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X-1530
FEDERAL RESERVE BOaRD ANNOUNCEI,IEN'I· b'OR THE
\VEEK ENDING J~NU~Y 2, 1920.
ADl•UTTED TO THE FEDERAL RESERVE
~
DISTRICT NO. 2
Ridgefield xark Trust Co.,
Ridgefield P-ark, N. J.
DISTRICT NO. 4
Farmers Bank & Trust Co.,
Georgeto"'Vn, Ky.
. City Deposit Bank,
.l?ittsburgh, Iennc..
!Otter Title & Trust Co.,
Pittsburgh, Ienna.
DISTRICT NO. 6
Bank of Qave Springs.
Cave Springs, G~.
DISTRICT NO. 12
Standard Bank of Orange County,
~ullerton, Calif.
Bank of Duchesne,
Duoheene, Utah ..
The Farmers Bank,
Ellensburg. Wash.
S~STEM:
Capital
Surplus
Total Resources
!irlOO,OOO
w25,0oo
wl,579,494
105,000
60,000
1,006,468
200,00iJ
800,000
11,130,344
500,000
75,000
4,620,382
25,000
25,000
313,576
50,000
5,000
67,042
25,000
2,500
225,941
50,000
50,000
1,684,726
AU'l'HORIZED TO ACCEPI' Dlili.FTS AND Bll.J,S O.E'
EXCHANGE UP TO 100 J:ER CENT 01<' CAPITAL
AND SURPLUS:
National Bank of Commerce, Providence, R. I.
Bank of America, Nffiv York City.
2
X-1530
FEDERAL RESERVE BOaRD AN1'WUNCID1ENT FOR THE
WEEK ENDING JANUaRY 9, 1920 •
.ADII!TTED TO THE FEDERAL REBERVE SYSTEM:
DIS'l'RICT NO. 2
Capitb.l
Bank of Bogota,
Bogota, N. J.
:W50 ,000
DISTRICT NO. 7
Woodlawn Trust & Savings Br..nk,
Chicago, Ill.
250,000
Spring Lake State B~nk,
Spring La.ke , I.lich.
25,000
DISTRICT NO. 12
Los Nietos V~lley B~nk,
Downey, Calif.
50,000
Kingsburg Bank,
75,000
Kingsburg, Calif.
SUrplus
'l'otal Resources
wlO,OOO
!jpl22,959
100,000
5,111 '7Z8
3,500
296,979
15,000
441,937
~.ooo
1,044,026
3
X-1530
FEDERA:t RESERVE BOaRD aNNOUNCE1.1ENT FOR THE
WEEK ENDING JANUARY 16, 1920 •
.t'l.D!il!TTED TO THE FEDEBAL RESERVE SYSTEM:
. DlSTRICT NO, 6
Capital
!.ionroe County Bank,
Forsyth. Ga.
;jp25,000
DISTRICT NO. 7
Eeoples State Savings Bank,
· · Britton, Mich.
25~000
DISTRICT NO. 8
Jei'terson-G:ravoi.s B:1nk of
200,000
St. Louis, !:lo.
South Side Trust Co.,
200,000
St •. Louis, ~~1o.
DISTRICT NO. ll
Bridgeport State Bank,
25,000
Bridgeport, 'lexas.
DISTRICT NO. 12
Bcmk & Trust Company ~f Central
Cal~fornia, Fresno, Calif.
~0,000
Dallas City Bank .
50 ,ooo
D&.llas , Ore go~.
surplus
Total Resources
~25,000
ijy415, 537
5,000
378 '369
70,000
1,719,057
50,000
2,235,934
1,000
158,444
100.000
4 ., 6 9'1 ' 832
10t0()0
702,595
CONSOLID.t~.TlON:
. · ·?~he First Commercial Ba.nk.B.nd. the fOnti.s.c Savings Bank, member b[.nks
0 ~ Pontiac, lhchigc.:.n, have consolidnted under the title "Pontiac Cornmerc~al & Savings Bank. 11
4
X-1530
FEDERAL RESERVE BO.ARD ANNOUNCEMENT FO::t
WEEK ENDING J.AUU.ARY 23 I 1920.
TID~
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
DISTRICT NO. 3
Ct..:pi tal
Surplus
'l'ota~.
Resources
Count~es
Trust Co.)
Allentown,Pa .
DlS'l'RICT NO. 8
South Siq.e Tn.'s t; Co .. ,
St,. Louis, Mo.
DISTRICT NO. l l
First G~ranty State B~k,
Clifton, Texos
DISTRICT NO. l2
Imperial Valley Bank,
:Brawley, Calif.
Bank of Santa N.aria,
Santa Maria, Calif.
Athena State B~k,
.Athena,· Oregon
Puyallup State Bank,
Puyallv.p, Wash.
Penn
$300,000
$f(),ooo
$1,996,924
200,000
5(),000
2,235,934
4o,ooo
15:000
410,623
77,000
31~, 665
977, 'j'Ol
4oo,ooo
300,000
5,463,027
25,000
5,000
30,000
50,000
823,539
WITBDR.AW.AL:
The Peru Trust Company, Peru, Indiana, hns wi thdravvn from
membership.
.AUrcHO:':i.IZED TO ACCEPT DRA:h"TS .AND BII,LS OF
EXCHANGE UP TO 10J PER CE:t-V.C C'F C.APIT.AJ~
A.."''D SURPLUS:
First Nationa). Bank, El Paso, Toxas ..
5
x...l5:30
FEDERAL RESERVE BOaRD ANNOUNCEMENT FOR THE
WEEK ENDING JANUARY 30, 1920.
ADMITTED TO THE FEDERAL RESEii.VE SYSTEM:
DISTRICT No. 6
Capital
Bank ct Ocoee,
Ocoee, Fla.
~25,000
DlSTRlC'l' No. 9
1~rchants & Miners State
Bank, Iron"rJOod, Mich.·
·100 ,ooo
DISTRICT No. ll
First State Bank
McGregor, Tex.
50,000
Citizens State Bank,
Valley Mills
30,000
DISTRICT No. 12
Garden City Bank & Trust Co.,
San Jose, Calif. ,
500,000
· Burley State Bank,
Burley, Idaho.
50,000
First Bank of Reedsport,
Reedsport, Oregon.
25,000
Surplus
Tota1 Resources
~2,500
~27,500
10,000
609,071
1,000
'.28,238
2·,ooo
175,947
595,000
9.571,187
10,000
910,468
1,.250
160,323
6
X-15~
.B'EDER.b.1 RESERVE BO.tiliD .aNNOUNCEI.iENT FOR THE
'.';"EEK ENDING l<'EBRU~illY 6, 1920.
ADhli'I'TBD TO THE FEDERAL RESERVE SYSTEM:
DISTRICT NO. 2
The Marine Trust Company of
Buffalo, N. Y.
Capital
b'urplus
Total Resources
~7,500,000
:W7,500,000
:W92,791,454
25,000
5,000
311,538
25,000
12,500
228,647
DISTRICT NO. 4
.
Atwater Savings Bank Co.,
AtwQter, Ohio.
DISTRICT NO, 6
Farmers & Ikrchants Bank,
Chipley, Ga.
DISTRICT NO. 7
Leon Savings Bank,
Leon, Iowa.
Oakland County Savings B.s..nk,
Ibntiac, I.lich.
25,000
102,189
250,000
70,000
3,415,134
200,000
60,000
3,450,228
50,000
13,000
255,386
750,000
114,500
5,559,555
100,000
70,000
2 '545,426
50 ,ooo
10,000
1,069,651
DIBTRICT NO. 10
Guaranty State Bank,
ardmore, Okla.
DIS'l'RICT .NO. 11
First State Bank of
George West, Texas.
DISTRICT NO. 12
Union Bank & Trust Co. of
Los angeles, Calif.
D. Vi. Stanrod & Company,
BlackfoJt, Idaho.
Citizens State Bank,
.fu.yallup, Wash.
7
X-1530
FED~L
RESERVE BO..ti.RD .d.NNOUNCEIJEN'J:' .l!'OH THE
WEEK
ENDING
FEBRU~~RY
13, 1920 •
.to.DMITTED TO THE li'E.l.)E&L RESERVE SYS'2EI.1:
DISTRICT NO. 2
The Feoples Trust Company,
1Ialone, N. Y.
DISTRICT NO. 7
~rysville Savings Bank.
Marysville, L1ich.
DISTRICT NO. 8
Peoples State 3ank,
CabJt, .t~rk.
DISTRICT lirO. 10
The Security Bank,
Meadow Grove, Nebr.
First State Bank,
Oklahoma City, Okla.
DISTRICT NO. 12
First State Bank,
Gresham, Ore.
Total Resources
Capital
Surplus
w~O,OOO
~100,000
~529,500
100,000
50,000
469,189
25,000
2,500
27,500
267,682
25,000
!:;00,000
14,400
2,250,963
30,000
25,000
630,243
WITHDRil.\'J~:
The Pierce Trust & Savings Bank, Syoamor0, Illinois, has withdravin from membership •
•
8
X-1530
~FEDERAL
RESERVE BOARD llNNOUNCEI.JEN'l' FOR THE
WEEK ENDING FEBRU.ci.RY 20, 1920.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
DISTRICT HO. 2
Bank of Coney I sla.nc1.,
Capital
~'u.rplus
Coney 1-aland, New York City. :1J;200,000
~100,0~0
Total Resources
~3,081,778
DISTRICT NO. 5
~oples Bank of F1.Qyc\ County,
Floyd. Virgirjia.
DISTRICT NO, 8
Tower Grove Bank of
St. Louis, I.lo.
35,000
25,000
200 ,Or)O
50,000
3,268,121
DISTRICT NO. 12
First Bank of Homedale,
Homedale~
Ictaho.
Farmers & MerchantiJ Bank,
Rupert, Idaho.
Buena State Bank,
Buena, Viash.
25,000
27,500
35,000
42,237
25,000
190,556
9
X-1530
FEDERAL RESERVE BOARD 4ImOUNCE11ENT FOR THE
/lEEK ENDING FEBRUARY 27 , 1920.
1
~WMITTED
TO THE .F'EDERAL RESERVE SYSTEM:
DISTRICT NO. 2
Capital
Bank of Hasbrouck Heights,
Hasbrouck Heights, N. J.
Induscrial Bank of Nev.; York,
New York, N. Y.
1,000,000
The State Bank of Shortsville,
Shortsville , N. Y.
DISTRICT NO. 4
The Me:..~chants State Bank,
New IhHadelphia, Ohio.
1.00 ,ooo
The Commercial Banking & Trust Co.,
~iloDster, Ohio.
150 ,ooo
Real Estate Trust Company of
Washington, Benna.
DISTRICT NO. 5
Farmers Banking & Trust Co.,
TarborJ, N. C ..
100,000
DISTRICT NO. 6
Bank & Trust Company of Talladega,
Tallarlega., .Ala.
100,000
DISTRICT NO. 7
Security Trust & Savings Bank,
Storm Lake, Iowa.
75,000
The Farmers State Bank,
Montague, r.Iich.
25,000
DimRICT NO. 9
The li'Ia:nistique Bank,
Manistique, Mich..
50,000
DIS'IRICT NO. 12
Lake Councy I.oan & Savings Bank,
Lake•Jie\'i r O:re{;On.
40,000
Fillmo1~e Co?rmer"J:i~l & Savings Bank,
Fi.llmore, U'tai1.
50,000
~urplus
Total Resources
,000
~65,000
500,000
4,225,631
6,000
:36,000
50,000
808,659
31,000
1,030,621
~10
2,619,255
50,.000
1,232' 171
16,000
598,203
2,648
596,749
5,000
371,812
30,000
862,480
10,000
10,000
CONVERSION:
The Illinois State Bauk, E~st St. Louis, Ill. into First National Bank.
CH.ANCiE Oi NAU!E:
•
The Dime DepoBit Bank, V!ill~es-Ba::-ree, Eenna., has changeJ. its name to
"Dime Barlk Title & Trust Company".
10
X-15~0
l!'EDERAL
RESJo~RYE
BO.tillD aNNOUNCEl.lENT FOR THE
WEEK ENDING MaRCH 5, :i.920.
DISTRICT NO. 2
C~pital
State Bank of Belmont,
Belmont, N. Y.
~50,000
The Merchants Bank of tho City
ot Nc\'· York, N. Y.
3,000,.000
The American Bank of Lackavvanna,
Lackawanna, N. Y.
100,000
DISTRICT NO. 4
The Dollar Savings Bank & Trust
Co., Bellaire, Ohio.
1~5,000
Guaranty Safe Deposit & Trust Co.,
Butler, Penna.
250,000
DISTRICT NO. 7
Morton !ark State Bank,
Cicero, 111.
100,000
First State Bank,
50,000
Di,.ernon, Ill.
DISTRICT NO. 8
Surplus
Total Resources
11>50 ,000
;>500 ,372
2,000,000
50,3t>2,~99
25,000
125,000
50,000
1,340,596
250,000
3, 722,042
12,500
968,415
50,000
Bank of Crockett,
· Bells, Tenn.
DISTRICT NO .. 10
The Citizens State Bank,
Kingfisher , Okla..
DISTRICT NO. ll
First State Bank,
Wortham, Texas.
DISTRICT NO. 12
Bank of Hansen,
Hansen, IdahO.
346,513
25,000
50 ,000
667,129
1,900
426.590
50,000
25,000
337,358
5,000
Bingham State Bank,
Bingham Canyon, Utah.
Gunnison Valley Bank,
Gunnison, Utah.
Peoples ~tate Bank,
Walla \.alla., 'V1ash.
299,174
50,000
25,000
6,950
402,271
100,000
20,001,)
2,292,391
AUTHORIZ:i!:D ?0 ACCE.Pl' DRA~'TS .tU'lU BILLS Ol!'
EXCH.iuWE UP TO lJO PER CENT OJ:<' C.al'IT.hL
.tiliD SURP.LUB:
The Merchants Bank of the City Of Uev; York, N. Y.
Lawrence National Bank, Lawrence, Kansas.
Continental National Bank, Kansas City, Mo.
11
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT l<'OR TliE
WEEK ENDING 11ARCH 12, 1920.
ADMITTED TO THE FEDERAL RESERVE SYSTE:lvi:
DISTRICT NO. 2
Capital
City Trust Company of Newark,
Newark, N. U.
:jp200 ,000
DISTRICT NO. 4
The Antwerp Exchange Bank Co. ,
'Antwerp, Ohio.
25,000
DISTRICT NO. 5
The Bank of Morehead City,
Morehead City, N. c.
45,625
DISTRICT NO. 9
Security Savings Bank,
Jamestown, N. D.
50,000
DISTRICT NO. 12
Bank of Fountain Green,
Fountain Green, Utah.
25,000
Surplus
Total Resources
•
3,000
409,569
654,006
51,000
10,000
301,265
CONVERSION:
Tradesmens State Bank, Oklahoma City, Oklahoma, into 'l'radesmens Natlonal
Bank.
12
•
X-1530
FEDERAL RESE...'WE BOARD ANNOUNCEMENT FOR THE
WEEK ENDING N.aRCH 19, 1920 •
.AD1vll'.rT·ED TO THE FED]!;RAL RESERVE
DISTRICT NO. 4
Capital
Napoleon State Bank,
Napoleon, Ohio.
;w50,000
DISTRICT NO. 5
The Feoples Bank of fu1ral Retreat,
Rural Retreat, Va.
35,000
DISTRICT NO. 7
Huston Banking Company,
Blandinsville, Ill.
60,000
Iowa State Bank,
Osceola, lov;a.
50,000
DISTRICT NO. 9
Belgrade State Bank,
Belgrade, Mont.
50,000
The Banking Corporation of Montana,
Helena, ]Jont •
500,000
State Bank of Pientywood,
25,00()
Pientywood, Mont.
DISTRICT NO. 12
The Holtville Bank,
25,000
Holtville, Calif.
Bank of Lemoore,
100,000
Lemoore, Calif.
Orange County Trust and Savings
300,000
Bank, santa ana, Calif.
Bank of Helix,
Helix, Oregon.
50,000
The ~irst Bank of Pilot Rock,
30,000
Pilot Rock, Oregon.
SYS~L'El';1:
&"urplus
Total ResoUl·ce:;
~1,082,675
l~l
,650
40,000
l ,538,107
5,000
430,181
50,000
610,363
10,000
2,263,513
10,000
21,500
567,729
40,000
1,366,524
?5,00(.)
2,675,600
10,000
363' 367
~0,000
519,700
13
X-1530
FEDERAL RE::>ERVE BO.A.RD ANNOUNCEMENT lt,OR THE
ViEEK ENDING MARCH 26, 1920.
ADMITTED 'CG THE li'ED:SRAL RESERVE SYSTEM:
DISTRICT NO. 5
Berwind Bank,
Berwind, w. '{a.
DISTRICT NO. 6
Farmers Bank,
Canon, Ga.
·DISTRICT NO. 6
arkansas Valley Dank,
:,·,. >•· Fort Smith, Ark.
··M~nt Olive State Be.:::'Jr
.Mount Olive., IlL
·Mound City Trust CompA-ny,
St. Louis, Mo.
Feoples Savings Bank & Trust co.,
Halls, Tenn.
DISTRICT NO. 9
State Bank of Belt,
Belt, Mont.
Miners Savings Bank & Trust Co.,
.Butte, Mont.
DISTRICT NO .. 10
Oklahoma State Bank,
Cordell, Okla.
DISTRICT NO, 12
Jeoples Savings & Commercial Bank,
Chico, Calif.
Columbia Trust Company,
Salt Lake City, Utah.
Total Resources
Capital
Surplus
~50,000
~50,000
4.>1,145,416
25,000
-- ---
112,~·47
JCO,OOO
20,000
1,594,077
sG ,ooo
5,000
297,829
200,000
25,000
245,237
25,000
10,000
219,408
40,000
10,000
510,699
200,000
50,000
1.835,127
:30.000
:3,000
402,650
100,000
4,500
849,074
250,000
25,000
1,229,699
..
CHANGE OF N.d.ME:
The Cuyahoga Falls Savings Bank .ComJ:&ny, Cuyahoga Falls, Ohio, has
changed its name to "The l!'alls Banking & Trust Company".
aUTHORIZED TO .ti.CCEP.I' Dlkl<~S .t.t.ND BILLS
Olt, EXC&.NGE UP TO 100 P:6R CENT 01<'
Cal'ITaL AND SURPLUS:
Mercantile National Bank, San Francisco, Calif.
Union National Bank, Seattle, Wash.
14
X-1530
•
FEDERAL RESERVE BO.tUID
V~
ENDING
~WUUCElilEl~T ~'OR
~F.RIL
THE
2, 1920.
aDMI'?TED TO THE .ti'EDER.n..L RESERvE SYSTEM:
DISTRICT NO. 2
North Side Bank of Brooklyn,
Brooklyn, N. Y.
The ~oples Bank of Hamburg,
Hamburg, Nt I.
DISTRICT NO. 6
Commercial Bank of Athens,
· athens , Ga.
DISTRICT NO. 8
1~hester Bank of St. Louis,
St. Louis, Mo.
West St. Louis Trust Company,
St. Louis, Mo.
DISTRICT NO. 10
The Bixby State Bank,
Bixby, Okla.
Clinton State Bank,
Clinton, Okla.
First State Ba:lk,
• Stigler, Okla.
DISTRICT NO. 11
Texas Bank & Trust Co .. ,
Galveston, Texas.
.
Total Resources
Capital
Surplus
~2oo.. ooo
~150,000
if8;.401,945
30,000
30.000
1~1&8,714
100,000
20,000
671,596
250 ,ooo
100,000
3,817,196
200,000
20,000
1,631,325
25,000
5,700
329,462
50,000
5,000
;L 71 ,6~9
25,000
5,000
526,720
200,000
200,000
7,229,878
The SOuth Norwalk Trust Company, South Norv.alk, Conn .. , has
from membership.
withu.ra,~n
15
X-15::0
.H'EDERi.L RESERVE BOARD .tiliNotJNCEI.IENT iOR THE
1'/EEK ENDING APRIL 9, 1920.
-
..
..ci.DMITTED TO THE FEDER<>.L RESERVE SYSTEM:
DISTRICT NO. 5
The Farmers Bank,
St. George, s. c.
DISTRICT NO. 8
Commercial Bunk of Bertrand,
Bertrand, Mo.
DISTRICT NO. 11
American Trust and Savings Bank,
E1 Jhso, Texas.
Farmers State Bank,
Hallsville, Texas.
Liberty State Bank,
Liberty, Texas.
Central State Bank,
McKinney, Texas.
Moran State Bank,
Moran, Tex.G.s.
First State Bank,
Munday, Texas.
First State Bank,
Slaton, Texas.
DISTRICT NO. 12
Farmers State Bank,
Sprague, Vias h.
Surplus
Total Resources
#9,000
qp319,474
zo,ooo
800
107,8:37
350,000
50,000
3,003,210
25,000
-- ---
118,127
35,000
3,500
317,045
75,000
5,000
906,992
30,000
6,000
459,581
35,000
5,000
309.712
25,000
3,200
603,190
25,000
2,500
199,795
Capital
VOLUNTARY LIQUID.I:l.'I'ION:
Boise State Savings Bank, Hudson, lliichigan.
CONVERSION:
Irving Trust Company, Nev. York, N. Y., into New York National Irving Bank •
.n.UTHORIZED TO .-i.CCB:;.-T DR.~.l!'TS rum BILLS
Olt' EXCHANGE UP TO 100 .F.ER CENT OF
C.a..PITil.L .L.ND SUR?LUS:
Jennings National Bank, Jennings, La.
Liberty Bank & Trust Co., Nev, Orleans, La.
16
..
..
X-1530
FEDERaL RES:SF:VS BO.n.RD aN1WUNCElfENT .FOH ?HE
WEEK El'J.J.HNG .rl..l:RIL 16, 1920.
n.DIUTTED 'I'O THE
(
II •
·~
DISTRICT NO. 6
Farmers & Merchants Bank,
Hartselle, Ala.
DISTRICT NO. 8
First State Bank,
Mt. Carmel, Ill.
DISTRICT NO. 11
First State Bank,
Malone, Texas.
First State Bank,
Rice, Texas.
DISTRICT NO. 12
First State Bank,
Garfield, Wash.
~'armers & 1ferchants Bank,
Rockford, ·wash.
RESERVE SYSTEM;
:E'ED~L
Capital
Surplus
:wso,ooo
~--
Total Resources
---
~217,923
100,000
16,500
515,3:37
25,000
8,000
184,861
50 ,ooo
10,000
341,060
50,000
15,000
561,925
25,000
3,000
384,787
The Merchants Bank of the City Of New York has merged with the Bank Of
N~w York City.
th$ Manhattan Company,
CONVER~ION!
••
The Hettinger State Bank of Hettinger, North
into fhe Live Stock National Bank Of Hettinger •
D~kota,
.cl.UTHORIZED TO ACCE.Pr DR.rl.FTS liND BILLS
0.1!, EXCH.tiliGE UP TO 100 .PEB. C:EN'l' Olt'
C~l..PITAL .iiliD SURPLUS~
.l:binte Coupee Trust & Savings Bank,
il
••
l~ev•
Roads, La.
has converted
.
'
17
-
X-15~
FEDERAL RESERVE BO~tRD ANNOUNCE:viENT !<'OR THE
WEEK ENDING APRIL 23, 1920.
ADMITTED TO TH:S FEDill:(AL RESERVE SYSTEM:
a
I
I
I
·I
.
DISTRICT NO. 8
Bank of Alamo,
Alamo, 'I'enn.
DISTRICT NO. 9
Clinton State Bank,
Clinton, Minn.
Iron Exchange Bank,
Hurley, Wis.
DISTRICT NO .. 11
Union State Bank,
East Bernard, Texas.
DISTRICT NO. 12
The Bank of Woodburn,
V:oodburn, Ore.
Surplus
ijr25,000
4?-- ---
~346,3Z5
25,000
6,000
307,529
50,000
30,000
1,256,661
50,000
10,000
252,182
40,000
10,000
647,940
AUTHOREE.0 TO ACCE F': DI-Al<'': S
.n.J.IJ D BILL;:,)
OF EXCHANGE U.P TO 100 PER CENT 01"
C.A.PIT.aL AJ.'il'D SURPLUS:
First National Bank, Santa Barbara, Calif.
.. ..
Total Resources
Capital
..
18
'
X-1530
-
FEDERAL RESERVE BOARD ANNOUNCEMENT .I!'OR THE
VJEEX ENDING alRIL 30, 1920.
ADI>ll'l'TED TO THE b'WERAL RESERVE SYSTEI.::
-
DISTRICT NO. 4
The American State Bank,
St. Marys, Ohio.
DISTRICT NO. 11
The McCurtain County Bank,
Broken Bow, Okla.
Citizens State Bank,
Alice, Texas.
DISTRICT NO. 12 ·
Bank of Castleford,
Castleford, Idaho.
Total Resources
Capital
Surplus
~50,000
:WlO,OOO
~565,105
40,000
10,000
322,838
60,000
20,000
526,777
25,000
1,250
28,750
LI';lU!DATii)NS;
The Struthers Savings and Banking Company, Struthers, Ohio.
Union Bank of Pike, Summit, 11ississippi. (Consolidated with the P.rogressi ve
Bank of b'ummi t, laississippi.) .
AUTHORIZBD '1'0 aCCBIT
OF
EXCHA.i~UE
.UliJi.J:i''.I'~ Ai~J)
31113
~·0
100 :-EH CEH'l' O:li'
CAPITAL .aND SUR.P.LUD:
U?
Garfield National Bank, New York City.
li'i deli ty National Bank & Trust Co. , Kansas City, Mo.
Denver National Bank, Denver, Colo •
. ..
...
19
X-15~
..
FEDERAL RESERVE BOARD ANNOUNCEN:EHT l!'OR 'I'HE
WEEK ENDING l'v1AY 7 , 1920 •
ADMITTED TO THE FEDERaL RESERVE SYSTEM:
•.
DISTRICT NO. 7
Bank of Southern Viisconsin,
Janesville, Wis.
DISTRICT NO. 8
Gravois Bank of
St. Louis County, Mo.
DISTRICT NO. 10
Citizens Bank of Billing.s,
Billings, Okla.
American State Bank,
Okmulgee, Okla.
DISTRICT NO. 11
First State Bank,
Floydada, Texas.
The Guaranty Bank & Trust Co.,
Orange, Texas.
First Guaranty State Bank,
Mertens, Texas.
~irst State Bank & Trust Co.,
Viaco, Texas.
Total,Resources
Capital
Surplus
%-100,000
4Pl0,000
~125,000
25,000
5,000
455,696
20(,)
416,7;07
200,000
20,000
220,000
50,000
1,000
747,958
100 ,oov
lO,OLlv
421,612
25,000
1,000
111,653
200,000
zo,ooo
40,000_
CONVBRSI ON:
The .feoples Bank of Harrisonburg, Harrisonburg, Va., ·into 1'he National
~.Bank. ot l'taltr:honburg .
•
LIQUIDATION:
The Guaranty State Bank, Tyler, Texas. (Consolidated with the Citizens
National Bank of Tyler, Texas.)
•
.'
20
X-1530
-
FEDERAL RESERVE BOARD ANNOUNCEMF'..NT FOR THE
VlEEK ENDING MAY 14, 1920.
ADl>llTTED TO THE FBDE&.L RESERVE
...
.
lit
DISTRICT NO. 2
Capital
Dunkirk Trust Company,·
Dunkirk, N. Y.
:W250,000
DISTRICT NO. 3
Farmers' and Merchants' Bank,
New Oxford, .fenna.
50,000
DIS!RICT NO. 4
The Peoples Bank of Delphos,
Delphos, Ohio.
50,000
DISTRICT NO. 9
Citizens' State Bank of Culbert son,
Culbertson, Montana.
25,000
DISTRICT NO. 11
Farmers & Merchants State Bank,
Maypearl , ~['exas.
25 ,oov
The First State Bank,
Seminole, Texas.
40,000
DISTRICT NO. 12
Bank of Coomerce,
Everett, \!ash.
100,000
Cor:unercial Bank,
Okanogan, Wash •
50,000
SYS'i'EM~
Surplus
Total Resources
~125,000
~377,387
50,000
607,762
10,000
497,319
10,000
340,611
15.000
248,596
20,000
229,765
25,000
1,739,851
10,000
598,804
'
CHANGE
o~~
Nal\lBS:
The b'armers & Merchants State Bank, Rusk, Texas, has changed its nane
to "Parmers & MerchantsState Bank and Trust Com]:Etny".
The A. Mierson Banking Company, Placerville, Calif., has changed its
name to "Eldorado County Bank" •
..
21
.'
X-1530
FEDERAL RESERVE BOAR!> .A~NOlJJ.IJCEMENT lWR THE
WEEK END~NG .!Y'!AY 21, 1920.
ADMB:'TED TO THE l''EDEP..AL RESERVE SYSTEM:
DISTRICT NO. 9
East Helena State Bank,
East Helena, Mont.
DI STRlCT NO • ll
First State Bank,
Cloudcroft, New Mexico.
The Coleman State Bank,
Coleman, Oklahoma.
Cameron County Bank,
La Feria, Texas.
DISTRICT NO. 12
Blcific State Bank,
South Bend, Wash.
Total Resources
Capital
Surplus
~50,000
:WlO ,500
~189 ,442
25,000
1,500
156,823
196,176
25,000
25,00u
100,000
50,000
1,501,734
]JERGER:
of
..
The Franklin Trust Company, Brooklyn, N. Y., has merged with the Bank
America, New York, l'f. Y.
AU'l'HORIZED TO ACCEIT DRAFTS AND BILLS
OF EXCHANGE ·u.t:- TO 100 PER CEN'I' 0.1!,
CAPITAL AND SURPLUS:
'
Union Savings & Trust Company, Cincinnati, Ohio.
.
..
22
.'
X-1530
.
FEDERAL RESERVE BOARD ANNOUNCEMEN'l' ~OR THE
WEEK ENDING MAY 28, 1920 •
.ADMITTED TO THE FEDERAL RESERVE SYSTEM;
DISTRICT NO. 4
Capital
The State Bank of
Bowling Green? Ohio.
~50,0JO
DISTRICT NO. 6
North Georgia Trust & Banking Co.,
Winder., Georgia~
200 000
.
DISTRICT NO. 7
leoples State Bank,
40,000
Corwith, Iowa.
The Pine onning State Bank,
Pinconning, Mich.
30,000
DISTRICT NO. 9
Edgar State Bank,
Edgar, Mont.
30,000
Bank of Commerce,
100,0:.J0
Kalispell, Mont.
First State Bank,
Richey, Hont ~
25,000
DISTRICT NO. 11
Falfurrias State Bank,
Falfurrias, Texas.
25,000
The Farmers State Bank,
Ganado, Texas.
55,000
DISTRICT NO_ 12
The .Mission Bank,
200,000
San Francisco, Calif.
.
.
'
&'urplus
Total Resources
il>-- ---
ijp440,687
20,000
1,234,257
9,000
229,946
6,000
652,503
l ,500
. 189,04'1'
]:7,000
694,266
5,000
146,958
20,000
280,433
-- ---
154,605
100,000
2, 902,031
WlTH.0RaWAL:
The l.Udland Trust & Savings Bank, St •. Raul, Minnesota. has withdrawn
from membership •
.
•t
23
. '·
..
X-1530
.
FEDEHAL RESERVE BOARD ANNOUNCEJ:,fSNT FOR THE
ViEEK ENDING J(JNE 4, 1920.
ADMIT~'ED
DISTRICT NO. 5
The Planters Bank,
Wilson, N. C.
DISTRICT NO. 7
TO THE li'EDE:RAL RESERVE SYSTEM:
Capital
;JilOO,OOO
Iowa State Bank,
Dexter, Iowa.
Surplus
~--
Total Resources
---
25,000
13,000
332,142'
25,000
10,000
284,990
10,000
414,770
10,000
227,430
100,000
2,934,861
DISTRICT NO. 8
Farmers & Traders Bank,
Iberia, Ho.
DISTRICT NO. 9
.
'
Farmers & Miners State Bank,
Belt, Mont.
50,000
Huntley State Bank,
Huntley, M-ont.
25,000
DISTRICT NO. 11
Guaranty Banlc & Trust Co •. ,
Dallas, Texas·.
1,000,000
Forney State B'3.uk,
Forney, Texas.
25,000
Farmers State Bank,
Madisonville, Texas.
25,000
Citizens Guaranty State Bank,
Lufkin, Texas.
75,000
Farme~s State Bank,
Shiro, Texas ..
25,000
DISTRICT NO. 12
The Kuna State Bank,
. Kuna. , Idaho.
25,000
..
15,000
20,000
437,051
1,500
505,800
20,000
164,601
218,317
24
.'
X-1530
FEDERAL RESERVE BOARD .ANNOUNCEMENT FOR THE
WEEK ENDING JUNE ll y 1920 •
•
ADM! TTED TO THE FEDERaL RESERVE SYSTEM:
'
' '
a
DISTRICT NO. 4
Ohio Savings & Trust Co.,
New F.hiladelphia, Ohio.
DISTRICT NO. 5
Eutnam County Bank.
Hurricane, W. Va.
DISTRICT NO. 8
Grand Avenue Bank of St. Louis,
St. Louis, Mo.
DISTRICT NO. 9
South Range State Bank,
South Range, Mich.
DISTRICT NO. 11
Farmers & Merchants State Bank,
Kenedy, Texas.
Commercial Guaranty State Bank,
Longview, Texas.
First State Bank & Trust Co .. ,
McAllen, Texas.
First State Bank,
Robstown, Texas.
DISTRICT NO. 12
Bank of 1'>yrtle .Foint,
Myrtle Point, Ore.
Wasco County Bank,
The Dalles, Ore.
State Bank of Goldendale,
Goldendale, Wash.
Pine City State Bank,
Pine City, Wash ..
Total Resources
Ca.pi tal
Surplus
~100,000
$50,000
~1,787,894
5o,ooo
35,000
493,647
200,000
50,000
2,626, 734
30,000
30,000
855,567
50,000
50,000
378,202
50,000
-- ---
86,219
100,000
12,000
984,750
25,000
8,000
197,444
50,000
15,000
546,014
100,000
-- ---
100,000
75,000
7,500
838,120
25,000
1,000
176,106
CHANGE Ob' NM.'lES:
The
name to
The
changed
•
First Commercial State Bank, Royal Oak, Michigan, has ch~~ged its
"First State Bank of Royal Oak".
Bank & Trust Company of Central California, Fresno, california, has
its name to "li'idelity Trust & Savings Bank".
•l
25
X-15:30
FEDERAL RESERVE BOARD ANNOUNCE.ME:J~[I FOR THE
WEEK ElJDING JUNE 18, 1920.
ADIUTTED TO THE FEDERAL RESEhVE SYSTEIVi:
DISTRICT NO. 7
Independence State Bank,
Chicago~ IJ.l.
Fort .lv;B.disnn Savillg~ Bank,
Fort Ma~ison, Iowa.
DISTRICT NO. 8
Americ3.11 Ban.k & Tr..1st Company,
Paris, Ar·k:ansas.
DISTRICT NO. 9
Hardin State Bank~
Hardin. Mont.
First State Bank.
Stevensville~
Cap.i.tal
Surplus
Total Resources
$200,000
$25,000
!jjJ2,911,971
100,000
50,000
1,957,504
50,000
325,956
50,000
35,000
416,474
40,000
8,500
372,784
100,000
50,000
741,674
30 ,'ooo
20,000
495,172
Mont.
DI STRICT NO • 11
First State Ba.nk & Trust Co.,
Bryan, Texas.
F&.l'nlarf.l·,Gue.:..·auty State Bank,
Clifton, 'l'exas.
First State
Ba~k
& Trust Co.,
Kenedy, Texas.
DISTRICT NO. 12
Rlget Sound Bank & T.rust Co.,
Tacoma, Wash.
60,000
300,000
547,884
30,000
WITHDP..AWAL:
The Bank of Sheboygan, Sheboygan, Wisconsin, has wi thdravvn trom membership.
AUTHORIZED TO ACCEI'.J.' DRAFTS AND BILLS
OF EXCHANGE UP TO 100 PER CENT OF
C.AFITAL A.I.~D SURPLUS:
The Pacific Bank, Nev, York City.
26
X-1530
FEDERAL BES2fi.VE BOARD A1"'NOUNCElv1EHT I!'OR THE
WEEK ENDING JUNE 25, 1920 •
•
ADMITTED TO THE FEDERaL FESERVE SYSTEM:
DISTRICT NO. ~
•
Federal T:r-11st Company,
Surplus
~20C',OOO
Philadel1ihia., Penn.a.
il
\
Total Resources
DISTRICT NO. 6
Bank of Wadley.
Wadley, Ga.
DISTRICT NO. 9
Joliet ~tate Bank,
JoliP-t, .Mont.
Willow Creek State Bank,
Willow Cz·eek, MGnt.
First State Bank,
Wolfe· Point, lllont.
DISTRICT NO. 11
Firs'tl Stata-r··Bar.Jt-,:
Bay City, Texas.
Farmers State Bank,
Clarendon, Texas.
First State Bank,
Copperas Cove, Texas.
Citizens State Bank,
Luling, Texas.
·Lipscomb Bank & Trust bomp:my,
Luling, ~1 exas,.
25.000
10,000
25,000
10,000
:316,417
25,000
15,000
:331,751
30,000
12.,000
520,891
'.55,,000
1_
5,11.600
50,000
3,030
25,000
9.,000
284,041
25,000
6,000
180.,497
55,000
CHANG~
OF N.A!'\1E:
The american Trust & Savings Bank; albuquerque, Nev. .i.Iexico, has cha.n.ged
its name to"The State Trust & SaV'ings Bank"·
TO aCCE.f'l' DBA.f'l'S aND BILLS
OF EXCHANGE UP TO 100 PER CENT OF
AUTliQ~IZED
CAPITAL AND SURPLUS:
FarmerA & Mechanics National Bank, Fc)rt· · W'•rth, Texas.
National Bank of Tacoma, Taooma, Washington.
W. P. G. HARDING, GoYIRNOl
ALIIRT STRAUSS, YICI GOYIINOl
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
EX OFP'ICIO MEM81lR8
CARTER G!.6..SS
SECRriJIIY tfp THI TRIIASitOY
CHAIRJIAN
JOHN SKELTON WILLIAMS
COMPTROLLER OP THI CURRINCY
FEDERAL RESERVE BOARD
'ADDRESS REPLY TO
WASHINGTON·
FEDERAL RESERVE BOARD
W. T. CHAPMAN, SICRETARY
R. G. EMERSON. ASSISTANT SECRETARY
W. M.IMLAY, FJICAL AGENT
27
,.
January 10, 1920 ..
•
X-1795
.
Weekll' Statement to be issued indicatin&
progress of campaign tor State Bank ~mbership..
.
Dear Sir:f.
We are sendine; hereWith a statement, wbieb wlll
be issued weekly. indicating the <ievelop~Jent of the State
Bank metzi)erahip catDpaign. or cOm-se you will und.ers tend
that this important matter during the month of Jan\&a.r7
will be before the Boards of Directot·s of a large number
of banks and we believe that there will be a material
increase in medlership during the ne:x.t three months.
Will be glad to heve yo\\ advise us as promptly
as possible as to progress in )·olli District and ass\Uil&
that you will keep this card. upo-n yow desk as 811 indicator
of the progress of our campaign •
..
Le·t ter
to Chalr1Den
of all F .R. !ank.S.
"
"
-\
x... 1795
CAMP AlGN FOR MEMBER STATE BANKS
( WEEKLY BEPORT )
a
Federal Reserve ~oard
Washington, D.C •
. Saturd~, January 10,1920
... - - - ... - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :State
- - - -Bank&
- - - - - - - - -Banks
-District
.. Eligible :Decrease .. Percentage of
ligib 1e
. Menbers : r&mber-s :: 1nerea.se
State
during :non-membel's :non...meniber·:d.uring
• members to total
:Jan. 3 1920 : this date . week :Jaaij,
.
: this date: week
. State :BanKS •
..
...
- -
~E
:Stat~
:
-
- -
-
Bank;
1~0
--
-
- - - - - -36- - - -
Boston
New York
Philadelphia
Cle-veland
Richmond
Atlanta
Chicago
5t.Louis
Minnea.-poUs
Kansas City
Dallas
SanFrancisco
....
J.22
123
l
3S
}8
- - 163
263
0
2£8
91
0
512
91
46
64
326
68
,•
46
64
Q.g
32a
68
87
48
114
ll4
81
137
-- -- - - - -1183- 'l'ot•l
36
139
----l.l88
0
0
0
2
0
0
570
715
1918
936
677
0
~89
0
42-o~:
5
-8630
---
e
1298
---
-
--- -
163
26:
269
-
--
0
l
0
0
512
570 .
715
1916
936
677
889
420
1296
0
2
8625
5
0
0
2
-
-18-.. 09
-· - -
- - -- -
J1.948
l.Z-..377
15.927
7.467
8,215
14.616
0
6. 773
0
11 .. 387
0
5.122
21.348
9.686
-- --- --
- --
- - - - - - - - - - - - - ..
- -12.11%
X-1802.
CMlPAl GN FOR iVlli.MBER STA'rE 3ANK S
(Weekly Report)
Federdl Reserve Board,
Washingtun 1 D. C.
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chic c.;. go
St. Louis
Mirmaapolis
Kansas CitY: .
Dallas
San Francisco
Total
:State Banks : , State Banks
r.:.ewbers
: menbers
:
this date
:Jan. 10,1920:
36
123
36
123
38
38
Increase :
du.ring
w~ek
9'
0
0
0
- - --
Eligible
..
262
269
48
114
1.39
115
141
2
1188
1194
6
8625
46
65
328
70
87
0
1
0.
2
0
0
1
week
163
262
269
512
...
s-,o .
714
1915
G
0
0
0
0
l
-- ... -
18.09
31 .. 948
12.377
15.927
7.467
6.,344
l*
2
677
889
419
1294
14.623
6.972
0
11.387
8618
7
934
5.122
21.535
9.825
0.
1
2
•Two wember banks consolid-:1ted and one new bank was admitted, 1ec.ving the nwnber of
as vn January 10,. but resulting in one less non...member bank.
:State Bank meuber ..
; to total State Ba
"":".-:"'
48
97
~
:non-L."3mbers : non-n:.er.1ber: during
-· lb3
17 • 1920,
- - - - -:Decr2ase
- - - -:Percentage
- - - - - -of- - -
1 Eligible
:Jan. 10,19?-0: this date :
512
570
715
1916
936
677
889
420
1296
97
46
64
328
68
87
Saturday, Jdnurry
--- - - - -- - -we~ber
bi::lllks the sau.e
CAMPAIGN FOR MEMBER STATE ::i3.Al.'Ua3
(WEEKLY REPORT)
X-17~8
Federal Reserve Boa1··d
Washington, D.C.
Saturday, January 24,1920.
State Banks
members
District
:Jan, 17 1920
---Boston
State Banks
members
this date
- -
36
Increase : Eligible : Eligib::.e
during :non-members:non-member
week
:Jan.l7,1920: this date
- -- - - ---
36
163
- - - - - - - - - - -·
--New- -York
123
123
0
2te
-----------------------------Philade l:phia
l
39
weel~
Pe :;.·can tage of
State :bank
members to t~tal
Stata Banks.
- - - - -- - - - - - - - - - - - - -
- -
0
Decrease
during
163
- 262
-
--
0
-
- -
--
0
13.09
- - - -
1
97
0
512
512
0
Richmond
46
46
0
570
570
0
7.lJ.6?
.Atlanta
65
0
714
714
0
3.344
0
1915
1916
0
14.57g
7.071
70
71
1
934
933
1
Minneapolis
37
37
0
677
677
0
Kansas City
43
43
0
339
Dallas
115
116
l
419
Sc.nFr:"?nc i sc o
141
Total
1194
* Che
'b~on.h:
4
1200
1
withdrew from membership. ·
3618
--
-
-.-----------
97
St.Louis
-
12.703
Cleveland
Chicago
-
3J.948
-------- ----- -268
-
0
413
1
21".722
1290
4
10.104
3612
7
12.229
- -
-
-
-
- - ....
.
•
..
C'.\'1'/if'f\IGN FOR ¥!EMBER S'r A'11 ~ llANKS
( vEEKLY REPOR':C)
173,./
.."'\..-..L,
0
Feder:-1 Reserve Joerd
Wn::;hington, D.C.
t
-
Stnte :B:mks.
District
merr:'bers
..
Skte lnnks
mem':le:rs
J :;,n 24)1920 -: this drtte
I::lcrer>se : E~.igibl.e
: Eligtb),e
during :non· -men;be: s ~n,_;n·~n;.::m.'bc r
week
J':m 24,1920 thi::; d;lte
36
()
123
(.i
.39
39
0
97
97
46
Lost on
- -· - - !.6)
Dec~eo.se
di.:ring
week
-----
Percent,ge of
Skte I ....1:k
xtt'ltahn-s t u ·t;o~~~l
Str te Bml::s
163
- ----262
262
---------.!.
New York
Fhilc:uielphia
Cleveland
Richmond
- -4.6-
2t3
26&
0
()
512
512
0
0
570
570
'71_i.j.
713
1
1916.
0
66
327
Chicego
71
St.Louis ( ~-)
- - - - ---- -Minne
o,
'PO l:l.s (b)
- ns as City (c) 46
-----
'!
327
(l
70 (deorec,se l)
r'(
if{~
D-:ll['S
ScnFr~'ncisco
(d)
'T'ot<:l
933
7 b467
s.472
934 (incre<.<.sel)
v
t~7
(dec reese
l)
- S90(incre;..-..::;el)
416
2
7955
4
116
113
2
145
143
3
1200
1204
4
7959
5.cn6
22.097
"
X--1795
(a)
(b)
(c)
(d.)
lV'ember brnks shuwn 0n Jctnuary 24 report ~hould have been 7v, no chanc;e having occurred
during week. .A dec~·eaae uf one is therefore made t0 cvrrecto
One be.nk wh1.ch has been carried as a member but has nut :paid in has been dropped and
. one was admitted du~ing the week, there being no change in the net result.
One bank which h:'ls been carried. as a member but wh5.ch has nvt :paid in has been. dropped.
Eligible non rr~mber bank figures heretofore used were incurrect. Corrected figures
are used in this report,
X-1802
CAMPAIGN FOR MEMBER STATE BANKS
(WEEKLY REPORr)
Federal Re.se rve Board
Washington, D. c.
-
Saturday, Febru.ary 7,1920.
- - - - - ---: State
- - - - - - - - - - - -- - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -- - - - - Banka
District
Ba~s
St~te
Increase : Eligible : Eligible : Decrease
during :non-r.aembers: non-member: during
Percentetge of
members
:JF.n 31, 1920
members
thib date
36
36
0
163
0
18.09
123
124
1
261
l
32.208
Philadelphia
39
39
0
26S
C1evehnd
97
98
.1
511
l
16.092
Richmond
46
46
0
570.
570
0
7.467
.Atlanta
66
67
l
713
712
l
s. tol
Chicago
327
•329
2
1916
1914
2
14.66S
St. Louis
70
70
0
934
934
0
6.972
Minneapolis
87
0
677
0
ll.3S7
Kansas City
tq
l
890
l
5.123
416
l
22.285
3 --
19.309
Boston
New York
Dallas
Total
118
1204
week
!Jan 31,1920:
~
this date:
week
State Bonk
members to total
Stn te Banks
12.703
10
13.255
X-1802
CMlP.AIGH Fa."'t MEM:BE..B. STATE J3ANKS
( Wl<.."'EKLY REPORT )
Federal Re<>erve J3oard
Washington, D.C.
- - - - - - - -- - - - - --
- - - - -
-
fli;,trict
State Baru~;;
members
:Feb. 1. 1920
--- -
--
--
-
- .-
.
-
-- --
- -
- -
- - -
--
- - -
Dl::lcreaue
Increase
Eligible : Eligible
during ~non-members: no~-member: during
week
week :Feb 7, 1920: thi.:.> date:
State Eankn
members
thh date
- -
- - -
Saturday, February 14,1920.
-
..
--
:
-
-
-
- - - - - - - - - --
Percentage of
State hank
rr;emberu to total.
State Ban.~t.G.
- - - - - - - - - - -
-
13.09
124
)9
93
125
1
163
261
l
}2.468
39
0
0
26s
511
263
511
0
12,703
16.092
Richmond
l.i-6
.Atlanta
Chicago
St. Louis
0
0
570
712
1914
934
570
712
1914
933
0
0
329
70
46
67
329
71
677
677
8<39
4).5
631
887
0
2
0
1
Poston
New York
Philadelphia
Cleveland
Minneapoliu
Kansas City
Dallas
San Francisco
--- ----· Total
36
36
93
67
l
50
0
2
0
152
1
119
"10
.1.-..,
1214
0
g7
87
4B
::.51
- - - - - -
0
--
1219
- -
-
--
.-
163
2to
0
415
. 630
0
0
1
T
5
7945
794o
7.467
3. tol
14.668
5
7.072
- -
·-
-
11.387
5.335
22.285
19.437 .
- - - - 13.}09
- - - - - -
..
CAMPAIGN FOR MEMBER STi\'l'E b.ANKS
(Vf.EEKLY REPORT)
Federal Reserve Board
Washingtun, D.C.
X-1002
February 21, 1920
--- -·----- - - - - - - - - -
-District
Boston ·
New York
Phi lad.el:phia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
SanFrancisco
State :Banks
State :Bar..ks
members : rnerribers
Feb. 14,1920: this date
36
39
36
126
39
98
0
l
0
0
46
47
1
125
98
67
329
67
329
71
72
87
-
---- - - - --
Increase : Eligible : Eligible
Decrease
during : non-mambers non-merrber: during
' week
:Feb.'l4,1920 ~ this date : weeit
0
0
1
163
26o
163
266
259
268
511
511
570
712
1914
569
933
712
1914
932
677
677
50
87
50
387
119
119
0
0
887
415
415
152
155
3
630
0
6?7
0
1
0
0
1
0
0
Percentage of
State Bank
members to total
State ~s
13.09
32.727
12,703
16.092
7. 63
3. 6ol
l
14.666
7.171
0
0
0
11.387
5·336
22.285
3
19.821
----~-----------·
Total
1219
..
1225
6
794o
6
"
.,
CAMPAIGN FOR MEMBER STATE BANKS
(WEEKLY REPORl')
Federal Reserve Bo~rd
Washington, D.C.
--Diatrict
....
Saturday, February 23,1920
- : -State
- - - - - - - - - - - - - - - -- - -- - -- - - - - - - - - -- - - - ------- -- - - Banks : State Eanks
Eligible
Increase : Eligible
: Decrease : Percentage of
~
~
members
:Feb. 21. 1920:
--- -Boston
New York
Philadelphia
Cleveland
..
.
36
126
39
98
Atlanta
Chicago
St.Louis (a)
47
67
329
72
Minneapolis
Kansas City
Dallas
SanFrancisco
87
50
119
155
Richmond
- -- -
members
this date
-- - .•
...••
.•
!
:
1225
(a)
durin~
week
-----0
36
129
39
101
.:.
48
68
331
71
.
_____
3
511
l
5!13
l
••
712
1914
932
2
677
8157
415
f2.7
12
7934
83
l
0
0
1237
_.;...
0
3
50
119
157
:non-tne!dJers :non-members
:Feb. 21.1920: this date
163
259
268
•
2
(Decrease) 1
-- --- - - - - - - - - -
Total
X-1!$02
. - -163-- - .
~
256
263
508
..
5615
711
1912
932
.•
576
o67
415
625
. - -- - - - -- - - - - --
l State bank. converted into National !.Bilk- ·
.
7921
during
week
: State Bank
: rrembe rs to total
: State Banks
- - --- 18
34
13
17
0
3
0
3
.•
1
1
2
0
:
1
0
.
0
3
••
2
9
15
7
12
5
22
20
- - - - - - - -- - - 13
.
lij%
CAMP .AIGN FOR MEMBER ST .ATE B.ANKS
( i'IEEKLY REPORT)
Fe~eral
-
-- --
District
-
- - ~
- - - - New Yun;;:
Philad.:;lphia
Ch "e lc..ni
Richmond
.Atlanta
Chicago
St.Louis
Minneapolis
Kansas City
Dallas
SanFrancisco
-
- - - - Increase
during
week
36
129
39
101
36
132
39
0
103
4b
63
48
63
331
333
71
72
0
0
2
l
83
50
119
38
51
120
161
157
- -
Total
- - - - - - Stute BanKs
members
this d<.:.te
- - - - -
- - - -
Boston
---
---
Stete :E_aruts
members
Feb.28,1920
- -
1237
- - - - -
3
0
2
,...
1251
- - -
-
Reserve Board
\'l£cshington, D.C.
Saturd.ny,
March 6,1920
- - - - - - - -- - - - - - . Eligible
Perc.ent~ge of
Decrease
Eligible
State B.su1k
un-members :nun-members : during
membe:rs to total
Feb. 28,1920: this date:
week
Stete Banks
- - - - - - 13 •
0
163
163
34
256
253
3
13
0
263
268
2
17
506
508
3
711
c
1910
931
2
l
15
7
676
336
414
0
l
1
4
711
1912
932
387
l
415
4
625
- - -
-
0
568
676
7921
- -- -
-
56~
0
1
- 14
X-1ES02
~1
7907
- - - - 14 - -
9
12
5
22
21
- -
-
14 -
- -
- --
-
.•
X-1802
CAMPAlGN FOR MGMBER STAT-E BANKS
( WE.EXLY REPORT)
Federal Reserve Board,
Washington, D.C.
---District
-
Saturday, March 13,1920.
-: -State
- - - - . - - - - - - - -:- - - - - . - - - - - - - - - - - - - - - - - - - -Banks
State Banks Increase : Eligible :Eligible :Decrease Percentage
~
:
: members
members
:March 6,1920 ! this date
--- -
-
Boston
N~w York
Philadelphia
Clev~land
36
132
39
103
Richmond
Atlanta
Chicago
St.Louis•
48
68
333
72
Minneapo1 is
Kansas City *
Dallas
SanFrancisco
88
51
120
i61
Total
-
----
1251
- - -- -
- -- -
---
36
133
39
104
1
0
1
49
68
333
72
1
0
0
0
89
50( decrease
120
162
---1255
* State Ba,n:; converted into a National Bank.
during
week
0
:non-members:nonmembers: during
.. this date: week
:March 6,
1920
--.
..,
1
1)
0
1
4
-:
1
8
568
711
1910
931
567
711
1910
931
676
886
414
621
675
886
414
620
0
7']02
7907
-- --
- -- -
1
163
252
268
505
-- - -
: m9IDbers to total
State Banks
18
35
13
17
163
253
268
506
0
1
0
0
9
0
0
15
l
1
12
5
22
21
5
14
0
of
: State bank
7
CAMPAIGN FOR
l~R
X-J.802
STATE BANKS
(WEEKLY REPORT)
Federal Reserve Board
WashingtonJ D.C.
- - - - - - - - - - - - -- - - - - - - - ------· - - - - - - - - District
--- Boston
-
State Banl:-s
members
March 13,
State Banks
members
this date
1920
1920
1
0
0
566
711
1908
931
3
0
0
5
675
886
414
620
672
886
414
615
3
0
Richmond
Atlanta
Chicago
St.Louis
49
68
333
72
50
.l
68
335
72
0
2
Minnean.olis
Kansas City
Dallas
89
50
120
SanFranci~co
162
92
50
120
167
0
0
567
711
1910
931
1
Total
- -
163
252
268
504
New York
Philadelphia
Cleveland
- - -1267
Ma~ch
G
0
0
12
.•
.
.
.•. - - - - -
.
7902
7890
20,1920.
--
- --- - --- - --
163
252
268
505
36
133
39
105
-
-
Increase :·Eligible : Eligib:'..e
Dsc:.'ease
during :noninember s :nonmembex·s
d.uring
·week
this datA~ WAek
:March 13,
36
133
39
204
- - - - - - -1255
Satu.rda;{,
0
1
2
0
--
"~'ercen·~age of
state ba.!k
merr.'bers t.c total
state banks
- - - - -
18
35
13
17
8
9
15
1
5
12
5
22
21
12
14
0
-- -- -
-
----
"--/.
0
~
CAM'PAIGN FOR MEMBER STATE BANKS- . ··
(WEEKLY REPORT)
Federal Reserve Board
Washingt·on,
- -- - --
District
'~--
.- - -
-
Richmond
Atlanta
Chicago
St.Louis
Minneapolis
Kansas City
Dallas
SADFrancisco
----
Total
- - --
State Banl~s
membeJ.'s
:March 20,1920
-- - -
Boston
New York
Philadelphia
Cleveland
--
- -
36
133
39
105
'10
68
335
72
92
50
120
167
----
.
c
: !higi~le
members :nQn-me<-rioers:
r; tl:J.is date
:March 20.
during
we4r
l92C
36
133
. 39
105
0
51
69
335
76
l
l
0
94
51
120
169
2
1
0
2
-- - --- -1267
1278
:
..
0
n<J
:>
!)
.
.•
4
-
-
- ·- -
1:'..
"!
.
--
27, 1920
- - ·- - -
- - - - -- - - - -- - • Eligible
..:non
Decrease :
...
- -- - - - - - Increase
State Banks
members
•
this date
X-1802
Saturday,· March
.....
-
n.c.
.
- -:-
- --163
252
268
50~
7890
163
252
268
504
566
711
1908
931
6-2
t
886
414
615
-----
565
710
1908
927
.
.
during
week
0
0
0
35
13
1
1
0
8
0
2
7879
11
2
l
-- - - -
- -- - - - - - - ,_e
17
4
- - - --
"?ercentage d
: st.ate bank
: m'9:::r.bers to total
. state banks
0
670
885
414
613
----
.
9
15
p:
12
5
22
22
- - - - - - - --- - 1.4
CA:i:PAIGN FOR i.iE..iDE.R STATE :BANKS
(WEEKLY REPORT)
Federal, Reserve :Board.
W~shington,
D. C.
X-1002
Saturday, A2ril
District
- - - -
Sta. t e :Da.1Jks
me."ll1bers
this date
-
-
- -
Boston
New York
Philadelphia.
Cleveland
36
133
39
105
39
105
Richmond
."..tla.nta
Chicago
St. Louis
51
69
335
76
51
70
335
78
S4
51
120
169
1278
94
54
121
169
1286
i'!Iinnea.l)O lis
Kansas City
Dallas
San Francisco
Total
----
36
during
week
Eligible ~ Eli;;H,le
De-Jra::...se
4.
:non-mernbers :no~:-members:
~~·Ta.r. 27,1920: t:::;.s d.at~ :
• - •. ·-• .:. -:>"'~
\.. .. ;~, • ..&..
-163
---
0
13~
-----
I~1crea.se
l
0
0
0
l
0
2
0
3
1
----
0
g
:
......... .J.~
252
2£8
504
163
251
268
504
0
1
565
710
1908
927
565
709
1)08
925
0
670
885
414
- -613
- 7879
670
882
413
- 613
-7871
3. 1920.
.Per~e:-.tase
members to tot.:...l
Sta. te Banks
----
0
0
1
18
35
13
17
8
9
0
2
1)
0
12
6
23
22
14
3
1
0
- - - - -----s
of
eta t e :Sar,k
,:-<
u
-- - --
!
'
' !
CAMPAIGN FOR MEMBER STATE BANKS
( 1MEEKLY REPORT)
X-1802
Federal Reserve Board
Washington, D. C.
DISTRICT
.
.,
State Ba."'lk-s : State Banks
members
members
April 3,1920: this date
Boston
New YoL·k
Phil adelphi a.
ClevelanC.
_,7:6
134
39
105
Ric-hmond
A'.;lan·ta
Chicago (a.)
St, Louis
70
335
78
Minneapolis
94
94
121
169
1286
Kansas City
Dal~&.S
San Francisco
TOTAL
(a)
51
5l~
36
134
39
105
Increase
during
week
0
0
0
0
1
52
0
70
334 (Decrease l.) ·
1
79
Saturday A~ril 10, 1920.
Percentage of
:
Eligible
De<',rease
Eligible
State
Brulk
:r..or..--nembers :nor..-members: dll!"ing
members to tctal
week
Apr.3,1920: this date
State Banks
18
0
163
163
2;1
0
251
35
268
0
268
13
0
17
504
504
..
l
0
0
l
8
9
15
g
1908
924
128
170
0
0
7
1
670
882
413
613
670
882
406
612
1
12
6
24
22
1295
9
7871
7861
10
14
54
One state member bank went into voluntary liquidation.
564
"t09
565
709
1908
925
0
0
7
C.M'IiPAIGN FOR MEMBER STATE BANKS
(WESKLY RE"DQRT)
Federal Reserve Board.
Washington, D. C.
X-1802
Saturday, April 17,1920
-----------------------------------------State Banlrs
State Barikis
Incre .
: Percentage
: Eligible ! Eli-,·ible
..,s~
District
members
:troril 10,1920:
Boston
members
this date
-------
Richmon.i
Atlanta
Chic age.
St.Louis
52
70
334
79
334
80
0
1
0
1
Minnsa-::olis B
94
54
128
170
93(Decreas?)
54
130
172
1
0
2
2
Kanse.s ·city
Dallas
San.Francisco
Total
1295
(A)
(B)
52
71
-- -
-
1299
-- - --
4
-
-----
564
709
1908
924
564
708
1908
923
0
1
670
882
406
612
670
882
404
610
0
0
2
2
12
7661
7855
6
14
Two state member batiks consolidated
OnP- state member bgrlk converted into a nationci1 ~arik.
---
504
268
-·-
-
0
0
0
0
163
251
Phil adel nhia
Cleve :band
--
of
Decrease
during : . State Bank
: members to total
week
St!:',te banks
163
251
268
504
0
1
0
0
36
134
39
105
New Yo:"J!':" A
36
13 3 (Decrease)
39
105
:non-members :n on-memhe r s :
:April 10, ... : this date:
1920
0
1
-- --
18
35
13
17
-
---
g
9
15
8
6
24
22
----- -
C.Aili!0 .AI GN FOR M;:i;f,if•cER STi~ TE B.1"NKS
( 1'v'EEKLY RE'PORT)
F-3der·:Q Raserve :)oc:trd
W-.cshin::;ton,
- -- -- -- - -
District
-- - --
-
- -- - - -
- -
- - -- -
St-t·-o -<3-U:~s
m'"lmbsrs
this d3ta
-
S~turd~y,
Incr-3-'Se : Eli··ible : EJ.i;::ibla
Decre::-·.se
durin:; :non-r: .:;m:)::!rs :n·)n..-r!,embers: durin_;<
week
:c'mr.l7,1920: this d::te
"';re ::-k
36
133
39
105
36
133
39
105
0
0
0
0
Richmond
1\.tls.nt''
Chic':'.f:O
St. Louis
52
71
334
30
52
71
Minn--: 3.no1is
K:::.ns CI.S City
D::U 13.s
S:::,ri!i'r "':nc is co
93
54
130
172
-
Total
----
95
54
131
173
1299
1304
X-1502
April 24,1920
-
Boston
N;w YorJr
?hilc.del--;hb
C1 ;v:]l'J1ld
334
31
D.C.
-
163
-
--
'P3rcent ,:8 of
s tc:. te b ~ll"ll< s
rr::m;bars to tot-:;1
s ta.t2 -'J.:.nks
0
0
0
0
18
35
13
504
163
251
263
504
0
0
0
1
564
708
1903
923
564
70S
1903
922
0
0
0
1
8
9
15
8
2
0
1
1
670
382
404
663
332
403
609
2
0
1
1
12
5
14
---- -
5
251
268
- -
610
-
-
- -
7355
-
-- - 7850
-- -
-
17
6
25
22
----
-
CAMPAIGN FOR MEMBER STATE BANKS
( ~VEEKLY REPORT)
Federal Reserve Bosrd
mashington, D. C.
X-1802
Sa turday:7 May 1 , 1920.
District
-- - - - - - --- - - - - - - - - - - - - - -- - - Stqte Ba.riks
m12mbers
: ~coril 24,
1920
Boston
New York (a)
Philadel '~".Jlia .
Cleveland(Q) .
36
133
39
Richmond
.Atlanta (b)
Chicago
St.Louis
71
334
Tvhnnea:oolis
Kansas City
Dallas
S9nFranci sco
Total
State Banl's : Increas'3 : Eligible : Eligible
Decrease
:
members
: . during :non-members :non-mem1-:ers: during
this date
week
:April 24,
this date:
week
1920
0
36
13J( (ecrease 1) 0
39
0
0
105
105
52
52
70( decrease
334
0
1)
163
163
251
251
268
268
504
503
564
564
708
708
0
1903
81
81
0
922
1903
922
95
95
663
668
882
BE~
403
401
54
131
173
54
174
1
609
608
1304
1305
1
7850
7846
4
-----
a
- One st2.te member bank convertec1 into <'.. national ban1;:.
b i. - One member 1)an1: declared insolvent 2nd one bant admitted
c. - One memher ha.nk liquidated and colsoUdated with non-merr.~)er 1;arJk,
35
13
17
8
0
0
0
0
0
0
2
1
--- --- --
18
0
0
0
1
0
0
2
133
Percentage of
St:te bank
members to total
State banks
9
15
8
12
6
----
25
22
14
CAi\11PAI GN FOR
~J1ElVBE3.
STATE -:-.ANKS
X-1802
(WEEKLY :fiEPQif. T )
Federal R~sEM'~' 3 "3oard
Washington, D.C.
Saturday May 8,1920
------ - - - - - - - - - - - -- -- - - - - - - - - -s - -Increase
- s- - State
------: Eligible
: Stat•3
Eligible ; Decrease :
of
-- District
-
-. ---
Banl~
.
~
Boston
--
New York
Phil ad.e1 nhia
Clgve1and
Richmond
: members
:May 1,1920
•
(.a)
.Atlanta
Chicago
St. LOllis
Minne auol is
Kansas City
Dallas (b)
Ss.ilh'Tanc ieco
~
a
b
m<mJbers
this date
•
•• during
week
..
~
•
~
~
~
w
.
.
.
0
17
0
0
8
9·
15
8
0
12
6
26
22
52
70
334
81
5l(Decrease
70
335
82
l)
0
1
564
708
1908
922
564
708
1907
921
95
56
136
174
0
2
668
gg2
401
608
668
880
397
1305
- - - --
1311
l
3
0
-6- - - -
7846
6oe
- - - - 7838
Q
l .
1
2
4
0
- -8 - -
One state member bank converted into a national banl;.
One state member banl~ consolidated ,JVi th a national bank and four banks admitted.
18
35
13
503
251
268
503
- -· - - - ·- -
'~:lank
0
0
0
0
0
133
174
week
163
251
268
132
39
105
54
during
~
132
39
105
95
. state banl.
to total
.: memhers
state
s
"Percenta~e
:non-memoers :non-memoers:
:May 1,1920 • this date •
.•
"
- - - 36- - - - - - -0 - - - -- 163
-- - - - ....
36
--
~-
~~tal
..•
•
Bani.~
-
------
- - 14- - - - -
CAMPAIGN FOR
~~ER
STATE
BA~S
X-16C2
(Weel;ly R~ort)
Federal
District
: State Banks
: merrters
:M.;..y 8,1920
------- - - - - -. - - - State Banks
Increase : Eligible
:
members
this date
Reaer•.~e
Board,
Washington, D. C.
Saturday, May
15,1920.
: Eligible
Decrease : Percentege of
during :non-msmbers:n·)n-u:emb0rs: durir..g : State EarJr
week
:May 8,1920 : this date : week
: membera to total
: s tat.e b. arks
-
.. - -
~
- - - - -- -
36
0
163
163
0
18
132
133
1
251
250
1
35·
39
40
1
268
267
1
13
Cleveland
105
106
l
503
~02
.,...
17
Richmond
51
51
0
564
564
0
8
Jltlanta
70
10
0
708
708
0
9
Chicago
335
335
0
1.907
1,907
·o
15
St.Louis
82
82
0
921
921
0
8
Minnea:gol is
95
1
668
667
1
13
Kansas City
56
0
880
880
·o
6
Dallas
136
2
. 397
395
2
2"6
SanFranci~;~co
.17-4
2
. 608
606
2
23
8
7,838
Eoston
New York
Phil a.de 1 nhi a
'l'~t~
1,311
1,319
- - 7,830
- - - .- - - 8- - - - -
14
....
~
- -~
~
CAI'/11?AI GN FOR 1\IE'MBER STATE B.Atilfi
(V'eekly Report)
Federal Reserve Board,
Washington, D.C.
Saturday,
May 22,1920
X-1802
.... - - - .. - - - - ·- - .... - - - - - .. -- - - - -- - - - -- - -- - - - - - - - - - - ..
.
of
Banks . State Banks •• Increase : Eligible :·Eligible •• Decrease .
District
.. members •• during :non-merooers:non-merrbers: J.uring • Percentage
.. State
members
state bank
. this date .• week :May 15,1920: this date: week
to total
:May 15,1920 .
.• members
state banks
- ------ -36- - -- - - - 0
- - - - - - - - - - - 36
18
0
163
Boston
163
--
,..
~
132{ Decrease
Phil a.del··hia
133
40
Cleveland
J06
"L06
J:d chr!lcnd
11 tla:.1.ta
Chicago
St. J,01.1is
51
7C
335
82
51
96
56
New York
a
Minneapolis
k.nsas City
Dallas
Sa:nFrancisco
Total
-
-- -
--- - - - 1,319
250
267
502
0
0
0
35
13
17
564
708
1,907
921
8
82
564
708
1.907
921
0
10
335
0
0
0
0
9?
1
667
880
395
606
666
880
392
605
)C
-
177
1,323
a - Merger of two member banks.
0
3
141
138
176
0
250
267
502
40
1)
0
---
1
- -
4
7.830
7,825
0
0
0
g
0
3
1
13
6
26
23
5
14
l
-- - --
9
15
-- - - -
\
CAMPAIGN FOO MEMBER STATE BANKS
(WEEKLY REPORT)
\c
Fede ra.l Reserve Board
Wasnington, D.C.
Saturday, May 29 ,1920
L1S02
----------------------------------------------------------: State Eanks : State Eanks : Increase : Eligible : Eligible : Decrease : Percentage of
District
:
members
:May
members
!
22, 1920. : this date
:
!
during
week
:non-members :non-nembers:
this date:
-:May 22, 1920=
~uring
week
:
: state bank
: menibers to total
: state b~
-----------------------..
---- - - - - - - - - - - - - - - - - - - - .... --Boston
0
36
0
36
163
18
163
~
New York
Phi 1 Edelphia.
Cleveland
132
40
106
132
40
107
0
0
1
250
267
502
250
267
501
0
0
1
35
13
18
Richmond
Atlanta
Chicago
_st. Louis
51
70
335
82
51
71
337
82
0
564
708
1907
921
564
707
1905
921
0
1
2
0
g
15
Minneapolis a
Kansas City
Dallas
SanFranc isco
97
56
141
177
99
56
143
178
666
880
392
605
sso
664
2
0
2
1
13
6
27
...
- - ......
2
0
2
o·
2
- -- - . - - - - ~
Total
:1. -
1
1323
~
~
1332
Three a.Guissiol'lS anC:. ona
1
~ ~
.
390
Go4
- - - -- - - - - - 7816
- -~-
9
withdr-c:~.wa.l.
~
7825
~
('\
.,.;
g
~ ...
-)
- ~
c;;I
15
~
~
--
~
~
- -~
0
l...,
C.Al,JPAIGN :EDR ME.I/.ffiER STATE BANKS
Federal Reserve ~oard
washington. D. C.
(WEEKLY REPORT}
Saturday, June 5, 1920.
- - - - - - - -: State
- - - Banks
-- -------: State Banks
District
:
!
Boston
New York
members
May 29, 1920:
36
132
members
this date
36
132
Cleveland
107
40
107
Richmond
Atlanta
Chicago
St. Louis
51
52
Philadelphia
Minneapolis
Kansas City
IB.llas
San Francisco
Total
40
71
337
82
99
56
143
178
71
338
83
101
56
148
179
- - - - 1343
- --1332
X-1802
. - -- - - - - - - - - -- - - - - - -- - - - - - --- - -- - Increase : Eligible : Eligible
Decrease Percentage of
~
during
week
:non-members:non-members:
:May 29,1920: this date :
..
during
week
0
0
0
0
163
163
6
250
250
0
0
0
1
564
707
0
1
1
267
501
1905
921
267
501
state bank
: members to tota.1
state banks .
18
35
13
18
563
707
1904
1
0
. 8.
1
15
920
1
8
9
2
664
662
880
5
880
390
2
0
13
0
6o4
5
603
l
28
1
385
11
7816
7805
11
15
6
23
C:,.'1
0
CAMPAIGN FOR MEMBER Sl'ATE BANKS
(WEEKLY BE~RT)
X-1802
Federal Reserve Beard,
Wa.shington, D. c.
J~e
12,1920.
- - - - - .. - - : -Stete
- - banks
- ... - ... State
- .. -Barks
... - ... - - - .. - - - . - - - .. - - - - - - - - - - - ... - - - ---- .. - ·- lncrease f. Eligible : Eligible t Decrease : Percentage ef
District
Saturday,
~
: members
:June 5,}920
\
------- -----.Boston
36
New York
Philadel 1)hia
Cleveland
132
40
107
Richmond
St.Louis
52
71
338
83
Minneapolis
Kansas City
Dallas
SanFrancisco
101
56
148
179
Atlanta
Chicago
~
:
·meubers
this date
-----36
:
:
during
week
:non-members:non-members:
:June 5,1920: this date :
--~---
0
~
--163- - - - -· -163.. - -·-
during
week
0
__ ..
--.---18
0
0
l
35
13
18
l
9
132
0
250
108
0
l
267
501
250
267
500
53
71
338
84
1
0
0
563
707
1,904
920
562
707
1,904
919
0
0
1
102
1
0
662
880
385
603
661
880
381
599
0
40
56
152
183
l
4
4
: state bank
: members to total
: s te. te banks _.
1
4
4
-------...
- - - - -1,355
- - - - - - - 12
- - - - -7,805
- - - - - - -7,793
- - - - - -12- - - - Total
1,343
___
9
15
8
13
6
29
23
15
-------
.·
CAMPAIGN FOR MID43ER SfATE BANKS
(WEEKLY REPORT)
Federal Reserve Board,
Washington, D.C.
Saturday~
State Banks
State Banks
: members
: members
this date
:June 12,1920
District
!
June. 19,1920.
Increase : Eligible : Eligible
Decrease
during :non-mambers:non-members: during
week
:June 12,19~0 this dat.e : ;veek
..
X-1802
Percentage of
state bank
members to total
state banks
-------- - - - - - - - - ------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Boston
New York
Philadelphia
Cleveland
36
132
40
108
132
40
108
Richmond
Atlanta.
Chicago
St.Lou.is
53
71
338
84
53
71
339
85
102
lo4
(a)
Minneapolis
Kansas City
Dallas
Sa.n Francisc'J
56'
152
183
------ - - ·- - - 1,355
Total
a
~
36
56
155
184
0
0
0
0
0
0
l
1
2
0
7
.,1
1
163
250
267
500
163
250
267
500
0
0
0
0
18
35
13
18
562
707
1, 9o4
919
562
707
1, 903
918
0
0
1
1
9
661
880
3el
599
659
880
378
598
2
0
3
1
- - - - - - - - - - --..
s
7, 793
1,363
Two admissions and one withdrawal
-- ---- -1s 785
9
15
8
lit .
6
29
24
-8- - - - --15- - ... - .. - ....
-
'
CM'P.A IGN FOR MEMBER STA'IE :BEllS
(WEEKLY REPORT)
X-1802
Federal Reserve Boa~
Washington. D.c •.
Saturday. June 26.1920
-----------------------------------------------------: State Banks : State Banks
Increase : Eligible : Eligible : Decrease : Percentage of
District
menbers
:
members
:June 19,1920 : this date
:·
-Boston
- - - - - - - - - -36- NewYork
'Philadelphia
Cleveland
132
4o
108
Richmond
.Hlanta
Chicago
St. Louis
71
339
Minneapolis
Kansas City
Dalle.s
SanFrancisco
!04
56
155
184
53
85
:
:
during :non-members :non-ID9mbers:
week
:June 19.1920
this date
:
: state bank
: members to total
: state banks
- - - - - - - -0- - - - - -163- - - - -163
- - - - -0 - - - - - -18- - - - 36
~
~
0
1
0
35
13
9
9
918
0
1
0
0
659
656
.,;
132
41
108
0
1
0
250
267
250
500
500
53
562
707
l;903
706
S5
0
1
0
0
1,903
918
107
3
12
339
266
562
4
56
16o
0
880
800
0
184
5
378
5
0
373
598
---------------------------------Total
10
1,373
during
week
-;
598
0
18
15
8
:t4r
c
30
21.!·
- - - - - - -10- - - - - -15- - -· - - -
7,775
·w. P. G. HARDING, IOVI. .OR
ALBERT STRAUSS. VICI IOYIUOR
ADOLPH C. IIILLER
CHARLES B. HAIILIN
HENRY A. IIOEHLENPAH
CARTIR GLAII
Slt:a&TAaY OP 'l.fll TRIASURY
.. -~liliAN
.,
FEDERAL RESERVE BOARD
• JOHN SKELTON WILLIANS
CoiiPTROLLII OP THI CUiliiNCY
ADDRIIS. REPLY TO
.
FEDERAL RESERVE BOARD
WASHINGTON
W. T. CHAPMAN. SECRit'ARY
R. G. EMERSON. ASSISTANT SECRITAIY
W. II.IIILAY.FIICAL ACIENT
X-1776
SubJect:
De~r
54
Foreign ~d International Banking
Institutions: Report of Condition
as of close of '&usiness December 31,1919 ..
Sir:-
Under authority of. the agreement entered into by your corporatiOn with the Federal Reserve Eoard, you are hereby respectful~
re~ested to furnish tbe DOard with a report of condition, as of close
of business December 31,1919, giving in detail all assets and liabilities
of 70ur corporation Dnd the data. tt.sked for in the accompanying men.orand1JUI.,
0
•r Please arrange to file the report of your Head Office as soon
after January s~cond a.s possible. Separate reports of branches and
a.ffiliat•a banks should be sent as soon as they are received by you. It
will be appreciated .if, after .the reports have been received from all of
your branches and affiliated banks, you will have prepared a consolidated
statement for your corporation tb be sent to the Board.
While the Board has ruled that no specific reserve has to be
carried by foreign branches or affiliated institutions of .American ban~ting
corporations against de:posi ts abroad, 1 t, nevertheless, wishes to be
advised as to the average reserve carrhd by all such branches and
affiliated institutions or corporations, which are operatin6 under agree~ent with the Federal Reserve Board.
You are, therefore, requested to ·
have each of yoU!' branches; ~encies, offices and subsidiary banks furnish
you, for transLJ.ission to the :Board, a teport of the ayetat?e reserve
carried during the month of DecerJber 1919, against de:posi t lialrili ties
in the form shown in the acco~anying memorandum.
0
Kindly acknowledge receipt.
Enclosure.
Very truly yours,
'·
Secretary..
(·"·
L. ..
··•.,;
X-1776
a
55.
REPORT OF CONDJ.T!ON '}:'0 FEDERAL R!SERVE BO.Mm
The following information is desired in connec&ion with tbe report of
condition to be made as at close of' business December
A•
J
31,
1919~
HE.AD OFF! CE
l.
Detailed balance sheet showing all ~sets arid liabilities~ including
cvntingent,liabilities.
2.
.Amount of loans and discounts, divided: Secured - Unsec\.1red
(a} Demand
(b) Time
(c) Overdrafts and other advances
Total
Ibmis and Discounts (including Overdrafts) to any one ir.ldividual,
firtn o:t cOX'pWf;l.tion in excess o£ 10 per cent of subscr·ibed
capital and sutplas' stat ins atndU1lt secured and amount
unsecwed. ..
3. Detailed list of investments (in.ciooins
stbtik ct alf'ilia~61i i_nstitu~io;.1e).
showing~
(a)
(b)
(c)
(d)
(e)
(f)
Iasuing Government or cor~oration
Interest rate
·
Maturity
Par value
Book value
Approximate market value -
4.
OwnerShip of stock of affiliated institutions:
(a) Per cent owned by yourselves
(b) Per cent owned by foreign governments
(c) Per cent owned by individuals end corporations
5.
List of banks, branches, ete. ·having balances due to your cor:poratiop.,
with amount for each bank separately:
(a) Government bank
.
(b) Local banks (exclude subsid.iary .banks, if any)
11 .
11
(e) Other banks (
11
·
"
'')
(d) ·:Branches, ae>encies, otfices and &!filiated instHutions.
6.
List of banks, branches, etc, having balances due from your corporation,
with amount for each bank separately:
(a) :Banks and bankers
(b) .Branches, agencie~s, offices and sffiUated illStl. tutions.,
i
7• Bills pa.yab le :
• ·•
(a.) Payable to-:
Amount
Interest ra.te
Maturity
(b)
(c)
(d)
(e)
Colla.~eral ~ give list
X-1776
f
a
8.
Rediscounts:
(a). Amount
(b) Maturity
•
(c) Rate
(d) With whom
(e) Secured or unsecured- if secured, 5ive detailed information
regaz·ding security.
9.
Reserve Statement:
Deposits in the United
States~
(a) Net de~and deposits (after deducting uncollected demand items
payable within United States - exchanges)
{b) Time deposits.
(c) Reserve held.
cash on hand
bank balahdes ...·_._....___ _ _ __
Total
Per cent of reserve •
10~
Acceptances - limitations ~
(a) Total outs tanJ.ing acce ptG.nces,
(b) Capital and surplus
$
$
Acceptances· secured
$
Acceptances unsecured
$
.Amount required to be secv.re~ under
agreement with Federal Reserve .Board
$
(Give list of security held as required above
giving· description anci app,roximate amo·c.u1 t)
(c) List of drawers of drafts accepted. with. tcta.J.
as~egate liability in excess of 10 per cent
of capital and surplus.
.Address
Business
S~cux:it~
Gvaranty
(*)
(d) Reserve against outstanding acceptances:
Required - 15 per cent
1. Cash (**)
2. Bank balances ._ (Head Office city) (**)
3· Bankers acceptances (***)
4. Securities approved by Ii'ederal Reserve
iloard (List in de t.ai.l)
Total
(*') If security, state what the .security consists of, glVJ.ng quantity and
approximate value; i f a bank guaranty, give name and ltlcation of bank.
(**) These amounts. of course, must not include those appearing in 9-(c) as
part of your reserve against deposits.
(***) Give list of acceptances - acceptor and amount.
56
-3-
'
11.
X-1776
a
General limitations:
57
(a) Total deposits and accepLw.~ces outstanding
(b) Capital and surplu~
..
Per cent deposits and acceptan.ces outstanding
to capital and s u r p l u s - · - - - - - - - - - Limit fixed by Federal Reserve Board against age::,re5ate
deposits and acceptances outstanding.___ _ _ __
12. List of officers and dix-ectors.
13 .. List o:f stockholders, showing number of shares owned. by
each~
14. List of branches, sub-branches, agencies, offices and aff:U.iated
institutions - date of opening of each and the location.
15. Date of last examination or audit - by whom made ..
D..
:Branches, Agencies and Subsidiary Banks and__ Corporations ...
1.. :Balance sheet to be furnished by each, showing in detail all assets and
liabilities, including contingent liabilities, as at close of
business December 3lj 1919.
2. Amount of loans and discounts, showing: Secured - Unsecured
(a) D2e:.1and
(b) Time
(c) Overdrafts and other ad.v84"1.ces.
Loans and Discm.mts (including Overdrafte) to any one individual,
firm or corporation in excess of 10 per ceut of subscribed
capital and surplus, stating amount secured am amount
unsecured ..
3.
Detailed list of investments, showing:
(a) Issuing Government or corporation
(b) Interest rate
(c) Nl.aturi ty
(d) Par value
(e) :Book value
(f) Approximate market value
4. Amount of balances due from:
(Name of bank and.~ovn~-t~ach)
( a) Government bank
(b) Local banks
(c) Other banks- (exclude head office and affiliated banlts)
(d) Head office
.(e) Other branches, agencies and affiliated institutions
5.
Amount of balances due to: (Name of bank and amount for each)
(a) :Banks and banke;;-(~~l;o_e Headoffi~e)
(b) Head office
(c) Other branches, agencie~ and affiliated banka
-46.
• •.
X-177 6 a
58
Bills payab le :
(a) Payable to
(b) .Amount
~) Interest rates
(d) Maturity
(e) Co Hater al (Give detailed list)
7 .. Rediscounts:
(a) .Amount
(b) !Vf.aturi ty
(c) With whom
(d) Rate
(e) Secured or 1msecured.- if secured 1 give detailed data
S~
Deposits;
Dollar
Eq,uivalent
(a) Government deposits (if secured, give
list of collateral)
1. Deman1
2. Time
Other deposits
3- Demand
4. Time _ _ - - - Total
(b) Deposits- how payable:
l. Local currency
2. Doliar
}. Sterling
4. Otherwise________
9-
Special Reserve Statement- average for the month of December,
I
1919.
(a:} Net de::posits ~
1. Payable in local currency
in dollars
2.
"
in sterling
3.
"
Otherwise
4.
"
Total
(b) Reserve:
1. Amount, if any, and composition required by local laws~
2 , Amount he 1d:
Per cent to
Amount
net deposits
{a) Gold ani Silver .. :.$
(~) Local c'l.trrency •...•
(c) Other cash•........
(d) Balance in local
Govt. bank.. ~.
(e) Other reserve funds _ _ _ _ _ _ _ _ __
Total
10. Date of last examination or audit - by whom made~
NOTE: 1. Where a schedule does not refer to your corporation, please indicate
this by inse:-:-ting the word "None".
2, Renorts for foreign branches, ~encies etc, should be in terms of United.
States money, stating the rate of exchange at which they were eonverter3.
FEDERAL RESERVE
BOARD
X-1779
STATEMENT FOR THE PRESS
59
For release ln morning pape-rs,
Thursday, JanuaL·y lt 1920.
The following i'l a review of general busine;ss
and financial conditions throug~o~t the several
Federal Reserve Distr.icts during the month ~f
December, as contained in the forthcoming issue
of the Federal Reserve B~lletin.
Great activity in retail trade 1 strong demand for
~oods
and consequently
large volume of buying orders at manufacturtJ~g plants. high and rising _p:Pices
tbrou!?,bout the country, an.d full ef.))_)loyrcent of labor at unprecedented wages 1
except in those cases where employment has been rendered unsteady or insecure
as the result of strikes or labor disturbancesj are the
~orted
~rincipal
by Federal Reserve Agents from their several districts.
factors re-
General anxiety
concel'Iling the continued advance in prices is eXhibited, while unfavorable
foreie:,n exchange rates are regarded as likely to bring a'bo-c.t· a reduction in
exports which may necessitate some
disturbances
d~ring
readjust~ent
of domestic industry.
Labor
the month of December have on the whole been less severe
than in November. both the steel and coal strikes reachil16 a. practical concl~sion
followed byresumption of work.
In practically all districts primary emphasis is placed on the general
distribution of pu.rche£ing vewer and the freedom with wbiah recipien-ts of wages
and salaries are expending their means in the purchase of goods.
t-eports; that
conditi~s
11
the year closes with New England industries stim!J.lated by post-war
to a degree of peace-time activity unparalleled in the economic
history of this section".
and both
District No. 1-
~acturers
In District No. 2 high prices and
~tive tr~e
and distributors of drygoods, textiles,
~1
exist,
foot-
.,
..
60
-2-
X-1779
Credits have been shortened and production is far short of demand, but cautious
manufacturers are disinclined to commit themsel•es far in advance. Banking expansion has been somewhat stayed.. In District No. 3 it is stated that 11 the .
enormous demand for commodities of all kinds has been far from satisfied. Unsatisfied demand is reflected in higher prices." District No .. 4 taes the view
that "with no thought of price, with little provision for the future, our people
almost without. exception are demanding goods, especially luxuries •... • The signing of the armistice was: apparently the signal for an outbwst of tbe buying
fever wb\ch has not yet reached its height." In District No. 5 high prices for
crops have furnished a stimulant to trade from which no considerable reaction
is yet app&·ent.. Demandat manufacturing establishments is unabated ..
District No.
6 speaks of nrema.rkable commercial activity and expansion"
and asserts that "the volume of holiday trade generally during the month appears
to be greater than has ever been experienced .. " The Federal Reserve Agent at
Atlanta, however 1 remarks that in some cases business. is about stable in the
volume of goOds, although "in money there has been quite an increase in the
.business done." From District No- 7 it is reported that "business is goOd" the
demand for bank accommOdations h.a.s continued heavy and business has rapidly
"picked up the slack caused by the coal. shortage and fuel conservation restri~tions~
In District No. g collections ar~ good and business is large, labor d~ficult1es
are less than heretofore. but "high prices are exerting a restraining influence ·
on buying," although even where the ..-olume of merchandise is smaller, . the val'ue
of the transactions is larger than last .year~ In District No. 9 "manufacturing
enterprises are very activert, demand is strong, there is a. shortage of skilled
labor in industrial centers,• but retail reports from outlying districts show
some slowing up in merchandise sales and a. tendency on the part of buyers to
hesitate because of high prices." In District No. 10 there is "an extraordinary
·volume of trade running through the fall months and reaching its highest peak
about Thanksgiving". Merchants' stocks are low and the holiday season has been
attented by great buying activity and considerable extravagance." In District
No. 11 "every line of trade and finance now reflects the year •s peu position in
trade balances and for the first time in many months the district finds itself
not only with ample funds for its own use but with a healthy surplus wbich it
. can lend." In District No. 12, except for seasonal unemployment, n labor is
fully employed," no strikes of consequence are in progress, domestic.
comnerce continues active, and real-estate sales are very large.
From sutldry of the districts it is noted that the growth of business is far
r.:10re noticeable iD. terms of dollars than in units of production, while, as JUSt
indicated, there are some in which very high prices are already beginning to produce a. curtailment of b:1ying power. Thia appeu:rs to be more largely true in the
country and outlying districts than in the cities. The banking situation is
spoken of as reflecting the high prices of goods in the form of larger demand
for accommodation.. Increase in the cost of l:i.ving is referred to as an unque&tionable menace and in some di.stricta it is x-a:ported that retailers themselves
recognize this fa.et.. The 11 wot•k and save" pr-ogram is reported by some to be
considered hackneyed or obsolete. High wages are resulting chiefly in a reduction
of labor time.. According to one report, 11 mv,ch of our skilled labor works only
sufficient days during the month to keep gol.ng •. The effect of excessive wage;
has been that of destroying regular standards of living and the recognized basis
of prices .. "
;,_3-
X-1779
61_
In districts whose products are predominantly agricultural, the usual
midwinter intermission of activity has set in. In the grain-growing regions
early snowfall and severe cold weather has done harm, particularly to the
live-stock prospects. On the Pacifi~ Coast ur~avorable climatic conditions
during the early planting season retarded the sowing ·of wheat so that in
Washington the acreage of winter wheat will be only W to 70 per cent and that
of Oregon 90 to 93 per cent of normal. However) in the dry-farming sections
of Utah and Southern Idaho there has been much larger sowing of fall grain
than in 1918. In the cotton States the crop has been relatively small and
the yield per- acre low, but pri.ces have been at a reco:r.d level. Wheat sowings
in Tennessee are about 6o per cent of last year 1s and in other Southern States
early rains have prevented plowing for wheat from obtaining its full scope,
· In
·District No .. 4 and especiall.;r in Ohio, winter wheat seeding is reported
very late, while the very late seeding naturally went into the winter with
practically no growth and a doubtful ultimate result. Fodder is reported to
have been severely damaged. District No. 5 reports that the season now drawing
to a c.lose has been a fair one for the hat'lfesting of crops. Cotton has been
more closely pieked than last year and. the demand for tools, horses~ mules and
fertilizers indicates extensive preparation for next year ts crops. Some cotton
is still being held. but the crop generally appears to have been rapidly picked,
ginned· and sold ..
•
Receipts of cattle at 15 p~imary markets during November were 2,046t664
bead, corresponding to an index number of 20.3, as co!I!Pared with 2,317t457 head
d'aing <.ctober and 2,053,359 bead d'>Jl'ing November 1915, the respective index
n~bers being 230 and 204. The receipts of sheep are slightly in excess Of those
during November, 1916, being 1,743,139. a.s compared with 1,677,537 last year,
and 2,405,511 during October, 1919, the respective index numbers being 128, 123
and 176. Receipts of hogs, however, are considerably less than at the same time
last year, showing a decline from 3,431,782 head, corresponding to an index
number of 156 during Novenmer, 1913, to 2.715,955 head 4 corresponding to an
index number of 124 during November of this year, as compared with 2,160,079,
corresponding to an index number of 95 during October~ Ftom Kansas City it is
reported that November receipts of cattle and sheep at the six markets of that
district were 15 and 36% respectively below the October record, while receipts
Of hogs were 13% larger than in October, Reports at the middle of December
indicated more liberal supplies of cattle and sheep 1 but largely reduced supplies
of hogs a.e cor.:Ipared with the marketing for the sane period la.st year. Bogs
1 marketed in NOvember showed an increased weight as compared with November, 1913,
while December has brought still further reduction in.the prices of bogs.
Cattle prices have also declined since the October report. The sale of the War
Department's entire surplus of frozen beef is not expected to affect the market
very materially~
Grain shipments are reported unusually slow, partly owing to coal shortage
and consequent reduction of warehouse accommodations. For the period from
December 1 to December 18 it was reported from the Minneapolis district that a.
severe shortage of cars has existed 8,rrl that there has been the utmost difficulty
in securing cars for the shipment of st~k and farm :products. Couniry elevato:rs ·
are full of gra.in and all movements of loaded cars are slow. On the Pacific
Coast farmers are holding spring seed wheat in anticipation of having to reseed.
• Winter feeding of 'uive-stock on the Pacific Coast has begun much earlier than
was expected, but in spite of this there was a heavy demand for cattle for £eeding
and the stock-yards report the quality offered superior to that of a year ago~
X-1779
rlt is reported from Chicago that although the average :price of live hogs in
. November was only $14~20 as eo~ared with $17.70 a year previous 1 the average
price for Decerrber is considerably lower. A large amount af paper is said to
be offered by cattle loan com:panie~ in consequence of the heavy moverrent of
cattle from the drouth sections of Montana, Wyoming and Kansas toward the
southwest for grazing grounds ...
Coal production has felt the effect of the strike and has accordingly been
low in the bitumino~s field. The production during November was 20,303,000 ton~,
corresponding to an index. number of 55, as compared with 54,579}000 tons,
corresponding to an index number of 147 during October and 43)895,000 tonst
·, corresponding to an index nu.11ber of US during November, 1915.. The production
of anthracite coal, however, has been well maintained, shipments during November
being 5,971,671 tons, as compared with 6,56o,150 tons during October and
5)276,659 tons during Novembe~, l91S, the respective index numbers being 106, 117
and 94. ln the central Pennsylvania fields the bituminous strike seriously
curtailed output.. Mines served by the Pennsylvania Irailroad produced at 46% of
capacity, those served by the New York Central at s%, and those served by the
Buffalo, Rochester and Pittsburgh at 21% of capacity. The Federal Reserve Agent
at Philadelphia predicts that the total production of bituminous coal for 1919
may be 150,000,000 tons less than in 1915. Anthracite coal :production has been
fairly satisfactory, although not quite up to the level of last year. In the
Fourth Federal Reserve District resumption of work by the miners has relieved
what might have been a serious situation, but the supply of cars still seems
inadequate to move coal freely to the :points where it is needed. The production
of coke in the Fourth District has also been curtailed by reason of the miner~
strike. One phase of the coal strike which has received much attention has been
its possible effect upon other industries. On this subject the Federal Reserve
Agent at Philadelphia remarks that "the effect on the industries of this district
has not been very marked, although some m:U.ls and factories have been compelled
to close down.. " In Cleveland it is stated that the restriction on ftlel supplies
necessitated a sharp cut' in the production of steel, although a critical stage
had only barely been reached when the coal strike was terminated~
Petroleum conditions, as reported from the Kansas City district, indicate
the completion of 963 wells, a decline of 76 wells as cor.wpared with the <ctober
record. The total daily new production from the November C041pletions was 69,131
barrels. Great activity in the effort to speed up production has occurred~ An
advance of 25 cents a barrel· on crude oil has given a new impetus.
The iron end steel industry has been obliged to face severe operating problew;::
and trade and market conditions have accordingly been subordinated for the tiiLe
being. Toward the end of the coal strike fuel cu.rtailments had been ordered
which would have necessitated a very material reduction in steel output. In fact,
durinf!, the early d.ays of Decerrber many b}.ast f1.:,:1JJ~cs ·were ob ~.iged to bank and
a number of steel works were also closed. Ioss of output has accordingly been
s\l.ffered by tbe industry d\.tring :December, tb.e situation being cumulative as a
result of the coal strike.and the steel disturbance~ It is estimated that the
loss of production during the past tbree months as compared with the rate of
activity :prevailing October 1, has been from 2~000,000 to.2,500,0UO tons in iron
and steel~ In the Atlanta district, however, although the·industry was handicapped by the coal strike, there has been a very heavy demand for pig iron, and
.steel mills, while suffering from the coal strike, have been actively employed.
They now have enough unfilled orders on hand to keep them·Operating at full
capacity for many months to come. In Philadelphia pig iron is in strongest demand
since the signing of the armistice, and steel products of all kinds are in heavy
62
-5(
63
Productiun during Noverr.be!r' war; 2,392)350 tow; a& compared with
1,663,556 tons during October, the respective index number-s being 103 and 60.
der..1and.
The unfilled orders of the United States Steel Corporation at the close of
November were the highest for eny month during the present year, being 7 712b,330
tons, corresponding to an index number of 135, as compa~ed with 6,472,66b tons
at the close of October, corresponding to an index. munbt;r of 123~ The ~igll
costs of production now prevailing are proving a serious problem to steel producers and one large manufacturer in the Philadelphia district has closed his
order books v.ntil definite costs can be ascertained. Raw materials are ad'tancing, while fael and tra~-1.sportation charges show p:>ssibilities of following in
the same dire<.; ~iun. MeanwhL.e 7 tl:itl demand for S"Geel is strong in all lines,
variou.s railroads placing tonnages for 1920 delivery. Qrders :placed or under
ne~otiations in the 4th District r·un from 2:00,000 to 1,00(., ,000 tons ..
Shoe
In general manufacturing activity is very great.
manufacturers in
the Philadelphia district are now operating with a~ficient orders ahead to last
unti-l spring, but it is noted that high prices have to some extent tended to
c1.eck purchasing. In St. Louis the manufacturing of boots and shoes is steady
and larger orders are in hand for future de livery than ever before. leather
is reported to continue to dec line in v.ellue, being particularly marKed in lower
grades. Tanners are reported to be cautious in the replenishment of stocks of
hides which have likewise sh!Wt!m a decTe[;>.{~e in price.
In shoe manufacturing and leather 1 New England. tanners are inclined to be
cautious. Iv!.aterials for women ts fine shoes are still rising in :price. No early
reduction in the cost of footwear is foreseen, but the public is beginning to
show a more conservative attitude as to purchasing.
Clothing c1anufactur.ers report very large orders, future demand exceeding
normal, while No'\'f'e.mber business was about on a par(''wi th the corresponding month
a year ago. Manufacturers of woolens in the 3rd District have not kept up with
demand and values are extremely hig~
·
J
l.
'
'
I
·'
•
.At the New England wool sales during the past month the demands for fine
grades continued and far-western wools are being pwcbased in advance of harvesting. Manufacturers are sold out for months ahead at high prices, chiefly for
an output of fine fabrics, but there are hopeful indications for an increasing
demand for wools of a lower grade.
In silk guods demand is unprecedented and prices are the hi~est ever S..·
received. Raw materials can be obtained in fair volume and wi.th reasonable~
but only at very high prices#
In New England manufacturers of fine cotton fabrics have not yet develo-pets_ s
policy with respect to taking on business, but many have sold practically their
entire anticipated output for the first q.ua!.·ter of 1920, and others have engaged
their product as far as .August and SepteJ..be:·. The demand for goods continues
high and sbong.
In cottons the high price of the raw material has had a bad effect while
shipping conditions have added to the diffic-:J.lties of p::;-ad.ucers.
an active call for all kinds of c()tton g ... ods both for domestic .
and export trade, while prices have be .m steadily on the increase. Therr:;; are
' practically no stocks on hand at the mills, Manufacturers are cuncerned over
the future and merchants are urged not to carry more gooct.s than are absolutely
necessary. The attitude of the consumer toward higher prices on s~ring goods
unsati.~;factory
There has be~n
64
X-1779
\
•
is considered likely to be an important factorl The wholesale and JObbing
trade is considerably confused. some dealers reporting very large increases
running as high as 200%, as compared with last year, while others report
decreases up to 33%- It would seem that some retailers in anticipation of
higher prices have been buying a~ead.
The housing situation is reaching a critical stage which may result
in largely stimulating building operatiuns. In the widdle west, particularly
in indus trial centers, the shortage is said to be acu.te. Hcmts have advanced
very greatly in view of the standstill of building operations and the increase
of city populations which have called for much more extensive accommodation.
In Chicago thus far buiJ.di.ng :permits have· been gt-anted amounting to about
9:90 1 000,cuo, but it is estimat.ed that from four to ten years will be required
to overcou1e the deficiency in housing accOt:l1"10datiolH In Detroit rentals have
increased about 65% since the beginning of the war and the shortage of ~ouses
is the more serious thaD. a year ago. In South l;end, Incdana, the shortage is
exceptionally acute ani the same is true at many important industrial points
throughout the mid~le west ond in the northwest. The s~e situativn exists
in many other parts of the country, in feet, so widely as to be all but universal,
although in varying degrees. As a result of it an increase in building bas
already set in and in St.Louis the permits gre.nted luring the past month have
been much larger than those of the :p!"eceed.:ing month or the corresponding month
last year. The same is true of the 4th Federal.Reserve District, while on the
Pacific· coast building construction is very active. In New York building co~
tracts fell off $2,565,000 in November as compared with the preceding month •
This was a decrease of about 5 per cent. Contract awards, however, normally
show much larger decline at this season. The total volume of building in New
York is very much above normal in cost and ·somewhat above normal in floor space ..
Residential building continues on a large scale. The continued rise in the
prices of building materials has not yet reduced the extent of building operations
be low normal.
The Atlanta ~istrict reports that conditions uurine the past month have
been favorable to the production of naval stores and that receipts :nave accordingly been well maintained. Prices have been stable and tb.e prospects are tbat
they. will go no lower this season. Domestic demand is very large and labor
conditions are not unsatisfe.c tory..
•
The development of real-estate speculation commented upon in many Federal
Reserve Districts in Nove~ber appears to have reached another stage in some
quarters at least, The Federal Reserve Agent at Cnicago notes that an encoura6in~
feature of the situation is the fact that the rise in the price of land has
received a decided check, while in some ciUes prices have declined 25 per cent
as compared with a few months ago. On the Pacific Coast, however, there is still
a tendency to purchase farm lands at high prices for the purpose of resellin5 •
•. '
.Pn active lumber market is repo!'ted for aJ.l parts of the country, in spite
of the steadily increasing prices. Prodl.lcticm in many sections is stated. to be
well below normal and mills at"e well supplied with orders.. It is stated from
the Atlanta district that "the year will close with ·t;he greatest demand for
lumber and the highest prices ever known, and the outlook is said to be for still
hi""her prices eac:ly next yeru.· •"
•
-7-
•
J.-1779
65
As already noted, a serious view is taken of the ad~ance in prices~
The index number of the .Eureau of Labor Statistics shows an advance from
223 during October to 230 during November, which is the hi~hest level yet
reached. The increase is found in the index n\Uilbers for each of the
principal gro~s, coruiumers 1 goodtS showing -~ increase from 220 dtr ing
<ktober to 226 during November, producers 1 goods from 211 to 216, ani
consumers t goods from 228 to 236. The increase in the index number for
the group of raJN materials is due largely to the increase in the prices of
farm prod.uc ts, the index number for which group increased from 254 in Oc to'ber
to 275 in Nbv~ber, while the index number for the forest products group
likewise increased from 224 in October to 239 in November. That for the
.animal prodracts group remains constant at 212 and that for. the group of
mineral products shows a decrease from 184 to 183.. In great Britain, Saile~·'s
index number shows an advance from 224.. 3 to 231.0.
The month of Deeel®er shows aome abatement of laber unrest and disturbances which had greatly reduced produc~ion during the preceding month.. The
termination of the coal strike and the cessation of activity in the steel
strike as well as the increase in the number of men employed in those i~
dustries has greatly reduced the figures representing unempbt~ent.. From
many districts it is reported that the chief difficulty does not lie in systematic strikes out in indisposition to increase production or to keep steadily
at work. The red'ilced oatpr.lt as a result of very short hours or suspension of
work. a given number of days each week, has J?roved to be a. national problem ..
The disposition of labor to pursue such a. policy is ascribed by many to high.
wages and the desire to employ the increased purchasing power thus obtained
in the purchase of leisure rather than goods~
During the month ·at Decerrber there has been
reduction in the expansion
~hat "the progressive
expansion of October has been stayed, at least for the present.n .A falling
off in the amount of new securities offered for sale is rellorted, whil.e during
the month the loans. of the New York banks have continued to decline* From
October 31 to December 21 the loans, discounts, and investments of the 112
reporting banks in the district fell off about $4o},ooo,ooo, this decline
being chiefly in New York City, but 'banks elsewhere increased their loans by
about $264,000,000 during the same period, making a net decrease of only
$139,000,000 for all. the reporting banks in the country, about 794 in number.
During the month discount rates at the Federal Reserve Eanks were once more
advanced, this advance being effective December 11.. Commercial paper rates
have continued to harden somewhat, and in New York are now on a 6 per cent
basis a.s compared with about a 52 per cent basis at the middle of November ..
Call money has been as high as 15 per cent.during the month. but the prevailing
rate has been around S to 10 %, although at one time as low as 5 per cent~
lass activity, not only in 'the New York stock market but alsij on stock. exchange-s
the country over 1 has bean a feature of the month •s operations. Practically
throughout the country there has 'been some tendency to a hardening in money
rates .of all kinds·. The investment yield of securities has increased materially
and during the month of December there has 'been i! considerable liq_uidation in
bonds.. The result has been to reduce bonds generally and in a marked way. The
lowest price level since 1896 has been reached. 3rd Liberty Bonds and Victory
$ notes ha.ve sold on a 'basis higher than 5~. Dubious issues of stocks have
made .their ap:pearance in great numbers throughout the country.. The movement
is stronger in the larger cities but is very widely prevalent- .A vast growth
of new enterprises 1 some doubtful, some sound. appears to ie taking place
~ome
of bank credit and from district No .. 2 it is reported
•
.. ..
66
-i>-
X-1779
throu5hout the country e.nd the total volume of securities if;;;~.ued :nas. been
fl:'r in excess of any. within recent months. v{El.;:,e earners are tuyine, tt..r
cabh or are transferring their L::.'uert,f bonds to p:romoters wt...v in r£lfJ.1J..f ca:;et;
off "..!r eAtre.ordinarily high rates of returl.l. Du.rin~.:o the m~th .t urel.c;:r• e~
chenge bas gone to record low levell::i, sterling at one time touchir.~ .::j. o5.
Francs and L.re have :pt:>rnlleled. thib d.uclir~e in sterlin6 , end pr?.ct.icall,v
c 11 e:t..chan:?,e s ·have b0en w.se t t led . Dl.lring the la t t~r part of t:ne n,un t;l tnere
was an upwRrci TfOV~r.lent 'Nhich rc:o:; tor.ed n~an.r of the currer..cios to b v ..eri.r..~.c.t uetter fi~ures.
\
December
3u,
•
.
.
1919 .
I
f
CARTER ,GLASS
SIC'iQA,jy or THI TIKAIUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
CoiiPTROLLIR OF THI CUIIIIIC:Y
.ADDilDI llEPI.Y TO
WASHINGTON
FEDERAL. RESERVE BOARD
W. T. CHAPMAN, SICRITARY
R. G. EMERSON, ASSISTANT SICRITARY
W. II. IMLAY. FIICAL AGENT
X-1734
Subject~
Collateral Loans; Re la.tion of Collateral
back of Note to faee amo1mt ot ·tiote ..
'
Sir~-
Dear
•
There is qpoted below for your information the text of
a. le.tter addressed '9y the Board t'? the chairman of one of the
Federal 'Reser-ve Danks:
.\,
ll
.
~The lloard has considered your lettel' in
which yo~ Qall attent).on to a case where a member
bSrik bu,yi.'hg Goverriment sec uri. tie~ in the open
~~t afa discount sought to discount 1t8 fifteenday pape~ with the bonds a.a collateral at their
fac;e 'l!alile. You state that when the situation was
made ele~ ·to the member bank that as the transaction
w.,a an ~en ciarket one and the bonds bad been purchased at a discount additional collateral should
be deposited in order 'to margin the loan \1P to one
hundred per cent., or else the loan should be reduced
to the market value of the collateral, it recoe;nized
the propriety of the suggestion and agreed to comply
With it~
The :Soard takes the view that the attitude of
the Federal Reserve Pank was entirely sound. The
underlying principle of a collateral loan is that
aside from the value of the maker 's name from a moral
standpOint the chief reliance for security is placed
upon the collateral, and collateral notes provide as
a rl,lle tor the maintenance of a certain mar61n
anc. fur
the calling for additional security ahould the market
value of the collateral decline ..
We are now getting away from Wa:t' financing and
.
•
'.
67
W. P. C. HARDIN C. IOYIIHOI
ALIIRT STRAUSS. YICI 80YIIHOI.
ADOLPH C. IIILLIR
CHARLES I. HAIILIN
HENRY A. MOEHLENPAH
68
-2-
from the principles which governed the Federal
Reserve Banks in faci 1i tatin;:; such financing.
It is quite probable that there are no longer
existent any commitments to carry securities,
and the Iloard feels that it is sound banld.ng
policy to require notes secured by Goven.mel1:t.
bonds to be limited to~~ market value of the
bonds. It assumes, of course, that it is not
the policy of the Federal Reserve Ilanks, as it
certainly is not the 3oard 's policy, to do anything to reflect on the value of Government ob~ igations, but the banks have already estab Hsbed
higher retes of discount for paper secu;:-ed by
Government bonds than we1•e in effect several months
ago and the adoption of a well--es·~ab lished bankiug
principle as to adequacy of collateral does not
cons ti tu te, and. should not be regax·ded as any reflection upon the ccllateral itself • 11
\
Very truly yours,
Governor.
Letter to Governors and Chairmen of all F.R. Banks.
\
...
69
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate release,
January 5, 1;:120.
On
\
Dec~Jber
27th the Federal Reserve E9ard
~e p~bl~c
its letter
addressed to the Federal Reserve llanks, req,uesting them to invite representative bankers of clearing bouse cities from all parts of the country!
I
to meet in Washington on TuesdEq, January 6th. for the purvose of discussing
the telation to the discount rates of 'ederal Reserve Danks of the rate of
interest paid by banks in the larger cities on balartees of out of town
banks and individuals..
The .American :Bankers t .Association will also be rep-
resented by a special committee appointed by its president.
The. conference will be opened at l0-30 o'clock tomorrow mor~~ng in the
auditorium of· the Interior Department at 18th and F Streets, N.W. • by the
Governor of the Federal RE:lserve toard, who will 111ake a statement ~ the :Board's
position on the subject matter of the discussion, after wC,ich it is the plan
of the Federal Reserve Iloard to withdraw to permit of f.re.:: discussion by the
re~esentative
bankers.
The conference will be open to the public up to the
point at which the Federal Rsserve hoard shall
witbd~aw.
'v.nether or not the
\
\
\
conference will thereafter be open to the public will be determined. by the
i
bankers themselves.
~·
',
January.5,1920
.
~-
70
.
W. P. 8, HARDIN$, GOVIINOR
ALaiRT STRAUSS, Yl~l IIOYIINOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
CUTER ILASS
BICIITARY or THI TIIAIUIY
CH!-IRIIAM
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COIIPTROLLII OF THI CUIIINCY
ADDRESS REPLY TO
W. T. CHAPMAN, SICRITARY
R. G. EIIERSOH, ASSISTANT SICIITARY
W, II, IMLAY, FISCAL AGIJIT
WASHINGTON
FEDERAL RESERVE BOARD
Jmuary 10,1920
X-1786
Remazoks of Mr. James B. Forgan before
the .American Econoxxdc Association on·
tbe subject of n Prices ald -13anldng Polict'.
Subject:·
•.
Dear Sir:-
There 1s enclosed berewi th for your information ex~racts fran reilr.arks by Mr. Janes :B. Forgan,
President of the Federal Advisory Council on the
subject of "Prices and :Banking Policy" at a recel'lt
meeting of the American Economic Association.
Very truly yours •
Enc ..
II
Governor.
.
letter to Chairnen
and
Governors of all F .R. ·
»a:nks.
71
X-1766 a
Extracts from remarks by Mr. James B. Forgan, PreHident of the Federal
Council, on t~e subJect of " Prices and Banking Policy 11 at a
recent meeting of the Pmerican Economic Association.
~dvisory
"Tbe most urgent :p-ractical question raised by Professor
Moulton is, as to whether the Federal Reserve system is
J;Oing to prove the unfailing tower of strength:,we have
accustomed ourselves to consider it and whether) as has
been generally proclaimed, it will forever prevent tbe
recurrence of tbe ,periodical fina1:..cia.l r;anics, which
prior to its organization were so frequept in this country.
1
"Professor Moulton s!'lys that it has recently been computed
that the Federal Reserve banks as a whole could still expand
the total volume of credit by over a billion dollars before
the reserves of the system as a whole would be down to the
limits prescribed by law. 1 This may be so, provided they
can continue to get an ever expandin5 outlet for their circulation, which now stands at over ~~~~00,000,000 and u
they can maintain
continue to increase their reserve
d.eposits now '>t.a:nding at over $l,SOO,OOO,OOQ. These two
amounts combined - $4,6oo,oou,OOO, form the credit ext~ndcd
tr; the Fed~ral Reserve banks by thair member banks ani the
:public against which tht:y are required to keep a mimimum
gold reserve of 4o% on the former (their circulation) and of
35% on the latter (their reserve deposits). On the basis
of the credits thus ex. tended to them and of their ;:;old r<.?serve
they have loaned to member banks over ~2,J.OC.>~·Qu0,000, about
73% of which is a6ainst Government securities, besides which
they carry Government obligations amounting to $300 ,OvG 1000
and :Banker 1s acceptances, amounting to $5b5,000 ,000.
or
J.lthoush composed of twelve individual entities, the
Federal Reserve system must be regarded as one individual
whole. The financial pressure is not felt with equal force
all over the country at the same time, but varies with the
seas~nal requirements of different sections,
The strength
of the syst~m lies very largely in coo,perative action ty
the tNelve banks, which finds its most vital expr~ssion
in the maintenance of the Gold Settlement Fund in vvashingtor••
The policy of the Federal Reserve board is to treat the
twelv"> banK.s as integral partG:''Jf one system. This is
1'
I
-2-
,.
X-1786 a
necessarily so. Under this policy ~t is interesting to
note that some of the largest Federal Reserve :Bar.!.Ks have
recently re~uired assistance in order to keep their reserves
up to the mirtitnum lee;ai req_uirements, while some of the
smaller banks, which a few mont:11s a5o had to be similarly
assisted, now stand well to the top of the list in their
p~r centage of reserves to deposits.
The ratio of total reserves to net deposits and Federal
Reserve notes of the system is at present 45% - tho lowest
::QOint yet reached - a year ago it was 50% - two years age
62.% - three years ago 77% snd four years ~o 157%. These
figures clearly indicate that there are limits to the Federal
Reserve system as there are to all institutions of human
origin and warrant the words of caution used by Professor
Moulton "If we allow the situation to go forward until the
reserves of the Federal Reserve system have been reduced
to the legal minimum we will be in precisely the same situation
that we have always been in, in ti.me of crisis, namely Ni th
a fundt.rnental need for a te:n:lForary expansion of loans with
.
which to tide the business world over a threatening financial
abyss, but with utter inability to make any such expansion."
Of course, the Federal Reserve Boar~ has authority in an
emer~ency to reduce the legal reserve req_uirements of the
Federal Reserve Banks or to suspend them for a. stated period,
but panic of considerable ca;,nitude would doubtless J?reva.il
before such eetion would be taken or it miGht follow should
such action be taken. It certainly behooves us to call a. halt
L~w and to 6ive due heed as to whither we are driftin6·
I
therefore a5ain agre0 with Professor Moulton that in the li;ht
cf the present situation the reserves of the Federal Reserve
system should be conserved and that the only effective measure
available to the Federal Reserve BankS should be applied viz.
to raise tb.e discount rates on all lines of paper d5.scounted
by them. This policy has recently been adopted s• far as
removin,.; the preferential rates ~n loans secured by Government ob1i 6 ations is concerned and has already had the effect
of reducin~ somewhat the volume ef such loans, which is ~ood
n3 far as it &oes, but this has been practically offset by an
increase in co~mercial paper rediscounted and bankers acceptances purchased showin~ the correctness of Professor Moulton •s
statement. ''If member banks are compelled to reduce their
btrrowtngs from the Federal Reserve Banks on 1war paper', the
result will merely be 1 so lonb as a demand for their funds
continues, to shift the borrowins process to c1ro1cercial paper·
There would then be no chan~e in the total amount of credit
~xtension by the Reserve Lanks.w
He then draws attention to
the fact that "Funds may be drawn from Federal Reserve :Banks
by an. indirect process , 11 ref err :in;:. to theil· j_:)Urchases of
acceptances in the open market.· This is exactly what has
taken place since the rates on twar paper' loans were raised.
He then reaches the inevitable conclusion that 1' if the total
volame of bank loans is to be reduced it wi 11 the ref ore be :
necessary
11
..
72
X-17S6 a
-3f
.,
73
·:for discount rates to be raised on all classes of
paper and for the Federal Reserve banks to refuse
to expand their
own
market purchases·"
In explanation of the policy of the Federal Reserve
banks in r~gard to discount rates as heretofore approved
by the Federal Reserve Board with advice of the Federal
~dvisory Council, I would say that conditions confronting
them have prevented the application of reco~ized economic
principles. The controlling factor b.as been the necessity of the Government for credit to enable it t•.
prosecute and win the war.· Not only had the Federal
Reserve banks to make such rates as would enable the
Government to float its low rate securities in tbe sbape
Of bonds and certificates o£ indebtedness, but they had
to take charse of these issues and do everythinb they
could to induce thair member banks, at their own expense,
to help distribute thorn, arA to extend to their customers
who bought them such credit as was necessary at correspondin~ly preferential rates.
It was patriotism that
for the time bein:;!, disp1e,,;ed or disre6a:rded eccnomic
~~ laws ani principles. The hope for the future is in the
claim of the Treasury Department that after its financing,
necessary to :provide for its certificates maturing within
the next sixty days has be~n accomplished, its urgent
necessities will be out of the way and its requireroe~>s
will thereafter be -m.~t b"y floating short term certificates,
issued mn anticipation of the quarterly collection of
Federal taxes. Such c~rtificates having only a short time
to run and the certainly of th3ir payment at maturity will
afford them .a ready market with the large taxpayers as
We 11 as with the banks~
It will be no lon:ser necessar_y
to arbitrarily distribute them ~ong the banks by allot~ent in proportion to their resources.
The desire to
have the Gover~nt successfully achieve its last refunding
operations in connection with its $2,}00,000,000 o:f certificates maturing between December 15 and February 2B was
the principal reason why the discount rates at the Federal
Reserve banks were not raised on all lines of paper at tb.e
time the preferential rates on paper secured by Gover~ ·
ment bonds were wi thd.rawn. Wh\m this Government financing
is out of the way, as it is expected to be very shortly,
there is little doubt in my opinion that the Federal
Reserve bunks under the advice of the Foderal Reserve
Doard will ruise their rates for the purpose of cb.eckinb
undue expunsion of credit vihenever such action se~ros
necessary_ Thus they will secure sorue contrul of the
discount market whicb. abnormal conditions have so far
prevented. There is JUSt a possibility that after we @;et
throuoh with this Government financin~ and with the usual
first-of-the-year operations the borrowini:, dernands of the
member banks on the reserve banks may :perceptibly fall ~ff
and a shrin.kae;e in the volume of Federal Reserve notes may
take pla.coe. Tl.tis would occur in th.:o: natural course of
11
•
•
....
74
X-1736 a
'
e"tents, If 1 however, in the interest of our f creign trade,
and for humanitarian and ethical reasons, we are going to
extend to E\J:r:'OIJean co~-~1!,t?5.es tbe ::-recUts th:-,y :require, t::J
enable them to obtain from us the foodst\~fs and raw materials
they so urgently need, which I firmly telieve w~ should)
there is small :prospect of the demand for bank credit weakening during the year 1920. If the Governrrent should assist
in this necessary European financint?;, as I also think it
should, it.may have to be still further financed and again
theories may have to be suspended in view ~f the conditions
we will have te face. The necessities of the railroads· for
large amounts of credit after they are returned to their
owners is another important factcr which will operate in
maintaining a strong demand for bank credit for seffie time to
come.
" Under the abnormal c ondi ti ens new prevailing ani with
eu.ch Wlcerteinty as to futu.re <ievelopments, the1·e can \le rHt
doubt that the resources of the Federal Rese:r·ve Banks should
be conserved as much as possible, and that the policY of the
rrember banks sholild. be to discriminate against all loans f cr
s:pecalative purposes and to make careful investigation as
to the use to be made of all monies borrowed from the~ by
their customers. I am not without hope that if such policies
are pursued, financial panics may be avoided and that, notwithstanding the strain, which seems inevitable, the Federal
Reserve system will prove equal to itv - :But we must be on
our J;Ua.rd; we must look ahead and not strain the elasticity
of the system to the breaking point. If its reserves continue
to shrink, the t:rakes must be applied by mater:i.ally raising
the discount rates •
..
75
W. P.lt. HARDING, GOYIINOR
ALIIIIT ITIAUSI. VIC& IOVIRNOI
ADOLPH C. IIILLII
CNARLIS S. HAll LIN
ltx Omc10 MRMBII118
CAIITER 8LASI
·SICIUAIY Of THI TI:IAIUIY
CHAIRIIAII
FEDERAL RESERVE BOARD
JOHJISKELTOII WILUAIIS
C011P1'10LLII OF THI CUIIIKCY
ADDRIESS RIEPLY TO
WASHINGTON
FEDERAL RESERVE BOARD
HENRY A. ~~~,L!IIPAH
W. T. CHAPIIAJI, SICIITARY
R. G. EIIERBOJI, .UIIITAKT SICIITARY
W. II. IMLAY, FIICAL AIIMT
January 5,1920
SubJect:
CSmpa16Jl
tor New Pal" Pointe.
Dear·ss.r:!here is enelosllli berewith a copy of report
prepared fran replies received from all Federal Reserve
~ in response to our telegr&4 of Deeer,,ber 29th, as.king
for 1nformati0Zl reg~ding the progress of the caopate;n
being cond\JCted. for the establisbmect of new par po:i.nts.
In addition there is also enclosed a special
poqme~er banks not on par list distributed
by States accord~ to Federal Re.-e:rve Districts.
report Sbowtog
Very tru.ly yours,
•
Asslstant Secretary.
Letter to Chairmen of all F.R.
l>~s.
C.PMPJ.IGN FOR NEW
P.A'~
POINTS
R0port.s c.f Federco.l Reserve i&nh:.s,
Federrl
Rese:rve
?an..~
---
: Nat.
-
: Total
: Non-member
: Ierli;:s
r:atlk;
: ~~!.=mbe r
: banKs on
: in
:district
Members
:banks
: par list
N~w
:
395
-:-
121
York
Phi lade l:phia
640
Cl2V3land
747
- - -246
----
- -
-:-
-
-
-
-- -
- - - - - - - :No. of banKs :No. of banks
:added to par :e..d.cud to par list
:list durin(!, :since Jan 1, 1919
:Dec. 1919
- -%- - - - - .
- - -
-
---
--
- - - - - - - - : l.'io. of non- :Total nv.;J:b_;r of
: rLewber banzs ;non-mr..ffihor banks
:not on par
district.
list
- -
in
.
....
246
313
100
31&
415
100
643
l,Oo5
100
759
673
:
-
- - -
:Ratio of non-me~b0r
:banks on par list
ao total non-meinb<:Jr
: banKs in district
100
431
:
Decerriber 31,1919.
-- ------- -- -- -
State
-!-- ---:----- ~
Boston
X-l7ul a
:
115
415
11
415
l,Ob5
35
211
395
1,4b0
7
106
1,2}8
1,594
533
46
534
435
32.3
363
54
427
356
22.3
1,048
327
1,375
3,396
93 .. 0
199
1,541
293
Louis
463
63
536
2,309
b6-7
lOb
1,311
355
2, 664
!1•Jinn~epolis
b33
921
1,379
64.7
3b5
710
1,025
2,904
Ks:-ns2s City
366
1,034
3,345
100
201
1,164
},345
De llas
643
7'd.J
1,230
100
194
9~
1,230
564
717
942
u9. 6
14
15
1,051
7 ,bb3
9,065
16,506
00~4
1,154
6,jLO
"Richmond
.f\.t lanta
St~
Total
~
117
!
1,162
FEDE!t.A L TIESER VE l OARD
WASHINGTON
January 5,1920
..
4,ul5
.
4,189
c:o,521
-
_i
DIST"ttirLl'J:'ED .ACCO'iDING
T~
STATES .l!ND FEDEnAL
RESE"~rVE
DISTiUC1'S
Fad.ere•.l
Reserve
l'a"lk
!
Va.
: V::. V'-'-• :
~J. C •
S.C.
Nliss. :
Tenn.: Wise. : lrkt
Ky. : Minn .. :
S.D. :-
Ariz~
Ore 0
• :
Wash. : To,tal
los ton
New York
Phi lede l:phia
Cleveland
T~icbmond.
41::;~ !
l;;J;
30.:J
!
.
Chic~go
St.Louis
Minnet!polis
:Ki.nsc.s City
De.llo.s
Se.nFr(',ncisco
Total
1:,;; :
FEDERAL 'RESEltVE EO.Al1D
W.ASlUNGTON
J~nur~ry
5,1:120
30:7
:
201
142
503
104:
254
186 :
434
129
74 :
575
13
55
41
13
55
41
:4,vl5
FEDERAL
RESERVE
10.AHD
ST ilTEMENT FOR Th"E PHESS
X-1733
For release to morning papers,
Wednesday, January 7th.
The conference of representatives of the clearin6 houses from
various parts of the Country assembled at Washington
ye~terday
for the
purpose of discussing the relation of the rates of interest paid on deposits to the Federal Reserve bank discount rates, concluded its session
with the adoption of the following resolution:
WBEREAS the Federal Reserve :,~oard.has invited the
representatives of the clearing houses from various
parts of the country, here assembled, to attend a
conference in regard to the interest rates paid on
deposits throughout the country, and Governor Harding
of the Federal Reserve board, has ou tlin.ed very clearly
the present financial situation and the probability of
advances in rates by the Federal Reserve banks 1 and
WEEBE.AS it is the opinion of the conference that the
present wethod in several of the lare,er centers of the
country of re,sulatin~ :i.nterest on bank balc..nces, by a
sliding scale, based upon the ninety day Federal Reserve
Bank discount rate 7 is not wholly satisfactory 1 and
WHEilli.AS until more satisfac.to:r.y regulations are
adopted governing the rates of inte:c·es t to be paid on
balances it is most important that existing regula ~;ions
should not be abrogated, end
WHEREAS it is the opi.nion of t.b.is conference that the
Feder a 1 Reserve Banks should alwa;ys be f:i.~ee to es tab li.sb
their rctes of disr;Ol;.nt without reference to any cJ.ea:.:-ing
house regulations as to the payment of :i.nterest, and
WHEnEJ.S it is the opinion of this conference that
the payment of high rates of interest on bank or commercial balances :i.s unsound. ard is bad banking, and that
every effort should be made to avoid. such a p1·ac ttce,
79
X-1766
-2-
NOW THEREF0"8E in order to make progress along safe
and conservative lines, it is requested that the Federal
Reserve Board invite the Clea.t·ing houses in each Fede1•al
Reserve City to select thr:::e (3) representatives from
its Federal Reserve district to attend a meeting·to be
held on o£· a:buu~ the 23l:d day of ,January, 1920, at
Chicago, Illinois 1 to consider this whole question -of
intarest on balances in order that some basis may be
agreed vpon tha·i; will te mutually sat5.sfactory, conducive to conservative banking and benefit the entire
business and banking com~unity.
The Federal Reserve Board announces that pursuant to the request cuntained in the fore;;;oinb resolution it has instructed the Chairn1en
of the several Federal Reserve banks to invite the clearing bouse in each
Federal Reserve city to select
tl~ee
representatives frou its Federal
Reserve district to attend such a meeting to be held in Chicago on January
23rd next.
January 6, l;J20f
!>
FEDERAL RESERVE
80
LO.ARD
ST /tTEMENr FOR THE PRESS
X-1759
A1
For immediate release
January 6, 1920.
Fonowing is a statement made by Governor Harding in opening the
conference had by the Eoard today with banKers representing some 25
clearin6 house associat~ons throu5hout the country:
Gentlemen, during the time of war ordinary banking policies were
necessarily abrogated in order to make successful the war financing.
Rates were established by the various Federal Reserve TianKs, net so
much with reference to ordinary industrial &nd cor,;niercial requirements,
but rather to promote the success of the various Liberty Loan campai.:,ns.
r!e r.ay heve departed from some well established bankin~S precedents which
haa. always :soverned in time of peace and. adopted policies fully JUStified
by war conditions which should however be modified in normal times.
11
hs you know, tna requirements of tne Governn1ent during the war were
exceedinc,lY heavy. The Treasury issued in certificates and bonds a total
of about twenty five billion dollars durin~ a perj.oa. of ei 6 hteen months.
This amount wns very ~rcatly in excess of the normal investment capacity
of the country, ann in order to make a success of floatin6 the various
issues, it was necessary that the public be aiJpealed to to subscribe to
the various issues without reference to its immediate ability to pay.
The member banKs and the non-member banks ;ave a most patriotic
response to every appeal that was made by th0 Treasury. They opened.
their coffers to the public, invited subscribers to take large amounts,
to make lo~s at the banks and in many cases agre0ments were entered into
as to the rates of interest that would be charged for these loans over a ::>iven
period of time ..
The Federal ~eerve :Banks, wi tb the approval of the Federal Reserve
loard, established preferential r?tes of d:i.scount on paper secured by
war obli6atiuns and everythin~ possible was done to aid the Government in
raising the financial sinews of war.
The termination of the war, from a military standpoint ~id not,
however, synchronize with the financial end of the war. Wnen hostilities
ceased there were large liabilities of the Treasury outst~lding, many of them
undetermined, and it soon became evident that another large popular loan
was necessary. Doul1ts were expressed by some
to th~ efficacy of the
patriotic appeal that was made and had been responded to so magnificently
during the time of war. Eut the ·people of Pmerica arose to the occasion.
as
-2-
X-1739
A 2
The Victory Loan was over-subscribed. 1ut even then we did not reuc~ the
definite end of our war financing. for the Treasury had outstandin6 a floatin; debt in the shape of certificates of indebtedness amountin6 to nearly
four billion dollars. This floating debt had to be arr&n6ed. The Treasury
was anxious to reduce it from tirr.e to time at the ~uarterly periods when
income taxes and excess profit taxes are paid in.
The Federal Reserve ranks end. the Feder&l Reserve J.. oard reco""nized
early in the year 131:;~ certain dan,erous tendencies toward which we were
driftin~, and the J:oard issued re:;eated warnin 6 s that unnecessary credi~s
in excessive amounts should be checked. 1u~ those warnin6s haa only a
temporary effect, and as the yeo.r pro.;ressed it bec~e evident th&t
danberous tendencies had developed into dan6erous conditions.
J\ction was finally taken and a halt called. The Federal RGserve
Ioard was S'lbJect, .. no doubt, to some criticism. J~ut I believe that
even smJe who w~re severe critics last November recobnize now that the
corrective applied was necessary and sal1.1tary.
The Secrete:ry of the Treasury hc::.s notified the Fea.eral Heserve :Lo.srd
that the financial plans of the Treasury as to the handlin"" Dnd ultimate
re tirerr.ent of the floating debt have pro~ressed so far that as far as the;
Trecsury is coDcerned, the ::..oard might feel entirely free to exercise its
statutory po;rers with reference to the control of credits and the regulaticn
of aiscount rates.
"'
There is nu question, gentL~men, that the credit structure of this
country is expanded. Such a condition is inevitable; there is no blruLe
that should nttocb to anyone for such a state of affairs, for we have
passed through the greatest 1 most destructive and most expensive war of
all history. All wars are accompanied by increase of taxati0n. In most
of the countries there bas been inflation of currency 1 and in all countries
a greEtt expansion of credits.
the
· During/ Civil v7ar resort was had to increased taxation, to creJ.i t
expansion, as represented by bond issues; and to direct ·currency inflation
as represented by an issue of irredeemable notes which we~e paid out to
mec;t current expenses. Those notes were given the legal tender quality,
so tha.t th3y were receivable for c:tll debts, public and private. Tile
injection of irredeemable pc:per money into circulation drove out metallic
ruoney, gold and silver, and prices advanced.; they vvere based upon tt~e
paper str.ndard, and afte·r the Civil War closed fifteen yenrs ela:r:sed
before the :paper currency was able to ch~culate on an absolute parity with
gold, and. evt:!n so late as the yecrs J69L~, 16~5 and J.o)6 our legal tender
notes proved. to be a very dist.ur.bing factm.' 1 for, owing to thei:':' fre-1.nent
reder.lptions and irarr.eciiate re-issue, they constituted. a serious l.1enace by
rf.e,king u. constant drain UI)On our supply of gold.
Jlhe United. States was financed during the recent war partly by increased taxation <.=.nd partly by bond End certificate issues, n form of credit
exp.~na.ion.
Currency inflation c.i.id not enter into the scheme~ The oOJ.igations issued by the Government were not made e.v"'J.J.r.1Dle by Cong'::'ess t·J ~:::·.'1..c':'f:
issues cf circulating notes directly. lut, as Sect1on 13 of the Federc:l
'Lserve lc t, which defines the limitations of eligible paper, and wbl:::h
bars investrr.ant, securities of various kinds, made an exception in fa1ror
81
-3-
of paper secured by notes and bonds of the G<lv:;rnH.ant of the United
States, it developed th;:,t, aft:;r all, Gov-?rnrr.ont bonds were used
indirectly to sorr,G extant as a basis C!f circulation, by reason of
rx:.per secur?d by them bdn§> Tjlaced with Federal Reserve Agents as
part security for Fader-1 Res3rve notes, 1)lus the required gold
reserve.
So, while w:: h:ivo turned ou.r backs now upon the p~riod of
war fin&ncing and h;:cve directed our steps toward a ,nore normal
bari:dng TJOl icy 1 w2 cJ.n not )X}Jec t this y2s..r, nor next, nor in the
i:L.1edh.te future, to regc.tin a b&.nking ·cosition which would be
r::;garded 0..s normal, vhon judged by :pr2-war stc-ndards. We c:m
only reach such a position wh.m, c::.S the result of incrac:.sed
nroduction, :md nduced axpendi ture on th:: r.-art of thG '(;eOlJle
:::.nd of the Gov;·rnrrent, outst2.nding
I
obligctions of the~ver:ament have bc~n very are~t17 reduced ani
the remainder has boon abso~bed by tbe invef' tino public. The procusft
is one which will require time and patience. But 'lilt; can formulate
our polici\)S now. We must have a definite policy to whicll we must
adhere in order to bring about, in the course of tiJW • t·a~ result '! •"'JI
which I tb1nlt all tbinldna men &goa should be attainuli.
The banks of the country, the c01111ercial barlks in the larp
and medium sized. ei ties, and in the country towns, have an iJ~i>ortcnt
pert to play in bringing about this result. I hopu 70U gentleDm Wn.o · ....
ere here todq w.ll im,pr~ss upon your neipbors and upon your coun~ry
bank cli.mtele the importance of pursuing a ci.11fini li.:t, sountL policy.
•
N~~icen~iFl
loans shou~ b~ ~1scourr-~ ~ t~ r~iscount
faciliti;;s of the Federal Reserve Banks ought not to b.J used t·or th-.1
saJ.tc) 01 :Jrofits. The Federal.Rescrv~ System should be broui)lt back
u rE'l)ic..Ly as pof.lsible to th<;; basis th: t the authors of th..: ~ ct h3c..
1.n mind wnon tht. law was i:.'Dlleted. F-..'Cl.eral Reserve :Ba&.b should. bt: ~pt
in a 11-s,uid condi ticm. They should.. be in a position to lapand. or contraet wir loans according to ~ industrial and conr·;..rci: l r~quiremmta
of thE~ cr.mtry. They shculd be kept in a position to rv&pom tCJ .:.ny
'UileXpectc.d omorg~ncy and to r.·ll seasonal requiremmts. Th\;;.f shou.L\1 b~
ab};} to f\Dlish te ~hi::l 'u:incss of -ch;; co1.11try a sound a."Xl el4stic
curr~nc,-.
And when I say \,)lastic, I moan : curr~ncy whicll is c·t>p~'lu,
not only oi ~Bno.i.Jl6·, but c-lso of cCintr .. ctina, in t~rO....r thrt 1t ~ey
expand ~ain whvn occasion requires.
•
If tno F.}dorr 1 Rcsorve Banks, as a roflac ticn of the cond.i ~ion of
the mamb ..r b8Jlka of tlu; countr7 1hose r .... s~rvus cr\J JWpt dntir.;ly wi'Gil
the Ft.Cl-rcl Reserva Ban..D, .are permittuel to expand to ~llo vory limit.
of their reso\n"etts, and then the countrT")bould. bo c•JrUrontcll W1 til .;n
.::.meraency, we nould b~ obl1 0~d to meet that emergcmc7 J~t r:.a> th~
there w.;r.:~ no Feel~,;ral ~Eodrvo System. 1w.·~:.
•
Tht: Fed~&l Reslrve Board is direct.}¥ eonc,'jm;;d. With. tne subJc~ct of
rates, In ordinary times tho nP.tural cwrectiv~ ut' an expim.\#d eona.ition
is an ad.vanco in rates. Of courso, With tlw w\)rld out CJl JCiint ~s it is
at prbs~nt, with the United StF.tes. havin6 th_, only fruv bold marla:t, \111ih
the embargoes llfhich exist, necessarily, in fcr ... ie;.n countries upen thi.:
eJ:port v! gold. we· can not merely by raisin6 r.:. t~s adt1 bo uur gold hola.iJ2ie)
and in· raising ratef' we r:ust be cuefurn~Jt tt.• ... o ~.nythir-6 to discour&tr,"
productien or add to tb..; cv~ts and difficuli.i... ~ ...t rroa.~tion.. · \\v wouh
pref.:r. not to do tbet, b ... caus<: th~ ordinarY proiits ut ~vcrr-o.ay buoinc:atl
arv small as compared w1 a tnt- l:rg... r pl'ofi ts wb.i.ch me y e... ;;~i%ll.ld from
succ~ssful spccul.zt;tvv op.;r.:tions; and litl.: ttv.;r~e._. tusl.l\osa ma1 1& m-.~rv
~~3nitiv~ tu tncr~~s~a co~tb in nis supjly ~i aJUvy ana crwdit ·tbkn is
~h~ s~culntivc ia11vidual.
T~ lalit~r'a 6~ct~ticn ~f ~g~ prctits
eftt:n r ..md~rs b
i..~1ff.;r\.ftt tv rates.
If u ...n.. 1 in CAt;ap, t.>O r.ucl.. t£.;
bt::tt~r fer him, -ut if it :a.s hi:;a <lld. n ia l)hta.J.."l.):lo: , .a\: •d.ll t.rua..
it ~J·
X-1789
B-2
But we believe ~entlemen, that by eallin~ the attention of
~he banks of the eo~t~y to the fact that, after all, the resources
ot the Federal Reserve Banks are not infinite; and that not only ·
is there a eheek·provided upon rediscountin~ in the way of advancin~
rates, bu't a direct chflck; as c,utlined in Section 4 of the Federal
Reserve Act, which, in definin~ the· duties of the Board of Directors
of a Federal Reserve Bank, req~ires them, in grantinr. their loans and
diGeounts and accommodations, subject to the orders of the Federal
Reserve Board, to pay due re~ard to the Wants and requirements of
every •ther member bank, to administer the a~fairs· of their bank fairly
and impartially, keeping in view.the possible requirements of ail
members; .and it follows that should three or four member banks, or
a Cl'OUp of a dozen or so member banks ·~a permitted, throu.;h very
lar~ discounts, to absorb all the loanable funds of a Federal
Reserve Bank, it would be impossible to crant reasonable accommodations
to all m~~r banks •
. But it is coin~ to be necessary,pernaps, to raise rates beyond
their present level. I am not here to make a proph~cy nor to outline
!ut~e policies; but you should all bear in mind that a further rat•
·· · ~ ue is a. eontin:"'eney which must be reckoned with ..
LncreA~~
·
Now. we are cOf'Jina. to a subJecl: Wlne4 attects you u&nkers ver7
closel7. 'lhat is the effect of further advnnees in '-41scount rates ot
Federal Reserve »anD upon your r~lations with other banks. and upon
your relations With your own mercantile and bxlividual customers ...
.Jbout two ,ears ago, wben the war was at its height, when no
wo1lld continue, when we hai a certificate issue
ever7 week and a bond issue ever7 few months, the banks of the countey
tegan to be restive and they coemenced. bUdins up for deposita.. The ·
Federal Reserve llanks 8Dd the Federal Reserve Board looked. With concern
upon the new de·re:u,Piitel*•"s, and t,he Boacd •ent ooe oi ita uiDDera to
New York to confer with the Clearing House Committee. That confet>enee
was foll~ by a cunference with the entire Clearing House Association.
There were a good many things to be C'ansidered. tlan7 of the banlrers in
N.3w Yor~ were engaged in a nation wiue l:uainess. 'l'he;r eane into coD\P¢tition to some cxtellt with banks who carried accounts w:tth tbem. Finall7,
aa the result of various conference A, · th~ ~w York CJ.ee.ring J{Quse ®opted
a r~le governing the rates of in+.eres~ to be paid. on ~._,posi f;f! a;l:\ l>anlt
balances, a sliding sea!e be ina ad->vted !cr th(~ 1 ate on bnnk baln.1~es 1
lttlltwaen a minitlllAQl of. one !)Or ceut and a mtueimum of three per cent ba.ued
upon the ninet7 da.Y disco:mt rat~ for ccnmw:rcial paper at the Federal
Reserve l*lk..
one knew how lang it
;
X-1789
85
0-1
fbe schedule of maximum
r~tcs foll~s:
When tho 90-®y r~to tor
· cammerci~l papor ~t tho
.Federal Reserve Bank of
New York is:
Maximum rnte to be
pai~ on tho above
accounts is:
2~
113~
2% or over but less than
"·"
II
...
II
tl
II
tl~
II
II
It
II
tl
II
II
II
tt
fi
4"'
~
II
U
If
~II
If
II
R%
n·*
..
4"'
51&
II~
tte%
or .&em,
The Board has no criticism to make ot this schedule. It accepted the
arrangement when made with the realization thai it vtas ·not exactly the kind
of an arrangement it had sought to bring about, but it mLs the best to be
·
had under the cb:cumstances. fbe same schedule was adopted also by the clear-.
ing house banks of Boston, St. Louis, Chicago, st. Paul, Minneapolis and Ne..,. ·
Orleans. But ''lhat the Board wishes to have thoroughly understood ~Y the
bankers througheut the country is that it can not be hampered in its appr.val
of discount rates for Federal Reserve Banks by any arrang•ent made by ~anks
or any association of banks, as to rates nf interest which are made dependent
upon.Federal Reserve Bank disc~unt rates. In bther words, the.B.ard ~11
exercise its statutory rights., and will.be absolutely and entirely rr·ee to
· tl.pprove such rates as in ita opinion the interest ot the country demands.,
without reference to any oanpetition much may spring up as the result thereof
among bankers for ·deposits. It is '!Tell that rc)u shoUld understand this •.
lf<7.'f, I will pass to the next phase of the questil)n, e.s vir..red by the
Beard. We are exceedingiy anxious that there Should be ne scramble tor deposita. We see no occasion why an advance in a Federal Reserve Bank rate
should bring about such a condition because these ad~ces., after all., a~e
not permanent., they are temporary; wherell:s, the relationship bet"''e~a a depositor and his bank, or bet~een one bank and another bank, is aupP.osed t~
be more or less permanent. It is pretty hard sometimes, even in the face ef
greater inducements offered by other institutions, to bresk up an establish~&
rdationship of many yeara stnnding.
We have ne suggestions to offer as to the ~isdam of the policy of' pay1nt
interest on deposits. v.r., knOtT, of course, that fifty t'r seventy-five years
ago. the practice ·~as leoked upon uith.suspicion by many of thP. moat censervative banks. lVe knO'!r that in the panic of' 1873 in Ne-r Yerk ' . ee~rbuka
iti that. c.i-li7 ftichr~: the time ·.1erc engn:!ed mt)re par':.lr.'J.le.r ly in building up
a business with interior banks throughljut. t.~1e eow-~try, e.r.d "rhi~h paid interest
~n such balances, were the bankc •thieh 3t~~d mor~ i~ ~Pe• •t assistance; and
that they hrul to call on the bMks which did not pay interest on deposita, to
assist· them by means of advances through the clearing house·•
...
..·
X-1789
C-2
86
But times have changed. The world has progressed. One by one the
banks which stood out against the practice cf paying interest on bank balances, have yielded~.looking for remuneration in greater volume of business.
So we may recognize the fact that the payment of interest on deposits·is an
established practice among american banks and there is no need to criticize
it. But there is reason in all things. · There ought to be m~deration in all
banking methods. The Federal Reserve B~ard wishes you to keep in mind· thiSJ
thought ,,.,hich, in its opinion, if heeded will prevent any dangerous tendencies or unsound practices. All deposits in banks are of a temporary and
transitory character. Banks are Cf'>nducted Yrith due regard to the law of
averages. A man may have a large deposit 17ith a bank subject to check. Tomcrrc.v it may all be checked out. But it is going into somebody else's
hands. As long as there is no hoarding of funds 1 and credits move from
one individual to another on the books of a bank there is no chenge in the
position of the bank, or the position of the associated banks of the city
if there should be a transfer from one bank to another.
But keep in mind, gentlemen) the temporary character of deposits ~-both
demand and time deposits. There may be an agreement that, in consideration of
a higher rate paid a time depositor the banker may have assurance that the
funds ''!ill not be used by the dep.ositor for a given perio! of time - but
no banker should look upon deposits as a permanent asset. They are a liability.
.
No customer of a bank should be ed~~nted to believe that his deposit
in bank is an investment. In other Yrords, your rates should not be put up
so high that they vrill attract deposits on an investment basis, because a
deposit in bank is temporary; it is merely a fund a\·taiting use or investment and not an investment itself. If you get your customers educated to
the idea, by paying them high rates, that: their deposit~ Hith you are real~
investments that they have made, you may rrake up sometime to the very unpleasant realizatinn of the fact that after all these are investments ,·rhich
·you must buy l;laek at their gace value whenever the owner of the deposit desires you to do so.
·
This year there are going to be very heavy demands of various kinds
made upon the investment markets of this countTy. The railroads are soon to
be returned to their O\'mers. We are confronted now with the problem of financing our exports to Europe. We have financed
. '=""' exports amountin£; to f;~ur billion d~lla.rs du.::-i:lg 1919, just hovr we do not know·, but w·e
lin.v~ a suspicicn that the American banks have borne most of the burden, directly or indirectly.
'Vfuile there is no occasion to doubt the soundness of your loans - because
there is an ~\bundance of good c,.,llatercl.l exclusive of the tnenty billion
dollars or so of Government bonds - "Te feel that it is important in financinr::
our permanent requirements and long time loans to appeal, not to the commercial banks but to the investment market.
This reasoning applies more particularly to the smaller banks, ·:rhich
very naturally like to s~e their deposits continue to increase, and many &f
them have the feeling that any decline in their total footings i·s a reflectiC"n
·upon them, although it may very greatly strengthen their.rcse~ve pcsiticn i:
their l~ans, and deposits are reduced in equal proportion.
87
D-1
X... 1789
Here is the crux of the proposition.
If ba:nkel~s through higjl
rates of interest compete for funds with the investment market
and. attract la:rge deposits to thm:1selves, they are llound to
u.tilize these deposits.
High interest pay:rnents for deposits
tend to pronote unsotU'l.d. ba!l..king, for the reason that many a
a bank which has c. large volUJ:"le o:f deposits at
hi~
rates of
interest will malm a loan in order to keep the r.1oney in use
that it
\VOUld
not .thinlc of touching if tlJ.e deposit bore no
interest.
If all cocr.1ercial banl\:3 should Ul1d.ertake to treat their
deposits as f'J.nd.s available for long investr.Kmts, and should
accunr..:tlate deposits b'IJ :peying high rates i11 coqpetitionwith
the investr.-snt 1:1arket, they would.1w.turally be c.alled upon to
purcl'lase all ltinds of investr:;ent securities 1vhich should nore
properly be ta1mn by their depositors.
To sun up: There is not m.1.d can not be crny nrranger..1ent
to consider rates of interest ?aid. 'by L£TJber bo..nks for de:Josits,
in estc""olishing c".iscou::Tc rn.tes ::.t Foc"..err:-.1 Rcsor.;c Bc~:nlcs. :Monbcr
ronks ,._,2.:y, hone·! or, base their interest r2. tos on Fcdo:ro~ Reserve
.Bo;nlc c'i.isco·J.n t mt os if tl1ey wish. H UJ.y 'be the scientific w2.y
t 0 do it, but such a r..:tle should be as uniforn as possi blo ..
But if ado:;>ted gene rally i t oue;ht to be \7ith the distinct u.."ldc rst<:'.."'ldin~ tllL.:.t tl1ero is no oblig± ion resting on the Federal
Reserve Bo.11l::s to refrain frou est8..blishing or upon the Fedolt',l
Reserve Board n~t to o.:)rnove nec.essc;~T ad:vaucos in di SCO'JJ.1t ::rf.tes
88
X··1.789,.
:o-2.
ncrcly because such act ion night prcci:pitc.tc a fight botv.,rocn
ncr.:1b or ronks for deposits.
I mvc mro tclcgmr~ ani letters fron clearing houses
that were una blo to h::.ve rcprosontativcs hero; nnd thoy all
take tho posit ion that there ought not to be a:ny scr~:J.ble for
deposits or any change in the present interest ratos on
do"?osits should the Feder::cl Reserve discount ntos be advanced
further.
Th.c..t~J tolcg:rar::s and lett Ol'S will 1::c on tho desk so that
your ov-m presiding officer can bring then to your attention in
tho proper 11ay. I ·will roqd, hov:cvor, - - '.7ithout giving tho
naJ.:-:o of tho clo~ing house fron which it co:::cs -- extracts fron
one letter. This is a very large nnu inportant cor:.norcla.l center·,
which is not raprosontod here t oda.y. · Its clearing house cor.nittco
eoos on to say:
nrt r."2-y be said that t:rJ.i s Cl oaring House /.;.ss oc iation has
no ag:reenont s of acy kind between its nonb ors, <JS such, in
regard to rat os or c and it ions in their 1'Usinoss .. They have
no rules as to clnrgos, nor is there any prov is ion in their
organization other than voluntary acqu5.csonco in o~ing or
onfo rcing such rules. Hov;cvor, tho Ass ocit:cticn h;;s nuver
founcl ony difficulty in presenting "co foro its 1:ar.1"bors oattors
of C()LiL1nn interest and securing volunta:y s.1pport to what hcs
boon doonod prope.r policy.
"Tho con:J.ittco u:naninau.sly oxprossoc.l the~ opinion t1nt
rolo.tion between int crest pci. d to uq)osi tvrs ::mel tlu current
interest ro.tos (':ili.ich ::.ro p:l. maps best indicated by tho
FoC.oro.l Reserve Bnn.kt s Ro..te) is thoorotico..lly a :proper rol!ltion ..
It has no opinion to ex:p.ross o..t thi:s tiuo as to tho spread vmch
should oxi.st or hovv quickly the ch."l:lgos of rates of interest
p2.:kt to depositors should follor; an increase in the discount
rate. 'Tho rates no\7 :prevailing in this ctyy >7oro brought into
be ing by tho voluntary in ere o.s o of r :1t os on the part of oth0 r
b;;.nkers cor~q,:e. ting in o. sense 11i thus for certain of our doposi t
lines, and were not inspired by -J.ny original idea of the l:.::.ulkrs
in t his c it y.
"Ar: it YJ:JS at first announced thct;, the Ncr;.· Yorl>: 'ba:nks vvore to
l)ay 2-Ij2 per cent on l::an.l{ b:1bnces, thr>.t rate vns adopted bY
son:: cf our lc:din3 b::1nks, and fclla:Ied by all of tho otllc:t:s ..
·:rnon the rc.to in Nc.' York•?>.:J.s finally fi::ed at 2>·1/4 JO:l:' c.:mt,
::o ,..,_~ticn ,-,ns b.kcn to ch;;.ngo the 2-1/2 ~ r cent :rO:to ho.'T'e~n
'7~ t ('.ondit ion existed
en~ 4~-o:r~t ~i ty thnt has
-::hr.> i"n,,,., cJ' tl10
in several citi E:S. I thj.nlt tru:~re is
a 3 per cent ro.te in offoct now, in
2-1/4 per cent ro.t e in effect in N·::t.V Yorl:.
....
z. . . 1789
89
D-3.
To continuo uit;1 this letter:
\!~'lo co:r.Dittee feels sure that there is no intent, that
there will be no action on the :part of any *"'** b:m:k to
increase rates paid for deposit~, except as a r.1atter of
prJtectinc their situation a gaL st bmks in other eenters
ca:1p9.t :ing for the; s;ane business, 8XIi should tho r.::tes in
other centers be :fized at 2-1/4 IE r cent, we foe1 su::ce that ·
ne change vHJUld be necessary 'by "ur ba:nkr::r.s.. ,'Jlwuld 1 however,
the rates paid in competing centers be increa$ed above 2-1/Z
p Ell' cent, it is quite lilre 1y that the banks o .f th:is city wl"iv.ll
find it necessary to r.:eet. \1lhatever rate wo.s f..:.xe1 by co:r.:q>et :ing
banks witl1in the liDits of :proper business prar.tico.
"It l'T'lly be, there:fore, best to o.ssure the other m0nbers
of the Conference in the a 'tsence of our xeuresC;nt.::. tive that
we ·,;·ill not bitiate any ch.,'llge in rates
res.:;,:xmse to a
change in dis c.:mnt rates Il'.ade by the :B'ede.ral Reserve Banks,
but will be c fmpelled, in self-prote.;t ten, to follow the rates
agreed upon ::w competing centers to the limits 0£ prcpe>lr
practice as above outlined.u
in
It was suggested by the Board when the Iiftm York arrangement
went into effect thst instead of havin;, an autoru:.tic change
in rate with eve:cy change in the Fcde:;::.c 1 .Reserve Biscot.-nt rate,
a change in the bank rate be ndl.c a basu< for a ch?llge in the
de:posi t rate, but that the !Y'..at t er be c0ns i.dered .and voted upon
aeparately by the Clearing House Ass cc i~t: i.l'n.
It seems to the Foard that it would ell well for ycu to
consider thi.> whcle quest ion with a viov, if possi bls~ sf
preventing any distubance of ycur own bus:L1ess~ or lhncreas~d
off:;:rinss of discounts to the Fedexnl Rc.:o,..~ve B;:nks, \vhich wvuld
inevitably result if you were to :put your OiVn doposi t rates upon
an investment basis and were called upon to r:Dke long investments
yourselves, instend of passing then along to your cu.stor.1ers ..
Tho -nress were noti£iod tho. t as long as the Federal ReGcrve
Board vmre in chnrge of this r.1ee'ting they were r.rolcor:c, bu.t when
the bankers thenselvcs took charge of.the neoting they night be
~sked to wit hlraw.
V/c n.re indebted to tho Secretary of the Interior for the
uso of this roori, vmich you can have unt i1 4:30 o1 clock this
~ftornoon.
As far as the Board knows, thoro is no occasicn for
you to stay over until tonorrow, I think you o.:m conpletc your
deliberations in one dey.. You h::>.vc an opportunity to exchange views
and you can hear frw all sections of tho country and you can n.woint~
such COIJr:.1ittoes as you roy deon ad.vi sable; but the i:r.zportan t thing
for you to do c.t the nor...cnt is to elect a cbairr.nn for your r:;cet ing.n
~·
FEDERAL
HESERV:E
BOARD
ST ATE~4ENT FOR THE PRESS
X-1791
Release for :r.10rning pApers,
Janu<:cry 3, 1~20.
AN ADDRESS BY Vl.P .G. HARDING,, GOVERNOR OF THE 'FEDERAL RESERVE
BOARD, DELIVERED 1\T BOSTON, TU.NSDJ.Y, JANUARY 6, lj20,
BEFORE THE M.ASSACHUSETTS BANKERS 1 ASSOCIATION.
**************
The historian der·ls with the past, but the active mr.n of affairs
lives in the present nnd directs his vision toward the future.
Yet
it frequently happens th~t in order to arrive nt a thorough understanding
of present conditions and to interpret the significence of the shadows
which coming events are said to cast before them, it is necessary for
the business man to review the .past, or at least the recent past, in order
to draw logical conclusions from the
se~uence
of events.
We are living todi1.y in extraott.dinary times wnen lights and shadows
present contrasts more marked than we have ever seen 'Lefore.
In sume
localities qnd to some individuals the scene is illuminated with the
radiant intensity of a July sun nt noonday, w1,ile in other· places and to
other peoples it is enveloped in t11e murk;r darkness of an arc tic midnight.
We realize that such conditions nre unusual and transitory) for extremes
so violent cannot continue indefinitely.
In our own country we question
the permanence of the lurid prosperity enJoyed by some while so raa.ny
others are struggling with adverse conditions;
there is no La.sis for the hope
th~t
t~d
in our world relations
this country can prosper long vvhen
other great nE\tiuns i=.<re plunged intu tlle depths of deJ?rePsion, poverty
and famine.
More than sixty yenrs ngo Abraham Lincoln said that this
natiun could not exist half slave and half free 1 that it must be all one
90
I
91
L-1791
or the other.
So also neither this country nor the world can continue
to live'half in the glaring
st~light
and half in utter dorkness.
cennot, of c G1J:rse, lt;:k for 1:'.r.:\·-Tetsa1 S'...:nshine, but
vo~e
We
should undertc.ke
to soften the contrast now existing. taking pains to accomplish the
result by diffusion of light rather than by extension of the shadows.
To the superficial observer who considers only large figures and
volun1e of business, gross profits '3.nd demmd for services and goods,
it appears that the people of this country have never experienced such
exuberant prosperity.
Prices and wages hi1ve never bean so high, opportunity
tq work so abundant, demand for goods so great and bank deposits so large
as now; but with all the conditions present which are usually regarded as
concomitants of
prosperity, there is a wide-spread feeling of unrest,
of dissatisfaction with the present, and of apprehensivp for the future,
There is general complaint that while there has be.;;n no approach to uniformity
in rE•tes of increase of personal incomes there has teen a sweeping and universal advance in prices of necessities as well as luxuries uffecting all,
and resulting in deprivations and hardships to a very numerous unorganized
intermediate class whose earnings and incomes have remained practically
stationary.
The high cost of living therefore has become the subJect of universal
proposed
interest rnd concern nnd various methods have te~n
·
fer its reductio•~
·In considering the problem it is well to review briefly the course of events
during
t~e
past five years in order that we may understand clearly tue causes
that have led to present conditions and ty analysis be able better to reach
conclusions as to the proper corrective¥
There can be no doubt that the world war is directly resp•nsible
for many of the successive advPJ:lces which have taken
of
~illions
of men from productive
oper~tion~ ~d
p~ce.
their
'.Phe wi tfulrawal
conv~rsion
into
-3- .
92
X-1791
•
fighting units. and the expenditure of billions of dollars in processes
of waste end destruction created an abnormal and urgent demand for supplies
of all kinds, not only for the necessities which ere required in times
of peace and war alike, but also for arms, tounitions and all sorts of
military and naval equipment.
Production could not keep pace with demand
notwithstanding reduced consumption end rigid economies on the part of
civilian
populations,
The world was drained of its tangible liquid
wealth as represented by raw materials and manufactured goods; in many
countries currencies were inflated, mld everywhere there was credit
expansion on a vast scale.
Industry was diverted into the r.1ost essential
channels, and building operations and construction work generally were
suspended except where necessary for the production, stor<lge rnd transportation of war materie-L
When hostilities terminated upon the signing of the armistice nearly
fourteen months ago 7 the world had teen deprived of the productive power
~epresented
by perhaps fifteen million men who had lost their lives or
permanently
who had become/disabled. It was deficient in supplies of fooclstuffs, fuel
and textiles, and its manufacturing capacity and transportation
were greatly impaired.
faci~ities
Millions of :people found themselves homeless, not
only in the war stricken areas but also in countries whose soil remained
untouched ty invooing armies 1 for normal building operations were four
years in arrears.
The belligerent nations staggered vnder a stupendous
burden of debt, which had been inc1·eased during the war by the equivalent
of more than two hundred billions of dollurs, most of which hau beGn
expended in destructive energy involving uneconomic conswnption of goods.
The largest country and. great granary of Europe was torn oy revolution,
anarchy
~
civil war) and the populations of other European countries,
many of them crippled by loss of man power, oy la.ck of domestic animals
93
.X...l73l
,•
and a.gricul~ural implements and by the imp$irment of p:.-oductive capaeity
generally and the loss of their foreign markets, were una.ble to supply
their domestic requirements.
They were
obli~d
therefore to turn appealing
eyes to the Far East, to Colonial possessions, and across the Atlantic to
North and South America.
By reason of its stronger financial position and greater aLility to
produce foodstuffs, raw staples and manufactured articles, these appeals
have been made in larger part to the United States.
The assurances given
by our Government of its humanitarian ~lses in entering the war, and
the financial aid extended through loans from the Treasur;r amounting to
ten billlons of dollars have also served to focus tb.e eyes of all Europeans
upon tbe United States as the most dependable source of suppl;r for Europe's
wants.•
UnfOI'tUne.tely the trend of events in this co-untry during the year
131~
was not altogether satisfactory.
'
.
Following a period of waiting ond hesitation
thrift
during the early part of the year, the policies of
-, . and economy, of
self-denial and conservation which during the war proved so effective were
soon discarded, and the pent up··energies of a people which bad subrogated
so finely all pleasures, ambitions <;Qd impulses to the task of winning the
war were released and found expression in activities of every Kind.
In
many instances these activities were commendable for they were devoted to the
eonstructiQ work of bringing the industries of the country baek from a. war
to a J)eaee basis, but advantage was taken of the ease w1 th which credit could
be obtained, to avail of speculatiVe opportunities for profit.
became rampant in
al~
Speculation
sections of the country ::nd individuals everyNbere gave
free rein to extravagant tendencies hitherto restrained ..
M•a.ncina prices served to stimulate rather thr;n to check demand, alld
-5-
94-
X-1791
the evident necessity for conserving e-ssential cor.m1odi ties known
to be scarce failed to curtail consumption.
As the yec.:r pro--
gressed bank loans and. deposits increased, and reserves declined.
Frequent warnings issued uy the Federal Reserve Board had only
a temporary effect;
dangero-us tendencies developed into
dangerous situation 1
and corrective measures were applied,
conceded to have been
neces~ary
time were denounced by sorr.e who
l:i.
now
salutary,
but which at the
ought
tu nave known tetter as a
[tnd
conspiracy against the prosperity of the
country~
Meanwhile it tecrute evident that those who had predicted that
the year wuuld witness a marked falling off in our exports, because
of the decline in the cash purchasing po.ver of European nations and
their inability to secure credits as indicated by the
spec-
tacular drop in the exchanges of most European countries, h:J.d
r~ached
preu:ature conclusions, for the total value Qf exports from the
United States during the year ljl::J has exceeded imports l-y at
leas~
four billions of dollars.
Notwithstanding this fact, the movement
heavily
uutgu
of gold fer the year was •
against us, the net
having been
$27&,723,000, up to Decenber 20th, or taking into consideration the
balance of the gold received from Gern.-my for fovdstuffs nnd held in
London for future ship:r.::;ent to this country or for use atroad., the net
has been
December 20th,
$147 40},000.
1
In additicn to this there heve te0n, to
net exports of silver Dir;ounting to $145,<:'20,000.
Vi1hile the value of rnw materials arid of monufactu.red. orticles
produced. during the year wa5 the greatest in tn.e history of tho:: c ountryr
95
X-1791
-6-
the physical volume proved to te smaller than for any year since 191S~
During tb.e last f:cw we ~ks it has become increasingly avident that
active
st~ps
must be taken if our exports are tote maintained, es-
pecially tu European countries, in anything like their :rresent vol'Wl!~"
The fact tb.a.t V>e l;l.ave had a favorable tr'3.de balance of four tillions
uf dvllars accvrnpa.nieu by a large net loss of precious metals shews
conclusively tbat exporters have either
t~on
payment in
fcrei~
currencies vr that they. have accun::ulated credits in foreisn tc.mks ..
Just hvw these credits ho.ve teen a.rromgeli it is impussib le to trace fully
or even measuratly, but it is very protable that a lar5e part of the
financial burd.en has beRn tbrovm d.irec tly or indirectly upun .AJ;;eric:m
tanks.
There. is nv reason, however, to -lUestion the security of bank
loans f vr t.tle:re is an abundance ..,f priu:e collateral avai lGtb le inc lu.:dng
more than twenty billions of dollars of United States Governi:lent bonds ..
It is
hi~hly
important, however, that e-ll long credits granted in
connection with exports be kept out vf the banks, whose: policy should
be to maintain themselves in a liquid condition.
Apart from the locns
which the War Finance Corporation is authorized to :rcak,;.;, there is nu
provisiun for Govc:rnrr;ent aid in
finF.~UCin,; exports~
Th~;;
fund. of ten
billions of dollars which Congress authorized to be advnnced to foreign
e5overn:r,ents associated with us in the war has been :pra.c tic~lly exha.usted, ·
~r~
barring a possibility that fer hum@nitarian reasons, in order to
prevent actual starvation a further ad:vance of two or three hund.red
million dollars mure may be perni tted 1 there seems to be no
ex:pe.c t t1lat any more large lo<:llls by
will be autborized.
~he Governr:1~mt
to
for financing ex.pcr ts
Such a policy would rr.ean either more tn.x.ation Dr
rr1ore bonds; it wou.ld me£0. a return to wartime r.c.ethod.s of
we have tUl"fled
r~ason
our backs upon such
~ethods
fir><Jn~il'..g
and. are directing
O'U'
after
st-eps
-7-
..
X-1791
96
towards the metllods and poJ:',;.;ies of peace financing; it would rr:.ean that
funds belonging tO all the people would be applied in time of peace to
the more direct benefit of exporters and of those who produce goods for
export ..
Without discussing at this time the eff3ct of credit and currency
expansion~
it is evident that decreased physical volume of production,
higher prices of raw materials. and higher operating costs, coupled with
increased domestic consumption and heavier movement of exports, have
made higher costs of living inevitable.
As regards the responsibility
of the comn:ercial banks of the country, of the Federal Reserve Banks, a.J.d
of the Federal Reserve Board for present conditions, and as to the policy
that should be adopted in the futt\re, much can be said..
it be understood that there is as wide a
and
pro~er
differer~e
But first let
between war financing
banking policies in time of peace as there is between martial
and civil law.
The story of our wa:r financing will constitute a brilliant chapter
in the country ts
histo:r:y~
wt.ile the Fede:a.'al Reserve ]nnks and the
roomber and non-memb'=lr banks are entitled to the greatest pra:i.se for
their most effective cooperation, neither they nur the Federal Reserve
13oarcl are responsible for the policies and methods adopted in fj.nancing
the war and deserve neither :prnise nor blame for thew. Respons 4.bili ty
witb
for these methuds and policies rests ·
the Pres:iclent 1 the Congress,
and the Secret"'-rY of the 'l'l.'easury, who autbu:c5.7.-ed and
tu them the
~opted
them. cmd
results shuuld be creiited.
No great war bas been f:i.nan-;ed entirely by taxativn: ani inva:riably
resort has been hod to expcd.icnts such as ).rc:':lat.iun of currency or abnormal expansion of credi.ts; and sometimes to
·bo~·h..
Wa.rs vvi th us have
always caused higher taxat iCin, and during the ci vi 1 wa:r recourse was had
also both to credit expansion through bond issues and to currency inflatiun.
''·r.·
-&..
'
X-1791
•
Irredeemable paper money was issued to defray current expenses, and as
this currency was made a legal tender for all debts and dues, it was in
effect a forced popular loan without interest.
tt proved to be a very
expensive currency, however, because of its effett Upon prices, and not
until nearly fifteen years after the end of the war din it circulate on
a parity with gold.
in 1894,
The legal tehdet notes
we~e
a disturbing factor again
189, arid isj6• becaUse ot theit repeated redemptions in goid and
immediate reissue, and were described as an endless chain.
'!'he policy adopted by the Secretary of the Treasury in financing the
.requirements of the Government during the war with Germany excluded the
issue of uncovered paper money, and provided for sales of interest-bearing
obligations, consisting of short time certificates of indebte4nets, and
bonds of various maturities, which could not be used directly to secure
circulating notes, although indirectly through the Federnl Reserve
Ban~s
they were used to some extent as a basis for circulation.
In the clearly defined
'
limit~tiQns
prescribed in Section 13 of the
Federal Reserve Act, in the description of the kinds of paper eligible for
rediscount by
Feder~l
Reserve Banks, a special exception is
of bonds and notes of the Governn:ent of the United States.
period of actual war,
de~ds ~e
~de
in favor
During the
upon the Treasury were greatly in
excess of curr8nt receipts from taxation. ana the offerings of bonds
within a comparatively short time amounted to far more than the investment capacity of the
country~
In order to insure the success of the re-
spective bond issues it was necessary to anticipate the investment capacity
i:
97
~·
X-1791
-9-
of the public as represented by future incomes and savings.
Banks, manufacturing concerns,
busin~ss
houses and individuals
were urged therefore to subscribe· for bonds without regard to
their immediate ability to pay for them, and an effective appeal
was made to the·patriotic impulses of the people to borrow
heavily from bnnks upon the security of bvnds, and as a special
inducement preferential rates were established for such loans and
easy terms of payment were
promised~
The inevitable result was a great expansion of credit, which
was reflected not only in the statements of
indi~~ual
also in the position of the Fecieral Reserve Banks.
ti~e,
banks, but
.At the same
no opportunity was lost to impress upon the public the
necessity. for increPsed pro-iuction anci reducei consueytion, for
thrift and rigid economy.
fs long
!'l.S
the
Wr:tr
WI:\S
1n progress anci.
its issue in cloubt, appeals of this kind were far mox·e effective
th£-.n couH be expected c.fter the war hal been brought to a successful
conclusion, after the tension had been relieved and a period of
reaction
~cl
relaxation had set.in.
The end of e. world war in a military sense does not
· s;mchronize
with its termination from a financial point of view, and abnormal
expenJitures incident to war cannot be curtailed
tha suspension of hostilities.
iffiffie~iately
upon
I'he armistice was signed.
shortly after the flotation of the Fwurth Liberty Loanr
many months in ad.vance of popular expectation. The liabilities cf our
98
(
X-1791
-KlO-
Government were greatly in excess of the amounts which had boen
raised by taxation end by the sale of bonds;
there was·
aver~
large floating debt in the furro of Treasury certificates of indebtedness besides heavy unascertained liabilities of various
kinds.
It became necessary for the Treasury to float another
great popular loan, and notwithstanding the fears expressed by many
that an appeal to :patriotic motives in tiiLe of peace would not
meet with an ade-1uate response. the car;n:paign £or tbe Victory Loan,
the last appeal of the Treasury to the generous
irr~ulses
of the
.Arr.ericen people, proved to be an un.:tualified success ani tb.e loan
was oversubscribed •
.As a logtcal sequence the loan accounts of the banks generally
were greatly increased <.md more so oecc..use currJi,t::rcial dem;::.nd.s were
not restricted as they had
fro~
be~n
during the war period.
Receipts
the Victury Loan, however, were nvt sufficient tv li{uidate
entirely the liabilities of the Treasury. Ril<i a large fluG!ting
debt represented by nearly fuur billivns vf dollars uf Tra2.sury
certificates still remained to be cared for..
to cuntinue the wartime banking :;::olicies
r~re;jsury
had cumple ted. its
plan~
It was deen:ed necessary
until
~uch
for the periuc\isal
time as the
rei.lUC tiun
thlo in:iebteill1e::;c, 1:mJ. its refunJ.ing from time tu tirr.e
t 'lA
p2-ywsnts were
mac:te.
a~
uf
q_u.,.rterly
99
100.
-11-
x~1791
A few weeks ago the Secretary of the Treasury advised the
Feder~l
Reserve Board that the plans of t:1e Treasury had. reached
a stage where they would not 1)e ir.uperiled by resurqption on .the
part of the Board of its statutory
rates.
po;~rs
to
reb~late
discount
It 'vould be vvell
Revisions were made iw.;.edia.tely.
therefore for the tanks a:nd the pu1Jlic to understand that
financins have definitely lapsed and determined.
Henceforth
especial consideration .vill 1Je Given to the industrial and
coranercial
require~ents
of the country, and everythin;; possible
will be done to restore the J.:'roper balance bet·,;.rec:n the
credit and the volume of ,:;oods.
~~e
volur~Je
of
The pror:ess will nP-c..essarily
a .;ra.du.a.l one, and can ·Je corrpleted. c.nly when ··. v0ry
erable redell!Jtions of bonds have 'ceen made,
a.r:.d
consid-
~he re~::ainder
thorou;hly atsorbed by the pulllic.
Our
~.;anking
system is therefore passing thl'.'ou.gh a transition
period, inte~ediate betv~en that of war finance and a st~ge regarded as normal according to pre-war stando.rds.
Owin;; to the
necessity in the r.ieanv;hile of a.idtn;; in the financing of Europe,
it is probable that several ye<;.rs will elapse before an icie;:.l relationship between goods and credit can
conditions restored.
established and normal
During this transition period there should
be an effective control of credits,
~e
f
1_01.
..
X-1791
-12-
gradual liq_uidotion, and such temporary expansion only as rne..y be
necessary to meet seasonal re~uirements or emergencies,
There should
be a less lavish but more efficient use of capital and credit, extravagance
should be discouraged in every way possible, ~nd the production of essential
commodities increased.
It is important that the
~orld
should get ba<:k to work,
but in order to provide steady emplOYL~nt for the people of our own country
e:ven, it is necessary that there should be a sustained delllEUld for the prvducts of our fields and factories) mines and forestsr and in order to J~i~
tain this steady demand it is necessary to provide markets abroW. for our
surplus production.
~order for the populatio~of European countries to get
back tu wor·k and to produce tb.e things needed for their own support F.nd f0r
. exchP..nge with other nations, thus restoring tran'i.uillity to a war-torn wurld,
it· is necessary· thDt we should send ther:r; the raw materials, cuy..u,10dities and
e"luipment which they need so urgently...
In order to send curJl.'l10dities to
Europe we must have commodities available» for we crum1ot send
we consume here.
~bruad
With every appeal to aid Eurupe nttention should be
what
c~lled
that we may have an ade•luate exportable surplus ..
The domestic denwnd has been competing with expurt demc.nds, and tb.e
result has been that prices have been bid up on both foreign und QO~estic
consumers,
By some means or other credits have thus far been arranged
which have enabled shipments of goods to Europe to be made but for more
·
or direct
than a year there has be~n no systematic/curtailment of domestic consumption
'-
in order tu provide a surplus for export.
1.02
l} -
Tha resu.l t has been tba.t to the extent that our cons1Jrll)tion has been restrictiiQ. cit
has be~n accomplished through competition and constant advances
of prices. Had shipments to Europe been accompanied by corresponding
voluntary curtailment of const111ption at home 1 prices would not have been
forced u;p and from the resulting s.;.:vings the.re v;ould have been accumulat-.
ed a c~pita1 fund av~il~ble directly or indirectly for the purphase of
whatever Europe may
h~ve
had to sell in order to finance her irr.ports.
During the vvar the popular response to a:ppec.ls for conservation and
saving was magnificent.
~ne
reaction, however,
~s
been correspondingly
violent. :md a systematic ca.rqpaign of educ:J.tion may be necessary to
arouse our people. to the consciousness that vre may after all be living
in a fool's pa:r.:~.dise .sond that ha.td work, economy and liberal inve&tment
in foreign securities are necesscry if we wish to m::..ke our present apparent pr:psperity real and perrrD.nent-
The bill introduced Gmd sponsored several monthl ago by S8na.tor
Edge, of Hew Jersey, is novv .;.
"Edge Act".
l~w
o..nd will be known for all time as the
It is a gre;;;..t piece of constructive legislation and :Pro- ·
vides for the incor-_f>oration of associations under~ der:::J.l charter a.nd
under Government supervision to
eign banking or in such
eng~ge
either in international or for-
fi~cial ~erations
as may be necessary to pro-
mote exports of goods from the United States. The
E~ge
law affords
opportunity to all exporters, producers and manufacturers to
~
coope~ate,
to extend their connections a.bro«.d, to invest in foreign securities of
v .... rious kinds, and to offer their own o·bligations, specifically secil.red
•
.
:103
14 -
...
by their foreign collateral, to .American inv0stors. If oparm a way for
private financing of exports on long tirr~, not by the b~nks, but through
the investment market. The development of our foreign tr<:,de under the
Edge Act may be slow, and probably will be. At first, perho.ps, shipments
of only the most essent:ial o.rticles will be fimnced by cotlporations orgmized under the Act, but this rr.ay be really desiro.ble, far in view of
the present wave of extrJ.vas::tnce which is sweeping all over the world,
trJoughout Europe as well as i\merica, it is best that the stimulus for
production be concentrJ.ted upon essentials and that s:1les on credit be confined to such articles.
The sale of
1'orei~;n
secUl'i ties, either directly or indirectly,
through corporations ope:.atine; under the new law will create, of course,
additioml dem::mds Ufon
c~pit:::.l
and crodit.
time \i"l"hen there will be other ur ;e'1t d.err,ands.
Tlti.s demand is cominc:; at a
1"1:le g:reo.t railroad sys~em s
''1/~.1:1.
of the country 1 soon to be retm:ned to their owners>
large amounts.
States as a
The :problems ah.eJ.d vf us a.re
~tion ~s
sC1.'f'8:i'trJ<Ji.L;',
reached the years of maturity,
f3.iled even in its infancy and during the period of
meet successfully e7iTY issue
~d
to overcome every
require very
but the United
~nd
i~·S
it has never
ea.:cly youth to
obst~cle
and
d~ser~
As a sturdy siant it turned the scales to victory in the war in whiCh we
a.re still
technic.J.lly.en~;:'.ged
thing of the pa.st.
but which. let us hope, will soon be a
It is necessary only to h:we the people of this
country understa.nd· the n3.ture of the J?roolem; confronting them 3Xld the
need for their :;Jro:per solution, for our n::.tion:.t1 spirit when once
aroused is invincible.
FEDEIL\L J:.ESERVE BO_\aD
X-1794
ri.ASHINGTON
January 8, 1S20
FOR REPRESENTATIVES OF THE PBESS.
1•·.
.
.
:d
Please
on
p~ge
elimi~te
the following two sentances
~~pearing
ll of the copy of address to be delivered by Governor
H3.rdine before the Massachusetts Bankers Assocb.tion today, as
san:e will not be used by Governor Harding in delivering his
.3.d,ciress.
"It would be well therefore for the :;a.nks
and the public to understand that ?Olicies which
:;overned during the war period of financing have
l
i:'
~-:r
'
definitely lapsed
~d
activities of the
Feder~l
determined.
efforts to bring about a
Henceforth the
Aeserve Board will include
con~lete
distribution of
Governr.1ent bonds to investors and their elimination
.
from the assets of the ·.,a.nks.
>i"
.
11
105
W. P. II. HARDING. GOVIINO&
ALaiRT STRAUSS. VJCI IOVIINOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
CAIITERGLAU
SICIITARY OP THI TIIAIUIY
CHAIRIIAII
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLII OP THI CURIIMCY
W. T. CHAPMAN • SICR.ITARY
R. G. EIIERSON.A.SSISTANT SECRETARY
ADDilES• REPL.Y TO
W. M.IMLAY. FISCAL AGIIIT
WASHINGTON
FEDERAL RESERVE BOARD
January 12 • 1920.
X-1796
CONFIDENTIAL.
Subject:
Facilities of Federal Reserve System.
Use by Eligible Nonmember Ban!cs.
Dear Sir:
In our Ca.llJlaign for State bank 1mmbership we have run
againstJ a.s you know, the fact
~at
many eligible nonmember banks
do not see any pressing reason why they should join the System because,
as tbey themselves ex.press it, they can get all the help they need fr<m
their correspondent banks and. do not have to lose anything upon their
reserve balances.
Of course these same ei ty correspondent banks are
ustng the System quite freely and we would appreciate your suggestions
or thought upon the im.portant proposition of in some way restricting
this abuse or misuse of the System by the eligible nonmeuiber banks.
Would appreciate if you would. a.rop me a line as tc what you
think would be a dignified, direct approach to thl.s very serious matter .
.Assume of course the &ubJect matter of this letter will be kept in
strict confidence until we may arrive at some
~ecisiun.
Awai t1ng your reply, I am,
Yours tl'l:\lYt
H. A. MOEHLENPAH.
1_06
W. p, G. HARDING,IIOVIRNOI
ALBERT STRAUSS, VIC I GOVERNOR
ADOLPH C. MILLER·
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
EX OP'FICIO MO:MBI:R8
CARTER GLASS
SICRITARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLIR OF THI CURIINCY
ADDRESS REPLY TO
W. T. CHAPMAN, SICRITARY
R. G. EMERSON. ASSIITAifT SECRITARY
W.M.IMLAY,FIICAL AGINT
WASHINGTON
FEDERAl. RESERVE BOARD
January
13,1920
X-1797
Subject:
Da.ta. for Anr1U::1.l r,e-:;or t of Feder<-l.l Reserve
13oard Regarding Fo;eign B~ing Institutions.
Gentlemen:The Annual Re;;ort of the Federal Reserve Board to Congress
is now in course of preJ.J<?.ration and wilJ. be issued sbortly. The Board
is desirous of including in this rei;Ort a table similar to tha.t. published in last year's r~~ort giviLg certain ~ta regarding foreign
banking cor:;.>oraticns doing business un:ier agreement with the Boa.rii.
It will ce ap::,:>l·eciatad, therefore, if you will ha.ve tra.r~s--
mitted. to this office, as :prof1lPtly as :possiblet inforn:a.tion, a.s o!
December 31, 1919, ior your corporation, as requested below:
~·
1.
C~pital
anu Surplus
2.
Total
3·
Number of foreign branches.
4.
Nuui:>er
5.
Number of foreign agencies.
6.
Number of affiliated banks and, also, number
of offices maintained by these banks.
Resource~ (Ee~d Office
of
Ouly)
ci..omestic branches ..
Very truly yours •
Assi§ta.nt Secretary
:l07
ax OFFICIO MltMS&R8
W. P, G. HARDING, GOVUNOR
ALBERT STRAUSS, VICI IIOVUNOR
ADOLPH C. IIILLER
CHARLES S. HAIILIN
HENRY A. IIOEHLENPAH
CARTER,GMJI
SICIITAIY OF THI TIIAIUIY
CHAIRIIA.
..-..
FEDERAL RESERVE BOARD
JOHN SKELTON .WILLIAMS
COIIPTROLL!I OF THI CURRINCY
W. T. CHAPMAN. SICRUARY'
R. G. EIIERSON. AIIIITANT SICII:ITAit.Y
ADDRESS REPLY TO
W,II,IIILAY, FISCAL AGINT
WASHINGTON
FEDERAL RESERVE BOARD
January 14,1920,
X·~l7':J9
I
Dear Sir:There is attached hereto, for
Fer.e:r.;;}
Ee~erve
yo\~
Boari to the Chairr.can of a
Federal Reserve Bank un.ier ds.te of Jc;.nu.cl.ry l2th 1
with re:'erence to the size cf a.nnr,al l'·3J.crt [or
the y6ar 1920:
Very truly yow:·s 1
En c.,
.
Secretary•
Letter to Chairmen of all F.R. Bank:s.
1.08
January 12,1920.
COPY
Subject:
Size of Annual Report for 1920!
Dear Sir!As you were advised, a reply to your letter of December
31st on the above subject has been delayed in order that consideration
might be given to the question in the light of the plans of other
Federal Reserve Banks.
After consideration of the question, I am authorized to
say to you that the Board sees no o lJJection to the :Federal Reserve
Bank of *** using a page measuring 6-5/8 by 10 inches for its complete annual report for circulation in its own district, as per s~le
submitted with your letter.
The report for local distribution, as you lmow, will be of
much greater length than the condensation thereof that will be published by the Federal Reserve BoarQ. as a supplen1ent to its Annual
Re:port, and the size of the report used for local distribution will
have no effect U..?On the Board's plans in this connection. It would,
of course, as sug;ested by the Board in its letter of November 12th,
have been a good idea to have the local reports of all districts of
uniform size so as to admit of binding of complete local reports in
a single ~olun~. However, as tastes appear to be different in the
various districts, the Board does not feel that it should ask any
Federal Reserve Bank to rrake its local report to cordorm to any particular dimensions. As a Latter of fact, it would be possible to
bind in one volume, although of course not neatly, re2orts of varying
sizes not to exceed the size of report conten~lated by you.
Very truly yom· s 1
W. T. Crl!'P:IL\N
•
•
:109
Ex OJ'Ficto MEM811:FIS
W. P. G. HARDING. GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
CARTER GI,At!f SECRETARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRINCY
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
W. M.IMLAY, FISCAL AGENT
WASHINGTON
FEDERAL RESERVE BOARD
JIID\81"7 l5tl320.
X-lSOO
Subject:
Penalt.iea tor Deficient lleaerves.
Dear Sir:'By direction of the Federal Reserve Boax-d 1
enclose herewith for your information, copy of letter
addressed to the Governor of a Federal aeserve :Bank undet'
d.ate of January 15th. calling attention to the provisions
of See tion 19 of tbe Ped.era.l Reserve .Act 114 th reference
to the maintenance by menber banks Qf sufficient reserves
at Federal Reserve 'Banks , and proYi.dins eer tai.n penal ties
in connection with deficiencies therein.
Very truly yours,
Enc.
Secretary.
letter to
~er.nors of
all F.R. l3ankS e!cept Cle•tlmd
\
.....
1.10
r
FEDERAL RE:.:JERVE BOARD
WASHINGTON
X-1800 a
"January 15, 1919~
Dear Sir:Your letter of the 13th instant regarding the continuous
depletion of reserves of certain of your member bru1ks for long periods
of time has been considered by the Federal Reserve Bo8;I'd. In other
districts the Board has approved a progressive penalty for deficiencies
in reserves and is prepared to do so in the cBse of your bank. It is
important that member banks be maae to meet the requirements of· the
law with :cespe~t to re.::;e ..·ves, a;·,~d in l.:C..e ...;ase vf nciU.·.:.na.l ta:Dks you
are requested to forward to the Comptrollez· of the Cl.:trrency a list
of the banks'whose reserves have been deficient for continued periods.
It would be well to call the attention of all your member
banks, state as well as national, to the paragraph in Sec~ion 19 of
the Federal Reserve Act which reaas as follows:
"The required balance carried by a member bank with
a Federal Reserve Bank may, under the regulations and
subJect to such penal ties as may .be prescribed by the
Federal Re~erve Board, be checked ~gainst and withdrruv.n
by such member bank for the purpose of meeting existing
liabilities: Provided, ho·vever, That no bank ~h?...:1 1. a:L
any time make new loans or shall J?_ay any di. vi.9-..?!~-~,t}]~
and until the total balance required by J.aw it; fully
restored."
It is suggested that in the ease of delinquent state banks you
send a. list to the state superintendent of banking and call his attention
to the proviso above quoted."
Very truly yuurs,
W.P.G. HARDING.
(signed)
Governor •
•
•
j_fj_
a:
l!x OPI"'CIO MIMDIIIIi
CAITER GLASS
•
Slcfti#.a.-/.OP THI TIIAIU8Y
CHAIRJIAII
JOHN SKELTON WILLIAMS
COIIPTROLLII OP THI CUII:IINCY
FEDERAL RESERVE BOARD
ADDitESII REPL.Y TO
FEDERAL RESERVE BOARD
WASHINGTON
W. P.
HARDING,IIOYIRNOR
ALBERT STRAUSS. VICI IOYIRNOl
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SICitiTARY
W, M,IIILAY, FISCAL AOINT
CONFIDENt' IAL.
January 17. 1920 ..
X-1801.
Dear Sir:
Your attention is directed to the enclosed copy of
the circular sent by the United States Wheat Director to all his
licensees. This circular sets forth clearly the present situation
as it appears to the Director and contains sound ~d Judic:i.ous warnings whiCh the business community should not be permitted to disregard.
I am also enclosing for your confidential information copy of a letter
written by the Director to the Vice Governor of the Federal Reserve
Board in response to the request for copies of this circular. The
Wheat Director's letter naturally expresses his views with somewhat
less reserve than the c1rcular 1 and is, therefore, important as further
e~1zing the views held by that official, who is undoubtedl7 in the
best positiOD. to judge the wheat situation. The exportable surplus of
· 3Q),«>>,OOO bushels of wheat involves ~t the guaranteed price the sum
of aoma $700,000.000 o£ cash. To the ex.tent to vilhich wheat has been
either sold abroad on credit, or is being held. back on account of car
shortage, or for other reasons, the burden of carr~ i,t has undoubtedl.T
been placed either ~irectly or indirectly on our banks, ani in spite of
any local information indicating that sales of wbeat for eJ'port have
been pai<.l. for in cash, this must be true to the exten-t to which~
cgh has been obtained throu;Jl. export credits financed by the ban!9!__
1g New York or other centers in the East.
We must not lose sight of the fact· that the situation
in some, and perhaps in IJ:Ia1l1' other commoa.i tie-s may not be very different
f~om the wheat situation and. should so far as poss·ible guide the policy
ot member banks accordingly.
Very truly yours,
1.12
•
X-li301-a
JULIUS H. BARNES
•
UNITED STATES WHEAT DIRECTOR
NEW YORK
(CONFIDENTIAL COPY)
January 13 , 1920
Mr. Albert Strauss,
,Federal Reserve Board,
Washington, D. C.
My dea.r Mt. Strauss:
I have your letter of the 12th.
I enclose you a number of
licensees by the Wheat Diredor. I
me, by letter or phone or wire. for
of this office, which wo·1.1ld further
copies of the communicat~on to
hcpe you will nevex- hesitate to ask
any information regarding the conduct
team-play in the national service.
F:.:·ankly I am very much concerned r egardj.ng the e,•iden t disposi ticn
of millers and dealers throughout tile Uni tea States to carr:y considerable
commitments in the form of wheat and flour, this coqrse bavj,ng proven so
far quite prof:i. tab2e to them on the l.lpward t:rend of prices, bl.lt which on
this price-level might, in certain contingencies, lead to considerable loss
and possible disaste~.
I
I reaJ.ize even as I say th:J.s that. ot\I' w:i.£lter wheat prospect, with
unfavorable winte:e weather, may be such that the prosent price-level may be
JUstified and mere next spr:L'l"lg, bl.i.t I think it my duty to point out the
possibilities, so that if they do assume those risks, it will be with open
eyes.
It is unfortunate that restricted transportation plays such a
part in not making fully liquid and available ow:- perfectly adequate wheat
and flour supplies.
In passing, it will be interesting for you to know that substantially every bushel of wheat owned by the Grain Corporation is contracted in sale abroad and wiU shortly be. sh:tpped, although we still ha'fe
large holdings and purchases of flour. I sho·uld welcoxre this shifting of
the export trade from a retiring Government Agency to private initiative,
which must soon function anyway, if I were not so apprehensive over the
risks to that private trade of the present conditions.
With personal regards,
Yours truly,
JHB:H
Enclosures.
(Signed) JULIUS H. BARNES.
1_13
•
JULIUS H. BA.-qNEs
UNITED STJ',TES VJh'1J;.AT DIFJ£CTOP..
NE'VJ YOR:r.;:
.'1.-1601-b
Ja~uary
10, 1920.
TO .1\LL LICENSEES OF TEE WHE.AT DIRECTOR:
The Wheat Director and the Gl·ain Cotpol"ation approach the last ha)f-yeai·
of their official service. For over two years the Gra:tn Corporation has bee11
a dominant influence in grain marke t:i.ng. The enC'.. of that official inf J.t:.ence
ancl control is in sight.
Forty-two thousand licensees should realh~-.3 that the wi i;hd.:rawa~. of su.ch
a market ancl price influence \;an not be made wit.hc..r:.J.t int:.:'odud.ng large hazar::.is
to the wheat and f lovr. hand.le:t·. World infJ.uences of great potentiality in
price-making exist today.
There is no guide to point the way to commercial security. Inaiviiual
judgment must sol'.7 e· unusual problems, soon to be faced.. We can only warn of
the play of world-wide factors of unprecedented potentiality, and submit information, as accurate as hl.unanly possible, on which business policies mnst
construe t. The Grain Corporation 1s weekly reports of trade data will continue
until June 1st. They should be studied.
Our total wheat crop exceeded that of 1918. ~ch is said of t~e relat\ve
scarcity of strong wheats. 'l'he curious fact develops, howevAr, tba:i; >.>y
continued replacements from the Southwest and the Pacific (;on.st an:1.. b:~caune
Eastern mills will probably draw their smaller needs of stror~g vibe.:~.t.s fz-:)m
Canada and the Argentine, the Northwestern mUJs can grind fully e(1nal to last
year's
large production and still leave, at the end of this crop-year. a
larger carryover in the Nor thwe s t than last ye a:r •
Exports for past siX months are 33,000,000 bushels less than last year.
Difficult finances abroad, forcing utmost cur·~ailment of. :tmrchases, · wiH
continue. Present purchases, still to be shipped, largely supply fore:i.gu
requirements for a considerable period. Chea:pe:r rye will replace some ;vneat~
The United States can apparently export 50,000,000 bushels rye, against
35,000,000 bushels last year.
Flour production in the United States for si• months exceeded last yeat ~s
production by l2,ooo,ooo barrels, while exports of flour have been 1,000,000
barrels less. How much of this 13,000,000 barrels represents increased. consuri!Ption of wheat bread, and how much increase in domes tic and coiiiilercial
stocks, with its resultant later shrinkage of cr.trrent demands 1 Flour stocks,
visible, are very large: 15,000,000 barrels, against S,OOO,OOO last.year.
With no
Corporation,
until we can
open to them
immediate prospect of further purchases of flour by the Grain
it is fairer to ask the mills to discontinue their weekly offertngr
advise some prospect of further pw·chases. The export outlet is
individually without necessity for pet·mits.
.'.
ti4
- 2 -
Restricted transportation and extraord7.nary indifference to ex:pendi tu.-ee
a section of our people have facilitated €asy price advances in certain
qualities of flour. Our ovm campatgn of placing the lower-priced flou:rs
through the retail trade is demonstrating that there is a section of our
people desirous of the practice of thrift. It may become cont~gious as
extravagance has been. The extraordinary choice is offered our consumers of
standard qualities of flour in the same retail trade at ranges from $1.1·10
to $2.00 for the one•eighth barrel~
b~
New-crop prospects will shortly be a decided price influence. Mueh
emphasis is laid on our Fall-sovm acreage this year of 39,qoo~ouo acres,
against 50,000,000 a year ago.. It is well to :ce'!lomber that .Arnerica 's secondlargest winter wheat yield (685,000,000 bv.shels) c~e from 37,000v000 acres
sown. .Also, that twice in our history the yield fro:m spring sow:i.;?.gs alone
has exceeded 350rOOO,OOO bushels. Last year, our total home cons~m2tion for
foOd and seed did not exceed 550,000,000 bushels.
Import and Export embargo restrictions are now eliminate~, and Canada
and Argentina
are already making sales, attracted by our prices now ruling
above the guarantee level.
Farmers, millers and dealers (outside of the Grain Corporation) ovr.n and
are carrying 437 ,ooo,ooo bushels of wheat, against 299 ,ooo·,ooo a year ago.
Seriously ponder. on this statement. .After June lst, next, the Gra:\n Corporation authority to buy wheat at the guaranteed price expi.res, and thereafter
the security of that basis is withdrawn. The fact that present prices l~gely
rule above the Government guarantee should not obstruct a study of conditions
which may develop, and at a time when that price assurance no l.onger exists.
America's comple~ and delicate marketing structure must be preserved, and
prepared to function when this agency retires.
.
Price fluctuation always is followed by distress and loss. Wisdom
dictates the reduction of conrni tments to the minimum req,uired for the conduct
of: necessary current busines's. We should. not feel that the full responsibility
of this office had been discharged without calling attention to the price
huard which may exist for many months, knowing that a large pw.·t of the
prOdac'ing and distributing trades have been accustomed, by two years of
official stabilization and assurance, perhaps not to fully realize the danger
of QVer~extended commitments under the present extrao~dinary world sit~ation.
JULIUS H. BMNES
United States Wheat Director.
i15
W. P. G. HARDING. GOVIRNOl
ALBERT STRAUSS. YICIIIOVIIftOl
ADOLPH c. MILLER
CHARLES 8. HAJJ LIN
HENRY A. MOEHLENPAH
lx 0PPICJO MI:MB&Re
CARTER GLASS
IICIIfAti:Y OP THI TRIAIUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLI!R OF THI CURRIHCY
W. T. CHAPMAN, SICRITARY
R. G. EMERSON. ASSISTANT SI:C:RI:TARY
ADDRESB REPLY TO
W. M.lllLAY, fiSCAL AGINT
WASHINGTON
FEDERAL RESERVE: BOARD
January 21.1920 ..
Subject:
X-1006
Certificate as to non-payment of
amount on account of franchise' tax.
Dear Sir:-
.At the request of the Treasury Department, the FedeJ;"al
Reserve Board requests that your .Auditor sign a certificate in ·the
following form, to be countersigned by a senior executive officer,
and that it be forwarded to the Secretary of the Treasury, Division
of Pub lie Moneys, Washington:
" I hereby certify that I have examined the
income and expenditure account of the Federal
Reserve Bank of
for the period
from January l, 1919 to December 31, 1919, and
that no amount is due to the United States Government on account of franchise tax in accordance
with the provisions of Section 1 of the Federal
Reserve .Act approved December 23, 1913, as amended
by the Act of March 3, 1919.
Juditor, Federal Reserve Bank of ____
Countersigned:
{Title)
tl
A similar request has been made of each Federal Reserve Bank not yet liable
1n aocordance with the l~ovisions of Section 1 of the
tor franchise tax
Federal Reserve Act.
Very truly yours,
Governor,
Istter to Governors of all F.R. :Banks except N.Y.
1_16
Y!• P. 4. HARDING, 40YIRNOR
lx 0PI'ICIO MEMBI:tiS
ALBIRT STRAUSS, VIC I 40VIONOI
ADOLPH C. MILLER
CHARLES 8. HANLIN
HENRY A. MOEHLENPAH
CARTER 4LASS
SICRftillrr-c!lr THI TOIAIURY
CHAIRIIAM
JOHN SKELTON WILLIAMS
COMPTROLLER OP 1'HI CURIINCY
·'"
FEDERAL RESERVE BOARD
ADDRESS REPLY TO
FEDERAL. RESERVE BOARD
WASHINGTON
W. T. CHAPMAN. SI!CRITARY
R. G. EMERSON, ASSISTANT SICRITAIIY
W,JI,IIILAY, FIICAL AGINT
January 21.1920.
·X-1807
SW;ljeet:
Comments by Federal Reserve Board with respect
to recommendations made by governors of Federal
Reserve Banks at conference with Federal Reserve
:Board, November 19-21, 1919 ..
Dear Sir·:-
The Federal Reserve Board concurs in the recOUJZI;endations made
by the GQvemors of ths Federal Reserve Banks at a conference of GoYernors
held. at Washington, November 19-21, 1919, as set forth in the attached
memorandum, ~th the exception of the topics qnd recommendatians discussed
be low. For ~he purpose ·of easy reference topics bear the same number as
those in the attached memorandum.
T9Pic 4· •
SHOULD THE FEDERAL RESERVE BANKS CONTINUE TO ABSORB TWf
ABRASION LOSS ON GOLD COIN?
Voted, that the policy of absorbing abrasion of gold coin
should. be continued, with special reference to Governor
Calkins r report on the attitude of the Sub-treasury in San
Francisco, and that the Federal Reserve Board be asked to
secure the cooperation of the Treasury Department in seeing
that $5 and $10 gold pieces are not paid ot&t by the Subtreasuries.
The Treasury Department has been cooperating with the Board fot'
sonetime past with regard t.o l the payment of golc., and the policy of tlle
Treasury Department, including .Assistant Tr·easwers located outside of
Washington, has been to disco~age tbe use of gold ciJins as a circulating
medium, but in no case would gold be refused if derom.a.ed in redemption for
currency ~r coupons payable in gold~ The T'-easury has agreed to suppletmnt
previous instructions to the Assistant Treasv~ers with request that $5 and
$10 gold pieces be not paid out, but that such gold paJID.ents be made in $20
gold. pieces.
Topic 5.
TRANSIT OPERATIONS:
(e) ·Transit Expense: 1n view of the fact that no
uniform method has been adopted of determining transit
expense, should not this segregation be abolished 1
:117
~2~
~1807
varED, that in view oci' the fact that no uniform method has
been adopted of determining transit expense, that the segregation
be abolished.
The Board hRs recently had under consideration the question of the desirability of the seg:.:·egation of transit expense, and the J3oar.d 1s statistical
division has been making an analysis of the reports 1:eceived from the Federal
Reserve Banks, and has found that this segregation of expense is not being handled
uniformly at the Federal Reserve Banks. The Boa.ro feels, however, that Federal
Reserve Banks and branches should subdivide their expense figures to show separately the cost of operating the transit department, particularly where that
department constitutes the maJor activity of a branch ·bank< It feels that such
information would be valuable if calculated uniformly.
.
"/
It is, therefore, requested that you fotward to thf( Board a statement
showing in detail the method followed by your :Bank in arriv:4lg at transH expense
for your head office and branches, if any, as reported on form 96. It is the
intention of the Board, after analyzing these reports, to prepare instructions to
be furnished to all Federal Reserve Banks to be fo-llowed in determining transit
department expense, so that this segregation ro.ay be made uniferm at all Federal
Reserve Banks and branches.
Topic 10
ADMINISTRATION PROBLEMS:
. (f) Pension ;plans:
( 1) Grollp insurance.
(2) Disability and retirement allowances.
VOTED, that, subJect 'to the approval of the Federal Reserve
Board, the Pension Committee be authorized to carry out its
recommendations. (The complete recommendation of the Pension
·Committee will be found in the attached memorandum.)
The Board approves the suggested action of the Fension Co~ttee, except
that before any co~tment is made as to the employment of a committee of expert
actuaries and pension specialists, the cost of the se:rvices of such experts shall
be submitted to the :Board for approval •
. Special Tgpic. QPESTIONNAIRE FOR USE IN OBT.AIN~NG INFORMATION REGARDING
.
INCOME AND EXPENDI~U~§ OF EMPLOYEES OF FEDERAL RESERVE BANKS:
After consideration of the recommendations of the Governors (see attached
memorandum) regarding the liuestionnaire for use in obtaining information rega:ro.ing
income and expenditures of employees in Federal Reserve Banks, the Board has decided to use the form of questionnaire furnished to Federal Reserve Banks in
December, with a sUpplementary notice that the date should l!e changed tnroughout
the form from December 31 to June 30, and that when the fonn has been filled out
by an employee it should be returned to the Governor of the Ban.~t rather than to
the Federal Reserve Agent. A s tateroent regat"'d.ing the work uniertaken by the
Board 1S Division of Analysis and Research in compiling data for use in adJusting
the salaries of employees of Federal Reserve Banks; together with a revised copy
of the questionna~re to be answered by employees of Federal Reserve BanKs is
published in the January Bulletin.
1.18
Topic l2
U.S. TREASURER'S ACCOUNT:
(a) Can more prompt and dependable verifications
and reconcilements be obtained 1
VCYrED, that a committee of three/ be appointed
( l from New York, 1 1 rom Chicago. 1 from Cleve land)
to make a stud.r of this matter, come to \Jashingtun
md meet proper officials of the Treasury to see if
an improvement cannot be made in the present s-;stem.
VOTED, also, that the Fea.era}. Reserve Boarc..i. be
reriuested to send a letter to the Governor .jf each
Federal Reserve BanK, as~ng that all questi~n9 of
practice in the hand lin!;!; of the accounts of the
Treusurer of the United States, vihich are causing
difficulty, shall be submitted to the committee of
accountants or auditors no·v.r a:ppointeo. from the C~1ic¢160•
Cleveland r~ New York ~deral Reserve Be~, these
~uestions to be addressed to the Federal Reserve
Ban~ of
Yor1:.
New
Tb.e Board approves the above recomr.'lEmdations of the Governors and
tha.t each Federal Reserve Bank forward 1 as soon as pOSi>i't le, to the
Federal Reserve Bcnk of Ne·... York a report covering the questions of practice
in the handling of the accounts of. the Treasurer of the United States \·thich
ure causing difficulty, to be used by tile comraitr;ee consisting of the auditors
or accountants from the Federal Reserve Banl.o.s of Cn1ca.:;o, Cl.3VE?lanQ.. and· New
York, in determining "'lays and menus of improving the methods and prc.ctices
of handling the accounts of t:r. .e Treasurer of the Unitt::ci States.
re~uests
VOTED. t.1at. vvith the consent of the Feder~~ Reserve Board,
u permanent secretary be selected, to "tJe pc.iu. by the tvvelve
·~:;ank.s,
to act r.:s secretary durin5 conferences and f9llow
such matters as need m tention, incl.udin~ the a.igest of
the stenographic re-port of each conference ..
The Board does not 1elieve it necess~; to ~ppoint a permanent
secret2ry of the Governors' conference e,t this time. Mr. 'il. ;; • Hoxtvn) who
t.::-..s recently teen ap:9ointed to the Boe.rd 's st.::.:t f o,s Executive Secretary; will
attend tile conferences uf Governors and is ·av;;.l.iL:iL le to fol.lou such mutters
and recomrr..ende-tions of the conferences c.s way need .:··Gtention.
Very truly yuurs,
Enc ..
Governor •
•
Letter to Governors of all F.R. Bcnks,
X-1307
1_19
&.
January 21,1920.
SubJect:
\'
Topics discussed and recomrrendations m8de ty
Governors in conference with Federal Reserve Board,
in Washington, November 19-21, · 1919 ..
There is given below the recommendations of the Govenlors of the
Federal Reserve Banks on the topics discussed at the conference of Governors
held in Washington, November 19-21, 1919. For convenience of reference the
number of the page of the stenographic report on which the recommendation is
given is shown.
tropic 1
RESERVES:
(a) The Federal Reserve Board is authorized to reclassify
existing reserve and central reserve cities.
Should this power be exercised 1 ~!~ if so, how?
Should Congress be asked to amend Section 19 so as
to require uniform reserves throughout the country, differentials to be based on the various classes of deposit?
VOI'ED, that i t is the sentiment of the Governors of the Federal
Reserve Banks t.nat questions relating to changes in requirements of reserves
of member banks be held in abeyance for the present~ (Page -233)
(b) Is there a demand for the payment of interest on
reserve deposits, and should such a policy be considered?
varED, that no consideration be given to the question
of paying interest an reserVe deposits. (Pages 92-93)
Topic 2.
SHOUlD FEDERAL RESERVE BANKS EXERT .ANY INFLUENCE UPON THE POLICY
OF MEMBER Bt-NKS IN THE .AMOUNT OF· INTEREST ALLOWED ON DEPOSITS?
VOTED, that, while in the Judgment of the conference this is the
proper function of the Comptroller of the Currency and the State Banking
Commissioners, it is the belief that Federal Reserve Banks should exercise such
remedial influences as in their judgnent occasion warrants. (Pages 99-100)
Topic 3.
SHOULD EFFORTS BE MADE TO INDUCE MEllff.BER BliNKS TO CONTINUE THE
PROCESS OF SORTING AND DEPOSITING iOLD CERTIFICATES IN FEDERllL
RESERVE BJ\NKS?
VOTED, that it is the sense of the conference
practice be continued.
(Pr-Jge 104)
•
t~tt
the present
Topic 4 • SHOUy> THE :FEDERAL RESERVE BANKS CONPINUE TQ MlSORB THE ABRASION
LOSS ON GOLD COIN?
--
2 .
•
1_20
X·l&07 a
VOTED, that the policy of asor1ing at rasion of gold coin should
be continued, with speci::tl reference to Governor CalKins 1 report on the
attitude of the Sub-treasl:lrer in San Francisco, ani that the Federal Reserve
Board te asked to secl:lre the cooperation of the Trensury De:po rtment in seeing
that $5 "'na. $10 2,0l.d pieces e.re not pn.id out by the Sut-trec.suries.(Pc,;e 106).
Topic 5.
TRANSIT OPERJ,T!ONS:
(a) Jt.ethod of trentment of transit problems throue;h
meetin3s of transit managers~
The conference sue,Jested t:O.c,t it was not desirable tnat Transit
Manr-e;;ers i...e 6 iven the priifilet;,e of maKing recommendations to the Federal
Reserve Board, except through tl1e Executive Officers of the Federal Reserve
Banks ..
(t) In the interest of more prompt presentation and
payment of checks, should not nearby tanKs in given sections
clear on each other directly, instead of t!rrough Federal
Reserve Banks 1 Should tne Federn.l Reserve BanKS promote
the es tab l i shmen t of such local clearing houses 1
VOTED , that in those districts where they have congested areas.
and where the collection of checks can te fncilitated ty exchange amongst the
different tc.nks, the si tuntion be studied by the Governors with u view to
facilitating the collection of those particular items~ therety reducing the
float. (Po.ges 481-482)
(c) Collection of drafts, tills of exchange, etc. Should
the collection facilities of the Federal Reserve BanKS be
ex.tended to include collection of cor11rnercie.l p[per IilL.turing
in Federal Reserve cities and trench cities, !3Ild credit given
on d.?.te of maturity subJect to finn.l pL.yment?
VOTED, that no octiQn be taken on this topic.
(~_!±9lJ
(e) Transit Expense: In view of the fact that no uniform
method has been adopted of determining transit expense, should
not this segregation be at olished 1
VOTED, that in view of the fact that no uniform method has been
adopted of determining trEmsit expense, the segregation te o.tolished.
(Pages 491-492)
(h) Discussion by Federal Reserve Bank of New York of
desirability of curtailment or elimin~tion of practice of
direct routing of items by member l:,anks to Feden1l Reserve
Banks in other districts.
VOTED , t~12.t action on this topic be deferred until the next
cunference. (Pages 506-509)
--3-
•
1_21_
x-1007 a
VOTED. also, that the privilege of direct sending f.rom any
Federal Reserve member to another Federal Reserve District be restricted to
those cases who already have the privilege, and that they shall receive the
approval of the Federal Reserve Bank ~o which 4irect sending is to
sent.
(Pages 505-509)
be
Topic 6.
RELATIONS WITH STATE BANKS :
(b) Fraudulent advert.isement or claim of' membership
in Federal Reserve System. \Vhat means exist for preventing?
.Y...QI:gQ, that it is the sense of the meeting that each bank
should adopt such methods as are thought proper to suppress such practices~
(Pege 122)
Topic
7- DISCOUNT RATES:
(c) Calculation of interest at 365 days per year:
Present practice is to compute interest on notes rediscounted on basis of 365 days and on bills purchased in
the open market at 3W days per year.. Should basis of
calculation be uniform?
Vai'ED, that no change be made in the method of computing
discount.
topic
~
·(P?ge 124)
CREDIT SITUATION:
(c) Discussion of the complicated situation presented
by the amendment to Section 5200 U.S.R.S.
VOTED, that it is recommended that state banks; which are
members of the Federal Reserve System, and national -banks, which are members
of the Federal Reserve System, be put upon the sarre basis as to limitation of
liabilities, under both the Reserve Act and the Revised Statutes, and that
Federal Reserve Banks be put in a position where the limitation as to endors&"
ment of bills sold shall apply the same, both When the bills are payable
abroad and when they are payable in the domestic market, <r~eV21-!~)
!opic 10.
ADMINISTRATION PROBLEMS:
VOTED, that a conference of representatives of the Federal
Reserve :Sanks be called for the purpose of studying these matters and submitting a report.. (Pages 426-~)
'
(f)
Pension plans:
(1) Group insurance.
(2) Disability and retirement allowances ..
VOTED, that, subJect to the approval of the Federal Rese1~e
Board, the Pension Committee be authorized to carry out its recommendations.
(Pages~).
The recommendation of the Pension Committee is as follONS!
"Your
committee, therefore, rather than suggest a plan
!rlSOT a
'
1_22
that if adopted udght p~ove unsound, recommends that steps
be taken to secure the s~rv1ces of a committee of expert
actuaries and. pension specialists, to advise with a committee
to be appointed representing the Federal Reserve Board and the
Federal Reserve Banks, and 1lhat such commit tees together
shall work out the cost and an equit~le distribution of
cost between the Federal Reserve Banks, ~ their officers
and emp 1 oye s , and such other persons, if any, that i t may
be decided should be permitted to participate in co.ntribui•
tions or benefits, of a pension and benefit fvnd that wi 1
be self-supporting in perpetuity and embody in relative
degree all of the benefits of the Canadian Bank plans,
which are hereby recommended and provide ~.imum annuities
of $6,000. That such Joint comrndttees be re~uested also
to formulate and fur.nish complete plan of organization
and operation.of such fund with due regard for the laws
of several states, (taking such legal advice as may be
necessary) that will provide for representation of employees and pensioners in the administration of the fund
and establish valid contracts between the fur1d ani the
contributor.s and beneficiaries.
11 That such plan shall include provision for participation by employees of the Federal Reserve Board, if legally
possible, and the Federal Reserve Agents and their staff,
and employees in the fiscal departments of Federal Reserve
Banks ..
"That the expenses of the conmittees including reasonable compensation for expert advisors and council be prorated
among and paid by the Federal Reserve Banks.
"It is also recommended that the plans of the Bank of
Montreal and the Canadian Bank of Cornir..erce receive careful
consideration) as in the opinion of this committee, they
combined most excellent features which should be adopted by
Federal Reserve Banlts. 11
The QUESTIONNAIRE was discussed and the following recommendations
were adopted:
1. That the questionnaires now d.istributed be withdrawn;
2 .. That a new set of questionnaires be distributed to the clerks
in the 12 Reserve Banks after salary adJustments are completed at the end of
this year;
}. That the instructions to the clerks shall provide that the
~uestionnaire be delivered in sealed envelopes to tbe Governor of the Bank or
to such officer as he shall designate;
4. That the information contained in the ~uestionnaires be first
made available to the officers of the Reserve Bank and that they shall then
be delivered to the Federal Reserve Board for such analyses and tabulation and
so forth as will be prepared by each Reserve Bank;
5. That the questionnaire cover the period of the year ending
December }lst next;
6. That the questionnaire b.e reprinted to conform to the above
regulations;
7. That the fonn of letter of instructions addressed to the employees which accompanies the questionnaires shall be uniform at all "twelve
reserve banks. (Pages 182.-183)
X-1807 a
~
'iopic 11.
i23
BRANCH BANKS :
(a) Published Comparisons of Branch Operations and Expenses;
Inasmuch as statistics affol'd no opportunity for cor::va:dson
unless the functions and operations are comparable should they
not be subjected to analysis or be discontinued7
(b) .Advisability of conference of branch bank managers
to study problems of branch bank operations.
VOTED, that, before the next Governors 1 Conference, the manager of
each of the branches be asked to submit a list of i:lter;_district CJ!lestions
affecting the operation of the branches and matters of uniformity of operation,
to the Governors of their respective Federal Reserve Banks) together with
recommendations on these subJects, to be considered by the Governors at their
ne~t regular conference, and that these recomrrendations be sent to Governor
Fancher to :pr~pare & pnog:r.amrupon those matters submitted4 (Pages 191--192)
Topic l2
U.S. TREASURER 1S .ACCOUNT:
(a) Can more prompt and dependable verifications arrl
reconcilements be obtained?
VOI'ED, that a committee of three be appointed ( 1 from New York,
l from Chicago, l from Cleveland) to make a study of this matter, come to
Washington and meet proper officials in the Treasury to see if an improvement
cannot be made in the. present system..
VOTED, also, that the Federal Reserve Board be requested to send
a letter to the Governor of each Federal Reserve Bank, asking that all
questions of practice in the handling of the accou.l'lts of the Treasurer of
the United States, which are causing difficulty, shall be submit~ed to the
committee of accountants or auditors now appointed from the Ci1icago, Cleveland.
and New York Federal Reserve Banks, these questions to be addressed to the
Federal Reserve Bank of New York. (Page 196)
T9Pic 14.
ABSORPTION OF EXPENSE BY FEDERAL RESERVE B.ANKS:
(b) In view of large earnings of Federal Reserve Banks,
would it not be well to furnish poatage and pay all express
and postage charges for member banks, covering their transactions with Federal Reserve Banks?
VOI'ED, that no action be taken on this topic.
Topic 16.
action.
(P..@:&.e 211)
CuNTROL OF FOREIGN E.XCH.ANGE TRANS.J.\_CTIONS TO PREVENT
DISHONEST BANKING PRACTICES.
VOTED, that this topic be referred back to the Treasury without
(Pages 361-:-.l§;U
Topic lS.
FEDERAL RESERVE TELEGRiiPHIC
COD.~.
VOTED, that the sub-cormdttee of the leased wire committP-e be
authorized to proceed at once with the preparation of a code for use be tween
the Federal Reserve Banks; and, as soan as possible, another ~ode for u~e
-6-
.....
between the rr.eniber banks and Federal Reserve :Sanks6
Topic
19~
ST.f'J\JD.ARD FOm1S FOR J.LL FEDERAL
Jl24
X-lb07 a.
FlES~VE
(I_>ages 312-373)
:B.ANKS.
VarED, that a committee of three be appoj.n.ted ( l from New York,
1 from Cleveland, 1 frorn Chicago), charged with the duty of perfecting a
standardization of the forms which are used between the twelve Federal Reserve
Banks. (Pages 374--375)
- -- - - - - - - ---- - --- - - -- - -- - - ~
WEJ?.., that a resoh\t).on be sent to the Fuel .Administratbr requesting that cotton seed .oil :plants be :placed on :preferential list to receive
coal. (Pages 351-·:.1~2)
· VC1l']J!, that Mr. Renzel shall be made respom~ibJ.e for starting the
procedure required as the result of the meeting. (~1{9)
V<YrEJ~>.,
that, wHh the consent of the Federal Heserve Board, a
permanent sec:-etary be sele0ted, to be paid. by the t.w~lve ban-KS: to act as
secretary during co1Jfe-..·en:~e~ and follow such matters as need. attention,
including the digest of the stenographic report of each conference. (Pa_ge 38~J.
'I
1.25
•
FEDERAL
R.!i:S.i!,RVE
BOl~RD
STATEiVJE.NT FOR THE PRESS
'.
X-1&08
J.:..nuary 22,1920
For i .. ~.edia te release.
Upon review uf the rediscount r<:.t-3s
R;serve Bank of New York, thv
FedarC~.l
~?roposGd
Reserve BoStrd has deter:;:.int.:Jd the
following r.:::tes for th"'t bank, effective at the
J~n~ry
by tha ]'adGr<.>l
op~ninJ
of business
23rd, 1920.
Notes with ~•.aturi ty of 1 to 90 dccys ( includint, r.:ewbGr
banks collateral notes) S.'lcured by Uni t-:;d St.:.t·3S
certific?.tes of ind~.:·btedness.... . . ......................... 4-3fu.%
Bankers acceptances discounted for >..er.;.ber barJ.ks ••.....•.•.•
5%
Notas with ii.aturity of l to 90 dCl.ys (includinb r~ei.c:ber
banks colla.teral n,;)tes) secured by Liberty Bo11ds end
Victory Notes •..................•...........................•
5-1/2%
Co;.....ercial paper with JLaturi t.y of 1 to 90 d~·s (in~,; 1uili.ng
J4.eruber bcmks collateri:ll notes so secv..red) •.....•.•.... , • . . . • •
6%
6v.i.
tv
Agricultur.o.l paper, all11:.aturj.ties, ••....._. .. . •. . .. .• .. . .••
Notes secured by War Fin<-'-nce Corporc.tion Bonds •.....•..•..••
BoC~.rd
has also .:;q:r,Proved the forei5o5.ng rates .for the Federa..1. Reserve
B&lb.s of Boston and PhilHdelphia•
7%
:126
W. P. 8. HARDINI.IoYIIIIOR
ALII IT ITIIAUSI. YICI IOYIUOI
ADOLPH C. IIILLII
CIIAIILII 1. HAll LIN
HiiiRT A. IIOIHU:NPAH
camasua•
·
IICRnr...tSrTHI TRIAIURY
CIWRIL\11
JOHN SKELTON WILUAIIS
COM,.OLLIR OF THI CURIINCT
FEDERAL RESERVE BOARD
ADDRUS Rli:PI-Y TO
WASHINGTON
FEDERA~RKSERVEBOARD
W. T. CHAPIIAN. SICRUAIY
R. I.IHIRION. AlllnAIIT lldUARY
W. II.IIILAY. PliCAL AIIIIT
January 26, 1920.
X-1810
Subject:
Preferential Rates of Discount on
:Member Bank Notes.
Dear Sir:
With f'urtber reference to the Board's
wire of January 22 with regard to the ruling of the
Board 1s Counsel on the subject
11
Preferential rates of
discount on member bank notes", there is enclosed here-
with for your information the full te.xt of the opinion.
Very truly yours,
Governor.
T.etter to Governors - copy to Chai1-man.
Enclosure. X-I60'J
J'F.DEft.At RES!KVE
1_27
BO.ARl>
WASlttNalvN
~umfor
Gov'ernor Ha.rd.ing
SubJect:
count on
Preferential
rat~s
ot dis-
member bank note••
Dear Governor Harding:
You have asked. the following question:- If the Federal Reserve Board.
approves a Federal Reserve Bank's recomrrendation of preferential rates of discount for member bank notes secured by certificates cf indebtedness of the United
States, or by Liberty Bonds or Victory Notes, may the Federal Reserve Bank make
advances at those rates only when the certificates of indebtedness, ~~nds or notes
pledged as security are actually owned by the member bank procuring the advance
and only when the Government deposit of such b~k, if any. at the time that the
advance is made is also secured respectively by certificates of indebtedness,
Liberty Bonds or Victory Notes actually owned by the bank.
There is no doubt that a Federal Reserve Bank may establish and the Federal
Reserve Board may approve ~ preferential rates of discount upon member bank notes
secured by certificates of indebtedness, Liberty Bonds or Victory Notes; tha~ has
already been done in previous instances~ There is also no doubt that the exercise
of the power conferred u,pon a Federal Reserve Bank to make advances upon mezriber
bank notes secured by certificates of indebtedness, Liberty Bo~s or Victory Notes
is purely optional .vi th the Federal Reserve Bmk ani not mandatory. The Federal
Reserve Board has freq,uently had occasion to rule that the word "maT' as used in
the Federal Reserve .Act in contradistinction to the word 11 shalln is permissive,
md that powers conferred upon reserve ban~ by that word, may or may not be
exercised in the discretiun of the Board of directors of the Federal Reserve B~.
In the exercise of that discretion, however, the board of directon is required
by the .terms of Section 4 of the Federal Reserve Act to "administer the affairs of said bank fairly md impartially md
without discrimination in favor of or against any member bank or
banks and shall, subject to the provisions of law and the orders
of the Federal Reserve Board. extend to each nember bank such
disco·l.Ults, advancements end accommodations as may be sa.fdly and
reasonably made with due regard f·or the claims md demands of
other merrher banks,."
From a legal standpoint, therefore, it is clear that if a Fed~ral Reserve
Bank establishes and the Federal Reserve Board approves preferential rates upon
member b~ notes secured by certificates of indebtedness, Liberty Bends or
Victory Notes, the reserve bank may, as a matter of administration, refuse to
make an advance on such notes unless the certificates of indebtedness, bonds or
notes pledged as security are actually o.vned by the member bmk and unless the
Government deposit of such bank, if any, at the time such advance is made is aJ.s,J
secured respectively by certificates of indebtedness, Liberty Bonds or Victory
Notes actually owned by it.
The Federal Reserve Boru·d in transmitting its approval of a rate may, of
course, advise the reserve bank of the nature of its p~rs referred to above,
.An expression of the Board's opinion in that res.Pect may be helpfUl to the re~e~
bank in the effective adndnistration of its preferential rates~
Respectfully,.
GEORGE L. ,HARRISON.
~neral
eoupsel.
J
·128
F..b;DERAL
Mernorandu.m for the Board
RESERVE
BOARD
X..-1813
January 27,19201
Subject: Protest of Fort ibrth Banks
against discontinuance of Dallas
District Clearing House plan.
As directed by the Federal Reserve Board on January 17, I have conferred
with Mr. Paddock relative to the District Clearing House plan which has been
for SOllie time in operation at the Dallas Bank, and which is soon to be discontinued, in accordance with the recor..m1endation of the Federal Reserve Board on
December 9, 1919, and in accordance with the action of the Board of Directors
of the Dallas Bank shortly thereafter. The delay in this report has bea:i
caused first by !VIr. Paddock 1 s absence from the city and then by my own.
Investigation shows that the Dallas Bank is the only Federal Reserve Jank
using the District Clearing House and that the ;_;lan has been criticized re11eatedly by Mr. llroderick and by Mr. Willa as well as by certain officers of the
Dallas Federal Reserve Bank itself.
Briefly, the District Clearing House '..>rovides that items received by the
Reserve Bank from a mexnber bank for the latter's credit shall offset items
which the Reserve Bank receives from all sources that are drawn upon the said
~ember bank. For instance, a bank at Fort Worth sends to the Federal Reserve
Bank checks drawn upon banks on the par list aggregating $1,000. Let us assutlle
that upon the day these checks are received by the Federal Reserve Bank it
also receives from other member banks checks ag~egating $1,000 drawn U"J?On the
said member bank at Fort Worth. In this case, no balance results. The inec;1uali ty lies in the fact that the Fort Worth Ba~ may 'Q.se a cb,ec'k which it
actually t~es the Federal Reserve Bank three days to collect to offset a
check for a like amount, drawn upon itself, which it can, by charge to its
customer's account, realize upon in two days.
·
It might appear U'l?On. first thought that the principles governing the
clearance of local checks in a city clearing house can be ap"J;llied satisfactorily in the clearance of checks for a larger territory such as a w11ole
Federal Reserve District. However, experience has demonstrated that any plan
for the intra-district clearance (irrruediate debit or credit) of items fDom a
large Federal Reserve District operates inequitably, owing to the ele~~nt
of time required for the collection of the items, and generally results favorably for banks near Federal Reserve cities and to the detriment of more remote
banks of the district4
\
A local or city clearing house is composed of banks within a certain
limited territory 1 and cheCks cleared in the morning will be collected
(charged to the depositor 1 s account u'9on which they are drawn) on tne same
day. The items cleared are of similar character, all having the quality
of immediate availability.
1.29
X-1813
-2-
However, the Dallas District Clearing House has member banks indifferent cities in the terri"l;ory covered by the Eleventh Federal Reserve
District, and these u1ember banks include in their cash letters sent to
the District Clearing House, checks u?on bariks in their own district and
u~on batiks in other sections of the United States.
The clearance (offsetting) of a men~er barik 1 s cash letters, sent
to Dallas, containing iteu.s which will require an avera~ of three days for
collection, against the cash letters sent fro~ the District Clearing
House to the rr.er;:.ber benk, .wade tl.p of i teu.s which rcey become available to
the n.eiiJber ba~k in frox;.1 two to six dccy's, according to the distance of the
u.e11.ber bank from Dallas, is manifestly unfair, and bound to resUlt in
injustice to individual remote ba.n:ks and advanta;e to the banks within
a two day radius of Dallas. It seeu:s clear that it is a :practical impossibility to offset in a. clearance time i tel;is which have different
.:.aturi ties and still deal justly with all concerned. This injustice
is clearly shown to be the case by Exa.:uiner Will 1 s analysis of incoming
and outgoing cash letters in his re~;ort of exauJ.nation of the Federal
Reserve ~ank of Dallas, as of the close of business NovffiLber 15, 1919,
and Fort Worth is one of the ::>oints shown by IV.~r. mn1 to be a beneficiar)'
under the District Clearing House plan.
w.w.
\
\
HOXTON
130
.X-1814
FbiDBRAL RESERVE BOARD
STATE~~NT
FOR THE PRESS
January 29, 19 20
For release Friday morning,
J an\iar¥ 30 11920.
Announcement is rrade of the appointment of the following
directors of the Oklahoma City Branch of the Federal Reserve Bank
of Kansas City:
Mr. William Mee
lVlr. E ~ K. Thurmond
Mr. L.H. Earhart
Mr. Dorset Carter
Mr. P. C. · Dings
The first two gentlemen have been appointed by the Federal
Reserve Board, while the last three are the
Reserve Bank of Kansas City.
Se~rity
Mr.
Willia~n
~~?ointees
of the Federal
Mee is President of the
National Bank of Oklahoma City, and Mr. E.K. Thurmond, also
of Oklahoua City, is prominently connected with banlring interests in the
State of Oklahoma.
Mr. L.H. Earhart, formerly Assistant Cashier of
the Federal Reserve Bank of Kansas City, has been appointed
of the Branch.
m~r
Mr. Dorset Carter, is an attorney and President of
the Coline Oil CoMpany, and Mr. P.C. Dings is President of the
State
:dank
\
of Ardmore, Oklahoma..
Guaran.t~r
:131.
EX DPPICIO NaMHR8
W, P. G. HARDING, GOVIRNOR ALBIRT STRAUSS, VIC I GoVIRNOI
ADOLPH C. MILLER
CHARLES 8. HAMLIN
llENRY A. MOEHLENPAH
CARTERtW.,.
SICJkrART OF THE TRI.UURY'
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTAOLLIR OF THI CURRENCY
W. T. CHAPMAN, SICRETARY
R. G. EIIERSON,AISIITANT SICRITARY
W.II,IIILAY, FIICAL AGINT
ADDRESS REPI. Y TO
FEDERAL RESERVE BOARD
WASHINGTON
JmUD.ry 31.1920.
X-1618
Subject:
Regulation of Exehnnge Charges on Out-of...'.ruvm Cheeks.
Dear Sir:The Federal Reserve Tianks nvw have on their par lists about
banks, o.nd it hnd. been expecteel that by Febmary 1st the 1uard
would. be able tv armot.nce the e~tc..blitihr.-:.ent of a tmiversul par sy;,tem.
Strvng opposithn, however, has developed .i.n certain sections of the
country and i t is evid.e:1t. that a last 'l:lut d.etermined effort will be
made to induce Cons;res::; t.u amer,d the Pet so as to allow exchemge charges.,
Merr.bers Jf Congress are being bvmbsn-o.ed. with letters ·cumplaining of.
alleged 11 coercive roethod.5 11 employed by Federal Reserve liank~ in making
collections on ba:rt..ks which will not remit at pnr, sud many b~ks which
are remitting at par are writing that t,lley hati been compelled to do su
in order to avoj.d paying out cash to exp:re~s agent! or uther representatives of the Federal Reserve Banks. :But the argument which is being
used more fre 1uently than a:ny other end wn-5 ch seems to hr>.ve more effect
is th~t while the country bar..Jts have been Q.e:pd.ved uf their exchange
profits the city ban'k.s a1te allowed to chcrge their US'J.a.l 1 c..tes. of exchnne;e on out-of-town checks deposited with them r-..ud that therefore the
benefits of the pnr collection system, instead of accruing to the public,
are reaped by the banks in the larger cities.
26,vu~.~
4
The :uard bas no reason to be-lieve thc..t the larger b~s -seek
to profit in this way and appreciates the fact that becuuse of the
ruutine methc.ds emplvyed in the eunduct of tran3H de:pa.rtrnenta, it is
difficult to devise any practical means of diseri.rnin.atip.g between cheeks
dre.wn on bcn.ks wlthin a given state or area. It seems necest~ary, therefore, that a state be taken as the unit :md tr~at the clenring hvuse
banks in any center adopt a uniform ch~rge for all checl~s dn:'wn ..,;n banks
in a given state. In view of the fact, howeYer, that & lare;e number uf
states are now entirely on the par list m1.o. ·t;hat in muny other state!!
only a cvmparatively small number of bcnks are hold:i.ng out. ( the total
for the entire country being about 4,0GO) j t is believed that the time
is nuw opportune for a general revis:i.r.m of exchange schedule~. T'.b.e ]oard
is of the o:pinicm thct these re.tes should be t•eud.Justed as early a8
:possible upon the appr;,)ximate basis of interest foX" time in transit and
that the new schedules be made .effective on an agreed date in all the
X-lblS
-2-
districts. When this is done the arguments now being made that city
banks are profiteering, and that the par collection system is of no
benefit to the public will lose their force.
Under Section 16 vf the Feder:::.l Reserve .Act the :Board is
eT!';povre>-<;;d t.o f':tx. the cbDre;;es w!lich m~~y he co] ~ec+e:i by member banks
on out-of-town checks deposited with them which are cleared through
the Feder::;.l Rese!·ve 13c.n.~:t:, n."ld the 1onrd does not :feel that it C<-Ul
postpone very mnch longer the exercise of this power., 1t has been
the view of the J3oard thnt it would be better for the bonks in c:tearing
centers to make vohm.t:~ry nd.j1>.st:nent3, but haYing been informed that
the clearing h.;,use ba1>ks in one of the Federal Reserve ci tiel!! have
beGn notified by a cormnittee of c.::n.mtry bankers, who Etre so advere:e
to 11 coercive mensures", that the clearing house banl(s m1.\st not ·take
any steps whatever to nid the Federal Reserve :Bank agninst t.he .cuuntry
b~ks in their fight to maintain their exch8nge chcr6es, upon pain
of the wi thdrnwnl oi the country banks t deposits, the Board is now
inclined to the op:i.nion th8-t 1 t would be bet'ter for it to formulate
a rule and to put it into effect.
You t,re rec1uested to bring this matter to the attentiun uf tb.e
banks in the lead:i.ng centers in your d:i.str:i.ct 'in such n way as, in
wour opiniun, will be lec.st likely to invite publicity, and repurt to
the Board theit· views un the st.tbject.
Very truly yours,
Governur.
Ietter to Chairmen uf all F.R. Banks.
133
TELEGRAM
FEDERAL RESERVE
BOARD
WASHINGTON
r
X-1820
•
·~
Referring to Board 1s notica of December; 6~ in connection wj, th tbe ·
release by the Tree.sury of st:md.Lrd silver dollo.rs to Americ[U) banks
operating their vwn branches in the Orient, for the purpose of s~ regulating the Ot:ienttU exchr.nges as to protect our sub;;idio.ry coinage
from export, 1 t has become neces.;nry fvr the Federal Reberve :Brok of
New Yorkl in order tu pennit these trrn~oetiuns to be carried .through,
to purchase u:ndel" its open market opere:tions, bins clrRWn to finrnce
the export of this sill'er.. The said bills will be<>.r the names vf the
following three institution& as drawers, ~ceptor& ~d endorsers, ,:;:nd
will be met c.t their r.ilaturity thrO\lgb dollar telegraphic transfers
'purchased in Chino. at the time of the !::ihipnent of the silver, but payable
only on arrival of the silver in the Orient; Asia Banking Corporation,
Intemnti.onul :l!E>,nldng Corporation, p.~rk 1Jnion Foreign 3r·nking Corp.oration. Th.;y are therefore export bills bearing three first-cl<.l.Ss nnmes,
the payment of which is aseured through the purch<l&e of dollar telegraphic tran$fers c..t the tir·e of the creation of the bills. In•'u>mu.ch
as these trnnsac t1ons are undertc.lem ct the request of the Federc..l
Re<~crve I:oa.rd for the purpose Of pro.tecting from export the subsidi2.ey
coina.ee of the entire cuuntry, the toard sugge::;t·s that Federc.l Reserve
Lanka each tv~ their proportion of the eaid bills. Y~ur ~roportion
wou~d cmuunt tv appr~..drwtely .
per eent., Dnd. on receipt, of
not~ce thct Y"U will covper.r::te, Duard will f'.rre.nge ellotment to you
froqt time to time of your proportivn of bills.
The bills rtJ.<"l.Y reach
a t~to.l of $4o.oc.c,ooo before the bills fir~;;t dra.wn mature. The
che:rlces are, huwever, th'!J.t the operation will begin to turn it::>elf
before that total is reRched.
·
H~RDING
GOVERNOEi ..
Copy of telegrcm tc be sent to all F .. R. iJ.'11Uts excel(t New York;
OFFICIAL BUSINESS
GOVERNMENT RATES
CHARGE FEDERAL
RESERVE BOARD
F !!:. D E R A L I1 E S E R V E
~,
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0 ]; R D
ST t,'l'EMENT FOR TfiE rRESS
X-1~1
Fur re:;l.c--cs0 morning p£~pe rs,
l'einc sdc,y, Februory 4,1920.
'!'ha fullowing is a review of general business cmd finzm.ciSl-1
conditions throughout the several Federal Reserve Districts
during the month uf JDnuary, o.s contuined in the forthcoming
issue of the Federnl Reserve lulletiX\:
hepurting heavier trorlt> o.em~:. ..L:. f4lci in mnny caaes gr0r~ter npruspsrity" tha.tl
ever befcr~ in the history of their districta. Federal Reserve a~enta n~verthe
les::; point to shortened lending power, less easy credit end. dc.ne>ers of variuus
kinds 6I'Gwing out of c:xtn::.vagance, excese>ive prices and overtrdding. u.·bvr cundi tions have be on vn the whole encouraging 211d the demand for pr\.lducts strcng
end. a.c t i ve ..
Plthuugb. emphc,sis is thus plc:.ced upon bpending puwer tnd the volUDe uf
busine as: :nF;ny c·,:nmtrjrvo.iling cun<:iderations G~.re receiving ntttmtion he retof ure
nut ~r~nted then.. From district
1 it is stnted thc.t 11 never in tne ui:.tory
of tbe mercentile life uf New Engl1nd w~s Christmas tr~e so envrroous, Pnd
never W?s purchasing pvwer exercised with such e.xtro.vag~ce .. " Yet, "in spite
cf tbe orgy of spending, the -pevple cf New Englmd b<-.'ve put intu its 3avin5e
institutions during the pust year approximately $19L-,.V .. L .v~-.~.. There is no
reasvn t0 become pes:>im.istic with respect to existing conditium;."
No.
In district Nu .. 3 mrtnufe.ctu.ring business n cuntin\Ws to be uffere.i in large
volume,n nod &clthoue:,b retail trude shvws c, n<Atural fo.lling uff frvm the hvliday
level? it is "in e.xces,, of last January~n "The stures repvrt difficulty in
procuring ~upplies uu.e to the heavy demand~ Collections are excellent and cash
pE.yrr.ents comprise ~ large part of tutal receipts-"
1
In district Nu .. 4 th..:: present der.a.1Ild fur manufeiCtu.red pruO..ucts a..'1d the
present fever uf e:.-ctra.v<'g.:mce has nut reached its zentth 1 while fureign trade
is r~pidly developing.
rep~ t;i tion
In district Nu. 5 1' the end of the yef:tr b rine;s a
vf the rep 0rts of
unprecedented prusperi ty. F~;,nnerl:l, merchants • manufacturers and bankers have
all had record yeErs. Cvllectivns were never better r-md. ~y old. <..ccQunts h~ve
be sn li·:iuid<tted ..
District No. 6 note~ thl:t the "public mind is ~iving more thvugb.t tu the
ecvnumic situftion", <.:nd :ret. "there has been little if a:ny slackening in tho
.wholesale or ret<::il trooe during JDnu~ry. All lines report very lirni ted stocks
on hE'nd "·,nd new suppliel4 difficalt to obtc..in.,n
In diatrict No. 7 "demand for cvu"~••oditiee uutruns any passibili ty uf providing a supply. The gener"'-1 volume uf business in the Midcile West c ... ntinues at
a high. level~ F~r.ming communitiec continue to enjoy the pro~perity wbich has
resulted from severo.l yenrl3 of very high prices. Nevertheless, there ie running
through the' banking mind in the Middle We !:It the;; thought that "tbia country can
not long cuntinue th<;; extraordinary volume of foreign tn.:port<>, 11 while there bo.s
been n "r~ther liberul ~e of credits in ull lines.n
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1_35
District No. 6 finds that " the holiday trade w~s in 100ny instl:.nces
unprecedented. while prices continue high,~ demand for money :;~t a record
level, .'m£1 collections t!ood."
In district No~ 9 there is "sufficient work for ~11 who care tv wor~
Factories are running full time c.nd booking all the urder;l they can fill,"
and there ia a 11 continuous dema.nd for ~ larger supply of ~;;killed labor.. n
District Nu. ·1u reports th<At 1919 wRs a recurd yef.l.r of. bu~>inesb effort ~m
thc:.t ::..t the opening of the new year the business situation continues active,
while payments for the fir::.t week in Jrmuary are from lu.4 per cent to 12.7
per cent better than in the corresponding week la~t ye?.r., "The tremendous
buying power of the people" has ·Continued.
In district No. l2 no strikes or labor disturbance are in progres&, bank
clearings h~ve increased, retail tr~de continues active, averaging 45 per cent ·
greater than in December, 1918, and there is a strong demand for all clc.s::.es.
of products ..
Some districts report that an indication of a limit of buying power is
apparently in sight. At Doston increases in rediscount rates are required to
check further expansion of unnecessary credits. In Philadelphia the present
sitl.lation can be remedied chiefly by increased production which is needed ..
In Clevelond. the peak of high prices h~s not yet be:;:n reached, while "the evil
effects of underproduction and labor unrest" are present in certain line=>. In
Richmond "universal criticism of the present extrrw~~ce of the public nnd of
inefficiency in production'' id wide, but there is "no f~bc.ternent of the;;;e
symptoms." In Atlanta. "there is great need for universnl thrift in order tu
prevent the conditions which a continuous increase in the price of commodities
will bring." In Chicago "there is a. terribly curtailed supply of goods" c.nd
"a persistent maintenance of the high cost of living.'' In St.Louis little hE.s
been accomplished in fighting the cost of living ~ it is likely that "little
will be accomplished" until individue.ls stop indulging in extravagance. raw
are besieged by s~ll borrowers who wish to borrow on Liberty bonds. In Kansas
City there is n tendency to "defer payment of war oblig~tions, to further inflc.te
credits, and thus prolong the abnormally high prices."
Agricultural operationd in most districts are now pr~ctica.lly suspended ·
owing to the presence of midWinter conditions which have prevented F!lly change
in the productive outlook from manifesting itself, leaving in most placea only
marketing problems to be dealt with. From Minnen.poli::i~ however. it is repvrted
that the outlook is guod:. The we::;tern half of the district has been covered
by'' gvod bl~ket of snow which has disu.ppeared under wr>.rm winds, but most
of the moisture has gone into the ground. Conditivns in the e0stern part of the
district are very favorable to winter wheat and rye, and while the seed wheat
situation se~m:; likely to give t>ome concern, much of the' cva.ilr-ble seed being
of doubtful genmine.ting quality, it is believed that the shortnge will not be
raally acute. In the St. Louis district winter wheat ncrecge has be r;:n ~terio.llf
reduced as compared With last year, which, however? was \UmS\lally large.. In
parts of the district the crop h&s been d::'llla.ged by excessive rains c.tnd. sleet. .An average yield in tobacco is expected r.nd abuut one-quarter of the last cottvn
crop is still unpicked. In ~sas City the winter wheP.t. area h:iS likewise been
reduced, being about 16,5C~,~~ acres as compared with 2v,939.ou~ ~ yenr ago,
?. reductiun of 2u.6 :per cent~
Tllere io a tend.ency on the part vf fn.rmers tv get
bnck to normal crup growing.. The movement of grain tu the mnrkets ha.s been
in st.tisfe..ct~.ry volume. On the P~cific con.st heavy snvws eM cold weather in
:136
-3the northwest ho.:. brought live stock off .. ·• the ranges
winter feeding. Winter wheat bE.s been undiWaged. by tbe
snows have incre~sed the moisture cuntent of the suil.
suffered some dnmBge. A large movement uf canned goods
is in progress. ·
~s
end t orced early .
cold ~ the beavy
Fruit trees h2~e
r?.nd. other products
regards the live stock situation, receipts of cattle
~t
15 primary rnnr-
kets during December are repGrted as 1,650,315 head, correaponding to an index
number of 1St, as compared with 2 ,v46, 664 head during November md l, 7~,6,945
herui during December. 1916, the respective index numbers being 2t-3 ODd 1($ ..
Receipts of sheep during December were 1,539,237 hec.d., a.s corJ.!Pared wi tb
1,114.761 bead a yecz earlier md 1,743,159 head durin& Naember, 1919, the
respective index numbers being 116, S2 ond. 128. Receiptto> of hogs show a change
fri.)!Jl }, 7!$5, S7C.. bead, corresponding tu an index number of 172 during December 1919,
tJ 4, 197,313 hec.d, corresponding to an index number of 191 during De~ember l9lb,
ns compared with 2,715,955 head, corresponding to an index number of 124 during
November. From KSnsas City it is reported that December 1919 ~December 1918
receipts of cattle and sheep at the siX mArkets of that dis tric~ were 6,621,1+51
~nd 6.9~6.561, respectively, while ruceipts of hogs were 9,777,b7l as compared
with lv, 66v, 622 in DecerJ'ber • 1918. '!'be live-stock markets hc.ve been in Wl unsettled cund~tion throughout the year 1919 and losses at the six markets referred to, as compared with the 1916 record, were 6.. 2 per cent of cattle and
8.5 per cent uf bogs, nlthough an increase of 17.1 per cent for sheep and c&lves
fur 1919 is ahvwn by the reports ..
Flo.ur milling hs..s 'been heavy a.uring ·the latter part of 1919 md tb.e opening
of 192~ in the ~;nsas Cit1 district. At Kansas City flour outp~t e~ua1ed 84
per cent of milling ct·.paci ty, a.t tln.aha. it wc..s a lightly above 94 per cent capacity•
~.nd at interior points it was &.; per cent capacity.
This compares with the
.
output uf a year ngu of 75 per cent capacity at Kansas City, c~,; per cent capacity
at Omaha, ~ 72 per cGnt capacity at interior mills. Car shortr~e exists in a
good many regions, including the flour-producing sections. Nevertheless the output of f luur has been larger in many sectiuns d,uring 1919 than in 1918 ..
lrvn <end ,;steel production ha.s renehed a high recurd level. but the demand
for prvd:uetion is keeping well ahead of supply. lnde)?8lldent producers are r'e·
gulating their 4.uota.thns mvre nel'..rly to conform to the present intensity of
demand ~nd ndvances in operating costs. Steel corporation mills continue to
adhere to millimum prices, but they are 'lU.oted only to regular customers.. Total
~illed orders of the Ubited Stetes Steel Corporation on Decerr.ber 31 were the
largest since October 31. 1918, while December showed the greatest single monthly
gain in history. This rmounted to 1,137 ,vJ6.. tons.. Total unfilled orden during
.t~e las~ seven months increased over 4,'-''-''• '"'"'"' tons. SollX3 of the independent
·mlls are in a. similar position. Pig-irvn production also shows an increase
from 2 ,J92,35i.! tons during November to 2, 633,268 tons during December, ~-" :-·. ..
" ..
-. .
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:137
X-1621
the respective index numbers being 103 and 114. Philadelphia district·
reports a heavy demand for pig iron and
foundries are unable
to produce in sufficient amounts. Prices are advancing ana. t~1ere are
practically no stocks on hand. Steel producers are r'Ul'l:(!ing at their
maximum so far as the material and labor situation will l_Jenni t~ T~1ere
is a general feeling that the next six months ~vill continue to be mar.J:reo.
by business of a very large volUL'le. In District No .. 6 industrial plants
around Birmingham are working to capacity. •rvith sufficient orders to keep
them actively employed for some ti:tr.e to come. Pig iron production was
not (lui te so large in 1919 as in 191B, the decrease being due to a.ifficulty
in securing raw material and to inefficiency of labor. Tuere is now a
shortage of railroad equipment with which to ship pig iron.
The termination of the coal strike has removed the last obstacle from
the path of the mdners who wished to return to work, but in spite of this
fact and the continuance of a strong foreign demand, the output of coal is
limited by the failure of railroad companies to deliver cars to the Llines as
needed. The car problem must be solvea. before a material bettennent can be
expected. In the fourth Federal Reserve district some mines are operating
at only 10 per cent of capacity on this account, and 136 mines in the
Pittsburgh district report a loss of 2uu,ooo tons. of production durin6 the
last two weeks in December. In District No. 3 the production of ·oituminous
coal is gradually recovering, but is nut yet up to nonnal, while the car
situation is bad •
..
:-'
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J
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X-l~l
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h-~
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·J:ue an tnraci te
"l.nuu.stry closed the year with an esti~.ated. production of 68, 700, 000 tons,
which is lO>OuiJrOUO tons short of the "Oreced.in-" year. The u.arket d::l:llanU.s are
a~ the present tin·.e absorbing the ou.tp~t of do:.estic sizes. The output of bi tu:U1nous coal has, howev 3r, shown a. s teaJ.y increase in that district durine; the
jlast .uonth, the outpu.t for December arnountine_ to 1,325,000 tons as compared with
lJOOO,OOO tons in November.
In the country as a whole prodl:.ctivn during Decett~er was 36,, 612, 000 tons corresponuing to an index number of 99, as corr~ared with
~0,303,0?0 tons, corres?Ondin~ to an index number of 55 during Novemberr and
40,1~4~000 tons, corresponding to an index number of 106, during DecenberJ 1918.
~pec1al c?mi.i,ent is offered in some districts with respect to the tremendous
~ncrease ln the use of oil as fuel, the prouuctian of crude oil being on the
lncrease, while :prices are C:~.pproaching the level where new drilling operations
way be expected. Fror.n the Kansas City district it is reported that durin,;; the
l i raonths of 1919 the output was 130,000,000 barrels of crude Oil, as against
145,000t000 barrels in 1918, the loss in production amounting to 10.1 per cent,
due to shortage of labor andn.aterials and scarcity of machinery. Durin::, the
year, however, it was a fiy1t to develOP new -oroductlon in order to offset the
natural decline of pro~ction from old ~ells. The demand for oil at uresent is so
t:;reat that the supply is not keening pace with it and it is ex-pected that during
1920 the d.evelop~.Jent of oil on a larger seale than ever before will be undertaken..
For the past December 665 new wells were completed, with 50,425 barrels of daily
pr oduc ti on.
In wool and textile manufacture there has been some easing of the situation,
pricss being-slightly lower for the ~edium grades of raw wool, and dealars
passing on these inducements to the manufactur~r in the belie! that the public
rnay be willing to buy less expensive goods. Mills, hovvev<'lr, continue to be sold
far ahead and particularly the better goods are in very great demand. In the
'Phili!elphia district. however, the demand for the; finest grades continues very
stro~, while t.ne percentage of wools free !'rom defect is comparatively swl~
Yarns are scarce, but in so far as n.aterials can be obtained, manufacturers are
very busy. It is ex.-gected that during the next few months heavy demand Vl1i ll
continue . . In clothine, the claim is wade that conS"Wilers have shown a finical
tendency to demand only the finest qualities, while -prices of ready-znade articles
are tending ~terially hi~ner and labor conditions are such as to entail heavy
-eost of prod.ucti on entirely independent of raw material expenses.
Cotton textile ~~ills are runnilli;; to ca'pacity and in some instances are sold
throu.:;h June &nd are acce:Jting contracts for as late as September in the Naw
England. ~strict. 'l'ne purchase of raw cott .m has, howjver, fallen off of late
and manufacturers are coming to the view that the limit of prices has been reached.,
There is no a¥prehension as to the future of the industry in New England,
extensive aduitions to iactories bein~ unuer way_ In the Philadelphia district
the finer grades of cotton yarns are pref~rred. while stocks of yarns are not
incraasing. 1 t is beco;uing increasi~ly difficult to place ne,lll orders owing to
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1_39
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X-1821...
tha .fact that spinners nave sold out so f.;J.r ::Jl~aa~ Pric'3s ot' yarns ~re treniiin.g
c;.nti the price ot' f'inishe d goods is high and is expoc ted to go hiiJler •
'l'he C,i.Ue~tion it'l the .clnds of buyers is said to be not so much that of price as
of delivery. From the M~Ule West·prosperity in wholesaling is reported, wholesale dry-,:_oous U.ea.lers r~porting increases runnine?, froTL47 per cent to 100 per cent
and even over .3 00 per cent for Dec ::mber, as cou.pared with the ~orre sp ondillb month
a yee:a.r at,o..
.
. .
. 1 · .
In leather aru shoes there has been i:i1J:parently sOi4>3 s1:;n of a s ow~ng
~own in der.-and. for the hiehest cost goOds, with corresponlling increase :n demand
tor tha 10\'lldr grades. The leath~r ruar.i.: :.:;t has been firm and stable and l.S
likely to rei.aln unchan~ed for some ti;.o.e to con:.e. Sou:e manufacturers fear further
wage increases which nay offset decline& in other i te:-11s of production cost.
Factories-, however, are sold well into the sprinE, and their caf)aci ty is not
sufficient to take care of business offered.
ln automObile ~e~ufacturing the sale of pleasure cars seems to be reaching
new :~roportions. Trucks are in but little demand, although there has been sou.e
recent improvement. He,rciware business is flourishinf::, (:llld the volume for
.
December and the .first half of January VIaS considerably in ;:xcess of the prenous
year. Manufacturers of electrical specialties re.1Jort business fror.-. 80 per cent.
to 115 per cent beyond that C)f> December. 1918. Harvesting machinery ~u:f'actur1ng
in so~ districts is problematical owing to the uncertainty of the wheat crop.
Manufacturers of chemicals are enjoying a staa\Jy trade. The stove business is
not nor:.:al in volwr.e.
The housing situation in th~ Middle W<Jst continues to be fundalr.entally
i.u..por tant. In the Kansas City di·stric t the y~ar 1919 recorded. an ·increase of
130 per cent over 1916, the estimated cost of new buildings amounting to more
than $64,ooo.ooo. In district No. 1 ~e period of building postponement has
a-pparently been passed, ia.wea.iate nece'ssities being of such urgent character
that they must be rr;et. It is 'Ol'eciicted that the current year. will break all
current records. Certain classes of ~terials, bowev~r. saem to be absolutelt
bwpossible to deliver. In the Philadelphia uistrict a good volume of ~emand for
many classes of naterials is r~ported.
StoCks of lumber Qn hand are scanty.
In Chicago the structural trades are opera.t1ng at ona-half noru18.l speed owing .
to inability to obtain structural steel'!)' PrQh\_bitiva :t)l'ices ana, extre1..:e sc~rc1ty
control the bridb. .-ituation. In Atlants:~..f 1.fJr.oand. for lusnber is in excess
of the su:pply and prices continue very high. The winter season has been un.tavorabl~ for pro<;~-uct~ori. 'l'he n~?-val stores industry. is .'iuiet, but m-o~cers .;..re
en~aged 1n pr~ar1n,, :tor the c OI.Cllnr:, season.
Demand l.S 1ruproving. ""ForeJ.gn
purchasing is restricted on i:i.CCount of. high exchang<J rt;~.tes. 'l'ak ing the country
as a whole, the ct1aracteristics of the situation ~e extr~~ly strong dewand.
for buildin~ materials, ~rticul~ly for lumber, and very low stoCks, couplzd
with unfavvrable traneport~tion conditions which have prevented. deliveries. EarlY
sprin6 building operation& will be correspondingly diffi~lt.
Dllring the month Oi Decemb,~r thr3re was an increase of 6 points in the
Bureau ot Lab~r Statistics index number, th~ index number for the month of
December standint, at 235. The index numbers for each of the princi:pal classes
of con:..;,odi ties likewise shON increases, the figure for the groun of raw matl3rials
for the ruonth of Deceruber beinii- 233, ae compared with 226 tor November, for the
group of :pro<i.u.cers 5oocis increa.sint froru 216 in November to 229 in December,- and
for the 5roup of conswuers goOds stand.in~· at 244 during December as col-:.3)ared.
with 236 d.urine> Nov amber. The increase in the inc:Lex number for the grOU"J of
raw n:aterials E due largl3ly to the increases in prices of farm products and
forest products, the index nlln!ber for th\3 forrr.er group increasing 12 points to
u:,mi;il'tl
:l40
.. ..
288,
I"
-o~nd
for the latter group increasing 20 points, the December figure being
259. On the other hand, animal products show a slight decrease and mineral
pro duets a sli~ht increase.
There has been an evident ir.u:provement in general labor conditions durin~;
the month. In the East and North en•ploymcnt is reported as being full and
labor is said to be in a more contented I!!OOd than for sorLe time past. High
wg.ges and gen;;rally- satisfactory condi tiona of employ-ment arc g,i vm as the reason
for this iwprovGment. .At so.-r;'J rr.anufacturing cooters .~fforts ar~ made to increase
wages on the ground tha.t hi1I)ler living costs .make them necessary but this argu....
ilient in behalf of hiGher wages is dpparently losing its force, ernyloyers feeling
that the strong deL:;and for luxu.ries indicates that there is a large surnlus of
buying power in the hands of consU.'ll·3rs. In the steel districts the tern,ination
of the strike has resulted in a >rlOre stable condition ot.' the lab or '•amJt, and
the Pittsburgh district is noe free from strikesli excepting minor local disturbances.. In all parts of the country a sirnilar condition is reported except that
poor transportation conditions seem at some points to make full operation diffic~
hence subjecting labor to some little irregularUy of e.r1:ploynumt. At some points
in the South and Southwest there are still ccx:upl;.ints t~' t labor is not working
full tilJ> but. is usin.: its high income to purChase lu.aure at ,;ne e~~\se o1'
produ.~_ti~ Neve~tn'-lless, the general l.abor situation even i:n thea-9 ·;·,·. t.t-lct:
b repQ:rted "":> th~'""best for months past. There is .:.ow''> prospect of d.gncul ~"3.1.
labor Shortage i~ connectlon with~ the crou season now pending, but the extent of
this is still_for-the future to datermine. There are so~e strikes of str~et
railway worlterq_. in various cities and more or less unrest exists here and there.
but from various. q,uarters it is stated. that a muoh better understanding of the
industrial si tuatiun exists aruong labor organizations and that adjustrumts of
wages alreally made have tended to restore good feeling.
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X-1621
The banks in the eastern centers particularly are reporting a
heavy demand and are using the Federal Reserve :Banks freely. In
the interior of the country money has been in strong demand for
local uses. The action of the Federal Reserve system in raising
its discount rate to 6 per cent on January 23, ha.s been favorably
received by the financial community as a step toward the reduction
of outstanding lines of credit. Ordinary c~reial rates are moving
upward. While on sotre days there have been very high rates for call
funds at the different centers, a reduction il\ the volume of speculation has limited such charges, and during much of the . tiU18 call funds
have ranged around 6 per cent to 8 per cent, althWgh they have run
as high as 25 per cent. '!'he market for comn:sreial pat:er is dull,
and commercial paper houses report that tbey are discouraging their
clients from extensive borrowing. A lower level of prices and very
much less activity in stocks and securities generally baS been
characteristic during the latter part of the month of January. Liberty.
bonds have declined slightly and standard railroad and industrial
bonds have sold at low figures. Foreign exchange bas be$un to move
downRard, sterl!ng bills reaching the low le•el of $3.50t, while
practically all continental exchanges have also gone to record low figures.
During the past month the money situation has not shown the relaxation
usual in January~ New financini has been greatly impeded. There
has been no ~·ange in the foreign credit situation, but a :Belgian loan
of $25tOCO,OOO was successfully placed during the middle of the month.
On the whole , the business outlook presents much the same
characteristics as during December, but with evident s~toms that a
peak in high prices and 1nf lation has been approached 1 f not reached ..
Financially the month has been one of doubt and tension. General
b~siness prospects for the coming weeks appear favorable, but will
require careful· disposal of pending financial and exchange problems.
Foreign trade continues on its ab~ormally high level, although a
reduction during December was noted. A much heavier reduction, should
exchange continue at its present unfavorable figures, is predicted by
many.
'
142
REI.E.ASED FOR PUBLICATION
AFTERNOON DJ\''ERS, WEDNESD,\Y FEBRUARY llth, 1920
..
A
N .A D D R E S S
_by
HENRY .A. MOEHLENP.AH,
Member, Federal Reserve Board.
Delivered at the Convention
of the
Dallas Group
of the
TEXAS ST.ATE BANKERS .ASSOCIATION
February lltb, 1920
The story of Texas grips me.
1.43
X-1822
-1-
Its traditions
~~d
the achievements of
its men stir the pride and excite the imaginathJn of every American who,
contemplates them.
The
gJ.o:~y
the history of the ret:i.on.
of the tone Star St:lte has been written into
The spirit of Texas 1 with its vigorous optimism,
is congenial, and its atmosphere of wholesu.-r.e frankness is one in which the
average American should be able to breathe freely and deeply.
at home among you.
You speak a
l~1guage
I understand.
FranKly I feel
Therefore, may I
express the hope that I will be able to speak the language you will understand.
I desire to sit with you as a banker a..'"l.d citizen, to confer with you in a
frank, ordinary way concerning the problems confronting our Republic..
May I
·ask you to forget for the Ume the supervisory relations:iip I occupy, that we
may take counsel tugether to the e:ad that we may serve better ov.r comrD-unities,
our eountry and the world. ..
Texas is a Stat.e of bj_g things.
You boast of c terri tory greater than the
States of Massachusetts, New York, PennsyJ.vania., V:i.rginia, North Cc.rolina, md.
Georgia - the area of which totals
256,919 square miles - and of a territory
which is two hundred a.(l.d twelve times greater th<m that of the smallest State
of the Union- Rhode Island.
In
You have a po:;,nlation estimated at five millions,
1919 you produced crops of cotton worth
$1~75,000,0CO• of co:::n '~24o,000,000;
of wheat ~63,000,000; of oats ~6o,ouo,ooo and of hay ~2),000,000.
You possess
horses, mules> cattle, and sheep of a value of ::1',572 1 000,000, and who can estimate
the value of your oil, your sulphur and coal end. othe:- sources of wealth 1
In the value of your crops; for the first time you now head the nation, for
in
1919 you had a "billion dollar crop" ..
You are also the secoLd State in the
Uh~on
in the value of your livestock.
These things are of outstanding material imrortm•ce, but when I come to
Texas I am reminded of other things of no less impot-tance.
Your illustrious
Sam Houston and Colonel Bowie, and Davey Crockett, that hero of every American
.... 2-
1_44
X-1822
lad, speak of a spirit that is more than the spirit of Texas, that is the
spirit of America, the spirit that is in my heart today and in the heart of
every true American who is permitted to live in these momentous times.
A statement recently issued by the Comptroller of the Currency indicates
that the three leading States whose National Banks have shown the greatest
'
actu~l increase, proportionately, in resources in the last twenty years are
Oklahoma, $357,722,000. or 6537 per cent; California, $l,Ou0,214,uuO, or
and Texas, $869,611,000, or 1013 per cent.
in the banking resources of your State.
1665%;
This will indicate the increase
Truly indeed, 11 Westward the course of
empire takes its way. 11
Your war record is only another evidence of the greatness of your State ..
Psked to subscribe a q_uota of $362, 695t550 towards the various issues uf liberty
bonds, you did far better than that, you• subscriptions in all amounting to
~405,772,000, or $4o,OOO,OCO more than your quota.
in the military service, 155,000
~f
And of the 3,441,000 men
those who answered to the call of their
country were from Texas&
fis we felicitate ourselves on the greatness of our achievements of the
past, let us not fail to recognize that they
co~stitute
a challenge to us for
the future.,.
.As citizens we are proud and happy indeed to know that while our sons
were baring their breasts to the enemy,
. we, their elders, in the common,
ordinary pursuits of life, made some contribution.to their support.
indeed we would be today if we had not done our best.
Chagrined
Proud we are of the fact
that, under the leadership of just such patriots as sit here today, we who
stayed at
ho~e
raised twenty-two billions of dollars to equip and maintain our
military forcest and ten billions of a.ollars to lend to the allisd
seemed like an impossible task.
nc..:iur~s.
In fact you will remember that the leading
financiers of our country thought ,a sum in excess of one-half billion
on the first
This
loan would be more than our natian could absorb.
c~
dollars
The resp7nse to
-3-
145
X-1822
the call of the Secretary of the Treasury was over four billions uf dollars ..
This proof of the s:piri t that possessed. our pe_o?ple is only an index of what
our country may do in the
d.~?.ys
before us.
Iet us remember that at the be-
ginning of this war we o·.ved tho nations of Europe a trade balance of 4oo
millions of dollars, and besides
~hat
they held
a~
controlled our bonds and
securities in the sum of over four billions of dollars, representing a signal
portion of the railroad, comrr.ercial an<l industrial capital of uur country.
Just as our sons assisted in forcing back the enemy vmo believed that
"might makes rig,ht" ,-so we did our part, citizens and bankers, a splendid part
of which
we
may alvvafs be :proud, a magnificent achievement in finance equalled
by no other nation in c:.ll hictory.
I would bring i.o you a messe.ge, a spirit of o:ptimisrr., of endeavor, like
U...J.to that carried by our so.-:1.s to the distracted nations uf Europe in their hour
·of
peril~
Is it possible, m;;' fellow banKers tllat, after such sacrifice and such
an example, we can go back to the old days of iso).a.ti on, ·of selfishness, to the
old narrow program as butiiness rrenJ
Shall we not in the economic strife and
strain JUSt ahead. go to our sectors, as our boys went to thE.irs, in the first
.
_line, and there like true .•'\mericans "Carry on?!'
Some of us may have felt at the
beginning of this \var that from a military point uf view we were not e;a.ual to
the Job confronting us, but we .knew where our duty lay,
is
pec~liarly
.Americ2n vve ·took the shortest way to the JOb.
o:r;-ganized to accelerate prOduction.
with the spirit which
Every industry was
The energies of t.he nation were coordinated.
Labor unselfishly cooperated ,,IIi th capital.
in every home..
an:;.
Economy ani thrift were enforced
The Americ&n people organized for team work, ani overnight a
·plan of campaign was under way..
We had a '·Vill to win.
we a.re a democratic people 1 that this is a
gove~ent
T"nis proves to rr.e that
of the people completely
·capable of self government under the greatest strain•
.A writer says of P~rsh:i.ng that nothing typifies his character so vividly
-4...
1.46
X-1822
as the driving force he put into his campaign from beginning to end..
He had~
definite plan, and he stuck to it through thick and thin, letting nothing get
in the way.
General Pershing only reflects the traditions of our·Pmerican spirit- the
spirit of George Washington at Vall~y Forge,, General Jackson at New Orleans, ani
General Scott, upon your own soil and in Mexico. - the spirit of Grant and tee,·
of Stonewall Jackson and Phil Sheridan.
That is the spirit of America and that
is what I would like to interpret to you today in terms uf present day problems.·
This is a mighty State With a long history of great things done.
can only make big men.
Ana
These
right here, with all the vigor of my soul, gentlemen,
I wish to say we have a big job ahead of us - a world job.
No great task can be
perfo~ed unless we have the impulse and dynamic force of the heart behirld it.
When men like Hoover bring to us the news that two million.; five ·hundrE'!d thnusand
·children are being f.ed daily iri Europ~; that fifteen to twenty rtlillion families are
receiving unemployment allowances, and as we read the news the travelers bring
.
·
.
beasts
,
that the ftr.menians are eating grass beside the roadways like d~b
, and
when we re-read the stories of the devaste.tad cities in Europe and have a pic tv.re
of the demolished factories and the deserted farms 1
it drives us to our knees and
we are humbled in our pride, and we cry aloud.
The first need over there is food.
yes, credit.
~~ere
The next, raw material, and the third •
else can our brothers get it7
Let me remind you, my country-
men, "that the kirid of men to whom we shall extend credit is the peasantry of
France and Belgium, the kind of men who ha'f"e made those countries great and who
stood with the spirit expressed in the words "THEY SHALL NOl' "PASS", who kept
back the hordes of Germany and stood between us and
de~potism~
pay their debts for we know of what stuff they are n:a.de.
our own country, SJ>rang from their loins.
These people will
T:ne citizenship c.:<' ttlis:
Dare we forget them in their
Can we returning from these heroi111. tasks which we performed as
e:X.':?:t~rnit.y?
&J. \iu:.r:\0.~:...:: i .,>.
n::.::. . '.. u. :,
go back to the ordinary pur.suits of life, the"same kind of men we once were, to
-5-
X-1822
live again the same narrow, uneventful, uninspired livesi
i.47
I will not believe
it~
We can understand
All·human relationship in these days is being spiritualized.
why our boys were made soldiers over night better now than we could before the
war.
I love to think of you...1g j'\merica, the whi te·-faced doughboy inexperienced
in war, with no military training, but with all the traditions of .American life.
I
the initiative which came to him from the baseball diamond and the football field I love to think of him with that democracy imbibed in the public schools, with
that Justice and honesty and right of the ..~rasrican. home, and I am sure these
elo~uent
things Jmerican found most
expression when they were confronted with
false ideals of the giant autocracy.
So we must be loyal to this heritage they have given to us and take our
place in the economic strife before us.
Shall we be any less loyal?
My country-
men, it is our privilege in tbe "Providence of God to take ou.r place forever with
the nations of the Ea1·th.
T.b.e Great Teacher snid
for my sake shall find it."
unto but to minister.".
the heart are the issues
It was said of Him
11
11
He
He th<:t shall lose hl:-s life
~J·ame
not to be ministered
The great expounder of wisdom, Solomon, also said "Out of
of
lifc,.if
.· I would bring you not a n'3w message but an old. one, along this line; tha.t
we can never do our full measure of service a.s business rr;en, as bankers, or a.s
Americans only as we try to do it by the heart impulse.
axiomatic.
This principle is
If you are here today a.s bankers, thinking in terms of service to
your communities as before the war, get out of the vva.y for your other
You are too small for the JOb •. A new day is here.
brother~
This is my appeal to you a.s
big men, to do the big thing with a. big spirit.
There are many economists and lead.ets and statesmen who are devising plans
for solving the many problems arising out of this unpreriedenteci \vorld upheaval ..
While we wait we do well to recall the tried virtues of our fathers.
Time is needed to heal the wounds, economically
remedies can be applied..
speaking~
Let us be steady in our thinking..
$orne artificial
Let us be generous
j_48
X-lt22
..
and helpful to those in authoti ty.
Let us be free from pol:l.tical bias and. snap
J udgrr.en t.
Let us set a good example as leaders in the new day 1s program. We
certain
are
of a few things~ This nation must produce more if those petple
over there are not to starve, and if feeble and new governments are to be made
stable.
As we get deeper into the winter, adeg_uate description cannot depict corl-o'.
ditions that exist in Europe.
Orte writer gives one phase which tells the story!
':For months past the reports of the health cond.itiuns in the Central ~mpirea have
been of such character that the imagination is dulled, and one almost seems guilty
of sentimentality in quoting them.
}::U t
their general veracity is not disputed.
In the last years of the war, In Austria alone at least 35,000 people died of
tuberculosis.
In Vienna alone 12,000.
Today we have to reckon with a number of
at least 350,000 to 4oO,OGO people who re·quire treatrr:ent for tuberculosis. .~,s
bloodless
the result of malnutrition a · - ·
generation is growing up with undeveloped
muscles, undeveloped joints, and undeveloped brains.
Tuberculosis is nearly
always fatal now among· adults.
11
Nothing can be d!lme against it owing to lack of foocistuffs.
child here
1,
the physician in charge of one of the hospitals said:
an incredible amount of bread, and yet did not get any strunger.
'You see this
1i
t consumed
I found out
that it hid all the bread it received underneath its straw mattress.
The fear
of hu•6er was so deeply rooted in the child that it collected stores instead of
eating the food, a misguided animal instinct made the dread of hunger worse than
the actual pani?js. ' "
Mr. Herbert C. Hoover in a recent statement said:
"One of the first acts of the Gennans was to denude the peOple of ?elgium
to a very large extent, and the north of France almost wholly, of their cattle ..
In consequence, it has been necessary to maintain a stream of condensed milk and
other food especially for children for the whole of the last four years.
Ths
European races are absolutely dependent for the rearing of their young on ths::.r
i49
-7cattle.
There is no cruelty to the
dairy stock.
popula~ion
greater than to rob tnem of
Nor can the herd. be r.:stored ovemi[;ht.
the
It taKes four years to
rebuild the herd by bre0ding up from a few foundation animals."
"The big problem is the child. problem.
Just as l3lgium was in danger of
losing her next gener3.tion by nv.:n'oe::-less cas;;;s of tal...erculosis brought on by
malnutrition, so are these natJ.ons e;oing through a pt;riod where
~ht:J
child forces
are being steadily and incr.::asingly diminished and wiped out."
"Things, how3ver, arc as be;.d. as they are painted, or more truly, things aren 1t
painted as bad as they are*
Starvati.on in war is to be e.:{pected, but starvation
in peace means one thing only. thu breeding of ruJ.archy."
1Jmbassador Morg0:nthau seys,
11
l7othing on earth
,~:"cop
t a
can prevent the death by fr00z::.ng and starvation of from
people in Europe and tho near e<e::>t this winter, 11
flames of Lolshevisrr. arise ir..E1.:;.rope?
lead 'tll.e way to succor Ru.rope.
mira~ le
f.~.v0
from heaven
to tGn million
Do you ,vonder, gentleri.en, the
This is our first task, f,r::erica·
alone must
How?
It is an outstana.ing privilege for me to me .:;t with you bEmkers bec&use you
have to do with the gJ."eatest pro·iucing class of our country - the :farmer.
are producing the essentials most in dmnand by
·ot~1ez-
cour.tl'i8s.
~hoy
It has been my
privilege to serve as a country bar.ker for twenty--five year·s, a com::n.4nity ;.;imilar
to that which most of you serve here.
producers of livestock.
These were che f<:.rmers, Clairyrr.en and the
You heve in addition, because of your soil and climate,
the great cotton industry.
You will becume more than ever tne co\:.Ilsellors, the
leaders, in the large new program Jt.,st ahead.
Te..;·~as
occupied a uni.1ue position at
one time of being the greatest livestock district of the world.
You are without
doubt the largest natural livestock breeding district of our nation.
You he.ve had
the setbacks of seasons, disease, and rr.arket conditi ..ms similar to all other
sections, but at no time in the history of the world
great for the staple products which you :produce here.
out of the
Digitized forthat
FRASER
r~ave
the dernrmds been so
It is gratifying to know
distress and. strain of your serious drought of three and four years
:150
-6--
,.
X-1822
ago you have en:erged to nearly as strong a position as formerly,
As Mr .. Paul M. Warb1.1.rg, a former member of the Federal ReserV'e :Board, in a
recent speech said: "We are living in mera where the production uf money. and
·
ti· on
ere d J.· t h as J.ncreased
and the protilJ.C
--~
· of goods has deqreased.
e~erge we must produ~e
In order to
less credit and money and produce more goods."
We do well to take inventory at this time on the qt:estion of fir~ t im;'''' ta.,ca:
namely, the beef supply.
pounds.
.
The total exports for the year 1914 were
Four years later, in 1916, during the
war
33 }000,000
·they were increased to
700,000,000 pounds, and then in 1919, approximately 260;00l 1 0GO pounds, or nearly
nine times that of the last normal pre-war year.
This increase in five years
means that our beef supplies have been cut to the bone~
Irtfotmation
from
the
dairy districts would indicate marked encroach!tent upon dairy herds for beef
slc.ughter.
At the close of your
dry season, in the spring of 1919, it was indicated that
your breeding stock has been reduced to less than 50% of notwal.
At the close of
1919 the sarr.e condition prevailed in the Mountain States of Wyoming, Idaho, Mantana and Colott.ado, and for the san:e reas.on their he:rds were reclaced t and thin
cows, heifers and unfinished beef came to. the markets in '..lr..usual vohnne.
During the first eleven months of the year 1919, the total receipts of cattle
at the six principal markets, Chicago, Kansas City 1 Omaha, St~Louis, St. Jobephj
and Sioux City, were 9,962,ouo heed, as against 10,751,000 cattle during the
corresponding period of 1918, showing a decrease of 7139,000 cattle~
1_5:1
X-1~22
.A.s you well know, the big ranges in Texas have been cut up so that the
livestock proposition has become more intensive and means that every farmer
must heve a few head.
.
This is we 11, for the waste feed on every fenced
\
farm is of immense value.
When a country is short of female breeding
cattle as the United States is today, the vital necessities of growth
require at least seven years to replenish the ranks of breeding females and
prodtlce a normal crop of beef steers ready for slaughter,.
For the first time in the history of our country a good milch cow is
now worth more than a horse.
In :).690, we had 26 cows per hundred population; in 1900 - 23; in 191022; and in
1919 -
22.
If you will bear in mind the increase in population
during this thirty year period and that this
population has been centered
in the cities, you will readily grasp the importance of an enlarged program
if we do our part as a producer of milk products as well as meat in this
time of world need~
1.52
X-1822
-9-
Serious consideration should be given as to legislative action prohibiting
for a period of years the slaughter of nll female calves fit for breeding purposes.
Vl'e protect our wild gar..:;e
b~1t
we should. give more thought to the :pro-
tection and perpetuation of our domestic livestock, particularly of the beef
strains.
The record at the live stock markets during. the past four years shows the
volume of veal calves being slaughtered, which is appalling.
The following table
shows the slaughter of cnlves for 1916, 1917, 1918 and 1919 ..
1916
1917
1913
1919
( Es tirr.<: ted)
5,773,900 Heads
7,030,700 Heads 7,767,175 Hems
8.919,000 Heruls
Last yee.r you hnd nn unusual precipi t&.tiun which hns had its influence on
your pastures end your conditions are again normnl.
The herds from the Northwest
and West h:we been ret11rn.ed in a marked way to 'Jvur Stnt.e.
During the three years pl;'ecf3eding l9l9 whe:"l you had a drou-th over the Texas
country the number of sbeep duclined greatly.
It wo.s estimc-.ted that there was
a decrease of about 300,000 het::ds up to J:muary 1919.
S:i.nce
thr~t
time the ro.ins
hr.ve come ·and you hnve had about 300,000 heads of lamb come into Texas from the
drouth stricken areas of Me>ntona, Wyoming, Utah and parts of New Mexico cmd it is
said that all of Western Texas to date has been largely restocked in its lambs
to the pre-drouth number.
Your sheep now total
ne~rly
3 million
hend.
Vlhen the compact or U;egue of Nations. or Treaty has been completed and the
credit program reconstructed nnJ. when the
nation~;;
of E·urope come to buy in this
country to replenish their b.ards 1 for ·this is the only country they cc..n come to,
you will reudily understoncl who.t this menns.
Our exports const;mtly increasing
j_53
X-l~
-10-
will make hecvy draft upon the production, which is therefore related directly
to the home supply and the price levels*
Another important phase of this question is related to the labor problem.
labor was never so well paid and was never in Sl.\Ch demand as now.
This must
cont5.nu8 f o:r ma':ly yea.rs in this country because of t1e g:·e3.t need for building
operations of all kinds, construction of highways, the rehabilitation of the
railroads, the increase of the plants necessary for increased production and
manufacturing of all kinds and it can be safely said without contradiction in
view of past history that when labor is well employed, meat consumption increases
in proportion.
The ratio:·of slaughter has exceeded that uf production during the last five
years.
The excessive marketing during the war period is no indication of over-
productiort, but rather of depletion.
A
cattle increase during the past four
years at the seven principal markets of 6,000,000 heads or over
means rapid
destruction~
S3 per cent1
It is predicted that the coming census will demonstrate
that the annual cattle estimates will show a grossly exaggerated condition in
the number of cattle in this covntry and particularly the breeding stock.
It
is claimed by the best informed statisticians of our country that the
nations supply of ~emale cattle is way below normal; that it will take
two_whole. g~nerations of livestocK. before H will be poR~c;1bJe +.o sum)ly
tb~
country with a normal supply of beef for the block.
This is the time to take stock and make our plans for the future.
This is
a message of prirr.e importance to the bankers ani leaders of livestock interests
of Texas.
May I suggest therefore
two outstanding needs to which every banker must
relate himself during the next few years:
First, .Adequate financing of the fanner for purchase "f tractors and all
machinery, seeds and labor necessary for increased acreage to take up the slack
X-1622
- 11-
154
of available lab or.
Second, 'ro provide ample funds wherever character a."ld ability are in
evidence to carry over for the necessary period all female stock for breeding
purposes.
''
.And right here let n.e state, gentlemen, the Federal Reserve System
was established for the purpose of stabilizing agric'L'.ltural as well as the
industrial and comrr.ercial act~.vities of our country.
No paper will come to
the Federal Reserve System that will be more acceptable and more eligible for
rediscount than thet of your farmers and livestock producers ..
The orderly marketing of cotton, both in domestic ani foreign commerce,
is highly es·sential to the nat.iont and especlally to you of the South..
Your
whole civilization is based uyon the profi tabJeness of cotton production.
Here-
tofore, the marketing of cotton has been anything but orderl;,•, in :.:·act it has
been positively disorder·J.y.
This ho.s been due to two thi.ngs - the lack of
adequate credit facili t5.es enci. of sufficient wa1·ebousir.g
facilities~
The first
difficulty, that of inac'.eq.Pate credit fa.ciliUes, has been almost, if not
entirely, overcome by tbe passage of the Federai. Heserve .Act, under whose :provisions every r..ember bank is authorized to "accept draft::; or bills of exchange
drawn upon it
* * * * *
whi.cl1 are secured at the ti.n.e of c:.ccep tance by a ware-
house receipt or other such doctAr.uent conveying or securing ·t;i tle cove ring
readily marketable staples .. 11
Here is authority for the open disco1.mt market an(i for the use of ban.LIDrs
acceptances.
Hitherto the fl.nancing of cotton was largely localized.
t
Its
burden rested upon the southetn ·banks, with only small assistance from ou.tside
sources.
Credits on cotton were extended by the ordinary promis;sory note, which
had no entree into the open market.
The Federal Reserve .Act throws wide open
the door to the money markets of tne world, an.d the only req_uireruent for entrance therein is that the seeker after credit shall cQme pro:perly clothed.
Under the .Act and the regulations of the Federal Reserve Iloard this dress
consists of a warehouse receipt, cove ring cotton or other staple rod nonperishaele
-12-
1_55
X-li522
agricultural prod\.:cts, issued under such safaguards as to guarantee a.t all
times the absolute integrity of its statement of fact •
.Adet1uate warehousing fac).li tiefi for cotton would, therefore; seem to be
the most pressing necessi t1 in the sane and economic distribntion ot' your great
crop~
The warehouse receipt to be of the highest credit value should be ur.:iform
in its character, Just as are bills of lading and other instrumentalities upon
.
I
which credit is extended..
Cotton, when saf.eg,larded against weather, fire ani
theft' is practically indestructible t and should furnish the basis of the very
best collateral upon which to borrow money.
Credit only desires to be assured
that this c~~odity is thus protected. This assurance can be made absolute only
s tandardhed
through
a system of
y.rarehousing issuing a uniform receipt ...
If, as everyone agrees is the ('ase 1 the lack of credit is the chief reason
for the present WlSOund and unecor1omic system of marketing cottcn, and if the
uniform wareh•.Juse receipt 1 as everyone agrees, is the k9y which unlocks credit,·
then it must follow that the providing of ao.eqv.ate, s tar.~.dard WE,;rehouses is by all
od.d.s the uppermost thing to be done by cotton proO.u')er e.nd bLlS"iiless man to bring
about the solution of the difficulties under wl:.id! you of t1.<.e r,o•Jth have 'oeen
' <
handicapped for so.many years.
A proposition of setting UlJ a 1wcf:'erential ,·ate
on paper secured by warehouse receipts issued under prop8r r. t.ate or federal
regulation and inspection should have the fullest
The farmer needs your help.
consideration~
Give it to him along these line sA
I have only
briefly hinted at this question of increasing productivity. ·May I suggest the
need for a larger ca-npa.ign of eC!.t1cation to stop the people in their debauch, tb.eir
spree, their extravagant
people since the war.
was universal.
li~ring
a1d spending?
A great reaction bas come over our
Economy and even sa.cr.if:i.ce when the boys were at the front
Every unit of our country was organized under the county
of defense to encourage thrift, prod\.\ction and saving:
armistice a reaction set in.
corning more serious~
c~~ncils
ilfter the s\gning of tlle
Signs are appearing that the :people are now "be'-
In some industrial centers they are beginning to reeJ.iae
-13-
156
X-1&22
that in this hour of need for greater prod.uc tion is their opportunity to save
from their earnings for the. rsJ.ny day.
\Ve should encourage our customers and
our people by example and precept that we mean what we say.
We should take
the message to them emphatically that no bank can encourage SIJeculation whether
upon the stock markets, l.n the handling of commodities, or in land.
The time
has come when we must shift all of our relierves to tbe point of attack.
are the Ol.ltstanding officers of the line.
Yo1.1
The war, finartd.ally, has JUSt begliln •
This lesso~ must be cartied with emphasis and must be put into practice behind
.
i
the counteh of every bank.
Every loan should be analyzed and critiched to
the end. that every dollar should count for production and not a cent for
speculation.
To w,_ thholct produ.cts from the market for pure speculation is
unwise and hurtful.
.A reg'llar, ot·derly market;.ng is part of your problem~
We hear much these days about the necessity of
deflat~on
of
credit~
Some
economists lay it to the expansion of currency, others to preva.il:i.ng price
levels, others to condition of foreign exchange, and so on~
Whatever maybe the
cause for abnormal conditions in our credit structure \le are confident of two
essential necessities for approach to solution.
First, we must increase our
production and from our prodv.ction save more and spend less.
We all feel s'UI'e
that these are the ·: found.atiun stones in these days of recvnstr:uction.
So
instead of talking of the inflation or expansion of currency or of credit, or
its deflation or contraction, let us,
thinking and doing.
a~
I have indicated, be steady in our
tet us conservatively regulate our credits and apply our-
selves to this new great task with a1.1 our energy and.
pow~r,
but with that
power under absolute and complete control.
The Edge Act, now a law 1.1pon the statute 'books, will furnish the
machiner~r
with private capital and control, but with Government SlJ!lervisl.on, which will
pro.vide in large measure means for financing the operC2.tivns governing the exports
and im,ports of our country so that credit may be extended and rationed in ord.erl;}
fashion..
It is another great piece of constructive legislation
inJ~
to
1_57
X-1522
provide credit ~pon long time. and offering a good investment for the savings
~
of our people.
The Federal Reserve System is now the reservoir of strength to the financial,
industrial, corrrnercial and· agric'll.ltural interests of o'll.r country.
As bankers we
are beginning to understand that this law was put upon th~ statute books, not
for bankers only, that they might profit more, or for any one class, but for the
interest of all our people; if you please the financial traffic regulator.
There
is not a man in this room today but who will admit that the Federal Reserve System
saved • not only our country, but the world from financial chaos and distressWe could not have won the war without American men ·ani money.
participated in its benefits.
made more secure and valuable.
Every citizen has
Every stockholder in a bank has had his holdings
Does it mean anything to you, my !'ellow bankers,
as a truEtee for your depositors to be a participant in a System the capita~ of
which is $67,5v9 1 000 and the su~lus of which is $120,120,000, and the resources
$6-,171,747,000 and in control of over two billion dollars of gold ..
Let us take for example the case of a strong state bank in one of our
T~ President stated that his bank entered the System during the
largest States.
war as a patriotic duty but
~
it haJ. never borrowed or re-discounted the direc-
tors were discussing, now that the war is over, the advisability of withdrawing
from the System.
T'n.is bank had paid in $9,COO on capital subscription and carried an average
reserve of $162,000- or a total of $171,000.00- which under the tenns of the
Federal Reserve il.c t was paid in gold.
The withdrawal of this bank would take
that much gold from the system.
As the gold held oy the Federal Reserve Banks forms a forty J_:;er cent basis
for loaning power the withdrawal of this bank's
~171,000.
of gold would redn.ce
the loaning capacity of the Federal Reserve Bank by,$42?,500~
Therefore any
withdrawal of capital or reserve reduces the ability of the Federal
toFRASER
protect the
Digitized for
credit situation of the country by two
an~
R~~e~e
bank
one-half ttroos the
158
-15-~
amo·..mt of such withdrawaL
Every State member bank has the privilege of with--
drawing from the syst.em and as a:-pp'!:"c,xiwately y/jo of the capital and reserve
deposits of the Federal
Rcse~'"'~Te
13aaks of the
co11rAt1~;y
belongs to Sta.te n:ember
banks you can see wh~t the effe~ t to onr crecU t st:tucturc would be if the
privilege were taken
aiva~1tage
The aggregate resou:.:·c8s of
half billions.
t~l.e
of, especially luring these days of reconstruc Uon
3tate merr.ber banks approximates nine and one-
The eHgible LOn.,·member banks have resources of about
b
billions,
The effectiveness of the Fedn:ral Reserve System would be increased from twenty
to ,twenty five per cen~ if these eligible non-merLber banks entei·ed the System •
.And when you stop to consider that the Federal Beserve Systom 1s task is to
maintain confidence and insLL'e corrtJlercj_al solver:.cy don't you think membership
worth while?
It is highly impor-ta"".t that the eli gfb J.e no:n-roembe r State banks in Texas,
to the number of 3L~1, witll a capital of twei1t;y-·one a1d a haJJ miLLions and a
surplus of nine miHions and res014rces of p;5 m:U.lions 1 e.dd their strength to
the great structvre.
Is i t fair for y01.1 as bar-.lre rs to sta2.d on tha side li:.1es and participate
in the benefits of this gr-eat financial Sys :.om
EX.rl
not mc.ke auy contrib'.-ltion?
Is it safe for you to ass1.·:rr.e that in the day of stress or strain
•
~;hat
your
correspondent in the city will be able to care for you regardless of his own
needs 7 Have you the rj.ght to put this burden upon hire.?
It is my sincer·e
JUdgment that your elder brother, your real reserve, vvill be ym.1.r f1lll protect5.on,
keeping youi in full control of your L1dependent re latJ 011s as a banker in - the
independent bank:i.ng System of onr country.
You owe it to your community.
You
owe it to this larger prog:rar,1 as a banker and as a pr·od.,.acer to rr.ake s\:re of yo1.:'.f'
ability to ser-ve.
-·
~
Why shoultt
yol.~
be dependent?
We hear a good deal these a.ays
about the possibility of Branch I.anks being estab lishe~ in this country.
hostile to my sense as an independent banker
~~d
This is
citizen, and yet I am convinced
a need for ~his can only come when the local bc;tnker cannot or will not serve
his community and it becomes necessary for outside capital to come in.
·159
You
do well my friends to consider this independent relationship and you should make ·
safe your position as a financial leader of your community.
May I assure you l am not making this statement with a view to solici.tmg
1ut as I stated at the beginning, to be of service and to make those
membership.
suggestions that I would like to have made to me if ! were in your place~
/
May I "Qriefly reeapit\ollatG what I consider ·the outstanding benefits of
membership in the Federal Reserve System:
l.
It is an insurance policy, assuring to you complete confidence in. your
ability to serve your communities and to care for you.r depositors under every
stress and
2.
strain~
It is a guarantee to your community that any program for development
or production can be safely and continuously carried out.
3.
It is a guarantee to you as a conservative banker in the district of
your business that you can take these deposits with the assurance of security
and continuous service.
4.
It insures the independent relationship of your bank as to its dependence
upon any other bank..
5.
It is not a fie ti tious reserve but a real reserve.
For the first t).roe
in the history of our country we are able to assemble the wealth of our·peopl.e
into the credit structure.,
6.
You are able to transfer funds without cost.
checks at par ,·~e-ither going or comingr
You are able to collect
You are able to' ship currency either way>
insured and all charges paid, without any expense to your bank •
.
'
7.
You have the benefit of the adVice of business experts of the country
not only on financial matters but upon the conduct of your business in particv.lar.
You have 'the privileges of rediscounting eligible paper.
This is pa;ticularly
important at this time because of the need of increased. production of the art)c)c>.F".
160.
. X-lS22
-17you produce in this section.
6.
The System has in the short period of its exi~tence brought about better
banking methods.
You have heard criticism as to the necessity for making reports,
etc., but let me re:rr..ind you Gentler;,en that it was well for your country that
i
under the National lanking law s" careful e:xamination of banks
that when the stress of war
adhered to;
111J.S
upcn us we had little to clean up or remove but
w.:l.S
we could go imrr.edietely at our job.
]ankers now ar0 becoming real bsnkers and
I
trusteQ. guardirtns of the peoples money.
9·
It has given to every bank, a mc;mb9r of the system. the prestige because
of the things I have enumerc.ted. and it is reflected in the confidence of the
depositor, which is above :111 absolutely necessary,
Have you undertaken to socure the viewpoint of your depositor, very seldom
expressed, as to how he feels?
reflect
If there is any doubt in your mind~as to this
upon the four yea4's or more since the World War began.
lnstee.d of
apprehension or fri€';ht our :people for the fir<Jt time in the history of our
country understood that the Goverr®ent was behind tL0 tanks; that somehow, someway:
their interests were fully protected#
:ta:"lk failures ·.ver:. t:he lowest in the
his tory of· the country during t.h:is period.
LDn4 depos!.ts inc.reasecl, bank stock
paid large dividends, lare;er than ever before, ani in ::>pi te of all we were able
to finance the Government in £:11 .its operations as I have iadicated before in
the sum of approximately thirty--five billion dollars.
liihen I say "we" I do not
mean bankers but I mecn the :people, our depositors; unQ.er your leadet'<>hip.
l'ut this could not have been done
Federal Reserve System in operation.
A.S
you will fr3ely admit without the
May I emphasize this again because it is
my thought to get into your minds f::i.rst things so that the petty, smaller thing
will take its right Flace, and that you
w~ll
have proper respect because of the
accomplishments of the System during this great period.
•'
'
I am conscious of the fact that there are critics everywhere.
there are some here today
~no
No doubt
fail to appreciate the fact that tha Federal
X-1322
-16-
Reserve System stands· as the great insurance policy, past, present and futurej
vVho still cling to their idea and chi!"p and whistle because of their pet.ty losses
on exchange and their losses upon reserves a year after the war is over, and
with the memory of past panics fresh in their minds, ani with their deposits
doubled and their profits greatly increased, having the complete confider£e of
the people.
In spite of all this wonderful record there are still sorr~ men left
who would take us back to the dark alley of narrow thinking .and small doing.
·Do you realize, my friends, "What it means to be a citizen of a country, and
the only country on the face of the earth with a stabilbed money standard ..
How would you like to live in a country where the mark, in terms of gold, is today
only equal to one twenty-second of what it was before the war, or where the franc
in
exchange for gold is eq,ual to less than half its t'onrer value, and the lire
one-third of its former value?
fl.nd what shall we ~ay of the previous standard
of the world, the pound sterling? Ch, I Jmow thert:l are rwn here who will begin
to talk about the purchasing pow.;r of th.;; dollar, but let me remind you that J.n
spite of the present price 10vels our dollar still heads the list..
undisputed creditor
D.;t
tion of the world,
He are ·t,he
Not a natiunal ban.K :failure of any
cunsequence during all these years of stress.
wt
me refresh your mind as to how you people in Texas have participated
in the Federal Reserve System.
Rediscounts
1917
$52,052,6oO
1916
$5;)7 J 677 '766
1919
$1,224,94<--, 345
Is that any contribution to the State of Texas?
\!~bat
Are you as a banker a debtox·?
will be the record for 19201
.
In the old days when the stock gamblers vvould plan
set the wheels of speculation
gain~.
th•~ir
I
little parties and
when the garn\:l got beyond their control. you
will remember, they were playing with the funds the producing people had en .J.:>posit.
-19-
:162
X-li:.22
and wllen we desir-ed thes-e- .t•J.nd.o f o;: their use, enci for legitimate purposes
to increase production and. care for our ctillmunities, v:e were told that vr.e
could not have tb.em and we v;ere CJi1~lled to resort to one device and. :.o.:1.otl\er
to care fer our need.
One centralized power controlled. How different t.cday,
A lemocrati'ied System responding to needs of every sectiun of our country.
1..8 t us get it into ~ur minds if we have forgot t,.m it, that the Fede re.1
Reserve System is a great G3vernment institution, and is, as I have stated, tor
the benefit of all th8 p~C!Jle.
There fl.re sorr.e 'bankers who labor u.."lder the :Ui?•.J.-
1·\,).cination that the deposit::; in their institution are their property.
Ti~
do well occasionally to r0rr.ind ourselves that the funds belong to the people,
and that the Sys tern i~ fun?-tioning ~ot primarily for the banker bvt for the
people •
That is what we have the Government for, end after all you and I arc
the Goverr.rnent.
Has the safety 5nd security that the Fec.eral Reserve System
has brought to yov a! a bank::r meant anything to yov.r customer?
tried to get his viewp•Jint 7
Have you ref lecteJ on how he felt during the wa.r?
This System has been the great insurance policy for all of us
members or non-members.
Have yov cnr
wh~thcr WI?
were
Your whole district ia now on the par bMis) .rud. by
the way, is this not in ms.ny w'ij.yc
~
goQd thing?
Would you n..,t suffer rnany
ir~
conveniencjs and possible iess if you were to go back to the old days :;f taJ"iy
service.
In a short tin:e now, the whole country will be upon a par basis.
use an old illustration, which to my mind is <.lui te clear, l!f tho
prodv,c~r
To
in the
old davs, who hauled his produce 'ey wagon, forced to go dOV>ll strears1 ten miles
to find. a bridge to deliver his goocls, of course putting thP. cost of trans-p'lrt.r
tion as to time, labor and all upon the Q:Ustomer _
The
Stah.-or.~r
Government carue
along more recently and put a bridge across this river right at thP- door of
producer and the cunsumer and have told them to use it to expedite trade,
save tima, labor and moneyr
the u:;:,c of the old bridge?
tl~e
~~
Do you want to be one of thosP men who i·M;ist upon
Think i t over, and again 1e t me remind. 'J""U, always
-20-
X-1622
163
remember that these deposits belong to the people ani that the Federal Reserve
System is functioning in their interest primarily.
·May I have the ear of the State bankers present who are not members of
the System, to urge upon you the prime importcnce of st:·engthening the System
for the job ahead as I have outlined briefly.
n1e day has come when if you
expect to use the System directly or indirectly you must make your :f'ai.r con· tribution to its reserves in every way.
In this brief, plain way I have
undertaken to talk to you in a languame you would understand, without technique
or any effort to give advice.
I would like to do to and for you as I would like to be done by if I WGre
in your place.
The time has come for us to relate ourselves as citizens> not
only to the financial system but to the country and to the world in terms of
sacrifice and service-for you to put first things first.
You may discover that
this principle when once worked out will be not unlike the tides of the ocean.
They come in with unfailing regularity and when they go out they take with them
not only the greab war vessels and merchantmen, but the 1i ttle dory and canoe are
lifted alike upon the bosom of the tide.
A well known philosopher put the
idea something like this: "Just as in religious hysteria a single text becomes
a whole creed, to the exclusion of every other text, and instead of being
itself subJect to rational tests is made the sole test of the rationality of
everything else."
small doing.
That is the mistake of small thinking, which results in
lVJay I urge you again to use your privilege as leaders in the new
day of opportunity..
How proud we are of our country and our civilization.
unmindful of this:
let you be not
That our country in the days to come will be JUst as great
and strong according to our own contribution.
have paid the price.
~ut
It has cost u·3 much, the fathers
We will not tolerate on our shores the anarchist or the
bolshevist, but we propose, methodically, steadily, conscientiously to go at our
job of reconstruction, having full respect for the blood arrl treasure that has
:l64
-21~
'been spent to make our cou.Yltry what it is, a11d. hand down to our children the
heritage unsullied a:.1d pro>Te
~o
a.Jl the world that this is a Democracy where
:people know how to perform the task of self govemment,.
'
.
1.65
W. P. e. KARDINe. BOVIlNOI
ALRIRT ITRAUSI. YICI eov11101
ADOLPH C. IIILLIR
CHARLII I. HAIILIII
HENRY A. IIOEHLINPAH
CARTER eLAII
IICIFAIY OP ••• TRIAIUIY
~MiliAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAIIS
COMniOLLER OP THI CUII&NCY
ADDI'IIIBB REPLY TO
W. T. CHAPIIAN. IIOIITAIY
R. a. !II IRION. AIIIITAKT SICRITAIT
W. ii.IIILAY. FIICAL Ae . .t
WASHINGTON
FEPERALRESERVEBOARD
February 5,1920 •
.X.-1823
SW>jeet:
Campaign for New Par Points.
Dear Sir:There is enclosed herewith a copy of report
prepared from replies received from all Federal Reserve
Banks in response to our telegram of January 29th, as.1dng
for information regarding the progress of the campaign
being conducted for the establishment of new par points ..
In addition there is also enclosed a special
report showing nonmember banks not on the par list distributed by States according to Federal Reserve Districts.
Very truly yours,
2-Inc.
Assistant Secretary.
To Chairmen of all F;.R. :Barut.s.
~-1823 a
CAMPAIGN FOR NEW ?.AR FOI:NTS
----------------
R~rorts
Bank
%
1
- -
N3W
·-
Nat 11. :State :.Total :Non-member:Ratio of non-member:No, of banks :No. of banks
:rrernber :br4"1ks on :bru•.ks on par l5.st
Benks
:BanK
:acLued to parLad.J.6d tv par
in
: ~(Bmbe rs :bcnl.:s
:par list :to tot<:cl rwn-raember:list d.ur·ing :list SJ.nce
:dis 'eric t ·
:banKs b district :Ja>J..lg2o
Federal
Reserve
--
Banl~, January 31,1920,
--------------------------------------
of Federal Reserve
-- - - - - - - - - - - - -
-
- - -
-
-
No. of nun- : Tote~l nur--:b:c; r of
r:-.e;rc:b<..:r banks: nt•r)-msml:J0r tc..tlJ<.s
nut on par
in district
list
395
36
431
248
100
Yo:;.-k
637
122
759
327
lOO
·327
DhiJ ad.e ),phi a
6!~3
39
. 6S2
415
100
:~415
Cleveland
747
93
845
1085
lOv
1085
Richmond
54o
46
536
566
33.0
bl
!tlanta
363
65
429
694
44 .. 1
333
Chicago
1()1~5
325
1373
33;6
93.0
St.Louis
469
70
539
24~i3
91.7
144
!funna ap o 1 is
339
39
923
2210
75.5
331
KPnsas City
996
47
lQl!j
33L:.5
100
1164
3345
Dallas
644
120
764
1236
100
1002
1236
San Francisco
144
586
- - - -
730
941
- - --
:J:Soston
-
-
-
-
7904
Total
FEDEB!L RESERVE LO/IRD
WftSHINGTON
FEIRUPRY
5, 1920.
:
1205
.
9109
:
17416
--
-
-
90.1
1492
901
4191
.2
2675
1041
-*
14
b92
2927
717
104.
)165
84.6
1595
f
295
-
--- - -
- --
2l!3
--
-
-
1045
- -
20531
-
-
-
-
-
- - -
-
-
lO
,-1
NON-MEN!BER B11Nro:i NOT ON
-Federal
-- - - - - -
--
--
-
- - -
Reserve
Bank
-
Va.
--
N.c.
S.C.
Ala.
-
-
Pl\R LIST JANUARY 31,1920.
Distributed according to States and Federal Reserve Districts.
- - - - - - - - - - - - - - - - - -· - - - - - - - - - - - - - -
-
. Fla.
Ga.
- - - -
MisB. :
La.
Tenn.: Wis
. Ark
Minn.
X-1823
-
. Ariz.
-
b
- - - - :. Oreg.
-
- -
Wash. : Total
- - -
..
Boston
Naw York
..
Dhi lade lphia
Cleveland
190
Richuond
426
-.
310
7f>
f.tlanta
498
7C:
91
36
926
l26
901
..
295
C'bicago
222
84
138
St.Louis
295
142
Minne2polis
717
575
YU?-nsas City
....
SanFrancisco
---
-
To· tal
190
FEDERAL RESERvE EOARD
WJ~HlNGTON
..'
February
-
..
..
Dallas
5,1920 •
http://fraser.stlouisfed.org/
Federal Reserve Bank
• of St. Louis
426 : 310
78
72
498
91
174
126
437
84
575
13
55
36
13
55
36
104
-
---:
3165
-
'
IICIIIT.UY OP THI TR.... UIT
FEDERAL RESERVE BOARD
C08PTROLLIR OP THI C.URIIIICT
,'•,
-~.
:-- ·-
'.
W. T.CHAPIIAN, IICRITAIY
ADDJtU. JtllPL.Y TO
R ••• I:MIIlSON, AIIIIIAIIT SICIIIAIT
FEDERAL RESERVE BOARD
W. II.IIILAY, I'IICAL Aeaar
WASHINGTON
F&bruary 7,1920.
X-1825
Subject:
P'IArcha.aes a£ B,.lls from .Accepting Bmks.
Dear Sir:The reeo:rds of the Federal Reserve :Board show that on a
recent date one of the Fede:t•nl Reserve Danks purchased thirty-d~
bills direct from the acceptor at six percent, which was an entirely
proper proceeding in view of the fact that the bank 1& rate for
commercial paper at the time of the purchase was six percent. On
the same date, howeve~, another Federal Reserve Bankpurch~sed bills
from the acceptor, running from thirty to ninety d~.ya, a.t five and
one-ha.lf percent, or one-half of one percent below its. rate for
conmercial paper; and about the sAme time a third Federal Reserve
:Bmk purchased from th-.: acceptor a bill running twenty-nine days
r'.t five rmd. one-q,uarter ~ereent. whioh was three-·t.P.a.:rt.ers of 01'1.9
percent below its ro.te for comrrereial papeX'.
It is the :Boa.t'd 1s view' that a. draft drawn by en indivS.d.ual ~r
firm and a.ecepted by a member bank is in no sense a. str.ouger credit
instrument than a note made 'by tb.e drawer of the bill would be when
endorsed by the accepting bank. and the Federal Reserve Banks should
refrain from making direct purchasea ot bills from accepto:rs at rates
les~ than the current ro.tes for commercial paper.
You are requebted to advise the :Board of ~he policy of your bank
with respect to the purchAse of bills :from acceptors ond. whether ot:
not your officers concur in the vieW& of the :Board as ex.pres~.;ed above.
Very
t~ly
yours,
Governor.
lstter to Chairmen of all F.R. l3anka.
i68
W. P. e. KAIOlNe, eovaa1101
~liT lftAUU, VIe& eoviiNOR
ADOLPH C. IIILUR
CIIARLU I. HAMLIN
HINRT A. IIOIHLINPAN
CAIITIII eLASI
CIWRIIAN
JOHN SKILTON WILLIAIII
.' ;:-~ '}
1_69
W. P. 8. HARDINII.IIOVIRNOI
EX OI'I'ICIO MIIMBIIM
ALBERT STRAUSS. YICI 80VIINOI
ADOLPH C:. JIILLER
CHARLES S. IIAJILIN
HENRY A. JIOEHLINPAH
CARTER ILASS
SICIITAI!hOJ:lHE .TREASURY
CIIAIRIIU
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAIIS
CO•PTROLLII OF THE CURRINCY
W. T. C:HAPJIAN. SICRITARY
R. G. EIIERSON, ASSISTANT SBC:RETART
ADDRESS REPLY TO
W. M.IIILAY, FISCAL A.81HT
WASHINGTON
FEDERAL RESERVE SOARD
Februur.f
SubJect:
~,
1::)2U.
X-lS27
Acceptances of the Continental
QQaranty Corporation.
Dear Sir:-
On
Dec~rnber
15, 19l9,
the Fedaral Reserve Boar-d addreb;;;ed to
you a letter rea.ding os follows;
" I'he Fed.eraJ. Re;;.erve Board has been advisect. that
the Contimntal G1.1ara:..-..ty Corporation of New York hat> widely
circulated circul~s ~d forms relating to a plan which
it hns devised to fluance the pt'.rc!la;;;e of automo'b:i.l~s by
local dealers from !Ik".nu:facturers, and the :Ooa.rd h~s received
from several of the Feder&l Rebetve Bank& in~~iries not
only au to the nllture end scope Of this pl-m but al::;o as
to whether or not :pcrpcr drawn nnd accepted there-:.mder is
eligible for rediscouut t<s a bcankers' ncceptance.
11 ·The lloard l.s of the opinion thnt teclmicul.ly
the dtafts described, when accepted by the Contincnt~l
Gue.r~ ty Corporation, come within it:; definition of a b~:nk
ers t acceptance set forth in itt> regulat:tons ~d as ~;;l.lch are
technically eligible for dio>count provided that they
comply in other re~pects with the terms of the law and the
re~~lations of the Federal Reserve Board.
" The Loard has been advised further that its
letter of July 22, 1919, addredsed to the Continental
Guaranty Corporation~ stating that its occ~ptRnces of the
kinds described would be eligible for discount provided,
of course, thnt they comply with the varlous terms of the
Federsl Reserve Act and the regulations of the Bonrd; has
been widely distributed with its other circulars and forms
e.mong banks Md bankers throu6fiout the country. 1ec::.u.ue
of the very eenera.l mis~~erst~din6 which evidently bas
resulted, the J3oc..rd wishes to state that this letter of
July 22, 191::;, was not in fact am should not in any way
be construed to be t>.n expression of its approval of the
merits or desirability of the paper aG an investnent either
by the reserve bi'Ulks or their member banks, and the :doard
regrets that it has be~ circularized in such a manner as
1_70
(
.
.
-2.,.
X-1827
•.
to give undue advertising valhe to the plan of the Continental Guaranty Corporation :·which it accompanies.
" Federal Reserve Banks are, of course, aware
that it is their right nnd duty carefully to consider the
merits or bankable risk attached to any paper presented
either for rediscount or purchase And in their own diBcretion to accept or refuse the paper on the basis
of thi'i.t celn:;;ideration, The }iOard beHaves, however,
that many me!Wer banks may fail to appreciate that
tecb:J.icn.l elie,,:i.bility does not of itself imply desirability and you are therefore requested, whenever opport~,ities afford themselves, carefully to indicate
this distinction to member banks interested with a
view of correcting what might otherwiae be a wrong
impresBion of the purpose and effect of the Board's
letter referred to. above."
Bece-,use of the Board's strtem::nt in the ebove letter
to the effect that it had been advised that 1 ts letter of July 22, 191~,
addressed to the Continental Guaranty Corporation, hro been " widely
dh tributed" with the other circulars and f onns of that Corporation anong
banks tmd bankers throue;hout the country, the Continental Gaaranty Corporation in a letter addressed to the ~oard under date of January 15, 1920,
hn~ explained that althoagh " in a small nWllber of cases specific reference"
has been made by it to the Board 1;, letter of Ju.ly 22 in correspondence
with banks who have 11 asked the direct ques ti.on of our authority for the
eligibility of the drafts or has expra~sed doubt as to their eli6ibility"
and although in one particular instance a copy of the ]oard 's J..e·tter wn.s
forWarded to a bank end although a photostatic copy of the Board's letter
wns 6iven to each one of its twenty field representatives to show to AnY
banker whenever the eli~ibility of the C·..;I'pora.tion :s a.co:;ept~m.:;.ea is at
is::;ue, nevertheless " in no other case can any officer :Jf tJ:.e Corporation
remember having sent out a copy of this letter to Any cne in c(lrrt;~>pon
dence ·" In concluding the Corporation stated that i t 11 ba;; never V<;ed
the Board ts letter of July 22 1 except in the brdinary and prope:r.· cr;urse
of bu~>ines::; unless such use has been by some one of the ciis tx·ic ~ rep·~
resenta.tives who has parted with his copy of said letter without authority
md agninst the express prohibition of the officers of the Corpomtion
and that therefore the Boatd was misinformed in the premises ~pon which
its letter of Decerr:ber 15 to the Federal Reserve Banks was written.. 11
The Board i~, of cour~e, glad to be advised that the
Continental Guaranty ·.corporation 1 ttielf has not, except in the cases
recited, sent out o. copy of the Bo.ard •s letter to a.eyone in correspondence.
In view of that explanation it is probable that roost' of the advices received
by th0 Federnl Re::.erve Eoard with reference to the use of thc.t letter by
the Corporation were based upon the p_"tlotostatic copy vvb.ich had been furnished by the Corporation to ench of its twenty field representatives
with expresl; authority to show it to the interviewed brmker whenever the
eligibility of the Corporation's paper was nt iasue.
i71.
-3-
X-1627
Independently, however, of the precise extent to or
mnnner in which the Iioard 1s original letter was brou~ht to the
attention ~f banks and banker~ throu6hout the country, the ]oard
wishes to reaffirm its former opinion that its original letter of
July22, 1919, "was not in fact and should not in anyway be
cunstrued to be an expression of its approval of the r~rits or
desirability of the paper ( of the Continental Guaranty Corporation ) as an investment either by the reserve bonks or their member bonks," and that Federo.l Reserve Do.nks should indicn.te to
interested n:ember banks tho.t a ruling by the Iloard as to technical eligibility should not of itself imply approval or disapproval of the merits of the pape~.
Iecause of the fact, however, that the Continental
Guaranty Corporation has stated in its letter, addressed to the
Ioard, th2t "UJ?.doubtedly very great injury is being done to the
credit of the Corporation with the banks who have received copies
of or notice of the board's letter of December 15, " the 1oard
wi.shes to advise that, while its original letter of July 22, 1:;13,
should not~ .be construed in any way to approve the m0ri ts or desirability of the Corporation's p~per, so also. its oUb~equent
letter of December 15, quoted nbove, should not be construed to
be on expression of the board 1s disapproval of the m; ri ts or desirability of that paper. The purpose of that letter wn" solely
to ~<2lb1..4t !"ny .erroneous infel'ences thRt may have bee<-1. drn.w:n by
bankb or bankers receiving or seeing typed or photost~tic copies
of the loard 1s original letter po.soing upon the mere technical
eligibility of the paper issued in accoAdunce with a specified plan.
This letter is udclressecl to you in oni.er thD-t you r::1ight
wherever possible correct A.ny misundorst!:J.nding of thnt purpose
th<t t rul;l.y ex.i st.
Ver1 truly yours,
It
Gove mor-
To
Governor:. ::md Chn.irmen of all F .R~ Lnnks,
1.72
KX 0PPICIO MIIMBII ...
W. P. I. HARDIIII, I0¥&111011
ALBERT STRAUSS, YICI 10¥&. .011
ADOLPH C:. HILLER
C:HARLES 8. HAHLIII
HENRY A. HOIHLINPAH
..... ....-
..
DAVID F. HOUSTON
JIICIII'r&IIY OP THI TR&AIUIIY
C:HAIRNAII
FEDERAL RESERVE BOARD
JOHN SIIIILTON WILLIAIIS
CONPriOLUII OP THI C:URRIIKCY
.ADDRUB RIEPi.Y TO
f'EPEAAI. RESERVE 80ARP
W. T. C:HAPHAII, IICRITAIY
R. fl. EHERSON,AIIInANT IICIIIrARY
W.II,IHLAY,FIICAL AIIHT
WASHINGTON
February 10,1920.
X-18213
SubJect;
Code for Telegraphic Advice of Approval
of Applications of State Inatitutions for
Membership in System.
Dear Sir:-
The Federal Reserve Board bas heretofore designated
the code word .n archery" for use in notifying you of the appro"Val
of applications of State institutions for membershipt and furnished you with the text· of four conditiuna~ The number of
conditions which are comnon to a large number of banks bas· now
been consider~ly increased, and it iS desired to extend the
use of the code word to cover same.. There is accordingly enclosed herewith the text of seventeen conditions, nuuilered from
one to seventeen, inclusive. and in the future in wiring you of
the approval of applications these condi tiuns will be referred
to by numbers
&
Very truly. yours 7
Enc •
•
Secretary.
To Chairmen of all F ~R. :SanJts,
173
X-1828 a
••
ConE FOR TELEGRAPHIC ADVICE OF .t'\PPROV.AL OF APPLICATIONS BY STATE
INSTITUTIONS FOR MEMBERSHIP.
Archery -
a
The application .. of . • ..•........•... _. has been approved by Federal
Reserve Eoa.rd subject to following conditions in paragraphs nwribered:
1..
That you shall reduce to the limit ·prescribed by the laws of (~tate)
any loan which may be tn excess of that limit.
2.
That you shall reduce to ten per cent of your capital and surplus all
balances in excess thereof~ if any, which are carried with banks or
tru::;t companies not members. of the Federal Reserve System ..
3·
That although you may accept drafts and bills of any character permitted
by the lawe of (State), you shall agree that the aggregate amount of all
acceptances outstanding at any one time shall not exceed tbe limitations
imposed by Section 13 of the Federal Reserve ~4ct, that is, fifty per cent
of your capital md surplua for acceptances drawn for the purpose of furnishing dollar exchange in countriet~ specified by the Federal Reserve
'Board, and fifty per cent of such capital and sW'plus for all other
aeceptances, whether domestic or foreign, except that the Federal Reserve
.Board may increase thia limit from fifty :per cent to one hundred per cent
u:pon your application, provided, however. that in no event shall the
aggregate amount of dome6tic acceptances outstanding at any one time exceed
fifty per cent of your capital and surpluB.
4..
That except with the approval of the Federal Reserve Board there shall be
no change in the general character of your assets or broadening in the
functions now exercised by you, such as will tend to affect materially the
standard now maintained and required as a. condition of membership ..
5.
That prior to the payment of a dividend you ahall carry to surplus account
not less than one-tenth part of your net profits for the preceding divide:fld
period until your surplus fund shall amount to twenty per cent of your
capital stock..
6.
That you ahall agree not to pay any dividend until you have a surplus ·of
(~
.
}, and that thereafter prior to the payment of a dividend
you shall carry to surplus account not less than one-tenth part of your
net profits for the preceding dividend period until your surplwo fund. shall
amount to twenty per cent of your capital stoc~
1.
That you shall charge off at once, out of undivided. earnings, not less than
$.·-······-· fr.om your securities accownt, and shall agree that after
admis.,ion to the system you will charge off from this account annually not
less than 20% of the depreciation in your investments until the book and
market value~ thereof are more nearly in accord.
5..
That you shall agree to bond your active officer;; and employees handling
cash or securities or having access to same.
-
ll
1.74
..
-2;..
X-ll!ZS a
9.
That you shall dispose of or otherwise
secured by your own ~ tock.
10.
That you shall agree as a condi t,ion of membership that except with
the appr~ al of the Federal Reserve Board you will not exercise the
powers which you have under your charter or under the laws of your
State to • • (description of powers)
11..
That you shall agree a.iii a condition of membership that you will ex.ercise
the power.:. which you have under your charter or under the laws of your
State (deG~rip,tion of powers ) , so as not to permit them to assume auch
proportions as, il}. the jud,ynent of the Federal Reserve Board. ma¥ endanger the safety of your depositors.
12.
That a resolution be adopted by you.r Board of Directors authorizing the
interchange of reports and infonnatio.n between the Federal Reserve Bank
aDd the State Banking Department.
13.
That even if authorized now or hereafter by the laws of the State of
-------------- to establish branches, no branch will be established except
with the approval of the Federal Reserve Board-
14.
That eXcept with the approval of tbe Federal Re::>erve Board additional
branches shall not be established.
~ecure
any loan which may be
15. That you shall agree to require financial statements wherever pOS:3ible
in connection w1 th all important loans.
16. That you
shall agree to reduce annually the amount charged to - - - - - - - - - - - - - - - - - - until the same more nearly represents
actual liquidating value.
17.
That you uha.ll agJ"ee to reduce the amount of y o u r - - - - - - - - - and make every effort to keep aame at a minimum.
:17fi:
W. P. 8. HARDING. GOYIINOR
ALBIRT STRAUSS, YICI CiOVIIIIOR
ADOLPH C. MILLER
CHARLII 1. HAMLIII
HENRY A. MOEHLINPAH
CAIITERIJLASS
SICIIT4110 GLTHI TRU.IURY
CHAIRIIAM
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COMPTROLLII OP THI CURIINCY
w. T. CHAPMAN. SICRITAaY
R. G. IIIIIRSON, AIIIS'I'ANT SICIIITAitT
W. M.JIILAY. FIIC~L AUNT
ADDRIISS RIIPLY TO
WASHINGTON
FEDERAL RESERVE BOARD
February 11.1920.
X-1829
Subject:
Dedlletiona allowed in coapllting mentJer
bank~>'
reserves carrted with
~ral
Rese M'e :Bank.
Sir:Section 19 of the Nera.l Ref.>EIJ'1'1! Act. which relateu to ~t.erve re~iuire
ments of ~mber banks am. which .;\lpersed.es "Section 5191 Revised Statutes.
provides in part as followo:
"EYery bank• bMld.ng 31:HlOCia.tion, or truat c-ompany
which 1a or which bec0100s a member of any Federal
Reserve J3ank shall et.tablish arxl maintain re:Jerve
balances With its Federal Reaene :Bank as tollows: •••
"in estimatil1g
the balance;., required by this Act,
the net difference ot anounta due to 8lld £rom other
banks shall be taken a.r. the basis for l;lflcertaining
tbe depo~its against which required balances with
Federal Re~erre :Blmk& sba.ll be determined."
ln detennining tbeir nee deposit liability on which reserve 1~ c~ted,
medler banD are pel'tnitted \IDQ.et' present rulings to deduct the total of:
(a) Balanceli dtae from banJtS, other than Federal
Re~ene lsank;
·
(b} Item111 with Neral Reuerve Bank in process of
collection;
(c) ·~hang&$ for clearing-bow;e";
(d) Checks on ot.her bankS in the same place;
from the
t~tal
of
(a) Bala:neea due to banks other than Federal
ReGene Dank;
(b) Cashier's, secretary's or trea.l.iurer•s checks
on 0WD bBDK 0\ltS tanding;
(e) Certified checkB outstanding:
•••
It will be noted from the above that while bankll are allowed to deduct
"1 ttmlS with Federal Reserve Bank in proces ~. of collection" from "'balaQCea
due to banks, etc", they are not required to carry reserves against hems ln
proces~ of collection which they have received from the Federal Reserve Bank,
i.e., items which they have received from the Federal Re~:~erve Bank ani charged
to their depositors c accounts, but for which the Federal Reserve Bank baa be~n
given deferred credit for tbe number of days elapsing between the day tbe
checks are charged to the depositors 1 accounts and the da.y on which, in
accordance with the published. time schedule, they become a charge ag~nst the
bank
reserve account 9n the books of the Federal Reserve Bank.,
'a
It is evident, however, that amounts for which Federal Reserve.Banks have
been given deferred credit must be included with amounts due to bankS alii
bankers. if items with the Federal Reserve Bank in process of collection are
allowed as deductions in ascertaining the net deposit liability on which
reserve is computed.
Accordingly, the Federal Reserve noard has ruled· that in ccmputing their
net deposit liabilities on ·which reserve ,is computed bank~ may deduct the
total of
Ealances du~ from banks, other than Federal
:rteserve Bank and foreign banks;
(b) Items with Federal Reserve Bank in process of
collection;
(c) "Exchanges for clearing-hou~elt •
(d) Checks on other banks in same place;
(a)
from the total of
(a)
(b)
(c)
(d)
due to all bankb, other than Federal
Reserve Bank;
Due to Federal Reserve Bank-- deferred credits;
Cashier 1s, ~.;ecretary 1s or treaaurer 's check6 on
own bank· ou.ts tanding;
Certified check~ out~tandine•
~alancea
I'here is attached hereto a staten:ent indicating the manner :i.n which
member bank~ may calculate the amount of reserve required to be carried with
the Federal Reserve Bank, corrected to include the new account, "Due to
Federal Reserve Bank- deferred credits."
Very troly yours,
Governor.
Enc.
To Chairmen of all F.R. Bank9.
LlS29 a
C~t7rATION OF RESERVE TO BE CAAAIED WITH THE
1.77
FEDERAL RESERvE :S.ANK BY MEMBER BANKS.
l.
2.
3·
ij~
5.
DEMAND DEPOSITS
Deposits, other tban United States Gave~
ment and bank deposi tB, payable
$. _ _ __
Within tliirty days •.•.•..•..•..••.....•..•
Balances due to all banks other than Federal
Reserve Bank (1) ........................... $_ _ _ __
:Balance due to Federal Ret.erve BankDeferred credits ••••.•....•..............• $._ _ _ __
Cashier's, Secretary's or Treasurer•s
checks on own bank outs tanding •.••.••••••• $._._ _ _ __
Certified checks outstanding.· ••••••••..•...••• $._ _ _ __
TOl'AL D~ TO BANKS (Items 2, }, 4 and 5)
$._ _ __
~:
6. Balances due from banks othe.r tbaD
Federal Reserve :Bank end foreign banks
$._ _ __
1.. Items w1 th Federal Reserve :Bank in
proces:. of collection •••.••...•.••.••••••• ~.__ __
S. Exchanges for clearing house ••...••...•..•.... c:l;._ _ __
9· Checks on other banks in f>ame place ••..• , .•.•. $._ _ __
TOJ!~L DEDUCTIONS :BROM BANK DEPOSITS
$._......___
(Items 6., 7, 6 and 9) ............... · .. .,...•
10. Net balance due to banks• •..•......•••.•.•••••
..$~---ll. 'l'OfAL DEMAND DEPOSITS (Items l md lO) ••••••••
____
TIME DEPOSITS
12. Savings accounts (subJect to not leuu
than
thirty days' notice before payment).
1}. Certificatea of deposit(subject to not le~s
than thirty days 1 notice before pa;yment)
14. Other deposits payable only after thirty
days . ........................................... .
15. Postal Savings deposi~s·····~·················
16. TO!AL TIME DEPOSITS(Items 12,13.14 and 15)
It
RESERVE REQUIRED
Demand deposits:
Banks 1n Central Reserve Citie~:>, 13 per
cent of 1 tem 11..•.•. ......................
Banks in other Reserve Cities, 10 per
cent . of item 11• ...........................
~ outside ~eserve and Central Reberve
Cities, 1 per cent of item 11•••••••••••
Time deposits:
All banks, 3 per cent of . item 16
Tor.At RESERVE TO l3E MAil~.AINED WITH
$_ _ __
lt_ __
$._ _ __
$. _ _ __
·-·--¢
~·----
$._ _ __
$._ __
.....-
~--
$._ _ __
•Should tbe aggregate "due fl'om banks" (Items 6, 7 ,S and 9) exeeed tbe aggregate
•dae to baDtts" (Items 2.J,4, and 5) both amounts must be omitted from tba
calculation.
NOTE.
"balance~ due to all banks other than Federal Reserve ~(ltee. 2
Demand Depoaite) aho11ld !Delude balances due to foreign banks ..
;178
Ex 01'1'1010 MIIMRIIt.._
DAVID P. HOUSTON
JICIITAI'f OP THI TREAIURY
C:H~IRIIAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COIIPTROLLIR OF THI CURRINCT
W. T. CHAPMAN, SICRITAIY
R.i. EMERSON, ASSISTANT SICRITAIY
W.II.IMLAY. FISCAL AGINT
ADDRE88 REPI.Y TO
WASHINGTON
FEPERAL RESERVE BOARD
W. P. G. HARDING, GOviRNOI
ALBl!RT STRAUSS, YICI GOVIINOR
ADOLPH C:. IIILLEI
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
February 11,1920
X-18.31
Subject:
Applications under the· Provisions
of Kern Amendment to Clayton Act. ·
Dear Sir:Your attention is respectfully directed to the
Board's Form No. 94-B, being a statement by Federal Reserve
Agents upon applications made to the Federal Reserve Board,
under the provisions of the Kern amendment to the Clayton
Act~
The Boa.;-d is receiving these reports on forms that
are not completed by Federal Reserve Agents so far as paragraph
No. 1 is concerned, viz:
"If institutions are located in the
or town, what is the approximate
distance between such institutions."
same city
It
geographical
application,
formation in
is of great assistance to the Board to know the
locations of the banks affected by any particular
and the Board requests that you supply ~his inall reports made by you.
Very truly your_s,
Secr~tary.
To Chairmen of all F .R. Banks ..
:l79
66th CONGRESS
____gnd. Ses:;ion
X-1832
s. 3773
IN THE
SENATE
OF THE
UNITED
STATES.
January 22, 1920.
;)
Mr. Gore ( by request ) introduced the following bill; which was read twice
and refez·red to the Committee on Banking and Currency.
To provide for the payment of intereet on reserve balances in Federal
Reserve Banks.
.l
.
Be it enacted by the Senate and House· of Representatives
2
of the United States of America in Congreas aasembled,
3
That section
4
amended by adding to the end thereof the following
5
graph:
6
19
of the Federal Reoerve Act,
a~
amended, be
par~
"Each Federal Reserve Bank shall pay to each member
7
bank interest on reserve
8
!ederal Rewerve Bank, to be comptlted on the dai l~ balance
9
of such me!OOer bank, at the current rate pre"t'ailing on de-
10
mand deposits in the reserve. or central
ll
such reserve bank is
12
earning~
of such Federal Reserve Bank, after all necesuary
13
expen~ee
have been paid or provided for and the dividends
14
15
16
on the paid-in ca:pi tal stock ha'le been fully met as provided
balance~
maintained with such
It
17
located~
re~erve
city in which
Provided, That in case the
in ~ection 7, are not .;;ufficient to pay ~uch rate of interest as
herein provided, then interest shall be paid on such re••erve
balance;; at ;.:;uch rate as such earnings will permit."
.180
W.
P, II, HARDING, CIOYIIMOa
ALBERT STRAUSS, YICI IIOYIRMOR
ADOLPH C. MILLER
CH.ARLES I. HAMLIN
HENRY A. MOEHLINPAH
CARTER liLABI
SICIITARY Of THI TRIAIURT
CHAJRIIA.
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMnROLl.ER OF THI CURRINCY
W. T, CHAPMAN, SICRITARY
I!• G. EMERSON, ASSISTANT SIC:tiiTARY
ADDREBB REPLY TO
W. M.IIILAY, FIIC"L AllaT
WASHINGTON
FECERAL RESERVE BOARC
FebrUary 16,1920 •
.
X-1833
SubJect:
Use of Code in Telegraphic Ccmnunications
regarding Discount Rates.
Dear Sir:-
..
In view of more or less freqwnt complaints
which have come to the Board's attention as to premature
discussions of changes in discount rates, the Board feels
that it would be well to adopt every reasonable precaution
against "leaks" or unauthorized announcements of contemplated changes. It 1~ therefore requested that code words
be used in all telegrams relating to changes in rates,
and you are refer:-ed to circular letter X-1307, dated
December 14, 1918, in which the code words are given.
Very truly yours,
Governor.
,.
,.
. ......
1_81.
X-!~34
Any attempt to control credit by refusing to rediscount is subJect
to seriuus administrative difficulties. If the :ps.per. offe!'ed is eligible
and good, it would be better for a reserve bank to grant accorornodation
at a price rather than to refuse it entirely, but the act, subdivision (cl)t
section 14, :provides that a Federal Reserve J3EU1J.( shall have power to
establish from time to time, subject to review and determination of the
Federal Reserve Board, rates of discount to be charged by the Federal
R~~erve Bank for each class of paper, which shall be fixed with a view
of accommodating cornri,e:•ce md business. There is no authority, however',
for establishing graduated rctes based upon the total borrowings of a
member bank, and consequentl;y when it becomes nece~;;sary to ad.va:r.i.ce the
discoulit rate in order to curb the demnnds of those banks rediscotalting
with the Federal Reserve Banks in very large amounts, the same rate would
nave to apply to the moderate requiremmts of other meruber banKs who may
rediscount with the Federal ReHerve :Banks infrequently and never excessively·
Thus the application of rate as a corrective or deterrent to certain banks
tends to raise the level of current rates to all.
..
The Board, therefore, recommends to Congress that an additional power
be granted it, by adding to subdivision (d), section 14, a :proviso that
each Federal Reserve Bank may 7 with the approval of the Federal Reserve
Boam, determine by uni:l:' orm rule, a:pplicab le to all its member banks ali..IS:e,
the normal maximum rediscount line of ea.cb member ba.n.tt: nnd that it may
submit for the review and determination of the Federal Reserve :Board
graduated rrtes on an ascending scale to appJ.y e,:::.uaHy ancl ratably to all
its member banks rediscounting amounts in excess of the normal line so
determined. In this vlay, in the opinion of the Board, it would be pos,;ible
to reduce excessive borrowings of member banl~s and to ir..d.uce them to :nold
their ovm large borrowers in check ~,·.rithout raising bas:l.c rates.
182
KXOII'I'ICIOM•t~~••"•
CARTE!,JLA~I
SICIITAIY Of THI TRIASU RY
"
CHAIRIIA.
JOHN SKELTON WILLIAMS
COMPTROLLER OP THI CURRINCY
FEDERAL RESERVE BOARD
W. P. G. HARDING, GOYIRMOI
ALBIRT STRAUSS. VICI GOYIINOR
ADOLPH C. MILLIR
CHARLII B. HAMLIN
HENRY A. MOEHLINPAH
W. T. CHAPMAN, SICRITARY
R, G. EIIERSON, AISIIIANT SICIIITART
ADORES. REPl-Y TO
FEDERAL RESERVE BOARD
WASHINGTON
W. M.IIILAY, PliCAL AIIMT
February 17,1920.
X-18.)5
Subject~
Gold Settlement Fund ·Daily, Clearing.
Dear Sir:-
.
With reference to the BoEtrd •s letter X-1766 of December 20th,
subJect, "Method of Determining Required Reserves", and the :Board 1s wire
of December 31st, advising that the date of making this plal\ effective
would be March 1. the Eoard has decided that effective March l, ~ha metbod
of settlement bet~en Federal Reserve :Banks through the Gold Settlement
Fund will be changed so that Federal Reserve Banks may set,tle inter-Reserve
:Bank business as of the same date that items are collected rathar than the
day following as is now ·.the plan. The plan of operation is given below•
Commencing with the afternoon of March 1, each Federa~ Reserve
:Bank and direct settling branch should arrange to wire to the Boatd as early
as possible in the afternoon, and il;l no event later than 7:30 P.M., Washington
time • its daily Gold. Settlement 11\and clearing telegram (cOde WEG). giving
credits t~ other Federal Reserve :Banks co·Jering that day•s business, which
now are cr~dited to Gold Settlement Fund Suspense on :&'o:nn 34 anq telegraphed
to the Board the next morning. It will be necessary to ha~re a telegraph
oparator on duty at each Federal Rcse:r'Ve :Bank and direct settllng branch
until these telegrams have been dispatched, received by the Board, verified.,
and release instructions given f~om Washington.
Upon receipt of the daily clearing telegrams the Board will effect
the settlement and the return el.earing telegrams (code BEPEG) wil). be prepared
ready for dispatch to the Re:..;erve :Banks upon the opening of tbe t-el~graph
wires the following morning.
Federal Reserve :Banks should c~lete all their transactions and.
entries in the customary manner now in effect, with the following exceptions;,
First, Federal Reserc1e Banks will no longer carry en account
"Gold Settlement Fund Suspense". Entries in connection with the
daily liOld Settlement Fund clearing affecting the Gold Settlement'
Fund, Tklcollected Items and Deterred A.vailabil:t ty Items accounts
should be made j.nn:ediately upon receipt of the :Board's clearing
wires (code BEPEG) the following morning, and iibe FeC..eral Se:~erve
Banks' books closed for the da.y.
-2-
~83
X-1835
,.
oecond, the paragraph of the Board's letter of August 12, 191B,
reading as follows:
X~ll21,
11 In ord.er to bring about a daily settlement for clearing house
items, it is recomrrended that all Federal Reserve Banks give
inF.nediate credit for clearing house items the day received from
other Federal Reserve Banks, without regard to the tim~ o£ day
received, inasmuch as the balance so created is reported to the
Gold Settlement Fund at the close of business but is really settled
the following day when the checks have been collected,'*
is rescinded; and bbrnmencing March 1, Federal Reserve Banks will give
deferred credit for .one day on all clearing.house items received from
other Federal Reserve Banks after clearing hours.
V~ere a Federal Reserve Bank ha~ direct settling branches~ entries,
of course, will have to be made in connection with the branch office accounts.
•
The Federal Reserve Banks will be expected to anticipate in so far
as pobsible thGir net debit balances or net credit balances in the settlement;
and wherever necessary request the Board to arrange rediscounts with other
Federal Reserve Ban~ in the afternoon as at present, in order to maintain
their reserve position at about 4o% after final closing of the books for .the
day. ~Vhenever a Federal Reserve Bank receives a heavy debit in the settlement
(advice of which will not-be received under the new plan until the following
morning) which was not anticipated and which will reduce its reserve below
the required minimum, notice of this should be promptly communicated to the
Board with the re~est that rediscounts be arranged in sufficient amount to
bring the reserve to the re~ired minimum. Entries of course, in connection
with this transaction will be made on the books of both the rediscounting ani
lending Federal Reserve Banks before the final e losing of books as of the
previous day.
·
Daily TEND wire~ regarding condition, also Friday night Form 34
telegrama shoull be prepared and dispatched to the Board in the manner at
present prevailing; that is, before receipt of the Board's daily code BEPEG
Gold Settlement Fund clearing telegrams. Upon receipt of the daily condition
telegrams (code TEND) and Form 34 wires on Saturday mornings, the Board's
Statistical Division will make the following adJusting entries in connection
with the results of the Gold Settlement Fund clearing:
Debit •.................... Deferred Availability
Credit ••................. Gold Settlement Fund
It~~
Total of amounts each Federal Reserve Bank credits to other
Federal Reserve Banks through the Clearing; also
Debit •.•................. Gold Settlement Fund
Credit •.......•.......••• Uocollected Items
Total of amounts credited to each Federal Reserve Bank by otber
Federal Reserve Banks through the Clearing.
184
•
"'
•
I
-3-
x... 1s35
Saturday mornings after receipt of tae Boara 1 ~ Gold Settlement
Fund clearing telegrmns {code BEPEG), and after closing its books earh
Federal Re:3rcn·ve Bank is requested to wire the Board the balances in the
accounts affected by entries resulting from the Gold Settlement Fund
clearing using the code words as shown against the caption;s of such
accounts on Form 34. The following introductory code word is recommended
for use in order to designate these telegrams:
Code Word
SETL ....... In order to conforn1 to the balances as shovm on
our books after entries we:re made in connection
with the results of the Gold Fund clearing and our
books finally closed for the day, please change
amounts reported against res:pecti ve code words on
our Form 34, Friday night telegram of __ ia§t~)- _- __
to read as follows: BABE_-- ___ l$~_5.~.49_6.L612l,_-_-~tc.
Ever since the inauguration of the daily settlement between the
Federal Reserv~ Banks there has been from time to time, more or less
agitation for a daily settlement between Reserve Banks through the Gold
Settlement Fund as of the same day rather than on the following day as is
now the :practice. The principal difficulty in putting this plan into
effect has been the difference in time between the East and San Francisco.
It is believed that this difficulty will be overcome with the adoption
of the above plan, and inter-Federal Reserve Bank accounting simplified
and inter-Federal Reserve Eank 11 float" eliminated.
Ve:ry truly yours,
Governor.
To Governors and Chairman of all F .R. Bank.
, . .· .
'i'·
185
W, P, e. HARDINe, eoviRNOI
ALBIRT STRAUSS, YICI eoVIIMOR
ADOLPH C:. IIILUR
CHARLII I. HAll LIN
HENRY A, IIOIHLINPAH
IIX OPPICIO Mlll.lltll
CARTIR eLAII
til.
S&CIITAIY
or THI TRIAIUIT
CHAJIIIAII
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COMPTROLLII OF THI CUIIIKCY
ADDRESS REPL.Y TO
WASHINGTON
f'EDii:RAL RESERVE BOARD
February 18,1920.
Subject.
W, T. C:HAPIIAN, BICRITARY
R. G. I:IIIRSON.AsiiiTAMT SICRITAIT
W. II.IIILAY, PliCAL A811lT
x.. 1s36
Foreign ~ranches Open for Business
on February lS,l920.
Gentlemen!-
•
It is intend.eci. to publish in the March is sue
of the Federal Reserve Bulletin a complete list of foreign
branches of national banks t:lld foreign banks doing business
under agreement with the Federal Reserve :Board, which were
open tor business on February 1&,1920.
It will be appreciated, therefore, if you. will
furnish this office, as soon as convenient, with such a list
for your institution.
Very truly yours,
1:
Assistant
Secretary~
Letter to 9 Foreign banks and National City :Bank of
New York and First National Bank of Boston.
1.86
W. P. Cl. HARDING, CIOYIRMOR
ALBERT STRAUSS, YICI 50YIRHOI
ADOLPH C. MILLER
CHARLES I. HAll LIN
HENRY A. MOEHLENPAH
llllC Of'PICIO M&MURR
---~
CAIITER 8USI
IIC8rtAIY OF 'fHI TRIAIURY'
CHAJIIIIAa
FEDERAL RESERVE BOARD
JO.HN SKELTON WILLIAMS
COMPTIOLLII OF THI CURRIMCY
W. T. CHAPMAN, SICRITARY
R. G. EMERSON, AJ:IISTANT SICRITARY
ADDIIIIURIIIItPL.Y TO
W. II. IMLAY, PliCAL AGINT
WASHINGTON
FEDERAL RESERVE BOARD
February 18;1920
.A-lt$}7
Subject:
Special Rates for Open Jv'f.arket Purchases
of Baruters t Acceptances.
-
Dear Sir:There is transmitted herewith, for your infonnation,
comrrents of tr1e Federal Advisory Council upon special rates for
the rediscount of bankers t acceptances am the policy which
should be pursued by Federal Reserve Banks having open mar...ret
rates for such purchases;
•
"The special rate established. by Federal Reserve Banks
for the rediscou."lt ot bankers 1 acceptances affords membet
btmks the legitimate opportl.."llity of purchasing them. Carrying them as a secondary reserve, and ree.lizing
them
promptly whenever they have occasion to do so. It also
however affords them the opportunity of purchasing them at
current open market rates and having them rediscounted at
the preferred rate simply for the profit in the transaction
on
i f this is
permitted.
·
It shoald be understood that the ObJect of the special
rate is to encourage merriber banks to carry lines of this
class of paper as a secondary reserve, promptly convertible
into legal reserve balances when such conversion becomes
necessary. Witb. such an u.. ..J.e•·stand.ing pl:'eva.iling mcny of
the member banks would no doubt adopt the policy of carrying
lines of ban.~:ters' acceptances as secondary reserves ani the
market for them would thus be materially broadened. In some
districts this has already occurred.
11
•
"The policy to be pursued therefore by Federal Reserve
Banks should be to leaV'e the control of the open market for
such accentances in the hands of member banks and discount
houses, s~ long as the fo~~r use the special rediscount rate
legi timatel.y and <10 not .abuse it.. The Federal Reserve Banks
should not therefore normally buy acceptances in the open
market below the c~rrent rates at which the meniber banks and
1_87
...
-2-
-~
X-1836
•
discount houses are buying them. Should it become
urgently necessary to curt~.il rediscounts at the Federal
Reserve Banks rates can be ra.ised and shol.,ld it be found
that the preferred rate for b~1l':ers 1 acceptances is being
abused such discrirninati.on in their favor should be
discontinued."
Respectfully,
Secre taT;y ..
..
To
Governol~s
and Chai nne:1 of ell F. n. :Banks.
W. P. G,IIARDING, GDYIRMOI
ALURl' JTRAUSI, YICI I0¥111101
ADOLPH C. MILLER
CJIARLIJ 1. HAll LIN
IIENRY A;MOEHUNPAH
·.,
CARTER GJ.AU ....
~
IICIIri'AIY OP THI TRIAIURT
CKMIIIAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COIUTIOI.UI 0, THE CUIIKMCY'
ADDIIIIUI8 JUEPLY TO
FEDERAL RESERVE BOARD
W, T. CHAPMAil, BICUTARY
R.G.IMIRION,AaiiiTANT BICIITART
W, M. IMLAY, PliCAL AIIIIT
. WASHINGTON
February 19, 1920 ..
X-1838
Subject:
Collection of Maturing Notes.
Dear Sir:•-
•
I am forwtard:ing hei:·f~with a. copy of a. JI1ilmorarldum prepared
by Counsel on the rig.b.t of a. 1~edera.l Reserve Bank t(j colJ.ect
maturing notes and hi:t.ls drawn 1-1p0n firm~;~, individuals or cor..
poratiort&\1 in its d.t.st~:idt other' t....w:-1 rnetrher banks which are forwarded to it f'oi• colleehon by a member ba.uk of another district
for the accovnt of the
Fede~al ~esetve ~\k
of that other district.
The Board at. its meeting an Febrt1ary seventeent..~ appr~ed ·
this memorandum with the 'l.!nderstaniing, cf course, that u.nder the
terms of Section 13, each Federal Reserve Bar~ may in its discretion decl~ne to re~eive for collection maturing notes and bills
which are fo:twa.r-¢ied to it by another Federal Reserve :Bank through
the agency of one of 1 t.s member banks ..
Very truly yours,
Governor.
To Chairmen of all F.R.
.
~ank.s
.
except Dallas
1_89
X-1836 a
Feb. 14, 1920 ..
Subject:
rtatu:~ing
•
TO
Re: Collection of
:Notes ..
The Federal Reserve Board
FROM Mr. Harrison.
In a ruling published on page ~(67 of tb·:; May 1919 Bulle tin, it is explained that although a Fede::·al Reserve :Bank may p':'operly collect ma·~uring
notes and bills dra\ovn upon firms, individuals o~' corporations in its district
other than member banks, which a1'S forwarcied to it for collection by ~notQEu:
Federal Reserve Bank, neVJ?Jrtheless no Federal Reserve Bank may perfo:tm this
service directly for any member baJ.".1.k located outside of its own District ..
The attached cor:responderce with Governor Van Zan<l t presents for the
consideration of t!.1e Board the rJ.l..~estion whether a I'ader.al Reserve Bank may
properly receive for c()llect:i.on ruatncing items fonJa;~d.ed. d).rect to it from a
member bank in another District~ if tl::ey are forwarded for the accot.mt of the
Federal Reserve Iiank of that other D:\s trict. Seed on 13 expressly authorizes
a Federal Reserve Ba.:1k to receive maturing notes and bills payable within its
District from any other li'ode!'al Reserve J3Eu1k. It seems, therefore. that if
such i terns are forvva.rded to a Federal Reserve Bank 'by a member bank in another
District for the accoun.t of its own Federal fl.eserve Bank they ma;:r properly
be handled for collection .iu.st as if they had teen forwarded directJ.y by the
Federal Reserve Bank of that other District. 'l'b:i.s service, however, should
not be performed unless tb•3 coHe:~ting F'ede1·al Reserve :Bank has received
satisfactory notice f:.Nom the other Federal Reserve Bank that i t has authorized
its member bank: or member banks to act as its agent in forwarding maturing
items of this character for collection an.d credit to its account. This agency
may be specific as to a particular n:ember bank or may be genezal as to all
member banks of the Dj.strict;,;
if
of
of
of
It is believed that the development of this practice may be found ad.vlsable
not necessary in the proper extension of tl..e various collection facilities
the Federal Reserve Ba.ru;:s and will no do~11Jt penni t of a considerable saving
time and expense which would otherwise be inctC!.ent to the indirect routing
maturing i terns throu.gh the ]'eder-al Reserve Banks of each district ..
Re spec tf.ully,
(SIGNJ!,'D)
George
L. Harrison,
General Counsel.
:190
w. P. •· HAIIDIN8, 8ovuooo
ALBIRT STIIAUSS, VIC I 80YIINOR
ADOLPH C:. IIILL!R
C:HARLES S. HAMLIN
HENRY A.MOEHLINPAH
CARTER 8LASS
SICIITARY
-'
or THI TRIAIURY
CK.II ....II
JOHN SKILTON WILLIAMS
COMPTIO&.LII OF THI CURI&JICY
FEDERAL RESERVE BOARD
ADDNIUI. REPLY TO
WASHINGTON
FEDERAL RESERVE BOARD
W. T. CHAPIIAII, SICRITAIY
R. G. EMIASON, AIIIITANT SICIITART
W.M.IMLAY, FISCAL AtiOT
•
SubJect:
Demand for Circulation. '
Dear Sir:-
FQ+ iQVr i.ll1'9n~Mtf.Qn \Oere a&·e ervuosed aerewiY:I.
cQ:pies of replies t"eee5..ved frOJrt all Federal ieservv 1lanks
to the :SOard 1S;; t.e.legram of Februar~ lith, asking to be
advised of conditions in the res pee tive districts • which
have brought aboat the unusual demand for currency.
Very
~ruly
yours,
Enclosure.
Governor ..
\
latter to
Chai noen of ·all F. R . Banks •
:i91
1EDEil. AL RESERVE
B.A~JK
X-1339
J:lOSTON
...
..
Feb :ruary 13, 1920
With reference to the telegram as to the cau::;es of c;he unusual
demand for cuxorer.cy in this District at the present, tirr.e. He :nave
JUSt made an investigai:.ion vith representat::.ve bonKs in fuur ..,ta.tes
and all of e1em tell about '.:.he s;:-me sto:-y.
First, payrolls r0presenting the bulk of the outgo art: nec,vier
than ever before~
Second, lo~al retflil traCLe has alackect ofi resultint:'> in a less
amount of curn::ncy ·be.l.!~g tu~"'rl.ed into the ban.._~s ciue to the severe
s torrn and the c:.:-ipphng of local transpO!'tation vvi th the follovving
results. It has shw.t urf trade from ::;ttrbur'ban tmms and even
slackened tracie within the town and. it has also held vp 'che supply
of goods to be solJ. su thrtt in manv case<> merchants are \.nable to suppl.f
the demand. To SU:;Y,~a.fize, first, t•:i.gh Nr<ge scale with resulting _
enormous payrolls. Second, l).DLJ.~;ual >veat.her .conditions nnei crippled
transportation res cricting retail traC:.e :::cnCl -:,he process of turning
back currency from the poc~ets of vwge earners to stores ani thence
to banl:~s to be used oYer again.
F .H. Curtiss
•
.
;
.
F.EDERA L
RE~ERVE
OF NEW YORK
192
BANK
X-1839
February 18,1920.
Your telee;ram of today asking about the causes for the increase
in the circulat:l.on of notes has been received. The following give$
the best information that is available at this time.
The circulation of Federal Reserve notes reached their maximum on
Decernber24last, when the total stood at $827,679,000. By January 15
the circulation had. redur-ed to $755,2bS.ooo 1 the minimum for the year
thus far. From that time for about a week the circ1;.J.a.tion remained
approximately- static, and sin-;e ,January 22 has baen steadily rising, until
at the clo.se of busi.nes s y~s terc.ay it stood at $Sl.3 ,285:000. At present,
therefore,· our circulation. is S14,L~oo,Ou0 less than it was on December 24
last. The present figu>."'e is ver-y close to th.'lt of .Tanllary 2 of this year.
J.n increase in FEdel:al Re~:>erve n.ote circulation on or about- January
22 is not abnormal for this bank. In 1918 the minimvrn as shown in the
weekly statement~ was on January l l and. by February 21 had increased about
$24,000tOOO, In 1919 the minimum figure shown 1n the weekly reports was
on January 31. !t s·terted to Hse imrtediate.L•r thereafter and on February
21 had increased tl9 1 UGO~ooo. The increase this yenr h~ been unusually
heavy up to this time and is variously accounted for.
•
We learn that there have been heavy shipments to Cuba, where United
States currency is legal tender for the movement of the sugar crop. During
Jenuary the National City Bank shipped about $1,000,000 a week to Cuba,
and in February has shipped at the rate of about tl,250,uOO. The Nativnal
Park Bank has shipped about $2 1 700,000 to Cuba arld is about r.o ship $7uu,ouo
more. The Guaranty Trust Company has also made shipments to Cuba for the
same purpose, but in smaller amounts.. We understand also that some of the
New York banks have been shipping currency in amounts ranging around $200,000
to Florida, but probably the aggregate effect on our currency expansion
has not been great from that cause. A third factor is the amount of cash
used for paying laborers engaged in snow removal. I am informed by the
City Department of Finance r.hat this figure is in e;;cces::; of $2 ,o..-o ,000 and
it suggests that the heavy stonns requiring a large amount of day labor
throughout the state has swollen the mnount of cash commonly required for
payrolls. Of cO'I.\rse labor in this district, c-,s elsewhere, is very 6 enerally
employed, with resulting heav·.r demands for currency, but accurate statistics
covering the month of Febrv.ary have not been received, so that it is impossible to say whether increased emplo3IDent accounts in any rr.easurable
degree for the expansion of our circulation.
t:Alr circulation of Federal Reserve Bank notes is now about $2,000.000
less than it was on J a:nu.ary 2.
Shepard Mortian. ·
i.93
X-1!539
FEDEP.AL RESERVE BPNK
PHI L.ADELPHI.A
February 19, 1920
In reply to your telegram inquiring as to the cause of the
large increase in issue of notes, we beg leave to· say that from
the best infonnation obtainable a portion of it is due to the
increased shipments to the ~oal regions, where we are told payrolls are c~1siderably larg~r than they were, on accovnt of the
greater produ.ction of coaJ. which the miners are getting out •
.A large :part of it ts due to the t,:ting up of the country
on account of th.e sno'v s t<.•rm.s. Banks report. that very few notes
are coming back to them ar.d pay--r~Jlls cuntim:e as heavy as ever
and they had to be me~ with new issues of .notes. As transportation improves receipt:s of notes increase, anci before long we
expect to have notes returned to us in large (1\.~.an;;,i ties.
The general increase in the activity i.n busines::; also
possibly accounts for some of it.
R. L•.Austin
•
194
FEDErt··l· RE.JERVE Bl'NK
CLEVELAND
X-1639
February 2.3,1920
Your telegram, the unusual demand for currency is on acconnt cf
increased pay~rolls. ar~e memller bank that has analyzed this c'J.emand
says that the pay-·:tOH demand· for Feb::'l)a;·.r tenth for fo:::-ty customers
was 100 percent grea<,sr than. the same date lo.st year and. 40 percent
greater than the pr"'3Ce8d.ing month of this y0ar. This sitt.:.ation is
believed to exist i:r1 ma:r:~trt'ae;r,ring centers thror·.ghou.t the dist:·i:;t~
:U .C. Wills
i.95
X-lo39 .
•
February l8 ,l~o •
.
We have your telegram advising that the Doard bas noted the unusual
demand for curremy at this tih.e • a.s evidenced by increasing Federal Reserve
Note is.aues, and req,uesting tba.t we advise as nearly as possible the causes
producing this si tvation.
The issue of Federal Reserve Note~::~ by this Ban!t since January lst does
not appear to have been unusua?.. Ta.Jd.ng figui'es from the hank ani deducting
from the Note~::~ cu.tst1lndi.ng the atnount or Notes on hand by the Bank, there wa.s
outstanding on De~cm~er 23:-a. ~o,.tt $149.396,ovo of Federal Rese1..ve Notes. The
amount gradua.l!y decl;ned ~Y Jerrua.ry 25th to SlJl,Wc,OOO, and has remaineci
at about this fig•~re, o~ a ]it-rle lowe.r 1 since that date. The net amount
outstanding Feb:11ary l6tt. wr.s !':130,034,000, which is che lowest figure since
October 1~, 1919.. Th&se f-':.~ures correspooi veri' close~y with those for 1919,
the net amount outst:m.di.ng c,n Je'nuary l8, i9l9 being $13(.:,~5Jouo.
·
Business has coutiHPeJ. a::t.1ve 8D1 hi~h prices ne.:assa.rily ~welled payrolls. Since Januar:r l::;t, ~e have paid o1.1t tJ't..e follMng rouni amounts to
the points named:banks of-
Ricbmom, Vd..
Danvil)e, Va.
Norfolk, Va.
NeWl'oet Ne;.vs, Va.
Charleston,
Gary, tt.Va.
''·'[a..
Charlotte, N.C •.
WillpiJliton, N.C.
Winston-Salem, N.C.
!53 ,059)000
300,000
lf55,UCO
lt OC>5 , OC.O
26b,OVO
80,000
291.,0\JO
2Qs,OOO
l.QV5..&YO
$6,1192, 000
None of these amounts appear to be unusut>.l. Shipments to \!ms ton-Salem
probably imicate large tobacco payrolls or Government t~es. The shipments
to Newport News were largely, I am sure, for payrolls at the Shipyard there.
Some of Q1e amount, hOWiever, is due to reques"s from the ·oaruts there to
strengthen their cash on h<md.J dae to the excitement over the failure of the
Colonial State Barut at that po5.nt.
v:e should be glad to have any information which !he
this tHibJect·, made up from reports of other banks.
Caldwell Hardy.
])oar<l
mat issue
on
:l96
X,...lS39
February 15,1920
mswering your telegrAm tJlis date, ei.rculation ~deral ·Reserve Notes
this 4istriet. Nat,v-ally our circulation should largely decrease. Total
issues. bere and at brancbe$ s;.nce January ls t to date $17 ,&>0,0\j(). In ·
this is included •$4,000,()4)0 issued by Treasu&--er t!nited States WasbingtCil.
Redemptions ~28,473,00".. J:n this is included unfit all sources through
coq,trollers offi~.e ~14,}7~,000. Net decrease in district $l0,67J,OCJO.
J.s to increases: Atl..:mta.'t2, 195,000. Desire for new money replacing
worn bills. Redeuption $7 ,55Q,()(A). New Orleons $4,815,000. Mainly large
billa shipped to ~ba, prssvmably pa,ment for stlgar. Redemptions $},890,000•
Nashville 1,470,000.. Due l~rgely to establishment ~ranch am redeeJDin&
Wlfit currency. In ad-iitic.n to our red81J!Ptions, largo rede&Jptions for
St.Louis district. Redemptii)Xls $355,ow. BirmiJ)gham"''2,6l!o,oco. Increased
activities iron and steel industry am larger payrolls. P.~emptions ~l,215,00C1 •
Jacksonville $1,6so,ooo. TQ>..trist travel Florida demandin& new bills. Redeq>ticn $1,085,000.
JoseP1 A. M::Cord,
•
•
:l97
•
•
CB!CtGO
Re yours today ClD unusual U.emand for curr-3DC)'.. In VJ.ew of publicity
given to Reserve position en\i nevrapaper canment tnereon it would not be aurprising if hoarding were going on. However, there is as yet no substantial
evidence of this.. ~et inquiry tcxlay with a nWDber of lead~ bankers
develops all sorts of answrs to y\lW' question, beginning with tbe usual
hi&h cost of liv~. It is a fact that every-one is carrying in· hii:J pocut
two or three times as mvch cash e.s forme.t:"ly. Thia is particularly noticeable
and c0111nented on in regard to the W&i!J eamer wb.o v.sualJ.y carries a pocxetful.
lnotber: reason given for i.Dmediate cause is that bld)Aing operations have
begun on a large scale ~n Chicago end all over the clis tric t, ani thl.s is
requiring a large adAiti~Jnal amc.•unt of readY, cash. .It 1s prolJ~le 'Gba~ a
good mBnl' cOl.Ztt:Y baruts lw.ve l?ecn bUilding up their vault Qa.&h in view of
the promised spet3ds SllpplJ 03;' cars to move .srain in t.bis a.istrict, which .
supply, however • has not su~st:m.tially materiali~ed, e~ept in spo'Gs• · It ls .
probably true, also, t~at c01·ntr, bsnks all over the district.are acc1£UlatiD&
additioDal cash in order to fortify themselves age.ins~ the m1lsually nwr.eroua
and lar&e laDd transaeti•.it:.s \o'hich center aqout March first anci · .vbic~ will
begin to be closed within the l'lKt few da.18• A large ~rcentage of tbese
transactiJm> in count:-y districts are made by .actual cash instead of by ctleCJL
and no country barurer· can dvtermine accurately .laSt wl.t.at tho fonn or volume
of thea~ transactil.lJls ma¥ as.:;lUB. The Ui!ual Nturn flO\v of currancy from the
country. bas not thu year be,;.n. as large as usual for this season, where~
the calls for currtJncy are ccnrd.ll6 frc:~m· all over the district. ~urt~t to
us from variOWI s~tiuna indictl.~ that March first transactions will run in
dollars from two to six times the ordinary ~unt ali the large ·ci t7 ban4ers
·here say that awJ.Vices from their country correap~nts ixla.ica.te about the same
condition of affairs.
Wm.. A. Jfeath..
198
S'l'.LOUIS
February lo, 1:;20
I t.eg to acknowlE;;lge ruceiiit uf you-: tt;tle6ra:n of toda,y reading as
follo~~:
"'Fne au8rd has noted the unusual demand for currency
at this t~ ~ E;Vicienced by. increasing Federal Rt:;.etVe
note iso~s.. ?lease advise as nearl;r as you can '.;he
causes. which have l>~"oduced this situation•"
The Federal Reserve Notus o! this banit in &ctual circulahivn.at the
clolie of busiues:> each irMo.y s1.l£Cd Cbristmao \te:r~ as follows:
Decero:i.e( 26, ·.1919
Je.nvary 2, 1920
.
II
9. 19C:CI
!I
lb; 1920
~1 1+8,451.930
192()
13(::o7, ~30
II
+
·ret. ruary
..
231
)0,1920
ti, 1920
13. 1920
143 ,tt} 1)080
1.38, .,2o,a1;
l)o,.&:1, 19v.
l}
.oif9,585
1)4,4!,ij,1Co
135,606,335
From the abov~ • JCHJ. '-fill not.e thtit tho e.mount oi Federal Rese.rve Notes
in actue.l circulation <iecreased t rom ·t-l~.~oS,451,9)0. to ~136; .568.335. on
February 13th. 'rhere \ias a ::.teody decrease in circulation un~il ~e last
of January. Sinee th!l.t tUi:e, the· cirCulation hat~ be ~n increasing. The
reason for the unuuual daman<l for currency a.t tnis tiT~ of the yt3ar in this
district is due in. great measure to increased build1n& 1 industrial and
commercial· activities am the high coet of labor and r.oaterials.
••
.
+
+
.
'In the southern part of our district ·;;he wea~her has recendy permi11ted
the res~ti.on of cotton picking,· and this ha:: stir:lulated the decond for
·Federal Reserve Notes. It seems that 'lui te a good deal of last 1Car 's
cotton crop still reJJla.irus unpicked in somE< ::orti(Jns of our district, du.e to
the wet weather last fall.
VIm. tltC. Martin.
:i99
'
'
Jm>ER:.t f:.ESERVE ll.:.NK
X-1839
F~bruary l~,l92fJ
Replying wire of today our note issues have remainea. atationary
since February l, and sh0;1 a contraction of about 5 hlillion since
January first for like pri<Xl. o-M year aao contraction was 8 million
our high mark was 103 1 000,0()(; December 27th 1918 ot.tr h16}1 in 191~ was
97,000,000 on December 27. fur present circulation over 5,vvo,ooo
below peak o-1 1919.
In t~~.dd.S.tion theN bas b9en nut less than 25,0vv,000
dollars in gold coin, golct certificates, legal::) a:Xl silver certificates
retired in thi& Ca.istrict during 1'19. Part of thl.s money, especially
in the ease of state b~:mks, has been replaced by our is bees. J.Et soon
as the railroEds a::e abla to move grain more freely fran country points
there should be a .a.eav~.er d~ for currency but even with this demand
our·eircu1ation sbon1d decreose due to the increased volume of notes
destroyed at WaSL1ngton.
John B.. Rieb
200
'
-,
l{EDEF.AL RESERVE BAl"JK
IU3S..AS CI 'rY
X-1839
Fecruc..ry 16, 1:320
Replying telegram regarding unusual demand for currency as evidenced
by increasing Federal Reserve Note !Bs,.te, you are advised that increa::;e in
this district is slightly ~.bove nor:nal. :probably ci.ue to inability of
borrowers to liq'l::i.da.~e indebtedness in wheat distx'icts o.'l account of lack
of transportation faclL.ties. :Banks in :packing house centers report large
':luanti ties used to meet r3.ckers pay-rolL One ·bank£ r sug;es ts that Federal
Reserve Currency is prob.s;.b:ty being hua:nied •
.Asa E. Rarcse.y
201
X-1&39
J).AI.i.AS
]'eb ntary 19 , 1920.
As requested in your telegram of yesterday, and. ccnf:l.rm:i.!'l.g wi.re
acknowleo.gment of the same, I frt.<;l.de some )nquiry and investigaU')n of the
causes for the d.em<mds for cur:;.~ency in this dist:rlct. 1 presume your
message was sent to other Federal Retierve .Agents 1 and as far as th.1s
district is concerned that no u.nu:ona.l or extraordinary d.emsnd for. cvrrency
caused the inveo tiga.tion. As a matter of fact, I cio not think tl~e i.sb\!e
of Federal Re!:ierve not.es, which this de-nartment has n:aile to t.l.1e bank here
within recent weeK-s, or ·the demands lJ.po~ the bank, which have been pa~tially
met by other forms of currency, a.re indicative of anythin6 but the seasonal
movement.
The bank has recentJy he an shipping national bank notes, which it
received from member banks, to the United Stat.es 'I'reaburer as a transfer
of funds, and has r.:e t the demands of zrember banks with Federal Reserve notes.
This has caused a sl:i.ght increase, and in addition to tbis demand, we have
on a few occasions, recantly, upon instructions to do ~:;o, req1.~ested. the
Comptroller to del:i.ver. notes d5.r-e~t to the l::.1:i.ted States Treasurer, against
entries in the latter's gene raJ. account he:·e.
Our attention is a~.so directed, by the head of our Cash Division, to
the continued demand for currancy at Wichj_ t,,3. Falls and Shreveport, on account
of the necessity for large amovnts of f'I.Jnda to finallce the oil ac.tivit:i..es
in those sections.
This office will keep in close touch with the situation and keep you
advised of any un1_1sual, or ab~1ormal developments ..
Chas . C. Hall
202
FEDERAI, RESF;VE
BM~K
X-1839
SbN FRMJCISCO
1i'cb ruary 13,1920
Your telegram date. In absence of Mr. Perrin beg to advise no incree:tsa
in circulation Federal Reserve notes evidenced in this district since
first of year. Federal R~serve notes in act•J.al circulation Decer:.ber 31,
1919 $242,48:: ,OUO gradually decreased from that t.in:e, uncil Feoruary nine,
when reached minimvm for yee.r cf $222,077 ,QUO. Notes in circulation uave
now increased to $225,926,000, approximating $226,176,000 in cL:·culation
on November 25, 1913. GI"Of>s amoHnt Federal Reserve notes out~standing fo:c
which Federal Reserve Agent liable have been constantly decreas1ng from
~79,419,000 on January 2nd, ·co $262:672,000 on F'ebruary 17th.
Total
issue~ and re--is::;ues by Federal Reserve Agent during this period $11,060,000,.
total redemptions including notes returnea to Feaeral Reserve Agent
$23,939,000.
E. H.Tucke:c
203
W, P, 8, HARDING, GOYIOMOI
ALIIRT 'TIIAUSS. YICI 80YIIMOI
ADOLPH~. IIILLER
CHAIII.IS I. HAIILIII
HENRY A. IIOIHLINPAH
IIX OPI'ICIO M ........
CARTER GLAII
SICIITAIY OP THI TRIAIUIY
CHAIIIIAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COJIPTROLUR OP THI CURRINCY
W. T. CHAPIIAII, SICRITAIY
R. G. EMI.RSON,AsaiSYANT SIC:IIITAitT
ADDRESS REPLY TO
W,JI,IIILAT,
WASHINGTON
F'EDERAL RESERVE BOARD
Feb t'Uar y 20, 192o.
PIIC~L
X-lS4o
Gentleman:...
You. are advised that the regulations of the Federal Reserve
Board with wh1eh yo\1 have agreed to eamply ae a eondi tion preceden\ to
the purchase of your stock by national banka \olnder the provisions ot
Section 25 of the Federal Reaerve Act have been amended by the Federal
Reeerve Board in so far as they relate to the amount of r~serves required
to be maintained against acceptances outstanding• That.,paragr.aph of
subdivision B.l.b 4, relati:ng to reserves, hill been atnendeci so aa to read
as follows:
"it must 'be ~dera.t..oocl.. ilirtilennore', that against
·a~1 ac'ceptances which mature in thirty days or lees a
reserve of at leal,; t. fifteen· per . .centum shall "be main--t~ned1 and that. a.sainst .ail ~ceptances outstartding
wbich mat~re ifi ~t~ than t~ir'; dafa ~ reserve of at
leil8t thi"ee ~t ~&nttim snail btt .rhairitained.. Reserves·
aetinat Ut$plaiiles tnuat be irt 11(\taid ass~ta of· any or
all dt tll¥ follewiris ldrtcist
1.
Cash:
2.
Be.l.an,ce s wi tb otller
}.
4.
oank$ :
i3ers.kers' acceptances; ~ / or
Such securities aa the Eoard may,
from time to time, permit.
lery truly yoursr
•
Governor.
· letter aent to U,st of. foreign 1Hm:IQ.ng eorporatlone.
AIIIT
204
IX OPI'IOIO
MKM.KII•
c:ARTEII •LASS
SICIIITAIIY OP THI TIIAIUOY
CHAIIIIAII
..
FEDERAL RESERVE BOARD·
JOHN SULTON WILUAIIS
· CO.PriOLUII OP THI CUIIIMCT
W. P ••• HARDINII. IIOVIIOOI
ALBERT BTIIAUIS. VfCI IIOVIINOI
ADOLPH C. IIILLEII
CHARLES S. HAIILIII
HENRY A.JIOIHLIHPAK
... T. CHAPIIAH. SICIITA&Y
R. 8. EMERSON. AUIITANI SICRITAIT
ADDIIU• IIII:PI.Y TO
PBDERALRESERVEBOARD
W. JI.IJILAY. FliCAL A81NT
WASHINGTON
February 21, 1920
X...l84l
Change in Code for Telegraphic Advice
of Approral of Applications for "'Dbersh1p.
Subject:
Dear Sir:;..
Referring to Board •s letter .,_1828 of February 10, 1920.
and enclosed code for use in telegraphic advice of approval of
applications of state institutions for membership, you are advised ·
t-t condition 11\d)er fOU.J' has been amended by tbe addition of
the follOWing 9lawse:
·
• and that you will exercise all powers with due
regard to the ~Jafety of 70U.r c us taners .. "
So that tbe cdind.ition as amended reads as follows:
" Ta.at except with the approval of the Federal
ReserYe :Boar4, there shall be no change in
•
the general cl:Jaracter of 7<>Ur assets or broadening 1n the functicm.s now e~~ised by you, s~
aa will tend tQ atfect materially the standarD.
now maintaine.d 'am required as • condition, of·
membership am. that you will exereise all p~rs
with due regard to the safety of your customers.•
Plaase change your cop;r of the code accordingly.
lery tzuly yow-s,
· Assistant Secretar7-
To Cbainuen of all F.R. :BaDka.
W, P. II, HARDINII,IIOYIIMOI
ALURT STRAUSS, YICIIIOYIINOI
ADOLPH C. IIILLIR
CRARLII I. HAIILIII
CARTER II LAS I
SICIITAIY OP THI TIIAIUIY
CHAIIIIA.
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAIIS
COMPTROLLII OF THI CUIII.c:T
HENRY A.IIOEHUNPAH
1J, T, CHAPIIAII, IICIITAIY
R. 8. RMIISOM. Aa•lft'AMT SICIItAar
ADDRII:IIII REPLY TO
FEDERAL RESERVE BOARD
W. II.JIILAT, PliCAL AUNT
WASHINGTON
February 24.1920.
X-1~
SubJect:
Inter-district Time Schedule.
Dear Sir:-
Last August the Federal Reserve Buard sent to all Federal
Reserve :Banks for checking and corrections • a proposed inter,..distFict
time schedule, which was based unm such information ~ the Board had
from the Fed.era.l Reserve Banks at that time. When this schedule was
revised it developed over one hundred inconsistencies in the transit
time between given points. By means of correspondence wi~ the
several Federal Reserve B~s these inconsistencies were ·redUced b7
mutual agreement to abi!lut twenty. These ]Ja.tter discrepancies, which
the Fedel"al Reserve l3anks were unable to hannonize among theJJJ$el•es,
have now been ad.Ju~ted by this office 1n strict compliance with railwa7 time schedules as fumisbed 'by the Railway Mail Service and with
due regard to the hours of e lea.ring by the e learing houses of the
various points concerned in the adjustment. You will find enc-losed
a. copy of the completed schedule, which. has been duly au. thorized
by the Federal Reserve Board.
·lt is not e:x:pec ted that this inter-district sehedu.le should
be deemed immutable, but it is believed that under norme.l operations
ot the mail service the schedule, as now devised, will materially
elim:S.nate the inter-dis1iriet float oeoasioned by checks and draftti
in transit, and· at the same time \'ITill be fair to the meui)er banks.
It seems important tbat the inter-district float should be redt~ead
to the lowest possible point, so that when float is carried bJ a
Federal Reserve Bank the remedy will lie entirely in its own baDdS
thr.ougb. the correction ot f~lt7 intra..-district schedules,
Very truly
JQW"S •
Enclosure.
G<wernor.
To Governors of all F .R. :Banks
. Copy to F.R. Agents.
206"
W. P. G. HARDING, GOVERNOR
EX OPI'ICIO M&MB&R•
ALBERT STRAUSS, VIC! GOVERNOR
ADOLPH C. II ILLER
CHARLES S. HAll LIN
HENRY A. NOEHLENPAH
CARTER GLASS
SICRITARY OF THE TRIASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLIR OF THI CURRINCT
W. T. CHAPMAN, SECRETARY
R. G. EIIERSON,ASSISTANT SECRETARY
ADDRESS REPLY Td
FEDERAL RESERVE BOARD
W. M. IMLAY, fiSCAL AGENT
WASHINGTON
February 26.1920.
A-1843
Subject:
P\lrchase of Bills from .Accepting Banks.
Dear Sir:Referring to Board's letter of February 11th (X-1~5)
regarding purchases of bllls from accepting banks, you are advised that
the majority of replies received indicate that the officers of most
of the Federal Reserve Banks ag::-ee with the Eoa.x·d ts view of the matter
and that in the majority o£ cases purchaaes of acce:ptacces direct from
accepting banks which have. not the endorsement of another meniber bank
are made at tbe I'egulai· commercial ~er" rates. In a few cases, however,
iedera.l Reserve :banks ba7E:: purchased aceeptar.~es direct from accepting
banks at rates about one--half of l<f, less than current commercial paper
rates.
Please advise the executive officers of your bank that the
Board has ruled that all purchases of pills di~·ect from accepting banks
which are not endorsed by another member bank m1.:st be nnde at tbe prevailing connnercial paper ~-ate~.
Very truly yuurs,
Governor-.
To Chainnen of all F .R. Banks.
.·
. 207
DAVID F. HOUSTON
II.CIITUY OP THI TIIAIUrt
CHAIR II AM
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
C011ni0LLIR or THI CURII.IICY
W. P. G. HARDING, GOVIIHOI
ALBERT STRAUSS, YICI GOVIIHOI
ADOLPH C. IIILLER
CHARLES S. HAll LIN'
HENRY A.IIOEHLENPAH
W. T. CHAPMAN, SICRITAIY
R. G. ENERSON. ASSISTANT SICR.IT.A.IY
"DDREBB RII:PI. Y TO
FEPERAL RESERVE BOARD
Subje~t~
WASHINGTON
W.II.IIILAY, FIICAL AUNT
Regulation of Charges imposed by rmtrber :Banks
against Customers for Collection of Checks
through Federal Reserve Banke.
Dear Sir:You are requested to advise the executive officers of your bank
that the :Board has decided to carry out the duty wbieh is imposed upon it
by a clause in Section 16 of the Federal Reserve .AGt, which reads as
follows: "The Federal Reserve :Board shall, by rule 1 fiX the charges to be
collected by the member banks from its patrons whose checks are cleared
through the Federal 1\eserve Bank and the charge which may be imposed for
the service of clearing or collection rendered by the Federal Reserve :Bank. tf
The Board has already ruled tlw.t JJO service cba.rge will be imposed
by the Federal Reserve Banks, and it now announces its purpose to fix the
charges which ma7 be collected by member banks .t'rQID. their customers who
deposit checks which are collected through the Federal Reserve Bank. This
regulation will apply to all member banks alike, both in the large cities
and in the country towns.
The charges will be optional - that is, they may be imposed or
not at the discretion of each member bank - but no member bank will be permitted to impose a charge higher than that authorised. by the Board. The
Board will adopt the principle of allowing as a max-imum charge interest at
the rate of
per annum for the transit time involved in the cQllection
of items. In general the state will be the unit, end each Federal Reserve
Bank is requested to prepare a schedule of rates to be announced by the
Board which shall be applicable to the members in each state, or in .the
case of large states, to sections of states. It is assumed that l/lOth
of 1% will be the ma:Kimum charge permitted and that application of the time
in transit and siX percent interest rule will mean for near-by states rates
of l/20th end l/4ot:n of 1%.
6%
208
X-1844
-2-
Please request your executive officen to have the Transit
Manager proceed at once to the working out of schedules in order that each
member bank in eaeh state in your district JIJI:}"' mow JUst what the maximwn
charge is that it may iml:Ose upon customers for collecting through the
Federal Reserve :Bank checks which are payable in every other state in the
l.h~on, and after these schedules have been approved by your ex.eeutive officers
you are requested to have them forwarded to the :Board in order that a formal
re@l.lation may be issued in compliance with the terme of Section 16 of the
Federal Reserve Ae t, above quoted.
Veey tNly yours,
Governor.
To Chairmen
ot all F.R. :Banks ..
FEDERAL RESERVE BOARD
209
X-1846
ST ~TEMENT FOR THE PR?JSS
•·
For release in morning papers,
Monday, ~~arch ls t, 1920·
February 28, 1920
The following is a review of general business and
financial conditions throu~out th~ several Federal
Reserve Districts durit~ the month of February, as
cuntained in the forthcoming issue of the Feueral
Reserve Bulletin.
Vbile Federal Reserve Agents in their reports as tc business concdtiuns
·and the outlook for trade forecast the continuance of an active aemanJ. for
products, the situation in some districts is such as to raise questions anJ. to
lead t• predictions of possible reduction in business activity
an~
in prosperity.
There is in many sections of the country indication cf some alteration in outlook sni a u.isposition on the :part of the custcmer to use more care ana. JULI.grr,ent
observable
··
, but in some
in his purchases. No increase in labor unrest is ·
Jistricts a continuat1on of underproduction or limitation of production is
encountereu..
In District No. l (Boston) the Feueral Reserve Agent reports that "it seems
clear not only that commodities are finding their way to the counters of the
retail merchant with increasing facility, but that the shelves of the latter are,
in general, being stocked to capacity, anl merchants are buying more and. more
cautiously from month to month, willinG to take chances which they woula. not
risk a few months
a(!,O,
on d.elivc;ries;
an(l
though they may not yet have actually
observed any appreciable fallin6 off in the purchasing activities uf the pu-blic,
they are becoming increasingly conscious that the inevitable time of forced
retrenchment is approaching nearer
and.
nearer."
~
From District No. 3 (Philadelphia) it is re:portea. that there is a brisk·
de1:iand for manufactures of all kinas but that the danger of further price advances
is well recognized.
"There cannot be any long contin\.la.tiun of price aa.vances
X-1846
-?-
210
combined vv'ith increa.sea. p'l.lrcha.sing, unless production can at the same time be
.
made larger," says the repurt.
Foreign traJ.e cordi tions are making themselves
felt in a practical way, sunu.ry prices weakening as a result of the U.ec line in
sterling.
In District No.
4 (Clevela.nu) the Feueral Reserve Agent, while callinb
attention to the restriction of output as a general· evil, anu. while fearine; tl;te
continuation of high prices as the result o:f
\.l.IUerpro~ucti()n 1
states tna.t '(;.b.ere
is a be6irning on the part of employees to recognize that the volllffie of pro~uestion.
auction is a. vital
The opinion is expressed that
e~travagant
pur-
chasing will continue for some time, although the reports of uealers innicate
an opposite view.
No·
5 (Ricbmvnd)
No ground fer actual pessimism is to be noteu..
11
In District
the new year has openeJ prosperously ,,;i th no indications cf
nny general business curtailment.
11
There is however, a distrust of future
pricc;s ani retailers are showing a conservative tena..ency.
6
In District No.
(Atlanta) observations similar to those reported from the Cleveland District
are presented.
The ne0J. of increased
p:~od.uc
tion is recognizel anJ. it is
~-
tatea.
th&t "the betterment of prevailing conditions rests lar3ely wit.b. the general
public
and
c::;ood.
In District No. 7 (Chicago) nit is not surprisine; that the
to
especially with labor."
in~uiries
more or less
The outlook for asricultural development is
shoul~
concerning business conaitions in the miel.ale west
~ppreb.ension
of a period of business depression.
tom~
,n
of replies
reflect
This is said to
be particularly noticeable in the advices received from proaucing centers~
In
District No. 8 ~St.Louis) active business in practiaa.lly every line is reported,
a.lthOU§:,h
11
ilu:ring the past few weeks several disturbing fa.c tc,rs have tenued to
lessen its volume from the high level of January. 11
Possible price red.uc tions
are foreseen and buyers are limiting cheir purchases 1 yet there is
of optiroism 11 among most :business men.
11
l i ttle diminution.
11
a feGling,
The buying power of the public shows
In District No. 9 (Minneapolis)
unfavorablA transportation
ccnditicns· have tended to limit the activity of business 1 hut
outhok is g•.)Qd and sales of farm implements arE'l awtive.
11
th~
agricultutal
Coll~ctions
an:
X-1846
-3satisfactory.
in the month of January
* * ** *
money than that of January,
dise."
211.
In District No. lO (.Kansas City) "the volume of mercantile trade
was abu-.1t 4(; per cent greater in amouc1t r;?;
1919, and about the same * * * * in -i_Uanti ty of
mercha;.~
Some lines of businesti have declined in activity, but building operations
hav.;: cnono.ously increased.
ane. there is an effort to pay off war indebtednass.
In
District No. ll (Dallas) January businoss conditivns "reflecc a moderete net gain
*** *
as contras tt!d with the situation a
;~ear
ago.
.Agricultural prospects are
favorable and. the volume of mercantile tra:::te was slightly better than that of
January,
1919.
In District No. 12 (San Francisco) planting co~itions are not as
good as they should be.
There is much activity in busines;;,, unemployment is
nominal, strikes are at a minimum, and. the :prospects are good in spite of somewhat
unfavorable agricultural
condition~.
Throughout practically all the reports runs a recognition of the e;eistence
of an overstrainea. condition of credit. and of some continued tendency toward
speculative operations, while high living costs ana the upward movement of prices
hav0 apparently not been
ch~cked,
notwithstanding the decrease in prices of some
classes of goods and a tendency toward restricted trade in specified lines.
Interest rates are high and rising in most places, whlle banKS are exercising a
greater degree of discrimination and Julgment in complying with the demands of
t.neir customers.
February has witnessed a beginning of active preparations for
the coming agricultural season, particularly in the South and Southwest and on
the Pacific Coast.
In District No.
6 (Atlanta) preparation for the new crops
has been somewhat retardtd by weather conui tions end cot.ton acreage cannot as yet
be
fore~ as
last. year~
t with accurc-cy 1 although i.t w:i.ll probably be red.uceei. as compared with
Small grain has beon somewhat damaged by wet weather along the
Atlantic coast.
has
b~an
The fruit and vegetable crop gathered during the past few months
very satisfactory, although prices for some classes of fruit have been
aisappointing.
In District No. 11 (Dallas) little winter plowing has be0n done
and preparation for the staple crops is three or four vve~ks behino.. The South Texas
rice crop which has Just be.m completed is the most profitable ever gro\11/ll.
Truck products
-4are moving to market in large volwne and at guoa prices.
In District
(Kansas City) conditions have be.:on id.eal for work out of doors.
been in excellent conJition for
grain crops.
212
X-1846
p~owing
No~lO
The ground has
ani the weather was favorable for winter
The corn acreage will be largely in excess of last year.
9
District No.
In
(Minneapolis) the season is still tuo early to forecast conditions,
On the Pacific Coast the germination of grains has been slow, although in Oregon
aml Washington autuzrn wheat is wintering well.
\Jhile the information is not y~t
sufficiently complete or the season sufficiently far advanced to furnish conelusive facts, the prospects are e7idently regarded as ..;ntirely favorable.
Prac.tically throughout the country the problem of agricultural labor, both as
to amount
wag~s
an~
cost, is
regarde~
offereQ in the cities have
as one of unprecedented difficulty.
attract~d
many farm
worKer~
Tibe high
from the land, and
as a result decreased prod.uc tion in various sec ticns can scarcely be avoided.
Farm animals in mes t parts of the cO\Ult ry are reprirteu. as wit"lte ring in exhead of
ceptionally good condition. In Texas there was an increase ef 836,0CO/ live B tock
from 1918 to
known.
1919.
The sheep ind'ilstry in West T..Jxas has the best prospects ever
L"l District Nca. 10 (Kansas City) live stock has been reported in thriving
condition with less disease among animals than for some time.
There is a
problem in the northwest section of the district in restocking the ranges 1 but
pr~spects
are good for a large crOp during the current year.
On farms there has
been a iecrease in the number of animals available, amounting to about 7-1 per
eent since January,
1919.
Some falling off in sheep has occurred. in Colorado
and Wyoming but in the eastern part of the district sheep have increased fro~
2
.•· to 10 per eent. the increase being especially uoticeable in Kansas. Declines
are reported in the holdings of hogs.
On the Pacific Coast 1 in spite of hay
shortage anci high prices for fec..d, cattle are wintering we 11 end the quantity
of live stock on fanns in the district is approximately the same as on J.:;m\.1.ary
lj 1919.
~rrivals at the six marAets in District No. 10 (Kansas City) in
37,006 cars as compared with 37,694 cars in Dececber anu. 44,134
DigitizedJa'1JJ.ary
for FRASER were
~.ar&
213
X-lS46
in January 1919.
There was a decline of 12.7 per cent in cattle receipts as
compared with the Decewber record. ani of 14.9 per cent as corr;parei.l with the
receipts in January of last year, while 12.7 p,;;r cent more hogs arrivea. in
Ja,nuary than in December, but the January total fell 30% short of the receipts
in Januc:ry, 1919.
Fewer sheep came to the markets in January than in Decerriber
but the Jonuary total was 14.4 per cent larger than a year ago.
No.
7
In District
(Chiccgo) it has been found thet receipts of live stock at the principal
marLets ~uring January show a 1.1ecrease of 19 per cent as comparei.l with the
correspon~ing month of last year.
Prices for cattle, beef anu mutton aeclined
compareQ with a year ago, while sheep an1 young lamb increased in price~
was a f alHng off of
of live hogs.
15
per cent in hog receipts and a decrease in the price
In
·Kansas City
tb::tn a yeo.r ugot whila feeder cattle were $1.50
calves maintaineci fairly high prices.
ana District No.
There
steers were about $1 .. 50 lower
to $2.50 lower.
Loth in District 10.
Lambs and.·
(Kmso.s City)
7 (Chicago) it is noted. that meat packing operations have be ,n
r11aterially slowed liown on account of the
er:~tport
Arrivals of wheat have be ..m smaller both in
situation ..
District No. lO (Kanso.ts City)
an1 District No. 9 (Minneapolis), as well as in District No. 7 (Chicago).
has be'.:On partly cJ.ue to i.lifficulties of transportation..
This
!nubility to snip
accumulate0. stocks frow the elevators in the northwest has prevente.:.L grain from
movine;.
In District No. 10 (Kansas City), although such difficulties have been
sr11a1ler, the arrivals of wheat at princ:i.pal markets were about
15
per cent less
than in Dece:·ber, but about three times as great as in January, 1919.
grain is now being held on the fanns for hit!)ler prices •
Much
.Activity at the
:t:rinci}?al flour milling centers has declined in District No. 10 (Kansas City)
on account of the car shortage, ·,vhile the srune is true in District
(Minneapolis) and elsewhere.
No~
Wheat flour production in January, 1920, was how-
ever, 1},005,000 barrels as against 10,5931000 barrels a year earlier.
9
This
214
-6continues the upward movement in the output of flour already noted in the
February
is~ue
of the Dulletin.
The demand for iron and steel continues to be vigorous and many mills are
seld far ahead.
In District No.
4
(Clevelanu) it is reported that pig iron
buying during the past four or five weeks has been in "tremendous volumen, and
it is estimated by trade authorities 'chat total sales during that perioG.t
exceeded. 1,000,000 tons.
ConsUID:!rs have bought; ahead. up to Jonuary 1, 1921
The aJ.vance in pig iron prices has ranged from $3 to $6 a ton..
The Lake Superior
iron ore market for the season 1920 has opened at an advance of z~l a ton ..
Predictions are now being made of a scason 1s movement of 6o,000,0~0 tons~
The
'
unfilled orG.ters of the United States Steel Corporation for January were
9,285,441 7 corresponding to an inaex. number mf 176, while for January, 1919,
they were 6,684,268, correspoooing to an index number of 127.
duction was 3,015,181 tons for January, as against
1919, the corresponding index. numbers being 130
Pig iron pro....
3,302,26o tons for January,
e,ro
143 respectively. In
e..l(ceptionallv
District No. 3 (Philadelphia) demand for iron and steel has been
heavy and manufacturers were recently operating to capacity.
Fieather ctiffi-
culties have lately retarded their production anc:.. fuel shortage has been tronbleume.
Eastern Pennsylvania f:1:2x. pig iron a year ago was S}6. 15 a ton, but is
now ~45.35 a ton~
All derived products of steel, inclUding she.Jts, tin plates,
bars, pipe, tubes, etc., have advanced very greatly in price.
chain has been especially heavy, but prices have not
elsewhere.
advanc~d
The demand :for
as rapidly as
Sheet steel for use in automobile manufacturing has been in strong
demand and the prices show an increase of $21.00 per ton as comparea with a year
ago.
In Jistrict No.
6
(A~lanta) there is great activity in the iron and. steel
industry and pig iron is selling from $40.00 to $4}.0v per ton wlih no
•
accumulation of stocks.
than for December, 1919.
The pro<1uction for January, 1920, was slightly larger
2·15
~7-
X-1846
Coal production is reported by District No. 3 (Philadelphia) to have
been 36,200,000 tons of anthracite in 1919, as compared with 98,826,034 tons
in 1918.
In January shipments for the nine anthracite carrying roaus were
5 •713,319 tons as comparecl with 5, 638,383 tons in January 1919. The .J.atter
part of January and the first few weeks in February have b·e\3n characterizea. by
weather which has restricted. production ani the movement of cars.
Shij;pers of
coal have been embarrasseCI. by having their money tied up in coal that has been
confiscateCI..
The bituminous output for JanU&ry, 1920, is reported as
49,419,000 tons, corresponding to an index number of 133, as compared with
41,485,000 tons, or an index number of ll2, in January, 1919.
The iruex
number for coke for January was 76, shipments being 1,982,000 tons 7 while
for January, 1919, the index number was 92, with shipments 2,401,967 tons.
In
.~District
No. 4 (Cleveland) it is reported that coal is going forward from
the upper lake ports as fast as the
railro~s
can handle it, and stocks will
be low all around at the opening of the shipping season.
216
X-1846
-SPetroleum production in the
~nsa.s
and Oklahoma fields for January was
somewhat over 10,000,000 barrels, or about the same as for December.
a gain of
96% over January, 1919.
In W:yoming
c.ncl.
This was
Colorado current monthly
figures are not obtainable 1 but reports incLicate a good January output.
1.!'7yoming production for 191:) averaged 1,147,750 barrels :per month..
The
There has beerJ
a decrease in stored stocKs of patroleur!l, v;hile a slight increase in the r.1onthly
:production has taken :place.
A tendency to substitute oil for coal thcoubhout
the country is proceeding and increasingly severe cJ.rafts are being made upon
the accumulated. stacks of the prou.uc t.
General manufacturing is very active all over the country, but in textiles
In uistrict No.
there hc.s been some clecline as cOirr_flared with December.
3
(Philooelphia) the •-~.emand for raw cotton lk'ls fallen off because rnills are well
supplied.
.A
consern~'cive
policy as to purchases of raw
Cotton yarn m'"nufacturers are well soll ahead anr:.L are
ma·~erial
brin;,;in~
is being pursueu...
their mill pro- .
.:..uction nearer to capacity, although there has been a slight falling off in the
past thirty days.
on the part of mills to lay in raw materiaL
The domestic yarn market is quiet
and. there is em "abundant tenclency to caution11 •
ue~n
ot last attainea their
100
In district No. 1 (Boston) there is a U.isinclination
per cent in some cases.
grades have lately
a 6o/~~out
Prices are higher today than they were a year
in less
maximurd~
and export d.emand is fairly
~emend.
Cotton fabries :i.nclua.in6 the fine
There is a conviction that "prices have
Cotton goods manufacturers are
stron~,
runnin~-:,
while opinion az to prices is
manufacturers believing that the peak has
at C!:tpaci t,)
J..iviu.e~..L,
some
be~n reached~
Raw wool supplies of t;he finer grades are insufficient ana. little is being
offered in the market.
':Voolen yarn manufactur·ers report an excellent demanJ. ana.
are operating their plants to capucity when they can get the labor..
217
X..,.l846
Finished goods manufacturers in District No. 3 (Phil~elphia) find their
products so much iR demand that they are obliged to allot ~he output amons their
customers.
Good business is expected.
District No. l (Boston) woolen
In
mills are running to their full capacity aml claim to have no surplus of manufactured goods.
Deliv~ries are being made promptly and there is some overproduc-
tion of overcoatings.
The dress goods
mar.~Fe
t is quiet.
Wholesale trade conditions are reported prosperous almost throughout the
country.
Wholesale dry-goous houses in St. Louis say that their sales in Janucry
1920, were in ma~ instances larger by 100 per cent than in J~uar,y 191).
business was also larger than. in December.
c. epleted..
Their
The retail stocks are reporteu. to be
In Chicago, mercantile stocks are at a low ebb anu. wholesalers stc;.te
that the aecline in foreign trade has apparently not affected them much•
They do
JObbers report the largest bookings in the history of their businass ..
not anticipate ;;my decline in orders.
the country.
Some
Similar conui tiuns obtain in many parts of
1n shoe manufacturing producers have received heavy orders, but
there is a dullness in the leather market, while the recluction of e..,;ports is
believed likely to forecast a cut in prices to
cons~rers.
The demana for
goo~
grades of shoes, regardless of price, seems to continue, In the leather field sole
leather continues dull and 'Neak, while prices are not much chenged.
Declining
quotations for hides have brought no corresponding movement in leather.
Shoe
price lists for the new season are higher than ever.
In spite of exceedingly high costs of building mate.rial, the intense shonage
of accommodations is causing a great growth in
of the country.
buil~ing
operations in many parts
On the Pacific Coast an increase of nearly 30 per cent is noted
as compared with December, while as compared with January of last year :permits
issued are nearly four times as great.
x-is46
In the Southwest an even larger ratio of increase has been noted.
basis of incomplete statistics
a relative increase of
No. 11 (Dallas) reports
On the
Distl"ict No. 10 (Kansas City) reports
467 per cent during the past year, while District
~5,3,9 per
cent.
Great building expansion in 1920 in
the Southwestern part of the country is accordingly anticipated.
In the
Middle West pennits issued have been far in excess of the corresponding
month last year.
In the East and Northeast, where the movement toward
increased building started. perhaps earlier than it did in other parts of
the country, the growth is not always so noticeable, relatively speaking,
but the activity is ~till considerably on the increase.
Difficulty in
obtain:i.ng deliveries of 'Quilding materials have been severe. Scarcity of
cars has prevented the movelllent of lumber and heavy building materials and
the effect of this situation will be to restrict the early spring progress
.·
in construc·tion .
Labor conditions are quite generally reported throughout the country
as being in fairly stable position.
The most \Ulfavorable aspect of the
toward
labor outlook is the tend.ency reported from va.riot1.S d.istric ts/restriction
of output.
the
opin~on
Even in those cases, however, 'Nhere this tendency is noted,
is occasionally expressed that the effect of the restrictive
policy in injuring those who practice it is beginning to be bettfilr understood.
Scarcity of labor is noted in many districts, particularl:y in the
agricultural regions, and as a result reduction in the acreage oi fa.:.cws and
the output in sowe manufacturing lines is foreseen.
.An especially acute
situation in farm labor is reported from the Southwest.
In the Eastern
nun:ber
inanufacturing districts notable increases in the ~:Xadxlln of rnen employed
and in the advance o£ factories toward capacity production have occurred.
In sowe specialized industries, however, either strikes or shortage o£
raw material have led to restriction of output, although such interferences
218
'
X-1846'
219
-1..:..-
have not been extensive.
to
b~ing
more than a
MAny plants which during the war were not able
~stantial
percentage of their machinery intc active
operation have succeeded in getting Iimch closer to total activity. It is
noted, however, that even those plants which are running at full capacity
are in sOILe instances unable to turn out as much as in prewar days. From
Cleveland it is reported that one large employer of labor finds that
while the numerical strength of his staff has increased 11 per cent, the
au~ented
force is producing 14 per cent less thro1 the old force.
Pacific Coast labor has been fully employed and unen!plOyment
winter m\lnths has be·=n purely nominaL
On the
durin~
the
A fairly extensive telephone
strike recently occurredt but apparently has not enlisted the support of
a very large proportion of those subject to it.
During the month of February there was a continuation of the heavy
demand for
fund~
which had been characteristic throughout the country for
more than 90 days.
Advances in rates of interest, both for call and time
•
money, and for collllllercial paper, carried the general cost of l;tan funds up
to a figure probably in advance of any that had been recognized in the
(
United States for some years past.
Coincident with these advances in the
cost of loan funds was a decline in the quotation of the best investment
securities, while on the whole a shrinkage or contraction in the volume
of tradifig in all claroses of securities thr01.1ghout the country was
observed.
In the opinion of some districts there were also indications
of a reduction in the
vol~e
of speculation in cOllllllodities.
The
effects of the increase in rediscount rates at Feder·al Reserve Banks made
themselves evi«ent in a mc;re conservative a.tt.itnde on the part of bmks
in general with respect to industrial expansion and in the cutting of
commitments on spea.U..a.ti~ account.
From Distr:i.ct No. 2 (New York) it is
220
X-1~46
..,.12-
reporte1 that during the past thirty days there has been "a gradual
reduction in bank loans
~~*
more than two-thirds of wnich has been in
the decline of leans secured by stoCks and bonds.
Since last October
when bank le;ans at this District were at their highest point, they ha"re
declined 10 per centn,
This contraction of bank credit was not, however,
gene:-:-al th"ou.ghout the country, but the reduction in New York was partiallY
offset by an increase in other districts.
both in the financial centers and
A decline in bank deposits
thr~~ghout
the country
~nerally;
has
occurred, a part of it being due to the withdrawal of Government funds.
Very great difficulty in placing both commercial paper in satisfo.ctory
Y,uanti ty and conservative investUJent securities, is reported by dealers.
Some evidences of the transference of denand which would naturally be
exhibited through invest;:;1ent institutions
t~
coranercial banks is alss
noted, and member banks have quite generally increased the scope
demands upon Federal Reserve Banks.
is i.n
8
~f
their
In the West and Middle West "~oney
trong demand both in the country and in the city", while the
movement of credit continues to indicate greo.t act5.vi ty.
N0. 4 (Cleveland) there has been little activity in the
In
District
accept~ce
market, dealers are purchasing as few bills as possible, and credit
accomnJOd.ations are limited, although there is ab'tmdant money for
"legi. timate uses 11 •
On the Pacific Coast bank clearings have fallert
slightly as cowpared with Decewber, but are still far ahead of January,
1919-
Interest and discount rates are firmer and th~ demand for funds
is strong.
In the South and Southwest borrowing is active, although
a temporary check has been caused by advances in discount rates.
This
temporary setback is not expected to c.ontinue long, spring requirements
necessitating a renewal of sharp demand for acc~mmodatien.
..
.
X-1846
221.
-13There
i~
evidencf# that f.l.nancial and banting au.thori tie:; all over
the country are looking more seriously to the general situation in
credit and are beginning to urge the adoption of conservative policies ..
Foreign exchange has suffered a collapse which Cai'ried rates down to
the lowest level thus far recorded early in the month, after which
recovery took place.
Predicted reduction of exportG has
borne out by the Government figure·• for January which show
0ver December amounting to about $50,000 1 000.
not been
an advance
A material cut in the
amount of credit av~ilable for the suppGrt of exportation is taking
place.
The general prospects at the close of February are favort~le to
an a.c ti ve, prosperous spring sear.on in the principal manufacturing,
wholesaling and retailing lines.
strong deu:and.
in
due
export~&.·._,.
Wages continue very high and labor in
Agricul t\,_ral prospects are good and the ,- curtailment
to folleign exchange conditions, while undoubtedly
beginning to make
th~selves.felt,
is believed by many to be beneficial
to the consumer rather than injurious.
A tendency to resist the
advance in prices and some increase in care in purchasing are regarded
as favorable symptoms.
The credit and ruoney situation contim.:tes
scarcity
strained and there is a
of funds both for long and short
te:rm use.
~:.
FEDERAL
RESZRVE
TELEGRMl
:BOARD
X-1848
CONFIRMATION
Curtiss, Boston
Jay, New York
Austin, Ph:i.ladelphia
Wills, Cleveland
Hardy, Richmond
~f.cCord, Atlanta
Heath, Ghicago
Martin, St.Louis
Rich, Minneapolis
Ramsay, Karlsas City
Ramsey, Dallas
Perrin, SanFrancisco
:Bureau of Engraving and Printing advises there can be
no considerable increase in deliveries of notes and currency for
at least another month. Conservation of supplies by your bank
will therefore be necessary pending i~£reased delivery of notes
by the Eureau.
HARDING
222
W. "P.li.JIAI!Jli!IQ,.GOVUNOR
lEX OPPICIO MEMB ...ll
DAVID 1'. HOUSTON
SICI&TARY OF THI TRIASUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTIOLLIR OF THE CUIIINCT
ALBIRT STRAUSS. VICI GOVIINIIR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SICRITABY
ADDREBB REPJ..Y TO
W. M.IIILAY, FISCAL AGlNT
WASHINGTON
FEDERAL RESERVE BOARD
X-B51
March 4,1920.
Subject:
Campaign for New Par Po).n t'~.
Dear Sir:There is encl )Sed herewith a. copy
of report :prepared frcm replies rece:.. veL. from
all Federal Reserve Ilaz;.tcs in. response to our1
telegram of Februo.ry 2b, a.skirJ<b': for information
regarding the :progress of the campaign being
conducted for the establishment of new :par
points~
In aduition, there is w.so enclose~
a special report showing nonmember bMkS not
on the po.r list distr-ibuted by Str:ttes accorc..ing
to Fea.era.l ResGrve Districts.
Very truly yours,
2-Inc.
.Assistant Secre t;n-y.
To Chfli rmen of all F. R. :Bnnks ..
.
X-1851 a.
C.AIVIP.AIGN FOR NE\7 PAR POINI'S
Repcrts of Federn-l Reserve :Banks 1 February 29, l..~>:o.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :Nfl t 11
: Stette :Totnl :Non-mGmber :Ratio of non-: No. of brmks !No. uf bankS :No. of nC'n-: rotal No. of
: Bcnks : :Br.n.K. :member:banKs on :m..:;rnber banks ;l.W.ded to'par::;:da.cCl to pnr:m8mber b[.nJ::sNon-rr:em.b<:lr bc.nks
in
: 1/embers :brnh:s :po.r list :on par list to:
list
:liut since :not on p~:..r :in u.istrict
:district:
: tote1 non:o.uring
:Jrm'E ry l,
list
:ru.:::rr.ber bE:.ni~s :Feb. 1320
1)19
:in district
--- -- ---
Federe.l
Reserve
:Bonk
- -
-
-
-
%
-
- - Boston
395
36
431
243
100
24l:S
New York
636
129
765
323
100
323
Phi1r·da 1:,-:.hia:
643
39
662
417
100
118
417
C1sveland.
749
102
851
1~061
100
427
l,Obl
Richmond
544
46
592
5SS
I t1lln t£-.
3S4
Sti
432
453
Chici-gO
1,045
330 :1,375
4,193
- -
231*
100
- -
292
933
1,499
213
1,132
1,595
299
1,839
472
71
543
2.573
120
1,575
110
2, 633
MinnG~Cpolis
637
66
925
2,3o3
153
1,194
570
2,933
City
995
49 :1,044
3,363
100
1,182
764
1,251
100
1,017
156
750
- 1,237 :91154
935
90.1
2
17,77 6
36,2
340
Da11ns
643
SanFrancisc o:
594
-- --To tel
7,917
121
-
*
Decre~.se
FEDERJ'L RESERVE BO.ARD
\.'..AS IING'l'UN
16
-
4,193
St. Louis
Ksnsas
.
3,363
:
103
2,3~6
MARCH 4,1920.
1,251
1,033
- - - !
20,624
-
- - -
-
-
NON- iElVillER 131\NES Nor ON p,m
-
- - - -
Fed.enl
Reserve
Bonk
-
-
-
Va.
- --- -
-
-
LIST
FEBRU.c'\RY
29 1 1920.
Distributed. according to S t<::. tes nnd Federo.l Reser-~·e
- - - - - - - - - ·- - - - - - - - - -
--
s.c.
N.C.
: .Ala.
.
-
Fla.
Go.~
La.
: Misr::,,
f,.-1351 b
i) is t
- -
.J.
:-i c t
- - -
Tenn.
--
- - -
---
Minn • : Ariz.
- -
--
- -
-
-
: Oreg :Wash :Total
Boston
..
New York
:
.
..
Phi l".de l :"hi a
Cleveland.
Richmond
193
Atlanta
...
429
311
933
192
123
507
91
93
126
1132
,chicago
St.Louis
110
110
:
.
570
'
1\flinne.apc 1 i s
570
&nss.s City
Dl:'lla.s
SsnFrencisco
-
--
-
Tot.r-1
FEDER.A L
- -
193
RESER~
WASHINGTON·
M.ARCH 4 1 1920.
429
EO.ARr
--
:
- - - - 311
192
123
----507
91
203
126
570
13
54
13
54
36
103
36
. 2,343
- - - -
225
Ex OPPICIO MllMBilU
DAVID P. HOUSTON
SICR&TARY OF THI TRUSUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLEI OF THI CUII&NCY
W. T. CHAPIIAN, SICRITARY
R.lil. EIIERSON, AsSISTANT SICRITARY
W,JI.IMLAY, FII"-L AAIKT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
W. P.G. HARDING, GOYIINOI
ALBIRT STRAUII, VIC I GOVIINOI
ADOLPH C. IIILLIR
CHABLIS I. HAMLIN
HENRY A. IIOEHLENPAH
WASHINGTON
March 4,1920.
X-1852
Subject:
Recommendatiuns covering changes
in discount rE,tes~
Dear Sir:Since the Board no longer considers recommendations
for ch..-mges in uiscount rates t:1-t Federal Reserve lkmks upon a
stated day e!I.Ch week, und is at all times prepared to con~ider
such recc:mnendDtions in its regular meetings, it is requested
that the pr£>ctice be discontinued of sending to the Board. ea.ch
Wednesday a code te legr~.m subtlli tting your recomDend:ttions regarding discount rrttes in your district.
'Ihe ins true tions rega.rci.ing reports to the :Soard each
Wednesday with respect to discount rates, contained in the
Board's letters of December 14, l9lB, ~nd August 7, 1919, (X-1307,
"Rn.tes of Discount", and X-1545, ".A.ddi tiona1 Code Word for use
in Discount Rate TelegrC'JD.s") are accordingly revoke~, ana. hereafter, the Federal Reserve Banks will advise the Board only \Vben
submitting recommendr~tions for changes in the prevailing discount
rates for tbe review und det0rminntion of tbe Board. \~en
recommendations are forwarded by wire, the code suggested in the
Board 1 s letter of DeceDber 14, 1916 1 (X-1307) should be used ..
Very truly yours,
Secretary.
To Choirmen of all F.R.
B~s.
226
X-1854
STATE'M.ENT FOR THE PRESS
For. irJlr.C;ediate release
March 4,1920.
There is no truth whatever in the statements md suggestions
appearing in certain newspapers to the effect that my resignation
as a member of the Federal Reserve Board was caused or influenced
by differences with my colleagues as to matters of policy ol"
otherwise, or intended as a protest against political, sectional,
or other pressure.
There have been no differences with rtJ.Y col-
leagues and there has been no atteli!Pt by any one to exert any
such pressure on the Board.
I 8Cce:pted the office as a war task and. I resigned because
I felt that the time had come when I might fairly do so.
is the whole story:
from it ..
That
there is nothing sensational to be extracted
227
IV. P. G. HARDING. GOVERNOR
Ex OI'FICIO MEMBEIUI
ALBERT STRAUSS, VICE GOVERNOR
ADOLPH C. MILLER
DAVID F. HOUSTON
CHARLES S. HAMLIN
SECRETARY OF THE TREASURY
CHAJRMAN
HENRY A. MOEHLENPAH
FEDERAL RESERVE BOARD
JOHN SKELTON- WILLIAMS
COMPTROLLER OF THE CURRENCY
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
W. M.lf4LAY, FISCAl. AGENT
WASHINGTON
FEDERAL RESERVE BOARD
X-1356
Dear Sir:It is the J.esire of the Federr,l Reserve Board
that you forward. to it promptly, whatever ru.les anu.
resulations may be promulgated. by the Federr,l Reserve
BanK of which you are Chai n.aan.
The .Board would particuJ.arly like to recej.ve
complete copies of rules and regulations adopted to
,sovem the err.ployees of the Bank.
Very truly yours 7
Secreti.iry..
tetter to Chainnen of all .F .R. Bnnks ..
228
IIX OPPICIO MEMB&M
W. P. G. HARDING, GoVEINOI
ALBERT STRAUSS, VICI GOVIRNOI
ADOLPH C. MILLER
•·
CHARLES S. HAMLIN
DAVID P.&QI!VON
sacaiiA'Wor Taa TRu.suav
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRIHCY
FEDERAL RESERVE BOARD
HENRY A.IIOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SIECRITARY
ADDRESS REP..Y TO
FEDERAL RESERVE BOARD
WASHINGTON
W.II.IIILAY,FIICAL hilt!
March 17, 1920.
X-1861
Dear Sir:.
There have been presented to the Board for payment, bills of the ~erican Railv.ay Express Company amounting to ~123, 750, covering shipments of gold
coin aggregating ~110 9 000 .ooo from the Denver IHnt to tho United States G.Ab-·
treasury at San Francisco, during the months of august 1919 to January 1920,
inclusive, and also bills of DeLanoy&: De.Lanoy, aggregating ~a .. aoo, covering
insurance on such shipments, the total Charge against the Federal Reserve Board
to .l:!'ebruary 1, 1920, being :Wl32,550.
The shipments in question resulted from payments of gold made by the
Treasurer or assistant Treasurers of the United States to the order of certain
Federal Reserve Banks on checks drawn by the Federal Reserve Board on the Treasurer of the United States and paid out Of the Gold Settlement Fund held by the
Treasurer o£ the United States in trust for the Federal Reserve Board, upon receipt by the Board of request from the Reserve Banks ordering such payments to
be made, the expense for which shipments is provided for in Section 16 of the
Federal Reserve .c>.Ct as follows:
"That any expense incurred in shipping gold to or from the Treasury or subtreasuries in order to make such pa~~ents, or as a result of making such payments. Shall be paid by the Federal Reserve Board and asses sed against the Federal Reserve Banks."
Based upon paid-in capit~l and surplus the amount due from each Federal Reserve Bank is as follows:
~ 9, 772.05
Boston
43,380.92
Nev. York
10,675.0~
.fhilade lphia
Cleveland
11 '949.13
6.509.87
Richmond
Atlanta
5,166.70
Chicago
16,914.92
St, Louis
4~928.08
Minneapolis
4,212.23
Kansas City
6,452. 73
4,090.41
Dallas
8'i,497.93
San Francisco
Total
.~132,550.00
.
... ......
229
X-1861
-2-
Please deposit the amount chargeable to your bank in the General
account, Treasurer, U. s., on your books, and issue C/D on form 1, National
Banks, for creJ.it of "Salaries and Expenses, Federal Reserve Board, :Special
Fund, ''Expense of Gold Shipments, sending duplicate C/D to the Federal
Reserve Board.·
By direction of the Federal Reserve Board.
Very truly yours,
Fi seal Agent.
Letter to Chairman
o~
each Federal
Reserve Bank.
230
W. P •. G. HARDING, GOVIINOR
ALBERT STRAUSS, VICI GIOVIINOR
ADOLPH C, MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOU5TON
IICIITARY OP THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THI CURR&HCY
ADDRESS REPLY TO
W. T. CHAPIIAN, SICRITAIY
R. G. EIIERSON,ASSISTAHT SICRITAIY •
W. M.IJILAY, FISCAL AGENT
WASHINGTON
FEDERAL RESERVE BOARD
March 19,1920.
Subject:-
x...1s67
Changes in Nanes or Boundaries of Counties.
Dear Sir:In order that the Board's records, with
respect to Federal Reserve Districts. m~ be correct
qt all times, will you please .~range to advise the
Board of my changes in the names of counties in the
states comprising your district, and also ~y ch~ges
in county lines which in any w~y affect the boundaries
of your district.
There is enclosed a list Showing counties
by states c~mprising your district, according to the
information on record with the Board. Will you tindly
have this list cheCked and return it to the Board, i~
dicating changes, if any, which may be necessary to bring
it U'O to date.
Very truly yours.
Enclosure ..
Assistant Secretary,.'
To Chairmen of all F .R. Banl· s ..
).""
23:1
w.
bO.PICJOIIIIMBIIU
DAYtDtf.~·~~
IICa&TAU 01' THE TIIAIURY
CHAIRIIAN
JOHN SKILTON WILUAIIS
COIIHIOLUI 01' THI CUIIIIICY
FEDERAL RESERVE BOARD
ADDIIIEIIS RIEPLY TO
WASHINGTON
FEPERAL RESERVE<BOARD
r;,1arch
P. •· HARDING, eoVIRNOR
ALBERT STRAUSS, YICI I0¥11101
ADOLPH C. !IlLLER
CHARLES S. HAll LIN
HENRY A.IIOEHLENPAH
W. T. CHAPIIAN, SIC I ITAlY
R. G. EIIERSON,MIIITANT SICRITAU
W.ti,IIILAY, FIICAL AGIIIT
23,1920
The Federal Reserve Board issues her.awi th ita rules and re ....
gulations, of whiGh this circular is ~ p~rt, governing the mrgani7.ation and o~eration of Con,>orations under the prov<isions of
Section 25 {a) of the Federal Reserve ftct.. <
Section 25 of the Fecleral Reserve Act, as a.JI:ended by the Act
of Sente:Lber 7,< 1916, author.i.Zed natirJna~. bam:s having a capital
and surplus of $1,000,000 or more to '!.nvest, under certain circurr·stances, in the stock of bett..ks or ..;oruorations chartered or
incorporated under the laws of the th:J. tad States or of any State
thereof, and principally e11gaged in int?rnaUonal or foreign banking.
P.t ths.t time, h01v"3ver, Cvn.g:esE had not 'l?l'O'•:l.:i'3d any 1:,.;eans for the
Federal incor-po:t·ation of fore5 gn banktng co:::r,orations in whose stock
it expressly authorized natlCrJal ba;;1~rs to invest. In the enactmant
of Section 25 {a) of the Federal Rez;e:.--ve Act, approved. Dece:r.ber 24,
1919 1 Congress has n~N provided a me~ns for the incorporation of
institutions for the nur::oos0 of engaging in international or foreign
,_,anking or other international or foreign financial operations in
whose stock national banl::s, as well as individuals, firms and other
cornorations, may invest.
wrne the pUblic discussions of th8 -ourpose of this law have
emphasized the :fact that it ..
is to pern:it American investors
by rreans of Federal corporations to assitlt in the reconstruction of
Euro:pe at a tim3 when ~ch assistanca is most vitally ne'jded, nsvertheless, the real< purpose is a broader one, that i·s, to provide :fr;r
the establishment of a Fedaral syster:1 of international banking or
financial cor!;>orations operating under Federal sapervision ·~d th powers
sufficiently broad to enable them effectively to compete with sirr.ilar
foreif!!l ins.ti tutions and to afford to the American exoort~r arid importer
at all tirr.es a possible n1eans of financing his foreign business ..
Although it is true that the irrn:adiate effect of the operation of
Corporations under the terms of this section may be grea'tly to aid in the
extension of much ne ded lon~ term credits to Eu:.:-ope, that effect is in
reality onlY one incident to the permanent development of the American
ex:oort IT'arket,
3
Congress being mindful of the unusual powers conferred by thts
section has placed upon the F~deral Reserve Board the responsibility
of making such regulations and restr:Sc·tions as may be :1ecassary to
insure the conservative and pru<dent n.anagerJent of Cocy,)rations char+;ered
under its provisions and to safeguarc as far as 1)0ssible th<S intere~t.s
of the public with whom they may do business. The Federal Reserve
232
X-1868
Board therefore, while realizing the importance of making its
reg~ations sufficiently liberal to enGble Corporations oparating
under them effectively to compete with foreign institutions or
State institutions doing a foreign busin.SJss, has ba.:m impelled
by the ordinary ~rinci~es of banking ~rudence to imnose restrictions which it believes 'JVill ultiw.ataly do much to com:nand
the prestige and public confidence uoon which must depend the
success of every corporation of this character.
It is realized by the Federal Reserve Board that the
organization and operation of these Cornorations involve new
principles and new fields of effort and- that experience may
demonstrate that the regulations promulgated herewith are in some
respects too restrictive and in other respects too liberal. The
Federal Reserve Board, therefore, in order to permit of the development of opsrations under the terms of this section in the
~anner conte~plated by Congress, reserves the ri~ht from time to
time to amend its regulations in such manner as experience and changing
conditions ~ay dictate.
W.P .. G. HARDING,
Gov3rnor.
W. T. CHAP!VJAN,
Secretary.
X-186g
233
REGULATION._____
SERIES OF 1920.
•
BANh.ING CORPOfu~TI01~S.AUTHORIZED TO DO FOREIGN
BPNKING BUSINESS UNDER TITh TJ£RMS OF SECTION 25 (a)
OF THE FEDER1~L RESERVE PCT.
1.
Organization.
Any numb~r of natural p8rsons, not less in any case than
five, ~ay form a Cornoration * under the nrovisions of Section
25 (a) for the purnose of engaging in international or foreign
banl~ing or other international or foreign financial operations
or in barr~in~ or other financial o~erations in a dependency or
insular -ryossession of the United States either directly or
through the agency, o·.vnership o:t control of local institutions
in foreign countries or in such dependencies or in§Ular nossessions.
II.
.:1rticles -of Association.
Any persons desiring to organize a corporation for any of
the purnoses defined in Section 25 (a) shall 0nter into articles
of association (see Federal Reserve Board Form 151 which is
suggested as a satisfactory form of articles of association)
which shall specify in genera1 terms the objects for which the,
Corporation is formed, and may contain any other nrovisions not
inconsistent with law which the Corporation may se ·~ fit to adopt
for the regulation of its business and the conduct of its affairs ...
The articles of association shall be signed b'T each person intending to partici~ate in the organization of the cor-ryoration
and when signed shall be forwarded to the Federal Reserve Board
in whose office they shall be filed..
·
III.
Organization Certificate •
fill of tho persons signing the articles of association
sha~l under their hands ~n!ce an organization certificate (Federhl
Reserve Board Form 152) ·vhich shall state specifically:
.First:
The name assun:ed by the Corporation.
Second: The place or nlaces where its operations are to
be carried on.
-----------------------------------------------------------------------------------*'~enever these regulations refer to a Coruoration spelled 'vith a
ca~ital C, they relate to a cornoration organized under Section 25(a)
Federal Reserve Act.
http://fraser.stlouisfed.org/ of the
Federal Reserve Bank of St. Louis
X-1868
-2-
Third: The place in the United States where its home office
is to be located.
Fourth:
The amc1.mt cf j ·~;; r.;a::;i tcl. fltocl: and the mlillber of
shares jnto which it shall ·co divided.
Fifth: The names ~)nd plc;.;.-::es of' business or residences of
persons executing the Oj~grol.izo.tic·n \}e:r·tifica~e and the number of
shares to which eac:h has subscr5.bed.•
Sixth: The fact that, C1e ~ertificate is made to enable the
persons subscribing the same and all other persons, firms, companies
and corporatior!s who or which may theree.ft'3r suoscribe to or
"Ourchase shares of the ca,J?:l. tal s~ocl: of such Cor"Ooration to avail
themselves of the advantages of \;his section.
The persons sign:i.ng the orgar..izat:i.on certificate shall acl-nOIIITledge the execu·~io:1 there0:f ·uef.:>r~ a judge of some c~;.1rt of
record or notary p:1blic w:lC she..3.J certHy thereto under the seal
of such court or nota:r:y". Therenft3r th'3 c;e:r·!;ificate shall be
fol'IJVarded to the :fi,eder.al Reserve .Bo<::.rd to be filed in its office.
Inasmuch as the name of the·Corporation is subject to the
apoDCval of the Federal Resex-ll'e Boa:rd a pielimina.ry a.pplic.ation,
for that approval should be filed with the FeC.eral Reserve Board
on Federal Reserve Board !!'0-rm 150. This a:np.lJ.cat.i on shon.ld state
merely that the organization of a cc::-l"pol·at,ion. ll.:rtdeT the proposed
'name is contemplated and. may req:u.es:.: t~1e a:IJ1?.rO"Ta.l of that name and
1 ts reservation for a pe:t:HH.i cf ·~hi.:~:ty days. No Coroorati 0:1 wh~.ch
issues its own bonds, debentl..U"e::> o-:;: othe1.· ~:;ouch obligat:i ons w:Ul
be permitted to have the W(JTtl ': 1,;an1:r: as a pr-~.rt of i'ts title. No
Cor-ooration which has ·;he wo..::& 11 l!'ederal n in its title will be
pertci tted also to have the ~JVvrd "bank 11 as a part of its ti t1e, So
far as possible the tit-le cf the Cornoraticn should i!ldi·~ate t'l:le
nature or reason of the business co::::templated and shcnlld in no case
resemble the name of any other cc;rpvra·tion to t~1e extent that it
might result in mis2eading or deGeiving ~he public as ~o its identity~
pur~ose, connections or affiliations.
V.
.Au~hor:i. tv
to Com:nence Business
After the articles of associa.tion and o:..·ganization certificate
have been made and filed with the Fede?al Reserve Boaxd, and after
they have be•=n appx·ov·ed. by the :l:!"'ode~>~·e.l Re~erve Boa-rd a·.::d a. p:.:-eliminary permit to begin business ~.:<D.c been is~ued b;r t}J.e Fed.3J~<i.L
Reserve Board, the association shall beccme ru~.d be a bod.y co:;.~pc:.:-ate
but none of its powers except sueh as are ino:.iCter1t.a:'.. a11d p:t·eliwinary to its organization shall be exercised ,L~til it has been
formally authorized by the Federal :9.eserve Boari by a fi.'laJ. pertoi t
generally to corrmence businessw
234
235
-3-
X-1868
Before the Federal Reserve Board will issue its final F9rmit
to commence business, the president or cashier, together with at
least three of the directors must certify (a) that each director
elected is a citizen of the United States; (b) that a majority
of the shares of stock is owned by citizens of the United States,
by corporations the controlling interest in which is owned by
citizens of the United States, chartered under the laws of the
United States. or by firms or co~anies the controlling interest
in which is 011V11ed by citizens of the Hn:tt.ed States, and (c) that
of the authorized cani tal stocl:: specified in the art.icles of
association at least~25 per centum has be-=n paid in/lash and that
each sh~~eholder has individually naid in in cash at least 25 per
centum Of his stoc~ subscri~tion. Thereafter the cashier shall
certify to the nayment of the remaining installments as and when
each is paid in, in accordance with law.
No c.orporation may be organized under the terms of Section
25 (a) 'Vith a capital stock of less than ~-2,000 1 0'JO. The par
value of each share of stock shall be specified in the articles
of. association and no c- orp0rati on wiU be r.ermi t ted to issue stock
of no par value. If there is more than one class of stock the
name and amount of each class and the o~ligations, rights and
privileges attaching thereto shall be set forth fully in the
articles of association
Each
class of stock shall be so named as to indicate t0 the investor
as nearly as -possible wh,~t is its character and to put him on notice
of ·any · unusual attributes.
VII,
Transfers of Stock
Section 25 (a) provides in nart that:
"A majority of the shar•3s of the capital stock of any
such co~oration shall at all times be h3ld and O'Vn·:;~d by
the citizens of the Unit0d States, by corporations the
controlling interest in which is O''IT!led by citizens of
the United States, chartered under the l~~s of the Unit~d
States or of a State of the United States, or by firms ~
companies, the controllin;s int?rest in which is O''ll!led by
citizens of the Uni t~d States."
In order to insure comnliance at all times with the requiremants of this :orovision after the organization of the Cor11oration,
shares of stock shall be issuable and transferable only on the
bodks of the Corporation unon anproval of its board of directors.
Every annlication for the issue or transfer of stock shall be
accompanied by an affidavit of the person to whom it is desired to
issue or transfer stocl< stating:
X-1868
In the case of an ind.j..viclual:
(a) '~bether he is or is not a ciUzer of the United States and
if a citizen of the United States, w:netner he is a natural barn
citizen or a citizen by naturalization, and if naturalized,
whether he remains for a:'ly ptlrpose in the allegiance of any
foreign sovc:ereign or state; (b) Whether there is or is not any
arrangement under which he is to hold the shares or anv of the
shares which he desires to have issued or transferred to him, in
trust for or in any way under the control of any foreitP'l state
or any foreigner, foreign corporation or any cornoration under
foreign control, and if so, the nature thereof,
In the case of a cornoration:
(a) Whether such cor-ooration is or is not chartered under the
laws of the United States or of a state of the United States.
If it is not, no iUrther declaration is necessary, but if it is,
it rrust also be stated; (b) v;hether the controlling interest in
such corporation is or is not o·v.ned by citizens of the United
States, and whether there is or is not any arrangement under which
guch corporation will hold the shares or any of the shares if
is£ued or transferred to s1;.ch coi"'Joration) in trust for or in any
way under the control of any foreign state or any foreigner or
foreign cor~oration or any co~oration under foreign control, and
if any such arrangement exists, the nature thereof, and {c) Whether
such cor~oration is subject to the control of any foreign state
or foreigner or foreign corooration or coruorations under foreign
control and if so, in what manner and to what extent.
Ip
t~_ase
of a firm or corrrpany:
(a) Whether the controlling interest in such firm or company is or is
not 01m1ed by citizens of the United States and whether there is or is
not any arrangement under which such firm or company will hold the
shares or any of the shares if issued or transferred to such firm or
company in trust for or in any way under the control of any foreign
state or any foreigner or foreign corporation or any corporation
under foreign control and if such arrangement exists, the nature
thereof, and (b) ~~ether such firm or co~any is or is not ~bject
to the control of any foreign state or foreigner or foreign coruor-ation
or corporation under foreign control. and if so, in what manner and to.
what extent.
The Board of directors may in any case before making any
issue ot transfer of stocv, require such further evidence as in
their discretion they may think· necessary in order to deterrLine
whether or not the issue or transfer of the stock would'result in
~ violation of the law.
The Board of directors of the Corporation
shall refuse to issue or transfer any stock the issue or transfer
of which would cause fifty per cent or rr;ore of the total an.ount of
stock issued or outstanding to be held·contrary to the provisions
of the law or these regulations. The decision of the board of
directors in each case shall be final and conclusive and not
236
237
X-1868
•
subject to any question b'7 any person, firm or co:rnoration on
any ground whatsoever~
If at any time by reason of the fact that the holder of any
shares of the cornoration ceases to ~e a citizen of the United
States, or, in the oninion of the board of directors, becomes
suhject to the control of any foreign state or foreigner or
foreign cor~oration or cornoration under foreign control, fifty per
cent or more of the total amount of capital stoct issued or outstanding is held contrary to the nrovisions of the law or these
regulations, the board of directors may, when a?0riseJ of that
fact, forthwith serve on the holder of the shares in question
a notice in writing req_uiring such holder within two months to
transfer such shares to a citizen of the United States, or to
a firm, coiT.I)any or COI'!Joration EfO<)roved by the board of directors
3.S an eligible stocl~holder.
When such notice has been 0.iven
by the board of directors the slr.ares of stocl~ so held shall
cease to confer any \rote until they have been transferred as
required above and if on the expiration of t'vo months after
such notice the shares sh~ll not have 'be :-n so transferred, the
shares sh2ll be forfeited to the Cornoration.
Tne board of directors shall ~;rescrib·3 in the bv-la,rs of
the Cor~oration a~~ro~riate regulations for the regi~tration
of the shares of stock in accordance ''ci th the tGrms of the law
and the regulations. The by-laws must also "')rovide that the
certificates of stock issu8d by the cor-voration shall contain
nrovisions sufficient to ~ut the holder on notice of the t·3rms
of the law and the re@Ulations of the Federal Reserve Board ·
defining the limitations unon the riqhts of transfer.
VIII.
~erations
in the United States
No Cornoration shall carry on any part of its business ln
the United States except such as shall be incidental to its
international or foreign business. Agencies may be established
in the United States ,vith the annroval of the Federal Reserve
Board for specific purposes, but not generally to carry on the
business of the Cor")oration.
IX. ·Investments in the
stocl~
of other cor'Jorations.
It ~s contemplated by the la•v that a Conoration shall
conduct its business abroad either directly or indirectly through the
ownership or control of coruorations and it is accordingly -provided t:'1at a cor-1oration may invest in the stoc>·, or other certificates of o'rmershi 'P, of any other conoration organized
'
238
X-1868
Under the provisions of Section 25 (a) of the
Federal Reserve Act;
(b) Under the la~ of any foreign countrv or a
col oti.y or denentienc y there of;
(c) Under the laws of any St~te, dependency, or
ins1uar nossessi on of the United States.
provided, first, that such other corporation is not engaged in the
general business of bu.ying or selling goods, wares, merchandise,
or com:nodities in the United States; and ~econd, that i t is not
transacting any business in the United States except such as is
incidental to its international or foreign business.
(a)
Except with the a~proval of the Federal Reserve Board, no
Corporation shall invest more than 15 -~er cent of its capital and
sur,.,lus in the stoc~~ of any cor'1Joration engaged in the business of
banl-:ing, or more than 10 per cent of its caT>ital and sur'!'Jlus in the
stock of any other 1-S.nd of <;:OI"T)or-ation.
No Corporation shall nurchase any stock in any other corporation
·under the te~ms of Se~tion 25 (a) or under the laws of
any State, which is in substa:nt~.al competition therewith, or which
l!olds stock or certifbatt.Js of ow.nersh:i:o in cor-norations which are
in substantial corr.netition with the pllr~hasing Cor'JOration. ·This
restriction hDT.vever, does not a:n1Jly to coJ:"'1orations organhed under
foreign laws.
organi~ed
....
239
-7-
•
X.
X-1868
].rapche..;
No Cor-poration shall e·stabl ish any branches except with the
a1)nroval of the Federal Reserva Board and in no cas.s shall any
branch bs established in the United States.
XI.
Issue of Debentur8s, Bon!3-s and Pro1J2:,~-~~"
An'!Jroval of the Federal Reserve Board; No Cornoration shall rr;a1;e
any T;Ublic or private issue of it-s-·deb;n~res, bend~, notes or other
such obligations without the aC)p!'OVal of the Federal Reserve Board, but
this restriction shall not apply to notes issued by the Coruoration in
'f) orr oWing from bari\.rs or bankers for teimorary purnoses not to exce ~d
one vear. The approval of the Federal Reserve Board will be based
solely upon the ri,ght of the Cor-poration to make the issue under the
tGr~s of this regulation and shall not be understood in any ~~ay to im~ly
that the Federal RGserve Board has approved or ~assed upon the rr.eri ts of
such obligations as an investrr.ent. The Federal Reserve Board will consider
the ~Gneral character and scone of the business of the cornoration in
determining the amount-; of debentur8s, bonds, notes or oth~r such
obligations of the Corporation which rray be issued by it •
.-fumlica.tion:
Every application for the a'l"l''roval of any such issue
b'' a Corporation shall be acco:rpanied by (1) a staterr::ent of the condition
of the Cor~oration in such form and as of such date as the Federal
Reserve Board rr,a:y require; (2) a d.o:tailed list of the Gecurities by
which i t is proposed to secure. such issue, statin~ their maturities,
endorsements, guaranties or collateral, if aJ1y, and in general tern;s
the nature of the trapsaction or transactions unon which they w·ara based,
and (3) such other data as the Federal Reserv8 Board may from tirr..? to
tirr.e re<pire.
Advertisements: No circular, letter, or other docm~ent advertising the issue of the obligations of a Cornoration shall state or
contain any reference to the fact that the Federal Reserve Board'has
granted its annroval of the issue to which the advertisement relatas.
This requirerr'~;t will b2 enforced strictly in order that there may be
no possibility of the "OUblic' s misconstruing such a reference to
be an a1Jnroval by the Federal Reserve Board of th"' merits or desirability
of the obligations as an investment .
•
240
'
-6-
XII.
Sale of Foreign Securitias
A~nroyal of th8 Federal ReseryA Board.
No Coruoration shall
offerfor sale any for3ign sec·r.rities with its endorS,3inent or guaranty,
except with the ar>:proval of the Federal R:Jserve Board, but such approval
will be based solely u-oon th~ right of the Corporation to mak"3 such a
sal~ under the terms of this remulatjon and shall not be understood in
any way to imply that the Federal Reserve Board has auproved or nassed
upon the m~rits of such S8C1l:ti ties as an investr.1ent.
'
APDlication. Every application for the a~~oval of such sale
shall be acco.i,panit?d by a staterent of the character and amount of the
securities :proposed to l:le sold. their nndorsem-:mts, gu.arartties or
collateral, if any, and such other data as the Federal Reserve Board
;nay from tbe to time require.
Advertisement§: No circular, letter or ot.her document advertising
the sale of foreign securiti;;js by a Cor1Jorati on with its ;mdorseG,ent
or guaranty shall state or contain ~~y reference to the fact that the
Federal Reserve Board has granted its a~roval of the sale of the securitias
to vvhich the advertiser6ent relates.
VIII.
~ce~tances.
Kinds: Any Corryoration may accent drafts and .ryills of excrange.
dra'm U'DOn it which gr01v out of transactions of the kinds which form the
basis of Gligible bacl~ers acce'Dtances under the t~rms of Section 13 of
the Federal Reserve Act, !Jrovi'o.ed, hOIIVever, that except with the a;:mroval
of tha Federal Reserve Board and subject to such lirni tati ons as it .r.ay
prescribe no Cornoration shall exercise its ~ower to accept Q.rafts or
bills of exchanze if at the tirLe such drafts or ')ills are ~esented for
acceptance it h~s outstanding any deben\uras, bonds. notes~ 01· other
such obligations i ssuGd 'Jy it.
Maturity: No Cornoration shall accept any draft or bill of exchange
with a rcaturi ty in excess of six H,onths except with the a"Yoroval of the
Federal Reserve Board.
241
f
X-1868
Limitations: (1) Indiviuu~l druwers!- No acceptances snall
be r.r.<.·,ce fol:-the account of uny one druvver in on c:unount at,e;ret,o.tino at any time in excess of lo% of the subscribed e~pital ana
.surplus of the Corporation, unless the trnnsaction be fully secured or represents an exportation or importation of commo~ities
and is guaranteed by a bank or bnnker of undt;ul!tecl solvency~
(2) Abgregates: Whenever the ~gre6ate of acceptances outstanding at any time (a) exceaa.s the amount ot the subscribe...~.
capitnl nnd surplus,
of all the ncceptances in excess of the
amount shall be fully secured, or (b) exce ..;u.s twice the e:unount
of the subscribei capital and surplus, all the ncceptances outstanding in excess of such amount shall be fully secured. (The
Corporation snall elect whichever re~uirem~nt (c) or (b) calls for
the smaller runount of secured. acceptances).
50%
Reserves: Ag~,inst all acceptances outst<md.in6 which mature in thirty days or less a reserve of c.t :i.east 15% per centum
shall be maintaine,i, and a,sain~t all acc8ptances outstanJ.ine;
which mature in more than thirty days ~ reserve of at le~st
per·centum shall be maintained. Reserves aGainst acceptances
~1st be in li~uid assets of any or all of the following kinds:
(1} cushj (2} balnrtces with other boru.cs; (3) bunl,:ers acceptances,
nnd (4) such securities as the Board. m~y from time to time pennit.
3%
XIV.
Deposil§_.
1n tht:J Unl,teu. States: No Corporation sh,~ll receive in the
Uni teu. Stc."'o.tes gny ...~.eposi ts except such .:lS .,.,re i.nciu.ental to or
for the purpose of carryine, out transr..ctions ~..n fot'eiJ! countries
or dependencies of the Unitea. States where the 9or;poration has
~stablisheu. a 0 ~ncies, br~nches, or where it operates tnrou~h the
ownership or control of subsiu.iary corporations. Deposits of
this cht~rac ter rnr_ty be made by inu.i viJ.u;:.;.ls, fi:rrus, bro::ucs or other
corporations. whether f orei:;n or a.omes tic) an:..L r:1r.y be time u.eposits or on d8mand.
Outside
the United Stutes:
Outside the United States a
a
....,._
Corporation mo.y receive deposits of ony kind from inc..iviJ.uals,
firms, bWlks or other corporations unless such Corporation hus
any of its bonds 1 debentures 1 or other such obli~r~tions outstmlciing. ~ that event it may receive abroud only such ueposits as
are pennitted in the United States. (See above)
mhx:=::::e::.~::x:::z:eza::::::t:.:::;....,.Z~
Reserves•
A.~c.ibst
all aeposits receiVt;;CJ. in the UniteU.
This
reserve mE•Y consist of cash in vault, a balnnce vri th the Fecieral
reserve bf:lllk of the uistric t in which the head office of the Corporation is located, or a balonce with any member bank. Against
States~-;;~;e of not less than 13% must be maintained.
242
'
-10-
X-1868
all deposits received abroad the Corporation shall maintain
such reserves as may be required by local laws and by the dictates
of sound business judgment and banking principles.
XV.
G?neraJ. Limi_tations and Restrictions
Liabilities of one Borrower:
Ths total liabilities to a
firm or corporation for money
borrowed, including in the liabilitiGs of a company or firm the
liabilities of _the several members thereof, shall at no time
exce'2d 10 per centum of the amount of its paid-in capital and
surplus, except with the a-o-oroval of the Federal Reserve Board,
-provided, however, that th~-discount of bills of exchange drawn
in good faith against actually· existing values and the disc.ount
of comrrercial or business paper actually owned bv ths person
negotiating the same shall not be considered as monov borrowed
'Vi thin the n:eanin~? of this paragraph.
The liability of a customer
on acr:ount of an acce-ptance made by the Corporation for his account
is not a liability for money borrowed within the rr:eanin~ of this paragraph unless and until he fails to place the Corooration in funds
to cover the payment of the acce-otance at maturity or unless the
Corporation itself holds the acceptance.
Cor-oor:a:tion-of
any persorl,corn:iciiw,
Agfregate Liabjljti~~-~f the Cornoration:
The ag~egate of
the Coryoration 1 s liabilities outstanding on account of acce!)tances,
av~rage de-posits dorr:estic and foreign, d.eb?ntu.::.·es, t,onds, notesJ
guaranties, endorsements and other such obligations shall not exceed
at any one tirr:e ten times the amount of the Corporation's subscribed
capital and surplus except with the auproval of the Federal Reserve
Board. In determining the amount of the liabilities within the
rr:eaning of this paragraph, endorsements of bills of exchange having
not ·more than six months to run, drawn and accepted by others than
tr.e Corporation, shall not be included.
''
X-lZ6i5
-11-
Operations Abroad: Except as other••lise provided in the law and
these re'nll.atfons~aCorporation nay sxercise abroad not only the
powers specifically set forth in the law but also such incidental
powers as ;;;a.y be usual in the deterrr.ina.~ion of ~'he Federal Reserve
Board in connection with tha t1·ansac';;ion o.~ the business of bar..::ine:;
or other financial operations in the CO'.ll".t:des in which i t shall
transact business. In the exercise o:· any nf these powers abroad a
Corporation :::ust be guided by the laws of the country in which it is
operating and by sou.."l.d b'.lsiness judF,!!Dent and bankinr; principles.
The directors, officers or en.pl.oye·~s of a Cor'l')oration shall exercise
t'rair ri;:rhts and perform their d1.1tie3 a.s directors, officers, or employees with due regard to both the letter an1 th8 s~irit of the law
and these re~lations. F<)r the p-v.rpose of thase regul·auons the
Corooration sball, of course; be reST;crns:i.ble for all acts of orr,ission
or corn;·~ission of any of its dire~tots~ officers, emnlovees or representatives in the conduct df thei!' official duties. The character
of the mana,t;eerrent of a Cof"!:)oration a:1d ~- ts F.eneral attitude towards
the purnosg and s~irit of thA law and t~ese reP.Ulations will be
considered by the Federal R;serve Board in actin;: u·oon M.Y' apnlication
made under the terrr.s of these :cef!tllations.
XVII.
1!!3J19r.J:;s
and Exarr.inati ons
Re~orts.
Each Cornorati on shall •rake at le::lst ~>0'0 renorts an.:w~lly
to the Federal Reserve Board at such times and in such forrr. as it may
require.
Examinations. Each Cornoration shall be examinsd at least once a
year by examiners appointed bv the Fec.eral Reserve "Board. The cost of
exarr.inations shall be paid by the Co::..·:o·n·ation examined.
These regulations are subject to amendment by tl:ce Federal Reserve
Board from time to time, provided, however·, that no such amendn:ent shall
prejudice obligations undert.?l:en in good faith under regulations in
effect at the time they were assumed •
..
244
W. P. G. HARDING, GDVIRIIOI
ALBERT STIIAUSS, YICI GOVIIROR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. IIOEHLENPAH
IIX 0PPICIO MEMIIIIIS
114YID F. "OUSTON
IICL}i;; dTHit TRIAIUIY
CHAIRIIAII
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
GQIIPTRDU.II DP TH& CiiiiiNCT
ADDRESS REPLY TO
WASHINGTON
FIDERA'- RESERVE BOARD
March
Subject:
2~,
1920.
W. T. CHAPMAN, SICRITAIY
R. G. EMERSON, AIIIITAHT SICRITAIIY
W.M.IMLAY, FISCAL AGINT
X-1873
Topics for Discussion at Conference
of Governors an April 7, 1920.
Dear Sir:There is enclosed a list of topics which will
be presented for discussion at the conference on April
7th. This list embraces topics which have been suqgested
by several of the Governors as well as some which have
been offered by members of the FeJ.e:ral Peserve Board• and
it is believed that it is ~~fficiontly c0opr.ehensive to
absorb all the time available for the coclerez:.ce. The
list, however, is not a closed one, and if there are any
other topics which any Govern·)r would like to submit,
they can be considered.
Very truly yours,
Governor.
Enclosure.
To Governors of all F .R. Banks.
245
X-187} a
TOPICS FOR DISCUSSION AT GOVEllNORS' CONF.E:RENCE
WEDNESDAY, APRIL 7, 1920.
'I:
CREDIT CONTROL:
(1)
Effect of recent rate increases u~on liquidation.
(2}
In view of pending amendrr.ents to the Federal Reserve
Act authorizing progressive rates for large borrowings what should be the basis of the normal line?
(a) Capital and surplus of member bank ..
(b) Total resources of member bank ..
(c) De~osits of roember bank.
{d) Reserve balance of member bank.
(e) Loan capacity of Federal Reserve Bank prorated among
the member banks in "9roportion to the reserve
balance of each.
(J)
Should basis of normal line be: uniform in all districts,
and at ..Ul seasons of the year?
·
(4)
What scales should be used
( 5)
What steps should be taken to control the absorption in the
System of an excessive amount of paper made by borrowers
who do a nationwide business?
(6)
Is it practicable to discriminate effectively against nonessential business in favor of .essential business?
~
applying the pr'()gi"essive rate?
(7) What methods does· your bank en:roloy to inform and satisfy
itself of the uses made. by member banks of credit
facilities obtained from their Federal Reserve Bank more particularly the uses made for speCQlative purposes as c.ontrasted w1 th those for productive purposes.
( 7a) What steps have y01.1 taken to inform yourselves as to abuse
of credit in hoarding commodities? (A written statement
in res~anse to this ~estion is desired.)
ADVISABILITY OF INVOLVING SYSTEM IN LESS PUBLICITY WITH A VIEW
TO REACHING MORE BEADILY A 'PEACE TIME .AND NORMAL BASIS.
(1)
SUggestions as to what activities produc.e undesirable
pablieity ~d should therefore be modified or eliminated.
246
Y-1873 a
...2-
·II L
CLEARING
,~ND
COLLECTION SYST.B:M •
. (1)
In view of the fact that no system involving deferred
· avai.labili ty is strictly a 3'ar sys tern, shonld not
in all discussions an~l. uublic;atio:as the term '~"f'c-,r
Collection System 11 be ch.::n.g;d to 11 FedergJ Reserve
Clearing and CoJ.lectior Svs·~em 11 or to some name
more exactly descriptive than the one ncvv in use?
(2)
Assuming that the provisions of the Federal Reserve
.Act with reference to exchange charges will remain
uncha:nged:
.
(a) What will be the most effective method of continuing the catrtodgn for par points?
(b) What will b3 the best procedure to me ot rmd prevent
the recurrance of, the charg0s af coercion made
by non~·mewber ban"k s?
now
(c) Should the B2J:1.l~s jn1,;;.blish a non•·par list instead of
c. par list?
(3)
Board's Int~r-district Time Sched:q.le.
(a) Should it oe puolished in the Bulleti.n?
(b) Correc ti ·)n af errors.
(c) Relation to intra-district schedules.
(4)
Direct routing of collection items by member ba."ll\s in one
Feder::U Reserve dis t~:ict .to rr.ember and non-rri&mber banks
in another Peders.l Rese:rYe district, for w:.i.re transfer
of proceeds to sending bE.!Illr 1 s Federal Raserve bank.
(a) Are the facilities afforded being abused by nonmerrber banlrs?
( 5)
Routing of checks through intermediary banldng centers in-stead of sending direct to dr~~ee batik.
{a) Could not the rvires be used to expedite such cJ.e~rJngr?
IV.
SCHEDULE OF C&mGES .ALLOWED TO BE MADE BY ME.!JBER BANKS AGAINST TP"..ElR
CUSTOMERS UPON OUT--OF-TO:vN CHECKS WHICH .,;1RE CLEABE:D 'l'illtOUGH
THE FEDER..-lL RESERVE SYSTEM.
(1)
Re-oort of progress ;na.de in preparation of this sched.ule.
(2) . Is the :olan suggested by the Board, Ci:.~cular le·tter X-184Lf r
February 26, 1920, fair to the rne:r:oer banks?
•
247
-3 ...
V.
BANKERS 1 ACCEPTANCES:
\
Are
(2)
Should an import or export bill bear specific details
of the transaction upon its face, inclu'-l.ing the name
of the ship, as is th~ custom in certain foreign
countries?
(3)
Warehc·use acceptances - how to prevent their abuse
without destroying their usefulness?
( 4)
ShoulO. open market purchases of bankers ' acceptances
by the Federal Reserve :Banks be curtailed at this
more of such acceptances
time with a view to tak:t.rlg
for rediscount 7
(5)
Trade Acceptances:
What is being done to encourage tneir use?
(b)
Requirements, credit conditions, etc. incident
to trade acceptances offere~ for rediscount?
{1)
Should preferential rates on Government secureu paper
be discontinued 7
(2)
Shall there be a O.ifferential rate :i.n favor of, or
preference shown, paper secured by receipts of warehouses. operated under the Fecteral WarehQuse .Act or
complying with the tenns of that .Act in essential
particulars 1
BUILDING OPERATIONS:
(l)
VIII.
(a)
RATES:
'
VII.
b~ers 1 acceptances bei~ createu for purposes
not contemplated by the Act and are accepting
banks abusing the privilege?
{l)
j,.
VL
, X-1873 a.
Present situation?
DESIRABILITY OF SEEKING FURTHER AMENDMENTS TO THE ACT:
(1)
Federal Reserve Board 1s attituae as to payment of
interest upon reserve bal~ces.
(2)
Suggestion that amendment be sought allowing the
use of the 10% super-surplus funcl. in the payment
of extra dividends.
i
X-lb7} a
f.
IX.
... 4-
ORGANIZATION DETAILS:"
( l)
How many of the banks have organized M:lmber l3ank6
Relations Departments?
(2)
Have the l3oara.s of Directors placea these Qepartments
und.er the authoi-ity of the Governor or the Feueral
Reserve .Agent, or both?
(3)
What steps have been taken, or are in contemplation,
looking to the satisfactory adjustment of all
aifferences which arise between the Federal Reserve
Bank and. the member banks 7
(4)
Is there any systematic plan for using clerks,
temporaril1 idle, in other than their own d.epartments7
'
(5) Advisability of making efforts to secure the use of
checks of standard size by the Feueral Reserve and
member banks.
X.
RESERVE SUPPLY OF CURRENCY:
(1)
In view of present insufficient supplies uf new
currency, is it .iesirable that all Fea.eral Reserve
Banks and branches ari.opt a uniform policy of paying
out new anu. of redeeming unfit currency?
248
249
1!X OI'PICIO MIIMSIEM
W. P. G. HARDING, GOVKRNOR
ALBERT STRAUSS, YICI GOVIIIOR
ADOLPH C. IIJLLER
CHARLES S. HAIILIN
HENRY A. IIOEHLENPAH
.DAVID F. HOUSTON
SICRKTUY OF THI TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURR&HCY
FEDERAL RESERVE BOARD
W. T. CHAPIIAN. SECRETARY
R. G. EIIERSON. AISISTAMT SECRITAIY
ADDRESS REPL.Y TO
FE.DER~L
RESERVE
x:i874
WASHINGTON
BO~RD
Y. FISCAL AlENT
March
~OBJECT~
27. 1920.
Sc-hedule 1:4 Maximum Charges Allowed..
Dear Sit:
Referrirtg to the Board 1 s letter (X-1844} dated
February 26, 1920, I enalose a copy of the schedule sub-
'
mitted by the Federal Reserve Bank of Richmond in compliance
witb the terms of that circular letter. Inasn».ch as some of
the Federal Reserve :Ba,nks have as.l~ed for further details a&to the requirements of the Boa=d in this matter, this sehedple
is sent to you. t• serve as a model in the preparation of yo-ur
own. It is believed that the tra.n!mission of this typical
schedule at this time will assist in sec~ing uniformity and
will prevent delays arising fram different interpretations
which may exist as to the form of schedule desire~
lt will be noted that in the
e~se
of !ichmond
it was not fOW!d neceua:ry to split $tates, as it mrq
b~
in other districts.
Exe~utive Secreta~.
Enclesv-e.
F.EDEm
~
250
JO.ARD
STATEMENT FoR THE 'Hl.ESS..
For relea~.e ~n m?rJ1_~ :papers,
Thu.rM-w, .A1?ril l, 1920.
.I
March 29, 1920.
The following is a review Of general business and
financial conditions throughout the several FederP~
Reserve Districts during the month of M.s.rch, as
contained in the forthcoming issue of the Federal
Reserve Bulletin.
Business and financial developments during the month of March h.<>:Ve shovm
some confusion 2.nd lack of uniformity which indicates that the cot!ntry is now
passing through a transition
stage~
There has
be~
a
h~sitation,
if not an
actual recessioh, of commodity prices, a sligh~ but nbti~eable improvement in
the bank reserv·:"! ratio, some :relief of the barrier-s to transportation and distribution which existed during the winter months, and at the same time there
h.<.1.s
a.ppe~U"ed
to be some alteration in the :ooint of view of the cOIIlii!Ullity with
respect to extravagance :md reckless purchasing.
view is by no means universal, but
Fed~ral
This alt3ration in point of
Reserve agents
siderable difference of attitude on the part of the
r~ort
~blic.
The change, whatever
it may be in character cmd scope, is, however, very conservative
and there is no
very con-
c~
moderate
appreciable letting down in the volume of legitim.:::.te business..;
The outloOk for the spring season, both industrially and agriculturally, is
excellent, the chief modifying factors in the situation being inadequacy of
labor supply "nd shortage of various kinds of ma.teri'?J.s as well as of borriawin.g
facilities of banks.
The present character of the outlook is rmmmarhed by .£ederal Reserve
..agents as follow·s:
In district No .. 1 (Boston) "industrial conditions • • . h"-~.ve undergone no
marked change since , • • a month ago.
Evidences of deflation which were so
numerou.s .~ pronQUlleed in February • • - a:re not· so c OnSJ?icuou.s in the SUX"face
-2-
X-1876
25:1
indications of March", but "nothing has occurred to indicate that the influences referred to have ceased to operate. 11
A factor of great importance
in this matter is the "backing UJ:'> on this side of the Atlantic of .A."Derican
goods manufactured_ for expor.t."
It is -predicted that the "drop in prices
which is admittedly inevitable, will set in before another winter season
and that it Will become only grad:ually perceptible, tt
In district No ... 2 _(New York)
11
the activity of the stock market, together
with. the ]:'>respective den:and fer funds for tax :r;>a;vments ·was ~reflected in a rise
in call money rates Friday, March
i2•
to 15 per cent, but following the pa:~
rcent of taxes. rates eased off graduaily to 7 and 6 per cent. 11 . Time loans,
have
which · ~·: hMn practically unobtainable at from 9~ to 10 per· cent on all-ind\tstrial and 8 to
9 per cent on mixed collateral, with lenders in most cases
derranding payment- of rra.turing obligations, have lately been renewed more
freely at 8 ~r cent on mixed collateral and 8} ~et tent on all-in~ustrial,
but little new· money is. forthcoming.
In dis.trict .No. 3 (PhiladelnhieJ "trade has been fairly brisk and somewhat
ahead of last year in so far as the volume of '~Jusiness in dollars is concerned."
Nevertheless, it is to be doubted whether the "actual bUlk of the sales is· as
large".
Moreover, "objection is raised to :price inereases 11 and there is
further "a :partial shifting in demand from lu-rury
goods'~.
Prices d.o not yet
show signs of a decl.ine, however, and little hope i-s held out by retailers -in
that regard until the· fall season is past.
The mos<t noteworthy feature is· the
increasing indisposi-tion of ··the public to pay the exorbitant 'PI'ices for;·eonsumable goods.
In district No_•. 4 .(Clevel9,Ild) i t is found that "conditions are rapidly
changing" and that there is ..possibility of curtailed- t-nroduction" which calls
for
11
r>roper rerr:edial
measures-~.
In d..is_trict No .. 5 (Richmond} domestic business is good., but "en.>orters
252
-3renort marked depression".
X-18.76
Reckless buying by the :public continues and there
is no general lowering of prices, but "there is an undercurrent of uneasiness
and uncertainty in commercial circles 11 •
BuyL1g -'-•• alm:>st entirely for immediate
needs and not for future delivery.
In district No. 6 (Atlanta) there has been nc r.oatet·ial change in the
general economic situation, b·u.t sales show a large increase in value, although
pr~bably
not in
amoWJ.t~
While there has 1Juen some d:i.s:lJosition to place fall
orders, this is being discouraged b,eca:J.se of a belief that prices will decline,
and this fact tends to produce some conservatism.
In district No~ 7 (Chicago) extravagance continu.es unabated and is
tending to stimulate inflation by swell:i.ng profits to the extent that manufacturers of luxuries are
un~tw:·bed
by
ac.var.ce~
in discount rates, while
the latter bear heavily u~on those who are working on a narrow margin.
are accordingly conflicting re'tlol·ts concerning the general
There
outlook~
In district No. 8 (St.Louis) there is an increasing "snirit of conservatism" and business men
11
are '9roceeding with greater caution,
11
while the "9Ublic
at large is "making 1 ts purchases with a greater rr.easure of discretion".
is believed· that the "peak of high prices has been passed 11 •
there is an undertone of confidence in the firmness of the
It
Nevertheless
~esent
industrial
situc.tion.
In district No. 9 (Minneapolis), while ·che~·e is great difficulty in getting
goods, there is expected to be heavy demand for fa::-m machinery and there is
already unprecedented demand in mechanical equipment for farms.
The credit
situation is satisfactory.
In district No. 10 (Kansas City) spring trading is vigorously und~r
way and there is an effort to increase
ou~Jput
in the belief that that is
"after all, the real solution of the abno1·maJ.ly high :orices 11 •
There is a
quickening of ind1.1strial energy, and business is strong and vigore-u-s; but in the
tenth dis triet,
as elsevvhere, SJ;>eculative buying has l)e.:m largely elimina.teci,
·.:.·.
-4prices are slightly easier and there is
irn~ediate
253
X-1876
~~
increasing tendency to buy for
wants rather than for future delivery.
In district No. ll(DaJ.las; there has been a "slight recession from ~'~.e
high wave of corurercial and industrial activity" and this has been accompanied
by a ''moderate reaction in the public and retail buying movement", while in
e .'.lilibrium. 11
the field of '1'Jrices there is a "more pronounced tendency towards an ·
·•
Luxury sales are tending to fall off and both merchants and the public are disinclined to increase their commitments :pending further developments•
In district No. 12 (San Francisco) the industrial outloOk is p~osperous
but both retail and wholesale trades re~ort decreases during rebruary as com pared 'Vith January, these being attributed to seasonal slackening of business.
Many stucks of goods are depleted on the Pacific Coast and it is believed that
great activity will be necessary in order to restore them.
The
0'1'Jening of the s-pring season has given an impetus to the agricultural
side of activity and is rendering the farmers• problem for the coming season
considerably more definite than heretofore.
has son:ewhat retarded the
prep~ration
In the southern states cold weather
for the new crop season and in the Atlanta
district has impaired the early fruit and vegetable outlook.
the value of farm
20%
to
25%,
lan~s
An increase in
throughout the district during 1919 is estimated at
bringing theffi un to about double the value of five years ago.
Prices
of agricultural products, especially fruits and cotton, are very high, a fact
mal~es
which partly
up for shortened output due to unfavorable weather.
Pastur-
age is in relatively bad condition, being only about 79% as cplY;oared 1111ith
last year.
In th<3 northern part of the district the condition
cr<ms is unsatisfactory.
85%
of• small grain
In th9 11th district (Dallas) the condition of winter
wheat was 75% as compared with the corresuonding date last year, and a decrease
of 900,000 acres as compared 1Mith 1919 is re'1'Jorted.
Preparations for the cotton
crou are well und2r way, an early start havin.g been made t
The
cotton
crop will be 15% larger than in 1919.
J
avoid insect darrage.
254
X-1876
-5··
The
moverrent of the old cot ton crop out of the disti ict is TJroceeding at a normal
rate with the exc..e:otion of the :!.n:ferior graC.es which are moving sJ. owly.
the 12th dis·~ri~t
In
(Sa:nF~ar..-~J.s~o) there ),s a material irrrorovem:mt predicted
for agTicul t·u.ral output in 1920; al tb::Yw.gh 1'aiYlfall is still thirty to sixt;y
ner cent below normal.
Rice, bean,
~id m1gar
best
a~reage
is being reduced,
and shortage of water is likely to cut down the spring acreage in general.
fall wheat cron will ave:;:·age a'vc·u~ 70% of noriral.
In the irrigated sections of
Idaho, Nevada and Utah. the yield will be only about 80% of normaL
conditions, however, are favc:rablc thx·cughout the district.
soil conditions are very
:pr~misjng
Range
In the middle west
fJr the reason that the ...;winter, al. thOU;gh
cold, showed less flue: IJ.ation in temperature than usual.
has suffered deterioration.
The
The wheat crop 7 however,
An impor.tant increase inproduct per acre is re11orted.
and is attx·ibuted in :part to the high nrices of land.
.An increase in the pros-
pective acreage of corn is noted bnt high wages for farm labor militate strongly
against the very great extension of operations.
In the 8th district (St.Louis)
the agricultural outlcot is good with the excention of winter wheat which has
been injured or killed in some
sections by alternate freezing and thawing.
Fann v>ork is behind. ·?.A good deal of acreage plovv-ed for wheat last fall will be
r- 1a."" t. ed.
to corn. Preparation for the ~lanting of the cotton crop has been
delayed by unfavorable weather.
last year.
The acreage of oats will be about the same as
LO'IIT -prices for tobacco have caused complaint but a larger acreage
is nevertheless being -olanned..
District No. 9 (Minneapolis) re·norts that the
spring agricultural outlook is favorable.
The condition o:f the soil and the
water conditions of the d:i.strict are regarded as -oartic1..uarly enco"'l1'aging, looking
to a good cro-p#
The states of Minnes:)ta, Nt):rth Dal<oca,
South Dakota and Montana,
producing the bulk of northwestern wheat, u..Yl.0.0.Jbted.ly will show a decrease in
the wheat acreage this year due to the high -price of farm labor, which as .re"'Q..'t.e4
from
65 local -points has advanced 73.4 per cent since 1914, and due also tti the
'
~
,....
"'" '
....
-6 ..
s<Oarcity of good :seed. wheat.
crop production
~fforts
255
X-1876
The natural letting down after the extr,a.o.rdinarY
A nrobable decrease
during the war is also a factor.
of at least ten per cent w-ill reduce the acreage this year to an-proximately
15,000,000 acres, which on the basis of average production, indicates a loss
of from 20,000,000 to 22,000,000 bushels on the 1920 cro:p.
-orospects in this district arc fair to gooJ.
Winter wheat
Some wheat in Montanawas wi11te-:r
killed, but the arr1~lt is hot greater thah the normal loss.
acreage, hcwever~ is somewhat less thai1 a year ago.
The wint~r ~heat
Some shrinkage may be
eryected in other grain crops, but it is too early to estimate what this will
amount to.
There is every l)ros:pcct, hbwever, that the acreag~ loss will be:
offset by better crops thah have been harvested for the last two years, due to
improved soil c ondi ti ons and bet t~r moi s t:\.rrc~
In the tenth district (Karts(3.S City) mild weather has afft'rded an excellent
.
basis for plowing and :preparation for spring planting and farm work is well
under way.
Sporadic
r~orts
of a pessimi3tic and discouraging nature have
armeared, but the statements of the secretaries of agricultur~ througho-u.t the
district are more encouraging.
Wheat conditions are said to be generally
01Jtimistic, especially ac to winter wheat.
adjacent di~;trict was about
with
1918.
91%
The -olanting in Colorado and the
for winter wheat and winter rye as compared
Winter wheat conditions in the sarr,e region are about
90%
of normal ..
In Missouri wheat conditions are p13or, and are exce-pt.ionally low in Oklah~ma,
the per cent there being tentatively estimated at
55%.
Planting for the c"tton
crcp is well under way and the acreage in Oklahoma, Tlllissouri and New
seems to
sh~v
an increase.
Corn acreage also shews an increase
district, .especially in Oklahoma.
is anti,;.j::ps:Led.
On
def'L.1.ite forecasts..
we·~ ~;;eo.son
thr~~h~t
the
In be,:;t g:!:'Owing a large inc.rease in acreage
the eastern seaboard the ~:;eas:on is still too early to permit
In the fifth district (R5.chmond) cold weather and a lonv.
have made tr:1ck crops late and poor, and farming operati .ns are two
or three weeks late.
Mexic~
IHgh prices for products and great shortage of la.bcr are
256
encouraging intensive cul tiva.tion and active demand for fertilizing.
Tobacco
prices are lower, due to shortened exports, bu.t the great success of the
tobacco crop of 1919 leads to the forecast of a gred.tl;y- i:1creased acreage in 1920 •
•
257
X1676.
Fanm and range livestock conditions are reforted decidedly good.
In district No. 10 (Kansas City) it is found that farm and range livestock
fared well during January and February.
winter helped pasturage conditions •
No.
i2
The mild. weathe:.r of the late
.A similar report cumes iron district
(San Francisco) where the open winter has prevented much loss of
livestock ana has asnured sufficient feed. for the summer season.
In the
11th district (Dallas) grass-fattened steers have begu~ arriving at the
~entral
markets, but the movement is still slow.
Range conditions have been
unusually good and the market was better supplied with oni~als during February
than a year ago, except in the case of hogs whic;l sht:Nvecl a decline.
Receipts
of ca.t'!;le at fifteen primary markets dur~.ng Febrl.l{l.ry are reported. as l,06E>,092
.
·
head, corresponding to an index number of ll 4 , as compared Wlth
1,:-u.-~.~.\tS~
.
•
, .
head during the preceding month and 1,096)113 head during the corresponding
month in 1919, the respective index numbers being 114, 139, anu 116.
Receipts
of sheep during February were 94·3;116 head as compared with 774.661 head. a
year earlier and 1,035,591 head during January, 1920, the respective index
numbers being 74, 6l, ana.
16. Receipts of hogs show a change from 3.912,44;:,
head during January 1920, to 2,44o,l54 head in February, corresponding to
index numbers of 178 and 119, respectively.
Receipts in February, 1919,
amounted to 3,451,894, the index nvmbeF being 166_
(Dallas) it is r,~portea that at the Fort Worth yards
From dlstrict No. 11
8
falling off of about
16% in receipts of cattle occurred in February, 1920, as compared w~tn
Janu2ry, wi tn c: sblr:}ewhc.t cornosponciing rouuc tion in :he case of calves and
hogs, while sheep increased about one-third.
In the; tenth :1is crict (Kansas
City) the movel'ilent of livestock to the six princi~.;al marKets for February
·totalled 25,643 cars, as conpared with 37,006 cars in Jc:nuary, anc.L 31,422 cars
258
-9in February 1919.
Receipts of cattle were 31% leas than in January and
13% below February a year ago.
January.
X-1876
Recei-pts of ~alves showed. a loss of
Arrivals of hogs at the markets in February we-re 38% less than
in Ja~uary and 4o% less than in February, 1919.
.heavy
, being about the same as in January and
ago.
19% frorrJ
Receints of sheep were
35% larger than a yea:r
In the 7th district (Chicago) for the four weeks ending March 13,
recei:ots of cattle were 208,881., as corr:pared with 222,731 a year ago,
'IIThile receipts of hogs were 616,104, as compared with 785,4o9 a year ago.
Calves and. sheep, however, showed some increase.
As against the light
receipts it was noted that the month of February showed a declin~ of prices
for all grades of cattle, although there was irrmrovement in the first week•
in March.
Hog prices which at the beginning of February were $14.85 to
$15.15 on bulk sales, were forced down about a dollar at the end of the
month 1 but during the first week of March bulk sales were back to very
nearly the
~ening
figure for February.
Sheep and lambs were slightly
higher than a year ago.
In flour willing district No. 10 (Kansas City) re~orts
a very
~atisfactory
month for February.
At Kansas City,
indicate
o~aha,
and 88
interior mills in Nebraska, Missouri, Oklahoma, and Kansas, the total outy:m.t
for February was
1,535,078
barrels, as against
955,333
barrels in February
1919 1 but the output was the smallest for thre<:1 months past.
Orders
ap-p~ared
to fall off during the month, and February reports showed declines in.
the price of all
gra~es of flour, amounting to about one dollar a barrel~
Western flour
millers are to some extent recovering their forelgn trade.
259
-10-
The iron and steel l-x:.clustry has snvwn a conUnuation of' its gre£-t
prosperity, teing booKed up far aheacl.
and
The; clew:cnc. for pie; iron is very strong
prices have ~vanced, but :i..t is repurterl fl·om dl:istrict Nv. 3 (PJ.1il~elphia)
that there iS great difficulty in securing
aue~uate
co:k~e,
finD. it nrru tv obtain deliveries of limestone,
Produce;.~s
well as to ship the finished product.
taKing new orders and are opposing
th~
transpurtat~un.
anci other waterlals, as
o.re beginning to hesitate in
new e;uvance in prices. The demand for
steel castings is increasing and prices are rising.
Plants engnged ln the
production of bars, shaps•s, structural steel, etc. are slightly
a.l the. ugh operations are
ward.
In district No.
erated a.t ·full
~arger
6
than a year ago.
u~~ow
capacity
Prices are ro,ving slightly up-
(Atl8~ta) it is expected thot the worKs will be op-
ca'Pac;ity
·
. · ·
Tor a. long time to come.
Business l.S
pr~Jnuunceu
excellent ana. the outlook ior continued activity very satisfactory.
conaitions are gooQ.
Producers
Fig iron is selling arounu ~42.00 a ton.
in all districts aave increaseQ tnonnou~ly.
particul.arly true in harciware lines.
Labor
Labor costs
This is reported as being
In the N.~rth Nb.chigan ana North Wisconsin
iron E>ining region conditions are at the usual seasonal standstill, awaiting
the opening of lake transportation.
In -J.istrict No. 4 (Cleveland) cun-
serva.tism on the buying sic.i.e has grown rather more pronounced in iron and
steel.
The
mar~et
has assumed a more
coffipos~d
and
some of the wide fluctuations in prices arc; tenuing
Fun:lam~ntally,
t..;
appearance anu
be levelleci off.
however, the situe.tion is as strong as ever anu. tLlere l.S an
unCJ.erlying sl!ortage vf tonnage.
nating factor.
s~abi~i6eu
Car an:.t. fuel shurtage:s lwve been a predomi-
In tl1e Pittsburgh U.istrict some corr.panie:;; nave been accumulatin:
260
Xl676
-11..,.
finis.!led pruo..ur:ts at a rate of about 2-5~ ofweir cutput.
large shortage of sheet and tin plate.
really amounts to a cungesti0n.
Tnere is a
In so;ne pl&ces this accumulation
rhe railroao..s have been buyin 6 neevily
of eq_v.ipment and it is estimated that at one time within the pas"L few we0£-.S
orcl.ers for 30,000 ear:;; were un(ier negotiA-tion.
The steel indus tr J is o.is-
bu~rers
posed to develop the railroads .
.Automobile
nut snuwn the general caution
other buyers but nave Luught wherever they
,)f
could and have paid any :price that was as]f.ed.
of iron on1 SGeel nave
The structurtll steel awaru.s
I
in February were the largest since June, l9l3, totalling 171,000 tOnb, or
95% of capacity.
buying
The pig iron n:e.rket :nas entered e periou. of quieter• ·
·
The situation npparently is a nrtural u.evelOJlm<?nt arisine:; both frorrj the soJ.ci.-up
condition of the furances anu the well covered re ·1uir2ments for montns aheao.
of many
consw.1cr~.
Statistics compilec.L as of Niarch l show that the merchant
furnaces of the country aad. on hanrL unfilleJ. orG.ers approxir..1ating 5,000,000
tons, ano. that
shipment~aud
excess of toO,OOO ton&,
protuction during February were slightly in
The mA.rketa:Dle pig iron capacity of t.tle country
apparently therefore is booked full at the present rate uf ou·cput to Nuvereber
l.
Wllile there :..ave been svr:.e irregularities in plg iron
p•~ices
as cun;pareo.
with some of the max.imum figures recently prevailing, these J:.c:ve been of a
local or special p.harac ter and there has been nothing in
~hem
to su!6,ses t a
weakening of the market.
Ar:long the non-fsrrcuo metals, zinc ano. 1eac.L have been heavily sh:t:p:ped
from
~istrict
No. 10
(~sas
City), but the price of zinc
wa~
lower than in January, the avero.ge price paid being $51.21.
about $4.50
Ca1am1r.e s.lnp-
ments have also increased, while leed ora has been in o.er.l&nu at higher
prices tnan last month.
The problem of moving the ore frorc the district,
Xl876
-12-
261
,.
hm·:ever, is "'::ry clifficu' t on acsouD.t 'Jf the csr si tuetion.
In the Colorado
metal mining region labor conuitions have been improving and new operations
are beins starteJ, especially in the siivcr mining sections.
Coal output is still seriously ho.rrrpcreJ. in sume uh>tricts by suortage
of cars, but proc,uction is gradually recoverin 6 .
in the thir:1 ctistrict (Phi.J.ad.elphi<').
Government diversion of fuel.
This is especially true
Many consumers hove sufferc~..l from
No Clec line in bituminous prices is eX:p8cte\l
as there is at prescmt a cunsLler:>ble s11ortage.
T11e ant:ilr&cite situation
is complier te:-~. by -.1iscussion of a nev~ wage a 6 reement with the miners on
1\prtl 1.
The prices are still trending upwo.r-....
is not cap8.b le of rcpiG. e:t.:pansion.
The prouuction of e.nt11rc.cite
Shipm=mts uver tlle j;)rinc ipal coal carryin6
roaQs c..uring February were 4,91~,6h4 tons, c's cuLipnrea: with 5,713,319 tons
in Januery and 3,371,932 tons in February a yeDr ogo.
(.Atl.onttJ.) cor>.l output is still .below nonnc-,1.
Iu the 6th '-Listrict
The ou·Gput for February was
1,251,430 tons, as compared. with 1,663,331 tons in J::muary.
operations in Muntana are pr<::.ctically on a nor;.o.ul tasis.
Coal mining
I1• ,;,isu·~.cc No.l+
(Clevelani) tne coal situation is very c:naotic on nccuunc of che lacK of
transportation.
57~
only about
In the Pittsburgh clistrict mines 11a7e been able to prOJ.tlC8
of capacity.
tJI:",nufacturers are ma.::..ing gre<:t efforts to
increasl:! their stocks of coal, vvhich were Jeplcteu during the striKe, but
operators are refusing to make contracts beyond .April l until they .twve been
a~visec..L of the tenns of the 'a;ward of the coal commission,
They say they
co.nnot make new cuntracts until they 1movv what total wage increase will be
anJ what portion of that increase they will be pennitteel to pass unto the
consumer.
Coke proluction is increasing with the better movement uf cars.
Connellsville u.istrict output is e,reacer than for some tir;1e past.
262
-13l'adng the country as a vihvJ.e, prl.)(.l.uction U.uring ]'ebruar.t wru:. 40,127,000
tons, co1·responu..:.a.:r;.g to an in~'e"' num.ter of 1}3 <..Lurini:; Jonucry,
tons, correspon<..Ling
to
ab ~ndex
number df
~1
ana.
31,5o6,ooo
Anthr~
uuring February, 1919.
cite eoal shipments O.uring Feoruary vvere 4;913,6:54 tons, as corr.pare ..... with
the respective inde.;..;. numbers being 94, 102, and.
w'he re un.ce tt a in on ace ount of thG
CL ouu
(/
74.
Cocl prices are every...
t t: s to the adJ us ttnel'l t of
.1.
a.b or
.controversies and. the posoible eft'ects r.r! tho finc4ings of t~le Presi:u..ant 's
coal wage
corom:~.ssion.
In petroleum, ~he lUch district (K~sas City) reports an output for
Ken::;as and. OU.ahoma at about 9,500,000 barrels for February, as against
about b,50U,OOO barrels for February,
over January.
Development
wor~
1919.
There was
£~.1so
an incree.se
resultec..L in a slight increase in com-
pletac4 wellb an"'- some 1.ncr0< se• in c,eily new prou.uction, it being estimated
that e.bout l ,00(; barrels of new uutput ret>Ultt:lu. i rom FJbruary vvork.
ha.$ been a €£,re£'t increase in uil prices
U.ue'
product an.:i the Jmuwledge that pro<..Luction h
finers are eagerly competiug for supplies.
There
&o the growing u.enanu. for the
still &hort of OletaanCI..
Re-
Cruu.e oil is now bringing in
district No. 10 (~nsas Ci'.;y) to2.50 to ~3.50 a P.arrel.
:Kansas crule oil
at the enu. of Februar J was selline:; at $.l..25 mure than in December anJ. an
·r:ne
at.Lu.i tional 25¢ a barrel vvas m~e ee,rly in J;lfcreh..
enactea. by Congress is e:h:pectea t-J result in
~reat
are <..LOine;; all the;r can to incree.se prouuction.
·oi.l. leas in6 bill
u.eveiO)?ment.
Rdineries
It is pre..iicteu. that some
of the lar6er onet:> will be able to tiouble their .:t.aily output before tlle enJ.
of thtls year.
Xl676
263
~14-
Extremely interesting conditions in teA: tile production are reported.
In u.istr:i.ct No.
3 (Fniladelphio) the der.1and for cotton has fallen off and
free buying from abroad has been chec};.eci by low exchange.
of cut tun goods are running ne11rly to capacity.
J.Vf.anufacturers
Orders on hand will
maintain O!Jerations for a few monthb but there has been a falling off in
activity.
In district No. l (Boston) nominal prices and a market only
fairly active in cotton have prevailec....
Mills have been
v~ell
btock.ed. up
ana. recent u.emanlis ~1ave bee:n u.ue to manufacturers whose supplies hrwe been
running short.
Manufacturers of goocls report a cont;inueu. slacKening in
deman.l, partly due to freight conc:t.i tions.
In the finer fabrics the
slackening,if it exists at all, is much less noticeable •
.Atterrr_pts to buy
for early fall delivery are proving somewhat er.Jbarrasslng.
It is believed
that the cost of waterials and supplies has rt;!acheu. its high level, but
tt1at any decline from present prices will be ;gradual.
In the knit goods market high prices
have tenled to cut down uutput.
ar.~.J.
the agitation for rectuctlons
Prices, however, hc:-.re nvt declineli, ·but
the etemanJ. for fall underw·ear is diminishing <mel hosiery buying 118s fallen
off.
Prices for all hosiery, however, are about 20% to
a6o.
In
woolen~,
25%
above a year
manufacturers art,) fairly \lell s tocL.ed with raw materia],
In the 3rd ·iistrict (Phila.Uelphia) ancl high money rates have led to a
postponement of purchasing.
higher than a year ago.
Prices of fabrics are finn at levels much
There is a uifference of op1nion as to the pros-
pects, some preQicting an increase, others a decline.
an au.vance is thOuc?,ht possible.
of vvoolens anci worsteU.s
ar'~
In the }ru district
Mills are operatin5 to capacity.
Stocks
small anu. as a result no material change in
XJ.b76
business is eX"[Jected for the next fewr:1on.hs.
~.
264
From c.,1strict No.1
(Boston) i t is reported that wool uealers Il&Ve very small stocKS of ·nie;h
or mecliura grades, tut many ;1[ ve an oversupply of low
is
practically no calL
Bu;;,:;_.;,-j!:>S
gracie~
for which there
in tile lower grad.es il:> clull ancL the future
if; a n1atter of con::;iU.erable an..r..iety. · MillB <r-eport a slach.ening of <.:.emanel.
It ia predicted, however, t:i.1a t the guous c owl:1g vn che marA.e t to be mad.e up
into clothing for the fall an:i winc:;r vf 1920 _vdll ue 25% higher than the
same class of goous
~1as
been recently.
Manufacturers, however, state that
the peak of prices has been reClched., wn:.ch meC4"'1S tns.t relief for the consumer will be cleferreu. uncil tilt- goou.s nvvif ceing Laue nave been absorbed.
In the c lathing tracle there is a
public to
ma~e
mar~eu..
tenctency on
~he
part of the
old supplies go further ond to refuse to pay the excessive
prices tnat are being c£iarge<i.
Demancl is accvraingly declining.
NfJ1ny
manufacturers are, hovvever, runnins, at full capacity, but they have difficulty
in securing supplies of cloth and. oth8r ravif materials.
Tvbrchcmts shc.w
little ci.isposition to cancel orders, ancl lnsist on Cumplete sl1ipments. Medium
and. lower gredes r:1re in relatively sr.1all te 1uest ..
265
.,.
'
•
-16-
X-1876
Tho '\7holosnlc d.rygoods trade is in lc.rGG volurJe o.nd in district
Ho. 8 (St. Louis) soL;e houses report as r:n1ci1 as 50'% inc:rnasc in the value
T:1o
of sales over lnst year.
discourc,god by ·,7holesc.:ors,
G.S
~~~olcs.:',le
trict ITo. 7 (Chico.go)
in other districts, buyers arc
::~1 c.cing
f::1~l
of
orders he.s? hoY.ovor, been
tl1oy believe prices mny decline.
businoss is
consorvc~tivc
~1olding
in
In dis-
W) very \-roll but,as
1~:.."1-cing
In
cor:lC'litmcnts.
the South, incrca£:es i:a i)r ices o..ro rc:)ortcd c..nd. doll.vcries arc
rnt~1er
bot-
tor, but hero c,go..in thoro is o., 1>10rc conso:..·vo.t ivo l)Olicy in trn.dc bu:ting.
The volU!'1o of '1.7holcsc.lo trc.do is lG.r cor, 011ing to
tl~c
vxistcnce of higher
prices.
ro.nges fron
4%
to
15%,
:;.ccordin[<" to diffo7'cnt lines affoctod.
No. 3 (Philo..dolphio..) bus :incss is :::..bout stc.blc.
Thoro is
in frenzied buying, both in \7holos2.lo rcnrl :::-cto.il lines.
In district
SIJ'11El
falling off
FroD district
no. 1 {Boston) it is re:portcd th::'..t tho vo1u:·.1c of \.holcsnlc drygoods d.is::.)osod of in Fcb:ruo.ry
\7C-S
o,bout the sc:nc in onount as a yco.r ngo, ui th
prices about 25% higher thc.n in 1919.
Prices arc
~bout
tho
s~~c
month, hoYJcvcr, and no r:1D.torinl drop is ox:pcctod until D-uturnn.
c. considcrc.blo sco..rcity in men's furnishings.
less satisfactory, but no fc.ilures hn.vo
as lnst
Thoro is
Collections c.rc slightly
occurred.
nholcsalers arc !!old-
ing off in placing their fall orders in 01dor to sec \!hethcr present
prices \7ill be sustained.
In leather o.nd shoos it is reported frou district No. 1 {Boston)
tm t
thcTc hns boon a slnclwning of dorr:c.nd \-.h ich h<:.s ,e,ffcctcd hides,
leather, end shoos themselves, o.l t:1ouc:h
~n
tho finished :product thoro is
so1:1o difforonco of O:;)inion, :::.. nur;liJcr of houses ro:;.•o:rting about stc.ble conditions.
Shoo retailers, hOYiover, o..ro holding off on their fall orders
X·-187~
-17-
Some r.JC.nufacturors repor-:; an
becn,usc they oxpoct a reduction in prices.
In hidus
ovorsu:lply of nanufacturod goods ..
on tho bo tt01:1 and
a11
11
it
U:)\'1
lool{S as if prices vmre
advance is loolcod for from timo to t
leather production is :;.bout tho so.-:1o as six r.1onths c.go.
:irt10 11 •
In sole
District ITo .. 3
(Philc.dolphin) reports that tnnncrics o.ro OIJoratiTIG at capo..city but tho..t
leather prices i1ill not be o.ffoctcd for
ness offered during the past
r:10~1th
'1
g'Jod YA1ilc to como.
ho.s been sr::o..ll in voll<J,lO.
tions in Philo..dclphio.. arc conflicting.
No'" busiShoo condi-
D:x:o..nd has been good heretofore
but some nnnu.facturors find th.'l t consc1JJcrs o.ro avoiding higher priced goods.
E.o.stcrn buying hus bococc so;-.lCV!lillt slOY'vr bu.t \-rostnrn and southe;rn dcmDnds
nrc still strong.
The supply of lnbor is not sufficient to enable full time
production in mmw plants.
Tho onplo:ymont s ituc.tion hc:,s b0on on the Ylholo satisfactory during
tho 1:1onth of Iinrch, at loo..st as cor:1.parcd -rri th recent 1.10nths.
boon very high o.nd tending to rise, but tho total volume of
boon lnrgo 2:11d raills hc:,vc been orcrc:,ting noc,rcr to
ca~)D.City
\7: gos hnvc
cm~loyr.wnt
ho.s
than heretofore.
In tho middle vtost i t is cor:lplainod th;::.t lc.bor is ineffictent o..rd tho.t thoro
is too strong n. des ire for short hours, c,ccou.pnnicd by poor scrvic(.;. 1:1i th a
corros:ponding reduction of output.
Tho o..mou:nt of pe:.yrolls o.s conpo..rod ':rith
a yoo..r ngo is g.roo..tor, c:,lthough tho nuulv::r of can CL'ployod is less.
middle 170St there is a
coLr~Jo..rntivoly
snnll cnount of UllOnploy:ment.
In tho
In tho
south\-.rostorn o..gricul tur.:-,1 regions tho su·,?l)ly of labor is rel o.tivcly sco.nty
and tho sar:1c is true in tho grc..in rugions of tho \7ost e:.nd nortlrr10st.
In
fc:,ct, tho labor shortngc in c..gricultUl'D.l oporo.t ions thro1:t[;hout tho country
nppoo.rs to bo
critic~l.l
c..nd is on:;.y
~;artic,lly
relieved by th8 o.pplication of
machinery on n larger scnlc tho.n heretofore to f::o.rr:lillbo
On the Pncific
266
267
X-1876
Coast labor is fully employed, exce:r_Jt
is tho
S2IUC
p~ss
ibly .:1rmmd So::lttlc, nnd there
shortage of fo.rr.1 labor as ni ;;c,YJl;or0.
with o.ccor:1p::mying
unemployment~
'j'l1o
n"Lm1bor o£ strikes,
is smoH thl·ougbotLt the country..
Average
earnings continued prn.ct;,co.lly o.t tho rcc..Ic in tho en.stern r.1anufo.cturing
districts.
Co:r:-n.:enting on the drift CHo.y fron the fo.rr.1 to the cities, the
Fodcrn.l Reserve Ban1c of HoY! York rommH:s thc.t 11 tho cm:r.i:1cti tion of the industr in.l centers for lo.bor is doplct i.ng the SU:ii)ly of f;1:r.r:1 workers, nnd
the younger generation is lcc.v:i.ng th(.) fo.r::1s for tho supposedly Ylidcr opportunitics offered by tho city.
An invest is-o.t ion r:10..de recently by Professor
G.. F. 11org.:m, of tr..c Um-; Yor1c State Hgr :.cult.u..;.~o.l College, .:md Jolm B. Shop-
nrd of tho United States
Burc~u
)I
~rop Fst~tos~
shows tho.t tho nunbcr of
persons on Hc\7 York farms dccronscd 3 per cont in t!lo period bct\·rccn Fcbl'U.D.ry
1, 1919 nr.d the so.mc do.to in 1920, YJhilc tho nu.rnbcr of hired non do-
creased 7 per cent.
Bnsing their figures upon d.:::-..t:J. obt:J.incd i'ror.1 norc
thnn 3, 000 f:J.rt.1s, o.nd
D.:_) plying
proportion, the
those fie;ttr cs to tho on tiro sto.tc in the scmo
ostil-:x~.tos sh0\7 th~'..t
du1.· ing 1919, :tpp:roxL:.ntoly 35,000 non
o.nd boys loft agriculture for ot:1cr industries . uhi.le in the scmo period
only 11,000 vrcnt from other industries into f.:::-..rrninc- 1 '
The building situc..tion tho country
O'hr
h:cs continued o.bou.t unch2J1[:Cd,
although it h:J.s if onything bccor::o slic;htly uorc cri ticnl th.::m horctoforc.
ln tho oD.stcrn industri:ll centers the mcvonont of l:J.bor f:::-om tho f.:;..m to
tho city hD.s created
D.
very nhorp dorJond on
[~11
possible
hou.sin~
f:::.cilitics,
c situation -rbich h<:!.s been pecul icrly ,:.gg::.:wo.tod in lJcu York City 2nd in
industri:J.l cit ios in the middle vest ..
Building
:;;lCI'TiitS
continue to incrc:::.so
in mnny pc.rts of tho country :::.nd there i.:: c, :::;ubst::..ntio.l 7olu::.1C of building.,
but capitn.l hes itn.tos tG go into this form of
cnto,~.·~•rise c~s
freely cs it
othcrYJiso \70uld do on c.ccount of tho unfo.vora.blo condit :ions of tmmtion.
X-18'/6
268
The existence of cont:rovers ics in the building trades not only as betYreen
labor D.nd capital but ns bet1wen different br.:1nches of labor, appear to result in preventing progress and full omployr.1cnt oven 11hore no actual strilms
or labor disputes of tho standard typo are in
progress~
Despite tho effort
to meet the urgent necessities of tho case tho country as a
~hole
has made
comparatively little progress toYiard providing for catching up with don12,nd
in regard to house accornnodntion.
IIuch tho sarr:e is true with respect to
shortage in industrial building.
While there has been a considerable vari[;.tion in rat8s of money for
call funds during the month of
direction of groo.tcr case.
llarch~
the tendency has boon strongly in the
Tho reloo.se of inco;Jo t2.:1:: inst<::.lr.1onts hD.s un-
doubtodly tended to relieve the situation to so1:1o cztcntt c.nd ,-nne ro.tos on
commercial paper o.nd for t it1o funds hc.vo cont inu.od high, call loan ro.tes ho.vo
~~torio.lly
fallon
off~
Tho demo.nd for ccr:u;1orc ial c.coor.ltlodation at most of
the b2Jll<:s Ins been strong, but in soDa co..sos it hn.s tended rclc.tivoly to s:1g
off a little as duo to slovmcss in tho opening U? of tho spring season.
In
some districts it i'S noted that commercial firms a.re not quito as liquid
as they ho..ve been in the past, o.lthou.gh this cnn
eral condition.
h~rdly
be said to be a. gen-
In tho middle vrost dcrr.and for uoney for co;:nm.erc ial purposes
has been very heavy, borrowers being \7illing to po.y n.lmost any rnte for accommodation.
Collections have been good <J,nd business fo.ilu.ros lovv, ·while
the movement of credit is extremely activo.
to..kil1e; the country o.s a Yholoo
Clon.rings h.:1vo been largo,
Applicnt ions for lnnd c.ontracts lmvo in
G!"me parts of the country created tcm_Jorctry and local stringeneies.
In tho
scu.thwest, collections are not as go(Jd as they ho..vo boon., l"lartly duo to unfavorable 17eatl1er conditions; but the demand for coney is very strong.
and investments are on the incronse.
has
bee.J;l
In the 11th district (Do.llns) there
same fall in cash reserves, but the volume of war paper carr-ied
Lflans
-20-
has declined ..
269
X-1876
Cloc:.crings have been vor-:1 1<::-rgc in tho. t po.rt of tho country,
1.t1.ilc disc aunt rates have tended to increase.
On the Pacific Coc..st there
hns boon a slight decline in tho volun;o o:f financial o..ctivity but there.
o.s else\rhcre, interest :::md discount ro.tes h2.vo tended to become firmer, tho
provo.iling r2,tcs being
&%
to 6~S in the industrio.l centers, and around 8jb
In Uev1 Y rk o.n u:rrusual nmount of stoclt mar-
in tho ngricultural regions.
ket activity has been
m~ifested.
Daily so,1os after tho first ·vrock in
Ifarch averaged well over a million sl'zres, n:nd on tv10 occasions tho tot2.l
fell just short of t\70 million shares.
Prices of tho activo s,ccu1ative
stocl{s advancea. 50 to 100 points or more, i1hile a general avornge of t-r,rentyfive industrial
stoc~cs
rose 22 points from a low level of 101 ren.chod in
tho second i7eek in F::::br-u.ary to 124, or only 3 points below t..'lc highest price
average of the yco,r.
TVTenty-five railroad stocks on l12.rch 20 avorn.ged 10
points above the lo\Jost prices on
reco:.~cl
for this group, which had been
roac'·::-;d during the Fobrun.ry liquidc.tion.
miniJ.~rum
payment period Yri th n.
T: cO pc..ssing of the March 15 to.x
of stro..in ::end tho incronsod supply of credit
mo.do availo..b1e by certificc.te redom::.Jtions i7ero inportant f:::cctors in enabling
the marltet to 1-:1c.intain its rapid fo raard p2.cc up to tho close of tho period.
Febru:::cry steele sn.les
ac~Gre:;:::cted
21,729,000 shc.res.
to..l on rccor9- for the month since 1905, c.nd
represen~s
2,075,000 shares over the Jc:.nuc.ry total, but is
the
fiC~cs
for
This is the l2r;-_:ost to-
n.n increase of
.:::~'Jp:~ox.imD,toly
2,000,000 belovr
Dcce~ber.
T~1e
c;enerc.l trend of bond ~'rices hn.s been U:;?'fV&rd durinc;
D..clV2..l1Ce
tl1irty d2.ys, ar.1ount iD{i
to
a"1
.
t~1e
past
'--·
yreolc in F"br"c:.ary.
the hic;h point of the year establis:1ed in
J~uar-:1
c:.nc1. ''-):?:ro:::inD..toly 6 }:Joints
belfJ';r
270
•c
-21-
tho pr i..ce level n.t this time J.n.st
sc;,f::~8}.'Cd
X-1876
ye~r ..
Practically all classes of bonds
a temporary setb2clt durinc tho period of coney stress in tho latter
pc.rt of Fobruo.ry ~
Liberty issues shovied tho sh'lrpost reactions a.t tho. t
tine, ost2.blishinc no\7 lo\1 records for the :3-} per cents, the first ::end
second 4 per cents, Gnd both Vlctory i&suos.
r!ith tho passinc of the acute
sto.co of tho money strc.in, thoso issues htlvo n1Qdo substo,ntic.l procress in
recovery.
Hev: corpomto fincncinc hc.s boon very heavy ..
chc.nces have shown
r~. 1~mch
crec.tor pov:or of self SU)l'JOrt
them d:urinc; the 1:1onth of Februnry.
Tho foroi£:,"11 exr~.nd
c.ro more stable
Export tr::cde ho.s fallen off somevlhn t,
duo to tho f::cct tl10.t b2l1Jcors ho..ve in some measure \7ithdravm tho credit v:hich
h.nd previously boon mm:de t:.va:i.lc.blo.·
Sprinc rcquiromonts are bocinning to
cc.ll into pln.y the resources both of member and of Federal Reserve banks
the
in tho D{;r,)culturc..l recions, o.nd tho pressure upon them for···
meetinG
these domc..:ads m.ny be ex:poctod to incroc..se from this tir;;o forvmrd.
:Production conditions the country over c;ive every reason for encouro,c;oment \7i th reforonco to actual industri<:ll c..nd o.gricul turc..l potentic..lities.
hopoful.
l2.bor, as
The crop outloolr, so fur o.s cnn be judged at
thi~
season, is
Thoro is c. substc..ntio..l dec;ree of hr..rmo:ny betvmen capital and
indicr~.tcd
by the small amom1.t of unemployment and lc..bor centro-
vorsy now in e:::istonco o
The difficulties in sight are due to conditions
of relative u.nder;Jroduction or decroo.se of production resulti:rl£; from lessened c..ctivity of capitnl and lc..bor,
~nobloms
o.risi:rl£; out of heavy to.:w.tion,
and measures resul tine frou the one-sided \7orl{illG of present tnx lo.Y:s, while
fin2.:i.1Ci2.lly SJ..'JOG.l{inc;, co..ution ::encl.
co~cservo..t
ism are co.l:!..cd for. and the e£-
forts to restrict the volume of credit \rhich hc..ve thus far been Inade have
been only l'Jartio.lly successful.
As a result, hich interest rates end
,-,
!
..,.\
-22-
relative scarcity of :f'ond.a ·will continue to prevail during' tho period ,,n
which the country 1s andenvorinc to extend its productive fncilitics end
to (Wcrcomo the roln.tivo loss of proc;ross resultinc; £ra;l war limitations
upon invostmcn t and prodllc t1on.
271
272
II:X OI'PIOIO MBMBSM
W. P.ll. HARDJNII,IIOYI. .OR.
ALBERT STRAUSS, YICIII0¥11801
ADOLPH c. IIILLER
CHARLES S. HAIILIN
HENRY A. IIOEHLINPAH .
JIAYIDF:H~
IICRUARY ot' THE TRIAIIORY
'
t.
CHAIRMAN
FEDERAL RESERVE BOARD
JOHH SKELTON WILUAIIS
COIIPTIOLUI OP THI CUIIINCY
Yl. T. CHAPIIAN, SICRITARY
,ADDREBa REPI. Y TO
I"E;DJE~AJ.
R. G. EIIERSON. AsllftAJI.T SaCIITAIY
W.II,IIILAY. FIICAL A81NT
WASHINGTON
RIEI'E:RVE BOARD
March 30, 1920.
SUBJECT:
Boa~~s
X-1S7S
reply to Senate Resolution 328.
Dear Sir:
There is enclosed herewith, for your information,
c~y
of the Board's reply to the following resolution adopted
by the Senate on March S, 1920:
""RESOLVED that the Federal Reserve Board be and
is hereby directed to advise the Senate what is the
cause and Justification for the usurious rates of
interest on collateral call loans i.n the financial
centers, under what law authorized, and what steps,
if any, are requireCi. to abate this condition•!
Very truly yours,
Governor.
To all Agents and Governors.of the F. R. Banks.
273
X-1875.
FEDERAL RESERVE BOARD ,
Uarch 27. 1920.
Subjc.ct: Reply to Senate Resolution No. 328,
Sir:On lTarch 8, 1920, tho Senate adopted tho follovring resolution:
"RESOLVED that the Federal Reserve Board be
and is hereby directed to advise the Senate what
is the cause and justification for tho usurious
rates of :interest on.collatcral call loans in the
finwcial centers, under v1hat law authorized, and.
\'That ste;_Js, i f 8J?.Y, .'lre required to abate this
condition. tl
In revly tho Bbru:-d desires fn·st td invito attention tO the
follo11ing tab los showing disc aunt a:nd in tercst rates :prevo.iling in
various centers in all Federal reserve districts during tho t\VO
thirty-day periods ended January 15, 1920, and February 15, 1920.
It Yrill bo soon from these tables that the mm::imum and minimum rates
on demand loans secured by collateral nrc n,pproximately tho sn,mc as
those for ccnmcrcial :pal)Or in all cities oxco:;?t Boston and Nmv York.
While tho legal rate of interest in I1ass2.chusctts is 6%, higher contract rates arc authorizod 1 and consequently tho 6% limitation is
occasionally excocdcd.
(Tables referred to a):pcn.r on :pogos 286 and 287
of Federal Reserve Bulletin for llarch 1920.)
Tho only financid center in this country in v.hich thoro is
!I'Lintnincd u cn.ll money market of nntionn,l importo.ncc is Noi7 York
City, c.nd \7hilc tho m t os chnrgod thoro on call loans arc frequently
in ~cccss of tho legal rates cllovrod for ca'i1rrlercial paper, they arc
not 11 usurious 11 under tho laws of tho State of Nci-.r York 9 ullich specifically o:xernpt collateral call loans from tho 6% limitation YJhich lenders must observe on -other loans on pain of incurring tho penalty pros·cribod for usury. Section 115 of tho Banldng Ln.w (1.1914, Ch. 369;
Consol~ L. Ch. 2) provides that upon adv2.nccs of money repayable on
domo,nd to an mnomt not loss than ~~5,000 Jr>.adQ upon vmrcnousc :receipts,
bills of lc:lding, ccrtificn,tcs of stocl<.::, etc., or other nogotin.ble instrumon ts as collateral, nny bml.l<.:: may receive and collect us compensa,tion any sur;1 iJhich mo.y bo agreed upon by tho parties to such trnnsaction. The section roD.ds:
274
-2-
X-1875
"Sec.115. Int_qrcst on collateral dem~_nd loans of not
less than five thousand dollars.
11 Upon adva"'locs of money repayable on dennnd to
an amount not loss than five thouso..nd dollars made· upon
·vvarohouse receipts, bills Of lading, certificates of
stoalc, cortific<1tcs of deposit, bills of e:::cha.nge, bonds
or other negotiable instr~nents~ pledged as collateral
security for such repayment, any bo.nJ.\: may receive or
contract to receive and collect as compensation for mrucing
such advcnces any sum ·which may bo agreed upon by the
pe.rties to such transaction. n
Section 201 of tho Banld11g· La\7, identical in language with
Section 115 above quoted, malms tho same provision in the case of collateral loans by trust com:xmies. In tho G-eneral Business Law (1.1909,
Ch. 25; Consol. !aCh. 20'} thoro is tho follovving general provision of
a lilto. character:
permitted
"Soc. 379. V.tcrostLon c,dvancos on collatorc,l security.
In any case l"loroaftor in Y.hich n.dvancos of r,1oncy,
ro:)a;y·~?.blo on c.orr.c..nd, to any o.mount not loss than five thousnnd dollars 9 arc made upon \7arohouso receipts t bills of lading 9
cortifica.tcs of stool.:, cort ificatos of dcposi t, bills of e~c
changc, bonds or other nogotic..blo instruments pledged as collateral sccuri ty for such ropayn1ent 9 it shall be le.-rlfu.l to receive or to contract to receive and collect, as coml:>onsri.tion
for making such advances, any sum to be agl."'oed upon in v~riting,
by tho parties to such tranSMt ion."
Tho National Banlc Act provides thn.t national banlcs may receive
and cmrgo on any loL!.11 or disC01lllt interest at the rnto nllovrod by tho
law of tho Sta-te, territory or district YJhoro tho ba:nlt is located.
Tho applicn.blo provision roads:
1imitat ion upon rate of interest iJhich may be trucen.
422. Sec. 3197.- il:ny association may toke, receive,
reserve and charge on v.ny loan or discount made, or upon any
note, bill of exchange, or other evidences of debt, interest
at tho rnte a.llor:od by the lavs of tho State, Territory or
District i7herc tho bruik is located, ond no more, o::::cc:;_:;t that
whore by tho lavs of any State a different rnto is limited for
bo:nks of issue organized under Stn.te laws, tho rnte so limited
shall be n.llowod for nssociations organized or o::l::isting in any
such St11te under this Title. \"'hen no rr1te is fh:cd by tho laws
of the Stntc or Territory or District, the b.::. u.lc may talco, race ivo, reserve, or charge a rate not o:::ceeding seven per ceJD.tum,
and such illterest mc..y be tnlcen ilt aclvn.nco ~ recleaning tho days
for \,hich the note, bill or other evidence of debt has to run.
And tho purchase discount, or sclo of a bona fide bill of
11
•
275
,
X-1875
-3-
e::::cho.ngo, po.yo.blo c.t another plnco tho.n tho plccc of
such purch2.so, discount 9 or so.lo, nt not more thnn the
current rate of exchange for sight dro.fts in ndditioh
to tho interest, sho..ll not bo considered as tclcing or
recoivilig o. greater ra,tc of interest • 11
It ·will bo observed thc.t the effect of tho foregoing provisions
is to o.uthorizc in tho Sto.tc of lTo\i Yo:rlc on collc.te:rd co.ll loc.ns of
not loss than ~?5,000 ro.tos Of intcrost nhich 1:1r:.y be in excess of those
ponaittod for loo.ns of other cho.rc..ctor, and tho.t such higher rates nrc
not prohibited c.s usurious.
As to tho nco.uso o.nd justificc.tion11 of tho high ro.tos of interest
Ylhich it thus C..:)peo.rs mo.y logr:.lly be chc..rgcd on c ollatcral call loans in
Hm1 Yorlc, nnd ns to tho 11 stops ~~** required to nbntc this condi tion11 ,
there is, o.s is \loll ll:nOYlll, c. \7ido differo11ce of opinion O..'":lOl"lg 1)ersons
who 11c.vo given thoug,'lt o.ncl study to tho question. Indood9 broad o.nd
f'u.nd2.1:.1ont<1l quest ions of goncro.l economic c.nd socio.l policy nre involved in tl1o lo.st n.nnlysis, the 1holo quesJcion of the u:b.ility of spoculo.tivo
doo.lings in securities end COL~odities on orgo.nizcd oxcl1o.ngos is involved; o.nd more ir.:u:lodintoly, tho question of tho methods Dnd practices
of the loo.ding spocul2.tivo mo.rlwts of tho country, l:lffi'gining, stock
r::o.nipulo..tion, ~d ldndrod mc..ttcrs o.lso susceptible of ab~lSOo As to
tho so tho Doc.rd ho.s never lmd occns ion officially to form o.n o:;_Jinion;
tho Fodcrc.l Reserve Act S)OC ifico..lly precludes tho J?urChaso or dis-count by Fodorc.l reserve bo.:nl;:s of "notes, dro..fts or bills covering
r:1oroly investments or issued or dravm for t11.o purpose of co..rrying or
tro.ding in stoclcs, bonds, or o thor invosti:~ont soc~u-itios, oxco~Jt bonds
o.nd notes of the Goverm.1ont of the United Stc..tos 11 •
'1:!10 Board could
not .undcrtclco to for1:1 a judgm-ent UJ.)Oll tho r.1nttors o.bove referred to
\7ithout study nnd. invest igo..tion of such o. comprehensive 11o. ture o.s \7ould
seriously interfere ..-ri th tho conduct of its regular y;orlc ond which, had
tho Bonrd tho requisite nuthority, \70uld require the services of e~cperts
o..nd nssisto.nts for the CDploymont of vrhich the Board docs not feel authorized to expend funds accruing fror:1 sto.tutory assossr.:onts on the
Fodorc.l reserve banlcs for tho :pur~)oso of defrayi11g tho or<.lino.ry o:cponsos contomj_)lc.ted by tho Fedcro.l Reserve Act.
Thoro is submi ttoci as an n::_)pendi:::: hereto c. mor.1orc. ndUJ;1 prepared
for the infor:nn tion of the Board by the Federal Reserve Agent in Fe\7
York, o~q::>laining in general tho nc. turo and opcro.t ion of tho lTew Yorlc
cnll r.~oney no.:;:•ltet c"nd causes of high and. fluctuating rates for call
nonoy in that center ..
Respectfully,
Governor.
Tho President of tho Senate.
X-18'7.3
f
T1ffi NEVI YORK CALL MOllEY I>TAKffiT
Definition of Call Loans.
Collateral call loans, in tr..e general acceptation of the
term, are made chiefly in New York City, vv.hich is practically
the only important call money market in the United states.
They are loans which are payable on demand of the lender without previous notice, secured by the pledge of investment securities, i.e. stocks and bonds, generally those which are dealt
in on the New Yorlc Stock Exclnnge.
The interest rates on these
lo.ans, as on other classes of loans, are on the basis .of a rate
per annv.m.
The Borro·.vers.
The loans are made for the most part to houses which are
members of the stock Exchange and the money so borrowed constitutes a ;JOrtion of the funds employed ordh1arily in purchasing
and carrying securities for their customers and. sometimes for
themselves.
Tha Lenders.
.
The ::orind:pal SU"?Plies of money for collc: teral call loans
sre loanable funds of banks and bankers located both in "'-nd out-·
276
X-1875.
- 2
side of new York City, including foreign banks and. agencies of
foreign ban.ks: and similarly the loanable funds of firms, individuals and corporations seeking tenrporary investment.
The
proportion of the vlhole :f'Lmd loaned by these several; interests
varies seasonally a:r.d in accordance with the attractiveness of
' other opportunities for investment, either lcca.lly or in other
markets.
The bt.1lk of call money is lent on the floor of the
New York Stock Exchange at llthe money post" Y.rhere through various
brokers loanable funds are offered and bids for fu:ods are received.
Most of the business io done betv;een the hours .of 12 noon and·
2:45 p.m.
The import8Jlt relation to the money market of the
present system of daily settlement of balances resulting from the
purchases and sales of securities on the stock Exc11ange will be
discussed more fully hereafter.
Commercial Requirements have the Prior Claim.
In the
~tter
of the supply ar attraction of funds to the
call money market, there is generally a definite and well understood obligation on the :part of banks to ace onmodate first their
0\-;n
comrnercial clients, so that it is only tm excess of loanable
funds \v:hich they may rove fran time to time that is available for
the collateral call money :market or for the .purchase of commercial
paper in t.he open market.
..
This excess of .loanable funds available
fOr employment in tho securities rr.arkot varies, therefore, according
to the col!lrr'.ercial requirements of tho country.
It las long been
277
x ...la75.
recognized that for assul·a.ooe of a sufficient amount of money to
finance the volume of business in securities, reliance cannot be
:placed on a rate of interest limited to the rates which obtain or
are permitted in commercial transactions vvhose prior claim on
banking ace om.noda t ions is universally cone eded.
CAUSES AFFECT :liNG lRESEl'l'I' CALL MQII1EY
RA~S,
I
The reference in the resolution to the present high rates
for call money in the financial centers ani the inquiry as to
their causes require, it is felt, a survey of tl1e operations
of the r.:1oney rr.e..rkets and t l:e reflection therein of the tmder'lying economic conditions which govern, in varying degrees, all
money rates, including those for call money.
Present Changed Conditions of SUPJ?l.Y•
In former times, and specifically prior to tho institution
of the Federal Reserve System, bankers, es_l;:ecially in reserve
centers, uere accustomed to look upon call loans as their princi:t,:e-1 second.ary reserve on tho theory that inasmuch as t 11oso loans
v:ere payable upon demani, fur..ds so invested could ali.Jays be
promptly obtaicned on short notice to meet withdrawals of deposits
or for otter use.
In these circumstances there was ord:inarily
available for collateral call loans a supply of funds sufficient
278
X-1D75
for ordinary market requirements and at low rates, althoug;h at
times the rates rose tD high levelS as the supply of funds dimin. ished, or the demands increased.
This attitude of the banks tovvard call loans as their chief'
secondary reserve bas been greatly modified by two causes..
The
fi::r;st was the closing of the Stock :sxchange at the outbreak of
the European \war in the summer of 1914, when it becar.'le practically impossible to realize on call loans secured by investment
securities, which became, thereft:re, ufrozen loansu.
This resulted
in a more or less permanent pr-ejudice against dependence upon
call loans as secondary reserves.
The second and more important
factor \vas the creation of the Federal Reserve system.
Under the
terms of the Federal Reserve Act pr-ovision is rr>.a.de for the rediscount of cor.1mercial paper, but the rediscount of loans for the
purpose of carrying invesnnent securities,
otl~er
than United states
Government obligations, is excluded+ Consequently, in order to
maintain maximum liquidity, with suitable provisiion for secondary
reserves that can be immediately availed of, banks, including
foreign agency batiks 11 now invest a greater pro port ion of their resources in assets that can be realized upon at the Pederal Reserve
Bank.
.Anotr..er changed factor in tbe present situation grows out of
the fact tba t the war and post-war conditions
l~ve
r enclered unavail-
able supplies of money which formerly carne from foreign banlcs. since
the S'UlnlT.er of 1914, while total banking resources have largely in-
279
X-1875 ..
creased, the volume of bank money available to tlJe sectlr it ies l!'.a.rket
at low or norrral rates
~~s
not increased proportionately, but on
the contrary has probably decreased.
All of these circumstances
explain in some measure, the increased rates which have often been
required during tl1e past year for money loaned in the secucities
rr'arke t.
Changed conditions are also present in the factors governing
the demand for money.
ITior to the armistice agencies of Govern-
ment were employed to restrict the issue of nev; securities for
purposes other than those which were deemed essential fer carrying
on tbe war.
~il.t
the same time, as tlce Treasury undertook to sell la..rge
amounts of certificates of indebtedness and
Liberty Bonds bearing
low rates of interest, the question arose as to whether the competition of the general investment ma.rl{ets might not pre judice the
success of the Government issues.
understanding on the part of the
In these circumstar.ces, -,vith full'
Treas~u~y
Department, the officers
and members o:f the New York Steck Exchange undertook to limit
transactions \vhich vvould involve the increased use of money for
other purposes in consideration of which the principal banks of Nev;
Yorl{ City enc:leavored to provide a stable amount of money for the
requirements of the security market.
After the armistice tl1ese restrictions were r eJT.oved and ordim.ry
market forces reasserted themselves.
The issuance of nevv securities
was resuned in unprecedented volume and consumed a vast a.1nount of
280
X-1875
281.
capital and credit, vvhen bank credit was already expanded by the
necessity of carrying large amounts of Governrr.ent securities \vbich
the investJ:lent market 'l:itas not ·prepa.red to absorb..
furtl~r
cause for the increased cost at
collateral call
ti~~s
Thus arose a
of accommodation on
l~ns.
Since the armistice these causes h:we been augmented by the
increased volum.e andvelocity of transactions in securities generally.
Before e:.r...a.mining the figures,_ it should be explained that the amount
of call money eoployed by the securities market fluctuates according
to the
2~ount
of other fUnds available for tAis purpose, i.e. cus-
t aners 1 money invested and time money borrm7ed, ar..d also as the volume
of business varies.
.:Volume. ·
~e
st~mt,
volume of money outstanding on call is more or less con-
fluctu':l.ting only OV3r relatively long periods, and the
amount which is loaned from day to day is but a small pro"Portion
of this constant volume.
The constent volume of outstanding call
loans bears a rate of interest which is determined daily and is
L-nown· as the renewal rate.
The daily borrowings, either in replace-
n:ent of loans called for payment or representing new money borrowed,
ar.e Ina.de at rates which may or may not be the same as the renewal
rate and which frequently vary during the same day.
Tur~ing
during the
call~
to the figures, it ap?ears that over a period of years
~re-War
e~loyed
period the volurne of all money, both time and
in the securities market was estimated at abou.t
X-1875
282
.,..7$1,000,000"000 .. , of which the average on call was about 6CJ% and the
average on time about 40%, or a normal volume of call money, say of
$600,000,000.
The daily turnover in call money, i.e. old loans called
for rayment, loans JY>.ade in replacement thereof, and new money borrowed,
ranged from
~'$15,ooo,ooo
·to $30,ooo,ooo.., and averaged about $20,000,000.
The daily turnover during the year 1919,
howeve~,
ordinarily ranged
from :)Z5,ooo,ooo to :;);4o,ooo,ooo, and averaged about
$~3o,ooo,ooo..
]iiore ...
over it is important to notice there t.as been a disproportionate in.crease in the amount of call loans, as distinguished fr.an t .:irne money,
v.ri. th the consequence that the former, it is now est :Dna ted, constitute
about 75% of the total money employed in the securities market ..
.At a time of such heavy credit requirenents as the present the greater
volU!!'.e of borro.vings, not only. in the aggregate but in the day to day
demands, naturally Often results in high rates for the money loaned ..
Indeed, so reluctant 1Ja.ve the bankers been during the l:a.st few months
to sup-ply t.he large danar.d. for eredit based on securities that the
occasional loaning of re Ja ti vel.y small amounts of money at very high
rqtes often rep:-esents a desire not to secure the high rate (UOted
but to prevent the rate from going very much higher with the consequent
demoralization which rd.ght rssul t.
Intermittent Factors.
There ~e certain other factors, the influence of which ie
principally manifested in intermittent wide fluctuations in the daily
r<1tcs or in the rates which cil.}?ply for brief P·3riods.
T!v:J incre:ised
Xl875.
t
... a-
volume of der.Jand loans called daily fCll." p3.yment noted above,
coupled with the decreased amount of t
jme
money looned on securities,
produces more cr.r less apprehension on the part of
bol~rowcrs
their ability to r e.-borrow money called for payment,.
as to
This .a.ppre ...
hension, quickened by tr.e number of insistent borrowers bidding
at times when momentarily loanable funds are exhausted or are
•
offered in small quantity, frequently results in competitive
bidding for fQmds vhich advames the rates for a day or part of
a day beyond the actual necessities of the si 'blation•
.Another active and important inf.J:ueroe which has recently
affected the supply o£. :funds available :for collateral loans and
precipitated at t.imes a rise in the rates, has been the periodic
transfers of' Governnent deposits from depositary banks to the
Federal Reserve .Banks in connection with the fiscal operations
of the Treasury.
SUch ·withdrawals result in. the depositary banks
calling money fran the securities narket, which causes sl1arp
advances in the rate bid :for call money in replacement of the
loa.ns called :for pagment.
RA~S
.ARE DETERMINED BY TEE OPERATIOlf
OF THE LNil OF SUPPLY .AND DEN+&® ..
The underlying cause of fluctuations
am,
es:pecially of
increases in call money rates is the optration of the law of
.
supply and demand..
In other words, as the supply Of loanable
283
X-187b.
funds diminiShes in proportion to the volume af: the d.enand, the
rate for collateral denani loans a.dvances4
However, in the case
of the d.ai!y borrowings of call money -- to vdnch tl1e abnormal
high and lO'li7 rates apply and which represent but a comparatively
small proportien
iniii~nta.l
\if
the total out standing loans -- other fa.etors,
to the temporary circumstances and conditions of the
market, tend in times Of stress to greater £luctuations in rates
than result from the more narrral operation of the
1~
which is
reflected in the rene,wt~ rate for the greater volume of the outstanding call loans-.
The renewal rate ia ·regarded as tre real
barometer of market c an.ditions and its fluctuations tlroughout
the ,longer periods more re:arly reflect the relation between tl:e
amount Of the loanable funds and the amount of the demam.
In
other words, high renewal rates are mainly due to other dema.nis
for credit, resulting in part from the increased requiremmts of
the commercial conr.runity ani in part from other tanporary factors,
such as depletion of bank reserves resulting either or both from
credit
e~-pansion
or loss of reserves through gold
e~rt,
specula-
tion in commodities and real estate, and congestion of commercial
transactions incidental to slow or interrupted transportation.
284
285
:1-1875
ComrnarcieJ, Rates are SimilarlY: and lndependent1y Petei'tnined.
The operation of the law of supply and demand is equally
~ffecttve 'in determining the rate for commercial loans and all
other borrowings.
In fact, rates for commercial loans and rates
for collateral call loans have a common root in the law of supply
a.nd demand, and the conditions which affect one, 1n the main affect
the other, although not in like degree, as is
demonstrate~
by the
far wider nuctuation of call rates and· the higher points to whic)J
they go.
The rates for call money do not determine and have not
ax'3rted an
ings.
i~ortant
influence on the rates for collliilercial borrow-
It is the universal custom of the bents, to satisfy first the
commercial n3eds of their customers.
They feel an obligation to
customers but none to those who borrow in the open market on
securities.
Besides as the reeou.rces of the banks mainly come
from the commercial customers, their own self-interest compels a
.,
~reference
in favor of their commercial borrowers, since failure
to grant them reasonable accommcda.tion would induce them to withdraw
their deposits and so l'educe the ability of the banks to do business.
Although the money of the banks and trust companies comprises by
far the greater proportion of the money loe.ned. on the securities
market, an examination of the prevailing rates on comnercial. paper
at times when the call money market is particularly strained indicates
that there is little causal relation between the rates for call money
and those on commercial loans..
~xhibits
Nos .. l and 2, showing
respectively the rates for call money on the
New
York Stock Exchange
dwing the years 1906-1919 and the rates for comnercial paper in
New York for the period from 1915 to 1920, are attached.
286
X-1875
-1.1-
'POSSIBILITIES
O~_QHA~~J.Jl.J'BE _QQNDl~i'lQNS
..QF~fEE
r:;t(.l,
w~:r.:rF
So long as collateral call
AND_METHODS
'1/h\:&.:tu:T
loans are made under prevailing
conditions it is difficult to see how the present situation can be
altered, because of the impracticability of controlling the underlying cause of high rates, which in the last analysis, is the
excess demand over supply.
An attempt to control the rates for call loans by the establiSh-
ment of an arbitrary limit at a low level, without the ability to
modify the causes above enumerated which operate to increase rates,
would be distinctly hazardous, for the reason that up to the point
where the arbitrary rate would limit the supply of new money,
speculation and exp;:msion might proceed unchecked and the natural
3lements of correction or regulation would not obtai.n.
words, high rates act as a deterrent to
expansion of credit..
over-specu~ation
In other
and undue
On the other hand, should the supply of
money available at a fixed maximum rate become exhausted, liquida-
.:
tion might suddenly be forced because the demands for add.i tionnl
accommodation for the consummation of commitm"?nts already made
could not be met.
The effect of such liquidation would be to
embarrass not only investors and dealers in securities, but
frequently might affect dealers and merchants in corrmodities as
well,
As an example of the latter, the case might be cited
287
-12 -
of a commitment to purchase a. ro"Und amount of cotton on a
certain day.
Many of the houses on the Cotton
Exchan~
are
also members of the Stock Exchange. and frequently bo:tro·,•.- very
larg3ly on the Stock
Excha~e
against investment securities
to provide funds for settling their
tr~sactions
in cotton.
If, therefore~ when an important cotton settlement is imminent,
borrowings on securities could not be availed of, the cotton
transaction could not be consummated
and a . drastic liquidation
through sale either of securities or of the cotton D2ight be
requi:ted to avoid default.
Similar consequences might obtain
in the cases of transactions by members of other eommodi ty
exchanges who are also members of the Stock Exeha,nge and have
recourse to the call money market.
THE IMPORTANCE OF A "CALL MONEY" MAEKET
Call money in some form is indispensable to every important
financial center.
There nru.st be not only an outlet for the emplOY-
ment of funds temporarily idle • but a large volume of call and
short time money is essential to the successful and economical
..
conduct of business.
It is particularly essential to the international
and domestie commercial business but the diversion of the use of the
major portion of such money to the securities markets is not in
accordance with sound banking principles.
It is to be noted that
288
X-1875
-13in no great world market, other. than New York., is the call money
market so dependent upon investment securities and so susceptible
to speculative influences.
In· other markets the reverse is truet
as their call money is based p1•incipally on commercial paper upcn
which realization can be had at the central bank, at a price, in
case of need.
'We have seen that in this country call
leans on
securitieG laCk this essential quality of liquidity required for
quiCk and certain realization, and that this fact has now been
more generally taken into consideration by our lenders.
But the
safe and successful divorce in this country of the use of call
. ...
:
money from i·ts dependence upon investment securities as a. basis
requires careful study in order that safe and adequate methods
may be substituted for the present mdthods
of the securities
market.
Term Settlements.
The achievement of this end probably depends upon the
successful devalopnant of a. plan for term settlements of the
..·
balances
r~sul ting
i'rom operations on the Stock Exchange, in
lieu of the present method of daily settlements.
The principal
effect of such a change of the method of settlements woul.O. be
to relieve the call money market from the necessities of the
securities market and release funds now used in collateral call
loans based on investment securities for employment in call loans
.
based on the collateral of more liquid securities, of a commercial
289
1-1875
-14nature, generally recognised abroad as the preferred bases for
demand loans.
From this change a broader discount market would
naturally develop.
Under term settlements the borrowing required
by the securities market would be on the oasis of short tiroe
accommodation, i. e. for the term between settlements, whether
they w~~ 6weekly, fortnightly or at other intervals.
Agitation for the improvement of the present method of
settlement of stoCk exchange contracts has extended over some
years and as the result of extensive studies and deliberations
of officers and members of the New York StoCk Exchange, as well
as bankers, an importAnt step has been taken to provide enlarged
clearing facilities through the organization of a new corporation
known as the Stock Clearing Corporation, which is expected to
begin operations in April, 1920.
A general description of the
purposes and contemplated operations of the corporation is contained in the :pamphlet attached hereto as Exhibit No. 3.
The
functions of this corporation include providing facilities for
clearing contracts between members, for the receipt and
deli~ery
of
securities between members and banks, trust companies and others,
and for the clearing of collateral call loans.
It is not asserted
or expected that the institution of these operations will materially
affect either the amount of money loaned from one day to another
on the call money market or the rates of such loans, but it is
expected that it will opt!rate materially to decrease the amount ot
batik certifications on day loans, which the .present practice requires
290
-15in the interval between paying one call loan and replacing it with
another on the same day.
It should be noted that the mechanism
afforded by the corporation is an indispensable. prerequisite to
the establianment of a system of term settlements •
. The more recent and definite development toward the sub!titutian of term settlements for the present system of daily
.settlements may be said to have had its inception in the action
bf the Ametic<:lll Acceptance Council at its annual meeting on
De~embei' ~·~
1919.
At that time the following resolution was
adoptedt
"whereas, The present method of. daily stock
exchange settlements, with its dominating and often
u.rlsettl~g effect on the C·'1ll money market, influences
adver.e1y the development of a wide and heal thy' disco'UZ'lt
·
ll'latket in the United States:
"Resolved, That the Chairman of the Executive
Committee be authorized to appoint a committee consisting of members of the Ex9cutive Committee and other
individuals to study the advisability, ways and means
of modifying the present system of settlements on the
New York StoCk Exchange and substituting therefor some
system of periodical settlement, with power to take such
steps as may seem advisable in the case. 11
A copy of the annual report of the American Acceptance
Council is appended hereto as Exhibit No.
•
resulution appears on page
4, in which the
5, e-nd the report of the Chairman
of tne Executive Committee ~pears' on pages
The Committee thus provided for was
16
to 27, inclusive.
a~inted
extended conferences in which the :Problem was
and held twc
ful~
discussed,
both from the point of view of the banks and of the Stock Exchange.
..
For
ill~straticn
of the sUbject matter o£ the discussion there
is attached hereto as Exhibit No. 5, a detailed report ccmpiled
.
by one of the members of the Conkdttee, Mr. Samuel F. Streit,
Chairman of the Commdttee on Clearing House of the Stock
E~ange
describing the term stttlement operations in London <md on the
European continent, which presently will be published by the
Americc..n Acceptance Council.
Through its courtesy an advance
copy of the report haa been received.
There are also attached,
as ·Exhibits Nos. 6 and 7, reS};lectively, two other publications
of the American Acceptance Council,
"Accept~ce
Corpor-ation",
by F. Abbott Goodhue, Vice President of the Fitst National Bank
of Boston, Mass., and "The Acceptance as the Basis of the American
Discount Market", by John E. Rovenaky,. Vice President of the
National B"'nk of Commerce, New York, in which on pages 14 and 22
res'Peetively, the n'3cessity for term settlements as a means of
relieving the call money market from the necessities of the
securities market and as a precedent to a bro&d and stable discount market is discusset.
The members of the committee have unanimously expressed the
•
o'Pinion that the adoption of a. term settlement by the Stock Exchange
would offer advantages in that it would eliminate duplica.ti•n of
the handling of .securities and in payments.
..
The cemmittee holds,
292
X-1875
-1.7however, that, L"lasmv.ch
o·p: the Ex•,-:hangc.
W0D~d.
8S
the adc.:ption of a term settlement
involve changes of great irr.portance, both
to be.:..1ks and to m:::mbers of +,he
Ex~haD.ge,
caref1u study of the sub,jec'.; by the
the tez·m
settl~ment
com.n:.i.t~ee)
and in eny case
can not be put into o:peraUon until the new
system of daHy Stock Exchange
Cleru.~ing
it w:i.ll require the most
settlemen·~s
through the Stock
Cori·Or<;;.ticm, abov'3 referred to, has been :perfected
and h<:ts been in practical op'3ration for a reasonable time ..
.
293
b
w. P. G. HARDING, GOVIBNOI.
-
DI'J'ICIO MIEMBI:IIll
ALBERT STRAUSS, VJCI GOVIBROI
ADOLPH C. MILLER
CH.t.RLES S. HAMLIN
HENRY A. MOEHLENPAH
»AVID• F. HlJuSTON
JIICBITJ.IY ep THI TRIASU IT
C::HAIRMAN
FEDERAL... RESERVE BOARD
JOHN SKELTON WILLIAMS
COIItT.OLLIR OF THI CURRIN~T
W. T. CHAPMAN, SECRETART
R. G. EMERSON, AIIISTAM'f SECRET.U:Y
,.DDRI!S!II RIIPL. Y TO
FEPERAL. RE$ERVJ!: BOARP
W.M,IMLAY.FIJCAL AlENT
WASHINGTON
April 3,1920.
'
X-181:'0
..
Subject:
Tax on Deficiencies in Reserves against Deposits-
Sir:Under terms of Section 11, sub-section (c) of the Federal Reserve Act,
the Federal Reserve Board is authorized and empowered to suspend any reserve
requirement s-pecified in the Federal Reserve Act, "Provided, That i t shall
establish a graduated tax upon the amounts by which the reserve requirements
of this Act may b~ permitted to fall below the level hereinafter specified~"
Section 16 of the Federal Reserve Act provides in part th~t 11Every
Federal Reserve Barik shall maintain reserves in gold or lawful money of not
less than thirty-five per centum against its deposits and reserves in gold
.
of not less than forty per centum against its Federal Reserve notes in actual
circulation. 11
The Federal Reserve Board has al~eady by regulation established a
graduated tax upon the deficiency in note reserves in the manner expressly
required by the second proviso· . of sub-section (c) of Section 11, but i t
has not heretofore established any specified graduated 'tax v:pon a deficiency
in reserves against d~osits. You are advised therefore, that in accordance
with the requirements of the law the Board has now established a te.:x of one
per centum per annum upon the amount of the deficiency in reserves against
deuosits provided, however, that whenever those reserves fall below thirty
per centUm the tax upon the amount by which they have fallen below that limit
shall be increased by one per centum per annum v.pon each five per centum or
fraction thereof that such reserve falls below thirty per centum.
You are advised that the rate of tax hereby established is retroactive
and that any barur to which it applies shall forward each month to the
appropriate officials of the Treasury Department, the full amount of any tax
due and payable by such bank for the preceding month.
This ruling is made by the Board in order to comply with the requirements of the Section of the Act above quoted but is not intended to change
the Board* s present policy of requiring Federal Reserve Banks to ·keep as far
as nossible the legal reserves required by rediscounting with other Federal
Reserve Banks.
\
)
.
294
..
X-1880
-2-
There is enclosed for yo~ further information copy of a letter frorr.
the Secretary of the Treasury describing the manner in which taxes on
account of reserve deficiencies shall be paid.
..
Very truly yours,
Enclosure.
Governor.
To Chairmen of all F.R. Banks.
·-
•
295
Anril
~.1920
X-1880 a
Dear Governor Harding:-
t
It is desired that payments be made by the
Federal Rese~e Banks through credit in the account of the Treasurer
of the United States with such banl':s at least once each month for the
aocoant of taxes on accdunt of deficiencies in reserve against denosits,
and also taxes on account of deficiencies against gold reserve held
against rederal Reserve. Notes, in accordance with the provisions of
Section 11, Pat.(c) of the Federal Reserv~ Act authorizing such payrrents.
Th~ amounts of such credits ih the account of the Treasurer of the
United States should be supported by certificates of depoeit iss~ed in
the name of the depositing bank on Form No. 1, National Banks, separate
certificates being issued for taxes on account of deficiencies in reserve
against denosits from the amounts of the taxes on account of deficiencies
in the gold reserve'against Federal Reserve Notes. It is the intention
of the Treasury Department to classify payments received on account o£
both kinds of the above mentioned taxes as Miscellaneous Revenues of
the Government.
In accordance with the usual Treasury practice
of making verifications as to accuracy of amounts collected on account of
obligations due to the Government, it is requested that ~onthly reports
be made by the Federal Reserve Banks rDaking payments of these ta.'tes to
the Division of Public Moneys of this office, such reports to be in such
form as will enable a verification of the amounts actually due in each
cas~, and to be certified as. to accuracy by an official of the Federal
Reserve Board.
V113ry truly yours,
(signed)
Ron. W.P.G. Harding,
Governor, Federal Reserve Board,
Washington, D. C.
D.F. Houston,
Secretary.
;·.
296
DAVID
r.aousroN
1 - Y Cll' THI TR&ASUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
.C:ONPTROU.II OF THI CUUINCY .
ADDRUS REPL.Y TO
FEDERAL RESERVE BOARD
WASHINGTON.
April
Subject:
W. P. G. RAIDING, GOVIRNOI
·
ALII aT BTIAUII, YICI GOVIRil!R
ADOLPH C. IIILLII
C:RAILII S. HAMLIN
HENRY A. IIOERLINPAR
W. T. CHAPIIAN, IICRITARY
8. G. EMERSON. AISIITAHT S&CIITAIY
W,II,IIILAY, FIICAL Ae.~T
3,1920.
Advertisemente ot S.tate fl4ember Banks.
Dear Sir:The Federal Reserve BoM'd has fran time to time been requeste.d.
to pass upon the propriety of State member banks advertising that they
are under o!' subject to Government, Fe4.eral or National su.pervisicm by
reason of their membership in the Federal Reserve System. · Indivi~ual
letters with reference to this subject have be~ written in answer·to
specific inquiries and on page 65 of the January, 1920, Bulletin, the
Board has pilbliebed a. more general ruling. It ap-:Jears, however, that
in v1'9w of the facts which have recently be")n presented to the Federal
fieserve Board some fur~er co~aats are .necesaary.
..
There is, of course, no question that any bank ••hieh is a
n:ember of the Federal Reserve Syste111, whether a national bani.:- or a State
bid;, IDfJ.Y advertise the fact of u.s membership and the nature cf the
supervision to which it beeOllles subJect because of that membership. It
has become evident, ho.vever. that there 1s a perhaps unconsciou.s tendency
on the part of a few State member baril.-:-e to ab'\lse this privilege. It h
evidenced :tn the form of aliverUsements which imoly ·that they are under
-preciselY the same supervision as Nat.ional banks as well a.s 1.mder the
supervision of the State ban1:ing a.uthori ties. In so fa.r as these advertisements create the itnpTeesion that State member banks are subject to
the sawe supervision as national banks, they are inaccurate. The Board
thirika it advisable, therefore, to state as definitely as·possible what
it believes tG be -the respective··rights and limitations ot both National
and State member banks in making reference to Government supervision in
these advertisements.
Onder the terms of Section 9 of th~ Federal Reserve Act a
State member bank whUe remaining subject to the jurisdiction and super...
vision of the State banl.dng •dhorities, is subject to examinations made
by direction ot the Federal ~eserve B()ard or th-3 Federal Reserve Banks
by examiners ael$cted w al;)lJJ'OVed by the. J'ed.eral Beserve Board. Tha~
section also "Dr(Wides ill t·~rms
no State bank which becon:es a ;nember
of the ll'eder&l Reserve Syctem Shall be subject to examination under the
pravi.sions ot Sectioa .21 of the Y'ede"al Reserve Ac\ which r-,lates to
eaninaUons t!aaG.e by the Comptroller of the Cwrency. ln Yie111 or thef'ac,. however. 'that the Federal h•erve Board is a Govemment.al bod7 trhoSe
'ha'
297
-2-
X-1882
members are officers of the United States, State member banl:-s ,vhich are
su~ject to examinations made by the direction of tha Federal Reserve
Board, and which are exyressly made subject to the provisions of the
various Federal laws, may properly advertise that thev are suhject to
or under Governmer!t, Gov"lrnrrental or Federal supervision or su:9ervision
of th~ Federal or Unit8d States Government as well as that thev are
under State su~rvi$ion.
The Federal Reserve Board feels, hO<"'e"'er, that there al'e certain
practical reasons that a State membet bank sh6uld. not advertise ~hat it i8
subject to or under NationaJ,. supervision or supervision of the Nation@).
Gover~ent.
This is not because there is any fundamental difference in the
meaning of the words "National" and "Federal" as a1'jplied to the Government of the United States, but rather because the word "National" when
used in reference to banking supervision has become definitely associated
with the supervision to which National banks are by law subjected. While
it is true that National banks are subject to special examinations ordered
by the Federal Reserve Banks, or by the Federal Reserve Board, nevertheless,
they are examined periodically by examiners appointed by the Comptroller
of the Currency and are under the general supervision of his office. The
Board believes; therefore, that when a State meThher bank uses the word
"Nati ona1 11 to describe the supervision to which it is subject-:;d by reason
of its membership in the Federal Reserve System, the plausible inference
of the public is that the supervision is the same as that to which National
banks are subjected. There is no doubt that that inference must be avoided
so far as it is possible to do so.
The Federal Reserve Board has :previously expressed the opln~on that
staten:ents by State memoer l)anl{s to the effect that their memoershi:p in
the Federal Reserve System gives "double securitY 11 or "dou.ble protection 11
are misleading in so f~r as thev imply anything more than su]©rvision by
Federal authorities or su£"2;est anythin~? in the nature of a Governmental
£'\larant~-3.
So also, while National b&nks are in a sense sul)ject to ·double
supervision. that is:;! the su-pervision of the office of the Corrrpt,roller of
the Currency and th~ supervision of the Federal Reserve Board through
special examinations made by Federal. Resene Banks with the a-pnrovai of
the Federal Reserve Board, nevertheless, it would not be prope:r for a
National bank to edvertise that that dou.ble supervision gives "-dOUble
security" or 11 d01lble 'Protection" to thi'Jir de'J)ositors.
......r
X-lf82
-3.-
These facts are referred to merely to indicate that all member
banks, whether State or National, must exercise reasonaQle care in the
selection of their advertising mat.ter and must exclude all statements
which are not consistent ~~ith the facts or which may inferentially
mislead the public. These are matters in which th3 Federal Reserve
Ban.1:s ma,.y be of real assistance through their CO\UlS·"ll and advice to
their respective member banks. It is assUli.ed by the Federal Reserve
Board that the advertisements. which have been called to its attention
recently and which in fact may result in misleading the public are
not intentional or conscious attempts on th,~ "?art of the member banl-s
by which they were issued to over-state the facts, but rather unfortunate choices of phrases intended by them as a legitimate statement of the advantages afforded by membership in the Federal Reserve
System.
Very truly yours,
Gov'3rnor.
to Glairmen
of
all F.R. hanks.
298
299
X-1&83
PROGRAM FOR GOVERNORS• CONJERENCE BE.GINNING
WEDNESDAY, A'PRIL 7, 1920.
The meeting will convene at 10:30 A. '11. in the Assembl.Y. Room
of the Federal Reserve Board in the National Metrooolitan Bank
Building.
1
Pe¥.
w~4nesggy, Anril 7th!
Morning session: Discussion· of United States Treasury matters
1'11ith the Secretary of the Treasury.
Afternoon session: Conference with the Federal Reserve Board.
First
Second.Day, Thursday, Aprn E:th:Morning session: Discussion of assigned topics.
Afternoon session; Discussion of topics.
Third Day, Fridaz. Anril 9th:
.
Morning session: Discussion of topics.
A.t'ternoon session: Conference with the Federal Reserve Board..
Fogrth Day, Saty.rday. Aptil lOth:
If it is found that it will be necessary for the Conference
to meet on Saturday, the final conference with the Federal R3serve
Board will be held Saturday morning, and the entire day Friday will
be devoted to the discussion of assigned tooics.
300
w. P ••• HARDING, GOYIINOI
DAVID P.HOUIHofN
IICa&'r.t.RY OP THI TRIAIUIY
CHAIRIIAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COMPTIOLLII OF THI CUIIIIICY
ADDRU• RIIPJ..Y TO
FECERAL RESERVE BOARC
WASHINGTON
ALIIRT STRAUSS, VICI GOYIINOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SICRITARY
R. G. EMERSON, AISIITANT SICIITAIY
W, JI,IIILAY,PIICA~ AIINT
April 5, 1920.
X-1884
SUBJECT~
Dear
Federal Reserve Clearing System ..
Sir~
There is enclosed herewith fer your infor:rration
copy o£ a letter written to a United States Senator in reply
to a letter frtlm him to the Board with regard to a complaint
made to the Senator by a State banking commis.sioner that bank.;
in certain States have been given special privileges by the
Fedex·al Reserve Beard in being permitted to. ctintinue their
exchange charges while b~-s in other States are remitting
at par.
Very truly yours,
Governor.
Enclosure.
Lettc::r to Chairm:m of all Batllrs.
301.
Anril 1, 1920
X-188'1
I have your letter of 1.1arch 31st enclosing co-oy of a letter frou
tr.e Comrrissioner of Banl-in£ of th;; State of Wisconsin..
I am rr,uch obliged
to you for qiving me an onuortuni ty of removing a mistaken impression that
the
Cornrrissioner a"l;)pears to have that banks in certain states hav-3 bezon
given special privileges ·by th9 Federal Resarve Board 'by being p13rmi tted
to continue
th~ir
exchange charges while banks in other statas are re-
mitting at :par.
I enclose for your information copy of a response made bv the Boar.:l
on January 26, 1920, to a resolution of the Senate, which explains at considerable length the ~osition that has beGn taken 'by the Federal Reserve
Board and the various Federal Reserve Baru:s in the Tatter of the country\"iide clearing of checks.
In this comrunication reference is rr..ade to the
nrovisions of Sections 13 and 16 of the Federal Reserve Act and to the
opinion of the Attorney General of the United States as to the intent of
these sections.
The Board is
char~ed
with the duty and resnonsibility of
inau,rsurating a complete check clearing system throu;hout the United States;
the Federal Reserve banlrs must receive at par from
merrb~r
banl:s checks
upon whomsoever drawn which are payable unon presentation, and the so-called
"Hardwick Amend.rr:gnt" to Section 13 authorize
lJanks to make
11
I>
both merr.'b'3r and non-rr:err.ber
r2asonabl3 charges, to be determined and regulated by the
Federal R2serv3 Board, but in no case to exce8d 10 cents per $100 or fraction
ther~of,
based on the total of checks and drafts :presented at any on8
t~e,
for collection or payment of checks and drafts and r•'3rr,ission therefor by
302
X-1631
-2-
exchange or otherwisej but nQ...such charges shall be made ar,;ainst the Feder81 Reserve Banks,
11
In view of the o~inion of the Attornev General, the Federal Reserve
Banks do not feel authorized to pay any charges to
b~-s
for remittances
for checks dra~ upon them and sent for collection by the Federal Reserve
Banks.
While banks are still authorized to charge each other for such
service, thev are prohibited from char~ing the Federal Reserve :Banks,
which are reqtlired to rGceive from 1Lember bank;::; at par all checl:s which
are payable u-:9on presentation.
Reserve Banks found
them~elves
Thus it came about that the Federal
in possession of checks dravm upon non-
~ember banks which they cculd n&t send to the banks upon which the checkz
were drawn for the reason that those banks had declined to remit at par,
and it became necezsary therefore, as the law does not provide any penalty
unon non-rr.elTber banks for refusing to remit at par, for tee Federal Reserve
Banl"s to begin a campaign of education to induce non-member banks to remit
at :oar, or failing this, to provide themselves with rsome other means of
collecting checks
dr~~ u~on
non-assenting
banks~
·Exchange charges are ba;;ed primarily upon the cost of :naking transfers of funds from one section or from one country to another.
In our
dealings with foreign countries exchange is in our favor or against us
according to the balance of trade and the flow of credits, and under
normal c _ndi ti ons the rate of exchange is governed by and a;rproximates
the co·st of transporting gold.
This coGt includes carriers 1 charges,
insurance, interest for tirr.e in transit, and less by abrasion.
So, in
our dorrestic exchanges, the charge was based originally u-pon the cost of
transferring funds from one point to another.
Sixty years ago when our
trans"!)ortatio.n facilities had not be m fully developed md exprr2ss rat2s
303
...)-
were high the average cost of our dorr.estic exchanges was about
or~l5 per $1,000.
As our transportation facilities improved, as the
country became rr.ore thickly settled and the flow of goods between the
various sections became larger and more constant, the result was that
balances could be settled through the medium of bank drafts without
involving the shipment of currency in such large amounts, and exchange
costs declined so that thirty years ago the maximum charge was generally
about $2.50 per thousand dollars.
During the past twenty-five years ths
actual costs of making domestic exchange have
the consequence has
be~
be~n
decreasing steadily and
that there has been a fall in the average charge
made by banks, so that during the past ten years $1. per thousand dollars
has
be~n
the maxirr.um charge in many sections of the country, although in
some of the less thickly populated and more remote sections higher rates
have obtained.
Since the establishment of the Federal Reserve Barurs the cost of
transferring balances from one section of the country to another has been
almost entirely eliminated.
Each Federal Reserve Bank carries a portion
of its gold reserve in a gold settlerr.ent fund which is kept in the
Treasury at Washington, and there .is a daily telegraphic clearing conducted by the Federal Reserve Board for all twelve bariko and for their
branches.
The areount of gold in the fund is practically a stable quantity.
but its ownership varies from day to day according to the debits and credits
to the
diff~rant
banks.
Transfers are made by the Federal Reserve Batiks
,
304
X-1831
-4-
for rr.ember banl~s, and also f•r non-u.eJ,:ber banks through the medium of
member banlcs, by telegraph without any charge whatever to the
me~ber
bank or its client~ all costs being borne by the Federal Reserve Banks.
Thus, a bank in Wisconsin or California, Maine or Texas, can secure an
instantaneous transfer to any one of the twelve Federal Reserve cities or to
the twenty cities where there are branch Federal Reserve Ba!ll:s without any
eXl_:lense whatsoever, and the sum total of these transfers is settled daily
throuQh the gold settlement fund above referred to.
The Federal Reserve
Barr:s pay all costs of transporting currency to or from their member
baclrs as well as transportation charges on currency sent them by nonme-r:ber banlcs in payment of checks.
The total volume of transactions through the gold settlement fund
in the year 1919 was approxiroately $74,000,000,000, and the total cost1
•
including the exuen~e of the leased wires, was about .$250, 000. This cost
was borne by the Federal Reserve Banks and does not represent any expense
whatever to the member banks or their custon:ers.
the basic cost of mrucing domestic exchange in
tenths of· a cent for each $1,000 transferred.
th~
Thus it will be seen that
year 1919 was three-
A charge of 10¢ pgr $100
on the ar.:ount cleared through the Gold Settlerrent fund would have invr>lved
an expense of $L for each $1,000 transferred, or about $74,000,000 for the
entire amount.
The intra-district clearings made by the Federal Reserve Banks,
elirrinating duplications, amounted to about $135,000,000,000, and the
total expense of these transfers was borne by the Federal Reserve Bacl:s.
305
.X-1881
-5Had the:! Federal Reserve
Banl~s
be :;n obliged to pay for these transfers
at the rate of 10¢ per $100, it will be seen that the total expense
•
would have been $135,000,000, which aiTount is :far in excess of the
total earnings of the Federal Reserve Banks and therefore could
not have beBn absorbed by them.
have had to have
so it
1 ~ill
be
be~n
s~~n
If not absorbed, the charge would
transferred to the denositors of the checks,
that a charge of 10¢ per $100 unon the business
'
.
handled by the Federal Reserve Banks would have involved last year
a cost to the com•rerce and industry of this country of at least
•
However, the nractice of making exchange charges, which began
when there was a real justification for such
char~es
expense of transferring funds, had becOJ.c,e so
de~ly
because of the
rooted that most
of the banks very naturally looked upon the charge as a normal and
legitimate source of revenue and were reluctant to give it up.
Until
the Federal Reserve ..ll.ct was amended in June 1917 the Federal Reserve
Barurs
had no mandate for undertaking to collect checks on non-rr.ember
banks at par, and their activities with respect to clearances were
devoted rrainly· to the collection of checks on member banks.
But after
XlbSl
306
the passa~e of the "Har,..i.wici~ .Amendment" with the provu,o abov-e y_1.1oteu.
which is una.erscored, :;_ t became the dut;r of the Federal res0rv8 banKS
to undert~e to establish a cumpl8te check c1earin~ sy~tom, 1ncl1.1ain~
checJ~s
c.lrawn on nvn-member banKs as W'3ll as on members.
There an~
approximz,tely twenty thousand non-member ban1:s in thi& country, ar:1:.i.
at the time the Act was amcncleu, three ;aar., a 0 u, a J.ar!.>e waJun.ty of
them were firt.1ly committed to the policy of makin,; an exchan""e or
service ehar~e for rerc1i tt in,; fur' checks drawn upon them.
1t was
clearly impracticable in the absence of soue le~islation l)enalizine>
banks which woulu nut remit at par to csta1Hish a complete clearin::;
system over night.
It wal:l thercfure detcm.ned tu bei,in a pru:;.;rcSblVe
carnpai;n of education, alon 6 the line of least resistance.
A lare;,e n-.aJor'~ty of the banLs 1n N~w EagH1.rld have been for the
past twenty years remlttine,
at :par, anu J..t
~~as
t~
the ballh.s uf tne hoBton Ciearin::, House
decidecl to establ.ish in thl'.t o.istrict the fir~t
complete Federal reserve c · ecring sys tern.
' t
A fevv banks 1n Vennont
ObJected, but within a few· munths they all cruut.: 1ntu line.
was then extended to the Now York uistr1ct.
The system
In a part of that district
the opliOIIiition was r.1ure detenn:_neu and it wat. necessary for a w·hile
to maKe co'llections on some uf the ban.,;,s
throu~h e~q)ress cur.1panie~.
Then the system was extended to the Phuadelphla d.is tric t, and a.i torward
to the Chicago, Cleveland, Kansas City anti Dallas uistrlcts, as well
as to certain stateb in other uistricts.
It was deemed wise not to force matters by r.1akin6 cul.tections
throu.;h the e.r.-:resc companies or other a,;encies until th(; non-member
XlS8l
307
-7banKs had had the who1e :>ituation fully explained. to them and vvere
given an oprortunity of a 0 reein.: to ma't;;.e rem:.ttances at par.
Then
when a maJority of th~ ban:.-.s in a Federal reserve district ha.i so
agreed arran 5 ements were ma4e to collect on non-assentin~ banKs by
means of, agencies, .announcESm<:nt then
being made that the system was
operative throughout the entire district or in particular states in a
district.
There is pronounced opposition in Minne~ota, an~ the Fe~eral
Reserve :B.snk of Minneapolis does nut feel that the time
1S
opportune
for the announcement of a compiete c1earin5 systen. .;,n its Ci.istnct.
Northern Wisconsin is in the Minneapolis clistrict and southern Wisconsin
in the Chicago district, hence the apparent inconsis tencr referrecl
to by the Cmnmissioner.
Northern Louisiana is in the Dallas
southern Louisiana in the Atlanta district.
~istrict a~
The Dallas bank has per-
fected its clearins system while the Atlanta banK has nut.
In the
Atlanta'district, which embraces parts of Tennessee anu Mississippi
and all of Alabama, Georgia and Florida, there is very
6
reat opposition
to the Federal reserve clearine;, s,rstem on the part of state ban.t.s.
This opposition exists also in North and South Carolina, which are in
the Richmond uistrict.
It is not so pronounced in the State of Virginia,
and the Federal R8scrve Bank of Richmond has announced that the clearin5
system iS in effect as of April 1 throughout the State of Virginia, but
it is not
in.;
y~t
in effcdt in the
Carol~as,
except as to member anu
ass~nt
b~s.
I enclose herewith copy of a law which has recently been 8nacteu
by the Legislature of Nlississippi, from which you will see that
ban...~s
308
...... &....
in that state arc I'e;_,tuirc~ to r;ay. cheC.t"S• by whomsoever fii'tSente-...., Vvhich
come throuih another bam~ at the rate of s99.90 per $100.
of this law :i. t
1s
In view
imposs.iblc for th;; Fc'-'eral reserve bank to enforce
the will of Con0 ress in the State of IVllssissippi.
In GJurb::..a a numlJer
of non--rr:;ember banKs instituted proceec.l.in,:s n.e,mnst t.L1e Federal res.::;rve
ban.J.;;. and secured a temporary inJunction res trainint.J the bank frorr> collectins checks by makirt6 presentation throu 6 h an abent for payment
over the counter, anu. as uno.er the tenr.s of the "Har'-'~vich. Amenclmcntn
the Fcneral· reserve bank cannot pay exchane;e to the banks upon which
checks arc d.rawn, it has no rec oursc e..<cept to ciec line to tat;:.e such
checks at all.
In .Alabama wherd th..; F8c~Grel reserve bDW~ at tcr.1pteJ. to
appoint agents to collect checlcs, it found in many cases that it was
impossible to bet anyone tu accept the asency, anci in one cas..; where a
reputable 7'!;erchant was induced to accept the agency he J,aVo it up after
a fe>.t J.ays because the local banks had c onvinceci him that his business
would suffer i f he continued. to act for the Federal reserve
baru~.
The Boarcl is J.oinc; everythint,; in its power to have the clearing
system apply equally to all sections anu. to all bam..s.
lncluuint:S member
baru:s there are about thirty thousand. ban;...s in the Unite-.1 States and
twenty-seven thousand of them are
DO'V.
remi-ttin:, at par.
The three
thousand which decline to remit are rna-Kin.; a ae ten11ined E;;ffort to o.efeat
the purposes uf the Fede·ral Reserve Act with respect to a country-wiue
checK clearine, system, and unless Cone;,ress should be willin,, to enact
some law makin; it decidedly to the interest of banKs to rc:mlt at par,
just as in 1365, by the exercise of its tax.ins power, Con;_;ress mooe it
XlSBl.
309
to the interest of the state ban:.s to retire th0ir state bank notes,
it is uifficul t to sec how 1t is possible to accelerate! the present
rate of pro6ress in the uevelopment of a compl0te nat~on-wiue check
clearin6 system through the Fe'.iertcl Reserve Bal!i:ks.
In the fore~oing I havo JndeavoreJ to show (l) that there is no
lon.s0r a basic cost to th8 brnLs of the country :..n makin:::, <iomestic
exchanges, (2) that Consress has forbii~en both member
anu
non-member
banks to make exchange or service chare;es again&t the Feu.eral reserve
ban~~s. and.
(3) that the Attorney General of the United St2tcs he,s held
that Feaeral reserve baru:s are not pennitted to pay such charges.
I may acid. that the Feaeral reserve batlli.S
0
ive non-member banKs which
a11ree to rGmi t at par the option of payin~S by check un surne convenient
bankint;; center or by shipm<:;nt of currency at the e;~pense of the Fea.eral
reserve bank.
Stamped envelopes are always sent a non-member banK for
use in makine;; remittances.
Non-member
baru~s
any collection service; they are merely
as~ed
arc not asKed to l_:lerfonn
to waive pcrsunal presenta-
tion of checks drawn upon thGmselves by their own ueposi tors anu. to pay
them throu6h the mails without maKin 0 any charge,
an~
the law appears
clearly to direct them to d.o this.
Some of the baiLS, member ban.rs as well as non-members, are asking
their a.epositors to use a check which has imprinted upon its face some
restrictive clause,
~uch
as "Payable only in exchane;e at current rates",
or "Not payable in cash if ;presented for account of a Federal Reserve ball.K".
I enclose for your further infonnation fonns of nutices which are being
~10
-10-
used by
manufactur~rs
X-113;:,1
and jobbers in various centers in returning
checks to their custoru:~rs which cannot be collected through a
Federal Reserve Bm~ 1 and also copy of a letter ,.vhich I am inf orrr;ed
a well knovm sho~~ manufacturing concern is sending to its customers.
The l~gal ptocesdings against the Federal Reserve Bank of
'
Atlanta, to which referenc!3 is mad~ above, •vere brought in a State
court.
The case was transferred to a Federal court and was heard
on its msrits a few days ago, but up to this tirr:e no decision has
been hand·"d down.
In ·any event, an ap:oeal will nrobably be taken
to a higher court - possibly to the Su~r~me Court of the United
States - and it is nrobable that several rr:;onths will elapse before
a corrmlete clearing syst<:m can be 0stablished in the Atlanta district~
Very truly yours,
(Signed)
W.P. G. Harding.
Governor.·
311
HOUSE BILL !{0.. 651
(As annroved by the Governor TYiarch 6,1920)
AN ACT TO PREVENT THE :FEDERAL RESERVE SYSTEM FROM FORCING THE
BANKS OF THIS STATE INTO WHAT IS KNOWN AS THE P.ARRING
OF CHECKS, DRAFTS, BILLS, ETC:(co:vDVIONLY KNOWN PS
"CASH ITEiVJS"); AND FOR THAT PURPOSE IV!AKING IT
IVIANDATORY ON TBE BANKS OF THIS STATE TO
CH/IRGE EXCH 1 NGE ON SUCH 11 CASH ITEMS"i .AN:
FIX!NG 'tlHE RATES OF SUCH EXCHANGE ..
Section 1. Be it enacted by the Legis1ature of the State of
Mississi1Jni:
That for the nurpose of ~roviding for the ~olvency 7 nrotection 3nd
safety of the baruring institutions of Mississip1Ji. th3 established custom
op the part of the banks of this state to charge a service fee (corrrronly called "exchange") for collecting and remitting, by, exchange ot
otherwise the "Droce"Jds of checks, drafts, bills, etc., (commonly knovm
arr.ong banks as "cash i terns 11 ) is hereby declared to be the law of this
state; and the baru:s of this state, both state and national, shall continue to make such charge as fixed by custom when such "cash i terns" ·
are presented to the payer bank for payment through or by any baclc, barucer,
trust co~any, Federal R~serve Baruc, postoffice, express company, or any
collection agency, or hy any other agency whatsoever; and the amount of
such charge is hereby fix~d at one-tenth of one per centum of-the total
amount of such "cash itemsn so presented and paid at any one time, and
not less than ten cents on any one such transaction; provided, however~
no such charge shall be made on checks or drafts ~iven or drawn in settlement of obligations· due the State of Mississip1)i or any subdivision thereof, or of the United States. And that no such char~e can be made by banks
for the collection of checks de1JOsi t·3d with said barnes, where the check
is drawn on any other bank in the same municipality, city, town or village,
this being the long established custom of such baru~s. And, provided that
nothing in this act shall be deemed to be wandatory U1JOn the banks to
charge exchange on checks or drafts payable to a person in this state,
and drawn on a barn', trust corr;pany or person within or •vi thout this sta:te,
but it shall be optional with such banks wh3ther they shall charge exchan,;;e
on checl':'s or drafts "Oayable to a person within this state, and drawn on a
banl-, trust corrpany or person within or 1Nithout this state.
312
X-18elA
Section 2. That no offic8r in this stc.te shall protest for nonpayrrent any such "cash i tenj", whetl. such non--payrr.ent is solely on a.acount
of th~ failure or refusal of any of said a£encies to pay such excha~ge;
and th':!re shall be no ri;;ht of actiont either at 1e:"' or in equity, against
any bank in this state for a r:~fusal to pay such cash i tern, when such
refusal is based alone on th~ ground of the non-pay:.r.ent of such exehilnge.
Section 3. That if for any reason the courts should hold that
the national barll:s in this state are not required to char,~e ana collect
such exchange, still this act shall remain in full force and effect as to
all other banks in this state, and in the event of such holding by the
courts, or the refusal of any national bank in this state to co~ply ~~ith
this act, then it shall be optional with state banks located in the sa~e
munici-pality with a national bank or state banl~s which are members of the
Federal Reserve System as to whether such charge shall be made.
Section 4. That this act sh~ll take effect and ~e in force from
and after its nassage.
313
X-1379
FORM
We
BETTER.
are returning herewith your check for $......______
The reason we are compelled to return this check is that the Federal
Reserve Bam' is not permitted to handle it because the terms of payment are
in conflict with the Federal Reserve banking laws.
All the banks we do business with are members of the Federal Reserve
System; therefore, we must use this system for the c9llection of our checks or
else change our banking connection, and as all of the large banks in this city
are rr.embers of this system, we would find it impossible to ;ri8J:e this change.
As
you, no doubt, kn~~, it is the p~ose of the Federal Reserve System
•
to make your check and all other checks good at par all over the country, and
it is, in our opinion, very much to the interests of the business man of this
country that this be done.
We have estirr.ated that if all of our collections were rrade in checks
such as we are returning to you, it would entail an annual cost on this Co~any
of $160.000. oo.
Every conservative manufacturAr figures into the cost of his nroduct
all items of cost; therefore, the alJove sum would have to be added to the price
of our shoes, and, no doubt, this amount would be passed along by the retailer
to the consumer.
we are sure that you will
agre~
with us that the price of
merchandise is on a dangerously high level, and you will also agree w1 th us that
every economy should be resorted to that would tend to reduce its cost.
we,
therefore, respectfully request that you favor us with St.Louis, New York or
Chicago exchange,
or Post
Office Mon'ly Order, in the place of this check.
We trust that you
·~ill
nardon us for the length of this
corr~unication,
314
X-1879
-2-
but we want to make our position clear. and we feel after reading this, you
r.till agree that our position is right.
1
With assurance of our appreciation of your patronage, we are,
Very sincerely t
315
X-1879 a
As the result of an Act of the Legislature
of the State of Mississippi, anproved March 8,
1920, the Federal Reserve Bank in St .. Louls is
obliged to decline to handle checks drawn on
NON-~l\IIBER Banks in Mississi'Opi.
If the bank
you are doing business with is not a member
of the Federal Res1:lrve System, kindly remit
in St.Louis 1 Cl'-icago or New York exchang~, or
~On8y Order, and very much oblige us.
All the banks we do business with are
rr.embers of the Federal R%erve System, and our
collections, therefor·:;, go through the Federal
Reserve Bank. We have be,~n notified that checks
bearing restrictive endorsements will not be
accepted by the Federal Reserve Barik. me, therefore, ask as a favor that you send us St.Louis,
New York or Chicago exchange, or money order,
or, if you do s ·md us a check on your local
bank, that you do not stamu or print any restriction thereon that would prevent its being
handled bv th8 Federal Reserve Bank.
316
.,
DAVID F. HOUSTON
SICR&f~ O,.,HI TRIAIUIY
,fJIAI ... AH
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
CoiiPTROLLIR OF TH& CUIRIIICY
W. T. CHAPMAN, SICRITARY
R. G. EMERSON. ASSISTANT
ADDRESS RIEPLY TO
W,JI,IIILAY, FIJCAL A81HT
WASHINGTON
FEDERAL RESERVE BOARD
W. P. G. HARDIN&, GOVIIHOR
ALBIRT STRAUSS, VICI CIOVlRNOW
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
April 6,1~20
Subject:
Campaign for New Par Points.
Dear Sir:There is enclos~d herewith a copy
of renort prepared from replies received from
all Federal Reserve Banks in res~onse to our
telegram :lf March 31, askins fer informat:i.on
regarding the nrogress of the campaign being
conducted for the establishment of ne1.111 pa:r.
T,>oints.
In addition, there is also
enclcs~d
a special re1_)ort showing nonmember ban1:.s not
on the par list distributed by States according
to Federal Reserv~ Districts.
Very tru.1y yours,
2-Inc.
Assistant Secretary.
To Chairmen of all F.R. Banks.
X-13c6
SICII~AIT
C.t\lVIP.AIGN FOR NEW P.AR POINTS
X-1886 a
RsDorts cf Federal Reserv~ Banks,
--- -
- -
---
Federal
Reserve
Rank
Natl
: State ; Total
'1anl:s : banl:- !m:,mhsr :h!illl:-s bn
in
:members: barn's :~ar list
:district:
-
--
- - - - -
:vlarch 31,1920.
--- - - --- - - - -- - - - - -- - :Non-m-:.mh8r :Ratio of non- :No. of b·ml:s :No.
%
4)3
250
100
Yorlr
637
132
769
321
100
Fhi lade1nl" ia:
6L~4
39
6S3
417
100
119
752
105
i:S5"(
1,07ci
100
429
Richmond.
543
51
594
761
51.0
At}.anta
~65
70
435
444
27.6
· c~1 :tcti.,'zo
l,Ol+9
335
3gl.~
4j23J.
St. Loui~;
475
78
553
2,518
,\llinnean('lis
242
94
936
2,933
100
City
1,000
st:.
:J.~05L~
5' '572
Dallas
642
12~-
766
1,259
SanFrancisco:
597
166
·.. 753
930
7 ,9l.J.3
:1,2S4
Cle7
:la~- :i
Kansas
- -- -
Total
!1~
=9;227
18,514
-
-
-
-
-
250
195
19~'
.
1,076
42:7
745
1,506
19~·
1,150
1,594
4,231
1,379
4S*
417
2,690
172
1,527
1,761
2,933
100
1,191
3,372
100
1,027
1,259
90.0
90.0
- --- -
321
100
93.6
-
non- :Total No. of
"benksNon-:r-3rrber bankE
par :in district
- -
36
N~w
---
----
397
:Bcsto::1.
-
- - - of hanks :No. of
:m.3mbcr banks :added to ~)ar:added to par:member
:on par list :list during :list since :not on
:to total non-:Marcb,l920 :Januarv 1, !list
: rr ·3mbe r b anl- s
~ 191 9
:in district
567
')*
690
3
8,617
- - -
-
103
2,170
1,033
-·
- - - -- :20,684
~
*
Decrease
FEDERAL RESERVE BOARD
WASHINGTON
APRIL 6,1920
r~
-J
NON-\ID/ffiER BANKS ~ ON PAR LIST ~llAP.C'H
31, l52J.
X-1286 b
Distributed according to States gnd Fe<ier.ql RGsarve D:l.s'tr1.cts.
- -- - - - - - - - - - - - - - - - - - - - - - - -- - - - - Federal
Reserve
Ban.lr
: N, C.
Boston
New York
s. C.
: Ga. : Fla.
Ala. ': Miss. : La,
!
- - - - - - -
--- ---
T.gnn. : Arb;. : Ore~C:on
-- -
- - - -
Wash.
-- ---
l'otaJ.
---- ---
- - - ---
..
Philadelnhia
Cleveland
Richmond
428
317
Atlanta
!
511:
126
193
98
92
130
!
1,150
Chic~o
St. Louis
172
172
..
·
Minneapolis:
Kansas City:
Dallas
SanFrancisco
Total
428
FEDER~L
11'A
317
RESE.RVE BOARD
SHINGTON
.A"PRIL 6,1920.
511:
126
193
270
92 ;
130
12
55
103
12
55
2,170
--
319
· lEx OPPICIO MEMBIIIUI
DAVID F. HOUSTON
SICIITARY OP THI TRIAIUIY
CHAIRMAN
.,
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
C:OIIPTROLLIR OF THI CUIRINC1
W. P. G. HARDING. GOV!RNOI
ALBERT STRAUSS, YICI GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SICRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
WASHINGTON
FEDERAL RESERVE BOARD
Dear Sir:Referring to Governo1• Harding:' s let'11er
of March 30th, X-1878, tra.nsmi ttin~ the reply
,:;f . the Fed.;;:r..s:.l Jle~e;;:va Bua:.'(:;. to Sena~~ :lot>v··
lutlon No. 328, a lim,. ted su.:;:.ply of :printed
copies of this document has .been recehred by
the Board, and 1. am sending you under separate
cover, t'Venty·-fiv9 c09ies for use by your bank ..
Very truly yours,
Assistant Secreta1·y.
To Chairll'an of all F .R. Banks.
W. M.IIILAY, FISCAL AGINT
320
W. P, G. HARDING, GOYIRNOI
11X OPI'lCIO MEMBEM
DAVID F. Hq,U~TON
IECIETAIY of' THI TRUIUR"f
CHAIRMAN
~
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COJIPTROLLIR OP THI CURRIMCY
ALBIRT STRAUSS, VIC I GOVIRNOI
ADOLPH C. IIILLER
CHARLES S. HAMLIN
HENRY A.IIO~HLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON. ASSISTANT SICRITARY
t.DDREBS REPL.Y TO
FEDERAL RESERVE BOARD
W, II,IIILAY, PliCAL AIUT
WASHINGTON
.April 6,1920
X-1639
Dear Sir:There is enclosed herewith for your
information, a mimeographed copy of the opinion
of Judge Beverley D. Evans of the District Court
of the United States for the Northern District
of Georgia, rendered April 3,1920, in the ease
of the Americ.<m Banl: and Trust Company, et al,
against the Federal Reserve Batik of Atlanta, et
al, involving the right of the Federal Reserve
Bank of Atlanta to collect checks at par over
the counter of certain State banl:s.
Very truly yours,
Enclosure.
Governor.
To {hairmen of all F .R.
Banks~
321
••
•
X-1889
!...---'
IN THE DISTRICT COURT OF THE UNITED STATES FOR 'l'HE
NORTHERN DISTRICT OF GEORGIA
The Arne ric an
Bank & Trust Co. ,
et
a.l. ,
(·
(
vs
(
(
Federai Reserve Bank of Atlanta, et al. (
Smith, HRmmond & Smith - for Plaintiffs
Hollins N. RanU.olph ancL Robert s. Parker - for Defe~ants
---------------------------------Beverley D. Evans- District
uuuge:
Several State Bcnks filed in the superior court of
Fulton County, Georgia, an equitable petttion 2bainst the Fe~eral Reserve
Bank of .Atlanta, an~ certain of its officials, alleging that the Reserve
Bank ha.:l i.eclarea. a policy of "Par clearance", set forth in an eJ!hibit to
the petition, and. that to enforce such policy i t .was the purpose of the
Reserve Bank to receive an.. collect cl'lecks arawn on the a.ra.wee banks, by
causing them to be presented over the counter of such banks by an agent of
the Reserve Bank, inste~ of sanuing the checks through the cust~y channels of correspoment banks or clearing houses; that this course of business
was intenc~.ed to coerce State banks into becoming members of the Reserve '
System and was ultra vires of the powers of the Federal Reserve Bank ana
would :i.eprive petitioning banks and. others in like position of the customary
compensation for collection ani remittance where checks reache~ them for
payment unler the present method of (Laing business. The principal prayer of
the petition was to restrain the defenciants ;from the a.U.option of any method
of collecting checks urawn against petitioners except thrO'lgh the usual an~
oriinary- channel of collecting che_cks through correspon.;i.ent banks or clearing houses. The ease was removed to the Unite~ Statas District Court of
the cause ~
the Northern District of Georgia. Motions were made to
also ~ismiss the petition. The motion to remand must be ~enie~. The
principal defendant is the Federal Reserve Earn~ of .Atlanta. Georgia, incorporateQ. by the Congress of the Un~.teci. States. The District Courts of the
Unitei States have Jurisdiction of all suits of a civi.l nature, at common
law or in .equity, where the matter arises under the Constitution anu. laws of
the United States. Judicial Co~e, section 24. A suit against a corporation
created an~ organized unuer an~ pursuant to the Feueral Reserve Act is one
arising under a law of the united States. Osborn v • .Bank, 9, Wheaten 738;
Bankers Trust Company- v. Tex. & Pac. Ry. Co. 24ly U. s. 295.
A Feaeral Reserve Bank is not a National Banki~ Association within the scope anQ meaning of the Acts of Congress of July 12, 1882,
.August 13, 1888 and Juuicial Coae, section llt which place national banking
remand
-322
•I
-2-
X-18E9
.\...._./
associations, for the purpose of action QY and against them, upon the
fo·)ting of other citizens. Nati ·Jnal Banl:ing associations and the subsequently created Reserve Banl~s are not eju~dem @:eneris; th.::!ir functions
are different, and their chief characteristics are so unlil::e that it can
no't be su-pposed that Conr;ress intended them to be included in the former
le~islation.
A cursory reading of the Federal Reserve Baru~ing Act disclos'3s that its great object is to give elasticity to the natl·Jnal currency,
and to prevent congestion in co;;.;-rercial centers. National banking associations are member banl:-s of the Reserve system. The Federal ResEirve Board
is empowerGd to examine into th:; affairs of a national banl::-ing association;
to supervise throug~ th.'3 bureau under the char.ze of the Comptroller of
Currency the issue and retirement of Federal Reserve notes; to ~rant
national bantin~ associations thG ric:ht to act as truste:;, executor or
administrator; to l')errni t /Wg[fiP~rt o carry in the Federal Reserve Banks of
their respective districts a portion of their reserves required to be
held in th~ir ~~n vaults, etc. The general object of the Federal Reserve
system would be thwarted if the Reserve Banl:s could only "'sue and he sued
under the same conditions as national banking associations.
Furthermore, the petition expressly raised the point that the actings
of the Federal R9serve Barur complained of are ultra vires tha act of incor~oration.
Clearly this raises a Federal Question, hecause the plaintiff's
case can not b0 adjudicated without construing a law of the United, States.
The motion to dismiss must be eranted. l\'hen the allegations of the
bill with its let::al conclusions and inter~stin~ historical statement as to
the ori~in and scope of State baru~s are reduced to th,ir last analysis, the
charge of complaininc: banl:s is, that the Federal Reserve Banl~ is without
thr; no'IVer, (or, if it has th~ ")Ower, it should be restrained frorr exercising
it), to collect checks on barJks of de-posit received by it in the course of
business by presGntin:; them for payment thro-u."h a!!ents over the counter of
the drawee banks. Trat this method of collection of chec::-s will deprive
the drawe'"' banl:s of the revenue previously enjoyed where checks on them
came thr ougt. the ma:i.ls from corres.,ond.ent banl:s does not make the transaction unlawful. It is the duty of the drawee banlr to pay a check of the
drawer, if it holds sufficient funds of the drawer to ~ay it. It is no
less the duty of thG drawee banl;:: to pay several checl;s than it is to pay
a single check, when presented qver the counter within banldng hours. The
policy of th' Reserve Bank cf .Atlanta, as outlined in the peti tiJn, is
neithGr ultra vires nor unlawful. It is nut to be presumed that the agency
employed hy the Federal Reserve Banl;: will act otherwise
may be la'Yful
and nroner in the -presentation of the checks for payment. The alle~at~ons
of conspiracy are iackin~ in essential features to charge an actionable
wrong.
than
Accordincly, orders way ~e presented denyin~ the motion to remand
and grantin~ the motion to dismiss the bill.
BEVERLY D EV~'\NS
United States
This April 3, 1920.
Filed in Clcrk 1 s Office April
O,C. Fuller - Cl~rk.
5, 1920.
J~dge
. .
X-1890
323
BY-LAWS OF THE FEDERAL RESERVJI: BOARD..
Article 1.
*The Cha.irmw.
The Secretary of the Treasury, as Chairman of the Board, shall preside e<.t
all meetings whsn present. In the absence of the Chairman, the Governor shall
act as ntesidinz officer. ln the absence of both the Chairman· and the Gov '3m or,
the Vic~-Gov~rn;r shall preside, and in the absence of all three such officers,
the remainin.? ID·"3mber of the Executive Commi tta 3 sh;\11 preside.
Ar:ticle II.
The . Gove.rnor;•
Section 1. The Governor of ths Federal ~eserve ~oard shall be the aetive
executive offic'9r thereof; subject, houv"!ver 1 to the su:oervision of the Board
and to such rules and reP-Ulations as may be incorpo?ated herein or may from time
to time, by resolution, be
~stablished.
Section 2. Tl-e Governor shall have general charge of all executive business
of the Board not specifically assigned by resolution to any individual member or
comrrittee trereoL
Section 3. It shall })e the duty of the Governor to oversee and control the
submission of staterrents to the press expressive of the Board 1 s policy or descri~tive of its action.
Article III.
Section 1. In th~ a~Jsence or disability of the Governor, his :oowers shall
be exercised and his duties discharged by the Vice Governor, and in the absence
or disability of both of these off~cers, such nowers shall be exercised ~d such
duties discharged by the remaining member of the Executive Committee.
Section 2. It shall 1)e the duty of the Vice-Governor to coop~rate with the
Governor in the administrati :n of the executive business of the Board..
.
"'
X-1890 .
-2-
..
324
Article IV.
The
Execu~ive Committe~.
Section 1. There shall ~e an Executive Comrr-itt~o. of tre Board consisting
·of three rr:err'\:lers, which shall include tha Governor and Vice Go'IJ'ernor and one
other. The third mem'r)er shall be nomL."lated and elected at a regular meeting of
the Board. Memhers of the Board shall serve as far as practicable in r~tation
and for periods to be fixed by th<; Board from time to time. Tlvo members shall
constitute a quomm for the transaction of business.
Section 2. It shall ~e the duty of the Executive Committee of the Board
to transact all business of an administrative nature which can be transacted in
accordance with -principles or 'Polici~s already established by the Board, and
such as way he delegated to it from time to time; to review and a~prove importrult
corresnondence involving the expression of opinions or decisions of the Board,
and to T.>ra:pare and make recorrur;endations governing the conduct of the Board 1 s
busin~ss.
. Article V.
The Secretary and
Secti.on L
Secre tar ie s.
A~sistant
Secretaries4
T:re 3oard shall appoint a Secr~tary and one or more Assistant
Section 2. The Secretary or one of the Assistant Secretaries shall attend
each meeting of the Board and shall keep an accurate record af its 'Proce=dings.
The Secretary shall assist the Governor and members of the Board in the ~dndnis
tration of the general business and in conducting the general correspondence
of the Board. Under th'3 direction of thl3 Governor, he shall have general SU'PSrvision of all eliiD;>lOya"'!s of the Board, except the staff of members of the Board.
and Counsel. The Secretary shall perform such othl3r duUes as may be assigned
to him frorr; time to time by the Board.
Section 3. The Secretary shall have custody of the seal, and, acting unde:·
the authority of the. Board, shall have pO'.ver to affix the same to all instrurr,en·:;s
requiring it. Such instruments shall be attested by the Secret;ary.
Section 4. Th-9 Assistant Secretary designated '0y the Board or by the
Secretary shall exercise the now~rs and discharge the duties of the Secretary
in his absence or disability. The Assistan;t Secretaries shall perform such other
duties as may be assign~d to th'3m from time to tin:-9 by the Board or by the
Secretary of the Board.
Article VI.
Execut.ive Sec:r.et.ary..:;_
Section 1.
The Board may
a~oint
an Executive
Secretary~
Section 2. The Executive Secretary shall perform such duties as may be
assigned to him by the Board and shall assist the Gove~nor as directed by him.
.
-3-
'
X-1890
\
325
Article VII.
The Fiscal Agent and Deputy Fiscal
Agent~
Section 1. The Board shall a·;point a Fiscal Agent and a Deputy Fiscal
Agent. The duty of the Fiscal Agent shall oe to collect and deposit all moneys
receivable by the Board with the -Treasurer of the United States, to be placed
iu a special fund established on the books of the Treasurer for the Feder·al
Reserve Board. T'ne Deputy Fiscal Agent shall perform the duties of the
Fiscal Agent during his absence er disability.
Section 2. , The Fiscal Agent and Deputy Fiscal Agent shall each execute a
separate bond with surety satisfactory to the Board.
Section 3· Payments of expenses and other disbursements of the Board shal:C
be made by the Fisca.G Agent upon -proper vouchers out of moneys advanced to him
by requisition and warrant out of the special fund and placed to his official
credit with the Treasurer of the United States as provided by Section 5 of this
ArticlG. In the absence of the Fiscal Agent payment of expenses and other
disoursements shall be made by the Deputy Fiscal Agent upon proper vouchers
out of mone~advanced to the Fiscal Agent by requisition and warrant out of
the special fund and ulaced to his official credit with the Treasurer of the
United States as provided "by Sections 5 and 6 of this Article.
Section 4. The Fiscal Agent shall prepare a quarterly account in such
form as shall be anproved "by the Comptroller of the Treasury and, after
approval by the Governor, such ~arterly account shall be suomitted te the
Auditor for the State and other Departments. Such account shall cover payments
of exoenses and other distursements made by both the Fiscal Agent and the
DePuty Fiscal Agent~
Section 5· The Governor shall, when necessary, make reqt'.isition on the
Treasurer of the United States for the advance of such sums to the Fiscal
Agent as may ~e necessary from the Federal Reserve Board fund,
Section 6. The
upon proper vouchers
against funds to the
the United States in
Agent.
Deputy Fiscal Agent in meking dis~ursements of the Bo~rd
out of the moneys advanced. :.o ·~he Fiscal Agent ·shall sigr"
official credit of the Fiscal Agent with the Treasur-er of
the name of the Fiscal A<?;en t by himself as Dep1ty Fiscal
Article VIII,.
All funds deposited by or for account of the respective Federal :Ja;'J.S.en~Q., ·
agents in the Federal Reserve agent 1 s fund of the Fe~eral Reserve Board and ail
funds deuosi ted by or for account of the respective Federal Reserve Ba:il:-s in
the Gold.. Settlement Fund of the Federal Reserve Board shall be held on de-oosi t
with the Treasurer of the United States and shall be su~ject to withdrawal only
'0y check of the Federal Reserve Board signed by its Secretary ot an Assistc:,;nt
Secretary and countersigned by the Governor, Vice Governor, or the remaintng
member of the Executive Comrrittee. In tee absence of the Governor, Vice
Govarnor, and remaining member of the Executive Co~mitte, sucn checks shall
be countersigned by the senior member of the Board present~
.
'
.
-4-
326
Article IX.
Re qui si ti :m for Deli very of Federal Reserve ]:'J_gte s ..
Requisitions upon the Comptroller of the Currency for the delivery of
Federal Reserve notes to the respective FederPl Reserve agents shall be signed
by the Secretary or an ~sistant- Secretary and count3rsigned "by the Governor or
Vice Governor. In the absence of both the Governor and the Vice Governor, tlle
power shall rest in the remaining member of the Executive Cownittee. In the
a"bsence of all .three of these officers, the senior mem"ber of the Board present
shall be authorhed to countersign..
Article X.
The Seal.
The following is an im~ression of the seal adopted by the ~oard~
(SEAL)
Article XL
Section 1. The Board shall appoint a General Counsel whose duty it shall
"be to advise with the Board, or any mem'!Jer thereof, as to such legal questions
as may arise in the conduct of its business; to nrepare, at the Board's requestt
ilpinions, regulations, rulings, forms and other legal papers and to perform
generally such legal services as he may be called u:non r,y the Board to perform.
Section 2. Subject to the direction of the Governor, the General Counsel
shall have authority to corres~ond directly with the CounsAl of the various
Federal Reserve Banl·s and to request their opinions as to the intarpretation of
the local laws of the States included in their respective Fedaral Reserve
Districts. Copies of all such correspondence to be furnished to the Board for
its information.
Section 3. Whenever it may be de31Iled advisable, the Board may aiJpoint one
or more AssociatG or Assistant Counsel, or one or more Assistants to Counsel~
The duty of such Associate or Assistant Counsel shall be to assist the General
Counsel in the performance of his duties and to p~rform the duty of the General
Counsel in his absence. The duty of such Assistant to Counsel or Assistants to
Counsel shall i)e to assist the General Counsel in the performance of his d·:tties.
Section 4. The Board may apnoint from time to time Consulting Coux1sel, who
Y.'ay >:e attorneys at law engaged in outside practice.
.
-5-
,,
4
•
.
327
Article XII
Meetin&L
Section l. Stated meetings of the Board shall be held on such days of the
week at such hours as the Board by majority vote may adopt from time to time •
Special meetings of the Board shall be called upon the written request of three
members of the Board.
Section 2. A majority of the Board shall constitute a qu.orom for the
transaction of ousiness, exc~t that an affirmative vote of at least five members
of the Board shall be necessary to require Federal Reserve Bari!!s to rediscount
the discounted paper of other Federal Reserve Banks> or to change reserves of
ba~s in outlying districtsSection 3,
of business;
At all meetings of the Board the following shall be the order
(l)
Reading or inspection of the Minutes of the last regular
-meeting and Minutes of meetings of all committeas.
(~) Report of the Governor.
(3) Renort of the Secretary.
(4) Reports of the committees or members on assigned business*
( 5) Uhfintshed business.
Article XIII
•
Information and Publication.
Section 1. All persons employed by the Board shall ke'3p inviolate its
business, affairs, and concer.ns, and shall not disclose or divulge the same to
any unauthorized person whomsoever, and any employe'3 who shall give information
contrary to this by-law shall be liable to imr.ediate dismissal.
Section 2. While each member of the Board must determine for himself the
or necessity of expressing publicly his individual opinion on any
question, members shall not quote publicly the o~inions of other members on
matters which have not formally been passed upon by the Board.
~ropriety
Section 3· There shall be published monthly, under the supervision of a
committee of the Board, a bulletin to he known as 11The Federal Reserv~e Bulletin"
which shall be the official periodical organ or publication of the Federal
Reserve Board.
Section 4. No resolutions of a personal character, exce~t upon the death
of a member of the Ji"~ederal Reserve Board while serving as S1.\ch, shall a:?Pear in
any ~blication of the Federal Reserve Board.
Article XIV.
The Board shall a~oint a comTlitte~ consisting of two members of the Board,
whose duty it Shall be to audit the accounts thereof for the six month 1 s period
-6~
X-1890
328
for which thev shall have be3n anpointed, and report to the Board a tentative
budget of expenses for the next succe~ding six months~
Article XV..
.Amwd1nelt t b.
These by-laws may be amended at any regular m~eting of the Board by a
rr.ajori ty vote of the entire Board, provided that a cony of such amendments shall
have been delivered to each member ~t least seven days prior to ~ch me3ting.
~n~roved
at
~~~ril
19~0.
6,
~oard Meeting~
329
I'
"'
x... Ie91
H:CliORANDUM
April 8,. 1920.
To Governor Harding
Subject: B~1~cors' Acceptances Purchased in tho open rncrl(ot held
by tho Fedor~1 Reserve B2rur of
:NO\i York, Harch 27, 1920.
From 11r. Paddoclc.
On February 28, 1920, tho total of acceptances purchased in tho
open marlmt by the Fodcr111 Rosorvo Banlt of :New Yorlc reached
the largest amount ever hold by the Barut.
~;231,257
,300.00,
At tho close of business
March. 27, 1920, when the pros ant examination v1as commenced, tho acceptancc holdings amounted to ~~196,480,000 .. 00 •
•
A general classification of tho 7,500 accc;>tancos held on Harch
27, 1920, is as follovTS:
Character
.Amount
Import and Export Bills
0154,45o,ooo.oo
Domestic Bills
25,750,000.00
Foreign Trade Bills
2,860,000.00
Domestic Trade Bills
270,000.00
Dollar Exchcngo Bills
2,150,000.00
Bills. hold under repurchase 11greament
11,000,000.00
$196,480,000.00
From information
t~con
off during the examination, it appears
that the acCO'.J?tnncos cover shipments of nearly one hundred different comJnoditios, and that about one
hal~
of those accoptancos, representing ap-
proximately 15% of_ tho dollar total, set out specifically in the instrumont tho commodity covered.
In many other instances an idea as to tho
character of tho transaction financed may be
obt~inod
from firm names,
place uhcro droxm, or other inforr.J.ation appearing on tho bill.
· :•nsos tho shipments arc doscr ibed as "General Horch11n<iisc 11 •
it
I11
a few
HmJCvor,
is estimated that about one fourth of the accc:;?tancos hllld boar no
evidence of the nature of tho goods shipped, beyond the certificate as tc
330
-~
~e
general character of the
transactio~
necessary under the Bo~d's regulations
.
fer_ eligibUity fer JUrchase.
thir4s of the total number of
X-1891
The import bills, which constitute about two
acceptan~es
and one half of the total amount,
Ufru:ally contain full detaUs in regard to shipnents -eovered, includ_ing .a de·- ·
scription of the goods, vessel ~which shipped, and reference to credit estab·
lished:
conc~ing
The export bills give very little specific information
the
shipnents represented, beyond a general statement sueh as "Exports to Japan",
·."Cotton for Export", ''Merchandise for export•, "carpets for Europe", etc.
Aside from the certificate as to the nature of the transaction, necessary for
eligibility; the domestic bills ~requentlJ fail to set out the goods covered.
However, the domestic
bi~ls
are in good form and the drawers are usually well
known provision• grain or .manufacturing concerns, of which the following may be
mentioned as samples: _Great Atlantic
. Go.,
Wil_son & co., Nestles Food
co.,
& Pacific Tea Co., International Grain
Augusta Knitting co,, utica Knitting Co.,
Mexico Hide C_o., Newbu:l"ger Cotton Co., Maxwell Motor Co., Oil Storage Co.,
Barnet Leather Co • , United Sugar Co.; Empire Petroleum Co • , Castle Ki.d Co • ,
Union Wool
eo.,
Premier Worsted Mills, Tungsten Products
eo.
The· folloWing classification as to commodities covered is
,mad~
of
the acceptances bearing definite information as to the character of the transaction
represented:
.
.
.
------·---~--------·------------------------------~·----------~-------~----------Characte:r
of
Acceptance
Silk
cOtton
Hid9'8 & Skins
Packers
Coe~nut
oil
Sugar
Silver
Coffee
Wool
Wheat
Digitized for!_obacco
FRASER
:Number of:
Percent of
Items :total no. items:
700
480
345
380
285
225
150
'150
80
75
'75
9.3
6.0
4.6
5.0
4.0
3.0
2.0
2.0
1.0
1.0
1.0
Percent of total
.Amount :amount acceptances: Remarks
12,162,000
11,130,000
10,461,000
'7,980,000
'7,935,000
5,515,000
4,2()0,000
3,500,000
2,600,000
1.965,000
1,935!000
..
6.2
5.'1
5.3
4.0
4.0
2,8
2.2
1.8
1.3
1.0
1... 0
-Imp. Japan
-etports
Imp.s.Am.
11K,porte
Imp. Orient
Imp.w. Ind.
Exp.Orient
Imp.s.Am.
Exp.Europe
Exp.E!lrop&
Im::.>·
..
331
X-1891
...
Other commodity shipments ·rhich n.re shmm by the datu on the
bills to have been financed by the a.cceptance method a.re n.s follo·.;s:
Copper, crude rubber, pulpwood, gasoline, kerosene, olive oil,
brass, groceries, gold flour, crude oil, hemp ··rn.lnuts, extrn.cts, cocon.,
C[Ullphor, humc.n hn.ir 1 bUIIlbOO mc•.. tti~g, muri~.te 6f potC\Sh, dried C.lbumen,
sn.rdines, diamonds, ivory 1 strn.•'r brc.id, .rice, dog skin m:~ts 1 elm-er.
seed, bristles, rc..isin§, "te:c dust, cur?d herring, n.niseed 01.1, strn.•.;
hc.ts, rut;s, C.'\rpets, _pec.nuts, Jn.pn.n ·.mx, gum dc.m.:.~r, hc..rd··rc.re, srttJ.n,
rn.tt::.n furniture, olives, cign.rs, glue, toys, drm·ring instruments,
sur;ic'al instruments, crockery.
~--
...,
.
-···
,__,...,.
...
!1.-
'"'
..
•
•
At the close of business I''!a.rch 27, 1920, the Federn.l Reserve
Ba.nk of New York held Ba.nkers 1 Accept:1.nces, drmm by the principal. packing
concerns, us follovrs:
------------·------------------·----------------------------------------Drm·;er
Amount
Number of
Distribution of
acceptors
in
in
in
in
in
Barik~ in
11 Bunks
16 Banks
4 Ba.nks
l2.Banks
1 Bunk
Armour &: Co.
~-'rift &: Co.
Eorris &: Co.
Wilson & Co.
Cud~hy & Co.
Tota.l
3M
·-------
ac~pt_~nce s
5 Cities
8 Cities
153
82
2 Cities
6 Cities
l City
12 Cities
.
'
'
~3
25
3,975,000
3;900,000
1,300,000
1,128,100
8
200,000
31l
fl0,503,100
--------~-------~---------------------------·---~---~--·------~--------~-
A few of these bills, a.m.ounting to less than
domestic nccept.ances bec..ring
thi~
bill
of r;oods".
'\TaS
rt
;'soo.,ooo.oo are
certifica.to th:;t "At the time of ucccptc.nce
seeured by shipping documents e.-idencing the domestic shipment
About one third of the n.ccepto.nces referred to in the foregoing
to.bulation o~ po.ckers 1 bills are accepted by No.tionnl banks n.nd there is
no nota;tion thereon to shou the charucter of the transo.ction.
{Under the
Boar9.' s regulations (13-1916) _no evidence of eligibility is required t·rith
respect to a bill a.ccepted by a National bank~)
Forty-four of the bills
carried in the tabulation 1 CJ'llounting to (1 1 100 ,000, were out for collection
and therefore could not be e:x:a.mined.
The remaindel" of the bills conto.in a
certification that ' 1This a.ccepta.nce is bnsed on o. tro.nsuction in\"olving th.e
importation or exportation of goods 11 or what the acceptnnce is "an inherent
••
-'
' ..
332
'
...
-":::-
X-1891
~
part of an export trans:::>..ction and does not require revenue stn.mps 11 •
":3wift" bills refer to
11
under L/C No.- , Date-
Exports 11 an~ the
1
11
The
J-irroour 11 bills sto.te "Dro.~·rn
Covering exportation of Herchandise".
None of
the packers' bills contains any definite statement as to the commodity
coveredr the date, character or destination of the shipment; or the name
of the vessel co.rryin; the ;oods.
On February 28, 1920, the date the
acceptances reached the hi~h nL..'l.rk, :' 231,257 )300.00, the packers' bills
n.mounted to :: 18 >300, 000 • 00 ( 8%) •
On r:ln.rch 27, 1920 1 vri th total acceptances
of ;:196,500 ,000.00, the packers' bills hod been reduced to . 10,500,000.00
(5 .3%).
A statement sho">ring the distribution n.mong; banks and bankers of
the acceptances on hand is attached to this memorandum.
GENERAL COMl'lliNT
The accept::'..nces held by the Federal Reserve Br:mk of Ner; York at
the close of business Ho.rch 27, 1920,
~·rere
found to be in sood condition.
Regulations and technical requirements are carefully observed, and detailed
information in connection '·rith the vrork is readily o.vailc..ble.
The examination of the 7,500 bankers' acceptances held by the
Ne':.r York Bank stronr;ly sugr;ests the desirability of a standard size for
accepto.nce forms, say 9 11 x
check form, and uniform
acceptance.
sli~htly
t..,n,
arro.nr~ement
of printed matter on the face of the
It is also believed th:"'..t
tpe consideration of acceptances to
larp:er thn.n the ordinary note or
it ..rould
ha~e
be of sreo.t advanto{~e in
included in the bill a definite
statement as to the coiDQodity covered, and in addition for
r
export bills, the details of shipment.
L~port
and
.
.
X-1891 a .
...
BJINKERS' ACCE"PT.ANCES 'PURCHASED
HELD BY FEDERJ!L RESERVE B.ANK OF NEW YOBK,
27, 1920 ..
AT CLOSE OF BUSINESS MARCH
NEW YORK DISTRICT
NATIONAL 3ANKS
.American Exchange National Bam:
.Atlantic National Bank
Bank of New York, N~ B~.A.
Battery Park National Bank
Chase National Bank
Chatham & Phoenix National Bam~
Chamical National Batik
Citizens National Bank
Coal & Iron National Bank
East River National Bank
First National Bank
Harriman Nati anal Bank
Imuorters & Traders National Batik
Irving National Bank
Li~erty National Bank
Mech. & Metals National Banl:
Merchants Nati •Jnal Bank
National Bank of Comnerce
National City Bank
National Park Bank
Seaboard National Bank
Union Exchange National Bank
Garfield National Barik
$1,289,000
377,000
1, 554,000
83,000
2,384, 000
305,000
1,082,000
127,000
91,000
2,000
300,000
50,000
2,784,000
1,659,000
780,0':)0
617,000
10,119,000
9,251,000
518,000
302,000
10,000
295,000
TRUST COMPANIES
Bankers Trust Co~
Central Union Trust Co
Colum~ia Trust Co
Equitable Trust Co
Farmers' Loan & Trust Co
Franklin Trust Co
Guaranty Trust Co.
Irving Trust Co.
Italian Discount & Trust Co
Lawyers Title & Trust Co
Mercantile Trust Co
Ne1v York Trust Co
Scandinavian Trust Co
U.S. Mortgage & Trust Co
$ 2,242,000
2,sse,ooo
1,161, 000
5, 705,000
3,032,000
277,000
5,673,000
376,000
53,000
485,000
334,000
333
.
.
.
..2 ...
X-1891 a
ftmerican Forei~n Banking Corporation
Asia Banking Corporation
Bank of America
Bank of Manhattan Oo.
Baxll.:: of United States
Corn Exchange Bank
Columbia Bank
Foreign Credit Corpo~ation
Foreign Trade Bariking Corp~
French American B'anking Corp.
Grace & .Qo., m.R. Bank
lnternati onal Banking Corp.
Mercantile Bank of the Americas
New Netherland Bank ·
'
New York Produce Ex change Bank
Pacific Bank
Park Union Foreign Banking Corp.
The State Bank
Textile Bam,ing Co
6. t 301 ' 000
2,408.000
286,000
2, 284,000'
282, OQO.
169,000
lliOOO
3.·368,000
1,005~000
1,990,000
46,000
3-419,000
6j521:,000
90,000
2.000
315,000
3,0341000
57,000
919,000
PRIV ~, TB BANKERS
.American Express Co¥
Brown Brothers & Co.
Goldman, Sachs & Co9
Hallgarten & Co
Heidel~ach,
705,000
9,121,000
6,195,000
l & Co.
Huth & Co
.-.Kuhn, Loe':l & Co
Ladenburg, Thalw..an & Co
2,760,000
155,000
950,000
230,000
1,089~000
Lazard Freres
Maitland Conpell &.Co
J.?. Morgan & Go
~oe & Co, John
Na\¥Iiburg & Co. , E. ' '
Schall & Co., Wm
SchUlz & Ruckgaber
Seli!IDlan & Co., J & w
Sutro Bros. & Co
A~ Iselin & Co
·370, 000
920,000
54,000
1,142,000
1,358,000
85,000
50,000
100,000
100,000
FOREIGN AGENCIES
An7lo South American Barik
Banca Comtle Italiana
Baru~ of British West Africa
Banl:: of Montreal
Bank of Nova Scotia
Batik of Taiwan
Canadian Bank of Ccmmerce
1~632~000
1,199,000
178,000
246,000
12,000
90,000
}, 938,000
334
..
-3-
Dominion Bank
London & Bra~ilian Bank
National Banl:- of S•1u.th Africa
Royal Bank of Canada
Standard Banb: of South Africa
U;1.:i.on Bank of Canada
Me::chants Bank of Canada
X-l89J. a
$
58,000
86,000
. 1,555,000
4,561,020
331,000
1,578,000
10,000
BROOKLYN
42,000
25,000
Brooklyn Trust Co
Pe~les Trust Co
NEW JERSEY
First National Banl-, Hoboken
Hamilton Trust Co. Paterson
Paterson National B~~. Paterson
First National Bank, Jersey City
Nat. Newark & Essex Bkg Co.· Netvark
74,000
141 '000
4,000
33,000
200,0JO
NEW YORK STATE
Buffalo,Banlr of Buffalo
"
Citizens Com 1 1. Tr. Co.
11
Fidelity Trust Co
"
Liberty Bank
#
Manufs, & Traders Natl •. Bk.
"
Marine Trust Co
Gen3seo,Livin!ston City Trust Co.
· Kingston,Rondout National Bank
Syracuse,First Trust & Denosit Co,
"
Salt Springs National Bank
25,000
350,000
1'00,000
78,000
6oo,ooo
618,000
9,000
10.3,000
75,000
25,000
335
•
'(I
•
336
X-1891 a
•
FOREIGN TRADE ACCEPTORS
_,......,.......,....,....==..,.....-~-
Ind., Chartered Batik of I., A & C
B. Altman & Co
Balfour, Williamson & C~
Cheney Brothers
H.W~ Peabody & Co
$ 39
1
000
129,000
51; 000
295;000
Ind~ 1 Hong, & Shang. Banking Corp.
Cheney Brothers
W.R. Grace & Co
H. w·. Peabody & C~
97,000
70,000
103,000
Ind. , Nonmember Banks
G, Amsinck & Co
Balfour, Williamson & Ce
w. R. Grace & Cc
V, Guerin & Fils
Hadden & Co ..
H. w. Peabody & Co
F. Vietor & Achelis
156,000
1.42, ooo
443,000
10.000
37,000
274,000
90,000
Ind., MemiJer Banl-(s
G. Amsinck & Co
Armour & Co
Balfour, Williamson
Cheney Br':lthers
W.R. Grace & Co
&
Co
New York State
Albany, N.Y. State National Bank
Utica, Citizens Trust Co.
n
First National Batik
11
Oneida City Trust Co.
n
Utica Trust & Safe Deposit Co
Total Foreign Trade Acceptances
109,000
79,000
71,000
518,000
153 J 000
25,000
100,000
472,000
50,000
871000
$2,866,000
DOMESTIC TRADE ACCEFTJI.NCES
United Cigar Stores Co.
268,000
~
•·
X-1891-a
-5ATLANTA DISTRICT.
New Or lean~, Canal-Comtl, Nat. Bank
II
II
Canal-Com 11. Tr. & Sav .. Eank
Bibernia
E~ & Trust eo.
"It
"II
Marine Iank & Trust Co.
Whitney Cen. Nat. Bank .
"
"
.Atlenta,
.Atlenta National Bank
Centrel Bank & Trust Co.
"
II
Lowry National Bank
.Augusta,
Merchants Natiopel :Eank
~OSTON
$20,000
126,ouo
g6S,ooo
25,000
335,000
. 202~000
1oo.ooo
90, 000
9·,000
DISTRICT.
.American Trust Co.
Federal Tn:~t co ..
First National Bank
First National Corp..
Fourth .Atlantic Nat),.onal Bank
International Trust Co~
Lee, -Higgi~son.& 9o.
Merchants National Eank
Moors & .co., J .. B•.
National Shawmut lank
Old Colony Trust. Co ..
Second National Bank .
Shawmut Corporation
State Street Trust Co.
Webster &. .Atlas ~tional Bank
Blackstone Canal Nat~ Bank, Provide~ce, R.I.
Hospital Trust Co.,
n
·Thames National Fank. Norwich, Conn.
First National Bank, New Haven, Conn.
Springfield Nat. lank, Spring(ield, Mass.
Massoit Pocasset Nat. Bank, Fall River, Mass.
250,.000
113,000
4; 525 ,ooo
l:r624,ooo
121,000
97,000
1, 601,000
170~000
47 ,ooo
4,384'1"000
3,961,000
9.ooo
1,863~000
369,000
330,000
72,000
350,000
233,000
23,000
100,000
53,000
CHICAGO D,ISTRI.£!
Central Trust Co. of· Illinois
C- & C. Natione.l lank
Corn Exchange National Bank
First National 1Jank
Harris Trust & Savings B~
Illinois Trust & Savings Bank
Merchants ~Loan. & Trust Co.
National Bank of the Republic
utfion Trust Co4
First Trust & Savings Bank
National C:\ ty l-ank
Detroit, F:i.rst & Old Detroit Nat ... :Bank
n
National Bank of Commerce
n
peoples State B~
4,000
1,003,000
316.,ooo
197,000
100)000
125,000
14,ooo
901000
~oo,ooo
325)000
119,000
250,000
100,000
331,000
337
x-1891-a
-6CHICAGO DISTRICT (CONTINUED)
IndiMo.:polis, Fletcher
~1\rn.
Uat. Bo.nlc
llihmu.l;:oc, First Hisconsin National Ba.nlc
II
Second \lard Savings Banlc
253,000
75,000
175,000
CI.JWELAND DISTRICT.
Contrn.l Hat ioncl Bo.nlc
Citizens Savings & Trust Co.
Cleveland Trust Co.
F:irst National Bani~
First Trust & Savi:q;s Bo.nlc
Guardian Savings & Trust Co.
Superior Savings & Trust Co.
Union Corrm1orcc Nati oncl Banlt
Cincinnati, CitizGns Ho.tional Banlr
11
Fi£th-Third National BD.lllc
Pittsburgh, Banlc or Pittsburgh~ N. -A.
"
First National Bank
II
Pittsburgh Trust Co.
II
Farmors Do?osits Nat. Banlc
II
Peoples National Bnnlc
II
Union Trust Coo ·
Akron, Ohio, Ohio Savings & Trust Coo
II
II
F.irst Second National Bo.nlc
11
Toledo,
Nc.tioncl .Bank or Commerce
95,000
49,000
873,000
125,000
30,000
1,096,000
325,000
1,158,000
221,000
. 322,000
359,000
176,000
50,000
144,000
137,000
250,000
50,000
104,000
135,000
DALLAS DISTRICT
City Ua tiono.l Bo.:nlc
El Paso, Tex. First No.tionc.'"'l.l .Bo.nlc·
Tc:x:arl{D.no.,. State National Banlc
Houston, First Hat ional .Bank
183,000
100,000
575,000
MINNEAPOLIS DISTRICT
First No.tiono.l .Bank
!.Iidlo.nd Nn.tional Banlc
Northvmstorn Nationc.l .Banlr
St. Paul First Nafiona1 Bo.:nlc
"
" llorchD.nts National BCJ:lk
l.Iinnoc.polis, 11ctropolitan National Banlc
PHILADELPHL~
Corn Exchange National Bank
Commercial Trust Co.
First National Banlc
Fourth Stroot National Banlc
Girard National Bank
Girard Trust Co.
llarltct Stroot Nationcl Bank
600,000
407,000
845,000
56,000
248,000.
70,000
DISTRICT
703,000
200,000
480,000
137,000
1,470,000
150,000
. 392,000
3 v~-8
339
-1PHILADELPHIA DISTRICT (.CONT.)
Philadelphia National Batik
Tradesmen 1s National Bank
Union National Bank
Franklin National Bank
· 1\nthracite Trust Company, Scranton, Pa.
Bosak State :Bank,
n
n
Peoples Savings & Dime Bank, ~
n
2; 629,000
494,000
99,.000
100,000
25,000
25,000
25,000
RICHMOND DISTRICT
r
American National Batik
33~,000
Merchants National Bank
54,000
National State & City Bank
292,000
Baltimore, Me·rch. & Mach. First Nat.Bank 1,000,000
"
National Exchange Bank
267,000
167,000
"
Second National Bank.
"
National Bank of COJl'JJre rce
50,000
"
Continental Trvst Co.
550,000
Citizens National Bank
"
250,000
rr
Union Trust Co.
47.000
"
Farm~rs & Merchants Nat.Bank
25,000
11
National Union Bank
25,000
Washington, D.c. Commercial National Bank
1121,000
100,000
"
Continental Trust Co.
"
District National Baak
50,000
"
National Metropolitan Bank 75,000
KANSAS CITY DISTRICT
Fidelity National Batik & Trust Co.
National Bank of Com:rerce
25,000
25,000
ST. LOUIS DISTRICT
Mercantile Trust Co.
Mississippi Va!ley Trust Co.
National Bank of Comrr.erce
Louisville, ~. National Bank of Kantuc~
Memphis, thion & Planters Bank & Trust Co.
309,000
174,000
258,000
50,000
385,000
SAN FRANCISCO DISTRICT
Anglo & Landon Paris National Bank
:Bank of California, N.. A.
Wells Fargo Nevada National ~
1,595,000
351,000
390,00$)
...
.
340
S.AN FRANCISCO DIS~RICT f, CONT.}
First National Bank, :Los Angel-es, Cal.
First National Bank, Berkeley, cal.
U. S.. National Bank~ "?ortlani, Ore.
First National Bank: Seattle: Was~.
R~rchase agreeme~~ ·
Betnbard. Scholle & 9o~
(
8, 625,000
·solomon Bros, & Hutzle~
.
!
'
75,000
49g,ooo
!Discount Corp ... of N.Y.
•
100,000
1:718,000
·13oad. & C'TOoJ.win
'
8t000
2§,000
175,000
(
·.·.
341.
W. P. Gl. HAIIDINGI,GIOYIBHOI
· lx 0PPIC10 MRMBRM
ALBIRT STRAUSS, YICI IIOYIRNOI
ADOLPH C. IIILLIR
CHARLES S. HAll LIN
HENRY A.IIOEHLENPAH
j,~,.,_ • . . _
DAVID F. HOUSTON
SICIIITAIY or THR TI&AIURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
CONPTIOLLII or THI CUIIINCY
ADDRESS RIEPL.Y TO
W. T. CHAPMAN. SICRITARY
R. G. EIIERSON.AISIITANT SICUTARY
W.II.IIILAY,FIIC:UAIINT
WASHINGTON
FEDERAL RESERVE BOARD
April 10,1920.
X~l893
Subject:
Five per cent Redemption Fund t'ay:ments
for National Banks through Gold Settlement Fund~
Dear Sir:Referring to previous instructions with
regard to payments from the Gold Settlement ~d to
the Treasurer of the United States for the account of
meml:ler national banks for cred.i t in their 5% redemption
fund, the Federal· Reserve Board has today authoz·ized
payments to l:le made, at the request of member national
bariks, by Federal Reserve Banks from the Gold Se.ttlement.
Fund to the Treasurer of the United States for the credit
of the 5% redemption fund accounts maintained by rrember
na.tional banks against national bank note circ-ulation,
1.
Jn
~amount,
It is suggested that notice of this facility
)e comrmmicated to your member n~tional banks.
·
1
The Federal Reserve Bank of St.Louis has been
fori111arding its requests for transfers from its Gold
Settlement Fund to the 5% fund of national banks to the
Board by mail in duplicate, on the attached copy of.form~
One COJJY of this advice has l:leen forwarded by the Board
to th~ Treasurer of the United States, accompanying the
Board's Gold Settlement Fund check, and the dunlicate
copy has he-m retained for the Boardt s files. This
arrangement has proven very satisfactory.
Enclosure.
Very truly yours,
Assistant Secretary.
To Governors of all F.R. Banks.
"'-- .
342
' 1
t
X-1893 a
CO"PY
FEDER,~L
RESERVE BANK OF ST.LOUIS
St.Louis, Mo. A~ril 6th, 1920.
Federal Reserve ~oard,
Washington, D.C.
I
Gentlemen:Please charge our account in the Gold Settlerrent Fund
$ 26,950.00 and arrange a credit 1 ~ith the Treasurer of the United
States for a like amount for the 5% Redemption Fund of the follow-ing
'i)anks, in the amounts indicated.
"Please advise us by telegraph 1Mhen this charge is made.
Very truly yours,
(Simed)
A.H. Haill
Assistant Cashier.
NAME OF B.ANK
First National Bank
Citizens National Bank
Salem National Bank
First National Bank
Joplin N~tional Bank
First National Bank
Mid,~est Nation91 Bank
and Trust Company
First National Bank
First National Bank
LOCATION
AMOUNT
Lake Village, Ark.
Sedalia, Mo.
Salem, Ill.
Madill, Okl~.
Joplin, Mo.
Stonewall,Okla.
4.400.00
6,000.00
3,800.00
l, 500.00
1,250.00
1,500.00
Kansas City,Mo .
Stillwell, Okla.
Stratford, Okla.
5.200.00
1,700.00
1,600.00
$26,')50.00
343
W, P. 8, HARDING, 80YIINOI
ALBIRT STRAUSS, VJCI GOVIRNOI
ADOLPH C. JIIUER
CHARLJ:S S. HAll LIN
HENRY A, IIOEHLIHPAH
IIExOPPICIOM•II••u
DAVID P,IIOUISfoN
SICIII'IARY OP THI TRIWIU8Y
CHAIIJIAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COIIPTIOLLIR OF THI CURRIIICY
W, T. C:HAPJIAH, SICR&TARY
R. G. EIIERSON, AsSISTANT SICIUAIT
ADDRESS RIIPLY TO
FEDERAL RESERVE BOARD
W. JI.IIILAY,I'IICA~ MINT
WASHINGTON
April 10,1920.
X-1894
Sul)ject:
Deficiencies in Reserves.
Dear Sir:The attention of the Federal Reserve Board
has oe9n directed to the fact that there is same sli~t
confusion in the method employed by different Federal
Reserve Banks in determining the amounts of their ~old
reserves against note and de~osit liabilities.
There is enclosed, here,'Vi th, for yr:mr information an opinion filed by Counsel, dealing •vi th the
general suhject of deficiencies in reserves and the
ri?hts and obligations of the Federal Reserve Barzs in
the matter of allocating their gold assets against
d~osit and note liahilities.
Yours very truly,
Governor.
To Chairmen of all F.R. 'Rari!:.:s.
344
•
To:
March 5,1920.
Federal Reserve Board
From: Mr. Harrison
s~:j 3 ct;
Deficiencies in reserves.
Upon the request of the Federal Reserve Board I w·i sh to
confirm in writing a statement which I made orally to the Board
at its me,ting on Fe'bruary 26th, with reference to the allocation
of its gold reserves against deT)osi t and note liabili-ties and
~~ith
reference to the tax unon the deficiency·in reserves against
either of those, liabilities.
'rile question first presented is whether a Federal Reserve
'"'ank
whose total resetves against the ags;regate of note and
denosit liabilities is below the minimum requirements
its gold assets is such a manner that its
~~hile
are maintained at 40 per cent
reser~es
~ay
allocate
against notes
its reserves against denosits
fall below 35 per C'3nt.
A study of the
Act indicates that
~rovisions
~eyond
of Section 16 of the Federal Reserve
a doubt a Federal reserve batik may rrain-
tain its 40 per cent reserves against Federal Reserve notes even
though the reserves against
the 35 per cent limit.
d~osi ts
may, as a. result, fall below
Paragraph 3 of Section 16, which fixes
the mimimum reserve requirements against hoth note and denosit
liabilities, provides "that when the Federal Reserve Agent holds
gold or gold certificates as
collat~ral
for Federal Reserve notes
issued to the oarik, such gold or gold certificates sha11 be counted
as part of the gold r.eserves which such bal'W- is required to maintain
against its Federal reserve notes in actual circulation."
Under
the terms of this -paragraph all gold or gold certificates held by
a Federal :;:: 3serve J;'sent as collateral for outstanding
not~s
must
-2-
..
necessa.:·ily be counted as reserves against those outstanding notes
:md cannot lawfully be considered as part of the reserve against
denosi ts.
So, also, Section
16 provides in next to the last paragraph
that "Gold denosits standing to the credit of any Federal
reserve bank with the Federal Reserve Board shall, at the,
ontion of SA.:i.d hank, be counted as -ryart of the lawful reserve which it is req:c..ired to maint~in against outstanding
Federal reserve notes, or as nart of the reserve it is required to maintain against de~osits."
Under the tJrms of this clause the Federal reserve barik is
qranted e:xpress authority at its own 01)tion to count credits in
the Gold Settlemsnt Fund as a part of the reserves which it is required to maintain against Federal reserve notes.
There is no express
the
ham~
~revision
in the law itself conferring upon
the right to allocate the free
~old
held hy it (that is,
gold not with the Federal reserve agent and not with the Gold Settlement Fund) as a part of its reserve against Federal reserve notes
instead of as a part of its reserves against deposits.
ho~ever,
It is believed 1
that that option must exist since for all practical
the same result may
b~
pur~oses
attained under those other sections of the.
law previously referred to.
In other words, inasmuch as the hank is
authorized to procure Federal reserve notes from the Federal reserve
agent unon the denosit of as much as 100 per cent gold, and inasmuch
as all deDosi ts with the Federal reserve agent must necessarily count
as nart of the reserves to lJe maintained against notes out.stand.ing,
the Federal reserve lJaru; may always maintain its reserves against
notes at the expense of its denosit r0serve account r,y transferring
fre 3 goldr to•·' the Federal
reserve. agent as collateral for outstanding
......
.. ...
notes.
It then automatically becomes a part of the reserve against
345
X-1894 a
-3~
notes.
The bank may 3lso accomplish this same purpose by de·nosi ting
free gold in the Gold Settlement Fund since credits in the Gold
Settlement Fund
rr~
by law, at the option of the'barik. be counted
either as reserve against notes or as reserve against denosi ts.
In
view of these facts it would seem to be futile to deny the right of
the bank to consider free gold in its vaul t,s as teser'.re against notes
even though to do so results in a defiCi8ncy in the reserve against
de-oosi ts.
Assuming this to be true, the sole question to be considered is
1111htther the Federal Reserve Board is required to im"Jose a tax unon
the deficiency in reserves against
de"losits~
Section 11 (~) ~rovides:
"To suspsnd for a ::>eriod not exc<3 "ding thirty days, end from
time to time to renew such susp9nsion for periods not exce~ding
fifte.:m days, any reserve requiremcmts specifi9d in this Act:
?ROVIDED, That it shall estahlish a graduated tax unon the
amounts by which the reserve requirements of this Act may be
P·"3rmi tted to fall below the level hereinaft?r specified, A.L'ID
PROVIDED FURTHER, That when the gold l"eserve held against
Federal reserve notes falls below forty per centum, the Federal
Reserve Board shall establish a graduated t~ of not more than
one pe;r centurr -oar annum U"lOn such dei"id.ency ~mtil the reserves
fall to thirty-two and one-half "Ue;r centum, and wi1en said reserve
falls below thirty-two and one-half 'Jer centum, a tax at the
rate increasingly of not less than one and one-half per centliun
:per annum uuon each two and one-half per centum or fraction
trereof that such reserve falls belo,.., thirty-two and one-half
per centum. The tax shall be uaid by the reserve "ba..l'lk. but
the reserve bank shall add an amount equal to said tax to the
rates of int~rest and discount fixed hy th~ Federal Reserve
Board. 11
Two questions are -oresented in conn:;ction 1'1Tith the construction
of this paragra-nh, (l) '"hether the Federal Reserve Board is _obliged
to estalJlish a graduated tax u-ryon the amounts 'ly which the Federal
reserve bank reserves against de-,osi ts fall below the required minimum,
and (2) if so, whether the amount of the tax shall b•"3 added to the
rc.:ctes of discount fixed by the F3deral Reserve Board.
The first proviso of fr~b-secti0n {c) requirea that the Federal
346
-4-
347
Reserve Board sha11 estahlish a graduated t~( upon the amounts 1JY
which
11
the res.;,rv'3 requirements of this Act 11 may be permitted to fall
below the specified levels.
uses the obligatory
There is little doubt that the law which
shall 11 , and not the optional "may", imposes upon
11
the F3deral Reserve Board an obligation to establish a graduated tax
upon the deficiency in the res3rves acainst Federal ResGrve Baril.;: deposits since that is one of the "res--rve requir.ements of this Act".
This
tax, how~rv:er, my be fixed at any amount, large or small, that the Bo1rd
deems to be advisable.
amount.
Technically, it may even be an infini t.;sirral
It must, however, be a graduated tax oas.>d upon th3 an'ount of
res~rves.
the deficiency in the
There is nothing in the law specifying to w!:om such a tax r,ust b8
paid~
In the
C':1.se
of a memlJer bank it is paid to the Federal R3!c:rv9
Banlr, but in th"'.l case of a Federal Reser7e '3ank th3r3 is no on2 to
whom the tax could reasonably be paid oth3::c than to th3 GovGrnrn3nt.
But if paid to the Government, i t would amount in substanc" to a tax
upon th3 Government's own equity in the F0deral Res:JrVG 8ank 1 s surplus.
ThG decisions of the Supreme O.ourt hav:~ frequently held that no F:;d;;ral
tax law should 'Je construed to impose a tax upon th:l Governm.mt itself
and it might by analogy be arguecf•with some force that
. intend to require the Federal Res;rv3 Bank to pey
&
Congr·~ss
did not
tax, even though in
the nature of a penalty, to th0 Government out of a fund
,~hich,
in the
final analysis, belongs to thc:l Government.
It would seem howev'3r, that although there is nothing in tho law
to indicate that the ta:x: should l')e paid to th:; Government, and although,
I
as sugg3sted
above~
it is perhaps illogical to require the F,:1deral
Reserv; Bank to pay a tax to th'3 GovGrnment out of its surplus, n'3v;rtheless, if any effect is to be given to those provisioz:ts of t!:e li}.W L:··)Osing
the tax, the Government is the only logical payee, and if inoosed, it is
348
• believed that it w·ould have to be paid in tha:t manner.
T'nese i:1-
consistencies are referred to Only for the 1?Urnose of emphasizing the
fact that this section is not in its entire-t-Y susceptible of any corr.plete
or satisfactory construction.
The remaining question for conside:c·ati on is whether the inmosi tion
of such a tax
u~on
the deficiency in the
reserv~s
against denosits
necessitate a corresponding increase in the rate of discount fixed
the Federal Reserve Board.
~ust
uy
Upon this question there can be little doubt
since the phrase requiring the increase in discount rates is not a part
of the first proviso of Sub-section (c) which nrovides for the tax upon
the deficiency in reserves against deposits, but instead is enacted as
a nart of the second uroviso of that paragraph which relates solely to
the tax upon the deficiency in
r~serves
against Federal reserve notes.
It mi12:ht be contended that the last sente.nce of sub-paragraph (c) refers
back to the first proviso as
~.vell
as to the second nroviso but that is
a position which it would be difficult to sustain.
In the first nlace, sub-section (c) of Section 11 as originally
passed lJy the House contained only one proviso which read as follows:
"Provided that i t shall establish a graduated tax upon
the amounts hy which the reserve requirements of this Act
may be permitted to fall'·eelow the level hereinafter specified,
such tax to l1e uniform in its au:olication to all banl:-s, ]'Ju_t__s.ai.Q,_
Board shall not sus-pend the reserve reguiremen~s with re:fe!'ence
to Federal Reserve notes. 11
When the bill IlVas passed by tha Senate tbe first part of this nroviso
was left substantially as it reads above but the requirement that the
Board "shall not suspend the reserve requirements with reference to
Federal reserve notes 11 was
struc~
was inserted in lieu thereof.
out and the present _second proviso
It is this second uroviso, inr9osing an
automatic graduated tax upon the deficiency in the reserves against notes,
that contains the clause requiring the reserve 'r)anl: to
11
add ,an amount
..;6-
•
equal to
~
349
X-1894 a
tax to the ratf'3s of int;rest and discount fixed by
•
the Federal Reserve Board."
the
sa~e
inasmuch
Inasmuch as that clause was enacted at
time, and as a part of, the
as
~esent
second proviso, and
the two together wei'e sUbstituted for that part of the
House bill prohibiting a gasPension of reserves against~. the
lodcal inference is that the automatic increase in discount rates
rR sul ts
~
acrainst
F~deral reserve~
in the case of a tax upon a deficiency in the reserves
and not in the case of a tax uj?on a
deficiency in the reserves a;ainst deposits.
But even if the legislative
history of this section leaves any doubt as to its meaning, pevertheless,
the context of the section as a whole
~recludes
the
~ossibility
of any
other construction.
The first proviso ,,rovides for the establishment of a graduated
tax unon the deficiency
in~
of the reserve requirements of the
Act oth'3r than ·those relating to Federal Reserve notes 'IVhich are ex'Oressly
covered in the second
~roviso.
That being so, if the last sentence
of sub-section (c), providing for the automatic increase in the discount
rates equal to the amount of tax unon deficiency in reserves should
be construed to apply to the first :::n-ovis.o, then a deficiency in the
reserves of any member bari£ would necessitate an increase in the discount
rates since membeJ:O banl:s 1 reserves are one of the reserve requirements
. of the Act.
Any increase in the discount rates, regardless of the· cause,
would be a1?plicable to all memlJer banks alike.
It is certain that no
such result could have be .3n con tem'Olated by Congress.
llside from the provisions of the :oaragra:oh "Ullder consideration,
and independently of the question of the tax u:oon deficiencies in
reserve,
th~
Federal Reserve Board, of course, has power to determine
rates of d:iae·ou:nt for each class of paper and that power would in i tselt'
include the power to nullify any automatic increase resulting from
a
••
--rdeficiency in reserves against
X-·1894 a
de~osits,
even if a contrary inter-
uretation of the law, discussed 1n this memorandum, could be suuported .
.
In conclusion, it is the oninion of this office, first, that
a Federal reserve bank may allocate its free3 Q;Old in such a way as
to maintain its reserves against notes at a minirr.um of 40 ner cent even
though that results in a
d~ficiency
in reserves against denosits;
second, that the Federal Reserve Board is rf3ouired. by law to establish
a graduated tax u:non deficiencies in reserves apainst de';osi ts a1 though
that tax may be made so srr,all as to be practically
ncgli~ible;
and
third, that a tax unon deficiencies in r3serves against denosits does
not rasult in an automatic increase in the rates of discount fixed
by
the Federal
Re~erve
Board.
Re sp~c t fully,
GEORGE L. HARRISON.
General Counsel.
350
351
b0PPIC:IOMBM8&~
W. P. G. HARDING, GoVIRNOI
ALURT ITRAUIS, VJCI GIOV.INOI
ADOLPH C. MILLER
CHARLES I. HAMLIN
liENRY A.IIOEHLENPAH
o•
DAVID F. HOUSTON
SICUTAIYTHI TRLUUIY
'''1i:l1Aft\NAII
FEDERAL RESI;RVE BOARD
JOHH SKELTON WILLIAMS
COMPTROLUR OP THI CURIINCY
W. T. CHAPMAN, SICIITAIY
R. G. EIIERSON. AIIIITANT SRCRITARY
ADDRII88 RI!PL.Y TO
W,II,IIILAY,FIICAL A81~T
WASHINGTON
FEDERAL RESERVE BOARD
April 14, 1920.
X-1898
SUBJECT:
Federal Rese1-ve Par Clearing System.
Dear Sir:
There is enolvsed
lett~r
f~r
your information copy
~f
a
written to a Member of Congress on the subject of the
Federal Reserve par clearing system.
The Rules Committee of the House will, on Thursday,
give a hearing to
di~satisfied b~ers
Federal Reserve System investigated.
and others who want the
The bone of
contenti~n
is the par clearing system and othu- charges which have been
made are mere cafuouflage to render the exchange fight less
conspi-cuous.
Very truly yours,
Goveruor.
l!::nclosure.
Letter to all Chairmen and Governors.
352
!DC OO'PICIO t,II!MBil ...
DAVID F. HOUSTON
SECBE~ARY "{THE TREASURY
·-CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRINCY
W. P. G. HARDING, GOVERNOR
ALIIERT STRAUSS, YICI GIOVIRNOa
ADOLPH C. IIILLEII
CHARLES S. HAll LIN
HENRY A. MOEHLENPAH
W, T. CHAPMAN, SECRETARY
II. G. EMERSON, ASSISTANT SECRITARY
ADDRESS REPLY TO
P'EDERAL RESERVE BOARD
w, II, IMLAY, FIICAL AGENT
WASHINGTON
Auril 12,1920.
X-1896
Dear Congressman:-
The situation regarding the Fede:ral Reserve clearinc.
system can be surm.ed up in a vo:ry few words, There ar:: certain clauses
in Sections 13 and 16 of the; Fed,'3ral Reserve .kt which S·3 3ID to r::;quire
the Federal Rqserve Board to ·~stablish a system for th'~ clearing l:ly
the Federal Raserve BanJzs of all checks 1?8Yable upon pres3ntation •·vi thin
their respective districts re€ardless of whether the checks are drawn
upon member or non .... member banks. It apPears also that the Federal
Reserve Banl; s are required to receive these ch.ecl's when tendered them
for deT)osi t by member bmks, ot par - that is, without ma1-ing any deduction from the face amount for collection or exchange cha:r-ges. Section
13 eiD"9owers the Federal R:Jserve 3 o::u-d to fix reasonable charges, not
to exceed 10¢ per $100, which may be made by one ·ba.nl::' against another
barlli' for remitting in exchan;e or otherwise for chec'l:s received for
collection, ':ll!It there is a ")roviso that "no such charges shall be made
against Federal Reserve :8aru::·s. 11
Unon be in:; asl;:ed for an o.,inion, the l.t torney G""n~al
of the United States has construed this ,.,rovisi on li t.,rally and has
advised t·he Board that Fede.ral R0serve ~3an.~s cannot lawfully 'Oay any
charge or fee to a bank for r3mitting to th.;, Feder'11 Reserve :3A.r..l;: for
checks dra1111!1 U'90n th? payer banl:- •'Vhich have be ~n sr:mt to it by the
Federal Reserve Bank for payment in exchange or other 1'1Tise.
It is evident therefore th~t a Federal Reserve ~ar~
receiving checlrs on non-member banl;:·s for denosi t must proce ":1 to collect·
these checks and th'3.t if th·'l .b'l.nks unon 1111hich they are dr3.wn •111111 not
remit at par the Feder'3.l Reserve lank :i,.s obliged to -provide itself with.
some other means of ma1--:"ing the collection. The Feder.-ll R;serve Banl::s
therefore have c?lled the attention of non-member banl.<s to these provisions of law ~md have stated that stamped envelopes will be sent in
each case to the remitting bank i~ order tr~t there may be no actual
expense incurred by the psyer b~:rik in m.31ring the remitt.:mce and that
if it is more convenient remittance may be ma.de in currency at the expense
of the Federal Reserve Bank. All non-member banks have been advised that
353
t
-2-
....
if th<Sy do not care to remit to the Federal· Reserve :Earu~s 2.t par.
collection ,,.,.ill be made throurrh some outside ag:ancy by havinf' the checks
nres~nted at the bank counters for :';)ayment.
If this, is coercion as contended by your constituent it is unavoidabl•3,
for regardl~ss of the question as to "vhether Congr'3ss has the ri,"ht to
led slate in any way that results in the diminution 6f the profits of
st?,te banl-s, it clearly has the ~ower to legislate in matters relating to
the manner in which the Federal 'Beserve B:u'llrs sh011l op~rat'9. The board's
view therefore is that Congress (1) has directed ~11 ~aruts, non-memhe~s as
well .as niem'bers, not to make exch•:n-;e charaes a~zo.inst Federal Reserve Jl~u1?-s,
( 2) has directed the Federal Reserve ~hrilis to receive on deposit at p.u.r any
checks and drafts which ur9 :9ayable on presentation, and (3) has· directed the
Feder:ll Reserve Ji ml-::s not to pay cmy exch-·lh"e ch;:~.rP.:·3s to ba.ri!rs in making
thes~ collections.
V·'hether Congress has the c-Onstitutional ri ··ht to enact a law :9rohibitin;:z
a Federal Res~rve :;:;~ from ·n.<lYin-; exch·mge to a non-memb·~r bank on checks
drawn upon the non-member b<..~nk by its o•'lltl de·:>osi tors may be ar 6U~d to be a
question of la·.111 which should be determined u1 timately by the courts. If it
is desir'3··i· to test the constitutionality of th<3 law, it ap'TJears th<>ct the
banks which question its validity should initiste woc·-;,dings rather than
the Federal Reserve Board. If, on the other hand, thay should concede that
Congress has the ri::!ht to legislate in the 'm2.:nner it has done but believe
that th0 law is op"'ressive, unjust or unwis·e, it would ap,ear that they
should "!'IJ"'eol to Congress with the view of ha•ring the obj~ction;:o.ble featur~s
of the .Act stricken out or modified. H8.re· ag3.in it w·ould se·3m th"''.t the
initiativ·~ should b'3 tcl:'3n by th~ bnnl:s which· feel therns'3lV·3S arz::ric~ved in
the matter.. If th~s:3 banks, al thouqh ~t'?rtainin;- doubts .;.s to the validity
of the h:w, should fz~l that bec-.us.::;: of the len.-;th of timq necess:J.rily in·
volved in obtainin" a juditzi..U qnd final int·~I"tlr~tati·on it is undesirable
to litig':lte, th~n again it 1111ould sc;:;rn th:=:lt recourse should be had to the
more direct method of a:?:~Jealin~ to Congress. In that case, however, it
would se .,m that th3 ban'l::'s ~.vould put thsmselv.~s in ~ mor'3 consistent attitude
if th'1y would not att'91Tlpt to obstruct the operation of the law as it now
stands -pending a final de t9rminati on of nolicy by Con;ress •
.The noard holds th"l further view 1 however, thc.t if non-member b3!ll·s be
no longer required to remit at par, member banks 3.lso should be relieved
from such an obligation, for the mer.cber b~:s ar·3 SUJ:morting the Feder<>.l
Reserve System and it would 'b~ unfair to deprive them of opportunities for
"'rofit which -:u-e given to non-members. This, of course, r:~ds~s a question
as to the confl1ct of the interest of the business corr.munity :'.!ld the p-ener·~,l
pu'l:llic on the on9 hand, end the banks on the other. If you should be in- ·
terested in a further consider~tion of this phase of the rnatter, I would
su -.·-_est that you r.,ad th;: enclosure, which is a co~y of a letter which the
Bac,rd sent a f ~w d.-3.YS ago to a United St·J.tds Senator in answer to sore~; in.;.
quiries made by one of his constituents.
Very truly yours,
Enclosure.
'V. u. G.
H·~.PDING,
Governor.
NOTE:
The enclosure referred to is
Mime o. X-1881, which was sent
yau with Mimeo. X-1884, of
.A:pril 5. 1920.
l
·.
354
(AN .ADDRESS BY W• "P • G. HARDING BEFORE THE CONVENTION X-lB97
OF THE AMERICAN COTTON ASSOCIATION AT .
MONTGOMERY, .ALA., A"ORIL 14, 1920)
THE MARKETING OF_QBQp.§
The crying
ne~d
of the hour
eve~~~ere
is more production.
This
a~lies
with equal foroe to the product$ of the fartn, the forest, the mine and the
factory.
The factors which ·regulate 1!)roduetion on the farm are essentially
different from those Which gover.n in other fields of
activity~
The mine
eoeratoi' 1 the lumberman, and the manufacturer can in ordinary circ'Umst.ances
make good a dimitlished ou.tput covering certain periods by an aCceleration
of anergy- at other times,
but the fa.tmer tmist oj;>erate unde:t natural laws
and his work in its variou.s stages mu.st be done at the -p~r season.
Other
'Producers can. generally speaking, regulate their operationa and adjust the
volume of their
time.
~tput
according to conditions which
de~elop
from time to
"'ith an increasing demand the vol'Wll6 can oe augmented and it can be
.
curtailed when the trend of the ma.rltet pointe to an oversupply •
'):)
Certain elements which ente1' into production, such as the s'troply of
labor and the financial
abilit~
to pay labor, apply to all classes of pro-
ducers, but as the farmer's activities are seasonal he is unable to gauge
as accurately and from as close a vie1'fi;'Oint as other producers can the conditions which will affect the market; for his product.
Certain cte>po must
be planted at certain seasons or not at all, and as the growing erO"Ds are
cl.n tivated and 'brought to rm.turity, advantage must be taken of changing
climatic conditions, otherwise the capital and energy eX"Oendedi.r.t>lanting
\
1
is lost ..
355
X-1?97
-2-
As the crons mature they must be harvested within the time limit :prescribed by nature or else :oermitted to e,o to tl\laste,
When the crops are har-
vested farmers ""re confronted with sarious :?roblems which call for the exercise
of
~~nergies
totally
diff3r.-~nt
from thos3 which are brou2:ht into :?lay during
the periods of planting, cultivation and harvesting.
In the three stages
:preliminar·y to marketing the farmer's probl·'3ms are largely physicDl in their
character and the judegnent '!.rhich he must us/3 r'3lates to nhysical. conditions.
In marketing. however, while he still has physical difficulties to ov~rcome
~n
the matter of storage and trans"'?ortati on, th'3 successfUl farmer Il1!lSt develop
the qualities of a m,erchant under conditions far more :?'3!'!)lexing th<m those
which confront the av3rc..ge merch:!\Ilt,
His
0'1\lll
nroduct is but a small part of
thf3 large volume of similar products grown by other farmers, all of ,.,.hic:h are
ready for market at th-3 S3llle time.
In the
c~tsa
of small crops and where
transportation facilities aN available, the pr9blem is solved by making shi:Pwents to other sections '111here the season is later. but my rerr.arks this morning
';vill relate more particularly to the larger crops and esnecially to the ar3at
stapl~
int~rested.
in which this bOdy·is
Tht3 cotton belt of the United States extends from the southern counti•::JS
of Virginia throuQ'h the South
Atlant~c
and Gulf St2,t3s, T0nnessee. Arl:-snsas,
and Oklahorn"'-, · thrOU?:h the st9.tes on the Mexican Border to the Imp3risl V.sllGy
of California.
Th2 cotton :oroduced in th3se states each year is
?"O''Vll
not
by a f:;1111 cornorations under centralized control with al'ITI)le ca'!>ital and 1111ith
every facility for learning
ability to toll:e th·3 best
of individuals.
with cotton
~own
Th.~
wh~t
m11.rket conditions are and with the financial
advanta2:~
of these conditions, but by
..American crop has no lonh"''3r
~
sev~ral
millions
monopoly·, it must compete
in other countries, more particularly Egypt and India..
-3-
X-1897
The av<;rage cotton farrr.er in this country has but a limited kno,vledge
of market conditionsj his resources are small and his necessities usually
gr3at.
Those to whom he sells are comparatively few in number; they have the
advantage of large financial resources and of f3llliliarity with all conditions
affecting the market, not only in this cOWltry but throughtut. the world.
The
farmer has all the odds against him at every stage, and yet his existence
and the continuation of his activities are essential, not only for the comfort
but for the.life of every other class.
It is therefore a matter of vital necessity that the efforts of the farmer
be suuported and stimulated, that he be assured of preserving the full measure
of his harvest, and that he be afforded a market for his uroduct on terms
sufficiently remunerative to warrant his staying in th~ business of farming.
Loss of a pot~tial crop because of drouth or storm is unavoidable; loss
by insect damage partly so; but loss of any TlOrtion of a crop actually uroduced and harvested can be avoided and §hould be avoided; its loss
a reduction of the resources of the
of
th~
world.
individu~
and
q
shrinkag~
r~resents
in the
'~e31
th
In the present circumstances 'Vhen the world is suffering from
the effects of rr.ore than four yeQrs of the most costly and wasteful war it has
ev'9r
~xperienced,
it is doubly inmortant that no 'Tlroduct of the fs.rm be wasted
for lack of care.
The great crop in which you are interestP.d furnishes the basic raw
mat~rial
for an industry which nroduces an irrroortant part of the worlU.' s clothing.
is also an irrl1?ortant element in
sumption of cotton and cotton
th~
se~d
su"Dply of fovdstuffs an:i fats.
products is a 'Tlrocess which is
It
The con~oing
on every
day in the year, the manufacture of cotton seed products is continuous for a
p~riod
ceas~s.
of seven or eight months while the manufacture ._,f cotton goods never
The whir of the spindle ·.mu. the click of the l.oom are he::trd around
the world, and there is not ·"'- minute in the course of the yePJ: when the machinery
-4~
357
X-1897
of the cotton mills, from a world-wide viewpoint, is still.
The production
of cotton involves about six months of the year, and as a rule a period of
eight months is the extreme limit between the planting of the seed in the
ground and the final
picking~
In view of these facts, how many months of the year should be devoted
to th~ marketing of cotton?
Shall there be a mad rush, as was the crtse in
bygone years, on the part of the cotton farmer to dispose of his entire crop
by Chri~tmas, or shall the marketing of cotton, like its manufacture and
consumption, extend throughout the entire year!
If no facilities are provided for the physical care of cotton, for its
nrotection frorr weather damage, from its loss by theft or fire, if the
financial necessities of the producer are ur~ent and if there qr~ none to
extend him a helping hand 7 thAn, indeed, must
,
h~
sell as his father did in
the old days as soon as his cotton is ginned and baled at whatever price his
customer in a narrow market is pleased to offer him.
There are some steps which are essential for the salvation of the cotton
farmerto the
Adequ.ate warehousing capacity must be 1:)rOVided at locations convenient
farmer~,a syst~m
of gooQ roads must be developed 8nd local transporta-
tion facilities provided to enable the farmer to convey his cotton to competitive
~oints.
It is important, too, that congestion at the local centers be
avoided by means of adequate railroad transportation facilities.
1i1hatever
1
may have be?n the sins of the railroads in other days they hgve been chastened
and today mos.t of them are in need of larger net operating revenues.
They are
great arteries which are essential for the 1ife of the nation and they should
be "'ermitted to live, to extend their activities and to afford the necessary
facilities~
business, and
Ocean transportation is another imoortant factor in the cotton
th~
present is the first season since that of 1913 that anything
like a normal amount 'of shi'Ol;)ing has be
~n
available.
358
-5-
X-1897
The cotton growing industry has experienced many vicissitudes du::-i.ng the
past quarter of a century.
Some of you may remember the days of
-a half cent cotton in the mid.d.le nineties.
of the
,~olf
fo\~
and
Those were days when the shado,,rn
and the sheriff menaced many Of our farrnersj those were the days
when stern necessity dominated the situation, when the crop movement was
virtually over by Christmas.
As the years progressed the pall of depression
was gradually lifted, :md al thcro.gh for a long time cotton growing yielded
no profit, yet by dint of hard work and close economy and by the application
of the principles of crop diversification the farmers gradually became more
independent and the crop ma:rlreting
degree.
farmer,
sea~on
began to lengthen in a
~Or:r'e~;pr':ndtng
The years 1911, 1912 and 1913 were fairly good ones for the cotton
and
in 1914, as the season advanced and indications of an abundant
yield, which was actually realized, became more in evidence, there was a
particularly hopeful and confident feeling throughout the cotton belt until
August, when without warning the European war broke out and ;,>aralyzed the
commerce of the world.
All of you. remember the fall
the largest crOJ) in history had
of 1914.
be.~n
The season had been propitious,
produced - more than sixteen million
bales - and yet for months because of the closing of the markets and the
stGppage of'ocean transportation cotton could not be sold at any price.
Quotations of
five cents a poWld, which had been real quotations eij;h.teen
or twenty years before, were merely nominal, and a cry of distress went up
throughout the entire length and breadth of the cotton belt.
There was a
great demand for loans on cotton, but the need for a market was even greater.
During these months the entire business of the country was affected, the
Federal Reserve System had not begun to function,exchanges were closed,money
was scarce and credit hard to obtain on any terms. Gradually;, however, the
situation
-6began to improve.
X-1897
359
A cotton l-oan ftmd of one hundred million dollars was
provided during the autumn, and the S~~the1~ ~eople. should not forget that
subscriptions to this fund were made by banks in other sections, many of
which were in localities whose immediate interest seemed to lie in cheap
cotton.
It was realized then that cotton is not merely a sectional crop
but that it is a great national asset.
WhiJe the ftmd was not used to any
appre'ciable extent) its establishment had a good mora:). effect for it established a loan value for cotton, and as the ocean vesMls which ha.,. be<>.n tied
UJ? for fear of destruction by enemy cruisers began once more to leave their
havens of refuge and as the financial situation bec~ne easier the spinners
began to buy and the crisis was
Since th~ fall of
1915
passed~
there has been a steady and almost continuous
adv:mce in the price of cotton; middling uplands, "Vhich sold at about eight
cents a pound on July l,
During this
1915,
bring now, I believe, about forty-two cents.
period, how,ver, there has be:m more holding of cotton on the
farms and in the small towns than was ever known before..
b0en
d~
This holding ha.r.o
in larger part to the necessities of the case, to
certain countries owing to the war to
to uriorities in the use of ocean
stuffs, war materials and troOps.
~urchase
shi~ping
their accustomeu
inability of
~~Flies,
and
for the transnortation of food-
We have had,
two years a. continuous cotton season.
th~
therefore~
during the past
The more gradual marl::eting of cotton
has be "'n made -possible because of improved banKing facilities, but more -particularly because of the stronger
fi~ancial
position of the Froducers themselves.
Yet the :price of a commodity is a relative tl'lrm.
TIIITO
htmdred dollars a bale
for middling cotton would have se"med six years ago a fabulous price; today,
when 'liTe consider the price of cotton good,s, the cost of labor, both on the farm
and in
th~
cities, the price of grains, meats, clothing> shoes,
iinol~mentsj
a~ricultural
of mules and horses, and the enormous taxes which are imposed in
360
-7-
X-1897
consequence of the wart it is evident ·that
is not so high.
r~latively
the urice of cotton
There has been an advance in the market value of the lands
unon ~ich the cotton is produced and a great advance in the price of
~
fertilizers, and it is clear that the cost of ~reduction has mounted in
nre~ortion
to the increased
p~ice
of the stanle.
I have not titne this morning for a diSouasion of the causes and general
effects of credit expansion, but I do wish to s~v that whil~ in terms of
· com:rr.od.ities the purchasing power of the dollar is far less than it was in
pre-war days, there has been no decline in its debt-paying ·power.
cannot buy
,~lith
While one
the two hundred dollars which he receives for a bale of
cotton today as much food and clothing or as much gasoline as could have been
~xchanged
for one hundred dollars a few years ago, you can still ~ay off two
hundred dollars of indebtedness with the
time within the memory of the
of debts as the
-:!)resen~,
~resent
proce~ds.
There has never bP.en a
generation so favorable for the
~ayment
and I would strongly· advise those of you who have
money in the bank or a sur;_:>lus of salable crO'?& and have at the same time
some indebtedness which is not pressing not to yield to the temptation
something which you do not need but on the other hand to avail
of
th~
~o
'buy
yourselt~lves
extremely favorable conditions which nO\If exist and liqu.ide,te or reduce
your old inde'btedness.
A year ago we ,qere still in the midst of a period of hesitation and
uncertainty which followed the
armi~tice.
Ade~te
ocean
trans~ortation
was not available.for transports were being us·<>d in· bringing back the two
million soldiers who had ber:m sent to France.
great cotton using countries of
Euro~e
It was thought that the
•.
were financially exhausted and it was
realized that if the normal amount of cotton was to be sent abroadi
not
only was the transportation problem to be solved put the still greater problem
361.
X-1897
of credit facilitiesy
the total value of our experts during
exceeded inroorts by mare than fcut' b5.1lion dcllars.
t~e
year 1919
Of this amo1.1nt about
a billion and three-quarters was taken care of out of advances made by th13
United States Treasury as authorized by war time legislation.
has be .,n financed in various ways.
The remainder
It is probable in many casas that payment
has be~n accepted by exoorters in the form of European bank credits,for not
until quite recently has there been any movement of gold from Europe to
America since 1916, and the imports thus far have been comparatively small
in amount and totally inadequate for the financing of Europe•s
trade
balance~
credits have
lar~?e
adverse
Our own banking statistics would indicate that very sul)stantial
be~n giv~n
by banks in this country to manufacturers and exoorters
who have; s<ent goods to Europe ..
From August 1, 1919 to April 2,1920, total
Uriited States amounted to
e~orts
of cotton from the
5,134,822 bales, of which 2,672,3i2 bales went·
to Great Britain, 489,400 to France, and 2,023,100 to other countries.
This
eoTpares with total exports for the entire season 1918...:.19 of 3, 514,269 and
for the entire season 1917-18 of 3,356,142 bales.
vitally interested in the continuation of
ex~orts,
The cotton ~roducor is
at least in the
~resent
volume.
There is no question as to the
ne~d
.ne~d
for cotton, but 'vhether or not this
c onsu.m<>r- ~;
will develop into an economic demand depends u:oon th-s ability of;-
an th'3 other side to pay in cash,or failing that,to
secur~
credits.
difficult to secure accurate informatiqn as to conditions in
Euro~e;
It is
re<;orts
are conflicting. · The complications which hav~ within th'3 last t~w davs arisen
are
between France ahd Germany/
iisturbing factors as is the situation in
Russia.
Nevertheless when everything is considered, it
se3m~
likely that the
362
-9-
X-1897
economic position of Europe as a whole is better than it was a year ago.
Great Britain anpears to be making rapid headway towards regaining its
old time position in world commerce and finance, and the marked advance
in sterling which has taken "Place in the last sixty days is both an 'ind,.ication that this .is true and an assurance .that' the·progress made will
be sustained.
Goods can be exported
to Great Bri.hain more readily with
sterling at a discount of 16% than when the rate of discOW'it was
33%.. The
nroductive capacity of France and Belgium has increased during the past
twelve months although the depreciation in the exchanges of both these
COl.Ultries restricts their ability to im:9ort and emphasizes the necessity
for .credit arrangements.
Germany and Austria,. formerly imported a 18-!ge
amount of cotton, and mills in both countries 7 as well as in Czecho-Slovakiat
I
which was formerly a part of the Austrian Empire 1 and Poland also lack
order
only the raw mater.ials m/
to resume o-oerations. The cu.rrenci% of
these countries, however, are so greatly depreciated as to make iniports en
usual terms impossible.·
For some tim'!'} past .Americ;m business men have bee>n conside'ring means
of sending .·raw materi:U s to Central Euronean countries for conversion into
finished nroducts and have endeavored to work out a -olan whereby credit
cculd be furnished in connection w-ith these ero·o:rts with reasonable 'safety
and fair business nrofi t.
All re-oorts frcm abroad agre ~ as to the necessity
that· the variOlls countries of Eu:rone be su,.,plied with raw materials in
order thl'\t the wheels of industry may once more be set in motion.
It is
highly essential that the United Ste.tes be able to continue to sell her
raw rr:aterials and it is ~erative that EurCJ'"9e be able tt secure these rE£"
rrat'3rials, for without them industries can not be established and a complete
ecQOomic collanse avoided.
It is
imoort~t
to
the entire world that not
363
-10-
X--1597
only the countries of the Entente but those of centr·al Europe be placed in
position to produce.
a
It is needless to ex-oect recovery from tho economic
disarrangement from which the world suffers today as long as J..OO, 000,000 people
in central Europe remain in enforced idleness.
I am informed that conferences have recently be.::n held for
i;t1e
:r.·u.:::--::J•)Ge
of developing a plal'l whereby raw materials can be sent to c mmtrles whose
currencies are most serio-.;_sly de-preciated for co:,we:.:sion into fin:1.shed
manufactured products under contracts for exportation under a plan whereby
title to the raw materiaJ. s exported remains in the American shippers through ..
out the "'rocess of manufact"rre into finished prod1.,.cts; when these prod<Jcts are
sold the proce -:;ds are applied to the payment of am(:Ot.l.<!.ts d:..1.e for the raw
materials, the arrangement t.o be sul)norted by :oro-.feT gJ:Lara.ntees given by the
manufacturers receiving the raw mated.als, by the ex:oc:d;eJ:s &'1d imnortel'S
selling the finished "'rod.ucts, and by foreign banks of good s-;-;a:nc".ing.
told that for various reasons it
se~ms
I am
desirable to atrply thj.s plan in the
first instance to the manufacture of cotton goods a;.1d that it is proposed to
organize a financing and trading cornoration with broad :po\vers
or Federal laws to
finfu~ce
m1de:l~
state
the :oroposition.
The necessity for providing means of ex:oorting raw mat~rials to Euro~e
has b::;"'n given much consideration during the past year by goverrtrnent authorities
in Washington and by the Congress of the United States.
known as the
11
Edge Act" has becorte a law.
An im"'ortant rn-erasure
This a&.t -orovides f-or the Federal
incorporation of association~ engaged -principally l.n international or foreign
banking or other international or fo?eign fina;.1cial operations and permits
National b~s as well as individuals, firms and other corporations, to invest
in the c~ital stocl~ of sllch associations; the total investments of this character
364
X-1897
by National banks, however, being limited to 10% of their capital and
surplus,
The act provides further that the Federal Reserve Board shall
issue regulations governing th9 organization and operations of co~orations
organized under its provisions, and these rules have recently be3n formulated
and made public.
A copy of the regulations will be handed the Secretary
of this convention.
Many of
the obstacles which have stood in the
have been ov-~rcome.
way
of the cotton farmer
I shall not undertal::e to predict the future course of
prices, and in fact at the
ri~ of
meeting your disanproval I will say that I
am not so much interested in the actual price
of cotton as I am in the
develonment of a steady and dependable market, for I believe that if such
a marlret can. be established li ttl~ concern need be felt as to prices4
good market is essential for the stimulation of production, and it is
also that the nrices of cotton and other farm products bear a
~roper
A
i~ortant
relation-
ship to the IJrices of commodities in general.
The census figures which are now being publi.shed from day to day show
a marked increase in the urban population and indicate a movem0nt from the
farms to the towns and cities.
This is not altogether a healthy condition-
There should be no halt in the development of farms, but in order to assure
this ,rural life must be made more attractive.
The comforts and advantages
of city life must be extended as far as possible to the country and attention
must l:>e paid to the betterment of . : living conditions on the farm.
rural communities must enjoy the
b~nefits
and cf education; schools must be
ke~t
The
of easy communication, of sanitation,
open for far longer perioda of time
than is now unfortunately the case in many localities and in order to secure
competent teachers, living salaries must be
~aid.
Absentee landlordism has
b-e"ln the curse of many communi ti'3s and tenant farmers sbould be .e:o..couraged
-12and a$siste.d to become l.and owners.
not necessaril7 by
du~lieating
X-1897
Labor must be attracted to the farm,
the wages paid in the cities
b~
by means
of agreeable living conditions and the inducement of a net return after
living costs are met.
co~arable
to that of the city wage earner.
This program will involve higher production costs than hAve be?ll v.su.al
but these
c~
methods of
be
count~racted
!~min~
and by
eornmerciel fertilizers.
to some extent at least by more scientific
che~ening
certain essentials, such as nitrates and
Fewer dogs and more shMp on the farm would cheapen
the cost of living and add to the income of the fartrers.
~a,ys
There are many
of stinlllating production on the farms but increased })reduction can not
be maintained i f haphazard methods of harvesting and marketing are "'ermitted
to
obtai~
Farm products are essential for
fe~ding
and clothing the world;
these should be marketed in an orderly manner and not dumped in such volume ·
as to bring about price reactions which will be detrimental to
and rhe consumer
a:l.ik.~;.
marl:et in the ho:9e of
th~
producer
But they should no-t be hoarded and held from the
for~ing
prices u:p to an artificial level.
Such a
pol icy is bound to result in disaster to those engaged in promoting it.
The
volume of our gre£,t etaple crops is so large and the value so enormous that
all efforts to corner them will result in failure by the ooeration of economic
law.
Convsrsely, it is to the interest of the
nrofit~ble
eon~er
that farming be
in order that production may be adequate;in effecting this
an
O'l:len market in whtch the law of SU'T)"Dly and demand is given fre ~ pla;y and in
which the buyer
~d
the seller me;t on equal terms is the great desideratum,and
tu. its attainment your best efforts may well be directed-
366
DAVID P'!lfOU!fJPN
I&CIITARY OP THI TRUSUIY
CH41111AN
FEDERAL RESERVE. BOARD
JOHN SKELTON WILLIAMS
COIIPTIOLLII OF THI CUIIBNCY
ADDRESS REPI.Y TO
'Ill. T. CHAPIIAN, SICIITAIY
R. G. EJIERSON,AIIIBTAKT SICIITAJY
w, IIJ.IIIJ.AY,~•qA~ A·R~T
WASHINGTON
FEDERAL RESERVE BOARD
W. P. G. HARDING, CIOVU.Oil
ALII! liT STIAUII, YJCI GOVIIMOil
ADOLPH C. JIILLIR
CHARLES S.II411LIN
HENRY A, JIOEHLENPAH
April 15,1920.
.
X-1899
Subject:
Warehouse Receipts on Whiskey in Bond.
Dear Sir:For your information there is enclosed copy of the
Boardr s reply to a letter from a firm formerly engaged in the
wholesale liquor business, relating to the use of wareh•)use
receipts on whiskey in bond as collateral for loans made by
member banks~
·
Very truly yours 1
Enclosure.
Governor.
To Governors and Chairmen of all F .R. Banks.
367
COPY
April 14,1920
X-1699 a
··Dear Sirs:-
Tln Feder.'S\l Reserve 3o3.r•i has received md considereu your
letter of April 12th, 1920,· stat in; that since n'l tional "Drohibi tion becc>me
effective banlo::s have not regarded warehouse receiuts coverin;r whislcey in
bond as good collateral 2md askin.:: that the Feder;u Reserve Boarc. "reconsider
the rr:a.tter a.nd give some relief".'-··
The Federal Reserve Bos.rd has never in tha past made any rulin:§"
to the effect that w.:..trehouse recei:?ts covering whiskey in bond are either
§:OOd or b<.td collateral for a ba.r:Jk loan.
It is obviously a. qUestion uvhich
each b.:m::: must determine for itself and is not a matter coming 1vi thin the
jurisdiction of the Federal Reserve Board.
Under th"! terms of Section 3 of Title II of the Vol stead .Act.·
it is :nroviJ.ed "That nothin.:;; in this act shall prohibit the purchase or
sale of warehouse receints covering distilled s:piri ts on de"tJosi t in Government bonrled warehouses and no s-peci.~ tax shall attach to the husine ss of
purchE-tsing and seUinrr such war~house receints. 11 Article IV, Section 26
of the Re£:U].ations issued by th~ Bureau of Intern2~l Revenue, unier the terms
of the Volstead Act, rel,.,.,tive to the r.oanu.fa.cture, sale, possession, .:,n~ use
of intoxicating liquors 1/rovides th'3.t whisl;:-ey "':U:l brandy rray be "bottled
in bon·t for •iOll~estic medicin:o1l "OUI'T.10ses in a distillery bottlin;r house or
bo1ttlinq: room of a snecicl bonding w~rehouse." On ..Aur,:ust 21, 1919, the
Attorney G3neral of the United States rendered an opinion to the Secretary
of the Treasury to the effect that the sale of warehouse certificates on
whiskey held in bon:l su·oject to the payment of tax befor·~ rerDOVal 'fll'.::ts not
a s~e of 1Shiskey for beverage pur:poses within the meaning of the War
Prohibition Act and was not prohibited by that Act.
It seems reasonably clear, therefore, that under the terms of
the ,.,rohibition laws :::~.nd the Reaulations issued by the Treasury DeT.Jartment,
warehouse receints coverin,Q' •111hiskey in bond may under certain circumst,'l!lc·es
be leG"ally bou::ht ?.Uti sold so that it is legally possible un.1er those
circumstances for the owner of a warehouse recei-ot covering l.vhis1:ey in bond
'
..
X-1899 a
-2-
to pledee that warehouse receiut as security for his note. ~ether
or not a bank will mak-e a loan unon a note secured in that manner is
a question which must, of course: be determined by the batiF itself in
each case.
The Federal Reserve Board has not and cannot make any
rulin~ one way or another as to the desirability of such P.. warehouse
recei~t as collateral for a loan upon a noter
The Federal Reserve Board in construing the provisions of
Section 13 of the Federal Reserve Act~ has had occasion to rule that
a warehouse receint covering whiSkey in bond cannot be considereu a
receint conveyinF: or securing title to "readily marl:etable staples"
w·ithin the meaning of that section :and that therefore such a receipt is
not a "~?remer basis for a ba.nl<:er 1 s accentance of the kind defined in
that section. That ruling, h~vever, has no relation to thA legal
right of a banl:- to make a loan u-pon the note of· a borro-v<~er secured
by P. warehouse receipt covering ;_,hislrey in bond.
Very truly yours,
w. '?. G. HARDING.
Governor •
.
...
369
I!X 0PI'IC:IO
W. P. G. HARDING. GoVUNOW
ALlERT STRAUSS. VICI GOVIRNOW
ADOLPH C. lULL! II
CHAitLIS &. HAMLIN
HENRY A. MOEHLENPAH
MEMBII~S
DAVID F. HOUSTON
SECRITA&J.Y Of' 'THE TREASURY
'I'
CHAJRtiAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLLER OF THE CURRENCY
111. T. CHAPMAN. SECRETARY
II. G. EMERSON,ASSIITANT S.ECRITAIY
ADDRESS REPLY TO
f"EDERAL RE:SJ::RVE BOARD
1!1, M.I .. LAY,
WASHINGTON
April
15~19204
X-1902
Subject:
Non-Par List.
Dear Sir:The Federal Reserve Board is considering the
issuance of a non-par list in order that the merchantsr
manufacturers and business n;en of the country rr•aY have
means of ready reference in determining whether or not
a check is collectible at ~ar through a Feder31 Reserve
Bank. This matter was discussed at the recen.t conference
of the Governors of Federal Reserve B:ml.rs, and you are
requested to have tran~~itted to the Board as early as
convenient, throuqh the pro~er official of your barik, a
list of all batiks of de0osit in your district, checks
u-pon which cannot be collected at par either direct or
through agencies.
This letter is being sent in identic fonn to
each Chairman and if no aclcnowledgment is made, it will
be taken as evidence that there are no non-par b::u:iks in
the district from which no reply is received.
Very truly yours,
Governor.
To Chq irmen of .Ul F .R. Banks.
FII~AL ~~I"T
370
lEX OPPIC:IO MKMSKIUI
W. P. G. HARDING, GoYIIIOI
.ALIIIIIT STIAUII, VICI GoY . . NOI
.ADOLPH C. IIILLII
CHAlLIS I. NAil LIN
HENRY A. IIOIHLINPAH
. DAVID P.~t'lfiN
IICIITARY OF THE TRIAIIU.Y
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
CO•niOLLII OP TJ:II CUII&NCY
W. T. CHAPIIAN, BICIIYAIY
R. G. EIIERSON,ABBISTANT SaCIITAIY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
WASHINGTON
1!f,II.IIILAV,FI1!;.\.~ Ae~NT
April 17,1920.
X-1904
Subject:
Payment of Interest CoU.Oons in Gold.
Dear Sir:For your information there is ~ivan below the text
of a letter received by the :Board under date of A,ril 9,1920,
.trom the Secretary' of the Treasury, •rl th rGference to the
payment of int(3rest CO'Il1?ons in gold at Federal Reserve Ban'k's,
together ~~th a cop,r of the Treasury Denartrnent's letter of
the same date in answer to an inquiry on this subject.
"In ~Onnection with the :9ayment of Liberty
bond interest cou~ons at Federal Reserve Banks, I
am enclosing for your information and guidance a
cop,y of the Treasury Department's letter of April
9 replying to an inquiry as to the payment of interest
coupons in gold at Federal Reserve Banks. As you
kn0!.'11J the Treasury holds that interest coupons from·
LibGrty bonds and Victory notes are actually "Oayable
at Federal Reserve Batiks, and not merely cashed there,
and that, therefore, gold must be paid on demand u~on
presentation and surrender of matured cou-,ons at
Federal Reserve Barurs. By the terms of the Liberty
bonds and Victory notes, the interest coupons therefran are payable in United States gold coin of the
present standard of value, and are :payable upon
presentation and surrender a~ the Treasury Department,
Washington, or, at the bolder•s· ap'Uon, at any agency
o:r agencies in the United States which the Secretary
. of the Treasury may desi~ate for the T.JUr'!')OS'3. The
Federal Feserve Banlrs are designate1i agencies for
this ~ose, and are exgressly reco~ized as such
in the Department's instructions of November 5, 1917."
Very truly yours,
'
Enclosure.
Secretll!7·
To Chairmen of all F.R. Banke.
X-1904 a
THE SECRETARY OF THE TJEASURY
COPY
----
WASHINGTON
April
9,1920~
Dear Sir:I received your letter of Febru&ry 12,1920, inquiring as to the payment of Liberty boncl interest coupons at the Federal Reserve Banlc-s in qol'i coin,
and have already brOUght the matter t9 the attention of the Fed8ral Reserve
Banks and the Federal Reserve Board. By the terms of the bonds themselves and
the circulars offering them for subscription, the coupons from Liberty bonds
are payable in United States gold coin of the present standard of value, and
are payable upon presentation gnd surrender at the Treasury Depart~ent, Washingtmlr
or, at the holder 1 s option, at any agency or agencies in the United States which
the Secretary of the Treasury may designate for the 1)Urpose. The Fe<leral
Reserve Barurs and the subtreasuries are designated paying agencies for this
purnose, as 1111ell as the Treasury Department, Washington, gnd upon presentation
and surrender of matured Liberty bond coupons will pay gold coin 'I.IpOn de~gnu. ..
As a practical matter, however, payments in ~old coin can be made only in
nul tiples of $5, inasmuch as the $5 gold coin is the lowest denomination now
coined by the Government, or to a limited extent in $2.50 gold coins which may
still be available ..
Throughout the war, moreover, it has been the policy of the Treasury
to conserve gold and discourage its circulation, and this nolicy has not
changed with the cessation of hostilities or th~ removal of the embargo on the
exnortation of gold. It is just as important as ever that gold, 1'lhich is the
foundation of our reserves and the backbone of all credit transactions, should
be concentrated in the Federal Reserve Bariks as reserve and f9r use in the
settlement of balances growing out of international transacti,bns. It is the
desire of thr: Treasury that the conservation of gold should continue and that
there should be no revival of the use of ;<;Old for domestic transactions generally,
in which it serves no useful -our.,.,ose. The circulation of 2"0ld coin and gold
certificates tends to dissipate th'3 reserves, and the circulation of gold coin
involves a considerable loss due to abrasion ,.,hich is avoided by having the gold
carried in the vaults of the Federal Reserve Banks and the Treasury.
In accordance with this ~olicy, the Treasurer and Assistant Treasurers
of the United States call the attention of persons requesting gold to the
Treasury's attitude toward th9 internal circulation of gold and invite them
to accent other currency instead, ~ut gold has not been and will not be refused
to l)·~rsons who demand it and '!)resent currency or matured United States obligations or int~rest counons therefrom which entitle them to receive it. The
policy of the Treasury ~~ith respect to gold has been called to the attention
of banks generally throughout the country, and the Federal Reserve Board and
Federal Reserve Banlrs are bein~ guided by a similar policy.
Very truly yours,
(Signed)
D.F. HOUSTON
Secretary.
FEDERAL
I
RESERVE
BOARD
STATEJVJENT FOR THE "CRESS.
X-1905
For release on Monday morning,
April 19th, 1920.
On Saturday, April 17, 1920, the Federal Reserve
Board approved the articles of association and organization
.
certificate of the First Federal Foreign Banking Association,
'
a corooration organized under the terms of Section 25 (a)
of the Federal Reserve Act, commonly lmown as the "Edge Act.
The
home office of the cornoration is New York.
is $2 1 000,000.
11
Its capital
It is inco~orated for the purnose of engaging
in the business of international or foreign banking or other
international or foreign financial operations.
Pending the issue
by the Federal Reserve Boarcl. of a final permit to c ornmence
business the corporation has authority to exercise only those
~owers
which are incidental and preliminary to its organization.
Washington, D.C.
A-pril 17,1920.
373
W. P. G. HARDING, GoYlR"OI
ALai IT ITIAU&a, YICl GOVIRNO'
EX OPI'ICIO MI!MBIIU
DAVID P. HOUSTON
SECRITARY OF THE TREASURY
CHAIRIU.M
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THI CURRENCY
ADDRESS REPI..Y TO
FEDERAL RESERVE BOARD
WASHINGTON
ADOLPH C. Ill LLII
CHABLIS S.IIAIILIN
l!ENRY A.liOEHLENPAH
W. T. CHAPMAN, IICRITAiY
lt. G. EMERSON,,AISISTANT S.ICRITAJY
W, M,IMLA'r, F!JCAL AflliT
April 17,1920
X-1907
Subject:
Conference •rlth Comnittees of Federal
Reserve Batik Directors.
Dear Sir:The Federal Advisory Council will hold its next
meeting on Monday, May 17th. The Board wishes to have a
conference on the following day with comr.1ittees of directors
of the Federal. Reserve Banks. It is not advisable to ask
all directors to come, one reason being that it is imoortant
nqt to interfere 1~ith the routine operations of the Reserve
Banks, and the Board therefore aSks that each batik designate
three directors to attend the conference, which will open
at 10:30 A.M. on Tuesday, May 18th, in the Board's Assembly
Room in the Metr~olitan Batik Building.
The tOpics which will be discussed will relate to
the credit situation and the Boaru is anxious to exchange
views with those directors who represent the institutions
which not only borrow from the Federal Reserve Banks but
which also make loans to the public. It is desirable therefore, that the three directors chosen to represent your barik
at this cOnference be the Class A directors. As soon as the
selection is maU.e you are request.sd to notify the directors
designated and extend them an invitation on behalf of the
Federal Reserve Board to be present at the confere~ce. The
Board will approve payment by the Feueral Reserve Batiks of
all necessary traveling expenses.
Very truly yours,
Governor.
To Chairmen of all F .R. Banks.
374
X-1913
CONFIDENTIAL: NOT FOR
"'PU-si~ICATION
Questionnaire re
(1)
Bgrikers'Accept~ces,
Etc.,
Is the ostaolishrnent of dollar exch:m;e in world markets
illl
essential benefit to Arr•3ric'=ln comrnerce and th3 Am~rican people?
Stat:-:J reasons - nro or con.
Is .en O"!:)~n discount market essential to th3 establishment of
(2)
dollar exchcnge in world rr,n.rkets?
St-:-t,:; reasons ... 'T)ro or con.
Is a lib >rctl onen marb3t policy 'by Federal Reser~re B~·s essential
(3)
to
th~
development of an ()'T)en discount marl\At in America?
St=.te reRsohs - pro or con.
(4)
Does banl::-ers acce'l?tance credit, as nerrri.itted under the :F'eder:ll.
Reserve ;~ct, suffici,:;ntl;t nrovidl3 for establishrr~nt of doll.e.tr exchange
in world markets?
If not, in what wr::..y 8Pd tO what ext?rtt :u-e the
nrovisions of the P.ct deficient?
( 5)
Does hankers accent·mce credit, as :_Qermitted under th-3 Federal
Reserve .Act, tend to infl·'l.tion of:
(a)
(b)
l=>le: se sta.te
(6)
Credit ?
B'llil: loF.ll'ls in United St::(tes.?
.ar~ent.
Is the use of banrers accent~ce dollar credit a b~nefit to
Americ-:n im'r.lort 2nd. er)ort trr:.de, either or both?
In ,qhe, t ways is it benefici :-l 1
(7)
Is the use of ~aru~ers acce~tsnce credit beneficial in dorr.estic
tr.~.de?
(a)
{h)
In do:v~~stic tr.:ms'T)ortation?
On W3-rehoused st~"Ol8s?
•
-2-
X-1913
Are .AmericPn 'rJankers accentance credits, as ·nermi tted under the
(B)
Federal Reserve Act, ordin:'lrily self-liquidatinrr within the periods for
which bills are drawn thereunder?
Does this vary .s's to c1A.sses of credits?
As to iT!'!T,iort tr2ns:::~.ctions?
Export transactions?
Domestic tr.=.nS"Dort<;ttion tr:msactions?
Warehoused st.=t:r;>1es secured credits?
In. your o-oinion does correct banking :pr:tctice require continuing
(9)
security durin~ the life of th~ credit for 0~ers acceptance credits
granted
(l<b)
fs
~~ainst
the
warehoused
US·"'l
sta~les?
of banlcers acceptance credit c..bused and if so in what
ways c.lll.d to what extent?
(11)
If abuses exist, how may they best be corrected?
(12)
Is an onen discount marl\::et for 'rJankers dollar acceptances essential
to the maintenance or further development of .American foreign
tr~de?
If so, why?
Is it essential or desiroble as the medium for r~,J.ization on bills
dr~~
in domestic trensactions?
If so, why?
(13)
Is an o~en discount market ~ essenti~l of the American system of
'b '3l!lk in fZ?
If
(13a)
SO I
1/Vhy?
1b.at is the relation of r.m O"'en discount marb~t to the international
111
flow of credit?
(14)
m~rket
Is the 'ban1:ers acceptance 'rJetter adapted to ne;;cotis.tion in o:pen
or to private discount at th"3 drawer's or borrower's bank?
Please st8.te
ar~:urnent.
376
('
·-3-
(15)
X-1913
Should the acceptor discount or buy his o~ acceptance from the
drawer or other holder in due course?
If so, under what circurr1stances and why?
(16)
If m ~.cceptor acquires his own acce"[)t:mce before rraturity, shcrllld
•
he reseli it or consider it retired?
(17)
ShOUld bares indorse bills:
(a)
(b)
Sold from their own portfolio?
Rec'3ived foi' discoUnt ~d credit of
correS1:)ondent?
Please state argument.
(18)
Should ~ants indorse merely for profit?
(19)
Should acceptors exchange accorr~odation indorsements or their
own acceptances for purnose of effecting rediscount or
~etter
terms of
rediscount?
Should there be any limits on indorsements in the cases SUL:~ested
(20)
in questions 17, 18 and 19?
(21)
If so, "Vhs.t limits?
Should there be a difference in the case of hills that •'Vhen bought
h1.ve already a bc-.nk 1 s or a betnker' s indorsement.
Wi~l the onm market effectiv~ly limit th<:l liabiliti~s of acceptors
(22)
~d
indorsers on
(23)
~aper
m~rket?
Wrat should be the nolicy of Federcl. Reserve Ba.ri'.~s in O'Pen market
purchases of hankers
( 24)
offered in the oncn
accept.~ces?
Should Feder~ Reser·r"l Banks consider indorsement of a m.:m~ber bank
on hills bou,:ht as rediscounts for the member
(a)
(b)
(25)
banl~?
If bou;;ht in o-p;n market?
If bou-;ht from the member bonk?
If considered as redisco1mts, would member 'Danks purch;:;..se bankers
acceptances for inv,::stment and rediscount them on OCC3.sion at Federal Reserve
B~nks?
If not, why not1
.
•
377
'
X.1913
-4(26)
,.,by do banks buy b-ml:ers accer,tances in the onen market?
(27)
Should Federal Reserve }ie.nl~s ever buy unindorsed bills?
(28)
Should they ever buy from, or discount for, an acceptor, his
own P..cce:J:)tance?
T~ri thout
( .::>J
other indor serr.ent 1
( 1:>) · 1ilii th other indor s".!rnent 1
Please state ar?Ument.
(29)
Should they l:>uy lona maturities, short maturities, or both?
(}J)
Should th,.~y ever; merely as a matter of 'DOlicy, decline to buy
prim~
indorsed
'~:>ills
at
some
I
r~te?
(31) What would be the effect in the
Federal Raserve
(}2)
3~s
dp~ m~rket if, as a mdtter of policy,
did discontinue open
mar~et
purchases?
What difference, if any, should Federal Reserve B~~s maintain
between rediscount rates and purchase rates ')n nrime
banke~s
acceptances?
(33) Are different rediscount rates (as distinguishea from purchase
rates) desirable for hankers acceptances and ~r.omissory notes?
If so, what is the .,roper basis for difference?
(34)
H01w, and tQ what extent, are the policies and nractices of the
Federal Reserve
B~rs
·(a)
(~\
(35)
felt as an influence in the
o~en
market?
On general ccmditions?
As towards specific -~a~er or classes of ~aper?
Are they uniform at all Federal Reserve !3anks?
and if not, should the~~
be?
(36) Has the open market
develo~ed in breadth ~ stability?
If so, to what coffiparative extent?
Please discuss fully.
(37)
What are the principal causes for the slow development of an
acceptance market?
378
-5(38)
(39)
X-1913
What, if anything, further is needed for its development?
(a)
To ~~hat extent do acceptances facilitate
the n~~ of credit between different
sections of the U.s. 7
(b)
If the ~ederal Reserve Baru~s adoryted a
narrower or more restricted policy toward
open market purchases of ~ankers 1 acceptances than at present, would this have a
tendency to impede the n em of funds
when needed from creditor to debtor
sections?
ShOUld an eXport or import 'l:lill bear Specific details of the
transaction ·upon its face?
(a)
(b)
The desirability
The probability.
, r.
379
D OPPIC:lO MSMSS. .
W. P. s. HARDING. SOY&noa
.,.-
'
ALBERT ITUUII. YICI SOY&IHOI
DAVID P. HIIIIIISH
IIGailfAIIY OP THI TRIAIUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKILTON WJLLIAIIS
COMPTIOUII
'!' TH& CURUHCY
ADDRJUIS REPLY TO
WASHINGTON
fEDERAL. RESERVE BOARD
':
ADOLPH c. IIILLII
CHAlLIS I. HANLIN
IIENRY A. IIOEHLINPAH
W. T. CHAPIIAH.I&CIITAIY
R. s. EIIIRSON • AIIIITANT I&CI&TART
W, II, IIILAY, Fllc;A&. A8 ..JT
A"Cril 24.1920.
X-1914
Su.bjeeC.:
Distribution of Earnings of .Federal
Reserve B~s ·- Suggested Amendment
to Federal Reserve Act~
Dear Sir:>y direction of the Federal Reserv~ ~:>oard,'
there h transmitted to you herewith. f. or the information
of your board of dir~ctors. a letter which has l)Mn
a.d;iresse4 by the Governor of the ·3oard. to the Chair:nan
of the board of di.rect<irs of a Federal Reserve 'Bank
whose directors were considering the ado~tian of resolutions favoring an amendment of the Federal Reserve
Act to ~ovide for the distrioution of a large ~t
of ihe earnings ot the Federal Feserve :lanks among,
trember oaDks.
Very truly YOW's,
Enclesure..
To Chairmen of all F .R.
~anks ..
'\
X-1914
380
a
A:9ril 22,1920
Dear Sir:-
The desire of the men.ber banks for a larger participation in the
profits of the reserve institutions ~4 quite general and perhaps not alto~
gather unnatural.
A care.tul stud,y, however, of the Federal Reserve .Act and
•ti es u1
· t he case will, I
due consideration of all the
.ll.;"....l
thinl.~,
convince
those who are willin~ to consider the matter dispassionately of the soundness
of the Board's point of view.
The ·.primary par-pose of the ~"ederal Reserve .Act as stated 1n tta
short title is to
"***
furnish an elastic currency, to a.f:f.ord means of re~er,
discounting commercial
l:>anking in ·the United States
to establish a more effectiV'e supervision o€
***".
The framers of the Act did not contem-plate
that .the Federal Reserve Banks should be essentially money-making institutions,
and but for the entry of the United States iu.to the
\'ITOrld
war early in 1917
. and the neeessity Of raising vast sums through bond issues in order to meet
the costs of military
aad~aYal
establishments,
c~~sing
a credit expansion on
a scale hithf';rto unknown, there is ·no reason to believe that the earnings of
tne Federal Reserve Hanks would have.
insti~tions.
You
\~111
'be~n
0\l.t of line with those of private
'
remember that in the early days of the system some of
the Federal Reserve Banks found difficulty in earning amounts sufficient to
'P8Y operating expenses and that up
to 19l6 only one
of them (the Federal Reserve
-wank of Richmond) was able to "'">aY the si-..: per cent. dividend which under the
law th~ stoer.holding member banks are entitled to receive •. In
1916
several
of the bar.ika paid dividends, 'but they were mainly on account of arrearage& for
1915.
Although
increased subs tan- the eamings of the Fader.al Reserve Banks
.
tially during the year
1917 on account
'
of the heavy rediscountin~ with them
.
by member 'l)anks of paper secured by war obligations, i.t wa.J not until June 30,
1918, that all of the Federal Reserve -,~anks had paid their divi.dends in full ..
3.81
X-1914 a
•
You. will dOW>Uees remember that d.uring the year
1915
there was a good
deal of agitation in favor of the reduction of tbe paid in capital of the
Federal Reserve ?a:n'ks, the arq:ument being made that in ordinary circumstances
the bart:"s could n~ver hope t.o -pay their six per cent. dividends fully paid up
notwithstanding the very liberal provisions of the Act with respect to the
· taXation of Federal Reserve
~anl;a.
The law expressly exempts Federal Reserve Janl:-s from Federal, state and
local taxation except taxes unon'real estate. thus they are relieved of paying
corporation, income and excess
p~ofits
taxes.
Section
7,
.
hovever, in its ori?inal
form !Jl'OVided that after dividend claims had bean fully met nall the net earnings
shall be paid to the United States as a franchise tax, except that one-half of
such net
ea.rnin~s
shall 'be paid into a surplus fund until it shall amount to
forty per centwn of the paid in capital stock of su.ch bank. 11
lt further provides
that rfshould a Federal Ro.serve 'ank be diSsolved or !IO into liquidation any
surplus remaining after the ,ayment of all de'bts 1 dividend requirements as
hereinoefore
9ecome the
~rovided,
~roperty
and the par value of the stock, shall be
of the United States".
amended Section 7 by
provid.in~
~id
to and
The Act a;pprovad March 3, 1919,
that "after the aforesaid dividend claims have
been fully met the net earnings shall be paid to the United States as a franchise
tax, except that the whole of such net earnings, including those for the year
ending December 31, 1918, shall be paid into a SU;n'jlus fund until it shall amount
to one hundred :oer centum of the. sujscri"bed capita4. stocl.: of such ")anf", and that
thereafter ten :oer centum of ~ch net earnings Shall rye ~aid into the surplus.~
Th~ e~fect
taxes by
th~
of this amendment is to defer the payment of large franchise
Federal Reserve
·,~anks
m:W.ation by each Federal Ihserve
to
-~jan1.:
th~
Government; it v.rill permit the accu-
of a surplus fund, belongin.; in the last
analysis to the Gove:rnment, which will ;ive unusual strength and security to the
position of the capital stock.
Any losses occurring in the Federal Reserve System
382
X-1914 a
-3-
.
'
will 'b& -prov1~ for w.t ot <Mrrel'lt eaminga or out ef 'he aeCl~JlW.ated s:urplus;
and the '!>Q&Session 'by a·'bw of a eru.rplu.s fund •qu.l to twice the amount of
its paid in ca.pi tal practically assures the prompt and regular p8lm.ant of
the six p~r eent. cumulative dividends on the sto~.
The Federal Reserve Banks l'.\re affording important facilities to the
member banks, and thr9ugh tham to the
~lie,
which were a.bsolutel;r unobtainabl~
a few years ago; they are perfOJ'ming certain services which are not actually
required oy the Federal Reserve Act but. ,lf'hieh are a very great convenience and
'vhich involve large expense.
This expense is in reality borne by the Govetnment
for it reduces the amount available for the. franchise tax.
of the imnortant. services rendered
~Y
the Federal
R~serve
Specific instances
Batiks are the operation
of branches in .various cities for the greater conveniente of the local and nearby
banks, and the :oa;yment
~harge$
c~ren~y
on
by
the Federal Reserve Bar.Jrs of all trans1:1ortation
delivered to and received from member oariks;
telegra~hie
tral'l$!ers are made available to all merr,ber banks without charge and by means
of the Fedsral
Re~rve
par clearing system checks de"Dosited with member banks
by their customers are being collected more expeditiously thar.1 formerly and with-
out
e:~nse
to the sending banks.
In
extendin~
these facilities the Federal
Reserve Banks have necessarily experienced a very heavy increase in their
G~rating
.
costs.
3amcs exceeded
For the year 1919 the operating exnenses o! the Federal
by
nearly five million dollars their
~oss
Reserve
earnings for the
year 1917 and were o.nly about two million dollars less than their net earninbs
for the year 191S.
One fact which is generally overlooked by those member banke which are
complaining that they do not receive an equitable share of the earning$ of the
Federal Reserve
r.aro~s
is that during the period of the war and
u~
to the present
. tirne by far the larger part of the earnings of the Federal Reserve Banks has
~rivM. from
be~~
the discOW'lt of notes secured by war obligations of the Go~t
.
383
..
'
X-1914 a
and by '!reaSUJ'Y' certificates.
In
~rder
to maintain the reserves
required by law .mile carrying thh large volume of discounts
it has
be~n
neeessal'Y
w
issue Federal Reserve notes in large
amouats, and the total amount
outs~anding
.at the pt>esent time is
about three billion dollars.
Member banks Should recognize the fact that the earnings
·of the Federal Reserve Baros therefore are derived very largely
from the circulation of these notes.
The Federal Reserve Board
·has the :power under Section 16 of the Fedetal Reserve Act to
imoose an
int~rest
cha%'ge at such tate as it may
de~·
expedient
unon the Feder~l Reserve banks for that portion of their notes
in circulation not covered by gold or gold certificates.
It
i.s rather a close qu.estion as to whether the ll·oard has any
o~tion
in the matter of
i~osing
:Reserve notes in circulation,
an interest
Char~e
but the Hoard
unon Federal
.. .
384
.
X-1914-a
-5&ome yerrs a..:;o .iec.b.e..i to
benefit of the doubt,
policy of the
Fe~eral
a&
~ive
the J'e.:i.eral Reserve BaJ:lks the
i.t prefers not to have the liiseount.
Reserve System complieRted with the
f'jr a large earning power.
necest1~
This view was JUstified by the further
consi:J.ert. tion th.:,t the surplus of tbe :Fe.:.erul Reserve :Banks wou.W.
revert to the Government upon their liquiu.ation ana. that e.;;.;cess
earnings, after the amount of surplus
permitte~
by the statute hal
be;en accumulate:., woulM be paid to the Government as a fr-anchise tax.
It was £elt that it woulJ. be better policy to permit each Feu.era.l
Reserve Bank
t~
accumulate a large
s~lus
rather than to
re~uce
their net earnings by the imposition of heavy taXes_
In rounu. fi3ures the ca:pit8.l stock of the twelve Feu.era.l
Reserve Br,nks combineCJ. is now ;;.bout ninety-ene million
~ollare
while the accumul.a.te;1 surplus, which is t.he property of the Govemment, amounts to one huncu·e.:.L
member
b~
M\l
get six per cent.
twenty million J.ollars.
r.... iviu.ends ~
The
t.heir capi t2-l stock.
while the GovelTllll8nt gets ..ll.Q return •m the surplus which it has
\
allowe\.1. the •P.nk.s to retain.
:But as the abnonM.lly lf\rge earnings
now 'being JnQ..I.e by the Fe11eral Reserve BFnk.s appear to be inviting
criticism
~ber
ti~
aJlQ.
are creatine;
b[·:nks, it
se~ms
some me-.u of
~
spirit of
u.iss!•.tisf~tion
c-mong the
that the Boar_. shoub now tE'Jre into considera-
re~uciJle
these large current earnings.
be unwise to attempt to bring £.bout this result by lewerin;:,
rE>.tes for there is
pr.actic~ly
It woulct
...~.iscount
unaaimity of O}:lini.on that. ttre\,j,it
'
'
~·,"' ._)
385'
-
leading to the restoration ot' a more normal balQllee
volume of .credit and the volume of goods.
~tween
tile
Nor does it seem
desirable to permit the Jederal Reserve Banks to pay interest
to member banks on reserve deposits.
sense have no earning power
~.eny
Reserve funds in the strictest
attempt to give such earning
power to reserves by artificial means which they do not possess
inherently would obvicusly be
It is true that before
unsound~
the Federal Reserve Act was ...'!~Rc ted a part of the lawful reserves
wf national banks located in cities oth~r tba.n central reserve
cities had an earning power bece.use of the privilege given banks
in reserTe cities of pyramiding one-hal! of their reserves with
bRD.ks in central reserve cities e.nd to coW'ltry bmks of
three•fifths of their
requir~d
ceDtrnl reserve cities.
reserves with
B«t aven
un~er
b:~
pyram.idin~
in reserve and
the old law there·
w~s
no
earnl.ng power possi•le for the reserves which bF,nk:3 were required
to e~ry in their
4wn
vaults (in central res~rve cities
th.ir net deposits in lawful money).
25%
of
There is enclosQd a memo-
randtm outlining m•re fully the views of the :Soard regarding the
p~yment
tf intere;t on
r~serve
It is evident therefore
tion of
reduci~
thf: imposition of
~s
'br..la.nces by Federal Reserve
th~t
the only means wortbyof
the current earnings of
~.n
Feder~~
:B~s.
consider~
Reserve le.nks is
interest charge again$t :Federal. bsenre notes.
provided for in Section
16 of the Act. These nvtes are obliga-
tions of the Uhited States And are issued to the Federal fteserve
386
-7-·
b@1k.S \lrlder conditione :preseribeti in Section 16.
r-.re not covered by e.n
3.
e;cld reserve they a.re eq1.l.ivalent t:::>
&..c tu~l
loan to the Federal :Reserve
fer
~-1.11
B~mks by
the GoverPment, and a_n interest
e~uita~le.
charge would be logical and
I:n so far :>.~· tt.a;
~1"8
These notes
receivable
taxes, cl..\stoms ani other public daes by all national
~nd
member banks and. "Federal 'lteserve B;o.nks and. circulate freeJ.y in the
he.nds of the public.
In the
opinion of many economi;;ts and students
of finance the large volume of these notes ir•
livi~.
essential factor in thr:: present high cost of
the profits e&rned by the Feneral Reserve
tion of the notes are
pa~d.
circul~tion
E~s
is
~
In any event,
througn the circula-
by t.he public and the payment of an
interest charge to the Tteasury ou the notes by the Federal Reserve
i2~ks
through which they
~re
issued would be merely a reimbursement
tc the public.
Whbther cr not the
R.S
Feder~
Reserve
being an opportune time for the
on Federal 1\eserve netes I
if serious n.tteropts are
tion of the
~arnif.16S
?JD
m~O.c
Eo~rd
iropc:sit~.c:n
will deem
th~
present
of &..n interest charge
not prepared co say, but I feel sure that
"!.o
ch~e.;t::
ths: :present method of distribt>-
of the Federc..l Reserve Banks by diverting ...,
larger :portion of the earnint;s from the people •s
Tre~su:ry
to the
coffers ot' member b;;...nkS the 'Board would feel obliged to protect the
interests of the Treasury by insuring to it in advance of any
distribution of
impo~ition
e~rni~s
the revenue which would. Rccrue
fr~
of a·taX on Federal Reserve notes.
Very truly
(Sie;ned.)
fou~s
.
VT. P. G. H.AP.DIID
Gove~or,
~;;eneral
the
387
X-1917
STATE'~ENT
~or
~1ay
release in
1st, 1920 ..
~orning
FOR
'I'H~
DRESS.
papers,
The following is a reviG'N of gt:Jneral business and
financial conditions throughout the several Federe~
Reserve Districts dtu~ing the month of April, as
contained in the forthcomhl[ issue af the Federal
Reserve Bulletin.
Not,vi thstanding the terrrnorary slowing down of the advance of nrices which
was noted during the months of February and P1arch, lJusiness and financial condi tions during Al)ril indicated a resu;nption of the movement, while business
activity has continued in many Districts unon an 1mprecedentedly hi§:h level.
Wages have rr:oved still further U:!_)'vard, while the advance in rates for r.r;oney,
a1r8ady note'-Jorthy, has attained even more irrmortant ,Jroportions than heretofors.
A severe railroad strike during the month, assuming n.3-tional urouortions,
with a corresuondinq congestion of nroducts and defective trans'!Jortation, has
tended to
ag-~ravate
serious.
A sharn l:Jreal:: in the Dr ices of stocl:-s and securi ti·% and relatively
conditions which othervvise
'NOU11. ha~re
lJeen in themselves
poor nrospects for the comin:r cro-:9 year ha,re nbt operated to check the activity
of husiness, although they have tended to confirm the doubts already entertained
by rr.anv business :rren concerning the outlook.
In District No. 1 (Boston) there is some indication of greater conservatism
in :ourchasing; 'banking conditions are sound and there is ;sen .:lral rr:anufacturing
activity and full emnloyruent.
There are no general strikes in any of the
princi"Dal industries of the section.
res~ect
There is a difference of o·Jinion with
to the future of urices, and hence difference of policy
advance orders and general purchasing.
~~ith
regard to
'
In District No. 2 (New York) the outstandin:: elements in t!le condition of
"Qusin3ss are re-norted to be adv:?nce in 1Jrices, hi2her 1vages, un1Jrecedentedlj1'
X-1917
-2-
388
high rates of interest, and continued activity in foreign traie.
In District No. 3 (Philadel,_:>hia) prices still show an 3.dvancing tendency
in some lines, but in other lines, including leather and textil?s, the advance
has stopped.
Collections are still
satisfacto~y
and retail trade holds up
very welL
In District No. 4 (Cleveland) the severity of the railroad strike has demoralized some "ranches of business and has caught some companies poorly :9repared
for any cessation of traffic, damage to plants
~roving
greater than had been
expected.
In District No. 5 (Rich!aond)
prices
exc~pt ~uilding
~here
has heen little chan.;;e in comr.oodity
materials, Which have steadily advanced; the public
continues to purchase all g~ods freely, hut there is unrest and uncertainty
among the com:rercia1 corr.rouni ty and there are signs of reaction against hi;h :!;)rices.
ln District No.
6
(Atlanta) fundamental business conditions have undergone
no change of especial note, 1)oth wholesale and retail trade holding U'9 well.
Al thou,:;h a lowering of prices is expected in
so~ne ~arters,
.
yet appears of Jecrease in lines entering into daily
'
little evidence as
consumption.
The agri-
cultural prospects for the coming season have 'l)een seriously decreased as a
result of the continued cold and wet weather and the farm labor si tu.ation has
continued unsatisfactory.
In District No.
7 (Chicago) the traffic situation has seriously affected
business, nreventing the movement .of finished ;oods and causing non-receipt of
ITaterials, fuel and supplies.
These conditions
·~ere
already under wav as a
result of car shortage, but during the past month the strike "has hrou5ht a\) out
a more acute condition".
co~·
Among other elements in the situation is the fact that
lections "hwe sl011\T8d do'Nll durin~?- the ,.,ast sixty days. 11
In District No. 6 (St.Louis) there has ha~n no slowin~ down in business
and signs TIOint to continued activity for some ti:r.1e to corr.e.
Thsre is a
~eneral
389
X-1917
gain in the volume of sales of 'ooth •>V'holesalers and retailers; raw materials
hold their O'vn well, tut labor unrest is causing uneasin'3ss, while agricu.l tural
conditions are not satisfactory.
Collections are
~ood ~~d
the
d~~:md
for money
is strong.
'In District No.
9
(Minne3.pO} is) sprintS planting has been sorr,ewhat delayed
and livestock conditions are unsatisfactory, although •vholesale and retail trade
is good.
In District No. 10 (Kansas City) the marked inmrovement in industrial
activity which was characteristic of fVlarch n,vas ef.fec tively checlred by tr:;msportation interr1J:l)tions in early Apr-:.1".
sus1Jension of activity in some lines.
Shorta,5e of coal, ,r;at"lrial, etc. caused
There has, however, been a large and. well-
sustained volume of trade in the fe,ce of al2. these various disturbing factors.
In District No. 1l (Dallas) th,:; revival of spring trade arid new hi;h levels
of both volurre and -nrices were noted, while as in other districts the :planting
of staple crops has made a rather unfavorq1Jle start.
Organized efforts are
being made,however, to deal "'lith the farm lal)or situatiC>n.
There is enhanced
demand and enlarged production in th3 petroleum industry.
In District No. 12 ( Sa.nFrancisco) t:he agricultural outlook has increc:.sed
very :naterial1y, "l:Jut car shorta::se has nrevented heavy
shi~x,,ents
in rcany lines.
Buildincr, ho,vever, continues active and lahar has h"??ll fully employed.
PracticaEy all of the Districts
re-·~ort
uncertainty concerning the con-
tinuance of existing conditions: anxiety concerning the over-strained situation
~
resulting from excessively hich ~rices ~d wages; and difficulty in continuing
nroduction
pn its normal scale, due to lack of equiprr>3nt and to inter'"'Uption in the movement
of goods as the result of labor troubles.
situation
A marred feature of the finencial
all over the country is the increase in the cost of :noney,
both in the investir1ent market and in connection with "banl: credit.
The Federal Reserve Barit of Richmond recently sent ten
T.mufacturers
and
qu~stions
to leading
wholesalers in the. Fifth District, reT,)lies to which show a
-4~elief
390
X-1917
ffi~d
in continuation of present prices for another year with high wages
free expenditure by consumers.
In District No. 9
Agriculturally the I.Gonth has be :n significant.
(Minneapolis) spring :olanting has he'm delayed throughout the District, and
this rray have tre effect of further curtailment of sprinE?; wheat acreage which
it is estimated ·vill fall from about 17,731,000 acres :olanted last year, to
15,0=·0,000 acres.
La~or,
however, is scarce and wages are hi;:::h, while in certain
sectbns of the District there has 11een difficulty in financing farrr:ers 1 seed
On the other hand, the westRrn half of
pUrchases and nlanting requirerr:ents.
the District has had arrmle n-,oisture, and soil conditions are very favorable.
In District No. 7 (Chice:~E:o) the beneral condition of th"3 soil and cro-p :orospects
are favorahle, but the season is being delayed by ex:cessiv9 moisture.
plowing has not generally heen st'.lrted.
S•;ring
The scarcity of farrn labor is proving
a very serious factor and considera1)le acreage is 11eing terrnorarily abandoned .
. Only a normal percentase of grain is in the hands of the farrrers, but their
obligations to the 1)anks are larger than a year ago.
purp"se of carrying re;:U-est :tte loans.
District No.
These are :oartly for the
Both in District No~ 7 (Chicago) and in
9 (Hinne:molis) the U...'lsatisfactory trans";)ortation situation has
del.:1yed the movement of far;r1 "Jroducts and consequently the liquidation of the
farmers' indebtedness to the banl~ s.
In District No. 10 (Kansas City)
winter
<111heat is about up to the ten ye3X average, al thou2h much below conditions in 1919.
In QOrn an increase in
acrea~e
is expected.
Other
cro~ ~rOs?ects
are not al-
together certain. High costs of seed will tend to shorten acrea;:se, '""hil3 the
same is true
~f
other increases in cost of Droduction.
In District No. 12
(San FranciscC>} th"? ~~rinter wheat condition is only 73'fc of norF'al as conrpared
with 97% a year ago.
condition.
conditions.
In the s;Jring wheat section the ground is in excellent
C9lifornia fruit crops
hav~
he ""n somewhat da.'Tlaged by clirr,atic
It is as yet too early to estimate the cotton acreage in District
No. 6 Utlanta).
Excessive rains have,
how~ver,
prevented farm '"'orl·, and the
391
-5-
X-1917
season is said to 1e from 20 to 35 days later
difficult farm labor situation it is
idle during the coming season.
~Jrnected
tha~
usual.
As a result of the
that much acreage will be left
In district No. 11 (Dallas) the average condition
of winter wheat ~is70%, a decrease of
5% from
a month ago.
Cotton and corn
nlanting is 11\TSll advanced in southern and southwestern Texas, although in the
notthern part of the State planting is light as a result of the protracted ueriod
of dry weather during Fel:>ruary and March.
Tal~ en
as a whble, th':l agricultural ou.t·-
look as re:oorted lJy the principal agricultural districts is not very natisfactory1
the nrospects being for a material reduction in outyut as
co~ared
with a year
ago, due in part to unfavorable climatic conditions, loss of acre3ge,
scar~:ty
of lahar, difficult transuortation and high cos i; of seed and Daterials.
In District No. 10 (Kansas City) conditions were excellent for 1ivesto~k on
far;r;.s and ranges as a result of favorable weather ccnditlol·"s,
m~d
the industry is very much more promising than for seva.r.al months.
the
ou·~Jc~;k
f;:,r
I'n District
No. ll (Dallas) range conditions likewise show steady improvement and livestock
is .;enerally reported
t~
lJe thriving. Receipts of cattle at fifteen princi1:)al
~rkets during March were 1,203,499 head as COIDT?ared with 1,066,092 head during
FelJruary, ~d 1,094,614 head during March, 1919, the resuective index numbers
being 119, 114 and 109.
Recei,.,ts of ho6S are likewise somewhat greater than a
year ago, being 2,910,909 head, corresuonding to an index
num~er
of 132, as
corL:9ared with 2, 842,663 head during March, 1919, corresTlonding to an index
number of 129, and 2,440,134 head during
number of 119.
Recei ·pt s of shee:9 during l!larch
948,116 head during Fe0ruar.y
index
n~~bers
Fe~ruary,
~d
847,842
being 66, 74 and 62.
he~d
·~rere
corresnonding to an index
900, 299 head, as COil-pared '!Vi th
during March, 1919, the
re~ective
In District No. 10 (Kansas City) the increased
rec'3i1jts were due to improvement in shi'T1-:>in'?; conditions and to an imnrovement in
the Eastern dressed beef market, a limited return to exnort l:>usiness, ..md a
tendency to market livestock in the face oi rising prices of fe8d and uncertainty
-6-
"392
X-1917
,regarding market prices of livestoCk.
Heavier receipts were likewise noted
in the movements of livestock to market in District No. 11 (Dallas).
Callle
prices in· the Kansas City District recovered. somewhat at the onening of March
from the slump at the end of February, althou$h they showed a decrease in the
second week of March, due to the break in the Eastern markets.
sul-)sequent upturn in prices.
follo,~~~ed
by a
•
Wheat receipts at markets in District No. 10 (Kansas City) were about 20%
greater than receipts for February and likewise considerably in excess of receipts
a year ago.
.Although corn recei"Ots were 17% less in March than in February,
they were 18~~ greater than in_ March, 1919; and receipts of oats during March
shovved a decline both as
co~ared
with Febru.ai"y and with March 7 1919, axnounting
to 26% and 45% respectively.Milling activity sho,~ed a decrease, combined flour
outout in March being estimated at
Omaha and 88 interior mills.
3. 7% less than a year ago at Kansas City,.
Operations at Kansas City and ~t Omaha were re-
s'Dectively 57~ and 47% of capacity, as against 76~ and 61<Jb a year ago. w·hile for ·
intl'lrior mills the figure for ?Aarch stood at '53 as al!ainst 56 in March 1919.
The loss in milling activity is re~orted to be due largely to the slow demand.
for some grades of flour, and the fact that the e:lrnort demand is only fair.
From
the 7th District (Chicago) and in a less degree from others, it is r~orted that
grain-raising localities ·have
1Je~n
obliged to C-'>.rry their nroduc t in a volume
very mu.ch above that of normal times.
roarksts.
This has retard.ad shipments to yrimary
Costly delay.s in trans'T)ortation have interfered both 'Vith the shipment
of grain and of livestoCk.
The iron and steel
~usiness
has
be~
very active, the U.S.
being booked ahead until about the middle of Octol:>er.
Ste~l Cor~oration
Inde?endent mills have
not received as many advance orders, owing to the fact that they have been
charging higher prices than the U.s. Steel Cor··iOration.
the
u.s.
Steel Cor'T')oration at the close of March
,.\~ere
The unfilled orders of
9,.392,075 tons, corres-
. "90nding to an index JlWilber of 183, as corr!pared w·i th 9, 'j()2,031 tons, corresponding
-7-
393
X-1917
td an index nu.-nber of 160 at the close of l!"'c'lrUili'Y, e..nd ~~ 430,572 tens at
I
the close of !Vlarch, 1919 1 corrcsponJ.ing to· an index nwnb3r of 103.
Pig iron
i
'TJroduction like,dse showed an increase amounting to 3,375,907 tons during March,
as compared ·with 2,978,879 tons during February! ar.d 3,090,243 tons during March
1919, the resnective index numb3rs b-3ing 146, lf6 and 133.
A similar increase
is r~flected in steel ingot ~reduction ~~hich amounted to 3,296,799 tons during
.
I
.
.
March, as compared ~~ith 2.365,124 tons durln~ February end 2,662,265 tons dur1ng
~~arch,
1919, ·
th~
res1')ecti•re index numbers b,3ingi 137,127 and 110.
The production
of iron and st8"3l has o'J ~n seriously i:rttcrferediwith during the month of koril,
·du~ to lack of ca~city to move r~~ materials ~d finished ~roducts.
Most of
I
th~ plants in th~ 4th District (Cleveland) ha·.r9 r,t"l
'!l').
iron ore and the main 1_}roole,n hA.s been that of fuel.
activity in the iron and steel industry
In District No, 6 (Atlanta)
continu~s. While car shortage has
Dist~ict,
caused some delay in deliveries from the
of the })reduct.
fairly well su~;plied ,vi th
there is little accumulation
In District No. 3 (Philadel'l')hir) demand for finished iron and
steel has not increased, 9lld 1)roJ.ucars are "IIOrking to c:::,;?acity.
High :prices
'I
are 'being off:3red for imr.ediate delivery.
Conservative rr:anufac turars recognize
th9 danger of ~xcessive pric3 increases, but th~ir eLort to arrest them has had
little effect.
The railroads haJ"e berm heavier i buyers of steel in all !'arts of
the country, both for new equipment and re:'1airs 1 them at any time since their
I
I
return to :private control.
This has
1J'3~n
du9 to successful iinancing on the
part of some of the roads.
The coal situation has 'l)een particularly i*teresting during the month of
AnriL
In District No. 3 ('Philadel'!?hia), with yhe withdrawal of Government re-
gulations on oi tUILinous coPl,
effectiv~
Aljril 1, "?rouuc,3rs ner:otiated with
I
consumers for the renewal of contracts which exPired '-Aarch 31.
'Prices ,lll'ere
ad,just'=!d to higher levels, due to the necessity! of a.lJ.o,ving for
th~
recOt.T,,ended r,y the
~resident•
'Vage
increase~
s Coal Corrarission, i and increaseu costs due to small
I
Digitized
carfor FRASER
su-rml Y. The en-rin'3ers
of the fuel .Administlation, "Vhich made an invsstigatien
394
-8-
X-1917
of the records of a central Pennsylva!':i
<'.
colliery, fmmd t:r. .at a ca.;-: s-:•pply cf
60 per cent increased the cost of mining 30 per cent.
The regions which sun:ply
the coal for this territory are said to be working under a 60 per cent suuply.
Demand is far ahead of su~~ly, and it is stated that ~~y consumers will try
to store as rr:u.ch coal as possible over the next six months, which will keep
the market active during that time.
The anthracite industry is at present
trouhled by demands of labor for higher wages, though the r.ce:n have walked out
in only a few cases.
The movement of coal is also held up by lack of cars.
Retail dealers are unable to care for
the orders which are ~eing received and
prices are advancing.
4
In District No.
(Cleveland) the onening cf the lake
shipping season was set back by the strike and in the meantime coal is slow in
coming forward.
Early coal cargoes are in great demand, as
at lake ports are swept clean.
amounted to 46,792,000
~orne
of the
dock~
Production of bituminous coal during March
tons as compared with 40,127,000 tons during February
and
33, 7l9,0JO tons during March 1919, the respective
116
and
ino.ex numbers being 126,
91.
The petroleum industry has shown a very .great adve.nce dl.1 ring the past month.
In California the output for March was about th'.:l same as February, amounting to
276,000 barrels, hut shipments were heavy, decreasing stored stocks considerably.
Consu'!iption of California petroleum has exceeded production each month since
July, 1919, and a serious shortage of crude oil is threatened.
In District No. lC
(Kansas City) increased activity in the development of new wells is noted in
Kansas and Oklahoma.
~roduction during March was
10,491,640 barrels as compared
with 9,548,250 'harrels during February and 9,206,240 barrels during March, 1919.
In District No. 11 (Dallas) there is both increased demAnd and enlarged production
of ~etroleum, the output in the fields lying in the 11th District being 11,132,024
barrels during March, as compared with 10,473,094 barrels during Fenr..'\.ary.
395
-9Little change is noted in conditions surrounding metal mining in
Colorc.d.o in
M~rch.
Shipments of lend nna. zin.c during that month were un-
usually. heavy, tc·tnl shipments of zinc nnd.
le~
ores for tbe four weeks being
at the rate of prooticr.lly 14,000 tons per week; as compr.1.ted with 12,614 tons
o. week the previous month •. This wn.s due to the increase of cars,
~~.lthough
production was seriously interfered with as a result of heavy rains and
stonns..
In e:,Emeral manufacturing the month has be.:-n a period. of great activity.
This is especially true in textiles.
Carpet and rug manufacturers report a
brisk demand. for their products which they can not fully meet.
Cotton yams
and raw materials are high; prices are holding steady at about double that
of a year ago; and while the tendency of consumErs not to pay high retail
prices now existing has kept dovffi offerings of new business to manufacturers,
the latter are still busy on olu. orders which have insured a capacity operation.
In cotton textiles the high price of the raw material has continued to
check buyin5 by doroBstic rnills, but the mills in the New England District
are already well suprlied.
March are very
m~·ich
Unfilled orders for future delivery placed during
greater tha."l a ye.-;tr ago, although new orders show a
tendency to fall off slightly or amount to about the same in volume. Vlhile
che demand for the future :products of the mills maLine; dress-e:,oods, shirtings,
and the like, aprears to be lessened, this bituation ha.s not affected prices,
vihich are about 20o% above the level for 1914.
!J,srticularly in the fine gra(a.es, is looked. for.
No l,erceptible d..ro:P in prices,
In District No. 3 {·Phila-·
delphia) prices are double what they were last year and. demand frQm foreign
sources has st:rved to kee:P up production.
Caution, however, is felt to be
necessary for the remainder of the year.
In wool and woolens, markets
X-1917
-10-
396
are fairly quiet, banks having put a check on speculation tin some sections.
The Government still holds about 65,0CO,OOO pounds of the lower grad.es of
wool and is now auctioning off about
6,ooo,uoo
pounci.s per month.
Fine meri.no
wools continue in demand and pri.ces are high, while yams are also generaJ.J.y
in strong demand.
Woolen and worsted mills are busy filling U!J.~OmiJleted orci.ers
and are especially active on account of the recent delays Ci.ue to trar.~sportn.tiQn
difficulties which left them without raw material.
In Distri.:;t No.
deliJhia) manufacturers are sold a.l:lead and are proei.ucin§> actively.
prices have weakGned slightly they are hie;..ner than last year.
requin~ments
3 {Phila..Ahhm.'.gh
Clothing
nill necessitate full time production for 1920, but there is no
certainty·as to conditions beyond that date.
There has been somG slowing
down of demand due to the apparently ccncerted disposition of conswners to
refrain from buying at present prices.
In the shoe and leather field the situation is somewhat
m~ixed.
Conditions
in the hide market have approached stagnation and there has been very little
acUvtty in Jr:;ather for- the month
past~
The
a.t.ti";~'cie
of the p1.1blic wHh
un.favorahle~
reference to purchases at present prices is
.Although salesmen
are in some cases offering reduced prices> retailers are slow to place fall
orders, believing that prices must go dmvn.
The public, however, still
insists upon the better grades of shoes, although some concerns note a decided
drift toward
cheaiJer product.
have reached their peak.
Prices for the finest grau.es are believed to
In District No.
3
(Philanelphia) tha aemanu for
leather has fallen off noticeably Juring the past month.
but the tendency is
towal';'d lower levels.
of boot ana shoe aistributors are
25%
to
Prices are steady
New Government orders in the hands
10%
over the same month last year,
with demand as strong as ever anu selling prices up to 10% higher.
N~.
5 (Richmond) no reduction in prices or demand is to be noted.
In District
Foreig;n
X-1917
397
-11trad~
in shoes and leather has been adversely affected by exchange conditions
General manufacturing
continues active and wholesale business throughout
the country hold.s up well.. The tendency to caution already noted in vhe
last issue of the Bulletin has become more
deci~ed
hesitation about placing orders far ahead..
and has taken the fonn of
This is due to the belief that
prices are probably near their peak if they have not passeo. it.
.Althou6h
buying power has been son:e.whnt limited in different parts of the country,
the contraction in this regard is not pronounced, and the continued expansion of the export trade has taken up the market surplus of goods which
wuuld otherwise have
tende~
to redUce prices.
On the other hand, it is
repotted that con$1derable q,ua.nti ties of goods which were shipped abJroad
on consignment are now coming hbme again and rn~ serve to disturb the mai:'ket
. in some lires.
this
influence.
Manufactured food products, canned
goo~s,
etc. are feeling
There has been a large decline in the amount of meat f?od
products shipped abroad.
Canned goods prices are in some cases reported
as 1<>% lower than a year a.go.
Automobile producers are sold up far ahead
and the value of stocks in automobile concerns in many instances has
reached an unprecedented figure.
Hardware lines have
e~perienced
an in-
creasing demani since the bee;inning of the year, although contractors
builders
1
supplies are somev.rhat under nonnal
~emand,
1
a:nd
due to the retarci.ation
of building ..
The outstandin6 feature of the month in connection with labor has been
a nation-wide railway strike which, however, has been tenninateci. on account
of the general lack of public sympathy..
At tirres it appeared liKely that
the railway strike would spread into other allied branches of industry, a
numb~r
of .local municipal utility organizations having been called out at
X-1917
-12:...
various points throughout the country.
strike
398
Except for the national railway
and spo:cadic disturbances, labor, however, has been fully employed
at record high wages, and unrest in manufacturing lines has been comparatively limited.
Perhaps the most difficult element in the labor situation
is now found in connection with agricultural labor.
There is an almost
unanimous report from the several Reserve Districts to the effect that
farmers are unable to obtain the assistance they need for the current crop
season and that while in part machinery has been substituted, th;k; method
of replacing humen labor is not altogether satisfactory.
Conferences on
immigration during the month have resulted in assertions of a general labor
shortage all over the country.
Sporadic unemployment has been noted in
some cases, aue to changes in conditions of production.
The railway strike
had the effect of temporarily decreasing the demand for certain classes
of labor, but on the other hand it temporarily increased the demand for
certain other classes.
another.
In:mi.gration and emigration have about offset one
A special inquiry into the labor situation in District No. 11
(Dallas) has revealed some unusually interesting conditions.
exodus of fann workers has
occ~rred
lumber camps of north Louisiana.
in
A heavy
eastern T0xas to the oil fields and
On the other hand, profitable returns
in local farming have, in west Texas and chosen regicns, brought back to
the land tenant fanners, thereby increasing the available labor supply.
High wa3es in the southwest have been drawing into the United States a
considerable number of Mexicans who have been attracted by the opportunity
to obtain steady and unintE:rrupted. employ.nent.
399
X-1917.
-13~n
upward tendency in rates for money has been notable auring April.
Action on the part of foreign central bankins institutions in raising their
rates of discount tended to conform domestic tendencies toward a higher
level of rates.
The action of large domestic borrowers in putting out
iszues of bonds at higher rates of interest has further tended to establish
a higher level of interest and discount charges.
Demand for conm1ercial
loans has continueci heavy and has been confirmed by the increasing
of need for
pre~:~eure
funds for connnercial uses in not a few of the western Districts.
Nevertheless, the volume of loans has not materially changed.
In N2w York
City it is reported that the reduction in the loan accounts of the New York
banks which continued with a reasonable measure of steadiness from last
fall to the early part of March, and the increase in bank loans elsewhere
in the country, which was practically continuous durin5 the same period,
have both been arrested. Within the Federal Reserve System there has been
noteworthy
a
movement of fvncis to New York, or in other words, the volume
sam"'
of bank credit for the country as a whole remains about the/
but the
points where pressure has been most sariously manifested ha7e changed.
Throughout the eastern Distrl.cts higher
rates for ordinary commercial
paper continue to be the rulet while from the
s:p~culative
relatively little money has been offering and
cl~rges
standpoint,
have been hi5h. The
money market has suffered from a very narrow margin and the narrowness of
this margin has been responsible for the advances in rates which have taken
place from time to time.
In the stock market, although there has been con-
siderable demand from the small investor, sp3culative manipulation has been
more than usually prominent.
The general level of bond priceG has declined
continuously during the past thirty days. an average of forty listed issues
_ 14 ·-
X-1917
••
400
declining abvut 2~ points to a new low level on April
16.
New
corporate
financiJl6 was larger in Marcil than in February, and the ten:lency to increase
has been noteworthy in April.
Considerable issues of railroad securities·
have been put out, and the volume of stock actually
has been large.
i~sued
as dividends
In the Middle West there is a disposition on the part of
bankers to sift loan applications more car0fully and to discriminate beIn
tween borrowers acco1uing to the character of their requirernents./District
No, 6 (St. Louis) and in the Southwest there is a strong demand for money
and the spring agricultural needs have been keenly felt.
The market for
commercial paper has slowed down and country banKs have ceased to buy as
heavily as formerly.
In same of the western and southwestern Districts
there has been an apparent degree of success in elinri.nating war paper from
bank portfolios, it being supposed that there has been absorption by
investors there on account of the general prosperity
ana growth in
ability to pay for bonds.
While the agricultural outlook is distinctly less satisfactory
th~
it was a month ago, and while the month of .April has been a period of
serious labor disturbance, especially in the transportatiun field, the
activity of business has continued htgh, d.emand for products strong, w1.th
~rices
tending upward rather than downward.
whole booked up as far ahead, relatively
Industries are not on the
spe~ing,
as in the past, although
in some the volume of unfilled orders is very large.
Underproduction or
inefficiency in production continues, and costs are being enlarged by
reason of the advance in the expense of e;;etting cap·.ital.
The exrort tralie
hulds up in an unexpec ced degree and bank cx·cdit, although not materially
larger in volume than at the opening of April, has had tu follow more or
less the courGe of demand, so that expansion at various points has taken
the place of reductions Which had been effected at others.
''
401
1/i. P. G. HARDING, GoVERNOR
lEX OFFICIO MIIMIIKR8
ALBERT STRI!'JSS.'lfiCE GOVERNOR
ADOLPH j;. ~ILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOUSTON
SICRITARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
ADDRESS REPI.Y TO
FEDERAL RESERVE BOARD
R. G. EMERSON, ASSISTANT SECRETARY
W. M.IMLAY. FISCAL A(i.E:NT
WASHINGTON
May
Subject:-
4,1920.
Campaign for Ne1v Par Points ..
Dear Sir:There is ~nclosed herewith a copy of report
prepared from replies received from all Federal R~serve
Banks in resnonse _to our telegram of .~pril 29, asking for
information regarding the progress of the campaign bein~
conducted for the establishment of new par ~oints.
In addition, there is also enclosed a special
renort showing nonmember banl:-s- not on the par list distributed by states according to Federal Reserve Districts.
Very truly yours,
Enclosures.
Assistant
To Chairmen of all F.R. Banks.
W. T. CHAPMAN, SECRETARY
Secr~tar7.
X-i919
CAMPAIGN FOR NEW PAR POINTS, April 30,1920
X-1919
Renorts ofFedaral Reserve Baru-s.
- - u - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Federal
: Natl
: State : Total :Non-member:Ratio of nori-:No. of banks:No. of "l:>anlc-s :No. of
Reserve
: banks : bank ~ m·~mber!"l:>anks on :member banl:-s :added to par:added to par:merriber
Banks
: in
:members: banks!par list :on par list :list during :list since :not on
:district:
:to total non-:April,l920 :January 1, :list
!
~mem'"er banks !
1919
:in district
a
- - - - - - - - - - non-:Total No. of
banksNon-member banks
par :in district
..
Boston
396
New York
640
100
254
321
132
772
321
100
39
684
419
100
122
419
106
857
1078
100
429
1073
Richmond
52
596
764
50.4
3
490
751
1515
Atlanta
71
4~6
441
27.6
3"'
191
11.~5
1596
lO?l
J31+
1385
4232
St.Louis
477
81
558
2511
Mirmeapolis
857
95
952
2914
100
1745
2914
1000
54
1054
3376
100
1195
3376
Dallas
646
135
781
1262
100
1045
1262
SanFrancisco
599
172
771
927
7971
1307
- - 89.4
---
'Philadel nhia
·
-%- - - - - - -
432
..
C'l~v ~1 and
ChicaQ;o
Kqns~s
City
---Total
-
~
-9278
- --- - - 18499
93-5
7*
1520
"90ARD
WASHINGTON
175
103
90.0
9*
8618
• Decrease
FEDERAL RESERVE
4232
1881
100
.flAY 4,1920
2184
2686
1930
-- - - - 20683
---
NON-M.E~'IBER
•
Fe leral
Re"'erve
:Sa:rik
BJl.N'.t\.S NOT ON P.AR LIST APRIL 30,1920 •
Distri0uted accordin-,. to States and Federal
-
Reser~.'e
X-1919
b
Districts.
- - - - -- - - - - - - - -- - - - - - - - - - - -- - - - - --- - - - - N.C.
S.C. : Ala.
Fla. :
Ga.
La. : Miss. : I'enn,:
Ariz.~
Oreron : Wash.:
'l'ota1
Boston
Nr:rN York
Philc.ddnhia:
Cl~veland
Richmond
430
751
321
126
Atlanta
513:
92
101
1155
129
Chicago
St.Louis
175
175
Minnea"Pol is
Kansas City
Dallas
SanFrancisco:
Total
430
Federal Reserve Beard
WASHINGTON
l\1ay
4,1920.
321 : 194
126 :
513
92 : 276
129
12
55
12
55
103
36 :
2184
404
DAVID F. HOUlTON
SICRITAIY OP THE TREASURY
C:HAIRIIAM
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COIIPTIOUII OF THI CURIINCY
ADDRESS REPI.Y TO
WASHINGTON
FEDERAL. RESERVE IIIOARD
W. P. G. HARDING, GOYIRNOI
ALBERT STRAUSS, VICI GOVIINOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLINPAR
W. T. CHAPMAN, SICRIETAIY
R. G. EMERSON, ASSISTAliT SICRITAIY
W. M,IMLAY, FISCAL AGINT
May 13,1920
X-1920
Subject:
"Participation in Bank of Japan .Agreement.
Dear Sir:There is enclosed herewith, for your information,
a copy of a latter received by the Board from Acting Governor
Case of the Federal Reserve Baril: of New York, su-sgesting
arrangerr:ents, -which were aT.)proved by the :Board at its
meeting today, - whereby all Federal Reserve Banks will participate ratably in the agreerr:ent bet\veen the Federal Reserve
Banl-:- of New Yark a.."l.d the Ba:nlr of Japan, as agreed at the
last Conference of Gover~ors held in Washington, April 7-9,
1920.
The Federal Reserve Bank of New York has been
requested to communicate with you. direct as to the execution
of the arrangement.
Very truly yours,
Enclosure.
Governor •
.•
To governors of all F.R. Banks.
405
COPY
EEDERAL RESERVE BANK
X-1920 a
OF NE1V YORK
May 3,1920.
Dear Governor Harding:
You ,~ill recall that I explained to the Governors of the other
Federal Reserve Banks, at our last Conference in Washington, the details
of our Agreement with the Banl: of Japan, and that it was voted that the
Federal R35erve Banl-s should participate ratably in the Agreement ..
We would recommend that this participation be accomplished in the
following manner!
·1. With respect to the balance of the Bank of Japan in current
account, apportion an even $4,000,000 among the other Federal
Reserve B~s, retaining in our own account slightly less than
our proportionate share of that sum since the balance of the
Bank of Japan is at present only $3,996,635.18. Vl'hen bills
mature and the ~roceeds are credited to the Banlr of Japan's
account, and when new bills are purchased, the cost of "vhich
is charged to the BAill< of Jiapan' s account, entries would be
made only through our Bazik of Japan account and not throu~h
the accounts of the other Federal Reserve Barurs. It should
be noted that the proceeds of maturing bills after the discount
earned has 1)een set aside for the Bani':' of Japan, will be immediately reinvested. A new account will be opened among our
Resources under the caption 11 Allotments to Other Federal Reserve
BanP:s, Banl~ of Japan Account", which would include the total
participations of the other Federal Reserve Bam:s in the
current balance of the Banl> of Japan. In our press statement
under 11 0ther De:oosits including Foreign Government Credits 11
we would include only our share of the Bank of Ja-oan balance
as is now done with the Argentine Government.
2. As a matter of convenience, in order to simplify the
h~dling
of the account, we would propose using the same percentages
for participation of the Bant of Japan balance as we now employ
in the Bank of England Sterling Gold and Argentine Government
accounts, i.e., capital, surplus and gross denosits as of
June 13, 1919, these being
Boston
Cleveland
Atlanta
St.Louis
Kansas City
SanFrancisco
7.3%
8.2%
3.6%
4.7%
4.8%
4.6%
Philadelphia
Richmond
Chicago
Minneapolis
Dallas
New York
8%
4. 9%
11.9%
2. 7%
2. 6%
36.7%
...
406
~
X-1920 a
-2-
3. With respect to the purchase of bills for the Barik of
.....
Ja~an,
we would apportion the bills among the Federal Reserve Banks
on the basis of an even $16,000,000 representing the ap~rox
imate present and maximum amount of bills under the agreen:ent, and retain in our own share any excess or deficiency
from $16,000,000. In other words, ~.re :propose to handle the
allotment of bills in the same manner as that proposed in
:paragraph 1 for the distribution of the current accountEach of the other Federal Reserve Banks would show on its
statement its own contingent liability for its 'T.')ro:portionate
share of $16,000,000, and no changes would be made in those
. amounts unless the T,~resent basis of the agreement was altered.
The other Federal Reserve Ban!-:-s wOUld make a contract with
us assundng liability for their ~roportionate share of all
bills held under the Bank of Ja,an agreement up to a maf(imum
amount equal to their '1:)1'0 rata share of $16',000,0JO. On our
own statement we would show as a contingent liability on
bills purchased for foreign corresnondents, only our ~~
share of the bills.
Will you be good enou~ to advise me if the foregoing meets
with the a-pproval of the Board, and if so, whether you wish me to
submit it to the other Federal Reserve Banks for their a~~roval.
Very truly yours,
J. H. CASE
Acting Governor.
Honorable W.P.G. Harding,
Governor, Federal Reserve Board,
Washington, D.C.
407
b
W. P. G. HARDING, eG'IIIKOI
OPPICIO M&MBII. .
DAVID F. HOUSTON
IICinAIIY OP THI TRIAIUU'
CHAIIIIAII
FEDERAL RESERVE BOARD
JOHN SKILTON WILUAIIS
COMPTROLUR OP THI CUIRI.CY
ALII RT STIAUSI, YICI GOYIIKOI
ADOLPH C. !IlLLER
CHARLES B. HA"LIN
HENRY A.IIOEHLINPAH
W. T. CHAPIIAN, SICRITAIY
R. G. EIIERSON. AIIIITANT SI.CIITAIY
ADDRII88 RIIPL.Y TO
FEDERAL RESERVE BOARD
W. II,IIILAY, PliCAL A81NT
WASHINGTON
May 7,1920
X-1922
Subject:
Letter to House Committee on Banking and
Currency relative to Par Clearing Controversy.
Dear Sir:There is enclosed herewith copy of a letter which the
Board addressed on May 5th to the Chairman of the Banking and
Currency Committee of the House of Representativest from which y~
will see that the Board takes the position that Congress should
settle definitely and finally the controversy regarding par remittances for checks.
The Board has not been advised as to whether the B~ing
and Currency Committee will adopt the sug2estion contained in its
letter that the Committee give all interested parties a hearing,
but in the event the Committee decides to do so, wide pUblicity
will be given in order that all who desire to ~e heard may have an
opportunity to express their views. It is the Board1 s view that the
Federal Reserve BanL-s should not participate in the hearing Uiaess
the Committee should reouest the attendance of their re~resentatives.
In case the Committee should fix a date for a hearing, Federal Reserve
Banks should take ste-ps to inform their member bank's and the public..
Very truly yours 7
Enclosure.
Governor ..
To Chairmen of all F .R. Banks.
408
COPY.
X-1921
iAa:r 5,1920
My dear ¥.r.. Chairmanl.The Federal Reserve Board desires to invite the attention of your
Co:.mittee to
Senat~
Docwnent 184, which contains the Board's renly
to a Resolution of the Senate of the United States dated January 191
1920,
re~estin~
whether the
~oard
that ,the_ Federal Reserve Board"iniorm the Senate
or any Federal Reserve Bam•, under instructions
or with the cmsent of knowledge of said Board, has resorted to any
.If
rr~thod
.
~·
of coercion to compel State
System, or
l)y
ba~s
to join the Federal Reserve
threats or other coercive means has attempted to requ.ire
such State Banl:s to submit to any rules or regulations made by the
Federal Reserve Board or any Federal Reserve
Bank.~
This response explains at consideraole length the position that
has 'lle8ll taken by the Federal Reserve "Board and the various Federal
Reserve
Baru~s
in the
~atter
of the country-wide
clearin~
of
checl~s.
In this communicatiOn reference is made to the provisions of Sections
.
-
13 and 16 of the Federal Reserve Act and to the Ol:linion of the Attorney
General of the United States as to the intent of these sections •. The
Board ryel1eves that it is
char~ed
inaugurating a complete cheek
with the duty and responsibility of
clearin~
system thrOUfhout-the United States,
t:tat the Federal.Reserve Banl-s in comr,>liance with the evident
the law and iri fairness to all their memoer
b~~s
:p~ose
of
mast exercise their
-ootver to receive for collection frou, those member banl-:-a checks uTJon
\Yhomsoever drawn which are paya1-Jle unon presentation) and the so-called
"Hardwick 1\rr;endmentn to Section 13 authoriZes l:loth member and non-member
1:lanlts to rr.ake "reasonaole charges • to l:>e determined and regulated by
409
... "'
X-1921
-2-
the Federal Reserve Board, but in no case to exceed 10 cents :per
$100 or fraction thereof, based on the total of checl:s and drafts
presented at any one time, for collection or payment of checks and
drafts 'and remission ther-efor by exchange or otherwise; but
oo
§uch
ghaft"S§ · sha11 be IM:,d.e ~s»nst the Fegera} Rs;serve Ban1FS•"
In view of the ouinion of the Attorney General, the Federal
Reserve Banks do not feel authorized to ,83' any charges to bal'lks
for remitting for cheCks drawn upon them and sent for collection
by the Federal Reserve Banks.
While bariks are still authorized t'4f
char?e each other for such service, they are prohibited from charging
the Federal Reserve "Ban1::·s, which are required to receive from member
banl-:-s at :par all checks which are payable upon presentation.
it
ha~ens
possession
Thus
that the Federal Reserve Banks ftnd themselves in
Of
checks dratm
UT.lOil
non-member banks 1~hich they cannot
send by mail to the l:>anks u-pon which they are drawn for the reason
that those l:>anks decline to remit at :par, and it becomes necessary,
therefore, as the la.w does not provide any penalty upon non-member
~aru:s
for refusing to remit at par, for the Federal Reserve Banks to
provide themselves with some other
~eans
of collecting checks
dr~vn
u-pon such non-assenting banl:s.
The Federal Reserve Ba.nlrs give non-mewber banks which agree to remit
llr1
\
410
I
·-3-
l-1921
at par the option of paying by check on some convenient bank.ing center or
by shipment of currency at the expense of the Federal Reserve Batik.
Stamped envelopes are always sent a non-member bank for use in making
remittances~
Non-member
b~:s
are not
a~red
to perform any collection
service; they are merely aSked to waive personal presentation of
drawn
u~on
checl~s
themselves by their own depositors and to pay them by mail
remittances without making any charge.
In the event that those
non~member
han1:s do not agree to remit through the mails at par for checks forwarded
to them 'oy the Federal Reserve Banl:-s, the Federal Reserve
Bam~s
are obliged,
as previously stated, to effect the collection of those checks by the only
other means possible, that is 1 presentation over the counter.
The legal
right to collect checks in this manner cannot he disputed since it is a
right which is inherent in the cheCk itself and which may be exercised by
any holder thereof whether an individual, firm or cornoratian.
There is unquestionably,
h~ever 1
a wide and deep-seated opuosition
on the part of non-member banks in various sections of the country, and on
the part of some member banl:s as well, to the
which the Federal Reserve Board has
be~n
universe~
clearing system
endeavoring to estao1ish.
Legal
proceedings were instituted several weeks ago in the Sixth Federal Reserve
District and an injunction vras granted restraining the Federal Reserve Bank
from collecting checks drawn upon non-member banlrs through the express
companies or by having
~resentation
made by a local agent other than a bank.
The United States District Judge has de.cided this case on all points in favor
of the Federal Reserve Banl-:- 1 but an a"Opeal will be t3ken to the United States
Circuit Court of
A~peal s
and e:ventually, no douht, to the Supreme Cour-t of
the
411
X...l921
- 4Pending the appeal the Unit~d States District Court will
·lhitnd States.
be asked t-o e,rant a supersedeas, which· if grent(::d ,;;,rill keep in effect the
terms of the original in.Juncttion.
'l'he Board would
important, ·if
r~spectfully
:possibl~,
represc:nt to yuur Comnittee that it is
to have the· attitUde of Congress toward the Federal
Reserve par collection system made clear beyond any possible
do~bt,
and it
therefore requests that your eommittee give all interested parties a hear-
ing, both those who are Op"!JOsed to the present systt:m And those who favor
its continuation and completion, and that after a hearing your Committee
ado~t one of
two definite courses: (1) that it report a bill authorizing
both mmnber and non-member banks to make charges against the· Federal Ro;;servc:
Bank as well as against e·ach othc.;r for remitting for checks, not to exceed
ten cents per one hundred dollars, with the provision that Federal
~eserve
Banks be authorbed to charge to sending banks any exchange charges paid in
· .collecting ehecks tot them,
f1nit~ly
posing
or
(2) that it report a. bill e;l.early ana. de-
establiShing the universality of the par rcmittance system by im-
Sll¢h
conditiona or penalties as wi,ll insure compliance with the law
by all banks of desposi t, non-member State banks and ~rivate 1-:mkers as well
as
memb~r
bank$.
The Federal Reserve Board suggests the second alternative only for the
raason that it has been contended that the IJrasent enae tment leaves open
some doubt as to the duty of the
drawn on non-memb.:::r banks which
F~deral
ar~
not
Resorve Banks to receive checks
w~lling
to rami t at par, and because
it is convinced that a large numbor of non-member banks will never be re-
conciled to par remittance as long as Section 13 of the Act remains in its
X-1921
412
- 5present form.
In many districts the methods which the Federal R,serve Banks
have baen obliged to adopt in order to make collections of checks drawn upon
non-assenting non-member banks hava subJected the Federal Reserve :Bank.s and
the Federal Reserve System to constant criticism ani opposition, and the
Board. believes that the public interes.t would be served by an even more defin...
itive enactment by Congress than that now in force.
The Fede.ral Reserve Board and the .Federal Reserve Banks have matters
of vital importance to which they ought to be permitted to give their un-.
divided attention, and the Board earnestly hopes ·that your Committee will
give this subject prompt consideration and that it vdll report a bill to
the House carrying out one suggestion or
th~
other.
W. P, G HARDING
Governor.
Hon. Edmund Platt, Chainnan,
Conmi t tee on Banking and Currency,
House of
Re:pr,~sentatives.
413
JIAYID F. HOUlTON
. IICnTAIIY OP THI TRIEASURY
CHAIRMAH •
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAIIS
•
COIInaoWR OF THI CUR. .ICY
ADDRESS RBPI. Y TO
FEDERAL. RESERVE BOARD
~bject:-
WASHINGTON
W. P. G, HARDING, 8o'IIIIOR
ALBERT STRAUSS, YICI GOYJIRMOR
ADOLPH C. IIILLER
CHARLES S. HAll LIN
HENRY A. IIOEHLINPAH
W. T. CHAPIIAN, SICIIYAIIY
R. G. EIIERSON, AISISTAJIT SICIITAIY
W.ll.IIILAY,FIICAJ. AIIHT
Expenses ot Main Line,Federal Reserve
Leased Wire Systamw
Dear Sir:The Federal Reserve Board has executed contracts• effective
May 1• 1920~ with the American TelephOne arid Telegra"Oh Company; covering
leaees of v.that are knOW%'! a.e the main line wires ot the Federal Reserve
leased wire system; and hereafter the Board will pay the bills of the
~ria:.an Telephone and Telegraph Compmy covering the total chai:ges
for the use of the main line wires. The Board has a~roved the following
plan of reimbursement by Federal Reserve Bar.iks.
Each Federal Reserve Bank will reimburse the Board monthly for
the total expense of the ooeration of the main line leased wire system
in the 't)roportion that the number of words sent by it bears to the aggregate
of words sent by all Federal Reserve B~:s, in the same manner as rei~
bursement has heretofore been made to the Federal Reserve Bank of Chicago,
except th:;tt each Federzl Reserve Bank will pay its OVIn operators' salaries,
advising the Board of the amount of such salaries each month, which smount
the Board will deduct from the Baz~tt s :nro rata shsre of the expense to be
reimbursed to the Board.
Each Federal Reserve Bazik will render to the Board, commencing
with the renort covering May operations, a ~onthly statement of business
h.mdled OO'er the main line leased wires, in the same form as the statement
nOW' rendered to the Federal Reserve Bank of Chicago.
Federal Reserve Balks will continue to charge the Treasury
Department monthly w1 th 1 ts pro rata. share of the main line leased wire
expense. upon advice from the Board of the proportion at the Treasury
business.
Very truly yours,
Assistant Secretary.
To Chairmen of all F.R. Banks.
414
EX OI'I"'CIO MIIMBJJ:U
DAVID F, HOUSTON
JIC:R&TARY OP THI TRIAIURY
CHAIRMAN
JOHN SKILTON WILLIAMS
COMPTROLLIR OF THI CURRI.RCY
ADDRESS REPL.Y TO
FE;DERAL RE;SERVE; !!SOARD
FEDERAL RESERVE BOARD
W. P. G. HARDING, GOVIRNOI
ALBERT STRAUSS, YICI GOYIINOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W, T. CHAPMAN, SICRITARY
R. G. EMERSON.AISIITA.NT SICIITAIY
W. M.IMLAY, FIICA.L AGINT
WASHINGTON
May 14,1920.
X-1925
Subject:
List showing Member
Bank~
Borrowings.
Dear Sir:You are requested to have tabulated and forwarded
to the Board a list of all member bank's which have been
borrowing from the Federal Reserve Batik throughout the
entire tirr~ during the twelve months ended ~~Y 1,1920, and
to make special notation of those banlrs, if any, which were
borrowing from the Federal Reserve Bank at any tirr~ during
the same period an amount equal to or more than the total
amount of their canital stock.
Very truly yours,
Governor.
To Chairmen of all F .R. Banks.
4:15
IIX OI"PPCIO MKJIGK118
W. P. Cl, HARDING, GOURNOI
ALlERT STIIAUSS, VICIIIOYII.OI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A.MOEHLINPAH
DAVID P.HOUSTON
SICUTAIIY or Tlil TIIAIIUIY
CIIAIRIIAII
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
C:OIIPUOUII or THI CUIIUCY
W. T. CHAPMAN, SICRDAIY
"DDRUS REPI.Y TO
R.ll, IMERSON,AOIIOTAIIT IICIDAIY
W. M.IMLAY, PliCAL AIIIIT
WASHINGTON
FE:D.IE.""L RE:SERVE: EIQ...RD
May 15, 1920.
X-1926
Parcel Post Rates of Postage <m
Cancelled Currency Shipments.
SUBJECT:
Dear Sir:
The Federal Reserve Board is
tod~y
in re-
ceipt of advice from the Post Office De:Partment that
hereafter parent Federal Reserve Banks may forward cut
and cancelled unfit Federal Reserye Bank currency to
the Treasury Department at Washington for redemption
and destruction, at parcel post rates of postage as
registered matter in rotary lork poaches, the Post
Office also aU.vising that the Postmasters ..at the cities
1111here parent Federal
R~serve
Banks are located have
been suitably instructed in this connection.
Very truly yours,
Assistant Secretary.
LETTER TO CHAlRMAN OF ALL TIANKS
416
X-1927
:?or release in morning :oa:oers,
Wednesdav, May 19, 19.20.
STAT.Ei.AEN'r BY GOVE;RNOR
w. P. G. HARDING.
Figures compiled by the Board's Statistical Division indicate that
since June 30, 1914, there has been an expansion of banking credit in the
.
United States, properly attributab~e to the war, of about $11,000,000,000,.
Since that date there has been an increase in money in actual circulation
of about $1,900,000,000.
When it is considered that our Gov~.:rnment has
during the past three years floated $26,000,000,000 of securities to meet
its war re<luirements and its advances to
gov~::;rnments
associated with it in
the war, the credit expansion which has taken place is neither excessive
nor alarming when viewed from the
~tandpoint
of war necessity ..
The continued expansion, however. which has occured. since the flota-
.a tion of the Victory Loan last l14!ly in the face of a decreased production
of essentials is one of the disquieting features of the pr,:;sent si tua-
tion.
The expansion of national bank cr0a.i ts was 16%, or 9-t the
rate of lOa% a
year, during
tha nineteen montns of the
war.
From
April l, 1919, to .April l, 1920, the increase in bank loans was approx.i-
mately
25%,
and during the sama period the rise in commodity
417
X-1927
-2•
pric:A; was ab~t
191~
for
~ach
26%..
.Assuming an index number of 100 for the year
of the following - livestock,
~rain,
lumber, coal,
petroleum, pig iron, steel ingots,· copper, and cotton and wool actually
consumed - the average index numb2r for the same articles in
is
59.07.
1919
While neither of these indices can be accepted as definitive
evidena.e of the trend
?f
production in this country, they do indicate
a falling off of at least 10~ in the actual output or marketing of
goods in ten important lines.
Wh~le
production figures for the first
quarter of the present year in some leading lines, sucb. as soft coalJ
steel, cotten and wool, are ir.dicative of greater industrial effort,
the difficulties in the tra:hsportation field which tee[ime acute during
.ftpril are bound to affett both the prod.uction and shipment
figures for the last two months.
/
It is this tendency of production to decline. ~artie~larl~ in same
essential lines, which constitutas a very unsatisfactory element in the
418
X-1927
- 3present outlook.
..
It is evident that the country camot continue to
advance prices and wages. to curtail production, to expand credits and
to attempt to enriph itself by non-productive operations and transactions
without
fost~ring
discontent and
radiealis~,
and thet such a course,
if persisted in, will eventually bring on a real crisis.
There is a
world~w1de
lack of capital, and with calls upon the
investment market which. cannot be met there is an unprecedented demand
for banit credits.
The fact must be recognized that however desirable
on g.;nera.l principles continued expansion of trade and indu.stry ma.y be,
sueb d_evelo:pments must accommodate .themselves to the actual supply of
eapi tal and credit available.
Official
b~
rates now in force in the leading countries are
higher than a\ any time during the present century,
the war panic w.-,ek .at the beginning of .August. 1914..
exb~pt
during
Only within
419
X-1927
-4the last few weeks the official ratj in Italy has been raised
from
5
to 5-l/2, the Bank of France :rate from 5-l/2 to 6 and
the Bank: of
Engl~d
rate from 6 to 7 per cent ..
Every effort "eh.ould be made to stimulate necessary pro.duction. especialry of food prOduets, and to avoid waste.
ing operations in
~
P+ant-
sections have been delayed becaase of advarse
weather conditions, and should there be an inadeq_uate yt>eld of crops
this year the necessity for conservation anc1 conservatism will be
accentuated.
War waste and war financing result inevitably in
diminished supplies of 60ods and inereased volume of credits.
The.
normal relationship between the volume of goods and the volume of
money and ctedits thus unsettled can be restored in either of two
ways: one.,the drastic method of contraction of credit, and the
ot~er,
by far the more desirable way, increased production.
In the
same Waf progress towards the restoration of the nonnal relationship
mar
420
X-192"{.
5 be ma.Je by
r~ducing
credit rr.ore rapidly than production is dimini:•h;:,d,
or by increasing production at a greater rate than credit is expanded.
If it should prove impracticable in the existing circumstances to increase essential production, then we must through economy in consumption
and through moderation in the use of credit check the· tendency towards
. a further widening of the margin between goods and credit.
· Our problem, therefore. is to check further expansion and to bring
about a normal and healtthy
liquida~ion
without curtailing essential
l:)roduction and 'V'Iithout shock to industry, and, as far as possible,. with-
out distur'bance Of legitimate .com:nerce and
business~
As a.rule there is a substantial reduction in the volume of cammercial loans during
~he
is entirely natur·al and
first quarter of the year •. This liquidation.
~ealthy
and is necessary in order that the ba!lks
may be prepared to :meet the demands made upon them during the crop
making and harvesting seasons.
li
..
.
There has been no silch lJtquida.iion during
.
.
the· present year;. on .the coritrary, comoorcial loans have ·steadily in-.
·creased.
~s
the public .has
~ticipa.ted
demand& tor.
banki~g
credit ..
wh.ich are usually m8de later on· in the year. · 'l'he average reserves ·of
•,.
421
- 6the Federal Reserve Banks are now ~bout ~a% as agai~t
beginning of the year and about
51%
45%
at the
twelve months ago.
The solution of the problems confronting us will require the cooperation of all banks and the public.
Whatever personal sacrifices
may be necessary for the general economic good should be made.
The -,.,ar-
time spirit to do things that are worth while must be revived, and there
should be the fullest cooperation in an effort to produce more, save more,
and consume less.
The banl-s should lean less heavily upon the Federal
Reserve Banks, and rely morr:: up-on their own
r~sources.
Unnecessary and
habitual l:>orrowi.ngsshould be discouraged, and. the liquidation of long
standing
non-essential loans should proceed.
Drastic steps, however,
should be avoided and the methods adopted should be orderly.
Gradual
liquidation will result in permanent improvement while too rapid d6flation
would be injurious and nnst be
avoided~
'There should be a clear understanding of the parts to be played by
the Board, the Federal Reserv-e Ban'l:':"s, and by the member and nonmellber bankc,
and trust companies.
With respect to credits, the :problems of the F'Olderci.L
Reserve Board, the Federal Reserve Banks, and the member
b~s.
while
•422.
- 7
inter-.related, are distinctive.
'':'he FederaJ. Reserve Board has
"tm~
l ittJ.e
direct contact with the membet' b;,•n1:.s; it deals vrlth general. conditions
)
and
principl~s
rather than •l'li th individual caseJ an<f
details.
The
•
Federal Reserve Barks, on the other hand, are iri dailY contact with their
member oanl· s and have constant dealings with them.
Reserve
Banl:~ and
Between the Federal
the Federal Reserve Board, as the supervisory anQ. co-
ordinating hody, there is necessarily a close and intimate relationship ..
The merrmer banks transact the greater part of the primary ban17ing husiness
of the
·::-~ountry.
They receive the
d~osits
of the public and are the
media t'h.rough which ordinary ccmnerciai credits are extended..
The primaryld:u.ty of the Federal Reserve Board is to see that the
Federal Reserve Banlrs function normally in the nw..nne!" prescribed by the
Federal Resel"Ye Act.
The·character of business which may be engaged
in by the Federal Reserve Banks is described in detail in Sections
13
and 14 of the Federal Reserve Act, and all regulations of the 'Board
bearing ·upon the loans and investments of the Federal Reserve BankG
''
f
423
X-1927
- 8 -
must be in conformity with the provisions of the
l&"JV,
Regardless of
the extent of its legal powers, it would be a most difficult ta~ for
the Federal Reserve Board sitting in Washington, to attempt by general
rule of country-wide application to distinguish between "essential"
and. 11non-essev.tial" loans.
During the war there was a broad underlying
.
:principle that essentials mu.st be "necessary or contributory to the
conduct of the war 11 , but notwi thstand.ing the sharp outline of this
principle much difficulty 1vas ,exporienced by the various war boards in
defining essentials and non-essentials.
All the more difficult would it
be for the Federal Reserve. Board to make such a general definition
now when there is no longer that purpose as a
gu.id~.
The Federal Reserve Board is :not a temporary or~anization..
It is
a :permanent board, and it must be. guided by the terms of the Federal
Reserve Act.
Section
13
in defining the leligibility of paper for
discount by Federal Reserve Banlrs lays down the general rule that any
pape:r maturing within the time prescribed, and. issued or drawn for
comnercial, a.gricul tura1 or industrial purposes; or the proceeds of which
424
-;;::;~-1927
- 9-
ho.vc bco;.1 used or m·c to "be used for such :.mr1)0 scs, is cl igi blo.
Ho
e:c)ress condition is rr.ado rccardlng the essential or non-essential character
of the trans<1Ction civinc rise to a note -.,;hich inay be offered fer C.iscount,
and t:1e Federal Reserve Bo t:.rcl in not required ani ?roperly coulcl not be e::-}ectec.
generally to adopt such a cri.te:;:-ion of eligibility.
It is too nmch a atter
of local conditions and local lmo·dedge to justify at this time <-'...."ly general
countl~y-nide
rulL1g by th(! Board. even if such a ruling uere C.eemec'.
On the otl1er hand,. there is nothinG in the
reauired a Feder<J.l neserve
:_)err.1issive only.
directorc of
2.
Banl~
Fecler~l
hel~:>ful.
Reserve •'-ct '.:·lich
to mclte any invcstDent or to :;:-edisco1.111t o:ny
Section ·1- of t:1e Poclcral 3esenre
~\ct,
ho..-;ever, require::; the
Pec;_ert:l Reserve Danl:: to administer its z..ffo..irs
"f~irly ~nc
im:Jartia11y anC: -.rithout C.:.iscrirJinc.tion in favor of or a..cs:a:L."lst aey menber b&nl<:: 11 ,
an( subject to the j_Jrovisions oi' lau and t:1e orders of the Federc:.l Reserve
Bocrc:. to e:::tcnd 1'to each member baru: such discounts, advaJ.1cements an<l
accor,'nodc. tions as
mB.y be
safel~
c::nd l'82.sonably
El.&G.e
\"Jith c:ue regard for the
425
•
~~-1927
-10-
claims an:l demands of other r.1ember ·banlcs".
Thus the directors of a Federal
!.leserve Ila:nlc have the pen er to limit tl-le volume 2-nd e.haructer of .loans \lhich
in their judgment r,:ay be safely and reasonably made to o.ny member banlc.
The recent ar,1endr:1ent to )aragraph (d) of Section 14 Clistinctly authorizes
each Federal Reserve Banlc on its ovn account,
ii
ithout reference to 2-c t ion talren
by any otl1er Federal Reserve Banlc, to est2-blish o. normal discount or credit
line for each member banlc, ar.d permits- tJ.1e im:;_)OS:i. tion of graduated r2.tes on
C.iscount lines in
~cess
of the normal line;:.
not re:;;eal or moC.ify sections 4 and
13~
U..'1.C.
'J:'his
&~.1end.i:-.ent,
hov.ever,
c~oes
a J?ederal l'leser're lla.nlt is still
free to c:ecline to discount a:ny pcg?er \·-'hich in its judgment c'.oes not constitute
a desir2.ble L.'l.vest111ent for it or ul1ich in its opinion
a safe
~1cl
YiOUlG.
not constitute
reason.2ble i:nvestinent n:Ithin the meaning of Section 4.
It is tl1e vic\/ of the Doard, houever 9
t~JB.t
''hile Federal Reserve Ba:nl-cs
;nay :nu:;orly undertc.J.ce in thcil· transactions "ith member banJcs to discriminate
426
4
X-1927
-11-
betY;reen essential and non-essential loans, nevertheless that discrimination
mic;ht much better be made e. t the so'I.U"ee by the r:'lember bam:s themselves.
'rlle
inclividll.al banlcer comes in direct contact \iith his customers; he iS better
'•
qualified tim.n anyone else to advise the customer because of his familiari1l{,
not only \Jith the customer•s business but with the general business condition:.
ru.1d needs in his :imnediate locality.
In m:i:ng loans he is .bound by no
general rule of lm"l as to the character of tlle pur)ose for ·:rhich a loan is
being as1cee..
He is entirely free to e::c:ercise discretion anG. can m2l:e one
loan a.'ld. declilte am ther as his judgment 1:1ay dictcte.
He can estinate t.i th
a fair degree of accuracy the legitimate der:-tands for credit ,.,hich are liable
to oe ;:lade upon him, as well as tile fluctuations in the -..rolume of his deposit;
He
lcno~:s '~hat
industries susta:in his comnllUlity, .:md is thus ql.ill1fied to :;>asL
u:.,:>on the essential or non-essential character of loans offered h:lm.
1\ll.OWS,
He
or shot:.ld l!JlO~.'lt '.7hat rediscount line he rtay rea.sonably expect Of hiS
•
Federal Rese1"Ve Da11lc 1 c.nd he Q'UGht not to regard this line as a .:_::>ermanent
427
'
~~-1927
-12-
put upon his borroYiings from the Federal Reserve Dank tbe bo.nlter may be
de:)ended U)On to use a more C'.iscriminat ing judgment in granting crecUt
accorml1odntions to his customers, anci. thz.t judgment he must exercise if the
present situation is to be remedied fundamentally.
It i.s true that under existing conditions the volume of credit required
in any transaction is much greater than was the case in pre-war times, but
it is also true that the resources of the
be
arrJ~lle
~::.ember
o.nd non-member banlts \·,ould
to t3.l:e co.re of the essential business of the countr; and to a lw·ge
eJ:.tent of non-essentials as well i f there \Jere a freer flon of goocls and
credit.
If "frozen loans" \.'ere liquified, and if cor.TI;:oc.1..ities 11hich are held
baclc e itller for S)eculat ive purposes or because of laclc of transportation
fc"cilities should ::;o to the
mo..rltets~
and if large stoclcs of Inerchandise shoulc1
·oe reduced, the resultant releo.se of credit \:ould have a most beneficial effect
u:2on the ger.eral situation.
In the meant:irne everything must be done to e::ped.its
the releo.se of these credits o.nd to restrict non-essential credits in future.
428
-13-.
''hile the problGm of credit regulation a.:r.r:l control is nationa,_
and oven
i:nternatio~1al
in its scope, yet in the last analysis it is
merely .::m <:l{;'_;regation of individual problems, <::nd the :>rO:i_Jer \·;orlting
out of the situation must de:i_<Jend upon the puol ic
i-Jhich deal \iith the public.
Me~
u_;on the ba111m
The• public must be L1<:.de to realize the
necessity of eco:m.omy in e::pendi ttU'es and in consequent de1il8.nds for
b2n:~:ing
cre(i t.
T!1e banl(s themselves are best able to :impress the
of this J:lolicy upon the public •
:i.rJ:portance
•,-,-1e Pecle:cD.l Reserve Dan3:::s :r:ay be clepe:nded. u)on to do their duty
to t11c member barl!cs and the
bani~:s
of
.::~nc:_
~lroduct
~lublic,
but to
accom~;lish
results the
the ::_.u'bliG must do their :;;_Jart in accelerating the )rocesses
• and distribution and in restrictint; waste and extravagcmce.
icn
811 0PPICIO MKIIBKRII
DAVID P. HOUSTON
SICiaTAIIY OP Till TRIAIUIY
CIIAIINAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILUAMS
C:ONHSOU.II OF THI CUI. .NCT
,ADDRIEB& RIIPL.Y TO
WASHINGTON
F&;DE.RAL RESERVE IIOARJ)
May
W. ·p, G, HARDING, GoviiNOI
ALBERT STRAUSS, YICI GoviiNOI
ADOLPH C. MILLER
CHARLES 8. HAll LIN
HENRY A. IIOEHLINPAH
W, T. CHAPIIAH, SICiaTAIY
R. G. EMERSON, AIIIITANT SICIUAIIY
W, II, I II LAY, FISCAL AIINT
18,1920~
X-1928
Subject:
Foreign Branches Open for Business
on May 18.1920.
Gentlemen:It is intended to publish in the June
issue of the Federal Reserve Bulletin a complete
list of foreign branches of national banks and
foreign banks doing business under agreement w1 th
the Federal Reserve Board, which were open for
business o.n May 18,1920.
It will be appreciated, therefore, if
you will furnish this office, as soon as convenient,
with such a list for your institution..
Very truly yours,
Assistant Secretary.
Letter to 9 Foreign 'banks and National City Bank of
Ne,, York and First National Bank of Boston.
430
IIX OI'...CIO M&MR&RR
DAVID F. HOUSTON
IICRITPY OP THI TRIAIUIT
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAIIS
CoiiPTROLLIR OF THI CURRINCY
W. P. G. HARDING, GOVIRNOI
ALBERT STRAUSS, YICI GOVIINOR
ADOLPH C, IIILLER
CHARLES S. HAll LIN
HENRY A.IIOEHUNPAH
W. T.CHAPIIAN, SICRITARY
R. G. EMERSON. ASSISTANT SICRITAIT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
W.II.IIILAY, FISCAL A81MT
WASHINGTON
May 21,1920.
X-lJ30
Dear Sir:There are being sent to you today, by
registered mail
copies of the complete annual
renort of the Federal Reserve Board for the year
1919, for use ')f the officers and em:oloyees of your
Ba.nlr,
On account of the shortage of :print :paper,
we were unable to print sufficient copies of the
complete renort to surouly all member batiks of the
System; and in order that each member bank might
have th9 essential :parts of the renort, two editions
•IVere printed. one containing 553 :pages, the other
an abbreviated edition containing about 100 -pages.
The abbr~viated report will be sent from this office
to all member banks. Our supply of the complete
renort is limited and we are therefore unable to
send you conies for general distribution.
Very truly yours,
Assistant Secretary.
To Chairmen of all F.R. Banks.
431
FEDERAL
RESERVE
BOARD
STATE•JJENT FOR THE PRESS.
X-1931
For release in morning papers,
May 19,1920.
At the conference on Tuesday betvve'3Il the Federal Reserve
Board, ~embers of the Federal Advisory Council and the Class "A"
Directors of the twelve Federal Reserve Banks, the following
resolution was adopted:
RESOLVED: That the ban'l:ers here assembled, in their
capacity as rr.embers of the Federal .Advisory Council, in
their capacity as directors of the Federal Reserve ~~:s
of the country, in their capacity as members of the Ordetly
Deflation Committee of the American Bankers Association, and
in their capacity as officers and directors of barlrs doing
business in the various cities of the country, approve the
sentiments e:q)ressed in the very able address of Govemor
Harding as representing the views of the Federal Reserve
Board i and also be it
FURTHER RESOLVED: That they believe tha·t the widest
publicity should be given the address, and further, that
they hereby agree to abide by the spirit of the address in
the conduct of their own affairs, and that they will encourage its general adoption by the bankers and peo::>le of
our country.
May 18,1920
432
X-1933
OPENING REMARKS OF GOVERNOR HARDING AT THE CONFERENCE
WITH THE FEDERJIL RESERVE BO.ARD OF THE FEDERAL ADVISORY COUNCIL AND THE
CLASS "A" DIRECTORS OF THE :FEDERAL RESF.RVE BANKS, TtJESDAY, MJY lS, 1920.
Gentlemen, the Board desires me to welcome you to Vvashington ana. to
ex:pr<oss its arpreciation of your consiu.eration in leaving your business anci
coming i..ere to t"nis conference.
We have been vary judiciously ndvised from time to time by the Federal
.Advisory Council, which body Las always held its four statutory meetin6s
a year. and 8ot times its executive committee hc.s come on by request for a.
specic>.l m.:e ting; but the !'resent ~itui.ctio:n is such thEt we felt it vvould
be helrful i f 'lYe could have vfi th us not only the Advisory Council but also
the Class''A"Directors of the Federal Resorve Banks.
We should have liked
to t1ave bad c 11 of the Directors, but we could not o.sk them all to come to
Washin:, r.on at one time, for it is necessary that a quorum of directors be
left at home to attend to the business of the Federal Reserve Banks •
. Tb.e Class''A"Directors are the banker members of the Boards of Directors
of Federal Reserve Banks.
They have a dual relationship.
They are not only
directors and, as a rule; very influential directors of Feaeral Reserve
Banks, but they are officials of member banks ana. thus they see both sides
of the ric ture.
So it seems to be peculiarly appropriate, at a time wnen
there is a bankin15 situation to discuss, to have bankers here to dif;cuss it.
433
X-1933
- 2P.s you are busy men it will be our purpose to detain you for as short
a time as possiblet and i f it is agreeable to the members of the Conferl:lnce,
we will try to finish our discussion by half past 1 or 2 o'clock so that
you ccm then be free to take afternoon trains home, i f you wish, or to dE::vote
your time» i f you stay in Washington, to such other enga5 ements as you may
have.
Of course, we all realize that the credit position is extended and
very considerably extended.
turbed over the situation.
There is no occasion, though, to
~e
unduly dis-
We want to look at the facts as they are and not
aeceive ourselves in any particular.
Having diagnosed the case, .then we
want to determine what is the proper policy to pursue.
We have had an analy-
sis made of the general banking credit expansion in this country, and without going into details I am going to save time by stating the result.
After allowing for the
norma~
credit expansion in a growing country,
we find that since the 30th of June, 1914,
in this country has
amo~ted
the exransion of bank cr;;;di t
to about eleven billion dollars.
At the same
time the expansion in the volume of currency in circulation, deducting from
our starting point the currency held in the Treasury, and deducting from
the present figures the amount held in the Treasury.and in the Federal
R..;serve Banks, has been about one billion, nine hundred million <iollars.
~~en we remember that during
the
last three years the Government has floated
twenty six billion dollars of securities to take care of its own war requiremJnts, and to enable it to make advances to governments associated
~,rith
us in the war, this expansion of bank credit does not seem to be exces-
sive or disturbing, when looked at purely from the standpoint of war necessity;
but the situation that we want to discuss particularly today, and •Nhich seems
434
X-1933
to b"' disquieting, is the expansion the.t has taken place in
tA<::
last twelve
Fran th6 lst of Ppril, 1919, to the 1st of April, 1920,
or fourteen months.
.
the expansion of bank cre.di t was about 25 per cent.
This he.s been in spite
of the V3ry large reduction of the amount of Government obligations outstancling.
The reduction in Government obligations hes ell been absorbed
by c~Jmercial crGdits, with the net result of expansion of bank credits of
about 25 per cent.
During the same time th6re has be.:.:n an advance iri com-
modi ty prices of about 25 per cent.
This has be'-n accompanied by a decrease
in production of essential articles •
.Assuming for the year 191S an index. numbur of 100 in eeeh of tt:Jn
principal articles of everyday use and n2cessi ty--not necessarily production
figures, but distribution and consumption figures, such comnodi ties as
grain, live stock, wool,
co~per,
cotton, petroleum, pig iron, steel bars--
putting all tham at 100 for the year 1916 we e,."t an inde\lt;. number for the
year 1919, on the avurage of the ten commodities, of 89.07.
Whlle these
figures cannot be accepted as indicating a positive decline in
product~an,
they do indicate a decided trend in that direction, a certain trend toward a reduction in
ana
th~
distribution of those products, so to all intents
purposes we may assume that there was a decline in essential production
duril)g the year ·.·J. 1919 of about 10 per cent.
At the same time credit has
expanded 25 per cent.
It is this tendency of :production to decline, particularly in some
essential lines, which consti tut~s a very unsatisfactory element in the
present outlook..
:prices and.
~;rages,
It is evident that the country cannot continue to Srl.vance
to curtail production, to expand eradits and to attempt
to enrich itself by non-productive
one uneconomic
operations w·ithout foster-
435
X-1933
- 4ing discontent and radicalism, and that such
c.
course, if persisted in,
will eventually bring vn a real crisis.
~1ere
is a word-wide lack of capital, and with calls upon the in-
vestment market which cannot be met there is an unprecedented demand for
bank credits~
The fact must be recognized that however desirable on
g2neral princiFles continued expansion of trade and industry may be, such
developments must accommodate themselves to the actual sup~·ly of ca1)ital
and credit available.
Official bank rates now in force in the leading countries· are hifYlt r
than at any time during the present century, except_ during the war panic
week at the beginning of August
1914..
Only within the last few weeks the
official rate in Italy has been raised from
rate from 5-1/2 to
61 and
5 to 5-l/21 the
the Bank of England rate· from
6
~ank of France
to
7
per cent.
Every effort should be made to stimulate necessary production, especially of food :;roducts, and to avoid waste.
Planting operations in many
sections have been delayed because of adverse weather conditions, and should
there be an inadequate yield of crOFs this year the necessity for conserv&tion and conservatism wiil be accentaated.
War waste and Wt>r financing·
goods
result inevitably in diminished supplies of
,and increased volume of
credits.
Now I.ussume, looking at the matter from the standpoint of the economist
that the
tro~ble
with the gen8ral situation throu6hout the world, and in this
country, is the disruption of the proper prorortion or relationshiithe
vol~~
of crGdit and the
vol~e
of 5oods.
occurs, there are two r;:;r:.:edies which suggest
in the volur.:.e of credit, credit contraction.
bet~•esn
Whenev0r that phenouenon
ther.:~selves:
That is a
first a rc<luction
drasti~
•
436
X-~933
-5remedy, it is unpleasant medicine, but it may be necessary at times
to take medicine pf that kind.
The other and better method is to
restore the proper equiiibrium by building up production, in
other words, letting the country catch up with itself.
can approximate this result in two ways.
We
We can· restrict credit
and expand production, letting the expansion of production proceed at
a greater rate than the restriction of credit, and we are then
working along in the right direction.
This is our essential
problem today, the formulation of some constructive policy to be
adopted by the Federal Reserve. Banks which will build up essential
production and at the same
ti~a
preserve the solvene.y of other
concerns which may not be essential per se, but which are highly
essential as. part of the general situation, because there is no
chain which 'is
stron~r
than its weakest link.
Now, there is undOQ.btedly·, however, a spirit of extravagance
in thi.s country Which must be curbed. ·There ..are some indic::>..tions
.
that the people are waking up to what the consequences will be if
this Wild orgy of extravagance and waste should be continued
indefinitely.
It may be that some real personal sacrifices must be
made for the .,general economic gocd.
if we find it
~possible
But it is very clear tbat
under the present circamstances to increase
the volume of production of tbe most essential articles,
the
only thing for us to do is to reduce consumption of those articles.
Now, we might as well look at the situa\ion as it is.
..Prudent man never lives for the day alone.
..
A
He always looks to
437
~6-
the morrow and the months to come.
X-1933.
%at is the situation in regard
to the output of the mines and of the farms in
h~s
time
been done to get
~d
particul~r?
nonnal output and production
~t
~t
the present
to provide proper me3ns of distribution of the output in
order that there ma;y be no 3.cute short3.ge
necessities of life next Winter1
ip the fundarr.enta.l
In this connectiont I might call
attention to one circurnstcmce which h'3.s caus<!d a good de'll of
uneasiness.
It :mey not prove as bad upon
an.:~.lysis ~s
it appears
at first blush, bat I refer to the lack of liquidation which we
have experienced during the early months of the present year •
.
We all know that noriml.ly, after the fall tr'2tde is over and the
crops have been harvested 3.11d distributed, there is a marked easing
of rroney accorrpanied by the liqui1ation of debts.
This occurs
usually in January and February and up to the middle of March of
each year.
Liquidation of this kind is entirely natural and is
necessary in order that the banks may strengthen their resources
in order to meet the dleHlands which will be made upon
X-1933
-7-
438
them later on in the vear as the crops are in the 'Process of ma.l.':"ing or harvesting.
This year we have had no such liquidation.
Commercial loans have expanded
steadily, and while there has been some reduction up to the last week or so in
loans secured by Government obligations, it is noticea~le in the last few days
that those loans have increased.
It would awear that this means an anticipation
on the part of the American people for their requirements for bank credit which
inquire
they usually make later on in the year. We may well
that as we have had
this demand at a time when we ought to have had liquidation, what is our situation
going to be in the later· months, when we are going to have the demands which we
ha~re been aCcustomed to having?
Now, I hope that the answer to this is -- and if
this is correct it is the reassuring feature of the situation --
that the
demands which have been made in the past few months, when we should have had
liquidation • are due, at least in part, to the fact that essential commodities
have been held baCk by lack of transportation facilities.
directed to
openin~
flow to market.
Then our problem is
up the transportation facilities in order that these goods may·
This done, we will get some liquidation which ought to be
sufficient to offset the demands which will be mad.e U'!?on the banks for essential
purposes later on in the year.
But we have figures to show that the extravagant spirit has not yet been
checked.
There are some indications that the peak has been reached and that
people are coming to a more realizing sense of the situation and that they wUl
a
rP-crudescence
pursue /sounder and a saner course. There ought to be a
of our old
war-time spirit, •of doing something that is worth while, and \life should get down
· to work and solid business.
There should be a general spirit of cooperation on
the part of the Federal Reserve Banks, the member banks, the non-member banks and
the public to work out a policy which will result in greater production, lesa
unnecessary congwmption and greater economy; all unnecessary borrowings for the
pilrpose of pleasure and luxury should be restricted as far as nossible and the
liquidation of long-standing, non-essential loans shOUld proce'9d.
439
-8-
X-1933
We should be careful, however, not to overdo this matter of liquidation,
because too drastic a policy of deflation, which mi?ht result in crowding
to the wall and throwing into 'lankruptcy legitimate enterprises, however
unessential their operations may be, would have a tremendously bad effect
and would defeat the purpose of the very policy 'vhich •ve are trying to have
established.
A
There must always be a wise and discriminating judgment used ..
sensible and gradual liquidation will result in permanent imnrovement,
as we all know) but any attempt at radical or drastic deflation merely for the
s@~e
of deflation will
r~sult
in very serious consequences) and such a policy
should be avoided.
It
rrust
~e
will be
hel~ful
for us to discuss and to understand the parts
~hich
played by the Federal Reserve Board, the Federal Reserve Barks and the
member and the nonmember banks in solving the financial and economic problems
that confront us.
Our problems are inter-related, but they are distinctive.
The
Reserve Board is a governmental body, sitting here in Washington.
~ederal
It does
not come, except indirectly, in contact with the member banks, and it can not
be expected to have any intimate l:.nowledge of the details of your business.
And, it ought not to attempt to interfere with the details of your business.
The function of the Federal Reserve Board, is to deal with general conditions
and principles and to keep away from the mass of details which it is impossible
for any Board sitting here in Washington to digest.
The Federal Reserve Benks do come in direct relationShip
with their member banks.
and contact
They have an intimate lrnowledge of the credit :policy
and of the borrowings of the member banks; they are ke:pt fully informed from
day to· day of the change of position of the member banl:s. and through their
contact with the Federal Reserve Board, as the coordinating and
supervising
X-19;3
440
body, they ke.ep informed as to the Board's general :policy, and they transmit
to the Board such specific and general
in determining these policies.
~nformatibn
as may be of assistance
But the :Primary banking business of this
country is transacted by the member and the nomnember banks.
Those are the
banks which come in contact with the public; which are the cu~todians of the
funds of the
pu.blic~
put with them on deposit, and they are the
~redia
through urhich comnercial loans are made.
We have heard a gre""t deal about the necessity of discriminating
between an essential and a less-essential and a non-essential loan.
The
discount operations of the Federal Reserve Banks and their powers to
~e
investments are all clearly defined in Sections 13 anu.. 14 of the Federal
Reserve Act.
Those sections are permissive and not mandatory.
Reserve Bank is not required to ma1re any particular loan
1.~.or
A Federal
any particular
l
investment.
The Federal Reserve Board may define eligible paper, but all
rulings and regulations of the Board mu.st be in strict conformity with the
terms of the Feel!ral Reserve .Act.
. lative powers whatever.
The Federal Reserve Board has no legis-
It can merely interpret by regulation or rule,
the enactrr.ent of Congress.
Now, without discussing any power that the Federal Reserve Board
have to define essential and non-essential loans, I
Section
13 provides,
in a general
~~
,~ish
Ir.ay"
to point out that
that e.ny paper naturing within
the prescribed time, the proceeds of which have been used, or are to be
used, for commercial, industrial or agricultural purposes, is eligible.
There is no specific condition imposed as to whether or not. in the judgment
of any man or body of men, any particular loan is an essential loan, for
the well being of the community or the country at large.
The Board has reached the conclusion that there is no occasion now,
whatever may be necessa-ry later on, for it to attempt, by any general rule
44:1
-10of a CO'lmtry-wide application, to define essential and no'1-essential :naper.
You remember the difficulties that 'NerFJ experienced in making- such a cl.efin.ition durin£" the war, when ""e had the War Trade Beard, the
1~ar
Industries
Board, the Capi ta.l Issues Comrni ttee, and other temporary Boards he:re :oassing
upon all these matters.
At that Erne ·the problem wus simple!' tha.;. it would
be now, because there was a gene!'al un:ie·rlying principle that an;rtl:.J.:ng
essential must be something thst was necessary or contributory to the conduct
of the war.
and gone.
Now we have no vvar.
The temporary boards have all dissolved
The Federal Reserve Board is not a temporary board.
It is a
permanent organization and it mU.st conduct its business in strict accordance
with the terms of the Federal Reserv.e .Act.
Therefore, I think we are all
agre9d that there is no occasion at the present time, if ever, for the
Federal Reserve Board to attempt to define, by reg\:latio:r.~. of country--wide
application, what is an essential and
~~hat
is a non-essential loan.
A
Federal Reserve Baril·· is in much better :position to undertal:e this then is
the Federal Reserve Board.
But even here there are difficulties in the
way. . Some of -the Federal Reserve Districts cover very large areas.
.A rule
adopted by one Fedenal Reserve Bank may not be susceptible of adantation
in another Federal Reserve District, because what seems to be essential.
or necessary in one :place may not be in another.
While there is no
its
-narticular objection to a Federal Reserve Bank,
in the wisdom of
undertaking
Directors,
~ to make a general discrimination between
loans ~lainly unnecessary, plainly non-essential, and those which are less
essential or more essential, it se?ms to the Board that that whole question
of discrimination might very properly be left for solution at the source,
as a matter between the individual banker and his own
c~stomer.
because the
individual banker, particularly at times like the present, has a very close.
confidential relationship with a borrowing customer.
They can tart
ma~ters.
442
X-1933
-11-
over with the utmost frarurness.
position to give
advice.
The individual banker is in
He can accustom his customer to come to
him,· in advance of seeking a loan, or of making any comrr.dtment
involved, to discuss the situation with him before the
made.
commit~~nt
is
The individual banker in many cases - - of course this may
not be possible in the larger cities - - but the great mass of
banks all over the country that do mostly a
l~cal
business can very
largely anticipate the legitimate and necessary credit demands.
-12~.ihich
arc going: to 0e
volume
of
tho ir
r;~d.e
1.r_:.on them; they can ostim&te tho fluctl.Ption in the
de~Josi ts 1 2"ril. ti1oy
sd.vice to o. borro•.ring custo1,:er.
befc:re it is
i:~ace
443
X-1933
:.:re iJotter
They
0.:.::1.1
<"'<1 ifiod thc.n c:.n~r
c-_1.}..
else to give
Oi.1C
o fton J.."estr ict t;1e <::.r::ount of c: loLJJ.
2..'1.d co.n persusde a customer in very
i~:<:my
cases
t~1::1t ~1e reo.ll~r
dete:c:;1ine, not so uuch the esscmt ic.1 nature of c. lo2.:1 from. 2n elo;::entary stc..ml-
needed., but l1e cc.n dec ide better tl1c..n c:ny :me ol se Y.hether tl1e loc.n is esGcnti.:·l
or necessary fo1· t:1e )Ublic G;Ood in his
of :nooduc ins sOi:letllinG;
t~K~t
~x:rticul2.r
ousht to 1Je )l'Oduced,
locnlity, not only c.s c: 1.1e<:.ns
211{
'Jhicll is
~1eeded
for con-
sUD)tLn , 'Jut <:s a me2.ns of preservil1b the solvency of l1is cu.rnunity.
scre,,s on ti;ht 11 tl1ey could bring dise.ster to the co;·Jrmnity; 1h1ch mic,'ht s ;resd
Of ccursc, there
;.12.y
be c<:sos, <::ac~ tllGj,'G :1ave 1Jeon ce.ses, doubtless,
)ro'JC.1Jly in c:::.J.l of the c:istricts, uhere some of the
1JCJ.i.1~;:s ~1c:::.ve ovcn~done
the
;_;o.tter of c:::::tonC:inz cre(its, 'out the:;..~o is o;1e very encouraging· fe2-tu.re of the
:n~esc:n t
s itt<C/cion,
2n,c.~
th<!.t is sucl1 ce:.ses :.'.re
of ;::.11 t:1cJ : -,c;;1ber bcn::s in c::ch of tl1c
~~ec~ercl
com~Jnr:::.ti vely
::lcservc
Distl~
feu.
'.l'he ma.jor i ty
icts arc not
bo:c1'0' :ers fron tho Fcd.crz.l ::ieGeTve Dru1lc, w1c'. tl1e n1.c::1bcr of : 'C;Jbor b2.nlcs uhich
2.re bo:"T01.fing froB the Foc:crc.l ::lcserve Da1L:s in 2,n
c<".)i t2..l
stocl~
is :1ot lE.rc;c in
l::J.10'.·s, or he ou,:-;ht to
~~no·.:?
:no~~ortion
<-1~1otmt
e~:cecC'..:il'lg
to the total mer:1bershi:p.
own
their oP;e.
:~:very
'0£cn:::er
'i1c.t :-ce2..sonr:ble line of c::cedit he c2.n get from his
444
:~-1933
'to com:;,;mls ion in the r.)Stter of loans thct you •:r:i.U find a.J.zy'".Jllere in tho .Act
is that ::_1rov:i.sion vThich :;_:>en.1its .Jnd,.
u:~on
tho affirmr.tive vote· of fi7e
1~1e;:fuers
qf the Fecler~l Reserve Bon.rd, requires a. Feder<!.l Reserve i3L"tlllc to rec"'.~scount
for Ba1.o t:1er Federcl Reserve Ba~'i!. · ·itl1 this e:~ce:_)tidn there is no otl')3r
:11Cndetocy :;_1rovisi·on relating to loc.ns in tl10 Feder2.1. Reserve .~ct.
:·.11ile sect ions
"1.3 u.n:: 14 <11~e permissive, there is horJever, a strict injunction lt..id u:_Jon the
Directol'S of the L"cdercl !lcserve :lt..!L:::S in thc..t ?C-rt of se;c~ion 4 -·,~'lich r~_;quires
t~10 DirectOrs of a ~'eder<.l Sese1·ve B2.ni::, to Gf.minister its affairs -.:i.thout fc:vor
o1· C:.iscrimination foJ;' or c-sc..i:..1st CJJ.T'J ne.:aber ban:;:, and in rr..s..!cing loe..ns, c'.2.scounts
?2-Y clue reg<l;t"d to the v~ants .:nc1 req_l.'..irements of otl1.er nei:1ber banlcs •. Thus. the
Reserve
Directorn of Fco.oraJ. jBan.r.s are clee.rly ;·:itbin their ri(!;hts Y1~1.en: t:1.ey s~y to e-zq
~:-:e;.~~)er
you
banlc, '.'You l'lCve gone far enough; ue a:oe fc:nilie:.r ''i ~'1 you:r co:.1C!.ition;
~:-.eve
got nor€ then your
ca;,mot use
~10
~1.c.1~e,
c.11d yre ,..,.c.nt you to reduce; uc c;:;.r..not let ~rq~-:»
resources of t:.te ?ederal Y:Lse:;;·ve :Bc:::r.Ll:s :for it-s o·.m )rive. tc ,
if he ':L".nts to e~rx·~c:.
~10 l!lUS t d.o it r.1ore ::. nC. r:.tOr e out of his o...-n
- . his business
'
:;.,·eso-t1:i.'Ces ~-:.n(:..
;not le2-n
30 · hec.vily
u
)0~1
the
:t:'0der~:l
:J.ese:tve Bc.:n.?.c, W·lA:;n
h~
"L'!.l'lC'.er-
445
-14-
be depended uroon to use a
,~iser
X-1933
discretion in the matter of granting credit.
The· recent amendment to :paragreph (d), section 14, which
empowers. the Federal Reserve Bank, for itself, and without regard to
any other Federal
of credit
~on
Reser~e
Bank, to establish a normal or basic line
some principle api;>licable to all member banks in its
District alike, and to imnose a graduated or penalty tate upon excessive
borrcbwings, does not repeal, amend or modify in any pa:rticular the
provisions of section 4 or section 13, and a Federal Reserve BaHt is
still, even thOUgh it adopts the progressive or penalty rate, entirely
within its rights in declining to take und.esirable paper at any ·rate.
The nrogressive or penalty rate I 1111ill not riiscuss at this time,
because we will have an open discussion a little later on and we will
take it up then.
It may be argued that the volurre of credit must necessarily
be greater now than was the case a few years ago on account of the
hi~her
prices and
hi~er
wages Which are prevailing, so that any given
transaction requires a greater number of dollars to finance it than
was formerly the case.
That is true, but I believe that I can present
figures to you that'will convince you that if there could be a freer
flow of goods and credit• in other words, a greater velocity in the turn
over of credit, the resources of the oariks of this country are abundantly
446
-14 a X-1933
ample to finance all essential enterprises and a good many of the
non-essential as well.
The fundamental trouble with the situation
and corrrnodi ties
today is that there is a large volume of essential goods/ held back
from the markets and kept out of the channels of distribution,
either for speculative purposes, being held with the idea of getting
higher prices later on, or *here they are held back of necessity on
account of laCk of facilities to transport them to market.
In the
latter case, it is a wise and proper policy to ease the situation
along, to assist the people who are thus compelled to hold and not
throw any obstacles in their 1P.iay, provided there is a genuine and
sincere disposition to put'the stuff in process of distribution as
soon as transportation can be had.
But in the case of the hoarder,
who for selfish and profi tearing purposes wishes to hold back from
the mouths of hungry people essential articles of food, or from the
backs of the naked essential articles of clothing, every good banker
should exert every influence within his power to force people of that
kind to turn loose their hoards.
Here is an
o~portunity
for
1~ise
discrimination, and this discrimination can be exercised more intelligently and effectively by the individual banker himself than by any
Governmental board.
•
-15-
We find instances also which
~lways
occur when there is a
constantly advancing tendency in the tnarket, where mcrch:mts have
stocked up.
There are many cases Where mercantile loans are too
large and ought to 'be reduced.
There are rrerch~ts everywhere who
ought to be reasoned with "lnd who ought to be encoUraged to push
their stocks out .and get rid of the high priced stuff, because
some of these days, it mqy be sooner rather th"'ll later, the reign
of reason is going to be restored and the man in the str3et is no
long3r going to want to pay $25.00
to $30.00 for a silk shirt, or
and
$20.00 for a pair of shoes or $1.00 for four pounds of sug3I',/lower
prices will be demanded , and trade will fall off unless lower prices
prevail.
It seems to me, from the standpoint of good merchandizing
and good banking, that the merChants should be encouraged to reduce
their stocks and not . temp.t the passer-by by extravagant display
in the windows at high price.s, which under the abnormal state of
mind which has prevailed, may themselves help to sell the goods,
because you all know cases where a. custqmar would pass by with
contempt a two or three dollar article and turn his attention to
something at $25.00, althoui!h it ma.y not be one whit better suited
to his purposes.
'.
448
t
X-1903
-16-
In order to bring about a corract tendency and to lead to
a permanent cure of our present sitt:.l,;i on,
?
must be begun and continued.
there is no
Here,
ag~in,
.;ampaigl'l of education
~gency
so
well qualified as the banker • who receives on deposit the money of
the public
~nd
makes loans to the public, to give advice, so thus
there should be a concerted effort all over this country on the
part of the bankers to arouse in the public a spirit of cannon
Let us take oor· heads out of the clouds and get down to
sense.
business, and let us save, produce,
~d
lat each do his part in
a constructive and productive way for the community, to add to
the volutre of goods and facilit1-te distribution, thereby doing
something to cura the discrepancy, the bai relationship Which has
existed between the volume of goods and the
vo~ume
of credit and
money.
In any circumstances, you all know that the Federal Reserve
Banks
~d
the Federal Reserve Board will do their part to cooperate
with the sound, sensible and reasonable member banks..
we may accomplish
~y
In order that
real results and effect any permanent goud,
there must be cooperation on the
p~rt
of the public with the banks,
and on their p:1.rt 'vit:!:l. the Federal Reserve Banks and the Federal
Reserve
Bo~d.
~e
must all pull together for soun1, econQmic anl
financial principles.
do a .e;reat
We should do all in our power, and we can
deal to chefk the false ideas which have gained
circulation amd. inculcate in the minds of the people a sense of
the irrportance of steady, every-day production and distribution,
and to encourage the avoidance of waste and the elimination of
449
X-1933
-17extravagance.
I have here some charts ,which w·ill be distributed among you,
which show the movement of principal asset 3.n:i liability items of
each Federal Res~."rve Bank 3.ni of th'l S yst'lm, of the twelve) banks combined.
These figures ar3 taken from July 3, 1919, to April 30, J920.
They show the gold. resl9rves,
th~
total cash
r~se'!"ves,
the memher
bmks 1 reserve deposits, the Federal Reserve notes in circulation,
the acceptances bought, paper secured hy Go,rernment war obligati0ns,
divided into the
hea:iin~s
1
9:ecured
hy Liberty Bonds 1 secured by
Victory Notes, and secured by Treasury Certificates, an1 tee total
discounted paper on hand.
Then there is another table which shows
the volume of bankers• acceptances purchased from other Federal
Reserve Banks and the volume of bankers' acceptances suld to other
Federal Reserve Banks, figures at the. close vf business on each
Friday from July 3, 1919, to April 30, 1920.
Now, gentlemen, I declare the meeting open fvr general discussion.
450
J11X OJ'PICIO MEMBERB
DAVID f. HOUSTON
iiCIITAIY OP THI TIIAIUIY
CHAIRMAN
•
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
COMPTIOLLII OP THI CUIIIHCY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
WASHINGTON
W. P. G. HARDING, GOVIRNOR
ALBERT STRAUSS, YICI GOVIINOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A.MOEHLINPAH
W. T. CHAPMAN, SICRITARY
R. G. EIIERSON. ASSISTANT SICJIITART
W.II.IIILAY, FIICAL AGINT
May 24, 1920.
X-1936-7
Su.bject:
Dear
Transmitting Copies of Board letter
to Senator Owen, and Response to
Senate Resolution #363.
sir:-
There is enclosed herewith for your information copy of Boardts reply to a letter from
Senator Owen, in which he critisises the discount
policy of the Federal Reserve Banks, and also copy
of the Board's re~y to Senate Resolution #363.
Very truly yours,
Enc.
Governor.
To Chairmen of all F.R Banks.
•
. ..
451
May
25, 1920.
X-1936.
Sir:
On May 17th, 1920, the Senate adopted the following resolution.
"Resolved, That the Federal Reserve Board be directed
to advise the Senate what steps it purposes to take or to
recommend to the member banks ~f the Federal Reserve System
to meet the existing inflation of currency and credits and
consequent high prices. and what further steps it purposes
to take or recommend to mobilize credits in order to move
the 1920 crop 11 •
In res:nonse the Board desires to say that it has recognized for
many months past that the expansion of bank credits in.this country
was proceeding at a rate not warranted by the production and oonsumption of goods.
It has repeatedly admonished the Federal Reserve Banks
that influence should be exerted upon the member banks to induce them
to avoid undue expansion of loans and to keep their
~olume
of out-
standing credits within moderate bounds,
Beginning six months ago the rates of discount on various classes
of paper at the Federal Reserve Banks were advanced.
During the latter
part of January the present rates were put into effect. These advances,
while undoubtedly checking credit transactions which otherwise would
have been made, have not been entirely effective in bringing about the
reduction in loans desired and which might normally have been eX})ected
during the early months of the year.
Liquidation during these months
...
'
452
..
X-1936
-2-.
is entirely natural and healthy and is necessary in order that the
hanks may be prepare~ to meet the demands made upon them during the
cro"P making md harvesting seasons, but there has been no such liquida...
tian and on the contrary coniT~rcial loans have steadily increased.
Thus
it a~ars that the public has anticipated demands for banking credit
which are usually made later on in the year.
The average reserves of
the Federal Reserve Banks are new a little over 42~ per cent, as
against
t,~Vel ve
45 per cent at the beginning of the year and about 51 per cent
months ago.
The Federal Adtisory Council, which is composed of one member from
each Federal Reserve District, elected annually by the Board of Director.s
of the Federal Reserve Bam, is required by Section 12 of the Federal
Reserve Act to meet in Washington at least fOur times each year.
The
Council is authorized "to confer directly with the Federal Reserve Board
on general business conditions; to make oral or .··· written representations
concerning matters 1dthin the jurisdiction of said board; to call for
infonnation and to make
~ecomnendations
in regard to discount rates,
. rediscount business, note issues, reserve conditions in the various Districts,
the ~chase and sale of gold or securities by reserve batiks, open-market
Oll9rations by said banks, and the general affairs of the reserve bariking
system.. "·
Upon receint of a notice that. the Council would hold its regular
meeting on May 17th, the Board extended an invitation to the three
Class
11 A"
Directors of each Federal Reserve Bank, who are .the re'Presenta-
tives of the stOCkholding banks, to come to Washington at the.
453
X-1936
- 3 same time for conference with the Federal Reserve Board and the Federal
Advisory Council.
This conference was held on the 18th instant and
it was developed at the meeting that the present credit expansion is
due in great part to the abnormally high prices of goods and commodities
nc•prevailing throughout the c'ountry and to the congestion of foodstuffs and essential raw materials at, or near, points of production
because of lack of
transpottati~
facilities.
The Board is convinced that if the unsold portions of last year's
crops can be brought to market before the ne•.JV crop matures, the
liquidation of credits which are no''V tied up in carrying the old crops
will be sufficient to offset to a considerable degree the credit demands
which
·~ill
be made upon the banks in moving the crop of
1920.
At the conference above referred to the Board's views were outlined by its Governor substantially, as follow·s:
The member banks
should lean less heavily upon the Federal Reserve Banks and rely more
upon their own resources. unnecessary and habitual borrowirlgs should
be discouraged and the liquidation of long standing,
loans should proceed.
Bc~s
no~essential
were cautioned, however, that drastic
ste-ps should be avoided and that the methods adopted
s~.ould
be orderly,
for gradual liquidation will result in permanent improvement ·vhile
too rapid deflation would be injurious and should be avoided.
The
Board pointed out the necessity for extending such credits as may be
necessary to promote essential,production, especially of foodstuffs
and that if for any reason it should prove impracticable to increase
essential production, there should be . greater econoiizy" in consumption
and more moderation in the use of credit. The problem of. the baclring
454
X-1936
- 4system of the country is to check further expansion and to bring about
a normal and heal thy liquidation without curtailing essential production
and without shock to industry, and, as far as possible, without disturbance of legitimate comrr.erce and business.
In order to eftect this it
seems necessary to distinguish betw·een essential and non-essential loans
but the Federal Reserve Board feels it would be a most difficult task,
which i t should not undertake, to attempt by general rule of country-wide
a~lication
to make this distinction.
During the-war there '"as a broad
underlying principle that essentials must be "necessary or contributory
to the conduct of the ·war", but notwithstanding the sharp outline of
this principle much difficulty was experienced by the various war boards
in defining e.ssentials and non-essentials.
All the more diffiC'Ul t would
it be for the Federal Reserve Board to make such a general definition
in the present circumstances.
Section
13 of the Federal Reserve
Act defines the eligibility of
paper for discount by the Federal Reserve
Banl~s
and lays down a general
rule that any paper maturing within the time prescribed and "issued
or drawn for agricultural, industrial or commercial purposes, or the
proceeds of 1111hich have been used, or are to be used, for such :9\li'POses"
is eligible.
Xo expressed condition is made regarding the essential or
non-essential character of the transactions giving rise to notes which
may be offered for discount and the Federal Reserve Board is not re·quired, and properly could not be ex:oected, generally to adopt such a
criterion of eligibility.
It is too much a matter of local conditions
X-1936
455
- 5 -
'.
and local knowledge to justify at this time any general coUntry-wide
ruling by the Board even if such a ruling were deemed helpful.
On the other hand, there is nothing in the Federal Reserve Act
which require .I a Federal Reserve Bank to make any inrestment or to
rediscount any particular paper or class of paper.
both Sections
Reserve Act,
13
and
h~~ever,
14
is permissive only~
The language of
Section
requires the directors of
4
of the Federal
a Federal
Reserve Bank
to administer its affairs "fairly and impartially and without discrimination in favor of. or against any member bank". and subject to the provisions of law and the orders of the Federal Reserve Board to extend
"to each member bank such discounts, advancements and accommodations
as may be safely and reasonably made with due regard for the claims
and demands of other member
banks".
Thus the Directors of a Federal
Reserve Bank have the power to limit the
vol~
and character of loans
which in their judgment may be safely and reasonably made to any member
bank
The recent amendment to paragraph (d) of Section
authorizes each Federal Reserve Bank on its
reference to action
t~en
01m
14
distinctly
account, ,'Vi thout
by any other Federal Reserve Bank, to
establish a normal discount or credit line for each member bank, and
permits the imPosition of graduated rates on discount lines in excess
of the normal line. This amendment, however, does not repeal or modify
Sections
4 and 13, and a Federal Reserve Bank is still free to decline
to discount any paper which in its judgment does not constitute .a
desirable investment for it or which in its opinion would not constitute
a safe and
reasonable investment within the meaning of Section 4.
..
- 6-
456
X-1936
It is the view of the Board, however, that while Federal Reserve Banks
may properly undertake in their trmsactions with r.:.ember banks to discriminate between essential and non-essential loans, nevertheless that
discrimination tnigbt much better. be made at the source by the rr.ember
banks themselves.
The individual banker comes in direct contact with his
customers; he is better qualified than anyone else to advise the customer,
because of his familiarity, not only with the customer's business but with
the general business conditions and needs in his irorr&diate locality-
In
making loans he is bound by no general rule of law as to the character
of. the purpose for which a loan is being asked..
He is entirely free to -
exercise discretion, and can make one loan and decline another as his
judgment may dictate.
He can estimate with a fair degree of accuracy
the legitimate demands for credit which are liable to be made upon him,
as well as the fluctuations in the volume of his deposits.
what industries sustain his
co~unity,
Be knows
and is thus qualified to pass upon
•
the essential or non-essential character of loans offered him.
He mows,
or should know, what rediscount line he may reasonably expect of his
Federal Reserve Bank, and he ought not to
~anent
addition to his capital,
rega~
this line as a per-
With knowledge of the limitatio.ns or
penalties put upon his borrowings froru the Federal Reserve BankS the
banker r.m.y be depended upon to use a more discriminating Judegr.ent in
granting credit accOimlodations to his customers • and that JudgtiJent he
u~st
exercise if the present situation is to be remedied fundamentally.
It is true that under existing conditions the volume of credit
required in any transaction is much greater than was the case in
pre-war times; but it is also true that the resources of the uember 2.nd non-~ember
banks would
•
457
~-1936
-'7-
countr.r
be at19le to tel:o care of tho essential business of tho
luge axtont
ot non-essentiDls ~ uell
o:.1e. creC.it. If
"fr~zcn
if there
loe.ns" ,·;oro liquitied,
\"Jere
mt~.
.e. treer
l.'lld
flO\;
to
o.
'ot zoods
if conunoc!ities thich
Dl>e held b2.c1: oitJtor for· s;>oculc.tive 1JU.r:..X>ses or bo.cc.use of look of trc.ns:.,10rtation fc.cilitios shoulC:. go
'.
to tho
ma.rltets, Wld if ltU"ge stockS of
merchandise should be reduced, tho rasul ta.nt role.::.so of credit •:ould have
a most bonoticia.l oftoct u:)()n t;lO general situa-tion.
In tho ;;tOntitime
everything must bo dono to e:t'.Jedito tllti release of those cret!.its end to
restrict non-ossunticl
cr~its
in futuro.
Uhile tho problem of croct.it rosuletion · Dnd control is ne.tion£11 · ~
ovcm interna-tional 111 its· scope,
·Yet
in the lAst «l.mlysis it is moroly
en S(;Groge.tion of individual :JroblCDJ, c:'.lX,_
t~ ~o:ter
\:orkillg out of tho
s itua.tion must dopond u:;.on tho :;m.blic one. u:>on tho banks ,.-hich
~
tm public. TbcJ public mu.st bo mndo to roclize tm nt;')Cessity of
in expenditures ond in consequent dem.'\llds for btm:'ing cret!.it.
themselves· :-..ro best Able to i.Jtt')r.oss the i.J:l;.ortcmco of this
:.ith
OCODOJI\Y'
The bcnlts
~licy 1QO:Il
the VUblic.
Fo.c tho. i"urthur infomc..tion oi
t~ · !:).,.n;.to t.~
·Zoc.rd quot\:s fron tho
i-o;?ort of tho Foccrc:.l ;.dvisory Council ·mcdc to it on :Io.y 18th, sisnoc by ·
·Janos D. Forscn, President. ·
·•Tb.e.Councll n::.s i;;ive:n consiC..erc.tio:n to the mnttvrs· inClude?.
in your coniJUllicction of .:'-:_.;rU l'7th onC!. bogs to rv.}ly thereto
in the follo·:in;; n"'mlcr, follo· ~~ the ort.or sot Out "'a<J you.
(c) "Co.usos of continued c::;.."'.;lsion of orc<'!.its
m..
of Fee:"rt'.l
noto issuos.u
.
.
• ·There nrc lno.JW' co;.ltributi.DG .cc.usos of · hich thG fo1.lo•.:ing nw:y
be regarded c.s "'..r~'OOunt •.
• I
•
f
X-1936 ·
.-8--
1. ·ia recognize, of ~ourso, tba.t tho first cause is
the GroD.t :Jar.
.
~. GroD.t oxtrc.vogc.nco, nc.tional, municipal and individuol.
3. Inoffici<llcy OZld indifference of labor rosultilig in
lossontng production.
4. ~ Shortage of tr~sportation f~cilittcs, thus 2reventtng tbo normal movement of comroodities.
5. The vicious circle of increasing uages ~?rices.·
(b) 'Ko•i ccn the reserve }Osition of the Fodor~ Reserve .i3alits
be mater i.a.lly strensthened beiorc t!le seD.SonL'.l e..emand sets in rlOXt
toll 'li tbout undue distu:rbaaco of th.:. ::>rocesses of :;>roc'!uction e.Dl
distribution?•
·
By lll"~ing u_1on mmbor bm:;:s through tlw· Federal Reserve 1>e.n1rs the
'\11sdom of shQuing borrouers tn... necessity of tho curtailment of'
g'-nora.l oroC'.its, and eSj?Oaia.lly for non-ossontia.l uses, as \:'Ull as
continuing to disotull'agc loans for oe.:.>tta.l and speculative purposes:
by chco:.;:ing O::OCSSiVO borrOYiing3 through tho a)pl i<?C-tiOU Of higher
r~tos.
·
(o) 'If stc?s oo.nnot be tt.kcn at this ti.DJ loe.ding to a more
normel ?roportion bot\10on tb.c wluoo of credits tWd tho volume of'
goods, \:hotJ. can they be taken?•
•'
!n our O?inion steps should bo
~en
now, as outlined in cnsr:or
to the last question. .
. (d) 'JhD.t is tho offoct tt:?On tho gonornl si tue.tion of the incrouscd
Trcas-ll.cy borrO\<ings. o.nd '1ht.t shOuld bo tho policy of th..; Fode~~.l Rv• ·
servo Donl~s in ost.:::.bl ishing rat us of c!i scotu1t o~t l2:;?... r scoured by
certificutus of indob~~dncss?•
It is obvious that tho borrowings ot tac Trccsury b::.vo tho S.:tlo
effect u,.:on tho gc~rol credit situation es those of other borro,:ors.
Tho Oounc U \"<Ould ~st tho 'ttisdom of Congressional roliot from
tho 'blDdon of govc~nt financing by a policy· of rigid .oconoll\f; tho
provision of the w:t l.aus for the. saJto of a more cauitablo distribution
of tho burden r:ithout reducing thv rov1..111110; the vnictmvnt of the oudg..:.t
systom, th;;; budget to include provision for the grac!ua.l ~-:.ym,,;nt of the
short time oblit:,~tions of the Tro<".SU.ry. These ~.oulc! of nocossity
procludu unwise t:;;>;.nocr;r tat ions, such a.s the ?reposed. soldier •' bonus.
In viotl of tho l::Jorgc volume of Troc.sury certificates of indobtoencss
carried. by mmbor ba.nlcs ct the instance of tho Troc..sury Dopartuunt, ro
believe th.-:.t rt.tos· established by the Fodc~>l Roso:rvc Danlts on ~p.;r
· scoured by them shoulct not bo mtcri~ly grca.t;;r tll"fl tho rates bomc
by tho corti:tic::.tos."
·
f .
~
459
- 9-
X-1936
The l3oard feels assured that the banks of the country now realize
the necessity of more conservatism in extending credits and of a reasunable reduction in the volume of credits now outstanding.
The Board
will not hesitate • so far as it may be necessary, to bring to bear all
its statutory powers in regulating the volume of credit 1 but wishes to
.point out that the more vital problems relating to the movement of the
1920 crop are physical rather than financial.
This was the unanimous view of those present at the conference
on the 18th instant, at which the following resolution was adcpted:
"The whole cmtrltcy is suffer'\n.g ftorn inflation of
prices with the consequent inflation of etedit. From
reports made by the members of this conference, representing every section of the country, it is obvious ·that
great sums are tied up in prod.uc ts which if marketed. would.
relieve necessity, tend to redace the price level and.
relieve the strain on our credit system.
"Th.is. congestion of freight is found. in practically
all of the large railroad centers and shippil1g ports. It
arises chiefly from inadequate transportat.ion facilities
available at this time and is seriously crippling business ..
We are informed that the per ton mile of freight increased
in three years - 1916, 1917, and 1915 - 47%, while the
freight cars in service during the same period increased
1.9%·
"A striking necessity exists which can orlly be reJ.ieved
through ·the upbuilding of the credit of the railroads. This
must come through adequate and prompt increase in freight
rates. .Any delay mee.ns the paying of greater cost directly
and indirectly and places a burden on the credit system which
in the approaching time for seasonal expansion may cause abnonnal strain.. Even under the load of war inflation, high·
price level, and extravagances the bank reserves would probably
be sufficient if quick transportation could be assured during
the time of the greatest strain.
"Therefore l3e It Resolved: That this conference urge as
the most important remedi;;-tihat the Interstate Comrr.erce C~
mission and the Uhited States Shipping l3oard give increased
.'
460
-10-
rat os ::nC. cdcquo..tc fc.cilities such ii~Jl110c1i:: t c effect as mcy
be unr:;:c.ntod under their authority o.nd th:::.t c.. committee of
five, ru?ros •.mting tho vc.rious sections of tho country, be
c. pointed by t~1c Ch<::.irmcm to present this resolution to tho
Intcrstcto Commerce Cormaission anc"'.. 'cl1c United St2.tos Shi:?lJing
Jo ard ui th st~ch vcrb2-l :_?rcsontation as may soum a}proprio.tc
to t:1c colrJl;1i t t oc. n
:L:uch uill clo:;_Jond
U~_)On
tho rcsto1·ction of the normal efficiency
of railro2.d and steamship lines.
If ccloquatc trc..ns:;>ortation facilities
cz,n be :;;rovidoc:. the Bo<:rd sc-..:s no occcsion for
'1
C~)j_Jrchc:nsion
ith tho mov LZn..:nt o f cro·)s nm1 being gro1m ..
Governor,.
Thc 'resident of tl1C Sono.tc.
in connection
.
.,..
461
- ,.
"'
X-1937
M~y
My
24, 1920.
dear Senator:
Your lstttr of the 14th instent was duly received, but unusual
pr~ssure
of
routi~e busin~ss
hes prevented an earlier reply.
let~er
I notice that you renew the suggestion made in your
oi
April 27th that the Federal Reserve Board lower the discount rates
of Federal
R~serve
Banks as a means of helping to
r~store
Liberty
Bonds to par, and that you take the· view that as the Federal R0serve
Banks pay no interest on deposits and that as they made very large
earnings last year on a four per cent rate; that "3 per cent is a rate
high enough to enable them to make all the money they
ar~:
entitled
to make out of the public", and you say that "the Federal Reserve
Banks shuuld not be put in the attitude of profite,:ring or of settin6
the example of profiteering to member banks".
Your suggestion that the discount rates of the Federal Reserve
Banks be fiXed with reference to their divideQd requirements is
cer~·
ainly a novel one, but before entering into a discussion of the propriety of fixing rates from this point of view I wish to say soEething
regarding your intimation that the Federal Reserve Banks are putting
th8mselves in the attitude of profiteering.
Section 7 of the Federal R<.oserve Act provides that
11
after all
! .
X-1937
l
462
•
.. 2 neeessr,ry expenses of
D
FeC..eral reserve :-··f!i.nk have be:;n :pa.id or provided
for, the stockholders shall be entitled to receive an
son~~l
dividend
of six per centum. on the pflid-in cari tal stock, which dividend shtl.ll be
cumulative".
As originally enacted this section
~rovided
further that
d'ter dividend claims had been fully met "all the net earnings siJ.;;.ll be
p&iel.
to the Uni tad Stntes ns a franchise tt.IX, except thr.t o.oe-nalf of
such net e11.rnings shall be paid into ::.. suzo:plus fund until it shall .:-..motlllt
to forty rer centum of the raid-in cn;i tal stock of such b~l.Jlk".
The Act
of MP.rch 3, 1919, which ~assed the Senate only as a result of your watchful care throughout an all-night session net~r the eDd of the Si.Xty..fifth
..
Congress, amended Section
7 by providing that "after the aforesaid divi-
<iend claims have been fully met, the net ecrnings shull be raid to the
United States as n
fr~chise
tax.excert that the whole of such net earn-
ings. including those for the yenr ending
Decerober-thirt~first,
nineteen
hl.U'ldred snd eighteen, shall be 1aid into a sur}'lus fw:ld until it shall
ataQUl';lt to one hutldred rer centum of the subscribed ca.:t~ita.l· stock of such
batlk, and that thereafter ten 1er centum of such net eW'lline,s bho.ll be
::,··a.ici into the surplus" ..
Section 7 also rrovides
t~t in
case a Federal Res.;,rve Batlk shoulC..
ue "dissolved or go into liquidation, any surplus remaining after tbe
payment of all debts, dividend requirements
~s
hereinbefore
}TOVi~ea.
onci the J.ar value of the stock, shall be paid to and. become the pTO}erty
of the United States•.
On May 21, 1920. the paid.-in cai-'i:t.al stock of
all the twelve Federal Reserve Banks aggregated.
$93,786,000.
an
this
•'·
X-1937
463
- 3basis of capitalization for the year the member banks can receive dividends at the rate of &f,, aroounting to $5.627, lCo; the rerr.ainder of the
net earnings, however great, will be
Gove~ent
~-a.ia. in
larger 1art d.irectly to tb.0
as a franchise tax, the balance being carriea to the surplus
fUDds of the Federal Reserve Banks \dth ultiwate reversion to tbe
ment.
Gov~r~
On May 21, 1920, the cunsolidated statenent of tb.e twelve: Federal
R';serve :Banks shc.wsbills disc cUll ted secured by Goven:m:ent war oblit;atiuns,
$1,446,723,000; all other rediscounts for met:~ber banks, .. $l,053.6o3,0CO;
bills bought in the open market, $417,368,000; ~ng a total of notes
and -bills rediscounted of $2,917, 754,uoo.
.At the sou:e tir:.e the reserve
deposits·of member banks were $1,633,665,000; total r~serves held were
$2,u79,533,v00, and Federal Reserve m•t0s in actuAl circulation arr.ounted
to $},085,202.000.
The ability of the Federal Reserve Baaks to extend so
lar~e
a voluPe
of discount accomroOd.ati.:.ns is due to the use of F~u.ertl Resez:ve.:o.otcs,
and this ~act ought not to be overloo]l:ed.
·xt follows therefore that the
earnings of the Federal Reserve Banks are derived. in
lorg~r
:;;:art from. the
circulation Qf. Federal R,c;serte notes. which P.re obligations of the Govc,rn· ..
went~
The Federal Reserve Board is· authorized in Section
16 of
th~ Fe~eral
R3serve Act ~o requ_ire the Federal Res_erve Bmlk~ to pa.y such rate of interest
as the ·Board may
~s.tablisb
o:o. the· amount of Federal Reserve notes outstanO.ing
less the awotmt of .;old .or gold certificates held by the Federal
Age~ts
.as· ·coll:ate.ral se,curity..
:Res~rve
Cb. Mal 21st, after setting aside the reser:ve
. of 35% ·agains.t net deposit iia)ilities.· the combined statement of the Federal.
Reserve
B~
shows
a reserva against Federal Reserve notes outstandint:S of
464
•
- 4-
47.1%. Even though all excess gold were deposited with the Federal Reserve
Jgents there would be
52.9% of the
outstand~ng note issue, or $1,6)2,071.356~
subject to an interest charge, the.imposition of which would very~ateriall~
reduce tbe apparent earnings of the Federal Reserve :Barlks.
The .Act gives
tbe :Boord discretion in the matter, however, and no charge .has been iLlposed
for the reason that the excess earnings of t:Ue Federal Reserve Banks go to
the Government in any event ..
It seems to me, Senator. that you are disposed in all your discussions
of the money and credit situation to ignore the fundaruental law of supply
and demand.
Let me point out a few statements in your last letter which
appear to be
incon~!.stent.
You state that you are "certainly- opposed to
inflatiod, but you are "strongl7 in favor of the e.xten!lion of business,
increasing production and improving distribution b7 extending credits or. a
stable low interest rate", and you s;q "The expans."n of credit for
s~h
purposes is JUstified, but, of course, the eXpansion of credit beyond the
av~.ilable
fied•.
resources, even for the most 'important of purposes, is not Justi-
You say further that "credits ought to be extended at a low rate to
the extent of the ce.pacit7 of the Reserve Banks f~r productive purposes",
and 701.1 intimate that as the Federal Reserve :Banks pay no interest on de•
posits, a three per cent rate is high
enou~.
While you do not.sa.• in direct
terms that Federal Reserve Banks should stand ·ready to make loano on Liberty
Bonds an4 Victory Notes at a three per cent rate your letter admits of this
constNCtion. although you do say that y:ou do not advocate the Reserve 'B&nks
."lending
be~
their resources at any rate, or on any seeuri ties".
You
say ".Assuredly raising the rates of interest will deflate c.redi ts, even the
X-1937
465
- ?
cr~dits
of the United States, of which I
co~plain,
but I am anxivus the
Federal Reserve Bunrd sbD.ll unly deflate thuse credl.ts that require deflati n and not defl<::te credits uf the Gvverm.::ent and vf legitimate
productiv:; business which uugnt not to be deflated".
You say th~,t "The
<..nly deflatiln of credit JUStified is the deflativn of credits ·3:wrluye<i
in SJ:eculati ve loans <.in
com:ocii ties fur
inv~::stt ent
hoar.1in~ L:f
securities, vn real estate, and on
r.rofi tec•rs" ..
From all tuis I understend your view to be that the Federal Reserve
Banks should letld at a low stable rc::,t~.-' on Go~rc;.;rmuent securities ro:lri. on
other eligU;le paper, barring only "s1·eculative. loons on inv<.:-stoent
securities. on real estate, end on corurrioclities for hoarding by ~rofitaers"
<~ t4~t
in your Judgcent this stable low rote ought to be three }er cent.
You adwit the correctaess of the otservation made in
w:r
letter of
tr.e 3rd instant that •there is a c1orld-wide der::;and for capital, c..nd tbe
der:ald for -bank credit in this country for agricultural. cotuJ:.-ercial aDd
ever
been _known before; investr"'ent
industrial rur-.f.Oses is heavier than has
dewands for new construction, for the maintenanc~ and equifwent of railroads, end for the finaocin 6 of our foreign trade are v0ry great". You
these
ask •Are
JUst dewands to be met 1y denying the credits, or ~re they
to La re:;:;ressed by raising the re.tes".
1 cannot escape the conclusion,
Senator, that were the Federal Reserve B£~ks to establish the stable low
rate 1jroposed by you they would soon reach the limit of their available
r.::sources, beyond which r-oint, you state, the eXJ;·ansion of credit, •even
for th6 most im:portant of I.lurposes, is not JUstified".
It se .:os to rue that
the ado} tion of the·I·Olicy l)roposed by yol;. would result in a wild scramble
466
..
- 6for discount a.ccorr.n,od.ations at the FeO.er"-1 Reserve Banks with e<n enforced
denial of cell c re:di t after the first few days.
The Bo::-.rd is insisting that all br.nks use a discrirainc=tting Jud.gr..;ent
in
r~aking
~iving
loans,
preference to those which are necessary for the
production and distribution of the basic necessities of life 1 such as
clothing, food and fuel. but in the exercise of this discretion it is
~ecessary
to have the restraining influence of a rate.
It is idle to
1,-rea.ch against excessive borrowings and then to invite bo:rrowin6s by an
artificially low rate less than half the•cur:rent open market :rate.
You hav.e had
Et
good deal to say about the low r.o,tes which prevailed
in bygone years, in Ene;landy France and Belgium., and I r'"ight co.ll your at-:
tention also to the low rrtes which prevodled at the Federal ReservG Banks
during the year
1915
when there was no demAnd for loans.
But we are
dealing ·vi th the pressing problems of t.ht: present; ·changing cond.i tivJlS
must be recognized and dealt with as occasion demands.
You no doubt
know, although you have never called attention to the fact, that official
discount rates are high everywhere, even in countries wnere inflation
has been carried to extren::es and which are no longer on a gold basis.
The official rate in Italy is ~%. that of the B~ of France is
that of the Bank of England is
The Federal Reserve
~oa:rd
7%,
6%, 'md
having recently been raised from A%~
does not take the view that discount rates
should be arbitrarily fixed by it; it recognizes the fact that there are
certain basic conditions which
credit throughout
affec~
th(> demand for and the supply of
tb.t,o.~!!'~'mtrJ' a.n·~":.throughout
the world, and that the formal
467
- 7establishment of a discount rate is r-;erely an interpretativn of these con·
di tions.
You cdl attention to tne fact th..'lt the open market rate in Londrm
during the war was 3~ficial bank rate of
7%.
It is now 6-3/4 to 6-7/S per cent, against an of.
You do not q_uestion the wisdom of the canager~~nt
of the bank of Englmd, wh~ch you sa;r is conducted bt tL£ wi~JU t
oerchwt;"'
in the world, although I have ~lw~s h~ an idea that ~any of these merchants are credit merchants, or private bankers, :'Ol.~, they would be called in
tb.is country~
The advances in rates ·in London are evidently· cu~ to natural
causes and there has been no attempt to maintain artificially the low
to w.b.ich you r,~fer.
r~tes
Wl:lr·then is it not Just as reasonable to concede to
the directors of the Federal Reserve Banks and to the Federal Reserve Board
some degree of honestJ of purpose and intelligence in making the advances
in rat~s of which you complain so vigorously?
From yuur
own figures, Senator, it is clearly impossible for the Fed-
eral Reserve Banks to carry at any rate which may be fixed the entire volume
of the Government war obligations, and if a stable low rate of
3% were
to
be established no very great volume of additional loans could be wade, and
instead of there being a stabilization of the bond market there would be
chaoti~
c ondi ti ons ..
The obligations of the Gov,,rnxr.ent of the United States offer the best
o~portunity
~
for invsstment in the world today.
They are being sold now on
oost attractive ~vestment basis, ?.nd us speculative t~ndencies are curbed,
as tb.e g?,ins of the profiteers are
r~uced,
as commodity rrices decline,
and as the business and industr.y of this country settle down to
~
more
nort:ta.l peace basis, .the market value of these securities will rise ver7
f
468
•
X-1937
-8-
r·apidly.
This conclusion is justifieQ. by the experience of the past.
The six per cent 20-year bonds of the Government during the Civil War
sold at a heavy discount (I thinlc they were do1.m at one time to about
80), but two years from the time of th~ir greatest depression they
-ryrernium
reached par and were selling at a ..
of about 25% in
twelve :ve.ars before their maturity.
a
si~ilar
experience with
Lib~rty
1669. only ·
I a:n satisfied that •ve 'vill have
Bonds,
~rovided
there are rigid
-economies in Governmental ·expenditures from this time forth and inflationary tendencies
gene~ally
are held in
cheek~
I do not know of anything further that I can say regarding the .
call money rates in New York.
You continue to insist that the powers
of the aovernment·should be exercised through the
off~ces
of the Federal.
Reserve Board, the Federal Reserve Ban!cs and the Comptroller of the
Currency to rerr.ove .the causes which lead to fluctuating rates there,
and I have already "';))inted out to you that the interest rates in New York
City are regul_ated ,,Y the laws of the St#;\te of New York and that there
is
nothing that. can 1;e done by. -the Federal Reserve Board,· or by the
Federal Reserve Barfr." of Ne111 .York, exce-pt, perhaps, to decline to make
loans on Governrnant bonds to
collateral.
~'anks
which in turn lend on Stock Exchange
This would result in even higher rates.
It is_ interesting to note, ho,Never, that the high rates of which
vou
c~lain
reached their peak in November, 1919,
be~ore
the discount
:rates of the Federal Reserve Banks had :been advanced and that since the
rates
·~ere
advanced to their present level. on January 2Jrd last, call
469
X-1937
~-
•
money rates have ruled, with the exception of one or two temporary
flurries,
~ite
steadily around their present level of from six to
seven per cent.
Very truly yours,
w:-P. G. HARDING,
Governor.
Ron. Robert L. Owen,
United States Senate,
Washington, D. C.
470
FEDERAL RESERVE llOARD
STATEMENT FOR THE PRESS
For release in morning papers,
May 31,1920.
X-1938
May
27,1920.
The following is a review of general
b~siness
and financial concii tions throughout the several
Federal Reserve Districts during the month of
May, as contained in .the forthcoming issue of
the Federal Reserve Bulletin ..
Changes in prices, as well as in both business and credit conditions,
occurring during the month of May, have borne witness to the presence of
disturbing factors, whose importance and persistence are, however,as yet
uncertain..
Local reductions in retail prices have occurred at a. considerable
n'W!iler of points and have at least suggested the advent of a. serious modification of the price level
tlU'o~out
the country.
More careful analysis has
shown that there has been no material alteration in the ~derlying conditions
affecting the situation, there being no decided increase
in
the volume of
production sufficient to create a more normal relationship with consumption,
no substantial change in the volUIJle of credit extended, and no greater disposition to economize and invest than heretofore.
The changes that have
t~n
place cannot, .therefore, be looked upon as ind.ica:ting" a. modification of vnder_.
lying conditions..
They may, however, afford a. basis for changes in
busine~s
relationships that may broaden into more far-reaching alteration of the
essential price struct'W"8..
The continuance of labor difficulties and unrest,
particularly in connection with the railroads, when added to the difficult
si tua.tion produced by c.a.r shortage 8Dd lack of .equipment, haS caused. con- '
siderable interruption to business operations, and the whole
outlook~
such as to bring about a. severe curtailment in the volume of stock and
been
-2-
. X-1938
471
securities transactions and to compel very material lessening in the market
value of Liberty bonds and of other securities of the first grade.
In district No. 1 {:Boston) there is noted a trend toward greater
discrimination and econorey in buying, with pressure for lower prices, but
there is also noted very g_reat difficulty in the way of actual
deflation~
In district No. 2 (New York) price reductions are nott:4 in retail
stores• a considerable accumulation of goods awaiting shipment resulting
from st'rikes~ a growth in the cost of doing business, great reduction in
securities prices, but nevertheless a continued high demand for goods,
and actiV'i ty in trade.
In district No. 3 (Philadelphia) the congestion of freight and
accompanying conditions have combined with a quieter state of things in
the markets and a larger relative public demand for medium and lower priced
goods, to alter in some respects the general drift of development of preceding months ..
In district No. 4 (Cleveland) an orderly movement back toward a more
solid and substantial footing is noted, although not all business men are
agreed on the outlook. · 13\.ls iness oondi tions, however, are said to be fun....
damentally sound.
In district No¥ 5 (Richmond) unrest and uneertainty in comrr.etcial
fields have continued, end agitation against higb. prices bas led to some
curtailment in purchasing.
Collections are good, on the whole, and the
most serious olol.d on the present situation is the traffic outlook.
In district No. 6 (Atlanta) the peak of high prices has been reached
in most lines ani the tendency is downward, while there is
of reduction in stocks of goods.
som:~
indicati'On
Unrest still prevails on accoW'l.t of high
prices~
In district No- 7 (Chicago) decided readJustment in economic conditions
4'72
-3-
X-1938
is anticipated, one factor in which is the growth of inCLications of general
reductions of prices.
The transportation and associated difficulties
noted elsewhere in the country appear to be especially acute in the Chicago
'
, ..
district, while the labor situation shows small improvement4
In district No. 8 (St.Louis) tbe volume of business is enor.mous, the
total in both manufacturing and distribution showing broad gains over ·t;ne
corresponding period lasi year.
believed to be re~hed.
The peak of the upward movement is, however,
Productive conditions have been unfavorable agri-
culturally•
..
•
In district No. 9 (MinneapoU.s) ~rop conditions are promising.
demand for credit is
ver~r
The
strong and the business outlook is satisfactory,
although there is a disposition to be cautious.
In district No. 10 (Kansas City) there was during April the first
recession from the hi€)! tici.e of activity" of the past year or more.
has been a curtailed movement of livestock and grain, resulting
transportation
eon~i tions
producers and shippers.
situation
i~
~rom
11
real
There
bad
aecompanied by severe financial hardships upon
Retail trade has slowed down but the general
regarded as one of enCfouragement, although more or less
Wl-
settled conditions are expected to preyail during readJustment.
In district No. 11 (Dallas) there has been a slowing
l.lp
of agrieultural,
business and financial operations which, hONever. ba.s had some beneficial
effect.
Prices have conttnued upward but the falling off in demand has
affected largely the higher priced articles.
There is recognition of .. " a
healthy spirit of caution among bank borrowers end users of capital•!·.
In distriet No. l2 (San Francisco) the prospects for good crops are
better .than at any time this year, although the season is late.
Car shortage
has hurt lumbering; building has been less active; and retail trade has
47·3
X-1938
fallen off slightly- as compared with a month ago.
The arrival of the time for active effort in connection with crops
has introduced a new factor into the situation in those districts
agriculture is the chief industry.
..
wh~re
In the cotton region the movement of
the 1919 crop has continued to slow up, while farming conditions in the
southwest (district No. l l Dallas) have not been very favorable.
is late and much replanting has been found necessary.
only partly relieved.
Planting
Undue drouth has been
Livestock ranges are in fair to good condition and the
condition of animals is reported good.
In district No. 6 (Atlanta.) pre-
liminary inq,uiry indicates that while planting is not complete there is a
disposition to increase acreage..
delayed.
The progress of the crop has been
greatl~
Actual damage to crops thus far through unfavoraole weather has
been small.
With respect to wheat it is reported by district No •.9(MitmeapoUs)
that spring wheat. acreage will be
12%
less than a year ago, owing to shortage
•
of farm labor, but that there will be increased seeding to flax• barley
acreage
and oats. corn; is expected to be unusually large. Livestock conditions are
improving, but the herds are in poorer condition than at this time a year
ago.
AJ!" il.
·
ln district No. 10 (Kansas City) winter wheat made good progress in
.Abandonment of acreage is not as large as was at first reported ..
In some States of the district, notably Oklahoma and Nevada, condi tiona are
very much better, but it is still true that
taken place.
~
large reduction in acreage has
Corn planting is slow; cotton is also retarded.
In the middle
west (district No. 7 Grdcago) there is a great demand for credit in agricultural districts, the serious shortage of farm labor, as well as cold
weather and large rainfall having hindered farm work.
Spring wheat acreage
has been restricted, but the crop is now doing well.
The outlook is"fairly
promising".
The transportation "tieup" is reported from all districts as
having prevented nonnal movement to the markets as well as for e)..port 1 and a
474
-5correspondingly
l~rger
use of credit.
X-1938
Large stocks of both corn and wheat
are being carried on fannst in elevators and elsewhere.
.Agitation designed
to bring about some relief of the labor shortage may produce better
ditions in the near future.
co~
From district No. 10 (Kansas City) it is
reported that Eansas had 35,500,000 bushels of wheat in storage, as against
11 ,oco.ooo a year ago.
Throughout the district the dela.y in the movement
of products is serious.
The favorable conditions for livestocjc reported from some districts.
notably Dallas, Kansas City and Minneapolis. encourage the belief that the
year's output will be better than was expected.
tions already reported a month ago.
the movement to
Tnis continues tbe eApecta-
In livestocK,
a$
in grain, however,
markets has been delayed.
the
In iron and steel, demand has continued very heavy and steel mills_ are
booked far ahead.
The ore situation is, howeverp not improved.
portation has been slow.
The railroads can handle only a small portion of
the ore which is ready for shipment.
is expected.
with
1,4oo,ooo
Lake trans-
A shortage .of coal in tne northwest
Shipments of ore for fpril were only 231,000 tons, compared
in April, 1919.
In district No. 3 (Philadelphia) the general
iron and steel market has been much quieter lately
The level of prices continues firm.
buying has slackened.
and
Some ndlls have been fortunately
situated in possessing a large supply of raw
IT~terials,
and orders in practi-
cally all lines are booked for a long time ahead, so that YI'Bnufacturers
feel that the present year should be a time of
continue~
prosperity.
This,
however, is largely contingent upon the development of better transportatiQO
and improvement in labor conditions.
In ciistrict No .. 6 (.Atlanta) pig
ir6n
production has increased somewhat over 1919 • but there is a decreaee as
compared with March..
Pig iron prices are advancing.
Steel plants a.re well
. 475
..
X-1938
supplied with orders and working on full time.
Commercial work in fabri-
cating plants is active and prosrects bright.
The unfilled orders of the
United States Steel Corporation at the close of .A:pril were 10,359,747 toris,.
corresponding to an index number of·l97, as compared with 9.892,075 tons
at the close of March, the index number for which month was 188.
Pig iron
production during April decreased to 2.739, 797 tons as compared with
_3,375,907 tons during March, respective index numbers being 118 and 146;
while steel ingot production likewise decreased fram 3,299.049 tons during
~arch to 2,638,305 tons during .April, the index riumbexsbeing 137 and 109
~
respectively.
Coal conditions have been particularly important in connection-with
iron and steel, as with other industries.
The state of things in regard
to coal is now very acute in some districts.
In~istrict No. 2 (New York)
the supply is far below the demand and consumers are bidding· against one
another.
Railroads "'"!are more or less the victiins of systematic sabotage
at their terminals~. The car supply at the mines is only 3o% of normal,
wnile the labor situation there is also unsettled.
The situation as a whole
"is such as to cause considerable concern among conservative coal men" and
transportation is regarded a.s a fundamental factor requiring improvement.
In the middle west (d,istrict No. 4 Cleve land) coal shipments have fallen
off.
For .A:pr11, at lake ports ·they were about one third of what they were
in Jlpril, 1919..
take shippers will pool their coal in oltier to increase
the movement, but this is only. a partial remedy.
on record in the lake trade.
Fllel prices are the highest
Not only does a general shortage of coal exist
now, but a shortage· nex.t winter which ma.y curtail production of iron and
steel at interior furnaces is foreseen.
In ~istrict No. 6 (.Atlanta.) the
coal production is being held down, mines being able to get only an insufficient number of cars.
labor,. however, shows no disquntent and there is small
..
476
X-1938
-7movement of. coal in foreign
trad~,
:placed orders for fuel for the
neJ~.t
P.eilro?.cls
th:.otlgh~ut
the
ois tric t
ha11e
twelve months, "the amount in every
instance being larger and the price higher then ever. before",
Production
of bituminous coal for the country at large during April amounted to
32 ,oo6,ooo tons, as compared with 46,792,000 tons during March, and
32,164,000 tons during March, 1919, the respective index numbers being
86, 126 and 87.
tabor difficulties, although sporadically existing, appear
to be a relatively minor factor in coal production as compared with the
influence of car shortage.
In the southwest many bituminous coal mines
are operating at only about two-thirds of capacity.
is in sight.
No reduction of prices
Demand for petroleum continues very s trongA
In the Kansas
and Oklahoma oil fields April output was about 10,500,000 barrels, or
.
slightly larger than in March, as compared with about 9,000,000 barrels in
April, 1919.
wa~
Production still tends to increase.
about 275,000 barrels a day, as
con~ared
stocks have decreased nearly 500,000 barrels.
•.
The California output
with 276,000 in March.
Stored
Pt the present rate of pro-
_duction and consumption, the stored stocks in California will probably be
eXhausted before the close of 1921.
Metal mining has shown a slight improvement in Colorado, despite some
shortage in labor, while lead and zinc have shown a price reaction on the
Joplin market, although much of the output is still in cars and on the
sidings.
The average price for lead ores is one of the highest for man;yinsufficient
months, but the supply of ore is
to meet demand. Production,
however, is fairly well maintained.
General manut·acturing has continued in substantial volume, although
unsettled conditions of labor and uncertainty on the part of retail buyers
have had a restrictive effect.
In leather and shoes production is reported
by district No. 1 (Boston) to be low and "qu·antities uf merchanuise extremely
_g_
X-1938.
Prices of leathe~· are clown. ·~~ f.,')¢ f'l'":)m ~ peak of $1.75 per foot ..
high".
Dealers stopped buying about the mid.dle of Maj'.
Some manufacturers have had
overtures for cancellations which have been refused.
(Richmond) no recession in :prices is expected.
. Irl district No.
Taru.J.ers in district No. 3
(Philadelphia) are not op~mistic about present conditions.
manufacturing for foreign trade contemplate shutting down,
insufficiency of labor.
Some tanners
There is an
Retailers are restricting their orders for shoes.
Wholesalers and jobbers are overstO<(ked.
cancellatiuns~
Manufacturers are receiving"sorr.e
Increased buying, however, is expected in the near future
and most manufacturers are continuing to operate at capacity.
is for
11
5
The outlock
a steady volume of business but at lower price levels·" ..
Textile production has been ·subject to many disturbing conditions.
..
In the New :Bedford district of Massachusetts, textile strikes of some im-
portance have occurred.
An advance of wages of about
textile centere of New England has been announced.
15%
Higb
continue with very little indication of a reduction.
in the principal
:prices for cotton
Spinners., however,
are cautious, believing that :prices on fine cotton yarn have reached the
top.
~or
!n knit goods demand has practically ceased at the present
time~
Goods
fall delivery have been quoted at twenty to thirty per cent below those
of spring.
Cotton yarn continues at a high level.
11
The outlook in the trade
{for knit goods) is very uncertain" but "many manufacturers hold. to the
belief that orders will soon be placed in great numbers'!. In wool the auction
sales at Boston have resulted in the purchase of only about
3o%
of offerings,
and prices were off about 2rif, from the previous sales of English wool..
of American woo~ are off 10% and on lower grades 10 to
15%.
Prices
There is some
letting Uf in the demand of the :purchasing public for the finer grades of
cloth.
Cancellations of orders in both cotton and wool have not been large
but are already noticeable..
Clothing manufacturers are purchasing but little
4
I
478
.
~9-
X-1938
from the weavers in district No. 3 (Philadelphia).
They also are
rece1 ving numerous cance liations and are obliged to make concessions
to retailers.
.,;.
General wholesale trade, in spite of unsettlement due
to conditions already described, holds up tolerably well •
Building activity continues well sustained in many sections,
although seriously curtailed in certain districts, such as Chicago, by
·. the shortage of materials and by increased prices.
From several
districts it is re::ported that new construction is largely confined to
business building as against construction for .housing
purposes~
The
character of building o::perations has resulted, it is reported, in a
lessened demand for lumbet, whereas in the case of brick, cement, etc.,
as JUSt noted, demand outruns supply.
In certain districts complaint
is made of difficulty in financing construction, and in some of the
larger centers the great increase in rentals has resulted in a large
growth of purchasing of Sjtl'dicates of tenants.
The labor situation during the month has been one of the out\.
standing elements of doubt and difficulty.
In addition to intense
shortage of labor on fanns and at other points of primary production,.
sporadic strikes in many lines of manufacturing, notably textiles,
have continued to indicate unrest.
Wages nave apparently
the advance in prices and cost of living.
the far.ms to the cities is continuing.
falle~
behind
The movement of labor from
Various demands for higner
wages have been taken under advisement for the purpose of brtnging about
compromise adjustments -between employers snci em::ployees.
General
complaint of low e£fic1ency or small out::put per unit of labor continues
to be prevalent.
The difficulty of getting skilled labor in same of the.
more highly developed lines of manufacture is yery considerable.
The financial occurrences of the month have been of first
i~ortance.
479
X-1938
-10-
In ad.di tion to a heavy decline both in volvme and value of securities
in the financial centers, there has been a general tendency.to
revision of interest rates·.
This has applied both to call and time
funds and to rates for commercial paper4
No material change in
rediscount rates at Federal Reserve .Banks has occurred but an effort
to limit
. credit .to essential necessities·has been general.
It has
been sought to promote this control of credit through conferences
among bankers and discussions of the financial situation at meetings
of bankers and financial authorities generally..
On May 18.
aD
important conferehee betweert the Federal Reserve Board and the Federal:
Advisory Council and Class "A" Directors ·of· Res-erve :&nks occurred in
•
Washington, as the outcome of which agreement was reached to make a
more careful scr.utiny of applications for bank credit, with a:·. view
t.o granting those only which might be found to be necessary.
It was further agreed that caution must be exercised and cormJ.tments
must be made only with discretion.
\
'
:\
?ISO
W. P. G. HARDING, GOVIRNOR
IIX OPI'ICIO MllMBilRII
DAVID F. HOUSTON
IICIITAI~H~~~T::.~RIAIURY
FEDERAL RESERVE SOARD
JOHN Iff~ WILLIAMS
,
COIIPTIOLLII OF THI CUIRIMCY
ADDRESS REPL.Y TO
FEDERAL RESERVE BOARD
ALBERT STRAUSS, VIC& GOV&RNOR
ADOLPH c. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLINPAH
W. T. CHAPMAN, SICRITAIY
R. G. EMERSON. AISIITANT SICIITAIY
w. M.IMLAY, FISCAL AGINT
WASHINGTON
Vay 29, 1920.
X-1941
SUBJECT:
Discount Rates.
Dear Sir:
There is nothing in the Federal Reserve Act to sustain the view
that discount rates at· the Federal Reserve ~anks should be fixed with a·
view of enabling member banks to make a profit out of their rediscount
transactions. Under normal cOnditions the rates of a central bank, .in
countries where such institutions have been long established, are higher
than the current open market rates.
The numerous protests which are being received at this office from
Senators and Representatives and from individuals all over the country
against the present discount rates of Federal Reserve ~~s ignore this
fact entirely, and appear to be based upon the assumption that member
banks have no loanable funds except such as they are able to borrow from
Federal Reserve BaDks, that it is necessary for a member bank 1 in making
loens, to charge a rate higher than the discount rate fixed by the.Fed~
eral Reserve Bank and that therefore an increase in the Federal Reserve
~ank rate means a corresponding increase in the rates on all loans made
by member banks and that thus a hardship is forced upon legitimate borrowers who may need money for purposes of production and distribution.
The reserves required of member banks under the Federal Reserve Act
are very much less than those required under the old law before the Federal Reserve Act was placed upon the statute books. There is no longer
any requirement as to the amount of vault cash to be carried by member
banks and their reserve balances with Federal Reserve Banks are less in
:proportion to the dewand and time deposits held by the member ban~s than
the proportion of lawful money to s·uch deposits which the member banks
were formerly required to carr·y in their vaults. The total rediscounts
made by member banks with Federal Reserve Banks are about 12 per cent of
their total loans. It has always been the custom of commercial banks to
take care of the legitimate requirements of their good customers at rates
based partly upon current market conditions and partly upon the value of
the account as determined by the average balance carried. Banks have not
as a rule based their rates to such customers on call money rates or
upon the rates at which paper could be purchased from note brokers.
(
481
- 2-
The Board suggests that you consider the propriety of presenting the
substance of this statement, in your own way, to member banks, letting
them understand that the primary purpose of the advances recently made in
discount rates at Federal Reserve Banks has been to protect the reserves
of the Federal Reserve Banks and to discourage undue expansion of loans
by the member banks. In making this suggestion tht.t you communicate the
substance of this letter to your member banks, the Board a~sumes that you
can do so in a manner not calculated to invite undue pressure on the part
of borrowers upon their local banks to extend. credit accomnodations, and
if you should deem it unwise.to call attention to the facts above stated
at this time, ·you will, of course, ignore the Sbggestion.
Very truly yours,
Governor
•
To Governors of all Federal Reserve Banks
482
W. P. G. HARDING, GOVUNOR
ALBERT STRAUSS, YICI jiOYIRNOR
ADOLPH C. !IlLLER
CHARLES S. HAMLIN
HENRY A. IIOEHLENPAH
DAVID F. HOUSTON
IICI&TAIY OF THI TRIAIURY
. CHAIIIIAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTIOLLII OF THI CURIINCY
W. T. CHAPMAN, SICRITARY
R. G. EIIERSON. AISISTAIIT SICRI.TAIT
-'DDRESS REPLY TO
W, II.IIILAY, FIICAL AIINT
WASHINGTON
FEDERAL RESERVE BOARD
June 2, 1920.
X-1943.
SUBJECT: Report of Salaries of Employees of Federal Reserve
Banks as of July 1, 1920.
Dear Sir:
With reference to previous letters of the Board
requesting that recommendations for changes in salaries of
employees of Federal Reserve Banks be submitted as of January
1 and July 1 each year, it is requested that in submitting
data regarding eUJ.Ployees of your bank a.s of July 1, 1920, you
follow a form similar to that used in making your report for
January 1, 1920, which was in accordance with the for.m outlined
in the Board's letter of December 2, 1919 '(X-1739, "List of
Officers and Employees of Federal Reserve Banks as of January
1, 1920ir).
Very truly yours,
Governor.
LETTER TO CHAIRMEN OF J,LL BANKS EXCEPT NEW YORK.
483
DAVID F. HOUSTON
IICIITARY Of THI TII.UUaY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAIIS
COIIPTROLLER OF THI CURRIHCY
W. P. G. HARDING, GoVERNOR
ALBERT STRAUSS, VICI GOVIINOR
ADOLPH C. IIILLER
CHARLES S. HAll LIN
HENRY A. IIOEHLINPAH
W. T. CHAPMAN, SICRITAIY
R. G. EMERSON, AISIITANT SICRITAIT
ADDRESS REPL.Y TO
FE:IJE:RAI- RESERVE: BOARIJ
W.II.IIILAY, FISCAL AGINT
WASHINGTON
June
SUBJECT!
7, 1920.
X-1944
Comments by the l!'ec1eral Re::serve Board on recomHendaticms
made ·by C'r)Vem~rs cf I'ed.eral I1:3ssr.i"c tanks at tJ:s~.i: \;G;::'et"ence
with the Federal Rese4Ve Board, April 7th-10th, 1920.
Dear Sir:
The Federal Reserve Board has examined the record of votes taken
by t.he Governors of the Fedsral Reserve Banks on the several topics submitted for consideration at the conference held in Washington, April 7thlOth, 1920.
made.
With a few exceptions the Board concurs in the recommendations
The cases where the Board is not prepared. to accept the recommenda-
tions, or which woi.lld seem to call for special c omrr.ent, are discus sed below;
TOPIC III.
Sub-section (2), (c). Should the Ba.nkS not publish a non-par
list instead of a par· list?
Inasmuch as some of the Districts have not pro~ressed as rapidly
as others in securing pe.r roints, it. Wa$ the opinion of the conference
that the publication of a pa.r list should be conti:.1.ued f<:.Jr the prase:::J.t.
Nevertheless, because of the banks of doubtfu.l standing, it was racommended that a non-par list should also be pu.olished of banks in those
States wherein practically all banks are on a par b&sis.
The completion of the par clearing program in the 6th Federal
Reserve District has been delayed because of the appeal which has been
taken from the decision of the United Statas District
Co~t.
RefereLce is
made to the Board's letter to the Chairman of the House Comni ~tee on :Bar.lking
and Currency, requesting that the Comndttee, after hearing, report an
amendment to Se::tion 13 of the Federal Reserve .Act which would either
484
- 2 (l) authorize all banks, both mem"t>ers
an~.
I'\rm.->rJerr:hers, to
at the rate of 10¢ :per $100 in remitting for
che~?-ks
c:b~.r.f:e
exchange
draV\n upon them) or
(2) require, in terms admitting of no dispute e.s to their mean:lng, all banks
to remit to Federal Reserve Banks at :;?ar, letting the e.meno.mer.1t be selfexecuting by imposing such conditions or l'€nal ties as wonld insv.re compliance
. with it.
The Board has decided, for the time being, not to undertake to
publish a non-par list on its own account, but has no objection to the
:publicati~
of such a list by any Federal Reserve Bank which desires to do
so~
TOPIC III.
Sub-section (3), Board 1s Inter-district Time .Schedule.
(a)
Should it be published in the Bulletin?
It was recommended that the Federal Reserve Board's Interdistrict Schedule should not be published in the Bulletin.
(b)
Correction of errors.
Recommended that inter-district time schedule should be :promptly
examined by each Federal Reserve Bank and if discrepancies occur they
should be corrected at once and the corrections noted in the ne~t
schedule.
The Board does not concur in this recommendation, and the Board's
inter-district time schedule will be published in the July issue of the
Federal Reserve
Bullet~n.
For four years or more the Transit Managers of the Federal Reserve
Banks have endeavored to agree among themselves as to a harmonious interdistrict time schedule.
Finally, last summer, the Transit Managers in con-
ference admitted their inability to agree upon such a time schedule and
requested the Federal Reserve Board to undertake the task.
The :present
schedule was prepared at the office of the Federal Reserve Board. largely
from data furnished by the Federal Reserve Banks, and, after exhaustive
correspondence, a few remaining discrepancies were removed by careful
485
- 3analysis of railroad time tables, and finally on February 24, 1920, copies
of the finished schedule were sent to the Feder·a1 Reserve Banks for examination.and correction.
During the intervening period of three months all
corrections offered by the Federal Reserve Benks have been noted upon the
schedule and that schedule, as it will appear in the July Bulletin, is
I
believed to be as nearly accurate as possible.
published whenever the
upon the
~utual
transi~
req4est of the
The schedule will be
re~
time between two points shall be changed
two Federal Reserve Banks concerned.
TOPIC III.
Sub-section (5), Routing of checks through intermediary banking
centers instead of sending direct to drawee bank.
(a)
Could not the wires be used to expedite such clearings?
It was voted that it is the recommendation of the Governors
that any circuitous routing of checks, which delays presentation
should be discontinued within. a reasonable time. Chicago voting no.
The
Boa~
believes that in certain cases the routing of checks
through intennediary banking centers might be of distinct advantage to the
System in that it would leave undisturbed the relations between the banks
in local centers and their country correspondents.
The Board feels that
the Federal Reserve Banks should avoid any action tending to f oroe a country
bank to remove its account from its own correspondent to the city of a
Federal Reserve Bank.
It is evident that loss of time in routing checks
through intermediary banking centers is generally immaterial, and especially
is this true if the wires are used in effecting or reporting settlement.
The Board holds that the practice as contemplated in this topic
sho~ld
f
not
be "discontinued within a reasonable time", but that all Federal Reserve
Banks might well give thought to the matter of establishing sOme system
by which checks upon country banks l'I'.ay be sent, upon request, by the
486
X-1944
4Federal. Reserve Bank to the COU;ltr.'y bank's near-by correspondent.
BANKERS' ACCEPTANCES.
TOPIC V.
Sub-section (1), Are bankers& acceptaxr;es being crea~ed for
·purposes not. contemplated by the Act and are accepting banks abusing
the privilege 'l
MOved and carried that it is the sen~e of the conference that
abuses and. m:l.suse of tr..e bankers r ac~optance crecli t w.:~y be abated
most efficiently and without limi ti;ng t.he proper fu:rther de-;elo;pment of this system of finro1c.i:o.::; "b;! a. rev:l.s:ion of r.e:;v.L~til:l:!1S 9
Series 1917, .ani that the Board be requested to consider S 1~h
revision at an early date, appointing a comnittee of individuals
from the Federal Reserve Banks to consult and assist if the Board
desires such assistance; that it is important to induce the most
specific identification possible of the underlying transaction
on the bill.
The Board is now at work upon an analysis of the whole subJect
of bankers
1
acceptances with a view of reyising and amending the Regulations,
Series of 1917.
SuPPLEMENTARY LIST:
TOPIC l.
Inter-Federal Reserve Bank Pension Fund.
Report to the Board from Mr. Kenzel.
Moved and carried that this conference petition the Federal
Re.serve Board to give prompt conside:;.~ation to this matter ar..d
r·ecommends that the e.Xpe1.1d.iture be approved arld d1v.1c.ed equally
among the Federal l~esene :Banks.
The Board has approved the report of Mr. Kenze 1, dated Feb ruar-.r
9,
1920, except as to Section III, and will authorize an expeni:l.ture of $20,000
to be pro-rated among the Federal Reserve Banks for the compensation and
expenses of' the proposeQ. committee.
The Board is not :prepared, however, to
approve the fee of $10,000, suggested ·for special counsel for the co:unittee.
TOPIC 4.
Cashing Goven1ment warrants ani checks drawn on the Treasurer
of the United States for disbursing officers.
Moved and carried that, if or when Federal Reserve B~~s ani
are reqp.ired to cash Gcvernroent checka ar.'l..i we.rrents, tb~
procedure of the .Bar..ks shou.ld be tr..at of corumer.cia.l "ha:1k.s d.eal.ing
with their own customers, and they should be gove1-neci. 1~1. t!.w1.1';"
actions by sound business principles and mathods, or that 1.;bey
condl.:.Ct the whole business for e.ccount and :.. isk of the Gcw,,:<t;:;nent,
as its agents a."ld without recourse to the l!,ede•·a.l Rese1."'le :Banks
except for negliger.ce; ~"'ld that the ]'ed.ers.l P.eserve Boaxtl. be
requested to take the matter up with the Treaoury Department to
that end.
Brat:~.ches
4
487
X-1944
- 5Treasury officials take the view that where Federal Reserve
Banks cash Government checks or warrants they do so upon their own
responsibility and not as fiscal agents of the Treasur,y.
Department ha.s, however, limited the
cas~li:ug
The Treasury
of Gc.rv&n"'.i!OE:nt c!wcks and
warrants by Federal Reserve Banks to disbursing officers of
tt"le
Government
under Pa. 29 of Department Circular No. 176, dated December
31~
1919t and
in accordance with these regulations, Federal Reserve BankS and Branches
will not be expected to cash Government checks and warrants presented direct
to the Bank by the general public.
Disbursing officers, of course, must
be satisfactorily identified before their checks are cashed, and the
Treasurer will, upon special request, advise Federal Reserve Banks and
their .Branches by wire the balance to the credit of such officers.
Federal
Reserve Banks, of course, should take such precautions as are generally
t~n
by the conmercial banks in cashing Government checks and warrants.
TOPIC 11.
Charges for wire transfers for the account of individuals, etc.
Moved and carried by vote of siX to five. It is recommended
that the facilities for making telegraphic transfer at par be not
open to banks that are known to charge for this service, for it
very much weakens the position of the Federal Reserve Banks in
enforcing a par collection system inasmuch as a b~~ would have
just as much right to make a charge for remitting its own draft
in payment f.or its checks as it would have in making an exchange
charge on a transfer which has cost it nothing.
The Board desires to note its concurrence in the action of the
· conference upon the above topic.
TOPIC
14. Modification of Board's ruling giving preference in
routing checks to member banks over non-members •
............
Discussion developed that while some of the banks are adhering
to the rule set forth by the regulation referred to, others are
using their own discretion in this matter.
488
X-1944
- 6The Board is willing to modify its former ruling as expressed
in Regulation J, sub-section (5), Series of
1917, tu the effect that the
Federal Reserve Banks give preference to member
ba~ks
as collection agents
for handling checks on non-member ba.n.Ks which have not become clearing
members.
When the non-mem"ber ba..'"lk has voluntarily ag;reed to remit at par,
it should, if it so des ires, receive from the Federal Reserve Bank
drawn upon itself.
checks
This opinion of the Board does not lessen the obligation
of the Federal Reserve Bonk to consider the matter of prudence and safety,
nor is it expected that Federal Reserve Banks will so route their items
in cases where valid reasons exist for not sending a non-member bank its
own items.
Very truly yours,
G
o v e r n o r.
Enclosure: (Mimeo. X-1906)
LETTER TO GOVERNORS OF ALL FEDERAL RESERVE
•
BM~ •
489
April 17,1920.
X-1906
Subject:
Topics discussed and recommendations made by
Governors of Fed.eral Reserve Ba1ll:s in conference
in Washington, April 7-10, 1920~
The following are the recomnendations of the Governors of the
Federal Reserve Banks ori the to~ics discussed .at the conference of
Governors held in Washington April 7-10, 1920. For convenience of
reference, the numb~r of the page of the stenograuhic re~ort on
which the recom~endation is given is shown.
TO?IC I.
CREDIT CONTROL.
(1)
Effect of recent rate increases unon liquidation.
The Governors differed chiefly as to the degree in which
liquidation has be;,n brought about by increases in discO'..mt
rates. Sweral Gov3rnors re·.Jorted r.. o liquid.at.ion directly
tract:Jable to th8t cc-mse. All a.;rr3·Jd that the increasA of
rates cou~led with th3 morai su;sion em:ploy.Jd ::,y aU Federal
Reserve B~rZcs had acted as a r3s traint u:o0n exuans).on. which
undoubtedly would havl9 be -m great l:rl'.t for th5 s res:traint.
G:;n:;ral o-pinion we,s that the increases of rates had not yet
had time .to becOJm fully ·>ffective.
(:p::1.ge 387)
-
( 2)
·-
II
In view of nending amendrrents to thG FodeC'al Reserv·e Act
authorizing nrogressive rates for large borr01vings what
should b,~ the basis of the normal line?
In the O'Dinion of the Governors, the :,asis of determination
so-call~d normal line of discount should be the amount
of the reserve de'')Osits -nlus the cani tal investment in the
Federal Reserve Bank by each mer11b~r bant, that being the contribution of each member barik to the loaning nower of the
System.
(page 389)
of the
(3)
_ShOUld basis of normal line be uniform in all districts, and
at all seasons of th8 ''ear?
490
-2-
X-1906
It was the on1n1on that the so-called normal line should
be determined by each F·eserve ~anlc ~'hile it was' agreed
that this basis should be the same in all districts it was
unanimously agreed that the rate if an1 when a'nlied should
be left entirely to each F. aservB l' ari!.-:, both w:i.th respect
to the manner of ,:::(nTllicq,tio!l and sea-;cns ~Y1. w~i~h :i..t shonld
be applied.
(~~ge 389)
(4)
il,'hat scales should be used in applying the "!'regressive rate?
No recorn.-l'endation. It was the consensus of ooinion that
the amendment to the Act shoulcl be studied by all thG f. eserve
"Banks before att~mpting to apply this method of credit control
ur to fix a scale for the :progressive rate. (page 389)
(5) ~·mat ste:os should be taken to control the absorption in
the System of an excessive amount of :oaper made by borr01.,..ers
who rio a nationwide l:lusiness?
Voted that this is a matter for each bank to deal with.
but that each banl-:- shc-Jld fB:;l free to a'J?PlY to the Federal
Reserve Board for data concerning any paper of borr~ers doing
a nationwide business, which may be found in the portfolio of
the other Federal Reserve Baru:s. (page 287)
(6) Is it pra~ticable to .tiscriminate effectivc3ly against nonessential business in favor of essential business?
Voted no.
(page 290)
{7) !!'hat methods does your bank empJ.oy to info... ·m ;,,"ld s ·.tisfy
itself of the uses made by member banl:s of credit facilities
obtained from their Federal Reserve Ba.rik - more :9artic·ularly
the uses made for speculative pur:poses as con"'",l'8St0d with
those for productive pul'T.loses?
Each Governor stated the methods used by his bank in the
presence .-of the Federal Reserve Boarrl. (uages 191-226)
491.
-3-
X-1906
(7-a)
v.rhat steps have you tal;·en to inform yourselves as
to abuse of credit in hoarding comrnodities? (A written
statem9nt in resnonse to this question is desired.)
Written statezr.er.ts receiverl from all banks except
Kansas City.
(page 291)
II. ADVISABILITY OF INVOJJvnm SYS~~EM IN LESS PTJEL!.CI~'Y w:: '_11::1 A VIEW TO
BEACHING MORE RE1miLY A "PR/\CE 'l'H'!E .J~ND NOR111AL BASIS.
(1)
Suggestions as to what activities nroduce undesirable
publicity and should therefore be modified or eliminated.
While i t was deplored that there should be loose and
irresponsible newspaper comxent unon rate policy, the Governors
are not ro~are of ~y activities which produce undesirable publicity.
(page 292)
III. CLEARING AND COLLECTION SYSTEM.
(1)
In view of the fact that no system involving deferred
availability is strictly a par system, should. not in all discussions
anti publications the term "Par Collection System" he changed to
nFederal Reserve Clearing nnd Collection System" or to some name
more exactly descriptive than the one now in use?
Action taken by vote of seven to five that there should
he no change in na.."'le 11Par Collection System". (-page 311)
(2)
Assuming that the nrovisions of the Federal Reserve Act
with reference t.o exchan~e charg~s will remain unchange,l:
(a) What 1vil1 1Je the most effective method of continuing
the cam:oaign for ::_:>ar points?
Recom•rended th2.t every effort be exercised to place all
remaining non-:par ba.•1ks on a par basis as quickly as nossible.
Non-par banks should be anproached first thrOUiih '!)ersonal solicitation,
second through corres-oondence, and if these methods are not successful
every non-par bank in a given st>1te should be notified that on a
certain date the Federal Reserve Ban1:;-s will handle checl:·s u:non it
for merrib"lr banks u-pon a :9ar basis. .All else failing, the Federal
Reserve Baru~s should nroceed to collect throurrh exnress comnanies,
~ost offices. or ~riv~te agencies.
(page 458) -
492
-4-
X-1906
("h) l"hat will be the best '!)rocedure to me<>t; and :orevent
the recurrence of the ch.'l-rges of coercion made by nonmemt:>er hanks?
It was agree,., that the charges generally .::1re u:nfounued
and that anything tending t01.'178.r~. inti'-.r;idation or coercion
c=m btS avoided. tr...rou~h th'3 selection of nro-per solicitors
and through exercisi;}g care in correspondence. (page 459)
(c)
Should the Banlrs nouv publish a non-nar list instead of
a -por list?
Inasmuch as ·some of the districts h<:J.ve not progres·seli
rapidly as others in securing par :ooints, it was the
0'1Jinion of the conference thq,t the publication of a par
list should be continued for the present. Neverth;less,
bece.use of the banl:s of doubtful standing, it 1Va.s recomrr.ended
that a non...-par list should also be publisherl of banlrs in
those states wherein 'Ol'actic!'\lly all banks are on a peir basis.
(page 460)
~s
(3)
Board 1 s Inter-·iistrict Time Schedule.
Should it be ptblished in the Bulletin?
(a)
It was recomrr:ended that the Fa•ier0.l Reserve Board 1 s
Inter-district Scherlule should not be published in the
Bullet in. (:page 460)
(b)
Correction of errors.
Recom'I'ended that inter-district time schedule shoulcl
he promptly examined by each Federal Reserve Bank E...nJ. if
diserenancies occur th~y should be corrected at once and
the corrections noted in the next schedule. (nage L~60)
{c)
Relation to intra-district schedules,
Recorr~ended that each Feder81 Reserve Bank should correct
its schedule to its o•m member banks ,'l.s soon as :nossible.. (~age 461)
X-1906
493
... 5-
(4) Direct routing of collectior. items by member banks in
one Federal Reserve District to member ani non-member banks
in another Federal Reserve llistrict, for ~vire transfer of
~roceeds to sending b~rs Federal Raserve Bunk.
Recommended th:1t this :practjce be liscont.inued wtil
the mechanism therefor c.:m be wo1·ked out. A cv:rucl.tte:~ W3.S
a~'pointed to stud.y the matter as follo''~S:
Mr. Str·:1ter of
Cleveland, Chairman, Mr. HendricLs of N·3W York, and Mr.
of Richmond.
( p.9.,:l;S 321)
(a) Are the facilities afforded being abused by nonmember banks?
Question discussed. but no definite action
t~en.
( 5)
Routinr: of checlcs through intermediary 1-:lanking centers
insteai of sending direct to drawee b~.
(a)
COUld not the wires be used to expedite such clearings?
It •vas voted th3.t it is the recom'7lendation of the
Governors that any circuitous routing of checl~s, which J.elays
nresentati on, should be iiscontinued within a reasonabl"l time.
Chic"'go voting no.
("Oar;e Jjl)
IV.
SCHEDULE OF CHARGES ALLOWED TO BE MADE BY MK,\iffiER BANKS AGAINST THEIR
CUSTO~>fERS uPON OUT-OF-TOilll~ CHECKS t'HICH ARE CLEARED THROUGH THE FEDER~L.
RESERVE SYSTEM.
(1)
Report of -progress made in :nreparation of this schedule.
(2)
Is the plan sw;<rested by the Boarl, Circular letter X-1S44,
February 26, 1920, fair to the member batiks?
Unanimou.sly voted. that the Board be :re queste·l to continue to
a.efer action on this matter for the :OI'es~mt. (p':lge 334)
494:
-6. V.
X-1906
BANKERS' ACCE"PTANCES:
{1)
Are bankers' acceptances being created for nurnoses
not contemplated by the Act and are accepting banks abusing
the privilege?
Moved and carried that it is the sense of the conference
that abuses and misuse of the b~ers' acceptance credit m~
be abated most effi·ciently ani without limiting the proper
further development of this system of firtanc~ng by a revision
of regulations, Series 1917, and that the Board be requested to
consider such revision at an early date. a:opointing a committee
of individuals from the Federal Reserve B~s to consult and
assist if the Board desires such assistance; that it is irnoortant
to induce the most specific identification possible of the
underlying transaction on the bill. (~age 403)
(2) Should an irr.roort or exnort bill be~r specific details of
the tr~saction upon its face, including the name of the Shi~,
as is the custom in certain foreign c~tties?
Moved and carri~d. that accepting banks granting iil'J!jOrt or
ex-)ort credits without documents at the time of accentance should
require that when the shipments are made and doc'Uffients issued,
they should be delivered to the acce~tor, who should handle them
from thst time on realizing their "Oroce"lris in due course and <?.'Pnlying
same to the retir~ment of the credit. ( -pages 124,125,126 and--404)
(3) Warehouse acceptances - how to ):)revent their abuse without
destroying their usefulness?
Moved and carried that 'banl~s granting warehouse secured
credit ShOUld limit their lines as to names, commodities, ~nd
length of creed t term to camt,:ercial and seasonul usance, and
in rio case should speculation in commodities be :perroitted on
b~ers' acc~tance credit, and that the acc~tor should remain
secured during the life of the credit; that domestic transportation credits should be limited to dr~~ings· of the seller of goods
shipped for the credit term granted by the seller: the -purpose
of this credit being to substitute a b~ter's name for the
merchant's name as drawe~. (page 404)
495
..
-7-
X-1906
(4)
Should open market purchases of barikers 1 acceptances
by the Federal Reserve Banl~s be curtailed at this time
1d th a 'C'iew to taking more of such acceptances for rediscount?
Moved and carried that the onen m;~rket -purchases of
the Federal Reserve Banlrs should not be curtailed at this
time.
(page 409)
(5)
Trade Accentences:
(a) ~at is being done to encoura~e their use?
Much has be :m done in the Clevel:md district to encour3.ge
the use of trade accept:mces, but little has been accomplished
in the other districts, due chiefly to the fe gling of most
of the Governors that the tra4e acceptance is much abused. (nage 411)
(b) Requirements, credit conditions, etc, incident to trade
acceptances offered for rediscount?
Moved and carriad to adopt the views of Mr. Kenzel as
appearing in the stenographic report, pages 411 and 412.
VI.
RATES.
Moved and carried that there be no change in the !Jresent
rate on comrr.ercial paper.
(page 293)
(1)
Should preferential rates on Government secured -o:xper
be discontinued?
Moved and carried that there should be no change at.
present in the rate on paper secured by Liberty Bonds and Victory
Notes. Voted ei~Zht to four. Chicago on record as op1Josing
motion. (page 163)
(2)
Shall there be a Q.ifferential rate in favor of, or
preference shown, naper secured by recei -ots of 1varehouses operated
under the Federal 1)11arehouse Act or complying '"1i th the terms
of that Act in essential particulars?
Cons :msn3 of opinion was there should be no nreference in
rates uoon pa-oer secured by receipts of any special class of
warehouse. (page 167)
496
X-1906
-8-
VII.
BUILDING OPERATIONS.
Moved and carried that the Secretary convev to Mr. Trovbridge the advisability of mal-:-ing comparisons between plans of
the various banl~s to th3 end of facilitatin"S a comparison of
features of each for the henefH of all. 1 )Jage 340)
(1)
Present situation?
Each Governor outlined the ~resent situation with reference
to his "banl• quarters. (,.,ages 33-5-343)
VIII.
DESIRABILITY OF SEBRING FURTHER AMENDMENTS TO THE ACT.
(1) Federal Reserve Board's attitude as to payment of interest
u,.,on reserve balances,
Conference unanimously agreed ~~ith view of Board in matter
.of interest on reserve ~alances as eXpressed in circular letter
X-1844. (:page 343)
.
. (2) Suggestion that amendment be sought allowing the use of
the 10% suDer-surrylus fund in the payment of extra dividends*
Discussed.
IX.
Ot)inions varied.
No action.
(nage
352)
ORGANIZATION DETAILS,
(1) H01111 many of the banks have organized Mem'l:Jer Ban1.'"s Relations
Departments?
Four, New York, Chicago, r.1eveland 1 and Minneapolis. (:oage
352)
(2) Have the Boards of Directors nlaced these departments under
the authority of the Govqrnor or the Federal Reserve Agent, or
both?
In N'?"" York such department under control of the Federal
Reserve A~ent. Governor Casq on record as e~ressing his entire
satisfaction with this arrang3mcmt. In the other cities there
is joint jurisdiction; all matters referring to st~te b~
mem"lcrshi:p being under thG jurisdiction of Agent and all other
matters relating to m,3mber banks being under the jurisdiction of
Governor. Consensus of ()'r)inion that M:'lmb•':lr Banl~s Relations
Departl'Y1ent should be under joint jurisdiction of Governor md A~ent
under conditions that exist in Chicago, Clev~land, and Minnea,.,olis.
hage 353)
/ln."7
'.:1:~
·9-
X-1906
(3) What stens have heen taken, or are in c mterrmlation,
looking to the s.qtisfactory adjustm~nt of '111 dif~crences
,,vhich arise bet,veen the Federal Reserve B:::nlr and th-3 men~her
b~~s?
-
•
Adjustment of differences which ::1rise are handled by
Member Bam:·s Relations Departrr,ent s where such departments
exis~In other Federal Reserve B~ks, these matters are
atten~ed to by the executive officers. c~~ge 361)
(4) Is there .my systemmtic phm for using clerks, ternpOr3.rily
idle, in other th.m their own departm:mts?
All banks shift idle cler~s to busy departments. (~age
361)
(5) Advisability of making efforts to secure th::l use of checks
of standard size by tho Federal Reser;e ~~d member baru:s •
..
Moved and carriGd that it is not sdvisable to try to bring
about methods of standardizin? chac~ forms. (p~ge 367)
X.
RESEBVE SUPPLY OF CURRENCY
(1) In ~.riew of yresent insufficient sun,.Jlies of new currency,
is it dcsirahle that 211 Federal Reservq Baru<s and hranches
adopt a uniform policy of nayin? out new -md of r·3d:J.;ming unfit
currency?
Mov:?d and carri2d thc?,t a Com~ itteJ hG annointed to ;;o into
the whol~ l'P",tter of currency supuly '.IDd us-,. Co~;rDi tte,, a"l')T)ointed
re'lJresent:=-tive of N:~w York • Boston, and Chicago •vi th Mr. Emerson
a1 so a m"!mber. ( pagJ 474)
XI.
TREJ\SUBY POLICY OF ISSUING CEBTIFIC.~TES OF I1iD.EBTEDNESS TO COV.ER
OVERDB)FTS.
Stricken from the list.
498
)
-10SUPPLET/JENT_,.~BY
TOPIC 1:
X-1906
LIST OF TO"PICS
Inter-Federal Reserve Bmli~ Pension Fund.
Report to the Board from "trr. Kenzel.
Moved and carried t!:.J.t this conference uetition
the Federal Reserve Board to givB prompt consideration
to this matter and recom:rends that the expenditure
be a~proved and divided equally among the Federal
Reserve Banks. (page 374)
TO.JIC 2:
Can market for Liberty Bonds be strengthened by
educatiQnal ~ropaganda among nrospective investors in
the several districts?
This question answered in the affirmative. (nage 470)
TO~IC
3:
Should the Federal Reserve Bam's assist in broadening
the open discount market by offering to purchase banl.:ers 1
accentances for the account of member lJanks7
Moved and cartied that·. it is desirable that the
Federal Reserve Banks. assist in broadening the market
by offering to.mal:e purchas"3s. (page 410)
TOPIC 4:
Cashing Governm,mt warranh and chec1-s dra'I!Jll on the
Tre"'surer of the United States for disbursing officers.
Moved and carriod that, if or when Federal Reserve
and Brmches are required to cash Governmcmt checks
and warrants, the nr ocedur= of the Banl:-s should be that
of comrflercial banl<s dealing •vi th th~ir own custor:cers,
and.they should lJe governed in their actions by sound
business principles and methods, or that they conduct
the whole business for account and risk of th3 GovernmBnt,
as its agents ':lnd without recourse to th,3 Federal Reserve
Barne-s except for negligence: and that the Federal Reserve
Board be requ3sted to take the matter up with the Treasury
Department to that 2nd. (page 500)
Banl~s
Condensed financial statement form anoroved and recorr~ended
by Cl e 3.ring. Hous·3 Section of the Ame~ican Bankers
fl ssocis. tion.
iV!oved and carried that, whil8 the conference .s:pproves
the statement form recommended by the American Bankers
Association and de~ms it hi~hly desirable to secure as
wide a. us-:3 of this form as possibl~, it is not practicable
to grant preferential rates to the na.,er of borr0"11ers
using the~e forms. (page 170)
499
• •
'
.
X-1906.
-11:_
TOPIC 6:
Method of mal::ing collection of checks dravvn on weak
banks in whole par states.
Di-.:>posed of by action on Topic III, Sub-section 2,
paragra-oh (c)
(oage 460)
TOPIC 7.
·The propriety of Federal Reserve Banks s'3rtding collection
items direct to member and·non-rnember barurs 'vith instructions to remit to the nearest Federal Reserve Bank for
the credit of th~ s~nding Federal Reserve Barik.
Dis~osed of by action on Topic
TOPIC B.
Dis-:r~osition
1 ~i
TOPIC
9.
III, Sub-section 4.(page 321)
of old records, reuorts of t:!xaminations, etc.
thdra'IA.'Il from 't>rogram.
(page 481)
Clearing member accounts.
Wi thdra'l\lll frorr. ~rogr'affi.
(page 483)
TOPIC 10. Member banl::- promissory notes secured by borrow·ed
Government securities.
Wi thdra:m from program.
(page 484)
TOPIC 11. Charges for 1vire transfers for the account of individuals, etc.
Moved and carried by vote of six to five. It is
recomn;ended that the facilities for mal:ing telegra"Ohic transfer
at par be not op~n to ">anks that are lmown to charge for this
seririce ,for it very much weakens the J?OSi tion of the Federal
Reserve Banl::s in enforcing a par collection system ,inasmuch
as a banl~ would hav~ just as much right to make a charge
for remitting its own draft in payment for its checks as it
'.~~rould have in making an exchang·3 charga on a transfer which
has cost it nothing. (page 487)
TOPIC 12.
TOPIC
13.
Redemption of National
Barib~
Notes.
Correction of total Federal Reserve rtotes outstanding.
Tonics 12 and 13 referred to corr~itte~ a~~ointed under
action unon Touic X, Sub-section 1, with ins.tructions to
re,,ort to a future conference. (pag~ 477)
•.
500
••
-12TO"PIC 14.
X-1906
Modification of Board's ruline g;iving preference in
routing checks to member 'balll<s over non-members.
('9ag~s 487-494)
Discussion developed that while some of the banks
exe adhering to the rule s~t forth by the regulation
refarre1 to, others are using th3ir 01'11!1 discretion in
this matter.
T0°IC 15.
Effect on· closine- of bo<t:s 'hy ne•111 Plan of settlement
through Gold Settlement Fu'ld.
Mr. Emerson exJlla.ined situation.
TOnic
16.
No action t~ren.
(pars 473)
'Personn.;l welfare.
Committee a'O"Oointed with instructions to re·;~ort back
to conference 'it next meeting. Parsonnol of COmmittee
Mr. Hopf df Naw York 1 \1r. Cramer of Chica~o, and Mr ..
Davis of Cl·'3veland. (pagOJ 494)
TOPIC 17.
Should Federal Reserve Banl':'s act under instructions
from departments other than the Secr~tary of the Tre<.,sury.
Informal discussion,
TOPIC 18.
No Action.
(pag~ 501)
Advisability of Federal Reserve Ba~~s a'hsorbing float
on currency shi!)lli·~n ts to member bari: s.
Tonic ~assed ~~ith underst~~ding that Governors
would give consideration to the matter. (page 501)
ACTION TMCEN ON
~MTTERS
NOT ON :=ROGR;'.M
The matter of whether the gold no~1de,)osited "'lith the Banl7 of
England should be left there or brou1.2-ht back was left to the discretion
of the Feder31 Reserve Baril:~ of N:Jw Yotk. (1:)age 428)
MOV"ed and carried that the Federal Reserve Banl:s should :9articipate
rnta'l,ly in the arrangement which the Federal Reserve Bank of N11w York
has with the Be.nl: of Jaj).m. (pag'3 437)
Moved and carried that it is the s~nse of this me,ting that the
stabilization of the oryen bill market is incumbent unon the System
~s a whole and that a committee be a~ointed to develop an equitable
basis for making such su..,.,,ort effecti,re. Committee armointed, Governor
Fancher, Governor ~orss, and Mr. KenMl. (nage 455)
.•
Advisability of inducing th~ Treasury Department to shi~ to the
Federal Reserve Bam:s for completion and delivery the incomplete note
issues of the member National banks. Referred to comdttee mentioned
in Tonic X, Sub-section 1. (page 484)
5<11
W. P. G. HARDING, GOYIRNOI
'EX OPJ'ICJO MEMBII:JUI
ALBERT STRAUSS, VICI GOVIIROI
ADOLPH C. IIILLER
CHARLES S. HAll LIN
HENRY A. IIOEHLENPAH
DAVID F. HOUSTON
I&CIIT.UY OP THI TREASURY
CHAIRMAN
t
FEDERAL RESERVE BOARD
JOHN SKILTON WILLIAMS
W. T. CHAPIIAN, SICRITAIY
R. G, EIIERSON,AISISTANT SICRITARY
W.JI, IIILAY, FISCAL AGENT
COIIPTIOLLIB OF THI CURIINCY
"DDIU!II8 REPL.Y TO
WASHINGTON
FE.DERAL RESERVE BOARD
June 7,1920
X-1946
SubJect:
Code J\.cknowledgmen t of
Board's Circular Telegrams.
Dear Sir!In order to insvre the receipt by all
Federal Reserve Banks of the Board's circular
telegrams, and for the pm:pose of providing a
simple method of ackl"lowledtsing such telagrams,
the Board, commencing with hme 15, will plece
the code wor.c1. 'rRPNS and a s~rial rE>fere"lce number
at the beginning of all circular telegrams, as
shown below:
CODE WORD
TRJINS . . • . . . . Kindly acknowledge receipt of
this telegr.an No. (Reference mm.;ber).
(Body of telegram)
It i& requested that
acknowled~ent
be
made in the form. given below:
COD:E: WORD
TWILL •.•••.• This will acKnowledge receipt of yuur
telegram No. (Reference r>,1.:rrpbex.:) dated
(Date).
Very truly yours,
502
W, P, G. !lARDING, GOYIRNOI
ALBERT STRAUSS, YICI GOVUNOI
ADOLPH C• .au.!~
lEX OPPICIO MIIMSII:IUI
DAVID F. HOUSTON
CHARLES S:-JriiLIN
S&CIITARY OP THE TRI.UURY
CHAIRMAN
'
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLER OF THI CURIINCT
ADDRESS REPLY TO
WASI:UNGTON
FEDERAL RESERVE BOARD
June 8,1920.
•"i'·
>_.
Subject:
Campaign for New Par Points.
Dear Sir:There is enclosed herewith a copy of
report prepared from·replies received from all
Federal Reserve Banks in respcnse to our telegeam
of May 29, asking for information regarding the
progress of the campaign being conducted for the
establishment of new par points ..
In addition, there is also enclosed a
special report showing nonmember banks not on the
par list distributed by States according to Federal
Reserve Districts.
·very truly yours,
· Enclosures.
.Assistant Secretary.-
To Chairmen ·of all F.R. Banks.
HENRY A.IIOEHLENPAH
W. T. CHAPII/dl, SECRETARY
R. G. EMERSON, ~~NT SICRITARY
W, II.IIILAY, PliCAL AGINT
X-1947 a
NON MEMBER BANKS NOT ON Bl-R LIST MAY 29,· 1920.
Distributed according to States and Federal Reserve Districts.
---- -- --- - - N.C,
- --- --Boston
New York
Phila.del:ohi a
Cleveland
Richmond
444
- - - -S.C.
Chicago
St.Louis
Minnea-polis
Kansas City
Dallas
SanFrancisco
--- -
June 8,1920,
- -
Miss.
.Ala.
Fla •
Ga.
104
193
124
514
-- - - - -- - - - -- - -
-- -- - - - - - - - - - - -- - -Tote,l
Tenn.
La.
- ---- - - - - ---- - -- - --
328
Atlanta
Total
!
-----
772
92
131
173
444
328
277
1,158
173
---193
-124
-- - - --514
- - -92
131
-.-
- - - - - - - --
2,103
X-1947 b
CAMPAIGN FOR NEW PAR POINTS, May 31,192'0.
Reports of Federal
~
Federal
Reserve
;Nat;'l.
.
!
: Ba:lk s
:Bank
:rrember :banks on
:in dist.:rr.embers:banks :par list
Bark
Reserve·~anks.
--- - --- ------ - ---:No.-. of----banks:No.
- - - - of- -:No.- -of- non- - - Total number
:State :Total :Non-meni>er:Ratio of
: n on.;.member :added to par:banks :member bank.s :non-mertber
:banks on
:list dtn·ing !added :not. on par :banks in
:district.
:par list to :May~ 1920
:to par :list
:list
:total non.!member banks
:since
:in district :
:1/1/19
- - - -----
- - - -%- - - - - - 100
Boston
254
New York
641
132
773
320
100
Philadel-phia
647
40
687
422
100
123
422
Cleveland
751
107
858 1,078
100
430
1,078
.. 547
52
599
763
49.7
Atlanta
366
71
437
441
27.6
Chicago
1,051
335
1,386 4,236
St.Louis
477
82
559 2, 517
Minnea-oo1i"s
860
101
Kansas City
1,003
Richmond
Da"!l.le.s
.. ~ SapFrancisco
- - ---
Total·
1*
5
489
772
1,535
191
1,158
1. 599
1,886
..
1,525
173
4,2)6
2,690
2,914
100
1,745
2,914
56
1,059 3.390
100
1,209
3.390
649
147
796 1,265
100
l,o63
1,265
6o4
179
783 1,025
100
961
lOJ,
101
------- - - - - - -- - - - - - - - - - - - - - - - - - - - - - 105
8,767
1.338 9.330 18,628
89.9
2,103
* Decrease
320
100
9}.6
...
7.992
June 8,1920
..
1,028..,. __
_____
20,731
--
505'.
' HARDING, GOVIRNOR
W. P. G.
ALBERT STRAUSS, VIC I liiOYIRNOR
ADOLPH C.·IIILLER
CHARLES S. HAIILIN
HENRY A. IIOEHLENPAH
lEX OPPICIO MKMSI:Illl
w.:r
DAVID F. HOUSTON
SICBITARY OP THI TREASURY
CHAIRMAN
. '
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THI CURRINCY
111. T. CHAPMAN, SICRITARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
WASHINGTON
W. II.IIILAY, FIICAL A81NT
June 11,1920 ..
X-1950
CONFIDENTIAL- NOT FOR PUBLICATION*
Subject:
Proposed Interest Charge on Uncovered
Portion of Federal. Reserve Notes outstanding.
Dear Sir:The Federal Reserve Board is giving serious consideration
to the advisability of imposing an interest charge upon the uncovered
portion of Federal Reserve notes outstanding. Section 16 of the
Federal Reserve Act provides in part, as follows:
"The board shall have the right, acting through the Federal
reserve agent, to grant in whole or in part. or to reject entirely the application of any Federal reserve bank for Federal
reserve notes; but to the extent that such apylicatlon may be
granted the Federal Reserve Board shall, through its local
Federal reserve agent, supply Federal reserve notes to the banks
so a})l>lying, and such b~· shall be charged with the amount of
notes issued to it and shall pay such rate of interest as may
be established by the Federal Reserve Board on only that amount
of such notes which equals the total amount of its outstanding
Federal reserve notes less the amount of gold or gold certificates held by the Federal reserve agent as collateral security."
The Board calls attention to the large volume of Federal
Reserve notes now in circulation and to the rate of increase in the
amount ou.tstanding during the l'ast ~welve months. Do the cc:r:merce and
business of the c'ountry really require so large an issue?
It is not assurred, of course, that the imposition of an interest
charge against Feder-al Reeerve notes would or should have the effect of
preventing the expansion of the total volume outstanding whenever there
is an actual need for more currency. So far there have been no restraints, penal ties, or cos·i;s imposed upon Federal Reserve note circulation, but the Board is of the opinion that it would be well to test
the efficacy of some of the restrictive provisions of the Act.
506
......
X-1950
A further consideration which has influenced the Board in
its view is the faet that the large earnings of the Federal Reserve
Banks are subjecting them to constant criticism and are a source of
more or less dissatisfaction to me~ber banks, whose participation in
the eernings is limited to six :per cent. cumulative dividends on the
stock held by them. While it is true that the net earnings in excess
of dividend re~irements go to the Government of the United States,
either directly in the form of a franchise tax or by additions to the
surplus funds of the reserve banks which may reach the Government
ultimately by reversion, the fact is generally overlooked that the
large earnings of the banks are due to a great extent to their use of
Federal Reserve notes.
The Board is inclined to the view,. therefore, that it would
be advisable to iJJn:)ose an interest charge on the uncovered portion of
Federal Reserve notes outstanding, as provided 1n Section 16. This
charge would constitute an item of expense to the Federal R~serve Banks
and would effect a correS'pondirtg reduction in their net earnings.
Attention is called to the fact that while a specific tax is
levied under the la.w upon Federal Reserve Bank notes, there is no .1M
levied against Federal Reserve notes, the Federal Reserve Board being
authorized to fix the rate of ipt~rest which the B.snks shall pay on
the amount of their Federal Reserve notes outstanding not covered bJ
gold or gold certificates deposited with the Federal ,Reserve Agents.
It appear!$ therefore that the interest ebaJ;"ge should be
fixed with reference to ~rrent discount rates and that the Federal
Reserve note issue should be no longer a. source of appreciable profit
to the Federal Reserve Bai'lks. While reserving the right to take earlier
action, the Board does not now contemplate making the proposed interest
charge effective d.uring the :present calendar year, and it is proposed
therefore to establish the charge as of January l, 1921 •. ~is will
.
afford ample opportunity for a thorough understanding of the matter and
woa.ld make the rule effective a.t a. time when there is normally a seasonal
reduction in the volume of currency outstanding, whereas earlier action
would make the change at a period when there is a strong seasonal demand
far currency.
·
The Board re~ests that without giving JlUblicity to this letter
you bring it up fol" discussion at an early meeting of your directors or
Executive Committee and transmit the substance of such suggestions or
objections as IDa7 be made.
Very truly yours.
Governor.
To Chairmen
of
all F.:R~ Bantis.
Copy to Governars.
507
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VIC I GOVERNOR
ADOLPH C. Ill LLER
CHARLES S. HAll LIN
HENRY A. MOEHLENPAH
EX OFPICIO MllMBitM
;
DAVID F. HOUSTON
...
SECRETARY O..THE TRIEASURY
C~AIAMA~
'
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
.
COMPTROLLER OF THE CURRINC:Y
W. T. CHAPMAH, SECRETARY
R. G. EMERSON,ASSISTANT SECRit:ARY
ADDRESS REPLY TO
W,JI,IIILAY, FliCAL AaiNT
WASHINGTON
FEDERAL RESERVE BOARD
June 12,1920.
X-1951
Subject: . Treasury Policy ~ith Regard To
Paying Out $2.50 Gold Pieces.
Dea.r Sir:-
For the information of the officers of your Bank
the following is quoted from a letter addressed by the
Secretary of the Treasury to the Treas~er of the United
States under date of June 10,1920:
,
ftFrom this date it will be. the policy of the
Treasury not to make any payments of gold quarter eagles •
.As you know, gold has not been coined in the denomination of $2.50 for several years past, and the ·total
supply in Treasury offices is exceedingly limi·ted.
It is, furthermore, the policy of the Treasury not
to resume the coinage of $2.50 gold coins in view of
the fact· that the demand for them is based on sentiment
rather than necessity or utility, and on acco1tnt of
the relatively large amount of abrasion involved in
their circulatiop and the tendency of gold coins in
this denomination to disapnear through circulation.
The Treasury's policy will be to refuse to meke payments
of $2.50 gold pieces whether designed for export or for
internal use. All $2.50 gold pieceG .now held. in Tt·easury
officest or which may from tirr~ to tirre be deposited in
Treasury offices, will be held as gold reserve and will
not be paid out except upon specific instructions from
the Secretary of the Treasury.
Please proceed in accordance with the policy outlined
above and without referring demands for $2.50 gold pieces
to my office. Please also transmit, as promp·tly as possibler
to each of the Assistant Treasurers of the United States
this statement of .the Treasury 1 s policy and instruct them
to proceed in accordance therewith."
Very truly yours.
Governor ..
To Chairmen of all F.R· :Banks ..
508
W. P, G. HARDING, GOVIINOR
ALBERT STRAUSS, YICI GOURNO.'
ADOLPH C, IIILLil
CHARLES s, HAll LIN
HENRY A, MOEHLENPAH
Ex OPPICIO Ma:MBIUUI
DAVID F. HOUSTON
SICR&t,yY OP THE TAlAIUIY
-. -IRIIAN
~
FEDERAL RESERVE BOARD
JOHN SKELT!IJI WILLIAMS
COIIPTROLLIR OF THE CURaiNCY
W. T, CHAPMAN, SICRITARY
a. G. EMERSON, AISIITANT SICRITA.T
ADDRESS REPLY TO
FEDERAL RESERVJ; .01-RD
W, Jl, IMLAY, ,IIC.U. AGINT
WASHINGTON
X-1952
June 16, 1920,
SUBJECT:
ASSESSMENT FOR GENERAL EXIENSES OF THE l!:EDERAL RESERVE
BOARD, JULY 1 TO DECEMBER 31, 1920.
Dear Sir:· There is inclosed herewith for your information and attention
cop,y ot a resolution adopted by the Federal Reserve Board at a meeting
held on June 15~ 1920, levying an assess~ent upon the several Federal
Reserve Banks of an amount equal to seven hundredths of one per cent
. (.0007) of the total paid-in capital stock and surplus of such banks to
defray the estimated general expenses of the Federal Reserve Board from
July 1 to December 31, 1920. This assessment does not include the cost
of engraving and printing Federal Reserve note·s.
There is also inclosed a statement showing the basis upon which
the assessment is levied.
~
..
,.
The assessment should be computed.upon your paid-in capital and
surplus as of close of business June 20, 1920, that is, upon capital paidin as shown by books on that date, and surplus after adjustment in- accordance with circular letter ST-1207, dated June 9, 1920.
I have the honor to request that you bring this matter to the
early attention of the Board of Dtrectors of your bank, and deposit onehalf of the amount of your assessment in the General Account, Treas~rer,
U. s., on your books on July 1, 1920, and one-half on September 1, 1920,
·in each tnstance issuing a C/D on Form 1, National Banks, for credit of
"Salaries and Expenses, l!'ederal Reserve Board, Special l!und," assessment
for general expenses.
Kindly send duplicate C/D to the Federal Reserve Board, together
With a statement of your capital and surplus used as a basis for the
assessment.
Very truly yours,
Fiscal Agent.
.
509
X-l952a .
.:.RE_S0=1-UT.:;;.;I:;..;O;.;;;No...=LEV;:;.;..;;Y;.;I::.:.NG;;;....;:A:;;S.;;;SE;;;.;S:;,;;:S!~!
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 semi-annually upon the Federal Reserve Banks in prcpo1·tion ·~o
their capital stock and surplus an assessment suffici~nt
to ~Y its estimated expenses, including the salarietJ qf
its members, assistants, attorneys, experts, and employees
for the half year succeeding the levying of such assessment, together with any deficit carried forward from the
preceding half year; and
\Jhereas, it appears frOm estimates submitted and
considered that it is necessary that a fUnd equal to seven
hundredths of one per cent (.0007) of the total paid-in
capital stock and surplus of the Fede.ca.l Reserve Banks be
created for the purpose hereinbefore described, exclusive
of the cost of engraving and printing vf Federal Reserve
notes; Now, therefore,
Be it resolved, That pursuant to the authority
vested in it by law, the Federal Reserve Board hexeby
levies an assessment unon the several Federal Reserve
Banks of an amount equal to seven hundredths of one per
cent (.0007) of the total paid-in capital and surplus of
such banks as of June 30, 1920, and the Fiscal Agent of
the Board is hereby authorized to collect from said banks
such assessment and execute. in the name of the Board receipts for payments made. Such assessment will be collected in two installments of one-half each; the first installment to be paid on July l, 1920. and the second half on
September l, 1920.
(.
510
X-1952b
ESTIMATE FOR JULY, l§l20, ASSESSMENT.
Average monthly encumbrance for period
January 1, 1920 to June 30, 1920 • • • • • • • • •$.54,047
Estimate for June, 1920 • • • • • • • • • • • • • • • 57,822
Estimated monthly requirements, July to
December, 1920 • • • • • • • • • • • • • • • • • • 68,530
Estimated monthly increase over June, 1920 •• 10,708
Estimated requirements, July t.o
December, 1920, inclusive • • • • • • • • • •
Estimated unencumbered balance, June ~. 1920 •
.411,180
.230,644
Amount to be raised by assessment • • • • • •]80,536
Estimated paid-in capital and surplus of
Federal Reserve Banks, as of June 30, 1920. • .::.59 'ioco .• ooo
An assessment of seven hundredths of
one per cent (.0007) will ~oduce • •
• •• ~181,300
I have the honor to recommend, therefore, that
an assessment of seven hundredths of one
per cent . ( ·.0007} be levied.
w.
11. Imlay
Fiscal Agent.
511
'
X-l952c
STATEMENT OF EXPENDITURES AND COI.1!\1IT11ENTS AS
A B.a.SIS O:b" ESTUiiATE ..
Estimated
monthly requirements,
Monthly average ~stimate
July 1 to Dec.
Jan.l to June ~. :for
31, 1920.
1920
June,l920.
Eersonal services:
41>7.300.00 ~7,500.00
Board and its clerks •••••••••••••••••••• ~6,859.14
Secretary• s 6ffice...... •• • • • • • • • • • .. • • • 5,378.14
5~555.00
5,800.00
Counsel's Office ......................... 2·,675.55
2,745.00
2,850.00
Statistician •••••••••.•••••••••••••••••• 1,770.00
1,770,01
1,800.00
Fiscal Agent ••••••• ~.....................
470.00
470.00
470.00
Division Of Examination ••••••••••••••••• 6,904.72
6,973.33
7,500.00
Division of Reports & Statistics •••••••• 4,620.03
4,834.67
5,300.00
Division of Gold Settlement.............
987.59
1,036.41
1,100.00
Division of Analysis & Research ••••••••• 2,744.01
2,816.05
3,000.00.
Division Of Architecture................
888.89
888.89
900.00
Division of Issue ••••••••••••••••••••••• 5,949.05
5,819.67
6,500.00
Messengers..............................
925.00
948.34
1,000.00
Charwomen...............................
96.00
96.00
100.00
Railway Loan Advisory Conmittee... •• • •• •
220.03
511.67
600.00
Contingent •••••••••••••••••••••••••••••• ____________________________~l~0~0~0~-~0~0~
41,764 .. 04 45,420.00
40,488.15
Non- .Fer sonal :
Transportation & Subsistence •••••••••••• 3,281.84
3,500.00
800.00
Communication Service: {Including Tel753.72
ephone, Telegraph, & lbstage
39 500 ..(")
4,ouo.oo
.Irinting and. binding, etc ••••••••••••••• 4,548~78
50.00
35.CO
Repairs •••••••••••••••••••••••••••••••••
38.93
35.;::0
40~00
Electricity (Light and lOwer) •••••••••••
35.20
20.00
Steam (heat) •••••••••••.•••••.••••••••••
24.60
~16.00
100.00
Miscellaneous- unclassified ••••••••••••
99.15
200.00
Equipment (Rental} ••••••••••••••••••••••
186.80
193.55
Supplies (Including stationery and office)
and periodicals •••••••••••••••••••• 1,062.86
1,050.00 . 1,100.00
Equipment:
Furniture & Office....................
537.28
300.00
600.00
Books ••••••••••••••••••••••• ~·········
93.64
50.00
100.00
Rent....................................
921.66
1,014.56
1,000.00
Vault construction tests •••••••••••••••• 1,968.03
5,904.09 10,500.00
Contingencies •••.••••••••••••••••••••.••.__~v~~----~------~------~1~0~00~·~0~0~
13,559.24
16,058.88 23,110.00
Grand Total •••••••••••••••••••.••••••••• ~54,047.39
+57,822.92 ~68,530.00
Total expenditures and commitments
January 1, to June 30, 1920 ••••••••••••••••••••••••••••••••••• 324 9000.00
Total estimate for next six months ••••••••••••••••••••••••••••••• 411,180.00
512
W, P, G. HARDING, GOVIRHOI
ALBIRT STRAUSS, VICI GOVlRHOft
J11X OI'PICIO MI!MS&II8
ADOLPH C. IIILLIR
DAVID P.Hq_~roN
CHARLES B. HAll LIN
HENRY A.IIOEHLINPAH
SICRIIT'XliY~HI TRI.UURY
CHAIR II AN
'
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
111. T.CHAPIIAN, SICRITARY
R. G. EIIERSON.AISIITANT SICRITAIY
COIIPTIOLLIR OF THI CURRENCY
·-
ADDRESS REPLY TO
Subject:
w.JI,JIILAY, FIScAL AIIHT
WASHINGTON
FEDERAl,. RESERVE BOARD
June 15,1920.
Editorial Frcrn "The Dallas Morning News."
Dear Sir:The Federal Reserve :Soard requests that you bring to
the attention of your member banks the following editorial which
appeared in "The Dallas Morning News", of Friday, June llth,l920.
"THE ADVANCING COST OF :SANK CREDIT"
"It seems to have become the policy of banks to
advance their discount rates commensurately with the
advances made in the rediscount rates of the Federal
Reserve :Sanks. Some of them ·seem not to have been
content to limit their advances to the advances zmde by
the Federal Reserve :Sanks, but to have made the action
of the Federal Reserve :Sariks a pretext to widen the
previously existing difference between the discount and
the rediscount rates. We use the word pretext· for the
reason that the action of a Federal Reserve Barik in
increasing its rediicount rates does not necessarily
warrant merd:>er banks in making any increase, whatever.
The idea that it does, which idea seems to govern the
policy of member banks, betrays a most surprising misconception of the purposes and functions of the Federal
Reserve System.
"It was not the purpose in creating the Federal
Reserve System to enable the member banks to make a.
~rofit out of their rediscount operations.
Nor was
it the purpose even to enlarge their opportunities for
increasing their earnings in any way. The salient pur•
pose was to create and maintain a reservoir of credit
for use in times of stress. Whenever rediscount rates
are advanced, therefore, it is done chiefly to husband
the resources of the Federal Reserve Bariks. Under
nor~ conditions, the rates of a central bank, in
countries which have long had them, are higher than the
open market rates, so that bariks which rediscount lose
instead of gain by the operation; and -properly so, since
the effect is to restrict the use of credit, which is the
purpose of the central barik in advancing its rediscount
rates. It is obvious that 'if member banks are to make a
profit on their rediscount operations they will be under
no inducement to contract the volwr.e of cred1 t, and hence
~·
'
X-1953
5:13
X-1953
-2-
•
.....
.-
the purpose of the Federal Reserve Bank in advancing its
rediscount rates will be sorcewhat balked, if not defeated.
"That there is a species of ptofitesring in advancing
discount rates on no other warrant than the fact that the
Feder.al Reserve Barks have adV'anced their rediscount rates
will became apparent on a moment 1 s reflection. For it is
but a small percentage - about 12 per cent, w~· believe - of
the loans made by member banks are rediscOtmted at the Federal
Reserve Banks. In other words, about 88 percent of their
loans are made from their own funds, so that when they advance
their discount rates comrr:enaura.tely with an advance made in
the rediscount rates of the Federal Reserve Bariks they,are merely
increasing their profits an nearly 90 percent of the loans they
make at the advanced rates. Thus what they in reality do is
to :put a 'replacement value' on their funds, but without, however. always replacing them; so that they have even less excuse
than the dealers in sugar for adopting that thrifty rule of
pricing. If the member banks had all of their loanable f'llllds
outstanding, or even any very large percentage of them, it
might be both just and expedient to make additional loans at
the rates of the Federal Reserve Banks, or even at rates higher
. than those of the Federal Reserve Bar:iks. l3u t when they make
their rates advance with those of the Federal Reserve Banks
without being under the necessity of rediscounting the loans
made at those advanced rates, it is evident that they are
merely exploiting an opportunity which arises from an u:nheal thful condition of finance and industry. There is the less excuse
for doing this in the fact that the Federal Reserve .Act has
freed for use a great deal of the money which the old law required them to keep in their vaults. Since
greater percentage of their funds is thus made available for lending, they
can make their rates lower and still n~e their discount
o~rations as profitable as they were before the institution
of the Federal Reserve System.
"The action of the banks throughout the country in advan.cing their discount rates has engendered no little dissatisfaction,
and that dissatisfaction vents itself in complaints against the
Federal Reserve Barks. That this is an injustice to those insti tu.tions is made clear by what has been said."
a
Very truly yours,
Governor.
To Chairznen of all F.F. Banks.
514'
IIX OPPIClO MII:MIIII:II8
DAVID F. HOUSTON
SIC8KTAIIY or THI TRUSIRY
.CHAIRMAN
FEDERAL RESERVE BOARD
JOHN $.KILTON WILLIAMS
COMnROLUR OP THI CURRINCY
W, T. CHAPIJAN, SICRITAIY
ADDRIIISII REPJ..Y TO
I, G. EIIERSON,AIIIftAHY SICIIYAIY
W, IJ, JIII,AY, f'llc:AL AII~T
WASHINGTON
FEDERAL RESERVE BOARD
June
~bject:
W, P, f, RAIDING, Govi£1HOI
ALBERT STRAUSS, YICI G0¥11101
ADOLPH C. IIILLII
CHABLIS S. HAIILIR
HENRY A,IJOIHLINPAH
15,1920.
X-1954
·Value of Security for Collateral
·Notes Rediscounted.
Dear Sir:The Governor of a Federal Reserve Bank has advised
the Board that his Bank has discounted for another Federal
Reserve Bank several million dollars worth of collateral
notes and that figuring the value of the collateral at the
present market price, there is an average deficiency in the
collateral of about 6. 7 percent. He states that these notes
and collateral are held for the account of the Federal Reserve
Agent of his Bank and that Federal Reserve notes are issued
against them for the full amount of the notes. He asks whether
in these circumstances his Bank should accept collateral from
other Federal Reserve Banks at more than the market price.
The Board has considered this question and desires
that all Federal Reserve Banks be informed that they are expected
in their discount transactions for other Federal Reserve Banks
to require that all collateral notes discounted be fully secured,
that is, that the market price of the collateral be equal to the
face of the notes. The Board would suggest, however, that Federal
Reserve Banks which hold collateral notes discounted for other
Federal Reserve Banks give the borrowing banks a reasonable time,
say until July lst, to make good any deficiency in collateral.
Very truly yours,
Governor.
To Chairmen of all F .R. Banks.
515
W. P. G. HARDING, GOVIRNOR
ALBERT STRAUSS, YICI GOVIBHOR
ADOLPH C.IIILLEB
CHARLES S. HAMLIN
·HENRY A. II&EHi!!!NPAH
11X OI"PICIO MIII!IBI:II.
.DAVID F. HOUSTOII
JECBITARY OF THI TREASURY
CIAIRIIAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTliOLUR GP THI CURRINCT
ADDRESS REPL.Y TO
FEDE;RAI- RESER.VE BOARD
W. T. CHAPIIAN, SECRETARY
R. G. EMERSON, AISIITANT SICIITAIY
W. II.IIILAY, FISCAL AGENT
WASHINGTON
X-1955
June 18, 1920.
SUBJECT:
EXPENSE MAIN LINE LEASED WIRE SYSTEM ..
Dear Sir:Referring to Board's letter X-1923, of May 12, 1920. and
to my telegram of June 17, in regard to the above matter, you will
find enclosed herewith two mimeograph statements, X-1955& and X-1955B,
covering in detail operlitions during the month of May.
If you have not already done so, ~ill you please cover the
amount due from your bank by a C/D, Form 1, National Banks, for credit
of "Salaries and Expenses, Federal Reserve Board, Special ~un<l," Expense Main Line Leased \":ire System, and mail duplicate to the i'edera.l
Reserve Board.
Very truly you.rs,
Fi seal Agent.
For
Chai~
of all F. R. Banks except Chicago.
516
c: ·.•
X-1955 a
REPORT SHOWING CLASSIFICATION AND NUMBER OF
WORDS TRANEMITTED OVER MAIN LINE OF THE
LEASED WIRE SYSTEM FOR THE MONTH OF
..
MAY, 1920
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta.
Chicago
St .. touis
Minneapolis
Kansas City
Dallas
SanFra.ncisco
Total F~R. Banks
Federal Reserve Board
Grand Total
BANK BUSINESS FISCAL AGENCY
. 449b0
184661
39626
83986
75162
6131
13052
. 36~7
8446
1735
766o
2749
3937
3597
8109
3l321
133643
103518
37367
88297
83712
3028
1318,1
111;;5
1104062
239002 .
1343c64
73216
128]11
201587-
'JAR FINANCE
43
1334
80
25
71
107
41
129
22
26
47
1925
3Il8
5303
TOTAL
51134
199o47
43273
92494
76922
99052
136499
107496
41093
96428
86766
148999
1179203
310151
~541954
Bank business is
' '
Fiscal Agent Business is
War Finance Business is
Bank Business 1,3431 064 words, or 86.95%
Fiscal Agcy "
20l,g81 "
" 13~05
Total
lJ 544,
51 "
100
·<86.65%
13.01
.34
100 ~
X-1955
EXPENSE
M!.lli._ LINE
tEASED ';fiRE SYSTEM
May -·
Name of Bank
Wire Rental
Operators'
Salaries
Operators'
Overtime
$
2.00
17.00
1.50
Total
Salary Expense
l92G
~ords sent by bar~s
on bank business.
per-cent
Number
of total
44,.960
164,661
39.. 626
83,968
75.. 162
4.07
16.73
3-59
7<>61
6.el
91,321
8.27
8.00
133 .. 643
12.10
25.00
103.,518
37,367
85.,297
83 .. 712
9·38
3·38
137.. !527
12.48
3)+2
Expense
Credit
s.oo
7·58
?ire Rental~ Main Line
(#)Cut-in, Richmond - ·7ash. Line
s~~ries of Operators
Amount received from ~ar
Finance Corporation covering
Business Feb. and March
$34} .. 60
April
320.15
663.15
$13 .. 780.05
( •) Includ~s salaries paid to Operators
·Washington Office;
$1,869.98
b
518
Yt, P, 9. HARDING, 90VIRNOR
Ex 0PI'ICIO MIIMBIIIUI
ALBERT STRAUII, VJCI GOVIRNOI
ADOLPH c. IIIUIR
C:HAILII 1. HAIILIN
lJENRY A. IIOEHLENPAH
DAVID F. HOUSTON
SICIITARY OF THI TREASURY
CHAIR II AN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THI CURIINC:Y
Jt. G •.~!,EliSOR. AISIITANT SICRITARY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
Yt, J{; 1110;(, FII~AL A!ll~t
WASHINGTON
. June 18 , 1920 ..
·Subject·:
W. T. CHAPMAN. SICUTARY
Expense of Gold Shipments.
X-1956
Dear Sir:Referring to mimeograph letter Xl861 of March 17, 1920, in
regard to express and insurance bills covering shipments of gold coin
from the Denver Mint to the Subtreasury at San Francisco, I beg to advise that the Board is nov; in receipt of ·bills covering further shipments to May 1, 1920, aggregating $56,250 on account of expressage,
and $4,000 on account of insurance~ or a total of $60,250.00.
Based upon paid-in capital and surplus the pOrtion of this
amount chargeable to each Federal Reserve Bank is as follows:
Boston • • • • • • • • • •
New York •
• •••••
Philadelphia •
• •
Cleveland. •
• • • • •
Richmond • • • • • • • .. •
Atlanta. •
• •
Chicago • • • • • • • • •
St. Louis .. • • • • •
.Minneapolis. • • • • •
Kansas City • •
Dallas • • • • • • • •
San Francisco- • • • • • •
~4,426.63
19.,677.96
4,823.35
5,404.86
2, 996.86
2,373.52
7,643.89
2,230.55
1, 925.94:
2,939.78
1 , 884. 97
3, 921.69
?lease deposit the amount chargeable to your bank in the
General account, Treasurer, U. s., on your books·, and issue C/D on
form 1, National Banks. for credit of "Salaries and Expenses, Federal
Reserve Board, Special Fund," Expense of Gold Shipnents, sending
duplicate C/D to the Federal Reserve Board.
By direction of the Federal Reserve Board.
Very truly yours,
Fi seal Agent •
Tt
Chai.r~1u.n tf
all J:o'. H. Bunks.
519
FEDERAL RESERVE BOARD .
WASHINGTON
June 19,1920
X-1959
CONFIRMATION
Morss - Boston
Case - New York
Norris -· Philadelphia
Fancher - Cleveland
Seay - Richmond
~ellborn - Atlanta
McDougal - Chicago
Biggs - St.Louis
Young - Minneapolis
Miller - Kansas City
Van Zandt - Dallas
Calkins - SanFrancisco
Trans. ·No. 6.
In accordance with previous instructions, rege.rdl.Dg~,division
expense Leased ~ire Service, you are authorized to charge 13.05%
of your total expense Main Line service for month of May against
.Fiscal Agency Department.
EMERSON.
520
.
X-1961
The Federal Reserve Bgard has rastorad confidence in the wool
·,_industry by suggesting a plan for financing the ·wool growers during the
present
emerg~ncy
.
By advance arrangement with the Federal Reserve Board 1
. nool growers, bankers in the wool producing sections and eastern wool
markets~
wool dealers 1 warehouse men1
m~nufactur~~- 1
and othersinterasted
in the "Nool trade 1 held an all day session with the Federal Reserve Board
yesterday.
•f
The condition of the wool market caused by the recent cessation
purchases of ran #ool was laid before the Bodtd 1 and a full discussion
was had of various plans for financing the industry until normal buying
operations are resumed.
Unlike most other cropsi wool is marketed in the
spring and early summer1 and the marketing conditions prevailing during
thepast month have threatened groat losses to iVOol gro,iers which might be
disastrous.
Such a conditioh1 if it
developed~
might cause serious sacri-
fice of sheep on farm and range 1 and result in reduced suppliefl of .¥ool and
mutton in future years.
tion on
th~
It was _clearly shown that there was no disposi-
part of anyone to maintain artificial pricee 1 but simply to
··-{
make arrangements by which the temporary interruption of the wool market
wo~ld
be removed and nor.mal marketing conditions restored*
The plan of action finally arrived at Nas adopted as a more
simple and satisfactory way of dealing Nith the situation than the Cotton
Loan Plan of 191'+ >*hich had been suggested.
At the termination of a
conference between the Board and a sub-committee consisting of bankers
thoroughly familiar with the entire situation, the Board authorized the
following statement:
521
.. .
-
2
X-1961
-
,,
"A wool gro?Jer may ship his wool to one of the usual points
of distribution., obtaining from t~e railroad a bill of lading
for the shipment; the gro?Jer may then dran a d~aft against his
bank, for such an amount as may be agreed upon by'the grower and
the bank., secured by the bill of lading.
a~thorizes any
The Federal Reserve Act
member bank to accept a draft secured in this manner
at the time of acceptance, provided that the draft matures iri not
more than six months from the time of acceptance.
After accept~ce
such a draft bearing the endorsement of a member bank is eligible
for rediscount or purchase by a Federal Reserve Bank1 provided.,
that it has a matu!ity of not more than three months from the date
of
redisco~t,
It
or purchase.
.~suggested
that the Federal Reserve Board comn1unicate
with the Federal Reserve Banks.,
pointir~
out that shipments of
wool to. points of distribution may properly be financed by acceptances in the above manner .. "
~ile
the statement refers tonly to acceptances based on
bills of lading, Governor Harding referred those present to the provisions of Section
13 of the Federal Reserve Act, as to eligibility
for discount of paper secured by warehouse receipts.
At a further meoting held late. last night of all interasts
concerned~
it was tha unanimous opinion that the plan suggested above
was practical and feasible, and that no extraordinary difficulty jvould
.
be encountered in the necessary financing to carry along the present
522
- 3 -
season's ••ocl clip until a normal buying mar kat· should reassert itself, which it was tha firm belief C?f all ·vVould be ;vithin a v-ery
reasonable length of time.
All members of the Conference have
departed for their homes feeling that the difficultjes surrounding
the marketing of the present season's wool crop have been satisfactorlly disposed of.
/
"
.
523
b
QI'PICIO MlEMBBIIII
QAVID F. HOUSTON
SICQ:J.{:llitOP THI TRE.UURT
fHAIIIIAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLIA GF THE CURRINCT
W. P. G., HARDING, GOVIINOI
ALBERT STRAUSS, VICI GOVIRHOR
ADOLPH C. MILLER
CHARLES S. HAll LIN
HENRY A. IIOEHLENPAH
W. T. CHAPMAN, SICRITAIIT
R. G. EIIERSON. ASSISTANT SEC:IETAI:Y
ADDRESS REPL.Y TO
FEDI;;RA.L RESERVE BO-'RD
Subject:
Statement Issued by
WASHINGTON
W. M, IMLAY, FISCAL AGENT
~ool Gro~ers.
Dear Sir:For your information there. is quoted beloN a statement which
was given to the press today by a committee of 'iV'OOl gro,;;ers who ;vere
in conf erenca .vith the Board on yesterday. While the Board has often
pointed out that the'fact that an acceptance or a note is eligible imposes upon a Federal Reserve Bank no obligation to purchase or discount
it~ the Board ass~ues that the Federal Reserve BanksJ recognizing the
obstacles in the Nay of rrarketing -vool at the present time) iVill accord
as liberal treatment as is consistent ,vi th good business principles to
member banks offering eligible notes or acceptances based on .vooL
..
"By advanca arrangement ::vi th the Federal Reserve Board1
wool gro~vers, bankers in the wool producing sections and eastern
wool markets, wool dealers, lVarea0use men~ manufacturers 1 and
others interested in the .vool trade, held an all day session
.vi th the Federal. Reserve Boar1 yesterday. The condition of the
"Nool market caused by the recent cessat:i.on of pu1·chases of raw
Nool was laid before the Board, ~d a full discussion was had
of various plans for financ:i.ng the industry until normal buying
operations are resumed. Unlike most other crops} .vool is marketed in the spring and early summer, and th~ marketing conditions prevailing during the past month have threat~nad great losses
to •vool groelers >Vhich might be disastrous. Such a condition, if
it developed, might cause serious sacrifice of sheep on farm and
range, and result in reduced supplies of -vool and mutton in future
years. It was clearly sho.m. that there .vas no disposition on
the part of anyone to maintain artificial prices, but simply to
make arrangements by which the temporary interruption of the aool
market would b0 removed and normal marketing conditions restored.
"The plan of action finally arrived at was adopted as a
more sirq>le and satisfactory ,vay of dealing ivith the sit\Ution
than the Cotton Loan Plan of 1914 which had been suggested.
At
the termination of a conference betneen the Board and a subcommittee consisting of bankers thoroughly familiar with the
entire situation~ the Board authorized the following statement:
'A wool grover may ship his 1vool to one of the
usual points of distribution~ obtaining from the railroad a bill of lading for the shipment; the grower may
524
-2then draw a draft against his bank, for such an amount
as may be agreed apon by the grower and the bank, secured by the bill of lading. The Federal Reserve Act
authorizes any member bank to accept a draft secared in
this manner at the time 0f acceptance, provided that
the draft matures in not more than six months from the
time of acceptance. After acceptance such a draft
bearing the endorsement of a member bank is eligible
for rediscount or purchase by a Federal Reserve Bank,
provided~ that it has a maturity of not more than
three months from the date· of rediscount, or parchase. 1
"It was suggested that the Federal .Reserve Board communiqate
with the Federal Reserve Banks, pointing out that shipments of wool
to points of distribution.may properly be financed by acceptances
in the above manner.
"While the statement refers only to acceptances based on bills
of lading, Governor Harding referred those present to the provisions
of Section 13 of the Federal Reserve Act, as to eliglbility for discount of paper secured by warehouse receipts.
"At a further meeting held last night of all interests concerned;
it Nas the unanimous opinion that the plan suggested above was ptactical and feasible, and that no extraordinary difficulty ~ould be
encountered in the necessary financing to carry along the present
season's wool clip until a normal buying market should reassert itself, ~hich it was the firm belief of all would bo within a very
reasonable length of time."
Very truly yours,
Governor.
To Chairmen of all
~;-R•
Banks.
525
1!X OPPICJO MIIMBIIU
DAVID F. HOUSTON
SICII.TAIY OF THI TRU.SURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLIR OF THI CURIIIICY
ADDRESB REPl-Y TO
FEDERAL RESERVE BOARD
W. P.IJ. HARDING, GOYIINOI
ALBIERT STRAUSS, VIC I GOYIINOI
ADOLPH C. IIILLIR ..,
CHARLES S. HAIILIN
l!ENRY A. IIOEHLINPAH
w. T
0 CHAPIIAN I SICRITARY
R. G. EMERSON, AsSISTANT SICIITARY
W,JI,IIII-AY, fllcA~ A•I~T
WASHINGTON
June 24,1920.
X-1964
Subject:
Disposition of Note Fragments4
Dear Sir:For your information and· for such action as you may deem
necessary, in line with the suggestion made therein1 there is quoted
below an excerpt from a letter received from the Chief of the Secret
Service Division of the Treasury Department.
" I am advised by our Detroit, Michi~n, operative
that fragments ( particularly the ends ) of currency
notes are frequently found in the waste paper sold by
the banks to contractors, and as these portions of
bills are admirably adapted to the raising or altering of lower denominations to higher I respectfully
request that instructicns be issued to the Federal
Reserve banks - and through them to the member banks
that an examination be made of the waste paper and
other waste materials of the bank, and all fragments
of currency collected and subsequently destroyed by
burning in the furnaces of the building in nhich the
bank is located or forwarded to the Department at
~ashingt on for destruction."
Very truly yours,
Governor.
To Governors of all F.R. Banks.
•
526
lEX OPPICIO MKIIBKIIS
r:
DAVID
HOUSTON
SIC:IITAIIY OF TMI TRIASUIIT
. CIIAIUAN
FEDERAL RESERVE BOARD
JOHN SKILTON WILUAIIS
C:OMPTROUIR OF THI CURRINc:Y
ADDR11111S REPI. Y TO
WASHINGTON
Frg)ERAL RESERVE BOARD
June
24, 1920.
Dear Sir:
There have been sent to you today,
for the use of officers of your Bank and
for your records, ten copies of the abbreviated Annual Report of the Federal Reserve
Board for the year 1919.
This is the same
form of report transmitted to all member
banks of the System.
Very truly yours,
Assistant
Secretary~
Chairmen of all F.R. Banks.
W. P. Q, HARDIN&, tOYIRNOI
ALBERT STRAUSS, YICI lloVIIROI
ADOLPH C. IIILLER
CHARLES s. HAMLIN
HENRY A •. JIOEHLENPAH
W. T.CHAPJIAN, SICRITAIY
R. 8. EIIERSON, AIIIITANT SICIITARY
W.JI.IIILAY, FIICAL ACINT
I
X-1965
527
l!x
OFPICIO MSYSJt:IUJ
DAYID~~ITON
S•CIITARY OP THI TRIAIUIY
CHAIRMAN
JOHN SKILTON WILLIAMS
COJIPTROLLIR OF THI CURRINCY
FEDERAL RESERVE BOARD
W. P. G. HARDING, GOVIRNOR
AL~ERT STRAUSS, VJCI CIOVIINOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPIIAN, SICRITARY
R. G. EMERSON, ASSISTANT SICIITAIY
ADDRESS REPL.Y TO
FEDERAL RESERVE BOARD
WASHINGTON
W. M.IMLAY, FtiCAL,AaiHT
June 26, 1920 ..
Subject:
X-1966
Transfer of Subtreasury Functions
to Federal Reserve Banks.
Dear Sir:I enclose herewith copy of a letter from ~cting
Secretary of the Treasury_ Leffingwell relating to the transfer
of the duties and functions of the Subtreasuries to the Federal
Reserve Banks and branches.
It is the Board 1s understanding that all Federal
Reserve Banks at the head offices will exercise Subtreasury
functions and that at least those branches which are located
in :present Subtreasury cities will also be required. to perform
similar functions in order that no city rna:y have grounds for
complaint that facilities now existing have been with<irawn from
it. The question of whether Subtreasury functions will be performed by brapches in cities which are not now Subtreasury cities
should be considered by your board of directors and any conclusions reached submitted for the approval of the Federal Reserve
Board ..
Very truly yours,
Enclosure.
Governor.
To Chairmen of all F.R. Banks.
.
528
··•
X-1966 a
TRE.ASURY DEPARTMENT
WASHINGTON
June 24,1920.
Dear Governor Barding:I am hereby bringing to your attention that :portion of an Act of
Congress approved May 29, 1920, repealing Section 3595 together with such
laws or :parts of laws as relate to the establishment ani maintenance of the
Subtreasuries ..
You will observe that the Secretary of the Treasury is authorized to
transfer on or before June 30, 1921, the duties and functions of said Subtreasuries, and to utilize any of the Federal Reserve Banks acting as depositaries and fiscal agents of the United States for the :purpose of :performing any or all of the duties and functions now and heretofore devolving
upon said Subtreasuries.
The Subtreasuries are located in the follOWing named cities:
Boston,Mass •.
New York, N.Y.
Philadelphia, Pa.
Baltimore, Mi.
Chicago, Ill. .
Cine innat i, Ohio ..
St .. Lonls, Mo •
. New Orleans, ta,.
SanFrancisco,Calif.
Inasmuch as the :proposed transfers. cannot be made simultaneously for
obvious reasons, nor will it be :practicable to make all of them during the
last two months of the fiscal year 1921, 1 beg to suggest that you communicate
with the :proper officials of the several Federal Reserve Banks interested,
with a view to ascertaining just when in their opinion the transfers contemplated by the Act of Congress above referred to may conveniently be made.
It may be advisable to suggest that in each case an official of the
Federal Reserve Bank or branch bank in the city in which the Subtreasuries
are located, confer with the Assistant Treasurer of the United States in such
city, relative to the character and volume of the work for the purpose of
determining at what time it may be most advantageously taken over.
••
The Department will make every effort·, if it is found that same may be
done, to begin to make these transfers as soon after July l, 1920, as the
several Federal Reserve Banks or branch banks interested are in a :position
to assume this branch of the work.
X-1966 a
529
-2-
The Departrrent controls the entire buildings occupied by the
Subtreasuries in New York and in San Francisco, and in the other ci ti~s
mentioned the Subtreasuries are located in certain rooms assigned in
Public buildings.
·
The .A.ct in question authorizes the Secretary of the Treasury to
assign the rooms, vaults, equipment and safes or space in the buildings
now occupied by the several Assistant Treasurers of the United States,
to the Federal Reserve Banks. Just what part'icular space is desired by
the Federal Reserve Banks should be ascertained •
..
It is also suggested that if practicable, the several Federal
Reserve Banks advise you as to what particular employees now in the
Subtreasuries they desire to take over in connection with the work.
With this information at hand, the Department may be able to tale up
with other branches of its field service the question of providing
employment for such employees as the Federal Reserve .Banks are not
prepared to offer pos 1 tions.
There are numerous details to be considered and worked out in ·
connection with transferring the above mentioned functions and duties
and it is suggested that these matters be taken up with Mr. H.P Huddleson.
Chief of the Division of PUblic Moneys, who will .have direct supervision
of the transfers referred to.
:By
~irection
of the Secretary.
Respectfully,
(signed) R.C. Leffingwell
Acting Secretary of the Treasury.
Honorable W.P:Gt Ha.~ing,
Governor, Federal Reserve Board,
Washirgton, D.C •
..
530
EX OFFICIO MEMBERS
DAVID F. HOUSTON
SECRITARY C')P' THE TREASURY
• CHAIPAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRIMCY
FEDERAL RESERVE BOARD
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
FEDJ::RAL RESERVE BOARD
W. M.IMLAY,FISCAL AGENT
WASHINGTON
June 29 , 1920 •
Subject:
X·l967
Proposed Treasury Regulations Regarding
the Replacement or Redemption of U.S.
Paper Currerey.
Dear Sir:There is enclosed herewith copy of proposed regulations
to be issued by the Treasury Department relative to the replacement or redemption of United States paper currency b1
the Federal -Reserve Banks.
It is the desire of the Treasury Department to issue at
an early date regulations governing this phase o£ the work to
be performed by the Federal Reserve Banks as fiscal agents of
the United States, but before doing so it would like to have
an op:portuni ty of considering any suggestions which the Federal
Reserve Board and the Federal Reserve Banks may have to make
with respect thereto. It is requested therefore that the
matter be given prompt consideration by the proper officials
of your bank and that the Board be advised of any comrents or
suggestions that they may have to offer with respect to the
proposed regulations.
Very truly yours,
Enclosure.
Governor.
..
To Chairman of all F .. R. Bmks.
531
INSTRUCTIONS FOR THF. TREftSURER OF THE UNITED
STP.TES, FEDERPL RESERVE BPNKS, FISCPL fiGENTS
OF THE UNIT'ED STPTES, AND Ol'fl"ERS CONCERNED t
WITH RESPECT TO REPLP.CEMENT OR REDE\1PTION OF
UNITED ST /ITES PfiPER CURRENCY.
The .Act of Congress approved
1.
May
29, 1920, making appropriations
for the legislative, executive and judicial expenses of the Government
for the fiscal year ending June
30. 1921, and for other
p~oses,
(PUblic
No~ 231 - 66th Congress), directs the discontinuance of the offices of
the several .Assistant Treasurers of the United States, on or before July
l, 1921, and with respect to the disposition of the duties and functions
performed by the P.ssistant Treasurers authorizes the Secretary of the
Treasury to utilize any of the Federal Reserve Banks, acting as depositaries or fiscal agents of the United States.
2.
In anticipation of a final discontinuance of the several
sub~
treasuries and pursuant to the authority above referred to and to
authority given in Section
15 of the Federal Reserve Act approved
1
December 23, 1913, and in order to furnish improved facilities for the
'pub lie, Federal Reserve Banks, as fiscal agents of the United States t
are authorized and instructed, beginning July l, 1920, to receive for
the account of the Treasurer of the United States, United States notes,
Treasury notes of 1890, gold certificates and silver certificates, and
to make replacements or redemptions thereof.
532
X-1967 a
-2-
Replacement of United States Raper currency unfit for .further circu-.
lation. -- ?rocedure in Federal Reserve Banks.
3.
Any person presenting United States paper currency mrl'i t for
further circulation is entitled to receive therefor. V'll:en demanded,
United States pap3r currency of the sane kind fit for circulation in
so far as such currency is available..
No Federal Reserve Bank is
authorized to receive for replacement paper currency fit for circulation.
In making replacements of unfit currency, if denominations
other than those presented are recpested, such requests should be complied with so far as possible,.
4.
United States currency in the hands of Federal Reserve Banks
unfit for further circulation shall be assorted, canceled, cut and
shipped in accordance with the following procedure:
(a) ./ISsort py kind and denomination, and separate into packages of 100 notes (of the same kind and denomination).
(b) Strap each package ( 100 notes) lengthwise '""i th manila
(or similar) -paper, crosswise with colored paper, green
for United States notes, white for silver certificates,
yellow for gold certificates; ends of both lengthwise
straps to be secured with paste, cross straps to be pasted
full length ..
(c) On each cross strap place notation in duplicate above and
below ndddle line, indicating kind of money, denomination,
amount, counter 1 s initials and date of count • ani narre of
Federal Reserve Bank.
(d) Cancel -package with four holes (largest diameter thereof
not less than 1/2 inch) two above and two below middle line,
1~ inches from ends of package.
(e) ~ssemble in units of ten packages {i.e •• 1~000 notes)
and secure each firmly with manila- (or similar) paper strap,
placed longitudinally, the strap to be the width of the
533
.
·~
X-1967 a
-3-
notes and to be secured at the ends with paste. Four such
units shall be assembled, and, when cut in half as next provided, will form shipping units or bUndles (of 4,000 halfnotes each).
(f)
On the upper and lower respective edges of each package
of 100 notes place an identifying letter and number, the first
unit of 10 packages to be designated~. the second ~. the
third .Q, the fourth Q.. Each package within each unit to be
designated by a number, 1 to 10, inclusive. The sane marks
will accordingly a~ar on co-;:.-responding upper ani lower
edges of the same package. Cut in halves lengthwise, separating
uppers from lowers. 4o packages of uppers and the same number of
lowers ( of lOO half-notes each ) will then be marked as follows:
A- 1
J. - 2
p, -
3
ft - 4
A- 5
]l -
6
A- 7
A- 8
}
- 910
]l -
BBBBBBBBBB-
1
2
3
4
5
6
1
g
9
10
cccccccccc-
1
2
3
4
5
6
7
g
9
10
D- l
D-2
D - 3
D- 4
D- 5
D- 6
D- 7
D- 8
D - 9
D- 10
(g)
Place fiber board at top and bottom of each such bundle
(shipping unit of 4.ooo ha~f notes) of uppers and of corresponding lowers, and secure vvi th binding strap ..
(h)
To each bundle attach a colored label (on top and beneath
strap), green for United States notes, white for silver certificates, yellow for gold certificates, indicating kind of
money, denomination, amount (of whole notes), whether uppsr
or lower halves, bundle number and lot number, and name of
Federal Reserve Bank.
(i)
ftssemble all bundles for day 1s shipment, and to each kind
assign a lot number. Bundle numbers ( 4,000 half notes each)
begin with number 1 for each lot each day. Lot numbers for
each kind of money begin with No .. 1 July l ani continue in
series to June 30, and repeat. All package, bundle and lot
nunbers are duplicated for uppers and lowers •
.
(j)
Odd amounts of the larger denominations may be shipped in
packages of less than 4,000 half notes when necessary.
'•
534
X-1967 a
(k)
Determine contents of each mail :pouch, and th;; serial number and rotary number of lock to be attached to each :pouch.
Prepare two sets of shipping manifests, each in quadruplicate,
one set covering uppers and one set covering lowers, setting
forth the contents of each pouch in the day's shipment. as
follows:
Registry Lock
Serial No. :Rotary No.:Kind
Contents of Pouch
:tot No. :Package :Denom :J\mount : Total
Nos.
:of Item:J'mount ·
The original copy covering uppers shall be addressed to the
Treasurer of the United States, Redemption Division, and forwarded on the day of shipment ( see m ) by ordinary mail. The
duplicatA, which shall carry a receipt form to be executed
by the Treasurer acknowledging receipt of shipment, shall accompany the original. The triplicate shall be inclosed in
the :pouch bearing lowest rotary lock serial number. The quadruplicate shall be retained by forwarding bank.
·_,
The signed copy covering lowers shall be addressed to the Secretary of the Treasury, Division of Loans and Currency, and
forwarded on the day of shipment ( see m) by ordinary mail.
The duplicate, which shall carry a receipt fonn to be executed
by the Secretary of the Treasury acknowledging receipt of shipment, shall accompany the original.. The triplicate and quadruplicate as above.
(1)
Pll shipments shall be made by registered mail, in locked
:pouches, under rotary locks especially assigned, postage
to be :prepaid at fourtrrclass (:parcel :post) rates, with registration fee for each parcel :post unit, without :payment of war
tax.
(m) The lowers shall be addressed to The Secretary of the Treasury, Division of Loans 8l'ld. Currency. The U'Pt>ers shall be addressed to The Treasurer of the United States, Redemption
Division, but shell be forwarded not earlier than the dav succeeding the day the lowers shall have been forwarded •
..
535
X-1967-a
- 5-
5. Such shipments shall be charged in the account of the
Treasurer of the United States as a transfer of funds to the Secretary
of the
Treasury~
Division of Loans and Currency.
The charge shall be
made on the day the loNers are shipped 1 and shall be the face amount
of th3 whole notes.
No charge shall be entered when uppers are shipped.
Postage and registration fees paid oh canceled United States currency
forwarded will be reimbursed Federal Reserve Banks from the appropriation
"Contingent
Expenses~
vouchers, duly
Independent Treasury" upon rendition of appropriate
certified~
Secretary of the
Treasury~
at the end of each month 1 and forwarded to the
Division of Public Moneys.
Denomira t i onal Ex cha.~,;t.
6.
In so far as possible, requests for denominational exchanges
should be complied ·.ri th, even though the currency presented is fit for
circulation.
Receipt and Report~~~po Secretary of the Treasury, Division of
I,oa."1s ru1d QY,Q:..~'1CY.
7.
Immediately upon receipt of a shipment of lower halves, the
Division of Loans and Currency shall makJ inventory ther.;;of and the
duplicate copy of the manifest
~ill
be accomplishod and returned to
Federal Reserve Bank 1 and prescribed accounting reports shall be sent
to the Treasurer of the
notices of receipt
~to
~nited
~ith
the Cash Division and the Radomption Divis:l.on
of the Treasurer's Office.
..
States, Division of Accounts,
Subsequently1 in due course, examination
536
.
.
X-1967-a
- 6will be given the lower halves 1 and any errors found shall be reported
to the Treasurer of the United States for adjustment.
Upon completion
of examination of shipment and adjustment of errors., if any., destruction
schedules shall be prepared as required, advice sent the Treasurer of the
•
United States1 Redemption Division1 that the _particular shipment is ready
for destruction1 and upon confirmation by the Redemption Division the lot
shall ba delivered to the Destruction Committee.
Action by Treasurer of the United States,
8.
Rede~ption
Division.
Immediately upon receipt of a shipment of upper halves, the
'Redemption Division shall make inventory thereof., and shall accomplish
and return to Federal Reserve Bank thJ duplicate copy of manifest of
'.
shipment.
The Redemption Division shall make test counts of not exceed-
ing ten per cent of the upper halves received, except that upon receipt
of advice from the Division of Loans and Currency of an ferror discovered
in the examination of lo;vers) the package containing corresponding uppers
shall be examined for verific_:...tion and adjustment) if necessary 1 of·
error reported-
9. Upon receipt of advice from the Division of Loans and Currency
that a shipment is ready for delivery for d0stt".ucti:an1 the Redemption
Division shall report to the Division of Loans and Cu.crency any errors
discovered in
t~st
counts not previously reported by the Division of
Loane and Currency, and after adjustment 1 if necessary 1 the Redemption
Division shall arrange to deliver the upper halves to the destruction
...
- 7committee at the same time the corresponding lower halves are delivered
by the Division of Loans and Currency.
Shipments of nevv currency by Treasurer of the United States.
10;
As same may be available in the cash 1 the Treasurer of the
United States >vill ship ne.v currency (and any other paper currency in
hand fit for further circulation) to the Federal Reserve Banks in such
'
proportion as will provide as equitable a distribution thereof as possible.
Generally such shipments will be made in proportion to the receipts of
unfit currency from the respective banks.
All suCh shipments shall be
charged as a transfer of turds to the appropriate Federal Reserve Bank.
Other unfit paper currency received by the Treasurer of the United States.
''
ll.
In case of United States paper currency received by the Treasurer
of the United States for replacement '(other than from Federal Reserve Bank),
•
after verification of the shipment recoived, the amount thereof will be
confirmed to the appropriate Federal Reserve Bank as a transfer of funds 1
with appropriate instructions.
In case of a member bank, the Treasurer
will instruct that appropriate credit be given in reserve accaunt of such
member bank with Federal Reserve Bank.
In case of a non-member bank, or
private individual or concern, the Treasurer will instruct that currency
be shipped and charge4 to his account as a transfer of -funds..
The
Treasurer is authorized to give such instructions by NireJ to be confirmed
in '!riting1 and Federal Reserve Banks shall send appropriate ad.vice to
member banks of credits entered 1 and to others of currency shipped.
538
- 8-
12.
Except for strictly local transactions 1 the Treasurer of the
United States will discontinue direct shipments of fit currency in
exchange for unfit currency 1 and Nill make all shipments of available fit
notes to Federal Reserve Banks1 the purpose being to provide as equitable
a distribution as possible throughout the United States of paper currency
fit for circulation.
Distribution by Federal Reserve Banks of notes fit for circulation.
13,.
In making deliveries of notes fit for circulation1 :Federal
Reserve Banks shall deliver new currency and circulated currency in proportion to the stocks of each
available~
New notes 1 however1 shall always
be furnished when shipments are made to the insular possessions of the
United States.
Unfit paper currencx received at
14.
subtreasuries~
In case currency unfit for futher circulation is received by an
Assistant 'Treasurer of the United States 1 receipt therefor shall be
issued by the receiving Assistant
Treasurer on Form
1716~
Subtreasury
Service, payment for the same to be made by the Federal Reserve Bank or
Branch located in the same city ·Nith the subtreasury issuing such receipt.
Currency received for
redemption~
15. United States notes are redeemable in gold; Treasury notes
of 1890 are redeemable in gold or in standard silver dollars; gold
certificates are redeemable in gold; and silver certificates are redeemable in standard silver
...
dollars~
Request for redemption in coin should
..
539
- 9-
,
be discouraged so far as possible, but the right of redemption as
above stated is inherent in United States paper
demands therefor must be complied with.
currency~
and specific
Redemptions Nill be made by
Federal Reserve Banks in ordinary course, and tha Treasurer of the
United States will make replacement in appropriate coin on request
therefor by Federal Reserve Banks upon the surrender by them of United
States notes 1 gold certificates, or silver certificates.
16.
When Treasury notes of 1890 are recai~ed, they shall not
be reissued but shall be canceled and forwarded in regular course as
transfer of funds.
Transactions at Branches of Federal Reserve Banks.
17.
Upon request of any Federal Reserve Bank, approved by the
Federal Reserve Board, the Secretary will consider extending the
privileges of these instructions to any Branch of such Federal
R~serve
BankJ provided, however, Federal Reserve Banks maintaining Branches in
~·tlities
·.:vhere subtreasuries are no;v located shall make arrangement.s to
cGnduct transactions contemplated by these instructions prior to
June 30J 1921.
llll OIIPICIO M&UUU
.
'IIAVIJI P.HOUiteri
hCRITAIY 01' THI TRL\CUIY
~~fMAM
'
• ,....
JOHN IKIL'ION WILLIAMS
COIPTIOLLII OP THI CU . . UCY
FEDERAL RESERVE BOARD --
ADDRU8 IUIPL,Y TO
WASHIN~TON
. FJH)ERAL RESERVE BOARD
W. P. G. HARDING, GoYIRNOI
ALBERT 81&AUSS, YICI GOYIIIO.
ADOLPH C. MILLER
.
. CHARLESS. HAMLIN
HENRY A. MOEHLINPAH
W. T. CHAPMAN, SICRITART
R. G. IIIEUON.AISIITUT SICIUAIY
W.II.IMLAY, FIICAL AGI•T
June 30.,1920.
X-1969
:..
Subject: ,Tax Exemption on Railroad and Pullman Tickets.
Dear Sir: ....
·.#
As you no doubt are aware officers and employees of Federal
Reserve Banks are exempt from the Federal tax imposed by Section 500
cf the Revenue Act of 1918 upon rai.lroad and Pullman tickets when suc}l
officers and employees are traveling on official business •. This exemption existe under the last paragraph of Section 7 of the Federal
Reserve Act and under Article 96 of Regulations 49 relating to the
Collection ~! Tax on Transportation and Other Facilities issued by the
Bureau of Internal Reven~e.
j
..
.,
Heretofore United States. Internal Revenue Form 73~ has been
the only form a,Tailable for use by officers and employees of. Federal
~eserve Banks when cla~ing this exemption.
This form, ho~ev~r, is not
strictly appropriate for use by such off:i cers and employees., for the
certificate printect thereon req;l.tires t.he holder to cert'ify that the
charges for the services rendered have been or will be paid for by the
United States. As you know a ~edera.J. Reserve Bank is not an agency of .
the Government except •vherl engaged ir.. fiscal agency operations and the
expenses incurred. by its officers and eipplo;reaB when traveling on official
busines~ for the bank are borne by the Federal Reserve Bank concerned
and not by the United States.
In order to correct this inconsi.stency the Board has had prepared and printed a ne~ form of tax exemption.certificate for use by
officers and employees of Federal .Reserve Banks. This .form. has been
approved by the Commissioner of Internal Revenue. I enclose 500 of
these printed f·orms, which should hereafter be used· in place of Form
731.
·541
-2-
.\
These new for.ms When properly filled out will entitle the
·holder to exemption from the tax on railroad ani Pullman tickets.
Care must be taken, ho.veve...-, that ·the forms are used only v:'ben the
facts are as certified to in the certifj.cate. For instance, a.
Federal Reserve Bank examiner, when traveling fo!' the :purpose of
.examining a. member bank~ cmmot properly uce this form i f the
cost of his transportation will be assessee! against the member
bank examined.
Very truly y01.1.rs,
Governor~
..
\
To F.R. Agents of all. F.R•. Banks
Copie~
to Governors of all F.R. Banks.
/'
CARTER eLASI
1
l•c:a&TARY OPTHI 'h:USUIY
.,._.-
- •
CHAIR•A•
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAIII
COMPTaOLUa OP TH8 CUaRIWCY
ADDRIII RIPJ..Y TO
WASHINGTON
FEDERAL. RESERVE BOARD
ADOLPH C. IIILLEI
CHAILII 1. HAIILIN
HEHRY A. IIOEHLENPAH
W. T, CHAPMAN, S&CIITAIY
R. 8. EIIIRSON, AIIIITAIT SICIITARY
W, IJ,IIILAY, PliCAl. AIIIMT
Ja.nua.l"1 2-, 1920.
St.Sl9
$UBJEC!:
~lyJioport
~d
Bosourco
Doar Sir:
'
of Principal
Lia:biUty Itcms.t
..
Boforring to your dail¥: SID tologr.am 'sllQWing principal
rl3s01ll'co and liabiU:~··:itams, t~ro a:ra .encloe.od borowith
arc.
-.
\.
copies of form st:&a,: on.w}lich
shown tm codo worda to w
usod in your tolograpbic reports tcgimling wi~ -tlla report for
Ja11'aa17 10, · 1~.; It will bo notod that the codo words which
appoar on tba 1920 .941 tl.on of form }4" bave l;x)Gn adopted throughout to dosigna.to ·ttcma· U1 tho onclosod to:aa. w~ch aro idontica.l:
with tboao 'on ftpm. ;4. ,I:J. cues irbJre i:tCJDS. appoar-ing in tho ·
TEND tologram -eCiupriao two or moro aoparats i~ of form 34,
the sopara:to codo words on tho latter form Ji,ro shown in .parontbosos on form S1;. 92a:•
It is not dO-sired that otbor itclrls appoaring on form }4
bo includDd in your mm tologran, bu.t ~ additional !tGIDlll ~bi~
mq at any time bO sbown on yoo.r £01111 }4- &alOng mcolloctod itc=s
Or in tho dO)?O$ it block S~ bo included in tbo .all$Nilt roportod
against the appropriate cod&. word o£ foxm St. 92a or· bo wirod
soparateq.
eoae worcls £or usc in tho dai]¥ 'mD ~legr'aJD. which do not
appoa.r on tbD 192.0 od.it~on of. £wm ;4 should not bo usod in tolDgraphing your Frida¥ night report, form ;4.
..
\.
Items BAZE to BUND inclusive of tb3 enclosod term should
ineludo all the earning assets of your ba%lk, i.o .. , smounts which
aro roportod apinst itoms MElD and 140BN should also l;x) includod
in your oaming ass~te against tho appropria.to coao words.
Very truly yours.
Enclosures.
542
W. P. 8. HARDIN8, 8oYIUOI
ALIIRT ITIIAUII, YICI 80YJIIOI
lEX 0PPJ4MIMIIR.
Assistant Secrotar,v.
St.92a
543
(Rev .1-2-20)
COITD~'!BE!j ST,\TE!1ENT OF CONDITIClJ OF FEDERAL RESBRVE BANK OF - - - - - - - - - - - - -
(D.:1te)
(In thous nds of dollars.)
AS S ETS
TZliD - Tot:l.l resorv;:;
EAZE
BEDE
BIGE
J30V"E
Bills discountc:d secured by
Collateral not~s •
All oth0r
u~s.
vvar obligJ.tions:
. .•
Bills discounted. oth.:;rvlfiso sGcur.;d a.nd unsGcured:
Coll::~.tor.1.l notGs .
All other
..
D"U:::..:t.1: - ,\cc ~pt3.ncos bought .
BU!ID - All oth:::r ::;3.rning 3.ss.ats .
(Ball , Il:lke , Boyd, B:u-l.d)
TILL - Total e1.rning assets • • . .
*B:sET- F. R. notes of paront
b::~.nk
held by JJr:mch
*B:::'Jill- F. R. b3.nk notes of p::trc:r:.t b:ull·-: h::;ld by Dr3.nch .
*:SRi\ G- DuG fro:n :Sr::1nche s or ~I.::n.d Offi cc
. ..
FOlTE -.. Uncolloctocl items
.
(Bern, Baba, Bind, BJ.rY- 1 Er:J.n, Juda, Jlot, Bait)
ITEID ... 3ills·discounted for other F. R. banks
(L1ill, Ihck)
Purclu.socl paper :J.cquir0d fro:::1 othor F. R. banks
T" d.e, ""
( -··O
.,;usc )
TIDE
TOTAL • • . . • . . . . . . . . . · · ·
===..,.·· .....-===
I
I
L I AB I L I T I E S
COPY
·CURZ
Government deposits:
Collected fund balance
. . . . . . . . . . . . . . . II
Uncollected items credited to TreJ.surer 1 s Gonl. Account
CLAY - Uemberst
Reserve Account. .
.
. . . .. . . . . .
~---
OTHR - Ct}-_.J:c d3J.Josi ts incluiir::g forzisn ,-sovo:;.·•n:c1cnt crtJdi ts
(Cere, Cine~ Cora)
TR!B - Fzdoral Reserve not0s in circul.;,ti.on • . .
TURN - FGdcr3.l R0scrv3 b::t.l'lk notes ... nGt UJ.bili ty ••
*CHOP- Due to
Bl~anchos
or Haari Of fica • •
.. .
GUST - tafcrrod :w;till.bilj.ty itc:-::1s
(Cube, Ch'lt, Curl, Cent)
: :AI!r - Liability o:n r~discounts v:i th other F. R. banks
'..:,'\ST - .Acccrpt·mces sol<'l. to oth.::r F.
(Hend, :~Ioat)
n.
banks
T 0 T A1
"' Should not appe3.r o:n co:-nbin<".:d sta t:;:-:cnt. I:n co:-::bining forDS 34 for Hcn.d Of fico
and Br3.nchcs, :my e:ccoss cf :BF:.AG ovzr CHCP should be 3.dclcd to ito::: BRI\N; and
any excoss of CHOP over BRl;.G should be doductcd fro::-1 iter:. BRt.!J.
5~4
Ex OI'I'ICIO
W. P. G. HARDING, GIOVIRNOI
ALBIRT STRAUSS, YICI GIOYUNOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
MEMURS
CARTER GLASS
SICIITARY OF THI TRIAIUIY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THI CUIRINCY
FEDERAL RESERVE BOARD
WASHINGTON
FEDERAL RESERVE BOARD
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SI.CRITAR'i
W.M,IMLAY, FIICAL AGINT
ADDRESB REPLY TO
Janua.ey
a.,
1920.
St.820
~
Assess~ent
for expenses ~federal
Rese1"'VS ~ard. d;.u-ing 6 mQntl,lJJ end-ing June 30, 1920.
Dea.r Sir:
..
111 th reference ·to the :Board's letter
l·l767 date_<! December
1919, which authorized and requested- you to cmrge the amount
·or ycn.:u• ·assessment for the el:penees of -the Bo~i-d _d.~ng the ·si~~
20.
monthpeH.-od ending ~e JO .. 1920,. to Undivided ~ot"~~~ OA December 31 and to carry· it a.s "B.esene l.or Federal Re~.._ve ~oa.rd
;\ssessment,." the :Board-requests that one-sixth of the amotint of
. au.eb. assessr.lf;mt be cbarged to Current :EJtp_anses ~ cr.ec;li ted to
·Profit and L-oss at a.nd as~ -elose o£ business the last-_d.a.y of
ea.ch m:nth !l"om January to June· 1920. Debits·•llould- be made
- against acco'llt).t "Reserve for Ji'ecieral Reserve :Boari !ss.esstr.ent 11 when
funds are transferred to- the :Board by credit in the V~ 5• Treas- 1lrer1 s General Acco-unt.
··Accordingly it will ~e nece-ssary for. you to include, as here-.
tofore, 'the manthly por.ti"On of· your assessment for. the expenses of.·
the Board aga.ill$t· item GJJi'F in your monthly exp~nse. ~.a_port form 96.
The ·1920 edftion or-·,forms· 95, 96 a.n4. 97a are _now being printed and
a year • s · supply will be furniabed y.our. bank as soon. as the f_orms
~re received from tbe prin~er.
tours very
•
t~uly,
i
~ ~
I
D :_:;)
W. P. G. HARDING. GOVIINOI
ALBIRT STRAUSS, VICI 80YIINOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. IIOEHLENPAH
CAIITER GLASS
SICAITARY OF THI TIIAIUIY
CHAIRIIAM
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OP THI CUIIIIICY
'If. T. CHAPMAN. SICRITAIY
R. G. EIIERSON. ASSISTANT SICR&TAAY
W.JI.IMLAY. FISCAL AGINT
ADDRES8 REPLY TO
FEDERAL RESERVE BOARD
WASHINGTON
I
I
January
I
St..
r
SUBJECT:
6. 1920.
827
Form 105, Condition refort
-of State bank and Trust
company me::1bers.
I
I
I'
~
Dear Sir:'I'here :tre bein:: forwarded to you today under separ~te
cover
copies of the December 18, 1919 edition of fo~
105, Condition report of ~tate bank and Trust compary me~
ber:>, It is requested tha.t three copi8s of the form be sent
to each non-national memb~r ba.nk in your district, with instructions to hold the blank forms pendin~ receipt of a call
for condition report, when they should be promptly filled out
and two copies mailed to you -·-:- in no case later than ten
days after receipt of the call·
As no chan6es have been rrado in the form, .the ins tructions issued by the ~oa.rd on Juno.l4• 1919, supplemented by
those cbnta.inod. in our letter St.692 dated November 6, still
apply and should be car~fully followed- . We are enclosin~
caries of the circular instructions with the forms 105,
for usc of banks which have joined the Sy-stem since November
17th.
Kindly acknowledsq receipt.
r.
Yours very truly,
Assistant Secretary.
l. '
Letter sent
to Chai~an of each F.E. nank•
.
C 0 N F I DE N T I AL
Not for publication.
l
•
St. 843
GOLD AlTD SILVER H1PORTS
Al~D
EXPORTS IN 1919.
The Feder'-l.l Resu:;.·ve Board hu.s just co<n:pleted. its compilation of _;ol.:i ani silve;;r imports in to ani exports frow the Uni t.:d States for the calen.:iar year 1919.
Goll imports for the year just ende.:i totaled 76.5 millions, compared with 62.0
r:,illions for the cale:1dar year 1918, while coli exports totaled 368.1 r.ilillions,
con~ared with 40.8 millions exported in 1918. Net ~old exports for 1919 amount
to 291.6 rr1illions, as a..::.a.LJ.st 21.1 millions the year before. The 1919 fi'""'ur"'s
are, however, exclusive of 173.4 millions of ""old received from til.:; Reichsbank
for foodstuffs sold to the Geri!l&l 0 0Vern.ment. This e;old. is held. at present in
London with the exception of about 42 millions which were subseq_uently sold by the
Federal Reserve banks and released to forei~~ interests. Countin; the 131.3 millions held on December 31 by the Ilank of Ene:,land for the Federal Reserve banks as
an offset a;ainst the net exports above shovv.~, the net loss of ~old. throubh tra~s
fer abroad is reduced to 160.3 millions. Of the gold imports over three-fourths
is credited to Canaia, Honbkong, the United Kingdom <llld Mexico, while of the gold
exports 94.1 millions were consi;ned to Japan, and over 125 millions to the other
Far Eastern countries; i.e., China, Hongkong, British India, Straits Settlements
a;.1d Dutch East Indies; 56.6 millions to Arc:;entina, 33 millions to other South
American countries, 29.8 millions to Spain and 10.4 millions to Mexico.
S-ilver imports durinf6 1919 totaled 89;4 millions, compared with 71.4 "r<illions
in 1918, while silver e.x.por ts durinG 1919 wert: about 239 millions com-pared with
252.8 millions the year before. By far the ldl"e:,er portio;.. of th0 silver export<>d
in 1919 was consigned to tl1e Far East, :3ri tis:h India being credited with 109.2
millions, China with 77.6 millions and Honc)con.; ;vi th 10. 2 millions.
The three
countries named account: for over SO per cent of the total value of silver
shipped to foreie;n dastinations durint; the. past calendar year. It is worth notin.;
that silver exports to India, which constituted by far the laroer portion of the
total foreit:)"l. silver shipme11ts durine;, 1918 and 1919 to SepteillOer 10, ha.ve prJctically ceased since a.nd bee . . l SUJ?"'rsedea. oy larbe 0 0ld. shiprn~n ts to tnat country
durinG the latter part of che year.
FEDERAL RES~VE EOARD
DIVISION OF IiEPORTS AND STATISTICS
JANUATIY 12, 1920.
i
!
L ~ --
Ex OP'FICJO MEM88R8
W. P. G. HARDING, GOVIRHOit
ALBIRT STRA~SS, VICE &OVIRNOR
ADOLPH C. MILLER
CHARLES S. HAll LIN
HENRY A. MOEHLENPAH
CARTER GLASS
SICRITARY OJI' THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THI CURRENCY
FEDERAL RESERVE BOARD
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
W. M.IMLAY, FISCAL. AGENT
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
WASHINGTON
J::m·nry 14, 192C.
St.854
SUBJ~CT; "0a1::'1y
flea t s t1. terr.ent. ·
De3.r Sir:
Tbor0 are <mclosod. horewi th t·;:o copies of tha :Board 1 s
flo1.t st3..t3ment coverin~ the wo0l:ly perio•.: en.lin-s December
12, 1919.
Th-3 st1.tament lns been revised so a.s to show avera;e
i:~.ily fi~ures
instaai of Fri·i.::~.y ni --;ht fi :;ures as heretofore.
This chan:-; ..J is in COl!lpliance with th0 recomr.:and.ation of the
transit ffi3.n3.;ers
1919.
3.
t tr.eir conference hold at Cleve1an'i in June,
A co1ucm h3.s ''llso ba..3n ::1d~l0l to show the a.vera;e d3-ily
amount of uncollected. items creditcl to the U.
s.
Treasurer's
c;ener1.l 3.Ccount, in order that the portion of the averaze float
carriei by tha sever:1.l Feder1.l R3serve b:mks which is a.ttributable to this source rr.:1.~r be known.
Vel.jT trul~r
yours,
Assistant
Enclosures.
Secreta~J·
EX OF'P'ICIO MaMBI!A.S
W. P. G. HARDING, GoVER NON
ALBERT STRAUSS, VIC! CiiO'tiRNOR
CARTER GLASS
SECRETARY OF THE TREASUftY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CUFl:R!NCY
FEDERAL RESERVE BOARD
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
ADDRESS REPLY TO
R. G. EMERSON,ASSISTANT SECRETARY
FEDERAL RESERVE BOARD
WASHINGTON
W. M. IMLAY, FISCAL AGENT
January 30, 1920.
St. 382
SUBJECT:
:Monthly reports of Earnings,
Expenses, and Fiscal Agency
Distursements, Forns 95, 9G,
and 97-a.
Dear Sir:
There are b'}ing for\7arded to you today under separate cover
copies of foms 95 and 96 and
copies of foi'!:l 97-a for use during
the calendar year 1920.
;ri th a view of insuring greater uniforni ty in the treatnent
of certain i to:rr.s such 3.S :Bnr..k Premises, Cost of Federal RGserve Note
issues, etc. t :l. t will be appreciated if you will instruct your .Accounting Dep:utme:nt' to follmv the methods outlinei below in the preparation
of the monthly e:::trninss 3.nd e:~pense reports.
FOR,~
gS
I. EXPENSES OF OPERJtTION
ASSESSME!iiT ACCOUNT EXPEKSES 01' JCI:E?.AL RESERVE BOARD: As requestei in the Board•s letter St. 320 0f J~nL~ry 2, current expenses
should be de-bited a~1d p:cofi t 3.nd loss cre:li ted a. t 3-nd. as of the l3.st d::w
of each month from J:::tn-uary to June with on8-aixth of the amount of the
assessm:)nt fo:· the exp~ns0s of the Beare.. for the six-month period 3nding
June 30, 1920.
C1.JRRENCY SHIPMENTS TO AND FR0M MEMBER AND NON-M:EMBER BlJITCS AND
J3ET71EE!J THE FE:UERP,L RESl':ltV::!:: BANK AllD ITS BRANCH OR BR!i.NCHES: The i tern
"CurrenGy shi}!ments to and from member .?Lnd non-member banks" heretofore
shown below oper::1tin:::; expenses on form 9S has been changed to read as above and is now sho.,.m among operating expenses ir.umediately after item
GOAL, repairs and alterations.
CUB.RZliiCY SHIPI.~TTS ( OTH:E:R TrL-\I,T FEDERAL RESERVE AND FEDERc'\.L RES:sRVE BANK r;;QTES) TO A~lj) FROM ~7ASHI:mTm.T OR A SUB-TBEi!$li1W: The amounts
repo:·tei against this nevY i tern plus arrm.-nts · reportei against the immediately preceding i tern should represent the t,otal cost to the Federal Reserve
:Bank cf currency ship::::ents other than the cost of snipping Federal Reserve
and Federal Reserve :Bank notes to and fro-:n Washin,;tor, or a Sub-Treasury or
to another Federal Reserve "Bank for credit or redemption.
•
.,
-~...,
FORM
96
I I.
O~'JTS:t?.
CUHF&"2TT
EXPJD.~S:SS
FEDERAL RI'SEI:VE CUFL.BEHCY (ORIGINfC-' COST INCLUDING s:IIPPING
CHARGES): This item is intended to repre:::ent ~otal }Ja:'rmcnts 1-rade to
the United States Tre3.su::.•y on account cf ;:rinting r.eH Federa,l Reserve
and Federal Reserve Bar~ notes and t~e ~ost of ehifpir~ such notes
from Washington to the Federal Reserve bar~::s and their branches ..
MISCELLAJ:.J"EOUS CE:li.RGES ACCOUDT FED~ RESE:2VE Ct.JRFiE:TCY: T'.ae
cost of shipping Federal Rese;rve a:nd I'eieral Reserve Bank notes to
Washington or to another Feder1-l Res3rv8 B3.Xlk for credit or red.er!l.ption
as well as the cost to the Federal liJserve Ban.il;;.. of redeer:1ing such notas
at \'!ashington should be reported a,~ainst t:'lis i tern.
TAXES ON FEDERAL RESER.VE BM!K NOTE CIRCULATION: Taxes accrued on Federal Reserve Bank notes should be esti~~ted as at the close
of business on the last day of each :r:onth and the amount thereof charged to current expenses and credited to account "Reserved for Sundry Expenses" of form 34.
BA..~ PF.EIVIISES: In cases where bank: premises are owned but not
occupied as a banking house the :income fro:m rentals, if any, and expenses
connected with such premises should be kept separate from expenses connected with bank premises actually occupied as a banking house. The excess of income over sxpense, if an~·, derived from ba.p]( premises not occupied as a banking house should. be repo:.~ted against "Miscellaneous Earnings," item LYON of form 55· In case the expenses connected with such
bank premises are in excess of income therefrom tile net excess should be
reported against item G1{'\T, "Bank Premises) li on· form 95. 1\:mounts reported against bank premises in the seco rd arnou..""lt colurrn of forn 96 should
represent, however, the net excess of expense over income for the period
from January 1 to the end of the repo!'t :oonth and inversely net earnings
from bank premises reported among "Miscellaneous Sa.r:1ings 11 in the se~ond
amount column of form 95, should represent the ne'v earnings for the period from Janua~J 1 to the end of the report rronth. I:r:come from rentals
as well as expenses 011 account of taxes ani fire ir..surance should be
kept, as far as practicable, on an accrual basis ir. order tr.at the actual nat ir..come or expense from bank promises rray be shown on your !!lont11ly earnings and expense reports.
The cost of new buildings or other expenses which are charged
to your bank premises account, i tern BILD of fo:rn: 34, should be reported
only against memorand-qm i tern GONG on reverse side of f·::>rr.:: 96.
Expenses connected with bank premises occu:;::iod as a banking ·
house sh01.lld be shown among operating exp:;mses on fo:::m ~y;, ta:::es ani fire
insurance (which should b~ kept on an accrual basis) against i ter:.t GIVE
and minor repairs and alterations against i~e~ GOJ\1.
---
4
'
I
-3-
DISCODN'I' E10:B'Irr' OE LOSS ON BILLS REDISCOUNTED WITH OR SOLD TO
ANOTHER :s'FDERAL RZSERVE BAl·m:: Nat earrj.ngs resul ·v~.:1g fx·om the rediscount
of discounted paper or the sale of bank:ox·s 1 acceptances to another Federal Reserw Bank at a lower rate than that at which the paper was originally discounted or purchased should oe credited to earnings on discounted
or p1u·chased bills as the case may bo 1 while a~y loss resulting from the
redincount or sale of such paper to ar:0ther Federal Reserve Ban.l< at a rate
in e:>ecess of that at which the paper was (;rig5.na1ly acquired should be deducted fron earnings on discounted or p1.:.r(.:r.ased bills as shown on the daily
balance sheet, form 34, and on the monthly earnings report, form 95·
INTEREST ON P~ST DUE PAPER: Past due paper should be carried
a"Dong the earning assets of ;rour banlc and interGst earned on such paper
credited to earnings on discounted bjlls.
IVIEMORANDUM I TEiviS
1.1Er,10J1UIDA OlJ REVERSE SIDE OF FORM 96: The rremorandum i terns
heretofore shown at the bottom of form 95 have been transferred to the
reverse sido of form 9S. In the past amounts reported against these
memorandum items have represented total expenditures on account of note
issues, banlc premises, furniture and equipment, etc,, regardless of
whether or not such expcmdi tures aore im:nedia.tely clurgGd to current
expenses. Beginni ns with January, 1920, :no·.vever, it is requested that
only such a~ounts be reported against the memorandum items as represent
expenditures which are not cbarged to current expenses during the mouth
in which the expense occurred, For example, the cost of office furnitm·e which is taken up on your books as an asset and shoNn against caption Furniture ~~d Equipment of form 34, should be reported against memorandu.~ item GLEN- of form 9G, while office fm·niture which is charged
to current expenses at time of purchase should be reported against item
GHUR.
Very truly yours,
Assistant Secretary.
Letter sent to Chairman of each Federal Reserve Bank.
,'~·-
EX OPPICIO MKMUU
W. P. Gl. HARDING. GOVERNOR
ALBERT STRAUSS. VICE GOVERNOR
ADOLPH C. MILLER
CHARLES B. HAMLIN
CARTER GLASS.
SICRnARY OF THE TREASURY
CHAIRMA.
HENRY 'II. MOEHLENPAH
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLIR OF THI CURRINCY
W. T. CHAPMAN. SECRETARY
R. G. EMERSON, ASSISTANT SICRITARY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
W.II.JMLAY, FIICAL ACIHT
WASHINGTON
Febr~ry
11, 1920
5».914
SUBJECT: Charts showing movement of principal
earning assets, deposit and note
liabilities, and cash reserves, 19191920.
Dea.r Sir:
We are forwarding to you today under separate cover two
copies e~ch of charts showing the movement of
(1) Net deposit and note 1i~bilities, also cash
reserves, and
(2) Principal classes of earning ~ssets,
of all Federal Reserve Darks durin; the period January 1, 1919
to January 16, 1920. One of the sets is intended for your use
and the other for the use of the Governor.
All the infor.nation re~uired to continue the several
curves for the rsmainder of the p~esent ca.hndar year will be
obtainable from the Board's regular weekly published statements.
Yours very truly,
Assistant Secretary.
(Letter sent to Chairman of each F.
R;
~arik.)
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOViRNOR
EX OP'fi'ICIO MEMBERS
CARTER GLASS
SECRETARY OF' THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CUJ.!RI!.NCY
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EIIERSON,ASSISTANT SECRETARY
ADDRESS REPLY TO
W. M. JMLAY, FISCAL AGIUIT
WASHINGTON
FEDERAL RESERVE BOARD
February 24, 1920.
SUBJECT:
Abstract of Condition Ilepcrts of
Me~ber State Ear~s and Trust
Comp~nies as of November
17, 1919.
De:l-r Sir:
We 3.re forwJ.rdin:s to you under sepJ.r3.te cover
copies of
t~~
]oJ.rd 1 s Abstract No.8 showin; condition
of St3.te :;:;3.nk and T::..·ust Comp::tuy members as ott close of
business on Novemter
all
~.:a ...:bzr 1::-l.r.Jt:s,
17, 1919. Consolid:J.ted fi::;ures for
';oth lhtion::.l and State, arc sho·.-m on
r:a;e 11.
Pleaso forwa.ri one COP'' of tho
St~te D~~~
and Trust
Comp~ny
abstr~ct
to
e::L(~h
memter in your district.
Very truly yours,
Assist~t
Secretary
(Copy of this letter sent tc Chairr.nn of ~.nchF. R. B:u:lk.)
~
'
l"
' ..
l
£x
-~,
L;.~)
fl. P. G. HARDING, GoVERNOR
0FP'ICIO MEMBII:R8
ALBERT STRAUSS, VICE GOVERNOR
DAVID F. HOUSTON
ADOLPH C. MILLER
CHARLES S. HAMLIN
SECRETARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
W, M,IMLAY,FISCAL AGENT
WASHINGTON
FEDERAL RESERVE BOARD
March 10, 1920
SUBJECT: Uniform pr~ctice in determining
number of member b~~s in district.
De~r
Sir:
With
~view
to
insuring~
uniform policy in determining
the number of :-nember b"'l.nk:s in e:t.ch Fed.er3.l Reserve district,
it is requested that, in future, b:mks (both National and
St,~te)
be consiiered as members of the Federal Reserve System
when payment of the subscription to
c~pital
stock has been
received by the Federal Reserve bank,and not before.
Likewiss, a bank li1uidating or otherwise withdrawing
from the System shouli b0 considered.
CJ.S
h3.ving withdrawn on
the date on which its subscription to the capital stock is
returned by the FeierJ.l Reserve bank.
Ple'l.se
aclmowled.~e
receipt.
Yours very truly,
~ssist~nt
(LETTE.;:l S"ENT TO CHAITI!VI!-~.N OF EACH F ..
BANK.)
Secretary
Form 40
TELEGRAM
'~
,.·
F"EDERAL.
i'
RESERVE
BOARD
WA&HINal:ON
March 27 , 1. 920
To all Federal Reserve Agents:
Referring to our circular letter St 1003,subject revision
of weekly member bank condition report, please disregard request for
net bank. balances in ca.fa'es where reciprocal accounts are r::aintained.
lt wtl.ir be . sa tisf a.c tory to the Board if gross bank .balanc•a will be
reported by the banks in the Federal Reserve Bank cities. Figures
should ba furnished as :of March 26 and each week thereaf~er. Please
a.cknow'ledge.
Har·ding
OFFICIAL BUSINESS
GOVERNMENT
RATES
CHARGE FEDERAL RESERVE BoARD
http://fraser.stlouisfed.org/
~
Federal Reserve Bank of St. Louis
/~,~
'
ElC ~I'I'JCIO MEMBKRS
+
"
'
"to: ...
;_:,
W. P. G. HARDING, GoVERNOR
ALBERT STRAUSS, VICE GOVERNOR
DAVID- F. HOUSTON
SECRETARY OF THE TREASURY
'
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
WASHINGTON
FEDERAL RESERVE SOARD
SUBJECT:
March 1 2 , 1920 ~w. M.IMLAv, FIScAL Aa••r
St. 1003
Revision of weekly member bank
condition r3port, form St. 51.
De.q,r Sir:
In order to enable the Eo~rd to follow rrore closely the movement of bank deposits in the larger cities, will you kindly request reporting member banks in
:· :·~
to show the following additional infornu tion in their WGekly report
of principal resource and li~bility items, form St. 51~:
Code ROTE - Amounts due from banks (other than Federal Reserve
banks), bankers and trust companies. (Exchanges fo:r
clearing house, checks on loc3,.l banks, cash items,
etc., should not be included.)
Code HOPE - Amou.~ts due to banks (other than Federal Reserve
banks), bankers ~d trust companies.
In arriving at amounts due from arA to b3.nks and bankers the net balance only
of amounts due from or to each bank should be included. Thus, for example, if
bank "A" ms $100,000 on deposit with bank nEn and bank 11 B11 h3.s $50,000 on deposit
with bank nAn, the former should consider the :mlount due from bank "B" as $50,000
md bank "B11 should consider the amount due to bank "A" as $50,000.. In the case
of amounts due from or to other banks and bankers, i.e., banks with which reciprocal s.ccounts ::~.re not ID3..int3.inad, the gross amounts due from or to should be used
in the compilation.
Kindly issue the necessary instructions, so that the new items will be included for the first time in the report for March 26.
The present edition of form St. 51 should be usad in making your consolidated
report, the additional d~ta to be shown 3.S memor3.nd'tllll i terns following i tern RISH.
Please acknowledge receipt.
Very truly yours,
,~-~':'
b.Jcrt n3.rne of
3\~d3r.l.l
P..eserve
ba.nk city.
(COPY OF
Governor.
THIS tETTER SENT TO CHAIRM.Alf
.. OF EACH F. R.. E,A.NK)
I!X OPPICIO MBM8&l'IS
W. P. G. HARDING. GOVERNOR
ALBIRT STRAUSS. YICI GOVIRNOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOUSTON
SECRETARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURII.N.CY
W. T. CHAPMAN. SICRITARY
R. G. EIIERSON,ASSISTAJIT SECRITARY
W.II.IMLAY, fiiCAL AGINT
ADDRESS REPL.Y TO
WASHINGTON
FEDERAL RESERVE BOARD
April 9, 1920.
St.974a
SUBJECT:
~'~onthly
reserv~s
report of deficiencies in
of ~e~ber banks.
Dear Sir:
With a. view to ana.bling the Board to follow
extent to which
~a~ber
~ore
closely the
banks are allowing their reserves to fall
"belovi ~.1ini:-:1uo. requirements na.y vve request that rr:onthly reports be
su·ord tted. in accordance with tha enclosed form St~974.
Inasmuch as penalties
and raserve
~ity
~re
assessed against central reserve
banks on the Jasis of average deficiencies cover-
ing a weekly period it ITay not be rra.ctica.ble to give figures for
calend~r
months, and accordingly the forn calls for Qata relating
to the four or five weekly periods ending within the calendar month
covered by the report.
With refarence to inquiry No.4 relating to the amount of leficiencies iuring the report period, m~y we request that you shovv
the aggregate
~T.ount
of deficiencies on which penalties were
assessed during each of tha weekly or
serr~-monthly
periods.
To illustrate: :Bank A, a reserve city bank, with net def··osits
and reserve balances as indicated in the following example, would
have an aggregate deficiency of $9,000 on which a penalty would be
assessed..
-2Het 1eposi t liaA.'11ount of
T
bility on which reserve re~uiredjReserve oalance
reserve is
to be carriedJ with Federal
__::c~.::o::.:r:::,&:p':.:::1U::..:t:.:::e:.:::d::..__ _J____:.:w~i~t~h!-!'-! R.. ~ank
_A~?.~ry·e-~~
_ _ _ _ _ _ _ _ _..J...__
1-!onda.y
Tuesday
\7ednesda.y
Thursday
Friday
Saturday
Sunday (Saturday
figures reEeated)
$79,000
$800,000
750,000
775,CCO
325,000
G50,000
375,000
875,000
78~000
77{,000
so,ooo
82,000
65;000
S5,C00
.~~~-----------------------
s66,ooo
575,000·
5.750,000
Aggre;ate deficiency on which penalty is assess-3d $9,000
-------------------------------------------------------------------In figuring deficiencies the Bank should
t~:e
into consideration
reserves carried and required on Sun1ays and holidays, the figures
for these days to be the sa.-ne as
ately preceding.
sho~·m
for the business days irJ.T.edi-
In arriving at average daily figures of reserve
deficiencies, the Board vV"ill divide the aggragatc deficiencies by the
nu.'11~:)er of days in the calendar month in the case of country banks and
by the 2G or 35 days, as the case :;:ay oe, for central reserve and reserve city '..:anks.
The introductory code word RULE should 'Je followed by the nu.':'lber
of weeY.s covered by the rJport for central reserve and reserve city
banks
~nd
ths
~te
represanting the
fin~l
day of the period, thus for
exa:::Ele, n::?.ule 4, January 26, 11 indL:a.tes rsport rendered for a four ..
•
•
,
-3week period ending January 26 in the case of
c·~nt.ral -reser'ITe and.
reserve city b3riks; ani for the month of January for country barikRIt is requested that reports be tn.ns·c-.i. tteti
by wire coverjng t1:e .j·)n
the months of Janua:ey. February and Ilia.rch as soon as r.r3.cticable
after receipt of this latter and. th3.t reports for subsequent x.1onths
be telegraphed as soon a.s :;;:ossible after the end of each LlO:nth.
In
or1.er tha.t reports -:ray not be i<Jlayei pending fin3.l determination
of fena.lties, it is desired th3.t re1orts be submitted. on the basis
of original penalty
a.ssess:~nts.
Very truly yours,
Assistant Secretary.
(Copy of~-this le.tter sent to Cr.airrcan of each Federal .aeserve :Bank.)
•
St. 974
DEFICIENCIES IN RESERVES OF MEMBER. BAN:{S.
FEDERAL RESERVE BA..l'U{ OF - - - - - - - - - - - - -
(~te) ---------------RULE - Report covering period of ___ weeks ending
centr~l reserve ~nd reserve city banks, ~nd the
for country banks.
calend~r
month of
, 1920 for
----
Total number of diffe~ent (~) banks penalized on account
of defi~ient reserves!
Banks located in F.·R. b~ and branch cities DI:K - - - - - - DELL
Other reser~e city banks
DISK------Country banks
1.
'
. banks assessed penalties in exNumber of different ta,
cess of minimum rate:
Baru:s lccated in F. R. bank ~d branch cities
Oth3r reserve city banks
Cou.ntry banks
2.
M:1ximum
4.
of penalty charged:
Ba.nks located in F~ R. bank and branch cities
Othe:o reserve city banks
Country banks
r~ te
----=-=--==::_
DOME~~~·
DUST
DYKE
--~.
-------------
=-_---711-:
'l)l:BE --· __________.;......._
Aggregate deficiencies on wbich penalties were assessed
during report period: (See paragraph 3 of Boa:rd1 s
letter, St. 974~, dl.ted. --Aplt"U 9 , 1920.)
"Yl
B~nks
located in
F. R. Bank a.nd
Brl.nch Cities
$_ _ _ _ __
First week
Secvnd week
Third week
Fourth week·
Fift·.n week
Tot::~.l
Other Reserve
City Ba.nks
$._ _ _ _ __
------->toTE~=====
DUNN======
Country banks:
First half of month
Second h~lf of month
Tota.l
$·---~--
DTim============
No bank to be counted more th'l.n once no ma.tter how ml.nY times pena.liz:;.;d duri~
report period.
NOTE;
Da.ta to be telegraphed to Federa.l Reserve B~a.rd a.t th:;.; el.rliest pr~ctica.bla
d~te a.fter end of e~ch month, f~llowed by mail report.
TELEGRAM
FEDERAL RESERVE
BOARD
WASHINGTON
April l. 1920
Curtiss, :Boston
Jay, New York
Austin, ·Philadelphia
Wills, Cleveland
Hardy, Ricmond_
McCordj f, tlanta
Heath, Chicago.
Martin. St.Louis
Bich. i..Iinn.eapolis
Raci~a.y, Kansaa City
Ra."!lSey, Dallas
Perrin, San Francisco
Collected funds due other Re$erve bariks or their branches which
cannot be cleared through current day's settlement on account of holida.Ys
in other Reserve districts shoUld be reported
on
form
34 as "bue
to other
Federal Reilerve Banks ~ collected i'una.sn• ~ _i~clUded with it~ CORA and .
OTHR
iri·y~ur
Frida; night and daily TEND
telegrams, respectively.
Above procedure should be tollbwed in the case of banks and branches
Please.acknawledge and notify
'
f
bra.nches·accordingiy.
1!lmso:N.
I
I
I
~
OFFICIAL BUSINESS
GOVERNMENT
RATES
CHARGE FEDERAL RESERVE
BOARD
TELEGRAM
rEDERAL RESERVE
BOARD
WASHINGTON
April 2, 1920
St.lC5l
Curtiss. Boston
Jay, New York .
, A.us tin, Philadelphia.
Wills, Cleveland
1
I
Hardy, Ri chrlond
McCord, Atlanta.
Heath, Chicago
Martin, St.Louis
Rich, Minneapolis
Ramsay, Kansas City
Ramsey, Dallas
Perrin, San Francisco
Effective immediately member banks in selected cities may discontinue
showing in weekly concii tion reports form
st . 51 separate figures
for loans
secured by Liberty bonds, Victory notes and TreasUry certificates.
In lieu
thereof banks shOuld repot't total leans secured by u~s. war c;~bliga.tions,
exclusive of Pa,per under rediscount, as was done prior to November 14,
Former ·code woiods HUNT» KUSE a.nd. PURA for banks in Federal Reserve ·
·..
~
1919•
l, .
barik cities, Federal Reserve branch cities, and all reporting banks,
respectively, should be used in telegraphing data
to
the toard.
Revised
form St. 5l for your use in making consolidated report will be mailed .. ·
:ElJIERSON
OFFICIAL BUSINESS
GOVERNMENT
RATES
CHARGE FEDERAL RESERVE
BOARD
.
I•
•• P. G, HARDING, GOVIRNOR
ALBERT STRAUSS, VICI GOVIRHOI
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A.IIOEHLENPAH
DAVID P. HOUSTON
SICRITARY OF THI! TRU.SURY
CHAIRMAN
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COIIPTIOLLER OF THI CURRIKCY
W. T. CHAPMAN, SICRITARY
R. G. EMERSON, ASSISTANT Slc.RITARY
ADDRESS REPLY TO
W, II,IIILAY, Flii:AL A81HT
WASHINGTON
FEDERAL RESERVE BOARD
7, 1920.
April
St.1065
SUBJECT: Revis.ion of Forr:t St. 51, Weekly
Member Bank Condition Report.
Dear Sir:
There arc being
forwar:iz:~
to you today und.er sap-
aratc cover 100 copies of Fo~ St.51 (Revised April 5, 1920),
"Weekly report of principal resource and lia.bili ty i te::JS of . -· ..
~e~ber
banks in selected cities."
You will note that. in
tele~ram
accord~ce
~oard's
with the
of April 2. item nu~ber 6 has been changed so that
it now calls for total loans secura1 by United States
\Var
obligations, as was the case prior to Novembar 14, 1919, instea.·i
of
scparat~
figures of loans secured. by Liberty bonds, Victory
notes,and Treasury certificates.
.Amounts d.ue fro:..""l a.n·i due to
banks, bankers and trust co!Zlpanies, reported by r.1ember banks in
your Federal Reserve bank city in accordance with the Board1 s
letter of March 12 as nodified by its telegra.zr. of March 27,
should b.a shown a;a.inst items
16
and 17.
Yours very truly,
Assistant
Se~retary.
(Copy of above letter sent to Chair,:-an of aach F. R. Bank.)
'.
EX OPPICIO MltMBIEIIUI
IV. P. G. HARDING, GoVERNOR
ALBERT STRAUSS. VICE GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOUSTON
SECRETARY OF THI TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER Of THE CURRIIICY
W. T. CHAPMAN, SICRETARY
R. G. EMERSON, AsSISTANT SECRITARY
ADDRESS REPL.Y TO
FEDERAL RESERVE BOARD
W, M.IIILAY, FIICAL·ASINT
WASHINGTON
April 19, 1920.
St.
SUBJECT: Debits·· to individual account
clearing house banks.
1093
a.t
Dear Sir:
The Board has. been fo-rwarding to you_ ea.ch we9k
of
copies
its weekly press s ta.tement snowing debits to individual account
at clearing house b3Jlks, for tUstribution to members and clearing
non-members 9f the several reporting clearing houses in ycur district.
Will you kindly advise the reporting
b~s t~t
the Board
is revising its :J>a.iling lists a.nd would like to be informed whether
or not.thay desire to receive copies of this statement issued in
the future.
Kindly advise· us cf the resu+ t of your inquiry. stating
how
~~
copies -of the
sta.te~ent
you desire furnished hereafter for
the above purpose, and oblige.
Very truly yours_.
Assistant Secretary.
(Copy of above letter sent to Cr..a.ir:-.:m of each Federal Reserve Ba.nk except
Phi13.delphia. and Chica.go.)
j'
\_)I
Ill. P. G. HARDING. GoVERNOR
EX 0PP'IC10 MI!:M81tR8
ALBERT STRAUSS, VICE GOVERNOit
ADOLPH C. MILLER
CHARLES S. HAMLIN
DAVID F. HOUSTON
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURIINCY
HENRY A. MOEHLENPAH
FEDERAL RESERVE BOARD
W. T. CHAPMAN, SECRETARY
R. G. EMERSON,ASSISTANT SECRETARY
ADDRESS REPLY TO
FEDERAL. RESERVE BOARD
W. M. IMLAY, FISCAL A&ENT
WASHINGTON
A~ril
20, 1920.
St. 1100
SUEJECT: Abstract of Condition Reports. of Member
St~te Banks ~nd Trust Companies as of
December 31, 1919·
Dear Sir:
We are fornarding to you under separate cover ·· copies of
the Board's Abstract No.9 showing condition of State Bank and
Trust Company members as at close of business on December 31, 1919.
Consolidated figures for ~11 member banks, both National and State,
:l.re shown on p:1ges l and 12. Please forward one copy of this abstract to each State Bank and Trust Company member in your district.
·Will you kindly advise the banks that the Board is revising its
lists and would like to be informed whether or not they desire
to receive copies of abstracts issued in the future. Please advise us
of the result of your inquiry, stating how many copies of abstracts
you desire furnished hereafter, and oblige.
~ailing
Very truly yours,
Assistant Secretary .
•
(Copy of above lettar sJnt to Chairman of each F. R. Barile.)
'
r-·
-··, ..,.
i ' ,,
llx
~~
j
W. P, G. HARDING, GOVERNOR
OFFICIO MEMDRI\1!1
ALBERT STRAUSS, VJC.E GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOUSTON
'
SECRETARY OF THE TREASURY
CHAJRMAH
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
W. M.IMLAY, FISOAL AGEHT
WASHINGTON
FEDERAL RESERVE BOARD
April 28, 1920
St.l120
SUBJECT: Revised Forr.1 105, Corcdi tion Report
of St:l.te B:l.nk and Trust Conp3.ny
r.1err:bers-
De:l.r Sir:
There a.re being forw3.rded to :rou tod::Ly under separate cover
by registered
m~il
copies of Form 105, revised as of April
20, 1920, togather with
copies of revised circular letter of
inskuctions regarding the prep1.ration of condition reports by
St::Lte Bank and Trust Company members.
Sample copies of the for.m
'•
and circula.r letter are enclosed herewith.
Pl(nse 'Jl:lil one copy of the circular letter and three copies
of the form to e:>.ch State :B:mk .:tnd Trust Coonpany member in your
district, with instructions to Y,_old th8 bl<1.n..1< forms pending receipt of a c3.ll for condition report, when they should be prorr:ptly
filled out and two copies
ten
d~ys
~3iled
to you - in no case later than
after receipt of tho c.:tll.
Please acknowledge raceipt.
Very truly yours,
Assistant Secretary.
(Enclosure.)
Copy of this letter sent to
Ch1irrr~n
of each F.R.
B~Y.
except New York.
J
St.ll33
-2In arrivin,; at "avera;;e daily reserve balances" used in calculating the
basic discount line and 11 avera~e daily amounts of paper held under discount"
during the period covered by the report, figures for Sundays and holidays
should be included, i.e., fi&uras for Sa.tur9,.ays and days preceding legal holidays should be repeated in order that the report may be based on the full
number of days in the report period.
You are authorized, on receipt of this letter, to discontinue the monthly
report of "tiabili ty of member banks to Reserve Banks, in excess of capital and
surplus,
11
which was requested in. the Board's telegram of March 7, 1919 (X-1414)
and letter X-1445 dated March 26, 1919.
Kindly acknowledE,e receipt.
Very truly yours,
Governor.
tetter sent to Chairman ~f each F. R. Bank.
t
t
Ex OP'l'ICIO
M~hiBaU
II. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOUSTON
SECRETARY OF THE tREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRIHCY
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
W, M.IIILAY, FISCAL A&ENT
WASHINGTON
FEDERAL RESERVE BOARD
May
5, l93J
St .. 1133
SUBJECT:
Discounts for Member Banks
in Excess of Basic Line.
Dear Sir:
With the view of
~nabling
the Board to follow more closely the credit
situation in each Federal Reserve district, will you kindly forward a statement to the Board at and as of close of business on the lOth, 20th and last
dey of each .month, ·beginning with May
10, showing the basic :iiscount 1ine
(to "be determined in the mannar indicated in the footnote to the subjoined
form) for each member bank in your district discounting paper in excess of
that line, also the average amount of paper held unier discount for such
banks during the period covered by the report.
Federal Reserve Bank of ___________________
MEMBER BANKS
GRAl~TED
During
DISCOUNTS IN EXCESS OF BASIC DISCryJNT LINE
period ending
10·~·
Basic Discount
Line
Name
Average daily amount
of paper under discount during period
covered by report.
Chairman or Governor.
Note:
Basic discount line e~uals 2i times (65 per cent of average
daily reserve balance maintained with Federal Reserve Bank
during previous calendar month plus amount of :Bank 1 s paid-in
subscription to capital stock of Federal Reservd Bank).
St.ll33
-2In arrivin,; at
11
averae;e daily reserve balances" used in calculating the
basic discount line and "avera;se daily amounts of paper held under discount"
during the period covered by the report, figures for Sundays and holidays
should be included, i.e., fi6ures for Satur~ys and days preceding legal holidays should be repeated in order that the repor~ may be based on the full
number of days in the report period.
You are authorized, on receipt of this letter, to discontinue the monthly
report of
11
surplus,
which was requested in. the Board 1 s telegram of March 7, 1919 (X-1414)
11
Liabili ty of member banks to Reserve Bank:s, in excess of capital and
and letter X-1445 dated March 26, 1919.
Kindly acknowledge receipt.
Very truly yours,
Governor.
Letter sent to Chairman of each F. R. Bank.
W. P. G. HARDING, GOVERNOB
ALiiRT ITIIAUSS, VICE GOVIRNOR
ADOLPH C.IIILL!II
CHAIILES S. MAll LIN
HENRY A.IIOEHLENPAH
Ex OPPICIO MEMBRIIB
DAVID F. HOUSTON
SECRETARY OF THE TREASURY
CHAIRMAN
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
W. T.CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRITARY
ADDRESS REPLY TO
w, M.IMUY, fi.CAL A~lNT
WASHINGTON
FEDERAL RESERVE BOARD
May 11, 1920.
St .. 1147 .
SUBJECT:
Extra Compensation, or Bonus
Paid Dnployees.
Dear Sir:
In order to insure a uniform method of reporting extra
compensation or bonus paid employees, may we request that such
additional compensation be included with salaries paid to the
respective groups of employees, items GIFT to GILT of the monthly expense report, Form
96; also that a note be
sh~v.n
on the re-
verse side of the form giving separately for each group of employees the amount
of extra compensation or bonus paid during
the report period.
In case your Bank has granted any bonus during the
past q_uarter, may
'Ne
ask that you kindly inform us of the amount
paid to each group of employees.
Please acknowledge receipt.
Very truly yours,
Assistant Secretary.
(COPY OF THIS LETTER SENT TO CHAIBM.AN OF EACH F. R. B.A..~)
Ex 0PFJCIO
MEMSE...
W, P, G. HARDING, GOVERNOR
ALBERT STRAUSS, Ylel GOVERNoR
A~LPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
DAVID F. HOUSTON
SECRETARY OF THI TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
CoMPTROLLER OF THI CURIEIICY
W. T, CHAPMAN, SleRETARY
Jl, G. EMERSON, ASSISTANT SleRETARY
W, M, IMLAY, FlleAL AGENT
ADDRESS RIIPL.Y TO
WASHINGTON
FEDERAL RE$ERVE BOARD
May 14, 1920
st.ll51
SUBJECT:
Sta.terr..ent of Federal Reserve Notes
Issued, Redeemed, etc., by Denominations, Form 44.
Dear Sir:
The Federal Reserve Issue and
ing final d&termination of the
Rede~tion
deno~nations
Division advises that
follow~
of notes redeemed prior to
January 1, 1920, several of the Federal Reserve Agents have found it necessary to make certain changes in the figures shown in their Decembar 1919
report , Form
44,
"Federal Reserve notes by denominations issued, redeemed,
and on hand, etc. 11
It will be appreciated, therefore, if you will advise us whether or not
any ch::mgas
h~ve
been found necessary in the figures shown in your Decen:ber
report, and if so forward a revised report for that month and for
~ach
month
during 1920 for which corrections are necessary.
Beginning with the month of April, may we request ·that your reports on
this for:n ba sub.mi tted in duplicate, one of 'Nhich will be retained by the
Division of Reports and Statistics, and the other deliverad to the Federal
Reserve Issue and Redemption Division.
Please acknowledge receipt.
sent to
(Letter
Very truly yours,
Assistant Secretary.
each Federal Reserve Agent)
!·
EX OFFICIO MI!MBBRS
',Y, P. G. HARDING, IJOVIRNOR
ALBERT STRAUII, VleK GOVEUOR
ADOLPH C. MILLER
CHAIILEI B. HAMLIN
HENIIY A, MOEHLENPAH
DAVID F. HOUSTON
SICIITARY OF THI TIIEAIUIY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTIOLLER OF THI CUIIINCY
W. T. CHAPMAN, SleRITARY
R. II. EMERSON, ASSISTANT SleRITARY
ADDRESS REPL.Y TO
W, II, IMLAY, Flle.lL A8.NT
WASHINGTON
FEDERAL RESERVE BOARD
St.,. 1185
M~
SUBJECT:
'tr, 1920.
Participation in
Bank of Japan
Agreement.
Dear Sir:
Referring to the Board's letter
X-1920~
of May 13,
and to the letter forwarded to you on the same subject under
date of May
19 by the Federal Reserve
Bank of New York, may
we request that when the distribution of the deposit held for
the account of the :Sank of Japan is made by the Federal Reserve
Bank of New York the amount of the deposit transferred to your
bank be shown in the deposit block on_ Form 34 against caption
"Foreign banks", code CINO, also that you show as a. memorandum
item the amount of yovr bank's contingent liability on bills
sold to the Bank of Japan under the agreement filed with the
Federal Reserve Bark of New York, against the caption "Oontingent liability on bills purchased. for foreign correspondents".
The amru.nt of suoh contingent liability should be telegraphed
to the Board as at Close of business eaeh Friday as a part of
your regu.lar Form
34 telegram. against
Code MILD.
Very truly yours·,
Assistmlt SEtcretary.
COPY OF THIS tETTER SID~ TO CRA.IRMAlif OF EACH FEDERAL
RESERVE B.A.L'!K EXCEPT NEW YORK
IIX OFI'ICIO MBM8SR8
l\', P, G. HARDING, GOVERNOR
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COIIPTROLLII OP THI CVRIItriCY
ADDRESS REPL.Y TO
W. T. CHAPMAN. SICIITAIY
II. G. EMERSON. AISISTANT SECRITAU
Wo II.IIII,AY 1 FIICAL A81~T
WASHINGTON
FEDERAL ~ESERVE BOARD
I
st. 1194
I
I
I
June 3, 1920.
I·
'
ALBIRT STRAUSS. VICI GOVERNOR
ADOLPH C. MILLER
CHARLES B. HAMLIN
HENIIY A.IIOEHL!NPAH
DAVID F. HOUSTON
SIC.RITA.RY OP THE TREASURY
SUJ3J"ECT:
Reports of C-old. and. Silver
Imports ~ Exports.
Dear Sir:
May we request that begiming with your June 1 to 10
reports of gold and silver imports and exports, you give,
in addition to the transactions for the current 10-day
period, the total amounts of gold and silver iwports and
exports fran January 1, 1920, to the. end of the report
period•
The latter infonnatiqn is called for on the re-
vised for.ms, Cat 1101, 1106, and 1110, a supply of which
was recently forwarded to your office.
We shall appreciate it if you will kindly have fUture
reports made out on the new fonns.
Very
tr~y
yours,
Assistant Secretary.
.
EX OFFICIO h\Eiifii£RS
DAVID F. HOUSTON
SECRETARY OF TH! TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
~)
£' t__)
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, Vltl GOVUNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON,A&SISTANT SECRETARY
ADDRESS REPLY TO
W. M.IMLAY, FISCAL AGENT
WASHINGTON
FEDERAL RESERVE BOARD
June 4, 1920.
SUBJECT:
I
I
I,
r:r-'':i''l
,_t
:c
St. 1196
Operations of Branch Banks.
•
Dear Sir:
With the view of presenting to the Board a detailed statement showing the
present operations of the Federal Reserve Branch Banks, it is desired to bring
up to date the outlines of the branches covering their powers and functions and
the character and volume of business handled, copies of WhiCh were forwarded to
you on October
2,
1919, with the Board's letter, St.
May we request, therefore
j
623·
that you revise the figures shown under "Earn-
ings and Expenses" and "Volume of Business Handled" in the second part of the
outline of your Branch (or Branches) so as to show monthly averages for each of
the three-month :periods ending on March 31 and June 30, 1920, except in the case
of clearing operations, the average figures for Which should be given for the
three-month periods ending on March 15 and June 15, 1920.
Will you also kindly give in the new outlines the following information together with any other :pertinent data or suggestions that may occur to you:
Directors - Name, business, home address and date of expiration of tar,m
of each director. Date of regular meetings.
Executive Committee - Composition:
Duties:
Regular meetings:
Personnel - Number of officers and employas as of Juna 30, 1920·
Territ~ry
assigned:
Assignment as of June 30~ 1920. Also ro~ changes
in boundary lines made since July 1, 1919, as well
as the dates on which the changes bacame effective.
Member Banks in Branch Terri tory ..
Separate figures for number, capital, surplus, and
total resources of National and non-National member
banks - (1) at opening of Branch and (2) as of May 4,1920 ·
(The latter figures should be based on condition reports received under
May 4 call) ..
'"
st.1196
- 2P~r List -
Number of non-member ba1iks on the par list (1) at opening
of branch, an~ (2) on Jur~ 30, 1920. Also number of nonmember banks not on par list on June 30, 1920.
Powers and Functions Exercised by Brancl1 Detaile<L statements covering each topic w~1ich is included
under the above heading in the old outlines, with any additional data you may deem important.
It is desired
t~:;.at
the outlines of the sevaral bra:1cl1es be made along the
same general lines and be as complGte as possible.
It will be ~ppreciated., there-
fore, if you will go over the old outlines covering the branches in other districts before finally submitting the statements for your branch or branches.
I.1ay we req_uest that you have the preparation of the new outlines erped.i ted
as much as possi blG in order that they may be prasanted to ti.1e Board at the
earliest practicable date after July 1, 1920.
Very truly yours,
Assistant Secretary.
Copy of this letter sent to Chairmar1 of each F. R. Barik, except Boston,
Philadelphia and Minneapolis.
J::X OFFICIO MEM8&1t8
DAVID F. HOUSTON
SECRETARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
ADDRESS REPLY TO
W. T, CHAPMAN, SECRETARY
Jl, G. EMERSON,ASSISTANT SECRETARY
W. M,lMLAY,FlSCAL AGENT
, WASHINGTON
FEDERAL RESERVE BOARD
W. P. G. HARDING. GOVERNOR
ALBERT STRAUSS. VICE GOVERNOR
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
Ju;.'10 9, 1920.
St.l207
SUBJECT:
Closing of books on June 30, 1920-
Dear Sir:
n1e
Boar~
requests that the books of all Federal Reserve
:Banl:s be closed ::c. .Tur10 30, 1920,
an~
in
~rd.er
to insure u.."'1ifo:cmi ty
of practice tne C:ollowin_g, mathoa. of trsc:.tment of net .;arning::;, re-
Res~rva
Board.:
1.
Cost of Federal B.es::>rva and. Federal Raserve Bank notes,
2.lsc of Furniture and E:Juipment:
C.:..arge balance of accou;.:Lo as s:.. own by books on
June 30 to current e:::_2::;~"'---' a.cco-c:.::.. "G.
2.
Raservc for ~·axes.
Set asid.e sufficier:t
taxes accrued..
c.il10;.;ll'vs
to tal:e care of all
3.
E:x:traordin.ar;t c::-.a.rge-off;; or Depreciatio~:. AllOWal'lCe$:
Defer all action re 0 arcdng extraordinary Cl1arge.- offs
or U..:J].Jreciation allowa.::w.as incluciin,; d.epreciati on
cb.arg,es O<"l accot~.;:l:. of 0a11k premises, until closing
of boolcs or. December )1, 1920.
4.
Distribution of Net Earnir.. ;ss after i'uakin; Allovvarice fgr
Di vii~nci. P .;:,.zn-..:m t s .
(a) Trc:rJ.sfer 10 pel~ cent to p:co:fit ::c.:-.:.ci loss account.
(b) T:..·ansf~:.~ balance o! 90 pa:..· c:mt to sur:plus
account, :::.:;rovided t::le sur;;lus accou.1:t woL:",ld not
as a result exceed t~1e brulk 1 s subs c:c i bed. capital,
in which case only sucl1 amount sl1ould. be transferred as is n.:;cessary to increass ": e normal
surplus to an ~.ount e-1ual ·~o ·:~:::.a 02,lllc 1 s subscribed capital.
(c) Transfer 90 per cent of reu-.ainu.-.:;c. 1 ii' any,
to account "Reservad for Govern;.,,;;nt Franci1ise
Tax", a.rlci 10 per cent to an accou.!.t on t~w books
of your bank to be k~;.ovm as "Supor-,-;,:.~cplus 11 •
I
St. 1207
.... 2 -
It is the Board's desire that the
nor~al
surplus account of each
Federal Reserve Bank, i.e., the surplus account which, according to law,
may reach a
maxi~
equivalent to the bank's subscribed capital, be kept
separate on the bank's books from the "Super-surplus"' to be accl.llllulated from
net profits retained by the bank after the normal surplus account shall have
reached 100 per cent of the bank's subscribed capital.
On Form 3tl- and in all published statements, however, the two accounts,
surplus and super-surplus, should be combined under the general heading
11
Surplus 11 •
May we request that you present this letter to your Board of Directors
at an early date so that their resolution in the rratter of closing the books
and payment of dividends on June 30, together with a statement of the estima.ted
amount of gross and net earnings, also of dividends accrued for the six months
ending June 30, 1920, may reach the Board not later than June 26, 1920.
Very truly yours,
Governor
(Copy of this letter sent to Chairman of each F. R.
B~nk.)
;, EX OFFICIO MltMBERJI
W, P, G, HARDING, GOVERNOR
ALBERT STRAUSS, VIC: I GOVERNOI
DAVID F. HOUSTON
F'EDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRINCY
W. T. CHAPMAN,
~.
l
II
r
SECRETARY
R. G. EMERSON,ASSISTANT SECRETARY
ADDRESS REPLY TO
W. M.IMLAY, fiSCAl. AGENT
WASHINGTON
FEDERAL RESERVE BOARD
I
r·
I
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
SECRETARY OF THE TREASURY
CHAIRMAN
June 15, 1920 •
St. 1209.
SUBJECT:
Report of Earnings. Ex;penses
and Dividend Pa~ents for six
months ending June 30, 1920.
Dear Sir:
In addition to your regular earnings and expense
reports for the month of June, will you kindly furnish the
Board with a statament showing the following information for
the six months ending June 30, 1920. It will be appreciated
if you will have this data compiled and telegraphed to the
Board not later than July 7, 1920; using the code indicated •
.AMOUNT
EACH
Gross earnings
ETTA - Total current expenses
EARN Current net earnings
$_ _ __
$~---
EDEN- Credits to profit and loss a/c
er~enses
of F.R.Board (See Board's
letter St.820 dated Jan. 2J1920
EARS- Other credits, net, to profit
and loss during six months period ----------Total
ELBO - Net amount available for dividends,
surplus, etc.
EYRE- Dividends paid (including interest
on surrendered stock)
Carried
to profit and loss*
EADS
EVEN- Carried to normal surplus
acco1mt*.
EASE- Carried to "super-surplus" account*
EVER - Reserved for franchise tax*
Total
*
See Board's letter St. 1207 dated June 9, 1920.
•
•
- 2-
l-
St. 1209
.An additional statement to accompany your regular
June earnings a."'l.d expense report should also be furnished to
the ~oard, Showing all debits and credits to profit and loss
during the previous six months.
1
Very truly yours,
Assistant Secretary.
\
TO THE CHAIRMAN OF ALL FEDERAL RESERVE
I
I
'
~.ANKS.
Ex
0PFICIO MEMBERS
DAVID F. HOUSTON
SECRETARY OF THE TREASURY
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
ADOLPH C. MILLER
CHARLES I. HAMLIN
HENRY /1. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON,ASSISTANT SECRETARY
ADDRESS IIEPLV TO
FEDERAL RESERVE BOARD
WASHINGTON
W, M.IMLAY, F!S~IIL A"NT
June 23, 1920.
St. 1246.
SUBJECT: Earnings ~nd Dividend.:> reports
of Shte B::ml: ;l.nd Trust Comp:l.ny
members ~s of June 30, 1920.
\
Dear Sir:
There are being forwarded to you today under separa.te
cover
copies of fo~ 107 for use of State bark and Trust
co;r.pany rr:ei::bers in sub:r.i tting their se::d-anmul reports of
earnings and dividends.
Please a.dvise the banks that the report is to cover the
six-rr.onth period ending June 30, 1920, irrespective of whether
or not they nn.y h1.ve closed their books on that d~te, or whether
any dividends that :r.xy have been declared cover that particular
period.
I
Th0 report should be submitted to you in duplicate Within
ten dJ.ys after receipt of the blank for;ns by reporting barks.
\
Ver'· truly yours,
f
I
Assistant Secretary,
f·
I
(Cop~~
of this letter aent to Cr..airma.r. of each li'.R.Ba.:nk except Cleveland.)
E:X
OFFICIO ME!,IBERS
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERHOR
QAVID F. HOUSTON
SECIITARY OP THE TREASURY
CHAIRMAN
J()HN SKELTON WILLIAMS
COMPTROLLER OF THE CURRI.IICY
FEDERAL RESERVE BOARD
ADOLPH C. MILLER
CHARLES S. HAMLIN
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON,ASSISTAJIT SECRITART
W. M.IMLAY, FISCAL AGENT
ADDRESS REPL.Y TO
FEDERAL RJ;:SERVE BOARD
WASHINGTON
June 24, 1920.
St.l248
i
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SUBJECT: Revised Foru1 105, Condition Report
of State Bank and Trust Company
Members.
Dear Sir:
There ar~ being forwarded to you today under separate cover by registered mail
copies of Form 105, revised as of June 19, 1920, together with
copies of circular letter of instructions dated April 20 regarding the
preparation of condition reports by State Bank ~~d Trust Compro1y members.
Please :wail three copies of the forw to each State Bank and Trust Company member in your district, with instructions to hold t..'le blank forms pending receipt of a call for condition report, when they should be promptly filled out and two copies mailed to you- in no case later than ten days after
receipt of the call.
·
State banks and Trust company members who submitted condition reports
as of May 4 and were supplied at t11at time with a copy of the letter of instructions above mentioned, should be advised that the general instructions
of April 20 are appli-able to the revised form of report. Institutions
which have joined the system since May 4, 1920, should be supplied with a
copy of the general instructions of April 20.
Please aCknowledge receipt.
Very truly yours,
Assistant Secretary.
(Copy of this letter sent to Chainman of each F. R. Bank.)
•
EX OP'P'ICIO MEM8ER8
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
DAVID F. HOUSTON
SECRETARY OF THE TREASURY
CHAIR MAll
FEDERAL RESERVE BOARD
JOHN SK!LTON WILLIAMS
COMPTROLLER OF THE CURRENCY
W. T. CHAPMAN. SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
ADDRESS REPLY TO
FEDERAL RESERVE BOARD
SUBJECT:
Report of Deficiencies in
Deposit Reserves.
Dear Sir:
With r~ference to the Board's telegram of this date regarding
pa.jment of taxes on deficiencies in deposit reserves, a copy of
which is enclosed herewith, may we request that for verification
purposes. reports be subuitted in duplicate on Form st.l252, "Report of Deficiencies in Deposit Reserves", 50 copies of which are
being mailed to you under separate cover today. The original of
suCh report, signed by the CaShier and the Auditor, should be mailed
to the Division of Public Moneys, Treasury Department, and the duplicate copy to the Federal Reserve Board.
\
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:
W. M,JMLAY, FISCAL AGENT
WASHINGTON
June 2S, 1920 .
st.l254
I~
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I
ADOLPH C. III~LER
CHARLES S. HAMLIN
HENRY A. IIOEHLENPAH
\·
In case your bank has had a deficiency in deposit reserves, it
is requasted that your first report on form st.1252 be submitted at
and as of close of business on Juna 30, 1920. Thereafter reports
should be sul::mitted as of close of business on the last day of each
month during which any deficiencies have occurred.
In "case your :Sank has no deficiency in deposit reserves during
the month, a statement in letter form, certifying to the fact, should
be sul::mitted as at close of bUsiness the last day of the month to the
Division of Pu.blic Moneys, Treasury Department, with copy to the Federal
Reserve Board.
Very truly yours,
i'
Assistant Secretary.
(En·closure)
(Copy of this letter sent to Chairman of each F. R. :Sank)
EX OFFICIO MEMBERS
W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GOVERNOR
DAVID F. HOUSTON
ADOLPH C. MILLER
SECRETARY OF THE TREASURY
CHARLES S. HAMLIN
CHAIRMAN
FEDERAL RESERVE BOARD
JOHN SKELTON WILLIAMS
COMPTROLLER OF THE CURRENCY
ADDRESS REPL.Y TO
WASHINGTON
FEDERAL RESERVE BOARD
HENRY A. MOEHLENPAH
W. T. CHAPMAN, SECRETARY
R. G. EMERSON, ASSISTANT SECRETARY
W. M.IMLAY, FISCAL AGENT
June 30, 1920.
St.l259
SUBJECT:
Pre:paJ~IDents for Paper under
Rediscount with another
Federal Reserve Bank.
Dear Sir:
The :Board has been experiencing considerable difficulty
recently in securing correct figures for use in the compilation
of the daily statements of condition of Federal Reserve Banks,
and for :publication in its weekly press statements, because of
a laCk of synchronization of entries on the books of the Federal
Reserve J3anks in cases where :paper under rediscount with another
Federal Reserve Bank is rebated or otherwise taken up before
maturity.
With a view to the el~ination of these difficulties and the
unnecessary work and confusion incident to reconciling the BankS'
figures, may we req,uest that in the future, each Federal Reserve ·
Bank rediscounting paper with another Federal Reserve Bank see
to it that advises of all rebates are dispatChed so as to reach
the discounting Bank in ample time to enable it to r:.~ake the necessary entries on its books before they are finally closed for the
day.
It is believed that if the Reserve Banks will exercise due
care in this matter, the Board will experience very little, if
any, difficulty in obtaining correct fisures.
In case, however, telegraphic advice of the rebate of paper
is received by a discounting Reserve Bank after its books have
I
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st.l259
- 2-
been' closed for the day it will be necessary for such bank to make
proper notation on its books that prepayment for the rebated paper
was received as of the previous day and to revise its Form 34 by
reducing the c:'Llount of discounted paper on hand and by increasing
the amount of its deferred debits (uncollected items).
The me~orandum
item "J3ills discounted for other Federal Reserve :Banks" will likewise
have to be reduced by the arnoun t of the paper so rebated..
Changes made as indicated. above after the daily "Tend" or Friday
night Form
34
telegrams have been filed. should. be brought to the
attention of the :Board promptly by suppl6mentary telegram.
Very truly yours,
Assistant
(Copy of this letter sent to Chairman of each F. R. :Bank)
Secr~tary.
@FedFRASER