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x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED JANUARY 8, 1926.
CHANGES IN STATE BASK MEMBERSHIP:
D i s t . No,
Admitted to Membership;
Date
None.
Merger Betwean Members:
2
The Buffalo Trust Company, Buffalo, H. Y., and the
Marine Trust Company, Buffalo, N. Y., both members,
have merged.
12-31-25
Closed:
J e f f e r s o n Savings Bank, J e f f e r s o n , Iowa
1 - 4-26
Voluntary Withdrawals:
4
10
Citizens State Bank Co., West Milton, Ohio
Nebraska State Bank,
Ord, Nebr.
1 - 8-26
1-. 2-26
Voluntary Liquidation:
12
Farmers State Bank,
Tetonia, Idaho
12-31-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
2
2
6
8
National Exchange Bank, Providence, R. I .
Citizens F i r s t National Bank, F r a n k f o r t , N, Y.
F i r s t National Bank,
Oloan, N, Y.
B r i t t o n and Koontz National Bank, Natchez, Miss.
Alton National Bantc, Alton, 111.
11111-
?-26
5-26
5-2$
5-26
5-26
x-1530
'
FEDERAL RESERVE BOARD AtOTOUNCEMENT
FOR THE WEEK'ENDED JANUARY 15, 1926.
Dist.
No.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted, to Membership:
Date
None.
Merger Between Member and Nonmember:
5
The Union Bank of Richmond, Va., a member, has
merged with the Federal $rust Co., Richmond, Va., a
nonmember, tender the t i t i e . "Union Bcm.£ and Federal
Trust Co.", which remains a member.
11-J0-25
AbPorrti<~>n of llo-i; aia1, ar•
7
The Mont ice l i o State Bank, k o n t i a e l l o , Iowa, a
member, has-absorbed the Jones County Trust &
Savings Bank, Menticello, Iowa, a nonmember.
12-31-25
Succeeded by Nonmember:
11
The F i r s t 8td.ee Banx, Cdlina, Texas, a member,
has been succeeded by F i r s t State Ban^ of Celina,
a' nonmember.
12-10-25
Voluntary Withdrawal:
11
Gilmer State BanJc,
Gilmer, Tuxas.
1 - $-26
Change of T i t l e :
11
The F i r s t Guaranty State Bank, Cross P l a i n s ,
Texas,. has changed i t s t i t l e to "The F i r s t State
Bank" .
12- 4-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
1
7
8
10
11
Citizens National Bank, Putnam, Conn.
Methuen National Bank, Methuon, Mass.
First. National Bank, Boone, Iowa
Citizens National Bank, Lebanon, Ky.
Central ILitional Bank, Enid, Okla.
North Texas National Bank in Dallas, Texas
1-11-26
1-11-26
1-11-26
1-11-26
1-11-26
1-11-26
2
3
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED JANUARY 22, 1926
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
No.
Date
Admitted, to Membership:
10 Central Savings Bank and
Trust Co., Denver, Colo.
Capital
Surplus
Total
resources
$500,000
$100,000
$6,265,027
1-20-26
Absorbed by National Bank:
6 The Barnesville Bank, Barnesville, Ga.
(absorbed by Citizens National Bank, Barnesville, Get.)
8 Merchants and Planters Bank, Texarkana, Ark.
(absorbed by State National Bank, Texarkana, Ark.)
1-20-26
1-12-26
Closed:
6 Pointe Coupee Trust & Savings B^nk, New Roads > La. •
11 Guaranty State Bank, Emory, Texas
Absorption of National Bank:
8
Federal Ban-tc and Trust Co., L i t t l e Rock, Afk., has absorbed
the F i r s t National Bank, North L i t t l e Rock, Ark.
1-16-26
1-15-26
1-18-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
2
2
4
5
7
12
Merchants National Bank, Poughkeepsie, N. Y,
Babylon National Bank,
Babylon, N. Y.
F i r s t National Bank,
Amityville, N. Y.
Liberty National Bank,
Covington, Ky,
Virginia National Bank,
Norfolk, Va.
F i r s t National Bank,
Oconomowoc, Wis.
United States National Bank, Salem, Ore.
1-19-26
1-19-26
1-19-26
1-16-26
1-19-26
1-19-26
1-19-26
4
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED JANUARY 29, 1926 .
CHANGES IN STATE BANK MEMBERSHIP;
Dist.
No.
Admitted to Membership:
Date
None.
Absorption of National Bank:
2
The Manufacturers & Traders Trust Co., Buffalo,
N. Y., a member, has absorbed the Riverside National
Bank, Buffalo, N. Y.
•
1-22-26
Absorption of Norunember:
8
The Citizens Bank of Festus, Mo«, a member, has
absorbed the Fedtus S t a t e Bank, Festus, Mo., a nonmember .
Voluntary Withdrawal:
L$
-
Trout Creek State Bank, Trout Creek, Mich.
1-27-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
2
3
5
5
7
7
10
11
Montelair National Bank, Montelair, N. J ,
American National Bank, Passaic, N. J .
Camden National Bank, Camden, N. J .
F i r s t National Bank, Martinsville, Va.
McDowell County National Bank, Welch, W. Va.
F i r s t National Bank, Michigan City, Ind.
Orange City National Bank, Orange City, Iowa
F i r s t National Bank, Grand Island, Nebr.
El Paso National Bank, El Paso, Texas
1-25-26
1-25-26
1-25-26
1-28-26
1-28-26
1-28-26
L-25-26
1-25-26
1-28-26
5
X-1530
FEDERAL RESERVE BOARD AMOUIJCElIBtT
FOB JH3 xlEZZ. ENDED FEBRUARY 5, 1926
CHANGES IN STATE BAM MEMBERSHIP:
Dist.
Mo.
Admitted to Membershipi
Capital
£
Surplus
Date
Total
resources
Coal & Iron Bank of the
City of Few York, N. Y. #1,500,000 #1,000,000 #28,746,810
(succeeds Coal a Iron National Bank)
2- 1-26
Withdrawn:
6
Peoples Bank & Trust Co., Bell Buckle, Tenn.
2 - 1-26
Absorbed "by State Member:
12
2
5
7
7
Bank of Alameda, Alameda, C a l i f . , a member, has been absorbed by the American Bank, San Francisco, C a l i f . , a member.
The Flatbush S t a t e Bank, Brooklyn, N-. Y., a nonmember,
has been absorbed by the Mechanics Bank, Brooklyn, a member.
F i r s t National Bank, H a r t s v i l l e , S. C., has been absorbed by Bank of H a r t s v i l l e , H a r t s v i l l e , S. C., a member.
F i r s t National Bank, Cowden, 111., has been absorbed by
S t a t e Bank of Cowden, Cowden, 111., a member.
F i r s t National Bank, Hammond, I n d . , has been absorbed by
F i r s t Trust & Savings Bank, Hammond, Ind., a member.
2 - 2-26
1-22-26
1-28-26
2- 3-26
1 - 2-26
Succeeded by a Nonmember:
8
The Crittenden County Bank, Marion, Ark., a member bank,
has been succeeded by the Bank of Crittenden County, Marion,
Ark,, a nonmember.
2- 3-26
Change of T i t l e :
The Canal-Commercial Trust & Savings Bank, New Orleans,
La., has changed i t s t i t l e t o "Canal Bank and Trust Company".
1 - 4-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
2
2
2
Falmouth National Bank, Falmouth, Mass.
Silver Creek National Bank, Silver Creek, N. Y.
F i r s t National Bank, Eamaroneck, N.. Y.
North Ward National Bank, Newark, N. J . (supplemental)
2222-
4-26
4-26
4-26
4-26
6
X-1530
FEDERAL RESERVE, BOARD AHtJOUHGSK3NT
FOR THE WEEK ENDED FEBRUARY 12, 1926
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
HrJT
Ma
Admitted to Membership
Total
, resources
Capital
Surplus
2 Municipal Bank, Brooklyn,
N. Y.
$2,000,000
$600,000
#24,447,288
2- 9-26
15,000
374,317
2- 8-26
6
Farmers & Merchants Bank,
Samson, Ala.
60,000
Closed:
9
Rock County Bank,
Luverne, Minn.
1-25-26
Absorbed by Nonmember:
8
Merchants and Farmers Bank, Baldwyn, Miss., has been absorbed by the Bank of Baldwyn, Baldwyn, Miss., a nonmember.
1-15-26
#
Voluntary Withdrawals ;
7
12
Farmers Savings Bank, Rems en, Iowa
F i r s t S t a t e Bank, Teton City, Idaho
2- 8-26
2-10-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
6
6
7
Farmers National Bank,
City National Bank,
F i r s t National Bank,
F i r s t National Bank,
Granville, N. Y.
Bessemer, Ala*
DeLand, Fla.
Lapeer, Mich*
2222-
9-26
9-26
9-26
9-26
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE UEEK SJIDED FEBRUARY 19, 1926
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
No.
Admitted, to Membership;
Capital
Surplus
8 Bank of Crittenden
County, Marion, Ark.
$100,000
- (succeeded Crittenden County Bank, a member)
11 Mimbres Valley Bank,
Deining, N. Hex.
50 > 000
- -
Date
Total
resources
#1,527,072
2-13-26
251,379
2-15-26
Closed:
6
Peoples Bank of Calhoun, Calhoun, Ga.
2-11-26
Voluntary Withdrawals:
6 The Peoples Bank, Crystal Springs, Miss.
9 Security Savings Bank, Jamestown, N. Dak.
2-17-26
2-19-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
2
3
6
8
9
12
F i r s t National Bank, Albany, N. Y.
Flemington National Bank, Flemington, N. J .
National Bank of Chester Valley, Coatesville, Pa.
F i r s t National Bank, Sanford, Fla.
Old National Bank, Centralia, 111.
Citizens National Bank, Watertown, S. Dak.
S e a t t l e National Bank, S e a t t l e , Wash. (supplemental)
2-15-26
2-15-26
2-16-26
2-16-26
2-16-26
2-16-26
2-16-26
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED FEBRUARY 26, 1926
CHANGES IN STATE BANK IISTIBERSHIP:
• Admitted to Membership;
Date
None •
Closed:
Dardanelle Bank & Trust Co., Dardanelle, Ark.
2-23-26
Voluntary Withdrawal;
Security Bank & Trust Co., Webster, S. Dak.
2-23-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Havana National Bank,
F i r s t National Bank,
Havana, 111.
Effingham, 111.
2-24-26
2-24-26
X-1530
9
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE 'TEEK IKDED JSBCH 5, 1926.
CHANGES IN STATU BANK MEMBERSHIP:
"™
Capital
Surplus
Dist.
No.
Total
resources
Date
Admitted to Membership:
6
9
Citizens State Bank,
Reynolds, Ga.
Peoples State Bankj
Plainview, Minn.
$25,000
#1,250
#64,102
3 - 1-26
20,000
4,000
204,963
3 - 3-26
Reopened.:
9 Rock County Bank, Luveri$6, Minn*
2-27-26
Merged v/ith National Bank:
2
Peoples Trust Co., Brooklyn, N. Y. Tme>"F,ed v/ith the National
City Bank, New York, N. Y.)
3- 4-26
Merged with State Member;
2 Coal and Iron Btmk of the City of New York (merged with the
F i d e l i t y I n t e r n a t i o n a l Trust Co., Nev; York, N. Y., which
changed i t s t i t l e to F i d e l i t y Trust Company)
2-27-26
Absorption of National Bank:
5 The State & City Bank & Trust Co., Richmond, 7 a . , a member, has
absorbed the Planters National Bank, Richmond, Va., and changed
i t s t i t l e to S t a t e - P l a n t e r s Bank and Trust Co.
*
2-27-26
Absorbed by Nonmember:
7" State Savings Bank, Marlette, Mich, (absorbed by Commercial
State Bank, Marlette, Mich., a nonmember)
1-30-26
Absorption of Nonmember:
9 F i r s t Security State Bank, Red Wing, Minn., a member, has absorbed the Security Loan & Trust Co., Red Wing, Minn., a nonmember, and changed i t s t i t l e to Security Bank & Trust Co.
Voluntary Withdrawals:
11 F i r s t State Bank, Wylie, Texas
12 Victor S t a t e Bank, Victor, Idaho
2-27-26
3- 4-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2 National Ulster County Bank, Kingston, N. Y.
Farmers and Merchants National Bank, Fort Branch, Ind.
3 - 4-26
3— 4—26
10
1-1530
FEDERAL RESERVE BOARD /iISTOmiCEMENT
FOE THE WEEK ENDED MARCH 12, 1926.
CHANGES- IN STATE BANK ME2SBER3HIP:
Dist.
No.
11
Admitted to Membership:
Capital
Surplus
Total
resources
Date
.$25,000
^213,505
3- 6-26
The F i r s t S t a t e Bank,
Celina, Texas.
- -
Voluntary Withdrawal :
7
F i r s t Commercial Savings Bank,
Constantine, Zich.
3-10-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS s
2
3
5
6
7
8
12
F i r s t National Bank, Floral Park, N. Y.
F i r s t National Bank, Kane, Parma.
F i r s t National Bank, R e i d s v i l l e , U. C.
Exchange National Bank,. Montgomery, Ala.
F i r s t National Bank, Hartford City, Ind.
F i r s t National Bank, M i l l s t a d t , 111.
National Bank of Commerce, Ogden, Utah
3-12-26
3 - 9-26
'3- 9-26
3-12-26
3 - 9-26
3- 9-26
3 - 9-26
1 1
X-1530
FEDERAL ESS3RVB BOARD MITOUIICEMBBT
FOR TIC X7SBK 3NDED m C H 19, 1926.
CHANGES IN STATE BANIZ HEIRSHIP:
Dist.
No.
Admitted to Membership:
Pate
S •« a e
Absorption of National Bank;
5
The Bank of Lunenburg, Inc.., Kenbridge, 7 a . , a member, has
absorbed the F i r s t National Bank, Kenbridge, Va„
5-10-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
None
12
X-1530
I'EDSRAl 22S3RV3 BOARD AlHOUNCEiOJT
POxi Til?: \!7ZK 3NP2D EARCH 26, 1926.
CHANGDS III STATE BANK M&IBIiBSHIP:
Dist.
.
Capital
Surplus
Total
resources
Date
Admitted to Membership;
3 Dime Savings & Trust Co.,
Allentown, Pa.
#251,530
$81,530
$1,590,052
3-22-26
7 Wilmette State Bank,
V/ilmette, 111.
100,000
2,854,202
3-25-26
100,000
National Bank absorbed "by State Member:
6
The Citizens Bank, West Point, Ga., a member, has absorbed the
F i r s t National Bank of West Point, Ga.
3-23-26
Voluntary Liquidation;
9
Mercantile S t a t e Bank, Minneapolis, Minn.
2-24-26
Voluntary Withdrawal:
11 F i r s t S t a t e Bank,
Estancia, N, Hex.
3-26-26
rSRMISSIOH GRANTS) TO EXERCISE TRUST P0U2RS.
2
3
3
3
5
5
6
National Bank of Haverstraw, Haverstraw, N. Y.
Peoples National Bank, Sdwar&sville, Pa.
Franklin National Bank, Philadelphia, Pa.
Farmers National Bank, V/atsontown, Pa.
F i r s t National Bank,
Snow H i l l , Ml.
F i r s t National Bank,
Asheboro, N, C.
City National Bank,
Miami, F l a .
3-23-26
3-23-26
3-23-26
3-23-26
3-23-26
3-23-26
3-23-26
FJJilKAL JttyailiViS tUMW
FOR TIEE \7E2E ENDED APRIL 2, 1926.
X-1530
CHANGES IN STATE BANK laiBJRSHlPl
*«
Tota
Dist.
~Y57
Capital
Surplus
i
resources
.
Dat£
n
Admit ted. to Membership:
2
5«oo,o<io
:j»,vn
& z , m
*-*-»>
ATds orption of Nat ional JBank
3
The Columbia County Trust Co., Bloomsburg, Pa., has absorbed. the Blooms "burg National Bank, Blooms burg, Pa., and has
changed, i t s t i t l e t o : Blooms burg Bank-Columbia Trust Co.
2-
Closed.;
7
The State Bank of Thompson,
Thompson, Iowa.
3-29-26
Voluntary Withdrawal;
9
The South Shore Bank,
South Shore, S. Dak.
4-
1-26
Change of Tit_lej
11
TJie Farmers Guaranty State Bank, Brady, Texas, has changed
i t s t i t l e t o : Farmers & Merchants State Bank.
Merger of State Members:
12
The Citizens S t a t e Bank, Sawtelle, Cr.lif., has merged with
the Security Trust & Sewings Bank, Los Angeles, C;-lif.
AUTHORIZED TO ACCEPT DRAFTS ;UiD BIL1S OF SXCHMGE
W TO" T o o ~ p W c S E ' W ^ l P i m W " s u m # k
12
The Crocker F i r s t National Ba.nk, Sc-n Frsncisco, C a l i f .
,
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
2
2
2
2
3
6
7
7
8
8
9
9
9
10
12
F i r s t National Bank,
Freeport, N. Y.
American National! Back, ':-Mcrant'. Vernon,' N.-Y. •
Port Richmond National Bank, Port Richmond, N. Y.
F i r s t National Bank,
Red Hook, N. Y.
Merchants National Bank, Syracuse, N. Y.
F i r s t National Bank,
Newville, Pa. F i r s t National Bank,
B r i s t o l , Tenn.
Mutual National Bank,
Chicago, 111.
F i r s t National Bank,
B r i l l i o n , Wise.
F i r s t National Bank,
Bunker H i l l , 111.
Tell City National Bank, Tell City, Ind.
F i r s t National Bank,
Hancock, Mich.
F i r s t National Bank of Alger County, mmising, Mich.
National Bank of Lewis town, Lewis town, Mont.
F i r s t National Bank,
Broken Airov," OkLu.
F i r s t National Bank,
Longview, Wash.
3-29-26
3-22-26
3-27-26
3-31-26
3-29-26
4- 2 - 2 6
3-31-26
4- 2-26
3-29-26
4- 2~2®
4- 2-26
3-31-26
3-31-26
4- 2-26
4 - 2-26
4- 2-26
14
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED APRIL 9, 1926.
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
No.
Date
Admitted to Membership:
None.
Voluntary Withdrawals:
7
7
Farmers S t a t e Bank, Bargersville, Ind.
Taylor County State Bank, C l e a r f i e l d , Iowa
4- 7-26
4 - 7-26
Succeeded "by Nonmemher Bank;
Broadway Savings Trust Co.,
S t . Louis, Mo.
4- 5-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
5
F i r s t National Bank,
Farmville, Va.
4- 8-26
X-1530
FEDERAL RESERVE BOARD MllOUHCEIJEffP
FOR THE WEEK ENDED APRIL 16, 1926.
CHARGES IN STATE BANK MEMBERSHIP:
Dat_e
Admitted to Membership None.
Closed:
liars h a l l town State Tank,
Marshal It own, Iowa.
4-15-26
Vo.Vujrber;f Withdrawalt
Bank of Crockett,
Bells, Term.
4-16-26
Insolvent:
F i r s t S t a t e Bank & Trust Co., Cuero, Texas.
3-25-26
' PERMISSION GRANTED TO EXERCISE TRUST POWERS;
F i r s t National Bank, Union City, K. J..
Frarningham National Bank, Framingham, Mass.
4-14-26
4- 9-26
X-1530'
FEDERAL SE3.j:iVS BOARD ANNOUNCEMENT
WEEK EBDHD APRIL 23, 1926.
CHANGES IN STATE BAM MEMBERSHIP:
Dist
NcTT2
Admitted to Membership:
Capital
Surplus
Trust Company of Northern
Westchester,Mt. Kisco, N.Y,
0100,000
$15,000
Total
resources
Date
#216,133
4-20-26
Voluntary Withdrawal:
11
Central Trust Co.,
San Antonio, Tex.
4-18-26
PERMISSION GRANTED TO EXERCISE TRUST TOWERS;
1
1
2
2
3
3
3
4
4
5
6
7
7
7
7
7
8
9
F i r s t National Bank,
Boothbay Harbor, Me.
Medomak National Bank,
Waldohoro, Me.
Lincoln National Bank,
Newark, N. J .
F i r s t National Bank,
Camden, N. Y.
Pitman National Bank,
Pitman, N. J.
Luzerne National Bank,
Luzerne, Pa.
F i r s t National Ba.nk,
Orwigsturg, Pa.
Citizens National Bank, I ant:field, 0. (Supplemental)
Merchants and Manufacturers National Bank, Sharon, Pa.
Towson National Bank,
Towson, Mi.
Delta National Bank,
Yazoo City, Miss.
F i r s t National Bank,
Blue Island, 111.
J e f f e r s o n Park National Bank, Chicago, 111.
Lake County National Bank, L i h e r t y v i l l e , 111.
F i r s t National Bcnk,
Taylorville, 111.
American National Bank, ilar shf ie ld, Wis.
Boatmens National Bank, S t . Louis, Mo,
United States National Bank, Iron Mountain, Mich.
4-21-26
4-23-26
4—23—26
4-23-26
4-23-26
4-21-26
4-23-26
4-23-26
4-23-26
4-21-26
4-23-26
4-23-26
4-21-26
4—23—26
4-21-26
4—23—26
4—23—26
4-23-26
17
X-1530
FEDERAL RESERVE BO Aim ANN01WCEK2NT
WEEK EMBED APE1L 30, 1926.
CHANGES IN STATE PANIC MEMBERSHIP:
Dist.
N°•
2
8
Admitted, to Membership:
Capital
Surplus
Trade Bank of New York,
New York, N. Y.
$500,000
$250,000
Broadway Trust Co.,
S t . Louis, Ho.
200,000
20,000
(succeeded Broadway Savings Trust Co., a member)
Total
resources
Date
§3,729,538
4-26-26
2,357,358
4-27-26
Voluntary Withdrawals:
4
6
12
Farmers & Merchants Bank Co., Sylvania, 0.
Plains Bank, Plains, Ga.
Genesee Exchange Bank, Genesee, Ida.
4-27-26
4-30-26
4-26-26
Change of T i t l e ;
8
11
11
The Shaw S t a t e Bank, S t . Louis, Mo., has changed i t s t i t l e
to "Shaw Bank".
The Guaranty S t a t e Bank, Hedley, Tex., has changed i t s
t i t l e to "Security State Bank".
The Guaranty S t a t e Bank, Mt. Pleasant, Tex., has changed
i t s t i t l e to "Guaranty Bond S t a t e Bank".
4-23-26
4-23-26
4-23-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
7
F i r s t National Bank,
Akron, l a .
4-30-26
18
WL3K ENDED MAY 7, 1926.
CHANGES IN, STATE BANK
Admitted to Membership:
"
~
Capital
Surplus
Dist.
No.
2
Morsemere Trust Co.,
Morsemere, N. J .
$100,000
#25,000
Total
resources
Date
§125,000
5- 3-26
Absorbed by a State Member:
4-
The S t a t e Banking and Trust Co., Cleveland, Ohio, a member,
has been absorbed by the Union Trust Co., Cleveland, 0. io, also
a member.
4-17-26
Absorption of Momnembers:
8
The F i r s t State Bank, Palmyra, 111., a member, has absorbed
the Palmyra S t a t e Banlc, Pvlmyra., 111., a nonmomber.
9
The Belgrade S t a t e Bank, Belgrade, Eont., a member, has absorbed the Farmers Bank, Belgrade, Hont., a nonmember.
1-15-26
4- 5-26
Converted into National Banks;
11
11
F i r s t State Bank,
F i r s t State Bank,
George West, Texas.
R a l l s , Texas.
4-21-26
5- 3-26
Change of T i t l e ;
2
The
to "Bank
2
The
t i t l e to
Bank of Europe, New York, N. Y., has changed i t s t i t l e
of Europe Trust Company".
Federation Bank of New York, N. Y., has changed i t s
"Federation Bank and Trust Company".
3-17-26
5- 1-26
19
X-1530
FEDERAL RESERVE BOABD ANNOUNCEMENT
WEEK ENDED MAY 14, 1926.
CHANGES IN STATE BANK MEMBERSHIP t
~ ~ ~
*
Capital
Surplus
Dist.
tJo •
Total
resources
Date
Admitted to Membership:
2
F i r s t Trust & Deposit Co.,
Oriskany F a l l s , N. Y.
#100,000
$20,000
#1,221,407
5-13-26
Change of T i t l e :
6
8
The Citizens Bank, West Point, Ga., has changed i t s t i t l e
to "Citizens Bank & Trust Company".
The Kentucky T i t l e Bank and Trust Co., Louisville, Ky.,
has changed i t s t i t l e to "Kentucky T i t l e Trust Company". '
4- 3-26
4-20-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS.
5
7
9
12
Peoples-First National Bank,
Coldwater National Bank,
F i r s t National Bank,
F i r s t National Bank,
Charleston, S. C.
Coldwater, Mich.
Negaunee, Mich.
Logan, Utah.
5-11-26
5-11-26
5-11-26
5-11-26
20
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED 1AY 21, 1926.
CHANGES IN STATE BANK 13^mSHIP ;
Dist,
No.
Capital
Total
resources
Surplus
Date
Admitted to Membership:
2
Erasmus S t a t e Bank,
Brooklyn, N. Y.
$200,000
^59,434
*416,192
5-18-26
4
Windoer Trust Co•,
Windier, Pa.
250,000
550,000
3,950,978
5-20-26
Voluntary Withdrawals;
11
12
F i r s t S t a t e Bank & Trust Co., Waco, Tex.
Blackfoot City Bank, Blackfoot, Ida.
5-19-26
5-13-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
5
Peoples Trust Company of Brooklyn, N.B.A.,Brooklyn,N.
F i r s t National Bank, Crewe, Va.
D—21—26
5-18-26
21
X-1550
F3DERAL EE532VB 30.132 ANNOUNCE! EN?
T.C3EIC EliDED I "AI 28, 1S26.
CHANGES IN STATE BANK MEMBERSHIP;
>is
M
Capital
Surplus
Total
resources
Date
$511,574
5-27-26
Admitted to I'enbership:
12
H i l l s t o r o Commercial Bank,
H i l l s o o r e j Greg.
$50,000
Q25,000
Closed:
11
The F i r s t S t a t e Bank, P a r i s , Texas
5-26-26
PERMISSION GRANTED TO 3330133 TRUST P0S3S3:
1
2
3
3
3
5
6
7
7
7
9
11
11
12
Howard National Bank, Burlington, Vt.
Bloc,;f l e l d National Bank, Bloonifield, N. J .
BrcaA s t r e e t National Banlc, Trenton,. N. J .
F i r s t National Bank, Altoona, Pa.
Phi lade lphia-G-irard National Bank, Philadelphia, Pa,
South Carolina National Bank, Charleston, S. C.
A l h e r t v i l l e National Bank, A l h e r t v i l l e , Ala,
Citizens National Bank, Knightstovrn, Ind.
Southern Michigan National Bank, Coldv/r.ter, Iiach.
F i r s t National Bank, N e i l l s v i l l e , Wis.
F i r s t National Bank, Winona, li'inn.
American National Bank, Beaumont, Texas
American National Bank, T e r r e l l , Texas
F i r s t National Banlc, San Diego, C a l i f .
5-24-26
5-24-26
5-24-26
5-24-26
5-24-26
5-24-26
5-24-26
5-24-26
5-27-26
5-24-26
5-24-26
5-24-26
5-24-26
5-27-26
22
-X-1530
FEDERAL BES3KV3 BOARD AMTOUBCSMENT
HSZ HiiBHD JUKE 4, 1S26.
CHANGES IK STATS BANK MEMBERSHIP:
?otal
Capital
Surplus
resources
Mat.
No.
Date
Admitted to Membership:
2 Bank of Farmingdale,
Farmingdale, N. Y.
325,000
#20,000
$937,549
6- 1-26
Vo l u n t a r y Wi t lidr awa 1:
6
G
Central Bank & Trust Co., Jasper. Ala.
Commerce Bank & Trust Co., Commerce, G-a.
6- 4-26
6- 1-26
PERMISSION GRANTED TO ZKEECIS^ TRUST POWERS :
3
5
6
6
Liberty National Bank, P i t t s t o n , Pa.
National Bank of Sumter, Sumter, S. C.
Fourth National Bank, llontgomery, Ala.
Farmers and Merchants National Bank, Troy, Ala.
6- 2-26
6- 2-26
6- 2-26
6- 2-26
23
X-1530
FEDERAL RESERVE B0A3D ^OUTICSISITT
WEEK ENDED JUNE 11, 1S26.
CHANGES IN STATE BANK MEMBERSHIP;
Dist.
No.
Capital
Surplus
Total
resources
Date
Admitted to Membership;
2
I n t e r n a t i o n a l Acceptance
S e c u r i t i e s & Trust Co.,
New York, N. Y.
#500,000
$500,000
$3,977,522
6 - 7-26
Voluntary Withdrawal:
7
Lovell State Bank,
Monticello, Iowa
6-11-26
Closed;
7
Hudson Savings Bank,
Hudson, Iowa
6- 7-26
PERMISSION GRANTED TO EXERCISE TRUST 'BOWERS :
8
10
iferion National Bank, Lebanon, Ky.
F i r s t National Bank, P i a t t stiurg, 1.5b,
6-9-26
6- 9-26
24
X-1530
FEDERAL RESlSVE BOARD ANNOUNCEMENT
WE3E :!OED JUNE 18, 1926.
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
-WT-
Date.
Admitted tto Membership:
N o n e.
Absorption of National Banks
11
The Cochise County State Bank, Tombstone, A r i z . ,
a member, has absorbed the F i r s t National Bank, Tombstone, Ariz.
5-21-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS;
1
6
7
York National Bank, Saco, Maine
Farmers National Bank, Opelika, Ala*
Third National Bank, Greensburg, Ind.
6-15-26
6-15-26
6-15-26
25
X-1530
EEDHRAL BZISEEVL BOARD AMOMCBMT
1EIDK HDHD JU1C 25, 1926.
CHANGES IN STAT:: BANK IEMBSRSHIP:
"
Dist.
No.
Admitted to Membership:
Capital
6 Brotherhood of Locomotive -Engineers
Sank & Trust Co., Birmin^iam, Ala. #500,000
•
Closed:
8
Bank of V e r s a i l l e s ,
Date
Surplus
Total
' resources
}55,000
#1,958,963
V e r s a i l l e s , Mo.
6-22-26
6-24-26
Absorbed "by National Bank:
6
The Commercial Bank & Trust Co., Miami, F l a . , a member, has
been absorbed by the City National Bank & Trust Co., Miami, Fla.
6-22-26
P3RHd3ICE GRANTED TO 1201CISI! TRUST P0V81®S;
7
F i r s t National Bank,
Cresco, Iowa.
6-22-26
( COPY )
X-4489
36
USE 0? WORDS "FEDERAL" AND "RESERVE" BY BANKS.
CORPORATIONS. ETC.. OTHER JHA3T FEDERAL RESERVE BANKS.
The following i s a b r i e f statement of the circoms tances of each
case wnich has been called to the a t t e n t i o n of the Federal Reserve
Board in which the word " f e d e r a l " , the word "Reserve", or a combination
of the two has been used as p a r t of the name of a bank, corporation,
or firm other than a Federal reserve bank or in the advertising of
such a bank, corporation or firm or where such use of these words has
been attempted,
FEDERAL BANK AND TRUST COMPANY.
Under dates of September 4 and October 4, 1915, r e s p e c t i v e l y , the
Board received complaints from the presidents of two d i f f e r e n t banks
in San Antonio, Texas, complaining of the f a c t that an advertisement
was being published in l o c a l papers to the e f f e c t that a bank was
being organized for the purpoee of engaging in the general banking
and t r u s t business under the name of "Federal Bank and Trust Company" •
One of the l e t t e r s s t a t e d that although no o f f i c i a l action had been
taken by the l o c a l clearing house a u t h o r i t i e s , i t was the impression
of the w r i t e r from conversations with the various members of the
Clearing House Association that they f e l t very strongly that such use
of -the word "Federal" would be misleading to the public and t h a t many
of the p u b l i c would believe that such bank was connected with the Fede r a l Reserve Banks.
FEDERAL RESERVE ASSOCIATION.
The j^oard received a l e t t e r from a national bank in Pennsylvania,
dated ^ovemoer 22, 1915, c a l l i n g a t t e n t i o n to the use by a l i f e i n surance company of the name "Federal Reserve Association". The Board
r e f e r r e d t h i s matter to the Postmaster General as a probable v i o l a t i o n
of the p o s t a l laws, but i t i s not advised as to what action was taken
by the Post Office Department* Under date of September 25, 1919, t h i s
case was again called to the a t t e n t i o n of the Board by Mr, R. L, Austin,
Federal Reserve Agent a t the Federal Reserve Bank of Philadelphia* Mr.
Austin enclosed in h i s l e t t e r a l e t t e r received from a member bank in
Wilkes Barre, Pennsylvania, s t a t i n g t h a t the Federal Reserve Association
was incorporated under the laws of Delaware on September 6, 1914, as
a f r a t e r n a l order with no specified c a p i t a l stock, that i t was sol i c i t i n g insurance on the survivorship payment plan, but that no s t a t e ment of i t s a s s e t s or l i a b i l i t i e s could be obtained.
FEDERAL STATE BANK.
Under date of February 11, 1916, Mr. John H. Rich, Federal Reserve Agent a t the Federal Reserve Bank of Minneapolis, advised the
Board that a p a r t y of men who were organizing a State bank in Minneapolis had inquired of him whether there was any objection to t h e i r
- 2 -
X-4489
ryy
using the t i t l e "Federal State Bank11 • In reply, the Board stated that
while i t knew of no s t a t u t e prohibiting the use of the word "Federal11
"by national or s t a t e banks, i t was considering the d e s i r a b i l i t y of asking
Congress to enact a provision prohibiting such use of the word "Federal",
and suggested t h a t in view of this s i t u a t i o n the p a r t i e s in question
probably would ntit desire to Select that name f o r t h e i r proposed bank.
RESERVE TRADING COMPANY.
Under date of August 4, 1916, the l a t e Honorable M. T. Helgesen,
Congressman from North Dakota, transmitted to the Secretary of the
Treasury a l e t t e r from the Cashier of a s t a t e bank in North Dakota, comp l a i n i n g of the use of the name "Reserve Trading Company11 by a company
giving i t s address as "739 Reserve Bank Building, Kansas City, Missouri".
Congressman Helgesen s t a t e d t h a t , " I t occurs to me that the point made
by Mr. - - - i s well taken and that if a way i s open to you to put a
stop to t h i s form of misrepresentation and fraudulent a d v e r t i s i n g , i t
should be taken forthwith." The Secretary of the Treasury r e f e r r e d
t h i s l e t t e r to the Federal Reserve Board, and the Board called ^ r .
Helgesen 1 s a t t e n t i o n to the f a c t that a b i l l to p r o h i b i t such use of
the words "Federal" and "Reserve" was then pending in the House of Representatives.
The -board a l s o called t h i s matter to the a t t e n t i o n of the Governor
of the Federal Reserve Bank of Kansas City, who advised the Board that
the building of the Federal Reserve Bank of Kansas City was not called
the Federal Reserve Bank Building" but that there was an o f f i c e building
in the c i t y called "The Reserve Bank Building" which was so named from
the f a c t t h a t the National Reserve Bank of Kansas City once occupied i t .
He s t a t e d that he was unable to obtain any information about the company
in question and suggested t h a t there should be a law preventing a l l concerns, as well as banks, from using the words "^ederal" and "Reserve",
except with the approval of the Federal Reserve Board. The Board also
called t h i s matter to the a t t e n t i o n of the Postmaster General who r e p l i e d
that i t would be given consideration in "connection with a similar comp l a i n t a l l e g i n g the use of the mails for fraudulent purposes by the
above named concern now under investigation by t h i s s e r v i c e . "
FEDERAL RESERVE STATE BANK.
Under date of June 29, 1917, Mr. Charles M. Sawyer, then Federal
Reserve Agent -at the Federal Reserve Bank of Kansas City, advised the
Board that he had received an inquiry from the State Bank Commissioner
of Kansas as to whether or not there was any objection to State banks
which become members of the Federal Reserve System using the words
"Federal Reserve" as p a r t of t h e i r names. I t appeared t h a t a State bank
had applied f o r an amendment to i t s charter changing i t s t i t l e to
"Federal Reserve State Bank". The Board replied t h a t while there was
no s p e c i f i c law p r o h i b i t i n g the use of those words, i t was of the
opinion t h a t t h e i r use by State and national banks should be discouraged.
-3-
X-4489
FEDERAL-AIvERICAN SAVINGS SAME.
Under date of July IS, 1917, Mr.
A. Heath, Federal Reserve Agent
at the Federal Reserve Bank of Chicago, advised the Board that the
German-Anerican Savings -Bank of Port Huron, Michigan* which was about to
a
PP^y for membership in the Federal Reserve System, was contemplating
changing i t s name to the ,! Federal-American Savings Bank". The Board r e plied that i t was decidedly against i t s policy to encourage the use of
the word ^Federal" as p a r t of the t i t l e of member "banks.
FEDERAL CATTLE LOAN SOCIETY.
Under date of November 7^ 19l9, the Governor of the Federal Reserve
Bank of Kansas City, transmitted to the Board a copy of a l e t t e r r e ceived from a State bank in Kansas inquiring whether paper offered by
the Federal Cattle Loan Society11 of Des Moines, Iowa, was accepted and
approved by the Federal Reserve Board. The writer explained that i t
was the desire of his bank to have i t s s e c u r i t i e s at a l l times such as
are acceptable under the Federal Reserve Act, from which i t appears
that the name "Federal Cattle Loan Society" caused him to think that
probably that society was in some way connected with the Federal Reserve
System,
The Board also received a l e t t e r from a member State bank in Des
Moines, Iowa, s t a t i n g that some of their citizens were organizing a
"Federal Cattle Loan Society" and inquiring whether there was any law
against such use of the word "Federal". The Board replied that, although
i t had always been very much against i t s policy to encourage the use of
the word "Federal" in the t i t l e of any banking corporation, i t was not
advised of any law prohibiting i t s use for that purpose.
FEDERAL RESERVE LIFE INSURANCE COMPANY.
Under date of October 15, 1919, the G o v e r n o r of the Federal Reserve
Bank of Kansas City transmitted to the Board a clipping from the Kansas
City Times of October 14, 1919, announcing the organization of the
"Federal Reserve Life Insurance Company" in Kansas, Governor Miller
stated that the organizers of t h i s company were o f f i c e r s and directors
of s t a t e banks in Kansas none of which had joined the Federal Reserve
System, and inquired whether there was not some way to prevent promoters
from using the t i t l e "federal Reserve", even for a l i f e insurance company.
The Board transmitted a copy of t h i s l e t t e r to the Chairman of the
Banking and Currency Committee of the House.
FIRST FEDERAL BANK OF WILLIAMSON.
Under date of March 24, 1920, Mr. Caldwell Hardy, Federal Reserve
Agent a t the Federal Reserve Bank of Richmond, called the Board's a t tention to the fact that a s t a t e ba$k in Williamson, West Virginia, was
contemplating changing i t s name to F i r s t Federal Bank of Williamson",
-4-
X-4489
39
ana applying for membership in the Federal Reserve System* Mr. Hardy
inquired whether there was any law prohibiting the use of the word
"Federal11 • The Board replied that, while i t was not aware of any
statute of the United States prohibiting the use of the word "Federal"
in the corporate t i t l e of any State institution, i t had consistently
tried to discourage the use of that word in such a manner and on several
occasions had recommended to Congress the enactment of a law prohibiting
a State corporation from including the word 11 Federal" in i t s t i t l e , but
that Congress had not taken any action in the matter.
FEBE10VL RESERVE SECURITIES COMPANY.
Under date of August 10, 1920, ^r. Charles B. Powell, Counsel for
the Federal Reserve Bank of Chicago, advised the Board that the o f f i c i a l s
of the Federal reserve bank had recently called to his attention the
fact that a corporation was about to be organized under the laws of
Illinois to be called 11 ederal Reserve Securities Company", and had requested him to take steps, if possible, to prevent the adoption of that
name by the proposed corporation# Mr. Powell stated that he had taken
the matter up with the attorneys who were organizing the proposed
corporation and that they had agreed not to use the words "federal Reserve"
as part of the t i t l e of this corporation. He suggested, however, that
legislation ought to be obtained from Congress prohibiting such use of
those words, just as the use of the word "national" i s prohibited by
^ection 5243 of the Revised Statutes.
FEDERAL RESERVE CORPORATION.
One of the most flagrant attempts to use the words "Federal Reserve" in an improper manner was made by the organizers of a proposed
corporation intended to compete with the Federal reserve banks* It was
f i r s t called to the attention of the Board Mr. L. C. Adelson, Deputy
Governor of the Federal Reserve Bank of Atlanta, under date of May 3L£?
1920, who stated that he had been approached by one C. D. Altman who
said that he was organizing a corporation along Federal reserve bank
lines with the t i t l e 'Federal Reserve Corporation", to rediscount real
estate paper for,banks? His purpose was to interest Mr. Adelson in
taking some of the stock of the proposed corporation, to get him to serve
as a director, and to ascertain i f i t would be possible for directors of
the Federal Reserve Bank of Atlanta to serve as directors of the proposed corporation. Mr. Adelson declined the invitation to purchase
stock and accept a directorship in the proposed corporation, and tried
to persuade A^r. Altman not to use the t i t l e "Federal Reserve Corporation"
on the ground that i t would cause such corporation to be confused with
the Federal reserve bank. In a few days Mr. Adelson1 s fear that the use
of this or a similar t i t l e would cause confusion was substantiated by
the fact that the Post Office Department returned to the Federal Reserve
Bank of -Atlanta a letter sent out by Mr* Altman, under the name "Federal
Trust Company".
Under date of June 1, 1920, Governor Harding received a letter
-5-
X-4489
3()
from Mr. Altaian written on plain stationery, in which, without referring
in any way to the name of the proposed, corporation, Mr. Aitman stated
that he was organizing a ""bankers' hank" to provide for the banks comprising i t s membership a service similar in many respects to that of the
Federal- Reserve System but operated in a s t r i c t l y private capacity, that
many of the banks feared that membership in such a corporation would interfere with their membership in the Federal Reserve System, and that in
order to offset this feeling he would greatly appreciate a line from
Governor Harding endorsing the idea, i f properly carried out, and stating
that membership with the proposed corporation would not interfere with
membership in the Federal Reserve System. Governor Harding replied that
'Hate banks which are members of the Federal Reserve System are permitted under the provisions of Section 9 of the Federal Reserve Act,
subject to other provisions of the Act and of the regulations of the
Board pursuant thereto, to retain their f u l l charter and statutory rights
and may continue to exorcise a l l corporate powers granted them by the
States in which they were created, and, therefore, i f the law authorizes
a State member bank to hold stock in another corporation this right is
not impaired by reason of i t s membership in the Federal Reserve System.
Governor Harding called attention to the fact, however, that the
National Bank Act forbids national banks to purchase stock in corporations other than federal reserve banks, except that they may purchase
stock held as collateral to loans previously made in good faith, in
which case they are required to dispose of such stock within a reasonable
time-.
The Board next received a letter from Ar. Frederic H. Curtiss,
Federal Reserve Agent at the Federal Reserve Bank of Boston, enclosing •
a circular which Aitman was sending to banks and clearing houses sol i c i t i n g subscriptions to stock of the Federal Reserve Corporation.
This circular stated that the Federal Reserve Corporation was being organized for the purpose of rediscounting paper which Federal reserve
banks could not rediscount; that i t would not serve individuals but only
banks, and that i t s "underlying purpose i s to afford member banks relief
for long and short-time paper along the samo lines as those embodied in
the FEDERAL RESERVE ACT for early maturing paper only." This circular
contained a paragraph headed, "Advantages over Federal Reserve System",
in which i t was argued that membership in the proposed corporation was
better than membership in the Federal Reserve System. It also contained
a paragraph quoting a part of Governor Harding's letter to Aitman to
the effect that i f State member banks are authorized by law to hold stock
in other corporations, this right i s not impaired by reason of their
membership in the Federal Reserve System, which paragraph was so worded
as to give the impression that Governor Harding intended to encourage
banks which are members of the Federal Reserve System to become members
of the "Federal Reserve Corporation".
The Board referred this matter to the Attorney General, who in turn
referred i t to the District Attorney at Atlanta, who, through negotiations
-6-
X-4489
with the attorneys for the proposed federal Reserve Corporation, f i n a l l y
succeeded in preventing the use of that name "by such corporation.
FEDERAL RESERVE PRODUCING- CO!fl>M .
Between January 17, and September 16, 1920, the Board received
several complaints from the Federal Reserve Bank of Kansas City about
the use of the words "Federal Reserve" "by an alleged 11 fake" o i l company,
^his company was using in i t s advertising a trade mark or symbol in the
shape of a shield resembling the shield of the United States "bearing the
words "Federal Reserve Producing Company". The Board called this matter
to the attention of the Chairman of the Committee on Banking and Currency
of the Senate with the suggestion that legislation prohibiting such use
of the words "Federal Reserve" was "badly needed. It also referred the
matter to the Attorney General for such action as he deemed advisable;
but i s not advised as to what action, i f any, was taken by the Attorney
General.
FEDERAL RESERVE CHATTEL MORTGAGE.
In March, 1921, the Board's attention was called to a form of
chattel mortgage prepared by a printing and stationery company which
bore the legend "Federal Reserve Chattel Mortgage". The Board promptly
expressed i t s disapproval of the use of any phrase containing the words
"federal Reserve" to designate a document of this character for the
reason that i t might be taken as signifying that paper secured by an
instrument in this form i s entitled to special privileges under the provisions of the,Federal Reserve Act. Subsequently, the Board was advised
by the printing company that the form was substantially identical with
a form which had been prepared previously and circulated by a Federal reserve bank. The Board replied to the company, however, that the mere
fact that this form or a similar form had been approved and distributed
by a Federal reserve bank would not eliminate the Board's objection to
the use of the words "Federal Reserve" to designate i t , and the Board
repeated i t s request that such words be not used in designating the form.
FEDERAL SAVINGS BAM AND TRUST COMPANY.
Under date of March 22, 1921, the promoters of a State bank in
Wilkes Barre, Pennsylvania, advised Honorable
J. Fowler, Deputy
Comptroller of the Currency, that they were contemplating adopting the
t i t l e , "Federal Savings Bank and Trust Company", that they had been informed by the Secretary of the Commonwealth of Pennsylvania that there
was no objection to this t i t l e , but that before making a final decision
in the matter they wished to be advised whether the Comptroller's o f f i c e
would raise any objection. This letter was referred to the Federal Reserve Board, which advised the promoters that, while there was no
statute of the United States prohibiting the use of the word "Federal"
in the corporate t i t l e of any State banking institution, the Board did
not look with favor upon the use of that word in such connection. In
-7-
X-4489
d e f e r e n c e t o t h e B o a r d ' s o b j e c t i o n , the promoters abandoned the i d e a
of u s i n g such name.
FEDERAL STATE BASK.
Under date of April 28, 1922, a national bank in Idaho complained
to the Comptroller of the Currency that there was a State banking institution in i t s city doing business under the name "Federal State Bank",
and that i t considered such nanie to be deceptive to the public. The
national bank said that when i t s customers came in to liquidate or renew
notes which i t had rediscounted with the Federal Reserve Bank and i t advised them that i t would take 2 or 3 days to get the notes returned they
sometimes inquired why i t took so long to get the notes, "as the Federal
Bank i s right here in our city". The national bank further said that
when i t explained to i t s customers that the Federal State Bank was in
no way connected with the Federal Reserve System they were somewhat surprised and stated that most people of the community were of the same
opinion as they.
This matter was referred to the Federal Reserve Board, and the
Board suggested that if the national bank which f i l e d the complaint
should call the matter to the attention of the Idaho Banking authorities,
they might take steps to induce the Federal State Bank to change i t s
corporate t i t l e . The Board also explained that while i t appreciated
the fact that the use of the word "Federal" by a State banking i n s t i tution in i t s corporate name i s undesirable and that i t s policy had been
to discourage such use of this word, there was no Federal statute prohibiting the use of the word "Federal" in the corporate t i t l e of any
State institution.
FEDERAL RESERVE LOAN COMPANY.
The case about which there has been the most complaint i s that of
the Federal Reserve Loan Company, which appeared to be an unincorporated
association operating under a declaration of trust and engaged in a
form of real estate loan business similar in some respects to the
business customarily transacted by building and loan associations.
Circulars issued by this company indicated that i t s o l i c i t s deposits
purporting, to entitle depositors to loans on real estate at some later
date* This scheme seemed to be somewhat widespread, as the Board1 s
attention has been called to companies operating under this name in
k i t t l e ^ock, Arkansas, and also in various different points in Florida.
The Board1 s attention was f i r s t called to the Federal Reserve
Loan Company of Little Rock, Arkansas, by the Federal Reserve Bank of
St. Louis, under date of December 7, 1921. The Board suggested that
the Federal Reserve Bank of St# Louis call the attention of the Federal
Reserve &oan Company to the impropriety of i t s using the words "Federal
-8-
X-4489
4> fy
Reserve" as part of i t s t i t l e and inform i t that i f i t persisted in
i t s plan the Federal reserve "bank would publish a statement giving the
public notice that the Federal Reserve Loan Company i s not connected
in any way with the Federal reserve batik.
The department of Justice has also received an anonymous letter
about the Federal Reserve Loan Company of LittleXBock, Arkansas, the
writer of which states that there were the names of two men connected
with that company who certainly should not handle funds for the public
and that he considered the company unworthy of the name "Federal Reserve",
as i t i s no doubt used to mislead.
Under date of June 1, 1922, Honorable Lew Wallace, Jr., director
of the United States Government Savings S y s t e m , advised the Board that
he had received a letter from the editor of a newspaper in Ocala,
Florida, referring to a company engaged in business under the name "Federal Reserve Loan Company of Ocala, Florida", as a "swindling firm",
maintaining that i t had no reliable standing, and questioning i t s right
to use the words "Federal Reserve."
The Federal Reserve Bank of Atlanta received and transmitted to
the Board several complaints about the Fedpral Reserve Loan Company of
Gainesville, Florida, which appeared to be operating not only in
Gainesville, Florida, but also in other places in Florida. The Federal
Reserve Bank of -"-tlanta also received a letter written on the stationery
of a business firm in West Palm Beach, Florida, stating that the Federal
Reserve Loan Company of Gainesville, Florida, was advertising that i t
would grant loans at 3% and that the writer was informed that such company was stating that i t was a branch of the Federal Reserve System. The
writer then inquired as to the connection of that company with the Federal
Reserve System and as to whether he could make .arrangements for real
estate loans along the same lines. Another complaint was received
from a member of a firm of real estate brokers in Gainesville, Florida,
who was of the opinion that the t i t l e of- the company was misleading and
evidently was used for the purpose of conveying the impression that the
company was in some way connected with the Federal reserve banks, and a
similar complaint was received from a national bank in Gainesville,
Florida.
At the suggestion of the Federal Reserve Board, Mr. Joseph A.
McCord, Federal Reserve Agent at the Federal Reserve Bank of Atlanta,
addressed a letter to Mr. B. D. Hiers, President of the Federal Reserve
Loan Company of Gainesville, Florida, advising him that i t was the
opinion of quite a number of citizens of Florida that the circular i s sued by the Federal Reserve Loan Company would lead people to believe
that i t was operating under a Federal charter and i s under Federal
Governmental control or that i t was operating under the control of the
federal Reserve Board or the Federal Reserve Bank of Atlanta, and re- <
questing that he change the name of his company so as not in any way
X-4489
to lead p e o p l e to "believe t h a t it i s under F e d e r a l control or the
control of the Federal Reserve Bank of Atlanta* In reply Mr, Hiers
expressed regret that the Federal Reserve ^arik of Atlanta should object to the name of his company and stated that they certainly had no
thought of any infringement nor did i t occur to them that the use of
the name would be in any way misleading. He then suggested that i t
would be expensive for them to change the name of their company and
that they did not feel that they ought to be called upon to do so,
"unless i t appears to be our plain duty under the law to do so." He
concluded by promising that "in the event i t can be shown that we are
viola ting any Federal rule or law or coming close enough to make i t
reasonably doubtful whether or not we are doing so, we will take whatever action may be necessary to meet the requirements of the law." Mr.
McCord states that he is informed that Mr. Hiers stands well in his
community; but, in view of the obvious misleading character of the name
adopted by the Federal Reserve Loan Company, i t was hard to believe that
the Company acted innocently and in good faith in selecting such a name,
or that i t sincerely desired to act in harmony with the wishes of the
Federal Reserve Bo&rd and the Federal reserve bank, especially in view
of the fact that i t apparently intended to continue to do business under
that name in the absence of a Federal statute forbidding i t to do so.
Mr. McCord also called this matter to the attention of the Comptroller of the State of Florida, who replied that he would have stopped
this company from doing business in Florida, but that there i s no law
in that ^tate which affords protection against such concerns.
The Board then referred this matter to the Attorney General who
through the local United States Attorney finally succeeded in arranging
with the officers of the company to change the t i t l e of the Federal Reserve Loon Company.
FEDERAL RESERVE HOME BUILDERS ASSOCIATION.
On September 25, 1922, the Department of Justice advised the Federal Reserve Board that i t had received an inquiry as to whether the
, words "Federal Reserve" in connection with the name of a home building
association to be called "The Federal Reserve Ho^e Builders Association of New York" contravened any provision of the Federal statutes.
The Department of Justice was -advised that there was no statute prohibiting the use of these words but that there was a b i l l then pending
in Congress which would have this effect, i f passed. It was also stated
that the Board has consistently taken the position that the use of
these words in the t i t l e of any corporation, other than a Federal reserve bank, is fraudulent and unfair and that such a practice should
be prevented i f possible.
FEDERAL RESERVE ASSOCIATION.
Under date of April 23, 1923, the Federal reserve agent of the
Federal Reserve Bank of Philadelphia called the/at ten ti on of the Board
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85
to the name of a certain corporation in Wilkes-Barre, Pennsylvania,
whose t i t l e was "Federal Reserve Association". This company was also
using a letterhead hearing a cut of the United States Treasury Building.
This matter was referred by the F e d e r a l Beserve Board to the Attorney
General and also to the Federal Trade Commission. A reply received
from the Federal Trade Commission stated that i t had no jurisdiction
in the case because the corporation in question was engaged in l i f e
insurance business,
RESERVE DEPOSIT COMPANY.
One of the federal reserve examiners early in September, 1923,
called the attention of the Board to a certain advertisement appearing
in a South Carolina newspaper. This advertisement which was signed by
the "Reserve Deposit Company" of Cincinnati, Ohio, stated that this
company made loans at six per cent on city or farm property under the
Federal Reserve System. This advertisement which i s , of course, most
unfair and misleading, was called to the attention of the Federal reserve agent of the federal Reserve Bank of Cleveland with the request
that he endeavor tactfully to have this company change i t s name and discontinue the use of su.ch improper advertisement.
ADVERT IS35MENTS OF SHOSHONI STATE BANK.
Under date of July 13, 1923, the Federal Reserve Agent of the Federal Reserve Bank of Kansas City addressed a letter to the Board stating
that the Shoshoni State Bank of Shoshoni, Wyoming, a nonmember bank,
was making use of checks bearing the phrase "Federal Reserve Bank Protection" . In reply to this letter the Federal Reserve Agent was requested to communicate with this bank in an attempt to have the use of
this phrase on i t s checks discontinued. The attempt was made but no
reply was received by the Federal Reserve Agent although he twice wrote
to the Shoshoni State Bank in this regard. On September 18 this matter
was referred to the Attorney General and the Federal Trade Commission
by the Federal Reserve Board. The Federal Trade Commission has advised
the Board that i t has no jurisdiction in any case involving banks. The
Attorney General advised the Board that he had succeeded in obtaining
a statement from the bank that the imprbper phraseology would be omitted
from the next supply of blank checks purchased by i t . The Board at a
later date was advised that this same bank had distributed calendars on
which were printed "Federal Reserve Bank Protection". This matter the
Board also called to the attention of the Attorney General and he advised the B0ard that the District Attorney at Cheyenne had been instructed to notify the bank to discontinue the use of any advertising
matter containing the words "Federal Reserve Bank Protection".
FEDERAL RESERVE BUILDING AND LPAIT ASSOCIATION.
On October 9, 1923, the attention of the Board was called to the
fact that a corporation located in Philadelphia, Pennsylvania, was
operating under the t i t l e "The Federal Reserve Building and Loan Association". The Board advised i t s informant that i t had always taken
-ll-
X-4489
86
the position that the use of the words "Federal Reserve" "by any corporations other than a Federal reserve bank was misleading to the public
and unfair to the Federal reserve hanks and member hanks of the Federal
Reserve System and that every effort should he made to prevent such improper practices by private corporations. The Board stated, however,
that there was no Federal statute prohibiting the use of these words
as part of the name of a private corporation. The Board also requested
the federal Reserve Agent at Philadelphia to take this matter up with
the federal Reserve Building and Loan Association and endeavor to obtain a change in the t i t l e of that corporation. After some correspondence
with the corporation i t s officers stated that they were willing to adopt
the name "Federal Building and Loan Association" i f this were agreeable
to the Board, •'•he Board agreed to this suggestion, but i t was found that
there already existed in the State of Pennsylvania a Federal Building
and Loan Association and also a Reserve Building and Loan Association,
tht*s making i t impossible for the Federal Reserve Building and Loan Association to adopt either of these names. Ag i t was impossible for the
Federal Reserve Building and Loan Association to adopt either the name
"Federal Building and Loan Association" or "Reserve Building and Loan
Association" and as this association had been in operation for a number
of years before the fact was known to the Board i t was decided not to ins i s t upon a change in i t s name, but the Federal Reserve Agent at Philadelphia was requested to advertise in the Philadelphia papers that the
Federal Reserve Building and Loan Association had no connection with the
Federal Reserve Bank of Philadelphia or the Federal Reserve System and
this was done.
FEDERAL SAYINGS AMD LOAU ASSOCIATION.
On January 24, 1924, a corporation inquired of the Comptroller of
the Currency whether there would be any objection to organizing a savings
and loan association in the State of Washington under the name "Federal
Savings and Loan Association" and whether there was any Federal legislation which would prohibit the use of such name. This inquiry was referred to the Board and i t advised the corporation that there were no
statutes prohibiting the use of the word "Federal" by private corporations but that the Federal Reserve Board seriously objected to i t s use
because of the misleading effect and the unfair competition involved
therein*
THE FEDERAL COMMERCE TRUST COMPANY.
4
The Federal Reserve Agent of the Federal Reserve Bank of St. Louis,
on January 28, 1924, advised the Board that a trust company had been
organized in Missouri under the t i t l e of "The Federal Commerce Trust
Company." The Board addressed a letter to Mr. Lonsdale, the organizer
of this trust company, stating that i t f e l t strongly that the use of the
word "Federal" in the t i t l e s of State banks was likely to prove misleading to the public and that i t had always discouraged this practice
in every possible way. The Board also stated that a b i l l was then
pending in Congress to prohibit the use of the words "Federal", "Reserve"
-12-
X-4489
37
or "United States11 or any combination of them in the t i t l e s of any
hanks or similar corporations except corporations chartered "by the
federal government and the Board requested ^r. Lonsdale to consider
some change in the t i t l e of the Federal Commerce Trust Company "by
which the word "Federal" might "be eliminated. Mr. Lonsdale advised
the Board that he had applied to the Commissioner of Finance of Missouri
for permission to use the t i t l e 11 Commerce Trust Company" but that since
that t i t l e was already in use "by another trust company in Missouri i t
was decided to apply for the t i t l e of "Federal Commerce Trust Company"
and this t i t l e had been approved by the Commissioner of Finance. Mr.
Lonsdale also stated that at the time the t i t l e was approved he had no
knowledge of any objection to the use of the word "Federal" in State
bank t i t l e s nor had he heard of the b i l l then pending in Congress, and
he was not inclined to make a change in the t i t l e of the trust company.
The Board advised Mr. Lonsdale that notwithstanding the facts which he
presented i t was s t i l l of the opinion that i t was improper for State
banking corporations to include the word "Federal" in their corporate
t i t l e s and again requested him to eliminate the word "Federal" from the
t i t l e of the Federal Commerce Trust Company, Other correspondence ensued
and the Board finally took the matter up with the Commissioner of
Banking of Missouri but nothing was accomplished.
FEDERAL SAVINGS AMD LOAN ASSOCIATION,
On April 17, 1924, a folder published by the Federal Savings and
Loan Association of Oklahoma City was sent to the Comptroller of the
Currency and the sender inquired whether i t was proper for such corporation to use the word "Federal" in i t s t i t l e , ^he inquiry was referred
to the Federal Reserve Board and i t advised the inquirer that i t had consistently taken the position that the use of the word "Federal" as a part
of the t i t l e of a private corporation was improper and should be prohibited, but tnrvb there was no statute which prevented the use of this
word in the t i t l e of any corporation.
PEOPLES RESERVE SYSTEM*
The Federal Reserve Agent at the Federal Reserve Bank of Chicago,
on June 3, 1924, sent to the Board a copy of a letter from a corporation
known as the Peoples Reserve System. It appeared that this corporation
authorizes certain retail dealers to use price discounts as a means of
saving for their customers, the amount of the discounts being forwarded
by these retail dealers to certain banks designated as depositaries of
the system where they were held for the account of the customer in whose
favor the discount was made. The banks designated as depositaries were
authorized to display a sign reading "Member Peoples Reserve System"*
Forms used by the retail dealers also bore the words "Member Peoples
Reserve System". The Board took the matter up with the Attorney General
and the Postmaster General for such action as they deemed advisable to
prevent the Peoples Reserve System from competing unfairly with the
Federal reserve banks and their members by the use of the word "Reserve"
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X-4489
and the advertisement "Member Peoples Reserve System". The~Postmaster
General advised the Board that it appeared that the only way in which
the company could be restricted from using the name adopted by i t was
to obtain an injunction in a court of competent jurisdiction and i f
such action was to be taken the injunction should be requested by the
Federal. Reserve Board and not by the Post Office Department. The Attorney General's Office advised the Board that his department was inclined to believe that sufficient grounds were not shown which would give
any assurance that a court of equity would be likely to issue a writ of
injunction restricting the Peoples Reserve System from u t i l i z i n g the
words "reserve system" and i t was stated that i t was believed that this
case was one that could be cared only by the enactment of legislation.
The Federal Reserve Agent at Chicago took the matter up with the Peoples
Reserve System and i t agreed
not to permit banks to use the sign "Member
Peoples Reserve System.11 The form used by the retail dealers, however,
continued to bear this inscription.
FEDERAL BOND AMD MORTGAGE COMPAilY.
In September, 1924, the Board's attention was directed to a news
item to the effect that the Federal Trade Commission had prohibited the
Federal Bond and Mortgage Company of Detroit from using the phrase
"federal bonds are better bonds", and also from using the :7ord "Federal"
alone in connection with the word bond or bonds and from using the word
"Federal" alone in designating or referring to any place of issuing or
marketing securities dealt in by such company.
FEDERAL COMMERCIAL AMD SAVINGS BAM.
The Board was advised on December 29, 1924, that the Federal Commercial and S a vings Bank of Port Huron, Michigan, was displaying advertisements referring to i t s e l f as the "Federal Bank". The B o a r d advised i t s informant that i t was opposed to the use of the word "Federal"
by a state banking institution and that i t s policy had been to discourage
the use of this word by such banks, but that there was no federal s t a t r ute prohibiting i t s use. The ®oard also requested the ^ederal Reserve
Agent at Chicago to take the matter up with the Federal Commercial and
Savings Bank. He did so and that bank assured him that there would be
no further improper advertising on i t s part.
FEDERAL FINANCE AMD CREDIT COMPANY.
Mr. Mason, the Counsel of the Federal Reserve Bank of New York, on
May 25, 1925, sent the Board a copy of a letter sent out by the Federal
Finance and Credit Company of Baltimore, Maryland. This letter stated
that i t was to i t s customers what the Federal 'reserve bank was to i t s
member banks. The Board sent a copy of the letter to the Federal Reserve Agent at Richmond and requested him to take the matter up with
the officers of the Federal •"inance and Credit Company with the request
that they eliminate the word "Federal" from the t i t l e of the company and
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X-4489
in the future refrain from stating that i t was performing the same
service as that performed by Federal reserve "banks for .their member
hanks. The president of the federal Finance and Credit Company advised the Federal Reserve Agent that i t was not the intention of the
company to mislead the public or to benefit from the similarity between
the names of the Federal Finance and Credit Company and the Federal reserve bank. He stated that the instance which had come to the Board's
attention was the only one in which the objectionable statement had
been used by his company and he was instructing a l l departments to use
extreme care to present any reference in the future which might possibly give rise to the inference that the Federal Finance and Credit
Company was connected with the Federal reserve bank. Upon receipt
of this advice from the Federal Reserve Agent the Board advised him
that in view of the absence of any statute prohibiting the use of the
word "Federal" by private corporations there seemed to be nothing
further that could be done toward obtaining a change in the t i t l e of
the Federal Finance and Credit Company.
FEDERAL RESERVE LIFE INSURANCE! COMPANY.
On June 20, 1925, and November 6, 1925, the attention of the Board
was directed to the fact that a corporation was operating in Kansas
under the title"Federal Reserve ^ife Insurance Company of Kansas City."
The Board advised i t s informant that the use of the words "Federal" or
"Reserve" in the corporate name of private institutions not connected
with the Federal Reserve System was misleading to the public and that
the Board was strongly opposed to such practice. The Board also stated
that there have been several b i l l s pending in Congress which would prohibit. the use of these words by private corporations, bat that as yet
none of these had become ,law.'
I
X*-4490
January 4, 1926.
To
Federal Reserve Board'
From Mr. Wyatt, General Counsel.
•48t
Subject: preliminary rough draft
of letter to Mr. McFadden re
H.a. 2 .
Pursuant to the action taken at the Board meeting on December 15,
I have prepared and respectfully submit herewith a preliminary rough
draft of a letter to Hon. Louis T. McFadden, Chairman of the Banking &.
Currency Committee of the House of Representatives, with reference to
H.R.2, the latest draft of his b i l l to amend the National Bank Act and
the Federal Reserve Act.
This letter contains a revised draft in proper legal form of
Professor Sprague's proposed revision of Section 5200 of -the Revised
Statutes as tentatively approved by the Board and also drafts in proper
legal form of the other amendments to the National Bank Act and the Federal Reserve Act recommended by Professor Sprague and tentatively approved by the Board. It also expresses the Board's approval or disapproval of various sdctloag,of H.R.2 as tentatively agreed upon at the Board
meeting on December 15 as sho'.vn by the minutes of that meeting. It contains no further comments or discussion except such as are based upon the
brief comments contained in Professor Sprague's memorandum of November
21, 1925. In preparing this draft, I have only attempted to state the
action tentatively agreed upon by the Board; and I wish to make i t clear
that i t contains no expression of my ovm views and does not necessarily
represent my views with reference to this b i l l .
I have not yet received Professor Sprague' s comments on this
proposed letter or on the revised draft of Section 5200; but I am sending
a copy of i t to him and expect to go over i t with him before the Board
meeting on Thursday, January 7, I shall also furnish a copy to each individual member of the Board in order that he may have an opportunity
to study i t carefully in advance of the Board meeting.
The attached letter states that the Board approves Section
15 of the b i l l , which would amend the fourth paragraph of Section 13
of the Federal Reserve Act so as to permit Federal Reserve Banks to rediscount for member banks the eligible paper of any one borrower in an
amount equal to that which may be borrowed lawfully from any national
banking association under the terms of Section 5200 of the Revised
Statutes as amended; and I wish to c a l l attention to the fact that this
section of the b i l l was not specifically approved at the Board meeting.
The minutes show, however, that the Board approved paragraph 2 (a) of
Professor Sprague's draft of Section 5200 "on condition that a correlated provision be included in the Federal Reserve Act" , and this i s such
a correlated provision,
I also wish to c a l l attention to the fact that the Board has
taken no action on the following portions of this b i l l and therefore the
attached letter contains no comment on those provisions:
41
Page 2.
X-4490
1. Section 10, which would amend Section 9 of the Federal Heserve Act in such a manner as to restrict the Board's power to impose
conditions of membership.. (This has nothing to do with branch hanking
hut was inserted in the b i l l in an effort to meet the views of the
tional Association of Supervisors of State Banks. When the representatives
of that Association met with the Board last week, they indicated that
this amendment would not satisfy them and that they wanted the b i l l
changed so as to take away the Board1s power to impose any conditions
of membership except such as are made pursuant to an express provision
of the law,)
2. Section 12, which would merely correct a clerical error
in that section of the Agricultural Credits Act of 1923 which attempted
to amend Section 5202 of the Revised Statutes so as to exclude from
the limitations of that section l i a b i l i t i e s incurred by national banks
in rediscounting agricultural paper with Federal Intermediate Credit
Banks.
3. Sections 7, 8 and 9 relating to branch banking and that
portion of Section 1 which relates to branches of State banks which consolidate with national banks.
There are attached hereto for the further information of the
Board a copy of H.R.2 and a copy of Professor Sprague's memorandum of
No vsmber 21, 1925. Inasmuch as this i s only a preliminary report, I
am holding the remainder of the f i l o on this subject for discussion
with Professor Sprague.
Respectfully,
Walter .Wyatt,
General - Counsel.
Attached:
Preliminary draft of letter to McFadden
Copy of H.3.2
Copy of Professor Sprague's memorandum
WW -sad
X-4490
( PRZLimmRY HOUGH DRAFT )
January 4,1925.
Hon.Louis T. McFadderi, Chairman,
Committee on Banking and Currency,
House of Representatives,
Washington,' D.C.
My dear Congressman:
In accordance with the request contained in your letter
of December 11, 1925, the Federal Reserve Board has carefully considered your B i l l , H.3.2, to amend the National Bank Act and the
Federal Reserve Act, and I desire to submit herewith the Board's
views thereon.
The Board unqualifiedly approves the following provisions of H.R.2 in their present form:
Section 2 (a), amending subsection 2 of Section 5136 of
the Revised Statutes so as to give national banks indeterminate charters in lieu of charters for a term
of 99 years.
Section 2 (b), amending subsection 7 of Section 5136
of the Revised Statutes so as to regulate the safe
deposit business and the business of buying and s e l l ing investment securities when transacted by national banks.
Section 3, amending Section 5137 of the Revised Statutes
so as to permit the purchase by national banks of
such real estate as shall be necessary for their accommodation in the transaction of their business
rather than merely such as may be necessary for
4:3
Page 2
X-4490
43
their immediate use.
Section 4, amending Section 5138 of the Revised Statutes
so as to authorize the chartering of national hanks
in outlying sections of large c i t i e s with a capital
of *100,000.
Section 5, amending Section 5142 of the Revised Statutues
so as esprossly tor authorize national banks to increase their capital by means of stock dividends.
Section 5, amending Section 5150 of the Revised Statutes
so as to authorize the board of directors of a national bank to designate a director in lieu of the president
to be chairman of the board of directors.
Section 13, amending Section 5208 of the Revised Statutes
relating to the certification of checks by officers,
directors, agents or employees of Federal reserve banks
and member banks of the Federal Reserve System.
Section 14, amending Section 5211 of the Revised Statutes
so as to permit reports of condition of national banks
to the Comptroller of the Currency to be signed by the
vice president or assistant cashier.
Section 15, amending tho fourth paragraph of Section 13
of the Federal Reserve Act so as to permit Federal
reserve banks to rediscount for member banks the e l i g i ble paper of any one borrower in an amount equal to that
which may be borrowed lawfully from any national banking
association under the terms of Section 5200 of the Revised Statutes as amended.
X-4490
Page 3
44
Section 16, amending Section 22 of the Federal Reserve
Act, ao as to make thefts by any bank examiner or
assistant tank examiner from any member bank of the
Federal Reserve System a federal offense.
The Board approves of that portion of Section 17 of your Bill
which would amend Section 24 of the Federal Reserve Act so as to
broaden the power of national banks to make loans on real estate
and increase the aggregate amount of such loans which may be made
by any national bank from 33 1/3 per cent to 50 per cent of the
nationalvbank's savings deposits; but the Board is opposed to that
portion of this section of the B i l l (page 27, lines4 to 9, inclusive) which would provide that the rate of interest which national
banks may pay upon time deposits, savings deposits or other deposits
shall no,t exceed the maximum rate authorized to be paid upon such
deposits by State banks or trust companies.
Upon consideration of Section 1 of your B i l l , which erould
amend the Consolidation Act of November 7, 1918, by the addition
thereto pf a new section simplifying the procedure involved in the
consolidation of State banks with national banks, the Board voted
to approve a l l of such proposed new section except that portion
thereof which relates to branch banking.
The Board recommends that the following be substituted for
Section 11,of your B i l l , which would amend and reenact Sedtion
5200 of thd Revised.Statutes:
"Sec.l'l. That Section 5200 of the Revised Statutes of the United
States, as amended, be amended to read as follows:
4 5
X-4490
Page 4
^Section 5200.
The total direct l i a b i l i t i e s to any national "banking
association of any person, firm, company or corporation for money "borrowed
shall at no time exceed 10 per centum of the amount of the capital stock of
*
such association*- actually pai.d in and unimpaired and 10 per centum of i t s
unimpaired surplus fund; and the aggregate l i a b i l i t i e s to any national "banking association of any person, firm, company or corporation, to wit, the
direct l i a b i l i t i e s for moneys borrowed and theriindirect l i a b i l i t i e s as surety,
endorser or guarantor, where such surety, drawer, endorser, or guarantor obtains a loan from, or discounts paper with, or s e l l s paper under guarantee
to, any such association, shall at no time exceed 25 per centum of the amount
of the capital stock of such association actually paid in and unimpaired, and
25 per centum of i t s unimpaired surplus lund,
1
Within the meaning of this section: (a) The l i a b i l i t i e s of any company
or firm shall include the l i a b i l i t i e s of the several members thereof; (b) where
the majority of the stock of any corporation i s owned by any borrower the
l i a b i l i t i e s of such corporation as surety, drawer, endorser or guarantor
shall be considered part of the aggregate l i a b i l i t i e s of such borrower; and
(c) a l l l i a b i l i t i e s as maker, acceptor, surety, drawer, endorser, or guarantor
on accommodation paper shall be considered direct l i a b i l i t i e s within the
meaning of this section.
*The limitations prescribed above in the f i r s t paragraph of this section
shall be subject to the following exceptions:
f
(l)
Liabilities arising out of the discount or purchase of the f o l -
lowing classes of paper (other than l i a b i l i t i e s on paper in classes (a), (b),
or (c) where both the drawer and drawee, or both the maker and ^p&yee, are
46
Page 5
X-4490
corporations and one of such corporations is a f f i l i a t e d with, or a subsidiary
of, the other - i . e . , where a majority of the stock of one of such corporations
is owned by the other or by the stockholders thereof) shall be subjeat to no
limitation based upon the amount of such capital and surplus:
*(a) B i l l s of exchange drawn in good faith against actually
existing values*
'(b) Commercial or business paper actually owned by the
person, company, corporation, or firm negotiating the same.
'(c) Drafts and b i l l s of exchange secured by shipping documents conveying or securing t i t l e to gmods shipped.
'(d) Demand obligations which are or have been discounted
>r purchased for the account of the drawer or endorser and which are secured by documents covering commodities in actual process of shipment.
'(e) Bankers' acceptances of the kinds described in section
13 of the Federal Reserve Act.
'(f) ^otes secured by net less than a like face amount of
bonds, notes, or certificates of indebtedness of the United States.
'(2)
In addition to the 10 per centum permitted under the f i r s t
paragraph of this section, l i a b i l i t i e s to any national banking association
may be incurred in an amount equal to 15 per centum of the pai<$ in and unimpaired capital and 15 per centum of the unimpaired surplus fund of. such
national banking association, when such l i a b i l i t i e s are evidenced by notes
secured by shipping documents, warehouse receipts, or other such documents
conveying or securing t i t l e covering readily marketable nonperishable staples,
the actual market value of which is not at any time less than 115 per centum
of the face value of such notes, and which are fully covered by insurance i f
47
X-4490
Page 6
i t i s customary to insure such staples; but this exception shall not applyto l i a b i l i t i e s of any person, corporation, firm or company or the several
members thereof arising from the same transactions and secured Upon the
identical staples for more than six months; Provided, however# That l i a b i l i t i e s of this character may be incurred for a period ofnot more than
three months in a further amount equal to 15 per centum of the paid in and
unimpaired capital and 15 per centum of the unimpaired surplus fiind of such
national banking association, in addition to the 10 per centum permitted
under the f i r s t paragraph of this section and the 15 per centum hereinbefore
permitted under this paragraph,
1
(3)
In addition to the 10 per centum permitted under the f i r s t para-
graph of this section, l i a b i l i t i e s to any national banking association may
be incurred in an amount equal to 15 per centum of the paid in and unimpaired capital and 15 per centum of the uni mo aired sur-olus fund of such
national banking association, when evidenced by notes secured by documents
conveying or securing t i t l e to live stock which i s being prepared for market
during the period of the loan evidenced by such notes, and the market value
of which i s not at any time loss than 115 per centum of .the face amount of
sueh notes; but this exception shall not apply to the l i a b i l i t i e s of any
person, corporation, firm, or company, or the several members thereof, for
more than ninfe months; Provided, however. That exceptions (2) and (3) are
not cujnulative but only alternative exceptions - i . e . , only one of the two
shall be available to the same borrower and not both at the same time.* **
Page 7
X-4490
4.8
This proposed revision of Section 5200 i s a result of a thorough
study which the Board has caused to be made oy a committee of experts.
In
the opinion of the Federal Reserve Board, i t combines the best features
of the various drafts of Section 5200 incorporated in the "bills on
this subject heretofore introduced in Congress, together with certain
new provisions which the Board believes to be desirable.
Those features
of this proposed revision which are taken from drafts heretofore considered
by Congress require no comment; but I shall coianent briefly on certain of
the proposed new features.
Subdivisions (b) and (c) of the f i r s t paragraph of the above
draft are new and are intended definitely to exclude from the greater
limitation on indirect l i a b i l i t i e s allowed under the f i r s t paragraph
the l i a b i l i t i e s of a f f i l i a t e d corporations and a l l l i a b i l i t i e s on accommodation paper.
The f i r s t paragraph of the f i r s t exception i s broadened so
as to apply to l i a b i l i t i e s arising out of the purchase of paper as well
as the discount p a p e r A parenthetical clause is also inserted exeluding from the exception paper in classes (a), (b) and (c) where
the drawer and drawee, or the maker and payee, are a f f i l i a t e d corporations.
The purpose of this provision i s to exclude some portion of
those notes and b i l l s of exchange which are in substance nothing more
than the obligations of a single interest.
Certain language i s inserted in subdivision (d) of the f i r s t
exception to exclude the holding of accepted demand obligations for
an indefinite period of time by a bank, - a practice which involves
49
Page 8
X-4490
making what i s substantially an unsecured loan on single name paper.
A new subdivision ( f ) i s added to the f i r s t exception,
excluding from any limitation notes secured by not less than a like
face amount of bonds, notes or certificates of indebtedness of the
United States.
This i s based on the theory that, since a bank may
purchase an unl|mited amount of these securities, i t would seem
logical to permit them to make loans in unlimited amounts oj$ notes
collateraled by such securities.
The second exception, which relates to l i a b i l i t i e s on
notes secured by shipping documents, warehouse receipts, or other
such documents conveying or securing t i t l e covering readily marketable non-perishable staples, would permit such loans to be made in
an amount equal to 15 per cent of the bank's capital and surplus in
addition to the basic 10 per cent for periods of six months, and
in a further amount equal to 15 per cent of the bank's capital
and surplus for a period of not more than three months.
The provi-
sion requiring such staples to be insured is qualified in such a way
as not to apply to staples like pig iron, which are not customarily
insured.
The above draft of this exception i s believed to be a fair
compromise between the corresponding provisions of the various
other drafts of this b i l l which have heretofore been introduced in
Congress; and the Board believes that i t will enable the banks to
supply a l l proper financial f a c i l i t i e s for the marketing of such
staples.
Page 9
X-4490
50
The Board also desires to recommend the following additional amendments to the National Bank Act and th% Federal Reserve Act and requests
that these proposed amendments be incorporated in your b i l l :
1.
That Section 5202 of the Revised Statutes as amended be further
amended "by adding at the end thereof a new paragraph to read as folltiwsr
"All obligations of every nature both direct and
indirect arising out of the sale, pledge, or hypothecation of any of i t s assets by a national banking association shall be definitely recorded upon i t s books at the
time such assets are sold, pledged, or hypothecated. For
each failure to comply with this requirement a national
banking association shall be subject to a fine of Five
Hundred Dollars, to be imposed by the Comptroller of the
Currency."
This proposal i s designed to cover the rather common practice
of the assumption of obligations by banks in an informal fashion, often
in correspondence between bank o f f i c i a l s .
ly escape the notice of
These obligations frequent-
bank examiners because they are not definitely
recorded on the books of the banks.
<2. That Section 5240 of the Revised Statutes of the United States,
as amended, be further amended by adding at the end thereof a new
paragraph reading as follows:
"Whenever an officer or director of a national banking
association i s also an officer or director of any other
bank, banking association, trust company, securities company or investment company, and in the judgment of the
Comptroller of the Currency such national banking association i s so closely related in management and operation
to such other bank, banking association, trust company,
securities company or investment company that an examination of such national banking association f a i l s to disclose
i t s true condition in the absence of detailed information
regarding such other related institution, such national
banking association shall (a) obtain from such related
institution and furnish to the Comptroller of the Currency
a copy of a report of an examination of such related
institution made by the State authorities simultaneously
with an examination of such national banking association
made by examiners appointed by the Comptroller of the
X-4490
Page 10
Currency, or (b) through such other arrangements as may be
deemed satisfactory "by the Comptroller of the Currency,
furnish to the Comptroller of the Currency detailed information regarding the condition and operation of such a f f i l i a t e d
institution. In such cases the Comptroller of the Currency
may, upon request, furnish the State Supervisor of Banking,
or other similar officers, copies of reports of examination
of such a f f i l i a t e d national banking association. Upon the
failure of any national banking association to comply with the
requirements of this paragraph, any officer or director of
such national banking association who is also an officer or
director of such other related institution shall bo disqualified to serve as on officer or director of such national
banking association after the next annual meeting of the
stockholders there of."
This proposal i s designed to secure adequate information regarding
national banks which are clos'ely a f f i l i a t e d with other institutions and
in particular to afford some chock upon certain abuses frequently engaged
in by chains of banks.
During the last few years a number of such chains
have collapsed, and investigation shows that when a national bank i s in
such a chain an examination of it often f a i l s to indicate i t s true condition, duo to the shifting of assets back and forth between the various
institutions which make up the chain.
3.
That Section 9 of the Federal Reserve Act as amended be further
amended by inserting therein, immediately after the sixth paragraph
thereof, a new paragraph reading as follows:
"Whenever an officer or director of a member bank is also
an officer or director of any other bank, banking association, trust company, securities company or investment company
and in the judgimnt of the Federal Be serve Board such member
bank i s so closely related in management end operation to
such other bank, banking association, trust company, securities
company or investment company that an examination of such
member bank f a i l s to disclose i t s true condition in the
absence of detailed Information regarding such other related
institution, such member banks shall (a) obtain from such
related institution and furnish to the Federal Reserve Board
a copy of a report of an examination of such related i n s t i tution made by the State authorities simultaneously with an
X-4490
page 11.
*
examination of such member bank, or (b) through such
other arrangements as may be deemed satisfactory by
the Federal Reserve Bonrd, furnish to the Federal Reserve Bo-rd detailed information regarding the condition
and operations of such a f f i l i a t e d institution. In such
cases the Federal Reserve Board may, upon request, furnish the State Supervisor of Banking, or other similar
officers, copies of reports of any ex&mination of such
a f f i l i a t e d member bank which has been made by direction
of the Federal '3serve Board or of the Federal 3*9serve
bank by exuxin^rs selected or approved by the Federal
Reserve Board."
^
This proposal is similar to the preceding and i s intended to apply
to state banks and trust companies which are members of the Federal Reserve System.
The penalty for non-compliance with this provision is
already provided for in the seventh paragraph of section 9 of the Federal
Reserve Act which authorizes the Federal Reserve Board to expel from
the Federal Reserve System any State member bank which f a i l s to comply
with the provisions of that Section.
4.
That Section 5146 of the Revised Statutes of the United States,
as amended, be further amended to read as follows:
"Sec. 5146. Every director must, during his
whole term of service, be a citizen of the United
States, and at least three-fourths of the directors
must have resided in the State, Territory, or District in which the association i s located, or within
f i f t y miles of the location of the office of the
association, for at least one year immediately preceding their election, and mast be residents of
such State or within a fifty-mile territory of the. V
location of the association during their continuance
in office. Every director must own in his own right
at least ten shares of the capital stock of the association of which he i s a director, unless the capital
of the bank shall not exceed $35,000, in which case
he must own in his own right at least f i v e shares of
such capital stock. Any director who ceases to be
Page 13.
X-4490
the owner of the required; number of shares of
the stock, or who pledges cr hypothecates the
same, or who becones in any other runner disqualified, shall thereby vacate his place.
"No national banking association shall cake
a loan or loans aggregating more than Five
Hundred Dollars to any salaried officer of such
national banking association or to any corporation
in which such officer or any director of such
national banking association owns or controls a
majority of the stock or of which he is an off i c e r or director, unless (a) such loan i s f u l l y
secured by readily rarketable collateral, or
(b) such o f f i c e r or director has f i r s t submitted
to the board of directors of such national banking
association in approved form a financial statement
of such officer or of such corporation, as the
case nay be. A violation of this provision shall
disqualify any such officer or director from
serving as such and vacate his place ."
,
This would anend Section 5146 in two respects:
(l)
The last
sunt once of that section as it now rends would be anended =50 as to
disqualify a director who pledges or hypothecates his stock.
This
is intended r.arelv to neet an apparent ovsrsi^ht in the law.
(3)
A new paragraph would be added relating to loans to officers of
national banks "and to corporations the majority of the stock of
which is owned or controlled by officers or directors of national
banks.
5.
That Section 5205 of the Revised Statutes of the United
States,&z amended, bo further cr.erJ.ed to road as follows:
cw
Page 13.
X-4490
"Sec. 5205. Every association which shall have
failed to pay up i t s capital stock, as required "by
law, and every association whose capital stock shall
have become impaired by losses or otherwise, shall,
within two months after receiving notice thereof from
the Comptroller of the Currency, pay the deficiency in
the capital stock, by assessment upon the shareholders
pro rata for the amount of capital stock held by each;
and the Treasurer of the United States shall withoId
the interest upon a l l bonds held by him in trust for any
such association, upon notification from the Comptroller
of the Currency, until otherwise ratified by him. If any
such association shall f a i l to pay up i t s capital stock,
and shall refuse to go into liquidation, as provided by
law, for two months after receiving notice from the
Comptroller, a receiver may be appointed to close up the
business of the association, according to the provisions
of section fifty-two hundred and thirty-four: And provided, That if any shareholder or shareholders of such
bank shall neglect or refuse, after two months' notice,
to pay the assessment, as provided in this section, i t
shall be the duty of the board of directors to cause a
sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after
thirty days' notice shall be given by posting such
notice of sale in the o f f i c e of the bank, and by publishing such notice in a newspaper of the city or town
in which the bank is located, or in a newspaper published
nearest thereto), to make good the deficiency, and the
balance, if any, shall be returned to such delinquent
shareholder or shareholders; Provided, however, That
the Comptroller of the Currency may extend the time for
payment of such assessment whenever in his judgment i t
may be deemed advisable."
The only effect of this amendment would be to shorten from
three months to two months the period allowed for the payment of assessments to restore the capital of a national bank which has become impaired,
with a provision authorizing the Comptroller of the Currency to extend
the time for the payment of such assessment when in his judgment i t
Pcigo 1 4 .
X-4490
riay be desnod advisable.
The Board has taksn no definite action upon those provisions of
your S i l l which c.ra not spacifically mentioned above, but if it doos
so I shall advise yon promptly of the action trJcon.
If thoro is anything further that the Board cr.n do to bo of any
assistance to you in this or in any other natter, please do not
hesitate to call upon us.
Very truly yours,
D. B. Crissinger,'
Governor.
i f f D E B AL
R E S E B VE
B 0 ABB
STATEMENT FOP THE PRESS
X-.4491
For Inmediate Be lease.
January 4, 1926*
Gross earnings of the Federal reserve banks during 1935 were $41,800,000,
or about $3,500,000 more than in the preceding year, while current expenses
amounted to $27,500,000 or $900,000 less than in 1924., Net deductions from
current net earnings to cover depreciation charges, reserves for losses on
paper of f a i l e d banks, e t c . , amounted to $4,800,000 as compared with $6,200,000
the year before, and net earnings to $9,400,000 as against $3,700,000 in 1924.
Earnings of the Atlanta and St. Louis banks were not sufficient to fully
cover expense and dividend requirements, end these two banks were authorized
by the Federal Reserve Board to pay dividends, totaling approximately
$55? ,000, out of accumulated surplus.
The federal Be serve Banks of Minneapolis and Krnsrs City were the only
ones to pay a franchise tax to the United States Treasury.
The amount of
the t x aggregated $59,300.37, and the balance of the net earnings of these
two banks, $6,588.93, was transferred to their surplus accounts in eccordrnce with Section 7 of the Federal Beservo Act.
as the subscribed capital
of a l l other reserve brriks i s mr.t3riR.lly in excess of accumulated surplus,
the balance of their net earnings (§3,118,000), remaining after the payment
of dividends, was transferred to surplus account.
The surplus account of
a l l Federal ressrvo banks now Aggregates $220,311,000 or $2,474,000 more
than last year.
Full details :.s to the disposition of the gross earnings of each Federal resorva b^nk will appear in the forthcoming Annual Report of the
Federal Reserve Boi.rd.
X-4492
57
January 5, 1926
To:
Federal Reserve Board
From: Mr. Wy&tt, General Counsel
Subject:
Mr. Piatt's Proposed B i l l regarding Branch Banking.
The opinion of this office has "been requested with reference to the
effect on existing law and the regulations of the Beard i f the attached
draft of a b i l l to amend Section 5190 of the Revised Statutes i s enacted.
In my opinion the effect would be:
1. To confirm by implication the Board's power,to prescribe
regulations and restrictions with reference to the establishment
of branches, additional offices or agencies by State banks and
trust companies which are members of the Federal Reserve System.
2. To enable the Comptroller of the Currency in his discretion to authorize national banks to open and operate one or
more branches, additional offices or agencies under the following conditions:
(a) The Comptroller could authorize national banks
to open and operate such branches, additional offices or
agencies in any State where State b nks are"authorized or
Pemitted" to do so;
(b) The Comptroller could not authorize national banks
to o^en or operate any branch, additional o f f i c e or agency
in any State where State banks are net "authorized or
permitted" to do so;
(c) The establishment and operation of such branches,
additional offices or agencies by national banks would
be subject to such regulations and restrictions as the
Federal Reserve Board might from time to tline prescribe
with reference to the establishment of branches, additional
o f f i c e s or agencies by State banks or trust companies which
are members of the Federal Reserve System;
(d) The establishment of such branches, additional
offices or agencies by national banks would not be subject
to the requirements of the State law as to capital, public
convenience, etc., unless required by the regulations of
the Federal Reserve Board;
58
X-4492
Page 2.
(e) T.ue Federal Reserve Bci.ru could make the establishment of such branches, additional o f f i c e s cr agencies
by national bunks subject to such provisions of tho St - te
law by prescribing th^t State bwnks which are members of
the Federal Reserve System may establish branches, additional
o f f i c e s or agencies only after complying in all respects
with the Stt-te law on the subject,
I may add that the words "authorized or permitted" are of special
significance when used together in this way. The word "authorized"
woula apply to States in which State bonks are expressly authorized by
statute to open and operate branches, and the word "permitted" would
apply to States where State banks are not expressly authorized by statute
to open and operate branches but are permitted to do so through administrative rulings or through administrative acquiescence in the practice,
where the State law does not expressly prohibit i t .
The enactment of this proposed b i l l would net effect the Beard's
regulations in any way except to confirm the Board's power to prescribe
such regulations regarding branches and impliedly to authorize the Board
to prescribe regulations and restrictions governing this subject independently of conditions of membership prescribed by the Board and accepted
by State banks prior to their admission to the Federal Reserve System.
I trust that this will give the Board all the information i t desires.
If not, I shall be very glad to elaborate this opinion or discuss the
subject further.
Respectfully,
Walter Wyatt
General Counsel.
Draft of b i l l
at t acheu..
( COPY )
X-4492a
A BILL
To amend Section 5190 of the Revised Statutes of
the United States, relating to "branches of national
"banking associations and for other purposes,
Be i t enacted by the Senate and Eou.se of Representatives of
the
United States of America in Congress assembled, That section
5190 of the Revised Statutes of the United States be, and the
same i s hereby, amended so as to read as follows:
"Sec. 5190.
The usual business of each national banking
association shall be transacted at an o f f i c e or banking house located in the place specified in i t s organization certificate:
Provided, That subject to such regulations and restrictions as the
Federal Reserve Board may from time to time prescribe with reference
to the establishment of branches, additional offices or agencies
by State banks or trust com^-mies which are members of the Federal
Reserve System, the Comptroller of the Currency may in his discretion
authorize the opening and operation of one or more branches, additional o f f i c e s , or agencies by a national banking association in any
State where State banks or trust companies are authorized or permitted to open and operate branches, additions! offices, or agencies,
and not elsewhere."
FEDERAL RESERVE BOARD
X-4493
WASHINGTON
January 5,
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
1926
SUBJECT: Procedure at Reserve Banks on Rates.
Dear Sir;
In order to give greater uniformity to the
procedure in the matter of fixing discount and open-market
rates and to provide for a consideration of these questions
at each meeting of the Boards of Directors of the Federal
Reserve Banks, the Board requests that each Federal Reserve
Agent, in his capacity as Chairman, present to his Board
of Directors a complete schedule of the rates prevailing
at the "bank for their consideration and action.
following:
The schedule of rates should include the
1. Discount rate.
2. Minimum buying rates by maturities for bankers'
acceptances.
3. Rates at which bankers' acceptances may be purchased, with agreement to resell (so-called
repurchase agreements).
4. Rates at which Government securities may be purchased with agreement to r e s e l l .
Following each meeting of the Board of
Directors the Board desires to be advised by telegraph of the
action taken by the Directors, either in approving the existing schedule of rates, or in recommending change in any
one of the rates.
Very truly yours,
D. R. Crissinger,
Governor.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4494
January 6, 1926.
SUBJECT: Officers and Employees of Federal Reserve
Banks Authorized to Examine Member Banks,
Dear Sir:
In order to check the Board!s records, i t
".•ill "be appreciated if you will furnish the following
information at your convenience*
!•
Names of examiners designated by your "bank
and approved by the Federal Reserve Board.
2.
List of other officers or employees who
have been designated as special examiners
with the approval of the Federal Reserve
Board, and who are now authorized to examine
or to a s s i s t in the examination of State member
banks and banks applying for membership, or
to make special credit investigations or
examinations of National or State member
banks.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO ALL CHAIRMEN OF Fa R. BANKS EXCEPT ATLANTA.
61
F 2 DEEA L
EE S 3 E V E
B 0 ABD
STATEMENT FOE TIE PBSSS.
For Immediate Eelease
X-4498
4:00 o'clock p.m
January 7, 1926
The Federal Eeserve Board announces that i t has approved
an application of the Federal Be serve Bank of Hew York for pe remission to establish a rediscount rate of 4 per cent on a l l
classes of paper of a l l maturities, effective January 8, 1926.
The Board has also approved the ^ew York bank increasing "by
l / 4 of 1 per cent a l l rates at which i t purchases acceptances
in the open market.
FEDERAL
RESERVE
BOARD
STATEMENT FOR TEE PRESS
For Immediate Release.
X-4499
January 8, 1926..
Mr. John Perrin, who has served as Class "C" Director,
Federal Reserve Agent and Chairman of the Board of Directors
of the Federal Reserve Bank of San Francisco since the establishment of that institution, has tendered his resignation,
which has been accepted by the Federal Reserve Board effective
March 1, 1926.
The Board has appointed Mr. I. B. "Newton, of Los Angeles,
as Class "C" Director of the San Francisco Bank for the unexpired term of Mr. Perrin, which ends December 31, 1926, and
has designated him as Federal Reserve Agent and Chairman of
the Board of Directors of the Bank.
64
( co?y )
X-4-500
January 8, 1926.
ti
onorable Louis
McEaddea, Chairman,
Committee on Banking and Currency,
House of Representatives,
Washington, D. C.
My dear Congressman:
The Federal Reserve Board weIconss the opportunity
afforded by the request conveyed in your l e t t e r of December 11,
1935, to express i t s opinion on your B i l l , HiB. 2, amending the
.National Bank Act and the Federal Reserve Act.
The urgent,impertance of liberalizing the law so as
to enable national banks to compete moro e f f e c t i v e l y with State
institutions has long been recognized by the Board, and appropriate l e g i s l a t i o n for this purpose lias been under consideration during tho last year by a special commit tec of o f f i c e r s of
various Federal reserve banks assisted by the Board's Division
of Research and S t a t i s t i c s , The opinions herewith submitted
are based in large measure upon the work of this Committee after
consultation with the Federal Advisory Council.
Many of the provisions of the b i l l as introduced
are approved without change, but the Board ventures to suggest
considerable changes in Section 5200 designed in part to clarify
that very complicated section and in part to limit certain somewhat hazardous classes of loans. While strongly in favor of
liberalizing the statute, the Board f e e l s also that i t i s highly
desirable to introduce additional safeguards, especially in
view of the numerous bank failures in recent years. The Board,
therefore, submits a limited number of suggestions with this
©bject in view. They are designed mainly to secure more adequate
data regarding the conditions of the bonks through examination
and i t i s not believed that they would hamper in any way the
conduct of i t s business by any well managed bank.
-2-
X-45G0
sections approved without A?,\ suggsstzd chaiges,
^ho Board approves tho following provisions of H.R. 2
in their present form:
Section 2(a)j amending subsection 2 of Section
5136 of the Revised Statutes so as to
give national banks indeterminate charters in lied of charters for a term of 99
years,
Section 2(b), amending subsection 7 of Section
5136 of the Revised Statutes so as to regulate the safe deposit "business and the business of buying and selling investment securi t i e s when transacted by national banks,
Section 3, amending Section 5137 of the Revised
Statutes so as to permit the purchase by national banks of such real estate as shall be
necessary for their accommodation in the
transaction of their business rather than
merely such as may be necessary for their immediate use.
Section
amending Section 5138 of the Revised
Statutes so as to authorize the chartering
of national banks in outlying sections of
large c i t i e s with a capital of $100,000.
Section 5, amending Section 5142 of the Revised
Statutes so as expressly to authorize national banks to increase their capital by
means cf stock dividends.
Section 6, an ending' Section 5150 of the Revised
Statutes so as to authorize the board of
directors of a^ national bank to designate
a director in lieu of the president to be
chairman of the board of directors.
^ection 13, amending Section 5208 of the Revised
Statutes relating to the certification of
checks by officers, directors, agents or
employees of Federal reserve banks and member banks of the Federal Reserve System.
S e c t i o n 14, amending S e c t i o n 5211 of the Rev i s e d S t a t u t e s so a s to p e r m i t r e p o r t s
of c o n d i t i o n of n a t i o n a l banks to t h e
Comptroller of t h e Currency to be s i g n e d
by the v i c e p r e s i d e n t or a s s i s t a n t
cashier.
65
<
-3-
'
X-4500
Section 15, amending the fourth paragraph of Section IS of the Federal Reserve Act so as
to permit federal reserve bruaks to rediscount for member banks the e l i g i b l e paper
of any one "borrower in an amount equal to
that which may "be borrowed lawfully from
'any national banking association under the
terms of Section 5200 of the Revised Statutes as amended.
Section 16, amending Section 22 of the Federal Reserve Act, so as to make thefts "by any "bank
examiner or assistant "bank examiner from any
member bank of the Federal Reserve System a
Federal offense.
REAL ESTATE LCAITS.
The Board approves of that portion of Section 17 of your B i l l
which would amend Section 24 of the Federal Reserve Act so as to
broaden the power of national banks to make loans on real estate
and increase the aggregate amount of such loans which may be made
by any national bank from 33 l / 3 per cent of i t s time deposits to
50 per cent of the national bank's savings deposits; but the Board
i s opposed to that portion of this section of the B i l l (page 27,
lines 4 to 9, inclusive) which would provide that the rate of interest which national banks may pay upon time deposits, savings
deposits or other deposits shall not exceed the maximum rate authorized to be paid upon such deposits by State banks or trust
coripani es.
COSES OLIDATI PIT OF NATIONAL BANKS.
Upon consideration of Section 1 of your B i l l , which would
amend the Consolidation Act of November 7, 1918, by the addition
thereto of a new section simplifying the procedure involved in
the consolidation gf State banks with national banks, the Board .
voted to approve a l l of such proposed new section except that
portion thereof which relates to branch banking.
SECTIOH 5200 OF THE REVISED STATUTES.
The Board recommends that the following be substituted
for Section 11 of your B i l l , which would amend and reenact Section 5200 of the Revised Statutes:
X-iSOO
»3oc. 11. 'Ifcit Suction 550Q of the Revised Statutes
of the United State;:?, cs -mended, be mended to read as
follows:
1
Suction 5200. The totnl direct l i a b i l i t i e s to
any national banking association of any person, firm,
company or corporation for mo.icy borrowed shall at no
time exceed 10 pur con turn of the amouht of tlio cop i t a l
stock of such association actually paid in and unimpaired
and 10 ptier centum of its unimpaired surplus fund; and
the aggregate l i a b i l i t i e s to any national banking association of any portion, firm, company or corporation, to wit,
the direct l i a b i l i t i e s for moneys borrowed and the indirect
l i a b i l i t i e s as surety, endorser or guarantor, where such
surety., drawer, endorser, or guarantor obtains a loan
from, or discounts paper with, or s e l l s paper under
guarantee to, any such association, shall at no time exceed
25 per centum of the amount of the capital stock of such
association actually paid in and unimpaired, and 25 per
centum of i t s unimpaired surplus find.
'Within the meaning of this section: (a) The
l i a b i l i t i e s of any company or firm shall include ..the .
l i a b i l i t i e s of the several members thereof; (b) where
the majority of the stock of any corporation is owned
by any borrower the l i a b i l i t i e s of such corporation as
surety, drawer, endorser or guarantor shall be considered
part of the aggregate l i a b i l i t i e s of such borrower; and
(c) a l l l i a b i l i t i e s of the actual borrower on accommodation paper, whether in the form of l i a b i l i t i e s as maker,
accentor, surety, drawer, endorser, or guarantor shall
be considered direct l i a b i l i t i e s within the meaning of
this section.
1
The limitations prescribed above in the f i r s t
paragraph of this section shall be subject to the
following exceptions:
' ( l ) Liabilities arising out of the discount
or purchase of the following classes of paper shall
be subject to no limitation based upon the amount of
such capital and surplus except where both the drawer
and drawee, or both the maker and payee, are corporations and one of such corporations i s a f f i l i a t e d with,
or a subsidiary of,thb%other - i . e . , where a majority
of the stock of one of"such corporations is owned by
the other or by the stockholders thereof:
(a) B i l l s of exchange drawn in good faith
, against actually existing values.
X-4500
(b) Commercial or business paper actually owned.
• '
l'-y the person, company, corporation, or firm
negotiating the same,
(c.) Drafts and "bills of oxchango secured by shipping documents conveying or securing t i t l e to
goods shipped.
*
1
(2) Liabilities arising out of the discount or purchase
of the following classes of paper shall be subject to no
limitation based upon the amount of such capital and surplus:
(a) Demand obligations which are or have been
discounted or purchased for the account of
the drawer or endorser and which are secured
by documents covering commodities in actual
process of shipment.
(b) Bankers' acceptances of the kinds described
in section 13 of the,federal Reserve Act.
(c) ^otes secured by not less than a like face
amount of bonds, notes, or certificates of
indebtedness of the United States.
1
(3) In addition to the 10 per centum permitted under
the f i r s t paragraph of this section, l i a b i l i t i e s to any
national banking association may be incurred in an amount
equal ^ 0 15 per centum of the paid in and unimpaired capital
and-'l5 per centum of the unimpaired surplus fund of such
national banking association, when such l i a b i l i t i e s are
evidenced by notes secured by shipping documents, warehouse
receipts, or other such documents conveying or securing t i t l e
covering readily marketable non-perishable staples, the actual
market value of which is not at any time less than 115 per
centum of the face value of such notes, and which arc fully
covered by insurance if i t i s customary to insure such staples;
but this exception shall not apply to l i a b i l i t i e s of any
person, corporation, firm or company or the several members
thereof arising from the same transactions and secured upon
the identical staples for more than six months; Provided. *
however. That l i a b i l i t i e s of this character may be incurred for
a period of not more than three months in an additional amount
equal to 15 per ccn turn of the paid in and unimpaired capital
and 15 per centum of the unimpaired surplus fund pf such
national banking association, in addition to the 10 per centum
permitted under the f i r s t paragraph of this section and
the 15 per centum hereinbefore permitted under this paragraph*
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X-4500
1
(4) In addition to the 10 per centum permitted under
the f i r s t paragraph of this scction, l i a b i l i t i e s to any
national banking association may "be incurred in an amount
equal to 15 per centum of the paid in and unimpaired capital
and 15 per centum of the unimpaired surplus fund of such
national banking association, when evidenced by notes secured
by documents conveying or securing t i t l e to live stock which
is being prepared for market during the period of the loan
evidenced by such notes, and the market value of which is
not at any time less than 115 per centum of the face amount
of such notes; but this exception shall not apply to the
l i a b i l i t i e s of any person, corporation, firm, or company,
or the several members thereof, for more than nine months;
Provided, however. That exceptions (3) and (4) are not
cumulative but only alternative exceptions - i . e . , only
one of the two shall be available
to the same borrower and
not both at the same time, 1 n
69
This proposed revision cf Section 5200 i s ' a result of a thorough
study which the Board has caused to be made by a committee of officers
of the Federal Reserve System aided by the Board1s Division of Research
and Statistics. The recommendations of this committee were also considered by the Federal Advisory Council, In the opinion of the federal
Reserve Board, this revision combines the best features of the various
drafts of Section 5200 incorporated in the b i l l s on this subject heretofore introduced in Congress, together with certain new -provisions
which the Board believes to be desirable. Those features of this proposed revision which are taken from drafts heretofore considered by
Congress require no comment; but I shall comment briefly on certain
of the proposed new features.
Subdivisions (b) and (c) of the second paragraph of the
above draft are new and are intended to bring under the 10$ limitation of the f i r s t paragraph the indirect l i a b i l i t i e s of a f f i l i a t e d
corporations and l i a b i l i t i e s of the borrower on accommodation paper*
The Board believes this i s necessary in order to cover cases where
the drawer and drawee or the maker and indorser are in effect a
single interest»
The f i r s t and second exceptions are broadened so as to apply
to l i a b i l i t i e s arising out of the purchase of paper as well as
the discount of paper# A provision i s also inserted in the f i r s t
exception excluding from the benefits of that exception paper on which
the drawer and drawee, or the maker and payee, are a f f i l i a t e d corporations, The purpose of this provision i s to exclude some portion
of those notes and b i l l s of exchange which are in subgis&ce nothing
more than the obligations of a single interest.
Certain language is inserted in subdivision (a) of the
second, exception to exclude the holding of accepted demand obligations
for an indefinite period of time by a bank,-a practice which involves
making what i s substantially an unsecured loan on single name paper#
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X-4500
^0
A new subdivision (c) is added to tho s ocond oxcoption, excluding from any limitation notes secured by not less than a like face
amount of "bonds, notes or certificates of indebtedness of the United
States. WThis is based on the theory that, since banks may purchase air
unlimited amount of these securities, i t would seem logical to permit
them to make loans in unlimited • mounts on notes collateraled by such
securities.
The third exception, which relates to l i a b i l i t i e s on notes
secured by shipping documents, warehouse receipts, or other such documents conveying or securing titles covering readily marketable nonperishable staples, would permit such loans to be made in an amount
equal to 15 per centum of the bankf s capital and surplus in addition
to the basic 10 per cent for periods not in excess of six months, and
in an additional amount equal to 15 per cent of the "bank1 s capital and
surplus for a period of not more than three months. The provision requiring such staples to be insured is qualified in such a way as not
to apply to such staples as pig iron, lead, zinc, etc., which arc not
customarily insured. The above draft of this exception i s believed to
be a fair compromise between the corresponding provisions of the various
other drafts of this b i l l which have heretofore been introduced in Congress; and the Board believes that i t will enable the banks to supply
all proper financial f a c i l i t i e s for the marketing of such staples.
Tiie fourth exception, which relates to loans on live stock is
changed so as not to apply to loans on dairy or breeder herds nor to
txie l i a b i l i t i e s of any one borrower for more than nine months.
SUGGESTED AMSl-TDMmTS DESIGIJZD [TO STEElIGTHm TEE BMKS.
Tne Board also desires to recommend, the following additional
amendments to the National Bank Act and the Federal Reserve Act and
requests that these proposed amendments be incorporated in your b i l l :
1. That Section 5202 of the Revised Statutes as amended be
further amended by adding at the end thereof a new paragraph to read
as follows:
f * t'Vill obligations of every nature both direct
and indirect arising out of the sale, pledge, or hypothecation of any one of i t s assets by § national banking &ssaciatiqa shall be definitely recorded upon i t s books at the
time such assets arc sold, pledged, or hypothecated. For
each failure to comply with this requirement a national
banking association shall be subject # 8 f*n@ pf Five
Hundred DoiXays,
be imposed by the CeHptyoller of the
.... . t^is pr.epog^l 4s designed to cover the rather common practice
of ths assumpt^gn
obligations by banks in an informal fashion,
often in correspondence between bank o f f i c i a l s . These obligations
-
8
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X-4500
71
f r e q u e n t l y escape the n o t i c e of "bank examiners "because t h e y a r e n o t
d e f i n i t e l y r e c o r d e d on t h e books of the "banks.
2 . That S e c t i o n 5240 of t h e Revised S t a t u t e s of t h e United
S t a t e s , a s amended, he f u r t h e r amended by adding a t t h e end t h e r e o f a new
paragraph reading as follows:
n
Whenever in t h e judgment of t h e Comptroller of t h e
Currency any n a t i o n a l banking a s s o c i a t i o n i s so c l o s e l y r e l a t e d in management, o p e r a t i o n or i n t e r e s t to any o t h e r bank,
b a n k i n g a s s o c i a t i o n , t r u s t company, s e c u r i t i e s company or
investment company t h a t an examination of such n a t i o n a l banking a s s o c i a t i o n f a i l s to d i s c l o s e i t s t r u e fcbhdition i n t h e
absence of d e t a i l e d i n f o r m a t i o n r e g a r d i n g such o t h e r r e l a t e d
i n s t i t u t i o n , such n a t i o n a l banking a s s o c i a t i o n s h a l l (a) obt a i n from such r e l a t e d i n s t i t u t i o n and f u r n i s h to t h e Compt r o l l e r of t h e Currency a copy of a r e p o r t of an examination
of such r e l a t e d i n s t i t u t i o n made by t h e S t a t e a u t h o r i t i e s
s i m u l t a n e o u s l y w i t h an examination of such n a t i o n a l banking
a s s o c i a t i o n made by examiners a p p o i n t e d by bhc Comptroller of
the Currency, or (b) by such o t h e r means as may be deemed
s a t i s f a c t o r y by t h e Comptroller of t h e Currency, f u r n i s h to
t h e Comptroller of the Currency d e t a i l e d information r e g a r d ing t h e c o n d i t i o n and o p e r a t i o n of such r e l a t e d i n s t i t u t i o n .
In such c a s e s t h e Comptroller of t h e Currency may, upon r e q u e s t ,
f u r n i s h t h e S t a t e S u p e r v i s o r of Banking, or o t h e r s i m i l a r o f f i c e r s , c o p i e s of r e p o r t s of examination of such r e l a t e d n a t i o n a l b a n k i n g a s s o c i a t i o n . If any n a t i o n a l banking a s s o c i a t i o n
s h a l l f a i l t o comply w i t h t h e r e q u i r e m e n t s of t h i s p a r a g r a p h a f t e r
a demand f o r such compliance has been made by the Comptroller of
the Currency, t h e Comptroller s h a l l r e p o r t the f a c t s i n t h e
c a s e to t h e F e d e r a l Reserve 3oSrd, which may, a f t e r a h e a r i n g ,
i s s u e an o r d e r d e p r i v i n g such n a t i o n a l banking a s s o c i a t i o n of
the p r i v i l e g e of r e c e i v i n g any d i s c o u n t s , advancements or a c commodations from the F e d e r a l r e s e r v e bank of which i t i s a memb e r u n t i l i t h a s complied f u l l y w i t h a l l demands made by t h e Compt r o l l e r of t h e Currency p u r s u a n t to t h e p r o v i s i o n s of t h i s p a r a g r a p h . The F e d e r a l Reserve Board s h a l l send a copy of such o r d e r
by r e g i s t e r e d mail to such n a t i o n a l banking a s s o c i a t i o n and a
copy to t h e F e d e r a l r e s e r v e bank of which i t i s a member; and,
a f t e r r e c e i p t of s a i d o r d e r , such F e d e r a l r e s e r v e bank s h a l l
n o t r e d i s c o u n t any paper f o r , or make any l o a n , advancement,
or o t h e r e x t e n s i o n of c r e d i t t o , such n a t i o n a l b a n k i n g a s s o c i a t i o n u n t i l s a i d F e d e r a l r e s e r v e bank h a s been n o t i f i e d by t h e
F e d e r a l Reserve Board t h a t such n a t i o n a l banking a s s o c i a t i o n
has complied f u l l y w i t h the r e q u i r e m e n t s of t h i s p a r a g r a p h . "
This p r o p o s a l i s desirj^S&t© s e c u r e a d e q u a t e i n f o r m a t i o n r e g a r d i n g
n a t i o n a l banks which a r e r e l a t e d t o o t h e r i n s t i t u t i o n s and i n p a r t i c u l a r to
a f f o r d some check upon c e r t a i n abuses f r e q u e n t l y engaged i n by c h a i n s of
b a n k s . During the l a s t few y e a r s a number of such c h a i n s have coll'apscd,
- 9 -
X-4500
72'
and i n v e s t i g a t i o n shows t h a t v/hon a n a t i o n a l "bank i s i n such a chain
an e x a m i n a t i o n of i t f a i l s to d i s c l o s e i t s t r u e c o n d i t i o n , duo to t h e
s h i f t i n g of a s s e t s back and f o r t h between t h e v a r i o u s i n s t i t u t i o n s which
make up t h e c h a i n .
o . That S e c t i o n 9 of t h e F e d e r a l R e s e r v e Act a s amended "be x£i*t¥&r
amended "by i n s e r t i n g t h e r e i n , immediately a f t e r t h e s i x t h p a r a g r a p h
t h e r e o f , a ne?- "paragraph r e a d i n g a s f o l l o w s ;
"When'over i n t h e judgment of t h e F e d e r a l R e s e r v e
Board any member bank i s so c l o s e l y r e l a t e d i n management,
o p e r a t i o n and i n t e r e a t t o any o t h e r "bank, b a n k i n g a s s o c i a t i o n , t r u s t company* S e c u r i t i e s company ox4 i n v e s t m e n t
conn any t h a t an e x a m i n a t i o n of such member bank f a i l s
to d i s c l o s e i t s t r u e c o n d i t i o n i n t h e a b s e n c e of
d e t a i l e d i n f o r m a t i o n r e g a r d i n g such o t h e r r e l a t e d
i n s t i t u t i o n , such member bank s h a l l ( a ) o b t a i n f r o m
such r e l a t e d i n s a n d
f u r n i s h to t h e F e d e r a l
Reserve Board a copy of a r e p o r t of an e x a m i n a t i o n of
such r e l a t e d i n s t i t u t i o n made by t h e S t a t e a u t h o r i t i e s
s i m u l t a n e o u s l y w i t h an e x a m i n a t i o n of such member "bank,
or (b) by such o t h e r means a s may be deemed s a t i s f a c t o r y
by t h e F e d e r a l Reserve Board, f u r n i s h t o t h e F e d e r a l
R e s e r v e Board d e t a i l e d i n f o r m a t i o n r e g a r d i n g t h e cond i t i o n and o p e r a t i o n s of such r e l a t e d i n s t i t u t i o n .
In such c a s e s t h e F e d e r a l R e s e r v e Board may, upon
r e q u e s t , f u r n i s h t h e S t a t e S u p e r v i s o r of Banking,
or o t h e r s i m i l a r o f f i c e r s , c o p i e s of r e p o r t s of any
e x a m i n a t i o n of such r e l a t e d member bank which h a s
been made by d i r e c t i o n of t h e F e d e r a l R e s e r v e Board o r
of t h e F e d e r a l r e s e r v e bank by examiners s e l e c t e d or
a p p r o v e d by t h e F e d e r a l R e s e r v e Board, I f any member
bank s h a l l f a i l to comply w i t h t h e r e q u i r e m e n t s of
t h i s p a r a g r a p h a f t e r a demand f o r such compliance
h a s been made by t h e F e d e r a l R e s e r v e Board, s a i d Board
may, a f t e r a h e a r i n g , i s s u e an o r d e r d e p r i v i n g such
member b a n k of t h e p r i v i l e g e of r e c e i v i n g any d i s c o u n t s ,
advancements o r accommodations f r o m t h e F e d e r a l r e s e r v e
bank of which i t i s a member u n t i l i t h a s complied
f u l l y w i t h a l l demands made by t h e F e d e r a l R e s e r v e
Board p u r s u a n t to t h e p r o v i s i o n s of t h i s p a r a g r a p h .
The F e d e r a l R e s e r v e Board s h a l l send a copy of such
o r d e r by r e g i s t e r e d m a i l to such member bank and
a copy to t h e F e d e r a l r e s e r v e bank of which i t i s a
member, and, a f t e r r e c e i p t of s a i d o r d e r , such F e d e r a l
r e s e r v e b a n k s h a l l n o t r e d i s c o u n t any p a p e r f o r , o r
make any l o a n , advancement, or o t h e r e x t e n s i o n of
c r e d i t t o , such member bank u n t i l s a i d F e d e r a l r e s e r v e bank h a s been n o t i f i e d by t h e F e d e r a l R e s e r v e
Board t h a t such member bank h a s complied f u l l y w i t h
t h e r e q u i r e m e n t s of t h i s p a r a g r a p h . 1 1
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7X
This proposal is similar to the preceding and. i s intended to apply
to State V.rsnks and trust companies which are members of the Federal Reserve
System. At present the only penalty for non-compliance with any provision
of the Federal Reserve Act by State member banks is that provided for in
the seventh paragraph of Section:-9 of the Federal Reserve Act, which authorizes the Federal Reserve Board to expel from the Federal Reserve System
any State member bank which f a i l s to comply with the provisions of that
Section. The penalty suggested above is less drastic but i s nevertheless
thought to be sufficient.
4t That Section 5146 of the Revised Statutes of the United
States, as amended, be further amended to read as follows:
11
Sec.5146. Every director must, during his
whole term of service, be a citizen of the United States, and
at least three-fourths of the directors must have resided in the
State, Territory, or District in which the association is located,
or within f i f t y miles of the location of the o f f i c e of the association, for at least one year immediately preceding their election, and must be residents of such State or within a f i f t y mile territory of the location of the association during their
continuance in o f f i c e . Every director must own in his own right
at least ten shares of the capital stock of the association of
which he is a director, unless the capital of the bank shall
not exceed $25,000, in which case he must own in his own right
at least f i v e shares of such capital stock. Any director who
ceases to be the owner of the required number of shares of the
s to sic, or who pledges or hypothecates the same, or who becomes
in any other manner disqualified, shall thereby vacate his
place.
"Ho national banking association shall make
a loan or loans aggregating more than Five Hundred Dollars
to any salaried, officer of such national banking association
or to any corporation in which such officer or any director
of such national banking association owns or controls a majority of the stock or of which he i s an officer or director, unless (a) such loan i s f u l l y secured by readily marketable collateral, or (b) such officer or director has f i r s t made available to the board of directors of such national banking association by f i l i n g with such national banking association in approved form a financial statement of such officer or of such corporation, as the case may be, which financial statement shall
accurately show the financial condition of such officer or corporation at the clese of the last f i s c a l or calendar year preceding the loan. A violation of this provision shall disqualify any such officer or director from serving as such and vacate
his place."
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11
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X-4500
74
This would -amend Section 5146 in feo respects: (1) The last sentence of that section as i t no*,v reads would he amended so as to disqualify a director who pledges or hypothecates his stock. This is intended merely to meet an apparent oversight in the law. (2) A new paragraph would oe added relating to loans to officers of national tanks
and to"corporations the majority of the stock of which i s owned or controlled by officers or directors of national banks..
5. That Section 5305 of the Revised Statutes of the United
States, as amended, be further amended to read as follows:
"Sec.5205. Every association which shall have
failed to pay up i t s capital stock, as required by law,
and every association whose capital stock shall have become impaired by losses or otherwise, shall, within two
months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capital
stock, by assessment upon the shareholders pro rata for
the amount of capital stock held by each; and the Treasurer of the United States shall withhold the interest upon
a l l bonds held by him in trust for any such association,
upon n o t i f i c a t i o n from t h e Comptroller of t h e Currency,
until otherwise notified by him. If any such association
shall f a i l to pay up its capital stock, end shall refuse
to go into liquidation, c?s provided by law, for two months
after receiving notice from the Comptroller, a receiver
may be appointed to close up the business of the association, according to the provisions of section fifty-two hundred and thirty-four; And provided, That if any shareholder
or shareholders of such bank shall neglect or refuse, after
two months' notice, to pay the assessment, as provided in
this section, i t shall be the duty of the board of directors
to cause a sufficient amount of the capital stock of such
shareholder or shareholders to be sold at public auction
(after thirty days' notice shall be given by posting such
notice of sale in the office of the bank, and by publishing
such notice in a newspaper of the city or town in which the
bank is located, or in a newspaper published nearest thereto),
to make good the deficiency, and the balance, if any, shall
be returned to such delinquent shareholder or shareholders:
Provided, however, That the Comptroller of the Currency may
extend the time for payment of such assessment whenever in
his judgment i t may be deemed advisable."
The only effect of this amendment would be to shorten from three
months to two months the period allowed for the payment of assessments to restore the capital of a national bank which has become inkpaired, with a provision authorizing the Comptroller of the Currency
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12
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to extend the time for the payment of such assessment when in his
judgment i t may be deemed advisable.
The Board has taken no definite action upon those provisions of your B i l l which are not specifically mentioned above, but
if i t does so I shall advise you promptly of the actiori taken.
The Board i s also considering the advisability of recommending
the enactment of certain other amendments to the National Bank
Act and the federal Reserve Act, but has not yet taken definite
action upon the matter. If i t decides to recommend any
further amendments, I shall advise you at a later date.
It may be of interest to yjur Committee to know that
this letter was considered in detail at a meeting of the Federal
Reserve Board at which all members except the Secretary of the
Treasury and the Comptroller of the Currency were present and
was approved by a l l those members who were present.
If there i s anything further that the Board can do to
be of any assistance to you in this or in any other matter,
please do not hesitate to call upon us.
Very truly yours,
D. R. Crissinger,
Governor.
WW-OMC sad
P.S. If you so desire the Board will be
glad to furnish you
with additional copies of this letter foS&ie use of the other members of your Committee.
76
X-4502
TREASURY DEPARTMENT
Office of the Secretary
WASHINGTON
January 9, 1926.
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 December 1 to December 31, 1925, amounting to $118,440.
Federal Reserve Notes, Series 1Q14
$5.
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
San Francisco
§10
200,000
500,000
340,000
200,000
200,000
300,000
450,000
200,000
.
2,390,000
100,000
200,000
$20
100,000
100,000
150,000
100,000
450,000
300,000
3,150,000 sheets at'$T?.6o per M
$100
Total
200,000
500,000
]40,000
210,000
400,000
600,000
450,000
4^0,000
10,000
10,000
3,150,000
$118,440.00
The charges against the several Federal Reserve Banks are as follows:
Sheets
1
P
Total,3
200,000
500,000
340,000
210,000
400,000
600,000
450,000
450,000
&
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
San Francisco
Compensation
Plate
Printing
$ 3,540.
8,850.
6,018.
3,717
7,080.
10,620.
7,965.
$1,640.
4,100.
2,788.
1,722.
7 , 9 6 5 .
$
5 5 , 7 5 5 .
3,280.
4,920.
3,690.
3 , 6 9 0 .
$25,830.
Materialsi
$ 2,340.
5,850.
3,97s.
2,457.
4,680.
7,020.
5,265.
5,265.
$ 36,855.
Total
$ 7,520.00
18,800.00
12,784.00
7,896.00
15,040.00
22,560.00
16,920.00
16,920.00
$118,440.00
The Bureau appropriations will "be reimbursed in the above amount from the
indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", and i t i s requested that your board cause such indefinite appropriation to be reimbursed in like amount.
Respectfully,
S. R. Jacobs,
D§puty Commissioner.
FEDERAL RESERVE BOARD
^
WASHINGTON
X-U5O3.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
January 18, 1326.
SUBJECT: Expense Main Line, Leased Wire System,
December 1925*
Dear Sir:
Enclosed herewith you will find two mimeograph statements, X-4503-a and X-U503~b, covering in
detail operations of the main line, Leased Wire System,
during the month of December, 1925.
Please credit the amount payable by your
bank in the general account, Treasurer, U. S., on your
books, and issue C/D Form 1, National Banks, for account of "Salaries and Expenses, Federal Reserve Board.,
Special Fund", Leased Wire System, sending duplicate
C/D to Feddfal Reserve Board.
Yours very truly,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.
REPORT SHOEING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE
FEDERAL RESERVE LEASED WIRE SYSTBI FOR THE MONTH OF DECEMBER 1925.
Percent of
Fed.Res. Total Bank
Bank Business BusinessC*)
From
Boston
New York
Philadelphia
Cleveland
Richmond.
Atlanta
Chic/jge
St. Louis
Minneapolis
Kynsas CityDallas
San Fr<mcisoo
33,550
iU5,2gg
38,596
75,'llU
47,45s
66,276
105,433
77,897
37,467
85,563
68,244
106,946
Total
887,843
Board
Total
1,176,032
288,189
Per cent of total
87.08#
3.78
16.36
\35
it, 46
5-35
7.46
11.87
8.77
4.22
9.64
7,69
Words sent
War
By ITew York
Treasury Finance
chargeable
Dept. Corporation to other
Business
Business F.R.Banks(l)
5,751
10,382
767
w
5,558
7,623
6,068
7,305
10,059
6, 808
-
723
749
726
-
5,067
««
-
2,351
1,735
135
12.05
4,908
7,654
3,760
11,956
57
2,422
5,194
2,692
100.00
87,832
192
24,152
86.277
174,109
433
12.89$
—
1,726
241
.03$
Business
Reported
by Banks
38,534
155,671
43,431
81,988
52, 810
68,514
113,141
82,970
40,649
90,930
66,810
116,267
951,715
X-l+503-a
Total
39,301
155,671
44,154
82,737
53,536
73,581
115,492
84,705
42,375
93,352
72,004
118,959
975,8S7
,374,707
1,350,574
100.00%
(*) lhese percentages used in calculating the pro rata share of leased wire expense
as shown on the accompanying statement (X-4503-b).
( l ) Number of words sent by New York to other F. I . Banks for their sole benefit charged to
banks indicated, in accordance with action taken at Governors' Conference Nov. 2-4, 1925.
X
1
X-4503-T3
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, DECEMBER 1925-
Operators'
Salaries
Name of Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Sc. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Federal He-serve Board
Total
$
250.00
933-48
Operators'
Overtime
$1.00
—
Wire
Rental
$
mm
216.66
280.33
175-00
225.00
# 3,768.96
200,00
!83.34
275*64
251.00
380.00
-
$7,139.41
Total
Expenses
$251.00
933.48
216.66
280.33
-
-
*•
—
-
2,00
-
-
-
$3.00
175.00
225,00
3*770.96
200.00
I83.34
275*64
251.00
380.00
.83
15,359.8)
15,259
-
$15,359.S3$22,502.24
W2.911.09
$19,591.15
Pro Rata
Share of
Total
Expenses
$
740.55
3,205.11
852.21
1,657*41
1,048.13
1,461.50
2,325.47
1,718.14
826.75
1,888.59
1,506.56
2,360.73
-
Credits
$
Payable to
Federal
Reserve
Board
251.00
933.48
216.66
280.33
175.00
225.OO
3,770.96
200.00
183.34
275.64
251.OO
380.00
$
635.55
1,377.08
& 1,077.80
1,236.50
* 1,445.49
1,518.14
643.41
1,612.95
1,255.56
1,980.73
-
-
$19,591.15
$7,142.41
489.55
2,271.63
$14,098.90
(b)1,445.49
$12,653.41
(&) Includes $204.67 for branch l i n e business transmitted over main line circuit*
(#) Includes s a l a r i e s of Washington Operators.
(*) Credit.
(a) Received $10.22 from War Finance Corp. and $2,900.87 from Treasury Department covering
month of December 1925*
(b) Amount reimbursable to Chicago.
business for the
CO
X-4504
80
OFFIC33S A-IE DIRECTORS OF FSDHSAI RESERVE BAHXS
District Ho.l - Federal Reserve Bank of Boston
(Frederic H. Curtiss, Chairman and Federal Reserve Agent; Allen S o i l i s ,
Deputy Chairman; W. p. G. Harding, Governor)
DIRECTOR
RESID2HCE
BUSINESS AFFILIATION
t s U-.: ™L:i'2";3
Dec. 31
Class A:
Alfred L. Ripley
Boston, Mass.
Pres. Merchants Eat 1 1 Bank
Edward S. Kennard
Ruaiford, Maine
V-P & Cashier Romford Nat' 1 Bank
Frederick S.Chamberlain Hew Britain, Conn. V-P.-Cash.,Hew Britain Mat'1 BarJs
1827
1823
Class B:
Philip R. Allen
Charles G. Washburn
Albert C. Bowman
E.Walpole, Mass.
Worcester, Mass.
Springfield, Vt.
V-P. Bird & Son Inc.Paper Co
Director, The Washburn Co.
Pres.The John T.Slack Corp'n
1827
ISc'O
Boston, Mass.
Concord, H.H.
Providence, R.I.
Lawyer
Public U t i l i t i e s
1925
1927
1528
Class C:
Frederic H.Curtiss
Allen Hollis
Chas.H.ManChester
District Ho. 2 - Fodoral Reserve Bank of Hew York
(Pierre Jay, Chairman and Federal Reserve Agent; William L. Saunders,
Deputy Chairman; Benjamin Strong, Governor)
Class A;
R. H. Iranian
Delmer Rankle
Jackson E. Reynolds
Ithaca, H.Y.
Pres.Tompkins County Hat*1 Bank
Hoosick Falls,H.Y. Pres.Peoples Hat11 Bank
Hew York, H.Y.
Pres.First Hat'l Bank
1926
1927
1923
How York,H.Y.
Hew York,H.Y.
How York,H.Y.
Pres.Francis H. Leggett & Co.
Pres.Lord & Taylor
Chrm.General Electric Co.
1225
1827
1928
Hew York,H.Y.
Hew York,H.Y.
Hew York,H.Y.
Chrm-Dir.Ingersoli-Rand Co.
Chrm.American Radiator Co.
1925
1927
1923
Class B:
Theodore F. Wnitmarsh
Samuel W.Reyburn
Owen D. Young
Class C:
Wm.L. Saunders
Clarence M.Woolley
Pierre Jay
— 2
BESIDENCE
8IHECT0R
—
BUSINESS AFFILIATION
X-45001
TERM EXPIRES
Doc. 31
D i s t r i c t No.3 - Federal Reserve Bank of Philadelphia
(Bichard L. Austin, Chairman and Federal Reserve Agent; Chas. C. Harrison,
Deputy Chairman; Geo. W. Morris, Governor)
Class A:
Jos. Wayne, Jr.
Frincis Douglas
John C. Cosgrove
Philadelphia, Pa.
Wilkes-Barre, Pa.
Johnstown, Pa.
Pres.Philadelphia-Girard Nat.Bank
Cashier, F i r s t Nat. Bank
Dir. United States Trust Co.
Philadelphia, Pa.
Philadelphia, Pa.
Philadelphia, Pa.
1926
Merchant
Merchant, and V-P Lumbermen's Ins.Co.1927
Chrm,Southwarlc Foundry & Mach,Co.
1928
Philadelphia, Pa.
Philadelphia, Pa.
B r i d g e v i l l e , Del.
Banker
Canner, - Farmer
' 1C..6
1927
1928
Class B:
Edwin S. Stunrt t
Charles K. Kaddon
Alba B. Johnson
Class C:
B. L. Austin
Chas. C. Harrison
H. L. Cannon
1986
1927
1928
D i s t r i c t I T O . 4 - Federal Reserve Bank of Cleveland
(George De Camp, Chairman and Federal Bo serve j^ro;:t; Lewis Blair Williams, Deputy Chairman; E. B. Fanchor, Governor)
Class A;
Bobert Wardrop
0. N. Sams
Chess Lamberton
Pittsburgh, Pa.
Hillsboro, Ohio
Franklin, Pa.
Chrm. F i r s t National Bank
Pros. Merchants National Bank
V-P Lamb er ton National Bank
1986
1927
1928
Cincinnati, Ohio
Youngstown, Ohio
Erie, Pa.
P h i l i p Carey Manufacturing Co,
Iron & Steel Manufacturer
Beed Manufacturing Company
1926
1927
1928
Cleveland, Ohio
Toledo, Ohio
Cleveland, Ohio
V-P Bo s twi ck-Braun Company
Hoyden, Miller & Company
1926
1927
1928
Class 3:
Geo. D. Crabbs
John Stambaugh
B. P. Wright
Class C:
George De Camp
w. W. Knight
Ju B. Williams
X-45B
- 3 -
D
a
in
c
T
O
P
v
H^sircrcn
busii^ss affiliation
tee-: 3x?iies
Dec. 31
D i s t r i c t Ho. 5 - F e d e r a l Z e s e r v e Banlc of Hichnond
( W i l l i a c W. Hoxtoii, Chp,irr,an and F e d e r a l lie s e r v e Agent; F r e d e r i c A.
Delano, Deputy Chairman; George J . Seay, Governor)
Class A:
L. 3 . Johnson
Charles 2 . Hiercan
J a s . C. B r a s w e l l '
Aiders©;*., W. Va.
B a l t i m o r e , Md.
KG city Mount, 27. C.
P r e s . F i r s t I T a t ' l Bank
P r e s . Western H a t 1 1 Bonk
P r e s . p l a n t e r s ITat'l Sank
1S26
1S27
1928
H a x t s v i l l e , S. C.
Bichnond, Va.
Washington, D. C.
Merchant & p l a n t e r
1926
P r e s . A t l a n t i c L i f e I n s u r a n c e Co. 1337
P r e s . ITat'l E l e c t r i c Supply Co.
1928
Hichnond, Va.
Washington, D. C.
C h a r l o t t e , IT. C.
Hocciver
Textiles
C l a s s B:
D. B. Coker
Edmund Strudwick
Edwin C. Grahan
Class C:
to. v». Hoxton
F r e d e r i c A. Delano
Robert L a s s i t e r
1926
1927
1926
D i s t r i c t Ho. 6 - F e d e r a l lie so rye Bank of A t l a n t a
(Oscar ITcwton, Chairnan and F e d e r a l Beserve A r e n t ; W. 3 . K e t t i g ,
Deputy Chairnan.; M. B. Wellborn, Governor)
C l a s s A:
G. G. Ware
Bugene li. Black
B. C. K e l v i n
Leesburg, F l a .
A t l a n t a , Go,.
Selnia, A l a .
P r e s . F i r s t ITat'l 3ank
p r e s . A t l a n t a T r u s t Co.
p r e s . S e l n a 1'Tat11 Bank
1526
1927
IS 28
ITev: O r l e a n s , La.
Decatur, Ga.
H a s h v i l l e , Term.
p r e s . Kohn, Weil & Siuon, I n c .
C o n t r a c t o r and. Bngineer
H a r t f o r d Hosiery M i l l s
1925
1927
1928
A t l a n t a , Ga.
A t l a n t a , Ga.
Birmingham, A l a .
Investment Banker
Southern Hep. Crane Co.
1926
1927
1923
Class
Leon C. Siaon
J . A. LicCrary
W. H. H a r t f o r d
Class C:
Oscar Fewton
Lindsey Hopkins
W. I-I. K e t t i g
X—4504
83
3SID3ITC3
DIR3CTCR
rxF'ircs
3USIE5SS AFFILIATION
Dec. 31
D i s t r i c t Ho. 7 - F e d e r a l Reserve 3a:"/: of Chicago
( W i l l i a n A. Heath, C h a i m a n . a n d F e d e r a l Reserve Agent; Jnnes Siapson,
Deputy C h a i m a n ; Janes 3 . "cDougal, Governor)
C l a s s A:
3 . 1 . Johnson
George I*. Reynolds
Charles H. 1/iclTidcr
Waterloo, Iorza
Chicago, 111.
Mason C i t y , low,a
P r e s . L e a v i t t 6 Johnson T r u s t Co.
Chrri. Con. & C o n ' l 2\;?.t'l 3a:ik
P r e s . F i r s t IT,at11 Banlc
D a c a t u r , 111,
IlilT/aukco, Wis.
D e t r o i t , Mich.
1526
H u c l l o r lioxivlo.cturing Co.
P r o s . P f i s t c r & Vogcl l e a t h e r Co. 1527
S e e . / Treas.Huron P o r t l a n d Cor.ont
1320
Co.
Chicago, 111.
Chicago, 111.
I.uncie, I n d .
P r e s . H a r s h a l i F i e l d & Co.
1826
1927
1S28
Class 3 :
Robert Mueller
A. H. Vogcl
S. T. Craoc
C l a s s C:
Janes 3 inp sari n . A. Hcr.th
F . C. 3c.ll
Pres. 3all brothers
D i s t r i c t ITo. 8 - F e d e r o l Re servo
(Williar.
Co.
IS 2 6
1537
1528
of S t . Louis
KcC. Llartin, C h a i m a n and F e d e r a l R e s e r v e Agent; John T?. 3oehne,
Deputy Chairnan; David C. 3 i g g " , Governor)
C l a s s A:
John G. Lonsdale
J . C. U t t e r b a c k
John C. M a r t i n
S t . Louis, ICo.
Paducah, Ky.
Salon, 111
P r e s . ITrit11 3ank of Cor:.orce
P r e s . C i t y JTat'l Bank
Y-P-Cashier, Saler. 27at ' 1 3ank
Greenville, Hiss,
S t . Louis, Mo.
L i t t l e Rock, Ark.
1926
Attorney-at-Law
P r e s . Wells R e a l t y & I n v e s t : - ' t C o . 1927
P r e s . P l u n k e t t - J a r r e l l Grocery Co.lS28
H v a n s v i l i e , Ind.
S t . Louis, Mo.
Ke;;;phis, Tenn.
Retired Capitalist
i»<io
1S27
I5ac
Class 3:
Lejtoy Percy
Kolla Wells
W. 3 . P l u n k q t t
Class C;
John W. 3oehne
Wr.:. KcC. Liar t i n
C. P . J . Llooney
E d i t o r " C o m e r c i a l Appeal"
1926
1S27
1928
x-:so:-
84
/DIPuCTOn
2ZSIE31TCS
IUSIF3SS AFFILIATION
T-xic nxr n s s
Dec. 31
D i s t r i c t ITc. 0 - Fcderr.1 Reserve Bank of Minneaoolis
(John i\. M i t c h e l l , Chairman ana f e d e r a l Boaervc Agent; Honor P . Clark
Deputy Chairman; aI. A. Young, Governor)
Class A:
J® C. B a s s e t t
Lesley C. McDowell
Paul J , Loonan
Aberdeen, S. D.
Marion, 17. d.
Minneapolis> Minn.
P r e s . Aberdeen N a t ' l Bank
V-P F i r s t R a t 1 1 Bank
1226
1227
1228
Helena, Mont.
Sau C l a i r e , Wis.
S t . Baul, Minn.
HoItor & Company, Hardware
John S. Owen Iur.ibor Co.
V-P Waldorf Paper p r o d u c t s Co.
1226
1227
1228
Minneapolis, 14 nn.
S t . P a u l , Minn.
Mcnoninee, Kick
P r e s . West P u b l i s h i n g Co.
(Jen. Mgr. Mer.oninec Sugar Co.
1226
1227
1228
Class 3;
If. B. B o l t e r
John S. Owen
Paul IT. Myers
Class
C:
John B. M i t c h e l l
Honor P. Clark
George W. McCormick
D i s t r i c t ITo. 10 - F e d e r a l Reserve Dnnk cf Kansas City
(x.i. L. McClure, Chairman and F e d e r a l Ho serve Agent; Hober Hord, Deputv
Chairman; 17, J . B a i l e y , Governor)
Class A:
E. E. Mullaney
C. C. Parks
Prank
Spenable
H i l l C i t y , Kans,
Denver, Colo.
Paola, "an.
P r e s . Earners & Merchants Zka:
V-P F i r s t K a t ' l Bank
P r e s . Miami County Hat 1 1 Bank
1226
1227
1228
Muskogee, Okla.
Or-aha, ITebr.
Kansas City, Ho,
Retired
Byrne & Earner Dry Goods Co.
o. M, B e m a r d i n Lumber Co.
1926
1227
1220
Class B:
Harry W. Gibson
Thos. C. Byrne
J . M. Bernardin
Class C;
M. L. McClure
Heber Hord
W. S. Bulkley
e .6 S
Kansas Qity, Mo,
C e n t r a l C i t y , ITebr. gtoclzian - Farmer
Oklahoma C i t y , Okla. P r e s . Kerr Dry Goods Co.
1226
1227
1926
X-4504
85
BI2EGTCH
ICSIID1TCE
30SI2GSS AFFILIATION
g.:
zcrncs
Dec. 31
District Ho. 11 - Federal Reserve Bark of Dallas
(C. C. Walsh, Chairman and Federal Be serve Sgcht; Clarence 3. Linz,
Deputy' Chairnan; Lynn P. Talley, Governor)
Class :A:
Eowell 3. Srith
J. H, Frost
W. E. Patrick
!,:cKinncy, Texas
Pres. First Hat'l Bank
San Antonio, Tex.
VW' Frost Fat'l Bank
Clarendon, Texas 'pres. First Hat'l Bank
1526
1527
1528
Paris, Texas
Cotton Oil Mills
Wichita Falls, Tex. pres. & Gen.Mgr.,Wichita Falls
& Southern Railroad Co.
Forth Worth, Tex.
Cattlecan
1526
Class B:
J. J. Culhertson
Frank Kell
J. E. Hail
1527
1928
Class C:
Clarence D. Linz
S . B . Perkins
C. C. Walsh
Dallas, Texas
Dallas, Texas
Dallas, Texas
V-P & Treas.Southland Life Ins.Co. 1926
Perkins Dry Goods Co.
1527
1526
District Ho. 12 - Federal Soscrvc 3r.nli of San Francisco
(Isaac B. Hewton, Chairman and Federal He servo Agent; Walton IT. Moore,
Deputy Chairman; J. U. Calkins, Governor)
• • -..iss A:
J. S. Macdonnell
Boward Whipple
C. K. Mcintosh
Pasadena, Cal.
Pres. First Hat * 1 Bank
1526
1527
Turlock, Cal.
Pres. First Hat' 1 Bank
San Francisco, Cal. Pros. The Bank of California 1T.A.152C
Class 3:
A. 3. C. Dohrr.:ann
vfc. T. Sesnon
S. H. Cox
San Francisco, Cal. pres. Dohrnami Corxi'l C0„
Soquel, Cal.
Agriculturist
Madera, Cal.
V-P & G-en.il^r. Hadora Sugar
1526
1527
San Francisco, Calif.
San Francisco, Cal. Pros.Walton H.Moore Dry Goods
Co. Inc.
San Francisco, Cal. Pres. Southern Pacific Co.
1926
Class C:
Isaac 3. ITewton
Walton H. Moore
Wb. Sproule
152?
1528
X-4504-a
OFFICERS
DIRECTORS OF FEDERAL RESERVE 3RAHCH BiMS
86
District Ho. 2 - Buffalo Branch of the Federal Heserve Bank of
Now York (W. W. Schneckcnburgcr, Managing Director) •
DIRECTOR
ItESIDZTCE
BUSINESS AFFILIATION
W. W. Schneckenburger
J. H. McHu}ty # Chrm.
Harry T„ lams dell
Elliot_|f<5.McDougal
Arthur Hough #
John A. Kloopfer #
Frank 7. Cranial 1
Buffalo, H.Y.
Buffalo, H.Y.
Buffalo, H.Y.
Buffalo, IT.Y.
Batavia, H.Yi
Buffalo, H.Y.
Westfield, IT.Y.
Pros.
Chrm.
Chrm.
Pres.
Pres.
Pres.
T23Id SXPIISS
Dec. 31
Pratt & Bambert Co.
Mfgrs.A Traders Nat. Bank
Marino Trust Comoany
Wiard plow Company
Liberty Bank *
Hat. Bank of Westfield.
1926
1926
1925
1927
1927
1928
1928
District Ho. 4 - Cincinnati Branch of the Federal Reserve Bank
of Cleveland (C. F. McCombs, Managing Director)
C. F. McCombs
Charles W. DuPuis
John Orawake # Chrm.
B. H. Kroger
George M. Verity f
E. S. Lee
Cincinnati,Ohio
Cincinnati,Ohio
Cincinnati,Ohio
Cincinnati,Ohio
Middletown,Ohio
Covington, Ky.
Pres.Citizens ITat.Bank & Tr.Co.
Pres.U. S. Playing Card Co.
Pres.Provident Savings & Tr.Co.
Chrm.American Rolling Mill Co.
Pres.First Hat. Bank
1926
1926
1926
1927
1927
1928
1928
District Ho. 4 - Pittsburgh Branch of the Federal Reserve Bank
of Cleveland (J. C. Hevin,. Managing Director)
J. C. Hevin
Joseph R. Eisaman
Jas.D. Callery # Chrm.
R. B. Mellon
Joseph R. Haylor #
A. E. Braun
Chas. W. Brown #
Pittsburgh, Pa.
Greensburg, Pa.
Pittsburgh, Pa.
Pittsburgh, Pa.
Wheeling, ?. Va.
Pittsburgh, Pa.
Pittsburgh, Pa.
V-P First Hational Bank
V-P Philadelphia Co. (Pittsburgh)
Pres.Mellon national Bank
John S. Hay lor & Co.
Pres,Farmers Deposit Hat.Bank
Pres.Pittsburgh plate Glass Co.
1926
1926
1926
1927
1927
1928
1928
District Ho. 5 - Baltimore Branch of tho Federal Reserve Bank
of Richmond (Albert H. Dudley, Managing Director)
Albert H. Dudley
Baltimore, Md*
Carter Or. Osburn
Baltimore, Md.
Edmund P.Cohill # Chrm. Hancock,
Md.
Henry B. Wilcox
Baltimore, Md.
John G. Rouse #
Baltimore, Md.
Levi B. Phillips
Cambridge, Md.
Wm. n. Mat thai #
Baltimore, Md.
Chrm.& pres.Frmrs.& 2Jrchnts.Hat.Bk.
pres.& Treas.Tonoloway Orchard Co.
V-Chrm.Merchant1 s Hat. Bank
Pres.Rouse, Honpstone & Co.
pres.Hat.Bank of Cambridge
V-P Hat. Enameling & Stamping Co.
1926
1926
1926
1927
1927
1928
192$?
-
2
X-4504-a
-
District No. 6 - ITow Orleans Branch of the Federal Reserve Bank
of Atlanta ( Marcus Walker, Managing Director)
•'Sifeoa
RESIDENCE
l .arcus Walker
F. 7. Pooto
L. C. Simon # Chrm.
2. S. Hecht
Albert P.Bush #
J. P. Butler, Jr.
P. H. Saunders #
ITew Orleans,
Hattiesburg,
New Orleans,
ITew Orleans,
Mobile, Ala.
New Orleans,
Mew Orleans,
BUSINESS AFFILIATION
La.
Miss.
La.
La.
La.
La.
TEHM EXPIRES
Doc. 51,
1926
1926
Pres.First Nat'l Bank
Pres.ICohn,Weil & Simon,Inc.
Pres.Hibernia Bank & Tr.Co.
Pros.T.G.Bush Grocery Co.
Pies>Canal Bank & Trust Co.
V-P.2Tewiaan,Saunders & Co., Inc.
1927
1927
1928
1926
District No.6 - Birmingham Branch of the Federal Reserve Bank
of Atlanta.( A. E.Talker, Managing Director)
A. E; Walker
W. W. Crawford
Oscar Wells #
Walter E. Henley
John P. Kohn #
John H. Frye
*, H. Kettig # Chra.
Birmingham,
Birmingham,
Birmingham,
Birminghamt
Montgomery,
Birmingham,
Birmingham,
Ala.
Ala.
Ala.
Ala.
Ala,
Ala.
Ala.
1926
1926
1926
1927
1927
1928
1928
Pres.American Trust & Svgs.Bgnk
Pres.First Nat * 1 Bank
(
Pres.Birmingham Tr.& Svgs.Co.
Real Estate and Insurance
Pres.Traders Nat'l Bank 1
Southern Sep., Crane Company
District No.6 - Jacksonville Branch of the Federal Reserve
Bank of Atlanta (George R. DeSaussure, Managing Director)
George 'R. DeSaussure
Edwai'd W. Lane
Fulton Saupsy # Ghrm.
C. P. Kendall
L. C. Edwards #
G. G. -Ware
J. C. Cooper #
Jacksonville, Fla.
Jacksonville, Fla.
Jacksonville, Fla.
Jacksonville, Fla.
Tampa, Fla.
Leesburg, Fla.
Jacksonville, Fla.
Preg.Atlantic Nat'l Sank
Saussy & Common .
V-P. Barnett Nat'l Bank
Pres.Florida Citrus Exchange
Pres,First Nat'l B$nk
Attorney at Law
.
1926
1526
1926
1927
1927
1928
1928
District No.6 - Nashville Branch of the Federal Reserve Bank
'of Atlanta ( Joel 3. Fqrt, Jr., Managing Director)
Joel B. Fort, Jr.
E. A. Lindsey
JP. M. Davis #
J. E. Caldwell
Wm, P . ^ l e ^ #
T. A. Embrey *
W. H. Hartford # Ghrm.
X
Nashville, Tenn.
Nashville, Tenn.
Nashville, Tenn.
Nashville, Tenn.
Columbia Jenn.
Winchester, Tenn/
Nashville, Tenn.
Pj*es.Tenn.Hermitage Nat'l Bank
VsifP. American Nat'l Bank
P?es.Fourth & First Ba#k & Tr.Co.
Farmer
Pres^Farmers Nat'l Bank
Pres.Hartford Hosiery Mills
1926
1936
1926
1927
1927
1928
1928
88
~ 3
X-4504-a
District No.7 - Detroit Branch of the Federal Reserve Bank
of Chicago ( Wm. 3. Cation, Managing Director)
DIRECTOR
RESIDENCE
BUSINESS AFFILIATION
Wm. R. Cation
John W. Staley
N. P. Hull # Chrm.
George B. Morley
Harry H. Baasett #
James Inglis #
William J. Gray
Detroit, Mich.
Detroit, Mich.
Lansing, Mich,
Saginaw, Mich.
Flint, Mich.
Detroit, Mich.
Detroit, Mich.
Pres.Peoples State Bank
Pres.Grange Life Ins.Co.
Pres.Second National Bank
Pres.Buick Motor Co.
Pres.American Blower Co.
Pres.First National Bank
TERM EXPIRES
Dec. 31
1936
1926
1926
1927
1927
1928
1928
District No.8 - Louisville Branch of the Federal Reserve Bank
of St. Louis ( W. P. Kincheloe, Managing Director)
W. P. Kincheloe
Eugene E. Hoge
Vim. Black# Chrm.
Max B. Mahm
E. H. Woods #
Attilia Cox
E. L. Swearingen #
Louisville, Xy.
Frankfort, Ky.
Louisville, Ky.
Bowling Green,Ky.
Lucas, Ky.
Louisville, Ky.
Louisville, Kjr.
Pres.State National Bank
Pres. B.F.Avery & Sons, Inc.
V-P. Citizens National Bank
Farmer & Live Stock Grower
Attorney
Pres.First National Bank
19f ...
17
1
192',
1927
1928
1S28
^District No.8 - Memphis branch of the Federal Reserve Bank
of St. Louis ( W.H.Glasgow, Managing Director)
W. K. Glasgow
Jno. D. McDowell
S. E. Ragland # Chrm.
R. Brinkley Snowden
E. M. Allen #
J. W. Vanden
T. K. Riddick f
Memphis, Tenn.
Memphis, Tenn.
Memphis, Tenn.
Memphis, Tqnn.
Helena, Ark.
Jackson, Tenn.
Memphis, Tenn.
Pres.Fidelity Bank d Trust Co.
Pres.First Nat. Bank
T-^. "Bank oT CoEuaeree ^"Trus* Co.
Planter & Real Estate
Pres.First National Bank
Attorney
1926
1926
1936
1927
1927
1928
District No. 8 - Little Rock Branch of the Federal Reserve Bank
of St. Louis (A. F. Bailey, Managing Director)
A. F. Bailey
Little Rock,Ark.
Stuart Wilson
Texarkana, Ark.
G. H. Campbell # Chrm. Little Reek,Ark.
John M. Davis
Little Rock,Ark.
Ramp Williams #
Hot Springs, Ark.
W. A. Hicks
Little Rock,Ark.
Moorhead Wright #
Little Rock,Ark.
V-P. State National Bank
V-P. Bankers Trust Company
Pres.Exchange National Bank
Pres.Hamp Williams Hardware Co.
V-P. American Southern Trust Company
Pres.Union Trust Co.
1926
1926
1926
1927
1927
192P
1920
89
X-4504-a
- 4 -
D i s t r i c t Ho. 9 - Helena Branch of the Federal Reserve Bank of
Minneapolis (E. E. Towle, Managirg Director)
DIRECTOR
RESIDENCE
BUSINESS AFFILIATION
TERM EXPIRES
Dec. 31
2. E. Towle
E. 0. Kaufman
C. J. Kelly # Chrm.
T. A. Marlow
Henry Sieben #
Lee M. Ford
Helena, Mont.
Helena, Mont.
Butte, Mont,
Helena, Mont.
Helena, Mont.
Great Falls,Mont.
V-P & Cash. .Union Bank & Trust Co.
Hanson Packing Co.
Pres.National Bank of Montana
Pres.Sieben Live Stock Co.
Pres.Great F a l l s National Bank
1925
1926
1926
1927
1927
1928
1928
D i s t r i c t No. 10 - Denver Branch of the Federal Reserve Bank of
Kansas City (J. E. Olson, Managing Director)
J. E. Olfion
A. C. Foster
R. H. Davis # Chrm.
Win. L. Petriken #
Harold Kountze
Harry W. Farr
Murdo MacKenzie #
Denver, Colo.
Denver, Colo.
Denver, Colo.
Denver, Colo.
Denver, Colo.
Greeley,Colo.
Denver, Colo.
V-P United States National Bank
Merchant, Wholesale Drug Business
Pres.Great Western Sugar Co.
Chrjp.& V-P Colorado National Bank
V-P. Farr Produce Company
The Matador Land & Cattle Co.,Ltd.
1926
1926
1926
1927
1927
1928
1928
D i s t r i c t No. 10 - Omaha Branch of the Federal Reserve Bank of
Kansas City (L. H. Sarhart, Managing Director)
L. H. Ear hart
T. L. Davis
J. E. Miller, # Chrm.
E. 0. Marnell
A. J. Weaver #
A. H. Marble
Wm. Diesing #
Omaha, Nebr.
Omaha, Nebr.
V-P First National Bank
Lincoln,Nebr.
Miller & Paine Dept. Stores
Nebraska City,Nebr.Cashier, Merchants National Bank
F a l l s City,Nebr.
V-P First National Bank
Cheyenne, Wyo.
Pres.Stock Growers National Bank
Omaha, Nebr.
Cudahy Packing Co.
1926
1926
1926
1927
1927
1928
1920
D i s t r i c t No. 10 - Oklahoma City Branch of the Federal Reserve Bank
of Kansas City (C. E. Daniel, Managing Director)
C. E. Daniel
Walter Ferguson
Frank But tram # Chrm.
William Mee
E. J. Murphy #
Ned Holman
W. F. Nichols #
Oklahoma City,
Oklahoma City,
Oklahoma City,
Oklahoma City,
Clinton, Okla.
Guthrie, Okla.
Tulsa, Okla.
Okla.
Okla.V-P First National Bank
Okla.
Okla.Pres.Security National Bank
V-P Security National Bank
P r e s . F i r s t National Bank
Pres.Nichols Hardware Co.
1926
1926
1926
1927
1927
1928
1928
- 5 -
X-4504-a g Q
District No.11 - Si Paso Branch of the Federal Reserve Bank
of Dallas (M. Crump, Managing Director)
DIRECTOR
RESIDENCE
M. Crump
3. A. Cahoon
A. P\ Coles # Chrm.
Geo. D. Flory
H. L. Kokernot #
E. M. Hurd
C. M. Newman #
El Paso, Tex.
Roswell, N.Mex.
El Paso, Tex.
El Paso, Tex
Alpine, Tex.
El Paso, Tex.
El Paso, Tex.
BUSINESS AFFILIATION
TERM EXPIRES
Dec. SI
Pres.First B a t * 1 9
Investments ,
V-P. The State National Bank
Cattleman
The H. Lesinsky Company
Pres.Newman Injiestmsmt Co.
2
•
1926
6
1926
1927
1927
1928
1928
District No.11 - Houston Branch of the Federal Reserve Bank
of Dallas (D. P. Reordan, Managing Director)
Houston, Tex.
D. P., Reordan
2. F. Gossett
Houston, Tex.
J. Cooke Wilson # Chrm. Beaumont,Tex.
Fred W. Catterall
Galveston, Tex.
Ei A. Peden #
Houston, Tex.
Guy M. Bryan
Houston, Tex.
R. M. Farrar #
Houston^ Tex.
1926
V-P. South Texas Com 1 Na.t'1 Bank 1926
Pres.The Wilson Broach Co.
1926
Cash.First Nat'l Bk.of Galveston 1927
Pres.Peden Iron & Steel Co.
1927
V-P. Second National Bank
1928
Pres.Farrar Lumber Co.
1928
1
District No*12 - Portland Branch of the Federal Reserve Bank
of San Francisco (R.B. West, Managing Director)
R. B. West
J. C. Ainsworth
E-.than Strauss #Chrm.
Win. Pol-lman
Portland, Ore.
Vort'lrnd, Oi-o.
Portland, Ore.
Baker, Ore.
A. C. Dixon #
John F. Daly
Edward
Pease #
Eugene, Ore.
Portland, Ore.
The Dalles, Ore.
Pres.United States Nat'l Bank
Gen.Mgr.Fleischner,Mayer & Co.
Pres.First Nat'l Bank; Pres.Baker Loan & Trust Company
Gen.Mgr.Booth-Kelly Lumber Co.
P^es.Hlbernia Com.& Svgs.Bank
E^wsixd C. Pease, Co.,Inc.
1926
1926
1926
1927
1927
1928
1928
District No.12 - Seattle Branch of the Federal Reserve Bank
of San Francisco (C. R. Shaw, Managing Director)
C. R.
M. A.
Chas.
E. W.
Chas.
Henry
M. F.
Shaw
Seattle, Wash.
Arnold
Seattle, Wash.
H. Clarke # Chrm. Seattle, Wash.
Purdy
Bellingbam, Wash.
E. Caches #
Kt.Vernon, Wash.
A. Rhodes #
Tacoma, Wash.
Backus
Seattle, Wash.
Pres.First National Bank
Pros.Kelly Clarke Company
Pres.First National Bank
Farmer
Rhodes Bros. Department Store
Pres.National Bank of Commerce
1926
1926
1926
1927
1927
1928
1928
* 6 •*
91
X-4504-a
District No. 12 - Spokane Branch of the Federal Reserve Bank of
Sam Francisco (D« L. Davis, Managing Director)
DIRECTOR
RESIDENCE
D. L. Davis
C. E. McBroom
G. I . Toevs # Chrm.
Charles J/. McKenzie
I . H. Van 0strand #
Spokane, Wash.
Spokane, Wash.
Spokane, Wash.
Colfax, Wash.
Coeur d'Alene.Ida.
William JCuling #
R. L. Ratter
Garfield, Wash.
Spokane, Wash.
BUSINESS AFFILIATION
TERM EXPIRES
Dec. 31
Pres.Exchange National Bank
V-P Centennial Mill Company
Retired.
Pres.Craig Mountain Lumber Co.
Winchester, Idaho.
Pres.Spokane & Eastern Trust Co.
1926
1926
1926
1927
1927
1928
1928
District No. 12 - Salt Lake City Branch of the Federal Reserve
Bank of San Francisco (W. L. Partner, Managing Director)
W. L. Partner
Salt Lake City,Utah
Charles H. Barton
Ogden, Utah
Pres.National Bank of Commerce
Lafayette Hanchett #Chrm.Salt Lake City " Pres.Utah Power & Light Co.
J. S. Bus s e l l
FocaSsllo,Idaho
Pres.ctt'na Ik & Trust Co.
Chapin A. Day #
Ogdon,
Utah
Pres.Ogden Portland Cement Co.
L. H. Farnsworth
Salt Lake City,Utah,Chrm.Walker Brothers,Bankers,
F. J. Hagenbarth t
Sponcer, Idaho
Pres.Wood Livestock Co.
1926
1926
1926
1927
1927
1928
1928
District No. 12 - Los Angeles Branch of the Federal Reserve Bank
of San Francisco (R. B. Motherwell, Managing Director)
R. B.
J. F.
W. L.
F. J.
E. M.
Henry
Motherwell
Sartori
Valentine f Chrm.
Belcher, Jr.
Lyon #
M. Robinson
Los Angeles,Calif.
Los Angelas,Calif.
Fullerton, Calif.
San Diego, Calif.
Redlands, Calif.
Los Angeles,Calif.
# Appointed by Board
Corrected to October 9, 1525.
Pres.Security Trust & Svgs.Bank
Pres.Fullerton Oil Co.
Pres.First National Bank
Horticulturist
Pres.First National Bank
1926
1926
1926
1927
1927
1928
1928
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4505
January 19, 1926
SUBJECT: Participation of liquidating member "banks
in election of Class A and B directors.
Deal* Sir:
In answer to an inquiry made by the Chairman of one of the Federal reserve banks, the Federal
Reserve Board ruled that member banks in process of
liquidation, either under voluntary or involuntary
T
proceedings, may not participate in the election of
Class A and B directors of Federal reserve banks.
Very truly yours,
D, R. Crissinger,
Governor.
TO ALL CHAIRMEN OF F. R. BA.NKS#
9
FEDERAL RESERVE BOARD
WASHINGTON
official correspondence to
federal reserve board
X~4506
January 19,1926.
SUBJECT:
Code Words Covering Hate Schedules.
Dear Sir;
Referring to the.Board's circular letter X-4493, dated January 5,1926, on the subject "Procedure at Reserve Banks on Hates",
i t has been decided, effective February 1st, in the interest of
safety and economy, to designate the following new code words which
are to be used in all messages exchanged between the Federal reserve
banks and the Federal Reserve Board with regard to rate changes:
Discount rate -(see X-4140, dated Aug. 22,1924).
MAYMOON -
Minimum buying rate for bankers' acceptances within 45 days (percent)
MAYONNAISE - Minimum buying rate for bankers' acceptances within from 46 to 90 days (percent)
MAYORALTY -
Minimum buying rate for bankers' acceptances within from 91 to 120 days (percent)
MAYORESS -
Minimum buying rato for bankers' acceptances within from 121 to 180 days (percent)
MAYPOLE -
Rates at which bankers' acceptances may be
purchased, with agreement to resell (socalled repurchase agreements) (percent)
MAYQUEEH -
Rates at which Government securities may be
purchased with agreement to resell (percent)
MAZURKA -
No change in existing schedule of rates.
It i s requested that the above code words be added to the bottom
of page 145 of tho Federal Reserve Telegraphic Code to follow the
code word niAYOAMS".
Yours very truly,
Walter L. Eddy,
Secretary.
TO ALL F.R.AGENTS.
FEDERAL RESERVE BOARD
94
WASHINGTON
address official correspondence to
the federal reserve board
\
X-4507
January 21, 1926.
SUBJECT: Letters to Committee on Banking and. Currency
re legislation.
Dear Sir:
The Federal Reserve Board has recently addressed
three letters to the Chairman of the Committee on Banking
and Currency of the House of Representatives, copies of which
are enclosed for your information',^ as follows:
(1)
(2)
(3)
Expressing the Board's views on and recommending certain amendments to H, 2. 2, the socalled McFadden B i l l ;
Recommending an amendment to Section 13 of the
Federal Reserve Act extending the maximum
maturity of advances "by Federal reserve banks
to member banks on their promissory notes when
such notes are secured by eligible paper; and
Recommending the enactment of legislation to
prohibit the use of the words "Federal",
"Reserve" and "United States" by banking ass o c i a t i o n s , etc.
Very truly yours,
Waiter L. Eddy,
Secretary.
(Enclosures)
TO CHAIRISH AM) GOVERNORS OF ALL P* R. 3ANXS
( COPY )
X-4508
January 16, 1926.
Dear Mp. McFadden:
Reference is made to your letter of October 31st in which i t
is suggested that the maximum1 maturity of advances made "by Federal
reserve banks to member banks on their promissory notes be increased
from f i f t e e n days to ninety days•
After careful consideration of this suggestion, and after consultation witn the Federal Reserve Agents and the Governors of the
several Federal reserve banks, the Federal Reserve Board is of the
opinion that an amendment to the law increasing the maximum maturity
of such notes when secured by paper e l i g i b l e for rediscount or for
purchase by Federal reserve banks should be adopted. The Board does
not believe, however, that this increase in maturity of such notes
snould apply when they are secured by bonds or notes of the United
States or by bonds of the War Finance Corporation# I am enclosing
herewith a draft of an amendment to Section 13 of the Federal Reserve
Act waich embodies the views of the Federal Reserve Board, which are
concurred in by the Federal Reserve Agents and the Governors of the
several Federal reserve banks.
^'he proposed amendment would permit Federal reserve banks to
extend credit to their member banks for any period of time not exceeding ninety days on the aecixrity of eligible -paper, whereas under
the present law the length - of the period of any such credit in excess
of f i f t e e n days i s determined necessarily by the maturity dates of
th& notes which arc offered for discount at the Federal reserve banks.
The Federal Reserve Board believes that i t would be of distinct advantage to member banks to be able to obtain credit for any desired
period up to ninety days, regardless of the maturity dates of the
notes in i t s portfolio. Especially i s this true in those sections
of the country where seasonal credit i s greatly demanded#
•^t is also believed that the enactment of the amendment proposed
w i l l be a means of saving country banks much inconvenience#
Member
1
banks notes with fifteen-day maturities are in many cases frequently
renewed and the proposed amendment would eliminate the necessity and
inconvenience of such frequent renewals. This would be of especial
assistance to those member banks which are so situated" that more than
one day i s necessary for the mails to pass to or from the Federal reserve
bank by which they are served.
X-4508
S
The Federal Reserve Board feels that the increase in maturity for
member "banks' notes should be limited to those notes secured by paper
eligible for discount or purchase by Federal reserve banks because, in
the opinion of the Board, i t is unsound banking to permit the issue of
Federal Beserve ^otes against promissory notes secured by Government
bonds as collateral..
For this reason the Board believes that the present
law i s sufficiently liberal as respects advances to member banks on notes
secured by Government bonds..
Board.
The foregoing recommendation i s made by a majority vote of the
Very truly yours,
*
Hon. Louis T. McFadden, Chairman,
Committee on Banking and Currency,
Washington, D. C.
D. R. Orissinger,
Governor.
X-4508-a
A
SILL
To Amend Section 13 of the Federal
Reserve Act and for other purposes.
Be i t enacted "by the Senate and House of Representatives of the
United States of America in Congress assembled. That the seventh paragraph of Section 13 of the Federal Heserve Act as amended he amended
and reenacted to read as follows:
"Any Federal reserve hank may make advances for
periods not exceeding fifteen days to i t s member banks on
their promissory notes secured by the deposit or pledge
of bonds or notes of the United States or of bonds of the
War Finance Corporation, or when authorized by the Federal
Reserve Board and subject to such conditions, regulations,
limitations and restrictions as the said Board may prescribe, may make advances for periods not exceeding ninety
days to i t s member banks on their promissory notes secured
by such notes, drafts, b i l l s of exchange or bankers'
acceptances as are eligible for rediscount or for purchase
by Federal reserve bonks under the provisions of this Act-.
All such advances shall be made at rates of interest to
be established by such Federal reserve banks subject to
the review and determination of the Federal Reserve Board."
( COPY )
X-4-509
98
tfanuary 16, 1926,
Honorable Louis T, McFaaden, Chairman,
Committeemen Banking and Currency,
House of Representatives,
Washington, D. C,
My dear Congressman:
The Federal Reserve Board has received many complaints about
the use of the words "Federal" or "-Reserve", or a combination of the
two as part of the t i t l e of banks, corporations and firms other than
Federal reserve banks• In most of these instances i t is obvious that
such words have been used in an attempt to take advantage of the
prestige enjoyed by the Federal reserve banks and to arrogate to
the firms or corporations using such words part of the benefits accruing from this prestige, and the Board lias f e l t that not.only is
this purpose in i t s e l f objectionable but also that such use of
these words i s likely to mislead the public and to cause confusion.
Indeed, in several instances i t has been found that the use of
such words by firms or corporations other than Federal reserve banks
actually has led to confusion# The Board has always opposed such
use of these words and feels that legislation to remedy the situation is very badly needed.
Under date of September 2, 1922, the Board called this
matter to your attention with a request that you endeavor to secure
the passage of a law which would prevent this objectionable practice
as far as possible; and you introduced at the f i r s t session of the
68th Congress a B i l l (H.B. 6145) for this purpose, a copy of which
is enclosed herewith* This b i l l , however, was never reported out by
the Banking and Currency Committee, and the Board desires to renew
its recommendation that this b i l l , or some other b i l l having substantially the same effect, be enacted into law at the present session
of Congress and to express i t s hope that you will exert your best
efforts to this end.
It will be noted that the f i r s t provision of the enclosed
b i l l would prohibit offering for sale as Farm Loan bonds any securities
not issued under the terms of the Federal Farm Loan Act, This provision
was included in the b i l l , at the time i t was being prepared, at the
request of the Farm Loan Board, but the Federal Reserve Board is not
advised whether the Farm Loan Board is s t i l l desirous of securing
the enactment of such legislation,
A precedent for the enactment of a law of this kind i s
found in Section 5243 of the Revised Statutes which prohibits the
^2-
X-4509
99
use of the -70rd nnational11 as ioart of the t i t l e of any "bank not organized
under the National Bank Act, While the validity of that provision has
never "been passed upon by the courts, i t has "been on the statute hooks
since 1873 and i t s validity has never "been questioned. It is well
recognized that the good name or reputation of a "bank i s one of i t s
most valuable possessions and it would seem clear that the same i s true
of any banking system* Any device or scheme the natural result of which
would be to cause banks,, corporations or firms of questionable standing to be confused with the Federal reserve banks or which i s likely
to mislead the public into believing that such banks, corporations or
firms are a f f i l i a t e d in some way with the Federal Reserve System
endangers the good name and reputation of the Federal Reserve System.
It i s believed, therefore, that the enactment of legislation to
prevent such abuses i s necessary to protect the Federal reserve banks
and the Federal Reserve System* The Supreme Court of the United States
has recognized the principle that the power to create national banks
carries with i t the power to preserve them,(See First National Bank v.
Fellows, 244 U.S. 416 and cases cited), and the same must be true.•as
to the Federal reserve banks. There would seem to be no doubt, therefore, as to the constitutionality of a b i l l designed to protect the
reputation of the Federal reserve banks.
For your information there i s also enclosed herewith a copy
of a memorandum prepared for the information of the Federal Reserve
Board containing a brief statement of the circums tances of each case
which has been called to the attention of the Board in which the word
"Federal11 or the word "Reserve11 or a combination of the two has been
used as a part of the name of a bank, corporation or firm other than
a Federal reserve bank or in the advertising of such a bank, corporation or firm or where such use of these words has been attempted.
I t i s b e l i e v e d t h a t a r e a d i n g of the f a c t s s 0 t f o r t h i n t h i s memorandum w i l l convince any one of t h e n e c e s s i t y f o r some l e g i s l a t i o n t o
p r e v e n t such a b u s e s .
As you w i l l note from the memorandum, the Board has sought
various ways of preventing the objectionable practices, but usually
with l i t t l e success. The Board has several times requested the aid
of the Federal Trade Commission in these matters, but as this body
is without jurisdiction over banks or insurance companies i t s Dower
to render material assistance has necessarily been greatly restricted.
The Federal Reserve Board hopes that you w i l l do a l l that is
possible to secure the introduction and enactment into law of a b i l l
which w i l l provide an effective remedy for this situation.
I f a g r e e a b l e t o you, the Board w i l l be g l a d to f u r n i s h a
copy of t h i s l e t t e r and the e n c l o s e d documents to each member of your
committee i n o r d e r t h a t they may s t u d y them a t t h e i r l e i s u r e .
Very truly yours,
Enclosures
WW OMC
D. R. Crissinger
Governor
68th Congress,
1st Session.
( COPY )
H.
X-4509-a
6145.
IB THE HOUSE OF REHiESatTATIVES.
January 24, 1924#
Mr, McFadden introduced the following "bill; which was referred to the
Committee on Banking and Currency and ordered to "be printed.
A BILL
To prohibit offering for sale as Federal farm loan bonds any securities
not issued under the terms of the Farm Loan Act, to limit the
use of the words "Federal" , "United States' 1 , or "reserve",or
a combination of such words, to prohibit false advertising, and
for other purposes.
BE 'IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF
THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That no bank,
banking association, trust company, corporation, association, firm,
partnership, or person not organized under the provisions of the Act
of July 17, 1916, known as the Federal Farm Loan Act, as amended, shall
advertise or represent that i t makes Federal farm loans or advertise
or offer for sale as Federal farm loan bonds a;xy bond not issued under
the provisions of the Federal Farm Loan Act or make use of the word
"Federal" or the words "United States" or any other word or words
implying Government ownership, obligation, or supervision in advertising or offering for sale any bond, note, mortgage, or other security
not issued by the Government of the United States or under the provisions of the said Federal Farm Loan Act or some other Act of Congress.
\
SEC. 2, That no bank, banking association, trust company, corporation, association, firm, partnership, or person engaged in the
banking, loan, building and loan, brokerage, factorage, insurance,
indemnity, or trust business shall use the word "Federal", the words
"United States", or the word "reserve", or any combination of such
words, as a portion of i t s corporate, firm, or trade name or t i t l e or
of the name under which it does business• Provided, however. That the
provisions of this section shall not apply to the Federal Reserve Board,
the Federal Farm Loan Board , the Federal Trade Commission, or any other
department, bureau or independent establishment of the Government of
the United States, nor to .any Federal reserve bank, Federal land bank,
or Federal reserve agent, nor to the Federal Advisory Council, nor
to any corporation organized under the laws of the United States,
100
—2—
X-4509-a
ncr to any bonk, "banking association, t r u s t company, corporation,
association, firm partnership, or person actually engaged in business
under such name or t i t l e prior to the passage of this Act.
SEC. 3. That no bank, banking association, or trust company
which i s not a member of the Federal reserve system shall advertise
or represent in any way that i t is a member of such system or publish
or display any sign, symbol, or advertisement reasonably colcal&ted
to convey the impression that i t i s a member of such system.
S3C. 4. That any bank, banking association, trust company,
corporation, association, firm or partnership violating any of the
provisions of this Act shall be guilty of a misdemeanor and shall
be subject to a fine of not exceeding $1,000. Any person violating
any of the provisions of this Act, or any officer of any bank, banking
association, trust company, corporation or association, or member
of any firm or partnership violating any of the provisions of this
Act who participates in, or knowingly acquiesces in, such violation
shall be guilty of a misdemeanor and shall be subject to a fine of
not exceeding $1,000 or imprisonment not exceeding oneyear, or both.
Any such i l l e g a l use of such word or words, or any combination of
such words, or any other violation of any of the provisions of this
Act, may be enjoined by the United States district court having
jurisdiction, at the instance of any United States district attorney,
any Federal laad bank, joint-stock land bank, Federal reserve bank;.
or the Federal Farm Loan Board or the Federal Reserve Board.
SEC. 5. That if any clause, sentence, paragraph, or part of this
•Act shall for any reason be adjudged by any court of competent
jurisdiction to be invalid, such judgment shall not affect, impair
or invalidate the remainder of this Act, but shall be confined in i t s
operation to the clans?, sentence, paragraph, or part thereof
directly involved in the controversy in which such judgment shall
have been rendered.
101
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4510
January 20, 1926.
SUBJECT: Federal Heserve Bank of San Francisco v.
Idaho Grimm Alfalfa, Seed Growers Association.
Dear Sir:
There i s enclosed for your information a copy of a l e t ter addressed to the Board "by Mr, Perrin transmitting a copy of
the opinion rendered "by the Circuit Court of Appeals in the above
entitled case, which was decided adversely to the Federal Reserve
Bank "by the United States District Court and the Circuit Court of
Appeals. After discussing the case at some length, Mr. Perrin
states that the Executive Committee of the Federal Reserve Bank of
San Francisco feel that the case involves a cuestion of vital importance not only to the Federal Reserve Bank of San Francisco, but
to a l l other Federal reserve banks, and has authorized the employment
of Honorable Newton D. Baker to assist in handling the case before
the Supreme Court of the United States.
Mr. perrin suggests that
the case be brought to the attention of the othef Federal reserve
banks and that, if agreeable to them, Mr. Baker1s fee be prorated
among a l l of the Federal reserve banks, as has be&n done in the
past in relation to other cases of system-wide interest,
the Board understands that Mr. Baker actually has
been employed by the Federal Reserve Bank of San Francisco and
has f i l e d with the Supreme Court a petition for a writ of certiorari.
The Board desires to make no recommendation in this matter, but requests that you advise i t whether or not your bank would be willing
to bear a pro rata share of the expenses of Mr. Baker * s employment
in this case.
Yours very truly,
D, B. Crissinger,
Governor
TO GOVERNORS OF ALL F.R.BANKS
Enclosure.
X-4464
COPY
103
IN THE UITIIED STATES CIRCUIT COURT OF APPEALS
For the ITinth Circuit. .
FEDERAL HES3RVE EAHK OF SAU
FRA2TCISC0, a corporation,
P l a i n t i f f in Error
No. 4560
vs.
I MHO GRII.il ALFALFA SEED GROWERS
ASSOCIATION, a corporation,
Defendant in Error.
Upon Writ of Error to the United States District Court for the
District of Idaho, Eastern Division.
Before GILBERT, HIHT, and BZJDKIN, Circuit Judges.
RUDKIH, Circuit Judge:
During the period herein mentioned, the
Idaho Grimm Alfalfa Seed Growers Association was a farm marketing association organized under the laws of that State and was engaged in the business of cleaning and marketing a l f a l f a seed produced "by i t s members.
When
Alfalfa seed was Sold, a draft was drawn on the buyer for the purchase
price with a b i l l of lading attached.
Up to about a year prior to November
28, 1923, a l l drafts thus drawn were deposited with D. W. Standrod and
Company Bankers, for collection only, and the Association was not permitted
to draw against the amount of the drafts until payment was actually made to
the Standrod Bank.
But in the f a l l of 1922, this arrangement was changed
through an agreement between the Association and the Standrod Bank, and
thereafter the Association was given immediate credit for the amount of the
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X-4454
AO
drafts when deposited, and was permitted to draw against them to the f u l l
amount, if i t so desired.
If a draft was not paid vrhen presented, the amount
was charged back to the account of the Association, and if paid, the Association was charged with interest oil the amounts checked out "before the draft
was Actually paid.
On November 23, 1923, tiie Association drew a sight draft
in the sum of $10,848.80 on Teweles and Company for the purchase price of a
carload of alfalfa seed shipped to that company.
The draft was made payable
to the Standrod Bank, had attached thereto a b i l l of lading for the shipment,
and was accompanied by a letter of instructions, stating that payment might
be deferred until the arrival of the car.
The draft was then forwarded by
the Standrod Sank to the Federal Reserve Bank at Salt Lake for discount and
was there discounted and the amount placed to the credit of the Standrod Bank.
Two similar drafts were drawn by the Association on November 26, 1923, for
substantially similar amounts and these drafts took the same course.
It might
be said in this connection* however, that the general manager of the Association neglected to sigh btie of tha l&fet ifientionod drafts and the defect was
not discovered until the draft reached the Federal Reserve Bank at Salt Lake.
The Standrod Bank was then notified of the defcct over the telephone and another draft was substituted in i t s place.
The Standrod Bank was open for the transaction of business for the
last time on November 28, 1923* and on November 30, 1923, i t s affairs were
taken over by the Banking Officers of the State,
On the latter date the
Standrod Bank had an overdraft with the Federal Reserve Bank in the sum of
$47.96, and the Association had a balance to i t s checking account, on the
books of the Standrod Bank, in the sum of $32,295.20.
On December 1, 1923,
the Association notified the Banking Officers of the State that the Standrod
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X-4464
105
Bank was insolvent at the time of the receipt of the drafts and that i t s
officers and agents knew or had cause to "believe that i t was so insolvent, and
the Association made claim to th£ drafts or, if collected, to the proceeds
thereof#
A copy of this notice was mailed to the Federal Refeerve Bank oh
the same day.
The present action was then instituted by the Association agaiiist
the Federal Reserve Bank, the Standrod Bank, and the Banking Officers of the
States to recover the amount of the three drafts or their value,
The com-
plaint contains six causes of action in all* or two causes of action "based
oti each of the three drafts.
The causes of action on each of the three
drafts were identical in fotm however, so that for persent purposes reference
need only "be made to the f i r s t and second causes of action "based on the draft
of November 23, 1923,
Speaking generally, i t was alleged in the f i r s t cause
of action that for upwards of a year prior to the date of. the receipt of
the draft in question the Standrod Bank was insolvent; that i t s directors
and managing officers, and the managing officers of the Federal Reserve Bank
were at a l l times f u l l y aware of i t s insolvent condition; that the draft was
forwarded to the Federal Reserve Bank for collection; that the amount thereof was collected by the Federal Reserve Bank after the close of the Standrod
Bank, and that the Federal Reserve Bank refused to account for the proceeds
thereof.
In the second cause of action i t was alleged that the draft was
deposited with the Standrod Bank under an agreement between the Association
and the Bank that the draft and the proceeds thereof should be and remain the
property of the Association, and that the t i t l e thereto* or to the proceeds
thereof, should not become the property of the Standrod Bank, At the commencement of the trial the Federal Reserve Bank moved the court to require
-4-
X-4454
^06
the plaintiff to elect whether i t would proceed on the f i r s t , third and f i f t h
causes of action, which i t claimed were of equitable cognizance, or on the
second, fourth and sixth causes of action which i t claimed were cognizable at
law.
This motion was denied.
The motion was renewed at the close of the
testimony on the part of the plaintiff but was again denied.
A motion for a
nonsuit was then granted to the second, fourth and sixth causes of action,
but denied as to the remaining causes of action.
The Federal Reserve Sank
then moved the court to discharge the jury and transfer the cause to the equity
side of the court.
The court took this motion under advisement and directed
the trial to proceed in the meantime.
The cause was thereafter submitted to
the jury under instructions to which no exccptionswere taken , and the jury
returnbd a verdict in favor of the plaintiff in the sum of $32,692.12.
Some-
time after the verdict was returned the court f i l e d a memorandum on the
motion to discharge the jury and transfer the cause to the equity side of the
court in which i t said:
"While the point i s not entirely free from doubt,
' upon consideration I have concludod that the complaint
was properly- entertained upon the law side of the court.
"The further question of whether or not, i f the
verdict be taken as advisory only, i t should be approved
and adopted, I answer in the affirmative. 11
The court then added:
"Counsel for the plaintiff will prepare a judgment
in the ordinary form of a judgment upon the verdict, incorporating therein, at the proper place, the additional
clause, in substance,
'which finding of the jury is approved and adopted.1"
Judgment was thereafter entered upon the verdict, as directed by
the court, after making certain deductions for moneys checked out by the
plaintiff before the close of the Standrod Bank.
has been brought here for review by writ of error.
The judgment thus entered
X-4464
The f i r s t assignment of error i s "based on the refusal of the court
to require the defendant in error to elect whether it would proceed on the
even or odd numbered causes of action.
In answer to this assignment we need
only say that the granting of the nonsuit as to the even numbered causes of
action necessarily compelled the defendant in error to proceed on the remaining causes of action and, conceding for the purposes of this case only,
that i t was error not to require an election at an earlier stage of the trial,
the error was plainly and manifestly without prejudice.
The next assignment of error is based on the refusal of the court
to discharge the jury and transfer the cause to the equity side of the court
after the nonsuit had been granted as to the even numbered causes of action.
Again, if we concede that the action or actions were of equitable cognizance,
no error can be predicated upon the action of the court in submitting the i s sues to a jury in an advisory capacity because that practice i s always permissible and i t s adoption i s a matter of discretion with the court.
And
when the court treated the verdict as advisory only and approved the findings
of the jury i t asserted a l l the powers and assumed a l l the responsibilities of
a Chancellor.
This was the utmost consideration to which the plaintiff in
error was entitled and i t is in no position to complain of mere matters of
procedure resting in the sound discretion of the court.
We might say in this
connection, however, that i t does not appear to us that the defendant in
error was seeking to enforce a trust or to follow trust funds.
It proceeded
upon the theory that the diversion of the proceeds of the drafts by the Federal Reserve Bank, with knowledge that the Standrod Bank was insolvent, and
with knowledge that the drafts were not the property of the Standrod Bank,
was a tort or wrong for'which a court of law has always afforded a f u l l ,
complete and adequate remedy.
-6-
X-4464
Jl08
Numerous errors have "boon assigned on tho admission of testimony
over objection.
The defendant in error offered in evidence a compilation made
"by one of the witnesses from the "books of the Bank, showing in detail the resources and l i a b i l i t i e s of tho Bank at the close of business on November 28,
1923,
This compilation or summary was taken from books already in evidence;
i t s correctness was at no time questioned and i s not questioned now.
was no error in this ruling#
There
San Pedro Lumber Co* v. Reynolds, 53 Pac. 410;
Jordan v. Warner's Estate, 83 $T.W. 946; State v• Brady, 69 H.W. 290.
The liquidating officer of the State, who had charge of the affairs
of the Standrod Bank since i t s close, was permitted to give the amount collected or realized from the assets in his charge daring the preceding ten
months, and to state whether, in his opinion, any equity remained in the
pledged b i l l s receivable of the Bank after payment of the loans secured by
the pledges.
As already stated, the witness had been in charge of the affairs
of the Bank for about ten months; i t was his duty to collect and distribute
the assets in his charge and he had devoted his entire time and attention to
that object#
He had consulted with the collecting agent of the Federal Re-
serve Bank and was more familiar with the assets of the Bank and their probable
value than any other person, except perhaps the managing officers of the Bank.
He was competent therefore to express an opinion on the question submitted,
and the fact that his opinion was based on the value of the securities some
time after the close of the Bank would go to the weight of his testimony, not
to i t s competency.
State v. Cadwell, 44 N.W. 700; Campbell v. Park, 101
U.W. 861.
The p l a i n t i f f in error moved to strike the testimony of one of the
witnesses, based on a compilation prepared from the books of the Standrod
Bank in evidence, showing the number of overdue notes held by the Standrod
•
- 7 -
X-4454
1
0
J
Bank and how long overdue, and the deficiency or cxccss of reserve on deposit
with the Federal Reserve Bank on .different dates.
There was no error in this
ruling for reasons already stated.
Under date of November 10, 1923, or eighteen days before the close
of the Bank, the vice-president and manager of the Standrod Bank addressed a
letter to the managing officer of the Federal He serve Bank stating that he had
found i t necessary to take advantage of the offer of the latter to handle a
note of $10,000; that he was enclosing the note therewith, payable ten days
from November 13, adding: "This will tide us over#n
The manager of the Federal
Reserve Bank answered this letter under date of November 14, 1923, stating
that the discount committee of the Federal Reserve Bank had declined to accept
the note for discount, and further that the directors of the Federal Reserve
Bank were of opinion that the Federal Reserve branch had advanced a sufficient
sum to provide for the ordinary needs of the Standrod Bank, and that considering a l l the features entering into the security pledged as collateral to
i t s obligation now owing to the Federal Reserve Bank, i t was only proper that
the directors and stockholders of the Standrod Bank should provide funds out
of their personal resources of a sufficient amount to properly rehabilitate
the Bank and furnish i t with a large enough amount of working capital to have
the bank Ainction in a proper manner.
Error i s assigned in the admission of
these two letters, but the assignment i s without merit#
The letters clearly
tended to show the desperate condition of the Standrod Bank on that date and
knowledge of that condition on the part of the Federal Reserve Bank#
Under date of September 9, 1922, the assistant manager of the Federal Reserve Bank addressed a letter to the president of the Standrod Bank
stating tnat the harvest season was on; that he desired to impress upon the
officers of the bank the necessity of shaping their affairs so that after the
X""4/i64:
-8-
period of iiqti.ida.tion was over the bank would eh0x7 a decided improvement i^-1^
i t s condition; that at that time the loans of the institution approximated
$1,700,000, while the deposits were less than one half that amount, or in the
neighborhood of $785,000; that these figures spoke for themselves and called
for no comment; that if the Standrod Bank expected to continue to receive assistance from the Federal Beserve Bahk, a determined effort mast he put forth
by i t s officers to the end that a proper ratio between loans and deposits
might he shown; and the president of the Standrod Bank was directed to "bring
the letter to the attention of the hoard of directors and furnish the Federal
Reserve Bank with a letter over the signature of each, outlining what the
Federal Reserve Bank might expect in that regard.
This letter was answered
by the president of the Standrod.Bank under date of September 11, 1922.
In
this letter he stated that they expected to reduce their loans to $1,200,000
that season; that with this reduction there would no doubt be a corresponding
increase in deposits; that the officers of the Standrod Bank realized that i t
would take another year to put everything in shape, where there would be no
borrowed money; that in a great many cases thoy had loaned money to farmers
and stockmen and i t was absolutely necessary to make further advances in order
to secure liquidation on their present indebtedness.
This letter was answered
under date of September 12, by the assistant manager of the Federal Reserve
Bank, by a second letter, stating that the letter of the president of the
Standrod Bank was unsatisfactory for two reasons:
First, because a communi-
cation over the signature of each of the directors setting forth what might
thenceforth be expected from the bank was not furnished as requested, and
second, while the Federal Reserve Bank was not in a position to know how
great a reduction in loans should be made, i t believed that the policy of the
Standrod Bank should be to bring about the greatest possible liquidation, to
the end that it might again resume a position more nearly bordering on the
"9^
sound and normal,
X-4464
These letters were objected to for the like reasons as
111
the letters already considered, but, in our opinion, they were competent for
the same reasons.
They*.tended to show the condition of the Standrod Bank and
knowledge of that condition on the part of the Federal Reserve Bank.
True,
the letters were written a l i t t l e more than a year before the bank closed,
but other testimony in the case shows that there was no substantial change in
the condition of the bank from that date until the time i t closed* except perhaps for the worse, as the disparity between loans and deposits was even
greater when the bank closed than when these letters were written.
It only remains to consider the question of the insolvency of the
Standrod Bank; knowledge of that insolvency on the part of i t s officers and
the officers of the Federal Reserve Bank, and the effect of such insolvency
and knowledge, if proven.
A bank is said to be solvent when i t has enough
assets to pay, within a reasonable time,all of i t s l i a b i l i t i e s through i t s
own agencies, and is insolvent when unable to meet i t s l i a b i l i t i e s as they become due in the ordinary course of business, or, in shorter terms, when i t
cannot pay i t s deposits on demand in accordance with i t s promise.
7 C.J. 727.
Measured by this rule we think the court and jury were amply justified in
finding that the bank was insolvent, if indeed i t was not wholly and hopelessly so.
When the Bank closed, i t s deposits were approximately $500,000, and
i t s loans and discounts approximately $1,300,000.
It had borrowed from the
plaintiff in error the sum of approximately $700,000; from the United States
National Bank of Portland approximately $85,000; and from the National Bank
at Pocatello, Idaho, $20,000.
It had pledged with the plaintiff in error, as
security for i t s loan, b i l l s receivable of the face value of approximately
$900,000; with the United States National Bank of Portland b i l l s receivable
-10-
X-4464
112
of the face value of approximately $175,000; and with the bank of Pocatello
b i l l s receivable of the face value of approximately $30,000.
And we think
i t fairly appears from thti testimony that there was no equity in the b i l l s
receivable thus pledged, after the payment of the loans which they were
pledged to secure.
There Was l e f t with the bank to meet i t s ordinary demands
from day to day and to pay i t s depositors, b i l l s receivable of the face value
of approximately $275,000 and a small amount in stocks t bonds, warrants and
overdrafts.
During the toil months which had elapsed since the bank closed
i t s doors, the liquidating officer of the State had been able to realize but
$40,000 or $50,000 from the
assets and resources that came into his hands.
In the summer of 1923, the board of directors considered the proposition of
forming a holding company to take over three, four, or five hundred thousand
dollars in face value of the uncollectible paper of the bank, but the vicepresident and manager did not think that this would suffice.
During July and August, 1923, the Pacific Joint Stock Land Bank
forwarded two checks to the Standrod Bank aggregating the sum of $11,000,
with instructions to obtain releases of liens against property and turn the
proceeds over to borrowers from the Joint Stock Land Bank.
The releases
were not returned and several letters passed without satisfaction.
A repre-
sentative of the Joint Stock Land Bank was then sent to the Standrod Bank
to inquire into the matter.
He there discovered that the money had been
misapplied and was informed by the vice-president and manager that the demands upon the bank were rather large and unusual, and that owing to low reserves he was not in a position to repay the money.
time, but this ^ns refused.
He asked for further
Several meetings of the board of directors fol-
lowed and finally, about two days later, the representative of the Land Bank
received a draft on the Walker Brothers Bank at Salt Lake City for the amount.
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X-4464
l i 3
We have already referred to the refusal of the loan of $10,000 a few days
"before the close of the bank to tide it over.
As against this the only t e s t i -
mony offered by the p l a i n t i f f in error was some testimony tending to show
that the officers of the Standrod Bank had no knowledge of i t s insolvent condition.
While the testimony had that tendency, i f credited by the court and.
jury, i t likewise had a strong tendency to show that the bank was in fact insolvent.
It appeared from the testimony of one of the directors that nearly
all the loans had been outstanding since the close of the war; that there
was no money in the country; that tfye bank was unable to make collections;
that i t s deposits had decreased from a million and a half to about half a
million dollars; that the directors of the bank had pledged their personal
credit to raise money for the bank, in short, that the condition of the bank
was a l l bat desperate, tfnddr these circumstances i t is idle to claim that
the finding of the court and jury on the question of insolvency was not
justified by the testimony.
The claim that the directors find managing officers of the Standrod
Bank had no notice or knowledge of the existing condition i s equally unfounded.
The directors, called as witnesses,
derived their knowledge of
the condition of the bank, in most part, ,from reports made to them by other
officers of the bank, and it is a significant fact that such other officers
were not called as witnesses.
True, they might have been called by the de-
fendant in error, but officers who receive deposits in an insolvent bank
are guilty of a fraud, i f not a crime, and a third party who undertakes to
prove the fact of insolvency cannot be expected to call the perpetrators of
the fraud as witnesses.
5*ur the more, the insolvent condition of
the bank
had so long continued and was manifested in so many different ways, that a
finding of knowledge of insolvency on the part of the managing officers 5f
-12-
"both "banks was fully justified*
X-4464
1 1 4
If this "be true, a l l the authorities agree
that the receipt of a deposit by an insolvent bank i s a fraud on the depositor; that t i t l e to the deposit does not pass, and that the deposit may
be followed so long as i t can bo identified#
A fraud was thus perpetrated
on the defendant in error by the officers of the Standrod Bank, and, wittingly or unwittingly, the Federal Reserve Bank became a party to the fraud#
It i s l a s t l y contended that the plaintiff in error i s a bona fide
purchaser before maturity and that i t s t i t l e cannot be assailed.
But the
Federal Reserve Bank had notice that the drafts were not the property of the
Standrod Bank, in two ways:
First, because i t was apparent that the Standrod
Bank had no funds with which to purchase the .drafts} and second, because the
applications for discount stated on their face that the drafts were the
property of a depositor* faith this knowledge, a finding of
mala fides on
the part of the p l a i n t i f f in error was justified, &nd the plea of bona fide
purchaser cannot prevail.
The judgment is affirmed.
(ENDORSED:) Opinion. Filed Nov. 9. 1925
F. D. Monckton, Clerk, by Paul P. O'Brien, Deputy Clerk.
( COPY)
FEDERAL RESERVE BANK
x-4464-a
11.5
Of San Francisco
John Perrin,
November 18, 1925.
Chairman of the Board
and Federal Reserve Ascent.
Federal Reserve Board
Washington,
B.C.
Sirs:
During 1924 the Idaho #Grimra. Alfalfa Seed Growers Association,
an organization of farmers engaged in the production and sale of alfalfa
seed, "brought an action against the Federal Reserve Bank in the state
courts of Idaho for the recovery of $32,692, loss alleged to have "been
sustained through the failure of D. W. Standrod & Co., Bankers, Blackfoot,
Idaho. This case was removed "by the Federal Reserve Bank from the State
Court to the United States District Court sitting in Idaho. P l a i n t i f f ' s
claim was predicated upon the following facts:
The Seed Growers Association, for some time prior to the
failure of the Standrod Bank on November 30, 1923, had "been a depositor
in that "bank. Thoy had entered into a special arrangement with the
Standrod Bank whbreby they were privileged to deliver to the Standrod
Bank sight drafts dram to the order of the "bank, with order "bill of lading
attached, representing the purchase price of seed sold "by them to eastern
customers, and for these drafts the Standrod Bank gave the Association
f u l l and immediate credit. The Association was then allowed to treat the
proceeds as part' of their general checking account and to use the funds
represented "by the drafts without restriction, even "before the drafts could
possibly have "been collected. For some time prior to November, 1923, the
Standrod Bank had "been in an extended condition and this fact was known to
the Federal Reserve Bank and to the officers of the Standrod Bank. During
the early part of November, 1923, the condition of the Standrod Bank was
such that the Federal Reserve Bank of San Francisco f e l t that i t was not
warranted in making any further advances to the Standrod Bank and so
notified that bank. During the last week that the "bank was open for
"business, the Seed Growers Association deposited with the Standrod Bank
three sight drafts with "bills of lading attached, aggregating over $30,000,
receiving immediate credit therefor, and against the credit thus created
the Seed Growers Association immediately commoncod to draw.
These drafts
were negotiable in form and bore no evidence of any attempt on the part
of the Association to restrict their negotiation. Immediately upon their
receipt "by the Standrod Bank, that bank transmitted them to the Salt Lake
City Branch of this bank, accompanied by the usual form of application
for discount. Credit of the Association being good, and the paper being
eligible and entirely acceptable, the drafts were immediately discounted
-2-
X-4464-a
116
"by this "bank and. the proceeds thereof passed to the reserve account of
the Standrod Bank# That bank immediately proceeded to avail i t s e l f of
the reserve credit thus established and between the date of the credit
and the date on which the bank closed i t s doors used a l l of i t s reserve
funds and failed with an overdraft of a small amount. Upon the delivery
of the drafts to the Federal Reserve Bank they were immediately f o r w a r d e d
to the eastern points at which they were payable for collection. Proceeds
from the collections had not come into the possession of the Federal Reserve Bank when the Standrod Bank closed i t s doors. As soon as the Association received notice that the Standrod Bank had placed i t s affairs
in the hands of the State Commissioner of Finance, the Association notified the Standrod Bank and the Commissioner of Finance that the drafts had
been deposited for collection only, that t i t l e thereto had not passed to
the Standrod Bank and that the Association would claim as i t s own any funds
representing the collection of said drafts. The Association also claimed
at this time that a fraud had been committed upon i t through the receipt
of the drafts by the Standrod Bank at a time when i t was insolvent and when
such insolvency was known to the officers of the Standrod Bank# A copy of
this notice was served upon the Federal Reserve Bank after the Standrod
Bank had closed# Subsequently, long after collection of the drafts had
be-eii -inacLS'?
Association demanded that the Reserve bank reimburse i t for
the amount df-'its deposit in the Standrod Bank at the time of failure, aggregating over $30,000, This demand was refused and the action above referred
to was commenced.
The case was tried in the United States District Court at
Pocatello before a jury consisting of eleven farmers and one ex-policeman#
The complaint consisted of six causes of action, two on each of the drafts
involved# The f i r s t cause of action as to each draft was predicated upon
the theory that the Standrod Bank was insolvent when the drafts were received, that this insolvency was known to i t s officers and to the Federal
Reserve Bank and that the failed bank, as well as the Federal Reserve Bank,
was liable to the Association for the unused portion of the deposit representing the face value of the drafts. The second cause of action in each
instance was predicated upon the theory that the drafts had been deposited
for collection only and that, t i t l e having been retained by the Seed Growers
Association, no purchaser of the drafts could acquire t i t l e good as against
the Association, Upon the trial this bank contended that there was no
evidence to support the theory that the drafts had been deposited for collection only and that inasmuch as the Federal Reserve Bank did not know and
had no means of knowing the status of accounts as between the Association
and the Standrod Bank, i t patently could not be charged as a party to the
alleged fraud resulting from the receipt of deposits* The Court granted
a motion for nonsuit on the three causes of action, predicated upon the
theory that the drafts had been deposited for collection only, but allowed
the case to proceed on the insolvency theory# The case was voluntarily
dismissed as against the Commissioner of Finance, the Standrod Bank and
the liquidating agent, leaving this bank as the sole defendant# A verdict
was rendered for the f u l l amount of the drafts, without any allowance for
the amount thereof actually used by the Association# The Court subsequently required a deduction of the amount checked out by the Association
-3and entered.
judgment for the balance.
X-4464-a
117
The case was appealed by us to the Circuit Court of Appeals for
the Ninth Circuit and was recently argued before that court# The judgment
of the lower court was affirmed and it i s the present intention of this
bank to ask for a rehearing before the Circuit Court of Appeals and i f
this i s denied to take the matter to the Supreme Court of the United States.
There are many facts in connection with the case, favorable to
our position, which i t i s d i f f i c u l t to set forth in this letter* It may
be said, however, that there i s absolutely no evidence in the record which
even remotely tends to show that the Federal Reserve Bank had any knowledge
whatever that the Seed Growers Association had not received a f u l l , adequate
and present consideration from the Standrod Bank for the drafts. Mo attempt was made to prove that the Reserve Bank knew that the proceeds of the
drafts had been l e f t on deposit with the Standrod Bank. It was shown that
the Association might have withdrawn the f u l l amount of the drafts in cash
over the counter of the bank, might have accepted exchange on the Standrod
Bank's correspondents for the amount thereof, or might have used the proceeds t@ pay a preexisting indebtedness to the Standrod Bank and that no
knowledge of which of these three courses had been followed was brought home
to the Federal Reserve Bank. It was further shown that the Association i t self was so well acquainted with the condition of the Standrod Bank that
about a month prior to the date when i t closed the manager of the Association demanded from the Standrod Bank a prerequisite to further deposits
that the bank should give the Association a bond to protect i t s account
similar to bonds furnished to indemnify public deposits. The manager of the
Association also admitted that he had known the Standrod Bank was in an extended condition for two years prior to i t s failure. The Directors of the
Standrod Bank a l l t e s t i f i e d that they had no knowledge whatever that the
bank was insolvent until i t was taken in charge by the Commissioner of
Finance. Practically the only evidence of insolvency introduced was that
gained from an examination of the books of the bank after i t had closed
and from an appraisal of the value of i t s assets by the Deputy Commissioner
o.f Finance who took charge of the bank in November, 1923. The existence
of a condition of insolvency i s predicated solely upon inference and not
upon positive testimony.
Yesterday the Executive Committee of this bank, feeling that
this case involves a question of such vital importance not only to this
bank but to .all other Federal reserve banks and banks generally, authorized the employment of Hon. Newton D. Baker to assist in handling the case
before the Supreme Court of the United States, provided Mr. Baker was
available. From the brief summary of the facts which I have given i t can
be plainly seen that i f the judgment of the lower court, sustained by the
Circuit Court of Appeals, i s to stand, neither this bank nor any bank can
safely discount for another institution, which i t knows or has reason to
believe is in an extended condition. Banks do not usually discount their
customers1 paper unless they are in need of funds and the Court has said
in effect that i f the bank i s in that condition, the discounting agency i s
placed on notice that there may be equities enforceable against innocent
third parties purchasing paper for value. The decision of the Circuit Court
of Appeals was evidently hastily prepared and i s not supported by any
citation of authorities. A copy of the opinion prepared by Judge Rudkin
X-4464-a j jjk
i s attached hereto, as well as a copy of our closing brief.
I have taken the liberty of calling this case to your attention,
not only for the purpose of acquainting you with the situation in relation
thereto, but also for the purpose of suggesting that the case and i t s importance be brought to the attention of the other Federal reserve banks and,
i f agreeable to them, that Mr. Baker * s fee be prorated among a l l of the
banks, as has been done in the past in relation to several other cases no
more important and of no more universal interest than this.
I am informed that counsel for the Federal Reserve Board has been
advised as to progress in this case and has been supplied with copies of
the briefs. A copy of the Opinion of the Circuit Court of Appeals i s being forwarded to Mr. Wyatt.
Very truly yours,
(signed)
JOHN PERMIT
Chairman of the Board.
Enclosures
X-4513
119
FEDERAL
RESERVE
BOARD
STATDm# FOR THE PRESS
For Release in Morning Papers,
Thursday, January 23, 1926.
The following i s a summary 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 December and
January, as contained in the forthcoming
issue of the Federal Reserve Bulletin,
Production and distribution of commodities was in larger volume in December
« than in November, and the volume of r e t a i l trade was larger than in any previous
month.
Wholesale prices declined to the level prevailing last spring, which was
the low point for the year.
Production.- The Federal Reserve Board* s index of production in basic industries
advanced S per cent in December to the highest level in ten months.
The rise in
this index iaas been nearly continuous since last August, when the volume of production was at the low point for 1925•
In December the production of iron and
steel and bituminous coal and factory consumption of cotton increased considerably,
and the production of lumber, cement, and copper was maintained at relatively high
levels.
The volume of factory employment and pay r o l l s , after increasing during
the late summer and autumn months, continued practically unchanged in November and
December, with increases in some important industries offsetting seasonal declines
in others.
Building contracts awarded during December were the largest recorded
for that month and exceeded in value those awarded in November, although a seasonal
decrease in building activity usually occurs at that time of the year.
Trade.- Sales at department stores, chain stores, and mail order houses in
December indicated the largest volume of Christmas trade on record.
Trade at
wholesale declined seasonally, but continued larger than last year.
Stocks at
department stores showed less than the usual decline in December and were 4 per cent
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-
X-4513
- 3 -
p a r t i c u l a r l y
loans
at
at
member
member banks
quirements
and
to
banks
were
in
Hew York
r e l a t e d b o t h
e n d - o f - y e a r
City,
to
the
disbursements
by
These
changes
changes
many
in
in
the
demand for
customers'
i n d u s t r i a l
and
currency
re-
f i n a n c i a l
i n s t i t u t i o n s .
Conditions
December,
lowing
ive
in
were
the
January
e a s i e r
advance
8,
the
in
while
period.
money market,
in
January.
the
r a t e s
buying
on
which had become
Hates
r a t e
of
commercial
on
the
bankers'
Hew
paper
firmer
acceptances
York Federal
showed
in
l i t t l e
the
l a s t
h a l f
increased
Reserve
change
Bank
during
of
f o l e f f e c t the
122
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For
X-4514
Immediate R e l e a s e .
January 28,
1926.
C O N D I T I O N OF A C C E P T A N C E Mft-RKBT.
December 17th t o January 20th.
Accompanying
supply
of
acceptances
demand was
The
a l s o
of
New
advanced
York,
i t s
increased*
cent
e s p e c i a l l y
17
with
to
showed
i n c r e a s e .
5/8
b i d
o f f e r e d
for
120
b i l l s ,
day
o f f e r e d
for
reduced
and
o f f e r e d
90
the
and
for
1/2
60
day
with
longer
per
1/8
dealers'
the
cent
3
7/8
to
4
m a t u r i t i e s .
end
20,
of
o f f e r e d
3/4
to
4
bid
1 / 4 p e r
The
at
Federal
r a t »
Were
and
the
the
Reserve
demand
r e p o r t e d
about
15
reporting period,
sales
as w e l l
the period,
their
p o r t f o l i o s
were
3
30
7/8
and
cent
quoted
New York
day b i l l s ,
bid
3 3/4
bid
in
and
and
to
4
3
3/4
3 5/8
3
to
7,
a l s o
consequently
were
the
New York.
on January
r a t e s
of
the
and
d e a l e r s '
for
te
year,
increased
p o r t f o l i o s
beginning
rates
3
were
the
reported
d e c r e a s e d
Rates
the
orders
quiet.
h i l l s
of
markets
r e d i s c o u n t
In Boston where
day b i l l s ,
4
at
end
and dealers'
b i l l s *
than
toward
b i l l s ,
of
Chicago
On January
3
i t s
acceptances
90 day
Boston
foreign
in
o f f e r i n g s
end
toward the
remained
increase
January 20.
were
cent
for
large
markets
on
the
and New York
purchases
an
the
conditions
New York and
a c t i v e ,
r a t e s
smaller* a t
December
3
the
a f t e r
baying
u n s e t t l e d
per
i n
T h e r e a f t e r
increased,
per
more
money
Chicago and P h i l a d e l p h i a
Bank
as
f i r m e r
7/8
4
to
a s
as
b i d
3
p e r
and
3 / 4
o f f e r e d
1/8
3
for
cent
5/8
123
federal reserve board
WASHINGTON
address official correspondence t o
the federal reserve board
X-4516
January 29, 1926,
SUBJECT:
Dear
r
b
a
a
R e v i s i o n
of R e g u l a t i o n s re D i r e c t o r s
Federal Reserve Banks.
of
Branch
Sir:
e g u l a t
ranch
ry 1,
s to r
The Fe
i o n s with
Federal r
1925 (see
ead as f o
deral Reserve
r e s p e c t to th
e s e r v e "banks,
Board's l e t t e
l l o w s :
Board has ame
e appointment
w h i c h "became
r X-3956, Jan
1st. Boards of D i r e c t o r s
Banks shall c o n s i s t e i t h e r of
m e m b e r s , a s m a y "be d e t e r m i n e d
of the d i s t r i c t concerned, su
Federal Reserve Board.
Where
Federal Reserve Branch Banks
s h a l l be appointed by the Fed
by the Federal Reserve Board;
f i v e members, three s h a l l be
R e s e r v e Banks and two by the
c
i
s
c
i
t
2nd. Th
hosen from
n b a n k i n g
erve Board
haracter a
ndustry or
i c a b l e .
a
b
a
c
n
u
n
i
3rd.
d s h a l
t at l
d one
t y in
l
e
a
w
e
D i
t h e
and
s h a
nd s
com
All
r e s
a s t
ppoi
hich
r e c t
ran
the
l l b
tand
merc
D i r
i d e
one
nte
th
e c t
w i
of
d b
e b
o r s a
ks of
D i r e c
e cho
ing,
e, i n
ppoi
men
t o r s
sen
who
s o f a
o r s
t h i
th
y t
ran
hal
the
D i r
Bo
i s
s
n
e
he
ch
l
nde
of
e f f
uar
d
i t
d i r
e c t i
y 25
s r u l
e c t o r
v e as
, 192
of Federal Reserve
seven members or o
by the Federal r e s
b j e c t to the a p p r o v
the Boards of D i r e
c o n s i s t of seven me
eral Reserve Banks
where the Boards c
appointed by the Fe
Federal Reserve Boa
nted
wel
a p p
from
are
r as
by the Ba
l q u a l i f i e
o i n t e d by
the ranks
engaged in
may be p o
be c i t i z e n
t e r r i t o r y s
e c t o r s appoi
ard s h a l l r e
l o c a t e d .
s o
e r v
nte
s i d
e s and
s of
of Janu4), so
Branc
f f i v e
e r v e b
al of
c t o r s
mbers,
and th
o n s i s t
deral
rd.
h
a n k
the
of
four
ree
of
nks s h a l l be
d and experien
the Federal Re
of men of h i g
a g r i c u l t u r e ,
s s i b l e or p r a c
-
f the D i s t r i c t
e d by the branch,
d by the Bank
e o u t s i d e of the
4th. One of the D i r e c t o r s appointed by the Reserve
Bank s h a l l be the a c t i v e manager of the branch bank and
s h a l l have the t i t l e Managing Director.
ced
h
X-4516
- 2 -
I f M
5th. The ter
the Reserve Bank
shall be for one
to year, if such
m o
to
yea
act
f o f f i c e for
act as Managi
r, subject to
ion bo desira
the Director chosen by
ng Director of the branch
reappointment from year
ble.
6th, The f u l l term for other Dire
where Branch Boards consist of s
where Branch Boards consist of f
In order to make p r a c t i c a b l e
of.Branch Directorships, the terms of
the Managing D i r e c t o r , , s h a l l be so a r
expire each year - one, the term of a
the Federal Reserve Board, the other,
appointed by the Federal Reserve Bank.
Reserve Board f e e l s it to be desirable
o f f i c e of Branch Directors the rule is
years
years
7th.
Banks sha
member ap
of o f f i c e
o
f
o
u
tive
f
i
r
n
The
ll a
poin
exp
Board of Directors of
nnually e l e c t as Chairm
ted by the Federal Rese
ires with the current y
8th. In the
Directors of a
l l i n g such vaca
iginal appointm
expired term,
ev
B
nc
en
ent of a v
ranch Fede
y shall be
t and such
acancy
ral Res
made b
appoin
to
of
9th. The Federal Reserve Board
remove, for cause, any member of
a Branch Federal Reserve Bank.
on
and
These r e v i s e d
a f t e r January 1,
rules
1927.
ctors shall be three
even members and two
i v e members.
an orderly r o t a t i o n
Directors, other than
ranged that two w i l l
Director appointed by
that of a Director
(While the Federal
to have r o t a t i o n in
not mandatory).
Federal Reserve Branch
an of the Board the
rve Board, whose term
ear.
occurring
erve Bank,
y the body
tment shal
in th
appo
maki
l be
shall have the right
the Board of Directors
and regulations
are
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary,
TO CHAIRMEN OF ALL F.R.BANKS.
o Board
intments
ng the
for the
to
become
e f f e c - -
125
federal reserve board
WASHINGTON
address official correspondence t o
the federal reserve board
„
—
a — i d ± t
January
29,
1926.
SUBJECT; financial Statements of Subsidiaries,
Dear
Sir:
It has been p o i n t e d out by one of the Federal reserve banks
that the r u l i n g contained in the Board's l e t t e r of December 30, 1925
(X-4484), w i t h r e s p e c t to the e l i g i b i l i t y for rediscount of notes of
corporations r e p r e s e n t i n g borrowings to be advanced to s u b s i d i a r i e s ,
apnears to abrogate the requirement contained in the Board's R e g u l a t i o n
A that - "Whenever the borrower has c l o s e l y a f f i l i a t e d or s u b s i d i a r y
corporations or firms, the borrower's f i n a n c i a l statement s h a l l be accompanied by separate f i n a n c i a l statements of such a f f i l i a t e d or subs i d i a r y corporations or firms,***".
The r u l i n g made by the B o a r d and e x p r e s s e d i n i t s l e t t e r o f
December 30, 1925, was not intended to q u a l i f y or aaend in any way
this p r o v i s i o n of i t s r e g u l a t i o n .
The r u l i n g h a d r e f e r e n c e o n l y t o
the l e g a l e l i g i b i l i t y for rediscount of notes of the kind d e s c r i b e d
and there was no i n t e n t i o n to a f f e c t the e x i s t i n g requirement in the
r e g u l a t i o n as to separate f i n a n c i a l statements of corporations or
firms c l o s e l y a f f i l i a t e d with the borrower.
This requirement was added to the Board's R e g u l a t i o n A in
order that Federal r e s e r v e banks might have more complete information
regarding the c o n d i t i o n of borrowers having c l o s e l y a f f i l i a t e d or
s u b s i d i a r y corporations or firms, and also that they might determine
whether the paper of such borrowers i s d e s i r a b l e and e l i g i b l e for rediscount.
As p r o v i d e d in the Board's regulation, i f the statement of
the borrower c l e a r l y i n d i c a t e s that the note is both e l i g i b l e from a
l e g a l standpoint and a c c e p t a b l e from a c r e d i t standpoint, separate
statements of a f f i l i a t e d or s u b s i d i a r y corporations or firms are not
required.
The r e g u l a t i o n s of the Board on this subject have been in
n o tray m o d i f i e d b y t h e B o a r d ' s r u l i n g o f D e c e m b e r 3 0 , 1 9 2 5 , a n d i t i s
r e q u e s t e d that you endeavor to correct any misunderstanding which may
have a r i s e n as to the 'oroper i n t e r p r e t a t i o n to be p l a c e d upon t h i s
ruling.
Very
TO GOVS.
OF ALL F . S .
BASICS.
t r u l y
yours,
Ednmnd P i a t t ,
Vice Governor.
federal reserve board
WASHINGTON
address official correspondence t o
the federal reserve board
X—4520
February
SUBJECT:
Holidays
d u r i n g
February,
1,
1926.
1926,
Dear Sir:
^
t
o
B
o
h
f
r
te Cle
e book
f i c e s
anches
Ther
aring
s of t
of the
w i l l
e w i
on F
he B
Boa
rema
l
r
o
r
i
l
id
ar
d
n
"be n
ay,
d w i
and
open
o
F
l
t
&ol
ebru
l be
he f
for
d
ar
c
ol
b u
Settlement Fun
y 12th, L i n c o l
losed.
For yo
lowing Federal
s i n e s s as usua
Boston
Hew Orleans
Birmingham
J a c k s o n v i l l e
nc
er
d i
l o
h
v
t
w
On
es of
ance o
s of F
i n g b u
w i l l be
and the
t
f
e
s
Tues
he F
Mar
brua
i n e s
Federal Reserve
birthday, and
information, the
s e r v e Banks and
Kansas City
Oklahoma City
Atlanta
ra
bs
r e
o l
r
St. Louis
L i t t l e Rock
Richmond
B a l t i m o r e
B
o
c
f
d o
n ' s
ur
R e
l:
d
e
d
r
s
P o r t l a n d
ay, February
deral Reserve
i Gras.
Plea
y 16th for He
day.
16th,
Bank
so inc
w Orle
the Birmingham and
o f Atlanta w i l l b e
lude your Gold Fun
ans Branch w i t h th
leans
in
ing
the
On Monday, February 22nd, Washington's b i r t h d a y , there
no Gold S e t t l e m e n t Fund or Federal Reserve Hote Clearing,
o f f i c e s o f the Federal Reserve Board w i l l be closed.
Kindly
n o t i f y branches.
Very
t r u l y
yours,
J. C.
A s s i s t a n t
TO GOVERNORS OF A L L F.
How Or
c l o s e d
d Clear
ose of
R.
BARKS.
H o e l l ,
Secretary.
federal reserve board
WASHINGTON
address official correspondence to
the federal reserve board
X-4521
February 3, 1926.
Dear
your
by t
on B
s e n t
S e c t
s p e c
the
the
Sir:
There are e n c l o s e d herewith
information, c o p i e s o f l e t t e r s e
he Board with the Chairman of the
anking and Currency of the House
a t i v e s , r e l a t i v e to a proposal to
i o n 9 of the Federal Eesorve Act
t to the conditions of membership
Board may impose upon State banks
Federal Reserve System.
Very
t r u l y
, for
xchanged
Committee
of Repreamend
w i t h rewhich
j o i n i n g
yours,
J. C.
A s s i s t a n t
(Enclosures)
TO CHAIBMEET OF ALL F. B. BANKS.
N o e l l ,
Secretary.
i
c
$y
128
( COPY
)
X-4521-a
February 2,
1 9 2 6.
Honorable Lo
Committee on
House of r e p
Washington,
My d e a r
uis
Ba
r e s
D.
T, McFadaea,
irman,
nking and Currency,
e n t a t i v e s ,
C.
Congressman:
f e r r i n g t
30, 1925,
Superviso
amendment
tence of
the words
Receipt is acknowledged of
the appearance before the
of the Committee represent
rs of State Banks, for the
to the Federal Reservd Act
the f i r s t paragraph of Sect
underlined being addedt
o
y o u r letter
Federal Rese
ing the Natio
purpose of d i
whiell would
ion 9 thereof
o f January 2
r v e Board o n
nal Associat
s c u s s i n g a p
change the l
to read as
5th reDecember
ion of
roposed
a s t senfollows,
"The F e d e r a l Resei've Board, s u b j e c t to the p r o v i s i o n s
& f t h i s Ac.t atid t o s u c h c o n d i t i o n s a s i t m a y p r e s c r i b e
- p u r s u a n t t h e r e t o , m a y p e r m i t t h e applying b a n k t o b e come a stockholder of such Federal Reserve Bank; Provided, however. that such conditions or rules or regulations prescribed shall not limit or impair the charter or s t a t u t o r y rights and powers of such banks nor
shall the Federal Reserve Board impose any conditions
or r e s t r i c t i o n s other than those under ~?hien nation al banks s h a l l operate."
a
s
p
a
b
a
p
While the above mentioned conference was e n t i r e
n d n o f o r m a l Vote w a s t a k e n b y the F e d e r a l R e s e r v e B o a r d - *
i o n showed very clearly that the Board is s t r o n g l y opposed
osed amendment and also developed the fact that the advoca
mendment by the H a t i o n a l A s s o c i a t i o n o f Supervisors of Sta
ased upon a misunderstanding of the f a c t s regarding the Bo
n d p r a c t i c e i n p r e s c r i b i n g c o n d i t i o n s o f m e m b e r s h i p for S t
r i o r to their admission to the Federal Reserve System.
sidered
amendme
and the
p r o v a l
In
i t nec
nt.
Yo
Board
of this
view
essary
u now
has no
propo
of
t
d e
h
se
these
o take
s i r e a
e s i t a n
d amen
f a c t s the
any forma
formal ex
c y in expr
dment.
Board
l a c t i o
pressio
essing
has n
n w i t
n of
i t s u
l y in
the d
to t
cy of
te Ba
ard's
ate b
ot heretof
h referenc
the Board'
n q u a l i f i e d
ore
e to
s vi
dis
formal
i s c u s his prothis
nks is
p o l i c y
anks
cont h i s
ews,
ap-
-2-
X-4521-a
129
1
LBGrlli EFFECT Off PBOPQEKD AMMDMSM .
B
is "believe
The f i r s t
read as fo
efore d i s c u s s i n g the p r a c t i c a l objections to this amendment, i t
d a d v i s a b l e to c a l l a t t e n t i o n to the l e g n l p h a s e s of t h e s u b j e c t .
two paragraphs of Section 9 of the Federal Reserve Act now
llows:
11
A n y "bank i n c o r p o r a t e d b y s p e c i a l l a w o f a n y S t a t e , o r
organized under the general laws of any State or of the United
States, d e s i r i n g to become a member of the Federal Reserve System, may make-application to the Federal Reserve Board, under
s u c h r u l e s and r e g u l a t i o n s as i t may p r e s c r i b e , for the r i g h t
to s u b s c r i b e to the s t o c k of the F e d e r a l r e s e r v e bank o r g a n i z e d
w i t h i n the d i s t r i c t in w h i c h the applying bank is located. * * *
The F e d e r a l R e s e r v e B o a r d , s u b j e c t to such c o n d i t i o n s a s i t may
p r e s c r i b e , may permit the applying bank to become a stockholder
of such Federal reserve bank/
"In acting uoon such application the Federal Reserve
Board shall consider the f i n a n c i a l condition of the applying
bank, the general character of its management, and whether or
not the corporate powers exercised are consistent with the p u r poses of this Act."
In acting upon an application of a State bank for membership in
the Federal Reserve System, the Board is thus required by law to consider
( l ) t h e f i n a n c i a l c o n d i t i o n of the a p p l y i n g bank;, (2) the g e n e r a l c h a r a c ter of i t s management, and (3) whether or not the corporate powers exerc i s e d by it are c o n s i s t e n t with the purposes of the F e d e r a l R e s e r v e Act*
and before admitting a bank to membership in the Federal Reserve System
the Board is a u t h o r i z e d to prescribe such reasonable conditions of membership as may be necessary to provide for the maintenance of a h i g h
standard of membership.
Such conditions of membership, however, can be
p r e s c r i b e d only a t the time a bank applies for membership in the Federal
Reserve System and cannot become binding upon any bank u n l e s s and u n t i l
such bank v o l u n t a r i l y accepts such conditions*
Moreover, when c e r t a i n conditions of membership have once been agreed upon between the Board and
a p a r t i c u l a r bank applying for membership and when that bank has once
been a d m i t t e d to membership subject to such c o n d i t i o n s , these c o n d i t i o n s
cannot thereafter be changed nor can any additional conditions be prescribed by the Board, except by the mutual consent of the Board and the
p a r t i c u l a r bank involved.
of
F
s
s
a
a
State
eder
uch
erve
p a r
nd p
al
as
A
t i
ro
T h e a m e n d m e n t proposed by t h e N a t i o n a l A s s o c i a t i o n o f
Banks would have the following legal e f f e c t :
(
Re
is
ct;
c u l
vid
1) If
serve
made
so t
a r s i
ed fo
s t r
Boa
pur
hat
t u a t
r in
i
r
s
t
i
c
d
u
h
o
s
t l y
to
ant
e B
n w
ome
construed, it
prescribe any
to some s p e c i
oard could not
h i c h has not b
s p e c i f i c p r o v
w
c
f i
p
ee
i s
ould take a
ondition of
c p r o v i s i o n
rescribe an
n foreseen
i o n of the
way
me
of
y c
in
Fed
the pow
mbership
the Fed
ondition
advance
eral Res
Supervisors
er of the
except
eral Recovering
by Congress
erve Act#
X-4512-a
-S-
j L 3 ( )
(2) It would f o r b i d the Federal Reserve Board to p r e s c r i b e any
condition, rale or r e g u l a t i o n w h i c h would l i m i t or ivapair the charter
o r s t a t u t o r y r i g h t s or p o w e r s o f a n y S t a t e member bankr;-so t h a t , e v e n
i f the Board should f i n d that the corporate powers of a State bank app
ing for membership were i n c o n s i s t e n t with the p u r p o s e s of the F e d e r a l
R e s e r v e A c t i t c o u l d n o t a d m i t t h a t b a n k s u b j e c t to a c o n d i t i o n t h a t
\ h e bank w o u l d not e x e r c i s e such powers but could do o n l y one of two
things: (a) Permit the bank to come into the Federal Reserve System an
e x e r c i s e powers i n c o n s i s t e n t with membership in the Federal Reserve Sy
or (b) exclude such bank from membership in the Federal Reserve System
together.
(3)
to impose
those und
unimporta
membershi
banks a r e
The
an
er
nt,
p r
r e
proposed
y c o n d i t i
which n a t
because
e s t r i c t i n
s t r i c t e d
amend
o n or
i o n a l
the Bo
g a St
by law
men
r e s
ban
ard
ate
.)
t would f o r b i d
t r i c t i o n upon
ks s h a l l opera
never has p r e
bank to any g
the F e d e
any S t a t e
te.
(Thi
s c r i b e d a
reater ex
ra
b
s
ny
te
l Reserve B
ank other t
is u n n e c e s s
conditions
nt than n a t
ly-
d
stem,
a l -
oard
han
a r y and
of
i o n a l
PRACTICAL EFFECT OF PROPOSED AMENDMENT.
becaus
n e c e s s
in the
and re
Federa
have b
c e n t l y
below,
the f a
The
e i t w
a r y to
Feder
asonab
l Rese
een g e
there
such
c t s re
Federal Reserve Board is s
ould deprive the Board of a
enable the Board to m a i n t a
al Reserve System and which
ly.
The wisdom of the p o s s
r v e B o a r d angL t h e f a i r n e s s
n e r a l l y r e c o g n i z e d by the b
has been no o p p o s i t i o n to
o p p o s i t i o n as now e x i s t s is
garding the scope and e x e r c
Most
d e s i g n e d to ca
the Federal Re
of S t a t e banks
Reserve Board
the g e n e r a l c h
powers e x e r c i s
Act. In other
i t s management
and not to acq
be i n c o n s i s t e n
Ot
fecting, p a r
covered by
Thus, where
n o n - l i q u i d
t r o n g l y opposed to
power which i t b e
in a h i g h standard
it has always e x e
e s s i o n of t h i s pow
with w h i c h it has
anking fratertiity
it.
Moreover, as
based upon a mis c
i s e of t h i s power.
this amendment
l i e v e s to be
of membership
r c i s e d temperately
er by the
been e x e r c i s e d
and u n t i l rew i l l be shown
onception of
of the conditions o f membership p r e s c r i b e d by the Board are
rry out the purpose of that p r o v i s i o n of S e c t i o n 9 of
serve Act w h i c h p r o v i d e s that in a c t i n g upon a p p l i c a t i o n s
f o r membership in the Federal Reserve System, the Federal
s h a l l c o n s i d e r the f i n a n c i a l c o n d i t i o n of the applying bank,
a r a c t e r of i t s management, and whether or not the corporate
e d a r e c o n s i s t e n t witii the p u r p o s e s of the F e d e r a l R e s e r v e
words, they a r e d e s i g n e d t o r e q u i r e the member bank to k e e p
and f i n a n c i a l condition sound a f t e r admission to the System
uire and e x e r c i s e a d d i t i o n a l corporate powers which might
t w i t h the purposes of the Act.
her condi
t i c u l a r b
general p
a bank h
real e s t a
t
a
r
a
t
ions
nks,
o v i s
s to
e lo
are des
which s
i o n s of
o large
ans, the
igne
i t u a
law
a p r
Boa
d to cove
t i o n s are
a p p l i c a b l
o p o r t i o n
rd may p r
r p
no
e t
of
e s c
e c
t,
o
i t
r i
u l
a
a l
s
b e
i a
nd
l
fu
a
r
s i t u a t i o n s
could not b
S t a t e member
nds t i e d up
s a conditio
a f e
banks.
in
n of
X-4521-a
mcm
of
app
the
a c
u n t
cor
the
not
bcrshi-n i t shall redu
i t s c a p i t a l and surpl
l y i n g "bank h a s no s u r
Board may p r e s c r i b e
e r t a i n p e r c e n t a g e of
i l such fund reaches
porate powers i n c o n s i
Board may approve i t
e x e r c i s e such Dowers
ce the amount of such loans to a c e r t a i n p e r c e n t a g e
us w i t h i n a d e f i n i t e time. Similarly, where the
p l u s f u n d a g a i n s t w h i c h l o s s e s c o u l d "be c h a r g e d o f f ,
as a condition of membership that it shall put
its net earnings oach year in i t s surplus fund
a given amount.
If the a p p l y i n g hank has certain
s t e n t with membership in the F e d e r a l R e s e r v e System,
s a p p l i c a t i o n s u b j e c t to a c o n d i t i o n t h a t it s h a l l
while it is a member of the Federal Reserve System.
Cases l i k e these not i n f r e q u e n t l y a r i s e in which a bank a p p
for membership is in a l l r e s p e c t s e l i g i b l e and d e s i r a b l e for i n c l u s
the ranks of the members of the Federal Reserve System except that
or two r e s p e c t s i t s c o n d i t i o n is not e n t i r e l y s a t i s f a c t o r y or i t s p r
do not a c c o r d w i t h t h e b e s t banking p o l i c y .
The bank i t s e l f d e s i r e
come i n and is w i l l i n g to agree to improve i t s c o n d i t i o n or correct
p r a c t i c e s in these r e s p e c t s by an agreement with the Federal Reserv
The Board and the Federal reserve bank, on the other hand, are desi
having t h i s p a r t i c u l a r i n s t i t u t i o n as a member if these d i f f e r e n c e s
p r a c t i c e can be ironed out. In such cases the Board f e e l s that i t i
to admit the bank s u b j e c t to appropriate c o n d i t i o n s of membership t
exclude it a l t o g e t h e r from the System.
l y i n g
i o n in
in one
a c t i c e s
s to
i t s
e Board.
rous of
of
s b e t t e r
han to
T h e r e a r e m a n y m e f i l t e r s o f t h e S y s teijh t o d a y W h i t i i a r e i n a l l
r e s p e c t s l o y a l and d e s i r a b l e memberB w h i c h the Soard could not, in the
e x e r c i s e of a souild d i s c r e t i o n , have a d m i t t e d to membership if it had
not p o s s e s s e d the power to p r e s c r i b e appropriate conditions of membership
to f i t t h e i r p e c u l i a r situations*
The o b s t a c l e s in the way of admission
were such t h a t the Board f e l t that it could not p r o p e r l y admit such banks
to membership w i t h o u t some promise or assurance a g a i n s t the continued
The
e x i s t e n c e of p r a c t i c e s then being engaged in by the applicant banks.
d i f f i c u l t y was overcome in a l l these cases by p r e s c r i b i n g conditions of
membership which were v o l u n t a r i l y accepted by the member banks p r i o r to
a d m i s s i o n . I f the a u t h o r i t y of the F e d e r a l R e s e r v e B o a r d to p r e s c r i b e
such c o n d i t i o n s of membership 18 taken away from it, t h e r e w i l l be many
cases in. t h e f u t u r e in which the Board w i l l h a v e to r e f u s e to admit
banks to membership* b e c a u s e of the absence of a u t h o r i t y to r e q u i r e a d e quate assurances from the a p p l i c a n t s as to t h e i r f u t u r e conduct, although
i f these assurances could be given the a p p l i c a n t s would i n a l l p r o b a b i l i t y
p r o v e t o be v e r y s a t i s f a c t o r y a n d h e l p f u l m e m b e r s o f t h e S y s t e m .
o
e
p
o
a
i
t
t
f
f Sta
s t a b l
r o t e c
f any
l s o t
nsure
o the
hese
or S t
The Board has sought in t h e r e g u l a t i o n s governing the admission
te banks and t r u s t companies and i n t h e s e c o n d i t i o n s of membership to
i s h only such reasonable standards of admission as are n e c e s s a r y to
t the member banks, both S t a t e and n a t i o n a l , a g a i n s t the admission
b a n k which would be a source of weakness r a t h e r than of s t r e n g t h , and
o p r e s c r i b e such regulations g o v e r n i n g their conduct as w i l l
a reasonable conformity to fundamental p r i n c i p l e s deemed e s s e n t i a l
continued success of the Federal Reserve System, It has been with
purposes in mind that the Board has from time to time p r e s c r i b e d
a t e banks j o i n i n g the System c e r t a i n conditions of membership which
X-4521-a
—5—
s e e m t o "be d i c
more u s u a l of
have been p r e s
System have be
desired, and o
b e l i e v e s that
is e n t i r e l y so
future.
The w
and a c q u i e s c e d
Congress has i
to a u t h o r i z e i
t a t e d by sound "banking p o l i c y and has r e c e n t l y p u b l i s h e d the
these conditions in i t s Regulation E. Conditions which
c r i b e d for State banks and t r u s t companies coming into t h i s
en found by t h e Board to be e f f e c t i v e in serving the purpose
n the b a s i s of the r e s u l t s obtained in the p a s t the Board
i t s p o l i c y of p r e s c r i b i n g such conditions of membership
und and one which i t seems advisable to continue in the
isdom and n e c e s s i t y of the p r a c t i c e has long been r e c o g n i z e d
in by the banking f r a t e r n i t y ; and, as w i l l be shown below,
m p l i e d l y approved it by amending the law so as e x p r e s s l y
t.
HISTORY OF
subject
THIS
It is b e l i e v e d that a b e t t e r and
w i l l r e s u l t from a c h r o n o l o g i c a l
O r i g i n a l
vided,
132
S e c t i o n
in part,
Statute
9 of the Federal
as f o l l o w s :
SUBJECT.
clearer u n d e r s t a n d i n g of t h i s
d i s c u s s i o n of its h i s t o r y .
and P r a c t i c e
Reserve Act
as
Thereunder*
o r i g i n a l l y
enacted pro-
u
The Organization Commit tee or the Federal Reserve Board.
"under guch r u l e s and regulations as i t may prescribe,
subject to the - p r o v i s i o n s of this s e c t i o n , may permit
the applying bank to become a stockholder in the Federal
Reserve Bank of the d i s t r i c t in which the applying bank
i s located."
Acting under authority of t h i s provision, the Board has always
understood that i t has the power to prescribe for State banks admitted to
membership such conditions as in i t s discretion i t deems necessary or
advisable-. I t acted on the t h e o r y that, even i f t h i s power were not included in the power to prescribe rules and regulations, i t was an incident
of the power to approve or r e j e c t the application of any particular State
bank, in the Board's d i s c r e t i o n . In other words, i t acted on the theory
that the discretionary power to approve or r e j e c t any application included
the power to approve any application subject to such reasonable and
proper conditions as the Board might proscribe.
The Federal Reserve Board's circular l e t t e r published with
i t s f i r s t regulations with reference to membership of State banks (Regul a t i o n M, Series of 1915) contained the following statements which
indicate the Board's understanding of the scope of i t s power as well
as the s p i r i t in which i t approached t h i s problem :
"A u n i f i e d banking systern,embracng in i t s membership
the well-managed banks of the country, small and large,
State and national, i s the aim of the Federal Reserve
Act. There can be but one .American credit system of
nation-wide extent, and i t w i l l f a l l short of s a t i s f y i n g
X-4521-a
133
" t h e "business judgment and e x p e c t a t i o n of the
country'and f a i l of a t t a i n i n g i t s f u l l p o t e n t i a l i t i e s i f i t r o s t s era o n a n i n c o m p l e t e f o u n d a t i o n a n d
l e a v e s out of its murnbership any considerable p a r t
of the banking strength of the country.
The way
m u s t "be o p e n e d f o r S t a t e b a n k i n g i n s t i t u t i o n s t o
c o n t r i b u t e their share to the c a p i t a l and resources
of the Federal reserve banks, in harmony with the
i n t e n t of the Federal Reserve Act and in accordance
w i t h i t s p r o v i s i o n s . State banks, trust companies,
and n a t i o n a l banks have their d i s t i n c t i v e characters
and p l a c e s in the -American banking organization, and
these should be r e s p e c t e d in c o o r d i n a t i n g them in
the Federal Reserve System. The problem p r e s e n t e d
is to f i n d a basis upon which these- d i f f e r e n t t^pes
of banking i n s t i t u t i o n s may thus be a s s o c i a t e d #hich
s h a l l be f a i r to each and which w i l l not require
g r e a t e r u n i f o r m i t y of operation than may be n e c e s s a r y to t h e a t t a i n m e n t o f tho p u r p o s e d of the F e d e r a l
Reserve Act.
"Appreciating f u l l y that the strength of
the Federal Reserve System is to be measured by
the q u a l i t y and character of i t s members,
r a t h e r
t h a n Ty t h e i r n u m b e r , t h e F e d e r a l R e s e r v e B o a r d i s
p r e p a r e d to use the broad d i s c r e t i o n a r y power v e s t e d
in i t by the Federal Reserve Act to bring about this
c o o r d i n a t i o n on the# b a s i s of e q u i t y a n d p r a c t i c a b i l i t y .
The Board has sought i n the r e g u l a t i o n s governing
the admission of s t a t e banks and t r u s t companies
h e r e t o appended, f i r s t , to e s t a b l i s h only such
reasonable stabards of admission as w i l l be genera l l y r e c o g n i z e d a s ne c e s s a r y to p r o t e c t t h e F e d e r a l
Reserve Sys tan
and the n a t i o n a l banks, whose memb e r s h i p in the System is obligatory, a g a i n s t the admiss i o n of any bank vrhich would be a source of weakness
r a t h e r than of strength, and second* to p r e s c r i b e
such r e g u l a t i o n s governing t h e i r conduct as w i l l
insure a reasonable conformity to fundamental
p r i n c i p l e s deemed e s s e n t i a l to the s u c c e s s of the
new banking system.
*
"Th
are,
in th
being
v e s t e
e condition
furthermore
e Act, the
l e f t to t h
d w i t h the
s
,
f
e
n
*
*
of members
p r e s c r i b e d
urther and
Federal Re
e c e s s a r y d i
*
*
hip of State
only in gen
f i n a l e l a b o r
serve Board,
s c r e t i o n a r y
i n s
eral
a t i o
w h i
a u t h
t i t u t i o n s
terms
n of them
c h is
o r i t y . "
— 7 -»
X-4521-a
134
vided,
The text of the r e g u l a t i o n
m p a r t , as follows:
(Regulation
In p a s s i n g upon an a p p l i c a t i o n
Board vvill consider e s p e c i a l l y
(1)
The
or
of
(2)
Whethe
ty t h
c h a r t
pi op
and w
Bank#
"(3)
the
-
M,
S e r i e s
Federal
of
1915)
pro-
Reserve
f i n a n c i a l condition of the a'Tolying bank
trust company and the general^ c h a r a c t e r
i t s management.
r t
e s
e r
er
i t h
h
a
p
c
Whether th
which the
l o c a t e d c
f e r e w i t h
of member
e
i d
r o
on
me
nature of t
bank or tr
v i s i o n s are
duct of the
mbership in
e
laws
a p p l y i
o n t a i n
the p r
banks.
he powers e x e r c i s e d
ust company and its
c o n s i s t e n t w i t h the
b u s i n e s s of banking
the Federal Reserve
o f the S t a t e or d i s t r i c
n g bank or trust comoan
p r o v i s i o n s l i k e l y to i n
o p e r r e g u l a t i o n and s u p
t in
y is
t e r e r v i s i o n
.
* * W h e n e v e r t h e B o a r d may deeip i t n e c e s s a r y ,
i t w i l l impose such conditions as w i l l insure compliance
w i t h the: Apt a n d t h e s e r e g u l a t i o n s . When the c e r t i f i c a t e
of approval and any Conditions contained t h e r e i n have
• „?en, a c c e p t e d by the a p p l y i n g bank or t r u s t company,
stocic in the Federal Reserve Bank of the d i s t r i c t in
w m c n the^ a p p l y i n g b a n k or t r u s t company i s l o c a t e d
s h a l l be i s s u e d and paid for under the r e g u l a t i o n s of
the Federal Reserve Act p r o v i d e d for n a t i o n a l banks
w h i c h beconftJ s t o d M i o l d e r s i n t h e F e d e r a l R e s e r v e B a n k s .
* * * * * *
*
of
Svery S t a t e bank or t r u s t
the Federal Reserve System
(Shall
r i g h t s
contin
admiss
Act an
i n c l u d
of app
r
as a S t a t
ue to e x e r
ion, excep
d the r e g u
i n g a n y co
roval.
e t a i n i t s
e bank or
c i s e the
t as p r o v
l a t i o n s o
nditions
Amendment
f u l l
t r u s
same
i d e d
f the
embod
of
a member
c h a r t e r and
s t a t u t o r y
t company, and may
functions as b e f o r e
in the Federal Reserve
Federal Reserve Board,
ied in the c e r t i f i c a t e
June
2 1
^
' 1917> t h e r e was ena
ad been d r a f t e d and submitted to Congres
Jfoard for the purpose of making a number
v i s i o n s of the F e d e r a l Reserve Act.
One
w
company w h i l e
-
21.
1917.
cted into the law a b i l l which
s by the Federal Reserve
of amendments to various p r o of the p r i n c i p a l purposes of
—
8
X—4521—a
—
135
those amendments was t
to S t a t e "banks, and t h
chem that the l i b e r a l
the Board would not be
p o r t i o n s of i t s r e g u l a
tinued e x e r c i s e of the
^ to such c o n d i t i o n s as
to membership: and (2)
Reserve Act which s u b j
Comptroller of the Cur
Bank Act.
amended by
The l a s t
the Act
o make th
is r e s u l t
i n t e r p r e t
changed
t i o n s whi
r i g h t s e
the Board
by r e p e a
e c t e d Sta
rency and
sentence of
of June 21,
e
Federal Reserve System more a t t r a c t i v e
was sought in two ways: (1) By a s s u r i n g
a t i o n o f t h e l a w p r e v i o u s l y a d o p t e d "by
and that the Board would not amend those
ch a s s u r e d to S t a t e member banks the conn j o y e d b y t h e m u n d e r S t a t e law,, s u b j e c t
might p r e s c r i b e p r i o r to their admission
l i n g a number of p r o v i s i o n s of the Fbderal
t e riiember b a n k s t o e x a m i n a t i o n b y t h e
to varioun p r o v i s i o n s of the N a t i o n a l
the f i r s t paragraph of S e c t i o n
1917, to read as f o l l o w s :
9 was
"The Federal Reserve Board, subject to such c o n d i t i o n s
as it may p r e s c r i b e , may permit the a p p l y i n g bank to
become a stockholder of such Federal Reserve Bank."
a
o
B
b
S
n
r
o
e
y
The s u b s t i
d r e g u l a t i o n s " whi
i g i n a l act was int
ard*s e s t a b l i s h e d
f o r e a d m i t t i n g S t a
stem,
added,
t
c
e
p
t
u
h
n
r
e
t i o n o
appea
ded to
a c t i c e
banks
Immediately a f t e r
reading as f o l l o w s :
11
s
t
t
p
h a l
he
he
o s e
In a c t i n
l c o n s i d
general
corporat
s of this
g
e
c
e
f the
red in
sanct
of p r
and t
the
upon s
r the f
haracte
powers
act."
wor
th
ion
e s c
r u s
d
e
11
c
an
r i b
t c
clause
conditions
orrespond
d e x p r e s s
i n g c o n d i
ompanies
above
1 1
ing
l y
t i o
to
quoted
f o r t h e w o r d s 11 r u l e s
p o r t i o n of the
to a u t h o r i z e the
n s of membership
the Federal Reserve
a new paragraph
uch a p p l i c a t i o n the Fede
i n a n c i a l condition of th
r of its management, and
"exercised axe c o n s i s t e n
ral
e a
wh
t w
Reser
pplyin
ether
i t h th
v
g
o
e
was
e
Board
bank,
r not
pur-
This simply adopted and wrote into the law the p r i n c i p l e s prev i o u s l y announced by t h e Board in i t s R e g u l a t i o n s as a b a s i s for i t s
action on the a p p l i c a t i o n s of State banks for membership.
The
f o l l o w i n g
11
r
b
r
b
c
c
b
e
e
e
a
o
r
a
Subject
g u l a t i o n s
coming a
t a i n i t s
nk or tru
rporate p
e a t e d and
nks: * *
new
language
to the p r o v i s
of the Board
member of the
f u l l charter a
st company, an
owers granted
shall be e n t i
* "
was
i o n s
made
Fede
nd s
d ma
it b
t l e d
also
of
pu
ral
t a t
y c
y t
to
t h
rsu
Re
u t o
o n t
he
a l
i n s e r t e d
i s
an
se
r y
i n
St
l
a
t
rv
r
u e
at
p r
in
S e c t i o n
ct and to
thereto, a
e System s
i g h t s as a
to e x e r c i
e in which
i v i l e g e s o
the
ny b
h a l l
S t a
s e a
it
f me
9:
ank
t e
l l
was
mber
o ~
Thi
Board1 s r
iven in t
e System
t continu
r o v i d e d i
e Board a
he Federa
s
e
h
s
e
n
n
l
new p r o v i s i o n was
g u l a t i o n , and s i u p l
e Board's r e g u l a t i o
hould r e t a i n t h e i r
to e x o r c i s e the sa
the Federal Reserv
d the conditions of
R e s e r v e System.
the
l y
ser
mig
as
ser
to
g
v
h
p
v
t
o
i
l
l
It i s o
S e c t i o n 9 were
o it the l i b e r
e r a l p r i n c i p l e
i o n s .
f
nt
i b
a t
bvious, the
made for t
a l i n t e r p r e
s which the
a
y
n
f
m
e
X-452l-l36
lso an adop
wrote into
that S t a t e
u l l charter
e functions
Act, the r
membership
refore, that a l
he purpose of c
t a t i o n w' i c h t h
Board had p r e v
tion
the
ban
and
as
e g u l
agre
k
"
a
e
by Congress
law the assu
s j o i n i n g th
s t a t u t o r y r i
before admiss
t i o n s of the
d upon p r i o r
of a p o r t i o n of
rance previouse Federal Reg h t s and
ion, except
Federal Reto admission
l of these changes in the language
l a r i f y i n g the law and w r i t i n g
e Board had g i v e n it and the
i o u s l y incorporated in i t s regu-
The S t a t e banks had r e p r e s e n t e d to the Board that b e f o r e coming
into the Federal Reserve System they wished to know e x a c t l y what terms, cond i t i o n s , and r e g u l a t i o n s they would be r e q u i r e d to comply w i t h and they
wished to be a s s u r e d b e f o r e b e i n g admitted to membership that the Board
would not t h e r e a f t e r amend its r e g u l a t i o n s in such a way as to change the
terms and c o n d i t i o n s on which they had entered the System.
This d e s i r e was
f u l l y met by the amendment of June 21, 1917,
Inasmuch as the Board's regul a t i o n s r e g a r d i n g S t a t e member banks must be based upon the p r o v i s i o n s of
the Act, the banks know in advance what such p r o v i s i o n s are, and they can
not be s u b s t a n t i a l l y changed without an amendment to the law.
As. t o c o n d i t i o n s of membership, they are equally protected, because such c o n d i t i o n s
must b e submitted to, and a c c e p t e d by, such banks b e f o r e they become members.
PUBLICATION OF
CERTAIN
CONDITIONS OF MEMBERSHIP
I N BOARD'S R E G U L A T I O N S .
Many of the conditions of membership p r e s c r i b e d by the Board
from time to time are designed e s p e c i a l l y to meet p e c u l i a r c o n d i t i o n s eff e c t i n g a p a r t i c u l a r b a n k a p p l y i n g f o r m e m b e r s h i p , arid s u c h c o n d i t i o n s c a n not be standardized or incorporated, in any set of r e g u l a t i o n s or s t a t u t e s ,
nor can they a l l be f o r e s e e n in advance and p r o v i d e d for in a s t a t u t e .
Certain other conditions, however, had become quite w e l l s t a n d a r d i z e d and
were g e n e r a l l y p r e s c r i b e d by the Board for a l l banks admitted to membership
in the Federal Reserve System; and the Board decided that, in order that
any S t a t e b a n k or trust company which might contemplate applying for membership in the Federal Reserve System could know in advance what c o n d i t i o n s of
membership of a general nature, as d i s t i n g u i s h e d from a s p e c i a l nature, it
would b e r e q u i r e d to agree to, p u b l i s h e d some nine of these general condit i o n s i n S e c t i o n IV o f i t s R e g u l a t i o n H, S e r i e s o f 1 9 2 4 . T h i s s e c t i o n o f
the r e g u l a t i o n , however, is not r e a l l y in the nature of a r e g u l a t i o n but i s
m e r e l y a s t a t e m e n t of what the B o a r d i n t e n d s to do in the f u t u r e in the way
of p r e s c r i b i n g c o n d i t i o n s of membership for banks t h e r e a f t e r admitted to
membership.
It i s not r e t r o a c t i v e but simply s t a t e s that h e r e a f t e r the
Board w i l l p r e s c r i b e c e r t a i n c o n d i t i o n s of membership for a l l State banks
X-4521-a.
—10—
or trust companie
a l l such t a n k s a p
d i t i o n s and any o
admission of such
s
p l
th
b
a
y
e
a
dmitted, to the Federal Reser
i n g f o r m e m b e r s h i p w o u l d "be
r c o n d i t i o n s which the Board
nk or trust company to the F
ve
r e q
mi
e d e
Sy
u i
gh
r a
s
r
t
l
tem
e d
p r
Re
and that
to agree
e s c r i b e p
serve Sys
h e
to
r i o
tem
r e a f t e r
such conr to the
.
The p u b l i c a t i o n of these general c o n d i t i o n s of membership in the
Board's R e g u l a t i o n s has been misunderstood and probably is the cause of the
o p p o s i t i o n of the N a t i o n a l A s s o c i a t i o n of Supervisors of S t a t e Banks to the
Board's p r a c t i c e of p r e s c r i b i n g c o n d i t i o n s of membership for S t a t e banks and
trust companies a p p l y i n g for admission to the Federal Reserve System.
This
o p p o s i t i o n o r i g i n a t e d with a speech d e l i v e r e d by Honorable George V. McLaughlin,
then Superintendent of Banks of the State of New York, at the 2 3 r d Annual Convention of the N a t i o n a l A s s o c i a t i o n of Supervisors of S t a t e Banks, h e l d at
Buffalo, New York, on J u l y 21-23, 1924, which r e s u l t e d in the a d o p t i o n of a
r e s o l u t i o n by that convention advocating c e r t a i n amendments to S e c t i o n 9 of
the Federal Reserve Act which would, among o t h e r things, take away the Board's
power to p r e s c r i b e c o n d i t i o n s of membership.
The text of Mr. McLaughlin's
speech, together w i t h a statement a n a l y z i n g it and answering the various
p o i n t s made therein, were p u b l i s h e d at your i n s t a n c e in the Congressional Record
for January 8, 1925, at pages 1500 to 1511, i n c l u s i v e .
There was a l s o p u b l i s h e d
at the same time and p l a c e a copy of the Board1s R e g u l a t i o n H and the text of
Mr. M c L a u g h l i n ' s o r i g i n a l p r o p o s a l to amend the F e d e r a l R e s e r v e A c t .
OPPOSITION BASED ON MISUNDERSTANDING-.
B
c
s
t
t
r
The r e
anks c r i t i c i s e s
o n d i t i o n s of me
igned f o r t h e i r
he Board's powe
ion, however, i
oneous:
s o l u t i o n of the Na
the Board's new R
mbership set f o r t h
proper administra
r to p r e s c r i b e suc
s b a s e d u p o n three
tional A s s o c i a t
e g u l a t i o n H, p r
therein and c e
tion, and recom
h c o n d i t i o n s of
assumptions, a
i o n of Supervisors of
i n c i p a l l y because of
r t a i n o t h e r p r o v i s i o n
mends that Congress r
membership.
That r e
l l of which are t o t a l
t
s
e
s
l
Sta
he
de
pea
o l u
y e
te
l
r-
1. That the c o n d i t i o n s of membership s e t f o r t h in S e c t i o n IV of
t h e B o a r d ' s R e g u l a t i o n H, S e r i e s o f 1 9 2 4 , a r e s o m e t h i n g e n t i r e l y n e w a n d c o n s t i t u t e a departure from the Board's p r e v i o u s p r a c t i c e :
2.
That the Board has the r i g h t to change these c o n d i t i o n s
membership at any time, and that, therefore, S t a t e banks are u t t e r l y
mercy of the Federal Reserve Board w i t h regard to such c o n d i t i o n s of
ship ; and
3
Reserve Boa
al -banks, b
b e r s h i p f o r
. That
rd woul
ecause
n a t i o n
Each
order;
of
the c o n d i t i o n s
d d i s c r i m i n a t e
the Board does
a l banks.
these
of
at the
member-
of membership p r e s c r i b e d by the Federal
a g a i n s t S t a t e banks and in favor of n a t i o n not attempt to p r e s c r i b e c o n d i t i o n s of mem-
p r o p o s i t i o n s
w i l l
be
d i s c u s s e d b r i e f l y
in
X-4551-a
-11-
1.
As shown above, these conditio
at a l l new, but are conditions which the
years c u s t o m a r i l y p r e s c r i b e d for State b
Federal Reserve System,
T h e only t h i n g
for the f i r s t time the Board has
set
p r i n t e d r e g u l a t i o n s for the i n f o r m a t i o n
they may know and understand in advance
what c o n d i t i o n s they w i l l be r e q u i r e d to
to the Federal Reserve System.
ns
Fe
ank
new
f o
of
of
a g
of membership are not
deral Reserve Board has
s upon t h e i r admission
about the s i t u a t i o n is
r t h these c o n d i t i o n s in
the State hanks, so tha
a p p l y i n g for membership
r e e to if they are a d m i
^
for
to the
that
i t s
t
t t e d
2.
The assumption that the Board has, or thinks it has, the
r i g h t to change i t s c o n d i t i o n s of membership at any time is a l s o e q u a l l y
erroneous.
The Board always has considered conditions of membership
analogous to c o n t r a c t s or agreements "between the Board and each i n d i v i d u a l
State bank admitted to membership in the Federal Reserve System, and
has always adhered to the view that they are not subject to change except,
ol course, by the mutual consent of b o t h p a r t i e s .
When an a p p l i c a t i o n
for membership is r e c e i v e d from a State bank and the Board is i n c l i n e d to
a p p r o v e i t , the B o a r d n o t i f i e s the b a n k tlxat i t i s w i l l i n g to a p p r o v e
the a p p l i c a t i o n p r o v i d e d it w i l l a g r e e to be bound b y c e r t a i n d e f i n i t e
c o n d i t i o n s of membership set f o r t h in the n o t i c e .
I f the "bank i s w i l l i n g
to a c c e p t these c o n d i t i o n s of membership, it so n o t i f i e s the Board,
w h e r e u p o n t h e B o a r d 1 s c o n d i t i o n a l a p p r o v a l o f t h e "bank* s a p p l i c a t i o n f o r
membership becomes e f f e c t i v e , and the bank is admitted to the Syatem.
The c o n d i t i o n s of membership a p p l i c a b l e to t h a t bank are t h e r e b y f i x e d
for a l l time and cannot be changed except by the mutual consent of the
Board and the bank.
The Board does not have, nor has it ever claimed to
have, t h e r i g h t to change -a
c o n d i t i o n of membership subsequent to the
admission of a bank without the consent of such Bank.
In p r a c t i c e , there
have r a r e l y been any changes in the conditions p r e s c r i b e d upon the
admission of a bank; and in the few cases where such conditions have
been changed, they have almost i n v a r i a b l y been changed at the request
of the member bank.
3.
The as sumption that conditions of membership p r e s c r i b e d by t
F e d e r a l R e s e r v e B o a r d d i s c r i m i n a t e a g a i n s t S t a t e "banks a n d i n f a v o r o f
n a t i o n a l "banks i s e q u a l l y e r r o n e o u s .
The Board never has p r e s c r i b e d a
c o n d i t i o n of membership for a S t a t e bank which r e s t r i c t s the o p e r a t i o n
of such bank to a g r e a t e r e x t e n t than n a t i o n a l banks are r e s t r i c t e d by
the p r o v i s i o n s of the National Bank Act.
On the c o n t r a r y , the B o a r d a
ways has endeavored to permit State bank members of the Federal Reserv
System as much freedom as is c o n s i s t e n t with membership in the Federal
Reserve System, even though t h i s r e s u l t s i n t h e i r e x e r c i s i n g much more
l i b e r a l powers than those enjoyed by n a t i o n a l banks.
It is the p o l i c y
of the F e d e r a l R e s e r v e Board to make the System as a t t r a c t i v e as
p o s s i b l e to State banks and not to r e s t r i c t their o p e r a t i o n s w i t h i n
the System to any g r e a t e r extent than is a b s o l u t e l y n e c e s s a r y for
the p r e s e r v a t i o n of a high standard of membership.
f e r e n t
S t a t e banics,
s t a t e s , many of
however, operate under
which are more or l e s s
he
ny
s
l e
the laws of f o r t y - e i g h t d i f inadequate to p r o v i d e for
x 4521 a
-
-12-
a proper s u p e r v i s i o n and r e g u l a t i o n of the bonking
i n s t a n c e s i t i s a b s o l u t e l y necessary t o p r e s c r i b e
f o r S t a t e b a n k s i n o r d e r t o maintain a h i g h s t a n d a
Federal Reserve System..
T h e only o t h e r a l t e r n a t i v
s u c h S t a t e Htpnks 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 o
membership.
W h e n a S t a t e b a n k has o n c e b e e n a d m i t
Federal Reserve System i t cannot be r e q u i r e d to wi
u n l e s s it v i o l a t e s some c o n d i t i o n of membership or
of the Federal Reserve Act.
- 189
b u s i n e s s ; and in many
c o n d i t i o n s of membership
rd of membership in the
e s would be to exclude
r lower the standard of
t e d to membership in the
thdraw from the System
some s p e c i f i c p r o v i s i o n
M .VIOLATION OF STATE RIGHTS.
a c
a c
Fed
who
but
cor
onl
ser
F e d
is
It has been argued, that when
n d i t i o n of membership r e q u i r i n g a
r t a i n one of i t s corporate
powers
ral Reserve System, this v i o l a t e s
e laws that bank was incorporated
this is not so. The Board does not
porate powers i t shall or s h a l l not
y says that if a S t a t e bank a p p l i e s
ve System and has c e r t a i n powers i n
e r a l Reserve System, it must agree
i n the System.
o
e
e
s
the Federal Reserve Board p
State bank to agree not to e
while i t remains a member o
the p u b l i c p o l i c y of the S t a
and i n f r i n g e s the r i g h t s of
attempt to say to any S t a t e
confer on banks c r e a t e d by
for membership in the Feder
c o n s i s t e n t w i t h membership i
not to e x e r c i s e those powers
r e s c r i b
x e r c i s e
f the
t e unde
the Sta
what
it.
It
al Ren the
while
e s
r
te;
it
The f a c t that a p a r t i c u l a r State grants unustial powers to banks
c r e a t e d by it does not n e c e s s a r i l y mean that the p o l i c y of the State requires the e x e r c i s e of such powers by S t a t e banks, nor that such powers
a c t u a l i y w i l l be exercised.
The S t a t e l a w s do n o t r e q u i r e b p t m e r e l y p e r mit the o r g a n i z a t i o n of banks and trust companies; and even when they
are organized
S t a t e banks and t r u s t companies are p e r f e c t l y f r e e to
a b s t a i n from e x e r c i s i n g c e r t a i n powers granted to them by the laws of
their c r e a t i o n .
Thus, the laws of P e n n s y l v a n i a authorize a l l t r u s t companies o r g a n i z e d thereunder to t r a n s a c t a t i t l e insurance, f i d e l i t y insurance, and s u r e t y b u s i n e s s ; but many of the trust companies of Pennsylvania have never e x e r c i s e d t h i s power.
It is no v i o l a t i o n of the p o l i c y
of the S t a t e of P e n n s y l v a n i a , t h e r e f o r e , f o r the Board to r e q u i r e a Penns y l v a n i a t r u s t company which never has and never w i l l w i s h to e x e r c i s e
these powers to agree that i t w i l l not do so as long as it remains a
member of the Federal Reserve System,
PROPOSED M M D M E N T
Th
every bank o
which are i n
the i n e v i t a b
be to exclud
Federal Rese
to e x e r c i s e
e
r
c
l
e
r
t
o
e
v
h
gen
t r u
n s i
r e
eve
e S
ese
eral banki
s t company
s t e n t w i t h
s u l t of th
ry such ba
ystem, eve
unusual p
ng
o
m
e
nk
n
ow
HARMFUL TO
laws
r g a n i z
embers
enactm
or tr
though
ers.
STATE BANKS AND TRUST COMPANIES.
of a number o
e d thereunder
hip in the Fe
ent of t h i s p
ust company f
they should
f
the S t a t e s confer on
c e r t a i n unusual power
deral Reserve System a
r o p o s e d amendment woul
rom membership in the
have no d e s i r e whateve
s
nd
d
r
X-4521-a
serve
so lon
c o n d i t
t e r n a t
banks
way in
e r c i s e
At p r e s e n t s ich "banks a r e
System on c o n d i t i n that they w
g as t h e y r e m a i n lernbers of the
i o n s of membership is taken awa
i v e but to deny m ambersnip in t
or t r u s t companies p o s s e s s i n g s
which the Board can assure i t s
of such powers*
j ^ / | Q
admitted to membership in the Federal Rei l l not e x o r c i s e the o b j e c t i o n a b l e powers
System. If the power to p r e s c r i b e such
y from it, the Board w i l l have no a l he Federal Reserve System to a l l State
uch powers, because there w i l l be no
e l f that they w i l l not undertake the ex-
Even
ooze b a n k s a p p l y i n g f o r m e m b e r s h i p i n t h e F e d e r a l R e s e r v e
System have no corporate powers i n c o n s i s t e n t w i t h membership, i t is o f t e n
found that their management or f i n a n c i a l condition is such that they cannot
-properly b e a d m i t t e d to the F e d e r a l R e s e r v e System u n l e s s t h e y w i l l a g r e e
as a c o n d i t i o n of membership to improve the c ha r a c t e r of their management
or their f i n a n c i a l c o n d i t i o n w i t h i n a s p e c i f i e d time.
In such c a s e s the applying, banks w i l l have to be denied membership in the Federal Reserve System
if the Board is d e p r i v e d of the power to admit them subject to appropriate
conditions d e s i g n e d to b r i n g them up to the proper standard of members of
the Federal Reserve System.
Instead of b e n e f i t t i n g the S t a t e banks and trust
,companies, t h e r e f o r e , the enactment of the amendment proposed by the n a t i o n al A s s o c i a t i o n of Supervisors of State banks w i l l in many c a s e s work an actual hardship on them.
CONCLUSION.
In c o n c l u s i o n I w i s h to say that the Board has no d e s i r e to be
a u t o c r a t i c or unreasonable in t h i s matter and is always w i l l i n g to hear and
g i v e due weight to the views of S t a t e banks and State banking a u t n o r i t i e s
w i t h reference to the expediency and reasonableness of i t s r e g u l a t i o n s and
the c o n d i t i o n s of membership p r e s c r i b e d by it*
The Board, however, has
found by e xpe r ien ce that the power to p r e s c r i b e conditions of membership
governing State banks o r g a n i z e d under the divergent laws of f o r t y - e i g h t
d i f f e r e n t States is a b s o l u t e l y e s s e n t i a l to the p r e s e r v a t i o n of a h i g h
standard of membership in the Federal Reserve System; and f o r t h i s reason,
the Board is s t r o n g l y opposed to the amendment proposed by the N a t i o n a l
A s s o c i a t i o n of Supervisors of State Banks or any other amendment which
would take away or s e r i o u s l y impair the e x e r c i s e of this power. The Board,
however, has no o b j e c t i o n to an amendment such as that contained in Sect i o n 10 of your B i l l , H . R . 2 , as o r i g i n a l l y introduced, which would p r o v i d e
t h a t t h e B o a r d 11 s h a l l n o t p r e s c r i b e a n y c o n d i t i o n o f m e m b e r s h i p w h i c h w i l l
prevent the applying bank from competing w i t h n a t i o n a l banks on a b a s i s of
s u b s t a n t i a l e q u a l i t y or which w i l l subject the applying bank to any greater
l i m i t a t i o n s or r e s t r i c t i o n s than those under which n a t i o n a l banks shall operate11 ; b e c a u s e t h e B o a r d n e v e r h a s a n d n e v e r w o u l d p r e s c r i b e a n y s u c h d i s criminatory c o n d i t i o n of membership.
Respe c t f u l l y ,
Edmund P i a t t ,
Vice-Governor,
(COPY )
X-4521-t
HOUSE 0" BEPEESSmTIVES
Commit tee on Banking and Currency
WASHINGTON
141
January 25, 1926.
Honorable D. R. Crissinger,
Governor, Federal Reserve Board,
Washington, D# C.
Dear Governor Cri 8singer:
Referring to the appearance of the committee representing
the Association of State Bank Supervisors of ,thc United States
before the *ederal Reserve Bbard on Decenter 30 last* the purpose
of this meeting was to discuss a proposed amendment to Section 9
of H. R. 2, on Line 21, as followsi
"The Federal R e s e r v e B o a r d , subject to the provisions of
this A c t a n d to such conditions a s i t may -prescribe -pursuant thereto, may permit the a p p l y i n g bank to become a
stockholder of such Federal Reserve B a n k ; Provided, however, that such conditions or rules or regulations -prescribed shall not l i m i t or impair the charter or statutory rights a n d rowers of such banks nor shall the Federal
Reserve Board impose any conditions or restrictions other
than those under which national banks shall operate.**
The matter underlined i s new.
I gained the impression during the discussion of this subject that i t was the view of the Federal Reserve Board that such
a provision was undesirable, but apparently the committee representing the Association of State Bank Supervisors was not convinced of
the soundness of the views presented to them by the individual members of your Board who were present at this meeting, because their
insistence on pressing their amendment i s manifest.
purpose of this letter i s to ask you if you will not
kindly write me the Board* s objections totalis amendment that I
may present these views to the Members of the House in such opposition as I shall make to this proposal when i t is offered on the
floor of the .House during the consideration of H. R. 2.
I expect now that the consideration of this measure w i l l be
taken up by the House next Wednesday, January 27, and I believe
that debate will be concluded on this b i l l and vote had on the f o l lowing Wednesday. I am, therefore, hoping to have as early a reply from you as possible.
Very truly yours,
LTM:b
(signed)
L. T. McFadden.
FEDERAL RESERVE BOARD
143
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4522
February 3, 1926.
SUBJECT: Stocks of Unissued F. H. Notes.
Dear Sir:
You are requested to prepare and submit to
the Federal Reserve Board, at your early convenience,
an estimate of the amount of each denomination of the
Federal Reserve notes of your bank you may be called
upon to issue during the calendar year 1926.
This
information is desired for the purpose of regulating
the production of Federal Reserve notes during the
coming year.
For your guidance, I would state that the
Board is of the opinion that i t s stock of unissued Federal Reserve notes should at a l l times include approximately a twelve months' supply of each denomination of
the notes of each bank, and that not more than a six
months' supply of each denomination of unissued notes
should be in the custody of the Federal Reserve Agents.
By direction of the Federal Reserve Board,
Yours very truly,
Walter L. Eddy,
Secretary.
TO ALL F. R. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
X-4524
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
February 4, 1926.
SUBJECT: Canned food products as nonperishable readily
marketable staple agricultural products.
Dear Sir:
This is to advise you that in the opinion of
the Federal Reserve Board canned corn and other canned
food products should not be considered nonperishable
readily marketable staple agricultural products which
may be made the basis of sight or demand b i l l s of exchange eligible for discount or purchase at a Federal
reserve bank under the third paragraph of Section 13
of the Federal Reserve Act.
Very truly yours,
Edmund Piatt.
Vice Governor.
TO - GOVERNORS OF ALL FEDERAL RESERVE BASKS.
X-4526 ^4.4
TREASURY DEPARTMENT
Office of the Secretary
WASHINGTON
February 8, 1926.
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 to
January 30, 1926, amounting to $117,500.00.
Federal Reserve Notes, Series 1914
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Kansas City
15
fio
200,000
625,000
400,000
100,000
200,000
200,000
400,000
100,000
100,000
2,325,000
150,000
Total
$20
100,000
100,000
100,000
50,000
50,000
50,000
100,000
450,000
50,000
50,000
350,000
3,125,000 sheets © $37.60
350,000
625,000
600,000
200,000
200,000
300,000
400,000
200,000
250,000
3,,125,000
$117,500.00
The charges against the several Federal Reserve Banks are as follows:
Sheets
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Kansas City
Total
350,000
625,000
600,000
200,000
200,000
300,000
400,000
200,00*0
250,000
3,125,000
Compensation
Plate
Printing
Materials
Total
$ 6,.195,00 $j>2,870.00 $4,095.00
$13,160.00
11,062.50
7, 312.50
5,125.00
23,500.00
10,620.00
4,920.00
7, 020.00
22,560.00
3,540.00
1,640.00
2, 340.00
7,520.00
3,540.00
1,640.00
2, 340.00
7,520.00
5,310.00
2,460.00
3, 510.00
11,280.00
7,080.00
3,280.00
4, 680.00
15,040.00
3,540.00
1,640.00
2, 340.00
7,520.00
4,425.00
2,050.00
9,400.00
2, 925.00
$55,312.50 #25,625.00 $36,562.50 $117,500.00
The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", and i t is requested that your board cause such indefinite appropriation to be reimbursed in like amount.
Respectfully,
(signed) R. W. Barr
Acting Deputy Commissioner
L.G.C.
of the Public Debt.
( COPY)
S'SDERAL BlSMVB
or BAius
X-4528
BAM
145
February 8, 1926
The Federal Reserve Board,
Washington, D.C.
Attention Mr. Walter Wyatt
Dear Mr, Wyatt:
On last Saturday, we obtained an instructed verdict in the case
styled "Vacuum Oil Company vs The Federal Reserve Bank of Dallas11.
This case involved the alleged negligence of the Federal Reserve
Bank of Dallas and the Mercantile National Bank of Dallas in the
collection of a check in the sum of $357.02." The facts were substantially these:
The Vacuum Oil Company received a check from one of i t s debtors in
payment of an account. They deposited the check in the Mercantile
National Bank for collection. At the time of the deposit# the Mercantile National Bank had no agreement on i t s deposit slips or
otherwise with reference to the handling of checks for collection.
The check was transmitted by the Mercantile National Bank to the
Federal Reserve Bank of Dallas, and by the latter forwarded direct
to the drawee bank, the Citizens Bank of Desdemona.- The drawee
bank received the check and charged the same to i t s depositor 1 s
account, and remitted the Federal Reserve Bank of Dallas exchange
on a correspondent bank for this and several other items included
in the Federal Reserve Bank's cash letter. Before the remittance
draft could be presented for payment, the Citizens Bank of Desdemona
closed, and the remittance draft was therefore uncollected.* The
Vacuum Oil Company f i l e d suit against the drawer of the check, the
Citizens Bank of Desdemona - which was a co-partnership - the Mercantile National Bank of Dallas, and the Federal Reserve Bank of
Pallas.
The drawer of the check was discharged upon instructions of the
qourt at the end of the p l a i n t i f f ' s testimony, upon the theory that
the check was paid, and the drawer discharged from l i a b i l i t y . Before the case was presented for trial, an interlocutory judgment by
default was taken against the co-partnership.
In the trial of the case, we plead and introduced in evidence Regulation
" J ,f , Series of 1920, of the Federal Reserve Board, and also our1 circular
letter No.13, Series of 1922,' on transit operations. Our circular No.
13 contained provisions placing l i a b i l i t y practically the same as
those which are now incorporated in a l l the circulars of Federal Reserve
Banks; We also plead and attempted to prove certain other defences
which are ndt material at this time.
At the conclusion of a l l the evidence, the court directed a verdict
for the Federal Reserve Bank of Dallas on the theory that the Mercant i l e Bank was the agent of the Vacuum Oil Company, and that i t s knowledge
2
X-452&
of the terms and conditions under which the Federal Reserve Bank of
Dallas accepted the check for collection was binding upon i t s principal.
The court also took the view that under the Massachusetts rule, which,
prevails in Texas, the Mercantile Bank was the agent of the Vacuum Oil
Company for the purpose of selecting a sub-agent in the collection of
this check, and that i t s contract with the Federal Reserve Bank of
Dallas as evidenced by Circular No.13, Series of 1922, was binding upon
i t s principal.
After disposing of the parties other than the Mercantile National Bank
as aforesaid, the court submitted the case on special issues to the
jury. It developed that the Mercantile National Bank held the check for
two days before sending the same to the Federal Reserve Bank for collection. The f i r s t issue was predicated on this fact, and was in substance whether or not the Mercantile National Bank was guilty of negligence in holding the check in question for two days# The jury answered
this question affirmatively* The succeeding question was whether or
not this act was the proximate cause of the loss, and this question
was answered by the jury in the negative. The next question submitted
was whether or not the Mercantile National Bank was negligent in authorizing
the Federal Reserve Bank of Dallas to collect the check in cash or by
bank draft, and this question was answered by the jury in the negative.
Thus from the answers of the jury to the questions submitted, the Mercantile National Bank is entitled to judgment. In presenting our testimony, eleven witnesses were introduced on the question of custom among
banks with reference to the accepting of remittance-drafts in settlement
of cash l e t t e r s . Two of these witnesses were from the Federal Reserve
Bank of Dallas, and nine from the various commercial banks in this City,
All t e s t i f i e d substantially that i t had been the general custom among
a l l banks in this district for many years to settle for out-of-town
items through the medium of remittance drafts; and I am inclined to believe that the jury answered the question relating to the l i a b i l i t y of
the Mercantile National Bank favorably due to this testimony,
M r . Dreibelbis tried the case, and I am very much pleased with the result which he obtained, as I think he not only succeeded in obtaining
an instructed verdict for us, but was also largely instrumental in
securing a favorable decision for the Mercantile National Bank,
The case, of course, involves such a small amount that i t i s doubtful
whether the same w i l l be appealed, but if i t should be, I think tiie
record i s in such a shape that i t will give us a very favorable opportunity to establish a precedent which will be of some value in this
question of remittance.
Yours very truly,
(Signed) E. B# Stroud, Jr.
Office Counsel.
EBSzfh
FEDERAL RESERVE BOARD
X-4530-a
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
February 16, 1926.
SUBJECT; Opinion of U. S. Circuit Court of Appeals
in Pascagoula Case.
Dear Sir;
There i s enclosed for your information
a copy of an opinion rendered. February 11th by the
United States Circuit Court of Appeals for the
Fifth Circuit confirming the decision of the
United States District Court in the case of
Pascagoula National Bank v. Federal Reserve Bank
of Atlanta, and also a copy of a dissenting
opinion rendered by Judge Foster.
It is expected that the plaintiff will
petition the Supreme Court for a writ of certiorari
bringing this case again before that Court for
review, but the granting of such a writ i s discretionary with the Supreme Court and if the writ
i s denied the decision of the Circuit Court of
Appeals will be f i n a l .
Yours very truly,
Walter L. Eddy,
Secretary.
TO GOVEMOHS OF ALL F.B.BANKS Alffi TO ALL AGENTS.
Enclosure;
147
X-4530
148
III THE UNITED STATES CIRCUIT COURT 01? APPEALS FOR
THE FIFTH CIRCUIT.
110. 4721.
PASCAGOUIA NATIONAL BANK OF MOSS P0I1TT AND PASCAGOULA,'
MISSISSIPPI.
Appellant,
Versus
FEDERAL RESERVE BANK OF ATLANTA AND OSCAR NEWTON AS
FEDERAL RESERVE AGENT, ETC.,
Appellees.
Appeal from the District Court of the United States for the
Northern District of
Georgia.
Alex W. Smith, Jr,, (Alex W. Smith, Jr., Smith, Hammond.
& Smith, and Denny & Heidelberg on the "brief), for Appellant,
Newton D. Baker, Ho11ins N. Randolph and Robert S. Parker,
(Hollins H. Randolph, Robert S. Parker, Newton D. Baker, Walter
Wyatt and Montgomery B. Angell on the brief), for Appellees.
Before WALKER, BRYA1T and FOSTER, Circuit Judges.
WALKER, Circuit Judge
This is an appeal from a decree
dismissing a b i l l f i l e d by the appellant, a national bank
X-4530
-2-
149
l o c a t e d
as
in M i s s i s s i p p i .
f o l l o w s
in
the
opinion
The
questions
r a i s e d
r e n d e r e d "by t h e
arc
D i s t r i c t
w e l l
s t a t e d
Judge:
"The present case involves the handling of
checks "between the Federal reserve "bank and one of
i t s members under regulation J of the Federal Reserve
Board. That regulation, adopted to execute the collection and clearing house powers granted in section
13 and section 16 of the Federal Reserve Act (Comp.
St. Sees. 9796, 9799), requires that each Federal
reserve bank shall exercise the function of a clearing
house and collect checks on terms and conditions particularly set forth, whose effect, so far as here
material, i s that each reserve bank will receive at
par, checks which can be collected at par, and only
such, whether they be sent i t by i t s own member and
a f f i l i a t e d banks, or by, or for the account of, other
reserve banks, and whether the checks are drawn on
i t s own member banks or non-member banks, and that
the checks sent each reserve bank will be counted as
reserve or become available for withdrawal by the
bank sending them (subject to final payment) only in
accordance with a time schedule based on experience of
the average time required to collect checks drawn on
the different points. The observance of this regulation by the reserve bank of Atlanta results in a refusal by i t to permit the complainant, one of i t s
members to deduct the previously charged 'exchange'
or compensation for remitting payment for checks drawn
on complainant, and prevents complainant getting immediate credit for checks sent by i t to the reserve bank
when drawn on points at a distance from Atlanta,
whereby i t loses the use of the credit during the
period of delay. The complainant contends, f i r s t ,
that by the provision of section 16 of the Reserve
Act, i t is entitled to immediate credit, at par, for
checks drawn on any of the depositors in the reserve
bark of Atlanta, no matter at what distance from
Atlanta the drawee may be; second, that under the
Hardwick Amendment of section 13 (section 4, c. 32,
40 Stat. 234,) (Comp. St. Ann. Supp. 1919, Sec. 9796)
i t has the right to make a chhrge for remitting payment to the reserve bank of Atlanta of checks drawn
on i t s e l f when these are not the property of the reserve bank, bat are handled for collection; third,
that under section 13 the reserve bank of Atlanta
has no right to have or collect any checks drawn on
complainant which come to the reserve "bank from a
source outside of the Sixth Reserve district; fourth,
that, if the Reserve Act authorizes this deprivation
of complainant's right to charge for remittance, i t
takes i t s property without due process of law, contrary to the Constitution.11 Pascagoulia. National Bank
v* Federal Reserve Baric of Atlanta, 3 3?. (2d). 465*
The claim that for checks drawn upon any of the depositors of the Federal Reserve Bank of Atlanta (herein referred to
as appellee), sent or delivered by appellant to appellee for deposit, appellant was entitled to immediate credit at par as
deposits subject to he checked or drawn on i s based upon the provision of section 16 of the Federal Reserve Act (38 Stat. 26,
U. S. Conrp. St. 1918, 59799, Par. 12) that "Every Federal Reserve
Bank shall receive on deposit at par from member banks * * * *
checks and drafts drawn upon any of i t s depositors,"
That pro-
vision i s explicit in imposing on a Federal reserve bank the
duty of receiving on deposit from member banks checks and drafts
drawn upon any of i t s depositors, and in requiring that such
checks be so received at par.
The amount of the credit to be
given the depositor i s prescribed, but not the time of giving i t ,
unless the language used means that the amount called for by such
a check, upon the receipt of i t by the reserve bank, at once
becomes subject to be withdrawn on the depositor's checks.
In
the absence of a statute otherwise providing, the express or implied agreement or understanding of the parties determines whether
a bank accepting from a depositor a check on another bank is required to give credit therefor at the time of the acceptance or
at a subsequent time., the bank not being required to give irane-
- 4 -
X-4530
diate credit for the check as for cash if i t clearly manifests
i t s intention not to do so.
National Bank v. Barkhardt, 100 U.S.
151
686; Barton v. United States, 186 U.S. 283; St. Louis & S. ?. 3y.
Co., 27 Fed. 243.
The opinion in the f i r s t cited case shows that
i t was distinctly recognized that where a "bank takes from a depositor
a check on another hank the depositor i s not entitled to credit
for the check at the 'time of i t s delivery if at that time he
has notice that the giving of credit therefor would "be deferred
to a time in the future.
the last cited case:
The following i s from the opinion in
' "It i s quite certain that bankers do not
invariably credit their customers for sight paper as for cash,
but are generally influenced by the financial responsibility of
the customer, or the drawee of the paper, or both.
If a bank
does not wish to assume the relation of debtor for the paper to
the depositor, this intention may be manifested in a very explicit
manner by crediting the paper as paperM.
The relation between a
bank and a customer having a checking account with i t does not
necessarily imply that for checks on other banks sent or delivered
for deposit the customer i s entitled to be credited as for cash
prior to the presentation and collection of such checks.
The
receipt by a bank of checks on other banks for collection and
credit and making the amount to be credited therefor subject to
withdrawal by the depositor only after collection
incidents of such a relation.
are ordinary
It could not well be said that
banks so receiving checks on other banks do not thereby engage
in receiving on deposit checks.
Appellee 1 s above mentioned regu-
lation disclosed its intention as to the time the amount of a
check recuired to be received by it on deposit would become a part
— 5 —
of the Customer's checking deposit.
X-4530
Hi at regulation is not incon-
sis tent vith the requirement that appellee "shall receive on deposit at par" such a check unless that requirement gave appellant
the right to "be credited for such sight uaper as for cash: As
a'^ovc indicated, the duty of a "bank, whether imposed by statute
or by agreement, to receive on deposit checks on other banks does
not noccbsarily imply that tho amount to be credited for a check
becomes, immediately upon the tank's receipt of i t , part of the
depositor's balance subject to be checked againit and withdrawn.
{Incontroverted evidence in this case showed that there i s a general custom among banks to refuse to pay checks drawn against
uncollected funds.
The provision in question is to be construed
in the light of customs affecting the relations of banks and their
customers.
Furthermore, if that provision has the meaning attrib-
uted to i t in behalf of the appellant, practically it has the
effect of requiring a reserve bank to buy from member banks checks
on i t s depositors and to pay in cash therefor the amount they call
for, or to lend without interest that amount on such checks for
whatever time may elapse between the bank's receipt of them and
the presentation of them to the drawees.!or payment, the obligation incurred by the member bank in such a transaction being to
repay to the reserve bank the amount of checks not paid by the
drawees.
That the lawmakers did not intend the provision in
question to have that effect is persuasively indicated by other
provisions of the Federal Reserve Act.
A member bank's checking
deposit in a reserve bank constitutes also i t s reserve balance
provided for by section 19 of the Act.
That reserve balance is
required to be "an actual net balance" equal
to not less than a
3.52
- 6 -
X-4530
prescribed percent-um of the aggregate aiuount of i t s demand deposi t s
and a prescribed percentm of
its
time
d e p o s i t s .
So far as
a "balance i s represented "by uncollected checks or: other • "banks
received from a depositor i t could act t e l l "be considered to "be
either actual or net.
The value
of
such
paper may consist wholly
in the depositor's obligation to repay the amount credited therefor or acvanced thereon.
Evidently i t was not intended to permit
the depositor's promises to make good to "be counted in determining
the amount of its"actual net balance."
Section 13 of the Act
prescribes the character of paper which a
count for, or make advances on
provision of
that
section nor
to,
any
reserve
bank may dis-
its member banks.
other provision of
Neither
the
the
Act in-
dicates an intention to authorize a reserve bank to invest i t s
funds in uncollected checks on other banks presented by a member
bank.
If
u n d e r
quired,
upon
chocks
drawn
the provision in question a reserve bank is re-
the receipt by i t for deposit from a member bank of
on any of
i t s
depositors located where there is no
o f f i c e o f a reserve bank, to credit the amount thereof in t h e
reserve account of such member bank, i t i s apparent that the reserve banks would constantly have many millions of dollars of
their resources invested in non-interest bearing paper in transit.
That result is not consistent with due effect being given to t h e
provision as to what a, member bank may obtain advances on:5from
a reserve bank.
For reasons above indicated, we conclude that the
provision in question does not require the appellee, upon i t s receipt from appellant for
deposit
appellee's depositors and
p r i o r
of checks
to the
drawn
payment
upon any of the
of such checks,
to credit the o:..ount thereof as for cash, thereby making: such
amount at once subject to he withdrawn by appellant.
In viev. of the unequivocal language of paragraph 1 of
Amended Section 13 of the Federal Bescrve Act as to collection
charges against federal reserve banks and of the decisions in the
cases of American Bank v. Federal Bshcrvo Bank, 262 U. S. 643,
and farmers Bank v. federal Be serve Bank, P,62 IT. S. £49, wc think
i t would be superfluous to add anything to what was said in the
opinion rendered by the District Judge in support of the conclusion
that appellant was not entitled to rake exchange or remitting
charges on checks on i t s e l f received from appellee, whether appellee Wf.s the owner of those checks or held them for collection pursuant to authority conferred by the federal Reserve Act.
The decree is
AF7IPJ3D.
(OF-IGIxIAL FILED FE3BUAHY 11th, 1926.)
Foster, Circuit Judge, dissenting.
Section 16 of the Federal .Reserve Act provides
that every Federal Reserve Bank shall receive on deposit at par from member banks checks and drafts drawn
upon any of its depositors.
Section 13 of the Act
provides that any Federal Reserve Bank may receive
such deposits from member banks but does not specify
at par, and further provides that both member and nonmember banks may make reasonable charges, for collection or payment of checks and drafts and remission
thereof by exchange or otherwise, provided no such
charges shall be made against the Federal Reserve
Banks.
In this case i t appears that the appellee does
not give immediate credit for checks deposited by
member banks, drawn on other member banks.
Regula-
tion J provides for holding such checks in suspense
for a period sufficiently long to allow for collection in the ordinary course of events before credit
i s given.
of the Act.
Thi-s is a plain violation of section 16
Receiving checks for collection i s not
receiving them on deposit.
It i s idle to say that to give immediate credit
to checks deposited would require the Reserve Bank
to lend millions of i t s money without interest.
In
nearly all cases a crediting of the check and subsequent collection would be a mere matter of book-
keeping.
If the Reserve Bank applied, clearing house
Methods as they are authorized to do, probably most
of the iter.is could be handled in the bank.
The danger of loss to the Beserve Bank i s also
infinitesimal.
Die member banks are stockholders
of the Reserve Bank in proportion to their own capital and surplus * In the event of the failure of a.'<
member bank the Reserve Bank has a f i r s t lien on i t s
stock.
The member bank is: also required to keep a
certain percentage of i t s total deposits on deposit
with the
Reserve rank, in this instance three per
cent of time deposits and seven per cent of i t s
general deposits.
If the check deposited were not
in fact paid, the Reserve Bank could immediately
charge i t against the deposit.
If that reduced the
deposit below the legal requirement, the penalty
provided by the act could be applied.
The penalty
usually enforced for a reduction of the required
deposit below the minimum is to charge the discount
rate and two per ceilt additional on the deficit
until repaid.
The Reserve Bank has the right to
make frequent examinations of the member banks and
to call for statements of their affairs whenever
thought necessary.
So they have ample opportunity
to judge of the solvency of the member banks.
The
minimum deposit required by the act i s subject to
chcck so no violation of the law would occur i f
occasionally these deposits were reduced below the
Liininum.
Of course, the statute should not "be con-
strued to require the Reserve Bank t d give immediate
credit regardless of the solvency of the depositor
and the payee of the check, nor to give credit i f
there be cause to suspect thM; the check i s not
genuine or for any other reason . will not "be paid
when presented.
If
it
he
the
two
the
a p p e l l e e
on
conceded arguendo
s e c t i o n s
o t h e r
to
for
p e l l e e
is
on
h a r d l y
be
s a i d
of
f e d e r a l
It
serve
ceive
Bank,
such
in
the
Reserve
i s
charge
which
is
"by c o n s t r u i n g
is
v e s t e d
from member
the
"banks
same' r e s e r v e
it
seems
horn
of
the
dilerana.
made
for
payment
a
charge
made
to
in
drawn
d i s t r i c t
then
charge
me
the
ap-
It
or
against
can
c o l l e c the
Bank.
contended
r e c e i v e s
that
par
other
checks
them on
them at
t i o n
the
d i s c r e t i o n
checks
c o l l e c t i o n ,
Bank
dicated,
take
member banks
merely
t i o n
together
that
is
to
that
although
checks
say,
deposit
i n
f o r
for
s t i l l
would be
be
Federal
manner
c o l l e c t i o n ,
c o l l e c t i o n ,
when c o l l e c t e d ;
would
the
the
above
they
inre-
a n d must
consequently,
made
Re-
a g a i n s t
c r e d i t
a
c o l l e c -
the
Reserve
i l l e g a l .
The Supreme Court, in Farmers Bank vs. Federal
Reserve Bank, 262 U. S. at page 653, said this:
"Pa
of a cho
l e c t i o n
f a c e of
may, d e s
r clearance does no
ck who deposits it
w i l l be c r e d i t e d in
the check if i t is
p i t e par clearance,
t mean tha
with
his
h i s accou
c o l l e c t e d .
make a ch
t the pay
bank for
nt w i t h t
His ban
arge to h
ee
c o l he
k
im
-li-
X-4530
for i t s service in collecting the check from the
drawee bank. It nay make such a charge although
"both i t and the drawee tank are members of the
federal reserve system; and some third bank
which aids in the process of collection may likewise make a charge for the service i t renders."
The argument that the Reserve Bank mast inevitably credit the face of the check when collected i s
not sound.
Section 13 does not require i t nor does,
a reasonable construction of section 16.
It seems
to me to be clearly the intention of Congress that
the Federal Reserve Banks shall give to i t s member
banks immediate credit for checks drawn on other
member banks in the same district.
If I am wrong in this conclusion, then i t
inevitably follows that the member banks have the
right to make collection and exchange charges on
such checks as the charge can not be said to be
made against the Reserve Bank when the check i s
merely held for collection.
For these reasons I respectfully dissent.
(ORIGINAL FILED FEBRUARY 11th, 1926.)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4531
February 15, 1926.
SUBJECT: Compensation of Attorneys Employed by Federal
Reserve Banks other than Regular Counsel.
Dear Sir:
The Federal Reserve Board has ruled, as an administrative matter, that the compensation paid by the Federal reserve banks to attorneys employed to assist the banks' regular
counsel should have i t s approval*
Before employing a special attorney whose services
are likely to involve an expenditure by the reserve bank in
excess of $1,000, the matter should be submitted to the Federal
Reserve Board with a request that the Board approve of the payment of compensation to the attorney up to a stated amounti
This may be done by telegraph and w i l l receive prompt attention
by the Board.
Where the employment of a special attorney will not,
in the opinion of the officers of the reserve bank, involve
payment of compensation in excess of $1,000, the matter need
not be submitted to the Board before the services of the attorney are engaged, or before he is compensated in f u l l for ser
vices rendered.
By direction of the Federal Reserve Board.
Very truly yours,
Walter I>. Eddy,
Secretary.
TO AIL- C M M S M OF F. R. BAMS.
159
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4533
February 19, 1926.
(CONFIDENTIAL)
Dear Sir:
The Department of Justice is endeavoring to locate
the possessor or possessors of certain Liberty "bonds and has
asked the Federal Reserve Board to request each Federal reserve "bank to be on the lookout for coupons from the bonds in
question which may be presented for payment through the Federal reserve bankst and to notify the Department of Justice
promptly upon receipt of the coupons and to advise from whom
received, The serial numbers of the bonds t the denomination
of each and the issue are as follows:
J-00091169,
K-00091170,
A-00091171,
C-00091173,
E-00091175,
F-00091176,
G—00091177,
J-00091179,
H-00091188,
A-00091191,
B-00091192,
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
$10,000.
4|yo Fourth Permanent Liberty Loan
tl
II
41#
II
t!
II
fl
41%
I
I
II
4$$
II
1
1
4W
I
I
I
I
4%
I
I
I
I
4|$
II
I
I
41$
II
II
4$%
I
I
I
I
41%
The Board requests your compliance with the wishes
of the Department of Justice in this matter.
Very truly yours,
Edmund Piatt,
Vice Governor.
TO ALL CHAIRMEN OF F.R, BANKS EXCEPT CLEVELAND.
160
16:1
X-4534
STATEMEMT FOB THE PRESS
For Release in Papers
Saturday, February 20, 1926.
Trie f i r s t and organization meeting of the Federal Advisory Council
for 1926 with the Federal Reserve Board at which general "business and
financial conditions were discussed was held Thursday, February 18.
The members of the Council are;
Federal Reserve District Mo.l, Boston, C. A. Morss
Mo. 2, Mew York, James S. Alexander
Mo.3, Philadelphia, L. L. Rue
Kb.4, Cleveland, George A. Coulton
Ho.5, Richmond, Col. John F. Bruton
Mo.6, Atlanta, P. D. Houston
Mo.7, Chicago, Frank O.Wetmore
Mo.8, St.Louis, Breckinridge Jones
Mo.9, Minneapolis, Theodore Wold
Mo. 10,Kansas City, Peter W. G-oebel
Mo.11,Dallas, B. A. McKinney
Mo.12,San Francisco, Henry S. McKee
Frank 0. Wetmore of Chicago,was elected President, and Chas. A.
Morss of Boston, Vice President.
bers
These officers as
ex-officio mem-
and Messrs. Alexander, Rue, Coulton and Jones will comprise the
Executive.Committee.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4535
February 20, 1926.
SUBJECT! Expense Main Line, Leased Wire System,
January, 1926.
Dear Sir:
Enclosed herewith you will find two mimeograph statements, X-4535-a and X-4535-b, covering in
detail operations of the main line, Leased Wire System,
during the month of January, 1926.
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 HeserVe Board,
Special Fund", Leased Wire System, sending duplicate
C/D to Federal Reserve Board.
Yours very truly,
Fiscal Agent,
(Enclosures)
TO GOVERNORS OF ALL BAJIKS EXCEPT CHICAGO.
$AJ2
X-45 3 5 - a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE
FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JANUARY, 1926.
From
Business
reported
'by banks
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t• Loui s
Minneapolis
Kansas City
Dallas
San Franc i sco
30,882
128,105
36,530
71,644
46,333
53,181
97,313
73,602
34,647
72,932
57,582
109,185
Total
8.11,939
Board
Total
Percent of Total
Words sent
by New, York
cnargeable
to other
F.R. Banks (1)
978
-
Treasury
Total
31,860
128,105
36,951
74,378
48,476
Dept.
Business
2,99s
3,459
421
2,734
2,143
3 >410
1,350
2,609
2,274
2,582
4,457
2,593
56,591
98,663
76,211
36,921
4,169
2,950
62,039
111,786
1 ,l4l
5,046
25,556
837,495
35,122
295,309
1,132,804
28,546
75,514
100$
2,920
3,196
2,041
2,737
1,579
War
Finance
Corporation
F.R.
Business
Bank Business
63,668
5.62%
28,862
124,646
-
3.60
15.54
4.24
8.87
5.79
6.71
11.78
9.13
4.41
9.04
34,031
-
71,182
-
46,435
53,854
-
94,494
-
-
68
2,886
Percent of
total bank
Business (*)
73,261
35,342
72,560
60,898
106,740
7.59
13.30
68
802,305
100.00
202
270
1,068,866
~
. 02$
266,561
94.36$
(*)
These percentages used in calculating the pro rat a share of leased wire expense as shown
on the accompanying statement (\X-4535~b)
(1)
Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated, in accordance with action taken at Governors' Conference Nov. 2-4, 1925*
05
C*5
X-4555-b
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, JANUARY, 1926.
Name of Bank
Operators'
Salaries
t 260.00
Boston
New York
979-66
Philadelphia
216.66
Cleveland
284.50
160.00
Richmond
Atlanta
225.00
Chicago
(#)3,583.61
St. Louis
238.50
Minn eap.oil s
183.34
Zansas City
275*64
Dallas
251.OO
San Francisco
38O.OO
Federal Reserve Board
Total
(&)
(#)
(*)
(a)
(b)
$7,057.91
Operators1
Overtime
$
-
Wire
Ren tal
Total
Expenses
Pro rata
Share of
To tal
Expenses
$-
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,347,21
-
$15,347.21
260.00
979.66
216.66
284.50
180.00
225.00
3,583*61
238.50
I83.34
275-64
251.OO
38O.OO
15,347.21
$22,405-12
(a)l,264.50
$21,140.62
Credits
Payable to
Federal
Reserve
Board
761.06 $ 260.00 $
501.06
3.285.25
979.66
2,305.59
216.66
896.36
679.70
284.50
1,590.67
1,875.17
180.00 (&)1,248.71
1,224.04
1,418.54
225.00
1,193.54
2,490.37 3,583.61 (*)1,093.24
1,691.64
238.50
1,930.14
748.96
183,34
932.30
1,911.11
1,635,47
275.64
251.OO
1,604.57
1,353,57
2,811.71
2,431.71
380,00
$21,140.62 $7,057*91
$15,380,62
(b)l,093,24
$14,287>35
Includes $204.67 for branch line business transmitted over main line circuit.
Includes salaries of Washington operators.
Credit.
Received $5.24 from War Finance Corp. and $1,259*26 from Treasury Dept. covering business for the
month of January, 1926.
Amount reimbursable to Chicago.
CD
FEDERAL
A M I S 0 ',1 Y
i 9 a "6
Officers:
Frank 0* Wetmore, President.
Charles A. Morss, Vice President.
Walter Lichtenstein, Secretary
District
COUNCIL
X-4536 165
Executive Committee:
Frank 0. Wetmore
Levi L. Rue
Charles A* Morss
Getii A. Coultcn
Breckinridge Jones.
jameS S. Alexander
M E M B E R S
Address
No.
1
Charles A. Morss
Simplex Wire & Cable Co.,
2vl Devonshire Street,
Boston, Mass.
No.
2
James S. Alexander
No.
3
Levi L. Rue
National Bank of Commerce,
New York, N. Y.
The Philadelphia,Natl. Bank,
421 Chestnut Street,
Philadelphia, Pa.
No.
4
George A# Coulton
Union. Trust Company,
Cleveland, Ohio.
No.
5
John F. Bruton
First National Bank,
Wilson, N. C.
No.
6
P. D. Houston
American National Bank,
Nashville, Tenn.
No.
7
Frank 0. Wetmore
First National Bank,
Chicago, Illinois.
No.
S
Breckinridge Jones
Mississippi Valley Tr. Co.,
St. Louis, Mo.
No.
9
Th&cdore Wold
Northwestern Natl. Bank,
Minneapolis, Minn.
No. 10
P. W. Goebel
Liberty National Bank,
Kansas City, Mo.
No. 11
B. A. McKinney
American Exch. Natl. Bank,
Dallas, Texas.
No. 12
Henry S. IVbKee
Barker Brothers,
Los Angeles, Calif.
Address of Mr. Lichtenstein, First National Bank, Chicago, Illinois.
February 20, 192b.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4537
February 23, 1926.
SUBJECT: Bank Holidays during March, 1926.
Dear Sir:
. The Federal Reserve Bank of Dallas, together
with i t s El Paso and Houston Branches, will "be closed
on Tuesday, March 2nd, on account of observance of Texas
Independence Day.
The Baltimore Branch of the Federal Reserve
Bank of Richmond will be closed on Thursday, March 25th,
in observance of Maryland Day.
On the dates indicated, the banks affected will
not participate in either the Sold Fund Clearing or the
Federal Reserve Note Clearing. Please include your
credits for the Banks and Branches mentioned on each of
the holidays with your credits of the following business
day in your Gold Fund Clearing telegrams, and make no
shipment of Dallas Federal Reserve notes, f i t or unfit,
to the Head Office or to Washington on March 2nd.
Kindly notify Branches.
Very truly yours,
J, C. Foell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
166
X-4539
F EI S BAL
RESERVE
BOARD
1.67
STATEMENT FOR THE PRESS
For Release in Morning Papers,
Saturday, February 27, 1926.
The following i s a summary 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
January.and February, as contained in the
forthcoming issue of the Federal Reserve
Bulletin.
Industrial activity in January was in slightly smaller volume than in
December, and the distribution of commodities showed a seasonal decline.
The level of prices remained practically unchanged.
Production.The Federal Reserve Board* s index of production in selected basic industries was about one per cent lower in January than in December.
The
output of iron and s t e e l , copper, and zinc increased, while activity in the
woolen and petroleum industries declined, and mill consumption of cotton,
the cut of lumber, and bituminous coal production increased less than is
usual at this season of the year.
the index,
Automobile production, not included in
was slightly smaller than in December, but considerably larger
than in January, 1925.
Factory employment changed but l i t t l e in January,
but the earnings of workers decreased considerably owing to the closing of
plants in most industries at the opening of the year for inventory-taking
and repairs.
The volume of building contracts awarded in January, although
seasonally less than in December, exceeded that of any previous January on
record.
Contracts awarded were particularly large in the New York and
Atlanta d i s t r i c t s .
Trade.Sales of department stores and mail order houses showed more than the
-2-
X-4539
168
usual seasonal decline in January, but were larger than in January of last
year.
Wholesale trade declined considerably and was in smaller volume than
a year ago.
Stocks at department stores showed more than the usual in-
crease in January and were a tout 11 per cent larger than at the end oi January, 1925.
Freight car loadings declined in January and the daily average
for the month was approximately the same as a year earlier.
Prices.Wholesale prices, as measured "by the index number of the Bureau of
Labor Statistics, remained practically unchanged from December to January.
By groups of commodities, prices of grains, coke, and paper and pulp increased, while dairy products, cotton goods, bituminous coal, and rubber declined.
In the f i r s t three weeks of February there was a decline in the
prices of grains, and following the settlement of the strike in the anthracite region, a drop in the prices of bituminous coal and coke.
Price ad-
vances were shown for refined sugar, copper, and petroleum.
Bank Credit.At member banks in leading cities the seasonal decline in the demand
for credit, which began at the turn of the year, came to an end toward the
close of January, and in the early part of February the volume of loans and
investments at these banks increased considerably.
The increase was largely
in loans for commercial purposes, which after declining almost continuously
from their seasonal peak early in October, advanced by more than $50,000,000
in February.
The growth in the commercial demand for credit throughout the country,
together with some increase in currency requirements, was reflected in a withdrawal of funds from the New Y0rl< money market and was a factor in the
169
-3-
X-4539
increase in the demand for reserve "hank credit after the end of January.
Reserve "banks1 holdings of b i l l s and securities increased "by about $66,000,000
between January 27 and February 17.
As the result of the withdrawal of funds from New York the rates on call
loans became somewhat firmer in February, but commercial paper rates were
slightly lower.
FEDERAL RESERVE BOARD
X - 4 5 4 1
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
February 25, 1926.
SUBJECT: Code wordB for use between the Federal Reserve Bank
of IJew York and other Federal reserve banks in connection with certain telegraphic transactions in U.S.
Government securities.
Dear Sir;
Referring to the cod# word for use between the Federal
Reserve Bank of Hew York and other Federal reserve banks in connection with certain telegraphic transactions in TJ. S. Government
securities, the Board's letter X-4111 dated July 12, 1924, authorizes the use of the code word "MOAITING" , covering the placing of
subscriptions with the Treasury for Government securities to replace maturing issues held in the Special Investment Account*
It is now requested that the code word referred to above
be cancelled in the Federal Reserve Telegraphic Code and in l i e u
thereof, effective March 15, 1926, the following new code word be
used between the Federal Reserve Bank of New York and other Federal
reserve banks to cover the corresponding transaction:
"MOLLIFY" Have arranged with Treasury for subscription by reserve banks to new issue to replace
maturing issues held in Special Investment Account,
Will you, therefore, place subscription for $
representing your proportion of new securities advising Treasury that payment will be made by
$
maturing certificates and $
maturing notes* Please wire us amount of your allotment on this exchange subscription, and on payment
due date credit Treasurer with amount of allotment
and debit Treasurer with same amount as transfer of
funds to Hew York* Also as soon as allotment i s
received request Commissioner of the Public Debt
to authorize the Federal Reserve Bank of New York
to make delivery for your allotment account of the
amount of your allotment on System investment subscript!#^
- 2 ~
X-4541
±71.
A code word, has also been designated to cover an additional transaction as submitted by the Federal Reserve Bank of New York
and i s as follows:
"MOLLUSKS" Referring to your MOLLIFY telegram
Treasury has allotted this bank $
of subscription for Special Investment Account.
On payment due date we will credit and debit
Treasurer's account as arranged and have requested Commissioner of the Public Debt to authorize your bank to make delivery for our a l l o t ment account of the amount stated herein.
The code words indicated should be inserted in the Federal
Reserve Telegraphic Code at the end of page 154 following the code
word "MOLLIFIED".
Yours very truly,
J. C. Noell,
isistant Secretary.
TO GOVERNORS OF ALL F.R.BAIIKS.
(COPY )
X-4542
FEDERAL RESERVE BAH
OF SAN FRANCISCO
February 17, 1926.
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dedr Mr. Wyatt:
I have received your letter of February 12, 1926, enclosing
copy of Mr. Strand's letter to you dated February 8, 1926, outlining
the proceedings in the case of Vacuum Oil Co. v. Federal Reserve Bank
of Dallas, et a l . Mr. Stroud's letter is very interesting and I believe he i s to be congratulated upon the result obtained.
I have had the same question presented in a l i t t l e different
form in the case of Denning against the Federal Reserve Bank of San
Francisco, f i l e d in the District Court of the State of Idaho. In this
case the Federal Reserve Bank was the only party sued. The plaintiff
was the payee of a check drawn by Fred Rush in the sum of $593. The
check was deposited by Rush in the Burley National Bank of Burley,
Idaho, and credited to his account. It was forwarded by the Burley
National Bank to the Continental National Bank of Salt Lake City and
by that bank delivered to us in the ordinary form of cash l e t t e r . The
check was sent by us direct to the drawee, Paul State Bank, of Paul,
Idaho, upon the day of i t s receipt and a remittance draft for this and
other items was received in purported payment. The draft upon presentation was dishonored by reason of the prior failure of the Paul
State Bank.
To the complaint in this action I interposed a demurrer,
general and special. In argument upon the demurrer, which I handled
personally, we contended for the adoption in Idaho of the so-called
"New York rule," the courts of that state not being definitely committed
to either rule. The argument necessarily was largely academic and in
making i t I attempted to stress the fact that the New York rule was
that adopted by the Federal courts, that i t had not been departed from
in the Malloy decision and that, in the absence of any controlling
decision, i t was the one which should be applied in this case. In a
very brief memorandum decision, copy of which I enclose, Judge Lee
adopts this position. Plaintiff having refused to amend or plead
further, judgment of dismissal has been entered. I am informed that
this case will be appealed to the Supreme Court of Idaho on the ruling
i
i 173
X-4542
- 2 -
upon the demurrer, in which event we will have the opportunity of a
definite decision as to the right of action on the part of the owner
of the item against the last collecting tank.
I have several similar cases pending in Idaho and Utah, in
one of which the facts alleged were similar to those alleged in the
Denning case. A general demurrer was also interposed in this other
case and the matter argued "by me upon the same brief as that used in
the Denning case. The trial court in the other case overruled the demurrer and we w i l l proceed to trial on the merits. As Mr. Stroud seems
to have done in the Vacuum Oil Co. case, i t i s our intention to stress
the question of custom.
Chapter 165 of the Idaho Session laws, 1921, to which Judge
Lee refers, in his memorandum decision, i s a statute expressly authorizing the direct routing of items by collecting banks and we shall also
contend that the enactment of this statute carries with i t by implication the right of the collecting bank to accept the drawee's draft
in payment.
Very truly yours,
(signed)
Albert C. Agnew
Counsel.
Enclosure.
(COPY )
X-4542a
T. BAJLEY LEE
Judge Eleventh Judicial District
Burley, Idaho
Jan. 14, 1926
District Court
Denning vs Fed. Reserve
Mr. John S. Codding,
Burley, Idaho.
Hon. H. A. Baker,
Rupert, Idaho.
Gentlemen:An exhaustive study of this problem constrains me to
sustain defendant's general demurrer.
I am impelled to this conclusion "by the holdings of the
U. S. Supreme Court in Bank vs 1,{alloy, 68 L Ed
and Exchange
Bank vs Third Nat. Bank 28 L Ed 722 where the IIew York rule i s
expressly upheld.
Also by Chapter 165 of the Idaho Session Laws of 1921
which seems to exempt the i n i t i a l bank from l i a b i l i t y only where
with due diligence i t has attempted to collect by sending the item
to the drawee bank.
Defendant's Counsel will kindly prepare the proper order
Very truly yours,
T. BAILEY LEE
175
X-4543
LIST OF COITTROLISRS AND tIMAGISS OF THE
|TOBiI L J^MXOMK§--SllJ?OQM
MP CHICAGO.
COHTEOLLSEb.
CHICAGO
1JW YORK
Gilbart, A. W., Cash & Collections Dept.
Gidney, E. M., Loans Dept.
Hendricks, L. H., Fiscal Agency Dept.
Jones, J. W., Administration Dept.
Hounds, L. R., Accounts Dept.
Bachman, W. C., Collections Dept.
ChiIds, K. C., Loans & Credit Dept.
Dillard, J. H., Administration.
Jones, D. A., Fiscal Agency Dept.
Netterstrom, 0. J . , Cash & Custody Dept.
it A H A G E R S
Barrows, D. H., Administration Dept.
Coe, C. H., Check Dept.
Crane, J. E., Foreign Dept.
French, E. C. , Cash Dept.
Jefferson, H. M., Personnel Development
Dept.
Lins, A. J . , Credit & Discount Dept.
Matteson, W. B., Securities & C. of I.
Dept.
O'Hara, R. M., B i l l Dept.
Rice, J. M., Accounting Dept.
Vansant, S. S., Safekeeping Dept.
"aters, I. W.t Collection Dept.
Bateman, F., Securities Dept.
Buss, R. H., Loans.Dept.
Callahan, J. C., Member Bank Accounts
Dept.
Coulter,, R. E., Cash Custody Dept.
Dazey, A. W., Investments Dept.
Delaney, E. A., Credit Dept.
Fischer, Irving., Check Dept.-Collections.
Hargreaves, R. J . , Personnel Dept.
Huelsman, R. C., Planning Dept.
Huston, F. M., Research & Statistics
Dept.
LeRoy, A. R., Loans. Dept.
Lindsten, F. A., Disbursing Dept.
Meyer, L. G., Service Dept.
Pavey, L. G., Collections Dept.
Roberts, J. G., Cash Dept.
FEDERAL RESERVE BOARD
x-4544
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
P A H M A TV
* ^DRUARY
P 7
,
1 qp A
X ^ O ,
SUBJECT: Designation on applications for rediscount
of person from whom member banks acquired
paper offered for rediscount.
Dear Sir:
There are enclosed for your information copies of certain
correspondence between the Federal Reserve Board and the Governor
of the Federal Reserve Bank of San Francisco, and a copy of a memorandum by the Board's General Counsel on the above subject.
You w i l l note that, for the present, and until further
notice, the Board will waive compliance with that provision of
Section IV(b) of Regulation A which provides that in applying for
the rediscount of promissory notes, "The member bank shall c e r t i f y
in i t s application whether the note offered for discount has been
discounted for a depositor other than a bank or for a nondepositor
and, i f discounted for a bank, whether for a member or nonmernber
bank"; provided, that the application for rediscount shall require
member banks to designate which paper offered for rediscount, if any,
was acquired from nonmernber banks and shall contain a c e r t i f i c a t e
that none of thb paper offered for rediscount except that so designated was acquired from a nonmernber bank.
The Board i s considering the advisability of amending the
above provision of i t s Regulation A in accordance with the suggestion contained in the memorandum of the Board*s General Counsel;
but, before taking any definite action on the subject, i t desires
to have the matter discussed at the next Governors* Conference with
a view of determining whether there i s any practical reason why
member banks should be required to specify on applications for rediscount the persons from whom they acquired the paper offered
for rediscount, except in the case of paper acquired from nonmernber
banks. This subject, therefore, will be made a topic for discussion
at the next Governors* Conference,
Very truly yours,
TO ALL GOVEH2TOR5,
Enclosure:
Walter L. Eddy,
Secretary,
177
(COPY)
X—4-544-a
February 24, 1926.
Mr, J. U. Calkins, Governor,
Federal Reserve Bank of San Francisco,
San Francisco, California.
Dear Governor Calkins t
The Board has carefully considered your letter of December
22nd and the enclosed memorandum "by D e p u t y Governor Clerk, and has
voted that, for t h e p r e s e n t a n d u n t i l further notice, i t will
waive compliance with t h a t provision of Section 17(b) of Regulation
A which provides t h a t in applying for t h e rediscount of promissory
notes, "The member bank s h a l l certify in i t s application whether
the note offered for discount has been discounted for a depositor
other than a bank or for a nondepositor and, if discounted for a
bank, whether for a member or a nonmembor bank" ; provided, that
the application for rediscount shall require member banks to designate which paper offered for rediscount, if any, was acquired
from nonmembcr banks and shall contain a certificate that none
of the paper offered for rediscount except that so designated
was acquired from a nonmember bank.
The Board is considering the advisability of amending
this portion of i t s regulation?.; but in view of the fact that the
practical situation in other Federal reserve districts may be different from that in your district as described by Mr. Cleric1 s memorandum, the Board will defer any action on a definite amendment to
i t s regulations until after the matter has been discussed at the
Governors1 Conference,
Very truly yours,
Edmund Piatt
Vice Governor.
W
W OMC
( d0 t t )
OFFICE COMllSPOITDSlICE
To
From
Federal Reserve
Board
The Federal Reserve Board
Mr. Wyatt - General Counsel
X-4544-*b
Date February 16, 1926
Subject: Designation on applications for
rediscount of the party from whom the
member bank acquired the paper offered
for rediscount.
The attached letter from Governor Calkins requests
the Board1s permission to discontinue the practice of requiring
member banks to designate on their applications for rediscount
the parties from whom such member banks acouired the paper
offered for rediscount, except in cases where the paper was acquired from nonmember banks.
•
Section 17(b) of Regulation A, which pertains to
the rediscount by member banks of promissory notes, provides that,
11
The member banks shall certify on i t s 'application (for rediscount)
whether the note offered for discount has been discounted for
a depositor other than a member bank or for a non-depositor and,
if discounted for a bank, whether for a member or a non-member bank" .
Governor Calkins' request, therefore, i s in effect that the Board
waive this requirement of i t s Regulation A except that part of i t
which requires member banks to designate which paper was acquired
from nonmember banks,
RECOmsmDATION.
I respectfully recommend that:
(1) Until further notice, the Board waive this requirement
of i t s Regulation; provided that the application for rediscount
requires member banks to designate which paper offered for rediscount, if any, was acquired from nonmember banks and contains a
certificate that none of the paper offered for rediscount except
that so designated was acquired from a nonmember bank.
(2) That the Board make this subject a topic for discussion
at the next Governors* Conference with a view of considering the
desirability of an amendment to this portion of i t s Regulation; and
(3) That a copy of this correspondence be sent to a l l Federal
reserve banks for their information.
DISCUSSION.
This suggestion of Governor Calkin si jarose out of the
decision of the Circuit Court of Appeals in tfi'e case of IdahoGrimm Alfalfa Seed Growers Association v. Federal Reserve Bank
of San Francisco, wherein the Court held in effect that if a
member bank which i s known by i t s officers to be insolvent receives commercial paper on deposit such action constitutes a
fraud on the depositor and the bank acquires no t i t l e to such
I 4544 t
-
~ 179
paper; and if the member bank rediscounts such paper with a Federal
reserve "bank and the Federal reserve bank has knowledge of the insolvency of the member bank and also of the fact that the paper offered
for rediscount was received 011 deposit by the member bank, the Federal
reserve bank i s charged with notice of the- fraud and acquires no
v t i t l e to the paper and i s , therefore,
accountable to the depositor
for the proceeds of the paper upon the lrii>Qlv.ar><vr cuf
In that case the only evidence of the fact th&t the paper
was received on deposit was that such paper was designated by the
letter 11 on the application for rediscount, which required member
banks to designate "Depositor* s Paper" by the letter HD'1 • The court
evidently construed this designation to mean that the paper was
the property of the depositor or was received on deposit, whereas
the designation 'Was really intended to mean that the paper was
acquired front a depositor as distinguished from paper acquired from
non-dep0:sitors• Governor Calkins fears that this designation on
the application for rediscount may be embarrassing in the future
and may in other cases enable depositors to defeat the t i t l e of
the Federal Reserve %)&nk to paper acquired under such circumstances.
Hence his recommendation.
Governor Calkins encloses a memorandum on t h i s subject from
Deputy Governor Clerk which contains the following statementt
11
In our revised form of application for discount,
we have usbd the following terms to designate the
source from,which paper i s received:
Write 11D11 for paper t i t l e to which has been $8[qtiired
from a depositor.
Write "P11 foi* paper purchased without endorsement or
guaranty of seller.
Write "Rn for paper t i t l e to which has been acquired
from another member bank*
Write ,fH" for paper t i t l e to .,-§6iich has been acquired
from a nonmember bank.
Although we feel that these designations f u l l y clear
the t i t l e to a b i l l accepted under discount, item !,DM i s
susceptible to the interpretation that a deposit i s
created by the discount of the b i l l by the offering bank,
and subject^ us to the claim that we thereby were placed
on notice that the bank discounting the paper with the
Federal Reserve Bank was receiving deposits at a time
when i t s condition was such as to constitute the receipt
of deposits a fraud on the depositor.11
180
- 3 -
X-4544-b
I think the revised form is a great improve on t over the
one formerly used by the San Francisco Bank, since i t i s much clearer
and eliminates the use of the possessive expression 11 Depositors1
Paper". In view of the fact that paper discounted for a depositor
is usually credited to his account as a deposit, and i s , in e f f e c t ,
deceived on deposit, however, I fear that even the designation contained in the new form might be held by the courts to j u s t i f y a jury
in finding that the Federal reserve bank had knowledge of the fact
that such paper was received on deposit. I believe, therefore, i t
would be desirable to eliminate all of these designations except
the designation of paper acquired from nonmember banks, unless there
i s some important practical reason why this should not be done.
I do not know of any practical reason why member banks
should be required by the Board1 s regulations to specify on applications for rediscount the person from whom they acquired the paper
offered for rediscount, except in the case of paper acquired from
nonmember banks; and I am unable to find in the f i l e s of the Board
anything which will throw any light on the reason for the above quoted
requirement, which has been in the Board1 s regulations since 1915.
On this point Mr. Clerk says:
H
The primary purpose of designating the source
froii which paper i s acquired i s to inform the Federal
Reserve Bank whether the member bank i s using the
f a c i l i t i e s of the Federal Reserve Bank to accommodate
nondepositors or nonmember banks, etc. In the early
stages of the organization of the Federal Reserve Bank,
this form of designation may have been very essential
but today we are so intimately in touch with the affairs
of our member banks that if a bank i s borrowing to
any considerable extent i t i s not d i f f i c u l t for us
to detect whether i t is using i t s credit to grant
accommodations to nondepositors even though i t uses
only depositor 1 s paper for discount purposes. Moreover,
every b i l l offered for discount i s supported by a f i nancial statement of the borrower and such supplemental
information which clearly would show whether or not
the borrower was a regular customer of the bank.H
If Mr. Clerk is correct as to the original reason for
this requirement and the lack of practical necessity for i t now,
I see no reason why this requirement of the Board*s regulations
should not be eliminated altogether and a requirement substituted
that member banks shall designate which paper offered for rediscount
has been acquired from nonmember banks and shall certify that
none of the paper offered for rediscount except that so designated
- 4 -
X-4544-b.
was acquired from nonmemher banks. I hesitate to recommend, that
the regulations be amended in this respect, however, until the
subject has been considered more thoroughly and the Board has
been thoroughly convinced that there i s no practical value
in the existing requirement of i t s regulation on this subject.
While Mr. Clerk may be entirely right as to the practical
situation in his District, the situation in other Districts
may be materially different. Eence my recommendation that the
matter be discussed at the next Governors' Conference.
In this connection I desire to suggest that the substance
of the Board's ruling in the Federal Reserve Bulletin with reference to the rediscount of paper acquired from nonmember banks
should be incorporated in Regulation A. If the McFadden B i l l
becomes a law, however, i t will be necessary for the Board
to get out a complete new edition of i t s regulations, and I
do not believe the Board should at this time attempt to make
any piece-meal amendments to i t s regulations.
The above mentioned requirement of the Board's
regulations is not contained in the law, but is merely a
matter of regulation which the Board can waive if i t so
desires. I believe^therefore, that the situation discussed
by Governor Calkins' will be sufficiently net for the present
if the Board adopts the recommendations which I have made
above.
I respectfully submit herewith a proposed draft of
a letter to Governor Calkina.
Respectfully,
(Signed) Walter Wyatt,
Walter Wyatt,
General Counsel.
Letter attached
±82
(COPY)
FEDERAL
H2SS3TS
X-4544-c. 3 A H
0? SAN KIAITCISCO.
December 22, 1925.
Federal Reserve Board,
Washington, D.C.
Dear Sirs:
We recently sent to the Board's Counsel, Mr. Wyatt, copy of
"briefs, petitions for rehearing and a l l pleadings in the action of Idaho
Grimm Alfalfa Soed Growers' Association vs. Federal Reserve Bank of
San Francisco.
You will recall that one of the points at issue was that the
Federal Reserve Bank was on notice that the b i l l submitted fo?- discount
was not the property of the discounting member bank, because the application specifically stated that i t was depco1tor's paper, the use of the
possessive' implying that the paper "belongjd to the depositor and not to
the "bank.
There is attached a memorandum prepared "by
• Deputy Governor
Clerk, and i t would bo appreciated if the Board would inform us whether
or not we may follow the suggestion contained therein and require the
member banks to use in their applications for discount merely the designation
"U" indicating that the t i t l e to the paper had been acquired from a non-member bank.
As we desire to recall the outstanding stock of applications
for discount now held by discounting member banks and distribute a revised form, i t w i l l be appreciated if the Board will telegraph us whether
or not we may make the change recommended.
Yours very truly,
(Signed) Jno.U.Calkins
Governor.
( c o p y )
•
183
X-4544-c 1
December 22, 1925.
MEMORANDUM TO MB. CALKINS
FROM MR. CLERK.
Federal Reserve Board Regulation A, Series of 1924, Section IV,
33, provides as follows:
"The member bank shall certify in i t s application
whether the note offered for discount has been
discounted for
a depositor other thaii a bank,
or for a non-depositor, and
if discounted for a bank, whether for a
member or non-member bank."
As a consequence of the following paragraph of Regulation B,
Series of 1915,
"Member banks shall certify in their letters of
application for rediscount whether the paper
offered for rediscount is depositor 1 s or purchased paper, or paper rediscounted for other
member banks," etc.,
I
which in e f f e c t i s practically the "same as the 1924 Regulation, the Federal
Reserve Banks quite generally designate, in their applications for discount,
paper acquired from a customer as "depositor's paper." Your attention is
drawn to the use of the possessive.
In the case of Idaho G-rimm Alfalfa Seed Growers' Association vs.
Federal Reserve Bank of San Francisco, plaintiff claimed that the Federal
Reserve Bank of San Francisco had no t i t l e to a certain negotiable draft
secured by bill-of-lading because the member bank offering the b i l l for discount to the Federal Reserve Bank designated in i t s application that the
b i l l was depositor's paper. Although our Counsel attempted to show that
the designation was intended to mean the source from which t i t l e to the
paper was acquired, the Court was persistent in i t s ruling that the use of
the possessive settled the question that the bill-of-lading draft belonged
to a depositor of the bank and that the Federal Reserve Bank took i t with
knowledge thereof.
In our revised form of application for discount, we have used
the following terms to designate the source from which paper i s received:
Write
Write
Write
Write
"D" for paper t i t l e to which has been acquired from a depositor
P" for paper purchased without endorsement or guaranty of seller
"R".,,|?jar paper t i t l e to which has been acquired from another memberbank
"N" '"S'br paper t i t l e to which has been acquired from a non-member bank.
11
Although we feel that these designations fully clear the t i t l e to a b i l l accepted under discount, item "D" is susceptible to the interpretation that
-
2
X-4544^>.%&
-
a
deposit i s created by the discount of the "bill "by the offering bank, and
subjects us to the claim that we thereby were placed on notice that the
bank discounting the paper with the Federal Reserve Bank was receiving deposits at a time when i t s condition was such as to constitute the receipt
of deposits a fraud on the depositor.
The primary purpose of designating the source from which paper
is acquired i s to inform the Federal Reserve Bank whether the member bank
is using the f a c i l i t i e s of the Federal Reserve Bank to accommodate nondepositors or non-member banks, etc. In the early stages of the organization of the Federal Reserve Bank, this form of designation may have been
very essential but today we are so intimately in touch with the affairs
of our member banks that if a bank is borrowing to any considerable extent
i t i s not d i f f i c u l t for us to detect whether it i s using i t s credit to
grant accommodations to non-depositors.oven though i t uses only depositor*s
paper for discount purposes. Moreover, every b i l l offered for discount
i s supported by a financial statement of the borrower and such supplemental
information which clearly would show whether or not the borrower was a
regular customer of the bank.
Would i t not be desirable to suggest to the Board that we be permitted to discontinue these designations except
•"IT11 for paper t i t l e to which has been acquired from a
non-member bank?
The only reason this one designation is suggested i s so that a Federal
Reserve Bank would not discount
paper actually acquired from a nonmember bank without i t s knowledge7
Respectfully submitted,
(Signed) Ira Clerk
Deputy Governor.
185
FEDERAL
RESERVE
BOARD
X-4546
STATEMENT FOR THE PRESS
For immediate release
February 27, 1926.
CONDITION OF ACCEPTANCE MARKET
January 21, 1926 to February 17,1926,
Acceptances.
The acceptance market was unusually quiet during the period from January
21 to February 17, reports from dealers in New York, Boston, and Chicago
showing the smallest volume of transactions since last summer.
The supply
of b i l l s was generally larger than the demand for them and dealers' portf o l i o s increased to the highest point in over a year.
Coffee, silk, and
cotton b i l l s were most in evidence and foreign funds provided the chief investment demand.
Rates, which were unsettled during the last half of
January, became stabilized around the end of the month with 90 day and longer b i l l s offered at 1/8 per cent less than immediately after the rise in
, rates on January 8th, but s t i l l 1/8 per cent more than at the f i r s t of the
year.
On February 17 rates in the New York market were as follows:
3 3/4
per cent bid and 3 5/8 offered for 60 and 90 day b i l l s ; 3 7/8 per cent
bid and 3 3/4 offered for 120 day b i l l s ; 4 per cent bid and 3 7/8 offered for
150 day b i l l s ; and 4 1/8 per cent bid and 4 per cent offered for the longest
maturities.
COMMITTEES OF
FEDERAL RESERVE BOARD
Effective, March 1st, 1926,
.EXECUTIVE C0H..ITTEE:
Gov. Crissinger
Mr. Piatt
Mr.
(term expires
LAW:
Mr. Haniin, Chairman, .
Mr. Mcintosh
EXAMINATIONS:
Mr. Piatt, Chai roan,
Mr. Cunningham
RESEARCH & STATISTICS:
Mr, Miller, Chairman,
Mr. Cunningham
SALARIES A
2
T
D EXPL"SITUT3S OF
FEDERAL RESERVE BAMS:
Mr. James, Chairman,
Mr. Piatt
X-4547jL86
DISTRICT COMMITTERS:
Boston:
Mr. Haml i n, Chai man,
Mr< Piatt
ITqw York:
Mr* Piatt, Chairman,
Mr. Crissinger
Philadelphia:
Mr. Killer, Chairman,
Mr. Piatt
Cleveland:
Mr. Crissinger, Chairman,
Mr. Hamlin
Richmond:
Mr. Hamlin, Chairman,
Mr. James
Atlanta:
Mr. James, Chairman,
Mr. Hamlin
Chicago:
Mr. Mcintosh, Chairman,
Mr. Cunningham
St. Louis;
Mr. James, Chai man,
Mr. Mcintosh
Minneapolis:
Mr. Cunningham, Chairman,
Mr. Miller
Kansas City:
Mr. Cunningham,' Chai man,
Mr. Miller
Dallas:
Mr. Piatt, Chairman,
Mr. Cunningham
San Francisco:
Mr. Miller, Chairman,
Mr, James
FEDERAL RESERVE BOARD
±87
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4550
March 9, 1926.
Dear Sir:
There i s enclosed herewith, for your information,
copy of a letter received from the Governor of the Federal
Reserve Bank of Dallas, in which the suggestion is renewed
that there he employed permanently at a fixed retainer special
counsel of outstanding ability to assist in l i t i g a t i o n of systemwide interest, and to act as a clearing house for the legal
departments of a l l Federal reserve "banks.
The suggestion was made a topic for consideration at
the last Governors' conference, azid the conference voted to
concur in the opinion of the Counsel of the Federal reserve
hanks voted at the joint meeting of those counsel on July 13,
1925 to the effect that i t is not essential to the proper administration of the Federal reserve banks to employ advisory
counsel for general supervision of legal matters affecting the
System, and that the tanks continue as heretofore to employ
special counsel to assist in litigation of system-wide interest
when in the judgment of counsel concerned the occasion requires
i t and the banks are agreeable.
In view of the statements contained in the enclosed
letter from the Governor of the Federal Reserve Bank of Dallas,
the Board requests that this matter be again made a subject of
discussion at the forthcoming Governors' Conference.
Very truly yours,
D. R. Crissinger,
Governor.
(Enclosure )
TO GOVERNORS OF ALL F. R. BAMS.
( COPY )
X-4550-a
FEDERAL RESERVE BANK
188
OF lulLLAS
,
n
My dear Governor Orissinger:
January 28, 1926.
. , T ^ i s w i l 1 aclcioivledge receipt of the Board's X letter 4510:
wish to advise you that the Federal Reserve Bank of Dallas is
1:1 Mr B a k c r s f e e
v° f
*
'
Pro rata with the other Federal
provlded the
v^wh
f
e
r
i
t
y
of the other banks concur in the
l t 18
proper for the expense to he pro rated.
,
and
1T
connection, however, I wish to advise the Board that
^
opinion the practice of employing outside counsel under such
11
L™mtna?h°S aS
Francisco case is not sound in principle. We
d e s i r e
.
1
Y
°?" w i l 1
t o
reca11
that some time ago I submitted as a tonic for
T ! i ^ ° n ° f a 1 1 F e d e r a l R e s e r v e b a z i k s employing a conf attorney, hut the matter met with the disapproval of the Confer°UnSe
^ f l a s t J u l y i n Washington. The Board seemed to be
. impressed with the views which I expressed on this subject in
P r
Counsels' S I : :
te
"
ieen
*»»«««« ^
that ^omb of the Governors may have changed their view.
<*«»» of the
At the risk of
heretofore, the reasons underlying our previous reference to the subject.
My idea of making this suggestion Was to obtain the Services of
available only in the event a particular Federal Resdrve bank desired to
call upon him for information and advice* It Was my idea that such an
attorney would bear the same relation to the federal Reserve Board as the
otner attorneys employed by the Federal Reservd bankB, and that he would
ave no control over yie legal departments of respective Federal Reserve
banks, but would merely be available for use in those cases where a matter
general importance was presented, and a particular bank debited to use
every precaution to insure the proper presentation of matters of general
could also serve as a clearing house for legal information
among the various tanks#
X-4550-a 189
- 2 -
The idea which led to my original suggestion was obtained from
the practice prevailing among railroads in Texas and. perhaps elsewhere,
where each road has i t s own general attorney, but they a l l pro rate the
expense of a consulting attorney whose services are used in much the same
manner as above suggested.
We feel that the practice of employing outside counsel after
a case has been taken to an appellate court i s expensive, and probably
insures no better presentation of the case than could be made by the
general counsel of the bank involved, who has been familiar with the
litigation from i t s inception. We also feel that there are many cases such as the San Francisco case - which turn on facts peculiar to that
particular case alone, but which involve principles of general importance.
In such cases, we think i t very valuable to know of .similar experiences
and litigation of other Federal Reserve banks at the beginning; but we
very seriously doubt the wisdom of employing outside counsel after such
a case has reached an appellate court.
I f , after having obtained some later views of some of the
other Governors, i f you so desire, you think i t would be worth while
to place the topic on the program of the Governors' spring conference,
I would be willing to lead the discussion and defend the merits of my
proposal.
Yours very truly,
(signed)
Lynn P., Talley
Governor
The Federal Reserve Board,
Washington, D. C.
Attention Mr. D. R. Crissinger, Governor.
x-4552
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 10, 1926.
SUBJECT; Opinion of Attorney General on question
whether a trustee, o f f i c e r or employee of
a mutual savings "bank may serve as a Class
3 or Class C Director of a Federal reserve
bank.
Dear Sir}
Upon request of the Federal Reserve Board, the
question whether a trustee, o f f i c e r or employee of a mutual
savings "bank i s e l i g i b l e to serve as a Class B or Class C
director of a Federal reserve bank was recently referred
to the Attorney General for an opinion.
There i s enclosed
herewith for your information a copy of the opinion rendered
by the Attorney General on this question in which he holds
that mutual savings banks are banks within the meaning of
Section 4 of the Federal Reserve Act prohibiting directors
of Class B and Class C from being o f f i c e r s , directors or
employees of any bank.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE .CHAIRMEN.
Enclosure;
190
( C 0 t* Y )
DEPARTMENT OF JUSTICE
Washington
1.9jL
X-4553
March 4, 1926.
Sir;
I have the honor to reply to your letter of January 12,
1826, transmitting one from the Governor of the Federal Reserve Board, and submitting for my consideration and opinion
the question whether a trustee, officer or employee of a mutual savings hank is eligible for appointment as a Class B
or class C director of a Federal reserve bank,
Section 4(5) of the Federal Reserve Act (Act of December
23, 1913, c. 6, 38 Stat. 254) provides that the board of directors of Federal reserve banks shall consist of nine members
divided into three classes designated as classes A, B and C.
It i s further provided that:
Ho director of class B shall be an
o f f i c e r , director or employee of any bank.
No director of class C shall be an
officer, director, employee or stockholder
of any bank.
It has been contended that a mutual savings bank, having
no capital stock, and not engaged in a general banking business,
i s not such a bank as i s contemplated by the atatute, and that,
therefore, an officer of such mutual savings bank i s not prohibited from serving as a class B or class C director of a Federal reserve bank.
The real question presented for my consideration, therefore, i s whether a mutual savings bank of the character above
X-4553
described., is to "be considered a "bank" , as that, term is used
in section 4(5) of the Federal Reserve Act, prescribing the
192
qualifications of class B and class C directors.
The word "bank" i s inclusive and cannot be restricted to
institutions transacting a l l of the business usually transacted
by commercial banking institutions.
A mutual savings bank, al-
though having no capital stock, accepts deposits, makes loans,
and invests i t s money in securities, paying over to i t s depositors the principal of their deposits and accrued net earnings. To
that extent i t i s engaged in the banking business.
Bouvier de-
fines a bank as "A place for the deposit of money" .
The Supreme Court of the United States, in Smith v. Kansas
City Title Company, 255 U.S., 180, 210 said:
11
Generally speaking,
a bank i s a moneyed institution to f a c i l i t a t e the borrowing,
lending and caring for money".
In Bank of Savings v. The
Collector, 70 U.S. 495, the Supreme Court of the United States
had under consideration the status of mutual savings banks
operating without capital stock, such as those referred to in
your communication.
At pages 512-513 the Court said:
Banks, in the commercial sense, are of
three kinds, towit: 1, of deposit; 2, of
discount; 3, of circulation. All or any
two of these functions may, and frequently are, exercised by the sane association;
but there are s t i l l banks of deposit, without authority to make discounts or issue
a circulating medium.
Savings banks which receive deposits and loan the same for
the benefit of their depositors, although they may have no capi t a l stock, and neither make discounts nor perform other functions
usually performed by commercial banks, are, nevertheless, engaged
in the business of banking and are, therefore, banks within the
-2-
193
meaning of section 4(5) of the Federal Reserve Act, supra.
I have the honor, therefore, to aclvise you that mutual savings banks are banks within the meaning of section 4(5) of the
Federal Reserve Act, prohibiting directors of class B and class
C from being o f f i c e r s , directors or employees of "any bank".
Respectfully,
(Signed) Jno. G. Sargent
Attorney General.
The Honorable,
The Secretary of the Treasury.
-3-
federal reserve board
X-4554
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
^
C
H
1Q ,
SUBJECT: Substitution of code word in Federal
Reserve Telegraphic Code.
Dear Sir;
A number of errors in the transmission
of currency telegrams have been recorded due to
the similarity of the code words "U2TLIVBLY" and
11
UNLOVELY", shown on page 194 of the Federal Reserve Telegraphic Code. Effective March 20th,
therefore, i t is requested, in order to minimize
the possibility of error in the transmission of
such telegrams, that the code word "IWLIVELY11 be
cancelled and that i t be superseded by the code
word "DELIST".
Kindly make the necessary adjustment
on page 194 of your copies of the code book.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO CHAIRMEN' AITD GOVERNORS OF F.R.BAKES.
1 9 2 6 .
195
TREASURY DEPAETJ.EUT
Office of the Secretary
Washington
X-4555
March 4, 1926.
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 27, 1926, amounting to $108,100.00.
Federal Reserve Motes, Series 1914
§5
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Kansas City
San Francisco
300,000
850,000
200,000
200,000
100,000
100,000
300,000
-
100,000
—
#10
$20
#50
$100
150,000
-
100,000
-
—
—
*
100,000
100,000
-
—
10,000
10,000
—
—
—
-
—
-
-
-
—
-
—
50,000
100,000
-
2,150,000 400,000
50,000
50,000
-
—
—
-
300,000 20,000
2,875,000 sheets © §37,60 per M
—
5,000
5,000
Total
450,000
850,000
410,000
310,000
100,000
100,000
300,000
100,000
250,000
5,000
2,875,000
. $108,100 .00
The charges against the several Federal Reserve Banks are as follows:
Sheets
Boston
450,000
New York
850,000
Philadelphia
410,000
Cleveland
510,000
Richmond
100,000
Atlanta
100,000
Chicago
300,000
Minneapolis
100,000
Kansas City
250,000
San Francisco
5,000
Total, 2,875,000
Compensation Plate Printing
#7,965.00
S 3,690.00
15,045.00
6,970.00
7,257.00
3,362.00
5,487.00
2,542,00
1,770.00
820.00
1,770.00
820.00
5,310.00
2,460.00
1,770.00
820.00
4,425.00
2,050.00
88,50
41.00
$ 50,887.50
§
• #23,575.00
Materials
§5,265.00
9,945.00
4,797.00
3,627.00
1,170.00
1,170.00
5,510.00
1,170.00
2,925.00
58.50
33,637.50
Total
#16,920.00
51,960.00
15,416.00
11,656.00
3,760.00
3,760.00
11,280.00
3,760.00
• 9,400.00
188.00
108,100.00
The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", and i t i s requested that your board cause such indefinite appropriation to be reimbursed in like amount.
Respectfully,
R. W. Barr,
Acting Deputy Commissioner
of the Public Debt.
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4557
March 12, 1926.
SUBJECT: Expense Main Line, Leased Wire System,
February, 1926.
Bear Sir:
Enclosed herewith you will find two mimeograph statements, ,X-4557-a and X-4557-b, covering in
detail operations of the main line, Leased Wire System,
during the month of February, 1926.
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.
Yours very truly,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL F. R. BANKS EXCEPT CHICAGO.
X-4557-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE
FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF FEBRUARY, 1926.
Business
reported
by banks
From
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
To tal
26,6&5
120,613
30,745
59,526
37,932
49,125
25,093
64,481
Words sent
by
York
chargeable
to other
F.R. Banks ( l )
Total
Treasury
Dept,
Business
War
Finance
Corporation
Business
48,700
95,331
488
1,204
2,156
2,454
2,408
2,164
1,726
1,720
3,489
1,977
2,122
3,990
2,735
1,280
2,115
90S
4,186
702,414
20,180
722,594
30,132
25
692,437
265,480
986,074
28,376
58,508
47
72
237,057
929,494
31=476
52,707
Board
To tal
Percent of Total
-
100#
1,960
1,679
5*92#
Per cent of
total bank
Business (*)
24,492
116,428
28,848
58,770
38.-409
49,457
27,079
120,613
31,233
60,730
40,088
51,579
87,501
66,645
33,202
54,427
52,189
97,308
394
2,587
4,185
2,385
Net
Fed. Reserve
Bank Business
-
-
-
33,511
-
63,910
31,922
52,287
51,281
93,122
—
-
25
—
.01#
9.23
4,6l
7.55
7.40
13.45
100.00
94.07#
(*)
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-4557-o)
(1)
Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated, in accordance with action taken at Governors1 Conference Nov. 2-4, 1925.
3.54
16.81
4.17
6.49
5-55
7.14
12.06
*
c
xJ+557-b
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, FEBRUARY, 1926.
Name of Bank,
Operators'
Salaries
$
260.00
Boston
80I.66
New York
Philadelphia
216.66
Cleveland
284.50
Richmond
180:00
Atlanta
225.00
Chicago
(#)3,816.94
St« Loui s
225.00
Minneapolis
I83.34
Kansas City
275-64
Dallas
251.00
San Francisco
JSO.OO
Federal Reserve Board
Total
$7,159.74
Operators11
Overtime
Wire
Rental
#
$
-
-
-
-
-
-
-
-
-
1.00
-
-
-
-
-
-
-
-
-
-
—
$ 1.00
*5,353.53
$15,353.53
Total
Expenses
$
260.00
861.66
216.66
(*)
(a)
(b)
$
749.74
3,560.21
883.17
1 J98.ll
1,175^44
1,512.19
2,554.20
1,954.84
284.50
180.00
225:00
3,817-94
225.00
183-34
275-64
1,599-03
251.00
1,567.26
380.00
15,353-53
976.36
2,848.59
$22,514.27 $21,179.14
(a) V > 3 5 - 1 3
$21,179-14
(&)
Pro rata
Share of
Total
Expenses
Credits
$
260.00
861.66
216.66
Payable to
Federal
Reserve
Board
$
489.74
2,698,55
666.51
284.50
1,513.61
180.00 (6)1,200.11
225.00
1,287-19
3,817.94 (*)1,263.74
1,729.84
225.00
183.34
793-02
275-64
1.323.39
1,31b.26
251.00
380.00
2,468.59
$7,160.74
$15,486.81
(b)l,263.74
$14,223-07
Includes $204.67 for branch line business over main line circuit.
Includes salaries of Washington operators.
Credit
Received $1.97 from War Finance Corp. and $1,333*16 from Treasury Department covering business for the
month of February, 1926.
Amount reimbursable to Chicago.
H*
CO
QC
FEDERAL RESERVE BOARD
X_4558
199
washington
March 11, 1926.
address official correspondence t o
the federal reserve board
SUBJECT; Additional Topic for Governors1 Conference.
Dear Sir:
The Board has voted to add to the program for discussion at the forthcoming Governors' Conference the question of the advisability of seeking an amendment to the law
to restore to Federal Courts jurisdiction over suits by and
against Federal reserve "banks. For your information, there
is enclosed herewith a copy of a memorandum from the Counsel
to the Federal Reserve Board on this question.
Very truly yours,
Walter L. Eddy,
Secretary.
TO GOVERNORS OF ALL F.R.BAITKS
Enclosure:
200
X-4551
March 9, 1926.
To:
Federal Reserve Board
From: Mr. Wyatt - General Counsel.
Subject: To"pic for Governors' Conference - Advisability of seeking amendment to restore to Federal courts
jurisdiction over suits "by and against
Federal reserve banks.
It is respectfully recommended that the above subject be placed
on the program for discussion at the forthcoming Governors' Conference and that copies of this memorandum be sent immediately to the
Governors of a l l Federal reserve banks in order that they may study the
subject and consult with their counsel prior to the Conference.
=
Prior to the Act of February 13, 1925, the Federal courts had
jurisdiction of suits brought by or against Federal reserve banks which
involved as much as $3,000, because of the fact that they were Federal
corporations. American Bank and Trust Company v. Federal Reserve Bank
of Atlanta. 256 U. S. 530.
A suit brought by or against a Federal
reserve bank, therefore, which involved as much as $3,000 could be
brought originally in a United States District Court, and a suit
brought against a Federal reserve bank in a State court could be removed to a United States District Court if i t involved as much as
$3,000.
\
The Act of February 13, 1925, however, which was recommended by the American Bar Association and by the Supreme Court of the
United States and which dealt primarily with the appellate jurisdiction of the Federal courts, contained the following provision:
"SBC. 12. That no district court shall have
jurisdiction of any action or suit by or against
any corporation upon- the ground that i t was incorporated by or under an Act of Congress: Provided,
that this section shall not apply to any suit, action, or proceeding brought by or against a corporation incorporated by or under an-Act of Congress
wherein the Government of the United States is the
owner of mere than one-half of its capital stock."
j
-j
*
This amendment has the effect of depriving Federal courts of
jurisdiction of a l l suits by or against Federal reserve banks unless
the pleadings of the plaintiff on their faces actually raise some
question.necessarily involving the interpretation of the Constitution
of the United States or some Federal statute. It i s not sufficient
for the pleadings of tho defendant to raise a Federal question.
Moreover, Federal reserve banks cannot get into the Federal
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X-4551
courts on the ground of diversity of citizenship, "because the
Supreme Court has held that a Federal corporation is not a citizen
of any State.
Bankers Trust Company v* Texas and Pacific Railway,
241 U.S. 295,
The Federal reserve banks, therefore, have not even
as 'much rights in the Federal courts as have national "banks* Section 24(16) of the Judicial Code specifically provides that, for jurisdictional purposes, national banks shall be deemed citizens of the
States in which they are located and this enables thorn to bring
suits in the Federal courts or remove suits brought against them to
• the Federal courts on the grounds of diversity of citizenship where
' the other parties are citizens cf States otner than that in which
the head office of the national bank i s located*
There i s no law,
however, giving Federal reserve banks a similar status.
>
>
The present situation i s of serious disadvantage to the
Federal reserve banks, because they can sue or be sued in the Federal courts only when the i n i t i a l pleadings show on their faces
that the suits necessarily involve the construction of the Constitution of the United States or.of some Federal statute; and suits
brought against them in the State courts can be removed to the Federal courts only when the -pleadings of the -plaintiffs show on their
faces tnat the suits necessarily involve the construction of the
Constitution of the United States or some Federal statute, and this
i s rarely the case. It is not sufficient for the Federal reserve
bank to plead in defence some provision of the Federal Reserve Act
or some Regulation of the Federal Reserve Board ( e . g . , Regulation
J upon which they rely for protection in collecting checks.)
Moreover, counsel for a number of the Federal reserve banks advise me
that they frequently find both the judges and the juries in the
State courts to be unreasonably prejudiced against, and hostile to,
the Federal reserve banks; so that it is very d i f f i c u l t for them to
get a fair trial in the State courts. For these reasons, counsel for
moat of the Federal reserve banks feel very strongly that the Federal Reserve System should seek an amendment to the Judicial Code restoring the jurisdiction of Federal courts' over suits by and against
Federal reserve banks.
I have not brought this question up before, because I was
advised informally that a b i l l probably would be introduced at
this session of Congress to amend the Judicial Code in several particulars and I had hoped that i t would be possible to have a provision restoring the Federal jurisdiction over suits by and against
Federal reserve banks incorporated in such a general statute.
This
I believe would be much better than to ask for special legislation
in a separate statute benefitting the Federal reserve banks alone.
I am now advised, however, that the demand for a further amendment
to the Judicial Code which was expected to develop has not yet developed and that there seems to be no prospect for such legislation
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X-4551
2 0 2
at the present session of Congress. It becomes important to consider, therefore, whether the Federal reserve "banks should seek to obtain the enactment of a special statute restoring the Jurisdiction of
the Federal courts over suits brought by and against them.
There are a number of ways in which the present situation
could be improved by a special amendment to the law:
1.
An amendment might be sought either to the Judicial Code or to the Federal Reserve Act providing that, for jurisdictional purposes, Federal reserve banks shall be deemed to be
citizens of the States in which their head offices are located,
thus placing them u p o n an equality with national banks and enabling
them to get into the Federal courts on the ground of diversity of
citizenship when the other party is a citizen of a different State
from that in which the head office of the Federal reserve bank is
located. Inasmuch as this would only give the Federal reserve banks
such privileges as national banks and any ordinary citizen or corpor ation would have it ought to be comparatively easy to get such
an amendment; but such an amendment would grant only partial relief*
2.
An amendment might be sought changing that provision of Section 4 of the Federal Reserve Act which authorizes Federal reserve banks 11 to sue and be sued, complain and defend, in any
court of law or equity" so as to authorize them "to sue and be sued,
complain and defend, in any United States District Court."
This
would be similar to a provision contained in the charter of the Bank
of the United States which was held by the Supreme Court to be sufficient to confer upon the Federal circuit courts jurisdiction of
suits by and against the Bank of the United States.
Osborn v. United
States Bank. 9 Wheat. (22 U.S. ) 737.
3.
An amendment might be sought to the above quoted
provision of the Act of February 13, 1925, changing the proviso to
read somewhat as follows:
"Provided that this section shall not apply to
any suit, action, or proceeding brought by or against a
Federal Land Bank, Joint Stock Land Bank, Federal reserve
bank or any corporation incorporated by or under an Act
of Congress wherein the Government of the United States
i s the owner of more than one-half of i t s capital stock."
Such an amendment would simply extend the proviso to cover a few
specific classes of corporations, the majority of the stock of which
i s not owned by the Government but in which the Government obviously has an interest and which obviously ought to be protected to the
same extent as corporations in which the Government merely owns onehalf of the capital stock. This I believe would be the best kind of
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X-4551
an amendment to seek if any special legislation i s sought.
It
could be supported "by unanswerable logic; and, by including the
Joint Stock Land Banks, the Federal Land Banks and possibly some
other Federal corporations whose position is analogous to that of
Federal reserve banks, i t might be possible to obtain additional
support for the b i l l and to avoid the appearance of seeking Special
privileges for Federal reserve banks ,
The principle which led Congress to exclude from the
provisions of Section 12 of the Act of February 13, 1925, any
Federal corporation wherein the Government of the United States
i s the owner of more than one-half of i t s capital stock would seem
to apply with equal force to Federal reserve banks for the following
reasons:
1# Although none of the stock of Federal reserve banks
i s owned by. the United States Government> the Government has a
reversionary interest in the surplus of the Federal reserve banks ,
which amounts to approximately twice as much as the capital of the
Federal reserve banks.
2. The Federal reserve banks have taken over the functions of the sub-treasuries and perform many very important services as depositaries and f i s c a l agents of the Government.
3* While Federal reserve banks are private corporations,
nevertheless they are corporations created for public and semigovernmental purposes and are under the supervision of a Board
composed of officers of the United States.
4. They were created and actually function as important
instrumeiitalities of the Federal Government, acting not only as
depositaries and f i s c a l agents and performing the functions
previously performed by the sub-treasuries but acting also as the
media through which the great bulk of our currency is issued.
5. All the net earnings of the Federal reserve banks,
after providing for expenses, limited dividends, and the surplus
authorized by the Act, go to the Government as a franchise tax; so
that the G o v e r n m e n t has an actual interest in the protection of Federal reserve banks against losses resulting from unfair treatment in
the State courts.
The above merely indicates some of the grounds that might
be urged as bringing the Federal reserve banks within the principles
of the proviso to Section 12 of the Act of February 13, 1925.
It
is believed that i f these were amplified and supported by s t a t i s t i c s
showing the volume of Governmental operations performed by the Federal reserve banks in their capacities as depositaries, f i s c a l
agents and sub-treasuries of the Government, an unanswerable ar-r
gument could be built up in support of such an amendment.
X-4551
-5-
In view of tiic rcluctance ox the Federal courts
to have their jurisdiction enlarged and in view of the prejudice
existing against Federal reserve "banks in many quarters, however,
i t i s a close question whether i t would be desirable or expedient
to attempt to seek a special amendment for the relief of the Federal reserve banks even on this obviously sound basis. It is for
this reason that I believe i t highly desirable to have this subject
discussed at length by the Governors of a l l Federal reserve banks
in conjunction with the Board before any attempt is made to obtain legislation.
It has also been suggested that an amendment should be
sought exempting Federal reserve banks from the process of attachment and garnishment before final judgment in any case, as
national banks are now exempted under the provisions of Section
5242 of the Revised Statutes,
I have not given much thought to
this question, because I believe the other question discussed
above is far more important and should be dealt with first; but
i t would seem obvious that if Congress has seen f i t to exempt national banks from the process of attachment and garnishment pending
the rendition of final judgments, it should also exempt Federal reserve banks, which are men more important from a public standpoint and which perform much more important functions as instrumentalities of the Government* For the further information of the
Board, I attach a copy of a letter from Judge Ueland, Counsel to the
Federal Reserve Bank of Minneapolis suggesting an amendment along*
this line.
In view of the short time remaining before the Governors1
Conference, It i s respectfully recommended that a copy of this
memorandum and the attached letter from Judge Ueland be sent direct
to the Governors of each Federal reserve bank at the earliest
possible date and that a QQpy be sent to the Secretary of the Governors ! Conference with advice that the Board has voted to add this
topic to the program for discussion at the forthcoming Governors1
Conference and has already sent copies of this memorandum direct
to the Federal reserve banks in order to save time.
Respectfully
Copy of letter
attached.
WW SAD
Walter Wyatt
General Counsel.
(COfT)
FEDERAL 5&SERVB BAM
OP MINNEAPOLIS
X-4551-a
205
February 23, 1926.
- Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, D.C.
My dear Wyatt:
*
*
j,
^
Congress being now in session I venture to suggest the
importance of an amendment -to the Federal Reserve Act exempting
Federal reserve banks from the process of attachment and garnishment,
the same as National banks. In this, the Ninth District, I have
been vexed a good deal by a suit started against this bank in a
North Dakota state court, with garnishment as basis of jurisdiction,
and, of course, for judgment in rem in case of no appearance on the
part of 't-he defendant. Without such an amendment as that suggested,
i t seems'to me there can scarcely be any limit to annoyance of that
sort, for in the absence of a clear provision in the act exempting
Federal reserve banks from attachment and garnishment a claim that
they are exempt by implication cannot be maintained so clearly as to
have the State courts sustain i t .
The Federal reserve banks are also much concerned in having
the Act of February 13, 1925 with respect to the jurisdiction of the
district courts of the United States amended, for, as you know,
Section 12 provides that incorporation under an act of Congress i s
no longer to give those courts jurisdiction, and the Federal reserve
banks having not been given the status of citizenship of any state,
the same as national banks, the present situation seems to be that
a Federal reserve bank can neither sue in a Federal court or have
a suit against i t removed from a State to a Federal court unless the
suit arises under the Constitution or Laws of the United States, aside
from that of being a Federal corporation. It i s of course entirely
unnecessary to point out to you the practical importance of giving
Federal reserve banks the right to l i t i g a t e their controversies in the
Federal courts.
Yours very truly,
(Signed) A. Ueland
A. UELAITD
Counsel.
F.S. As to a Federal reserve bank being able to remove a suit against
i t from a State to a Federal court on the ground that the suit
arises under the Constitution or Laws of the United States, please
remember the rule that this cannot be done unless the fact of the
suit arising under the Constitution or Laws of the United States
appears on the face of the Complaint. This i s hardly ever the case.
FEDERAL RESERVE BOARD
washington
x-4559
^ 0 6
March 12, 1926.
address official correspondence to
the federal reserve board
SUBJECT: E l i g i b i l i t y for discount of factors notes covering
advances to producers of eggs, poultry and butter.
Dear Sir:
*
^
>
*
The Board has recently "been requested to rule upon, certain questions arising under that provision of the second paragraph of Section 13 of the Federal Reserve Act which makes eligible for discount at a Federal reserve bank the notes, drafts
and b i l l s of exchange "of factors issued as such making advances
exclusively to producers of staple agricultural products in their
raw state 11 . It appears that a certain cold storage and warehouse
company which is engaged in business as a factor makes advances
to farmers who consign to the company, chickens, eggs and butter
to be stored in the company* s warehouse. The advances are made
pending the sale of these products by the company for the account
of the farmers. The question presented is whether or not the
notes of this warehouse company issued in i t s capacity as factor
for the purpose of making advances exclusively to producers of
eggs, poultry and butter should be considered eligible for discount at a Federal reserve bank.
Inasmuch as the warehouse company in this case i s
a factor, the only question to be decided i s whether the notes of
the company covering the advances to i t s customers are notes
covering advances to "producers of staple agricultural products
in their raw state". In considering this question i t i s important to note that the test of e l i g i b i l i t y of paper of this
kind i s to be found in the character of the person to whom the
advances are made rather than in the kind of products securing
these advances* If the advances are made to any person of the
class described by the term "producers of staple agricultural
products in their raw state" , the notes given by the factor may
be eligible for discount, regardless of whether the productsby
which particular advances are secured are or are not agricultural products in their raw state or whether the advances are secured
at a l l . Broadly speaking, the term "producers of staple agricultural products in their raw state" is synonymous with farmers,
dairymen and livestock growers and therefore, the notes of factors issued as such covering advances exclusively to this class
of producers will be eligible for rediscount at a Federal reserve
bank; and this i s true even though these farmers, dairymen or livestock growers may also be engaged in producing products which cannot properly be considered agricultural products in their raw state
and regardless of the kinds of products securing the advances made
by the factors.
X-4553
-2"
207
Applying these principles to the facts of the present inquiry, the Board holds that the notes of this cold storage and warehouse company issued in i t s capacity as factor -asking advances exclusively to producers of eggs and poultry or other staple agricultural products in their raw state, will ue eligible for discount at a Federal reserve bank, provided that these notes comply
in a l l other respects with the relevant provisions of the law and
the Board's regulations.
In the opinion of the Board butter is not a staple agricultural -oroduct in i t s raw state: but this does not affect the
e l i g i b i l i t y of nctee of factors covering advances to farmers,
dairymen or l i v e stock growers who produce butter, because any
member of this class is of course engaged in the production of
some agricultural products in their ran state even though he also
produces butter.
The Board holds, however, that the notes of a
factor covering advances to those engaged in the commercial production of butter with cream purchased from others, are ineligible for
rediscount, unless the persons so engaged are also producers of some
staple agricultural products in their raw state.
The paper of a
factor issued as such for the purpose of making advances exclusively to creameries or dairies, therefore, would ordinarily be ineligible for rediscount under this provision of the law.
In this connection i t also seems appropriate to mention a
ruling made by the Board prior to the date of the amendment to
the law regarding factors paper which holds that while the notes
of a cold s tor age company i t s e l f are ineligible for rediscount because the proceeds are used to make loans to third parties, the
notes of the customers of the.cold storage company representing
loans made to thorn by the conany, whin endorsed and discounted by
the company, would be eligible for rediscount by a member bank at
a Federal reserve bank, provided that the customers have used or
are to use the proceeds for arricultural or commercial purposes
and provided also that the notes comply in other respects with
the provisions of the law and the regulations of the Federal Reserve Board. (See 1921 Bulletin, page 308.) Under this ruling,
of course, the notes of the customers of a factor may be eligible
for rediscount without regard to the provisions of the second paragraph of Section 13 of the Federal Reserve Act providing for the
rediscount of factors' paper.
Very truly yours,
Edmund Piatt,
Vice Governor.
TO GOVERNORS OF ALL F.R. BANKS
FEDERAL RESERVE BOARD
washington
address official correspondence to
the federal reserve board
X-4560
March 12, 1926.
>
SUBJECT: Additional Topic for Governors' Conference.
Bear Sir:
i
u
The Board has voted to place upon the
program of the forthcoming Conference of Governors
for their consideration certain questions which have
arisen with regard to the Board's recent ruling upon the e l i g i b i l i t y for rediscount of notes of a
corporation representing borrowings of funds to be
advanced to subsidiaries, which was contained in
the Board's letter of December 30 (X-4484). These
questions are discussed in a letter from Governor
Fancher and in a memorandum from Counsel to the
Board, both of which are enclosed herewith for y^ur
information in this matter.
Yours very truly,
Walter 1. Eddy,
Secretary.
(Enclosures)
TO GOVERNORS OF ALL F. R. B6NXS.
x 4560 a
-
To
The Federal Reserve Board.
From Mr. Wyatt - General Counsel.
The attached letter from Governor Fancher raises
a further question with reference to the above subject which
was ruled on in the Board's circular letter of December 30,
1925, (X-4484).
*
"•
»
v
i
-
In a letter dated November 28, 1925, Mr. Thomas
P. 3eal, President of the Second National Bank of Boston,
called the Board's attention to the fact that, because of
a recent change in the method of financing the business of the
M. A. Banna Company and i t s subsidiaries, the paper of the
Hanna Company has recently been declared ineligible for rediscount by the Federal Beserve Banks of Cleveland and Boston.
It appeared that the former practice of the Hanna Company had
been to make loans to i t s subsidiaries taking the notes of
the Subsidiaries which were then endorsed by the Hanna Company
and discounted at various banks. Such notes were considered
eligible for rediscount when the proceeds were used by the
subsidiaries in the f i r s t instance for agricultural, industrial
or commercial purposes. Believing i t to be a better form of
financing, however, the Hanna Company had recently inaugurated
a new system whereby i t borrows on i t s own notes backed by
the consolidated financial statement of the Hanna Company and
a l l of i t s subsidiaries, and from the funds thus obtained the
Hanna Company makes advances to i t s subsidiaries. These notes
of the Hanna Company had been held to be ineligible because
Section 11(a) and (b) of Regulation A provides that, in order
for notes, drafts and b i l l s of exchange to be e l i g i b l e for
rediscount the proceeds must be used "in the f i r s t instance"
for an eligible purpose and must not be "advanced or loaned
to some other borrower/". This provision of Regulation A
i s based upon long established and well recognized rulings of
the Board which have always been deemed of fundamental importance.
Mr. Beal's letter was discussed at an informal
meeting of the Board held in Governor Crissinger's o f f i c e
on December 1st, 1925, at which Governors Harding, Strong
and Fancher were present. The business of the Hanna Company
was discussed at some length and i t was the understanding
of a l l those present that the Hanna Company made no advances
except to i t s own subsidiaries and that the subsidiaries
borrowed no money except from the Hanna Company. On the
basis of the assumed facts, i t was agreed that the Hanna Company
and i t s subsidiaries could be considered together as a single
borrower and that the above quoted provisions of the Board's
Regulation A pertaining to "finance paper" could be interpreted
as not applying to a case of this kind. With this understanding,
- 2O9
March 10, 1926.
SUBJECT: E l i g i b i l i t y for rediscount of
notes of corporation representing borrowings of funds to "be advanced to
subsidiaries.
X-4560-a'
I l e f t the meeting and Immediately prepared a ruling on the
21-0
subject and submitted i t to the Board on the same day. This ruling, which was approved at the Board meeting on December 14, was
to the effect that where a parent corporation owns at least 75
per cent of the stock of each of a number of subsidiary corporations the notes of such parent corporation the proceeds of which
have been advanced or loaned to i t s subsidiary corporations will
not be considered finance paper within the meaning of the Board* s
regulations: provided that (1) the parent corporation makes no
advancesexcept to i t s own subsidiaries, (2) the subsidiaries borrow
no money except from the parent corporation* and (3) the proceeds
of such advances have been or are to be used by the subsidiary
corporation for an industrial, commercial or agricultural purpose,
within the meaning of the Federal Reserve Act and the Board's
regulations• It i s understood, of course, that in order to be
eligible for rediscount such paper must also comply in a l l other
respects with the requirements of the law and the Board1s regulations.
The ruling was later incorporated in a circular letter
(X-4484) approved at Board meeting on December 29th and sent
to a l l Federal reserve banks under date of December 30th which
stated the fundamental basis for the ruling as follows:
"The Board has heretofore published several rulings
to the effect that paper representing borrowings by one
person, firm or corporation of funds to be advanced to an
independent person, firm, or corporation, i s 'finance
paper' and is therefore ineligible for rediscount; and
this ruling i s not intended as a reversal or qualification
of those rulings. There is a clear distinction, however,
between cases such as those covered in the rulings above
mentioned and the case here presented; because, where the
borrower ijs a parent corporation and makes advances only
~L subsidiary corporations owned by i t , the parent corporajiA0?.
the subsidiaries are in practical e f f e c t one single
organization and may with propriety be viewed as a single
borrower."
It now develops, however, that the M. A. Hanna Company
does hot confine i t s advances to i t s own subsidiaries in which
i t owns 75^ of the stock, but makes advances to some corporations
in which i t owns only a minority of the stock and to some other
corporations in which i t owns no stock but for which i t merely
acts as a factor or commission merchant. This being the fact, i t
i s clear that the Board's ruling (X-4484) i s not applicable
to such paper of the Hanna Company, nor do I believe that the
Board could amend the ruling in such a way as to make i t applicable
to such paper without practically abrogating in to to the ruling
against finance paper.
Governor Fancher suggests that the f i r s t condition
mentioned in the Board's ruling - i . e., that the parent corporation shall make no advances except to i t s own subsidiaries,
be eliminated from the ruling; but i f this were done the fun
— 3 -*
X-4560-a
damental principle upon which that fruling was based would be
eliminated and there would bo no basis fdr the distinction
between the circumstances covered by that ruling and circumstances of numerous other cases where the Board has held
certain paper to be 11 finance paper" and, therefore, ineligible.
I am unable to recommend, therefore, that the Board
attempt to amend the above mentioned ruling in such a way as
to apply to the paper of the Hanna Company in the light of
the facts which have developed since that ruling was made;
and I can see no way in which the Board can go any further in
declaring such paper to be eligible, unless it desires to
abrogate entirely.the ruling regarding finance paper.
I believe that the rulings heretofore made by the
Board regarding finance paper are sound and reasonable constructions of the Federal Reserve Act and are calculated
f a i r l y to carry out the purpose and intent of those portions
of Section 13 which define the classes of paper eligible for
rediscount at Federal reserve banks.
The requirement that the proceeds of paper offered for
rediscount must have been used in the f i r s t instance for
an agricultural, industrial or commercial purpose, however,
i s not absolutely required by a strict technical construction
of the language of the act; and i t i s conceivable that the
Board might abolish that requirement if i t so desires. That
requirement, however, has always been considered one of
fundamental importance and has long been in effect; and I
believe i t would be unwise to go any further in the direction
of l e t t i n g down the bars with respect to finance paper without
f i r s t having a thorough study made of the practical effects
of such a ruling and having the matter thoroughly discussed
by the Governors of a l l Federal reserve banks at a Governors*
Conference.
If, therefore, the Board i s inclined to further
liberalize i t s rulings with respect to finance paper in
order to be of further assistance to the Hanna Company and
other corporations similarly situated, I respectfully recommend
that the Board place this subject on the program for discussion
at the next Governors* Conference and send out to the Governors
of a l l Federal reserve banks complete copies of the attached f i l e
at* the earliest possible date, in order that each Governor may
study the subject and come to the Conference prepared to discuss
the matter and make a well considered recommendation to the Board,
Respectfully,
Walter Wyatt
General Counsel.
WW OMC
attached.
http://fraser.stlouisfed.org/ File
Federal Reserve Bank of St. Louis
X-4560-Td
( COPY )
FSDSSAX EESBRte MM
OF CEBVELAKD
21.3
February 10, 1926.
Mr. D. R. Crissinger, Governor,
Federal Reserve Board,
Washington;, L. C.
Dear Mr, Orissinger:
The M, A, Hanna Company of Cleveland, which company carries
accounts with. and "borrows from some of our local member "banks as well
as some member banks in other districts, has taken up with us the
question of the e l i g i b i l i t y for rediscount of their paper.
It happens that this i s the company in connection with which
the recent ruling of the Federal Reserve Board (letter X-4484 dated
December 30, 1925, Subject: Eligibility for Rediscount of Notes of Corporation Representing Borrowings of Funds to be Advanced to Suosidiaries)
was made•
This ruling set up the following conditions:
Where the parent company owns at least seventy-five percent of the stock of each of a number of subsidiary corporations,
the notes of such -parent corporation, the proceeds of which have
been advanced or loaned to i t s subsidiary corporations, w i l l not
be considered finance paper within the meaning of the Board1 s
ruling; Provided, that 1.
The parent corporation makes no advances except
those to its own subsidiaries;
2.
The subsidiaries borrow no money except from the
parent corporation;
3.
The proceeds of such advances have been or are to
be used by the subsidiary corporation for an
industrial, commercial, or agricultural purpose
within the meaning of the Federal Reserve Act and
the Board1s regulations.
These conditions can be met by the company in question, with
the exception of Mo. 1, which (for reasons outlined later in this letter)
cannot be met and which appear to the company to warrant further consideration by the Federal Reserve Board*
The company owns one hundred percent of the stock of nine
different companies operating as miners and shippers of coal and ore
and operators of docks and ships.
They also own seventy-nine percent
of the stock of a furnace company; seventy-nine percent of the stock of
a coke company; eighty percent of the stock of a coal sad dock compaiy;
-2~
X-4560-b
213
and in ,addition to this, from forty-three to sixty-seven percent of the
stock of seven different companies.
These seven companies are coal a$&
ore mining companies, manufacturers of by-products, iron companies and
transportation companies ,
Along with these operations, the M. A. Hanna Company acts as
selling agent for ore mining companies and furnace operators, and it is
in this capacity that the company at certain seasons finds i t necessary
to make advances for the stripping and mining of ore to "be sold "by the
company when the shipping season i s opened and for the production and
carrying of pig iron during slack seasons or pending orderly marketing.
Their "banks prefer that the obligations for borrowed money
be represented by notes of the M. A, Hanna Company and that that company
only should do the borrowing for the various operations of this company;
and i t s a f f i l i a t e d companies.
The consolidated statement of the company, as of December 31,
1925, would show current assets of approximately $15,000,000 of which
approximately $2,150,000 i s advances made to companies other than those
in which they own seventy-five percent or more of the stock.
Their current l i a b i l i t i e s are approximately $4,600,000.
It appears that i t is not
possible for this company to segregate their borrowings or earmark them
to any particular one of their various operations but that their borrowings are necessarily a part of their general operations as outlined
above.
As we understand i t , these advances are not in the nature of
loans to another party evidenced by notes or other paper but are in fact
advances carried in separate accounts and are eventually settled through
delivery of goods or commodities to this company or to customers to whom
this company s e l l s .
If another company without subsidiaries or a f f i l i a t e d companies
were engaged in the same kind of operations, showing a similar condition
of liquidity and strength, the paper of su.ch company would hardly be considered ineligible merely because the company showed in their statement
advances made to others, but provision No, 1 of the Federal Reserve Board*s
ruling in letter X-4484 at least appears to preclude the e l i g i b i l i t y of
the paper of the M, A. Hanna Company,
Under the circumstances, would the fact that the company i s
making advances other than those outlined in No, 1 of the Board1 s ruling
preclude the e l i g i b i l i t y of their paper under Regulation A, Section 11,
which in effect states that the proceeds must have been used or borrowed
to be used in the first, instance in producing, purchasing, carryirig, etc, ,
and (b) that it must not be a note, draft, or b i l l of exchange, the proceeds of which have been or are to be advanced or loaned to some other
;$>orf^er,:; etc, ?
Very truly yours,
(signed) E. R. Fancher,
Governor.
P.S. The company in question has submitted to us tentatively separate
statements of their own company and a l l of i t s subsidiary or a f f i l i a t e d
companies.
FEDERAL RESERVE BOARD
x-4561
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
"
MOTCH
1 3 ,
1 9 2 6
SUBJECT: Additional Topic for Governors' Conference.
Dear Sir:
In an inquiry recently received by the Board certain
questions were asked regarding the requirements which w i l l he made
by the Federal Reserve Board and by the Federal reserve banks before
rediscounting notes secured by adjusted service certificates under
the provisions of Section 502 of the World War Adjusted Compensation
Act. The specific questions asked in the inquiry received were whether the affidavit of the lending bank provided for by Section 502(h)
would be required to be executed before rediscount and what proof
that the required notice of transfer of the note has been given the
maker would be necessary. The Board has not, of course, issued any
regulations on this subject, and in i t s reply stated that i t could
not answer these questions at this time.
As a consequence of the provisions of the World War Adjusted Compensation Act no valid note of this kind can possibly be
offered for rediscount prior to January 1, 1927. Before undertaking
to answer any inquiries with regard to the requirements which will
be made for the rediscount of notes of this kind, the Board desires
to have the consideration and suggestions of the Governors as to the
advisability of issuing regulations on this subject at this time and
as to what requirements should be contained in such regulations, if
issued. The Board has therefore directed that this natter be made
an additional topic for the program of the forthcoming Governors'
Conference.
For your information in this connection there i s enclosed herewith a copy of Section 502 of the World War Adjusted
Compensation Act.
Very truly yours,
Walter L. Eddy
Secretary.
TO GOVERNORS OF AIL F.3.BAHKS.
Enclosure.
( COPY)'
X-4561-a
LOAN PRIVILEGES
SEC. 502. (a) A loan may be made to a veteran upon his adjus ted
service certificate only in accordance with the provisions of this
section#
(b) Any national bank* or any "bank or trust company incorporated
under the laws of any State, Territory, possession, or the District of
Columbia (hereinafter in this section called "bank")* i s authorized,
after the expiration of two years after the date of the certificate, to
loan to any veteran upon his promissory note secured by his adjusted service certificate (with or without the consent of the beneficiary thereof) any amount not in excess of the loan basis (as defined in subdivision
(g) of this section) of the certificate. The rate of interest charged
upon the loan by the bank shall not exceed, by more than 2 per centum
per annum, the rate charged at the date of the loan for the discount of
90-day commercial paper under section 13 of the Federal Reserve Act by
the Federal reserve bank for the Federal reserve district in which the
bank is located. Any bank holding a note for a loan under this section
secured by a certificate (whether the bank originally making the loan or
a bank to which the note and certificate have been transferred) may s e l l
the note to, or discount or rediscount it with, any bank authorized to
make a loan to a veteran under this section and transfer the certificate
to such bank. Upon the indorsement of any bank, which shall be deemed
a waiver of demand, notice, and protest by such bank as to i t s own indorsement exclusively, and subject to regulations to be prescribed by
the Federal Reserve Board, any such note secured by a certificate and
held by a bank shall be eligible for discount or rediscount by the Federal reserve bank for the Federal reserve district in which the bank i s
located. Such note shall be eligible for discount or rediscount whether
or not the bank offering the note for discount or rediscount is a member
of the Federal Reserve System and whether or not i t acquired the note in
the f i r s t instance from the veteran or acquired i t by transfer upon the
indorsement of any other bank. Such note shall not be eligible for discount or rediscount unless i t has at the time of discount or rediscount
a maturity not in excess of nine months exclusive of days of grace. The
rate of interest charged by the Federal reserve bank shall be the same as
that charged by i t for the discount or rediscount of 90-day notes drawn
for commercial purposes. The Federal Reserve Board i s authorized to
permit, or on the affirmative vote of at least five members of the Federal
Reserve Board to require, a Federal reserve bank to rediscount, for any
other Federal reserve bank, notes secured by a certificate. The rate of
interest for such rediscounts shall be fixed by the Federal Reserve Board.
In case the note i s sold, discounted, or rediscounted the bank making the
transfer shall promptly notify the veteran by mail at his last known postoffice address.
(c) If the veteran does not pay the principal and interest of the
lo&n upon i t s maturity, the bank holding the note and certificate may, at
any time after maturity of the loan but not before the expiration of six
months after the loan was made, present them to the Director* The Director may, in his discretion, accept the certificate and note, cancel the
-2—
x-4561-a 2 : 1 6
note (but not the c e r t i f i c a t e ) , and pay the bank, in f u l l satisfaction of
i t s claim, the amount of the unpaid principal due i t , and the unpaid interest accrued, at the rate fixed in the note, up to the date of the check
issued to the bank. The Director shall restore to the veteran, at any
time prior to i t s maturity, any certificate so accep.ted, upon receipt from
him of an amount equal to the sum of (l) the.amount paid by the United
States to the bank in cancellation of his note, plus (2) interest on such
amount from the time of such payment to the date of such receipt> at 6 per
centum per annum, compounded annually.
(d) If the veteran f a i l s to redeem his certificate from the Director
before i t s maturity, or before the death of the veteran, the Director shall
deduct from the face value of the certificate (as determined in section 501)
an amount equal to the sum of (l) the amount paid by the United States to
the bank on account of the note of the veteran, plus (2) interest on such
amount from the time of such payment to the date of maturity of the c e r t i f i cate or of the death of the veteran, at the rate of 6 per centum per annum,
compounded annually, and shall pay the remainder in accordance with the
provisions of section 501.
(e) If the veteran dies before the mturity of the loan, the amount
of the unpaid principal and the unpaid interest accrued up to the date of
his death shall be immediately due and payable. In such case, or i f the
veteran dies on the day the loan matures or within six months thereafter,
the bank holding the note and certificate shall, upon notice of the death,
present them to the Director, who shall thereupon cancel the note (but not
the certificate) and pay to the bank, in f a l l satisfaction of i t s claim',
the amount of the unpaid principal and unpaid interest, at the rate fixed
in the note, accrued up to the date of the check issued to the bank; except that i f , prior to the payment, the bank i s notified of the death by
the Director and f a i l s to present the certificate and note to the Director
within fifteen.days after the notice, such interest shall be only up to the
fifteenth day after such notice. The Director shall deduct the amount so
paid from the face value (as determined under section 501) of the c e r t i f i cate and pay the remainder in accordance with the provisions of section 501.
( f ) If the veteran has not died before the maturity of the certificate,
and has failed to pay his note to the bank or the Federal reserve bank
holding the note and certificate, such bank shall, at the maturity of the
certificate, present the note and certificate to the Director, who shall
thereupon cancel the note (but not the certificate) and pay to the bank,
in f u l l satisfaction of i t s claim, the amount of the unpaid principal and
unpaid interest, at the rate fixed in the note, accrued up to the date of
the ma*&rity of the certificate. The Director shall deduct the amount so
paid from the face value (as determined in section 501) of the c e r t i f i i
cate and pay the remainder in accordance with the provisions of section 501.
(g) The loan basis of any certificate at any time shall, for the
purpose of this section, be an amount which i s not in excess of 90 per
centum of the reserve value of the certificate on the last day of the current certificate year. The reserve value of a certificate on the last day
of any certificate year shall be the full reserve required on such c e r t i f i cate, based on an annual level net premium for twenty years and calculated
in accordance with the American Experience Table of Mortality and interest
-3-
- X-4561-«a
at 4 per centum per annum, connpounded emmally.
(h) No payment upon any note shall be made under this section by the
•Director to any bank, unless the note when presented to him i s accompanied
by as. affidavit made by an officer of the bank which made the loan, before
a notary public or other officer designated for the purpose by regulation
of the Director, and stating that such bank has not charged or 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. Any bank which,
or director, o f f i c e r , or employee thereof who, does so charge, collect, or
attempt to charge or collect any such fee or compensation, shall be liable
to the veteran for a penalty of $100,to be recovered in a c i v i l suit brought
by the veteran. The Director shall upon request of any bank or veteran
furnish a blank form for such affidavit.
SEC. 503. Ho certificate issued or right conferred under the -provisions of this t i t l e shall, except as provided in section 502, be negotiable or assignable or serve as security for a loan. Any negotiation,
assignment, or loan made in violation of any provision of this section shall
be held void.
SEC. 504. Any certificate issued under the provisions of this t i t l e
shall have printed upon i t s face the conditions and terms upon which i t is
issued and to which i t i s subject, including loan values under section 502.
FEDERAL RESERVE BOARD
2
washington
%-4562
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 13, 1926.
SUBJECT:
Credit Portion of Report of Sub-Committee Appointed,
to Study Bank Examination and Credit Functions.
Dear Sir:
On June 4, 1925, there was transmitted to all Governors a
copy of a report submitted under date 6f April 27, 1925, by the
sub-committee of deputy governors designated to make a study of
the bank examination and credit functions of the Federal reserve
banks (St. 4545)i The Board requested from each Governor a f u l l
expression of his views on the recommendations contained in the
reporti particularly with regard to those relating to the credit
function, and a summary of a l l replies was forwarded to the
Governors with the Board's circular letter of September 8, 1925
(X-4416). In this letter, the Board suggested that the Governors,
at their next conference, submit a statement outlining the views
of the conference with reference to the report on the credit
function.
The conference held in November, 1925, adopted a motion
approving of the report of the sub-committee (as relates to the
credit function) with the exception of the recommendation that
the reserve banks no longer furnish blank forms of credit statements free of charge* The action of the Governors' conference
meets with the approval df the Board.
By direction of the Federal Reserve Board.
Very truly yours,
Walter L. Eddy,
Secretary.
TO GOVERNORS OF ALL F.R.BANKS.
FEDERAL RESERVE BOARD
X-4564
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 19, 1926.
Dear Sir:
This is to advise you that in the opinion of
the Federal Reserve Board flour and bran should not "be
considered nonperishable readily marketable staple agricultural products which may "be made the basis of sight
or demand b i l l s of exchange eligible for discount or purchase at a Federal reserve bank under the 3rd paragraph
of Section 13 of the Federal Reserve Act. As stated in
the case of Getty v. 0. R* Barnes Milling Company (Kans,)
19 Pac. 617, "* * * In one sense i t may be said that
flour i s a product of agriculture, but in the common application of the term we think this is not truei A product of agriculture i s that which i s the direct result of
husbandry and the culture of the soil; i t embraces the
product in i t s natural unmanufactured condition*" As
flour is essentially a product of manufacture, i t i s not
believed that it can properly be deemed an agricultural
product within the meaning of this provision of Section
13*
Very truly yours,
Edmund Piatt
Vice Governor.
TO G-OVEPJIORS OF ALL FEDBR.1L RESERVE BAMS.
X*4565
REPORT OF TEE OPEN MARKET IFOSE:3NT COMMITTEE TO THE
GOVERNORS' C02T32BHCE, March 22, 1926.
220
Since the last Governors' Conference the changes in the
special investment account have consisted of (a) temporary readjustments to offset the effects on the money market of government financing at tax periods, (b) purchases and sales to offset seasonal changes
over the turn of the year, and (c) a reduction in total caused cy the
repayment of March 15 maturities, which have not yet "been wholly
replaced.
At the December 15 tax period temporary sales of 30 million
dollars were made to Hew York City banks, and at the March tax
period temporary sales of $38,000,000 were made, of which $35,000,000
were made in lie?; York and $3,000,000 in Chicago.
-The result of these
sales was to exert a considerable stabilizing influence on the market
at these periods.
During the latter part of December the committee purchased
50 million of short—term government securities to decrease the
seasonal strain in the market, and those securities were resold in
the latter part of January and early in February.
On March 15 there matured 65 million dollars of securities
held in the special account, and in addition $32,500,000 held for
foreign account,
These amounts have been fully replaced for the
foreign accounts but only partially replaced as yet hy the purchase of
$34,355,600 of securities for the System account.
This leaves a balance
of $31,411,100 to be purchased for the special account in order to rev
-
X-45S5
231
2 -
store i t to 210 million dollars; the $35,160,000 of Treasury notes
which matured December 15, 1925, were replaced by purchases of other
maturities, thus causing no change in the account.
In the past few weeks, there has been some change in credit
conditions, but more particularly in business and financial psychology#
The stock market boon has lost i t s impetus and the amount of funds
employed by the market has diminished by about 300 million dollars from
thu date when public reports wore commenced. Real estate speculation
has calmed down somewhat *
There are also reports of business hesita-
tion, evidence of which may be found in a weakness in commodity prices,
a decline of unfilled orders of the Steel Corporation, some recession
in retail trade and some decrease in the amount of building permits
taken out, although the actual volume of current business transactions
continues very large.
But some business hesitation appears to bo a
not unusual accompaniment of a rather sharp arrest of stock speculation
following a long extended period of activity.
Thus far i t would appear that the*diminution of speculative
activity i s wholesome.
The movements which have taken place have
been orderly and there has been no indication so far of untoward consequences.
It i s not yet clear how far liquidation will be continued
and i t is, of course, s t i l l possible that there might be a revival of
speculation with the dangers i t involves.
It appears more probable,
however, that the peak of this speculative and business expansion has
been passed.
It therefore seems appropriate in view of the above
to discuss at this time what our open market policy should be in the
222
X--4565
event a "business recession calls for a revision of policy "before we meet
in another governorsi conference.
Experience in the past has indicated that member "banks when
in debt at the Federal Reserve Bank of How York, and in less degree at
other raoney centers, constantly endeavor to free themselves fron that
indebtedness, • and as a consequence such, pressure as arises is in the
direction of curtailing loans.
This i s now accentuated over a year
ago as the discount rate at Hew York i s a, f u l l lft> higher, and l/2^
higher at four other "banks.
As the accompanying table of the earning
assets of the System shows, the amount of credit furnished "by Reserve
Banks on member banks direct borrowing, • just prior to the March 15th
operations, was larger this year than on any corresponding date since
1923.EARHIHG- ASSETS - FED25AL 53S3SVE SYST3I,i
(In millions of dollars)
1922
1923
1924
1925
1926
Mar. 8- Mar.7- Mar.12- Mar.il- Mar.10
Discounts
Hew York (City)
Chicago
(City)
Other
143
614
149
22
400 •
53
7
423
149
2
259
103
17
382
Total
631
571
483
410
502
Bankers Acceptances
103
219
243
301
285
-
140
275
245
72
113
115
15
12
U.S. Securities-Committee
U.S.' Securities-Other
Other Earnings Asset's
Total
-
—
444
-
1,177
345
—
1,135
-
938
1,114
1,159
X-4565S23
mm
The total amount of borrowing undoubtedly exerts some pressure
upon the "business community.
Should we go into a business recession
while the member banks were continuing to borrow directly 500 or 600
million dollars, ( i f b i l l s are included nearly 800 million dollars,)
we should consider taking steps to relieve some of the pressure which
this borrowing induces by purchasing government securities* and thus
enabling member banks to reduce their indebtedness*
It is not possible to predict to what extent member banks will
continue their borrowing on the present scale in the event of a business
rpcession.
The release of funds now employed in the security markets,
a decrease in currency requirements, and some decrease in bank loans
for business undertakings, would likely be partly offset by increased
requirements for funds to carry accumulating inventories.
major determining factor will be the movement of gold.
Perhaps the
During the f i r s t
half of March we received 30 million dollars of gold from Canada and
this movement resulted in easy money rates in Mew York in tho second
week of the month.
It seems possible that this gold movement may be
continued somewhat further, and, i f so, i t would correspondingly
liquidate the borrowings of member banks in New* York.
The usual move-
ment of gold, however, i f seasonal causes operate, would lead us to
anticipate gold exports rather than imports during the summer months,
with perhaps further imports in the f a l l .
With these conflicting
tendencies fut&re. changes in our loan account are especially significant as a guide and we should see that the total does not become or
continue too burdensome.
X-4565
- 5224
Future Policy,
As a guide to the timing and. extent of any purchases which
might appear desirable, one of our test guides will be the amount of
borrowing by member banks in principal centers, and particularly in
Nptt Yorlc and Chicago.
Our experience has shown that when New York
City banks are borrowing in the neighborhood of 100 million dollars
or mote, there is then some real pressure for reducing loans, and
money rates tend to be markedly higher than the discount rate.
On
the other hand, when borrowings of these banks are negligible, as
in 1924, .the money situation tends to be less elastic and if gold imports take place, there i s liable to be some credit inflation, with
money rates dropping below our discount rate.
When member banks are
owing us about 50 million dollars or less the situation appears to be
comfortable, with no marked pressure for liquidation and with the
requisite e l a s t i c i t y .
Under these circumstances no single bank tends
to be in debt for any extended period and borrowings are passed around
among the different banks.
Call and time money rates tend to be but
slightly above our discount rate.
With this situation existing in
New York, there i s less tendency for funds to be attracted to New York
(particularly since commercial rates at such times are apt to be higher
than stock exchange rates for call money) and the situation has a
considerable degree of stability.
The accompanying chart shows the amount of borrowing of New
York City banks by weeks during the past four years.
It shows borrow-
ings to be large during 1923, when, as we a l l know, there was some
X-4565
— 6
pressure for liquidation.
225
—
Allowing for the seasonal increase and de-
er e a s e i n December 1923 and January 1924 borrowings were v e r y s n a i l
d u r i n g 1 9 2 4 a n d we r e c a l l t h a t d u r i n g t h e "balance o f t h a t y e a r w h i l e
t h e r e was c o n s i d e r a b l e i n s t a b i l i t y i n money c o n d i t i o n s * i t was accompanied
by a gradual r e v i v a l of b u s i n e s s over 1923.
In 1925 borrowings were
s u f f i c i e n t l y h i g h d u r i n g p a r t s o f t h e y e a r to p l a c e some p r e s s u r e on t h e
Hew Y o r k C i t y b a n k s •
I t was i n t h i s s t a g e t h a t r a t e a d v a n c e s w e r e made*
I n t h e e v e n t o f b u s i n e s s l i q u i d a t i o n now a p p e a r i n g i t w o u l d seem a d v i s a b l e t o k e e p t h e New York C i t y b a n k s o u t o f d e b t b e y o n d s o m e t h i n g i n
the neighborhood of 50 m i l l i o n d o l l a r s .
It would probably be w e l l i f
some s i m i l a r r u l e c o u l d be a p p l i e d to t h e Chicago b a n k s , a l t h o u g h t h e
amount would, o f c o u r s e , be s m a l l e r and t h e d i f f i c u l t i e s g r e a t e r b e c a u s e g f t h e i n f l u e n c e o f t h e Hew Y o r k m o n e y m a r k e t •
I n g e n e r a l i t w o u l d a p p e a r t h a t we s h o u l d n o t i n c r e a s e o r
diminish the special account immediately beyond gradually replacing
t h e i s s u e s w h i c h m a t u r e d on March 15 a s market c o n d i t i o n s w a r r a n t , but
t h a t we s h o u l d p r e p a r e o u r s e l v e s now f o r t h e prompt p u r c h a s e o f some
f u r t h e r amount of s e c u r i t i e s i f and
when t h e r e s h o u l d be f u r t h e r
evidence of a recession in business activity,
especially if there is
no f u r t h e r l i q u i d a t i o n i n t h e amount o f F e d e r a l R e s e r v e c r e d i t employed*
March IS,
1926.
226
FEDERAL RESERVE BOARD
X-4566
washington
March 22,
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT: B a n k h o l i d a y s d u r i n g A p r i l ,
1926
1926.
Hear S i r :
For your i n f o r m a t i o n , the f o l l o w i n g Federal Reserve Banks and
Branches w i l l he c l o s e d on d a t e s s p e c i f i e d during A p r i l , on account
of holidays:
Friday
April 2
Philadelphia
Pittsburgh
Baltimore
tfew O r l e a n s
Hashvilie
Jacksonville
Memphis
Minneapolis
Tuesday
April 13 Birmingham
Jefferson's Birthday
Thursday
A p r i l 15 S a l t Lake C i t y
Arbor Day
Monday
A p r i l 19 B o s t o n
Patriots'
Wednesday
April 21 Dallas
El Paso
Houston
San J a c i n t o Bay
Thursday
A p r i l 2 2 Omaha
JUvbor P a y
Monday
April 26 Atlanta
Birmingham
Jacksonville
S o u t h e r n Memorial Day
Good F r i d a y
Bay
T h e r e f o r e , on t h e d a t e s i n d i c a t e d , t h e banks a f f e c t e d w i l l not part i c i p a t e i n e i t h e r t h e r e g u l a r Gold Fund C l e a r i n g or t h e F e d e r a l R e s e r v e
N o t e C l e a r i n g . P l e a s e i n c l u d e y o u r c r e d i t s f o r t h e b a n k s a f f e c t e d on
each of the h o l i d a y s w i t h your c r e d i t s f o r the f o l l o w i n g b u s i n e s s day in
y o u r G o l d Fund C l e a r i n g t e l e g r a m s , a n d make no s h i p m e n t s o f F e d s r a l R e s e r v e N o t e s , f i t o r u n f i t , f o r a c c o u n t o f t h e P l e a d O f f i c e s c o n c e r n e d , qi:
the holidays mentioned.
Kindly n o t i f y Branches.
Very t r u l y yours,
TO GOVERNORS OF ALL F . R . B A H S .
J . C. M o e l l ,
Assistant Secretary.
2 2 7
FEDERAL RESERVE BOARD
washington
X-4567-a
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
March 24,
1926.
Dear S i r :
Through t h e c o u r t e s y of Governor Young of t h e F e d e r a l
Reserve Bank of M i n n e a p o l i s , I e n c l o s e f o r your i n f o r m a t i o n a
copy o f a n o p i n i o n r e n d e r e d on March 1 3 t h b y the Supreme Court
o f Montana i n t h e c a s e o f Fergus County v . F e d e r a l R e s e r v e Bank
of Minneapolis#
AS y o u w i l l o b s e r v e , t h e f a c t s i n t h e c a s e w e r e s i m i l a r
t o t h o s e i n the Malloy Case, e x c e p t that the check c o l l e c t i o n
c i r c u l a r o f t h e F e d e r a l R e s e r v e Bank of M i n n e a p o l i s e x p r e s s l y
a u t h o r i z e d t h e F e d e r a l r e s e r v e b a n k " t o s e n d s u c h 4-tems f o r
payment i n cash or bank d r a f t d i r e c t t o the bank on which they
a r e drawn.11
The C o u r t h e l d t h i s e x p r e s s a u t h o r i t y s u f f i c i e n t
t o a b s o l v e the Federal r e s e r v e bank from l i a b i l i t y f o r a l o s s
r e s u l t i n g from the acceptance of an exchange d r a f t i n r e m i t tance f o r a check# Although the case arose under Regulation J
of 1920, the d e c i s i o n has a v e r y important and favorable beari n g u p o n t h e l e g a l i t y , e f f e c t i v e n e s s a n d r e a s o n a b l e tie s s o f
R e g u l a t i o n J, S e r i e s o f 1924#
The o p i n i o n a l s o d i s c u s s e s a
number o f q u e s t i o n s n o t h e r e t o f o r e r a i s e d i n l i t i g a t i o n o f
t h i s kind, and I b e l i e v e that i t deserves very c a r e f u l study.
G o v e r n o r Y o u n g i n f o r m s me t h a t t h e C o u r t r e s e r v e d
the r i g h t t o modify t h i s opinion w i t h i n f i f t e e n days from the
t i m e i t was rendered and, of c o u r s e , t h a t t i m e has not y e t
elapsed.
If 1 learn of any modification of the opinion I
shall advise you.
With a l l best wishes,
I am,
Cordially yours,
Enclosure
Walter Wyatt
General Counsel
Noi 5 8 7 3
S T A T E
OF
X-4567
M O H A H A
I n t h e Supreme C o u r t , March Term, 1926*
Fergus County, a municipal corporat i o n , "by a n d t h r o u g h i t s B o a r d o f
County Commissioners, John Quickend e n , A r t h u r W. S t o d d a r d a n d O s c a r
A n d e r s o n ; a n d H. L . F i t t o n , a s C o u n t y
Treasurer of Fergus County, Montana,
P l a i n t i f f s and R e s p o n d e n t s ,
-vFedefd.1 R e s e r v e Bank of M i n n e a p o l i s ,
a corporation of the United S t a t e s ,
(Helena Branch).
Defendant and A p p e l l a n t .
S u b m i t t e d : March 1, 1 9 2 6 .
Decided:
F i l e d : March 13, 1926.
J . W. C r o s l y .
Clerk.
March 13, 1 9 2 6 .
228
"1-
X-4^f^
Mr* J u s t i c e H o l l o w a y d e l i v e r e d t h e O p i n i o n o f t h e C o u r t .
At t h e t i m e s m e n t i o n e d h e r e i n t h e F i r s t S t a t e Bank o f C o f f e e Creek
( c a l l e d the C o f f e e Creek Bank) was a s t a t e bank w h i c h was n o t a f f i l i a t e d
w i t h the F e d e r a l Reserve System i n any manner, so f a r as d i s c l o s e d by the
record.
The Empire and S t a t e Bank of Lewis town ( c a l l e d the L e w i s town
Bank) was a l s o a s t a t e bank, but i t was a component p a r t o f the F e d e r a l
R e s e r v e S y s t e m , - a member b a n k o f the F e d e r a l R e s e r v e B a n k o f M i n n e a p o l i s
(herein c a l l e d the defendant).
About Decenber 1,
1923,
certain persons
w h o wdre i n d e b t e d t o F e r g u s c o u n t y , d e l i v e r e d t o t h e c o u n t y t r e a s u r e r
checks drawn on t h e C o f f e e Creek Bank.
T h e s e c h e c k s * f o r sums a g g r e g a t i n g
$ 9 9 9 . 6 4 , were e n d o r s e d by t h e t r e a s u r e r and were d e l i v e r e d to the L e w i s town Bank f o r c o l l e c t i o n *
to
The L e w i s t o w n Bank e n d o r s e d and d e l i v e r e d them
the d e f e n d a n t 1 s H e l e n a Branch Bank f o r c o l l e c t i o n ,
and t h e Helena
Branch Bank t r a n s m i t t e d the c h e c k s to the C o f f e e Creek Bank f o r payment.
The C o f f e e Crook B a n k c h a r g e d t h e c h o c k s t o t h e r e s p e c t i v e d r a w e r s a n d
r e m i t t e d i t s d r a f t s f o r the amount o f the c h e c k s .
upon the
These drafts,
drawn
Coffee Creek Bank's correspondents, were r e c e i v e d by t h e defend-
ant but b e f o r e they c o u l d be c o l l e c t e d , t h e Coffee Creek Bank f a i l e d in
b u s i n e s s and the d r a f t s were d i s h o n o r e d .
This a c t i o n was then i n s t i t u t e d
b y t h e c o u n t y to r e c o v e r the amount of the c h e c k s ,
together with the in-
t e r e s t w h i c h t h e c o u n t y w o u l d h a v e r e c e i v e d on t h a t amount i f t h e
had been c o l l e c t e d *
checks
I t i s the p l a i n t i f f 1 s theory t h a t the d e f e n d a n t r e n -
dered i t s e l f l i a b l e for the r e s u l t i n g l o s s by a c c e p t i n g d r a f t s f o r t h e
c h e c k s i n s t e a d of demanding and c o l l e c t i n g t h e money.
Every m a t e r i a l a l l e g a t i o n o f the complaint was admitted, and the
X-4567
defendant then -undertook t o j u s t i f y i t s act in a c c e p t i n g the d r a f t s .
0 8 0
It
a l l e g e d t h a t a b o u t O c t o b e r 6 , 1 9 2 0 , t h e F e d e r a l R e s e r v e B o a r d a d o p t e d and
promulgated certain rules designated in the entirety "Regulation J, Series
o f 1 9 2 0 ; 1 1 t h a t a b o u t September 1 , 1 9 2 2 , t h i s d e f e n d a n t , w i t h t h e c o n s e n t and
a p p r o v a l of t h e F e d e r a l R e s e r v e Board, a d o p t e d c e r t a i n o t h e r r u l e s and p r o mulgated them in
their entirety as
11
Circular No. 286;"
t h a t the L e w i s t o w n
B a n k h a d f u l l n o t i c e and k n o w l e d g e o f t h e c o n t e n t s o f t h e s e d o c u m e n t s a t
a n d f o r a l o n g p e r i o d p r i o r t o t h e time the c h e c k s i n q u e s t i o n were d e l i v e r e d t o t h e d e f e n d a n t , and t h a t d e f e n d a n t a c c e p t e d t h e c h e c k s f o r c o l l e c t i o n under the
terms and c o n d i t i o n s imposed b y R e g u l a t i o n J and C i r c u i r
286, and not otherwise#
p a r t of the answer.
E a c h o f these d o c u m e n t s i s a t t a c h e d t o and made a
The p o r t i o n s of R e g u l a t i o n J m a t e r i a l here, r e a d a s
follows:
"Each F e d e r a l R e s e r v e Bank s h a l l e x e r c i s e the f u n c t i o n s o f
"a c l e a r i n g h o u s e u n d e r the f o l l o w i n g g e n e r a l t e r m s and c o n d i t i o n s :
"(l) Each Federal reserve bank w i l l r e c e i v e at par from i t s
"member b a n k s a n d f r o m n o n - m e m b e r c l e a r i n g b a n k s i n i t s d i s t r i c t ,
checks
"drawn on a l l member and non-member c l e a r i n g banks a n d on a l l o t h e r non~
"mdmber b a n k s w h i c h a g r e e t o r e m i t a t p a r t h r o u g h t h e F e d e r a l r e s e r v e b a n k
!
bf t h e i r d i s t r i c t ,
11
* * *
( 8 ) I n h a n d l i n g i t e m s f o r member a n d n o n - m e m b e r c l e a r i n g b a n k s ,
"a F e d e r a l r e s e r v e b a n k w i l l a c t a s a g e n t o n l y * ***
Any f a r t h e r r e q u i r e -
m e n t s - t h a t t h e b o a r d may deem n e c e s s a r y w i l l b e s e t f o r t h b y t h e F e d e r a l
" r e s e r v e b a n k s i n t h e i r l e t t e r s o f i n s t r u c t i o n t o t h e i r member and n o n n
member c l e a r i n g b a n k s •
Each F e d e r a l r e s e r v e bank w i l l a l s o p r o m u l g a t e r u l e s
-3"
X-4567 2 3 J [
"and. r e g u l a t i o n s g o v e r n i n g t h e d e t a i l s o f i t s o p e r a t i o n s a s a c l e a r i n g
" h o u s e | s u c h r u l e s and. r e g u l a t i o n s t o "be " b i n d i n g n o o n a l l m e m b e r a n d n o n "memiber "banks w h i c h a r e c l e a r i n g t h r o u g h t h e F e d e r a l r e s e r v e h a n k . "
The o n l y p r o v i s i o n o f C i r c u l a r N o . 2 8 6 w i t h w h i c h w e a r e c o n c e r n e d
at present, reads as follows:
" E v e r y b a n k s e n d i n g c h e c k s to t h i s ( d e f e n d a n t ) b a n k * * * w i l l
"be u n d e r s t o o d t o h a v e a g r e e d t o t h e t e r m s and c o n d i t i o n s o f t h i s c i r c u l a r ,
"and t o h a v e a g r e e d t h a t i n r e c e i v i n g s u c h i t e m s t h i s bank w i l l a c t o n l y
M
a< t h e c o l l e c t i n g a g e n t o f t h e s e n d i n g b a n k , a n d a s s u c h , a u t h o r i z e d t o
"send such i t e m s f o r payment in cash or bank d r a f t d i r e c t t o the bank on
"which they are drawn."
A g e n e r a l d e m u r r e r to t h e a n s w e r w a s s u s t a i n e d a n d t h e d e f e n d a n t ,
d e c l i n i n g to p l e a d f u r t h e r , s u f f e r e d judgment to b e r e n d e r e d and e n t e r e d
a g a i n s t i t and appealed.
The u l t i m a t e q u e s t i o n f o r s o l u t i o n i s : D o e s t h e answer s t a t e a
d e f e n s e t o p l a i n t i f f ' s c a u s e o f a c t i o n ? o r , s t a t i n g t h e same p r o p o s i t i o n
i n d i f f e r e n t t e r m s : Do t h e p r o v i s i o n s o f R e g u l a t i o n J a n d C i r c u l a r 2 8 6 b i n d
t h e p l a i n t i f f a n d r e l i e v e t h e defendant o f l i a b i l i t y f o r t h e l o s s w h i c h r e s u l t e d from i t s act i n a c c e p t i n g the d r a f t s of
payment f o r the checks i t undertook to c o l l e c t ?
tiio
C o f f e e Creek Bank i n
If they do, the t r i a l
c o u r t e r r e d i n s u s t a i n i n g t h e d e m u r r e r ; i f t h e y do n o t , t h e n t h i s c a s e i s
c o n t r o l l e d b y t h e d e c i s i o n "in F e d e r a l R e s e r v e B a n k o f Richmond v . M a l l o y ,
264 U . S . 1 6 0 , and the d e c i s i o n i n J e n s e n v . Laurel Meat Co., 71 Mont. 582,
<.
230 Pac. 1081.
The F e d e r a l R e s e r v e Act ( 3 8 S t a t . 2 5 1 , s e e s . 9 7 8 5 - 9 8 0 5 , U. S .
Comp. S t a t . 1 9 1 6 ) a n d t h e A c t s a m e n d a t o r y t h e r e o f a n d s u p p l e m e n t a r y t h e r e t o
-4-
X-4567
c o n s t i t u t e the charter of the Federal Reserve System.
The g e n e r a l s u p e r -
v i s i o n and c o n t r o l of the system i s lodged i n the F e d e r a l R e s e r v e Board,
c o n s i s t i n g o f s i x members a p p o i n t e d b y t h e P r e s i d e n t of the U n i t e d S t a t e s ,
by and w i t h t h e a d v i c e and c o n s e n t o f t h e s e n a t e ,
and the S e c r e t a r y of the
T r e a s u r y and t h e C o m p t r o l l e r of the Currency, members ex o f f i c i o . (Amendment
o f J u n e 3 , 1 9 2 2 , 4 2 S t a t . 6 2 0 ; s e c - 9 7 9 3 , U , S . Comp. S t a t . , 1 9 2 3 S u p p l e m e n t # )
I t was t h i s b o a r d w h i c h p r o m u l g a t e d R e g u l a t i o n J and a u t h o r i z e d t h e d e f e n d a n t t o i s s u e C i r c u l a r No. $286.
The o p e n i n g p a r a g r a p h o f R e g u l a t i o n J q u o t e d above i s a n o r d e r of
the F e d e r a l Reserve Board c o n s t i t u t i n g each Federal r e s e r v e bank a c l e a r i n g
h o u s e f o r i t s member b a n k s and non-member c l e a r i n g b a n k s .
of
tiaat
By the p r o v i s i o n s
R e g u l a t i o n , member banks were i n f o r m e d t h a t i n h a n d l i n g c h e c k s and
d r a f t s for c o l l e c t i o n each Federal r e s e r v e bank would a c t a s agent o n l y ,
and w o u l d e x e r c i s e
the f u n c t i o n s o f a c l e a r i n g h o u s e u n d e r s u c h r u l e s and
regulations as i t might adopt.
Regulation J assumed to confer upon t h i s
d e f e n d a n t the a u t h o r i t y to adopt and p r o m u l g a t e the r u l e s and r e g u l a t i o n s
contained in Circular 236.
However, i t
i s a l l e g e d i n the answer, and ad-
m i t t e d t o be t r u e f o r the purposes of t h i s a p p e a l t h a t Circular 286 was
i s s u e d w i t h t h e c o n s e n t a n d a p p r o v a l o f t h e F e d e r a l R e s e r v e B o a r d , so t h a t
4
i n e f f e c t i t e m a n a t e d from t h a t b o a r d , and i t s v a l i d i t y d e p e n d s u p o n t h e
power of t h a t board to p r e s c r i b e t h e c o n d i t i o n s c o n t a i n e d i n the c i r c u l a r .
If the F e d e r a l R e s e r v e Board had a u t h o r i t y to impose those c o n d i t i o n s ,
t h i s defendant had a u t h o r i t y to say
then
that it would act as a clearing house
a n d c o l l e c t c h e c k s f o r member b o n k s on the t e r m s and c o n d i t i o n s p r e s c r i b e d
i n t h e c i r c u l a r and n o t o t h e r w i s e .
-5~
X-4567
Circular 286 constituted a continuing o f f e r by this defendant
t o p e r f o r m the s e r v i c e s of a c o l l e c t i n g a g e n t f o r the L e w i s town Bank u p o n
the c o n d i t i o n s t h e r e i n e x p r e s s e d ,
(1) that defendant might send the items
f o r c o l l e c t i o n d i r e c t l y t o t h e bank upon w h i c h t h e y were drawn, and (2)
t h a t i t m i g h t r e c e i v e " p a y m e n t i n c a s h o r "bank d r a f t . "
When t h e c o u n t y d e p o s i t e d t h e c h e c k s w i t h t h e L e w i s t o w n B a n k f o r
collection,
i t t h e r e b y a u t h o r i z e d t h a t bank to employ a s u b - a g e n t t o p e r -
f o r m t h e a c t u a l s e r v i c e o f making the c o l l e c t i o n ( J e n s e n v . L a u r e l Meat
Co., a b o v e ) and t o t h a t end t o e n t e r i n t o the n e c e s s a r y c o n t r a c t w i t h the
sub-agent for the service to be performed.
W h e n t h e L e w i s t o w n B a n k , w i tibt f u l l k n o w l e d g e o f t h e c o n d i t i o n s
imposed by C i r c u l a r 2 8 6 , d e l i v e r e d the c h e c k s to t h i s d e f e n d a n t f o r c o l lection, it
t h e r e b y e x p r e s s e d i t s a c c e p t a n c e of the o f f e r a s made, and the
r e s u l t was a c o n t r a c t by t h e terms of which the d e f e n d a n t was a u t h o r i z e d t o
s e n d t h e c h e c k s d i r e c t l y to the C o f f e e Creek Bank a n d to a c c e p t i n payment
" c a s h o r bank d r a f t ; " and when that c o n t r a c t was e n t e r e d i n t o , d e f e n d a n t
became the s u b - a g e n t f o r the c o u n t y , and the c o u n t y became bound b y the
c o n t r a c t t o the sane e x t e n t t h a t the Lewis town Bank was bound.
I t i s conceded that the f i r s t condition mentioned above is not
o b j e c t i o n a b l e and n e c e s s a r i l y s o , f o r i t i s a u t h o r i z e d e x p r e s s l y by s e c t i o n
6108, R e v i s e d Codes of 1921.
But i t i s contended that n e i t h e r t h i s de-
fendant, nor the Federal Reserve Board had power l a w f u l l y to require that
d e f e n d a n t would a c c e p t checks f o r c o l l e c t i o n only* on c o n d i t i o n t h a t i t
might r e c e i v e e i t h e r d r a f t s or c a s h i n payment t h e r e f o r .
In other words,
p l a i n t i f f ' s counsel argue that the Federal Reserve Act imposed upon t h i s
defendant the a b s o l u t e duty to r e c e i v e those checks f o r c o l l e c t i o n and to
X-4567
*^4.
c o l l e c t t h e m , and t h e r e f o r e i t was boyonci t h e p o w e r o f t h e d e f e n d a n t
or the Federal Reserve Board t o s a y t h a t defendant would perform i t s
p u b l i c d u t y o n l y upon c o n d i t i o n t h a t i t be r e l i e v e d f r o m t h e l i a b i l i t y
which would o t h e r w i s e a t t a c h t o i t s a c t in a c c e p t i n g d r a f t s i n payment
of the checks.
In support of t h i s argument a t t e n t i o n is d i r e c t e d t o
s e c t i o n s 13 and 16 of the Federal Reserve Act.
(Sees. 9796 and 9799,
U. S . Coup. S t a t . , a s a m e n d e d . )
S e c t i o n 1 3 , a s amended, p r o v i d e s : "Any F e d e r a l r e s e r v e b a n k
"may r e c e i v e f r o m a n y o f i t s member b a n k s and f r o m t h e U n i t e d S t a t e s ,
" d e p o s i t s of c u r r e n t f u n d s i n l a w f u l money, n a t i o n a l bank n o t e s ,
" f e d e r a l r e s e r v e n o t e s or checks and d r a f t s p a y a b l e upon p r e s e n t a tion,
and a l s o f o r c o l l e c t i o n maturing notes and b i l l s . "
232,234,235.)
(40 S t a t .
This s e c t i o n so f a r as i t i s i n v o l v e d here, a e r e l y a u t h -
o r i z e s a F e d e r a l r e s e r v e bank t o r e c e i v e from i t s members b a n k s , checks
and drafts for c o l l e c t i o n .
Reserve Bank of A t l a n t a ,
( A m e r i c a n Bank and T r u s t Co. v . F e d e r a l
262 U. S. 6 4 3 . )
S e c t i o n 16 provides:
"Every Federal r e s e r v e bank s h a l l r e c e i v e
"on d e p o s i t a t p a r f r o m member b a n k s or f r o m F e d e r a l r e s e r v e banks
"checks and d r a f t s drawn upon any of i t s d e p o s i t o r s . "
That t h e s e p r o v i s i o n s d i d not compel t h e defendant t o r e c e i v e
the checks or t o c o l l e c t them is r e a s o n a b l y c l e a r from the language
employed.
But a l l d i s c u s s i o n of t h e s u b j e c t has b e e n s e t a t r e s t b y t h e
supreme c o u r t of the U n i t e d S t a t e s i n Farmers and Merchants Bank v .
F e d e r a l R e s e r v e B a n k o f R i c h m o n d , 2 6 2 U. S . 6 4 9 i ;
With r e f e r e n c e t o the
d u t y o f a F e d e r a l r e s e r v e b a n k t o c o l l e c t c h e c k s fofc member b a n k s , t h e
X-4567
235
c o u r t s a i d : "Bat n e i t h e r s e c t i o n 13, nor any o t h e r p r o v i s i o n of t h e F e d e r a l
"Reserve Act, imposes upon r e s e r v e banks any o b l i g a t i o n to r e c e i v e checks
"for collection.
The
A c t m e r e l y c o n f e r s a u t h o r i t y t o do s o . "
In passing
u p o n t h e l a n g u a g e e m p l o y e d in t h e o p e n i n g p a r a g r a p h o f s e c t i o n 1 5 q u o t e d
above,
the court observed:
"United States,
11
The d e p o s i t o r s i n a F e d e r a l r e s e r v e bank a r e the
o t h e r F e d e r a l r e s e r v e b a n k s , and member b a n k s .
I t is checks
"on t h e s e d e p o s i t o r s w h i c h a r e t o b e r e c e i v e d by t h e F e d e r a l r e s e r v e b a n k s .
"These checks from these d e p o s i t o r s the Federal r e s e r v e banks mast r e c e i v e .
"And lohen r e c e i v e d t h e y m u s t b e t a k e n a t p a r .
"member b a n k s i n t h i s s e c t i o n .
There i s no mention of non-
When i n 1 9 1 6 , s e c t i o n 1 3 was amended to p e r m i t
" F e d e r a l r e s e r v e b a n k s t o r e c e i v e f r o m member b a n k s s o l e l y f o r c o l l e c t i o n
"other checks p a y a b l e upon p r e s e n t a t i o n w i t h i n t h e d i s t r i c t ; and when, i n
"1917, s e c t i o n 13 was a g a i n amended t o p e r m i t such r e c e i p t s o l e l y f o r c o l l e c t i o n a l s o f r o m c e r t a i n nonmember b a n k s - s e c t i o n 16 was l e f t i n t h i s r e "spect unchanged.
I n o t h e r r e s p e c t s s e c t i o n 16 was amended b o t h b y t h e Act
"of 1916 and by the Act of 1917.
The n a t u r a l e x p l a n a t i o n o f t h e o m i s s i o n t o
"amend t h e p r o v i s i o n i n s e c t i o n 16 c o n c e r n i n g c l e a r a n c e i s t h a t t h e s e c t i o n
"has no a p p l i c a t i o n to nonmember b a n k s , - e v e n i f a f f i l i a t e d . "
The checks h e r e i n q u e s t i o n w o r e drawn u p o n t h e C o f f e e Creek Bank,
which was n o t a Aember bank nor a f f i l i a t e d w i t h the F e d e r a l Reserve System
i n a n y manner; t h e r e f o r e , under the p r o v i s i o n s o f s e c t i o n 16 quoted above,
the d e f e n d a n t was not compelled to r e c e i v e them even f o r d e p o s i t .
But i t i s i n s i s t e d t h a t d e f e n d a n t was c o m p e l l e d to a c t a s a
c l e a r i n g h o u s e f o r i t s member b a n k s , i n c l u d i n g t h e Lewi s t o m a Bank.
p r o v i s i o n o f the F e d e r a l R e s e r v e A c t r e l a t i n g to t h i s s a b j e c t ,
The o n l y
so f a r a s we
have observed, i s to be found in the concluding paragraph of s e c t i o n 16,
X 4567
'
236
as follows:
"The F e d e r a l R e s e r v e B o a r d s h a l l make a n d p r o m u l g a t e f r o m
time to time r e g u l a t i o n s governing the t r a n s f e r o f funds and
c h a r g e s t h e r e f o r among F e d e r a l r e s e r v e banks and t h e i r "branches,
and may a t i t s d i s c r e t i o n e x e r c i s e t h e A m o t i o n s of a c l e a r i n g
h o u s e f o r s u c h F e d e r a l R e s e r v e "banks, or may d e s i g n a t e a F e d e r a l
R e s e r v e Bank to e x e r c i s e s u c h f u n c t i o n s and may a l s o r e q u i r e
e a c h such. B a n k t o e x e r c i s e t h e f u n c t i o n s o f a c l e a r i n g h o u s e f o r
i t s mem " h e r s . " "banks
T h i s l a n g u a g e a p p e a r s t o "be e x p l i c i t .
I t p r o v i d e s that the
F e d e r a l R e s e r v e B o a r d may r e q u i r e e a c h F e d e r a l r e s e r v e b a n k "to e x e r c i s e t h e
" f u n c t i o n s o f a c l e a r i n g h o u s e f o r i t s member "banks."
I f the language of
s e c t i o n 13 above, is m e r e l y p e r m i s s i v e , and not mandatory, a s h e l d by t h e
s u p r e m e c o u r t , t h i s l a n g u a g e o f t h e c o n c l u d i n g p a r a g r a p h o f s e c t i o n 16 i s
l i k e w i s e p e r m i s s i v e , and not mandatory.
In o t h e r words, w h i l e the F e d e r a l
R e s e r v e B o a r d may r e q u i r e a F e d e r a l r e s e r v e b a n k t o a c t a s a c l e a r i n g h o u s e
f o r i t s member b a n k s ,
i t i s n o t c o m p e l l e d t o make s u c h r e q u i r e m e n t .
It
might have refused altogether to constitute t h i s defendant a clearing house,
and i n the a b s e n c e of an o r d e r from t h e F e d e r a l R e s e r v e Board d i r e c t i n g i t
to function as a clearing house, this defendant might have refused to undertake any s e r v i c e w i t h r e s p e c t to these checks.
I t was compelled to f u n c t i o n
as a c l e a r i n g house o n l y i n v i r t u e of the order of t h e F e d e r a l R e s e r v e Board
d i r e c t i n g i t t o do so u p o n t h e t e r m s a n d c o n d i t i o n s m e n t i o n e d i n R e g u l a t i o n
J and C i r c u l a r 286.
S i n c e the f e d e r a l R e s e r v e Board was p e r m i t t e d , b u t was n o t compelled,
to require t h i s defendant to function as a clearing house,
it could
p r e s c r i b e the terms upon which the s e r v i c e should be r e n d e r e d when u n d e r t a k e n .
S e c t i o n 11 o f the F e d e r a l R e s e r v e Act d e f i n e s g e n e r a l l y t h e powers
and d u t i e s of the Federal Reserve Board.
Section 11 j provides:
"Said board
-9-
"shall perform the d u t i e s ,
X-4567
functions or services s p e c i f i e d in t h i s Act,
"and make a l l r u l e s and r e g u l a t i o n s n e c e s s a r y t o e n a b l e s a i d B o a r d c f " f e c t i v e l y to p e r f o r m the same."
S e c t i o n 11 j p r o v i d e s tiiat the Federal
^Reserve Board s h a l l "exercise general supervision over s a i d Federal reserve
"banks."
These p r o v i s i o n s f u r n i s h ample a u t h o r i t y to the Federal R e s e r v e
Board to make any l a w f u l r u l e s and r e g u l a t i o n s f o r the c o n d u c t o f t h e b u s i n e s s c a r r i e d on by a F e d e r a l r e s e r v e bank in i t s c a p a c i t y as a c l e a r i n g
house or c o l l e c t i n g a g e n t , and s i n c e the r u l e s p r o s c r i b e d i n R e g u l a t i o n J
and C i r c u l a r 2 8 6 a r e n o t u n l a w f u l , t h i s p l a i n t i f f i s bound by them so f a r
as they a f f e c t the instant case.
The c o n t e n t i o n made t h a t i t i s a g a i n s t p u b l i c p o l i c y t o p e r m i t t h i s
defendant to contract against l i a b i l i t y
for a c c e p t i n g d r a f t s in payment of
checks received by i t for c o l l e c t i o n , cannot be sustained.
In this juris-
d i c t i o n e v e n a p u b l i c s e r v i c e c o r p o r a t i o n may c o n t r a c t a g a i n s t l i a b i l i t y
f o r i t s own n e g l i g e n c e , u n d e r c e r t a i n c i r c u m s t a n c e s .
(Nelson v. Great
N o r t h e r n Ry. Co., 2 8 Mont. 2 9 7 , 3 2 1 , 72 P a c . 642; John v . N o r t h e r n P a c i f i c
3y.
Co., 42 Mont. 18,
35, 111 Pac. 632).
•In t h e i r b r i e f ,
c o u n s e l f o r p l a i n t i f f s o y : " O n l y i n c a s e s triiere
"a p e r s o n o r c o r p o r a t i o n c a n r e f u s e t o p e r f o r m a s e r v i c e ,
"terms under which i t w i l l perform the s e r v i c e . "
can i t d i c t a t e the
For the purpose of t h i s ap-
p e a l t h a t s t a t e m e n t may b e a c c e p t e d a s s u b s t a n t i a l l y c o r r e c t , b u t i t d o e s
not aid the p l a i n t i f f ,
and no u s e f u l 'purpose w o u l d be s e r v e d b y d i s c u s s i n g
the p u b l i c character of the s e r v i c e s rendered by the Federal Reserve System.
I t i s s e t t l e d b y t h e d e c i s i o n i n F a r m e r s and M e r c h a n t s B a n k v . F e d e r a l R e serve Bank o f Richmond, above, t h a t t h i s defendant was not compelled by the
Federal Reserve Act to c o l l e c t the checks in question.
"It i s a fundamental
*
X 4567
'
"rule of law, however,
that
'.That
8 8 8
o n e may r e f u s e t o d o e n t i r e l y h e may
"agree t o do on such terms as he p l e a s e s .
Honce, one person, b e i n g under
"no l e g a l d u t y t o p e r f o r m c e r t a i n s e r v i c e s f o r a n o t h e r , may, u p o n a g r e e i n g
" t o p e r f o r m s u c h * s e r v i c e s , e x e m p t h i m s e l f f r o m l i a b i l i t y f o r h i s own n e g l i gence,
p r o v i d i n g * * * t h e r e i s no a t t e m p t to exempt h i m s e l f from r e -
s p o n s i b i l i t y from any fraud or w i l l f u l injury to the o t h e r p e r s o n or h i s
" p r o p e r t y , or to exempt h i m s e l f from r e s p o n s i b i l i t y from any v i o l a t i o n o f
"the law, either w i l l f u l or negligent."
(6 Cal. Jur.
117; see a l s o s e c .
7554, Rev. Codes, 1921)
I t i s argued by counsel for p l a i n t i f f - t h o u g h i t nos pleaded i n the
c o m p l a i n t - t h a t the l e w i s t o w n Bank was c o m p e l l e d to s e n d the checks i n
q u e s t i o n to the d e f e n d a n t f o r c o l l e c t i o n , and t h e r e f o r e the c o n t r a c t l a c k s
the e s s e n t i a l element-consent given f r e e l y .
If it be a f a c t , a s suggested
i n argument, t h a t the Lewistown Bank was not f r e e t o c o l l e c t the checks d i r e c t l y from t h e C o f f e e Creek Bank or through any a g e n c y o t h e r than the d e fendant and that i t was coerced i n t o a c c e p t i n g the o f f e r , such f a c t i s not
one o f w h i c h t h i s c o u r t can t a k e j u d i c i a l n o t i c e ,
1921).
(sec.
10532, Rev. Codes,
I t i s t r u e t h a t e v e r y member b a n k i s r e q u i r e d b y s e c t i o n 19 o f t h e
Federal R e s e r v e Act t o m a i n t a i n w i t h the Federal R e s e r v e Bank o f t h e d i s t r i c t
a c e r t a i n d e s i g n a t e d minimum r e s e r v e , and i s s u b j e c t t o s e v e r e p e n a l t i e s f o r
any impairment of t h a t r e s e r v e but t h i s court cannot s a y t h a t t h o s e r e q u i r e ments f u r n i s h the means by which t h i s defendant could or did coerce the
l e w i s t o w n Bank t o mako a l l c o l l e c t i o n s t h r o u g h t h e H e l e n a B r a n c h B a n k .
This
i s n o t s u c h a c a s e a s was p r e s e n t e d i n A m e r i c a n B . & I . Co. v . F e d e r a l R e serve Bank, 256 U. S.
350, or in Brookings S t a t e Bank v. Federal Reserve Bank
-11-
X-4567
2
281, Fed. 222.
Again i t i s s u g g e s t e d that, assuming the v a l i d i t y of Circular 236,
t h e p r o v i s i o n t h e r e i n t h a t a F e d e r a l r e s e r v e "bank r e c e i v i n g c h e c k s f o r c o l l e c t i o n , m a y a c c e p t "bank d r a f t s i n p a y m e n t , s h o u l d b e c o n s t r u e d t o m e a n
" t h a t a b a n k d r a f t s i s t o "be r e c e i v e d o n l y i n t h o s e c a s e s w h e r e s u c h c o u r s e
11
c o u l d s a f e l y "be p u r s u e d * 1 1
suggestion.
We a r e u n a b l e t o a p p r e c i a t e t h e f o r c e o f t h i s
I t may b e t r u e t h a t i f a F e d e r a l r e s e r v e b a n k , u n d e r t a k i n g t o
c o l l e c t c h e c k s drawn u p o n a nonmember and n o n - c l e a r i n g bank* a c c e p t e d d r a f t s
on s u c h b a n k w h e n t h e b a n k w a s k n o w n t o b e i n s o l v e n t , s u c h F e d e r a l r e s e r v e
bank might be l i a b l e n o t w i t h s t a n d i n g the p r o v i s i o n s of R e g u l a t i o n J and
Circular 286; but t h a t i s not this case#
There i s not a s u g g e s t i o n i n the
p l e a d i n g t h a t the C o f f e e Creek Bank was i n s o l v e n t a t
the time i t
transmitted
i t s d r a f t s to the defendant, or, i f i t were insolvent in f a c t , that such
f a c t was known or s h o u l d h a v e b e e n known to t h e d e f e n d a n t .
The mere f a c t
that i t suspended b u s i n e s s b e f o r e the d r a f t s were c o l l e c t e d does not argue
t h a t i t was i n s o l v e n t when the d r a f t s were i s s u e d .
It does not appear upon
what banks the d r a f t s w e r e drawn or what time e l a p s e d a f t e r t h e d r a f t s were
r e c e i v e d by the d e f e n d a n t b e f o r e t h e C o f f e e Creek Bank f a i l e d .
I t i s our c o n c l u s i o n t h a t the contract e n t e r e d i n t o between the
Lewis town Bank a n d t h i s d e f e n d a n t i s v a l i d so f a r a s i t a p p e a r s from t h i s
record;
that that contract is binding upon Fergus county for whose b e n e f i t
i t was made, and t h a t i n v i r t u e o f i t s p r o v i s i o n s d e f e n d a n t was r e l i e v e d o f
l i a b i l i t y f o r a c c e p t i n g the d r a f t s of the C o f f e e Creek Bank.
t h a t the answer s t a t e s a d e f e n s e , and t h a t the t r i a l
It follows
court erred i n s u s -
taining the demurrer.
Under t h i s v i e w of the case i t i s not necessary to consider the
-12-
X-4567
210
second defense pleaded.
We h a v e t r e a t e d t h i s d e f e n d a n t a s s u b - a g e n t f o r F e r g u s c o u n t y i n
h a n d l i n g t h e s e c h e c k s f o r c o l l e c t i o n and we t h i n k c o r r e c t l y s o .
certain that plaintiff
It is
cannot m a i n t a i n an a c t i o n a g a i n s t d e f e n d a n t upon t h i s
cause of a c t i o n , upon any o t h e r theory and t h i s i s the t h e o r y upon which the
c a s e o f F e d e r a l R e s e r v e Bank of Richmond v . Malloy a b o v e was p r e d i c a t e d , and
i t i s i m m a t e r i a l h e r e t h a t t h e t h e o r y m a y h a v e "been a d o p t e d m e r e l y t o a v o i d
circuity of action.
I n t h e a n s w e r an a t t e m p t was made t o d e n y t h a t t h e c h e c k s w e r e d e l i v e r e d to t h e Lewis town Bank f o r c o l l e c t i o n , b u t t h e p l e a d e r i g n o r e d the
p l a i n p r o v i s i o n s o f s e c t i o n 9 1 3 7 , R e v i s e d Cod.es o f 1 9 2 1 , a n d t h e a t t e m p t e d
denial is not e f f e c t i v e for any purpose.
The j u d g m e n t i s r e v e r s e d and t h e c a u s e i s r e m a n d e d f o r f u r t h e r
proceedings.
Reversed and Remanded.
WM. L . HOLLOWAY
Associate Justice.
We c o n c u r :
LEW L . CALLOWAY
Chief Justice
ALBERT J . GALEN
ALBERT P . STARK
JOHN A . MATTHEWS
Associate Justices.
241
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
X-4568
March 24, 1926,
E l i g i b i l i t y for rediscount at a Federal reserve
b a n k o f n o t e s made o r e n d o r s e d b y a F e d e r a l I n t e r m e d i a t e C r e d i t Bank when o f f e r e d b y a member
bank.
Dear S i r :
The F e d e r a l R e s e r v e Board h a s b e e n r e q u e s t e d t o r u l e
upon the e l i g i b i l i t y f o r rediscount at a Federal r e s e r v e bank
of a n o t e o f a F e d e r a l I n t e r m e d i a t e Credit Bank and a l s o of a
n o t e made b y a c o o p e r a t i v e m a r k e t i n g a s s o c i a t i o n a n d e n d o r s e d
by a F e d e r a l Intermediate Credit Bank.
In each c a s e the n o t e
i s o f f e r e d f o r r e d i s c o u n t b y a member b a n k w h i c h h a s d i s c o u n t e d
i t f o r the Federal Intermediate Credit Bank.
I t was s u g g e s t e d to t h e Board t h a t i f such paper i s
e l i g i b l e for rediscount, the p r o v i s i o n of the Board's Regulat i o n A which p r o h i b i t s a Federal r e s e r v e bank to discount paper
f o r any F e d e r a l I n t e r m e d i a t e C r e d i t Bank when i t s own r e s e r v e s
are l e s s than 50$ of i t s aggregate l i a b i l i t i e s f o r d e p o s i t s and
F e d e r a l r e s e r v e n o t e s might be circumvented and a Federal I n t e r m e d i a t e Credit Bank migjit o b t a i n accommodation i n d i r e c t l y from
a Federal r e s e r v e bank even though the Federal reserve bank's
r e s e r v e might be l e s s than 50$.
The p r i n c i p l e u n d e r l y i n g t h i s
p r o v i s i o n o f t h e r e g u l a t i o n , h o w e v e r , i s t h a t member b a n k s a r e
e n t i t l e d to p r e f e r e n t i a l treatment in the matter of r e c e i v i n g
credit accommodations from the Federal reserve bank because
they contribute to the resources of the Federal reserve banks
and t h e i r c r e d i t f a c i l i t i e s ought not to be c u r t a i l e d i n any
way through t h e e x t e n s i o n of c r e d i t to F e d e r a l I n t e r m e d i a t e
Credit Banks, which contribute nothing to the resources of the
F e d e r a l R e s e r v e S y s t e m and w h i c h a r e n o t members o f t h e S y s t e m .
T h i s p r i n c i p l e , o f c o u r s e , w o u l d n o t b e a p p l i c a b l e when a member
b a n k o f f e r s f o p r e d i s c o u n t a t a F e d e r a l r e s e r v e bank p a p e r made
or endorsed by a Federal Intermediate Credit Bank, because in
s u c h a c a s e t h e member b a n k w o u l d b e o b t a i n i n g c r e d i t accommodation from the Federal reserve bank. If the paper i s otherwise
e l i g i b l e this provision of the Board's regulations would not prev e n t i t s r e d i # g a g n t b y a metober b a n k .
The question whether a note made by a cooperative marketing association and endorsed by a Federal Intermediate Credit Sank
i s eligible for rediscount at a Inderal r##@?w "bank, when offered
~
2
—
TE-4568
b y a member bank, i s t o b e d e t e r m i n e d b y t h e p u r p o s e f o r w h i c h i t
was i s s u e d o r t h e u s e made o f i t s p r o c e e d s and i s n o t a f f e c t e d by
the f a c t that i t i s endorsed by a Federal Intermediate Credit
Bank ( e x c e p t f o r the p r o h i b i t i o n c o n t a i n e d i n S e c t i o n 19 which i s
d i s c u s s e d b e l o w . ) As the Board has r u l e d , h e r e t o f o r e , i t i s the
purpose of the o r i g i n a l n e g o t i a t i o n which i s d e t e r m i n a t i v e of the
e l i g i b i l i t y of a note for rediscount.
In the f o u r t h paragraph of
Section 13 (a) of the Act, i t i s provided that a note i ^ u ^ d by
a c o o p e r a t i v e marketing a s s o c i a t i o n s h a l l be deemed to have been
i s s u e d f o r an a g r i c u l t u r a l p u r p o s e i f i t s p r o c e e d s h a v e been or
are to be u s e d f o r c e r t a i n s p e c i f i e d purposes.
If, therefore, a
n o t e made b y a c o o p e r a t i v e m a r k e t i n g a s s o c i a t i o n h a s b e e n i s s u e d
f o r o n e o f t h e p u r p o s e s so e n u m e r a t e d , o r may b e o t h e r w i s e c o n sidered agricultural paper, it is e l i g i b l e for rediscount at a
F e a e r a l r e s e r v e b a n k when o f f e r e d b y a member b a n k , r e g a r d l e s s o f
t h e f a c t t h a t i t may h a v e b e e n d i s c o u n t e d b y t h e member bank f o r
a^ F e d e r a l I n t e r m e d i a t e C r e d i t B a n k , O f c o u r s e , i t i s n e c e s s a r y
tnat the note comply in a l l other respects with the p e r t i n e n t prov i s i o n s of t h e Federal Reserve Act and the Board's R e g u l a t i o n s .
While i n theory the general p r i n c i p l e s applicable in
determining the e l i g i b i l i t y of other paper would govern the e l i g i b i l i t y o f a n o t e made by a F e d e r a l I n t e r m e d i a t e C r e d i t Bank
wnen o f f e r e d f o r r e d i s c o u n t b y a member b a n k , a s a p r a c t i c a l m a t ter, s i n c e Federal Intermediate Credit Banks are not o r d i n a r i l y
engaged i n commercial, a g r i c u l t u r a l or i n d u s t r i a l p u r s u i t s b u t
i n the b u s i n e s s o f l e n d i n g money, i t seems almost
certain that
s u c n a n o t e w o u l d n o t b e i s s u e d f o r an e l i g i b l e p u r p o s e b u t f o r
the p u r p o s e o f o b t a i n i n g f u n d s to be advanced or l o a n e d to some
other borrower * Under such circumstances, of course, the n o t e
made b y t h e F e d e r a l I n t e r m e d i a t e C r e d i t Bank would b e i n e l i g i b l e
f o r r e d i s c o u n t u n d e r S e c t i o n 1 1 ( b ) o f t h e B o a r d * s R e g u l a t i o n A.
Tiie e l i g i b i l i t y f o r r e d i s c o u n t o f p a p e r m a d e o r e n d o r s e d
b y a F e d e r a l I n t e r m e d i a t e C r e d i t Bank when o f f e r e d by a member
b a n k i s a l s o a f f e c t e d b y t h a t p r o v i s i o n o f S e c t i o n 19 w h i c h p r o h i b i t s a member b a n k f r o m a c t i n g a s t h e medium o r a g e n t o f a n o n member Dank i n d i s c o u n t i n g w i t h a F e d e r a l r e s e r v e b a n k e x c e p t b y
the Board's p e r m i s s i o n ; and i t is a c c o r d i n g l y n e c e s s a r y , under the
p r i n c i p l e s l a i d down i n t h e B o a r d ' s r u l i n g p u b l i s h e d i n t h e 1 9 2 3
B u l l e t i n at page 891, f o r the Board to grant i t s p e r m i s s i o n b e f o r e
paper bearing the signature or endorsement of a Federal I n t e r m e d i a t e C r e d i t B a n k may p r o p e r l y b e r e d i s c o u n t e d f o r a member b a n k .
Accordingly, the Federal Reserve Board hereby grants i t s perm i s s i o n f o r F e d e r a l r e s e r v e b a n k s to r e d i s c o u n t f o r member b a n k s
paper bearing the signature or endorsement of Federal Intermediate
Credit Banks, i f such paper is otherwise e l i g i b l e under the law
and the r e g u l a t i o n s .
In the r u l i n g r e f e r r e d to i t was s t a t e d
t h a t a s a g e n e r a l r u l e , the B o a r d w i l l n o t g r a n t t o member b a n k s
permission to rediscount with Federal reserve banks the paper of
X-456a
— 3
n o n m e n i b e r "banks w h i c h a r e e l i g i b l e f o r m e m b e r s h i p in. t h e F e d e r a l
Reserve System. Federal Intermediate Credit Banks, however,
are not e l i g i b l e for membership in the Federal Reserve System
and, t h e r e f o r e , t h e g r a n t i n g of t h i s p e r m i s s i o n i s n o t a d e p a r t u r e
from the p o l i c y announced in that ruling.
Very truly yours,
D. R. C r i s s i n g e r ,
Governor.
TO ALL FEDERAL RESERVE A S Z F T S .
::-<-569
' I N r £lii UNITED STATI5S C I R C U I T COURT O F A P P E A L S ,
FIFTH CIRCUIT.
No. 4-692.
DOUGLAS C- CROVGLL, -liiT A : , . ,
Appellants,
Versus
F - D 51:v, 1 G S 3 R V E BANK OF D . . L L A S , TEXAS, ET A L . ,
Appellees.
Appeal f r o m t h e D i s t r i c t Court of t h e United. S t a t e s f o r t h e
Tie s t e r n D i s t r i c t o f T e x a s .
R.xi.D. Morton (Dyer & Morton on t h e b r i e f ) ,
for Appellant.
J . C - . lip G r a d y , A . H . C u l v r e l l ,
(Turney, Surges, Culwell
H o l l i d a y & P o l l a r d ; Wm* H . S u r g e s ; C h a r l e s C. H u f f ; E t h a n
B« S t r o u d ,
J r . j Lea,
McGrady, Thomas on & E d w a r d s , on t h e b r i e f ) ,
for Appellees.
B e f o r e WALKER, BRYAN a n d FOSTER, C i r c u i t J u d g e s .
BRYAN, C i r c u i t J u d g e :
On S a t u r d a y , J a n u a r y 2 6 , 1 9 2 4 , b a n k e x a m i n e r s
completed an e x a m i n a t i o n i n t o the c o n d i t i o n of the C i t y National
Bank o f El Paso,
Texas, and n o t i f i e d i t s
o f f i c e r s t h a t the bank
w o u l d n o t b e a l l o w e d t o open i t s d o o r s on t h e f o l l o w i n g 1'onday
u n l e s s b y t h a t t i m e i t s h o u l d h a v e c h a n g e d o f f § 8 0 0 , 0 0 0 i n papc-r
2 4 4
X-45 69
-2-
.
h e l d as a s s e t s w h i c h t h e examiners c o n s i d e r e d t o be w o r t h l e s s .
On
the f o l l o w i n g night a meeting of c i t i z e n s was held for the purpose of
assisting
i n r a i s i n g $>800,000 i n money so as t o e n a b l e t h e bank t o
continue
in business.
aggregating $300,000,
subscriptions notes
bank e x a m i n e r s •
These c i t i z e n s s u b s c r i b e d t o v a r i o u s amounts
and signed an agreement t o accept for t h e i r
i n equal amounts which had been r e j e c t e d by the
I t was p r o v i d e d by the s u b s c r i p t i o n l i s t which t h e y
signed t h a t their subscriptions were subject to an agreement by the
Federal Reserve Bank t o take and p a y f o r at par
$500,000 of the l e a s t
valuable of the r e j e c t e d notes and a s s e t s h e l d b y the bank*
governor
The
of t h e R e s e r v e bank was p r e s e n t a t t h e p l a c e w h e r e t h e m e e t -
ing of t h e c i t i z e n s was h e l d ,
and s t a t e d t o t h o s e who a p p r o a c h e d him
t h a t the Reserve bank c o u l d not make a d o n a t i o n , and t h a t under no
c i r c u m s t a n c e s w o u l d he a c c e p t and p a y f o r w o r t h l e s s a s s e t s ,
but that
h e w o u l d c o n s i d e r m a k i n g a n advance f o r t h e R e s e r v e b a n k o f $ 5 0 0 , 0 0 0 ,
w h i c h was t h e amount o f t h e c a p i t a l
stock of t h e El Paso bank, pend-
ing an assessment of 100 per cent against the shareholders.
A resolu-
t i o n was a d o p t e d by t h e d i r e c t o r s of t h e El P a s o bank a c c e p t i n g an
advance
i n t h a t a m o u n t , a g r e e i n g t o make t h e a s s e s s m e n t s u g g e s t e d ,
and p r o v i d i n g ,
i n t h e e v e n t i t s h o u l d n o t be made or t h e E l P a s o b a n k
should suspend b u s i n e s s b e f o r e i t was completed and the amount n e c e s s a r y t o t a k e up t h e l o a n r a i s e d ,
that the Reserve bank should have a
f i r s t and p r i o r l i e n on a l l the a s s e t s of the El Paso bank t o secure
repayment#
On M o n d a y m o r n i n g ,
the c i t i z e n s and the
J a n u a r y 28, t h e $ 3 0 0 , 0 0 0 s u b s c r i b e d b y
"$500*000 a d v a n c e d b y t h e R e s e r v e b a n k w e r e d e -
p o s i t e d i n the El P a s o bank and t h e q u e s t i o n a b l e a s s e t s were taken out
245
2
a n d t u r n e d o v e r t o a c o m i t t c c f o r d i s t r Jbu-:.:.on.
closed its
ttiie E l P a s o b & n l c
d o o r s o n M a y 6, 1924* and i n ilOTcrabcr, 1 9 2 4 ,
w i t h t h e a p p r o v a l of t h e C o m p t r o l l e r ,
its receiver,
a n d the R e s e r v e b a n k e n t e r e d
i n t o a c o n t r a c t of s e t t l e m e n t , i n w h i c h t h e a d v a n c e o f $ 5 0 0 , 0 0 0 b y
t h e R e s e r v e banlc w a s r e c o g n i z e d a s , a l o a n .
D o u g l a s C# C r o w d 1 s u b s c r i b e d a n d p a i d $ 2 , 0 0 0 a t t h e c i t i z e n s 1
meeting in January,
was a d e p o s i t o r .
He w a s n o t a s h a r e h o l d e r i n t h e E l P a s o b a n k , b u t
At the time of that bank's failure
deposit with it 019,473.68,
failure #23,500.
He h a d b o r r o w e d o n h i e
It is admitted that a l l
e x c e p t one f o r § 8 7 5 0 , w h i c h i t
notes before the
of t h e s e n o t e s were negotiable
i s c l a i m e d was n o n - n e g o t i a b l e b e c a u s e ,
t h o u g h i t w a s m a d e p a y a b l e t o o r d e r six
as c o l l a t e r a l
i n H a y ho h a d o n
months a f t e r date,
it pledged
c e r t a i n stock with the right of the payee to c a l l for
additional security should the stock decline,
p a y a b l e on demand*
All these notes,
i*i w h i c h e v e n t i t b e c a m e
i n c l u d i n g the one l a s t mentioned,
were pledged as c o l l a t e r a l s e c u r i t y by the El Paso bank before I t s
f a i l u r e to the Reserve bank*
f i e d Crowe 11 t h a t
After the failure,
t h e R e s e r v e banlc noti**
i t was t h e h o l d e r of t h e n o t e s , a n d he p a i d t h e $8750
n o t e b e f o r e i t was due#
The r e p r e s e n t a t i v e o f t h e R e s e r v e b a n k s t a t e d
t o him that i t could grant a dhort e x t e n s i o n of time>
and did not
t h r e a t e n t o s u e o r t o e x e r c i s e t h e r i g h t t o s e l l t h e s t o c k p l e d g e d -as
collateral#
C r o w c l l s t a t e d t h a t he w a s p a y i n g h i s
notes under p r o t e s t ,
and demanded t h a t when t h e Reserve bank s h o u l d be p a i d i n f u l l
on
paper discounted w i t h i t by the El Paso bank his p r o p o r t i o n of any
•
s u r p l u s i n c o l l a t e r a l n o t e s or c a s h s h o u l d be d e l i v e r e d t o him and not
Z-4569-
turned over to the r e c e i v e r .
r e c e i v e r was s t i l l
At the date of the f i n a l h e a r i n g the
i n d e b t e d t o t h e Reserve b a n k t o t h e e x t e n t o f a b o u t
575,000, for which the Reserve bank h e l d c o l l a t e r a l notes amounting
t o % 7 , b 0 0 and r e d i s c o u n t e d notes amounting t o approximately $178,000.
Crowe 1 1 f i l e d a b i l l t o s e t a s i d e t h e c o n t r a c t o f s e t t l e m e n t
between the r e c e i v e r and t h e Reserve bank on t h e ground t h a t t h e
Reserve bank was e s t o p p e d t o claim, t h a t the
%00,000 a d v a n c e d b y i t
i n J a n u a r y was a l o a n , b e c a u s e the c i t i z e n s who d o n a t e d $ 5 0 0 , 0 0 0 d i d
s o o n c o n d i t i o n t h a t t h e R e s e r v e b a n k w o u l d m a k e a d o n a t i o n o f .$500,000,
The b i l l a l s o p r a y s t h a t Crowe 1 1 b e d e c r e e d t o h a v e t h e r i g h t t o s e t
o f f h i s d e p o s i t a g a i n s t a l l h i s notes> or a t l e a s t a g a i n s t t h e note f o r
$8750, w h i c h he c l a i m s t o be n o n - n e g o t i a b l e •
hearing the evidence dismissed the b i l l ,
The d i s t r i c t c o u r t a f t e r
but w i t h o u t p r e j u d i c e ,
The e v i d e n c e s h o w s w i t h o u t c o n f l i c t t h a t t h e R e s e r v e b a n k d i d n o t
a g r e e t o make a d o n a t i o n , and i t becomes u n n e c e s s a r y t o d e c i d e w h e t h e r
i t had t h e r i g h t or p o w e r t o do s o .
The m o s t t h a t c a n b e c l a i m e d b y
a p p e l l a n t i s t h a t some of t h e c i t i z e n s who made d o n a t i o n s w e r e l e d t o
b e l i e v e b y o t h e r s o f t h e i r number or b y o f f i c i a l s of t h e El P a s o b a n k
t h a t t h e R e s e r v e b a n k w o u l d a l s o make a d o n a t i o n o f h a l f a m i l l i o n d o l l a r s .
It is very clear,
in fact
it is a l l e g e d in the b i l l ,
that the governor
o f t h e R e s e r v e bank w o u l d d e p o s i t t h e amount r e q u e s t e d o f him o n l y upon
c o n d i t i o n t h a t he r e c e i v e as s e c u r i t y an a s s e s s m e n t in f u l l of the s h a r e holders* liability*
Nor i s t h e r e a n y d i s p u t e t h a t t h e R e s e r v e b a n k
r e f u s e d t o make a d e p o s i t u n t i l a f t e r t h e p a s s a g e o f a r e s o l u t i o n b y t h e
d i r e c t o r s of the El Paso bank p l e d g i n g other a s s e t s in the event of a
X-4569
-5-
S 4 S
f a i l u r e to sccurc by stock assessment the f u l l
amount a d v a n c e d .
It
was o n l y upon the p a s s a g e of that r e s o l u t i o n t h a t t h e Reserve bank
u n d e r t o o k t o b i n d i t s e l f t o do a n y t h i n g .
A l l p r e v i o u s s u g g e s t i o n s and
c o n v e r s a t i o n s were a c r e p r e l i m i n a r y n e g o t i a t i o n s , and i t was thoroughly
u n d e r s t o o d a l l t h e w h i l e b y t h o s e who d e a l t w i t h t h e g o v e r n o r o f t h e
F e d e r a l R e s e r v e Bank t h a t he w o u l d under no c i r c u m s t a n c e s make a d o n a t i o n , a n d t h a t i f he made a l o a n i t w o u l d h a v e t o be s e c u r e d .
The
q u e s t i o n i s not whether the l i a b i l i t y of the s h a r e h o l d e r s could be
p l e d g e d as s e c u r i t y b u t w h e t h e r a l o a n was m a d e .
c o n f l i c t answers that question in the affirmative.
The e v i d e n c e w i t h o u t
It is contended
that the t r i a l court should have granted a p p e l l a n t ' s request t o c a l l a
j u r y t o p a s s upon the q u e s t i o n whether t h e amount advanced was a l o a n
or a d o n a t i o n .
B u t c l e a r l y t h e r e w a s n o e r r o r i n r e f u s i n g t o summon a
j u r y , as the c o u r t w o u l d have b e e n o b l i g e d t o d i r e c t them t o f i n d
a g a i n s t a p p e l l a n t on t h e u n d i s p u t e d f a c t s ,
It follows that appellant
must f a i l on h i s p r i n c i p a l c l a i m of e s t o p p e l .
premature.
The E l P a s o bank was s t i l l
His c l a i m of s e t o f f i s
indebted t o t h e Reserve bank a t
the date of the f i n a l hearing, and i t t h e r e f o r e had not been determined
what amount,
i f any, would be r e a l i z e d from c o l l a t e r a l n o t e s and a v a i l -
able to the receiver.
I t i s contended, however, t h a t the Reserve bank
s h o u l d be c o m p e l l e d t o p a y over e i t h e r t o a p p e l l a n t or t o t h e r e c e i v e r
p r o c e e d s of the §8750 note on the ground t h a t i t was n o n - n e g o t i a b l e .
W h e t h e r t h a t i s t r u e o r n o t d o e s n o t scorn t o h a v e b e e n s e t t l e d i n t h e
S t a t e of T e x a s , and we f i n d i t u n n e c e s s a r y t o d e c i d e , b e c a u s e a p p e l l a n t
made p a y m e n t o f t h a t n o t e v o l u n t a r i l y ; ho e v e n p a i d i t b e f o r e i t was d u o ,
X—4569
2 4 9
-6-
a n d was not i n d u c e d t o do so b y a n y a c t i o n t h r e a t e n e d b y the R e s e r v e
bank t o s e l l or r e s o r t t o t h e c o l l a t e r a l p l e d g e d t o s e c u r e payment of
the note.
this
The d o c t r i n e o f m a r s h a l i n g a s s e t s h a s n o a p p l i c a t i o n ,
i s n o t a c a s e of a j u n i o r a n d s e n i o r l i e n h o l d e r .
for
Appellant has
no l i e n , and t h e R e s e r v e bank has t h e r i g h t t o s u b j e c t a n y s e c u r i t y
i t holds to the s a t i s f a c t i o n of its debt•
The s u g g e s t i o n i s f i n a l l y
made t h a t i t w a s e r r o r t o d i s m i s s t h e b i l l ^ b e c a u s e h a v i n g t a k e n j u r i s d i c t i o n the court should have proceeded t o e s t a b l i s h a p p e l l a n t ' s claim
to his deposit.
It is not averred in the b i l l that appellant had ever
p r e s e n t e d h i s c l a i m or t h a t i t had b e e n d i s a l l o w e d b y t h e r e c e i v e r #
It
is t o be assumed t h a t the c l a i m would be allowed upon p r e s e n t a t i o n .
I t w o u l d be i n t o l e r a b l e t o a l l o w e v e r y d e p o s i t o r t o come i n t o c o u r t t o
e s t a b l i s h h i s c l a i m w i t h o u t f i r s t h a v i n g made demand or s h o w i n g t h a t i t
had been disallowed.
As t h e d i s m i s s a l o f t h e b i l l w a s w i t h o u t p r e j u d i c e ,
a p p e l l a n t is l e f t f r e e t o a s s o r t i n a p p r o p r i a t e p r o c e e d i n g s a n y r i g h t s
he may have a g a i n s t t h e r e c e i v e r .
The d e c r e e i s
AFFIRMED.
( O R I G I N A L F I L E D MARCH 1 6 , 1 9 2 6 ) .
F E D E B A L
E E S E B V 5'
BOA B 3
JE-4571-
STATMWT F C B TEE P B E S S
For Release in Morning Papers,
S a t u r d a y , March 2 7 , 1926*
The f o l l o w i n g i s a summary o f g e n e r a l b u s i n e s s
and f i n a n c i a l c o n d i t i o n s throughout the s e v e r a l
Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s
f o r t h e months o f F e b r u a r y and March, as cont a i n e d i n the f o r t h c o m i n g i s s u e of the F e d e r a l
Reserve Bulletin*
P r o d u c t i o n and t r a d e c o n t i n u e d i n February a t the h i g h l e v e l of the
p r e c e d i n g month., w h i l e t r o g e n e r a l average of p r i c e s d e c l i n e d and was lower
i n F e b r u a r y than a t any time s i n c e t h e l a t t e r p a r t of 1 9 2 4 .
Production.The F e d e r a l R e s e r v e B o a r d 1 s i n d e x o f p r o d u c t i o n i n b a s i c i n d u s t r i e s ,
which i s adjusted for seasonal variations,
i n d i c a t e d a c o n t i n u a t i o n of pro-
d u c t i v e a c t i v i t y d u r i n g F e b r u a r y I n a b o u t t h e same volume as i n t h e p r e c e d i n g two m o n t h s .
anthracite,
Mill consumption of cotton and the output of f l o u r ,
copper, and newsprint showed i n c r e a s e s in February, when a l -
l o w a n c e i s made f o r u s u a l s e a s o n a l c h a n g e s , and t h e o u t p u t o f i r o n a n d s t e e l
and lumber remained p r a c t i c a l l y unchanged.
and the p r o d u c t i o n o f cement d e c l i n e d *
Activity in the woolen industry
A u t o m o b i l e p r o d u c t i o n was i n c o n -
s i d e r a b l y g r e a t e r v o l u m e i n F e b r u a r y and was l a r g e r than a y e a r a g o , a l though s m a l l e r t h a n i n the c o r r e s p o n d i n g month o f 1 9 2 4 .
Employment and
e a r n i n g s of f a c t o r y workers i n c r e a s e d , a f t e r t h e s e a s o n a l r e c e s s i o n o f
J a n u a r y t a n d w e r e i n February a t p r a c t i c a l l y the same l e v e l s a s d u r i n g the
l a t t e r part of 1925,
The v o l u m e o f b u i l d i n g c o n t r a c t s a w a r d e d d e c l i n e d
both i n January and i n February, but remained l a r g e r than i n the
corres-
ponding months of l a s t year.
R e p o r t s by f a r m e r s to t h e Department of A g r i c u l t u r e of i n t e n t i o n s t o
-2-
X-4571'
p l e a t i n 1926 i n d i c a t e t h a t the a c r e a g e of spring w h e a t - a a d tobacco w i l l be
slightly smller,
t h e a c r e a g e o f co m - i l l h e a b o u t t h e s a m e , a n d t h a t o f
o a t s , b a r l e y , h a y , o n d p o t a t o e s l a r g e r tha.i t h a t i n 1 9 2 5 .
Trade
W h o l e s a l e t r a d e i n Feb m a r y was i n a b o u t t h e same v o l u m e a s a y e a r a g o .
s m a l l e r volume of s a l e s was r e p o r t e d f o r g r o c e r i e s , dry g o o d s , and hardware, w h i l e s a l e s of meats, s h o e s , and drugs were l a r g e r .
I n v e n t o r i e s of
w h o l e s a l e firms d e a l i n g i n g r o c e r i e s , dry goods,
shoos, and hardware were
s m a l l e r a t the end o f February than a year ago.
Trade at department s t o r e s
and a t m a i l order h o u s e s was l a r g e r than i n February of l a s t year and dep a r t-ner-t s t o r e s t o c k s w e r e a b o u t 5 p e r c e n t g r e a t e r t h a n o n t h e c o r r e s ponding date of 1925.
•freight car l o a d i n g s c o n t i n u e d at about the sane d a i l y r a t e i n Februa r y as i n the p r e c e d i n g two months.
Shipments of merchandise i n less-than-
carload-lots and of miscellaneous commodities were p a r t i c u l a r l y large.
Prices
The g e n e r a l l e v e l o f w h o l e s a l e p r i c e s ,
Labor S t a t i s t i c s
index,
a s measured by the B u r e a u of
a f t e r r e m a i n i n g unchanged f o r two months, d e -
c l i n e d i n F e b r u a r y t o a p o i n t s l i g h t l y b e l o w t h e lo*; f i g u r e o f 1 9 2 5 , r e p o r t e d f o r l a s t May.
The g r e a t e r p a r t o f t h e d e c l i n e s i n e 3 l a s t autumn
has been in p r i c e s of a g r i c u l t u r a l commodities.
In February p r i c e s of
a l l major groups o f commodities, excep t f u e l s , d e c l i n e d and p a r t i c u l a r l y
large reductions occurred in the p r i c e s of g r a i n s , cotton, wool, s i l k ,
and rubber.
P r i c e advances in February were shown f o r p e t r o l e u m ,
coke,
and p a p e r .
During t h e f i r s t t h r e e weeks of March p r i c e s of g r a i n s ,
cotton,
wool, and s i l k c o n t i n u e d to d e c l i n e and r e c e s s i o n s were a l s o r e p o r t e d i n
the -prices of sugar and hardwood lumber.
-3-
X-4571
8 5 2
^ani: C r e d i t . At member a a n k s i n l e a d i n g c i t i e s demand f o r l o a n s
chiofly
f o r com-
m e r c i a l p u r p o s e s s h o w e d a n i n c r e a s e , p a r t l y s e a s o n a l i n c h a r a c t e r , "between
t h e m i d d l e o f F e b r u a r y a n d the m i d d l e o f March, and on March 17 t h e t o t a l
volume of t h e s e l o a n s was c l o s e to t h e h i g h -ooint r e a c h e d l a s t autumn.
A
f a r t h e r d e c l i n e o f l o a n s on s e c u r i t i e s , w h i c h a c c o m o a i i i o d t h e s h a m r e c e s s i o n i n s e c u r i t y p r i c e s i n xiarch,
c a r r i e d the t o t a l t o a p o i n t n e a r l y
$ 4 3 0 , 0 0 0 , 0 0 0 below t h a t roacned a t the end of the year#
Following a growth during February i n the volume of r e s e r v e bank
c r e d i t o u t s t a n d i n g , t h e r e was a s h a r p d e c l i n e e a r l y i n March t o a b o u t t h e
sam> l e v e l
as a y e a r ago•
F a c t o r s c o n t r i b u t i n g to the d e c l i n e have been
c o n t i n u e d i m p o r t s of g o l d and some r e d u c t i o n i n member bank r e s e r v e r e q u i r e ments, a s w e l l a s the temporary abundance of funds r e s u l t i n g from the e x c e s s o f T r e a s u r y d i s b u r s e m e n t s o v e r r e c e i p t s a r o u n d March 15#
Open market r a t e s on prime commercial p a p e r , a f t e r a s l i g h t d e c l i n e
i n F e b r u a r y a d v a n c e d i n March to 4~1 / 4 - 4-*l/2 p e r c e n t ,
had p r e v a i l e d s i n c e l a s t October•
the l e v e l w h i c h
253
X-4572
f e d e r a l
R E S E R V E
B O A R D
STATEMENT FOR THE P R E S S
For immediate r e l e a s e
March 2 7 , 1926
CONDITION OF ACCEPTANCE MARKET
February 18, 1926
to
March 17, 1926
Acceptances.
The a c c e p t a n c e market was g e n e r a l l y q u i e t d u r i n g t h e f o u r w e e k s e n d i n g
March 17, a l t h o u g h a somewhat l a r g e r volume o f t r a n s a c t i o n s was r e p o r t e d by
d e a l e r s i n Hew Y o r k , B o s t o n , a n d C h i c a g o , t h a n d u r i n g t h e p r e c e d i n g f o u r
weeks.
The s u p p l y o f b i l l s o f f e r e d i n t h e market r e m a i n e d s m a l l e x c e p t f o r
a temporary i n c r e a s e a t t h e end of February.
An i m p r o v e m e n t i n d e m a n d a c -
companying e a s i e r money c o n d i t i o n s , a r o u n d the m i d d l e o f March, r e s u l t e d in
a reduction in dealers' p o r t f o l i o s from the unusually high volumes reported
on February 18.
F e d e r a l r e s e r v e b a n k p u r c h a s e s w e r e m o d e r a t e a n d t h o s e made
from dealers were generally for foreign account.
B i l l r a t e s i n New Y o r k r e -
mained unchanged throughout the period. These r a t e s are given in the f o l l o w i n g
table:
A c c e p t a n c e R a t e s i n t h e New Y o r k M a r k e t , M a r c h 1 7 , 1 9 2 6 .
Maturity
30 days
60
"
11
90
120 "
150 "
180 "
Bid
3
3
3
3
4
4
5/8 per cent
3/4 "
"
3/4 "
"
7/8 "
"
1/8 "
n
1 / 8 i"
«
Offered
3
3
3
3
4
4
1/2 per cent
5/8
"
«
5/8
"
"
3/4
"
"
if
it
ii
ii
C 0 P Y
March 19, 1926.
Mr. George J .
Li. G» ' . / a l l a c e ,
Seay, Governor
Counsel.
additional Topics for
Governor 1s Conference.
I l y d e a r Governor S e a y :
I have c a r e f u l l y read the l e t t e r of the Federal Reserve
B o a r d , X - 4 5 5 8 , a n d t h e l e t t e r o f Mr. W a l t e r W y a t t , X - 4 5 5 1 , w h i c h
is attached.
Mr*• W y a t t h a s d i s c u s s e d s o t h o r o u g h l y t h e p r e s e n t s i t u a t i o n t h a t a d d i t i o n a l d i s c u s s i o n i s l a r g e l y s u p e r f l u o u s . As he
s t a t e s a t t h e p r e s e n t time F e d e r a l R e s e r v e Banks may n o t b r i n g s u i t s
in, or remove s u i t s t o Federal Courts upon t h e ground t h a t the
banks are c i t i z e n s of d i f f e r e n t States from t h a t of other p a r t i e s
t o t h e s u i t . A l s o t h e banks may n o t , as f o r m e r l y , b r i n g s u i t s i n ,
or remove s u i t s t o Federal Courts upon the ground t h a t any s u i t
a g a i n s t t h e F e d e r a l R e s e r v e Bank i s one a r i s i n g u n d e r t h e laws of
the United States.
The r e s u l t i s F e d e r a l C o u r t s w i l l n e v e r h a v e
j u r i s d i c t i o n , of l i t i g a t i o n concerning Federal Reserve Banks,
u n l e s s t h e s u i t , or a c t i o n , a s b r o u g h t b y t h e p l a i n t i f f shows t h a t
a q u e s t - o n i n v o l v i n g the c o n s t r u c t i o n of the c o n s t i t u t i o n of the
laws of the United States is involved.
This would e x c l u d e us f r o m
the Federal Courts i n nearly a l l usual l i t i g a t i o n .
I t h o r o u g h l y a g r e e t h a t i t w o u l d b e w e l l t o s e e k some
a m e n d m e n t o f t h e A c t s o f C o n g r e s s , a n d I am i n c l i n e d t o t h i n k t h a t
t h e t h i r d a m e n d m e n t s u g g e s t e d b y Mr. W y a t t w o u l d b e t h e b e s t .
I f t h e f i r s t amendment s u g g e s t e d b y Mr. W y a t t b e a d o p t e d ,
Federal Reserve Banks c o u l d o n l y remove s u i t s t o F e d e r a l Courts
when t h e s u i t was brought i n some S t a t e o t h e r t h a n t h a t i n w h i c h
the main o f f i c e of the bank was l o c a t e d .
If t h e second s u g g e s t i o n were adopted, t h e amendment
w o u l d a u t h o r i z e F e d e r a l Reserve Banks t o i n s t i t u t e s u i t s i n the
D i s t r i c t Courts o f t h e United S t a t e s , and would a u t h o r i z e other
persons to bring s u i t s against them in the D i s t r i c t Courts of the
United States.
I t would seem, however, t h a t t h e s e c t i o n must be
c o n s t r u e d t o mean e i t h e r t h a t Federal Reserve Banks may not sue
or be s u e d i n a n y S t a t e Court, or e l s e t h a t t h e y may s u e i n any
S t a t e Court or i n t h e D i s t r i c t Court of t h e U n i t e d S t a t e s .
If the
former c o n s t r u c t i o n be adopted, i t w i l l somewhat embarrass the
b a n k s ; b e c a u s e p r o c e e d i n g s i n Federal Courts are as a r u l e more
e x p e n s i v e t h a n t h e y are i n S t a t e Courts, and i t w i l l be inconv e n i e n t t o b e c o m p e l l e d t o r e s o r t t o a F e d e r a l Court w h e n e v e r we
found i t n e c e s s a r y t o bring s u i t t o c o l l e c t a note, or f o r other
slight cause.
The b a n k s m i g h t s u e a n d b e s u e d i n t h e D i s t r i c t
Court of the U n i t e d S t a t e s , but could not remove t o t h a t Court a
case brought against them in the State Court.
254
-2-
Mr• G e o r g e J . S c a y , G o v e r n o r .
o"i"i
&*-*<•
The t h i r d amendment w o u l d m e r e l y r e s t o r e t h e s t a t u s w h i c h
e x i s t e d p r i o r t o t h e A c t o f F e b r u a r y 1 3 t h , w h i c h i t s e e m s t o me
was f a i r , b o t h t o t h e banks and t o o t h e r p e r s o n s , as i t p e r m i t t e d
us t o remove s u i t s i n w h i c h t h e amount i n c o n t r o v e r s y e x c e e d e d ,
$ 3 , 0 0 0 . 0 0 , but d i d not p e r m i t us t o b r i n g , or remove s u i t s , t o t h e
Federal Court i f t h e amount were l e s s .
Mr. H y a t t a n d J u d g e U e l a n d i n h i s l e t t e r o f F e b r u a r y 2 3 r d
r a i s e other c l o s e l y r e l a t e d b u t somewhat d i f f e r e n t q u e s t i o n s w h i c h
t o my mind a r e p e r h a p s o f g r e a t e r i m p o r t a n c e t h a n t h e q u e s t i o n o f
Federal j u r i s d i c t i o n - that is to say the question of the location,
or d o m i c i l e , o f a F e d e r a l R e s e r v e B a n k . The F e d e r a l R e s e r v e A c t i s
n o t s p e c i f i c u p o n t h i s p o i n t , a n d i t s c o r n s t o me t h a t a F e d e r a l
R e s e r v e Bank m i g h t be r e g a r d e d a s d o m i c i l e d o n l y i n t h e p l a c c i n w h i c h
i t s h e a d o f f i c e , or i n a n y e v e n t , w h e r e some b r a n c h i s l o c a t e d , or
e l s e i t might be regarded as in contemplation of law d o m i c i l e d
throughout its D i s t r i c t .
Judge Ueland p o i n t s out t h a t h i s opponents have u s u a l l y
p r o c e e d e d ag-: i n s t h i m u p o n t h e t h e o r y t h a t a F e d e r a l R e s e r v e B a n k
was not doing b u s i n e s s i n any S t a t e , e x c e p t t h a t i n w h i c h i t s head
o f f i c e , o r s o m e B r a n c h , w a s l o c a t e d . On t h e o t h e r h a n d , i n s e v e r a l
s u i t s b r o u g h t a g a i n s t t h i s bank our o p p o n e n t s h a v e t a k e n t h e g r o u n d
t h a t a Federal R e s e r v e Bank was i n c o n t e m p l a t i o n of l a w p r e s e n t i n
e v e r y S t a t e of i t s D i s t r i c t , and s u b j e c t t o s u i t s i n such S t a t e i n the
same manner a s a c o r p o r a t i o n d u l y d o m i c i l e d t h e r e i n .
In other words,
the s u i t s mentioned b y Judge Ueland p r o c e e d upon the t h e o r y t h a t the
Federal Reserve Bank i s a f o r e i g n c o r p o r a t i o n and not d o m i c i l e d
throughout its District.
The s u i t s a g a i n s t us p r o c e e d upon t h e t h e o r y
t h a t wc a r c q u a s i - d o m e s t i c c o r p o r a t i o n s i n e v e r y S t a t e o f o u r D i s t r i c t .
The s u i t s a g a i n s t us h a v e n o t b e e n p r e s s e d t o a f i n a l j u d g m e n t , b u t
a r e now p e n d i n g .
The l o w e r C o u r t s h a v e h e l d t h a t w e w e r e d o i n g b u s i n e s s
i n e v e r y S t a t e i n our D i s t r i c t .
It is impossible to predict the f i n a l
o u t c o m e o f t h e s e s u i t s , b u t i t s e e m s t o me t h a t e i t h e r J u d g e U e l a n d , o r
m y s e l f must l o s e .
I t s e e m s t o me t h a t a F e d e r a l R e s e r v e B a n k i s e i t h e r
d o i n g b u s i n e s s i n e v e r y S t a t e i n i t s D i s t r i c t , and, t h e r e f o r e # .
subject to process i n such State as a corporation doing business
t h e r e i n , or e l s e i t is not doing b u s i n e s s i n t h a t S t a t e , and, t h e r e f o r e , subject t o attachment as a non-resident.
It is d i f f i c u l t t o decide which of these two a l t e r n a t i v e s
w o u l d be most a d v a n t a g e o u s t o t h e F e d e r a l Reserve Bank.
I f we a r c
d o m i c i l e d t h r o u g h o u t our D i s t r i c t , and l i a b l e t o s u i t i n e v e r y S t a t e ,
we a r e l i a b l e t o t h e c o n s t a n t a n n o y a n c e o f s u i t s i n r e m o t e p l a c e s ,
or the expense and i n c o n v e n i e n c e of t a k i n g d e p o s i t i o n s , or sending
w i t n e s s e s t o t e s t i f y i n s u c h p l a c e s , b u t on t h e o t h e r hand, we w i l l
p r o b a b l y be e n t i t l e d t o t h e s t a t u t e s of l i m i t a t i o n s , and c e r t a i n other
remedial s t a t u t e s which only apply t o residents of a State.
—O ™"
Mr. G e o r g e J . So a y , G o v e r n o r .
256
I f t h e C o u r t s h o l d t h a t we a r e n o t d o i n g b u s i n e s s i n a n y
p l a c e e x c e p t w h e r e we h a v e a n o f f i c e , we a r c , I t h i n k , l i a b l e t o
attachment in other States.
There appears t o be n o t h i n g i n the
Federal Reserve Act which extends t o Federal Reserve Banks the p r o t e c t i o n which National banks have a g a i n s t attachments b e f o r e a
j u d g m e n t . I h i l c a p e r s o n w i t h a c l a i m a g a i n s t us may n o t a l w a y s b e
a b l e t o a t t a c h money, or p r o p e r t y , b e l o n g i n g t o us i n t h e hands' o f a
member b a n k , t h e y c o u l d u s u a l l y do s o , a n d e v e n t h o u g h t h e p r o p e r t y
a t t a c h e d b e l o n g e d t o some member b a n k , a s , f o r e x a m p l e , c h e c k s s e n t f o r
c o l l e c t i o n , s t i l l we c o u l d b y t h e a t t a c h m e n t be p l a c e d i n a p o s i t i o n
w h e r e we s h o u l d b e c o m p e l l e d t o g i v e g r e a t i n c o n v e n i e n c e t o our member
b a n k s , or e l s e submit t o a t t a c h m e n t .
As y o u w i l l n o t i c e e i t h e r d e c i s i o n w h i c h may bo made under t h e
p r e s e n t law w o u l d have many d i s a d v a n t a g e s and some a d v a n t a g e s t o t h e
Federal Reserve Banks.
I f i t were p o s s i b l e t o have a s t a t u t e p a s s e d
p r o v i d i n g t h a t Federal Reserve Banks s h o u l d be c o n s i d e r e d doing b u s i ness o n l y i n the p l a c e s i n which t h e i r head o f f i c e s , or branches, were
l o c a t e d , and should not be s u b j e c t t o e x e c u t i o n or attachment b e f o r e
f i n a l judgment, t h e d i f f i c u l t i e s and expense a t t e n d a n t upon l i t i g a t i o n
of Federal Reserve Banks would b e . g r e a t l y d i m i n i s h e d .
Howe 7Cr, I c a l l y o u r a t t e n t i o n t o t h e f a c t t h a t t h e a b o v e
m e n t i o n e d p r o v i s i o n w h i c h would p r o t e c t us w o u l d moan t h a t a n y p e r s o n
who u n d e r t o o k t o b r i n g a s u i t a g a i n s t us w o u l d be c o m p e l l e d t o submit
t o t h e e x p e n s e a n d i n c o n v e n i e n c e w h i c h now f a l l s u p o n u s , a n d i t w o u l d
u s u a l l y mean t h a t a member bank, or o t h e r p e r s o n w i t h a s m a l l c l a i m
a g a i n s t t h e F e d e r a l R e s e r v e Bank w o u l d be c o m p e l l e d t o abandon i t
r a t h e r t h a n t o p r o s e c u t e i t t o judgment, and i t might bo t h a t such a
c o n d i t i o n would l e a d t o such f r i c t i o n and i l l - f e e l i n g t h a t i t would be
b e t t e r f o r us t o stand t h e expense and t r o u b l e of s u i t s t h a n t o seek a
p r o v i s i o n w h i c h w o u l d r e l i e v e us of t h i s t r o u b l e b u t c a s t i t upon t h o s e
who had, or t h o u g h t t h e y had good c l a i m s a g a i n s t u s .
I remain
Very t r u l y yours,
MGW:IB
M. G . W a l l a c e ,
Counsel.
i4
FEDERAL RESERVE BOARD
washington
x-4574
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 31, 1926.
SUBJECT:
JTecessity for appointment of Assistant Federal
Reserve Agents at Branches of Federal Reserve
Banks,
Dear Sir:
T h i s i s t o a d v i s e yov. t h a t t h e F e d e r a l R e s e r v e
B o a r d h a s a p p r o v e d t h e f o l l o w i n g r e s o l u t i o n a d o p t e d "by t h e
Conference of Federal Reserve Agents held in Washington in
November, 1925:
"Resolved that it is not necessary
t h a t an A s s i s t a n t F e d e r a l R e s e r v e Agenii
he a p p o i n t e d i n a n y b r a n c h a t w h i c h u n issued Federal Reserve notes are not
carried.11
Yours very t r u j y
D. R. Crissinger,
Governor.
TO ALL GOVERNORS ASD J1. R. AGENTS.
X-4576
258
Preliminary Draft.
March 3 1 , 1936.
COMPILATION OF THE LAWS OF THE SEVERAL STATES R E L I T I N G TO
SEGREGATION OF THE A S S E T S OF SAVINGS DEPARTMENTS OF BANXS~
AND TRUST COMPANIES,
CALIFORNIA.
The l a w s o € C a l i f o r n i a a u t h o r i z e b a n k s t o c a r r y o n a d e p a r t m e n t a l
business,
t r a n s a c t i n g the b u s i n e s s of savings banks, t r u s t companies and
commercial banks.
Segregation of Capital.
"When a b a n k d e s i r e s t o d o a d e p a r t m e n t a l b u s i n e s s , i t s h a l l
f i r s t o b t a i n the consent of the superintendent of banks,
and i n i t s a p p l i c a t i o n t h e r e f o r , f i l e a statement making a
s e g r e g a t i o n of i t s c a p i t a l and surplus for each department.
Such c a p i t a l and s u r p l u s , when so a p p o r t i o n e d and approved by
the s u p e r i n t e n d e n t o f banks, s h a l l be c o n s i d e r e d and t r e a t e d
as the separate c a p i t a l and surplus of such department as i f
each department was a s e p a r a t e bank. T h e r e a f t e r a bank may,
from time to time, w i t h the previous consent and approval of
the superintendent of banks and s u b j e c t to the p r o v i s i o n s of
s e c t i o n n i n e t e e n of t h i s a c t , change any segregation and
a p p o r t i o n m e n t o f c a p i t a l a n d s u r p l u s p r e v i o u s l y made a n d make
a new s e g r e g a t i o n a n d a p p o r t i o n m e n t o f i t s c a p i t a l a n d s u r p l u s .
Segregation of Reserves.
"Every bank s h a l l maintain for each department t o t a l reserves
equal i n amount to t h a t r e q u i r e d by t h i s a c t f o r the re# •
s p e c t i v e b u s i n e s s conducted, and s h a l l keep separate and d i s t i n c t the t o t a l r e s e r v e s of any department from that of any
o t h e r d e p a r t m e n t ; and a l l d e p o s i t s made w i t h o t h e r b a n k s ,
whether temporary or o t h e r w i s e , s h a l l bo a s s e t s of the r e s p e c t i v e departments by which they were made, and s h a l l be so c a r r i e d
on the books of such other banks, and s h a l l be r e p a i d o n l y
upon the order of the department to whose credit they stand.
No d e p a r t m e n t s h a l l r e c e i v e d e p o s i t s f r o m a n y o t h e r d e p a r t m e n t
o f t h e same c o r p o r a t i o n ; e x c e p t t h a t a t r u s t department, i n
p r o p e r c a s e s , may make d e p o s i t s o f t r u s t o r a n y o t h e r f u n d s ,
under i t s control with the savings department or the commercial
department o f the same c o r p o r a t i o n ; p r o v i d e d , however, t h a t any
bank having departments s h a l l have the r i g h t to s e l l and transf e r any bonds, s e c u r i t i e s or loans from one department to
- a -
259
another upon r e c e i p t of the actual value thereof, If
such bonds, s e c u r i t i e s or loans arc, under the p r o v i s i o n s
of t h i s a c t , a l e g a l investment for the department
purchasing the sane."
Segregation of Assets.
"Every bonk having d i f f e r e n t departments s h a l l
keep separate books of account f o r each department of
i t s b u s i n e s s , and s h a l l be governed as to a l l d e p o s i t s ,
r e s e r v e s , investments and transactions r e l a t i n g to each
department by the provisions in this act s p e c i f i c a l l y
provided for the respective kind of business.
"It shall keep a l l investments r e l a t i n g to the
savings department e n t i r e l y separate and apart from t h e
investments of i t s other department or departments.
*
*
*
*
*
*
*
"Every bank s h a l l keep e n t i r e l y separate and
a p a r t i n e a c h d e p a r t m e n t t h e c a s h , s e c u r i t i e s alad p r o p e r t y b e l o n g i n g to such department, and s h a l l not
mingle the cash, s e c u r i t i e s and p r o p e r t y o f one d e p a r t ment w i t h that of another.
" A l l money and a s s e t s b e l o n g i n g to e a c h d e partment whether on hand or w i t h o t h e r banks, and the
i n v e s t m e n t s made, s h a l l be h e l d s o l e l y f o r the r e p a y ment o f the d e p o s i t o r s and o t h e r c l a i m a n t s of each s u c h
department, as h e r e i n provided, u n t i l a l l d e p o s i t o r s and
o t h e r c l a i m a n t s o f e a c h s u c h d e p a r t m e n t s h a l l h a v e "been
p a i d , and the overplus then remaining s h a l l be a p p l i e d
to any o t h e r l i a b i l i t i e s of such bank*"
This Act was enacted in 1909.
The Banking Laws o f 1 9 2 5 , S e c t i o n s 2 3 , 2 5 , 2 6 and 27;
Hemingway's General Laws, 1920, Act 409, S e c t i o n s 23, 2 5 , 26 and 27.
260
COLORADO
Segregation of Savings Deposits*
Any p e r s o n , c o - p a r t n e r s h i p or
corporation conducting a savings department in connection with banking
or o t h e r b u s i n e s s s h a l l keep the books, funds, s e c u r i t i e s and a l l other
a s s e t s of such s a v i n g s department s e p a r a t e and a p a r t , and such a s s e t s
s h a l l c o n s t i t u t e a t r u s t fund f o r the payment of savings d e p o s i t o r s .
No d e p a r t m e n t o f a n y b a n k s h a l l r e c e i v e d e p o s i t s f r o m a n o t h e r d e p a r t ment or borrow from or l o a n t o the same.
This law was p a s s e d i n 1911.
*
B a n k i n g Laws o f 1 9 3 3 , S e c . 4 6 ; C o m , Laws o f 1 9 2 1 , S e c . 2 7 0 1 .
Law r e p e a l e d .
The a c t a b o v e s e t o u t was r e p e a l e d b y A c t o f
March 2 1 , 1 9 2 3 , s o t h a t t h e r e i s now n o law i n C o l o r a d o r e q u i r i n g t h e
segregation of savings deposits.
COmBCTICUT.
Segregation of Assets.
The l a w s o f C o n n e c t i c u t r e q u i r e a l l banks
and t r u s t companies r e c e i v i n g s a v i n g s d e p o s i t s to i n v e s t such d e p o s i t s
according to the requirements of the laws concerning investments of
deposits in bonds.
S a i d investments s h a l l be s e g r e g a t e d and not mingled
w i t h o t h e r a s s e t s of such bank or t r u s t comoany and s h a l l be f o r the
e x c l u s i v e p r o t e c t i o n of d e p o s i t o r s i n the savings department and s h a l l
not be h e l d f o r or u s e d to pay any other o b l i g a t i o n of the bank or
t r u s t company u n t i l a f t e r the payment of a l l d e p o s i t o r s i n the s a v i n g s
department.
-
4
~
261
This law was p a s s e d as e a r l y as 1 8 9 1 .
B a n k i n g Laws o f 1 9 2 3 , S e c . 3 9 2 8 ; G e n e r a l S t a t u t e s 1 9 1 8 ,
Chap* 2 0 2 , S e c , 3 9 2 8 #
GEORGIA,
Separate records.
The l a w s o f G e o r g i a r e q u i r e b a n k s d o i n g
b o t h a commercial and savings b u s i n e s s to keep separate records of
its savings deposits.
This law was p a s s e d i n 1919,
B a n k i n g Laws o f 1 9 2 3 , p . 85; P a r k ' s A n n o t a t e d Code o f G e o r g i a ,
1922 Supp. Vol, 8, Sec. 2280 ( u . u . )
ILLINOIS.
There i s no p r o v i s i o n i n the laws of I l l i n o i s r e q u i r i n g banks
r e c e i v i n g savings d e p o s i t s to segregate the a s s e t s of i t s savings
department from i t s other a s s e t s , but i t i s understood that the
Auditor requires banks to segregate savings deposits from their
commercial d e p o s i t s .
KENTUCKY.
Separate Records.
The l a w s o f K e n t u c k y r e q u i r e a n y b a n k
combining the b u s i n e s s of a commercial and s a v i n g s bank to keep
separate books for each kind of business.
This law was p a s s e d i n 1909.
Under s p e c i a l c h a r t e r s , however,
banks were required to keep separate books at an e a r l i e r date.
B a n k i n g l a w s o f 1 9 2 4 , p . 2 2 ; Ky. Code 1 9 2 2 , S e c . 5 9 0 ,
- 6 -
2 6 2
Aims.
Segregation of Assets.
E v e r y t r u s t company r e c e i v i n g s a v i n g s
d e p o s i t s er u s i n g the term "savings" i n connection with i t s b u s i n e s s ,
s e g r e g a t e and a t a l l
shall
times keep on hand so s e g r e g a t e d a s s e t s a t l e a s t
equal to the a g g r e g a t e amount o f i t s s a v i n g s d e p o s i t s and i n the c a s e of a
t r u s t company w h i c h a l s o a c t s a s s u r e t y upon bonds o r o t h e r o b l i g a t i o n s
t h e a m o u n t o f i t s a s s e t s s o s e g r e g a t e d s h a l l b e a t l e a s t 15% i n e x c e s s
o f the a g g r e g a t e amount of i t s s a v i n g s d e p o s i t s .
The Bank Commissioner
m a y r e q u i r e 6,11 s u c h a s s e t s a s a p p e a r t o b e c a r r i e d i n e x c e s s o f t h e i r ,
t r u e v a l u e t o b e c h a r g e d down t o t h e t r u e v a l u e .
A s s e t s s e g r e g a t e d and h e l d f o r s e c u r i t y of s a v i n g s D e p o s i t s .
A s s e t s so s e g r e g a t e d s h a l l be h e l d i n trust f o r the s e c u r i t y and payment
of savings d e p o s i t s and s h a l l not be mingled with other a s s e t s of the
t r u s t company, or be l i a b l e f o r the o b l i g a t i o n s t h e r e o f u n t i l a f t e r the
savings depositors s h a l l have boen paid in f u l l .
A l l other a s s e t s of the
company s h a l l be h e l d e q u a l l y and r a t a b l y f o r the payment o f a l l c l a i m s
i n c l u d i n g any b a l a n c e to savings d e p o s i t o r s a f t e r applying to t h e i r payment
the a s s e t s segregated*
How s e g r e g a t e d a s s e t s s h a l l b e h e l d a n d s e g r e g a t e d *
Assets segre-
gated for the b e n e f i t of the savings department s h a l l be so h e l d and
r e c o r d e d a s to i d e n t i f y them as the a s s e t s h e l d f o r the s e c u r i t y o f such
deposits.
A l l s e c u r i t i e s r e p r e s e n t i n g such a s s e t s S h a l l be p l a i n l y stamped
"savings department", provided, however, that in l i e u thereof i t shall be
lawful to record i n the investment book a d e s c r i p t i o n of a s s e t s so held
s
263
s u f f i c i e n t to i d e n t i f y them.
This law was p a s s e d i n 1911.
B a n k i n g Laws o f 1 9 2 3 , p a g e s 55 and 56; P u b l i c Laws of Maine 1933,
C h a p . 1 4 4 , S e e s . 89-^ ' 9 0 . a p d - S l i #
MASSACHUSETTS.
Segregation of Savings Deposits of Foreign Banks.
"Every f o r e i g n banking a s s o c i a t i o n or c o r p o r a t i o n which
was on June t e n t h , n i n e t e e n hundred and s i x , t r a n s a c t i n g
b u s i n e s s i n t h i s commonwealth and which r e c e i v e s any d e p o s i t s
or t r a n s a c t s a n y "business i n t h e manner o f a s a v i n g s b a n k ,
or i n such a manner as might l e a d the p u b l i c t o b e l i e v e t h a t
i t s business i s that of a savings bank, s h a l l have a savings
department i n which a l l b u s i n e s s t r a n s a c t e d i n such manner
i n t h i s commonwealth s h a l l be done. A l l money r e c e i v e d i n
s a i d manner s h a l l be a s p e c i a l d e p o s i t and s h a l l be p l a c e d i n
s a i d s a v i n g s department, and a l l loans or investments thereof
s h a l l be made i n accordance w i t h the laws g o v e r n i n g the
investment of deposits in savings banks,
"Such funds and the i n v e s t m e n t s or l o a n s t h e r e o f s h a l l
be appropriated s o l e l y to the s e c u r i t y and payment of such
d e p o s i t s , and s h a l l n o t be m i n g l e d w i t h the i n v e s t m e n t s of
the c a p i t a l s t o c k or o t h e r money or p r o p e r t y b e l o n g i n g to
such a s s o c i a t i o n or c o r p o r a t i o n or be l i a b l e f o r the d e b t s
or obligations thereof.
The a c c o u n t s and t r a n s a c t i o n s o f
s a i d s a v i n g s departments s h a l l be kept separate and d i s t i n c t from the general business of the a s s o c i a t i o n or
corporation."
Segregation of Deposits in Savings Departments.
• "Sgery s u c h c o r p o r a t i o n ( t r u s t company) s o l i c i t i n g or
r e c e i v i n g d e p o s i t s ( a ) w h i c h may b e w i t h d r a w n o n l y o n p r e s e n t a t i o n of the, p a s s book or o t h e r s i m i l a r form o f r e c e i p t
which p e r m i t s s u c c e s s i v e d e p o s i t s or withdrawals to be
entered thereon; or (b) which at the o p t i o n of such corporat i o n may b e w i t h d r a w n o n l y a t t h e e x p i r a t i o n o f a s t a t e d
p e r i o d a f t e r n o t i c e of i n t e n t i o n to withdraw has been given;
or (c) i n any o t h e r way which might l e a d the p u b l i c to
b e l i e v e t h a t such d e p o s i t s are r e c e i v e d or i n v e s t e d under
t h e same c o n d i t i o n s o r i n t h e same manner a s d e p o s i t s i n
s a v i n g s b a n k s ; s h a l l h a v e a s a v i n g s d e p a r t m e n t $n w h i c h
264
" a l l b u s i n e s s r e l a t i n g to such d e p o s i t s s h a l l be t r a n s acted. Every such corporation subject to t h i s section
s h a l l have an investment committee of not l e s s than three
members, e l e c t e d by and from the board of d i r e c t o r s , and
such committee s h a l l hold meetings at l e a s t once in each
month.
*
*
*
*
*
*
*
*
*
*
*
"Such d e p o s i t s and the i n v e s t m e n t s or l o a n s t h e r e o f
s h a l l be appropriated s o l e l y to the s e c u r i t y and payment
of such d e p o s i t s , s h a l l not be mingled with the investments
of the c a p i t a l s t o c k or other money or p r o p e r t y b e l o n g i n g
to or c o n t r o l l e d by such c o r p o r a t i o n , or be l i a b l e f o r the
debts or o b l i g a t i o n s thereof u n t i l a f t e r the deposit in
s a i d s a v i n g s d e p a r t m e n t h a v e b e e n p a i d i n f u l l . The a c c o u n t s
and t r a n s a c t i o n s of s a i d savings department s h a l l be kept
separate and d i s t i n c t from the general business of the
corporation."
The Law r e l a t i n g t o F o r e i g n C o r p o r a t i o n s w a s e n a c t e d i n 1 9 0 7
a n d t h e Law r e l a t i n g t o T r u s t C o m p a n i e s w a s e n a c t e d i n 1 9 0 8 .
B a n k i n g Law 1 9 2 3 , p a g e s 1 3 a n d 2 9 .
G e n e r a l Laws o f Mass. 1 9 2 1 ,
Ch. 1 6 7 , S e e s . 4 1 , 4 2 a n d C h a p t e r 1 7 2 , S e e s . 60 a n d 6 2 .
MICHIGAN.
Segregation of Savings Deposits.
"Any b a n k c o m b i n i n g t h e b u s i n e s s o f a c o m m e r c i a l b a n k
and a s a v i n g s bank s h a l l keep separate books of account for
each kind of b u s i n e s s : Provided, That a l l r e c e i p t s , i n v e s t ments and t r a n s a c t i o n s r e l a t i n g to e a c h of s a i d c l a s s e s of
b u s i n e s s s h a l l bo governed by the p r o v i s i o n s and r e s t r i c t i o n s
h e r e i n s p e c i f i c a l l y provided for the r e s p e c t i v e kinds of
banks: P r o v i d e d , f u r t h e r , Skat a l l the i n v e s t m e n t s r e l a t i n g
to the s a v i n g s department s h a l l be kept e n t i r e l y s e p a r a t e
and apart from the other b u s i n e s s of the bank, and that the
twelve per cent reserve required by the provisions of this
a c t to be kept on the s a v i n g s d e p o s i t s , s h a l l be kept s e p a r a t e and d i s t i n c t on tho books of the bank from the r e s e r v e
r e q u i r e d on the commercial d e p o s i t s , and t h a t such p o r t i o n
of s a i d s a v i n g s d e p o s i t s as are on hand u n l o a n e d or d e p o s i t e d
—
0
265
—
"with other banks or r e s e r v e agents and the investments
made "7ith t h o f u n d s d o - o o s i t c d by s a v i n g s d e p o s i t o r s s h a l l
be h e l d s o l e l y f o r the payment of the d e p o s i t o r s of s a i d
funds."
*
Penalty for f a i l u r e to segregate savings deposits*
"Any b a n k c o m b i n i n g t h e b u s i n e s s o f a c o m m e r c i a l b a n k
and a savings bank which s h a l l not keep separate accounts
a s r e q u i r e d by the p r e c e d i n g s e c t i o n or s h a l l n o t keep
the investments o f the savings department separate or
s h a l l not i n every r e s p e c t comply w i t h the requirements
of such s e c t i o n , s h a l l be l i a b l e to the s t a t e in the
p e n a l t y of f i f t y d o l l a r s for each and every f a i l u r e ,
n e g l e c t or r e f u s a l to comply w i t h tho p r o v i s i o n s of s a i d
s e c t i o n , to be recovered in a s u i t to be brought by the
a t t o r n e y g e n e r a l i n t h e name o f t h e p e o p l e o f t h e s t a t e
of Michigan in the c i r c u i t court of any county in which
sutzh b a n k may b e s i t u a t e d . "
This law was enacted i n 1887.
B a n k i n g Laws o f 1925, p a g e s 31 and 3 2 .
Ann.
Supp. 1922,
sec.
C o m p i l e d Laws o f M i c h i g a n .
7998.
MINNESOTA.
Lien on Investments.
A S t a t e bank or t r u s t company i n c o r p o r a -
t e d and a u t h o r i z e d t o do b u s i n e s s u n d e r t h e l a w s o f M i n n e s o t a may
e s t a b l i s h a n d m a i n t a i n a s a v i n g s d e p a r t m e n t a n d may s o l i c i t a n d r e c e i v e
d e p o s i t s in any department.
Savings d e p o s i t s r e c e i v e d by such bank
or t r u s t company u s i n g the word " s a v i n g s " or " s a v i n g s bank" i n i t s
t i t l e s h a l l be i n v e s t e d o n l y i n a u t h o r i z e d s e c u r i t i e s as d e f i n e d by
the law o f M i n n e s o t a and such bank or t r u s t company s h a l l keep on hand
a t a l l t i m e s s u c h s e c u r i t i e s a s d e p o s i t s i n s a v i n g s b a n k s may be i n v e s t e d i n to an amount a t l e a s t equal to the amount o f s u c h d e p o s i t s
and t h e s e s e c u r i t i e s s h a l l be r e p r e s e n t a t i v e of and the fund f o r ,
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266
a p p l i c a b l e f i r s t and. e x c l u s i v e l y t o t h e p a y m e n t o f s u c h d e p o s i t s ,
This law was passed, as to t r u s t companies i n 1915 and S t a t e
Banks i n 1923.
B a n k i n g Law o f 1 9 2 5 , p a g e s 1 3 a n d 3 7 .
Minn. 1923, s e e s .
General Statutes of
7651 and 7667.
MISSISSIPPI.
There i s no law i n M i s s i s s i p p i r e q u i r i n g banks r e c e i v i n g s a v i n g s
d e p o s i t s to segregate such d e p o s i t s from i t s commercial d e p o s i t s , but
i t i s u n d e r s t o o d t h a t the Bank Commissioner r e q u i r e s s u c h s e g r e g a t i o n .
NEW HAMPSHIRE.
Separate Departments.
Loan and t r u s t companies, l o a n and
banking companies, and o t h e r s i m i l a r c o r p o r a t i o n s r e c e i v i n g s a v i n g s
d e p o s i t s or t r a n s a c t i n g the b u s i n e s s of a savings bank s h a l l conduct
the b u s i n e s s a s a s e p a r a t e department and t h a t department s h a l l be
amenable to the laws governing savings bank.
This law was p a s s e d i n 1891.
Banking laws of 1921, p. 58.
Acts of 1915,
Ch. 1 0 9 , S e c . 2 0 .
N E I MEXICO.
Separate Accounts.
Banks a r e a u t h o r i z e d to operate commercial
departments and s a v i n g s departments and a l s o t r u s t departments; and
every bank having d i f f e r e n t departments is required to keep separate
accounts for each department of i t s business.
This law was p a s s e d in 1915.
B a n k i n g Laws o f 1 9 2 3 , p . 2 0 ; l a w s o f 1 9 1 5 ,
Ch, 6 7 , S e c , 5 3 .
10
—
KEff YORK.
267
T h e l a w s o f Hew Y o r k g i v e a p r e f e r e n c e t o d e p o s i t s i n "banks
a n d t r u s t c o m p a n i e s ;oade b y s a v i n g s "bank, s a v i n g s a n d l o a n a s s o c i a t i o n s ,
S t a t e l a n d "banks a n d C r e d i t U n i o n s .
Banks and t r u s t companies, however,
axe not authorized to receive savings deposits as such.
Birdseye,
Cumminga a n d G i l b e r t ' s C o n s . Law, 2 n d E d . V o l . 1 , p . 7 1 1 ,
Sec. 278, p. 783, sec. 414, p . 791, sec. 437, Vol. 12, p. 74, sec. 279
and p . 82, s e c . 456.
OHIO.
Separate Books of Account.
T h e l a w s o f O h i o a u t h o r i z e "banks t o
o p e r a t e commercial, t r u s t and s a v i n g s departments and r e q u i r e a , b a n k
operating such departments to keep separate books of account for each
department.
This law was p a s s e d i n 1908,
Banking Laws 1925, p . 49; A c t s o f 1919, V o l . 108, p . 110, s e c . 1 1 6 .
OKLAHOMA.
The l a w s o f Oklahoma a u t h o r i z e t r u s t c o m p a n i e s t o e s t a b l i s h
s a v i n g s d e p a r t m e n t s , b a t b e f o r e s u c h d e p a r t m e n t s may be e s t a b l i s h e d a
t r u s t company i s r e q u i r e d t o s e t a s i d e a p o r t i o n o f i t s c a p i t a l s t o c k ,
the amount of w h i c h s h a l l i n no c a s e be l e s s than t h e amount o f the
c a p i t a l s t o c k r e q u i r e d t o o r g a n i z e a S t a t e b a n k i n t h e c i t y o r -town i n
w h i c h t h e t r u s t company i s l o c a t e d , a s a p r i m a r y p r o t e c t i o n t o t h e
depositors in i t s savings department.
Segregation of A s s e t s .
"The C a p i t a l s t o c k s e t a s i d e f o r t h e S a v i n g s D e p a r t m e n t ,
and a l l d e p o s i t s and a l l investments and loans and s e c u r i t i e s
h e l d in the Savings Department s h a l l be a p p r o p r i a t e d s o l e l y
to the s e c u r i t y and payment of the d e p o s i t s i n the Savings
Department, and s h a l l not be mingled w i t h the investment of
the remaining c a p i t a l s t o c k or other money or p r o p e r t y b e
- 11 M
l o n g i h g to or c o n t r o l l e d by such t r u s t company, or
be l i a b l e f o r the d e b t s or o b l i g a t i o n s t h e r e o f u n t i l
a f t e r the d e p o s i t s i n said Savings Department have been
paid in full.
The a c c o u n t s a n d t r a n s a c t i o n s o f s a i d
Savings Department s h a l l be kept separate and d i s t i n c t
from the general business of the corporation.
"The c a p i t a l s t o c k o f s a i d t r u s t company a p p r o p r i a t e d
to the Savings Department, together w i t h the stockholders'
l i a b i l i t y thereunder, s h a l l be held as s e c u r i t y for the
p a y m e n t o f a l l d e p o s i t s made i n t h e S a v i n g s D e p a r t m e n t ,
and i n a d d i t i o n thereto, the persons making such
d e p o s i t s , or e n t i t l e d to s a i d d e p o s i t s , s h a l l have an
equal claim with the other creditors of such trust
company u p o n the remaining c a p i t a l and o t h e r p r o p e r t y
of the corporation, together with the stockholders'
l i a b i l i t y thereunder."
This law was p a s s e d i n 1919.
Laws o f Oklahoma, (1919) p . 2 4 3 .
OREGON.
Segregation ef capital.
"When a b a n k o r t r u s t c o m p a n y d e s i r e s t o d o a d e partmental business i t shall f i r s t obtain the consent
of the superintendent of banks, and in i t s a p p l i c a t i o n
t h e r e f o r s h a l l f i l e a statement making a s e g r e g a t i o n
o f i t s c a p i t a l and surplus f o r the commercial and savi n g s d e p a r t m e n t s . Such c a p i t a l and s u r p l u s , when so
apportioned and approved by the superintendent of banks,
s h a l l bo c o n s i d e r e d and t r e a t e d as the s e p a r a t e c a p i t a l
and surplus of such department as i f each department
was a s e p a r a t e bank. T h e r e a f t e r a bank or t r u s t company
may, from time t o t i m e , w i t h the p r e v i o u s c o n s e n t and
approval of the superintendent of banks #nd subject to
the p r o v i s i o n s of s e c t i o n 40 of t h i s a c t , change any
s e g r e g a t i o n and apportionment e f c a p i t a l and surplus p r e v i o u s l y made a n d make a new s e g r e g a t i o n a n d a p p o r t i o n m e n t
of i t s c a p i t a l and s u r p l u s . "
Separate books to be kept.
"Any s t a t e bank or t r u s t company c o m b i n i n g any o f
the b u s i n e s s of a commercial bank, t r u s t company and
savings bank s h a l l keep separate books or accounts for
each department of i t s b u s i n e s s and s h a l l be governed as
fco a l l d e p o s i t s , r e s e r v e s , i n v e s t m e n t s anfl. t r a n s a c t i o n s
r e l a t i n g t o e a c h d e p a r t m e n t b y t h e p r o v i s i o n s ®f t h i s
a c t s p e c i f i c a l l y p r o v i d e d f o r t h e r e s p e c t i v e k i n d of
268
' ' b t i s i n e s s , and. s h a l l keep a l l m o n e y s r e c e i v e d a s s u c h
s a v i n g s d e p o s i t s and t h e f u n d s a n d s e c u r i t i e s i n w h i c h bhe
s a m e a r e i n v e s t e d a t a l l t i m e s s e g r e g a t e d f r o m and. u n mingled w i t h the other moneys and funds of such bank or
t r u s t company and t r e a t e d a s i f such department were a
s e p a r a t e t a n k , a n d a l l "bonds, w a r r a n t s , n o t e s , m o r t g a g e s ,
deeds and other s e c u r i t i e s of every nature of such savings
department s h a l l t o marked, stamped or l a b e l e d ' s a v i n g s
d e p a r t m e n t 1 or some s i m i l a r w o r d s , and t h e same s h a l l bo
h e l d s o l e l y f o r the repayment of the d e p o s i t o r s of such
department. * *
S a v i n g s d e p o s i t s g i v o n p r i o r l i e n osa s a v i n g s a s s e t s .
In the event of
the i n s o l v e n c y or l i q u i d a t i o n of a bank or t r u s t company m a i n t a i n i n g
a savings department, the depositors of the savings department of such
bank or t r u s t company s h a l l have a f i r s t and e x c l u s i v e l i e n on a l l a s s e t s
of such s a v i n g s department and i n the d i s t r i b u t i o n of such a s s e t s the
samo s h a l l b e f i r s t a p p l i e d t o s a t i s f y t h e amount d u e s u c h d e p o s i t o r s
a f t e r the payment of expenses of l i q u i d a t i o n of the savings department
of such bank or t r u s t company, and the a s s e t s of such s a v i n g s d e p a r t s
ment s h a l l bo h e l d and l i q u i d a t e d f o r the e x c l u s i v e b e n e f i t of such
d e p o s i t o r s and the a s s e t s of such savings department s h a l l not be
a p p l i e d for the b e n e f i t of d e p o s i t o r s or c r e d i t o r s of any other department o f s u c h bank or t r u s t company; p r o v i d e d ,
that after the depositors
of such savings department s h a l l have been p a i d i n f u l l and the r e m a i n i n g a s s e t s o f s u c h d e p a r t m e n t may b e u s e d f o r t h e p a y m e n t o f d e p o s i t o r s o f the commercial department o f such bank or t r u s t company.
This law was p a s s e d in 1911,
Banking Laws o f 1925, p a g e s 1 6 , 51 and 57; laws o f Oregon 1925,
Ch. 2 0 7 , S e e s . 4 4 , 1 3 3 a n d 1 4 3 .
PENNSYLVANIA.
There i s no law i n P e n n s y l v a n i a r e q u i r i n g the s e g r e g a t i o n of
a s s e t s of the s a v i n g s departments of banks, but i t i s understood that
the Bank Commissioner r e q u i r e s s u c h s e g r e g a t i o n .
RHCD1 I S L A N D .
Segregation of savings deposits.
E v e r y "bank o r t r u s t c o m p a n y w h i c h
receives savings deposits shall invest a l l deposits so received
a c c o r d i n g to the r e q u i r e m e n t s of the laws of Khode I s l a n d and s u c h
d e p o s i t s i n v e s t e d or uninvested s h a l l be s e t apart for the e x c l u s i v e
p r o t e c t i o n of the s a v i n g s d e p o s i t o r s and s h a l l n o t be h e l d f o r o r be
u s e d to p a y any o t h e r o b l i g a t i o n of the bank or t r u s t company u n t i l
a f t e r the payment of a l l savings d e p o s i t s .
Uninvested funds of the
s a v i n g s department o f s u c h bank or t r u s t company s h a l l be k e p t i n a
s e p a r a t e d i s t i n c t d e p o s i t a c c o u n t i n s u c h manner t h a t the same can be
readily i d e n t i f i e d as c l e a r l y belonging to the segregated a s s e t s of
the savings d e p o s i t .
Every bank or t r u s t company s h a l l keep an a c -
curate account wherein s h a l l appear a conplete l i s t of the a s s e t s s e t
apart f o r the e x c l u s i v e p r o t e c t i o n of s a v i n g s d e p o s i t s h e l d by i t ,
s h o w i n g the p a r v a l u e , book v a l u e and as o f t e n a s a r e p o r t i s made
to the Bank Commission s h a l l e n t e r i n t o such account the f a i r market
value of each of the investments of s a i d a s s e t s .
This law was p a s s e d i n 1908.
B a n k i n g L a w s o f 1 9 2 5 , p . 4 3 ; G e n e r a l L a w s o f 1 9 2 3 , Gh. 2 7 2 ,
S e c . 4 0 0 0 ( C l a u s e XVI) S e c , 1 ( a ) ( • ) and ( f ) .
TEXAS.
Segregation of Savings Deposits.
A l l S t a t e b a n k s o r "banking a n d
t r u s t companies e s t a b l i s h i n g or m a i n t a i n i n g a s a v i n g s department or
u s i n g the words "savings" as part of i t s corporate t i t l e s h a l l keep
the b u s i n e s s of such department e n t i r e l y separate and d i s t i n c t from
- M -
2 7 1
t h e g e n e r a l b u s i n e s s o f s u c h "bank o r t a n k i n g a n d t r u s t c o m p a n y a n d
s h a l l keep a l l moneys received as savings d e p o s i t s and s e c u r i t i e s in
w h i c h t h e same may b e i n v e s t e d a t a l l tinies s e g r e g a t e d f r o m a n d u n mingled w i t h the other accounts and funds of the hank or banking
and t r u s t company.
Lien on A s s e t s of Savings Department.
In the case of the
i n s o l v e n c y or l i q u i d a t i o n o f any S t a t e bank or b a n k i n g and t r u s t
company which s h a l l e s t a b l i s h or m a i n t a i n a s a v i n g s department i t s
savings depositors s h a l l have an exclusive p r i o r l i e n upon a l l
the
a s s e t s of such s a v i n g s department and s h a l l be f i r s t p a i d and the
remainder of such a s s e t s , a f t e r they have been paid i n f u l l ,
s h a l l be
a p p l i e d t o t h e p a y m e n t o f c l a i m s mf g e n e r a l c r e d i t o r s .
This law was p a s s e d i n 1909.
B a n k i n g Laws o f 1 9 2 3 , p a g e s 2 1 and 2 3 ; T e x a s R e v i s e d S t a t u t o s
1911, p. 116,
Ch. 4 , A r t . 4 3 1 a n d 4 3 7 .
WASHING-TON.
Separate Books of Account.
Any bank or t r u s t company combining
the b u s i n e s s of a commercial banking and a s a v i n g s bank s h a l l keep
with the separate departments separate books of account for each kind
of business.
This law was p a s s e d i n 1907.
B a n k i n g Laws o f 1 9 2 1 , p . 3 5 .
Washington 1922, Sec. 3246.
Remington's Compiled S t a t u t e s of
— 15 —
272
WEST VIRG-IITIA.
There i s no p r o v i s i o n i n the laws of West V i r g i n i a
s p e c i f i c a l l y r e q u i r i n g the a s s e t s of s a v i n g s departments of
b a n k s t o b e k e p t s e p a r a t e l y , "but i t
is understood that the
C o m m i s s i o n e r o f b a n k i n g r e q u i r e s banlcs r e c e i v i n g s a v i n g s
d e p o s i t s to keep separate books of record.
WYOMING.
Segregation of deposits.
Any bank or t r u s t company
o r g a n i z e d u n d e r t h e l a w s o f W y o m i n g may o p e r a t e a s a v i n g s
d e p a r t m e n t , p r o v i d e d t h a t s u c h bank or t r u s t company which
maintains a savings department s h a l l keep.separate books of
accounts for each kind of i t s b u s i n e s s and provided f u r t h e r
that a l l investments r e l a t i n g to the savings department
s h a l l be kept e n t i r e l y s e p a r a t e and apart from the other b u s i ness of the bank and that such p o r t i o n of said savings deposits
as are on hand u n l o a n e d or d e p o s i t e d w i t h other banks and the
i n v e s t m e n t s made w i t h the f u n d s d e p o s i t e d b y s a v i n g s d e p o s i t o r s s h a l l be h e l d s o l e l y by s u c h bank or t r u s t company
for the payment of depositors of s a i d funds.
This law was p a s s e d i n 1915.
Laws o f Wyoming, 1 9 2 5 , p . 2 1 2 , s e c . 3 0 ,
C O P Y
S A t !
U
O
C I T Y
X-4577
qkn
»
B R A N C H
FEDERAL RESERVE B A M
of San Francisco
March 3 0 , 1926.
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
W a s h i n g t o n , D . C.
RE: C . M. & S t . P . R y . C o . v s . F e d e r a l
R e s e r v e Bank o f San F r a n c i s c o .
D e a r Mr. W y a t t :
The a b o v e e n t i t l e d c a s e w i t h w h i c h y o u a r e a l r e a d y s o m e w h a t
f a m i l i a r through previous, correspondence was t r i e d h e r e l a s t week
"before the Court s i t t i n g w i t h o u t a j u r y .
The c h e c k i n v o l v e d i n t h i s c a s e w a s d e p o s i t e d b y t h e M i l w a u k e e
R a i l w a y Company i n t h e B a n k o f Tomah, W i s c o n s i n .
I t was drawn on the
C i t i z e n s S t a t e B a n k o f B u h l , I d a h o . The b a n k o f d e p o s i t s e n t i t t o
the Marine N a t i o n a l Bank of Milwaukee f o r c o l l e c t i o n and that bank
s e n t i t to the S a l t Lake C i t y Branch o f the F e d e r a l R e s e r v e Bank. I t
was s e n t by t h i s Branch d i r e c t to the drawee and a d r a f t i n payment
of t h i s and o t h e r items was r e c e i v e d the day b e f o r e the Buhl bank
failed.
The d r a f t , o f c o u r s e , w a s d i s h o n o r e d .
The p l a i n t i f f c h a r g e d n e g l i g e n c e i n s e n d i n g t h e i t e m d i r e c t t o
t h e d r a w e e a n d i n t a k i n g t h e d r a w e e ' s d r a f t i n s e t t l e m e n t . Our d e f e n s e s
s t a t e d as s i x separate d e f e n s e s were; F i r s t : That by having authorized
u s to f i l e a claim a g a i n s t the f a i l e d bank predic&tdd upon the
unpaid check there had been an e l e c t i o n of r e m e d i e s . Second: That by
t h e p r o v i s i o n s o f our C o l l e c t i o n C i r c u l a r we were j u s t i f i e d i n s e n d ing the item d i r e c t to the drawee and that t h i s a c t i o n c a r r i e d w i t h
i t by i m p l i c a t i o n the r i g h t to acdept the d r a w e e ' s d r a f t . Third: That
the custom and p r a c t i c e o f the Federal Reserve Bank had f o r a long
p e r i o d of time been in accordance with the procedure f o l l o w e d i n this
c a s e . Fourth: That a s p e c i a l s t a t u t e e x i s t i n g i n the S t a t e of Idaho
a t w h i c h p o i n t t h e c o l l e c t i o n w a s made e x p r e s s l y a u t h o r i z e d t h e
d i r e c t r o u t i n g of cash items. F i f t h ; That by the custom and p r a c t i c e
of a l l banks g e n e r a l l y our procedure i n t h i s case had been j u s t i f i e d
and, Sixth: That under the terms of Regulations "J", S e r i e s of 1920
no n e g l i g e n c e could be charged.
I n a n e f f o r t t o o v e r c o m e w h a t h a s a l w a y s s e e m e d t o me t o b e t h e
v i t a l w e a k n e s s i n t h e M a l l o y c a s e , we p r o d u c e d a s w i t n e s s e s e i g h t l o c a l
b a n k e r s a n d a l s o t h e d e p o s i t i o n s o f s e v e n I d a h o b a n k e r s a l l o f whom
-
2
X-4577
-
Walter Wyatt, Esq.,
Federal Reserve Board,
W a s h i n g t o n , D . C.
March 30, 1926
B e : 0 . M. & S t . P . R y C o . v s F e d e r a l R e s e r v e B a n k
of San Francisco
t e s t i f i e d p o s i t i v e l y t h a t t h e r e was a g e n e r a l and u n e q u i v o c a l custom
on the p a r t of a l l banks to send items d i r e c t to the bank upon which
t h e y were drawn when the forwarding bank had no correspondent i n the
same town and t h a t h a v i n g s e n t the i t e m s d i r e c t t h e r e was a f u r t h e r
atid s e p a r a t e c u s t o m g e n e r a l i n i t s n a t u r e t o t a k e t h e d r a w e e ' s d r a f t
in payment.
T h i s morning, the Court rendered i t s d e c i s i o n i n w h i c h i t i s
held that any one of the s i x separate defenses would have been a s u f f i c i e n t answer to the n e g l i g e n c e charged. Judgment w i l l be entered i n
our favor tomorrow.
I f e a r t h a t on a c c o u n t of the r e l a t i v e l y s m a l l amount i n v o l v e d
($600.00) the p l a i n t i f f w i l l not appeal. However, there is a c e r t a i n
s a t i s f a c t i o n in receiving a favorable decision even in a court of
f i r s t instance where as in this case the facts were identical with
those presented in the Malloy decision.
I h a v e a n o t h e r c a s e o f t h e same k i n d coming on f o r t r i a l a t
Weiser, Idaho, next week.
That c a s e w i l l be t r i e d b e f o r e a j u r y and
I f e a r v e r y much t h a t t h e outcome w i l l n o t be s o f o r t u n a t e u n l e s s
we s u c c e e d i n o b t a i n i n g a d i r e c t e d v e r d i c t .
However, we w i l l do the
b e s t w e . c a n . I f we d o n o t p r e v a i l i n t h e l o w e r c o u r t we w i l l , o f
c o u r s e , t a k e the m a t t e r t o t h e Supreme Court o f the S t a t e o f Idaho.
I e n c l o s e h e r e w i t h a copy o f t h e C o u r t ' s memorandum o p i n i o n i n the
C. M. & S t . P . R y . c a s e .
Very truly yours
• A l b e r t C. A g n e w ,
Counsel
Enclosure
,
X-4577-4
2
7
I N TEE THIRD JUDICIAL D I S T R I C T COURT OF THE STATE OF UTAH
I N AND FOR SALT LAKE COUNTY.
CHICAGO, MILWAUKEE & S T . PAUL
RAILROAD COMPANY, a C o r p o r a t i o n ,
:
H o n . Wm. M. M c C r e a , J u d g e
Plaintiff,
VS.
No. 34951
FEDERAL RESERVE B A H OF
SAN F R A N C I S C O ,
!
Defendant
THE COURT:
:
March 2 7 , 1 9 2 6 .
In No. 34951, Chicago, Milwaukee & S t . Paul
R a i l r o a d a g a i n s t Federal Reserve Bank of San F r a n c i s c o , h e r e t o f o r e
t r i e d and s u b m i t t e d , most of the f a c t s are u n d i s p u t e d , the s t i p u l a t i o n
covering an a g r e e d statement of most of the m a t e r i a l f a c t s i n the
case.
TO t h e e x t e n t t h a t t h e f a c t s a r e n o t c o v e r e d "by t h e s t i p u l a t i o n
and are in d i s p u t e ,
I f i n d from the evidence that they are as a l l e g e d
and set out in the defendant's answer.
I n my j u d g m e n t t h e e v i d e n c e
e s t a b l i s h e s each and a l l of the a l l e g a t i o n s of the answer and each and
a l l of the a l l e g a t i o n s of the several separate defenses, or a f f i r m a t i v e p o r t i o n s of the answer, which l e a v e s o n l y one question to be
determined and that i s whether or not the f a c t s so found and so e s t a b l i s h e d , as a l l e g e d in the answer, are s u f f i c i e n t to c o n s t i t u t e a
defense to the cause of action set out in the complaint.
I do not
care to take the time to s t a t e in great d e t a i l s the reasons f o r the
conclusions that I have reached in that regard.
Suffice it to say that
I f i n d the i s s u e s in favor of the defendant, the evidence s u s t a i n i n g
the f i r s t ,
second, third,
f o u r t h , f i f t h and s i x t h a f f i r m a t i v e d e f e n s e s
5
— S **
X-4577-a
-
*5 /
s e t o u t i n t h e a n s w e r , and. i n my j u d g m e n t c o n s t i t u t i n g a
complete defense to the p l a i n t i f f ' s cause of action.
I think
t h a t any one o f them a l o n e , p r o b a b l y , i s a s u f f i c i e n t d e f e n s e ,
but certainly taken c o l l e c t i v e l y they constitute a complete
defense.
F i n d i n g s a n d j u d g m e n t may be p r e p a r e d a c c o r d i n g l y .
MR. JOHNSON;
issue of waiver,
Do I u n d e r s t a n d t h e c o u r t f i n d s o n t h e
t h a t to be a d e f e n s e in i t s e l f ?
THE COURT:
Which d e f e n s e do you h a v e r e f e r e n c e t o ?
MR. JOHNSON:
By the f i l i n g of the c l a i m w i t h the
Federal Reserve Bank.
THE COURT:
Not u p o n t h e t h e o r y s o much o f a w a i v e r a s
upon the theory of an e l e c t i o n of remedies.
I have more doubt
a b o u t t h a t d e f e n s e t h a n a n y o f t h e o t h e r s , M r . J o h n s o n , b u t I am
i n c l i n e d to b e l i e v e t h a t i t was such an e l e c t i o n as to c o n s t i t u t e
a defense to t h i s a c t i o n .
j,n t h a t r e g a r d ,
I am n o t u n m i n d f u l o f y o u r c o n t e n t i o n
the c o n t e n t i o n of the p l a i n t i f f that i t i s not i n
the nature of an e s t o p p e l because the defendant has not a l t e r e d
i t s p o s i t i o n , but the facts are as pleaded in the answer.
I t may
be, standing alone, I would not regard that as a s u f f i c i e n t defense,
that
but I t h i n k / a l l of the other a f f i r m a t i v e d e f e n s e s , or any o f them,
would c e r t a i n l y c o n s t i t u t e a d e f e n s e to the cause of a c t i o n , and
the f i n d i n g s and c o n c l u s i o n s m y be p r e p a r e d on the t h e o r y t h a t
the court f i n d s in favor of the defendant upon each of the
separate defenses.
c
0
X-4577-b
p
Y
REPORTER'S CERTIFICATE.
I,
Clyde R a s m u s s e n , do h e r e b y c e r t i f y t h a t I am
one of the o f f i c i a l r e p o r t e r s of the Third J u d i c i a l D i s t r i c t
Court o f t h e S t a t e o f U t a h , and was on t h e d a t e i n d i c a t e d
in the foregoing decision;
that as such reporter I reported
in shorthand the decision of the court in the above-entitled
c a u s e ; t h a t t h e r e a f t e r I t r a n s c r i b e d i n t o t y p e w r i t i n g my
s a i d shorthand n o t e s , and t h a t the above and f o r e g o i n g two
typewritten pages constitute a full,
true and correct trans-
cript of the court's decision in the a b o v e - e n t i t l e d cause.
D a t e d a t S a l t Lake C i t y , U t a h , t h i s 2 7 t h day o f
March, A. D. 1926.
(signed)
Clyde Basnnxssen
277
FEDERAL RESERVE BOARD
278
X-4578
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
A p r i l 6,
SUBJECT:
1926.
Member Banks Borrowing Continuously a t F e d e r a l Res e r v e Banks.
Dear S i r :
In o r d e r t h a t t h e r e p o r t s s u b m i t t e d i n r e s p o n s e to
t h e B o a r d ' s l e t t e r S t . 4 6 4 5 of September 15, 1925, showing member
banks which were borrowing from t h e F e d e r a l r e s e r v e banks cont i n u o u s l y f o r one y e a r or more, may be brought up t o December 31,
1925, i t w i l l be a p p r e c i a t e d i f you w i l l k i n d l y f u r n i s h t h e Board
w i t h a s t a t e m e n t showing t h e i n f o r m a t i o n c a l l e d f o r by t h e a t t a c h e d
form f o r a l l member banks which were borrowing c o n t i n u o u s l y from
your bank d u r i n g 1925.
The d a t a r e c e i v e d i n r e s p o n s e t o t h e B o a r d ' s l e t t e r of
September 15 show t h a t f o r t h e System a s a whole t h o r e were 588
member b a n k s which on August 31, 1925, had been borrowing cont i n u o u s l y from t h e F e d e r a l r e s e r v e banks f o r a t l e a s t one y e a r ,
and r e p o r t s s u b s e q u e n t l y r e c e i v e d from t h e r e s e r v e b a n k s i n d i c a t e
t h a t 150 of t h e c o n t i n u o u s borrowing banks were i n (••&. o v e r - e x t e n d e d
o r u n s a f e c o n d i t i o n on November 1, 1925. This l e a v e s 438 banks
which were n o t m a t e r i a l l y o v e r - e x t e n d e d , b u t which had been
borrowing f r o m t h e F e d e r a l r e s e r v e banks c o n t i n u o u s l y f o r a t l e a s t
a y e a r , and of t h i s number 129 had been borrowing c o n t i n u o u s l y
s i n c e 1920.
While t h e Board r e a l i z e s t h a t e x c e p t i o n a l c i r c u m s t a n c e s
may i n some c a s e s e x p l a i n t h e continuous borrowing of banks f o r a
year o r more, good banking p r a c t i c e d i c t a t e s t h a t e v e r y member bank
should o b t a i n t h e c a p i t a l i t r e q u i r e s f o r c a r r y i n g on i t s b u s i n e s s
from i t s s t o c k h o l d e r s and t h a t n o r m a l l y i t should r e s o r t t o borrowing
f o r s e a s o n a l p u r p o s e s o n l y . With t h i s i n mind i t w i l l be a p p r e c i a t e d
i f you w i l l k i n d l y f u r n i s h u s w i t h i n f o r m a t i o n supplementing t h a t
r e q u e s t e d above, showing (a) t h o s e banks borrowing c o n t i n u o u s l y d u r i n g
1925 which i n t h e o p i n i o n of t h e F e d e r a l r e s e r v e bank o f f i c i a l s w i l l
p r o b a b l y b e a b l e t o l i q u i d a t e t h e i r i n d e b t e d n e s s d u r i n g t h i s y e a r , (b)
banks which a r e a p p a r e n t l y o p e r a t i n g w i t h too small a c a p i t a l a c c o u n t ,
t h u s making i t n e c e s s a r y f o r them to r e s o r t to borrowing f o r t h e
p u r p o s e of c a r r y i n g on t h e i r normal b u s i n e s s , and ( c ) banks which
- 2 -
X-4578
O
c a r r y a f a i r l y s u b s t a n t i a l amount of United. S t a t e s s e c u r i t i e s or of'
o t h e r bonds and s t o c k s in t h e i r p o r t f o l i o s , or which make s u b s t a n t i a l
l o a n s i n o t h e r ccarauriities, and a p p a r e n t l y borrow from t h e F e d e r a l
r e s e r v e bank f o r tne purpo'ge of making a l a r g e r p r o f i t than would be
o b t a i n e d i f t h e s e c u r i t i e s or o u t s i d e l o a n s were l i q u i d a t e d and t h e
borrowings p a i d o f f . The above i n f o r m a t i o n may be f u r n i s h e d by
i n d i c a t i n g on t h e s t a t e m e n t c a l l e d f o r i n t h e f i r s t p a r a g r a p h the
group to which each bank b e l o n g s by t h e u s e of symbols appended to
t h e names of t h e b a n k s .
The Board would a l s o l i k e to know i n a g e n e r a l way to what
e x t e n t t h e w i t h d r a w a l of d e p o s i t s has been t h e cause of member banks
becoming c o n t i n u o u s borrowers d u r i n g t h e p a s t two or t h r e e y e a r s ,
and e s p e c i a l l y whether t h e withdrawal of p u b l i c d e p o s i t s , t h a t were
used in making l o a n s to l o c a l customers, has been an i m p o r t a n t f a c t o r
therein.
By d i r e c t i o n of t h e F e d e r a l Reserve Board.
Very t r u l y y o u r s ,
J . C. H o e l l ,
Assistant Secretary.
LETTER TO CHAIRMEN OF ALL F.R.BANKS.
Enclosure:
X-l+578-a
MEMBER BANKS BORROWING CONTINUOUSLY DURING 1925 FROM THE FEDERAL RESERVE BANK OF
Name and. l o c a t i o n of bank
Capital
-s;
and
Surplus
Dec. 31, 1925
Net demand and time
d e p o s i t s on d a t e of
Minimum
Maximum
borrowing
borrowing
Borrowings from F .
Date of
R.bank d u r i n g 1925
Maximum I Min imum ftporimum | Minimum
borrowing)borrowing borrowing(borrowing
10
or:
FEDERAL RESERVE BOARD
8 8 1
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4579
A p r i l 6, 1926.
SUBJECT:
O p e r a t i o n of C a f e t e r i a s a t F e d e r a l Reserve Banks.
Dear S i r :
The Board has reviewed the a c t i o n t a k e n by the Governors
a t t h e i r c o n f e r e n c e i n Hovember 1925 with r e g a r d t o t h e o p e r a t i o n
of c a f e t e r i a s , and wishes to s t a t e t h a t i t lias no o b j e c t i o n t o any
F e d e r a l r e s e r v e bank a b s o r b i n g approximately o n e ~ t h i r d of the c o s t ,
a s shown on the f u n c t i o n a l expense r e p o r t s form E, of o p e r a t i n g i t s
c a f e t e r i a . The B o a r d ' s d e c i s i o n i s based on the assumption t h a t the
e x p e r i e n c e of the F e d e r a l r e s e r v e banks has shown t h a t t h e a b s o r p t i o n
of such expense w i l l be i n the i n t e r e s t of economy and o p e r a t i n g
e f f i c i e n c y , by r e a s o n of the b e t t e r s e r v i c e r e n d e r e d by t h e employees
when a s a t i s f a c t o r y luncheon of good food i s served by t h e bank than
. i s u s u a l when employees e a t in o u t s i d e lunchrooms.
In o r d e r t h a t the f i l e s of t h e Board may c o n t a i n i n f o r m a t i o n a s to t h e p o l i c y followed by the F e d e r a l r e s e r v e banks i n o p e r a t i n g
t h e i r c a f e t e r i a s , i t w i l l be a p p r e c i a t e d i f you w i l l a d v i s e the Board
of t h e methods f o l l o w e d by your bank (and branches i f any) i n making
charges f o r meals s e r v e d , whether or not charges a r e made f o r a l l
meals s e r v e d , a n d whether any change i n t h e p l a n of o p e r a t i o n i s contemplated.
Such expenses connected w i t h the o p e r a t i o n of the c a f e t e r i a
a s a r e absorbed ty t h e F e d e r a l r e s e r v e bank s h o u l d h e r e a f t e r be cons i d e r e d as a c u r r e n t expense r a t h e r than as a l o s s t o be charged to
p r o f i t and l o s s a t t h e end of t h e y e a r , and c o n s e q u e n t l y , b e g i n n i n g
w i t h the month of A p r i l , you a r e r e q u e s t e d t o c r e d i t t h a t p o r t i o n of
the c o s t of o p e r a t i n g your c a f e t e r i a which i s a b s o r b e d by the F e d e r a l
r e s e r v e bank ( i n c l u d i n g any c o s t t o be absorbed f o r t h e f i r s t t h r e e
months of t h i s y e a r ) t o your c a f e t e r i a expense account on form 34, and
t o charge t h e same to c u r r e n t expense on the l a s t day of the month.
On form 96 t h e amount should be r e p o r t e d on the r e v e r s e s i d e a s
" C a f e t e r i a * n e t expense. 1 1 In keeping with t h i s method of h a n d l i n g
X—4579
- 2 -
t h e expense a b s o r b e d by the bank, the account " C a f e t e r i a - n e t
expense" now a p p e a r i n g i n the Earnings and Expense s e c t i o n of
form 34 s h o u l d be d i s c o n t i n u e d , and t h e new account " C a f e t e r i a "
should be c a r r i e d i n the Miscellaneous A s s e t s b l o c k .
This new
account should be charged w i t h a l l c a f e t e r i a expense a s o u t l i n e d
i n the manual of i n s t r u c t i o n s t o form 2 , and c r e d i t e d w i t h r e c e i p t s and, a t t h e end of the month, w i t h t h e amount to be a b sorbed by t h e F e d e r a l r e s e r v e bank, i . e , , with the d i f f e r e n c e
between the n e t b a l a n c e i n the account and the i n v e n t o r y taken a t
t h e end of t h e month. The amount remaining i n t h e account w i l l
then r e p r e s e n t the i n v e n t o r y c a r r i e d forward to the f o l l o w i n g
month.
By d i r e c t i o n of the f e d e r a l Reserve Board.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BAMS.
FEDERAL RESERVE BOARD
X _ 45G0
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
A p r i l 6, 1926.
SUBJECT: Weekly Condition Statement
of R e p o r t i n g Member Banks.
Dear S i r :
I n September 1922 t h e Board a u t h o r i z e d the F e d e r a l
Reserve Agents t o d i s c o n t i n u e f u r n i s h i n g i t w i t h d e t a i l e d
f i g u r e s of p r i n c i p a l a s s e t s and l i a b i l i t i e s , a s c a l l e d f o r on
form S t . 51, f o r each r e p o r t i n g member b a n k .
The Board would
l i k e to have t h e s e d e t a i l e d r e p o r t s resumed, and a c c o r d i n g l y i t
i s r e q u e s t e d t h a t b e g i n n i n g w i t h A p r i l 7, weekly r e p o r t s be
f u r n i s h e d t h e Board showing s e p a r a t e f i g u r e s f o r each r e p o r t i n g ,
member bank. These r e p o r t s s h o u l d i n c l u d e each item f o r which
f i g u r e s a r e r e c e i v e d from member banks and a l s o t h e f i g u r e s supp l i e d from t h e books of the F e d e r a l r e s e r v e bank, and so f a r a s
p r a c t i c a b l e should f o l l o w t h e g e n e r a l s t y l e of form St* 51; i . e . ,
t h e items s h o u l d be shown a t the top of t h e form and the r e p o r t i n g member banks, grouped by c i t i e s , s h o u l d be shown i n t h e l e f t hand margin w i t h a s u b t o t a l f o r each c i t y and a grand t o t a l f o r
a l l r e p o r t i n g member b a n k s . The sucmary m i l r e p o r t s now b e i n g
f u r n i s h e d t h e Board on form S t . 51 may be d i s c o n t i n u e d a s of
A p r i l 7, c o i n c i d e n t w i t h the resumption of t h e d e t a i l e d r e p o r t s .
By d i r e c t i o n of t h e F e d e r a l Reserve Board.
Very t r u l y y o u r s ,
J . C. Ho e l l .
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
TREASURY DSPARTLTDNT
O f f i c e of t h e S e c r e t a r y
WASHINGTON
Commissioner of t h e P u b l i c Debt
X-4582
284
A p r i l 6, 1926.
The Governor,
F e d e r a l Heserve Board.
Sir:
You a r e h e r e b y a d v i s e d t h a t t h e Department has r e f e r r e d t o t h e D i s b u r s i n g
Clerk, Treasury Department, f o r payment, t h e account of t h e Bureau of Engraving
and P r i n t i n g f o r p r e p a r i n g F e d e r a l r e s e r v e notes d u r i n g t h e p e r i o d March 1 t o
March 31, 1926, amounting t o ^126,900, as f o l l o w s :
F e d e r a l Reserve Botes,
$10
#5
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
San F r a n c i s c o
300,000
1,000,000
475,000
100,000
100,000
700,000
150,000
2,825,000
J20
300,000
150,000
50,000
25,000
25,000
500,000
50,000
Total
300,000
1,000,000
475,000
425,000
175,000
150,000
700,000
150,000
5,375,000
3 , 3 7 5 , 0 0 0 s h e e t s a t $37.60 per M . . . $126,900
The charges a g a i n s t t h e s e v e r a l F e d e r a l Deserve Banks a r e as f o l l o w s :
Sheets
Boston
300,000
New York
1 ,000,000
Philadelphia
475,000
Cleveland
425,000
Richmond
175,000
Atlanta
150,000
Chicago
700,000
San F r a n c i s c o 150,000
3 ,375,000
Compensation
# 5,310.00
17,700.00
8,407.50
7,522.50
3,097.50
2,655.00
12,390.00
2,655.00
59,737.50
Plate
Printing
$2,460
8,200
3,895
3,485
1,435
1,230
5,740
1,230
27,675
Materials
' $ 3,510.00
11,700.00
5,557.50
4,972.50
2,047.50
1,755.00
8,190.00
1,755.00
39,487.50
• Tot a l
§11,280.00
37,600.00
17,860.00
15,980.00
6,580.00
5,640.00
26,320.00
5,640.00
126,900.00
The Bureau a p p r o p r i a t i o n s w i l l be reimbursed i n t h 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 " P r e p a r a t i o n and I s s u e of F e d e r a l Reserve Notes, Rei m b u r s a b l e " , and i t i s r e q u e s t e d t h a t your board cause such i n d e f i n i t e a p p r o p r i a t i o n t o be r e i m b u r s e d i n l i k e amount.
Respectfully,
S . R. J a c o b s ,
Deputy Commissioner.
285
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-45S3
A p r i l 14, 192b
SUBJECT:
Expense Main L i n e , Leased Wire System,
March, 1926.
Dear S i r :
Enclosed h e r e w i t h you w i l l f i n d two mimeograph s t a t e m e n t s , X-4583-a and X-4583-b, c o v e r i n g i n
d e t a i l o p e r a t i o n s of t h e main l i n e , Leased Wire-System,
during the month of March, 1 9 2 6 .
P l e a s e c r e d i t t h e amount p a y a b l e by your
bank i n t h e g e n e r a l a c c o u n t , T r e a s u r e r , U . S . , on your
books, and i s s u e C / D Form 1, N a t i o n a l Banks, f o r account of " S a l a r i e s and Expenses, Federal Reserve Board,
S p e c i a l Fund", Leased M r e System, sending d u p l i c a t e
C/D to F e d e r a l Reserve Board.
Yours very t r u l y ,
F i s c a l Agent.
TO GOVERNORS OF ALL F.R.BANKS EXCEPT CHICAGO.
Enclosures:
X-4583-a
I
REPORT SHORING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LIFE OF THE
FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH 01 MARCH, 1926.
From
Business
reported
by banks
Boston
New York
Philadelphia
C1eveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
Sazi F r a n c i s c o
34,255
154,357
43,251
81,656
51,040
61,623
111,132
85,56s
38,053
80,126
60,232
113,515
Total
914,811
Board
Total
Percent of t o t a l
Words sent
by New York
chargeable
to other
F.R.Banks (1)
To t a l
Treasury
Dept.
Business
War
Financ e
Corporation
Business
Net
Fed.Reserve
Bank Business
3.44
16.51
4.46
8.90
5.60
6.71
12.21
9.46
4.14
8.85
7.10
12.32
100.00
825
1,416
2,480
3,268
2,336
2,835
2,122
2,412
4,670
2,786
35,014
154,357
44,076
83,072
53,520
64,391
113,46s
88,403
40,175
82,538
64,902
116,304
5,616
.10,639
5,936
7,009
5,643
7,508
9,131'
7,530
4,747
6,908
4,241
10,749
207
29,398
143,718
38,140
76,063
47,877
57,3&3
104,337
80,873
35,428
75,630
60,661
105,34s
25,909
940,720
85,657
207
854,256
356,318
1,297,038
79,301
164,958
244
276,980
1,131,836
12.72#
.02#
759
100%
Per c e n t of
t o t a l bank
Business (*)
87.26%
(*) These p e r c e n t a g e s used i n c a l c u l a t i n g t h e pro r a t a share of l e a s e d wire expense as shown
on the accompanying statement (X-l-583-b)
(1) Number of words sent by New York to o t h e r F.R.Banks f o r t h e i r sole b e n e f i t charged to
banks i n d i c a t e d , i n accordance with a c t i o n taken a t Governors' Conference Nov.2*4, 1925.
10
QO
CJi
x-i+523-t
REPORT OF EXPENSE MAIN LIKE
FEDERAL RESERVE LEASED WIRE SYSTEM, MARCH, 1926.
Name of Bank
Operators 1
Salaries
$ 260.00
Boston
944.16
New York
216.66
Philadelphia
284.50
Cleveland
180.00
Richmond
Atlanta
235.00
Chicago
(#)3,927.77
200.00
St.Louis
Minneapolis
183.34
Kansas City
275-64
Dallas
251.00
360.00
San Francisco
Federal Reserve Board
mo t a l
(&)
(#)
(*)
(a)
(b)
$7,318.0/
Operators 1
Overtime
Wire
Rental
$
$
"
Total
Expenses
$
-
-
-
-
-
-
-
-
-
-
-
-
-
«-
—
—
—
-
-
-
-
-
Pro r a t a
Share of
Total
Expense
.15,339.82
260.00
944.16
2lo.66
.-284,50
180.00
235.00
3,927.77
200.00
I83.34
275-64
251.00
36O.OO
15,339-82
$15,339.82 $22,657.89
(a) 2,890-18
$19,767.71
$
680.01
3,322.95
881.64
1,759.33
1,106.99
1,326.41
2,413.64
1,870.03
818.38
1,749.44
1,403.51
2,435.36
$19,767.71
Credits
$
Payable to
Federal
Reserve
Board
$ 420.01
260.00
944.16
2,378.79
664.95
216.66
1,474.83
284.50
180.00' ( 4 ) 1 , 1 3 1 . 6 6
1,091.41
235.OO
(*)1,514.13
3,927.77
1,670.03
200.00
635.04
I83.34
1,473.60
275-64
1,152.51
251.00
360.00
2,075-38
$7,318.07
$14,168.44
(b) 1,51^.13
$12,654.31
Includes $204.67 f o r branch l i n e business transmitted over main l i n e c i r c u i t . Includes s a l a r i e s of Washington o p e r a t o r s .
Credit.
' '
"
.
.
v
Received $3.54 from War Finance Corporation, and $2,581.64 from Treasury Dept. covering.business f o r
the month of March 1926.
Amount reimbursable to Chicago.
00
<2
X-4584
FEDERAL RESERVE BOARD
2 8 8
WASHINGTON
A p r i l 14, 1926.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Mo-protest Minimum.
Dear S i r :
A p o l l of t h e F e d e r a l r e s e r v e banks taken i n 1922 d i s c l o s e d t h e f a c t t h a t seven of the banks were i n f a v o r of a
suggestion made a t t h a t time by t h e E x e c u t i v e Committee
of t h e C l e a r i n g House S e c t i o n of t h e American Bankers A s s o c i a t i o n t h a t t h e n o - p r o t e s t minimum should be i n c r e a s e d from $10
to $20. However, a t t h e Governors' Conference l a t e r i n t h e
y e a r , i t was unanimously v o t e d t h a t t h e r e should be a u n i f o r m
n o - p r o t e s t minimum and t h a t the F e d e r a l r e s e r v e banks s h o u l d
a g r e e u n i f o r m l y to a d o p t e i t h e r t h e $10 or $20 l i m i t , whichever was d e t e r m i n e d by a m a j o r i t y of t h e member banks t o be
p r e f e r a b l e to them, i t b e i n g t h e s e n s e of t h e Conference t h a t
t h e F e d e r a l r e s e r v e banks should adapt t h e i r p r a c t i c e in t h i s r e g a r d
to t h e w i s h e s and convenience of t h e m a j o r i t y of t h e i r members.
Since t h a t tinie, t h e r e c o r d s of t h e Board i n d i c a t e t h a t a l l
F e d e r a l r e s e r v e banks have c o n t i n u e d t h e $10 minimum.
The American Bankers A s s o c i a t i o n Committee h a s a g a i n
b r o u g h t t h i s m a t t e r to t h e a t t e n t i o n of t h e Board, s t a t i n g
t h a t i t w i s h e s to d i s p o s e of same a t t h e s p r i n g m e e t i n g of t h e
C l e a r i n g House S e c t i o n , and r e q u e s t i n g t h e views of t h e Board.
In o r d 6 r t h a t t h e Board may be p r e p a r e d t o r e p l y t o t h i s i n q u i r y , i t i s r e q u e s t e d t h a t on o r b e f o r e A p r i l 2 8 t h you communicate to i t t h e reasons' which a c t u a t e d your bank i n c o n t i n u i n g t h e $10 minimum and your p r e s e n t views on t h e s u b j e c t .
Very t r u l y y o u r s ,
. J . C. N o e l l ,
Assistant Secretary.
%p ALL GOVERNORS.
289
X-4586
RESOLUTIONS APPROVED BY FEDERAL RESERVE BOARD AT
MEETING'ON MARCH 22, 1923.
11
Whereas t h e F e d e r a l Reserve Board, under the powers given i t
in S e c t i o n s 13 and 14 of the F e d e r a l Reserve Act, has a u t h o r i t y to
l i m i t and o t h e r w i s e determine the s e c u r i t i e s and i n v e s t m e n t s p u r c h a s e d
"by F e d e r a l r e s e r v e hanks;
Whereas t h e F e d e r a l Reserve Board h a s never p r e s c r i b e d any l i m i t a t i o n upon open market p u r c h a s e s by F e d e r a l r e s e r v e banks;
Whereas t h e amount, time, c h a r a c t e r , and manner of such p u r c h a s e s
may e x e r c i s e an i m p o r t a n t i n f l u e n c e upon t h e money market;
Whereas an open market investment p o l i c y f o r t h e twelve banks
composing t h e F e d e r a l r e s e r v e system i s n e c e s s a r y i n t h e i n t e r e s t of
t h e maintenance of a good r e l a t i o n s h i p between t h e d i s c o u n t and p u r chase o p e r a t i o n s of t h e F e d e r a l r e s e r v e banks and t h e g e n e r a l money
market;
Whereas heavy i n v e s t m e n t s i n United S t a t e s s e c u r i t i e s , p a r t i c u l a r l y s h o r t - d a t e d c e r t i f i c a t e i s s u e s , have o c c a s i o n e d embarrassment to
t h e T r e a s u r y i n a s c e r t a i n i n g t h e t r u e c o n d i t i o n of t h e money and i n v e s t ment markets from time to t i m e ,
THEREFORE, Be I t Resolved, That t h e F e d e r a l Reserve Board, in t h e
e x e r c i s e of i t s powers under the F e d e r a l Reserve Act, l a y down and adopt
t h e f o l l o w i n g p r i n c i p l e s with r e s p e c t to open market investment o p e r a t i o n s
of t h e F e d e r a l r e s e r v e banks, t o - w i t ;
(1) That t h e time, manner, c h a r a c t e r , and volume of open market
i n v e s t m e n t s p u r c h a s e d by F e d e r a l r e s e r v e banks be governed w i t h p r i m a r y
r e g a r d to t h e accommodation of commerce and b u s i n e s s and to t h e e f f e c t
of such p u r c h a s e s or s a l e s on t h e g e n e r a l c r e d i t s i t u a t i o n .
(2) That i n making t h e s e l e c t i o n of open market p u r c h a s e s , c a r e f u l r e g a r d be always given t o t h e b e a r i n g of p u r c h a s e s of U n i t e d S t a t e s
Government s e c u r i t i e s , e s p e c i a l l y t h e s h o r t - d a t e d i s s u e s , upon the mark e t f o r such s e c u r i t i e s , and t h a t open market p u r c h a s e s be p r i m a r i l y
commercial i n v e s t m e n t s , except t h a t T r e a s u r y c e r t i f i c a t e s be d e a l t i n ,
as a t p r e s e n t , under s o - c a l l e d "Repurchase 11 agreement.
Be I t F u r t h e r Resolved, That on and a f t e r A p r i l 1, 1923, t h e
p r e s e n t Committee of Governors on C e n t r a l i z e d Execution of P u r c h a s e s
and S a l e s of Government S e c u r i t i e s be d i s c o n t i n u e d , and be superseded
by a new committee known a s t h e Open Market Investment Committee f o r
t h e F e d e r a l Reserve System, s a i d Committee to c o n s i s t of f i v e r e p r e s e n t a t i v e s faom t h e r e s e r v e banks and to be under t h e g e n e r a l s u p e r v i s i o n of t h e F e d e r a l Reserve Board; and t h a t i t be t h e * d u t y of t h i s
Committee to d e v i s e and recommend p l a n s f o r t h e p u r c h a s e , s a l e and
d i s t r i b u t i o n of t h e open markot p u r c h a s e s of t h e F e d e r a l r e s e r v e
banks i n accordance with t h e above p r i n c i p l e s and such r e g u l a t i o n s
a s Qiay from time t o time be l a i d down by t h e F e d e r a l Reserve Board."
FEDERAL RESERVE BOARD
X-45A7
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
A p r i l 16, 1926.
SUBJECT:
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.
Bear S i r :
There i s e n c l o s e d h e r e w i t h , copy of a l e t t e r
r e c e i v e d from t h e Chairman of t h e F e d e r a l Reserve Bank
of C l e v e l a n d , which i s s e l f e x p l a n a t o r y . The Board h a s
heon g i v i n g c o n s i d e r a b l e thought to the q u e s t i o n of t h e
g r a n t i n g of a u t h o r i t y to n a t i o n a l hanks to e x o r c i s e
f i d u c i a r y p o w e r s , the manner i n which the departments
i n t h e hanks a r e conductod and t h e method and e x t e n t of
s u p e r v i s i o n and examination; The l a s t mentioned p h a s e
of t h e q u e s t i o n h a s been tak en up w i t h t h e Comptroller
of t h e Currency, who l i k e w i s e h a s been c o n s i d e r i n g t h e
m a t t e r , and i t i s hoped t h a t w i t h i n a s h o r t time some
e f f e c t i v e p l a n of examination w i l l - b e worked o u t .
I n t h e meantime, t h e Board would l i k e to have
your views and t h o s e of your d i r e c t o r s on t h e s u g g e s t i o n s
c o n t a i n e d i n Mr. DeCazsp's l e t t e r , which commend themselves
t o t h e Board. We would be p l e a s e d to r e c e i v e i n a d d i t i o n
any o t h e r s u g g e s t i o n s which you or your d i r e c t o r s may c a r e
to o f f e r .
Very .truly y o u r s ,
Edmund P i a t t .
Vice Governor.
(Enclosure)
TO CMIKMEH OF ALL FEDERAL RESERVE BABES EXCEPT CLEVELAND
FEDERAL
0 F
RESERVE
BANK
C L E V E L A IT D
291l
X-4587-a
A p r i l 13, 1926
F e d e r a l Reserve Board,
Washington, D. C.
Gentlemen:
Under d a t e of A p r i l 10 we forwarded to your Board a p p l i c a t i o n s
of t h e
and th„e
f o r p e r m i s s i o n to e x o r c i s e f i d u c i a r y powers,
w i t h the f a v o r a b l e recommendations of our E x e c u t i v e Committee.
I n our recommendations we s u g g e s t e d t h a t the t r u s t departments
of t h e s e i n s t i t u t i o n s should he under the s u p e r v i s i o n of t r u s t committees
c o n s i s t i n g of members of the Boards of D i r e c t o r s of t h e r e s p e c t i v e b a n k s .
I n making t h i s s u g g e s t i o n i t i s n o t the purpose of our committee to q u a l i f y i t s recommendations i n any way.
. . .
At each m e e t i n g of our E x e c u t i v e Committee we c o n s i d e r from one
to t h r e e a p p l i c a t i o n s f o r p e r m i s s i o n to e x e r c i s e f i d u c i a r y powers. The
f r e q u e n c y w i t h which t h e s e a p p l i c a t i o n s come t o - u s s u g g e s t s t h e thought
t h a t t h e a p p l y i n g bank may n o t i n every i n s t a n c e f u l l y a p p r e c i a t e the
importance of t h e f u n c t i o n s which i t seeks or p e r h a p s t h e r e s p o n s i b i l i t i e s
i n v o l v e d . R e g a r d l e s s of whether or not t h e a p p l y i n g bank i s i n any way
s u b j e c t i n g i t s e l f to c i s t t i c i s m by the Department of Examination or t h e
C o m p t r o l l e r ' s o f f i c e , we b e l i e v e t h a t t h e g r a n t i n g of f i d u c i a r y powers
s h o u l d c a r r y w i t h i t an u r g e n t s u g g e s t i o n to t h e e f f e c t t h a t t h e management of a t r u s t department should meet w i t h e s p e c i a l l y c l o s e s u p e r v i s i o n
and t h a t t h e importance of t h i s department should be impressed upon t h e
Board of D i r e c t o r s of t h e a p p l y i n g bank.
Another p h a s e of t h i s q u e s t i o n r w h i c h we t h i n k w i l l come under
t h e immediate concern of t h e C o m p t r o l l e r ' s o f f i c e and t h e Department of
Examination i s t h e m a t t e r of p r o v i d i n g f o r p r o p e r i n v e s t i g a t i o n or examinat i o n of t h e department a f t e r i t i s i n o p e r a t i o n .
This a p p l i e s , of c o u r s e , .
t o b o t h n a t i o n a l and s t a t e r n e n b e r b a n k s .
I t i s n o t t h e d i s p o s i t i o n of our committee to s u g g e s t a method
of p r o c e d u r e on t h e p a r t of t h e o f f i c e of t h e Comptroller of t h e Currency
n o t to o u t l i n e a p o l i c y , but we a r e impressed w i t h t h e v e r y i m p o r t a n t p l a c e
whidh a t r u s t department occupies i n t h e g e n e r a l conduct ©f t h e a f f a i r s of
our b a n k s .
These m a t t e r s have had s e r i o u s and d e t a i l e d d i s c u s s i o n a t the
l a s t s e v e r a l m e e t i n g s of our E x e c u t i v e Committee, and I have been r e q u e s t e d
by t h e committee t o p l a c e i n t h e hands of your Board i t s views w i t h r e s p e c t
t o t h e g r a n t i n g of t h e s e powers.
Very t r u l y y o u r s ,
( s ) Geo. DoCamp,
Chairman-of the Board.
X-4588
SUI*R£,ffi COURT OF THE TJITITED STATES
llo. 222 - OCTOBER TEEM, 1925.
The U n i t e d S t a t e s of America, P l a i n - )
t i f f in Error,
)
vs,
)
The N a t i o n a l Exchange Bank of B a l - )
t i m o r e , Maryland,
)
In E r r o r t o tine U n i t e d
S t a t e s C i r c u i t Court of
Appeals f o r the F o u r t h
Circuits
(April 12,,1926.)
Mr. J u s t i c e Holmes d e l i v e r e d t h e o p i n i o n of t h e Court.
This i s a s u i t b r o u g h t by the U n i t e d S t a t e s t o r e c o v e r the d i f f e r ence between t h e amount to which a check p a i d by i t had been f r a u d u l e n t l y r a i s e d and the amount f o r which the check was drawn.
The case
was h e a r d upon a demurrer to t h e d e c l a r a t i o n and the judgment was f o r
the d e f e n d a n t b o t h i n t h e D i s t r i c t Court and i n the C i r c u i t Court of
Appeals, 1 F. (2d) 888.
The f a c t s a l l e g e d a r e a s f o l l o w s : : A d i s b u r s i n g
c l e r k drew a U n i t e d S t a t e s V e t e r a n ' s Bureau check upon t h e T r e a s u r e r
of t h e U n i t e d S t a t e s i n f a v o r of one Beck, f o r $47.50.
A f t e r i t was
i s s u e d t h e check was changed so as t o c a l l f o r $4750.
Beck endorsed
i t to a bank of South C a r o l i n a and r e c e i v e d the amount of the a l t e r e d
daeck.
That bank endorsed i t "Pay t o t h e o r d e r of Any Bank, Banker,
or T r u s t Company.
A l l p r i o r endorsements g u a r a n t e e d , June 3, 1922
n e g o t i a t e d i t to t h e d e f e n d a n t , and r e c e i v e d the same amount., The def e n d a n t endorsed t h e check "Received payment Through t h e B a l t i m o r e
C l e a r i n g House, i n d o r s e m e n t s Guaranteed, June 5 t h , 1922," d e l i v e r e d i t
to and r e c e i v e d t h e samo amount from the B a l t i m o r e Branch of t h e Fede r a l Reserve Bank of Richmond, the agent of the p l a i n t i f f , which f o r warded t h e check t o the T r e a s u r e r of the United S t a t e s and was g i v e n
292
-2- ^
c r e d i t f o r $4750.
X-4588
The B a l t i m o r e Branch had 110 n o t i c e of the f r a u d u l e n t
change,
The Government a r g u e s t h a t a c c e p t a n c e or payment of a d r a f t or check
a l t h o u g h i t vouches f o r t h e s i g n a t u r e of the drawer does n o t vouch f o r
the body of t h e i n s t r u m e n t , Espy v . F i r s t N a t i o n a l Bank of C i n c i n n a t i ,
18 Wall* 604; t h a t t h i s r u l e i s n o t changed "by p a r a g r a p h 62 of the
Uniform N e g o t i a b l e I n s t r u m e n t s Law, A r t i c l e 13, s e c t i o n 81, Maryland
Code of P u b l i c General Laws:
11
The a c c e p t o r , by a c c e p t i n g the i n s t r u m e n t
engages t h a t he w i l l pay i t a c c o r d i n g to the t e n o r of h i s acceptance 1 1 ;
t h a t the drawer and drawee of t h e check wore not the same i n such sense
as t o charge t h e drawee with knowledge of the amount of t h e check, and
t h a t t h e r e f o r e t h e U n i t e d S t a t e s can r e c o v e r a s f o r money t)aid u n d e r
a mistake o f f a c t #
The d e f e n d a n t u r g e s s e v e r a l c o n s i d e r a t i o n s on t h e
o t h e r s i d e , b u t i t i s enough t o say t h a t t h e l a s t s t e p i n t h e Governm e n t ' s argument seems to u s , as i t d i d to t h e C i r c u i t Court of Appeals,
unsound.
I f t h e drawer and the drawee a r e the same t h e drawer cannot
r e c o v e r f o r an overpayment t o an i n n o c e n t payee because he i s bound t o
know h i s own checks#
Wheat. 333.
Bank of United S t a t e s v# Bank of Georgia, 10
In t h i s c a s e t h e r e i s no doubt t h a t i n t r u t h t h e check
was drawn by t h e U n i t e d S t a t e s upon i t s e l f .
The Government a t t e m p t s to escape from t h i s c o n c l u s i o n by t h e f a c t
t h a t the hand t h a t drew and t h e hand t h a t was to pay were not the same,
and some language of Chief J u s t i c e White a s to what i t i s r e a s o n a b l e t o
r e q u i r e the Government to know i n p a y i n g out m i l l i o n s of p e n s i o n c l a i m s .
The number of t h e p r e s e n t check was 48218587.
Exchange Bank, 214 U. S. 302 , 317.
United S t a t e s v. National
But the Chief J u s t i c e u s e d t h a t
-3-
X-4588
394.
language only to f o r t i f y h i s conclusion t h a t t h e U n i t e d S t a t e s could
r e c o v e r money p a i d upon a forged endorsement of a p e n s i o n check.
He
cannot be u n d e r s t o o d t o mean t h a t g r e a t b u s i n e s s houses a r e h e l d to
l e s s r e s p o n s i b i l i t y t h a n s m a l l ones.
0:1 b u s i n e s s t e r m s .
The U n i t e d S t a t e s does b u s i n e s s
Cooke v . United S t a t e s , 91 U. S. 389.
I t has been
s u g g e s t e d t h a t t h e ground of r e c o v e r y f o r a judgment under a mistake
of f a c t i s t h a t t h e f a c t supposed was the c o n v e n t i o n a l b a s i s or t a c i t
c o n d i t i o n of the t r a n s a c t i o n .
Bank, 177 Mass. 392, 395.
Didham N a t i o n a l Bank v . E v e r e t t N a t i o n a l
I f t h i s be t r u e , then when the U n i t e d S t a t e s
i s s u e s an o r d e r upon i t s e l f i t has n o t i c e of t h e amount and when i t
comes to pay to an i n n o c e n t h o l d e r making a claim a s of r i g h t i t i s a t
a r m ' s l e n g t h and takes the r i s k .
We a r e of o p i n i o n t h a t t h e U n i t e d
S t a t e s i s not excepted from t h e g e n e r a l r u l e by t h e l a r g e n e s s of i t s
d e a l i n g s and i t s having t o employ a g e n t s t o do what i f done by a p r i n c i p a l i n p e r s o n would l e a v e no room f o r doubt.
Judgment a f f i r m e d .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4589
A p r i l 19, 1926.
Dear S i r :
#
The Board has r e c e n t l y r e c e i v e d an i n q u i r y
from one of t h e F e d e r a l r e s e r v e t a n k s a s t o whether a
S t a t e member bank should s u r r e n d e r i t s c e r t i f i c a t e of
membership when t e r m i n a t i n g i t s membership i n the Fede r a l Reserve System.
'
*
H
Upon c o n s i d e r a t i o n of t h i s q u e s t i o n t h e
Board b e l i e v e s i t d e s i r a b l e t h a t S t a t e banks t e r m i n a t i n g
t h e i r membership i n the F e d e r a l Reserve System should
s u r r e n d e r t h e i r c e r t i f i c a t e s of membership. Cases may
a r i s e i n which such c e r t i f i c a t e s may be improperly d i s . p l a y e d or o t h e r w i s e used by banks which have p r e v i o u s l y
been members of the System and i n o r d e r to p r e v e n t any
p o s s i b i l i t y of such an abuse i t seems d e s i r a b l e i n a l l
c a s e s h e r e a f t e r t o r e q u i r e the s u r r e n d e r of the membership c e r t i f i c a t e .
I t i s requested, therefore, that a l l State
banks h e r e a f t e r t e r m i n a t i n g t h e i r membership in your
bank be r e q u i r e d t o s u r r e n d e r t h e i r membership c e r t i ficates.
Very t r u l y y o u r s ,
•
y
D. R. C r i s s i n g e r
Governor.
TO ALL F. R. AGEITTS.
7
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
^
X-4590
A p r i l 20, 1926.
»
SUBJECT:
Holidays d u r i n g May, 1926.
Dear S i r :
On F r i d a y , May 2 1 s t , t h e P o r t l a n d Branch
of t h e F e d e r a l Reserve Bank of San F r a n c i s c o w i l l be
c l o s e d a c c o u n t Primary E l e c t i o n Bay i n t h e S t a t e of
Oregon, and w i l l n o t p a r t i c i p a t e in t h e Gold Fund
C l e a r i n g . P l e a s e i n c l u d e c r e d i t s of May 2 1 s t f o r
P o r t l a n d Branch with those of t h e f o l l o w i n g day.
On Monday, May 3 1 s t , t h e o f f i c e s of t h e
F e d e r a l Reserve Board w i l l be c l o s e d in observance
of Memorial Day, and t h e r e w i l l be no Gold S e t t l e ment Fund or F e d e r a l Reserve Note C l e a r i n g . A l l
F e d e r a l Reserve Banks and Branches, w i t h t h e exc e p t i o n of t h e f o l l o w i n g , w i l l a l s o be c l o s e d on
t h a t day:
A t l a n t a , Hew O r l e a n s , Birmingham,
J a c k s o n v i l l e , L i t t l e Rock,
Oklahoma C i t y .
P l e a s e n o t i f y Branches.
Very t r u l y yours*
J . C. N o e l l ,
Assistant Secretary.
-s
i
10 GOVERNORS OF ALL F.R.BANKS.
297
FEDERAL PV,,S .BYE BOARD
STAT^MEliT 7QR THE PRESS.
For Immediate r e l e a s e .
X-4592
A p r i l 22, 1926.
4 : 0 0 b 1 c l o c k p.m.
The F e d e r a l Reserve Board announces t h a t i t has approved
an a p p l i c a t i o n
'of t h e F e d e r a l Reserve Bank of New York f o r p e r -
m i s s i o n to e s t a b l i s h a r e d i s c o u n t r a t e of 3 1/2 p e r cent on a l l
c l a s s e s of p a p e r of a%l m a t u r i t i e s , e f f e c t i v e A p r i l 23, 1926.
fad
FEDERAL RESERVE BOARD
WASHINGTON
^ 4593
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
A p r i l 24, 1926.
SUBJECT:
Payment of Counsel Fee i n connection w i t h Idaho Grimm
A l f a l f a Seed. Growers A s s o c i a t i o n Case.
Dear S i r :
. Under d a t e of J a n u a r y 2 0 , 1926 the F e d e r a l Reserve Board a d d r e s s e d a l e t t e r (X-4510) to a l l F e d e r a l Reserve Banks, t r a n s m i t t i n g copy
of an o p i n i o n r e n d e r e d by the C i r c u i t Court of Appeals i n t h e above named
case and r e q u e s t i n g to be a d v i s e d whether the v a r i o u s Reserve banks would
be w i l l i n g to b e a r a p r o - r a t a s h a r e of the e x p e n s e s of t h e employment of
Honorable Hewton D. Baker i n t h e case* The r e p l i e s to t h i s l e t t e r i n d i c a t e d
t h a t a l l banks wore w i l l i n g t o do s o .
The Board h a s now r e c e i v e d from t h e F e d e r a l Reserve Bank of San
F r a n c i s c o t h e e n c l o s e d s t a t e m e n t s , t o t a l i n g $ 2 , 3 1 4 . 7 8 , r e n d e r e d by Mr.
B a k e r ' s f i r m , which have been p a i d by the San F r a n c i s c o bank. On t h e b a s i s
of c a p i t a l and s u r p l u s a t the c l o s e of b u s i n e s s Wednesday, A p r i l 2 1 s t , t h e
p r o - r a t a s h a r e s of the r e s p e c t i v e F e d e r a l Reserve banks a r e a s f o l l o w s :
Bos ton
Hew York
Philadelphia Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s co Total"
$174.69
640.68
219.54
246.33
121.65
92.42
317.68
100.35
72.09
89.64
80.72
158.98
$2,314.78
I t i s roqu.estod t h a t your bank r e m i t d i r e c t to t h e F e d e r a l Reserve
Bonk of San F r a n c i s c o i t s p r o p o r t i o n a t e s h a r e of t h i s expense, a s s e t f o r t h
above.
Very t r u l y y o u r s ,
(Enclosures)
TO ALL GOVERNORS OF F. R. BASKS
Governor
399
X-4593-a
( COPY )
Baker, H o s t e t l e r and S i d l o
Counsellors a t Law
Union N a t i o n a l Bank B u i l d i n g
Cleveland,
F e d e r a l Reserve Bank,
15
an F r a n c i s c o , C a l i f .
Ohio.
Decernter 7, 1925.
To p r o f e s s i o n a l s e r v i c e s
Nov. 30
Dec. 5
Expenses t o and from S a l t Lake C i t y , i n c l u d i n g R a i l
and pullman f a r e , meals, h o t e l b i l l , e t c .
R e t a i n e r i n the m a t t e r of the Idaho Grimm A l f a l f a
Seedgrowers A s s o c i a t i o n a g a i n s t F e d e r a l
Reserve Bank.
$225.00
1,000.00
$1,225.00
300
( COPY )
X-4593-Td
Baker, H o s t e t l e r & S i d l o
C o u n s e l l o r s a t Law
Union N a t i o n a l Bank B u i l d i n g
Cleveland, Ohio.
^ F e d e r a l Reserve Bank of San F r r n c i s c o ,
San F r a n c i s c o ,
California,
A p r i l 8, 1926.
To p r o f e s s i o n a l s e r v i c e s
In the m a t t e r of the Idaho Grimm A l f a l f a Seed-Growers
A s s o c i a t i o n v . the F e d e r a l Reserve Bank of
San F r a n c i s c o .
J a n u a r y 7, 1926, c o s t s i n the United S t a t e s Supreme
Court, d e p o s i t e d "by u s ,
(We s e n t check f o r $30.00 and t h e Clerk
of t h e Supreme Court lias r e t u r n e d check
f o r 20^, unexpended "balance.)
J a n u a r y 12, 1926, Gates Legal P u b l i s h i n g Company,
p r i n t i n g of p e t i t i o n f o r w r i t of c e r t i o r a r i
and b r i e f .
J a n u a r y 15, 1926, t e l e g r a m t o P o c a t e l l o ,
Services in f u l l ,
$
29.80
55.04
4.94
1000.00
$1089.78
4
FEDERAL
B 3 S 2 S V E
3 0 1
X4594.
BOARD
STATEMENT FOR THE PRESS
For Release in Morning P a p e r s ,
Tuesday, A p r i l 27, 1926.
The f o l l o w i n g i s a summary of g e n e r a l "business
and f i n a n c i a l c o n d i t i o n s throughout the s e v e r a l
F e d e r a l r e s e r v e d i s t r i c t s , based upon s t a t i s t i c s
f o r t h e months of March and A p r i l , a s c o n t a i n e d
i n t h e f o r t h c o m i n g i s s u e of the F e d e r a l Reserve
Bulletin.
I n d u s t r i a l o u t p u t i n c r e a s e d in March and the d i s t r i b u t i o n of commodities
continued i n l a r g e volume owing to s e a s o n a l i n f l u e n c e s .
The l e v e l of whole-
s a l e p r i c e s d e c l i n e d f o r t h e f o u r t h c o n s e c u t i v e month.
Production
'
The F e d e r a l Reserve B o a r d ' s index of p r o d u c t i o n in b a s i c i n d u s t r i e s i n c r e a s e d i n March t o the h i g h e s t l e v e l f o r more than a y e a r .
Larger output
was shown f o r s t e e l i n g o t s , p i g i r o n , a n t h r a c i t e , c o p p e r , lumber, and newsp r i n t , and t h e r e were a l s o i n c r e a s e s in t h e a c t i v i t y of t e x t i l e m i l l s .
The
output of a u t o m o b i l e s i n c r e a s e d f u r t h e r and was l a r g e r than i n any p r e v i o u s
month, w i t h t h e e x c e p t i o n of l a s t O c t o b e r .
B u i l d i n g c o n t r a c t s awarded a l s o
i n c r e a s e d i n March, a s i s u s u a l a t t h i s s e a s o n , and t h e t o t a l was n e a r t h e
h i g h f i g u r e of l a s t summer,
p a r t i c u l a r l y l a r g e i n c r e a s e s in b u i l d i n g
a c t i v i t y a s compared w i t h a y e a r ago occurred i n the Eew Y o r k , A t l a n t a , and
Dallas Federal r e s e r v e d i s t r i c t s .
C o n t r a c t s awarded continued l a r g e r d u r i n g
t h e f i r s t h a l f of A p r i l than in t h e sane p e r i o d of l a s t y e a r .
Condition of
t h e w i n t e r wheat c r o p has improved s i n c e t h e t u r n of the y e a r and on A p r i l 1
was e s t i m a t e d by t h e Department of A g r i c u l t u r e t o be 84 p e r cent of normal,
compared w i t h 68.7 p e r cent l a s t y e a r and an average of 7 9 . 2 p e r cent f o r
t h e same d a t e i n t h e p a s t t e n y e a r s .
Trade
Wholesale t r a d e showed a s e a s o n a l i n c r e a s e in llarch and t h e volume of
s a l e s was l a r g e r than a y e a r ago in a l l l e a d i n g l i n o s except dry goods and
hardware.
S a l e s of department s t o r e s and mail order houses i n c r e a s e d l e s s
than i s u s u a l i n March.
Compared w i t h I'arch a y e a r ago s a l e s of department
s t o r e s were 7 p e r c e n t and s a l e s of mail order houses 9 p e r cent l a r g e r .
Stocks of p r i n c i p a l l i n e s of merchandise c a r r i e d by w h o l e s a l e d e a l e r s , except g r o c e r i e s and shoes
>• ^
• '• were l o n g e r a t the end of Eai'ch than
a month e a r l i e r , but f o r most l i n e s they were s m a l l e r than a y e a r age»
Stocks a t department s t o r e s showed s l i g h t l y more than the u s u a l i n c r e a s e in
March and were about 3 p e r cent l a r g e r than l a s t y e a r .
F r e i g h t car l o a d i n g s
d u r i n g March c o n t i n u e d a t h i g h e r l e v e l s than in the c o r r e s p o n d i n g p e r i o d of
previous y e a r s .
Shipments of m i s c e l l a n e o u s commodities and merchandise i n
l e s s - t h a n - c a r l o a d l o t s were e s p e c i a l l y l a r g o .
Loadings of c o a l , owing to
the l a r g e p r o d u c t i o n of a n t h r a c i t e , wore a l s o l a r g e , w h i l e shipments of coke
d e c r e a s e d c o n s i d e r a b l y from tho h i g h l e v e l s of p r e c e d i n g months.
Prices
W h o l e s a l e p r i c e s , a c c o r d i n g t o t h e Bureau of Labor S t a t i s t i c s i n d e x ,
d e c l i n e d by more than 2 p e r cent i n March to t h e l o w e s t * l e v e l s i n c e September,
1924.
The d e c l i n e was g e n e r a l f o r n e a r l y a l l groups of commodities and t h e
l a r g e s t d e c r e a s e s wore n o t e d in g r a i n s r c o t t o n , w o o l , s i l k , coke, and r u b b e r .
In t h e f i r s t two weeks of A p r i l p r i c e s of b a s i c c o n n o d i t i c s were s t e a d i e r
t h a n i n March.
P r i c e s of g r a i n s , f l o u r , and p o t a t o e s i n c r e a s e d , w h i l e p r i c e s
of c o t t o n goods, w o o l , s i l k , bituminous c o a l , p i g i r o n , and r u b b e r d e c l i n e d .
Bank c r e d i t .
Commercial l o a n s of member banks i n l o a d i n g c i t i e s were r e l a t i v e l y con-
-
3
-
3 0
$200,000,OOO h i g h e r than a t tho end of J a n u a r y and a p p r o x i m a t e l y equal t o tho
high p o i n t r e a c h e d l a s t autumn.
Continued l i q u i d a t i o n of l o a n s t o b r o k e r s
and d e a l e r s w?.s r e f l e c t e d in a f u r t h e r d e c l i n e in the t o t a l of loans on se^
c u r i t i e s , which on A p r i l 14 were more than ^500,000,000 below t h e h i g h p o i n t
reached a t t h e end of l a s t y e a r .
At tho r e s e r v e banks an i n c r e a s e in t h e volume of member bank borrowing
d u r i n g the l a s t two weeks of March was f o l l o w e d by a narked d e c l i n e i n the
f i r s t t h r e e weeks of A p r i l , which
of the y e a r .
brought t h e t o t a l n e a r t h e lowest l e v e l s
Holdings of United S t a t e s s e c u r i t i e s i n c r e a s e d c o n t i n u o u s l y
d u r i n g the month, w h i l e a c c e p t a n c e s d e c l i n e d s e a s o n a l l y .
T o t a l b i l l s and
s e c u r i t i e s were i n s m a l l e r volume a t the end Of t h e p e r i o d t h a n a t any o t h e r
time d u r i n g t h e y e a r and only s l i g h t l y l a r g e r than a y e a r a g o .
Open market r a t e s on commercial paper d e c l i n e d in A p r i l from 4 l / 4 4 l / 2 p e r cent t o 4 - 4 l / 4 p e r c e n t and r a t e s on a c c e p t a n c e s and on s e c u r i t y
loans wore a l s o lower i n A p r i l than in March.
On A p r i l 23 t h e d i s c o u n t r a t e
a t tho F e d e r a l Reserve Bank of ITew York was reduced from 4' t o 3 l / 2 p e r c e n t .
X-4595-a
304
ERRORS IN OODIFICATIOIT BILL RELATING TO
THE FEDERAL RESERVE ACT.
The following i s a l i s t of errors which have been found in that
part of H. R. 10,000, a b i l l for .the codification of the Federal statutes,
which corresponds to the various provisions of the Federal Reserve Act and
to certain other statutes related to the Federal Reserve Act and published
in the appendix of the edition of the Federal Reserve Act prepared by the
Federal Reserve Board.
OMISSIONS
The sixth end seventh paragraphs of Section 2 of the Federal Reserve
Act providing for the forfeiture of the franchises of national banks, have
been omitted from the b i l l *
This omission was made evidently because these
provisions were considered obsolete.
A careful examination, however, shows
that they are not obsolete but are s t i l l in f u l l force and e f f e c t and applicable to national banks at the present time.
The f i r s t sentence of the fourth paragraph of Section 10 providing
that the f i r s t meeting of the Federal Reserve Board shall be held in
Washington i s omitted.
This was also omitted no doubt because considered
obsolete but the provision i s one which m&y have a bearing upon the l o cation or s i t u s of the Federal Reserve Board for puxpoaoe of suit or otherwise and should be retained.
In Section 25(a) three sentences at the end of the paragraph incorporated in the b i l l as Section 618 have been omitted.
These sentences
deal with the increase or decrease of the capital stock of foreign banking
corporations organized under Federal charter, the withdrawal of the capital
stock of such organizations and the investment in thu capital stock of
-2- - . .
J-A59S-& 305
such c o r p o r a t i o n s by n a t i o n a l b a n k s .
The p r o v i s i o n s of S e c t i o n 26 of the F e d e r a l Reserve Act p r o v i d i n g t h a t
the S e c r e t a r y of t h e Treasury may borrow g o l d f o r the p u r p o s e of m a i n t a i n i n g
the p a r i t y of a l l forms of money has n o t been f o u n d .
I t may be t h a t t h i s
p r o v i s i o n i s i n c l u d e d i n some o t h e r t i t l e of the c o d i f i c a t i o n b i l l .
S e c t i o n 29 of t h e F e d e r a l Reserve Act p r o v i d i n g t h a t i f any p a r t of
the Act i s adjudged i n v a l i d such i n v a l i d i t y s h a l l not extend to o t h e r p a r t s
of t h e Act, has been o m i t t e d .
S e c t i o n 30 of the F e d e r a l Reserve Act p r o v i d i n g t h a t the Act may be
a l t e r e d , amended, o r r e p e a l e d , has a l s o been o m i t t e d .
There a r e c e r t a i n o t h e r p o r t i o n s of the F e d e r a l Reserve Act which have
been o m i t t e d from the c o d i f i c a t i o n b u t the omissions mentioned above a r e
t h e only ones found to be m a t e r i a l .
A l l o t h e r p r o v i s i o n s which have been
o m i t t e d a r e b e l i e v e d t o be e n t i r e l y o b s o l e t e .
OTHER ERRORS.
V
S e c t i o n 82.
Corresponds t o S e c t i o n 5202 of the Revised S t a t u t e s a s amended
by S e c t i o n 13, F e d e r a l Reserve A c t .
The r e f e r e n c e i n t h i s
s e c t i o n t o Chapter 10 of T i t l e 15, Commerce and Trade, i t has
been i m p o s s i b l e t o check because the r e f e r e n c e i s n o t found
i n t i t l e 12 which i s the only t i t l e a v a i l a b l e .
The 8 t h e x c e p t i o n made u n d e r t h i s s e c t i o n i s n o t now law.
This e x c e p t i o n was i n t e n d e d to be made by S e c t i o n 504 of t h e
A g r i c u l t u r a l C r e d i t s Act of 1923 b u t by m i s t a k e the amending
p r o v i s i o n r e f e r r e d to S e c t i o n 502 of t h e Revised S t a t u t e s
i n s t e a d of 5202 of the Revised S t a t u t e s .
-3Section. 93.
X-4595-a
t
Corresponds to t h e t e n t h p a r a g r a p h of S e c t i o n 13 of the
F e d e r a l Reserve Act,
In t h e l a s t l i n e of t h i s s e c t i o n the
word " f i l i n g " h a s been omitted between t h e words " i n " and
"his".
S e c t i o n 321. Corresponds to S e c t i o n 1 of the F e d e r a l Reserve A c t .
The
d e f i n i t i o n of a "member banld1 r e a d s , i n p a r t , " * * a member
of one of t h e r e s e r v e banks c r e a t e d by t h i s c h a p t e r I n a s much a s F e d e r a l r e s e r v e banks were c r e a t e d u n d e r the F e d e r a l
R e s e r v e Act of December 33, 1913 and t h e p r o v i s i o n s f o r t h e i r
c r e a t i o n a r e o m i t t e d from the code, i t would be b e t t e r to say
" a member of one of the F e d e r a l r e s e r v e b a n k s . "
S e c t i o n 333. Corresponds t o f i r s t p a r a g r a p h of S e c t i o n 2 of the F e d e r a l
Reserve Act.
Leaves out p r o v i s i o n s r e g a r d i n g r e s e r v e bank
o r g a n i z a t i o n committee b u t r e t a i n s p r o v i s i o n t h a t new d i s t r i c t s
may be from time t o time c r e a t e d by the F e d e r a l Reserve Board
n o t to exceed twelve i n a l l .
Inasmuch a s twelve d i s t r i c t s
have a l r e a d y been c r e a t e d , t h i s p r o v i s i o n i s o b s o l e t e and
s h o u l d be o m i t t e d u n l e s s i t i s d e s i r e d t o p r e s e r v e a l l of
t h e p r o v i s i o n s r e l a t i n g to t h e o r i g i n a l c r e a t i o n of the Federal reserve districts.
The a u t h o r i t y to r e a d j u s t d i s t r i c t s ,
however, should be p r e s e r v e d .
S e c t i o n 333. P r o v i d e s t h a t , "The F e d e r a l r e s e r v e c i t i e s now i n e x i s t e n c e
a r e continued."
This i s new and might be c o n s t r u e d t o f o r b i d
the changing of any F e d e r a l r e s e r v e c i t y .
The p r e s e n t law
does not f o r b i d t h e changing of a F e d e r a l r e s e r v e c i t y ; b u t
t h e A t t o r n e y General has r u l e d t h a t t h e p r e s e n t law does not
301
-4-
X-4595-a
a u t h o r i z e the F e d e r a l Reserve Bo-.rd to change a F e d e r a l
r e s e r v e c i t y once e s t a b l i s h e d .
S e c t i o n 225.
T h i s c o n t a i n s a new p r o v i s i o n t o the e f f e c t t h a t , ''The F e d e r a l
r e s e r v e banks now i n e x i s t e n c e i n the v a r i o u s F e d e r a l r e s e r v e
c i t i e s are continued".
This a l s o might be c o n s t r u e d to p r o -
h i b i t t h e d i s c o n t i n u a n c e of any F e d e r a l r e s e r v e bank but the
A t t o r n e y General has r u l e d t h a t the p r e s e n t law does not aut h o r i z e the F e d e r a l Reserve Board to d i s c o n t i n u e any F e d e r a l
r e s e r v e bank once e s t a b l i s h e d .
S e c t i o n 248
(el-
This corresponds to S e c t i o n l l ( e ) of the F e d e r a l Reserve Act
and r e f e r s t o t h e r e s e r v e r e q u i r e m e n t s s e t f o r t h i n " S e c t i o n
20 of t h i s c h a p t e r " .
There i s no S e c t i o n 20 i n t h e same
c h a p t e r of the Code, and t h e p r o p e r s e c t i o n number should be
substituted.
S e c t i o n 11(e) of the F e d e r a l Reserve Act r e f e r s
t o S e c t i o n 20 of t h e F e d e r a l Reserve Act; b u t t h i s o b v i o u s l y
i s a c l e r i c a l e r r o r , and Congress o b v i o u s l y i n t e n d e d to r e f e r
to S e c t i o n 13 of the F e d e r a l I t f s e r v e A c t , which i s covered
by S e c t i o n s 461-466 of the Code.
S e c t i o n 248
ill-
Corresponds t o S e c t i o n 11(1) of the F e d e r a l R e s e r v e A c t .
The
r e f e r e n c e to s e c t i o n 632 of T i t l e 5 i t has been i m p o s s i b l e
t o check because t h i s t i t l e i s n o t a v a i l a b l e .
S e c t i o n 282.
Corresponds t o a p o r t i o n of S e c t i o n 2 of t h e F e d e r a l Reserve
Act.
While t h i s makes c e r t a i n changes i n t h e t e x t of the
law i t i s not o b j e c t i o n a b l e .
X-4595-a
-o-
S e c t i o n 284.
308
Corresponds t o c. p o r t i o n of S o c t i o n 2 of the F e d e r a l
6 s s e r v e Act.
T h i s c o n t a i n s p a r t but n o t a l l of the
c o r r e s p o n d i n g paragraph of the F e d e r a l Reserve A c t , a l l
of which i s p r a c t i c a l l y o b s o l e t e because no s t o c k has
e v e r been a l l o t t e d to t h e U n i t e d S t a t e s and none ever
w i l l be a l l o t t e d t o t h e U n i t e d S t a t e s u n d e r the p r e s e n t
law.
I t would seen t h a t the c o r r e s p o n d i n g p a r a g r a p h of
t h e F e d e r a l Reserve Act should e i t h e r be o m i t t e d e n t i r e l y
or a l l of i t should be covered i n the c o d i f i c a t i o n b i l l *
S e c t i o n 324.
Corresponds to a p a r t of S e c t i o n 9 of t h e F e d e r a l Reserve
Act.
The r e f e r e n c e to " t h i s s e c t i o n " s h o u l d be changed
to r e a d " S e c t i o n s 321 to 331."
S e c t i o n 330.
Corresponds to a p a r t of S e c t i o n 9 of the F e d e r a l Reserve Act.
The r e f e r e n c e t o " t h i s s e c t i o n " should bo
changed to read " S e c t i o n s 321 t o 331."
S e c t i o n 331.
Corresponds to a p a r t of S e c t i o n 9 of the F e d e r a l
Reserve A c t .
The r e f e r e n c e t o " t h i s s e c t i o n " should
be changed to read " S e c t i o n s 321 to 331."
S e c t i o n 341.
Corresponds to a p a r t of S e c t i o n 4 of t h e F e d e r a l Res e r v e Act.
I n t h e t h i r d l i n e of t h i s s e c t i o n , the words
" t h e o r g a n i z a t i o n of" a r e s u p e r f l u o u s and s h o u l d be
omitted.
The p r e c e d i n g p a r a g r a p h s of the o r i g i n a l Fed-
e r a l Reserve Act p r o v i d i n g f o r the o r g a n i z a t i o n of
F e d e r a l r e s e r v e banks was o m i t t e d a p p a r e n t l y because
they a r e obsolete.
E i t h e r t h e s e p r o v i s i o n s should be
-6-
X-4595-a
309
r e s t o r e d o r , i f the p o l i c y of t h e c o d i f i c a t i o n
i s to omit e v e r y t h i n g which i s o b s o l e t e , the f i r s t
p a r a g r a p h of t h i s s e c t i o n should merely p r o v i d e t h a t ,
"Every F e d e r a l r e s e r v e bank s h a l l be deemed a body
c o r p o r a t e and as such and in the name d e s i g n a t e d i n
i t s o r g a n i z a t i o n c e r t i f i c a t e s h a l l have power".
The
l a s t p a r a g r a p h of t h i s s e c t i o n p r o v i d e s t h a t no Fede r a l r e s e r v e bank s h a l l t r a n s a c t any b u s i n e s s except
such as i s i n c i d e n t a l and n e c e s s a r i l y p r e l i m i n a r y t o
i t s o r g a n i z a t i o n u n t i l a u t h o r i z e d by t h e Comptroller
of the Currency to commence b u s i n e s s .
I f i t i s the
p o l i c y of the c o d i f i c a t i o n to omit a l l o b s o l e t e m a t t e r
i t would seem t h a t t h i s p a r a g r a p h should be omitted.The r e f e r e n c e i n the p a r e n t h e s e s f o l l o w i n g t h i s s e c t i o n
i s to "December 23, 1913, c.. 6, s e c t i o n 1 , 38 S t a t . 254".
This should be changed t o r e a d "December 23,
1913 c. 6, s e c t i o n 4, 38 S t a t . 251"*
Corresponds t o a p a r t of S e c t i o n 13 of the F e d e r a l Res e r v e Act.
The comma a f t e r t h e word "checks" i n the
f i r s t l i n e of t h e second column on page 281 s h o u l d be
o m i t t e d a s i t was not i n t h e o r i g i n a l a c t and i t s i n s e r t i o n a t t h i s p l a c e might be c o n s t r u e d to change t h e
meaning of the law.
Corresponds t o a p a r t of S e c t i o n 13 of the F e d e r a l Reserve
Act.
There i s a t y p o g r a p h i c a l e r r o r i n the middle of t h i s
s e c t i o n ; t h e word "or" s h o u l d be i n s e r t e d a f t e r t h e word
"wares".
-7~
X-4595-a
310
S e c t i o n 345.
Corresponds to a p a r t of S e c t i o n 13 of t h e F e d e r a l
Reserve A c t ,
The c a t c h - l i n e of t h i s s e c t i o n i s i n c o r r e c t
and m i s l e a d i n g .
The l i m i t a t i o n c o n t a i n e d i n t h i s s e c t i o n
a p p l i e s to t h e r e d i s c o u n t of any and a l l p a p e r b u t t h e
c a t c h l i n e would i n d i c a t e t h a t i t a p p l i e s o n l y t o a g r i cultural paper.
In view of t h e s u b d i v i s i o n i n t o s e p a r a t e
s e c t i o n s i t would seem t h a t t h e word " such" i n t h e t h i r d
l i n e of t h i s s e c t i o n could w e l l b e o m i t t e d .
S e c t i o n 346.
Corresponds to a p a r t of S e c t i o n 13 of t h e F e d e r a l Reserve
Act.
In view of t h e rearrangement of t h e p r o v i s i o n s of
t h e F e d e r a l Reserve Act r e l a t i n g to a c c e p t a n c e s of member
banks i t would seem t h a t t h e p h r a s e "of t h e k i n d s h e r e i n a f t e r
d e s c r i b e d " should b e changed t o r e a d "of t h e k i n d s d e s c r i b e d i n s e c t i o n s 372 and 373."
S e c t i o n 350.
Corresponds t o a p a r t of t h e A g r i c u l t u r a l C r e d i t s Act of
1923.
R e f e r e n c e t o T i t l e I of t h e F e d e r a l Farm Loan Act
should be changed so a s to r e f e r t o t h e p r o p e r c h a p t e r and
t i t l e of t h e c o d i f i c a t i o n .
S e c t i o n 351.
Corresponds t o a p a r t of t h e A g r i c u l t u r a l C r e d i t s Act of
1923.
The p h r a s e " w i t h i n t h e meaning of t h e t h r e e p r e c e d -
i n g s e c t i o n s " should be changed to r e a d " w i t h i n t h e meani n g of S e c t i o n 348."
S e c t i o n 373.
Corresponds to a p a r t of S e c t i o n 13 of t h e F e d e r a l Reserve
Act.
The word "or" s h o u l d b e i n s e r t e d a f t e r t h e word
" t i t l e " i n t h e 19th l i n o .
-8-
S e c t i o n 375.
X-4595-a
311
Corresponds to a p a r t of S e c t i o n 22 of t h e F e d e r a l Reserve
Act.
The word " s u b s e c t i o n " i n tho second p a r a g r a p h i t would
seem should be changed to " s e c t i o n " .
S e c t i o n 391.
Corresponds to a p a r t of S e c t i o n 15 of t h e F e d e r a l Reserve
Act.
The word "money" should be changed t o "moneys". This
s e c t i o n i s i n e f f e c t amended by t h e A p p r o p r i a t i o n Act of
1920 approved May 2 9 , 1920, b u t t h e amendment i s n o t n o t e d
in the c o d i f i c a t i o n .
Section 412.
Corresponds to a p a r t of S e c t i o n 16 of t h e F e d e r a l Reserve
Act.
The r e f e r e n c e to S e c t i o n 342 i s wrong; b e c a u s e ,
u n d e r t h a t s e c t i o n , n o t e s , d r a f t s and b i l l s of exchange may
b e r e c e i v e d o n l y f o r p u r p o s e s of c o l l e c t i o n and t h e F e d e r a l
r e s e r v e bank h o l d s them merely a s agent and t h e r e f o r e could
n o t pledge them w i t h t h e F e d e r a l Reserve Agent a s c o l l a t e r a l
security.
The r e f e r e n c e to S e c t i o n 372 i s i n c o r r e c t because
t h a t s e c t i o n merely r e f e r s to t h e power of member banks to
a c c e p t t h e d r a f t s and b i l l s of exchange drawn upon them.
R e f e r e n c e t o S e c t i o n s 343-347 would b e c o r r e c t .
Where r e -
f e r e n c e i s made to s e c t i o n s 353 t o 358 i t s h o u l d r e f e r to
S e c t i o n s 353 to 359 so a s t o i n c l u d e a c c e p t a n c e s of F e d e r a l
I n t e r m e d i a t e C r e d i t Banks and N a t i o n a l A g r i c u l t u r a l C r e d i t
C o r p o r a t i o n s endorsed by member banks and p u r c h a s e d by
F e d e r a l r e s e r v e banks (under S e c t i o n 1 4 ( f ) of F e d e r a l
Reserve Act),
I t would a l s o seem t h a t a r e f e r e n c e should be
made t o S e c t i o n 348; b u t t h i s i s n o t e s s e n t i a l , i n view of
X-4595-a
t h e f a c t t h a t S e c t i o n 348 i t s o l f makes a g r i c u l t u r a l p a p e r
acquired thereunder e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r
Federal reserve notes.
Section 422.
Corresponds to a p a r t of S e c t i o n 16 of t h e F e d e r a l Reserve
Act.
1908".
This r e f e r s to " n o t e s p r o v i d e d f o r by Act of May 30,
R e f e r e n c e should be made to t h a t s e c t i o n of t h e
Code which c o r r e s p o n d s to t h e Act of May 30, 1908.
This
s e c t i o n of t h e c o d i f i c a t i o n a l s o c o n t a i n s a p h r a s e " a t t h e
time of t h e p a s s a g e of t h i s c h a p t e r " ,
"chapter" being
s u b s t i t u t e d f o r t h e word " a c t " a s c o n t a i n e d i n t h e F e d e r a l
Reserve A c t .
I t would seem t h a t t h i s p h r a s e should be
changed to r e a d " a t t h e time of t h e p a s s a g e of t h e F e d e r a l
Reserve A c t . "
S e c t i o n 448.
Corresponds to a p a r t of S e c t i o n 18 of t h e F e d e r a l Reserve
Act.
The word " h e r e i n " i n t h e l a s t l i n e should be s t r i c k e n
o u t and t h e words " i n S e c t i o n s 441 to 448 of t h i s c h a p t e r "
added a t t h e end of t h e s e c t i o n .
S e c t i o n 467.
Corresponds t o a p a r t of S e c t i o n 16 of t h e F e d e r a l Reserve
Act.
The words " o r any A s s i s t a n t T r e a s u r e r " which a r e now
f o u n d i n t h e t h i r d l i n e of t h e p r e s e n t law a f t e r t h e word
" T r e a s u r e r " a r e o m i t t e d from t h e c o d i f i c a t i o n .
The words
" o r A s s i s t a n t T r e a s u r e r " now found i n t h e e i g h t h l i n e of
t h e p r e s e n t law af t e r t h e word " T r e a s u r e r " a r e a l a o o m i t -
3 1 2
-10-
ted.
X-4595-a
<*-8 «}
Inasmuch a s t h e S u b t r e a s u r i e s and t h e o f f i c e of
A s s i s t a n t T r e a s u r e r were a b o l i s h e d by t h e A p p r o p r i a t i o n
Act of May 29, 1920, t h e omission of r e f e r e n c e s t o t h e
Assistant Treasurers i s probably c o r r e c t .
The word
" s e c t i o n " found i n t h e f i r s t and second l i n e s of t h e l a s t
p a r a g r a p h of t h i s s e c t i o n should be changed to r e a d " c h a p t e r . "
Section 482.
Corresponds to a p a r t of S e c t i o n 5240 of t h e R e v i s e d S t a t u t e s
a s amended by S e c t i o n 21 of t h e F e d e r a l Reserve A c t .
The
word " h e r e i n " in t h e f i f t h l i n e should b e s t r i c k e n out and
t h e words " i n S e c t i o n 481" i n s e r t e d a f t e r t h e words " p r o v i d e d
for".
S e c t i o n 605.
Corresponds to a p a r t of S e c t i o n 25 of t h e F e d e r a l Reserve
Act.
The r e f e r e n c e to " S e c t i o n 197, T i t l e 15, Commerce and
Trade" i t h a s been i m p o s s i b l e to check b e c a u s e t h i s t i t l e
i s not a v a i l a b l e .
S e c t i o n 611,
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act.
*
The word " s e c t i o n " i n t h e n i n t h and t w e l f t h l i n e s
•
should be changed to r e a d " s u b d i v i s i o n of Chapter 6 " .
•*
S e c t i o n 613,
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act,
The word " s e c t i o n " i n t h e l a s t l i n e should be changed to
r e a d " s u b d i v i s i o n of c h a p t e r 6 " ,
S e c t i o n 614,
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act.,
The second word of t h e t e x t of t h i s s e c t i o n , "person"
s h o u l d b e made p l u r a l , " p e r s o n s . "
-11-
S e c t i o n 615.
X-4595-a
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act.
The word " c h a p t e r " i n t h a f o u r t e e n t h l i n e f r o m t h e end
of p a r a g r a p h ( a ) should he " s u b d i v i s i o n of Chapter 6 " .
The
word " s e c t i o n " i n t h e n i n t h l i n e f r o u t h e end of p a r a g r a p h ( a ) ,
i n t h e f i f t h l i n e from t h e end of p a r a g r a p h ( a ) , i n t h e f o u r t h
l i n e from the end of p a r a g r a p h ( a ) , i n t h e f o u r t h l i n e from
t h e b e g i n n i n g of p a r a g r a p h ( c ) and i n t h e s i x t h l i n e of t h e
l a s t p a r a g r a p h , should "be changed to " s u b d i v i s i o n of Chapter 6."
S e c t i o n 616.
Corresponds to a p a r t of S e c t i o n 25 ( a ) of t h e F e d e r a l Reserve
Act.
The word " s e c t i o n " i n t h e t e n t h l i n e s h o u l d b e changed
to " s u b d i v i s i o n of c h a p t e r 6" and the same change s h o u l d b e
made i n t h e l a s t word of t h i s s e c t i o n .
S e c t i o n 617.
Corresponds t o a p a r t of S e c t i o n 2 o ( a ) of t h e F e d e r a l Reserve
Act.
The word " s e c t i o n " i n t h e f i f t h l i n e should b e changed to
r e a d " s u b d i v i s i o n of c h a p t e r 6"»
The word " s e c t i o n " i n t h e
second s e n t e n c e should a l s o b e so changed.
S e c t i o n 618.
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act.
4
The word " s e c t i o n " i n t h e f i f t h l i n e from t h e end of t h i s
s e c t i o n s h o u l d be changed to
11
s u b d i v i s i o n of c h a p t e r 6 . "
The
r e f e r e n c e to s e c t i o n 25 of t h e F e d e r a l R e s e r v e Act a s amended,
a p p e a r i n g i n t h e f i f t h l i n e from t h e end of t h i s s e c t i o n should
be changed so a s to r e f e r to S e c t i o n s 6 0 1 t o 605 of t h i s c h a p t e r .
S e c t i o n 619.
4
Corresponds to a p a r t of S e c t i o n 25 ( a ) of t h e F e d e r a l Reserve
Act.
The word " s e c t i o n "
a p p e a r i n g i n t h e 9 t h l i n e from t h e
end of t h i s s e c t i b n and a l s o a s t h e l a s t word of t h i s s e c t i o n
X-4595-a
-12-
should, "be changed to " s u b d i v i s i o n of c h a p t e r 6 . "
word
11
115
After the
s e c t i o n " i n t h e n i n t h l i n e from t h e end of t h i s s e c t i o n
t h e word " i n " which i n the p r e s e n t law p r e c e d e s t h e words
"whose c a p i t a l stock" has been o m i t t e d .
meaning of t h e s e n t e n c e e n t i r e l y .
This changes t h e
The r e f e r e n c e t o S e c t i o n
19 of T i t l e 15 Commerce and Trade, found i n t h i s s e c t i o n i t
h a s been i m p o s s i b l e to check because t h i s t i t l e i s n o t a v a i l a b l e .
S e c t i o n 629.
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act .
In t h e e i g h t h l i n e from t h e end of t h e s e c t i o n , t h e word
" s e c t i o n " should be changed to " s u b d i v i s i o n of c h a p t e r 6 . "
S e c t i o n 630.
Correspohds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l Reserve
Act.
The word " s e c t i o n " i n t h e f o u r t h l i n e f r o m t h e end should
be changed to " s u b d i v i s i o n of c h a p t e r 6 . "
S e c t i o n 631.
Corresponds to a p a r t of S e c t i o n 2 5 ( a ) of t h e F e d e r a l , R e s e r v e
Act.
In t h e s e v e n t h l i n e of t h i s s e c t i o n t h e word "hereunder"
should be changed to r e a d "under t h i s s u b d i v i s i o n of c h a p t e r
6".
S e c t i o n 943.
Corresponds to a p a r t of t h e Farm l o a n A c t .
The words
" s u b d i v i s i o n (b) of" I n t h e 5 t h and 6 t h l i n e s should be o m i t t e d .
S e c t i o n 1222.
Corresponds to a p a r t of t h e A g r i c u l t u r a l C r e d i t s Act of
1923,
The word " s e c t i o n " i n t h e second l i n e s h o u l d b e changed
to r e a d " c h a p t e r " ,
S e c t i o n 1223
Corresponds to a p a r t of t h e A g r i c u l t u r a l C r e d i t s Act of 1923.
The word " s e c t i o n " i n the second l i n e should be changed t o r e a d
"chapter".
X-45$M)6
(Memorrnnjum J r ^ & r e d by O f f i c e of Comptroller of t h e C u r ^ n ^ f ) - .
A p r i l 31, 1926.
Memorandum f o r t h e C o m p t r o l l e r ;
I have given a h u r r i e d examination of t h e p r o p o s e d c o d i f i c a t i o n of t h e laws w i t h r e f e r e n c e to s e c t i o n s r e l a t i n g to N a t i o n a l
Banks and f i n d t h e f o l l o w i n g o m i s s i o n s and e r r o r s :
OMISSIONS.
1 . The p r o v i s i o n i n t h e Act of June 3, 1864, i n c o r p o r a t e d i n S e c t i o n
D80 of t h e R e v i s e d S t a t u t e s p r o v i d i n g t h a t s u i t s and p r o c e e d i n g s
a r i s i n g o u t of laws governing N a t i o n a l Basking A s s o c i a t i o n s should, J^a,
conducted b y d i s t r i c t a t t o r n e y s under t h e s u p e r v i s i o n of t h e
S o l i c i t o r of t h e T r e a s u r y ,
2i The p r o v i s i o n i n t h e Act of June 5, 1664, i n c o r p o r a t e d i n S e c t i o n
736 of t h e R e v i s e d S t a t u t e s p r o v i d i n g when p r o c e e d i n g s to e n j o i n t h e
Comptroller, must be b r o u g h t ,
3 . The p r o v i s i o n i n t h e Act of June 3, 1864. i n c o r p o r a t e d i n S e c t i o n
884 of t h e Revised S t a t u t e s nai.ti.ng s e a l e d c e r t i f i c a t e s of t h e
Comptroller competent e v i d e n c e .
4 . The p r o v i s i o n i n t h e Act of June 3, 1864, i n c o r p o r a t e d i n S e c t i o n
885 of t h e Revised Statutes? making a c e r t i f i e d copy of t h e O r g a n i z a t i o n
C e r t i f i c a t e evidence of t h e e x i s t e n c e of a N a t i o n a l Banking A s s o c i a t i o n ,
5 . The p r o v i s i o n i n t h e J e d o r a l Reserve Act i n c o r p o r a t e d i:i S e c t i o n
24 a s amended Se~:te".bcr 7 , 1316, a u t h o r i s i n g N a t i o n a l Banks to make
l o a n s on r o a l e s t a t e . While t h i s was p a s s e d a s an amendment to t h e
F e d e r a l Reserve ^.ct, i t r e l a t e s e n t i r e l y to N a t i o n a l Banks and should
be i n c o r p o r a t e d i n t h e c h a p t e r s r e l c , t i n c : to n a t i o n a l Bank Act and
n o t i n c h a p t e r s r e l a t i n g to t h e F e d e r a l Reserve A c t .
6. That p o r t i o n of S e c t i o n 11-K of t h e F e d e r a l Reserve Act a u t h o r i z i n g t h e F e d e r a l Reserve Board to i s s u e p e r m i t s to N a t i o n a l Banks to
e x e r c i s e f i d u c i a r y powers. As thi;3 r s l a t e s to N a t i o n a l Banks i t should
a p p e a r i n the c h a p t e r s r e l a t i n g to N a t i o n a l Bank Act and n o t to t h o s e
r e l a t i n g to t h e F e d e r a l Reserve A c t .
7 . S e c t i o n 25 of t h e F e d e r a l R3se:cva Act a u t h o r i z e s N a t i o n a l Banki n g A s s o c i a t i o n s p o s s e s s i n g c a p i t a l of a m i l l i o n d o l l a r s o r more w i t h
t h e p e r m i s s i o n oi' t h e F e d e r a l Reserve Board t o e s t a b l i s h b r a n c h e s i n
foreign countries.
This r e l a t e n e n t i r e l y t o N a t i o n a l Banks and should
appear i n c h a p t e r s r e l a t i n g to t h e N a t i o n a l Bank Act and n o t i n t h e
F e d e r a l Reserve A c t .
%
-2-
X-4595-b
3 1 7
8 . The 16th p a r a g r a p h of flection 24 of t h e Act of March 3, 1911,
p r o v i d i n g t h a t N a t i o n a l Banks should "be deemed c i t i z e n s of t h e
s t a t e s i n which l o c a t e d should a l s o appear i n t h e N a t i o n a l Bank A c t .
9 . S e c t i o n 18 Act of December 23, 1913, a u t h o r i z i n g N a t i o n a l Banks
to r e t i r e t h e whole or any p a r t of t h e i r c i r c u l a t i n g n o t e s "by s a l e
to F e d e r a l Reserve Banks.
10. S e c t i o n 175 Act of March 4 , 1909, p r o v i d i n g p e n a l t y f o r i m i t a t e
i n g banks c i r c u l a t i o n .
11* S e c t i o n 176 Act of March 4 , 1909, p r o v i d i n g a p e n a l t y f o r mut i l a t i n g N a t i o n a l Banking c i r c u l a t i o n .
*
12. While p r o v i s i o n i s made i n t h e Act f o r r e s e r v e s and where t h e y
s h a l l be h e l d f o r banks l o c a t e d i n Alaska and Hawaii, a l l p r o v i s i o n s
r e l a t i n g to r e s e r v e s f o r N a t i o n a l Banks i n t h e c o n t i n e n t a l United
S t a t e s t h a t a r e member banks of t h e F e d e r a l Reserve System, have
been o m i t t e d f r o m t h e N a t i o n a l Bank A c t .
As t h i s p r o v i s i o n a l t h o u g h
c o n t a i n e d i n t h e F e d e r a l Reserve Act r e l a t e s to N a t i o n a l Banks a s
w e l l a s to S t a t e Banks, a s e c t i o n should b e i n s e r t e d i n t h e N a t i o n a l
Bank Act c o v e r i n g t h e q u e s t i o n of r e s e r v e s .
1 3 . Act of J a n u a r y 26, 1907, f o r b i d d i n g N a t i o n a l Banks t o make con-v
t r i b u t i o n s i n c o n n e c t i o n w i t h e l e c t i o n t o p o l i t i c a l o f f i c e should b e
i n s e r t e d i n t h e c h a p t e r r e l a t i n g to N a t i o n a l Banks.
**
14. The p r o v i s i o n i n S e c t i o n 5240 a u t h o r i z i n g t h e Comptroller of t h e
Currency, w i t h t h e a p p r o v a l of t h e S e c r e t a r y of t h e T r e a s u r y , t o
a p p o i n t examiners who s h a l l examine every member bank a t l e a s t twice
each c a l e n d a r y e a r h a s been o m i t t e d .
The words "member banks" i n
t h i s s e c t i o n r e f e r t o N a t i o n a l Banks o n l y a s t h e Comptroller does
n o t a p p o i n t examiners to examine S t a t e Banks t h a t a r e members of t h e
F e d e r a l Reserve system.
15. The Act of A p r i l 12, 1900, e x t e n d i n g N a t i o n a l Banking laws to
P o r t o R i c a h a s been o m i t t e d ,
,
*
^
16, The Act of A p r i l 2 0 , 1 5 0 9 , e x t e n d i n g N a t i o n a l Banking laws t o Hawaii
h a s been o m i t t e d .
NOTE:
^
i
->
I t i s assumed t h a t
i n some o t h e r p a r t of
than t h a t r e l a t i n g to
t h e s e s e c t i o n s should
r e f e r r i n g to National
a l l of t h e s e s e c t i o n s a r e g i v e n
t h e p r o p o s e d R e v i s e d Code o t h e r
N a t i o n a l Banks b u t i t i s b e l i e v e d
be i n c o r p o r a t e d i n t h e Chapter
Banks.
-3-
X-4595-b
ERRORS IN THE PROPOSED REVISION
31
The Numbers g i v e n a r e t h e numbers of t h e new s e c t i o n s .
25.
This s e c t i o n i s n o t n e c e s s a r y a s i t merely r e p e a l s t h e qrld
E x t e n s i o n Act and p r o v i d e s t h a t t h e p r e c e d i n g s e c t i o n s h a l l govern.
The o l d E x t e n s i o n Act w i l l be r e p e a l e d by t h e g e n e r a l r e p e a l i n g
c l a u s e t h a t comes w i t h t h e enactment of t h e Revised S t a t u t e s and a
s p e c i f i c repeal i s not necessary.
38.
I t i s n o t u n d e r s t o o d why t h i s s e c t i o n i s i n s e r t e d . The Act
a s i t a t p r e s e n t s t a n d s i s i n c o r p o r a t e d under t h e t i t l e "Banks and
Bankers" and i s i n many ways d i f f e r e n t from t h e Act of June 3, 1864.
55.
Line 25 n e a r e s t i s m i s s p e l l e d .
57
and 58 Revised S t a t u t e s , S e c t i o n 5142, p r o v i d e d f o r an i n c r e a s e i n t h e c a p i t a l s t o c k of a N a t i o n a l Bank. When p r o v i s i o n was
made t h e r e f o r , i n t h e A r t i c l e s of A s s o c i a t i o n i n Act of May 1, 1886,
a new method f o r i n c r e a s i n g t h e c a p i t a l of a N a t i o n a l Bank was p r o vided f o r .
A p o r t i o n of S e c t i o n 5142 i s t h e r e f o r e o b s o l e t e and a
new s e c t i o n should be p r o v i d e d c o v e r i n g t h o s e p o r t i o n s of S e c t i o n s
57 and 58 t h a t a r e v a l i d a t t h i s t i m e . We had one i n s t a n c e r e c e n t l y
of a bank d e s i r i n g to i n c r e a s e i t s c a p i t a l s t o c k under t h e o l d p r o v i s i o n s of S e c t i o n 5142 w i t h o u t t h e v o t e of i t s s h a r e h o l d e r s a s i s
r e q u i r e d i n t h e Act of May 1, 1886.
S e c t i o n s 63 and 64. S e c t i o n 12 of t h e Act of June 3, 1864, i n c o r p o r a t e d i n R e v i s e d S t a t u t e s a s S e c t i o n 5151 p r o v i d i n g f o r t h e
i n d i v i d u a l l i a b i l i t y of s h a r e h o l d e r s , s t a t e d t h a t t h e s h a r e h o l d e r s
should b e h e l d i n d i v i d u a l l y r e s p o n s i b l e e q u a l l y and r a t a b l y and n o t
one f o r a n o t h e r , f o r a l l c o n t r a c t s , d e b t s and engagements of such
association, etc.
This i s i n c o r p o r a t e d a s S e c t i o n 63 of t h i p compiling.
S e c t i o n 34 of t h e Act of December 23, 193,3, p r o v i d e d t h a t
t h e s t o c k h o l d e r s of every N a t i o n a l Banking A s s o c i a t i o n s h a l l be h e l d
i n d i v i d u a l l y r e s p o n s i b l e f o r a l l c o n t r a c t d e b t s and engagements each
to t h e amount of h i s s t o c k t h e r e i n a t t h e p a r v a l u e t h e r e o f i n
a d d i t i o n t o t h e amount i n v e s t e d i n such s t o c k . The remainder of th&s
s e c t i o n r e l a t e s to t h e t r a n s f e r of s t o c k i n a N a t i o n a l Banking
A s s o c i a t i o n w i t h i n 60 days b e f p r o t h e d a t e of i t s f a i l u r e . These
two s e c t i o n s r e f e r r i n g to t h e game m a t t e r should be combined i n one
and n o t r e e n a c t e d a s t h e y s t a n d becaa.su t h e y d i f f e r a s to t h e l i a b i l i t y of s h a r e h o l d e r a .
As the l a s t p r o v i s i o n of law e n a c t e d governs
i t i s now h e l d t h a t tho l i a b i l i t y i s f i x e d by p r o v i s i o n i n S e c t i o n
23 of t h e Act of December 23, 1913, and not by S e c t i o n 12 of t h e Act
of June 3, 1864.
I f , however, b o t h s e c t i o n s should be r e e n a c t e d a s
p r o p o s e d , t h e r e would be a q u e s t i o n a s to e x a c t l y what t h e l i a b i l i t y
of a s h a r e h o l d e r of a bank would b o .
82.
In t h e f i f t h p a r a g r a p h of t h i s s e c t i o n a r e t h e words "of t h e
Federal Reserve Act i n s t e a d of Chapter 3 " . I n t h e s i x t h p a r a g r a p h a r e
319
-4-
X-4595-b
t h e words "of t h e War Finance i n s t e a d of Chapter 10 of t i t l e 15
Commerce and T r a d e " .
The e i g h t h p a r a g r a p h i s e n t i r e l y a d d i t i o n a l
and cannot be v e r i f i e d from a n y t h i n g s u b m i t t e d ,
84. On t h e f i f t e e n t h l i n e under t h i s number a f t e r 346 t h e r e
should a l s o be i n s e r t e d "372 and 373". There o r i g i n a l l y appeared
t h e number and words " 1 3 of t h e F e d e r a l Reserve A c t " . As i t s t a n d s
today " S e c t i o n " ' 3 4 6 a l o n e a p p e a r s ,
92.
L a s t l i n e f i l i n g o m i t t e d between i n
94,
F i r s t l i n e f i r s t word S u i t s o m i t t e d ,
107,
Line one
his,
e i g h t h word p r o c u r e d n o t p r o d u c e d .
143, The words " r e s e r v e of" o m i t t e d b e f o r e t h e words " l a w f u l money"
i n $he 18th l i n e of t h i s s e c t i o n .
145. The T r e a s u r y n o t e s r e f e r r e d to i n t h i s s e c t i o n a r e t h o s e
i s s u e d under t h e Sherman Act which h a s been r e p e a l e d ,
162,
In l i n e 7 v e r i f i c a t i o n i s m i s s p e l l e d ,
178, The second p a r a g r a p h of t h i s s e c t i o n r e l a t e s e n t i r e l y to c i r c u l a t i o n i s s u e d under a u t h o r i t y of t h e s o - c a l l e d A l d r i c h Act p a s s e d
H a y 30, 1908,
This Act e x p i r e d by l i m i t a t i o n and t h e r e i s no l o n g e r
any a u t h o r i t y f o r the i s s u a n c e of c i r c u l a t i n g n o t e s td N a t i o n a l Banks
on any s e c u r i t i e s o t h e r than bonds of t h e United S t a t e s , •
191, This s e c t i o n r e l a t e s to R e c e i v e r s h i p r e f e r r e d to a s S e c t i o n
9 4 . This should be 93,
548 (d) Second l i n e a f t e r 6 t h word i n s e r t a t ,
570
The l a s t c l a u s e does n o t r e f e r to N a t i o n a l Banks a t a l l ,
591. This i s Revised S t a t u t e s S e c t i o n 208 which h a s been e n t i r e l y
r e w r i t t e n and t h e g r e a t e r p a r t of t h e s e c t i o n h a s been o m i t t e d . The
e a r l y p a r t of S e c t i o n 5208 d e f i n e d t h e crime f o r f a l s i f y i n g c e r t i f i e d
c h e c k s . The l a t t e r p a r t p r o v i d e d a p e n a l t y t h e r e f o r . The former
p a r t of t h i s s e c t i o n h a s been e n t i r e l y emitted i n 591 t h e p e n a l t y
alone remaining i t being expressly stated t h a t i t i s a p e n a l t y f o r the
v i o l a t i o n s of t h e p r o v i s i o n s of this^ s e c t i o n . This r e f e r s to t h e
o m i t t e d p a r t of t h e s e c t i o n .
F E D E .R A. Z ' B,_E 5 E B V E
BOARD
X-4596
OU()
sikT^z:z'-i r o z t h e p r e s s
For immediate r e l e a s e
A p r i l 28, 1926.
CONDITION OF ACCEPTANCE MARKET
March IB, 1526 to A p r i l 14, 1926.
Acceptances.
During t h e l a s t two weeks of March t h e supply of a c c e p t a n c e s i n t h e New York
market i n c r e a s e d s l i g h t l y and t h e demand remained good with t h e c o n t i n u a n c e of
f o r e i g n , b u y i n g and r e l a t i v e l y easy money c o n d i t i o n s .
E a r l y i n A p r i l t h e demand
i n c r e a s e d s u b s t a n t i a l l y and d e a l e r s , f i n d i n g some d i f f i c u l t y i n r e p l e n i s h i n g
t h e i r p o r t f o l i o s reduced t h e i r r a t e s on A p r i l 7 by 1 / 8 p e r c e n t on a l l except
30-day b i l l s .
Firmer money c o n d i t i o n s soon a f t e r w a r d s , due i n p a r t to e x p o r t s
of c u r r e n c y to Cuba, r e s u l t e d i n heavy o f f e r i n g s of b i l l s i n b o t h t h e Hew York
and Boston m a r k e t s w i t h a p r a c t i c a l c e s s a t i o n of demand, and l a r g e s a l e s to t h e
r e s e r v e banks, c h i e f l y
of
b i l l s w i t h m a t u r i t i e s of 30 days or l e s s .
The t o t a l
volume of p u r c h a s e s r e p o r t e d by Hew York d e a l e r s d u r i n g t h e p e r i o d from March 18
t o A p r i l 14 was t h e l a r g e s t s i n c e December and t h e i r s a l e s , e x c e p t i n g s a l e s to
F e d e r a l r e s e r v e b a n k s , were t h e s m a l l e s t .
T h e i r p o r t f o l i o s on A p r i l 14 were l a r g -
er than on any o t h e r r e p o r t i n g d a t e f o r t h e l a s t t h r e e y e a r s .
Similar conditions
c h a r a c t e r i z e d t h e Chicago market where d e a l e r s r e p o r t e d a s l i g h t d e c l i n e i n p u r c h a s e s , a l a r g e d e c l i n e i n s a l e s , and i n c r e a s e d p o r t f o l i o s a t t h e end of t h e
period.
Cotton and c o f f e e were t h e commodities c h i e f l y r e p r e s e n t e d by t h e b i l l s i n
t h e market, w i t h a c o n s i d e r a b l e r e c e n t i n c r e a s e i n t h e number of sugar b i l l s .
B i l l r a t e s i n Hew York a t t h e b e g i n n i n g and end of t h e r e p o r t i n g p e r i o d a r e
given in t h e f o l l o w i n g t a b l e :
Maturity
30 days
60 "
90 "
120 "
150 "
180 "
Acceptance R a t e s i n t h e Hew York Market.
March 18, 1926
A p r i l . 14, 1926
Bid
Offered
Bid
Offered
3 5J8
3 1/2
3 5/8
3 1/2
3 3/4
3 5/8
3 5/8
3 1/2
3 3/4
3 5/8
3 5/8
3 1/2
3 7/8
3 3/4
. 3 3/4
3 5/8
4 1/8
4
3 7/8
3 3/4
4 1/8
4
4
3 7/8
X-4598.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
M a y
3 ,
1 9 2 6 .
S u b j e c t : Expenses i n Express Hate Case.
Dear S i r :
The a t t a c h e d c o p i e s of l e t t e r s exchanged by t h e Board
w i t h t h e Counsel f o r t h e F e d e r a l Reserve Bank of New York exp l a i n t h e f i n a l d i s p o s i t i o n of t h e complaint f i l e d w i t h t h e
I n t e r s t a t e Commerce Commission on b e h a l f of t h e F e d e r a l Reserve
Bank of Mew York, e t a l . a g a i n s t American Railway Express Company
e t a l . , f o r t h e p u r p o s e of o b t a i n i n g a r e v i s i o n of e x p r e s s r a t e s
on shipments of c o i n , c u r r e n c y , s e c u r i t i e s , e t c .
I f any f u r t h e r
i n f o r m a t i o n i s d e s i r e d , i t i s s u g g e s t e d t h a t your bank communic a t e w i t h t h e F e d e r a l R e s e r v e Bank of New York,
A l l F e d e r a l Reserve Banks upon r e c e i p t of t h e B o a r d ' s
l e t t e r of August 16, 1923 (X-3812) s i g n i f i e d t h e i r w i l l i n g n e s s
t o b e a r a p r o - r a t a s h a r e of t h e expense i n c u r r e d i n c o n n e c t i o n
w i t h t h i s c o m p l a i n t . The F e d e r a l Reserve Bank of New York h a s
s u b m i t t e d a s t a t e m e n t of expenses t o t a l i n g $10,168*34, copy e n c l o s e d , and on t h e b a s i s of p a i d - i n c a p i t a l and s u r p l u s a s a t
c l o s e of b u s i n e s s A p r i l 3 8 t h , t h e p r o - r a t a s h a r e s of t h e s e v e r a l
F e d e r a l R e s e r v e Banks a r e a s f o l l o w s :
Bos ton
New York
Philadelphia
Cleveland
Ricbmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas C i t y
Dallas
San F r a n c i s c o
Total
$765. 86
2 , 8 2 5 . 31
962. 59
1 , 0 7 9 . 85
533. 45
405. 17
1 , 3 9 6 . 38
439. 89
316. 00
393. 00
353. 89
696. 95
$10,168. 34
You a r e r e q u e s t e d t o r e m i t your p r o p o r t i o n a t e s h a r e of
t h e above expense d i r e c t to t h e New York bank.
http://fraser.stlouisfed.org/10 GOVERNORS
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
D. R. C r i s s i n g e r .
Governor.
OF ALL F . R. BANKS.
321
f
3 2 2
c o p y
STATEMENT OP EXPBHSES
X-4598-a
FEDERAL RESERVE BOARD vs AMERICAN RAILWAY EXPRESS
PAID BY FEDERAL RESERVE BANK OF NEW YORK
November 2 3 , 1923
James W. Carmalt
S p e c i a l Counsel
F e b r u a r y 2 , 1924
L* R. Sounds
Travel Expense
March 8, 1924
Brooks T r a f f i c
S e r v i c e Company
Preparing exhibi t s
and t e s t i f y i n g
March 11, 1924
- F.R. Bank of
$3,000.00
13*40
900.00
Cost of s t e n o g r a p h i c
work i n p r e p a r i n g
documents
99.66
March 26, 1924
Brooks T r a f f i c
S e r v i c e Company
Preparing exhibits
and t e s t i f y i n g •
1,155.28
March 23, 1926
James W. Carmalt
S p e c i a l Counsel
3,000.00
A p r i l 29, 1925
James W. Carmalt
S p e c i a l Counsel
2.000.00
$10.168.34
T
COPY
X-4598-b
A p r i l 27, 1926.
Dear S i r :
I acknowledge r e c e i p t of and have brought t o t h e
a t t e n t i o n of the F e d e r a l Reserve Board your l e t t e r of A p r i l
2 6 t h a d v i s i n g t h a t the I n t e r s t a t e Commerce Commission has
i s s u e d an o r d e r denying t h e p e t i t i o n f i l e d on b e h a l f of the
F e d e r a l r e s e r v e banks f o r a r e h e a r i n g on the e x p r e s s r a t e c a s e .
I t i s noted from your l e t t e r t h a t Mr. C a r n a l t concurs i n t h e
view t h a t t h e r e i s n o t h i n g to bo gained by p r e s e n t i n g the case
t o t h e c o u r t s , a s t h e r e i s but a remote chance t h a t the c o u r t s
would review and cnangc t h e f i n d i n g of t h e Commission t h a t the
r a t e s c h a r g e d by t h e e x p r e s s companies a r e i n f a c t f a i r and
reasonable.
I n view of t h e s e f a c t s , the Board approves of the
p r o p o s a l t h a t Mr, Carmalt be p a i d the $2,000 b al an ce' due him
on the minimum f e e f i x e d under t h e agreement of October 50, 1923.
I f , a f t e r making t h i s payment, you w i l l submit t o the Board a
s t a t e m e n t of t h e e n t i r e expenses of the ITew York Bank i n connect i o n w i t h t h i s c a s e , the Board w i l l bo glad t o a r r a n g e f o r
p r o r a t i n g among a l l the F e d e r a l r e s e r v e b a n k s .
Very t r u l y y o u r s ,
(Signed)
E. B. C r i s s i n g e r
D. B. C r i s s i n g e r ,
Governor.
Mr. L. R. Mason, General Counsel,
F e d e r a l Reserve Bank of ITew York,
Hew York, H. Y.
323
COPY
FKDEBAL H2SZ3VE BASK
X-4558-c
324
Or HEW YQEK
I . C. C. Docket Fo. 15449
F e d e r a l Reserve Bank of Few York
v#
American Railway Express Company e t al#
A p r i l 2 5 , 1926.
F e d e r a l Reserve Board,
Washington, B. C.
S i r s :
R e f e r e n c e i s made to l e t t e r a d d r e s s e d to me under d a t e of
F e b r u a r y 19 "by Vice Governor F l a t t i n r e g a r d to the above case*
On A p r i l 14 the I n t e r s t a t e Commence Coimiission p u b l i s h e d i t s o r d e r
of A p r i l 5, denying the p e t i t i o n f i l e d on b e h a l f of the r e s e r v e banks to r e open t h e c a s e .
i s concerned#
This f i n a l l y d i s p o s e s of the ma t t e r , so f a r as t h e Commission
Mr. Carina! t concurs in the view t h a t t h e r e i s n o t h i n g to be
g a i n e d by o r e s en t i n g the case to the c o u r t s .
I t i s thought we might be suc-
c e s s f u l i n g e t t i n g the c o u r t s to i n t e r p r e t the Cummins amendment i n a c cordance with our view of i t , but that p r a c t i c a l l y n o t h i n g would be g a i n e d
by so d o i n g , s i n c e the Commission has found i n the p r o c e e d i n g s t h a t the r a t e s
charged by t h e e x p r e s s companies a r e i n f a c t f a i r and r e a s o n a b l e .
The p o s -
s i b i l i t y of g e t t i n g the c o u r t s to review and change the f i n d i n g of f a c t by
the Commission i s too r e m o t e , in our judgment, to j u s t i f y r e s o r t i n g t o the
courts.
Mr. Carmali, has s u b m i t t e d h i s b i l l f o r $ 3 , 0 0 0 i n f i n a l payment of
h i s p r o f e s s i o n a l s e r v i c e s b e f o r e t h e Commission#
This i s t h e b a l a n c e of fee
minimum amount p a y a b l e to him under the f e e agreement of October 30, 1923.
I t i s proposed to make -oaynent t o him a c c o r d i n g l y and c l o s e the case*
Respectfully,
( s i g n e d ) L. R. Mason
L.R. Mason, General Couilsel#
X-4598-d
^ ®^ ^
February 19,
1926.
Mr. L. Randolph Mason, Counsel,
f e d e r a l He s e r v e Bank o f New York,
New York C i t y , New York.
Dear S i r i
The F e d e r a l Reserve Board has r e c e i v e d your l e t t e r of Febr u a r y 9th w i t h r e f e r e n c e t o the complaint f i l e d wi tin. the I n t e r s t a t e Commerce Commission on b e h a l f of the F e d e r a l Reserve Bank of
New York, e t a l . a g a i n s t American Railway Express Company e t a l f ,
f o r the p u r p o s e of o b t a i n i n g a r e v i s i o n of e x p r e s s r a t e s on s h i p ments of c o i n , c u r r e n c y , s e c u r i t i e s , e t c .
The Board n o t e s t h a t D i v i s i o n One of t h e I n t e r s t a t e Commerce
Commission has r e n d e r e d a d e c i s i o n a d v e r s e to t h e f e d e r a l r e s e r v e
banks and t h a t you propose t o f i l e a p e t i t i o n f o r a r e h e a r i n g b e f o r e t h e e n t i r e Commission. Inasmuch a s t h e r e i s e v e r y t h i n g to be
g a i n e d and n o t h i n g to be l o s t by f i l i n g such a p e t i t i o n , t h e Board
s e e s no r e a s o n why i t should not be f i l e d .
The Board a l s o n o t e s t h a t you propose t o pay Mr. Carmalt
$3,000 on account of h i s f o e f o r s e r v i c e s b e f o r e the I n t e r s t a t e Commerce Commission. Inasmuch a s the F e d e r a l Reserve Board has h e r e t o f o r e approved your c o n t r a c t with Mr. Carmalt f o r a minimum f e e of
$8,000 f o r h a n d l i n g t h i s m a t t e r b e f o r e the I n t e r s t a t e Commerce Comm i s s i o n and u n d e r s t a n d s t h a t you have only p a i d $3,000 of t h i s f e e
to d a t e , t h e Board s e e s no o b j e c t i o n to your p a y i n g him an a d d i t i o n a l $3,000 a t t h i s t i m e , l e a v i n g $2,000 of t h e minimum f e e to bo
p a i d when h i s s e r v i c e s b e f o r e the I n t e r s t a t e Commerce Commission
are f i n a l l y terminated.
The Board u n d e r s t a n d s t h a t the F e d e r a l Reserve Bank
of New York w i l l p a y a l l the expenses i n c u r r e d i n t h i s m a t t e r out
of i t s own f u n d s and w i l l c a r r y t h e amount i n a suspense a c c o u n t
u n t i l t h i s m a t t e r i s e n t i r e l y d i s p o s e d o f , a t which time the e n t i r e
expenses of h a n d l i n g the m a t t e r w i l l be p r o r a t e d among a l l the Fede r a l r e s e r v e banks and the o t h e r F e d e r a l r e s e r v e banks w i l l be
c a l l e d upon to reimburse the F e d e r a l Reserve Bank of New York f o r
t h e i r pro r a t a s h a r e s .
Very t r u l y y o u r s ,
WW SAD
(Signed) Idmund P i a t t
Vice Governor*
0 0 P Y
X~4598~e
3 2 6
FEDERAL RESERVE BAM OF HEW YOEK
February 9, 1925*
I.C.C.Docket No.15449
F e d e r a l Reserve Bank of Hew York
v.
American Railway Express Co. e t a l ,
F e d e r a l R e s e r v e Board,
Washington,
D.O.
S i r s :
On or about September 5, 1923, complaint was f i l e d w i t h the I n t e r s t a t e Commerce Commission on b e h a l f of the F e d e r a l Reserve Bank of HewYork
e t a l . v . American Railway Exprass Company e t a l . , a l l e g i n g t h a t t h e r a t e s
of the e x p r e s s companies on p r o p e r t y , i n c l u d i n g money, c o i n , c u r r e n c y , bank
n o t e s , s e c u r i t i e s , e t c . , and charges made t h e r e u n d e r , being based upon
the v a l u e of t h e shipments d e c l a r e d by the s h i p p e r and being e s t a b l i s h e d
w i t h o u t the a u t h o r i t y of t h e I n t e r s t a t e Commerce Commission, were i n v i o l a t i o n of S e c t i o n 20 of the I n t e r s t a t e Commerce Act known a s the Cummins
Amendment; t h a t t h e r a t e s were e x c e s s i v e and u n r e a s o n a b l e w i t h r e f e r e n c e t o
the element of i n s u r a n c e ; t h a t the r a t e s wore d i s c r i m i n a t o r y and were p r e f e r e n t i a l to s h i p p e r s of o t h e r commodities.
A h e a r i n g was h e l d upon the i s s u e s r a i s e d by the complaint b e f o r e
an examiner of t h e commission i n Hew York City i n February and March of
1924. • At t h i s h e a r i n g the banks were r e p r e s e n t e d by Mr. Carmalt and myself *
We o f f e r e d t e s t i m o n y showing the h i s t o r y of t h e r a t e s i n q u e s t i o n and a l s o
adduced such f a c t s a s were known t o t h e o f f i c e r s of t h e bank which-tended
t o show t h a t the r a t e s were e x c e s s i v e .
The e x p r e s s companies adduced t e s t i -
3 2 7
X-4598-c
~ s -
mony designed to shew t h a t t h e r a t e s were f a i r and reasonable#
Under the
r u l e s of t h e commission t h e burden of proof was upon t h e e x p r e s s companies.
The examiner h e l d t h a t t h e r a t e s were not i n f a c t u n r e a s o n a b l e , d i s c r i m i n a t o r y or p r e j u d i c i a l to t h e complainants, and i n e f f e c t t h a t the p u b l i c a t i o n
of r a t e s on the b a s i s of v a l u e d e c l a r e d by the s h i p p e r was not i n v i o l a t i o n
of t h e Cumnins amendment, a s a l l e g e d .
The f i n d i n g of f a c t t h a t the r a t e s
a r e not e x c e s s i v e or d i s c r i m i n a t o r y was r e a c h e d by the examiner n o t w i t h s t a n d i n g t h a t h e found t h a t t h e s t a t e m e n t of expenses i n c u r r e d by t h e Ameri c a n Railway Express Company i n i t s money department a t t h e Broadway o f f i c e
and a t t h e r a i l r o a d t e r m i n a l s i n New York and t h e s t a t e m e n t of revenue
and
expenses on shipments consigned to or r e c e i v e d from t h e F e d e r a l Reserve
Bank of Hew York, o f f e r e d i n evidence by t h e express company, were l a c k i n g
i n u n i f o r m i t y and thoroughness and were too narrow i n scope to be of izalue,
E x c e p t i o n s were duly f i l e d on b e h a l f of t h e bank to t h e f i n d i n g s
of t h e examiner and i n J u l y of 1925 b e f o r e D i v i s i o n One of the I n t e r s t a t e
Commerce Commission t h e s e e x c e p t i o n s were o r a l l y argued by Mr, C a r n a l t
and myself on b e h a l f of t h e banks, b r i e f s on b e h a l f of both s i d e s h a v i n g
beeaa f i l e d #
v
The commission s u s t a i n e d t h e r u l i n g of the examiner, both on
t h e f a c t s and t h e law.
The c o n s t r u c t i o n now p l a c e d by t h e commission upon
t h e Cumnins amendment i s d i r e c t l y c o n t r a r y to r u l i n g s of t h e commission on
t h i s q u e s t i o n of law, which had been r e n d e r e d p r i o r t o t h e time the.comp l a i n t was f i l e d i n t h i s c a s e .
The q u e s t i o n s of f a c t and law i n v o l v e d
were f u l l y a r g u e d b e f o r e t h e commission o r a l l y and on b r i e f s ,
i t i s our p u r p o s e to f i l e a p e t i t i o n f o r a r e h e a r i n g b e f o r e the
whole commission. The f i n d i n g of t h e commission t h a t i n f a c t t h e r a t e s a r e
X4598~e3^8
- 3 -
j u s t i f i e d makes i t doubtful that proceedings in the courts would "be of any
a v a i l . However, we are desirous of getting the f i n a l ruling on our petition
refor/hearing "before ticking a definite rc connendation in this respect. A
copy of the ruling of Division One of the comission i s enclosed herewith.
Mr. Carnalt has sent a t i l l , dated February 8, in the sun of
$3,000.
He has already heon paid $3,000 on account of the fee agreement of
October 30, 1923, approved "by the Board.
The nininun due hin for services
"before the coianission, in case the issues were decided against the bank, i s
$8,000.
It i s nov," proposed to pay hin $3,000, as requested in
February 8.
,
Respectfully,
L. R. Mason,
General Counsel.
End.
h i s b i l l of
FEDERAL RESERVE BOARD
x-4599
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
May 5, 1926.
Expense of S p e c i a l Counsel i n Case of Brookings
S t a t e Bank v. F e d e r a l Reserve Bank of San F r a n c i s c o .
Dear S i r :
As r e p o r t e d i n t h e B o a r d ' s c i r c u l a r l e t t e r of August 6,
1925, X-4400, a l l F e d e r a l r e s e r v e banks e x p r e s s e d t h e i r w i l l i n g n e s s
to b e a r a pro r a t a s h a r e of t h e expense of r e t a i n i n g Honorable Newton D. Baker i n c o n n e c t i o n w i t h t h e appeal from t h e d e c i s i o n . o f t h e
U n i t e d S t a t e s D i s t r i c t Court i n t h e above named case.
The Board has now r e c e i v e d from t h e F e d e r a l Reserve Bank
of San F r a n c i s c o t h e e n c l o s e d s t a t e m e n t i n t h e amount of $ 1 , 2 2 1 . 5 1
s u b m i t t e d by Mr. B a k e r ' s f i r m , which has been p a i d by t h e San
F r a n c i s c o bank. On t h e b a s i s of p a i d - i n c a p i t a l and s u r p l u s a s
a t t h e c l o s e of b u s i n e s s A p r i l 28, 1926, t h e p r o p o r t i o n a t e s h a r e s
of the v a r i o u s F e d e r a l r e s e r v e banks i n t h i s expense a r e a s f o l l o w s :
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s c o
Total
$
92.00
339.40
115.64
129.72
64.08
48.67
167.75
52.85
37.96
47.21
42.51
83.72
$1,221.51
I t i s r e q u e s t e d t h a t your bank r e m i t d i r e c t to t h e Fede r a l Reserve Bank of San F r a n c i s c o t h e amount s e t f o r t h above.
Very t r u l y y o u r s ,
(ENCLOSURE)
TO ALL GOVERNORS.
D. R. C r i s s i n g e r ,
Governor.
c
o
X-4599-a
P
Y
BAKER, H03TETLER & SIDLO
C o u n s e l l o r s a t Law
Cleveland
A-oril 19, 1926
The F e d e r a l Reserve Bank of San Francisco»
San F r a n c i s c o , C a l i f o r n i a .
To P r o f e s s i o n a l S e r v i c e s
• R e t a i n e r and s e r v i c e s in c o n n e c t i o n w i t h Brookings S t a t e
Bank v. F e d e r a l Reserve Bank of San F r a n c i s c o , i n c l u d i n g c o n f e r e n c e s i n Washington, examination of
j u r i s d i c t i o n a l q u e s t i o n and examination of p a p e r s
and p r o c e e d i n g s i n c o n n e c t i o n w i t h , s e t t l i n g b i l l
of e x c e p t i o n s and p r o s e c u t i o n of e r r o r in t h e C i r c u i t Court .of A p p e a l s , - - - - - - - - - - - - - - $ 1200.00
Expenses J u l y and September, 1924, ( T r i p to Washington
and e x p r e s s charges of testimony to San F r a n c i s c o ) ,
21.51
$ 1221.51
X-4601
TREASURY DEPARTMENT
O f f i c e of the S e c r e t a r y
WASHINGTON
O
Kay 5, 1926.
The Governor,
F e d e r a l Reserve Board.
Sir:
You a r e h e r e b y a d v i s e d t h a t t h e Department has r e f e r r e d t o t h e D i s b u r s i n g
C l e r k , Treasury Department, f o r payment, t h e account of t h e Bureau of Engraving
and P r i n t i n g f o r p r e p a r i n g F e d e r a l r e s e r v e n o t e s d u r i n g t h e p e r i o d A p r i l 1 t o
A p r i l 50, 1326, amounting t o ^122,012, as f o l l o w s :
F e d e r a l Reserve N o t e s , . S e r i e s 1914
%5_
$20
200,000
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
San F r a n c i s c o
850,000
700,000
100,000
500,000
275,000
2,425,000
100,000
§50
200,000
1,000,000
50,000
400,000
100,000
100,000
50,000
700,000
100,000
Total
20,000
20,000
700,000
520,000
150,000
100,000
300,000
275,000
3,245,000
3 , 2 4 5 , 0 0 0 s h e e t s @ $37,60 per M . . . i . $ l & 2 , 0 l 2 i 0 0
The changes a g a i n s t t h e s e v e r a l F e d e r a l Reserve Banks a r e as f o l l o w s :
Sheets
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
San F r a n c i s c o
200,000
1,000,000
700,000
520,000
150,000
100,000
300,000
275,000
3,245,000
Compensation
#3,540.00
17,700.00
12,390.00
9,204.00
2,655.00
1,770.00
5,310.00
4,867.50
>$57,43 6 * 50
Plate
Printing
$ 1,640
8,200
5,740
4,264
1,230
820
2,460
2,255
$ 26,609
Materials
#2,340.00
11,700.00
8,190.00
6,084.00
1,755,00
1,170.00
3,510.00
3,217.50
$37,966.50
Total
#7,520.00
37,600.00
26,320.00
19,552.00
5,640.00
3,760.00
11,280.00
10,340.00
$122,012.00
R e s p e c t f u l ly, :
S . R,.. Jacobs,.
Deputy Commissioner.
FEDERAL RESERVE BOARD
X-4602
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
May 1 1 , 1926.
SUBJECT:
F o t e s of P a r e n t C o r p o r a t i o n s R e p r e s e n t i n g
B o r r o w i n g s to b e Advanced t o S u b s i d i a r i e s .
Dear S i r ;
A c t i n g p u r s u a n t t o t h e r e q u e s t of t h e r e c e n t G o v e r n o r s C o n f e r e n c e t h e B o a r d h a s v o t e d t o p l a c e unon t h e p r o g r a m
f o r t h e n e x t C o n f e r e n c e of G o v e r n o r s f o r t h e i r c o n s i d e r a t i o n ,
c e r t a i n q u e s t i o n s which h a v e a r i s e n w i t h r e g a r d t o t h e B o a r d ' s
r u l i n g upon t h e e l i g i b i l i t y f o r r e d i s c o u n t of n o t e s of a c o r p o r a t i o n r e p r e s e n t i n g b o r r o w i n g s of f u n d s t o b e a d v a n c e d t o
s u b s i d i a r i e s , w h i c h was c o n t a i n e d i n t h e B o a r d ' s c i r c u l a r l e t t o r of December 3 0 , 1925* X-4484. These, q u e s t i o n s w e r e r a i s e d
i n a l e t t e r f r o m t h e Governor of t h e F e d e r a l R e s e r v e Bank of
C l e v e l a n d a n d commented on i n a memorandum f r o m t h e B o a r d 1 s
C o u n s e l , c o p i e s o f w h i c h were t r a n s m i t t e d t o a l l G o v e r n o r s
w i t h t h e B o a r d ' s l e t t e r X-4560 of March 1 2 , 1925*
P e n d i n g a r e c o n s i d e r a t i o n of t h e s e q u e s t i o n s b y
t h e n e x t G o v e r n o r s C o n f e r e n c e a n d f o r t h e g u i d a n c e of F e d e r a l
r e s e r v e b a n k s i n t h e m e a n t i m e , t h e B o a r d h o l d s t h a t n o t e s of
a p a r e n t c o r p o r a t i o n r e p r e s e n t i n g b o r r o w i n g s of f u n d s t o b e
a d v a n c e d t o s u b s i d i a r i e s w i l l n o t bo e l i g i b l e f o r r e d i s c o u n t
a t a F e d e r a l r e s e r v e b a n k u n l e s s t h e y comply w i t h a l l of t h e
c o n d i t i o n s l a i d down i n t h e B o a r d ' s c i r c u l a r l e t t e r of Decemb e r 3 0 , 1 9 2 5 . A c c o r d i n g l y , t h e n o t e s of a p a r e n t c o r p o r a t i o n
t h e p r o c e e d s of w h i c h h a v e b e e n a d v a n c e d o r l o a n e d t o i t s s u b s i d i a r i e s , w i l l not be e l i g i b l e f o r r e d i s c o u n t , if the p a r e n t
c o r p o r a t i o n a l s o makes a d v a n c e s t o o t h e r c o r p o r a t i o n s t h a n
i t s own s u b s i d i a r i e s .
Very t r u l y y o u r s ,
D. R. C r i s s i n g e r
G o v e r n o r .
TO ALL GOVERNORS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
3-4604
May. 18, 1926,
SUBJECT: Expense Main Line, Leased Wire System,
April, 1925.
Dear S i r :
Enclosed herewith you w i l l find two mimeograph
statements, X-4604-a and X-4604-"b, covering in d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of A p r i l , 1926.
Please c r e d i t the amount payable "by your "bank
in the general account, Treasurer, U. S., on your cooks,
and issue C/D Form 1, National Banks, f o r account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate C/D to Fede r a l Reserve Board.
Yours very t r u l y ,
F i s c a l Agent.
TO GOVERNORS OF ALL F. R. banks EXCEPT CHICAGO
(•Enclosures)
J
V
X-4604-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE
FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF APRIL, 1926.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Loui s
Minneapolis
30,070
133,737
37,205
72,139
44,137
5o,l66
97,681
73,006
Words sent
by New York
chargeable
t o other
F.R.Banks ( l )
488
-
623
1,295
1,917
3,001
2,083
Kansas C i t y
D&llad
San F r a n c i s c o
70,357
54,656
103,935
1,758
1,743
1,779
3,937
2,372
Total
207,761
20,936
32,642
Board
Total
Per cent of t o t a l
Total
30,558
133,737
37,828
73,^3.4
46,054
61,167
99,764
74,764
34,385
72,136
Treasury
Dept.
Business
3,H3
3,579
2,949
2,808
1,835
2,362
3,752
War
Finance •
Net
1C o r p o r a t i o n Fed. R e s e r v e
Business
Bank B u s i n e s s
-
-
-
27,445
130,158
34,579
3.45
16.35
44,219
58,805
5-55
7.3S
12.06
9.02
4.16
8.73
7.23
12.82
100.00
96,012
58,623
106,307
1,072
4,221
-
828,757
32,477
-
796,280
288,608
24.710
57,187
29
29
1 ,117,365
100#
-
1,271
-
2,576
-
-
4,38
6.S7
70,626
71,825
33,114
69,560
57,551
102,086
2,939
Per c e n t of
t o t a l bank
Business (*)
263,869
1,060,149
9.1#
(*)
These percentages used in c a l c u l a t i n g the pro r a t a share of leased wire expense as shown on t h e
accompanying statement (X-46c4-b)
(l)
Number of words sent by New York to other F. R. Banks f o r t h e i r sole b e n e f i t charged to banks
i n d i c a t e d , in accordance with a c t i o n taken a t Governors' Conference Nov. 2-4, I925.
X—MuC*T— D
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, APRIL, 1926.
Name of Bank
Operators 1
Salaries
$ 260.00
Boston
New York
944.16
Philadelphia
216.66
Cleveland
284.50
Richmond
180.00
Atlanta
275.00
Chicago
(f)3,902.83
S t , Louis
242.00
Minneapolis
184.47
Kansas City
275.64
Dal 1 as
251.00
San Francisco
360.00
Federal Reserve Board
Total
(&)
(*;
(' )
(a)
(b)
$7,376.26
Operators 1
Overtime
$ 5-00
Wire
Rental
-
$15,345.67
$ 5,00
$15,348.67
Pro r a t a
Share of
Total
Expense
Total
Expenses
$
265.00
944.16
216.66
284.50
180.00
275.00
3,902.83
242.00
184.47
275-64
251.00
360.00
15,348.67
$22,729.93
(4L16L92
$21,565.94
$
744.02
3,526.03
944.59
1,912.90
1,196.91
1,591.57
2,600,85
1,945.25
897.14
1,882.71
1,559.22
2,764.75
-
$21,565.94
Payable to
Federal
Reserve
Board
Credits
$
265.00
944.16
216.66
284.50
180.00
275.00
3,902.83
242.00
184.47
275.64
251.00
360.00
$
479.02
2,581.87
727.93
1,628.40
(6)1,221.58
1,316.57
(*)1,301.98
1,703.25
712.67
1,607.07
1,308.22
2,404.75
$7,381.26
$15,691.33
(b)1,301.98
$14,389.35
Includes $204.67 f o r branch l i n e business transmitted over main l i n e c i r c u i t .
Includes s a l a r i e s of Washington operators.
Credit.
Received $0.67 from War Finance Corporation, and $ 1 , 1 6 3 . 3 2 from Treasury Department covering
business f o r the month of A p r i l , 1 9 2 6 .
Amount reimbursable to Chicago.
OK
WW
Oi
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4605
May 18, 1926.
SUBJECT:
Holidays during June, 1936*
Dear S i r :
On Thursday, June 3rd, the following Federal Reserve
Banks and Branches w i l l he closed in observance of the birthday
of J e f f e r s o n Davis and Confederate Memorial Day, and w i l l not
p a r t i c i p a t e in e i t h e r the Gold Pond Clearing or the Federal Reserve Note Clearing of that date:
Richmond
Memphis
Atlanta
New Orleans
Birmingham
Nashville
Jacksonville
Dallas
$1 Paso
Hoxis ton
Please include c r e d i t s of June 3rd f o r such of the
hanks mentioned as p a r t i c i p a t e in the Gold, Fund Clearing, with
your c r e d i t s of the following "business day, and make no shipment
of Federal Reserve Notes, f i t or u n f i t , f o r account of the Head
O f f i c e s a f f e c t e d , on date of holiday.
Please n o t i f y Branches.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X - 4 6 0 F
May 2 4 , 1 9 2 6 .
SUBJECT:
C o r r e c t i o n s i n I n t e r - D i s t r i c t Time
Schedule*
Dear S i r ;
By a g r e e m e n t b e t w e e n t h e F e d e r a l
R e s e r v e Bank of D a l l a s and t h e F e d e r a l R e s e r v e
Bank of K a n s a s C i t y t h e f o l l o w i n g c h a n g e s
s h o u l d be made i n t h e i n t e r - d i s t r i c t t i m e
schedule:
D a l l a s t o Denver
Denver t o D a l l a s
-
2 days
2 days#
Yours v e r y t r u l y ,
<J• C. K o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL P. R. BANKS.
t
X-4608
I1DEE.AL
R E S E R V E
BOARD
STATEMENT FOR TEE PRESS .
For Immediate R e l e a s e
May 25, 1926#
CONDITION OF ACCEPTANCE MARKET
A p r i l l b , l y ^ b , t o May i y , 13Jb.
Acceptances
'
The a c c e p t a n c e m a r k e t was a c t i v e i n New York and. Boston a f t e r t h e
m i d d l e of A p r i l w i t h r a t h e r l i m i t e d s u p p l i e s of M i l s moving f r e e l y a t o f fered rates*
D e a l e r s l o w e r e d t h e i r r a t e s on A p r i l 22 by 1 / 8 p e r c e n t and
a g a i n on A p r i l 23 by l / 4 p e r c e n t , and on A p r i l 27 t h e F e d e r a l r e s e r v e banks
r e d u c e d t h e i r b u y i n g r a t e s f o r t h e f i r s t time s i n c e January#
The market d e -
mand f o r b i l l s a t t h e new r a t e s d e c l i n e d and d u r i n g e a r l y May New York
d e a l e r s 1 p o r t f o l i o s i n c r e a s e d to t h e l a r g e s t volume of h o l d i n g s r e c o r d e d ,
w i t h l a r g e r s a l e s t o t h e F e d e r a l r e s e r v e banks«,
A f t e r May 18, when d e a l e r s
r a i s e d t h e i r r a t e s 1 / 8 of one p e r c e n t on a l l m a t u r i t i e s over 30 d a y s , demand
i n c r e a s e d somewhat, and on May 20 F e d e r a l r e s e r v e banks f u r t h e r l o w e r e d
t h e i r r a t e s on b i l l s of over 60 days m a t u r i t y t o an e q u a l i t y w i t h o f f e r i n g
r a t e s i n t h e market#
I n New York t h e a v e r a g e w e e k l y p u r c h a s e s and s a l e s of
d e a l e r s d u r i n g t h e whole r e p o r t i n g p e r i o d from A p r i l 15 t o May 19 were the
l a r g e s t s i n c e l a s t O c t o b e r , b u t i n P h i l a d e l p h i a and Chicago r e l a t i v e l y q u i e t
conditions prevailed#
B i l l s c h i e f l y in evidence in the E a s t e r n markets i n -
v o l v e d t r a n s a c t i o n s i n s i l k , s u g a r , t o b a c c o , and r u b b e r , and i n Chicago were
b a s e d on a c o n s i d e r a b l e v a r i e t y of p r o d u c t s , i n c l u d i n g g r a i n , r u b b e r ,
p a c k i n g h o u s e p r o d u c t s , and i r o n ore#
The f o l l o w i n g t a b l e shows b i l l r a t e s
i n t h e New York m a r k e t a t t h e b e g i n n i n g a n d end of t h e r e p o r t i n g p e r i o d :
~2~
X-4608
A c c e p t a n c e H a t e s i n t h e How York Market
A p r i l 14, 1926
Maturity
30
60
90
120
150
180
days
days
days
days
days
days
Bid
3
3
3
3
3
4
5/8
5/8
5/8
3/4
7/8
May 19, 1926
Offered
3
3
3
3
3
3
1/2
1/2
1/2
5/8
3/4
7/8
Bid
3
3
3
3
3
3
1/4
3/3
3/8
1/2
5/8
3/4
Offered
3T/ 8
1/3
5/8
389
X-4609
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE TRESS
For R e l e a s e i n Morning P a p e r s ,
T h u r s d a y , May 2 7 , 1926.
The f o l l o w i n g i s a summary of g e n e r a l b u s i n e s s
and f i n a n c i a l c o n d i t i o n s t h r o u g h o u t t h e s e v e r a l
F e d e r a l r e s e r v e d i s t r i c t s , b a s e d upon s t a t i s t i c s
f o r t h e months of A p r i l and May, a s c o n t a i n e d i n
t h e f o r t h c o m i n g i s s u e of t h e F e d e r a l R e s e r v e B u l letin.
There was a s l i g h t d e c l i n e i n t h e a c t i v i t y of i n d u s t r y a n d t r a d e i n A p r i l ,
and a f u r t h e r r e d u c t i o n i n t h e g e n e r a l p r i c e l e v e l .
Commercial demand f o r "bank
c r e d i t c o n t i n u e d l a r g e and t h e volume of s e c u r i t y l o a n s , a f t e r a r a p i d d e c l i n e
s i n c e t h e t u r n o f t h e y e a r , remained a t a c o n s t a n t l e v e l .
Production.Production in b a s i c i n d u s t r i e s , according to the Federal Reserve Board's
i n d e x , d e c r e a s e d 1 p e r c e n t i n A p r i l , s l i g h t i n c r e a s e s i n p r o d u c t i o n of lumber
and p i g i r o n b e i n g more t h a n o f f s e t by d e c l i n e s i n o u t p u t i n o t h e r i n d u s t r i e s .
P a r t i c u l a r l y l a r g e r e c e s s i o n s were shown i n the p r o d u c t i o n of s t e e l i n g o t s and
in t e x t i l e m i l l a c t i v i t y .
c o n t i n u e d i n l a r g e volume.
Automobile p r o d u c t i o n , n o t i n c l u d e d i n t h e i n d e x ,
F a c t o r y employment and p a y r o l l s d e c l i n e d s l i g h t l y
i n A p r i l , p a r t i c u l a r l y i n t h e f o o d , t o b a c c o , t e x t i l e , and b o o t and s h o e i n dustries,
The v a l u e of b u i l d i n g c o n t r a c t s awarded d u r i n g A p r i l was s m a l l e r
t h a n i n March and p r a c t i c a l l y t h e same as i n A p r i l o f l a s t y e a r .
Awards f o r
t h e f i r s t two weeks i n May, however, showed i n c r e a s e s a s compared w i t h t h e
same weeks i n 1925,
R e p o r t s by the D e p a r t m e n t of A g r i c u l t u r e i n d i c a t e t h a t up t o t h e f i r s t of
May 68 p e r c e n t of s p r i n g p l o w i n g and 55 p e r c e n t o f sowing and p l a n t i n g was
c o m p l e t e d , compared w i t h a b o u t 83 p e r c e n t and 66 p e r c o n t l a s t y e a r .
On t h e
341
-2-
X-4609
"basis of t h e c o n d i t i o n o f w i n t e r wheat on May 1 , a y i e l d of 5 4 9 , 0 0 0 , 0 0 0
"bushels i s f o r e c a s t compared w i t h a f i n a l y i e l d of ^ 9 8 , 0 0 0 , 0 0 0 "bushels i n 1925.
Trade.The volume of w h o l e s a l e t r a d e i n A p r i l was s e a s o n a l l y s m a l l e r t h a n i n
March f o r a l l l i n e s e x c e p t m e a t s .
Compared w i t h a y e a r a g o , s a l e s of g r o c e r i e s ,
meats and d r u g s were l a r g e r i n A p r i l , w h i l e s a l e s of d r y g o o d s , s h o e s and h a r d ware were s m a l l e r .
D e p a r t m e n t s t o r e s a l e s i n c r e a s e d l e s s t h a n u s u a l and were
somewhat s m a l l e r t h a n a y e a r a g o .
S a l e s of m a i l o r d e r h o u s e s were s l i g h t l y
s m a l l e r t h a n i n March, "but c o n t i n u e d t o "be l a r g e r t h a n i n t h e c o r r e s p o n d i n g
month o f 1925.
T h e r e was some d e c r e a s e i n t h e s t o c k s o f m e r c h a n d i s e h e l d "by
w h o l e s a l e f i r m s d u r i n g t h e month, and i n v e n t o r i e s of d e p a r t m e n t s t o r e s showed
l e s s t h a n t h e u s u a l s e a s o n a l i n c r e a s e , though thoy were l a r g e r t h a n a y e a r a g o .
Weekly f r e i g h t c a r l o a d i n g s d e c r e a s e d i n the e a r l y p a r t of A p r i l "but l a t e r i n c r e a s e d , and t h e volume of s h i p m e n t s f o r t h e month of A p r i l a s a whole and
f o r t h e f i r s t two weeks i n liay was l a r g e r t h a n i n the c o r r e s p o n d i n g p e r i o d s
of any p r e v i o u s y e a r .
Prices.W h o l e s a l e commodity p r i c e s , a c c o r d i n g to t h e Bureau of Labor S t a t i s t i c s
i n d e x , d e c l i n e d s l i g h t l y f r o m March to A p r i l .
Increases in t h e farm products
and f o o d s g r o u p s , w h i c h had been d e c l i n i n g f o r s e v e r a l months, were more t h a n
o f f s e t by d e c r e a s e s i n o t h e r g r o u p s .
of c l o t h i n g m a t e r i a l s .
The g r e a t e s t d e c l i n e s were i n the p r i c e s
I n the f i r s t t h r e e weeks of May p r i c e s o f w h e a t ,
c a t t l e , sheep, c o t t o n goods, p i g i r o n , b r i c k s , and rubber d e c l i n e d , while
t h o s e of h o g s , raw s i l k , and crude p e t r o l e u m i n c r e a s e d .
Bank C r e d i t . Commercial demand f o r bank c r e d i t a t member banks i n l e a d i n g c i t i e s
342
-5-
X-4609
c o n t i n u e d i n l a r g e volume "between t h e middle of A p r i l and t h e m i d d l e of May.
L i q u i d a t i o n of s e c u r i t y l o a n s , which h a d been r a p i d s i n c e t h e b e g i n n i n g of the
y e a r , d i d n o t c o n t i n u e a f t e r the m i d d l e of A p r i l and the volume of t h e s e l o a n s
remained f a i r l y c o n s t a n t a t a l e v e l a b o u t $ 4 5 0 , 0 0 0 , 0 0 0 below t h e p e a k a t the
end of 1925.
There was some a d d i t i o n to t h e b a n k s ' i n v e s t m e n t s and t h e t o t a l
of t h e i r l o a n s a n d i n v e s t m e n t s was a b o u t $ 1 , 0 0 0 , 0 0 0 , 0 0 0 l a r g e r
t h a n a t the same
p e r i o d of l a s t y e a r .
W i t h d r a w a l s of f u n d s from New York were r e f l e c t e d i n a n i n c r e a s e between
the m i d d l e of A p r i l and t h e m i d d l e of May i n b o r r o w i n g s by member banks f r o m t h e
F e d e r a l R e s e r v e Bank o f Hew York, w h i l e b o r r o w i n g s a t most of t h e o t h e r r e s e r v e banks d e c l i n e d .
Open-market h o l d i n g s of t h e r e s e r v e b a n k s r e m a i n e d f a i r l y
c o n s t a n t d u r i n g the p e r i o d and t h e r e was l i t t l e change i n the t o t a l volume of
'
r e s e r v e bank c r e d i t o u t s t a n d i n g ,
Money r a t e s l a t e i n A p r i l r e a c h e d t h e l o w e s t l e v e l f o r a y e a r , b u t i n May
c o n d i t i o n s i n t h e money m a r k e t became somewhat f i r m e r .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4610
May 26, 1926.
Gentlemen:
•s
k
A
>
You are advised that i n compliance
with t h e provision of Section 21 of t h e Federal
Reserve Act that "The Federal Reserve Board s h a l l ,
a t l e a s t once each year, order an examination of
each Federal reserve tank * * *", the Federal Reserve Board has ordered i t s Chief Examiner, through
i t s Division of Examination, to make an examination
of each Federal reserve "bank a t l e a s t once during
the calendar year.
In accordance with t h i s a c t i o n , the
Board has directed Mr. J . F. Herson, i t s Chief Examiner, to make a t l e a s t one examination of the
Federal Reserve Bank of
during the
year 198 6.
The Board has also empowered i t s Chief
Examiner to s e l e c t the dates on which a l l examinations w i l l be began.
You are requested to give him and h i s
force a l l proper assistance in making the examinationa.
Very t r u l y yours,
D. 1 . Crissinger,
* Governor.
To a l l F. R. banks
343
X-4612
344
COM
IN THE UNITED STATES CIRCUIT COURT OF APPEALS
FOR THE FIFTH CIRCUIT.
n o . 4770
MISS RUTH M. JACKSON AND MRS. ANNA M. SCOTT,
i
Appellants,
Versus
J . W. McINTOSH, COMPTROLLER OF CURRENCY, AND E. F. ANDERSON,
RECEIVER OF GEORGIA NATIONAL BANK OF ATHENS, GEORGIA, et a l . ,
Appellees.
A
Appeal from the D i s t r i c t Court of the United States f o r the
Northern D i s t r i c t of Georgia,
C. N. Davie and Chas. S. Reid f o r Appellants.
Howell C. Erwin, Thos. F. Green, Thos. J . Shackelford
and M. C. E l l i o t t , (Green <$$ Michael, Shackelford & Shackelford,
Erwin, Erwin & Nix, M, C. E l l i o t t , W. S. Foage and Thos. F.
Green on the b r i e f ) , f o r Appellees.
Before WALKER, BRYAN and FOSTER, Circuit Judges.
WALKER, Circuit Judge: This i s an appeal from a decree denying a temporary injunction prayed f o r in a b i l l f i l e d by the
a p p e l l a n t s , one of them being a stockholder of the Georgia National
Bank of Athens, Georgia, and both of them being c r e d i t o r s of t h a t
bank, against the appellees, the Comptroller of the Currency, and
the receiver of that bank appointed by such Comptroller, who took
charge of the a s s e t s of said bank f o r the purpose of l i q u i d a t i o n
as provided by law*
The injunction prayed f o r was one r e s t r a i n i n g
and enjoining the appellees from consummating or f u r t h e r attempting
to consummate an alleged proposed disposition of a s s e t s of said
bank.
The a l l e g a t i o n s of the b i l l showed the following:
Prior to
the f i l i n g of the b i l l said Receiver f i l e d in the court below an
a p p l i c a t i o n f o r the approval of that court of a pretended sale to the
Georgia S e c u r i t i e s Company, a corporation organized under the laws
of Georgia, with a c a p i t a l stock of Ten Thousand Dollars, (herein
c a l l e d the corporation), of the a s s e t s of said bank except cash on
hand, stockholders' l i a b i l i t y , l i a b i l i t y of o f f i c e r s and d i r e c t o r s f o r
misfeasance or malfeasance in o f f i c e , and described r e a l e s t a t e ; and
the court made an order that any and a l l p a r t i e s in i n t y o s t show
cause, i f any there be, a t a time and place s t a t e d , why uaid a p p l i cation should not be granted, and that notice of that order be given
publication in a named newspaper.
follows:
That application showed as
The application has been approved by the Comptroller of the
Currency.. The Corporation w i l l deliver to the Receiver, f o r the
bank's c r e d i t o r s , i t s debentures, dated November 3, 1925, f o r the
amount due each c r e d i t o r a t the date of the bank's suspension, payable
-3-
346
on or "before f i v e years from date, with i n t e r e s t thereon a t the r a t e
of 4$ per annum, i n t e r e s t payable annually.
Said debentures to be
secured by deed of t r u s t of the t r a n s f e r r e d a s s e t s made by the
Receiver to named t r u s t e e s as security f o r the payment- of said
debentures.
Any available cash in the hands of the Receiver at the
time of the proposed sale, a f t e r reserving such sums as may be deemed
necessary to pay expenses of the receivership, shall be d i s t r i b u t e d
S
by the Receiver to the bank's c r e d i t o r s , the sums so paid to be
credited upon the debentures upon presentation f o r that purpose, "and
where debentures are not presented to be so credited, or where any
c r e d i t o r of said bank should f a i l or r e f u s e to accept said debenture
then the amounts that would be payable to such c r e d i t o r under said
d i s t r i b u t i o n s h a l l be held by said Receiver to the c r e d i t of such
c r e d i t o r s and paid to them upon application, and the debentures issued
to such c r e d i t o r s s h a l l thereupon be credited accordingly."
Said
t r u s t e e s in t h e i r d i s c r e t i o n may require any action with respect to
the property conveyed to them, "including tho s a l e , t r a n s f e r , assign1
ment or conveyance of any or a l l of said property or a s s e t s . "
"If any question should a r i s e with respect to the
r i g h t s or l i a b i l i t i e s of e i t h e r the debenture holders,
or any of them, or the company under t h i s indenture,
then the decision made by the t r u s t e e s , or a majority of
them, concurred in by said company, acting through i t s
d i r e c t o r s , or a majority of them, s h a l l be f i n a l and
conclusive. Should any such question a r i s e and the
decision of the t r u s t e e s , or a majority of them, not be
concurred in by said company, then the question s h a l l be
r e f e r r e d by them to the Judge of the J u d i c i a l C i r c u i t ,
in which i s located the City of Athens, Georgia, and h i s
decision thereon s h a l l be f i n a l and conclusive.
347
,The t r u s t e e s s h a l l tie deemed the representatives of
a l l debenture holders in said proceedings insofar as
necessary p a r t i e s are concerned*
If a t any time during the administration of the a s s e t s
of said Georgia Securities Company the Trustees or a
m a j o r i t y of them, should be of the opinion that the
o f f i c i a l s i n charge of said company are not pressing
with due and proper diligence the c o l l e c t i o n of any or
a l l of i t s a s s e t s , then said Trustees may c a l l upon said
o f f i c i a l s to proceed with greater dispatch in the c o l l e c t i o n
of same, and should said o f f i c i a l s t h e r e a f t e r omit to
p r e s s said c o l l e c t i o n s or convert said a s s e t s into cash
f o r the b e n e f i t of debenture holders with due and proper
diligence, in the judgment of said Trustees, or a majority
of them, then said Trustees may demand and receive of
. said o f f i c i a l s a l l of the a s s e t s of said company, and by
themselves, or through such agents as they may employ,
administer said a s s e t s f o r the b e n e f i t of said debenture
holders in the same manner of said o f f i c i a l s a r e required
to do. In such an event said Trustees have the r i g h t to
incur and pay from said a s s e t s in t h e i r hands a l l lawf u l and proper expenses of administration, according to
t h e i r best judgment and d i s c r e t i o n . "
The corporation s h a l l receive no compensation f o r performance of i t s
d u t i e s in the administration of tho a s s e t s acquired from the Receiver.
All s a l a r i e s of i t s o f f i c e r # and c l e r i c a l force to be approved by said
trustees.
The Federal Reserve Bank of Atlanta s h a l l have a p r i o r l i e n
on the t r a n s f e r r e d a s s e t s to secure a described debt owing to i t by the
bank, in consideration whereof i t i s to cancel a s t a t e d amount of the
debt to i t .
Each debenture contained the following:
" I f t h i s debenture i s not presented f o r f i n a l payment
within twelve months from the maturity of the same, then
said company shall have the r i g h t to l i q u i d a t e i t s a f f a i r s
and d i s t r i b u t e among the remaining debenture holders or
the stockholders of said company, a f t e r a l l other debentures
are paid in f u l l , the amount that would be otherwise held
f o r the redemption of the same, without f u r t h e r l i a b i l i t y
thereon. Certain persons have subscribed the sum of Ten
Thousand Dollars f o r the c a p i t a l stock of t h i s company in
order to p e r f e c t a l e g a l organization of the same.
~5~
34:8
The holder of t h i s debenture agrees that when the a s s e t s
acquired from the Receiver of the Georgia National Bank
• are exhausted that the c a p i t a l stock of said S e c u r i t i e s
Company s h a l l he d i s t r i b u t e d ratably among those who
contributed the same, and a l l claims upon said c a p i t a l
stock are hereby waived. This debenture i s accepted and
held subject to a l l of the terms hereof as well as the
terms, provisions and s t i p u l a t i o n s contained in said
trus.t agreement to the same extent as i f the same had
been incorporated herein. 1 '
Under Section 5234 of the United S t a t e s Bevised S t a t u t e a
national bank r e c e i v e r , "upon the order of a court of record of competent
j u r i s d i c t i o n may s e l l or compound a l l bad or doubtful debts, and, on a
l i k e order, may s e l l a l l the r e a l or personal property of such association,
on such terms as the court shall d i r e c t . "
This provisions does not
authorize a d i s p o s i t i o n of a s s e t s which i s not a s a l e .
The above men-
tioned application made no mention of bad or doubtful debts, but invoked
the exercise of the c o u r t ' s power to order a sale of r e a l and personal
property of the bank.
The proposed disposition of property of the bank
was challenged on the ground that i t was not a sale within the meaning
of the above quoted s t a t u t e , and was not consistent with other s t a t u t o r y
provisions with reference to the administration of a national bank's
a s s e t s placed in the hands of a r e c e i v e r .
U. S. Comp. S t a t . 9827,
In behalf of the appellees i t was contended that the a pplic a tion f o r
or the making of such an administrative order as was sought could not
be i n t e r f e r e d with by i n j u n c t i o n .
I t has been held that such a proceed-
ing by a receiver i s an ex p a r t e one, and that an order made therein i s
not subject to be appealed from by a c r e d i t o r of the bank.
F i f e r v. Williams, 5 F. (2d) 286.
in that case;
The following was said in the opinion
"For an attempt to make an i l l e g a l or f r a u d u l e n t s a l e ,
doubtless a remedy by s u i t would l i e , and from a decision in such
s u i t an appeal could be taken to t h i s court."
The appellants have
such an i n t e r e s t in the bank's a s s e t s as to be e n t i t l e d to r e s i s t
an i l l e g a l d i s p o s i t i o n of them.
In the circumstances disclosed no
adequate l e g a l remedy was available, and a court of equity properly
could be applied, to f o r r e l i e f .
And if a temporary i n j u n c t i o n was
improperly denied, the decree to that e f f e c t i s subject to be
appealed from.
The e f f e c t of the proposed d i s p o s i t i o n of a s s e t s of the
bank would be to t r a n s f e r them to the Corporation f o r administration,
or f o r the sale or other disposition of them when approved by the
t r u s t e e s under the deed of t r u s t .
The Corporation was to incur no
obligation or l i a b i l i t y to pay anything to the bank's c r e d i t o r s or
stockholders except that i t was to pay to debenture holders pro r a t a
shares of the amount r e a l i z e d from the t r a n s f e r r e d a s s e t s , a f t e r
deducting the costs and expenses of administration.
That the bank's
c r e d i t o r s and stockholders were not to get anything except from the
t r a n s f e r r e d a s s e t s i s c l e a r l y shown by the following provision:
"The
holder of t h i s debenture agrees that when the a s s e t s acquired from
the Receiver of the Georgia National Bank are exhausted, t h a t the
c a p i t a l stock of said S e c u r i t i e s Company s h a l l be d i s t r i b u t e d r a t a b l y
among those who contributed the same, and a l l claims upon said c a p i t a l
stock are hereby waived."
The creation of an agency f o r the handling
and administration of a s s e t s and the payment of the proceeds, l e s s
costs and expenses, to those who are e n t i t l e d to such a s s e t s i s not a
sale of them.
A change in the b e n e f i c i a l ownership of the thing dealt
with, and. a p r i c e , paid or promised, and c e r t a i n or capable of "being
ascertained, are e s s e n t i a l ingredients of a s a l e .
93 U. S. 412;
Butler v, Thompson,
Gockstetter v. Williams, 9 F. (2d), 354,
Under the
proposed t r a n s a c t i o n the bank's c r e d i t o r s and stockholders were to
get nothing from the t r a n s f e r r e d a s s e t s , unless what the corporation
r e a l i z e d from them exceeded the expenses of handling them, and the
Corporation was to get nothing but reimbursement f o r such expenses,
though more than the amount of such expenses should be r e a l i z e d from
those a s s e t s .
The Corporation was not to acquire the b e n e f i c i a l
ownership of the t r a n s f e r r e d a s s e t s , and e x i s t i n g r i g h t s of such
ownership were to be retained except so f a r as those r i g h t s were to be
destroyed or impaired by the exercise of the powers or p r i v i l e g e s
conferred on the Corporation, the t r u s t e e s under the deed of t r u s t ,
and the debenture holders.
Without a r e a l sale of them, a s s e t s of the
bank were to be surrendered by the receiver and made subject to be
sold by the Corporation with the approval of the t r u s t e e s under the
deed of t r u s t , instead of by the receiver with the approval of a court.
An above c i t e d s t a t u t e , (Comp. S t a t . 9827), provides f o r the contingency of the bank's debts being paid without exhausting i t s a s s e t s .
In that event the bank's stockholders are e n t i t l e d to have the remaining a s s e t s administered by an agent of t h e i r own s e l e c t i o n .
The plan
in question i s not consistent with due e f f e c t being given to t h a t
provision.
The s t a t u t e s provide a complete scheme f o r the winding up
of the a f f a i r s of a f a i l e d national bank.
A court cannot properly
approve a v i o l a t i o n by a receiver of s t a t u t o r y requirements.
By B. S. 5234
OF
t >*-
the "receiver* 11 uhdst1 the d i r e c t i o n of the Coifrpti'olier s h a l l take
possession of the books,' records, and a s s e t s of every description of
such a s s o c i a t i o n , c o l l e c t a l l debts, and claims belonging to i t ,
and," e t c .
The e f f e c t of the proposed transaction would be a
delegation to the Corporation of the r e c e i v e r ' s duty and a u t h o r i t y
to c o l l e c t what was owing to the bank, and a surrender of a s s e t s of
the bank by the receiver to the Corporation, which was not the
buyer of such a s s e t s .
The receiver was not authorized, with or without
a c o u r t ' s approval, so to delegate h i s duties or powers, or to make
such a surrender of a s s e t s .
We are of the opinion that the injunction
sought was an appropriate means of preventing an i l l e g a l d i s p o s i t i o n
of a s s e t s of the bank, and that the court erred in r e f u s i n g to grant
that r e l i e f .
As the challenged transaction was i l l e g a l f o r the reasons
above indicated, i t i s not necessary to pass on the question as to the
v a l i d i t y of the f e a t u r e of i t r e l a t i n g to the bank's debt to the
Federal Reserve Bank of Atlanta.
The decree i s reversed, and the cause i s remanded f o r f u r t h e r
proceedings not inconsistent with t h i s opinion.
REVERSED,
(ORIGINAL FILED APRIL 7, 1926.)
X-4615
TREASURY DEPARTMENT
WASHINGTON
Q<^0
*
June 7, 1926.
The (rover n o r ,
Federal Reserve Board.
Sir;
You a r e h e r e b y a d v i s e d t h a t t h e Department h a s r e f e r r e d t o t h e D i s b u r s i n g
C l e r k , T r e a s u r y D e p a r t m e n t , f o r payment, t h e a c c o u n t of t h e B u r e a u of E n g r a v i n g
m d p r i n t i n g f o r p r e p a r i n g F e d e r a l r e s e r v e n o t e s d u r i n g t h e p e r i o d May 1 , 1926,
t o l a y 3 1 , 1926, a m o u n t i n g t o # 1 1 7 , 5 0 0 , a s f o l l o w s :
.
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Dallas
San F r a n c i s c o
|5
300,000
750,000
100,000
400,000
100,000
200,000
mm
#10
If
F e d e r a l R e s e r v e N o t e s , S e r i e s 1914
100,000
100,000
100,000
50,000
150,000
50,000
10,000
100,000
Total
300,000
950,000
100,000
20,000
570,000
60,000
20,000
370,000
200,000
mm
100,000
100,000
100,000
100,000
375,000
40,000
5,125,000 s h e e t s © $37.60 per M
375,000
3",125,000"
#117,500.00
The c h a r g e s a g a i n s t t h e s e v e r a l F e d e r a l R e s e r v e Banks a r e a s f o l l o w s :
Sheets
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Dallas
San F r a n c i s c o
300,000
950,000
100,000
570,000
60,000
370,000
200,000
100,000
100,000
375,000
3,125,000
Compensation
S 5,310.00
16,815.00
1,770.00
10,089.00
1,062.00
6,549.00
3,540.00
1,770.00
1,770.00
6,637.50
155,312.50
Plate
Printing
# 2,460.00
7,790.00
820.00
4,674.00
492.00
3,034.00
1,640.00
820.00
820.00
3,075.00
$25,625.00
Materials'
§3,510.00
11,115.00
1,170,00
6,669.00
702.00
4,329.00
2,340.00
1,170.00
1,170.00
4,387.50
#36,562.50
Total
$ 11,280.00
35,720.00
3,760.00
21,432.00
2,256.00
13,912.00
7,520.00
3,760.00
3,760.00
14,100.00
?1T7T500.00
The B u r e a u a p p r o p r i a t i o n s w i l l be r e i m b u r s e d i n t h e above amount f r o m 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 " P r e p a r a t i o n and I s s u e of F e d e r a l R e s e r v e N o t e s , Reimb u r s a b l e " , and i t i s r e q u e s t e d t h a t y o u r b o a r d c a u s e s u c h i n d e f i n i t e a p p r o p r i a t i o n t o be r e i m b u r s e d i n l i k e amount.
Respectfully,
(signed) S, R. J a c o b s ,
Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
'
X-4617
June 14, 1926.
SUBJECT: Expense Main Line, Leased Wire System,
May, 1926.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph
statements, X-4617-a and X-4617-b, covering in d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of May, 1926.
Please c r e d i t the amount payable by your bank
i n the general account, Treasurer, U, S», on your books,
and issue d/B Form 1, National Banks, f o r account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate C/D to the
f e d e r a l Reserve Board.
Yours very t r u l y ,
Fiscal Agent»
TO G-0VECTORS OF ALL F. E, BAMS 2XC£p* CHICAGO
(fine lo stir ed)
X-46l7-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE
FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF MAY, 1926
"™
Business
reported.
by banks
prom
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t , Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
Words sent
by New York
chargeable
to other
F. R. Banks(l)
Total
Treasury
Dept.
Business
33,589
68,983
50,966
96,885
1,096
1,457
3,168
1,787
29,895
123,133
37,448
71,009
45,612
60,877
96,491
72,381
34,685
70,440
54,134
93,672
3,266
5,153
3,083
3,129
2,983
3,548
4,771
3,610
1,529
3,131
1,728
5,015
778,579
16,198
794,777
40,946
288,216
1,082,993
, 23,181
64,127
342
29,553
123,133
37,124
70,163
44,i60
58,183
94,739
324
846
1,452
2,694
1,692
71,041
F.R.Board
Total
Per cent of t o t a l
-
1,340
100#
War
Finance
Corporation
Business
5.92#
—
-
-
—
-
Net
Fed* Reserve
Bank Business
26,629
117,980
34,365
67,880
42,629
57,329
91,720
68,771
33,156
67,309
52,406
, 93,657
753,831
J 5 1
153
.01#
Per cent of
t o t a l bank
Business (*)
3-53
15.65
4.56
9.00
5< 66
7.61
* 12.17
9-12
4.40
8*93
6.95
12.42
100.00#
264,882
1,018,713
94.07#
(*) These percentages used i n c a l c u l a t i n g the pro r a t a share of leased wire expense as shorn on the
accompanying statement (X-4bl7-b)
( l ) Number of words sent by New York to other F. R. Banks f o r t h e i r sole b e n e f i t charged to banks
indicated, in accordance w i t h action taken a t Governors' Conference November 2 - 4, 1925•
CO
x-46iy-b
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, MAY, 1926.
Name of Bank
Operators'
Salaries
$ 260.00
Boston
944.16
Hew York
216.66
Philadelphia
Cleveland
284.50
Richmond
192.50
Atlanta
255.00
Chicago
(#)3,976.19
S t . Louis
200.00
Minneapolis
I83.34
K a n sa s C i t y
275-64
Dallas
251.00
San F r a n c i s c o
360.00
F e d e r a l R e s e r v e Board
Total
(&)
(*)
(a)
(b)
$7,398.99
Operators 1
Overtime
Wire
Rental
Total
Expenses
$15,353.48
$ 260.00
944,16
216.66
284.50
192.50
255-00
3,976.19
200.00
183.34
275.64
251.OO
360.00
15,353.48
$15,353.48
$22,752.47
(a)l,351.12
$21,401.35
Pro r a t a
S h a r e of
Total
Expense
$ 755.47
3.349.31
975-90
1,926.12
1.211.32
1,628.64
2,604.55
1,951.80
941.66
1,911.14
1,487.39
2,658.05
Credits
payable to
Federal
Reserve
Board
$ 260.00
$ 495.47
944.16
2,405-15
216.66
759-24
1,641.62
284.50
192.50(&) 1 , 2 2 3 - 4 9
1,373-64
255-00
3,976.19(*) 1,371.64
1,751-80
200.00
183.34
758.32
1,635.50
275*64
251.00
1,236.39
2,298.05
360.00
$21,401.35 $7,398.99 $15,578.67
(b)l,371.64
$14,207.03
I n c l u d e s $204.67 f o r b r a n c h l i n e b u s i n e s s t r a n s m i t t e d over main l i n e c i r c u i t .
I n c l u d e s s a l a r i e s of W&shington o p e r a t o r s .
Credit.
Received $ 3 . 8 8 f r o m Tar F i n a n c e C o r p . , and $1,347*24 f r o m T r e a s u r y D e p t . , c o v e r i n g b u s i n e s s f o r
mcnth of May, 1926.
Amount r e i m b u r s a b l e t o Chicago.
COPY
X-4618.
FEDERAL RESERVE BAH
of
ST.
June
LOUIS
13, 1926.
Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
Your telegram regarding the decision in the case
of the City of Douglas vs the Federal Reserve Bank of Dallas
was forwarded to me a t L i t t l e Rock, Arkansas, where I was i n
t r i a l of a similar case. Upon my r e t u r n to the o f f i c e I f i n d
your l e t t e r of June 4th enclosing copy of the Douglas opinion.
I have w r i t t e n to Stroud congratulating him on h i s success
in t h i s case, as i t seems to have removed a considerable
p o r t i o n of the s t i n g contained in the Malloy decision.
On Monday of t h i s week we t r i e d out a case
before the Circuit Court of L i t t l e Rock, Arkansas. The item
i n controversy was one drawn on an Arkansas Bank in favor of a
r e s i d e n t of Louisiana who deposited i t in a nonmember bank i n
Louisiana, which, in turn, forwarded i t to the F i r s t national
Bank of Shreveport and the l a t t e r (under the d i r e c t sending
agreement with tho Federal Reserve Bank: of Dallas) forwarded i t
to our L i t t l e Rock Branch and by the L i t t l e Rock Branch i t was
forwarded d i r e c t to the drawee bank. The item was c o l l e c t e d
by charging the account of the drawer of the item. The drawee
bank then attempted to remit by d r a f t on i t s L i t t l e Rock correspondent.
The d r a f t proved to be u n c o l l e c t i b l e because of the
f a i l u r e of the remitting bank.
I had employed Mr. H. M. Armistead, of the firm of
Cockrill & Armistead, L i t t l e Rock, Arkansas, to represent me as
l o c a l attorney in the matter, Mr. Armistead had always f e l t
t h a t the c i r c u l a r l e t t e r between the Federal Reserve Bank of
Dallas and i t s member, the F i r s t National Bank of Shreveport,
La., authorizing the c o l l e c t i o n to be made in exchange, cons t i t u t e d a defense in our f a v o r . I did not f e e l so confident as
to t h i s defense and f e l t that if the case was defeated i t must
be defeated on the ground t h a t the Louisiana Bank and not the
Federal Reserve Bank of S t . Louis must respond f o r the l o s s .
Under the Arkansas p r a c t i c e one i s permitted to f i l e a demurrer
and an answer in the some pleading. Accordingly, we demurred
on the grounds:
356
— 2
—
X-4618
(1) That since in Louisiana by j u d i c i a l construction
(Martin vs Hibernia Bank & Trust Co. 53 Southern, 572) the i n i t i a l
bank was responsible f o r the a c t s of i t s sub-agents.
(2) That if the Court should f i n d that the d i r e c t
sending s t a t u t e , since enacted by the Louisiana l e g i s l a t u r e ,
had changed the r u l e in Louisiana from the New York to the
Massachusetts r u l e , then since Arkansas has a similar d i r e c t
sending a c t , the Arkansas a c t made the drawee bank a s u i t able agent of the owner of the item, and that the drawee
bank having c o l l e c t e d the item and having f a i l e d to remit
i n money was alone responsible to the owner of the item.
We also pleaded the c i r c u l a r l e t t e r contract
between the f e d e r a l He serve Sank of Dallas and i t s member,
the F i r s t National Bank of Shroveport, authorizing the acceptance of a d r a f t in collection and the c i r c u l a r l e t t e r and
regulation between Federal Reserve Banks; also Regulation J .
I argued the demurrer on both p o i n t s , and whilst
the Court seemed to take kindly to the suggestions he s t a t e d
t h a t since under the Arkansas procedure he could consider
the demurrer a t the end of the case, he would p r e f e r to hear
the evidence. This being agreeable to both p a r t i e s , i t was
accordingly done. We thereupon submitted the s t i p u l a t i o n s
and o f f e r e d evidence of the universal custom among banks
of accepting d r a f t s instead of money in the matter of coll e c t i o n s , and r e s t e d .
The Court thereupon inquired of p l a i n t i f f ' s a t t o r ney i f h i s only charge of negligence against the Federal Reserve Bank was that i t took an exchange d r a f t i n s t e a d of cash
from the drawee bank and upon receiving an a f f i r m a t i v e reply
s t a t e d , under the circumstances, he would have to f i n d against
the p l a i n t i f f ; that as he viewed the case, when t h i s item was
deposited in the Louisiana Bank, drawn on a bank in another
s t a t e , the owner of the item knew that the c o l l e c t i o n would
have to be made through other agents and was bound by any
contract made by such agents; t h e r e f o r e , was bound by the
contract e x i s t i n g between the Federal Reserve Bank of Dallas
and the F i r s t National Bank authorizing the acceptance of a
d r a f t in l i e u of money in the matter of c o l l e c t i o n s .
The p l a i n t i f f , of courso, took an appeal from the
decision; nevertheless, the judgment, as i t now stands, can be
sustained by the Supremo .Court on any of the defenses or the
demurrer o f f e r e d , since the p l a i n t i f f did not ask f o r the
f i n d i n g s of f . a c t s a n d d e c l a r a t i o n s of l a w . I am, t h e r e f o r e ,
v e r y h o p e f u l of t h e s u c c e s s f u l outcome of t h i s e a s e when i t
r e a c h e s t h e Supreme Court of A r k a n s a s .
P e r s o n a l l y I a n now a n d a l w a y s h a v e b e e n somewhat a f r a i d of t h e c i r c u l a r l e t t e r d e f e n s e on c a s e s a r i s i n g p r i o r t o t h e amendment of R e g u l a t i o n J .
However, I
t h i n k u n d e r t h e s t a t u s of t h e judgment, a s i t now s t a n d s ,
we ought t o win i t on t h e d e m u r r e r , o r on t h e custom a s
p r o v e d even i f t h e Supreme Court s h o u l d n o t h o l d t h e same
views t h e t r i a l c o u r t d i d a s t o t h e c i r c u l a r l e t t e r d e fense.
With k i n d e s t r e g a r d s , I am
Very t r u l y y o u r s ,
( s ) J a s . Or. McConkey.
Counsel
359
FEDERAL RESERVE BOARD
WASHINGTON
X-4S19
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J u n e 15, 1 9 2 6 .
SUBJECT: R e p o r t i n g v i o l a t i o n of c r i m i n a l s t a t u t e
p r o h i b i t i n g u s e of w o r d s " F e d e r a l " , "Reserve", etc.
Dear S i r :
T h e r e i s e n c l o s e d h e r e w i t h f o r y o u r i n f o r m a t i o n a copy
of a n A c t of C o n g r e s s w h i c h was a p p r o v e d a n d became a l a w on May 2 4 ,
1S26, t o p r o h i b i t t h e o f f e r i n g f o r s a l e a s F e d e r a l Farm Loan Bonds, of
a n y s e c u r i t i e s n o t i s s u e d u n d e r t h e t e r m s of t h e Farm Loan A c t , t o l i m i t
t h e u s e of t h e w o r d s " F e d e r a l " , " U n i t e d S t a t e s " o r " R e s e r v e " i n t h e
t i t l e s of p r i v a t e i n s t i t u t i o n s a n d t o p r o h i b i t f a l s e a d v e r t i s i n g by b a n k s
The p r o v i s i o n s o f t h i s a c t
n o t members of t h e F e d e r a l R e s e r v e S y s t e m .
are as follows:
1.
I t p r o h i b i t s t h e a d v e r t i s i n g or o f f e r i n g f o r s a l e a s
F e d e r a l Harm Loan Bonds, of a n y s e c u r i t i e s n o t i s s u e d u n d e r t h e p r o v i s i o n s of t h e F e d e r a l Farm Loan A c t ,
2.
I t p r o h i b i t s t h e u s e of t h e word " F e d e r a l " o r " U n i t e d
S t a t e s " o r a n y o t h e r w o r d s i m p l y i n g Government o w n e r s h i p , o b l i g a t i o n
or s u p e r v i s i o n , i n a d v e r t i s i n g or o f f e r i n g f o r s a l e any s e c u r i t i e s not
i s s u e d b y t h e U n i t e d S t a t e s o r u n d e r t h e p r o v i s i o n s of some a c t of
Congress.
3.
I t p r o h i b i t s any f i r m , p e r s o n or c o r p o r a t i o n doing
a banking, loan, b u i l d i n g and loan, brokerage, f a c t o r a g e , insurance, i n demnity or t r u s t b u s i n e s s o t h e r t h a n the F e d e r a l Reserve Board, F e d e r a l
Farm Loan B o a r d , F e d e r a l T r a d e Commission, o r a n y o t h e r d e p a r t m e n t o r
independent e s t a b l i s h m e n t of t h e U n i t e d S t a t e s , or any F e d e r a l r e s e r v e
bank, F e d e r a l l a n d bank, F e d e r a l r e s e r v e a g e n t , F e d e r a l Advisory
C o u n c i l , o r a n y c o r p o r a t i o n o r g a n i z e d u n d e r t h e l a w s of t h e U n i t e d
S t a t e s , to u s e t h e words " F e d e r a l " , "United S t a t e s " or "Reserve" as
a p a r t of i t s name o r t i t l e .
Firms, persons or corporations a c t u a l l y
e n g a g e d i n b u s i n e s s u n d e r a name o r t i t l e i n c l u d i n g t h e s e words p r i o r
t o t h e p a s s a g e of t h e l a w a r e e x p r e s s l y e x c e p t e d f r o m t h e p r o h i b i t i o n s
of t h e a c t .
4.
I t p r o h i b i t s any bank, banking a s s o c i a t i o n or t r u s t
company w h i c h i s n o t a 'member of t h e F e d e r a l R e s e r v e S y s t e m t o a d v e r t i s e o r r e p r e s e n t t h a t i t i s a member of s u c h S y s t e m .
-
2 -
X-4619
5 . V i o l a t i o n of t h e p r o v i s i o n s of t h e law i s made a
misdemeanor p u n i s h a b l e by f i n e o r imprisonment o r "both, a n d t h e
i l l e g a l u s e of t h e words above s e t o u t , may b e p r e v e n t e d by i n junction.
S i n c e t h i s i s a c r i m i n a l s t a t u t e v i o l a t i o n s of i t s p r o v i s i o n s come u n d e r t h e j u r i s d i c t i o n of t h e Department of J u s t i c e ,
You a r e r e q u e s t e d , t h e r e f o r e , t o r e p o r t t h e f a c t s i n a l l c a s e s of
v i o l a t i o n s of t h i s law coming t o y o u r n o t i c e , t o t h e l o c a l U n i t e d
S t a t e s D i s t r i c t A t t o r n e y a n d a l s o t o s e n d a f u l l r e p o r t of t h e matt e r t o t h e F e d e r a l R e s e r v e B o a r d . This r e p o r t t o t h e Board s h o u l d
be made i n d u p l i c a t e i n o r d e r t h a t t h e Board may t r a n s m i t a copy
t h e r e o f t o t h e Department of J u s t i c e , which may t h e n t a k e such a c t i o n a s i t c o n s i d e r s a d v i s a b l e i n each c a s e .
Yours v e r y t r u l y ,
W a l t e r L. Eddy.
Secretary.
Enclosure.
TO AIL FEDERAL RESERVE AGEITTS.
361
C O P
I
X-4619-a
( P u b l i c - Ho. 279 - 69th Congress)
( s . 2606)
An Act To p r o h i b i t o f f e r i n g f o r s a l e a s F e d e r a l farm l o a n "bonds
any s e c u r i t i e s n o t i s s u e d u n d e r t h e terms of t h e Farm Ldan Act, to l i m i t t h e
u s e of t h e words " F e d e r a l , t ! " U n i t e d S t a t e s , 1 1 or " r e s e r v e , " or a combination of
such words, t o p r o h i b i t f a l s e a d v e r t i s i n g , and f o r o t h e r p u r p o s e s .
Be i t e n a c t e d by t h e S e n a t e and House of R e p r e s e n t a t i v e s of t h e U n i t e d .
S t a t e s of America i n Congress assembled* That no bank, b a n k i n g a s s o c i a t i o n ,
t r u s t company, c o r p o r a t i o n , a s s o c i a t i o n , f i r m , p a r t n e r s h i p , or p e r s o n n o t o r g a n i z e d u n d e r t h e p r o v i s i o n s of t h e Act of J u l y 17, 1916, known a s t h e F e d e r a l
Farm Loan A c t , a s amended, s h a l l a d v e r t i s e or r e p r e s e n t t h a t i t makes F e d e r a l
f a r m l o a n s or a d v e r t i s e of o f f e r f o r s a l e a s F e d e r a l farm l o a n bonds any bond
n o t i s s u e d u n d e r t h e p r o v i s i o n s of t h e F e d e r a l Farm Loan A c t , or make u s e of
t h e word " F e d e r a l " o r t h e words " U n i t e d S t a t e s " or any o t h e r word or words imp l y i n g Government o w n e r s h i p , o b l i g a t i o n , or s u p e r v i s i o n i n a d v e r t i s i n g or o f f e r i n g f o r s a l e any bond, n o t e , m o r t g a g e , or o t h e r s e c u r i t y n o t i s s u e d by t h e Government of t h e U n i t e d S t a t e s or u n d e r t h e p r o v i s i o n s of t h e s a i d F e d e r a l Farm
Loan Act o r some o t h e r Act of C o n g r e s s .
S e c . 2 . That no bank, b a n k i n g a s s o c i a t i o n , t r u s t company, c o r p o r a t i o n , a s s o c i a t i o n , f i r m , p a r t n e r s h i p , or p e r s o n engaged i n t h e b a n k i n g , l o a n , b u i l d i n g
and l o a n , b r o k e r a g e , f a c t o r a g e , i n s u r a n c e , i n d e m n i t y , or t r u s t b u s i n e s s s h a l l
u s e t h e word " F e d e r a l , 1 1 t h e words " U n i t e d S t a t e s , " o r t h e word "reserve," or any
combination of such words, a s a p o r t i o n of i t s c o r p o r a t e , f i r m , or t r a d e name or
t i t l e o r of t h e name u n d e r which i t does b u s i n e s s : P r o v i d e d , however % That t h e
p r o v i s i o n s of t h i s s e c t i o n s h a l l n o t a p p l y t o t h e F e d e r a l He s e r v e Board, t h e
F e d e r a l Farm Loan Board, t h e F e d e r a l Trade Commission, o r any o t h e r d e p a r t m e n t ,
b u r e a u , or i n d e p e n d e n t e s t a b l i s h m e n t of t h e Government of t h e U n i t e d S t a t e s , nor
t o any F e d e r a l r e s e r v e bank, F e d e r a l l a n d bank, or F e d e r a l r e s e r v e a g e n t f nor to
t h e F e d e r a l A d v i s o r y C o u n c i l , nor to any c o r p o r a t i o n o r g a n i z e d u n d e r t h e laws of
t h e U n i t e d S t a t e s , n o r t o any bank, b a n k i n g a s s o c i a t i o n , t r u s t company, c o r p o r a t i o n , a s s o c i a t i o n , f i r m , p a r t n e r s h i p , or p e r s o n a c t u a l l y engaged i n b u s i n e s s
u n d e r such name or t i t l e p r i o r to t h e p a s s a g e of t h i s A c t .
S e c . 3* That no bank, b a n k i n g a s s o c i a t i o n , o r t r u s t company which i s not
a member of t h e F e d e r a l R e s e r v e system s h a l l a d v e r t i s e or r e p r e s e n t i n any way
t h a t i t i s a member of such system or p u b l i s h or d i s p l a y any s i g n , symbol, or
a d v e r t i s e m e n t r e a s o n a b l y c a l c u l a t e d to convey t h e i m p r e s s i o n t h a t i t i s a member
of such s y s t e m .
S e c . 4 , That any bank, b a n k i n g a s s o c i a t i o n , t r u s t company, c o r p o r a t i o n ,
a s s o c i a t i o n , f i r m , or p a r t n e r s h i p v i o l a t i n g any of t h e p r o v i s i o n s of t h i s Act
s h a l l be g u i l t y of a misdemeanor and s h a l l be s u b j e c t to a f i n e of not e x c e e d i n g
$ 1 , 0 0 0 . Any p e r s o n v i o l a t i n g any of t h e p r o v i s i o n s of t h i s A c t , or any o f f i c e r
of any bank, b a n k i n g a s s o c i a t i o n , t r u s t company, c o r p o r a t i o n , or a s s o c i a t i o n , or
member of any f i r m o r p a r t n e r s h i p v i o l a t i n g any of t h e p r o v i s i o n s of t h i s Act
who p a r t i c i p a t e s i n , or knowingly a c q u i e s c e s i n , such v i o l a t i o n s s h a l l be g u i l t y
362
- 2 -
X-4619a
of a misdemeanor a n d s h a l l "be s u b j e c t t o a f i n e of n o t e x c e e d i n g $ 1 , 0 0 0 o r imp r i s o n m e n t n o t e x c e e d i n g one y e a r , or b o t h . Any such i l l e g a l u s e of such word
or words, or a n y c o m b i n a t i o n of such words, or any o t h e r v i o l a t i o n of any of t h e
1
. ' 0 v i s i o n s of t h i s A c t , may "be e n j o i n e d by t h e U n i t e d S t a t e s d i s t r i c t c o u r t
" p.vi$g j u r i s d i c t i o n , a t t h e i n s t a n c e of any U n i t e d S t a t e s d i s t r i c t a t t o r n e y , any
f e d e r a l l a n d bank, j o i n t - s t o c k l a n d bank, F e d e r a l r e s e r v e bank, o r t h e F e d e r a l Farm
Loan Board o r t h e F e d e r a l R e s e r v e B o a r d .
S e c . 5 . That i f any c l a u s e , s e n t e n c e , p a r a g r a p h , o r p a r t of t h i s Act s h a l l
f o r any r e a s o n be a d j u d g e d by any c o u r t of competent j u r i s d i c t i o n t o be i n v a l i d ,
s u c h judgment s h a l l n o t a f f e c t , i m p a i r , or i n v a l i d a t e t h e r e m a i n d e r o f t h i s A c t ,
b u t s h a l l b e c o n f i n e d i n i t s o p e r a t i o n t o t h e c l a u s e , s e n t e n c e , p a r a g r a p h or p a r t
t h e r e o f d i r e c t l y i n v o l v e d i n t h e c o n t r o v e r s y i n which such judgment s h a l l have
been r e n d e r e d .
Approved, May 24, 1926.
FEDERAL RESERVE BOARD
3 6 3
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-4620
J u n e 1 6 , 1926.
SUBJECT:
H o l i d a y s d u r i n g J u l y , 1926.
Dear S i r :
On Monday, J u l y 5 t h , i n o b s e r v a n c e o f I n d e p e n d e n c e
Day t h e r e w i l l be no Gold S e t t l e m e n t Fund o r F e d e r a l R e s e r v e
N o t e C l e a r i n g , a n d t h e b o o k s of t h e F e d e r a l R e s e r v e B o a r d w i l l
be c l o s e d .
In a d d i t i o n to the holiday mentioned, the following
b a n k s and b r a n c h e s w i l l be c l o s e d on the d a t e s s p e c i f i e d :
Tuesday
J u l y 13
Nashville
Memphis
General F o r r e s t ' s
birthday
Saturday
J u l y 24
Dallas
El Paso
Houston
Primary E l e c t i o n
Day
S a l t Lake C i t y P i o n e e r Day
On t h e d a t e s i n d i c a t e d , t h e b a n k s 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 e i t h e r t h e r e g u l a r Gold Fond C l e a r i n g o r t h o
F e d e r a l R e s e r v e No t o C l e a r i n g . . . •
P l e a s e i n c l u d e your c r e d i t s f o r t h e banks mentioned
on e a c h of t h e h o l i d a y s w i t h y o u r c r e d i t s f o r t h e f o l l o w i n g
b u s i n e s s day i n y o u r Gold Fund C l e a r i n g t e l e g r a m s , and make
no s h i p m e n t of F e d e r a l R e s e r v e N o t e s , f i t o r u n f i t , f o r a c c o u n t of t h e F e d e r a l R e s e r v e Bank o f D a l l a s , on J u l y 2 4 t h .
P l e a s e n o t i f y Branches.
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary.
TO GOVERNORS OF ALL F . R. BANKS
Z-4623
HEiDEAKDUM IN EE USE OF GOVZREMENT TRANSPORTATION REQUESTS;
The G e n e r a l A c c o u n t i n g O f f i c e h a s r e v i s e d t h e form o f Government
t r a n s p o r t a t i o n r e q u e s t now i n u s e and i s s u e d new r e g u l a t i o n s r e g a r d i n g same.
The f o l l o w i n g i n s t r u c t i o n s a r e "based t h e r e o n ;
1 . A l l u n u s e d r e q u e s t s of t h e o l d s e r i e s mast be t u r n e d i n p r i o r
t o J u n e 30, 1926.
They w i l l n o t "be h o n o r e d a f t e r t h a t d a t e .
2 . The new f o r m o f r e q u e s t i s p r o v i d e d i n p r o g r e s s i v e l y numbered
"books t h a t w i l l c a r r y "blanks i n m u l t i p l e s of 5 t o which s e r i a l
l e t t e r s have "been a s s i g n e d a s f o l l o w s :
A - "books c o n t a i n i n g
B "
"
C "
"
5 "blanks
10
"
25
"
D -
"
"
50
"
E -
"
"
100
"
A s u p p l y of "books A, B and 0 h a v e been o b t a i n e d and a r e now i n
t h e o f f i c e of t h e F i s c a l Agent.
3 . Each t r a v e l e r i s t o be s u p p l i e d w i t h a n i d e n t i f i c a t i o n c a r d f o r
u s e when o b t a i n i n g t r a n s p o r t a t i o n on a Government r e q u e s t .
4 . Books c o n t a i n i n g 5 r e q u e s t s or m u l t i p l e s t h e r e o f may be i s s u e d
i n b l a n k t o t r a v e l e r s a s may be r e q u i r e d , and when so i s s u e d , t h e
t r a v e l e r w i l l s i g n them a l s o a s i s s u i n g o f f i c e r . The name and t i t l e
of t h e p e r s o n t o vtiiom i s s u e d and t h e numbers i n t h e book w i l l a p p e a r
on t h e f i r s t t a b u l a t i o n s h e e t .
5 . The o r i g i n a l r e q u e s t s h o u l d be s i g n e d by t h e t r a v e l e r i n h i s own
bona f i d e h a n d w r i t i n g when t h e t r a n s p o r t a t i o n or t i c k e t f o r same h a s
been f u r n i s h e d .
Both forms s h o u l d be c o m p l e t e d by t y p e w r i t e r , i n d e l i b l e p e n c i l or pen and a l e g i b l e c a r b o n mast a l w a y s be s e c u r e d .
6 . When a t r a v e l e r s i g n s a r e q u e s t b o t h a s i s s u i n g o f f i c e r and
t r a v e l e r , t h e c a r r i e r w i l l r e q u i r e him t o e x h i b i t t h e book from which
t h e r e q u e s t was t a k e n i n o r d e r t o a s c e r t a i n t h e name of t h e p e r s o n t o
whom s u c h book was i s s u e d and w i l l t h e n r e q u i r e him t o e s t a b l i s h h i s
i d e n t i t y by t h e o f f i c i a l c a r d p r o v i d e d f o r t h e p u r p o s e a s t h e p e r s o n
t o whom t h e book was i s s u e d .
7 . R e q u e s t s w i l l n o t b e u s e d where t h e v a l u e of t h e t r a n s p o r t a t i o n
i s l e s s t h a n one d o l l a r ( $ 1 . 0 0 ) .
8 . The v a l u e of t h e t r a n s p o r t a t i o n s h o u l d be p l a i n l y marked on t h e
c a r b o n c o p y and t h e c a r b o n copy f o r w a r d e d t o t h e Board a t t h e e a r l i e s t
opportunity a f t e r i t s use.
B l a n k s a r e p r o v i d e d f o r t h e p u r p o s e of
k e e p i n g a r e c o r d of r e q u e s t s i s s u e d .
X-4623
-
2
-
9 . S e m i a n n u a l r e p o r t s a r e t o "be made "by t h e Board t o t h e
T r e a s u r y D e p a r t m e n t on June 30 and December 3 1 of e a c h y e a r ,
and e a c h p e r s o n h a v i n g i n h i s p o s s e s s i o n a hook of r e q u e s t s
s h o u l d send a d e s c r i p t i o n of same t o t h e F i s c a l Agent of t h e
B o a r d , g i v i n g t h e numbers of t h e r e q u e s t s r e m a i n i n g u n u s e d .
1 0 . C a n c e l l e d r e q u e s t s , t o g e t h e r w i t h t h e c a r b o n s s h o u l d he
f o r w a r d e d t o t h e F i s c a l Agent of t h e B o a r d .
W. M. IMLAY
F i s c a l Agent.
FEDERAL RESERVE BOARD
355
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT;
X-4625
ASSESSMENT FOB GENERAL EXPENSES 01? THE EHD5RM. K3SHRV33
BOARD, J U L ! 1 TO DECEMBER 3 1 , 1 9 2 6 .
June 24, 1926.
Dear S i r :
C o n f i r m i n g t e l e g r a p h i c a d v i c e of t h i s d a t e t h e r e i s
e n c l o s e d h e r e w i t h c o p y of a r e s o l u t i o n a d o p t e d by t h e F e d e r a l
R e s e r v e Board a t a m e e t i n g h o l d on J u n e 2 4 , 1926, l e v y i n g a n
a s s e s s m e n t u p o n t h e s e v e r a l F e d e r a l r e s e r v e "banks of a n amount
e q u a l t o e l e v e n h u n d r e d t h s of one p e r c e n t ( . 0 0 1 1 ) of t h e t o t a l
paid, i n c a p i t a l s t o c k a n d s u r p l u s of s u c h "banks a s a t c l o s e of
b u s i n e s s J u n e 3 0 , 1S26, t o d e f r a y t h e e s t i m a t e d g e n e r a l e x p e n s e s
of t h e F e d e r a l R e s e r v e Board f r o m J u l y 1 t o December 3 1 , 1 9 2 6 .
n i n & l y d e p o s i t o n e - h a l f of t h e amount o f y o u r a s s e s s m e n t
i n t n c G e n e r a l A c c o u n t , T r e a s u r e r , U. S . , on y o u r h o o k s J u l y 1,
/ ' ,"11<2' -Ko-~hcvlf September 1, 1926, i n e a c h i n s t a n c e i s s u i n g a
C/D f o r p r o & i t of / ' S a l a r i e s a n d E x p e n s e s , F e d e r a l R e s e r v e B o a r d ,
p e c i -1 vLiicy'„ a s s e s s m e n t f o r g e n e r a l e x p e n s e s , a n d s e n d i n g a
d u p l i c a t e G/D t o t h e F e d e r a l R e s e r v e B o a r d .
Also p l e a s e f u r n i s h
a s t a t e m e n t of y o u r c a p i t a l and s u r p l u s u s e d a s a b a s i s f o r t h e
assessment.
Very t r u l y y o u r s ,
Enc l o s u r e .
F i s c a l Agent.
367
1!-4625a
RESOLUTION LEVYING ASSESSMENT
Whereas, u n d e r S e c t i o n 10 of t h e a c t a p p r o v e d
December 2 5 , 1913, and known a s t h e F e d e r a l R e s e r v e A c t ,
t h e F e d e r a l R e s e r v e Board i s empowered t o l e v y s e m i a n n u a l l y Tijon t h e F e d e r a l r e s e r v e "banks i n p r o p o r t i o n t o
t h e i r c a p i t a l s t o c k and s u r p l u s a n a s s e s s m e n t s u f f i c i e n t
t o pay i t s e s t i m a t e d e x p e n s e s , i n c l u d i n g t h e s a l a r i e s of
i t s members, a s s i s t a n t s , a t t o r n e y s , e x p e r t s and employees
f o r t h e h a l f - y e a r s u c c e e d i n g t h e l e v y i n g of s u c h a s s e s s m e n t , t o g e t h e r w i t h any d e f i c i t c a r r i e d f o r w a r d f r o m t h e
p r e c e d i n g h a l f - y e a r ; and
Whereas, i t a p p e a r s f r o m e s t i m a t e s s u b m i t t e d and
considered t h a t i t i s necessary t h a t a fund equal t o eleven
h u n d r e d t h s of one p e r c e n t of t h e t o t a l p a i d - i n c a p i t a l s t o c k
and s u r p l u s of t h e F e d e r a l r e s e r v e b a n k s be c r e a t e d f o r t h e
p u r p o s e h e r e i n b e f o r e d e s c r i b e d , e x c l u s i v e of t h e c o s t of e n g r a v i n g and p r i n t i n g of F e d e r a l r e s e r v e n o t e g ; Now, t h e r e f o r e ,
Be i t r e s o l v e d , That p u r s u a n t t o t h e a u t h o r i t y
v e s t e d i n i t by l a w , t h e F e d e r a l R e s e r v e Board h e r e b y l e v i e s
a n a s s e s s m e n t upon t h e s e v e r a l F e d e r a l r e s e r v e b a n k s of a n
amount e q u a l t o e l e v e n h u n d r e d t h s of one p e r c e n t of t h e t o t a l
p a i d - i n c a p i t a l a n d s u r p l u s of s u c h banks a s of J u n e 3 0 , 19<?6,
a n d t h e F i s c a l Agent of t h e F e d e r a l R e s e r v e Board i s h e r e b y
a u t h o r i z e d t o c o l l e c t f r o m s a i d banks s u c h a s s e s s m e n t and
e x e c u t e , i n t h e name. of t h e B o a r d , r e c e i p t s f o r payments made*
Such a s s e s s m e n t s w i l l be c o l l e c t e d i n two i n s t a l l m e n t s of o n e h a l f e a c h ; t h e f i r s t i n s t a l l m e n t t o bo p a i d J u l y 1, 1926, and
t h e s e c o n d h a l f on September 1 , 1926.
X-4626
F E D E R A L
R E S E R V E
3 f j 8
BOARD
STATEMENT FOR 3H5 HESS
For R e l e a s e i n Morning P a p e r s ,
Monday, J u n e 28, 1936•
The f o l l o w i n g i s a summary of g e n e r a l b u s i n e s s
and f i n a n c i a l c o n d i t i o n s t h r o u g h o u t t h e s e v e r a l
F e d e r a l r e s e r v e d i s t r i c t s , "based upon s t a t i s t i c s
f o r t h e months of May a n d J u n e , a s c o n t a i n e d i n
t h e f o r t h c o m i n g i s s u e of t h e F e d e r a l R e s e r v e B u l letin.
P r o d u c t i o n i n "basic i n d u s t r i e s and f a c t o r y employment d e c l i n e d
f u r t h e r i n Mays w h i l e w h o l e s a l e p r i c e s advanced s l i g h t l y f o r t h e f i r s t time
i n seven months,
The volume of t r a d e a t w h o l e s a l e and a t r e t a i l i n c r e a s e d
p a r t l y as the r e s u l t of more f a v o r a b l e w e a t h e r c o n d i t i o n s .
Production. A c t i v i t y i n most l i n e s of i n d u s t r y was s m a l l e r i n May t h a n i n
April.
The r e d u c t i o n was r e f l e c t e d i n a d e c r e a s e d volume of o u t p u t a s w e l l
a s i n a d e c l i n e i n t h e number of f a c t o r y w o r k e r s and i n t o t a l wage p a y m e n t s .
Tne l a r g e s t d e c l i n e s o c c u r r e d i n t h e t e x t i l e ,
and s t e e l i n d u s t r i e s .
l e a t h e r and s h o e s , and i r o n
P r o d u c t i o n of a u t o m o b i l e s c o n t i n u e d l a r g e i n May#
In
t h e l u m b e r , cement, b r i c k and g l a s s i n d u s t r i e s a c t i v i t y was m a i n t a i n e d and
t h e r e w e r e s e a s o n a l i n c r e a s e s i n t h e o u t p u t of c e r t a i n f o o d p r o d u c t s *
The
volume of b u i l d i n g c o n t r a c t s awarded d e c l i n e d f u r t h e r i n May b u t c o n t i n u e d
l a r g e r t h a n i n May of l a s t y e a r .
F i g u r e s f o r t h e f i r s t t h r e e weeks of J u n e
i n d i c a t e f u r t h e r d e c r e a s e s and t h e volume of c o n t r a c t s awarded was s m a l l e r
i n t h a t p e r i o d t h a n i n t h e c o r r e s p o n d i n g weeks of 1925#
Recent d e c l i n e s i n
c o n t r a c t s a s compared w i t h l a s t y e a r have been p a r t i c u l a r l y l a r g e i n m i d d l e
w e s t e r n and s o u t h e a s t e r n d i s t r i c t s .
R e p o r t s by t h e Department of A g r i c u l t u r e i n d i c a t e t h a t t h e composite
_2«
1*4626
8 6 9
c o n d i t i o n o f c r o p s on J u n e 1 was 8 p e r cetlt below t h e a v e r a g e c o n d i t i o n on
t h a t d a t e f o r t h e p a s t t o n y e a r s , and somewhat l o w e r t h a n t h e a v e r a g e c o n d i t i o n
i
a y e a r a g o . On t h e b a s i s o f t h e June 1 c o n d i t i o n t h e e s t i m a t e d y i e l d of w i n t e r
wheat was 5 4 3 , 0 0 0 , 0 0 0 "bushels a s compared w i t h a n e s t i m a t e of 5 4 9 , 0 0 0 , 0 0 0
"bushels made a month e a r l i e r and a f i n a l y i e l d of 3 9 8 , 0 0 0 , 0 0 0 "bushels i n 1925.
Trade. With more f a v o r a b l e w e a t h e r i n May t h a n i n t h e p r e c e d i n g month t h e
volume of w h o l e s a l e and r e t a i l t r a d e i n c r e a s e d and was l a r g e r t h a n i n May of
last year.
Department s t o r e s a l e s e x c e e d e d t h o s e of e a r l i e r months o f t h i s
y e a r , and t o t a l s a l e s f o r t h e f i r s t f i v e months were l a r g e r t h a n f o r t h e c o r r e s p o n d i n g p e r i o d of a n y p r e c e d i n g y e a r .
M e r c h a n d i s e s t o c k s c a r r i e d by w h o l e -
s a l e f i r m s were s l i g h t l y s m a l l e r a t t h e end of May t h a n a month e a r l i e r .
S t o c k s of g r o c e r i e s , h a r d w a r e , and d r u g s were l a r g e r t h a n a y e a r a g o , b u t
t h o s e of m e a t s , d r y g o o d s , and shoes were s m a l l e r .
s t o r e s d e c l i n e d more t h a n u s u a l i n May and
end of t h e month t h a n a y e a r a g o .
Stocks a t department
were o n l y s l i g h t l y l a r g e r a t t h e
R a i l r o a d f r e i g h t s h i p m e n t s i n c r e a s e d and
i n May a n d i n t h e f i r s t two weeks of J u n e were above t h o s e of t h e same weeks
of p r e v i o u s y e a r s .
S h i p m e n t s of m i s c e l l a n e o u s commodities were e s p e c i a l l y
large.
Prices.The g e n e r a l l e v e l of w h o l e s a l e commodity p r i c e s , a c c o r d i n g t o t h e
i n d e x of t h e Bureau, of Labor S t a t i s t i c s , r o s e s l i g h t l y i n May f o r t h e f i r s t
time s i n c e l a s t August.
P r i c e a d v a n c e s were shown b o t h f o r a g r i c u l t u r a l and
non-»agricultural commodities.
Among t h e p r i n c i p a l a d v a n c e s w e r e t h o s e i n t h e
p r i c e s of g a s o l i n e , l i v e s t o c k and m e a t , w h i l e p r i c e s of g r a i n s and c o t t o n
declined.
I n t h e f i r s t t h r e e weeks o f J u n e p r i c e s of g r a i n s , l i v e s t o c k , s i l k ,
-3and n o n f e r r o u s m e t a l s a d v a n c e d , w h i l e t h o s e of s u g a r ,
X-4626
370
cotton, cotton goods,
and p i g i r o n d e c l i n e d #
Bank C r e d i t . Growth i n l o a n s on s e c u r i t i e s and commercial l o a n s c a r r i e d t o t a l l o a n s
and i n v e s t m e n t s of r e p o r t i n g momber "banks i n l o a d i n g c i t i e s i n t h e m i d d l e of
June t o a new h i g h p o i n t above t h e t o t a l r e a c h e d a t t h e c l o s e o f l a s t y e a r .
The l a r g e r e d u c t i o n i n t h e volume of l o a n s on s e c u r i t i e s by New York C i t y banks
s i n c e t h e b e g i n n i n g o f t h e y e a r h a s b e e n more t h a n o f f s e t i n t h e t o t a l of l o a n s
and i n v e s t m e n t s of a l l r e p o r t i n g banks by i n c r e a s e s i n commercial l o a n s and i n
i n v e s t m e n t s of banks b o t h i n New York C i t y and o u t s i d e .
At t h e r e s e r v e banks changes i n t h e volume of c r e d i t o u t s t a n d i n g
d u r i n g t h e month e n d i n g J u n e 23 r e f l e c t e d c h i e f l y t h e f i n a n c i a l o p e r a t i o n s
of t h e U n i t e d S t a t e s T r e a s u r y a r o u n d t h e m i d d l e of J u n e .
The t e m p o r a r y
abundance of f u n d s c a u s e d by t h e r e d e m p t i o n of m a t u r i n g U n i t e d S t a t e s o b l i g a t i o n s on J u n e 15 c a u s e d a s h a r p d e c l i n e i n b o r r o w i n g s of member b a n k s , p a r t i c u l a r l y i n New York C i t y .
As checks i n payment of income t a x e s were c l e a r e d
and c o l l e c t e d , h o w e v e r , b o r r o w i n g s a t t h e r e s e r v e b a n k s r o s e t o t h e i r p r e v i o u s
level.
Money r a t e s i n g e n e r a l showed l i t t l e change d u r i n g t h e month.
Hates
on c a l l a n d time l o a n s wore s l i g h t l y lower a r o u n d t h e m i d d l e of J u n e , b u t i n
t h e t h i r d week were n i g h e r t h a n i n t h e l a t t e r p a r t of May.
R a t e s on a c c e p t -
a n c e s and on commercial p a p e r remained p r a c t i c a l l y unchanged*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4S27
June 29, 1926.
SUBJECT:
B i g h t of F e d e r a l R e s e r v e Bank t o remove non-member
bank from par l i s t .
Dear S i r :
The F e d e r a l R e s e r v e B o a r d h a s b e e n r e q u e s t e d t o r u l e
u p o n t h e q u e s t i o n w h e t h e r a F e d e r a l r e s e r v e b a n k may, of i t s own
v o l i t i o n , s t r i k e f r o m t h e p a r l i s t t h e name o f a nonmember S t a t e •
bank which has a g r e e d to r e m i t a t p a r , b u t r e p e a t e d l y f a i l s to
comply w i t h s p e c i a l i n s t r u c t i o n s t o t e l e g r a p h nonpayment o f c h e c k s
drawn on s u c h b a n k a n d f o r w a r d e d d i r e c t t o i t f o r p a y m e n t , a n d
w h i c h i n some i n s t a n c e s r e t u r n s c h e c k s drawn u p o n i t u n p a i d w i t h out p r o t e s t i n g such checks.
Under t h e t e r m s o f t h e F e d e r a l R e s e r v e Act F e d e r a l r e s e r v e b a n k s m a s t r e c e i v e on d e p o s i t a t p a r a n d p r o c e e d t o c o l l e c t ,
a l l c h e c k s on member b a n k s w h i c h a r e p r e s e n t e d t o them b y member
b a n k s ; b a t t h e y a r e n o t r e q u i r e d t o h a n d l e c h e c k s on nonm'otaber Banks.
S e c t i o n I I I of t h e B o a r d ' s R e g u l a t i o n J p r o v i d e s t h a t :
"Each F e d e r a l r e s e r v e b a n k w i l l r e c e i v e a t p a r
f r o m i t s member b a n k s and f r o m nonmember c l e a r i n g b a n k s
i n i t s d i s t r i c t , c h e c k s d r a w n on a l l member a n d n o n member c l e a r i n g b a n k s , a n d c h e c k s d r a w n on a l l o t h e r
nonmember b a n k s w h i c h a r e c o l l e c t a b l e a t p a r i n f u n d s
a c c e p t a b l e to the F e d e r a l r e s e r v e b a n k o f t h e d i s t r i c t
i n w h i c h s u c h nonmember b a n k s a r e l o c a t e d . "
I t i s t h e g e n e r a l p o l i c y of t h i s p r o v i s i o n of t h e r e g u l a t i o n to r e q u i r e a l l F e d e r a l r e s e r v e banks t o h a n d l e a l l checks
drawn on nonmember b a n k s w h i c h c a n i n f a c t b e c o l l e c t e d a t p a r i n
a c c e p t a b l e f u n d s w i t h o u t employing a s p e c i a l a g e n t o t h e r t h a n a
bank to p r e s e n t such checks f o r c o l l e c t i o n a c r o s s the counter; a n d
c o n s t r u e d s t r i c t l y according t o i t s l e t t e r the r e g u l a t i o n might be
X-4627
-2
c o n s i d e r e d by i m p l i c a t i o n to f o r b i d a f e d e r a l r e s e r v e bank to
s t r i k e f r o m t h e p a r l i s t a n y nonmenber bank on w h i c h chocks
c a n i n f a c t be C o l l e c t e d a t par# A r e a s o n a b l e c o n s t r u c t i o n of
t h i s r e g u l a t i o n , h o w e v e r , does n o t r e q u i r e a F e d e r a l r e s e r v e
b a n k t o h a n d l e c h e c k s drawn on a nonmenber bank when s u c h c h e c k s
c a n n o t be c o l l e c t e d w i t h o u t u n d u e r i s k t o t h e F e d e r a l r e s e r v e
bank.
A f t e r a c a r e f u l c o n s i d e r a t i o n of t h e q u e s t i o n p r e s e n t e d ,
t h e Board h a s r u l e d t h a t F e d e r a l r e s e r v e banks may, of t h e i r own
v o l i t i o n # remove from t h e p a r l i s t t h e name o f a n y nonmember bank
which r e p e a t e d l y f a i l s t o r e m i t p r o m p t l y f o r c a s h l e t t e r s s e n t t o
i t , to p r o t e s t u n p a i d c a s h i t e m s s e n t t o i t , t o comply w i t h i n s t r u c t i o n s t o w i r e a d v i c e of nonpayment, t o comply w i t h any o t h e r
p r o v i s i o n s of R e g u l a t i o n J of t h e F e d e r a l R e s e r v e B o a r d , or of t h e
F e d e r a l r e s e r v e b a n k 1 s check c o l l e c t i o n c i r c u l a r , o r w h i c h f o r any
o t h e r r e a s o n a b l e c a u s e may b e deemed by t h e F e d e r a l r e s e r v e b a n k
t o b e a n u n f i t or u n s a f e a g e n t f o r c o l l e c t i o n ; u n l e s s c h e c k s on
s u c h bank can s a f e l y be c o l l e c t e d a t p a r i n a c c e p t a b l e f u n d s t h r o u g h
a n o t h e r bank i n t h e same c i t y or town*
By o r d e r o f t h e F e d e r a l R e s e r v e Board#
Very t r u l y yours f
W a l t e r L* Eddy,
Secretary.
TO GOVERNORS AMD FEDERAL RESERVE AGENTS OF ALL F . B. BANKS.
3 7 3
FEDERAL RESERVE BOARD
X-4628
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
JUHS 2 9 , 19-.6.
T H E FEDERAL RESERVE BOARD
1
SUBJECT:
E l i g i b i l i t y f o r r e d i s c o u n t of n o t e s of p a r e n t c o r p o r a t i o n t o f i n a n c e p u r c h a s e of a u t o m o b i l e s t o "be u s e d
by i t s s u b s i d i a r i e s .
Dear S i r ;
The B o a r d h a s b e e n r e q u e s t e d t o r u l e u p o n t h e e l i g i b i l i t y
f o r r e d i s c o u n t a t a F e d e r a l R e s e r v e Bank o f n o t e s i s s u e d u n d e r t h e
following plan:
The n o t e s a r e t o b e made b y a c e r t a i n c o r p o r a t i o n w h i c h
i s a p a r e n t company owning a p p r o x i m a t e l y 7 5 $ of t h e c a p i t a l s t o c k
of a number of c o r p o r a t i o n s t h r o u g h o u t t h e U n i t e d S t a t e s e n g a g e d i n
m o t o r t r a n s p o r t a t i o n u n d e r t h e " D r i v e i t y o u r s e l f p l a n " . The p r o c e e d s of t h e n o t e s i n q u e s t i o n a r e t o b e u s e d b y t h e p a r e n t company
t o p u r c h a s e a u t o m o b i l e s w h i c h a r e t o be d i s t r i b u t e d t o t h e v a r i o u s
s u b s i d i a r y companies. These s u b s i d i a r i e s a r e to pay f o r t h e c a r s out
of e a r n i n g s f r o m month t o m o n t h . The n o t e s w i l l b e g u a r a n t e e d b y a
s u r e t y company. The p a r e n t company d o e s a l l of t h e b o r r o w i n g f o r t h e
subsidiaries.
The p l a n a p p e a r s t o b e one w h e r e b y t h e p a r e n t c o r p o r a t i o n
b o r r o w s money t o f i n a n c e t h e p u r c h a s e of a u t o m o b i l e s t o b e u s e d a s
permanent or f i x e d i n v e s t m e n t s i n the b u s i n e s s of i t s s u b s i d i a r i e s .
The B o a r d h a s h e r e t o f o r e h e l d t h a t n o t e s of a c o r p o r a t i o n e n g a g e d i n
t h e b u s i n e s s of f u r n i s h i n g m o t o r t r a n s p o r t a t i o n , made f o r t h e p u r p o s e
of p r o v i d i n g f u n d s w i t h which to p u r c h a s e motor v e h i c l e s , a r e i n e l i g i b l e f o r r e d i s c o u n t , on t h e g r o u n d s t h a t s u c h m o t o r v e h i c l e s
n e c e s s a r i l y c o n s t i t u t e a l a r g e p a r t of t h e c o r p o r a t i o n ' s e n t i r e
equipment and a r e hence to be c o n s i d e r e d permanent or f i x e d i n v e s t ments.
I t i s t r u e t h a t under the plan here presented the n o t e s are
to b e made b y t h e p a r e n t c o r p o r a t i o n a n d t h e c a r s p u r c h a s e d and d i s t r i b u t e d by i t to i t s s u b s i d i a r i e s , b u t t h i s does n o t change t h e
n a t u r e o r p u r p o s e of t h e t r a n s a c t i o n .
I t does n o t appear whether
t h e r e i s an a c t u a l s a l e o f t h e s e a u t o m o b i l e s b y t h e p a r e n t company
to t h e s u b s i d i a r i e s , b u t i n any event t h e Board does n o t f e e l t h a t
t h e s e n o t e s s h o u l d b e c o n s i d e r e d e l i g i b l e on t h e t h e o r y t h a t t h e
p r o c e e d s a r e to be u s e d to p u r c h a s e goods which a r e t o be r e s o l d ,
b e c a u s e of t h e c l o s e a f f i l i a t i o n of t h e p a r e n t company w i t h t h e
s u b s i d i a r i e s ; t h e o b v i o u s p u r p o s e of t h e p l a n i s t o f i n a n c e t h e
X-4628
s u b s i d i a r y c o r p o r a t i o n s i n a c q u i r i n g the a u t o m o b i l e s . In t h e
B o a r d ' s o p i n i o n , t h e t r a n s a c t i o n i s , in s u b s t a n c e even i f n o t i n
f o r m , a b o r r o w i n g f o r c a p i t a l p u r p o s e s . The n o t e s of t h e p a r e n t
company, t h e r e f o r e , t h e p r o c e e d s of which a r e t o be u s e d to p u r c h a s e
a u t o m o b i l e s to be d i s t r i b u t e d to i t s s u b s i d i a r i e s and u s e d by them
f o r c a p i t a l p u r p o s e s , mast b e c o n s i d e r e d i n e l i g i b l e f o r r e d i s c o u n t
a t a F e d e r a l Reserve Bank.
By o r d e r of t h e F e d e r a l R e s e r v e Board.
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary.
TO GOVEBBOaS OF AIL F.R.BANKS AND ALL F.H.AGENTS.
374
X—4629
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
,
UTUIE
RRRY
OU ,
1 QPFF
X ^ O .
P u r c h a s e of Third. L i b e r t y Loan Bonds "by F e d e r a l
R e s e r v e Banks u n d e r a g r e e m e n t t o r e s e l l .
Dear S i r :
This i s to a d v i s e you t h a t t h e F e d e r a l R e s e r v e
B o a r d h a s a p p r o v e d a r e c o m m e n d a t i o n of t h e Open M a r k e t
I n v e s t m e n t Committee f o r t h e F e d e r a l R e s e r v e System t h a t
F e d e r a l R e s e r v e Banks e x t e n d t h e r e p u r c h a s e a g r e e m e n t
p r a c t i c e w i t h r e c o g n i z e d d e a l e r s i n Government s e c u r i t i e s
t o i n c l u d e T h i r d L i b e r t y Loan b o n d s . T h e s e b o n d s m a t u r e
S e p t e m b e r 1 5 , 1928, a n d now h a v e o n l y a l i t t l e more t h a n
two y e a r s t o r u n .
The volume of U n i t e d S t a t e s T r e a s u r y c e r t i f i c a t e s
a n d n o t e s o u t s t a n d i n g h a s b e e n g r e a t l y r e d u c e d and i t
seems p r o p e r t o i n c r e a s e t h e volume o f s h o r t - t e r m s e c u r i t i e s
w h i c h d e a l e r s c a n b o r r o w on f r o m t h e F e d e r a l R e s e r v e Banks
b y t h e a d d i t i o n o f t h e T h i r d L i b e r t y Loan b o n d s .
Yours v e r y t r u l y ,
D. R. C r i s s i n g e r ,
Governor.
TO ALL GOVERNORS OF FEDERAL RESERVE BANKS.
375
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
•January 6, 1 9 2 6 .
s t . 4792.
SUBJECT: S p e c i a l N o t i f i c a t i o n of D i v i d e n d
d e c l a r e d by S t a t e Bank and T r u s t
C ornpany Memb e r s .
Bear S i r :
E n c l o s e d H e r e w i t h i s a copy of
the Board's
f o r m 1 0 7 a "SPECIAL NOTIFICATION OF DIVIDEND DECLARED"
by S t a t e Bank and T r u u t company members of t n e F e d e r a l Reserve System.
W i l l y o u k i n d l y a d v i s e t h e Board w n e t h e r you
make any s p e c i a l u s e of t h e r e p o r t s s u b m i t t e d on t h i s
f o r m by S t a t e b a n k members and w h e t h e r t h e r e i s a n y
r e a s o n f r o m t h e s t a n d p o i n t of y o u r b a n k why t h e s e
b a n k s s h o u l d n o t be a u t h o r i z e d t o d i s c o n t i n u e s u b m i t t i n g the r e p o r t s .
Very t r u l y y o u r s ,
W a l t e r L . Eddy,
Secretary.
Enclosure.
TO ALL F. R. AGENTS*
3^6
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J a n u a r y ~(, 1 9 ^ o .
St. 47^b.
SUBJECT:
D a t a f o r 1 3 A n n u a l Report, of
t:ie F e d e r a l R e s e r v e Board.
Dear S i r :
For use i n the f o r t h c o m i n g annual r e p o r t
of t h e F e d e r a l R e s e r v e Board, w i l l you k i n d l y i Tarn i s h us as soon as p r a c t i c a b l e w i t h the f o l l o w i n g
data:
1 . C l a s s i f i c a t i o n of U. S. s e c u r i t i e s
h e l d by y o u r bank ( l ) u n d e r r e p u r c h a s e
a g r e e m e n t , and (2) i n i n v e s t m e n t a c c o u n t ,
a s a t c l o s e of b u s i n e s s December 31, 1 9 2 5 ,
g i v i n ; - t h e c h a r a c t e r of s e c u r i t i e s , i n t e r e s t
r a t e , m a t u r i t y d a t e , and p a r v a l u e .
The
t o t a l o n l y need be shown f o r s e c u r i t i e s
b o u g h t t h r o u g h t h e Open Market I n v e s t m e n t
Committee and h e l d i n S p e c i a l I n v e s t m e n t
Account.
2 . Statement, showing t h e number of member
b a n k s i n e a c h S t a t e ( o r p a r t of S t a t e i n
t h e d i s t r i c t ) accommodated t h r o u z n t h e d i s c o u n t of p a p e r d u r i n g t h e c a l e n d a r y e a r 1 9 2 5 .
Very t r u l y y o u r s ,
E. L. Sine a d , Cnioi ,
D i v i s i o n of Bank O p e r a t i o n s .
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS. *
377
FEDERAL RESERVE BOARD
378
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
J a n u a r y 1 1 , 19<2o,
S t . 4800.
SUBJECT:
R e v i s i o n of f o r m s A,
and 1 7 0 .
44-a,
Dear S i r :
T h e r e i s e n c l o s e d h e r e w i t h a copy of e a c h of
the f o l l o w i n g revised forms, f o r use beginning w i t h
the p r e s e n t month:
Form A -
D i s c o u n t and open m a r k e t o p e r a t i o n s
d u r i n g t h e month.
Form 3 8 -
C l a s s i f i c a t i o n of d i s c o u n t e d and
p u r c h a s e d b i l l s h e l d a t t h e end of
t h e month.
( S e p a r a t e head o f f i c e
and b r a n c h r e p o r t s need n o t b e s u b m i t t e d on t h i s f o r m i n t h e f u t u r e . )
Form 4 4 - a - C l a s s i f i c a t i o n of money h e l d by t h e
F e d e r a l r e s e r v e bank and of gold
h e l d by t h e F e d e r a l r e s e r v e a g e n t a t
end of m o n t n .
Form I 7 O
- Monthly r e p o r t of c l e a r i n g o p e r a t i o n s .
A s u p p l y of e a c h of t h e f o r m s i s b e i n g f o r w a r d e d
t o you today u n d e r s e p a r a t e c o v e r .
Very t r u l y y o u r s ,
L . Srnead, C h i e f ,
D i v i s i o n 01 Bank O p e r a t i o n s .
Enclosure.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS*
FEDERAL RESERVE BOARD
WASHINGTON
January 12, 192b,
S t . 4802,
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
Debits to I n d i v i d u a l Accounts.
Dear S i r :
I n c o m p i l i n g monthly f i g u r e s of d e b i t s t o i n d i v i d u a l a c c o u n t s
f r o m weekly r e p o r t s r e c e i v e d i n I 9 2 6 , i t i s p r o p o s e d , a s i n 1925, t o p r o r a t e t h e f i g u r e s f o r e a c h c i t y f o r t h o s e weeks which do n o t f a l l e n t i r e l y
w i t h i n a g i v e n month, on t h e b a s i s of a c t u a l b u s i n e s s d a y s . By r e f e r e n c e
t o d a t a a v a i l a b l e a t the B o a r d ' s o f f i c e s we f i n d t h a t t h e r e p o r t weeks i n
1926 which b e g i n i n one month and end i n a n o t h e r , i . e . , t h e r e p o r t weeks
f o r w h i c h t h e f i g u r e s must be p r o r a t e d between two months, c o n t a i n t h e
f o l l o w i n g days o b s e r v e d a s h o l i d a y s i n t h e s t a t e s s p e c i f i e d :
J a n u a r y 1 , 1926
March
2
A p r i l 29
A p r i l 3O
May
31
August 2
August 3
August 31
October 5
November 1
November 2
November 25
J a n u a r y 1 , 192J
All s t a t e s and t h e D i s t r i c t of Columbia
Texas
New Hampshire
Wyomi ng
D i s t r i c t of Columbia and a l l s t a t e s e x c e p t
Alabama, A r k a n s a s , F l o r i d a , G e o r g i a , L o u i s i a n a ,
M i s s i s s i p p i , N o r t h C a r o l i n a , Oklahoma, South
C a r o l i n a , Soutn D a k o t a .
Colorado
M i s s o u r i , Montana, Oklahoma
California
Arkansas, Missouri
L o u i s i a n a and Nevada
All s t a t e s e x c e p t Alabama ; C o n n e c t i c u t , G e o r g i a ,
K a n s a s , Maine, M a s s a c h u s e t t s , M i s s i s s i p p i , New
Mexico, Ohio, U t a h and Vermont.
A l l s t a t e s and t h e D i s t r i c t of Columbia
A l l s t a t e s and t h e D i s t r i c t of Columbia
I n c a s e t h e above l i s t i s not c o r r e c t f o r any of t h e s t a t e s i n
y o u r d i s t r i c t or t h e r e a r e any a d d i t i o n a l h o l i d a y s o b s e r v e d l o c a l l y by
c i t i e s f o r w h i c h d e b i t f i g u r e s a r e p u b l i s h e d by t h e B o a rd , i t w i l l be a p p r e c i a t e d i f you w i l l f u r n i s h t h e Board w i t h a c o r r e c t e d l i s t a t y o u r
e a r l y convenience.
Very t r u l y y o u r s ,
E. L. Smead, C h i e f ,
D i v i s i o n of Bank O p e r a t i o n s .
LETTER TO ALL FEDERAL RESERVE AGENTS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
J a n u a r y 1 4 , 1^'do.
S t . 4802
SUBJECT:
R e p o r t s of C o n d i t i o n ' o f S t a t e
Banks and T r u s t Companies.
Pear S i r :
I t 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 i n a c c o r d a n c e w i t h y o u r u s u a l p r a c t i c e you w i l l k i n d l y
f u r n i s h t h e F e d e r a l R e s e r v e B o a r d , a s s o o n as
a v a i l a b l e , w i t h a copy 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 b a n k s and t r u s t c o m p a n i e s i n
y o u r s t a t e on December ]>1, 1 $ 2 $ , o r o t h e r r e c e n t
d a t e i n c a s e y o u d i d not 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 December }1.
I n s u b m i t t i n g t h e above m e n t i o n e d d a t a
i t i s r e q u e s t e d t h a t t h e number of b a n k s be s t a t e d
and t h a t s e p a r a t e f i g u r e s be f u r n i s h e d f o r m u t u a l
s a v i n g s 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 b a n k s
o p e r a t i n g i n your s t a t e .
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 p o s t a g e , i s e n c l o s e d f o r u s e i n
transmitting the data requested.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
Enclosure
FEDERAL RESERVE BOARD
WASHINGTON
J a n u a r y 1 4 , 1^ 2b.
S t . 4S0g
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
R e p o r t s of C o n d i t i o n of S t a t e
Bank and T r u s t Companies.
Dear S i r :
I t 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 i n a c c o r dance w i t h your u s u a l p r a c t i c e you w i l l k i n d l y f u r n i s h t h e F e d e r a l R e s e r v e B o a r d , a s soon a s a v a i l a b l e ,
w i t h a copy 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 b a n k s and t r u s t c o m p a n i e s i n y o u r s t a t e on
December 31» 1 9 ^ 5 , o r o t h e r r e c e n t d a t e i n c a s e you
d i d 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
December 31*
I n s u b m i t t i n g t h e above m e n t i o n e d d a t a i t i s
r e q u e s t e d t h a t t h e number of b a n k s be s t a t e d and t h a t
s e p a r a t e f i g u r e s be f u r n i s h e d f o r m u t u a l s a v i n g s
b a n k s p r o v i d i n g t h e r e a r e any such b a n k s o p e r a t i n g i n
y o u r s t a t e , a l s o t h a t t h e f i g u r e s be s e g r e g a t e d by
Federal reserve d i s t r i c t s .
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 p o s t a g e , i s e n c l o s e d f o r u s e 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. K o e l l ,
Assistant Secretary.
Er. c l o s u r e .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J a n u a r y 21, 1 9 2 6 .
S t . ' A7rHr» 4 8 1 3
SUBJECT; Bank S u s p e n s i o n s and I n s o l v e n c i e s
December
Dear S i r :
T h e r e i s e n c l o s e d h e r e w i t h a l i s t of member
and nonmember b a n k s r e p o r t e d t o t h e Board a s h a v i n g
s u s p e n d e d o p e r a t i o n s d u r i n g t h e month of December,
and of banks p r e v i o u s l y c l o s e d w h i c h resumed b u s i n e s s
d u r i n g t h e same month, a summary of w h i c h w i l l be
published i n the Federal Reserve B u l l e t i n .
The
s t a t e m e n t a l s o i n c l u d e s any c o r r e c t i o n s made i n t h e
l i s t s p r e v i o u s l y s e n t t o you.
D a t a p e r t a i n i n g t o y o u r d i s t r i c t a s shown
i n t h e statement have been checked a g a i n s t the l i s t
of b a n k f a i l u r e s d u r i n g 1 9 2 5 , r e c e n t l y v e r i f i e d by
y o u , and s u c h r e p o r t s on f o r m X-4401 a s h a v e b e a n
r e c e i v e d by t h e Board,
Accordingly the statement
i s merely s e n t t o you f o r your i n f o r m a t i o n , i n cont i n u a t i o n of s i m i l a r l i s t s f o r p r i o r m o n t h s .
Very t r u l y y o u r s ,
i
W a l t e r L. Eddy,
Secretary.
;
E n d 0sure.
TO ALL FEDERAL RESERVE AGENTS EXCEPT ATLANTA,
RICHMOND AND CHICAGO*
382
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
J a n u a r y 23, 19 26.
S t . 4516.
SUBJECT: D i s c o n t i n u a n c e of R e p o r t s on
Form l O j a .
Dear S i r :
Replies received to the Board's l e t t e r
S t . 4792 of J a n u a r y b, 1 9 2 6 , a l l ' i n d i c a t e t h a t
adequate information regarding dividends dec l a r e d by s t a t e b a n k and t r u s t company members
i s c o n t a i n e d i n t h e s e m i - a n n u a l r e p o r t s of e a r n i n g s and d i v i d e n d s , and t h a t r e p o r t s on f o r m
l O j a , " S p e c i a l N o t i f i c a t i o n of D i v i d e n d D e c l a r e d "
by S t a t e bank and T r u s t company members,
serve
no u s e f u l p u r p o s e and may w e l l be d i s p e n s e d w i t h .
You a r e a c c o r d i n g l y a u t h o r i z e d t o
n o t i f y a l l s t a t e b a n k and t r u s t company members
i n y o u r d i s t r i c t t h a t no f u r t h e r r e p o r t s on
f o r m l O y a need be s u b m i t t e d t o y o u r b a n k .
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary.
LETTER TO AIL FEDERAL RESERVE AGENTS
383
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
F e b r u a r y 9> 1926*
S t . 4832
SUBJECT:
Member b a n k s a b s o r b e d and o p e r a t e d
as b r a n c h e s of o t h e r b a n k s .
Dear S i r :
I n c a s e you have s u c h i n f o r m a t i o n a v a i l a b l e , w i l l you k i n d l y f u r n i s h t h e Board w i t h a
s t a t e m e n t showing t h e name, l o c a t i o n , c a p i t a l and
d e p o s i t s of e a c h n a t i o n a l bank and of e a c h s t a t e
b a n k member w h i c h was t a k e n o v e r by o t h e r b a n k s
e i t h e r by c o n s o l i d a t i o n , p u r c h a s e , oi~ o t h e r w i s e ,
d u r i n g t h e f o u r - y e a r p e r i o d e n d i n g December 3 1 ,
1 9 2 5 , and c o n t i n u e d i n o p e r a t i o n as a b r a n c h o r
a d d i t i o n a l o f f i c e . I t w i l l a l s o be a p p r e c i a t e d
i f y o u w i l l g i v e t h e d a t e on w h i c h e a c h of t h e
member b a n k s h e r e i n r e f e r r e d t o s u r r e n d e r e d i t s
m e m b e r s h i p i n t h e S y s t e m , and t h e name of t h e
b a n k of w h i c h i t became a b r a n c h o r a d d i t i o n a l
office.
Very t r u l y y o u r s ,
Edmund P i a t t ,
Vice Governor.
COPY OF LETTER TO AIL F . R, AGENTS*
3 8 4
FEDERAL RESERVE BOARD
385
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
F e b r u a r y 1 3 , 1926.
S t . 4gUU.
SUVJECT: Weekly Member Bank P r e s s S t a t e m e n t .
Dear S i r :
^
«
,
The B o a r d ' s w e e k l y p r e s s s t a t e m e n t s h o w i n g t h e c o n d i t i o n
o f r e p o r t i n g member b a n k s i n l e a d i n g c i t i e s a s a t c l o s e o f b u s i n e s s
on Wednesdays i s now r e l e a s e d f o r p u b l i c a t i o n i n F r i d a y a f t e r n o o n
p a p e r s of t h e f o l l o w i n g w e e k , w i t h t h e r e s u l t t h a t t h e r e i s a n i n t e r v a l o f n i n e d a y s b e t w e e n t h e d a t e to w h i c h t h e f i g u r e s r e l a t e
and t h e d a t e o f t h e i r p u b l i c a t i o n .
The Board f e e l s t h a t t h e v a l u e
o f t h i s s t a t e m e n t would be m a t e r i a l l y e n h a n c e d i f t h e d a t e o f p u b l i c a t i o n c o u l d ' b e a d v a n c e d , p r e f e r a b l y t o Sunday f o l l o w i n g t h e
Wednesday t o w h i c h t h e f i g u r e s r e l a t e .
As a l l o r n e a r l y a l l of t h e
c i t i e s i n w h i c h t h e r e p o r t i n g banics a r e l o c a t e d a p p e a r t o be w i t h i n
o v e r - n i g h t m a i l time from a F e d e r a l r e s e r v e bank o r b r a n c h , i t
would seem t h a t i f a l l r e p o r t i n g member b a n k s would c o o p e r a t e by
m a i l i n g f i g u r e s e a c h T h u r s d a y showing t h e i r c o n d i t i o n a s a t c l o s e
o f b u s i n e s s on t h e p r e c e d i n g d a y , i t would b e p r a c t i c a b l e f o r t h e
F e d e r a l r e s e r v e b a n k s and b r a n c h e s t o r e c e i v e and c o n s o l i d a t e t h e
f i g u r e s f o r a l l reporting banks in their r e s p e c t i v e t e r r i t o r i e s ,
and w i r e them t o t h e F e d e r a l R e s e r v e Board on F r i d a y , i n m o s t
c a s e s p r o b a b l y by noon.
T h i s would e n a b l e t h e Board t o make t h e
n e c e s s a r y c o n s o l i d a t i o n o f t h e f i g u r e s , and t o i s s u e t h e complete
s t a t e m e n t t o t h e p r e s s on S a t u r d a y f o r p u b l i c a t i o n i n Sunday
morning papers.
I t w i l l b e a p p r e c i a t e d i f you w i l l a d v i s e u s a t y o u r
e a r l y c o n v e n i e n c e w h e t h e r o r n o t s u c h a p l a n would b e l i k e l y t o
work o u t s a t i s f a c t o r i l y i n y o u r d i s t r i c t .
I f any o f t h e c i t i e s
i n y o u r d i s t r i c t i n w h i c h r e p o r t i n g member b a n k s a r e l o c a t e d a r e
n o t w i t h i n o v e r - n i g h t m a i l t i m e f r o m y o u r b a n k ( o r one o f i t s
b r a n c h e s ) , advice w i l l be appreciated as to which c i t i e s f a l l in
t h i s c l a s s , and t h e a p p r o x i m a t e c o s t p e r r e p o r t i n g b a n k o f o b t a i n i n g t h e i n f o r m a t i o n b y t e l e g r a p h . The e s t i m a t e d c o s t p e r t e l e g r a m
should be based on t h e a s s u m p t i o n t h a t t h e t e l e g r a m w i l l be d i s p a t c h e d a s a f a s t day m e s s a g e a t Government r a t e s , s h o w i n g f i g u r e s
i n thousands of d o l l a r s f o r a l l of the p r e s e n t items (except of
course those t h a t are taken from the books o f the Federal r e s e r v e
b a n k ) , and t h a t e a c h i t e m r e p o r t e d w i l l be d e s i g n a t e d b y a s i n g l e
code word a s on f o r m S t . 5 1 .
-
386
2 -
The q u e s t i o n h a s bean r a i s e d a s t o w h e t h e r o r n o t i t
would be a d v i s a b l e t o add a new page t o t h e w e a k l y member b a n k
s t a t e m e n t snowing s e p a r a t e f i g u r e s f o r e a c h F e d e r a l r e s e r v e bamc
c i t y , and we should b e glad to have a n e x p r e s s i o n o f y o u r o p i n i o n
a s to t h e a d v i s a b i l i t y o f p u b l i s h i n g f i g u r e s f o r F e d e r a l r e s e r v e
bank c i t i e s r e g u l a r l y e a c h week. The r e l e a s e would then c o n s i s t
of f o u r pages.
The Board a l s o lias u n d e r c o n t e m p l a t i o n t h e a d v i s a b i l i t y
o f roaning c e r t a i n c h a n g e s i n t h e s t a t e m e n t , t h e p r i n c i p a l o n e s
b e i n g the p u b l i c a t i o n o f a s i n g l e t o t a l f o r h o l d i n g s o f U n i t e d
S t a t e s s e c u r i t i e s , i n s t e a d of s e p a r a t e f i g u r e s f o r p r e - w a r b o n d s ,
L i b e r t y b o n d s , T r e a s u r y b o n d s , T r e a s u r y n o t e s , and T r e a s u r y
c e r t i f i c a t e s , and t ^ e c o n s o l i d a t i o n o f l o a n s s e c u r e d by Government
o b l i g a t i o n s w i t h l o a n s secured b y s t o c k s and b o n d s .
In case the
date of p u b l i c a t i o n of the statement i s advanced, i t i s thought
t h a t t h e c h a n g e s u n d e r c o n t e m p l a t i o n , i f made, could be i n a u g u r a t e d
a t t h e same t i m e .
In t h i s c o n n e c t i o n , w i l l you k i n d l y a d v i s e t h e Board
w h e t h e r prompt r e c e i p t o f t h e t o t a l f i g u r e s from t h e r e p o r t i n g memb e r bank s t a t e m e n t ( i . e . , f o r a l l . d i s t r i c t s combined) i s of s u f f i c i e n t
i m p o r t a n c e t o w a r r a n t t h e i r b e i n g t e l e g r a p h e d t o you a s s o o n a s a v a i l a b l e f o r y o u r own i n f o r m a t i o n or t o be r e l e a s e d f o r p u b l i c a t i o n
l o c a l l y , a s i s done i n t h e c a s e o f t h e F e d e r a l r e s e r v e bank f i g u r e s .
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary.
TO ALL FEDERAL EESEEVE AGENTS.*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
F e b r u a r y 1 7 , 1$'26,
S t . Ug^O.
SUBJECT:
C o n d i t i o n of Member Banks a s of
December 3 1 , 1925.
Pear S i r :
For your i n f o r m a t i o n t h e r e i s enclosed,
herewith a preliminary statement regarding the
c o n d i t i o n of a l l member b a n k s combined a s of D e cember 311 1 9 2 5 .
The B o a r d ' s a b s t r a c t (No. J l )
s h o w i n g 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 b a n k 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 b a n k s 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 the near f u t u r e .
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary.
Enclosure
LETTER TO ALL FEDERAL RESERVE AGENTS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
F e b r u a r y 19, 1926,
S t . 4852
SUBJECT:
Bank S u s p e n s i o n s and I n s o l v e n c i e s .
Dear S i r :
T h e r e i s e n c l o s e d h e r e w i t h a l i s t of member
and nonmersber b a n k s r e p o r t e d t o t h e Board a s h a v i n g
s u s p e n d e d o p e r a t i o n s d u r i n g t h e month of J a n u a r y , and
of b a n k s p r e v i o u s l y c l o s e d w h i c h resumed b u s i n e s s
d u r i n g t h e same month. The s t a t e m e n t a l s o i n c l u d e s
a n y c o r r e c t i o n s made i n t h e l i s t s p r e v i o u s l y s e n t t o
you.
I t w i l l be a p p r e c i a t e d i f y o u w i l l k i n d l y
check the d a t a p e r t a i n i n g t o your d i s t r i c t a g a i n s t
y o u r r e c o r d s and a d v i s e t h e Board on o r b e f o r e F e b r u a r y 2 7 , - b y t e l e g r a p h i f n e c e s s a r y , w h e t h e r o r n o t any
c o r r e c t i o n s or a d d i t i o n s a r e necessary t h e r e i n , i n
o r d e r t h a t c o r r e c t s u m m a r i e s by d i s t r i c t s may be p u b l i s h e d i n the Federal Reserve B u l l e t i n .
Very t r u l y y o u r s ,
W a l t e r L. Eddy,
Secretary.
E n d osure.
LETTER TO ALL FEDERAL RESERVE AGENTS*
388
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
F e b r u a r y 24, l ^ c b .
S t . 4655-
SUBJECT:
Functional Expanses,
Second H a l f , 1 5 2 5 .
Dear S i r :
T h e r e i s e n c l o s e d h e r e w i t h one c o p y of
t h e c o n s o l i d a t e d F u n c t i o n a l Expense e x h i b i t f o r
t h e h a l f y e a r e n d i n g December 11, 1925«
C o p i e s of t h e e x h i b i t a r e a l s o b e i n g
•nailed t o t h e Governor of t h e bank and t o t h e
C o a i r m a n of t n e P r o c e d u r e C o m m i t t e e .
Very t r u l y y o u r s ,
E . L. Smead, S e c r e t a r y ,
Committee cn S a l a r i e s ,
E x p e n d i t u r e s and E f f i c i e n c y .
Enclosure.
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BANK*
389
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March B, IS2b,
St, 4670.
SUBJECT:
A b s t r a c t of C o n d i t i o n R e p o r t s of
S t a t e Bank and T r u s t Company memb e r s and of a l l Member Banks a s
of December
, 19^5 •
Dear S i r :
We a r e f o r w a r d i n g t o y o u u n d e r s e p a r a t e
cover
c o p i e s of t h e B o a r d ' s A b s t r a c t No.
s h o w i n g t h e c o n d i t i o n of S t a t e Bank and T r u s t Company
members a n d of a l l member b a n k s a s a t c l o s e of b u s i n e s s o n December 3 1 . 3-925•
Consolidated f i g u r e s f o r
a l l member b a n k s , b o t h N a t i o n a l and S t a t e , a r e shown
on p a g e s 1 and 1 2 .
P l e a s e f o r w a r d one copy of t h e a b s t r a c t t o
e a c h S t a t e Bank and T r u s t Company member i n y o u r d i s t r i c t t h a t has e x p r e s s e d a d e s i r e to r e c e i v e c o p i e s
of a b s t r a c t s a s i s s u e d .
Very t r u l y y o u r s j
E . L. Smead, C h i e f ,
D i v i s i o n of Bank O p e r a t i o n s .
LETTER TO ALL FEDERAL RESERVE AGENTS*
890
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 1 1 , 1 9 2 6 ,
St.
SUBJECT:
4875-
Form E - F u n c t i o n a l E x p e n s e R e p o r t .
Dear S i r :
There a r e b e i n g forwarded t o you today
under s e p a r a t e cover
c o p i e s of f o r m E ,
S e m i - a n n u a l F u n c t i o n a l Expense R e p o r t , a p r o o f
copy of w h i c h was s e n t y o u on December 15«
Very t r u l y y o u r s ,
E. L« Smead, C h i e f ,
D i v i s i o n of Bank O p e r a t i o n s .
TO CHAIRMEN OF ALL FEDERAL RESERVE BANKS*
COPIES TO GOVERNORS AND CHAIRMEN OF
PROCEDURE COMMITTEES.
391
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 1 5 , 1 9 2 6 .
S t . 4880.
SUBJECT:
Bank S u s p e n s i o n s and I n s o l v e n c i e s
Dear S i r :
T h e r e i s e n c l o s e d h e r e w i t h a l i s t of member
and nonmember b a n k s r e p o r t e d t o t h e Board a s h a v i n g
s u s p e n d e d o p e r a t i o n s d u r i n g th© month of F e b r u a r y ,
and of b a n k s p r e v i o u s l y c l o s e d w h i c h resumed b u s i n e s s
d u r i n g t h e same m o n t h . The s t a t e m e n t a l s o i n c l u d e s
any c o r r e c t i o n s made i n t h e l i s t s p r e v i o u s l y s e n t t o
you*
I t w i l l b e a p p r e c i a t e d i f you w i l l k i n d l y
check t h e d a t a p e r t a i n i n g t o your d i s t r i c t a g a i n s t
y o u r r e c o r d s and a d f i s e t h e Board on or b e f o r e March
2 7 , b y t e l e g r a p h i f n e c e s s a r y , w h e t h e r or n o t a n y
c o r r e c t i o n s or a d d i t i o n s a r e n e c e s s a r y t h e r e i n , i n
o r d e r t h a t c o r r e c t summaries by d i s t r i c t s may b e p u b l i s h e d in t h e Federal Reserve B u l l e t i n .
Very t r u l y y o u r s ,
W a l t e r L . Eddy,
Secretary.
Enclosure.
LETTER TO ALL FED3EUJ, HUSSIVE AGENTS*
392
FEDERAL RESERVE BOARD
393
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL'RESERVE BOARD
March 2 0 , 1 9 2 6 .
S t . 4891
My d e a r C o n g r e s s m a n :
D u r i n g t h e c o u r s e of t h e h e a r i n g on March 17 b e f o r e t h e
Committee on Banking and C u r r e n c y on t h e b i l l t o a u t h o r i z e t h e c o n s t r u c t i o n of a b a n k i n g h o u s e f o r t h e B a l t i m o r e B r a n c h , t h e Committee
a s k e d f o r c e r t a i n i n f o r m a t i o n r e g a r d i n g t h e c o s t of b u i l d i n g s a l r e a d y
c o n s t r u c t e d , t h e p o l i c y of t h e F e d e r a l R e s e r v e Board w i t h r e f e r e n c e t o
c h a r g e - o f f s and d e p r e c i a t i o n a l l o w a n c e s on b a n k p r e m i s e s , t h e c o s t of
t h e F i s c a l Agency work h a n d l e d b y t h e F e d e r a l r e s e r v e b a n k s s e g r e g a t e d
s o a s t o show t h e c o s t of t h e v a r i o u s o p e r a t i o n s , and t h e c o s t of
o p e r a t i n g t h e T r a n s i t and T r a n s f e r of Funds d e p a r t m e n t s .
I n c o m p l i a n c e w i t h t h i s r e q u e s t I am e n c l o s i n g h e r e w i t h a
p a m p h l e t s h o w i n g t h e " D i r e c t o r s , P e r s o n n e l , Bank P r o m i s e s , e t c . " of
e a c h F e d e r a l r e s e r v e b a n k , b r a n c h , and a g e n c y , w h i c h was p r e p a r e d i n
J a n u a r y of t h i s y e a r .
T h i s p a m p h l e t shows t h e c o s t of t h e l a n d ,
b u i l d i n g s , v a u l t s , and v a u l t e q u i p m e n t , f i x e d m a c h i n e r y and e q u i p m e n t ,
and f u r n i t u r e and e q u i p m e n t s e p a r a t e l y f o r e a c h F e d e r a l r e s e r v e b a n k
a n d b r a n c h , t o g e t h e r w i t h c h a r g e - o f f s and d e p r e c i a t i o n a l l o w a n c e s
t h e r o o n , and I t r u s t g i v e s t h e i n f o r m a t i o n d e s i r e d r e g a r d i n g t h e c o s t
of b a n k p r e m i s e s and of f u r n i t u r e and e q u i p m e n t a t t h e F e d e r a l r e s e r v e
banks.
I should l i k e t o c a l l your a t t e n t i o n t o t h e f a c t t h a t t h e
s e p a r a t e f i g u r e s shown a s t h e c o s t of t h e b u i l d i n g s and of f i x e d machi n e r y and e q u i p m e n t r e p r e s e n t t h e d i v i s i o n b e t w e e n t h e t w o i t e m s s e t
up b y t h e Board f o r d e p r e c i a t i o n a l l o w a n c e p u r p o s e s , t h e d e p r e c i a t i o n
o b v i o u s l y b e i n g much l e s s on a b u i l d i n g t h a n on f i x e d m a c h i n e r y and
e q u i p m e n t s u c h a s b o i l e r s , e n g i n e s , dynamos, e l e v a t o r s , h e a t i n g ,
p l u m b i n g and l i g h t i n g s y s t e m s , r e f r i g e r a t i o n p l a n t s , e t c . , w h i c h w e a r
o u t i n a r e l a t i v e l y b r i e f p e r i o d a s compared w i t h t h e l i f e of t h e
b u i l d i n g . The B o a r d ' s p o l i c y i n a u t h o r i z i n g d e p r e c i a t i o n a l l o w a n c e s
and c h a r g e - o f f s on b a n k p r e m i s e s i s shown i n t h e e n c l o s e d e x t r a c t
f r o m i t s 1922 a n n u a l r e p o r t , f r o m w h i c h you w i l l n o t e t h a t t h e d e p r e c i a t i o n a l l o w a n c e on b u i l d i n g s d o e s n o t e x c e e d 2 p e r c e n t , u n l e s s
t h e r e p l a c e m e n t c o s t of t h e b u i l d i n g i s b e l o w i t s book v a l u e , w h i l e
on f i x e d m a c h i n e r y and equipment t h e maximum a l l o w a n c e i s 10 p e r c e n t .
394
2 *•
Thar 3 have boon only f o u r F e d e r a l r e s e r v e b r a n c h b u i l d i n g s
e r e c t o d s i n c e t h o p a s s a g e of t h e Act of Juno 3, 1922, a s amended
by t h e Act of F e b r u a r y 6, 1923, l i m i t i n g t h e c o s t of b u i l d i n g s
e r e c t e d f o r F e d e r a l r e s e r v e b r a n c h e s , e x c l u s i v e of t h e c o s t of
v a u l t s , permanent equipment* f u r n i s h i n g s and f i x t u r e s • Of t h e s e
b u i l d i n g s , t h e c o n t r a c t p r i c e s of t h e b u i l d i n g s p r o p e r of t h e
Denver, Omaha, and L i t t l e Rock b r a n c h e s were a? f o l l o w s : Denver
$ 2 5 0 , 8 6 3 , Omaha # 2 3 0 , 2 2 7 , and L i t t l e Rock $ 2 2 0 , 6 5 9 . The t o t a l
c o s t of t h e b u i l d i n g a t J a c k s o n v i l l e i n c l u d i n g v a u l t and permanent
equipment was only $ 2 3 6 , 4 9 9 , or l e s s t h a n t h e §250,000' maximum s e t
up by C o n g r e s s f o r t h e b u i l d i n g p r o p e r .
I am a l s o s e n d i n g you a s t a t e m e n t r e g a r d i n g t h e F i s c a l Agency
work h a n d l e d by t h e F e d e r a l r e s e r v e b a n k s , whicn shows r e i m b u r s a b l e
and n o n - r e i m b u r s a b l e e x p e n s e s f r o m 1917 t o t h o end of 1925, and a
s t a t e m e n t showing t h e c o s t of o p e r a t i n g t h e T r a n s i t and C o l l e c t i o n
d e p a r t m e n t s and t h e c o s t of e f f e c t i n g T r a n s f e r s of F u n d s .
This l e t t e r t o g e t h e r w i t h t h e e n c l o s u r e s r e f e r r e d t o h e r e i n
i s b e i n g s e n t t o e a c h member of t h e Committee on Banking and C u r r e n c y .
I n c a s e t h e d a t a e n c l o s e d a r e n o t s u f f i c i e n t l y c o m p l e t e f o r t h e Comm i t t e e *s p u r p o s e s , I s h a l l be g l a d t o have such a d d i t i o n a l d a t a p r e p a r e d a s may b e d e s i r e d .
Very t r u l y y o u r s ,
Geo• R. James,
Member, F e d e r a l R e s e r v e B o a r d .
Enclosures.
(TO ALL MEMBERS OF HOUSE COMMITTED ON BANKING AND CURRENCY)
EXPENSES OF THE FISCAL AGENCY DEPARTMENTS OF FEDERAL RSSERVS BANKS
39
The F e d e r a l r e s e r v e b a n k s were a p p o i n t e d d e p o s i t a r i e s and f i s c a l a g e n t s of
the U n i t e d S t a t e s "by t h e S e c r e t a r y of t h e T r e a s u r y on J a n u a r y 1, 1916, i n a C c o r d i;;ce w i t h t h e p r o v i s i o n s of S e c t i o n 15 of t h e F e d e r a l R e s e r v e A c t . T h e i r o p e r a t i o n s
in t h e s e c a p a c i t i e s w e r e , however, of r e l a t i v e l y s m a l l volume u n t i l t h e e n t r y of t h e
United S t a t e s i n t o t h e w o r l d war i n 1917, and f o r t h a t r e a s o n w e r e c o n d u c t e d by t h e
? e d e r a l r e s e r v e b a n k s w i t h o u t expense t o t h e T r e a s u r y . A f t e r t h e Government began
to i s s u e c e r t i f i c a t e s of i n d e b t e d n e s s and l i b e r t y bonds i n o r d e r t o f i n a n c e t h e w a r ,
f i s c a l agency o p e r a t i o n s i n c r e a s e d v e r y r a p i d l y , and p r o v i s i o n was t h e r e f o r e made i n
1917 by t h e T r e a s u r y t o r e i m b u r s e t h e F e d e r a l r e s e r v e banks f o r p r a c t i c a l l y a l l
d i r e c t e x p e n s e s i n c u r r e d b y them i n t h e p e r f o r m a n c e of t h e i r f i s c a l a g e n c y " f u n c t i o n s
T h i s a r r a n g e m e n t was c o n t i n u e d u n t i l June 3 0 , 1921, s i n c e w h i c h t i m e t h e F e d e r a l
r e s e r v e banks have b e e n r e i m b u r s e d f o r o n l y t h o s e f i s c a l a g e n c y e x p e n s e s w h i c h a r e
i n c u r r e d d i r e c t l y i n c o n n e c t i o n w i t h t h e s a l e of new i s s u e s of Government s e c u r i t i e s , t h e c e s t ef c o n d u c t i n g a l l o t h e r f i s c a l a g e n c y o p e r a t i o n s b e i n g a b s o r b e d by
the Federal reserve banks.
The t a b l e below shows t h e r e i m b u r s a b l e and n o n - r e i m b u r s a b l e F i s c a l Agency
department e x p e n s e s of t h e F e d e r a l r e s e r v e b a n k s b e g i n n i n g w i t h 1917, i n comparison
,' ? ith t h e c u r r e n t e x p e n s e of o p e r a t i n g a l l d e p a r t m e n t s :
COMPARISON OF EXPENSES OF THE FISCAL AGENCY FUNCTION OF THE FEDERAL
RESERVE BANKS WITH THE TOTAL EXPENSE OF ALL FUNCTIONS
( F i s c a l Agency e x p e n s e s a s shown below do n o t i n c l u d e g e n e r a l a d m i n i s t r a t i v e
e x p e n s e s , such a s s a l a r i e s of s e n i o r o f f i c e r s and c o s t of s p a c e i n b u i l d i n g s
owned b y F e d e r a l r e s e r v e b a n k s )
E x p e n s e s of F i s c a l Agency F u n c t i o n
( i n c l u d i n g War F i n a n c e C o r p o r a t i o n
operat1ons)
Reimbursed
: Absorbed
:
by
s b y F. R. :
Total
Treasury
V banks
:
1917
1918
1919
1920
' 1921
1922
1923
1924
1925
$3,094,750
16*256,689
16,626,016
6,215,356
2,609,754
1,183,815
1,912,483
444,067
167,330
Total 48,510,260
:
:
:
:
:
Total
expense
of a l l
functions*
R a t i o of
F i s c a l Agency
expense t o
t o t a l expense
(per cent)
$1,245,939
1,530,551
1,142,936
867,765
703,485
$3,094,750
16,256,689
16,626,016
6,215,356
3,855,693
2,714,366
3,055,419
1,311,832
870,815
$8,254,477
27,216,222
35,965,649
34,473,386
37,073,599
30,742,864
31,676,656
28,875,193
27,695,493
37.5
59.7
46.2
18.0
10.4
8.8
9.6
4.5
3.1
5,490,676
54,000,936
261,973,539
20.6
-
* C u r r e n t e x p e n s e s of F e d e r a l r e s e r v e banks p l u s r e i m b u r s a b l e
f i s c a l agency expenses.
,t.4339
Under t h e a r r a n g e m e n t now i n e f f e c t , the F e d e r a l r e s e r v e banks
a b s o r b t h e c x n e n s e of t h e f o l l o w i n g F i s c a l Agency o p e r a t i o n s ;
d e n o m i n a t i o n a l exchange of coupon b o n d s .
Exchange of temporary f o r permanent bonds
Exchange of i n t e r i m r e c e i p t s f o r permanent bonds
I n t e r - c h a n g e of coupon and r e g i s t e r e d bonds
T e l e g r a p h i c t r a n s f e r of s e c u r i t i e s
Forwarding of r e g i s t e r e d bonds to t h e T r e a s u r y
for transfer
Shipment of c a n c e l l e d s e c u r i t i e s to t h e T r e a s u r y
•Redemptions o f c a l l e d o r matured s e c u r i t i e s
Maintenance of Government d e p o s i t s a c c o u n t s w i t h
d e p o s i t a r y banks
Custody of s e c u r i t i e s f o r T r e a s u r y
P u r c h a s e and s a l e of Government s e c u r i t i e s f o r
Treasury account.
j i s i d e from p u r e l y f i s c a l agency o p e r a t i o n s , a l l F e d e r a l r e s e r v e
banks a c t a s d e p o s i t a r i e s f o r t h e g e n e r a l f u n d s of t h e T r e a s u r y , f o r
which work they
have n e v e r r e c e i v e d r e i m b u r s e m e n t .
In t h i s c a p a c i t y ,
t h e r e s e r v e banks a r e r e q u i r e d t o p e r f o r m t h e f o l l o w i n g o p e r a t i o n s ;
Pay Government c h e c k s and w a r r a n t s
Pay coupons from Government, s e c u r i t i e s
T r a n s f e r f u n d s by t e l e g r a p h f o r Government a c c o u n t
v/ithdraw Government d e p o s i t s from banks i n t h e d i s t r i c t
^ o l l e c t c h e c k s and n o n - c a s h i t e m s f o r Government account
Handle f o r m e r s u b - . t r e a s u r y o p e r a t i o n s .
ITo s e p a r a t e r e c o r d h a s been m a i n t a i n e d of t h e c o s t of some of
t h e s e o p e r a t i o n s , but f o r 1925 t h e d i r e c t c o s t of h a n d l i n g Government
c h e c k s and w a r r a n t s was # 1 3 6 , 7 3 5 , Government coupons $ 1 2 3 , 7 1 9 , and
c o i n -$304,381.
S t . 4889
397
POLICY FOLLOWED BY F5DTT5AL RESERVE BOARD IN AUTHORISING DEPRECIATION
ALLOWANCES AND CHARGB-OFPS ON BAMC PREMISES OF FE^El'L RESERVE BANKS
The p o l i c y f o l l o w e d by t h e F e d e r a l R e s e r v e Board i n a u t h o r i z i n g d e p r e c i a t i o n a l l o w a n c e s and c h a r g e - o f f s on l a n d and b u i l d i n g s a c q u i r e d f o r b a n k i n g
house p u r p o s e s by t h e F e d e r a l r e s e r v e b a n k s , a s s e t f o r t h on page 23 of t h e
B o a r d ' s 1922 a n n u a l r e p o r t , i s a s f o l l o w s :
"On August 1 , 1922, t h e F e d e r a l r e s e r v e b a n k s were ^ d v i s e d t h a t i n
t h e f u t u r e r e q u e s t s f o r a u t h o r i t y t o c h a r g e o f f d e p r e c i a t i o n on bank
p r e m i s e s o r t o s e t up a r e s e r v e f o r d e p r e c i a t i o n t h e r e o n s h o u l d be
accompanied w i t h a s t a t e m e n t showing f o r e a c h s e p a r a t e p i e c e of p r o p e r t y
t h e c o s t , e s t i m a t e d r e p l a c e m e n t v a l u e , and book v a l u e of b u i l d i n g s ,
e i t h e r c o m p l e t e d o r i n c o u r s e of c o n s t r u c t i o n ; t h e c o s t , e s t i m a t e d
market v a l u e , and book v a l u e of l a n d owned; and t h e c o s t of f i x e d machi n e r y and e q u i p m e n t , such a s h e a t i n g , l i g h t i n g , p l u m b i n g , v e n t i l a t i n g
s y s t e m s , e t c . , i n o r d e r t h a t t h e Board might have c o m p l e t e d a t a b e f o r e
i t i n p a s s i n g upon such r e q u e s t s and i n o r d e r t h a t s e p a r a t e r a t e s of d e p r e c i a t i o n might be d e t e r m i n e d f o r l a n d , b u i l d i n g s , and f i x e d m a c h i n e r y
and e q u i p m e n t . I n t h e same l e t t e r t h e b o a r d s t a t e d t h a t no c h a r g e s
a g a i n s t c u r r e n t n e t e a r n i n g s would be a u t h o r i z e d t o c o v e r d e p r e c i a t i o n
on l a n d where t h e e s t i m a t e d market v a l u e of t h e l a n d was e o u a l t o o r
i n e x c e s s of i t s book v a l u e and t h a t , i n g e n e r a l , d e p r e c i a t i o n a l l o w a n c e s on bank b u i l d i n g s were not t o exceed 2 p e r c e n t of t h e i r e s t i m a t e d
r e p l a c e m e n t c o s t ( i n c l u d i n g v a u l t s b u t e x c l u d i n g f i x e d m a c h i n e r y and
e q u i p m e n t ) u n l e s s t h e e s t i m a t e d r e p l a c e m e n t c o s t o f bank b u i l d i n g s
was m a t e r i a l l y below book v a l u e , i n which c a s e rc-oucsts f o r p e r m i s s i o n
t o w r i t e o f f a d e p r e c i a t i o n c h a r g e i n e x c e s s of 2 r>or c e n t would be
c o n s i d e r e d . E s t i m a t e d r e p l a c e m e n t c o s t s wor<*< t o be d e t e r m i n e d by
t a k i n g t h e mean of t h e a c t u a l c o s t and t h e e s t i m a t e d l o w e s t c o n s t r u c t i o n
c o s t s a t any time i n t h e p a s t 15 y e a r s . The r u l e l a i d down w i t h r e f e r ence t o f i x e d m a c h i n e r y and equipment p r o v i d e d t h a t r e s e r v e s s h o u l - be
b a s e d upon t h e e s t i m a t e d l i f e o f t h e machinery and equipment t w i t h a
view t o i t s u l t i m a t e r e p l a c e m e n t , t h e a n n u a l r e s e r v e a l l o w a n c e i n no
c a s e t o e x c e e d 10 p e r c e n t of c o s t . "
S t . 4888
898
COST OF OPERATING THE TEAKSIT AND COLLECTION DEPARTMENTS OF THE FEDERAL
RESERVE BANKS, AND COST OF MAKING TRANSFERS OF FUNDS
D u r i n g t h e p a s t t h r e e y e a r s t h e F e d e r a l R e s e r v e Board h a s been
r e c e i v i n g r e p o r t s f r o n t h e Federal r e s e r v e banks d i s t r i b u t i n g t h e i r
o p e r a t i n g expenses according to f u n c t i o n s performed.
The c o s t s of
o p e r a t i n g e a c h f u n c t i o n o r d e p a r t m e n t , however, a s shown i n t h e s e
r e p o r t s do n o t i n c l u d e g e n e r a l o v e r h e a d e x p e n s e s such a s s a l a r i e s
of s e n i o r o f f i c e r s , t h e c o s t of space o c c u p i e d by t h e s e v e r a l d e p a r t m e n t s , and t h e k e e p i n g of t h e g e n e r a l b o o k s , i n d i v i d u a l l e d g e r s ,
e t c . , of t h e b a n k , which a r e shovm s e p a r a t e l y i n t h e r e p o r t s .
The
e x p e n s e s d i r e c t l y c h a r g e d t o t h e T r a n s i t and C o l l e c t i o n d e p a r t m e n t s , and t o t h e o p e r a t i n g u n i t which h a n d l e s t r a n s f e r s of f u n d s ,
were a s f o l l o w s
during the past three y e a r s .
1923
Check c o l l e c t i o n s
Non-cash c o l l e c t i o n s
Total
Transfers of funds
1924
1925
>,585,982
-£4,462,189
$4,174,170
1,156,236
1,051,719
905,888
5,742,220
5,513,906
5,080,058
479,583
457*753
419,075
S t . 4890
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 2 3 , 1926
S t . 4892
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
T r u s t Company Members, Form 1 0 5
Dear S i r :
There a r e b e i n g f o r w a r d e d t o you t o d a y under s e p a r a t e
cover
c o p i e s of f o r m 1 0 5 a s r e v i s e d f o r t h e n e x t c a l l .
P l e a s e m a i l t h r e e c o p i e s of t h e f o r m t o e a c h S t a t e Bank a n d
T r u s t Company member i n your d i s t r i c t w i t h i n s t r u c t i o n s t o
h o l d t h e b l a n k f o r m s p e n d i n g r e c e i p t of a c a l l f o r c o n d i t i o n
reports.
Upon r e c e i p t of n o t i c e f r o m t h e Board of t h e c a l l
f o r c o n d i t i o n r e p o r t s , k i n d l y n o t i f y t h e banks t h e r e o f by
m a i l a n d r e q u e s t t h e m t o f i l l o u t t h e r e p o r t s and m a i l t h e m
t o you p r o m p t l y - i n no c a s e l a t e r t h a n 10 d a y s a f t e r r e c e i p t
of t h e c a l l .
I n o r d e r t h a t t h e c o m p i l a t i o n of t h e B o a r d ' s a b s t r a c t
s h o w i n g t h e c o n d i t i o n of a l l s t a t e bank and t r u s t company
members combined a s of t h e d a t e of t h e n e x t c a l l may n o t b e
unduly d e l a y e d , i t i s r e q u e s t e d t h a t t h e r e p o r t s be forwarded
t o t h e Board a s s o o n a s p r a c t i c a b l e a f t e r t h e y a r e r e c e i v e d
b y t h e F e d e r a l r e s e r v e b a n k . I f i t i s n e c e s s a r y t o communicate
w i t h a bank r e g a r d i n g apparent e r r o r s in i t s r e p o r t , a n o t e
t o t h a t e f f e c t s h o u l d b e made on t h e r e p o r t i t s e l f b e f o r e i t
i s m a i l e d t o t h e B o a r d , and t h e Board s h o u l d b o a d v i s e d of
_ t h e n e c e s s a r y c o r r e c t i o n s when t h e d e s i r e d i n f o r m a t i o n i s r e c e i v e d f r o m t h e member b a n k .
http://fraser.stlouisfed.org/
Federal Reserve Bank ofLETTjH
St. Louis
Kindly acknowledge r e c e i p t .
Yours v e r y t r u l y ,
W a l t e r L. Eddy,
Secretary.
TO ALL F3D :2RAL RS'LOSVS AG JUTS*
399
FEDERAL RESERVE BOAI^D „
WASHINGTON
ADDRESS
O F F I C I A L
CORRESPONDENCE
TCSUBJECT:
St
*
51> I G 2 6
4902
Weekly member b a n k p r e s s s t a t e m e n t .
T H E FEDERAL RESERVE BOARD
Dear S i r :
R e f e r r i n g t o y o u r r e p l y t o t h e B o a r d ' s l e t t e r S t . 4844 of F e b r u a r y 13,
r e g a r d i n g p r o p o s e d c h a n g e s i n t h e w e e k l y c o n d i t i o n r e p o r t of member b a n k s i n
l e a d i n g c i t i e s and t h e p r a c t i c a b i l i t y of a d v a n c i n g t h e d a t e of p u b l i c a t i o n
t h e r e o f , I b e g t o a d v i s e t h a t t h e Board h a s d e c i d e d t o combine a l l h o l d i n g s
of Government s e c u r i t i e s i n t o one i t e m and t o a d v a n c e t h e d a t e of p u b l i c a t i o n
of t h e s t a t e m e n t a s much a s p r a c t i c a b l e .
The r e p l i e s r e c e i v e d t o t h e B o a r d ' s l e t t e r i n d i c a t e t h a t t h e r e p o r t s
can p r o b a b l y b e o b t a i n e d i n t i m e t o w i r e t h e d a t a t o t h e Board e a c h F r i d a y ,
b u t t h a t c o n s i d e r a b l e d i f f i c u l t y may b e e x p e r i e n c e d i n g e t t i n g a f e w of t h e
b a n k s t o s e n d t h e i r f i g u r e s i n p r o m p t l y . C o n s e q u e n t l y i t would seem a d v i s a b l e
f o r a l l t h e F e d e r a l r e s e r v e a g e n t s t o o b t a i n t h e r e p o r t s f r o m member b a n k s i n
t h e i r d i s t r i c t s a s p r o m p t l y a s p o s s i b l e f o r a few weeks b e f o r e a n y a c t u a l
c h a n g e i s made i n t h e r e l e a s e d a t e , so t h a t t h e e a r l i e s t p r a c t i c a b l e r e l e a s e
d a t e may b e d e f i n i t e l y d e t e r m i n e d i n a d v a n c e of t h e a c t u a l c h a n g e • You a r e
r e q u e s t e d , t h e r e f o r e , t o a d v i s e r e p o r t i n g member b a n k s i n your d i s t r i c t t h a t
t h e v a l u e of t h e s t a t e m e n t w i l l b e much e n h a n c e d i f t h e p u b l i c a t i o n d a t e i s
a d v a n c e d , and t o a s k them t o m a i l t h e i r r e p o r t s i n t i m e t o r e a c h y o u r b a n k
on F r i d a y i f p o s s i b l e .
If t h i s i s done, t h e r e p o r t s can be c o n s o l i d a t e d a t
y o u r b a n k and w i r e d t o t h e Board F r i d a y a f t e r n o o n , and t h e s t a t e m e n t mimeog r a p h e d b y t h e Board S a t u r d a y m o r n i n g .
T h e r e i s e n c l o s e d h e r e w i t h a copy of r e v i s e d f o r m S t . 5 1 , a s u p p l y
of w h i c h i s b e i n g f o r w a r d e d t o you u n d e r s e p a r a t e c o v e r , and i t i s s u g g e s t e d
t h a t you a d v i s e y o u r member b a n k s of t h e c o n s o l i d a t i o n of t h e U n i t e d S t a t e s
s e c u r i t y h o l d i n g s i n t o one i t e m a t t h e same t i m e t h a t t h e y a r e r e q u e s t e d t o
send t h e i r r e p o r t s i n more p r o m p t l y . T h i s c h a n g e w i l l b e i n c o r p o r a t e d i n
t h e B o a r d ' s w e e k l y s t a t e m e n t f o r March 3 1 , w h i c h w i l l b e r e l e a s e d f o r p u b l i c a t i o n on A p r i l 9 .
Very t r u l y y o u r s ,
W a l t e r L, Eddy,
Secretary.
Enclosure.
TO ALL F5D3RAL R3S3RVB • AG SOTS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
A p r i l 1 5 , 1926.
s t . U920.
SUBJECT: Bank Suspensions and Insolvencies.
Bear S i r ;
There i s enclosed herewith a l i s t of member
and no member banks reported to the Board as having
suspended operations during the month of March and
of banks p r e v i o u s l y closed which resumed business
during the same month. The statement also includes
any c o r r e c t i o n s made in the l i s t s previously sent to
you.
I t w i l l be appreciated i f you w i l l k i n d l y
check the d a t a p e r t a i n i n g to your d i s t r i c t against
your records and advise the Board on or before April
271 by telegraph i f necessary, whether or not any
c o r r e c t i o n s or a d d i t i o n s are necessary t h e r e i n , i n
order t h a t c o r r e c t summaries by d i s t r i c t s may be
published in the Federal Es serve B u l l e t i n .
Very t r u l y yours,
J . C. Noe 11,
Assistant Secretary.
Ene lo sure.
LETTEB TO ALL FEDERAL BESEBVE AGENTS*
V4
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
A p r i l 24, 192b.
s t . U932.
SUBJECT:
R e p o r t s of C o n d i t i o n o f S t a t e
Banks and T r u s t C o m p a n i e s .
Dear S i r :
I t 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 i n a c c o r d ance w i t h your u s u a l p r a c t i c e you w i l l k i n d l y f u r n i s h
t h e F e d e r a l R e s e r v e B o a r d , a s soon a s a v a i l a b l e , w i t h
a copy 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
b a n k s and t r u s t c o m p a n i e s i n y o u r s t a t e on A p r i l 1 2 ,
1926, or o t h e r r e c e n t d a t e i n case you did not 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 A p r i l 1 2 .
I n s u b m i t t i n g t h e above m e n t i o n e d d a t a i t i s
r e q u e s t e d t h a t t h e number of b a n k s be s t a t e d and t h a t
s e p a r a t e f i g u r e s be f u r n i s h e d f o r m u t u a l s a v i n g s 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 b a n k s o p e r a t i n g i n y o u r
s t a t e , a l s o t h a t t h e f i g u r e s be s e g r e g a t e d by F e d e r a l
reserve d i s t r i c t s .
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 p o s t a g e , i s e n c l o s e d f o r u s e 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.
f
402
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
A p r i l 24, 1926.
s t . 4933,
SUBJECT:
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.
Dear S i r :
I t 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 i n a c c o r d a n c e w i t h y o u r u s u a l p r a c t i c e you w i l l k i n d l y
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 a copy 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 b a n k s and t r u s t c o m p a n i e s i n
y o u r s t a t e on A p r i l 1 2 , 1 9 2 6 , o r o t h e r r e c e n t
d a t a i n c a s e ycu did not 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 A p r i l 1 2 .
I n s u b m i t t i n g the above mentioned d a t a
i t i s r e q u e s t e d t h a t t h e number of b a n k s be s t a t e d
and t h a t s e p a r a t e f i g u r e s be f u r n i s h e d f o r m u t u a l
s a v i n g s banks p r o v i d i n g t n e r e a r e any such banks
operating in your s t a t e .
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 p o s t a g e , i s e n c l o s e d f o r u s e i n
transmitting the data requested.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
Enclosure.
403
FEDERAL RESERVE BOARDWASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May 1 5 , 1926.
st.4951-
SUBJECT:
Bank S u s p e n s i o n s and I n s o l v e n c i e s .
Dear S i r :
T h e r e i s e n c l o s e d , h e r e w i t h a l i s t of member
and nonmerriber b a n k s r e p o r t e a t o t h e B o a r d a s h a v i n g
s u s p e n d e d o p e r a t i o n s d u r i n g t h e month of' A p r i l and of
b a n k s p r e v i o u s l y c l o s e d which resumed b u s i n e s s d u r i n g
t h e same m o n t h .
The s t a t e m e n t a l s o i n c l u d e s any c o r r e c t i o n s made i n t h e l i s t s p r e v i o u s l y s e n t t o y o u .
I t w i l l be a p p r e c i a t e d i f you w i l l k i n d l y
check t h e d a t a p e r t a i n i n g to your d i s t r i c t a g a i n s t
y o u r r e c o r d s and a d v i s e t h e B o a r d on or b e f o r e May 2 7 ,
by t e l e g r a p h i f n e c e s s a r y , w h e t h e r o r n o t any c o r r e c t i o n s or a d d i t i o n s a r e n e c e s s a r y t h e r e i n , i n o r d e r
t h a t c o r r e c t s u m m a r i e s by d i s t r i c t s may b e p u b l i s h e d
in the Federal Reserve B u l l e t i n .
Very t r u l y y o u r s ,
J . C. l l o e l l ,
Assistant Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS*
405
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
Hay 2 8 , 1 9 2 6 ,
J t . 4966.
SUBJECT:
C o n d i t i o n of Member b a n k s a s of
A p r i l 12, 1926.
Bear S i r :
For your i n f o r m a t i o n t h e r e i s enclosed.
herewith a preliminary statement regarding the
c o n d i t i o n of a l l member b a n k s combined a s of A p r i l
12, 1926.
The B o a r d ' s a b s t r a c t
( S o . 32) showing
the 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 b a n k s 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 the near f u t u r e .
Very t r u l y y o u r s ,
W a l t e r L. M d y ,
Secretary.
Enclosure.
LLiTTLR TO ALL FLDJLEAL RBSLKVE AGEKTS*
CONDITION OF MLMBER BAITKS Ad OF A?BIL 12, 1926.
jt. 4 9 6 ^ ^ ^
Loans and i n v e s t m e n t s of a l l member banks door e a s e d $ 1 3 0 , 0 0 0 , ooO between December 31, 1925, a n d A p r i l 12, 1926, to $ 3 1 , 0 7 0 , 0 0 0 , 0 0 0 . D e c r e a s e s of
^ 3 8 6 , 0 0 0 , 0 0 0 i n l o a n s and i n v e s t m e n t s r e p o r t e d by jew York C i t y c e n t r a l r e s e r v e
c i t y banks and of $ 5 1 , 0 0 0 , 0 0 0 r e p o r t e d by the same c l a s s of b a n k s i n Chicago
7/ere p a r t i a l l y o f f s e t by i n c r e a s e s of # 1 7 1 , 0 0 0 , 0 0 0 r e p o r t e d by o t h e r r e s e r v e c i t y
banks and $ 1 3 6 , 0 0 0 , 0 0 0 by c o u n t r y b a n k s . Loans and d i s c o u n t s , i n c l u d i n g o v e r d r a f t s , a g g r e g a t e d # 2 2 , 0 0 6 , 0 0 0 , 0 0 0 , a d e c r e a s e of # 2 6 9 , 0 0 0 , 0 0 0 s i n c e December 3 1 ,
but an i n c r e a s e of $ 1 , 6 1 7 , 0 0 0 , 0 0 0 s i n c e A p r i l 6, 1925. The p r i n c i p a l changes i n
t h i s item s i n c e December 31 i n c l u d e d e c r e a s e s of %345,000,000 and $40*000,000 i n
t h e New York and Boston d i s t r i c t s , r e s p e c t i v e l y , and i n c r e a s e s of $ 6 5 , 0 0 0 , 0 0 0
and ^ 5 3 , 0 0 0 , 0 0 0 i n t h e P h i l a d e l p h i a and Cleveland d i s t r i c t s .
Investments in
United S t a t e s s e c u r i t i e s were $ 7 0 , 0 0 0 , 0 0 0 g r e a t e r t h a n on December 3 1 , b u t
# 8 5 , 0 0 0 , 0 0 0 l e s s t h a n a y e a r a g o , w h i l e h o l d i n g s of o t h e r s e c u r i t i e s wore
$ 6 9 , 0 0 0 , 0 0 0 l a r g e r t h a n on December 31 and £253,OoO,000 l a r g e r t h a n on A p r i l 6,
1925.
T o t a l d e p o s i t s amounted t o $ 3 2 , 3 7 0 , 0 0 0 , 0 0 0 , a d e c r e a s e of # 1 , 3 5 6 , 0 0 0 , 0 0 0 s i n c e
December 31, b u t an i n c r e a s e of $ 1 , 6 4 4 , 0 0 0 , 0 0 0 s i n c e ^ p r i l 6, 1925. Demand a e p o s i t s increased #973,000,000 during tne y e a r and time d e p o s i t s $828,000,000, i n c r e a s e s o c c u r r i n g i n a l l d i s t r i c t s e x c e p t f o r a nominal d e c r e a s e i n b o t h demand,
and time d e p o s i t s i n t h e M i n n e a p o l i s d i s t r i c t .
Substantial increases in these
items were r e p o r t e d f o r t h e New York, Chicago, B o s t o n , San F x a n c i s c o , P h i l a d e l p h i a ,
A t l a n t a , and C l e v e l a n d d i s t r i c t s . Amounts due t o banks and b a n k e r s f e l l o f f
#232,000,000 d u r i n g t h e y e a r , d e c r e a s e s b e i n g r e p o r t e d f o r a l l d i s t r i c t s e x c e p t
San F r a n c i s c o . Of the i n c r e a s e of # l , 6 4 4 , u 0 0 , 0 0 0 i n t o t a l d e p o s i t s s i n c e A p r i l 6,
1925, $ 3 7 6 , 0 0 0 , u 0 0 was r e p o r t e d f o r t h e c e n t r a l r e s e r v e c i t i e s of Hew York and
Chicago, # 6 1 8 , 0 0 0 , 0 0 0 f o r o t h e r r e s e r v e c i t i e s , and $ 6 5 0 , 0 0 0 , 0 0 0 by c o u n t r y b a n k s .
The d e c r e a s e of # 1 , 3 5 8 , 0 0 0 , U 0 0 i n t o t a l d e p o s i t s s i n c e December 3 1 , 1925, of
which $ 1 , 0 4 9 , 0 0 0 , 0 0 0 was r e p o r t e d by c e n t r a l r e s e r v e c i t y b a n k s i n Now York C i t y ,
i s a t t r i b u t a b l e i n p a r t t o a r e d u c t i o n i n t h e amount of f l o a t c a r r i e d by t h e member b a n k s , u n c o l l e c t e d i t e m s h a v i n g d e c l i n e d by $ 8 4 8 , 0 0 0 , 0 0 0 , of which
$103,000,000 was i n i t e m s w i t h F e d e r a l r e s e r v e banks i n p r o c e s s of c o l l e c t i o n and
$745,000,000 i n exchanges f o r c l e a r i n g house and checks on o t h e r banks ' i n same
pla<
Lace,
I n t h e a t t a c h e d t a b l e s a r e f i g u r e s by F e d e r a l r e s e r v e d i s t r i c t s f o r a l l member
banks and bystem f i g u r e s f o r S t a t e b&nk and t r u s t company members and f o r n a t i o n a l
banks.
Changes i n t h e p r i n c i p a l r e s o u r c e s and l i a b i l i t i e s a s compared w i t h f i g u r e s
f o r December 3 1 , 1925, and A p r i l 6, 1925, were a s f o l l o w s ;
I n c r e a s e (+) or d e c r e a s e ( - )
since
Doc. 3 1 . 1925 A o r i l 6. 1925
Loans and d i s c o u n t s ( i n c l u d i n g o v e r d r a f t s ) . . - $ 2 6 9 , 0 0 0 , 0 0 0 + $ 1 , 6 1 7 , 0 0 0 , 0 0 0
United S t a t e s s e c u r i t i e s
+
70,000,000 85,000,000
Other bonds, s t o c k s and s e c u r i t i e s
+
69,000,000 +
253,000,000
T o t a l l o a n s and i n v e s t m e n t s
- 130,000,000 + 1,785,000,000
Demand d e p o s i t s
. . . . .
-"1,002,OoO,000 +
973,000,000
Time d e p o s i t s
+ 302,000,000 +
828,000,000
Government d e p o s i t s
+
75,000,000 32,000,000
Due t o banks and b a n k e r s
- 371,000,000 232,000,000
C e r t i f i e d and c a s h i e r s ' checks
- 362,000,000 +
107,000,000
Acceptances o u t s t a n d i n g
15,000,000 +
8,000,000
B i l l s p a y a b l e and r e d i s c o u n t s
- 171,000,000 +
141,000,000
•Demand d e p o s i t s p l u s c e r t i f i e d and c a s h i e r s ' checks o u t s t a n d i n g and l o s s
and o t h e r u n c o l l e c t e d i t e m s d e c r e a s e d $>515,349, uOO.
exchanges
JiESOURCES ANT LIABILITIES OF MEMBER BANKS .ON APRIL 12, 1926 AND DECEMBER 31, 1925.
S t a t e Bank & T r u s t Company members
A p r i l 1 2 , 1926
Dec. 31, 1925
T o t a l l o a n s and i n v e s t m e n t s
Casn i n v a u l t
R e s e r v e w i t h F. R. Banks
Items w i t h F e d e r a l R e s e r v e Banks i n
p r o c e s s of c o l l e c t i o n
Due f r o m banks and b a n k e r s
Exchanges f o r c l e a r i n g h o u s e , and
c h e c k s on o t n e r banks i n sa/ne p l a c e
All otner resources
Total resources
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
Due t o banks and b a n k e r s
Total deposits
3 i l 1 s . p a y a b l e and r e d i s c o u n t s
Acceptances o u t s t a n d i n g
Capital stock paid i n
Surplus fund
All o t h e r l i a b i l i t i e s
Mati anal Banks
A p r i l 1 2 , 1926
Dec. 31, 1925
$8,698,506,000
1 , 2 9 3 , 4 0 9 , 000
1,965,470,000
$8,733,482,000
1,241,015,000
1,913,038,000
$ 1 3 , 3 0 7 , 8 0 2 000
2,53.7,669 000
3 , 2 6 7 , 1 4 7 000
$13,541,803,000
2,520,050,000
3,250,128,000
11,957,385,000
11,887,535,000
1 9 , 1 1 2 , 6 1 8 000
l9,3H,9£i,ooo
I73,54o,000
847,284,000
185,670,000
861,241,000
3 6 o , 7 1 5 000
1 , 2 8 8 , 6 6 4 000
388,856,000
1,376,992,000
234,710,000
484,223,000
^53,453,000
538,772,000
4 8 7 , 3 4 5 000
1 , 4 4 9 , 2 7 8 000
572,090,000
1,516,534,000
592,441,000
905,737,000
959,027,000
900,141,000
8 5 8 , 0 1 0 000
1 , 3 1 7 , 4 7 8 000
1,236,439,0*00
1,336,558,000
15,195,326,000
15,585,845,000
2 4 , 8 8 0 , 1 1 4 000
25,839,450,000
6,371,736,000
4,756,886,000
147,587,000
381,650,000
1,047,836,000
6,678,897,000
4,607,266,000
113,183,000
549,880,000
1,209,013,000
10,451,412
6,197,861
231,863
481,816
2,801,570
000
000
000
000
000
11,145,805,000
6,045,762,000
190,948,000
675,878,000
3,011,569,000
12,705,695,000
13,158,239,000
20,164,522
0
8
Loans and d i s c o u n t s ( i n c l u d i n g
overdrafts)
U. S, s e c u r i t i e s
O t i e r bonds, s t o c k s and s e c u r i t i e s
|
S t . 4966b
21,069,962,000
316,555,000
239,602,000
752,800,000
692,652,000
488,022,000
362,930,000
242,632,000
727,007,000
666,812,000
428,225,000
524,303
285,692
1,409,634
1,187,968
1,307,995
000
000
000
000
000
648,882,000
297,524,000
1,378,301,000
1,165,879,000
1,278,902,000
FEDERAL RESERVE BOARD
WASHINGTON
Ju:lu %, 1 9 2 6 ,
S t . 4971.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT;
Payment of D i v i d e n d s on
J u n e 3 0 , 1926.
Dear S i r :
In submitting the usual semi-annual r e s o l u t i o n
of y o u r b o a r d of d i r e c t o r s w i t h r e f e r e n c e t o the payment
of t h e J u n e 30 d i v i d e n d , k i n d l y f u r n i s h t h e Board w i t h
s t a t e m e n t s showing, a s of J u n e 1 , ( 1 ) t h e i n d e b t e d n e s s
t o t h e F v d e r a l R e s e r v e b a n k of e a c h f a i l e d b a n k and t h e
e s t i m a t e d l o s s w h i c h t h e F e d e r a l r e s e r v e bank w i l l
p r o b a b l y s u s t a i n i n t h e c a s e of e a c h b a n k , and (2) t h e
i n d e b t e d n e s s t o t h e F e d e r a l r e s e r v e b a n k of e a c h member
bank t h a t i s considered t o be in an u n s a f e c o n d i t i o n
and t h e e s t i m a t e d l o s s , i f a n y , w h i c h t h e r e s e r v e b a n k
i s l i k e l y t o s u s t a i n i n t h e c a s e of e a c h s u c h b a n k .
Very t r u l y y o u r s ,
w a i t e r L. Eddy,
Secretary.
LETTER TO ALL CKAIKMEU*
408
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J u n e 1 5 , 1926
S t . 4gg4
SUBJECT:
A b s t r a c t of C o n d i t i o n R e p o r t s of
S t a t e Bank a n d T r u s t Company memb e r s a n d of a l l Member Banks a s
of A p r i l 1 2 , 1 9 2 6 .
Dear S i r :
We a r e f o r w a r d i n g t o y o u u n d e r s e p a r a t e
cover
c o p i e s of t h e B o a r d ' s A b s t r a c t Ho. 3 2
s h o w i n g t h e c o n d i t i o n of S t a t e Bank a n d T r u s t Company
members a n d of a l l member b a n k s a s a t c l o s e of b u s i n e s s on A p r i l 1 2 , 1 9 2 6 .
Consolidated f i g u r e s for a l l
member b a n k s , b o t h N a t i o n a l a n d S t a t e , a r e shown on
pages 1 and 12.
P l e a s e f o r w a r d one copy of t h e a b s t r a c t t o
e a c h S t a t e Bank a n d T r u s t Company member i n y o u r d i s t r i c t that has expressed a desire to receive copies
of a b s t r a c t s a s i s s u e d .
Very t r u l y y o u r s ,
E . L. Smead, C h i e f ,
D i v i s i o n of Bank O p e r a t i o n s .
LETTER TO ALL P . R. AGENTS*
409
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June l 6 , 1926.
s t . 4926.
SUBJECT:
Bank S u s p e n s i o n s and I n s o l v e n c i e s .
Dear S i r :
T h e r e . i s e n c l o s e d , h e r e w i t h a l i s t of member
a n d nonmember h a n k s r e p o r t e d t o t h e B o a r d a s h a v i n g
s u s p e n d e d o p e r a t i o n s d u r i n g t h e month of May a n d of
b a n k s p r e v i o u s l y c l o s e d which resumed b u s i n e s s d u r i n g
t h e same m o n t h . The s t a t e m e n t a l s o i n c l u d e s a n y c o r r e c t i o n s made i n t h e l i s t s p r e v i o u s l y s e n t t o y o u .
I t w i l l be a p p r e c i a t e d i f you w i l l k i n d l y ,
check the d a t a p e r t a i n i n g t o your d i s t r i c t a g a i n s t
y o u r r e c o r d s a n d a d v i s e t h e B o a r d on or b e f o r e June
2 8 , b y t e l e g r a p h i f n e c e s s a r y , w h e t h e r or n o t a n y
corrections, or a d d i t i o n s are necessary t h e r e i n , i n
o r d e r t h a t - c o r r e c t summaries by d i s t r i c t s , may b e p u b l i s h e d i n t h e F e d e r a l . jEle s e r v e B u l l e t i n .
Very t r u l y y o u r s ,
E . M. M c O l o l l a n d ,
Assistant Secretary.
LETTER TO ALL FEDERAL RESERVE AGENTS*
Enclosure.
410
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
June 17, 1 9 2 6 .
St.1+988.
SUBJECT:
Bank F a i l u r e s .
Dear S i r :
The C o m p t r o l l e r of t h e C u r r e n c y h a s k i n d l y c o n s e n t e d t o
supply t h e Board i n t h e f u t u r e w i t h i n f o r m a t i o n r e g a r d i n g the
c a u s e s of f a i l u r e of N a t i o n a l b a n k s , and a c c o r d i n g l y i t w i l l b e u n n e c e s s a r y h e r e a f t e r t o o b t a i n any i n f o r m a t i o n r e g a r d i n g t h e c a u s e s
of f a i l u r e s f r o m t h e r e c e i v e r s of N a t i o n a l b a n k s .
Such i n f o r m a t i o n
a s y o u h a v e r e a d i l y a v a i l a b l e s h o u l d c o n t i n u e t o b e r e p o r t e d on
form X-4401.
I n s u b m i t t i n g r e p o r t s on t h i s f o r m r e g a r d i n g f a i l u r e s
of s t a t e b a n k and t r u s t company members and of non-member b a n k s , i t
i s r e q u e s t e d t h a t s p e c i a l c a r e be e x e r c i s e d i n d e s i g n a t i n g t h e
c a u s e s of f a i l u r e , a l s o t h a t s u c h a d d i t i o n a l i n f o r m a t i o n b e a r i n g on
t h e c a u s e of t h e f a i l u r e a s y o u may h a v e a v a i l a b l e be shown i n t h e
column m a r k e d " S u p p l e m e n t a r y c o m m e n t s . "
I n a number of i n s t a n c e s t h e B o a r d h a s f o u n d i t d i f f i c u l t
t o d e t e r m i n e whether a bank r e p o r t e d by t e l e g r a m # s h a v i n g c l o s e d
should be c l a s s e d a s a bank f a i l u r e or merely a s a bank g o i n g i n t o
v o l u n t a r y l i q u i d a t i o n . Accordingly i t i s r e q u e s t e d t h a t i n the
f u t u r e t h e B o a r d b e g i v e n t e l e g r a p h i c a d v i c e of t h e c l o s i n g of o n l y
s u c h b a n k s a s h a v e b e e n c l o s e d t o d e p o s i t o r s by s u p e r v i s o r y b a n k i n g
a u t h o r i t i e s or b y the b a n k ' s d i r e c t o r s b e c a u s e of f i n a n c i a l d i f f i culties.
I n c a s e t h e r e i s any d o u b t , however, a s t o whether a bank
h a s b e e n c l o s e d on a c c o u n t of f i n a n c i a l d i f f i c u l t i e s , and s h o u l d
t h e r e f o r e b e c l a s s e d a s a b a n k f a i l u r e , o r h a s gone i n t o l i q u i d a t i o n f o r o t h e r r e a s o n s , a d v i c e s h o u l d b e w i r e d of t h e c l o s i n g
t o g e t h e r w i t h such p a r t i c u l a r s as a r e a v a i l a b l e .
Very t r u l y y o u r s ,
W a l t e r L. E d d y ,
Secretary.
LETTER TO ALL FEDERAL RESERVE AGENTS *
FEDERAL RESERVE BOARD
WASHINGTON
z
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June 21. 1926.
st.
SUBJECT:
4995
Condition reports of State Bank 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 May 5> 1926.
Please mail three copies of the form to oach State Bank and
Trust Company member in your d i s t r i c t with i n s t r u c t i o n s to
hold the blank forms pending re c e ipt of a c a l l f o r condition
reports.
Upon receipt of notice from the Board of the c a l l
f o r condition r e p o r t s , kindly n o t i f y the banks thereof by
mail and request them to f i l l out the reports and mail them
to you promptly - in no case l a t e r than 10 days a f t e r r e c e i p t
of the c a l l .
In order that the compilation of the Board's a b s t r a c t
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 unduly delayed, i t i s requested that the r e p o r t s 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 e r r o r s in i t s r e p o r t , a note
to that e f f e c t should be made on the report i t s e l f before i t
i s mailed to the Board, and the Board should be advised of the
necessary corrections whan the desired information i s received
from the member bank.
Kindly acknowledge r e c e i p t .
Yours very t r u l y ,
W a l t e r L. E d d y ,
Secretary.
LETTER TO ALL FEDERAL RESERVE AGENTS*
412
FEDERAL RESERVE BOARD
WASHINGTON
413
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J u n e 25, 1 9 2 6 .
S t . 1+999.
SUBJECT:
E a r n i n g s and D i v i d e n d s R e p o r t s
of S t a t e Bank and T r u s t CompanyMembers a s of J u n e 3 0 , 1 9 2 6 .
Dear S i r :
There a r e b e i n g forwarded t o you today
under s e p a r a t e cover by mail
c o p i e s of f o r m
l O J f o r u s e of S t a t e b a n k and T r u s t company memb e r s i n s u b m i t t i n g t h e i r s e m i - a n n u a l r e p o r t s of
e a r n i n g s and d i v i d e n d s .
P l e a s e a d v i s e t h e banks t h a t t h e r e p o r t ,
which should be s u b m i t t e d not l a t e r than J u l y 10,
1926, i s t o cover t h e six-month p e r i o d e n d i n g
J u n e 3 0 , 1 9 2 6 , i r r e s p e c t i v e of w h e t h e r o r n o t
t h e y may h a v e c l o s e d t h e i r b o o k s on t h a t d a t e , o r
w h e t h e r a n y d i v i d e n d s t h a t may h a v e b e e n d e c l a r e d
cover that p a r t i c u l a r period.
Kindly acknowledge r e c e i p t .
Very t r u l y y o u r s ,
W a l t e r L. E d d y ,
Secretary.
LETTER TO EACH FEDERAL RESERVE AGENT*
1
@FedFRASER