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X-1530
i
EBEERAL RESERVE BOARD ANNOUNCEMENT
FOB THE ,'ffiEK ENDING JANUARY 4, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
Resources
DISTRICT NO. 12.
Wells Fargo Bank & Union Trust
Co., San Francisco, Cal.
$9,000,000
^5,000,000
$131,823,000
CLOSED;
Iowa Savings Bank, Audubon, Iowa.
Bank of 7<aynesville, Waynesville, Mo.
SUCCEEDED BY STATE MEMBER:
Union Trust Company, San Francisco, Cal., has been succeeded
by the Wells-Fargo Bank &. Union Trust Company, San Francisco, Cal.,
a member, being a merger of the Union Trust Co. and. the 7/ells Fargo
Nevada National Bank.
SUCCEEDED BY NATIONAL BANK:
Texas Bank and Trust Co., Galveston, Texas.
CONVERTED TO NATIONAL BANK:
American Exchange Bank, Milwaukee, 7/isconsin.
Bank of Hattiesburg and Trust Co., Hattiesburg, Miss.
VOLUNTARY LIQUIDATION:
First
State Bank, Mount Carmel, Illinois.
WITHDRAWALS:
Farmers State Bank, Rockham, South Dakota.
City State Bank, Ogden, Iowa,
Foreman Trust & Savings Bank, Chicago, 111.
PERMISSION GRANTED TO EXERCISE TRUST PO'YERS:
First National Bank, St. Augustine, Fla.
Commercial National Bank, Hattiesburg, Miss.
City National Bank, Fort Smith, Ark,
\
X-1530
' FEDERAL RESERVE BOARD ANNOUNCEMENT
JOB THE ,/EEK ENDING JANUARY 11, 1924.
ABUTTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
Resources
DISTRICT NO. 5.
Atlantic Exchange Bank & Trust Co.,
Baltimore, Maryland.
#1,000,000
%1,000,000
$10,677,070
50,000
2,995,331
DISTRICT NO. 7.
Citizens Savings Bank,
Mount Clemens, Michigan.
150,000
CLOSED:
Bank of Camilla, Camilla, Georgia.
Security State Bank, Portales., New Mexico.
AUTHORIZED TO ACCENT DRAFTS AND BILLS OF EXCHANGE
UP TO 100 PER CENT OF CAPITAL AND SURPLUS:
Industrial Trust Company, Providence, R. I,
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
.Windham National Bank, vVillimantic, Conn.
Emerson National Bank, Warrenstourgh, N, Y.
American National Bank, Rushville, Ind.
First National Bank, Bentonville, Ark.
X-1530
FEDERAL RESERVE BOARD ANNOUN CEMENT
FOB THE WEEK ENDING JANUARY 18, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Citizens Banking and Trust Co.,
Conneaut, Ohio.
$125,000
#32,750
Total
resources
DISTRICT NO. 4.
#1,261,754
• REOPENED;
The Security State Bank, portales, New Mexico.
VOLUNTARY .LIQUIDATIONS:
Fort Scott State Bank, Fort Scott, Kansas.
Conrad Trust & Savings Bank, Helena, Montana,
(assets being taken over by other Helena banks).
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF
EXCHANGE UP TO 100
C ^ T OF COITAL AND SURPLUS;
j.he Atlantic Exchange Bank & Trust Co., Baltimore, Maryland.
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE ,ffiEK ENDING JANUARY 25, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
DISTRICT NO. 8.
Crittenden County Bank,
Marion, Ark,
(Succeeded Crittenden County
bank & Trust Co., a member). .
3i>200,000
- -
fi ,725,164
CHANGE OF TITLE:
The Hub Trust Company, Bdston, Mass., has changed its title
to the Bank of Commerce & Tfust Company.
VOLUNTARY LIQUIDATION:
Albion State Bank, Albion, Washington.
MERGED WITH NON-MEMBER:
The Surprise Valley Bank, Cedarville, California, has merged
with the Bank of Fort Bidwell, Fort Bidwell, California, a non-member.
NATIONAL BANK ABSORBED BY STATE MEMBER:
The Merchants Natioral Bank, Buffalo, Ni Y., has been absorbed
by the Buffald TfrUst Company, Buffalo, Ni Y.* a member.
STATE MEMBER ABSORBED BY NATIONAL BANK:
The State Trust & Savings Bank, Albuquerque, N. Mex.
NON-MEMBERS ABSORBED BY STATE MEMBERS:
The Merchants Bank, Mobile, Ala., has absorbed the Farmers and
Mechanics Bank, Mobile, Ala., a non-member.
The American Bank & Trust Co., Denver, Colo., has absorbed
the Union State Bank, Denver, Colo,, a non-member.
CLOSED:
Citizens Savings Bank, Decorah, Iowa.
Evart State Bank, Eyart, Michigan.
Citizens State Bank, Culbertson, Montana.
Phi lipsburg State Bank, Philipsburg, Montana.
PERMISSION GRANTED TO EXERCISE TRUST gO,VSRS:
Metuchen National Bank, Metucaen, N. J.
First National Bank, Toms River, N. J.
First National Bank, Delmar, Del,
Peoples National Bank, Norristovvn, Penna.
Second National Bank, Warren, Ohio.
South Texas Commercial National Bank, Houston, Texas.
United States National Bank, Galveston, Texas.
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE 7/EEK ENDING FEBRUARY 1, 1924.
ADMITTED TO THE FEIiERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
$200,000
4,90,000
$2,107,964
DISTRICT NO. 8.
Broadway Savings Trust Co.,
St. Louis, Mo. v
CHANGES IN STATE B*NK MEMBERSHIP:
absorbed by National Bank.
Falfurrias State Bank, Faifurrias, Texas.
Absorbed by State Member.
Imperial Valley Bank, Brawley, California, absorbed by the
Pacific Southwest Trust & Savings Bank, Los Angeles, California.
Closed.
Exchange Bank of Valdosta, Valdosta, Ga.
American Bank & Trust Co., Missoula, Mont.
First State Bank, Alamogordo, N. Mex.
Insolvent.
Pecos Valley State Bank, Pecos, Texas.
Withdrawn:
Union State Bank, Winter Park, Fla.
AUTHORIZED TO ACCENT DRAFTS AND BILLS OF EXCHANGE
UP TO 100 PER CENT OF CAPITAL AND SURPLUS:
T.'ells Far ga Bank & Union Trust Co., San Francisco, Calif.
PERMISSION GRANTED TO EXERCISE TRUST PQ"/ERS:
Commercial National Bank, Washington, D. C.
First National Bank, Norton, 7a.
First National Bank, Fergus Falls, Minn.
FEDERAL RESERVE BOARD
WASHINGTON
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDING FEBRUARY 8 , 1924,
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Total
resources
Capital
Surplus
#200,000
$50,000
#259,150
35,000
7*000
585*918
DISTRICT NO. 2.
Central Home Trust Co.,
Elisabeth, N. J.
DISTRICT NO, T*
Farmers Savings Bank,
Palmer, Iowa
CHANGES IN STATE BANK MEMBERSHIP:
Closed:
The Farmers Bank, Canon, Ga.
Empire and State Bank, Lewistown, Mont.
The Bank of Van Tassell, Van Tassell, Wyo.
Absorption;
The Buffalo Trust Company, Buffalo, N. Y., a member, has
absorbed the Lafayette National Bank, Buffalo, N, Y.
Withdrawals:
Dayton Savings & Trust Co., Dayton, Ohio.
Lewis Bank & Trust Co., Upper Sandusky, Ohio.
PERMISSION GRANTED TO EXERCISE TRUST P0~,VERS.Montpelier National Bank, Montpeiier, Vt.
First National Bank, Danville, Penna. (Supplemental}:.
Sfcpange National Bank of McKean County, Smethport, Penna.
Snell National Bank, Winter Haven, Fla.
Capital National Bank, Jackson, Miss.
West Coast National Bank, Portland, Ore.
Xxl530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE ?®EK ENDING FEBRUABY X3, 1924.
ATMTTTRT) TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
# 25,000
$ 5,000
$601,935
DISTRICT NO. 7.
State Savings Bank,
Marlette, Mich.
CHANGES IN STATE BANK MEMBERSHIP:
Change of Title
New Bern Banking & Trust Co., New Bern, N. C., has changed its
title to Eastern Bank & Trust Co., New Bern, N. C.
Closed
Bank of Brookings, Brookings, S. Dak.
Security Savings Bank, Rapid City, S. Dak.
Absorbed by National Bank
Clinton State Bank, Clinton, Okla,, a member, has been absorbed by the Security National Bank, Clinton, Okla.
AUTHORIZED TO ACCEPT IRAFTS AND BILL5 OF EXCHANGE
U? TO 100 PER CENT OF CAPITAL AND SUEu'LPS;
South Texas National Bank, Galveston, Texas.
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE ,SEK ENDING FEBRUARY 22, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
CHANGES IN STATE BANK MEMBERSHIP:
Change of Title
The Ballinger State Bank & Trust Co., Ballinger, Texas,
has changed its title to Ballinger State Bank.
Closed
Battle Creek Savings Bank, Battle Creek, Iowa,
Insolvent
Iowa Savings Bank, Audubon, Iowa.
Citizens State Bank, Roundup, Mont.
Security State Bank, Wolf Point, Mont.
First State Bank, Alamogordo, N. Mex. .
Absorbed by a National Bank
The Security State Bank, Decatur, Texas, has been
absorbed by the First National Bank of Decatur, Texas.
Withdrawn
Farmers & Merchants Savings Bank, Burbank, Calif.
PERMISSION GRANTED TO EXERCISE TRUST P07SRS:
Portland National Bank, Portland, Maine (Sup,).
Louisville National Bank, Louisville, Ky.
First National Bank, Anaheim, Calif.
United States National Bank, LlcMinnville, Ore.
X-2530
FEDERAL RESERVE BOARD AJjTNOUNCEMENT
BOB THE WEEK ENDING FEBRUARY 29, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM;
Capital
Surplus
Total
resources
First American Bank & Trust Co.,
lima, Ohio.
$150,000
$207,000
#4,557,923
10,000
309,023
DISTRICT NO. 4.
DISTRICT NO. 7.
Citizens State Savings Bank,
New Baltimore, Mich.
25,000
CHANGES IN STATE BANK MEMBERSHIP:
Withdrawn:
First btate Bank & Trust Co., McAllen, Texas.
Absorbed by State Member:
The Pioneer Bank, porterville, California, has been absorbed
by the Pacific Southwest Trust & Savings Bank, Los Angeles, Calif.
••PERMISSION GRANTED TO EXERCISE TRUST POWERS;
Ottawa County national Bank, Miami, Okla.
Pir^t National Bank, Greenville, Penna. (Supplemental).
Uniontown National Bank & Trust Co., Uniontown, Penna.
Citizens National Bank, Hammond, La.
National City Savings Bank & Tfrust Co., VickSburg, Miss.
National Peoples Savings Bank & Ttust C o ^ Vicksfeuirg* Miss.
McKeen National Bank, Torre Haute, Ind.
i
X-1530
FEDERAL RESERVE BOAED ANNOUNCEMENT
FOR THE "/EEK ENDING MARCH 7, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
DISTRICT NO. 8.
Twin City Bank,
North Little Rock, Ark.
Chippewa Trust Co.,
St. Louis, Mo.
#100,000
$20,000
$769,471
200,000
50,000
1,513,515
CHANGES IN ST-aTE BANK MEMBERSHIP;
Closed:
Magnolia Savings Bank, Magnolia, Iowa.
Voluntary liquidation;
Citizens Savings Bank, Decorah, I*wa.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First National Bank, Glens Falls, N. Y.
Salt Springs National Bank, Syracuse# N. Y.
Harlan National Bank, Harlan, Ky.
Second National Bank, Greenville", Ohio.
First National Bank, Menominie, Wis.
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE ;®K ENDING MARCH 14, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM;
Capital
Surplss
^250,00u
^150,0u0
DISTRICT HO. 5.
First Bank & Trust Co.,
Mechanicsburg, Pa.
PERCUSSION GRATED TO EXERCISE TRUST POWERS:
East River National Bank, New York, N. Y.
Miners National Bank, Pottsville, Pa.
Merchants National Bank of W. Va., Clarksburg, W. Va.
National Bank of Carol, Carmi, 111.
Total
resources
o
X-1530
EEBEPAL RESERVE BOABD ANNOUNCEMENT
FOR THE WEEK ENDING MARCH 21, 1924
ATMITTF.T) TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
#100,000
$35,000
$613,166
DISTRICT NO. 2
Ramapo Trust Company,
Spring Valley; N. Y.
CHANGES IN STATE BANK MEMBERSHIP:
Closed:
The Planters Bank, Sarlton, Ga.
Voluntary Liquidation:
The Farmers Savings Bank, Roland, Iowa.
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE
UP TO 100 PEP CENT OF CAPITAL AND SURPLUS:
Fifth National Bank, New York, N. Y.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
The
The
The
The
National Bank of Newport, Newport, Vt.
National Bank of Wareham, War eh am, Mass.
Lincoln National Bank, Fort Wayne» Ind.
Commercial National Bank, Los Angeles, Cal.
X-1530
FEDFRAL RESERVE BOaEE ANNOUNCEMENT
FOR THE vTEEK ENDING MARCH 28, 1924
ABUTTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
$ 40,000
^616,652
DISTRICT NO. 10.
Colorado Savings & Trust Co.,
La Junta, Colo.
y 75,000
CHANGS IN STATE BANK MEMBERSHIP;
Absorbed by National Bank
The Central Metropolitan Bank, St. Paul, Minn., has been
absorbed by the National Exchange Bank, St. Paul, Minn.
PERMISSION GRANTED TO EXERCISE TRUST POwERS;
Franklin National Bank, Jersey City, N. J..
Commercial National Bank, New York, N, Y.
Loudoun National Bank, Leesburg, Va.
1 4
X-1530
FEEEExL RESERVE BOARD ANNOUNCEMENT
FOR THE ITEEIC ENDING APRIL 4, 1924.
ABUTTED TO THE FEDER'L RESERVE SYS TEE!:
Capital
Surplus
Total
resources
DISTRICT NO. 2.
Raritan Trust Company,
Perth Amboy, N. J.
^100,000
. $ 20,000
125,000
75,000
$1,739,753
DISTRICT NO. 3.
Citizens Bank & Trust Co.,
Middle town, Pa.
867,407 .
CHANGES IN STATE BANTC MEMBERSHIP; •
Closed:
The Mo Is on State Bank, Molson, Y/ash.
Security State Bank, Portales, N. Mex.
Absorbed by Non-member:
The Citizens State Bank, Alice, Texas, has been taken over
by the Security State Bank, Alice, Texas, a non-member.
Merged with State Member:
The Citizens Bank & Trust Company of Louisiana, Nev; Orleans,
La., has merged witK the Canal-Commercial Trust & Savings Bank,
New Orleans, La., both being members.
Converted to National Bank:
The American Bank & Trust Co., Denver, Colo.
PERMISSION GRIMED TO EXERCISE TRUST POWERS:
Atlantic HighlandsNational Bank, Atlantic Highlands, N. J. (Sup.)
Bridgeton National Bank, Bridge ton, N. J.
First National Bank, Schuylkill Haven, Pa.
First National Bank, Linton, Ind,
First National B?nk, Anna, 111. (Sup.)
Twin Cities National Bank, St. Paul, Minn.
American National Bank, Denver, Colo.
15
X-1530
EEIEEAL BE SERVE BOARD ANN0UNCI3"FNT
FOR THE WEEK ENDING APRIL 11, 1924
ATMTTTRT) TO THE] FEIBRAL RESERVE SYSTK:
Capital
Surplus
Total
resources
DISTRICT NO. 4,
Toledo Trust Company,
Toledo, Ohio.
§1,500,000-
§1,000,000 §6,623,485
DISTRICT NO. 11.
Guaranty State Bank,
ICosse^ Texas.
25,000
3,700
204,000
CHANGES IN STATE BANK miEERSHIP •
Change of Title:
The Lor/ry Bank & Trust Company of Georgia, Atlanta, Ga. *
has changed its title to Trust Company of Georgia.
Absorbed "by State 1C ember:
The Valley Bank of Fresno, Fresno, California, has "beer
taken over by the Pacific Southwest Trust & Savings Bank, Los
Angeles, Calif., and by the Bank of Italy, San Francisco, Calif,
PERMISSION GRANTED TO EXERCISE TRUST POSTERS:
Georges National Bank, Thomaston, Faine.
National Bank & Trust Co., Red Bank, N. J,
First National Bank, Ann Arbor, Fich.
National Bank of Fes? Eexico, Raton, N. Fex,
Skagit National Bank, Mount Vernon, "./ash.
16
X-1530
EEBERAL RESERVE BOARD ANNOUNCEMENT
FOR THE W W m T l t APRIL 19. 1924
ABUTTED TO THE FEIERAI RESERVE SYSTEM:
Capital
Surplus
Total
resources
$5,000
§229,331
DISTRICT NO. 4.
The Newton State Bank,
Newton Falls, Ohio,
$25,000
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Fairport National Bank, Faixport, New York.
First National Bank,
Tamaqua, Pennsylvania,
Citizens and. Peoples National Bank, pensacola, Florida.
17
X-1530
FEDERAL BE SERVE BOARD AMOUIICH SFT
FOR THE WEEK ENDING APRIL 25, 1924
ATlilTTED TO THE FEIERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
$25,000
#3,250
$116,847
DISTRICT HO. Bt
Producers State Bank,
Siloan Springs, Ark.
DISTRICT NO. 11.
The Liberty State Bank,
Soper, Okla.
15,000
-
25,000
7,000
84,563
DISTRICT NO. 12.
Bank of Beaverton,
Beaverton, Oreg.
492,056
CHANGES IB STATE BANE MEMBERSHIP:
Voluntary Liquidations Mercha nts & Savings Bank, Kenosha, Y/i scons in.
Security State Bank, Dillon, Montana.
PERMISSION GRANTET) mn pTHRCISE TRUST POSTERS:
Central National Bank & Trust Co., St. Petersburg, Fla.
First National Bank, Oelwein, Iowa.
Enid National Bank, Enid, Oklahona.
'
18
X-1530
EEIEEAL RESERVE BOARD AMOXINCEMEET
FOE THE WEEK ENDING I,CAY 2, 1924.
AIMIT2ED TO THE FEIERA.L KBSZRVE SYSTEM:
Capital
Surplus
Total
resources
$50,000
$5,000
$279,314
60,000
14,000
974,157
VLSTRICT m . 5.
Merchants & Miners State Bank,
Luzerne, Peirna.
DISTRICT KO. 9.
Bradley Bank,
Tomahawk, Wis.
DISTRICT m . n .
Guaranty State Bank,
Emory, Texas
17,500
- -
92,423
' 19
X-1530
FEEEBAL HESEBVB BOARD ANNOUNCEMENT
FOB THE WEEK ENDING MAY 9, 1924,
AIMITTED TD THE FEIERAL EC SERVE SYSTEM:
NONE
NATIONAL BANK ABSORBED BY STATE 12EKB5R;
The Union Trust Company of East St. lotiis, Illinois, has
taken over the Security National Bank of East St. Louis.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First National Bank, Hancock, N. Y.
Danville National Bank, Danville, Pa.
Russell National Bank, Lewistown, Pa.
Kensington National Bank, Philadelphia, Pa.
First National Bank, Plymouth, Pa.
Lowell National Bank, Lowell, Ind.
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE WEEK ENDED MAI 16, 192-=.
ADMITTED TO THE FEDERAL EE SERVE SYSTEM:
Capital
Surplus
Total
resources
$3,750
$50,551
DISTRICT NO. 8Mercnants and Farmers Bank,
Baldwin, Miss.
$15,000
CHANGES IN STATE 3AUK MEMBERSHIP:
Change of Title.
The Central State Bank of Lakeland, Florida, has changed its
title to "Central Bank & Trust Company of Lakeland".
Reopened.
The Itiraers Bank, Canon, Georgia.
National Bank Absorbed By State Mssiber.
The Mercantile Trust Company of California, San Francisco,
California, has absorbed tne Marin County National Bank, San Rafael,
California.
Six Months Withdrawals.
The Bridgeport Trust Company, Bridgeport, Conn.
Tne Yoakum State Bank, Yoakum, Texas.
PERMISSION GRANTED TO EXERCISE TRUST POSTERS:
First National Bank, MLllburn, N. J.
Uhion National Bank, Pniladelpnia, Fa. (Supplemental)
Columbia National Bank, Pittsburgh, Pa.
First National Bank, Princeton, Ky.
21
X-1530
FEDERAL RESERVE BOARD JtiTOUNCEMENT
FOE THE WEEK ENDED MAY 23, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital
Surplus
Total
resources
$250,000
$200,000
$2,143,950
DISTRICT NO. 2.
International Uhion Bank,
New York, N. Y.
CHANGES IN STATE BANK MEMBERSHIP:
Six Months Withdrawal.
Eastern Bank & Trust Co. , New Bern, N. C.
PERMISSION GRANTED TO EXERCISE THJST POWERS:
First National Bank, Manchester, N. H.
Franklin National Bank, Newark, Ohio.
Citizens National Bank, Baltimore, McL
22
X-153C
FEDERAL EESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED MAY 30, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capi ta.1
Surplus
Total
resources
$250,000
$62,500
$2,923,882
DISTRICT NO. 7.
Home State Bank for Savings,
Grand Rapids, Mien.
CHANGES IN STATE BANK MEMBERSHIP:
National Bank Aosorped by State Member:
The Meridian State Bank, Meridian, Idaho, has absorbed t m
First National Bank of Meridian, Idaho.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Rockland National Bank, Rockland, Maine.
Farmers National Bank, Malone, N. Y.
Citizens National Bank, Covington, Va.
Citizens National Bank, Charleston, W. Va.
First National Bank, Miami, Flo..
First National Bank, Deadwood, S. Dak.
1
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ilTDED JUNE 6, 1924.
ADmTTED TO THE FEDERAL RESERVE SYSTEM:
NONE.
CHANGES IN STATE BANK MEMBERSHIP:
Cnaxize of Title.
The Dili ted Banking & Savings Co. , Cleveland, Ohio, has
cnanged its title to "The Utiited Banking and Trust Company".
Voluntary Withdrawals.;
Peoples State Bank, Cabot, Arkansas.
Farmers & Merchants State Bank, Shamrock, Texas.
Absorbed by National Bank.
State Bank of Armstrong, Armstrong, Iowa* nas been absorbed by tne First National Bank of Armstrong.
PBmiSSION GRANTED TO EXERCISE TRUST POWERS:
First-Columbia National Bank, Columbia, Penna.
First National Bank, Hamburg, Fenna.
First National Bank, Blacks tone, Va.
Austin National Bank, Chicago, 111.
23
24
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR WEEK ENDED JUNE 13, 1924.
ADMITTED TO FEDERAL RESERVE SYSTEM:
NONE.
CHANGES IN STATE BANK MEMBERSHIP:
Qhnnfla of Title:
Ttie Gold and Company State Bank, Big Stone City, S. Dak. ,
nas cnanged its title to "Big Stone City State Bank".
Closed:
The Bank of Grayson, Grayson, Georgia.
Withdrawn:
The Farmers Bank, Canon, GeorgiaFirst Bank of Home dale, Home dale, Idaho.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Union National Bank, Bartlesville, Okla.
Northern National Bank, Philadelphia, Pcu
Planters and Merchants National Bank, South Boston, Va. (Sup.)
Florida National Bank, Jacksonville, Fla. (Sup.)
Second National Bank, Houston, Texas.
" 25
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE WEEK SIDED JUNE 20, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
DISTRICT NO. 3.
Miners Trust Co. ,
Nanticoke, Pa.
Capital
Surplus
Total
resources
""
$125,000
$150,000
$1,637,840
17,500
1,750
104,440
DISTRICT NO. 11.
Sudan State Bank,
Sudan, Texas.
CHANGES IN STATE BANK MEMBERSHIP:
Converted into National Bank.
W. R. Grace & Co's, Bank, New York, N„ Y.
Voluntary Withdrawal.
,
Steuben County State Bank, Angola, Ind.
Voluntary Liquidation.
The Canon Bank,
Canon,
Georgia.
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE
UP TO 100 PER CENT OF CAPITAL AND SURPLUS:
Grace National Bank of New York, New York, N. Y.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Grace National B»nk of New York,
New York, N. Y.
26
X-1530
FEDERAL BESERVE BOARD ANNOUNCEMENT
FOR TEE WEEK ENDED JUNE 27, 1924.
ADMITTED TO THE FEDERAL BESERVE SYSTEM:
Capital
S-grplus
Total
resources
$15,000
$ 1,500
$84,408
DISTRICT NO. 11.
The Farmers State Bank,
Garvin, Oklahoma.
CHANGES IN STATE BANK MpMRTOfiHTP«
Converted into National Bank,
Tae Security State Bank,
Sallisaw, Oklahoma.
Voluntary Withdrawal.
Toe State Bank of Mosinee,
Mbsinee, Wisconsin.
PERMISSION GRANTED TO EXERCISE TRUST POWERS;
Tbe tiiited National Bank of Troy, Troy, N. Y.
Second National Bank, Uniontown, Fema*
First National Bank, Rochester, Minn.
X-3932
IN THE UNITED STATES CIRCUIT COURT
OF APPEALS
FIFTH CIRCUIT.
—0—3—0—O—0—0—
No. Ulbg.
— 0 — O-^O—O—O — 0—
D. S. SOWELL,
Plaintiff in Error,
versus
FEDERAL RESERVE B A M OF DALIAS, TEXAS,
Defendent in Error.
—0—O—O—0—O—
Error to the District Court of the United States for the
Northern District of Texas.
—0*0—0—0—0—
J. D. Williamson for Plaintiff in Error.
E. B. Stroud, Jr., Tom
Scurry and Joseph Manson
McCormick, (Etheridge, McCormick & Bromberg, Charles C. Huff,
and E. B. Stroud, Jr., on the brief), for Defendant in Error.
""*Q— 0— O— O— O"*
Before WALKER and BRYAN, Circuit Judges, and GRUBB,
District Judge.
GRUBB, District Judge:
This is a writ of error from a
judgment for the defendant in error (plaintiff in the District
Court) against the plaintiff in error (defendant in that Court)
for the amount of a promissory note and interest, executed by
the defendant, made payable to the National Bank of Cleburne,
X-3932
1
28
and by it endorsed to the plaintiff, and pledged as collateral security
for an indebtedness in excess of the amount of the note. The Rational
Bank of Cleburne became insolvent and failed to pay its indebtedness to
the plaintiff, which proceeded to collect the note*
Three'objections to
the recovery were offered in the District Court, and are here insisted
upon.
(1) The defendant questioned the jurisdiction of the District
Court upon the ground that the plaintiff was an assignee of the note sued
on and his assignee could not h&ve sued the maker upon it in a federal
court•
(2) Because the plaintiff, as a holder of the note, negligently
failed to present it at the place of payment named in it, and negligently
failed to notify the maker of its dishonor•
(3)
Because the District Court refused to stay the suit until
it could be determined whether the other collateral, which the plaintiff
held to secure the indebtedness of the National Bank of Cleburne, was sufficient to pay the indebtedness.
1, Jurisdiction of the District Court was conceded unless prevented by reason of the operation of the "assignee clause" of Section 24
of the Judical Code*
It was also conceded that the case was one arising
under a law of the United States (American Trust & Bank Company vs.
Federal Reserve Bank of Atlanta, 2 5 6 U. S., 350), and that the federal
courts would have been without jurisdiction in a suit between the original
parties to the note. Jurisdiction depended upon whether the assignee clause
a
PPlied to a case in which the ground of federal jurisdiction was that the
case was one arising under a law of the United States. The plaintiff contends
-3*
X-3932'
29
and the District Court held that the assignee clause only applied to cases in which federal jurisdiction was acquired by the character of the
parties, and not to cases in which it depended upon the character of the
subject matter.
The assignee clause appeared in the Judiciary Act of
1789 and has remained in substantially like form in all subsequent acts.
In the Act of 17S9, federal jurisdiction was conferred only as a result
of the character of the parties. The United states, aliens and citizens
of different states alone could sue in the federal courts by its term.
Jurisdiction was not given in cases arising under a law of the United
States, except for a brief period, under the Act of February 13th, 1801;
until the passage of the Act of March 3rd, 1875J until that date the assignee clause could not therefore have applied to suits arising under the
laws of the United States. The courts further limited its application to
cases in which aliens and citizens o'f different states were parties, by
eliminating from its scope suits in which the United States were a party.
U. S. vs. Green, 26 Fed. Cases, 33>
15258. Before the Act of March
3rd, 1875, jurisdiction was denied federal corporations, unless their
charters expressly authorized them to sue in the federal courts. When
such power was expressly conferred, the courts held the assignee clause inapplicable; the suit being one arising under the laws of the United States.
Commercial National Bank vs. Simmons, 6 Fed. Cases, 226, No. J,Qb2; Bank of
U, S. vs. Planters Bank of Georgia, 9 '"heat. 9^4. When general jurisdiction was given the federal courts by the Act of March 3rd, 1875> over suits
arising under laws of the United States, the necessity for express charter
authorization to sue in the federal courts was removed, and the assignee
clause became inapplicable to the general ground of jurisdiction, as it had
been held to be in cases in which jurisdiction was conferred by special
30
x-3932
charter*
In the Act of 1887, as corrected by the Act of 1888, the posi-
tion of the assignee clause shows the intention of congress to have been
to limit its application to cases in which jurisdiction was acquired because of the character ol the parties*
It came immediately after them,
and before the grant of jurisdiction because the case arose under a law of
the United States. The change of the position of the clause in the Judicial Code is not significant of a change in meaning, in view of Section
295 of the Judicial Code, The case of Wyman vs. Wallace, 201 U* 3. 230,
is at least persuasive * In that case the assignee clause would have prevented jurisdiction from attaching because of diverse citizenship.
It was
sustained by the Supreme Court upon the idea that the case was one arising
under a law of the United States; the Act of June 30th, 18?6, conferring
jurisdiction on the federal courts in cases, in which the individual liability of a stockholder of a national bank was sought to be enforced, (as
was the case in that case) in addition to a recovery on a note.
It is
true that the Act of Congress conferred jurisdiction of such a proceeding
in terms on the federal courts but if the assignee clause had been held to
a
PPly to suits arising under the laws of the United States, it would have
operated to defeat the jurisdiction so acquired, for the plaintiff claimed
by an assignment and his assignor could not have resorted to the federal
courts*
The Supreme Court, in effect, held that it did not do so, because
jurisdiction was acquired, not because of diverse citizenship, but because
the case was a suit arising under the laws of the United States; the assignee clause applying to the former, but not to the latter ground of jurisdiction.
2.
The note sued on contained a provision that the maker waived
?5r
X-3932
31
protest, notice thereof and diligence in collecting. This provision was
in the body of the note, over the signature of the maker. Section 82 of
Art. 6001a B„ S., Texas, provides that "presentment for payment is dispensed with x x x x (3 ) by waiver of presentment, express or applied."
Section III of the same Article provides that
"A waiver of protest,
whether in case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver not only of a formal protest but also of
presentment and notice of dishonor."
vides that
Section 109 of the same Article pro-
"Notice of dishonor may be waived either before the time of
giving notice has arrived or after the omission to give due notice, and
the waiver may be express or implied,"
Section 110 provides that where the
waiver is embodied in the instrument itself, it binds all parties.
In view
of the waiver of presentment and notice of non-payment and diligence in
collecting, which the defendant signed as maker of the note, we find it unnecessary to determine what, if any, duties as to presentment and notice
of dishonor, rested.upon the plaintiff under the Texas Negotiable Instrument Act.
3-
Defendant's contention that the suit should have been stayed
until defendant had exhausted its other collateral is untenable in reason
and unsupported by authorities. The doctrine of marshalling assets applies only to the case of a junior lien holder, who seeks to compel a senior lien holder to exhaust security, which the senior has, and which the
junior has not access to; and only in cases of a common debtor to two creditors for the protection of the junior creditor.
It does not require a
bona fide holder of negotiable paper, pledged as collateral to an indebtedness, to proceed first against other collateral, because of equities alleged
-6-
X-3932
to exist between the original parties to the pledged paper. The obligation of the maker, as to the bona fide holder, is to pay certainly at a
fixed time. Payment at the fixed time ray be vital to the holder of the
paper, especially when it is a bank. The rights of the obligors, on the
other collateral, could be determined only in a proceeding to which they
were all made parties.
Such a determination would involve interminable de
lay and hopeless confusion. Bo such condition to the payment of the note
at maturity entered into the obligation of the maker; and to inject it
would be to greatly impair the negotiability of commercial paper, the value of which depends upon the assurance of prompt payment at maturity regardless of equities between the original parties. The authorities are op
posed to such an application of the doctrine of marshalling the assets.
Haas vs. Ee-zik of Commerce, 60 N. W. 85; Citizens State Bank vs. Iddings
84 N. Y. 78; Dallemand vs. Bank, 5^ H I .
App. 600;. Third National Bank vs
Harrison, 10 Fed. 2 U 3 ,
We find no error in the record and the judgment of the District
Court is
AFFIRMED.
(ORIGINAL FILED DECEMBER 6th, 1923)
FEDERAL RESERVE BOARD
WASHINGTON
x-3933
January 2, ig24.
SUBJECT: Information regarding the bonding
of officers ana employees.
Dear Sir:
The Federal. Reserve Board has received an inquiry from
the United States Bureau of Efficiency with regard to the bonding
of officers and employees of the Federal Reserve System. Information is asked upon the following points:
(1) What officers or employees of the Federal Reserve
Board and of the Federal reserve banks give bonds
funning to the Government?
(2) What is the penalty of each of these bonds?
(3) Please indicate present surety for each bond.
(4) Have any payments been made by sureties on such
bonds since the organization of the Federal reserve
banking system!
(5) If such payments have been made, please give cause
of loss, whether payment was made as a result of
suit, and reference to legal proceedings, if any.
(6) What is the general policy followed in bonding other
officers and employees of the Federal reserve banks
whose bonds do not run to the Government?
You are requested to submit to the Board the information
necessary to reply to these questions in so far as they affect your
particular bank.
Very truly yours,
D.R, Crissinger,
Governor.
To All Federal Reserve Agents.
34
FEDERAL RESERVE BOARD
WASHINGTON
X-3936
January J, I92U.
SUBJECT:
Inter-district Movement of Funds through Gold
Settlement Fund.
Dear Sir:
In reviewing the annual reports of the Federal
Reserve Banks for past years we note that certain of the
banks have shown tables giving the amount of money paid
to and received from each other Federal Reserve Bank
during the year through the Gold Settlement Fund. These
figures are particularly interesting as showing the trend
of business between given districts, especially when
figures for several years are available. We will appreciate it therefore if you will kiridly advise the Board
whether or not your'bank has compiled any figures showing
the amount of money received from and paid to each other
Federal Reserve Bank through the Gold Settlement Fund for
the current or for any prior years. In case these tables
have been compiled it will be appreciated if you will
kindly furnish the Board with a copy of such statements,
giving the figures by months if available in that form.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ,»LL FEDERAL RESERVE AGENTS
35
FEDERAL RESERVE BOARD
WASHINGTON
X-3937
January 7, iga4.
SUBJECT: Member Bank Branches.
Dear Sir:
At a meeting of the Federal Reserve Board today, consideration was given to applications received from three state
member "banks located in one of the Federal Reserve districts for
permission to establish from time to time during the course of
the next several months a number of branches in designated cities
or areas, in accordance with programs of branch bank development
contemplated by the applicant banks.
The Board adopted, the following resolution and directed
that it be communicated to all Federal Reserve Agents, with the
request that they in turh advise all member banks in their respective districts:
""'HERE/S, the Board, in Resolutions adopted November 7th, 1923,established certain principles, or
policies, regarding the Board's attitude toward the
extending of branch banks; .
"BE IT RESOLVED, that the banks making these applications, as well as others interested in the question
of branch banks, be informed that under regulations heretofore, established blanket authority will not be granted
to establish branches. Each application mast be presented to the Board separately and in regular form and
manner, subject to the approval of the State Banking
Authorities and a recommendation of the Federal Reserve
Bank of the district; and
"BE IT FURTHER RESOLVED, that any application to
establish a branch or branches in definitely named
places or locations in territory non-contiguous to the
city of the home office, which is made in good faith
and filed prior to February 1st, 1 9 2 U , may be considered
by the Board, as to detailed arrangements, after
February 1st, I 9 2 U .
"BE IT FURTHER RESOLVED, that the Federal Reserve
Board reserves to itself the right to pass upon each
application on its merits and to act accordingly."
Very truly yours,
>
•
Governo
TO ALL F. R. AGENTS
r.
o
FEDERAL RESERVE BOARD
WASHINGTON
X-3938
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
January 8, 1924;
SUBJECT: ADVICE OF CHANGED Iff STATUS OF STATE MEMBER BANKS.
Ufcar Sir:
It appears that the Board is not in all cases receiving
prompt advice ef changes in the status of State member banks as
required in letter X-2093 of April 9, 192S, with the result that
the publication of notices of such changes is very much delayed
and the records of the Board are frequently not up to date.
It
is therefore desired that in the future information be furnished
by wire, giving effective dates wherever possible, when a State
member institution has (1) suspended business or when a suspended bank has reopened.
(2) been declared insolvent.
(3i
gone into voluntary liquidation, with advice as to
whether absorbed by another bank or succeeded by a
new bank, giving name of bank in each instance.
(4) absorbed or taken over another bank, member or non-member,
giving capital, surplus, and total resources after absorption and also capital, surplus, and total resources
of bank absorbed.
(5) consolidated with or been absorbed by another bank, member
or non-member, and
(a) name of 6ther bank;
(b) name of consolidated bank;
(c) capital, surplus, and total resources of other
bank afid of consolidated bank.
Please also advise the Board by wire when a non-member institution has been closed.
Very truly yours,
J. C, NOELi,
Assistant Secretary.
X- 3939
37
IN TEE SUPREME COURT OF MISSOURI
. EM B/NC
OCTOBER TERM I923
ST/TE Ex Bel. BURNS NATIONAL BANK of
St. JOSEPH,
Petitioner.
vs.
(
No. 2U20S
A. B. DUNCAN, Judge of Probate Court
of Buchanan County.
Respondent
Mandamus, The Relator filsd its petition in this Court setting
forth its organization as a national bank and alleging that ens Mary E.
Bird, a citizen of the State of Missouri ani resident of the city of St.
Joseph, died November 27, 1922, leaving a will which was duly admitted to
probate in the Probate Court of Buchanan county, in which will she named
the relator as executor; that the Federal Reserve Act, Section 9704, paragraph K, in granting certain powers to national banks, included the ri^ht
to act as
executors of estates; that the Federal Reserve Board, under
the rules and regulations prescribed by the Federal Reserve .Act, granted
the petitioner the right to exercise its privileges so granted in so far
as such exercise of that right was not in contravention of the state of
local law; that under the Revised Statutes of Missouri for 19^9 > trust
companies of this state are authorized to act as executors, and in fiduciary
capacities; that subsequent to the probate of said will the petitioner
made application to the Probate Court of Buchanan County for appointment
as executor, and for the issuance of letters testamentary under the terms
of the will; that January 2 9 , 1923, the respondent, Judge of said Probate
-2-
X-3939
38
Court, entered an order declining to appoint the petitioner on the
grounds that under the laws of the State of Missouri, said petitioner
was not authorized to act as executor. The proceedings of the Probate
Court in that connection were set out in full, including the order declining to appoint the Burns National Bank as executor, and the appointment of Mary E. Williams, to be administratrix, with will annexed, of
said estate.
The petition thereupon prays this Court for an alternative
writ of mandamus, directing the respondent Judge of the Probate Court to
set aside said order appointing Maiy E. Williams, and to appoint the
petitioner as executor of said estate, or show cause why he had not done
so.
Upon the filing of such petition this Court caused an alternative
writ to be issued March 3, 1923.
The respondent then for return to the alternative writi demurred
on the ground that the aforesaid petition did not state facts which would
authorize the issuance of a peremptory writ of mandamus. The case, then,
is to be determined upon the facts stated in the petition for an alternative
writ.
I.
The petitioner calls attention to Section 11, R.S. Mo. 1919,
providing that after the probate of a will, letters testamentary shall be
granted to the persons therein appointed executors, arguing that "persons"
mentioned in the section includes corporations as well as natural persons.
The*e can be no force in this argument unless petitioner means that this
and other sections of the chapter relating to administration, authorize
any and every corporation to act as executor or in other fiduciary relation
"• 39
-3as provided for in that chapter.
*-3939
It is true that in many instances where
the word "person" is used in a statute, it is construed to include corporations.
The use of the term applies particularly to criminal statutes where
a criminal act affects the property of a person.
But that construction is
by no means universal; it depends upon the context and the intent with
which the term is employed.
"Person."
(30 Cyc p. 1526; See Words & Phrases, title
The entire purpose and context of Article 1 on Administration
excludes the idea that "person" means corporation.
Section 7, relating to
persons who may administer on estates; Section 6, excluding certain persons
from acting as administrator or .executor; Section 36, providing the form
of letters issued to an executor;, in fact, all the provisions of that article
show that the legislature was dealing with and granting powers to natural
persons.
It must be remembered that there was no common law right to make
a will or appoint an executor.
lation.
It is purely a matter of statutory regu-
The statute authorizing certain persons to act as executor is an
enabling statute, and it must be construed according to the intent and
purpose of the legislature in enacting it. The intent of the legislature
to include only natural persons in the authority granted in that article
appears not only in the terms of the article, but is shown by the actual
grant, in another statute, of authority to trust companies to act as
executors, and in other fiduciary relations.
There would have been no need
of such affirmative act if this chapter on Administration had granted such
authority to all corporations. Before any corporation in this state can
have a right to act in a fiduciary relation in administering estates there
must be express authority given that kind of a corporation and that statutory
-V
X-3939
40
authority mast be construed in pari materia with the chapter relating to
Administration.
Certainly there is no warrant for a contention that any
corporation which might be named, as executor in the will would have authority
to act as such unless the law creating and defining the powers of such
corporation should authorize it to perform such duties.
The petitioner
cannot derive authority to act as executor from the article on Administration
or the section of that article relating to executors,
It must be author-
ized to act through some other statute, Federal or State, giving it such
authority.
II.
The petitioner claims authority to act as executor under the
provisions of the Federal Reserve Act. A brief filed herein by several
amici curiae, presumably representing national banks, has a good deal to
say about the authority of the Federal government, quoting precedents to
the effect that the Constitution of the United States and the acts of
Congress, within the scope of authority delegated to them, are paramount,the Supreme Law of the land,- and binding upon all the States; that when
Congress has enacted a statute within its constitutional power, regulating
and defining the powers of any agency created by Congress,- a State cannot
by any enactment nullify or abridge the powers thus granted or defined.
Of course those principles are well established, and the extent of such
authority is not in issue in this case.
In accordance with its constitutional authority Congress, it was
held, had power to authorize the organization of national banks and invest
them with whatever functions it thought necessary to make the business of
the banks successful.
Thus incidental authority was founded upon necessity;
-5-
X-3999
41
national banks could be empowerad to perform any duties when "Congress was
of the opinion that these faculties were necessary to enable the bank to
perform the services which are exacted from it, and for which it was
created."
(First National Bank v„ Fellows, 244 U.S., I.e. 420).
That
quotation is taken from an earlier case and the principle applied to the
section of the Federal Reserve Act authorizing banks to act in fiduciary
capacities. That case is the only case cited, and, so far as we know, the
only case decided by the United States Supreme Court construing that feature
of the Federal Reserve Act under which the petitioner asserts its right.
It is mentioned often in later decisions of other courts, and the argument
of petitioner is largely based upon deductions drawn from it by such other
courts, Te think it settles a good many questions which have arisen in
relation to the act,- questions which occur in this case.
It is well to
note what is said there regarding the authority granted by Congress to a
national bank to serve in fiduciary relations, such as executor, as necessary to enable the bank to perform the services required of it. We will
notice below just what is meant by those duties in the light of the provision of the Federal Reserve Act.
III.
While Congress has power, unless restrained by the Federal Con-
stitution, to absorb4 to itself the entire regulation of such matters as
are under consideration here, it has not done so%
On the contrary, while
the Federal Reserve Act authorizes National Bants to act in the capacity of
executors, administrators, etc.* Congress appeared to have in mind the
popular protest against its supposed tendency to legislate in matters of
purely local and state concern, for it limited the authority of national
banks in that respect to cases where such authority was "not in contravention
x-3939
4of the state or local law.n
The question at issue lie re is whether the ex-
ercise of the fiduciary function by National Banks authorized by that provision of the Federal Reserve Act is in contravention of the law of . the
State of Missouri. First, however, we most ascertain what authority is to
decide that question.
Is its determination peculiarly within the juris-
diction of the Federal Court?
Or does this Court have authority to say
whether the exercise of such functions by National Banks is in contravention
of the law of this State?
It has always been held that the power to regulate the acquisition and transfer of property, descents and distributions, the devolution of estates, etc., is exclusively within the jurisdiction of the
State.
Overly v. Gordon, 177 U.S. 214; Penoy v. Neff, 95 U.S. 714.
Trustees,
Executors and administrators are the instruments through which the State
regulates and controls certain classes of property.
the Federal courts in the cases just mentioned.
This is recognized by
It naturally follows that
the State, by statute, has the right to say, and the state courts have the
right finally to determine, what agencies may exercise such control without
acting in contravention of the state law.
That was expressly held by the
Federal Supreme Court in the Fellows case. (244 U.S., I.e. 427-8), where
Chief Justice White said:
"In other words, we are of opinion that as the particular
functions in question by the express terms of the act of Congress
were given only, 'when not in contravention of the State or local
law,1 the state court was, if not expressly, at least impliedly,
authorized by Congress to consider and pass upon the question whether
the power was or was not in contravention of the state law, and we
place our conclusion on that ground.
nature
-7-
X-3939
of the subject dealt with adds cogency to this view since that subject
involves the action of state courts of probate in a universal sense, implying from its very nature the duty of such courts to pass upon the
question and the power of the court below within the limits of state
jurisdiction to settle, so far as the State was concerned, the question
for all such courts by one suit, thus avoiding the confusion which might
arise in the entire system of state probate proceedings and the very serious
injury to many classes of society which also might be occasioned."
Since that decision the Federal Reserve Act has been amended.
Originally it authorized the Federal Reserve Board.
"To grant by special permit to national banks applying therefor,
when not in contravention of State or local law, the right to act
as trustee, executor, administrator, or registrar of stocks and
bonds under such rales and regulations as the said board may prescribe."
Section 11 (k) of the Act was amended by Congress in September,
1918, so that the provision read as follows:
"To grant by special permit to national banks applying therefor,
when not in contravention of State or local law, the right to act
as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks,
trust companies, or other corporations which come into competition
with national banks are permitted to act under the laws of the State
in which the national bank is located.
"Whenever the laws of such State authorize or permit the exercise of any or all of the foregoing powers by State banks, trust
--3939 '
44
companies, or other corporations which compete "'ith national hanks, the
granting to and the exercise of such powers by national banks shall not
be deemed, to be in contravention of State or local law within the meaning
of this Act."
It cannot be contended that Congress by this amendment took
away from the courts of a State the right to interpret its own statutes
and to determine this particular question. The reasoning of the Supreme
Court in the Fellows case negatives the existence of any such authority
on the part of Congress.
The petitioner argues that this amendment enlarges the authority
of national banks, giving them authority to act in such matters where
before the amendment they had none.
On the contrary, the first paragraph
of the amendment limits the exercise of that authority.
Under the original
act the authority to act as executor, etc., riven to national banks was
only when such function was "not in contravention of the state or local
law." Under the first paragraph of the amendment it is not sufficient
that it is not in contravention of the state law, but there mast be
competition with state institutions, authorized to act in such fiduciary
capacities, before a national bank has such authority.
The petitioner calls attention to the second paragraph of the
amendment quoted as further limiting the right of
the state to exclude
national banks from acting in such capacities, by declaring that where
the State gives such authority to state banks and trust companies or other
corporations "which compete with national banks" the exercise of such
power "shall not be deemed to be in contravention of the state or local
laws."
Some courts have held this to be a legislative interpretation of
the authority granted and not binding upon the courts.
-9*
.
X-3939
Appellant says that it was not necessary for Congress to make
any qualification; that it had a right to authorize national banks to act
in fiduciary relations without any exceptions and regardless of the state
law.
so.
It is sufficient answer to say that Congress has not seen fit to do
On the contrary, Congress has dealt very tenderly with the supposed
sensitiveness of states in regard to encroachment upon their authority.
It
is not contended and cannot be that that provision attempts to take away
from the state courts the right to determine when the exercise of such
powers is in contravention of state law, except to define one particular
instance where it shall not be so considered.
It remains for the courts
to say what is meant by the competition with national banks as mentioned
in the act.
That the provision relating to the contravention of state or
local law is retained in the amendment shows an intent to give it some
meaning, and that meaning is not taken away by the attempted definition
following.
If the latter paragraph should be construed to statd the entire
case as to when national banks should be excluded from exercising such
authorities, the use of the expression "not in contravention of the state
or local law" would be superfluous.
We hold, therefore, that this Court has the right and the duty
to determine whether the office which the petitioner seeks to discharge is
in contravention of the laws of this state.
IV.
In consideration of the terms of paragraph 11 (k) of the Federal
Reserve Act we mast ascertain what Congress had in mind.
Congress did not
grant such powers to national banks because it claimed any right to provide
for the custody of property which is within the constitutional control of
-10-
the State,
X-3939
Congress had no intention to trespass upon State preserves.
National banks were vested with such functions because they ware necessary
to enable them to "perform the services which were exacted from them and
for which they were created."
equal competition.
It was a matter of surviving against un-
That idea is apparent in tfce Act, and particularly in
the amendment. Unless it was necessary to the proper discharge of its
duties there was no reason why a national bank should act in fiduciary
relations, and such function would not be necessary unless the bank came
in competition with the state institutions, w&ch would thereby have an advantage over their national competitors. This appears in the expressions
where the Act speaks of other corporations, "which come in competition
with national banks" * * * "which compete with national banks.v
If state
institutions of like character are denied the right to exercise such
functions national banks have no right to exercise them.
It is in contra-
vention of state law; that is, in contravention of the state legislative
policy.
It is only because national banks, by reason of an advantage given
to state institutions, could not compete and survive that this authority
is conferred upon them.
T%en Congress in the Act speaks of competition of course it
means competition on equal terms with state corporations.
It cannot be
that Congress intended national banks to have privileges and advantages
which state institutions could not enjoy in matters relating to control of
estates which are peculiarly within the state authority
The entire
purpose of the Act was not to cive national banks an advantage but to place
them upon equal terms with competitive state banks.
Federal Supreme Court in the Fellows case, I.e. U26:
It was said by the
-il-
_
X-3939
"This mast be since the state may not by legislation create
a condition as to a particular business which would bring
about actual or potential competition with the business of
national banks and at the same time deny the power of Congress
to meet such created condition by legislation appropriate to
avoid the injury which otherwise would be suffered by the
national agency. Of course, as the general sutyect of
regulating the class of business just referred to is peculiarly
within the state administration control, state regulation for
the conduct of such business, i£ not discriminatory or so unreasonable as to justify the conclusion that they necessarily
would so operate, would be controlling upon banks chartered by
Congress when they came in virtue of authority conferred upon
them by Congress to exert such particular powers
This is a distinct recognition of our interpretation of the
/ct.
National banks have no right to exercise the fiduciary functions
enumerated in'the statute unless the state has discriminated against
national banks in that respect and put them at a disadvantage.
If national
banks, without such authority can compete successfully with state institutions, then under the terms of the Act they have no right to demand
the exercise of such functions.
V.
In determining whether the exercise of fiduciary capacities
by a national bank is in contravention of the state law it is not necessary to point to a specific statute which forbids the exercise of such
functions by such banks or similar institutions of the State.
If it is
contrary to the policy of the State and plainly so appears from its
-12-
X-3939
statutory enactments, then it is in contravention of the state law.
The legislative power of the State has not given authority to state banks
to act as executors* administrators, etc., hut has selected trust companies
as the only and peculiar corporations to be invested with such trusts.
This authority is not %iven to trust* companies as a convenient incident
to the conduct of their ordinary business. The legislature was not considering the prosperity of trust companies, but was looking for the safety
of certain important trust funds which are attended with the natural insecurity and danger of dissipation, making them the especial and peculiar
concern of the law. The legislative purpose was not to confer a privilege
upon trust companies but to seek additional sources of security for those
funds. Hence the law-making body hedged about the custodians of such
funds with restrictions, conditions and securities with which only a trust
company could conveniently comply,- restrictions which the state courts
are powerless to impose upon national banks. National banks with the
regulatory provisions in the Federal Reserve .Act may be just as safe as
the state trust companies. ?ith that we have no concern. The propriety
and Expediency of statutes are for the sole determination of the legislative body. We must declare the legislative policy as we find it.
Now let us consider for a moment what that policy is:
(a)
The legislature has not given authority to act as executors and
administrators to state banks, the natural inevitable competitors of
national banks in the transaction of ordinary business.
(b)
In giving this authority to trust companies it has provided in
Section 11801 H.S, 1919, Subdividion 5, that;
-12*1/2
X-3939
"All investments made by any trust company of money received
by it in any fiduciary capacity shall be at its sole risk,
and for all losses of such money the capital stock and property
of the company shall be absolutely liable."
except on certain unimportant conditions.
(c)
Subdivision 8 of the said last mentioned section provides that
the property held by a trust company in trust "shall not be mingled with
the investments of the capital stock or other property belonging to such
trust company or be liable for debts or obligations thereof." For the
purposes of that section the trust company is required to have "a trust
department in which all the business authorized by the act" shall be kept
distinct and separate from its general business.
(d)
Subdivision 9, of the said section, provides that, unless
otherwise provided in the instrument creating the trust, on certain of
the money held by the trust company in a fiduciary capacity interest shall
be allowed at not less than 2^ per annum, compounded annually.
(e)
Section 11802, R.S. 1919» provides that the directors may set
apart a trust or guaranty fund, and provides for its investment.
Section
II8O3 provides that the guaranty fund shall be absolutely pledged for the
faithful performance of the
duties of the trust company under the pro-
visions of the act.
(f)
Section 112)8 R.S. 1919, provides that when any company now
doing business in this State, or which may hereafter be organized under
the provision of this article relating to trust companies,
* * * "which shall make with the bank commissioner a deposit of
two hundred thousand dollars * * * * * shall be permitted to qualify
-13-
X-3939
as guardian and. curator, executor, etc., without giving bond
as such, and the fund so deposited is primarily liable for the
obligation of the company as guardian, curator, executor, etc.11
The Federal Reserve Act provides that the assets held by a
national bank in a fiduciary capacity shall be segregated from the
general assets of the bank and a separate set of books and records shall
be kept which shall be open to inspection of the state authorities.
It
further provides that funds deposited or held in trust by the company
"awaiting investment" shall be carried in a separate account and shall
not be used by the bank in the conduct of its business unless first set
aside in the trust department in United States bonds, etc., and in the
event of the failure of such bank the owners of the funds held in trust
for investment shall have a lien on the bonds.
It further provides that
when the laws of the state require corporations acting in fiduciary
capacity to deposit securities with the state authorities, national banks
shall be required to make similar deposits.
It cannot be contended that these regulations in any way conform
to the requirements which the state law imposes upon trust companies. The
extraordinary burden which trust companies carry by acting in a fiduciary
relation is shown in subdivision 5> in Section 11801, which makes all the
capital stock and property of the company liable for the loss of trust
funds. Nothing to compare with this appears in the Federal Reserve Act.
The State requirement of trust companies further provides that money so
deposited shall be a special deposit.
It shall not be mingled with the
investments of the capital stock nor with other money belonging to the
trust company or liable for its debts, and two per cent interest shall be
—lU—
X-3939
allowed, on it. Not only must the money be kept separate and accounted for
separately; it_ is_ a separate department and completely independent in its
management. as if it were indeed a separate and distinct organization. TThen
a trust company takes on the discharge of duties as executor, etc., it
elects to conduct new business distinct from its trust company business,
and to become peculiarly responsible for funds which have nothing to do
with and cannot add to the prosperity of its ordinary business, nor make
the functional discharge of its regular business any easier or more effective. The trust company might fail with complete loss to all stock-?
holders and depositors, and yet that would not affect in the least the
security of the trust funds if the statute is complied with.
A trust com-
pany, by reason of taking on this additional duty and engaging in this
outside business, is not competing with national banks as_ a trust company.
It would be exactly the same as if the legislature should attach such a
function to Probate Courts.
Considering then that the legislative depart-
ment of the State has not seen fit to give such authority to state banks,
and has not given such authority to trust companies as an aid to the conduct of their ordinary business, but has selected trust companies to discharge such duties only on condition that they create a separate and distinct operative agency, there is no such competition with national banks,
as is contemplated in the Federal Reserve Act.
The exercise of such
functions by national banks is not necessary in the performance of the
service for which they were created. We cannot admit that Congress intended
to give national banks an advantage in competition with state banks.
The relator hastens to assure us that state authorities have no
control whatever over national banks, except as permitted by the Congressional Act
This Court has recognized that in the recent case of State
-15-
X-3939
^
v. National Bank, 2U9 S,w, 619. The legislature of this State cannot,
by any means, require on the part of national banks a compliance with the
conditions mentioned which reflect the legislative policy of the state
and national banks,restrained by the law of their organization cannot
comply with them.
Thus it plainly appears that the relator cannot act
as executor in this case because the exercise of such function would be
in contravention of the state law.
VI,
The authorities support the conclusion we have reached. ' The
most important case, of course, is the First National Bank v. Fellows,
(244 U.S. 4l6) referred to above. That case arose in Michigan where the
Attorney-General brought a quo warranto proceeding against a national bank
(92 Mich.640), questioning its right to act as trustee, executor, etc.
The Supreme Court of Michigan held by a majority ruling, (a) that the provision in the Federal Reserve Act ll(k) was not in contravention of the
state law, neither of any express provision of the statute, nor of the
legislative policy of the State, (b) but that the exercise of such function
by a national bank was unconstitutional. The United States Supreme Court,
where the case went on writ of error, gave special emphasis as quoted aoove,
to the fight of the State to determine the question of contravention. The
Court said, (244 U.S., I.e. 425), referring to the Michigan decision:
"In
view of the express ruling that the aijoyment of the powers in question
by the national bank cannot be in contravention of the state law," the
State Court proceeded upon the erroneous assumption that because a particular
function was subject to be regulated by state law, "Congress was without
power to give a national bank the right to carry on such functions." The
United States Court then reversed the
ruling, not because the Michigan
-l6-
X-3939 r -
{-
r,
<U>ij
Supreme Court erred in determining the question of contravention, but
erred in holding that Congress had no constitutional right to invest
national banks with such functions.
The Court then further indicated
a deference to the power of the State to control its own affairs, as
follows!: (I.e. 426-427):
"That the statute subjects the right to exert the particular
functions which it confers on National Banks to the administrative
authority of the reserve board, giving besides to that board power
to adopt rules regulating the Exercise of the functions conferred,
thus affording the means of coordinating the functions when permitted to be exercised.
It charged all national banks with
reasonable and nondiscriminating provisions regulating their exercise as to said corporations, the whole to the end that harmony
and the concordant exercise of national and state power might result."
This is a definite statement of the United States Supreme Court
that the rules regulating the exercise of the functions under consideration
provided by the Reserve Board must coordinate with the state regulations.
No doubt the conditions in Section 11 (k), were framed to meet the usual
requirements andregulations to be expected in State statutes "to. the end
that harmony and the concordant exercise of national and state power might
result." This seems to be a plain indication that if the State has regulations and exacts conditions for the exercise of these fiduciary powers,
with which a national bank cannot comply and with which the State legislature is powerless to compel compliance, then the exercise of such
functions by a national bank is in contravention of the state law.
The case of the People v, Brady, 2J1 111. 100, is referred to
in the cited cases and furnishes an important illustration of the subject.
-17-
X43939
O
That was a mandamus proceeding at the relation of a national bank, asking
a peremptory writ requiring the issuance to relators of a certificate of
qualification to act as trustee, executor, etc.
the Supreme Court of
Illinois, in a very able and lucid opinion, held that the exercise of
functions prescribed in Section ll(k) were in contravention of the state
law, pointing out as regulating the exercise of such functions the Illinois
Statutes which could not be applied to national banks.
The opinion also
denies the constitutional authority of Congress to regulate and provide for
the exercise of fiduciary functions because they come strictly within the
state rontrol.
That decision was rendered before the Fellows case got to the
Supreme Court,
After that ruling the same national bank brought another
mandamus proceeding in the Illinois State Court on the theory that in the
Fellows case the United States Supreme Court overruled the conclusion
reached by the
Illinois Court in the Brady case. - That case came before
the Supreme Court of Illinois. (State ex rel. v. Russell, 283 HI- 520).
The Court then refused to grant the relief prayed on the ground that the
former ruling was res ad.iudicata and indicated (i.e. 524), that if it were
not for the conclusiveness of the former judgment the court would be obliged
to rule differently, conceding that the former judgment was erroneous.
In
that obiter statement the Illinois Court shows a misunderstanding of the
point decided in the Fellows case. The only question considered in the
Fellows case and the only point upon which the Michigan Supreme Court was
overruled was as to the constitutionality of the provision in the Federal
Act.
The Illinois Court evidently failed to notice that the Federal Supreme
Court did not pass upon the question of whether the Federal Act was in
'
-is-
x-3939
55
contravention of the law of Michigan so as to affect that question when
applied to the Illinois law. As a matter of fact, under the ruling in the
Fellows case, the judgment in the Brady case was not erroneous and would
have been sustained by the Federal Supreme Court if the question had got
before it on the sole ground that the exercise of such powers by national
banks in Illinois was in contravention of the State Law,
So that the ruling
in the Brady case is still the law of Illinois on that questionThe case of Aquidneck National Bank of Newport v. Jennings, 117
Atl. 7U3, is where the Supreme Court of Rhode Island held that the provisions of Section 11 (k) were in contravention of the state law of Bhode
Island.
The Court points out the statutes regulating the exercise of
fiduciary relations such as are mentioned in Section 11 (k), and holds that
the State cannot impose such regulations upon national banks and therefore
the exercise of such functions by a national bank is in contravention of the
State law. Rhode Island, like the State of Missouri, did not grant such
powers to the state banks. The opinion says (I.e. 7^6):
"The extension by the General Assembly of this power of Trust
Companies alone, of all corporations, is plainly because the
provisions governing their creation and their regulation safeguard in a peculiar manner the rights of those beneficially interested in such trusts."
The same may be said of the Missouri Statutes in relation to
that matter; the selection of trust companies alone and the peculiar manner
of managing trust funds required, show that it is the legislative policy
of the State that general banking institutions shall not be endowed with
J
such functions. The brief of amici curiae, calls attention to recent
56
-19-
x. 39J9
statutes of this State giving Trust Companies certain additional powers
which make them competitors of banks in respects where they were not such
competitors before. This does not alter the attitude of the State towards such institutions. Trust Companies are selected as fiduciary agents
doubtless because the legislature deemed them best fitted to meet the
rigid exactions which the statute imposes upon the exercise of such trusts.
In the Appeal of Henry W, Woodbury, JS N*H„ p,50, the question
came before the Supreme Court of New Hampshire.
In that case there wasan
express statute forbidding the appointment of banking companies and trust
companies as administrators and executors. The court held that the exercise of the fiduciary functions mentioned in 11 (k) of the Federal Reserve Act were in contravention of the State Law.
Of course there is no
express denial in the Missouri statute, but the denial to banks of such
functions is clearly implied and as emphatic as if there had been express
denial.
No cases have been cited by petitioners in support of their
position, when regulations and restrictions such as are imposed by the
Missouri legislature are present, where it has been held that the provisions
of the Federal Reserve Act are not in contravention of the state law.
The Supreme Court of Pennsylvania, in case of In Re Turner
Estate, 120 Atl. 701, held that the provisions of the Federal Act were not
in contravention of the law of Pennsylvania, on the ground that the regulation of such fiduciary functions •was in harmony with the state regulations.
There were no such stringent regulations as are provided in our statute.
(Hamilton v. State, 94 Conn. 648).
5^3; In re Mullinax, 179
Y
In Re Estate of Stanchfield, 171 Wis.
< Supp. 90; are cited).
In each case the ex-
ercise of such powers was expressly granted to state institutions which
* *
-20-
X-3939
^
act in direct and general competition with national banks in the exercise
of their ordinary functions.
In the regulation of trust funds the Federal Act is in direct •
conflict with the Missouri statute,
abov»
nointed out.
Necessarily there
would be a want of that "harmony andconcordant exercise of national and
state powers" which Chief Justice Vhite, in the Fellows case held was
•necessary in such cases.
We think that both reason-and authority support the view that
the exercise of fiduciary functions mentioned in Federal Reserve Act,
11 (k), are in contravention of the law of Missouri, the legislative policy,
and the express statutes,
The peremptory writ is therefore denied.
All concur.
J. T. Vhite
Judge
>
58
FEDERAL RESERVE BOARD
WASHINGTON
X-39UO
January 9. 192U.
SUBJECT:
Code words tq be used "by Federal Reserve Bank of New York,
in advising other Federal Reserve Banks of their participation
in purchases and sales of Government Securities and Bankers*
Acceptances, by the Open Market Investment Committee.
Dear Sir:
In connection with the participation plan recently adopted by
the Federal Reserve Banks and approved by the Board, with respect to
the purchases and sales of Government Securities and Bankers' Acceptances for the System by the Open Market Investment Comnit tee, it has
been suggested to the Board by this Committee that additional code
words, supplied from the Federal Reserve Telegraphic Code, be designated
to cover such telegram* as may be transmitted by the Federal Reserve
Bank of New York to the remaining banks, vdaich have reference to such
purchases, sales and other incidental advices, and which will have the
effect of reducing the phraseology of present telegrams and of aiding
in the relief of leased wire congestion.
•
This suggestion has the 3oard*s approval, and you are advised
that commencing with January 15th, code words as indicated below will
be used by the Federal Reserve Bank of Hew York in transmitting telegrams to the remaining banks, covering advices of purchases, sales and
other relative transactions which are herewith submitted with the accompanying code woi'dsi
NOTABLYi Purchased today System investment total $
We charge you certificates $
Treasury notes
;
$.
;
Total $
your apportionment.
Please credit us.
NOTARY: We credit today $
net earnings (date) on $
securities.
your pro rata share
special investment U. S.
NOTCH: Sold today System investment total $
We
credit you certificates $
Treasury notes
$
Total $
your apportionment.
Please charge us.
X-39U0
-2-
NOTEBOOK: Referring distribution bills purchased by System
total acquired by your bank $
during week ending
(date) Your participation of total purchased by participating banks amounted to $
In order to
correct New York will adjust its allotment to you during
coming week $
Your ratio for coming week is
It is requested that the code words "Notably", "Notary",
"Notch" and "Notebook" indicated in this letter be added to the
bottom of page l64 of the Federal Reserve Telegraphic Code, to follow
the code word "Nostrum".
Yours very truly,
J. C. Noell,
Assistant Secretary.
%
TO GOVERNORS OF ILL F. R. BAFFS
FEDERAL RESERVE BOARD
WASHINGTON
X-3942
January 12 th, 1924.
SUBJECT: EXPENSE MAIS LINE, Leased Wire System, December, 1923.
Dear Sir:
Saclosed herewith you will find two mimeograph state- ^
merits, X-3942-a and X-3942-b, covering in detail operations of *
the main line. Leased Wire System, during the month of December,
1923.
Please credit the amount pay obi e by your bank in the
general account, Treasurer, U. S., on your books, and issue C/D
Form 1, Hational Banks, for account of "Salaries and Expenses,
Federal Beserve Board, Special Fund," Leased Wire System, sending duplicate C/D to Federal Beserve Board.
Very truly yours,
Fiscal Agent.
(Enclosure)
TO GOVEBSOBS OF ALL BANKS
61
X-3942-a.
REPORT SHOWING CLASSIFICATION AND
OF WORDS TRANS*
MITTED OVER MAIN LINE OF THE FEEEiUL RESERVE LEASED WIRE
SYSTEM FOR THE MONTH OF DECEMBER, 1923.
From
Boston
New York
Philodelphia
Cleveland
Richmond
Atlanta.
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Percent of
Treasury War
Fed. Res. Total Bank
Dept. Finance Corp.
Bank Business Business (*) Business Business
.
^1,753
254,758
65,010
93,374
75,846
91,843
149,904
93,763
61,534
97,386
81,366
142,764
3.34
20.39
5.20
7.47
6.07
7.35
12.00
7-50
4.92
7-79
6.55
11.42
l,249,go6
Board
287,257
(total
1,537,063
Percent of Total
100.00
87«5&%
7,707
17,841
7,113"
6,406
5,940
7,512
11,305
8,190
5,498
7,818
4,426
12,540
155
13
35
114
Total
49,460
272,599
72,123
99,935
81,799
99,355
161,209
101,993
67,032
105,204
36,406
155,304
102,296
317
1,352,419
115,127
577
402,961
217,423
894
1,755,380
12>39/°
•Oy/»
Bank Business 1,537,063 words or 87«6l$
n
#
Treasury Dept. 217.1+23
12.19%
TOTAL
1,754,436
100.00^
(*) These percentages used in calcul ating the
pro rat a sha^e of leased vira azpsnsas as
shown on the accompanying statement (X-3942-t)
FEDERAL RESERVE BOARD,
Washington, D. C.,
January 12, 1924
Ct
X-3942-b
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED W IRE SYSTEM DECEMBER, 1923
Name of Bank
Wire
Operators' Operators t
Salaries
Overtime
Rental
Boston
$ 250.00 $
New York
1,280.82
Philadelphia
190.83
Cleveland
388.00
Richmond
315.00
Atlanta
240.00
Chicago
' (#) 4,841.38
St, Louis
250.00
Minneapolis
275.00
Kansas City
346.64
Dallas
251.00
San Francisco
1,360.00
-
-
-
W
*•
—
—
-
3*00
-
-
«•
-
-
-
*
•*
-
-
$17,115.65
*460.56
$17,115.65
Credits
250.00 $
763.02 $ 25O.OO
4,658.10
1,738.38
1,73S.38
I9O.83
1,187-94
190.83
388,00
388.00
1,706.52
315.00
1,386.69
315.00
240.00
240.00
1,679.11
4,844.38
2,741.40
4,844.38
250.00
250.00
1,713.38
275.OO
275.00
1,123.97
346.64
346.64
1,779.63
251.OO
251.00
1,496.35
2,608.90
1,360.00
1,360.00
Payable to
Federal
Reserve
Board
$
513.02
2,919.72
997.11
1,318.52
1,071.69
1,439.11
(*) 2,102.98
1,463,38
843.97
1,432.99
1,245.35
1,248.90
17,115.65
$27,564.88 $22,845.01 $10,449.23
(a„)4.71Q .87
$22,845.01
(#) Includes salaries of Washington operators.
(&) Amount reimbursable to Chicago.
(*) Credit.
(a) Received $19.87 from War Finance Corporation and (4,700.00
from Treasury Dept. covering business for minth of December, 1923.
FEDERAL RESERVE BOARD,
Washington, D. C,
January 12, 1924.
$9,988.67
Total
Expense
$
457.56
Fed. Res. Board
TOTAL
L.Z.J
Pro Rata
Share of
Total
Expense
$14,498.76
(&) 2.102.98
*1^,395.78
'63
X-3943 '
. TREASURY DEPARTMENT
Office of the SScretary
' WASHINGTON
January 0, 1924.
The 6»verner
Federal Reserve Board.
Sirs
You are hereby advised that the Department has referred to the Disbursing Clerk, Treasury Department, for payment, the account of the Bureau
ef Engraving and Printing for preparing Federal Reserve notes during the
period December 1 to December 31, 1923, amounting t© $102,212.50, as follows:
Federal Reserve Notes, 1?14.
#50
jo*
§20
15
Bosten
N ew Ytrk
Philadelphia
Cleveland
Richmond
Chicago
St. Louis
Kansas City
San Francisco
258,000 14?,000
258,000
208,000 147,000
257,000
98,000
122,000 49,000
245,000
98,000
49,000
49,000
49.000
25.000
1,495,000 564,000
iioo
74,000
5,000
49,000
5,000
62,000
49,000
62,000 • 5,600
6,000
25,000
321,000 21,000
* "•••
— — -
—
w
—
4,000
4,000
.
Total
479,000
258,000
409,000
422,000
220,000
410,000
49,000
59,000
99.000
2,405,000
2,405,000 sheets at ^42.50 per M
$102,212.50.
The charges against the several Federal Reserve Banks are as follows:
Compenopiate
Inc. CamSheet s sation
Printing Materials pensation
Total
Boston . . . . .479,000 &6,466.50 ^6,586.25 ^5,628.25* %>i,676.50 #20,357.50
Hew Y#rk . . . 258,000 3,483.00 3,547.50 3,031.50
903.00 10,965.00
Philadelphia . 409,000 5,521.50 5,623.75 4,805.75 1,431.50 17,382.50
Cleveland . . 422,000 5,697.00 5,802.50 4,958.50 1,477.00 17,935.00
Richmond .. . „ 226,000 2,970,00 3,025.00 2,58500
770.00
9,350.00
Chicago . . . 410,000 5,535.00 5,637.50 4,81^.50 1,435.00 17,425.00
St. Louis. . . 49,000
661.50
673.75
575.75
171.50
2,082.50
Kansas City. . 59,000
796.50
811.25
693.25
206.50
2,507.50
San Francisee.
99.000 1.336.50 1.361.25 1.163.25
346.50
4.207.50
2,405,000 32,467.50 33,068.75 28,258.75 8,417.50 102,212.50
The Bureau appropriations will be reimbursed in the above amount from
the indefinite appropriation "Preparation and Issue of Federal Reserve Notes,
Reimbursable", and it is requested that your board cause such indefinite appropriations to be reimbursed in.like amount.
Respectfully,
(signed) S. R. Jacobs,
Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
X-3946
•January 21, 1924.
SUBJECT:
Debentures of Federal Intermediate Credit Banks.
Dear Sir:
It appears to bare "been the sense of the recent
Governors' Conference that Federal Intermediate Credit
Banks should, if possible, float their debentures through
the investment market, rather than by direct sale to
Federal Beseree Boiiks - under re-purchase agreements.
It
seems to have been agreed by the Conference', however, that
in view of the important purpose for which the Federal
Intermediate Credit Banks were created, that .the Federal
Reserve Banks should consider each case on its merits and
afford all possible help whenever the temporary need of a.
Federal Intermediate Credit Bank would require it.
Hie purpose of this letter is to advise you that
the Federal Reserve Board concurs in the views of the
Conference.
By direction of the Federal Reserve Board.
Yours very truly,
Walter L. Eddy
Secretary.
TO CHAIRMEN OF ALL F. R. BANKS
(COPY TO GOVERNOR OF EACH F. R. BANK)
FEDERAL RESERVE BOARD
WASHINGTON
X-3947
January 21, 1924.
SUBJECT:
Cost of Shipping Currency to Government
Officers.
Dear Sir:
I am directed to advise you that the Federal
Reserve Board approves of the action of the recent
Governors' Conference in voting 11 that the costs of
shipping.currency to member barks for the account of
Government officers be absorbed by Federal Reserve Banks,
but that the costs of shipping currency to Government
officers direct be not absorbed". (See Pages 164 165 of the Stenographic Report of the Governors' Conference) .
Yours very truly,
Walter L. Eddy,
Secretary.
TO CHAIEMB.N OF ALL F. R. BANKS
66
FEDERAL RESERVE BOARD
WASHINGTON
X-39US
January 21, 1924.
SUBJECT: Discount of Sight and Demand Drafts
under Section 13, as Amended March
4, 1923.
Dear Sir:
For your information there is enclosed
herewith, copy of a letter addressed by the Federal Reserve Board to one of the Federal Reserve
Banks with regard to the discount of sight and demand bill of lading drafts under the provisions of
the amendment of March 4, 1923, to section 13 of
the Federal Reserve Act.
Yours very truly,
Walter L. Eddy,
Secretary.
(Enclosure)
TO ALL CHAIRMEN
( COPY )
x 3ji6a
-
87
January l6, 1924.
Dear Sir:
Receipt is acknowledged of your letter of October 22 raising
certain questions concerning the proper construction of the amendment of
March 4, 1Q23, to Section 13 of the Federal Reserve Act which authorizes
Federal reserve banks to discount sight or demand drafts under certain
circumstances* You state that in the opinion of the Federal Reserve Bank
of;
j this amendment was passed for the purpose of moving raw
agricultural products to market and that, since a commodity mast be deemed
to have readied a market when anything is done to it in the way of manufacture, the amendment covers only nonperishable, readily marketable,
staple agricultural products moving in their raw state• You ask to be advised whether the Federal Reserve Bank of
has taken a correct
position in this regard*
The proper construction of the term *nonperishable? readily
marketable staple agricultural products" presents a difficult question.
In its Regulation A, the Board has adopted a definition of the term "readily
marketable staple", as used in Section 13 in connection with bankers1 acceptances, and it has held that the question of perishability is fundamentally a question of fact which cannot properly be answered by the application of any general rule, but should be determined by a consideration of
the facts and circumstances surrounding each particular case. The further
question as to whether or not, or under what circumstances, a readily
marketable, nonperishable staple should properly be considered an agricultural product, will, in many cases, be an extremely debatable question
and it is doubtful if any rule can be laid down which will satisfactorily
dispose of all cases.
In view of the complex and equivocal considerations involved, the
Board is not prepared at this time to formulate a comprehensive definition
of the broad term "nonperishable, readily marketable staple agricultural
products", but deems it advisable for the present to rule upon questions
involving the proper classification of particular commodities as they may
be presented. After the Federal reserve banks have had a reasonable amount
of practical experience in handling transactions arising in this connection,
it may prove feasible to formulate a comprehensive ruling or statement of
policy on this question which will properly interpret the law and be satisfactory from a practical standpoint.
The Board does not believe, however, that the term "nonperisnable,
readily marketable staple agricultural productsn as used in the sight dratt
amendment under discussion, must be construed as limited to agricultural
products in their raw state- While it seems probable that the primary intention of Congress in thus amending Section 13 was to facilitate the
marketing of crops, it does not necessarily follow that Congress intended
to legislate with reference solely to the movement of crops in their raw
state. The language used contains no such limitation, but relates generally
X-3946a
-2-
to the shipment of agricultural products, and it is significant that
the amendment passed at the same tiiae which authorizes the discount of
factors' paper expressly refers to "staple agricultural products in
their raw state" . A consideration of these two amendments which form
part of the same legislative act is very- persuasive that Congress did
not intend to limit the application of the sight draft amendment to raw
agricultural products. The Board feels, moreover, that a strict construction of this amendment would be out of harmony with the liberal
purpose and intent of the Agricultural Credits Act as a whole.
The Board is of the opinion, therefore, that Federal reserve
banks should not refuse to discount sight or demand bill of lading drafts
merely because the agricultural products covered thereby are no longer
in a technically raw state, but have passed through the initial stages
of refinement or processing subsequent to their actual harvest. As you
indicate in your letter, it is, of course, necessary that the line be
drawn somewhere, but for the reasons stated above, the Board does not consider it proper to draw an arbitrary line which would include only commodities in their raw state within the scope of the provision authorizing
the discount of sicht and demand drafts. Pending the issuance of a comprehensive ruling or statement of policy on this subject, Federal reserve
banks shou^cLy^ their discretion in passing upon the eligibility of bill
of lading/offered for discount under this amendment, and the exercise of
this discretion should be predicated upon a fair and reasonable distinction
between agricultural and non-agricultural products and not necessarily
upon the initial stages of refinement which an agricultural product may
have reached in the course of its progress through the normal channels of
distribution;
Yours very truly,
D, E. Crissinger
Governor.
FEDERAL RESERVE BOARD
WASHINGTON
X-3949
January 22, 1924.
SUBJECT: Discount of Noa-member Bank PaparS»9.r S$rt
For your information there is enclosed he re witilcopy
of the letter addressed to one of the Inderal Beseirve Banks in
answer to an inquiry as to whether t^e Federal Reserve Board's
CifSeuia* letter of July 18, 1923# rescinding cert#4# ruling*
theretofore made in connection with the discount of non-member
bank paper, affects In any way the doling of the Federal Be serve
Board, published on page 7**3 of the August 1915 Bulletin, with
relation to the eligibility for rediscount of a- note of a nonmember beak used in trading in government obligations.
Very truly yours,
(Eaaloswoi
Walter L* Eddy,
Secretary*
OF W > FEDERAL RESERVE BANKS.
10 flOtBSTOfiS
( c
op y )
X-3949-3.
January lg , 1924.
Dear Sir:
Receipt is acknowledged of your letter of December 29, in which
you inquire whether the Federal Reserve Board's circular letter of July
13, 1923, rescinding certain rulings theretofore mode in connection with
the discount of n o n - m e m b e r yank paper affects in any way the ruling of
the Feae"al Reserve Bo?ra published on page 7^3
the August 191S Bulletin.
Th.3 filing published on page 7*+3 of the August 191% Bulletin resolely to the question whether notes of non-member banks issued for
thg purpose of carrying or tracing in Government obligations are eligible
for rediscount under the terras of Section 13 of the Federal Reserve Act,
and therefore, was not mentioned specifically by the Board's circular
letter of July IB, 19?-3« The Board has always been of the opinion, however, that while such notes are eligible for rediscount under the terms
of Section 1 3 , Federal reserve banks are forbidden to rediscount them
without permission of the Federal Reserve Board oy that provision of Section 19, which prohibits sny member Dank to act as a medium or agent of
non-member banks in obtaining red iscounts at Federal reserve banks except with the permission of the Federal Reserve Board.
fers
In order to encourjge the sale of Liberty bonds and Treasury
certificates during the war, the Board granted general permission for
Federal reserve banks to rediscount for member banks notes of non-member
banks secured by Liberty bonds and Treasury certificates; but the
BoardTs circular latter of July IS, 1923, was intended to revoke this
permission- You will note that the first paragraph of that letter states
that, "all previous rulings on this subject were rescinded"; and the
third paragraph of that letter (whicn is numbered "2") states that, "Except with the Board's permission, no Federal reserve bank shall discount
any paper acquired by a member bank from 0 non-member bank or bearing
the signature or endorsement of 3 non-member bank * * ". Inasmuch as
notes of non-member banks secured by Liberty bonds necessarily bear the
signatures of such banks they clearly come within the terms of this prohibition.
Very truly yours,
D. R. Crissinger,
G o v e r n o r .
71
FEDERAL RESERVE BOARD
WASHINGTON
x-3950
January 22, I92U.
SUBJECTr
Revocation by State Member BankJ of notice of intention
to withdraw.
Dear Sir:
The directors of a State member bank which had filed
with the Federal Reserve Bank of its district the required six
months' notice of intention to withdraw from the Federal Reserve
System, passed a resolution prior to the expiration-of the six
months' notice revoking same. The last examination of the State
member bank showed it to be in an unsatisfactory condition and
the Federal Reserve Bank recommended to the Board that the State
bank's membership be terminated as of the date of the expiration
of the six months' notice, and that the bank be required to again
apply for membership at that time in the regular manner.
follows:
The Federal Reserve Bank was advised by the Board as
"You are advised that the _________ State Bank is still
a member of the Federal Reserve Bank of ______ with all the
incidents ordinarily attending such membership and the Board
cannot, legally cancel its membership on February 10 as you
suggest. The notice of intention to withdraw from the Federal
Reserve System which is required by Section 9 °f the Federal
Reserve Act is a prerequisite of withdrawal, but cannot be
considered to be any part of the actual withdrawal itself, A
State member bank which has given such notice but has not
acted pursuant thereto continues to retain all the ordinary
rights and privileges of membership in the System. The
State Bank, therefore, has all the rights and privileges
of membership which it had before giving notice of intention
to withdraw from the System, and the Federal Reserve Board
consequently has no power to cancel the membership of this
bank, except by acting under the terms of the seventh paragraph
of Section 9 of the Federal Reserve Act which outlines the
procedure for the expulsion of a bank from membership under
certain conditions,"
The Board also held that the State member bank "having
x-3950
-2-
revoked the notice of intention to withdraw, could not, of course,
now voluntarily withdraw from the System except by giving to the
Board a new six months' notice of intention so to do."
Very truly yours,
Walter L. Eddy,
Secretary.
TO All F. R. AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
x-3951
,
Jeeiuery 23» 1924
SUBJECT:
Preparation of Registered Mail*
Dear Sir:
The Thixd Assistant Postmaster- Geaaeral has advised the
Board that there has been reported to the Post Office Department
an instance in which one of the Federal reserve banks failed to
properly attach the required tag to a sack of registered mail
dispatched by it* In. other words, "the tag was not attached to
the sack in the manner directed in Article 39» published on page
38 of the July 1923 Postal Guide-"
In his letter, the Third Assistant Postmaster General
states that while a representative from the Post Office Department has taken the matter up direct with the Inderal reserve bank
concerned, xthe Department would like to have the matter brought
to the attention of all Federal reserve banks, as it may be other
banks and branches are improperly attaching the tags.
There is enclosed herewith a copy of "Article 39* above
referred to, and your attention is directed particularly to Paragraph "e" thereof.
By direction of the Federal Reserve Board*
Very truly yours,
Enc*
Walter L. Eddy,
Secretary.
TO TEE GOVERNORS OF ALL FEDERAL RESERVE BANKS.
73
74
( C o p y )
PESPABSDHESS FOB MAILING* -
Mall for
X-3951-9-
registration must:
(a) Bear the name and address of sender and be legibly addressed• Mail
for members of military organizations should show the official designation
of the unit and organization to which the addressee belongs*
(b) Have postage and fee fully prepaid at time of registrations. (See
Sees* 4o6, 496 and 278, Postal Laws and1 Regulations.
(c) Be securely sealed if sent as first-class matter*
(d) Be inclosed in envelopes or wrappers of sufficient strength to withstand customary treatment in transmission. The "extra quality" 2 cent stamped
envelope is especially recommended as a cover for registered mail, particularly for coin, currency, or similar objects* Postmasters must decline to accept articles for registration when inclosed in flimsy envelopes, or not
wrapped so that they will carry safely with ordinary handling* They will
bring to the attention of banks and financial institutions at their offices
the necessity of adequately and effectively preparing and wrapping money packages, suggesting that it would be advisable to inclose paper money in canvas
sacks closed with lead seels or tied and placed within an outer wrapper,
strong enough to protect the inclosure and to withstand handling itself, or
that it be inclosed in cloth or linen lined envelopes. Sheets of currency
should be made into a compact package. The contents of a package must not be
so bulky or ill-fitting that the outer cover will be broken through or cracked by protruding corners or edge. Letters or parcels not prepared in this
way mast have a piece of cardboard or the like placed on top and "underneath
of each package of money before being placed in the outside cover; these
packages must be wrapped at least three times with a heavy grade of paper,
and securely sealed with mucilage or glue in addition to wax which, if used,
is frequently knocked off or broken in handling.
(e) In some instances the tags attached to lead-seal sacks containing
coin or currency are simply tied to the sack after it has been lead sealed,
in such a manner as to permit the string to become untied and the tag lost
off* To avoid this, the senders of registered sacks containing coin or currency should be requested to securely a.ttach the lead seal to the neck of the
sack in such a way that the tag bearing the name and address of the addressee
will be securely attached between the neck and the lead seal, immediately under the lead seal * This can be accomplished by passing the cord through the
eyelet of the tag, the cord being drawn taut and the seal compressed with
the tag in this position; or, if the lead seal is equipped with steel pin, •
the pin should be passed through the eyelet of the tag, before the cord is
drawn taut, while the tag rests flat on the neck of the sack, between the
sack and the he ad of the seal • The sealing of the ends of the cord with wax
is not alone a. sufficient safeguard, as the wax is liable to become broken*
When lead seals equipped with steel pin are used , the pin should not be so
long or the neck of the sack gathered together in such a manner as to permit
the pin to protrude through the foldr, of the sack to such an extent that a
sharp point will be exposed , resulting possibly in injury to postal employees.
(f) Be addressed with ink if for foreign countries» The address on matter for Mexico must include the Mexican State or Territory, and that for Canada the province, country, or district of tlqp office of address.
75
FEDERAL RESERVE BOARD
WASHINGTON
X-3953
January 25» 1924.
SUBJECT*
Currency In Transit to and from Federal Reserve Banks.
Dear Sir:
There is quoted "below, for your information, a. resolution
adopted by the Federal Reserve Board at its meeting on January IS,
1924:
"WHEREAS, it is the purpose and desire of the Federal
Reserve Board to equalize the services of the System to the
nember banks whenever possible; and
"WHEREAS, in securing currency from and depositing currency with the Federal Reserve Banks, member banks located
outside of the Reserve Bank and Branch Bank cities are at a
considerable disadvantage; and
"WHEREAS, all expenses connected with shipments of currency between the Reserve Banks and member banks are borne
by the Reserve Banks; and
TIHEREAS, all insurance is carried and all possible losses in transit are reimbursable to the Federal Reserve Banks;
and
fl
WHEREAS, the legal title to the Currency in transit between Federal Reserve Banks and member banks is vested in
the Federal Reserve Banks;
"THEREFORE, BE IT RE6Qi,VEB, that the B6atd Sees ho objection to the Federal Reserve Banks giving full consideration to currency in transit, in computing the reserve requirements and penalties for deficiencies in reserves of member banks; and
"BE IT FURTHER RESOLVED, that a copy of these resolutions be furnished each of the Federal Reserve Banns."
In acknowledging receipt of this letter, please advise the
Board of the manner in which your bank will treat shipments of currency in transit to and from your member banks when determining penalties to b e assessed a-gainst such member banks on account of reserve
deficiencies By direction of the Federal Reserve Board.
Walter L. Eddy,
Secretary.
TO CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
X-3954
January 24, 1924.
SUBJECT: Examination of State Member Banks.
Dear Sir:
I am directed to advise you that the Federal Reserve Board
concurs in the following resolution adopted at the recent conference
of Federal Reserve Agents:
"We believe it to be essential that the closest cooperation exist between the executive departments of Federal
Reserve Banks and the State Banking Commissioners. We also
believe that as a matter of good faith with our State member banks and in order to be prepared to extend credit intelligently, credit investigations of State member banks
We believe, too, that these
should be regularly conductedcredit investigations, whenever possible, should be made at
the same time that State examiner is examining the bank;
first, because of the desirability of cooperation; second,
because more information can be obtained at less cost;
third, because the bank should not needlessly be subjected
to additional visits of examiners. We believe also that
where special examinations other than credit investigations
are made of member State banks the charge for such examination made by the Ibderal Reserve Bank should not exceed the
fee that would be charged by the Comptroller of the Currency if the institution were a National Bank."
With regard to that portion of the resolution which refers
to the cha_rg9 which should be made against State member banks for examinations, your attention is directed to the Board1s letter of December 22, 1923, X-3924.
Very truly yours,
Walter L. Eddy,
Secretary.
TO CHAIRMEN OF ALL 3EDERAL RESERVE BANES*
FEDERAL RESERVE BOARD
WASHINGTON
X-3955
January 24, 1924«
SUBJECT: Distribution of One Dollar Bills.
Dear Sir;
At the recent Governors1 Conferencet ' consideration
was given to the plan proposed by the Treasury Department in a
letter dated September 27, 1923, addressed to the Governor of
the Federal Reserve Board, providing a new method tif distributing
"new" and "fit* one dollar bills among the Federal Reserve Banks
and Branches. The Conference voted to urge the Federal Reserve
Board to approve the plan suggested by the Treasury Department
and to request the Board to determine how the expense of interbank shipments of "fit" one dollar bills shall be provided for,
(See pages 15S to l64 of the Stenographic Record of the Governors1
Conference, and also the enclosed copy of the treasury Department's
letter to the Board above referred to,)
The Board approves of the Treasury* s proposed plan and
rules that the expense of shipping "fit" one dollar bills between
Federal Reserve Banks and Branches shall be borne by the receiving
banks.
The Treasury Department will advise you direct of the
date upon which the proposed plan will become effective.
By direction of the Federal Reserve Board.
Yours very truly,
(Enclosure)
TO THE CHAIRMEN OF ALL F. R. BANKS
Walter L. Eddy,
Secretary.
( COPY )
X-3935-S.
*78
TREASURY DEPARTMENT
Washington
September 27, 1923•
My dear Governor:
The question of supply and distribution of $1 notes has received
the Department's consideration as a result of representations rrade by
yourself and several of the Federal Reserve Banks.
It appears that
there are two sources of complaint, first, that in some districts a sufficient number of notes is not available to meet requirements or the
balance is so low as to be embarrassing, and, se cond, that the ratio
of payment between fit and new bills differs among the several districts.
As regards supply, the Department is now printing 1,700,000 $1
notes daily; this rate approximates 42,500,000 each month; a total of
approximately 510,000,000 for the year.
The Bureau of Engraving and
Printing is operating to approximate capacity and at a rate that will
incur a considerable deficiency, which later mast be presented to the
new
Congress. From all the evidence at hand it appears that this rate of production will be sufficient to provide the new I's required and at the
same time to establish in the course of a year a reserve stock ample to
meet seasonal demands.
Different ratios of payments in fit and new notes, as shown among
several of the Federal Reserve Banks, is accounted for almost entirely
through the disparity in the proportion of fit and unfit notes paid into
the banks; for example, during the fiscal year 1923 the payments into the
Cleveland bank were 24 per cent fit and 76 per cent unfit, while during
the same period similar figures for Boston were 43 per cent fit aui $2
per cent unfit.
To provide the Cleveland district with sufficient notes
-2-
x-3955a
to meet its payment requirements the Treasury has heretofore sent new
notes to Cleveland. Boston, on the other hand, having a larger supply
of fit notes available, has received a relatively small number of new
notes from the Treasury. As a result, on the face of these figures,
Cleveland has been able to supply its customers with four new bills to
one fit, while Boston has been obliged to issue one fit bill for each
new bill. It is not possible to equalize the situation as between the
various districts solely by the shipment from the Treasury of new bills
since, for example, if the Boston ratio were established at Cleveland,
Cleveland would not have enough fit notes to meet its requirements.
The situation could have been equalized, however, if Boston were to ship
to Cleveland some of its fit notes, the Treasury supplying Boston with
a larger percentage of new bills, reducing shipments to Cleveland in a
like amount. During the fiscal year I923, stocks of notes available in
all the banks for payment purposes approximated 60 per cent new and 40
per osnt fit. Aggregated payments by all the banks throughout the year
show that 6l,4 per cent new and 3S.6 per cent fit notes were paid out.
It appears, however, that at the close of the fiscal year the balance
of notes on hand shows the presence of an undue proportion of fit as
compared to new notes. This would not have occurred had the percentage
of p&ycent of new notes been slightly reduced and the fit notes increased.
To meet the complaints in the matter of currency distribution and
to provide that the distribution of new notes and fit notes throughout
the country shall be as equitable as possible and that the currency
shall be maintained in a fair condition, the following plan is suggested
-3-
x-3955*
1. 'For the present, adopt a ratio of payment at each Federal Reserve
Bank of S o new to 40 fit.
2. YJhere, as a result of the adoption of this ratio of payment, a
bank's supply of "bills, both fit and new, is excessive or short, that there
should be transfers as between banks to equalize the supply of. fits, the
cost of transportation to be at the expense of the banks.
3-
The Treasury will apportion its supply of available new bills
among the Federal Reserve Banks so that each bank will have an available
stock in the ratio of 6(3 new to 40 fit (after transfers of other fits have
been made).
The Treasury, of course, will be free to withdraw from this plan
or to change the i:atio at any time.
*
I shall be glad to have your Board consider these suggestions and
advise me as to its attitude.
Very truly yours,
(signed) GARRARD B. WINSTON,
. Assistant Secretary
of the Treasury. •
Honorable D. R. Crissinger,
Governor, Federal Reserve Board,
FEDERAL RESERVE BOARD
81
WASHINGTON
X-3956
January 25, 1924.
SUIXJECTt Directors of Branch Federal Reserve Banks.
Dear Sir:
By direction of the Federal Reserve Board, I have to advise
you that the Board has adopted the following rules and regulations, to
become effective as of January 1, 1925, with respect to the appointment of directors of branch Federal Reserve Banks:
1st. The Boards of Directors of Federal Reserve branch Banks
shall consist of seven members, four of whom shall be appointed by the
Federal Reserve Banks and three by the Federal Reserve Board.
2nd. The Directors appointed by the Banks shall be chosen
from the ranks of men well qualified and experienced in banking and
the Directors appointed by the Federal Reserve Board shall be chosen
from the ranks of men of high character and standing, who are engaged
in agriculture,, industry or comrrerce, insofar as may be possible or
practicable.
3rd. All Directors shall be citizens of the District and shall
reside within the territory serVed by the branch, %)ut at least one of
the Directors appointed by the Bank and one appointed by the Board shall
reside outside of the city in which the branch is located.
4th. One of the Directors appointed by the Reserve Bank shall
be the active manager of the branch bank and shall have the title Managing Director.
5th. The term of office for the Director chosen by the Reserve Bank to act as Managing Director of the branch shall be for one
year, subject to reappointment from year to year, if such action be desirable,
6th* Six other Directors shall be appointed - effective January 1st, 1925 - for terms as follows:
One Director appointed by Bank for term of one year.
•«
it
11 Board "
"
" one year.
«
»
H
M
II Bank "
"
" two years.
«
n
n
it Board "
"
" two years,
n
11
11
" Bank "
"
" three years.
11
"
n
n
n Board n
" three years.
X-3956
-2-
8
Thereafter the term of office for each member shall be for three years,
appointments being made oach year, one by the Bank and one by the Federal Reserve Eoard.
7th. The Board of Directors of Federal Reserve Branch Banks
shall annually elect as Chairman of the Board the member appointed by
the Federal Reserve Board, whose term of office expires with the current year,
3th. In the event of a vacancy occurring in the Board of Directors of a Branch Federal Reserve Bark, appointments filling such vacancy shall be made by the. body making the original appointment and
such appointment shall be for the unexpired term.
9th. The Federal Reserve Board shall have the right to remove, for cause, any member of the Board of Directors of a branch Federal Reserve Bank.
10th. "hese Rules and Regulations to become effective, as to
appointments for service as Directors, cn and after January 1st, I925#
Very truly yours,
Walter L. Eddy,
Secretary.
TO CHAIRMEN OF ALL FEDERAL RESERVE BANFS.
F E D E R A L • R F S IT R V E
BOARD
X-3957
STATE S T
FOR T H E P R E S S
For Release in Morning Papers
Monday, January 23, 1924The following is a summary of general business and
financial conditions throughout the several Federal
Reserve Districts, based upon statistics for the
months of December and January, as contained in the
forthcoming issue of the Federal Reserve Bulletin.
Production of basic commodities showed further decline in December and wholesale prices receded slightly. Christmas trade was somewhat larger than a year ago. Changes in the banking situation in January reflected chiefly an unusually large return flow of currency after
the holiday season.
PRODUCTION:
The index of production in basic industries declined 4 per
cent in December to the low point of the year. The decrease for the
month reflected principally a large reduction in consumption of cotton,
but also reduced operations in the woolen, petroleum, sugar, and lumber
industries. Production of pig iron and anthracite increased. The Federal Reserve Boardts index of factory employment decreased 1 per cent,
and was 4 per cent lower than in the spring. The largest decreases were
at plants manufacturing food products and railroad equipment. Building
contract awards in December were smaller than in November, but almost 25
per cent larger than a year ago.
TRADE:
Railroad shipments continued to decrease during December and
were slightly less than in December, i g 2 2 .
Loadings of coal and grain
were smaller than a year ago, while loadings of miscellaneous merchan
-2dise and live stock were in larger volume.
X-3957
"J
The volume of wholesale
trade showed more than the usual seasonal decrease and was at about
the same level as a year ago.
Sales of meat, hardware, and drugs were
larger than in December, 1922, while sales of dry goods and shoes - ore
smaller*
Retail trade, though larger in December, 1923, than in any
other month on record, did not show as large an increase over November
as is usual at the Christms season,
PRICES:
Wholesale prices, according to the index of the Bureau ol Labor Statistics, decreased less than one per cent during December«
The
chief reductions occurred in prices of fuel and building materials,
while prices of clothing and metals increased, and prices of farm products remained unchanged*
Earing the first two weeks of January prices
of corn, wheat, pig iron, petroleum, and lumber advanced, while quotations on cotton, sugar, and copper were lower,
CREDIT:
The volume of credit extended by the Federal reserve oariks
showed the usual sharp increase during the latter part of December in
response to holiday requirements for credit and currency and financial
settlements falling due on the first of January«
With the passing of
the seasonal demands there was an unusually rapid return flow of currency to the reserve banks, reflected both in an increase of reserves and
a decrease of Federal reserve note circulation. Member banks used the
currency returned from circulation to reduce their borrowings, with the
consequence that the earning assets of the Federal reserve banks declined by $360,000,000 during the four weeks following Christmas, or approximately $150,000,000 more than during the corresponding period of I923.
,3-
X-3957
At the middle of January the volume of reserve bank credit outstanding
was "below $1,000,000,000 for the first time since early in 191S.
loans made largely for commercial purposes by member banks in
principal cities declined between December 12 and January l6 to a point
£264,000,000 lower than at the peak in October and to about the level
of July, 1923. This decrease in loans, which was general throughout
the country, was accompanied by a movement of funds to the financial
centers and an increase in loans on securities, principally in New York
Easier money conditions in January were reflected in a further
slight decline in the rate on prime commercial paper to 4§ per cent,
compared with U-f to 5 per cent in December, and in increased activity
in the investment markets.
FEDERAL RESERVE BOARD
WASHINGTON
X-395S
January 25, 1924,
SUBJECT: Cost of producing Federal reserve notes.
Dear Sir:
For your information, I would state that on
January-1, 1924, the cost of producing 1,000 sheets of
Federal reserve notes (4,000 notes) at the Bureau 6f Engraving and Printing, was lowered from $42.50 to $39*00.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
COPY TO THE GOVERNORS.
F E D E R A L
R E S E R V E
B O A R D
Statement for the Press
x-3959
For Immediate Release
CONDITION OF ACCEPTANCE KAEEST
December 13 to January 9•
During the four week period ending January 9 the acceptance
market was less active than luring the preceding three months when
acceptances were drawn to finance the marketing of agricultural commodities.
In the latter part of December there was a decreasing supply of
bills but in January the volume of new bills increased somewhat and the
demand became more active, due to requests for bills from commercial
firms and banks in the interior.
The demand for bills was fairly good
except during the last week of December, but it was less than the supply,
and as a consequence dealers1 aggregate portfolios showed moderate increases at the end of the period.
Rates remained generally firm and
unchanged at 4 1/8 bid and U offered for 30-day bills and 4 l/4 bid and
4 l/s offered for SO and 90-day bills.
Rates on longer maturities
ranged from 4 l/4 to 4 5/S bid and 4 l/S to 4 3/3 offered.
Bills were
drawn principally against cotton, silk, sugar, grain, wool, agricultural
implements, provisions, and to provide dollar exchange.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-3960
January )Oth, 1924.
SUBJECT: Organization Charts of Federal Reserve Banks
and Branches,
Dear Sir:
V
Will you be good enough to prepare and send to
the Board at your earliest convenience an organization
chart for your tank, and for each of its branches, if any,
showing the name and title of each officer and department head, together with the number of employees in each
department or function supervised by such officer or department head. The chart should be prepared in accordance with the present organization of your bank without
reference to the functional expense classification, but
should, of course, be made out so as to include the entire
personnel of the bank cr branch. The Board would also like
to have the chart accompanied by a statement showing in
detail the work of each separate operating unit included
in each department or function mentioned in the chart.
Very truly yours,
Walter L. Eddy,
Secretary.
CIRCULAR LETTER TO ALL FEDERAL RESERVE AGENTS.
88
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-3963
February 1^; 1924.
SUBJECT:
Increase of capital by State member bank
intending to withdraw.
Dear Sir:
One of the Federal reserve banks has requested the
pederal Reserve Board to rule on the question of whether a
State member bank should be required to apply for additional
Federal Reserve Bank stock, under the following circumstances:
The member bank filed notice of intention to withdraw from
the Federal Reserve System and within the six months' period
subsequent to the date of filing the notice of intention to
withdraw, the member bank increased its capital stock.
The Board ruled as follows: "Inasmuch as the notice
of intention to withdraw from the System required by Section 9
of the Federal Reserve Act is merely a prerequisite to withdrawal and cannot be considered any part of the actual withdrawal itself, a State member bank which has given such notice
but has not yet acted pursuant thereto remains subject to all
the provisions of the Federal Reserve Act which are applicable
to other State member banks, and would, therefore, be subject
to the provision of Section 5 of the Federal Reserve Act requiring an application for additional Federal Reserve bank stock
upon an increase in the capital of the member bank. The mere
fact that it has given notice of its intention to withdraw cannot be said to affect in any way the requirement that it subscribe for additional stock in such case.
"Under the terms of the law, therefore, the (name of
member bank) must subscribe for an additional amount of capital stock in the Federal reserve bank, equal to 6 per cent of
any increase in the amount of its own capital stock made prior
to the time it actually withdraws from the Federal Reserve System. »
Very truly yours,
Walter L« Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
X-3966
90
l-.I- MEMORMDUM on article proposed, by Dr. Miller for insertion
in the Annual Report as to the regulation of Federal Reserve
note i§sues by the Federal Reserve Board.
2.
MEMORANDUM as to the proposal of Dr. Miller for insertion in
the Annual Report of the reasons for setting up separate reserve ratios for deposits and notes.
1.
After a carefu.1 re-reading of Dr. Miller's article favoring a new
policy of direct control by the Federal Reserve Board of Federal Reserve
note issues, I am unable to accept its conclusions and believe it would
be unwise to insert it in our Annual Report.
I appreciate that the part of this article which it was agreed at
our last meeting should be stricken out makes the article less objectionable,
but I feel that the portion of the article which was left in is merely
the reasoning intended to justify the conclusions in the article which
we agreed should be stricken out,- namely, that the Federal Reserve banks
are, and were created for the purpose of being primarily note issuing
bunks, and, further, that the Board is charged with the duty of directly
limiting future note issues instead of leaving such issues to the discretion of the Federal Reserve banks.
I believe it would be better to omit the entire article from
our Report.
The article in question is based upon three propositions
1,
That the Federal Reserve Act places upon the Federal Reserve
*
:
Board direct responsibility fcf the issue of Federal Reserve
notes through the respective Federal Reserve banks.
-22.
" 91
X-3966
That the Federal Reserve banks were created for the primary
purpose of issuing Federal Reserve notes to member banks against
credits established by them, (article p. 6)
J.
That member banks rediscount commercial paper with the Federal
Reserve banks mainly for the purpose of obtaining Federal Reserve
notes with which to meet the demand of their customers, (article,
p. 6)
Based upon these premises, the
article in question takes the position
that the Board should change its present and past policy wi£h relation to
the issue of Federal Reserve notes, should immediately place restrictions
upon future issues of- such notes, and, further, that the Board should take
certain not clearly defined action with regard to such notes as are now in
ac tual c irculation.
With neither (2) or (3) of the above propositions, nor with the conclusion derived from them, a m i in accord.
Hfliile thsy give a fairly ac-
curate statement of the intent of the Aldrich Central Bank Bill, under
which the note issues, available for reserves, were the principal function,
they do not represent the principles underlying the Federal Reserve Act.
An examination of the debates and the committee reports prior to the
passage of the Federal Reserve Act, and, as well, the preamble of the Act
as passed, shows that the
purpose of Congress in creating the
Federal
Reserve banks was not only to furnish an elastic currency but, aa well, and
primarily, to furnish a means of rediscounting commercial paper.
That the
discounting function was the primary function will clearly be seen, when it
is remembered that, under the Act as originally enacted, every Federal Reserve note issued was tied to, and arose out of the rediscount of commercial paper, that is, arose out of aa antecedent credit granted by the
-3-
*
X-3966
Federal Reserve bank to the member bank.
The Federal Reserve Board, on the other/ hana, ihas the ultimate powar
to control the antecedent credit by fixing the discount rate, and the
further power to control the issue of Federal Reserve notes through the
imposition of an interest charge on any issues not covered, dollar for
dollar, by gold.
The power also given to grant or to refuse altogether the
application of any Federal Reserve bank for Federal Reserve notes, in iqy
opinion, was intended to be used only in case the imposition of an interest
charge failed to be effective.
On analysis, it will, I believe, be realized that the privilege of
issuing notes, from the point of view of the Federal Reserve banks, is
merely the privilege of protecting their cash reserves by issuing such notes,
which notes are received by the public, when paid out by the member banks,
as the equivalent of cash.
The question 6f the regulation of Federal Reserve note issues, therefore, has to do more with the internal administration of the Federal Reserve
banks than with the public, for what the "public desires is merely circulating
medium, and it can always obtain the circulating medium it desires, in the
form of cash, if not of notes, as long as the member banks and the Federal
Reserve banks are solvent.
The real problem which confronts the Federal Reserve Board is, therefore, whether at any given time it should forbid a Federal Reserve bank to
protect itself against demands for cash by member banks by issuing Federal
Reserve notes; that is to say, whether the Federal Reserve Board, by
limitation of note issues, should insist that such demandsf'-for cash by
member banks be met by Federal Reserve banks by drawing down their cash
reserves rather than by issuing Federal Reserve notes.
7
-4-
93
X-3966
• The whole matter, however, was wisely left by Congress to the discretion
of the Federal Beserve Board and it is the necessity for th<? exercise of
such discretion which is now before us for consideration.
In considering the desirability of a change in the policy of the Board
as to the issue of Federal Beserve notes, as advocated by the article in
question, we should first consider what the policy of the Board has been
in the past in this matter.
We have heard it frequently stated in Board meetings that the Board
never has had a policy in the past but that, ignoring its plain responsibility under the law, it has thrown down the reins and left to the unbridled discretion of the Federal Reserve banks, the privilege of deluging
the country with issues of paper money, thus directly aiding the extraordinary speculative activity which was at one time rampant,, and causing,
as well, the serious inflation of prices from which the country is even
now suffering.
With some confidence I assert that just the contrary is the fact, .
There never has been a question before our Board which has been so
carefully and Thoroughly considered as the question of the policy of the
Board as to Federal Beserve note issues.
The whole question was argued
and debated, covering a period of some years, at the very time when the inflation of prices was going on.
The conclusion finally reached by the
Board was commnicated to the Senate on August 8„ 1919 * when it was pointed
out that existing inflation was caused by the excess of deposit credits
over production and distribution needs, and the conclusion was stated that
the issue of Federal Beserve notes merely represented the needs of the
community for small change in handling retail trade transactions, payrolls,
-5-
X-3966
and for pocket money, and similar services; that the increasing issues
of Federal Reserve notes were not the cause of inflated prices but were
merely the result of inflated prices which were really caused by excessive
deposit credits. C'vg Federal Reserve Bulletin, p. 699)
The conclusion of the Board was supported by a study of the ebb and
flow of Federal Reserve notes, which brought out the fact that the moment
the amount of such notes in circulation became in excess of the needs of
the community they were iranddiately presented for redemption and cancellation.
This fact is borne out graphically by the figures of Federal
Reserve notes in circulation at the present time.
Since December 23» 1920,
when the peak was reached,-3,404.9 millions, the circulation has declined
to 2,017.4 millions on February 8, 1924, a decline of over 1,3&7 millions
of dollars, or 40$,- and this decline took place without any limitation
or interference with such issues on the part of the Federal Reserve Board.
The Board, as above stated, reached the conclusion that it was safe
to leave to the discretion of the respective Federal Reserve banks the
right to determine how far they should respond to demands for cash by
member banks by paying out gold, or in the alternative by issuing Federal
Reserve notes.
In my opinion,- whatever criticism nay be made of the Board's use of
its power to fix discount rates upon the underlying credits given by the
Federal Reserve banks during the war and post-war period,- the exercise
of its discretion in refusing to place a tax upon or to limit the issue
of Federal Reserve notes during such periods has been amply justified by
experience.
Another important point to be borne in mind is that the conclusion
; 95
- 6 -
X-3966
of the Board, as above stated, was a. unanimous conclusion and was so
expressed in its answer to the Senate sent on August 3, 1919«
On September 25, 1919> Dr, Miller, in an address delivered to
the American Association of the Baking Industry, at Chicago, among
other things said as follows:
and
"The form that credit demand (/expansion) has taken in the
United States has been banking credit in the shape of bank deposits, Expansion of the currency has played a very subordinate
role. It is no exaggeration to say that expansion of the currency has been a consequence, rather than a cause of our high prices,
"So far as expansion of the purchasing medium of the country is responsible for our great rise in prices it has been and
is purchasing medium in the form of bank deposit credit and not
in the form of Federal Reserve notes."
At the time this address was delivered inflation was in full
swing. While it is true that Federal Reserve note issues continued
to increase for some four months after this address was delivered,
the relative increase was much smaller than that vAiich had taken
place during the war period, which was prior to the date of this address.
Later, however, Dr. Miller changed his opinion.
In an article
in the American Economic Review for June, 1921, he quoted approvingly the letter of the Board to the .^Senate Committee of August 8, 1919i
to the effect that "the expansion of currency is a consequence of the
expansion of credit and increase of prices and is not & causal fsOtor in price movement," but he qualified this approval by stating
that it "applies to normal conditions"
-7-
X-3966
The conclusion of the Board, however , expressed in said letter
of August g, 1919, was expressly stated by the Board to apply to the
then existing conditions which, so far from being "normal", were
chaotically abnormal at that time.
Dr. Miller, however, as shown
by his address on September 25, 1919, above referred to, concurred
in the conclusion of the Board as contained in said letter of August
8, 1919•
The same conclusion was expressed by .the Board in October
1919, in its Review of the Month.
(See 5 Federal Reserve Bulletin,
page 913')
I do not, of course, question the right of any member to change
his opinion.
I merely cite Dr. Miller *s aJdress to show that the
opinion given by the Board in said letter represented his opinion
as well as the unanimous and carefully thought outconclusion of the
Board.
The article now before us asks us in effect to change the
policy expressed in said Board letter of August S, 1919, to the
effect that inflated prices were not caused by the issue of Federal Reserve notes, and to lay down the new theory that excessive
issues of Federal Reserve notes are responsible for past and
present price inflation, that in the future such issues must
be regulated by our Board, and further that the original conception of Federal Reserve banks, as above set forth by me, is erroneous and that such banks are and were created to be primarily
note issuing banks,
When one considers that the Federal Reserve banks have today
outstanding about two billions of Federal Rasarve notes in circulation and hold reserve deposits of member banks of nearly the
X-3966
.
same amount, and are sustaining credits granted by member banks to
their customers, based on these reserve deposits, in excess of 18
billions of dollars it would seem somewhat difficult to draw the
conclusion that the Federal Reserve banks are primarily note
issuing banks.
When further it is realised that today the Federal Reserve
banks, taken together, could pay off dollar for dollar In gold
every Federal Reserve note in circulation and yet hi*e"left in
their possession gold and cash equivalent to a ratio of 6g# of
their deposits, it would certainly seem surprising to call these
banks primarily note issuing banks.
Every Federal Reserve note in circulation, other than those
issuid dollar for dollar for gold, grows out of some antecedent
credit granted to the member bank by the Federal Reserve bank,
and if the Federal Reserve banks and the Federal Reserve Board
have properly regulated this antecedent credit through the discount rate and open market operations, I believe that experience
has shown that there will be no necessity for direct limitation
of the issue of Federal Reserve notes.
If, however, a majority of the Federal Reserve Board believes
that the time has come to change the present policy of the Board
as to Federal Reserve note issues, a policy which I have shown
was adopted after most careful consideration and which has been
in force since the Federal Reserve System was established, the
Board should frankly state in the Annual Report that the past
policy of the Board was erroneous and that a new policy is to be
adopted, leaving to the minority the right to record themselves to
the contrary or to send to Congress a minority report.
2.
The publication of separate reserve ratios
a gains t deposits and Federal Reserve
notes.
I cannot see any wei^ity objection to the publication by
the Federal Reserve Board each week of the reserves actually
carried by the Federal Reserve banks as a whole against deposits
and against Federal Reserve notes respectively, assuming for the
purpose of such publication, that the gold held by the Federal
Reserve banks in the Gold Settlement Fund is allocated to the
reserve against deposits.
I feel strongly, however, that the reasons given in the
proposed article for such publication should not be published
in the annual report.
My reason for this feeling is that cDr.
Miller's article, to my mind, necessarily implies that the
Board has in its mind some ulterior object other than merely
giving a photograph of reserve cord itions as they actually
exist from week to week.
I feel very confident that if the reasons contained in this
article were published in the Annual Report they would at once
bring to mind the article published by Dr• Miller in The American
Economic Review for June 1921, in which he not only favors stating the reserves separately, but also favors allocating a certain
amount of gold to the Federal Reserve Agent as a gold reserve
w
1 0 *-
x-3966
against notes, such amount to be determined, by the Federal Reserve Eoard, and to remain a fixed quantity not to be reduced
by the Federal Reserve, banks unless the Federal Reserve Toard
determines that conditions justify a change.
In other words, as
I understand the article, the gold held by the Federal Reserve
agents as reserve for the notes is to be "pegged" so as to bring
about a certain pre-determined reserve ratio, at the cost of the
deposit reserve, which is to be permitted to fluctuate at whatsoever ratio will remain after the reserve fixed by the Board for
notes has been kept intact by gold taken from the deposit reserve
that is to say the deposit reserve is, as it were, made a surety
for the gold reserve, so that the note reserve ratio will always
be constant and the deposit reserve ratio will constantly fluctuate.
While I agree that the Federal Reserve banks, without any
order or direction from the Federal Reserve Loard, will in all
liklihood continue to do as they are doing now in the way of
allocating a larger portion of their gold to Federal Reserve
notes than to deposits in order to keep the note ratio higher
than the deposit ratio, I confess I can now see no legal method
by which the Board could order the banks to do this.
I cannot
see how the Board, for example, could order the note reserve to
ba maintained at 100$ when the Federal Reserve Act simply
<
-4i-
X-3966
prescribes that the minimum shall be 40^.
While the Board
has authority to lower tha reserve requirements, it certainly has no authority to increase them.
Furthermore, even ad-
mitting for the sake of the argument, that the Board has the
power to fix a reserve fund of 100^ against Federal Reserve
notes, I fear that if in the future this 100ft reserve should
have to be reduced, because of demands for gold for export or
for other causes, it might cause serious apprehension on the
part of the public similar to that caused in 1393 by the enforced
reduction of the one hundred million gold reserve held for the
redemption of the so-called greenbacks.
/
I venture to hope, therefore, that the Board will content
itself by merely publishing the separate reserve ratios as they
exist from week to week and wii 1 decide to leave out of the Annual Report arguments contained in this article which, to my
mind , clearly point to further requirements of at least doubtful
• legality.
C. S. HAS/LIN
Feu. 12, 1924.
/
100
X-3967
TREASURY DEPARTMENT
Office of the Secretary
WASHINGTON
1 0 1
February 7, 1924.
The Governor
Federal Reserve Board.
Sir:
You are hereby advised that the Department has referred to the Disbursing
Clerk, Treasury Department, for payment, the account of the Bureau of Engraving
and Printing for preparing Federal reserve notes during the period January 1
1924 to January 31, 1924, amounting to #02,180, as follows:
Federal Reserve Notes, 1914
m
Boston
New York
Philadelphia
Cleveland
Richmond
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Franciwoo
190,000
190,000
190,000
190,000
125,000
316,000
94,000
94,000
mm
97,000
63,000
63,000
125,000
—
—
47,000
—
190.000
1,532,0o0
—.
—
—
—
-»
—
—
63.000
505,000
$20
63,000
mm
—*
78,000
78,000
78,000
114,000
—
450
—
—
10,000
10,000
-*
•
20 ,000
—
24,000
25,000
20,000
63,000
543,000
—
—
—
—
—
—
•
•**
40,000
Total
347,000
190,000
375,000
341,000
266,000
575,000
94,000
24,000
72,000
20 ,000
316.000
2,620,000
2,620,000 sheets at $39.00 per M . . . #102,180.00
The charges against the several Federal Reserve Bsulks are as follows:
CompenSheets
sation
•347,000 $4,684.50
lesten
190 ,000 2,565.00
"Jew York
5,062.00
Philadelphia
375,000
341,000
4,603.50
Cleveland
266,000
3,591.00
Richmond
7,762.50
575,000
Chicago
1,269.00
94,000
St. Louis
324,00
24,000
Minneapolis
972,00
72,000
Kansas City
20,000
270.00
Dallas
4.266.00'
San Francisco 316,03u
2 ,620,000 35,370.00
Inc. ComPlate
Total
Printing Materials pensation
#13,533.00
$3,556.75 #4,077.25 $1,214.50
7,410.SO
665.00
2,232.50
1,947.50
.14,625.00
1,312.5$
3,843.75' 4,406.25
13,299.00
1,193.50
4,006.75
3,495.25
10,374.00
931.00
3,125.50
2,726.50
22,425.00
2,012.50
6,756.25
5,893.75
3,666.00
329.00
1,104.50
963.50
936.00
84.00
282.00
246.00
2,808.00
252.00
846.00
738.00
780.00
70.00
235,00
205.00
12.324.00
1.106.00
3.713.00
3.239.00
9,170.00 102,180.00
30,785.00
26,855.00
The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", and it is requested that your board cause such indefinite appropriation to be reimbursed in like amount.
Respectfully,
(signed) S. R. Jacobs,
Deputy Commissioner.
102
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-3963
February 12, 1924.
SUBJECT:
Treatment of Bonds and Coupons in Process
of Collection in Computing Beserves.
Dear Sir:
)
t
.x
There is enclosed herewith for your information copy of a letter addressed by the Federal Reserve
Board to one of the Federal Reserve Banks in reply to
an inquiry as to whether bonds and coupons, which have
"been cashed by a bank for its customers and forwarded
to a bank correspondent for collection, can be considered an amount due from banks and accordingly deducted
from the amount due to banks, in accordance with the
provisions of Section 19, regarding the computation of
reserves.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
J
( C o p y )
X-3968a
February 11th, 1924
Dear Sir:
Receipt is acknowledged of your letter of December 28th
with further reference to the question vmether bonds end coupons,
which have bean cashed by a b-snk for its customers and forwarded to
a bank correspondent for collection, can be considered an amount
due from banks and accord ingly deducted from the amount due to banks,
in accordance with the provisions of Section 19 regarding the computation of reserves.
The Board h%s considered this question and is of the opinion that such bonds and coupons, including those issued by national
or State governments or by municipalities, may not properly be considered as constituting an amount dua from other banks. Such bonds
and coupons are not to be paid by bsnks but by firms, corporations
or governments and they are, therefore, amounts due from such firms,
corporations or governments rather than amounts due from banks.
This is true even though these items have been forwarded to a correspondent- bank for collection, because even in this case the correspondent bank is not the party primarily liable but acts merely as
an agent in the transaction. Again in the case where Federal reserve
banks act as fisoi agents of the United States in cashing bonds or
coupons issued by the United States, the party primarily liable is
the United States and the Federal reserve banks act only as agents.
In the opinion of the Bosrd, the words "amounts due * * * from other
banks" refer to items drawn against or payable out of balances held
by such other banks and not to any items drawn upon firms, corporations or governments for which other banks set merely as collecting
agents. Bonds and coupons forwarded for collection, therefore,
should not be deducted from due to b?nk balances in computing reserves of member banks.
Wnere, however, such bonds and coupons have actually been
collected and the proceeds have been credited to the account of the
forwarding bank the amount thereof may be counted a.s part of the
balance due from the collecting bank to the forwarding bank, and
may be deducted from due to bank balances in computing the reserves
of the forwarding bank*
Very truly yours,
Edmund Piatt,
Vice Governor.
I
104
i
FEDERAL RESERVE BOARD
107
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-3969
February 14, 1924.
SUBJECT: EXPENSE MAIN LIME, Leased Wire System,
January, 1924,
Dear Sir:
Baciosed herewith you will find two mimeograph
statements, X-3969-a and %-}9&9-b, covering in detail
operations of the main line, Leased Wire System, during
the month of January, 1924.
«
^
Please credit the amount payable by your bank
in the general account, Treasurer, U. S., on your books,
and issue C/D Form 1, National Banks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate C/D to Federal Reserve Board.
Very truly yours,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL BANKS
105
x-3969-a
REPORT SHOEING CLASSIFICATION APD NUMBER OF It)EDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED riSE SYSTEM FOR THE MONTH CF JAMJARY, 1924.
s.
j
Percent of
Treasury
War
Finance Corp.
Fed. Res.
Total Bank
Dept.
3am: lusiness Business (*) Business
Business
Total
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Loui s
Minneapolis
Kansas City
Dallas •
San. Francisco
TOTAL
46,526
297,873
72,820
100,992
85,145
96,877
155,395
104,755
73,981
107,421
88,197
158,489
40,904
252,232
66,741
96,025
80,771
91,726
149,442
99,449
69,451
101,519
84,678
147,704
3-12
21.53
5.09
7.33
6.16
7.00
11.40
1-59
5.30
7.74
6.47
11.27
5,622
15,641
6,079
4,964
4,374
5,151
8,953
5,306
4,507
5,902
3,279
10,785
1,310,845
100.00
£0,563
63
1,391,471
23
40
Board
285,354
69,429
926
355,709
Total
1,596,199
149,992
989
1,747,180
Percent of Total
91.^6%
5.58ft>
.06%
Bank Buanessl,596,199 words or 91»4l^,
Traasur.yDept • -149,992
TOTAL
1,746,191
"
"
8- 59cl
100.00$
(*) These percentages used in calculating the
pro rata share of leased wire expenses as
shown on the accompanying statement (X-39^9-^)
I
FEDERAL RESERVE BOARD,
Washington, D. C.
February 14, 1924.
i
•-»-
X* ' *•**
-
_•*
—
V-Voj-ij
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED W E E SYSTEM JANUARY, 1924.
Name of Bank
Operators1
Salaries
Boston
$ 250.00
New York
1,300.02
.Philadelphia
200.00
Cleveland
368.00
Richmond
315.00
Atlanta
240.00
Chicago
(#)5,020.15
St. Louis
250.00
Minneapolis
253-33
Kansas City
346.64
Dallas
251.00
San Francisco
38O.OO
Fed. Res. Board
TOTAL
$9,224.14
Operators' Wire
Overtime
Rental
Total
Expense
$
$
1.00
$
—
—
—
—
—
-
—
—
—
—
—
—
—
~-
—
—
—
—
-75 '
—
-
17,019.74
$
1.75
Pro Rata
Share of
Tot al
Expense
Credits .
Payable to
Federal
Reserve
Board
251.00 $
640.19 $ 251.00 $
369.19
1,300.02 4,417.70 1,300.02
3,117.65
1,044.41
844.41
200.00
200.00
358.00
1,116.03
365.00
1,504.03
948.96
1,263.96
315.00
315.OO
240.00
240.00
1,436.32
1,196.32
5,020.15
2,339.15 5,020.15 (*)2,651.00
25O.OO
250.00
1,307.35
1,557-38
804.17
1,087-50
283-33
283.33
1,588.16
346.64
1,241.52
346.64
1,075-82
251.75
1,327.57
251.75
380.00
380.00(1)3,312.47
2,932.47
17,019.74
$17,019.74 $26,245,6) $21,518.64 $9,225.59 $14,973*95
(a)4,724.79
(&)2.681.00
$21,520.84
$12,292.95
(2) 2.00
(§)
(&)
(*)
(a)
(1)
(2)
$21,515.84
Includes salaries of Washington operators.
Amount reimbursable to Chicago.
Credit.
Received $24.79 from War Finance Corporation and $4,700.00 from Treasury Department
covering business for month of January, 1924.
Excess credit of $1,000.00 allowed operators' salaries, San Francisco, December, 192J.
Overpayment by banks 1922-1923.
jas^i
O
110
X-3971
STATEMENT FOR THE PRESS:
At the organization meeting for 1924 of the Federal
Advisory Council held today, Mr. Paul M. Warburg of New
York City was elected President, Mr. L. L. Rue of Philadelphia , after having served as President for three years,
having declined reelection to this office.
Mr. A.
Aiken of Boston was elected Vice President of the Council.
An Executive Committee was elected , consisting of
Messrs. Warburg and Aiken, ex officio, together with Messrs.
Rue, J, M. Miller,.Jr., of Richmond;
Chicago;
and E- F. Swinney, of Kansas City.
FOR IMMEDIATE RELEASE
J. J. Mitchell, of
February IS, 1924.
Ill
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
February 21, 1924.
X-3972
Subject: Discount of Paper Secured by Bonds
of War Finance Corporation.
Dear Sir:
One of the Federal Reserve banks has raised
a. Question a.s to the eligibility for rediscount at
Federal Reserve banks of paper secured by bonds of the
War Finance Corporation, stating that the provisions
of the Board's Regulation A, Series of 192}, seem to
preclude the discount of such paper, inasmuch as provision is therein made for the discount of only such
investment paper as is aravm to finance dealings in
United States Government securities.
For your information and guidance, a. copy
of the Board's reply is enclosed herewith.
Very truly yours,
Walter L. Eddy,
Secretary.
TO GOVERNORS OF ALL F.R.BANKS
112
c oil
February 20, 1924.
X-3972-a
Dear Governor
Receipt is acknowledged of your letter of February 3
inquiring whether the Federal Reserve 3ank of
may
discount for memo or banks paper secured by bonds of the War Finance Corporation. You state that the provisions of the Board's
Regulation A, Series of 1923, seem to preclude the discount of
such paper, inasmuch as provision is therein ra.de for the discount of only such investment paper as is drawn to finance dealings in United States Government securities.
Section 13 of the War Finance Corporation Act, as originally enacted, authorized Federal reserve banks, subject to the
caturity limitations of the Federal Reserve Act and to regulations of the Federal Reserve Board, to discount the direct obligations of member banks secured by bonds of the War Finance Corporation. As you state in your letter, this statutory provision
is incorporated in the third paragraph of Section I, Article A,
of Regulation A.
Section 13 of the War Finance Corporation Act,
in its original form, also authorized Federal reserve banks "to
rediscount eligible paper secured by such bonds and endorsed by a
member bank".
This provision- , however, apparently did not enlarge the discount powers of Federal reserve banks, inasmuch as
they were already author!zed by Section 13 of the Federal Reserve
Act to discount eligible paper, irrespective of the existence or
character of security.
Consequently, it was unnecessary to embody
this provision of the War Finance Corporation Act in Regulation A«
Section 13 of the War Finance Corporation Act was amended by an Act approved August 24, 1921.
As amended, this section
authorized the discount by Federal reserve banks of direct obligations of member banks secured by bonds or notes of the War Finance
Corporation, and.also authorized Federal reserve banks "to rediscount notes or other negotiable instruments secured by such notes
or bonds and endorsed by a. member bank." This legislation apparently did enlarge the discount powers of Federal reserve banks, inasmuch as it purported to make eligible for discount paper which
rcight not otherwise be basically eligiole if it were secured by
bonds or notes of the Wai' Finance Corporation.. It was apparently
through an oversight that this provision of law was not taken care
of in Regulation AIt thus appears that notes and other negotiable instruments secured by oonjs or notes of the War Finance Corporation are
made eligible for discount, subject to regulations of the Federal
Reserve Board, and thst the Board has made no appropriate regulations covering the discount of this class of paper.
The Board is
of the opinion, hov-rever, that Federal reserve banks should be authorised to discount negotiable paper secured by bonds or notes of
the War Finance Corporation and endorsed by a. zazber bank to the
same extent and under th3 same conditions as Federal reserve banks
are now authorised to discount negotiable paper secured by bonds
or notes of the United States. The Board accordingly rules that
Federal reserve banks ray discount negotiable paper secured by bonds
or notes of the War Finance Corporation and endorsed by a meirber
bank when such paper is issued or drawn, or the proceeds have been
used or are to be used in the first instance, for the purpose of
carrying or trading in such bonds or notes of the V'ar Finance Corporation, provided, such paper complies in other respects m t h the
relevant provisions of law and of the Board's regulations.
Yours very truly,
(Signed)
D. B. Orissinger,
Governor.
114
F E D E R A L
A D V I S O R Y
19 2 4
Officers:
P. M. Warburg, PresidentS. 7: Swinney, Vice President.
C. B. Georgen, Secretary.
Corrected to May 12, 1924.
M E M B E R S
District
C O U N C I L
^~3373~
Superseding X-3653
Executive Committees.
L. L. Rue
1. F. Swinney
P. M. Warburg'
C. A. Morss (l)
J. J. Mitchell
J. M. Miller , Jr.
Representative
No. 1
Charles A. Morss
No. 2
Paul M. Warburg
No. 3
L, L. Rue
President, The Phila. N&t11. Bank,
421 Chestnut Street,
Philadelphia, Pa.
No. 4
C. E. Sullivan
President,
No. 5
John M. Miller, Jr. President,
First National Bank,
Richmond, Va.
No. 6
Oscar Wells
First National Bank,
Birmingham, Ala.
No. 7
J. J. Mitchell
No. S
Festus J. Wade
No. 9
G. H. Prince
No. 10
E. F. Swinney
No. 11
No.12
M. McGregor
D. W. Twohy
Vice-Pres., Simplex Wire & Cable Co.,
Boston, Mass.
3'1 Pine Street,
New York, N. Y.
President,
Chrm. of
the Board
Central National Bank,
Savings & Trust Company,
Cleveland, Ohio.
Illinois Merchants Trust
Company, Chicago, 111.
President, Mercantile Trust Co.,
St. Louis, Mo,
Chrm; of
the Board
President,
Merchants National Bank,
St. Paul, Minn,
First National Bank,
Kansas City, Mo.
President., First National Bank,
Wichita Falls, Teasas.
Chrm. of
the Board.
Old National Bank,
Spokane, Washington.
Address of Mr. Georgen, Federal Reserve Bank, New York, N. Y.
(1) Vice Chairman.
115
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
February 23, 1924.
x-3975
Subject: Examinations of State Member Banks.
Dear Sir:
For J"0ur information, I would state that the Federal
Reserve Board has recently ruled as follows on the question of
whether or not the Federal reserve banks may conduct examinations of stats-rcember banks with examiners other than those
selected or approved, by the Federal Reserve Beard.
"The following provision of Section 21 of the Federal
Reserve Act Was contained in the Act as originally enacted:
•In additioh to the examinations made and conducted
by the Comptroller of the Currency, every Federal reserve bank may, with the approval of the Federal reserve
agent or the Federal Reserve Board, provide for special
examinations of member banks within its district.'
The following provision* ahich is now contained in the
federal Reserve Act, was added to Section 9 by the amendment
of June 21, 1917:
* As a. condition of membership such banks shall likewise
be subject to examinations made by direction of the
Federal Reserve Board or of the Federal reserve bank by
examiners selected or approved by the Federal Reserve
Board.'
Although the provision of Section 9 above quoted does
not expressly supersede that of Section 21 on this subject, it
seems to be controlling with respect to the examiners who shall
make examinations of State member banks.
Section 21 of the Act
contains no reference to the selection or qualification of such
examiners, but the later enactment in Section 9 requires that
they be 'selected or approved by the Federal Reserve Board'.
Since the original statute is silent on the subject, and the
later provision contains an express requirement, it is the opinion of the Federal Reserve Board that Section 9 of the Act is
controlling on the point.
You are advised, therefore, that examinations of State member banks conducted by Federal reserve
banks shoald not be made by examiners other than those selected
or approved by the .Federal Reserve Board in accordance with the
provisions of Section 2. of the Federal Reserve Act."
TO ALL
Very truly yours,
Walter L. Eddy,
Secretary.
FEDERAL RESERVE AGENTS.
116
F E D E R A L
R S S E H V E
B O A R D
STATEMENT FOR TEE FREES
X-3976
For Release in Morning Papers
Thursday, February 23, 1924.
The following is a. surmary of general business and
financial conditions throughout the several Federal
Reserve Districts, based upon statistics for the
months of January and February, as contained in the
forthcoming issue of the Federal Reserve Bulletin.
Production ofi basic commodities increased sharply in January, the
volume of distribution continued larger than a year ago, and the wholesale
price level remained unchanged.
In February there was an increase in the
demand for credit for commercial purposes.
PRODUCTION:
The Federal Reserve Boord's index of production in basic industries increased g per cent in January and was at approximately the same
level a.s a year a go.
This increase followed a. downward movement which had
been under way since May, 1923.
The increases over December, which occurred
in most of the industries, were particularly large in the production of steel
ingots, lumber, and bituminous coal and in mill consumption of cotton,
A
small but general reduction of working forces at industrial establishments
resulted in a slight decline in the index of factory employment.
The largest
decrease occurred at plants manufacturing food products and tobacco.
Contract
awards for new buildings in January were slightly higher in value than in December and were 26 per cent above a. year ago.
TRADE:
Railroad shipments, particularly of miscellaneous merchandise, increased during January and total car loadings were somewhat above the high
117
- 2 ~
level of January, I923.
X-397o
The index of wholesale trade increased 11 per cent
during January and was slightly higher then a year ago.
Soles of groceries,
meat, and drugs were larger than in January, 1921, while sales of dry goods
and shoes were smaller.
decline.
Retail trade in January showed the usual seasonal
Compared with a year ego department store sales were 7 per. cent
larger and stocks of merchandise at these stores, after declining in January,
were 6 per cent above last year's level.
Sales of mail order houses in
January exceeded those of a pea.r ago by 11 per cent.
PRICES:
The wholesale price index of the Bureau of Labor Statistics
remained unchanged, during January and was at a. level 3 P s r cent lower than a
year ago.
Prices of fuels and building materials which had been declining
since early in 1923 increased in January, while prices of farm products,
foods, and clothing declined.
Daring the first t.vo weeks -of February prices
of hogs* sugar, hides, lumber, and metals advanced, while prices of cotton,
wheat, and silk declined.
BANK CREDIT:
The volume' of borrowing for commercial purposes at member
banks in leading cities, after an almost continuous decline for more than
three months, increased considerably during the latter part of January and
the first two weeks in February.
This increase was a-ccompanied oy a decline
in loans secured by stocks and bonds.
Total loans and investments of the
reporting banks are now slightly larger than a year ago, commercial loans
118
- 3 -
X-3976
and loans on stocks and bonds are larger, but investments are smaller.
At the Federal reserve banks the total volume of earning assets
fluctuated within narrow limits during February.
The large return flow of
currency and the repayment of discounts, which characterized the early weeks
of the year, did not continue after January.
Since the first week in Feb-
ruary the volume of discounts for member banks has-been about $500,000,000
and the holdings of securities purchased in the open market about $400,000,000.
The easier money conditions of January were followed in February
by slightly firmer ra.tes on acceptances and on short term Government securities,
Commercial paper rates in the Few York market remained unchanged at .
4 3/4 per cent-
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
x-3977
February 26, 1924.
Subject: Applications for Reduction in Reserve
Requirements.
Dear Sir;During the past few months the Federal Reserve
• Board has received several applications from member
banks, located in outlying districts of reserve cities,
for reductions in their reserve requirements, under
Section 19 of the Federal Reserve Act, from 10$ of demand
deposits and 3$ of time deposits to 7$ of demand deposits
and yjo of time deposits.
Certain of these applications
have been filed by banks which were newly organized or
in operation for but a. short length of time, or by longestablished banks which have been members of the System
for - only a. few months.
For your information, the Board has ruled that it
shall be a. condition precedent to the filing of an application for a reduction in reserves that the applicant
bank shall have been a member of the Federal Reserve System
and in operation as such for a period of at least one year
prior to the date of such application.
Very truly yours,
J. C. Noell
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
119
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-397S
Februe-ry 27, 192*4.
SUBJECT:
Corrections in Inter-District Time Schedule.
Dear SinBy agreement between the Federal Reserve Bank of
Kansas City and the Federal Reserve Bank of Dallas, the
following changes should be made in the inter-district time
schedule:
-
Denver to El Paso ~ 2 days
El Paso to Denver - 2 days
Very truly yours,
J. C. Noell
Assistant Secretary.
TO G O V B M B S 07 ALL F. R. BANKS
120
121
.FEDERAL
R E S E R V E
B O A R D
Statement for the Press
X-3979
For I immediate Release
CONDITION OF ACCEPTANCE miRKST
January 10 to February 13•
The acceptance market during the four weeks ending February 13
was more active than for any period since early in the autumn.
As
a result cf large takiags oy New York and Boston banks as well as
those in the interior, the demand for acceptances increased rapidly
in the early part of the period and the volume of bills distributed
was larger than for any month in 1923 except April,
The supply of
new bills which came into the market increased during the first two
weeks but declined sorrewha.t in the remaining weeks.
The total
supply of new bills exceeded any month in 1923 with the exception
of April and Nov ember.
In fact, the supply increased more than
the demand, and dealers' aggregate portfolios at the end of the
period showed considerable increases and were at the highest point
in over two years.
Commodities against which bills were drawn
were cotton, silk, grain, sugar, coffee, copper, wool, and pack-'
ing house products.
Cotton bills were in particularly large
plume and the supply of bills drawn to finance the importation of
sugar and coffee and the exportation of copper was also large.
Easier money conditions early in January resulted in lowering
of dealers' offering rates to 4 per cent on all maturities up to
ajnd including four-month bills.
The consequence, however, was to
2 -
X-3979
cause the demand for bills to slacken and by the end of the period
offering rates had been raised to 4 l/s per cent on all maturities
except 30-day bills which continued at 4 per cent.
Rates on mat-
urities of more than four months remained unchanged at 4 3/3 to
4 1/2 bid and 4 l/g to 4 3/s offered.
123
X-39S1
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For Release in Morning Papers,
Monday, March 3« 19 2U.
The March, 1924 issue of the Federal Reserve
Bulletin will carry the following review of the
recent course of trade and industry.
Increased industrial and trade activity and a larger volume of
borrowing for commercial purposes have characterized the business situation
since the opening of the year.
In January the increase in the output of
basic commodities was unusually large and brought the volume of production
from the low point of 1923, reached in the preceding month, to the level
prevailing at the beginning of that year. Daring the last half of 1923 production declined and even after the sharp recovery in the first month of
192U the index was 5 per cent below the high point of last May. The distribution of commodities at wholesale and the shipments of merchandise also
increased in January and were in greater volume- than a year ago. The level
of wholesale prices, which had declined since the spring of 1923» remained
unchanged between * the middle of December and the middle of January, and the
prices of many commodities, particularly raw materials, advanced during the
early weeks of February. These changes in industry, trade, and prices reflect the extent and character of the recent business readjustments.
The course of industry and trade, because of the growth in current
information concerning business, can now be followed more closely and accurately than ever before.
In recent years much progress has been made in-
the collection of such information by governmental and private agencies.
-2-
X-39S1
The Federal Reserve Beard and the Federal reserve banks, in addition to
their reports on banking conditions, gather data on changes from month to
month in the industrial and business situation and make them available
through their publications to member banks and to the public. This information has an important bearing on changes in the demand for credit and it
is presented in detail each month in the Federal Reserve Bulletin, which is
sent to all member banks. The brief edition of the Bulletin, formerly sent
to the banks, which did not contain trade and industrial information in the
same detail, was discontinued at the beginning of this year.
In view of
the wider circulation of the Bulletin in its present form and of the variety
and comprehensiveness of the information which it contains, it is opportune,
in connection with a discussion of current business developments, to indicate the type and uses of economic data available and the method of its presentation.
Indexes of trade and industry, - In order to facilitate comparisons of industrial and trade movements in different lines, many of the figures have
been converted into percentages on a common base year and are in the form
of so-called index numbers. All the Federal Reserve Board indexes of production, employment, and trade take the monthly average for 1919 a s 100, and
express the figures for each month as percentages of this average. For example, the production index in January, 1924, was 120, which means that the
total output in January of the commodities included in that index was 20 per
cent larger than for the average month in 1919-
Since the purpose of this
index is to compare the production during the current month with that of
earlier months and not with what might be regarded as "normal," the base se-
-3-
x-3981
lected as 100 per cent is the actual production in 1919 and not an assumed
or computed "normal."
It is, therefore, the fluctuations in the indexes
rather than their position with reference to the base period that is significant.
Since in some lines of industry and trade definite and more or
less regular seasonal fluctuations occur, certain of the index numbers are
presented both with and without allowance for seasonal influences.
In re*
tail trade, for example, there are pronounced seasonal peaks in the spring
and especially during Christmas buying, and it is desirable to have an indication of the course of retail trade after allowance has been made for
these seasonal movements.
These index numbers of industry and trade are so
constructed that in addition to indicating the general movements of these
basic factors and making them comparable with each other, they also show
the changes in the individual major industries and the extent of trade activity in different sections of the country.
The movement of the component
group indexes, therefore, reflects the changes in the position of the various lines of industry and trade in relation to the general business movement, Tables presenting the index numbers in detail and much of the information on which they are based, appear currently in each issue of the Bulletin, in connection with a. discussion of the business and industrial situation
during the month.
table below;.
The most important general index numbers are shown in the
. I* .
x-3981
126
INDEXES OF INDUSTRY AND TRADE
(1919 average = 100)
Factory- WholeDepartment Stores
employsale
ment
trade
Sales *
Stocks *
100
100
100
100
100
100
104
112
120
120
136
136
23
110
110
115
115
73
00
111
111
74
116
116
101
82
124
124
129
129
Year
and.
Month
1919
1920
1921
1922
1923
Production
iti basic
Industries
100
105
80
9s
120
1921:
Jan.
Feb.
Mar,
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec,
121
120
125
124
12?
122
121
120
114
lis
116
111
99
101
103
103
103
101
101
101
101
101
100
99
19241
Jan.
120
os
77
74
85
73
SO
84
79
Eg
91
95
84
71
101
90
124
119
128
126
89
100
112
148
142
203
114
116
124
115
125
127
120
129
123
132
126
125
107
118
128
132
130
122
119
129
139
146
149
123
120
126
127
129
130
128
127
129
129
131
133
133
109
124
115
128
The production index is seasonally corrected; department
store sales and stocks with seasonal corrections are
shown by star (*),
127
r5-
x-jgsi
The production index shows the changes in the output, measured in
physical units
22 basic industries*
Among the commodities included in
the index are iron and steel, copper, cotton, wool, coal, lumber, cement,
petroleum, and various food products, the production of which in terms of
tons, yards, etc,, is reported monthly*
The index# therefore, measures the
changes in the physical volume of output rather than the dollar volume of
business.
Production in these basic industries ordinarily fluctuates to a
greater degree than the total for all industries, but changes in this index,
which is available at an earlier date than the more complete information,
indicate the direction of industrial activity. More comprehensive index
numbers showing the production of manufactured commodities, the output of
minerals, and the movement to primary markets of agricultural commodities
are also published regularly*
The index of factory employment measures changes in the volume of
employment at industrial establishments in 33 lines of manufacture throughout the country*
This index reflects the degree of current productive ac-
tivity and also when considered in connection with changes in payroll indicates the extent of the buying power of industrial workers.
The volume of purchases at retail aid the rate at which goods are
moving through the intermediate channels of distribution and into consumption is indicated by the indexes of retail and wholesale trade,. Figures on
sales by mail order houses furnish some indication of the extent of buying
in rural communities, Any interruption in tne movement of goods from producer to consumer results in an accumulation of stocks.
Information on
stocks serves to indicate whether the goods produced are moving currently
128
-6-
X-39S1
and regularly through the channels of trade or are being accumulated.
Changes in the volume of stocks held by department stores are available
monthly and are based on reports from about 300 stores located in various
cities in the different Federal reserve districts. Railroad shipments of
merchandise also furnish an indication of the volume of distribution*
Production and employment* ~
In January the increased industrial
activity is reflected in the index of production of basic commodities which
increased from the low point reached in December after a seven-month decline
to a level 8 per cent above the previous month and approximately the same
as in the opening months of 1923*
The steel industry showed a particularly
large increase in activity daring January; the output of steel increased 27
per cent and brought production in that industry to the highest point since
the middle of 192), Unfilled orders for steel, after declining for nine
months, turned upward in December and again increased in January, The demand for steel to meet railroad requirements, including equipment, continued
large, and the manufacture of automobiles and building construction were
other sources of tne increased demand,
An unusually large production for
tiiis season of the year of other building materials, such as lumber, brick,
and cement also reflects the undiminished volume of building.
Indeed, the
increase in production for the month has been general in nearly all of the
basic industries*
The employment index, on the other hand, which is based
on figures for the middle of the month, showed a slight decline in January*
In general, the employment index because it represents a larger number of
industries and because an increase in industrial activity may result in less
part time employment rather than in an addition to the number on the payroll,
-7-
x-3981
fluctuates over a. considerably narrower range than the production index*
Wholesale and retail trade. - Wholesale trade in January increased
11 per cent and was in somewhat larger volume than a year ago. The extent
of business activity is also indicated by the volume of check payments,
which since the opening of 1924 have been at about last year's level*
The
fact that wholesale trade and check payments, both of which are expressed
in dollars, are as large as in January, l$2j, while wholesale prices are
3 per cent lower, indicates that t-ie physical volume of trade is larger than
a year ago.
Retail trade, as shown both by sales at department stores and
mail order houses, is also in larger volume than at the beginning of 1923*
In fact, the sustained demand for goods at retail, even throughout the recent recession in productive activity, has been an important factor in the
business readjustment.
In the process of production and distribution it is the buying
power of consumers that finally determines the level at which industry and
trade can be maintained.
The upward trend of the seasonally corrected in-
dex of department store sales, which during 1923 reached the highest level
on record, indicates the extent of the consumers * demand for goods. Stocks
of merchandise at department stores also increased during the year but
their increase was not out of proportion to the increase in the volume of
sales.
In January, 1924 sales at department stores, when allowance is made
for seasonal influences, were smaller than in December, and stocks were
also somewhat reduced.
Stocks of basic materials, - In considering the present position
of industry and trade the extent to which the large production of basic
materials in 1923 was used in manufacture and building rather than accu-
130
-s-
x-3981
malated in stocks is indicated in the volume of stocks held at the opening
of the year compared with previous years.
available information;
The following table presents the
131
X-3981
STOCKS OF BASIC MATERIALS:
Jan. 1
Jan. 1
Jan. 1
iq2U
1A21
1A22
^6,000,000
412,232
264*578,000
583,793,000
39,866,000
216,000,000
36,50%,000
9,267,000
2,113,05%
21,230
25,156
155,011,000
19,208
6,345,676
3,298,299
8,730,219
9,151,*84
9,763,765
7,082,693
5,986,701
515,5*3,585
*9,174
7,700,000
116,255,000
619,319»000
5 2 3»000
*4,828
4,599,208
5,732,125
U8,000,000
1,418,732
185,623,000
586,087,132
35#596,000
459,000,000
133,216,000
11,938,000
2,178,%02
21,763
30,865
145,406,000
23,93%
51819•219
2,965,000
10,379,703
12,661,438
11,303,303
Bituminous coal, tons
62,000,000
Anthracite coal, long tons
1,063,277
Crude petroleum, bbls.
336,556,000
Gasoline, gal,
1,074,899,650
38,635*000
Iron ore, Lake Superior, long tons
Copper, lbs«
256,000,000
Zinc, Its.
81,39^,000
Cement, '• tbls,
10,581,000
Pine lumber, m. ft.
2,160,520
Oak flooring "
*
Ul,l40
Maple flooring " "
24,239
Brick, clay fire, number
183,009,000
Newsprint, short tons
23,669
Cattle, hides, number
5*086,286
Calf skins, number
2,175,*04
Goat and kid skins, number
9,926,128
Sheep and lamb skins, "
7,400,296
Sole leather, tacks, bends & sides
10,048,085
Upper leather, cattle, sides
6,970,651
Cotton, bales
5,1*9,617
Wool, lbs.
415,681,316
Silki bales ,
40,959
Flour, bbls.
7,100,000
Beef, lbs.
105,655,000
Pork products, lbs•
756,818,000
Lamb and mutton, lbs.
2,508,000
Sugar, long tons
57,929
Pneumatic rubber tires, number
4,329,300
Inner tubes
6,318,446
•June 30, 1922
U7
6,9**,801
9, 1 51,184
24,804
7,776,000
8*»80f>°°°
6, ^oV-ia
Jjc'e-iQ
u',,, noi
*,731,021
-lo-
Xr3SSi
Stocks of certain commodities in January, 1$24, were larger than
a year ago, the increases being particularly large in coal, the stocks of
which a year ago were exceptionally low owing to interrupted production incident to the strike, and in petroleum and gasoline because of the unusually heavy production in 1923.
In stocks of gasoline, however, as of a num-
ber of other commodities where stocks are in excess of last year, there has
been a decline from the higher levels of last summer.
Stocks of all tex-
tile materials are considerably less than in January, 1923*
In comparing
the position of stocks now and a year ago it should be taken into consideration that prior to the opening of 1923 production in basic industries had
been increasing rapidly for a year and a half, while for the seven months
preceding the opening of 1924 production had been declining.
In general
the figures indicate that the large volume of production in 1923 in most
lines of industry moved through the channels of distribution and did not
give rise to an unusual accumulation of stocks. On the other hand, in commodities which had an unusually low volume of stocks a year a^go, stocks are
now larger and indicate a better adjustment between available supplied ox
these commodities and the current demand.
Price readjustments. - Changes in the relationship between prices
of different groups of commodities have accompanied the industrial and
trade readjustment of recent months.
The regrouping by the Federal Reserve
Board of the 404 commodities included in the Bureau of Labor Statistics index of wholesale prices makes possible •comparisons between prices 'of commodities at different stages of manufacture.
Prices of raw materials in Janu-
ary were S per cent lower than a year ago, while prices of producers' goods,
which represent largely semi-finisned products bought by manufacturers, and
-ii-
X-39S1
consumers1 goods remained practically unchanged.
The general level of
prices in January, 1924, was 3 per cent lower than in January, 19^3 > and
5 per cent below the high point reached in April, 1923.
The following
table shows prices by commodity groups for three dates;
Wholesale Prices.
(1913 - 100)
:
All commodities
Consumers' goods
Producers* goods
Raw materials
Crops
Animal products
Forest products
Mineral products
January,
1923
:
:
April,
1923
:
:
January,
1924
156
159
151
155
136
loS
164
125
215
213
157
150
166
172
123
232
198
15&
13&
155
180
H5
191*
1%0
Fluctuations during the year in the prices of consumers' goods were
relatively small. Producers' goods, on the other hand, advanced rapidly dur
ing the early part of the year, when the volume of production was approaching its peak, and declined during the subsequent recession in business activity.
Since September these prices also have remained fairly stable.
The considerable decline in the raw materials group shown for the year occurred during the first six months, and these prices have changed relatively little since midsummer.
At the beginning of trie year raw materials were
mach above the general level of prices and their decline has brought them
closer to the index for all commodities.
Price adjustment has taken place
also among the several classes of commodities included in the raw materials
group. Prices of forest products and mineral products, which at the begin-
±34
-12-
XJ961
ning of the year were considerably abowe the average, showed the largest
declines during the year,
Prices of animal products in January were lower
'
than a year ago, while prices of crops, after considerable fluctuation, advanced rapidly from August to December*
Between December and January the
index for all commodities remained unchanged, the advance in the prices of
raw materials being offset by a decline in the prices of consumers1 goods.
As a result of the year1 s price changes, the prices of commodities in different stages of manufacture are in oloser adjustment to the general average
than they were a year ago,
Bank credit. Increase in the volume of production and trade since
the opening of the year has been accompanied by a growth of loans for commercial purposes at member banks in leading" cities*
The volume of these
loans, which had declined continuously since early in October* increased in
the latter part of January and during the first two weeks of February * In
the middle of February these loans were about $372,000,000, cf 5 per cent
above the level of a year ago.
The increase in this class of loans accounts
for the large part of the increase of credit extended by these member banks •
The year1 s growth in loans has been largely offset by a decline in investment holdings, with the consequence that the total loans and investments
of these banks are only about $127>000,000 larger than a year ago#
135
- 13 For all member banks, total loans and investments increased by
nearly $1,000*000,000 during 1923 and at the close of the year were the
highest on record, $3,300,000,000 above the low point of March, 1922,
The growth in the toteal volume of member bank credit during the last nine
'months of 1922 was due largely to the increase of their investment holdings, while in 1923 it was due to the larger volume of loans as investments
remained practically constant•
Time deposits continued to increase during
the year and were the chief source of funds for additional lending.
At the Federal reserve banks the seasonal return flow of currency,
which was the factor responsible for the decline in discounts during the
early weeks of the year, ceased to be an influence in February, The low
point in discounts was reached on February 6 when they were slightly below
$500,000,000 and total earning assets below $900,000,000.
For the following
three weeks an increase of over $55#000,000 in earning assets occurred.
During February there was an increased demand for currency which, however,
was not reflected in an increase in the outstanding volume of Federal reserve notes, as it was met largely by the payment of gold certificates into
circulation. Net gold imports in January totaled $46,000*000, the largest
imports, with a single exception, for any month in the past two years*
Changes in the volume of bank credit from month to month are in response to a wide variety of influences, and minor changes in the course of
industry and trade may not be immediately reflected in the credit situation.
Since changes in the demand for credit, however, arise out of changes in
the volume of business, there is a close relationship and a somewhat
- 14 -
X-3961
136
definite sequence between the major trove merits in business and in banking.
The business comKunity, including both the bankers and the borrowing
public, are now in a better position through the use of current economic
data to shape their policies with reference to the broader trade and industrial movements, and there is evidence that this practice is resulting
not only in a better understanding of business and credit trends, but
also is contributing to the maintenance of sound credit conditions.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
2U39S2
March 1, I92U
SUBJECT: Governors1 Conference.
Dear Sir:
The Federal Reserve Board has designated
Monday, May 5» 19-^» a s the opening date of the
next meeting of the Governors of Federal Reserve
Banks for conference with the Board and with each
Other. The meeting will convene at ten A. M. in
the Board*s Assembly* Room in Washington.
The topics which the Board desires to discuss with the Governors will be submitted later and
the topics which they may wish to discuss among
themselves will be prepared by their own committee.
Very truly yours,
Governor.
To all Governors of Federal reserve banks.
138
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March 3 , 1,924.
X-39S3
Subject: Collection of notes containing
provision for payment of Attorneys1
fees.
Dear Sir:*
The Federal Reserve Board has recently considered the question whether or not a Fe&eral reserve bank in collecting an overdue note,
is justified in retaining an amount received under a provision in the
note for the payment of attorneys' fees, in addition to the principal
and interest of the note*
The question arose out of the practice of
one of the Federal reserve banks in receiving and retaining such amounts;
in the case of this bank the counsel is employed on an annual retainer
basis and he, of course, handles the collection of notes and other items
which the bank is unable to collect through the regular channels•
The law on this question is not definitely settled but there
are many cases which indicate very strongly that the courts would not
permit the holder of a note containing such a provision to recover and
retain any sum greater than that sufficient to cover principal and interest and to indemnify the holder for reasonable attorneys1 fees expended, The provision is intended to save the holder from loss* but
he is not entitled to make any profit by reason of the stipulation.
Even if the practice can be considered legal it would seem to be an
unwise policy for Federal reserve banks to exact attorney^ fees under
such circumstances unless there has been an expenditure in the particular case for the employment of attorneys<
In view of the doubt as to the legality of the practice and
the considerations of policy involved, the Board recommends the following principles for the guidance of Federal reserve banks hereafter in
such cases:
(l)
In a case where special counsel are employed in connection with the collection of a certain note, containing a stipulation for the payment of attorneys* fees
by the maker in case of default, judgment should be
obtained for the full amount due including all attorneys'1
fees recoverable according to the terms of the note, but
a refund should be made to the debtor for any amount not
actually paid or contracted to be paid to the attorney
for his services.
-
(2)
X-39S3
2 -
Where the collection is made through the regular
Federal reserve bank counsel employed on an annual
salary or retainer, judgment should be obtained
for the full amount due, including the stipulated
attorneys1 fees (if possible), but the Federal reserve bank should refund to the debtor the entire
amount of attorneys' fees recovered.
By direction of the Federal Reserve Board.
Yours very truly,
Walter L. Eddy
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
140
( C o p y )
68th CONGRESS,
1st Session.
X-398U
H. R, 3206
IN THE HOUSE OF REPRESENTATIVES.
December 13, 1923.
Mr. Fulmer introduced the following bill j which was referred to the
Committee on Banking and Currency and ordered to be printed.
A BILL
Obligating Federal reserve banks to pay interest upon all realized
balances, whether reserve or otherwise, maintained by all member batiks.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled.
That the Federal
Reserve Act, approved December 23, 1913» as amended, be, and the
same is hereby, amended by adding to section 19 subdivision (d),
after subdivision (c), to read as follows:
"(d) The Federal reserve banks are hereby obligated and required to pay every bank, banking association, or trust company
which is or which becomes a member of any Federal reserve bank,
interest at the rate of 2 per centum per annum on all realized balances, whether reserve or otherwise, so that section 19 shall read
as follows:
141
-2-
X-3984
"BAM RESERVES.
"Sec. 19. Demand deposits within the meaning of this Act shall
comprise all deposits payable within thirty days, and time deposits
shall comprise all deposits payable after thirty days, all savings
accounts and certificates of deposit which are subject to not less
than thirty days' notice before payment, and all postal savings deposits.
"Every bank, banking association, or trust company which is or
which becomes a member of any Federal reserve bank shall establish and
maintain reserve balances with its Federal reserve bank as follows :
"(a) If not in a reserve or central reserve city, as now or hereafter defined, it shall hold and maintain with the Federal reserve bank
of its district an actual net balance -equal to not less than 7 per
centum of the.aggregate amount of its demand deposits and 3 per centum
of its time deposits.
"(b) If in a reserve city, as now or hereafter defined, it shall
hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than 10 per centum of the aggregate
amount of its demand deposits and 3 per centum of its time deposits:
Provided, however. That if located in the outlying districts of a reserve city or in territory added to such a city by the extension of
its corporate charter, it nay, upon the affirmative vote of five members of the Federal Reserve Board, hold and maintain the reserve balances specified in paragraph (a) hereof.
-3~
X-398U
"(c) If in a central reserve city, as now or hereafter defined,
it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than 13 per centum of
the aggregate amount of its demand deposits and 3 per centum of its
time deposits: Provided, however. That if located in the outlying districts of a central reserve city or in territory added to such city
by the extension of its corporate charter, it may, upon the affirmative
vote of five members of the Federal Reserve Board» hold and maintain
the reserve balances specified in paragraphs (a) or (b) thereof.
"(d) The Federal reserve banks are hereby obligated and required
to pay every member bank, banking association, or trust company which
is, or which becomes, a member of any Federal reserve bank interest at
the rate of 2 per" centum per annum on all realized balances, whether
reserve or otherwise.
"No member bank shall keep on deposit with any State bank or
trust company which is not a member bank a sum in excess of 10 per centum of its own paid-up capital and surplus. No member bank shall act
as the medium or agent of a nonmember bank in applying for or receiving discounts from a Federal reserve bank under the provisions of this
Act, except by permission of the Federal Reserve Board.
"The required balance carried by a member bank with a Federal reserve bank m y , under the regulations and subject to such penalties as
may be prescribed by the Federal Reserve Board, be checked against and
withdrawn by such member bank for the purpose of meeting existing
• 4«
•
X-39®4
i-13
liabilities: Provided, however. That no bank shall at any time make
new loans or shall pay any dividends unless and until the total balance required by law is fully restored.
"In estimating the balances required by this Act, the net difference of amounts due to and from other banks shall be taken as a
basis for ascertaining the deposits against which required balances
with Federal reserve banks shall be determined.
"National banks, or banks organized under local jiiws, located
in Alaska or in a dependency or insular possession or any part of the
United States outside the continental United States may remain nonmember banks, and shall in that event maintain reserves and comply with
all the conditions now provided by law regulating them; or said banks
may, with the consent of the Reserve Board, become member banks of
any one of the reserve districts, and shall in that event take stock,
maintain reserves, and be subject to all the provisions of this Act."
144
(c 0 e y)
X-39S5
February 13, 1924
My dear Mr. Congressman:
Pursuant tti our telephonic conversation, I am enclosing for
your information a copy of statements showing the net earnings of the
Federal reserve banks for 1921» 1922 and 1923, and what would happen
if Zi> interest were paid by the banks on realized balances to member
banks.
You will note in 1923 the Federal reserve banks of the whole
system would have lost, to be exact, $24,738>65^# and in addition they
could have paid no dividend, could have set apart no surplus, nor pay
any franchise tax; whereas, in 1922, the twelve Federal reserve banks
would have lost $19#124,764, and only one bank in the system could have
paid any part of its dividend; that was the bank at Philadelphia, which
could have paid $120,976 on its dividend. You will note that none of
the banks would have been able to have paid dividend, surplus or franchise tax. In 1921, the banks could have paid 2% interest, amounting to
$33 >457.380; but this was one of the unusual years that came about by
financing the war and when the banks were imposing a 6 $ and 7% rediscount rate, which, as you know, was not very popular.
In qy opinion, an attempt to pay 2$ interest on deposits is
wrong iz^ principle and should not be imposed upon the banks. If it
should fee imposed the Federal reserve banks will have to buy paper in
the open market in competition with member banks and non-member banks
in order to make its dividend, interest and expenses. I think you will
agree that such practice would be detrimental to the individual banks.
It mast be borne in mind well that at the time the banks were
making these big profits it was while they were financing the war, and
it should not be used as a pretext for the passage of an act to provide
for 2$ interest on realized balances.
I am also handing you an analysis of the statements which
will be self-explanatory,
Very truly yours,
D. B. Crissinger,
Governor.
Hon. Otis Wingo,
House of Representatives,
Washington, D. C.'1
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March 6, 1924.
x-3987
Subject;
Notarial Fees
Dear Sir:
The Board is making an investigation of the problem
of notary fees paid by Federal reserve banks for notarial
work done in connection with their banking operations in the
hope of reaching a satisfactory solution of this problem.
To assist it in this investigation, the Board desires you to furnish detailed information along the following 1ines:
1. The amount of notary fees paid during each of
the past three fiscal years.
2. The amount of fee paid per item and the controlling
statutory rates at the present time.
3« The manner of designating notaries at the present
time.
4. The names of the notaries employed during the past
three years and the amount of fees received annually by
each during such period.
5* A statement of any other services performed, and
compensation received, by such notaries.
6. The present method of payment of fees to such
notaries and the disposition of fees received by them.
7« All other information pertinent to the performance of notarial services and the compensation paid
therefor.
By order cf the Federal Reserve Board.
Walter L. Eddy
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March 7, 1924.
X-39SS
SUBJECT:
Proposed Amendment to Section 19 of Federal Reserve
Act regarding Reserves.
Dear Sir:
It has been proposed that the Federal Reserve Board
recommend to Congress the enactment of an amendment to the Federal Reserve Act viiich will permit member banks to deduct "due
from bank balances" from gross deposits in computing the reserves
that they are required to carry with the Federal Reserve Banks.
The text of the bill which it is proposed that the Board shall
recommend to Congress is as follows:
"An Act to Attend Section 19 of the Federal
Reserve Act, AS Amended.
"BE IT ENACTED BY THE SENATE AND THE HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That the
eighth paragraph of Section 19 of the Federal Reserve Act, as
amended by the Act of June 21, 1917, is amended to read as
follows:
•In estimating the reserve balances required by this Act,
member banks may deduct from the amount of their gross demand
deposits the amounts of balances due from other banks, except
Federal Reserve Banks and foreign banks, including in such
balances, checks with Federal Reserve Banks in process of
collection, checks on other banks in the same place, and exchanges for clearing house. •«
By direction of the Board, I have to request a full
expression of your views as to the desirability of the proposed
amendment.
Very truly yours,
Walter L. Eddy,
Secretary.
TO CHAIRMEN OF F. R. BANKS
I
147
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March g, 1924.
X-3989
Subject: Proposed Regulation J, Series of 1924.
Dear Sir:The Federal Reserve Board is now considering the promulgation of a. new regulation J to take the place of Regulation
J, Series of 1920, which is now in effect. There is enclosed
herewith a copy of the proposed new regulation in the form tentatively adopted? by the Board.
Before finally adopting this new regulation, the Board
desires to have the benefit of your coMrents thereon and any recommendations you may have to nake. You appreciate, of course, the
desirability of the Board issuing a new regulation at the earliest
possible date, particularly in view of the recent decision of the
Supreme Court tȣ the United States in the case of the Federal Reserve Bonk of Richmond vs. Mai 1 oy Brothers, and it is respectfully
requested, therefore, that you advise the Board at your earliest
convenience of any suggestions you may desire to make.
Very truly yours,
Walter L» Eddy,
Secretary.
TO GOVERNORS & AGENTS OP ALL FEDERAL RESERVE BANKS*
148
HtOPOSBD BETOUTIOM J.
Series of 1924
(Superseding Regulation J of 1920)
X-3959-a
CHECK CLEARING AND COLLECTION.
SECTION I. STATUTCBY PROVISIONS.
Section lb of the Federal Reserve Act authorizes the Federal Reserve Board to require each Federal Reserve Bank to exercise the functions of a clearing house for its member banks, and Section 13 of the
Federal Reserve Act, as amended by the act approved June 21, 1917,
authorizes each Federal Reserve Bank to receive from any nonmember v
bank or trust company, solely for the purposes of exchange or of collection, deposits of current funds in lawful mcnoy, national-bank notes,
Federal reserve notes, checks and drafts payaj] e upon presentation, or
maturing notes and bills, provided such nonmemter bank or trust company
maintains with its Federal Reserve Bank e balance sufficient to offset
the items in transit hold for its account by the Federal Reserve Bank.
SECTION II. GENERAL REQUIREMENTS.
In pursuance of the authority vested in it under these provisions
of law, the Federal Reserve Hoard , desiring to afford both td the public
and to the various banks of th3 country s iiroct, expeditious, and economical system of check collection and settlement of balances, has arranged
to have each Federal Reserve Bank exercise the functions of a clearing
house for such of its rrember banks as desire to avail themselves of its
privileges and for such nonmember State banks and trust companies as may
maintain with the Federal Reserve Batik balances sufficient to qualify
them under the provisions of section 13 to send items to Federal Reserve
Banks for purposes of exchange or of collection.
Such nonmember State
banks and trust companies will hereinafter be referred to as nonmember
clearing banks*
Each Federal Reserve Bank shall exercise the functions of, a clearing house under the general terms and conditions hereinaf ter set forth#
-
SECTION III.
2
-
X-39S9-S
CHECKS RECEIVED FOR COLLECTION.
(a) Each Federal Reserve Bank will receive at par from its member
banks and from nonmember clearing banks in its district, checks^ drawn
on all member and nonmember clearing banks, and checks drawn on all
other nonmember banks which are collocta-ble at par in funds acceptable
to the Federal Reserve Bank of the district in which such nonmember
banks are located.
(b) Each Federal Reserve Bank will receive at par from other
Federal Reserve Banks, and from all member and nonmember clearing
banks in other Federal Reserve districts authorized to route direct
for the credit of their accounts with their respective Federal Reserve Banks, checks drawn on all member and nonmember clearing
backs of its district, and checks drawn on all other nonmember
banks of its district which are collectable at par in funds acceptable to it.
(c) No Federal Reserve Bank shall receive on deposit or for
collection any check drawn on any nonmember bank which cannot be
collected at par in funds acceptable to the Federal Reserve Bank.
SECTION IV.
TIME SCHEDULE AND AVAILABILITY OF CR#ITS.
Each Federal Reserve Bank will publish a time schedule showing
the time at which any item sent to it will be counted as reserve and
become available to meet checks drawn.
For all checks received, the
sending bank will be given inurediate credit, or deferred credit, in
accordance with such time schedule, and as provided below.
For all such checks as are received for immediate credit in
accordance with such time schedule, immediate credit, subject to
final payment, will be given upon the books of the Federal Reserve
Bank at full face value in the reserve acoount or clearing account
upon day of receipt, and the proceeds will at once be counted as
reserve and become available to meet checks drawn.
For all such checks &s are received for deferred credit in
accordance with such time schedule, deferred credit, subject to
final payment, will be entered upon the books of the Federal Reserve
Bank at full face value, but the proceeds will not be counted as recheck is generally defined as a draft or order upon a baric or
banking house, purporting to be drawn upon a deposit of funds, for the
payment at all events of a. certain sum of money to a certain person
therein named, or to him or his order, or to bearer, and payable on
demand.
15
-3"*
X-3989-a
serve nor become available to meettihecksdrawn until such time as
may be specified in such time schedule, at which time credit will be
transferred from the deferred account to the reserve account or olearing account and will then be counted as reserve and become available
to meet checks, drawn.
SECTION V,
MANNER OF COLLECTION.
The Federal Reserve Board hereby authorizes, and each member and
nonmember clearing bank will be required to authorize, the Federal Reserve Banks to handle checks received on deposit or .for collection as
follows ;
(l) A Federal Reserve Bank will act as agent, only and will assume
no liability except for its own negligence and its guaranty of prior indorsements .
t"2)- A Federal Reserve Baltic is authorized to present or send diecks
for payment in cash or exchange draft direct to the bank on"which they
are drawn or at which they are payable, or in its discretion to forward
them to another Agent with authority to present or send them for payment
in cash or exchange draft direct to the bank on which they are -drawn or ,
at which they are payable.
(3) Checks received by a Federal Reserve Bank on its member or nonmember clearing banks will be forwarded or presented direct to such banks ,
and such banks will be required to remit therefor at par in funds acceptable to the Federal Reserve Bank, or to authorize the Federal Reserve
Bank to charge their reserve accounts or clearing accounts; provided, however, that the Federal Reserve Bank reserves the right to charge such items
to the reserve account or clearing account of such bank at any time when
the Federal Reserve Bank deems it necessary to do so.
(*+) Checks received by a Federal Reserve Bank payable in other districts will be forwarded to the Federal Reserve Bank of the district in
which such items are payable.
(5) A Federal Reserve Bank will charge back the amount of any check
for which payment either in cash or in the proceeds of an exchange draft
has not actually been received, regardless of whether or not the check itself can be returned.
SECTION VI. PENALTIES FOR DEFICIENCIES IN RESERVES.
(a) Statutory provisions. - Section 19 of the Federal Reserve Act
provides that The required balance carried by a member bank with a Federal Reserve
Bank may, under the regulations and subject to such penalties as may be
prescribed by the Federal Reserve Board, be checked against and withdrawn
X-39S9-a
by such member bank for the purpose of meeting existing liabilities.
Provided, however, That no bank shall at any time make new loans or
shall pay any dividends unless and until the total balance required
by law is fully restored (b) Computation of reservesItens can not be counted as part
of the minimum reserve balance to be carried by a member bank with
its Federal Reserve Bank until such time as iray be specified in the
appropriate time schedule referred to in Section 17.
If a member
bank draw agpinst items before such time, the draft will be charged
against its reserve balance if such balance be sufficient in amount
to pay it; but any resulting impairment of reserve balances will be
subject to all the penalties provided by the Act.
(c) Basic penalty*- Inasmuch as it is essential that the law in
respect to the maintenance by member banks of the required minimum reserve balance shall be strictly complied with, the Federal Reserve
Board, under authority vested in it by section 19 of the Federal Reserve Act, hereby prescribes a basic penalty for deficiencies in reserves according to the following rules:
1. Deficiencies in reserve, balances of member banks in central
reserve and reserve cities will be computed on the basis of average
daily net deposit balances covering a weekly period of seven days*
Deficiencies in reserve balances of other member^ banks will be com
puted on the basis of average daily net depositee lances covering s
semimonthly period.
*
,
2. Penalties for deficiencies in reserves will be assessed
monthly on the basis of average daily deficiencies during eac o
the reserve computation periods ending in the preceding mont »
3. A basic rate of 2 per cent per annum above the Federal Reserve Bank discount rate on 90-day commercial paper will be assess
as a. penalty on deficiencies in reserves of member banks (d) Progressive penalty. - The Federal Reserve Board will a ®
prescribe for any Federal Reserve District, upon the applica ion
the Federal Reserve Bank of that district, an additional pr ogres si
penalty for continued deficiencies in reserves, in accordance wi
the following rules:
.
y
1, When a. member bank in a central reserve or reserve
had an average deficiency in reserves for six consecutive wee
periods, a progressive penalty, increasing at the rate of one~
of 1 per cent for each week thereafter during which the average
_
serve balance is deficient, will be assessed on weekly deficienci
until the required reserve has been restored and maintained for 0
consecutive weekly periods, provided that the maximum penalty
arg
will not exceed 10 per cent.
2, When a. member bank outside of a central reserve or reserve
city has had an average deficiency in reserves for three consecutive
semimonthly periods, a progressive penalty, increasing at the ra e 0
one-half of 1 per cent for each half month thereafter during whidi
" ±52
- 5 -
X-3989-a
the average reserve balance is deficient, will be assessed on semimonthly deficiencies until the required reserve has been restored and
maintained for two consecutive semimonthly periods, provided that the
maximum penalty charged will not exceed 10 per cent.
SECTION VII. OTHER RULES Aim REGULATIONS.
Any further requirements that the Board may deem necessary will
be set forth by the Federal Reserve Banks in their letters of instruction to their member and nonmember clearing banks.
Each Federal Reserve Bank will also promulgate rules and regulations governing the
details of its operations as a- clearing house, such rules and regulations to be binding upon all member and nonmember banks which are clearing through the Federal Reserve Bank.
&.3930&
PROPOSED AMENDMENTS TO REGULATION H, SERIES OP 192).
(Revised Draft)
A. In the fourth line of the last paragraph of Section III, strike out the
words "to insure compliance with the act and these regulations," and insert
a period after the word "necessary.™
8. Change Section IV to Section VII; strike out the word "and" in the
third line of said section; insert a comma after the word"Act;"change the semicolon at the end of subdivision 1 of said section to a comma; and add the following at the end of ssid subdivision 1:
"and the conditions prescribed by the Federal Reserve
Board and agreed to by such State bank or trust company prior to its admission."
C* Change Section V to VIII*
D. Insert the following new sections immediately after Section HI:
SECTION IV. CONDITIONS OF ISiffiERSHlP.
Pursuant to the authority contained in the first paragraph of Section 9
of the Federal Reserve Act, which provides that the Federal Reserve Board may
permit
applying batiks to become members of the Federal Reserve System"subject
to such conditions as it may prescribe", the Federal Reserve Board will prescribe the following conditions of membership for each bank or trust comparer
hereafter applying for admission to the Federal Reserve System, in addition
to such other conditions as the Board may consider necessary or advisable in
the particular case 1. Except with the permission of the Federal Reserve Board, such bank or
trust
company shall not cause or permit any change to be made in the general
Character
of its assets or in the scope of the functions exercised by it at
the time of admission to membership, such as will tend to affect materially the
standard maintained at the time of its admission to the Federal Reserve System
154
-2-
:;-3J90a
and required as a condition of membership.
2. Such bank or trust company shall at all times conduct its business
and exercise its powers with due regard to the safety of its customers.
3. Such bank or trust company shall not reduce its capital stock except
with the permission of the Federal Beserve Board.
U. Such bank or trust company shall not, except after applying for and
receiving the permission of the Federal Reserve Board, establish any branch,
agency or additional office.
5. Such bank or trust company shall not, except after applying for and
receiving the permission of the Federal Reserve Board, consolidate with or absorb any other bank or branch bank; nor directly or indirectly, through
affiliated corporations or otherwise, acquire an interest in another bank in
excess of 20 per cent of the capital stock of such other bank; nor directly
or indirectly promote the establishment of any new bank for the purpose of
acquiring such an interest in it; nor make any arrangement to acquire such an
interest.
6. Such bank or trust company shall reduce to, and maintain within, the
limits prescribed by the laws of the State in which it is located, any loan
which may be in excess of such limits.
7. Such bank or trust company shall reduce to an amount equal to 10 per
cent of its capital and surplus all balances in excess thereof, if any, which
are carried with banks or trust companies which are not members of the Federal
Reserve System, and shall at all times maintain such balances within such
limits.
S. Such bank or trust company may accept drafts and bills of exchange
drawn upon it of any character permitted by the laws of the State of its incorporation; but the aggregate amount of all acceptances outstanding at any
155
~3"
X-3'jjOa
one time shall not exceed the limitations imposed by Section 13 of the
Federal Reserve Act, that is, the aggregate amount of acceptances outstanding
at any one time which are drawn for the purpose of furnishing dollar exchange
in countries specified by the Federal Reserve Board shall not exceed 50 per
cent of its capital and surplus, and the aggregate amount of all other acceptances , whether domestic or foreign, outstanding at any one time shall not
exceed 50 per cent of its capital and surplus, except that the Federal Reserve Board, upon the application of such bank or trust company, may increase
this limit from 50 per cent to 100.per cent of its capital and surplus;
Provided, however, that in no event shall the aggregate amount of domestic
acceptances outstanding at any one time exceed 50 per cent of the capital and
surplus of such bank or trust company.
9* The Board of directors of said bank or trust company shall adopt a
resolution authorizing the interchange of reports and information between the
Federal Reserve Bank of the district in which such bank or trust company is
located and the banking authorities of the State in which such bank is located.
Each bank or trust company applying for membership hereafter will be required to agree to the above conditions and any other conditions which the
Board may prescribe, prior to the admission of such bank or trust compary to
the Federal Reserve System.
SECTION V.
CHANGES IN ASSETS OR BROADENING OF FUNCTIONS.
Each bank or trust company hereafter admitted to the Federal Reserve
System and each bank or trust company which has heretofore been admitted subject to Condition No. 1 of Section 17 or subject to any similar condition,
shall, before opening any new department, consolidating or merging with any
156
- • * -3l-
X~#990a
other bank, purchasing the assets of any other bank or trust company,
establishing any branch, agency or additional office, or taking any other
steps which may result in a change in the general character of its assets
or broadening in the functions exercised by it, notify the Federal Reserve
Board of its intention to take such action in order that theFederal Reserve Board may make an examination or take such other steps as it may
consider necessary to ascertain whether such action will tend to affect
materially the standard maintained by such bank at the time of its admission
and required as a condition of membership.
X-3990a
W
W
SECTION VI. PRINCIPLES GOVERNING ESTABLISHMENT OF BRANCHES.
In passing upon applications by State banks and trust companies for permission to establish branches, agencies or additional offices, under Condition
No*. 4 of Section IV, or under any similar condition which may have been prescribed
by the Federal Reserve Board and agreed to by any bank or trust company heretofore admitted to the Federal Reserve System, the Federal Reserve Board will
observe the following principles 1.
The Federal Reserve Board will restrict the establishment of branches,
agencies or additional offices by such banks or trust companies to the corporate
limits of the city or town in which the parent bank is located and to sutii territory as is contiguous to such place or location of the parent bank or head
office as the term "contiguous territory" is new defined by the Federal Reserve 2oard or as it may hereafter be defined. *
2.
The Federal Reserve Board will not consider an application by such
bank or trust company for a permit to establish a branch, agency, or additional
office, unless the authorities of the State in which such bank is located regularly
make simultaneous examinations of the head office and all branches, agencies or
additional offices of such bank, nor unless the examinations made by the State
authorities are, in the judgpent of the Federal Reserve Board, of such character in every respect as to furnish the Federal Reserve Board with sufficient
information as to the condition of such bank and the character of its management to enable it fully to protect the interests of the public.
1. The term "contiguous territory" is defined by the Board to mean: "The territory of a city or town whose corporate limits at some point coincide with 3bhe
corporate limits of the city or town in which the parent bait is located.1,14 This
definition has been amended in the case of Los Angeles and San Erancisoo, California, by a more specific definition which is effective until August 1, 1924.
> . .
158
X-39?0a
3*
The Federal Reserve Board will require each bank or trust company
which establishes or maintains breaches, agencies or additional offices to maintain for itself and such branches, agencies or additional offices an adequate
ratio of capital to total liabilities and an adequate percentage of its total
investments in the form of paper or securities eligible for discount or purchase
by Federal reserve banks.
4,
The Federal Reserve Board will not consider any application to estab-
lish a branch, agency or additional office until the establishment of such branch,
agency or additional office has been approved by the Banking authorities of
the State in 'shich such bank or trust company is located and such authorities
have certified that, (l) the applying bank^or trust company is sblvent and is not
in a dangerous or extended condition and (2) the character of its management
is such as to justify the establishment of such branch, agency or additional
office;
nor until the Directors or Executive Committee and the Federal Re-
serve Agent of the Federal Reserve Bank of the District in which such bank
•or trust company is located have submitted a report on these facts and a
recommendation as to vsfaether or not the application should be granted.
5»
Before permitting such bank or trust company to establish any
branch, agency, or additional office, the Federal Reserve Board will require
the Federal Reserve Agent of the district in which such bank is located to
make an investigation and report whether in his opinion the establishment of
such branch, agency, or additional office would be in the interest of the
public in the locality in which it is to be established and whether it
would endanger the existence of existing local unit banks.
6. When permission is granted for the establishment of such branch,
-6
t-3990459
agency or additional office sane shall be established and opened for business within six months after such permission is granted.
If such branch,
agency, or additional office is not established within such time the
\ \
permit shall become void, imless\he time is extended by tixe Board for
gocd cause.
7.
The Federal Reserve Board reserves the right to cancel amy
permit which it has granted to establish aay branch, agency or additional
office whenever in its judgment the bank operating such branch, agency or
additional office has engaged in unfair competition or other unfair
practices to the detriment of other banks or of the public, or has failed
adequately to serve the public interest in the community in which it
is located.
j
160
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March S, 1924
X-3991
SUTJECT: Report of Gold Paymmts and Receipts.
Dear Sir:The Board is receiving regularly, at the end of each
month, from one of the Federal reserve banks a. statement of
its gold payments and receipts. The Board would like to obtain a. similar monthly statement from your bank, head office
and branches combined, reporting gold transactions as follows:
Gold Payments:
(1)
(2)
(3)
(4)
Coin paid to ba.riks and individuals - Certificates paid to banks and individuals Coin paid to U.S. Disbursing Officers
- Certificates paid to U.S. Disbursing Officers
Total payments
- $
- ______
$
Gold Receipts:
(1) Coin (2) Certificates
Total receipts
Net payments or receipts Very truly yours,
Walter L. Eddy,
Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
EXCEPT NEW YORK.
$
$
$
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
x-3992
Your subscription to the Federal Reserve
issue.
Bulletin expires with the
If you desire to renew it for another year, kindly
return the enclosed slip with remittance of $
made payable to the order of the Federal Reserve
Board.
The subscription price of the Bulletin has
been reduced to $2.00 per annum, effective January,
1924. The amount above indicated, together with
credit allowance of $
on copies forwarded prior
to
will entitle you to a subscription
for the period of
to
inclusive.
Very truly yours,
J. C. Noell,
Assistant Secretary.
X
Enclosure.
162
FEDERAL RESERVE BOARD
WASHINGTON
March 11, 1924.
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-3993
Subject: Fees in Par Clearance Cases
Dear Sir:Referring to Board's letter X-35&6 of November 17, 1922, in
connection with the employment of Hon. John W. Davis in all par clearance litigation, there is enclosed herewith a statement of his account,
which the Federal Reserve Board has approved.
The total amount now chargeable for services and expenses
against each Federal reserve bank directly involved is as follows:
Atlanta
Richmond
Cleveland
San Francisco
$16,064.81
5,137.37
2,512-51
2,508.30
$26,222.99
In accordance with Board's letter X-3626 under date of January 31, 1923, it is requested that each of the above named banks remit to Stetson, Jennings, Russell and Davis, 15 Broad Street, New York
City, the amount above indicated, and that each Federal reserve bank
reimburse the above named banks with their pro rate, share (based oncapital and surplus as of January l6, 1924) in each instance, which
the Board has determined as follows:
Due from
Boston
New York
Phi lad elphia
Cleveland
Richmond
Atl anta.
Chicago
St* Louis
Minneapolis
Kansas City
Dallas
San Fraiicisco
Atlanta
$1,172.73
4,337.50
1,445.33
1,751-07
351.44
642-59
2,216.94
733.93
530-14
674.72
573-33
1.124.54
$16,064.81
Richmond
$ 375*03
1,327.09
462.36
559-97
272-28
205.49
703-96
236.32
169.53
215.77
184-95
$5,137.37
Cleveland
'$ 133-41
673.33
226.13
273*36
133.16
100-50
346>73
115*58
82-91
105.53
90.45
175.37
#2,512.51
San Francisco
$ 183.11
677-24
225-75
273-40
132.94
100-33
346.15
115-38 .
32 >77
105-35
90.30
175.58
#2,503.30
Very truly yours,
Enclosure
TO CHAIRMEN
J. C. Noell
Assistant Secretary.
OF ALL FEDERAL RESERVE BANKS.
New York, February 26, 1984.
FEDBBAL HBSBRVB BOARD, Sr.
To
±63
Stetson, Jennings, Russell & Davis
Counsellors at law,
15 Broad Street
For professional services rendered in connection
with the Par Clearance Cases, ad fallows:
» American Bank & Trust Company v. Federal Reserve
Batfg Qf Atlanta:
Preparing answer; preparing answers to written
interrogatories filed against the defendant; preparing cross-interrogatories on plaintiff's interrogatories addressed to witnesses; taking deposition
of Governor Harding on July 22, 1921; trial at
Atlanta January 9-14, inclusive, 1922; preparation
of brief filed in District Court, February 16, 1922;
settling decree at Savannah March 25, 1922; brief
and argument in Circuit Court of Appeals, October,
1922; motion to advance in Supreme Court of United
States; brief and argument in Supreme Court of
United States, April 1925.
"
i>25,000.00
Farmers & Merchant^ Hftnit nf Monroe. North Carolina. v. Federal Reserve Bqjv
Conference February 20, 1922, with Deputy Governor
feple and Attorney Wallace; assisting in brief on
rehearing before Supreme Court of North Carolina;
criticism of re^ly brief to petition for certiorari;
preparing motion to advance in Supreme Court of United
States; participation in brief and argument in Supreme
Court of United States; preparing petition for rehearing in Supreme Court of United States.
5,000.00
Farmers & Merchants Bank of Catlettsburg v. Federal
Reserve Bank of Cleveland (two cases, one in equity and
one at law)
Conference with local counsel of Cleveland bank
and criticism of brief in equity case filed in District
Court; revising answer filed upon conclusion temporary
injunction proceedings; general supervision of the two
cases. (This litigation is not yet concluded).
e
1
•St*
2.500.00
Brooktegs State
y. Federal Reserve Bank of
(two eases, one ln equity and one at law).
Conference in San Francisco with local attorney;
general supervision of the two cases. (This litigation
is not yet concluded).
2,500,00
#35,000.00
X-3333a
Brought forward
%35,000.00
Disbursements.
•American Bank & Trust Company v. Federal
Deserve Bank of Atlanta:
Expenses Washington, D. C. and Atlanta and
Savannah, Georgia, Messrs. Davis and Angel1
Expenses ,/ashington D. C. and Atlanta,
Georgia, Mr. Davis
Printing brief, District Court
Printing brief, Circuit Court of Appeals ...
Printing brief, Supreme Court of United
States
Printing motion to advance in Supreme Court,
Telegrams, telephones and postage
Stenographic services
#381.22
181*42
98.90
68.45
104.60
11.95
106.03
112.24
1,064,81
42.15
11.95
73.50
9.77
1 37.37
5.21
7.30
12.51
Farmers & Merchants Bank of Monroe. North
Carolina, v. Federal Reserve Bank of Richmond.
Expenses Washington, D. C., Mr. Davis
Printing motion to advance
Printing petition for rehearing ,,,,,,
Telegrams, telephones, etc
Farmers & Merchants Bank of Catlettsburg v.
Federal Reserve Bank of Cleveland (tr:o cases):
Telegrams
Stenographic services
Brookings State Bank v. Federal Reserve Bank
of San Francisco (tv;o oases)
8.30
Telegrams
Grand total
Retainer received January 18th, 1922
in case of American Bank & Trust Company
v. Federal Reserve Bank of Atlanta
Balance due
^56,222.99
10.000.00
*26,222.99
^
105
Xr3995
TREASURY DEPART*!#?
Office of the Secretary
WASHINGTON
March 7, 1934.
The Governor
Federal Reserve Board.
Sir:
You. are hereby advised that the Department has referred to the Disbursing Clerk, Treasury Department, for payment, the account of the Bureau of
Engraving and Printing for preparing Federal reserve notes during the period
February 1 to February 29, 1934, amounting to $116,454, as follows *
19l4
$100
6,000
<2,
tuK/
oo
8
Federal Reserve Notes,
$10
413,000
16,000
— — —'
New York
.. 351,000
Piiiladelpiiia.. .. 35G,CGG
99,COO
152,000
Cleveland
94,000
Richmond
55,000 52,000
Chicago
. . 519,CCC 673,000 106,000
•WWW
San Francisco. . . 98.C0C
1,988,000
526,000 423,000
$5
12,000
11,000
20,000
— — «*
43,000
6,000
2,986,000 sheets at $39.00 per M
Total
507,000
351,000
645,000
275 ,000
lSti,G0G
918,GOG
98.000
3,986,000
$116,454.00
The cnarges against the several Federal Reserve Banks are as follows:
&
Compen- Plate
Mat erials
sat ion Print ing
Sjiflstff
§5,957.25
•Boston
507,000 $6,844.50 $5,196.75
New York...
4,124.25
351,000 4,738.50
3,597.75
Philadelphia
7,578.75
645,000
6,611.25
8,707.50
Cleveland ..
275,000 3,712.50
2,818.75
3,231.25
R icir.:ona. ..
2,256.00
1,968.00
192,000
2,592.00
Chicago....
918,000 12,393.00
9,409-50
10,786.50
San Francisco.. 98.000
1,151-50
1,333.00 ,1.004-50
3,986,000 $40,311.00 $30,606.50 *35,085.50
Inc. Com•p ens at ion Total
$1,774.50 $19,773.00
1,228.50 13,689.00
2,257.50 25,155.00
962.50 10,725.00
672.00 7,488.00
3,213.00 35,802.00
343.00 3.93S«QO
$10,451.00$116,454.00
Tne bureau appropriations will be reimbursed in the above amount from
tne indefinite appropriation "Preparation and Issue of Federal Reserve Notes,
Rein:..-.rs_i,vle", and it is requested that your board cause sucn indefinite
impropriation to be reimbursed in like amount.
Respectfully,
(S igned) S. R. Jacobs ,
Deputy Commissioner,
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
x-3991
March 13 » 1924»
SUBJECT: EXPENSE MAINLINE, Leased Wire System,
February, 1924.
Dear Sir:Enclosed herewith you will find two mimeograph
statements, X-3997-a. and X-3997-b, covering in detail
operations of the main line, Leased Wire System, during
the month of February, 1924.
Please credit the amount payable by your bank
in the general account, Treasurer, U. S., on your books,
and issue C/D Form 1, National Banks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate C/D to Federal Reserve Board.
Very truly yours,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL BANKS.
1G7
X-3997-a.
REPORT SHO"fINC- CLASSIFICATION AND NUMBER OF TORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF FEBRUARY ,1924.
Treasury
Dept.
Business
War
Finance Corp,
To tal
Business
From
Percent of
Fed. Res.
Total Bank
Bank Business Business (*)
Boston
New York
Phi lad elphia.
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansa.s City
Dallas
San Francisco
35,573
' 229,382
54,956
77,465
69,082
79,357
116,911
79,059
44,830
63,699
70,251
119,538
3-41
21.96
5.26
7.42
6.62
7.60
11.19
7-57
4.29
6.58
6-73
11.37
5,043
12,722
5,395
4,125
4,366
4,442
6,359
5,452
2,673
4,475
3,095
8,757
4o,6i6
242,104
60,351
81,590
73,443
83,799
123,270
34,511
47,503
73,174
73,346
128,295
1,045,103
100.00
66,904
1,112,007
TOTAL
Board
255,644
48,010
214
303,868
Total
1,300,74*7
114,914
214
1,415,875
Percent of Total
8 -12%
$1.37$
.01 £
Bank Business 1,300,747 woras or 91-28%
Treasury Dapt. 114,914
»
" ' 8.12%
TOTAL
1,415,661
100 »00%
(*) These percentages used in calculating the
pro rata share of leased wire expenses as
shown on the accompanying statement (X-3997~b)
FEDERAL RESERVE BOARD,
Washington, D. C.
March 13, 1924.
I
REPORT OF EXPENSE
MAIN LINE
,
%-3997-b
.
FEDERAL RESERVE LEASED WISE SYSTEM FEBRUARY, 1924. .
Nsjne of Bank
Operators' Operators• Wire
Salaries
Overtime
Rental
Boston
$ 250.00
New York
1,267,79
Philadelphia
200.00
Cleveland
388.00
Richmond
315*00
Atlanta
240.00
Chicago
(#)4.9l6.19
St. Louis
271.00
Minneapolis
Kansas City
Dallas
251.00
San Francisco
380.00
Fed. Res. Board
TOTAL
$
Total
Expense
$
250.00 $
1,267.79
200.00
388.00
315-00
16.00
15,571.07
240.00
4,932.19
271 >00
283 33
346.68
251.00
380.00
15 ,571.07
$9,108-99 $16.00 $15,571.07 $24,696.06
(a) 4.702.13
(#)
(&)
(*)
(a)
Pro Rata
Share of
Total
Expense
Credits
681.80 $ 250.00
4,390.6s 1,267.79
1,051.69
200.00
1,323.60
315-00
240.00
4,932.19
1,483.56
1,519.55
2,237.22
1,513.55
857-75
1,315.61
1,345.60
2,273.32
388.00
271.00
283-33
346.6s
251.00
380.00
$19,993 93 $9,*24.99
Payable to
Federal
Reserve
Board
$
431.80
3,122.89
851.69
1,095.56
1,008.60
1,279.55
(•>2,694.97
1,242-55
574.42
968.93
1,094.60
1,893-32
$13,563-91
(&) 2,694.97
$10,S6g.94
,
$19,993.93
Includes salaries of Washington operators.
Amount reimbursable to Chicago.
Credit.
Received $2.13 (B) from War Finance Corporation and $4,700.00 from Treasury Department
covering business for month of February, 1924,
(b) Original charge $4.75, reduced by $2.62, due to over-charge for January.
169
x-3999
Speaking on the subject of •Currency Elasticity" in the course
on Federal Reserve Policies, before the Hew York University School
of Commerce, Accounts end Finance, Mr. A. C* Miller, Member of the
Federal Reserve Board, took occasion to emphasize the importance of
•
.
V
'
'
'
the currency functions of the Federal Reserve Banks.
"There Is some misconception", said,Mr* Miller, "of the relative
importance of the functions performed by the Federal Reserve Banks.
'
'
• ^
•
The Federal Reserve Banks are frequently described as backerB1 bank#
or 89 banks of rediscount;
and such they are;
end in a more important sense, banks of issue.
but they are also,
They are the banks
which supply currency to their member banks and for the use of the
public when the currency supply needs to be increased.
To rest
content with simply saying that the Reserve Banks are banks of rediscount overlooks what it is that leads member banks to rediscount
with their Federal Reserve Banks.
Taking the Federal Reserve Banks
as a whole a review of their history will disclose that rediscoxmting
takes place on a large scale only tfcen additional circulating medium
is required by member backs to meet the demands of their customers
for pocket currency. There is great constancy in the "reserve deposits"
item in the Federal Reserve Bank statement over fairly long periods
of time, but there is much fluctuation in the "note issues* and the
"earning assets" items.
Jt will be found to be pretty invariably true
that when the earning assets, that is the loans and investments, of the
170
X-5999
Federal Reserve Banks rise it is because ef increased currency issues,
there is a very close parallelism observable between variations in the
total volume of the earning assets of the Federal Reserve Banks and the
total volume of their Federal .Reserve notes in circulation. This means
that while the Reserve Banks are banks of rediscount, redisoounting
by member batiks, looking at the matter in the aggregate, is for the
purpose of obtaining currency.
Essentially, therefore, the Reserve
Banks are currency banks, banks to which the other banks turn when
they need more cash, and more cash specifically in the form of currency
of hand.
••The Reserve Banks, of course, perform several other functions
for their member banks and the public, but these are either not banking functions strictly speaking, such tot example as acting as custodian of securities, making collections end transfers, performing fiscal
functions, and acting as a clearing house, etc., or they are functions
that are also performed in one degree or another by the ordinary batiks
of the country, such as acting as reserve agent, depositary, etc.
In
addition to doing all these things the Reserve Banks also issue currency.
They are the only institutions permitted under law to create fiduciary
currency (that is currency not covered by gold) against other collateral
than United States bonds with the circulation privilege.
In their
essential nature, therefore, Federal Reserve Banks are best conceived
and described as banks of issue.
Currency issue is their distinctive
X-3999
funption.
171
They were set up and invested with broad powers in
the creation, of fiduciary currency in order to provide a much needed
elastic element in our national circulation.
The reserve moneys
previously carried by member banks are concentrated in the Federal
Reserve Banks in order to give them an ample and secure basis for
the exercise of their currency functions.'
In brief, the Federal
Reserve Banks are reserve banks because they are currericjr banks.
(file supplying of currency is their primary function.
The reserves
taken over by them from their member banks constitute reserve primarily for the protection of their currency issues.
"An examination of the currency history 6f the United States
in the last five years dearly demonstrates the manner in whidh the
Reserve Banks supply the elastic element in the nation's currency,
There has been considerable variation in the total volume of money
in circulation in this period of time.
That variation is closely
paralleled by the volume of Federal Reserve notes in circulation.
During the great expansion of 19L9 and 1920 it was the expansion of
Federal'Reserve notes that supplied the y e a t increase in the volume of money in circulation.
The decline in the total volume of
circulation in the year 1921 is fully reflected in the decline in
the volume of Federal Reserve notes.
A characteristic of an elas-
tic currency is that it shall expand or contract according to the
.
R
- 4 -
X-3999
volume of currency required by the country to take care of the volume of trade at a given price level.
A large upward or downward
swing in the trade curve of the United States is usually pretty well
mirrored in the upward or downward awing of the Federal Reserve note
curve.
The One exception to this atatemsnt in recent years is found
in the year 1923.
That was a year of expanded trade calling for an
increased quantity of circulating medium.
Hp increase, however,
took place in the volume of Federal Reserve notes,
This was for the
reason that the continued heavy influx of gold ijjto the United States
made it expedient for the Federal Reserve Banks to supply the increased currency demands dfi the cwoaunlty by paying out gold certificates instead of by issuing Federal Reserve notes.
In brief,
our unprecedented!y strong gold position caused gold to be used to
supply the elastic element in our national circulation in this instance.
Bttt it still continued to be true, nevertheless, that the
Federal Reserve Banks were providing the increase needed in the
country's total circulation.
"This shows that there are two methods by which the Baderal
Reserve Banks provide currency elasticity.
The one method is to
pay gold or lawful money out of their holdings of reserve money
wfeen these are abundant and this course seems advisable on other
grounds.
The other method is ti create new currency by the issue
of additional Federal Reserve notes against the kinds of collateral
prescribed by the Federal Reserve Act.*
FEDERAL RESERVE BOARD
WASHINGTON
LDDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-U002
March 20, 1924.
SUBJECT: Advice of Holiday.
Dear Sir:
Ihe Detroit Branch of the Federal Reserve
Batik of.Chicago will be closed on Monday, April
7th > account of holiday, atid therefore will not
Jpariielpate in either the tegular Gold Fund
Clearing or Federal Reserve Note Clearing of
that date, April 7th.
Please include your credits for April 7th
with your credits for April 8th for that office
in your Gold Fond Clearing telegrams of April 8th.
Kindly notify Branches.
Yours very truly,
J. C. Boell,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
(except Chicago)
174
/
FEDERAL RESERVE BOARD
WASHINGTON
X—4003
^ D D R E S S OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
March 21, 1924.
SUBJECT: Advice of Holiday.
Dear Sir:
Federal Reserve Bank of Kansas City will be
Closed Tuesday, April 8th, account holiday. Therefore,
that office will not participate in either regular
Gold land Clearing or Federal Reserve Note Clearing
of that date, April 8th. Please include your credits
for April 8th with your credits for April 9th for that
dffiifre in your Gold Ftiftd Clearing telegrams of April
9th, and make no shipment of Kansas City Federal £&•
serve notes, fit or unfit, to that office or Washington,
respectively, on date of holiday, April 8th.
For your information, Oklahoma City Branch of
the Federal Reserve Bank, of Kansas City will also be
closed on Tuesday, April 8th, account holiday.
Kindly notify Branches.
Yours very truly,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS, except Kansas City.
175
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March 22, 1924.
X-4004
SUBJECT:
Correspondence with Congressman Wingo.
Dear Sir:
For your information there is enclosed
herewith copy of a letter received by the Board
from Honorable Otis Wingo, Member of Congress, together with a copy of the Board*1® reply, all with
reference to the expenses of the Federal Reserve
banks.
By direction cf the Federal Reserve
Board.
Very truly yours,
Walter L. Eddy,
Secretary.
(fcioloeuroe)
TO ALL GOVERNORS AND AGENTS .
( COPY )
X-4004.a
March 21, 1924.
Dear Congressman Wingo:
X received, in due course your letter of
February 27th, requesting that you be furnished with
statistics covering the cost of operation of each
Federal Reserve bank during the years 1920 to 1923
inclusive, showing items separately along the lines
of the clipping from the Wall Street Journal which
you enclosed with your letter. •
In oonpliance with your request, l a ®
sending you herewith a mimeograph statement containing a comparison of the expenses of the Federal
Reserve banks during the years in question, together
with one giving the volume of operations in the
principal departments of the banks during the same
years.
For your further information, I am also
sending you copy of a memorandum addressed to me by
the Chief of the Board's Division of Bank Operations
commenting upon the statements.
I trust that these enclosures will give
you all the information you desire.
Very truly yours,
(signed) D- E. Orissinger
D.
Crisdinger,
Governor.
Hon. Otis Wingo,
House of Representatives,
Washington, D. C.
( COPY )
X-UooU-b
CONGRESS OF THE UNITED STATES
JOINT COMMITTEE OF INQtJIKY
ON MEMBERSHIP IN FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
February 27, 1924.
Federal Beserve Board,
Washington, D. C.
Gentlemen
Please give roe statistic* covering
the cost of operation of each Federal Beserve
Bank, separating the items and the year, as indicated in the enclosed clipping.
Yours truly,
(sigaed)
W-T
Otis lingo
X-4005
OFFICERS OF FEDERAL RESERVE BANKS
Chrm.& F.R.Agt.
Governor
Deputy Governor
Cashier
Asst. Cashier
Asst. F.R.Agt.
C.F. Gettenqy
Auditor
BOSTON
F.H, Curtiss
W.P.G. Harding
C.C. BuljLen
W.W. Paddock
Win. Willett
E.G.
W,N.
E.M.
L,W.
C.B,
W.'C.
NEW YORK
Pierre Jay
Benj. Strong
J• H*
L.F.
G,L,
E,R,
L.H. Hendricks*
A. W. Gilbart*
G.E. Chap in*
J,W, Jones*
L.R. Rounds
J.L, Morris#
S.A, Morgan
W.B. Mattescn# W.R. Burgess
A.C. Lins#
tf.H, Di H i s tin#
G.H. Cge #
R.M. O'Harg#
J,E, Crane#
H.M. Jefferson#
I.W. Waters#
E.L* Dodge#
J.M. Bice#
E.C. French#
W.A. Hamilton#
B.M. Grant#
H, R.Murray#
S.S, Vansant#
A.K. Lauckner#
G,B. Roberts #
PHILADELPHIA
R.L. Austin
G.W, Morris
W.H, Hutt
W.A. Dyer(&)
W.G. MCCreedy*
W.J.
C.A.
S.R.
F.W>
B.M,
J.M.
*
#
(&)
**
Controller
Manager
Also Secretary
Acting
Case
Sailer
Harrison
Kenzel
Halt
Kenyan
Leavitt
Sweetser
pitman #
Rich #
Davis
A.E. Post
Mcllhenny W,T. Grosscup
Earl
J.F. Rehfuss**
Lafiold
Miller.Jr.
Toy
H.F. Currier
W. I, Rutter,Jr,
"'1
3
X-4C05
2-
Chrm.& FR.Agt. Governor
Deputy Governor. Cashier
CLEVELAND
D.C. fills
E.R. Fancher
M.J. Fleming
J.C. Nevin(&)
F.J, zarlinden
RICHMOND
WnuW. Hoxton
G.J. Seay
C,A. Peple
R.H, Broaddus
ATLANTA
J.A. McCord
CHICAGO
Win,A. Heath
Asst. Cashier
*
Controller
#
Manager
{&) Also Secretary
** „A6i±6g
Asst .F.R.JUt.
Strater
Arnold
Taylor
Bickford
Clouser
Wagner
Stephen son#
K.C. Chi Ids*
J. H, Dillard*
W.C. Bachman*
D A. Jones*
O.J. Netterstrom*
Clarke Washburne*
W.B.
H.F.
W.R.
R.A.
J.S.
J.M.
W.H,
.Roper
Conniff
Patterson
Sims
Tatwiler
Slattery#
Toole#
E.L. Harris#
F.M. Huston#
J.G, Roberts#
R.E. Coulter#
F. Bateman#
R.H, Buss#
F.R. Hanrahan#
E.A, Delaney#
J.H. Rumbaugh#
R.J. Hargreaves#
Audi tor
W,E. Fletcher F.V. Grayson
J,B, -Anderson
Thos. Marshall,Jr. J,G. Fry
G,H. Keesee
J.S, Waldea,Jr. * G.S. Sloan
R.H, Lee
Edw, Waller, Jr.
W.W. Dillard
C.V. Blackburn
J.T, Garrett #
A.S. Johnstone#
M.B, Wellborn J,L, Caupbell "M.W. Bell
Creed Taylor
J.B. McDougal J.H. Blair
C.R. McKay
H.F.
C,W.
W.F*
C.L.
D.B.
G.H.
G.A,
.
Hugh Leach
?&rd Albert son W, S, Johns
W.F. McLallen(&)F.R, Burgess
W.H. White#
C.G, Rutledge**
3
X-4005
- y
Chrm.& F.R.Agt. Governor
CHICAGO (Cont'd)
ST. LOUIS
Win. McC. Martin D.C, Biggs
Deputy Governor
Cashier
Asst. Cashier
O.M. Attebery
J.W.White A.H.
W.H.
J,W.
B.C.
S.F.
F.N.
Haill
Glasgow
Rinkleff
Adams
Giliccre
Hall
R, A. Young
Gray Warren H.C. Core
W.B. Geery
F,C, Bunlop* L.S, East
B.V, Moore
Haxrv Yaeger**
A,R. Larson
W.C. Langdcn
H, I. Zieaier
KANSAS CITY
M.L, McClure
W,J. Bailey
C,A.Worthingtcn J.W, Helm
C.M,- Stewart
E.J. Novy
C,L» Mosher
J.F. Ebersole
John Phillips, Jr.C.K, Boardman(&) S,A, W&rdell
G.E. Barley
E.Pi Tyner
Controller
Manager
Also Secretary
Asst. Deputy Governor
Auditor
L.G, Meyer#
A.W. Dazey#
W.A, Hansen#
A.R. LeRcy#
L.G. Pavey#
J«C. Callahan#
F.A. Lindsten#
R*E» Bielsman#
Irving Fischer#
MINNEAPOLIS
John H. Rich
*
#
(&)
**
Asst.. F.R.Agt.
A«.M. McAdams
G,H. Pipkin
M.W.Es Park
A.G, Frost
-4Chrm,& F.E, Agt. Governor
Deputy Governor
Cashier
DALLAS
I p n P . Talley
B.A.MsKinney
R.R, Gilbert
Val J, Grand
SAN FRANCISCO
John Perrin
J.U, Calkins
wm. A. Day
W,N. Ambrose
Ira Clerk** '
L.C,. Ponticus*?.
*
#
(&)
I*;
R,B« Coleman
X-4G05
Asst. Cashier
W,0. Ford
R.T. Freeman
J.L, Ixwpkin
W.D. Gentry
J. L» Hermann
C,C. Hall
W. J. Evans
Audi tor
E,L. Fculks
W.M, Hale
S„G, Sargent F.H, Hoi man (Genl)
C.E. Earhart
H.C, Breck(&) J»M. Osmer
C.D, Phillips
H.U. Mangels
H.U. Craft
Medio BfcRitchie
S.A. MacZachron
•
'
B.C. Mailliard
Controller
Manager
Also Secretary
Asst. Deputy Governor
Asst.F.R.A&t.
Corrected to March 25> 1924.
X-4005-a
OFFICERS OF FEDERAL RESERVE BRANCH BANKS
Manager
. Asst. Manager
Cashier
Asst. Cashier
Auditor
Ass
HAVANA AGENCY OF F.R.BANK OF BOSTON
Horace E- Snow
BUFFALO
Schnsckenburger, W.W•
H.W. Snow
C- Blakeslee
E, L. Theobold
CINCINNATI
L.W. Manning
B.J< Lazar
J.P.H. Brewster
H. N. Ott
B. Kennelly
(Asst.)
PITTSBURGH
Geo• DeCamp
T-C• Griggs
P. A-Brown
F' E. Cobun
Raymond Armor t• M. Jones
BALTIMORE
A-H, Dudley
E.G. Grady
FiMcC• Leake
T. I. Hays
M. F- Reese
Henry Sciiutz
NASHVILLE
J.B. MoNamara
J.B. Fort,Jr.
NEW ORLEANS
Marcus Walker
W.H. Black
BIRMINGHAM
A>E. Walker
(Asst.) ,
C • N. Duley
W. T. Tyler
F.C• Vasterling
W.C. Sterrett H.J. Urquhart
JACKSONVILLE
G-R. DeSaussure
SAVANNAH AGENCY
B.N. Groover
J.A- Walker
P-J - Faulkner
Lawson Brown
(& Auditor)
J . B ' Cobbs
(& Auditor)
G.N. Martin
r
,S. McLarin,
Jr.
(& And.)
D-E. Avery
HAVANA AGENCY OF F.R.BANK OF ATLANTA
L.C. Adelson*
L.L. Magruder
DETROIT
Wm.R. Cation
* Effective April 1st,
John B. Dew
H,J, Chalfont
H.J. Gardner
Geo.T. Jarvjs John G. Baskin
(Asst)
Wm.C .• Sohrader (Acting)
Manager
LITTLE ROCK
A. F. Bailey
Asst. Manager
Cashier
Asat.. Cashier
X-4005-a
Auditor
Asst. F.R. Agent
M. H. Long
F, A. Coe
F> P. Maguire
(Asst.)
LOUISVILLE
W, P, Kincheloe
John T. Moore
Earl R. Muir
Lee A. Moore
(Asst.)
MEMPHIS
John J. Heflin
V. S. Fcupia
S. K. Belcher
C. E. Martin
HELENA
R;E. Towle
H. F. Brown
R. E. Schumacher
DENVER
J, E. Olson
A, J. Conway
John A.
OMAHA
L» H. Ear hart
G, A, Gregory
W. D, Lower
Wm. Phillips
OTTTAHOMA CITY
C. E, Daniel
R. 0. Wunderlich
R. L. Mathes
EL PASO
D. P. Re ordan
M. Crump
Allen Sayles
HOUSTON
Fred Harris
M. D. Jenkins
L,G, Pondrom
LOS ANGELES
C. J, Shepherd
G.H. Schmidt
PORTLAND
Frederick Greenwood
SEATTLE
C. R. Shaw
R.B. Weat
Cronan
H.L, Zinmenrann
(& Auditor)
R. V. Smith
.D. C. Meigs
T, G. Sanders
(& Asst. Aud.)
0. A, LeamOn
. (Asst.)
W. P. Clarke
(& Asst, Aud.)
E. C- Vogelsang
A' J- Duxnm
A. W. Scougall
3. P. Blanchard
J. P< Read
B. A. Russell
Geo. B• Williams
v5
.3Manager
Asst. Manager
SALT LAKE CITY
R. B, Motherwell A. B, Nordling
SPOKANE
W. L, Partner
D, L, Davis
Cashier
x-UOO^-a
jAsst. Cashier
Auditor
Paul M. Lee
|J, M. Leisner
E. W. Morton
Evan Berg
Asst. F.R. Agent
M. C. Dague
FEDZr. AL
R E S E R V E
BOARD
,
185
STATEMENT FOB THE PRESS
Per Release in Morning Papers
Thursday, March 27, 1924.
X-4006
The following is a sunmary of general business and.
financial conditions throughout the several Federal
Leserve Districts, based upon statistics for the
months cf February and March, as contained in the
forthcoming issue of the Federal Reserve Bulletin.
Employment at industrial establishments increased in February
and the output of basic commodities was slightly larger. Distribution,
both at wholesale and retail continued large; wholesale prices were somewhat
higher; and there was a further increase in the vcluma of borrowing, for
commercial purposes,
PRODUCTION:
The Federal Reserve board's index of production in basic industries, adjusted to allow for length of month and ether
seasonal
variations,
increased less than 1 per cent in February. Production of pig iron, steel
ingots, and flour increased, while mill consumption of
cotton
and production
of cement and lumber declined. Factory employment advanced 1 per cent in
February, following successive decreases during the three preceding months.
Increases in working forces were reported by most industries and were
particularly large at iron and steel plants, automobile factories, and textile
finishing establishments. Fuller employment through reduction of part-time
work is indicated by an increase of over 5 per cent in average weekly earnings
Building activity was slightly less than in January, though contracts awarded
were 7 per cent larger than a year ago.
TRADE:
)
Railroad shipments in February were in greater daily volume than in
•
'
•
January and car loadings of practically all important commodities were larger
-2-
%Uoo6
186
than a year ago. The daily average volume of wholesale business increased
about 5 per cent in February, but vvas slightly smaller than a year ago. Sales
of meat, dry goods $ and hardware were larger than In February, 1923# while
sales of shoes were smaller. Department store sales in February averaged
,
*
a
about the same daily volume s in January and about 5 per cent more than a year
f
•
ago, while merchandise stocks at these stores at the end of the month were 6
per cent above last year's level. Business of mail order houses and chain
stores also showed increased activity in comparison with January*
PRICES:
Wholesale prices, as measured by the index of the Bureau of labor
Statistics, advanced slightly in February. Prices of fuel, metals, and building materials increased, while prices of farm products, clothing, and chemicals
declined. During the first two weeks in March price declines occurred in
wheat, cotton, silk, hides, and rubber, and price advances in hogs, copper,
v
and crude petroleum.
BANE CREDIT:
The volume of borrowing for conmercial purposes at member banks
in leading cities in the early part of March continued the increase which began in the latter part of January, and on March 12 total loans of the reporting banks were higher than at any time since the seasonal peak at the
turn of the year, and about $275,000,000 higher than a year ago.
At the Federal reserve banks during the four-week period ending
March 19 a further decline in the volume of discounts for member banks and of
acceptances was offset by an increase in the holdings of U. S. securities, so
that total earning assets were at about the same level as in February. Federal
reserve note circulation continued to decline, while the total money in
''
circulation increased.
'
' .
'
f
'
.5-
X-4oo6
::'r
187
Easier money conditions were reflected in & slight decline in
rates for commercialfcaperio 4 1/2 per cent and also in lower rates for
bankers' acceptances and. reduced yields on Treasury certificates.
The
March offering of $400,000,000 of one-year Treasury certificates bearing
interest at 4 per cent, as conpared with 4 1/4 per cent on a similar issue
sold in December, was oversubscribed.
X-UOO?
Martil26, 1924.
Federal Reserve Board
SUBJECT: Bonus Bill (H. B. 7959)6 8 ^
*
affects the Federal Reserve System.
Mr. lyatt, General Counsel.
Mr. Lee, of the Senate Drafting Service, sailed me on the tele*
-
.«
.
m
^ i.
omaa
a*
j A n n
nfl.va
a
have an opportunity to study the bill.
SEVERAL fROVISlOHS OF T # B M '
In general, this bill provides for additional compensation to
each veteran in an amount equal to $1.25 f°r each
overseas serv ce
and *1.00 for each day of home service, the total amount received by any
veteran to be limited to £500 in the case of veterans who performed no
overseas service and $625 iT1 the case of veterans who did perform overseas service. In all cases in which such additional pay amounts to H50
or less it is to be paid in cash, but where it amounts to more than o O
it is to be paid in the form of "adjusted servide certificates" wfaich are_
in substance paid-up 20-year endowment insurance policies in amounts equal
to the amount of 20-year endowment insurance that could be purchased by a
single premium equal to the amount of such adjusted service credit increased by 25 per cent. The face value of such certificates is payable (1) to
the veteran twenty years after date of the certificate, or (2) upon the
death of the veteran prior to the date of expiration of such period, to the
beneficiary named therein. These certificates also bear a loan value
which is not in excess of either (l) 90 per cent of the reserve value of
the certificate, computed on the basis of an annual premium for twenty years
and calculated in accordance with the American Experience Table of Mortality
and interest at four per cent per annum, compounded annually; or (2) SO per
cent of the face value of the certificate.
LOAN PRIVILEGES.
There is given below a brief analysis of the loan privileges accorded under Section 502 of the bill :
(l) Loans may be made only in accordance with the provisions
of this section.
r
r 2 ~
x-uoo?
189
(2) National banks and State banks and trust companies are authorized, after the expiration of two years after the issuance of such certificates, to make loans to veterans upon their promissory notes secured by
such certificates in amounts not exceeding the loan basis of such certificates.
(3) The rate of interest charged on such loans shall not exceed
by more than two per cent the Federal reserve rediscount rate on. commercial
paper.
(4) Such notes may be sold by one bank to another or may be discounted or rediscounted by one bank with another.
(5) Upon the endorsement of any bank, and subject to regulations
to be prescribed by the Federal Reserve, Board, such notes shall be e^igiblg
for discount by Federal reserve banks, regardless of whether or not the
discounting bank is a member of the Federal Reserve System. In order to be
eligible for rediscount, however, such notes must have a maturity at the
time of rediscount not in excess of nine months, exclusive of days of grace.
(.6) The rate of interest charged by a Federal reserve bank on
such rediscounts shall be the same as that charged on commercial paper.
(7) Such notes are eligible as collateral security for the issuance of Federal reserve notes.
(S) The Federal Reserve Board may permit Federal reserve banks
to rediscount such notes with each other at rates to be fixed by the Board.
(9) %enever a note is sold, the bank making the sale shall
promptly notify the veteran.
(10) If the veteran does not pay the principal and interest of
such loan at maturity the bank holding the note may, "after the expiration
of six months after the loan was made™, present it to the Director of the
Veterans Bureau who "may, in his discretion.* accept the certificate and
note and pay the hank in full satisfaction of its claim the amount of the
unpaid principal due it with interest to date.
(11) Such certificates may be redeemed by the veteran upon payment
of the principal and interest of the loan.
(12) If such certificates are not redeemed, the Director of the
Veterans Bureau deducts the amount of the loan with interest and pays the
balance to the veteran on the maturity of the certificate, or to his beneficiary in the event he dies before the maturity of the certificate.
r
X-U007
190
(13) m@re a veteran dies before the maturity of a loan, the amount
thereof with interest becomes immediately due and payable in which event the
Director of the Veterans Bureau pays the note with interest to the bank holding such note, deducting the amount from the face value of the certificate.
(lU) If the certificate matures during the life of a veteran, any
bank holding an unpaid note secured by such certificate presents it to the
Director of the Veterans Bureau who pays the note with interest and deducts
the amount from the face value of the certificate.
(15) No payment upon any note shall be made under this section by
the Director of the Veterans Bureau to any bank unless the note when presented to him is accompanied by an affidavit by an officer of the bank which
made the loan stating that such bank has not charged of collected, or attempted to charge or collect, directly or indirectly, any fee or other
compensation (except interest as authorized by this section) in respect/
of any loan made under this section by the bank to a veteran.
QUESTIONS OF POLICY.
This presents several important questions of policy for the Board's
consideration, including the followingi
(a) The advisability of having such notes made eligible for rediscount by Federal reserve banks.
(b) The advisability of permitting Federal reserve banks to rediscount such notes for nonmember banks.
(c) The advisability of permitting such notes to be used as security for the issuance of Federal reserve notes and thus become a basis for
our currency.
CONCLUSION.
After I have had an opportunity to study this bill more carefully,
I probably shall submit some criticisms of the legal phraseology of Section
502.
I am having this memorandum mimeographed and shall famish a copy
to each member of the Board; together with a copy of the Bill.
Respectfully,
Walter %att,
General Counsel.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4009
March 27, 192U-
SUBJECT:
Information furnished to Committee on Banking and
Currency of the House of Representatives*
Dear Sir:Under date of March 10, 1924, the Clerk of the Banking and Currency Committee of the House of Representatives
requested the Board to furnish the Committee with a detailed
statement showing what has been expended for the sites of
each Federal reserve bank; how much has been expended for
each building; what has been the cost of the completed
building,- and where not completed, the estimated cost of
completion; the cost of the building proper, and the cost
of the vaults, permanent equipment, furnishings and fixtures
to be segregated; also the number of officers and employees
at each of the branch Federal reserve banks.
In compliance with this request* the Board furnished
the Committee with two statements, St. 3970
St. 398),
relative to the cost of bank premises, and one statement,
St. 3986, relating to the number and salaries of officers •
and employees at each Federal reserve bank and branch as
of December )1, 1923. copies of which are enclosed herewith.
Very truly yours,
Walter L. Eddy,
Secretary.
ENCLOSURES.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
192
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE B O A R p
x-Uoio
March 27, 192%.
STJBJECT: Interpretation of the word "borrower" as used
in Section 13.
Dear Sir:
For some time the federal Reserve Board has had undei* consideration the question: What is the proper interpretation of the word "borrower" as used in the following provision of Section 13 of the Federal .
Reserve Act:
"The aggregate of such notes, drafts, and bills bearing the
signature or indorsement of any one borrower, whether a person,
company, firm, or corporation, rediscounted for any one bank
shall at no time exceed ten per centum of the unimpaired capital
and surplus of said bank; but this restriction shall not apply
to the discount of bills of exchange drawn in good faith against
actually existing values".
The question involved is whether the word "borrower" as used in
this provision refers to the maker or to the indorser of & promissory
note discounted at a member bank and later offered for rediscount at a
Federal reserve bank.
The specific facts upon which this question arose were as follows : . A cattle dealer sold cattle to various farmers, taking in payment
therefor the notes of the individual farmers and discounting these notes
with his indorsement at a member bank. The amount of each note was less,
but the aggregate amount of all of them was more, than ten per cent of
the capital and surplus of the member bank. Under such circumstances, if
the cattle dealer who indorsed all the notes were considered the "borrower" the Federal reserve bank could not rediscount such notes in an amount,
exceeding ten per cent of the member bank's capital and surplus; but if
the farmers who were the makers of the notes were to be considered the
"borrowers" the notes of each farmer would be eligible for rediscount in
an amount not exceeding ten per cent of the member bank's capital and
surplus and the aggregate amount of such notes bearing the indorsement of
the same cattle dealer, which might be discounted at a Federal reserve bank
by a single member bank would be several times ten per cent of the member
bank*s capital and surplus.
.
Vhen first called upon to rule on this question, the Federal
Reserve Board took the position that, in determining the amount of notes
bearing the signature or indorsement of any one borrower which a Federal
X-UOXO
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193
reserve bank may legally rediscount for any one member bank under the
above quoted provision of Section 13, the maker of a note should be considered the borrower unless it appears that he is an accommodation maker,
in which event the indorser who receives the benefit of the loan should
be considered the borrower. The Board was asked to reconsider that ruling
and, after very careful reconsideration, reaffirmed the position formerly
taken:
Subsequently, the Governors1 Conference requested the Board to
reconsider the question again, and each Federal reserve bank requested its
counsel to render an opinion on this subject and submit it to the Federal
Reserve Board for the information and assistance bf the Board in formulating its final ruling. Opinions of counsel to all Federal reserve banks
were finally received and were found to be in hopeless conflict# Some
counsel agreed with the position taken by the Board, others took the
opposite position, while others, reached still different conclusions.
The Board has carefully reconsidered the entire subject and is
of the opinion that the position heretofore taken by it is correct. It
rules, therefore, that in determining the amount of notes bearing the
signature or indorsement of any one borrower which a Federal reserve bank
may legally rediscount for any one member bank under the above quoted
provision of Section 13, the maker of a note should be considered the
borrower, unless it appears that he is an accommodation maker, in which
event the indorser who receives the benefit of the loan should be considered the borrower.
Very truly yours,
D. R. Crissinger,
Governor.
TO GOVERNORS OF AI& FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
March 28, 1924.
X-UOlUa
SUBJECT:
Regulation H, Series of 1923, as amended
March 27, 1924.
Dear Sir:The Board has amended its Regulation H, Series of
1923» as per the enclosed mimeographed copy thereof.
%is amended regulation is effective immediately, and
you are requested to prepare and send copies to all of
your member banks.
Very truly yours,
D. R. Crissinger,
Governor.
(Enclosure )
TO GOVERNORS AMD FEDERAL RESERVE AGENTS.
195
REGULATION H
Series of 192^
(Superseding Regulation H of 192«J.)
X-UOll
MEMBERSHIP OF STATE BATES AMD TRUST COMPANIES.
SECTION I. BAN1V,S„J:LIGIPLE FOR MEMBERSHIP.
1. Incorporation. - In order to be eligible for membership in a
Federal Reserve Bank, a State bank or trust company must have been incorporated under a special or general law of the State or district in
which it is located.
2. Capital stock. - Under the terms of section 9 of the Federal
Reserve Act as amended, no applying bank can be admitted to membership
in a Federal Reserve Bank unless (a) It possesses a paid-up, unimpaired capital sufficient to entitle it to become a national banking association in the place where it
is situated, under the provisions of the National Bank Act, or
(b) It possesses a paid-up, unimpaired capital of at least 60 per
cent of such amount, and, under penalty of loss Of membership, complies
with the rules and regulations herein prescribed by the Federal Reserve
Board fixing the time within which and the method by which the unimpaired
capital of such bank shall be increased out of net income to equal the
capital required under (a).
In order to become a member of the Federal Reserve System, therefore, any State bank or trust company must have a minimum paid-up capital
stock at the time it becomes a member, as follows:
I
196
X-4011
Minimum capi- Minimum capiIf located in a city or town with a population 6f- tal if admitted tal if admitted
under clause(a) under clause
Not exceeding 3,000 inhabitants
$25,000
Exceeding 3,000 but not exceeding 6,000 inhabitants.
56,000
Exceeding 6,000 but not exceeding 50,000 inhabitants 100,000
Exceeding 50,000 inhabitants
200,000
$15,000
30,000
60,000
120,000
^ny bank admitted to membership under clause ()>) mast also, as a condition of membership, the violation of which will subject it to expulsion
from the Federal Reserve System, increase its paid-up and unimpaired capital
within five,years after the approval of its application by the Federal Reserve Board to the amount required under
For the purpose of providing
for such increase, every such bank shall set aside each year in a fund exclusively applicative to such capital increase not less than 50 per cent of
its net earnings for the preceding year prior to the payment of dividends,
and if such net earnings exceed 12 per cent of the paid-up capital of such
bank, then all net earnings in excess of 6 per cent of the paid-up capital
shall be carried to such fund, until such fund is large enough to provide
for the necessary increase in capital.
Whenever such fund shall be large
enough to provide for the necessary increase in capital, or at such other
time as the Federal Reserve Board may require, such fund or as much thereof
as may be necessary shall be converted into capital by a stock dividend or
used in any other manner permitted by State law to increase the capital of
, " "
*' - ' .
•
such bank to the amount required under (a): Provided, however. That such
bank may be excused in whole or in part from compliance with the terms of
1
this paragraph if it increases its capital through the sale of additional
stock: Provided, further. That nothing herein contained shall be construed
'
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„ 3.
r
197
X-UOll
as requiring ary such bank to violate any provision of State law, and in
any case in which the requirements of this paragraph are inconsistent with
the requirements of State law the requirements of this paragraph may be
waived and the subject covered by a special condition of membership to be
prescribed by the Federal Reserve Board.
SECTION II. APPLICATION FOB MEMBERSHIP.
Aiy eligible State bank or trust compary may make application on
P. R. B. Form 83a* trade a part of this regulation, to the Federal Reserve
Board for an amount of capital stock in the Federal Reserve Bank of its
district equal to 6 per cent of the paid-up capital stock and surplus of
such State bank or trust corrjjaijy.
This application must be forwarded
direct to the Federal Reserve Agent of the district in which the applying bank or trust company is located and most be accompanied by Exhibits
I, II, and III, referred to on page 1 of the application blank,
SECTION III. APPROVAL OF APPLICATION.
In passing upon an application the Federal Reserve Board will consider especially 1. The financial condition of the applying bank or trust company and
the general character of its nemagement;
2. Whether the corporate powers exercised by the applying bank or
trust company are consistent with the purposes of the Federal Reserve Act;
and
3. Whether the laws of the State or district in which the applying
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k
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X-1*011
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bank or trust company is located contain provisions likely to prevent
proper compliance with the provisions of the Federal Reserve Act and the
regulations of the Federal Reserve Board made in conformity therewith.
If, in the judgment of the Federal Reserve Board, an ppplying bank
or trust company conforms to all the requirements of the Federal Reserve
Act and these regulations, and is otherwise qualified for membership, the
Board will issue a certificate of approve! subject to such conditions as
it may deem necessary.
When the conditions imposed by the Board have
been accepted by the applying bank or trust - compaiy the Board will issue
a certificate of approval, whereupon the applying bank or trust company
shall make a payment to the Federal Reserve Bank of its district of onehalf of the amount of its subscription, i. e., 3 per cent of the amount
of its paid-up capital and surplus, and upon;
' receipt of this payment
the appropriate certificate of stock will be issued by the Federal Reserve
Bank.
The remaining half of its subscription shall be subject to call
when deemed necessary by the Federal Reserve Board.
SECTION IV.
CONDITIONS OF MEMBERSHIP.
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•
Pursuant to the authority contained in the first paragraph of Section 9
of the Federal Reserve Act, which provides that the Federal Reserve Board may
permit applying banks to become oaembers of the Federal Reserve Sv3tem"sub.1ect
to such conditions as it may prescribe*, the Federal Reserve Board will prescribe the following conditions of membership for each bank or trust company
hereafter applying for admission to the Federal Reserve System, in addition
to such other conditions as the Board may consider necessary or advisable in
(
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' x-uoii . ^ 199 .4
the particular case 1. Except with the permission of the Federal Reserve Board, such bank or
trust compare shall not cause or permit any change to be na.de in the general
character of its assets or in the scope of the functions exercised by it at
the time of admission to membership, such as will tend to affect materially the
•$ 1*
'
"
standard maintained at the time of its admission, to the Federal Reserve System
and required as a condition of membership#
2. Such bank or trust company shall at all times conduct its business
and exercise its powers with due regard to the safety of lit s customers.
3» Such bank or trust company shall not reduce its capital stock except
with the permission of the Federal Reserve Board.
4. Such bank or trust company shall not, except after applying for and
receiving the permission of the Federal Reserve. Board, establish any branch,
agency or additional office.
5« Such bank or trust company shall not, except after applying for and
receiving the permission of the Federal Reserve Board, consolidate with or absorb any other bank or branch bank; nor directly or indirectly, through
affiliated corporations or otherwise, acquire an interest in another bank in
excess of 20 per cent of the capital stock of such other bank; nor directly
or indirectly promote the establishment of any new bank for the purpose of
acquiring such an interest in it; nor make any arrangement to acquire such an
interest.
6. Such bank or trust company shall reduce to, and maintain within, the
limits prescribed by the laws of the State in which it is located, any loan
which may be in excess of such limits.
7, Such bank or trust company shall reduce to an amount equal to 10 per
cent of its capital and surplus all balances in excess thereof, if any, which
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x-4onr
3 0 0
are carried with banks or trust companies which are not members of the Federal
Reserve System, and shall at all times maintain such balances within such
limits.
6. Such bank or trust company may accept drafts and bills of exchange
drawn upon it of any character permitted by the laws of the State of its incorporation; but the aggregate amount of all acceptances outstanding at any
one time shall not exceed the limitations inoosed by Section 13 of the
Federal Reserve Act, that is, the aggregate amount of acceptances outstanding
at any one time which are drawn for the purpose of furnishing dollar exchange
in countries specified by the Federal Reserve Board shall not exceed §0 pet
cent of its capital and surplus, and the aggregate amount of all other acceptances, whether domestic or foreign, oat standing at any one time shall not
exceed 50 per cent, of its capital sod surplus, except that the Federal Reserve Board, upon the application of eueh bank or trust conpany, may increase
this limit from $0 per cent to 100 per cent of its capital and surplus:
Provided, however, that in no event shall the aggregate amount of domestic
acceptances outstanding at any one time exceed 50 per cent of the capital and
surplus of such bank or trust company.
9. She Board of directors of said bank or trust eospany shall adopt a
resolution authorizing the interchange of reports and information between the
Federal Reserve Bank of the district iti which such bank or trust company is
located and the banking authorities of the State in which such bank is located.
Bach bank or trust company ^plying for membership hereafter will be required to agree to the above conditions and any other conditions which the
Board may prescribe, prior to the admission of such bank or trust coup any to •
the Federal Reserve System.
.
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X-4011
SECTION V. CHANGES IN ASSETS OR BROADENING OF FUNCTIONS.
Each bank or trust company hereafter admitted to the Federal Reserve
System and each bank or trust conpany which has heretofore been admitted subject to Condition No. 1 of Section IV or subject to any similar condition,
shall, before opening any new department, consolidating or merging with any
other batik, purchasing the assets of any other bank or trust coapany,
establishing any branch, agency of additional office, or taking any other
steps whica may result in a change in the general character of its assets
or broadening in the functions exercised by it * notify the Federal Reserve
Board of its intention to take such action in order that the Federal Reserve Board m y make.an examination or take such other steps as it may
consider necessary to ascertain whether such action will tend to affect
materially the standard maintained by such bank at the time of its admission
and required as a condition of membership*
SECTION VI. PRINCIPLES GOVERNING ESTABLISHMENT OF BRANCHES*
In passing upon applications by State banks and trust companies for permission to establish branches, agencies or additional offices, under Condition
No. 4 of Section IV, or;under any similar condition which may have been pre#*,
scribed by the Federal Reserve Board and agreed to by any bank or trust company
heretofore admitted to the Federal Reserve System, the Federal Reserve Boardwill observe the following principles 1. The Federal Reserve Board will as a general principle, restrict the
establishment of branches, agencies or additional offices by such banks or
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202
X-4011
trust companies to the city of location of the parent bank and the
territorial area within*: the state contiguous thereto, as said territory
has been defined in the Board's resolution of November 7» 192^ J" ^excepting
in instances where the State banking authorities have certified and the
Board finds that public necessity and advantage renders a departure from
the principle necessary or desirable.
2. The Federal Reserve Board will not consider an application by such
bank or trust company for a permit to establish a branch, agency, or additional
office, unless the authorities of the State in which such bank is located regularly make simultaneous examinations of the head office and all branches,
agencies or additional offices of such bank* nor unless the examinations made,
by the State authorities are, in the judgment of the Federal Reserve Board,
of such character in every respect as to furnish the Federal Reserve Board
with sufficient information as to the condition of such bank and the character
of its management to enable it fully to protect the interests of the public.
3* The Federal Reserve Board will require each bank or trust company
which establishes or maintains branches, agencies or additional offices to
maintain for itself and such branches, agencies or additional offices an- adequate ratio of capital to total liabilities and an adequate percentage of its
total investments in the form of paper or securities eligible for discount
or purchase by Federal reserve banks.
1. The term "contiguous territory* is defined in the Board's resolution of
November 7» 1923• to mean: "The territory of a city or town whose corporate
limits at sdme point coincide with the corporate limits of the city or town
in which the parent bank is located."
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X-4011
The Federal Reserve loayd will net consider any application to establish a branch, agency or additional office until the establishment of svuch
branch, agency or additional office has been approved by the ranking authorities of the State in which such bank or truat. company is located and such
authorities have certified that, (1) the applyiru oaak or trust company is
solvent and is not in a dangerous or extended condition and (2) the character
of its management is such as to justify the establishment of such branch,
agency or additional office# nor until the Directors or Executive Committee
and the. Federal Reserve Agent of the Federal Reserve Bank of the District in
which such bank or trust company is located have submitted a report on these
facts and a recommendation as to whether or not the application should be
granted.
5» Before permitting such bank or trust company to establish any branch,
agency, or additional office, the Federal Reserve Board will require the
Federal Reserve Agent of the district in which such bank is located to make
an investigation and report whether in his opinion the establishment of such
branch, agency, or additional office would be in the interest of the public
in the locality in which it is to be established and whether it would endanger the existence of existing local unit banks.
6. %@n permission is granted for the establishment of such branch,
agency or additional office same shall be established and opened for business within six months after such permission is granted. If such branch,
agency, or additional office is not established within such time the permit
shall become void, unless the time is extended by the Board for good cause.
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304
7« The Federal Reserve Board, reserves the right to cancel any
permit which it has granted to establish any branch, agency or additional
office whenever in its judgment the bank operating such branch, agency or
additional office has engaged in unfair competition or other unfair
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:
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practices to the detriment of other banks or of the public, or has failed
adequately to serve the public interest in the community in which it
is located.
SECTION VII.
POWERS AND RESTRICTIONS.
Every State bank or trust company while a member of the Federal Reserve System 1. Shall retain its full charter and statutory rights as a State bank
or trust company, subject to the provisions of the Federal Reserve Act, to
the regulations of the Federal Reserve Board, "and the conditions prescribed
by the Federal Reserve Board and agreed to by such State bank or trust company prior to its admission".
2. Shall maintain such improvements and changes in its banking practice
as may have been specifically required of it by the Federal Reserve Board as a
condition of its admission and shall not lower the standard of banking then
required of it;
3„ Shall enjoy all the privileges and observe all those requirements of
the Federal Reserve Act and of the regulations of the Federal Reserve Board
made in conformity therewith which are applicable to State banks and trust
companies which have become member banks; and
4. Shall comply at all times with any and all conditions of membership
prescribed by the Federal Reserve Board at the time of the admission of such
member bank to the Federal Reserve System.
M
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X-U011
205
SECTION VIII. EXAMINATIONS AND HIPCBTS.
Every State bank or trust company, while a member of the Federal Reserve
System, shall be subject to examinations made by direction of the Federal Heserve Board or of the Federal Reserve Bank by examiners selected or approved
by the Federal Reserve Board.
In order to avoid duplication, examinations of State banks and trust com*
panies made by State authorities will be accepted in lieu of examinations by
examiners selected or approved by the Board wherever these are satisfactory to
the directors of the Federal Reserve Bank, and examiners from the staff of the
Board or of the Federal Reserve Banks will, whenever desirable, be designated
by the Board to act with the examination staff of the State in order that uniformity in the standard of examination may be assured*
Every State bank ot trust company, *hile a member of the Federal Reserve
System, shall be required to make in each year not less than three reports of
condition ofi F. R, B. Form 105.
Such reports shall be made to the Federal Re-
serve Bank of its district on call of such bank, on dates to be fixed ty the
Federal Reserve Board. 2hey shall also make semiannual reports of earnings
and dividends on F. R* B„ Form 107. As.dividends may be declared from time to
time, each State bank or trust conpany member shall also furnish to the Federal Reserve Bank of its district a special notification of dividend declared
on F. R, B» Form 107a. F* R» £. Forms 10$, 107, and 107a are
this regulation.
a part of
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-U012
March 29, 1924.
SUBJECT: Corrections in Inter-District Time Schedule.
Dear Sir:By agreement between the Federal Reserve
Bank of San Francisco and the Federal Reserve Bank
of Minneapolis the following changes should be made
in the inter-district time schedule:
Seattle to Minneapolis - St, Paul - 3 daysMinneapolis - St. Paul to Seattle - 3 days
Very truly yours,
j', C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
206
F E D E R A L
R E S E R V E
B O A R D
Statement for the Press
X-403.3
For Immediate Release
CONDITIO!? OP ACCEPTANCE MARKET
February lU to March 12, 1Q2U
Daring the four-week period ending March 12 the acceptance market
was less active than in the preceding four weeks.
The supply of tills
showed a considerable reduction and was smaller than in any month since
October. Bills drawn to finance the exportation of cotton and the importation of sugar constituted the greater proportion of the total supply,
but there were also substantial amounts of acceptances issued against
silk, wool, grain, provisions, and to provide dollar exchange.
The de-
mand was irregular during the greater part of the period and total sales
by dealers were considerably smaller than a month earlier. The principal
demand for bills, especially with short maturities, came from city banks
where considerable funds had accumulated in anticipation of tax payments.
Rates on acceptances, after strengthening early in February when
the demand for bills slackened, became firmer and remained generally unchanged at 4 l/S bid, and 4 offered for 30-day maturities, and 4 1/6 to
4 l/4 bid and 4 to 4 l/S offered for 60 and $0 day bills.
Rates on
maturities of more than three months ranged from 4 1/4 to 4 5/8 bid and
4 l/S to 4 l/2 offered varying as to different length bills. After the
middle of March money rates became easier and acceptance rates showed a
declining tendency.
FEDERAL RESERVE BOARD
208
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X- >4014
March 31, 192U.
Dear Sir:
There is enclosed herewith for your infornation as Counsel to the
Federal Reserve Bank of
, a copy of a brief filed in the Supreme
Court of the United States by the Solicitor General of the United States as
amicus curiae in the case of the State of Missouri at the relation of the
Bumes National Bank, St. Joseph, Missouri, v. A. B. Duncan, Judge of the
Probate Court of Buchanan County, Missouri, which case is now pending before the Supreme Court of the United States on a writ of error to the Supreme Court of Missouri.
As you probably know, the Burnes National Bank had been named as
executor under a will and had made application to the Probate Court for
appointment as such executor. On January 29, 1923, the Probate Court refused to issue letters testamentary to the national bank on the ground
that under the laws of Missouri the bank was not authorized to act as executor . The national bank applied to the Supreme Court of Missouri for a
writ
mandamus requiring the Probate Court to appoint it as executor. The
Supreme Court of Missouri upheld the decision of the Probate Court and
denied, the writ of mandamus. The opinion of the Court, a copy of which I
sent you some time ago, is to the effect that the exercise of trust powers
by national banks in Missouri is in contravention of State law. The Court
considered the provision in Section ll(k) of the Federal Reserve Act that
the exercise of trust powers by national banks shall not be deemed to be
in contravention of State law when State institutions which compete with
national banks are permitted to exercise such powers, but failed to apply
this provision, arguing that it is not controlling and. that trust companies
in Missouri do not compete with national banks
in the sense contemplated
1
by the statute.
The case was promptly taken to the Supreme Court of the United
States on a writ of error and has been advanced on the docket and set for
argument on April 7th. It is hoped, therefore, that a final decision
of this question will be rendered by the Supreme Court of the United States
before the Court adjourns in June. The case is of particular interest
because it is the first one presented to the Supreme Court of the United
States which involves the application of Section ll(k) of the Federal
Reserve Act as amended by the Act of September 25, 1918.
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£509
At the suggestion of the Federal Reserve Board and the Comptroller
of the Currency, the Secretary of the Treasury requested the Department of
Justice to intervene in the case on behalf of the United States, and in
accordance with this request the Solicitor General obtained leave of the
Court to file a brief and make an oral argument in the case on behalf of
the United States as amicus curiae. At the request of the Solicitor General, the enclosed brief was prepared largely in this office.
Very t Ally yours,
•
Enclosure.
Walter Wyatt
General Counsel
FEDERAL RESERVE BOARD
WASHINGTON
X-4oi6
April 1, 1924.
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
Additional Bank Holidays
during April, 19&.
Dear Sir;
For your information, the following Federal Reserve Banks and
Branches w i l l be closed on dates s p e c i f i e d during April, acceunt
holidays:
Monday .
April 14 — Birmingham - J e f f e r s o n ' s birthday
Tuesday
April 15 - Salt Lake City - Arbor Day
Friday
April 16 - Philadelphia — Good Friday
Pittsburgh
Baltimore
New Orleans
Nashville
Jacksonville
Memphi s
Minneapolis
Saturday
April 19 — Boston — P a t r i o t ' s Day
Monday
April 21 - Dallas - San Jacinto Day
El Paso
Houston
Tuesday
April 22 - Omaha - 'Arbor Day
Tuesday
April 22 - New Orleans - E l e c t i o n Day
Saturday
April 26 - Atlanta - Memorial Day
Birmingham
Jacksonville
Therefore, on the dates indicated, the banks a f f e c t e d w i l l
n o t p a r t i c i p a t e i n either the regular Gold Fund Clearing or the
Federal Reserve Note Clearing, Please include your c r e d i t s for
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x-4016
the banks affected, on each of the holidays with your c r e d i t s f o r
the following b u s i n e s s day in your Gold Fund Clearing telegrams,
and make no shipments of Federal Reserve Notes, f i t or u n f i t * to
Head O f f i c e or to Washington, r e s p e c t i v e l y , on the holidays mentioned.
Kindly n o t i f y branches.
Yours very truly,
J * C<• N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
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212
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
x-4019
April 7, 1924.
SUBJECT:
Amended Regulation "H", S e r i e s of l y 2 4 .
Dear S i r : The Board's Regulation "H", S e r i e s of 1924, which
was adopted and made e f f e c t i v e March 27, 1924, has todaybeen amended as per the enclosed copy.
P l e a s e have prepared copies of the amended r e g u l a t i o n and d i s t r i b u t e them to t h e member banks of your d i s t r i c t .
By d i r e c t i o n of t h e Federal Reserve Board.
Very t r u l y y o u r s ,
(Enclosure)
Walter L. Eddy,
Secretary,
TO ALL F. B. AGENTS, 60PY TO THE GO VERMS-
X-4oig|~3. ,
(Superseding X-Uoil) r<>X3
REGULATION H
S e r i e s of 1924 (As amended April 7, 1924)
(Superseding Regulation E of 1 9 2 3 )
MEMBERSHIP OF STATE BANKS AND TRUST COMPANIES.
SECTION I . BANKS ELIGIBLE FOR MEMBERSHIP.
1*
I n c o r p o r a t i o n . - In order to be e l i g i b l e f o r membership in a
Federal Reserve Bank, a State bank or t r u s t company mast have been i n corporated under a special or general law of the S t a t e or d i s t r i c t in
which i t i s l o c a t e d .
2%
Capital stock- - Under the terms of s e c t i o n 9 of the Federal
Reserve Act as amended , no applying bank, can he admitted to membership
in a Federal Reserve Bank u n l e s s (§•) I t possesses a p a i d - u p , unimpaired c a p i t a l s u f f i c i e n t to ent i t l e i t to become a national banking a s s o c i a t i o n in the place where i t
i s s i t u a t e d , under the provisions of the National Bank Act> or
(k) I t possesses a paid-up, unimpaired c a p i t a l of a t l e a s t 60 per
cent of such amount, and , under p e n a l t y of l o s s of membership, complies
with the r u l e s a.nd r e g u l a t i o n s h e r e i n prescribed by the Federal Reserve
BoaJpd f i x i n g the time w i t h i n wnich and the method by which the unimpaired
capital of such bank s h a l l be increased out of n e t income t o equal the
c a p i t a l required under (a) ,
In order to become a member of the Federal Reserve System, t h e r e f o r e , any S t a t e bank or t r u s t company must have a minimum paid-up c a p i t a l
stock a t the time i t becomes a member, as follows:
X-uoi£K5
£ 1 4
Minimum capi- Minimum capiIf located in a c i t y or town with a population of- t a l if admitted t a l 'if admitted
under clause(a) under clause ( \ )
Not exceeding 3,000 inhabitants
Exceeding 3,000 but not exceeding 6,000 inhabitants.
Exceeding 6,000 but not exceeding $0,000 inhabitants
Exceeding 50,000 inhabitants
$25,000
50,000
100,000
200,000
$15,000
30,000
60,000
120,000
Any bank admitted to membership under clause ( \ ) mast also, as a condition of membership, the violation of which w i l l subject i t to expulsion
from the Federal Reserve System, increase i t s paid-up and unimpaired capital
within f i v e years after the approval of i t s application by the Federal Reserve Board to the amount required under { ^ .
For the purpose of providing
for such increase, every such bank shall set aside each year in a fund exclusively applicable to such capital increase not l e s s than 50 per cent of
i t s net .earnings for the preceding year prior to the payment of dividends,
and if such net earnings exdeed 12 per cent of the paid-up capital of such
bank, then a l l net earnings in excess of 6 per cent of the paid-up capital
shall be carried
to such fund, u n t i l such fund i s large enough to provide
for the necessary increase in capital.
'Whenever such fund shall be large
enough to provide for the necessary increase in capital, or
at such other
time as the Federal Reserve Board may require, such fund or as much thereof
as may be necessary shall be converted into capital by a stock dividend or
used in any othef manner permitted by State law to increase the capital of
such bank to the amount required under (a):
Provided, however, That such
bank may be excused in whole or in part from compliance with the terms of
t h i s paragraph i f i t increases i t s capital through the sale of additional
stock:
Provided, further, That nothing herein contained shall be construed
- 3 -
X-401#-a
as requiring any such bank to v i o l a t e any provision of State law, and in
any case in which the requirements of t h i s paragraph are inconsistent with
the requirements of State law the requirements of t h i s paragraph may be
waived and the subject covered by a special condition of membership to be
prescribed by the Federal Reserve Board..
SECTION I I .
AFPLIC/TI01T FOB MEMBERSHIP.
Any e l i g i b l e State bank or trust company may make a p p l i c a t i o n on
F. R. E. Form 83a, made a part of t h i s regulation, to the Federal Reserve
Board for an amount of capital stock in the Federal Reserve Bank of i t s
d i s t r i c t equal to 6 per cent of the paid-up capital stock and surplus of
such State bank or trust company.
This application mast be forwarded
direct to the Federal Rsserve Agent of the d i s t r i c t in which the applying bank or trust company i s located and must be accompanied by Exhibits
I, II, and I I I , referred to on page 1 of the application blank,
SECTION I I I .
APPROVAL OF APPLICATION,
In passing.upon an application the Federal Reserve Board w i l l consider e s p e c i a l l y 1.
The f i n a n c i a l condition of the applying bank or trust company and
the general character of i t s management;
2.
Whether the corporate powers exercised by the applying bank or
trust company are consistent with the purposes of the Federal Reserve Act;
and
3.
TThether the laws of the State or d i s t r i c t in which the applying
- 4 -
•
X-U01S-a. 3 1 6
bank or trust company i s located contain provisions l i k e l y to prevent
proper compliance with the provisions of the Federal Reserve Act and the
regulations of the Federal Reserve Board made, in conformity therewith.
I f , , in the judgment of the Federal Reserve Board, an ppplying bank
or trust company conforms to a l l the requirements of the Federal Reserve'
Act and these, r e g u l a t i o n s , and i s other,vise q u a l i f i e d f o r membership, the
Board w i l l i s s u e a c e r t i f i c a t e of approval subject to such conditions as
i t may deem necessary.
"fnen the conditions imposed by the Board have
been accepted by the applying bank or trust compary the Board w i l l issue
a c e r t i f i c a t e of approval, whereupon the applying bank or t r u s t company
s h a l l make a payment t o the Federal Reserve Bank of i t s d i s t r i c t of onehalf of the amount of i t s subscription, i . e . , 3 per cent of the amount
of i t s paid-up c a p i t a l and surplus, and upon
receipt of t h i s payment
the appropriate c e r t i f i c a t e of stock w i l l be issued by the Federal Reserve
Bank.
The renaining h a l f of i t s subscription s h a l l be subject to c a l l
when deemed necessary by the Federal Reserve Board.
SECTIOr IV.
CONDITIONS OF MEMBERSHIP^/
Pursuant to the authority contained in the f i r s t paragraph of Section 9
of the Federal Reserve Act, which provides that the Federal Reserve Board may
permit applying banks t o become members of the Federal Reserve System"sub.iect
to such conditions as i t may prescribe", the Federal Reserve Board w i l l prescribe the f o l l o w i n g conditions of membership f o r each bank or t r u s t company
h e r e a f t e r applying f o r admission t o the Federal Reserve System, in a d d i t i o n
to such other conditions as the Board may consider necessary or advisable i n
- 5 *
x-Wig-f
2 1 7
the particular case 1»
Except with the permission of the Federal Reserve Board, such bank or
company &hsll not cause or permit aoy change to be ins.de in the general
character of i t s assets or in the scope of the functions exercised by i t at
the time of admission to membership, such as w i l l tend to a f f e c t materially the
standard maintained at the time of i t s admission to the Federal Reserve System
and required as a condition of membership.
2»
Such batik or trust company shall at a l l times conduct i t s business
and exercise i t s powers with due regard to the s a f e t y of i t s customers.
3«
Such bank or trust company shall not reduce i t s capital stock except
with the permission of the Federal Reserve Board.
4-
Such bank or trust company shall not, except after applying for and
receiving the permission of the Federal Reserve Board, e s t a b l i s h any branch,
agency or additional o f f i c e .
5-
Such bank or trust company,except after applying for and receiving
the permission of the Federal Reserve Board , shall hot cons olid ate with or
absorb or purchase the assets of any other bank or branch bank for the purpose
of Operating such batik or branch bank as a branch of the applying bank;
nor
directly or i n d i r e c t l y , through a f f i l i a t e d corporations or otherwise, acquire
an interest in another bank in
such other bank;
excess of 20 per cent of the capital stock of
nor d i r e c t l y or indirectly promote the establishment
new bank for the purpose of acquiring such an i n t e r e s t i n i t ;
of any
nor make any
arrangement to acquire such an i n t e r e s t .
6.
Such bank or trust company shall reduce t o , and maintain within, the
l i m i t s prescribed by the laws of the State in which i t i s located, any loan
which may be in excess of such l i m i t s .
7.
Such bank or trust company shall reduce to an amount equal to 10 per
cent of i t s capital and surplus a l l balances in excess thereof, i f a.ny, which
-6-
-
I-U01|-a
818
a r e carried, with banks or t r u s t companies which a r e not members of the Federal
Reserve System, and s h a l l at a l l times maintain such balances within such
limits.
o.
Such Dank or t r u s t company may accept d r a f t s and b i l l s of exchange
drawn upon i t of any c h a r a c t e r permitted by the laws of the S t a t e of i t s i n corporation;
but the aggregate amount of a l l acceptances outstanding a t any
one time s h a l l not exceed the l i m i t a t i o n s imposed oy Section 13 of t h e
Federal Reserve Act, that i s , the aggregate amount of acceptances outstanding
a t any one time which are drawn for the purpose of f u r n i s h i n g d o l l a r exchange.
in countries s p e c i f i e d by the Federal Reserve Board s h a l l n e t exceed 50 per
cent of i t s c a p i t a l and s u r p l u s , and the aggregate amount of a l l other acceptances, whether domestic .or f o r e i g n , outstanding at any one time s h a l l not
exceed 50 per cent, of i t s c a p i t a l and s u r p l u s , except t h a t the Federal Reserve Board, upon the a p p l i c a t i o n of such bank or t r u s t company, nay i n c r e a s e
t h i s l i m i t from 50 per cent t o 100 per cent of i t s c a p i t a l and s u r p l u s :
Provided, however, that in no event s h a l l t h e aggregate amount of domestic
acceptances outstanding a t any one time exceed 56 per cent of the c a p i t a l and
surplus of such bank or t r u s t company.
9. The Board of d i r e c t o r s of s a i d bank or t r u s t company s h a l l adopt a
r e s o l u t i o n a u t h o r i z i n g the interchange of r e p o r t s and information between t h e
Federal Reserve Bank of the d i s t r i c t in which such bank or t r u s t company i s
located and the banking a u t h o r i t i e s of the S t a t e in which such bank i s located..
Each bank or t r u s t company applying f o r membership her s o f t e r w i l l b-e r e quired to agree to tne above c o n d i t i o n s and any other c o n d i t i o n s which the
Board may p r e s c r i b e , p r i o r to tne admission of such bank or t r u s t coup any t o
tne FecWfal Reserve System-
' " »' " '
"
' "'' ' ' '
V '
, ? 219
.
) SECTION V.
FERMI SSI ON NECESSARY PRIOR TO MAKINGCHANGES IN ASSETS OR SCOPE OF FUNCTIONS -
Each bank or trust company hereafter admitted to the Federal Reserve System
and each bank or trust company which has heretofore been &##mittad subject to Con. No.
u i t i o n / 1 of Section IV or subject to aziy similar condition, shall through the Federal Reserve Agent, request the permission of the Federal Reserve Board prior to
taking any action which may result i n a change in the general character of i t s
assets or in the scope of the
functions exercised by i t at the time of admission
to membership, such as w i l l tend to a f f e c t materially the standard maintained at
the time of i t s admission to the Federal Reserve System and required as a condition
of membership.
The Board considers that among the actions which may r e s u l t in changes of the
kind referred to in t h i s Section are the
establishment of branches, agencies or
additional o f f i c e s and consolidations or mergers with, or purchases of the assets
of other banks or branch banks.
SECTION VI. PRINCIPLES GOVERNING ESTABLISHMENT OF BRANCHES.
In passing upon applications by State banks a.nd trust companies for permission
to establish branches, agencies or additional o f f i c e s , urjder Condition No. 4 of
Section IV, or unoar any similar condition which may have been prescribed by .the
Federal Reserve Board and agreed to by any bank or trust company heretofore admitted
to the Federal Reserve System, the Federal Reserve Board w i l l observe the following
principles 1-
The Federal Reserve Board w i l l as a general principle r e s t r i c t the
establishment of branches, agencies or additional o f f i c e s by such barks or
X
i
-
„
"
x.Ucv,-»
220
trust companies to the c i t y of l o c a t i o n of the parent bank and the
t e r r i t o r i a l area within the state contiguous thereto, as said t e r r i t o r y
(1)
has been defined in the Board's resolution of November 7, 1923, excepting
in instances where the State banking authorities have c e r t i f i e d and the
Board finds that public necessity and advantage render a departure from
the principle necessary or desirable.
.2.
The Federal Reserve Board as a ggneral principle w i l l not consider
an application by such bank or trust company f o r a permit to e s t a b l i s h %•
branch, agency, or additional o f f i c e , unless the a u t h o r i t i e s of the State
in which such bank i s located regularly make simultaneous examinations of
the head o f f i c e and a l l branches, agencies or additional o f f i c e s of such
bank, nor unless the examinations made by the State authorities are, in the
judgment of the Federal Reserve Board, of such character in every respect
as to furnish the Federal Reserve Board with s u f f i c i e n t information a s to
the condition of such bank and the character of i t s management t o enable the
Federal Reserve Board f u l l y to protect the i n t e r e s t s of the public.
3.
.
The Federal Reserve Board as a general principle w i l l require each
bank or trust company which e s t a b l i s h e s or maintains tranches, agencies or
additional o f f i c e s to maintain for i t s e l f and such branches, agencies or additional o f f i c e s an adequate ratio of capital to t o t a l l i a b i l i t i e s and an
adequate percentage of i t s t o t a l investments in the form of paper or sec u r i t i e s e l i g i b l e for discount or purchase by Federal Reserve Banks.
( l ) The teym "contiguous territory" is defined in the Board's resolution of
November J, 1923, t o mean' "The territory of a c i t y or town whose corporate
l i m i t s at some point coincide with the corporate l i m i t s of the city or tewn
in which the parent bank i s located."
'
F
-94.
221
X-4019-3
The Federal Reserve Board w i l l not consider any application
to e s t a b l i s h a branch, agency or additional o f f i c e u n t i l the State
banking a u t h o r i t i e s have appr^ed the establishment of such branch,
agency or additional o f f i c e , and the Directors or Executive Committee
and the Federal Reserve Agent of the Federal Reserve Bank of the d i s t r i c t in which such bank or trust company i s located have made a
report upon the f i n a n c i a l condition of the applying bank or trust
company, the general character of i t s management, what e f f e c t the
establishment of such branch, agency or additional o f f i c e would have
upon other banks or branches in the l o c a l i t y in which i t i s to be
established, and whether, in their opinion, i t would be in the i n t e r e s t of the public in such l o c a l i t y , together with t h e i r recommendation as to whether or not the application should be granted.
5-
^hen permission i s granted for the establishment of such
branch, agency or additional o f f i c e same shall be established and
opened for business within s i x months a f t e r such permission i s granted.
If such branch, agency, or additional o f f i c e i s not established within
such time the permit s h a l l become void, unless the time i s extended
by the Board fo% good cause.
J 222
. ~1Cu
6.
..
X-U01^-a
The Federal Reserve Board reserves the right to cancel
any permit which i t may grant t h e r e a f t e r to e s t a b l i s h any branch,
agency or additional o f f i c e whenever i t shall appear, a f t e r hearing,
that such branch, agency or additional o f f i c e , i s being operated in
a manner contrary to the i n t e r e s t of the public in the l o c a l i t y in
which i t i s established.
SECTION VII.
POWRfe AND RESTRICTIONS.
Every State bank or trust company while a member of the Federal R e serve System 1.
Shall retain i t s f u l l charter and statutory r i g h t s as a State bank
or trust company, subject to the provisions of the Federal Reserve Jict, to
the regulations of the Federal Reserve Board, and to the conditions prescribed by the Federal Reserve Board and agreed to by such State bank or
trust company prior to i t s admission.
2«
Shall maintain such improvements and changes in i t s banking practice
as may have been s p e c i f i c a l l y required of i t by the Federal Reserve Board
as a condition of i t s admission and shall not lower the standard of banking
then required of i t ;
3-
Shall enjoy a l l the p r i v i l e g e s and observe a l l those requirements
of the Federal Reserve Act and of the regulations of the Federal Reserve
Board made in conformity therewith which are applicable t o State banks and
trust companies which have become member banks; and
Shall comply a t a l l times with any and a l l conditions of membership
prescribed by the Federal Reserve Board at the time of the admission of such
member bank t o the Federal Reserve System.
F
—11—
SECT I Oil VIII.
223
X—401^1-a
EXAMINATIONS AND RJPORTS,
Every State bank or trust company, while a member of the Federal Reserve
System, shall be subject to examinations made by direction of the Federal Reserve Board or of the Federal Reserve Bank, by examiners s e l e c t e d or approved
by the Federal Reserve Board.
.In order to avoid duplication, examinations of State bamcs and trust com#
panies cade by State authorities will be accepted in l i e u of examinations by
examiners s e l e c t e d or approved by the Board wherever these are satisfactory to
the directors of the Federal Reserve ?aak, and examiners from the s t a f f of the
Board or of the Federal Reserve Banks w i l l , whenever d e s i r a b l e , be designated
by the Board to act with the examination s t a f f of the State in order that uniformity in the standard of examination may be assured.
Every State bank or trust company, while a member of the Federal Reserve
System, s h a l l be required to make in each year not les» than three reports of
condition ©£ F, R, B, Form 105.
Such reports shall be made to the Federal Re-
serve Bank of i t s d i s t r i c t on c a l l of such bank, on dates to be f i x e d by the
Federal Reserve Board.
They shall also make semiannual reports of earnings
and dividends on F. R. B. Form 107,
As • dividends nay be declared from time to
time, each State bank or trust company member s h a l l also furnish to the
Fed-
eral Reserve Bank of i t s d i s t r i c t a special n o t i f i c a t i o n of dividend declared
on F. R. B. Form 107a.
this regulation.
F. R> P. Forms IO5, 107, and 107a are made a part of
924
FEDERAL RESERVE BOARD
WASHINGTON
<
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
SUBJECT:
,
X-4022
"
CONDITIONS OF MEMBERSHIP,
Bear S i r s :
This i s to advise you that the Federal Reserve Board
has had under consideration your application f o r
shares of the c a p i t a l stock of the Federal Reserve Bank of
and i s ready t o approve the same upon the following conditions;
1.
Except with the permission of the Federal Reserve Board,
- you s h a l l not cause or permit any change t o be made in
the general character of your a s s e t s or in the scope of
the functions exercised by you at the time of admission
to membership, such as w i l l tend to a f f e c t materially
the standard maintained at the time of your admission t o
the Federal Reserve System and required as a condition
of membership.
2.
You s h a l l at a l l times conduct your business and exercise
your powers with due regard to the s a f e t y of your customers.
3.
You s h a l l not reduce your c a p i t a l stock except With the
permission of the Federal Reserve Board.
4*
You s h a l l n o t , except after applying f o r and receiving the
permission of the Federal Reserve Board, e s t a b l i s h any
branch, agency or additional o f f i c e .
5.
Except a f t e r applying for and receiving the permission of
the Federal Reserve Board, you s h a l l not consolidate with
, or absorb or purchase the a s s e t s of any other bank or branch
bank f o r the purpose of operating such bank or branch tank
as a branch of the applying bank; nor d i r e c t l y or i n d i r e c t l y ,
through a f f i l i a t e d corporations or otherwise, acquire an
i n t e r e s t in another bank i n excess of twenty per cent of the
c a p i t a l stock of such other bank; nor d i r e c t l y or i n d i r e c t l y
promote the establishment of any new bank for the purpose of
acquiring such an i n t e r e s t in i t ; nor make any arrangement
to acquire such an i n t e r e s t .
-
2
-
X-4022
You shall reduce t o , and maintain within, the l i m i t s prescribed by the laws of your S t a t e , any loan which nay be
in excess of such l i m i t s .
You s h a l l reduce to an amount equal to ten per cent of your
c a p i t a l and surplus a l l balances in excess thereof, i f any, '
which are carried with banks or trust companies which are
not members of the Federal Reserve System, and shall at a l l
times maintain such balances within such l i m i t s .
You may accept d r r f t s and b i l l s of exchange drawn upon you
of any character permitted by the lams of the State of your
incorporation; but the aggregate amount of a l l acceptances
outstanding at any one time s h a l l not exceed the l i m i t a t i o n s
imposed by Section 13 of the Federal Reserve Act, that i s ,
the aggregate amount of acceptances outstanding at any one
time which are drawn for the purpose of furnishing d o l l a r
exchanger in countries s p e c i f i e d by the Federal Reserve Board
shall not exceed f i f t y per cent of your c a p i t a l and surplus,
and the aggregate amount of a l l other acceptances, whether
domestic or foreign, outstanding at any one time s h a l l not
exceed f i f t y per cent of your capital and surplus, except
that the Federal Reserve Board, upon your application, may
increase this, l i m i t from f i f t y per cent to one hundred per
cent of your c a p i t a l and surplus: provided, however, that
in no event s h a l l the aggregate amount of domestic acceptances outstanding at any one time exceed f i f t y per cent
of your c a p i t a l and surplus.
Your Board of Directors s h a l l adopt a resolution authorizing
the interchange of reports and information between the Federal Reserve Bank of your d i s t r i c t and the banking authori t i e s of the State in which you are located.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4023
April 12, 1924.
SUBJECT:
EXPENSE MAIN LINE, Leaedd Wire System,
March, 1924.
Bear Sir
Enclosed herewith you w i l l find two mimeograph
statements, X-4023-a and X-4023~b, covering in d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of March, 1924.
Please credit the amount payable by your bank
in the general account, Treasurer, U. S . , on your books,
and issue C/B Form 1, National Banks, for account of
"Salaries and Expenses, Federal Resertee Board, Special
Fund", Leased Wire System, sending duplicate C/D t o Federal Reserve Board.
Very truly yours,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL BANKS.
(EXCEPT CHICAGO)
I-S.VW f
X-U023-d.
HEPORT SHOWING CLASSIFICATION AND NUM32B OF W02DS
TBANSMITTED 0VE2 MAIN LINE OF TEJE FELEIiAL .RESERVE
LEASED WISE SYSTEM FOR TEE MONTH OF MARCH, 1924.
Percent of
Fed. iie-s.
Total Bank
Bank; Business Business (*)
^rom
Boston
New York
Philadelphia
Cleveland.
llichrrond.
Atlanta.
Chicago
S t . Louis
Minneapolis
ICansa.s City
Dallas
San Francisco
TOTAL
Treasury
Sept.
Business
War
Finance Corp.
Business
Total
37,574
250,087
53,303
39,399
73,454
37,103
144,792
97,296
53,459
92,919
72,222
136,032
3H6\
21.05
4.4g
7-57
b.18
7-33
12.19
8.19
4.5O
7-32
6.03
11.45
6,317
14,235
3,134
7,071
6,327
7,977
11,048
3,322
4,393
3,175
5,704
15,514
43,891
264,372
61,437
96,970
79,731
95,030
155,840
105,613
58,357
101,094
77,926
151,546
1*188,140
100.009,
103,772
1,291,912
Board
283 .034
102,258
155
335,447
Total
1,471,174
206,030
155
1,677,359
Percent of Total
87.71%,
12.23>
.0l£
B^r^L Business 1,471,174 words or 37«72'>
Treasury Dept. 206.010
"
« 12.28%
TOTAL
1,677,204
100.00#
(*) These percentages us 3d. in c a l c u l a t i n g the
pro rata, share of leased wire expenses a.s
shown on the accompanying statement (X-4023-b)
FEDERAL BESERVE BOARD,
Washington, D. C.
April 12, 1924.
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM MARCH, 1924.
Name of Bank
Operators'
Salaries
Boston
$ 250.00
NevrTork
1,324.95
Philadelphia
. 200.00
Cleveland
388.00
Richmond
315.00
A. t l a n t a
262.50
Chicago
(#) 4 , 9 0 6 . 5 3
St» Louis
292.38
Minneapol i s
284.33
Kansas C i t y
346,6s
Dallas
251.00
San F r a n c i s c o
380.00
F e d e r a l Res* Board- -TOTAL
/J£\
'#/
(&}
(*)
(A)
Total
Expense
$
$
-
$
-
- $16,753-48
250,00$
1,324.95
200.00
388.00
315.00
262.50
4,906.53
292,3s
284.33
346.6s
251.00
Credits
Payable t o
Federal
Reserve
Board
671.54. $ 250.00
$
421.54
4,473.42 1,324,95
3,142.47
952,06
200.00
752,06
1,60S.73
388.00
1,220.73
1,313.34.
315.00
998.34
1,557-73
262.50
1,295.23
2,590.5^ 4,906.53 (*) 2,315.99
1,740.49
292.3s
i,44s.11
956.31
284.33
671.98
1,661.86
346.6s
1,315.1s
1,292.09
251.00
1,041.09
2
> 3 3 - 2 S ^ 380.00
2.09.28
$25,954.85 $21,251.39 $9,201.37
$14,366.01
U i 4.70?.46
(&) 2.315.99
f T J
,
$21,251.39
$12,050.02
Includes s a l a r i e s of Washington o p e r a t o r s *
An.ou.nt r e i m b u r s a b l e t o Chicago,
Credit
Received $3.46 from War Finance Corporation a m $4,700.00
from Treasury Department covering b u s i n e s s f o r month of March 1924,
$9,201,37
Operators 1 Wire
Overtime
Rental
Pro Rata
Share of
Total
Expehse
X-4023-b
329
Revised Draft of
PROPOSED REGULATION J .
Series of ig24
(Superseding Regulation J of 1920)
X-4025
CHECK CLEARING AND COLLECTION.
SECTION I .
STATUTORY PROVISIONS.
Section 16 of the Federal Reserve Act authorizes the Federal Reserve Board to require each Federal Reserve Bank to exercise the functions
of a clearing house for i t s member banks, and Section 13 of the Federal
Reserve Act, as amended by the act approved June 21, 1917, authorizes each
Federal Reserve Bank to receive from any nonmember bank or trust company,
s o l e l y for the purposes of exchange or of c o l l e c t i o n , deposits of current
funds in lawful money, national-bank notes, Federal Reserve notes, checks
and drafts payable upon presentation, or maturing hotes and b i l l s , provided
such nonmember bank or trust company maintains with i t s Federal Reserve
Bank a balance s u f f i c i e n t to o f f s e t the items in transit held for i t s account by the Federal Reserve Bank,
SECTION I I .
GENERAL REQUIREMENTS,
In .pursuance of the authority vested in I t uhder these provisions of
law, the Federal Reserve Board, desiring to afford both to the public and
to the various banks of the country a direct, expeditious, and economical
system of check c o l l e c t i o n and settlement of balances, has arranged to
have each Federal Reserve Bank exercise the functions of a clearing house
and c o l l e c t checks for such of i t s member banks as desire to a v a i l themselves of i t s p r i v i l e g e s and for such nonmember State banks and trust
companies as may maintain with the Federal Reserve Bank balances s u f f i c i e n t
to qualify them under the provisions of section 13 to send items to Federal
Reserve Banks for purposes of exchange or of c o l l e c t i o n .
Such nonmember
State banks and trust companies w i l l hereinafter be referred to as nonmember
clearing banks.
Each Federal Reserve Bank shall exercise the functions of a clearing
house and c o l l e c t checks under the general terms and conditions hereina f t e r set f o r t h .
SECTION I I I .
CHECKS RECEIVED FOR COLLECTION.
( l ) Each Federal Reserve Bank w i l l receive at par from i t s member
banks and from nonmember clearing banks in i t s d i s t r i c t , checks drawn
lA check i s generally defined as a draft or order upon a bank or banking
house, purporting to be drawn upon a deposit of funds, f o r the payment
a t a l l events of a certain sum of money to the order of a certain person
therein named, or to him or h i s order, or to bearer, and payable on demand.
8 3 0
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X-4025
on a l l member and nonmember clearing banks, and checks drawn on a l l other
nonmember banks which are c o l l e c t a b l e at par in funds acceptable to the
Federal Reserve Bank of the d i s t r i c t in which such nonmember banks are l o cated .
(2) Each Federal Reserve Bask w i l l receive at par from other Federal
Reserve Banks, and from a l l member and nonmember clearing banks in other
Federal Reserve D i s t r i c t s which are authorized to route d i r e c t for the
credit of their accounts with their respective Federal Reserve Banks,
checks drawn on a l l member and nonmember clearing banks of i t s d i s t r i c t ,
and checks drawn on a l l other nonmember banks of i t s d i s t r i c t which are
collectable at par i n funds acceptable to t h e c o l l e c t i n g Federal Reserve
Bank.
(3) No Federal Reserve Bank shall receive on deposit or for c o l l e c t i o n any check drawn on any nonmember bank which cannot be collected
at par in funds acceptable to the Federal Reserve Bank of the d i s t r i c t i n
which such nonmember bank i s located.
SECTION IV.
TIME SCHEDULE AND AVAILABILITY OF CREDITS,
(1) Each Federal Reserve Bank will publish a time schedule showing
the time at which any item sent to i t w i l l be counted as reserve and become available for withdrawal or other use by the sending bank. For a l l
checks received, the sending bank w i l l be given immediate c r e d i t , or deferred c r e d i t , i n accordance with such time schedule, and as provided
below.
(2) For a l l such checks as are received for immediate credit i n
accordance with such time schedule, inmddiate c r e d i t , subject to f i n a l
payment, w i l l be given upon the books of the Federal Reserve Bank at f u l l
face value i n the reserve account or clearing account upon day of rec e i p t , and the proceeds w i l l a t once be counted as reserve and Become a v a i l able for withdrawal or other use by the sending bank.
(3) For a l l such checks as are received for deferred credit in accordance with such time schedule, deferred, c r e d i t , subject to f i n a l payment, w i l l be entered, upon the books of the Federal Reserve Bank at f u l l
face value, but the proceeds w i l l not be counted as reserve nor become a v a i l able for withdrawal or other use by the sending bank u n t i l such time as
may be s p e c i f i e d in such time schedule, at which time credit w i l l be transferred from the deferred account to the reserve account or clearing account
subject to f i n a l payment and w i l l then be counted as reserve and become
available for withdrawal or other use by the sending bank•
SECTION V.
TERMS OF COLLECTION.
The Federal Reserve Board hereby authorizes^ and each member and
nonmember clearing bank which sends checks to a Federal Reserve Bank for dep o s i t or c o l l e c t i o n shall by such action be deemed to authorize, the Federal Reserve Banks to handle such checks subject to the following terms
and conditions:
9 3 1
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X-42C5
(1) A Federal Reserve Bank w i l l a c t as agent only and w i l l
assume no l i a b i l i t y except f o r i t s own negligence and i t s guaranty of
p r i o r indorsements.
(2) A Federal Reserve Bank may present such checks f o r payment
or send such checks f o r c o l l e c t i o n d i r e c t to the bank on which they a r e
drawn or a t which they are payable, or in i t s d i s c r e t i o n may forward them
to another Agent with a u t h o r i t y t o present them f o r payment or send them
f o r c o l l e c t i o n d i r e c t to the bank on which they a r e drawn or a t which they
a r e payable.
A Federal Reserve Bank may in i t s d i s c r e t i o n and at i t s option^ e i t h e r d i r e c t l y or through an agent, accept e i t h e r cash or bank
d r a f t s in payment of or in remittance f o r such checks and s h a l l not be
held l i a b l e f o r any l o s s r e s u l t i n g from the acceptance of bank d r a f t s i n
l i e u of cash, nor f o r the f a i l u r e of the drawee bank or any agent to r e mit f o r such checks, nor f o r the nonpayment of any bank d r a f t accepted i n
payment or a s a remittance from t h e drawee bank or any a g e n t .
(4) Checks received by a Federal Reserve Bank on i t s member or nonmember c l e a r i n g banks w i l l o r d i n a r i l y be forwarded or presented d i r e c t t o
such banks, and such banks w i l l be required t o r e m i t , o r pay t h e r e f o r a t
par i n cash or bank d r a f t acceptable to the c o l l e c t i n g Federal Reserve Bank,
or a t the option of such Federal Reserve Bank to a u t h o r i z e such Federal Reserve Bank to charge t h e i r r e s e r v e accounts or c l e a r i n g a c c o u n t s .
( 5 ) Checks received by a Federal Reserve Bank payable i n other
d i s t r i c t s w i l l be forwarded f o r c o l l e c t i o n upon the terms and conditions
herein* provided to the Federal Reserve Bank of the d i s t r i c t i n which such
checks a r e payable.
(6) The amount of any check f o r which payment in a c t u a l l y and
f i n a l l y c o l l e c t e d funds i s not received s h a l l be charged back t o the
forwarding bank, r e g a r d l e s s of whether or not the check i t s e l f can be
returned.
*
• SECTION VI.
PENALTIES FOR DEFICIENCIES IN RESERVES.
(a) S t a t u t o r y p r o v i s i o n s . - Section 19 of the Federal Reserve Act provides t h a t The r e q u i r e d balance c a r r i e d by a member bank with a Federal
Reserve Bank may, under the r e g u l a t i o n s and s u b j e c t t o such p e n a l t i e s
as may be p r e s c r i b e d by the Federal Reserve Board, be checked a g a i n s t
and withdrawn by such member bank f o r the purpose of meeting e x i s t i n g
l i a b i l i t i e s ; Provided, however, That no bank s h a l l a t any time male new
loans or s h a l l pay any dividends u n l e s s and u n t i l the t o t a l balance r e quired by law i s f u l l y r e s t o r e d .
(b) Computation of r e s e r v e s . - Items can not be counted as p a r t
of the minimum r e s e r v e balance t o be c a r r i e d by a member bank w i t h
i t s Federal Reserve Bank u n t i l such time as may be s p e c i f i e d in the
a p p r o p r i a t e time schedule r e f e r r e d to i n Section IV. If a member bank
draw a g a i n s t items b e f o r e such time, t h e d r a f t w i l l be charged a g a i n s t
i t s r e s e r v e balance i f such balance be s u f f i c i e n t in amount to pay i t ;
but any r e s u l t i n g impairment of reserve balances w i l l be s u b j e c t t o a l l
the p e n a l t i e s provided by the Act.
232
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X-4025
(c) Basic penalty. - Inasmuch as i t i s e s s e n t i a l that the law i n
respect to the maintenance by member banks of the required, minimum r e serve balance s h a l l be s t r i c t l y complied with, the Federal Reserve Board,
under authority vested i n i t by section 19 of the Federal Reserve Act,
hereby prescribes a basic penalty f o r d e f i c i e n c i e s i n reserves according
to the following r u l e s :
1. D e f i c i e n c i e s in reserve^ balances of member banks i n central
reserve and reserve c i t i e s w i l l be computed on the b a s i s of average d a i l y
net deposit balances covering a weekly period of seven days. D e f i c i e n c i e s
in reserve balances of other member banks w i l l be computed on the b a s i s
of average d a i l y net deposit balances covering a semi-monthly period.
2. Penalties for d e f i c i e n c i e s in reserves w i l l be assessed, monthly
on the basis of average d a i l y d e f i c i e n c i e s during each of the reserve
computation periods ending in the preceding month.
3* A b a s i c rate of 2 per cent per annum above the Federal Reserve
Bank discount rate on 90-day commercial paper w i l l be assessed as a
penalty on d e f i c i e n c i e s i n reserves of member banks.
(d) Progressive penalty. - The Federal Reserve Board w i l l also prescribe for any Federal Reserve D i s t r i c t , upon the application of -the
Federal Reserve Bank of that d i s t r i c t , an additional progressive penalty
for continued d e f i c i e n c i e s in r e s e r v e s , i n accordance with the following
rules.
1. When a member bank in a central reserve or reserve c i t y has had
an average d e f i c i e n c y in reserves for s i x consecutive weekly periods,
a progressive penalty, increasing at the r a t e of one-fourth of 1 per cent
for each week thereafter during which the average reserve balance i s def i c i e n t , w i l l be assessed on weekly d e f i c i e n c i e s u n t i l the required r e serve has been restored and maintained for four consecutive weekly period 9,
provided that the maximum penalty charged w i l l not exceed 10 per cent.
2. When a member bank outside of a central reserve or reserve c i t y
has had an average d e f i c i e n c y i n reserves for three consecutive semimonthly periods, a progressive penalty, increasing a t the r a t e of one-half
of 1 per cent for each half month thereafter during which the average r e serve balance i s d e f i c i e n t , w i l l be assessed on semirmonthly d e f i c i e n c i e s
u n t i l the required reserve has been restored and maintained for two consecutive semi-monthly periods, provided that the maximum penalty charged
w i l l not exceed 10 per cent.
SECTION VII.
OTHER RULES AND REGULATIONS.
Each Federal Reserve Bank s h a l l also promulgate rules and regulations
not inconsistent with the terms of the law or of this r e g u l a t i o n , governing
the d e t a i l s of i t s check clearing and c o l l e c t i o n operations. Such rules
and regulations shall be s e t f o r t h by the Federal Reserve Banks i n their
l e t t e r s of instruction to their member and nonmember clearing banks and
shall be binding upon any member or nonmember clearing bank which sends
any check to such Federal Reserve Bank f o r c o l l e c t i o n or to any other
Federal Reserve Bank for the account of such Federal Reserve Bank for
collection*
• »»»«•,.»
<ni o
X-U027
THE AMENDMENTS TO THE FEDERAL RESERVE ACT IN THE MCFADDEN BILL REFERRING TO
BRANCH BANKINGThe McFadden B i l l (H. R. 6855) has been announced as a b i l l drawn for the
purpose of l i b e r a l i z i n g the National Banking Act, so that National banks may no
longer be prevented by law from performing banking functions regarded as useful
and sound i n principle which State banks have long been performing.
The Comptroller
of the Currency has noted the f a c t that State banks have s t e a d i l y gained in numbers
and in resources while National banks have f a i l e d to maintain the same rate of
growth.
Since January 1 , 1913, he t e l l s us 173 National banks, each with capital
of over $100,000 have given up their National charters and taken out State charters.
These f a c t s are indisputable and in so far as the b i l l confines i t s e l f to i t s
announced purpose I have no c r i t i c i s m to make of i t , further than to s t a t e that
some of the departures from commercial banking need very careful consideration.
One of the l i b e r a l i z i n g provisions of the b i l l has to do with branch banking within
c i t y l i m i t s , and with this provision the Federal Reserve Board i s unanimously in
agreement.
I think I may f a i r l y add that the members of the Board regret that this
l i b e r a l i z i n g feature of the b i l l does not go to the f u l l limit of permitting the
establishment of branches in a l l c i t i e s l a r g e enough to have need for outlyifag
banking f a c i l i t i e s , as a matter of right and without regard to the l i m i t a t i o n s of
State laws.
I t would seem that the National banks might sometimes be permittedto
take the lead in a matter of sound barking vdaich every competent banker and every
economist approvesSo much for the l i b e r a l i z i n g , or modernizing features of the b i l l , designed
to permit banks to transact l e g i t i m a t e business along sound l i n e s by modern methods.
We can a l l get behind and support these f e a t u r e s , these amendments to the National
Banking Act.
But the b i l l doesn't stop there.
I t seeks to amend the Federal Re<*
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X-4C27
serve Act, and here i t becomes r e p r e s s i v e and r e a c t i o n a r y .
Because many bankers a r e
opposed to any f u r t h e r l i b e r a l i z i n g of the National Banking Act t h e b i l l seeks to
deprive s t a t e bank members of the Federal Reserve System of some of t h e i r c h a r t e r
r i g h t s guaranteed them under the Act of June 21, 1917, p a r t i c u l a r l y with r e f e r e n c e
to branch banking.
Certain s t a t e s permit and even encourage banks of s u f f i c i e n t
c a p i t a l to e s t a b l i s h branches beyond c i t y l i m i t s , on the theory t h a t t h e farmer
i s as much e n t i t l e d to the best and s a f e s t banking s e r v i c e a s the c i t y dweller i s .
Instead of advocating the same p r i v i l e g e s f o r National banks t h a t these s t a t e s give
t h e i r S t a t e banks the Comptroller of the Currency has entered i n t o an e l a b o r a t e
argument a g a i n s t branch banking in general, an argument which would, if sound,
u t t e r l y destroy h i s c i t y branch banking recommendation i f i t were not f o r the development of a very ingenious theory of home r u l e .
The s t a t e s may, according t o t h i s
theory, decide f o r themselves whether banks s h a l l or s h a l l not have branches w i t h i n
c i t y l i m i t s , but they must not be allowed t o decide whether any branch banks s h a l l
e x i s t outside of t h e l a r g e c i t i e s - i f t h e i r banks a r e t o remain in the Federal
Reserve System.
There i s n ' t an economist i n the country who would agree with the arguments of
the Comptroller.
Some 322 independent banks have f a i l e d in t h i s country since the
1st of January t h i s y e a r ( t o .April 11th). more than t w o - t h i r d s of them banks with a
capit a l l e s s than $50,000, and more than seven-eighths of them banks with a c a p i t a l l e s s than $100,000.
With f a i l u r e s s t i l l running a t the r a t e of nearly 100 a
month an unprejudiced o u t s i d e r might be pardoned f o r t h i n k i n g t h a t u n i t banking
r a t h e r than branch banking i s a t present in most need of d e f e n s e .
The Comptroller bases h i s arguments on two assumptions, both demonstrably
erroneous.
He assumes, f i r s t , t h a t branch banking In t h i s country i s wholly a Aig
-*3-
X-U027
£35
c i t y proposition - that the banks i n the big c i t i e s w i l l e s t a b l i s h branches throughout each s t a t e i f allowed to do so - and, second, that country branch banking,that
i s branch banking outside of the big c i t i e s , i s "fostered and protected" by the
Federal Reserve System.
The f i r s t of these assumptions the Comptroller partly d i s c r e d i t s himself i n
h i s statement that he has never yet discovered a big banker who wished to extend
h i s i n s t i t u t i o n beyond c i t y l i m i t s .
1 think that i s true of the b i g bankers in
Chicago and in most of the great c i t i e s of the East*
They already do a national
business, r e c e i v i n g deposits from and making loans to large commercial and manufacturing i n s t i t u t i o n s throughout the country, without branches.
Furthermore they
receive deposits from, make loans to, and exercise a c e r t a i n amount of control
over, thousands of small banks a l l over the country.
It i s doubtful i f they would
gain enough more to compensate them f o r the added r e s p o n s i b i l i t y i f they were to
e s t a b l i s h branches outside c i t y l i m i t s .
But the error of the Comptroller's a s -
sumption i s f u l l y demonstrated not by conjectures or by the statements of b i g
bankers but by the f a c t s of the development of branch banking in the s t a t e s which
have permitted i t .
Although the laws of California have provided d i s t i n c t l y f o r
state-wide branch banking since I9O9 only one i n s t i t u t i o n has r e a l l y spread i t s
branches throughout the State, one other has branches covering about oneithird of
the State and two others cover t e r r i t o r y that i s hardly more than suburban or contiguous.
The overwhelming majority of the i n s t i t u t i o n s engaging in branch banking
i n California are country banks not located i n any of the large c i t i e s .
Through-
out the Southern s t a t e s branch banking i s a country bank proposition, with head
o f f i c e s generally not even in towns large enough to be c a l l e d c i t i e s .
The bank
having the l a r g e s t number of branches in Alabama (about 15 branches) i s not a
- 236
e
-.4t Birmingham bank, but a bank at Decatur.
X-U027
The largest branch banking system in
" Mississippi, with about lU branches, has i t s headquarters at Grenada, and the
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•
•
•
v':'largest branch banking system i n Maryland has i t s head o f f i c e not i n Baltimore or
;
In Annapolis, or in any town large enough t o be c a l l e d a c i t y , but in Cambridgei
t?" $»•'Alabama, Georgia, Louisiana, Maryland, Virginia, North Carolina and South
^ Carolina there are I3U banks operating 319 branches, l e s s than three branches t o
F; •
' •
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, a bank, and l e s s than a dozen of these banks are domiciled i n the larger c i t i e s .
h'
''
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Further p o s i t i v e proof of the error of the assumption that branch banking i s
t
ti.
a c i t y monster which most be chained up l e s t i t spread i t s t e n t a c l e s over the
-
5 whole country i s found in connection with the f a c t s which disprove the Comptroller 1 s
#
.
:
fi second assumption, v i z : that branch banking i s "fostered and protected" by the
r Federal Reserve System.
Of the 13^ banks which operate branches i n the Southern
s t a t e s mentioned only 20 are member banks, leaving l l U non-members, and these l l U
; non-members are operating 233 branches, or about 2 branches to each bank.
In Vir-
ginia there are 2 members operating 3 branches and 22 non-members with 29 branches.
The "head o f f i c e s " are located in such towns as Clintwood., Columbia, Gloucester,
Keller, Keysville, Louisa, Staunton, Tappahannock, Wbaana, Wakefield and Williamsburg.
Six banks in Richmond maintain brandies, but not one of them has more than 2
» branches and only one of them, the Richmond Trust Company, of which Mr. John Skelton
); Williams i s president, has a branch outside of the c i t y . On© bank i n Norfolk has 2
f
branches both outside the c i t y and one bank in Lynchburg has a branch at Bedford.
t
•
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'
Exactly the same conditions prevail in North Carolina and in Georgia, with the
single exception of the Citizens and Southern of Savannah, which has branches in
Atlanta and Macon.
In the s e c t i o n of Tennessee within the Atlanta Federal Reserve
r
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S
X-U027
D i s t r i c t there are 12 non-member banks operating 33 branches, and no member banks
with branches.
In the other end of the d i s t r i c t one member bank in Memphis has
branches, but they are inside the c i t y .
Certainly t h i s Southern development of branch banking i s not "fostered and
protected" by the Federal Reserve System, since i t i s nearly a l l outside the Sys; tem.
true.
Bat even in California, the great branch banking s t a t e , the same thing i s •
There are 88 state banks in that state maintaining branches, but only 19 of
them are members of the System, leaving 69 outside, and the outsiders are almost
'
a l l country banks.
«
It i s true of course that the member banks maintain the most
branches, but when i t comes to the question of being "fostered and protected" i t
should be said that the large branch banking systems, the Bank of I t a l y , the Pac i f i c Southwest Trust and Savings, and the Security Trust and Savings, have none of
tBem ever been large borrowers from the Federal Reserve System.
has borrowed and the other two only to carry Liberty bonds.
One of them never
During the strenuous
months of 1920 and 1921 i t may f a i r l y be said that these large branch banking ins t i t u t i o n s furnished a large share of the reserve funds which were loaned by the
Federal Reserve Bank of San Francisco to the independent unit banks.
The r e s t r i c t i v e amendments to the Federal Reserve Jct are, i t seems to me,
unfair, as they overthrow the guarantees under which the larger California State
banks, and many State hanks elsewhere were persuaded to j o i n the Reserve System.
We were w i l l i n g enough to invite them in and o f f e r them the guarantee of their charter rights when their funds were sorely needed, but now that the seas are.smooth
we propose to repeal the guarantees so far as branch banking i s concerned.
It $6t only seems to me unfair but from every, point of view unwise.
Every
economist favors branch banking as affording the best and safest means of extending
I"*
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X-4027
A
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banking accommod&tions t o agricultural sections and small communities. Professor
r
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o . M. W. Sprague begins an a r t i c l e on branch, banking in the Quarterly Journal of
?•«
.
Economics with these words:
'
"Upon few subjacts has the consensus of opinion of
both economists and f i n a n c i a l writers been mbre general than upon the advantages
of branch banking over a system of separate l o c a l banks.
I t s superiority in respect
,/ to safety, econoiry, the equalization of rates f o r loans, and the d i f f u s i o n of
f banking f a c i l i t i e s cannot be questioned."
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The economists generally agree that branch banking i s a matter of most concern
not to the b i g c i t i e s or t h e i r b i g banks, but t o t h i n l y s e t t l e d a g r i c u l t u r a l
% •
i communities.
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:
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They b e l i e v e that our present scheme of extending banking f a c i l i t i e s
5; to such communities by means of small weak independent banks, banks with a capital
•
•
of $5,000, $10,000, or even $25,000, i s unsafe for depositors and uneconomical,
; Taking i n t e r e s t r a t e s t o the farmers higher than necessary. Professor J . Laurence
l\ •
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'
.
Laughlin of Chicago University, one of the men who had a prominent part i n the preliminary work leading to the establishment of the Federal Reserve Act, declared in
1912 that "the maintenance of such conditions necessarily involves some rather
; serious s u f f e r i n g . "
Hasn't t h i s prediction been rather s t r i k i n g l y and p a i n f u l l y
'
.
•••
• .
v e r i f i e d by the great number of bank f a i l u r e s in the Northwest?
Most of the Comptrollers of the Currency have recommended branch banking in
r;:
r
some form, and nearly a l l of them have recognized i t s superiority e i t h e r as a
general proposition or under certain conditions to unit banking.
'
The f i r s t
.
'
Comptroller, Hugh McCullough, was himself the President of one of the most notable
branch banking systems i n the country, the Bank of Indiana,
Mr* Hepburn refers
t o t h i s bank as "an exemplary i l l u s t r a t i o n of the e f f i c i e n c y of branch banking as
: a x^stem."
Comptroller Eckles, whose administration f e l t the f u l l force of the
f339
-7-
X-UC27
Panic of 1S93 advocated the establishment by n a t i o n a l banks of branches i n p l a c e s
not having n a t i o n a l banks already e s t a b l i s h e d .
Comptroller Charles G. Dawes
who succeeded him recommended branch banking in p l a c e s with a population l e s s than
2000.
Mr. Dawes in an address t o Pennsylvania bankers in 1903 spoke a g a i n s t
"general domestic branch banking," but in the course of t h e address f r a n k l y admitted t h a t one of the advantages of branch banking would be lower i n t e r e s t r a t e s
to the farmers who grdw crops having a cash Value * Recent Comptrollers have r e commended branch banking w i t h i n c i t y l i m i t s as something a b s o l u t e l y necessary in
most of our great c i t i e s i n order t o save the National banks of t h e c i t i e s from
d e s t r u c t i o n by s t a t e bank competition.
Branch banking by counties was recommended
by some of them, and was recommended a l s o by the Federal Reserve Board i n I 9 I 8 .
In
i t s report f o r 1$22 the Board urged t h a t National banks be given the same p r i v i l e g e s
with regard t o branches t h a t s t a t e banks have been given i n t h e branch banking
states.
The l a s t recommendation i s the only one t h a t w i l l f u l l y meet the s i t u a t i o n , so
f a r as the competition of s t a t e banks i s concerned.
If t h i s cannot be c a r r i e d the
Committee might a u t h o r i z e branch banking by n a t i o n a l banks i n c i t i e s where the
s t a t e s l i m i t branch banking t o c i t i e s , and in counties where s t a t e s permit country
banks to e s t a b l i s h branches.
Such an amendment would g r e a t l y s t r e n g t h e n the country
banks i n a g r i c u l t u r a l s e c t i o n s , and would enable the Federal reserve banks t o deal
with well managed i n s t i t u t i o n s , i n s t e a d of small banks which o f t e n h a t e no f a i r
chance t o survive i n times of s t r e s s .
The argument t h a t branch banking i s monopolistic i s unsupported by any a c t u a l
evidence - t h e evidence on t h e other hand i s c l e a r l y t o t h e e f f e c t t h a t branch banking i n c r e a s e s competition.
I t i s t r u e t h a t the number of c h a r t e r e d banks in
10
g'
XU027
Canada, and the number of j o i n t stock banks in England and Scotland, have greatly decreased, but except in the largest c i t i e s there are more banks competing with each
other than b e f o r e . A recent Parliamentary investigation (19-3) into the question of
banking in i t s r e l a t i o n to agriculture in England contains t h i s statementt
"Finally, from the point of view of the agricultural community, i t
i s important to r e a l i z e that, notwithstanding the absorption of the
small country Banks, there i s , in f a c t , far keener competition for
rural business than ever before; while, in the matter of security to
depositors, the suralgamtion of the Banks has also been of very gxeat
advantage. The old private Banks were always heavily involved in the
fortunes of a r e s t r i c t e d area and this was a source of weakness at
times of l o c a l c r i s i s . The Joint Stock Banks spread t h e i r r i s k s over
a wider area and a greater range of industries, and can b e t t e r carry
periods of depression." (Report of the Committee on Agricultural
Credit, p. 2 2 ) .
Similar findings were made by a Canadian committee, which investigated credit
conditions in the Canadian northwest a year or so ago.
Furthermore Mr, Frank W,
Murphy and Mr. Castleman, a committee representing our own northwestern farmers,
t e s t i f i e d a few weeks ago that one of the advantages Canadian wheat growers had over
the wheat growers on our side of the l i n e was b e t t e r treatment from t h e i r banks and
lower interest r a t e s .
Why ignore t h i s direct testimony?
Califomians?
And why ignore the direct testimony of the
Can any one maintain that there i s l e s s competition among banks in
California today than there was before the development of the branch banking systems
in that state?
e x i s t i n g in the
Can any one deny that agricultural' s i t u a t i o n s as serious as that now
wheat growing s t a t e s of the Ninth Federal Reserve D i s t r i c t have
been handled in California p r a c t i c a l l y without bank f a i l u r e s ?
.
I s n ' t i t rather un-American to express fear of monoply in a f i e l d where the
unite are so overwhelmingly numerous?
"In union there i s strength" i s an American
-9~
shibboleth.
X-U027
Every week brings increased evidence of the lack of strength of the
small unit banks in agricultural sections of our country.
The s t a t e s c h i e f l y con-
cerned have t r i e d guaranteeing deposits and every other remedy, except the one
remedy of uniting resources 1 a remedy which has been successful wherever tried*
In conclusion I wish to say that the Federal Reserve Board has directed i t s
division of analysis and research to make a complete study and survey of branch
banking in t h i s country, and with some reference also to conditions in other countries.
The Board has a l s o recently adopted regulations dealing with branch bank-
ing, copy of which I present for the record*
I submit that these regulations w i l l
take care of the matter adequately and make unnecessary the amendments to the Federal Reserve Act contained in the b i l l •
April 17, 1924
Edmund P i a t t •
242
TBFAFTjgy W f R M #
X-4038
Of 'f e e Ox txie • e c r e t .ry
'
WASHINGTON
I
-
.
'
April 14, 1934.
The Governor
Federal Reserve Board.
Sir:
are
n„
heraby advised that the Department has referred t o t h e
_isbursing Clerk, Treasury Department, f o r payment, t h e account of t h e
•Bureau of Engraving and Printing for preparing Federal Reserve notes during the period March 1 t o March 31, 1934, amounting t o $136,461,as follows.*
•
* ^
M
Boston. . . . . . . . . 4 0 0 , 0 0 0
New Y o r k . . . . . . . 3 1 7 , 0 0 0
P h i l a d e l p h i a . . . 387,000
Cleveland
1^,000
Richmond.>.....190,000
Chicago..
533,000
Federal Reserve Notes. 1914
110
$30
$50
, $100
Total
—
160,000
75,000
—
63^000
...
517 000
300,000 100,000
18,000
——
705 000
100,000
50,000
30,000
S^OOO
40,000
30,000
—
. . . . : • 360 000
98,000
93,000
——— ;
733 000
San Franc isco..300.QQu
3,400,000
70,000
668,000
mnejpolis
—
—
—
30.000
378,000
10,000
5,000
48,000
5,000
3,499,000 sheets at t$>39.00 per M...
15,000
300^000
3,499,000
. .$136,461.00
The charges against t h e several Federal Reserve Banks are as f o l l o w s :
Coup en- P l a t e
Ino< Com'
Shaata
Aafcifla p r i n t i n g Mat o r i e l s uensation
Total
B o s t o n . . . . . . . . 6 3 5 , 0 0 0 $8,573.50 $6,508.75 v7,461.25 $3,333.50 $34,765.00
New York.. " , .517,000 6,979.50 5,399.35 6,074.75
1,0)9.50
30,163.00
Philadelphia. .705,000 9,517.50 7,336.35 8,383.75
3,467.50
37,495.00
Cleveland. .. " 3 4 4 , 0 0 0 4,644,00 3,536.00 4 , 0 4 3 . 0 0
1,304.00
13.416.OC
i d i m o n d . . . . , 360,000 3,510-00 3,665-00 3,055.00
910.00
ID,140.00
C h i c a g o . . . . . . . 7 3 3 , 0 0 0 9,760.50 7 , 4 1 0 . 7 5 8,495.35
3,530.50
38,197.00
Minneapolis... 15,000
303.50
153.75
176.35
53.50
585.00
SanFrancisco^0^_4^5^_3^7^_3^535.00
1.050.00
U .700.00
3,499,000$47,336.50^35,864.75$41,11^.25 $13^346.50 5136^461.00
T
>
*u
he^2ureau appropriations w i l l be reimbursed in the. above amount
from the i n d e f i n i t e appropriation "Preparation and Issue o f Federal Reserve
o t e s , eimbursable , and it i s requested that your board cause such indefi n i t e appropriation t o be reimbursed in l i k e amount.
Respectfully,
*
(Signed)
S. R. Jacobs,
Deputy Consnissioner.
O -i
X-4C
TREASURY DEPAETMFWT
O f f i c e of t h e S e c r e t a r y
f i S l i INGTON
w
April K , 192rt
The Governor
Federal Reserve Board.
Sir:
You are hereby advised t h a t t h e Dep irtnent has r e f e r r e d to t h e Disbursing Clerk, Treasury D-part™ ant, f o r payment , the account of the Bureau of
•Engraving and P r i n t i n g f o r preparing Federal Reserve notes during t h e period.
March 1 t o March 31, 1924, amounting t o §39.00, as f o l l o w s :
Federal Reserve Notes, 1918
50C
Minneapolis
. Total
1,000
1,0CC s n e e t s at $39-00 p e r M.
1,000
;
$39.00
The charges a g a i n s t t h e Federal Reserve Bank of Minneapolis a r e as
follows:
Sneets
Compensat ion
Plate
Printing
1,000
*13.50
^10.25
M^t e r i a l s
Inc. Corop^nsat ion
Total
s-11.75
V3.50
^39-Ov
The Bureau appropriations w i l l be reimbursed in t n e above amount
from t h e i n d e f i n i t e a p p r o p r i a t i o n "Preparation and Issue of F e d e r a l Reserve
Notes, Reimbursable", and i t i s requested t h a t your board cause such indefi n i t e a p p r o p r i a t i o n t o be reimbursed in l i k e amount.
Respectfully,
(Signed) S. R. Jacobs
Deputy Commissioner.
'
$44
X-U029
To - Federal Reserve Board
April 12, 1924
From - Mr. F .vatt. General Counsel.
Subject: Revised Draft of Regulation "J"
All of the Federal reserve banks have replied to the Board 1 s circular l e t t e r
of March S>, 1924 (X-3989) requesting suggestions with reference to the proposed
Regulation J, Series of 1924, and such r e p l i e s are attached hereto.
I have carefully considered a l l the suggestions made in these l e t t e r s and have
prepared and submit herewith a r e v i s e d draft of Regulation J which incorporates a l l
of such suggestions except those discussed below.
None of the changes a f f e c t the
broad policy of the regulation.
Mr. Bullen, Deputy Governor of the Federal Reserve Bank of Boston, suggests
that whenever the publication of a complete s e r i e s of the regulations i s undertaken
i t would be well to transfer that portion of Regulation J which r e f e r s to d e f i ciencies in reserves, t o Regulation D and that Regulation D should be given a new
caption - "Reserves."
Mr. Bullen thinks t h i s would be a more l o g i c a l grouping pf
the regulations and I agree with him.
I have not incorporated t h i s change in the
present Regulation J, however, f o r fear that i t might cause some delay in the promulgation of the new regulation.
I believe that when the new Regulation J and the
proposed new Regulation H are f i n a l l y adopted i t would be well to issue a complete
new edition of the Board's regulations, in order that the e n t i r e regulations may be
included in one pamphlet so as to avoid the confusion and inconvenience which would
result from the n e c e s s i t y of referring to several d i f f e r e n t p u b l i c a t i o n s .
This
would not involve much extra expense because the present regulations are plated and
would not have to be set up in type and proof-read.
If the Board decides to do t h i s
I think i t might be well to adopt Mr. Bullen 1 s suggestions at the time the new regu-
-2-
X-U029
l a t i o n a are issu ed and t h i s eould be done with very l i t t l e trouble and without any
change i n the substance of the Board's r e g u l a t i o n s .
I t would merely amount to a
transfer of part of the regulations from one p l a c e t o another,
Mr. Jay suggested that a p r o v i s i o n should be inserted i n S e c t i o n 6 of Regulat i o n J r e l a t i n g t o p e n a l t i e s f p r d e f i c i e n c i e s i n r e s e r v e s , which p r o v i s i o n should
cover that provision of the law which forbids a member bank t o make new loans or
pay any dividends while i t s reserves are d e f i c i e n t .
He says that the present pro-
v i s i o n s of Regulation J with reference t o p e n a l t i e s f o r d e f i c i e n c i e s in reserves
sometimes g i v e r i s e t o the impression that such p e n a l t i e s are in l i e u of t h i s r e quirement of the law and that the Board therefore has waived t h i s requirement of
the law.
Such an impression, however, i s absurd on i t s f a c e , because the Federal
Reserve Board has no power t o waive t h i s
provision
the law.
Furthermore, i t
i s quoted i n Section 6, and I do not see how the present r e g u l a t i o n with reference
t o d e f i c i e n c i e s i n r e s e r v e s could p o s s i b l y give r i s e t o any misunderstanding.
It
would seem t h a t the incorporation of such a provision i n that s e c t i o n would amount
t o an unnecessary r e p e t i t i o n of the terms of the law.
I t i s b e l i e v e d , however,
that i f and when the Board t r a n s f e r s the provisions regarding d e f i c i e n c i e s i n r e serves to Regulation D i t would be w e l l t o rearrange the quotation from t h e law
and when that
i s done i t might not be inappropriate t o adopt Mr. J a y ' s suggestion
and i n s e r t a s e c t i o n i n the new regulation which would cover the subject of new
loans and dividends w h i l e the reserves are d e f i c i e n t .
%
Mr. W i l l s , Federal Reserve Agent at Cleveland, has suggested t h a t the Board
i n s e r t i n S e c t i o n I I I ( 3 ) of Regulation J , the words • u n l e s s otherwise p o t i f i e d "
or "until further n o t i c e , " so as t o q u a l i f y the requirement that Federal reserve
banks s h a l l not r e c e i v e on deposit or f o r c o l l e c t i o n ary dheck on any nonmember
Sr
•
'
»
346
-3r
bank which cannot be collected at par in funds acceptable to the Federal reserve
-
,
""
batik. Mr. Wills toys:
"The reason for t h i s suggestion i s the possible e f f e c t of an absolute regulation which makes i t mandatory upon a Federal Reserve
Bank not to accept any check of the character described. I am
wondering whether a milder statement might not serve the purpose
of the regulation and s t i l l not convey notice to remitting no remember banks that they may abandon their remitting and f e e l perf e c t l y safe that the Federal Be serve Bank at no tine and under no
conditions would reinstate i t s over*the*counter presentation. n
I think there i s much merit in Mr. Wills* suggestion and that i t i s worthy of
very careful consideration, since i t might have the e f f e c t of reducing the number
of withdrawals from the par l i s t .
I believe, however, that i t i s not in accordance
with the present policy of the Board which I understand i s to make i t perfectly
clear that the Federal Reserve System has d e f i n i t e l y abandoned the collection of
checks over the counter and therefore will not attempt to c o l l e c t any checks on
• nonmember banks which w i l l not remit in funds acceptable to the Federal reserve
I
. . . can be collected through other banks in the same town
bank except
where such checks
or c i t y .
If the Board desires to adopt Mr. Wills' suggestion I think the best form
would be to insert the words "until further notice* at the beginning of Section
HI (3).
Mr. Randolph, Counsel to the Federal Reserve Bank of Atlanta, has suggested
the addition of the following clause to Section V:
"A Federal Reserve Bank w i l l at a l l times be protected in conclusively presuming that any national or state barik which i s permitted to remain open, and to transact i t s business, by the Federal or State authorities having supervision thereover, i s solvent
and i s a suitable instrumentality-to be u t i l i z e d in collecting
checks or other, items, whether drawn on i t s e l f or on other banks."
He explains h i s reasons for this suggestion as follows:
f
'
•
"
2 4 7
-4-
X-4029
"It seems to us that the Federal Reserve Banks should be
authorized by a regulation which would be binding upon a l l members of the system, to rely upon the conclusive presumption that
any bank which i s permitted t o remain Open i s in a solvent cond i t i o n , and i s a suitable instrumentality to a v a i l of in the
c o l l e c t i o n of checks; otherwise the Reserve Banks (naturally being more or l e s s familiar with the a f f a i r s of their member
banks), must assume a possible l i a b i l i t y i n handling in the
usual way checks drawn on members known to be in a weakened condition, or e l s e , by refusal t o handle such items in the usual
way, perhaps p r e c i p i t a t e f a i l u r e s which they are trying to avert."
I have not incorporated t h i s suggestion in the revised draft of Regulation J
because I doubt that the Board w i l l care to adept i t , since i t seems to go too far
in limiting the l i a b i l i t y of Federal reserve banks and in absolving them of a l l res p o n s i b i l i t y of conducting their business in a b u s i n e s s - l i k e way.
I t might give
the impression that the Federal reserve banks are e n t i r e l y too "hard-boiled" and
might even r e s u l t in l e g i s l a t i o n requiring the Federal reserve banks to assume more
r e s p o n s i b i l i t y i n the c o l l e c t i o n of checks.
Furthermore, the new s e c t i o n V(^)
inserted in the revised draft of t h i s regulation affords the Federal reserve banks
considerable additional protection against t h i s sort of l i a b i l i t y and certain
other changes in the regulation have been made for the same purpose.
I f , however,
the Board decides to adopt Mr. Randolph's suggestion, i t w i l l be very easy to insert i t in Section V.
Mr. Martin, Federal Reserve Agent at St. Louis, has suggested that the term
"exchange draft" be defined in a foot-note just as the term "checks" i s defined.
In cy opinion t h i s suggestion should not be adopted, because i t would have the e f f e c t of l i m i t i n g the authority of Federal reserve banks to accept exchange drafts
in payment o£ checks forwarded for c o l l e c t i o n and in that way would increase t h e i r
l i a b i l i t y under the doctrine of the Malloy case, thereby defeating one of the
principal purposes of the new regulation.
-5-
X-U029
Governor Young of the Federal Reserve Bank of Minneapolis, suggests that the
word "nonmember" should be eliminated from Section I I I ( 3 ) , so that the section
would forbid Federal reserve banks to receive on deposit or for c o l l e c t i o n any
oheck drawn on any bank (member or nonmember) which cannot be c o l l e c t e d a t par in
.funds acceptable to the Federal reserve bank.
He i s a f r a i d that the Federal re-
serve bank would be l i a b l e for negligence i f i t forwards a check to the drawee bank
when the Federal reserve bank knows that such drawee bank i s in a precarious cond i t i o n and he says that i t i s often impossible t o present such checks over the
counter, which i s the only safe way of c o l l e c t i n g them under such circumstances.
He says, however, that the Federal reserve bank can protect i t s e l f against such
l i a b i l i t y with reference to checks drawn on nonmember banks by dropping such banks
from the par l i s t and refusing to handle any further checks on them when they are
in a precarious condition.
This, of course, can be done under Regulation J i n
the form t e n t a t i v e l y adopted by the Board. As to member banks, Mr, Young a l s o adI
mits that he i s protected to a considerable extent by the f a c t that he i s able to
charge off the amount of dishonored checks from the reaerve account of such member
banks and a l s o by requiring additional c o l l a t e r a l from such member banks, which
c o l l a t e r a l i s held not only as security for rediscounts of that bank but a l s o for
any other l i a b i l i t y of such member bank to the Federal reserve bank.
He says tjaat
on February 29, 1924, the Federal Reserve lank of Minneapolis had approximately
$253,000 in dishonored drafts of closed nonmember banks which were in payment of
transit items and about £4(50,000 of such drafts of member banks, and that,"The
?400,0C0 of dishonored drafts from closed member banls, we are perhaps l i a b l e on a
portion of the amount, but we are so f o r t i f i e d in most cases with additional c o l l a t e r a l that was pledged for any and a l l obligations of the bank to us, that the
eventual l o s s ,
-6-
X-4029
even though we are found negligent, w i l l only be a small portion of the amount,"
These f a c t s would seem to show that the l i a b i l i t y of the Federal reserve bank, i f
any, for sending items direct to member banks which are known t o be in a precarious
p o s i t i o n i s not so great a f t e r a l l .
Furthermore, i t i s believed that the new Sec-
t i o n V (3) and certain other changes incorporated in the attached revised regulation, including the s p e c i f i c authority to send such checks direct to the drawee
banks at any time, would afford a Federal reserve bank s u f f i c i e n t protection against
l o s s e s of the kind contemplated by Governor Young,
There i s a far more important and v i t a l objection to Mr. Young's suggestion,
however, which l i e s in the fact that under the terms of Section l 6 as interpreted
by the Supreme Court of the United States in the par clearance cases, Federal reserve banks are required by law to receive on deposit from member banks or from
Federal reserve banks, checks and drafts drawn on any member bank or clearing member
bank, and i f Section III (3) were amended as suggested by Governor Young, i t would
forbid Federal reserve banks from doing something that they are required by law to
do.
This being so, such a regulation would be absolutely void and of no e f f e c t and
of course could not afford the Federal reserve bank any protection whatever.
If
Governor Young desires to ignore t h i s requirement of the law and refuse t o handle
checks on member banks which are in a precarious condition he could do so just as
well under the regulation as i t i s now written as he could under the regulation
amended in accordance with h i s suggestion, since the Board has no more authority
than he has to disobey the law or take any action inconsistent therewith.
If the
Board attempted to do so i t would not give him any more authority than he now has
to refrain from handling such checks.
For these reasons I did not incorporate
Governor Young*s suggested change in the present draft of the regulation.
-7-
X-402g
Governor Calkins of the Federal Reserve Bank of San Francisco suggests that
vhe words "their accounts with" should be eliminated from Section I I I (2) since i t
seems doubtful to him whether authorisation obtains for direct routing between member banks and Federal reserve banks of d i f f e r e n t d i s t r i c t s f o r the account of the
sending bank and that consequently the e f f e c t of t h i s should be to have such sendings for the account of the Federal reserve bank of the d i s t r i c t in which the sending bank i s located.
Governor Calkins 1 point i s not e n t i r e l y clear, but i t seems
to me that h i s recommendation involves a d i s t i n c t i o n without a d i f f e r e n c e .
Where
one Federal reserve bank receives a check from a bank located i n another d i s t r i c t
and credits i t to the account of the Federal reserve bank in the other d i s t r i c t ,
such other Federal reserve bank would naturally credit the check to the account of
the member bank which forwarded i t f o r c o l l e c t i o n , regardless of whether or not
t h i s phrase i s contained in the regulation.
The regulation as now drawn,
there-
fore, conforms most c l o s e l y to the actual practice and i t would seem b e t t e r not to
adopt t h i s suggestion*
Governor Calkins a l s o suggests that old Section V (4), new Section V (5), be
amended so as to authorize the sending of checks payable in another d i s t r i c t to the
branch of the Federal reserve bank or direct t o the drawee bank for the account of
the Federal reserve bank of the drawee bank's d i s t r i c t , in order t o shorten the
time necessary to c o l l e c t such checks and eliminate circuitous routing.
This sug-
gestion has much merit, but i t would make quite a radical change in the present
method of handling such checks and would lead to such l e g a l and p r a c t i c a l complications as to make i t inadvisable in my opinion to adopt such suggestion u n t i l a f t e r
vely careful study and a thorough discussion at a Governors' Conference.
A more
important objection to t h i s change i s that i t might subject Federal reserve banks
—8—
X—4029
to additional l e g a l l i a b i l i t y and thus defeat one of the principal purposes of the
new Regulation J which i s to l i m i t the l i a b i l i t y of the Federal reserve banks in
handling checks for c o l l e c t i o n .
If the regulation should be amended so as to
authorize a Federal reserve bank receiving checks on a bank i n another d i s t r i c t to
send such checks at i t s option either to the drawee bank direct or t o the Federal
reserve bank of the drawee's d i s t r i c t , i t would place the burden upon the Federal
reserve bank to decide wbieih i s the better course to pursue in each case, and i f the
Federal reserve bank should e l e c t to send a check to the Federal reserve bank of the
drawee's d i s t r i c t rather than direct to the drawee bank and such sending should r e sult in a delay i n presentation of such check and the drawee bank should f a i l before the presentation but a f t e r the time i t could have been presented i f sent d i rect, the Federal reserve bank might be changed with negligence becaiiise i t f a i l e d
to adopt the most expeditious manner of c o l l e c t i o n .
T!here the bank i s only author-
ized to send such a check to the Federal reserve bank of the drawee's d i s t r i c t ,
however, i t would be protected in complying with the Board's regulation and would
not be forced to make a decision which might result in a l o s s .
In addition t o the changes suggested by the various Federal reserve banks, I
have made a few other changes in the regulation, some of which are original with me
and some of which were suggested by Messrs. Wallace and Stroud, Counsel for the
Federal Reserve Banks of Richmond and Dallas, r e s p e c t i v e l y .
The most important of
these i s the new Section V(3) which was inserted because i t i s believed that i t
constitutes a clearer and more s p e c i f i c authorization to accept bank d r a f t s in payment of checks forwarded for c o l l e c t i o n , and more completely protects the Federal
reserve banks against l i a b i l i t y growing out of the doctrine of the Malloy case.
(COPY )
X-U031
Federal Reserve Bank
of Richmond
April 17, 1924.
Mr. Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
Mr. Wallace has shown me your telegram of yesterday to him s t a t i n g
that the Board has determined to defer f i n a l action with respect to Regulation
J until after the coming Conference of Governors, and that the regulation may
be made a. topic of discussion at that Conference. Mr. Wallace discussed with
the o f f i c e r s of the Bank your l e t t e r of the ljjth to him accompanying which was
the l a s t draft of Regulation J.
Inasmuch as the Board i e aware that Mr- Wallace has collaborated with
you in the verbal preparation of certain provisions of the regulation, which
necessarily involved d i s c u s s i o n with our o f f i c e r s , I do not think i t inappropriate
for me, as a. r e s u l t of the discussion of your l e t t e r with Mr. Wallace on y e s t e r day , to transmit to you certain suggestions, r e l a t i n g s p e c i f i c a l l y to Section V,
paragraph ( 4 ) .
Mr. Wallace participated , a t your request, i n a conference between
you and Counsel of the Dallas bank, and we are, of course, aware of the con clusions arrived at and the reasons therefor. We have given very c a r e f u l consideration to the changes incorporated by you in the draft of the regulation
as a r e s u l t of that conference, and we have arrived at the d e c i s i o n that- i t i s
highly, advisable to change somewhat the form of paragraph ( 4 ) . I t is my understanding, of course, that, at the present stage, there i s e n t i r e freedom of
suggestion on your part and on the part of Mr. Wallace and on our part, the
vtiiole matter being in course of preparation for submission t o the Board I regard paragraph (4) as being one of the most important i n the
regulation, and we have come to the conclusion that i f we can make i t follow as
nearly as p o s s i b l e the language of the former Regulation J, i t w i l l be advisable
from many points of view. We have, therefore, examined the former regulation,
and are sending you herewith draft of that paragraph as we now b e l i e v e would
meet the requirements better than anything heretofore considered. If i t does
not meet the contention of the Counsel for the Dallas bank, i t i s t o be regretted;
but in our opinion, the peculiar s i t u a t i o n of the Dallas bank should not necess a r i l y determine the language of the paragraph, which would be applicable to a l l
Federal Reserve Banks a l i k e .
In the draft of paragraph as we submit i t , you w i l l notice a very
close analogy between the two methods of c o l l e c t i o n , one by remittance and the
other by charge to the drawee bank on the books of the Reserve Bank. In the one
case, d r a f t s on the reserve or clearing accounts or remittances i n other immediately available funds are required; i n the other case, the charge i s made
against the reserve accounts of the member banks and the clearing accounts.
When the charge is made, i t i s at the expiration of the agreed transit time;
r* < >
X-U031
-2-
we are therefore of the opinion that there should "be a p r o v i s i o n t h a t i f r e mittance i s not received at the expiration of the agreed t r a n s i t time, t h e r e
should he.vested in the Reserve Bank the authority to charge the accounts of
the delinquent hanks. This authority may be by implication, vested i n us by
other terms of the r e g u l a t i o n , but i n our judgment i t i s very much b e t t e r to
have i t s p e c i f i c a l l y s t a t e d . This i s the provision which may come in c o n f l i c t
with the argument of the Dallas bank- Nevertheless, we are of the opinion s t a t e d .
While I have stated that the new regulation should f o l l o w the language
of the old r e g u l a t i o n , there i s one respect i n which we think the time opportune
for change, and we think i t i s of importance to make the change* The old regul a t i o n provides that when t h e remittance method of c o l l e c t i o n i s i n f o r c e ,
rather than the charge method, remittance shall be made i n funds acceptable, to
the Federal Reserve Bank; there can be only one c l a s s of furd s e n t i r e l y acceptable to Federal Reserve Banks in dealing with members i n t h i s connection,
that i s immediately a v a i l a b l e funds, and i t should be so expressed, i n our judgement.
In dealing with nonmember banks, the term "acceptable funds" i s used, which does
not in p r a c t i c e , a t l e a s t , always mean immediately a v a i l a b l e funds; but there i s
the strongest kind, of reason in g i v i n g a Reserve Bark d i s c r e t i o n as to the
d e f i n i t i o n of "acceptable funds11 i n t h i s connection i n dealing with nonmembers,
because in c e r t a i n parts of the country ( t h i s being one of them) immediately
available funds cannot be furnished, by a very large number of banks*
In l e a v i n g the phraseology "acceptable funds" i n the d r a f t of the
regulation applicable t o member banks, there has been — and there w i l l continue
t o be - - great danger of t h e i r r a i s i n g the contention that acceptable funds^
should mean i n t h e i r case what i t means i n the case of nonmember banks. This
cannot be; there i s a wide d i s t i n c t i o n , and we b e l i e v e now i s the time to
eliminate those words from the regulation, and that i t i s of extreme importance
that they be eliminated.
Inasmuch as you are preparing a form for submission, as we understand i t , I would suggest your adoption of paragraph (4) as we submit i t to
you herewith, or a t l e a s t that you g i v e i t a s an a l t e r n a t i v e paragraph, so that
when the matter i s presented i t s h a l l be iA t h e most desirable form or, i f there
are two opinions, in a l t e r n a t i v e form. I recognize that c o n f l i c t i n g opinions
render your p o s i t i o n i n t h i s matter a trying one.
Permit me to suggest, a l s o , that should the Board decide to submit
the r e g u l a t i o n to the Conference of Governors, a copy of the proposed form 0
regulation be transmitted to each governor in advance, t o p e r m i t him t o d i s cuss the matter with the operating department of h i s bank; t h i s i s a matter
which the governors themselves would ordinarily r e f e r t o tke Standing Committeeon Collections f o r report and r econanepdation: , but inasmuch as i t i s d e s i r a b l e
to i s s u e Regulation J with as l i t t l e delay as p o s s i b l e , i t would be a d v i s a b l e ,
i n our opinion, t o f u r n i s h the Reserve Banks with a copy of the regulation as
proposed so that d i s c u s s i o n may be had. i n advance of the Conference and d e c i s i o n
reached, in the Conference.
Very truly yours,
(signed) Geo« J- Seay,
GJS-CCP
End s
GED» J . SEAY,
Governor*
x-4031
SECTION 7 (4) - REGULATION J.
Checks received by 9 Federal Reserve Bank on i t s member
or nonmember clearing banks w i l l ordinarily be forwarded or presented
direct to such banks, and such banks w i l l be required to pay or remit
therefor at par i n cash or in d r a f t s on their reserve or clearing accounts or in other immediately available funds, or to authorize the
Federal Reserve Bank to charge their reserve accounts or clearing accounts; provided , however, that i n c a s e such remittance or authorization is not received by the Federal Reserve Bank from any such bank
at the expiration of the agreed transit time between the Federal Reserve
Bank and such bank, the Federal Reserve Bank s h a l l have the right to
charge such items to the reserve account or clearing account of such
bank at the expiration of such time*
FEDERAL RESERVE BANK
OF CLEVELAND
X-4032
April 13 , 1924.
Mr* Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, B* C.
Dear Mr* Wyatt:
I acknowledge receipt of your l e t t e r of April 1^, enclosing
revised draft of Regulation J, which you submitted to the Federal Reserve Board »
I note that you have incorporated some further changes and
these appear to me to meet some of the objections« There i s , however,
one portion of Section 5 which I believe s t i l l needs r e v i s i o n and I
notice that you have not adopted a change which we recommended i n
connection with t h i s s e c t i o n . Paragraph 4, Section 5> reads as follows:
"Checks received by a Federal Reserve Bank on i t s member or
non-member clearing banks w i l l ordinarily be forwarded or
presented, direct to such banks and such banks w i l l be required to remit or pay therefor at par in cash or bank draft
acceptable to the c o l l e c t i n g Federal Reserve Bank> or at the
option of such Federal Reserve Bank to authorize such Federal
Reserve Bank to charge their reserve a.ccounts or clearing
accounts. u
The language of the l a s t portion of t h i s paragraph seems to me
to be needlessly involved * Furthermore, i t r a i s e s a question as to the
l e g a l right of a Federal Reserve Bank to cha.rge the reserve account of a
member bank or the clearing account of a non-memoer clearing bank, in the
event that such member or non-member clearing banjr f a l l s to authorize
the Federal Reserve Bank to do so % I think I understand the objections
which may have been raised by some of the Federal Reserve Banks to the
language which you have stricken out in the revised regulation- In s t r i k ing i t out, however, you may have met the objections of some of the
Federal Reserve Banks but a new objection was raised from t;~e standpoint
of those Reserve Banks which may f e e l tnat they desire to reserve the r i g h t
to charge the reserve account of the member bank or the clearing account
of a non-member bank i n case of the f a i l u r e of a member or non-member
clearing bank a f t e r checks sent to them for c o l l e c t i o n have been charged
to the customers 1 account but before a remittance in acceptable funds
has been received by a Federal Reserve Bank.
The language of the revised regulation, I t^ink you w i l l agree,
%
%
8 5 6
Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, D. C,
-2-
X-4032
s p e c i f i c a l l y gives the Federal Reserve Bank the right to charge the reserve account or the clearing account only when authorized by the member
bank or the non-member clearing bank to do so. Inasmuch as the language
i s s p e c i f i c , i t would seem that the courts might hold that Federal Reserve
Banks had the right to charge the reserve account or clearing account only
when authorized to do so and i t might be presumed by the courts that the
Federal Reserve Banks were prohibited from exercising t h i s right i n the absence of s p e c i f i c authorization from the member cr non-member clearing bank.
In our d i s t r i c t , we require our member banks (and we have no nonmember clearing accounts outside of Cleveland) to remit for the checks which
we send to them. In some cases, we permit them to authorize us to charge
their reserve accCUnt but we s p e c i f i c a l l y reserve the right in our check
c o l l e c t i o n circular to charge the reserve account whenever i n our judgment
we deem i t necessary to do so. This reservation i s for our protection i n
the case of the f a i l u r e of a member bank and we have found i t very u s e f u l in
several cases recently, notably in the cases of the Springfield National
Bank and the National Bank of B a m e s v i l l e , both of Ohio.
>
In e i t h e r of these cases, had the receiver questioned our right t o
charge the reserve Account under the terms of the revised Regulation J, I
am inclined t o think the court would have sustained the receiver for reasons given above. I would l i k e , very much, to see incorporated in the new
regulation, either the language which has been stricken out in the revised
copy or the language suggested in iry telegram of April 7th, as f o l l o w s :
"Provided that the Federal Reserve Bank may e f f e c t payment of such
checks by charging the reserve or clearing accounts of the drawee
banks with them."
j
#
Those Reserve Banks which may object t o t h i s provision on the basis
of court decisions giving the proceeds of checks handled for c o l l e c t i o n and
remittance, a d i f f e r e n t status from the proceeds of checks sent for c o l l e c t i o n and credit,might object to either of these suggested changes. It occurs to ire. however. f h ° t t h e i r objections might be overcome, i f the following were substituted:
"Provided, however, that the Federal Reserve Bank w i l l r e t a i n a l l
ef i t s l e g a l r i g h t s to protect i t s e l f in cases of emergency."
Very truly yours,
•
(Signed) H, F. Strater,
Assistant Cashier.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-U033
April 21, 1924.
Subject:
Daylight Saving, 1924.
Dear S i r :
The Federal Reserve Board has been advised that
the following Federal Reserve Banks and Branches
w i l l operate under the daylight saving plan during
the period beginning April 28th and ending Sunday,
September 28, 1924:
Boston
New York
Buffalo
Cincinnati
Pittsburgh
Chicago
Philadelphia
Further advice w i l l be given in event the
plan becomes operative i n other Federal Reserve
Bank or Branch c i t i e s .
Yours very truly,
J. C. Hoell,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BAHES.
( COPY )
X- 4034
FEDERAL RESERVE BANK
OF DALLAS
April 16, 1924.
Federal Reserve Board,
Washington, D. C•
A t t e n t i o n : Mr. Wyatt,
Gene r a l Connsel.
Gentlemen:
I have your telegram of April 15th, with reference to our
objection to the proviso in old subdivision 3> new subdivision 4 of Section
5, Regulation "J". The proviso i n question i s as f o l l o w s :
"Provided , however, that the Federal Reserve
Bank reserves the right to charge such items
to the reserve account or clearing account
of such bank at any time when the Federal
Reserve Bark deems i t necessary to do so."
The language employed i n the old subdivision 3> which preceded the proviso
in question, constituted general authority from the Federal Reserve Board
for Federal Reserve Banks to follow either one of two general methods af
c o l l e c t i o n ; that i s , each Federal Reserve Bank c o u l d i t s option,
forward checks for c o l l e c t i o n and remittance or for c o l l e c t i o n and c r e d i t .
If the f i r s t method were adopted, then the Federal Reserve Bank would
look wholly to the remittance sent i t for payment of the items involved.
This remittance could , of course, be in the form of a draft on the bank's
reserve account or on other acceptable drawees, and the Federal Reserve
Bank would, under i t s duties as agent having authority to receive these
remittance d r a f t s , be l i a b l e only f o r due diligence i n the presentation
and. c o l l e c t i o n of the remittance draft sent i t . It i s very desirable
where t h i s plan i s followed, that the Federal Reserve Bank undertake no
duty to i t s principal, further than to use ordinary care in the c o l l e c t i o n
of the remittance draft sent i t i n payment of the checks.
If the second method were followed, then the Federal Reserve Bank could,
by proper authorization, charge the account of the bank to which items
are sent, even though Regulation "J" did not contain the proviso above
quoted.
In connection with banks following the c o l l e c t i o n and remittance plan,
the proviso under d i s c u s s i o n mi^it e a s i l y be construed by the courts to
place upon a Federal Reserve Bank the duty of charging the bank's account
with the amount of outstanding cash l e t t e r s whenever such Reserve Bank has
the s l i g h t e s t information which would lead i t to b e l i e v e that the ultimate
c o l l e c t i o n of the remittance draft i s i n arywise doubtful. A s t a t e of
f a c t s might frequently a r i s e when a Federal Reserve Bank would f a i l to
X-U03^
-2-
charge the account of a bank with the outstanding cashJLattars . and before
the remittance draft was collected, the bank to which the items were sent
f a i l e d . Under such circumstances, our principal would, contend that we had
f u l l authority to charge the account of the bank to which we sent the items
for c o l l e c t i o n , and had we taken advantage of the authority conferred upon*
u s , the items would have been collected; and thus i t would be contended that
we were negligent in f a i l i n g to charge the account* We would, therefore,
always be confronted with a serious question i n the c o l l e c t i o n of checks
•
from extended member banks.
Banks following the c o l l e c t i o n aid remittance plan would never have occasion to charge the account of the hank to which items were sent unless
they were s p e c i f i c a l l y authorized to do so. The proviso, therefore, could
b e n e f i t only those banks following the c o l l e c t i o n and credit plan. I am
firmly of the opinion that the proviso does not in any meaner strengthen
the position of Federal Reserve Banks following the l a t t e r plan, because
as a matter of law they would have the r i g b t to charge the account of the
bank to which items were sent.
We would have no objection to the proviso i f i t applied only to Federal
Reserve Barks following the c o l l e c t i o n and c r e d i t plan* However, as i t
read i n the old subdivision 3, i t applied both t o the banks following the
c o l l e c t i o n and remittance plan, and to those following the c o l l e c t i o n and
credit plan.
* For the reasons hereinabove stated, i t i s our opinion that old subdivision
3 , as ,changsd and now incorporated i n new subdivision 4 , gives to any
Federal Reserve Bank a l l the l a t i t u d e which i t could possibly d e s i r e , and
at the same time does not contain the embarrassing features.
Very truly yours,
(signed)
EBS-j
B. Stroud, Jr.
O f f i c e Counsel.
. . •'
:
2 6 0
s M m o m re* O B . M t s s
;
f o r Releaae i n Morning Pfepers,
W a y , April 28, 1Q2U.
iMi05§
The following i s & summary of general business and
financial conditions throughout the several Federal
Reserve D i s t r i c t s , based upon s t a t i s t i c s for the
months of mrch and April, as contained in the
forthcoming issue of the federal Reaerve B u l l e t i n ,
Production of basic commodities decreased during y&rch, and there was a
recession in wholesale p r i c e s ,
distribution, both a t vAiolesale and r e t a i l ,
showed l e s s thah the usual seasonal increase and waa ensile* 1 than a year ago.
tmssm-The Federal Reserve Board's index of production i n b asi c industries, adjusted t o allow f o r length of month and ether seasonal v a r i a t i o n s , declined
3 per cent in March.
Output wag reduced by most industries aa& the de-
creases were particularly large in mill consumption of cotton and production
of bituminous coal and copper.
Daily average production of f t e e l ingots,
however, was larger than i n any previous month.
The l e v e l of factory em*
ployaent was unchanged but some curtailment i n working hours was evidenced
by a decline of one per cent in average we tidy earnings.
Contract awards for
new buildings i n March reached the highest t o t a l value on record, owing
c h i e f l y to a large increase i n the Bew ierk d i s t r i c t *
•
/
Estimates by the Department of Agriculture on the teals of condition on
April 1 indicate a redaction of 4 per cent in t h e y i e l d of winter wheat and of
6 per cent i n the production of #ye as c o u n t e d with the f i n a l harvests i n
1913.
, •
mmShipments of comoeoSSMos
railroads declined eaeh we#: W MMreb and
<«a* loadings t w w - 4 per em* l e w than a year ago.
Wholesale trade lmiiT.ni.wiff
QPA!
-2-
X-U036
s l i g h t l y during March t u t was 8 per cent l e s s than a year ago owing to
decreases i n s a l e s of dry goods, shoes, and hardware.
March s a l e s of de-
partment s t o r e s were 8 per cent l e s s than i n March, 192), and merchandise
stocks a t the end of the month were S per cent larger than & year a g o .
Sales of mail order houses al so showed l e s s than the usual seasonal increase
i n March.
Decrease i n the volume of par chases at r e t a i l compared with l a s t
year i s p a r t l y accounted f o r "by the l a t e Easter and the generally unfavorable
weather c o n d i t i o n s .
PRICES:
Wholesale p r i c e s , a s measured by the Bureau of Labor S t a t i s t i c s index,
decreased s l i g h t l y more than one per cent i n March and were 6 per cent lower
than a year ago.
P r i c e s of farm products, foods, c l o t h i n g , chemicals, and
house furnishings declined, building materials remained unchanged, w h i l e
f u e l and metals were s l i g h t l y higher than i n February.
During the f i r s t three
weeks of April quotations on p i g iron, l e a d , c o a l , s i l k , and sugar declined,
while p r i c e s of wheat, corn, and cotton
advanced.
BAM CREDIT:
Volume of borrowing for commercial purposes at member banks i n leading
c i t i e s , a f t e r increasing during the early part of the year, remained constant
a t a high l e v e l between the middle of March and the middle of A p r i l .
During
the four-week period t o t a l loans of these banks were i n larger volume than
at any time i n more than two y e a r s .
Discounts and investments of the Federal Reserve Banks, which on April 2
were s l i g h t l y above $1,000,000,000, declined by about $125,000,000 during the
f i r s t t h r e e weeks i n April t o the lowest point f o r the y e a r .
This d e c l i n e
represent# a reduction i n discounts and in the holdings of acceptances, while
0f?0
X-U036
the volume of government s e c u r i t i e s increased somewhat.
Money rates in the New York market during the f i r s t three weeks i n
April were at about the same l e v e l a s in the l a t t e r part of Jflftrclu
Prime
commercial paper was quoted at 4 l / 2 per cent and $0 day barkers * acceptances
at 4 per cent throughout the period.
8G3
f e d e r a l
r e s e r v e
b o a r d
X-U037
Statement for the Press
For Immediate Release
Aijril
25, 1324.
'
CONDITION OF ACCEPTANCE M&BKET
March 13 to April 9 , 1924.
During the period ending April 9> the acceptance market was under the
influence of wide variations in money r a t e s .
The easing of the money
market in the middle of March resulted in an a c t i v e demand f o r acceptances , e s p e c i a l l y from c i t y banks, which was temporarily in excess of the
supply*
But early in April the money market became firmer and the demand
for b i l l s slackened*
Notwithstanding a s l i g h t increase in the supply of
b i l l s the a c t i v e derrand, together with heavy maturities, resulted in a
further reduction in dealers i p o r t f o l i o s which reached the lowest point
since October«
B i l l s drawn to finance the exportation of cotton and
the importation of sugar constituted the greater proportion of the t o t a l
supply but considerable amounts were issued against s i l k , wool, provisions,
and to furnish dollar exchange,
Easier money rates in March were r e f l e c t e d immediately in lower acceptance quotations, but by the close of the period the rate had partly recovered*
Bates ranged from 3~7/S to 4-1/8 per cent bid and 3 ~ 3 t o 4-1/8
per cent offered for maturities up to 90 days and from 4 to 4 - l / 2 per cent
bid and 3-7/S to 4-3/8 per cent offered for maturities of more than three
months,
364
FEDERAL RESERVE
BOARD
STATEMENT FOR THE PRESS
For Immediate Release.
A p r i l 23, 1924.
X-U039
The complete o f f i c i a l English t e x t of the r e p o r t s of
the experts appointed by the Reparations Commission to make an
i n q u i r y i n t o f i s c a l and monetary conditions in Germany ( t h e soc a l l e d Dawes-McKenna r e p o r t s ) w i l l appear i n t h e May i s s u e of
the Federal Reserve B u l l e t i n , the o f f i c i a l monthly p u b l i c a t i o n
of the Federal Reserve Board.
The Federal Reserve Board has announced t h a t i t w i l l ,
on order, be a b l e t o supply, a t a nominal charge, pamphlets cont a i n i n g a r e p r i n t of t h a t p o r t i o n of the May issue of the Federal
Reserve B u l l e t i n containing the text of the Dawes-McKenna r e p o r t s .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL. RESERVE BOARD
X-4940
April 23, 1924
SUBJ1CT:
Revision of Code Word "Archery".
Dear Sir:
There i s enclosed herewith a r e v i s i o n of
the t r a n s l a t i o n for the code word "Archery", necess i t a t e d by the adoption of the new Regulation "H",
Series of 1924,
Very truly yours,
J. C. Noell.,
Assistant Secretary.
(Enclosure)
TO CHAIRMEN OF aLL F, R. BsNKS.
X-4013a.
(4-26-24)
CO# FOR TELEGRAPHIC ADVICE
APPROVAL OF APPLICATIONS OF STATE INSTITUTIONS FOR MEMBERSHIP.
Archery - The a p p l i c a t i o n .of —
f o r membership h a s "been approved
by t h e F e d e r a l Reserve Board s u b j e c t to t h e c o n d i t i o n s enumerated^ i n
S e c t i o n IV, R e g u l a t i o n H, s e r i e s of 1924, numbered 1 t o 9 i n c l u s i v e ,
(Should any of the f o l l o w i n g c o n d i t i o n s be imposed, they w i l l be r e f e r r e d t o by number):
10.
P r i o r t o t h e payment of a dividend you s h a l l c a r r y t o s u r p l u s
account n e t l e s s tb~v o n e - t e n t h p a r t of your n e t p r o f i t s f o r
the p r e c e d i n g dividend p e r i o d u n t i l your s u r p l u s fund s h a l l
amount to twenty p e r c e n t of ycur c a p i t a l s t o c k .
11.
Yen s h a l l agree net to pay any dividend u n t i l yen have a s u r p l u s of ($
j , and t h a t t h e r e a f t e r p r i o r t o t h e payment of
a dividend you s h a l l c a r r y t o s u r p l u s account n o t l e s s
than
one-t'unth p a r t of your net p r o f i t s f o r t h e p r e c e d i n g dividend
p e r i o d u n t i l ycur s u r p l u s fund s h a l l amount t c twenty per c e n t
of your c a p i t a l s t o c k .
12.
You s h a l l charge off a t once, cut of undivided e a r n i n g s , not
l e s s t h a n (0
) from your s e c u r i t i e s account,and s h a l l agree
t h a t a f t e r admission t o the system ycu w i l l charge o f f from
t h i s account annually not l e s s than twenty p e r cent of the dep r e c i a t i o n in ycur investments, u n t i l t h e "bock and market v a l ues t h e r e o f a r e mere n e a r l y in accord.
13.
You s h a l l agree to "bend ycur a c t i v e o f f i c e r s and
employees
h a n d l i n g cash or s e c u r i t i e s or having a c c e s s to same.
14.
Ycu s h a l l dispose of or otherwise s e c u r e any loan which
be secured by your own s t o c k ,
15.
You s h a l l agree t c r e q u i r e f i n a n c i a l s t a t e m e n t s wherever p o s s i b l e in connection w i t h a l l important l o a n s .
16.
Ycu s h a l l agree t o reduce annually the amount charged t c
u n t i l t h e same more n e a r l y r e p r e s e n t s a c t u a l liquidating value.
17.
You s h a l l agree to reduce t h e amount of your —
every e f f o r t t o keep same a t a minimum.
may
>" emdemake
SG6
(4-26-24)
- 2 -
18.
X-404-Oa
As provided i n the Federal Reserve Board's Regulation H,seri.es
of 1924, you s h a l l increase your paid-tzp and unimpaired c a p i t a l w i t h i n f i v e years a f t e r the approval of your a p p l i c a t i o n
"by the Federal Reserve Board t o $
* For the purpose of
providing t o r such i n c r e a s e , you s h a l l set aside each year in
a fund e x c l u s i v e l y applicable t o such c a p i t a l increase not l e s s
than f i f t y p e r cent of your net earnings f o r t h e preceding year
p r i o r co the payment of dividends, and i f such net earnings exceed. twelve per cent of your pa?.d-Bg c a p i t a l , then a l l net
earnings i n excess of s i x per cent of your paid-up c a p i t a l s h a l l
"be c a r r i e d to such fund, u n t i l such fund amounts to 0
.
Whenever such fund s h a l l ai.ount to $
, or a t such other
tir;.e as the Federal Reserve Board nay.require, such fund or as
Lvuuh thereof as nay "be necessary s h a l l 'be converted into c a p i t a l
"by a stock dividend or used in any other manner p e r m i t t e d "by
S t a t e lav; to increase your c a p i t a l to the r e q u i r e d amount. Such
increase in c a p i t a l nay t e provided i n xvhole or i n p a r t "by the
s a l e of a d d i t i o n a l stock.
*
*
*
#
2QW
268
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
A p r i l
2 9 ,
1 9 2 4 .
X-UoUl
SUBJECT: M v i c e of Holiday.
Dear S i r :
The Federal Reserve Bank of San Francisco,
together with i t s Los Angeles Branch, w i l l be closed
on Tuesday, May 6th, on account cf Election Day. Therefore, those o f f i c e s w i l l not participate in either the
regular d a i l y Gold Fund Clearing or the Federal Reserve '
Note Clearing of that date, May 6th, Please include your
credits for May 6th with your credits for May 7th for
those o f f i c e s in your Gold Fund Clearing telegrams of
May 7th, and make no shipment of San Francisco FederalReserve Notes, f i t or u n f i t , t o that o f f i c e or to Washington,
respectively, - on date of holiday, May 6th.
Kindly n o t i f y Branches.
Yours very truly,
J. C• Noell,
Assistant Secretary.
To Governors of a l l F. R. Banks, except San Francisco.
COPT
X-U0U2
IN THE DISTRICT COURT OF THE UNITED STATES,
IN AND FOR THE DISTRICT OF IDAHO,
EASTEMf DIVISION
IIUEML EESERirE BANK OF
)
SAN FRANCISCO, a c o r p o r a t i o n ,
No. U15
Plaintiff,
MEMORANDUM DECISION ON
DEMURRER TO AMENDED COMPLAINT.
v.
A. D. MILLET?, JR.,
Defendant.
March 31st, I92U.
Albert C, Agnew, Geo. H. Lowe and Bulge & M e r r i l l , Attorneys
for P l a i n t i f f ,
M i l l e r & Rickc, Attorneys f o r Defendant.
DIETRICH, DISTRICT JU3GE:
The p l a i n t i f f , a s a s s i g n e e , sues the defendant, a r e s i d e n t
c i t i z e n of Idaho, upon a promissory note given by him t o a bank organised
and doing b u s i n e s s i n the S t a t e of Idaho under the laws of t h a t s t a t e .
By h i s dercwrer defendant challenges the j u r i s d i c t i o n of t h e c o u r t , r e l y i n g upon the p r o v i s i o n t h a t "no d i s t r i c t court s h a l l have cognizance
of any s u i t (except upon f o r e i g n b i l l s of exchange) to recover upon any
promissory note- or other chose in a c t i o n i n favor of any a s s i g n e e * * *
u n l e s s such s u i t might have been prosecuted i n such court t o recover upon
\
-2-
__
X- UgU?.
said note or other chose i n a c t i o n if no assignment had been made."
Sec. 2U, J u d i c i a l Code.
Clearly t h e o b j e c t i o n would be well taken if j u r i s d i c t i o n were
p r e d i c a t e d upon d i v e r s i t y of c i t i z e n s h i p .
But the p l a i n t i f f contends t h a t
i t being a f e d e r a l reserve bank, organized under the laws of the United
S t a t e s , the s u i t i s to be deemed to be one " a r i s i n g under the c o n s t i t u t i o n
or laws of the United S t a t e s " .
sustained by the decided cases,
And in t h i s p o s i t i o n i t seems to be c l e a r l y
See Art, Bank & Trust Co. v. Federal
Reserve Bank of Atlanta, 2%6 U. S. 35O; Bacon v . Federal Reserve Bank of
San Francisco, 289 Fed, 513> and Federal Reserve Bank of Dallas v.
Webster, 287 Fed. 579.
The defendant, however, conceding t h i s contention, s t i l l urges
that the "assignee clause", above quoted, l i m i t s the j u r i s d i c t i o n of
f e d e r a l courts as well in cases a r i s i n g under the .constitution or laws
of the United S t a t e s as where d i v e r s i t y of c i t i z e n s h i p i s r e l i e d upon.
And i t must be conceded t h a t , considered apart from i t s o r i g i n and h i s t o r y ,
the language i s r e a d i l y susceptible to such a construction.
But i t i s to
be noted t h a t as o r i g i n a l l y enacted (Sept. 24, I7S9) the l i m i t a t i o n could
have -iad r e f e r e n c e only to s u i t s where j u r i s d i c t i o n r e s t s upon d i v e r s i t y
of c i t i z e n s h i p or the alienage of one of the p a r t i e s .
The o r i g i n a l en-
actment is found in Sec. 62$ of the Revised S t a t u t e s of the United S t a t e s
(1878 E d i t i o n ) , which i s as follows:
"The Circuit courts shall have o r i g i n a l j u r i s d i c t i o n as follows:
F i r s t . Of a l l s u i t s of a c i v i l nature at common law or in
equity, where the matter in dispute, exclusive of c o s t s , exceeds the
sum or value of f i v e hundred d o l l a r s , and an a l i e n i s a p a r t y , or
the s u i t i s between a c i t i z e n of the s t a t e where i t is brought and a
c i t i z e n of another s t a t e : Provided, That no c i r c u i t court s h a l l have
cognizance of any s u i t to recover the contents of any promissory note
or other chose in a c t i o n in favor of an a s s i g n e e , unless a s u i t might
-3-
x-4o42
have been prosecuted in such court to recover the s a i d
contents if no assignment had been made, except in cases
of f o r e i g n b i l l s of exchange,"
Clearly by the proviso Congress o r i g i n a l l y intended the
l i m i t a t i o n t o apply only to cases r e f e r r e d to in t h i s s u b d i v i s i o n .
By t h e amendment of .August 13, 1888 (25 S t a t . U33), t h e r e were
gathered t o g e t h e r in the same paragraph provisions covering j u r i s d i c t i o n
not only of cases where one p a r t y is an a l i e n or where t h e r e i s d i v e r s i t y
of c i t i z e n s h i p , but a l s o cases a r i s i n g under the c o n s t i t u t i o n or laws of
the United S t a t e s , or t r e a t i e s , and a l s o cases in which the United Stages
was p l a i n t i f f , and following the paragraph t h e r e i s a p r o v i s i o n subs t a n t i a l l y the same as the proviso above quoted.
With some d i f f e r e n c e in arrangement and s l i g h t d i f f e r e n c e s in
language, the whole paragraph, including the l i m i t a t i o n , i s c a r r i e d f o r ward i n t o t h e f i r s t subdivision of s e c t i o n 24 of the J u d i c i a l Code (Act
of March 3 , 1 9 H ) , upon which defendant r e l i e s .
Without e l a b o r a t e d i s c u s s i o n , i t may be b r i e f l y s t a t e d t h a t t h e r e
is no i n d i c a t i o n anywhere t h a t Congress ever intended t o enlarge t h e scope
of the proviso clause as o r i g i n a l l y enacted, or to make i t a p p l i c a b l e to
s u i t s other than those t h e r e r e f e r r e d to-
I t i s not thought t h a t an i n -
t e n t i o n m a t e r i a l l y to change, or enlarge t h e a p p l i c a t i o n of the o r i g i n a l
clause should be i n f e r r e d from s l i g h t changes in phraseology and the more
l o g i c a l and compact arrangement of e x i s t i n g p r o v i s i o n s of the law.
Sections
294 and 295, J u d i c i a l Code; Anderson v. P a c i f i c e t c . Co., 225 U. S. 187;
Hermann v. Edwards, 238 U. S. 107.
The proviso has been the s u b j e c t of
c o n s i d e r a t i o n i n a multitude of d e c i s i o n s , many of them s i n c e t h e r e v i s i o n
of 1888, but in no case called to my a t t e n t i o n has i t been h e l d to apply
-U-
X-U0U2'
where j u r i s d i c t i o n i s predicated, upon the ground t h a t the s u i t a r i s e s
under the c o n s t i t u t i o n or laws of the United S t a t e s .
The p r e c i s e question i s discussed a t l e n g t h i n Federal Reserve
Bank of Dallas v. ^ e b s t e r , 287 Fed. 579) &nd Sowell v. Federal Reserve
Bank, 29U Fed. 7Q&, the reasoning of which i s highly p e r s u a s i v e .
The demurrer w i l l he overruled.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-U0U3
April 30, I92U.
SUBJECT:
Banking Hours, S a l t Lake City.
Dear S i r :
The F e d e r a l Reserve Board i s a d v i s e d by t h e
F e d e r a l Reserve Bank of San Francisco t h a t t h e banking
hours a t t h e S a l t Lake City Branch during t h e p e r i o d
May 15th t o September 15th i n c l u s i v e , w i l l be from 9 a.m.
t o 2 p.m. mountain time, except on Saturdays, when the
hours w i l l be 9 a.m. to 12 noon, as a t p r e s e n t .
Kindly n o t i f y Branches.
Yours very t r u l y ,
J . C. N o e l l ,
Assistant Secretary.
To Governors of a l l F. R. Banks
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
April 30, 1924.
X-4o44
Dear Sir:
~
I am e n c l o s i n g herewith f o r your information a copy of the opinion
rendered A p r i l 2g by t h e Supreme Court of the United S t a t e s i n the case of
S t a t e ex r e l Burnes National Bank of St* Joseph v . Duncan, which r e v e r s e s
the d e c i s i o n of the Supreme Court of Missouri and upholds the r i g h t of
n a t i o n a l banks i n Missouri t o e x e r c i s e t r u s t powers.
As you probably know, t h e Burnes National Bank had been named as
executor under a w i l l and had made a p p l i c a t i o n t o t h e Probate Court having
j u r i s d i c t i o n , f o r appointment as such executor * On January 29, 192), the
Probate Court refused to i s s u e l e t t e r s testamentary to the n a t i o n a l bank, on
the ground t h a t under t h e laws of Missouri the bank was not authorized to
a c t as executor* The n a t i o n a l bank applied to t h e Supreme Court of Missouri
f o r a w r i t of ma.ndamis,r e q u i r i n g t h e Probate Court t o appoint i t *as
executor* On January 4 , 1924, the Supreme Court of Missouri rendered a
d e c i s i o n denying the w r i t of mandamus, The Court held i n e f f e c t t h a t the
e x e r c i s e of t r u s t powers by n a t i o n a l banks i n Missouri was i n c o n t r a v e n t i o n
of S t a t e law. I t considered the p r o v i s i o n of Section 11 (k) of t h e Federal
Reserve Act t h a t the e x e r c i s e of t r u s t powers by n a t i o n a l banks s h a l l not
be considered i n c o n t r a v e n t i o n of S t a t e law when S t a t e i n s t i t u t i o n s which
compete with n a t i o n a l banks are permitted t o e x e r c i s e such powers, b u t f a i l e d
to apply t h i s p r o v i s i o n , arguing t h a t i t i s not c o n t r o l l i n g and t h a t t r u s t
companies in Missouri do not compete with n a t i o n a l banks i n t h e sense con tempi a t ed by the s t a t u t e .
The case was promptly appealed to the Supreme Court of t h e United
S t a t e s , was advanced on t h e docket and was argued oh April 11- At the sugg e s t i o n of t h e Federal Reserve Board and t h e Comptroller of t h e Currency,
the S e c r e t a r y of the Treasury requested t h e Department of J u s t i c e to i n t e r vene i n t h e case on behalf of the United S t a t e s ; and i n accordance with
t h i s r e q u e s t the S o l i c i t o r General f i l e d a b r i e f and made an oral argument
of the case i n behalf of t h e United S t a t e s as amicus c u r i a e .
I n r e v e r s i n g t h e d e c i s i o n of t h e Supreme Court of Missouri t h e
Supreme Court of t h e United S t a t e s said t h a t , "Whatever may be the S t a t e
law, n a t i o n a l banks having t h e permit of the Federal Reserve Board may a c t
as executors i f t r u s t companies competing with them have t h a t power*** This
would seem to e s t a b l i s h once and f o r a l l t h e r i g h t of n a t i o n a l banks t o exe r c i s e t r u s t powers i n any S t a t e in which competing S t a t e corporations
e x e r c i s e such powers, r e g a r d l e s s of d i s c r i m i n a t o r y S t a t e l e g i s l a t i o n * Mr*
J u s t i c e Holmes rendered t h e opinion of the Court and Mr * J u s t i c e Sutherland
rendered a d i s s e n t i n g o p i n i o n , i n which Mr. J u s t i c e McBeypolds concurred*
X-4o44
I t i s believed t h a t t h i s d e c i s i o n , which was rendered j u s t
seventeen days a f t e r the c a s e was argued and l e s s than seventeen weeks
a f t e r the d e c i s i o n of the Supreme Court of Missouri, e s t a b l i s h e s q u i t e
a record f o r speed. I t i s a l s o i n t e r e s t i n g to note t h a t the case was
f i n a l l y decided by the Supreme Court of the United S t a t e s almost e x a c t l y
f i f t e e n months a f t e r the Probate Court r e f u s e d t o i s s u e l e t t e r s t e s t a mentary to the n a t i o n a l bant:..
Very t r u l y y o u r s ,
Walter Wyatt,
General Counsel.
(Enclosure - opinion)
FEDERAL
RESERVE
BOARD
X-U0U5
STATEMENT JOR THE PRESS
For Release i n Morning Papers ,
Monday, May 5, 1924.
The Federal Reserve B u l l e t i n for May w i l l c o n t a i n the
following summary of the provisions of the r e p o r t t o the
Reparations Commission made "by the committee of e x p e r t s on the
German "budget and currency s t a b i l i z a t i o n .
The May i s sue w i l l a l s o c o n t a i n t h e complete o f f i c i a l
English t e x t of the r e p o r t s of the two committees ( t h e s o - c a l l e d
Dawes and McKenna r e p o r t s ) . Copies of r e p r i n t s of the t e x t of
the r e p o r t s can be obtained from the Federal Reserve Board a t
a nominal charge.
REPARATION PAYMENTS AND STABILIZATION OF GERMAN CURRENCY.
Report of Experts to Reparation Commission.- During t h e month the p r i n cipal event of i n t e r e s t has been the report of the committees of experts appointed
by the Reparation Commission t o make an i n q u i r y i n t o f i s c a l and monetary conditions
in Germany and t h e i r r e l a t i o n t o the problem of r e p a r a t i o n s .
A f t e r r e c e i v i n g the
unanimous approval of the Reparation Commission t h e r e p o r t s of the experts were
accepted by the German Government and favorably received by t h e Governments of the
Allied c o u n t r i e s as o f f e r i n g a p r a c t i c a l basis f o r a s o l u t i o n of the problem of
reparations.
In view of t h e importance of t h e s e r e p o r t s , which a r e r e p r i n t e d in
f u l l elsewhere i n t h i s i s s u e , the p r e s e n t review suoorrarizes the proposed program
of a c t i o n contained in the recommend a t i o n s of t h e committee on budget and currencyUnder i t s terms of r e f e r e n c e t h i s committee was to consider "means of
balancing the German budget and t h e measures to be taken to s t a b i l i z e i t s
currency."
The e s s e n t i a l f e a t u r e s of the plan recommended by t h e committee
are a schedule of r e p a r a t i o n payments to be made by Germany d i r e c t l y out of
t a x a t i o n and through the imposition of 9 mortgage debt upon German railways
and i n d u s t r y ; t h e s e p a r a t i o n of c o l l e c t i o n s i n Germany, f o r which t h e German
Government i s to be held r e s p o n s i b l e , from the t r a n s f e r of funds abroad, which
i s to be c o n t r o l l e d by a. committee r e p r e s e n t i n g the A l l i e s whose f u n c t i o n i t
'
-2-
X-4(A5
w i l l be to make the maximum t r a n s f e r s c o n s i s t e n t with maintenance of exchange
s t a b i l i t y ; the establishment of a new bank of issue to u n i f y and. s t a b i l i z e
German
currency; and the f l o t a t i o n of a f o r e i g n loan intended to a s s i s t in the
establishment of t h e bank and in enabling Germany to meet h e r most urgent immediate o b l i g a t i o n s .
The committee regards i t s proposal as one i n d i v i s i b l e whole and cons i d e r s i t e s s e n t i a l to i t s s u c c e s s f u l operation t h a t the r e p o r t be adopted in
its entirety.
I t furthermore points out t h a t vvhile the plan does not "attempt
a s o l u t i o n of the whole r e p a r a t i o n problem, i t foreshadows a settlement extending in i t s a p p l i c a t i o n f o r a s u f f i c i e n t time t o r e s t o r e confidence, and a t
the same time i s so framed as to f a c i l i t a t e a f i n a l and comprehensive agreement
as to a l l the problems of r e p a r a t i o n and connected questions as soon as
circumstances make t h i s p o s s i b l e , "
In considering the conditions e s s e n t i a l to the r e s t o r a t i o n of
Germany's c r e d i t and the establishment and maintenance of s t a b i l i t y in budget
and currency, the committee based i t s report on t h e assumption that the f i s c a l
and economic u n i t y of Germany w i l l be r e s t o r e d .
Furthermore, the committee
recognizes t h a t Germany's p r e s e n t f i n a n c i a l conditions a r e such t h a t r e p a r a t i o n
payments can be made from her ordinary budget revenues only a f t e r a period of
recuperation.
The r e p o r t says: "At the time of our i n v e s t i g a t i o n Germany was
passing through an a c u t e economic c r i s i s , the d i r e c t r e s u l t and the culminating
point of a d e p r e c i a t i o n of t h e currency so c a t a s t r o p h i c as p r a c t i c a l l y to
destroy the currency and reduce the budget to a l l but a shadow.
The h a b i t of
saving has been destroyed and i t w i l l r e q u i r e time and the r e s t o r a t i o n of confidence to r e e s t a b l i s h i t .
u n p a r a l l e l e d degree.
The e x i s t i n g wealth i s m a l d i s t r i b u t e d i n an almost
The c e s s a t i o n of d e p r e c i a t i o n , w i t h t h e consequent r e -
moval of the premium on exports and the s t a b i l i z a t i o n of p r i c e s a t a l e v e l which
-3-;
X-U0U5
i s momentarily, a t any r a t e , above t h a t of t h e world l e v e l , has had important
reactions.
F i n a l l y , t h e s t a t e of employment and the f i s c a l and economic ma-
chinery of Germany have been v i o l e n t l y deranged by the events of 19-3*
& return
to normal c o n d i t i o n s i n t h i s r e s p e c t can not be e f f e c t e d o v e r n i g h t . "
In i t s a n a l y s i s of t h e problem of s t a b i l i z a t i o n of the Germany'-'
currency and b a l a n c i n g the German budget, the committee' d i s t i n g u i s h e s sharply
between t h e two phases of the problem, the amount of revenue Germany can make
a v a i l a b l e f o r t h e r e p a r a t i o n account and the amount which can be t r a n s f e r r e d
to f o r e i g n c o u n t r i e s .
Since the probable amount of t h e budget s u r p l u s and
other c o l l e c t i o n s on r e p a r a t i o n account can be nore d e f i n i t e l y e s t i m a t e d than
the amount which can be made a v a i l a b l e f o r payments abroad, the r e p o r t p r e s e n t s
a schedule of annual payments over a s e r i e s of y e a r s , but does not undertake
to e s t i m a t e the amounts t h a t can be converted i n t o f o r e i g n c u r r e n c i e s w i t h o u t
causing i n s t a b i l i t y of exchange.
abroad a r e d e f i n e d a s f o l l o w s :
The l i m i t s w i t h i n which payments can be made
"The funds r a i s e d and t r a n s f e r r e d t o t h e A l l i e s
on the r e p a r a t i o n account can not i n t h e long run exceed the sums which t h e
balance of payments makes i t p o s s i b l e t o t r a n s f e r w i t h o u t currency and budget
i n s t a b i l i t y ensuing."
The e n t i r e plan r e s t s upon t h i s d i s t i n c t i o n between the
c o l l e c t i o n s in Germany on r e p a r a t i o n account, which a r e measured by the German
t a x p a y e r s ' c a p a c i t y t o pay, and the t r a n s f e r of funds t o t h e A l l i e s , t h e volume
of which depends i n t h e f i n a l a n a l y s i s on Germany's balance of i n t e r n a t i o n a l
payment s.
Schedule of C o l l e c t i o n s . The committee, in view of i t s terms of r e f e r e n c e , Aid not u n d e r t a k e
t o determine the t o t a l amount of r e p a r a t i o n payments, but worked out a p l a n of
annual payments t o be i n c l u s i v e f o r any p a r t i c u l a r year of a l l p o s s i b l e charges
f o r which Germany may be l i a b l e t o t h e A l l i e s , w i t h t h e u n d e r s t a n d i n g t h a t any
-4-
X-UO45
a d d i t i o n to one category of charges can only be made a t the expense of another.
The f i r s t f o u r y e a r s of the operation of the plan a r e regarded a s a r p e r i o d of
r e c u p e r a t i o n and t r a n s i t i o n . , with a gradual increase of payments t o t h e f i f t h
y e a r , when t h e amount to be paid reaches a standard t o t a l .
During t h e f i r s t
two years no payments are t o be made out of ordinary budget r e c e i p t s ; in the
following years t h e payments from t h i s source a r e increased so t h a t in t h e
standard year the budget f u r n i s h e s one-half of the t o t a l payments.
The plan
f u r t h e r provides f o r a f o r e i g n loan and f o r t h e c o l l e c t i o n of i n t e r e s t upon a
mortgage indebtedness t o be placed on
German r a i l r o a d s and i n d u s t r y .
Essentia
d e l i v e r i e s in kind a r e to continue and t h e i r value i s to be included each year
in the t o t a l of payments p r e s c r i b e d by the p l a n .
The amounts which i t i s
estimated Germany w i l l be i n a p o s i t i o n t o pay during the p e r i o d s of r e cuperation and t r a n s i t i o n and the standard amounts s p e c i f i e d f o r subsequent
years are given i n t h e following schedule, which d e s i g n a t e s the several sources
from which t h e funds a r e to be derived.
Provision i s made f o r m o d i f i c a t i o n of
the amounts s e t f o r t h in the schedule during t h e t h i r d and f o u r t h y e a r s in
accordance with t h e y i e l d of c e r t a i n c o n t r o l l e d revenues and f o r a d d i t i o n s to
the standard payments t o be determined by an index of p r o s p e r i t y .
t5-
X-U045
SCHEDULE OF COITZCTIONS
(In'.millions of gold marks)
I
First
Year
Second
Year
j
Vi a. lllcXL J U UUgC V — — —
T? A 4 1 A O v*l
I n t e r e s t on railway bonds
Sale c^f railway p r e f e r e n c e
—
800
200
595
500
125
I n t e r e s t on i n d u s t r i a l bonds —
11 dilu vl V wU-A
Total
1 ......
1,00C
1,220
Transition
period
Standard
year
F i f t h and
subsequent
years
Third
Year
1
1
Fourth
Ye.,r
110
500
1,250
550
660
660
O O
Budget moratorium period
300
290
300
290
1,200
1,750
2,500
Sources of c o l l e c t i o n s In t h e proposed schedule, as shown above, no c o l l e c t i o n s on r e p a r a t i o n account are expected t o bs made out cf funds derived from the ordinary budget during
the two years of r e c u p e r a t i o n or s o - c a l l e d budget moratorium.
I t i s a requirement
of the plan, however, t h a t f o r t h e s e two y e a r s taken as a whole ordinary revenues
and expenditures s h a l l balanceIn the t h i r d year the budget i s expected to c o n t r i b u t e l l u , 0 0 0 , v 0 gold marks.
i n the f o u r t h year 500,000,000 marks, and in the f i f t h and subsequent y e a r s
1,2^0,000,000 marks, which c o n s t i t u t e s one-half of the t o t a l standard payment.
The c o n t r i b u t i o n s of the budget to r e p a r a t i o n payments a r e t o be secured by the
control and s u p e r v i s i o n of revenues derived from taxes on tobacco, a l c o h o l , sugar,
and b e e r , and from customs r e c e i p t s .
During the t r a n s i t i o n period, the t h i r d and
f o u r t h y e a r s , p r o v i s i o n i s made f o r i n c r e a s e s and decreases in payments w i t h i n the
-6-
X-U0U5
l i m i t of 250,000,000 marks, dependent upon the y i e l d of these controlled revenues
It i s estimated that these revenues w i l l y i e l d in the standard year over
2,000,000,000 marks, against which reparation payments w i l l be a f i r s t charge.
Any excess of y i e l d over t h i s charge w i l l be a v a i l a b l e to the German Government
for ordinary expenditures.
Beyond indicating the t o t a l amounts to be paid from
budget and the guarantees provided by the controlled revenues, the committee does
not undertake to prescribe methods of r a i s i n g revenue, but Germany i s l e f t f r e e
to devise such f i e c a l arrangements as seem best adapted to her conditions.
The
committee does, however, commend to the German Government c e r t a i n methods of
taxation which have been worked out by technical experts.
A proposed f o r e i g n loan of 800,000,000 gold marks i s to bd the chief source
of reparation payment during the f i r s t y e a r .
This loan i s intended to "serve the
double purpose of assuring currency s t a b i l i t y and financing e s s e n t i a l d e l i v e r i e s
in kind during the preliminary period of economic r e h a b i l i t a t i o n . "
The r e l a t i o n
of t h i s loan to the proposed bank of issue and i t s use as a b a s i s of currency
s t a b i l i z a t i o n i s considered l a t e r in t h i s review.
Other proposed sources of payment are i n t e r e s t on railroad and i n d u s t r i a l
bonds r the s a l e of railway preference shares, and the transport t a x .
The com-
mittee places upon the German railroads a t o t a l valuation of 26,000,000,000 gold
marks, and against t h i s t o t a l i t s plan provides for the issue of 11,GOO,COO,000
of mortgage bonds, 2,000,CO,COO of preference shares, and 13,000,000,000 of common stock.
The mortgage bonds, which shall be guaranteed by the German Government
are to be turned over to the Reparation Commission and are to bear i n the standard
year a rate of i n t e r e s t of 5 per cent and an amortization charge of 1 per cent,
The income from t h e s e bonds, which i n c r e a s e s during the f i r s t four y e a r s , i s the
p r i n c i p a l source of payments luring these y e a r s .
Of the p r e f e r e n c e shares, one-
f o u r t h i s to be turned over t o the German Government and t h r e e - f o u r t h s to a company
which i s to take over the operation., of t h e r a i l r o a d s .
This company i s t o be ad-
ministered by a board of d i r e c t o r s r e p r e s e n t i n g the Reparation Commission, the German Government, and t h e h o l d e r s of the p r e f e r e n c e s h a r e s .
From the s a l e of i t s
preference shares the Government i s to make r e p a r a t i o n payments i n the second year
amounting t o ^00,000,000 marks, and in case the sale of these shares f a i l s to
y i e l d t h i s amount the d e f i c i t i s t o be made up by an i n t e r n a l l o a n .
The common
stock i s t o be issued t o the German Government, which w i l l have a u t h o r i t y t o hold
the stock or t o s e l l i t , a s i t p r e f e r s .
Through redemption of the bonds and the
repurchase of t h e p r e f e r e n c e shares the plan provides a means f o r t h e German Government u l t i m a t e l y t o r e g a i n control of the r a i l r o a d s .
TJpon German industry the plan places a mortgage amounting t o 5»000., 000,000
gold marks t o be r e p r e s e n t e d by bonds, the burden to be d i s t r i b u t e d a-rong i n d i v i d u a l concerns and guaranteed by the Government.
The y i e l d of these bonds in the
standard year (5 per cent i n t e r e s t plus 1 per cent a m o r t i z a t i o n ) i s to be a source
of r e p a r a t i o n payments beginning with the second y e a r .
The t a x now l e v i e d on r a i l -
road t r a n s p o r t a t i o n i s r e t a i n e d and, beginning with the t h i r d y e a r , i s t o be a d i r e c t source of r e p a r a t i o n payments up to 290,000,000 marks.
Total payments under
the schedule, a s shown in the t a b l e , are t o i n c r e a s e from 1,000,000,003 gold marls
in the f i r s t year t o 2,500,000 ,000 gold marks in the standard, y e a r .
—8—
X—U0U5
• Commensurate t a x a t i o n . ~
A guiding p r i n c i p l e used by tne committee in determining t h i s schedule of
annual payments was that the German people should bear a burden of t a x a t i o n as
heavy as t h a t borne by the peoples of the a l l i e d c o u n t r i e s - the p r i n c i p l e of
commensurate t a x a t i o n .
This p r i n c i p l e , which i s considered j u s t i n i t s a p p l i c a -
t i o n t o Germany, i s a l s o deemed to be economically d e s i r a b l e , because i t tends
toward competitive e q u a l i t y in i n t e r n a t i o n a l t r a d e between Germany and the A l l i e s
The placing of a mortgage debt of 16,000,000,1?0 marks upon German r a i l r o a d s and
industry i s in r e c o g n i t i o n of the f a c t t h a t a l l bonded indebtedness in Germany
has been v i r t u a l l y extinguished through the f a l l of the mark,
Railroads and i n -
dustry, which through the d e p r e c i a t i o n of the German currency have been r e l i e v e d
of a l a r g e p a r t of t h e i r burden of bonded indebtedness to i n v e s t o r s , a r e to cont r i b u t e u n d e r . t h i s plan to currency and f i s c a l r e s t o r a t i o n and t o r e p a r a t i o n payments through the assumption of a mortgage debt to the Reparation Commission.
I n t e r e s t payments on t h i s mortgage debt into r e p a r a t i o n account w i l l under the
plan take the p l a c e of the annual i n t e r e s t charges which were borne by German ent e r p r i s e s in tho y e a r s b e f o r e i n f l a t i o n .
No mortgage debt i s placed upon a g r i -
c u l t u r e , but i t i s recommended t h a t the German Government, i n case i t deems i t
d e s i r a b l e , impose such a mortgage in favor of the r e g u l a r budget.
Certain o b l i -
gations, i t may be noted, have already been imposed upon a g r i c u l t u r a l land
through the levy which guarantees the rentenmarks.
Two c o n s i d e r a t i o n s are indicated by the committee which might l e a d to a modi
f i c a t i o n of the annual t o t a l s s p e c i f i e d in the schedule - growth of i n d u s t r i a l
p r o s p e r i t y and changes in the value of gold.
For the purpose of enabling the
-q-
X-4oU5
A l l i e s t o . s h a r e in the growth of German industry and t r a d e , an index of prosperity i s proposed, which, a f t e r the f i r s t f i v e years, may i n d i c a t e v a r i a b l e addit i o n s to the standard payments on r e p a r a t i o n account.
Thus the payments, instead
of being modified by changes in the value of exports alone as i s contemplated under e x i s t i n g arrangements, w i l l under the proposed plan increase in accordance
with a composite index based upcn s t a t i s t i c s of railway t r a f f i c , population
growth, t o t a l f o r e i g n t r a d e , consumption of tobacco, sugar, beer, and alcohol,
budget
expenditures (excluding r e p a r a t i o n payments), and per c a p i t a consump-
tion of coal.
There i s no provision f o r decreasing the standard payments on the
b a s i s of the p r o s p e r i t y index, but in case i t i n d i c a t e s a reduced capacity f o r
payment in any year the amount of the deficiency i s to be deducted from any f u t u r e
supplementary payment based on the index,
A f u r t h e r m o d i f i c a t i o n i s provid-
ed f o r on the b a s i s of changes in the value of gold which, i n case they exceed
10 per cent of i t s value in 1928,.may r e s u l t in f u t u r e years in a corresponding
increase or decrease of annual r e p a r a t i o n payments.
-10Transfer of funds to A l l i e s -
X-4045
A more important f a c t o r in i t s p o s s i b l e
e f f e c t upon t o t a l r e p a r a t i o n payments i s the p r o v i s i o n which p l a c e s a d e f i n i t e
l i m i t upon the accumulation of r e p a r a t i o n funds in Germany in excess of the
amount t h a t can be t r a n s f e r r e d abroad without r e s u l t i n g in undue f l u c t u a t i o n of
exchanges *
In c a s e c o l l e c t i o n s on r e p a r a t i o n account a r e in excess of what
Germany *s balance of payments w i l l make i t p o s s i b l e to remit to the A l l i e s , a
l i m i t i s placed upon the accumulation of r e p a r a t i o n funds in Germany*
Up to
2,000,000*000 marks t h e s e funds, which a r e to be d e p o s i t e d in t h e new bank of
i s s u e , may be used i n short-term c r e d i t operations in Germany.
If the accumula^
t i o n continues beyond t h i s amount and up to ^,000,000,000 marks, the funds may
be used by the A l l i e s in Germany in t h e purchase of bonds and other forms of investment,
When, however, the t o t a l amount of t h e s e funds reaches S,000,000,000
marks p r o v i s i o n i s rnde f o r a decrease of payments out of t h e budget
and the t r a n s p o r t tax and f o r t h e i r discontinuance to the e x t e n t t h a t t r a n s f e r s
can not be e f f e c t e d *
Even, b e f o r e the funds accumulated reach t h i s t o t a l the
payments may be modified if in the judgment of the t r a n s f e r committee i t appears
t h a t f u r t h e r accumulation i s a menace to the f i s c a l or economic s i t u a t i o n of
Germany or to the c r e d i t o r c o u n t r i e s .
In case the t r a n s f e r committee d i s -
covers concerted f i n a n c i a l maneuvers by the Government or by i n d i v i d u a l s to i-*rethe
vent / t r a n s f e r , the t r a n s f e r committee may undertake whatever measures a r e necessary t o defeat t h e s e maneuvers and i s authorized under these circumstances t o
accumulate funds beyond t h e l i m i t of 5>000,000,000 marks.
In d i s c u s s i n g the r e l a t i o n betwesi c o l l e c t i o n ~ that i s , the German
taxpayers 1 c a p a c i t y t o jjay ~ and remittance abroad - t h a t i s , Germany * s capacity
-11--
x-4045
to pay t h e A l l i e s - r e c o g n i t i o n i s made in t h e r e p o r t of t h e f a c t t h a t the
amount t h a t can be p a i d abroad by means of an economic surplus in i n t e r n a t i o n a l
trade i s "by comparison with the budget, incapable of c l o s e c a l c u l a t i o n , 'unmanageable *, and t o o e l a s t i c .
Tut l i m i t s s e t by economic b a l a n c e , i f im-
p o s s i b l e of exact determination, a r e r e a l .
For s t a b i l i t y of a c o u n t r y ' s
currency t o be permanently maintained, not only mast her budget be balanced
but h e r earnings from abroad mast be equal to the payments she mast make
abroad, including not only payments f o r goods she imports b u t sums p a i d in
reparation.
Nor can balance of -the budget'i i t s e l f be permanently maintained
except on the same c o n d i t i o n s . "
Thus the amount which the exchange p o s i t i o n
makes i t p o s s i b l e f o r the A l l i e s to t r a n s f e r not only l i m i t s the r e c e i p t s t o
the A l l i e s on r e p a r a t i o n account but a l s o u l t i m a t e l y p l a c e s a l i m i t upon the
c o l l e c t i o n s to be irade i n Germany.
Faced with t h i s l i m i t a t i o n t h e committee
does n o t undertake t o make a d e f i n i t e estimate of t h e amount which can be
t r a n s m i t t e d , but makes the volume of t r a n s f e r s depend upon the a c t u a l exchange
s i t u a t i o n a s i t develops in experience.
BAfik of I s s u e - Reference has already been made t o the proposed bank
of i s s u e , which i s to serve as the d e p o s i t a r y of r e p a r a t i o n funds c o l l e c t e d in
Germany and i s r e g a r d e d by the committee as an e s s e n t i a l agency f o r t h e c r e a t i o n
of a u n i f i e d and s t a b l e currency.
which the r e c a i t s t a b i l i t y of Gernan
Establishment of t h e Benten'oank, through
currency has been brought about, i s viewed
by t h e committee a s not a f f o r d i n g , in t h e absence of other measures, an adequate
guaranty of permanent s t a b i l i z a t i o n .
Such s t a b i l i t y the committee b e l i e v e s i s
e s s e n t i a l to the maintenance of a balanced budget and t h e r e s t o r a t i o n of German
-12credit.
X-4O45
The commit tee provides safeguards that reparation payments w i l l
not lead to i n s t a b i l i t y of exchange through the control i t places in the
hands of the transfer committee, and proposes to maintain the gold value of
the domestic currency by means of the establishment of the new bank of issue
and through the l i m i t a t i o n s placed upon i t s n o t e - i s s u i n g power.
The bank i s to perform the usual functions of a central bank and
may, in f a c t , be established through a reorganization of the Reichsbank.
The
c a p i t a l of the bank i s to be 400,000,000 gold marks, of which one-fourth i s t o
represent the f i x e d a s s e t s of the Reichsbank and the remainder i s to be offered
for s a l e in Germany and abroad.
The bank i s to have the exclusive r i 6 h t , with
certain minor q u a l i f i c a t i o n s , to i s s u e notes, and a l l other notes now in c i r culation are to be gradually withdrawn.
Against these notes the bank i s re-
quired t o maintain a normal reserve of 33-1/3 per cent in gold, s t a b l e foreign
exchange and gold c r e d i t s with foreign banks.
The purpose i s t o keep the
currency stable in r e l a t i o n to gold and a s soon as conditions w i l l permit to
place i t upon a convertible b a s i s .
Against i t s demand deposits the bank i s to
maintain a reserve of 12. per cent in gold, with c e r t a i n further provisions regarding l i q u i d i t y of a s s e t s .
The bank i s intended to be primarily a bankers'
bank, though i t may make loans d i r e c t l y to the p u b l i c , with safeguards as to
type and naturity of paper to be discounted.
I t i s to be the f i s c a l agent of
the German Government, but e n t i r e l y f r e e from governmental control, and i t s
power ,to l a i d to the Government and to State enterprises i s s t r i c t l y limited.
It i s contemplated that the new bank of i s s u e , which w i l l either,
supersede the Reichsbank or be the outcome of a reorganization of that bank,
- 13 w i l l absorb the r e c e n t l y organized gold discount bank (the s o - c a l l e d Schacht
B&nk).
This l a t t e r bank i s considered an i n t e r i m arrangement e x p r e s s l y l i m i t e d
to p r o v i d i n g the means of carrying on f o r e i g n t r a d e and thus supplementing the
Eentenbank, whose o p e r a t i o n s and currency i s s u e s a r e l i m i t e d to domestic t r a d e .
According to the committee's p l a n , the Eentenbank i s to be l i q u i d a t e d .
With
the p a s s i n g of the Eentenbank and the absorption of t h e gold discount bank,
the new bank of i s s u e i s intended through i t s operation a t home and abroad t o
take over the f u n c t i o n s which a t p r e s e n t a r e performed by both of t h e s e i n stitutions.
Proposed Administrative Machinery - P r o v i s i o n i s made i n t h e plan f o r
machinery to administer the bank of i s s u e and the r a i l r o a d s , and f o r t h e establishment of a t r a n s f e r committee.
Administrative arrangements w i t h r e f e r e n c e to
t h e bank provide f o r an organization committee c o n s i s t i n g of the p r e s i d e n t of t h e
Beichsbank and one member of the committee of e x p e r t s ;
and a f t e r i t s e s t a b l i s h -
ment a general board of 14 members, 7 e l e c t e d by German stockholders and 7 f o r e i g n
members, r e p r e s e n t i n g United S t a t e s , Great I r i t a i n , France, I t a l y , Belgium, the
Netherlands, and Switzerland, to be appointed by t h e organization committee, and
later selfperpetuating.
This board i s t o elect t h e p r e s i d e n t of t h e bank, who
mast be approved by t h e p r e s i d e n t of t h e Reich, and f o r the f i r s t s i x months of
the bank*s operation i s t o be t h e p r e s i d e n t of the Beichsbank.
The board i s
to have general s u p e r v i s i o n of the operations of t h e bank, and t h e a c t u a l adm i n i s t r a t i o n i s t o be in charge of a mana E .in e board t o c o n s i s t of German n a t i o n a l s
appointed by the p r e s i d e n t s u b j e c t to the approval of the general board and .the
p r e s i d e n t of the Reich.
In a d d i t i o n t h e general board s h a l l e l e c t a banking
commissioner to s u p e r v i s e the maintenance of r e s e r v e s and tne i s s u e and r e demption of n o t e s .
- 14 -
X-4045
The r a i l r o a d s a r e to be operated by a board of IS d i r e c t o r s , ; 9 of whom
a r e t o be appointed by the t r u s t e e of the mortgage bonds and 9 by the German
Government.
A f t e r the s a l e of the p r e f e r e n c e shares the h o l d e r s of these
shares w i l l e l e c t f o u r d i r e c t o r s and the Government w i l l appoint f i v e .
Of
the d i r e c t o r s appointed by the t r u s t e e , f i v e may be of German n a t i o n a l i t y .
chairman of t h e board and t h e general manager s h a l l be Germans.
The
The f o r e i g n
members of t h e board of d i r e c t o r s w i l l s e l e c t the commissioner of railways who
i s t o e x e r c i s e s u p e r v i s i o n over t h e operations of the roads, and i n case the
railways f a i l t o y i e l d n e t revenues s u f f i c i e n t to meet the r e q u i r e d r e p a r a t i o n
payments, i s to t a k e over the f u n c t i o n s of the g e n e r a l manager.
The Reparation Commission w i l l appoint a t r u s t e e of bonds and a.
commissioner of c o n t r o l l e d revenues.
The t r u s t e e w i l l receive and hold tne
railway and i n d u s t r i a l bonds and w i l l have cnarge of tne s a l e of tnese bonds
and the c o l l e c t i o n of i n t e r e s t payments.
The duty of the commissioner of con-
t r o l l e d revenues w i l l be to supervise t h e r e p a r a t i o n payments out of budget, and
in case of d e f a u l t to take complete charge of the c o n t r o l l e d revenues.
All o p e r a t i o n s in connection with tne t r a n s f e r of funds to ti>e A l l i e s
and the investment i n Germany of accumulated funds i s to be i n cnar^e of <» t r a n s f e r committee appointed by the Separation Commission,
With t h i s committee w i l l
r e s t the d e c i s i o n to suspend c o l l e c t i o n s when the f u n d s exceed the s t a t e d l i m i t
of 5,000,000,000 marks.
This committee w i l l include in i t s membership the anient
f o r r e p a r a t i o n payments, who i s to be the p r i n c i p a l r e p r e s e n t a t i v e of t h e Repa r a t i o n Commission and i s t o coordinate the a c t i v i t i e s of a l l the agencies p r o posed by the p l a n .
Foreign Loan — Funds a r i s i n g from the proposed f o r e i g n loan of
- 15 -
x-uou-5
800,000,000 gold marks, to which r e f e r e n c e has been made in connection with the
f i r s t y e a r ' s r e p a r a t i o n payments, w i l l be deposited in the bank to the c r e d i t
of the German Government and w i l l c o n s t i t u t e a c o n t r i b u t i o n t o i t s r e s e r v e s
and thus enlarge the b a s i s of i t s currency i s s u e s .
The loan w i l l a l s o help to
overcome the acute s h o r t a g e of l i q u i d funds in Germany and w i l l a s s i s t in meeting her immediate and more urgent o b l i g a t i o n s to the A l l i e s , p a r t i c u l a r l y in
making payments in Germany f o r goods to be d e l i v e r e d on r e p a r a t i o n account.
In commenting upon the c r e d i t p o s i t i o n of Geraany i n connection with
the proposed f o r e i g n loan and upon the use to be made of the funds thus r a i s e d ,
the r e p o r t s t a t e s t h a t "A c o n s i d e r a b l e sum can c e r t a i n l y be r a i s e d upon the good s e c u r i t y
that t h e plan p r o v i d e s , with a c l e a r prospect of improved i n t e r n a t i o n a l p o l i t i c a l
p o s i t i o n and of s t a b i l i t y .
"The q u e s t i o n i s , t h e r e f o r e , whether t h e claims upon Germany can be so
reduced by agreement amon^ the a l l i e d c r e d i t o r s as t o come within t n i s p o t e n t i a l
credit.
If they can, then obviously the g r e a t e r the reduction the more moderate
the sum to be r a i s e d , and the g r e a t e r the p r o b a b i l i t y of Germany s u c c e s s f u l l y
r a i s i n b : a loan.
If n o t , then, the loan w i l l not be forthcoming, s t a b i l i t y can
not be insured, and n e i t h e r t h i s p l a n nor any other can come i n t o b e i n g .
« •
- 16 -
X-4045
"The s u c c e s s f u l launching of the scheme depends, therefore, upon three
main f a c t o r s :
( l ) Limitation of payments for a l l purposes to 1,000,000,000
gold marks, of which at least 800,000,000 mast be spent in Germany for the f i r s t
year, and thereafter to such sums as are available under the plan during the
succeeding, years;
(2) cooperation between the A l l i e s and Germany in securing
p o l i t i c a l conditions w^ich w i l l i n c l i n e the investors of the world favorably
toward the German loan upon £ ood security;
(3) a loan of 800,000,000 gold
marks, which w i l l serve the double purpose of securing currency s t a b i l i t y and
financing e s s e n t i a l d e l i v e r i e s in kind during the preliminary period of economic
rehabilitation,"
Currency S t a b i l i z a t i o n and Reparations - Flotation of t h i s external
loan w i l l be one of the f i r s t p r a c t i c a l steps in the carrying out of trie plan,
a f t e r the acceptance of the report by the Governments concerned, and will t e s t
the a c c e p t a b i l i t y to the investing public of the s e c u r i t y offered by the plan.
Banking credits of a short-term character have already been granted by ITew York
and London bankers in connection with the recent establishment of the gold d i s count bank in Gernany,
The establishment of foreign c r e d i t s as a means of
s t a b i l i z i n g currency in relation to gold was the plan followed by a number of
other European countries during the past year, and t-ie r e s u l t s of t n i s metnod
of currency s t a b i l i z a t i o n were described in the previous issue of the Federal
Reserve b u l l e t i n .
In e f f e c t taese plans e s t a b l i s h a
& old
exchange standard and
may be regarded as c o n s t i t u t i n g an intermediate arrangement between depreciating
paper money with wide fluctuations in exchange and currency s t a b i l i t y on tne gold
- 1% standard.
X-4045
Currensy reforms under taken i n Europe have been in the d i r e c t i o n of
r e e s t a b l i s h i n g the connection between domestic c u r r e n c i e s and gold by l i n k i n g
them to s t a b l e f o r e i g n exchanges.
In those c o u n t r i e s whose budgetary p o s i t i o n
was not immediately a f f e c t e d by the payment of r e p a r a t i o n s , t n i s method of
currency reform has r e s u l t e d in a g r e a t e r s t a b i l i t y of exchange.
In Germany
the balancing of t h e budget and t h e s t a b i l i z a t i o n of the currency i s complicated
by r e p a r a t i o n o b l i g a t i o n s , but in i t s proposals the committee nas considered
currency s t a b i l i t y as e s s e n t i a l t o the r e s t o r a t i o n of German c r e d i t and .nas
made t h e maintenance of s t a b i l i t y a limiting, f a c t o r upon the payment of
reparations.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4O47
toy 5, 1924.
Subject:
Advice of Holiday;
Portland Branch.
Dear S i r : The Portland Branch of the Federal Reserve Bank
of San Francisco w i l l be closed on Rriday, May l 6 t h ,
on account of Election Day.
Therefore, that o f f i c e
w i l l not p a r t i c i p a t e in either the regular d a i l y Gold
IVmd Clearing or the Federal Reserve Note Clearing of
that date.
Please include your credits for May l 6 t h
with your c r e d i t s for May 17th for that o f f i c e i n your
Gold Fund Clearing telegrams of May l?th«
Kindly n o t i f y Branches.
Yours very t r u l y ,
J * C. Noell>
Assistant Secretary.
10 GOVERNORS OF ALL FEDERAL RESERVE BANZS, except San Francisco.
FEDERAL RESERVE BOARD
WASHINGTON
A i f e R E S S OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-404S
May 7, 1 9 * .
Subject:
A f f i l i a t i o n of o f f i c e r s and enployees with outside
business concerns.
Dear S i r : The Board r e c e n t l y received the following anonymous l e t t e r :
"Since when has the Federal reserve bank through i t s iranagers,
such as —
•—, gone into stock selling? 1 1 Upon inquiry
i t developed that an o f f i c e r of a Federal reserve branch bank had
become president and director of a certain real e s t a t e investment
company. He had accepted this p o s i t i o n on the understanding that
h i s connection with the Federal reserve bank should not be used
in any way for the b e n e f i t of the r e a l estate coop any, and that
he could give to the company only so much of h i s time and s e r v i c e s
as were not devoted to the a f f a i r s of the Federal reserve branch.
When the question was raised as to the propriety of h i s connection
with the real e s t a t e company, he immediately severed that connection.
There appears t o be no provision of law which would prohibit
an o f f i c e r of a Federal reserve bank from forming an outside conn e c t i o n with a business concern of any kind, but the Federal Reserve Board b e l i e v e s i t w i l l be as obvious to the d i r e c t o r s of the
Federal reserve banks as i t i s to i t s e l f that the _ood conduct and
repute of the Federal Reserve System require that the o f f i c e r s of
the reserve banks s h a l l give their entire time and attention to the
a f f a i r s of the banks and not be i d e n t i f i e d with any outside business
interests.
The suggestion i s made that the board of directors of each r e serve bank, i f i t has not already done s o , reach some understanding
with the personnel of the bank concerning a f f i l i a t i o n s with outside
business enterprises.
Very truly yours,
Governor.
TO CHAIRMEN OF ALL F. E. BANGS.
FEDERAL RESERVE BOARD
WASHINGTON
x-Uo4g*
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May 7i 192%
SUBJECT:
Report of Committees of Experts to
Reparation Commission.
Dear S i r :
By d i r e c t i o n of the f e d e r a l Reserve
Board, I am t r a n s m i t t i n g herewith a copy of t h e
complete o f f i c i a l English t e x t , with annexes, of
t h e Report of Committees of Experts to Reparation
Commission.
Very t r u l y y o u r s ,
J . C. Noell,
Assistant Secretary.
TO DIRECTORS, CHAIRMEN AND GOVERNORS OF ALL F.R. BANES,
AND DIRECTORS OF ALL BRANCHES.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-4051a
May 9, 1924.
SUBJECT:
Regulation "J", Series of 1924,
Dear S i r :
The Federal Reserve Board has adopted
the enclosed Regulation "J", Series of":.l'92U, which
supersedes i t s Regulation "J" of 192c.
This
Regulation i s e f f e c t i v e immediately, and you are
requested to prepare and send copies to a l l of your
member and clearing non-member banks.
Yours very t r u l y ,
Edmund P i a t t ,
Vice Governor.
To Governors of a l l F. R. Banks
Copies t o Agents.
X-4051
REGULATION J.
Series of 1924
(Superseding Regulation J of l^dC)
CHECK CLEARING AND COLLECTION
SEC Tim I-
STATUTORY PROVISIONS.
Section 16 of the Federal Reserve Act authorizes the Federal Reserve Board to require each Federal Reserve Bank to exercise the functions
of a clearing house for i t s member barus.5, and Section 13 of the Federal
Reserve Act, as amended by the act approved June 21, 191%, authorizes each
Federal Reserve Bank to receive from any nonmember bank or trust companyy
s o l e l y for the purposes of exchange or of c o l l e c t i o n , deposits of current
funds in lawful money, national-bank notes, Federal Reserve n o t e s , checks
and drafts payable upon presentation, or maturing notes and b i l l s , provided
such nonmember bank or trust company maintains with i t s Federal Reserve
Bank a balance s u f f i c i e n t to o f f s e t t i e items in transit held for i t s account by the Federal Reserve Bank.
SECTION I I .
GENERAL REQUIREMENTS.
In pursuance of t-.e authority vested in i t under these provisions of
law, the Federal Reserve Board, desiring to afford both to the public and
to the various banks of tne country a d i r e c t , expeditious, and economical
system of check c o l l e c t i o n and settlement of balances, has arranged to
have each FederCL Reserve Bank exercise the functions of a clearing house
and collect checks for such of i t s member banks as desire t o a v a i l themselves of i t s p r i v i l e g e s and f o r such nonmember State banks and trust
companies as may maintain with the Federal Reserve Bank balances s u f f i c i e n t
to qualify them under the provisions of section 13 to send items to Federal
Reserve Banks for purposes of excnange or of c o l l e c t i o n .
Such nonmember
State ban^s and t r u s t companies w i l l hereinafter be referred to as nonmember
clearing banks.
Each Federal Reserve Bank s h a l l exercise the functions of a clearing
house and c o l l e c t cnecks under the general terms and conditions hereina f t e r set forth.
SECTION I I I .
CHECKS RECEIVED FOR COLLECTION.
(1) Each Federal Reserve Bank w i l l receive at par from i t s member
banks and from nonmember clearing banks in i t s d i s t r i c t , checks drawn
*A c.ieck i s generally defined as a draft or order upon a bank or banking
house, purporting to be drawn upon a deposit of funds, for the payment
at a l l events of a certain sum of money to the order of a c e r t a i n person
tnerein named, or to him or his order, or to bearer, and payable on demand.
X-4051
on a l l member and 11 on member clearing banks, and checks drawn on a l l ether nonmember banks which are c o l l e c t a b l e at par in funds acceptable to the, Federal Reserve Bank of the d i s t r i c t in which ?uch nonmeriber banks are located.
(2) Each Federal Reserve Bank w i l l receive at par from other Federal tieserve Banks, and from a l l member and nonmember clearing banks in other Federal
Reserve D i s t r i c t s which are authorized to route direct for t h e credit of t n e i r
respective Federal Reserve Banks, checks drawn on a l l member and nonmeraber^clearing banks of i t s d i s t r i c t , and checks drawn on a l l other nonmember banks of i t s dist r i c t wnich are c o l l e c t a b l e at par in funds acceptable to the c o l l e c t i n g Federal
Reserve Bank.
(3) No Federal Reserve Ban^: shall receive on deposit or f o r c o l l e c t i o n any
check drawn on any nonmember bank which cannot be. c o l l e c t e d at par in funds acceptable to the Federal Reserve Bank of the d i s t r i c t in which such nonmember bank
i s located,
SECTION IV.
TIME SC15DUIE AND AVAILABILITY OF CREDITS.
(1) Each Federal Reserve Bank w i l l publish a time schedule showing the
time at which any item sent to i t will be counted as reserve and become a v a i l able for withdrawal or other use by the sending bank. For a l l cnecks received,
the sending; bank w i l l be ^iven immediate c r e d i t , or deferred c r e d i t , in accordance with such time schedule, and as provided below.
(2) For a l l such checks as are received f o r immediate credit in accordance
with such time schedule, immediate credit, subject to f i n a l payment, w i l l be
given upon the books of the Federal Reserve Bank at f u l l face value in the reserve account or clearing account upon day of r e c e i p t , and the proceeds w i l l
at once be counted as reserve and become available for withdrawal or other use
by the sending bank,
(3) For a l l such checks as are received f o r deferred c r e d i t in accordance
with such time schedule, deferred credit, subject to f i n a l payment, w i l l be entered upon the books of the Federal Reserve Bank at f u l l f a c e value ^ out tne
proceeds w i l l not be counted as reserve nor become available for witndxawa
other use by the sending bank u n t i l sucn time a s nay be s p e c i f i e d in sucn time
schedule, at which time c r e d i t w i l l be transferred from the deferred account to
the reserve account or clearing account suoject to f i n a l payment an wi
n
be counted as reserve and become available for withdrawal ojr other use by the
sending bank.
•*«P
SECTION V.
TEEMS OF COLLECTION.
The Federal Reserve Board hereby authorizes the Federal Reserve Banks t o
authority.
- 3-
X-14051
(1) A Federal Reserve Bank w i l l act only as agent of the bank from which i t
receives such checks and w i l l assume no l i a b i l i t y except f o r i t s own negligence
and i t s guaranty of p r i o r indorsements.
(2) A Federal Reserve Bank may present such checks f o r payment or send such
checks f o r c o l l e c t i o n d i r e c t to the bank on which they are drawn or a t which they
are payable, or in i t s d i s c r e t i o n m y forward them to another agent with authori t y to present them f o r payment or send them f o r collection d i r e c t to the bank
on which they a r e dravai or at which they a r e payable.
(3) A Federal Reserve Bank may in i t s d i s c r e t i o n and a t i t s option, e i t h e r d i r e c t l y or through an agent, accept either cash or bank d r a f t s in payment of
or in remittance for such cneck» and s h a l l net be held l i a b l e f o r any loss r e sulting from the acceptance of bank d r a f t s in l i e u of cash, nor for the f a i l ure of the drawee bank or any agent to remit f o r such checks, nor f o r the nonpayment of any bank d r a f t accepted in payment or as a remittance from the drawee
bank or 'any agent.
(4) Checks received by a Federal Reserve Bank on i t s member or nonmember
clearing banks w i l l ordinarily be forwarded or presented d i r e c t t o such banks,
and such banks w i l l be required to remit or pay therefor at par in cash or bank
d r a f t acceptable to the c o l l e c t i n g Federal Reserve Bank, or a t the option of such
Federal Reserve Bank to authorize such Federal Reserve Bank to charge t h e i r r e serve accounts or clearing accounts; provided, however, t h a t any Federal Reserve
Bank cay reserve the r i g h t in i t o check collection c i r c u l a r to charge such items
to the reserve account or clearing account of any such bank at any time when in
any p a r t i c u l a r case the Federal Reserve Bank deems i t necessary to do so,
(5) Checks received by a Federal Reserve Bank payable in other d i s t r i c t s
w i l l be forwarded f o r c o l l e c t i o n upon the terms and conditions herein provided
to the Federal' Reserve Bank of the d i s t r i c t in which such checks are payable,
(6) The amount of any check f o r which payment in actually and f i n a l l y
collected funds i s not received s n a i l be charged back to t h e forwarding bank,
regardless of whether or not t h e check i t s e l f can be returned.
SECTION, VI.
PENALTIES FOR DEFICIENCIES IN RESERVES.
(a) Statutory provisions.
Section 15 of the Federal Reserve Act provides t h a t -
The required balance c a r r i e d by a member bank with a Federal Reserve Bank
may, under the regulations and subject to such p e n a l t i e s as may be prescribed
by the Federal Reserve Board, be checked against and withdrawn by such member
bank for the purpose of meeting existing l i a b i l i t i e s ; Provided, however, t h a t
no bank shall at any time make new loans or s h a l l pay any dividends unless and
u n t i l the t o t a l balance required by law i s f u l l y r e s t o r e d .
(b) CotQpusfcstlcn of reserves . - I t ems can not be counted as p a r t of the minimum reserve bala&c-e to be c a r r i e d by a member bank with i t s Federal Reserve Bank
u n t i l such time a s aay be s p e c i f i e d in t h e appropriate time schedule r e f e r r e d
to in Section IV. If & member bank draw against items before such time, the
d r a f t will be charged against i t s reserve balance i f such balance be s u f f i c i e n t
in amount to pay i t ; but any r e s u l t i n g impairment of r e s e r v e balances w i l l be
subject to a l l the p e n a l t i e s provided by the Act.
J-4051
u J'
(c) Basic penalty* - Inasmuch as i t i s e s s e n t i a l tha4t the law in
respect to t h e maintenance by member banks of the r e q u i r e d minimum r e serve Dala nee s h a l l be s t r i c t l y complied w i t h , the Federal Reserve Board, •
under a u t h o r i t y v e s t e d i n i t by section 19 of the Federal Reserve Act*
hereby p r e s c r i b e s a b a s i c penalty f o r d e f i c i e n c i e s i n r e s e r v e s according
to the following r u l e s :
1* D e f i c i e n c i e s i n r e s e r v e balances of member banks i n c e n t r a l
reserve and r e s e r v e c i t i e s w i l l be computed on the b a s i s of average d a i l y
net deposit balances covering a weekly period of seven d a y s . D e f i c i e n c i e s
in reserve balances of other member banks w i l l be computed on the b a s i s
of average d a i l y net deposit balances covering a semi-monthly period *
.2* P e n a l t i e s for d e f i c i e n c i e s in r e s e r v e s w i l l be a s s e s s e d monthly
on the basis of average d a i l y d e f i c i e n c i e s during each of t h e r e s e r v e
c o n f u t a t i o n p e r i o d s ending in the preceding month*
3* A b a s i c r a t e of 2 per cent per annum above the Federal Reserve
lank discount r a t e on 90-day commercial paper w i l l be assessed as a
penalty on d e f i c i e n c i e s i n r e s e r v e s of member banks*
(d) Progressive penalty* - The Federal Reserve Board w i l l also p r e scribe for any Federal Reserve D i s t r i c t , upon the a p p l i c a t i o n of the
Federal Reserve Bank of t h a t d i s t r i c t , an a d d i t i o n a l p r o g r e s s i v e penalty
tor continued d e f i c i e n c i e s in r e s e r v e s , i n accordance with t h e following
rules,
1 * When a member bank in a central r e s e r v e or r e s e r v e c i t y has had
an average d e f i c i e n c y i n r e s e r v e s for s i x consecutive weekly periods,
a p r o g r e s s i v e . p e n a l t y , increasing a t the r a t e of one-fourth of 1 p e r cent
for each week t h e r e a f t e r during which t h e average r e s e r v e balance i s d e f i c i e n t , will be assessed on weekly d e f i c i e n c i e s u n t i l the required r e serve has been r e s t o r e d and maintained for four consecutive weekly p e r i o d s ,
provided t h a t the maximum p e n a l t y charged w i l l not exceed. 10 per cent *
2. VZhen a member bank outside of a c e n t r a l r e s e r v e or r e s e r v e c i t y
has had an average d e f i c i e n c y i n reserves for three consecutive semimonthly p e r i o d s , a progressive p e n a l t y , i n c r e a s i n g a t the r a t e of one-half
of 1 per cent f o r each half month t h e r e a f t e r during which the average r e serve balance i s d e f i c i e n t , w i l l be assessed on semi-monthly d e f i c i e n c i e s
u n t i l the required r e s e r v e has been r e s t o r e d and maintained f o r two consecutive semi-monthly p e r i o d s , provided t h a t the maximum p e n a l t y charged
will not exceed 10 per c e n t .
SECTION VII.
OTHER RULES AND REGULATIONS.
Each Federal Reserve Bank s h a l l also promulgate r u l e s and r e g u l a t i o n s
not i n c o n s i s t e n t with the terms of the law or of t h i s r e g u l a t i o n , governing
the d e t a i l s of i t s check c l e a r i n g and c o l l e c t i o n operations* Such r u l e s
and r e g u l a t i o n s s h a l l be s e t f o r t h by t h e Federal Reserve Banks i n t h e i r
l e t t e r s of i n s t r u c t i o n to t h e i r member and nonmember c l e a r i n g banks and
s h a l l be binding upon any member or nonmember c l e a r i n g bank which sends
any check to such Federal Reserve Bank f o r c o l l e c t i o n or t o any other
Federal Reserve Bank for the account of such Federal Reserve ^&hk for
collection*
FEDERAL RESERVE BOARD
3
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4053
May 9, 1324.
SUBJECT ?. Banking hour a, Helena Branch.
Dear S i r :
The F e d e r a l Reserve Board id advised by t h e
F e d e r a l Reserve Bank of Minneapolis t h a t t h e banking
h o u r s a t the Helena Branch d u r i n g t h e p e r i o d May 15th
to September 1 s t i n c l u s i v e , w i l l be from 9 a-m, t o
2 p.m. mountain time, except on Saturdays, when t h e
h o u r s w i l l be 9 a.m. t o 12 noon, as a t p r e s e n t .
Kindly n o t i f y Branches.
Yours very t r u l y ,
J , C, H o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS, EXCEPT MINNEAPOLIS
X-4054
TREASURY IEPAHTLXNT
O f f i c e of the Secretary
WASHINGTON
llay 6, 1924*
The Governor
Federal Reserve Board.
Sir:
You are hereby advised t h a t the Department has r e f e r r e d to the Disbursing Clerk, Treasury Department, f o r payment, the account of the Bureau
of Fngrsvinfr and P r i n t i n g f o r p r e p a r i n g Federal reserve notes during the
period April 1 to April 30, 1924, amounting to $124,410.00, as f o l l o w s , "
Federal Reserve Notes. 1914
M
Boston . . . . . . . 473,000
New York
436,000
Philadelphia . 422,000
Cleveland . . . . 64,000
Richmond
127,000
Chicago
491,000
Kansas C i t y . . . 100,000
San Francisco. 130.000
2 ,243,000
£10
113,000
—
—
208,000
66,000
93,000
-
-
139.000
619,000
60,000
—
—
118,000
60,000
25,000
25,000
10,000
—
—
298,000
3,190,000 sheets at $39 per M
$50
$100
5,000
5,000
—
—
10,000
10,000
-
-
—
—
— —
-
*"
—
—
—
—
-
~
—
—
-
-
—
25,000
— —
5,000
Total
656,000
436,000
758,000
134,000
218,000
609,000
110,000
269,000
3,190,000
$124,410,00
The charges agpinst' the sever? 1 Federrl Reserve Banks are as f o l l o w s , -
H
<£>
0
01
81
CompenPlate
Inc.ComSheets
sation
P r i n t i n g M a t e r i a l s pensation
Total
Boston......
656,000 $ 8,856.00 j£ 6,724.00
$7,708,00 $ 2,296.00 i& 25,584.00
New Y o r k . . . .
436,000
5,886.00
4,469.00
5,123.00
17,004.00
1,526.00
P hi l a d e l p h i a
758,000 10,233.00
7,769.50
8,906.50
29,562.00
2,653.00
Cleveland...
134,000
1,809.00
1,373.50
1,574.50
469.00
5,226.00
Richmond... .
218,000
2,943.00
2,234.50
2,561.50
763.00
8,502.00
Chicago.....
609,000
8,221.50
6,242,25
7,155.75
2,131.50
23,751.00
Kansas City.
110,000
1,485.00
1,127.50
1,292.50
385.00
4,290.00
San Fr?ncisco 269,000
3,631.50
2.757.25
3,160.75
941.50
10,491.00
3
$43,065.00 $32,697.50 $37,482.50 $11,165.00 $124,410.00
The Bureau appropriations w i l l be reimbursed in the above amount from the
i n d e f i n i t e appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", 2nd i t i s requested t h a t your board cause such i n d e f i n i t e app r o p r i a t i o n to be reimbursed in like amount.
Respectfully,
(signed) S. R. Jacobs,
Deputy Commissioner.
t l V
FEDERAL
ADVISORY
-
COUNCIL
STATEMENT FOR THE PRESS
For r e l e a s e i n morning p a p e r s ,
Wednesday, May 14, 1924-.
At the meeting of t h e Advisory Council of the Federal Reserve Board
held i n Washington on May 12th and 13th, t h e r e s i g n a t i o n of Mr. A l f r e d L.
liken, as a member and Vice P r e s i d e n t of the Council was p r e s e n t e d .
Mr.
Cnarles A. Morss, of Boston, has been, designated by the Boston Federal Reserve Bank to succeed Mr. Aiken, and i n h i s p l a c e he was e l e c t e d a member
and Vice Chairman of t h e Executive Committee.
Mr. E. F. Swinney, of Kansas
City, was e l e c t e d Vice P r e s i d e n t of tne Council.
In a d d i t i o n to the customary discussion of discount r a t e s and economic
conditions, t h e Council a t the request of tne Board gave c o n s i d e r a t i o n t o
the Dawes r e p o r t .
In view of the general i n t e r e s t in the matter i t was de-
cided t o permit the p u b l i c a t i o n of tne C o u n c i l ' s statement to the Board
bearing on t h i s .subject, a s f o l l o w s :
"At t h e r e q u e s t of t n e Federal Reserve Board the Advisory Council has
given c a r e f u l c o n s i d e r a t i o n t o t h e Report of t h e F i r s t Committee of E x p e r t s ,
the s o - c a l l e d Dawes Report.
The Council wishes to record i t s admiration f o r t h e e x c e l l e n t work done
by the Committee and to express the nope t h a t with the l e a s t p o s s i b l e d e l a y
t h e Committee's recommendations w i l l be c a r r i e d i n t o a c t u a l e f f e c t .
The Council f u r t h e r m o r e endorses the wish r e c e n t l y expressed by P r e s i dent Co&lidge t h a t American p r i v a t e c a p i t a l and i n i t i a t i v e give t h i s p l a n
i t s h e a r t y support a s a demonstration of the Nation*s d e s i r e to do i t s f u l l
share in t n e economic r e h a b i l i t a t i o n of tne Old Forld.
The Council has given p a r t i c u l a r thoug.it to the q u e s t i o n of how f a r
t h e Federal Reserve System may a i d t h e country in accomplishing these aims.
I t i s obvious tiiat the Federal Reserve System, as such, cannot by
any action of i t s own cooperate in the f l o t a t i o n and. d i s t r i b u t i o n of the
new German loan, the absorption of which on a l i b e r a l s c a l e by the United
S t a t e s i s one cf the p r e r e q u i s i t e s , of the Dawes P l a n .
Nor should
anj- such d i r e c t a i d oy the Federal Reserve System be necessary.
There
snould be no d i f f i c u l t y in p l a c i n g t h i s loan provided i t i s p r o p e r l y secured and provided tiie investing public f e e l s confident t n a t the debtor,
having accepted tne ourden in good f a i t h , w i l l be f r e e to ^o about h i s
work without hindrance as long a s he makes the utmost e f f o r t of which he
i s capable.
Ydhilei t h e r e f o r e , the Council has no suggestion to o f f e r to the Federal
Reserve Board concerning t h i s phase of the problem, t h e r e a r e important
services the Federal Reserve System could render with regard t o the operat i o n s of the new Note-Issuing Bank which Germany i s to organize under the
provisions of the Dawes Plan.
The Council urges the Federal Reserve Board to examine very closely
i n t o the powers vested in t h i s r e s p e c t in the Federal Reserve Banks and to
study the question now f a r i t may be d e s i r a b l e t o amend e x i s t i n g r u l i n g s
and regulations i n order to approach the problem of Europe 1 s f i n a n c i a l and
economic r e c o n s t r u c t i o n in t h e most h e l p f u l s p i r i t , in t h e same manner as
i s being done by the Bank of England and other c e n t r a l n o t e - i s s u i n g banks*
Unless America finds* ways and means t o permit her excessive banking
strength to b e n e f i t other c o u n t r i e s , p a r t i c u l a r l y those s t r i v i n g to bring
t h e i r house in order, the d o l l a r cannot maintain i t s p o s i t i o n as a world
standard of exchange, and f o r e i g n countries - and even American banking and
conmerce - w i l l , once more, in a l a r g e r degree become dependent upon.and
t r i b u t a r y to t h e pound, s t e r l i n g , t o the g r e a t e r exclusion of the d o l l a r .
I t i s i d l e , however, to preach the u s e of the d o l l a r , u n l e s s , a t t h e same
t i m e , we render i t p o s s i b l e f o r o t h e r c o u n t r i e s to a v a i l themselves of our
dollar f a c i l i t i e s .
I t i s obvious t h a t our c r e d i t power cannot continue
to grow i n d e f i n i t e l y without the danger of over—saturation.
If the stream
of gold t h a t f l o o d s our shores i s not stemmed i n time i t i s to be f e a r e d
t h a t , u l t i m a t e l y , we w i l l not be able to ward o f f i t s i n f l a t i o n a r y e f f e c t s .
And i n f l a t i o n would only aggravate the economic maladjustment a l r e a d y
ex-
i s t i n g within our own boundaries; a maladjustment which n o t only d i s t u r b s
and endangers our t r a d e with other c o u n t r i e s , but which makes our a g r i c u l t u r a l s i t u a t i o n p a r t i c u l a r l y d i f f i c u l t and d i s t r e s s i n g .
But, i r r e s p e c t i v e of the danger of i n f l a t i o n a g a i n s t which t h e r e s t i l l
a r e a t our d i s p o s a l powerful cushions that could be a p p l i e d i n order to
counteract or s o f t e n i t s e f f e c t , the problem ought t o be weighed from another
and even more important angle.
I t i s the q u e s t i o n of whether the world i s more l i k e l y t o r e g a i n the
b l e s s i n g s of economic s t a b i l i t y under the sway of several f l u c t u a t i n g
standards of exchange or by a general r e t u r n , as speedy as circumstances
may permit, t o d e f i n i t e r e l a t i o n s of exchanges to gold as t h e u l t i m a t e measure
and r e g u l a t o r .
The Dawes Report l e a d s t h e world t o the c r o s s - r o a d s i n - t h i s regard.
I t provides f o r a German n o t e - i s s u i n g bank on a gold b a s i s , but leaves the
door open to p l a c e i t on a s t e r l i n g b a s i s , and i t cannot be denied that
t h e r e i s no small p r o b a b i l i t y of the l a t t e r b a s i s being chosen.
In the opinion
of the Council the sooner Germany can be placed on a gold or gold-exchange
b a s i s , the sooner can England, and other c o u n t r i e s , a l s o , r e t u r n to an
"unrestricted gold standard, while, i f Germany were placed on a s t e r l i n g
b a s i s , Ehgland, - i n returning to an unrestricted gold b a s i s - would have
to p u l l not only her own weight, but that of Germany a l s o .
I t i s obvious,
therefore, t h a t , i f the new German bank i s placed on the s t e r l i n g exchange basis, the world mast prepare i t s e l f t o remain on a b a s i s of exchange i n s t a b i l i t y f o r a prolonged period, the end of which cannot be
foreseen, n&ile the adoption of the gold (that i s , the dollar) basis would
accelerate the return to world-wide s t a b i l i t y .
I t i s t h i s momentous alternative that i s involved in the organization
of the new German Note-Issuing Bank, and the Council deems i t . i t s duty t o
point to i t s importance with a l l the eeqpnasis of which i t i s capable.
It
i s not as an American problem that we are discussing t h i s phase, but as
one that, touches the future of a l l the world.
The Council has bean pleased to learn that i t has been ruled that
Federal Reserve Banks may consider as e l i g i b l e f o r their open market purchases certain German dollar trade b i l l s , payable in the United States, i f
endorsed by t h e recently established German Gold Rediscount Bank, the soc a l l e d Schacht Bank, and by approved American endorsers.
The Council s e e s in t h i s decision a move in the right direction*
helpful t o a l l p a r t i e s concerned, inasmuch as i t transfers c r e d i t power
from where i t i s i d l e and redundant to. where an acute shortage of c r e d i t
cripples the purchasing a b i l i t y of a country, which normally ranks second
i n l i n e as a buyer of our goods.
The Council recommends t h a t , when the new German Note-Issuing Bank,
provided in the Dawes Plan, i s organized, the Federal Reserve Banks take
the steps necessary in order t o f a c i l i t a t e the rediscounting i n t h i s country
.
t
.g.
307
of properly protected German gold b i l l s , be i t through the intermediary
of American banking i n s t i t u t i o n s , or through s o - c a l l e d agency agreements,
or such other arrangements as have been, concluded by Federal Reserve Banks
with Central Banks of other countries.
Measures of t h i s character do not only tend to bring our gold hoard
into a c t i v e and healthy use, but by enabling and encouraging other count r i e s t o trade i n terms of dollars we stimulate our ovm f o r e i g n commerce.
We f a c i l i t a t e furthermore, the direct s a l e i n d o l l a r s , of our own products,
instead of Baking foreign countries and ourselves dependent in t h i s respect
upon Great B r i t a i n ' s acting as broker and banker, as naturally she would,
where the Pound Sterling would govern as an exclusive b a s i s of c.oranerce
and trade.
I f there i s any reason to assume that success of the Dawes Plan may
prove the turning point in Europe's long road of suffering and decline,.
i t i s a unique opportunity and duty f o r the United States t o lend a helpf u l &and to the utmost of i t s a b i l i t y .
In the opinion of the Council, there does not seem t o be any room
f o r doubt with regard to the p o l i c y which i n t h e s e circumstances the Fede r a l Reserve System should pursue.*
May 13, 1924
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-.4057
May 15, 19 2U.
SUBJECT: Limitation of Gold Held as Security for Federal
Reserve Notes.
Dear Sir;
Reports received by the Board sometime ago from
one of the Federal Reserve Banks indicated that the Federal
Reserve Agent held as security for Federal reserve notes an
amount of gold in excess of the amount of the bank 1 s notes
actually outstanding. At the request of the Board, i t s
Counsel has rendered an opinion to the e f f e c t that the Board
may properly issue a ruling requiring that a Federal Reserve
Bank shall a t no time have lodged with the Federal Reserve
Agent an amount of gold in excess of i t s Federal reserve
notes outstanding.
By d i r e c t i o n of the Board there i s transmitted
herewith a copy of Counsel's memorandum and you are requested
to give the Board the b e n e f i t of ary comment you may have to
make on the subject covered thereby.
Yours very truly,
Walter L. Eddy,
Secretary.
(Enclosure)
TO ALL FEDERAL RESERVE /.GENTS
(COPY)
1
To
X-U057-a
Apr. 18, 1924,
Federal Reserve Board
Subject: Limitation of gold held by
Federal reserve agents as securFrom Mr# Freeman, Assistant Counsel* • i t y for Federal reserve notes.
This o f f i c e has been requested f o r an opinion as to whether or not the Board
can l e g a l l y issue a ruling "requiring that a Federal reserve hank s h a l l at no
time have lodged with the Federal reserve agent an amount of gold in excess of the
amount of i t s Federal reserve notes outstanding*11
In my opinion the Board may properly issue such a ruling. Section lo of the
Federal Reserve Act, which deals with the issuance of Federal reserve notes, contemplates that the Federal reserve agent shall issue Federal reserve notes to the
Federal reserve bank upon the deposit of an equal amount of c o l l a t e r a l security
therefor, such security consisting of e l i g i b l e paper, gold and gold c e r t i f i c a t e s *
?hen notes are thus issued upon the security c( gold, the Act requires that such
gold be held in the joint custody of the Federal reserve agent and the Federal
reserve bank, the agent and the bank being j o i n t l y l i a b l e therefor. This l i a b i l ity for the s a f e custody of such gold imposes a burden upon the Federal reserve
agent and I do not believe that the Act contemplates that he must assume l i a b i l i t y for gold owned* by the Federal reserve bank and not required as security f o r
the notes. In t h i s capacity, the Federal reserve agent i s the Board's representative and the Act similarly does not contemplate that the Board should be
burdened with such r e s p o n s i b i l i t y .
Section 16 provides s p e c i f i c a l l y that Federal reserve notes may be issued
upon the security "of c o l l a t e r a l in amount equal to the sum of the Federal reserve notes thus applied f o r and issued pursuant to such application T f , and also
provides that ,f in no event shall such c o l l a t e r a l security, whether gold, gold
c e r t i f i c a t e s , or e l i g i b l e paper, be l e s s than the amount of Federal reserve
notes applied for". The Act thus f i x e s a minimum of required c o l l a t e r a l security
and while i t does not provide s p e c i f i c a l l y that the Federal reserve agent s h a l l
not hold security in excess of the amount of notes issued, tiie following provision
indicates that in ordinary circumstances there need be no excess c o l l a t e r a l :
"The said Federal Reserve Board may at any time c a l l upon a Federal reserve bank
for additional security to protect the Federal reserve notes issued to i t ^. In
other words, unless and u n t i l the Board does c a l l for such additional security ,
an amount of security equal to the amount of notes issued s a t i s f i e s tne requirements of the law. I t would follow that the Board, in the exercise of i t a general
supervisory power over Federal reserve banks and to avoid unnecessary l i a b i l i t y ,
may properly rule that the custody of gold c o l l a t e r a l in excess of 100;: and the
responsibility for i t s safekeeping should remain in the Federal reserve bank.
The provision authorizing the Board to c a l l for additional security for outoWnuing
notes, moreover, probably would not authorize the. Board to require & aeder^l reserve bank to deposit more than lOOfo in gold security, as t n i s provision no
doubt refers to additional security in the form of e l i g i b l e paper, or a greater
percentage of gold security in place of paper security, but not exceeding
vyc-
Respe3tfully»
(Signal) 3dgar W. freeman,
Assistant Counsel.
—JU'" •»
•f
(Copied from The Saturday Evening Post)
April 12, 1924, i s s u e .
THAT PAIN IN OUR NORTHWEST
By Garet Garrett.
OH, TiTRETCHED abundance.' Ruin and plenty are as twin specters stalking to
and f r o in the land. The Department of Agriculture causes expensive color
posters to i$e displayed on the walls of the post o f f i c e s , urging people to eat
more meat. This i s for the sake of the c a t t l e r a i s e r s . There i s propaganda
in the same s p i r i t for the sake of the grain growers. Bread i s nan's p e r f e c t
food. Increase thereof thy morsel.
We eat what we can. Yet of precious sustenance there i s a surplus l e f t .
American agriculture i s a t the verge of economic despair. Over great f e r t i l e
areas i t i s bankrupt, Tne Government i s c a l l e d upon to save i t , either
d i r e c t l y oy grants of money from the United States Treasury, or i n d i r e c t l y by
law, or both. I t i s believed to be unable to save i t s e l f . Also i t i s believed
that unless i t i s saved the whole country w i l l sink under the calamity of ex-r
c e s s i v e abundance. Does i t l i e in r i d d l e between God and nan that you can have
ruin and plenty at the same time? Hath- man himself invented t h i s contradiction?
Or i s the omen of d i s a s t e r a product perhaps of the p o l i t i c a l inagina tion?
For the dispassionate answer consult s t a t i s t i c s . What in the broadest
o u t l i n e i s the s t a t i s t i c a l history of American agriculture these l a s t few years?
We take the S t a t i s t i c a l Abstract of the l a s t census, turn to page 682, and see
that the value of farms and farm property has increased in twenty years as
follows:
In 1900 i t was 20 b i l l i o n s .
In 1910 i t was 41 b i l l i o n s .
In 1920 i t was J8 b i l l i o n s .
Increase in twenty years, 290 per cent, or a t the r a t e of 14 1/2.per cent
a year.
However, t h i s i s the Census Bureau talking. I t s word on a g r i c u l t u r a l
matters i s perhaps incomplete. We want to know i f the value of the land's
produce has been increasing, and at what rate; f o r of course the value of the
land i s determined, or should be determined, by the value of what i t produces.
So we take down the l a t e s t yearbook of the Department of Agriculture; and
therein i t appears that the annual value of farm products has been as f o l l o w s :
1900, 5
1905, 6^
1910, 9
1915,10f
billion
billion
billion
billion
dollars
dollars
dollars
dollars
lyl6,lj
1^17 ,.19
1915,22
1^19,23
1/2
1/3
l/2
3/4
billion
billion
billion
billion
d o l l a r s 1^20,18 l / j b i l l i o n dollars
d o l l a r s I y 2 l , l 2 1 / 2 b i l l i o n dollars
d o l l a r s 1922,14 1 / 3 b i l l i o n d o l l a r s .
dollars
In f i f t e e n years from 1900 to 1915 the aggregate value of the land's produce
more than doubled; in the next four years, representing the war's demand, i t
more than doubled again. In 1920 and 1921 i t was roughly halved, owing to the
great postwar p r i c e d e f l a t i o n , but in 1922 i t somewhat recovered, and in 1923
i t was even a l i t t l e b e t t e r . The remarkable f a c t i s that a f t e r a l l the d e f l a t i o n
of p r i c e s the value of the land's produce i s nearly $0 per cent greater than i t
was in any year preceding the war.
-2How much of t h i s increase may have come from an extension of the area
farmed? Let us regard that f a c t o r . There must have been an increase in the
number of farms and in the number of acres t i l l e d . So i t i s , But the increase
has been unimportant* Only about 21 per cent in twenty years against an increase of 290 per c e ' t in the value of farms and farm property. So now we
look for the value of crops per acre. That w i l l be the f i n a l t e s t . Finding
i t , in the yearbook, we see that t h i s corresponds to the increase i n the aggregate value of crops. In f i f t e e n years from 1900 to 1915 the value of
crops per acre doubled; then in the war period i t doubled again. In 1920 and
1921 i t was halved; in 1922 i t somewhat recovered and i s s t i l l , a f t e r a l l the
postwar price d e f l a t i o n , very much higher than in any year before the war.
Clearly, the value of the land*s produce has enormously increased* But beware of s t a t i s t i c s . They have been known to b i t e the hand that made them.
You would think an industry ought not to be ruined and was certainly not doomed
whose plant and equipment had been increasing in value for twenty years at the
rate of l U | per cent a year, and whose product in that time had more than
twiee doubled in value, with a setback in the next three which, though i t was
very severe, leaves i t s t i l l much higher than ever i t was before the war, consideredeither in gross or in value per acre. You are tempted to say i f i t
i s ruined i t has only i t s e l f to blame, even t o suspect that the agricultural
c r i s i s i s perhaps greatly imagined* You may be right— s t a t i s t i c a l l y ,
rationally right— and everyone e l s e may be emotionally wrong* That w i l l not
dispose of the s i t u a t i o n .
SOME STRIKING FIGURES.
For a s i t u a t i o n does e x i s t . Everything about i t i s controversial. All i t s
premises are debatable* Even i t s geography i s vague. Generally i t i s referred to as the s i t u a t i o n i n the Northwest, The American Northwest i s no
precisely delimited area. Yet from certain phenomena a rough f a c t appears.
The fact i s that a s i t u a t i o n , i t s e l f undefined, i s most acute i n what i s
called the Ninth Federal Reserve Bank D i s t r i c t , which comprises p r i n c i p a l l y
Minnesota, North Dakota, South Dakota and Montana.
Having so f a r as possible isolated the situation, i t i s natural then to
ask, What i s i t ?
Stupid question! As well ask a mathematician what one is* If you i n s i s t
on a simple d e f i n i t i o n and w i l l not stay for a d i s s e r t a t i o n on the properties
of number, a l l he can say i s that one i s one. Likewise, i f you i n s i s t upon
a simple d e f i n i t i o n of what the s i t u a t i o n in the Northwest i s , upon having
i t without a compendium of economic and s o c i a l theory since, Adam Smith, a l l
that anyone can do i s t o r e f e r you to i t . There i t is* Look at i t . Among
i t s e f f e c t s and phenomena are these:
3* In January the Department of Agriculture published the findings of
a
s p t e i a l survey touching 2,289,000 farmers in f i f t e e n wheat and corn growing
stateo. In two years—1921 and 1922—the number of them that went bankrupt
was 600,000. Of these, 108,000 l o s t their property by foreclosure or other
legal process; 122,000 l o s t their prpperty by default without l e g a l process;
373,000, though bankrupt, retained physical possession of t h e i r property
through the leniency of creditors. Since t h i s survey was made the economic
mort&lit$; has continued„
A. ' C '
I t i s highest in the s t a t e s of North Dakota, South Dakota and. Montana.
If the foreclosures, farm by farm, are laid upon a large-scale map certain
areas, whole counties, are seen to be solid black, with only here and there
a l i t t l e white spot.
THE VICIOUS CIRCLE OF DEPRESSION.
Many lawyers s p e c i a l i z e in foreclosure p r a c t i c e and make wholesale prices
to loan conpanies that have many cases in the neighborhood, One lawyer in
Montana has 1500 foreclosure cases in his o f f i c e , current; he puts system into
the work and uses multiple forms which h i s stenographers know how to f i l l up and
file.
2* Practically a l l these bankrupt farmers, besides having mortgaged t h e i r
land, borrowed money also on their notes at the l o c a l bank. They cannot pay
these notes. Therefore .the banks f a i l . In the four Northwestern states —
North Dakota, South Dakota, Montana and Minnesota— nearly 550 banks have f a i l e d .
In Montana every third, bank has f a i l e d . They are s t i l l c l o s i n g . There are
large towns l i k e Lewis town, and whele counties, i n which a l l the banks have
shut up. Business i s on a cash basis,
3. Farmer and banker bankruptcy on such a s c a l e creates a s t a t e of general anxiety. The elements of sympathetic danger are f a i r l y obvious. No bank
stands alone like a solitary cedar tree. Banks r e s t up cm one another, A
country bank in South Dakota borrows from a Sioux F a l l s bank, the Sioux F a l l s
bank borrows from a Minneapolis bank, the Minneapolis bank borrows from
a Chicago bank, and the Chicago bank borrows in New Yofk. Thus no bank can
f a l l anywhere without in some degree a f f e c t i n g other banks. Nor does any one
section of the country stand alone and. self—contained. When an agricultural
section i s in d i s t r e s s i t w i l l buy fewer automobiles and l e s s of Alt the
products of industry, and i f this continues long there begins to be unemployment in the industrial centers, which causes the industrial population
to buy l e s s food, which reacts in turn upon agriculture, and so on in a c i r c l e .
4. The Government has declared that a grave emergency i s present. In a
message to Congress at the end of January the President described i t as aa
"economic situation in certain wheat-growing sections of the Northwest", and
said i t had reacned a stage requiring "organized cooperation on the part of the
Federal Government and the local i n s t i t u t i o n s of that t e r r i t or y. " He favore
the prompt enactment of what i s known as the pig-and-chicken b i l l . This i s a
b i l l which appropriates $50,000,000 out of the United States Treasury to e
loaned to wheat farmers for the purchase of milch cows, pigs and chickens in
order that they may get started in the way of f e e d i n g themselves. This i s
c a l l e d Federal aid toward d i v e r s i f i e d farming, in areas where agriculture has
consisted in mining the s o i l year after year f o r one thing only - to wit,
wheat. Tne President recommended also that the l i f e of the War Finance
Corporation be extended in order that i t might a s s i s t in meeting the emergency,
and this was done.
„ ^
.
5. In the f i r s t week of February, at the suggestion of tne President,
great conference of Northwest bankers, merchants, manufacturers, ra ro
m. ,
farmers and agricultural experts was held in Washington under
e c ai
of Mr, Hoover to think up a way of saving banks tnat could not save themselves
c a p i t a l privately subscribed and $100,000,000 c r e d i t , partly to be supplied by
the Government, the u s e s of which, so far as i t functions, w i l l be to thaw
out the frozen a s s e t s of Northwestern banks, e s p e c i a l l y r e a l - e s t a t e a s s e t s ,
which at the present time are l i k e s o l i d i c e . Land that was thought only three
years ago to be the very best security f o r a bank loan new i s almost unsalable.
This r e l i e f corporation, finding a bank otherwise solvent but unable to r e a l i z e
on i t s assets because they are frozen, w i l l take over those a s s e t s , or lend
upon them, and slowly warm them in the bosom of optimism, biding a better time.
STRANGE EXPERIMENTS.
6. Meanwhile the imminence of some very strange l e g i s l a t i o n . For Example
One, a b i l l which would oblige the Government to buy and s e l l a l l basic agricultural commodities, thereby substituting i t s e l f f o r the hated middleman who
i s supposed to do away with the farmer's p r o f i t . For Exanple Two, a b i l l
creating a commission with power to r a i s e the average price of basic agricultural
commodities to a p a r i t y with the average price of industrial commodities, according to a s t a t i s t i c a l device c a l l e d an index number, and then to dvuq? in
foreign markets a l l such food products as cannot be eaten among us at that price.
This proposal, c a l l e d the McNary B i l l , has the a c t i v e support of the Secretary
of Agriculture, who i s said to have helped write i t ; i t has the support of
farmers generally; i t has the support also of a great many bankers and merchants
i n the agricultural regions, who say they do not know whether i t w i l l work or
not, but maybe i t w i l l , and i f i t does the price of farm produce w i l l be improved. All their prosperity i s bound up i n tne p r i c e of farm produce,- together
with the speculative value of farm land, in which they are a l l deeply involved.
7. Lastly, in consequence of a l l this economic disorder, there i s a
s t a t e of mind in which men deliberately r e j e c t r e a l i s t i c modes of thought, and
advocate experimental remedies, Jsnowing them by every rational t e s t to be unsound. Even Mr. Hoover w i l l say there comes a time when you are obliged to
bend your economics to ends in s o c i a l welfare. And s t i l l you do not know what
the situation i s .
Do you speak of tne causes, thinking perhaps to s t a l k the e f f e c t s ? There
a l l controversy truly begins. The cause, did you say? I t i s that the Government , having moved the farmer dangerously to increase h i s production for
reasons of patriotism, l e f t him afterward to the mercy of bankers, who outrageously deflated him, the Federal Reserve System a s s i s t i n g ; i t i s that big
business i s organized against the farmer to exploit him; i t i s that industry
receives the b e n e f i t s cf t a r i f f protection while agriculture does not, so that
the farmer s e l l s on the open market a t a world p r i c e and buys in a closed
market at a protected price; or i t i s that the American wheat grower i s not
an a g r i c u l t u r i s t , but a s o i l miner, a land gambler, a reckless borrower of
c r e d i t , a planter, without slaves wno pays the I.W.W.'s s i x or eight dollars
a day to reap h i s one crop, buys h i s food in the c i t y , and charges h i s l o s s to
the Government. Any or a l l of t h i s may be true in f a c t to some degree. But
a f a c t i s not n e c e s s a r i l y a cause.
There i s no doubt that the radical explanation of a g r i c u l t u r e ' s dilemma
has been the e x c e s s i v e supply in the l a s t three years of c e r t a i n great s t a p l e s ,
p r i n c i p a l l y c a t t l e and wneat, the production of wnich was enormously stimulated
during the war. f h i p h was the greater stimulus, the price or the patriotism,
i t would now be unseemly to consider. But c e r t a i n l y i t was the p r i c e alone for
nearly two years a f t e r the Armistice that stimulated production to i t s apex.
INCREASING- WHEAT ACREAGEThe high point or peak, both in c a t t l e production and wheat acreage, was
reached in 1919, the year a f t e r the Armistice. Prices were s t i l l very high in
1915 and m t i l mid-year of 1920, higher than during the war; and then suddenly
the demand slumped. The high p r i c e for wheat — $2-58 per bushel on the farm —
was touched in 1919# a f t e r the Government had removed, i t s p r i c e control.
Similarly the high p r i c e for beef c a t t l e — ten cents a pound on the farm —
was touched in 1919•
In 19m, before the war, the number of beef c a t t l e on the farms was
6,000,000. I t increased s t e a d i l y , as the p r i c e rose, u n t i l i t touched
5.000,000 in 1919* The decrease since has been much slower than the increase
was. Last year, according to the yearbook of the Department of Agriculture,
the number of beef cattlecon the farms was s t i l l 42,000,000 — that i s to say,
one-sixth more than i n 1914, and only o n e - f i f t e e n t h l e s s than the highest
point touched on the peak of the postwar demand.
So also as to wheat. The area in wheat in 1914 was f i f t y - t h r e e and a
half million acres. I t increased steadily as the p r i c e of wheat advanced u n t i l
i t was seventy-five and a half m i l l i o n in 1919- Not u n t i l l a s t year was the
acreage reduced t o somewhere near the prewar l e v e l ; and by that time the
world's production had so increased that the t o t a l supply exceeded the prewar
demand. The Wheat Council of the United States, which i s an organization formed
l a s t year of farmers, m i l l e r s , railroad men and bakers to take a world-wide
view of wheat, discovered that in 1923 the wheat exporting countries had perhaps 350,000,000 more bushels to s e l l than had been required in any one year
before the war by a l l the wheat-importing countries of the world. In view of
that f a c t , which i s a continuing and not an accidental f a c t , and seeing, moreover, that the c o s t of producing wheat in the United States i s higher than in
the other surplus-wheat countries, such as Canada, Argentina, India and Egypt,
i t appeared to the TOaeat Council of the United fitatesto be p e r f e c t l y f u t i l e f o r
American farmers to go on r a i s i n g wheat for export.
THE OBVIOUS REMEDY.
The evidence i s not arguable. What a f f l i c t s basic agriculture i s overproduction. But i f you say t h i s to one of the farm lobby at Washington, to a
member of the farm bloc in Congress, to the Secretary of Agriculture, or to
anyone l i k e that, you w i l l be regarded wearily, and with some abhorrence; as
one who may be expected to utter a t e r r i b l e banality about the law of supply
and demand. Any one of them, speaking in what i s believed to be the f a r m e r ' s
point of view, w i l l say: "Fell, suppose that i s i t . What are you proposing
to do about it?"
If you say the obvious remedy i s to c u r t a i l production, the weariness
deepens, turning to d i s g u s t . Everybody says that. Now you say i t . Go on.
And i f you go on to say that when the farmer shall have produced an aoouuit of
wheat one measure l e s s than the domestic demand he w i l l thereby automatically
add thirty cents a bushel to the p r i c e of his crop, s i n c e Were i s an inport
duty of t h i r t y cents on wheat, the provocation become# great indeed.
"Yes," says one of the farm lobfey, a member of the farm b l o c , the Secretary of Agriculture, or anyone l i k e that in Washington. "There i s a duty of
t h i r t y cents a bushel on wheat. What of i t ? Does the farcer get the "benefit?
No. He s e l l s h i s whole product, as before, at the world p r i c e . In the f i r s t
place he i s unorganized* In the second place h i s output i s variable, according
to the whims of Nature. He cannot Regulate h i s production exactly to meet the
domestic demand. Nor can he, being unorganized, do as the s t e e l people do. They
have two p r i c e s . One i s the export price, the world p r i c e . The other i s domestic price, which i s the world price plus the t a r i f f . They f i l l the American
demand a t the high, protected p r i c e . Then they s e l l t h e i r surplus product abroad
at the world p r i c e . The farmer cannot do that tot himself. Therefore i n a l l
fairness the Government should either do i t f o r him or remove the t a r i f f on a l l
those things which the farmer buys."
By such l i n e of discourse you are brought to see two points of l i g h t . The
f i r s t i s an idea. The second i s a conclusion.
The idea i s that in s p i t e of uncontrolled production the price of a g r i cultural commodities may be raised by act of Congress.
The conclusion i s that the ruin of agriculture i s owing not to overproduction
as such, but to one of the e f f e c t s of overproduction which comes to be regarded
as a cause i n i t s e l f , mmely, the f a c t tba$ from the high peak of war p r i c e s
certain basic agricultural commodities have f a l l e n much more than industrial commodities. Hence the disparity that everyone i s talking about, meaning the d i s parity between the purchasing power of what the farmer produces and the cost of
what he buys.
This conclusion i s widely, in f a c t generally accepted. The President says:
"The great food staples do not s e l l en a parity wxth the products of industry.
Their average price i s l i t t l e above the prewar l e v e l while manufactures are about
50 per cent higher. The farmer i s not receiving h i s share. The r e s u l t has been
a decrease l a , t h e value of farm lands, the choking of the avenues of credit with
obligations which are doubtful or worthless, the foreclosure of mortgages and the
suspension of a large number of banks."
Ihere i s that d i s p a r i t y . And i t i s cruel, A bushel of wheat, worth i n
money what i t was worth before the war, w i l l actually buy only two-thirds as much
because those things/which the farmer must exchange h i s wheat are ^0 P©r cent
/ for
higher than they were when wheat was at t h i s price before. Agriculture under
these conditions would be seriously depressed. Nevertheless, on r e f l e c t i o n the
f a c t of that disparity alone seems an inadequate explanation of the s i t u a t i o n in
the Northwest.
SEARCHING- OCT CAUSES.
Contradictions appear. To instance: Tfhile i t i s true of wheat and c a t t l e
that prices are l i t t l e above the prewar l e v e l , other agricultural commodities
whereof there has been l e s s overproduction lave fared very much b e t t e r . Therefore you would expect the s i t u a t i o n to be most acute in those areas where wheat
and c a t t l e are produced by the one-crop system, and very l i t t l e e l s e . Indeed,
advocates of the plan to lend $50,000,000 out of the Treasury among the wheat
growers of the Northwest in order that they may buy chickens, pigs and Hows, find
then:selves in the way of saying that the one-crop system was the great e v i l ,
that the present s i t u a t i o n i s very largely owing to that e v i l , and that the
solution l i e s i n d i v e r s i f i e d farming. That w i l l scan i n North Dakota, which i s
a l l wheat, and in Montana, which i s either a l l wheat cr a l l c a t t l e ; but what of
South Dakota with i t s panic i n land values, i t s progression of bank f a i l u r e s ,
i t s comparable p l i g h t , in s p i t e of the f a c t that two-thirds of i t s agriculture
»1 ready i s highly d i v e r s i f i e d ? In i t s survey of farmer bankruptcy the Department
cf Agriculture treated Montana, Forth Dakota and South Dakota a l i k e , whereas in
:P
f a c t their agricultural conditions sre extremely d i f f e r e n t . Then conmenting on
it® own data the department said that 43,000 farmers l o s t t h e i r property as a
result of having bought land in the boom — that i s to say, land speculation.
Then a l s o in the remedies applied and proposed to be applied there are
amazing contradictions. Through the w ar Finance Corporation the Government i s
extending credit to the c a t t l e raisers, who are staggering under the weight of
excessive production; at the same time Congress i s voting money out of the
Treasury to stock the Northwestern wheat farms with animals. Beyond t h i s , i t
i s proposed by act of Congress to r a i s e the average price of a g r i c u l t u r a l commodities to a parity with industrial commodities and keep i t there, which would
tend to stimulate production again, and at the same time t o create a great Federal machine t o monopolize the export of our agricultural surplus and dump i t
i n f o r e i g n markets.
One begins to be seized with the thought that the depression in agriculture*
owing to the great f a l l in c a t t l e and wheat and the s i t u a t i o n i n the Northwest,
may be two d i s t i n c t species of thing which various people, for p o l i t i c a l , mistaken or other reasons, i n s i s t upon treating as one pattern of woe.
The thought suggests a method. Washington i s f i l l e d with soothsaying,
theories of healing, emotional quarreling, p o l i t i c a l a n x i e t i e s ; but ruins contain t h e i r own h i s t o r y . Let us therefore try the archaeological method. On
our way i t may be well to stop at Chicago, which i s much nearer than Washington
t o what has happened. Chicago, b e s i d e s , i s keeper of the wheat p i t , proprietor
of the packing industry, and in a l l these matters cool-minded — so c o o l minded that i t i s supposed to be cold-blooded and without springs of human
compassion.
Well, i t becomes very i n t e r e s t i n g . You get a group of Chicago bankers t o gether and say, writing i t down on a pencil pad as you think i t :
h
Let us suppose the f i v e principal f a c t o r s i n the Northwest s i t u a t i o n are
t h e s e : ( l ) Acts of Providence, ( 2 ) bad banking, ( 3 ) bad farming, (4) land
speculation, and ( 5 ) too much credit. Now how should these be weighed? How
should you set them down i n the order of t h e i r importance?
They reply, a l l with one v o i c e , " Leave Providence out of i t . "
TOO MANY W E S
You say, crossing out that f a c t o r , "All r i g h t . How about the four r e maining?"
They answer: "You've got them upside down. Put the l a s t one f i r s t . Too
much c r e d i t . And you can't cure what a i l s them up there in the Northwest by
giving them more c r e d i t . "
'"%at i s the right cure?"
"For everybody t o take h i s l o s s and work i t out."
That does sound cold-blooded even in Chicago. In Washington i t would
sound reactionary. And y e t , how shall i t be answered 7
Then you go over to the Rookery Building f o r a word with John Clay — a
Scot, dean of the l i v e s t o c k business, very hard in the head, whose money?
loaned out to farmers f o r feeding purposes was probably what put the f a t on
the next beefsteak you w i l l eat. He has written what he thinks of the s i t u a t i o n .
He has printed i t i n l a r g e type over the whole front page of h i s private l i v e stock b u l l e t i n . It i s t h i s :
The Federal Reserve agent at Minneapolis, i n h i s report t o the
Federal Reserve Board at Washington, brings out some remarkable f a c t s
as t o the p o s i t i o n of agriculture i n the Northwest s t a t e s .
Bead the following:
NUMBER OF PEOPLE PER BANK
In the whole United S t a t e s
3i520
In Michigan
. .
5,1)0
In Wisconsin . ;
2,710
In Minnesota
1,590
In Montana
«
1,370
In South Dakota. . . » .
$21
In North lakota
* . . .
768
Fancy what madness seized the people of North Dakota. They
had a bank to every 768 people, 384 males, about 200 r e a l l y earning
their bread and b u t t e r . So in t h i s one-crop country there i s a
deluge of bankers, of storekeepers, of grafters l i v i n g o f f one another t i l l the bubble bursts; and when the crash comes everybody
i s wrong but themselves.
Banks are c l o s i n g in those l a s t four s t a t e s with tiresome
r e g u l a r i t y . It i s pathetic to think of those unfortunate circumstances , of homes made desolate by l o s s of deposits or forced
l i q u i d a t i o n . In t h i s flood of f a l s e , f e c k l e s s financing the day of
retribution comes. Nothing can stop i t , for economic conditions
right and equalize the vagaries of men who defy the j u s t laws of
Nature, of production and consumption. I t a l k s p e c i a l l y of the West
and Northwest. There more than at any time since the end of the
Civil Tar we need courage, conservatism, honest conviction to stem
the t i d e of growing taxation, of mortgaged towns, c i t i e s , Counties
and s t a t e s — i n f a o t , the whole country — against future generations.
The inheritance of extravagance and fraud w i l l be an awful load for
the children to bear in the long years to come.
Here i s Montana. One of the famous disaster spots is a vast three-cornered
area of semiarid land, h a l f the s i z e of Iowa, i n the north-central part of
Montana, c a l l e d the t r i a n g l e . Until a few years ago t h i s was public land,
covered with natural b u f f a l o grass. All i t was supposed t o be f i t for was
c a t t l e grazing. Then i t was opened for settlement by homesteaders. Montana
decided that what i t needed was people. It got that idea f i r s t from the great
Northern Railway; the Chicago, Milwaukee & St. Paul Railway, which had j u s t extended i t s l i n e through Montana to the P a c i f i c Coast, supported i t . The three
of them together — the s t a t e , that i s , and the two railroads — put on a
great advertising campaign for people. They spread color posters at country
f a i r s in the East and Middle % s t to e x c i t e the 6y@; these were followed by
paid criers t o e x c i t e the ears. One of the posters represented the farmer
plowing s i l v e r d o l l a r s out of the s o i l of Montana. The c r i e r s s a i d i t was not
at a l l exaggerated. And t h i s was f r e e land. All you had t o do *as t o go and
take i t .
The rush began. Havre, at one corner of the t r i a n g l e , was overwhelmed.
Every Great Northern t r a i n disgorged homesteaders. They s l e p t i n heaps at
the railroad s t a t i o n , because there was nowhere e l s e to s l e e p , and vanished
at dawn with t h e professional locators vHao knew where the f r e e land was and
charged f i f t y d o l l a r s f o r pointing i t out. So the triangle was s e t t l e d . Nobody knew what would come of i t . The natives, whose business had been c a t t l e ,
mining, merchandising and banking, with a l i t t l e o i l speculation aside, looked
on u n e a s i l y . They did not b e l i e v e t h i s land would farm. They had heard of
-9dry farming; but they could not imagine growing grain in place of b u f f a l o
grass on t h i s high semiarid bench. Moreover, these rash homesteaders were
not a l l farmers. Nearly two-thirds of them wefe people who knew nothing
about farming; they were doctors, lawyers, miners, blacksmiths, bartenders,
old maids, w r e s t l e r s , butchers, s a i l o r s —. thousands of them i n t h i s miscellaneous character. And as to the one-third who were farmers, they were
from Iowa, I l l i n o i s and Missouri, and knew nothing whatever about dry farming
here or anywhere e l s e .
Yet a miracle happened. All of them planted wheat on that v i r g i n s o i l ;
nothing but wheat — no gardens, no t r e e s , no shrubs, not even feed ftir t h e i r
l i v e s t o c k . And the wheat came — wonderful hard wheat, commanding a premium
i n a l l the markets of the world — prodigious wheat, twenty-thirty and f o r t y
bushels to the acre, from merely throwing seed upon the ground. This happened
in 1915; i t happened again in 1916; and people abandoned themselves t o
ecstasy. The poster was true. You could plow dollars out of Montana s o i l .
From land that cost them nothing but the trouble of taking i t , two-dollar
wheat, t h i r t y bushels t o the acre I ^hat was that land worth now? Figure i t
for y o u r s e l f . Life became very e x c i t i n g . You might have seen a t suridown on
a harvest day one hundred wagons waiting s t i l l a t the elevator to unload the
fabulous wheat, and the owners f l a y i n g black jack in the v i l l a g e near by. A
cigar was a quarter; a shave was f i f t y cents; and food was dear because nobody
raised any food to eat — nothing but wheat to s e l l . Everybody was r i c h .
Everybody wished to be richer s t i l l . The way t o get richer was to get more
land. Having got a l l the f r e e land that was arable they began t o buy i t . Newcomers bought i t from the lucky f i r s t comers; then they bought i t from one
another.
PYRAMIDING MORTGAGES"You could have sold the top of that mountain then," said a banker sadly.
A man with a quarter s e c t i o n he had got for nothing mortgaged i t a t 10
per cent to buy a whole section, part cash and part mortgage. Then, to farm
the s e c t i o n he needed a steam tractor, and for that he borrowed money on h i s
note at 10 or 12 per cent. Expectations were so great that nobody cared about
the rate of i n t e r e s t ; and because the rate of i n t e r e s t was unlimited, money,
e s p e c i a l l y mortgage money, came pouring i n from the East, Loan companies sent
agents around i n automobiles s o l i c i t i n g farmers to mortgage t h e i r land. This
was another miracle. Credit was l i k e wheat. A l l you had to do was to wish
for i t , and there i t was. It came to the door in an automobile.
Thus they b u i l t an enormous pyramid upside down, everybody g e t t i n g richer
and richer on c r e d i t . You didn't need any c a p i t a l . You could borrow at the
bank on the value of your land for anything you wanted, even a closed car, and
pay out of the next crop. Once i t was that the f i r s t thing that opened in a
new town was the saloon. In the triangle i t was the bank. A proper t r i a n g l e
town consisted of s i x or eight l i t t l e houses, one large garage, and two banks
in shingle shanties. And the a c t i v i t y of banking was somewhat l i k e t h i s :
Farmer: "I own a half s e c t i o n of land up the road worth f i f t y d o l l a r s
an acre. That's $lo,000. There's a mortgage on i t for twenty-five an acre.
That's $8,000. Eight from s i x t e e n leaves e i g h t . That's what I'm worth —
$8,000, not saying anything about what's on the land. I need some ready money
u n t i l my crop comes o f f . Am I good for $2000 on my note?"
Banker: "I guess you are."
The banker w r i t e s i t down in h i s book that the farmer i s good for $2000
i 9
T io T
on h i s note and may draw M s checks on the bank up to that amount. But he
has not got the money in the s a f e . He has t o get i t . So he sends the farmer's
note to the Federal Reserve Bank at Minneapolis for rediscount. That means
he pledges the farmer's note there f o r a loan of $2000 in"bright clean currency,
which duly arrives in a nice package and i s paid out over the counter to people
who bring i n the farmer's checks and want the cash on them. The banker has
charged the farmer, say, 10 per cent interest; but he himself pays only Ujg
per cent interest at Minneapolis.
-The difference i s the bank's p r o f i t .
The re-.son why the farmer needs t h i s $2000 of ready money i s not that he
i s poor. He needs i t because he i s g e t t i n g rich so f a s t . He has bought more
land and more equipment to farm i t with; then he has to hire labor because he
has more land than he can farm himself, and that means a pay r o l l to meet; and
he has naturally bought an automobile to go about in, having so many things to
oversee. The more land he can swing, the more credit he can borrow t o increase
the scale of h i s operations, the more money he w i l l make if nothing happens.
But if h i s crop f a i l s he Will be unable to pay h i s note; not only w i l l he be
unable to pay that note but he w i l l be obliged to borrow more on a second note
to bring off the next year's crop; and the bank, having started with him, i s
obliged to go on, f o r i f i t doesn't everything w i l l be l o s t .
•"HEN THE CRASH CAME
So i t comes that more notes go t o Minneapolis to be rediscounted, and more
currency i s duly received in nice packages and paid out over the bank's counter
to people who bring i n the farmer's checks and want the cash; and everybody has
more at hazard on the next crop. If that f a i l s , so that the stakes have a l l to
be doubled a second time, i t begins to be serious. Then i f a third crop f a i l s
disaster begins. The value of land collapses. Mortgages begin to be foreclosed. The farmer cannot pay what he owes the triangle bank; and h i s notes
which the triangle bank has hypothecated at Minneapolis are worthless because
there i s now no equity i n the farmer's land above the mortgage.
The Minneapolis bank writes to the triangle bank, saying: "Those farmer
notes you pledged with us are overdue. Please redeem them at once,"
But the triangle bank cannot redeem them. It has paid away the money on
the farmers' checks and there i s no way to get i t back. So i t answers the
Minneapolis bank, saying: "All the farmers hereabouts are bankrupt. Then we
ask them to pay they gay, 'All we've got i s nothing. If you want that come
and get i t . ' And that i s a l l we can say. You have their notes, as we pledged
them with you. ~"e cannot redeem them. But i f you think there i s anything
around here you want, please come snd get i t , r'e don't know what that could be".
Just then two or three depositors who had some real money with the bank
came in. They have heard a rumor. They want their money out. The banker
walks past them without speaking and sticks a piece of white paper on the glass
of the front doot. There he stands, looking out, with his hands in h i s pockets.
The bank i s bust.
All t h i s has been supposed, for uses of i l l u s t r a t i o n . But i t happened,
l i t e r a l l y , throughout the t r i a n g l e . The 1917 crop, out of which people meant
to pay for t h e i r automobiles, their tractors, their extravagances
their
added land, f e l l t o seven bushels per acre. ITobody was dismayed. You h.cd t o
expect th^t in dry farming. They borrowed more money and planted more wheat —
more, of course, than the year before. The l g i S crop averaged l e s s than f i v e
bushels to t h e acre. S t i l l they were optimistic. Credit seemed inexhaustible.
Dae counties sold tax-exempt bonds to Eastern investors and distributed the
money among farmers to enable them to plant again*
H i l l County alone did
this to the tune of $800,000.
The thing was to plant more wheat, more thaA
ever before; there could not be three f a i l u r e s in succession.
I f only they
planted enough and then i f they got another drop l i k e 1916, everybody could
pay.
After that they would be a l i t t l e more conservative.
I t was a desperate gamble - the l a s t thrOw - a l l or nothing!
Result:
Nothing.
The 1919 crop was just nothing.
And the whole t r i a n g l e was bankrupt.
Many of the people to whom the county loaned money j u s t tip and moved
away.
You may drive through the tf iangla now for f o r t y or f i f t y miles along
the new, bonded Roosevelt Highway, and ssstfi to see nothing but abandoned towns,
abandoned farms, banks along the road w i t h pieties of white paper pasted on
their door panes and steam tractors sinking in the f i e l d s l i k e l o s t locomotives.
Kremlin i s a c h a r a c t e r i s t i c town - s i x or eight houses, an elevator, a
large garage and two banks.
The garage i s closed; but in one year i t sold
12) automobiles.
Both banks are closed.
One has not y e t got i t s receiver
in.
There i s a famine of receivers, owing to the unprecedented demands The
cashier i s s t i l l there.
I t i s only decent, a f t e r having taken a snapshot of
the Dank as i f i t were a public e x h ibit, to go in and speak t o him.
He i s
from South Dakota and smokes a corncob pipe.
DOMESTIC TRAGEDIES
"The Government told us to r a i s e wheat," he says.
"It never told us to
stop.
We raised i t , or tried to r a i s e i t , u n t i l we a l l went broke*
That's
the end of the story."
"Do you speak as a banker or a s a farmer?"
"Both.
I had 1000 acres in wheat this year.
I t looked l i k e a good
crop.
Then the grasshoppers came.
They were so bad the locomotive engineers
had to sand the r a i l s to get through here.
That's truth.
You can s e e what
happened.
They ate everything there was.
I got 125 bushels from 1000 acres."
"Now *ba.t are you going to do?"
"I'm going to s t i c k around here.
I t ' s worse in South Dakota, from what
I hear.
This wouldn't be s# bad i f only we had raised eoaa corn.
Did you
know corn would grow hare?
We didn't know i t . "
At Havre the bank buildings are #f brick with stone c e l u m s , and the
f a t a l p i e c e s of white paper are read through plate g l a s s .
I n one p l a t e - g l a s s
window may be several n o t i c e s , announcing not only the insolvency of t h i s bank
but that a l s o of a number of shingle-shanty banks out on the bench, or a f o r e closure notice like t h i s :
TO WHOM IT MAY CONCERN: The chattel mortgage of Frank and Eloise
Robinson for $lbjpO being now due and unpaid . . . the following property
will be sold at auction, to wit: One red cow named Betty, one roazi h e i f e r
named Irene, one black gelding named Dick, one gray mare, lU- y r s . , named Bell (Signed) FIRST NATIONAL BANK OF FRESNO,
By I t s Receiver.
-12-
This receiver has received not only the brick hank but a number of
l i t t l e barks, including the one at Fresno, where Frank and E l o i s e mortgaged
Betty, Irene, Dick and B e l l . He i s within* Ee i s glad t o see you. V i s i t ing breaks up the gloomy echoes. There are some people i n town. He w i l l
have them in - the man who was governor when Montana thought what she needed
was people, and the president of a bank that ought not to have f a i l e d and
perhaps would not have f a i l e d i f i t s depositors had not got themselves into a
sympathetic panic. These and others. They seem a l l a l i t t l e dazed. Nobody could have imagined what happened. It seems unreal, stranger than
f a c t . Only three years ago the president of the bank that ought not to
have f a i l e d would not have taken
a share f o r h i s bank stock. Now he
w i l l pay an assessment i f he can, or l o s e i t i f he c a n ' t .
"But i s n U t h i s what happened? You overcapitalized and overmortgaged
two freak years of plenty and put nothing by. You believed your own color
poster at l a s t . "
"Yes," they say, "that's s o . "
"Too much c r e d i t . That i s what ruined you really?"
"It d i d , 6 says the man who was governor, "Not here in the t r i a n g l e
only. Everywhere. The loan companies swamped us with money. I know a
man who had the f i n e s t 10,000-acre ranch in the state* Owed nobody a
penny. He thought he would borrow *60,0C0. The loan agent s a i d : *T0hy not
take ninety?* He said, 'All right - n i n e t y . 1 Now h e ' s bankrupt. The
mortgage i s being foreclosed."
"Why did he borrow $$0,000?"
"I asked him that question. I s a i d
did you borrow the money?*
He said, *1% damned i f I know why. Everybody e l s e was branching out. I
thought I ' d get me a few tractors and some f i n e s t o c k . 1 "
"This i s H i l l County?"
"Y@s."
• I t ' s black with foreclosures?"
'
"Almost s o l i d black," they sigh.
"
"Bat here and there i s a white s p o t . TRkat has happened i n those
White epots?*
"There are what you c a l l white spots," says the iran whose bank ought
not to have f a i l e d . "That's a good way t o put i t . "Tiite spots. 1*11
t e l l you what happened in one of them. This l a s t year, yv.u know, we were
about'to get another crop when the grasshoppers came. The sky was v e i l e d
with them, gleaming i n the sunlight. A pretty sight, i f you've never seen
i t . But what a scourge! They eat everything down t o moisture. The land
they've been over i s aa i f i t were summer fallowed. You have seen i t . %11,
there was a woman out there whose husband worked oh the r a i l r o a d . She did
the farming. She fought the grasshoppers with her hands, and right there,
surrounded by people who got no wheat at a l l , she brought through a crop of
forty bushels t o the acre and paid o f f a $1200 mortgage. Last year I I
know because she paid i t at my bank. I said, ' " e l l , you ought t o be mighty
glad t o get that paid! SQaat seemed t o h i t her in a place she'd forgotten
about. F i r s t she stared at me, then she began to sob. That was a white
spot, wasnH it?"
22:
- ij "And Sadly as the c a t t l e "business i s h u r t , there are white spots i n that
picture t o o . "
"There e r e , " says the nan who was governor,
"I knew a man who i s making
money in c a t t l e right now."
"How does he do i t ? " the others asked.
"He doesn't r a i s e too many, and they are f i n d .
Up to 1600 pounds per
head.
He always g e t s the top p r i c e . "
What b e f e l l the c a t t l e industry of Montana, i s a separate story*
First
i s the f a c t that c a t t l e r a i s i n g there had always "been an e x c i t i n g gamble with
NatureI t did not have tb be; people l i k e d i t to be.
Natural b u f f a l o grass,
which cares on the s t a l k , makes r i c h grazing both winter and summer - winter in
the v a l l e y s and summer on i n the mountains.
Therefore the drudgery of r a i s i n g
feed, may be avoided.
There i s the s t o r y of a ranchman A o on returning from an
errand to the c i t y was furious to find that a raw hand had plowed a patch of
ground f o r p o t a t o e s .
"But potatoes w i l l grow here," said the culprit#
"I know they w i l l , r t said the ranchman.
"But i f you s t a r t t h a t the hunnyakkers w i l l come i n . "
TROUBLES IN FLOCKS
That i s a contemptuous word, meaning farmers who work t h e s o i l .
The
rancher's idea was both to grow and f a t t e n c a t t l e on the u n t i l l e d bosom of
Nature.
Now and then came a bad year.
Then he l o s t .
But the next year he
began again, pyramided, h i s herd with each s u c c e s s i v e good year, and played for
sweepstakes.
They were doing t h i s , as usual, i n 1917 and 1918, only on a much larger
scale than u s u a l , and went i n t o 1919 with a clean-up in s i g h t such as h i t h e r t o
they had dreamed o f .
Never had the pyramid been so enormous, never so dangerous, and the p r i c e wa.s i n the sky.
Then came the drought, the same that k i l l e d
the wheat growers i n t h e t r i a n g l e .
There was not enough b u f f a l e grass to bring
the herds through another winter.
And j u s t as they had made up t h e i r minds not
to r i s k i t , but to s c a l e the pyramid by s e l l i n g o f f a l o t of c a t t l e , the outlaw
switchmen's s t r i k e began.
For weeks l i v e s t o c k accumulated a t the shipping pens;
c a t t l e cars couldn't be moved, out.
In October i t began to sn®w; and the snow
that f e l l i n October was s t i l l on the ground the next May.
The winter was
terrific.
Without f e e d , never having raised, any, they had to import hay from
other s t a t e s , and i t cost them up to f o r t y - f i v e d o l l a r s a ton.
They borrowed
money on t h e i r notes a t the bank to pay f $ r i t .
But already they had borrowed
on their c a t t l e as much or mora than i t had been s a f e for banks t# l e n d .
The
baiits were caught.
If they d i d n ' t land more money for f e e d the c a t t l e would be
l o s t , together with a l l the money already loaned upon i t .
Take a concrete c a s e .
In the autumn of 1919 tw# banks in. the Judith Basin
were lending $3>000,000 on growing l i v e s t o c k which at the very h i g h e s t p r i c e s was
worth $10,000,000.
There was rear g i n enough in t h a t , provided nothing happened.
- 14 In the spring of 1920 their loans on that same l i v e s t o c k had increased to
$6,000,000.
The increase represented money loaned for bay*
Then there was
no calf crop to speak o f , because the cows were weak and slunk their c a l v e s .
Finally, i n 1920, came the great f a l l i n p r i c e s , aid the disaster was complete.
A steer that had been thought worth $200 f e l l to a c t u a l l y $60; a cOw that had
been worth $100 f e l l t o $30.
In the f a l l of 1920 the l i v e s t o c k on which those
two banks in Judith Basin had loaned $6,000,000 could not be sold for $6,000,000.
Much of i t was carried over for another year, everybody desperately hoping for
a better p r i c e .
The price did not improve; the l i v e s t o c k did not f a t t e n . I t
had not the bone.
The hard winter had hurt i t ,
The banks at l a s t could go
no further.
They could not borrow any more money at Minneapolis because they
had nothing to pledge; and Minneapolis was c a l l i n g upon them to pay what they
already owed.
The c a t t l e at l a s t were sold off for earners and c u t t e r s , and
brought l e s s than the cost of the hay they had eaten i n the winter of 1919-20.
Never had there been so great a c a t t l e disaster i n Montana.
But then,
never had the play for sweepstakes been so steep.
The banker who t e l l s you this story brings out some folders containing
the cattlemen's notes.
You shall see how i t was.
Here, for example, i s a
man who i n 1918 borrowed $8,000 on h i s note to buy some c a t t l e .
He had sold
out and was going i n again; and he borrowed the money to do so.
At that time
h i s net worth was $30,000, a figure obtained by subtracting h i s debts from the
estimated, value of h i s land.
That note was never paid.
I t was renewed and
increased.
In 1921, on what survived of his oat t i e , he owed the bank $20,000,
and h i s net worth was n i l , because the estimated value of h i s land had f a l l e n ,
he owed more than he was worth.
Wasn't i t amazing?
And how could anyone
have foreseen i t ?
WHEN NATURE FROWNED
One's amazement does not exactly follow the banker's words.
The i r o n i c
way of Nature with the man who presses chance - y e s , one may wender a t i t . But
the way of Montana, banks with credit is. a natter lower down.
And that takes
away the breath.
Banking was a pyramided industry too.
The pyramiding of land,
of wheat growing, of c a t t l e r a i s i n g , of bank loans, of mortgages - i t was a l l
one piece of excitement, and had already gone so far that i t was no trouble at
a l l for the Lord to upset i t .
One frown of Nature, and i t crashed.
What the receivers found when they came to take possession of that every
third bank i n Montana which failed was that everybody more or l e s s had been
doing a l l these things together, with a kind of wild, uncontrollable enthusiasm.
I t was a. pyramid of pyramids.
Bankers were involved in land and c a t t l e and
wheat.
The big speculators in land and c a t t l e and wheat were involved i n the
banks.
As thejre were many new ufceat growers and c a t t l e r a i s e r s who knew only
the p r o f i t s and none of the r i s k s , so also there were many new bankers who knew
only how easy i t was to increase their p r o f i t s anJ thereby the value of their
bank stocks by increasing their loans and deposits.
They competed w i t h one
another to make loans.
They loaned money not only to one another; they loaned
i t to themselves and sometimes to people thsy knew nothing about except that
they owned the land, wore spurs and smelled of c a t t l e .
They ware known, when
business was a l i t t l e d u l l , to swap notes with one another, almost f o r no other
reason apparently than to whoop i t up.
Or one would go out and create business in this fashion: A man owned some
cattle.
The banker would say, "I know somebody vifco w i l l buy those c a t t l e at a
very good p r i c e , provided you w i l l leave the money on deposit with the bank."
If the c a t t l e owner was w i l l i n g the banker would go to another man, saying:
"Thare's a. f i n e herd of c a t t l e over hare for s a l e .
TShy not buy i t ?
Our bank
w i l l lend you the money."
Thus loans and deposits were both increased, with no
increase a t a l l in the wealth of the community; and the r i v a l bank had then to
thitik up some way td increase i t s loans and deposits or seem t o be f a l l i n g behind.
Not only did bankers finance the land and wheat end c a t t l e pyramids. They
took part in them.
And then when the receivers began to examine the paper i n
the banks they found among the worthless a s s e t s of the banks' debtors - what would
you think?
Why, bank stocks.
That i s to say, bankrupt borrowers were a l s o
stockholders i n bankrupt banks.
They had borrowed money to buy bank stocks as
they had borrowed money to buy land.
Was i t gambling?
That i s a harsh word.
I t was boosting.
And what were they playing with? Depositors' money. Everybody forgot the depositor.
Most of this rainbow banking got started, during the war.
The Government
encouraged i t , not d i r e c t l y , y e t i n e v i t a b l y , by putting Unlimited credit at the
disposal of bankers through the Federal Reserve System and then exhotfting them to
finance a l l manner of production.
Once i t got started, you almost could not
stop i t without a smash.
I t was very prevalent. Yet i t was not u n i v e r s a l . We must keep the perspective.
A great majority of the banks of Montana were always sound and always w i l l
be.
And the strength of Montana i s s t i l l in the sons of those pioneers who vdien
Helena burned up held a meeting to decide what they should do*
They had no
c a t t l e , no sheep, no agriculture.
Placer mining was about played out*
Quartz
mining had not begun.
All their merchandise came from St* Louis, up the. Missouri
to Fort Benton and then by wagon overland.
A message of commiseration was r e ceived from the merchants of St. Louis, who said they had c o l l e c t e d a l a r g e sum
of money which they wished to contribute to the restoration of Helena*
To whom
should they send i t ?
The men of Helena sent back word, saying: "Thanks. Please
return the money to those from whom you received i t .
We came here with nothing
but our hands.
Therefore we are no vrorse off than when w started.
And we l i k e
te think we can s t a r t a l l over again."
Now North Dakota.
Years ago the bonanza wheat miners with their monster
o u t f i t s passed slowly westward over this v i r g i n s o i l . They were followed by
s e t t l e r s , mostly at f i r s t Scandinavians imported by the railroads that had Federal
land-grant acreage to s e l l .
They are a strange, unaccountable people, both
credulous and suspicious in morbid degree, with the brooding f a t a l i s m of a onecrop mentality, a Nordic b e l i e f i n imitative magic, and no sense of humor*
They
began to grow wheat because i t vtes wheat land and that was the e a s i e s t crop* They
have been growing i t ever s i n c e , and r e l a t i v e l y l i t t l e of anything else*
They
were urged to d i v e r s i f y t h e i r farming.
The l o c a l bankers, the county agents,
the agricultural c o l l e g e s , the rotary clubs - a l l preached d i v e r s i f i c a t i o n of
crops and l i v e s t o c k .
Bat these people would grow wheat.
TEE ONLY REMEDY
I t i s a habit very hard to break.
For wheat a farmer works ninety days;
i f he has.general crops and l i v e s t o c k he works every day.
Changing from wheat
— 16 —
to general farming means going hard to work*
A survey l a s t year showed that
20 per cent of North Dakota farms had no sows; some had no chickens; many had
no cows.
There were farms without barns, -vheat in that case "being threshed at
harvest and hauled to the elevator h o t .
Such farmers buy the food they eat.
A North Dakota farm self-contained i n swine, dairy, poultry attd garden products
i s exceptional.
Yet these are the people who l o s t $70,000,000 with Townley in f i v e years.
The same survey that revealed the s c a r c i t y of milk cows, pigs and chickens
showed that among 6 l average farmers s t a t i s t i c a l l y sampled, 21 had tractors and
47 had automobiles.
Kiey were not poor.
They were obstinate, unable to give
up the fixed notion that wheat mist pay.
They mined the f e r t i l i t y of the s o i l
u n t i l the earth groaned, the growth, became thin and mean, and the y i e l d per
acre declined in a disastrous manner*
There was only one way t o save a g r i culture in North Dakota.
That was to change i t fundamentally, as had been
done, for example, i n Iowa.
Bit the farmers thought i t could be saved by law.
They hated, farmyard
drudgery.
There was a saying among them that they would not p u l l t e a t s . They
thought the trouble was that the railroads and the millers and the speculators
got a l l the "profit; which, even i f i t ware true, had nothing to do with the
basic problem,
They dramatized these ideas and took them to the l e g i s l a t u r e at
Bisma-rak*
The l e g i s l a t o r s told them t o go home and slop their p i g s .
This irafje
them very angry.
The episode has always since been treated as the beginning of the Nonpartisan League experiment under the leadership of Arthur C. Townley, a man who
had f a i l e d a t bonanza farming On rented land with borrowed money i n Golden Valley
and who then borrowed an automobile and went about t e l l i n g the farmers that i f
they would take control of the s t a t e they could make t h e i r own c r e d i t , be rid qf
their -taxes, have t h e i r own m i l l s and packing houses and s t o r e s , and be big
business i t s e l f .
He appealed to their fip4.th in imitative magic. To become
a l l of til em rich l i k e bankers they had only to imitate bankers; t o be m i l l e r s
they had only to have m i l l s ; to be packers they required only a packing plant;
to be statesmen they had only to s i t as statesmen s a t .
They went with him.
He took t h e i r dues in the form of post-dated checks.
The f i r s t example.
No money.
Only the promise to pay.
They got possession
of the s t a t e by voting together.
Then they changed the c o n s t i t u t i o n i n order
to create a s t a t e bank, which was to ma-ke t h e i r c r e d i t . . I t offered bonds to
raise capital.
The bonds would not s e l l .
Thereupon the bank i t s e l f bought
them.
Then small cooperative banks were formed, i n imitation of r e a l batiks;
the capital was supplied by post-dated checks which the s t a t e bank treated as
money.
All the real money there was a t any time was s t a t e money, such as
school funds, a l l of which the state bank required to be deposited with i t s e l f ;
then i t spread t h i s public money out to the cooperative banks to be loaned to
good league members.
A tinsmith became s t a t e superintendent of banks. With
post-dated checks they founded chain stores and f i f t y - o n e newspapers t o t e l l
only the non-partisan truth.
They b u i l t at Fargo a pack!qg plant that cost
$2,300,000.
I t l o s t $1,300,000 in seven months' operations. Afraid to refuse
to buy c a t t l e from i t s 17,000 stockholders, i t bought the c a t t l e and resold than
at a l o s s .
I t sent away dressed and padced. meats and brought them back unsold
to be ground Into f e r t i l i z e r
They started a $3,000,000 m i l l and elevator at
Grand Forks and l e f t i t unfinished,
State taxes tret>l3d in f i v e years; and
when the s t r u o t w e f e l l i t was.not hollow, as everyone supposed; i t was a l i v e
with white-eyed, mephitic things, h o s t i l e to the l i g h t , that scattered and d i s appeared with amazing r a p i d i t y ,
THREE CLASSES OF FARMERS
Sanity haS been sorrewhat restored.
There are many who perversely b e l i e v e
the scheme was a l l right and that big business k i l l e d i t . They are the irreducible minority.
A great majority are ready to try a return to agriculture on
principles previously recommended..
They are w i l l i n g to take pigs from the
rotary clubs, bees from the bankers, cows and chickens from the United States
Government, and tend them for increase.
The population f a l l s into three categories.
O n e - f i f t h of i t i s s i l e n t ,
e f f i c i e n t and getting on; i t asks for nothing bat a rough parity of buying
power and t o be l e t alone.
Three-fifths of i t i s badly in debt, but not bankrupt; i t can work i t s e l f out.
The l a s t f i f t h i s hopeless and s t i l l vocal.
These are they who forgot farming and s e t out to regulate government.
Meanwhile business, notwithstanding the wreck of banking, i s transa.cting
i t s e l f with l e s s awkwardness than you vould imagine.
Not a l l the banks that
were insolvent could be permitted to shut their doors; there had to be places
to put money for safe-keeping and a way to get i t back when i t was needed. So
many of them, instead, of being shut up t i g h t , were chloroformed.
That i s the
word they use for i t .
The method was simple.
I t was to draw a red l i n e
across the books as of a certain date.
Everything prior to that date was
moribund; and the bank, having l o s t i t s c a p i t a l , could not, of course, make
loans.
But i t could, subsequently to the date of that red l i n e , receive new
deposits, keep these separate, and permit them to be withdrawn or checked against
in the ordinary way of bank d e p o s i t s .
This plan has been adopted also i n South
Dakota.
When the sound bankers at Fargo who are t e l l i n g you about Townleyism pause
for breath you can s t a r t l e them by saying:
"You ought t o build a monument t o him."
"Why?"
"Because he saved North Dakota from having a land boom.
Say tha t for him.
Outside capital shunned you.
Eastern lean companies would not come i n . "
"That's r i g h t , " they admit.
"Like the monument down South to the b o l l
weevil, you mean.
Yes.
No e v i l without some b l e s s i n g .
We haven't had e.ny
land boom here.
We are s t i l l close to the s o i l .
Much, better off in that
respect than South Dakota.
And w e ' l l come back a l l the f a s t e r .
Correct."
If farming vera anywhere safe i t ought to be so in South Dakota.
Most of
i t is intelligently diversified.
The la.nd i s tame and very d e s i r a b l e .
The
farms are l i k e the woodcuts at the top of the months i n the old almanacs.
"What happened to South Dakota?" you ask a banker at Sioux F a l l s .
He.answers mechaJiically• "Corn that was two dollars i s s i x t y cents. Oats
that were a dollar are f o r t y cents.
Hogs that were twenty cents are s i x . Wheat
that was three d o l l a r s a bushel i s ninety cents."
"Is that all?"
"Ain't that enough? Where are you from?"
"You don't mention land."
«
-
18
-
He moves a. l i t t l e u n e a s i l y .
"No", be says.
"You don't mention land around
here i f you can help i t .
Land that was three and four hundred d o l l a r s and acre i s
a hundred and f i f t y i f you can s e l l i t at a l l - and worth that i f you can buy i t . "
"And you capitalized two-dollar corn, twenty-cent hogs and three-dollar wheat
i n the value of land."
"They went crazy," he says, speaking slowly.
"Take a case l i k e t h i s : A
man had 160 acres of f i n e land, owed nothing, $20,000 in the bank.
What could
happen to him?"
*TOiat did?"
"He l o s t h i s mind..
He bought the quarter section next to him for $500 an
acre.
That was <80,000, wasn* t i t ? He paid h i s $20,000 cash dcwn, and gave a
mortgage for $60,000.
You might s e l l that land today for h a l f the face of the
mortgage.
I t ' s being foreclosed.
That man has l o s t everything he owned. He
has disappeared.
And he was a good farmer too."
"Too easy to borrow money. That seems to have been true everywhere»"
"Yes," he answers, "and too much prosperity.
A farmer with nothing to
borrow on was just in here trying to get a loan.
I said, * 'Tell me, do you
know what happened to you?'
He said, 'Yes, I know.
I sold some hogs a l l at
one time for $3800 and i t made a fool of me. 1 "
"It appears that i n the year 1920, when borrowing in a l l forms was a t i t s
peak, South Dakota went to the top of the automobile l i s t .
She was distinguished
for having more motor cars in proportion to her population than any other state
i n the Union."
His reply to that i s to s p i t .
"How did you come through?
Why i s your bark, one of the four l e f t standing
in this neighborhood?"
GRANDPA'S ADVICE
"I never forgot what scy grandfather told me," he answers.
grandfather said, 'Suppose everybody to be dishonest u n t i l you know better; t r u s t
your own money a l l the time and the other f e l l o w ' s money only h a l f the time;
never lend to a man while h e ' s l o s i n g . '
I ' v e been running this bank on those
principles for many years, and. you see i t ' s s t i l l here."
Although everybody w i l l v i o l e n t l y r e j e c t the thought, nevertheless i t seems
true that South Dakota had a mild attack of the North Dakota disease. There was,
only in l e s s degree, the same b e l i e f in the magic of credit; also the idea that
i t was one of the s t a t e ' s functions to create and: d i s t r i u b t e credit*
The annual report of the South Dakota Sural Credit Board begins with t h i s
thesis:
"It appeared that a s t a t e ought to use i t s credit to help the people of the
state . . . .
This system.was organized for the purpose of giving to the farmers
cheap money on long time."
On that theory the Rural Credit Board has sold $47,500,000 of tax-exempt
s t a t e bonds to Eastern investors, meaning to laid the money to the farmers; but
apparently also i t undertook in time of s t r e s s to aid the s t a t e banking system,
for by the l a s t annual report i t had deposits i n 27b s t a t e banks; and for these
deposits i t has no surety whatever, none being required, since a l l bank deposits
are guaranteed by law.
- 19 This deposit-guaranty scheme has not the look of one of those three—horned
monsters that once prowled about, for God knows why, i n viiat now i s South Dakota.
I t s resources are i n s u f f i c i e n t t o pay i n t e r e s t on the deposits that are l o s t , to
think nothing of the principalOf the four banks that have failed, i n Sioux
Fails one i s a national bank, three are s t a t e banks.
On each of the three defunct
s t a t e banks one reads the rash and disproved legend, in s i l v e r and gold l e t t e r s :
"Deposits Guaranteed»"
Later truth i n the form of a small typewritten notice i s
pasted, on the door:
This bank suspended, business Jan* 24, 1924, and i s now i n the hands of
the Superintendent of Banks of South Dakota on account of constant withdrawals, causing a depletion of reserve.
(Signed) JOHN HIRNING, Superintendent
of Banks of the State of South Dakota.
I t was never intended perhaps that p o l i t i c s should control banking in South
Dakota, as was the case in North Dakota] and yet that p o l i t i c s did touch banking deeply i n South Dakota i s not e a s i l y denied.
And their ideas of wiiat banks
were for became very grand and s o c i a l .
The big credit machine was the Sioux
Falls Trust and Savings .uank.
I t had four and a h a l f m i l l i o n dollars i n dep o s i t s , of which one—half m i l l i o n was s t a t e money and two millions represented
the reserves of nearly 200 small s t a t e banks, which seemed unJer some kind of
psychic compulsion to keep their money in that place.
The Sioux F a l l s Trust and
Savings Bank advertised on the billboards i t s own idea of what i t was f o r ; and
that was t o bring the sky and t h e town rrnch nearer together.
A subsidiary concern, which i t owned, issued guaranteed gold bonds secured by unspecified c o l l a t eral as to which unlimited r i g h t s of substitution were reserved.
Afterward the people who had bought the bonds seemed rather to enjoy the
excitement of guessing whether their security was the garage> a new apartment
house, or the h o t e l , and whether, in any c a s e , i t began at the f l o o r or at the
eaves*
A FAMILIAR AMERICAN MALADY
In the area of ruin Montana, North Dakota and South Dakota are the hi^tx
spectacles.
In Montana, one-third of the banks have f a i l e d , representing a
l i t t l e more than one-quarter of her entire banking c a p i t a l , and involving onef i f t h of her t o t a l bank d e p o s i t s .
In North Dakota one-quarter of a l l the
banks have f a i l e d , representing about o n e - f i f t h of her entire banking c a p i t a l ,
and involving o n e - f i f t h of her t o t a l d e p o s i t s .
In South Dakota about one-tenth of the banks have f a i l e d , representing
nearly o n e - f i f t h of her whole banking c a p i t a l , and one-tenth of her bank deposits.
The f a i l u r e s i n Minnesota, have been fewer than one bank in twenty,
representing only 2 per cent of the s t a t e ' s banking c a p i t a l and 1-1 / 2 per cent
of i t s bank deposits.
Now l e t us demand the lowest common denominator for the d i s t r e s s of Montana., with i t s overturned wheat and c a t t l e pyramids, that had a wild.
land boom;
North Dakota, with i t s one-crop obsession, that had no land boom;
South Dakota> with i t s highly d i v e r s i f i e d farming, that had a land boom.
What i s i t i f not, in a l l three c a s e s , a d e l i r i o u s way with credit?
There i s a basic depression of a g r i c u l t u r e , owing to overproduction; to
the f a c t that we produce a surplus of wheat in competition with countries whose
costs of production are much lower than ours; to t h e f a c t that our f o r e i g n
market for beef i s limited because Argentina can always undersell us; and,
- 20 -
l a s t l y , to the f a c t that the products of agriculture are l e s s protected from the
competition of low-cost countries and have been more deflated from war prices
than the products of industry.
These are grave problems.
They complicate and
do touch the situation in the Northwest; but they touch a l l basic agriculture
at the same time in a certain way-.
They do not explain why one type of malady i s extremely acute in three states
whose agricultural conditions are structurally dissimilar.
It i s a very familiar American malady - this delusion that credit i s
substance.
TL-HDU"
:J
^
V'
Copied from
"The Saturday Evening Post"
of April 19, 1924.
A FIFTY-YEAR CRISIS IN AGRICULTURE
"by Garet Garrett.
It i s proposed that we shall have in t h i s country a successful agriculture
without i t s ancient means - that i s to say, without either slave labor or peasantry.
Conscience has abolished slave labor.
peasantry, we care not for i t .
It i s forever put away.
As for
The word assoc iate s with Old World drudgery,
"Shall the American farmer be reduced t o the condition of the European peasant?"
asks the p o l i t i c a l rhetorician.
% answer a l l with one voice "No!"
This i s what the psychologist c a l l s a reaction.
"peasantry" means.
The sound i s wrong.
Few stop to examine what
It makes us think of Russia or the Bal-
kans; we pass l i g h t l y over France and Germany, where peasantry, though i t hurts
the back, does o f f e r one sweet reward.
The name of that reward i s s e c u r i t y .
Wars, revolutions, economic d i s a s t e r s pass; the peasantry survives, l i k e a tree,
through the seasons.
It appears that we do not esteem s e c u r i t y .
Or perhaps we
take i t for granted.
At any rate, we say "NoJ" We point with pride to the
f a c t that although the y i e l d per acre i s much lower in t h i s country than in
Europe the y i e l d per man i s higher.
To explain t h i s we keep in our minds the
picture of the American farmer, not bending h i s back, not tending a few acres
i n t e n s i v e l y , but s i t t i n g on h i s plow with eyes to see h i s p r a i r i e domains
stretching t o the horizon, commanding mechanical energy.
way.
That i s the American
u 1.
-2-
Nevertheless, agriculture without slave or peasantry presents d i f f i c u l t i e s
which are yet unsolved.
them thoughtfully.
We hardly know what they are, never having defined
It has been p o s s i b l e f o r a long time to conceal them.
They
could very e a s i l y be concealed as long as new land was to be had f o r the trouble
of taking i t
- v i r g i n land that increased in value from the f i r s t stroke of the
ax and was prodigal in giving.
And i t could be further concealed as long as
the cost of production continued to f a l l , as i t did f o r many years, even where
the f i r s t richness of the s o i l had been taken.
I t continued to f a l l for two
reasons - the use of improved implements and the method of s p e c i a l i z a t i o n .
The Rising Costs of Agricultural Production
But now the land i s a l l accounted for; a l l owned.
There cannot be any such
improvement upon e x i s t i n g implements as these represent upon the scythe ahd
flail.
And s p e c i a l i z a t i o n already has been carried to the point of e v i l ,
costs are r i s i n g .
Thus
They have r i s e n enormously for reasons that are permanent.
And now concealment begins to be much more troublesome.
Agriculture in t h i s country was at f i r s t of two types.
er type, r e s t i n g upon slave labor.
There was the plant-
The planter crops were such as r i c e , tobacco
and cotton.
The other was the i n d i v i d u a l i s t i c type - heroic, romantic, a l l e g o r i c a l .
With a few rude t o o l s , a gun, h i s team and wagon, a bushel of seed, a bag of
s a l t and a new w i f e , the pioneer entered the wilderness, l a t e r the surveyor found
him in a l o g cabin, proprietor of the solitude, surrounded by increase.
came and bought him out; he went on to do i t again.
Others
Then these others, having
further improved the land, sold i t again and followed the o r i g i n a l s o i l breaker.
-3When they overtook him he sold and went on.
We can remember i t who were not there.
So wave a f t e r wave.
The straining of the wagon gear
through the l i s t e n i n g s t i l l n e s s of f o r e s t , nameless terrors, the pungency of
hut harness, the odors of evening and frying food on the river bank, the sweetness of coarse f a r e , storm, s t a r l i g h t , morning, boundless expectation, and news
and rumor even there.
Always someone had gone before; news was coming back.
The place of eminent desire was not Boon's Lick.
discovered farther on.
The perfect v a l l e y was j u s t
Then the great anxiety whether i n taking what was here
one had not missed what rumor said vt&s there.
Speculation in Land a Century Ago
"Scarcely," says a contemporary writer - 1826 - "has a family f i x e d i t s e l f
and enclosed a plantation with the universal fence - s p l i t r a i l s l a i d i n the
worm t r a i l , or what i s known in the north by the name of Virginia fence - reared
a suitable number of l o g buildings, in short, achieved the f i r s t rough improvements that appertain to the most absolute n e c e s s i t y , than the assembled family
about the winter f i r e begin to talk about the p r e v a i l i n g theme - some country
that has become the rage as a
point of immigration.
They o f f e r t h e i r farm for
sale and move away."
S e l l i n g out on the third or fourth wave, to people who b u i l t roads as they
came, who brought hardware, better t o o l s and f l o c k s , and who meant to stay, gave
those r e s t l e s s homesteaders the capital they required to go on w i t h .
Speculation i n land was already the national mania.
F l i n t , writing h i s Recollections i n 1326,said: "During my residence in
Missouri the rags f o r speculating i n t h e i r lands was at i t s h i g h e s t .
1 hav©
o f t e n be^n a t c o l l e c t i o n s where lands were at sale f o r taxes and by o r d e r s of
t&e c o u r t , and a t otner times, whan there were voluntary s a l e s a t auction*
zeal to purchase amounted to a frenzyler party.
The
Land s p e c u l a t o r s c o n s t i t u t e d a p a r t i c u -
I t required prodigious e f f o r t s to become a d r o i t .
The s p e c u l a t o r s
had a p e c u l i a r kind of slang d i a l e c t , a p p r o p r i a t e to t h e i r p r o f e s s i o n , and when
they walked about, i t was with an a i r of solemn t h o u g h t f u l n e s s , as though they
were t.ie people and wisdom would die witn them.
A very l a r g e t r a c t of land was
cried by the s h e r i f f for s a l e when I was p r e s e n t , and the only l i m i t s and bounds
given were t h a t i t was t h i r t y miles north of S t . Louis.
through t h e crowd assembled at the courthouse door.
A general laugh ran
But a purchaser soon appeared.
. . . Families were c o n s t a n t l y a r r i v i n g , many of them p o l i t e and well-informed, and
they
e going on to t h e s e t r a c t s , which, portrayed by t h e i n t e r e s t e d surveyor
and s p e c u l a t o r , and as yet only p a r t i a l l y explored, were to be t h e i r home.
Never have I seen countenances suffused with more i n t e r e s t or eagerness than in
c i r c l e s ot t r u s d e s c r i p t i o n , where the comparative beauty and advantages of d i f f e r e n t s e c t i o n s of trie country, cr t^e beet s i t e s f o r l o c a t i o n , were the themes
of conversation.
No doubt many of tnese speculations were dishonest*
No subject
i s more s u s c e p t i b l e of a l l tne a r t s of c h e a t i n g , because in no point i s i t so
impossible to disprove advantages, which vary with the imagination of him who
contemplates them."
-but, as ne adds, t n e r e wjre moments of r e t r i b u t i o n .
The s p e c u l a t o r s a t
that time overstayed trieir market, as one says i n Wail S t r e e t .
a mighty f a l l and many o.t them vsre^ r u i n e d .
Land values took
The t r a c t of land l y i n g somewhere
t n i r t y miles north of S t . Louis was for a time perhaps unsalable*
Not f o r long.
Less than ten years l a t e r , in 1835.
a
survey 'my made for a railroad in I l l i -
nois from the steamboat landing at Alton through Brown1s Prairie by C a r l i n v i l l e
and Otter Point to Springfield, a distance of seventy m i l e s .
Merely the survey.
And people were seized with the delusion that there would soon be no more farm
land on that p r a i r i e , only c i t i e s .
Farms in a s t a t e of rude development as
farms were immediately l a i d out in town l o t s .
Imaginary town s i t e s were sold on
Tmbat are s t i l l to t h i s day only very good farms.
a thing of course the panic followed.
A panic followed.
Always as
Yet never did the value of land go back to
where i t was^Fantastic values disappeared; permanent values s t e a d i l y and amazingly increased, and t h i s has never stopped.
Plenty, Famine and Panic
What occurrid on the I l l i n o i s prairie has been occurring ever since, not
as a rational
-procedure but as an expression of the pioneer mentality, with i t s
r e s t l e s s , excitable imagination, i t s l o v e of adventure, i t s ruling phantasy of
wealth by luck and discovery, and i t s aversion to slew r e p e t i t i o u s t o i l .
l y , the mentality of the gold seeker.
We know i t .
Brief-
There i s l e s s or more of i t
in a l l of u s .
So far from ever having sought to control or r a t i o n a l i z e t h i s s p i r i t , the
Government has encouraged i t .
There has never been but one national land p o l i c y .
That was and i s t o e x p l o i t the land.
makes us r i c h !
in
hy not?
The land - i t i s the land that
There was nothing e l s e to Teegin with.
It was in order t o bring value quickly to the land that the Government made
enormous grants of the public domain to the railroad builders; and on the part
of the builders to create and capture that value was the great i n c e n t i v e .
Many
—6-"
of the early railroads were conceived as settlement projects on a. magnificent
scale-
A railroad might be laid down on the prairie almost as f a s t as a team
could walk; and then the only problem was t o get people in f a s t enough from the
Old World.
The increase in the value of the land was expected t o pay for every-
thing, even the f a i l u r e s and disappointments, and ultimately i t did.
When i t was no longer necessary t o subsidize railroad building with grants
©f land the Government found something e l s e to do.
arid lands.
them now.
There were vast areas of
Agriculture did not need these lands - not then.
Yet the impulse to exploit them was i r r e s i s t i b l e -
money have been spent to reclaim them by i r r i g a t i o n .
though very productive, i s c o s t l y .
Enormous sums ef
But irrigated land, a l -
It may be a good investment for such as mean
to practice intensive farming on small acreage.
i s not present.
I t does not need
But the element of speculation
The majority pass i t over and take instead the f r e e , unirrigat-
ed land beyond, where the hazards are steep but where something you become possessed of for nothing may make you suddenly rich.
Of t h i s 3. notable instance has just occurred .
When a. vast tract of semi-
arid land called the Montana, triangle was opened for settlement there was a
frantic rush to s e i z e i t .
A motley of adventurers, speculators and people with
neither capital nor experience, whom the blind earth hunger moved, and also
a. great many farmers from Iowa., I l l i n o i s , Missouri a-nd South Dakota, where land
had become dear - they a l l crossed the beautiful irrigated Milk River Valley,
and established themselves on that dry, high bench beyond, where land was free
and where nothing had ever grown but buffalo grass.
Over an area half the s i z e
of Iowa eighteen thousand habitations, seventy towns and v i l l a g e s , schoolhouses,
banks and elevators popped out of the ground.
Anc , note # nobody knew whether or not that land would farm.
The Government
tx^at threw i t open f o r s e t t l e m e n t did not know, the r a i l r o a d s t h a t brought the
people did not know, the A g r i c u l t u r a l College of Montana did not know; and of
course the people did not know.
wheat*
They would have to f i n d o u t .
They planted
If the land would grow anything i t would grow wheat; and, b e s i d e s , wheat
growing i s the true American way of e x p l o i t i n g the v i r g i n s o i l .
I t i s more ex-
c i t i n g than placer mining, and much l e s s l a b o r i o u s .
This semiarid land did a t f i r s t yield wheat in a prodigious manner * A f t e r
two f r e a k years of p l e n t y i t was valued at f i f t y d o l l a r s an acre-; you could borrow
twenty-five on i t -
A f t e r t n r e e freak, years of bad weather i t f e l l to ten or f i f -
teen d o l l a r s an a c r e ,
quences ,
Then tr,e panic*
They w i l l pass.
Montana now is d e a l i n g with the conse-
The A g r i c u l t u r a l College i s t e a c h i n g people how s a f e -
l y to grow wheat t h e r e , on a d i c i n g p r i n c i p l e , so t h a t if you get one crop i n
three you come out ahead.
That land ne^er again will go back to b u f f a l o g r a s s .
I t probably could not happen as a matter of b i o l o g i c a l f a c t , for i t i s said t h a t
once the n a t u r a l sod i s broken the grass w i l l not r e t u r n .
sons i t i s forbidden to hapi en.
The land was not and i s not needed f o r wheat.
There i s a. ruinous s u r p l u s of wheat*
Yet there are those towns, the e l e v a t o r s ,
the investment which cannot be permitted to p e r i s h .
must be kept on t h e s o i l .
But f o r economic rea*
To support i t the people
To t h i s end s h a l l be employed a l l t h e r e s o u r c e s of
a g r i c u l t u r a l knowledge; even, i f n e c e s s a r y , p u b l i c f u n d s .
Now the p o i n t .
I t is t h i s ; If by "peasantry" we s h a l l agree to mean, not
uncouth r u s t i c i t y but a manner of taking r o o t in t h e s o i l f o r s p e c i a l love of i t ,
the p a i n s t a k i n g c u l t i v a t i o n of small holdings with the l a b o r of t h e f a m i l y and a
high degree of s e l f - c o n t a i n m e n t upon the land, then American a g r i c u l t u r e i s
""V br '
largely free of i t .
Actually i t does e x i s t .
i t i s not c h a r a c t e r i s t i c .
The cases are innumerable.
But
What may be called the American idea of agriculture
i s somewhat as f o l l o w s :
F i r s t , that i t s h a l l be at l e a s t as p r o f i t a b l e as industry or business for
a l l who are w i l l i n g to engagd in i t ;
Second, that i t shall not be more laborious than
industrial l i f e , for i f
i t i s people w i l l leave i t ;
Third, and for the same reason, that i t shall enjoy as f a r as p o s s i b l e a l l
the b e n e f i t s of c i t y l i f e and be compensated for those i t i s obliged t o do without;
Fourth, that i t s h a l l be e f f i c i e n t , as business i s , and produce primarily
a money crop.
Our Unique Idea of Agriculture
There i s almost no thought of a country l i f e s e l f - s u f f i c i n g i n v i r t u e of
s a t i s f a c t i o n s beyond the reach of c i t i e s , a rural culture self-regarding in i t s
own environment.
about.
When you speak of i t people do not know what you are talking
Farming i s understood to be a business, not a way of l i v i n g one might
prefer to any other.
This American idea of agriculture, altogether unique in the world, was
never stronger than at the present time.
The power of education i s behind i t .
great sums of money in support of i t .
It controls a l l our ways of thinking.
The Government f i r s t and l a s t spends
^e adopt i t unawares.
Consider now how i t
i s the fashion to speak of agriculture. Farming i s an u n s c i e n t i f i c term,becoming
obsolete*
We speak, instead, of the wheat industry, of the c a t t l e industry,
of the dairy industry, of overhead, f i x e d charges, net income, quantity production and turnover.
It s h a l l "be s a i d , f i r s t , that i f i n any country on earth t h i s idea may be
r e a l i z e d , here i s that country) and, moreover, that the extent t o which American agriculture has been already urbanized, s p e c i a l i z e d , i n d u s t r i a l i z e d , could
not be imagined anywhere e l s e .
I t has more plumbing, more automobiles, more
s c i e n t i f i c data, more news, more contact with the c i t i e s , more excitement, more
a t t e n t i o n , shorter hours and l e s s drudgery than any other a g r i c u l t u r e i n the
world, now or ever b e f o r e . -Great numbers of farmers keep t h e i r f a m i l i e s i n
towns.
A&ny go to Florida or California for the w i n t e r .
In t h e i r preoccupation
with the one money crop, whatever that may be, they o f t e n n e g l e c t t o produce
t h e i r own food.
They increasingly buy t h e i r food, a s c i t y people do, and the
same kinds.
Taking i t the country over, 40 per cent of the food eaten on the farms i s
not produced on the farms.
I t i s not that they s e l l grain f o r cash and buy
f l o u r or bakers' bread, not that they s e l l hogs f o r cash and buy hams and bacon
and lard from the Chicago packers by the trainload; they buy garden v e g e t a b l e s ,
potatoes, f r u i t s , canned goods, j e l l i e s , milk, butter, eggs, cheese and p o u l t r y .
In Missouri, Iowa, Minnesota, North .Dakota, South Dakota, Nebraska and Kansas
the average farm produces l e s s than 60 per cent of what i s eaten there, and i n
Worth Dakota alone the average farm buys more than h a l f that i s eaten on i t s
own t a b l e ; and t h i s runs up to 100 per cent, the farm in that case producing
no food a t a l l for i t s own t a b l e - nothing bu,t cash wheat to be hauled away t o
the e l e v a t o r .
Thus farmyard drudgery i s avoided - no milking, no slopping the
-lo-
pigs > no hoeing, no chores a t a l l , and only n i n e t y or a hundred d ays * work i n the
year*
a e l l , i f such i s the American idea and i t tends to be r e a l i z e d , then what i s
tne problem?
I s i t tha t progress i s not rapid enough?
The problem has many a s p e c t s .
Are we i n p a t i e n t ?
No *
Totally i t derives from the f a c t t h a t t h i s
type of a g r i c u l t u r e i s always i n trouble*
I t , p a s s e s from one c r i s i s to another
and i s c h r o n i c a l l y in need of being saved* J u s t now i t i s proposed, among other
i
things, t h a t t h e Government s h a l l lend money to those farmers in the Northwest
who have f a i l e d to r a i s e t h e i r own food «- money with which they s h a l l buy milch
cows, jvigs and chickens i n order that they may get in the way of feecBng themselves « This measure i s obviously f a l s e to the i d e a , and i s j u s t i f i e d only on
the ground of an emergency*
peasantry#
I t i s what might be called a s t e p backward toward
Indeed , many of those proposed to be helped regard i t in t h a t l i g h t *
They do not want to milk cows and slop p i g s -
All they want i s a high p r i c e for
wheat*
So the problem i s complicated,
And there i s endless confusion from the f a c t
that nobody wants to give up the idea*
defeat i t s e l f •
Nobody wants to admit t h a t i t tends to
This i t does i n an i n e v i t a b l e manner ^
The Great Land Boom.
E x p l o i t i n g new lands f a s t e r than they are needed has t h i s r e s u l t , t h a t t h e r e
a
i s always a. p o t e n t i a l food surplus*
crop basis* what i s bound to happen?
In t h a t case, with a g r i c u l t u r e on a moneyA p r o f i t i s k i l l e d i n the rush to s e i z e i t *
Millions of farmers with an "uncontrollable impulse i n c r e a s e t h e i r production of
the cash crop t h a t happens to be p r o f i t a b l e .
actual and everybody i s l e f t in t h e l u r c h .
Then the p o t e n t i a l s u r p l u s becomes
Such being the c a s e , or, i f i t i s true, as a l l professors of farm economics
prove by their f i g u r e s , that agriculture under the American idea does not pay, then
what keeps i t going?
Roughly, the answer i s that what f l o a t s i t and has floated i t
a l l these years i s the increase in the value of land.
How now? A r i d d l e .
If there i s no p r o f i t in agriculture why does the land
increase i n value?
, -
The explanation i s not simple.
To begin, -Alien the professors of farm economics,
either t.iose of the Government, or tnose of the s t a t e s , demonstrate by s t a t i s t i c s the
absence of p r o f i t i n agriculture - nay, the actual l o s s in i t - they take this year
or l a s t year alone.
Land values, i n t e r e s t , taxes, rents, a l l as they are, i t i s
true - agriculture does not pay.
The farmer is lucky to make wages.
But i f land
values, i n t e r e s t , taxes and rent were s t i l l what they were f i f t e e n or twenty years
ago there would be a p r o f i t .
This means that the p r o f i t s of agriculture are to a
rvery great extent absorbed by the increase in the value of the land; or, to say i t
another way, the earning power of the land i s capitalized i n advance, j u s t as a
Wall Street stock that pays no dividend may r i s e in anticipation of one, and then
stop r i s i n g , even decline a. l i t t l e when the dividend i s declared.
There i s no
gain from buying i t afterward; there i s only a small return on the investment,
and the r i s k , "besides., that the dividend w i l l be discontinued.
pens to land.
That i s what hap-
In special years, with high prices, i t s earning power runs up; then
i t i s valued accordingly and people e x c i t e d l y buy i t .
Then prices f a l l and i t s
earning power declines; so also i t s value.
There i s always the expectation of t h i s .
Land booms come and come again.
They are not at a l l confined to new experimental lands.
In 191S and 1919, a f t e r the Armistice, there was the wildest "boom in Western
f&ro land that has occurred since the raw prairie days*
I t represented the capi-
t a l ! zavi on. i n land values of the high wartime prices for agricultural produce*
Iowa land values had been for a generation the f i r s t example i n s t a b i l i t y .
i t could be said that they had once doubled in t h i r t y y e a f s .
there*
In 1900
Nothing mercurial
They doubled again i n the next ten years with the r i s e in the average price
of a l l crops; and that had already made them rather dear - so dear that one of the
oldest mortgage-loan companies in Chicago pulled out of Icwa and went into Texas
lands,
Then suddenly between 1910 and 1919 they doubled again#
heads*
They dealt i n farms as i n blue-sky mining stocks, s e l l i n g them, buying
them back, s e l l i n g them a.gain.
People l o s t their
A man i n Lincoln township sold h i s farm at $2)0
an acre* bought i t back at $270, and sold i t again at $42^•
Those Iowa farmers
who sold out i n 1919 at values calculated on the basis of two-dollar wheat and.
twenty-cent hogs, got the p r o f i t - not from the preceding ten years but from the
neat ten years of Iowa agriculture.
And there are yet other reasons why the value of land r i s e s f a s t e r than the
p r o f i t s of agriculture.
strength of i n s t i n c t .
One i s that innate earth hunger of people vtiaich has the
Another i s the certainty that people w i l l continue to mul-
t i p l y u n t i l the bowl i s f u l l and running over*
Anyhow i t i s a fact that in proportion as the American idea of specialized
money cropping i s realized agriculture becomes an extra-hazard0us occupation,
chronically somewhere i n trouble-
I t i s a f a c t , a l s o , that so long as the land
continues to be exploited, i n the c h a r a c t e r i s t i c Western manner the only natural
restraint upon overproduction w i l l be loss*
This means that a.s you have marginal railroads, marginal mines, marginal
f a c t o r i e s , so you will have marginal farms and marginal farmers.
The marginal
producer i s one whose c o s t s are hi$2, whose e f f i c i e n c y i s low, and whose p l a c e ment: in the scheme i s perhaps disadvantageous.
In good times he makes a l i t t l e
money, in f a i r times he e x i s t s , i n worse times he loses or goes bankrupt.
As applied to agriculture t h i s coldblooded thought i s shocking.
cannot accept i t .
i c s may r u l e .
mines.
As to a. coal mine or a. railroad i t i s a l l r i g h t .
We almost
There econom-
In the s t a t e of I l l i n o i s there are above a hundred marginal coal
When prices are high they open up and add their production to the t o t a l ,
thereby l i m i t i n g everybody's p r o f i t s ; when prices f a l l they shut up again.
do not care.
The spectacle of an idle coal mine does not move us sentimentally.
We regard i t , indeed, with s a t i s f a c t i o n .
I t represents insurance against extortion
Yet the spectacle of an idle farm saddens us.
man tragedy.
We
We react emotionally.
I t i s a. hu-
Here someone has tried to get a l i v i n g from the s o i l and f a i l e d .
Conclusion: There i s something wrong in a. country where one cannot get a l i v i n g
from the s o i l .
The Wheat-Raising Machinist
"Here i s a case," says a Montana banker.
"A man came to me only the other
day saying he didn't b e l i e v e he could s t i c k i t out.
a l i v i n g for h i s family.
him.
He was running behind.
He had not been able to make
Another poor year would f i n i s h
Then he would have to go back to h i s job in Minneapolis, where he was making
eight dollars a day at h i s trade.
He was a machinist.
Now what are you going ti-
de ? If something i s n ' t done right away that man w i l l have to abandon h i s farm;
and there are hundreds, thousands l i k e him."
But now consider what t h i s case represents.
I t i s one of numerous cases,
fairly typical.
A machinist i s a- product of technical training.
s k i l l to s t e e l .
The r e s u l t i s a machine, and machines are i n great demand.
world cannot get enough of them.
He applies his
Only a few nations can produce them.
The
I f we
are thinking to produce 9 surplus of anything for s a l e abroad , then l e t i t be a
surplus of machines, for they comcrand a. high price - the price of high c r a f t s k i l l
What has t h i s machinist done?
to Montana t o r a i s e wheat.
He has deserted the task of machine making and gone
There i s already too much wheat.
I t is produced in
surplus by the l e a s t rewarded , the l e a s t developed labor i n the world - i n Egypt,
i n India., in Argentina., i n thirty-dig^t d i f f e r e n t c o u n t r i e s , i n a l l of which wages
and standards of l i v i n g are lower than they are here.
chinist ,
Mow fancy an American ma-
man of h i s technical s k i l l , worth eight, ten, maybe f i f t e e n d o l l a r s a
day, putting himself into competition with that kind of labor?
In doing so he
adds h i s moiety to the world's surplus of wheat and then complains that he cannot
make a. l i v i n g .
He i s r e a l l y not interested i n any of t h i s .
to begin with; he i s not a farmer now.
He was not a. farmer
What moved him was the thought of getting
a farm for nothing - a wheat ranch in Montana that would make him rich.
If you
t e l l him there i s a. sure way to get a l i v i n g for himself and family on the farm,
that he needs a. garden, some f r u i t t r e e s , milch cows, pigs and chickens, he w i l l
say: "OhI That i s n ' t what I came cut here to do.
the year.
That means work every day in
I'd rather go back to n§r trade."
Yet even a banker asks what shall be done to keep t h i s man on the land,
thereby thinking, as most of us do, without r e f l e c t i o n , that i f he has to abandon
h i s farm i t w i l l be a tragedy, and that many such tragedies portend a. s o c i a l d i s aster.
Most of that thinking, or f e e l i n g , i s great nonsense.
very general and i t s consequences are amazing.
Nevertheless, i t i s
For more than f i f t y years our p o l i t i c a l l i f e has bean tormented by the e f f o r t to put p r o f i t into agriculture — to do i t by edict or economic stratagem notwithstanding the two f a c t s already developed - namely, that the c e a s e l e s s exp l o i t a t i o n of land creates the p o t e n t i a l i t y of a ruinous surplus and that the
only natural restraint upon overproduction i s loss*
Panaceas of the Past
In the l a s t year of the Civil War wheat was $ 3 o 0
proportion*
a
bushel, other things in
High prices held for another year, j u s t as they did through 1919>
and land values increased i n the same way, everybody going into debt to buy more
of i t , as if the laws of gravity and reaction had been suspended forever.
In the
next year the collapse began, and agricultural commodities declined f o r nearly
thirty years.
So did the products of industry in a p a r a l l e l manner, and for the
same reason - namely, excessive and uncontrolled production; but i t i s agriculture we now speak o f .
The f i r s t two or three years of the f a l l were the worst, because that was
the most v i o l e n t part of i t and because also i t caught the farmers heavily in
debt for land the earning power and value of which had been calculated on war
prices*
In the decade from 1870 to 1280 the production of wheat more than doubled.
That would seem a f a i r l y obvious reason for i t s decline in price*
But that cause
was disregarded; every other reason was imagined - many reasons that did not e x i s t .
There followed i n order the Grange movement, the Farmers* Alliance, the Populist
Party and Bryanism,
The means whereby i t was proposed to restore a p r o f i t to
agriculture, excessive production notwithstanding, were mainly these:
-16-
CoOperative s e l l i n g ;
Cooperative buying;
Low f r e i ^ a t rates;
Piat money;
Free s i l v e r .
Cooperation was tried on a very extensive scale*
There was something in i t
i f i t could be well managed, but i t seldom was; and the most there was in i t was
only the middleman's p r o f i t , and that was not enough to make agriculture p r o f i t able*
Railroad rates were reduced by law i n the agricultural s t a t e s and the
principle of s t a t e regulation of railways was established.
agriculture p r o f i t a b l e ,
roads.
Nor did that make
f t made hardly any d i f f e r e n c e at a l l , except to the r a i l -
Tb.a consumer, not the producer, pays the f r e i g h t in general.
What the
producer pays i s a. geographical penalty, governed by h i s distance from the point
of consumption.
Fiat money and free s i l v e r were never t r i e d .
Both proposals were
abandoned , not that the farmers believed in them l e s s but for the reason that a l l
at once agricultural-commodity p r i c e s stopped f a l l i n g and began to r i s e .
This happened between 1895 and 1900,
Why i t happened need not be discussed.
I t w i l l be enough to say that the products of both agriculture and industry, having f a l l e n together f o r nearly thirty years, stopped f a l l i n g together and began
r i s i n g together.
The causes were general over the whole world.
The universal
e v i l of low p r i c e s , which international commissions had been i n v e s t i g a t i n g in a
f u t i l e manner, suddenly vanished.
catch up.
Wants enormously increased.
Demand began to
And i f the products of industry advanced f a s t e r than the products of
agriculture i n the next twenty years, which apparently was the case, that was owing to the f a c t that b a s i c industry stopped exploiting i t s resources i n the
pioneer s p i r i t and found ways to r a t i o n a l i z e production, as agriculture never did.
-17-
%
It was no act of Congress that saved American agriculture through a l l that
heartbreaking decline i n prices that "began in 1S6S and continued for nearly
thirty years.
saved i t .
Nor did low freight rates save i t .
Nor would f i a t money have
It was saved by i t s own way with n e c e s s i t y .
That which has been c a l l e d the American idea of agriculture was not so
strong t h e n ; : i t had not been developed .
What there was of i t was put a s i d e .
Those farmers who could paid o f f t h e i r debts; those who couldn't were foreclosed
upon; then they started again on deflated land.
They grappled with the s o i l .
They produced t h e i r own food, dressed i t themselves, and supplied the v i l l a g e
demand.
without.
They bought nothing they could make or produce for themselves, or do
On t h i s long curve of f a l l i n g prices came into being a generation of
farmers who would sooner want than borrow, who regarded debts with terror, who
thought signing a note was a step with the s h e r i f f .
They never could understand
what they saw on a r i s i n g price curve where the next generation l i v e d .
Borrowing i n Falling Markets
They were right and sound in their f e e l i n g about debts.
i t i s disastrous to borrow.
l a s t you are ruined.
On f a l l i n g prices
I t takes always more and more to pay back, u n t i l at
If when wheat i s a dollar a bushel you borrow a thousand
d o l l a r s , that represents a debt of a thousand bushels of wheat.
f a l l s to f i f t y cents the debt i s doubled.
But i f wheat
You need two thousand bushels t o pay
it off.
Precisely the opposite i s true in a time of r i s i n g p r i c e s .
Then i t takes
l e s s And l e s s of your labor and produce to pay back what you borrow.
If when
wheat i s a dollar a bushel you borrow a thousand dollars, that again represents*
-13-
a thousand bushels of wheat,
debt i s h a l v e d .
But if wheat r i s e s to two d o l l a r s a bushel the
You need only f i v e hundred bushels to pay i t off*
Between 1895 and 1900 p r i c e s began to r i s e , and they rose f o r more than
twenty y e a r s , not u n i n t e r r u p t e d l y , of course, but as t h e t i d e r i s e s *
Old farmers
whose wisdom was t h a t of t h e f a l l i n g p r i c e curve saw the young men going i n t o
debt, and prophesied t h e i r r u i n .
But t h e young men escaped.
They borrowed more
and more; they bought land with borrowed money and gave t h e i r notes at t h e bank
f o r working c a p i t a l •
them#
Their land increased i n v a l u e and t h e i r notes did not worry
I f t h e y could not pay them off one year they renewed them and waited f o r
a b e t t e r crop or b e t t e r prices*
Now suddenly a g r e a t discovery occurs.
The p e r f e c t s o l u t i o n i s a t hand.•
The way to put p r o f i t in a g r i c u l t u r e i s to give i t c r e d i t , p l e n t y of c r e d i t - credi t such as any other b u s i n e s s g e t s .
business a t t h e bank.
The farmer s h a l l be f i n a n c e d .
He s h a l l do
He s h a l l have banks s p e c i a l l y adapted to h i s uses and
needs.
Comparative marketing i s not f o r g o t t e n .
I t is a l l t h e h a t t e r .
why i t never succeeded i s t h a t i t never was properly f i n a n c e d .
The reason
I t wanted c r e d i t -
The master key i s c r e d i t - c r e d i t to buy land with, c r e d i t to buy implements w i t h ,
c r e d i t t o sow and h a r v e s t w i t h , c r e d i t with which to hold one 1 s crops f o r a f a i r
p r i c e instead of s e l l i n g them away to the speculator*
This became of a sudden the r u l i n g theme*
For f i f t e e n years no man spoke
sympathetically to the farmer^s case without saying t h a t above a l l e l s e what h e
needed was c r e d i t - cheap c r e d i t , long-time c r e d i t , s h o r t - t i m e c r e d i t , honorable
c r e d i t , s p e c i a l forms of c r e d i t determined by the s p e c i a l problems of h i s industry.
-19Consent was unanimous.
ductive panacea.
Never had human contradiction h i t upon a more se-
There was plenty of i t .
It was cheaply dispensed.
The pat-
ient clamored f o r i t .
So the farmer was financed.
Yea, how he was financed!
The amount of credit that has been placed at the c a l l of agriculture in
the l a s t ten years cannot be d e f i n i t e l y calculated.
press i t .
Nobody knows how much i t i s .
There i s no figure to ex-
A former secretary of the Treasury e s -
timated that the amount provided for by Federal l e g i s l a t i o n alone - by that onl y - was f i v e b i l l i o n d o l l a r s .
First of the credit agencies under the j u r i s d i c t i o n of the Federal Government came the Federal Reserve System with twelve regional banks.
The functions
of these twelve regional Federal Reserve Ban!;s were mainly two - to mobilize the y
gold resources of the country, and to male credit more e l a s t i c , more Equitably
a c c e s s i b l e to everybody by lending money cut of one great reservoir, through
those twelve Federal Reserve Ban* s, to private banks, which in turn should lend
i t to private borrowers.
For the farmer i t worked l i k e t h i s :
If he went with
h i s note to the small-town bank and asked to borrow on i t and the small-town
bank had no money of i t s own to lend, i t could s t i l l take the farmer's note,
send i t to the nearest one of the twelve Federal Reserve Banks and get the money.
Farmers F i l l e d by Credit Kindness
But that was not enough.
It was soon found that the rules under which the
notes cf merchants and manufacturers were taken at the Federal Reserve Banks
were too narrow for the farmer.
Therefore the rules were relaxed in h i s favor,
so that a farmer's note had Tore time and grace at a Federal Reserve Bank than
any other.
—20-
And that was not enough.
yes.
do.
And he could get i t .
The farmer needed credit for what he was doing -
But he needed credit a l s o for what he was going to
So Congress created the Federal Farm Loan System, with twelve regional Fed-
eral Laitt Banks to he launched where necessary, with government c r e d i t ; and the
purrose of these banks was to lend money to national farm-loan a s s o c i a t i o n s ,
which i n turn should lend i t to farmers for the purchase of agricultural land,
for the equipment and improvement of the land and to pay off old mortgages.
Any
ten or more natural persons could form a national farm-loan a s s o c i a t i o n ; more
than forty-four hundred have been formed.
The same law authorized the creation by
private persons of joint-stock land banks, under the supervision of the Government,
such banks to s e l l debentures up to f i f t e e n times the amount of t h e i r c a p i t a l , and
lend the money on land.
S t i l l not enough.
In March, 19-3, Congress passed the great Agricultural
Credits Act, creating twelve Federal Intermediate Credit Banks, to be established
"alongside of but organically independent of the twelve Federal Land Banks, n each
with a capital of f i v e m i l l i o n dollars provided by the United States Government,
These intermediate credit banks lend money for "agricultural purposes" for periods of s i x months to three years.
The same act provided also for national agricultural credit corporations to
lend money for "agricultural purposes" direct to farmers, and national a g r i c u l tural rediscount corporations to take over from private banks loans that have
already been made for "agricultural purposes."
These are the agencies created by Federal l e g i s l a t i o n :
Federal Reserve Banks;
Federal Land Banks;
Joint-stock land banks;
-21-
National farm-loan associations;
Federal Intermediate Credit Banks;
National agricultural credit corporations;
National agricultural rediscount corporations.
These agencies have placed in the l a s t ten years, by an estimate of a former
Secretary of the Treasury, f i v e b i l l i o n dollars of new credit at the disposal of
agriculture.
And t h i s i s by no means a l l .
The War Finance Corporation, a banking concern
set up during the war to finance war a c t i v i t i e s - owned by the Government and furnished with government capital - has been converted into an agency f o r extending
government credit direct t o agriculture.
In addition t o what the Federal Government has done, the s t a t e s have been
at the same time dispensing credit to agriculture.
They, too, have created farm-
loan systems and farm-credit boards; they have sold tax-exempt bonds on the public
credit and loaned the money t o farmers at low rates of i n t e r e s t .
And above everything e l s e there occurred a wild multiplication of private
banks in the a g r i c u l t u r a l d i s t r i c t s , under both national and s t a t e charters,
whose principal business was to. lend money to farmers on their notes and who competed with one another for the p r i v i l e g e of doing s o .
with a l i t t l e money could start a bank.
Any few natural persons
In the Northwest area, c a l l e d the Ninth
Federal Reserve D i s t r i c t , more than f i f t y national banks were chartered by the
Comptroller cf the Currency at Washington over the protest of the Federal Reservg
Bank at Minneapolis.
There were already too many new and inexperienced banks, ae
the Federal Reserve Bank at Minneapolis knew; but the man then Comptroller of the
Currency at Washington said that i f people wanted banks they should have them.
So farmers became t h e i r own bankers; they could give credit t o themselves.
-"22r*
Never since credit was invented had agriculture so mach of i t .
fore in a l l the history of banking was the farmer so much financed.
Never beAnd with
what r e s u l t s ?
There i s again an acute c r i s i s i n agriculture.
occurred in t h i s generation.
It i s the worst that has
Farmers by the tens of thousands - the Department
of Agriculture says by the hundreds of thousands - are l o s i n g or have already
l o s t their property, their lands and c h a t t e l s , by f o r f e i t u r e to creditors and
by the foreclosure of mortgages.
In the Nocthwest area alone - Minnesota, Mon-
tana, North Dakota and South Dakota - where occurred an expansion of credit perhaps greater i n a r e l a t i v e sense than anywhere e l s e , more than f i v e hundred
banks are shut up because the farmers cannot pay their notes.
The War Finance
Corporation has been dispatched to the scene with more credit.
An extraordinary
credit corporation has been formed by private bankers of the East and the Middle
West, at the instance of the Government, to go to the r e l i e f of the Northwestern
banks.
There i s s t i l l no lack of credit.
That i s not the trouble.
i s to f i n d anything suitable upon which to grant c r e d i t .
The d i f f i c u l t y
Farms, l i v e s t o c k ,
c h a t t e l s , commodities in storage are already mortgaged for more than they are
worth.
Mortgaged to the Hilt
And you have t h i s spectacle to ponder:
Those bankrupt money croppers of
the Northwest, with neither means of t h e i r own nor credit at the bank with which
to buy the chickens, pigs and milch cows they need in order to be able to feed
themselves, are to have money out of the United States Treasury for t h i s purpose,
and at the same time a large mortgage-loan company in Minneapolis, having bought
-23and sold Northwestern farm mortgages u n t i l the taag hurst, makes a street-window
display of Imperial Japanese Government
mand for them.
They are s e l l i n g .
per cent bonds.
There i s a good de-
Is the word of the Japanese Government then
better security than Northwestern farms and chattels?
No.
The explanation i s
simply that the Northwestern farmers, who desperately need the money that Minneapolis investors are putting into Japanese bonds, have nothing l e f t t o pledge.
They have borrowed more on their farms and c h a t t e l s than those farms and chatt e l s would bring i f put up for sale at auction.
Here now an interruption.
shall be reminded that t h i s c r i s i s in a g r i c u l -
ture i s owing to the headlong f a l l in p r i c e s .
cause.
But i t was the l a s t cause.
Yes.
The f a l l in prices was a
If the farmers had not been extravagant with
credit before, i f they had not mortgaged their property above i t s ears in the
days of exuberance, i f in North Dakota they had not used i t to hold wheat for
three dollars and f i f t y cents a bushel when they might have been s e l l i n g i t for
two dollars, i f they had not behaved as if the day of payment had been abolished
by e d i c t , there would s t i l l have been a c r i s i s , no doubt, but not the kind of
crisis it i s .
There would have come losses,'disappointments, • hard times, but
no avalanche of bankruptcy, pulling down banks by the hundreds.
thing you can use only once,
Credit i s a
Having already used i t they could not use i t again
t o ease themselves down as prices f e l l away.
Not only t h a t .
Just when they be-
gan to need credit for reasons beyond their control, and when they had nothing
l e f t to pledge or mortgage, the day of payment arrived.
was due and payable.
That they already owed
-24- •
The farmers say they were deflated in a "brutal manner by the banks.
Par-
t i c u l a r l y do they say t h i s in the Northwest, where now the consequences are most
acute.
To t h i s the f a i l u r e of more than f i v e hundred banks i n Minnesota, North
Dakota, South Dakota and Montana- i s a f a i r l y convincing answer.
brutal save themselves.
These did not.
did not demand payment in time.
Banks that are
First they loaned too f r e e l y ; then they
They are not denounced for having loaned too
f r e e l y , nor for having renewed farmers 1 notes beyond prudence instead of requiring
them to be paid; they are denounced f o r having demanded payment a t a l l .
Borrow-
ing human nature w i l l always blame mbre the banker who demands t o be paid than
the one who refused i n the f i r s t place to lend.
Danger Signals Unheeded
For a long time before the f a l l in prices began i t was notorious that much
of the credit at the c a l l of agriculture was being improperly used.
no way to stop i t .
A great deal of i t was by indirection.
There seemed
Individual farmers
t i e d up t h e i r own money in golden a f f a i r s of the imagination, e s p e c i a l l y in land
speculation , and r e l i e d upon the banks for money with which to carry on farming
operations.
Thus, l e s s and l e s s the farmer financed himself with h i s own means;
more and more of h i s own capital was l e f t f r e e f o r adventure.
The l o c a l banks,
unable to take care of him, and having a great deal of t h e i r c a p i t a l a l s o t i e d
up in speculation or in %ad loans, passed him on, or, rather, they passed h i s
notes on, to the nearest Federal Reserve Bank.
The notes were a l l regular enough.
They were for agricultural purposes, according to law.
They were therefore e l i -
g i b l e for rediscount - that i s to say, they were properly purchasable under the
rules; yet every Federal Reserve Bank knew what the s i t u a t i o n was.
In December, 1919> the Federal Reserve Batrik of Minneapolis said:
"It i s quite evident that through the extravagances of individuals and the
indiscriminate extension of credit by certain banks for investment and speculat i v e purchases the reserves held by the Federal Reserve Banks have been used
through an indirect process for purposes other than those intended and authorized
by law.
The extension of credit f o r speculative purposes i s not confined to
stocks and bonds alone; but substantial advances have been made to encourage the
movement of land and for speculation i n commodities.
The Federal Reserve Bank of
Minneapolis has used every precaution to eliminate such use of i t s f a c i l i t i e s ,
but i n d i r e c t l y these c r e d i t s have been extended, with the r e s u l t that an unwarranted overextension of credit e x i s t s .
If t h i s condtion i s permitted to continue i t
w i l l i n time work a severe hardship upon everyone."
No matter.
The inverted pyramid of bank loans continued to grow.
u n t i l i t f e l l ; a f t e r that i t grew l y i n g down.
It grew
"Following the collapse of prices
in I920," says the Federal Reserve Bank of Minneapolis, speaking of the Northwest,
banking, Federal Reserve and Tar Finance credits underwent an acute secondary in—
. f l a t i o n , for the obvious reason that farmers caught in the collapse could not
continue without immediately available resources.
No f u n i s were available for
current operations, or to meet maturing indebtedness, except by borrowing from
the banks,"
In 1921 the ^ar Finance Corporation came with i t s bag of emergency c r e d i t .
It i s there s t i l l .
How strange! The Federal Reserve Bank of Minneapolis says one cause was too
much c r e d i t .
Yet a block away i s the temporary o f f i c e of the War Finance Corpor-
ation, with an organization made cn the
-26-
dpot, dispensing more c r e d i t .
However, the part of the War Finance Corporation
i s somewhat l i k e that of the physician with the v i o l e n t drug addict.
He mast
believe he w i l l continue to get i t , and at the same time he mist he tapered o f f .
The true index to what agriculture has done to i t s e l f with credit i s a
s t a t i s t i c a l curve representing the r i s e in the farmer's annual i n t e r e s t changes
and taxes.
in 1913•
His i n t e r e s t and taxes together in 1923 were threefold what they were
Threefold!
The increase in h i s i n t e r e s t represents what he "borrowed as an individual.
Farm mortgages more than doubled in ten years.
"The great increase in mortgage indebtedness," says the Howard-Moorhouse Agricultural Business Service, "came in 1919> as a r e s u l t of land speculation a f t e r
the Armistice.
The t o t a l amount en January 1, 1920, has been estimated at eight
b i l l i o n d o l l a r s , which was more than twice the amount of ten years previous.
Since
1920 there has been a further increase of one b i l l i o n d o l l a r s , due to the funding
of current obligations incurred during and j u s t previous to the depression."
After the Armistice.
During and just previous to the depression.
This i s not unsympathetic testimony.
The Howard-Moorhcuse Agricultural Busi-
ness Service i s conducted by James R. Howard, f i r s t president of the American Farm
chief
Bureau Federation; N. C. Murray, f o r m e r l y / s t a t i s t i c i a n of the Bureau of'Crop E s t i mates; Lloyd M. Graves, formerly s t a t i s t i c i a n of the American Farm Bureau Federation, and H. W. Moorhouse, formerly dean of the School of Commerce of the Oklahoma
State College*
It i s obvious that what agriculture did with credit was to c a p i t a l i z e war
prices in the value of the land.
-27-
The increase in the farmer's taxes represents, not altogether, but principall y , h i s group borrowing.
In h i s p o l i t i c a l capacity he adopted the universal ex-
ample and s o l d enormous amounts of s t a t e , county, township and s c h o o l - d i s t r i c t
bonds.
He used the money to improve h i s s o c i a l environment, saying: "?hy are we
not e n t i t l e d to have these things too?
TThy shall our children not have schools
as f i n e as those the c i t y people's children have?"
There i s no simple answer to that question.
separately at a l l .
It perhaps cannot be answered
It t i e s up with the whole problem of American agriculture.
The machinist who leaves h i s job in Minneapolis to get a f r e e wheat ranch in
Montana not only thinks he i s e n t i t l e d to a p r o f i t a b l e price for h i s wheat; he
thinks he i s e n t i t l e d tc have, out there on what was yesterday a c a t t l e range
covered with b u f f a l o grass, a school f o r h i s children l i k e the school in Minneapolis.
And he thinks t h i s without reference to the f a c t that in choosing to
raise wheat instead of making machines he has cut himself into competition with
the low-paid wheat-producing labor of Argentina, Egypt, India and t h i r t y - f i v e
other countries.
Building cn Credit
But the farmers asked the question in a rhetorical manner only.
wait for the answer.
country schools.
The credit was handy and they used i t .
They did not
They did not build
They b u i l t c i t y schools, with baths, gymnasiums and a l l .
You
cail understand i t .
You can understand also the disgust of the rcundheaded banker, whose bank
has never f a i l e d and never w i l l , who started in l i f e with one calf and one horse,
when he says, "Over here's a town of f i v e hundred people t h a t ' s just b u i l t a
school that cost f i f t y - t h r e e thousand d o l l a r s .
They put in one of them gymnasium
-25th ings ,
How they w i l l hire somebody to teach their kids basketball because
they t ve got nothing b e t t e r to do."
Product: Taxes.
Farm taxes per acre, taking the country at large, were in 1923 about 2s
times what they were in 1913-
Commenting upon t h i s the Department of J g r i c u l -
ture says: "In 1913 taxes consumed a l i t t l e l e s s than one-tenth of the farmer's
net income.
In 1923 they consumed nearly one-third of i t . "
Then i t adds:
"Between 80 and 90 per cent of the taxes paid by the farmer i s for expense
within the county, the larger items being schools and roads.
Such taxes, there-
fore, are within the control of a majority of the people of the county."
That i s merely t o say, the farmer did i t t o h i m s e l f .
A very great portion
of h i s taxes i s now beyond control, since i t represents interest on money borrowed - i n t e r e s t on county, township and d i s t r i c t bonds sold to outside i n v e s t ors.
In reduction, the great solution solved nothing; i t produced instead many
lamentable e f f e c t s which were not intended.
It w i l l take years to e f f a c e them.
So now the sacred credit nyth i s in de cline.
If there were symbols of
t h i s f e t i s h on which farmers could i n f l i c t t h e i r wrath yoti. would find them l y ing in the Western ditches igno'miniously, l i k e those pagan rain gods the heathen
were used to hurl into the dry f i e l d s so they might see f o r themselves how bad
the drought was, and perhaps repent.
Ybu cannot put p r o f i t into agriculture by giving i t c r e d i t .
That i s s e t -
Farmers themselves now say, ""e don't want any more c r e d i t .
That one thing
tled.
has nearly ruined u s ,
T
7hat we want i s b e t t e r p r i c e s . "
"r
k
•
-29Maiy cf them indeed are suspicious of further experiments with c r e d i t , even
such as lending Northwestern wheat croppers money out of the United States Treasury to stock their farrryards with chickens, pigs and milch cows; they suspect
that the Government thereby begs the issue and postpones consideration of the
true solution.
For there i s a new solution.
Everything e l s e has been t r i e d ;
therefore t h i s i s bound to work.
The name of the new solution i s the McNary B i l l .
idea.
ed.
The idea i s price control by government e d i c t .
The name stands for an
But i t must not be so s t a t -
To say baldly what i t i s would perhaps defeat i t . . There i s already too much
prejudice against the thought of price f i x i n g .
And because i t must not be re«c
ferred to as a scheme for controlling prices by edict the exposition of i t by i t s
friends becomes extremely involved.
The McNarv B i l l Analyzed
It begins with a declaration of the thing to be done - namely, to make basic
agricultural commodities worth as much as industrial commodities when by reason
of overproduction or a surplus above domestic needs they are s e l l i n g for l e s s ,
The means by which t h i s i s t o be accomplished are as f o l l o w s :
F i r s t , the United States Agricultural Commission to n o t i f y the President that
there i s a surplus of wheat, f l o u r , corn, cotton, wool, c a t t l e , sheep, swine or
any food product of c a t t l e , sheep or swine, and that the domestic price i s too
low.
The President thereupon by proclamation declares an emergency t o e x i s t in
respect of that commodity.
Second, the United States Agricultural Commission determines what the domestic price of that commodity ought to be.
This i t does by means of a s t a t i s t i c a l
index number comparing agricultural products with industrial products.
The price
-30-.
so determined i s c a l l e d the ratio price, and i t i s proclaimed a s the price that
by right should, and in f a c t shall thereafter prevail,.
Third, the United States Agricultural Export Corporation, now f o r the f i r s t
time named, begins to operate.
This i s a merchandising concern, to be owned by
the Government, with two hundred m i l l i o n dollars capital out of the Treasury*
At the r a t i o price proclaimed by the commission the United States Agricultural
Export Corporation w i l l buy up a l l the surplus, or any amount necessary,, of wheat
or corn or c a t t l e , or whatever the commodity i s , i n order to make the r a t i o
price e f f e c t i v e ; and then the surplus over domestic needs i t shall dump in f o r eign oarkets for what i t can get.
Both the amount that w i l l have to be sold
abroad and the l o s s thereon - meaning by l o s s the difference between the domestic price and the world price outside - w i l l be estimated beforehand.
Say
the commodity i s wheat; and i t i s estimated that one-tenth of the wheat crop w i l l
have to be sold abroad at twenty-five cents a bushel l e s s than the o f f i c i a l d@*
mestic p r i c e .
In that case every farmer when he s e l l s h i s wheat w i l l get the f u l l
o f f i c i a l domestic price, except that as to the one-tenth which i s exportable surplus he shall receive the l a s t twenty-five cents per bushel in the form of scrip*
If the l o s s on what i s exported turns out to be l e s s than twenty-five cents a
bushel he nay get something for h i s scrip; If the l o s s turns out t o be more he
l e t s the Government worry.
The scrip, you w i l l understand, i s bought for cash
at any post o f f i c e , l i k e stamps, and the post o f f i c e s turn the money i n to the
United States Agricultural Export Corporation.
If you are a buyer of wheat you
are obliged t o have scrip with which to pay the l a s t twenty-five cents on every
tenth bushel.
I t i s compulsory.
Unless one i s interested in the McNary Bill curiously, as a piece of experimental mechanism, a l l that one needs to know about i t is t h i s :
It is a pro-
posal to employ the power and credit of the Government to l i f t the average price
of basic agricultural products.
If i t is not meant to do that i t has no point
whatever; if i t were not meant to do that nobody would be for i t .
I t is an undertaking to put p r o f i t into agriculture in s p i t e of excessive
production, in spite of the fact that the exploitation of land in the characteri s t i c American manner creates the potentiality of surplus in the f i r s t place, in
spite of the fact that the only natural r e s t r a i n t upon overproduction is loss.
Even more.
One comes at l a s t to the complete contradiction that the aver-
age price of a g r i c u l t u r a l products m s t be l i f t e d because there i s overproduction.
The b i l l contains i t s own argument.
All these things proposed to be done
are necessary because "there exists a general emergency in respect of agricultura l commodities." And then i t declares - the b i l l declares - that the general
emergency is owing to "the existence of surpluses available for export" and to
"the economic impracticability of immediately preventing the continued production of such surpluses."
Thought of limiting ' production i s resentfully rejected by a l l concerned,
for three reasons:
i t is impossible.
F i r s t , i t is too simple; second, i t is impracticable; third,
That is to say, agricultural production mast not be subject
to that r e s t r a i n t which regulates every other kind of production - namely, the
r e s t r a i n t of l o s s .
In North Dakota the true problem i s how to diversify agriculture- how to
induce wheat growers to bother with pigs and chicken*, milch cows and bees, in
order to feed themselves.
Necessity is the only inducement to which they have
responded.
One crop for money - that i s what they want.
Farmers are united f o r the McNary B i l l .
it.
The Department of Agriculture is for
All the agricultural minds of Congress are behind i t .
Many more Western
business men, even bankers, than you might suppose are for i t , on the ground that
if i t helps agriculture, no matter how, i t will help them too. The b i l l includes
the
the hated millers and/horned packers. It had to do t h i s , for obviously they could
not btiy grain and c a t t l e from the farmers at the high r a t i o price and s e l l flour
and meat products abroad at the world price; and if they could not do t h i s they
would hot buy from farmers more than enough to supply the domestic demand. So i t
is provided that the millers and packers may buy at the high r a t i o price and then
sell their exportable surplus of f l o u r , hams, sausages, bacon,lard, and so., on, to
the United States Agricultural Export Corporation.
Are We Farmers at Heart
And what the farmers are for is not the McNary Bill as such.
the doctrine i t embodies.
They are for
A b i l l by any other name that went nmch further with
the same doctrine would be more acceptable.
The doctrine is that agriculture,
as i t has been and i s and wants to be without change, shall be made to pay as a
matter of public policy.
The marginal farm and the marginal fanner shall be
saved for the sake of a l l that structure of exploited land values, and a t the
same time the farmer shall be saved from drudgery and boredom in virtue of the
great money-crop idea.
The farmer i s not alone to blame.
He is perhaps the least to blame.
relation to the s o i l , wherein i t is uneconomic, is an e f f e c t , not a cause.
His
-33The United States Government through the Department of Agriculture, and the
states through t h e i r agricultural colleges, have spent vast sums of money to
propagate the thought of money cropping, of specialization, of industrial methods
as applied to agriculture, a l l the emphasis op production, with a shabby imitation of city culture at the end.
The one thing that has not been sold to the
farmer i s farming - the agricultural l i f e for i t s s p i r i t u a l s a t i s f a c t i o n ! as a
manner of l i v i n g .
we are not farmers.
Do you say i t has not these satisfactioms?
That may be i t .
And yet, half of us are on the farm. Of
that half of us, only about 20 per cent are in serieus trouble.
tion r e l a t e s to that 20 per cent.
Then at heart
They are the marginal people.
All the cobmoTheir costs
are high, t h e i r efficiency i s low, they have planter notions uader a high wage
system, and they make the surplus. There is about the same percentage of marin
ginal people in shopkeeping,/manufacturing, in any f i e l d of human a c t i v i t y . Only
in agriculture is the question of their survival a p o l i t i c a l issue.
what would happen to American agriculture if only i t were l e t alone.
One wonders
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
-
X-4062
r
May 15, 1924.
SUBJECT:
EXPENSE MAIN LINE, Leased Wire System,
April, 1324.
Dear S i n Enclosed herewith you will find two mimeograph
statements, X-4o62-a and X-4o6a-b, covering in d e t a i l
operations of the main line, Leased Wire System, daring
the month of April, 1324.
Please credit the amount payable by your bank
in the general account, Treasurer, U, S., on your books,
and issue C/D Form 1, National Banks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased tVire System, sending duplicate C/D to Federal Reserve Board.
Very truly yours,
Fiscal Agent.
(Enclosure)
TO GOVERNORS OF ALL BANKS.
(EXCEPT CHICAGO)
X-4o62-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF VORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF APRIL, 1924.
From
Percent of
Fed. Res.
Total Bank
Bank Business Business (*)
Total
32,920
237,547
52,112
89,924
74,454
79,271
139,50b
94,144
51,259
91,967
69,567
132,061
2.88
20.75
4.55
7.86
6.5o
6.92
12.19
8.22
4.48
8.03
6.08
11.54
3,608
10,817
5,127
3,420
3,299
4,135
8,232
4,103
2,519
4,420
2,345
7,315
36,528
248,364
57,239
93,344
77,753
83,406
147,738
98,247
53,778
96,387
71,912
139,376
1,144,732
100.00
59,3^0
l,204,072
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
. TOTAL
Treasury
War
Dept.
Finance Corp.
Business
Business
Board
272,702
46,452
3 54
319,508
Total
1,417,434
105,792
354
1,523,580
Percent of Total
6.94f,
93-04$
.02#
Bank Business 1,417,4-34 words or 93*05%
Treasury Dept. 105,792 n
" 6.95%
TOTAL
1,523,226
lOO.OOfo
(*) Tnese percentages used in calculating the
pro r a t a snare of leased wire expenses as
shown on the accompanying statement (406s-b)
FEDERAL RESERVE BOARD,
Washington, D. C.
m y : 15, 1924.
4
REPORT OF EXPENSE
X-4o62-b
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM APRIL, 1924,
Name of Bank
Operators'
Salaries
Operators1 Wire
Overtime Rental
Boston
$
250.00 $
New York
1,356.65
Philadelphia
200.00 '
Cleveland
388.00
Richmond
315.00
Atlanta
255.00
Chicago
(#) 4,973.76
St, Louis
260,00
Minneapolis
283-33
Kansas City
365.51
Dallas
251.00
San Francisco
38o.oo
Fed. Res. Board
TOTAL
$ 9,278.25
$
_
w-
—
_
w'
17,086
-
Total
Expense
Pro Rata
Share of
Total
Expense
Credits
250.00 $
623.70 $ 250.00
373.70
1,356.65
4,493,68 1,356.65
3,137.03
200,00
98.5.36
200.00
7S5.36
388,00
1,702,19
388.00
1,314.19
1,407.66
315.00
1,092,66
315.00
1,498.61
255.00
1,243.61
255-00
4,973.76
2 , 6 3 9 . 9 0 4,973.76 (*) 2,333.86
260.00 1.7S0.15
260.00
1,520.15
283-33
970.20
686,87
283-33
365.51
1,739.00
365.51
1,373.49
251.00
1,316.70
251.00
1,065.70
360,00 2,499,14
2,119.14
380.00
$17,086.85 $26,365.10 $21,656.29 $9,278.25
$14,711,90
(A) 4,708.81
(&) 2,333.86
$21,656.29
$12,378.04
f$) Includes s a l a r i e s of Washington operators,
(*) Credit.
(A) Received $8,81 from # r Finance Generation and $4,700.00
from Treasury Department covering business f o r the month of April, 1924,
(&) Amount reimbursable to Chicago,
Payable to
Federal
Reserve
Beard
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May 15, 1^24.
X-4G61
SUBJECT:
Holiday, Friday, May 30th,
account Memorial Day.
Dear S i r :
For your information, on Friday, May 30, 1924,
the o f f i c e s of the Federal Reserve Board w i l l Tie
c l o s e d on account of observance of Memorial Cay.
Accordingly, the Board's books w i l l be closed
and there w i l l be no Gold Settlement Fund or Federal
Reserve Mote Clearing 0:1 that date.
Please advise Branches.
Yours very t r u l y ,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS-
X-4064
(Revised)
IrTDSX 0? FORMS
IK USE BY. THE FEDERAL RESERVE BOARD
(CORRECTED TO I/JRCH 15, 1925)
Printed Forms of the Federal Reserve Board
Mimeographed Forms of the Federal Reserve Board:
X Forms
St. Forms
Unnumbered Forms
Printed Forms of the Issue and Redemption Division
Mimeographed and Multigraphed Forms of the Issue
and Redemption Division
Printed Forms of the Treasury Department
Miscellaneous Printed Forms
LIST OF PPJITfED FORKS OF
•EHE IS23RAI R2SI3\E BOARD
Form Ifcunber
Description
X-4064-A
(Revised)
Division
Employee 1 s record folder
Chief Clerk
Order s l i p s for publications
(Three to each set - white, blue, yellow)
R. &?S.(Library)
C e r t i f i c a t e of authorization to serve under
Clayton Act
General Counsel
Daily statement of Federal Reserve Agent
Bank Operations
30
Application for stock by national bank
Examination
30a
Application for stock by non-member bank when
converting into a national bank
Examination
34
Balance sheet of Federal reserve bank
Bank Operations
38
C l a s s i f i c a t i o n of discounted and purchased b i l l s
Bank Operations
41
Record card, application for stock by national
banks
Examination
Record card, a p p l i c a t i o n f o r stock by S t a t e
banks
Examination
Requisition for Federal reserve notes
(Original, Confirmation and Copy)
Currency
46
Member bank reconcilement request
Examination
48
Clearing house v e r i f i c a t i o n
Examination
51
Voucher for traveling expenses
Chief Clerk
51a
Continuation sheet for Form 51
Chief Clerk
52
Voucher for purchase & and services other than
personal
Chief Clerk
53
Schedule of disbursements
F i s c a l Agent
53a
Continuation sheet for Form 53
Fiscal Agent
FBA-5
41a
45
- 2 -
a
Description
X-4064-A
(Revised)
Division
54
Purchase order - receiving c l e r k ' s copy
Chief Clerk
54a
Purchase order - Vendor's copy
Chief Clork
55
Fiscal Agent's account current
Fiscal Agent
56
Application f o r additional stock "by national
banks
Exanination
58
Cortificato cf increase of capital stock
(Exhibits A, increase, and B, decrease)
Examination
59
C e r t i f i c a t e of decrease of capital stock
(Exhibits A, increase, and B, decrease)
Examination
60
Application for surrender of stock
Examination
60a
Application for surrender of stock
( f o r consolidating member banks)
Examination
61
Application of national banks foY fiduciary
powers
Examination
61a
Cover to application of national banks for .
fiduciary powers (Containing recommendations and action taken)
61b
Supplementary application of national bank
for additional fiduciary powers
Examination
61c
Analysis of Report of Examination, Fiduciary
Powers
Examination
62
Requisition for printing and binding
Chief Clerk
63
General Account (Ledger)
f i s c a l Agent
78
Library record card
R. & S .(Library)
81
Charge s l i p
R. & S.(Library)
83a
Application for stock by State bank, with
supplement
Examination
86
Application for surrender of stock by l i quidating national bank
Examination
87
Application by receiver of insolvent member
bank for* surrender of s tock
Examination
Examination
X-4064-A
(Rovisod)
Form ITunibor
Description
Division
SO
Gold Settlement Fund balancc shout (Federal
Reserve Agents' lodger)
Gold Settlement
32
Cash Letters
Examination
93
Drafts &ma Fotes l e t t e r
Examination
93a
Continuation Sheet for Form 93
Examination
94
Application to serve as Director under
Clayton Act
General Counsel
94a
Statement of bank in connection with a p p l i cation to serve as Director under Clayton Act.
General Counsel
94b
Iveconiiaendation of Agent in connection with app l i c a t i o n to serve as Director under Clayton
Act
General Counsel
94d
Application to serve as Director under Clayton
Act (private banker)
General Counsel
94e
Statement of private banker in connection with
application to serve as Director under Clayton
Act
General Counsel
95
Earnings of Federal reserve banks
Bank Operations
96
Current expenses of the Federal reserve banks
Bank Operations-
97
Income and expense, "Other real estate"
Bank Operations
97a
Reimbursable expenditures, account of F i s c a l
Agency operations
Bank Operations
98
98a
Work sheet (8 x 10i) l i s t i n g Federal reserve
banks
Bank Operations
(General)
Work sheet (8 x 13v|) l i s t i n g Federal reserve
banks
Bank Operations
(General)
105
Report of condition of member banks
Bank Operations
107
Report of earnings and dividends
Bank Operations
107a
Special n o t i f i c a t i o n of dividend declared
Bank Operations
120
Gold Settlement Fund ledger
Gold Settlement
/ X.
-
Terra !"umbor
A
Description
X-4064-A
(Revised)
Division
126
Rcconcilcment of c o l l e c t i o n item debits of
federal reserve banks.
licamirauion
126
Work shoot f o r member bank condition statement
Bank O p e r a t i o n s
129a
Gold Settlement Fund Clearing ledger (3 sheets)
Gold Settlement
131
Office correspondence letterheads
( l e t t e r s i z e and memorandum s i z e )
Chief Clerk
(General)
136
Record of telegrams sent and received
Telegraph Office
137
Gold Settlement Fund Clearing telegram blank
(Outgoing "Drysalter")
Gold Settlement
137a
Confirmation of 137
Gold Settlement
157b
Gold Settlement Fund Clearing telegram blanl:
(Incoming "Labcg")
Golo. Settlement
137c
Confimation of 137b
Gold Settlement
141
Employee1s record card
Chief Clerk
142
Percentage block sheet
Secretary
143
Application by liquidating member State bank
or trust company for surrender of stock
Examination
144
Word card for international price index
Res.& Statistics-
145
Order card for Library
R.& S.(Library)
146
Annual check card for publications
R.& S .(Library).
147
Annual check card for publications
R.& S.(Library)
148
Original telegram blank
148a
Confirmation telegram blank
149
Encumbrance record
Chief Clerk
(General)
Chief Clerk
(General)
F i s c a l Agent
150
Application for approval of . t i t l e under Edge Act
General Counsel
151
A r t i c l e s of a s s o c i a t i o n of corporations under
Edge Act
General Counsel
- 5 [Description
Form ITumber
X-4064-A
(Revised)
Division
152
Organization c e r t i f i c a t e of corporations
under Edge Act
General Counsel
155
Deposit "block work sheet
Examination
156
Cross reference sheet
157
International price index card
Chief Clerk
(>.iails & F i l e s )
Res.& S t a t i s t i c s
160
Receipts and payments of paper currency
Currency
161
F i s c a l Agent 1 s daily "balances
F i s c a l Agent
162
Record of transportation requests
F i s c a l Agent
165
Record of receipts "by Fiscal Agent
F i s c a l Agent
164
Record card of condition reports, e t c .
Bank Operations
167
ITew currency shipped to Federal reserve "banks
Currency
169
Items and s e c u r i t i e s held in custody
Examination
169a
Continuation sheet for 169
Examination
170
Lonthly report of clearing operations
Bank Operations
171
Monthly report of average daily holdings of
each c l a s s of earning a s s e t s , e t c .
Bank Operations
173
(X-2098)
Application for stock in international banking.
corporations
General Counsel
174
Redemption account, Federal reserve bank notes
Currency
175
Analysis of weekly statement of Federal reserve
banks
Bank Operations
(For Lir .Hamlin)
177
Record card of receipts and shipments of grain,
f l o u r and stocks
Res.& S t a t i s t i c s
181
Bond of Federal Reserve Agent
Secretary
182
Bond of Assistant Federal Reserve Agent
Secretary
183
Federal Reserve ITote Clearing ledger
Gold Settlement
X-4064-A
(Revised)
Description.
Form Nix, "oer
Division
Pedural Reserve ITote Clearing telegram blank
(Outgoing "Drummer")
Gold Settlement
184a
Confirmation of 184
Gold Settlement
184b
Federal Reserve Heto Clearing telegram blank
(Incoming "Druid")
Gold Settlement
184c
Confirmation of 184b
Gold Settlement
185
Currenc;.™ received for redemption
(For use of the Treasurer, U.S.)
Currency
186
U. S. currency (allotments, shipments and
balances due)
Currency
187
Record of c l a s s i f i e d expenditures
F i s c a l Agent
188
Comparison of expenses of Federal reserve
banks and branches by functions
Bank Operations
189
Blank form for reporting items for c o l l e c t i o n
(foreign - 2 pages)
Examination
Record card of examination - foreign banking
corporations
Examination_
191
State bank membership ledger
Examination
192
national bank ledger
Examination
194
Report of Federal Reserve Agent of Federal
reserve notes received and issued
Currency
195
Library s l i p for material loaned
R.& S.(Library)
196
Library s l i p for p e r i o d i c a l s loaned
R.& S. (Library)
199
War Loan Tracers
Examination
200
Serial Record card
202
203
203a
203b
203c
National Bank Membership ledger
Requests for Currency Shipments
ii
ii
ii
ii
• 184
* 190
R.& S.(Library)
Examination
Currency
II
II
1!
IvIILZHOGIlAPHEi: "X" Fomis 0?
X-4064-B
(Revised)
$KE FEDI3A1 BBSSBTS BOARD
Form lumber
Description
Division
X- 228
Deposit l e t t e r
F i s c a l Agent
X- 284
Miscellaneous reimbursements
F i s c a l Agent
X- 300
Requisition f o r s t a t i o n e r y or equipment
Chief Clerk
(General)
X- 402
Cover page of memoranda-.: of r c co::xiendation. to
the Board on a p l i c a t i o n of State banks for
membership
Examination
412
Reference s l i p to Counsel
Chief Clerk
544
Purchase order record
Chief Clerk
X- 567b
State bank membership record card
Examination
X- 584
Letter of transmittal of telegraphic request
f o r Fedora.1 reserve notes
Currency
X- 585
Letter of transmittal of r e q u i s i t i o n confirming
telegraphic request f o r Federal reserve notes
Currency
X- 586
Letter of transmittal of r e q u i s i t i o n f o r
Federal reserve notes
Currency
608
Request for an;.ual leave
Chief Clerk
(General)
654
Docket f o r Board Meetings
Secretary
675
Acknowledgment of payment for subscription to
Federal Reserve B u l l e t i n
Chief Clerk
X- 783
Federal reserve bank stock record card
Examination
X- 889
Letter forwarding checks
F i s c a l Agent
X-1051
Letter showing balance in Federal Reserve
Agent's Fund a t c l o s e of business each week
Gold Settlement
X-1084
Personnel report, rendered semi-monthly
Chief Clerk
X-1104
Report of p r e v a i l i n g i n t e r e s t and discount
rates
Research and
Statistics
X-1145
Summary of transactions for week
Gold Settlement
~ 2 -
Form Number
X-1145b
Description
X- 4064-3
(Rcvieed)
Division
Smeary of transactions, federal Reserve
Agent's Fund
Gold Settlement
Federal reserve notes issued, r e t i r e d and
• outstanding-Statement f o r U.S.Treasurer
Bank Operations
Letter re "Approved Liethods for the Preparation of Balance Sheet Statements"
Chief Clerk
Memorandum form of recommendation to Board
of a p p l i c a t i o n , f o r authority to accept up
to lOOyo of capital and surplus
Examination
X-1339
Letter showing "balance of F.B.Banks in
Gold Settlement Fund
Gold Settlement
X-1343
Requisition f o r Stamps
Chief Clerk
X-1344
Requisition f o r Car Tokens
Chief Clerk
X-1397
Docket sheet
General Counsel
X-1466
Sheet l i s t i n g acknowledgments of circular .
l e t t e r s issued "by the Board
Chief Clerk
X-1479
Daily noon cable rates
Currency
X-1504
Bulletin receipts
Chief Clerk
X-1505
"Approved Methods for the preparation of
Balance Sheet Statements" receipts
Chief Clerk
X-1599
Acknowledgment to Board's circular l e t t e r s
Chief Clerk
X-1623
Check acknowledgment
Chief Clerk
X-1686
C e r t i f i c a t i o n for commercial telegraph
company b i l l s
Chief Clerk
X-1790a
Telegrams handled
Telegraph Office
X-1845
C e r t i f i c a t i o n of duty for night force
Gold Settlement
X-1855
Time record for night clearing force
Gold Settlement
X-1912
Transportation receipt card
Fiscal Agent
X-1918
Reference form for Clayton Act application
General Counsel
X-1984
Letter of renewal for subscription to Federal Reserve B u l l e t i n with s l i p attached to be returned
with remittance
Chief Clerk
X-1185
X-1221
X-1301
S -
X-4064-B
(Revised)
flefecrifliioa
Form ^lumber
Division
X-2098
(Form 173)
Application for stock in international
"banking corporations
General Counsel
X-3016
Helec.se form
Telegraph Office
X-3168
Reference s l i p to Comptroller General
Chief Clerk
X-3168a
Chief Clerk
X-3168b
Chief Clerk
X-3201
Gold. Settlement Fund reconcilement form
Examination
X-3220
Bank members - liquidations, e t c .
Examination
X-3260
Photostat r e q u i s i t i o n
Chief Clerk
X-3268
Application for p o s i t i o n
Chief Clerk
X-3269
Record card of firms from whom purchases
are made
Chief Clerk
X-3314
Letter of transmittal with Federal Reserve
Board 1 s Gold Settlement Fund checks
Gold Settlement
X-3316
Schedule of time of arrival of Federal
Reserve Note Clearing telegrams
Gold Settlement
X-3325
Gold Settlement Fund work, sheet
Gold Settlement
X-3338
Receipts, Gold Settlement Fond Clearing and
payments Federal Reserve Note Clearing
Gold Settlement
X-3344
Statement of 'lather" Federal reserve notes, e t c .
Gold Settlement
X-3352
Daily clearings through Gold Settlement Fund
Gold Settlement
X-3409
Application for sick leave
X-3476
Branch hank f i l e card, for "branches of member
banks
Chief Cleric
(General)
Examination
X-3488
Salary card of o f f i c e r s of Federal reserve
"banks and "branches (alphabetically)
Chief Clerk
X-3488b
Salary card of o f f i c e r s of Federal reserve
banks and branches according to t i t l e s
and divisions
Chief Clerk
A -
Form dumber
Desci'ipticti
X-4064-B
(Revised)
/ i
Division
X-3509
Sheet l i s t i n g "Reserves against Federal reserve
notes a f t e r s e t t i n g aside 35fa against deposits"
Secretary
X-3509a
Sheet l i s t i n g percentages, deposits, e t c .
(Work sheet)
Secretary
X-350Sb
Sheet l i s t i n g "Free Gold"
Secretary
X-3561
Letter enclosing Federal reserve note statement
to bank with charges
F i s c a l Agent
X-3561a
Letcer enclosing Federal reserve note statement
to tank without charges
F i s c a l Agent
X-3599
Daily l i s t of absentees
Chief Clerk
(General)
X-3612
"Tend" Sheet (Reserve Statement,)
Gold Settlement
X-3650
Memorandum to Chief Clerk of work sent to
Government Printing Office
Chief Clerk
X-3651
Postal Telegraph Cable Company blank l i s t i n g
corrections
Chief Clerk
X-3656a
Sheet l i s t i n g "Members present"
Secretary
X-3686
Release form for night clearing telegrams
Gold Settlement
X-3692
Branch bank form f o r loose leaf folder
Examination
X-3704
Biographical sketch card
Secretary
X-3725
Monthly report of sick leave taken
Chief Clerk
X-3729
Counsel's o f f i c e receipt for f i l e s
General Counsel
X-3774
Gold Settlement statement receipt
Gold Settlement
X-3830
Form of card for record of correspondence
in f i l e
Examination
X-3858
Receipt record of correspondence taken from
f i l e s of o f f i c e of General Counsel
General Counsel
X-3868
Travel Authorization
Chief Clerk
X-3878
Registered mail receipt
Chief Clerk
X-4064-5
(Revised)
Form' Number
X-3835
Description
Division
Record of national tanks admitted and withdrawn, c l a s s i f i e d and showing number, c a p i t a l ,
surplus,' and resources
Examination
X-3?S*5a
Sane as X-3895, for State banks
Examination
X-3909
Receipt for books borrowed from Counsel's ,
office
General Counsel
X-3935
Receipt s l i p for dockets
Secretary
X-5962
Closed bank form f o r weekly report, for loose
l e a f book
Examination
X-3964
Examiner's voucher record card
Fiscal Agent
X-3998
Memorandum b i l l form
Chief Clerk
X-4030
Office reference form
General Counsel
X-4050
Aggregate amount of leave token by personnel
of Otis Building
Chief Clerk
X-4090
Route s l i p - Counsel
General Counsel
X-4270
Budget of Expenditures
Fiscal Agent
X-4305
Request for Currency Shipments
Currency
X-4315
Changes in personnel in D.C.
(Report to Civil Service Commission)
Chief Clerk
X-4515a
Changes i n personnel outside D. C.
(Report to Civil Service Commission)
Chief Clerk
liII.SO GRAPHED "ST" FOHIiS CF
5%
Form ITumber
St.
51
X-4064-C
(Revised)
HBSERVB 10ASD.
Description
Division
Weekly report of principal resource and l i a b i l i t y
items of member banks in selected c i t i e s
Bank Operations
St.
69
Working sheet for "Float11 statement
Bank Operations
St.
69b
Preliminary working sheet for "Float" statement
Bank Operations
St.
70
Working sheet for weekly percentage statement
showing separate reserve percentages against
deposits, notes, e t c .
Sank Operations
St.
92
Working sheet for daily condensed statement of
condition of Federal reserve banks
Bank Operations
St.
92a
Condensed statement of condition of Federal
reserve bank (Daily "Tend" telegram)
Bank Operations
St.
92b
Condensed statement of condition of Federal
reserve bank
Bank Operations
St.
92c
Condensed statement of condition of Federal
reserve bank
Bank Operations
Supplementary working sheet for use with daily
condensed statement of condition of Federal
reserve banks
Bank Operations
Statement of difference between data shown in
daily TEND telegrams and on mail balance sheets
form. 34
Bank Operations
Statement showing reduction in reserve ratio
Bank Operations
St. 178
(form 57)
Federal reserve notes outstanding, as shown by
Federal Reserve Agent's daily statements Form
F.R.A. - 5
Bank Operations
St. 195 (44)
Federal Reserve Agent 1 s report of Federal reserve
notes received from Comptroller, returned for
destruction, issued to bank, and returned by
bank, (by denominations)
Bank Operations
St. 231
Working sheet for weekly consolidated statement
of condition of Federal reserve banks
Bank Operations
St. 246
Working sheets for average maturity and average
rates charged on b i l l s discounted and b i l l s
purchased
Bank Operations
St.
St.
St.
92d
92e
92f
-
Fora ITunber
2
-
liofccyiptlori
X-4064-G
(Revised)
Divi sion
Working sheets for average maturity and average
r a t e s charged on "bills discounted and b i l l s
purchased
Bank Operations
Working sheets for average maturity and average
rates charged on b i l l s discounted and b i l l s
purchased
Bank Operations
St. 321 (A)
Discount and open market operations of the
Federal reserve bank during the month
Bank Operations
St. 588 (44a)
C l a s s i f i c a t i o n of money held by the Federal
reserve bank and of gold held by the Federal
Reserve Agent; also Federal reserve notes
outstanding and forwarded for redemption;
as of the end of the month
Bank Operations
St. 728
Distribution s l i p
Bank Operations
St. 974
D e f i c i e n c i e s in reserves of member banks
Bank Operations
St.1241
Memorandum of Trans-Atlantic Radio of noon
exchange cables in Hew York
St.1252
D e f i c i e n c i e s in deposit reserves of the Federal
reserve bank
Bank Operations
St.1287
Daily statement of rediscounts and s a l e s between
Federal reserve banks
Bank Operations
St.1501
Working sheet f o r maturity d i s t r i b u t i o n of b i l l s
discounted and bought,!!. S. c e r t i f i c a t e s of indebtedness , and municipal warrants hold by the
Federal reserve banks
Bank Operations
Distribution or mailing l i s t for statements
Bank Operations•
St. 246a
S t . 246b
St. 1548
Bank Operations
St.1548a
St.1872
Distribution or mailing l i s t f o r mimeographed
„ letters
Bank Operations
Bank Operations
St.l8Y2a
St.2252
Research and
Statistics
Analysis sheet for weekly reporting member
bank statement
S t . 2252a.
Bank Operations
Bonk Operations
- 3 Description
Form, Uumber
St.2471
St.2786
X-4064-C
(Revised)
Division
Working sheet for average rates charged "by
member banks on customers paper rediscounted
with Federal reserve banks
Bank Operations
Working sheet for calculation of average maturi t y of paper discounted for member banks in
each State and the amount of such discounts Adjusted to a common maturity basis
Bank Operations
St.2786a
Bank Operations
St.2786b
Bank Operations
Bank Operations
St.2810
Bank premises report (new building operations)
St.2810a
Bank premises report (remodeled building operations)Bank Operations
St.2903
Working sheet f o r weekly Federal reserve agents'
statement
Bank Operations
St.3410
Summary of changes in the principal a s s e t s
and l i a b i l i t i e s of the reserve banks for use
in preparing weekly analysis
Bank Operations
Discounted b i l l s held by each Federal reserve
bank and t o t a l earning a s s e t s held by the
System
Bank Operations
Summary, of condition of Federal reserve banks
as compared with preceding day and daily averages
of preceding month
Bank Operations
St.3458a
Daily summary of condition of Federal reserve
banks
Bank Operations
St.3501
Deposits of member banks in each State (grouped
by s i z e of c i t i e s and towns)
Bank Operations
St.3512
Blank working sheet l i s t i n g a l l Head o f f i c e s and
Branches
Bank Operations
St.3598
Condensed statement showing changes in condition
of Federal reserve bank
Bank Operations
St.3677
Paper held under discount at the end of the month
for member banks whose borrowings from the Federal
reserve bank were continuously in excess of their
combined capital and surplus during the report
Bank Operations
period
St.3438
St.3458
X-4064-C
(Revised)
Form number
St.3839
St.3839a
St.4080
St,4350
St.4374
Description
Division
Card record of member banks whose borrowings
are continuously in excess of capital and
surplus
Bank Operations
Summary of member banks whose borrowings are
continuously in excess of capital and surplus
Bank Operations
Working sheet for monthly statement showing
c l a s s i f i c a t i o n of b i l l s purchased
Bank Operations
Working sheet for combining San Francisco and
branch figures for weekly statement
Bank Operations
Daily l e t t e r to Assistant Federal Reserve Agent
at Hew York giving c l a s s i f i c a t i o n of earning
a s s e t s of the Federal Reserve System
Bank Operations
laHSOGBAPHSP UBtUMBERED ?QRl>i5 0?
;
T£S fStiffl&L RESKRVS BOARD
Description
X-4064-d
(Revised)
Division
Reference s l i p
Chief Clerk
Record card of distribution of supplies
Chief Clerk
Telegraph receiving blank
Telegraph O f f i c e
Daily time report
Research & S t a t i s t i c s
Request f o r s t a t i s t i c a l assistance
Research & S t a t i s t i c s
Summary of Daily Time Reports
Research & S t a t i s t i c s
Income & Expense Accounts
Research <?•. S t a t i s t i c s
Work Sheet - Months l i s t e d
Research & S t a t i s t i c s
l e t t e r to Library of Congress
Library ( R.& s . )
Letter re exchange of publications
Library (R. & a.)
Letter re securing certain material
Library (R. & s . )
Letter re f a i l u r e to receive publications for
which exchange i s made f o r other publications
Library (R. & s . )
Letter of appreciation for receipt of publications
Library (E. & s . )
Letter re f a i l u r e to receive publications regularly
Library
Letter re non-receipt of p e r i o d i c a l s
Library (R. & s . )
(a. & s . )
X->,O64-E
LIST OF PRINTED FORMS CURRENT IN
THE FEDERAL RESERVE ISSUE AND REDEMPTION DIVISION
Form Number
2316
2317
2318
2319
2320
Description
Record of Federal reserve notes deposited and on hand
Vault balance, mutilated Federal reserve notes (book form)
Register of mutilated Federal reserve notes
Daily report of mutilated Federal reserve notes (book form)
Schedule of Federal reserve bahk currency issued to
Federal reserve banks
2320a
Schedule of Federal reserve bank Currency issued to
Federal reserve banks
2321
Schedule of Federal reserve bank currency withdrawn
from vault for issue to Federal reserve banks
2321a
Schedule of Federal reserve currency withdrawn from vault
2322
Daily report (book form)
2323
Daily report (2 book forms)
2324
Schedule of Federal reserve notes withdrawn from vault
2325
Schedule of Federal reserve notes issued
23255
Schedule of Federal reserve notes issued
S325b
Schedule of Federal reserve notes issued
2325c
Schedule of Federal reserve notes issued
2325d
Schedule of Federal reserve notes issued
2326
Federal reserve bank account
2327
Federal Reserve Agent account
2327a
Federal Reserve Agent account
2328
Advica of issue of Federal reserve bank. .
2329
Advice of Federal reserve notes returned, by bank
2329a
See Form numbers 6232 R.A. and 6232 A.R.A. (second sheets)
2330
Advice of reissue of Federal reserve notes
2331
Request to print Federal reserve notes
Request to print Federal reserve bank currency
2332
2333
C e r t i f i c a t e of destruction of Federal reserve notes
2333s
C e r t i f i c a t e of. destruction of Federal reserve notes
2333b
C e r t i f i c a t e of destruction of Federal reserve notes
2335
Counter's schedule
2336
Federal reserve bank currency account
2337
Vault balance, Federal reserve bank currency (book form)
2338
Counter's monthly record
6232 R.Ar Advice of Federal reserve notes redeemed and delivered
for destruction
6232 A.R.A.Advice of Federal reserve notes redeemed and delivered
for destruction
8070
Letter of transmittal of new Federal reserve notes
8070a
Receipt of Federal reserve notes by Federal Reserve Agent
8070b
Receipt of Federal reserve notes by Assistant Treasurer U.S.
8070c
Receipt of Federal reserve notes by Superintendent U.S. Mint
8449
Federal Reserve Alto.
24gb
Book record of Federal reserve plates
8487
Federal reserve dies
8488
Federal reserve r o l l s
,
MIMEOGRAPHED AND MULtlGRA^HEP FORMS Of
X-4064-F
THE FEDERAL RESERVft
REDEMPTION DIVISION
Form Nonfcer
1
Description
Form l e t t e r to Director, Bureau of Engraving and Printing
on Federal reserve bank currency
2
Form f o r Federal reserve bank notes issued
3
Form f o r Federal reserve bank currency received and issued
4
Memorandum f o r issuing Federal reserve bank currency
5
*
Memorandum f o r issuing Federal reserve notes
6
Memorandum f o r wrong n o t e s accounting
7
Schedule of errors i n Federal reserve notes
5
Form l e t t e r to Federal reserve banks of Federal reserve
bank notes shipped
9
Form A-Letter to Director, Bureau of Engraving and Printing
on Federal reserve n o t e s .
10
Form B-Letter to Federal Reserve Agent of shipment of
Federal reserve notes
11
Form l e t t e r to Director, Bureau of Engraving and Printing
for delivery of Federal reserve currency to U.S. Treasurer
13
Form l e t t e r to Federal reserve bank f o r delivery of Federal
reserve bank currency to U. S. Treasurer
14
Form l e t t e r to Treasurer of U.S. transmitting d r a f t s f o r
payment of p l a t e s engraved.
15
Form l e t t e r f o r mutilated Federal reserve notes received
and destroyed
16
Monthly statement of Federal reserve bank currency
17
Monthly statement of Federal reserve bank notes
18
Monthly statement of Federal reserve notes outstanding
19
Monthly statement of Federal reserve bank notes outstanding
21
Form f o r denominational l o t s
22
Semi-monthly balance sheet of Fedoral reserve notes
23
Weekly memorandum of Federal reserve notes printed and shipped
<24
Weekly memorandum of Federal reserve n o t e s shipped
25
Form schedule of Federal reserve bank note c i r c u l a t i o n
26 (S#l6-c) Federal reserve banknotes shipped and on hand
2?
Supplementary order f o r printing Federal reserve bank currency
28
Request f o r preparation of p l a t e and t o print Federal
reserve bank currency
PRINTED FORKS OF TEE TREASURY
XSPA2?I,ZUtr
X-4064-G
(Revised)
(Used by the Federal Heserve Board)
Form number
62
Description
Division
Requisition to Chief Clerk, Treasury Department f o r supplies or s e r v i c e s
Chief Clerk
Payroll f o r personal s e r v i c e s
(Standard Form-Comptroller General,U.S.)
Chief Clerk
Payroll f o r personal services ( f o l l o w sheet)
(Standard Form-Comptroller General,U.S.)
Chief Clerk
Payroll for personal s e r v i c e s (carbon sheet)
(Standard Form-Comptroller General,U.S.)
Chief Clerk
Payroll f o r personal s e r v i c e s ( f o l l o w sheet
for carbon)
(Standard Form-Comptroller General, U . S . )
Chief Clerk
C e r t i f i c a t e f o r salary
( O f f i c e of Disbursing Clerk)
Chief Clerk
"Special" tag
(Departmental Stock Form)
General
Requisition f o r disbursing funds
(Departmental Stock Form)
F i s c a l Agent
Order f o r books and blanks
(Departmental Stock Form)
Chief Clerk
2150
Daily l i s t of absentees f o r the year
(Departmental Stock Form)
Issue and Redemption
2152
Individual record of absence f o r the year
(Departmental Stock Form)
Chief Clerk
Requisition to Bureau of Supplies f o r
a r t i c l e s of stationery
(Departmental Stock Form)
Chief Clerk
Carbon of Treasury check
(Departmental Stock Form)
F i s c a l Agent
3222
Oath of o f f i c e
(Departmental Stock Form)
Chief Clerk
2225
Instruction to binder
(Departmental Stock Form)
Chief Clerk
1013
1013a
1013b
1013c
1603
2131
2139
2141
2163
2220
- 2 —
Form ITumber
Description
%-4064-G
(Revised)
Division
5273
"Statement acconpanying deposit"
(Treasurer's orfice-Cashier)
F i s c a l Agent
5584
Balance card
(Treasury Department Form)
Fiscal Agent
6599
C e r t i f i c a t e of deposit f o r checking account
(Treasurer's Office-Cashier)
F i s c a l Agent
MISC2LLAIIE0US PRI3T3D IOWS
Description
Form Number
36
Division
Quarterly f u n c t i o n a l expense report
(51 pages) - (Printed and d i s t r i b u t e d
by the Federal Reserve Bank of New York)
Bank Operations
BD-4
Schedule of b i l l s discounted (Printed
"by each Federal reserve bank)
Bank Operations
BD-7
Schedule of b i l l s bought in open market
(Printed by each Federal reserve bank)
Bank Operations
S—2
Schedule of investment operations
(Printed by each Federal reserve bank)
Bank Operations
3570
Memorandum form of corrections i n telegraph
b i l l (Western Union Telegraph Company blank)
Chief Clerk
6047a
Record of subject matter taken from F i l e s
(Library Bureau Catalogue Card)
Chief Clerk
(Mails & F i l e s )
E
•
X-4054-H
(Revised)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4G65
May 19, 192U.
SUBJECT: Advice of Holiday.
Dear Sir:
The Federal Reserve BariEs of Richmond* Atlanta and.
D a l l a s , together with Branch Banks a t New Orleans, Memphis,
El Paso and Houston w i l l be closed on Tuesday, June 3rd, account holiday.
Therefore, those o f f i c e s w i l l not p a r t i c i p a t e in
e i t h e r the regular daily Gold Fond Clearing or the Federal Reserve Note Clearing of that date. Please include your c r e d i t s
f o r June 3rd with your credits for June 4th f o r those o f f i c e s
in your Gold Fund Clearing telegrams of June 4 t h , and make no
shipments of Federal Reserve Notes, f i t ur u n f i t , to Head Off i c e s concerned or to Washington, respectively, on date of
holiday.
For your information, Birmingham, Nashville and
Jacksonville Branches of the Federal Reserve Bank of Atlanta
w i l l a l s o be closed on date of holiday, June 3rd.
Kindly n o t i f y Branches.
Yours very t r u l y .
J. C # xJo e l l ^
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL REserve BANKS
f e d e r a l
r s s e b v e
b o a r d
statesmen? f o r t h e p r e s s
For Release in Morning Papers,
Wednesday, May 28, 1924.
x-4o6?
The following i s a sscmary of general business
and financial conditions throughout the several
Federal Reserve Districts, based upon s t a t i s t i c s
for the months of April and May , as contained
in the forthcoming issue of the Federal Reserve
Bulletin.
Factory employment and production of basic commodities declined in April
and there was a further recession in wholesale prices.
Retail trade was
larger than in March, chiefly because of Easter buying, and was at about the
level of e a r l i e r months of the year.
Ther# was a decrease in the volume of
borrowing for commercial purposes and further easing of money r a t e s .
PRODUCTION:
The Federal Reserve Board's index of production in basic industries,
adjusted to allow for seasonal variations, declined 2 per cent in April.
Declines wefe particularly large in the iron and s t e e l , coal, and woolen industries.
Mill consumption of cotton, on the other hand, showed less than
the usual seasonal reduction between March and April.
Factory employment
declined 2 per cent in April, wing chiefly to large reduction of forces at
t e x t i l e and clothing establishments.
Contract awards for new buildings reached
a higher value than in March and were alse larger than a year ago; value of
building permits granted, however, declined and was smaller than in the correspond ing month of 1923'
Department of Agriculture estimates on May 1 of the yield of winter wheat
and rye are somewhat above the forecasts made in April-
The acreage of winter
wheat i s estimated at 7 p@r cent less than l a s t year.
TRADE:
Railroad
shipments,
which since the middle of March have been smaller
-2-
X-4o6?
th.sn l a s t year, were 3 P e r cent l e s s in April than a year ago*
Shipments of
coal were much below l a s t year, while loadings of merchandise and miscellaneous f r e i g h t were higher.
Wholesale trade i n April was in a.bout the same volume as during the preceding month and as in April, 1923-
Sales of dry goods and hardware were
smaller than a. year ago, while sales of drugs and shoes showed some increase*
Department store s a l e s were considerably larger in April than i n March,
partly owing to the unusually l a t e Easter; total s a l e s for the two months were
2 per cent greater than in the corresponding period of 1923*
Merchandise
stocks at department stores showed l e s s than the usual seasonal increase i n
April, but were at a higher l e v e l than &. year ago.
PRICES:
Wholesale p r i c e s , according to the Bureau of Labor S t a t i s t i c s index, declined 1 per cent during April and reached the lowest point since May, 1922.
Farm products, however, advanced 2 per cent i n April»
Metals and foods showed
substantial reductions; prices of clothing, f u e l , and chemicals also declined;
while prices of building m a t e r i a l s and house furnishings remained unchanged.
During the f i r s t half of May quotations on cotton, vdieat, f l o u r , and hogs
increased, while?prices of sugar, s i l k , wool, and metals declined.
BANK CREDIT:
During the f i v e week period ending May 14, the volume of borrowing for
commercial purposes at member banks in leading c i t i e s declined sane whet from
the high l e v e l reached early i n April.
There were i n c r e a s e s , however, i n
loans on stocks and bonds and i n investments in s e c u r i t i e s ; so that the total
of a l l loans and investments at the middle of Bfey was higher than a month
previous, and in larger volume than at any time i n more than three years.
-3-
X-4o6?
Volume of borrowing by member banks at Federal reserve banks declined
further during the l a s t week of April and in May, while holdings of s e c u r i t i e s
bought in the open market increased s l i g h t l y .
Total earning a s s e t s declined
to $795,000,000 on May 21, the lowest figure since the autumn of 1917*
Further easing of money conditions during the l a s t week of April and the
f i r s t three weeks of May was reflected in a continued r i s e of the prices of
government securities, in a reduction from 4 l / 2 to 4 l / 4 per cent in the rate
for prime commercial paper, and a decline in the rate for bankers 1 acceptances
from 4 to 3 per cent.
On May 1 the discount rate of the Federal Reserve Bank
of New York was reduced from 4 l / 2 to 4 per cent.
X™'40b<5
4 GLANCE AT BRANCH 3AMTNG BY STATES
SHOWING NUMBER OF INSTITUTIONS CONDUCTING BRANCHES IN EACH STATE THAT ARE
MEMBERS OF THE FEDERAL RESERVE SYSTEM AND THE NUMBER 1HAT
ABE OUTSIDE THE RESERVE SYSTEM.
The following brief statements with regard to branch banking i n each
of the s t a t e s where branch banking i s permitted (omitting the s t a t e s where
branch banking i s confined to c i t y l i m i t s ) have been compiled for the purpose of showing that Section 9 of the McFadden b i l l w i l l not accomplish what
i s expected o f i t y i s : the prevention of the spread of branch banking by s t a t e
banks.
The f i g u r e s submitted w i l l shew that there are four times as many nonmember s t a t e banks engaged in operating branches as there are member s t a t e
banks, 2)6 non-members and hg members. The member s t a t e banks maintaining
branches are, generally speaking, larger than the non-members, many of the
l a t t e r being simply country banks extending banking f a c i l i t i e s to smaller
neighboring communities by means of branches. In some cases these non-member
i n s t i t u t i o n s are groups of country bariko united together under a common
management with a. comron board of directors.
The development of most of these country branch banking systems has been
very gradual and along conservative l i n e s . Seme of them have been i n existence
for a considerable term of years - the Bank of Grenada (Mississippi) for example , for thirty years# Only occasionally do they add branches, but those
that are outside of the Federal Reserve System will c e r t a i n l y not be induced
to join by the prohioition contained i n Section 9- If that s e c t i o n should'
become law i t s natural r e s u l t would be to repel these banks and keep them
outside vthe System, and to drive some that are now members - and very desirable members - to withdraw.
The figures do not include c i t y branch banking i n New York, Massachusetts,
Ohio and Michigan, where branch banking i s confined to c i t y l i m i t s , (in Ohio
to c i t y l i m i t s and contiguous t e r r i t o r y ) . City branch banking i s c h i e f l y a
matter of convenience to customers- Country oranch banking i s a matter of
s a f e t y and service to customers.
' I t has been impossible in a l l cases to obtain the c a p i t a l and surplus of
the non-member banks operating branches, but t h i s i s given for enough of the
s t a t e s to be of some value for purposes of comparison.
I
SUMMARY OF MEMBER AND NON-MEMBER BANKS MAINTAINING BRANCHES BY STATES.
(.Omitting S t a t e s where branches a r e permitted only w i t h i n c i t y l i m i t s . )
Member
Ncn-ir. ember
I
4
19
69
Delaware
1
4
Florida
0
1
Georgia
8
9
Louisiana
8
25
Maine
3
20
Maryland
3
lb
Mississippi
l
3
North Carolina
5
33
Rhode Island
J
7.
4
South Carolina.
2
5
Tennessee
2
15
Virginia.
2
22
5S
236
Ai 30317)3.
California
—
X
—
4
0
b
£
>
ALABAIVIA
Alabama- h a s I member b a n k
( c a p i t a l and
and 4 n o n - m e m b e r b a n k s ( c a p i t a l
s u r p l u s $63,000) w i t h 1 branch;
and s u r p l u s $ 6 4 3 , 0 0 0 )
with IS branches»
FLORIDA
F l o r i d a , h a s 1 non-member bank w i t h 2 b r a n c h e s GEORGIA
G e o r g i a , h a s g member b a n k s
( c a p i t a l and
surplus $6,698,000) with l4
b r a n c h e s ; and 9 n o n - m e m b e r b a n k s w i t h 29 b r a n c h e s .
LOUISIANA
L o u i s i a n a h a s g member b a n k s w i t h 4 l b r a n c h e s ,
and 2 5 n o n - m e m b e r b a n k s
w i t h 43 b r a n c h e s .
MISSISSIPPI
M i s s i s s i p p i h a s 1 member b a n k ( T h e Bank o f
s 5 5 0 , 0 0 0 ) w i t h 12 b r a n c h e s ,
Grenada, c a p i t a l
and s u r p l u s
and g n o n - m e m b e r b a n k s w i t h 11 b r a n c h e s *
Capital
and s u r p l u s o f n o n - m e m b e r s $ 1 , 1 3 5 * 0 0 0 .
NORTE CAROLINA
N o r t h C a r o l i n a , h a s 5 m e m b e r s w i t h 13 b r a n c h e s and 3 3 n o n - m e m b e r s w i t h
49 b r a n c h e s »
T h e s e f i g u r e s a r e a s of J u n e 3 0 , 1 9 2 3 *
(Since January 1 > 1924,
o n e member b a n k h a s w i t h d r a w n f r o m t h e F e d e r a l R e s e r v e S y s t e m and h a s
tablished
three branches,
w i t h 52 b r a n c h e s . )
es-
s o t h a t p r e s e n t f i g u r e s would s h o w 3 ^ n o n - m e m b e r s
The 13 m e m b e r s h a v e a c a p i t a l and s u r p l u s o f $ 3 , 6 2 4 , 0 0 0
and t h e 33 n o n - m e m b e r s $ 6 , 1 7 5 , 0 0 0 .
TENNESSEE
T e n n e s s e e h a s 2 member b a n k s w i t h 5 b r a n c h e s ,
and l b n o n - m e m b e r s w i t h 4 l
branches.
MARYLAND
M a r y l a n d h a s 3 members w i t h 11 b r a n c h e s
n o n - m e m b e r s w i t h 52 b r a n c h e s *
$ 6 , 9 0 0 , 0 0 0 , and o f
The c a p i t a l
(nearly all
and s u r p l u s o f
t h e l 6 non-members $ 7 , 1 1 2 , 0 0 0 .
in Baltimore)
and l 6
t h e tj members i s
-4-
X-406g
VIRGINIA
V i r g i n i a has 2 member banks with } branches, and 22 non-members with
29 branches, n e a r l y a l l cf then: country banks i n comparatively small towns.
The c a p i t a l and surplus cf the 2 members i s £3,400,000, and of the 22 nonmembers $6,292,000.
SOUTH CAROLINA
South Carolina, has 2 member banks with 3 branches, and 5 non-members
with 13 branches.
The 2 members have c a p i t a l and surplus of $700,000,
and the 5 non-members $ 1,240,000.
DELAWARE
Delaware has one member bank maintaining one branch, the Wilmington
Trust Company, c a p i t a l and surplus <3,110,000, d e p o s i t s $14,221,236, and
4 non-member banks operating 13 branches.
One of t h e s e , the Delaware Trust
Company of Wilmington, has 11 branches, only one of which i s in Wilmington.
The c a p i t a l and surplus of the non-member banks operating branches i s
$4,120,000, and t h e i r combined d e p o s i t s $24,000,000.
MAINE
Maine has 3 member s t a t e banks ( t r u s t companies) m a i n t a i n i n g branches'
and 20 non-members.
The law permits a t r u s t company to have branches i n i t s
own and "an a d j o i n i n g county."
20 non-members 39 branches.
The 3 member banks have 8 branches, and the
No bank has more than 4 branches a t p r e s e n t .
The c a p i t a l and surplus of the 3 members i s $1,250,000 aid t h e i r d e p o s i t s
$12,882,178.
The c a p i t a l and surplus of the 20 non-members i s $4,272,000 and
t h e i r d e p o s i t s $56,924,013-
One of the non-members has a c a p i t a l ($25>000)
and surplus ($23,000) of only $50,000.
$725,000.
The others run from $75»000 up to
An even h a l f of them have a c a p i t a l l e s s than $100,000.
-5-
X-4o6s
0T
RHODE ISLAND
Ehod3 Island has 3 member banks maintaining branches ( s t a t e - w i d e law)
and 4 non-members, the members ( a l l i n Providence) being very much l a r g e r
banks than the non-members.
The 3 members maintain l 4 branches, and one
of them (no.v maintaining only 1 branch) has been authorized to open several
more.
The non-members maintain 5 branches.
Three of them a r e i n com-
p a r a t i v e l y small towns, Wakefield , Westerly and Woonsocket-
The 3 members
have c a p i t a l $8,000,000, surplus $11,000,000 and d e p o s i t s $190,478,710.
The 4 non-members have c a p i t a l $600,000, s u r p l u s $635,000 and d e p o s i t s
£13,806,471.
CALIFORNIA
In C a l i f o r n i a , where the laws have provided for branch banking since 1909,
there are (December 31, 1923) 19 member banks maintaining branches, and 6 9 nonmember banks.
Most of the l a t t e r are country banks, but they include several
large i n s t i t u t i o n s i n Los Angeles,
the 6 9 non-members 202.
The 19 member banks have 264 branches and
Of the 264 member bank branches 100 are located i n
the c i t y of the parent bank and 164 o u t s i d e .
Of the 202 non-member branches
102 are located in the c i t y of the parent bank and 100 o u t s i d e .
C a l i f o r n i a i s the l e a d i n g branch banking s t a t e , and t h e only one i n which
branches have been extended to any considerable d i s t a n c e from t h e parent banks.
Branch banking appears to be popular, and to be rendering good s e r v i c e e s p e c i a l l y to the l a r g e a g r i c u l t u r a l i n t e r e s t s and to the cooperative marketing
associations.
The l a r g e s t branch banking i n s t i t u t i o n , i n number of branches, i s the
P a c i f i c Southwest Trust and Savings of Los Angeles, but the l a r g e s t bank i n
Los Angeles i n resources i s the Los Angeles Savings and Trust Company, which
has only about 12 branches o u t s i d e of the c i t y l i m i t s .
The branches of the
—6-
X— 4Q 6S
Bank of I t a l y of San Francisco covers the widest extent of t e r r i t o r y .
Branches are obtained by purchase of or c o n s o l i d a t i o n with e x i s t i n g
i n s t i t u t i o n s , and
n
de novo" branches are not permitted outside of the
c i t i e s , except r a r e l y and where adequate banking accommodation does not
exist*
I t does not appear t h a t u n i t banks have i n any case been driven
out of e x i s t e n c e , or forced i n t o consolidations by the competition of
branches,
a s a- r u l e the branches outside the c i t i e s are managed by the
same man who managed them b e f o r e they became branches, .and they generally
have f u l l d i s c r e t i o n , except f o r l a r g e loans and investments-
x-4o6g
FEDERAL
HE S E P . 7 E B O A R D
Statement for the Press
For Immediate Release
May 28, 1924.
CONDITION Op ACCEPTANCE MARKET
April 10 to May l 4 , 192U
For the period ending May 14, the principal factor influencing the acceptance market was a general decline in money r a t e s .
Early in April c a l l
money rates -declined and dealers' rates on acceptances were reduced from 4
per cent bid and.3 l/S per cent o f f e r e d to 3 7/S per cent bid and 3 3 A P? r
'
cent o f f e r e d .
'
.
V
1
The reduction in rates resulted in an a c t i v e i n v e s t o r s ' de-
mand for b i l l s and dealers 1 aggregate p o r t f o l i o s were reduced to the lowest
l e v e l s since October.
The a c t i v e demand and a decrease in holdings caused
a further reduction i n dealers* quotations in the week ending April J>0 to
3 5/8 per cent bid and 3 l / 2 per cent offered, rates that were maintained during the remaining weeks of the period.
from banks and investors.
The demand for b i l l s came p r i n c i p a l l y
Federal reserve banks' holdings declined steadily
during the period!and reached the lowest l e v e l of the year in the week ending May l4.,
B i l l s of short maturity, principally 6 0 days, were reported to
be in the best demand although b i l l s of longer maturities were e a s i l y absorbed.
Commodities against which b i l l s were drawn were sugar, cotton, grain, wool,
hides and leather, tobacco, and provisions.
400
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-U071
May 3 1 , 1924.
SUBJECT:
Requests for Rulings,
Dear Sir i
i The Board has from time t o time, and with increasing
frequency in the recent past, received requests for rulings from junior
o f f i c e r s and employees of Federal reserve banks„
The Board disapproves
t h i s practice for various reasons which need not be detailed at length,
but c h i e f l y because i t often means duplication of work and l o s s of time.
In many cases the questions raised can be answered by the senior o f f i c e r s
of the bank or have already been covered in correspondence between them
and the Board.
For purposes of record to the banks, i t would also be
more businesslike to have correspondence on o f f i c i a l matters pass through
the hands of the senior o f f i c e r s and t h i s w i l l make for greater e f f i c i e n c y and orderliness of administration.
The Board accordingly advises you that in the future a l l requests fjor rulings emanating from your bank should be addressed to the
Board over the signature of the Governor, Chairman, or the acting senior
officer.
Yours very truly,
D. R. CRISSIFGER
Governor.
TO AIL "GOVERNORS AND CHAIRMEN.
- 401
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
June 6, 192U
X-U07U
STJBJECjTt Payment of Dividends on June 30* 192%.
Dear Sir:
F i l l you kindly accompany your usual mid-year dividend
resolution, which should react the Board not l a t e r than June 27,
with the following statements:
1.
Unpaid indebtedness of closed "banks to Federal
reserve bank, giving names of the banks, indebtedness of each, character of security, i f any, and
estimated losses;
2.
Indebtedness to Federal reserve bank of member banks
which are considered to be in an unsafe condition,
giving names of the banks, indebtedness of each,
character of security, i f any, and probable l o s s e s ,
In view of the fact that the earnings of the Federal Reserve System as a whole are now not much in excess of expense and
dividjend requirements, the earnings of some of the Federal reserve
banks during the current six month period may not be s u f f i c i e n t to
cover! current expenses, depreciation in the assets of the bank,
probable l o s s e s and dividend requirements, and accordingly such banks
w i l l have to modify somewhat the second paragraph of the form of
dividend resolution accompanying the Board's l e t t e r St. 5557 of
June 12, 1923.
Following the custom adopted two years ago, the books of
the Federal reserve banks w i l l not be closed on June 30 of t h i s year,
nor w i l l argr reserveebe set up a t that time to take care of depreciat i o n i n the a s s e t s of the bank, to cover l o s s e s on paper of suspended
banks, or for ether purposes.
By order of the federal Reserve Board.
v v i r y truly yours,
Walter 1. Eddy,
Secretary.
t o Chairman of each Bank
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
June 6, 1924.
X-4075
SUBJECT:
Opinion of Counsel re X-3953*
Bear Sir:
A reading of the report of the recent Governors1
Conference d i s c l o s e s the f a c t that there i s apparently
some doubt i n t h e minds of certain of the Governors as t o
the l e g a l i t y of the Federal reserve banks acting in accordance with the ruling of the Board as contained in i t s l e t t e r
of January 25, 1924, X-3953, which permits Federal ressrve
banks to treat shipments of currency in t r a n s i t to and from
member banks as part of their lawful reserves, when applying
the prescribed penalties for d e f i c i e n c i e s .
For ycur information, there i s enclosed herewith a copy
of an opinion rendered by the Board * s Counsel as to the l e g a l i t y
of the practice i n question#
Very t r u l y yours,
B. R. Crissinger,
Governor,
Enclosure:
TO GOVERNORS OF ALL F. R. 3AHKS.
x*4o75a
To Federal Reserve Board
Erom Mr. Wyafct, General Counsel
SUBJECT:
COPY
_,_vK
March 28, 192^«
Currency in transit as legal reserve balances*
In the attached l e t t e r , Governor Strong of the Federal Reserve Dank
of New York questions the Board*s l e g a l authority to permit Federal reserve
"banks to count currency i n transit as part of the required reserve "balances of
member banks * His argument i s based, largely upon the language of Section 19
of the Federal Reserve Act, which provides in part that each member bank 11 shall
hold and maintain with the Federal reserve bank of i t s d i s t r i c t an actual net
balance equal to not l e s s *** than" a certain percentage of i t s deposits - In
Governor Strong 1 s opinion, this provision requires that member bank reserves
must be kept on deposit with the Federal reserve bank and he argues that currency in t r a ns i t can not be considered as hold with the Federal reserve bank *
I agree with Governor Strong that the required reserve balances of member
banks must be held with their Federal reserve banks, and I also agree that
ordinarily currency in transit i s net thus held• In legal contemplation, however , currency in transit may be considered to be held by a Federal reserve
bank i f the railroad company, the express company, or other carrier i s l e g a l l y
i t s agent for the purpose of receiving and holding such currency* In the eyes
of the law,custody and possession of an agent are the custody and possession
of the principal*
Currency in t r a n s i t , therefore, w i l l l e g a l l y c o n s t i t u t e
part of the required reserves of a member bank, provided the carrier i n such
case i s the agent of the Federal reserve bank and receives and holds such currency for the Federal reserve bank rather than for the member bank*
I have not s u f f i c i e n t information as to the arrangements which the several
Federal reserve banks have made for shipping currency to and from their irember
banks to enable me to determine d e f i n i t e l y whether the carrier i s in f a c t the
agent of the Federal reserve bank for the purpose of r e c e i v i n g and holding such
currency* I understand , however, that the Federal reserve banks pay the transportation charges and insure such shipments i n their own names, and i f t h i s is
true i t i s a strong indication that the carriers are the agents of the Federal
reserve banks. If i t i s decided to have the carriers act as the agents of the
Federal reserve banks for t h i s purpose, however, i t would be advisable to cover
the matter by express contracts with both the carriers and the member banks * i n
order that there may be no doubt as to the l e g a l r e l a t i o n of the parties or the
l e g a l t i t l e to the currency. I can s e e no l e g a l reason why arrangements to this
end could, not be made and i f they are made, I believe that the Board ^^ild^be
acting within i t s l e g a l authority i n permitting Federal reserve banks to county
in transit under such shipping arrangements as part of the reserve balances
of their member banks. Unless, however, the carriers are the agents of the Federal reserve banks for the purpose of receiving and holding shipments of currency, I b e l i e v e the Board has no authority to rule that currency in transit
nfey be considered in computing reserve requirements or penalties for d e f i c i e n cies i n reserves of member banks.
The greater part of Governor Strong*s l e t t e r deals with various p r a c t i c a l
reasons why i t would be inadvisable to count currency in t r a n s i t as part of
member bank reserves* These considerations r a i s e important questions of policy
for the Board i s determination and , i n my opinion, this entire matter should
be decided as a question of policy rather than of law.
Respectfully,
(Signed)
WALTER WYATT,
General Counsel*
(COPY)
FEDERAL
RESERVE
BAM:
x-4o?6-a
OF BAIL AS
June 2, 192U
Federal Reserve Board
Washington, B.C.
Attention Mr. Walter Wyatt-
In re: City of Douglas Arizonav.
Federal Reserve Bank
Bear Mr. Wyatt:
The above case wa.s t r i e d before the United States B i s t r i c t
Judge on May 7th. Prior to the submission of.testimony i n the c a s e ,
we presented exception to the P l a i n t i f f ' s p e t i t i o n on the ground that
there was no privy of contra.ct between P l a i n t i f f and Defendant*. The
Court overruled ihis exception. After the testimony had been submitted, the Judge announced tiiat, in h i s opinion foe f a c t s of the case
brought us e n t i r e l y within the rnle as laid down by the Supreme Court
of the United States in the Malloy case, although he expressed doubt
as to the right of the P l a i n t i f f to maintain foe action, and requested
that both sides submit written b r i e f s on t h i s question. These b r i e f s
were submitted, and cn the 29 th of May, the Court rendered jud gment in
favor of foe Federal Reserve Bank, upholding our p o s i t i o n that no privy
of contract e x i s t e d .
I have undertaken to have Judge Smith write an opinion, i n
order that i t might be used as authority i n other cases. However, the
Judge i s ordered to New York to hold Court for several weeks, beginning
about the 15th of June, and on account of the f a c t that h i s docket i s
rather crowded u n t i l he l e a v e s , we have not as yet been able to get h i s
promise to write the opinion. I am in hopes however, that he w i l l do
so a f t e r he returns from New Ycrk.as he i s a very able Judge, and h i s
opinion would be a valuable precedent for us.
For your information, I am enclosing herewith, the brief vdiicih
I have -filed cn the question involved. I did net t r y to make an exhaustive
b r i e f , f o r the reasontiiat foe question was very thoroughly argied before
the Court upon cur exception.
Very truly yours,
(signed)
E. B. Stroud, Jr.
O f f i c e Counsel
( COPY )
IN THE DISTRICT COURT OF THE UNITED STATES
X-4o?6-b
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
THE CITY OF DOUGLAS
9- Municipal Corporation,
Plaintiff,
vs
No. 84? LAW
FEDERAL RESERVE B.ANK OF
DALLAS,
Defendant.
BRIEF OF DEFENDANT.
In conformity with the request of t i i s honorable <zrurt we submit
brief on the legal question presented by the defendant with reference t o the
right of the City of Douglas to maintain t h i s a c t i o n .
I t being our under-
standing that t i e court does not desire any additional law or argument with
reference to the merits of the case, we confine this brief purely to the point
above stated*
The question arises over the d i f f e r e n t holdings of the courts of
t h i s country as to the r e l a t i o n s h i p existing between the owner of an item deposited for c o l l e c t i o n and the several banks i n the chain of c o l l e c t i n g banks
undertaking to make the c o l l e c t i o n .
The court has well in mind the d i s t i n c t i o n
between the so-called "New York" and "Massachusetts Rule" and we think i t unnecessary to go into any lengthy d iscussion a.s to the difference i n these rules.
The "New York Rule", b r i e f l y stated , i s that the f i r s t bank undertaking the c o l l e c t i o n becomes an independent contractor and subseqient banks
in the chain are i t s agent but not the agent of the owner of toe item.
-2-
X-Uc?6-b
This rule i s adhered to by the Supreme Court of the United States.
Hoover v . Wise, 91 U. S. 309
Extih. Ntl. Bk. v . Third N t l . Bk., 112 U.S. 276
Fed. Reserve Bk. v. MaiIcy, U.S. Sup. Ct. Adv.
Opinions, March 15, 192U; 6g L. Rd. 288
In th3 case of Hoover v. Wise, supra, the Supreme Court of the
United States i n an opinion by Mr. Justice Hunt, after discussing various
cases, sgys:
:
"These cases show that where a bank as a c o l l e c t i o n agency
receives a note for the purpose of c o l l e c t i o n , i t s p o s i t i o n i s
that of an independent contractor , and_that..the instruments employed by such bank in the business contemplated are i t s agents
and not the sub-agents of the owner of the note."
In the case of Exchange National Bank v. Third National Bank, supra,
the court i n an opinion by Mr. Justice Blatdiford adepts the "New York Rule,"
c i t i n g with approval the case of Hoover v . Wise, Supra.
In the case of Federal Reserve Bank cf Richmond v. Mallcy, supra,
the identical question under consideration was presented .
Mr. Justice Sutherland
in the opinion summarizes the question as follows;
"Ihe State decisions i n respect cf the l i a b i l i t y cf a
correspondent bank to the owrer of a check forwarded for c o l l e c t i o n by the i n i t i a l bank of deposit are in c o n f l i c t beyond
the p o s s i b i l i t y of r e c o n c i l i a t i o n . A number of States f o l l o w i n g
the 'New York Rule,' s o - c a l l e d , have held that there i s no such
direct l i a b i l i t y but that the i n i t i a l bank alons i s responsible
to the owndr * * *.
"This court in Exchange National Bank v. Third National Bank,
112 U.S. 276 * * * after reviewing the two l i n e s of d e c i s i o n s ,
approved the 'New York Rule.*"
We think the d i s t i n c t i o n between the so-called "New York" and
"Massachusetts Rule" i s so c l e a r l y drawn by these decisions and others 4iat
there i s no reason to go further into t h i s question than to c a l l the tiourt1 s
attention to the authorities above c i t e d .
-3-
x-4o?6-b
I t i s , of course, elementary that a c o l l e c t i n g bank may enter into
such a contract as would r e l i e v e i t of the l i a b i l i t y imposed by the so-called
"New York Rule", for obviously an agent would be l i a b l e to i t s principal only
for the discharge of the obligations which i t expressly undertook.
And thus,
should the original bank make a contract with i t s principal vAiitih would put i t
clearly within the "Massachusetts Rule, 11 that rule would undoubtedly control.
To do t h i s , of course, the original bank should either expressly or impliedly
contract with i t s principal only to act as a forwarding agent.
The f a c t s in
the case under consideration are not such as would put the F i r s t National Bank
of Douglas in that category.
The contract of the First National Bank of BougLas,
as disclosed by the uncontradicted testimony, was to c o l l e c t , there being no
agreement or understanding, express or implied, to the contrary.
In other
words, i f the "New York Rule" ever applied to the f a c t s in any given case, i t
undoubtedlyapplied in the case under consideration.
I t i s p e r f e c t l y apparent that the conclusion reached in t h e Malloy
case was forced because of the provisions of fee Florida s t a t u t e .
In p r i n c i p l e
the court adhered to i t s former holdings, sustaining the so-called "New York
Rule", but held that the Florida statute was an express contract which changed
the status of the p a r t i e s .
In t h i s connection we want to d i r e c t the a t t e n t i o n of the Court to
what we deem an important f a c t , vthitih i s , that prior to^tiae passage of this
statute the Supreme Court of Florida had adopted as the rule of d e c i s i o n in
that State the so-called "New York Rule".
52 So. 719.
The opinion i s very instructive and i s quite 3 c l e a r elucidation
on the question.
The f a c t s in tha t case are i d e n t i c a l , to a l l intents and
purposes, with the f a c t s in our case.
Please see Brown v. People's .aarikrs,
The Florida statute in question was erect
x-4076-b
subsequent to the bringing of the action in that case but prior to i t s
decision, and t h i s i s commented upon i n the opinion.
As some question i s
sought to be raised by the p l a i n t i f f herein indicating t h e contention that
they had a. contract which took the transaction away from the "New York Rule,"
i t may be well in t h i s case to hers sat out t i e Florida statute made basis
of tie decision i n the Mslloy case.
it* * * ugh en. a check, d r a f t , note or other negotiable instrument
i s deposited i n a bank f o r c r e d i t , or for c o l l e c t i o n , i t diaLl be
considered due diligence on the part of the bank i n the c o l l e c t i o n
of any check, draft, note or other negotiable instrument so deposited,
to forward en route the sane without delay in t h e usual commercial
way in use according to the regular coarse of business of banks, and
that the maker, endorser, guarantor or surety of any check, d r a f t ,
note or other negotiable instrument, so deposited, s h a l l be l i a b l e
to the bank u n t i l actual final payment i s received , and t h a t when
a bank receives f o r c o l l e c t i o n any check, d r a f t , note or other negotiable instrument aid forwards the same f o r rollsction, as herein provided, i t s h a l l only be l i a b l e after actual final payment i s r e ceived by i t , except i n case of want of due diligence on i t s part,
as aforesaid.
"All laws which are in c o n f l i c t with t h i s a c t are hereby r e pealed, and t h i s act s h a l l take e f f e c t immediately upon i t s approval
by the Governor."
That is q u i t e a d i f f e r e n t contract to the one r e l i e d upon by the
p l a i n t i f f in this c a s e .
The pass book, on i t s face had t h i s statement: "Oat
of town items subject to f ir&l payment," which, of coarse, meant nothing and
created no d i f f e r e n t r e l a t i o n s h i p between the depositor and the bank than
existed as a matter of la-w.
I t is the rnle of law that a depositor assumes
to repay to a baric the amount of any check that i s dishonored.
ment of the check f i x e s that l i a b i l i t y .
His endorse-
Hence we say that t i e r e c i t a l on the
pass book i n question did not c o n s t i t u t e any d i f f e r e n t contract than the law
i t s e l f inposed.
Please see Brown v . People's Bank, 52 So. 721, aid many other
cases.
I t would be w e l l , a s we b e l i e v e , f o r the court to have constantly
;-5-
X-U076-b
in mind the fact that i n the t r i a l court Judge Connor held the Federal Reserve
Bank l i a b l e because of the Florida, s t a t u t e , c l e a r l y indicating that aside from
that statute the r u l e i n the Federal court would deny l i a b i l i t y *
We perceive
no good could r e s u l t from an attempt t o draw fine-haired d i s t i n c t i o n s »s to
vfoa.t was r e a l l y held i n Exchange National Bank case because i t i s q u i t e clsar
from a reading of the various cases wherein t h i s question has been under consideration by the Supreme Court that that court i s committed to an adoption
of the so-called "New York Rule" in the absence of p o s i t i v e contract to the
contrary in a particular case.
We again ask the court to read the Brown case,
supra.
With these preliminary observations we pass to the d i r e c t question
which the court upon t h e hearing of the case evidenced some doubt, that i s ,
does the law as announced by the courts of Arizona, Texas, or the Supreme Court
of the United States^ control in this action?
We submit that by t h e uncon-
tradicted authorities the r u l e as laid down by the Supreme Court of the United
States controls in t h i s c a s e .
We base this upon the following proposition :
The d e c i s i o n s of a Stats court w i l l be c o n t r o l l i n g only whan
those decisions interpret the p o s i t i v e statutory law of the S t a t s .
In questions of general commercial law, each court w i l l be found
by i t s own i n t e r p r e t a t i o n of that law upon the theory that there
i s only one common law and each oourt presumes fh at i t s interpretation
of that law i s correct.
St. Nicholas Bk. v . Stats N t l . Bk. 1 } L» R- A. 24l Faulkner v .
Hart, 62 N. Y. 4 l )
Swift v, Tison, 10 Law Ed. 865
Oats v . Ntl. Batik, 25 Law Ed. 580
Third N t l . Bk. v . Ntl. Bk. of Commerce, 139 S. W. 6 6 5
Liverpool S.S. Co. v . Phoenix L i f e Ins* Co. 129 U.S. 397
I t can not bo questioned but that the r u l e of law with reference to
the r e l a t i o n s h i p between the owner of an item and s e v e r a l banks undertaking
the c o l l e c t i o n thereof i s a rule of common law.
I t i s not dependent upon any
-6-
x-Uoj6-b
statute, for admittedly there i s no s t a t u t e in e i t h s r Arizona or Texas.
As far as we have been able to determine the courts of Arizona have not
passed d i r e c t l y .upon the question.
Four courts of c i v i l appeals i n Texas
have adhered to the "New York Rule" and the Supreme Court of Texas in a
recent decision has followed the "Massachuse11s Rule."
With this condition
e x i s t i n g the question presented i s whether or not t h i s court should be
guided by the interpretation of the law as laid down by the Supreme Court
of the United States or by the Supreme Court of Texas.
In the case of Liverpool & Great Western S-S. Co. v« Phoenix Insurance Co., supra, Mr. Justice Gray who delivered the opinion of the court
says:
"But on this subject. as on any question depending upon
mercantile law and not upon local statute or usage, i t i s well
settled that the courts of the United States are not bound by
decisions of the courts of the s t a t e , but w i l l exercise their
own .judgment, even when their .jurisdiction attaches only by
reason of the c i t i z e n s h i p of the p a r t i e s , in an action at law x
of which the courts of the State have concurrent j u r i s d i c t i o n
and upon a contract made and to be perforated within the State."
In the case of St. Nicholas Bank v. State National Bank, supra,
the New York Court of Appeals passed upon the identical question here presented,
The f a c t s of the case are almost identical with those in the case
before this court.
The question presented was whether the rale as announced
by the New York courts (the so-called "New York Rule") or the m l e announced
by the courts of Tennessee (the so-called "Massachusetts Rule") controls.
In passing upon the question the court says, a f t e r referring to the opinion
of the Supreme.Court of Tennessee upholding the "Massachusetts Rule*:
"That decision was not based upon aiy statute law but upon
the principles of the common law, supposed to be applicable to
the f a c t s of the c a s e . I t did not make or establish law, but
expounded the law airi furnished some evidence of what the law
applicable to that case was, evidence which other courts might
or might not take and receive as r e l i a b l e and s u f f i c i e n t - And
X-UoTB-b
-7-
ev^n the same © u r t , upon f u l l e r discussion and more mature
consideration, mig&t in some subsequent case r e f u s e to take
the same view of the law. There i s no comnon lav/ peculiar
to Tennessee. But the common law there i s the same a s that
which prevails here aid elsewhere, and the j u d i c i a l expositions
of the common law there do not bird the courts here. The
courts of t h i s State and of other States and of tie United
States would f o l l o w the courts of that State in the cons t r u c t i o n of i t s statute law but the courts of t h i s State w i l l
f o l l o w i t s own precedents in the expounding of the general common law applicable to commercial transactions, and so i t has
been repeatedly held
We do not care to bother the court with a. long and laborious
brief as we believe the principles of law to be d e f i n i t e l y s e t t l e d by
the decisions referred to and the court w i l l undoubtedly l i k e t o read
these decisions and place h i s aim interpretation upon the p r i n c i p l e s of
law herein s e t forth.
We b e l i e v e , however, that the a u t h o r i t i e s cited
herein conclusively establ ish, f i r s t : t a t under, the rules l a i d down by
the Supreme Court of the United States there is no p r i v i t y of contract
between the City of Douglas and the Federal Reserve Bank; second: that
t h i s court, being a Federal court, i s bound by the decisions of the
Supreme Court of the United States; and third: that the question presented,
being a question of general law, the interpretation of t h a t law as l a i d
down by the Supreme Court of the United States is c o n t r o l l i n g .
Respectfully submit ted,
Attorneys "Tor defend ant
TREASURY DEPARTMENT
Office of to9 Secretary
WASHINGTON
X-40P?
412
June 6, 1924.
DM Governor
Federal Bessrve Board.
Sir:
>«***,a*""1**19!- hereby advised that the Department has referred to the Die*
sss-JsrsLtfii's-
period May 1 to May 31, 1924, amounting to $111,740.00, as f o l l o w s , Federal Beaerre Notes
l§
Boston
477,000
New York
534,000
Philadelphia - • 362,000
Cleveland
115,000
Bicanond
—
Cniodgo
516,000
Kansas City . . . 100,000
San Francisco . 101.000
2,205,000
1914.
m
m
I2M
50,000
50,000
225,000
50,000
50,000
150,000
115,000
50,000
577,000
534,000
737,000
280,000
100,000
516,000
50.099
425,000
?5,0PQ
390,000
100,000
„m*sm
3,020,000
3,020,000 saeets
@ $37.00 per M . . . . . . $111,740.00
The charges against tae several Federal Reserve Banks are as f o l l o w s ,
SsasM
Compensation
Boston
577,000 $7,789.50
New York . . . 534,000
7,209.00
Philadelphia 737,000
9,949.50
Cleveland . , 280,000 3,780.00
Richmond . . . 100,000 1,350.00
Chicago . . . . 516,000
6,966.00
Kansas City 100,000
1,350.00
San Francisco 176.000
3,020,000 40
00
,
J
BsSa
Printing
$4,760.25
4 , 4 0 a 50
6,080.25
2,310.00
825.00
4,257.00
825.00
1.452.00
24,915.00
Materials
Inc. Comp.epsati<m
2SM
$ 6,779.75 $2,019% 50 $21,349.00
6,274. 50
1,869.00
19,758.00
8^659.75
2,579.50
27,269.00
3,290. 00
980.00
10 i360.00
1,175.00
350.00
3,700.00
6,063.00
1,806.00
19,092.00
1,175.00
380.00
3,?0(1Q0
QQ
512. OQ
35,48& 00 1 0 , ^ 0 . 0 0 l i f t 740.00
Bureau appropriation# w i l l be reimbursed in the above w a n t tv<m the
propriation to be reimbursed i n l i k e amount.
Respectfully,
(signed) S. R. JACOBS
Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-4078
June 9 , I92U.
SUBJECT:
I n t e r - d i s t r i c t Shipments, of Currency
Dear S i r :
Hie recent conference of Governors held on May 5~7»
1924, discussed the p r a c t i c a b i l i t y of a plan whereby a member
bank in one Federal reserve d i s t r i c t can obtain currency from
and ship currency to the reserve bank of an adjacent d i s t r i c t ,
where the member bank i s so situated that the t r a n s i t time
between the member bank and i t s own Federal reserve bank i s
, considerably greater than the tr ansit time t o the reserve bank
of the adjacent d i s t r i c t .
The Governors' Conference recommended and the Federal
Reserve Board has approved the policy that Federal reserve banks
be permitted t o make shipments to member banks in adjacent d i s t r i c t s upon the application and approval of the Federal reserve
banks of the d i s t r i c t s in which such member banks are l o c a t e d .
The Board recognizes that there are many objections
to t h i s procedure, both theoretical and p r a c t i c a l , and, theref o r e , the use of the plan should be resorted to only in s p e c i a l
cases of emergency, or in i s o l a t e d cases where f o r geographical
or other reasons i t i s peculiarly desirable to do so, and then
only upon the request by one Federal reserve bank of another.
Very truly yours,
Walter 1, Eddy,
Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
(114
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-4079
June 17, 1924
SUBJECT:
Code word, to be used by the Board in connection with
telegraphic advices to Federal reserve banks, covering the monthly cost of Federal reserve notes pirinted
f o r each bank.
Dear Sir:
In order to reduce the phraseology in telegrams transmitted by the Board to Federal reserve banks on the l a s t day of
each month, advising of the cost of printing Federal reserve
notes for each bank, as covered under paragraph 26, page 3» of
general instructions on the preparation of the earning and expense report issued in December 1922, you are advised t h a t , commencing with the telegrams of June 36th, the following code word,
supplied from the Federal Reserve Telegraphic Code, w i l l be used
by the Board in i t s telegrams to the Federal reserve banks covering such advices:
"CHIGNON: Referring to page 3, paragraph 26, general instructions covering preparation of earning
and expense report, Treasury Department advises cost
of Federal reserve notes printed for your bank during period
'
t o ..
is $
It i s requested that the code word. "CHIGNON11 indicated
in t h i s l e t t e r , be added to the bottom of page 4% of the Federal
Reserve Telegraphic Code to follow the code word "CHIFFON."
Yours very t r u l y ,
Walter L. Eddy,
Secretary.
)
TO GOVERNORS OF ALL FEDERAL RESERVE BANES.
( COPY )
X-UOSO
BAM COLLECTIONS AND PAR CLEARANCE
Despite increasing liberalism in other f i e l d s , our American courts
seem determined to compel banking practice to conform to established doctrines
of law and steadfastly refuse to adapt the law to sound banking practice.
As
one might expect, any such medieval l e g a l i s t i c principle cannot be carried
to i t s l o g i c a l conclusion.
ignored.
The existence of banking customs cannot be wholly
Their partial and reluctant recognition has led to some strange in-
consistencies in the law of bank c o l l e c t i o n s and has confronted the banks
with some curious problems of law evasion.
In the case of Federal Be serve Bank of Richmond v. Mallqy (1924, U.S.)
44 Sup. Ct. 296, the United States Supreme Court reiterated the apparently
rigid rule that a bank acting as c o l l e c t i o n agent of commercial paper i s
under a duty t o the holder to receive cash in payment, and accepts an exchange
draft at i t s p e r i l .
The court by way of dictum admits that i f the custom
were without exception to transmit the proceeds of checks (not cleared through
clearing houses or the books of the Federal Reserve Banks) by receiving drafts
of the drawee upon some other banks, i t might \>e permitted to control.
But
t h i s ray of hope i s considerably dimmed by the court l s curious a s s e r t i o n
that "there i s nothing to prevent the sending bank from requiring the drawee
to remit currency as a condition upon which the check may be s a t i s f i e d . "
Yet only recently the same court in American Bank & Trust Co. v . Federal Reserve Bank of Atlanta noted some of the reasons why drawee banks have come
to rely on the custom of paying their obligations by means of d r a f t s .
That
case arose out of the attempt of the Federal Reserve Banks t o e f f e c t u a t e
universal par clearance.
Country banks have strenuously r e s i s t e d par clearance
-2-
X-UOSO
because a large part of their p r o f i t s consists of the small exchange charges
which they a r b i t r a r i l y deduct from the amount of every draft remitted by them
at a distance in payment of checks drawn on them and which i t i s the purpose
of par clearance to eliminate.
Another important source of income i s the in-
t e r e s t paid on the deposits in c i t y banks against which they draw these d r a f t s .
In trying to bring them t o terms the Federal Reserve Bank of Atlanta struck a
double blow.
It undertook to c o l l e c t checks over the counters of recalcitrant
banks, thus forcing them to pay in cash the face value of the checks.
This
eliminated the exchange charge, and i t a l s o deprived the banks of i n t e r e s t by
compelling them to maintain large amounts of cash in their own v a u l t s .
The
Supreme Court enjoined the Reserve Bank from c o l l e c t i n g checks "except in the
usual way."
True, the undenied a l l e g a t i o n s of the b i l l declared that the Re-
serve Bank was accumulating checks on the country banks and presenting them
in large and irregular batches in order to compel them t o keep on hand an excessive amount of cash; and when on r e t r i a l the a l l e g a t i o n s were denied by the
Reserve Bank and not sustained by the evidence, the r e l i e f sought in t h i s respect was denied.
But in denying the r e l i e f the court stressed the point that
the Reserve Bank had formally declared i t s e l f w i l l i n g to receive in payment
of such items a draft of the drawee, i f solvent, on any other solvent bank.
Certainly in that case the court realized that compliance with the rule against
taking payment of checks in bank drafts was at l e a s t undesirable.
Oddly enough another feature of the same struggle f o r par clearance which
exposed the obsolescence of the rule of the Malloy case may carry within i t
the germs of a remedy.
Before the s t a t e banks had won t h e i r contention in
the courts the l e g i s l a t u r e s of several agricultural s t a t e s came to t h e i r rescue
by providing that d r a f t s on these banks whenever presented by or through a
-3-
"8
x-Uoso
Federal Reserve Bank might be paid in exchange, and l e s s exchange charges.
The c o n s t i t u t i o n a l i t y of the North Carolina statute was sustained i n Farmers'
& Merchants1 Bank of Monroe v. Federal Reserve Bank of Richmond (1923) 262
U.S. 6U9, 43 Sup, Ct, 651.
So far as these statutes permit the payment of
checks in exchange d r a f t s , they are t o be unqualifiedly approved.
They r a i s e ,
however, some questions as to the legal r e s p o n s i b i l i t y of banks which now receive such drafts in payment of commercial paper.
As against a principal who
oust be taken to know the d i s a b i l i t y of h i s agent to require cash, obviously
i t i s no longer negligence not to c o l l e c t cash.
It i s equally clear that the
agent would not be j u s t i f i e d in receiving every sort of draft offered by the
drawee.
Certainly i t could not take a draft which i t knew t o be worthless.
must i t be free from negligence in not knowing the draft to be worthless?
i t be reasonably certain that the draft i s good?
But
Mast
If i t were not f o r the rules
of protest and notice, the problem would be r e l a t i v e l y simple.
A check might
be treated like,-a promissory note without endorsers; a worthless draft given by
the drawee might be regarded as conditional payment, i t s dishonor leaving the
holder a l l h i s original rights against the drawer and other p a r t i e s .
This rule
might well be applied in cases where protest and notice had been waived or i n
the rare cases in which the worthlessness of the second d r a f t , a s , for instance
a check on another i n s t i t u t i o n in the same city* could be discovered in time
to protest the f i r s t one.
In deciding cases which may arise, under these
statutes the law of bank c o l l e c t i o n s may be forced into l i n e with banking
practice.
As a practical solution of the problem, the Federal Reserve Banks
w i l l simply contract themselves out of a l l r e s p o n s i b i l i t y .
They w i l l merely
add one more to t h e i r already long l i s t of exemptions from l i a b i l i t y .
And the
member banks w i l l j u s t as rapidly change the set of conditions upon which they
receive checks for c o l l e c t i o n .
As to the original c o l l e c t i n g bank's a b i l i t y to
-4-
x-Uoso
" r,
make such a contract with a l l of i t s principals, some i n t e r e s t i n g problems
of o f f e r and acceptance a r i s e , and i t i s probable that there are occasional
instances in which the bank could not shake off a l l l i a b i l i t y .
But that portion of these s t a t u t e s which purposes to obviate par clearance
by permitting the deduction of exchange charges was prompted by a short-sighted
policy.
Exchange f e e s exacted for services which are not rendered are a use-
l e s s drain on commerce, a waste motion; but their elimination, generally conceded to be highly desirable, has been most d i f f i c u l t to put into p r a c t i c e .
Even member banks at f i r s t refused to remit at par voluntarily and had to be
required to do so.
Nor a f t e r Congress permitted to non-member banks the ad-
vantages of c o l l e c t i o n through the Federal Reserve System, could these banks
be induced to give up their exchange charges.
The Reserve Banks determined
to c o l l e c t at par regardless of opposition or temporary expense, as i s i l l u s trated by the .American Bank &. Trust Co. case.
Whenever the opposition persisted^
in remaining unconvinced, their e f f o r t was e f f e c t i v e l y blocked,
present a t -
tempts to achieve a universal par clearance system by coercion of unwilling
banks have been abandoned.
The protest against the change, however, i s that of
the subliminal competitor always loudly voiced on the introduction of new,
more e f f i c i e n t conditions.
If i t i s true, as the objectors i n s i s t , that they
cannot e x i s t without t h e i r unearned p r o f i t s , then at l e a s t they should be
recognized as p a r a s i t i c and maintained as such.
The building up of a smooth e f f i c i e n t system of commercial transfers and
clearances has been one of the most valuable contributions of the Federal
Reserve.
The decision in the Malloy case w i l l not induce a return to clumsy
expensive methods of transferring funds.
Bank case permanently deter par clearance.
Nor w i l l the d e c i s i o n in the Farmers'
Universal par clearance i s e s s e n t i a l
to e f f i c i e n c y and i t i s not l i k e l y that the Federal Reserve Tanks w i l l be s a t i s f i e d with an incomplete system.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-U0S2
June 10, 1924.
SUBJECT: Withdrawal of authority to e f f e c t exchanges, replacements
and' redemptions of United States paper currency as f i s c a l
agents.
Dear Siri
There are enclosed herewith for your information a copy of
a l e t t e r addressed to the Board by Mr. Winston, Under Secretary of the
Treasury, under date of June 10 and a copy of the Board's reply of the
same date.
You w i l l note that Mr, Winston advises the Board that, owing
to the f a i l u r e of Congress to pass the Second Deficiency B i l l , the
Treasury i s without funds with which to defray the expenses of shipments
of u n f i t United States paper currency from the Federal Reserve Banks to
the Treasury and the expenses of shipments of new United States paper
currency from the Treasury to the Federal Reserve Banks u n t i l July 1,
I92U, and that because of this situation the Treasury has temporarily
discontinued the f i s c a l agency functions of the Federal Reserve Banks
in e f f e c t i n g exchanges, replacements and redemptions of United States
paper currency u n t i l July .1, 1924. You w i l l also note that t h i s has no
bearing on shipments of Federal reserve bank notes, Federal reserve
notes and national bank notes.
Mr. Winston requests the Board to advise you of the Treasury's
p o s i t i o n in t h i s matter, but, inasmuch as the authority of the Federal
Reserve Banks to perform such functions as f i s c a l agents of the Government emanated from the Treasury Department, the Board f e e l s that n o t i f i c a t i o n of the withdrawal of such authority should also emanate from
the Treasury Department and has so n o t i f i e d Mr. Winston.
The Board f e e l s that, upon the withdrawal of t h i s f i s c a l agency
function, the Federal Reserve Banks should discontinue exchanging, replacing and redeeming United States paper currency u n t i l t h i s function
is restored, since t h i s i s purely a Governmental function which the Federal Reserve Banks can no longer l e g a l l y perform. When applications are
made to the Federal Reserve Banks for the exchange, replacement or redemption of such United States paper currency i t i s suggested that the
X-U0S2
- 2 -
Federal Reserve Banks advise the applicants that their authority
in this respect has been temporarily withdrawn by the Treasury due
to the failure of Congress to appropriate funds to defray the expenses thereof and that it will be necessary for the applicants to
ship such currency direct to the Treasury for exchange, replacement
or redemption.
Of course, irrespective of its authority as fiscal agent,
a Federal Reserve Bank has the same right as any other bank in the
ordinary course of its banking business to exchange one form of currency for another. Ho difficulty should be experienced in meeting
the denominational demand for currency, except perhaps with respect
to $1 b i l l s , in which event the reserve banks can pay out such $1
b i l l s as they have on hand, irrespective of the standard of their
fitness and also partially meet the demand for $1 pieces by paying
out standard silver dollars.
Very truly yours,
D. R. Crissinger,
Governor.
(Enclosures)
TO JILL GO'Tt'EI'TORS OF FEDERAL RESERVE PAKETS.
( COPY )
X-4082-a
: J
THE UNDERSECRETARY OF THE TREASURY
WASHINGTON
June 10, 1924*
My dear Governor Crissinger:
The second deficiency b i l l failed cf passage before the close of
Congress Saturday,
This bill carried a deficiency appropriation neces-
sary to permit shipments of United States paper currency for the last
three weeks of June.
The Federal Reserve Lanks are acting under instruc-
tions of the Treasury in receiving unfit currency, forwarding it to the
Treasury in Washington, and receiving in exchange new currency so far as
available.
I accordingly wired them that since the appropriations were
insufficient, if they desired new currency it could only be furnished if
they wished to pay the expense of shipment •
I expressly stated that this
had no bearing on shipments of Federal Reserve notes, Federal Reserve
Bank notes, and National Lank notes.
?/hen the subtreasuries were in
existence, it had been the practice on shipments of paper currency from
banks to the Treasury or to the subtreasuries, that the bank making the
shipment paid the expenses of sending in the unfit currency and of transporting the new currency* When the subtreasuries were abolished, as a
matter of convenience the Treasury authorized the Federal Reserve Banks
to receive for it unfit currency and to pay out for it new currency, and
the Treasury then paid the expense of shipments from and to the Federal
Reserve Banks.
Since funds for this expense are no longer available and
will not be until the beginning of the next fiscal year on July 1st, the
Treasury has been obliged to withdraw these agencies temporarily and
X-40S2-a
-2-
return to its original practice,
It is, of course, unfortunate that the deficiency b i l l did
not pass but the Treasury is faced vith. a condition which it cannot
remedy, and unless the Federal Reserve Tanks are willing to assume this
expense, shipments of new currency to the Federal Reserve Banks will
cease until July 1, 1924.
I trust, therefore, that your loard will ad-
vise the Federal .Reserve Bari.cs of the Treasury's posit ion and your views
in respect thereto.
Very truly yours,
(signed)
Garrard 2. Winston
Garrard 3. Winston,
Under Secretary of the Treasury.
Hon. D. R. Crissinger,
Governor,
Federal Reserve Board.
COPY
X* 40S2b
June 10, 1924.
Honorable Garrard 3. Winston,
Under Secretary of the Treasury,
Washington, B, C»
Dear Mr. Wins ton:
The Board has received your letter of June 10th and
notes that, because of the failure of Congress to pass the Second
Deficiency Bill, the Treasury is without funds with which to defray
the expenses of shipments of unfit United States paper currency from
the Federal reserve banks to the Treasury and the expense of shipments
of new United States paper currency from the Treasury to the Federal
reserve banks until July 1, 1924, and that because of this situation
the Treasury has temporarily discontinued the fiscal agency function
of the Federal reserve banks in effecting exchanges, replacements and
redemptions of United States paper currency until July 1, 1924. It
is also noted that this has no bearing on shipments of Federal reserve
bank notes, Federal reserve notes and national bank notes.
Inasmuch as the Federal reserve banks act as the
fiscal agents of the Government in performing these functions,
Board assumes that you have notified the Federal reserve banks
withdrawal of their authority to effect exchanges, replacements
redemptions of United States paper currency as fiscal agents of
Government.
the
of the
and
the
In view of the withdrawal of this fiscal agency function,
the Federal reserve banks will have to discontinue exchanging, redeeming and replacing United States paper currency until this function is
restored , since this is purely a Governmental function, which the
Federal reserve banks can no longer legally perform.
Very truly yours,
(Signed)
D. R. CRISSINGER
Governor•
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
^
40??3
June 11, 1924,
SUBJECT: Necessity for Individual Surety Bonds for
Federal Reserve Agents and Assistant Federal
Reserve Agents*
Bear Sir:
The question has been raised whether individual surety bonds
for Federal reserve agents and assistant Federal reserve agents are
necessary in view of the fact that the Federal reserve banks carry barkers1
blanket bonds vhich purport to cover all losses which are covered by
the individual surety bonds* I t appears that some of the Federal reserve
banks are under the impression that because of these blanket bonds there
is no necessity for such individual surety bond s, and especially in cases
where the blanket bonds contain clauses expressly covering the acts of
Federal reserve agents and assistant Federal reserve agents*
Section 11(i) of the Federal Reserve Act authorizes and empowers the Federal Reserve Board n tc require bonds of Federal reserve
a g e n t s * * . Notwithstanding the permissive character of this provision, the
Board oelieves that in order adequately to protect the interests of the
United States i t should require bonds of the Federal reserve agents
running directly to the Government, and i t has accordingly always required
Federal reserve agents to execute individual surety bonds for the protection of the United States % The Board has likewise required that all
assistant Federal reserve agents execute such individual surety bonds in
accordance with the terms of the mandatory provision of Section 4 of the
Act that "The Federal Reserve Board shall require such bonds of the assistant Federal reserve agents as i t may deem necessary for the protection
of the United States.11
It may be that the bankers1 blanket bonds which are carried by
the Federal reserve banks are sufficient to protect the banks and the United
States against all losses which are covered by the individual surety bonds
executed by the Federal reserve agents and assistant Federal reserve agents#
It should be noted, however, that these blanket bonds are in substmce no
more than insurance policies obligating the insurance companies only and
imposing no liability whatever upon the Federal reserve agents or assistant agents 4 It is well recognized that the term "bond11 as used in this
connection refers to an instrument in which there is a double liability,
that of the principal obligor as well as that of the surety. The bankers1
blanket bonds carried by the Federal reserve banks are not such instruments*
x-Ugo3
-2-
^£5
Th» d i r e c t primary l i a b i l i t y of the Federal r e s e r v e agent or a s s i s t a n t
agent assumed under a surety bond i n which h e i s the pr incipal obligor
i s in t h e Board's opinion n e c e s s a r i l y contemplated by the law and t h i s
requirement as cot s a t i s f i e d by m insurance p o l i c y , Under the law,
S® ? 0 3 r d 1087 n o t Properly permit i t s agents t o discontinue
their individual surety tends.
is
.. , A v
a p i ^ r e n t that a provision contained i n the bankers'
blanket bonds s p e c i f i c a l l y covering the a c t s of the Federal r e s e r v e agents
and a s s i s t a n t agents does n o t meet the Board's objections to the discontinuance of the use of individual surety bonds f o r the agents and t h e i r
ass s t a n t s . Such a clause would, of course, do away with any u n c e r t a i n t y
as to whether the bankers* blanket bonds were s u f f i c i e n t l y broad in terms
to cover^the Federal r e s e r v e agents and t h e i r a s s i s t a n t s , but i t does not
change the nature of the blaricet bond which is e s s e n t i a l l y an insurance
policy, nor does i t impose any d i r e c t primary l i a b i l i t y on the Federal
reserve agents or a s s i s t a n t agents. The Board, t h e r e f o r e , does not f e e l
that i t can properly permit Federal reserve agents or a s s i s t a n t agents to
be relieved of t h e i r individual s u r e t y bonds even i n a case where the
Federal reserve bank c a r r i e s a bankers' blanket bond containing a clause
expressly extending t h e scope of the bond to cover the a c t s of t t e Federal
reserve agent and h i s a s s i s t a n t s .
Yours very t r u l y ,
D. fi. Oris singer,
Governor.
TO ALL FEDERAL RESERVE AGENTS.
F E B E R A 1 B / S E S V E BOARD
X—4085
STATElM^FOR THE PRESS
FOR IMMEDIATE RELEASE:
2:30 p . m .
June 11, 1924
The Federal Reserve Beard announces that the
Federal Reserve Banks of Boston and New York have
both reduced their rediscount rates to 3-l/2 per
cent for all classes of paper of all maturities,
effective June 12, 1924.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-40S7
June 14,1924.
SUBJECT: EXPENSE MAIN LINE, Leased Wire System,
May, 1924.
Dear Sir:
Enclosed herewith you will find two mimeograph
statements, X-4027-a acd X-40S7-b', covering in detail
operations of the main line, Leased Wire System, during
the month of May, 1924.
Please credit the amount payable by your bank
in the general account, Treasurer, U. S., on your books,
and issue C,'l> Form 1, National Banks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate c/c to Federal Reserve Board.
Very truly yours,
Fiscal Agent.
(Enclosures)
To ffovernors of all banks
(except Chicago)
X—4087~a
REPORT SHOWING CLASSIFI CATION AND NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SI STEM FOR THE MONTH OF MAY, 1924.
Percent of Treasury
War
Fed. Res.
Total Bank
Dept.
Finance Corp.
Bank Business Business(*) Business
Business
From
Boston
New York
Philadelphia.
Cleveland
Richmond
Atl a nt a
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
37,796
236,192
55,632
97,370
73,869
90,237
142,026
94,086
55,822
91,238
71,101
12b,934
3'22
20:i5
4-75
8.31
6.30
7-70
12-11
8,03
4.76
7.78
6.06
10-83
3,936
9,316
4,594
3,182
3,189
3,504
7,221
3»9L! 7
3,145
3,942
3,363
6,932
1,172,303
100-00
56,271
88
1,228,662
41,732
245,508
60,226
100,552
77,058
93,774
149,247
98,033
58,967
95,235
74,464
133,866
—
-
33
—
-
-
55
-
Board
278,943
47,599
624
327,166
Total
1,451,246
103,870
712
1,555,828
Percent of Total
6.67$
93-28$
-05$
Bank Business 1,451,24b words or 93-32$
Treasury Dept. 103,870 "
» 6.68$
TOTAL
1,555,116
"
"100.00$
(*) These percentages used in calculating the
pro rata share of leased wire expenses as
show on the accompanying statement (4087-b)
FEDERAL RESERVE BOARD,
Washington, D. 0.
June 14, 1924.
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASEE, WIRE SY STEIVI
Name of Bank
Operators * Operators'1 Wire
Salaries Overtime Rental
Boston
$ 250.00 V6
New York
1,356.65
Philadelphia
200.00
Cleveland
383.00
Richmond
315*00
Atlanta
255.00
Chicago
(#)4,933.62
St. Louis
323.69
Minneapolis
233.33
Kansas City
_)46.64
Dal las
251.00
San Francisco
330.00
Fed. Res, Board
TOTAL
$9,237-93 $
$ -
—
-
-
Total
Expense
$
MAY, 1924,
Pro Rata
Share of
Total
Expense
250.00 $
1,356.65
200.00
333.00
315.00
255.00 •4,933.62
323,69
2 3 3 . 3 3
346.64
251.75
.75
330.00
17,096.14 17,096.14
—
X—4c37
Credits
697•62
$ 250.00
4,365'52
1,356.65
200.00
1,029.09
1,300-37
333.00
1,364.90
315.00
1,663.21 '
255.OO
2,623.65
4,938-62
1,739.71
323.69
1,031.26
233-33
346.64
1,635.55
1,312.91
251.75
330.00
2,346-33
.75 $17,096.14 $26,334.32 $21,665.12
(3)4,719,70
$21,665.12
$9,233.6s
(f) Includes salaries of Washington operators.
(*) Credit.
(a) Received $4700.00 from the Treasury Dept. and $19*70 from
War Finance Corporation covering business for the month of May, 1924.
(&) Amount reimbursable to Chicago.
FEDERAL RESERVE BOARD,
Washington, D. C*
June 14, 1924.
Payable to
Fed eral
Reserve
Board
$
447.62
3,003,37
329.09
1,412.37
1,049.90
1,413.21
2,314.97(*)
1,4i6.02
747.93
1,33S.91
1,061.16
l ,966.33
$14,691,41
(&)2,3l4.97
$12,376.44
FEDERAL RESERVE BOARD
STATEMENT FOR THE. PRESS
For Immediate Release
3:00 o'clock p.m.
X-U08S
June 13, I92U,
The Federal Reserve Board announces that the
directors of the Federal Reserve Banks of Richmond and
Chicago have reduced the rediscount rates of both banks
to 4 per cent on all classes of paper of all maturities,
effective June 14, 1$24»
-Ol„
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
x-4ogg
June 14, 1924*
SUBJECT: Announcements of.Eate Changes.
Dear Sir:
Your attention is again called to the prime importance of
keeping secret and confidential all information concerning prospective
rate changes until such changes have become effective, Section 14(d)
of the Federal Reserve Act authorizes Federal reserve banks "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 reserve bank for each class of paperr 11 Under this provision of law, rate
changes do not become effective until they have been approved by the
Federal Reserve Board and, although as a general practice, Federal reserve banks initiate rate changes, it must be borne in mind that any action taken by directors of Federal reserve banks with respect to discount
rates is not final. Until, therefore, the Board has given its approval
to any change in rate, such change is not effective and it cannot be too
strongly emphasized that no publicity whatever should be given to any
prospective rate changes*
This matter has been called to your attention several times
in the past. In Circular Letter X-3077, dated March 22, 1921, the Board
stressed the importance of withholding information concerning rate
changes and in the previous circular letters the Board directed that
code telegrams be used in all communications respecting discount rates,
See circular letters X-1S52, dated March 4, 1920; X-1833* dated February
16, 1920; X-1307, dated December 14, 1918* The instructions contained
in these letters, however, have not always been followed strictly and in
several cases information concerning rate changes has been given to the
public prior to the dates on which the changes became effective*
In order to prevent further occurrences of this nature, the
Board has in mind promulgating rules and regulations governing the announcement of rate changes* To this end, it has tentatively adopted the
following and before finally issuing same requests such suggestions and
comment thereon as you may care to make*
x-%ogg
-2-
1,
All telegraphic communications dealing with rate changes shall
be in code,
2* No information of any kind with respect to any rate change shall
be published until the Federal reserve bank in question shall
have been advised that such change has been approved by the
Federal Reserve Board*
3* Announcements of rate changes which have been approved shall be
made as nearly as possible simultaneously by the Federal reserve
bank concerned and the Federal Reserve Board and such announcements
shall be made immediately after the close of business at the bank
concerned on the day on which the rate change was approved and not
sooner.
4* The new rate shall be effective at the beginning of the first
business day following the day on which the announcement of the
change was made.
In view of the dual capacity of the Federal reserve agent as
Chairman of the Board of Directors of the Federal reserve bank
and as local representative of the Federal Reserve Board, a l l
announcements with respect to rate changes on the part of the
Federal reserve bank shall be made by him and he will be held
strictly responsible for compliance with these rules and regulations.
6.
All communications or announcements to other Federal reserve banks
with respect to such rate changes shall be made only by or with
the approval of the Federal Reserve Board.
Yours very truly,
Walter L. Eddy,
Secretary.
To Chairmen and Governors of all Federal Reserve Banks*
FEDERAL RESERVE BOARD
STATEMENT FOE THE PRESS
For Immediate Release
3:00 o'clock p.m.
X-%091
June 17# 1924.
The Federal Reserve Board announces that
the Federal Reserve Bank of Atlanta has reduced i t s
rediscount rate from 4| per cent to 4 per cent on
all classes of paper of all iraturities, effective
June 18, 1924.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-U092
June 17, 1924
SUBJECT: Inde:: Digest of the Federal Reserve Act.
Dear Sir:
There is enclosed a notice of a new Index Digest
of the Federal He serve Act, and kindred .Acts, which the Federal Reserve Board is about to publish.
The Board would
suggest that you communicate with your member banks, and obtain subscriptions from as many as care to purchase the
book, forwarding the same tc the Federal Reserve Board. The
Federal' Reserve Board will ship orders direct to the Federal reserve banks for distribution. Enclosed is a sample
page of the new book.
Very truly yours,
Governor
(Enclosure)
TO ALL FEDERAL RESERVE AGENTS.
X-40g2a
AMOUNCEMENT
The Federal Reserve Board has had prepared, through
Mr. C. S. Hamlin, a Member of the Board, a third edition of
the Index Digest of the Federal Reserve Act.
The first edi-
tion was published in 1915, and the second in 1918.
Since tne
publication of the second edition, the Federal Reserve Act has
been amended in many important particulars.
The new edition
contains the text of the Federal Reserve Act as amended to date,
and the text of other Acts which either amend it or have relation to i t .
Each line of the text is numbered for ready refer-
ence, and there is contained an alphabetical table of words and
phrases contained in all the various Acts, with s concise digest
showing the use of each word and phrase, and the corresponding
use in other sections of the respective Acts, the references being to section, line, and page of the text.
The price of the Digest is $2.00 per volume.
All who desire copies of this Digest should send their subscriptions at once to the Federal reserve bank of their district.
In order that the Board may know how many copies to print, i t is
urged that these subscriptions be sent in as soon as possible.
455
xuao4
TEDEBAL RESERVE
f
(
OF BICHMDi©
OPINION Sf JQDGE JESSE f , WEST.
?«**€
C
WytheviUe, Va., Jane 12, 1924.
H. D. PETERS, RECEIVER OP PRINCE
ED^AIMUNENBUBG' COUNTY BANK, and M. E, QBE.
CIRCUIT corns OF ItiHEHBtma COUNTY.
On and before January $, 1922, the federal Reserve Bank of Richmond
w e engaged in the business of banking, as defined in a certain set of Congress
known as the Federal Reserve Act. The Prince Zdward-Imnehburg County Batik WAS
a State banking corporation engaged in the business of banking at Meherrin, Virginia. The Prince Edward-Iwieriburg County %nk was not a member bank and maintained no deposit account with the federal Reserve Batik of Richmond, and the
federal Reserve lank of Richmond maintained no deposit account with the Prince
j. IdwardUIaanenburg County Bank, but the federal Reserve Bank of Richmond was authork''
'
-
' '
lied to receive and did receive from various member banks and other persons checks
f/
•
,
•
'
- :
••
l-jead drafts drawn upon and payable by the Princa Edrnardmloaenburg County Bank. XA
order to collect the amount of such drafts, the federal Reserve Barfs of Richmond
had agreed with the Prince IHward-fcuneaburg County Bank that a l l such checks and
drafts should be sent by the federal Reserve Batik of Richmond, f r a i its office im
%Lchmondl,by mail, to the Prince ESbwurd-ltimeriburg County Bank, at i t s office i a
Win, Virginiaj and that the Prince Edward-Ieneeburg County Baxfc, i&en the
said checks and drafts were received, would present or cease them to be presented
to i t s e l f , and would pay such as were good and i t desired to pay, and would return properly protested such as i t was unwilling to pay, and would immediately
-2-
X-4104
remit the amount of the checks which it paid by means of a shipment of currency
or money to the Federal Reserve Bank of Richmond or by means of a draft drawn by
the Prince Edward-Lunenburg County Bank upon some other bank with which it had
funds upon deposit.
The two banks had done business under the above arrangement for some
time, and on the 5th day of January, 1922, the Federal Reserve Bank of Richmond
sent to the Prince Edward-Lunenburg County Bank a letter containing checks drawn
upon the Prince Edward-Lunenburg County Bank to the amount of $2,295-10*
The
Prince Edward-Lunenburg County Bank received the above mentioned letter on the
6th day of January, 1922. Apparently the drawers of the checks had sufficient
balances with the bank to have required it to pay, and the bank had on hand a
sufficient sum to have enabled it to have paid the checks had they been presented at i t s counter and cash demanded.
The Prince Edward-Lunenburg County Bank accordingly cancelled the
checks sent to it by the Federal Reserve Bank of Richmond, and charged them to
the accounts of the several drawers of the said checks, and deducted them from
the balances of such drawers.
The Prince Edward-Lunenburg County Bank thereupon drew in favor of
the Federal Reserve Bank of Richmond a draft upon the Bank of Commerce & Trusts,
of Richmond, Virginia, for the sum of $2,295*10, and sent i t to the Federal Reserve Bank of Richmond in settlement for the amount which the Prince EdwardLunenburg County Bank had collected upon the checks sent to it by the Federal
Reserve Bank of Richmond. This draft was dated and apparently mailed on the
6th day of January, 1922. At that time the Prince Edward-Lunenburg County Bank
-3-
X-4io4
had. on deposit to i t s credit with the Bank of Commerce & Trusts the approximate
amount of $11,000.00. As soon as the said draft was mailed to the Federal Beserve Bank of Richmond and certain other drafts apparently given under like
circumstances were mailed to the payees thereof, the Prince Edward-Lunenburg
County Bank deducted the amount of the said drafts from its balances with the
Bank of Commerce & Trusts and charged the amount of the said drafts to the persons to whom they were payable, just as if cash had actually been withdrawn
from the Bank of Commerce & Trusts and delivered to the payees of the several
drafts.
The said draft for $2,295*10 was received by the Federal Reserve
Bank of Richmond in due course of mail and was presented by i t to the Bank of
Commerce & Trusts and demand was made for the payment. Payment was refused because in the meantime a receiver had been appointed for the Prince Edward-Lunen^
burg County Bank by a decree entered by the judge of the Circuit Court of
Iiunenburg County. At the time the said draft was so presented the said Bank
of Commerce & Trusts had in i t s hands the sum of approximately $11,000 payable
to the order of the Prince Edward-Lunenburg County Bank, but it refused to pay
this sum to the Federal Reserve Bank because of the fact that a receiver had
been appointed, and the said sum has since been paid over to the receiver in
this cause.
Prior to the closing of the Prince Edward-Luneriburg County Bank, the
Federal Reserve Bank of Richmond had been directed by the Secretary of the
Treasury of the United States to make for the public, through a branch which
the Federal Reserve Bank of Richmond maintains in the city of Baltimore, ex-
-4-
X-4104
changes of different kinds of United States coin and currency for other kinds
of coin and currency, and it had accordingly issued a circular addressed to all
the banks in the Fifth Federal Reserve District, in which the Federal Reserve
Bank of Richmond did business, stating that it was ready and willing to exchange any kind of United States coin and currency for any other kind of coin
and currency for which it might properly be exchangeable, provided the persons
shipping the coin and currency for exchange would pay the cost of such shipment *
On the 6th day of January, 1922, the Prince Edward-Lunenburg County
Bank shipped to the Federal Reserve Bank of Richmond, at its Baltimore branch,
the sum of $^10»82 in five cent and one cent pieces of United States coin* At
the time that this shipment was made the Prince Edward-Lunenburg County Bank requested the Federal Reserve Bank of Richmond to send to the Prince Edward-Lunenburg County Bank a check in settlement for the amount of coin so shipped*
The
amount due for said shipment, after deducting express charges, was $505*^5* but
the check requested by the Prince Edward-Lunenburg County Bank was not sent because before the coin could be counted and the check prepared and sent, the
Federal Reserve Bank of Richmond was informed that the Prince Edward-Lunenburg
County Bank had been placed in the hands of a receiver.
In due time the Federal Reserve Bank of Richmond presented its claim
to the commissioner to whom this cause was referred, and contended that the
Prince Edward-Lunenburg County Bank was its agent for the purpose of transmitting to it the money collected upon the several checks sent to it by the Federal
Reserve Bank of Richmond, and that by reason of the fiduciary relationship of
the Prince Edward-Lunenburg County Bank the cash in its vault was impressed
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X—4lo4
with a trust in favor of the Federal Reserve Bank of Richmond, or that the cash
in the Bank of Commerce & Trusts, against which the draft sent to the Federal
Reserve Bank of Richmond was drawn, was impressed with a trust.
The said Federal
Reserve Bank of Richmond further admitted that it held in i t s hands the sum of
$505.1+5, which should in a settlement of its account "between itself and the receiver be properly a credit upon the amount due by the said failed bank to i t .
The commissioner to whom this cause was referred sustained the contention of
the Federal Reserve Bank of Richmond, and reported that it was entitled to receive payment in full out of the cash in the hands of the receiver, or out of
the funds in the Bank of Commerce & Trusts.
Inapt time Crag C. Eatchett, by his attorney, filed in the Circuit
Court of Lunenburg County his petition alleging that he was a depositor of the
failed bank, and, therefore, interested in the administration of its estate,
and further asking that he be allowed to become a party defendant to the claim
of the Federal Reserve Bank of Richmond and to object and to make exceptions to
certain portions of the report of Commissioner Nelson including the portion
which determined that the Federal Reserve Bank of Richmond was entitled to a
secured or preferred claim.
Thereupon, the Federal Reserve Bank of Richmond filed in court i t s
petition, alleging in substance the above mentioned facts, and praying that the
report of Commissioner Nelson be approved and confirmed so far as i t dealt with
its claim.
Further evidence was taken by both Crag C. Hatchett and the Federal
Reserve Bank of Richmond, but no specific conflicts of testimony appeared from
such evidence.
—b—
X—4ioU
The foregoing statement of facts, taken from the petition, is sustained
by the record*
Upon the final hearing the court entered a decree denying the claims
of the Federal Reserve Bank of Richmond to a preference, establishing its claim
as anunpreferred debt for $2,2Q5.10, adjudging that it is not entitled to set
off against the indebtedness due it by the Prince Edward—Lunenburg County Bank
the sum of $505*^5, referred to in the petition, and directing the Federal Reserve Bank to pay the same to the receiver of the Prince Edward-Luneriburg County
Bank* The case is before us upon an appeal from that decree*
The appellant assigns as error the action of the court:
First:
In denying the claim of petitioner to be a lien upon the
cash which was in the vault of the Prince Edward-Lunenburg County Bank at the
time that the receiver took charge and in refusing to direct that so much of
such cash as was necessary to pay in full the claim of petitioner should be
paid over to i t .
Second:
In denying the claim of petitioner to be an equitable lien
upon the deposit of the Prince Edward-Lunenburg County Bank in the Bank of Commerce & Trusts, and in refusing to direct the receiver to pay over to petitioner
from such funds a sum sufficient to pay i t s claim in full*
Third:
In adjudging that the Federal Reserve Bank of Richmond was
not entitled to apply on the indebtedness due i t by the Prince E&ward-Luneriburg
County Bank, the sum of $505*45, and in requiring and directing the Federal Reserve Bank of Richmond to pay the same to the receiver•
-7-
X-4104
In order to make collections of checks handled by them, banks usually
adopt one of two methods - - reciprocal accounts, or remittance * Under the reciprocal accounts method, the collecting bank, upon receipt of payment of the
checks, gives credit upon i t s books to the forwarding bank, and the forwarding
bank charges the collecting bank upon its books.
They settle.- from time to time
according as the balance accumulates, with the one or the other* Under this
method, as soon as the collection
is made the relation of the banks is that of
creditor and debtor» Under the remittance method the forwarding bank sends the
checks to the collecting bank with instructions to collect them and remit immediately* The collecting bank is not authorised to retain the proceeds in
its hands and therefore acts only as an agent for the forwarding bank*
It is
manifest that the remittance method was the one used by the Federal Reserve
Bank of Richmond in the instant case.*.
The first two assignments of error involve the question, whether the
facts disclosed by the record are such as to create a trust relation which
gave to the Federal Reserve Bank of Richmond a lien upon the assets of the
failed bank, before and after they passed into the hands of the receiver*
When a bank receives from its correspondent a check upon i t s e l f , it
is an agent for its correspondent to make a presentation to i t s e l f .
Hilsinger
v* Trickett, 36 Ohio St, 2g6; Ann* Cas. I9I3-D, p. 421.
The agreement between the two banks constituted the Prince Edward- .
Lunenburg County Bank a special agent to collect and remit immediately the
proceeds of the checks enclosed, either in currency or by draft on some other
bank. When the checks were cashed, the $2,295*10 realized thereby became the
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X-4104
property of the Federal Reserve Bank of Richmond, in the hands of the Prince
Edward-Lunenburg County Bank a.a its trustee.
The trustee had the right to with-
draw the money from its bank in currency and ship it to the Federal Reserve Bank
of Richmond,, in which event no controversy would have arisen.
The fact that i t
retained the actual cash, thus permitting the same to temporarily mingle with
its general funds, and sent the Federal Reserve Bank of Richmond a draft upon
its deposit in the Bank of Commerce & Trusts, did not, however, cause the relation of debtor and creditor to arise, but the general deposit was thereby impressed with a trust#
•
The relation of principal and agent, which it is admitted obtained
between the parties at the beginning of the transaction, did not change to that
of debtor and creditor.
The authority expressly given the Prince Edward-Lunenburg County Bank
was to collect the checks and remit immediately by means of a shipment of currency to the Federal Reserve Bank of Richmond, or by means of draft drawn by
the Prince Edward-Lunenburg County Bank upon some other bank with which they had
funds upon deposit-
An authority to do a specific thing authorizes by implica-
tion the doing of whatever is necessary to accomplish the thing authorized, but
not the doing of another and separate thing*
lect and remit at once.
The authority granted was to col-
The authority now sought to be added by implication
is to destroy, by the mere cashing of the checks, the relation of principal and
agent and to substitute therefor the relation of debtor and creditor*
It is
clear that this change of relation was not necessary to carry into effect the
authority granted.
Besides, the mingling of trust money with that of the trustee
does not defeat the owner * s t i t l e , simply because there is no way to identify
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X-4lo4
money. The general assets "being increased by the amount of the money attempted
to be converted., it is equitable and just that the general assets should bear
the burden of the preference.
We cannot agree with the contention of appellee that a commingling
of the proceeds of the checks with the funds of the collecting banks brings about
the relation of debtor and creditor.
Where the relation of trustee and cestui que trust is established
the mingling of the trust fund with the general fund in the hands of the
trustee does not destroy the trust, but serves to extend the trust or lien
to the w hole mass of money.
In the recent case of Board of Supervisors v. Prince Edward-Lunenburg County Bank. 138 Va.
, 3^ ?a. App. 335, this court quoted with ap-
proval from Knatchbull v. Hallett, (L, R. 13 Ch. Div. 696, 707), where Sir George
Jessel, Master of the Rolls, says: " . . Supposing, instead of being invested
in the purchase of land or goods, the money were simply mixed with other moneys
of the trustee, using the term . . in its full sense, as indicating every person
in a fiduciary capacity. Does it make any difference, according to the modern
doctrine of equity?
do so.
I say, none.
It would be very remarkable if it were to
Supposing the trust money was 1000 sovereigns, and the trustee put them
into a bag, and by mistake or accident, or otherwise, dropped a sovereign of his
own into the bag.
Could anybody suppose that a judge, in eq uity, would find
any difficulty in saying that the cestui que trust has a right to take 1000
sovereigns on the 1001 sovereigns, but that is the effect of i t .
doubt of it."
I have no
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x-4104
Upon the question of whether the relationship existing between banks
in such cases is that of debtor and creditor or that of trustee and cestui que
trust, the authorities are in sharp conflict, but we feel that the better
reason and weight of authority support the views expressed herein.
It appears from the record that as soon as the draft was sent to the
Federal Reserve Bank of Richmond the cashier of the Prince Edward-Lunenburg
County Bank deducted the amount thereof from the apparent balance due from
the Bank of Commerce & Trusts upon which the draft was drawn, just as if this
amount had already been withdrawn from the latter bank and transferred to the
Federal Reserve Bank of Richmond. By this act the cashier intended to set
apart such a portion of the balance in the Bank of Commerce & Trusts as was
necessary to meet the draft sent to the Federal Reserve Bank of Richmond, as
he was obligated to do under his contract.
Equity regards that as done which ought to have been done* Under
such circumstances, the draft on the Bank of Commerce & Trusts was an equitable
assignment of the funds to the Federal*Reserve Bank of Richmond, and we will so
adjudge.
In Messenger v» Carroll Trust & Savings Bank (Iowa), 185
W. 5^5*
the Moline Plow Company sent a draft to the Carroll Trust & Savings Bank at
Carroll, with the instructions to collect and remit.
The draft was drawn on
the Swaney Company and was paid by a check on the Carroll Trust & Savings Bank*
The court, in the course of i t s opinion, said; "It is the contention for the
Moline Plow Company that the relation created between it and the bank was strictly that of principal and agent; whereas, the receiver contends that the trans-
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X-4l04
action had created the relation of creditor and debtor only.
strictly with the directions of the claimant.
The bank complied
It did not purport to open any
account with the claimant, nor to deposit the proceeds to the credit of the
claimant.
It simply put such proceeds in the form of its own draft upon the
Chicago Bank for the purpose of remittance. The case at this point is ruled
squarely by Brown v. Sheldon State Bank. 139 Iowa S3> 117 N. W« 289,
our previous cases cited therein.
an<
* by
The question is fully discussed in the Brown
case, and nothing can be gained by a repetition of the discussion here.
Follow-
ing such case, it must be held that the proceeds of the sight draft came into
the hands of the bank as agent for the Moline Plow Company, and that the t i t l e
thereto was at all times in the principal and not in the agent."
"Vie deem i t clear that the net result of the transaction of payment
by the Swaney Company and the receipt thereof by the collecting bank was the
same as though the Swaney Company had drawn the currency into i t s own hands
by means of check, and had thereupon delivered the same to the collecting
bank in payment of the sight draft. Such is the holding of the cited cases."
In the case of Goodyear Tire & Robber Company v. Hanover State Bank .
204 Pacific 992, decided by the Supreme Court of Kansas, the Goodyear Tire &
Rubber Company of Akron, Ohio, sent a draft to the Hanover State Bank. The
draft was drawn upon Poell Bros., who paid it by a check on the Hanover State
Bank. The Hanover State Bank failed before remitting the amount of the draft
to the Goodyear Tire & Rubber Company. The court held that the Rubber Company
was entitled to impress a trust upon the cash in the hands of the failed bank.
In disposing of the case this language was used:
-
!2 -•
X-410U
"If Poell Bros., instead, of paying the draft upon them by check,
had used currency for the purpose, there can be no doubt that the receiver
would hold the amount in trust for the-plaintiff, for the total of the cash,
or i t s equivalent, which came into his hands would necessarily, or at all
events presumptively, have been that much larger by reason of such payment,
The court is of the opinion that the rule applies, that where a payment to a
"bank is made by check dram thereon, the result is the same as though the
depositor had presented his check, received the money over the counter, and
then used i t in making the payment.
That rule has often been announced.
ffashon v. Bank, 67 iCan. 6$8, 125 Pac. 17; 2 Morse on Banks and Banking (5th ed.)
451, and cases cited in note.
" . • It follows from these views that the money belonging to the
plaintiff must be regarded as having passed into the hands of the receiver,
increasing by that amount the assets to be administered by him, and that the
plaintiff is entitled to reclaim i t as a trust fund. "
In the case of Keal v Hanover State Bank, 204 Pac. 994, the Kansas
court also held that where a check of one - , is sent by mail for collection
to the bank on which i t is drawn, which has at the time of i t s receipt, and at
all other times thereafter, sufficient cash to meet it, and the bank charges i t
to the drawer and at once nails to the owners a draft for the amount, payment
of which is prevented by the bank commissioner taking charge of the bank issuing i t , before i t could be presented in due course of business, the owners of
the check have a preferred claim for its amount against the assets of the suspended bank.
To the same effect' is Kansas State Bank v. First State Bank of
Marion, 62 Kan. 788.
X-4io4
— 13 —
In State v.Edwards, Receiver, 6l Neb- 181, 85 N. W, 4-3, the court
said "It is a recognized principle in this State that money collected by a
bank for another on notes or drafts is in trust for the owner who is a preferred creditor in case the bank goes into liquidation,"
In Arnot v. Bingham, 55 Hun. 553, the plaintiff sent to the First
National B&nk of Danville a note payable by one of its custerrors at the bank.
The customer paid the note by means of a check.
charged to the customer's account.
The check was cancelled and
At the time the customer had to his
credit a balance sufficient to pay his check and the bank had cash in i t s
vaults sufficient to have paid the check had payment been demanded in cash.
In deciding the case, the New York court said:
ville
"If the receipt by the Dan*,
Bank of the maker's check, the cancellation and surrender of the note
and deducting the amount of the check from the maker's account was in effect
a collection of such check from the general fund, then in the hands of the
bank, so that i t was bound to hold the money for the plaintiffs and apply i t
to the purpose for which it was collected, then we think that i t was properly
held that the funds remaining in the hands of the bank when i t failed, as
between the plaintiffs and the bank, or between the plaintiffs and the receiver, equitably belonged to the plaintiffs, as well as the amount collected
on the McCullom note. "
In State National Bank v. First National Bank of Atchison, 1S7 S. W.
673, the First National Bank of Atchison sent to the State National Bank for
collection certain drafts of F. J. Darrag & Company. These drafts were
presented to Darrag & Corrpany by the State National Bank, who paid them by
• - 14 - •
-
X-4104
their check on the State National Bank. The State National Bank collected the
check of Darrag & Company by charging i t to the account of that firm, on June
15th.
On June 19th the State National Bank closed its doors because of insol-
vency, without having remitted the amount of the check, but with cash on hand
in excess of the amount of the check.
of Arkansas held:
In deciding the case the Supreme Court
"It is likewise well established that a bank receiving a
draft for collection merely i s the agent of the remitter, drawer, or forwarding
bank and takes no t i t l e to the paper or the proceeds when collected, but holds
the same in trust for .-remitting.
Second National Bank v. Bank of Aline, 99
Ark. 386; Oklahoma State Banlr. v. Bgnk of Central Arkansas, 179 S. W. $09, 3 R.
C. L. 633^ 3 Am- & Eng. of Law 816; 5 Cyc. p. 5l4;Msffc.v v. Roedenbeck. 2?7 Fed,
346."
In the course of the opinion the court further said:.
"The payment of the drawee of the draft of the amount thereof, by
the delivery of i t s check therefor against his account in the collecting bank
and the charging of the amount against his account, constituted to all intents
and purposes a payment in cash of the drafts; the check being merely the
vehicle of transfer of the cash.
Certainly there is no necessity for the
drawee of the drafts to take i t s check to i t s bank, the collector, and present
i t and receive the money and hand it back to the bank in payment of the draft.
"The testimony shows that the bank had more money cm hand each
day i t continued business, after the collection of the drafts than the amount
thereof, and that the lowest amount i t had on hand thereafter, and which went
into the hands of the receiver, was more than $7,000 and under the rule
- 15 -
x-4104
announced by t h i s court i n Cove;/ v. Cannon, 104 Ark. 550,
149 S. W,
t h i s showing i s a s u f f i c i e n t i d e n t i f i c a t i o n of the proceeds jf the c o l l e c t e d
d r a f t s and tracing them to the possession of the r e c e i v e r . "
To the same e f f e c t are:
6 l Neb. 181, 5'd.
State v. Bank of Coirmerce, 85 N. W. 43,
R. A. 858; Kansas State. Bank v. First State Bank, 64 Pac.
634, b2 Kan. 788; F i r s t national Bank v. Sanford, 62 Mb. App. 39^# and
Anheuser Busch Brewing Co. v. Morris, 36 Neb.
, 83 N. W. 1037*
In Western German Bank v. Norvell, 134 Fed. 7^6, the court held that
"wnen a bank r e c e i v e s ma:ey, i t being known to i t s o f f i c e r s to be insolvent,
and mingles the money with i t s own funds, which, tc an amount larger than the
sum so received from i t s c l i e n t , gcps into the hands of i t a r e c e i v e r , i t i s
not e s s e n t i a l t o the r i g h t of i t s c l i e n t to recover from the r e c e i v e r that he
should be able t c trace the i d e n t i c a l money i n t o the r e c e i v e r ' s hands; but i t
i s s u f f i c i e n t to shew that the sum which went i n t o the r e c e i v e r ' s hands was
increased by the amount which the bank received of i t s c l i e n t .
Richardson v.
New Orleans Rid. Co., 102 Fed. 42, C. C. A. 6 l 9 , 52 L. R. A. 67, and cases
cited."
In the c a s e of In re City Bank of Dowagiac, 186 Fed, 250, the bank
c o l l e c t e d $500'upon a draft sent i t by the Harris Bank.
I t intermingled the
actual money r e c e i v e d with i t s general funds and used i t to pay c e r t a i n debts
other than i t s o b l i g a t i o n s to the Harris Bank, but i t drew a g a i n s t i t s account with i t s New York correspondent a draft in favor of the Harris Bank for
t h e proceeds of the c o l l e c t i o n .
The Dowagiac Bank f a i l e d b e f o r e t h i s remit-
tance d r a f t was presented, or c o l l e c t e d , having a balance with i t s New York
c o r r e s p o n d e n t more than equal to the outstanding d r a f t payable t o the Harris
Bank.
The court s t a t e d the law thus:
- 16 -
X-4104
"It i s clear beyond dispute that Nelson i s not a general creditor,
"but that this money, when received by the City Bank, was a trust fund, belonging to Kelson; and the only question in controversy i s the s e l e c t i o n of the
property to which Nelson's l i e n attaches.
The r e f e r e e gave him a l i e n only
upon the general balance of cash on hand i n the vaults of the bank, at Dowagiac,
when i t closed; and, as this amount was only $495>
an(i
there are a large number
of other preferred claims against the same fund, Nelson w i l l r e c e i v e , from t h i s
l i e n , nothing of consequence.
He appeals from the disallowance of h i s claim as
a l i e n against the fund in the National City Bank of New York on February Sth,
and since transferred to the trustee.
"I think this l a t t e r l i e n should be allowed.
% understanding of the
s i t u a t i o n i s that on February 5th, and because of the mingling of t h i s fund, by
the City Bank, with i t s general funds, Nelson had a l i e n upon such general
funds.
This was a f l o a t i n g , i n d e f i n i t e l i e n , and i t could be l o c a l i z e d and
made s p e c i f i c , either by Nelson's act in seizing s u f f i c i e n t of such funds to
s a t i s f y i t , or by the act of the City Bank in appropriating s u f f i c i e n t of such
funds for that purpose, in which appropriation Nelson, or those representing
him, should join or acquiesce. Such s p e c i f i c appropriation was made by the City
Bank, when i t drew i t s draft for that purpose against i t s New York depositary,
and had already furnished, or then did furnish, to such depositary, funds
s u f f i c i e n t to meet this draft.
I think this appropriation of a fund for t h i s
purpose, followed by Nelson's use of the draft and demand for the fund so
appropriated, established and f i x e d the lien for $499-50 against such fund,
and the trustee should pay to Nelson this amount, unless there are other conf l i c t i n g l i e n s against the same fund."
X-4104
- 17 -
Both c o u n s e l f o r a p p e l l a n t and a p p e l l e e r e l y upon t h e c a s e of F i r s t
R a t i o n a l Bank of A l e x a n d r i a v . P a y n e , 8$ Va. 8 g 0 .
The F i r s t N a t i o n a l Bank
s e n t Payne & Company, p r i v a t e b a n k e r s doing b u s i n e s s i n W a r r e n t o n , V a . , a
l e t t e r c o n t a i n i n g c h e c k s drawn by v a r i o u s d e p o s i t o r s i n Payne & Company upon
t h a t b a n k i n g f i r m a n d r e q u e s t e d Payne & Coirpany t o c r e d i t t h e a c c o u n t of the
F i r s t N a t i o n a l Bank of A l e x a n d r i a w i t h t h e p r o c e e d s of t h e c h e c k s .
A clerk
i n t h e o f f i c e of Payne & Company a c c o r d i n g l y c a n c e l l e d t h e c h e c k s and c h a r g e d
them t o t h e a c c o u n t s of t h e d e p o s i t o r s and c r e d i t e d t h e amount of t h e c h e c k s t o
t h e F i r s t N a t i o n a l Bank of A l e x a n d r i a .
On t h e day upon w h i c h t h e l e t t e r was
r e c e i v e d by Payne & Company and t h e above m e n t i o n e d e n t r i e s made i n t h e a c c o u n t s , Payne & Company were d i s s o l v e d by t h e d e a t h of one of i t s p a r t n e r s .
The p r o c e e d s of t h e c h e c k s r e c e i v e d were n e v e r p a i d over t o t h e F i r s t N a t i o n a l
Bank of A l e x a n d r i a , and i t was d i s c o v e r e d t h a t
t h e f i r m was i n s o l v e n t and an
a s s i g n m e n t was made f c r t h e b e n e f i t of i t s c r e d i t o r s .
The A l e x a n d r i a b a n k
f i l e d a p e t i t i o n p r a y i n g t h a t t h e e n t i r e amount of t h e c h e c k s s e n t by i t t o
Payne & Company b e p a i d over t o i t upon t h e t h e o r y t h a t t h e p r o c e e d s of t h e
c h e c k s were a t r u s t f u n d which d i d n o t p a s s t o t h e a s s i g n e e .
The c o u r t s u s -
t a i n e d t h i s c o n t e n t i o n and o r d e r e d t h a t t h e f u l l amount of t h e c l a i m o f t h e
F i r ^ t N a t i o n a l Bank of A l e x a n d r i a b e p a i d .
T h i s was c l e a r l y a c a s e of r e c i p r o c a l a c c o u n t s , and b u t f o r t h e d i s s o l u t i o n of t h e f i r m of Payne & Company by t h e d e a t h of one of t h e p a r t n e r s ,
t h e p r o c e e d s of t h e checks would have p a s s e d t o t h e a s s i g n e e , a n d t h e p o s i t i o n
of t h e F i r s t N a t i o n a l Bank of A l e x a n d r i a would h a v e been t h a t of a g e n e r a l
creditor.
Upon t h e f i r m ' s d i s s o l u t i o n , however,
t h e s u r v i v i n g p a r t n e r was
w i t h o u t a u t h o r i t y t o make t h e f i r m a d e b t o r t o a n y one, and h i s a c t i o n i n
— IS —
-
x-4lo4
c r e d i t i n g t h e a c c o u n t of t h e F i r s t N a t i o n a l Bank of A l e x a n d r i a w i t h t h e
p r o c e e d s of t h e c h e c k s was a n u l l i t y .
The c h e c k s had been c o l l e c t e d b u t the
p r o c e e d s were t h e p r o p e r t y of t h e A l e x a n d r i a bank and h a v i n g been a c t u a l l y b u t
wrongly t u r n e d over t o t h e a s s i g n e e , .the c o u r t p r o p e r l y o r d e r e d t h e same p a i d
over t o t h e F i r s t N a t i o n a l Bank of A l e x a n d r i a , f o r whom i t had been c o l l e c t e d *
The Payne c a s e i s a u t h o r i t y f o r t h e p r o p o s i t i o n t h a t wherever t h e r e l a t i o n of
c r e d i t o r and d e b t o r does n o t e x i s t , t h e m i n g l i n g of t h e f u n d s of t h e f o r w a r d i n g
bank w i t h t h e g e n e r a l f u n d s of t h e c o l l e c t i n g bank w i l l n o t d e f e a t t h e r i g h t
of t h e f o r w a r d i n g b a n k t o c o l l e c t t h e amount due i t out of such g e n e r a l f u n d s »
The a p p e l l e e r e l i e s a l s o upon two o t h e r V i r g i n i a c a s e s : P e n n i n g t o n ,
R e c e i v e r v. T h i r d N a t i o n a l Bank of Columbus, G a . . I l 4 Va. S?4, a n d M i l l e r v .
N o r t o n & Smith, l l 4 Va, 609.
The P e n n i n g t o n c a s e r e s e m b l e s , i n some r e s p e c t s , t h e i n s t a n t c a s e I t i s t r u e t h a t t h e c o u r t , a l t h o u g h n o t n e c e s s a r y to t h e d e c i s i o n of the
case,
l a i d down t h e g e n e r a l r u l e , t h a t "tile c o l l e c t i o n of a d r a f t by a b a n k f o r a
customer i n t h e o r d i n a r y c o u r s e of b u s i n e s s ( i t a l i c s o u r s ) , and p l a c e d t o the
c u s t o m e r ' s c r e d i t , amounts t o a g e n e r a l d e p o s i t by t h e l a t t e r , and c r e a t e s t h e
r e l a t i o n of d e b t o r and c r e d i t o r between them."
But t h e c o u r t a l s o h e l d t h a t
t h e Tarooro bank, which f a i l e d , and had c o l l e c t e d a d r a f t s e n t i t
"for col-
l e c t i o n and r e t u r n , r e m i t t o N a t i o n a l P a r k Bank, New York, f o r our c r e d i t a n d
a d v i s e " , and m i n g l e d t h e p r o c e e d s w i t h i t s g e n e r a l f u n d s , was a t r u s t e e and
t h a t the g e n e r a l d e p o s i t b a l a n c e of t h a t bank i n t h e hands of t h e N o r f o l k
c o r r e s p o n d e n t was i m p r e s s e d w i t h a t r u s t .
I f , a s we h o l d , t h e r e l a t i o n s h i p
of d e b t o r and c r e d i t o r n e v e r a r o s e i n t h e c a s e a t b a r , then we f i n d n o t h i n g i n
the Pennington c a s e t o s u s t a i n the c o n t e n t i o n of t h e a p p e l l e e .
x-Uio4
.^
"-19-'
I t i s t r u e t h a t t h e t r u s t was e s t a b l i s h e d , on t h e ground, of t h e i n s o l v e n c y of t h e c o l l e c t i n g bank, known to i t s e x e c u t i v e o f f i c e r s a t t h e time
when t h e c o l l e c t i o n was r e c e i v e d , b u t i t d e e s n o t f o l l o w t h a t i f t h e c o l l e c t i o n had been s e n t , a s i n t h e i n s t a n t c a s e , under i n s t r u c t i o n s to r e m i t
immediately t h e amount of t h e c h e c k s by shipment of c u r r e n c y , t o t h e f o r w a r d i n g b a n k , or by means of a d r a f t drawn by the c o l l e c t i n g bank u p o n some o t h e r
bank w i t h which i t had f u n d s upon d e p o s i t , t h e c o u r t would h a v e h e l d t h a t t h e
c o l l e c t i n g b a n k d i d n o t h o l d t h e p r o c e e d s of t h e c h e c k s a s t r u s t e e .
The c a s e of M i l l e r v . Norton & Smith. 114 Va, 609, l i k e w i s e f a i l s t o
s u s t a i n t h e c o n t e n t i o n of t h e a p p e l l e e .
In t h i s c a s e , the c o u r t was d e a l i n g w i t h an i n s o l v e n t f o r w a r d i n g
bank and n o t an i n s o l v e n t c o l l e c t i n g b a n k .
Unlike the i n s t a n t case, there
was no q u e s t i o n of s p e c i a l a g e n c y , and M i l l e r i n t e n d e d a f t e r t h e c h e c k was
c o l l e c t e d , to l e t t h e p r o c e e d s remain i n bank a s a g e n e r a l d e p o s i t .
question
The r e a l
i n v o l v e d was whether or n o t b e f o r e :the c o l l e c t i o n was complete
t h e f o r w a r d i n g b a n k should be r e g a r d e d a s a h o l d e r of t h e c h e c k f o r v a l u e , or
as a nere agent f o r c o l l e c t i o n .
The c o u r t h e l d t h a t i t was a n a g e n t b e c a u s e
i t h a d n o t g i v e n v a l u e ; and t h a t t h e d e p o s i t when made, b e i n g g e n e r a l , t h e
b e n e f i c i a l ownership of t h e money v e s t e d i n t h e b a n k and t h a t t h e r e l a t i o n s h i p
between i t and t h e d e p o s i t o r became t h a t of d e b t o r and c r e d i t o r .
Among c a s e s f r o m o t h e r j u r i s d i c t i o n s , r e l i e d on by t h e a p p e l l e e s ,
which do s u s t a i n h i s c o n t e n t i o n , may be mentioned t h e f o l l o w i n g :
First
N a t i o n a l Bank v . D a v i s . 114 N, C , , 4 l Am. S t - Rep. 795.1 Bur man v . F i r s t
- 20 -
X-4lC)4
N a t i o n a l Bank, 43 Am* S t . Rep, 870; P e o p l e v . Merchants & Mechanics Bank, JS
N, Y. 266; S a y l e s v„ Cox, 49 Am, S t , Rep- 9^0; Akin v< J o n e s , 42 Am. S t . Rep*
921; C e n t r a l T r u s t Co, of 111, v , Hanover T r u s t Co, , ( M a s s . ) , 136 N, E, 336,
and o t h e r s ,
In F i r s t N a t i o n a l Bank v . D a v i s , 114 N. C. 343, 4 l Am. S t . Rep, 795,
supra, unlike the i n s t a n t case,
and t h e r e c e i v i n g b a n k .
t h e r e was no a g r e e m e n t between t h e f o r w a r d i n g
New
The Bank o f / H a n o v e r was i n t h e h a b i t of r e c e i v i n g
f r o m t h e F i r s t N a t i o n a l Bank o f Richmond c h e c k s and o t h e r e v i d e n c e s of i n d e b t e d n e s s f o r c o l l e c t i o n , c h a r g i n g f o r i t s s e r v i c e s a s c o l l e c t i n g a g e n t and r e m i t t i n g d a i l y t h e p r o c e e d s of i t s c o l l e c t i o n s *
The money and c h e c k s r e c e i v e d and
c o l l e c t e d were n o t k e p t s e p a r a t e , b u t were m i n g l e d t o g e t h e r i n one g e n e r a l f u n d
w i t h t h e o t h e r moneys and p r o p e r t y of t h e f a i l e d bank*
The c a s h i e r of t h e
New Hanover Bank, f o r which D a v i s was a f t e r w a r d s a p p o i n t e d r e c e i v e r , had no
knowledge of i t s i n s o l v e n c y u n t i l i t had a c t u a l l y f a i l e d .
The c o u r t h e l d t h a t
t h e two banks were presumed t o h a v e e n t e r e d i n t o a n i m p l i e d a g r e e m e n t t h a t t h e
b u s i n e s s would be t r a n s a c t e d i n a c c o r d a n c e w i t h t h e e s t a b l i s h e d c u s t o m i n such
b u s i n e s s , which p e r m i t t e d t h e c o l l e c t i n g bank t o p u t a l l c o l l e c t i o n s made by i t
i n t o the g e n e r a l f u n d of t h e b a n k , and u s e them f r o m day t o d a y i n t h e t r a n s a c t i o n of t h e i r c u r r e n t b u s i n e s s , and when t h e t i m e came f o r making r e m i t t a n c e
to send t h e
f o r w a r d i n g bank money f r o m i t s g e n e r a l f u n d , or i t s c a s h i e r * s
c h e c k f o r t h e amount due*
The c o u r t a l s o h e l d t h a t t h e r e l a t i o n e x i s t i n g b e t w e e n t h e two banks*
up t o t h e t i m e t h e c h e c k s were c a s h e d , was t h a t of p r i n c i p a l and a g e n t , a n d
t h a t i m m e d i a t e l y t h e r e a f t e r t h e r e was . s u b s t i t u t e d a s t o such c a s h t h e r e l a t i o n
of d e b t o r and c r e d i t o r .
I n t h e i n s t a n t c a s e , t h e c o n t r a c t b e t w e e n t h e f o r w a r d i n g and r e c e i v i n g b a n k s d i d n o t a r i s e o u t of a c u s t o m b u t out of an agreement between them
- 21 -
X-4lo4
by which the c o l l e c t i n g bank would cause the checks to be presented to i t for
payment, and. immediately upon payment remit the amount of the checks so paid to
the forwarding bank by a shipment of currency, or by a .draft upon some other
bank with which i t had funds upon deposit.
Under these circumstances, i t was
net contemplated that the receiving bank should become the owner of the s p e c i f i c
money collected, and i t had ho express or implied contract r i g h t to lend,or
otherwise use i t in i t s banking business.
It was a special agent of the for-
warding bank to c o l l e c t the checks and remit the money immediately, and the
relationship of debtor and creditor did not a r i s e .
Board of Supervisors v .
Prince Edward-Lunenburg County Bank et a l s , 1JS Va.
, 31 Va. App. 33&*
In determining whether or not the f a i l e d bank i s a debtor or a
trustee, the court may well look to the intention of the p a r t i e s .
If the f o r -
warding bank intends to leave the money in the hands of the c o l l e c t i n g tank,
to be used by i t in i t s usual course of business, i t intends to become a general
depositor and accepts the bank as a debtor.
If on the other hand the forward-
ing bank, as in the instant case, does not intend i t to be so used, and demands
that the proceeds of the checks be immediately returned to i t , i t does not become a depositor, but singly entrusts the bank with the money f o r a special
purpose, and the c o l l e c t i n g bank becomes a trustee and a court of equity w i l l
impress with a trust the general funds in the hands of the t r u s t e e , in which
the trust fund i s included.
So far as the Davis case, supra, and the other cases from other j u r i s d i c t i o n s , r e l i e d on by the appellee, are in c o n f l i c t with the views herein expressed, we d e c l i n e , for reasons indicated, to f o l l o w them.
a further review of these cases i s deemed unnecessary.
In t h i s s i t u a t i o n
- 22 -
x-4104
Having sustained the p e t i t i o n e r ' s f i r s t and second assignments of
error, i t i s unnecessary to d i s c u s s the third assignment; s i n c e appellant
agrees that in the settlement of accounts the amount in i t s hands should be
credited upon i t s claim as though i t were a part payment thereon.
Our conclusion i s that t h e Prince Edward-Lunenburg County Bank was
a s p e c i a l agent c o l l e c t i n g checks f o r the Federal Reserve Bank of Richmond*
In equity and good conscience, the money thus i n i t s hands was a t a l l times
the property of the Federal Reserve Bank of Richmond.
This money passed from
the agent's hands t o the hands of the receiver impressed with a t r u s t , and i s
s u f f i c i e n t l y i d e n t i f i e d , since i t appears that an amount equal to the amount
held for the Federal Reserve Bank of Richmond was i n i t s hands
from January 6,
1922, u n t i l i t s f a i l u r e .
A check i s not payment u n t i l the check i s paid, and the drawing of
a draft by the Prince Edward-Lunenburg County Bank to the order of t h e Federal
Reserve Bank of Richmond and mailing the same to the l a s t mentioned bank in
no way a f f e c t e d the trust already impressed.
While the check was not an as-
signment of the fund against which i t was drawn, a s between the drawer of
the check and the person who gave value for i t , i t was an equitable assignment of the fund pro tanto, Daniel on Negotiable I n s t r . , sec. I6U3, p. 1852.
The decree complained of w i l l be reversed and set a s i d e , and the decree w i l l be entered here which the lower court ought to have entered, adjudging that the r e c e i v e r , H. D. P e t e r s , out of the amount now i n h i s hands, pay
to the Federal Reserve Bank of Richmond the f u l l sum of $2,295* 10, with i n t e r est thereon from the 6th day of January, 1922, t i l l paid, l e s s the sum of
$505.45, with i n t e r e s t from the 6th day of January, 1922, t i l l p a i d , and the
c o s t s by the Federal Reserve Bank of Richmond in t h i s s u i t expended.
Reversed and f i n a l .judgment»
Tests:
J. M. K e l l y , Clerk,
X-4105
FEDERAL
RESERVE
BOARD
Statement for the Press
For Immediate Release
Jane 30, 1924.
CONDITION OF ACCEPTANCE MARKET
May 15th to June 11th.
During the four wesks ending June 11, the acceptance market was
influenced primarily by a continuous decline in i n t e r e s t r a t e s .
The volume
of purchases by dealers in the principal money centers, which i s indicative
of the supply of new b i l l s coming into the market, reached the lowest point
since early in October.
The demand for b i l l s as r e f l e c t e d by sales by deal-
ers was 25 per cent smaller than in the preceding period owing in part to
the low rate borne by acceptances compared with y i e l d s on other high grade
investments.
Despite the smaller volume of purchases and a l e s s a c t i v e demand,
dealers' aggregate p o r t f o l i o s were s l i g h t l y heavier than a t the close of the
previous period.
Cotton, s i l k , grain, wool, sugar, o i l , c o f f e e , and merchan-
d i s e were the principal*commodities against which b i l l s were drawn.
At the beginning of the period rates on 30 to $0 day b i l l s were
3-5/S per cent bid and 3 - 1 / 2 per cent offered.
After the middle of May there
was a s e r i e s of rapid reductions accelerated by
rates which reached 2 per cent early in June.
an easing in c a l l money
By the c l o s e of the period
rates on acceptances had declined to 2 - 1 / 2 per cent offered and 2-5/S per
cent bid,
which was approximately one per cent lower than a month e a r l i e r
and 1-1/2 per cent lower than a year ago.
down to a l e v e l
These reductions brought rates
substantially below the comparable rates in the London market.
FEDERAL
E E S E E V E
EOAED
S'i'ATEi'SN? FOE THE PBESS
For immediate r e l e a s e
4 p. m.
June 30, 1924
X-4106
The F e d e r a l R e s e r v e Board announces t h a t t h e
F e d e r a l R e s e r v e Bank of Kansas C i t y has reduced i t s
r e d i s c o u n t r a t e t o 4 p e r c e n t on a l l c l a s s e s of p a p e r
of a l l m a t u r i t i e s , e f f e c t i v e J u l y 1, IS24.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4107
June 30, 1924
SUBJECT: Abolition of Office of Consulting Architect.
Dear Sir:
You are advised that the arrangement which has
e x i s t e d for some time between the Federal Reserve Board
and Mr» A. B, Trowbridge, whereby Mr. Trowbridge has served
the Board and the Federal reserve banks in the capacity of
consulting a r c h i t e c t , in consideration of a f i x e d annual
retainer f e e , has been discontinued, e f f e c t i v e June ^Oth,
In the event of the necessity a r i s i n g in the
future, as i t undoubtedly w i l l , for the employment of the
services of a consulting a r c h i t e c t , the Board w i l l arrange
with Mr. Trowbridge, or some other architect, to serve in
that capacity on an agreed b a s i s for each s p e c i f i c building
project.
Very truly yours,
Walter 1 . Eddy,
Secretary.
TO THE GOVERNORS OF ALL FEDERAL RESERVE BAMS,
79
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE B O A R D
January 2, 1924,
St. 3868.
SUBJECT: C e r t i f i c a t i o n of Franchise Taxes
paid on December 31, 1923 •
Dear Sir:
In accordance with the practice adopted at the sugg e s t i o n of the Treasury Department, the Board requests that
you have the Auditor of your bank prepare and forward to the
Under-Secretary of the Treasury, Washington, D. C., a s t a t e ment showing the manner in which the amount of franchise
taxes ( i f any) paid by your bank t o the United States on
December 31, 1923, was determined. This statement should
show the following information:
First.
Second.
Gross earnings, current expenses, and p r o f i t
and l o s s account for the calendar year 1923,
in the form of the tables printed on pages
151-154 of the Board's 1922 annual, report,
except that the expense items should conform to the current edition of the monthly
expense report form 96.
Balance sheet a f t e r closing of books on
December 31, 1923, i-n the form of the
Bcard 1 s consolidated weekly press statement
of condition of Federal reserve banks.
This balance sheet should a l s o give, as a
-memorandum item, the amount of the bank's
subscribed c a p i t a l on December 31, 1923,
also the balance in your surplus account
a f t e r closing of books on December 31, 1922.
On the l a s t sheet of these statements should appear
the Auditor's c e r t i f i c a t i o n , countersigned by a senior
executive o f f i c e r of the bank, reading as f o l l o w s :
"I hereby c e r t i f y that I have examined the above
statements of earnings, expenses, and p r o f i t and l o s s of
the Federal Reserve Bank of
for the calendar
year 1923, and the balance sheet of such bank a f t e r closing
of books on December 31, 1923i that the items in such
statements are correct as shown by* the records of such
Federal reserve bank; that such p r o f i t and l o s s statement
shows a l l items of gain during the period; that a l l deduct i o n s made from cross and net earnings in such statement
appear to be f a i r , just and reasonable in a l l respects;
and that, as shown thereon, there was $
due the
United States under the provisions of Section 7 of the_
Federal Reserve Act approved December 23. 1913, as amended
by the Act of March 3. 1919."
Auditor, Federal Reserve
Bank of
COUNTERSIGNED:
In the event that no franchise tax was paid on
December 31, 1923» the underlined portion of the above
c e r t i f i c a t i o n should read "and that there was no amount
due the United States under the provisions of Section 7
of the Federal Reserve Act approved December 23, 1913> as
amended iy the Act of March 3> 1919*"
Kindly furnish the Board with a duplicate copy
of the c e r t i f i e d statements forwarded t o the Treasury
Department.
Very truly yours,
Walter L. Eddy,
Secretary.
LETTER TO CHAIHMEW AT ALL FEDERAL RSSETVS BASICS.
FEDERAL RESERVE BOARD
WASHINGTON
SUBJECT:
January 4 ,
1924.
St. 387&
Reporta of Condition of State
Banks and Trust Companies.
Gentlemen:
Tour courtegy w i l l be greatly appreciated i f
you w i l l furnish the federal Reserve Board, as soon as
available, with two copies of the abstract of reports
of condition of State banks and Trust companies in your
State on December 31, 1923, or other recent date in
case you did not issue a c a l l for reports of condition
as of December 31•
I f convenient to your o f f i c e , we would l i k e
t o have separate figures for mutual sa/ings banks and
for private banks, providing there are any such banks
operating in your s t a t e . In case the number of each
c l a s s of banks reporting i s not shown in the abstract,
w i l l you a l s o be good enough to incorporate t h i s i n f o r mation in your l e t t e r of transmittal. May we a l s o ask
you to segregate the data according to federal reserve
d i s t r i c t s , i f your s t a t e f a l l s within two d i s t r i c t s , ad
the value of these data t o the Board and for purposes
of publication w i l l be greatly enhanced i f they can be
tabulated by Federal reserve d i s t r i c t s .
The January riutaber of the Federal Reserve
B u l l e t i n (copy of which w i l l be ftrwafded to you as
soon as received from the printer) cObtains, on pag3 6?,
a summary statement of the abstracts of reports of cond i t i o n on or about September 14, 1923, of a l l banks and
trust companies (other than nutual savings banks) under
s t a t e supervision in the 48 s t a t e s and the D i s t r i c t of
Columbia, t o which your attention i s invited.
A franked and self—addressed envelope, requiring no postage i s enclosed f o r use in transmitting
the data requested.
Very truly yours,
J' C. Noell,
Assistant Secretary.
State Banking Department.
Enclosure.
FEDERAL RESERVE BOARD
WASHINGTON
January 9» 1924.
St. 3888.
SUBJECT:
Revision of weekly Federal
reserve bank press statement.
Dear Sir:
With the view of presenting the assets and l i a b i l i t i e s
of the Federal reserve banks in their l o g i c a l order in the
weekly press statements, the items w i l l be rearranged in accordance with the order shown on the enclosed form St, 231
beginning with the statement for January 9-
The weekly
COND telegram which i s sent to Federal reserve agents on
Thursdays showing the condition of a l l banks combined w i l l
be based on the new form beginning with next week, and the
code words used in that telegram w i l l be those shown in the
attached form.
I t i s requested that weekly press statements issued at
your bank, including the statement of your bank and the consolidated statement for the System ( i f the l a t t e r i s issued
l o c a l l y ) , be prepared in the same form beginning with January 16, 1924.
Very truly yours,
Walter L. Eddy,
Secretary.
Enclosure
LETTER TO ALL FEDERAL RESERVE AGENTS
Eele-ised f o r publication Friday morning,
,
, 192—; not e a r l i e r .
RESOURCES AND LIABILITIES
OF THE TWELVE FEDERAL RESERVE BANKS COMBINED
Form St. 231
(Rev.Jan.9,'24/
(in thousands of dollars)
00 ND
RESOURCES
Gold with Federal reserve agents
Gold redemption fund with U, S. Treasury .
Gold held e x c l u s i v e l y against F. R. notes
Gold settlement fund with F, R. Board
Gold and gold c e r t i f i c a t e s held by "banks .
Total gold reserves
Reserves other than gold
Total reserves
Non-reserve cash
B i l l s discounted:
Sec. by U. S. Government obligations
Other b i l l s discounted . . .
Total b i l l s discounted
B i l l s bought in open market . . . . . . .
U. S, Government s e c u r i t i e s :
Bonds
Treasury notes
C e r t i f i c a t e s of indebtedness
Total U. S. Government s e c u r i t i e s
Municipal warrants
BLIK
, . . BELT __
. . .BRIK __
BABE —
, . . BIRR
BULK __
BOSS ^
TEND __
TUBA —
BOLT __
BOTH
TIME ~
. . .BURK __
Total earning a s s e t s
5$ Redemption fund - F„ R. Bank notes
Uncollected items . . .
Bank premises . . .
All other resources
TOTAL RESOURCES
.BOOK _
BECK __
BUTE __
TALL __
. TORN
TILL
BACK
TODD
TOUR
BRIG
TOTE
L I A B I L I T I E S
F. R. notes in actual c i r c u l a t i o n . . . . . .
F. R. Bank notes i n circulation - net . . . .
Deposits:
Member bank - reserve account
Government
Other deposits
Total deposits
Deferred a v a i l a b i l i t y items
Capital paid i n
Surplus
All other l i a b i l i t i e s
TOTAL LIABILITIES
Ratio of t o t a l reserves to deposit and
F. R. note l i a b i l i t i e s combined
Contingent l i a b i l i t y on b i l l s purchased
for foreign correspondents
. . . . . . . .
.TRIM
. TURN _________
CLAY
CAKE
.OTHR
TUBB
TAPP
. CAPE
CEDE
CORN
.
====3 __^^
TWIN
TEST
.MILD
<jg
FEDERAL RESERVE BOARD
WASHINGTON
January 12, 1924.
St. 3893.
SU3JECT:
Revised Forms 38 , 95 ahd 96.
•
bear Sir•
There are being forwarded t o you today under separate cover
the following number of copies of revised forms 38, 95 and 96 for
use during 1924:
copies of form 38 - C l a s s i f i c a t i o n of discounted and
purchased b i l l s .
copies of form 95 - Monthly report of earnings.
copies of form 9^ - Monthly report of current expenses.
It w i l l be noted that the only change on both forms 95 and
96 is the printing of a number of general captions t o be used
for reporting miscellaneous earnings and miscellaneous expenses.
The additions have been made with the view of s i n p l i f y i n g the
reporting of miscellaneous earnings and expenses by the Federal
reserve banks, also to enable the Board t o have a more uniform
c l a s s i f i c a t i o n of such items.
The revised form 38 is substantially the same as that used
l a s t year, with the exception that memorandum items have been
added t o cover holdings of paper made e l i g i b l e for discount ty
the Agricultural Credits Act of March 4, 1923i It i s believed
that these changes are self-explanatory.
No r e v i s i o n has been made of forms 17Q, 1?1, 97 and 97a,
and the Board w i l l be glad to Supply, upon request, such
Copies of thess fohmd as your bank may require.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
LETTERS TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
FEDERAL RESERVE BOARD
WASHINGTON
January 17, 19 2 4,
St. 3298.
*
SUBJECT: Revision of Weekly Federal
Reserve Bank Statement*
Dear S i r :
The revised form of the Board's weekly press s t a t e ment showing condition of Federal reserve banks, a copy of
which was attached to l e t t e r St, 3888 of January 9, 1924,
provides for showing holdings of U« S, bonds and Treasury
notes separately.
Inasmuch as weekly statements issued dur-
ing 1923 showed only a combined t o t a l of "U. S. bonds and
notes," and as the consolidated statements issued at some of
of the Federal reserve banks give comparative figures for
the preceding year, the attached statement has been prepared
giving the d i s t r i b u t i o n of U. S, bonds and notes held by the
twelve Federal reserve banks combined on each weekly s t a t e ment date during 1923.
It w i l l be noted that the figures
appearing under the caption "Treasury notes" include Victory
notes up to May l6, 1923, and these figures should carry an
appropriate note, as was done in the Board's weekly press
statement for January 9, 1924, copies of which have already
been sent t o you.
Very truly yours,
E, L. Srnead, Chief,
Division of Bank Operations,
TO A£L FEDERAL RESERVE AGENTS
$
Me**
i;
487
St. 3898a
U. 8. BONDS AND TREASURE NOTES HELD 31 THE TWELVE FEDERAL RESERVE
BANKS COMBINED OH EACH WEEKLY STATEMENT DATE DURING 1923(In thousands of dollars)
Bate
U. S. Bends
U. S. Bends
Treasury Notes Date
Treasury Notes
25,618
64,126
25,016
25,138
99,888
24,905
24,815
24,824
58,106
Jan. 3
Jan. 10
Jan. 17
3m, 24
Jan. 31
28,0%
28,704
28,043
28,781
29,898
*154,256
*147,005
*128,835
*138,076
*133,054
July
July
My
July
3
11
18
25
Feb. T
IW>. 14
ieb. 21
lab. 28
29^98
29,532
29,315
29,197
*136,088
*133,706
*138,105
*144,778
Mar.
M«r.
Mar.
Her.
7
14
21
28
*139,134
*131*814
*134,^1
*142,905
1
8
15
22
29
S:18
60,043
59,780
6§,812
28,842
28,865
29,298
29,303
Aug.
Aug.
Aog.
Aug.
Aug.
J»*. 4
Apt. 11
# r . 18
4pr. 25
29,330
29,293
26,155
27,939
*135,296
*133,533
*130,755
*129,091
Sep. 5
Sep. 12
Sep. 19
Sep. 26
20,904
59,675
21,387
21,462
75,416
73,843
63,283
66,275
%y
May
May i i
May 23
27,963
29,573
27,125
27,180
26,952
*120,030
*119,387
*124,538
123,710
125,059
Oct.
Oct.
Oct.
Oct.
Oct.
3
10
17
24
31
22,067
'22,098
19,733
19,744
18,213
67,561
64,710
66*518
60,163
59,361
Jane
June
June
June
26,678
•65,149
25,070
25,220
115,199
Nov. 7
Nov. 14
Nov. 21
Nov. 28
18,203
13,192
18,234
18,509
57,237
60,465
50,098
52,832
Dec. 5
Deo. 12
Dec. 19
Dec. 26
18,491
18,464
23,555
18,612
51,772
58,691
54,M93
65,280
May 29
6
13
20
27
100,138
83,493
82,938
•Includes Victory notes.
IEHBRAL RESERVE SURD,
IffVISION Of BASK OPERATIONS
3 m m 17, 1924.
25,616
58,897
FEDERAL RESERVE BOARD
WASHINGTON
January 29, 1924.
St. 5915.
SUBJECT:
Federal Reserve Branch Banking.
Dear S i r :
In connection with the. work of the Econony and
E f f i c i e n c y Committee, which has now been under way for
nearly two years, the Board is making a study of the
branches of the Federal Reserve Banks, with s p e c i a l
reference t o the p o l i c y which should be pursued in deciding upon the extent and character of the work that
should be permanently performed at the branches and t o
the determination of the additional cost entailed by
the maintenance of the branches.
At the present time some of the branches are
operated on the so-called memorandum plan while others
are permitted to conduct p r a c t i c a l l y a l l of the functions incident t o the operation bf the Federal reserve
banks and ate therefore known a& "full-fledged"
branches. All of th6 branches, however, are handling
p r a c t i c a l l y the sane c l a s s of operations, with a few .
exceptions r e l a t i n g principally t o earning a s s e t s , dep o s i t s and f i s c a l agency transactions, (thd c o s t of
which i s comparatively small), as w i l l be noted f^dm
Table 1 in the Outline of Federal Reserve Branch Banks
covering t h e i r powers and functions and the character
and volume of work handled which was issued by the
Board i n June, 1922.
In order that the Board may be in possession
of data e s s e n t i a l t o the coupletion of i t s study in
regard t o the operation of Federal reserve bcancn
banks i t w i l l be appreciated i f you w i l l furnish i t
at your e a r l y convenience with a report containing
the following information:
A, Statement, based on functional expense reports, showing the amual | o s t of maintaining: each of
the 21 functions l i s t e d on page 32 of the quarterly
functional expense report form E, together with figures
i n a p a r a l l e l column showing the estimated net saving
that cculd be e f f e c t e d i f the br&nch were d i s c o n t i n ued and the work taken over by the head o f f i c e .
3. Statement til t o whether or not in your
opinion and that of the o f f i c e r s of the bank aiy one
or more of the functions now being performed by the
branch could be disc ait inaed and the work taken over
by the head o f f i c e without slowing up the work of member banks t o a greater extent than would be warranted
by the saving to be effected in the expenses of the
Federal reserve banks, together with an estimate of
the probable annual saving.
C. Statement expressing the ©pinien of your
Board of directors as to whether any of your branches
or any of the functions now being performed by them
should be discontinued•
In addition t o the information s p e c i f i c a l l y
requested we shall a l s o welcome a f u l l expression of
your views regarding any phase of Federal reserve
branch banking which you. think should be considered
by the Board, e s p e c i a l l y as t o the d e s i r a b i l i t y of
somewhat broadening the functions of Federal reserve
branch banks.
Very truly yours,
Walter L. Eddy,
Secretary.
LETTER TO CHAIRMEN AT AM, FEDERAL RESERVE BATIKS
BKKPT BOSTON AND PHILADELPHIA.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March 4, 1924.
s t . 3962.
SUBJECT: Abstract of Condition Reports of
State Bank and Trust Company Members
and of a l l Member banks as of
December J l , 1925*
Dear S i r :
We are forwarding to you under separate
cover
copies of the Board's Abstract No. 23
showing the condition of State Bank and. Trust Company
members and of a l l member banks as at c l o s e of business on December 31# 1923*
Consolidated figures for
a l l member banks, both National and State, are shown
on pages l and 12.
Please forward one copy of the abstract to
each State Bank and Trust Company member in your
d i s t r i c t that has expressed a desire to receive
copies of abstracts as issued.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
LETTER TO EACH FEDERAL RESERVE AGENT
f
J* oi*v
*3?CT
FEDERAL RESERVE BOARD
'>.1
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
^ r i l
1 ,
1 9 2 4 ,
st.4oo4
SUBJECT:
C o n d i t i o n r e p o r t s of S t a t e b a n k
and Trust company members, form 105.
Dear S i r :
There are being forwarded to you today under separate
cover
copies of form 105 revised as of March 4, 1924,
Please mail three copies of the form to each State Bank and
Trust company member in your d i s t r i c t for i t s own use and, i n
addition, three copies for each of i t s branches ( i f ary) not
located within the c i t y in which the head o f f i c e i s located
or within c i t i e s and towns adjacent thereto with instructions
to hold the blank forms pending receipt of a c a l l for cond i t i o n reports.
*
Upon receipt of notice from the Board of the c a l l
f o r condition reports, kindly n o t i f y the banks thereof by
mail i f they are located within two days' time from the Federal reserve bank, or by telegram i f not within two days'
time by mail, and request them to f i l l out the reports and
mail them to you promptly - i n no case l a t e r than 10 days
a f t e r receipt of the c a l l .
In order that the compilation of the Board's abstract
showing the condition of a l l s t a t e bank and t r u s t company
members combined as of the date of the next c a l l may not be
tnduly delayed, i t i s requested that the reports be forwarded
to the Board as soon as practicable a f t e r they are received
by the Federal reserve bank. If i t i s necessary to communicate with a bank regarding apparent errors i n i t s report, a
note to that e f f e c t should be made on the report i t s e l f bef o r e i t i s mailed to the Board, and the Board should be
advised of the necessary corrections when the desired informat i o n i s received from the member bank.
http://fraser.stlouisfed.org/
LETTER
Federal Reserve Bank of St. Louis
Kindly acknowledge receipt.
Yours very truly,
Ualter L, Eddy,
Secretary.
TO EACH FEDERAL EE SERVE AGENT.
32
FEDERAL RESERVE BOARD
WASHINGTON
A p r i l 7 » 19<^»
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
S t ,
SUBJECT:
4 0 1 2 .
R e p o r t s of C o n d i t i o n of S t a t e
Banks and T r u s t Companies.
Gentlemen:
Your c o u r t e s y w i l l be g r e a t l y a p p r e c i a t e d i f
y o u w i l l f u r n i s h t h e F e d e r a l R e s e r v e Board, a s soon a s
a v a i l a b l e , w i t h two c o p i e s of t h e a b s t r a c t of r e p o r t s
of c o n d i t i o n of S t a t e banks and. T r u s t companies i n y o u r
S t a t e on March 31> 1924, or o t h e r r e c e n t d a t e i n c a s e
you did. n o t i s s u e a c a l l f o r r e p o r t s of c o n d i t i o n a s of
March 31,
I f c o n v e n i e n t t o y o u r o f f i c e , we would l i k e
t o have s e p a r a t e f i g u r e s f o r mutual s a v i n g s banks and
f o r p r i v a t e b a n k s , p r o v i d i n g t h e r e a r e any s u c h banks
o p e r a t i n g i n y o u r s t a t e . I n c a s e t h e number o f e a c h
c l a s s o f banks r e p o r t i n g i s n o t shown i n t h e a b s t r a c t ,
w i l l you a l s o be good enough t o i n c o r p o r a t e t h i s i n f o r m a t i o n i n y o u r l e t t e r of t r a n s m i t t a l * May we a l s o a s k
you t o s e g r e g a t e t h e d a t a a c c o r d i n g t o F e d e r a l r e s e r v e
d i s t r i c t s , i f y o u r s t a t e f a l l s w i t h i n two d i s t r i c t s ,
as tiie v a l u e of t h e s e d a t a t o t h e Board and f o r p u r p o s e s o f p u b l i c a t i o n w i l l be g r e a t l y enhanced i f t h e y
c a n be t a b u l a t e d by F e d e r a l r e s e r v e d i s t r i c t s .
The A p r i l number of t h e F e d e r a l R e s e r v e
B u l l e t i n (copy of which w i l l be forwarded t o y o u a s
soon a s r e c e i v e d from t h e p r i n t e r ) c o n t a i n s a summary
s t a t e m e n t of t h e a b s t r a c t s of r e p o r t s of c o n d i t i o n on
or about December 31, 1923, of a l l banks and t r u s t
companies ( o t h e r t h a n mutual s a v i n g s banks) u n d e r
s t a t e s u p e r v i s i o n i n t h e 46 s t a t e s and t h e D i s t r i c t
of Columbia, t o which y o u r a t t e n t i o n i s i n v i t e d .
A f r a n k e d and s e l f - a d d r e s s e d , e n v e l o p e , r e q u i r i n g no postage i s enclosed f o r use i n t r a n s m i t t i n g
the data requested.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary,
S t a t e Banking D e p a r t m e n t .
Enclosure.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
May 22, 1924.
St. 4o6s
SUBJECT:
Functional Expenses
First Qu.arter 19^**
Dear Sir:
There i s enclosed herewith one copy of
the Functional Expense Exhibit for the First
Quarter of 1924, showing for each Federal Reserve
bank and branch the cost of operating each function and expense unit, together with the number
of o f f i c e r s and of employees, the t o t a l number of
•units handled, u n i t s handled per employee per day,
and unit costs.
Copies of the exhibit are also being
mailed to the Governor of each Federal reserve
bank.
Very truly yours,
Chairman, Committee on
Economy and E f f i c i e n c y .
Enclosure.
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BANK
"8
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May 2 3 , 1924.
S t . 4075.
SUBJECT:
C o n d i t i o n of Member Banks
a s of March ] 1 , 1924.
Dear S i r :
For your i n f o r m a t i o n t h e r e i s e n c l o s e d h e r e with a preliminary statement regarding the condition
of a l l member banks combined a s of March 31» 1924.
The B o a r d ' s a b s t r a c t (No. 24) showing t h e d e t a i l e d
f i g u r e s f o r S t a t e bank
and T r u s t company members
and t h e combined f i g u r e s f o r a l l member banks i s now
i n t h e hands of t h e p r i n t e r and. w i l l be r e a d y f o r
d i s t r i b u t i o n in t h e n e a r f u t u r e .
Very t r u l y yours*
W a l t e r L. Eddy,
Secretary.
LETTER TO EACH FEDERAL' RESERVE AGENT
CONDITION OF MEMBER BANKS AS OF MARCH 31, 1924.
The Federal Reserve Board's abstract (No. 24) showing the condition of s t a t e
tank and t r u s t company members and of a l l member banks as of March 31, 1924, which
w i l l shortly be ready f o r d i s t r i b u t i c n , w i l l show increases i n t o t a l loans and investments of about £94,000,000 f o r a l l member banks and of about $57,000,000 f o r
member s t a t e banks together with a considerably larger decline in t o t a l deposits and.
in borrowings at the Federal reserve banks. The reduction i n deposits i s due primar
r i l y to the reduction in the amount of uncollected funds credited to depositors
( c h a r a c t e r i s t i c a l l y large at the end of the j^ear) as i s indicated by reductions of
$117,000,000 in the amount of items with the reserve banks in process of c o l l e c t i o n ,
of $180,000,000 in amounts due from banks and bankers and- of $128,000,000 in exchanges
for clearing house and checks on banks i n Same place as the reporting bank..
There i s a net reduction of 93 in the number of member banks for which figures
have been included in the abstract, c o n s i s t i n g of 69 national banks and 24 s t a t e
banks and t r u s t companies.
Additions t o and withdrawals from membership'both of
national banks and of s t a t e bank and t r u s t company members have been of comparatively
small banks for the most part, the only change which greatly a f f e c t s the aggregate
figures i s the consolidation of the Wells-Fargo-Nevada National bank with the Union
Trust Company of San Francisco. This added, about £80,000,000 to the t o t a l resources
both of s t a t e bank and t r u s t company members and of a l l member banks, due to the
fact that f i g u r e s for the former Wells-Fargo-Nevada National bank were not included
in the December 31, 1923, abstract.
Loans and investments reported for a l l member banks increased from
$26,736,000,000 to $26,832,000,000 or by $94,000,000, the larger increase of
$124,000,000 shown for loans and discounts being o f f s e t in part by a decrease of
$30,000,000 in investments. Holdings of United States s e c u r i t i e s f e l l o f f about
$71,000,000 while holdings of other bonds, stocks and s e c u r i t i e s increased, by
$41,000,000. Total deposits declined from $28,487,000,000 on December 31 to
$£§>,248,000,000 on March 31- The substantial increase of <239,000,000 in time dep o s i t s was more than o f f s e t by a decrease of 8445,000,000in demand d e p o s i t s .
Borrowings of member banks dropped from $1,018,000,000 cn December 31, 1923
to $745,000,000 on March 31', 1924, or by $273,000,000.
'
A s i m i l a r trend i s shown by the reporting member banks between January 2 and
April 2. Between these dates loans and discounts of reporting members increased by
$35,000,000, while t h e i r investments declined about $28,000,000. Net demand der os'its
of these banks showed a decrease of $192,000,000 and t h e i r time d e p o s i t s an incW-iis-*
of $126,000,000.
f.
#
I,
r'
-
2 -
Below i s a condensed s t a t e m e n t showing r e s o u r c e s and l i a b i l i t i e s of a l l
member banks on March 31, 1924, w i t h changes s i n c e A p r i l 3 and December 31, 1923-
Loans and d i s c o u n t s ( i n c . o v e r d r a f t s )
U. S, s e c u r i t i e s
Other bonds, s t o c k s and s e c u r i t i e s
T o t a l l o a n s and i n v e s t m e n t s
Cash in v a u l t
Reserve w i t h F- R. Banks
Items w i t h F. R, Banks i n p r o c e s s
of c o l l e c t i o n
Due from banks and bankers
Exchanges f o r c l e a r i n g h o u s e , and checks
on banks i n same p l a c e
All other resources
Total resources
+604,000,000
+ 41,000,000
+209,000,000
26,832,000,000
+ 9^,000,000
4-500,000,000
494,000,000
- 67,000,000
- 7,000,000
- 24,000,000
- 16,000,000
549,000,000
1,644,000,000
-117,000,000
- 53,000,000
1,582,000,000
-128,000,000 +592,000,000
1,893,000,000
34,520,000,000
- 71,000,000 -313,000,000
-180,000,000 -130,000,000
-419,000,000
+965,000,000
+193,000,000
+747,000,0:0
-112,000,000
+266,000,000
14,719,000,000
8,690,000,000
292,000,000
867,000,000
24,766,000,000
- 2 0 7 , 0 0 0 , 0 0 0 +1,094,000,000
3,480,000,000
745,000,000
413,000,000
2,022,000,000
1,650,000,000
1,742,000,000
§§§§
+124,000,000
8888
0000
Due t o banks and b a n k e r s
B i l l s p a y a b l e and r e d i s c o u n t s
Acceptances
Capital stock paid-in
Surplus
All other l i a b i l i t i e s
$19,176,000,000
3,570,000,000
4,066,000,000
1 + + *
T o t a l d e p o s i t s ( o t h e r t h a n bank)
Changes s i n c e
Dec. 31, 19231 Apr. 3, 1923
£££•&
Demand d e p o s i t s
Time d e p o s i t s
U. S. d e p o s i t s
C e r t i f i e d and c a s h i e r s ' c h e c k s
March 31, 1924
- 32,000,000
-273,300,000
- 13,000,000
+ 19,000,000
+ 9,000,000
+ 76,000,000
- 28,000,000
-223,000,000
- 8,000,000
+ 42,000,000
+ 19,000,000
+ 72,000,000
( S t . 4075)
FEDERAL RESERVE BOARD
WASHINGTON
June 7, 1924
May-?$—lQOH.
S t . U095.
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT: Abstract of Condition Reports of
State Bank and Trust Company Members
and of a l l Member banks as of
March 31, 192U.
Dear S i r :
We are forwarding t o you under separate
cover
copies of the Board 1 s Abstract No. 24
showing the condition of State Bank and Trust Company members and of a l l member banks as at c l o s e
of business on March 31»;3-924.
Consolidated
figures for a l l member banks, both National and
State, are shown on pages 1 and 12.
Please forward one copy.of the abstract
t o each State Bank and Trust Company member in
your d i s t r i c t that has expressed, a desire to receive copies of abstracts as issued..
Very truly yours,
E.L. Sine ad, Chief,
Division of Baltic Operations.
LETTER TO ALL FEDERAL RESERVE AGENTS
'
FEDERAL RESERVE BOARD
#95-
36
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
JUIIQ
9 f
1924%
St. 14097
SUBJECT:
Functional Expense Report, First Quarter, 1924,
Dear Sir:
Will you kindly have the following corrections made i n the functional expense report f o r the f i r s t quarter of 1924, Which was forwarded
to you with our l e t t e r of May 22, 1924:
1. Page 19 - Failed Banks function,
COMBINED FIGURES: Change number of employees for Atlanta from
3.68 to 2.S3 and for Minneapolis from 41,23 to 42,OS.
2. Page 25 - Currency - Receiving and Sorting expense unit.
HEAD OFFICE FIGURES: Under v e r i f i c a t i o n count change Chicago
f i g u r e s from 34,740,200 to 57,758,690 and the t o t a l from
238,471,820 to 261,490,310.
COMBINED FIGURES: Change Chicago figures from 35,450,200 to
58,468,690 and the t o t a l from 295,001,232 to 318,019,722,
3. Page 32 - Country checks - Remittances.
HEAD OFFICE FIGURES: Change number of cash l e t t e r s for Kansas
City from 4,201 to 1,400 and the t o t a l from 22,687 to 19,886.
COMBINED FIGURES: Change Kansas City from 6 , l 4 o to 3,339 and
the total from 34,373 to 31,572.
4. Page 43 - Government Issues. Number of pieces handled - Redemptions.
BRANCH FIGURES: Insert opposite Los Angeles 2,764, Portland
1,860, Seattle 2,099 and change total from 17,905 to 24,628.
COMBINED FIGURES: Change San Francisco from 8,651 to 15,374
and total from 176,652 to 183,375.
% Page 46 - Legal Function,
COMBINED FIGURES: Change total expense fot Richmond from
$5,590 to $3,565, fot Atlanta from $3,695 tb $5,345 and for
Chicago from $6,666 to $7,o4l.
Very truly yours,
E. L. Sine ad, Chief,
Division of Bank Operations,
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE LANK.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June 10, 1924.
St. 4099SUBJECT: Earnings and Dividends reports
of State Bank and Trust Company members as cf June 30, 192*4-.
Dear Sir:
There are being forwarded to you today under
separate cover ty mail
copies of form 107 for use of
State bank and Trust company members in submitting t h e i r
semi-annual reports of earnings and dividends.
Please advise the banks that the report i s to
cover the six-month period ending June }0, 1924, irrespect i v e of whether or not they may have closed t h e i r books on
that date, or whether any dividends that may have been declared cover that particular period.
The report should be submitted t o you in duplicate within ten days a f t e r receipt of the blank forms by
reporting banks.
Kindly acknowledge receipt.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
$
F 4 W
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June 25, 1924
St. 410?.
SUBJECT 1 Condition reports of state
bank and trust company members, form 105.
Dear S i r There are being forwarded t o you today under separate cover
copies of form 105 revised
as of May 15» 1924, Copies of these forms should
be sent t o each state bank and trust company member
In your d i s t r i c t in accordance with the following
schedule, with instructions to hold them pending
receipt of a c a l l for condition reports.
Banks having no branches - 3 copies
Banks having branches:
.For consolidated report of head o f f i c e
and branches - 3 copies
For combined report showing condition
of branches i n head-office c i t y 3 copies
. For combined reports showing condition
of a l l branches located In each other
c i t y - 3 copies for each c i t y in which
one or more branches are located.
Upon receipt of notice from the Board, of a
c a l l for condition reports kindly n o t i f y the banks,
by mail i f they are located within two days' time
from the Federal reserve bank or by telegram i f not
within 2 days' time by mail, and request them t o
f i l l cut the reports and mail them to you promptly
- in no case l a t e r than ten deys a f t e r receipt of
the c a l l .
I t w i l l be appreciated i f you w i l l furnish
the Board at your early convenience with a l i s t of
c i t i e s i n your d i s t r i c t whose corporate l i m i t s at ,
some point coincide with the corporate l i m i t s of
another c i t y or town. This w i l l enable the Board
t o determine whether or not a branch of a given
bank i s located in a c i t y or town ccntiguous to the
c i t y or town in which the parent bank i s located.
• 500
In order that the coiqoilaticn of the Board's
abstract showing the condition of a l l s t a t e bank and
trust company members combined as of the date of the
next c a l l may not be unduly delayed, i t i s requested
that the reports be forwarded to the Board as soon as
practicable a f t e r they are received from the member
banks. If i t i s necessary to communicate with a bank
regarding apparent errors in i t s report, a note to
that e f f e c t should be made on the report i t s e l f , bef o r e i t Is mailed t o the Board, and the Board should
be advised of the necessary corrections when the des i r e d information i s received from the member bank.
Kindly acknowledge receipt.
Very truly yours,
Walter L. Eddy,
Secretary.
LETTER TO AIL FEDERAL RESERVE AGENTS.
\
1
f.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June 24,
1924.
St. 4118.
SUBJECT:
S t a t i s t i c s Relating t o Hon-member
State Banks and Trust Companies
E l i g i b l e for Membership.
Dear Sir:
With a view to bringing up t o date the s t a t i s t i c s regarding the number, c a p i t a l , surplus, and. resources of non-member banks e l i g i b l e , on the basis of
c a p i t a l i z a t i o n , for membership in the Federal Reserve
System, i t is requested that you kindly furnish the
Board with a statement, as of June 30, 1924, showing
the information outlined in the attached form. The
statement should cover a l l non—member banks e l i g i b l e
for membership as of the date mentioned, but the figures
of c a p i t a l , surplus, and resources may be as of an
e a r l i e r date, i f i t i s necessary to use such e a r l i e r
figures in order that the completion of the report may
not be unduly delayed.
I t w i l l be noted from the form attached that
the banks are to be divided into eight groups, based
on the c a p i t a l stock requirements as outlined in the
Board's Regulation H, Series of 1924. The population
figures should be based upon the l a t e s t available data
published by the United States Bureau of the Census.
In addition to the summary figures for each
s t a t s as outlined in tne attached form i t is requested
that a l i s t be submitted showing the name and location
of each e l i g i b l e non-member bank in the d i s t r i c t whose
c a p i t a l and surplus combined amounts to $1,000,000 or
more. This l i s t should a l s o -','ive the paid— in c a p i t a l ,
surplus (exclusive of undivided p r o f i t s ) , and t o t a l
resources of each such bank.
Veiy truly yours,
Walter L, Eddy,
Secretary.
LETTER TO ALL FEDERAL RESERVE AGENTS.
j*
St. 4112a.
NONMEMBER STATE BANKS AND TRUST COMPANIES ELIGIBLE FOR MEMBERSHIP IN THE FEDERAL RESERVE SYSTEM
CH THE BASIS OF CAPITAL STOCK REQUIREMENTS, JUNE 30, 1924.
Federal Reserve D i s t r i c t
Banks located in c i t i e s and towns with a population of
6 , 0 0 1 t o 50,C X)0, with paid- 3 , 0 0 1 t o 6 , ( XX), with paidOver 50,000, with p a i d - i n
in capita] of at l e a s t
in capita] . of at l e a s t
c a p i t a l of at l e a s t
$60,000
$120,000
$200,000
but l e s s
$100,000
than $200,000
STATE OF
$30,000
but l e s s
$50,000
t h a n $100,000
but l e s s
than $50,000
DATE OF CONDITION REPORTS
Number of b a n k s . . . . . . .
Paid-in capital.
Surplus ( e x c l u s i v e of
undivided p r o f i t s ) .
Total resources.
(show same information for each s t a t e in the d i s t r i c t )
DISTRICT TOTALS:
Number of b a n k s . . . . . . .
Paid-in c a p i t a l
Surplus....
Total resources
3,000 or l e s s , with paidin c a p i t a l of at l e a s t
$15,000
$25,000
but l e s s
than $ 2 5 , 0 0 0
F 664
:: 504
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
^
2|)|
S t <
19y,_
U l l ^ •
SUBJECT: Cooparative Statement of Earnings
and Expenses, 191^1923*
Dear Sir:
In order that data relating to the earnings and
expenses and profit and loss accounts of the Federal reserve banks and reimbursable expenses of the Fiscal
agency departments oajr tie readily Available on a e cap arable basis for each year since the organization of the
federal Be serve System, the Board has recently oocpiled
detailed statements corresponding as nearly as praot ic»
sbla in form to the last published statements. Three
copies of the statements relating to y*ir bank (St#3992#
3992a and 3992b) are attached hereto.
It will be appreciated if you will kindly have
the data checked against the records of your bank and
advise the Board at your earliest convenience of the re*
suit of such checking. 5i the statement of expenses
combined figures have been shown for two or more items
in some instances, because separate figures for each
item were not available. We prefer, however, to have
the statement show separate figures for each item
throughout, and shall be glad to mate the necessary revisions to that end if you find i t practicable to furnish the separate figures from the records of your bank.
After replies have been received from all
federal reserve banks and such changes as are found
necessary haPe been oede, your batik will be famished
with such number of copies of the complete statements for all banks and for the System as you may desire. In
the fixture i t will be the policy of the Board to use
these statements as a basis in preparing figures for
publication, and i t is suggested that the same practice
be followed by your bank.
Very truly yours,
Walter L« Eddy,
Secretary. '
GOVERNOR OF EiCH JEDEBAL RESERVE BANK.
X-4og4
Sample page of the Index-Digest of the Federal Reserve Act
(Third E d i t i o n )
insurance
By s o l i c i t i n g and s e l l i n g insurance, etc.
(Sec. 1 3 , l i n e 24, p. 29»)
The bank shall not guarantee the truth of any statement made by an
assumed in f i l i n g h i s application for insurance.
(Sec. 1 3 , l i n e 40, p« 29»)
When such property i s f u l l y covered by insurance,
(United Skates Revised Statutes, sec* 5200, l i n e 19,P* SO*)
Any bond of indemnity required to be f i l e d by any person to secure
payment of any ...insurance by the United S t a t e s , e t c .
(Revenue Act, sec- 1101, l i n e 8 , p . S5»)
INSURANCE COljPANT
May act as the agent for any i i r e , l i f e , or other insurance company, etc*
(Sec. 13, l i n e 22, p . 29')
By s o l i c i t i n g and s e l l i n g insurance and c o l l e c t i n g premiums on p o l i c i e s
issued by such company.
(Sec. 13, l i n e 2 $ , p*29«)
May receive for services ss. rendered such f e e s or commissions as may be
agreed upon by the said a s s o c i a t i o n and the insurance company for
which i t may act a.s agent.
(Sec* 13", l i n e 28, p« 29-)
INSURANCE POLICIES
No such bank shall in any case ...assume @r guarantee the payment of any
premium on insurance p o l i c i e s issued through i t s agency by i t s
principal.
(Sec. 13, l i n e 3&, ]?* 29-)
INTENDING TO PARTICIPATE,
Such a r t i c l e s of a s s o c i a t i o n shall be signed by alls of the persons
intending to participate in the organization eg&he corporation.
(Sec. 25a, l i n e 40, p. 52.)
INTENT
With i n t e n t , i n either case, to injure or defraud such corporation, e t c .
(Sec. 25a, l i n e 26, p . 6 l . )
With intent to injure or defraud any person, e t c .
(Sec. 25a, l i n e 39 > P* °1<)
Who with l i k e intent aids or abets any o f f i c e r . . . i n any v i o l a t i o n of this
s e c t i o n , etc(Sec* 253> liziB 4^, p* 61*)
With intent i n any case to injure or defraud such Federal reserve "bank
or member bank- (United States Revised S t a t u t e s , s e c . 5209>
l i n e 19, p. S3*)
x-4084
- 2 -
Who, w i t h l i k e i n t e n t t o defraud or i n j u r e ,
(United S t a t e s Revised S t a t u t e s ,
"
:
T
embezzles, e t c ,
s e c . 5209, l i n e 27, p. 8 3 . )
Every p e r s o n who, w i t h l i k e i n t e n t , a i d s or a b e t s any o f f i c e r , e t c . ,
i n any v i o l a t i o n o f t h i s s e c t i o n , e t c .
(United S t a t e s Revised S t a t u t e s , s e c . 5209, l i n e 30, p. 8 3 . )
INTERCHANGEABLE
The terms " n a t i o n a l bank." and " n a t i o n a l banking a s s o c i a t i o n " used i n
t h i s Act s h a l l "be held, t o "be synonymous and i n t e r c h a n g e a b l e ,
(Sec. 1, l i n e 15, p« 1 . )
INTEREST, CONTROLLING(See
(Sec. 25a, l i n e 35, p . 57; s e c . 25a, l i n e 38, p „ 5 7 . )
Controlling interest)
INTEREST, PUBLIC
(See
( s e c . 14, l i n e 24, p . 3 5 . )
Public i n t e r e s t )
INTEREST, RATE, RATES (See a l s o D i s c c u n t r a t e s )
S h a l l be e n t i t l e d t o a r e f u n d of i t s c a s h - p a i d s u b s c r i p t i o n w i t h
i n t e r e s t a t the r a t e o f o n e - h a l f of one per centum per month
fror., d a t e of l a s t d i v i d e n d , i f earned, e t c .
(Sec. 9, l i n e 8, p . 1 6 . )
To r e d i s c o u n t the d i s c o u n t e d paper of other Federal r e s e r v e "banks a t
r a t e s of i n t e r e s t t o b e f i x e d by the Federal Reserve Board.
( S e c . 11, l i n e 35, p. 2 0 . )
The r e s e r v e bank s h a l l add an amount eq.ua! t o s a i d t a x t o t h e r a t e s o f
i n t e r e s t and d i s c o u n t f i x e d by the F e d e r a l Reserve Board.
( S e c . 11, l i n e 11, p. 2 1 . )
Federal r e s e r v e banks may compute the i n t e r e s t t o b e deducted on the
b a s i s of the e s t i m a t e d l i f e o f each b i l l , e t c .
(Sec. 13, l i n e 6, p. 2 7 . )
No such bank s h a l l i n any c a s e guarantee e i t h e r the p r i n c i p a l or i n t e r e s t
of any such l o a n s .
(Sec. 13, l i n e 35, p. 2 9 . )
Such bank . . . s h a l l pay such r a t e of i n t e r e s t a s may be e s t a b l i s h e d by
the F e d e r a l Reserve Board on only that amount of such n o t e s which
e q u a l s t h e t o t a l amount of i t s o u t s t a n d i n g Federal Reserve n o t e s
l e s s the amount of g o l d or g o l d c e r t i f i c a t e s h e l d by the Federal
r e s e r v e agent a s c o l l a t e r a l s e c u r i t y .
(Sec. 16, l i n e 27, p. 3 6 . )
May f i l e w i t h t h e Treasurer of t h e United S t a t e s an a p p l i c a t i o n t o s e l l
f o r i t s account, a t par and accrued i n t e r e s t , United S t a t e s
bonds s e c u r i n g c i r c u l a t i o n t o b e r e t i r e d .
(Sec. 18, l i n e 18, p. 4 1 . )
X-4084
-3To i s s u e a t par Treasury n o t e s . . . b e a r i n g i n t e r e s t a t the r a t e of 3 per
centum per annum . . . a n d t o t e exefa.pt as to p r i n c i p a l and i n t e r e s t
from the payment of a l l t a x e s , e t c .
( S e c . 1 8 , l i n e 12, p . 43; s e c . 1 8 , 1 i n e 1 7 , p . 4 3 . )
To i s s u e United S t a t e s gold bonds a t p a r , b e a r i n g 5 per centum i n t e r e s t ,
etc
( S e c . 18, l i n e 22, p . 4 3 . )
No member bank s h a l l p a y t o any d i r e c t o r , e t c . , a g r e a t e r r a t e of i n t e r e s t
on the d e p o s i t s o f such d i r e c t o r , e t c . than that paid t o other
depositors, etc.
( S e c . 22, l i n e 35, p. 4 8 . )
Such banks may c o n t i n u e h e r e a f t e r a s h e r e t o f o r e t o r e c e i v e t i n e d e p o s i t s
and t o pay i n t e r e s t on t h e same* ( S e c . 24, l i n e 4 4 , p . 4 9 . )
Whoever . . . r e p r e s e n t s i n any v ; a y that t h e United S t a t e s i s l i a b l e f o r
t h e payment of any bond or other o b l i g a t i o n , or t h e i n t e r e s t
thereon . . . s h a l l be punished, e t c . (Sec. 25a, l i n e 11, p . 6 2 . )
Or f o r one-year gold n o t e s b e a r i n g i n t e r e s t a t a r a t e o f not t o exceed
3 per centum, e t c .
( S e c . 26, l i n e 30, p . 6 2 . )
To d e p o s i t i t s s e c u r i t i e s and i t s current funds s u b j e c t t o check w i t h any
member bank of the. Federal Reserve System and to r e c e i v e i n t e r e s t
on t h e same a s may be agreed.
(Federal Farm Loan Act, s e c . 13, l i n e 36, p . 6 8 . )
Such d e p o s i t s may bear such r a t e of i n t e r e s t . . . a s t h e S e c r e t a r y of t h e
Treasury may p r e s c r i b e .
( F i r s t L i b e r t y Bond Act, s e c . 7 , l i n e 2 3 , p . 69;
Second L i b e r t y Bond Act, s e c , 8, l i n e 9 , p . 70;
Third L i b e r t y Bond Act,, s e c . 8, l i n e 1, p . 7 1 . )
No d i s c o u n t or r e d i s c o u n t under t h i s s e c t i o n s h a l l be granted a t a l e s s
i n t e r e s t charge than one p e r centum p e r annum above t h e p r e v a i l i n g
r a t e f o r e l i g i b l e c o n m e r c i a l paper of corresponding m a t u r i t y .
(War Finance Corporation Act, s e c . 13, l i n e 37, p. 7 1 . )
D i s c o u n t s or r e d i s c o u n t s under t h i s s e c t i o n s h a l l be a t an i n t e r e s t
r a t e equal to t h e p r e v a i l i n g r a t e f o r e l i g i b l e commercial paper
of corresponding m a t u r i t i e s .
("ar Finance Corporation Act, s e c . 13, l i n e 11, p . 9 6 . )
Whenever Federal R e s e r v e n o t e s a r e i s s u e d a g a i n s t t h e s e c u r i t y o f such
o b l i g a t i o n s or p a p e r , the F e d e r a l Reserve Board may make a s p e c i a l
i n t e r e s t charge on such n o t e s , w h i c h , i n t h e d i s c r e t i o n o f the F e d e r a l
R e s e r v e Board, need not be a p p l i c a b l e t o other F e d e r a l r e s e r v e n o t e s
which may from time t o time be i s s u e d and o u t s t a n d i n g .
(War Finance Corporation A c t , s e c . 13, l i n e 5 , p. 72;
Sec. 13, l i n e 2 1 , p . 96)
-4-
X-4084
Including principal and i n t e r e s t t o maturity.
(War Finance Corporation Act, sac, 15, l i n e 23, p. 97,)
Moneys so deposited shall constitute a special fund for t h e payment
of principal and interest of such bonds or notes, or f or the
purchase or rademption of such bonus or notes at not mora than
par and accrued i n t e r e s t , e t c ,
(War Finance Corporation Act, sec. 15, l i n e 25, p. 97;
Sec. 15, l i n e 27, p. 97.)
Including principal and interest to maturity.
(War Finance Corporation Act, sec. 15, l i n e 32, p. 97.)
Any such advance shall bear i n t e r e s t at a rate not exceeding 1 | per
centrum in excess of the rate of discount for SO-day commercial
paper prevailing a t the Federal Reserve bank, e t c .
(War Finance Corporation Act, sec, 22, l i n e 8, p. 98.)
All such loans shall bear i n t e r 3 s t at the rate of s i x per centum, e t c ,
(Transportation Act, sec. 210, l i n e 18, p. 88.)
Rates of i n t e r e s t or disc cant charged by the Federal intermediate
credit banks upon such loans and discounts shall be subject to the
approval of the Farm Loan Board,
(Agricultural Credits Act, sec. 202, l i n e 29, p. 90.)
On the majority vote of the members of the Federal Farm Loan Board any
Federal intermediate credit bank shall be required to rediscount ^
the discounted paper of any other Federal intermediate credit bank
at rates of i n t e r e s t to be fixed by the Federal Farm Loan Board.
(Agricultural Credits Act, sec, 202, l i n e 36, p» 90#)
']
X-UC«3^
COMMITTEES OF THE FEDERAL RESERVE BOARD - E f f e c t i v e July 1. 1924.
AGRICULTURAL CREDITS:
Mr, Cunningham
Mr. James
Mr* Dawes
Mr. Goldenweiser, Sec'y.
EXECUTIVE COMMITTEE:
Gov. Crissinger
Mr, P i a t t
(Mr.
(Term expires
BRANCHES - FEDERAL RESERVE;
Mr. Hamlin
Mr. Cunningham
DISTRICT COMMITTEES:
CLEARINGS:
Mr. Hamlin
Mr, Dawes
CUBA:
• Mr, HamlinMr. Jasjss
•CURRENCY:
Mr. Dawes
Mr, James
DISCOUNT & OPEN MARKET POLICY'
Mr, Miller
Mr, Piatt
Mr, Cunningham
Mr4 Stewart, S e c y ,
EXAMINATIONS;
Mr. Piatt
\ James
Herson, S e c f y .
RATIONAL FINANCE:
TMiller
Etr. Hamlin
\1t, Stewart, Sec'y.
W & LEGISLATION:
l'.\ Hamlin
I's, Piatt
NOMINATIONS:
Mr. Piatt
Mr, Miller.
RESEARCH & STATISTICS:
Mr, Miller
Mr. Cunningham
Mr. Stewart, Secly.
SALARIES. EXPENDITURES & EFFICIENCY:
Mr. James
-ntegpeegmr, i ngham
Mr, Smead, Sec'y.
ADVISORY COMMITTEE OF GOVERNORS:
Mr, Harding
Mr. Fancher
Mr. Strong
Mr, Seay
Mr. Norris
Mr, McDougal
OPEN MARKET COMMITTEE OF GOVERNORS:
Mr, Harding
Mr. Fancher
Mr. Strong
Mr. McDougal
Mr. Norris
^40
Boston:
Mr. Hamlin
Mr. P i a t t
New York:
Mr. Piatt
Mr. Miller
Philadelphia:
Mr. Cunningham
Mr, Hamlin
Cleveland: .
Mr, Crissinger
Mr. P i a t t
Richmond:
Mr, James
Mr. Hamlin
Atlanta:
Mr. Hamlin
Mr. James
Chicago:
Mr, Dawes
Mr, Cunningham
S t . Louis:
Mr. James
Mr. Hamlin
Minneapolis:
Mr. Miller
Mr. Cunningham
Kansas City:
Mr. Cunningham
Mr, Miller
Dallas:
Mr. P i a t t
Mr. James
Ran Francisco*
Mr. Miller
Mr, James
COMMITTED ON VOLUNTARY SERVICES:
Mr. Harding
Mr. McDougal
Mr, strong
Mr. McKinney
Mr, Fancher
GOVERNORS' COMMITTEE ON INSURANCE: .
Mr. Kenzel
Mr. Taylor
Mr. D i l l a r d
\
FEDERAL RESERVE BOARD
STATEMENT FOE THE PR1S3
For Immediate Release
3:00 o'clock p.m.
X-^C9^
June IS, I92H.
Tlie Federal Reserve Board announces that
the Federal Reserve Bank of Philadelphia has established
a rediscount rate of
per cent on a l l c l a s s e s of paper
with maturities of ninety days or l e s s , e f f e c t i v e immediately.
FEDERAL RESERVE .BOAW
STATEMENT FOR THE PRESS
For Immediate Release
X-U0Q5
June IS, 1S?M.
4:30 o'clock p» nu
The Federal Reserve Board, announces that
the Federal Reserve Bank of St. Louis has reduced
i t s rediscount rate from 4g per cent to 4 per cent
on a l l c l a s s e s of paper of a l l maturities, e f f e c t i v e
June 19, 1924.
A l i i
FEDERAL RESERVE! BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-uc97
June 20, 1924.
SUBJECT;
Holidays during July, 1924,
Dear S i r :
For your information, there w i l l be no Gold S e t t l e ment Fond or Federal Reserve Note Clearing on Friday, July
4th, 1924, on account of observance of Independence Day, and
the BoardTs books w i l l be c l o s e d .
In addition to t h i s holiday, the following o f f i c e s
w i l l observe holidays during July:
Monday
July 14 - (Memphis
(Nashville
Thursday
July 24 -
Forrest's Birthday
S a l t Lake City - Pioneer Day
Therefore, on the dates indicated, the Branches mentioned w i l l not participate in either the regular Gold Fund
Clearing or the Federal Reserve Note Clearing.
Please include your credits for Memphis and Salt Lake
City Branches on t h e i r respective holidays, with your credits
f o r the following business day, in your Gold Fund Clearing
telegrams.
Please advise Branches.
Tours very truly,
J. C. Noell,
Assistant Secretary,
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4098
June 23, 1934.
SUBJECT: ASSESSMENT FOR GENERAL EXPENSES OF THE FEDERAL RESERVE
BOARD, JULY 1 TO DECEMBER 31, 19%.
Dear Sir:
Confirming telegraphic advice of this date there i s
enclosed herewith copy of a r e s o l u t i o n adopted by the Federal
Reserve Board at a meeting held on June 21, 1924, levying an
assessment upon the several Federal reserve banks of an amount
equal to ninety-one thousandths of one per cent (.00091) of
the t o t a l paid i n capital stock and surplus of such banks to
defray the estimated general expenses of the Federal Reserve
Board from July 1 to December 31, 1924,
Otoe re i s a l s o enclosed a statement showing the basis
upon wnicn the assessment i s l e v i e l .
Kindly deposit one-half of the amount of your a s s e s s ment in the General Account, Treasurer, U. S. , on your books
J u l y 1, 1924, and one-half September 1, 1924, i n eacn instance
i s s u i n g a C/D f o r credit of "Salaries and Expenses, Federal Reserve Board, Special Fund", assessment for general expenses,
and sending a duplicate C/D to the Federal Reserve Board. Also
p l e a s e furnish a statement of your capital and surplus used as
a basis f o r the assessment.
Very t r u l y yours,
Enclosures.
Fiscal Agent.
(Sent to Cn&irman of each Federal Reserve Bank)
.
SSTIMATE FOR JULY 1924 ASSESSMENT
3t-4-098a
Average monthly encumbrance for period
January 1, 1924, to June 30, 1924:
Personal services,
Non-personal s e r v i c e s ,
$ 4?,151.73
13,729. 90
$ 60,881. 63
Encumbrance f o r June 1924:
Personal services, . . . . .
Non-personal services,
$ 47,451.48
13,904.15
61,355.63
Estimated, monthly requirements,
July to December, 1924:
Personal services, . . . .
Non-personal s e r v i c e s , . .
$ 47,451.48
14,358.42
61,809. 90
Estimated, monthly increase over June, 1924, . . .
454.27
TotcJ. estimated, requirements ,
July to December 1924:
To cover above estimate, . .
To provide a contingent fund,
$370,847.40
10,000.00
$380,847.40
Estimated unencumbered balance June 30, 1924, . .
Salaries and expenses of examiners in connection
with examination of brancnes of Bank of Central
and South America, to be reimbursed,
53,000. 00
26,000. 00
79,000.00
Amount to be r a i s e d by assessment, . .
301,847. 40
Estimated paid-in capital and surplus of Federal Reserve
Banks as of June 30, 1924,
. $332,415,000. 00
An assessment of ninety-one thousandths of one per cent
(. 00091) w i l l produce,
$302,497. 65
X-4098b
RESOLUTION LEVYING ASSESSMENT
,
.Whereas, under Section 10 of ,tne act approved.
Decemoer 23, 1913, ana known as the Federal Reserve ACT,
the Federal Reserve Board i s empowered to levy semi-annually
upon the Federal Reserve Banks i n proportion to t h e i r capital
stock and surplus an assessment s u f f i c i e n t to pay i t s estimated
expenses, including tne s a l a r i e s of i t s members, a s s i s t a n t s ,
attorneys, experts and employees for the half-year succeeding
the levying of such assessment, together with any d e f i c i t
carried forward from the preceding half-year;
and
Whereas, i t appears from estimates submitted and considered that i t i s necessary that a fund equal to ninety-one
thousandths of one per cent of the t o t a l paid-in capital stock
and surplus of the Federal Reserve Banks be created for the
purpose hereinbefore described, exclusive of the cost of engraving and printing of Federal Reserve notes;
Now, therefore,
Be i t resolved, That pursuant to the authority vested
i n i t by law, the Federal Reserve Board hereby l e v i e s an
assessment upon the several Federal Reserve Banks of an amount
equal to ninety-one thousandths of one per cent of the t o t a l
p a i d - i n capital and surplus of such banks as of June 30, 1924,
and tne f i s c a l Agent of the Board i s hereby authorized to
c o l l e c t from said banks sucn assessment and execute, i n the
name of the Board, receipts for payments made. Such assessments
w i l l be c o l l e c t e d i n two installments of one-half each; the f i r s t
installment to be paid on July 1, 1924, and the second half on
September 1, 1924.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
June 21, 1924.
SUBJECT:
X-4099
Revised R e g u l a t i o n s Governing the u s e of
Federal Reserve Leased Wires,
Dear S i r :
I n accordance w i t h the a c t i o n of the r e c e n t Governors 1
C o n f e r e n c e , the F e d e r a l Reserve Board has r e v i s e d i t s r e g u l a t i o n s g o v e r n i n g t h e u s e of the Federal r e s e r v e l e a s e d w i r e s ,
as f o l l o w s :
1* T e l e g r a p h i c t r a n s f e r s of funds w i l l b e a c c e p t e d from
and p a i d t o member banks only*
They must r e p r e s e n t bank b a l a n c e s
and .can be made o n l y f o r round amounts, i . e . , m u l t i p l e s of 6100,
The term "bank b a l a n c e " s h a l l be c o n s t r u e d t o mean an accumulation of
funds comprising an e s t a b l i s h e d account c a r r i e d by one member bank w i t h
another tnember bank*
2. The d e s c r i p t i v e data i n telegrams t r a n s f e r r i n g funds
must be l i m i t e d t o the name of the sending member bank, name of i t s
correspondent member bank r e q u e s t i n g the t r a n s f e r , name of the member
bank r e c e i v i n g c r e d i t , and name of i t s correspondent member bank,
3* The F e d e r a l r e s e r v e c o d e , i n c l u d i n g t e s t word, mist b e
u s e d f o r a l l messages i n v o l v i n g the t r a n s f e r of f u n d s and, i n the i n t e r e s t of econony, a l l o t h e r telegrams should be sent i n code when i t s u s e
s h o r t e n s the message.
U, In a d d i t i o n t o t h e u s u a l m a i l a d v i c e t o theHoemb e r b a n k
r e c e i v i n g c r e d i t f o r t e l e g r a p h i c t r a n s f e r s of f u n d s , immediate a d v i c e
by t e l e g r a p h y or o t h e r w i s e , should be g i v e n by t h e F e d e r a l r e s e r v e bank
r e c e i v i n g the t r a n s f e r , except i n c a s e s where the c r e d i t e d member bank
has s t a t e d t h a t other than the u s u a l mail a d v i c e i s unnecessary*
.2-
f.
x-4ogg
5*
Requests f o r t e l e g r a p h i c t r a n s f e r s of funds f o r consummation on date of r e c e i p t should not be a c c e p t e d by Federal r e s e r v e
banks l a t e r than t h i r t y ( ] 0 ) minutes p r i o r t o the c l o s i n g hour of the
Federal r e s e r v e bank t o which t r a n s f e r i s to be made. Any t e l e g r a p h i c
t r a n s f e r s of funds r e q u e s t e d a f t e r such time w i l l be made a t the d i e c r e t i o n of the Federal r e s e r v e bank r e c e i v i n g c r e d i t *
6* The l e a s e d w i r e s s h a l l not be used f o r t r a c i n g or a d v i s i n g payment or non-payment of any non-cash c o l l e c t i o n i t e m s , nor
f o r t r a n s f e r r i n g the proceeds t h e r e o f ,
7* She l e a s e d w i r e s s h a l l not be used f o r r e c o n c i l i n g e x c e p t i o n s i n a c c o u n t s between Federal r e s e r v e banks, except where a l o s s
might be i n v o l v e d .
8* Any l o s s r e s u l t i n g from n e g l i g e n c e on the part of t h e
Federal r e s e r v e system i n the t r a n s m i s s i o n of telegrams t r a n s f e r r i n g
funds over the l e a s e d w i r e s through r e l a y s t a t i o n s s h a l l be borne by
the sending Federal r e s e r v e bank, u n l e s s r e s p o n s i b i l i t y can be d e f i n i t e ly
- p l a c e d upon t h e Federal r e s e r v e bank to which the t e l e g r a m was
addressed.
9 . Telegrams must be worded as c o n c i s e l y a s p o s s i b l e . T e l e grams should not be s e n t when communication by mail w i l l s u f f i c e * For
the purpose of e n f o r c i n g t h e s e r e g u l a t i o n s , p r o v i s i o n should be made i n
each Federal r e s e r v e bank so t h a t any misuse of the l e a s e d w i r e s w i l l
be brought to t h e a t t e n t i o n of a d e s i g n a t e d o f f i c e r f o r r e f e r e n c e t o
the o r i g i n a t i n g department, or, i n the case of incoming messages, t o t h e
sending Federal r e s e r v e bank#
The above r e g u l a t i o n s are intended t o govern the u s e of
the l e a s e d w i r e s by the Federal r e s e r v e banks, The f o l l o w ing c l a u s e s should be i n c l u d e d by a l l Federal r e s e r v e banks
i n t h e i r c i r c u l a r s t o member banks r e l a t i n g t o t e l e g r a p h i c t r a n s f e r s of f u n d s , The Board understands each Federal r e s e r v e bank
w i l l i s s u e a new^ c i r c u l a r l e t t e r t o i t s member banks on J u l y 1 ,
1924, making e f f e c t i v e as of J u l y 15, 1924, the new r e g u l a t i o n s
governing w i r e t r a n s f e r s of funds f o r the account of member banks.
1, T e l e g r a p h i c t r a n s f e r s of funds w i l l be made f o r and p a i d t o
member banks o n l y .
2 e T r a n s f e r s of bank b a l a n c e s in round amounts, t h a t i s , m u l t i p l e s
of $100, w i l l be made over the Federal r e s e r v e l e a s e d w i r e s .
Such t r a n s f e r s w i l l be made w i t h o u t c o s t t o member b a n k s . The term "bank balance 1 1
s h a l l be construed t o mean an accumulation of funds comprising an e s t a b l i s h e d account maintained by a member bank w i t h i t s Federal r e s e r v e bank or
w i t h another member bank.
x-4099
.- 3 3- T r a n s f e r s of proceeds of i n d i v i d u a l c o l l e c t i o n items w i l l not
be made over t h e l e a s e d w i r e s ,
4 . The d e s c r i p t i v e data i n telegrams t r a n s f e r r i n g bank b a l a n c e s
mast be l i m i t e d t o the amount t o be t r a n s f e r r e d , name of t h e member bank
to r e c e i v e c r e d i t and, when n e c e s s a r y , name'of i t s
correspondent member
bank and name of member bank w i t h which request o r i g i n a t e s .
5- The Federal r e s e r v e banks maintain, a t l a r g e e x p e n s e , a l e a s e d
w i r e system over which a heavy volume of important communications p a s s e s
between Federal r e s e r v e banks and b r a n c h e s . Member banks a r e r e q u e s t e d t o
c o - o p e r a t e w i t h u s i n attempting t o avoid over-crowding t h e l e a s e d w i r e s
by not making r e q u e s t s f o r t e l e g r a p h i c t r a n s f e r s of small amounts, or t h o s e
which can be made a s w e l l through t h e m a i l s .
6 , The f o r e g o i n g r e g u l a t i o n s r e l a t e t o
b a l a n c e s over t h e Federal r e s e r v e l e a s e d w i r e s .
a l s o make t r a n s f e r s of funds f o r any purpose and
mercial t e l e g r a p h w i r e s ,
Such t r a n s f e r s w i l l be
member banks o n l y , but may be f o r the u s e of any
or c o r p o r a t i o n .
t h e t r a n s f e r r i n g of bank
Federal r e s e r v e banks w i l l
any amount over t h e coma c c e p t e d from and p a i d t o
bank, i n d i v i d u a l , f i r m ,
7• The c o s t of a l l telegrams between Federal r e s e r v e banks t r a n s f e r r i n g funds over the commercial t e l e g r a p h w i r e s w i l l be charged t o the
member banks f o r which t h e t r a n s f e r s a r e made. Member banks should rprepay
the c o s t of telegrams r e q u e s t i n g such t r a n s f e r s , and t e l e g r a m s t o member
banks a d v i s i n g c r e d i t w i l l be sent " c o l l e c t " .
8 . The Federal Reserve Bank of
w i l l u s e due d i l i g e n c e
and car-- in t h e t r a n s f e r . of funds by t e l e g r a p h t o the r e c e i v i n g F e d e r a l
r e s e r v e bank f o r c r e d i t t o t h e account of the payee bank, but w i l l not be
r e s p o n s i b l e f o r e r r o r s or d e l a y s caused by circumstances beyond i t s c o n t r o l .
Very t r u l y y o u r s ,
J . C. NOELL
Assistant Secretary.
TO BE SENT TO GOVERNORS OF ALL BANES.
X-4100
TREASURY DEPARTMENT
Office of the Secretary
WASHINGTON
"3T3
June 23, 1924,
The Governor
Federal Reserve Board.
Sir:
You are hereby advised that the Department
bursing Clerk, Treasury Department, for payment, the
Engraving and Printing f o r preparing Federal reserve
June 1 t o June 21, 1924, amounting to $90,428.00, as
/
has referred to the Disaccount of the Bureau of
notes during the period
follows,-
Federal Reserve Notes, 1914.
£5
Boston . . . .
New York . . .
Philadelphia .
Cleveland . .
Atlanta . . .
Chicago . . .
Kansas City. .
San Francisco.
, 345,000
. 361,000
. 326,000
. 50,000
. 100,000
. 342,000
. 100,000
. 134,000
1,758,000
m
85,000
56,000
200,000
68,000
85,000
64,000
Total
£50
£20
486,000
—
361,000
626,000
15, 000
15,000
197,000
100,000
342,000
100,000
—•
98,000
451,000
205,000
30,000
2,444,000 sheets at $37.00 per M
232,000
2,444,000
$90,428.00
The charges against the several Federal Reserve Banks are as f o l l o w s , Sheets
Compensation
Plate
Printing
Inc« CornMaterials pensation
Boston. . . 486,000 $10,206.00 $2,065.50 $4,738.50
New York . . 361,000
7,581.00 1,534.25
3,519.75
Philadelphia 626,000 13,146.00 2,660.50
6,103.50
Cleveland. . 197,000
4,137. 00
837.25
1,920.75
Atlanta . - 100,000
2,100,00'..
425.00
975.00
Chicago . . 342,000
7,182.00 1,453.50
3,334,50
Kansas City
100,000
2,100.00
425.00
975.00
San Francisco 232.000
4,872.00
986.00
2,262.00
2,444,000 $51,324. 00 1 0,387. 00 $23,829.00
$ 972.00
722.00
1,252.00
394.00
200.00
684.00
200,00
464.00
$4,888. 00
Totg
$17,982.00
13,357.00
23,162.00
7,289.00
3,700.00
12,654.00
3,700.00
8,584.00
$90,428. 00
The Bureau appropriations w i l l be reimbursed i n the above amount from the
i n d e f i n i t e appropriation "preparation and Issue of Federal Reserve Notes, Reimbursable", and i t i s requested that your board cause sucn i n d e f i n i t e appropriation to be reimbursed i n l i k e amount.
Respectfully,
(signed) S, R. Jacobs,
Deputy Commissioner.
FEDERAL
RESERVE-BOARD
STATEMENT FOR THE PRESS
X-4101
For Release in Morning Papers
Friday, June 2J, 1924.
The following i s a summary of general business and financ i a l conditions throughout the several Federal Reserve
D i s t r i c t s , based upon s t a t i s t i c s for the months of May
and June, as contained in the forthcoming issue of the
Federal Reserve Bulletin.
Production of basic commodities and factory employment showed unusually large declines in May and were considerably below the l e v e l of a
year ago.
Purchases at wholesale and r e t a i l also declined during the
month and were somewhat below l a s t year's volume.
Commercial loans at
member banks decreased and there was a further decline in money r a t e s ,
PRODUCTION:
The Federal Reserve Board's index of production in basic indust r i e s , adjusted to allow for seasonal variations, declined about 10 per
cent in May to a point about 18 per cent below the peak reached a year
ago.
Particularly marked decreases were "shown for production of iron and
steel and mill consumption of cotton*
Output of anthracite, cement, and
tobacco products, on the other hand, was s l i g h t l y larger than in April.
Factory employment declined 4 per cent in May, the number of employees being reduced in almost a l l reporting industries.
The largest reduction of
working forces occurred in the t e x t i l e , metal, automobile, and leather industries.
The value of building contracts awarded in May was 13 per cent
l e s s than the month before and for the f i r s t time since the beginning of
the year f e l l below the corresponding month in 1$23«
-2-
X-UlOl
The Department of Agriculture f o r e c a s t s as of June 1 indicated
smaller y i e l d s of wheat, oats, and barley as compared with the harvests of
1923.
The: condition of the cotton crop on May 25 was 5 per cent lower
than a year ago and 7 per cent below the average condition for the past ten
years,
TRADE:
Railroad shipments showed a s l i g h t increase in May, but were 8 per
cent "Bnaller than a. year ago.
Car loadings of a l l c l a s s e s of f r e i g h t , with
the exception of grain and l i v e s t o c k , were smaller than in May 1923Wholesale trade decreased s l i g h t l y in May and was 6 per cent l e s s
than i n May, 1923.
Sales of dry goods, shoes, and hardware were much small-
er than a year ago, while drug sales were s l i g h t l y l a r g e r .
Retail trade
at department stores and mail order houses declined during May more than i s
usual at that season and was smaller than l a s t year.
Department store
stocks were U per cent snailer in May than in April and 3 P e r cent larger
than a year e a r l i e r .
PRICES:
Wholesale p r i c e s , as measured by the index of the Bureau of labor
S t a t i s t i c s , declined 1 per cent during May to a l e v e l about 8 per cent below the high point reached in the spring of 1923-
Prices of a l l commodity
groups, with the exception of food, declined in May.
During the f i r s t
half of June quotations on wheat, corn, rye, and s i l k increased, while
prices of hogs, b e e f , cotton, and lumber declined,
BAM CREDIT:
Decreased demand for credit for current business requirements
?
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4 m
x-uioi
4 5 3
between the middle of May and the middle of June was r e f l e c t e d i n a smaller •volume of borrowing for commercial purposes at member banks i n leading
cities.
Further purchases of corporate s e c u r i t i e s by these banks and
larger loans on stocks and bonds, however, resulted in an increase for the
month i n t h e i r t o t a l loans and investments.
There was an unusually large
increase i n net demand deposits of these banks, which carried the t o t a l of
these deposits t o the highest figure on record.
At the Federal reserve banks between May 21 and June 18 there was
a further decline in discounts f o r member banks and in'acceptances purchased i n the open market.
Government security holdings, on the other hand,
increased and t o t a l earning a s s e t s were somewhat larger than a month ago.
The p r e v a i l i n g ease in the money market was r e f l e c t e d i n a further
decline from 4 l / U to 3 l / 2 - 3 3 / 4 per cent in rates on prime commercial
paper in New York.
The June 15 issue of six-month Treasury c e r t i f i c a t e s .
*»
bore a rate of 2 3 / 4 per cent, compared with 4 per cent on a similar o f f e r ing l a s t December.
Discount rates a t the Federal reserve banks of Cleveland, Ricjamond,
Atlanta, Chicago, S t . Louis, and San Francisco were reduced from 4 l / 2 to
4 per cent during June, and the rates in Boston, New York, and Philadelphia
were reduced to 3 V 2 per cent.
I
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
X-4102
For Immediate Release
3 : 30 P*
June 25 t 1924,
The Federal Reserve Board announces that the
Federal Reserve Bank of Philadelphia has established a
rediscount rate of
for paper with maturities of
over ninety days e f f e c t i v e immediately.
The Philadelphia
Bank recently established a 3i% rate on paper maturing
within ninety days.
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@FedFRASER