1918
July 1, 1918
JulylO, 1918
X-493
»
- 9 AUGUST 1918
$ 2,000,000
Grand Trunk Ry. Co, of Canada 5$ 2 Yr. Col
lateral Gold Notes
'
Aug. 1
1918
Hudson Companies Secured 6$ Notes
Aug. 1
1918
500.000
Lehigh Valley RR Coll, Tr. 4s
Aug. 1, 1918
700.000
Missouri Electric RR Purchase Money 5s
Aug. 1, 1918
500.000
Norfolk & Western Ry.Equip. Tr. 4^$ Ctfs.
Series of 1914
Aug. 1, 1918
U.S. Mtge. & Tr. Co. 1st 4s Series “G"
Aug. 1, 1918
West End St.Ry.Serial Debenture 5s
Aug. 1, 1918
Waltham Watch Co. 4g- Gold Notes
Aug. 1, 1918
Canadian Northern Ry.5$ Secured Stealing Notes
Aug.l2, 1918
Masonic Hall & Asylum Rind (Trustees of) 1st 6s
Aug.18, 1918
1.500.000
855,500
1.581.000
500.000
-£ 2,000,000
850.000
$18,987,500
SEPTEMBER 1918
2,195,700
555.000
1.200.000
500.000
Appalachian Power Co.Coll. Trust 7$ Notes
Chicago &
West Towns Ry 1st Lien & Coll.Tr.6s
Sept. 1, 1918
Sept. 1,
1918
Guardian Realty Co.of Canada,Ltd.5 Yr.lst Mtge.
Sept. 1, 1918
Lehigh Valley RR. Equip.Tr. 4js Series "O'1
Sept. 1, 1918
1,863,227. 95 Chesapeake & Ohio Ry.Equip.Tr.Series "S.W.C.Col'S«pt.l5, 1918
*
6,314,927.95
X-493
• i
- 10 -
OCTOBER 1918
Oct.al, 1918
Cleveland,Painosville & Eastern R.R.lst Cons. 5s
Oct. 1, 1918
Cleveland,Painesville & Eastern R.R.lst 5s (ext.)
Oct. 1, 1918
Grand Trunk Ry„of Canada 5 Yr. 5$> Secured Notes
1918
Potosi & Rio Verde Ry, 1st Skg. Fund 6s
1918
2.500.000
Proctor & Gamble Co. Serial 5% Coupon Notes
Oct. 1, 1918
2.500.000
Shawinigan Water & Power Co. 2 Yin 5
Oct. 1, 1918
1.543.000
Western Ry.of Ala.Consolidated Gold 4%b
1.131.000
5C0,000
4. 2*900,000
600,000
Notes
r-4
Boston & Albany RR (N.Y.C.R.R) 4j$ Equip. .'
Trust of 1912
O
O
500,000
i—1
-•
o
O
$
Oct. 1, 1918
$15,274,000
NOVEMBER 1918
2,000,000
Atlantic Coast Lumber Corp.lst 5s,Seties "B"
Nov. 1, 1918
2,000,000
N. Y. Central Lines 5fo Equip. Trust of 1907
Nov. 1, 1918
1,Go8,00Q
United Gas & Fuel Co.of Hamilton,Ltd. 1st 5s
Nov. 1, 1919
U.S.Mortgage & Trust Co. 1st 4s, Series "H"
Nov. 1, 1918
2,000,000
Detroit,Grand Haven & Milwaukee Ry.lst Equip. 6s
Nov.14, 1918
3.000.
000 R. R. 3 Yr. 5$ Notes
Cuba
Nov.15, 1918
3.200.000
Detroit,Grand Haven & Milwaukee Ry.Cons. 6s
Nov. 15,:.-1918
5.000.000
Kansas City Terminal Ry. 3 Yr. 4-gfi Notes
Nov.15, 1918
669,000
$19,147,000
X^493
>•
- 11 -
DECEMBER 1918
$ 2,500,000
Canadian Cons.Rubber Co. Ltd. 5$ Debent. Noted
500,000
Case (J.I.) Threshing Machine Co. 1st Serial 6s
500.000
Eastern Texas Electric
Dec. 1,
1918
Dec. 1, 1918
Dec.
1, 1918
9.000. 000 General Rubber Co* 5% Gold Debentures
Dec.
1, 1918
1.000. 000 Hooker Electrochemical Co. 5$ Notes
Dec.
1, 1918
Co. 3 Yr. 6$ Notes
920.000 Huntington Land & Impvt.CO.Coll.Tr..Serial 6s
Dec. 1,
1918
5.000.000 Morgan & Wright (Rubber Goods Mfg.Co. )5fo Deben*
Dec. 1*
1918
750.000
Toronto Ry. 6$ Gold Notes
16,500,000
Dec. 1, 1918
U. S. Rubber Co. Coll. Tr. Skg. Fund
600.000
Barney & Smith Car Co.
500.000
Bayano River Lumber Co. 1st 6s
125,000
6s
6$ Notes
1918
De6.31i 1918
Oceanic Steam Nav.Co.Ltd.4^ 1st Mtge.Debskfsf^
RECAPITULATION.
jDedember 1917
January 1918
February 1918
March
1918
April
1918
May
1918
June
1918
July
1918
August
1918
Septemberl918
October 1918
November 1918
December 1918
1> 1918
Dec. 15,
$38,395,000
Dec.
2,500,000
29,745,217
128,023,000
23.868.000
35.018.000
48,268,350
20, 563,500
97,774,274
18,987,500
6,314,927
19.274.000
19.147.000
38.395.000
487,878,768
1918
Dec.31,
Duplicate to X-491 on page 2932*
Ex -Officio Members
W. P. 6. HARDING, GOVERNOR
PAUL M. War b u r g . V ic e g o v e r n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H . PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
X-494,
November 13, 1917. .
Dear Sir:
Please advise me of the number cf
state banks in your district which, in year
opinion, might be desirable as members of the
Federal Reserve system, but which are not eligible
for membership because of their having a smaller
capital than is required by law of national banks
in the towns and cities in which they are located.
Very truly yours;
Governor.
FEDERAL RESERVE BOARD
Ex-Officio
mbmbers
W. P. G. HARDING, Govermqr
PAUL M. WARBURG, VICE G8VERH8R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM « . McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCA L ASE NT
WASHINGTON
ADDRE88 REPLY TO
X-4S5
November 12, 1917.
Dear Sir:
Please call the attention of the
officials of your bank and of the executive
committee, to the fact that the ComrdssioneT of
Internal Revenue has written the Board that,
in his opinion, Federal Reserve banks are not
subject to the tax upon charges for telephone,
telegraph, and express service when such
charges fall directly upon the Federal Reserve
bank.
Vehy truly yours,
Governor,
FEDERAL. RESERVE BOARD
Ex-Officio
members
W. P. 6. HARDING, GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
c . m ille r
iH/rRtes«s. ham lin
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
W8&-
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 12, 1917
Gentlemen:
I wish to bring to your attention the following letter
from the Treasurer of the United States:
November 9, 1917
”1 think the letter of October 10th of the Federal Reserve
Board is a little misleading, namely:
"Paragraph 1 states that upon the receipt of unfit currency
the Treasurer will place to the credit of the
appropriate Federal Reserve Eank in the gold
settlement fund an equivalent amount of gold or
gold certificates and will advise the Federal
Reserve Bank of the amount of that credit,
stating for Whose account the deposit is made,
and will aisO advise the bank sending money
for redemption in like effects
’•This, of course* leads the Reserve bank to believe that
we are going to make this eiedit in gold or gold certificates,
which we might not have at the time* It is also accountable for
that part of the letter which says that Our advice is not clear,
and it does not appear therefrom* that the credit is going to be
made in the gold settlement fUnd*
"The better way is to simply have this credit as a trans
fer of funds in the amount of the money redeemed, and I believe it
would be a good plan to amend the letter of October 10th.”
Very respectfully yours,
JOHN BURKE
In the Board's letter of October 10, relative to the new
plan for the redemption of unfit currency, paragraph 1, it was sug
gested to the Federal Reserve Banks that the Treasurer would upon
X-496
- 2 ~
receipt of unfit currency for redemption place to the credit of the
appropriate Federal Reserve Bank in the Gold Settlement Fund an
equivalent amount.
In view of the letter of the Treasurer of the United
States quoted above the Board’s letter of October 10, is amended
so as to provide that the credit shall be given as a transfer of
funds in the amount of money redeemed, and Federal Reserve Banks
will charge the Treasurer's general account in one total for each
list as a transfer of funds to the Treasurer of the United States.
Very truly yours,
Governor.
Federal Reserve Bank,
X-498,
SUGGESTED OUTLINE OF ANNUAL REPORT OF FEDERAL RESERVE BOARD.
1 9 1 7
1,
2t
Prefatory Remarks:
(a)
Entry of U. S. into war and financial problem arieing
therefrom,
(b)
Consequent Change in character of work done by Federal
Reserve Banks and transformation of their functions.
Financial and Banking Situation at Entry into War:
(a)
3.
Normal and stable conditions of Winter and Spring,
1916 - 1917,
(1)
Conservative policy of F. R. Banks.
(2)
Preliminary policies - preparation and
distribution of new F. R. notes.
(b)
Character of work done by F. R. Banks as fiscal
agents up to March, 1917.
(c)
Estimate of investment and banking strength of
country at end of March 1917.
Opening of War and Placing of Loans:
(a)
Treasury policy toward Board and banks - development
of fiscal agency function.
(b)
Organization for first loan;
(1)
Work at banks of several districts.
(2)
Policy of Board as to rediscounts.
X-498.
- 2 -
(c)
Short term certificate.methods - how applied relation to bond issues.
(d)
Effect of first loan on banks of country.
(e)
4.
(1)
Easy disposal of bonds.
(2)
Maintenance of liquidity.
Placing of second loan:
(1)
Difficulties of time and conditions
surrounding it.
(2 )
Methods adopted for sale of bonds.
(3)
Effect on banks.
(4)
Problems of investment market.
Strength of Reserve Banks:
(a)
(b)
(c)
Amendments of Federal Reserve Act.
(1)
Reasons for and sketch of amendments.
(3 )
Effect of amendments on reserves held.
Relation of F. R. Banks to market.
Cl)
Policy as to purchases and discounts.
(2)
Relation to nonrr.em.ber banks.
Entry of State institutions into System.
(1)
Sketch of origin and conditions of movement.
(2)
Growth of resources.
(3)
Critical estimate of effect of movement on
system as a whole.
X-498
m m
- 3 -
5.
Underlying Financial Problems of Year:
(a) Condition of general business.
»
6,
7.
(b)
Confidence and its maintenance.
(c)
Movement of gold into country up to midsummer
and turn of tide.
'
(d)
Effort to check outward gold flow.
(e)
Foreign exchange situation - Board's policy.
;
'
Oranization Problems:
(a)
Branch question - how
(b)
Personnel at banks - Problems growing out of war,
(c)
Changes in directorates.
(d)
Board's own staff and expenses.
Summary and Forecast:
(a)
Net result of year.
Board established new offices.
.
•
(b) . Capacity of System under prospective demands."
11/13/17
Ex -Off ic io Mem bers
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
WILLIAM G. MCADOO
S e c r e ta r y o f t h e T r e a s u r y
CHAIRMAN
T-S&CF;
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
and
WASHINGTON
Fis c a l A g en t
ADDRESS R E P L Y TO
FEDERAL RESERVE BOARD
November 13, 1917.
Dear Sir:
Copy of letter which appears below is sent to you for
your information and that of your bank.
Assistant Secretary.
November 12, 1917,
Mr. R. L. Austin,
Federal Reserve Agent,
Philadelphia, Pa,
Dear Mr. Austin:
The Board has today considered your schedule of proposed,
changes in discount Pates and had attted Upon your board's recommehdation
as follpwst
The increase in the ratd for jfifieen*<iay pafrett including
member banks' collateral notes, from
to 4$ has been approved.
As to the ninety-day Liberty Loan rate, the increase to 4 % has been
approved, upon the condition, however, that the rate shall not be jut
into effect until possibly a few day? after November fifteenth, so that
your member banks will have an opportunity to rediscount at the present
rate when paying for the first installment of the Liberty Loan.
As to the fifteen-day rate for collateral notes secured by
Liberty bonds or certificates of indebtedness, it was decided to keep a
decision on thi3 rate in abeyance and leave your rate of 3a$ unchanged
until after November fifteenth, when it will be possible fully to guage
the pressure that will have to be faced by the Federal Reserve banks.
With respect to the trade acceptance rate., it was the opinion
of the Board that a margin of l/2fi should, if possible, be maintained
X-500.
■between trade acceptances and the rate for commercial paper of
siirdlar
maturity. The amount of trade acceptances redisoounted with your bank
is unimportant - not much in excess of $100,000. - and it is our under
standing that your board's reason for applying for an increase in the
rate was that your bank is rediscounting a very large number of very
small items*'which it is the view of your board entail too much labor
to warrant so low a rate. The Federal Reserve Board recommends in this
respect that you leave the rate as it now stands, l/2$ under the com
mercial paper rate, but that you make it a rule that upon any items under
fifty dollars you cake an extra charge of ten cents each, in addition to
the interest charge fixed for trade acceptances.
Very truly yours,
W. P. G. HARDING.
Governor.
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex-Officio Members
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
November 13, 1917,
Dear Sir:
I enclose herewith statement as of
November 9, shewing ratio,
of float of each
Federal Reserve Bank to earning assets and to
deposits.
This statement shows some improve
ment over those brought to the attention of
the Federal Reserve Bank governors when they
were here last week.
Very truly yours,
Governor*
Inclosure.
X-b5Q1w:rWILLIS,
SECRETARY
SHERMAN P. ALLEN,
ASST. SECRETARY
AND FISCAL ACENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
''£f&~
r
X-501
RATIO QT "FLOAT" OF EACH FEDERAL RESERVE BANK TO EARNING ASSETS AND DEPOSITS
•
*,
SGVEMBER 9, 1917.
-V: BAIT
: BLOT
Ratio of
:
Ratio of
All other ;
:
Total
;
Total
: Clearing :Transfers uncollected
:
“'Float" to
i "Float"to
: uncollected :collection: Total
: House
: : bought
Govt, and
"Float": total earn :
•
Iterns
: Itecs
:
' Sfceos
bank de noalt.t»
•
Dr
ing assflts
.
Cr.
:
: Exfi.haA ga.9_
•
4.5
3,467
8.0
1,576
14,192
215
15,983
12,516
14,977
50,593
65,570
44,251
a , 319
6.4
3.2
2,316
31,742
34,058
30,349
3,709
9.5
4,5
>
15,869
17,039
12,094
4,945
8.0
4.5
,
1,310
16, 390
17,700
13,797
3,903
15.6
8.0
1,825
14,554
16,379
8,222
8,157 _
30.3
22.5
e
TOTAL
**
1,170
1,522
12,739
21,287
35,518
23,109
12,439
13.3
7.2
236
2,745
14,435
17,416
13,964
3,452
13.3
6.8
*••
3,615
6,736
10,351
4,746
5,605
19.4
11.5
55
2,729
14,019
16,8C3
9,977
6,826
13.4
9.0
11
5,573
7,816
13,400
5,117
8,283
29.5
17.7
1,613
1,521
8,415 —
11,549
8,880
2,669
8.5
3.2
25,441
30,307
271,796
187,022
84,744
10.8
5.7
216,048
:
:
:
:
ex -officio
A
Members
WILLIAM 6. McADOO
S e c r e ta r y o f t h e T r e a s u r y
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
W. P. 6. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
Fis c a l a g e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 1 3 , 1^17
You are ooreby advised that tne Board has authorized tne discontinu
ance, until furtner notice, of weekly reports on Form
}2. showing the dis
tribution by maturities of paper held in pledge by tne Federal Reserve agent.
Accordiiigly, begiiming with Friday November lb, we shall no longer ex
pect any report an Form J2.
Statements on Form
maturities of all classes of paper,
A^ent and on Form
showing distribution by
(also of warrants) held by Bank and
snowing distribution by maturities for each clads of
paper should be sent by wire and mail as heretofore.
Both of these ferns
are now in process of revision and copies of tne 1^15 edition will be sent
to you snortly.
It will be appreciated if you will advise us heew many copies of tne
daily Stnteuient (Four
l$lb edition) you will require for your own, as
well as your branches' needs.
Respectfully,
Mr
Federal Reserve Agent,
Ex-Officio
W . P . G. HARDING, GOVERNOR
P A U L M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
members
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD-503
H. PARKER W IL L IS . SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
WASHINGTON
FEDERAL RESERVE BOARD
November 14, 1917.
Copy of lettor to a Federal Reserve agent regarding endorsement of
paper sold by one Federal Reserve bank to another:
Dear Sir:
Receipt is acknowledged of your letter of November 6th in
which you ask whether the Federal Reserve Rink of Nov/ York should not
have ondorsed the §5,005,CKI of bankers* acceptances which you bought
recently from that bank in accordance with the suggestion of the
Federal Reserve Board.
j
Your point Is well taken and tho question was fully discussed
by tho Board when tho transaction was arranged. In reviewing the
conditions which led to this transaction, it should bo rememborod that
the Federal Reserve banks, with hardly any exception, have been
accustomed, with the approval of the Board, to invest liberally in
bankers’ acceptances which
#*re purchasod for them by tho Federal
Reserve Bank of New York. These transactions have been regularly
engaged in and on a largo scale,.particularly by those banks which,
like your own, did not find a sufficient fiold of investment in their
own districts,
Tho Now York acceptance market has thus been developed
to a considerable degree by the combined operations of the Federal
Reserve banks. It has frequently happened that the F>deral Reserve
Bank of New York has given other Fedora! Reserve banks larger partici
pations in those bankers’ acceptances than it would have desired had the
matter been looked upon from the viewpoint of its own interest alono.
Those liberal participations have been given other Federal Reserve banks
when the New jfork bank’s earnings wore not sufficient to meet its own
dividend roquireraonts, while the other banks, by receiving a liberal
allotment of acceptances purchased in New York, were enabled thereby
to make a better showing in the matter of earnings.
There have boon other occasions when the Federal Reserve banks
have discontinued their purchases in anticipation of heavy demands in
their own districts, thus throwing the whole burden of sustaining the
acceptance market upon the Federal Reserve Bank of Now York. In this
way they conserve their own resources, while the reserves of the Federal
Reserve Bank of New York wore correspondingly reduced because of the
larger part of the burden which it had to assume. These facts are brought
i» your attention for the purpose of emphasizing the point that a partici
pation in tho purchase of acceptances is not only a privilege but that it
i§ iyetffaps a duty also, the measure of which can hardly be gauged by the
X**503
if 2 •
convenience cf any individual bank* Final responsibility in the matter
rests under the law upon the Federal Reserve Board, and it may become
necessary for the Board in the future to undertake a more complete
regulation of these functions.
In suggesting to a number of Federal Reserve Banks which were
in a strong position, to purchase bankers’ acceptances from the Federal
Reserve Bank of New York, the Board asked merely that they resume their
purchases of acceptances in the manner in which they had engaged in
these transactions heretofore; i.e., without the endorsement of the
Federal Reserve Bank of Now York. The Board anticipates that-there will
beb a quick change in banking conditions shortly after the fifteenth instant,
when the pressure on New York should diminish and bear heavier upon some
of the other districts.
From this point of view, the most natural
operation perhaps would have been the rediscount by other Federal Reserve
banks of the fifteen day member banks* collateral papet?-, of i»4iich the
Federal Reserve Bank of New York holds a very large amount at this time.
Such a transaction, however,would necessarily have been dealt v/ith as a
rediscount, as it would have involved single name collateral notes of
member banks taken under Section 13, endorsed by the Federal Reserve
Bank of New York under instructions fra® the Federal Reserve Board* It
would have been necessary to show a transaction of this kind in the
weekly statement, thereby creating more or less comment, which might have
been undesirable in the present circumstances, and the Board felt, there’*
fore, that it would be better for the adjustment to take the form of a
sale of acceptances suggested by the Board rather than by a rediscount
transaction ordered by the Board. The Board understands, of course, tfckt
in any case where a rediscount operation is ordered, Federal Reserve
banks should have the right to require that the paper bear the endorse-r
ment of the selling bank; but where the Board invited the banks to
resume purchases of bankers' acceptances upon the same conditions which
have prevailed hitherto, it was felt that there was no necessity for
requiring an endorsement. Had any bank to which the Board suggested a
purchase, stipulated that the paper should be endorsed, the Federal Reserve
Bank of New York, in that event, would have been called upon to decide
whether it wouldoprefer not to consider the proposed sale.
While your letter was in transit the Board effected a second
transaction of this kind. When the Federal Reserve bank governors were
X-503
* 3 -
assembled here last Thursday, some of them, whose banks were in a par
ticularly strong position, were asked if they were willing to take from
the Federal Reserve Bank of Mew York a specified amount of bankers'
acceptances.
Without hesitation they all stated their willingness to
do so. This transaction also had the character of a voluntary purchase
on the part o,f the Federal Reserve banfcs, upon the suggestion of the
Federal Reserve Board, and as there was ho compulsion in the natter,
the endorsement of the Federal Reserve Bank of New York was not required
•
Respectfully yours,
W, P.
Or. HARDJHG;
Governor,
X-506
Before the
.
::
INTERSTATE COMMERCE COMMISSION ::
::
Docket 4590
.
::
No. 57 Ex Parte
::
:::::::::::::::::::::::::::::::::
November 16, 1917.
3 P.M.
Testimony*of
'
HON. PAUL M. WARBURG
Vice-Governor,
Federal Reserve Board.
You have done me the honor of inviting me to testify before
you for the purpose, I understand, of giving some facts as to how
the general banking situation affects the financing of the rail
roads, and I believe you wish me to dwell upon this phase of the
problem in its bearing upon the question before you of the peti
tion of the railroads to be granted a fifteen per cent increase
of the rates charged by them.
1
Owing to the- very short notice that you have given me, it
has, of course, been quite impossible for me to familiarize.my
self with the more technical railroad questions involved in this
case or to collect any statistical material.
I am glad to comply
with your request to discuss this question from the.purely finan
cial point of view, but, at the same time, I am frank to admit
that I do it only with grea*c hesitation.
Your honorable body
is so fully conversant with the entire situation and has given
:':it such close study that I feel that there is very little that
I can add to the*discussion of a subject that has been before
you for about ten years.
There are, however, certain extraordi
nary conditions which must enter at this time into your deliber
ations - conditions which have created a most unprecedented and
anomalous situation in the financial market.
It is, I under
stand, your wish that I should speak to you about this phase cf
the problem, and I am only too glad to present to you my thoughts
for what they may be worth - emphasizing, however, that, of
(3 )
course, they represent only my own personal views.
A discussion of the subject necessarily involves at this
time a consideration not merely of the railroads but also of the
people as individuals and the Government as a whole, for the in
terests of each of these elements, interdependent even in normal
times, are still more closely woven together in view of the com
mon cause of all - the successful prosecution of the war.
When the country turns from peaceful occupations to the busi
ness of war a drastic upheaval in the entire economic structure
of the country must necessarily result, and inasmuch as it is
clear that the combined strength of the nation is essential to
victory, every project, every industry, that contributes towards
this end must be encouraged in every possible way; whereas, what
is not necessary for the common cause must, for the present at
least, stand aside.
The railroads are clearly one of the most
necessary factors in this respect and they must be placed and
maintained in such a condition as will best enable them to render
in the most efficient degree the services for which they are de
signed.
It is not necessary to elaborate this point; it is suf
ficient to consider the disastrous effect that the deterioration
of the railroads ha3 had upon the military efficiency of some of
the European belligerent countries.
What, then, is the carriers1 present condition?
Like any
other corporation or individual, or even the Government itself,
railroads suffer at this time from the fact that the dollar
which they now earn has diminished very materially in purchasing
power so that, even if they were earning the same amount in dol
I
lars as prior to the war, these earnings would not buy anything
like the same amount of materials or the same amount of labor.
It is interesting in this respect to note that their condition
is parallel to that of all the belligerent governments which,
owing to increasing prices, in order to produce the sane purchas
ing power as heretofore, are forcied to place upon the- market
larger and larger loans.
A comparison of the index figures for the years 1914 and
1S17 would show that wholesale prices of commodities have in
creased, roughly, by 100# since the beginning of the war, and,
therefore, the same number of dollars netted by a railroad can
produce only a smaller amount of improvements than it produced
in pre-war times.
It follows that in order to secure these im
provements, or even the necessary upkeep, a much larger amount
of money must be procured.
That money can be obtained in two
ways only: by the flotation of additional securities or by an in
crease in revenue.
,
I believe I am safe in saying that the vast majority of the
railroads are nowadays old established concerns which long since
have sold their first mortgage bonds and have generally given
comprehensive liens on their tangible properties so that, in fi
nancing today, they offer as the basis for new securities the
general equity in the property; that means it is their earning
power that today constitutes the chief basis of their credit.
Tf/hen net earnings dwindle, as they have, or when, doubt arises in
the public mind as to the ability of the railroads to be permitted
to earn a generous return in the future, the entire credit struc-
3963
(4)
ture of the railroads suffers.
a higher interest basis.
Securities can then be sold only on
The higher interest charge, in turn,
causes' a corresponding reduction in net earnings, which again, in
turn, operates further to destroy public confidence.
And so one
destroys the other!
Moreover, it must be borne in mind that the purchasing power
of the dollar having been reduced to about 50$ of its pre-war val
ue, the interest received from his railroad obligations and the
dividends received from his stock to the investor are worth only
approximately one half as much as they were before the war, and
the return from his investment is further reduced by taxation
which absorbs a more or less substantial portion of what the rail
road; pays him.
These are factors which make for the depreciation
of railroad securities and it will have the further effect of forc
ing railroad companies in general to pay higher rates of interest
and higher dividends in order to attract the investor's money.
The investor's present attitude toward railroad securities is,
as just described, one of serious doubt as to the future.
He does
not and cannot know what will be the requirements of the Govern
ment; or what will be the l^bor situation: whether adequate labor
will be available and if so at what price, and he naturally asks
himself the same question as to the materials for the upkeep of
the railroads: will they be available and at what price.
On the
other hand, he questions himself as to the attitude of the Inter
State Commerce Commission: will it permit an increase in the rates
rged by the railroads sufficient to offset these abnormal condi
tions?
It is natural that such an attitude of doubt affects seriously
both the marketability g.nd the market value of railroad securities.
But this doubt alone has not produced the present shrinkage in their
value.
Other important factors-play a part.
One is the unprece
dented amount of Government securities which has been placed upon
the market and which must continue to be offered as long as the war
<
lasts.
It is natural that Government financing undertaken upon so
gigantic a scale cannot occur without affecting security values
both directly and indirectly.
Another factor is that the patriotic
investor, under present circumstances, justly has a strong desire
to make all his savings available for the direct U3e of the Govern
ment, and he wishes, therefore, to buy Government securities, re
gardless of how tempting may be the securities of private corpora
tions.
There is, in addition, the endless stream of American rail
road securities, heretofore hel$ in Europe, flowing back into our
country and seeking investment here ever since the beginning of
the war in 1914.
Under all these circumstances, it is at present
becoming increasingly difficult for radlroads to 3ell their securi
ties on reasonable terms, whether to provide for the renewal of such
of their obligations as may be approaching maturity or vrhether for
necessary improvements.
As a matter of-fact, the sale of securities
has become practically impossible for most of them.
Inasmuch, therefore, as the present condition of the securi
ties market is practically prohibitive as far as the carriers
are concerned, it is of paramount importance that the railroads,
-3 far as possible, should be enabled to pay out of current reve
nues for all improvements that are necessary to keep their prop-
.
? 9 « 5
(6)
erty in at least the same condition of efficiency as obtained at
the outbreak of the war.
They should have ample revenue, not on
ly because of these reasons, but also because of the fact, as
stated before, that their earning power is the measure of their
credit.
If their credit is sustained it will tend to eliminate
at least the lack of oonfidence, the doubt on the part of the
investor, and thus remove one of the most serious handicaps upon
the financial operations of the railroads.
Enhanced confidence
is tantamount to an increase of revenue because of the fact that
it decreases the interest charges which must be paid.
It may be asked whether or not the proposed increase in net
earnings and the consequent greater confidence of the public will
open the securities market to the railroads to a degree suffici
ent to enable them to finance themselves.
Not entirely.
It will
remain difficult enough for the railroads to finanoe themselves
even under improved conditions, and it has been suggested that
it may become necessary, in some way or other, to use or create
agencies of the Government for the purpose of granting some sort
of relief.
Without entering into the merit of such a proposition,
it is evident that, even in that case, the task of such agencies
would be immeasurably relieved if they were dealing with compan
ies capable of showing substantial net earnings.
It might be asked, "Why not let the railroads stop paying
dividends and use these funds for the purpose of providing the
moneys necessary for their improvements?"
a policy would be fatal.
It is patent why such
The weak railroads havj no dividends
p°*n>
(7)
which they might suspend.
The strong railroads through such sus
pension would destroy the continuity of their dividend records
wnich constitutes a most valuable asset in that on the strength
of these records tney have secured tne advantage of being able to
sell some of their obligations*as mvestr e n t s for savings banks
Furthermore, such a policy would completely wreck railroad, credit
and would seriously affect the income and savings of the very
public upon whom the Government must now rely for its revenues
and for the flotation of its loans.
VJhile all corporations, industrials and railroads, and even
municipalities, when trying to raise money m
the security market,
are meeting with soiie of the obstacles encountered by the rail
roads i.e. the general conditions created by the over-shadowing
financial operations of the Government, there is no doubt that no
other class of borrowers is as much affected as are the railroads
The municipalities s n l l have the advantage of making their issues
attractive by freeing them from onerous taxes, and such industries
as are not affected by price fixing by the Government are not
hampered m
shifting to the consumer the additional burdens aris
ing out of changed conditions.
The railroads, however, and cer
tain public utilities, while forced to pay increased wages and
increased prices for materials, are dependent upon the action of
Government agencies m
for their services.
adjusting the rates which they may charge
From all the information available to *ie,
r* ft
(8 )
the index price of railroad stocks has gone down about 2Q/S since
the beginning of the war m
1914 down to the present tine, while
the index price of industrial stocks has undergone but little
change.
The capitalization of all the railroads in the Unitea
Sta.tes has been stated at 58,750,000,000 of stock and about
511,000,000,000 of funded debt.
If we should figure that the
value of railroad bonds has decreased by about
and that of
railroad stock by about 20jS, we would find that the shrinkage in
railroad values since the beginning of the war, on that basis,
would amount to about 52,800,000,000..
This leads me to a discussion of another side of thi3 ques
tion - the interest of the Government.
The successful placing of the Government loans to be issued
from time to time, and running into billions, is predicated upon
the strength of the general banking situation and the public's
confidence in that strength.
It has been estimated that national
banks, State banks, trust companies and savings banks together
own about two billion dollars of railroad securities.
In addi
tion to that, these securities form a large percentage of the col
lateral for their loans.
A drastic shrinkage in value of rail
road securities, therefore, is naturally a matter of serious
concern to all of these institutions and might materially impair
their vigor and freedom of action in cooperating with the Govern
m e n t ’s financial program “and,, if permitted to go too far, it may
throw an additional burden upon the Government.
It is my sincere
*
(9)
conviction that one of ':
j'ie 12ain objects of the Government - the
successful prosecution 0 1 the war - will be considerably helped
if greater strength is given to the railroads and if greater
confidence in them is instilled into the public mind.
For reasons which no doubt are apparent to your honors, it
is difficult, in a public hearing, to express my views fully or
in more than a very general way, but, in conclusion, I do not
hesitate to say that present financial conditions appear to me
to be such that an increase of the revenues of the railroads
seems an urgent necessity for the purpose of sustaining their
credit and efficiency, both of 'which are essential in aiding the
Government and the country successfully to master the difficult
tasis which are their chief concern at this time.*
*
2969
In the analysis of accounts required by the Federal Reserve Board it is
necessary to have all the information celled for on the "Memorandum copy of
Government request iot tanspOrtation";
It is*therefore, requested that
carbon attached be used properly and that ail blanks, including cost of tickets,
be filled in at the time of receiving ticket. When more than one ticket is
obtained on a transportation request the names of those using the tickets
should also be indicated on the memorandum copy. This inforamtion is re
quired by the Government Auditor before be will pass our accounts. Failure
to give this information has been the cause of much additional work both to
this offide and the railroad companies to whom it is necessary to apply for
assistance in filling out the blanks.
SHERMAN ALIEN.
Fiscal Agent.
/* >7-
*•*& <«-*** . ^
;*
,
STATE BANKS ADMITTED TO FEDERAL RESERVE SYSTEM
A
NOVEMBER, 1917. t.......
„
'
1j >
• ;L; 1'J f l
Tot al Resourcee
Surnlus
. C-oital
$2,898,481
" $40, 27 0 j6
$1,500,000
Brooklyn Trust Company
Brooklyn, N. Y.
1,319j436
50,000
100,000
St. Clair Co. Savings Bank
Port Huron, Mich.
475,360
10,000
50,000
Citizens Bank,
Clinton, Wis.
679,397
110,000
50,000
Miners Deposit Bank,
Lykens, Pa.
18,196,063
1,250,000
1,250,000
Citizens Commercial Trust Co.
Buffalo, N, Y.
5,271,822
150,000
-730,000
Citizens Trust & Savings Bank,
Columbus, Ohio. ,
8,415,862
570,000
630,000
Savannah B»nk & Trust Co.,
Savannah, Gu.
15,031,812
300,000
1,000,000
Manufacturers Trust Co.,
Brooklyn, N. Y.
15,990,745
2,000,000
1,000,000
The Baltimore Trust Co.,
Baltimore, Md.
74,532,631
4,000,000
4,000,000
Citizens Savings & Trust Co.
Cleveland, Ohio.
82,094,144
4,500,000
2,050,000
Manhattan Company,
Sew York, N. Y.
13,965,146
1,000,000
1,000,000
Fidelity Trust Co,
New York, N. Y-.
29,443,301
1,000,000
1,000,000
Peoples Trust Co.,
Brooklyn, N, Y.
6,675,523
500,000
500,000
W. R. Grace ■& Co.'s Bank,
New York, N. Y.
194,868
750
25,000
Paoli State.Bank,
Paoli, Ind.
339,528
6,000
30,000
Farmers Banking Co.,
Prairie Depot, Ohio,
53,681,743
3,000,000
Wayne Co. & Home Savings Bank, 3,000,000
Detroit, Mich,
2,668,945
100,000
500,000
Baltimore Commercial Bank*
Bal timo re, Md .
71,783,303
4,000,000
3,000,000
Industrial Trust Co.,
Providence, R.I.
84,207,394
500> 000
500,000
First Trust & Savings Bank,
Chicago, 111.
869,220
30,000,
200,000
United State Bank of Chicago,;
Chicago, 111,
2,668,743
100,000
500,000
Austin State Bank,
Chicago, 111,
87,043,831
4,500,000
3,000,000
Union Trust Co, of New York,
New York, N. Y,
93,377,698
4,000,000
United States Mortgage & Tr.Co., 2,000,000
lew York, N. Y.
497,661
100,000
50,000
Marion Central Bank
Marion, Ala.
124,186,774
5,000,000
5,000,000
Columbia Trust Co.,
Hillsboro Bank & Savings Co.,
Hinsforb, m i o . ^ ---Scandinavian Trust Co.,
New York, N. Y.
_
TOTAL
551,959
OW, v',.
^
•4 %
■
■-- -
t
l,000,wv0
1,500,000
11,359,362
33,685,000
41,187,231
845,796,400
E x -O f f ic io m e m b e r s
W . P. G. HARDING. GOVERNOR
P A U L M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. P M K O n W J L L IS , SECRETARY
SH E W H AJrir TU.LEN, ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 17, 1917*
Gentlemen;
Thursday, November 29, is Thanksgiving Day.
Please forward figures for use in connection with the
Gold Settlement as usual.at close of business, Wednesday,
Hoveir.be r 28,
Settlement will be made Friday, November 30.
Very truly yours,
Assistant Secretary
X-514
OUTLINE OF OPERATIONS OF BRANCH BANK TO BE OPERATED UNDER
BY-LAWS AGREED UPON BY THE BOARD ON NOVEMBER 16, 1917.
There will be no theoretical capital assigned to the branch,
nor will the member banks in any specific territory be required to deal
with the branch.
The branch will be established upon the theory that
it is an office of the Federal Reserve Bank of the district opened for
the convenience of such member banks as nay desire to use it.
The routine
operations of the branch will be conducted by the nanager and the Board
of Directors, subject to the supervision of the directors of the Federal
Reserve Bank and of the Federal Reserve Board. A collection zone will be
branch
allotted to eachy
^and checks drawn upon banks located in this zone
nay be sent to the branch by any member bank in order to save time in
transit and to reduce float.
The resulting credit will be reported by
the branch to the Federal Reserve Bank.
The member banks will continue to send their offerings for
discount to the Federal Reserve Bank except that anv bank located in
the collection zone allotted to a branch and having signified its desire
branch
to deal with they
may have the option of offering its paper for dis
count to the branch.
Paper which, in the opinion of the directors or
the discount committee of the directors of the branch, is eligible, may
be passed immediately to the credit of the member bank on the books of
the branch, subject to approval by the Federal Reserve Bank.
•
•
X-514
-
2
-
Each member bank located in the collection zone of a branch
bank will be expected to advise the Federal Reserve Eank as to whether it
wishes to treat the branch bank as its Federal reserve correspondent.
If a bank so elects, it will transact all its Federal reserve business
with the branch, except that it nay send checks direct to the Federal
reserve bank
own branch.
or to any other branch for credit of its account with its
In the natter of exchange transfers, currency shipments
and cash deposits and withdrawals, its dealings will be with its own
branch, and not with the Federal Reserve Bank.
Each Federal reserve branch will forward to the Federal re
serve bank of its district a daily transcript of all business transacted,
showing in detail credits given for loans, y ^0^^rre<\:redits given on ac
count of collected items, and checks paid for
■ member banks.
The
Federal reserve bank will sr-ke proper entries on its books, in order to
maintain a record of the reserves of all member banks in its district,
and will receive, as heretofore, reports from all member banks through
out the entire district, of their deposits and required reserves, and
will notify all member banks of any delinquincies in reserves.
Each
Federal Reserve branch ' bank will keep a record of the collected balances
and total reserves of each member bank within its collection zone, in
order that it may be in position to pay checks of member banks in its
zone which elect to use it as ,• ^ principal correspondent, without being
X-514
- 3 obliged to telegraph or telephone the Federal Reserve bank.
Each
branfch will receive daily advices from the Federal Reserve bank and
from other branches in the district of debits and credits appearing
on their books which affect the accounts of member banks which have
elected to use the branch as its Federal reserve correspondent, in order
that the record of a branch as to the reserves of member banks deal
ing with it may be complete.
11/17/17
2975
X- 61S
Washington, D. C.
November 17, 1917.
Hon. W. f. >. Harding,
Governor, Federal Reserve Board',
Washington, D. 6.
Bear Sir:
Fermit me to leave this witb you as a memorandum
of what I understood to be the plan relating to state bank member
ship fn the Federal Reserve systeto which was agreed upon at the
conf ejhenee at which were present, you, Messrs, Hamlin, Delano and
Willie; and President HinsCh, Mr. Stevens and I.
''
'■
■‘
K
'
.
It was thought advisable to adopt the plan suggested
by Mr. F. W. Ellsworth, of the Guaranty trust Company, modified as
follows:
1.
For the purpose of introducing into the plan the
personal element, it seemed desirable that the Governor, or Federal
reserve agent, of each Federal reserve bank send each week to the
chairman of the American Bankers1 Association Federal Reserve
Campaign Committee (a)
.
the names of ten state banks in his district not now
members;
(b)
the name of the officer in each of these banks vrtio
shapes the policy of the institution;
(c)
in the selection of these banks to take the ten • » ..
largest banks that have Shown interest in membership in
the system;
(d)
in sending in the names of ten banks each week to avoid
sending the names of mere than one bank in each community.
.
2.
The chairman of the committee will then write to each
of these ten banks a personal letter as per copy attached.
X-515
- 2 If each of the twelve Federal reserve banks submit ten
Barnes each week it w ill mean that one hundred and twenty banks are
being solicited directly each week* The nature of the letter
written would bring a reply from practically every bank thus
addressed. This reply would indicate the attitude of the bank toward
membership in the system.
3.
Upon receipt of these replies the contents would be
carefully analyzed. If objections to membership in the system were
evidenced therein founded on a lack of knowledge of the law governing
state bank membership, or founded on a lack of knowledge of the
practical working of the system, the Chairman would attempt in a
further letter to correct these false impressions.
(a)
he would send to the Federal Reserve Board and to the
Federal reserve bank a copy of the letter from the
objecting bank and his reply thereto, thus putting the
Board and the Federal reserve bank of the district in
possession of the exact attitude of that particular
institution;
(b )
if any of the banks responded favorably to the firs t
letter the Chairman would write advising them to put
themselves into communication with the Federal reserve
bank of their district, again putting the Federal
Reserve Board and the Federal reserve bank in possession
of the facts.
4.
When the correspondence with any of these banks begins to
indicate a sufficient interest in membership i*? the system, which if
encouraged might result in an application for membership (a)
an interview should be arranged between the interested
banker and some local banker with whom he is friendly
and who is an advocate of membership in the system.
(b )
or, if the bank is of sufficient importance it might
be arranged to have a representative of the Federal
reserve bank in the prospective applicant's district call
upon the officers of the bank for the purpose of explaining
away the d ifficulties and securing the application.
X-5X5
- 3 5.
Mr. Ellsworth*s plan, copies of which were sent to the
members of your Board, contemplated using a country-wide publicity
campaign at intervals of six weeks or two months. It is my hope
that the Federal Reserve Board w ill aid this campaign by sending
to a ll eligible nonmember banks, copies of the Federal Reserve
Bulletin and inserting therein such matter as w ill induce an
interest in the system:
(a )
prominence should be given to the .earnings of a ll
Federal reserve banks;
(b )
letters such as have already been published expressing
satisfaction by state banks in membership in the system
should be includedj
(c )
a ’’ro ll of honor" should be given a prominent place
in the Bulletin, which should contain the names of
a ll banks that have recently joined the system and
which, each month, would bring the names of those
banks joining during the month;
(d)
a feature should be made of the total amount of assets
which the state banks have put back of the system and
this should be published each month showing the progress
made.
I have asked Mr. M. I, Stevens, First National Bank
Building, Milwaukee, who has for the past five or six years been
publicity counselor of the Marshall & Ills le y Bank, to assist me
in the publicity work sent out from my office in connection with
the campaign.
It would be well to ask those connected with the Federal
Reserve Board and the Federal reserve banks caking speeches in the
interest of the system to send copies of their speeches to Mr. Stevens
who would then send them out to the financial papers and other publica
tions of the country.
If reasonable cooperation is established, this plan can
be conducted without any other expense than the necessay postage.
X-515
v 4 Mr. Ellsworth’ s plan of sending out at intervals
literature in relation to membership in the system to a ll nonmember
banks, together with the speeches made a group meetings, bankers1
dinners and conventions, would maintain a sufficient interest in
membership in the system so there would always be a number of banks
volunteering to join, and so the letters from the Federal Reserve
Campaign Committee would be given reasonable consideration.
Mr. Hinsch has announced that i't is his intention
as president of the American Bankers* Association, to do every
thing possible toward the unification of the banking system of
the country. The machinery of the American Bankers* Accociation
may therefore also be relied upon to help in every way. If the
secretary of the Federal Reserve Board w ill advise the editor
of the A. B, A. Bulletin of matter conducive to creating member
ship in the system, that matter w ill find a place in the Bulletin
which is sent to practically every bank in the United States once
each month.
I started outlining what we discussed at our meeting
of Thursday morning, but in my enthusiasm found myself adding a
number of suggestions which I sincerely hope may have the approval
of the members of your Board with the result that' atyour convenience
the plan be transmitted to the proper person in each Federal reserve
bank whom you desire to have assist in this work.
Respe ctfully,yours,
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
AWLPH'C. MILLER
CHARLES S. HAMLIN
Ex -Officio Members
WILLIAM G. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
FEDERAL RESERVE BOARD
W A S H IN G T O N
A DDRESS REPLY TO
.
FEDERAL RESERVE BOARD
November 19, 1917.
Dear Sir:
I beg to transmit for your information a letter which
was sent on November 17, to Deputy Governor Treiran of the Federal
Reserve Bank of New York, as follows:
"Referring further to your letter of October 29, in
which you inclose a letter from Mr. J. T. Sproull, dated
October 27, with reference to the use of gold as Christnas
holiday gifts, I beg to advise you that at a meeting of
the Federal Reserve Board held November 16, the Conmittee
to which this matter had been referred reported that t*********
view of the general opinion that
gold should be concentrated, the attention of
bankers, employers of labor and of individuals
should be directed to the new War Savings Cer
tificate plan as being an entirely suitable and
patriotic method of handling the matter. These
War Savings Stamps w ill be on sale by December
firs t, descriptive literature is now on the press,
and the Treasury circular w ill be issued within
a few days.*
This report was approved by the Board."
Very truly yours,
Secretary
.
Ex -officio
members
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. P. G. HARDING. GOVERNOR
Y«E*PT**]*‘ WARBURG. VICE GOVERNOR
A F (lt m i C A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 19, 1917.
Dear Sir}
In view of the extensive fiscal operations which will
be undertaken by the Government during the period of the war, it
seems most desirable that those in charge of these operations and
the member banks themselves should be able to have a clear view
at all times of the financial situation. To this end the Federal
Reserve Board has decided that the member banks in eighty-two of
the most important cities should be requested to transmit once a
week to their respective Federal Reserve banks, a condensed states
ment showing the principal items, such as deposits, loans, invest
ments, cash, government obligations owned, and loans on such
securities.
The preparation of these statements will involve but
little labor and when tabulated they will reflect quite accurately
the changing conditions in money and credit* The information given
will be most valuable to the business community and to the banks.
It is intended that the figures be reported to the Federal Reserve
banks at the close of business Friday of each week, beginning Decem
ber 7, and that a summary be mads by each Federal Reserve bank and
telegraphed to the Federal Reserve Board not later than the follow
ing Thursday, for publication when the Board's weekly statement is
issued on Saturday.
As the leading state banks and trust companies are now
members of the systepi, it will be. possible for the first time ~
regularly to publish statistic# which will include figUies fahsa
both the national banks and the state banking institutions*The
necessary forms are transmitted herewith and you are requested to
instfndt the tnetebsr b&nks of those cities oh the list which, are in
your dislHntt if yctt desihe to have any additional cities in your
district added to the list, please notify the Board promptly,
Tour usual cordial and effective cooperation will be
appreciated by the Board.
Respectfully,yours.
Governor,
Ex-Officio Members
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
Co m p tr o ller o f the c u r r e n c y
W. P. G. HARDING. GOVERNOR
PAUL M. w a r b u r g . V ice go v er n o r
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 19, 1917.
Dear Sir:
The American Bankers Association at its last convention
held in Atlantic City, authorized the appointment by its president
of a campaign committee on state bank membership in the Federal Re
serve system.
Mr. J. H. Pueiicher, Vice President of the Marshall
& Ilsley 3ank of Milwauaee, Wisconsin, has been named by President
Hinsch as chairman of this committee.
When the Federal Reserve bank
governors were here recently, reference was made to this Committee,
and it was explained to them that the cooperation of the Federal
.
Reserve banks seemed most desirable.
1 am inclosing herewith, for your consideration and that
of the officials of your bank, a copy of a memorandum which has been
addressed to the Board by Mr. Pueiicher.
Your bank is requested,
through its chairman or governor, to write Mr. Pueiicher on the sub
jects outlined in this inclosure, and its cooperation with the
American Bankers Association Committee w ill be appreciated by the
Board.
'
Very truly yours,
Governor.
X-51S
Ir.clesure.
STATEMENT FOR THE PRESS.
The Federal Advisory Council today convened for its
usual stated meeting, as required by law.
A conference with the
Federal Reserve Board was held at 11 o'clock, a ll members of the
Council, with the exception of Mr. Record of Texas, being present.
In accordance with custom. Governor Harding briefly addressed the
Council, laying before it
certain matters relating to the operation
of the Federal Reserve System.
w ill be held on Tuesday,
»
November 19, 1917.
It is expected that further sessions
X—bol
RATIO OF “FLOAT" OF EACH FEDERAL RESERVE BANK TO EARNING ASSETS AND DEPOSITS
NOVEMBER 16, 1917.
FEDERAL
RESERVE .
BANK
: All other
uncollected
: Clearing :• Transfers
:
bought
:
Items
:
House
: Exchanges
:
Total
:
Total
: uncollected : collection
:
Items
:
Items
:
Dr.
:
Cr.
3,636
900-
26,172
30,708
18,420
New York
15,313
*t •
64,814
80,127
51,196
Philadelphia
12,278
* * .
35,620
47,898
31,934
26,744
36,454
24,422
Boston
3,385
: Ratio of
Total
“FloatB : “Float" te
: total earn
: in? assets
Per cent
18.1
12,288
28,931
7.0*
: Ratio of
: . "Float* to
: Govt, and
*
..%Mt_a£i>y.sits
•
Per cent
*
9.5
4.3
:
15,964
35.2
15.5
*
20,940
15,514
21.7
10.5
+
30,409
15,971
14,438
54.1
21.2
.
Cleveland
6,325
Richmond
5,987
Atlanta
2,367
• »»
19,692
22,079
10,870
11,209
47.0
29.3
*.
#
*-
Chicago
926
41,761
26,088
70,775
38,889
31,886
29. u
14.8
:
St. Louis
1,128
5,532
20,407
27,067
16,073
10,994
38.5
17.4
:
Minneapolis
2,890
7,696
7,744
18,330
5,252
13,078
47.2
22.7
%
*
Kansas City
3,950
18,507
13,444
35,901
13,695
22,206
46.4
25.7
*
19
5,680
9,327
15,026
6,451
8,575
31.0
18.3
•
Dallas
San Francisco
1,217
1,882
10,671
13,770
10,746
3,024
8.1
3.3
56,056
85,343
287,145
428,544
240,437
188,107
20.3
10.9
m
♦
♦
*
*■
TOTAL
V7AR SAVINOS COMMITTEE
Initial Distribution of. Expense Fund Allotment.
Basis: $500,000, allotted on basis of population at rate of $0.00475 per
♦unit of population as estimated by Bureau of Census for July 1.191'
Mr. Harris' District (Boston and New York Federal Reserve Districts)
Initial
Boston
Estimated
Expense
District:
Population
Allotment
Connecticut
$ 6,340
1*334,864
3,725
Maine
784,216
Massachusetts
3,903,684
18,542
New Hampshire
. 445,613
2,116
Rhode Island
3, 099
631,505
Vermont
1.753
. 368.260
$34,57 5
Total Boston
6,836,637
New York
District:
New Jersey
' New York State
New York City
Total New York
Total Mr. Harris' District
3,120,488
|lG, 785,854
13,906,342
21,374,484
14,822
25,000 (State)
26.203 (City)
66,025
$ 101,600
Mr. Lyon’s District: (Philadelphia and Cleveland Federal Reserve Districts)
Philadelphia
District:
,
Delaware
Pennsylvania
Total Philadelphia
Cleveland
District:
, Kentucky
Ohio
West Virginia
Total Cleveland
Total Mr. Lyon’s District
234,219
3.683.728
8,317,947
1,112
41.247
$42,359
2,425,460
5,251,384
1.420.151
9,106,995
18,024,942
11,520
24,991
6.745
43,256
$85, 615
Mr. Marxfc District: (Richmond and Atlanta Federal Reserve District:
Richmond
District:
■
Dist. of Columbia
Maryland
North Carolina
South Carolina
Virginia
Total Richmond
369,282
1,409,41 5
2,433,782
1,646,645
2.254.137
8 }113^ i
1,750
6,500
11,500
8,138
10.500
v33,338
y.524
(Mr. Marx's District Continued)
Atlanta
District:
2,381,326
1,031,373
2,875,204
1,864,524
1,99 5,49 5
2.328.729
12,476,651
20,589,912
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Total Atlanta
Total Mr, Marx's District
$11,300
6,50C
12/000
9,100
9,500
11.000
59,400
$97,788
Mr. Riley's District (Chicago and Minneapolis Federal Reserve Distri
Chicago
District:
6,275,779
2,916,193
2,376,526
3,458,186
2,536.091
17,562,975
28,000
12,000
10,269
15,000
12,000
77,269
.
Minnesota
2,331,341
472,987
Montana
North Dakota .
664,625
605.179
South Dakota
Total Minneapolis 4.074.132
Total Mr. Riley's District
21,636,907
10,500
5,000
5,000
5.000
25,500
$102,769
Illinois
Indiana
Iowa
Michigan
Wisconsin
Total Chicago
Minneapolis
District:
Mr. Fleming’s District (St. Louis and Kansas City and Dallas Federal
Reserve Districts)
St. Louis
District:
8,000
Arkansas
1,776,457
16.000
Missouri
3.549.219
24,000
5, 325, 676
Total St. Louis
Kansas City
District:
Dallas
District
Texas
Total Dallas
Total Mr. Fleming’s District
1,014,178
1,888,858
1,296,006
349,920
2,315,178
142.332
7,006,472
6,000
8,000
8,000
3,000
ic,oeo
1,273
$36,273
4.574.240
20.000
16,906,388
$80,273
Colorado ^
Kansas
Nebraska
New Mexico
Oklah otra
Wyoming
Total Kansas City
'
Mr. Bradley'
San Francisco
District:
District (San Francisco Federal Reserve Bank District)
Arizona
263,788
California(North) (
California (South) (* >'*'>*•***
448,577
Idaho
111,284
Nevada
862,239
Oregon
445,196
Utah
1.558,808
Washington
Total San Francisc o 6,728,214
R E C A P
District Allotted
to Federal Director
Mr. Harris
Mr. Lyon
Mr. Marx
Mr. Riley
Mr. Fleming
Mr. Bradley
11/21/17
$2,500
7.500 (>Jorth)
3.500 (South)
3.000
1,455
4, 500
2, 500
7.000
$31,955
I..T D L A T I O H
Territory
F. R. Districts
Boston
New York
Total
Population
July 1. 1917
. 6,836,637
13.906.342
21,374,484
Initial
Expense
Allotment
$ 34, 575
66.025
$101,600
Philadelphia
Cleveland
Total
8,917,947
9.106.995
18,024,942
42,359
43.256
$85,615
Richmond
Atlanta
Total
8,113,261
12.476.651
20,589,912
38,388
59.400
$97,788
Chicago
Minneapolis
Total
17,562,975
4.074.132
21,636,907
77,269
25.500
$102,769
St. Louis
Kansas City
Dallas
Total
5,325,676
7,006,472
4.574.240
16,906,388
24,000
36, 273
20,000
$80,273
6,728,214
131,955
All Districts
Grand Total 105,260,847
$500,000
San Francisco
X525
Washington, D. C. November 22, 191?.
MEMORANDUM IN REGARD TO VOUCHERING BILLS FOR EXPENSES IN
CONNECTION WITH THE WAR-SAVINGS CAMPAIGN.
The general plan of procedure in regard to vouchering bills
for expenditures by the State Committee in the campaign for the sale of
War Savings Certificate Stamps; is as followsi
The initial allotment of the general appropriation for field
work is $500,000.
This is divided among the forty-eight states as shown
on the inclosed detailed list, from which it will be seen that the al
lotments vary from $51,203 for the State of New York (including New York
City) to $1,112 for the State of Delaware.
It is proposed that expenditures be made in accordance with
rules prepared by the Treasury Department, inclosed herewith, which are
similar to the rules in respect to the auditing of expenditures in the
Liberty Loan Campaign.
Expenditures for field work in the different
states must first be approved by the respective State Director and for
warded to the Federal Reserve Bank of the District in which the state
is located.
The Federal Reserve Bank, acting as fiscal agent of the
Treasury Department, will advance the funds to meet the expenditure thus
duly approved, and transmit the papers, vouchors, etc., to "Chief Clerk,
Treasury Department, Washington, D. C." for final approval.
The Federal
Reserve Bank, upon final approval by the Treasury Department, will either
be reimbursed or authorized to charge the sum against the account of the
Treasurer of the United States.
Xo27.
.
W. P. 6. HARDING. GOVERNOR
Ex -Off ic io Mem bers
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
• Chairman
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
and Fiscal Agent
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 26, 1917.
Dear Sir:
I inclose herewith for your information throe papers
in regard to making advances for expenditures by the War-Savings
Committee and accounting for these expenditures.
The documents
inclosed are as follows:
•
•
1.
Mimeograph X-524 - Allotments of proportions
to various States.
2.
Mimeograph X-525 - Memorandum in regard to
vouchering bills for expenses in connection
with the War-Savings Campaign.
3.
Treasury Department Circular, which is also
War*Savings Circular, Noi^iy giving instruct
tions of the Treasury Department in regard to
auditing the accounts of War-Savings Committee
expenditures in the various States.
As you will note, handling these expenditures is going
to follow closely the rules which applied in the case of the Liberty
Loan Campaign.
I thrust,therefore, it will be readily comprehended.
The expenditures being comparatively small, should not prove a serious
burden.
Yours very truly,
Member, National War-Savings Committec.
Ex -Offic io Mem bers
WILLIAM 6. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. P. 6. HARDING. GOYBftESR
PAUL M . WARBURG. VISE CS'VIlUiSR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
X _ 5 2 9 fiscal agent
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Dear Sir:
The Federal Reserve Board is in receipt of
your request for copies of the Tentative Proposal on
Uniform Accounting.
I regret to advise that the edition of this
booklet is entirely exhausted, and we are therefore
unable to comply with your request.
It is not our intention, at the present
time, to republish this pamphlet, but subsequently
it may be reprinted and in somewhat modified form,
in which case your request will receive attention.
Respectfully,
E. PARKER WILLIS.
Secretary.
Ex -Off ic io Mem bers
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. P. 6. HARDING. GOVERNOR
PAUL m. WARBURG. VICE Governor
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
—533 AN°F,SCALAcENT
W A S H IN G T O N
A DDRESS REPLY TO
FEDERAL RESERVE BOARD
November 26, 1917.
Dear Sir:
The following ruling has teen made by Counsel for the WarSavings Committee, in response to a query from a Federal Reserve Bank:
"In reply to inquiry of the Federal Reserve Bank of Richmond
as to its right to use the franking privilege in the distribution
by it of stamps, certificates and cards, beg to advise that any
shipment made by any Federal Reserve Bank or branch thereof, which
contains exclusively stamps, certificates or cards or correspondence
pertaining thereto, issued or in the process of being issued by the
Secretary of the Treasury under provisions of the Act of September
24, 1917, relates exclusively to the business of the Government of
the United States and is therefore entitled to be carried through
the mails under frank of the Secretary of the Treasury.
••
The Federal Reserve Banks should be provided with suitable
franked envelopes for letters, correspondence, etc., and with
franked pasters for packages."
You will please be guided accordingly. Requisitions for
supplies of franked envelopes and pasters should be placed with the
War Savings Committee.
Very truly yours,
Member, Rational War Savings
Committee.
ex -o f f ic io
Mem bers
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
and Fiscal Agent
W A S H IN G T O N
ADDRESS REPLY TO
____ _
DIVISION OF REPORTS AND STATISTICS
FEDERAL. RESERVE BOARD
November 27, 1917Dear Sir:
Ref erring to Governor Harding’s circular letter
(X-5 I7 ) of November 19 in the matter of weekly reports from
member banks in principal cities, I enclose herewith list of
code words to be used by Federal Reserve banks in transmit
ting the consolidated figures for tne member banks of their
districts separately for banks in central reserve cities, in
other reserve cities, and outside of reserve cities.
It is suggested that the figures for the individual
member banks be transcribed to a weekly compilation sheet,
sample form of which is also enclosed herewith, and that the
figures be grouped thereon separately for the three classes
of banks above mentioned.
Your first consolidated report showing condition of
the reporting banks as at close of business on December
7
Is
expected to reach the Board not later than Thursday, Decem
ber
13, 1917.
Yours very truly,
Secretary.
Mr.
Federal Reserve Agent,
X538 Rev.
CODE WORDS TO BE USED BY FEDERAL RESERVE BANKS T?J TELEGRAPHING TO THE
BOARD THE CONSOLIDATED WEEKLY REPORT SHOWING PRINCIPAL RESOURCES AND
LIABILITIES OF LUMBER BANKS LOCATED IN SELECTED CITIES.
(Figures as at close of business on Friday __________ _____ _
191 .)
BANKS IN CENTRAL RESERVE CITIES
ROCK
HAND
HELP
HUFF
HACK
HEAR
HILT
HOST
HULL
HALE
HEMP
HEFT
ROME
-
Number of reporting banks
U. S. bonds to secure circulation
_________
Other U. S. bends including Liberty bonds __________
U. S. certificates of indebtedness
_________
Total U. 3. securities craned
Loans secured by U. S. bonds and Certificates
All other loans and investments
Reserve with Federal Reserve Bank
Cash in vault
=
Net demand deposits 'on which reserve is computed
Time deposits
Government deposits
Total of items HACK to HEFT inclusive
BANKS IN RESERVE CITIES
RENT
KAST
KREX
KUBE
KALE
KENT
KIRK
KLUX
KOLB
KULT
KROP
KNOB
RUNG
-
Number of reporting banks
U. S. bonds to secure circulation
____
Other U. S. bonds, including Liberty bonds ___
U. S. certificates of indebtedness
Total U. S. securities owned
Loans secured by U. S. bonds and certificates
All other loans and investments
Reserve with Federal Reserve Bank
Cash in vault
Net demand deposits on which reserve is computed
Time deposits
Government deposits
Total ©f items KALE to KNOB inclusive
BANKS NOT LOCATED IN RESERVE OR CENTRAL
RESERVE CITIES
RAIL PALM POOR PUCK PART--
PEAL PIKE PONE PULL PRIM PLUS
PELT
RUTH -
Number of reporting banks
U. S. bonds to secure circulation
Other U; S. bonds, including Liberty bonds
U. S. certificates of indebtedness
Total U. S. securities owned
Loans secured by U; S* Bonds and certificates
All ^ther loans and investments
Reserve with Federal Reserve Bank
Cash in vault
Net demand deposits on which reserve is computed
Time deposits
Government deposits
Total of items PART to PELT inclusive
Figures to be telegraphed to Federal Reserve Board
not later than Thursday following the date of report
Signed report to be mailed.
_____ _
______
______
______
______
______
_____ _
______
______
X-537
RATIO OF "FLOAT" OF EACH FEDERAL RESERVE BANK TO EARNING ASSETS AND DEFOSIXS
NOVEMBER 23, 1917.
FEDERAL
RESERVE
BANK
: Clearing
:
House
: Exchanges
: All other
: Transfers : uncollected
;
Bought :
Items
T otal
uncollected
Items
Dr.
Total
collection
Items
Cr.
T otal
"Float"
iiatio of
“Floatff to
total earning assets.
Per cent
1,2*6
15
14,961
16,222
14,311
1,911
2.7
10,447
I»•
50,526
60,973
52,094
8,879
2.1
PHILADELPHIA
1,254
••*
29,382
30,636
27,285
3,351
6.4
CLEVELAND
1/313
2,760
17,633
21,706
16,815
4,891
6.6
RI CHI.ONE
2,308
• %*
18,305
20,613
16,469
4,1*4
12.5
ATLANTA
1,909
» *' ♦
15, 212
17,121
9,137
7,984
33.4
CHICAGO
1,070
20,178
22,774
44,022
27,807
16,215
12.6
ST. LOUIS
236
1,675
14,987
16,898
13,592
3,306
11.4
MINNEAPOLIS
• • •
6,711
4,979
11,690
4,614
7,076
30.8
BOSTON
NEIV YORK
■
KANSAS CITY
31
13,344
11,035
24,410
12,162
12,248
25.1
DALLAS
15
6,890
10,372
17,277
6,915
10,362
40.1
4,084
3,418
13,455
20,957
13,968
6,989
17, 9
23,913
54,991
223,621
302,525
215,169
87,356
SAN FRANCISCO
TOTAL
8.9'
.
: Ratf| of
: nn % * to
: Govt«pad
:bank deposits
: Per -dLt
W. P. 6. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -Offic io Me m o ir s
WILLIAM Q. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
and Fiscal Agent •
FEDERAL RESERVE BOARD
W A S H IN G T O N
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
x~539
member 27, 1917
Dear Sir;-
I am sending you herewith page proof of Treasury Circu
lar No. 95 - War-Savings Circular No.2, as information supplementary
to what I have already sent you.
These proofs are subject to modi
fication in detail, but probably not as to general principles; but
are sent you to save time.
Yours very truly,
bemoer
-
National War-Savings
Committee
REGULATION OF THE FEDERAL RESERVE BOARD.
In accordance with administrative procedure pre
scribed by the Secretary of the Treasury under authority of
executive order of the President, dated October 12, 1917, and
in order that transactions in foreign exchange nay be investi
gated, regulated, or prohibited as the circumstances nay require,
the following regulations are hereby prescribed, effective from
this date.
■
FEDERAL RESERVE BOARD
By
Governor.
Secretary.
APPROVED:
Secretary of the Treasury.
X453
- 2 DEFINITIONS.
The term person as used in these regulations shall be
held to include individuals, firms, partnerships, corporations,
and all associations of persons.
The term dealer shall be held to include any person
engaged in the business of buying, selling or dealing in foreign
exchange.
The term foreign exchange shall be held to include
checks, drafts, bills of exchange, cable transfers, or any other
form of negotiable or assignable instrument or order used to
transfer credit or to order the payment of funds in any foreign
country, insular possession or dependency of the United States,
or other territory not included within the geographical limits
of the Continental United States,
The term customer shall be held to include any person
other than a dealer who is resident or domiciled in the United
States, regardless of nationality, and who seeks to purchase or
acquire foreign exchange or to arrange for the transfer of funds
or of credits, or for the establishment of a credit in any form
outside of the Continental United States.
The term registration certificate shall be held to
m e a n certificate authorizing a dealer to engage in foreign ex
change transactions not prohibited by law.
The term special license shall be held to mean a li
cense or permit issued to an applicant authorizing such appli
cant to export gold or silver bullion or currency, or to engage
in a particular foreign exchange transaction otherwise prohibited
by law.
The term general license shall be held to mean a. li
cense or permit issued to an applicant authorizing such applicant
to export gold or silver bullion to certain designated countries
or to engage in certain classes of foreign exchange transactions
for a,fixed period of time or until such license is revoked.
X-539
- 3
FOREIGN EXCHANGE TRANSACTIONS!
Every dealer in foreign exchange shall within______________ __
days from this date file with the Federal Reserve Bank of the
district in which such dealer is located, or is engaged in business,
an application for a registration certificate. Such application
shall be in fora approved by the Federal Reserve Board and shall
show the character of the business engaged in and whether or not
any enemy or ally of an enemy of the United States has any interest
directly or indirectly in such business. It shall embody an agree
ment on the part of the applicant.
(a)
(b)
(c)
to comply with regulations of the Board
to permit the inspection of the books of the dealer and
to make report as and when required on forms to be ap
proved by the Board.
The Federal Reserve Bank with the approval of the Federal Re
serve Board, may issue to such applicant a registration certificate
in form approved by the Federal Reserve Board entitling the holder
to engage in foreign exchange transactions not prohibited by law,
by executive orders of the President or by administrative regula
tions. Such certificates may be revoked at any time by direction
of the Secretary of the Treasury or the Federal Reserve Board. The
Federal Reserve Bank issuing such licenses shall furnish to the ap
plicant, copies of forms of reports required and the bocks and ac
counts of such applicant shall thereafter be kept in a manner which
will enable him to furnish information Called for in such reports
without delay.
LICENSES:
Applications for licenses to export coin, bullion, or currency
shall be filed as heretofore with the Federal Reserve Bank and if
such exports are to be made pursuant to authority granted to the ap
plicant by license of the War Trade Beard to trade with an enemy, the
application shall be accompanied with copy cf the license issued by
the War Trade Board. Applications to engage in foreign exchange
transactions which involve trading with an enemy, shall likewise be
accompanied with copy of license issued by the War Trade 3oard.
X-539.
- 4 -
GENERAL REPORTS:
W i thin_______________ d£i.ys after obtaining a registration
certificate each dealer in foreign exchange shall file with the
Federal Reserve Bank issuing such certificate a report showing
all balances carried with or for foreign correspondents and such
'
other inf creation as nay be called for on the forms to be furnished
by the Federal Reserve Bank and shall thereafter file with the Fed
eral Reserve Bank on dates specified by the Federal Reserve Bank,
reports showing all changes in such balances and all purchases,
sales, and other transactions in-foreign exchange. Each dealer
should require all customers purchasing or selling exchange to
file a statement showing the purpose of such purchase or sale
with full details of any transactions for the liquidation of or
in connection with which such purchase or sale is made. Copies of
such staterrent should be furnished upon request to the Federal Re
serve Bank.
SPECIAL REPORTS:
Whenever any dealer in foreign exchange shall have reason to
believe that any transaction, within his knowledge, involves or may
involve lirectly or indirectly the payment ox funds to or the trans
fer of credit for the benefit of an enemy or an ally of an enemy, he
shall immediately report the facts and circumstances to the Federal
Reserve Bank of his district.
EXAMINATIONS:
The books and records of all dealers in foreign exchange
nust at all tiroes be open to inspection to examiners to be
selected by the Federal Reserve Board.
11/28/17
W. P. 6. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -Off ic io m em b e rs
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
November 28, 1917.
Dear Sir:
In December, 1914, Hon. Wm. H. Osborne, who was then
the Commissioner of Internal Revenue, advised the Board that the
following rul&s^iad been made by his bureau.
"The rediscount of a note by a bank does not involve
any tax liability.
"A promissory note payable on denand is not held to be
renewed and subject to tax under the provisions of the Inter
nal Revenue Act of October 22, 1914, ‘
when accrued interest
thereon is paid.
"A promissory note may have interest payments endorsed
thereon without becoming subject io tax; if the life of the
note is not contingent Upon payment of the interest and is
not extended to a certain future date.
"A promissory note given for a fixed period which when due,
• is allowed to run without suit, is not held to be renewed upon
payment of interest. This is looked upon as a forbearance
and not as a renewal; the holder not relinquishing his right
for any stated period, and, therefore, no stamp is required
in such cases."
The present Commissioner, Hon. Daniel C. Roper, advises
.the Board that these rul^e%.Ve deemed to be consistent with proper enforcement of the existing law. This information is given
you in order that it may be transmitted to your member banks in
such manner as may be deemed expedient.
Very truly yours,
Governor.
•
X-542.
November 3Q, 1917,
MEMORANDUM FOR THE EMPLOYEES
OF THE FEDERAL RESERVE BOARD:
The Federal Reserve Board will not grant leave to
employees during the month of December except under unusual,
and fully explained conditions.
The attention of employees
was called to the fact that the Board desired leave to be
taken in other months than December in connection with the
granting of annual leave early in the sunrner.
Chiefs of
Divisions and heads of offices will please call this to
the attention of those associated with them, and refer all
requests for leave to the Secretary’s Office.
H. PARKER WILLIS.
Secretary.
X-544
STATEidSNT FOE THE PRESS.
The Secretary of the Treasury has made arrangements so
there shall be available to the importers of the United States
.
rupee exchange for the purpose of satisfying the legitimate trade
requirements of the country.
The embargo on gold exports has
.
made it difficult for importers of the United States to find re
mittances for their purchases in India.
This difficulty was
realized by the Secretary of the Treasury and the result has been
a negotiation which now permits the merchants to purchase rupees.
The Secretary of the Treasury has placed in the hands of
the Federal Reserve Board the administration and apportionment of
these Rupee drafts and the Federal Reserve Board has taken the
necessary steps so that merchants requiring such remittances can
make their applications through the Federal Reserve Bank of their
district and receive allotments to cover their requirements.
The amount of rupees now available is estimated as
sufficient to take care of the immediate requirements of trade and
it is hoped thi.t further arrangements can be made to take care of
the future requirements as they arise from time to time.
December 1, 1917.
Ex -Offic io m em b e rs
A.W.^GI?HARDING. GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. MCADOO
Secretary of the Treasury
Chairman
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
December 1, 1917.
Dear Sir:
#
On November 28, 1917, the Federal Reserve Board for
warded to you the following telegram:
"Board has been advised that promissory notes of member
banks are subject to stamp tax Stop Legislation necessary
to obtain exemption Stop Eligible commercial paper, how
ever, may be rediscounted by member banks with Federal Re
serve Banks without any additional stamps Stop If Federal
Reserve Banks desire to do so they may resell such paper with
customary rebate of unearned discount.
■
HARDING, Governor."
In view of the fact that the stamp tax imposed by the
War Revenue Act has been held to apply to the promissory notes oi
member banks on which short time advances are made by Federal Re
serve Banks under the provisions of Section 13 of the Federal Re
serve Act, and in view of the fact that this tax practically pro
hibits this form of short term borrowings by member banks at a
time when such borrowings are most necessary as an incident to the
successful loan operations of the Government, every proper effort
will be made to secure an amendment effecting the requisite exemptir.::.
Pending consideration of such an amendment by Congress,
member banks may properly obtain short time advances from Federal
Reserve Banks, by rediscounting eligible commercial paper, of
longer maturities, under an agreement by which the reserve bank
will resell and the member bank repurchase on whatever date may be
agreed upon by both parties.
the usual nanner.
The unearned discount nay be rebated in
'
It is suggested by the Board, however, that, in order, to ex
pedite these rediscount operations and to simplify the bookkeeping inci
dent to such operations so that they will be practicable during the rush
.and pressure of the banks1 activities in connection with the payment of
the next installment of the Liberty Loan subscriptions, Federal Reserve
Banks may adjust the rebate of discount in advance.
That is, instead of '
deducting interest for the full period of the note or bill when making
the credit in favor of the member banks, the reserve bank may charge
interest only for the period covered by the agreement, that is, from
the date of rediscount to the date of repurchase.
Or the reserve bank
may, if it desires, credit the member bank with the full amount of the
paper rediscounted at the time of making the rediscount and at the date .
of repurchase charge the member bank with that amount plus the amount
of discount earned up to the date of repurchase.
It should also be understood that the Federal Reserve Banks
may further aid the situation by purchasing, either from member or non
member banks, notes or bonds of the United States under similar agree
ments of resale.
Respectfully,
'
Governor.
Federal Reserve Agent
Copy sent to Bank.
e x -o f f ic io m em bers
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A S H IN G T O N
W. P. G ^ TlA ^ D ^ , GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION
Dear Sir:
This is to advise you that the Federal Reserve Board
has given favorable consideration to the application of the
for membership in the Federal Reserve system, upon the condi
tions set forth in a letter to that institution, a copy of
which is herewith enclosed.
Upon receipt of notice that
the conditions are accepted you will be further advised.
Very truly yours,
Secretary.
Enclosure.
Ex -Offic io m em b ers
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG. VICE Governor
FREMRInqA.gpELANO
ADOLPH ‘CTttfLLER
CHARLES S. HAMLIN
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
W A S H IN G T O N
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION
TO TIE ADDRESSEE:
In connection with the examination of the Fe.deral Reserve Bank of
, as of close of business
.
will
you kindly give below a list of items hell in special custody for your
account by the bank named on the date stated.
Envelope for reply is
inclosedj which requires no postage.
Respectfully,
J. A. BRODERICK,
Federal Reserve Examiner.
(Mame of bank)
(Date)
(Official signatuiei
Ex -o f f ic io Members
W. P. 6 .WARDING. GOVERNOR
jeMȩ4ȣWARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
and Fiscal Agent
W A S H IN G T O N
A DDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION
TO THE B A M ADDRESSED:
In connection with the examination of the Fiscal Agent
accounts of the Federal Reserve Bank of ________ __________ , the
information called for below is desired. Please address your reply
to the undersigned, care of the Federal Reserve Bank.
Resgectfully,
J. A. BRODERICK,
Federal Reserve Examiner.
J. A. Broderick,
Federal Reserve Examiner.
Sir:
The records of this bank as of close of business _________
show that the balance or balances listed below were due by this tank
to the Treasurer of the United States:
War Loan Deposit Account .............
$_______________
-_________________________________ ^
___
$_______________
As security for the Government deposits aforementioned, the
Reserve Bank holds the following:
(Name of Bank)
(Date)
( City)
(State)
(Official title)
Ex-Officio Members
W. P. G. HARDING, GOVERNOR
*
PAUL m . w a r b u r g , v ic e Go v e r n o r
FREDERIC A. DELANO
'
ADOLPH C. M ILLER £ A
CHARLES S. A M 'b n P •
W ILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
Co m p t r o l l e r o f t h e C u r r e n c y
FEDERAL RESERVE BOARD
H. PARKER W ILLIS , SECRETARY
SHERMAN P. ALLE N , ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION
»
Gentlemen:
The books of the Federal Reserve Bank of _______________
show that on _________________ the balance or balances, listed below
were due from you to the Treasurer of the United States:
War Loan Deposit Account.............
$_____-__________
____________________________________ _ $__ ____________
As security for the Government deposits above named, the
Reserve Bank holds the following:
Please confirm the figures shown herein to the under
signed, care of the Federal Reserve Bank o f ____ ______________
Respectfully,
'
Federal Reserve Examiner.
Correct.
(Cashier)
(D a te )
3008
B I S C O U J I
X-552
R ATE S.
Discount rates of each Federal Reserve Bank approved by the Federal Reserve Board up to Leee<..ber^£ L917.
Discounts
DEAN
JEcaaa_a c c a pt .anc-asDINE
FEDERAL
RESERVE
BANK
Within 15
days includ
ing member
banks' col
lateral metes
DOOR
Agricul
tural and
live-stock
raper over
16 to 60
days
61 to 90
days
vO days
DRUM
DUAL
Secured by U. S.
certificates of in
debtedness or-Lib
erty Loan bonds.
Within 15
days includ
16
to
ing member
90
banks' col
lateral notes daxB
4
-3-2
3
DALE
1 to 60
days
inclusive
PYRE
61 to 90
days
inclusive
4
4 .
4
4i
A,k
Boston
4
5
3
New York
3k
32
4
4
5
4
4
Philadelphia
4k
4s32
4
4
4’
5
4
Cleveland
4i
4k
3-2
4
4
4
4
Richmond
32
4k
4?
4
4
4
4
5
Atlanta
4s
4k
4
4
5
4
41
Chicago
32
32
5-2
4
4
4
4
St, Louis
51
42
4b
32
4
4
’
4
4
5
Minneapolis
42
32
52
4
4
4
4
5
Kansas City
4k
32
4'f
4
4
5
4
Dallas
32
4k
4k
3k
4
4
4
4
Ran Francisco
5k
4k
2k
4k
Note 1. Rate for acceptances purchased in open market, 2k to 4 per cent, except for San Francisco, whose rate
ranges from 2k to 42 per cent.
Note 2. Rates for commodity paper have been merged with those for commercial paper of corresponding maturities.
3t
DESK
DIKE
Commodity paper
16 to 60 aays : 61 to 90 4ERJDS
DOVE
Bankers acceptances
Ex-Officio Members
W. P. 6. HARDING, GOVERNOR
W ILLIAM 6 . MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN
FREDERIC A. DELANO
A D O tp H ^C . M ILLER
t S. HAMLIN
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER W ILLIS . SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
AND FISCAL AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION
December 6, 1917.
Dear Sir:
In view of the fact that several of the Federal Reserve
Banks seem to feel that the form of par list submitted with the
Board's circular letter of Juiie 6, 1917, is preferable to the one
now in use, it has been decided tp adopt this form beginning with
the coming January full list.
A copy of the circular letter re
ferred to with the form attached is enclosed herewith.
•
In preparing your data for the January list, will you,
therefore, kindly prepare same in accordance with this form, in
duplicate. and forward so as to reach the Federal Re sen;© Board
not later than December 2$,1917?
Corrections may be made by
telegraph until December 27, 1917.
With the number of branches now being established it is
probably desirable that the list show in what district or zone the
bank or town is located, and it would also appear desirable to in
clude the time schedule of each branch as applying to banks in .....
its zone on items such banks send to the branch.
Should there b# any other ...corrections in >our time
schedule, will you please make the necessary indications?
Very truly yours,
Enclosure.
Secretary.
B t-O r n e io Mmmmbrq
W. P. 0. H A X m f k 3 d « E R H O R * ^ 0 ^ 0
PAUL H. WAMBURO. VlCR SOVRRMOS
PREDERIC A. DELANO
ADOLPH C. HILLER
•
CHARLES S. HANUN •
WILLIAM « . MCADOO
ERRERTARY OP THB T n u i l T
_
Chairman
JOHN SKELTON WILLIAMS
COMPTROLLER OP THR CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SRCRRTART
SHERNAH P. ALLEH. ASAT. SRCRRTART
and Fiscal aornt
WASHINGTON
ADDHMSS REPLY TO
n O H R A L RE8ERVB BOARD
December 6, 1917.
Dear Sir:
nave
Inclosed herewith is a table showing the discount rates which/
been approved by the Federal Reserve Board as of December Sth. This
table shows the changes which were made by all the Federal Reserve Banks
at the suggestion of the Board, except in the case of the Federal Reserve
Bank of New York, which, because of conditions of a local character, has
asked that action be deferred until December 15th;
The" table will show greater uniformity in the rates established
by the eleven banks which have, acted than has existed heretofore. It
has been the desire of the Board to simplify the rate schedule and the
means of acting upon changes in rates. There are now only two schedules
for fifteen day paper, .one for commercial paper an.d collateral notes se
cured by commercial paper, (including commodity paper and.trade accept
ances) and th9 other for collateral notes and customers1 paper secured
by Government securities.
Heretofore there were four rates, as some
banks charged a different rate for a note secured by commercial paper .
than for fifteen day commercial paper discounted, and some had a rate
one-half per cent higher for member banks1 customers* notes secured-by
Government securities than for a collateral note secured in the same way.
Some banks had a special quotation for .the fifteen day trade acceptances.
In telegrams which were exchanged between the Board and the
banks some confusion has arisen because of difficulty in describing the
character or maturity of the paper to which the rate referred.
In
order to avoid this in the future there has been inserted in the table
a code word at the head of each classification of paper, and hereafter
in telegraphic correspondence regarding rates the.se code words will be
used. An additional code word has been inserted for bankers' accept-,
ances, and two additional code, words appear for-commodity paper having
from 16 to 60 days -and from 61 to 90 days to run, for use by such tanks
as still maintain a quotation for this kind of paper, although for’the
time being the rates are the same as on ordinary commercial paper. Tho
fifteen day rate for commodity paper should remain merged with the
fifteen day rate for commercial paper, even though a special rate fo”
longer time commodity paper be reestablished later on.
'
X-5^4
- 2
It should be understood that fifteen day trade acceptances
will be taken under whichever classification nay be the lower. To
illustrate, one of the banks has a trade acceptance rate of 3a$> for
1 to 60 days and a fifteen day commercial paper rate of 4$. Fifteen
day trade acceptances v/ill according be taken by that bank at 3^.
At another bank the rate is 3j$ for trade acceptances from 1 to 60 ^
days and 3J& for fifteen day conmercial paper. In that case the trade
acceptance would be taken at the commercial paper rate of 3p.
The
Board is of the opinion that when commercdal paper or trade acceptances
have run down to fifteen days, the difference in classification is not
of sufficient importance to warrant a special quotation.
Very truly yours,
Governor.
■(‘OmeiolUttHM
WILLIAM * . NcADOO
X-555
sscekmbi o r tmc t i u m m
CEAIEEAE
JOHN SKELTON WILLIAMS
COMpnOtUtt OP TMC CERUNCT
FEDERAL RESERVE BOARD
W. P. « . HARDIMO. OOTBNNOM
RAUL M. WARBORD. VICE SoVSRNM
PRKDRRIC A. DELANO
ADOLPH C. MILLCR
.
CHARLES S. HAMLIN
H. PARKER WILLIS, SCCMTACY
SHERMAN P. ALLEN. ASST. SECRETARY
ANO FISCAL ASEMT
ADDRESSREPLYTO
WASHINGTON
PKOKRAL RESERVE BOARD
fibeofc.bai* 7> 1917.
Dear Sir:-
.
The Federal Reserve banks are now considering the matter cf
dividends and several of them have asked the Board.for a ruling as
to the depreciation charges which may prcperly be made.
In the opinion of the Board there should be liberal prcvi3.ic_i
for apparent depreciation, as it seems likely that in the immediar,;
future this depreciation will be increased rather than diminished,
because cf the weight cf succeeding issues of government bonds uptn
the market.
The Board*s conclusion, therefore, is that full pro
vision should be made for apparent depreciation in securities hefere
any sum is transferred to surplus account or any payment is made tc
a
\
the United States government.
A national bank cannot lawfully pay
a dividend to stock-holders when such a payment would impair its
capital, and it does net seem proper that a Federal Reserve bank
should be permitted to distribute a surplus which does not really
exist.
There are however, a number of Federal Reserve banks which are
in position to make proper provision for depreciation and at the saat*
time make a substantial payment to the government, carrying a like
amount to surplus fund.
Consequently, there is need for the adoption
of a uniform rulo in the treatment of depreciation on furniture,
fixtures and equipment, bank premises; and cost of unissued Federal
Reserve notes.
c oncluded
After due consideration cf the matter the Board has
X-555
(1)
That Federal Reserve bank* should be permitted to charge
cff furniture and fixtures account in full and not exceeding 1C$ of
the cost of vaults;
(2)
That no charge be made against the cost of Federal Reserve
notes except the notes actually issued to the bank" by the Federal
Reserve Agent;
(3)
That on the cost of bank premises depreciation allowance
in any one year should be limited to 5% of the total cost.
No reserve for depreciation against 3/£ one year notes should be
provided as these notes may be taken up on any interest date.
Very truly yours,
Governor,
/
X-55'6
FEDERAL RESERVE BOARD
'
WASHINGTON
Deceiver 3, 1917.
When the United States joined in the war against Germany
in April of this year, the cash reserves against combined note
and deposit liabilities of the Federal Reserve System were 83$.
At the end of Hove:.her they were about 6 3 .2 % (see memo. No. 1).
This means that the financial operations of the Government,
covering loans to the aggregate of mbout $6,500,000,000 during
the period from A pril to November 30, have brought about a re
duction in reserves of about 2 1 %.
We must bear in mind, how*
ever, that full payment for the second Liberty Loan has nojr yet
been completed (the last installment not being due until January
15th and about
$3,400,000,000 being still paid by credit and
about $650,000,000 being still on deposit against certificates
of indebtedness sold and included in the above $6,500,000,000).
It is quite possible, therefore, that our reserves have not yet
reached their lowest point in connection v/ith the payment of
this loan, though the paying off of the Certificates of indebted
ness will liquidate some of the loans of the Federal Reserve Back
and thus counteract to a certain extent demands for further loans
from them.
If between A pril 6th and November 30th, 1917, there had not
been an increase of $149,000,000 in the free gold holdings of the
Federal Reserve System (see Memo No. 2) the reserve percentage
would have dropped by a further 5.6^ to 57.8^.
2
X-556
It is to be hoped, and it must be our serious concern,
that between now and the next Liberty Loan campaign the reserve
percentage will again.be increased.
it dropped down from 81*0^
During the previous campaign
in June
to 71.4/£/and then recovered
to 82/£ in A ugust (see memo No. 3).
It is too early to attempt
to prognosticate how fast and how far the reserve strength will
recover this time, but if we consult the charts (Nos. 4 and 5)
showing similar developments in the Bank of England, the Banque
de France, the Reichsbank and the Bank of Russia, we find that
we must be prepared for a continuous rise in the liabilities
and a continuous fall in reserves of our Federal Reserve Banks.
Indeed, we will perceive that in European central banks in most
cases rise and fall show a fatal acceleration with each successive
year*
The German Reichsbank’s chart shows most
clearly
the lines on which the Federal Reserve System’s chart is likely
to develop; it shows at the same time the dangers that are fac
ing us if we do not move cautiously.
If we look at the Reichsbank chart we find in line 3 (bill;'
discounted, including treasury
bills and advances) seven peak'3
indicating the large increases in loans and discounts accompany
ing the payments for each successive loan.
Within one month
after reaching the peak of the load unere follows liquida
tion bringing the curve down to about the previous level; bad
we find that this level rises between loans so that each s u c - a ive starting point is higher than the previous one, and between
the first and the last starting points there is a difference ox
X-556
3.
over $2,000,000,000, and the reserve has gone down from 36.7$
to 15.8$,
to 7.4$.
In Trance from 59.5$ to 14,1$; Russia from 60.2$
The Bank of England's chart does not show the real
picture because about $910,000,000 of small treasury circulating
notes are not included (Greenbacks to all intents and purposes,
secured by only 14.9$ of gold - memo. Ho 6) and the deposits
of the Bank of England, which play a large part in England’s
reserve position must be considered.
The Bank of England's
reserve percentage dropped from 39.4$ to 27.1$ (if we include
the $93?.,000,000 Treasury notes it dropped to about 20.5$ since
the beginning of the war.
But we must bear in mind that England,
from the beginning of the v/ar, drew on the United States first
for gold and later on for credit.
Without the approximately
$4,000,000,000 ($1,700,000,000 securities sold and $2,500,000,000
in direct loans) which England thus secured from the United States
Sterling exchange long since would have collapsed like Russian
and Italian exchange and England, like those countries, would
be practically or. a paper basis today.
France would be in the
same condition had it not been for our assistance unless, indeed,
these two countries should have been able to continue the war
without importations from us.
(in spite of our assistance,
France’s condition appears to be a critical one - see memo. No. 7)
I mention the experiences of France and England only because
I am seriously alarmed by the thought of what will be our condi
tion when our gold reserve should reach the danger point, when ouf
currency should become seriously depreciated - with consequent
4.
X.-55G
extreme increases in prices - and when our power of expansion
on any reasonably safe basis should have come to an end.
When
we reach that print it will mean a catastrophe because, unlike
England and France, we have nobody who will stand behind us and
bolster up our credit.
How saon will we reach that point?
It is too early to venture any guess as to our ability- to
liquidate the investments of our Federal Reserve Banks, thereby
regaining our strength before the issue of the next Liberty Loan.
It is not too early, however, to sound a word cf warning and to
ascertain what means we have to arrest a development which, if
shown to exist, might prove disastrous.
If experience should shew that our reserve pewer is dwindling
from one loan to another by anything like 15%, the second or third
following loan would bring us face to face with a critical situa
tion.
What means of protection are there available to the Fed
eral Reserve Banks?
And what else can there be done to ward off
a too rapid decline of our banking strength?
(l)
The Federal Reserve Banks, by raising their rates, will
have to try to liquidate a substantial portion of their investments.
The difficulty in the way of carrying such policy into effect
is the danger of creating a financial disturbance which might make
things vrorse and affect unfavorably the large loan operations of
the Government.
We must, therefore, move cautiously and cannot
force matters beyond certain limits.
X-556
-5 -
(2)
The Federal Reserve Banks oust try to increase their
gold holdings by continuing to withdraw gold certificates from
circulation and substitute Federal reserve notes.
This process will
become more and more difficult as the amount of outstanding certifi
cates becomes smaller and smaller.
(3)
Federal Reserve Banks must continue their efforts to
secure gold and gold certificates from the vaults of the banks.
But
we have drawn heavily on that source of supply and it will be more
difficult in the future than in the past to gain gold from that
quarter.
(4)
We might try to get gold from abroad.
Can we get it?
It would be very interesting to find out what happened to the Russian
and French gold in London.
Is it impossible to get England to release ..
some portion of that gold, provided it is available and necessary?
(5)
The Federal Reserve Banks must try to reduce their
"float" (the amount invested in checks and transfers)
by raising the
rate of interest upon which these transactions are based and by trying,
if at all possible, further to reduce the double circle that money
describes when paid in by the banks for account of the Government and
paid out again by the Government.
(6)
We must bend every effort to prevent permanent corporate
financing, camouflaged as commercial paper, from creeping into the
Federal Reserve Banks.
The securities market being in a most un
satisfactory condition, corporations will try to create securities
I
X-556
- 6 in form available for investment by Federal Reserve Banks; or
amendments will be recommended with the object of permitting Fed
eral Reserve Banks to lend on corporate securities.
It is most
important that some machinery be created (a Government corporation
such as we have discussed) to relieve the Federal Reserve Banks
from additional pressure from these directions.
(7)
The Federal Reserve Banks have about $100,000,000 in
vested in Government securities.
The Federal Reserve Banks are per
mitted to convert their one year notes and other holdings of Govern
ment bonds into the 3% conversion bonds, only.
These bonds sell at
present at about 86% and the amounts invested can not therefore be
liquidated at this time.
If Federal Reserve Banks were permitted
(with the approval of the Secretary of the Treasury) to convert their
holdings into whatever bonds the Treasury issues from time to time,
they could free themselves of these investments.
These are palliative measures, necessary and important, in
deed, but
they will not adequately remedy the situation if it should
be shown that we are placing Government securities faster than
the
country is able to absorb them, either because the country does not
yet save enough or because we are moving too fast - or both.
I need not go into the question of savings, except to say
that if a Government corportation (mentioned under 6) should be
established and Congress should empower the Presidnet to license
X-556
- 7 all public sales of corporate securities - the President vesting
this power in the board of said corporation — waste by States and
rcunicipalities could be chocked and expansion by sale of securities
could be controlled.
Our train concern, however, trust be as to the speed with
which we are moving.
We trust be certain that we have not started
upon a three mile run at a thousand yard pace.
sure to get "winded" and to get knocked out.
Otherwise, we are
In this connection the
question is a burning one, whether it is possible, without endangering
our chances of victory, to bring the military and naval program of the
United States and her allies into a scope that will enable us to be
quite certain that financially we can hold out even if the war should
continue for several years.
People talk about the marvellously increased saving power
of the country.
But this impressive increase is caused by increased
prices and increased wages (moving in a vicious circle).
increase the amount that the Government must borrow
And as these
increases and
the value of the dollar decreases.
Issuing billions for perishable goods (and, worse than that,
perishable goods that destroy things of permanent value) creates
inflation; it creates increased deposits and circulation and increased
loans based upon inflated values (excep/t stocks and bonds which
go down)
Increased
ariu thereby creates a demand for increased reserves.
reserves
in turn are created
by
increased borrowing
X-556
- 8- from Federal Reserve Bank* (Table 3, showing increase .of deposits and
loans since 1914, shows that loans have increased by 40,6% and
*
deposits by 34.5%, both having increased by about $2,500,000,003, But
investments during that period have increased by 68.5%, from $1,914,
000,000 to $3,227,000,000, and this greater increase of loans and in
vestments - 47% against increase of deposits of 34.5% - is in itself
a sign of a critical development that calls for close watching).
This process of inflation and the gradual weakening of our reserves
can not be entirely avoided.
tended war financing.
It is the necessary consequence of ex
War expenses and Government loans must, however
remain fairly nearly within the limits of what can be raised by taxa
tion and absorbed by savings between one large Government loan and the
subsequent one.
If loans are raised much in excess of that limit,
Government bonds must be carried in increasing amounts by bank loans
and these loans, and ultimately the Government bonds themselves, or
direct advances to the Government, will creep into the Government
banks, causing inflation, sapping the gold reserves and bringing
about a critical financial and economic situation, and ultimate
disaster.
The charts of Russia and France tell their own stories in
this respect. (I have no doubt Italy and Austria would show similar
conditions);
The speed at which we are proceeding is unparalleled. Within
one year, 1918, it is estimated that we are to raise about $19,000,000
000, of which $15,000,000,000, by loans; while
England, it is
X-556
’
- 9 '■
estiirated has raised by loans an average of $6,725,000,000 per year,
France $4,370,000,000, Germany $5,459,000,000, Russia $5,000,000,000,
(See metros. 9 to 12); and, as stated before, these countries could
resort toother financial markets in order to strengthen their position,
while we not only can not borrow abroad, or sell our securities abroad,
but must finance by our loans our allies as well as ourselves and, in
addition, have the proceeds of credits opened by us used quite ex
tensively for our allies1 purchases of goods in foreign countries.
This latter cirnumstance, and the scope and speed with which our
departments and our allies call upon the Treasury for funds and
credits are $he danger points which must command our closest attention,
The next month will bring us definite figures upon which
to base reliable conclusions.
We are dealing with a new machinery
and new conditions and have no precedents that would enable us to
do more at this time than to point to certain possibilities, which,
if they should become realities, may prove a serious menace to the
successful prosecution of the war.
P. M. W.
12/7 A 7
X-556
December 5, 1917.
MEMORANDUM 1.
RATIO. OF Tffi FEDERAL RESERVE RANKS’ TOTAL
RESERVES TO NET DEPOSIT AND FEDERAL RESERVE NOTE LIABILITIES
COMBINED ON NOVEMBER 30, 1917.
Total Reserve
$1,576,211,000
Total net deposits .................
1,594,647,000
Total F. R. notes in circulation .....
1,056,983,000
Total net deposit and F. R. note
liabilities.
Coitbined........
2,651,630,000
Ratio of total reserve to net deposit and
F. R. note liabilities. Combined - 63.2 per cent
X -5 5 6 .
MEMORANDUM 2
FREE GOLD ON APRIL 6 AND NOVEMBER 30, 1917.
April 6, 1917.
Not deposit liability
$
Reserve require! (35Jb)
November 30, 1917.
760,282,000 :
$1,595,571,000
: $558,450,000
: $266,099,000
376,510,000 •
F. R. notes in circulation
Reserve require! (40$)
Total net deposit & note Liab'l’a
_____ ___ :
1^136,792,000
:
1,056,983,000
_____________
2,652,554,000
150, 60*±,'jOQ
__________
•
422,793,000
__________
Total reserves require!
416,703,000
981,243,000
Total reserves hell
Gold holdings in excess of
reserve requirements
Gain in free gold between
April 6 an! Nov. 30, 1917
962.662.000
1,676.211.000
545.959.000
694.968.000
149.009.000
Percentages of reserve to combined net deposit and note liabilities:
April 6 -
(962,662,000 4 1,136,792,000)
84.7 per cent.
Nov. 30 -
(1,676,211,000 + 2,652,554,000) 63.2
"
”
If it had not been for the increase of $149,009,000 in free gold between April 6 and November 30, 1917,
the reserve percentage would have dropped to 57,6 (1,676,211,000 - 149,009,000 + 2,652,554,000)
X"5o£
MEMORANDUM 3.
RATIO OF TOTAL RESERVE OF THE FEDERAL RESERVE
BANKS TO COMBINED NET DEPOSIT AND FEDERAL RESERVE NOTE
LIABILITIES.
>
O
S3
April 5-6, 19
11, !l
May
June
15, II
June
22, fl
29, II
June
July
6, H
July
13, II
July
20, II
July
27, tl
Aug.
3, II
Aug.
10, II
Aug.
17, II
Aug.
24, II
Aug.
31, It
Sept.
7, II
Sept. 14, 11
Sept. 21, II
Sept. 28, II
Oct.
5, II
Oct.11 -12, II
Oct.
19, II
26, II
Oct.
Nov.
2, U
9, II
Nov.
16, II
Nov.
23, II
Nov.
30, II
83.0 par cent
n
81.1 it
II
n
71.4
II
71.6 u
II
ii
75.4
tt
11
79.6
II
79.9 II
II
II
. 79.1
11
. 80.1 II
1
1
1
1
. 81.9
II
II
. 82.7
11
82.0 tt
II
1
1
. 82.6
It
II
, 81.7
It
, 79.6 II
II
It
. 80.0
It
79.6 II
It
77.1 11
tt
II
, 74.4
11
, 74.5 II
It
II
, 75.6
II
71.7 II
tt
69.0 II
tl
II
69.4
II
, 65.8 II
It
It
64.7
n
63.2 11
.
.
.
.
.
.
,5.
MEMORANDUM 6 .
RATIO OF TOTAL RESERVE TO COMBINER DEPOSIT AND NOTE LIABILITIES
FOR THE PRINCIPAL EUROPEAN BANKS 07 ISSUE.
(in thousands of dollars)
Bank of England
: Bank of France
: Russian State Bank
July 29,
1914
Nov. 14,
1917
July 30, :Nov. 15,:July. 16, :Sept. 16,
1914
:1917
: to
29, : to
29,
:
:1914
:1917
$185,567
$270,603
$919,968
61,869
205,486
73,834
6,375
Other Deposits
264,830
586,468
182,881
523,213
3c.nl: notes in
Circulation
144,566
206,138 1,289,855 4,312,749
m
~u„1
A O O o v i.
471,265
998,092 1,546,570 % 842,337 1,433,696
Totai Metallic
Reserve
Government
Deposits
Ratio of Reserve
to combined
Deposit and
Note Liat’s
Treasury notos
outstanding
Coin and “bullion
Cover
Per cent
39.4
4
•
.
*
.
27.1
931,317
138,695
14.9
59.5
July 31,
1914
Oct. 23,
1917
$742,249
$363,670
$598,291
109,421
1,365,026
1,710,221
)
)299,515
D
841,174 8,181,781
692,442
2,413,010
10,001,423
991,957
3,778,036
7.4
36.7
$683,825 $683,371
14.1
: German Reichshank
264,937
327,585
60.2
15.8
X-555
13EM0RANDUM 7.
v
The following is a quotation from a letter of a Dutch Gentleman.
"According to the official memorandum regarding French
finances, Franco had borrowed in England somewhat over Fes.
8,000,000,000, and close to Fes. 6,000,000,000 in the United
States.
Further advances which we (U. S.) have made in the
mean time may have brought France’s debt in this country up to
about Fes. 8,000,000,000, making a total of Fes. 16,000,000,000.
"The official estimate of crops of France indicates
that there will be a shortage of wheat, rye, barley, and oacs
of about 45“
/o against the average yield of these crops for the
years 1905 to 1914♦
What is more serious is that the short
age is greatest in wheat, where it amounts to more than 55f0.
The "Temps" of September 28th estimates that France may have
to import between three and four billion Francs cf^ cereals to
make up the shortage of this year.
It seems impossible to see
how France will.be able tc keep up her rate of exchange, even
if peace should come.
Unlike England, France does not dispose
of any foreign investments which can be easily made available.
For political reasons, the French markets were closed to just
foreign securities which would have helped the country most
now, and the Government and the banks co-operated in putting
- 2 -
X-555
the savings of the nation which were availablefc3r investment
abroad - chiefly in Russia, South America and Mexico - just
t h e 'countries where investors have received the heaviest blows.
It was exactly on account cf this situation that France found
herself actually in the miast of a financial crisis at the out
break of the war.
T^e necessities of the war long ago consumed
whatever foreign assets of a more liquid kind France may have
been holding and it is a wellknown fact that the country has
even gene so far as to practically pledge the credit of its
cities and its biggest private enterprises financially to back
up the Government.
"If we turn to the conditions of the Bank of France, we
do not find any more reassuring facts.
"On October 11th, the note circulation was Fes, 21,500
000,000, which were covered by only Fes. 3,300,000,000 actual
gold, being only about 15jo.
Most cf the assets held against
the note issues are absolutely uncollectable for the time being.
They consist up to:
and
Fes. 12,100,000,000 of advances to the State,
1,150,000,000 Bills of Exchange not collectible
under the moratorium.
3,500,000,000 cf advances to foreign governments
which notoriously are advances to the
Russian Government for the payment
of interest on its pre-war debt hold
in France.
3
This makes a
t ot al of un
collectible
assets of Fes.
X-555
16,750,000,000, or about 77/£ of the total
amount of notes outstanding.
’'Perhaps one of the greatest difficulties which is in
store for the French money market and which may well give
the final blow to the whole structure, lies in the fact that
the day must come when the French Government will cease to
pay out to the French holders of the Russia pre-war debt the
interest which it can never hope to collect itself.
day comes I fear a very serious situation,''
P, J£. W*
t
When that
MEMORANDUM
8
H'TOKEA.SES BETWEEN JUNE 30, 1914 AND SEPTEMBER
11, 1917 OF LOANS AND DISCOUNTS AND NET DEPOSITS
OF NATIONAL BANKS, AS SHOWN BY COMPTROLLER* S ABSTRACTS.
June 30, 1914 : Sept. 11, 1917
Increases,
(In thousands of dollars).
Loans and discounts
including overdrafts
Other loans and invest
ments, excluding per
manent investments
Total loans and
investments,
Net deposits, on which
reserve is coax-uted
$2 ,619,300= 4o.6$
$6 ,445,555
$9,064,855
1,914,888
3,227,124
8,360,443
12,291,973
3,531,536= 47»t$
7,495,149
10,082,779
2,5S7,630=
1
,3 1 2 ,2 3 6 =
.^
68 5
X-556
MEMORANDUM 9.
BRITISH WAR LOANS
On September 30, according to official announcement of the Chan
cellor of the Exchequer, the total funded debt of the United Kingdom
stood at £2,518,300,000 equivalent to $12,255,307,000.
In addition
there were outstanding on November 3 about £991,000,000 equivalent to
$4,820,000,000, of^Treasury Bills, about $1,475,000,000 loans from the
United States Government and several hundred millions of credits raised
in Holland, Scandanavia, Japan and other foreign countries, making a
total of about 18.7 billions of dollars (see London Economist, Nov. 17,
1917).
The London Economist gives the total net borrowings of the British
Government for the period August 1, 1914 to November 10, 1917 as £4,491,
514,000 equivalent to $21,857,953,000, of which £1,260,000,000 equiv.^
alent to $6)133,'QQO,000 represents advances to Dominions and Allies.
Under date of November 14 the Bank of England reports among its
assets "Government Securities" amounting to £58,721,320, equivalent to
$285,768,000.
Taking the larger estimate of total war debt of $21,357,
953,000 given by the London Economist as our basis for calculation, we
obtain a yearly average of war loans raised between August 1914 and
November 1917 of about 6,725 million dollars.
I
•
X-556
MEMORANDUM 10.
F R E N C H
W AR
L O A N S
The Economists European quotes an official budget report,
indicating the following increases in the French National debt be
tween August 1, 1914 and September 30, 1917:
Millions of
Francs.
National Defense short-term bonds,
C'Bons de la Defense Nationals")
National Defense "Obligations",
funded loans of 1915 and 1915,
T otal
21,700
840
21.920
44,460
This total is exclusive of 12,350 millions of francs, equivalent
to $2,383.5 millions of dollars (at the nominal rate of 19.3# per
franc) of war advances by the Bank of France shown among its assets
on November 15, 1917, - The Bank also carries among its assets an
item of 3.145 millions of francs, or about 607 million dollars dis
counted Treasury Bills, the proceeds of which were advanced to the
Allies.
It is not clear whether this amount is included in the
above total of 44,460 millions of francs.
To the total given should
be added also the following amounts, largely taken from M. Klotz’s
Treasury Statement as at July 31, 1917:
'
Millions of
francs.
7,952
Bills sold in England,
Amounts borrowed in the United States:
Bank credits,
518
239
Industrial credit
498
April 1917 credit operations,
Anglo-French loan,
.
1,243
Advances by United States Gov’t. (Nov.1,1917) 4,248.7
Amount borrowed inJapan,
129.0
Advances by the Bank of Algeria,
____ 65.0
Total
14,892.7
Total long-term and short-term domestic loans
outstanding Sept. 30, 1917
44,460
Advances of the Bank of France,
12.350
71,702,7
or million $13,838.8
Assuming this amount to represent total expenditures between August
1, 1914 to September 30, 1917 the average annual expense would be
about 4,370 million dollars.
f
I
*556
MEMORANDUM 11
RUSSIAN
WAR
'
LOANS.
According to an official announcement of the Russian Finance
Minister (reproduced in the Economists Europeen of October 12, I 9I7 )
the Russian State expenditures between August 1, 191^ and September
1, I 9I7 , aggregated ^1,393,000,000 Rubles, or $21,317*000,000 nominal,
While Jlovernment ^revenue?fpr the same period was only about 9*701*000,000
Rubles, or $^,996,000,000 nominal.
which had to be covered by loans.
This leaves a total of $16,321,000,000
Aggregate domestic long-term and short
term loans are given in the statement as 12,753,000,000 Rubles or $6,570,000
000 nominal, the remainder of $9,7^9,000,000 nominal thus being covered by
foreign loans, largely advanced by Great Britain.
On September 29 , 1917 the Russian State Bank reports among its
assets 13,39^*795;000 Rubles of short-term Treasury bonds (Bens du Tresor)
besides 823,99^,000 Rubles of advances for provisioning operations of the
Government, or a total of 1^,223,789,000 Rubles equivalent to about 7,32.5
million dollars at the nominal rate of 5 1 .5 cents per Ruble.
the Bank reports a total of
Per contra
15,886,953,000 Rubles or $8,181,781,000
nominal of notes in actual circulation.
Assuming a total war debt to September 1917 °f $16,319,000,000
the yearly increase of the debt would average slightly over 5 billion
dollars
MEMORANDUM 12
GEBMAH
WAR
LOANS.
In millions of
Marks
@
Dollars
(In millions)
1,066.4
1s t . ............
2nd..............
............ 9,106,3
2 ,1 6 7 0
3 r d .......... ..
2,394.7
4 t h ............. .
2,562.7
5t h . ............
2,546.4
6t h ............. .
3 ,122.6
7t h ............. .
2 ,9 5 8 .1 ,
Total. ........... 72,766.3
17,318.4
@ ..Marks converted a t 23.S^ p e r Mark.
Note:
The t
fbove t o t a ls are e x c lu siv e of T re asu ry B i l l s
Treasury Notes, Government War Lean bank notes and other unfunded
obligations of the Imperial Government.
The above increase in the
public debt averages about $5 ,469,000,000 per year, to which should
be added a certain amount of floating indebtedness chiefly in the
form of Treasury bills and War Loan bank notes.
X-557
DEPARTMENT OF JUSTICE
WASHINGTON
November 26, 1917.
Sir:
I have your letter dated November 16, 1917, with
reference to the authority of the Federal Reserve Board
to grant to national banks located in New York the power
to act as trustee, executor and administrator.
I
am
of opinion that the Reserve Board has no such authority
under existing laws.
Section 11 (k) of the Federal Reserve Act of De
cember 23, 1913, c. 6, empowers the Reserve Board:
Sec.ll(k). To grant by special permit to
national banks applying therefor, when not in
contravention of State or local law, the right
to act as trustee, executor, administrator, or
registrar of stocks and bonds under such rules
and regulations as the said Board may prescribe.
(38 Stat. 251, 262.)
The congressional enactment therefore authorizes
the special permit only "when not in contravention of
State or local laws".
The Act of April 16, 1914, Article V, section 223,
Laws of New York 1914, c. 369, p. 1371, provides:
X-557
-
2
-
No corporation other than a trust company
organized under the laws of this State shall
have or exercise in this State the power to re
ceive deposits of money, securities or other
personal property from any person or corporation
in trust, or have or exercise in this State any
of the powers specified in subdivisions one, four,
five, six, seven and eight of section one hundred
eighty-five cf this article, nor have or maintain
an office in this State for the transaction of,
or transact, directly or indirectly, any such or
similar business, except that a federal reserve
bank nay exercise the powers conferred by sub
division one of such section if authorized so to
do by the laws oi' the United States * * * .
Subdivisions 1, 4, 5, 6, 7, and 8 of section 185 of
Article V referred to confer authority upon trust companies
to act as registrar of stocks and bonds, as executor and
administrator, and as trustee in various capacities.
The laws of New York empower only trust companies
organized under the laws of that State to act as trustee,
executor and administrator.
This is not a case where
the local law simply authorizes State banks to assume
trust company functions.
192 Mich. 640.
Fellows v, First National Bank.
Corporations other than those organized
in New York are expressly prohibited from exercising such
powers.
Since the national banks in question are not organized
under the laws of New York, a special permit to act as trustee
be
would/plainly in contravention cf the State law.
X -557
- 3 -
I find nothing in the opinion of Mr. Chief Justice
White in First National Bank v* Fallows, 244 U. S. 416,
which would justify, in the present matter, a different
construction of the unambiguous provisions of the con
trolling statutes.
The language of the present Chief
Justice demonstrates the power of the national legis
lature to confer authority upon national banks to act
as trustee, executor and administrator, where such,
powers are exercised by State trust companies, even
though the State law discriminates against the national
agencies in this regard.
The power of Congress to
determine how far national banks may be subject to
State control is settled, and State regulations which
conflict with the congressional enactments are invalid.
Davis v . Elmira Bank. 161 U. S. 275; Easton v. Iowa. 188
U. S. 2201 VanReed v. National Bank. 198 U. S. 554. But in
this case Congress has not exerted its power.
By section
1 1 (k) it has explicitly constituted the local statutory
provisions as the criterion of the corporate capacity of
national banks.
The New York statute, therefore, can not
fairly be said to deny to national banks operating in New
York a power Congress intended they should have.
Very respectfully,
T. W. GREGORY
The President
Attorney General
x-55*
Extract fife [jcction 22 of the Federal Be servo .act:
‘•Other than the usual salary or director’s fee
paid to any officer, director, employee,*or attor
ney of a member bank, and other than a reasonablefee paid by said bank to such officer, director,
employee, or attorney for services rendered to
such bank, no officer, director, employee, or, at
torney of a member bank shall be a beneficiary of
or receive, directly or indirectly, any fee, com
mission, gift, or other consideration for or in con
nection with any transaction or business of the bank;
Provided, however, That nothing in this act contained
shall be construed to prohibit a director, officer,
employee, or attorney from receiving the same rate of
interest paid to other depositors for similar deposits
made with such bank: And provided further, That notes,
drafts, bills of exchange, or other evidences of debt
executed or indorsed by directors or attorneys of a
member bank may be discounted with such member bank
on the same terms and conditions as other notes,
drafts, bills of exchange, or evidences of debt upon
the affirmative vote or written assent of at least
a majority of the members of the board of directors
of such member bank."
X-56G
MEMORANDUM.
December 8 . 191?.
Thor© are at present V,578 National banks.
Of this number
7423 have circulation and there are outstanding and. in the hands
of National Banks unissued at tho present tins (December 1, 1917)
$717,052,065 of national bank notes.
While the backs of national bank notes are identical, every
national bank issuing notes has to maintain special plates; and
on account of the great number of banks, and different denominations
the Bureau of Engraving and Printing is obliged to maintain approx
imately 1 .
1 ,0 0 0 plates for different banks - at least one set for each
national bank availing itself of the circulatinn privilege.
Although
the Bureau of Engraving and Printing is reimbursed for this expense,
it greatly hampers it in making rapid production of notes; and the
expense of redemption is, of course, enhanced in equal proportion.
X-5tO
..*■* 2 —
It is very desirable at the present time to minimize
in every feasible way the work of the Bureau of Engraving and
Printing, this Bureau being very ssvorly overtaxed by the do-
mends upon it for the printing of bonds, revenue stamps, war
savings stamps, United States currency, Federal reserve notes,
etc.
Three methods have suggested thomselves as possible ways
of attacking the problem - there are doubtless others:
Firstt
To adopt a standard national bank note with
a blank space upon which the name of the
bank, and the name of the president and
cashier if necessary, may be printed a 3 a
separate operation.
This will probably
%
require special legislation.
Second -
To provide so that each national bank depositing
bonds with the Comptroller of the Currency for
circulation will deposit these bonds as now,
but deposit them in trust for the Federal Re
serve Bapk of its District,
Instead of issuing
national bank currency, the Comptroller will
,
issue Federal Reserve Bank currency of the
.1-560
3
District, which currency will be sent direct to
the applying bank*
The bank receiving the current:j
will bo relieved of all expense of maintaining
plates and of redemption, because that expense
will be borne by the Federal Reserve Bank,
If
for example, a Bank in Utah deposits $50,000
of bonds with the Comptroller of the Currency
it will receive $50,000 of San Francisco Fed"
oral Reserve Bank currency, subject to tho
usual redemption fund requirements.
The
Federal Reserve Bank of San Francisco will
redeem and replace unfit notos as thoy como in.
The offoct upon tho Bureau of Engraving and
Printing will bo that instead of 11,000 Nation
al bank note plates, it will bo roquirod to main
tain only 60 plato3 (12 sots) for Fodoral Roservo
Bank currency.
It is possiblo that this plan might
bo worked out by moans of regulation by tho Comptrollor of the Curroncy without change in tho law.
Third - Section 18 of the Fodoral Rosorvo Act providing for tho
convsrsion of
2$ b-nds with circulation privilege
into 3fa bonds, might bo modified so as to make it
more effective.
A 3$ short-timo conversion bond -
say ton yoars - might bo issued with the privilege
of circulation when the bonds aro hold by Fodoral
Reserve Banks, but subject to a tax of, g*y,
2^560
-
or even
4
-
7$ on circulation.
National banks
might sell their 2$ bonds to Federal Reserve
Banks for the aforesaid conversion bonds, giv
ing up their circulation at the same time, and
Federal Reserve Banks would immediately there
after buy back the bonds and issue circulation
to the national banks covering
the bonds.
This would operate the same as plan 2, in respect
to making 60 plates of Federal Reserve Bank notes
take the place of 1 1 ,0 0 0 plates of national bank
notes, and would also have the effect of redeeming
and getting out of the way as quickoy as possible
the
2$> bonds with conversion privilege, this hav
ing teen one of the objects of the framers of the
Federal Reserve Act.
ex -o f f ic io
W. P. G. HARDING, GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Mem bers
WILLIAM G. McADOO
SECRETARY O f THE TREASURY
PHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
F E D E R A L
R E S E R V E
B O A R D
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
X 5&1
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
December S, 1917*
Dear Sir:
During the more recent period the Federal Deserve banks have
been reporting an Form 3^+ increasing amounts of Bill of lading drafts*
Some of these bills are reported with definite maturities and supposed
l y represent rediscounted bills secured by bills of lading, while other
paper designated as B. L. Drafts have no definite maturities and apparent
ly are in the nature of maturing bills or notes accepted for collection
in accordance with Section 13 of the Act.
It is suggested tnet Drafts
of the first class be reported with Bills discounted - Members and that
the designation "Bill of lading drafts" be confined to drafts that have
no definite maturity (including sight drafted and are accepted by the
Deserve banks for collection only.
Accordingly figures of drafts of
definite maturity with B. L. attached should be included on weekly and
monthly reports to the Board with figures of bills discounted - Members.
May I also request that items representing B* L. Drafts with
indefinite maturities be reported an Schedule B. D. U, the respective
items to be prefixed by letters B. L. and the "Due" column to contain
the notation "Indefinite" "arrival" "sight"or some other similar teim
which will enable our compilers to segregate these items from others on
the same schedule.
Very truly yours,
Secretary.
Mr.
Federal Deserve Agent,
Ejj-Offic io Members
WILLIAM Q. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
__
F E D E R A L
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
R E S E R V E
Jt-563
B O A R D
W. P. o . HARDING, Go v e r n o r
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
and
WASHINGTON
Fis c a l a g e n t
AD D R E SS R E P L Y TO
FEDERAL RESERVE BOARD
Dear Sir:
There is being sent you today; under separate
cover; a supply of the 1918 edition of Form 38, weekly
report of discounts and short-term investments classed by
maturities.
You will note that a few slight changes have
been made in the form.
This has been done with the view of
securing data regarding amounts and maturities of paper
secured by Liberty Loex bonds and Certificates of Indebted
ness.
Since the rates on ''Commodity paper" have been
merged with the general rates, you need no longer report
any figures under this caption on form 38, 40, or schedule
BD-4, but, on the other hand, information is desired regard
ing maturities of Government short-tin* securities.
The former more elaborate classification of dis
counts, by nature of the paper, has been considerably simpli
fied, and it is believed that the new form will be found much
more servicable to the banks, and that the compilation of data
under the slightly changed captions will not increase the work
of your discount department.
Respectfully,
Secretary.
FEDERAL RESERVE BANK,
'
RATIO OF "FLOAT1' OF EACH FEDERAL RESERVE BANK TO EARNING ASSETS AND DEPOSITS
DECEMBER 7, 1917.
CO
: FEDERAL
4
RESERVE
BANK
ifitetON
Ism YORK
:
:
:
Clearing
House
Exchanges
1,032
:
:
:
Transfers
bought
• * •
15,961
:
Total
:
Total
All other
: uncollected : collection
uncollected :
Items
:
Items
Items
:
Dr.
:
Or.
Ratio of
"Float"to
Total
: total earn
"Float” : ing assets.
Per cent
:
:
:
:
:
X-565
-
Ratio of "Float to
immediately available
Government and bank
deposits.
Per cent
15,763
16,795
13,895
2,900
3.0
3.4
51,697
67,658
40,058
27,600
6.4
4.0
:PHILADELPHIA
2,006
* •«
32,063
34,069
26,832
7,237
13.9
8.3
^CLEVELAND
1,236
1,535
15,058
17,829
14,438
3,391
4.7
3.1
jRICHMOND
2,238
4 • to
19,317
21,555
14,594
6,961
19.2
10.4
23,936
25,265
to
10,893
14,372
50.9
29.6
18,109
43,705
20,937
22,768
21.7
12.5
2,870
15,582
18,670
13,752
4,918
15.6
7.3
6,438
6,286
. 12,724
4,289
8,435
45.3
15.4
375
5,225
17,126
22,726
13,111
9,615
23.5
1 1 .8
25
7,049
8,645
15,719
6,531
9,188
32.1
15.6
2,032
2,015
9,810
13,857
10,531
3,326
8.5
3.6
27,380
49,800
233,392
310,572
189,861
120,711
12.3
7.4
X*AflANTA
1,329
rCHICAGO
928
rST. LOUIS
219
:MINNEAPOLIS
•!KANSAS CITY
:DALLAS
IsAN FRANCISCO
:
TOTAL
24,668 .
:
:
:
:
:
*
*
X-566
Ex -O fficio m em bers
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
Co m p t r o l l e r o f th e c u r r e n c y
F E D E R A L
R E S E R V E
B O A R D
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
an d f is c a l
WASHINGTON
Ag e n t
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Decomber 13, 1917.
Dear Sir:
Section
H of the Federal Reserve Act provides in part
as follows.:
"After all .nedessary expenses of a Federal Reserve
Bank have been paid or provided for, the stockholders
shall be entitled to deceive an annual dividend of six,
per dentum on the paid-in capital stock, which dividend
shall be cumulative* Aftei* the aforesaid dividend claims
have been fully mei> all the net earnings shall be paid
to the United States- as a franchise tax, .except that onehalf of such net earning? shall be paid into a surplus
fund until, it shall amount to forty per centum of the
paid-in capital stock of such bank."
•
Inasmuch as on December 31, your bank will have remaining
out of undivided profits, after charging off all current expenses, and
»■
.
*i .
providing a reserve for depreciation, a sum UUffieieiit to pay all ac
cumulated dividends on capital stock, it will become necessary for your
bank to
make a payment to the United States as a franchise tax, in an
amount equal to one-half of the net earnings in excess of the required
dividend, the other half of such excess to be paid into a surplus fund.
•It is suggested^ therefore, that after the necessary entries have been
made upon the.books Of your bank,that the Federal Reserve Board be
authorised to transfer from your account in the Gold Settlement Fund,
to the Treasurer of the United States, an amount equal to one-half of
X-566
-
2
-
the net earnings in excess of all accumulated, dividends, the regain
ing half of the excess earnings to be carried to a surplus fund in a
ledger account to be opened for that purpose.
.
It is desired that pay
ments to the Treasurer be na.de on the sane day, on behalf of all the
Federal Reserve Banks which have excess earnings, and that any announce
ments made nay be simultaneous.
The Board will telegraph your bank
when this transfer from the Gold Settlement Fund to the Treasurer of
the United States is cade, and you are requested to make no public
announcement until you receive the Board's telegraphic advice.
Very truly yours,
Governor.
Ex -O ff ic io Mem bers
W. P. 6. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
Co m p t r o l l e r o f t h e c u r r e n c y
F E D E R A L
R E S E R V E
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
B O A R D
AND FISCAL AGENT
X~f03
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Dear Sir:
An examination of the
shows that you are serving as a director of that hank
and at the same time as
of
Under the terms of the Clayton Anti-trust Act no
person who is a director of any national bank shall be
permitted to serve at the same time as director of any
other institution located in the same city of more than
200,000 inhabitants, without first obtaining the permis
sion of the Federal Reserve Board.
If you desire to continue to serve with these
institutions, it will be necessary for you to file an
application with the Federal Reserve Board for its con
sent .
Enclosed you will find blank form of application
to be filled out by yj\i and statements to be filled out
by the institutions on which you desire to serve.
It
will also be necessary for those banks to submit copy
of last published report of condition.
When pr»p4rly executed all the papers ih y-.ur
case should be filed with the Federal Reserve Agent at
Respectfully,
Enclosure.
Governor.
Ex-officio Members
W. P.'G. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
CHX^SW*Ji!L
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
F E D E R A L
R E S E R V E
B O A R D
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
December 13,. 1917,.
Dear Sir!
There is inclosed for your information and attention
Copy of a resolution adopted by the Federal Reserve Bward at a
meeting held on December 12, levying an assessment of one h u n
dred and thirty-five thousandths of one per cent (.00135)
against Federal reserve banks to defray the estimated general
expenses of t)ie Federal Reserve Board from January 1 to June
30, 1918. This assessment does net include the cost of engrav
ing and printing Federal reserve notes..
There is also inclosed a statement showing the basis
Upon which the assessment is levied.
I have the honor tc
to the early attention of the
and f orward the assessment tc
half to be payable January 1,
dicated in the resolution.
request that you bring this matter
Board of Directors of your bank,
the Federal Reserve Board, oneand one-half wn March 1, as in
Very truly yours.
Fiscal Agent.
Inclosures.-
X~569b
WHEREAS, under Section 10 of the Act approved December
23, 1913, and known as the Federal Reserve Act, the Federal
Reserve Board is empowered to levy semiannually upon the Fed
eral reserve banks in proportion to their capital stock and
surplus, an assessment sufficient to pay its estimated ex
penses, including the salaries of its members, assistants,
attorneys, experts, and employes for the half year succeed
ing the levying of such assessment, together with any deficit
carried forward from the preceding half year; and
WHEREAS, it appears from estimates submitted and con
sidered that it is necessary that a fund equal to one hundred
and thirty-five thousandths of one per cent (.00135) of the
capital stock of the Federal reserve banks be created fotvthe
purposes hereinbefore described, exclusive of the cost of en
graving and printing of Federal reserve notes;
NOW, THEREFORE, EE IT RESOLVED, That pursuant to the
authority vested in it by law, the Federal Reserve Board
hereby levies an assessment upon the several Federal reserve
banks of an amount equal to one hundred and thirty-five
thousandths of one per cent (.00135) of the total capital
stock of such banks, and the fiscal agent of the Beard is
hereby authorised to collect from said banks such assess
ment and execute, in the name of this Board, a receipt for
payment made. Such assessment will be collected in two
instalments of one-half each; the first instalment to be
paid on January 1, 1S18, and the second half on March 1, 1918.
12/12/17
X~569d
ESTIMATE FOR JANUARY. 1918. ASSESSMENT.
Average monthly encumbrance for period
July 1, 1917 to December 31, 1917 ..................
$21,870.42
Estimated monthly requirements,
January to June 1918, inclusive ....................
30.811.24
Estimated monthly increase ......... .
$6,940,82
Estimated requirements,
January to June 1918, inclusive .......... ......... $184,867.44
Estimated unencumbered balance January 1, 1918 ..........
0.00
Total capitalization of Federal Reserve Eanks,
December 7, 1917........................ .......... $138,096,000.
. Rate
Rate
Rate
Rate
of assessment to produce $184,867.00 ............... 0.001387
of assessment to produce $186,430.00 ...........
00135
of assessment to produce $193,334.00 ...................0014
of assessment to produce $207,144.00 .................. 0015
In view of all conditions I have the honor to recommend that
an assessment of one hundred and thirty-five thousandths of one per
cent be levied.
SHERMAN ALLEN________
Fiscal Agent.
Approved for
.00135 ;
F. A. DELANO
C. S. HAMLIN
A. C. MILLER_______________________
Committee on Organization,
Expenditures, and Staff.
12/12/17
X-OoPg,
DETAILED STATEMENT OF EXPENDITURES AND COMMITMENTS AS A BASIS OF ESTIMATE.
Estimated
July 1 to
Estimate
for
Nov. 30,
1917
... Dp ep.rnhnr
Personal .seirvipes:
37,040.56
Board & its Clerks
Secretary’s Office
11,885.00
Counsel’s Office
9,013.33
Div.Audit & Examination 10,149.88
7,083.34
" Rep.rts & Statistics
n of Issue
4,203.99
Messengers
2,485.83
Charwomen
327.05
Contingent
.............
82,188.98
Total
Non-nersonal Services:
Transportation & Subsistence:
B.ard & its clerks
774.37
18.00
‘Secretary’s Office
Div.Audit & Examination 3,802.03
40.05
" Reports & Statistics
22.90
Counsel's Office
10.00
Messengers
Communication Service:
870.98
Telephone
3,227.70
Telegraph
, * ,
t ,
Postage
Printing, Binding, etc: 10,938.46
35.09
Contract repairs:
Electricity(light & power):150.00
30.00
Steam (heat) :
873.23
Other (Non-personal):
Supplies:
646.69
Stationary
150.80
Periodicals
260.09
Other
Equipment;
piie s
Furniture & office sup- 3,540.74
142.40
Bo.ks
805.91
Geld Settlement Fund:
555.79
Rent:
• •
C-ntingencies:
Total
GRAND TOTAL
109.064.21
Total
f or
6
Months
M.nthly
Average
for
6
Months
monthly
require
ments
1/1 to
6/30/18
7,458,33
2,430.82
1,845,66
2,614.96
1,447.66
1,041.64
493.33
66*00
44,498 89
14,315.82
12,764.84
12,764.84
8,531.00
5,245.63
2,979.16
393.05
17,399.40
99,568.38
100.00
••
700.00
874.37
18.00
4,502.03
40.05
22.90
15
145.73
3.00
750.34
6.68
3.82
2.50
200.00
20.00
1,000.00
10.00
10.00
3.00
1,050,98
4,027.70
20.00
12,438.46
35.09
180.00
45,00
923.23
175.16
671.28
3.33
2,073.08
5.85
30.00
7.50
153.87
250.00
1,000.00
5.00
2,000.00
20.00
30.00
15.00
50.00
796.69
150.80
310.09
132.78
25.13
51.68
150.00
25.00
100.00
150.00
188.93
500.00
3,840.74
142.40
955.91
744.72
500.00
640.13
23.73
159.32
124.12
83.33
500.00
25.00
2w0. sX)
188.93
5.000.00
4.738.93
31.634.16
21.870.42
30.611.24
,*
5.00
180.00
600.00
20.00
1,500.00
*■ *
'
30.00
15.00
50.00
150.00
# 4
50.00
300.00
, ,
22.138.33 131.222.54
7,416.48
2,385.97
1,810.00
2,127.47
1,421.83
874.27
496.53
65.51
7,458.33
2,430.82
1,846,66
2,614.96
1,447.66
1,041.64
493.33
66.00
. 2.609.91
16,598.06 20,009.31
(Name of place)
19_____
I certify that the ticket (or tickets) Ho...... ...........
Form No............ for........ (state the purpose for which
purchased., 'whether for transportation by rail or water, or for
seat, berth, or stateroom in parlor car, sleeping car, or on
vessel, or for charges for excess baggage), from ........ ..... ...
to ............... .. via
............ is on account of official
business and not for private purposes, and is exempt from the tax
imposed by the Act of October 3, 1917.
(Signature of officer or employee
purchasing ticket.)
....... .......... ...... ...(Title)
(Department or Establishment)
X— 571
•
LIST OF STATE INSTITUTIONS
MEMBERS OF THIS FEDERAL RESERVE SYSTEM
UP TO AID INCLUDING- DECEMBER 13, 1917
TOTAL MEMBERSHIP 206.
ALABAMA:
Birmingham
Eufaula
’Marion
Montgomery
COLORADO:
Denver
Capital
Surplus
Total
Resources
American Tr. & Savings Bank
Bank of Eufaula
Marion Central Bank
Sullivan Bank & Trust Co.
Total
500,000
1 -'0,000
50,COO
250,000
900,000
250,000
14,000
100,000
25,750
369,750
5,636,700
378,628
497,561
605,5S2
7,318,771
International Trust Co.
500,000
500,000
13,803,659
500,000
300.000
500.000
600.000
7,666,545
4,574,303
12,440,648
CONNECTICUT:
Bridgeport
New.Haven
Bridgeport Trust Co.
Union & New Haven Tr. Co
Total
650 loot?
1,150,000
X-572
- 2DISTRICT OF COLUMBIA:
Washington,
, Continental Trust Co.
1,000,000
100,000
4,289,237
250,000
500,000
3,550,995
100,000
1,000,000
1,000,000
100.000
1,000,000
630.000
3,830,000
20,000
300,000
1,000,000
72,000
1,000,000
570.000
2,962,000
538,635
9,620,109
3,893,161
1,049,176
18,537,851
8.415.862
42,054,794
25.000
35.000
60.000
12,500
10.250
22,750
482,091
389.592
871,683
FLORIDA:
Tampa
Citizens Bunk
&
Tr. Co.
v
GEORGIA:
Athena
Atlanta
Brunswick
Savannah
American State Bank
•_
Central Bank & Tr. Corp.
Trust Company of Georgia
Brunswick'Bank & Trust Co.
Citizens & Southern Bank
Savannah Bank & Trust Co.
Total
IDAHO:
Genesee
Kimberly
Genesee Exchange Bank
Bank of Kimberly
Total
— 3 ir
ILLINOIS:
Chicago
X-572
♦
60,000
2,666,743
Austin State Bank
200,000
Central Trust Co. of 111.
6,000,000 1,000,000 54,074,035
200,000 12,733,891
Chicago Savings Bk.& Tr. Co.1,000,000
First Trust & Savings Bk.
5,000,000 5,000,000 84,207,394
Foreman Bros.Banking Co.
1,500,000
500,000 18,141,352
2,000,000 2,000,000 33,570,255
Harris Tr,& Savings Bank
1,840, 530
Hyde Park State Bank
50,000
200,GOO
6,476,754
500,000
Kaspar State Bank
300,000
Merchants Loan & Trust Co. 3,e00,000 SjGOO,GOO 109,517,884
2,428,746
Noel State Bank
300,000
7 5 , 0 wvj
9,980,043
,Standard Tr. & Savings Bank 1,000,000
5 0 0 ,0 0 0
State Bank of Chicago
1, 5e0,eOo 3 , 0 0 0 , 000 38,004,507
Union Trust Company
1, 5^0,000 1,500,000 37,348,934
United State Bank of Chicagoi 200,000
869,220
30,000
X-572
A ILLINOIS: (Con .inued.)
703,765
25.000
Elmhurst State Bank
60,000
Elmhurst
569,684
5,000
Commercial Tr. & Savings Bk. 100,000
Joliet
766,311
25.000
Joliet Trust & Savings Bank
100., 000
4,142,457
200,000
State Bank of Evanston
150,000
Evanston
1.170.562
25.000
Union State Savings Bk.&Tr.Co.100,000.
Kewanee
419.215.068
Total
24,410, 000 22,495,000
INDIANA:
Elkhart
Paoli
iaVA:
Clinton
Des Moines
Gilman
lias on City
Ottumwa
Sioux City
St.Joseph Valley Bank
Paoli State Bank
Total
Peoples Tr. & Savings .bank
Iowa Loan & Trust Co.
Citizens Saving Bank
Commercial Savings Bank
Ottumwa Savings Bank
Bankers Loan & Trust Co.
Total
100;000
25.000
125,000
50,000
750
50,7 50
2,484,247
194.868
2,679,115
3v0,000
500,000
25,000
100,000
100,000
100.000
1,125,000
300,000
100,000
11,000
14,000
30,000
5,000
460,000
5,179,744
7,436,047
383,801
1,117,160
1,205,090
277.323
15, 599,165
X-572
KANSAS:
Fairview
Ft. Scott
Hiawatha
Wichita
KENTUCKY:
L-uisville
Mt. Sterling
LOUISIANA:
Gretna
Iota
New Orleans
MARYLAND:
Baltimore
Fairview State Bank
Fort Scott State Bank
Morrill & Janes Bank
Southwest State Bank
Total
430,000
15.000
26.000
50.000
9.000
100,000
German Insurance Bank
Exchange Bank cf Kentucky
Total
250,000
50.000
300,000
500, v A
7,307,484
2 5 . 4 3 4 , 5 7 2
525,000
7,742,056
30,000
lou, vOO
100,000
200.000
Jefferson Trust & Savings Bk. 30,000
25,000
Eank of Iota
2,000,000
Canal Bank & Trust Co.
1.500.000
Hibernia Bank & Trust Co.
400.000
Metropolitan Bank
3.955.000
Total
Baltimore Commercial Bank
Baltimore Trust Co.
Total
500,000
1.000.000
1,500,000
291,985
748,859
1,143,410
1.521.337
3,705,591
2,720,000
402,332
114,204
21,210,372
25,881,516
4,077.889
51,686,313
100,000
2.000.000
2,100,000
2, 668,945
15.990.745
18,659,690
20,000
500,000
2,000,000
200.000
X-57 2
- 6MASSACHUSETTS:
Boston
Cambridge
Fitchburg
Newt on
Norwood
Winchester
Worcester
MICHIGAN:
Albion
Detroit
Flint
Grand Rapids
Highland Park
Jackson
Lapeer .
Niles
Monroe
M t . Pleasant
American Trust Co.
Commonwealth Trust Co.
International Trust Co
Metropolitan Trust Co,
Old Colony Trust Co.
1/000,000
1,GCQ,000
1,500,000
300,000
6,000,000
200,000
Charles River Trust Co .
Fitchburg Bank & Trust Co.
500,000
400,000
Newton Trust Company
200,000
Norwood Trust Company
Winchester Trust Company
100,000
Worcester Bank & Trust Co. 1.250.000
12,450,000
Total
25,578,848
500,000 24,001,520
1,500,000 23,933,840
5,787,080
300,000
7,000,000 150,784,124
2,000,000
200,000
250,000
400,000
2,893,283
4,935,072
4,889,053
2,563,580
731,236
25,000
24.123.410
500.000
12,675,000 270,221,046
75,000
Commercial & Savings Bank
First State Bank
500,000
2,500,000
Peninsular State Bank
2,500,000
Peoples State Bank
The Dime Savings Bank
1,000,000
Wayne Co. & Home Savings 1Bk.3,000,000
40,000
150,000
1,000,000
2,500,000
1,000,000
3,000,000
798,485
8,275,489
27,270,333
77,761,759
32,769,194
53,681,743
..Citizens Com'l & Savings Bk. 150,000
100 ,coo
Union Trust & Savings Bark
250,000
Industrial Savings Bank
400,000
Grand Rapids Savings Bank
500,000
Kent State Bank
QQo,
000
Highland Park State Bank
1,
lvQ,^00
Central State Bank *
400,000
Union Bank of Jackson
50,000
Lapeer Savings Bank
100,000.
Niles City Bank
B. Dansard & Son’s State Bk. 100,000
50,000
Exchange Savings Bank
175,000
135,000
250,000
350,000
500,000
400,000
26,000
100,000
10,000
20,000
20,wOO
30,000
3,438,805
3,848,355
4,307,935
8,479,169
9,419,740
20,976,678
1,062,781
4,388,130
545,282
699,175
1,627,265
791,176
X-572
- 7
MICHIGAN: (Continued)
100r000
St. Clair Co. Savings Bank
Port Huron
50,000
Rochester
Rochester Savings B^nk
5v,000
Romeo Savings Bank
Romeo
50,000
Fruit Growers State BcOik
Saugatuck
IvO,uOO
Sault Ste.Marie Sault Savings Bank
Total
13, 125,000
MINNESOTA:
Minneapolis
Bankers Tr. & Savings Bank 1,j j u , wOO
200,wOG
German American Bank
3
ddO
St. Anthony Falls Bank
200,000
200,000
60,000
300,000
50,000
25,000
l^Q,^^0
1,925,000
5,000
50.000
565,000
149,292
2.581,970
15, 660,890
25,000
4,000
165,516
St. Paul
Peoples Bank
Spring Valley
Winona
Farmers State Bank
Merchants Bank of Winona.
Iotal
MISSISSIPPI:
Suranit
1,319,436
50,000
55u j 3*tC
10,000
X,vjox,lc3.
30,OwO
476,786
10,000
35.000
1.140,332
S,84l,000 264,715,626
Union Bank of Pike
2,197,403
4,689,159
3,763,062
2,
3w4
- 8•
X-572
MISSOURI:
Kansas City
Cgranadrce Trust Co,
Fidelity Trust Co.
750,000
1,000,000
32,897,159
14,461,776
St. Louis
700,000
600,000
Franklin Bank
7 00,oOO
1,000,000
German American
German Savings Institution 1,500,000 1,000,000
500,000
500,000
International Bank of
800,000
400,000
Lafayette South Side Bank
3,000,000 6,500,000
Mercantile Trust Company
3,500,000
3,000,000
Mississippi Valley Tr. Co.
St. Louis Union Bank
.0,500^.010 2.500.000
Total
14,900,000 17,550,000
8,961,674
9,239,685
19,261,222
6,981,718
12,604,870
40,732,458
30,414,523
44,389.921
219,945,006
80,000
MONTANA:
Helena
Hingham
Opheim
Sidney
NEBRASKA:
Lewellen
NET JERSEY:
Bloomfield
Camden
Montclair
Passiac
Plainfield
Rahway
Westfield
1, \j00,ewO
1,000,oOQ
200,000
Conrad Trust & Savings Lank
35,000
Hingham State Bank
First State Bank
25,000
Yellowstone Valley Bk & Tr, CoJlQPjga
360,000
5,000
_£*000
90,000
~3,042,678
335,296
229,183
748.601
4,355,758
Bank of Lewellen
10,000
250,820
200,000
100,000
Bloomfield Trust Co.
800,000
Camden Safs Deposit & Tr. Co. 500,000
Bank of Montclair
100,000
80,000
100,000
Passiac Tr.& Safe Deposit Co. 200,000
300,000
200,000
Plainfield Trust Company
100,000
25,000
Rahway Trust Company
100,020
6V ,GOO
Peoples Bank « Trust Co.
Total
1,500,000 .1,385,000
3,213,787
10,352,726
2,799,827
7,130,181
8,749,434
398,277
.2,005,718
34,649,950
25,000
« ♦
*
* *
X-572
- 9 -
NEW YORK:
Batavia
Brooklyn
Buffalo
New York
100,000
1,500,000
1,000,000
1,000,000
1,000,000
500,000
1,250,000
100,000
2,898,481
1,000,000
300,000
1,000,000
500,000
1,250,000
1,151,907
40,270,629
24,823,842
15,031,812
29,443,301
9,624,217
18,196,063
Bankers Trust Company
11,250,000
Bank of America
1,500,000
Broadway Trust Company
1,500,000
5,000,000
Central Trust Company
Columbia Trust Company
5,000,000
C o m Exchange Bank
3,500,000
Equitable Trust Company
6,000,000
Fidelity Trust Company
1,000,000
German American Bank
750,000
Germania Bank of the City of 400.000
Guaranty Trust Company
25,000,000
Manhattan Company
2,050,000
Mercantile Tr.& Deposit Co. 1,000,000
Metropolitan Bank
2,000,000
Metropolitan Trust Co,
2,000,000
New York Trust Company
3,000,000
Pacific Bank
500,000
Scandinavian Trust Co.
1,000,000
Union Trust Company
3,000,000
U. S. Mortgage <5t Trust Co. 2,000,000
W. R. Grace & Company's Bk.
500,000
11,250,000
6,000,000
750,000
15,000,000
5,000,000
6,991,165
10,500,000
1, OvjO, 000
250,000
600,000
25,000,000
4,500,000
500,000
1,000,000
4,000,000
10,000,000
500,000
1,500,000
4,500,000
4,000,000
500,000
327,011,784
60,903,035
34,726,703
209,953,374
124,186,774
153,989,100
230,210,148
13,965,146
8,404,825
8,731,766
613,535,033
82,094,144
8,593,786
28,801,800
63,853,782
90,773,776
13,907,579
11,359,362
87,043,831
93,377,698
6,675, 523
The Bank of Genesee
Brooklyn Trust Co.
Franklin Trust Co.
Manufacturers Trust Co.
Peoples Trust Co.
Buffalo Trust Co.
Citizens Commercial Tr.Co-
fc
X-572.
- 10 -
NEW YORK: (Continued)
823,362
100,000
25, 000
Ogdensburg
St. Lawrence Trust Co.
400, 000 10,641,93?.
500,000
Utica
Citizens Trust Company
2,428,746
250, 000
250,000
Oneida County Trust Co.
000
11,850,975
400,000
200,
Utica Tru&t & Deposit Co.
7.151,603
400. 000
400.000
Watertown
Northern New York Trust Co .
646
2,443,537,357
85,9 50,000121, 664,
Total
NORTH DAKOTA:
Enderlin
Hettinger
Williston
OHIO:
Cleveland
Enderlin State Bank
Hettinger State Bank
Bank of Williston
Total
Citizens Savings & Tr.Co.
Cleveland Turust Company
Guardian Savings & Tr. Co.
Columbus
Hillsboro
Massillon
Toledo
Citizens Trust
Hillsboro Bank
Ohio Banking &
Guardian Trust
Youngstown
City Trust & Savings Bank
Total
& Savings Ek.
& Savings Co.
Trust Co.
& Savings £k.
50.000
25.000
50.000
125,000
13,500
395,259
282,089
113.071
790,419
4,000,000
2,500,000
3,wOo,OvO
4.000.
2,500,000
3.000.
000
74,532,631
55,121,784
52,731,355
000
700.000
50,000
150.000
200.000
150.000
12 ,0 0 0
37,500
200.000
5,271,822
551,959
1,307,036
4,224,961
10,000
3,500
200.000
150.000
4.752.034
10,800,000 10,049,500 198,493,582
X-572
4 »
« 11 T
OREGON:
Hood River
Portland
No. Portland
PENNSYLVANIA:
Lykens
New Castle
Pittsburgh
Philadelphia
Butler Banking Company
Ladd & Tilton Bank
Live Stock State Bank
Total
100,000
1,000,000
1 u p ,v O Q
1,200,000
20,000
1,000,000
lv.OvO
1,030,000
909,706
21,427,913
872.546
23,210,467
50,000
110,000
679,897
Miners Deposit Bank
300,000
3,183,907
Lawrence Savings & Trust Co . 300,000
2.000. 000 1,000,000 21,067,764
Pittsburgh Trust Company
1.500.000. 34.500.000 137,516,868
Union Trust Company
1.000.
000 1,750,000
24,796,108
Commercial Trust Company
2.500.000 7,500,000 61,172,461
Girard Trust Company
Philadelphia Trust Company 1.000. 000 4,000,000 26,160,684
8.350.000 49,160,000 274,577,669
RHODE ISLAND:
Providence
SOUTH CAROLINA:
Cheraw
Hartsville
Sumter
Westminster
Woodruff
Industrial Trust Co.
Merchants & Farmers Bank
Bank of Ifertsville
Peoples Bank of Sumter
Westminster Bank
Bank of Woodruff
Total
3,000,000
4,000,000
71,783,303
100,000
50,000
100,000
100,000
40.700
3,000
50,000
19,400
25,000
10.500
338,007
394,626
368,325
453,433
256.g?4
390,700
107,900
1,811,26;
X-572
- 12 -
SOUTH DAKOTA:
Sioux Falls
Sioux Falls Savings Bank
200,000
23,000
3,852,236
TENNESSEE:
Memphis
Union & Planters Bk & Tr.Co.1,400,000
200,000
15,307,795
100,000
50,000
200,000
250,000
14,000
25,000
5,000
28,000
543,354'
232,823
1,698,236
3,016,796
25,000
First State Bank
Farmers & Merchants State Bank 35,000
25,000
BFirst State Bank
100,000
Lubbock State Bank
75,000
Citizens State Ban!
25,000
First State Bank
50.000
First State Bank
Total
935,000
25,000
7,000
1,750
13,000
26,400
. 3,500
20.000
168,650
2,638,304
95,675
158,894
837,114
377,603
120,175
235.461
9,954,435
100,GOO
150,000
600,000
200.000
Ip050,000
10,000
20,000
500,000
&QQj,P.QQ
730,000
173,005
554,154
5,896,002
2.198.163
8,821,324
Coffman-Dobson Bank & Trust Co 150,000
50,000
First Savings & Trust Co.
Bank of Rosalia
25,000
Spokane & Eastern Trust Co. l+ Q O O im
Total
1,225,000
100,p00
15,000
5,000
200.000
320,000
1,493,790
369,711
308,777
20.078,867
22,251,145
100,000
30,000
1,180.082
50,000
3w0,O00
200,000
1.000.000
1,550,000
10, vv>0
60,uvO
2,000
700.000
772,000
478,360
2,156,438
1,506,471
17,405.264
21,546,533
TEXAS:
Bonham
Bretnond
Dallas
De Kalb
Edgewood
Hamlin
Lubbock
Memphis
Savoy
Wolfe City
VIRGINIA:
Chase City
Harrisonburg
Norfolk
Richmond
WASHINGTON:
Chehalis
Colfax
Rosalia
Spokane
First State Bank
First State Bank
Central State Bank
First State Bank
Peoples Bank & Trust Co.
Peoples Bank of
Citizens Bank of
The Savings Bank of
Total
WEST VIRGINIA:
Grafton
Grafton Banking & Trust Co.
WISCONSIN:
Clinton
Madison
Milwaukee
12/17/16
Citiaens Bank
Bank of Wisconsin
Badger State Bank
Marshall & Illsley Bank
Total
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
E x *O f f ic io m e m b e r s
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
F E D E R A L
R E S E R V E
B O A R p 574
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
WASHINGTON
ADDRESS REPLY TO .
FEDERAL RESERVE BOARD
December 3 4, 1917
Dear Sir:
Your attention is drawn to a ruling by the
War Trade Board with reference to the payment of certain
acceptances made before December fourteenth.
A copy of
the statement is inclosed herewith.
Very truly yours
Vice Governor
Federal Reserve Bank
Inclosure
X-574.
The War Trade Board das authorized the payment of drafts accepted
on or before December 14, 1917, drawn on funds to the credit of a person
^
who is an "Enemy" or "Ally of Enemy", or acting for or on behalf of an
"Enemy" or "Ally of Enemy", or on which such a person appears as drawer
or endorser, when such drafts are presented for payment in the United
States, PROVIDED, however, that when such drafts are collected for or
on behalf of any person who is an "Enemy" or "Ally of Enemy" or person
acting for or on behalf of an "Enemy" or"Ally of Ensmy"> the proceeds of
collection shall be at once reported by the person making such collection,
to, and
be held subject to the disposition of the Alien Property Custodian,
Attention is called to the fact that no drafts can now be accepted,
or transferred or dealt in before acceptance, which are drawn on funds to the
credit of any person who is an "Enemy" or "Ally of Enemy", or
.acting for or
on behalf of an "$nemy" or "Ally of Enemy", or drawn by or to the order of
such person, or on which such person appears as endorser, unless a license
is first obtained from the Bureau of Enemy Trade, Bond Euiiding, Washington,
D. C.
The War Trade Board has authorized the payment of travelers'
checks, not exceeding $100.00 in amount, on which there appears the endorse
ment of a person who is an "Enemy" or"Ally of Enemy", or acting for or or
behalf of ah "Enemy" or "Ally of Enemy", without obtaining a license there
for.
I
APPROVED : W, T, 3,
Be cerr.be r ’14 , 1917,
W . P. G. HARDING. GOVERNOR
P A U L M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. M ILLER
CHARLES S. HAMLIN
E X -O FFIC IO M EMBERS
W ILLIAM G. MCADOO
SECRETARY OF THE TREASURY
C h a ir m a n
JOHN SKELTON W ILLIAM S
COMPTROLLER OF THE CURRENCY
F E D E R A L
R E S E R V E
B O A R 3
l 577
WASHINGTON
H. PARKER W IL L IS . SECRETARY
SHERMAN P. ALLE N . ASST. SECRETARY
AND FISCAL AGENT
ADD R E SS R E P L Y TO
FEDERAL. RESERVE BOARD
December 15, 1917.
Dear Sir:
Referring to the matter of setting up a
Reserve against depreciation of bonds, I quote that
price at which depreciation 6f Government bonds should
be allowed for:
2j£ Consols. - 1930
1936
3% One year notes
3% of 1918
4 ’s of 1925
3% Conv. 1946-7
Price 96-1/2
"
96
Par
Par
104
84
Governor Harding is away from the city today,
and X find that this fact was omitted from hid recent
letter to you on the subject, and I am therefore vrriting to supplement his letter*
Yours very truly,
EX-OFFICIO MEMBERS
W. P. 6. HARDING; GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
A N D F IS C A L A G E N T
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
December 15, 1917
Dear Sir:
You have been advised that it is the plan of the Secretary of the
Treasury to renew his offerings of certificates of indebtedness matur
ing June 25, 1918, bearing interest at the rate of 4$>, the purchase
price being payable between January 2 and January 15.
It is expected to leave the offer open for some time so as to en
able the Federal reserve banks widely and properly to distribute these
certificates.
I am addressing this letter to you in order to enlist your particu
lar interest in this offering and to point out to you that in order to
attain the results contemplated in this instance special efforts must be
made to reach the tax payer, large and small, who wishes to anticipate
or spread payments due in June. These certificates can not be used in
payment of future Liberty Loan instalments and they are not designed
ultimately as an investment for banks, and in addressing the banks of
your district it might be well to point out to them that viflaile the
Treasury contemplates through these issues to raise money and welcomes
subscriptions from other/iax payers, the ultimate object of the issue is
to relieve the congestion of the toeney market such a3 would ensue if the
two billions of tax payments were made by the tax payers in June«•It is
of the greatest importance, therefore, that, the largest possible number
of tax payers, be reached and enCotiraged to purchase these Certificates
maturing June 25. A vigorous effort should be made not only to place
these certificates in the first instance as far as possible among tax
payers, but to the extent that they and the similar certificates dated
November 30, are subscribed in the first instance by banks and other than
tax payers, tv continue the work with a view to obtaining a large second
ary distribution among tax payers.
It mi$it be well worth while tc consider the advisability of creat
ing in your district and in your bank a small special organisation that
will devote its efforts to this particular work.
Respectfully
Vice
Governor
X-578
X-560
TREASURY DEPARTMENT
WASHINGTON
December 13, 1917.
The Governor,
F e d e r a l R eserve Board.
Sir:
By direction of the Secretary you are advised that the Department has re
ferred to the Auditor for the Treasury Department for settlement the account of
the Bureau of Engraving and Printing for preparing Federal Reserve notes during
the period July 1 to 31, 1917, amounting to $134,321.44, as follows:
$10
$5
Boston.......... „
9,000
New York.. . . . . 2,000,000
Philadelphia..
14,000
Cleveland.......
2,000
3,000
Richmond, ......
19,000
Chicago..........
St. Louis......
13,000
Minneapolis...
2,000
Kansas City...
2,000
Dallas...........
San Francisco.
—
-
2.063.000
26,000
1,121,000
—19,000
——
63,000
14,000
—_
—
—
24.000
$30
6,000
252,000
6,000
1,000
—
29,000
—
—
—
—
—
—
$50
15,000
—
5,000
1,000
6,000
1,000
—
—
—
—~-
$100
Total.
2,000
47,000
3,368,000
22,000
.
29,000
4,000
137,000
16,000
13,000
2,000
2,000
24.000
—
—
2,000
1,000
6,000
1,000
—
—
---
8
1%
1 -s
30.000 14.000
3.674.000
1.269.000
290.000
"sheets & $36.55 per M .. r:.. :t .r..r...... $134732174 ?"
The charges against the several Federal reserve banks are as follows:
_______Bureau appropriations________
Sheets
47,000
Boston......
New York.....3 ,360,000
22,000
Philadelphia.
29,000
Cleveland....
4,000
Richmond.....
Chicago...... 127,000
16,000
St. Louis....
13,000
Minneapolis..
2,000
Kansas City..
2,000
Dallas......
24.000
San Francisco
3.674.000
CompenPlate
Inc. ComPrinting:
sation.
k&tarie, 1 s -sensation.
Total
$665.05
$ 56.4 u
$482. 22
$1,716. 32
$514.65
123,665.,28
37,096.60 47,940.20 34,760. 88 4,065.60
311.30
26.40
604. 32
240.90
225. 72
1,060, 24
410.35
297. 54
34.60
317.55
41. 04
56.60
4.60
43.60
146.,24
1,797.05
1,303. 02
152.40
4,643. 12
1,390.65
226.40
164. 16
175.20
19.20
564. 96
142.35
15.60
163.95
133. 33
475. 28
26.30
' 21.90
20. 52
2.40
73. 12
21.90
26.30
20. 52
2.40
73. 12
262.60
339.60
246. 24
28.60 _____§ m 44
$40.230.30 $51.9o7.10 $37.695.24 $4.406.60 $134,321,44
The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation, ’'Preparation and Issue of Federal Reserve Notes, Re
imbursable," and it is requested that your Board cause such indefinite appro
priation to be reimbursed in like amount.
Respectfully,
Signed
Paul Myers
Acting Assistant Secretary of the Treasury.
X-5oO-a
TREASURY DEPARTMENT
WASHINGTON
December 13, 1917.
The Governor,
F e d e ra l Reserve Board.
Sir:
By direction of the Secretary you are advised that the Department has re
ferred to the Auditor for the Treasury Department for settlement the account of
the Bureau of Engraving and Printing for preparing Federal reserve notes during
the period August 1 to 31, 1917, amounting to $109,935.92, as follows:
$5
$10
$20
$50
'
$100
Total.
New York...... 1,783,000
514,000
87,000
--2,384,000
Philadelphia...
--12,000
--12,000
Cleveland.....
..
—
-6,000
2,000
8,000
60,000
271,000
166,000
25,000
8,000
530,000
Chicago.......
Kansas City....
7 3.000-------- --------— -------- -- --------- ------73. QCO
1.916.000
785, wvO
265,000
31,uOQ
10,000
3,007,00(3
37007.000 sheets @ $36.56 per 11....................$109,935.92
The charges against the several Federal reserve banks are as follows:
Bureau appropriations_________
CompenPlate
Inc. Com
Sheets.
sat jon.
Printing. Materials pensation.
Total.
New York.....2.,384,000 $26,104.80 $33, 733.1io"$24,459.84 $2,860.80 $87,159.04
Philadelphia.
12,000
131.40
169.80
123.12
14.40
438.72
Cleveland___
8,000
87.60
113.20
82.08
8..60
292.48
Chicago.....
530,000
5,803.50
7,499.50
5,437.80
636.00
19,376.80
Kansas City..
73.000
799.35
1.032.95
748,98_
87.60
2.668.88
3.007.000 $32,926.65 $42,549.05 $30,851.
The Bureau appropriations -will be reimbursed in the above amount from the
indefinite appropriation, ’’Preparation and Issue of Federal Reserve Notes, Re
imbursable,” and it is requested that your Board cause such indefinite appro
priation to be reimbursed in like amount.
Respectfully,
Signed
Paul Myers,
A c tin g A s s is t a n t S e c re ta ry of the T re a su ry .
X-50C-b
TREASURY DEPARTMENT
WASHINGTON
December 13, 1917.
The Governor,
Federal Reserve Board.
Sir:
By direction of the Secretary you are advised that the Department has re
ferred to the Auditor for the Treasury Department for settlement the account of
the Bureau of Engraving and Printing for preparing Federal reserve notes during
the period September 1 to 30, 19i7, amounting to $73,741.52, as follows:
&
Boston........ . 187,000
New York..... . 845,000
Philadelphia..*
--Cleveland.... #
Richmond..... •
-Atlanta......
Chicago..... . . 164,000
--St. Louis.... #
10,000
Kansas City... .
——
Dallas.... ...
San Francisco.
1.206.000
&0
147,000
—
46,000
14,000
1 0 ,0 0 0
106,000
——
— —
-
—
323.000
MO
$50
7,000
3,000
48,000
191,000
23,000
22,000
114,000
-—
3,000
—
8,000
1,000
—
3,000
3,000
$100
—
—
3y0©0
--—
—
1,000
—
—
—
22,000
36.000
466.000
——
——
—
—
-
18,000
4..000
Total.
341,000
851,000
94,000
216,000
24,000
32,000
$87,000
4,000
10,000
22,000
36.000
2.017.000
27 O I7 , 000"'sheets & $36.56" per M . ......T T" : ,..... $75^ 1 7 5?
The charges against the several Federal reserve banks are as follows:
______ Bureau appropriations__________
Compen
Plate
Inc. Com
Sheets.
sation.
Materials pensation.,
Edatias
Xfitak.
Boston......
341,000 $3,733.95 $4,625.15
$
409.20 $12,466.96
$3,498,66
N0vv York*.... 851,000 9,318.45 12,041.65
31,112.56
1 ,0 2 1 .2 0
8,731.26
Philadelphia.
94,000 1,029.30 1,330.10
3,436.64
112.80
964.44
Cleveland.... 216,000 2,365.20 3,056.40
7,896.96
259.20
2,216,16
Richmond.....
24,000
877.44
339.60
2 8 ,6 0
2 6 2 .6 0
246.24
Atlanta......
32,000
350.40
452.80
328.32
38.40
1,169.92
Chicago.... .
387,000 4,237.65 5,476.05
464.40
14,148.72
3,970.62
St. Louis....
4,000
146.24
43.60
4.80
56.60
41.04
Kansas City,.
10 ,0 0 0
109.50
1 2 .0 0
365.60
141.50
102.60
Dallas......
2 2 ,0 0 0
240.90
311.30
26.40
804.32
225,72
San Francisco
36.000
394.20
509.40
1.316.16
43.20
369.36
2JD17.000 $22,086.15 $26,540.55 $20,694.42 $ 2.420.40 SS
J73^741.5?'
SESSSSeSSS-JXZ*.
_ The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation, "Preparation and Issue of Federal Reserve Notes, Re
imbursable, " and it is requested that your Board cause such indefinite appro
priation to be reimbursed in like amount.
Respectfully,
Signed
Paul Myers.
Acting Assistant Secretary of the Treasury.
r
<a.
;.
■
iv
o
w
BATIC OF "FLOAT” OF EACH FEDERAL RESERVE BANK TO SARHI'Ai ASSETS AKD DEPOSITS
DECEMBER 14, 1S17.
•
•
1EDERAL
’
RESERVE
;
BASK
Clearing
House
Transfers
bought
Exchanges
Boston
Sew York
Cleveland
3,786
700
.1 other
sollected
items
*
Total
: Uncollected
:
items
:
Dr.
•
4
%
•
.*
Total
Collection
Items
Cr.
:
:
:
:
Total
"FIeat"
3L-582
I Ratio of
: "Float" to
: total earn
: iztg as seta*
: ver cent
• Ratio of "Float""
9
*
immediately aval]
*
• Government and be
• deposits
♦
♦1
Per cent.
19,745
24,233
17,616
6,415
7.3
7.5
29,991
49,006
. 75,997
43,261
35,716
?.*
4.4
4,438
35,334
39,772
33,036
6,734
11.B.
8.4
17,332
19,216
16,522
3,694
4.4
3.0
764
1.X00
Richmond
1,167
14,275
15,442
11,769
3,653
9.0
7.4
Atlanta
1,410
22,470
23,660
6,223
15,657
56.5
30.1
’
-Chicago
3,201
15,874
20,761
39,836
22,333
17,503
17..3
9.7
414
2,565
15,566
16,545
13,
5,269
12.5
9.6
5,179
5,653
10,632
4,166
6,664
25.9
13.9
126
12,652
12,524
25,302
10,109
15,193
36.1
19.4
9
5,109
7,644
12,762
6,519
6,243
19.9;
12.4
1 .452
-6.271
10.839
10.691
146
0.^-
0.2
44,631
232,602
322,656
196,767
122,689
St. Louis
Minneapolis
JGtasas City
fihllas,
JTancisco
ietal
- i n ft
46,444
_________________
11.5
7.3
W. P. G. HARDING. G O V E R N O R
PAUL M . WARBURG. V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -o f f i c io M e m b e r s
WILLIAM G. McADOO
SECRETAR Y OF TH E TREASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
H: PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
C O M P TR O LLER O F T H E C U R R E N C Y
A N D F IS C A L A G E N T
W A S H IN G T O N
ADDRESS R EPLY TO
FEDERAL RESERVE BOARD
X-583
The Comptroller of the- Currency,
Washington, D. C.
Dear
Sir:
In accordance with a telegraphic request re
ceived from the Federal Reserve Agent at
I have the honor to request that you will cause the
release to the Federal Reserve Agent by the Assistant
Treasurer of the United States at
of Federal Reserve notes in the following amounts and
denominations:
Very truly yours,
Governor.
Countersigned:
Secretary,
Ex -O f f ic io M e m b e r s
W. P. G . HARDING, G O V E R N O R
PAUL M. WARBURG. VICE G O V E R N O R
. FREDERIC A. DELANO
V ARP&W c - m ille r
S. HAMLIN
WILLIAM G. McADOO
SECRETAR Y OF TH E TREASURY
C h a ir m a n
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
C O M P TR O LLER O F T H E C U R R E N C Y
*
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
W A S H IN G T O N
AD D R E SS R E P L Y TO
FEDERAL RESERVE BOARD
The Comptroller of the Currency,
Washington, D, C,
Dear Sir:
In accordance with a telegraphic request
received from the Federal Reserve Agent at
I have the honor to request that you will cause shipment
to he made to the Federal Reserve Agent at
of Federal Reserve notes in the following amounts and
den ominati ons;
Requisition in regular form covering^ this
request will be handed to you in due course. •
Very truly yours^
Governor.
Countersigned:
Secretary.
\
'
Ex -o f f i c io
W. P. G, HARDING, GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
mem bers
WILLIAM G.McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN. ASST. SECRETARY
and fiscal aoent
ADDRESS REPLY TO
W A S H IN G T O N
*
FEDERAL. RESERVE HOARD
DIVISION OF REPORTS AND STATISTICS
X-585
The Comptroller of the Currency,
Washington, D. C,
Dear 3ir:
Attached hereto is requisition confirming
telegraphic request of
from the Federal Reserve Agent at
for Federal Deserve notes in the following amounts
and denominations:
Very truly yours,
Governor
E x -O f f i c io
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN*
mem bers
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H . PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
and Fiscal agent
ADDRESS REPLY TO
W A S H IN G T O N
FSDKRAL RESERVE BOARD
X-586
The Comptroller of the Currency,
Washington, D. C.
Dear Sir:
There is handed to you herewith requisition
from the Federal Reserve Agent at
for Federal Reserve notes in the following amounts and
denominations:
.
Very truly yours,
Governor.
Inclosure.
.3 0 8 0
W. P. 6 . HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL ASRKT
FEDERAL RESERVE BOARD
W A S H IN G T O N
«»«•■
mplyto
X —588 FKDERAL reserve board
DIVISION OF REPORTS AND STATISTICS
December 20, 1917.
Dear Sir:
For the purpose of insuring uniform treatment
of items handled by all Federal Reserve Bankfe as reported
in the "Monthly report of clearing operations" a new iiem
"Average number and amount of items handled daily by both
parent bank and branches*’ has been added to form 50.
You will note that the setting up under separate
head of this item will further increase the amount Of duJ
plication shown on Fora No. 50, which at present segregates
items drawn on "Banks located outside the district*’, though
these items are again reported by another Federal Reserve
bank as items drawn on banks either in the Federal Reserve
city or the Federal Reserve district.
But the duplication
is apparent in both cases and necessary for the proper cal
culation of cost per item handled by each Bank.
In case a
check is handled by both parent bank and the branch, it
should be included under the caption "Items handled by both
parent bank and branches" in addition to being included in
one of the immediately preceding items, depending on the
location of the drawee hank.
-2In the consolidated report forwarded to the Board all
items drawn on banks in the city where the parent bank is located
should be reported as items drawn on "Banks located in the Federal
Reserve City", while all items drawn on banks located elsewhere in
the District, whether on banks in cities where the Branch is sit
uated or outside these cities should be reported as items drawn on
"Banks located in this district outside Federal Reserve City".
A supply of 25 copies of the revised form is being for
warded under separate :aver*
.
Yours very truly,
Secretary.
Mr*
Federal Reserve Agent,
W. P. S . HARDING, GOVERNOR
PAUL M. WARBURB, VICE GOVERNOR
FREDERIC A. DCUMO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO MEMBERS
WILLIAM 6 . NcADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W A S H IN G T O N
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. A*#T.SECRETARY
AND FISCAL ARENT
AD D R E SS R S M .Y t o
FEDERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
X5S9
Decamber 20, '1917.
Dear Sir:
Supply of form 3^ for the ccming year is now being forwarded to your
bank by the Government Printing Office. You will note that the ooly material
changes in the form relate to the method of computing reserve percentages.
Beginning .with the Board’s weekly statement for January 4, 1 9 1 8 , the publish
ed report will show reserve percentages as follows: "Gold reserve against
net deposit and Federal Deserve note liabilities combined" and "frold and law
ful money reserve against net deposit and Federal Deserve note liabilities
combined”. The number of code words for use on Friday nights has been con
siderably decreased and you may therefore discard fojm 341.
Since the proof on the nsw f01m 3 ^ was sent to the printer it has
been decided to have the banks combine on form
"Disbursements a/c Traneio Department" with "Expense — current". This will also necessitate com
bining the current expenses of the bank proper with the disbursements of
the transit department in the monthly expense report form 9 6 . The Board
desires you however, to continue to submit detailed statement of Transit
department disbursements on monthly form 9 7 *
view of the above noted,
change involving the merging on form 34
"Disbursements a/c Transit Departmant* with'lExpense — current"item "iTet service charges - received"
should be reported next year among the bank’s monthly earnings on form 9 5 *
One copy each of forms 95 “ 56 and 57 revised for use during the
ccming year are forwarded herewith. The regular supply will be forwarded
to you ay soon as it is received from the printer.
x
Yours very truly,
Secretary.
Mr.
Federal Reserve Agent,
EX>OPFICIO MEMBERS
,
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
CO M P TR O LLER O F T H E C U R R E N C Y
W. P. G. HARDING. GOVERNOR
PAUL M. WARBURG. VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
592 CHARUES S*HAML,N
FEDERAL RESERVE BOARD
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
A N D F IS C A L A G E N T
ADDRESS REPLY TO
W A S H IN G T O N
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION
TAX ON PARCEL POST PACKAGES,
December 20, 1917.
Dear Sir:
The Commissioner of Internal Revenue has advised
the Board that Federal Reserve banks are subject to the war stamp
tax imposed by Subdivision 14 of Schedule A, act of October 3, 1917,
upon ,-parcel post packages, and states that this tax applies to all
packages on which postage required to be paid amounts to 25/ or more.
The Commissioner advises that postal authorities are prohibited
from transporting such packages until a stamp or stamps representing
the tax due shall have been affixed thereto, and that there is no
exemption provided by the act for those agencies or departments
of the government, including the Federal Reserve banks, mailing such
packages, where postage is to be paid thereon.
Very truly yours,
Governor
E x -O f f ic io M e m b e r s
WILLIAM G. McADOO
SECRETAR Y OF TH E TR EASU R Y
X-593
C H A IR M A N
JOHN SKELTON WILLIAMS
CO M P TR O LLER O F T H E C U R R E N C Y
W. P. G. HARDING, G d y i R ^ : ^
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
H. PARKER WILLIS. S E C R E T A R Y
SHERMAN P. ALLEN, A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
A N D F IS C A L A G E N T
WASHINGTON
ADDRESS R E PLY TO
FEDERAL RESERVE BOARD
DIVISION OF AUDIT AND EXAMINATION v
December 20* 1§17
Bear Sir*
The Federal Reserve Board .has modified its previous
ruling regarding amounts rrhich may be written off against
expenses incurred in the printing of Federal Reserve notes, so
that Federal Reserve banks may, at their discretion, write oif
amounts \7hich have been actually expended for these notes,
whether they are held by the Federal Reserve agent or are in
circulation.
The previous ruling, which has now been modified,
limited the amounts which could be written off to notes actually
issued to the bank by the Federal Reserve agents.
Very t^dly yours
Governor.
X-594
TRANSFERS OF PROPERTY OR OF EVIDENCES OF INDEBTEDNESS
Sale or pledge of securities or other..prQ.pa.Efcx.
No person in the United States shall sell,hypothecate,deliver
or transfer, or cause to be sold, hypothecated, delivered cr transferred,
any shares of stock or other form of property, real, personal or mixed,
or any bonds, securities or other evidences of indebtedness for or on
behalf of, or for the benefit of any foreign government or resident of
any foreign country without first making a declaration to the effect
that no enemy or ally of an enemy has any interest directly or in
directly in the property or evidence of indebtedness sold,hypothecated,
transferred or delivered, and will not be benefited directly or indi
rectly by such transaction.
Sale of Collateral.
In the case of collateral held as security for existing loans
and sold for the liquidation of such loans the pledgee or seller,at his
option, may make a declaration showing for whose account such sale is
made in lieu of the declaration hereinbefore described. In such case
the proceeds of the sale may be used in the liquidation of the loan
but no part of such proceeds shall be paid over or- delivered to the
owner of the equity in such collateral until the person making such
payment has been furnished with a declaration to the effect ' . . .
that no enemy or ally of an enemy is interested in or will be benefitted
by such payment.
Filing of Declarations.
All declarations made as provided in these regulations shall
be filed with the Federal Reserve Board through the Federal reserve bank
of the district in which such declarations are made.
License to deal with or for an Enemy.
If any person in the United States desires to sell, hypoth
ecate, transfer or deliver, any stocks, bonds or other securities, or
other evidences of indebtedness, or any property of any kind whether
real, personal or mixed, and has reasonable cause to believe that the
person to or with whom such sale, hypothecation, transfer or sale is to
be made is an enemy or an ally of an enemy, or is acting for or on
behalf of or for the benefit of an enemy or an ally of an enemy, he
shall first procure from the War Trade Board a license to engage in such
transaction.
X-595CERTIFICATE OF AGREEMENT OF FOREIGN CORRESPONDENT TO BE OBTAINED BY
HOLDERS OF REGISTRATION CERTIFICATES AND FILED WITH THE FEDERAL RESERVE
BOARD,
.
Every holder of a registration certificate desiring to engage
in transactions with or for a foreign correspondent shall obtain from
suh correspondent by or before ________________________________ 1
a certificate of agreement to the following effect:
Having arranged w i t h ____________________________ to act as the
vHolder of registration certificate)
agent or correspondent in the United States for, or on behalf of, the undersigned,
under regulations issued by the appropriate authorities of the United States
Government
I/We
do hereby undertake and agree that
l/Ve
'fiTill not deal or at
tempt to deal, directly or indirectly, with said agent or correspondent in any
transaction for or on account of, or for the benefit of, an enemy or an ally of
an enemy of the United States, and will not make available for the use of an
enemy or an ally of an enemy of the United States any funds or property received
or credits established as a result of any transaction engaged in with or through
said agent or correspondent, and will not transmit to said agent or correspondent
for collection or credit any negotiable instrument bearing the signature or in
dorsement of an enemy or ally of an enemy of the United States,
The words"enemy" and "ally of enemy" are used herein, as defined in
Section 2 of the act of Congress of the United States,approved October 6,1917,
and known as the Trading with the Enemy Act — a copy of Section 2 having been
exhibited to the undersigned before the execution of this agreement.
NOTE: If foreign correspondent is an incorporated banking
institution, this certificate must be executed by a
duly authorized officer of such corporation.
DECLARATION OF NON-INTEREST OF ENEMIES TO BE FILED BY PERSONS ACTING
FOR FOREIGN AGENTS OR CORRESPONDENTS.
From actual personal knowledge, or in reliance upon
declarations or affidavits furnished the undersigned by the par
ties in interest, i/ffe do hereby expressly declare that no enemy
or ally of an enemy is directly or indirectly interested in the
transaction described below; that the property or evidence of in
debtedness involved therein has not been owned or held for the ac
count of an enemy or an ally of an enemy of the United States
since _______________________________ ,and that the funds de
rived therefrom will not be made available for the use of an enemy
or an ally of an enemy of the United States.
NOTE:
If the transaction is engaged in by a
corporation the foregoing declaration must
be executed by a duly authorized officer.
TRANSACTIONS REFERRED TO IN ANI) MADE A PART OF THE FOREGOING
DECLARATION.
~
Property or
evidence of
indebtedness
involved.
Nature of trans Other party to
action. i.e.sale, transaction, i.e
hypothecation,de purchaser,lend
livery for safe er, person to
keeping or collectwhom delivery
tion of maturing is made (3?obliobligations.
gor.
Foreign dorres?
poadent for
whose account
or in whose
behalf person
making decla
ration is act
ing.
Amount
DECLARATION OF NON-INTEREST OF ENEMIES TO BE FILED BY FOREIGN AGENTS OR
CORRESPONDENTS.
From actual personal knowledge, or in reliance upon declara
tions or affidavits furnished the undersigned by the parties in
interest, i/ffe do hereby expressly declare that no enemy or ally
of an enemy is directly or indirectly interested in the transac
tion described below; that the property or evidence of indebted
ness involved therein has not been owned by, or held for the ac
count of an enemy or an ally of an enemy of the United States
since __________________ ; that such property has not been pur
chased by the present owner from an enemy or ally of an enemy
of the United States since February 3, 1917, and that the funds
derived from the transaction will not be made available for the
use of an enemy or ally of an enemy of the United States. The
words "enemy” and ally of enemy" are herein used as defined in
Section 5 of the act of Congress of the United States, approved
Optober 6, 1917, and known as the Trading with the Enemy Act,
a copy of Section 5 having been exhibited to the undersigned
before the execution of this declaration.
NOTE:
If the transaction is engaged in by a
corporation the foregoing declaration
must be executed by a duly authorized
officer.
TRANSACTION REFERRED TO IN AND MADE A PART OF THE
FOREGOING DECLARATION.
Date: Property or
evidence of
indebtedness
involved
Nature of t.ransaction.i.e. sale
hypothecation,de
livery for safe
keeping or collec
tion of maturing
obligations.
Other party to
transaction i.e.
purchaser,lender,
person to whom
delivery is
made or obligor.
Foreign corres
pondent. For
whose account
or in whose be
half person
making declara
tion is acting.
Amount
COLLECTION OF DIVIDENDS.
INTEREST ON MATURING BONDS FOR FOREIGN ACCOUNT.'.
All persons presenting for collection maturing bonds or cou
pons, or checks or drafts issued for dividends or interest, for the
the account of any foreign government or resident of ary foreign coun
try, or who are authorized to collect such maturing bonds, interest
or dividends as the agent of any foreign government or resident of
any foreign country, shatl mate a declaration in writing to the effect
that such collections are not made for or on behalf of, or for the
benefit of, any enemy or ally of an enemy; that the proceeds of such
collections will not be made available for any enemy or any ally of
an enemy; and that the maturing bonds or the bonds and stocks upon
which dividends or interest are to be paid are not the property of any
energy or any ally of an enemy gsnd have not been owned by or held for
the account of any enemy or ally of any enemy since ____________ 1917.
Provided, however, that the holder of a Class A or Class C reg
istration certificate may collect maturing bonds and coupons, and
checks and drafts for dividends or interest for the account of a for
eign correspondent, without making such declaration, if such holder
has filed witH the Pdderfil Rsaorva 'Board-a declaration or certif icate
of the correspondent for whom collection is made to the following ef
fect:
That the foreign oorr aspendent certifies from actual per snnal
knowledge or in reliance upon declaration or affidavits made uni or
oath by the actual owner of the securities involved that such seurities are not ovaaed or held for the account of any energy or ally of
an energy of the United States and have not been so owned or held
since , .
that no enemy or ally of an enemy has any
interest in the proceeds of the items collected and that such jr oceeds will not be made available for any enemy or ally of an enemy of
the United Stat es.
NOTATION ON DIVIDEND CRECKS PAYABLE TO FOREIGN GOVERNMENTS OR
RESIDENTS OF FOREIGN COUNTRIES.
'
Every person issuing checks or drafts for interest or dividends after
__________________________ payable to any foreign Government or per
sons resident in any foreign country shall affix upon the face of said
checks or drafts,by rubber-stamp or otherwise, words to the following effe<
This check or draft will be paid only if presented
by holder who ha3 filed declaration of non-interest of
enemies or allies of enemies, in accordance with the
Executive Order of the President,dated ____________
1917.
W. P. 6. HARDING, G O V E R N O R
PAUL M. WARBURG. V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
E x -O f f ic io M e m b e r s
WILLIAM 6. McADOO
Secr etar y of th e tr ea su r y
C H A IR M A N
JOHN SKELTON WILLIAMS
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
C O M P TR O LLER O F T H E C U R R E N C Y
A N D F IS C A L A G E N T
X-598
WASHINGTON
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
December 20, 1917a
Dear Sir:
In connection with applications for permission to export
coin, bullion or currency, your attention is called to the
notice, copy of which is herewith enclosed, which is being sent
to all applicants for licenses to expert such corn, bullion
or currency.
Your attention is particularly called to this notice in
order that you may cooperate, so far as possible, with the
Board in this matter, taking pains to approve only those appli
cations in which the definite proof asked for is submitted to
you, and in which such proof is. to your mind, convincing;
showing that the individual or concern submitting it has in
good faith used the funds in the manner indicated in the appli
cation.
Your ascertainment of the facts in each case should not
be pro-forma, but should in every instance go as far as possible
in order that there may be no release of funds for purposes other
than those named.,
It is the opinion of the Board that v/here
applications are made with the specific statement that they are
to be applied to the payment of duties and taxes there should
be no difficulty in obtaining such evidence yourself.
?
Very truly yours,
Secretary.
'
x -593
Notice to applicants for peimmssion to export
coin and bullion.
The Federal Reserve Board has directed that in each case
where an application for the exportation of coin or bullion
is ^ranted, the applicant shall, upon making subsequent
application for licenses covering further shipments, submit
with his application definite proof that the coin or bullion
whose shipment; has been authorized in his last preceding ap
plication has been actually applied to the purposes set forth
in said application.
Applicants are advised that the submission of such proof
will have an important bearing upon the said subsequent appli
cation.
)
W. P. G. HARDING, G O V E R N O R
PAUL M. WARBURG. V I C E G O V E R N O R
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
EX-OFFICIO M lM B K R t
WILLIAM 6. MCADOO
SECRETAR Y OF TH E TR EASU R Y
Chairman
JOHN SKELTON WILLIAMS
H. PARKER WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
CO M PTR OLLER O F T H E C U R R E N C Y
M
A N D F IS C A L A C E N T
X-600
.
W A S H IN G T O N
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
December 20, 1917.
Dear Sir:
‘ In connection with applications for permission to export
gold and silver made to you the Board thinks you might be
saved some trouble if advised that at the present time all
applications involving industrial use of either metal are
being referred to the War Trade Board, and are no longer being
acted upon by the Federal Reserve Board,
This means that in
all cases where the value of an article composed wholly or
in part of gold or silver is primarily du:e to workmanship or
to some other element of value, so that the material of which
it is composed is comparatively unimportant in estimating its
worth, or where the article in question has passed through a
process of manufacture which has practically transformed it
from bullion into an industrial shape, the applications for
license to expert should not be presented to the Federal
Reserve Board but should go to the War ^rade Board.
This
rule applies especially to such items as dental gold and
jewelry.
Very truly yours,
Ex -O f f ic io
m em bers
W. P. 6. HARDING, GOVERNOR
PAUL M. WARBURG, VICE GOVERNOR
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
WILLIAM 6. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN, ASST. SECRETARY
AND FISCAL AGENT
W A S H IN G T O N
ADDRESS REPLY TO
_
m
n n EEDERAL RESERVE BOARD
December 21, 19X7.
Dear Sir:
The Federal Reserve Board has had tinder careful advisement the
question of making suitable acknowledgment to persons who, while not
attached to the Staff of Federal Reserve Banks, generously participated
in the Liberty Loan work of the several districts, Many such persons
served on committees and assisted in the placing of bonds at consider
able expense and inconvenience to themselves. In sending out instruc
tions with reference to the preparation of the reports of the Federal
Reserve Agents, Governor Harding, some time ago, suggested that no
special praise ol thanks should be given to anyone mentioned by name
in the reports, but that such acknowledgment should be purely general.
In the reports thus far received some of the Federal Reserve Agents fol
lowed these instructions closely while others have entirely disregarded
them. The Board feels that it will be necessary to eliminate from all
reports statements of the kind referred to, but in order not to seem un
generous it is suggested that those Federal Reserve Agents who feel sc
disposed may incorporate into their reports a paragraph in somewhat the
following .form:
"Appreciative acknowledgment is hereby made to the many citizens
who patriotically and unselfishly cooperated in the work of the local
Liberty Loan organization and who freely devoted their time to the
task of placing the bonds in the hands of subscribers.- While no ex
pression of individual thanks is possible in this report, there is
annexed hereto a roster of the various committees participating in
this work in order that there may be an official record of their ef~
forts."
There may then be attached to the report as an appendix or exhibit
a list of the committees and their rrembership, in which nay be set forth
the names of all those who, in the opinion of the Federal Resfuve Agent
submitting the report, are entitled to such recognition.
If you have already inserted in your report a paragraph to sub
stantially this effect accompanied by such a list of names, no further
action on your part is necessary. If, on the other hand, your report
does not contain such an acknowledgment and if you think it desirable to
add material of the kind above described, the Board will bo glad to re
ceive such data at as early a date as possible. Those reports which con
tain as a part of their text descriptions of the personnel of the Liberty
Loan committees will be edited by the omitting of. such data, and those
who desire the insertion „f some acknowledgment in place thereof, should
prepare and forward it substantially in the form herein recommended.
Very truly yours,
S e c re ta ry .
X-601
W. P. G. HARDING. GOVERN0*
PAUL M. w a r b u r g . Vice Governor
FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN
Ex -O f f ic io M e m b e r s
WILLIAM G. MCADOO
SECRETAR Y OF TH E TR EASU R Y
C H A IR M A N
JOHN SKELTON WILLIAMS
C O M P TR O LLER O F T H E C U R R E N C Y
WILLIS, S E C R E T A R Y
SHERMAN P. ALLEN. A S S T . S E C R E T A R Y
FEDERAL RESERVE BOARD
A N D F IS C A L A G E N T
ADDRESS REPLY TO
W A S H IN G T O N
December
1917.
Dear Sir:
I have the honor to advise you that at a meeting
of the Federal Reserve Board held on December 21, you were
reelected a director of the Branch of the Federal Reserve
Bank of
at
for the period
of one year, the term expiring on December 31, 1916.
.
FEDERAL RESERVE BOARD
Very truly yours,
Secretary
X-6Q3
MEMORANDUM FOR THE STAFF OF THE FEDERAL RESERVE BOARD.
The Federal Reserve Board stands for intelligent thrift - individual
and collective. Coal is a scarce commodity which it is important to saver
NOW, THEREFORE, PLEASE,turn out electric lights not in use, or not
needed. Daylight is ouch tetter for the eyes, when it can he had.
Do not, when .you go home at night, lea,ve lights burning in your room
if these lights are not in use by others.
Do not use letterheads, or printed matter, when an unprinted sheet
will do as well. An example of this may be found in memoranda for the use
of the Board itself.
Do not use costly embossed stationery when printed sheets and envelopes
will do as well.
Help to save coal used for making electric light, and do not waste
time, paper, or supplies.
Make suggestions that will save time and money.
THIS COUNTRY IS AT WAR.
SAVE AND SERVE.
3096
E x -O f f i c io
W . F . 0 . H AR D INO . S O V IM O A
P A U L I . W A R B IIM . V K I G O V I M O I
FREDERIC A . DELANO
ADOLPH C . M ILLE R
CHARLES 8 . HAM LIN
m rm bxnb
W ILL IA M « . MCADOO
I B U I U T OF T H I l U H U n
JOHN SHELTON W ILLIAM S
CONFTHOLLSR OF T H I C U M U C T
H . PAR E ER W IL L IS . S IC R IT A IT
'SHERM AN P . A L L E N . A W T .S IC M T A B Y
A ID FISCAL AOIMT
FEDERAL RESERVE BOARD
WASHINGTON
IMRVM B O A R D
X-605
December 22, 1917.
Dear Sir:
Arrangements have been made with the National Bank
Redemption Agency, which also assorts Federal Reserve notes,
to reduce its standard so that a greater proportion of used
notes will be :roturned to Federal Reserve banks as fit for
circulation.
This step is necessary because the Bureau of
Engraving and Printing has been concentrating upon the pre
paration of Liberty Bonds, and as a result cannot complete
orders for Federal Reserve notes as rapidly as formerly.
It is sggestod that youi* standard be Revised to
conform to that adopted by the National Bank Redemption
Agency in the Treasury Department, and that no notes be
sent in for redemption unless badly worn.
Very truly yours,.
Governor
—
W . F . O . HARDIHO. OOVIRHOB
P A U L M. W A RB U R S. V l d OOVIRNOR
FREDERIC A . DELANO
ADOLPH C . M ILLE R
CHARLES S . HAM LIN
M X -O FFIC IO M I M I 1 R I
W IL L IA M S . MCADOO
S IC R R A R V OF T H I T R IA R IIR
CHAIBHAR
JOHN SHELTON W IL L IA M S
CORFTROLLIR OF THK CURRBHCT
FEDERAL RESERVE BOARD
H . PAR K ER W IL L IS , SIC R R AR V
SHERM AN P . A L L E N . A M T . S IC R R A R V
a s d f is c a l a r r h t
ADMBOllSfi^O
WASHINGTON
December 24, 1 9 1 7 .
Dear Sir:
■■
X send you herewith mimeograph X-572 covering
State institutions vifoich are members of the Federal Re4*
serve System, up to and including December 13, 1917.
You will note that' the statement is made up
i
39 that additional names may be inserted under the
various State captions as the various institutions
come into the System,
You will also note that there
are 13 States which are not representated in this list.
Yours very truly,
✓
Secretary.
Federal Reserve Agei*t,
W . F . « . HARDINO, M
P A U L H . W ARB UR S, W c |
FRKDERIC A . DELANO
ADOLPH C. N IL L E E
CHARLES S . H A H U N
EX-OFFICIO MKMERRS
W IL L IA M 0 . NcADOO
SECRETARY OF T H I 1 M M U I Y
JOH N SHELTON W ILLIAM S
COMFTROLLBR OF THR CURRRHCV
FEDERAL RESERVE
BOARD•
.
.
WASHINGTON
•
H . PARKER W IL L IS . SECRETARY
SHERM AN P . A LLE N . ASST. SECRETARY
AND FISCAL ASSET
A D D R E SS R E P L Y T O
FED ERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
X-608
December 26»
1917*
Dear Sir:
Deferring to our telegram of even date* m a y I request that be-*ginning with next Thursday, December 27* you. give us in your weekly tele
. gram (Form X-53^) in addition to items heretofore shown* also amounts of
Special Government deposits (Liberty loan emu. tfi S. Certificate accounts)
held by reporting member banks under tee threefold Caption:
1.
2a
3-
Banks in Central Reserve cities,
Banks in Reserve cities,
Banks outside Reserve cities,
Code word HEFT
n
"
KROB
n
«
PELT
Weekly figures of special Government aeposits desired are those
shown on the books of your own Fiscal Agent Department as at close of bus
iness on Fridays of each week.
It will, therefore, not be necessary for
you to request your members to insert the addition..! information in their
weekly condition reports (Form X-53S) to the Federal Deserve bank.
•
.
Very tru.j» yours,
Secretary*
Mr,
Federal Reserve Agent,
\
X-6GS
KxO
W P S
H A R D IN S BOVM HORf
P A U L M W ARB UR 8 V lC I GOVERNOR
FREDERIC A DELANO
AD O LPH C M ILLE R
CHARLES S N A N U N
f f i c io m b m b b r s
W ILL IA M 9 MCADOO
SECRETARY OP THE T M M I I f
JOHN SHELTON W ILLIAM S
COHFTROLLRR OF T H I CURRBRCV
FEDERAL RESERVE BOARD
WASHINGTON
H PAR K ER W IL L IS SECRETARY
.
SHERM AN P ALLE N A M T SECRETARY
ARB FISCAL ASEHT
AD D R E SS R E P L Y T O
December 36* 19X7.
Dear Sir:
It appears that in some sections of the country it
is not customary for national banks* state banks* .*nd trust
compaxiies which have savings departments to require the pre
sentation of the pass-book whenever savings accounts are with
drawn* and in some cases national banks have indicated that they
are at a disadvantage by reason of the Board*s regulation as to
savings accounts*
To meet this situation it has been suggested
that Regulation 0* Series 1917* be amended insofar as it relates
to savings accounts* to read as follows:
nThe term 'savings accounts* Shall be held to in
clude those accounts which are usually carried on the
books of the banks in ledgers or accounts separate and
distinct from commercial or checking deposits; which are
not ordinarily used or drawn against by the depositor
for current expenses and which* by the printed regulations
of the bank* accepted by the depositor at the time that
the account is opened - -
(a) The depositor nay at any time be required by
the bank to give notice of an intended withdrawal not
less than thirty days before the withdrawal is made.
(b) The pass-book* certificate* or other similar
form *f receipt must be presented to the bank when*"
ever a deposit or withdrawal is made* but this require
ment say be waived, by the bank in those cases m which
the account does not exceed five thousand dollars.
In any case in which thi3 requirement is waived all
sums standing to th3 credit of the depositor in ex
cess of five thousand dollars shall be treated as
demand deposits.11
In view of the fact that the reserves required against
"time deposits11 and "saving accounts11 are very low, only 3$, the
Board is reluctant to take any action which could be abused and
which would result in a lowering of the reserves carried with the
Federal Reserve banks, but in view of the requests which have been
xzade for a modification of the present regulation, the Board would
lik3 to have your opinion as to the advisability of caking the
change above outlined.
It is particularly desirous of avoiding
a situation which .would enable a bank/ by the simple expedient of
requiring notice at its discretioh, to classify all its deposits
as time deposits, thereby reducing its.reserves to 3$«
Very truly yours,
Governor.
31 0 1
(.3) FORM TO EE USED 3Y GOVERNOR OR VICE GOVERNOR IN MAKING REQUISITION FOR
FEDERAL RESERVE NOTES.
Under authority of resolution of the Federal Reserve Beard adopted
December 12, 1917, you are hereby requested, in accordance with the fore
going application, to deliver tc the Federal reserve agent whose signa
ture appears thereon Federal reserve notes in the aggregate amount of
..................... in denominations as follows:
Five dollars ($20,000 per package)............ $
. Ten dollars ($40,000 per package) ............ $
Twenty dollars ($80,000 per package) ........
$
Fifty dollars ($200,000 per package) ........
$
One hundred dollars ($400,000 per package) ... $
Governor.
To the Comptroller of the Currency;
Washington, D. C.
.
X-610
Secretary
EX-OFFICIO MEMBERS
W . P . 0 . HARDIHQ, « o n n i O ^ A
P A U L M. W ARBURO. V lC I d v l l l b f
FREDERIC A . DELANO
ADOLPH C. M ILLE R
CHARLES S . HAM LIN
W ILL IA M 0 . McADOO
S K I R A H OF T H I TRIARURY
CHAIRMAN
JOHN SKELTON W ILLIAM S
c o m p t r o l l e r o p t h r Cu r r e n c y
FEDERAL RESERVE BOARD
WASHINGTON
H . PARKER W IL L IS . SECRETARY
SHERM AN P . A L L E N . ASST.SRCRRTART
AND FISCAL ACRNT
AD D R E SS R E P L Y T O
FED ERAL RESERVE BOARD
DIVISION OF REPORTS AND STATISTICS
Dear Sir:
According to preliminary data an hand net earnings of-certain Re*
serve banks for the current year will be large enough to provide for the pa
went of dividends up to the end of the year and the carrying of substantial
amounts to Surplus accounts.
Section 7 of the Act provides that "all net earnings shall be paid
to the United States as a franchise tax, except that one-half of such net
earnings shall be paid into a surplus .fund until it shall amount -to 40 per
centum of the paid-in capital stock of such bank"* - - In accordance with
this provision one-half of all net earnings, less amounts reserved for. de
preciation, unexpected losses and like contingencies will have to be paid
. to the Government at the close of the year, after the net earnings shall have
been determined*
It is proposed to have a. new item "Surplus" shown in the publish
ed weekly statements of the Board* beginning January 4, 1310, and these
banks which have set up surplus accounts are requested to show the item an
their daily and weekly statements to tne Board, (Item CEDE of Form 3^)»
as well as in their weekly press statement#*
Great care should be used in calculating these amount*, as tns
totals carried to surplus by the banks at this time must e*ual tea a. ounts
of franchise tax payable by tnem to tne Government* For this Reason n o
changes in the surplus account once set up snould be made ourin^ tne f o l l o w
ing year, or six-month priod.
It" will be appreciated if these instructions will be brought to
tbe attention of your Bookkeeping and Aud^ti*^- Departments*
Very truly yours*
Secretary*
Mr.
Federal Reserve Agent,
f
j j
< 5
RATIO OF "FLOAT" OF EACH FEDERAL RESERVE -k:K. TO E^r^I ::?G ASSETS AND DEPOSITS,
.
# . ‘
BECE6L E R 21, lffrlr
.
FEDERAL
RESERVE
BANK
:
:
Clearing
House
Exchanges
Boston
2,503
14,723
New York
Transfers
h ought
All other
uncollected
items
:
:
:
:
Total
uncollected
items
Dr.
: T otal
: collection
:
items .
:
Cr.
Total
"Float11
:
:
:
:
:
Ravio of
"Float" to
total earn
ing assets.
Per cent
:
:
:
:
:
.
Ratio of "Float to
immediately available
Government and bank
deposits.
Per cent
630
1 6 ,5 2 2
1 9 ,6 5 5
1 'S-c6 12
5,0 4 3
6 .9
6.4
•«
61,159
75,332
4j 1 660
23,222
7 .0
4.2
A
Philadelphia
4, COS
see
28,757
3 2 ,7 6 5
27,343
5,417
7.2
6-3
Cleveland
1,473
2 ,7 2 0
18,356
2 2 ,5 4 9
1 7 ,3 6 s
5,isi
4 .3
3-2
••
15,722
1 6 ,5 2 1
1 3 ,3 9 7
3,124
6 *5
6 .0
1,603
541
17,46s
1 9 ,6 1 2 .
12,019
7,593
2 4 .9
1 6 ,8
Chicago
3,5*6
: 2 3 ,9 9 2
2 2 ,7 3 6
50,271
2 6 ,6 6 7
2 3 ,6 0 4
13.6
1 2 .2
St. Louis
1,159
1 ,9 1 0
15.33**
i s , 403
13,931
4,422
3.6
7 .6
5 ,9 5 3
9 ,6 2 6
13-579
4 ,9 1 7
6 ,6 6 2
25-3
1 3 .3
Richmond
Atlanta
7S9
•
Minneapolis
a
.
Kansas City
26
1 0 ,4 4 7
16,062
26,535
1 1 .52S
1 5 ,0 0 7
3 2 .6
is.3
Dallas
26
^ ,3 9 7
S,S95
13,318
6 ,9 7 7
6 ,3 4 1
2 0 .6
12.6
.1,342
5 ,5 5 3
9,5S9
I6,4s4
9,3**5
7.139
1 4 .7
6 .7
3 1 ,2 0 5
56 ,11*3
2 3 6 ,2 2 6
2 0 5 ,3 1 9
117,755
1 0 .9
7-2
San Francisco
Tot&l
.
3 2 3 ,57**
.
’
3104
F
e d e r a l
W
OFFICE OF THE GOVERNOR
R
e s e r v e
B
o a r d
ashington
/
i
Dear Sir:
four letter of
addressed to
the Secretary of the Treasury has been referred to
the Federal Reserve Board which will., as soon as
practicable give oareful consideration to your
proposition and advise you of the conclusions
reached.
'
Very truly yours.
Grove rnore
WILLIAH G. HCADOO
SECRETARY OP THE TREASURY
CHAWNAN
X-6I9
JOHN SKELTON WILLIAM
COMPTROLLER OP THE CUEBBECT
F E D E R A L
R E S E R V E
B O A R D
W. P. a . HARDING.
PAUL H. WARBURG.
PRID1RIC A. DELANO
ADOLPH C. HILLER
CHARLEG 8. HAHL1N
H. PARKER WILLIS. SECRETARY
SHERHAN P. ALLEN, AHT. SECRETARY
an d fis c a l a s s e t
WASHINGTON
December 29, 1917
Dear Sir:
,
.
«
Section 9 of the Federal Reserve Act provides that
state banks admitted to membership .under authority of that
section shall be required to make reports of condition and of
the payments of dividends to their respective Federal Reserve
banks, reports to be made on call of the Federal Reserve bank,
on dates tp be fixed by the Federal Reserve Board«
You will call upon your state member b~nks for in
formation as to dividends paid and disposition of earnings
for the dividend period ending December 31st and the Board
will within a short time telegraph you advising you of the
date fixed for vdiich you should call for report of condition
from 'your state bank members* The necessary printed blanks
for their reports are in transit to you. In forwarding forms
to your state bank members, please instruct each one to fill
out the forms in triplicate, retaining one copy for itself,
and sending two copies to you as promptly as possible after
the date of the report has been cozmunicated to it: As those
reports are received, retain one copy for your files and send
one copy to the Board. Please advise the state bank members
that no publication of these reports is required, although
there is no objection to their publishing them as an official
report made to the Federal Reserve bank if they care to do so»
Ver7 truly yours,
Governor
W. P. C. HARDINS. COVESRO*
»
PAUL M. WARBURS, VlCB GOVBBSOB
FRIDBRIC A. DELANO '
ADOLPH C. MILLER
CHARLES S. HAMLIN
■x-OFPieio M H iB in a
WILLIAM « . McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMFnOUU OF THB CUBBBBCT
F E D E R A L
R E S E R V E
B O A R D
WASHINGTON
H. PARKER WILLIS. SECRETARY
SHERMAN P. ALLEN. ABBT. SECRETARY
AHD FISCAL ASEMT
ADDRESS REPLY TO
X*63iDIML RMSBRVK BOARD
The Comptroller of the Currency,
Washington, D. C.
Dear Sir:
I have the honor to request that you will cause
shipment to be made to the Subtreasury at
of Federal Reserve notes of the Federal Reserve Bank-.
for the account of the Federal Reserve Agent
at that bank, in the following amounts and donominations:
Very truly yours,
Governor.
X-622
First Draft
W.F. 6* H*
S I Hs
#
In conformity with the requirements of Section 10 of the Federal
Reserve Acty the fourth annual report of the operations of the Federal
Reserve Board for the ca3endar year ended December 31, 191V, is submitted
herewith:
The outstanding feature of the year has been, of course, the entry
of the United States 3nto the war.
The declaration by Congress of a
state of war, on April 6th, had been preceded by a period extending over
many months of unprecedented activity and expansion m
practically all
lines of business and industry, tempered, however, in the minds of thought
ful men, by uncertainty and apprehension as to the ultimate adjustment of
international relationships.
The Board had seen, for a long time, that
/
/
the feverish conditions brought about by tjie rap*d change *n our position
from a debtor to a creditor nation, by the great influx of gold into the
country, and by the large foreign Credits negotiated here, rendered it
imperative that the Federal Reserve system should be strengthened and
brought to the highest state of efficiency, in order that it might perform
the most effective service in either one of two events which seemed likely
to transpire —
the conclusion of a general peace in Europe, or the entry
of the United States itself into the war.
In the event of peace, a
radical readjustment was to be expected, and there would have been a
slov7ing down of those industries which were engaged m
supplying war
material, a consequent heavy falling off in our exports, accompanied, in
SI 0 8
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■
all probability, by a strong demand upon us for gold* . and on the other
hand, in the case of our own belligerency, it was foreseen that there
would be a greatly increased denand for all articles necessary for the
equipment and maintenance of our own military and .naval establishments,
much laxger credits to the countries associated with us in the war, and
an inevitable cessation of gold shipments to us by those countries.
For these reasons, the Board felt that it should in either event,
during this period of uncertainty, undertake to preserve the liquid
character of the assets of the Federal Reserve banks, to discourage
any undue expansion of credits, and to reduce to very moderate proportions
the holdings of the batiks in such investments as bonds and warrants
which had been ta&La: primarily for the sake of income.
Early in the
year, therefore, the Board began to carry out these policies and the end
of March found the Federal Reserve banks in a very strong position, with
assets unusually liquid.
While some of the banks had purcl&sed and
were holding government bonds, the aggregate amounted to less than five
per cent of their total resources.
Holdings of municipal warrants,
which at times had been freely purchased by some of the banks also, had
been reduced to a comparatively small amount.
In order better to provide for the strengthening of our banking
structure, for the conservation of our gold supply, and for the regula
tion of its outflow, the Board in January suggested some amendments to
the Federal Reserve act which were designed to make membership in the
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system more attractive to the state banks and trust companies, and to
modify reserve requirements in such a way as to increase the gold holdings
of the Federal Reserve banks and to make their gold more available as a
basis for note issues*
These amendments finally became law on June 21st
and will be discussed more fuliiy in other parto of this report*
In anti
cipation of these changes and of future contingencies, the Board determined
upon the preparation and distribution of a much lazier volume of Federal
Reserve notes, and during the months of January and February placed ad
ditional orders with the Bureau of Engraving and Printing, through the
Comptroller of the Currency, for more than $900,000,000 of these notes,
and arranged also that the stock of notes on hand should no longer he
v
reduced through withdrawals for current needs, but that as drawn upon by
the Federal Reserve banks new orders .In equal amount should be placed
automatically.
In order to insure immediate availability, ample supplies
of notes were placed at the subtreasuries for delivery to the Federal
Reserve agents as required.
The precautions taken have been, justified by
events and an ample supply of Federal Reserve notes has been available
throughout the year.
When a state of war was declared on April 6th, the reserve position
of the Federal Reserve banks was exceptionally strong.
' Gold in the
Federal Reserve banks and with Federal Reserve agents amounted to
$943,552,000;
the reserve against notes was 101.2$ and against deposits
76.5$, the combined reserve against deposits and notes
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—d—
Investments in government bonds and municipal warrants had been reduced
to #51 ,836, COO and -purchases of acceptances were in smaller volume.
FEDERAL RESERVE BANK& AS FISCAL AGENTS OF THE
UNITED STATES.
The entry of the country Into war resulted almost immediately in
the assignment to the Federal Reserve banks of new and exceedingly im
portant duties.
Section 15 of the Federal Reserve Act provides in fart
that the banks when required by the Secretary of the Treasury shall
act as fiscal agents of the United States.
This function had hither
to been a negligible one, byt on May 2nd the Secretary of the Treasury
made public the details of theffxst bond issue, known as the Liberty
loan of 1917v and at the same time lie announced that each Federal Re
serve bank would be constituted a central agency in it3 own distridt
for the organization of a bond campaign, for receiving subscriptions
and payments, making deliveries and managing the necessary details.
The
Kaviirg were also charged by the Secretary of the Treasury with the duty
of placing the successive issues of short time Treasury certificates
which have been offered, and of rddeeming them at maturity.
These new
duties have brought the banks into more intimate contact with the
Treasury and have also increased enormously their operating problems.
It has been necessary for them to add to their working space and to more
than double their clerical staffs.
They have rendered especially
valuable service In the prompt flotation of the various issues of Treasury
\jf
X-623
3141
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certificates of Indebtedness which, running for short periods only in an,ticipatlon of receipts from the long term bonds, were placed with banks
rather than with the investing public*
The first issue of $50,COO,000 offered under the provisions of the
Act of March 3, 1917 in anticipation of income tax receipts accruing on
June 30th, was offered before rates for mo2iey had advanoed, and at the
request of the Secretary of the Treasury, the Federal Reserve banks them
selves subscribed for the entire issue, at the rate of
2% per annum*
This constituted their first direct service to the government in its war
financing*
This issue however, was only a beginning*
by an offering of $250,000,000, at
^
It was following
on April 25th, which was quickly
distributed by the Federal Reserve banks among the member.* and nonmember
banks of their respective districts.
This process has been repeated on
eleven subsequent occasions, four Issues having been made in anticipation
Oao
of the first Liberty loan of $2,000,000.which was closed on June 15th,
A
while six were anticipatory of the second Liberty loan, subscriptions to
which closed on November 28th.
The last issue or $700,000/000, in
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anticipation of taxes due next June, has a longer time to r..n than the
others and being intended prin&rily for the convenience of those who will
have taxes to pay on account of incomes and excess profits, appealed more
particularly to corporations and investors than other issues, which went
mainly to banks*
Subscriptions are now being received by the Federal
Reserve banks for a new offering of the same character.
In his annual report to Congress the Secretary of the Treasury
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expressed his appreciation of the services rendered by the Federal Reserve
banks as fiscal agents by stating that "The Federal Reserve system has been
of incalculable value during this period cf war financing on the most ex
tensive scale ever undertaken by any nation in the history of the world.
It would have been impossible to carry through th93e unprecedented financing
operations under our old barJrlrg system.
The effective machinery af
forded by the Federal Reserve banks has p e m i t t e d the government to ex
ecute its plans without a tremor of disturbance.
GresLt credit is due
the twelve Federal. Reserve banks for their broad grasp of the situation
and their intelligent and comprehensive cooperationc"
He added that the
oxganizations which they have perfected have contributed greatly to the
phenomenal success of the Liberty leans.
The Federal Reserve banks have from the first met with a prompt and
hearty response from the member and nonmember banks in their respective
districts, both in th9 flotation of Treasury certificates and of the
Liberty bonds.
The Treasury has relieved pressure upon the market
by permitting the Federal Reserve banks to distribute the proceeds of the
£jle of certificates and bonds among the national banks subscribing, but •
the term of these deposits has necessarily been short, and as a consider
able lapse of time is required for the redistribution of these funds
throughout the country through normal trade and banking channels, the
greatest measure of relief has been afforded through rediscounts of member
banks with the Federal. Reserve banks.
These transactions have involved .
no loss of gold, this being obviated by a substantial expansion of Federal
Reserve note issues.
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DISCOUNT POLICY.
Upon the Federal Reserve Board has fallen the responsibility of
directing the policies of the system so as to Insure prompt accommodation
to banks whose customers required assistance in making their payments
for bonds, as well as to banks which bought bonds for their own account.
It was important that there be no disturbance in the money market and that
Interest rates should be stable and as free as possible from fluctuation.
The Board accordingly, before the subscriptions to the first Liberty bond
issue were closed, and in anticipation of the amendments which became
law on June 21st, established a preferential-fate of disoount for notes
of fsember banks secured b y government obligations, whether certificates or
bonds, firing a lower rate than that borne b y the securities themselves, 3§$ for notes maturing up to 90 days.
As a further means of relief, the
Board authorized Federal Reserve banks to discount for nonmember banks,
*
upon the endorsement of a member bank, notes secured by government se
curities, whether made by the nonmember banks themselves or by their cus
tomers, when the proceeds were to be used for carrying Treasury certifi
cates or United States bonds.
These measures involved modifications in
discount schedules and rates, which may be enumerated as follows:
(1)
The establishment of a rate of
Z% per annum for the discount
at Federal Reserve banks of notes of menber banks running not longer than
15 days secured by Treasury certificates of indebtedness, which certifi
cates had been issued at rates varying from 3 to
(2)
per annum.
The establishment of a rate of discount at. Federal Reserve
banks of 3§$ per annum for customers’ notes running up to 90 days, with
X-623
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the endorsement of member banket when such notes had been made for the
purpose of obtaining funds for the purchase of government bonds and were
secured by government obligations*
(3)
.
She authorization of Federal Reserve banks to rediscount for
member banks, on behalf of nonmcmbar banks, notes of nonmember banks or
their customers, secured by government obligations, for the purpose of
obtaining funds with which to purchase United States bonds or notes*
(4)
The establishment of a one day rate of from 2 to 4 $ at the
Federal Reserve banks in the principal financial centers, New Yolk
Vi
•
particularly, for the purpose of restoring to the market funds temporarily
withdrawn through government loan operations*
(5 ] M -The authorization of Federal Reserve barite to discount notes
made by nonmember banks with the erdorsemsit of a member bank, on con
dition that such notes, running not longer than 90 days, should be redis
counted only up to July 15th and that they should be accompanied by an
affidavit that the proceeds thereof had been used for the purchase of
government bonds by the banks er their customers*
/7as given
"
'
A general assurance / savings banks and trust companies that
the Board desired in every way to cooperate with them in avoiding strin
gency and that the Federal Reserve banks were prepared to extend through
member banks every reasonable accommodation not inconsistent with law,
for the purpose cf relieving any strain which might result from with
drawals of deposits for purchases of government securities.
The rediscount policy of the Board, which was intended to assist
X-623
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those desiring to subscribe for the first Liberty loan by assuming banking
accommodation pending the payment in full of their subscriptions, was
amply justified by results.
As nearly as can be ascertained, scarcely
more than $300,000,000 of the loan ./as actually subscribed by banks for
their own account, and of this amount a very large part was quickly trans
ferred to private investors who had not originally subscribed for or been
allotted all the bonds they desired to obtain.
The amount of rediscounts aj Federal B.eser/e banks of notes secured
by government obligations reached its maximum of $82,950,000 on June 22nd,
one week after the closing of subscriptions for the loan, but these notes
were paidkoff so rapidly that the total of such rediscounts had on August
17th, fallen to $11,051,000.
Reports from all sections of the country
indicate that only a comparatively small percentage of the first issue of
Liberty bonds is now being carried.upon a long term instalment basis, and
that as a rule both barks and private investors were able, within a few
weeks* to pay for the securities which they agreed to take.
EFFECT OF ADDITIONAL LOANS.
The services rendered by the Federal Reserve banks during the second
Liberty loan oampgign, which began on October .1st and ended on October
27th, were even more marked than in the first instance.
The experience
which had been gained on the former occasion, the fact that more time had
been afforded for
organization, a better understanding by the
people of the merits of government bonds as an investment, and a general
awakening to a sense of patriotic duty, all combined to bring about the
X-6 23
vigorous cooperation
of the public generally.
The arrangements pre
viously made to accommodate the hanks and their customers who desired to
subscribe to government bonds, remained effective, and there were no changes
in discount rates, notwithstanding the advance, of one-half of one per cent,
in the rate of interest carried by the bonds themselves, until the close
of November and the middle of December, whan general advances of one-half
of one per cent in rates of Federal Reserve banks ware made.
The organisation of the liberty loan committee and the arrangement*
for publicity and for soliciting subscriptions, had been greatly improved
under the leadership of the Federal Reserve bank in each district, and
t
the result wqs gratifying In a corresponding^ degree.
The fadt that the
•second loan, as offered to the public, was fifty per cent greater than the
^firbt, while actual subscriptions received were in an even greater pro‘
.
po3ption,Anaturaily. increased tfery substantially the operations of the
Federal Reserve banks in discounting paper secured by government obliga
tions.
The total of such paper discounted at the Federal Reserve banks
As was the case with the first loan however,, there were constant transtors to investors, and on
<*&&& JL&
of this character had been reduced to
the total amount
X S j . $**■/' 0 0 c?
Ekperience during the year with these operations a n d an analysis of
the consequent changes in the banking situation, demonstrate how greatly
the entry of the United States into the war has increased the responsibility
X-6 23
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of the Federal Reserve system In its relations to the Treasury and to the
public*
Not only have new duties devolved upon the Federal Reserve system,
but it has been made more directly responsible for the soundness of the
banking position*
The Federal Reserve Board is, of course, not concerned
with the financial policy of the government except in so far as the Sec
retary of the Treasury may choc-F.e to call upon its members for service in.
an advisory capacity*
The Board, however* is charged by the Federal Re
serve Act with the exercise of a general supervision over Federal Reserve
banks, which, in their function; as fiscal agents of the government, are
responsible for banking technique of government borrowing, as well a3 for
the execution of policies determining the extent and manner of backing
participation in public leans*
This responsibility is one which, during
the past year* has rested heavily upon the members cf the-. Board, and rtilch
they cannot evade or transfer*
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•
The Board feels that the duties which it is called upon to perform
are at all times impressed with the highest quaJ.iti.es of trusteeship, and
in times of emergency like the present, are vested, if it be possible, with
an added solemnity.
it seems net improper to suggest that those charged
with the supervision of bazfks should at this time advise a::.', caution the
banks of the country in the interest of the public welfare, with the view
of developing and applying methods which are best adapted to withdrawing
from private employment and diverting to public service the vast sums which
national necessity demands and which Congress, by its enactments, has
authorized the Secretary of the Treasury to borrow or to raise by taxation.
In its final analysis, war financing means the furnishing to our government
X-623
■
(
of supplies or services for its own use or for the assistance of those
governments which are associated with us in the war.
These services and
supplies are necessary for the winning of the war, and it is just as im
portant that the government secure them as it is that it should procure
the funds or credits with whi>h to. pay for them.
In some respects the
American people have not as yet cooperated to a sufficient degree, not
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because of any lack of patriotism, but because they have not yet been
adequately impressed with the 2mp era Live necessity for the ir complete and
constant cooperation.
. fact that the issue —
in their hands.
They have hot yet been thoroughly aroused to the
success or failure — - our future as a nation, lies
A great campaign cf education, nation-wj.de ir. scope,
lies ahead of us, and in this campaign the banks of the country have an
opportunity to render great service by const!tutlng themselves the leaders
of public sentiment.
Each bank, in its own community ought to make the
people understand clearly that the amount of goods, or supplies which can
be produced is limited, and that in conservation and in the avoidance of
waste, as well as by increased production of food stuffs, cotton, wool,
lumber, iron and steel products, and all other supplies necessary in the
conduct of the war, the people who remain at home have the best op
portunity of serving their country.
These necessary supplies should be
furnished in sufficient quantities and in the shortest possible time, for
time is .a vital factor.
It is of course essential to economize in the
use of those things yhioh are required by the government, but by re
stricting the use
of those things which are not required by the government,
material may be released which can be used in other ways or shipped to
3119
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other countries.
As an ill-as oration it may be pointed out that if every
family in the United States would use fewer clothes than they would in
ordinary times, cotton and woolen goods to the value of millions of dol
lars could be made available for export, and the proceeds could be used in
making purchases of copper in Mexico, hides and wool in Argentina, and of
nitrates in Chile.
By consuming a smaller amount of goods additional
money is saved, which can be used by the people in payirg for the war loans
of the government>
Decreased demand for goods by individuals and pur
chases of government bonds out of savings rather than by excessive borrow
ing from banks, will tend to retard a further xise in prices and t o re
strict expansion of banking credits which necessarily contribute to the
rise of prices.
The government is the principal customer for .farm
products and for mauufaebured articles and there need be no fear of any
falling off in demand for staple articles of all kinds as the result of
Individual economies.
Since the beginning of the war, and more especially since the entry
of this country into the v/ar, deposits in banks have increased enormously,
b.:t it should be remembered that loans and discounts and investments have
increased in an even greater degree,
^sp^gold holdings in three years
have Increased more than a billion dollars and are now larger than those
of any other country, but at the same time par percentage of gold reserves
against deposits and note issu&3 has decreased.
These conditions are not
unusual in times of war, and to a certain extent they cannot be prevented,
but the banks of the country should make it their business to keep these
tendencies under control and to- prevent too rapid a n expansion of credits
X-6 2 3
n*
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as far as possible, without placing in jeopardy the supreme object of our
national effort r*- the w5m'.ng of the war*
Bab we «should realize that
in the accomplishment of this purposo, the conservation of our economic
and financial strength is ju3u as important as the augmentation of our
military power, and that upcn +bis conservation our military strength de
pends*
Nothing mas b be need which can be dispensed with*
There mast
be a conservation of credit as well as goods, and credit, generally speak
ing,
should not be used except where it Js required for the common
welfare,
as in planning crops, the manufacture of necessary articles,
or in such construction work as nay be essential in bringing about in
creased production*
Contraction of ordinaxy lines of credit js necessary
to make room for the credits required by the goveTireu!# for ihe purchase
of supplies essei-tjal for wa^ purposes.
It is hoped that the banks of the coimtzy will cooperate along
these lines and that they will teach the d o c r n n e of serving and saving*
Shis is not the time for the purchase and sale of 3usuries or for carrying
large stocks of any kind.
There should be fewer and plainer goods carried
1*1 stock, for their is no unlimited supply of goods or of credit*
This
is a time for all establishments, large and small, to reduce inventories,
thereby freeing goods and banking credit*
It should be urged upon state,
city and county authorities, that this is not the time for municipalities
to engage in construction work, except perhaps in cases where such work is
necessary for the public health, and that instead of engaging in new under
takings, they should rather consider cancelling existing contiacts in order
X -6 2 3
-15to release men and nftterdal, thereby avoiding competition with the govern
ment for man power and for the savings of the people*
It is, of course, inevitable that the war activities of the govern
ment will tend, to oaose a farther rapid growth of deposits and loans in
banks, and in order to keep our credit structure strong it is necessary
that the banks should exert their influence and lend their energies to
a more general absorption of government loans by savings, to a contraction
of private credits wherever practicable without causing hardship.
We
most look to the future, and prepare unceasingly for further demands which
the forests
nay be made upon us.
The products of the fields,/the mines, and the
manufacturing establishments of
in the nature of luxuries.
the country are not, generally speaking,
They can, as a rule, be classed as
necessaries, and with the outlook ahead of us there seems to be no
possibility of over-production.
It seems, therefore, that the banks
of the country, from the standpoint of good business as well as from
patriotism, should lend their funds and credits freely to those engaged
in these productive enterprises, and their power to serve the country
.In this w a y will be increased by the curtailment of unnecessary credits
and b y the adoption by the people generally of a policy of common sense,
k
practical economy*
The Board would call attention also) to the very great assistance
which it is in the power of the Federal Reserve banks to give to their
member banks by rediscounting paper growing out of agricultural, indus
trial, and commercial transactions.
The Federal Reserve Act as amended
X-263
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last June provides that state banks admitted to membership may retain
all of their statutory and charter powers.
Thus state bank members are
governed -by their own state laws and remain under the supervision of their
state banking departments.
Their Interest rates and the limitations upon
their loans are determined entirely by state law*
. There are
not yet members but which ure eligible 2or membership
* ".v-
hundreds of good banks throughout the country/ and It seems proper to re
fer here to a statement issued by the President of the United States on
October 13th last In which he called attention to the fact that "the
•
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extent to which our countxy can wJ.thstand the financial strains for i/fc-ieh
we must be prepared will depend very largely upon the strez^th and
staying power of the Federal Reserve banks," and In which he urged the im
portance of developing our banking power to the
nB.xf.mow degree and of pro
viding financial machinery adequate for the very great financial require
ments imposed upon our country by reason of the war.
He pointed out
that all banks should cooperate in strengthening the position of the Federal
Reserve system, thereby strengthening the nation's banking power, and
urged upen every bank officer and director to consider the question of
membership in the Federal Reserve.system as a "solemn obligation."
Since the date of the President's statement the banking departments
of nearly all of the states
have ejcpressed approval of menbershlp in the
Federal Reserve system on the part of the banks under their supervision,
but the reserve requirements In a few states practically prohibit the co
operation of state banks and trust companies w ith the Federal Reserve
system, making it
or them to become members as well as
X-6 2 3
* -i *.
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impossible to exchange their Federal Reserve notes for gold*
The Board
would suggest to the banks in these states that efforts should be made to
obtain such legislative action as may be necessary to enable them to co
operate with the system, and that in those states where the legislatures
will not meet for a year or more, the banks might feel justified in ask
ing their governors to convene the legislature in special session.
DISCOUNT
RATES.
The discount rates of the Federal Reserve banks have an important
bearing upon the problems of government financing, and upon the condition
of the banks of the country as a whole.
Since the first adjustment of
discount rates, effective shortly after the organization of the Federal
•
«*<Txt4»£ue
Reserve banks, changes have been comparatively
iurfiujiifi 1niTI.
thjo m
^
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'fa
year 1917, money
was in abundant s j ^ l y , and discount rates were low.
The expectation ^
of some that the entry of the United States into the war would^cause
w
7
In rates"rnJ intemjot, was not realized. ^ Market rates
have, ■o&juMgffS, advanced substantially, fijk the process has be9n
gradual, and there were no changes
^ 4 ^ in the rates of Federal Reserve
banks until the flotation of the first Liberty loan was well under way.
Then, in order to facilitate the disposition of the ljbonds, the Beard
Indicated to the Federal Reserve banks that it would be desirable to es
tablish preferential rates in favor of notes secured by government
X-G 23
-1 8 obllgatiens.
With such paper, as with ordinary commercial paper, a
distinction was made between short maturities and these running f cr a
longer period.
Accordingly, notes of member banks running
net longer?
than fifteen days, and secured, by government obligations, were in general,
put upon a
3% basis, while 90 day obligations secured in the same way,
were given a rate of 3j^S, these rates being about one-half of one per cent
below the rates fixed f?r ordinary commercial paper of the same ma
turities.
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Because ef the generous cooperation of many banks throughout the
country in making advances to purchasers of government bonds at the same
rate of interest as that carried by the securities, these bond purchasers
have had the full advantagej ef the facilities afforded by Federal Re
serve banks in the rediscount of their notes.
A firmer tendency became
apparent during the summer at some of the financial centers, and the 4jJ
rate borne b y the second Liberty loan (one-half per cent more than the
sfif
• '
first) suggested the pragrftoty e‘
^ a'general advance of one-half of one
per cent in Federal Reserve discount rates.
As already stated, this
advance has been made, but the differential in favor of paper secured by
government obligations is still maintained.
The discount jchedules
have been consolidated and simplified by reducing the number of separate
classifications.
In connection with the revision of rates, it was deemed proper to
merge with the ordinary commercial rates the special rate which was made
in the summer of 1915 for paper secured b y warehouse receipts for staple
and readily marketable articles of a non-perishable character, known as
X-623
-IS-
commodity paper.
The continuance of this rate, which had been na.de
originally for the purpose of assisting the orderly maiketing of crops
'In order to avoid speculation and violent flsibctuafcions in prices, had
become unnecessary because of the great advance in the price jjf
agricultural products, and because/of price fdsisg^by the government.
Changed conditions made it desirable that these products should move
steadily to market, and it seemed best in the circumstances not to encourge
their holding
b y producers or middle men.
Complete tables showing
these changes in discount rates, are appended to this report, as Exhibit
EFFECT OF THE A M E M M E H T S OF JPME 21ST.
The amendments to the Federal Reserve Act which became law on June
21st last, were most opportune, as they added greatly to the ability of the
i
Federal Reserve system to assist in meeting the financial requirements of
the government, and to exercise '.ft-, controlling influence in the money
raarke^, just at a time when mush larger demands were being made upon it
because of war financing.
The amendments were substantially those
recommended by the Board in its last annual report, and they have opened
two new and distinct avenues of added strength, - by making possible greatly
increased holdings of gold in the Federal Reserve banks by permitting them
to issue Federal Reserve notes in exchange for gold, and by inviting the
full cooperation of state banks and trust companies, through more favorable
conditions of membership*
X-623
8 1 3t>
- 20-
The process of issuing notes has been simplified, and the discount
power of the banks has been augmented without impairing their actual
holdings of gold, by reason of their larger power to issue notes* While
it may be true that the character of the Federal Reserve note as contem
plated in the original act has been altered to' a certain extent, and that these
notes may remain outstanding for longer periods of time than had been first
intended, the flexible quality of the notes has not been impaired, nor dees
a large issue of notes of necessity mean expansion of currency.
The
character of the Federal Reserve note is now best determined by the amount
*f the gild reserve behind it.
lihen it is issued against geld, it merely
takes the place as a circulating medium ef the gold for which it was
exchanged.
As the geld reserve is reduced, commercial paper is deposited
to preserve the security; and the note takes on more of the quality which
it possessed under the original act, and when the rediscounts of the
Federal Reserve banks are reduced, the paper securing the note issues isreturned to the makers, and the gold reserves are correspondingly increased,
thereby giving outstanding'Federal Reserve notes more of the character of
geld certificates.
Amendments to the act have also changed the former reserve require-*
ments for member banks by fixing them at 13$, 1©$, and 7$ for central
reserve, reserve city, and country banks respectively, and have, at the
same time, strengthened the position ©f the Federal
Reserve banks them
selves by requiring the maintenance with them of the member bqnks* entire
reserves in collected funds, the amount^of vault cash to be carried by a
pun*
member bank being left to its discretion,as determined by actual needs.>
This change, togethe r with the expiration of the time limit for the com
'
X-623
.
'
'
'
.
-
21 -
plete transfer of reserves ab required by the original act, involved the
transfer of a lafge amount fif actual money to the Ffederal Reserve banks.
- The termination of the period when fugds dep!?sited with banks in reserve
cities might be counted as reserve for count-y banks., would hot;, for reasons
ejqplalhed in thb Board's last annual report; have made necessary any material
transfer of cash, btit the hew. fesefve requirements led to the shifting
of about $250,000,000 and a corresponding increase in the cash holdings of
Federal Reserve barks.
Another amendment included in the act of.June 21st, permits nonmember
banks to open for exchange or collection purposes, accounts with Federal
Reserve banks, thereby availing themselves of the facilities of the check
clearing and collection system.
; This change, at the outset,' increased
still further the cash holdings of the Federal Reserve banks, as several
large nontaember institutions opened accounts of this kind with Federal
Reserve banks.
Most of these institutions have, however, how become
members, so that the balances held by nonmember banks are comparatively
■ "
.
.
negligible, amounting bn December 31st to $______________ The^gain in
actual cash by Federal Reserve banks,
Jan
may be best demonstrated by a comparison of their condition on. June 1st
on the latter date the total was $1,421,382,000.
MEMBERSHIP OF STATE BARKS.
Second only in importance to the change in the reserve and note issue
provisions of the law, must be.reckoned the amendment to Section 9, under
^
■4
>/
j t - 623
31 s b
-2 2 -
which state banks and trust companies may become menbers of the Federal
Reserve system and retain, at the same time, their full charter and
statutory privileges.
The Board has already given such assurance in
its regulations relating to membership of state banks, but there had alu&ys
been a question in the minds of many as to the validity and permanence of
rhese regulations, in the absence of definite ' stUtutjUPy. authority.
The
action of Congress in c o n f i r m ! ^ what the Board had attempted to accomplish
by regulation has given state barking institutions firm assurance that
they may continue to carry on their business in substantially the same way
as they have heretofore done, without fear of future changes in methods
prescribed, and it has given them in addition the definite right to withrdraw from the system upon sir months’ notice, subject to conditions which
they, regard as reasonable.
The inducement to the state banks to become
members of the system thus held out by theamendment to Section 9 of the Act
\
was further strengthened by an opinion of the Attorney General of the
United States rendered on September 10th, in which h e expressed the vuew
that this amendment, in reserving to the state banks as members their full
statutory a nd charter powers, released them from the restrictions of
Section 8 of the Clayton Act, as to interlocking directors, to which they
had been previously held to be subject, in common with the national
banks*
Just at a time when the principal obstacles which had previously
stood in the way of the enlargement of the system b y state bank member
ship were thus overcome by statute and bjrjsig^legal Interpretation, an
additional incentive was given the 1
_
state banks and trust companies
to apply for membership in the system b y reason of the- rapid development
1
X -6 23
-2 3 -
of the government’s requirements in war financing, the patriotie desire
to assist in meeting and supplying these needs, and an appreciation of
the added safety to themselves resulting from menbershlp*
Compelling
reasons for membership in the system from a patriotic standpoint were
brought to the attention of all the banks in a strong statement by the
■
»
#
President on October 13th, to which reference has already been made*
Under all these influences many of the strongest state banks and trust
companies in the United States have filed their applications and have been
admitted to membership.
21st .
/
S 3
At the time of the passage of the Act on June
.state banks and trust .companies were members of the system*,
but on December 31st membership had been increased to
..
The
aggregate capital and surplus of the-member state banks and trust
companies was on that date 4
tot
£ik
<3*1tJlt 'erus*
and aggregate resources
« as compared with -jj>.^
_ on June 21st*
y
?ft
. and
It is estimated that the manber-
ship of the Federal Reserve system represents at this time about
l
of the total banking assets of the country.
. Thus it- is evident that
substantial progress has been made toward the complete unification of our
•
banking system.
.
A table showing the titles, dates of admission, capital
and surplus, and aggregate resources of state bank^ members appears in
the appendix.
.
CREDIT EXPANSION.
',
Great as is the admitted power of the Federal Reserve system,
equipped with its new resources and supported by the greater part of the
banking uiousui'iircj ol^the country, there are nevertheless, limits to its
m U f a *
v
C
f r f u
V W f M V j J e f r
ildtJLeit
X-623
?"s' <■.:.0/'O
-2 4 -
capacity.
Boring the past year there have been very naturally some ex
pressions of anxiety on the part of the financial community as to ex
pension of credits*
The Board has fully recognized the dangers of
overH[xpansion and has endeavored in every way not hurtful to war financing,
to. prevent such a condition*
The question as to how far expansion has
drifted toward the danger point, despite concentration and careful use
Of our banking resources, shorild be'carefully considered in the develop
ment of a sound policy for the future*
The .wllowing tabulation from
combined statements of the twelve Federal Reserve batiks shows the changes
|
in the reserve position of the Federal Reserve system during the year,
|
the figures being as of December 31, IS 16, April 1, 1917, July 1, August
1, November 1, and December 31, 1917, the four dates last named re-
\
fleeting
I
thechanges directly attributable to the flotation of the
■.
Liberty loans-
J
,
(Inserttable)
'
From.the foregoing it will be noted that the increase in the total
invested funds grouped as earning assets., during the months intervening
between the beginning and the close of the year 3.917 is about ^
Of this sum,
*}..
.
is represented by purchase or discount of '
commercial paper of the kinds made eligible under the tern®, of the
Federal Reserve Act, the remaining & ^ '5<
f £ O & a representing the dis-<
---- ------ — *
c o u n t e r p u r c h a s e p y the banks o f ^ a p e r secured by government obligations',
for the purpose of enabling buyers of bonds to. carry them during the
<
period necessary for the liquidation of their own obligations thus in-
|
*
cur red.
■
■
As will be seen from the table, the reduction in the reserve
percentages of the Federal Reserve banks against notes and deposits was
<tLh 'fentALtom*!
ut^d****^
3
fa
‘
,
I
|
*/,&, j
X-6 2 3
-2 5 -
most marked during the periods between April 1 to July 1 and between
August 1 to November 1*
During the month of July there was a notable
strengthening of the reserve position and this condicion is also observed
in a smaller degree between November 1 and Deoember 31*
Taking the
year as a whole, It will be no^ed that, although there has been a great
increase in the total asseis of the system, there has been a reduction of
gold and lawful money reserves ,from
at the beginning* to
at
the end of the year, but it should not be overlooked that the figures
fer December 31, 1917 represent the condition existing at a tlzae when
the process of distributing the second Liberty loan was still uncompleted*
The question whether the final distribution of the second Liberty loan
and the resulting financial adjustments *would bring about as favorable a
existed
situation as that which Bftrtoforaft at the closing of the first loan, is still
an open one, but indications are that there will be a larger amount of
bonds left in the hands of the banks and that a correspondingly greater
volume of rediscounts secured by government obligations may remain with
the Federal Reserve banks than was the case at the close of the first
Liberty lean.
This condition will no doubt b e gradually improved,
but the reduction in the volume ef d isdaunts will depend to a great
extent upon the requirements of the government and the time which will
elapse before the floating of a new bond issue becomes necessary.
The
position of the banks with respect to credit expansion is shown by the
condensed statement of the deposits, loans, discounts, and investments
•f the national banks as reported to the Comptroller of the Currency
on November 20th 1917, as compared with corresponding figurgs on
X -6 2 3
—26—
3 1 3*«
November 17, 1917-
Nov. 17. 1916
»
Deposits, net on which reserve
is computed
L
7. f
Nov. 20. 1917
oc&
^
Leans and discounts t
/Of*##?
United States bondsCjjJ
7*V-
Other stocks, bonds, and securi
■
(a)
including i r o a s m y certificates of indebtedness
'
'
t
It seems reasonable.to assume that while, during the year 1917/
there has been a
lessoning of the fluidity and immediate avail
ability of the country's banking resources, the change has really been
moderate when there Is considered the extent of the requirements which
_
i
have been made upon our banking system*
.
It is evident also, from an
analysis of the figures, that the decrease In reserve strength is liaj.iHy attributabl^jto commercial discounts but that it is directly the result of
government financing and its unavoidable but necessary demands upon our
J8£t355adL resources.
It is estimated that the advance in commodity
prices during the year 1917
( d shown by the statements of the Department
of Labor has been a b o u t __ __ which may be compared with a n estimated
advance of about
^ from August 1, 1914 to December 31, 193.6.
It is
clear, however, .that so far as the year 1917 is concerned, the rise in
prices must be attributed more to the relatively decreasing supply of
neoessaiy commodities and a greatly increased demand for them because c^f
the war, than to expansion in the volume ef currency or bank credits.
X-623
8 1?Vi
«2 7 ~
Rising prices are an unavoidable out growth of a state of affairs through*
out the world whereby a very large proporti&n cf artisans and laborers
have been transferred from productive occupations into* unproductive and
destructive wcrk, no longer performing their functions aa producers of
raw materials and of canuTaotured articles, but at the same time increas
ing their demands upon the remain !rjg stoc’-r. of the available supplies*
. It seems, therefore, unjust to ascribe the rise in prices entirely to
credit expansion or over-activity on the part of the banks *
Nor can
the increased volame cf the Federal. Reserve note Issues be regarded as
. inflationary, for not cnly are these notes net available as legal re-
.
serve, in the vaults of member banks, but the withdrawal of gold and
gold certificates from circulation which has resulted frein the efforts
of the Board has naturalJy created a vacuum which could cnly be filled
by additional issues of currency*
It may be asserted with confidence
#
that any danger of undue expansion with which the country cay be confronted
Is likely to manifest itself not in a n ever-Issue of circulating notes,
but rather in the increase in bank deposits resulting from loans —
creation of demand credits upon the books cf the banks.
the
The danger of
currency inflation, the evils of which have been fe'JLt in all previous
'
wars of long duration, has not, up to this time, been a menacing one in
the United States*
The fluid condition cf our banking resources and the
•
•
should
amount of free gold held b y Federal Reserve banks, are factors which ■■
be taken into account when the question of note issues is considered*
PRIVATE A N D CORPORATE FINANCE.
A feature ef the banking and financial situation which has been
X-623
3134
-28-
developing during the past year, and 1 9 whidh £he attention of the Beard
has been frequently directed, is the position of firms and private c o o
perations having short term obligations maturing in the near future, and
who have been accustomed to procure banking accommodations upon terms
which are now impossible*
The action of the President in taking over
control of the railroads and of their financing has apparently solved the
most serious problem with which the country had been confronted, but
there remains to be considered the requirements of various public utili
ties corporations, as well as. of some of the larger concerns which have
been accustomed to borrow heavily at banks for the purpose of carrying
laige stocks or of providing themselves with working capital*
The ef
fect of public borrowing on a very large scale has been a withdrawal
from the market of a large proportion of the funds available for short
term loans, or for private investment on long term*
While every effort
has been made to transfer government obligations speedily and effectively
1/
.
to private ownership, in order to withdraw them from the market, and to
prevent their accumulating in. the portfolios of the banks, it is neverthe
less true that during the process of distribution, large amounts are
necessarily carried by the banks for their account, as well as for their
customers*
The influence thus exerted upon the loan and investment market is
necessarily incidental to operations, of this kind*
The resulting situation
is more or less inconvenient for all who have been accustomed to resort
to banks for loans on collateral, but it is particularly distressing to the
29-
larger borrowers*
She situation has been further complicated by the com*
paratively large Volume of obligations of foreign governments which are
being carried by the banks against short texm notes, resulting in a di
minution of their percentage of liquid assets*
Sheee conditions are
reflected in the requests which the Board has for some time past received*
from many quarters that the rediscount privilege be extended to papeS of a
character and form which has not been regarded hitherto as eligible*
Perhaps the most urgent request of this kind has been that the Board per
mit Federal Reserve banks to discount notes or acceptances ^Llch have
been placed upon the market under an agreement between the borrowers and
their bankers, which provides for a considerable number of successive
renewals*
Had the Board permitted such paper to be rediscounted, Federal
Reserve banks would have been burdened with paper which the makers would
not expect to liquidate at maturity*
She discount of paper based upon an
agreement for repeated renewals is not consistent with the underlying
principles of the Federal Reserve Act, and the Board has had no hesitation
in stating that it does not regard paper subjedt to these agreements as a
desirable investment for Federal Reserve banks*
The Board's attitude
-
does not imply any doubt or question of the legitimacy of the purposes
for which the funds were desired, or of the Inherent soundness of the paper
itself, but rather that such transactions are not a kind which Federal
Reserve barks may properly facilitate, as they should never overlook their
obligation to preserve the liquid character of their, assets*
Another proposition of a somewhat similar aharacter which contemplated
the sale of acceptances designed to finance foreign purchases of goods in
X-623
31 «i
-3 0 -
the United States, but whidh had no connection with any qpieoific trans
action, was likewise brought to the attention of the Board during the
month of November:
and for reasons similar to those governing the case
of the renewal paper, to \rihlch reference has Just been made* the Board
has found itself unable to look upon such acceptances as eligible for
discount at Federal Reserve banks*
Another case involving the eligibility
of aooeptaneed secured by readily marketable commodities carried In ware
houses, was also taken under consideration, and the Board reached the
conclusion that acceptances of this kind might be eligible for discount
or purohase by Federal Reserve banks, provided the goods were stored in a
satisfactory manner, and unquestioned legai title of the property con
veyed by the warehouse receiptsfl
While this conclusion is in harmony
with the letter of the Federal Reserve Act, it seems, nevertheless, that
discounts of paper of this character should be scrutinized closely and
that they should not be permitted in very large volume.
The significance of .these prepositions is that there is pressure on
the part of commercial and manufacturing .enterprises to gain access to the
rediscount facilities of the Federal Reserve banks, and there Is evidently
a disposition to obtain the privilege upon the terms of technical points
of the law rather than its spirit*
The policy of the Board, however,
must invariably be to interpret and apply the law in accordance with its
«
manifest intent and underlying principles, with the end in view always
.
X-623
of safeguarding and naintainirg the liquid character of the assets of the
Federal Reserve hanks/
Thfts duty, always present, lias become inoperative
because of the fact that the entire reserves of the member bankb, so far
as based upon legal requirements, are how, by the act. of June 21, 1917,
carried on the books of the Federal Reserve banks*
Upon these banks#
and upon the Federal Reserve Board, therefore, falls the.responsibility
for the maintenance of a liquid condition, and upon them will justly fall
censure for any improper or imprudent use ef these reserve funds which
are held under a trusteeship of the highest character.
Therefore, in no circumstances, can the Beard admit thp eligibility
of paper by whomsoever made which, in its essential character, fails to
conform to sound banking principles and to the provisions of the Federal
Reserve Act.
In making this statement ef its attitude, however, the
Board does not Ignore or overlook the very serious problems which new
confront private enterprises of providing for their financial requirements.
From statistics which have been obtained by the Beard, it is evident that
there will mature during the year 1918, short term obligations aggregating
a large amount, and the Board has no infermatipn, up to this time, as to
arrangements for their liquidation or renewal.
Reference has already been made te the position of the savings banks
and other investment institutions In general*
Undoubtedly some effective
measure of relief is desirable and if made available will be of great
benefit net only to those requiring funds for comparatively long periods,
but would also improve indirectly the general banking situation.
The
X - 623
4
*
-3 2 -
reeulting problem Is 6ne which may perhaps come within the scope ef the
Board's advisory Relationship,. but It Is not ope which can be dealt with
by the Board in an administrative way*
FRam a purely advisory standpoint,
the Board would suggest the propriety of dealing with this situation
through direct governmental aid in some form approved by the Secretary
&f the Treasury*
The Board is, moreover, of the opinion that any plan
involving governmental aid is preferable to one which would be dependent
upon the use /?f the resources of the Federal Reserve banks*
Such an
expedient would be justified, If at all, only after all other means had
failed, and as a final and desperate erStmafe resort at a time of the most
urgent national, necessity*
It is particularly recommended also, that any
plan which may be adopted for the relief of those desiring long time
accommodations upon security cf a non-liquid character, should not be
made to depend for its success upon any access direct or indirect to the
resources of the Federal Reserve banks, or upon the pewer to i3sue currency
for the purpose of extending credits of this character*
It ought to
be possible to extend effective aid to those deserving it without
jeopardizing our entire financial structure*
CONSERVATION OF <GO£D.
She entry cf the countiy into the war was accompanied almost Immediately
by a cessation of the movement of gold to this country which had been
continuous since the early months of the year 1915, and in fact the move
ment had begin to slacken as early as November 1916*
Foreign governments
had found it convenient to liquidate their obligations due in other
countries by purchase of bilia in our own markets, and while the aggregate
X-623
-3 3 -
trade balance has continued In favor of this country, the balance is against
us In some cases.
During the second quarter of the year there developed
a strong tendency te withdraw gold by those neutrals whose supplies of raw
materials had been drawn upon by our own government and by other govern
ments associated with us in the war, and during the months of June, July,
and August, our net loss of gold amounted to about $100,000,000.
She
movement of gold having already been restricted Inall of the belligerent
uatfcftffig countries, demands for it In settling International accounts, in
adjusting exchange rates, and in strengthening reserves, were naturally
made In our own markets.
As the movement began to assume larger pro
portions, the President, on September 7th, issued an executive ordee,
attached hereto as Exhibit
. vesting In the Federal Reserve Beard,
with the approval of the Secretary &f the Treasury, tM- duty of passing
upon applications for shipment of coin, bullion, or currency.
Acting
In conjunction with a representative of the Treasury Department, the
Board issued regulations covering the licensing of such shipments, and
has since held dally sittings for ttye purpose of considering applications.
It became manifest almost immediately that applications for peimission to
export gold fell into a few distinct classifications. ■Applications for
permission to ship gold, to European neutral countries have, except for a
few days following the date of the cider, been invariably declined, for.
obvious reasons which it does not seem necessaiy to enumerate. A dif
ferent problem however, presented itself in the case of applications for
shipmaits of gold to the Orient, to Mexico, and to South American
countries which had been furnishing necessary raw materials.
It was
X-623
■34-
deemed Important to continue these trade relationships while reducing ship-i
ments of gold to a minimum*
For a short time large shipments were
permitted to go> to India, but as a result ef negotiations between the
Treasury Department and representatives cf the British government,
prevision has been made fpr rupee exchange resulting from shipments of
silver, to be allotted by Federal Reserve banks to Importers according to
their necessities.
In a few cases shipments of gold are being permitted
to South American, countries, although it is hoped that arrangements can
be concluded at an early date which Will ebviate the necessity of making
further shipments in any considerable volume.
Issued a decree on September
The Mexican government
27th which requires the payment of expert
and import duties in gold, the return in gold of the full value of geld
ores and bullion exported from Mexico, and the return in gold of 25$ of
the value of silver ores exported.
For a time it was necessary to per
mit some shipments of gold for payroll purposes, in mining operations
controlled by citizens of the United States, and where the products were
brought into this country.
More recently, however, it has been the
policy of the Board to decline to permit exportation of gold to Mexico
except for payment of duties, and for the return to Mexico of the value
of metallic brought into this country.
It has been ascertained that in
many instances United States currency can be used in Mexico for payroll
purposes, and that in cases where it cannot be used, Mexican gold can
usually be purchased.
The total amount of gold shipments to various
countries which have been authorized since September 7th appears as
Exhibit
.
Before the executive order was issued, considerable sums
X-623
i
4•.j
•35-
of gpld had bean earmarked
of the banks in New York City.
or held In trust for Canadian banks by some
The Board has deemed it proper to permit
the exportation of this earmarked gold, and has also entered into an
agreement with Canadian bankers whereby a total of $25,000,000 of gold
may be released up to July 1, 1918.
This action was deemed essential in
order to finance the movement of Canadian orcps which were needed for
export to European countries associated with us in the war, and its effect
upon sentiment wa3 so favorable that ne part of the amount has so far
4
' ’
been withdrawn, New York exchange in Canada having new advanced to a
considerable premium.
Foreign exchange rates have been abnormal throughout the year and in
many of the countries which send us necessary material, American bills are
at a heavy discount*
The Board is making a close study of our trade
relationships with neutral countries and has been fortunate in securing
the services of Mr. Frederick 1. Kent, of New York as its foreign exchange
adviser.
(Statement by Kent)
.
(Make reference here to the new order which the
President is expected to issue giving the Board
authority to issue licenses in foreign exchange
transactions.)
CLEARING AND COLLECTION.
The volume of checks handled by. the Federal Reserve batiks during the
year has increased enormously, although there has been no material addition
to the number of nonmember banks which remit at paS to Federal Reserve
banks.
Section 13 of the Act was amended last June as recommended by .
X—623.
-<36.
the Board, a* as to allow Federal Reserve banks to receive accounts for
collection and exchange purposes from such nonmember banks and trust
companies as may agree to remit to Federal Reserve banks at par for checks
«
drawn upon themselves and Which will, in addition, maintain balances with
the Federal Reserve bank sufficient to offset the items in transit held
for their account by the Federal Reserve bank.
Comparatively few nen~
member banks have, however, availed themselves of this privilege, and the
Federal Reserve banks are still unable to collect checks drawn on many
nonmember banks except at heavy expense.
An- effort was made, on behalf
of some of the bank3 to amend the Act by providing for a standard! zed
exchange charge not to exceed one-tenth, of one per cent, to be made by
member banks against Federal Reserve banks for checks sent for collection.
It was not successful, and the Act as finally amended provides that a
member or nonmember balk may make reasonable charges, to be determined
and regulated by the Federal Reserve Board, but in no case to exceed ten
cents per hundred dollars or fraction thereof, based on the total of
checks and drafts presented at any one time, for collection or payment of
checks and drafts and remission therefor by exchange or otherwise;
such charges shall be made against the Federal Reserve banks.
but no
The
Attorney General has been requested to give his opinion as to whether
this proviso applies to nonmember banks.
kptx An affirmative opinion
will make possible the establishment of an universal par clearing system,
but if, on the contrary, it should be held that It applies to member
banks only, the further development of the collection' system will neces
sarily be slow.
• It seems unfair that small member banks should be
obliged to. remit at par while their nonmember bank competitors can continue
X-623
3143
-3 7 -
to make their usual charges«
The Board feels $hat all banking institutions
should be obliged to remit at par or else that they should all be permitted
to make reasonable charges*
In order to complete as far as possible the clearing and collection
system, and to rendeS all possible service to the banks and to their
customers, the Board authorised the Federal Reserve banks on July 1st, to
receive for collection for account of member banks natu.ri.ng notes and
bills, and miscellaneous drafts, subject to a moderate collection charge*
Consequently, mamba? banks which were obliged to rely upon other banks
for services of this kind, can now depend upon the Federal Reserve banks
for such service.
There has also been put int* operation by all Federal
Reserve banks a system of transfer drafts, which enables any member bank
to have its drafitj drawn upon tlie Federal Reserve bank cf its i m dis
trict, paid immediately, without time allowance or deduction at any other
Federal Reserve bank, adjustments between the respective Federal Reserve
banks being made through the gold settlemait fund-
In this way, any
member bank has, under the proper and necessazy restrictions provided, the
same exchange facilities it would have by carrying accounts in each of the
twelve Federal reserve cities*
GOID SETTLEMENT FUNLv
The operation of this fund has been described, in former reports of
the Board, and no extended commaiits upon it seem necessary at ■this time.
Under the act as amended additional safeguards have been thrown around
the fund by permitting the Treasurer of the United States to carry a special
account upon his bocks to the credit of the Federal Reserve Board as agent
-3 8 -
for the respective Federal Reserve banks and Federal-Reserve agents*
Settlements are now made by warrant, signed by officials of the Board^t and
the pzactlce of Issuing gold order certificates in denominations of $10,GOO,
representing gold deposited with the Treasurer by federal Reserve banks,
and which were held in the custody of the Federal Reserve Board pending
transfers between the banks and the Treasury, has been discontinued*
The operation of this fund, which Is in effect a clearing house
between the twelve Federal Reserve banks, has been particularly useful
during the past year by reason of the continuous transfers for very large
amounts which have grown out of the sale of government bonds and Treasury
certificates and the redistribution and disbursement of the funds real
ized.
Without such an arrangement, our own operations would have been
accompanied with great expense and much Inconvenience, but by its aid,
transfers have been instantaneous and automatic, and have been made with*
out the inconvenience and expense which would have been unavoidable- had
physical transfers or shipments of monsy been necessary*
BRANCHS OF FEDERAL RSERVE BANKS.
During the year, branches have been established at Omaha, by the
Federal Reserve Bank of Kansas City, at Louisville by the Federal Reserve
Bank of St* Louis, and at Portland, Oregon, Seattle and Spokane, Washing
ton, by the Federal Reserve Bank of San Francisco, and are in satisfactory
operation*
The Board has, in addi tlen, authorized the establidiment of
branches at Pittsburgh, and Cincinnati by the Federal Reserve Bank of
Cleveland; at Detroit by the Federal Reserve Bank of Chicago; at Baltimore
by the Federal Reserve Bank of Richmond, and at Denver by the Federal
Reserve batik ef Kansas City®
It Is expected that all ef tJiese branches
will begin business during the months of January or February.
Questions relating to the establishment and operation of branch
banks' have been simplified by the amendment to Section 3 of the Federal
Reserve Act.
As originally enacted, this section provided that each
Federal Reserve bank “shall establish branch banks" to be "operated by a
beard of directors raider rulea and regulations approved by the Federal
Reserve Beard," and provided also that there be seven directors and that
should possess the same qualifications as directors of Federal Re
serve banks*
The Section as now amended provides that the Federal
Reserve Board may pernlt or require any Federal Reserve bank to establish
branches within Its district, and that such branches, subject to such
rules and regulations as the Federal Reserve Board may prescribe, shall
be operated under the supervision of a board of directors to consist of not
more than seven or less than three directors, of whom a majority shall
ef one shall be appointed by the Federal Reserve bank of the district, and
the remaining directors by the Federal Reserve Board*
.
policy
The '
of the Board in the establishment of these new branches,
has been to recognise the unity arid paramount responsibility of the Fed
eral. Reserve bank, while extending to the banks in the territoiy served
by the branch full facilities*
By avoiding duplications in bookkeeping,
and by a consolidated control of accounts at the Federal Reserve batik,
it is believed that branches can be operated at a comparatively small
expense*
The branch of the Federal Reserve Bank of Atlanta, at New Orleans,
date
of the Board's last annual report, was the only one in
which?! at the
X-623
31^
-4 0 -
operation, has, during the past year, again demonstrated its usefulness
and has been , or soon will be, supplemented by the tei just referred to*
INTERLOCKING DIRECTORATES.
In its report for the year 1916, the Board gave full details of its
work in the application of the previsions of Section 8 of the Clayton Lot
and the Kern amendment thereto*
During the year 1917,
applications
^ were received for permission to serve as joint directors, and of this
J
$ number
.
'
have been granted, and
■
■
have been refused.
■
FIDUCIARY POWERS.
On June 11, 1917, the Supreme Court of the United States handed
down its decision in the case of Bank vs Fellows? appealed from the
'
Supreme court of Michigan, which was referred to in the Board's last
annual report to Congress*
The lswer court was reversed, and the court
sustained the constitutionality of Section 11 (k| of the Federal Reserve
Act which authorizes the Federal Reserve Board "to grant by special
permit to national banks applying therefor when not in contravention of
state or local law the right to act as trustee, executor, administrator,
and registrar of stocks and bonds under such rules and regulations as the
said Board may prescribe."
The decision in this case is of far-reaching
and vital importance to the Federal Reserve system in that it not only
sustains the right of Congress to vest in national banks the powers
enumerated in Section 11 (kb but
recognizes the right of Congress
to grant to such banks any and all powers that are necessary to enable them
to meet the competition of corporations organized under state law.
• * First National Bank of Bay City, v Grant Fellows,
Attorney General, and others.
X-623
Prior to this decision the Federal Reserve Bpard had granted permits
•
•
*
tfi applicant banks except in those cases where the laws of the s.tate in which
the bank was located expfeAsly or by necessary Implication prohibited such
banks from exercising these powers*
The language of the court, in the
decision handed down on June lith; was apparently susceptible of the inter
pretation that these permits might be granted in any case in which the state
laws permitted competing banks to exercise such powers.
In view of its
importance the matter was referred to the Attorney General who reached the
conclusion that while Congress is fully.empowered to authorize the Board to
grant permits under such circumstances, the Act as it now stands does not
vest this authority in the Board*
There are seme states, which authorize
banks or trust companies created and organized under their own laws to exercise
such powers but which expressly prohibit any other corpoiations from doing
so.
In order to coordinate the powers of national with state banks it is
recommended that section 11 (k),should be amended so as to permit the granting
of these powers to national banks in any case in which the competing coiporation
organized under state laws are permitted t® exercise such powers.
By direction of the Board its counsel, with the consent of the Court,
took part in the proceedings both in the Supreme Court, of Michigan and on
appeal before the Supreme Court of the United States.
The Board has granted
during the year 1917, 112 permits for the exercise of fiduciary powers,
making a total to date of 481.
.
mHNIlKS AND EXPENSES.
The rediscount demands which have been made upon the Federal Reserve
banks during the past year, and the greater employment of their funds, have
been reflected in very greatly increased earnings.
The combined net earnings
‘
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>42—
of the twelve banks for the year, were at the rata ef _____ % on the ag- //t/ / /
gregate capital, and the total net earnings f©r the entire year were .
&--
•
Section 7 of the aot provides that "afterall necessary expenses of a
Federal Reserve bank have been paid ef provided for, the stockholders shall
be entitled to receive an annual dividend tf si& per centum on the paid-in
capital stock, which dividend shall be cumulative*
After the aforesaid
dividend claims have been fully met, all the net earnings shall be paid
to the United States as a franchisee tax, except that one-half of such net
earnings shall be paid into a surplus fund until it shall amount to forty
per centum of the paid-in capital stock of such bank*11
The Board construes the foregoing as meaning that no contingent funds
can be set up against future expenditures Or As a reserve for unforeseen
losses, but that the surplus fund which, under the law, can accumulate until
it readies forty per centum of the capital of the Federal Reserve bank, is
intended to take care of all such contingencies.
The Board has, however,
advised the hanks that provision for apparent or temporary depreciation in
securities should be made, before any sum is transferred to suiplus account
or any payment is made to the United States government.
It has also per- '
mitted banks to charge off furniture and fixture accounts in full, and a
reasonable proportion of the cost of vaults.
It has authorized the writ
ing off of the amounts actually paid for the printing of Federal Reserve
notes, whether the notes have been put in circulation by the bank or held
by the Federal Reserve agent.
It has also authorized those- banks which
own their premises to write off five per cent of the total cost per annum
as a depreciation allowance.
The gross and net earnings of all the banks
for the calendar year 1917, and the dividends declared by them from the date
their organization
Digitizedof
for FRASER
to the end of 1917, are shown in the following tables
-4 3 -
(Insert table — See page 13 annual report 1916)
_
lr
'
i
.
It will be seen frpm tjje foregoing that the Federal Reserve Bank of
San Francisc^hasj^I^D^^^unulated dividends up to December- 31y 1916,
that five others - the Federal Reserve banks of Philadelphia,
Kansas City, Cleveland, and Dallas* have paid their accumulated dividends
up°to June 30, 191?, and that six banks’ those of Boston* New York,
Richmond, Atlanta, Chicago, and Minneapolis* have paid all accumulated
dividends to the end of 1917..
These batiks;* after charging off their ex
penses and making the depreciation allowances, which have been previously
described, have' set aside surplus funds and have paid equal amounts to
the government as a franchise tax, making the total return to the govern
■‘
ment £ A
’
'
'
*
'
'
f
i
The Board wishes to repeat the statements made in previous reports
that the bahkA are'not operated piin&rlly tat profit, but in meeting the
demands Which are exsected to be made upon them during the coming year
their earnings will undoubtedly continue to be large.
It is exp.acted
titeat all accumulated dividends will be paid during the year, and that the
excess to be paid to the government as a franchise tax, at the beginning
sf 1919, will be very much greater than the payment which has just been
made*
'
administrative policies .
Dyring the period sf organization and ef development which extenied
tver the first two years of. the operation of the system, the Board deemed
it advantageous to> obtain frequent suggestions from the officials ef the
Federal Reserve banks, and to have them confer with each other in order that
£-623
3150
-44-*
definite understandings might be reached, and uniform methods of operation
determined upon*
Many of the problems which had to be worked out were
entirely new* and because of w5.de2y different conditions in the various
districts, frequent consultations seemed necessary to ensure a better
knowledge of administrative details*
Thus frequent conferences with the
Federal Reserve agents and governors of the banks9 were deemed advisable,
In order to secure more speedily an effective organization.
The banks had,
however, by the end of the year 1916, become well established, and having
had two years of actual experience to guide them in the future conduct of
their business, these frequent conferences gave become no longer necessary«
The Federal Advisory Council, composed of twelve members, chosen by
and representative of the Federal Reserve hanks, has held, in conformity
with the requirements of Section 4 of the Act, four meetings during the
year,-thus, giving the Board at frequent intervals the benefit of its views
as to the trend of the money na.rket, and the proper adjustment of discount
rates.
Members of the Council have reported also upon the general
financial, agricultural, commercial and industrial conditions in their
respective districts.
There have been no meetings of the Federal Reserve agenua during
the year, but the Board, in anticipation of the first
Liberty bond campaign,
held a meeting with the governors of the Federal Reserve banks in April,
and requested them to confer with it, in Washington, again in November.
The activities of the year have been so great as to require the constant
presence of the executive officers at their banks.
The Board now exercises
broader administrative functions, and makes final decisions on all questions
X-623
3151
-4 5 *
of policy calling far prompt aoticn, without awaiting an ©xjportunity *9T
consultation and development of opinion on matters of detail, as has been
customary in the beginning*
The'functions of the Board as the co-oidinat- ■
ing body for all the banks, and as the directors of the Federal Reserve
are now
system,//
.
■well defined, and the line of distinction between the
local management of the banks and their operation as a system, has become
more clearly marked.
The Board has, on two occasions during the year,
exercised its power of requiring Federal Reserve banks to mefce rediscounts
for other Federal Reserve banks without submitting the questicn to their
directors tfor determination.
This has been dene for the Sake of greater
jji■■■jmrtfrgrev promptness and efficiency in securing the adjustments desired,
.
and not because there was any doubt about favorable action being taken
upon the suggestions of the Board, as the banks have all responded promptly
in cases where the Board has made its wishes known*
RESERVE
'
CITIES.
(The Federal Reserve Act confers authority upon the Federal Reserve
'
Board to add to the number of cities classified as reserve and central reserve
citids, or to reclassify existing reserve and central reserve cities or to
terminate their designation as such.
As the reserves of member banks
are new carried exclusively »*ith the Federal Reserve banks, the designation
Of any city as a reserve city relates An only to the percentage of reserve
■-■rhich must be carried by the member banks located therein.
The Board has
retained the old classification of central reserve and reserve cities, and
has also designated as reserve cities, making the banks therein subject to
-4 6 -
Xhe cities so designated all have a population in excess of 100y000 and are
banking centers.
Vithout this classification, the banks in those cities
would have continued to carry the reserve prescribed for country banks **
7%, and the Board deemed it equitable to bring their reserves up to the
requirements of other cities of their class*
The. three central reserve
cities, under the old national banking laws - New York, Chicago, and St.
Louis, have been continued in that classification, and the member banks
of those cities are required to carry the, maximum reserve of 13$.
Philadelphia and Boston, although important banking centers, and each
having a greater .population than the city of St. Louis, continue to be
classified .as reserve citites, and reserves of 10$ only are required of the
banks located.therein.
it is difficult to nake an equitable and uniform
adjustment of reserves under the. present law, and the Board is making a
careful study of the subject, with a view of recommending to Congress at a
lat©9 date a change in the law which would provide for a differential in
xssBZsauDKJt reserves to be carried in all towns and cities a^like upon certain
classes of deposits, with a minimum for time deposits, a maximum Stet'harik
deposits, and an intermSdiate figure, to be determined upon, for individual
or commercial deposits subject to check.
This is a matter however, which
will require careful study and analysis, and the Board is not prepared
as yet to make a recommendation for any change in the reserve requirements.
SUGGESTIONS FOR AMENDMENTSi
-
xhe Board seed no occasion at this time for any sweeping changes in the
■
Act.
.
/
-
,
■
It would suggest* however, the following for the consideration of
Congress:
(1)
:
An amendment of Section 4 relating to the election of directors*
The law provides that the member banks sisalX be classified into three general groups or divisions, each group to contain as nearly as may be
one-*third of the aggregate number of member banks of the district, and to
consist as nearly as possible of banks of small capitalization, and that
each member bank shall elect by ballot a district reserve elector and shall
certify his name to the chairman of the board of directors of the Federal
Reserve bank of the district, who shall make lists of the district reserve
electors thus named by banks in the three groups and shall transmit one list
to. each elector in the group.
Each member bank is permitted to nominate to
the chairman one candidate for a director of Class A and one candidate for
director of Class B.
Candidates so nominated are listed by the chairnan and
a copy of the list is furnished by him to each electcr, who, within fifteen
days after the receipt of the list certifies to the chairman a second or
other choice of directors of Class A and Class B respectively, upon a
preferential ballot.
*
Any candidate having a majority of all votes oast in
the column of the first choice is declared elected and if no candidate have
a majority of all the first choice votes, then there is added the votes cast
by the electors for such candidates in the second choice column.
Any candidate
having a majority of the electors1 vote by adding together the first and
second choices, is declared elected.
Should no candidate have a majority
X-623
3154
-4 8 i
In this way, then the third ohoioe voted are added*
This System, which is
designed tfc secure ft representative beard of directors* is complicated and has
resulted in many cased in the choice bi directors by a very small minority Of
the banks.
A majority bf the baziks has zieve$ since 1914 chosen a district
elector and there seems tb be no reason why the directors of the banks should
not be peimitted to authorise the President or Cashier Of the bank to bast
the vote of the bank.
The heard has ruled that electors ence chosen may
continue to serve until their successors are elected, but since the first
year the baziks have net as a rule participated fully in these elections,
■
*
*
■
In the election held in December 1917 by the various greups in the respective
districts, In nearly every case less than -one-half of the banks participated.
In the New York district 84 votes were cast out of a total of 224;
Richmond district 72 out of 172;
In the Atlanta district 66 out of 140;
the Chicago district 86 out of 360;
162;
in
in the St, Louis district 35 out ef
in the Minneapolis district 45 out of 283;
15 cut of 201;
In the
in the Dallas district
in the San Francisco district 71 out of 178;
and in one
instance the successful candidate was chosen by 15 votes out of a total of
201,' and in another by 28 votes out of 162,
.
The Board would suggest that this section be changed so as to simplify
elections by pexmlttizig each bazik through its President or Cashier to cast ohe
vote for director regardless of its capitalization, and by providing that ene
additional vote may be cast by a bazik for each sj2LQ» 0 0 9 ©f stock held by it
in the Federal Reserve bazik, the total number ef vjftes cast by any bazik not to
exceed ten*
It is also suggested that the baziks be permitted to elect three
Class B directors, but ozily two Class A directors, and that one Class A director
X-623
be appointed by the Board In addition to the three Class C directors now
appointed by it*
The member banks would still elect a majority of the
Beard, five against four appointed by the Federal Reserve Board, which in
being permitted to appoint the third Class A director, would have an
’
-f
opportunity of rectifying any inequalities which might result from the election
by the member banks*
(2)
.
An amendment to Seotlcn 9 to permit state banks already in
operation, having an aggregate capital and surplus of net less than $109,©00
to become members of the Federal Reserve system at the discretion of *the
Federal Reserve Board*
This section as it is now written requires that
ns applying bank should be admitted to membership in a Federal Reserve bank
unless it possesses a paid-up and unimpaired capital sufficient tc entitle
it to become a national banking association
in the place where it is situated
under the provisions of the national bank Act.
The attention of the Board has been directed, in many cases, to state
banks otherwise, eligible fGr membership, which cannot apply because of this
restriction, and which do net feel warranted in asking their stockholders to
increase their capital to the requisite amount.
There are several national
.banks located in towns or cities whose population has been greatly increased
by annexations or otherwise, which are how operating with a smaller capital
than would be required of new banks in these cities, under charters granted
before this increase in population took place, and the Board does not believe
that any injustice would be done by modifying this section in the manner
suggested so as to be applicableenly to existing banks.
X-625
- 50(3)
’
3156
An amendment to Sect.Ion 9 to authorize mutual savings banks
having no capital stack, te becenJe associate members of the Federal Reserve
system under certain prescribed conditions*
This was suggested by the
•
Board in its annual report for the year 1916, and its consideration at this
tinte Seems mere important than was the case a year ago, as many savings
.
banks hbw have eligible paper 5n the form ef notes secured by obligations Of
the United States.
The principal beneficiaries would be the mutual savings
banks of the. Eastern and New England states which cannot become members of
the Federal Reserve system under the present law because of the lack of
any provision enabling them to subscribe to capital stock in a Federal
Reserve bank, as they have no capitalization of their own upon which a
percentage could be based.
The accommodation proposed limits mutual
savings banks strictly to the discount of customers1 notes secured by notes
or bonds of the United States maturing within thirty days, or of their own
i
promissory notes secured in like manner running not longer than fifteen days.
(4)
An amendment of Section 16 which now permits Federal Reserve
notes to be issued in denominations ef $5, $10, $20, $50, and $100 only,
so as to permit their issue in the larger denominations of $500, $1,003,
$5,000, and $10,000.
It is thought that such an amendment would tend to
increase the geld holdings of the Federal Reserve banks, particularly
those in the larger financial centers.
The Federal Reserve banks receive
gold at the present time chiefly from two sources*
by registered mail or
express from national or state banks, and over the counter in cases where
now currency ia convenient denominations Is required for payrolls or for
other purposes.
.
All avenues for loss of gold are now under control except
X-623
fttfi
-*51-
direct withdrawals over the counter, and an analysis of counter transactions
at some of the larger Federal Reserve banks discloses the fact that frvm
$100,000 te $1,£00,000 of gold certificates are paid out every business day
mainly because many member banks prefer te keep as part of their vault msney
notes of large denominations which can now be furnished only in the form
of
gold certificates.
(5)
An amendment of Section 22.
This is a penal section, not al
together definite in its terms, and the Board is constantly receiving requests
for a proper construction of it.
It has, however, uniformly adhered to
the view, that a section of this character can be construed duly by the
courts, and has declined in all cases to express any opinion as to the
liability vdiich might be incurred by any bank which acted upon an incorrect
interpretation.
As amended on June 21st this section permits transactions
relating to the discount of notes, drafts, or bills cf exchange by a director
with his cwn bank, upon the affirmative vote or written consent of at least
a majority of the board of directors ef the bank;
but there are other trans
actions such as the purchase by directors of goods or property taken by the
bank for debt, vhich might well be .permitted under the same conditions. It is
not inconceivable that there may be occasions where a bank can best save
*
Itself from loss by being permitted to have a transaction ef this kind with
one of its own directors.
(6)
An amendment to Section 25 to provide for the Federal incorperation
of banking corporations whose stock is owned by national banks which operate
under;the contrwl of the Federal Reserve banks aai which are engaged'solely
in international and foreign banking.
The present law permits any national
X-623
v. »
'
~5&«
• 1
.
tank to Invest an amount not exceeding In the aggregate ten per centum of its
paid In capital stock and surplus In the stock of one or mere hanks or cor
porations chartered, or incorporated under the laws of the United States or
any state thereof * and principally engaged in International or foreign bank
ing, or banking In a dependency or insular possession of the United States*
This language appears to indicate an intention by Congress- to permit in
corporation under the laws of the United State&j and Several national banks
have become stockholders in banks which have been organized under state laws
for the purpose of carrying en a foreign banking business in accordance with
the terms of this section.
The arguments in favor ef Federal incorporation
are:
(1)
The time will probably come when the conflict of the dual
control exercised by the Federal Reserve Board and by the banking department
of a state may be a matter of embarrassment or unduly restrict the activities
ef the banking corporation*
(2)
Such a banking corporation* being essentially a national enter
prise, whose stock ownership by national banks was authorized by an act of
*
Congress, is subjected to unfavorable comment by foreigners, in that it is
incorporated under local rather than national laws*
(7)
An amendment to Sections 5208 and 5209 of the Revised Statutes.
These are penal sections relating to the overcertification of checks, to
embezzlement, abstraction or wilful misapplication of moneys, funds, or credits
of national banks by officers, directors, agents, or employes of national
banks, and to false entries in books, reports, or statements of national
banks with intent to injure or defraud en the part of any officer, director,
' agent er employe of a national bank.
It is suggested that these sections be
3159
X-623
-5 3 -
,
amended so as to apply to similar acts committed by officers, directors, agents,
or employes of Federal Reserve banks and member banks.
.
ORGANISATION, STAFF* AND EXPENDITURES,
There'have been no changes In the organization ot the Board during the
past year.
The growth cf the system and the expansion of the work of the
-
4
Board have required some additions to its clerical and examining force.
There
have been some minor changes due mainly to the fact that several of the
Board1s staff have engaged in military service, but the Board has thus far
been able to fill their places satisfactorily.
staff of the Board*
There are now
- on the
The total cost of conducting its work during the year
1917, including
printing of the Bulletin and salaries of members,
✓
'
was $______________ , which was defrayed by assessments levied upon the
Federal Reserve banks amounting to .foranraoc
_____ % of their capital*
The
volume of clearings through the g$ld settlement fund has greatly increased,
the total during the year having amounted to 4________________ as compared
with £
___ during 1916.
The cost of operating the gold
settlement fund for the year 1917 was $___________ jsis compared with £_______
in 1916, the net cost being_______ cents per ^1,000 as against ________ cents
the previous year.
The net balances, representing the change of ownership
between the Federal- Reserve banks of gold held in the fund were 4 _____________ ,
which represents the amount of currency or coin which would, without the
facilities of the gold settlement fund, have been transported between the banks.
Further details relating to the operation >#f the Federal Reserve banks and of
the system, will appear as exhibits in the appendix of this report, as will
the annual reports of the Federal Reserve agents.
WILLIAM G. HcADOO
SECRETARY OF TMI TREASURY
CHAIRMAN
JOHN SHELTON WILLIAHS
COHPTROLLRR OF THR Cl
ICT
W. P. S. HARDING, GOVRRHOR
PAUL I . WARBURG, VlCR GOVRRHOR
PREDRRIC A. DILANO
ADOLPH C. HILLRR
CHARLES S. HAHUH
FEDERAL RESERVE BOARD
WASHINGTON
H. PARKER WILLIS, SECRETARY
SHERHAN P. ALLEN. ASST. SECRETARY
ADDRESS RKPLY TO
FBDKRAL RBSKRVK WOARO
December 31, 1917
Dear Sir:
.
. It is especially desirable that your member banks
take a more active interest in the United States Treasury,
certificates of indebtedness maturing June 25, which are now
being offered. It was not expected that sales of these certif
icates could be made in large volume during the closing days of
December, but there ought to be a much greater demand for them
during the first half of January. The Board has no doubt that
you are doing all in your power to induce, good subscriptions in
your district, and deems it unnecessary to point out further the
importance of anticipating tax payments in order that congestion
may be avoided in June. It would be well for the banks to bear
in mind that upon the extent to which these certificates are
taken will depend the date of new Treasury financing.
This letter is, of course, not for publication, and is
intended for the attention only of yourself and of your directors.
Very truly yours
Governor
@FedFRASER