The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
'
'
~~·.: \
.X-1530
FEDD:lL USlltVE :OO.tim J\NNO\JN.CIDNT
WEEic limED' J.AW.dY 4., 1929.
C·H.ANGES lN STATE @K ·l!!BJ!R!!IP;
A4mi tted to. lf(Hnbership:
)is,t. ·
-lo.
....
5
-])Ate
AmEJrict;~.n
:Bank &:: Trust Co.,
lUolmu.md, Va •
~1,800,000
Absor11_tio~
1
..
'I
2
~150,000 $3,204,104
_bY. State Yember:
RhOde Island Ho{Jp~t&l Trust Co., Providence, R. I., hAs
abaorb&d the following banks:
. }4echa.nios Savings :Sank, Woonsocket, R. I., nonmember.
National Globe :Sank, • Woonsocket. R. I.
Bank of the
tbe following
l~ttan
12-31-28
12,- 3•28
12- S-28
Co., New York, N. Y., htl.s aJlsorbed
~nks~
:Bronx Borough :Sank, New York, N. Y., nonmember.
:First :Sank of :Brooklyn, Brooklyn, N. Y., nonmember.
(succession to Pirst NE~otiona.l .Bank of ::Sro.okl1Il)
12....3?44
12-~~28
Consolidation of State Members:
-------~---------·--·----
1
~.he
Liberty Trust C:o., Boston, Ma.ss., member, has consoliwith and under t~tle of. the Beacon Trust Co., :Boston,
~ss., a member.
12- 6-28
The Shenandoah Va.J:,ley ::So..nk & Tr'ust Co., 1./Jtl.rtinsburg, W. Ve..,
member, ho.a consolidated with and und..t:ir tlle title of the
•
Peoples Trust Co., lbrtinaburg, W. Ve•• , a. llleiU:b.er.
12.. 31-28
da'li!~Jl
5
~-lunte.ry
L
4
Lodi
St~te ::S~nk,
Wi thdr~l_:_
12-29-28
Lodi, Ohio.
eo_rbed byJ!.E!.t_i_ona_~k'=
.•
8
11
Fnrmers & Merchants T~st Co., St. Lou~s, Mo., hne been
absorbed by the South Sidl,t National ::So.nk of St. Louis.
LC'.Jlltl.r Str.te Bnnk &: Trust Co., P~ris, Texas, hfl.s been
Q;bsorbed by the First N ~t.ional Bll.nk of Pari.s, Texas.
12-31-28
12-31-28
Closed:
11
State :Sank of Cottl'llerce, Commerce, Texl'.s.
Pllal~l$Sl01f
2
\V&~.shington
GRANTED TO lltEC!SE TRUST POWERJ!:..
County Nr.tion£,.1
)f.lll,k, Gr~::.nville,
N. t.(Su:~leJnCm;-l.Jl.""~
j_
X-1530
....
FEDERAL RESERVE BOARD ANNOUNCE1..1ENT
VVEEK E-.TDED JANUARY 11, 1929
CHANGES IN STATE. BANK N:EMBERSHIP:
·
Dist.
Date
No.
Admitted to Membership:
None.
Succeeded 'by Nonme!llber Bank:
11
First State Bank & Trust Co., Waxahachie, Texas
(Succeeded by Repu.blic Bank & Trust Co., Waxahachie,
Texas, nonmember) •
12-31-28
PERMISSION GRANTED TO FXERCISE TRUST POWERS:
5
8
National Bank of Norton, Norton, Va.
South Side National Bank, St. Louis, Mo.
1- 8-29
1-11.;..29
•
X-l530
FEDERAL RESERVE BOARD .ANNOUNCEI\'ENT
\VEEK ENDED JANUARY 18, 19 29
CHANGES IN STATE BANK ];!EMBERSHIP:
Admitted to
Dist.
2
2
:Membership~
Ca.Eital
Colonial Trust Co.,
Newark, N. J.
Rochelle Park Bank,
Rochelle Park, N. J.
SUrplus
Total
resources
.
Date
;j300,000
~15o,roo
~2,069,96('
1-18-29
50,000
20,000
75,033
1-18-29
Consolidation of State Members:
7
7
11
The First State Savings Bank, Croswell, Mich., a member, has
cousolidated with and under the titlG of the State Bank of
Croswell, J.Uch., a member.
The Carroll County State Bank and the First State Bank,
both of Mt, Carroll, 111., members, have consolidated under the
title of First Carroll County State Bank, a nonm~1ber.
Farmers State Bank, Georgetown, Texas.
PERJ:ISSION GR 1\NTED TO EXERC IS "S TRUST
None.
1- 2-29
1-11-29
1-12-29
PO~!JERS:
~-L. -~
X-1530
FEDERAL RESERVE BOARD ANNOUNCFJf.ENT
WEEK SED JANUARY 25, 1929.
CHANGES IN STATE BANK ME.MBERSHIP:
Admitted to 1f.embership:
Dist.
2
7
Capital
Surplus
Total
resources
Midtown Bank of New York,
NewYork, N.Y.·
$500,000 $250,000 $3,844,608
l~rchants Trust & Savings Bank,
250,.000
Battle Creek, N~ch.
125,000
4,564,279
-Date
1-25-29
1-24-29
Closed:
12
Bank of Farmington, Fe,rmington, Wash.
1-18-29
PERli!ISS ION GRANTED TO EXERCISE TRUST POWERS:
1
5
6
7
10
12
Somerville National Bank, Somerville, Mass.
Riggs National Bank, Washington, D. C. (Confirmatory)
Unaka and City National Bank, Johnson City, Tenn.
American National Bank, Beaver Dam, Wis.
Security National Bank, Norman, Okla.
First National Bank, Beverly Hills, Calif.
1-23-29
1-23-29
1-23-29
1-23-29
1-23-29
1-23-29
4
5
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMEN'l'
\'lEEK EliDED FEBRUARY 1, 1929.
CHANGES IN STATE B.ANK liTinrBERSHIP:
Admitted to
Dist.
No.
7
l~embership:
Capital
:Surpluf!_
Tott\l
resources
Central Trust Company of
Illinois, Chicago, Ill.$10,500,000 $7.,500,000 $168,599,063
(A consolidation of Central Trust Company of Illinois and the
Bank of America, both of Chicago, under new charter)
Date
2- 2-29
Closed:
11
First State Bank of Idalou, Idalou, Texas.
1-30-29
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF :EXCHANGE
UP TO 100 PER CENT OF CAPITAL AND SURPLUS:
2
Chatham Phenix National Bank & Trust Co., New York, N. Y.
PER1vll3SION GRANTED TO EXERCISE TRUST POVVERS :
None.
1-28-29
X-1530
FEDEB.•U. H3JERVB :'dO ~>.Ilp .iJ?IWUlW?J·::;rn'
f.S~( -:.]{l)BD FJ.rr>HU.IRY 8, 1929.
Dist.
Uo.
Surplus
Savines Bt.nk,
0 l~J·phrmt , I'll •
J:'ot:;;.l
resources
--
;;~iners
~;100,000
0100~000
)1,305,201
-
D1.te
B- 2-29
Absc.irnt!on;o;t; !'!d*nehper:;
2
The J.:~~nu.tr1cturero }ru.st Co., 1~ew York, N. Y•, I!. mer.:ber,
ht>.s c.bSQrbed the Stnte 3o.nk L 'rru.l:lt Co., lJeYJ York, N. Y.,
nonmember.
2
.{!he :BF.:nk or the 1 r...nlw.t tiEWl Co.' r~ow York, }: • y.' e. r.:.enber,
h." a c,bsorbed the Little l'leci' Nut io:nt:.l Bnnk, Little Heck,
jiew York, H. Y.
2
12
1-26-29
l'he A1mrican Exchange-Irvine; 'rru.st Co., Hew York, N. Y.,
has changed ito title to Irving 'l'ru.st Comrjany.
The F.onterey County :Be.nk, Salines, Calif., has ch<-m[,"ed
its title to l1onterey Cou.nt;:r 'l'rust & Se.v:Lncsf:Sank.
l
5
7
10
ll
12
l-26-29
2- 1-29
l-23-29
Thornv,ston N(~tiona.l Bc.nk, '!'homaston, li.\ine
2national Bank of lUsing Sun, Rising Sun, ln.(Su.pplemental)21Iillikin National Bank, Decatur, Ill. (SU:LJLllemental)
2First l~;...tionttl :Bank, Alliu.nce, Hebr.
2First Ut.~t iona.l Be.nk in Childress, Childress, Texas
2.First Uu.tiono.l J3t;'.nk, J.iedford, O:reg.
2-
2-29
8-29
2-29
4-29
2-29
2-29
~~...,.,.,...
7
X-1530
FEDERAL RESERVE BO.ARD ANNOUNCEJ/!ENT
WEEK ENDED FEBRUARY 15, 1929
\I
CHANGES IN STATE BA.NK MEli!BERSHIP': ·
DATE
DIST.
lfurged with State Member:
2
The Mechanics Bank, Brooklyn, N. Y., has merged into the
Brooklyn Trust Co., Brooklyn, N. Y.
2- 8-29
Closed:
6
2-11-29
:Sank of Henry County, McDonough, Ga.
Oonsolida tion:
7
The First Trust & Savings Bank and the Union Trust Co.,
both of Chicago, Ill., both members, have consolidated under
a new charter.
2-11-29
Voluntary Withdrawals:
5
8
11
Fe.rlllers & Merchants Bank, Walterboro, S. c.
Peoples Savings Bank & TrUst Co., Pine Bluff, Ark.
First State Bank & Trust Co., Snyder, Texas
2,- 9-29
2-13-29
2- 9-29
PERMISSION GRA.NTED TO EXERCISE TRUST POWERS •
-
2
10
------
First National Bank, Huntington, N. Y.
First National Bank, Omaha, Nebr. (Supplemental)
2-14-29
2-14-29
8
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED FEBRUARY 22, 1929.
CHANGES IN STATE BANK !1ElmmiSHIP:
Date
l>ist.
-Admitted to Membership:
None.
Closed:
6
f1i tizeus Ba.'Yllcing
Company, East:q:aan, Ga.
2-19-29
Absorption by State Member:
7
The Farmers Trust & Savings Bank, Seneca, Ill., a member,
has been absorbed by the StAte Bank of Seneca., Ill,., member.
1._ 7-29
PER1v!ISSION GRANTED TO EXERCISE TRUST POWER_§_:_
2
3
Chase National Bank, New York, N. Y. '(Confirmatory)
Wernersville National Bank & Trust Co.~ Wernersville, Pa.
·~'
2-19-29
2-18-29
9
FEDERAL RESERVE BOARD ANNOUNCE1)lENT
WEEK ENDED ].[ARCH 1, 1929.
CHL'II{GES IN STA:rE BANK l@,f.BERSHIP:
Admitted to Membership:
Dist.
No.
3
4
11
Total
resources
Capital
Integrity Trust Co.,
Philadelphia, Pa.
$1,000,000
l!idland Bank,
Cleveland, Ohio.
4,000,000
(Succession to Midland
Bank, a member )
Mercantile Bank & Trust C!o.
2,000,000
of Texas, Dallas, Tex.
$6,000,000 $32,129,174
Date
3- 1-29
2,000,000
32,382,447
2-28-29
100,000
17,316,714
2-27-29
Succeeded by State Member:
4
The Midland Bank, Cleveland, 0., a member, has been succeeded by the Midland Bank, Cleveland, 0., a member.
2-28-29
Consolidated with National Bank:
7
The Griswold-First State Bank, Detroit, :Mich., a member,
has consolidated with the National Bank oc Commerce, Detroit.
3- 1-29
Consolidated with Nonmember:
11
The Texas State Bank & Trust Co., San Antonio, Tex., member,
has consolidated with the Central Trust Co., San Antonio, rex.,
2-23-29
a nonmember •
Succeeded by Nonmember:
12
l
4
4
5
7
7
7
8
9
10
11
11
The Farmers State 'Bank, Moro, Oreg., a member, has been succeeded by til& State Bank of Moro, Moro, Oreg., nonmember.
2-25-29
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First am Ocean National Bank, Newburyport, J..nss.
2-27-29
First National Bank & Trust Co., Springfield, 0. ( Gonfirmatox:v)2-27-29
Monongahela National Bank, Pittsburgh, Pa.(Supplemental)
2-27-29
National Bank of O!'ange, Orange, Va.
2-27-29
First National Bank, Des Plaines, Ill.
2-27-29
Shelby National Bunk, Shelbyville, Ind.
2-27-29
St. Charles Natiom:.l Bank, St. Cmrles, Ill.
3- 1-29
First National Bank, West Point, ~tlss.
3- 1-29
National Bank of Huron, Huron, s. Dak.
2-27-29
Fidelity Nat. Bank & Trust Co., Kansc.s City, Mo.(Confirmatory)2-27-29
Guaranty National Bank, Houston, Tex.
2-27-29
First Na.tion£i.l Ba.nk, Kingsville, Tex.
2-25-29
X-1!>30
:;.:"'!~)~ .•1 ;:-t~~ V3
·.B~ ~!ID!l!D
ANNOUliC~:::Nl'
:BOARD
n . RCH S, 1929.
None.
~.c.!.!.~-~-bL !f.o~m'be.!.!_
8
..:'he Union & Planters Bank & Trust Company, Memphis,· Tenn.,
n r•.ewber has ileen succeeded b~ Union Planters :Bank &: ·rrust Co.,
a new non::.tember institution.
2-28-29.
Closed:
s
The l:iddle Georgia Bank, Eatonton, Ga.
__
PBID:ISSION
TO ______
EXERCISE TRUS
------.
---GRAlfrED
-----._...
2
3
3
3
4
11
11
12
12
3-6-29.
~
POWERS:
..;...;....;;..;....-
Glen Rock National Bank, GlenRock, N. J~
·nle Industrial National Bank or '·iest York, York, Pa.
(Supplemental)
l'he First Nationul :Bank or Pr.. lmerton, Palmerton,
The First l'ilton N:\tional :SO.nk, llilton, Pa. (Oontirmator7)
Ele Clw.mpa.ign Nutiom.l·B'Ulk or Urbar~, UrbNta, Ohio.
(Confirmatory)
Del Rio Na.tiona.l :Bank, Del Rio, Tex:.;.s.
Pnrmers-First N~tional Bank or Stephenville, Stephenville,
Texas.
'lhe La Jolla N~..tional knk or ·san Diego, S:m Diego, Cal.
The Citizens National Bank :\nd Trust Co., Everett, Wash.
Pa.
3-7-29.
3-7-29.
3-7-29.
3-7-29.
3-7-29.
3-7-29 •.
3-7-29.
3-7-29.
3-7-29.
11
·'
X-1530
FEDERAL RESERVE BOARD A1JNOUNCEMENT
WEEK ENDED MARCH 15, 1929.
CHANGES IN STATE BANK MEMBERSHIP:
Adclitted to Mer.1berohip:
Dist.
Ho.
8
8
12
Total
resources
Ca})ital
SUrplus
$300,000
$100,000
$3,873,286
3-12-29
30,000
12,500
85,267
·s-15-29
150,000
100,000
4,810,085
3-11-29
The Baltimore Trust Co., Baltimore, Md., a member, has
a'bsorbed the l'iatio.l".al Union Benk, Belt irnore, Md.
5-11-29
Peoples Trust Co.,
Little Rock, ArJc.
Midland Savings .BtHlk,
St. Lotti s Cou...'lty, :Mo.
First Security Bank,
Boise, Idaho
Date
Abf:wrptio.E:: of Nat_i_onal Bank:
5
Voluntary Withdrawal:
7
Austin state1 Bank, Chicago, Ill.
Converted to
ll
N~tional
3-15-29
Bank:
The Grsy County State Bank, Pampa, Texas, has converted
into the ps,:npa Ns.tiona.l B~ulk, Pfll!!~e, Texas.
3- 8-29
PRIDHSSION GRANTED TO EXERCISE TRUST POWERS:
2
2
l
2
7
lO
First National Benk, Baldwi~ville, N. Y.
Nat io.na.l Be."lk of Wa.te1·vliet ,: Watervliet, U. Y.
Millers River NE1.t1onal Bank, Athol, Mass.
Sterling National Bank & Trust Co., New York, N. Y.
First National Ban~, Dundee, Ill.
Fidelity National Benk, Oklahoma City, Okla.(Suyrplemental)
3-ll-29
3-11-29
5-12-29
3-13-29
3-12-29
3-l.t:c-29
(·jl..
1.'f.."'
X-1530
,
FEDERAL RESERVE BO.ABD ANNOUNCEJ.:ENT
WEEK ENDED MARCH 22, 1929.
CHANGES IN STATE BANK
Admitted to Membership:
Capital
Surplus
DIST.
NO.
7
l~ffiERSHIP:
Continental Illinois Ba.nk and
Trust Co., Chicago, Ill. $75,000,000 $65,000,000
DATE
3-18-29
Succeeded by State Member:
7
The Illinois Merchants Trust Co., Chicago, Ill., has been
succeeded by the Continental Illinois Bank a.nd Trust Co.,
Chicago, Ill., a. member·.
3-18-29
Consolidation with Nonmember:
9
The Security B~nk & Trust Co., Red Vling, Minn., a. member,
has consolidated with the Red Wing State Bailk, Red Wing, Minn.,
a nonmember, under the title of Security Bank & Trust Co.
3- 2.-29
Oonverted to National Bank:
12
The Citizens Bank, .Portland, Oreg., a member, has converted
into the Citizens National Bank of Portland, Oreg.
3-19-29
Voluntary Withdrawal:
7
Benton Harbor State Bank, Benton Harbor, Mich.
-PERMISS
2
2
2
3
!01~
GRANTED TO EXERCISE TRUST POWERS:
P&lisa.des Park National :Bank, Palisades Park, N. J.
Sterling National Bank & Trust Co., New York, N. Y.
Briggs National Bank, Clyde, N. Y.
First National Bank, Harrington, Del.
3-22-29
3-18-29
3-13-29
3-18-29
3-18-29
X-1530
~OAR:D
FEDERAL Bl:SERV!
AlrrutJNC:tii.....::NT
WEDK E1Jl>E:D I\lABCH Z~ • 1 S29 •
Admitted to MembershiJ2.:
Diet.
can•!
b.
3
!Jiplus
Inter·boro ':Ba.nk & Trust Co., .
'
Prosplct Pa.rk, Pa..
$125,0ot
Volunt~rz
7
$87,610
Total
resources
--$1,156,745
3-28-29
Withdrawa.l:
Schaller Savings :Sank, Schaller, Iowa
Absorption, ot,.No~ber:
5
ThE> Peeples Trl.Wt r.o., Ma.rtinsbure, w. Va,, metnber, has
absorbed. the J3s.nk of Martinsburg, li&tinabucg, w. Va., nonmember.3~28-29
Consolidated With National :Sank:
8
12
.
Liberty Central Trust Co •, St. Louis, Mo. ( C~olidated
with First Nat ilna.l :Sank · in St. Louis., J.:o. ) ·
·
American Exchange :Same, :Pertla.nd, Oreg. ( ~oneelidated with
Portland National :Sank, ,pfrtle.nd, Oreg.)
.lbso!"Etion of
12
2-28-29
:Sank:
The Aurora State :Bank, Aurora., Oreg., ha.s absorbed the
J'il' st Nati()na.l Ba.:nk ct AJ.rora., Oreg.
P£ID'.ISSIQ!;
1
2
4
B
B
ll
11
12
N.~~i_onal
3-23-29
G~TED
TO EXEROISE TRUST POWERS:_
Nat io~l :Sa$ of Lebanon, Leba.no~, N. H.
3-26-2~
Olitten Na.ti. onal :Sank, Clifto1n.N. J.
~ ...2.6-29
Pint N.a.t. :Bt.nk & Trust Co.,. · ingto:n, ~· ( Conffrma.tor1l
3-26-29
Pun lla.tion.l Bank, Clinton.
•
.
3-26-29
St. LouilJ Na.ti.O,JI&l :B&nk, st-. Ltuis, lio.
3-23-29
liidland National. ~k·, Midland, Tex. ·
3-23-29
Pirst National tank, Smithville, Tex.
3-2G-29
United States N&tiona~ :Sa.uk, Mcl~i:lmville, Oreg.(eontirma.tory}3-26-29
14
X-1530
FEDERAL RESERVE :SOARD .ANNOUNCEMENT
'WEEK ENDED APRIL 5, 1929.
CHANGES IN STATE l3ANK
MEIIil~ERSHIP:
Admitted .to Membership:
Diat.
No.
2
2
Capit@l
Total
resources
Surplus
Fleetwood Bank,
Mount Vernon, N. Y. ~ eoo,ooo
$ ioo,ooo ~ · 316,158
Bank of CQmmerce in
New York, N. Y.
25,000,000 40,000,000
730,387,814
(Succession to National Bank of Commerce in New York}
Date
4- 1-29
4- 5-29
Consolidated with·Nonmember:
~
The Federal Trust Company, Philadelp~ia., Pa. (Consolidated
with Bankers Trust Comtany, Philadelphia, Pa.., a nonmember).
3-20-29
Consolidation of State Members:
3
6
West Philadelphia Title & Trust Co., Philadelphia, Pa.
(Consolida.ted with Integrity Trust Co., Philadelphia, Pa.,member). 2-28-29
Citizens Bank, l~tter, Ga. (Absorbed by :Sa.nk of Candler
County, WLetter, Ga •. , member).
3-21-28
Absorption of National Banks:
2
9
The
absorbed
The
absorbed
Globe Exchange Bank, Brooklyn, N. Y., member, has
the :Bushwi.ck National Bank, New York, N. Y.
Farmers State Bank, Fullerton, N. Da.k., member, has
the First National Bank of Fullerton, N. Dak.
4- 1-29
3-14-29
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE
UP TOlOOPER CENT OF CAPITAL AND SuRPLUs"T--
-
2
---·--
Bank of Commerce in New York, New York, N. Y.
4- 5-29
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
1
5
5
5
6
11
Abington Nat iona.l Bank, Abington, NJD.ss.
National VC.1.8.ling :Bank, New London, Conn.
First National Bank, Rocky ];!ount, N. c. (Confirmatory)
Peoples National Bank, Rock Hill, s. c.
Charleston National :Bank, Charleston, w. Va,{Confirmatory)
First National :Bank, Rome, Ga.
Frost National :Ba.nk, San Antonio, Tex. (Confirmatory)
4- 2-29
4- 1-29
4- 1-29
4- 6-29
3-30-29
4- 5-29
4- 5-29'
15
X-1530
FEDERAL Rl!lSERVE BOARD ANNOUNCEMENT
WEEK ENDED APRIL 12, 1929.
CIU.NGES IN STATE BANX MEMBERSHIP:
Admitted to Mem;bership&
Capital
Total
resources
Surplus
-Date
5 Broadwq Bank & Trust Co.,
Richmond, Va.
$300,000
$25,000
$2,430,089
Converted to National Bank=
7
The Niles City Bank, Niles City, Mich. , has converted
into the City National Bank &: Trust Co., Niles Oi ty, Mich.
.4• 1-29
PERMISSION GRANTED TO lttERCISE TRUST PONERS 1
2
~
2
2
5
5
7
7
10
10
ll
Nassau National Bank of Brooklyn in New York, N. Y.
{CoDf irmato%7)
Lefcourt Norma.ndie National Bank, New York, N. Y.
Citizens National Bank, Waverly, N. Y.
Farmers &: Merchants National Bank, Stanley, Va.
Bluefield :National Bank, Bluefield, VI. Ta.
Tipton National Bank:, Tipton, Iowa
City National Bank & Trust Co., Niles, :W.ch.
Fi'l'st National Bank, Leavenworth, Kana.
Genoa National Bank, Genoa; Nebr.
First National Bank, Amarillo, Tex. (Supplemental)
4-·9-29
4- 9-29
4- 9-29
4• 9-29
4- 9-29
4- 9-29
4- 1-29
4-11-29
4-11-29
4· 9-29
1G
X-1530
.
FEDERAL RESERVE BOARD ANNOUNCEl.W:NT
\lEEK ENDED APRIL 19, 1929.
CHANGES IN STATE BANK ME1ffiERSHIP:
Admitted to Membership:
Di~t '·
Ca.pita.l
No•
2
Plaza Tru.st Co.;
NewYork,N.Y.
~2,000,000
Total
resources
Surplus
Ql,OOO,OOO
Date
$3,158,099
Absorption of Nonmembers:
2
2
The Commercial Trust Compar'..y of New Jersey, Jersey City,
N. J., member, has absorbed the Mercantile Trust Comp:~.ny,
Jersey City, N. J., nonmember.
The Bank of United States, New York, N.Y., member, has
absorbed the Colonial Bank, New York, N. Y., a.nd the Bank
of the Rockaways, Far Rockaway, N. Y., nonmembers.
4- 1-29
4- 1-29
Change of_Title:
6
7
The Leesburg State Bank, Leesburg, Fla., has changed its
title to Leesburg St~te Bank and Trust Co .
• Fordson State Bank, :&'ordson, Mich., has changed its
The
title to Bank of Dearborn, Dearborn, Mich.
3-19-29
3-23-29
Withdrawal:
7
State Bank of Ellsworth, Ellsworth, Iowa.
4-16-29
Consolidated with National Banke
12
The Security Trust & Savings Bank, Los Angeles, Calif., has
consolidated with and under the charter of the Los AngelesFirst National Trust & Savings Ban~, Los Angeles, Calif.
PEEa~USSION
1
1
2
2
2
7
7
10
10
.GRANTED TO
EXERCIS~
TRUST P0\1.ERS:
Hampden National Bank, Westfield, Mass.
National Bank, Exeter, N. H.
City National Bank, Hackensack, N. J.
Cazenovia National Bank, Oa~enovia, N. Y.
Sidney National Bank, Sidney, N. Y.
Peoples National Bank & Trust 00., Chicago, Ill.
Farmers National Bank, Webster City, Iowa (Supplemental)
First National Bank, Leavenworth, Ka.ns •.
Genoa National Bank, Genoa, Nebr.
Rockingh~
3-30-29
4-16-29
4-16-29
4-16-29
4-16-29
4-16-29
4-13-29
4-16-29
4-11-29
4-11-29
X-1530
FEIJERAL RESERv"E :BOARD ANNOUNCEME1"T
WEEK ENDE:P .APRIL 26, 1929.
CHANGES IN STATE BANX MBMBEF.SHIP:
Admitted to, Membership:
Dist.
No·.·
2
4
8
Surplus
Capital
To,tal
r&sou..rces
Hanover :Sa.~ of the City
of New York; N• y,
$10,000,000 $15,000,C.OC $32(,273,000
Peoples Savings & Trust
Co., Pittsburgh, Pa..
4,000,000
9,000,000
54,264,931
University City :Bank &
Trust Co., University
City, Mo.
100,000
26,200
1,063,305
!late
4-24-29
4-22-29
4-25-29
Change C'lf Title:
2
7
The :Bloomfield Trust Co., :Bloomfield, N. J., has changed
its title to Bloomfield :Bank & Trust Co.
The Kent State Bank, Grand Rapids, Mich., has changed
its title to Old Kent Bank.
4-15-29
4-22-29
Closed:
6
Peopl~s
~~unta.rl
8
4-19-29
:Bank, Sardis, Ga.
Withdrawal:
Fidelity Bank & Trust Co., Memphis, Tenn.
!bsorbed by
7
4-19-29
Nonn1em~er:
The Central State Bank, Jackson, Hich., has been absorbed
by the Jackson City Bank & Trust Co., Jackson, J\i:ich., a
nonmember.
4~13-29
Absorption of National Banks:
2
7
The Bloomfield Trust Co., Bloomfield, N, J., a member,
has absorbed the Bloomfield National Bank, Bloomfield, N.J.
The Kent State Bank, Grand Rapids, 1,dch., a member, has
absorbed the Old National Bank, Grand Rapids, Mich.
4-15-29
A-22-29
AUTHORIZED TO ACCEPr DRJ,FTS AND BILlS OF EXCHANGE
-
-~- TO 100 PER CENT OF CA?)~.¥--~----stfRPLUS:
6
First National Bank, Lake Charles, La..
4-25-29
•
18
X-1530
4-26-29
- 2 -
Dist.
No•
-
Date
PERliiSS ION GRANTED TO EXERCISE TRUST PO\"!ERS :
.3
3
5
ll
12
12
~oiht Pleasant Beach Natior~l Bank, Point Pleasant Beach, N~J; 4-26-29
4;..26-29
Mifflin County National Bank, Lewistown~ Pa•
4-23 ...29
Second National Bank, Culpeper, Va.
4-25-29
First National Bank in Lubbock, Lubbock, Tex.
4-23-29
Security-First NatiomU Blink, tos Angeles, Calif:
. ,
( Conf'irina.tory)
4 ..23 ...~9
National Bank of Commerce; Seattle~ Wash. (Cohfirmatory)
•
•
19
X-1530
FEDERAL RESEI!.VE :SOARD ANNOUNOEl:ENT
· WEEK ENDED :VJAY 3, 1929:
ClHANGES IN STATE :SANK ME1::SEESHIP:
Admitted to :MembershiR:
To-tal
resources
Dist.
N,.,.
2
Oa.pi-t&1
Surplus
Chemical :Sank & Trust Co. ,
New York, N. Y.
$lo,ooo,ooo $15,000,000
~252,8Be,eoo
Date
5- 3-29
Merged with Nonmember:
· 2
Clarem.nnt :Sank of Jersey City, N. J. (Merged with Trust
Company of New Jersey, Jervey City, N. J., nonmember)
4-30-29
Absorption of National :Sanks:_
·
2
First Trust & Deposl t Co., Syracuse, N. Y., member, ha.s
absorbed the following nat iona.l banks:
Liberty Na.t iona.l :Sank & Trust Co., Syracuse, N. Y.
Third National :Bank, Syracuse, N. Y.
~olunta.ry
7
Second Security :Sa.nk,
4-27-29
4-27-29
Withdrawal:
Chicago, Ill.
5- 3-29
Consolidated with National :Sank:
6
The Chattanooga. Savings :Sank & Trust Co., Caatta.nooga.;
Tenn., a. member, ha.s consolidated with a.nd under the title
of' the First National :Bank of Chattanooga..
2- 2-29
AUTHORIZED TO ACCEPT DRAFTS AND :SILLS OF EXCHANGE
UP TO 100 PER CENT OF--CAPITAL-ffiS1rn.PLuSI·2
Chemical Bank and Trust Co., New York, N. Y.
5-·3-29
PEE&J:SSION GRANTED 'nO EXERCISE TRUST POWERS:
2
2
7
10
Callicoon National Bank, Callicoon, N. Y.
Brooklyn Na.tic:ma.l Bank, New York, N. Y.
First No.tional :Sank, Wyandotte, Mich.
F~de;t:a.~ _N~~i()~_l_:Be,n~J S~wnee, Okla..
4-29-29
4-30-29
4-30-29
4-29-2~
X-1530
I
FEDERAL RESERVE BOARD ANNOUNCE11ENT
WEEK E1TDED JYJAY 10, 1929.
CHANGES IN STATE BANK J,JEll'illERSl!,IP:
Dist.
No.
Admitted to Membership:
None,
Mergers .Between State l:embers:
2
2
The :tunic ipa.l Bank and Trust Co. , .Br oaklyn, N. Y. , has
merged with am under the title of Bank of United States,
New York, N. Y.
The Banlt of Commerce in New York, N. Y., has merged with
and under the title of the Guaranty Trust Co., New York,N.Y.
•
5-10•29
5-
4-29
Voluntary Withdrawal:
10
PfURMI~§JQN
4
7
7
9
5- 4-29
F:ii-st Security Bank, Rock Springs, Wyo.
GfiANTED ,'2,0, ~0 ISE TRUST
po·,-~ERs:
Painesville Natib~i Bank & Trust Co., Painesville, o.
Cid National Bank, Bluffton, Ind.
5- 9-29
5- 7-29
5- 7-29
First National Bank, Charlotte, Mich.
First and American National 'Bank, Duluth, :Minn.
(Confirmatory and supplemental) 5- 3-29
21
X-1530
FEDERAL RESERVE :BOARD ANNOUNCEMENT
WEEK ENDED MAY 17, 1929.
CHANGES IN STATE :BANK 11EATBERSHIP:
Admitted to Membershipl
Dist.
No.
2
Capital
Surplus
$700,000
$350,000
Total
resources
Date
J. Henry Schroder Trust Co. ,
New York, N. Y.
$1,050,000
5... 16-29
Change of Title:
5
The Savings :Bank o:f Ric.hmond, Va.., has changed its title
to Savings :Bank and Trust Company, Richmond, Va..
PERMISSION GRANTED TO EXERCISE TRUST
7
8
9
12
12
POV~S:
Central National Bank & Trust Co., Des :Moines, Iowa.
First National Bank, Carrollton, KY·
:Mer chants Nat iona.l :Bank & Trust Co • , Far go , N. Da.k.
First National Bank, Stockton, Calif. (Supplemental)
Citizens Security National :Bank, Everett, Wash.
( Confirms. tory)
5-16-29
5-15-29
5-15-29
5-15-29
5-17-29
5-17-29
.2..2..
FEDERAL RESERVE :BOABD ANNOUNCEMENT
\'lEEK EliDED MA.Y 24, 1929.
CHANGES IN STATE :BAUK MEi'i::BERSHIP:
Admitte~
Sui'J;JlUS
Total
resources
$15,000
$368~415
5-23 ...29
5,000,000
149,666,288
5-20-29
2,500
171,605
5-20-29
The Corn Exchange :Bank, New York, N. Y., has changed its
title to Corn Exchange :Bank Trust Company •
5-20-29
Dist.
No.
8
8
10
liembership:.
Capital
State Savings :Bank,
Lebanon, Ho.
$25,000
Mercantile-Comnerce :Bank &
Trust Co., St. Louis·, :Mo. 10,000,000
Park County :Bank,
Powell, Wyo.
25,000
Date
Change of, Title:
2
.Merger of State l'fembers:
2
The Hanover Bank of the City of New York, N. Y., has
merged with the Central Union Trust Co., New York, N.Y., unier
the title of Central Hanover :Bank & Trust Co.
5-15-29
Voluntary Withdrawal:
4
Antwerp Exchange :Bank Co., Antwerp,
o.
'5- 1-29
Converted to National Bank:
7
The Central State Bank, Des Moines, Iowa., has converted
into the Central National :Bank & Trust Co., Des Moines, Iowa..
5-15-29
Closed:
7
American State :Bank, Fart Madison, Iowa..
Succeeded by State
8
5-20-29
l~mber:
The 1Sercantile Trust Co., St. Louis, Mo., a member, has been
succeeded by the Mercantile-comnerce :Bank & Trust Co., a member. 5-20-29
Absorption of Nonmember:
9
The Swift County :Bank, Inc., Benson, Mirtn., a. member, he.s
absorbed the Farmers ~ Merch~s State :Bank, De Graff, Minn.,
a nonmember.
5- 7-29
PErufJSSION GRANTED TO EXERCISE TRUST POWERS:
2
2
2
7
9
Broadway National Bank & Trust Co., New York, N. Y.
First National :Bank, Pleasantville, N. Y,
Roslyn National Bank & Tru.s t Co., Rosly:1~~ N. Y.
First National Bank in Creston, Creston, Iowa.
American National Bank, St. Paul, :Minn.
5-20-29
5-20-29
5-20-29
5-23-29
5-23-29
,."1! ""
~t)
X-1530
FEDERAL RESERVE BOARD
AlifNOUNC~MENT
WEEK E:NDED MA.Y 31, 1929 •
CHANGES IN STATE BANK l'IE11BERSHIP:
Admitted to Membership:
Dist..
No.
·7.
8
Surplus
Capital
Union Industrial Bank,
Flint, Mich.
Cass Bank & Trust Co.,
st. Louis, Mo.
Tota.l
resources
-
Date
('
$1,800,000 '8IP 700,000 .W31,680,824
. P-:-2.7-29
6,725,531
5-27•29
The Savin§s Bank of Richmond, Richmond, Va., has changed
its title to S_~vings Bank and Trus.t Compa.ny.
5-16-29
'
300,000
400,000
Change of Title:
5
Reopened
6
The Citizens Banking Company, Eastman, Ga..
5-24-29
'
·· Succeeded by State Member
8
The Cass Avenue ~ank, St. Louis, Mo., has been succeeded
by the Oass Bank and Trust Company.
5-27-29
Merger of State Members:
7
The Industrial Savings Bank and the Union Trust and Sa.vings B&nk, both of Flint, Mich., have merged under the
name ''Union Industrial· Bank."
5-27-29
PEBlUSSION GRANTED TO EXERCISE TRUST PO\f.ERS:
1
1
2
12
. 5-28-29
First National Bank of Middletown, lliddletown, Conn.
Warren National Bank of Peabody, Peabody, 118.ss,
5-28-29
First National ~ank & Trust Co. of Rochester, Rochester,N.Y. 5-24-29
First National Trust & Savings Bank of Spokane, Spokane,
Wash.
-5-25-29
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED JUNE 7 j 192~.
CHANGES IN S'r.d.TE. BANK :MEMBERSHIPt
Date
Dist.
Admitted to Membership:
None •.
Absorption of Nonmember:
2
The Trade Bank of New York, N. Y., ha.s absorbed the
Tompkins Square Bank, New York, N. t. • norttnetnber.
N.erger
7
~;~.nd Ol'~atfie
o:f Ti tl~f
The Merchants National Bank, Detroit, Mich•; has merged
with the Dime Savings Bank, Detroit, Mich.-, a m.ember, 'Wlder
the title of the Bank of :Michigan.
5-27•29
.Y..oluntary Wi thd.ra.wal'
7
6- 6-29
State Bank of Wau];iun, Waupun, Wis •
Change of Title:
12
The Bingham State Bank, Bingham, Utah, ha;s changed its
title to Fir s t Secux i ty Ba.nk of Bingham o1
PERMISSION GRANTED TO EXERCISE TRUST
4
7
7
10
ll
11
12
POWERS~·
Marine National Bank, Erie, Pa.
First National Bank, Harvey, Ill.
First National Ba.nk in Bluffton, Bluffton, Ind.
First National ~an~, Canon City, Colo.
Merchants National Bank, Brownsville, Tex.(Supplemental)
First National Bank, Paris, Tex.
Ska.gi t Nat iona.l Ba.nk, Mount Vern011, Wash. (Confirmatory}
5- 3-29
6- 3-29
6- 3-29
6- 6-29
6- 6-29
6- 6-29
6- 6-29
s-
6-29
25
X-1530
FEDERAL· RESERVE BO.AlU> ANNOUNCEMENT
Vnm!C ENDED JUNE 14, 1929.
-CHANGES IN STATE BANK 1!El1BERSHIPt
Da.te
Dist.
Nolle.
Absorption of Nation4l Bank:
2
The Liberty :Bank of Buffalo, N. Y.,· member, ha.s absorbed the Frontier Na.tiona.l Ba.nk; Buffalo, N. Y.
6-10-29
:Mergers of State !;!embers:
3
The Ba.nk of North America. a.nd Trust Co., Philadelphia.,
Pa. .. , member, ha.s merged with a.nd under the title of the
Pennsylvania Co~y for InsuraNCe on Lives & Granting
Annuities, Philadelphia., Pa. •• a member.
The Citizens Savings & Tr:ust Co., York, Pa.,;, member,
ha.s merged with a.nd urder th~ obitle o'f the York Trust Co.,
York, Pa., a member.
6- 1-29
5-15-29
P.EIDUSSION GR/LNl':&JJi ,rto. ,tltEHQql]l_~T PO\':J'lllaS c.
l
4
6
8
10
Haverhill Na.t io:nal Ba.nk, Hn.verhi~\.1, :Mass.
First Na.tioml Bank, Leechburg, Pa.
City National Ba.nk, Almey, Ga..
Farmers National B&nk, Lebanon, ~·
Drovers National BAnk in Kansas City, Mo.
6~14-29
6-14-29
6-12-29
6-10-29
6-.12-29
X-1530
FEDERAL RESERVE BOARD ANNOUNCID,:ENT
\JEEK ENDED JUNE 21 , 1929 •
C&NGES .IN STATE BANK 1:1:EMaERSHIP:
Admitted to Me~ershipt
pist..!.
No.
Capita1
1 Bristol American Bank &
Trust Co• ,Bristo1,Conn. $200,000
2 Seaboard Bank of the City
11,000,000
of New York, N• y.
11 Security State Bank &
125,000
Trust Co • ,Bea.umoi;lt, Tex.
11 Central TrW3t Coq
250,000
San Antonio, Tex.
SurplUs
Total
resources
Date
$200,000
$3,599,243
6-21-29
14,000,000
279,739,812
6-19-29
lo,ooo
1,219,271
6-19·29
100,000
5,474,730
6-19-29
Mer~r~
3
The Camden Sa.fe Deposit & Trust Co., Camden, N.J., a. member,
a.nd the Secu,r i ty Trust Co., Camden, N, J, nonmember, ha.ve nerged
umer the charter a.nd ti t1e of the Camden Safe Deposit & Trust
Co.
6-17-29
Voluntary Withdrawal:
11
American State Bank, Fort Madison, Iowa
Central State Ba.nk, Shernnn, Texas.
Wit hdra.wa.l:
6-19-29
6-20-29
11
Texas State Bank & Trust Co., San Antonio, Texas.
6-15-29
7
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE
UP TO 100 PER C!i!NT OF CAPITAL AND SURPLUS:
·----·--
2
See.board Bank of the City of New York, N. Y.
6-19-29
PERHISSION GR.:lNTED TO EXERCISE TRUST POWERS:
2
4
7
Central Nr.tio:nal BMk, Yonkers, N. Y.
Lagonda-Citizens National Bank, Springfield, Ohio
American National Bank, Noblesville, Ind.
6-19-29
6-21-29
6-00-29
X-1530
FEDERAL
RESERVE BOARD ANNOUNCEMENT
WEEK ENDED JUNE 28, 1929.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to lifembership'
Dist.
No.
-
1
Sagamore Trust Co.,
Iqnn, M:l.ss.
ca.pttal
S;lltil.us
$200,000
$75,000
Total
resources
$~,375,106
Date
6.&..26·29
Closed a
6
Citizens Bank of Lake Wales, Lake Wales, Fi&•
6-28-29
Voluntary Withdtawa&sa
4
7
Peoples·Commerciai ~ank, Bellefontaine,
Van Wert State ~ank, Van Wert, Iowa.
Ohio.
6-27-29
6-28-29
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
First National Eank, Salwmanca, N. Y.
9
National Bank & l'rust Co•, Ja.mestown, N. Da.k.
6-26-29
6-24-29
n8.,
~c
X-6212
January 4, 1929.
TO:
The Federal Reserve Board.
FROM:
Mr. Wyatt - General Counsel.
SUBJECT:
Report to Senator Norbeck on
S-4662 f.or signature of Secretary
of the Treasury.
I res·?ectfully submit herewith a draft of a letter for the signature of
the Secretary of the Treasury to Senator Norbeck of the :Banking and CUrrency Committee pf the Senate, in response to a request for a report on S-4662, a bill to
amend tpe Federal Reserve Act with r~spect to venue of civil suits against Federal
reserve banks.
This bill is so inartistically and ambiguously drawn that it is impossible clear;Ly to understand its purpose or effect. In view of the fact, hqwever,
that 1 t was introduced by Senator Brookhart of Iowa, aJld in view of the further
fact that certain suits were recently breught in the State Courts of Iowa against
the Federal Reserve Barik of Chicago and objections to the jurisdiction were made
by the Jlederal Reserve Bank of Chicago both on the ground that the Federal Reserve
Bank of Chicago is not doing business}n the State of towa and on the ground that
process was not properly served on the Federal Reserve Barik, I am confident that
the intent of this bill is to make it possible to bring suit against, and to obtain
service of process upon any Federal reserve bank in any State Court aQ1Where within
the Federal Reserve District served by such Federal reserve bank.
As soon as this bill was introduced I sent copies to Counsel for all the
Federal reserve banks and requested an informal expression of their views on the
subject. TWo or three of them misunderstood the purpose of ~~e bill, but those
which understood it strongly opposed 1 ts ena.ctmant. Their letters, however, are
uot in suitable form for transmission to Congress; and opposition to this "bill by
the Secretary of the Treasury and by the Federal Reserve Board woUld have much more
force than opposition by the Federal reserve banks.
For the reasons stated in the attached letter, I feel very strongly that
this bill should not be enacted and that both the Boar·d and the Secretary qf the
Treasul'f should go on record as opposing its enactment. It is possible, however,
that notwithstanding this opposition the Co~ittee will favor the enactmen~ of the
bill. ·To cover this contingenby I have incorporated in the attach~d letter recommendations for certain changes which shoUld be made in the text of the bill and. •
also recommendations for additional provisions restoring to the Federal Cou,:rts
jurisdiction of suits by and tgainst Federal reserve banks where ~Ch suit~ actuallY
invo.lve the validity or interrretation... of any.. proTision of t.he FedeJ"al Reserve Act
or the Board 1 s Regulations, a.pd also a pro'V'ision exempting the Federal reserve
b&llke f:rom the issuance o£ an: attachment, injunction or execution prior to the
rendition of final. jud&ment i" any case. These amendments· would accomplish in part
the purpose of similar amendm-nts reconunen.ded in the Board's last .Annual Report;
but this would seem to be a fEi,vol'able opportunity to recoumend the enactmeJ:~,t of
those amendments as separate oills, and I baTe drafted the letter •ccordingly.
X-6212
The statement wit~ regard to the number of State Judicial Districts in
'the United States is based upon reports received from Counsel to various Federal
reserve banks and is.believed to be fairly accurate.
It is neceS"Sary that three carbon copies of the attached letter and
enclosures be furnished to the Secretary of the Treasury.
Respect fully,
Wa.l ter Wyatt,
General Coun.sel
n
OMC
Inclosures attached
X-6212-a
•
January 4, 1929 •
Honorable Peter Norbeek, Chairman,
Committee on :Banking and Currency,
United States Senate,
Washington, D. C.
My
dear l::r. Chairman:
In accordance with the request contained in your letter
of December 15th, I have 'conferred with the Federal Reserve :Board
and take pleasure in submitting the following report on S. 4662, a
bill to amend the Federal Reserve Act with respect to venue of civil
suits against Federal reserve banks.
It would appear that the general purpose of this bill is
possib~e
to make i t
to bring suit against, and to obtain service of
process upon, any Federal reserve bank in any court anywhere within
the Federa~ reserve district in which stch Federal reserve bank is
located.
To this end it provides that each Federal reserve bank shall
be deemed to be an inhabitant of each judicial district within the
geographica~
limite of its Federal reserve district and shall appoint
an agent upan whom process may be served in each such judicial district.
It is not
cl~ar,
however, whether it is intended to refer to State
judicial districts or to Federal judicial districts.
If it is intended to refer to Federal judicial districts
it would have little effect; because. as explained Qn page 48 of the
Annual Report of the Federal Reserve Board for the year 1927, since
the passage of the Act of February 13, 1925, amending the Judicial
30
•
X-6212-a
~"1
u_
Code, the Federal courts have jurisdiction Jf very few suits brought
against Federal reserve banks.
It is assunud, therefore, that this
bill is intended to refer to State judic.J.al. districts •. If so, its constitutionality is doubtful; because it is in subE.tance an attempt to enlarge the jurisdiction of the State cour·cs and it is doubtful whether
Congress has any such :power.
Assuming, however, that the bill is intended to refer to
State judicial districts and assuming that, notwithstanding this fact,
it is constitutional, it is nevertheless open to serious objections.
It would fail to give recogn: tion to what should be considered to be
a 9rinci:ple of law, namely, that a corporation not domiciled in a certain State can only be sued in a jurisdiction within such State in which
it voluntarily accepts service or in which it is actually doing business
and w:'lere service of :process is made u:pon an actual agent or officer.
The disregard of such a fundamental :principle would not only be unjust
to Federal reserve banks but would subject them to serious inconvenience
and unnecessary expense.
To require the Federal reserve banks to defend numerouEjl :petty
suits in local courts scattered
throug~out
their Federal reserve districts
would necessitate the attendance of officers and employees of the Federal
reserve banks as witnesses and the :production of their books and records,
and would very seriously interfere with the :performance of their important
:public duties.
From an inquiry as to the number of State judicial districts
in each Federal reserve district it appears that this bill would make
it necessary for the Federal reserve banks to appoint approximately 104?
X-6212-a
-3-
agents whose sole purpose r.ould be to receive service of process in suits
brought against Federal re.serve banks.
This alone would be an unneces-
sary and unjustifiable expense to the Federal reserve banks.
In addi-
tion thereto it would compel the Federal reserve banks to defend suits
in the most remote corners of their Federal reserve districts and to
retain local attorneys in such cases in addition to their regular counsel, who now handle practically all of their litigation.
Moreover, the
rights of the Federal reserve banks in such suits would be prejudiced
by local influence and the natural inclination of rural juries to regard Federal reserve banks\as enormously wealthy foreign corporations
instead of
semi-Gover~ental
institutions created solely for the pur-
pose of performing a public service.
For these reasons the Treasury Department and the Federal
Reserve Board are strongly opposed to the enactment of this bill or
· a:ny other bill having a similar purpose.
If, notwithstanding these objections, your Committee should
decide to report this bill with a recommendation for favorable action,
it is earnestly requested that the bill be amended so as to clarify
its provisions and so as to relieve to some extent the distinct disadvantages under which the Federal reserve banks are now laboring, as
pointed out on page 48 of the .Annual Report of the Federal Reserve
A proposed revised draft of the bill incorporating amendments which would be necessary to accomplish• these
Board for the year 1927.
purposes is enclosed herewith, and the more important amendments will
be explained briefly.
The changes suggested
•
i~
the text of the bill are intended
X-6212•a
-4-
to make it clear that the bill refers to both State and Federal judicial
districts and that it is intended to affect the jurisdiction as well as
the venue of suits brought by or against Federal reserve banks.
To
this end, it \':'OUld mal<:e such banks citizens of the States in which their
head offices are located and inhabitants of each Federal and State judicial district within the
geograph~cal
limits of their Federal reserve
district, and would provide that they shall be deemed to be doing business in each such judicial district.
It is believed that these prOvi-·
sions are necessary to accomplish the original purposes of the bill.
As
a matter of simple justice, the bill would also be amended so as to apply
to suits brought by Federal reserve banks as well as to suits brought
against them.
In addition to these amendments, it is suggested that there
be added at the end of the bill three provisos which would accomplish
in -:;>art the purpose of the recommendations contained on pages 48 and
49 of the Annual Report of the Federal Reserve Board for the year
1927.
The first proviso would give the District Courts of the
United States jurisdiction of all suits brought by or against any Federal reserve bank which actually involve the validity or construetion of any provision of the :·Federal Reserve Act, any amendment thereto, or any regulation
serve Board.
prescri~ed
pursuant thereto by the Federal Re-
This is clearly :in accordance with
. the policy of the
Constitution to have the validity
a~d
interpretation of Federal stat-
utes passed upon by Federal rather than State courts.
•
Adherence to
this policy is especially important with respect to the Federal Reserve Act, because of the technical nature of its provisions and the
technical nature of the subjects with which it deals and also because
n,-,
u~)
X-6212-a
of the unfortunate fact that the nature, functions and purposes of the
Federal Reserve System are not generally understood by either tha State
judges or the lawyers practicing in the State courts.
The second proviso would make it possible to remove from the
State courts to the United States District Courts suits of the character
of those described in the first proviso, in accordance with the provisions of the Judicial Code providing for the removal of suits brought
in the State courts of which the United States District Courts would
have original jurisdiction.
The third proviso would exempt the Federal reserve banl{S from
attachment, injunction or execution before final judgment in any case,
as national banks are now exempted under the provisions of section 5242
of the Revised Statutes.
Such an exemption is clearly warranted by the
unquestioned credit standing o.f the Federal reserve banks and their
financial ability to pay any judgment which may be rendered against them;
and such an exemption is necessary in order to prevent the Federal reserve
bariks from being hampered in the performance of their public duties through
the issuance of attachments, injunctions or executions before final judgment on the merits of any litigation in which they may be involved.
As
stated above, both the Federal Reserve Board and the Treasury
Department are strongly
op~osed
to the enactment of Senato Bill 4652 or any
other bill having the effect which this bill in its present form apparently
is intended to have.
Both the Board and the Treasury Department, however,
are in favor of the enactment of bills exempting Federal reserve banks
from attachment, injunction or execution before final judgment in any suit,
action or proceedinG and restoring to the Federal courts
j~isdiction
over
""" r::
X-6~12-a 0 ~'
-6-
suits bz:ought by and against Federal reserve banks.
Separate bills cover-
ing these subjects are, therefore, enclosed; and it is requested that your
Committee give them favorable consideration.
Very truly yours,
Secrutary of tho Treasury.
Enclosures.
.....
,t..
) .)
L
.
X-6212-b
(Revised Draft of
S-4662.)
A BILL
To amend the Federal Reserve Act, as ameaded, witn respect to venue
of civil suits against Federal reserve banks.
Be it enacted by. the Senate and House of Representatives
of the United States
of
America in Congress assembled, That the
fourth subdiTision of the fourth paragraph of section 4 of the Federal Reserve Act, as amended, is amended by adding at the end thereof the following:
"For the purp9ses of JuRISDICTION .Alm venue of civil
I
suits BY AliD against Fedelal reserve banks, each Federal reserve bank
shall be deemed to be a A CITIZEN OF THE STATE HT WHICH ITS HEAD OF:i?ICE
IS LOCATED AND an inhabitant of, AND TO BE DOIUG
B~H!ESS
IU, each
FEIER.AL AND STATE judicial district within the geographical limits of
the Federal reserve district in which such barik is located.
The board
of directors of each such bank shall appoint, in each such judicial
district, an agent upon whom process may be served.
PROVIlll!lD, HOWEVZR,
THAT :HE DISTRICT COURTS OF THE UlUTED STATES SHALL HAV:C JURISDICTION
OF ALl SUITS OF A CIVIL NATURE AT LAW OR IN EQ,UITY, BROUGHT BY OR
AGAINST ANY FEDERAL RESERVE BANK WHICH ACTUALLY UTVOLU T:a.::i: VALIDITY
OR. C01JSTRUCTION OF ANY PROVISION OF THE EUDER.AL rol$!RVE ACT, ANY AMJJND-
!GliJT TE:ilRETO, OR ANY REGULATION PRIDSCRIBZD PURSUAHT TEEETO BY THE
FEDERAL RBSIJRVE BOARD, REGARDLESS OF WHETFJER SUCH Q,tmSTION .ARISES FROM
TE3 PLEADINGS OF THE PLAINTIFF OR FROM lEFlllNs:!lS INTERPOSED IN GOOD FAITH
BY TlB Di.ilFENDANT; PRq,VIDED, FURTHER,
TH.lf ANY SUCH SUIT INSTITUTED IN
A STA'Eci COURT MAY BE REMOVED BY THE DEFEUDA1'T OR USFENDANTS INTO 'IRE
-2DISTRICT COURT OF
~rlE UNIT~D
X-6212-b
STATES FOR THE PROPJR DISTRICT, AS
PROVIDED IN CHAPTER 3 OF THE JUDICIAL COre (UNITED STATES CODE, TITLE
28, CHAPTER 3); AND PROVIDED FURTHER, TH..i\.T NO ATTACH?v:::NT, nrJUNCTION,
OR :illXBCUTION SHALL :BE ISSUED AGAINST ANY FEJBRAL R3S:ERV:El :BAlm: OR
Tif]
PROPERTY OF .ANY FEDERAL R'ESERVE :BANK :BEFOR'3 FIUAL JUDGl1::Jl1T IN
ANY SUIT, ACTION, OR PROCEEDil:TG HT ANY STAT.mt COUNTY, 1liDTICIPAL,
OR UNITED STATES COURT."
•
X-6212-e
A :SILL
To amend section 4 of the Federal Reserve Act and for other purposes.
:BE IT ENACTED :SY TEE SElUTE AND HOUS?: OF REPRESENTATIVES OF 1m UJ:UTED STATES OF .AMmRICA. IN CONGRESS
ASSDi:BL.ED, That the Fourth subdivision of the fourth paragraph of section 4 of the Federal Reserve Act ( the fourth
subdivision of Section 341, Chap. 3, Title 12, of the United
States Code) be amended to read as follows:
11 Fourth.
To sue and be sued, complain and
defend, in any court of law or equity; but no
attachment, injunction or execution, shall be
issued against such bank or its property before
final judgment in any suit, action or proceeding
in any State, county, municipal or United States
court."
X-6212-d
A BILL
I
To amend section 12 of the Act entitled "An Aet to amend the Judicial
Code, and to further define the jurisdiction of the circuit courts
of appeals and of the Supreme Court, and for other purposes, 11 approved February 13, 1925, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, that section 12 of
the Act entitled "An Act to amend the Judicial Code, and to further
define the jurisdiction of the circuit courts of appeals and of the
Supreme Court, and for other purposes, 11 approved February 13, 1925,
Section 42 of Title 28 of United States Code, be amended and ree~acted
to read as follows:
11 Sec. 12.
That no district court shall have jurisdiction of any action or suit by or against any corporation upon
the ground that it 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 Federal Land
Bank, Joint Stock Land Barik, Federal reserve barik or any corporation incorporated by or under an Act of Congress wherein
the Government of the United States is the owner of more than
one-half of its capital stock. 11
•
40
X-621~-e
December 19, 1928.
ili.Ji,iORANDUE FOR THE FII..:.:S:
Subject:
I.~r.
Ueed t s vieYTS on S. 466.8.
Lr. reed, Counsel to the Federal Reserve :Sank
of :Boston, just ce.lled me on the telephone and advised me
that he is o·?-yosed to the enactment of S. 4662 on the ground
that it will result in unnecessar¥ and unjustifiable inconvenience and hardship on the Federal reserve banks.
(S)
m:-sad
Walter \:yatt.
l-6212-f
FEDERAL
R.!~S:E!RVE
B.A.L'TK
OF NEW YORK
December 12, 1928.
Walter Wyatt, Esq., General Counsel,
Federal Reserve Board,
, Washington, D. C.
Dear Walter:
I enclose a copy of the digest I prepared referring
to S. 4662, copy of which you sent me with your letter of December 8.
You will recall that I showed this digest to you when
we were discussing the bill in my office
yester~.
Yours faithfully,
(S)
Walter S. Logan,
General Counsel.
Encl.
X-5212~f-l
fGDERAL P.ES::RVE BANK
OF NE'!l; YORK
~
OFFICE CORRESPONDENCE
DATJ: December 11, 1928.
TO: ________________________
SUBJECT:FE~RAL
LEGISLATION - PE1TDING
(Digest lTo .. ·1 - 70th Cong., 2nd session)
The following bill which is of interest to Fedel'al Reserve Ba;rlks
has
p~en ~introduced:
Senate 465a, introduced by Mr. Brookhart, December 5, to amend Section 4 of the
Federal Reserve Act by adding the following provision at the end of tha fourth
subdivision of the fourth paragraph thereof:
For the purposes of venue of civil suits
against Federal reserve banks, each Fedel'al reserve
bank shall be deemed to be an inhabitant of each
judicial district within the geographical limits of
the Federal reserve district in which such oank is
located. The board of directors of each such bank
shall appoint, in each such judicial district, an
agent upon whom process may be served. 11
11
At the present time the United States Dtstrict Courts have no jurisdiction over suits by or against Federal Reserve Banks except in cases in which
the construction of a Federal statute or of the United States Constitution is
involved. Jurisdiction of United States courts over suits against Federal
Reserve Banks cannot be maintained on the ground of Federal incorporation or on
the ground of diversity of citizenship. Presumably, the purpose of the bill
is to permit suits to be brought against Federal Reserve Banks in the Federal
Courts on the ground of diversity of citizenship. The sco~e of the bill,
however~. is not clear.
For example, under the terms of the bill this bank
would ;l:>e .a citizen of New York, 1 New Jersey, and Connecticut and it is not clear
wh~ther a Federal 'court. of New ~ork would have jurisdiction over a suit broueht
against this bank by a citizen o{ New Jersey. Moreover, the bill relates to
suits 11 against 11 Federal Reserve !f.nks and does not appear to give the Federal
Reserve. Banks any additional righ\s with respect to suits brought by them.
'\
The following bills hav~ also been introduced.
S. 4602, introduced by Mr.• McNary, December 5.
H. R. 14940, introduced by Mt~· C:annon, December 6.
Both are entitled "A bill to establhh a Federal Farm Boarcl. to aid
in the ord.erly.marketing and in the control and disposition of the ~1J.I'Plus of
agricultural commodities in ~nterstate and foreign ·commerce • 11
•
x... s.212-g
WILLIAMS A..'ID SINnER
Attorneys at Law
601 Commercial Trust Building
Philadelphia.
December 21, 1928
Walter Wyatt, Esq., General Counsel,
Federal Reserve BQard,
Washington, D. C.
Dear Mr. Wyatt:
We are writing concerning Senate Bill No. 4662 entitled "A Bill to
amend tbe Federal Reserve Act as amended, with respect to venue of civil suits
against Federal reserve banks".
It is our view that any legislation intended to determine definitely
the jurisdictiorswithin which suits may be brought against Federal reserve banks
in the Federal courts should be limited to such provisions as would make Federal
, reserve banks subject to suit only in those Federal judicial districts within
which are 1ocated their principal offices or branches.
The Bill if adopted in
its present form would go much further and make each Federal reserve bank sub.. ,
ject to suit in each judici~· district within the geographical limits of its
reserve district regardless of the fact that such bank: might not be conducting
its business or operations in such judicial district and that also neither its
I
principal offices or branch
m~ght
be located therein.
It also fails to give
recognition to what should be considered to be a principle of law, namely, that
a corporation not domiciled in any state ·cari only be sued in a jurisdiction
. within such state in which it
v·ol'u~tarily
accepts service or in which it is
· actually doing business and service of proc.ess is made on its agent or officer.
X-6212--g
We do not believe that the disregard of such a fundamental
\
be warranted
in
vi~w
p~in:ciple
44
would
of the :f'ac.t that little substantial advantage would
result to those persons bringing suits against Federal reserve banks inasmuch as the Eill should probably be construed not to
-~pply
to suits brought
in State courts, where the great majority of suits against Federal reserve
More constructive results could possibly be accomplished if the
:~;'~serve
banks were made subject to suit . only in the judicial district in
which their principal offices or branches are located, and were permitted
at their discretion in the proper jurisdictional instances to rerJOve suits
brought in State courts to the Federal courts on the sole ground of their
Federal incorporation.
This is in accord with one of the suggestions contained
in your memorandum to the Federal Reserve Board under date of March 9, 1926.
OUr view must necessarily be based on theory, inasmuch, as in many
other inatances; the absence of li tigat.ion in this district has not given us
. the benefit of actual experience in such matters.
We should, of course, be
inf],uenced by the views of counsel for the other banks Wh()se districts cover
. much .wider terri tory than the .~f.ird disti·ict and whose experiences in actual
I·
. l i tiga.tion hs.ve brought ·home tf them more emp}latically the problems involYed.
i
.
· Apart, hor1ever, fro; bei~ opposed to the principle upon which the
\',.
;Bill is .ba.sed, we believe that its adoption '!fOUld not only result in great
confusion without any substantial advantage to. any one class of li tiga.nts,
-~.but
would require judicial
construc~i()n
The Act woulQ, seem to
·at the outset.
dis;re~ard
the ·fact that all Federal judicial
: .districts are not Wholly i.ncluded within the
~ographical
limits of a:ny
particu+,ar Federal reserve district - For instance, Pennsylvania is divided
;,to three
Feder~l
judicial districta, the. eastern, middle and western districts.
X-6212-g
-3~enty-five
counties comprise the western district, of which six are included
within the Philadelphia district and nineteen in the Cleveland district.
The
offices of the Clerks of the Courts in this district are located in Pittsburg
and Erie, neither of which cities lies within the Philadelphia district.
A
question ·might possibly arise as to whether or not a Federal reserve bank
would be considered an inhabitant of a judicial district, part of which only
lies within the reserve district, or whether the entire judicial district
~st
be within the geographical limits of the reserve district.
Furthermore,
if the western district could be said to be in the Philadelphia district for
the purpose of litigation, then the Philadelphia Bank might possibly have to
defend a suit at Pittsburgh or Erie, both of which would, of course, be out of
it~
dietrict.
A similar situation might arise in New Jersey, which constitutes
only one Federal judicial district but part of which lies within the New York
district and part .in. the Philadelphia district.
The direction in the Act that the Board of Directors of each bank
shall appoint in each judicial district an agent upon whom process may be served
would in our opinion
b~
inadequate and of little value, in the absence of further
provisions specifying the manner in which notice of such appointments shall be
given to the public and SOfe limitation on the places of residence of the agent
appointed for accepting
'
s~rice
of process in any particular district.
. know, the State Acts with \aspect to service of process
As you
on foreign corporations
are always quite explicit in these respects and require the appointment of .
eillther the Secretary of State or some other public official as agent for the
acceptance of service of process.
In this district we have always consi.dered that the Philadelphia Bank
is conducting business only within that jurisdiction either State or Federal,
46
X-6212-g
in which its principal t!lf!.iee is located and where all of its operations are
carried on, but, of course, there has been no legislation for the purpose of
determining this point.
We appreciate the difficulties with which you are faced in •opposing
such ltgislation as the proposed :Sill, but· feel decidedly that i t should not
be adopted in its present
for~.
If we can be of any help to you in this
respect we shall be glad to do so upon your request.
Very truly yours,
(S)
EMS.
Williams and Sinkler.
X-6212-h
SQUIRE, SANDERS & DEMPSEY
COUNSELLORS AT LAW
THE UNION TRUST BUILDING
CLEVELAND
December 22, 1928.
Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Sir:
We acknowledge receipt of your letter of December
8, enclosing copy of Senate Bill No. 4662, introduced by Mr.
Brookhart of Iowa.
We believe that this is objectionable legislation,
as it will place each Federal Reserve Bank in the position
of being subject to the annoyance of litigation throughout
its district, and will, we believe, encourage the filing of
suits on small claims.
Federal Reserve
Barik~
It will furthermore restrict the
in exercising the right of removing
cases to the Fe<i1z:al~courts, except in cases involving a
construction of the Federal Constitution or Federal laws.
Such legislation l'ill also subject the Federal Reserve Banks
to attachment or injunction 'before judga!.ent or final hearing,
Vie feel that, ·.if passed, the proposed bill should
at least contain an amendment exempting Federal Reserve Bariks
from attachment or from injunction, except after judgment or
final hearing.
Yours very truly,
s:tt:D
(S)
Squire, Sanders & Dempsey.
FEDERAL RESERVE :BANK
OF RICHMOND
DecembGr 13, 1928.
Mr. Wal tor Wyatt, Goneral Counsel,
Federal Reserve :Soard,
Washington, D. C.
Dear Mr. Wyatt:
Mr. Wallace has turned over to me his reply to
your letter of December 8 aSking for the expression of views upon
the bill of Senator Brookhart to amend the Federal Reserve Act
with respect to venue of civil suits against Federal reserve
banks, and I am sending his reply to you herewith.
My own opinion is that Senator Brookhart's bill
is too broad and would be likely to subject us to expensive and
vexatious suits in the different parts of the district for trifling ~s in cases which might involve a principle of operation.
I d<> not thi:nk this should be the case, but am inclined to thi:nk
that it would be better if Federal rese~ve banks were regarded
as being present only in those parts of the district at which
the main office or branches are located.
Very truly yours,
(S)
GEO. J. SEAY,
Governor.
GJS-CCP
.1 Encl.
X-6212-.:;i-1
FEDERAL RESERVE :BANK OF RICHMOND
DATE
TO
Mr. George J. Seay, Governor.
FROM
I. G. "iiallace, Counsel.
December 12,. 1928
SUBJECT
Senate Bill S~4662 with
respect to Venue of Civil
Suits against Federal Reserve Banks.
My dear Mr. Seay:
I hand you herewith a letter from Mr. Walter Wyatt, General
Coul'lsel of the ·Federal Reserve :Soard, to myself, enclosing a copy of
the above mentioned bill,· which was introduced in Congress by Senator
:Brookhart, of Iowa.
You will see that the object of this bill is to amend Section 4 of the Federal Reserve Act by providing that the several Federal
Reserve banks shall be deemed to be inhabitants of each judicial district
in their respective Federal Reserve districts, and that the :Board of
Directors of each bank shall appoint a person in each such judicial
district upon Whom process may be served.
Under the present law it is by no means clear whether or not
a Federal Reserve b~nk should be· regarded as present in every part of its
Federal Reserve district, and therefore. subject to civil suits :Ln Elach
state of its district, or whether the bank should be regarded as present
only' in the state in which it has a main office or branch.. The qu~stion
has arisen several times in our experience. Upon two such occasio:q.s the
lower courts decided that we were present and doing business in North
Carolina before we had a branch in that state, but in both of the suits
which I mentioned it was never necessary to carry the case to an appellate court as the suit was decided in otir favor upon other grounds. In
a third case in North Carolina the same question was raised, but t!tat
case is stilf pending.
·
From the standpoint of a lawyer, therefore, I can sat o~y that
at present 1the law is uncertain and that an anendment which would remove
that uncer~ainty would be desirable. I cannot, however, see why the proposed bill shoula. require an ~nt for· the service of process in e&ch
judicial qistrict. I think that this means Federal judicial districts.
In this Fe'deral Reser.ve _district the judicial districts are as follows:
One. in Maryland, two in Virginia, two in West Virginia, three in Nqrth
Carolina, alld two in South Caro1i~. The District of Columbia is :n.ot,
strictly speaking, a Federal: judici~. district, but I imagine that within
the contemplation of . this. Act it would be classified as a judicial district.
I can see no rea~on for the requirement of a separate agEint in
each judicialdistr:ict because the Federal courts have no jurisdiction of
suits by and. against Federal Ret:;erve banks unless some question of Federal
],.aw is involved in that suit other than the mere fac_t that the baJ.'lll; is
·-
',
• ..
50
-2--
incorporated under Fed~ra:l law. It therefor$ ,seems to me that if Congress
desires to declare that th.e banks shall be regarded as inhabitants of their
entire Federal Reserve district, the most reasonable requirements would be
the appointment of an agent in each state of the district upon whom process
could be served in any suit brought in the courts of that state.
Whether. or not it would be advisable to declare the Feder41.l Re- ·
serve banks iiable to service of process in all parts of their district or
restrict service of proc.ess to those states in which the banks have esta.blish~Q, offices is of course a matter of public policy.
There are certain
advantages and disadvantages, however, in either case.
If we· are deemed an 'inhabitant in e~ch state in our Federal
Reserve district, we may be vexed with suit~;~ in rem~te and inaccessible
places; but·, upon :the other hand, we would be entitled to the benefit of
statutes of limitation and similar statutes which apply only to res~dent
defendants. Upon the other ~nd,. if. r~e are. resident .and doing business
only in tho.se states in '!ihich we. have established offices, we will be
relieved in many cases of suits in inaccessible points in o'Ql' Federal
Reserve district; but we 'f!ill be s'Q.bject to attachment as non-resident· in
those states in which we are not doi~ business, and when money or p~perty
is atta.¢led as that of a non..:.resident. su9h non-reside·nts are not usually
enti~led to statutes of limitation; and, also, if we cannot be sued in
states in which we have. n9. offices, persons who have, or think they have,
ema:U. claims against u~ wiil be co~elle~ to abandon them .rather than to
~i tigat-e them. .This might •t ·.first . appear of some benef~ t to us~ but the
:feeli:Dg of irritation which would follow from such a condition might well
putweigh the ·s,.n.no,&.nce . which we .would s:u£fer if we were sometimes sued in
:remote or ina,cees·sible points...
.
Very truly yours,
(S) .M. G. Wallace,
Counsel.
MGW:L
X-6212-j.
FEDllRAL RESERVE BA.l.1K
OF ATLANTA
December 18, 1928.
Mr. Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
We have your letter of December 8, enclosing for
our information a copy of Senate Bill 4662, introduced by
Senator Brookhart ttTQ amend the Federal Reserve .Act, as
amended, With respect to venue of civil suits against
Federal :reserve banks."
We do not believe that this legislation should
be enacted. It might be advisable to so am3nd the Act
as. to provide that, for the purposes .of venu~ of civil
suits against Federal reserve bariks, each Federal reserve·
bank should be deemed to be an inhabitant of the judicial
distr~ct witl:dn the: geographical limits of which its main
of:t'ie:e is lGC'ate<d.. and we: would see no particular objection. to a "frill providing that it should also be deemed to
be an inhabitant of each.judicial district within the
geographical limits of which might be located a branch.
Legislation to this effeqt might place Federal reserve
banks iri: the cate&el7• for ~lldiet.io:Dal. purposes, with
national bankEr;. There would seem to be. no reason, however,.
for ~ing a Federal reserve bank suable anywhere within
the geographical litjits of its Federal Reserve District.
"'
Such legi~.llation would be discriminatory, unfair
and uncalled for as \we see it.
Very truly yours,
RAliDOLPH & P.ARKER,
By
(S)
Robt. s. Parker.
RSP/w.
51
X-62lp-k
FEDERAL RESERVE EA:NK Oi!' CHIC ...GO
CHICAGO
Dacenher 12, 1928.
MR. WALTER wYATT, General Counsel,
Federal Reserve Board,
Washington, D. c.
Dear Mr. Wyatt;
I received your letter of 8th inst. enclosing copy of Senate
File 4662 which is a !ill to amend the Federal Reserve Act with respect to
venue of civil suits against Federal Reserve Banks. In your letter you ask
me to give you my views on the Bill at an Garly date.
I am of the view that the enactment of this Bill into law
would seriously embarrass the operations of Federal Reserve Banks. It is a
well known fact that prejudice exists in the minds of a great many poorly
informed people against Federal Reserve Banks and their operations; and if
these people who have pretended grievances against the Banks were enabled
to institute suit in any court within the Reserve District, great numbers of
such suits are bound to be brought, many witho1,1t foundation, which will have
to be unjustly settled or defended against at ruinous expense.
I am decidedly of the view that the enactment of $UCh legislation would be a grave mistake and would in the long run very seriously
affect the operation of Federal Reserve. Banks; would especially embarra~s
them in the performance of their clearing house functions and would pla~e
upon them a useless, needless and expensive burden.
·
In th~ connect~on, if there is to be legislation affect:i,ng
the jurisdiction of q~urts over Federal Reserve :Banks, I should like to see
the Judiciary Act amcfhded so as .to restore to Federal Courts jurisdiction of
suits by and against JFed,.eral Reserve Banks on account of their Federal incorporation; and if ~his latter cannot be done, at least I would like to see
legislation to the effect that the several Federal Reserve Banks for junisdictional purposes
like national banks, be considered residents of the
state in which their )rincipal office is located.
'
And while we are on this subject, I suggest further that
Federal Reserve Banks, like national banks ought to be free from attachment
prior to final judgment.
mar·
Vii th regards, I am
Yours very truly,
(S)
CHAS. L. POWELL,
c~e.~.
X-6212-1
FEDERAL RESERVE B.Ali.K
of
ST. LOUIS
December
11~
1928.
Mr. \:alter ·,:ya tt,
General Counsel,
Federal Reserve Board,
Washington, D. C.
My dear liir. Wyattt
I have your letter of 12/B/28 and copy of Senate
Bill S-4662 accompanying it.
As you would naturally infer, as Counsel for one
of the Federal Reserve Banks I hope the Bill referred to
will not be favorablyreported out of the Committee on
Banking; for, if reported out, it would be popular with
the country lawyer and the country banker whose influence
as vote getters might have considerable influence on the
votes of the Legislators When the Bill comes up ·for passage.
The Bill, if passed, would add greatly to the expense of the Federal Reserve Banks in that we could not
afford (when we have a Jury. case) to go into the District
of the Plaintiff and defend a suit without the employment
of local Counsel; and, even in equity cases or jury cases
tried before the Court, it would be nearly imperative to
have some local Attorney to look after the filing of pleadings and to attend to informal motions and the setting of
the case.
If the bill becor~s a law, we would have to defend
in the atmosphere qf Court and Jury both, in most cases,
favorable to pla~ntiff, Qur Circuit Court Judges being elected by the voters of the particular district.
• I further fear that the enactment of the bill would
encourage the bringing of a gre~t many suits of doubtful merit
for the purpose of forcing a ~vment in compromise rather than
to be put to the 'xpense of defending a suit at a. distant point
having in mind the gamble against us in having to defend before
a Jury friendly to the llcal plaintiff.
-2-
•
X-6212-1
Having in mind that if this bill qecomes a law,
there will be one introduced (if it has not already been
introduced) affecting the Federal Land Banks in the sarr.e
way, I, therefore, called in the Counsel for the Federal
Land Bank, and, without disclosing to him that you had
sent the bill to me, asked for his opinion as to how it
would affect the legal department in the Land Bank~- who
have even more litigation that would be affected by a
si~ilar bill than do the Federal Reserve Banks.
He was
very much interested in the Bill, and, suggested that
he was personally acquainted with Senators Robinson and
Carraway, and, that i f either.of them were on the Banking
Committee, he would be very glad to do what he could towards
seeing that the Bill was not reported out.
I am fairly close to Senator Hawes of this District,
and, if he is on the Banking Committee, I would not hesitate
to go to him with a view of attempting to have· the bill not
reported out of the Conmi ttee. However, neither Counsel for
the Land Bank nor I will take any steps towards seeing these
gentlemen until I have heard from you.
·
Our troubles in Missouri are already sufficient
under a State statute which permits substituted service by
filing the suit in the District of the Plaintiff, suing out
summons, and, directing the local sheriff to forward the
summons to the sheriff of the District. where the defendant
resides, and, service by the latter sheriff, in cases where
the cause of action . arises in the District of the Plaintiff,
Fortunately not ~ cases come withi~ the requirements of
this statute.
Thanking you for furnishing me the Bill, I am
Very truly yours,
(S)
Jas. G. McConkey,
Counsel.
f- ,....
'-)D
X-6212-m
OF l:iDillEAPOL IS
December 10, 1928.
!vh· r ~·:alter Viyatt
Counsel Federal Reserve Eoard
Washington D. C.
Dear Sir: .
I have your letter of the 8th with copy of S.4662, introduced
by Senator Brookhart.
It is not clear. whether the words
11 judici~l
district" in the
bill refer to Federal judicial districts,.of which there are 7 within the limits of Ninth
•
Dis~ct,
or to State judicial districts of
which thoro are 75 •. InasmuCh as the district courts of the United
States since the Act of Feb. 13t .1925, have not jurisdiction of civil
suits by or age.inst Federal reserve banks except v<hen the United
States or an agent .tl::ereof is plainti.ff or when th6 matter in controversy arises under the Constitution or laws or treaties of the United
States, I think the words
11 judicial
districts" must be conetrued to
mean State judicial districts •.
From my
exper~ence
as counsel for this ba11lc the past 14
.
years my OJ.Jinion is that t).Othing coul.d be more vexatious to the Federal reserve banks than
thi~.
proposed amendment to the Federal Reserve
Act.. This bank would. have to' keep agents in 75 judicial districts,
and suit might be started against it in any of the districts, and
would have to be tried where started .regardless of convenience or
expense with respect to witnesses or the records of th8 bank as
-2evidence.
A suit tnvolving
of Michigan could be
tr~nsactions
0n the Northern Peninsula
started in the remotest jl".d5.cial district of
Montana, and vice versa.
It would have to be for quite a large
sum if the expense of defending should noot excoed the sum sued for.
Up to the present time I and
my
assistant at the Helena :Branch have
handled practically all litigation, but if this bill were passed we
should not only have to travel over a wide territory but also have
to employ local attorneys.
I can
th~rik·
of nothing more conducive to vexatious litigation
or tending more to diminish the Government's share in the net narnings
of the Federal reserve
b~~s
than the proposed
~nendment.
Yours very truly
( S)
A. Ueland,
Counsel.
X-6212-n
FEDERAL RESERVE
:B~lK
of
KANSAS CITY
.Tanuary 5, 1929.
Hon. Walter Wyatt, General Counsel,
Federal Reserve :Board,
Washington, D.C.
Dear Mr. Wyatt:
This will confirm my recent telegram to you
concenning Senate :Bill S-4662, which has been introduced
by Senator :Brookhart, and which has as its purpose the
amendment of the Federal Re·serve Act "with respect to
venue of civil suits against ~ederal reserve banksn.
As stated to you in my telegram, I see no good purpose
to be served by this bill, but on the contrary I consider that it would be harmful to the Reserve banks .•
As I read the bill, it would not change ihe
present status of the Federal reserve banks with respect
to their right to sue or be sued in the district courts
of tne United States. The right to sue or be sued in
such courts is, at all events, a question of jurisdiction.
The proposed amendment does not appear to affect jurisdiction, but by its express terms relates solely to the
venue of actions. In all cases that might now be brought
in the United States district courts against the Reserve
banks, the amendment would very effectively fix the venue
of such actions, but to my mind, it could not serve the
purpose of creating a jurisdiction where the same does
not already exist.
It is also significant that the place of habi tation is fixed as being in the judicial districts rather
than in the states which are embraced in the territory
of the respective Reserve banks... I believe it is not
necessary to consider here whether an inhabitant of a
judicial district is also an inhabitant of the state in
which such district is located, but unless such is the
case, no diversity of citizenship could ever arise under
the terms of the amendment which .could give jurisdiction
to the United States district courtJ?, for as you well know,
the requirement of jurisdiction on the ground of diversity
of citizenship is that the parties be .citizens of different
states•
-2I &n further influenced in these views by reason
of the·follovring:
FIRST. The amendment is to the l'ederal Reserve
Act rather than to the Judicial Code. If it uere the intention to make the Federal reserve banks inhabitants of
the seYeral states in their respective districts for
jurisdictional purposes, the natural way to have accomplished that result would have been an amendment to the
Judicial Code, by a provision similar to that which now
relates to national banks.
SECOlm. The. word 11 inhabi tant 11 is used rather
than ci tizen11 • The provisions of the Judicial Code
which relate to matters affecting jurisdiction use the
word 11 citizen11 , and those which relate to the question
of venue use the word 11 inhabi tant 11 •
11
THIRD. There is no right conferred on the
Reserve banks as inhabitants of the judicial districts
to bring any action in any of s·uch districts, but they
are made inhabitants only for the purpose of actions which
may bebrought against them.
If .I am not correct in my conclusion that the
amendment would not change the status of the Federal reserve banks so far as their. right to sue or pe sued in
the United States district courts is concerned, I still
feel that the amendment is not a proper one. Itwould
permit the Reserve banks to be sued in United States
courts only in those instances where the. party bringing
suit is an inhabitant of some state other than the states
embraced in whole or in part in the Federal reserve district of the bank involved. Actions of that kind would,
of course, be ·rare. and the benefit, therefore, from the
amendmant, would be practically nothing.
I realize, of course, that you have analyzed the
effect of this proposal more closely than I have been able
to do, but unless I have overlqoked something in it, I see
nothing which I feel could be approved by the friends of
the System.
Yours very truly,
(S) B. G.
RGL:CR
Leedy.
X-6212-o
Law Office of
LOCKE, LOCIVJ, STROUD AlTD RANDOLPH,
American Zxchange Building,
Dallas, Texas.
December 17, 1928.
Federal Reserve Board,
Washington; D. C.
Attention: Mr. Walter
~yatt,
General Corinsel.
G-entlemen:
We acknowledge receipt of your letter of December
8, 1928, enclosing copy of Senate Bill 4662, the same being
a bill introduced by Senator Brookhart, providing, in substance, that the federal reserve banks shall be deemed inhabitants of each judicial district within the ~~ographical
limits of the federal reserve district in which such bank is
located.
In some respects this bill ap-:?ears to us satisfactory, that is to say, we have no objection to a federal reserve
bank being deemed an inhabitant of the federal reserve district
in which it is located, nor do we have any objection to a federal reserve bank: designating e.n agent "in each portion of its
district upon which service might' be had, :provided the bill
should go further than it now does and provide that federal
courts be given jurisdiction of all suits involving federal
reserve banks.
It seems to us that the introduction of this bill
gives good opportunity for the federal reserve banks to raise
the last mentioned question.
We notice that the bill has been referred to the
Banking & Currency Committee and we are wondering whether or
not the matter could not be called to the attention of Sene.tor
Glass and perhaps worked out so as to renew the jurisdiction of
federal courts. \Ve do not feel that the law should permit
federal reserve banks to be sued in state courts located anywhere within the federal reserve district for many reasons with
which you are familiar.
Qur Mr. Stroud has several matters in Washington which
are in need of attention and he .is at present planning to make a
~:rip to Wasl:l.ington sometime in Janu.a.ry.
If he can be of any assistance to you in connection with this matter, please advise.
Yours very truly,
Jil:BS ;lm
(S)
Locke,
•
Loc~e,
Stroud
& Randolph •
X-621.2-p
GO
OF SAlT FR.iJ)TCISCO
December 18, 1928.
Walter l'.'yatt, Esq.,
General Counsel,
Federal Reserve :Boardi
Washington, D. C.
This is in reply to your letter of ~cember 8i 1928 in
which you enclose a copy of Senate :Bill Uo. 4662 introduced by
Senator Brook.""lart and relating to venue in civil suits against
Federal reserve banks.
I am frank to say that I am somewhat at a loss to know
what the intent of the :Bill is; that is, whether it is il1tended to
affect jurisdiction in suits brought .against Federal reserve ba11ks
in state courts, or whether it is intended to affect Federal jurisdiction. If the latter is the intention, I cannot see that the
measure will be Gffecti ve for the uurnosc
for which it is intended •
.., ...
:By the provisions of Section 42 of the Judicial Code, Federal courts arc deprivad of jurisdiction in actions or suits by or
against any corporation whore jurisdiction is predicated upon the
ground that the corporation was organized under an act of Congress.
This section undoubtedly deprives tho FederaJ. courts of jurisdiction
in suits by or against Federal reserve banks where such jurisdiction
is predicated upon Federal incorporation and not upon the theory that
the action involves an interpretation of the constitution or laws of
the United States.
FEDERAL LAND EA.'ti!K vs. Ul!l TED STATES
~TK,
NATIOl~AL
13 Fed. (2nd Ed.) 36.
This being the case, Senator :Brookhart • s :Bill would 11ot in my opinion
change the situation or confer jurisdiction upon Federal courts where
it does not now exist.
If, on the other hand, the Bill is intended to subject Federal
reserve banks to the jurisdiction of all state courts within the respective Federal reserve districts, I consider the :Bill an unfair measure and
one which should not be enacted into the law. The purpose of the proposed
legislation is Q.oubt1ess to avoid the effect of such decisions as that
rendered in the case of :BACON vs. FEllERAL RESERVE :BAl'iK:, 289 Fed. 513 •.
-2-
X-6212-:p
The effect of the proposed legislation would be to subject
a Federal reserve bank: to suit in any state court '1\'i thin the geographical limits of the district within which the bank: is located; whether
or not it was judicially held that the bank: was 11 doil1€ business 11 withjn the state under the terms ~f the state statute. In a district the
size of ours, comprising approximately 20% of the area of the continental United States, the proposed legislation, conferring jurisdiction or fixing venue at any judicial district within the area,
would result in great hardship to this bank.
~e have five branches, located at Seattle and Spokane,
Washington; Portland, Oregon; Salt Lake City, Utah; and Los Angeles,
California. The distance from Seattie to our head office is 956
miles; from Salt Lake City to our head office 818 miles; from Spokane
to this office 1149 miles. This district is appro~imately 1600 miles
in length and approximately 1000 miles in width. I have no doubt that
we are subject to suit within the judicial district wher~ these bra:1chcs
are located, but legislation which Would subject us to the inconvunienco
and expense. of responding to a suit brought in Arizona or Nevada in which
we have no branches and with which our business is tr&~sacted entirely
by mail, would certainly be inequitable and unfair.
The proposed legislatt.on would moreover involve the appointinc;
in each judicial district of each state, an agent upon whom process
might be served. In many of the judicial districts embraced within our
area we have no local 8bent and would be forced to aypoint for this purpose an officer of some member bank. In cases such as these, the agent
not being familiar with our transactions or practices, would be at a
serious disadvantage and might very easily so conduct himself as to
jeopardize the best interests of the Federal reserve bank.
Federal reserve banks are already suffering under several
serious legal disabilities with which you are familiar and of which I
strongly feel they should be relieved. I can see no need for the addition of the burden proposed by Senator Brookhart and believe that every
effort should be made, to defeat the Bill.
Very truly yours,
(5)
ACA/SW
A. C. Agnew,
Counsel.
'
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6213
January 7, 1929.
SUBJECT:
Code words for use between Federal
Reserve Banks, in connection with
certain telegraphic transactions
in foreign accounts.
Dear Sir:
Referring to letter X-6193, Dec'ember
10, 1928, the Board is now advised 1 that the
definition of the code word UJDliPSOME 11 on page
4, is incomplete, in that a dollar sign and blank
space should follow the words
11
SPECI.AL INTEREST
ACCOUNT" on the last line.
Kindly make this correction.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF .ALL F • R. BA.,.'l'U{S.
FEDERAL RESERVE BOARD
JC-6215
WASHINGTON
January 16, 1929.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Expenses of.Special Counsel in Raichle Case.
Dear Sir:
There is enclozed herewith statement in the amount
of $10,157.86 submitted by Hon. Hewton D. :Saker, covering
professional services and ex·oenses in connection with the
case of Frank G. Raichle v. Federal Reserve :Sarfr~ of New York,
which has been approved by the Federal Reserve 3oard and the
directors of the Federal Reserve :Sank of New York and paid by
the New York Bank.
Inasmuch as rv:r. :Baker's services in this case were
authorized by the Board as a System matter, it is requested
that each Federal reserve bank remit to the Federal Reserve
:Sank of New York its pro rata share of the expense (based on
capital and surplus as of January 9, 1929), as follows:
:Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
£t. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
By
$753.82
3,072.14
978.18
1,032.03
467.48
400.21
1,390.42
411.05
255.78
336.90
329.55
730.30
$10,157.86
direction of the Federal Reserve :Soard.
Very truly yours,
Walter 1. Eddy,
Secretary.
TO GOVERUORS OF ALL F. R. BANKS EXCEPT NEW YORK. ,
Enclosure.
c 0 p y
X-6215-a
BA.TG1R, HOS~TLER & SIDLO
Counsellors at Law
Union Trust Building
Cleveland
Federal Reserve Bank of New York
New York City
December 17, 1928
To Professional Services in re Frarik G. Raichle v.
Federal Reserve Barik of New York
- - ~ - - - -
1928
$io,ooo.oo
Disbursements
.Aug. 14
Long distance call to I;;r. Wyatt
16
3xpenses (Mr. Baker) New York trip
23
Long distance call to Buffalo
Sept. 24
25
24
Erpenses (Mr. Baker) trip to New York
$ 2.05
75.CO
1.40
75.00
Telegram from Walter S. Logan, relayed
to ~;:r. Baker at Blossburg, Pen."'lsyl vania
1.01
Long Distance call to New York
3.40
Total - - - -
- -157.86
$10,157.86
BUJ)GET
&
EXPENDITURES
••.•.•••••••••••• 1929.
CmffiUIED STATEM:b"'NT.
X-6217
--------------------~----y------------y------------T------------y------------F------------;-----------7
l Budget
Objects of Elqlenditure:
I
Uonthly
ICommitments J Budget
lThis Month
l
To Date
l Commitments l
I
To Date
l
Budget
Yearly
1 Balance
I
1
Available.:
-------------------------}------------}------------1------------t------------t------------t-----------t
I
I
I
I
1
Personal Services:
I
I
I
I
I
I
I
I
I
I
f
I
l
l
l
l
1
I
I
I
I
I
I
I
I
I
J
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
:
:
566.42:
3,870.83
1,950.00
1,143.75
4,437.50
100.00
1,333.33
3.00
68.33
716.67 1
158.33 I
l
!
53,955.83
647,47o.oo
~-----~------+-----~------~-----~-----~
I
I
I
I
I
I
Supplies & Materials
Subsistence Expenses
Transportation :SXpenses
Communication SeTvice
Prtg.,Engr.,Bind.,Etc.
U.:eat & Lirht
Rents - Building
Rents - Equipment
Repairs - Equipment
Eouiptnent
Sp€cia1 & l:Iiscellaneous
l
I
l
:
I
l
I
l
l
II
I
I
14 1 342 ol 7
I
I
---*=
•
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
!
I
I
I
I
I
----------t----------;---------1-···· ··- ---·I
1
I
'
:.: :.-= :..:-=:-....:::::-....:::::.:___
:
:
I
11
-t-
Complete Total.
l
l
6,725.00
46,450.00
23,400.00
13,725.oo
53,250.00
1,200.00
16,ooo.oo
36.00
82o.oo
8,6oo.oo 1
1,9oo.oo 1
t··----·· ----1--- -·- --···-+----------! ---- --- --t-- ------1-····
I
Total·.•..• .- ....... ,..•
l
~
68,298.00
I
I
I
r___
I
,
::: ::::-:::i
I
I
.:...:..~ ~
I
I
I
1 7 2, 10 6 • 00
I
1
I
I
--·--·--..,.--·- · - - - --r
819,576.00
I
I
I
I
I
I
I
I
1
1
±- --..=::_-:::._ _._ - - - - ±=--- -- =:..-t
BUDGET & EXPElilliTU:RI!;S
................ . 1929 .
BOARD J:ffi.ffiK!iS.
X-6217
I
I
I
-------------------------~------------r------------r------------r~-----------r------------r-----------r
Objects of Expenditure:
I.
lI
Budget
Honthly
l.commi tments
· l This lTonth
I
l
lI
Budget
To Date
~Commitments ~
To Date
I
I
.
~
Budget
Yearly
J
I
lI
Balance l
Available. l
I
-------------------------~------------r------------r------------r------------r------------~-----------T
I
I
I
I
I
I
I
Personal Ser~ices:
-~--------~
I~on-:oersonal
Services:
I
I
'
8,566.66
I
I
I
I
I
I
I
I
I
& r'f.aterials
Subsistence Expenses
Transportation Expenses
Communication Service
I
I
Prtg., :Eilf'r. ,Bind. ,Etc. I
I
Repairs - Equipment
I
I
Equipment
I
Special & Miscellaneous II
- -
~iLpplies
Total ••••.•.•.•
Complete Total.
I
I
t--.
I
I
I
-
-
-
-
'
'
t- -
-
-- -- -
-
I
I
• - -·· ··· -
41.67
1oo.oo
416.66
66.66
~~-~~
8.~3
83.33
16.67
I
I
:
:
I
I
I
- · -- T
I
I
I
I
I
1
-
-- -- -· -
102,800.00
I
I
-J -- I
I
I
I
I
:
i
l
:
l
I
l
:
:
·
-
-
-
-
. 500.00
1,2oo.oo
5,000.00
800.00
400.CO
100.00
1,000.00
200.00
I
I
I
I
-r- I
I
I
I
I
I
I
I
I
9,333.33 :
:
lI
112,000.00 :
r
-
-
I
!
""r
I
l
I
I
I
!
l
I
9 ,·zoo .O"o_l______
-1---------~--- -----+--------ir----·----->1
I
I
I
I
r
- -
:
:
:
:
I
I
I
I
l
I
l
,
I
I
I
I
I
I
I
7'""6'"'6::-.-:6:-cG=-T--- - - - - - - - ; - - - - - - - - ; - - - - - ·
I
I
·•
. __ ... -~ _- - - - -..-.:::1"=:=-:::--:-::==t=
I
I
I
I
I
r
·TI
I
--+
I
lI
I
t
BUDG:!JT & EXPEiffiiTURES
••••••••••••••••• 1929.
SECRETARY'S
X-6217
OFF~CE
( COl1BINIID)
---------------------~---,------------r------------7------------r------------(-----~------,---------~
Budget
1Commitments 1 Budget
1 Commitments 1
Budget
1
:3alance 1
9]>j~_c_t_s of Expenditures:
.l!fonthly
l This Month
To Date
To Date
Yearly ·: Available~
-------------------------~------------~------------~------------~------------~------------~---------~1
I
I
I
I
I
I
·
Personal Services:
1
!
I
I
I
I
I
11,100.83
I
I
I
I
I
!
!
!
I
I
I
I
I
I
I
I
I
I
I
I
~
t
I
I
+- --- ··- - - ......I - - - -- - -- ...... - - - - - ......I - - - - - I
Supplies & "~aterials
Sur>si stence Expenses
Transportation· Expenses
Communication Service
P:rtr·. ,:Bnpr. ,Bindg. ,Etc.
Re~irs - Equipment
Equipment
Special & lUscellaneous
I
I
I
I
I
I
I
'
116.66
16.67
25.00
83.33
25.00
16.67
125.00
8.33
-t-.
Total ... •........
I
I
I
I
i-
t
Complete Total ••
I
I
I
I
•
416.66
- - - - - _,- - - --- +-
I
I
I
I
I
I
I
I
l
II
I
lI
I
I
--- ---+---- ----+J
I
I
I
I
I
I
I
I
I
I
t
1,400.00
200.00
300.00
1,000.00
300.00
2oo.oo
1oo.oo
1
1,500.00
I
-1----------
5,000.00
I
I
I
I
I
--1-..--------t----·· - - - 1 - - - - - T - - - - - - t - 1
11,517.50
I
I
I
I
I
I
I
I
I
-------~-------
I
133,210.00
I
I
I
I
I
lI
l
l
J
lI
lI
I
L
:r-·- --- - ---
I
-.
l
0(..
I
138,210.00
I
--+··
I
J
t
- - ---+I
:t
I
..l._
II
I
I
lI
-:e=
·
I
-
t.
-:::::¥-..:..
BUDGE.T & EXPEliDIIllU'-\:88
- •..•• 1929.
IL'":!SP:.ARCH &
··-6217
STti.TI~TICS
-------------------------7------------7-~----------~----------~-v------------T------------y-----------,
Objects of Expenditure:
I
I
Personal fervices:
I
Eudget
1-lonthly
:Commitments
!This -:~onth
I
I
I
I
Budf"et. ;
To Date ;
I Commitments I
I To Date I
3udfet
Yeurly
I
I
1, 4oo. oo
1
Balance I
Available.l
----·---------------------t------------t------------t-----------~-t-------------1------------t-----------t
I
9, 78:3.33
I
I
I
I
I
l
I
'
~
:
I
:
I
In
I
I
1
I
.1
t
l
I
I
I
I
1
l
1
I
I
I
I
I
I
I
I
1------------1------------T----------~-r------------1------------ -----------~
fupplies & :ii!Taterials
Subsistence Expenses
Transportation Expenses
Communication Service
Prtg. ,Enp-r. ,Bind.f·. ,Etc.
Repairs - Equipment
Equipment
Special & Uiscellanoous
I
I
I
I
I
l
I
I
I
I
I
l '.J"0 • 00
58. 33
l25.oo
25o.oo
62.50
12.50
25o. oo
25 o 00
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
1
I
I
I
I
l
l
l
1
1
1
1
I
I
I
I
I
I
I
I
I
l
I
I
I
l
I
1
I
I
I
I
I
I
I
I
I
Complete Total..
as3.33
I
l
1
I
I
I
,------+
I
I
1
I
I
10,666.66
1
I
I
===~=:=====::..=:=-'-±::.==::::.=:::-::::.-
1o,6oo.oo
t
.,
I
I
I
.l
I
I
t
I
I
I
I
-==-.--
---- ---•---1---·
I
I
I
I
I
I
I
I
1
l
1
I
I
I
I
I
I
I
I
I
I
-+-- -----+
·-···· - -l----·-----1------=-- II
I
I
Total . ......... .
l ' 200 • 00
700 • 00
1,5oo.oo
3,ooo.oo
750.00
150.00
5, ooo • oo
300 o QQ
I
I
I
I
I
I
I
I
-tI
l
I
128,000.00
I
1
I
I
--··-1
l
I
l
I
I
I
------4
BUDGET
& EXP:E.:NDITURES
. . . . . < ...... • · . . . . . . . . . . . . . . . .
.-1929...,.
X-6217
:BANK OPERATIONS.
-------------------------p------------y~-----------y------------,------------~---------~--,-----~-----~
Objects of I::xpendi ture:
I
l
"'3'tdf"et
Honthly
I Comrni tments I
I This Month l
:Bud.r.-et
To Date
I Comrni tments l
I To Date l
:Budget
Yearly
I
I
Balance
Available.
I
I
- ·-----------------------t------------+------------+------------+------------+--~---------1-----------i
I
I
Personal Services:
I·
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
+-I --- - """"-1---+
._
I
I
5,933.33
I
SerVices:
..Non-personal
. -..,...-.-- ----•·
I
I
I
I
~unplies & V.J.aterials
1
Subsistence Expenses
i
Transportation Expenses 1
Communication Service
1
P:r1:;g ..,Enr· r. , Bindg •• Etc. II
t
~epairs - Equipment
I
Equipmel).t
1
Special & Hiscellaneous 1
I
133.33 1
16.66 1
25 .oo 1
283.33 1
45 83 II
12.50 II
41.66 1
16.66 1
I
I
I
I
I
I
I
I
l
•
t
I
I
I
I
1
I
1
l
·
I
I
I
I
- - . . . . : - -t
I
I
I
I
I
1, 6oo.oo ·
2oo.oo
3oo .oo
3,4oo .oo
550 • 00
150.00
5oo.oo
2ob.oo
I
+·--·----+--------~-------+--·
l
575.00 ~
i
I
I
l
l
I
I
t------+I
I
I
I
l
I n,2oo.oo l
I
I
I
1--- - --1---+
---I
0
+----Total._,., ........ ,,,_...
I
I
I
1
I
6,900.00
--·--------f-·---------1
I
I
Complete Total...__... l
6.508.33 I
1
1
1 78,100.00
t
I
!
I
I
I
--- ..... --:: .__:- ::::::---::_ .:.:===;=::~~=-=-- ---·-· ---'::..__...---- -----'---- ~ --- _--'-~--------·--·-:::..-1-- - - - - - - ' - --------_--_._. ...t_
!
--------~-I
............... . 1929.
X-6217
GEITERAL.
-------------------------1------------,----~-------,------------,------------,------------,-----------,
I ~udget
:commitments l Budfet
:commitments l
Eudg·ct
l Balance 1
Objects of Expenditure: l Honthly
!This llonth l To Date
1 To Date
1 Yearly
1 Available. I
-------------------------L------------~------------~------------~------------+------------~-----------~
I
I
I
I
I
I
I
Personal Services:
!
I
1
I
I
833.33 :
.
I
I
1
I
I
I
1
I
I
I
I
I
I
1
1
1
1
1
1
10,000.00
J ________ ____J _____________-+------------~------------~-------------~-----------~
~upplies ~ 11aterials
!
I
I
I
I
I
1
S lbsistence Expenses
1
Trcnsporti~ ti on :I::::r.:pense s 1
Communication Service
i
Prt.g., En.rr., 13indg. ,EtE.. 1
Heat & Light
I
'Rents - BuiJ.dill€"
1
Rents - Equipment
:
I
Repairs - Equipment
I
Equipment
l
Special & Hi scellaneous II
1
I
I
I
I
I
83.33 1
83.33 1
83.33 ·
416.66
4,166.66
l 00 • 00
1,333.33
3.oo
4,16
e3.33
41.66
I
I
I
I
I
1
l
I
:
I
I
1
I
I
.L. ... ----·---- __....._ _ _ _ _ - --------- -·-. ·- -·-
Total ••••••••••••
i
1
l
I
6,398,83
I
I
I
1, ooo. oo
1,ooo.oo
1
1
I
I
I
I
I
I
I
I
I
I
·'· ---· -·-·I
I
I
I
1~ooo.oo
l
5,ooo.oo
5o,ooo.oo
l ' 200 • 00
l6,ooo.oo
36.oo
50,00
1,ooo.oo
500,00
1
----f--.-I
1
1
1
I
I
I
I
I
i
Complete Total .. ,,
7, 232.17
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
:-::-:=:=:=:=:=:=:=:f:=:=::=:=:=:=:=f=::.:..::==:;=:=:=::::J::f=::.::=:.::====:=-:.:J:t=:::=::::---
I
I
I
I
I
I
I
1
1
I
I
1
I
I
I
--------·-1----.-·-· ----+I
I
76,786.00
, 1 _ _ - - - - ______ l. -. -····-·-· .• - - _..J_ - - - - - · - - - - - -'·- - - - - - ·--·--'----
I
I
I
I
I
I
1
I
86,786,00
I
I
1
l
t
I
-4- - - - · - - -- -~
I
I
I
I
1
1
1
1
I
I
I
I
=:::L;
_
,,:-,;
-·==t
•............ ' ..• 1929.
:X:-6217
DUISION OF ISSUE.
--------------------?----1--------~---,------------,------------,------------1------------;----------,
I 3udget
ICommi tmcnts l
Bud[et
l Balance l
I To Date I To Date I Ycu.rly I Available~
-------------------------t-------------t------------+--·-----------t-----------+------------1----------1-·
1
Objects of Expenditure:
1
Budget
I.Ionthly
I
I
Personal Services:
ICommi tments
IThis l1lonth
I
I
I
I
I
I
I
I
I
I
I
I
1
1
:
l
51,54o.oo l
l
1
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
l
1
4,295.oo
+------~-----+------~-----+------~----+
I
I
I
I
I
I
Sup:nlies & ll[n tGricls
Communication Service
Prtv. , En'·r. , Bindp. , Etc.
'lcpairs - Equipment
Eauinment
S:;}ecial & Miscellaneous
I
I
25. 00
6.25
33.33
6.25
25.00
4.16
l
l
1
l
•
:
!
I
I
I
I
:
I
I
I
1
1
1
1
I
I
I
I
I
I
f
I
300. 00 I
75.oo :
400.00 l
75.00 :
300.00 :
5Q,QQ l
!
t----------t---------- -:--... ------- ·-·t---. ··----- ·····--+---··- . ----- -·-+------- --+·
!
I
I
I
I
I
I
Totc.l. ••••••••••• 1
100.00
I
-+-------- ---+-------}--·-----+------·
-t
I
Complete Totcl. ••
~
I
I
4,395.00
:
l
I
I
I
I
.;::;_-::-:-::- : :: : .:·- ---·-·-·-------+------------L -- =--:::::-::::::::::-·± -
1,200.00
l
I
I
1
I
I
52,740.00
I
I
I
I
I
I
I
I
I
I
~--------·-+·
l
I
_:!-:-·:: ::-_:.:::::-:::::::-=:::.-=::: !::-:::-=-::::--=-=·-::-:::=:: ::. !....:·::-:-_::__--::::--:-::- ~,.
BUDGET & EYJ'ElilliTURES
••••••••••.••.•• 1929.
X-6217
FISCAL AGENT.
-------~----------~------1------------1------------1-------------,------------,------------,-----------~
1 Budget
:commitments 1 Budget
:commitments 1 Bud~et
1 Balance 1
Objects of Expenditure:
1 Monthly
IThis l!tonth
1 To Date
1 To Date
1
1 Available. 1
Yearly
-------------------------~------------~------------~------------~------------~------------~-----------~
I
I
I
I
I
.
I
I
,
Personal Services:
I
I
I
:
941.67
I
-LI
~u:p:plies & Materials
Communication Service
Prtg,
1 Entr.,Bindg.,~tc.
Bepairs - Equipment
Equipment
Special & Miscellaneous
Total •••••.••••••
f
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
1
·
-
-
I
- - -1
- I
I
I
I
I
I
6 . 25 I
I
-
-
-
-
1
I
I
1
I
I
I
-1- -
I
I
-
-
-
-- -
-
l
-
.!.. -
-
-
n,3oo .oo
+I - - - - I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
4 .l 7
4.17
1.67
16.67
2.08
I
I
I
I
1
I
-1- I
I
I
75 • 00
50 • 00
50.00
20.00
200.00
25.00
1
I
-
-
-
~I
I
I
I
I
I
I
I
I
I
--4----·------- :- -------~------1-------f
35.00
I
I
I
I
420.CO
~-----------~---------~---------+l---------~----------~,---------1
Complete Total •••
976.67
I
I
I
r
'
ll, 720.00
I
I
I
I
1
I
I
1
I
I
================c=========~========~==========x~·==========~========~~========-=J~
BUDGET
& EXPENDITURES
. •· ....... •· -·-· . " • ...• 1929 •.
X-6217
COUESEL'S OFFICE.
-------------------------y------------;------------;------------,---------~--T------------;-----------1
Ob,iects of Expenditure:
l
l
Budget
},{onthly
:commitments
IThis Honth
l
l
I
I
I
I
Budget
To Date
:commitments l
To Du.te
I
l
Budget
Yearly
l
l
Balance l
Available. I
I
I
I
I
-------------------------t------------+------------t------------t------------1------------+-----------1
I
I
Personal Services:
:
Z,OOl.67
+- - - - I
I
I
_I_- - - - -
I
I
I
I
I
Supplies & ~futerials
1
su:bsistence Expensos
l
Transportation Expenses 1
Communication Service.
l
Prtg.,B~r.,Bindg.,Etc.
l
Repairs - Equipment
:
Equipment
1
Special & Uiscellaneou.s 1
I
+-- - - I
I
I
I
I
I
l2.5o
12.50
25 • oo
16.67
4.17
2.08
5o.oo
2.o8
:
l
1
I
+-----...:--+---------+
Total. •••••••••••
I
I
125.00
I
I
I
:. 36,020.00 I
I
I
I
-I- -- - - - +- -....,. - - _,_ - I
I
I
I
I
:
I5o.oo
150.00
3oo • oo
200.00 I
50.00 :
2!ii~OO :
6oo.oo t
25.oo 1
:
l
:
:
I
:
I
I
I
I
I
I
I
1
I
I
-
l
- -tI
I
I
I
I
I
1
:
l
:
:
:
1
l
I
-- -+-----. ----- -.--·------+ ------t
I
I
l
I
I
I
I
I
I
1,500.00
I
l
I
I
I
I
I
I
I
I
I
+-·--·----- ---+--------}-----+--- ·----+----·----+---- . -- --II
I
Complete Total. •• I
I
I
3,126.67
I
I
I
I
l
I
I
l
l
I
I
I
I
l
I
I
37,520.00
- ~-: - :. ·. ·. : ·. :· ..:..:·:•..:..:·:.::=.:·:=:=-::..:.:1===--=--:=-7.-- -t-:::. :..::-·.:-: :·:.::.:::.: :.t :-: ::-:·--: :::.:: _·:~ ..:.t. ....:.::.·.....:_::_:·:...:...: :_±____
1
l
·-t-..:.::-:---=-.- ==:t
BUDGET
& EXPEN"DITURES
............. ., .. . 1929.
X-6217
DIVIS I Or 0" EX.A:I·HEATIOIT.
-------------------------~------------~------------~------------T-----~------T------------v-----------T
l
Objects of Expenditure:
l
I
Budf!et
Monthly
l Commitments l
l This Honth l
I
I
Bud,rvet
To Date
l Cormni tments
To Date
II
I
lI
Bud(:'et
Yearly
~
l
II
Balance l
Available.l
I
I
I
-------------------------r------------~------------~------------T------------T------------~-----------~
I
I
I
I
I
I
I
I
Personal Services:
-
----~-'-
.. -
·----
II
1
9,5oo.oo
I
r -- -·- - - Non-'!'Jersonal Services:.
lI
I
"""1-- - - - I
I
I
I
I
4.1.66
3,583.33
1,250.00
16.67
62,50
4.16
41.66
41 .. 66
Supplies & Materials ·
Subsistence Expenses
Transportation Expenses
Communication Service·
Prtg.,Engr.,Bindg.,Etc.
~epairs - Equipment
Equipment
Special & Miscellaneous
I
I
I
I
I
I
I
I
5,041.67
I
I
I
l
l
l
l
I
I
l
t
I
II
I
II
I
I
I
-I r - - - - - -1----___,I.
I
114,ooo.oo
I
I
I
I
I
I
I
500.00
43,000,00
15,000.00
200.00
750.00
5o.oo
5oo.oo
500.00
I
I
I
Total . ......... .
I
-~------
I
lI
1
lI
+--- - - - -
lI
1
t·
I
II
lI
1
I
1
l
l
l
----,----------i-------t----I
II
6o,5oo.oo
i
I
I
I
-T
I
II
+----------~--------+--------~~~---------;---------~------------~1
I
I
I
Complete Total ••
l
I
I
14,541.66
l
I
I
174,500.00
l
I
I
~==~==~t~====~~~~===±======~i======~~====~===~-
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6218
January 18, 1929.
SUBJECT:
Holidays during February, 1929.
Dear Sir:
On Tuesday, February 12, Lincoln's
:Birthday, (Shrove Tues~ in .Alaba1na, Hardi
Gras in New Orleans), there will be neither
Gold Fund. nor Federal reserve note clearing,
and the books of the Board will be closed.
For your information, the offices of the
Board and the following Federal Reserve Banks
and Branches will be open for business on that
day:
Boston
Richmond
Baltimore
Charlotte
.Atlanta
Jacksonville
Kansas City
Oklahoma City
St. Louis
Little Rock
Havana .Agency
On Friday, February 22, v;·ashington 1 s
Birthday, the offices of the Board ru1d all
Federal reserve banks and branches will be
closed.
Please notify branches.
Very truly y6urs,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. :SANKS.
F_EDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6219
January 18, 1929.
SUBJECT:
Changes in Inter-District
Time Schedule •
•
Dear Sir!
At the request of the Federal
Reserve Earik of Chicago, the Federal Reserve Eoard has approved changes in the
transit time from Chicago to Portland,
Seattle and Spokane from four days to
three ~s.
Very truly yours,
J. C. Noell,
Assistant Secretary .
•TO
GOVER:HORS OF ALL F. R. E.ANKS •
1-"-.'r"'·l
I
DISTRICT NO. 1
(
X-6222
FEillRAL RZS2RV":'; BAi:tK OF BOS".lON
OFFICZRS AliD DIRECTORS, 1929
OFFIC:LRS
W. P. G. Harding, Governor
W. W. Paddock, Deputy Governor
Wm. Willett, Cashier
K. K. Carrick, Secretary
Frederic H. Curtiss, Cha.irman of the
Board and Federal Reserve Agent
Allen Hollis, Deputy Chairn~n of the
Board
c. F. Gettemy, Assistant Federal Reserve
Agent
H. F. Currier, Auditor
E. G. Hult, Assistant Cashier
E. M. Leavitt, Assistant Cashier
L. w. Sweetser, Assistant Cashier
DIR"SCTORS
Term
lxoires
Class A:
Alfred L. Ripley
Pres., Merchants Nat. 1 1.Bank,
Boston, Eass.
Edward S. Kennard
V .p. & Cashier, Ru.'Ilford Nat •1. Bank,
Ru."nford, Maine
FrederickS. Chrunberlain Pres., New Britain Nat 1 l.Bank,
Neu Britain, Conn.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Class B:
Philip R. Allen
A. F. Bemis
Albert C. Bovmnan
Pres., Bird & Son
E. Walpole, kass.
Chrm., Bemis Bros. Bag Company,
Boston, Mass.
Pres., The John T. Slack Corporation,
S:pringf iel d, Vt.
Dec. 31, 1929
.1930
Dec. 31,
,,,....-
..-nee.
31, 1931
Class C:
Frederic H. Curtiss
Allen Hollis
Chas. H. Manchester
Boston, Mass.
Lawyer, Concord, N. H.
Public Utilities, Providence, R. I.
MEMBER FEDEBJ\1 ADVISORY COUHC IL
ArthUf H. Heard
COUNSEL
A. H. Weed
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
n::sT:::tiCT NO. 2
F3D::mAL R::SERVE :B.Ali!K OF 1TE-:::: YO:rtK
X-6222
OFFICERS AND DIRECTORS, 1929
OFFIC"SRS
George L. Harrison, Governor
J, H. Case, De?uty Governor
L. F. Sailer, Deput;>" Governor
~. R. Kenzel, Deputy Governor
L. R. Rounds, Deputy Governor
A. W. Gil bart, De::mty Governor
R. M. Gid.ne;}', Asst. Deputy Governor
.J. W. Jones, Asst. Deputy Governor
J. E. Crane, Asst. Deputy Governor & Sec•y.
W. :B. li:atteson, Asst. Deputy Governor
C. H. Coe, Asst. Deputy Governor
D. H. :Barrows,
E. C. French,
Gates W. EcGarrah, Chairman of
the :Board and Federal Reserve
Agent
Owen D. Young, Deputy Chairman of
the :Board
W. R. Burgess, .Assistant Federal
Reserve .Agent
W. H. Dillistin, Assistant Federal
Reserve .Agent
H. S. Downs, Assistant Federal Reserve .Agent
Carl Snyder, General Statistician
E. L. Dodge, General Auditor
J. L. Rice, Manager
t1~anager
H.
~anager
ll.. F. Mc1iurray, Eanager
J. A. ~a tchell, Iv:anager
R. lf.. O'Hara, iianager
v.
Roelse, Mgr.
W. A. Scott,
&
.Asst. Sac•y.
~anager
S. S. Vansant, Manager
I. W. Waters, Eanager
DIRECTORS
Term
Expires
Class A:
·.. R. H.
Treman
Delmer Runkle
Chas. E. Mi tche.ll
Dec. 31, 1929
Pres., Tompkins County Nat 1 l.:Bank,
Ithaca, N. Y.
Chrm., Peoples Nat 1 1.:Bank,
Hoosick Falls, N. Y.
Pres., Nat 11. City :Bank, New York, ~!. Y.
Dec. 31, 1931
Pres., Francis H. Leggett & Co., N.Y., N.Y.
Pres. , Lord & Taylor, New York, N. Y.
Pres.~ A.mer. Car & Fdy. Co., New York, 1T.Y.
Dec •. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Chrm., Gen. Elec. Co., New York, N. Y.
Chrm., Amer. Radiator Co., Greenwich, Conn.
New York, N. Y•
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Dec. 31, 1930
Class :B:
Theodore F. Whitmarsh
· Sa,muel W. Reyburn
Wm. H. Woodin
'Class C:
· Owen D. Young,
Clarence M. Woolley
Gates W. McGarrah
i.WmtffiER FEDIDRAL ADVISORY COUNCIL
William C. Potter
COUNSEL
Walter S. Logan
79
DISTRICT NO. 3
X-6222
FEDERAL RES"JRVE :BA1W. OF FHil.AllEL?HIJ\.
OFFICERS .AND DIRECTORS, 1929
OJ'FICERS
--·Geo. W. Norris, Governor
William H. Hutt, Deputy Governor
· C. J\. •. Mcilhenny, Cashier and Secretary
W. J.
James
R. M.
F. W.
s. R.
Richard L. J\.ustin• Chairman of the Board
and Federal Reserve J\.gent
Alba :B. Johnson, Deputy Chairman of the
:Board
.Arthur E. Post, Assistant Federal Re'serve
Agent
Ernest c. Hill, Assistant Federal Reserve
Agent
William G. McCreedy, Comptroller
Davis, A.ssistant 1Cash1er
M. Toy, Assistant Cashier
Miller, Jr., Assistant Cashier
LaBold, Assistahti Oaahier
Earl• Assistant Cashier
DIRECToRS
Term
E:x.pires
Class A.:
~oseph Wayne, Jr.
George W. Reily
John c. Cosgrove
Pres •• Phila. Nat•l. Bank, Philadelphia, Pa.
Pres., Harrisburg Nat •1. :Bank, Harrisburg, Pa.
V.P., First Nat•l.Bank, Hastings, Pa.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1531
Pres., Gen •1. Asphalt Co., Philadelphia, Pa.
Gen. Mgr •• Campbell So~p Co., Camden, N.J.
John R. Evans & Co., Philadelphia, Pa.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Philadelphia, Pa.
Chrm. , Southwa.Tk FoUD,dry & Lfach. Co.,
Philadelphia, Pa.
Farmer and Packer, Bridgeville, Del.
Dec. 31, 1929
Dec. 31, 1930
Class :B:
Arthur W. Sewall
C. Dorrance
·_ C. F. C. Stout
Ar~hur
Class C:
Richard L. Austin
- Alba :B. Johnson
Harry L. Cannon
~:ElR.. FEDERAL
.ADVISORY COIDTCIL
-Levi L. Rue
COUNSEL
Williams and Sinkler
Dec. 31, 1931
80
DISTRICT NO. 4
X-62212
OFFIClllRS AliD DIR"C;CTORS, 1929
OFFIC:JRS
:E. R. Fancher, Governor
M. J.
Fleming, Deputy Governor
F. J• Zurlinden, Deputy Governor
H. F. Strater, Cashier and Secretary
Geo. . netamp, Chairman of the Board
and Federal Reserve Agent·
L. B. Williams, Deputy Chairman of the
Board
J. B. Anderson, Assistant Federal Reserve
Agent
W. H. Fletcher, Assistant Federal Reserve
Agent
r. V. Grayson, Auditor
c. W. Anlold, AssiStant Cashier
C. L. :Bickford, Assistant Cashier
D. :a. Clouser, Assistant Cashier
Vi. F. Taylor, .f\ssistant Cashier
G. H. Wagner, Assistant Cashier
DIRECTORS
Term
Exoires
Class A:
Robert Wardrop
Chrm., First Nat 1 l.Bank, Pittsburgh, Pa.
0. N. Sams
Pres., Merchants Nat•l. Bank, Hillsboro, Ohio
Chess Lamberton V. P., Lamberton Nat•l. Bank, Franklin, Pa.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
· Class B:
Geo. D. Crabbs
S. P. Bush
R. P. Wtight
Philip Carey Mfg. Co., Cincinnati, Ohio
Uanufacture:r', Columbus, Ohio
Reed Manufacturing Co., Erie, Pa.
Dec. 31, 1929
Dec. 31; 1930
Doc. 31, 1931
George R. DeCamp Cleveland, Ohio
v. P., BostwiCk-Braun Co., Toledo, Ohio
L. B. Williruns
Hayden, Miller & Co., Cleveland, Ohio
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Class C:
W. W. Knight
MEMBER FEDERAL ADVISORY COUNC!L
Harris Creech
COUNSEL
Squire, Sanders & Dempsey
X-6222
DISTRICT :NO. 5 ,
FEDERAL RBS:JRVJ :B.A1"K OF RICID!.OND
OFFIC?RS .AJ:iD DIRECTORS, 1929
OFFICERS
George J. Seay, .Governor
C. A •. Peple, Deputy Governor
R~ H. :Broadd.us, Del;llity Governor
J. S. Walden, Jr. , Controller
G. H. Keesee, Cashier
A. S. Joh~1stone, I1·:anager
J. T. Garrett·, r1:anager
Wm. W. Roxton, Chairman of the :Board and
Federal Reserve Agent
Frederic A. Delano, Deputy Chairman of
the :Board
J. G. Fry, Assistant Federal Resarve Abent
T. F. Epes, Auditor
W. Dillard, Assistant Cashier
Edward ~aller, Jr., Assistant Cashier
V~.
DIRECTORS
Term
ExDires
Class A:
L. E. Johnson
Pres., First N~ttl. :Bank, Alderson, W. Va.
Chas. z. Rie~n Pres., Western Nat 1 1. :Bank, :Baltimore, Md.
Jas. C. :Braswell .Pres.,.Planters Nat•l. :Bank, RoCky Mount, N.
c.
Dec. 31, 1929
Dec. 01, 1930
Dec. 31, 1931
Class :B:
D. R. Coker
J. P. Fishburn
Edwin C. Gra.l-lam
Class
Marchant and Planter, Hartsville, s. c.
Pres., Times-ilorld Corp., Roanoke, Va.
Pres •. , Nat•l. Elec. Supply Co., Washington, D.C.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
c:
Wm. W. Haxton
Richmond, Va.
Frederic A. DelanoReceivert ;·;ashington, D. C.
Robert Lassiter
Textiles, Charlotte, N. C.
MEliJ3ER FEDERAL ADVISORY COUNCIL
John Poole
COUNS])L
M. G. Wallace
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
DISTRICT NO. 6
X-6222.
FEimRAL RES::;RVE BA1JK OF ATLANTA
OFFICERS AUD DIRECTORS, 1929
OFFICERS
E. R. Black, Governor
'.
_·_Hugh Foster, Deputy Governor
_·Creed
Taylor, Deputy Governor
. .- .
.
'
M.; W. Bell, Cashier
Oscar Newton, Chairman of the Board and
Federal Reserve Agent
17. H. Kettig, Deputy Chairman of the
Board
Ward Albertson, Assistant Federal Reserve Agent and Secretary
W. S. Johns_, General Auditor
J. vr. Honour. Assistant AUditor
H. F. Conniff, Assistant Cashier
K. Bowman, Assistant Cashier
R. A.. Sims, Assistant Cashier
C. R. Camp, Assistant Cashier
p. L. T. Beavers, Assistant Cashier
S. P. Schuessler, Assistant Cashier
v.
DIRECTORS
Term
Exoi:res
..Class A:
G~ G.•.. Ware
: H. · Lane Young
-l!l. · C.. Melvin
Pres., First Nat 1 1. Bank, Leesburg, Fla.
Dec. 31, 1929
V. _P., Citizens & So. Nat 1 i. l3k., Atlanta, Ga. Dec.· 31, 1930
Pres., Selma Nat •1. :Bank, Selma, . Ala.
Dec. 31, 1931
. Class B:
_Leon C. Simon
:_· J. .:A •.. MeCrary
Lulce Lea
V. P., Kohn,, Weil & Simon, Inc., New Orleans, La.
Pres., J. B. McCrary C:o. (Atlanta), Decatur, Ga. .
Publisher, Nashville, Tenn.
Dec. 31, 1929
Dec. 31, 1930
Dec • 31, 1931
Atlanta, Ga..
Pres.
Exposition Cotton Mills, Atlanta, Ga.
Southern Rep., Crane Co., Birmingham, Ala.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Class C:
Oscar Newton
Geo. S. Harris
W. H. K~ttig
lamER FEDERAL ADVISORY COUNCIL
J. P. Butler, Jr.
COUNSEL
Randolph and Parker
DitTRI~T ~TO.
X-6222
7
FJDZR.AL R::;;::S::RV:J: :BAlUC OF CHICAGO
OFFIC:JRS AliD DIR"l:CTORS, 1929
OFFICJRS
J. :B. McDougal, Governor
William A. Heath, Cha.irnc.an of the :Soard
and Federal Reserve Agent
James Simpson, Deputy Chairrnan of the
:Board
1V. H. ·;hi te, Assistant Federal Reserve
.Agent and SGCrcto.ry
F. E. Huston, Jf.anager, R. & S.
F. R. :Burgess, Auditor
W. A. Hopkins, Assistant Auditor
J. H. :Blair, Deyuty Governor
. . C• R. McKay, De:;u ty Governor
~.
K.
J.
D.
0.
A.
F.
J.
R.
A.
:Bateman, l.ianager
C. Callahan, l':anager
:ll:. C-oul tar, l:Ianager
W. Dazey, r.:anager
C.
C.
H.
A.
J.
L.
:Bachman, Controller
Childs, Controller
Dillard, Controller
Jones, Controller
Netterstrom, Controller
Olson, Asst. Controller
& Asst. Sec 1y.
J. G. Roberta, :Uanager
J. A. Delaney, Nanager
Irving Fischor, Manager
R. J. Hargreaves, l.'Ia.nager
F.
L.
L.
F.
A. Lindsten, i,:anager
G. r.:eyer, r'.'ianagor
G. Pavey, I,:ane..ger
t. Purrington, Eanager
DIRECTORS
.
Term
::!1xoiros
Class A:
'.
E.
t.
Johnson
Ge·erge M. Reynollls
EdwardR. Estberg
Clas~:~.
Pres., Leavitt & Johnson Trust Co.,. ";';'aterloo,
Iowa
Chrm., Cont 1 1. Nat 1 1. :Bank & Trust Co ••
Chicago. Ill.
Pres., ·:.aukesha 1qat 1 l. :Bank, -~iaukesha, 'iiis.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
:B:
· ' Robert 11:ueller
_. . . , A·. R. Vogel
S. T. Crapo
E'ueller r.Ifg. Co., Decatur, IlL
v. P.' Pfister & Vogel Leather Co.,
v:il waukee' ·;/is.
Sec. & Treas., Huron Port. Cement Co.,
Detroit, Mich.
Dec. 31, 1929
Pres., I.·~arsha.ll Field e: Co., Chicago, Ill.
Chicago, Ill.
Pres., :Ball :Bros. l::fg. Co., l!iuncie, Ind.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Dec. 31, 1930
Dec. 31, 1931
Class C:
James Simpson
·ivm • .A. Heath
F. C. :Ball
MEMl3ER FEDERAL ADVISORY COUNCIL
Frank
o.
l:etmore
CO~EL
C. L. Powell
DISTRICT NO. 8.
F~JT.:RAL
RJS:JRV":: :BAlli{ OF
OFFIC~RS
X-6222
S~,
LOUIS
Alto DIRECTORS, 1929
OFFIC"JRS
Wm.
11:cc.
Martin, Governor
0. E. Attebery, De:9u ty Governor
Jas. G. l.1cConkey, Sec•y. & Counsel
Rolla Wells, Chairman of the :Board and
Federal Reserve Agent
John W. Boehne, De':lUty Chairman of the
. Board
C. I:.i:. Stewart, Assistant Federal Reserve
Agent
Wm. L. Gregory, Jr., Acting Assistant
Federal Reserve Ag~nt
~. J. Novy, Auditor
A· ~. Debrecht, Assistant Auditor
A. H. Haill, Controller
S. F. Gilmore, Controller
F. N. Hall, Controller
C. A. Schacht, Controller
G. 0. Hollocher; Controller
DIRECTORS
Term
Bxoires
Class A:
John G.
Lom~dale
Max B. Nahm
John C. Martin
Pres., Nat•l. :Bank of Commerce. St. Louis, li~o. Dec. 31, 1S29
v. P~, Citizens Nat•l. Bank, Bowling Green, Ky. Dec. 31, 1930
v. P.~cashier, Salem Nat'l. Bank, Salem, Ill. Dec. 31, 1931
Class B:
LeRoy Percy
W. B. Plunkett
Planter, Greenville, Miss.
Dec. 31, 1929
Doc. 31, 1S30
Pres., Plunkett-Jarrell Groc. Co., Little RoCk, Dec. 31, 1931
Ark.
Class C:
John W. :Boehne
Rolla Tlells
Paul Dillard
Retired, Evansville, Ind,
St. Louis, Mo.
Dillard & Coffin Co., Memphis, Tenn.
MEM:BER FEDERAL .A.DVISORY COUNCIL
Walter \i.. Smith
COUNSEL
Jas. G. McConkey
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
85
l)IS'l'RIC'l'''l.IJO. 9
FEJ)lm.Al. RESERVE
:BAJ.~
X-6222
OF MINNEAPOLIS
. OFFICERS .AND DIRIDCTORS, 1929
OFFICERS
w.
B. Geery, Governor
B. V. lV:oore, Deputy Governor
Harry Yaeger, Deputy Governor
Gray
~arren,
Cashier
John R. Mitchell, Chairman of the :Board
and Federal Reserve Agent
Romer P. Clark, Deputy Chairman o.f the
Board
Curtis L. Mosher, Assistant Federal Reserve .Agent
. Fred M. Bailey, Assistant Federal Resene
Agent
.
Frank C. Dunlop, Controller
Leonard E. Rast, Assistant .Cashier
Harry I. Ziemer, Assistant Cashier
Harold C. Core. Assistant Cashier
Arthur R .. Larson, Assistant Cashier
Term
Expires
Class A:
J. C.
~ssett
<Karl J. Farup
Paul ·. J .. Leeman
Pres., .A.berdeen Nat 1 1. Bank, Aberdeen, S. D.
Pres., First Nat•l. Bank, Park River, N. D.
v. :P., First Nat•l. Bank, Minneapolis, Uint)..
Dec. 31, 1929
Dec. 31~ 1930
Dec. 31, 1931
.A.. M•. Holter Hardware Co. , Helena, Mont.
JohnS. Owen Lumber Co., Eau Claire, Wis.
Fre:S., Waldorf Paper Prod. Co., St. Pa'Ul, liinn.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Minneapolis, M:inn.
Pres., West Publishing eo., St. Paul, Minn.
Pres:.. • , Menominee Ri'Ver Sugar Co. ,
Menominee, Mich.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Ol:ass B:
N. B. Holter
John S. OWen
Paul li[. Myers
Class .C:
John R. Ml tchell
Homer P. Clark
Gao. W. McCormick
MJ~t.fl3ER
FJlmRAL J\.PVISORY COUNCIL
Theodore "i{old
COUJSEL·
Andreas .veiand
86
DISTRICT NO. 10
x::.s222
FEDERAL RES:J.RVE BANK OF XAUSAS CITY
OFFICERS .Aim DIIDJCTORS, 1929
OFFICERS
W. ;j. Baile3~", C-overnor
c.
.
·
·... '
....
M. L. McClure, Chairman of the Boa1·d
r~d
Feo.eral Reserve Agent
Wm. L. Petrikin, Deputy Chairman of the
Board
A. M. McAdams, Assistant Federal Re~erve
Agent and Secretary
S. A. Wardell, .Auditor
A. Worthington, Deputy Governor
J. W. Helm, Cashier
'
John Phillips, Jr.~ Assistant Cashier
. G. E. Barley, Assistant Cashier
E. P. Tyner, Assistant Cashier
· M. W. E. P·a:rk, Assistant Cashier
G. H. Pipkin, Assistant Cashier
DIRECTORS
Class
,_,..
Term
A:
. · E.. E • Mullaney
. C. C. Parks
1rank W. S:ponable
Ilxpires
Pres., Fanners & Merchants Bank, Hill C.ity, Kans. Dec. 31, 1929
V.P., First Nat•l. l3ank, Denver,· Colo.
Dec. 31, .JISO
Pres., Miami County Nat'l. Bank, Paola, Kans.
Dec. 31, 1931
Class B:
~,
:
.·..· ..L. E. Phillips
-.:. · · · Thos. c. Byrne
.:· ·' : J. M. Bernardin
t>J... ~ :.
;;.. -:.7
Class C:
~ ·-:
M; L. McClure
·E. M. Brass
"_,. " Wm. L. Petrikin
.. .
.;
V~P. & G.M. ,Phillips Petrol.Co. ,:Sartlesville,Okla. Dec. 31, 1929
Byrne & Ha.~I~mer Dry Goods Co •. , Omaha, lTeb..
Dec. 31, 1930
J. M. :Bernardin Lumber Co., Kansas City, Mo.
Dec. 31, 1931
Kansas City, Mo.
Farming & Livestock, Grand Island, Neb •
Pres., Great Western Sugar Co~. ·Denver, Colo.
.MEMBER FEDERAL ADVISORY COUNCIL
Peter
w~
Goebel
COUNSEL
H. G. Leedy
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
DISTRICT NO. 11
FEDERAL RESERVE BANK OF DALLAS
OFFICERS AND DIRECTORS, 1929
OFFICERS
c..C.
Lynn P. Talley, Governor
R. R! Gilbert, De:!_:luty Governor
R. E. Coleman, Deputy Governor
Fred Harris, Cashier
W. D. Gentry, Asst. Deputy Governor
Walsh, Chairman of the :Board and
Fe.deral Reserve .Agent
Clarence E. Linz, Deputy Chairman of the
Board
C. C. Hall, Assistant Federal Reserve
Agent
W. J. Evans, Assistant Federal Reserve
Agent
W. P. Clarke, General Auditor
C. C. True, Assistant Auditor
J. L. Hermann, Assistant Cashier
E. E. Austin, Assistant.Cashier
R. 0. Webb, Assistant Cashier
DIRECTORS
Term
Expires
Class A;
Hewell E. Smith
J. H. Frost
w. H. Patrick
Pres., First Nat'l. Bank, McKinney, Texas
Pres., Frost Nat 1 1. :Bank, San Antonio, Texas
Pres., First Nat•l. :Bank, Clarendon, Texas
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
V. P., Southland Cotton Oil Co., Paris, Texas
V. P., Cooper Grocery Co., Waco, Texas
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Class E:
• J. J. Culbertson
J. R. Milan
A. S. Cleveland
\Vholesale Grocer & Cotton Factor, Houston,
Texas
Class C:
Clarence E. Linz
V. P. & Tr., Southland Life Ins. Co., Dallas,
Dec. 31, 1929
S. :S. Perkins
C. C. Walsh
Texas
Perkins Dry Goods Co. , Dallas, Texas
Dallas~ Texas
Dec. 31, 1930
Dec. 31, 1931
OffiER FEDERAL ADVISORY COUNCIL
B. A. McKinney
COUNSEL
Charles C. Huff
Locke, Locke, Stroud & Randolph
DISTRICT NO. 12
X-6222
FEIERAL RESERVE EA.UX OF Slu'1 FR.Al!CISCO
OFFICERS Alr.D DIRECTORS, 1929
OFFICERS
Isaac E. Newton, Chairman of the :Soard
and Federal Reserve Agent
Walton N. Moore, Deputy Chairman of the
:Soard
S. G. Sargent, Assistant Federal ~eserve
Agent
Allan Sproul, Assistant Federal Beserve
Agent and Secretary
F. H. Holman, General Auditor
R. T. Hardy, Auditor
Jno. U. Calkins, Governor
W. A. Day, Deputy Governor
Ira Clerk, Deputy Governor
W. M. Hale, Cashier
C! E. Earhart, Assistant Cashier
C. D. Phillips, Assistant Cashier
H. N. Mangels, Assistant Cashier
E. C. Mailliard, Assistant Cashier
F. c. Bold, Assistant Cashier
J. 11:. Osmer, Assistant Cashier
DIRECTORS
Term
Expires
Class A:
T~ H~
Ramsay
Vernon H. Vawter
c. X. Mcintosh
·Chrm.,U.nited Sec.J3k.lrTneo.Red :Sluff, Cal.
Dec. :31, 1929
Cashier, Jackson County Bank, Medford, Ore.
Dec. 31. 1930
Pres., Bk. of California, N.A., San Francisco,Oal.Dec. 31, 1931
Class :S:
A. E. C. Dohrmann Pres., Dohrmann Comm'l. Co., San Francisco, Cal.
Wm. T. Sesnon
Agriculturist, Soquel, Cal.
E. H. Cox
V. P. ..
Madera Sugar Pine Co. ,
Madera, Cal.
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1931
Class C:
Isaac B. Newton
Walton N. Moore
Wm. Sproule
San Francisco, Cal.
Dec. 31, 1929
Dec. 31, 1930
Chrm., Walton N. Moore Dry Gds. Co.,
San Francisco, Cal.
Pres., Southern Pac. Ry. Co"' San Francisco, Ca.l. Dec. 31, 1931
MEMBER FEDERAL ADVISORY COIDTCIL
F. L. :tipma.n
COUNSEL
A. C. Agnew
DISTRICT NO. 2
BUFFALO BRANCH of the I.limERAL RESERVE BANK OF N.EW YO.BK
OFFICERS .A1TD DIR:&CTORS, 1929
OFFICERS
W. W. Schneckenburger, M~ Director
H. W. Snow, Cn.shier
R. B. Wiltse, Assistant Manager
i),. L. Blakeslee, Assistant Cashier
•
DIRECT0l1S
Term
Expires
W. W. Schneckenburger Buffalo, N.Y.
F. B. Cooley # Chrm. Pres., N.Y. Car Wheel Co., Buffalo, N.Y.
Harry T. Ramsdell
Arthur G. Hough #
Geo. 'F. Rand
Edward A. J)J.err :/1:
Jno. T. Symes
f1:
Hon.Chrm.,Mfg.rs. & Traders·-Peop1es Tr. Co.,
Buffalo, :H. Y..
Pres. , Wiard Plow Co. , . Batavia, N.Y.
Pres., Marine Trust Co., Buffalo, ~l. Y.
Pres., CoiimUni ty Nat' 1. Bank, Buffalo, N.Y.
Pres., Niagara Co.Nat 11. Bk. & Tru.st Co., .
Lockport, N.Y.
Appointed by the B~a.rd.
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1929
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
1930
1930
1931
1931
90
x-6222-a
DISTRICT NO. 4
CINCINNATI BRANCH of the FEDERAL RESAlRVE BADtK OF CLEVELAND
OFFICERS AND DIRECTORS, 1929
OFFICERS
C. F. McCombs, Managing Director
B. J. Lazar, Cashier
Bruce Kennelly, Asst. Cashier
H. N. Ott, Asst. Cashier
DIRECTORS
Term
Expires
C. F. McCombs
John Omwak:e, #(}J.rm.
Chas • W. DlPui s
Geo. M. Verity#
:a. H•. Kroger
Fred. A. Geier #
E. S. Lee
.. --"'"' -·-
Cincinnati, 0.
Pres., U.S. Playing Card Co., Cincinnati, 0.
Pres., Central ':t'rust Co., Cincinnati, o.
Pres., Amer. Rolling Mill Co., Middletown, 0.
Chrm., Provident Svgs. Bk. & Tr. Co., Cinn., 0.
Pres., Cincinnati Milling Mach. Co., Ginn., 0.
Pres., let lat'l.'Bk.& Tr.Co., Covington, Ky.
Dec.
Dec.
Dec.
Dec.
!)ec.
Dec.
Dec •
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
----
PITTSBURGH BRANCH of the FE:OZ:RAL RESERVE BANK OF CLEVELAND
OFFICERS
AND DIRECTORS, 1929
OFFICERS
J.
T.
c.
c.
Nevin, ~ing Director
Griggs, Cashier
p, A. Brown, Asst. Cashier
F. E. Cobun, Asst. Cashier
DIRECTORS
Term
Expires
J. C. Nevin
Pittsburgh, Pa.
A.. L. Humphrey 'ii= Chrm. Pres., Westinghouse Air Brake Co.,
Pittsburgh, Pa.
Jos. R. Eisaman
V.P., First Nat•L Bank, Greensburg, Pa.
V.P.,John S. Naylor Co., Wheeling, W. Va.
Jos. R. N~lor 'ii=
Pres., Mellon Nat 1 1. Bank, PittsburtPh Pa.
R. B. Mellon
Pres., Joseph Horne Co., Pi ttsbu.rgh, Pa.
Jos. B. Shea #
J.. E. Braun
Pres., Farm~rs !)tlposit Nat'l. Bk:.,
Pittsburgh, Pa.
#
ApPointed by the !Qar~.
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1930
Dec. 31, 1931
Dec. 31, 1931
X-6222-a
q1
5
DISTRICT NO.
·- ..lL
BALTIMO:RE :BIWTCH of the FEDERAL RESERVE :BANK CF RICHMOND
OFFICERS Alto DIRECTORS, 1929
OFFICERS
A. H. Dldley, :Managing Director
T. I. Hats, Assistant Cashier
J. R. Cupit, Assistant Cashi·er
M. F. Reese, Cashier
DI:ru!lCTORS
Term
Erpires
A. H. DJ,dley
E. P. Cohill # Chrm.
carter G. Osburn ·
Norman James #=
H. :s. ·wu cox
Wm. H. Matthai :(/:
Levi :s. Phillips
:Baltimore, Md.
Pres., Tonoloway.· Orchard Co., Hancock, Md.
Chrm!, Farmers & Merch. Nat •l.Bk. ,Ba1 timore,Md.
James Lumber C.o., Baltimore, :Md.
Vice· £-rea., }!(erch. Nat•l. Bank, Baltimore, M.d.
Pres., :Beaver Dam Marble Co. , :Sal timore, Md.
Pres., Nat•L Bk:. O.f Cambridge, Cambridge, Md.
--- - -- - -- - - -- -- --- - -CB:A:RLOTT!l BRAUCH of the FEDERAL RESERVE
OFFICERS AND DIRECTORS,
BAl~
- - -
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1929
nee. 31, 1930
Dec. 31, 1930
Dec. 31, 1931
Dec. 31, 1931
----
OF RICHMOND
1~29
OFFICERS
Hugh Leach,
~~naging
Director
W. T. Clements, Cashier
DIRECTORS.
Term
Expires
Hugh Leach.
·Charlotte, N. C~
Chas. A. Cannon # Chrm.Pres., Cannon Mfg. Co., Xannapolis, ir. 0.
w. J. Roddey: ··
Chrm., Columbia. Natn. :Bank:, columbia, S'.
John .A. Law :Ji=
Man:u.facturel'-:Bapker, ·Spartanburg, s. c.
Robert Gage
V,P;.&Casb.ier,Oa$a. !k~. Chester, s. c..
Jno. L. Morehead 11=
Manufacturer,·. charlotte, ·tr. c..
W. H. i1ood
Pres., :Amer. 'Trust Co •.~ Charlotte, N. C.
f Appointed
by the ~ard.
l)ec~
c.
Dec.
Dec.
Dec.
Dec.
Dec·.
Dec.
31, 1929
31, 1929.
31, 1929
31~ 1930
31, 1~30
31, 1931
31, 1931
DISTRICT NO. 6
JACKSOJ:..TVILLE :BRANCH of the FEDERAL RESERVE BAmc OF ATLANTA
OFFICERS AND DIRECTORS, 1929
OFFICERS
W. S. McLarin, Jr., Managing Director
Geo. S. Vs.rdeman, Cashier
Mary E. Mahon, Assistant Cashier
DIRECTORS
Term
Ex-oires
W. S. McLarin, Jr.
Fulton Saussy # Chrm.
·. Edw. W. Lane
· S ~ 0. Chase #
A~ F. ·.Perry
J. C. Cooper#
G. G. Ware
Jacksonville, Fla.
Saussy & Common, Jacksonville, Fla.
Cbrm., Atlantic Nat 1 l.Bk.,Jacksonvi1le,Fla.
Chase & Co., Sanford, Fla.
Pres., Fla. Nat'l. Bk., Jacksonville, Fla.
Attorney at Law, Jacksonville, Fla.
Pres., First Nat 1 1. Bank, Leesburg, Fla.
- - - - - - - - - - - - - - - - - - - - - ·- - - -
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31, 1929
31, 1929
31, 1929
31, 1930
31, 1930
31, 1931
31, 1931
---- -- -
lTASHVILLE BRANCH of the FEDERAL RES::RVE BANK OF ATLANTA
OFFICERS AND DIRECTORS, 1929
OFFICERS
Joel B. Fort, Jr., Managing Director
E. R. Harrison, Cashier
Leo W. Starr, Assistant Cashier
DIRECTORS
Term
E>..=pires
Nashville, Tenn.
V.P., Amer. Nat 11. :Bank, Nashville, Tenn.
Pres. ,Tenn .. Hermitage Nat'l.Bk. ,Nashv:Ule,Tenn.
Fafroer, Columbia, Tenn.
Pres.,4th & 1st lat•l. ik .,Nashville,Tenn.
Publisher, Nashville, Tenn .•
Joel B. Fort, Jr.
P. M. Davis :/1:
E. A. Lindsey
Wm. P. Ridley fl:
J. E. Caldwell
Luke Lea # Chrm.
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1930
Dec. 31, 1930
DeCw 31, 1931
Dec. 31, 19:31
SAVANNAH AGENCY of the FEDERAL RESERVE B.ANK OF ATLANTA.
J. H. Bowden, Manager
J~es
A. Goethe, Assistant Manager
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ---HA.V.AltA AGENCY of the FE:oERAL RESERVE BANK OF ATLANTA
L. L. Magruder, Manager
fl: Appointed by the
Board.
H. C. Frazer, Assistant Mana,ger
X-6222-a ·
DISTRICT NO. 6
NEW ORLEANS BRANCH of the FEDERAL RESERVE BANK OF ATLANTA
OFFICERS AND DIRECTORS, 1929
OFFICERS
ll.a.rcus Walker, Managing Director
James A. Walker, Assistant Manager
Wm. H. Black, Cashier
F. C• 1asterling, Asst. Cashier
W; E· Miller, Asst. Auditor
Term
Jxpires
Marcus Weiker
L. c. Simon =IF Chrm.
F. W. Foote
Albert P. Bush =IF
J. E. Bouden, Jr.
P. H. Saunders =IF
R. S. Hecht
New O~ieans;
La•
Dec. 31, 1929
Dec. 31, 1929
Deq. 31, 1929
Pres., First Nat•1• Bank, nattiea~ur~ •. Miss.
V.P., T. G. Bush Groc. Co., Mobile; Ala&
Dec. 31~ 1930
Pres., Whitney-Central Nat•l.Bk.,New Orleans, La. Dec. 31, 1930
V.P., Newman,Saunders & Co.,Inc.,New Orleans, La. Dec. 31, 1931
Dec. 31, 193i
Pres.,Hibernia Bk. & Tr. Co., New· Orleans, La.
V.P. • Xohn1 We:it & Simon• Inc: ,:New Orleans, La.
-
B:ImiiNGRA.M :B:BJ\NCB of the FEDERAL RESERVE :BA.NK OF ATLANTA
- - - ...
OFFICERS AND DIRECTORS, 1929
OFFICERS
A.. E. Walker, Managing Director
H. J. Urquhart, Cashier
T. N. Knowlton, Asst. Cashier
DIRECTORS
Term
E~ires
A.. E. Walker
··
Birmingham, .A.la.
Oscar Wells f
Pre,,., .Jirst Nat '1. Bk., Birmingham, Ala.
w. W. Crawford
Ch:na. 1 .Amer.Traders Nat•l.Bk:.,Birmi,hgham, Ala.
E. F. Allison fl:
Pres., Allison Lumber Co., Bellamy, Ala.
W. E. Henley
Pres.,Birmi~ Tr.& Svgs.Co.,Bindngham,Ala.
W. H. Kettig =IF Chrm. Southern Rep. ,·orane Co., Birmingham, Ala.
John H. Frye
Pres.,Realty Mortg&€e Co., Birmingham, Ala.
f
Appointed by the Boari.
31,
31,
31,
31,
Dec. 31,
Dec. 31.
Dec. 31,
Dec •.
Dec.
Dec.
Dec.
1929
1929
1929
19:30
1930
1931
1931
DISTRICT NO. ?
DETROIT BRANCH of the FE:omRAL .RESERVE lW:JX O]' ·CHICAGO
OFFICERS AND DIRECTORS, 1929
OFFIC]l:BS
J. G. BaSkin, Assistant Cashier
G. T. Jarvis, Assistant Cashier
F. L. Bowen, Assistant Auditor
W. R. Cation, Managing Director
H. J. Chalfont, Cashier
H. M. Butzel, Counsei
Dmd1'o:Rs
Term
ZX:pir~s
W. R. Cation
N. P. Hull Chr.m.
*
Julius H. Haass
David McMorran f
Geo • .B. Morley
James Inglis
Wm. J.
Gr~
*
Detroit, Mich.
Pres., Gra.nge Life Ins. Co., Lansing, Mich.
Pres., Peoples-Wayne Co. Bk., Detroit, Mich.
McMorran & Co., Pt. Huron, Mich.
Pres., Second Nat•l. Bank, Saginaw, Mich.
Pres., Amer. Blower Co., Detroit, Mich.
:V.Omn.,First Nat 1 1. Bank, Detroi.t, Mich.
I Appointed by the Board.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
X-6222-a.
95
DISTRICT lrO. 8
LOUISVILLE ~CH of the FED:ER.AL R::JSE::.=rn J3.A.lzy,: OF ST •. · LOUIS
OFFICERS
~qD
DIRECTORS, 1929
OFFICERS
W. P. Kincheloe,
N~ing
Director
John T. Moore, Cashier
Earl R. Muir, Assistant Cashier
L. A. Eoore, Assistant .Auditor
DIRECTORS
Term
ExDires
W. P. Kincheloe
~lack ff Chrm.
Zugene :S. Hoge
E. H! 'Hoods ·fJ:
T. !>. Scales
E. L. Swearingen
Jno. T. Reynolds
Wm.
*
Louisville, Ky.
Pres., B.F. Avery & Sons, Louisville, Ky.
Pres., State Nat 1 1. :Bk., F.rank:fort, KY.
Planter, Lucas, Ky.
Pres., First Nat•l. :Bk., Boonville, Ind.
Pres., First Nat•l. :Bk., Louisville, Ky.
Pres., First Nat 1 l. ]k., Greenville, Xy.
:nee~
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
MEMPHIS BRANCH of the FEDERAL RmSERV::ll BAlm: OF ST. LOUIS
OFFICERS Al:rD DIR?.CTORS, 1929
OFFICERS
W. H. Glasg,"Ow, l~anaging Director
S. K. Belcher, Cashier
c.
E. Martin, Assistant Cashier
DIRECTORS
Term
:zxpires
W. H. Glasgow
Wm. Orgill Chrm.
Jno. D. McDowell
E. L. Anderson iJ:
R. B. Snowden
S • E. Ragland 'if
J. W. Ald.er:son
*
Memphis, Tenn.
Pres., Orgill Bros. & Co., Memphis, Tenn~
T.PJ:es... Fidelity :Bk. & Tr. Co., Memphis, Tenn.
Pres., ling & .Anderson, Clarksdale, Miss.
V.P., Bk. of Cornm.& Tf.Co .. , 1..\emphis, Tenp.
Pres, ,,First Nat 'l.Bk. r Memphis, Tenn.
V~P., Bk. of last.Arltt• Forrest City, Ark.
# Appointed by the Board.
Dec. 31, 1929
Dec. 31, 1929
nee. 31, 1929
:Jlec. 31, 1930
nee. 31, 1930
'
1931
Dec. 31,
Dec. 31, 1931
X-6222-a
DISTRICT NO. 8
96
LITTLE ROCK BRA.NCH of the FEDERAL RESZRV::TI l3.ANK OF ST. LOUIS
OFFICERS AlTD DIRECTORS, 1929
OFFICERS
A. F. l3ailey, !·f.anaging Director
C• Wood, Assistant Cashier
M. H. Long, Cashier
DIRECTORS
Term
]lxoires
A. F. l3ailey
G. H. Campbell # Chrm.
· Stuart Wilson
Hamp Williams #
Jno. M:. Davis
Moorhead Wright :/1=
Jo. Nichol
Little Rock, Ark.
Ins., Little Rock, Ark.
Pres.,· State lTat •1. l3k., Texarkana, .Ark.
Pres., Hamp Williams H~~ Co.,Hot Springs,Ark.
Pres., Exc. Nat•l. l3ank, Little Rock, Ark.
Oh~ •• Union Tr. Co., Little Rock, Ark.
Pres., Simmons l!at'l.:Bk.,Pine l3luff, Ark.
flo Appointed by the l3oard.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
DISTRICT NO. 9
HELEN.A. :BR.ANCH of the :F'EDERAL RESERVE BAlTIC OF
MilJ~OLIS
OFFICERS Al!D DIRECTORS, 1929
OFFICERS
R. E. Towle, Managing Director
A. A. Hoerr, Assistant Casl1ier
H. L. Zimmerman, Cashier
T. :B .. ;-Je ir, Counsel
D1RECTbRS
Term
ExPires
R. E.
Henry
T. A.
c. J.
*
Towle
Sieben
Marlow
Kelly #
Kaufman
Chrm.
Helena, Mont.
Pres., Sieben Livestock Co., Helena, Mont.
Pres., Nat tl. :Bank of Mont., Helena, Mont.
Hanson Packing Co., Butte, Mont.
v. f·' Union Bank & Tr. Co., Helena, Iv:ont.
R.
o.
*
Ap:pointe·d by the Board.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
X-6222-a
DISTRICT
~ro.
10
B8
nr:mv:r:m :BR.Al!CH of the FEJ)11'Jl.AL RBSERVE :BANK OF K..\!rSAS CIT!
OFFICERS Aim DI3ECTORS, 1929
OFFICERS
J. E. Olson, l::ana.ging Director
J. A. Cronan, Assistant Cashier
S. A. :Brown, Cashier
DIRECTORS
Term
Exoires
J, E. Olson
R. H. Davis # Chrm6
Henry Swan
Merrit W. Gano #
Harold Kountze
Murdo MacKenzie #
Harry W. Farr
Denver. Col.
Wholesale Drug Business, Denver, Col.
VjP., U. s. Nat•l. Barik, Denver, Col.
The Gano-Downs Co., Denver, Col.
Chrm., Colo. Nat•l. Barik, Denver, Col.
The Matador Land & Cattle Co.,Ltd •• Denver,Col.
LivestoCk & Farming, Greele7,. Col.
- -
-
- - - - - - - - - - - - - - - - - -- -
OlAAHA BR.AlTCH of the FEDERAL RESERVE BANK OF K.A.I.'1S.AS CITY
OFFICERS AND
DI~CTORS,
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31;
31,
:::il,
31,
1929
1929
1929
1930
1930
193it
1931.
-------
1929.
OFFICERS
L. H. Earhart, Managing Director
G. A. Gregory, Cashier
Wm. Phillips, Assistant Cashier
0. P. Cordill, Assistant Cashier
DIRECTORS
Term
ExPires
L. K. Earhart
Omaha, Nebr.
Wm. :E. Hardy :#= Chrm.Hardy Furniture Co., Lincoln, Nebr.
T. L. Davi~
V.P., First Nat~l. Bank, Omaha, Nebr.
W. W. Mag~e
Farmer - StoCkman, Bennington, Nebr.
R. o. Marnell
Cashier, Merchants Nat•l. Bank, Uebr.City,Nebr.
Wm. Diesing 11=
Cudahy facking Co., Omaha, Nebr.
A. H. Marble
Pros., ltock Growers Nat •1. Barik:, Cheyenne;\77••
*
1/=
Appointed by the Board.
Dec. 31, 1929
Dec. 31, 1929
Dec. 31, 1~2~
Dec. 31, 19:30,
De~:. 31, 1930
Dec. 31, 1931
Dec. 31, 1931
.
qq
x~6222-a ...
"·
DISTRICT NO. 10
OKLAHOMA CITY BR.AE'CH of the FEilmBAL RESERVE B.AilK OF KANSAS CITY
OFFICERS AND DIRECTORS, 1929
OFFICERS
C. E. Daniel, Managing Director
R. 0. Wunderlich, Cashier
R. L. Mathes, Asdstant Cashier
DIRECTORS
Term
Bxuires
C. E. Daniel
· A'llstin Miller ://= Chrm.
Walter Ferguson
E. J. Murphy r/F
. William Mee
W.F. Nichols I
Ned. Holman
:/1=
Okla. City, Okla.
Dec •. 31,
Pres., Okla. Furniture Mfg. Co., Ok:la.City,Okla.Dec. 31,
V.p., Exchange Nat •1. l3ank, Tulsa, Okla.
· Dec·. 31,
Farming & Livestock, Clinton, Okla.
Dec. 31,
Chnn., Ex. Com:. ,.Am. 1st Nat •l.Jk., O~la.Ci ty, Okla. Dec. 31,
Merchandijling & Livestock, Tulsa, Okla.··
Dec. 31,
Pres., ~irst Nat•l. Bank, Guthrie, Okla.
· Dec. 31,
Appointed by the Board,
1929
1929
1929
1930
1930
1931
1931
1_00
X-6222-"a
'
DISTRICT UO. ll
3L P.A.SO :BRANCH of the F.EJDER:.AL RESERVE :B.A1"'K OF D.ALLAS
OFFICERS .AlTD DIBECTORS, 1929
OFFICERS
W. o. Ford, Managing Director
Allen Sayles, Cashier
DIRECTORS
Term
Exuires
W. o. Ford
A. P. Coles # Chrm.
El Paso, Tex.
Investments, El Paso, Tex.
Pres., F~rst Nat'l. :Bank of Roswell, N.M.
Pres., Peoples Mercantile Co.,Carlsbad,N.M.
V.P., The State National :Bank, 31 Paso,Tex.
Pres., Newman Invest.Co., El Paso, Tex.
The H. Lesinsky Co. , El Paso, Tex.
E. A. Cahoon
A. J, Crawford#
Geo. D. Flory
C. M. Newman #
E. M. Hurd
HOUSTON :BR.A.NCH of the FEDERAL R:"1SEB.V:S BAl'TK OF D.ALLA.S
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
-
--
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
- - - -
OFFIC3RS JiliD DIRECTORS, 1929.
OFFICERS
D. P. Reordan, !vianaging Director
H.
R. DeMoss, Assistant Cashier
L. G. Pondrom, Cashier
DIRECTORS
D. P. Reordan
J. Cooke Wilson# Chrm.
E. F. Gossett
E: A. Peden 'II=
Fred. W. Catterall
R. M. Farrar :fj:
Guy M. :Bryan
f
Appeinted by
t~e
Houston, Tex.
Pres., The Wilson :Broach Co.,Bea~nt, Tex.
V.P., So.Tex.Com.Nat 1 l.:Bank, Houston, Tex.
Pres., Peden Iron & Steel Co., Houston,Tex.
Cash.,lst Uat'l.:Bank, Galveston, Tex.
Pres., Farrar Lumber Co., Houston, Tex.
V.P., Second Nat'1. :Bank, Houston, Tex.
:Board.
Term
Exoires
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
DISTRICT liTO. 11
S.A1' .AlJTOUIO BRAUCH of the
OFFIC:::RS
FZD~RAL
.Al~D
RDSERV"3 E.AlrK CF D.ALL.AS
DIRECTORS, 1929
OFFIC:ct::RS
M. Crump, Managing Director
C. B. Mendel, Cashier
DIRECTORS
Tenn
Exuires
~---
M. Crwnp
Frank G. Crow # Chrm.
·Franz C. Groos
·. Jno. M. Bennett :ff=
:a. T. Hunnicutt
· " Reagan Houston #
Ernest Steves
San Antonio, Tex.
V.P., State Bank & Trust Co., McAllen, Tex.
Pres., Groos ~Tat •1. Bank, San Antonio, Tex.
Pres. , Standard Tr. Co. , San Antonio, Tex.
V.P., First Uat 1 1. Bank, Del Rio, Tex.
V.P., A. B. Frank Co., San Antonio, Tex.
Pres., Alamo 1Tat 1 1. Bank, ·San Anto:nio, Tex.
'
-'·
~
.#
Apryointed by the Board.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
1931
1931
~")
X.... 6222-a -1l0''
JL' ·t~~
DISTRICT NO. 12
LOS ANG:EL:E5 :BR.ANCht of the FEDERAL RESERVE :BJU'lK OF SAlT FIW!CISCO
OFFICERS
Al~D
DIRECTORS, 1929
OFFICERS
W. N. Ambrose, Managing Director
M. McRitchie, Assistant Manager
A. J. Dumm, Assistant Cashier
L. C. Meyer, Assistant Cashier
DIR~CTORS
Term
EA.:Eires
W. N'. .Ambrose
W. L. Valentine :/1= Chrm.
J. F. Sartori
J. :B. Alexander #
Henry M. Robinson
Los Angeles, Cal.
Pres., Fullerton Oil Co., Fullerton, Cal.
Pres.,Secur.Tr.& Svgs.Bk.,Los Angeles,Cal.
Spreckles. :Bros.Comm.Co. ;Los Angeles, Cal.
Pres., L.A. 1st Nat•l. Tr. & Svgs. :Bank,
Los Angeles, Cal.
31,
31,
31,
31,
31,
Dec.
Dec.
Dec.
Dec.
Dec.
1929
1929
1929
1930
1930
SALT LAKE CITY BIWtCH of the FEDERAL RESERVE :BANX OF SAlT FRANCISCO
OFFICERS AND DIRECTORS, 1929
OFFICERS
W. M. Smoot, Assistant Cashier
L. W. Dalby, Assistant Cashier
W. L.
Part~r, }f~ing Director
H. M. Craft, Assistant Manager
DIRECTORS
Term
Expires
W. L. Partner
Lafayette Hanchett
Chas. H. Barton
G. G. Wright
L. H. Farnsworth
*
f
:/1=
Salt Lake City, U.
Ohrm. Pres., Utah P. & Light Co.,S.L.City,U.
Pres.,Nat•l.~. of Commerce, Ogden, U.
V.P.,Cons.iagon & Mach.Co.,S.L.City,U.
Chrm., Walker Bros. ,Bankers, S.L.Ci ty, U.
Appointed by the Board.
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31/,
31,
31,
1929
1929
1929 ;
1930
1930
:lO~~
X-6222-a
DISTRICT NO. 12
PORTLAND BRANCH of the FEDERAL RESERVE BANK OF
SAl~
FIWTCISCO
OFFICERS AND DIRECTORS, 1929
OFFICERS
R. :e. West, Managing Director
S. A. MacEachron, Assistant Manager
J. B. Blanchard, Assistant Cashier
DIRECTORS
Term
Expires
R. !. i'lest
Nathan Strauss rf/= Ohlin.
J. C. Ainsworth
Edward C. Pease rf/=
· John F. Daly
Portland, Ore.
Fleischner, Mayer & Co., Portland, Ore.
Pres., U. S. Nat'l. Bank, Portland, Ore.
Ed:ward c. Peas·e Co.,Inc.,The Dalles, Ore~
Pres., Hibernia Com.& Svgs.Blt.,Portland,Ore.
------
~-
Dec.
Dec.
Dec.
Dec.
Dec.
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
-.----------- ----
SPOK:AD BRABCH of the FEDIRAL RESERVE BANK OF SAl! FRIU!CISCO
OFFIClCRS Alffi ·DIRECTORS, 1929
OFFICERS
D. L. Davis, Managing Director
J. M. Leisner, Assistant Manager
Evan :Berg, Assistant Cashier
DIRECTORS
Term
Expires
D. L. Davis
G. I. Toevs
D. W. Twohy
*
Chrm..
Peter McGregor
R. t. Rutter
f
rf/=
Spokane, Wash.
V.P .• .., Centennial Mill Co., Spokane, Wash.
· Chrm.,01d Nat''l:o:Bk.& Union Tr,Co.,Spokane,Wash.
McGregor I,and & Livestock Co • ., Hooper, liash.
Pres., Spokane & Eastern Tr.Co .. , Spokane, Wash.
Appointed by the Board.
Dec. 31,
nee. 31,
Dec. 31;
Dec. 31,
Dec. 31,
1929
1929
1929
'1930
1930
11
~~.
.JL ("}':'£..
X-6222-a
DISTRICT NO. 12
SEATTLE llRAl1CH of the FEDERAL RESERVE :BANK OF S.A11 FR.Al-1CISCO
OFFICERS
~~
DIRECTORS, 1929
OFFICERS
C. R. Shaw, Managing Director
:B. A. Russell, Assistant Manager
G. W. Relf, Astdstant Cashier
DIRECTORS
Term
Expires
C. R.
Chas·.
M. A.
Henry
M•. F.
=II=
Shaw
H. Clarke
Arnold
A. Rhodes
:Backus
Dec.
Dec.
Pres., First Nat 1 L :Bank, Seattle, Wash.
Dec.
Dec.
Rhodes :Bros. Dept. Store, Tacorna, Wash.
Pres., Nat 1 1. :Bank of Cou~erce, Seattle, Wash. Dl:3c.
Seattle, Wash.
#: Chrm .. Pres., Kelly Clarke Co., Seattle, Wash.
#
.A.-:)-pointed by the :Board.
31,
31,
31,
31,
31,
1929
1929
1929
1930
1930
-·
-·3
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESE!RVE BOARD
X-6223
January 26, 1929.
SUBJ.TICT:
Examination of Member Banks.
Dear Sir:
rhe Federal Reserve Act requires that the cost of ex~inations
of member banks made by the Federal reserve banks or the Federal Reserve Board through the Federal reserve agents, be assessed against
the mGmbor bank examined. Within the last two weeks, bills have
been introduced in both the Senate and the House of Eepresentatives,
which if enacted will amend the law in such a way as to make the
charges for member bank examinations discretionary with the Board:
several occasions in the past the Bo~rd has attempted, by
letter, to· define a credit investigation, but after several
years experience it has arrived at the conclusion that a far too
liberal interpretation has been placed upon credit investigations by
the agents.
~on
circul~r
The Board has had this nmtter under review for some time and on
October 10, passed the following resolutions which deal with the
responsibility of the Federal Reserve Board in reference to member
banks as it interprets the law:
"BE IT RESOLVED, That the Federal Reserve Board
recognizes its duty under the Federal Reserve Act to keep
itself informed as to the condition of all member banks;
"BE IT FURTHER RESOLVED, That the Board is of the
opin!on that it is justified in relying upon the Comptrol er of the Currency for such information as to
Nati ,nal banks;
l,1BE IT FURTH:Eli RESOLVED, That whenever the reports
of ex~ination of State member bankQ furnished by the
State authorities are not deemed satisfactory either to
the Federal reserve bank of the district concerned or to
the Federal Reserve Board, the Feaeral reserve bank or
the Board shall cause to be made at least one examination or investigation each year of such character as to
furnish satisfactory information, the cost of such examinations to be assessed against the member banks
examined."
. .
... 2-
.
X-6223
In order to avoid duplications and unnecessary expense of
operation, which now exist, the Board has voted that the Department of State Bank Examination, now in operation in the Board's
quarters in Washington, be abolished, effective February 1, 1929,
and that you be charge.d with the duty of seeing to it that the
Board's views, as covered in the above resolutions, are carried
out in your district. This does not mean that the Board is attempting to relieve itself of all responsibility, and'you are
advised that thro1;1gh its examining force, it will check carefully
your bank examination department.
Tho following instructions will serve as a gUide to you in
performing ~our duties:
...
1, The Cotnptroller of the C"uri'ency is a me~ber of the
Federal Reserve Board and under the 1~w is chatged with the responsibility of enforcing the terms of the National Bank Act and
also of the Federal Reserve Act. The Board therefore relies upon
the Comptroller Gf the Currency to perform his duties and it will
not be necessary for the Federal reserve agents to duplicate the
work.
2. In the opinion of the Board, State reports of examination can be relied upon in the great majority of cases to furnish
the necessary information to the agents.
..
.
3. If a State examination is unsatisfactory, a credit
investigation will not give sufficient information for the agents
to act intelligently upon and a complete examination should be made
for which the member bank should be charged. This does not prohibit
investigations of member banks by Federal reserve banks or Federal
reserve agents without cost, because the Board realizes that unusual
situations require unusual action. Therefore, the Board will act
promptly by approving or disapprovmng the request of any Federal
reserve barik or any Federal reserve agent for permission to make an
investigation without cost. The Federal reserve banks, however, and
the Federal reserve agents, in mak:ing such req~:~;est for investigation
wi.thout cost must bear in mind tr...a.t if the investigation contemplates
anything covered by the following language, ~hich appears in Section
21 of the Federal Reserve Act, the Board cannot waive the cost: 11 The
expense of such examinations Shall be borne by the batik examined.
Such exami~tione shall be so conducted as to inform the Federal .reserve batik of the condition of its member batiks and of the lines of
credi-t which are being extended by them. 11
4, If Federal reserve age~ts have evidence in the form
of letters or otherwise, that officers and directors of State member
.
:lOG
. ..
X-6223
-3-
banks have had their attention called to violations nf the law and
unsound banking practices by State authorities, it is not necessary
for agents to duplicate this work.
5. If this supervision is not conducted by State authorities Federal resorve agents are directed to take such action, as in
their opinion, will discharge the responsibilities of the Board.
6. When a State member barik fails to show any disposition
whatever to corr.ect these irregu.lari ties within a reasonable time
so as to show improvement in its conditiOni the Federal reserve ·
agent will be expected to ley the information before the directors
of his barik and ask them to tnake a formai reccmiroondation to the
Federal Reserve Board. with reasons, ltS to whether or not the State
member barik, should continue as
member.
a
7. Federal reserve agents ate instructed to discontinue
their present practice of furnishing the Federal Reserve Board with
reports of examination of State member bahks, excep.t in e~treme cases
where they may wish to ask fol' advi~e or request the l3oard to cancel
membership• In. lieu of these reports; agents will furnish the Board
with art a.na11~:d$ of ..e.ch report received or made by them, using the
enclosed analysis fo~. A supply of this form is being forwarded
under separate cover.
The Federal reserve agents are advised that the Board thoroughly
that it is utterly impossible to lay down uniform, detailed
proce~ute in each and every district because of the local conditions
which exist in the 48 states. It does believe, however, that certain
fundamental policies can be laid down and asks your cooperation toward
that end.
r~al izes
Yours very truly,
)
R. A. Young,
Governor •
•
..
.TO .ALL FEDERAL RESERVE AGENTS.
1_{)~'
1.08
X-6224
FEDERAL RESERVE
STATEMENT FOR
T~
BOARD
PRESS
For immediate release:
Washington, D. c.
January 26, 1929.
The Federal Reserve Board announces the appointnent of Mr. Rolla Wells, of St. Louis, as a Class
11
C11
Director of the Federal Reserve Batik of St. Louis for the
unexpired term ending December· 31, 1930, and his designation as Chairman of the Board of Directors of the Batik
and Federal Reserve Agent.
Mr. Wells, who has been serving as Class "B"
>
Director of the Bank, succeeds Mr. Wm. McC. Martin, whom
the Directors have elected as Goverrt't>r•-
..
X-6225
FEDERAL RESERVE
:10H
BOARD
STATEl.1El-i'T FOR THE l?RESS
}.
For release in Morning Papers 1
Tuesday, January 29, 1929.
The following is a summary of general
business and financial conditions thrdughout the several Federal Reserve Districts,
based upon statistics for the months of
December and January, as will appear in
the forthcoming issue pf the Federal Reserve Bulletin and the monthly reports of
the Federal reserve banks~
Industry and trade continued active in December, and the general levei of
prices remained unchanged.
Banking and dredit conditions at the turn of. the year
were influenced chiefly by seasonal changes in the demand for currency and by
requirements for end-of-year financial settlements.
Production--Output of manufactures decreased in December, but the decline was
less than is usual during the month, and the Board's index was slightly higher
than in November and above the level of a year ago.
Smaller than usual seasonal
reductions were reported in the daily average output of steel, pig iron, automobiles, copper, cement, silk, and flour, while cotton and wool textiles declined
considerably.
Meat-packing increased in December, reflecting a larger output of
pork products, though beef and wutton production was smaller.
•
employment and payrolls was larger than at this season of last year.
of minerals
..
Volume of factory
~as
Production
in somewhat smaller volume in December than in November, reflect-
ing chiP-fly a large reduction in the output of bituminous and anthracite coal.
Production of copper and zinc ore on a daily average basis was slightly smaller,
while petroleum output increased.
Preliminary reports for the first half of
January indicate a steady increase in the output of petroleum and greater activity
in the steel, automobile, coal, and
~um~er
industries following the temporary lull
during the inventory period at the end of the year.
X-6225
-2-
•
Building contracts awarded in 37 Eastern states declined sharply during
Dece~ber,
as in the preceding month, and were smaller than in any December
EJii).(le 1924.
~n ~~rds
The decline from
l~ovember
was attributable lart;ely to decreases
for residential building and public works and utilities.
Ey districts,
the largest declines over the preceding month were in the Cleveland, Chicago,
Boston, and Richmond Federal reserve districts, while increases were reported
in the New York, Philadelphia, and Atlanta districts.
Trade--Department store trade showed greater activity in December than in
the preceding month, after allowance is made for the customary holiday increase.
'rotal sales for the month were the largest on record, exceeding December 1927 by
one per cent, although there was one less trading day this year.
Increases over
a year ago were reported for the New York and Philadelphia districts while substantial decreases occurred in Atlanta and Minneapolis.
Distribution at wholesale
declined seasonally and was smaller than a year ago.
Freight-car loadings in December and the first half of January showed a
slightly larger than usual seasonal reduction, but, as in earlier months, were
above a year ago.
Prices--The general level of wholesale prices, as measured by the index of
the United States Bureau of Labor Statistics, reznained approximately the same during Deeember as in the preceding month.
Average prices of iron and steel, auto-
mobiles, copper, and building materials continued to advance slowly, and prices of
.
farm products, after declining during October and November, also rose in December,
reflecting higher average prices for raw cotton, oats, rye, and some grades of
wheat, offset in part by lower prices for corn and cattle. · In the first three
weeks of January the price of rubber advanced sharply, and wheat, corn, potatoes,
and flour also increased, while silk and sugar decreased somewhat, and hides
•
reached the lowest level in more than a year.
-3-
..
Barik credit--Banking and credit conditions in January were influenced
chiefly CrJ the seasonal decline in the volume of money in circulation.
At the
reserve banks the return flow of currency from circulation resulted in a liquidation of member barik borrowing and small declines in reserve bank holdings of
acceptances and of United States securities •. Total bills and securities showed
a decline of about $450,000,000 for the period from December 26 to ·January 23 and
were in about the same volume as in midsummer of last year.
At member banks there was an increase in the total volume of loans at the
turn of the year due chiefly to year-end financial settlements, and the temporary
withdrawal of funds loaned by corporations in the New York market.
In January
deposits and loans of member banks. declined to approximately the level of the early
part of December.
In the money market, rates on call loans declined sharply in January, while
rates on time loans on securities remained firm and rates on acceptances advanced •
..
-,
January 26, 1929.
Honorable A. Ueland,
401 New York Life Bldg.,
Minne~polis, Minnesota.
Dear Judge Ueland:
I have received your letter of January 14 and have
read with muCh interest the enclosed memorandum addressed by
Mr. Sigurd Ueland to the Federal Reserve Bank of Minneapolis
with regard to the policy to be followed by that bank in asserting rights on behalf of depositors of unremitted fo~ transit
items against receivers of insolvent member banks.
You ~ggest that this raises a question of policy
which is of interest not only to the Federal Reserve Bank of Minneapolis but to the other Jederal reserve banks, and request an
informal and entirely unofficial expression of my views.
•
•
I agree with you that the questions raised in this
memorandum are of interest to the entire Federal reserve system;
· afld, ina.smu.ch as they vi tally affect the understanding arrived
at between counsel for all the Federal reserve banks and the
office of the Comptroller of the Currency during the conference
of counsel held on July 13, 1925, I telegraphed for your permission
to send copies of this memorandum to counsel for all Federal reserve banks. Having received your consent, I am sending copies of
this memorandum to counsel for all Federal reserve banks and
am req~esting an expression of their views. I am omitti~ from
the copy which I am sending them, however, subdivisions 5 and 5 of
the memorandum; which pertain solely to the peculiar situation of
the Federal Reserve Bank of Minneapolis and which you do not desire
to have circulated. Of course, I shall respect the confidential
nature of this memorandum and not disclose the contents of the same
to anyone in the office of the Comptroller of the Currency.
In view of the importance of the questions raised by
this memorandum and in view of the changed situation resulting from
the court decisions discussed therein, I believe that it would be
well to have a conference of counsel of all Federal reserve banks
in Washington some time in the near future to discuss this entire
subject, endeavor to reach an agreement among ourselves, and then
discuss the subject with the Comptroller of the Currency in an
effort. to reach an agreement with that office. I have not yet been
authorized by the Federal Reserve Board to call such a conference,
•
•
x... 6226
1.1 ')
tJ)
•
but expect to take the matter up with Gover11or Young in the near
future and I shall appreciate an expression of TO~ views as to
the advisabilitT of calling suCh a·conference •
I am so greatlT pressed for time that I canno\ at this
moment give J"OU a full statement of rq Views with regard to the
matters discussed in )"Our memorandum. My offhand views, however,
based upon only a hasty consideration of the anbject, may be stated
brieflT as follows:
..
(1) With all due respect, I disagree with all three of the
legal conclusions stated on page 8 of the memorandum. In doing so
I recognize that the decision of the Circuit Court of Appeals in the
Early case and the decisions in the casES of Ke)"es v. Federal Reserve
B8nk of Minneapolis and Federal Reserve Bank of Minneapolis v. First
National :Sank of Eureka apparently sustain your views on the first
point. The Early case, however, will be taken to the Supreme Court
of the United States, and I believe the decision of the Circuit Court
of Appeals will be reversed. Even if the Supreme Court does not reverse the Circuit Court of Appeals, I think the decision in the Early
case is distinguishable from any case arising in a district where
cheCks are collected on the remittance basis instead of the charge
basis; because the Circuit Court of Appeals based its decision so
· largely upon the fact that the normal course of business of the Federal Reserve :Sank of Richmond was to collect checks by charging same
to the reserve account of a drawee, and the banks which deposited
such checks with the Federal Reserve Bank of Richmond did so in reliance upon the belief that they would be collected by charging them
to the reserve accounts of the drawee banks. The Circuit Court of
Appeals sustained the District Court on the question of the use of
the proceeds of the canceled Federal reserve bank stock, holding that,
under the specificprovisions of the Federal Reserve Act, the proceeds
of this stock could not be used to pq the cash letters. On the
question of the application of the collateral, I believe the decision
in the Midland National :Sank case is clearly wrong and is also distinguishable from the case of a Federal reserve bank collecting checks
under Regulation J, which specificallT provides that the Federal
reserve bank shall act only as agent and that, 11 The amount of any
check for which payment is actually and finallT collected funds
is not received shall be charged back to the forwarding bank,
regardless of whether or riot the check itself can be returned".
(2) I agree with you. that, in the present state of the
law, 1 t is unsafe for a Federal reserve bank to release 'to the receiver the .reserve account and probably the collateral, but not
the proceeds of the canceled stock, without first obtaining a release of liability from the depositors of its uncollected cash
items drawn on the in•olvent bank or a court order instructing the
Federal reserve bank to release such assets to the receiver.
(3) I believe that, if your views of the law as expressed
on page 8 of the memorandum are upheld by the courts, there is
X-9226
1.1_4
-3-
grave danger that the courts will bold that, having the right to
applJ the reserve accaun~. the proceeds of t-he. canceled stock and
the collateral to the coliection of outstanding unremitted for cash
letters, the Federal reserve bank has the duty to do so and ~annot,
as an agent have U7 interest adverse to its principal, utilize
these assets to protect itself against losses on rediscounts. I
have no positive view that the courts .should reach this conclusion,
but I feel that there is danger that they !118.1 do so.
.)
•
(4) I belie~e, therefore, that, in order to avoid placing
the Federal. reserve banks on the horns of the dilemma pointed out by
Mr. Sigurd Ueland at the bottom of page 9, the Federal reserve banks
should, as a matter of policy, not insist upon the right to collect
cash letters out of the reserve accounts, the proceeds of the canceled
sillOck, or the collateral, but, on the contrary. should do everything
in their power to divest themselves of this right and the corresponding
;poasibility of a duty to exercise it.
(5) I believe this is especially important in view of the
faci that, if the courts should hold that the Federal reserve banks
have such a duty ,nd must exercise it, it would seriously interfere
with the freedom of the Federal reserve banks in extending aid through
rediscounts or loans to a member bank in a badly extended condition.
By taking additional collateral they can often extend financial assistance and sometimes prevent the insolvency of a member bank; but would
hesitate to grant additional credit without taking additional collateral.
If the courts hold that the collateral must tirst be applied to the
collection of unremitted for cash letters, the possibility of extending such aid will be greatly curtailed, because th.e additional collateral
will not afford the same protection to the Federal reserve bank as it
has in the past.
(6) I also disagree with the view expressed at the top of
7 that the recent amendment to Regulation J was not intended to
prevent the reserve balance from being available to p~ unremitted for
cash letters after notice of suspension. On the contrary, that was
the sole purpose of the amendment.
·
..).
p~
..
I have the greatest respect for your opinions and those
of Mr. Si~rd Ueland; and it is with much· regret that I disagree
to such a large extent with the · views expressed in the memorandum.
I could not, however, conscientiously refrain from expressing my
disagreement when you reqnested an informal expression of my views.
With kindest personal regards and all best wishes for both
you and :Mr. Si~ Ueland, I 8D1
WW:vdb
Cordially yours,
Walter Wyatt,
General Counsel •
-
Cc:?Y
FEDERAL RESERVE :BANK
•
X-G226•a
OF MINNEAPOLJ:S
January 14, 1929.
Walter Wyatt, Esq.,
Counsel Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
We are taking the liberty of enclosing copy of a rather
lengthy comnunication from us to the Federal Reserve :Bank of
Minneapolis, dealing with a question of policy which it seems to
)
us is of interest not only to the
other Federal Reserve Banks.
Minn~apolis
bank but to the
You are familiar with the questions
discussed in this communication and if you feel so inclined we
would very much appreciate having an expression of your views.
We would
understa~d,
of course, that any such expression of views
would be entirely unofficial.
We do not know how the Minneapolis bank will deal with
this problem.
If the bank should adopt our recommendations it
occurs to us it might be advisable to have a discussion of the
whole subject with representatives of the Comptroller's office.
If this were done, we believe your good offices might prove invaluable in bringing about
~n
understanding.
We should be glad to have you show
t~e
enclosed opinion
·to Governor' Young or any member of the :Board, but of course we
would not want it submitted to the Comptroller's office in its
present form.
Yours very truly,
SU:ME
(S)
A. Ueland
Sigurd Ueland
Harry Yaeger,
Deputy Governor.
The recent decisionI of the Supreme Court of Minnesota in the
case of Midland National Bank &: Trust Compaey vs. First State Bank of
Sioux Falls et al. has again brought to the fore the question which
has repeatedly vexed the Federal Reserve Bank of Minneapolis.
.
question has various phases, but broadly it
~at
m~
That
be stated thus:
is to be the policy of the Federal Reserve Bank
of Minneapolis with respect to asserting rights on behalf
of its depositors of unremitted for transit items against
receivers of insolvent member bariks?
'
The failure to answer this question correctly involves
the possibility of so much future trouble, litigation and liability
that we have deemed it wise to reconsider it in all its aspects at
the present time.
On account of your interest in and familiarity
with the subject, we will deal with it at some length, witbout making
much of an attempt at condensation •
•
1·.·
A member bank: closes and your bank has an unremitted for
transit letter addressed to that bank outstanding.
returned with the i-tems unpaid and protested.
no problem.
The
letter~
be
In that case there is
The items are simply charged back to your endorsers.
In
such a case, with rate exceptions, the closed bank never became liable
on the items.
--11 A r-.1
JLJi_ '
X-6226-b
-2-
But suppose the drawee bank has charged up the checks to the
respective drawers and has attempted to remit to ybur bank by draft or
otherwise.
In such a case your bank ·has sometimes charged up the draft
to the reserve account of the ·member bank, after notice of its suspension.
More often the credits given for the items deposited with you have been
charged back to the respective depositors.
Where this has been done, your
bank has requested authority from each depositor to file a general claim
)
in the receivership of the closed bank as the depositor's
11
agent 11 and 11 wi th
the understanding" ·that the deposi'tor 11 would not look to 11 your bank "except
for such dividends as it might receiven on account of the depositor's items.
·,_
In a typical case some of the depositors of the checks represented by the
dishonored remittance draft have authorized your bank to file a claim on
their behalf and others have preferred to file their own claims.
Accordingly
the amount of the transit claims filed by your bank has, in most cases, been
less than the aggregate amount .of the unremitted for items.
In some cases the closed bank is liable to your bank on rediscounts
or bills payable.
The closed bank has stock in your bank; it
reserve balance to its credit, and it
rD~q
have a
have deposited collateral securities
under a collateral agreement almost identical in
in the Midland National Bank case.
m~
te~s ~ith
the one involved
Hence, the general question undeT con-
sideration·maf be subdivided as follows:
(1)
"-'
Are you entitled to charge remittance drafts to the reserve
account after notice of the suspension of the remitting bank?
(2)
Are you entitled to hold the proceeds of the cancelled
Federal Reserve bank stock for the benefit of depositors of
unremitted for tran$it itemsl
-3-.
(3)
Are you entitled to hold the collateral securities and
the proce·eds thereof for the same purpose?
(4)
If the preceding three questions are answered in the
affi~tive,
is there a correlative
to assert these
ri~hts
~ty
to your depositors
in their favor?
2.
>
f
In the Midland National :Bank case the court he.ld that collateral
)
securities held pursuant to a collateral agreement in the form used by
your bank could be held as secu.ri ty for dishonored remittance drafts. notwithstanding the fact that the items attempted to be remitted for by such
drafts had been deposited for conditional credit and subject to the right
to charge back if not collected, and notwithstanding the fact that such
checks had actually been charged back to the d.eposi tors after notice of
the suspension.
The view of the court was that the collection of checks
creatE!S a liability on the part of the collecting bank to the forwarding
bank; that such a liability is within the terms of the collateral agreement,
.)
and that it is no business of the collecting bank or its receiver that the
forwarding bank may stand in a relation of trust to its depositors, or that
the latter may be the parties beneficially interested.
If the Midland decision is good law. as we think it is, then in
)
every case where your bank holds a collateral agreement you are entitled
to hold or foreclose on excess collateral from a closed national bank until
your claim on account of unremitted for transit items has been paid in full.
We limit this conclusion to national banks because there are statutes in
certain of the states of the ninth district, ootably North Dakota and Minnesota, which might aff.ect the result in the cas& of member state banks.
X-6226-b
-1l
~$
As the decision of the state court would not be controlling in
cases in the federal courts. we will consider briefly the relevant decisions
of the latter.
In the case of Keyes, as Receiver of the First National Barik of
Clarkfield v. Federal Reserve Bank of Minneapolis, the United States District
Court for this district decided in 1918 that the reserve account was available
by way of setoff to pay unremitted for transit items the cradi ts .for which
had been charged back to its depositors by the Federal Reserve Bank after
notice of suspension.
In Federal Reserve Bank of Minneapolis v.
Fi~st
National Bank of
Eureka (277 Fed. 300) it was held by the United States District Court for
South Dakota that the reserve account and also the proceeds of the cancelled
stock could be applied towards the liquidation of a dishonored draft sent in
attempted remittance of a transit letter.
In the case of Thos. Ear!y, Receiver of the Farmers and Merchants
National Barik of Lake City
v. Federal Reserve Bank of RiChmond, the United
States District Court for South Carolina ·has rendered a decision against
the Federal Reserve Bank of Richmond and has held that the latter was not
entitled to use a reserve balance to pay unremitted for checks.- So far as
we know no written opinion was filed by the court.
)
The Richmond bank 1 s method
of collecting transit letters was by charging the reserve account in accordance with a time schedule.
We doubt, however, whether this could distinguish
the case from the Clarkfield and Eureka cases and it seems to us that
•
is a conflict.
~here
An appeal to the United States Circuit Court of Appeals for
the Fourth Circuit is pending.
We have read the briefs on both sides and it
is not unlikely that there will be a reversal.
Federal district courts will usually follow the decision of circuit
(1.
.JL.JL.I
' ~
'
•'
' ' . i,'
-5-
X-6226-b
courts of appeals for other circuits even though inconsistent with their
own previous holdings.
Foster on Federal Practice, f375.
In re
-~.
~aird,
154 Fed. 215.
.Warren ~ros. Co. v. Evans, 234 Fed. 659·.
Vacuum Cleaner Co. v. Thompson Mnfg. Co. 238 Fed. 239.
However, the decision of the Circuit Court of .Appeals in the RichmOnd case
>
would not be followed he_re if in conflict with principles laid down by the
Circuit Court of Appeals for this circuit (the 8th).
That court in the recent
•
case of Storing, as Receiver of the Merchants National Bank of Mandan vs.
First National Bank of Minneapolis held that the First National Bank of
Minneapolis had the right to hold a deposit balance against the receiver of
a national bank to reimburse itself :(or a transit letter where the
remitt~ce
draft in attempted payment thereof was received after notice of suspension.
~~
This case was submitted in such a wq that the point that the depositors of
·I
the First National
~ank:
were the beneficial owners of the claim against the
insolvent bank was probably not before the court.
. J
attempting to
.
make ·this point
The receiver, however, is.
.
in his petition for reargument which is still
pendfng. On this· point Judge Cant, the trial judge, sa14 in his opinion:
11
)
No matter what the relation of the two banks here in
qaestion
~have
been with their respective
patrons on and
,.
prior to December 21, 1923, the banks themselves were dealing
with each other as principals."
In any litigation between your bank and a receiver of a national
ba~
it is probable that the receiver could either bring the action in or
remove it to the
>·
fe~eral
court.
See Studebaker Corporation va. First National :Bank,
10 Fed. (2nd) ·590.
;•,
-6.;.
X-6226-b
All we can say at present about the law in the federal courts
•
is that the decision of the lower court in the Richmond case raises doubt
..
as to what will be the ultimate answer to questions (1) (2) and (3) put above •
•
3.
T.he Federal Reserve Board has recently amended paragraph (4) of
...
Section V of Regulation J by eliminating the clause:
ttacy
Federal reserve
barik may reserve the right in its check-collection circular to charge such
items (checks) to the reserve account or clearing account of any such bank
at any time when in any particular case the Federal reserve bank deems it
necessary to do so."
This amendment becomes effective February 1, 1929.
The right indicated has been reserved by your bank in your checkcollection circulars since August 1, 1924.
.·~
Such reservation certainly
strengthens the claim of your bank to apply the reserve balance against
unremitted for transit letters.
..
The reason for amending Regulation J was doubtless the feeling
that if the Federal reserve banks had the right to utilize reserve balances
for the payment of check collections, there might be a correlative duty to
the prejudice of their own claims on rediscounts, and notes of the member
banks maintaining the balances.
April 11, 1928.
See letter of 'A. Ueland to Gov. Geery dated
The comptroller's office will undoubtedly contend that this
amendment of Regulation J shows an intention that the reserve balance is no
·'
longer to be available to pay unremitted for transit letters after notice of
suspension.
In our opinton this was not the purpose or effect of the amend-
ment.
The pledge agreement for.m used by your bank provides that your
bank 11 shall also have a lien upon any balance of tre deposit account" of the
member bank "existing from time to .time
* * * for
any liability" of the
··7-
member bank to you::- bank
11
now
~xisting
or hereafter contracted.u
construction given in the Midland National Bank case this is an'
Under the
ejp~ess
•
agreement that the reserve shall be available
to pay unremittei for Cheeks.
The reserve balance of a member bank is also, in a sense, a
clearing balance.
As to non-member clearing banks the Federal Reserve Act,
#13, provides that such banks must maintain 11 a balance sufficient
to offset
the items in transit held for its account by the Federal reserve bank. 11
A
former counsel of the· Federal Reserve Board has ruled that this phrase
11
i tems in transi t 11 refers to checks drawn upon the
and forwarded to it for collection by the Federal
Reserve Bulletin, Vol. 3, p. 617.
~on-member
Re~~rve
clearing bank
Bank.
Federal
If this view is correct, then there is
clear intention shown on the part of qongress .that. the credit balance of' a
non-l'Jlember clearing bank
it.
~hall
stand as security for clearing balances against
While not expressed in the Act itself it is persuasive to us that Cong-
ress intended the same as to reserve balances •
•
We will summarize our own views upon the questions under consideration as follows:
1.
Where a member bank or a non-member clearing bank fails
to return or to
re~it
for transit letters, you are entitled to
charge the amount .thereof to the reserve or clearing
though the
2.
re~ittance
acco~nt
even
draft be received after notice of suspension.
Where a member bank fails to return or remit for transit
letters, you are anti tled to use the proceeds of the cancelled
Fed,eral Reserve bank stock to reimburse your depositors of the
' such letters even
.
i terns in
though such i terns have been charged
back to such depositors.
3.
Where a member Dational bank fails to retlll.'n or remii
-8-
for tra.nsi t letters, and your bank holds collateral securities •
pursuant to the usual form of collateral agreement you are
entitled to hold this collateral or its proceeds to reimburse
your depositors of the items in such letters.
We reserve our
opinion as far as collateral securities deposited by member
state banks is concerned.
With the decisions in the somewhat muddled condition pointed out
abvve, a legal opinion is only what the law should be; we can only guess
what the law will be.
While we have always been able to maintain the fore-
going views in litigation up to the present time, decisions in other litigation may pTove controlling against them.
However, we do not believe that even though the Circuit Court of
Appeals should affirm the lower court in the Richmond case that would
neces·sarily require us to revise our opinion as to the rights of your bank
in another circuit.
Such an affirmance would only have the effect of making
your rights and .obligations more_ doubtful than they are at present.
4.
•
The next question to be considered is whether the rule in the
Midland National Bank case, the rule we are contending for, has as a corollary
the requirement that the pledgee bank must share pro rata in the collateral
securities with its depositors of unremitted for checks.
•,
In our opinion this
does not follow and we feel confident that your collateral securities may be
appropriated first to the promissory notes and notes rediscounted by the insolvent
me~ber
bank.
See U. S. Natl. Bank v. Westervelt, 55 Nebr. 424.
Freeman & Shaw v. Citizens Natl. Bank, 78 Iowa 150.
-9-
The next question is whether, assuming your bank has the rights
herein indicated, there is not also a corresponding dnty to utilize the
balance in the reserve account, proceeds of cancelled Federal Feserve stock,
and excess collateral for the benefit of your depositors of unremitted for
cheCks?
In other words is your bank liable, as for a breach of trust, in
cases where it has surrendered reserve balances or excess collateral to a
reciever of a suspended member bank?
On this point Sigur4 Ueland in his
memorandum to you dated June 20, ·1928 (First National Bank of Colman) said:
11
In other words the Federal Reserve Bank • • • finds itself to
some extent on the horns of a dilemma..
If the surplus is paid over
to your endorsers of the transit items your bank may be liable to
.the receiver; if surrendered to the receiver there mightpossibly
be liability to your endorsers.
fiThere may be a question whether your bank is not under
some moral duty to its depositors to protect them as far as possible.
Especially in cases where an attempt was made to remit by draft on
the reserve acoount, it seems unfair that the balance in that account should be returned to the receiver rather than used for the
)
purpose intended by the officials of the suspended bank. 11
We are firmly of the opinion. that if there is
~
obligation in this
sitUf1-tion to either the receiver or your depositors of unremitted for
che:eks, it is emphatically to the latter.
In the light of the Midland National
Bank decision 1 t is certain that 70ur bank canno·t continue surrendering excess
collateral to receivers without incurring a certain amount of unpopularity
.•.
~~
with the better posted among such depositors.
Our recommendations are as follows:
-101.
X-6226-b
That all settlements already made or agreed·upon between
yo1ir bank and the comptroller's office or a receiver, including all of
the so-called "Oswego
2.
a~eements 11
entered into, be allowed to stand.
That hereafter no reserve balance, proceeds of cancelled
stock, or excess collateral held under a collateral agreement be ,surrendered
to a receiver until all transit claims filed by your bank have been paid or
until a court of last resort has so ordered.
3.
That your form of collateral agreement be amended so as to
state expressly that you; bank has a prior lien on the reserve balance and
collateral securities for the note, rediscount and overdraft indebtedness
and a secondary lien for liability resulting from unremitted for transit
and collection letters.
(N. :B. Some special consideration would have to
.be given to the case of member state banks in this connection.)
4.
That the comptroller be advised of this change of policy and
the reasons therefor, and that negotiations be opened looking toward a
speedy determination of the questions involved by the Circuit Court of
· Appeals of this circuit.
Counsel.
Assistant Counsel.
•
X-6227
DISTRICT COURT
S'l'ATE OF MIIDi!nSOTA
COUNTY OF
FOURTH JUDICIAL DISTRICT
HENl~IN
International Shoe Company,
Plaintiff,
vs.
Federal Reserve Bank of Minneapolis,
Defendant.
)
)
)
)
)
)
)
)
)
FINDINGS OF FACT
CONCLUSIONS OF LAW
AND ORI!ER FOR JUroMENT
The above entitled cause was tried the 2nd
the court without a jury, a jury having been waived.
.
Reed appeared on behalf of the plaintiff and Messrs.
day
of April, 1928, before
Messrs. L.A. Reed and A.
P~
Ueland & Ueland appeared on
•
•
behalf of· the defendant. The court having heard the evidence adduced and being
fully advised in the premises
FINre AS FACTS:
1.
That on o-ctober- 6, 1923 plaintiff was the owner of a check drawn
payable to its order by Schefter Clothing House, said check being in the sum of
$1376.23 and being drawn upon the Citizens State Bank of Langdon, North Dakota;
that on the same date plaintiff duly endorsed said check by unrestricted endorsement to the First National Bank in St. Louis and .deposited said check with said
bank for credit to its account with said bank;
that the pass book issued by said
bank in which said deposit was entered contained the following provision, to-wit:
NOTICE TO CUSTOMERS.
The First National Bank in St. Louis
accepts business on the following
conditions only:
Lil./iiTATION OF BANK'S LIABILITY FOR
COLLECTIONS OR·CREDITS.
All item~ received
accomodation ~nd at his·
more than ordinary care
items; and it shall not
for Collection or·credit are taken for depositor's
risk; and in no case shall ·this Bank be liable for
and diligence on its part with respect to such
be liable for the negligence or fraud of any person
X-6227
.
-2-·
j_'.'t:t<:'.-.'
('.-.J '
or corporation to whom such items may be sent for payment, nor shall it
be liable for returns on such items until such returns have been cashed.
In case any item is lost through faUure to collect, or failure of return
to be paid, this Bank shall have the right to charge back such item to the
depositor.
In the absence of written instructions to the contrary by the depositor
in each case, items may be sent for payment to the Batik, Banker or Trust
Company on which they are drawn, although a charge is made for such collectio~
This Ba_nk will accept items for collection or credit only on the above terms
and conditions and the delivery to this Bank of such items shall ·constitute
an acceptance of such terms and conditions by the customer.
FIRST NATIONAL BANK in ST. LOUIS
Deposited by
That on the deposit slip by which said check was deposited was printed the following:
"First National Barik in St. Louis. Deposited by International Shoe
Company. ·To depositors: Checks, drafts etc., are received and
credited for the accommodation of Depositors. The barik declines
responsibility for their collection and reserves the right to'
charge them back to the account if they, or the remittances received
for them, are not paid. When instructions to the contrary are not
given, items may be sent to the barik on ·which they are drawn, though
a Charge is made for the service, and when so sent, these conditions
are not waived or suspend.ed. 11
2.
That on October 6, 1923 the said First National Bank in St. Luuis
did then and there credit the amount of said check at its face value to the
checking or commercial account of plaintiff with said bank and did then and there
end<a·se the same as follows:
"P~ to the order of aey bank or banker.
Prior endorsements guaranteed.
Fil'st National :Bank in St. Louis, C. L. Allen, Cashier, 4-5, 614 Oct. 6,
1923. 11
and it qid then and there send the said check by mail to defendant with other
items enclosed with a letter dated October 6, 1923 which bore the direction:
11 Credi t 4-4 Federal Reserve Bank of St. Louis 4-4 For account of First
National Bank in St. Louis, Mo. 4-5. Protest of items over $10 except
those on the face of which appears this stamp 'no - pro 4-5' or similar
authority that can be identified by the collecting bank as that of a
preceding endorser. Telegraph nonp~nt of items $500 or over and
quote the name of last preceding endorser . 11
,
-3-
X-62271_~Z.f'1
which said letter and check were received by the defendant on October 8, 1923.
3.
That thereafter and on October 8, 1923 the defendant endorsed the
said check on the back thereof as follows:
"Pay to the order of any bank, banker or trust Co. All prior endorsements
guaranteed October 8, 1923. Federal Reserve Bank 17-8 Minneapolis, Minn.
17-8. 11
and thereupon transmitted the said cheOk direct to said Citizens State Bank of
Langdon for ?ayment.
That said check for $1376.23 was forwarded by defendant to
said bank in Langdon on October 8, 1923 in a form letter bearing the following
printed
instr~ctions:
We enclose the following items for collection and returns. Do not hold
items for any reason whatever. Wire non-payment of items of $500 or over.
Do not protest items of $10 or over or those bearing stamp on the face -no pro 17-8 -- or similar authority of a preceding bank endorser. Prote~t
all other items. Return this letter with your draft. 11
11
That said letter contained items aggregating $1812.31.
4.
That said Citizens State Bank received the said letter and eheck
and on October 10, 1923 issued for the said above described check and other checks
its draft drawn on the Nortbv;estern National Bank in Minneapolis in favor of
defendant for the said sum of $1812.31, stamped the said above described $1376.23
check 11 paid11 , debited the account of the said Schefter Clothing House with the
· amount thereof and returned the said check to the said Schefter Clothing House.
·~a,
on or after October 10, 1923 the said Citizens State Barik of Langdon trans-
mitted said draft by mail to the defendant and that on October 18, 1923 the
defendant received the same.
\ .
5.
That on October 18, 1923 the defendant presented the said draft to
the said drawee bank for payment and payment was refused and the same was dishonored, and defendant thereupon caused said draft to be protested for non-payment.
That on October 19, 1923 the defendant charged the amount of said check to the
Federal Reserve Bank of St. Louis for the account of the said First National Bank
~n
St. Louis.
That on October 23, 1923 the said First National Bank in Sit. Louis
-4-
X-6.:::27
notified plaintiff that the said check had not been collected and then and there
•·
charged the amount of the same to
said plaintiff and on October 24, 1923 the said
plaintiff duly repaid the amoun.t of said check to the said First National Banlc in
'-.
St. Louia.
That said. check of $1376.23 has never been returned by defendant or
by any one else to said First National Batik in St. Louis or to plaintiff.
That
no demand. has ever been made by defendant on the said Citizens State Bank of Lang.don
for the
return of the said check subsequent to the dishonor of the said draft.
6.
That said check for $1376.23 was handled by defendant as a part of
defendant's clearing house. operations pursuant to Regulation J - Series 1920,
promulgated by the Federal Reserve Board, and that said check was received by
defendant direct from said First National Bank in St. Louis pursuant to an arrangement entered into between defendant, the Federal Reserve Bank of St. Louis and said
l
~··...
J
First National Batik in St. Louis, whereby the privilege of routing checks direct
to defendant was extended to said First National :Sank: and whereby it was understood
'
and agreed that all checks so routed direct to defendant shculd'be received and
handled by it in all respects in the same manner and subject to the same terms
and conditions that were pre.scribed by defendant from time to tme for the handling
of checks in its ·clearing house operations.
7.
That Regulation J - Series of 1920, promulgated by the Federal Re-
serve Board as aforesaid, also provided in part as follows:
11 In handling i teins for member *** batiks a Federal Reserve Bank will
act as agent only. The Board will require that each member *** batik authorize
its Federal Reserve Bank to send checks for collection to banks on which
checks are drawn~ and, except for negligence, such Federal Reserve Batik will
aseume no liability. Any fur\her requirements that the Board may deem
~ecessary will be set forth by the Federal Reserve ~~ in their letters of
instruction to their member *** banks. Each Federal Reserve Bank will also
promulgate rules and regulations governing the details of its operations as
a clearing house, such rules and reil:Ulations ";a 1::-e bindinp,: upon all member
and. nonL:.ember 'banz:s which are clearing tnrouch ·the ]'ederal Reserve Ba:.1l:. 11 ,
8.
That pursuant to and in accordance \7i th sc.id order e.nd regulation
of the Federal Reserve Board, defendant did promulgate rules and regulations
governing the details qf its operations as a clearing house Ul1uer said Federal
'
-5-
X-6227
:130
Reserve Act; that said rules and regulations which were in force during all times
mentioned in the complaint, insofar as the same are material to the issues here
in controversy between plaintiff and defendant, provided as follows:
"GElrERAL CONDITIONS. Every bank sending checks to this bank,
or for its account to another Federal Reserve bank, will be
understood to have agreed to the terms and conditions of this
circular, and to have agreed that ~n receiving such items
this bank will act only as the collecting agent of the sending bank, and as such authorized to send such items for payment in cash or bank draft direct to the bank on which they
are drawn, or to forward them to another agent with authority
to present or send them for payment. in cash or bank draft
direct to the bank on which they are drawn, and that this
bank is authorized to charge back the. amount of any item,
whether returned or not, for which this bank has not actually
received payment either in cash or in the proceeds of the bank
draft. 11
9.
That said rules and regulations of defendant were contained in a
check clearing and collection circular of defendant known as.defendant 1 s circular
No. 286; that said circular No. 286 was furnished to the Federal Reserve Bank of
St. Louis long prior to October 8, 1923, but that no copy of said circular was ever
furnished to or received by plaintiff and that plaintiff had no direct dealings
either with defendant or the Federal Reserve Bank of St. Louis until long after
October 8, 1923.
10.
That on October 8, 1923 said Citizens State Bank of Langdon was in
fact insolvent and was unable to pay the checks of its depositors as presented,
and at *o time on or after October 8, 1923 could said check for $1376.23 have
been collected in cash.
11.
That the only loss in connection with the collection of said check
for $1376.23 was incurred from the fact that said Oi tlzens State Bank. of Langdon,
on October 10, 1923, wrongfully treated said check as paid, as hereinbefore set
forth, without having available funds to rami t for said check to defendant, whereby the drawer of said check was discharged on October 10, 1923.
12.
That defendant never agreed with plaintiff to act as the agent of
piaintiff in the
collecti~n
of said check for $1376.23.
X-6227
-6-
13.
Th.s.t the only te.rms and conditions -q.nder which d~f endant ever
agreed to handle said check were those terms and conditions contained in
Regulation J and defendants circular No. 286, as hereinbefore set forth.
· 14.
That until October 18, 1923 defendant had no knowledge or notice
of the insolvent condition of the Citizens State Bank of Langdon, and that defendant in handling said cheCk for $1376.23 for collection was not negligent in·
any particular.
AS CONCLUSIONS OF LAW the court finds that defendant is entitled to
ju~ent
·of dismissal against plaintiff and for
i~costs
and disbursements to be
taxed by the clerk.
LET JUDGMENT BE ENTERED ACCORDINGLY.
(S)
Dated ·January 12, 1929.
Enter a stay of 40 days.
(S) Johnson, Judge •
•
Harry A. Johnson
Judge of District Court.
X-6231
FEDERAL RESERVE E.ANX
OF
ST. LOUIS
'January 7, 1929.
M;y dear
~:r
.. Wyatt :
In Vol. 10 (2d) No. 5, Page 1038, of the January
2, 1929 issue of the Southwestern Reporter Advance Sheets,
is found an opinion of the Court of Civil .A;-~L1eal s of Texas
in the case of the AMJlJR!CAN EXCHANGE NATIONAL BAine vs.
STEEU:Y, relative to a form of acceutance the wording of
which is the same as the wording of the first part of the
acceptance in the case of LANE vs. CRl.Th1,· 291 S. W. Rep.
1084, but which acoep'tance did not have the objectionable
clause contained in the latter portion of the Lane vs. Crum
acceptance.
The Court, after referring to the decision in the
Lane vs. Crum case, pointed out the distinction between the
forms of acceptance under consideration and the form. of acceptance in the ~ne vs. Crum case, and said the form of
acceptance under consideration was not open to the same
objections.
You will recall that this question was before
the Conference of Counsel of the Federal Reserve Banks at
·our last meeting, and, we recommended the elimination of
the objectionable clause in the LANE vs. CRUM case.
I presume you will be interested in knowing that
the Texas Courts have approved a form similar to the one
recommended.
Very truly yours,
(S)
Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, D.C.
Jas. G. McConkey,
Counsel.
•
X-6232 .
•
FEDERAL EESERVE BANK
OF ATLANTA
December 18, 1928.
Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
~.
Dear Walter:
I have your letter of November 15, addressed
to my firm and enclosing a copy of a recent opinion
rendered by the Supreme Court of Minnesota in the case
of Midland National Bank & Trust Company vs First State
Bank of Sioux Falls, et al. It seems to me that this
case is of great interest to Federal Resarve Banks. If
it is to be generally followed it will modify several
of our preconceived ideas. The Court seems to hold that
a bank holding collateral for any and all indebtedness
due it by another bank has. the right to ~pply such collateral in satisfaction of unpaid remittance drafts
which, while drawn in favor of and upon the q;redi tor
bank, are, in fact, sent in payment of items belonging
to third persons.
In many cases Federal Reserve Banks hold
ad.di tional 11 or general collateral for the payment of
any and all indebtedness due by a member bank, and it
wo~ld·appear that the proceads of the capita1 stock in
the Reserve Bank might fairly be classed as general collateral. So far as I know, it has been the custom of
Federal Reserve Banks to regard any such collateral as
being held only for its own benefit. If, however, the
Minnesota Court correctly states the law, the Federal
Reserve Bank would have the right to take such collateral and utilize same in the extingUishment or toward
the liquidation of items which, although collected by a
closed member, had been by the Reserve Bank "charged
back 11 because unrani tted for in actually collected funds.
11
It is difficult to see a reasonable basis for
a distinction between collateral held for the indebted-
X-6232
-2-
ness of a borrowing bank o.nd ~ts reserve account, nor
does the opinion of the Minnesota Court necessarily turn
upon the proposition that the remittance drafts had been,
prior to suspension, mailed to the Reserve Ba~z by the
closed member. Followed to its logical conclusion, the
case would be authority for the proposition that any
Federal Reserve Bank would have in its own right a
claim against a member which had collected items for
the account of the Reserve Bank, with the concomitant
right to charge the amount of such items against the
reserve account of the closed member or to pay the same
out of excess collateral.
The many complications which mie.;ht result are
obvious and, as above stated, the decision seems to be
at variance with many of the conclusions which were
reached at the Conference of Counsel which had under
consideration similar questions several years since.
I would appreciate it if you would write me
your own views with respect to the decision.
With the compliments of the season, I am,
Sincerely yours,
(S)
RSP/w.
~obt.
S. Parker.
•
X-6232-a
OF SAN FRANCISCO
December 21, 1S28.
·cal ter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:Although I understand that it is not
customary for counsel of the Reserve bariks to reply to your routine communications transmitting
decisions of interest, I feel that some cotnment
on the case of MIDLAND 1TATI01J.AL B.A..i'm: vs. FIRST
STATE B.AlJK OF SIOUX F.ALLS, transmitted with your
letter of December 15, is a~uropriate.
It is possible that I have misconceived
the true purport. of the court's decision in this
case, but from my study of it I feel that it is
an unsound ~nd dangerous decision.
Y~ views are set forth at greater length
on a memorandum which I have prepared for the inforn~tion of the officers of this barik, copy of
which I transmit herewith.
Very truly yours,
(S) Albert C. Agnew,
Counsel.
ACA/SW
Encl.
X-6232-b
j_3f}
DIGEST OF DECISION
December 21, 1928.
MIDLAliD NATIO:tlAL J3Al!K vs. FIRST STATE
BAl~ OF SIOUX FALLS, SOUTH DAKOTA
(Sup.Ct. Mi:im., 11ov. 30,1928.
Not yet reported.)
Pledge ~f collateral by drawee
bank wi h its corr~s~ondents raay
be used. by corre.s-ooridents to uay
checks forwarded to drawee, even
after such checks have been charr,ed
back to customers of forwarding baru{.
The Supreme Court of 1annesota has just rendered a decision
in the above entitled case which seems to the writer unusual in its
conclusion and dangerous in its effect upon Federal reserve batiks.
TEZ FACTS.
The defendant, First State :Bank of Sioux Falls, had as
its Minneapolis correspondent the plaintiff, Midland
Nationc..l.l :Bank. These two banks trB..l;sacted considerable 'business and
as security for advances made by the Minneapolis bank to defendant
a ~ledge agreement had been entered into under the general terms of
which all securities deposited by defendant bank r:i th plaintiff batik
were to remain as collateral to any loans or indebtedness due from
defendant to plaintiff.
Plaintiff forwarded to defendant for collection and remittance certain phecks and drafts drawn on other banks in Sioux Falls,
which it had rj\ceived from various customers. All of these were
collected and ~efendant forwarded its drafts upon plaintiff in settlement. Defenda#t failed before the drafts reached plaintiff. There
were no funds ~n deposit with plaintiff and payment of the drafts was
refused.
The checks forwarded by plaintiff to defend.B.nt for collection and remittance had been deposited by various customers .with the
understanding that they would be credited but that the customers would
not have the right to Withdraw the funds until the checks were paid,
and, if not paid, that plaintiff might charge them against the depositors.
lfhen the drafts sent in settlement were dishonored, plaintiff charged
against its customers the amount of the checks which thet had deposited,
and in this action sought to foreclose on the collateral which it held
from defendant for the payment of the indebtedness represented by the
remittance drafts.
·
,
X-6232-b
-2'I'IDi: D.'.DCISION.
Tho court held, although the checks had been charged back
.
to plaintiff's customers, that plaintiff had the right to
resort to the collateral for the payment of the drafts sent in remittance
for such checks. The court overruled the contention that the plaintiff
having rid itself of the indebtedness to its depositors represented by
the checks, was not privileged to resort to collateral which it held for
the settlement of obligations between plaintiff and defendant. Plaintiff's customers, so the court stated, shou~.d wt be required to resort
to th'eir claim against the insolvent bank. Plaintiff bank was therefore
allowed to foreclose the collateral, reverse the entries on its books,
and credit the amount of the checks back to its de~ositors.
TH:E.R::l:S1JLT.
In the opinion of the writer this decision is bad law
and contains several elements of danger to Federal reserve
banks.
It is clear from the decision that under the contract between
plaintiff and its depositors, plaintiff would have suffered no loss through.
the transactions with defendant. In fact, all of the items for which credit
had been given were charged back and at the time the suit was brought, so
far as I can see, no indebtedness existed in relation to the checks between
plaintiff and defendant.
The pledge agreement recited in the opinion was clearly one
safeguarding plaintiff on debts due from defendant, and not on debts due to
plaintiff acting as agent for its depositors.
If this decision constitutes good law, by a parity of reasoning
a Federal reserve ba:ik: having received a remittance draft, subsequently
dishonored by reason of the insolvency of the drawer, and having charged
the items back to its member banks, would have the right and probably a
corresponding obligation to resort to the reserve balance of the insolvent
bank for the payment of items embraced in a cash letter. We have sought
to maintain a status of agency in the collection of checks and, having the
right to reTerse entries involved in unpaid cash letters, we have contended
(a.nd supported the contention in court) that we may not resort to the reserve balance and a.re under no obligation to do so.
It seems to the writer that the Supreme Court of Minnesota has
failed to distinguish between the rights of the plaintiff bank arising out
of the relationship of debtaf and creditor; and its rights against the
collateral involved in its ro.lationship as collecting agent for its de•
positors.
Albert C. Agnew
ACA/s~·
Counsel
'11i
X-6233
FEDERAL
RESERVE
BOARD
STATEli:E:lTT FOR THEl PRESS
For release in
morning papers
.February 7, 1929.
February 5, 1929.
The Federal Reserve Bulletin for February, 1929, will contain the
following
state~ent:
T'ne United States has during the last six years experienced a most
remarkable run of economic activity and p~oductivity . . The production, distribution and consumption of goods have been in unprecedented volume. The economic
system of the country has fu~ctioned efficiently and smoothly. Among the factors which have contributed to this result, an important place must be assigned
·· to the operation of our credit system and notably to the steadying influence
and moderating policies of the Federal Reserve System•
During the last year or more, however, the functioning of the Federal
Reserve System has encountered interf~rence by reason of the excessive amount
of the country• s credit absorbed in speculative security- loans' The credit
situation since the open:ing of the new year indicates that some of the factors
Which occasioned untoward developments during the year 1928 are still at work•
The volume of speculative credit is still growing.
Coming at a time when the country has lost some 500 million dollars
bf gold 1 the effect of the great and growing volume of speculative credit has
alreadY produced some strain, which has reflected itself in advances of from 1
to 1-1/2 per cent in the cost of credit for. commercial uses. The matter is one
that concerns every section of the coantry and every business interest, as an
aggravation Gf these conditions may be expected to have detrimental effects on
business and may impair its future.
The Federal Reserve Board neither assumes the right nor has it any
disposition to set itself up as an arbiter of security speculation or values. It
is, however, its business to see to it that the Federal reserve barnes function
as effectively as conditions will permit. When it finds that conditions are
arising which obstruct Federal reserve banks in the effective discharge of their
function of so managing the credit facilities of the Federal Reserve System as
to ll.ccommodate conn:nerce and business, it is it.s duty to inquire into them <:md
to take such measures as may be deemed suitable and effective in the circmnstances to correct them; which, in the immediate situation, means to restrain
the use, either directly or indirectly, of Federal reserve credit fadH ties in
aid of the growth of speculative credit. In this connection, the Federal Reserve
Board, under date of February 2nd, addressed a letter to the Federal reserve
banks, which contains a fuller statement of its position: -
-2-
X-"6233
"The firming tendencies of the money market which have been in
evidence since the beginning of the year - contrary to the usual
trend at this season - make it incumbent upon the Federal reserve
banks to give constant and close attention to the situation in
order that no influence adverse to the trade and industry of the
country shall be exercised by the trend of money conditions, beyond
what may develop as inevitable.
The extr.aord~ absorption of funds in speculative security
f·1oans w.tnch has characterized the credit movement during the past
year or more, in th~ judgment of the Federal Reserve Board, deserv~s
parti01;1.lar attention lest it become a decisive factor working toward
a still f~rther firmihg of money rates to the prejudice of the country's
commercial interests.
The resources of the Federal Reserve System are ample for meeting
the growth of the country's cor...i!Ilercial needs for credit 1 provided they
ate competehtly adciinistered and protected against seepage into uses
not contemplated by the Federal Reserve, Act.
The Federal Reserve Act does not, in the ,opinion of the Federal
:Reserve Board, contemplate the use of the resjources of th'e Federal reserve banks for the creation or. extension of speculative credit • A
member bank is not within it~. t'easonab1e claims for redililcount facilities at its FE!lderai reserve bank when it borrows either for the
purpose of ruaking speculative loans or for the purpose of maintaining
. speculative loans.
The Board has no disposition to assume authority to interfere
with the loan practices of member banks so long as they do not involve the Federal reserve banks. It has, however, a grave responsibility whenever there is evidence that merr.ber banks are II'.aintaining speculative security loans with the aid of Federal reserve credit.
When such is ·the ce.se the Federal reserve bank becomes either a ,contributing or a sustaining factor in the current volume of speculative security credit. This is not in harmony with the intent of
the Federal Reserve Act nor is i t condUcive to the wholesome operation of the banking and credit system of the country."
X-G235
STATE11ENT OF BUREAU OF ENGRAVING AND PRINTING
Cost of pre})C..rint;
Feder~·l
Reserve Notes during Janu:.;.ry, 1929.
Je.n. 2 to 31, 1929, Federal Reserve Notes, Series of 1914.
666,000 sheets, $5, New York,
tt
133,000
10
"
"
7SS,OOO sheets,
@
$35.50 per M,
"
"
$28,364.50
Credit c.;..l:"'ropriations, 1929, as follows:
Comp. of Ernp.,
Bur. Eng. & Prtg.
Plnte Printine;.
Bur. Eng. & Prtz.
Mtl s ~'& Mise • Exp. Bur. Eng. & Prto.
$14~501.85
61471.90
7,390. 75
:Btl.rettu of Encr-.-.vint; and Printing
Per
c. R. Long
Assistant Director
X-6236
FOREIGN BRANCHES OF AMERICAN
BANIU!G INSTITUTIONS
American Trust Company, San Francisco, Calif.
:Branch:
England:
London
Bankers Trust Company, New York, N. Y.
Branches:
France :
Paris .
London
England:
Chase National =B..::;ank="-'-=N~e'-w-=Y..;;.o;;:..;rk:;.;;z...,-=N~·-=Y...:...
Branches:
Cuba:
Havana
Panama:
Panama City
Canal Zone: Cristobal
Empire Trust Company, New York, N. Y. {Non-Member)
Branch:
England:
London
Egui table Trust Company, New York, N. Y.
England:
London (2 offices)
Branches:
France:
Paris
Mexico:
Mexico City (Collection agency)
Farmers Loan
:Branch:
Trust Company, New York, N. Y.
England:
London; at same address as the
Fanners Loan & Trust Co.,
Ltd. , London, England, a
British company whose
entire stock is owned by
the Farmers Loan and
Trust Co., New York, N.Y.
Paris
Representatives:France:
&
First National Bank, Boston, Mass.
Branches:
Argentina:
Buenos Aires ( t·;7o offices)
Cuba:
Havana
( t:1o o:flices)
Guaranty Trust Company, New York, N. Y.
Branches:
England:
London (three offices)
Liverpool
Belgium:
Antwe;rp
Brussels
France:
Paris
Havre
National City Bank of New York, New York, N. Y.
Branches:
Argentina: ·:su.enos Aires
Rosario
Belgium:
Brazil:
Antwerp
:Brussels
Pernambuco
Rio de Janiero
Santos (Agency)
Sao Paulo
X-6236
-2National City Bank of New York, New York, !-!. Y. (continued)
Brunches:
China:
Canton
Dairen
Hankow
•
Harbin
Hongk:ong
Mukden, Manchuria
Peking
Shanghai
Tientsin
Cuba:
Caibarien
Camaguey
Cardenas
Ciego de Avila
Cienfuegos ·
Florida
Guantanamo
ManzanillC>
Matanzas
Santa Clara
Havana - City Branch
Belascoain
Galiano
Cuatro Caminos
La Longs..
Plaza de la. Fraternidad
Moron
Nuevitas
Palma Soriana
Pinar del Rio
Remedios
Sagu.a la Grande
Sancti Spiritus
Santiago·
Vertientes
.. Chile:
Santiago
Valparaiso
Dominican Republic:
Barahona
La: vega
Puerto Plata
San Pedro de l1:acoris
Santiago de Los C~balleros
Santo Domingo City
England:
London - City Branch
West End Branch
India:
BombB\Y'
Calcutta
Range on (Burma)
Italy:
Genoa
Milan
-3-
X-6236
National City Batik of New York, New York, N. Y. (continued)
Kobe
Branches:
Japan:
Tokyo
Yokohama
Osaka
Java:
Batavia
Panama:
Colon
Panama
Peru:
Lima
Porto Ricoz
San Juan
Caguas
Straits Settlements:
Singapore
Uruguay:
Montevideo
Venezuela:
Caracas
BBANCHIDS OF FOREIGN BANKI!:ZG CORPORATIONS OPERATING
U1TDER AGREEMENT WITH Tml F.EDERAL RESERVE BOARD
Batik of Haiti, Inc.
(Subsidiary of National City Batik of New York).
Holds stock of Banque Nationale de la Republique d'Haiti, operating at the following
points in the Republic of Haiti:
Port au Prince (Read Office)
Aux Cayes
Ca-pe Rai tian
Gonaives
Jacmel
Jeremie
· Petit Goave
Port de. Paix
St. Y~c
Aquin (Agency)
Miragoane (Agency)
:Elqui table Eastern Banking Corporation (Subsidiary of Equitable Trust
Company, New York, N. Y.)
Branches:
China:
Shanghai
Hongkong
International Banking Corporation (Subsidiary of National City Batik
of New York, N. Y.)
·
Branches:
China:
*Hankow
*Peking
*Shanghai
*Tientsin
!4::)
X-6236
International Banking Corporation (Subsidiary of National City Bank
of New York, N. Y•) (Continued)
Branches:
England: ·
London
·
Spain:·
Barcelona
Madrid
Philippine Islands:
Cebu
Manila
*Ndn•banking offices.
International Finance Compe~~- , ·
Federal Reserve Board,
December 31, 1928.
Exercise note issuing
function only
(Subsidiary of the National City
Bank of New York). OWns entire
c~pital stock of the National
City Bank, France, 5• A.
144
......
X,..6236"
l.~~~!~~ !~!!~!! !!!!!!~
STATEMENT FOR THE PRmS
For immediate release:
,Friday, February 15, 3:00 P,M.
The Federal Advisory Council at a preliminary
meetin~
yesterday made the following minute, Which was delivered to the
Federal Reserve Board.at the regular quarterly meeting of the
Council and the Board this m,ornipg_:
11 The Feder~l Advisory Council approves the action
of the Fed.eral Reserve :Board :in instructing the Fed.eral Re,sel'V$ Bar.ks to prf;'vent, as far as possible, the
diversion of. Federal reserve funds for the purpose of
carrying lo:ms ba3ed on securities. The Fed.eral Advisory
Council t!V-t$.~est.s that all the member banks in each district
be asked d il•ec tly by the Fedel'al Reserve Bank of the district to coo:perate ill order to a"ttailt' the end desiredo.
The Council believes beneficial results cari be ~tta.ined
in this manner. 11
~. 'r {"
..JL ':.t )
FEDERAL RESERVE BOARD
WASHINGTON
ADDRE$$ OFFICIAl.. COI'tR.E$PONDENCE T()
THE FED~!.. RE:SERVE B()ARD
X-6239
February 16, 1929.
Dear Sir:
There are sent you today by registered mail
copies of the reprint of the Federal Reserve
Telegraphic Code Nos.
to
. , inclusive, to replace a like number of copies now charged to your
Eank on the Eoard •s records.
This code has been reprintea with only such
revision as has been nece~:~se.ry in order that additional phrases may be properl; placed as to
subject and alphabet, all supplemental code phrases
covered by the Eoard•s circular letters having been
included therein, except thQse which have become
obsolete.
•
·
There are attached two lists covering changes
in the revised code book, one showing new words
which have been substituted for old code words, and
the other giving new words which have been added to
the new code book.
The reprint, as in the previous issue, does
not inclu&e any of the four-letter code words assigned to cover telegrams concerning reports to the
Eoard•s Division of Eank Operations.
The new code book becomes effective on March
1st, after which date please return to this office
all code books of previous issue now in your possession, in order that proper credit may be given.
Kindly acknowledge receipt of the new code
books on the attached form.
Very truly yours,
J. C. Noell,
Assistant Secretary.
(Enclosu-res)
TO GOVERNORS Oi ALL
f.
R. BANKS.
X-6239-a
LIST OJ' d'i CODE WORDS Su:BSTITUTED FOil' OLl') CODE i70RDS IN THE REVISED l&DITlON OF
FEDERAL RESERVE TELEGRAPH CODE :BOOK
NE» WORDS
OLD WORDS
.ABSE1TTING
ABSTINENT
ACCEPTANCES (E.ANKERS 1 ) DELIVERED :BY lr.EW YORK - ETC -
A'BSONOUS
ABSTRACT
ACCEPTANCES (BANKERS 1 ) RECEIVED FROM :BOST01T - ETC -
ANCHORESS
ARCEER
(NANJ!l OF APPLYING BANK) ACCEPTS CONDITIONS OF N.:E1ta;ERSHIP-ETC-
ANCHORING
ARCHERY
APPLICATION OF----FOR MEK:BERSHIP IN F R SYSTEM - ETC -
ANCHOR:BALL
:BEFOOL
APPLICATION OF----FOR ORIGINAL STOCK IN F R BANK - ETC -
NARBATEDLY
:BEFRIEND
:BEHOLDEX
:BEGET
STOCK PAYMENT ACCT SUiiSCRIPTION TO STOCK F R BANK - ETC .
CERTIFICATE OF AUTHORITY ISSUED :BY COMPTROLLER - ETC -
NOWHERMIT
BESTOWING U S TREASURY CERTIFICATES OF INDEBTEDNESS SERIES TM 1929
SUJ3JECT
J3ESTRIDE
II
II
II
II
TM-2 1929
NOWHEROIC
:BESTRIP
II
II
II
II
TJ 1929
NOWHERRING
:BIGOTED
II
II
II
II
TS 1929
NOWHORSE
:BELOVETH
NOWHOUID
:BESTIAL
II
:B 1930-32
NOWHOUSE·
:BESTOWAL
II
c
J3EHEFT
:BELIDWS
:BEGRUTTED
EELLPULL
II
II
II
II
!I
:BEHEFTED
:BEIDNG
If
II
II
II
. II
:BEGRUT
:BELOVE
II
II
II
"
:BUNKAGE
:BUCKISH
COLLECTION - SENT DIRECT :BY MEMBER- ETC -
:BULXLESS
:BUCKLE
COLLECTION - ADVISE STATUS :BY WIRE - ETC -
CHISELLED
CHIGNON
CURRENCY - FEDERAL RESERVE NOTES - ETC -
CHEMICALLY
CIWRCH
II
II
II
II
II
CHRISTIAN
CHtJRNUTG
11
II
11
II
II
CHINAMATE
CIDER
If
II
II
II
II
. NOWHERO
us
TREASURY NOTES - A 1930-32
193~32
CERTIFICATES OF INDEBTEDNESS SPECIAL - WITHDRAWAL - ETC -
II
-·-
.
.,...~-
-P-
Jt.... 62l39-a
j_
NEW WORDS
OLD WORDS
CHRISMAFT
CLAVICLE
CHRISNIACE
CLAYB.ANK
II
TREASURER U S DESIRES TO OBTAIN - ETC -
CHATTERILL
CLAYKILN
11
COLLATERAL HAVING BEEN DEPOSITED -
CHINK IRK
CLAYli~ORE
II
1LEASE REQUEST COMPT.ROL1ER - ETC -
DRAYLOT
DREDGING
DRYS ELL
DRUID
II
DRYPOBE
DRUlviMER
II
IN ACCORDANCE WITH YOUR TELEGRAM - ETC -
DUCALITE
DUCKBILL
II
YOUR GOLD SETTLZliiE1TT FUND ACCOUNT - ETC -
DUBITACE
DUCKED
II
YOUR ACCOUlrr WITH F R AGENTS FUND - ETC -
DUBITAT
DUCKFOOT
II
YOUR ACCT WITH GOLD SETTLEMENT FUND - ETC -
DUPLEXING
DUPl<:AN
II
VERIFY ITEM
DUPATING
DURATE
II
COMPLYING WITH WIRE
DUPATE
DURBAR
II
CHARGE OUR (HEAD OFFICE) FIVE - ETC -
DUPLEXED
DUSKY
11
HAVE TODAY CHARGED YOUR FIVE - ETC -
JUMBLY
JUNKETING
JUGULUM
JURnt.AST
II
BEGINNING (DATE) DAILY EARNINGS - ETC -
JUMENTLY
JUSTIFIED
II
WE CREDIT YOU TODAY - ETC -
JUGULATE
JUSTNESS
II
BANK POLSKI LOANS REDUCED - ETC -
JUMBELER
JUSTLY
"
HAVE MADE FURTHER GOLD LOANS - ETC -
:V.ARSHP INE
MASCOT
MARTIAN
MASCULATE
"
OUR BOARD OF DIRECTORS TODAY - ETC -
M.ARTIANATE MASCULINE
II
OUR EXECUTIVE
MARSHNUT
:MASHBALL
II
FEDERAL RESERVE BOARD TODAY
MARS BLAND
M.ASHIEST
II
COMMERC!AL, AGRICULTURAL Ali.D - ETC -
MARSHMAN
MASKERS
II
MARROWCELL
MASKING
II
AGRICULTL1LlL AND LIVE STOCK - ETC -
II
BANDRS' ACCEPTANCES MA.'.FURING - ETC -
~~OWISH
MASON
SUB.TSC T
CURRENCY - TREASO,RER
US
~~UZSTJD
ETC -
TO SHIP ·-
~TC
-
FEDERAL RESERVE - SAN ANTONIO BRAlmH
PLEASE CREDIT OUR GOLD SETTLEMENT FtlND-ETC -
$__FOR CREDIT OF - ETC - ETC. -
PARTICIPATION - PURCHASED TODAY F.ROM FOREIGN BANKS - ETC -
REDISCOUNT - FEDERAL RESERVE BOARD TODAY - ETC -
II
COMMITT~
II
- ETC -
II.
---
.... 3-
X-6239-a
./~
NEW
.1:....
WORDS
OLD WORDS
SUEJECT
REDISCOUNT - !tU;DE ACCEPTANCES - MATURING - ETC -
MASSIVECX
tiASONIC
lvtARROWED
MASONRY
11
.ALL CLASSES OF PAPER - ETC -
lfu\RSHY
MAYM:OON
11
MINIMUM :BUYING RATE - ETC -
MARS IAN
lv'lAY017NAISE
II
II
II
MARS ILIA
MAYORALTY
II
II
"
:VIARS OJ;. INE
MAYORESS
II
II
II
MARTIANLY
MAYPOLE
II
RATES AT WHICH BA1'iJKERS - ETC -
MARTINET
li.AYQUEEN
II
RATES AT WHICH GOV:SRNMENT - ETC -
MARSO ON
IvlAZURX.A.
II
NO
MOCKJ.AR
MIXElDLY
MITHA.N
lHXING
11
lviiTER
IHXTURE
II
II
II
MITHA.BLE
IviiZZEN
II
II
II
MOCK JEST
MIZ ZENMA.S T
II
UNITED STATES TRE.A.S1JRY ORDER - ETC -
MOCKJADE
MIZZLING
11
THE NEW RATIO- OF APPORTIONING - ETC -
MITHFUL
MOANED
11
REFERRING ACTION COMMITTEE - ETC -
N.ITHIC
MOANFUL
11
REFERRING TEMPORARY SALES - ETC -
MITIIRA
l{:o.A.NFULLY
"
MIS VOTE
MOLLIFY
11
HAVE .ARRANGED WITH TREASURY - ETC -
MITiffiiAC
MOLLUSKS
11
REFERRING TO YOUR
NAVIFORM
MUTTON
N.ARRATELL
NEWCOME
NAVIDE
NOT.A.ELES
NE:BUIDNG
NOTARIAL
NEGROAT
NOTARY
NAVYYAWL
NAVIESTER
t~
CHA.l~GE
IN EXISTING SCHEDULE - ETC -
SECURITIES - TREASURY HAS AUTHORIZED - ETC -
STOC~S
REFERENCE EXCF.ANGE 'OF "iHRES - ETC -
II
& BONDS
"
11
MISVOTE" TELEGRAM - ETC -
- REFUND OF CAPITAL STOCK PAYMENT - ETC -
"
"
"
PURCHASED TODAY - U S SECURITIES - ETC -
II
WE CRZDI T TODAY
NOTATING
II
SALE TODAY RESULTS IN DIFFERENCE - ETC -
NOTEBOOK
II
REFERRING DISTRIBUTION BILLS PuRCHASED-ETO--
STATE BAJIK PAYMENT ON CAPITAL STOCK - ETC -
SOLD TODAY $__ U S SECURITIES - ETC -
$__ YOUR PRO RATA - ETC-
-4-
NEW
wg
~D
WORDS
. X-6239-a
1.50
SUBJECT
NAPPINTLE
NOTEDLY
STOCKS & :BONDS - FOR USE HT YOUR PRESS STATEl.f..ENT
DGRALING
NUCHIO~
II
UPON AUTHORITY C P D - ETC -
NAVAL
UUMERATE
II
PLEASE PURCHASE AT NOT TO EXCEED - ETC -
NEGRATE
1TUMERIC
"
UPON RECEIPT OF AUTHORITY C P D - ETC -
MUSKDUDE
NUMEROUS
II
ACCEPT DELIVERY -- FROM -- - ETC -
ONRUN
OLYMPIAN
"
TELEGRAPH REPLY OVER PRIVATE LEASED WIRE
PATROLING
P.ARTROLING
CALENDAR
NOT AFTER MARCH-
POMADE
POMN.ADE
DECIMALS
.194
REORGAN
REORDER
NUM:BERS
l8Q
UNFAMILIAR UHF.AlHLAR
DOLLARS
6300
UNHANDYM.A.N UNHANDY
DOLLARS
18,000
'·
X-6239-b
LIST OF Fc:r~· CODE WORDS Ju~D rrr:'.". PHRAS:C:S ";illiCH .ARZ m;n:G ADmD TO 'l'E:E
j_5j_
FEDERAL RESERVE TELEGRAPH CODE :BOOK AND ARE DTCLUDED m Tl-::E REVISED EDITION
. ACACIA.
C .ARE SHIPPING TODAY FOlt
~C()ijft
OF _ _ _ ACCEPT.AlTCES $_ __
_ _ _.DISCOUNT_ __.:Alm CHARGE YOu"R ACCOUNT
.x...$_ __
.AGRAM
----'ADVISE$. Il!!EM $___ YOURS _ _ _TO NOTARY
BERTH
WE CHARGE
.;z;..§..;..__
OF
TOTAL $
BERT HAD
ITEMS _ _ LISTED NOT ENCLOSED IN CASH L:l:TT:JR
--$_ _
WE CHARGE $ - - - PA!MENT TO
_ A T _ __
DISPOSnTG OF :BON:CS AS U!STRUCTED IN YOUR TEL:EGRAM (LETTER) OF _ _
:BL.AMA.GE
FORWARDING TO _ _ C~CK FOR $..........,...._ ON
SENT US IN ERROR
(:BY_ _ ) TFfEIR/YOUR/ CASH ~TTER OF - - - ELUE:BELLOW
RETURNING CHECK (DRAFT) ON
$ ------
(DATE) li'OR ENI()!tSJill:IE1'fll!
:BLUEBILL!
RETURNING CHECK(DRAFT) ON ____ FOR $~YOURS _trOT ON PAR LIST.
EUNKAT
WE CREDIT YOUR ACCOUNT TODAY WITH $
REPnEStNTlNG PROCEEDS OF
COLLECTION#_ SENT DIRECT TO US :BY_ WIRE tm;:EER DATE CREDI~:b
EURHULL
YOUR COLLECTION fir__ $_ _ ON
BURLET
YOUR COLL"ECT!ON
f_
REPORTED IN H.ANtS OF NOTARY
$....___ON _ _ ~AID CLAIM HAVE REMI~TED DIRECT
'
CELIBA.TING
CREDITING $ __ CHECK(DR.AFT)ON _ _ LETTER _ _
CELIBEAR
CREDITING $ __ PROCEE!S OF BONDS DELIVERED TO _ _ # _ _
CHAINGATE
PLEA.S'E CREDIT AS OF TODAY DELAYED UT OUR OFFICE
CHA.NELAGE
WE CREDIT $ __ ITEMS _ _ ENCLOSED NOT LISTED IN CASH LETTER
http://fraser.stlouisfed.org/
OF _
Federal Reserve Bank of St. Louis
TOTAL $ --~
~·
. --·
X-6239....b
-2CHANGINGLESS
WE CBEDIT $
CHANGINGLY
WE CREDIT $___ OUR PART SP.ICI.AL Ilm1ST:,::;;;NTS
CEERAD
GOLD COIN
CLUCKN'ESS
PLEASE BEVERSE YOUR DEDUCTION
COLLUSITE
UNABLE TO MAKE DELIVERY - - - WILL .ACCEPT DELIVERY
-----
ON _ _ _YOUR TRANSACTION
CONSIDERABLE
----- HELD IN SAFEKEEPING
INTERBlST ON
#_ _ _WIRE
$_ ___
£lEW PAYMENT FIGURES
REFER YOUR_ OF_ OTJR _ _ YOU·.REPORT $_ _WE HAVE$_ _
ADVISE
. DISAVENGE
RETURNimCERTIFIED FOR CORRECT ENDORSEMENT CHECK ON - - - FOR $__ LISTED IN CASH LETTER O F - - -
DISC LAD
WE CONFIRM YOUR ACTION SUPPLYING ENDORSEMENT
FABER
FORWARDING TO _
GRANTISE
_ _ CASH U:TTER DA.TED __ RECEIVED CITY ITEMS
$ __
SENT US IN ERROR (BY) _ __
ON
$ -:---
CREDITED TODAY CREDITING COUNTRY ITEMS $ __ - - - - GRANTISING
_ _ CASH LET!fER DATED
RECEIVED TOO LATE FOR TODAY 1S
$ _____ CREDITING COUNTRY
CLEARINGS CREDITING CITY ITEMS
Imi.S
$ _ _ _ __
CASH LEmR FRO'M--(DATE)
GRONEN
$ ._ __,__ CREDITED
YOUR. AIR MAIL CASH lETTERS
--- BECEIVED CITY
TODAY CBEDI~ING COUNTRY ITEMS
GRONGE
ITEMS CREDITED
--..--
YOUR AIR MAIL CASH LETTERS _ _ RECEIVED TOO LATE FOR TODAY 1S
CLEARINGS
http://fraser.stlouisfed.org/
.
Federal Reserve Bank of St. Louis
CREDITING CITY
ITEMS
.
-- CREDITING COUNTRY ITEMS .
X-6239-b
HOGGET
NO RECORD HAVING REC:EIVED YOUR :!iESSAGE
HOGPENNY
R:IDFE..'ffi!NG TO OUR MESSAGE
----,.-
DID YOU SEND
ADVISE Tilv:iil RECEIVED
HOGPENTED REFERRING TO OUR MESSAGE
----- .AMOUNT. SHOULD
READ
Arm
Iv~.ffiER
ADVISED
-----
HOGPEOPLE
REF"'.c.RRING TO OUR MESSAGE ___ DEPOSITING BANK SHOULD READ _ __
HOGPEST
SHOULD READ DEPOSITED l3Y _ __.FOR CREDIT OF
HOGPLUNGE
REF:ElRRING TO YOUR MESSAGE
ADVISE FOR WHOSE CREDIT
HOGPLURA.L
REFERRING TO YOUR MESSAGE
ADVISE FOR WHOSE USE
HOGPLUSH
RZFERRING TO YO'tJR !t:ESSAGE
ADVISE NAME OF CREDITING BA:NX
HOGPOLE
REF~ING
HOGRA.ID
REFEJ:rn!NG TO YOUR MESSAGE
GIVE CORRECT PREFIX AND TESTWORD
HOGRAISE
REFERRING TO YOUR MESSAGE
IS THIS CORRECT ADVISE
HOGRIIIE
REFERRING TO YOUR MESSAGE _ _ IS THIS INTENDED FOR US
HOGROAD
REFERRING TO YOUR MESSAGE
HOGROSE
REFERRING TO YOUR MESSA'E _ _ NOT IN OUR DISTRICT ADVISE
FOR USE OF _ __
TO YOUR MESSAGE __._ COMES WITHOUT AMOUNT
NOT A MEMEER BANK ADVISE
I
HOGRUN
REFERRING TO
MARSHWRAP
MINIMUM BUYING RATE FOR MN.K:ERSt ACCEPTANCES WITHIN 15 DAY8 (PER CENT)
.YOt~
MESSAGE
OUR MEMBER ADVISES NO ACCOUNT
I
MARSHWRIT
MINIMUM BUYING BATE FOR BANKERS I .A.CC~TANCES WITHIN 3t DAY8 (PER CENT)
MIS DIRE
RETURNED IN ERROR
RETURNING
MIS DUB
PROTESTED
X-5239-b
-4· MISERA.m:T
RETURNING TODAY
MISERHAT
RETURNING UNPAID
MISGUIDED
REVERSING TODAY
NANKAT
DISPOSING OF :BONDS AS INSTRUCTED
NOW:BAB
U S TREASURY :BONDS
NOWBACK
U S TREASURY 3 3/8% :BONDS 1940-43
NOW:BEAR
U S TREASURY 3 3/8% :BONTis 1943-47
NOW:BELL
U S TREASURY 4% :BONDS 1944-54
. NOW:BENT
U S TREASURY
3!% :BONDS
1946-56'
4-f% :BONDS
1947-52
f
NOWl3EBRY
U S TBE.ASURY
NOWHORREllT .
U S TREASURY NOTES
ORNATION
WE HAVE DELIVERED TRANSACTIONS ~---
X-6240
F~. E
DE R AL ADV I S 0 R Y C0 UN CI L
1 9 2 9
Officers:
Executive Committee:
Frank 0. Wetmore, President.
Levi L. Rue
Frank 0. Wetmore
Harris Creech
B. A. McKinney, Vice President.
B. A. McKinney
Walter Lichtenstein, Secretary.
w. W. Smith
Wm. C. Potter
·-~-----~ -----..-..-- ..- .............. -.~·--····-···-··---:--------------------------------- ....... ------- ...... -----------.....
M E M B E R S.
District.
Address.
No. 1
Arthur M. Heard
Amoskeag National Bank,
Manchester, N. H.
No.2
William C. Potter
Guaranty Trust Company of
New York, N.Y.
No. 3
Levi L. Rue
Philadelphia National Bank,
421 Chestnut Street,
Philadelphia, Pa.
lro. 4
Harris
No. 5
John Poole
Federal .American Nat t 1 Bank,
Washington, D.C.
No. 6
J. P. Butler, Jr.
Canal Bank & Trust Company,
New Orleans, La.
No. 7
Frank 0. Wetmore
First National Bank,
Chicago, Ill.
No. 8
Walter W. Smith
First National Bank,
St •. Louis, Mo.
No. 9
Theodore Wold
Northwestern National Bank,
Minneapolis, Minn.
No. 10
Peter W. Goebel
Liberty National Bank,
Kansas City, Mo.
No. ll
B. A. McKinney
American Exchange National Bank,
Dallas, Texas.
No. 12
F. L. Lipman
Cre~ch
Cleveland Trust Company,
Cleveland, . Ohio.
· Wells Fargo Bk.& Union Tr. Co.,
. SC~;n, -Francisco , _ Cal if.
---------------------------------------------------------------------~----------·-
Address of Mr. Lichtenstein, First National Bank, Chicago,
February 20, 1929.
Illinois.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRE$$ OFFICIAL CORI'IESPONDENCE TO
THE FEDMAl,.
l'tl!;liil~VE
x-6241
BOARP
S1~J~CT:
Cost of Printing Telegraphic
Code Book.
Dear Sir:
The report of the Leased Wire
to the Governors' Conference,
dated Nov. 14. 1928, contained a recommendation that the Federal Reserve Telegraphic Code be reprinted and that the
cost thereof be prorated among the Federal Reserve Banks in proportion to their
usage of the original supply.
In accordance with the foregoing
recommendation, the new code books have
been printed under the direction of the
Leased Wire Committee, at a cost of $1,250.34, which has been paid by the Federal Reserve Batik of Chicago. Attached is a
statement showing the proportionate use by
all Federal Reserve Batiks o.f the original
issue and the share of cost based upon such
use. Please arrange to send check to the
Federal Reserve Bank of Chicago for your
Bank's share of the cost, as per this statement.
Co~nittee
Very truly yours,
J. c. Noell,
Assistant Secretary.
TO GOVERNORS OF .ALL F. R. BANKS.
X-6241--a
F~DERAL RESER~ TJ!.i~RAPHIC
CODE
.
--·-·
Federal Reserve I No. of books used, Percentage of 1I Share of cost
I
:Bank
Original
'?otal issued
~of New Issue,
i
Issue.
to
F.R. Banks , :Eased upon use
i
I
iof first issue
J
..
:Boston
II
i~
3.08
New York
I
55
12.12
151.54
i
13
2.86
35.76
.I'
35
7.71
96.40
Richmond
.l
25
5.51
68.89
Atlanta
I
49
10.79
134.91
32
7.05
88.15
49
10.79
Minneapolis
30
6. 61
82.65
City
45
9,91
123.91
Dallas
39
8.59
107.41
San Francisco
68
14.98
187.30
454
100.00
$1!_250.34
$ 38.51
I
Philadelphia
Cleveland
I
Chicago
I
I
St. Louis
I
I Kansas
I
Total
I
134.91
FEDEB.(iL RESERVE :B.Al!K
OF RICE¥01\TD
February 2, 1929.
Federal Reserve Board,
Washington, D. C.
Attention: Mr. Walter Wyatt, General Counsel.
My
dear Mr. Wyatt:
I am sending you a copy of a complaint in an action brought
by L. R. Gilbert, Trustee of Audrey Spinning Mills, Inc., against the
Phoeni.:le l£ills and other parties, including the Federal Reserve Bank of
Richmond~
You will notice the action is for the amount of a check drawn
by the Phoenix Mills to the Audrey Spinning Mills on the Commercial
National Bank of Statesville, which was sentro the latter by the Federal
Reserve Bank of RiChmond, which in turn received authority to charge the
amount of such cheCk to the reserve account of the Commerical National
Bank of Statesville.
The pertinent facts in this case so far as the Federal Reserve
Bank of Richmond is concerned are as follows:
On April 16th the Charlotte Branch of the Federal Reserve Bank
of Richmond sent to the Commercial National Bank of Statesville checks
totaling $20,561.03 and on the same day checks were sent from the main
office to the Commercial National Bank of Statesville totaling $1,176.J.2.
These checks were apparently received by the .Oommercial National Bank of
Statesville on April 17th and were cancelled and charged to the drawers.
On that day the Commercial National Bank of Statesville sent to the
Charlotte Branch of the Federal Reserve Bank of RiChmond a remittance
letter which contained a form directing the Federal R~serve Bank of
Richmond to charge these checks to the reserve account of the Com;nercial
National Bank of Statesville. The remittance letter above mentioned was
received by the Charlotte Branch of the Federal Reserve Bank of Richmond,
at which the reserve account of the Commercial National Bank of Statesville
was kept, on the morning of April 18th.
At the close of business on April 17th the reserve account of
the Commercial National Bank of Statesville showed a credit balance of
$1,084.62. Various credits were made to the account of the Commercial
National Bank of Stateaville on the morning of April 18th. These credits
apparently consisted of checks formerly deposited and becoming available
in the reserve account, a Shipment of currency amounting to $5,000.00,
and a transfer of $4,000.00. The Charlotte Branch also received a draft
for $12,500.00 drawn by the. Commercial National Bank of Statesville on
the American Trust Company of Charlotte, so that the apparent balance
exceeded the amount of the cash letters which were accordingly charged
against it. About midday on April 18th, but after the charge of the cash
X-6242 :1~9
.._ji ...
-2-
Mr. Walter Wyatt,
Federal Reserve Board,
Washington, D. C.
February 2, 1929
letters·, the Charlotte Branch was advised that the Commercial National
Batik of Stat~sville had been closed. ·The American Trust Company received
a similar notice and returned the draft for $12,500.00 which had been
presented through the Clearing House. This draft was charged against the
account of the Commercial National Bank of Statesville, causing an apparent overdraf~·, Thereupon the cash letters which had been charged to
the account earli~r in the day were charged baCk and credited to the
Commercial National Bank of Statesville, leaving an apparent balance of
approximately $11,000.00. On April 19th and 20th the reserve account of
the Commercial National Bank of Statesville was credited with the sums
of $1,001.48, $1,654.27, and $1,330.71, which were apparently checks
deposited prior to April 18th but which became available on the 19th and
20th. The net result of these debits and credits left a balance of
$17, 114•20, We were holding this balance in suspense to await the action
of the court in the Lake City case.
The present suit, however, may present some additional questions
not involved in that case, particularly with respect to the credits made
after April 18th.
I remain,
Very truly yours,
(s)
MG'IIV L
M,
~. Wallace,
dounsel.
O'"l'
'<)
,f'
x-6242-a
160
STATE OF NORTH CAROLINA.,
COUNTY OF MECKLENBURG.
)
)
)
IN THE SUPERIOR COURT.
)
)
)
)
)
)
)
)
)
L. R. Gil bert, Trustee in
Bankruptcy of Audrey Sp~nning
Mills, Inc,,
Plaintiff,
versus
Phoeni:k Milia, ±hc4• W~ldon
Bank &: Ttu~ t Co • • The C6mmer-
~)
cial Natioilal :Batik of Rale 1igh~
N. c., Federai Reserve :a&nk df
Richrnond, and C. L • .Williams,
Receiver of The Commerical
National Bank of Statesville,
N. C., .
)
)
)
)
)
)
Defendants.
The plaintiff, complaining of the defendants, alleges:
That the plaintiff was heretofore duly appointed and qualified,
I.·
and is now acting as the Trustee in :Bankruptcy of Audrey Spinning Mills,
Inc., a corporati.on duly organized and existing under the Laws of the State
of North Carolina, which was heretofore, to-wit, on or about the 19th of
I
·September, 1928, duly adjudicated a bankrupt by the United States District
Court, for the Eastern District of North Carolina.
II.
That as plaintiff is informed and believes the defendant,
:Phoenix Mills, Inc., is a corporation duly organized and existing under
the laws of the State of· New York, and is now, and was at the times hereinafter referred to engaged in doing business in this state, and at such
times owned and operated, and still owns and eperates a cotton mill in the
county of Iredell, in this State.
-:J
....
X-6242-8,4 C·i
III.
_LU..iL
That the defendant, Weldon Ba:lk: & Trust Company,
is a banking corporation duly organized and existing under the
Laus of the State of North Carolina, with its home office and
principal place of business in the Town of Weldon, Halifax
County, North Carolina, and as such corporation is duly authorized and empowered to receive and handle for collection cheCks
drawn upon other batiks.
IV.
That
t~e
defendant, Commercial National Bank of
Raleigh, N. C., is a banking co:r,-poration duly organized and
existing under the Acts of Congress, with its home office and
principal place of business in the City of Raleigh, Wake County,
North Carolina, and as such corporation is duly w. thorized and
empowered to receive and handle for collection checks drawn upon
other banks.
v.
That the d.e:fendant, :&'ederal Reserve Bank of Richmond,
is a banking corporation duly or@anized and existing under the Acts
of Congress, especially under that.. Act known as the Federal Reserve
Act, and is dllly authorized and empowered to receive and handle for
collection checks drawn upon other banks, and at the times hereinafter
referred to was, and still is, engaged in business in this State,
with its principal office and place of business in Charlotte,
Mecklenburg County, North Carolina, where at all such times it maintained,
and still .maintains, a branch bank.
VI.
That the defendant, C. L. Williams, was heretofore, to-wit,
on or about April 19th, 1928, duly appointed Receiver of The Commercial
-3National :Bank of Statesville, N. C., by the ComptroH:er of the Currency
of the United States, and immediately qualified as _such Rectiver,
and as such has since been in charge, and is stil1 in charge,
of winding up and liquidating the business and affairs of said
bank, which was at the times hereinafter referred to a banking
corporation duly organized and existing under the Acts of
Congress, and duly authorized and empowered to receive deposits
of money to pay checks drawn on such deposits when duly
presented, and to receive and handle for collection checks,
and otherwise engage in the banking business under said Acts
of Congress, and at all such times had and maintained its
principal office and place of business in this State in
Statesville, Iredell County, North Carolina.
VII.
That heretofore, to-wit, on or about April lOth,
1928, the defendant, Phoenix Mills, Inc., being indebted to the
Audrey Spinning Mills, Inc. in the sum of $6,928.94, for cotton
yarns theretofore sold and delivered by said Audrey Spinning
Mills, Inc. to said Phoenix Mills, Inc., forwarded through the
United States mails to said Audrey Spinning Mills, Inc., its
check drawn on. the Commercial National :Bank of Statesville,
N. C. in words and figures as follows, to-wit:
NO. ·386.
"PHOENIX MILLS, INC.
STATESVILLE, N. C.
APRIL 10, 1928.
PAY TO THE
ORDER OF
.A.udrey Spinning Mills, Inc.
$6928.94
Six Thousand Nine Hundred Twenty-eight and 94/100 ------ DOLLARS
PHOENIX MILLS, INC.
TO
THE COMMERCIAL NATIONAL RANK
STATESVILLE,
N. C.
C. W. MCLAn!
Agent • 11
which said check was issued by said Phoenix Mills, Inc. to
said Audrey Spinning Mills, Inc. in payment of the indebtedness
aforesaid.
VIII.
That said check was received by the Audrey Spinning
Mills, Inc., at Weldon, N. C., in the U. S. mail on the afternoon of Thursday, April 12, 1928, after the close of banking
hours; it was duly endorsed and deposited by said mills with
the defendant, Weldon Bank & Trust Company, for collection on
the morning of Friday, April 13, 1928, and on the sama day was
duly endorsed and forwarded by said defendant to the defendant,
Commercial National Bank of Raleigh, N. C., for collection; that
it was received by the latter on Saturday, April 14, 1928, and on said
date was duly endorsed and forwarded by it to the Charlotte
Branch of the Federal Reserve Bank of Richmond, for collection;
that it was received by the latter on April 16, 1928, and on
said date was duly endorsed by it and forwarded to fhe Commercial National Bank of Statesville, for payment.
IX.
That the Federal Reserve Bank of Richmond, through
its Charlotte Branch,
forwar~d
said check to The Commercial
National Bank of Statesville in a letter containing other checks
drawn upon the latter, and which said Charlotte Branch held
'for collection, the total amount of the checks thus forwardad
to said Commercial National Bank of Statesville in said letter
for payment being $20,561.03.
x.
That said check,. together with the other checks
eontained in said letter, were received by The.Commercial
X-6242 ... a
-5National Bank of Statesville on Tuesday, April 17, 1928; and
on said date it wrote to the Federal Reserve :Balli: of Richmond
directing it to pay said check, and the other checks aforesaid,
and charge them to its reserve account with said Federal Reserve
Bank; that said letter was received by the defendant, Federal
Reserve :Bank, on the morning of Wednesday, April 18, 1928; that
at the close of business on said date the books of said Federal
Reserve :Bank showed that the balance in the reserve account of
said CoL:i".lercial National Bank of Statesville was $13,429.19;
that inasmuch as the balance in said. reserve account as shown
by its books was less than the total amount of the checks forwarded to The Commercial National Bank of Statesville for payment as aforesaid the Federal Rese_rve Bank of Richmond refused
to pay the check of the Aud.r.ey Spinning Mills,
Inc~,
hereinbefore
set forth, and on said lSth day of April, 1928, notified the Commercial National Bank of Raleigh of the non-payment thereof,
and charged the amount of said check back against said Cammercial Bank of Raleigh; the Commercial National Bank of Raleigh
in turn notified the Weldon Bank & Trust Company af the nonpayment of said check, and charged the latter's account with
the amount thereof; the Weldon Bank & Trust Company thereupon
notified the Audrey Spinning Mills, Inc., of the non-payment
of said check, and the latter in turn duly notified the defendena, Phoenix lUlls, Inc. , of the non-payment thereof.
XI.
That notwithstanding the presentment of said check
to The Conmercial National Bank of Statesville for payment
on April 17, 1928, as hereinbefore alleged, the said bank fail
x-6242-a
-6ed and refused to pay said check, or to cause the sam3 to b6
paid by the Federal Reserve ]a:nk of Richmond, and that notwithstanding such failure the Cashier of said Cornraercial
National ]aru{ of Statesville wrongfully and uri1awfully stamped
said check as paid on April 18, 1928.
XII.
That said Commercial National ]ank of Statesville
suspended business on the 18th of April 192?, and did not reopen on the 19th, and on or about said date the defendant,
C. L. Williams, was appointed as Receiver for said bank, as
hereinbefore alleged.
XIII.
That after repeated demands by the Audrey Spinning
Mills, Inc., upon said Phoenix Mills, Inc., to pay the indebtedness for which said check was issued, the latter on May 16,
1928, declined at that time to pay the same, or at least postponed payment thereof,. upon the ground that there. was a question
as to whether or not the collecting banks who handled the check
aforesaid were responsible for the
non-p~ent
thereof, and on
July 2nd, 1928, declined to pay said indebtedness upon the alleged ground that the Audrey Spinning Mills, Inc., had. notreceived the proceeds of
sai~
check through the fault of the
defendant banks who had hapdled same.
That a controversy there-
fore exists between the Phoenix Mills, Inc., and the defendant
banks, as to who is liable to the plaintiff for the payment
of the amount of said check representing the indebtedness of
said Phoenix Mills, Inc., to said Auarey Spinning Mills, Inc.
X-6242-a
XIV;
That the Audrey Spinning Mills, Inc., accepted said
cheCk from the defendant, Phoenix Mills, Inc., in payment of
the indebtedness aforesaid upon the condition that said check
would be paid by said Commercial National Barik of Statesville
when duly presented for payment; and that said cheCk was not
paid by said barik when presented, as hereinbefore alleged, so
that said Phoenix Mills, Inc., remains liable to the plaintiff
as the Trustee in Bankruptcy of said Audrey Spinning Mills, Inc.
in the sum of $6,928.94, with interest thereon at the rate of
6% per annum from April 10, 1928, until paid.
xv.
That the Weldon Bank & Trust Company, the Commercial
National Bank of Raleigh and the Federal Reserve Bank of Richmond each in receiving and handling said check aforesaid for
collection on behalf of said Audrey Spinning Mills, Inc. became
its agent for the collection thereof, and each undertook to
exercise due diligence in procuring the proceeds of said check
from said Commercial National Bank of Statesville, and in remitting the same in due course to said Audrey Spinning Mills, Inc.
XVI.
That as the plaintiff
of said banks consented to,
~s
informed and believes each
acqui~~ced
and
participate~
in the
method and manner in which said check was handled for collection, and failed and neglected to comply with its contract and
agreement with said Audrey Spinning Mills, Inc., as hereinbefore
alleged.
XVII.
That as the plaintiff is informed a11d believes the
_g ....
x-6242-a
defendant, C.
L• Williams, Receiver of the Commercial National
Bank of Statesville, has in hand funds for distribution to
those having lawful claims against said bank, and the plaintiff
is further informed and believes thatafter April 18th, 1928,
the reserve account of said Commercial National Bank of Statesville with the Federal Reserve Bank of Richmond was further increased and now amounts to the sum of $17,114.27, and as the
plaintiff is advised and believes, inasmuch as the Commercial
National Bank of Statesville
aut~orized
and directed the
Federal Reserve Bank of Richmond to pay said check out of said
reserve account, as hereinbefore alleged, such authorization
and direction constituted an equitable assignment of said reserve account to the amount of said check.
XVIII •.
That as the plaintiff is advised and believes he
is entitled to have the liability of the defendants, and each
of them, to him determined, and to recover judgment against
the defendants, and each of them,in accordance with such determination, and is further entitled to have the rights of the
parties against the defendant, C. L. Williams, Receiver, and
their rights in
~nd
to the aforesaid reserve account held by
the Federal Resprve Bank of Richmond, determined and adjudged,
and so far as
~y
be necessary to collect the amount due him
from the defendants, or from such of them as may be liable to
him, is entitled to be subrogated to the rights of the defenda.nts against said Receiver, and to their interest in and to
said reserve account held aforesaid by the Federal Reserve
Bank of Richmond.
x-624~-a.
-9-
i68
WHEREFORE, the plaintiff
pray~
that the liability
of the defendants, and .that of each of them- t.o him be
determined,
and that he recover judgment against them, and each of them,
in accordance with such determination, arid for such other or
further relief in the premises as the plaintiff is entitled to
have, and for the cost of this action to be taxed by the Clerk
according to law.
(sgd)
W. S. O'B Robinson, Jr,
(sgd)
John M. Robinson
Attorneys for the Plaintiff.
STATE OF NORTH CAROLINA.,
COUNTY OF HALIFAX.
L. R. Gilbert. being fU'st d.uly sworn,
s~s
that he
is the plaintiff in the above en titled action; that he has read
the foregoing complaint and knows the contents thereof, and that
the same is true of his own knowledge, except as to those matters therein stated to be alledged upon information and belief,
and as ·to such matters he believes it t() be true.
(sgd)
Sworn to and subscribed before me,
this the
~day
of December, 1928.
{Sgd) Janie Hccyw:ood
Notary Public
Com. expires Fel,). 16, 1929.
L •. R. Gilbert, Trustee
.ARTICLE l3Y DOCTOR WILLIS
NEW YORK WORLD
Sunday, February 17, 1929.
BRIEF .ANALYSIS
The Federal Reserve System was never designed to check or
prevent speculation carried on with individual funds.
Purpose of Federal Reserve System was merely to take the
barik reserves of the country out of the speculative market.
The Reserve J;.Ct transferred the required reserves to the
Federal reserve banks and further provided that loans of the Federal
reserve banks should never be made for the purpose of carrying speculative
transactions.
The Federal
it indirectly provided for
permitting member banks to
the city batiks for loan on
Reserve Act not only did not attack speculation;
it by reducing amount of required reserves and
continue to deposit their surplus reserve with
collateral if the owners of it so desired.
The Federal Reserve Act exempted United States obligations
from the prohibition against loans for carrying securities; in other words,
it allowed borrowers to get funds from reserve banks for the purpose of
buying and carrying United States bonds and certificates.
The reason for this exception was shown in the World War, the
reserve banks being an indispensable adjunct in the placing of Government
bonds.
The special interests induced Congress to permit Federal reserve batiks to loan on the direct notes of member bariks with Government bonds
as collateral.
Administrative rulings and practice under this new provision
made it almost mandatory for a reserve bank to do so.
This was a long step in advance of the permission granted in
the Act to loan for the purpose of carrying United States securities.
This put the reserve banks in the position of being obliged to
loan with United States bonds as collateral, without inquiring what the purpose of the loan was, - that is to say, to loan indirectly for the purpose of
speculation in ether securities.
Although promise was made to repeal this immediately after
the war was over the same special interests sought to protect it and it has
remained on the statute books.
Thus the batik reserves of the country have more than ever
gone back into the market •
.Lf
:170
-2-
X-6243
At a recent date the reserve banks were carrying about
$720,000,000 of certificates or loans secured by such Government obligations.
The Res~rve Act provided for the bankers' acceptance as a
means of obtaining suitable interest bearing instruments in which the surplus reserves of the member batiks could be invested should they prefer not
to loan on call. It was supposed that, as in Great Britain, batiks desiring
to be in a liquid condition would put their surplus reserves into bankers'
acceptances and then when needing funds get tl:em by selling these acceptances
to reserve batiks.
The member banks have never carried any considerable amount
of such acceptances but have sold them direct to the reserve batiks which
have to carry the entire b,-.rden of the acceptance market from the very beginning.
At a recent date member banks were holding only about $25,000,000 out of the total of $1,284,000,000 of acceptances outstanding of which the
reserve bariks held for their own and for~ign accounts about $800,000,000.
The
c~edit
obtained by acceptance financing has admittedly in
many instances gone directly into the stock market and thus the surplus re-
serves of the country, as well as the basic reserves themselves, have been
put back into the service from which the Reserve Act had sought to draw them.
)
The remedy for a bad practice is always the complete cessation
of that practice.
This may not be possible as an immediate step but it must be
begun and systematically carried forward.
REMEDIES:
1. Reserve banks should absolutely stop supporting the market for
Treasury certificates under re-purchase agreements.
2. They ought to stop lending to members on the direct notes of
such mer:.bers collateraled by Governme\nt obligations.
Cites recent loan to member bank of over $100,000,000 on
its direct notes collateraled by Government securities.
3. The reserve bariks Should rid themselves of all save a very
moderate holding of Government certificates.
4.
They should hold no Government bonds whatever.
5. They should refuse to buy acceptances except when they represent
a fractional part of a general' body of paper of the sort which is being carr.Ud
'by the member banks as a way of investing surplus reserves and thereby keeping themselves liquid.
6.
Reserve banks should do what they never have done, - resort to
-3-
direct de~lings in two-name paper regardless of the endorsement of member
batiks, - a practice widely carried on by European central batiks.
The above changes would result in re-establishing the liquidity
of reserve banks and in doing what the original Act intended to do, - keep the
rsserve funds of the count~y out of the stock market.
~ne Federal Reserve Act never had any quarrel with legitimate
speculation but on the contrary provided for the release of funds which could
be used if desired to take care of it.
Speculation is a part of the industrial and financial structure
of the United States and performs a useful economic service. It cannot be
well dispensed with under ~::·1 present economic order. It ought to be liberally financed.
It is, ha.ever, constantly tending to invade other fields. At
the present time the stock market is taking the place of the banks in many
particulars.
A new type of financing by the issue of stocks and bonds rather
than through commercial batik loans has come into vogue.
The number of enterprises listed on the Stock Exchange has
immensely increased.
The New York Stock Exchange is serving vastly more than a
speculative purpose; it has become a medium of current industrial and business
finance.
The excess in the use of credit for brokers' loans and collateral loans is shown by the fact that the Stock Exchange calls upon New York
banks for total loans of $3,000,000,000 at a time when the entire short-term
loans of the London Clearing House baruts, as estimated by Mr. McKenna, are
less than $750,000,000 of which probably less than half is devoted to genuinely speculative transactions.
·
The above, of course, is what the Federal Reserve Board had
reference to in its recent statement.
The statement referred to the lack of any duty on the part of
reserve batiks as regards speculation; it would have been better had it referred positively to their actual duty to keep batik reserves out of speculation.
Whatever the form.of expression employed, the real meaning was
the same, in that an unusual share of the country's resources had become involved in supporting a kind of transaction which, even though beneficial in
itself when kept within limits, may, like anything else, be exaggerated and
rendered dangerous.
It does not help the present situation to point out what our
banking system ought to have done several years ago,· or to note the errors
which were made during and after the war and to point the way to long range
reform.
-4This situation is one of emergency, - nothing less.
It is not necessary to figure the possibility of a collalJSe
of values or an old fashioned panic, or a series of bank failures.
As a matter of fact, these conditions may present themselves
as they did after 1920.
They may not appear at all, and yet·the harm of present conditions may ;t.anifest itself in other ways that are quite as serious i f
slower in operation and less spectacular.
It may manifest itself in one way or another, and the question
is how to bring about a better situation, - a situation from which it is
possible to raake a start towards better conditions.
TWO R!Jt:iEDIES SUGGESTED:
1. Obtain an agreement that no greater amount of credit should be
used for Stock Exchange purposes than is now employed.
This is perfectly feasible. It was done during the war through
the money pool and the equivalent was done many times before the war to arrest or prevent panic and disastrous chro1ges in security values.
The effect of it would be to cut off at once the constant
growth in stock market transactions which calls for an ever growing volume of
credit and which permits more and more people all over the country to become
involved in a speculative maelstrom.
2. To make this effective it might be accomplished by an agreement
amont: the is.suing houses of the city to slow down, or perhaps for a time suspend further new issues except where such transactions are necessary.
This was effectively resorted to during the war through the
Capital Issues Committee.
In a moderate way it has been pursued at different times since
then for the purpose of preventing a condition of indigestion from becoming
acute in the bond market.
One reason for the constantly mounting total of brokers' loans
is the vast amount of loans used to finance iss•-:e houses and syndicates and
in enabling them to carry large volumes of securities that have not been
sold to the public.
WHAT C.Alr THE RESERVE SYSTEM 00?
Let us see what it has done.
1., It has raised its acceptance rates in the effort to liquidate
its portfolio of acceptances.
...-"~ rt:llo-.,1 t;•r:l
....;5-
Govern~ent
X-6243 ...L t
1 :;
2. It has shown a little more reluctance towards supporting the
security market.
3.
It has slightly raised its discount rates (last summer).
4.
The Eoard has lately issued a warning statement.
5. Certain western reserve banks have informed their members they
will not rediscount for any member who sends funds out of the district for
speculative· purposes.
All the above are good as far as they go. They have not been
applied early enough but have been used reluctantly and s.lo\vly as conditions
had developed which were really beyond control.
It has been suggested that the reserve bank should refuse further
credit to borrowing banks who are lending in the stock market. That would merely bring on a crash which would aggravate existing conditions.
The local reserve bank by reason of past blunders is more
responsible than any otherinstitutionsfor what is occurring in the market today,
It cannot stand from under by merely repudiating its responsibility, - as the Reserve System .tried to do without success in 1920.
Wise and strong handling of the local reserve bank could and
would produce results very much greater than any that have been obtained thus
far by the policies already described.
It is too late to obtain the desired effect by the conventional
methods, especially in view of the bur.den we have assumed in connection with
our joint effort to sustain the Eank of England in maintaining the gold standard policy.
It is an unfortunate outcome of 15 years experience. in centnal
banking, - for now we must find some way of correcting conditions on old
fashioned 1 ines.
--'
F~DERAL
X-6244
R?SZRVE BOARD
STATEl.iEUT FOR THE PRESS
For irr..,:.ediate Re-lease
February 20, 1S29.
?ne first and organization meeting of the Federal Advisory Council for
1929 was held on Friday, February 15.
The members of the Council are:
Federal Reserve District No. 1,
Boston, Arthur M. HearQ
No. 2,
New York, Wm. C. Potter
No. 3, Philadelphia, L. L. Rue
No. 4,
Cleveland, Harris Creech
No. 5,
Richmond, John Poole
No. 6,
Atlanta, J, P. Butler, Jr.
No. 7,
Chicago, Frank 0. Wetmore
l!o • 8,
St. Louis, Walter W. Smith
No. 9,
1;;innea-polis, Theodore Wold
No. 10, Kansas City, Peter W. Goebel
No. 11, Dallas, B. A. McKinney
No. 12, San Francisco, F. L. Lipman
Frank 0. Wetmore of Chicago, was re-elected President and B. A. McKinney
of Dallas, was elected Vice President.
These officers as ex-officio members
and Messrs. Potter, Rue, Creech and Smith will
cou~rise
the Executive Committee.
Mr. i1al ter Lichtenstein was reappointed Secretary of the Council.
FEDERAL RESERVE BOARD
X-6245.
WASHINGTON
ADDRESS OFFICIAL. CORI'IESPONDENCE 'TO
'THE FEDI<RAJ.. RESERVE BOARD
SU'I3JECT:
February 20, 1929.
Hclidays during Marc:Q,
1929~
Dear Sir!
On Satu.rdey, March 2nd, the Federal Reserve Bank pf
Dallas and all its branches will be closed in observance of
Texas Independence Day.
On Monday, March 25th, the :Baltimo:re Branch of the
Federal Reserve Bank of Richmond will be closed in observance of i11arylaJ:id Day.
.
On Friday, March 29th 1 the fbllowing Offices will
be closed in observance of Oood Fridayt
Philade 1:phi a
New Orleans
Jacksonville
Nashville
Havana Agency
Pittsburgh
Baltimore
Nemphis
Minneapolis
On the dates indicated; the banks affected will not
participate in either the Gold Settlement Fund or the Federal
Reserve Note clearing. Please include cre,ii ts for the cfr'ices
affected on each of the holidays with your credits for the following business day, and make no shipments o'f Federal reserve
notes, fit or unfit, for account of the Head Offices mentioned
on the dates specified.
On Monday, March 4th, the offices of the Federal Reserve Board will be closed, but the daily Gold Fund Clearing
and the Federa.l Reserve Nc to clearing will take :place as usual.
Kindly notify branches.
Very truly yours,
J. C. Noell,
Assistant Secretary.
To GOVERNORS OF ALL F. R•. BA..'IIJKS.
X-6248
OF RICHMOND
February 20, 1929
Federal Reserve Board,
'1'/ashington, D. C.
Attention: Mr. Geo. B. Vest, Asst. Counsel.
Dear 1ir. Vest:
I have your letter of February 18th acknowledging
letter enclosing to you a copy of the complaint in the
action of Gilbert, Trustee, v. Phoenix Mills, et al.
my
I notice that you are sending a copy of the
complaint to the Counsel for other Federal Reserve banks
and it occurs to me that you might wish to send them a copy
of my answer, as the answer sets forth the facts which are
of interest to the Federal Reserve banks more fully than
they are set forth in tho complaint.
I am enclosing you a copy of the answer which I
have prepared. The Receiver of the failed bank is filing
a petition to remove this case to the Federal court, in which
we and all other defendants will join. If the removal is
effected, the answer will be filed in the Federal court
and i t may be necessary to make some slight changes .in
its for.m to comply with the Federal practice, because I
think that in the Federal court the proceeding will be
considered a suit inequity. The essential allegatio~s,
however, will not be changed, and therefore the answer
enclosed will give all information which would be of any
interest to the Counsel for other Federal Reserve banks.
Of course I shall keep your office advised as to
the progress of this suit.
In sending copies of the answer to Counsel for other
Federal Reserve banks I would be greatly obliged if you would
say to them that I should of course welcome any suggestions
which. they may wish to mako, particularly with reference to
possible distinctions between this case and tho .case of Federal
Reserve Bank v. Early.
Very truly yours,
http://fraser.stlouisfed.org/ MGW
Federal Reserve Bank of St. Louis
(S)
L
M. G. Wall~ce,
Counsel.
X"":P6248-a
_.~~
n~
L. R. Gilbert, Trustee in
:Bankruptcy of Audrey Spinning
Mills, Inc.,
Plaintiff,
versus
Phoenix Mills, Inc., Weldon
:Bank & Trust Co., The Commercial National :Bank of Raleigh,
N. C., Federal Reserve :Bank of
Richmond, and C. L. Williams,
Receiver of :.l.be Commercial
National :Bank of Statesville, .N. C.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
THE SUPERIOR COURT.
~
OF FE:nm:R.AI: mlS::!lRVE l3ANX
OF RICHMOND, :JJEFENDAN'T.
)
)
)
)
)
)
Defendant, Federal Reserve Bank of Richmond,
a.~swering
the complaint
of the plaintiff says:
I.
The defendant, Federal Reserve :Sank of Richmond, has no knowledge
or information sufficient to form a belief concerning the allegations in
the
fir~t
paragraph of the complaint and therefore denies the same.
II.
The defendant. Jederal Reserve :Bank of ;Richmond, has no
knowled€;~
or information sufficient to form a belief concerning the allegations in
the
sec~nd
paragraph of the complaint and therefore denies the same.
III.
The defendant, Federal Reserve :Bank of Richmond,
•
.
'i
a~its
that the
allegations in the third paragraph of the complaint are true.
IV.
The defendant, Federal Res-erve :Bank of Richmond, admits that the
. allegations in the foul;'th paragraph of the complaint are true.
f-"-Jrl
JL i {
STATE OF NORTH CAROLINA )
)
COUNTY OF 1\::ECKI:SNBURG
)
X-6248-a
v.
~~e
defendant, Federal Reserve Bank of Richmond, admits that it is
a banking corporation organized and existing under the Acts of Congress, especially under that Act known as the Federal Reserve Act,
to engage in the business of banking as therein provided.
havi~g
the power
Federal Reserve
Bank of Richmond admits that before the times mentioned in the complaint it
had established and was at all times thereafter and is now operating a bre.nch
in the county of Mecklenburg and the city of Cr..arlotte in the state of North
Carolina.
The defendant, Federal Reserve Bank of Richmond, denies all
allegations of the fifth paragraph of the complaint e.xcept in so far as they
are herein admitted.
VI.
T~e
defendant, Federal Reserve Bank of Richmond, admits the allegations
of the sixth yaragraph of the complaint.
VII..
I1he defendant, Federal Reserve Bank of Richmond, has no knowledge
or
info~~tion
sufficient to form a belief as to the allegations
in the seventh
paragraph of the complaint and therefore denies the same.
VIII.
Tne defendant, Federal Reserve Bank of Richmond, admits that on
April 16, 1928, it received from the Commercial National Bank of Raleigh,
North Carolina, a cheCk for the sum of six thousand nine hundred twenty-eight
dollars and. ni:.-lety-four cents ($6,928.94) drawn on the Commercial National
Bank of Statesville, but the Federal Reserve Bank of Richmond has no knowledge
or infonnation concerning the further description of the check received by
it.
The said check was sent by mail to the Charlotte Branch of the Federal
Reserve Bank: of Richmond in a letter dated A-;>ril 14, 1028, for collection
in accordance with the Regulations of the Federal Reserve Board and of the
circulars and agreements hereafter mentioned.
The Federal Reserve Bank of
X-6248-a
Richmond has no knowledge or information sufficient to form
-1
a belief concert!t
1-"'.1()
~
ing the other matters and things alleged in the eighth paragraph of the
, complaint and therefore deniefl the allegations in the eighth paragraph of the
complaint, e:wept in so far as they are her.ein admitted.
IX.
The defendant. lederal Reserve iarik of Richmond, on Ap~il 16, 1928,
forw~ded
the check in the eighth paragraph of this answer mentioned by mail
ffom 1ts Charlotte Branch to the Commercial National Ba....'"lk of Statesville along
with certain other checks drawn on said bank-aggregating twenty thousand six
hundred twenty-nine dollars and fifty-three cents ( $20, 629.53), as more fully
hereafter set forth.
Federal Reserve Bank of Richmond denies the allega,tions
of the ninth paragraph of the c,omplaint, eJtcept in so far as they are herein
admitted.
x.
The defendant, Fedetai ne~ar~e ~ank of Richmond, on the morning of
April; ~8, 1928, at its Charlotte Btanch, recei vad from the Commercial liational
· ~ of ~tatesville a printed form or rami ttance letter a'l;lthorizing it to
..· charge the reserve account of the Commercial National Bank of Statesville
with the sum of twenty
(:$20,591.03).
tbou~d
five hundred sixty-one dollars and three cents
The amou1'lt of the reserve balance of the Cor.:nnercial National
. Bank of Statesville at the opening of business on April 18, 1928, was
cme thousand eighty-four dollars and sixty-two cents ($1, 084. 62).
Certain
credits and debits.were made in the said account during that day and thereafter
.. ·a.s hereafter set forth.
The Federal Reserve Bank of Richmond admits that
. it notified the Comercial Nat.ional Bank of Raleigh that it had not received
.a.ctual and
fina~ p~ent
for the check for six thousand ni.ne hundred twenty-
eight d.olUu's and ninety-four cents ($6,928.94) received by it from the
. ·.
Co~rgial
National Bank:. of Raleigh and charged the amount of said check to
·· fort!le
S.C9.0U]lt o_f
Digitized
FRASER
the COlJII:I'Ie:rcial National Bank of Raleigh.
The Federal Reserve
-4~
X-6248~a
Bank of Richmond has no knowledge or information sufficient to form a belief
180
as to the other matters and things set forth in the tenth paragraph of the
complaint and therefore denies all such allegations except in so far as they
are herein
a~nitted.
XI.
The defendant, Federal Reserve Bank of Richmond, has no knowledge
or information sufficient to form a belief concerning the allegations of the
eleventh paragraph of the complaint and therefore denies the same.
XII.
T'ne defendant, Federal Reserve Bank of Richmond, admits that the
Commercial
l~ational
Bank of
State~ville
did not open for business on April
19, 1928, and that sometitne after that date C. L. Williams was duly
appointed receiver thereof.
Federal Reserve Bank of .Richmond is informed
and believes that the Commercial National Bank of Statesville transacted
business throughout the ehtire day of April 18th.
of Richmond therefore
den~es
Federal Reserve Bank
that it suspended business on that date.
XIII.
The defendant, Federal Reserve Bank of Richmond, has not
··sufficient knowledge or information to fonn a belief concerning the
allegations in the thirteenth paragraph of the complaint and therefore
d.enie s tha sa111e.
XIV.
The defendant, Federal Reserve Ba.nk of Richmond, has not sufficient
knowle~
or information to form a belief concerning the allegations of the
fourteepth paragraph of the complaint and therefore denies the same.
xv.
The defendant, fedetal Reserve Bank of Richmond, denies that it
acted as agent of the plaintiff in handling the check described in the
coUJplaint or in
any other matter.
'
-
I
.As to the other matters and things ·set
X-6248-a
'-"'· ~
i cfJL
.
·
forth in the fifteenth paragraph, Federal Reserve :Bank of Richmond has no
knowled@e or information sufficient to form a belief, and therefore denies
all the allegations in the fifteenth pa.r8€raph of the complaint.
XVI.
The defendant, Federal Reserve
~~
Of Richmond, denies the
allegations of the sixteenth paragraph of tne complaint in so far as they
relate to itself, and in so far as they relate to other defendants says it has
no knowledge or information sufficient to form a belief and therefore denies
all allegations ·of the sixteenth paragraph of the complaint.
XVII.
The defendant, Federal Reserve :Bank of Richmond, admits that it
,.
'·
now has in its hands the SUm of seventeen. thousand one hundred fourteen dollars
and twenty-seven cents ($17,114.27), as is more fully hereafter set forth, and
aqs that it is advised that. the other allegations in the seventeenth
paragraph of the complaint are matters of law upon which it prays the judgment
of the court; but it denies all allegations of fact in said paragraph,
exce~t
in s:> far as they are herein admitted.
Federal Reserve :Bank of .Richmond alleges as a further and affirmative defense:
XVIII.
That it is and at all times hereafter mentioned was a Federal
:Reserve :Bank organized and doing business under the laws of the United
States and especially under a certain Act of Congress k;nown as the Federal
Reserve Act and that its chief office and place of business
is
and was in
the ci \f of Richmond in the state of Virginia, and that the district or
territocy assigned to it was and is the state of Maryland, a part of the
state
ot
West Virginia, the state of Virginia, the state of North Carolina,
the state
Digitized forand
FRASER
.~
.
of South Carolina and the District of Columbia, and that befQre
the time mentioned in the comylaint i t had established a branch in the ci tyi8~3
of Charlotte in the state of North Carolina and was operating the said branch
at all times in the complaint mentioned.
XIX.
The Comnercial National Bank of
Ralei~h,
defendant herein, was at
all times hereafter mentioned a national barucing association duly organized
and doing business under the laws of the United States, and as such was a
member of the Federal Reserve System and a stockholder of the Federal Reserve·
Bank of Richroond and 1naintained a reserve deposit or account with the Federal
Reserve Bank of Richmond, which account was kept at the main office in
Richmond, Virginia.
xx.
The
Corr~ercial
National
Ba~
of Statesville was until closed, as
herein set forth, a national banking association duly organized and doing
bcainess under the laws of the United States, and as such a member of the
Federal Reserve System and a stockholder of the Federal Reserve Bank of
Richmond, and
Reserve
Baru~
u~intained
a reserve deposit or account with the Federal
of Richmond, which account was kept at the Charlotte Branch of
the Federal Reserve Baruc of Richmond.
XXI.
Prior to the times mentioned herein the Federal Reserve Board had
made and proruulg.ated a certain regulation governing the collection of checks
by Federal Reserve banks, which regulation was in force on the 14th day of
April 1928 and at all times thereafter.
A copy of said regulation which is known
as Regulation J, Series 1928, is hereto attached, mar:r:ed Exhibit I, and is
made a part hereof as if it were here set forth in full.
XXII.
Prior to the times mentioned herein the Federal Reserve Bank
of Richmond had duly issued a certain circular stating tho terms and
·'
-7-
X-624:.-a
-11
conditions upon \':'hich it was authorized and willillf, to accept checks for
~"l t}
jl_(.)U
collection anc1 the manner in which said checks would be ha11dled and collected
by it, a copy of which circular had been sent to all other Federal Reserve
banks and to all member banks holding stock in and
maint~ining
reserve accounts
with the Federal Reserve Bank of Richmond, including the CoDrnercial National
Bank of Raleigh and the Commercial Natioll8l Bank of Statesville, both of which
had acknowledged in writing receipt of the said circular.
A copy of the said
circular, known us No. 143, is hereto attached, marked :cixhibi t 2, and made a
par~
hereof as if it were hure set forth in full.
XXIII.
It was the practice and custom of the Federal Reserve Bank of
Richmond to accept at its main office or any branch checks drawn upon any
member banks which maintained a reserve deposit with it at the office where
the depositing or forwarding bank kept its reserve account or. did business,
or'· in certain cases to accept such checks at .the office with which the
member bank upon which such checks were drawn did business.
This practice
or custom was known to the Commercial,National Bank of Raleigh and the
Commercial National Bank of Statesville.
XXIV.
It was the practice and custom of the Federal Reserve Bank of
Richmond to forward all such checks
from the office at which they were
received directly to the member bank upon which they were drawn and to direct
or require that bank to make remittance or settlement for such checks as
.it· desired to pay by sending to the office at which its reserve account was
kept mo!l.ey, or immediately collectable draft drawn on some other bank with
Which the remitting bank had funds on deposit, or an order or direction to
charge such checks against tho available reserve deposit or account of the
-remitting bank.
This practice or custom was known to the Comrnercial National
Bank of Statesville and the Commercial National Bank of Raleigh.
-8-
XXV.
On the 16th day of April 1928 the Federal Reserve Earut of Richmond
received at its
Ricfu~ond
Office for collection for the account of member
banks in its district and other Federal Reserve banks chocks drawn on the
Commercial }!ational :Sank of Statesville amounting to two thousand nille
hundred seventy-three dollars and ninety-five cents ($2,973.95).
The
depositing banl::s were in accordance with the terms and co11di tions of the
time sc:pedule mentioned in the said Regulation and Circular entitled to
i
receive credit for the amount of such checks in two dey's after receipt,
subject to all other terms and conditions of the Circular and Regulation.
XXVI.
These checks were on the 16th day of April 1928 sent by mail to
the
National :Sank· of Statesville along with a letter or list
Co~rcial
commonl;y called a
settlern~nt
11
cash letter" showing. the amount of
s~i·d
checks and re·quiring
or remittance therefor as in Paragraph twenty-four set forth.
XXVII.
On the 16th day of April 1928 the Federal Reserve :Sank of Richmond
receive<;l at its Charlotte Office for collection for the account of member
banks in its district and other Federal Reserve banks checks drawn on the
Commerc+al
l~ational
:Bank of Statesville amounting to twenty thousand six
hundred twenty-nine dollars and fifty-three cents ($20, 629.53).
The
depositing banks were in accordance with the tenns and conditions of the
time
~chedule
and in the said Regulation and Circular given credit for
the amount of such checks two days
~erms
~fter
receipt
~ubject
to all other
and conditions of the said Circular and Regulation.
XXVIU.
These said checks. were on the 16th day of April 1928 sent by mail
to the Commercial National :Bank of Statesville along with a letter or list,
commonly called a "cash letter," showing the amount of said checks and requiring
-9-
X-6248-a
-1j
a settlement or remittance therefor as in Paragraph twenty-four set forth.
XXIX.
Arnona the checks so received and handled at the Charlotte Office
was a check for the sum of six thousand
nine hundred
and twenty-eight
. .
.
.
~
'
.
dollars and ninety-four cents ($6,928.94),, which check was received from,
the Commercial National Bank of Raleigh for collection for its account in
accordance with the ter.ms and conditions of the said
and
th~
Regp~ation
and Circular,
Federal Reserve Bank of Richmond had no agreement with aD1 person
concer:q.ing -the said check except the agreement embodied and set forth in the
said Circular and Regulation, and the Federal Reserve Bank of Richmond had
no notice or knowledge of any interest in or claim to such check on the part
of any person other than the Commercial National Bru'lk of Raleigh.
x:x:x.
On the 18th day of April 1928 the Federal Reserve Batik of Richmond
recei~~d
si~ed.by
by mail from the Commercial National Bank of Statesville duly
its .proper officer notices or forms commonly called 11 rem1 ttance
letters" and "return item letters" as follows:
C)r-
.l!._(J~-=-)
-10-
REMITTANCE LETTER
Use this form in remitting to Charlotte Branch for cash letter described below.
(REMIT SEPARA.mY FOR COLLECTION ITEMS)
From
Commercial National Bank,
Statesville,
APR. 17, 1928
(date)
N. C.
To CHARLOTTE ERAlTCH, Federal Reserve Bank of Richmond,
CHARLOTTE, N.C.
We are remitting as indicated below
for your cash letter dated .AJ?R. 16, 1928 . . • . • . • •
Loss:
Total amount of unpaid items and protest fees •.•.••
68.50
$ 20,561.03
NET AMOUNT DUE
'
·.· REMITTANCE AS FOLLOWS:
$ 20,629.53
Charge our reserve account ••..•...•.•........•......•..•
(For use of member banks only. Ee sure to insert the
net amount to be pharged.)
$ 20,561.03
DI'aft on •...............................................
$
Currency shipment t·oday as per advice mailed under
separate cover .•..................................•...•
$
D. M. Anslet, Ch.
Authorized Signatu~e
RETURN ITEM LETTER
From
National Bank,
Statesville,
Co~~ercial
N. C.
Please use this letter in returning
items to us. List separately below
unpaid items actually returned herewith, including protest fees, if any.
CHARLOTTE ERANCH, Federal Reserve Bank of
Richmond.
REASON FOR RETURN
AMOUNT
No Act here
I nsf
$ 2.50
66.00
TOTAL
68.50
-n ...
X-6248-a
_,~ '!.2,r:l
JLL.> ;,
REMITTANCE LETTER
Use this form in remitt~ng to Charlotte Branch, Federal Reserve Bank of
Richmond, for cash letter described below.
From
Commercial National ~ank,
Statesville,
66-140
N. C.
APR. 17, 1928
(Date)
CHARLOTTE BRANCH, Federal Reserve Bank of Richmond,
To
CltARLOTT:m,
N.
C.
We are remitting as indicated below for
.RICHMONI>'S .cash letter dated
APR. 16, 1928 ..•.•..• $ 2, 973.95
Less:
Total amount of unpaid items and protest fees
$ 1,800.08
$ 1,173.87
NET AMOUNT DUE
REMITT~E
AS FOLLOWS:
Draft on • . . . . . . . . . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Onarga our reserve account •..•.•.....................• $ 1,173.87
(For use of member banks only. Be sure to insert the net
a:rnount to be charged.)
Currency shipment today as per advice mailed under
separate cover • . . . • • • • • . . • . . . . . . . . . . . . . . . . . . . . . . . . • • $
D. M. Ausley, Ch
Authorized Signatur-e
~TUBN
ITEM LETTER
APR. 18, 1928.
From
Commercial National Bank,
Statesville,
66-140
N. C.
REASON FOR RETURN
AMOUNT
$ 1, 797.83
±nsf.
Fee
2.25
TOTAL
Please use this letter in returning
items. List separately below unpjiid
items actually returned herewith;
including protest fees, i f any. Return all items to
CHARLOTTm BRANCH, Federal Reserve Bank
of Richmond.
1,800.08
X-6248-a
Federal Reserve Bank. of Richmond does not know the exact hour at
which such forms were received by its Charlotte :Branch, but i t verily believes
and therefore alleges that they were received by it by mail at or about 9:00
A. M.
These forms had been sent to the Commercial National Earik of
Statesville by the Charlotte and Richmond Offices of the Federal Reserve :Barik
of Richmond along with the cash letters mentioned above, and were designed and
intended for use by the member barik to which sent in making remittance for cash
letters and for returning dishonored or unpaid chocks sent in such letters.
XXXI.
At the close of business on April 17th the reserve account of the
Commercial National l3ank of Statesville showed a credit balance due it of
one thousand eighty-four dollars and sixty-two cents ($1,084.62).
On April
18th and thereafter charges and credits were made in that account as shown
below:
CREDITS
Description
April 18
18
18
18
18
18
18
18
19
19
20
. 20
20
20
26
April 18
18
18
18
18
Amount
$ 1,084.62
:Balance
167.66
Cash letter dated 4/16 rec'd 4/17
2,631:09
n
11
n
4/14 rec 'd 4/16
149.83
Imnediate cash letter dated 4/17
5,000,00
Currency shipment dated 4/17
Cash letter·4/14 credited Comm.Nat.Bk. Char. in error
599~85
4,ooo,oo
Wire transfer from Wachovia :Bk. & Tr. Winston-Salem
l2,500f00
munediate cash letter 4/17
1,001+48
Deferred.. caah letter 4/11 rec•d 4/17
u
n
n
4/14 rec'd 4/16
1' 654.27
2.25
Protest fees from ck. $1,797.83 rt.from Rd.'s C/L 4/16
1,173.87
Reversing debit 4/18 Rd's C/L 4/16
20,561.03
"
n
4/18 our C/L 4/16
1,330.71
Deferred .cash letter 4/17 rec•d 4/18
.53
Refund of postage on currency shipments from 3/26 to 4/25
mBITS
Interest on Discount No. 7374 & 7375
Our cash letter 4/16
II
II
II
4/16
OUr collection 19431 Coupons City of Statesville
Deficient Reserve Penalty
24.62
20,561.03
1,173.87
55.00
122+74
...
«;·-,
x-sB4B•a
April 18
19
20
21
28
it;D
Our return letter 4/18 ($12,500 bk. draft drawn
by Statesville on American Tr. Char. dishonored on
account of being drawn against uncollected funds
See our credit of this day)
Our return letter of 4/18
Our return letter ot 4/19
Qur ~eturn letter of 4/20
To transfer bal. in reserve acct. to Head Office
12,501.50 .
3.66
58.00
242.50
17,114.27
The credits in said account described as for cash letters, either
deferred or imnediate crcdi t, are for th!3 amounts of checks deposited b;y- the
Commercial National Bank of Statesville for collection under the terms of the
Regulation,. Circular, and timo schedule above described.
Checks peyable in
·charlotte were under such time schedule credited immediately to the account of
·the Commercial National Bank of Statesville; checks payable elsewhere were
received upon a deferred credit basis and credit in the reserve account given
in accordance with tho estimated time necessary for collection.
All checks
were received and creQ.i ted subject to fi.nal payment as in the said Regulation
~:1
.·
and Circular provided.
The account shows the date of the letter containing
.
\
such checks, and the da.te on which it was received, and the date on which it
is cre4ited is the
~te
of availability mentioned in the Circular.
The debit or charge of twenty-four dollars and sixty-two cents
{$24.62) is for interest upon notes discounted for the Commercial NatioDBJ.
Bank of Statesville on April 17th, and the proceeds of which were credited
to
it
of
~ichmond,
on that day, but accord.i·ng to the cue tom of the Federal Reserve Bank
the discount or interest was not charged against the lliombor
bank: until the following day.
Tho other entries in said account are
<\fscribed in the account itself as set forth above.
XXXII.
On the 18th day of April.l928 as shown in said account the
Fed.e)ra~
Reserve Bank of Richl:nond received at its Charlotte :Branch from the
C_olllnerqial National Bank of Statesville a shipment of money or currency
aaounhng to five thousaxJ.d dollars ($5,000.00), also
an order from the
-14Wachovia Bank and Tru.s t Compaey of Winston-Salem transfdrring
the
sum of
four thousand dollars ($4,000.00) on deposit and due to it to the account
of the Commercial National Bank of Statesville, also from. the Commerciai
Natio~
Bank of Statesville a draft drawn by it on the .American Tr..1st
Compaey of Charlotte for twelve thousand five hundred dollars ($12,500.00).
This
~aft
was credited immediately to the account of the Commercial National
:Bank of Statesville subject to the terms o·f the Regulation and Circular
mentio~ed
above.
Thereupon the Federal Reserve Bank of Richmond entered
~n
the aceount of the Commurcial National Barik of Statesville a charge for the
amount of the two cash letters of April 16th •.sent to it from the Riclunond
and Charlotte Offices, respectively.
XXXIII.
The said draft for twelve thousand five hundred dollars ($12,500.00)
was on April 18th presented to the .American Trust Compaey of Charlotte through
the cl~ing house of Charlotte, but payment thereof was refused and it was ·
protested on the said day and the amount thereof and protest fees thereon were
charged to the account of the Commercial National Bank of
at the close of business on said day the total
av~ilable
~ta.tesville;
so that
credits in said account
amounted to thirteen thousand four hundred twenty""'nine dollars and nineteen
cents f$13,429.19), being insufficient to cover the amount of the two cash
I
'
letters of April 16th aggregating twenty-one thousand seven hundred thirtyfour dollars and ninety cents ($21, 734.90), which were charged against thG
said, credits.
XXXIV.
The Federal Reserve Bank of Richmond· notified the Commercial
National Bank of Raleigh that it had not received final payment in actualt7
collected funds for said check for six thousand nine hundred
~wenty-eight
dollars and ninety-four cents ($6,928.94) and thereafter charged the amount
said check
Digitized forof
FRASER
to the account of the Commercial National Bank of Raleigh, and
likewise gave a similar notice to all other banks which had deposited
cheCks contained in the two cash letters of
Ap~il
16th, and
char~d
arr:r 1~)1.
such
cheCks to the accounts of t~ depositing banks.
XXXV.
On the dates shown· in the account the Commercial National :Bank of
Statesville had deposited certain checks with the Federal Reserve Bank: of
:Richmond, the amounts of which becam_e available for credit in tho reserve
account of the Commercial National Bank of Statesville on April 19th and
April 20th, as shown iri the said account, and certain checks deposited by
the Conmercial National Bank of Statesville on or before April 18th were
returned dishonored and unpaid and charged to it as shown in the said account,
being described as. return letters, so that the Federal Reserve Bank of
· Richmond. held the balance of seventeen thOl sand one hundred fourteen dollars
and
twenty~ seven
cents ( $17,114. 27) as shown in said ·account.
XXXVI.
The Federal Reserve :Bank of Richmond is willing and desires, if it
is proper to do so. to distribute this balance among
~
the Commercial
. · National Ba.nk: of Raleigh and other l:iank:s which deposited the checks contained
in· the two cash letters dated April 16th, or to such other persons as may
be
the
equitable owners, in the proportion that the amount of the checks
·received from each such b8.nk bears to total amcunt of
letters; that is to aq, to the sum of
twenty-~ne
checks in such cash
:thousand seven hundred
thirty-four dollars and ninety cents {$21, 734.90); bu.t the Federal Reserve
Bank of Richmond is advised that of
such checks C. L. Williams, Receiver
o~
the Coii11J16rcial National :eank of .$·tatesville, claiJns that the balance state<i
above is payable to him as receiver of the said bank:; and the Federal Reserve
:BaJlk
of Richmond has been advised that if it should pay the said
S'Wil
of
money t9 the dePOsiting 'bSruts or to .the said receiver without a determinat:l;on
Digitized for of
FRASER
their conflicting
http://fraser.stlouisfed.org/
I
Federal Reserve Bank of St. Louis
claim~. by a col!I.Petent COUrt, such payment wou.ld be
-16..4 1
X-6248-a
made at its own risk and peril.Therefcre, Federal Reserve Bank of
Ric~on.d 1~)2
is holding the said fund subject to the order of this court.
:XXXVII.
Wherefore, the Federal Reserve Bank of Richmond prays that, in so
far as the plaintiff claims that the Federal Reserve Bank of Richmond is
liable further than to account for the fund mentioned above, the plaintiff
may take nothing by his bill, and that this defendant may recover from the
plaintiff its costs in this action expended.
In so far as the plaintiff seeks an accounting for or distribution
of the fund mentioned, the defendant prays that this action may be treated
as an action by it for an interpleader or for the administration and distribution of funds held in trust, and that all proper orders may be
taken, and
~de,
accounts
directed, and that the court will adjudge and determine
inquiri~s
the rights of C. L. Williams, Receiver, and of the plaintiff and the other
defen~ts,
and of all other persons to said fund, and the defendant may be
directed to pay and distribute the said fund to such persons as may be lawfully
entitled thereto, and
t~&t
the defendant may be allowed from said funds its
costs and disbursements in this action expended, including a reasonable fee
for the service of its attorneys in conducting this suit; and for such other
further and general relief as may be proper.
(S)
W. G.
Wallace~
Attorneys for Federal
Reserve :Bank of Richmond.
STATE OF VIRGUTIA )
) to-wit:
CITY OF RICHMOND
)
George H. Keesee, being duly sworn, deposes and says that the
Federal Reserve Bank of Richmond is a corporation and tbat he is an officer
thereof, to-wit its
~ashier,
and as such has access to and knowledge of its
. ·•.. r•· '::
-17-
X-6248-a
records and accounts and knowledge of its business and dealings, and that he
/~ t.) .::~l
..i:...•J<..J
makes this affidavit because the said defendant is a corporation and he is
an officer thereof, as a,bove stated, and he has read the foregoing answer
and that the allegations therein are true of his own knowledge, except as to
those matters therein stated on infonnation and belief, and as to those matters
he believes them to be true.
(Signed)
S~bscribed
and sworn to before me this
leth day of February, 1929 •
. My commission expires
(Signed)
C. Vasal Blackburn
Notary Public.
George H. Keesee
.I
X-6249
FEDERAL
RI.SIRVZ
BOARD
STATEMENT :roR THE PRESS
For release in Morning Papers;
March 1, 1929.
Fri~.
summary
The foliowihg is a
df general
business and financial conditi.ons throughout the several Federhl Reser~e Districts,
based uuon statistics for the months of
January- and February, as wi11 appear in
the forthcoming issue of the Federal Reserve :Bulletin and the monthly reports of
the Federal reserve ba~s.
Manufacturing and mining increased in January and the first part of February,
while building continued to decline.
Wholesale commodity prices rose slightly.
Reserve barik credit declined between the middle of January and the middle of
Febtuary feflecting chiefly a reduction in reserve balances· of member banks.
Prodilction--lndustrial production increased in janu.a.ry and continued to be
larger tha.zi a year a.gO.
Output of pig iron, steel (ngot~, a."'ld automobi;L~s was in
record volw.ne for January.
The high rate. of steel activd. ty reflected large pur-
. chas~s from automobiie nlanufacturers and also increased det:Qa.nd
:ri-om railroads.
Domestic output of refined co'pper, While continuing in large voltima, was somewhat
lower in January than in December.
ably in January.
Activity df textile mills increased consider-
In the mineral graup, output of copper ore, bituminous coal,
and petroleum was exceptionally large, and anthracite coal and tin also increased.
In the first part of February preliminary reports indicate the maintenance of
a high level of industrial
activity.
I
Steel plants operated at a high percentage
of capacity; the output of coal continued large and employment in Detroit factories
increaseq..
The production of petroleum, however, declined slightly in the middle of
February.
Building activity declined in January for the third
a large reductio~ ~~
Digitized forpri~rily
FRASER
ing
~uccessive
month, reflect-
awards for residential building, while commercial
..
.
-2buildinc awa.rds increased somewhat.
The value of building contracts let during
the first six weeks of the year was substantially lower than in the corresponding
p~riod
of either 1928 or 1927.
Trade--Shipments of freight by rail increased
durir~
.two weeks of February and were larger than a year ago.
January and the first
The increase during January
reflected ;?rimarily larger shipments of coal and coke and livestock.
Sale.s by
wholesale firms were seasonally larger in January and above the level of a year ago.
Department store sales declined less than is usual at this season and were considerably larger than in January 1928.
Prices--The general level of wholesale prices rose somewhat in January. Prices
of grains, livestock, and meats advanced, and there were also price advances in
steel, automobiles, and copper.
A decrease in the group index for building
materials reflected reductions in the prices of
l~~ber.and
pig iron, silk, cotton, and petroleum also declined.
brick, and prices of
Among the raw materials,
rubber advanced sharply in price, while silk, cotton, and hides declined.
~he
first half of February, the price of
the price of rubber continued to rise.
of wheat, corn, and hogs rose,
wh~le
cop~er
During
advanced to a new high level, and
Among the agriaultural commodities, prices
sugar and cattle declined slightly.
Bank credit--On February 20 total loans and investments of member banks in
leading cities were nearly $90,000,000 smaller than in the middle of January, owing
chiefly to reductions in the banks' investment holdings.
After the first week in
February, security loans declined, while all other loans, largely commercial, increased somewhat in February.
During the five weeks ending February 20, decline in the reserve balances of
member banks, together with a considerable inflow of gold from abroad and some
further decline in the demand for currency, were the chief factors accounting for
a decline of $173,000,000 in the
~olume
of reserve bank credit in use.
A large
. ..
.JC-6249
decline in l"'&serve ba.Ilk
ho.~dings
o.f
.aco$p~es
and
u.
S-. s.ecuritie.s wa.a offset
in part by a mnall increase in the volume of member bank borrowing.
Open market rates on bankers• acceptances and commercial paper advanced,
while rates.on collateral loans showed little change.
i
(V"'_I
1 •'
... '
FEDERAL RESERVE BOARD
WASHINGTON.
ADDRESS OFFICIAL.
THE
FED~
CQfi~NDENCJt
TO
RESIIRVE BOARD
X-6250
February 27,
1929~
:Dear Sir:
Thete is enclosed herewith for
your information, copy of the reply
made by the Board under date of February 26th to Senate Resolution 323,
adopted February 11, 1929.
Very truly yours,
E~ M. McClelland, ·
Assistant Secretary.
TO CHA.IRMEN .AND GOVERNORS
OF ALL FEDERAL RESERVE BANKS.
(Enolosure)
.I
X-6250-a
February 26, 1929.
Sir:
The Federal Reserve Eoard is in receipt of Senate Resolution 323,
reading as follows:
Vl'hereas in :press dispatches recently, the Federal Reserve
Board has complained that money is being drawn from the channels
of business and used for speculative purposes, and that some
of said speculation is illegitimate and harmful; Therefore be i t
Resolved, That the Federal Reserve Eoard is hereby requested
to give to the Senate aey information and. suggestions that it
feels would be helpful in securing legislation necessary to
correct the evil complained of and prevent illegitimate and harmful speculation.
Inasmuch as this Resolution was occasioned by the statement issued
by the Federal Reserve Board on February 6th, wherein the attitude and viewpoint of the Federal Reserve Board with respect to the growing volume of
credit in speculative security loans was indicated, . the statement is repeated
here in order that there may be no misapprehension of the Eoard 1 s position
with reference either to tht matter discussed in its statement or to that
which is the subject of
11 The
th~
Senate's Resolution.
United States has during the last six years experienced a
most remarkable run of economic activity and productivity. The production,
distribution and consumption of goods have been in unprecedanted volume. The
economic system of the cO'I;mtry has functioned efficiently and smoothly. Among
the factors which have coptributed to this result, an imPortant place must be
assigned to the operatic~ of our credit system and nota9ly to the steadying
influence and moderating policies of th,e Federal Reserve System.
11 D.:tring the last year or more, however, the functioning of the
Federal Reserve System has encountered interference by reason of the excessive
amount of the country's d.·edi t absorbed in speculative security loans. T!1e
credit situation since the opening of the new year indicates that some of the
factors which occasioned untoward developments during the year 1928 are still
at work. The volume of speculative credit is still growing.
-2-
:X:-6250-a
"Coming at a time when the country has lost some 500 million dollars
of gold, the effect of the great and growing volur,1e of speculative credit has
already ;_Jroduced some straih, which r...as reflected· itself in advances of from 1
to 1-1/2 ~)er cent in the cost of credit for commercial uses. The matter is one
that concerns every section of the country and every business interest, as an
aggravation of these conditions may be expected to have detrimental effects on
business and 1nay impair its futtire.
"The Federal Reserve Board neither assurnes the right nor has it any
disposition to set itself up a~ an arbiter of security speculation or values.
It is, however, its business to see to it that the Federal reserve banks function as effectively as conditions will permit. When it finds that conditions
are arising which obstruct Federal reserve banks in the effective discharge
ef their function of so managing the credit facilities of the Federal Reserve
System as to accommodate commerce and business, it is its duty to inquire into
them and to take such measures as may be deemed suitable and effective in the
circumstances to correct them; which, in the immediate situation, means to
restrain the use, either directly or indirectly, of Federal reserve credit
facilities in aid of the growth of speeul·ative credit. In this connection,
the Federal Reserve Board, under date of February 2nd, addressed a letter to
the Federal reserve banks, which contains a fuller statement of its position:'The firming tendencies of the money market which have been in
evidence since the beginning of the year--contrary to the usual
trend at this season- make it incumbent upon the Federal reserve
barucs to give constant and close attention to the situation in
order that no influence adverse to the trade and industry of. the
country shall be exercised by the trend of money conditions, beyond
what may develo~ as inevitable.
'The extraordinary absorption of funds in speculative security
loans which has characterized the credit movement during the past
year or more, in the judgment of the Federal Reserve Board, deserves
particular attention lest it become a decisive factor working toward
a still further firming of money rates to the prejudice of the country's
commercial interests.
.
·
'The resources of t~e Federal Reserve System are ample for meeting
the growth of the count~~·s commercial needs for credtt, ~rovide4~they
are competently adminisl,ered and protected ag.ainst seepage into uses
not contemolated by the 1FP.der~l Reserve Ar.t.
1 The Federal Reserve Act does not, in the opinion o! the Federal
Reserve Board, contempl~te the use of the resources of the Federal reserve banks· for the cref!.tion or extension of spec.ulati ve credit. A
member bank is not with~n its reasonable claims for rediscount facilities at its Federal re~er~e barik when it borrows either for the
purpose of making spec~ative loans or for the purpose of maintaining
speculative loans.:
·
.
1 The Board has no disposition to assume authority to interfere
with the loan practices of member banks so long as they do not involve the Federal reserve banks. It has, however, a grave responsibility whenever there is evidence that member banks are maintaining
speculative security loans with the aid of Federal reserve credit.
When such is the case the Federal reserve barik becomes either a con
G()f·"'
l"w
A./
X-6250-a
-3-
tributing or a sustaining factor in the current volume of speculative secu.tity credit. This is not in harmony with the intent of
the Federal Res$rve Act nor is it conducive to the wholesome operation of the banking and credit system of the country.'"
The Board begs leave to call the attention of the Senate to the
fact that the purport and language of its statement do not agree with those
in the preamble of the Senate resolution.
itself with credit conditions.
desire
It
The Board's statement concerned
It disclaimed both the authority and the
to set itself up as an aroi ter of security speculation or values".
That still is the Board's position.
At the time of the issue of its statement, it was the belief of the
Board that it could count upon the cooperation not only of the Federal reserve
banks but of leading member banks everywhere in the country in making successful an effort to bring about an orderly readjustment of the credit situation;
and the Board has been confirmed in this belief by what has taken place since.
This also is the view of the Federal Advisory Council, as will be
seen from the following minute of its proceedings which was presented to the
Board February 15th on the occasion of its recent
~uarterly
meeting:
The F.O.eral ,Ad,visory Co'lmcil approves the action of
the Federal Reserve Board in instructing the Federal
reserve banks to prevent, as far as possible, the diversion of Federal reserve funds for the purpose of
carrying loans based on securities. The Federal Advisory
Council suggests that all the member banks in each
district be asked directly by the Federal reserve ba:tlk
of the district to cooperate in order to attain the
end desired. The Council believes beneficial results
can be attained in this manner • 11
II
This whole matter is engaging the earnest attention and efforts of
the Federal Reserve Board.
If it should develop that the Board, through
exercise of the powers granted under the provisions of the Federal Reserve Act,
or through cooperation with the Federal Reserve and member banks, should be
unable to bring a.bou-t a solution cf
th~
problem which has awakened the con-
cern alike of the Senate, the FederalR&serve Board, and the general body
of public opinion, it will be glad to give consideration to the possibilities
of remedy by way of legislation.
EY direction of the Federal Reserve Board.
Re tpec tfully,
Walter L. Eddy •
Se~retary.
The President of the Senate,
Washington, D.C.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CQRR.E$PONDENCE TO
THE FEDERAL RESEI'tVE BOARD
X-6251
February 27, 1929.
StmJECT:
Topics for next Governors 1
Conference.
Dear Sir:
There are enclosed herewith,
for your
informati~n
in advance of the
next Governors 1 Conference, copies of
letters which have been addressed to
the Secretary of the Conference submitting topics which the Board would
like to have discussed at the meeting.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F • R • BANKS •
(En~losures)
'
• •
X-6251-a
February 26 1 1929.
Dear Mr. Strater:
Some of the Federal reserve banks have established
currency depots from time to time at interior and other important points, all of which have had the approval of the Federal
Reserve Board. A number of years ago the Board permitted the
establishment of a currency depot in a certain city because
of unsettled conditions in tr.at territory. Figures that the
Eoard now has in its possession, however, convinced the Board
that the emergency has passed a.nd the Board has abolished the
depot for the reason that its continuation would result in furnishing the member batiks a good portion of their till money.
1
Requests for additional currency depots are being
received and the Board has arrived at the conclusion that the
practice must from now on be considered as a System matter rather than a regional one, because as various cities learn of
the advantages of the currency depot they will request that
accommodation. and it will be impossible to grant some and refuse others when the conditions are more or less identical.
In view of this situation, the Board would like tc,
have this subject placed upon the program for discussion at
the next Governors' Conference.
Yours very truly,
(S)
Mr. H. F. Strater, Secretary,
Governors' Conference,
Federal Reserve Earik,
Cleveland, Ohio.
R. A. Young,
Governor.
••
X-6251-b
February 26, 1929
Dear Mr. Strater:
I have been advised that the Texas legislature has
passed a law authorizing depositary banks to include bankers
acce,tances of bqnks having a capital of $500 1 000 or more in
the pledge of collateral to secure public deposits. Governor
Talley believes this will broaden the dema.nd for and the per.manent use of bankers bills by banks in his state, and from
my e~~erience in the Ninth Federal Reserve District, I am inclined to agree with him.
The mechanics of the transaction, hov.·ever, llla¥ be
a bit difficult because no bank will care to turn over to inex-.:_:>erienced public officials the custody and handling of
bankers bills any more than they 11ould care to turn over to
them Government bonds, and it seems to me that from the
st~ndpoint of serving member banks and also in order to promote the use of bankers bills, Federal reserve banks could
well afford to act as custodian for public officials who
have securities owned but pledged by member banks.
In view of this possibility, the Board would like
to have this subject placed on the program for discussion at
the next Governors' Conference.
Yours very truly,
(S)
Mr. H. F. Strater, Secretary,
Governors• Conference,
Federal Reserve Bank,
Cleveland, Ohio.
R. A. Young,
Governor.
'205·
X-6255
!:!~!~~~
~~§.~~!~
~Q~~~
STATEMENT FOR THE PRESS
For Release at 3:00 p. m.
The Federal Reserve
March 1, 1929.
~oard
announces that the
Federal Reserve ~ank of Dallas has established a rediscount rate Of 5 per cent on all classes of paper
of all maturities, effective March 2, 1929.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OfFICIAL·CI;IRitESPONDENCE TO
THE FEDEitAL lti£SERVE BOARD
X-6258
March 8, 1929.
SUBJECT:
Code word to cover new Issue of Treasury
Certificates of Indebtedness, Series
TD2-1929, in tele€raphic transactions.
Dear Sir:
In cohrtection with telegraphic transattions
in Government securities between Federal reserve
l';anks, the code word 11 NOWh"EST 11 has been designated
to cover the new issue of Treasury Certificates of
Indebtedness, Series TD2-1929, dated March 15, 1929,
due December 15, 1929.
This word should be inserted in the Federal
Reserve Telegraphic Code Book, following the code
word 11 NOWHESSIAN11 on page 172.
Very truly yours,
J, C. lToell,
Assistant Secretary.
TO GOmlroRS OF ALL F. R. BAlWS •
C.¥().,_,..}
N· .f··
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C:OJUU!SPONDENC£ TO
THE FED(I!JIAL ~VE BOARD
X-6259
March 8, 1929.
SUBJECT:
Biographical
Information~
Dear Sir:
In ord..er tM.t the :Soard's file of
biographica:i,. sketches 6f Federal ~eserve bank
and branch directors may be up to date, it is.
requested that the Board be ad.vised from tLJ.e
to tirae of changes in the business afi"iliations
of the directors. It is also requested that
you advise the Board, at your convenience, of
any change~ in business affiliations which may
have taken place since the biographicc"ll sketches
of the present directors wera filed with the
Board.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
TC CHA.IruflEN OF ALL F. R. BJU."IKS.
.208
x.:...s2so
March 7. 1929.
TO:
The Federal Reserve Board
FR011::
Mr. Wyatt, General Counsel.
SUBJECT: Power of Board to enforce principles regarding proper use of credit
facilities of Federal Reserve System
laid down in Board's letter of February 2, 1929.
At the Board meeting on March 5th, I was requested liTo report
as. to Tihat powers the Board has under the Federal Reserve Act for
the enforcement, should it become
necess~ry,
of the principles re-
ga.rding the proper use of the credit facilities of the Federal Reserve System, laid down in the Board's letter of February 2nd to all
Federal .reserve banks. u
The following paragraphs of the Board's letter contain the statement of principles referred to:
"The Federal Reserve Act does not, in the op1mon
of the Federal Reserve Board, contemplate the use of
the resources of the Federal reserve bam~s for the creation or extension of speculative credit. A member bank
is not within its reasonable claims for rediscount facilities at its Federal reserve bank when it borrows
either for the purpose of making speculative loans or
for the purpose of maintaining speculative loans.
11 The Board has no disposition to assume authority to
interfere with the loan practices of me8ber banks so long
as they do not involve the Federal reserve banks. It has,
however, a grave responsibility whenever there is evidence
that member banks are maintaining speculative security
loans with the aid of Federal reserve credit. When such
is the case the Federal reserve baruc becomes either a contributing or a sustaining factor in the current volume of
speculative security credit. This is· not in harmony with
the intent of the Federal Reserve Act nor is it conducive
to the wholesome operation of the ba.mcing and credit system
of the country.n
It would appear, therefore,
th~t
the Board desires to be informed
as to the powers which it has under the Federal Reserve Act which could
0
X-·62 6"
'.9
. ~\h
-2-
...
be used to prevent member banks from using Federal reserve credit
for the purpose of making or maintaining speculative security
loans.
In view of the further remarks contained 'in the press state~
ment issued by the Board under date of February 5th (X-6233) and
lished on page
~3
pu~
of the Federal Reserve Bulletin for February, 1929,
to the effect tbat, ".the great and growing volume of speculative
credit has already produced some strain, which has reflected itself
in advances of from 1 to li per cent in the cost of credit for commercial use, 11
I assume that the Board does not wish to know what powers
it might exercise with a view
of
tightening the
6~neral
credit situa-
tion, such as the power to increase the rediscount rates or further
r.estrict the volume of open market investments of the Federal reserve
banks.
With this understanding, I shall endeavor to point out certain
powers which the Board possesses under the Federal Re.serve Act and
which might be exercised with a view of accomplishing
purposes.
~he
above
In suggesting these powers, however, it is my intention
merely to inform the Federal Reserve Board of its lawful rights;
and the 1:1ention of these rights is not intended as a suggestion
that they should be exercised.
The question whether these rights
ought to be exercised is a question of policy on which I intend
to express no opinion.OPUTION.·
(1)
Under Section 13 of the Federal Reserve Act, the Board
has ample power to prescribe such restrictions,
limita~ions
and regu-
>
X-6260
(1;A
,.::~J._
-3-
lations (;overning the rediscount of notes, drafts, bills of exchange
and bankers 1 acceptances, the making of advances to member banks on
their promissory notes, and the purchase of bills of exchange,
bankers' acceptances and government, State, and municipal securities (lncluding purchases under so-called repurchase agreements),
as may be necessary to prevent member banks from using the
credit resources of the Federal Reserve System for the purpose
of making or·maintaining speculative security loans.
(2)
Thus, the Board could,·if it deems it advisable, prescribe
a regulation forbidding any Federal reserve bank to rediscount any
paper for, make any loan or advance to, or purchase any bills of exchange, bankers' acceptances, or government, State, or municipal securities (under repurchase agreements or otherwise) from, any member
bank which at the time:
(1)
Has loans outstanding to brokers or deal-
ers in stocks, bonds or other investment securities; or (2) has unreasonably large amounts of speculative loans outstanding to customers secured by stocks, bonds, or other investment securities, or
the proceeds of which have been or are to be used for the
of carrying or
(3)
tr~ding
p~rpose
in stocks, bonds, or other investment securities.
The Board has ample power to enforce such a regulation by
suspending or' removing from office the officers and directors of
any Federal reserve bank which violates it.
(4)
The Board has no independent power under Section 4 of the
Federal Reserve Act to issue orders restricting or qualifying the
right of member banke to der.nand of their Federal reserve banks '•uch
.·.1'~
discounts, advancements, and accommodations as may be safely and
0.
X-6260
-4· reasonably made with due regard for the claims and demands of other
member banks".
(5)
This right of member banks, however, is expressly made sub-
ject to the exercise of such powers as the Federal Reserve Board has
under other provisions of the Federal Reserve Act, including the power
under Section 13 to prescribe restrictions, limitations and regulations
gpverning the discount and rediscount and the purchase and sale by any
Federal reserve bank of any bills receivable and of domestic and foreign
bills of exchange and of acceptances; and the Board could order a Federal reserve bank to cease violations of any such restrictions, li;nitations or regulations which it may have
(6)
prescribed.
The Board could, if it so desires,
~escribe
a special rate
(higher than the rediscount rate on indus.trial, commercial or agricultural
paper) for advances to member banks on their promissory notes secured by
bonds or notes of the Government of the United States.
DISCUSSION
Section 13 of the Federal Reserve Act contains the following provision:
"The discount and rediscount and the purchase
and s~le by any Federal reserve bank of a1~ bills
receivable and of domestic and foreign bills of
exchange, and of acceptances authorized by this
Act, shall be subject to such restrictions, limitations, and regulations as IDa¥ be imposed by the
Federal Reserve Board.u
This, in my opinion, confers upon the Federal Reserve Board
~le
power to prescribe such restrictions 1 limitations and regula-
tions governing the rediscount of notes, drafts and bills of exchange
X-6260
-5-
by Federal reserve banks, the making of advancements by Federal reserve banks to member banks on the promissory notes
.rr
such member
banks, and the purchase and sale of bankers' acceptances, bills of exchange, and Government, State and municipal securities under Section 14
(including the purchase of such bills, acceptances, and securities under
repurchase agreements) as may be necessary to prevent member banks from
using the credit resources of the Federal Reserve System for the purpose
of making or maintaining speculative loans.
The above quoted provision of Section 13 has heretofore been considered by this office and it has been found that it applies not. only
to rediscounts under Section 13 but also to purchases and sales at home
or abroad under Section 14.
(See my opinion of October 20, 1927 (X-4980),
pages 5 and 6, a copy of which is attached hereto.)
It also applies to
the making of advances to member banks on their promissory notes under
the seventh paragraph of Section 13 (See opinion of Mr. Vest dated June 21,
1928, (X-6124-a), a copy of which is attached hereto.
The question might be raised whether this paragraph pertains to the
rediscount of notes and "drafts" as well as bills of exchange and bankers'
acceptances, but it is clear that notes and "drafts" are included in
term "bills receivable".
fu
e
That 1erm has been held by the courts to include
promissory notes, bills of exchange or other instruments for the payment of money.
(See Words and Phrases, Bouvier's Law Dictionary, and
authorities cited therein.)
The term
a~d
11
bills receivable" would seem to ap:9ly also to bonds
notes of the United States and bills, notes, reVenue bonds and war-
rants issued by States, counties, districts, political subdivisions and
municipalities; since all such obligations are "instruments for the
X-6260
-6.,...
payment of money".
Even if the aboy:e-quoted paragraph in Section 13
does not apply to these classes of seQurities, however, the Board has
ample power under Section 14(b) to prescribe rules and regulations
governing the purchase of such securities.
The Board has power, therefore, to prescribe rules and
regulations governing practically every method by which a member bank
obtains credit accommodations from a Federal reserve bank, including not
only the rediscount of notes, drafts, bills of
exchan~e
and bankers' ac-
ceptances, but also borrowings by member banks from Federal reserve
banks on the promissory notes of such momber barucs and sales of bills
of exchange, bankers' acceptances and Government and municipal securities to Federal reserve banks
unde~
Section 14, including sales under
so-called "repurchase agreements".
The exercise of all these powers is by the above quoted
paragraph of Section 13 made subject to
11
such restrictions, Umi ta-
tions and regulations as may be imposed by the Federal Reserve Board."
There is no limitation in the law on the character of restrictions,
limitations and regulations which the Board may prescribe; and the matter is left to the discretion of the Federal Reserve Board, subject
only to the usual qualification that the restrictions, limitations
.·
''\
-7-
x... Gzso
and regulations prescribed by the Board must not be in oonfliet with other
provisions of the Federal Reserve Act and must not be arbitrary, capricious
or unreasonable.
Any restriction, limitatiOn, or regulation which is
reasonably calculated to carry out the purposes of the Federal Reserve .Act
and the policies which Congress had in mind when it enacted the Federal
Reserve Act would clearly be reasonabl-e and within the Board's power.
Certain of these purposes and policies were summarized a.s follows on page t3!3 of the Bbal'd • s Ann u ai Report for the year 1923:
lltt'he Federai reserve act has laid down as the broad
principle for the gUidance of the ]federal reserve banks and of
the Federal Reserve Board ih the discharge of their functions
with respect to the administration of the credit facilities
of the Federal reserve banks the principle of •accommodating
con~erce and business.•
(Sec. 14 of the Federal reserve act,
par,(d).) The act goes further. It gives a further indication of the meaning of the broad principle of accommodating
con~erce and business.
These further guides are to be found
in section 13 of tht;l Federal reserve act, where the purposes
for which Federal reserve credit may be provided are described
as 'agricultura.l, industrial, or commercial purposes'. It is
clear that the accommodation of commerce and business contemplated as providing the proper occasion for the use of the
credit facilities of the Federal reserve banks means the accommodation of agriculture, industry, and trade.- The extension
of credit for purposes •covering merely investments or
issued or drawn for the purpose of carrying or trading in
stocks, bonds, or other investment securities, exce-pt bonds
a."'ld notes of the Government of the United States, t is not permitted by the Federal reserve act. The Federal reserve system
is a system of productive credit. It is not a system of credit
for eit.her investment or speculative purposes. Qredit in
the service of agriculture, industry, and trade may be described comprehensively as credit for productive use. The
exclusion of the use of Federal reserve credit for speculative and investment purposes and its limitation to agri- ·
<(~:~al, industrial, or commercial purposes thus clearly
indf(J~tes the na.tu:r:e of the tests which are appropriate
as guides in the extension of Federal reserve credit.
:(,.'·,..-,,
..
2'15
X-6260
-8They clearly describe the nature or character of the purposes for which such credit and currency may be extended. The
qualitative tests ap~ropriate in.Federal reserve batik credit
admird.stratibn laid down by the act are' therefore, definite
and aniple • it
'
11
That this is an accurate statement of certain of the pur~oses
which Congrecs had in mind When i t enacted the Federal Reserve Act can be
.
,
conclusively d~monstrlited. by a ~+•view of the legislative history of the Act •
After ·defining the character of paper which is eligible for rediscount at Federa.i reser'1te batiks; Section 13 provides that:
Such definition shall not include notes, drafts or
bills covering merely investments or i13sued or drawn for
the purpose of carrying or trading in stocks, bonds or
other investment securities, except bonds and notes of the
Government of the United States. 11
11
The policy of this provision is indicated by the following
passages from the report of the Committee on Banking and Currency of the
House of Representatives on the original Federal Reserve Act ( H.R. Report
No. 69, 63rd Congress, 1st Session, pages ll, 19, 20, 48, 59, 62 and 63):
ESSENTIAL FEATURES OF REFORM.
"The other plans before the committee or examined by
it have likewise been found unsatisfactory-some for reasons
analogous to those which made the Aldrich bill unaccep-table,
others because of defective detail, erroneous principle,
or faulty construction. An effort was, however, made to
ascertain the constituent.elements of these measures ~~d of
the Aldrich bill, common to all, which should be recognized
and pr'ovided for in aey new plan because representing the
fundamentals of legislation. It is believed that these are
as follows:
11 1.
Establishment of a more nearly uniform rate of
discount throughout the United States, and thereby the furnishing of a certain kind of preventive against over expansion of credit which should be similar in all parts of
the country.
X-6260
-9nz • General eco:npp\y of te~etves in order that such reserves might be held ready for use in urotecting the banks of
any se.ction of the country and for enabling them to go on meeting their obligations instead of suspending payments, as so often
in the uast·.
"3. Furnishing of an elastic currency by the abolition
of the existing bond-secured note issue in whole or in part, and
the substitution of a freely issued and adequately protected
system of bank notes which should be available to all institutions which had the proper class of paper for presentation.
11 4.
Management and commercial use of the funds of
the Government which are now: isolated in the Treasury and subtreasuries in large amounts.
11 5.
General supervision of the banking business and
furnishing of stringent and careful oversight.
11
6.
Creation of market for connnercial :paper.
"Other objects are sought, incidentally, in these plans,
but they are not as basic as the chief purposes thus enumerated.
*
*
"TRANSFER OF RESERVES.
11Reference has been briefly made to the fact that the
committee's proposals provide for the transfer of bank reserves
from existing banks which hold them for others to the proposed
reserve banks. At present the national banking act recognizes
three systems of reserves:
*
*
*
*
"The original reason for creating this so-called 'pyramidal' system of reserves was that inasmuch as central banking
institutions were absent, and inasmuch as banks outside of
centers were obliged to keep exchange funds on deposit with
other banks in such centers, it was fair to allow exchange
balances with such centrally located banks to count as reserves inasmuch as they were presumably at all times available in cash. *
*
*
*
As matters have
developed, it has been vicious in the extreme. Coupled with the
inelasticity of the bank currency, the system has tended to create
periodical stringencies and periodical plethoras of funds.
Banks in the country districts unable to withdraw notes and
contract credit when they have seen f1 t to do so, because of
the rigidity of the bond-secured currency, have redepQsited
such fundswi.th other banks in reserve and central reserve
cities and have thus built up the balances which they were
entitled to keep there as a part of their reserves. Moreover,
r$ -·<~
~JY:)
X-6260 r:::,u~.- '
-1011 the :practice of thus :h3deposi ting funds having been once
established, it has been carried. to extreme lengths, and at
times has been decidedly injurious in its influence. The payment of interest on deposits by banks in the centers has been
used for the purpose of attracting to such banks funds which
otherwise would have gone to other centers or to other banks in
the sa~e centers or which would lkave been retained at home.
The funds thus redeposited, even when not at~racted by any artificial means, have of course constituted a demand liability, and
have been so regarded by the banks to which they were intrusted.
"!1 In conse-quence, such banks have sou,£,ht to fL1d the most
profitable means of employment for their resources and at the
same time to have them in such condition as would ~ermit their
prompt realization when demanded by the depositing banks whiCh put
the1~1 there.
T'ne resUlt has been an effort on the part of the
national banks, particularly in central reserve cities, to dispose of a substantial portiori of their funds in call loans protected by stock-exchaltge collateral as a rule. This was on the theory
that, inasmuch as listed stock-exchange securities could be
readil:r sold, call loans of this type were for -~)ractical purposes
equivalent to cash in hand. The theory is of course close enough
to the fact·s when an effort to realize is made by only one or few banks,
but is entirely erroneous whenever the attempt to withdraw deposits
is made by a number of baru~s si~ultaneously. At such times, the
banks in central reserve and reser..-e cities are wholly unable to
meet the demands that are brought to bear on them by country banks;
and the latter, realizing the difficulties of the case, seek to
protect themselves by an unnecessary accumulation of cash which they
draw from their correspoudents: thereby weakening the latter and
frequently strengthening the.asel ves to an undue degree. Under
such circumstances the reseT-vc:Js of the country, whic~ ought to
consti:!>U.te a readily avai1~:;,1e homogeneous fun'h__!eady for use in
~ direction where sudden necessities may de-relop, are in fact
scattered and entirely los~ their efficiency and.._~_tre~ owing
to their being diffuset through a great number of institutions
in rela~ively small amount and thereby rendered nearly unavailable. T:.i"lis evil has been met in times past by the suspension
of specie ?ayments by banks and by the substitution of unauthorized and extra-legal substitutes for currency in the form of
cashiers• checks, clearing-house certificates and other methods
of furnishing a medium of exchange. Needless to say such a
method of meeting the evilisthe worst kind of makeshift and
is qnlf somewhat better than actual disaster.
·
"HOLDING OF FU11)5 •
The comni t tee believes . that the only way to correct
this condition of affairs is to provide for the holding of
reserves by duly qualified institutions which shall act primarily
in the public interest and whose motives and conduct shall be so
absolutely well known and above suspicion as to inspire unquestioning confidence on the part of the community. It believes
11
~·
_,.
0\ •••
X-5260
-1111 that the reserve banks which it proposes to ~~rovide
for will afford such a t7pe·of institutions ru1d that they
may be made ·. ~· the effective means for the holding of
the liquid reserve· funds of the countr;y- to the extent
that the latter are not needed in the vaults of the banks
themselves. * * *
*
*
*
*
"Section 20 (i.e., section 19 of the Federal Reserve
Act) seeks to readjust the reserve requirements now provided
by the national banking act in such a way as to L~e them conform to the dictates of scientific banking, and to adjust
them to the provisions of the proposed bill. Tho following
1:1ain objects have been had in mind:
To abolish entirely the present system of redeposited or 'pyramided' reserves.
11 1.
11 2.
To establish a moderate required reserve actually to be held in cash in the vaults of the banks.
"3. To prescribe a secondary reserve to take the form
of a credit with the Federal reserve b~~s.
*
*
*
*
11 In outlining the general philosophy of the proposed barucing bill it was pointed out that the existing
systom of redeposited reserves ~ives rise to cheap money
for stock-exchange speculation in the centers while it fails to
-provide in times of panic a reserve upon which the country can
draw with assurance, because at such times &rock-exchange securities can not be easily liquidated,. so that call loans are unavailable as a resource, and the city banks in self-defense have
deemed themselves warranted in susnending s~ecie payments. It is
contended, however, that these difficulties and irregularities
of the existing system are me.a· blemishes upon the surfac¢ of
an otherwise desirable state of affairs, and that there is
coed and sufficient economic reason for maintaining the present
system of redeposited reserves at least in ~art. This claim
may be reduced to a series of propositions as follows;
11 1.
The redeposited reserves are placed with the
city banks not for stock speculation, out in larg~
measure at least to supply exchange funds upon which the
depositing banks may draw.
2. The redeposited balances must be kept with the
banks which now hold the~, bec~se the country banks look to
these city banks for accommodation and the latter .gauge the
amount of accommodation to be granted them by the size of the
balances.
11
X-6260
-12"3. The country ba1"lks, and in general all banks makthe redepoaits get a rate of interest thereon. They
are thus able to make use of a reserve which would otherwise
be 'deadJ 1 and which when held in cash or in the Federal reserve banks will yield them no revenue, the latter batiks being forbidden by the terms of the bill to ?8¥ interest on deposits.
ir~
"These contentions are worthy of careful study, because
they are widely urged.
...
*
*
*
...
11 ~e second point already noted has even less force
than the first. Not only does the proposed
bill urovide more extensive. facilities for rediscount
than have ever been known, but even if it didnot do so,
and even if, as alleged, there are many kinds and classes· of
security not elit;ible for rediscount under the bill which
country banks can use as a basis for accomffiodation only with
city banks, it would still remain true that this does not
afford any warrant for demanding the maintenance of the existi~g situation.* *
*
•
...
...
11 * * In view of the great difficulty of defining
'comrnercial :paper, r the actual definition of the same has
been left to the Federal reserve board in order that it
may adjt"..st the definition to the practices -prevailing
in different parts of the country in regard to the transaction
of business and the making of paper. For obvious reasons
it is forbidddn that any such paper shall be admitted to
rediscount if made for the purpose of carrying stocks or
bonds."
From this,
i~
is perfectly clear that one of the fundamental" purposes
of the Federal Reserve Act was to prevent the bank reserves of the country
from being tied up in speculative loans on stocks, bonds and other
investment securities.
It is obvious, therefore, that it would be en-
tirely in accordance with the purposes of the Federal Reserve Act and
the policy of Congress when it enacted the Federal Reserve
~ct
if the
Board should promulgate restrictions, limitations and regulations designed
to prevent member banks of the Federal Reserve System from using the
credit resources of the Federal Reserve System for the purpose of making
-13.,-
or maintaining loans, the proceeds of which are used for the purpose of
carryiDb or trading in stoCks, bonds or other investment securities.
It is true that the above-quoted provision of the Federal Reserve Act excluding loans of this character from the definition of eligible paper, does not itself prevent member
b~1]lt:s
from discounting el-
igible paper and using the proceeds to make loans on stocks, bonds and
other investment securities; but it is equally clear that the b11oad powers
of the Federal Reserve Board to prescribe restrictions,. limitations and
regulations governing theoperations of Federal reserve bankswere intended to enable the Board to meet just such contingencies and to prescribe such rules, regulations and restrictions as rdght be necessary to
supplement the express provisions of the Act and more fully to carry out
the broad purposes of the Act.
It has been
ar~ued
that it is not inconsistent with the provisions
of the FederalReserve Act for federal reserve
bruh~s
to make loans to, or
to rediscount eligible paper for, member banks which at the time have
surplus funds loaned to brokers or dealers in stocks, bonds and other
investme11t securities; because it is impossible to trace the proceeds of
any particular rediscount or advance to a
m~nber
bank and show that
the crodi t obtained from the Federal reserve bank is used for the purpose
of making or obtaining such loans.
is not a
tec~nical
While it may be true that this
violation of the Federal Reserve Act, it obviously
is contrary to the policy of the Act, as indicated by the above quotations from the Committee report; and i t clearly is within the BoaTd 1:s
power to prescribe such rules,
regulation~
an9. restrictions as may be nee-
-14essary to prevent any such evasion of the Gxpress provisions of the
Act.
II.
One of the most direc·t, appropriate and effective powers
which the :Soard could exorcise for the enforcement of the principles laid down in its letter of Fe.bruary 2, 1929, therefore, would
be to prescribe a regulation forbidding any Federal reserve bankto
rediscount any paper for, or to make any loans or advances to, or to
purchase any bills of exchange, bankers' .acceptances or Government,
State, or municipal securities (either outright or under repur-.
chase agreeoents) from, any member bank which at the time: (1) Has
loans outstanding to brokers or dealers in stocks, bonds or other
investment securities; or (2) Has unreasonably large ru:;ounts of specul.ative
loans outstanding to customers secured by stocks, bonds, or other
investment securities, or the proceeds of which have been or are to
be used for the purpose of carrying or trading in stocks, bonds, or
other investment securities.
!f the Board should decide to pronrolgate such a regulation,
it probably would find it necessary, for practical reasons,
to incorporate therein certain exceptions which would enable member
ba~s
embarrassed by sudden fluctuations in their reserves or their
reserve
requir~ments
to obtain temporary accommodations at the
Federal reserve bank until they eQUid liquidate their investments
in loa.ns to brokers or dealers in stocks, bonds or other investment
se·cu.ritie-s.
However, exceptions to cover this practical difficulty
can ba &ovised; and, if the :Soard desires to
~romulgate
such a regu-
X-6260
-15lation, I believe that a thoroughly practical
and workable regula-
tion can be drawn.
III.
~Dere
can be no doubt that the Board has ample power
to enforce such a regulation, or any other lawful regulation which
it mir:ht prescribe; since Section 11 (f) of the Federal Reserve
Act authorizes the Board,
11 To suspend or remove any officer or
director of any Federal reserve bacl~, the cause
of such removal to be forthwith communicated in
writing by the Fe·deral Reserve Board to the removed officer or director and to said bank".
This power to·
removal~is
subject only to the condition that
the Board communicate the cuase of such removal in writing to
the removed officer and to the Federal reserve bank.
The cause of
removal is not specified in the law but is left to the discretion
of the Rederal Reserve Board, the only limitation being that it
must be reasonable and not capricious or arbitrary.
Clearly, the willful violation of a lawful rebulation JJrescri bed by the' Federal Reserve :Board would be a reason able and valid c·ause for the removal of any officer or director
of any Federal reserve bank.
X-6260
('':'~c."'.\
The question .has been raised whethor' under the following
provision of Section 4 of the Federal Reserve Act, the Federal Reserve Board has power to order a particular Federal reserve barik
to ceaae or suspend the granling of any discounts, advancements or
acco1m~odations
to a particular member bank.
"Said board shall administer the affairs of
said bank fairly and impartially and without discrimination in favor of or against any member bank
or banks and shall, subject to the ~revisions of
law and the orders of the Federal Reserve Eoard,
extend to each member bank such discounts, advancements and accommodations as n~y be safely and reasonably made with due regard for the claims and demands
of other member banks."
In view of the importance of this question, I have made a careful study of the legislative history of this paragraph of the Federal
Reserve Act before undertaking to construe it.
A complete statement
of the legislative history of this paragraph, with lengthy quotations
from the debates in Congress, has been prepared by this office and
will be furnished to any member of the Board desiring to read it; but
I believe that a brief statement of the situation and one or two quotations from the debates will be sufficient for the purposes of this
opinion.
The above quoted paragraph was included in Section 4 of the Federal
Reserve Act as originally enacted and has never been amended.
It was
not discussed in the reports on the original Federal Reserve Act either
by the House Banking andCurrency Committee, by the Senate Committee, or
by the conferees.
{-;.
(.:';, r:,.j L.J
-16-
This paragraph, however, was not contained in the
-17bill when it passed·the House of Representatives, but was inserted
in the bill by the Senate Committee on
comp~omise
between
~arious
Baru~ing
& Currency as a
conflicting views.
It appears that certain Senators feared that the Federal re-
serve ba11ks would come under the domination of the larger member
banks and would discriminate against other member banks 4 It was
feared that, through such discrimination, some member baruts ndght
be denied credit aceommodations at the Federcl reserve banks when
it was badly needed in times of emergency; and, in order to prevent
such discrimination, it was proposed to
provide that,
11
~~end
the bill so as to
Each member bank:shall be entitled as a matter of
right to the rediscount of eligible paper to the full amount of its
capital stock upon the lowest current rate of discount . 11
This was
incorporated in an amendment proposed by Senator HitchcoCk and was
the subject of a bitter fight both in the committee and on the floor
of the Senate.
It was felt, however, that such a provision would be absolutely
contrary to accepted banki.ng practices and would be extremely dangerous and unsound; and finally the above-quoted paragraph was inserted
in the bill by the Senate Committee as a compromise.
Senator Shafroth
explained the matter as follows (Congressional Record for Dec. 13,
~913,
Vol. 51, Part 1, page 859):
Mr. SH.A:FROTH. 11 Mr. President, that clause was placed
in that paragraph largely for the reason that the
Hitchcock bill contained a provision for compulso~y
discounts, assetting that any member bank going with
paper to a Federal reserve bank should be entitled, as
()>
;,r:
f',..,t(•..-t)
-18- .
X-6.360
a matter of right, which it could enforce perhaps
by mandamus, to compel the Federal ~eserve bank to
discount that paper. We thought that was too extreme a provision; it was thoucht wise that there
might be conditions of the bank that would not justify
the discounting of its -p;;;per. For that reason we put
in a clause, which to a large extent is advisory ·to
them, but which, nevertheless, indieates the policy
that should be pursued by them in making these discounts
where they fairly can. 11
It ap-oears that this compromise was suggested by Senator Reed
of
r~:issouri
durin€; the meetings of the Senate Cor.arJ.i ttee on Banking
anC Currency .and that the above quoted paragra=)h was inserted in
Section 4 of the Federal Reserve Act at his suggestion.
Reed's
e~olanation
Senator
of the purpose and effect of this paragraph,
therefore, is entitled to great weight in construing it.
On :3ages 173 and 174 of the Congressional Record for December
4, 1Sl3, (Vol. 51, Part 1) Senator Reed
eA~1ained
this paragraph
as follows:
11 Mr. President, we did not stop at that point.
I· myself had the honor of offering an amendment prescribing
or defining the duties of these directors. It is as
follows:
11 The board of directors shall perform the
duties usually appertaining to the office of
directors of banking ass.ociations and all such
duties as are prescribed by law.
Sa,id board shall administer the affairs of
said bank fairly and impartially and without
discrimination in favor of or against any member
bank or baru~s. and shall, subject to the provisions
of law and the orders of the Federal Reserve Board,
extend to each member bank such discounts, advaj1Cements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other member ba1iks.
11
"Mr. President, the importance of that amendment lies
in the fact that for the first time it wrote into the bill
-19-
X-6260
C)C't,{"
f(..l,<.;.;o
language which commanded the directors of the regional banks
to treat all member banks alike. It :9rohibits favoritisi:l;
it forbids discrimination; it gives to member banks the right
to demand impartial treatment. The me;~1ber bank is not left
to solicit favors; it may insist upon rights.
"Mr. President, the provisions I have just discussed might
be ineffectual if it were not for the fact that at the same time
we enlarged the powers of the Federal reserve board so that it can
compel regional banks to obey this mandate of the law. We conferred this power by providing in section 11, paragra?h J, as
follows: The Federal reserve board shall have power~It ~o
exercise general supervision over said Federal reserve
banks•
"When, therefore• we imposed the duty upon the directors of
the regional banks to treat all member banks fairly and impartial!~ and without discrimination, and gave the Federal reser~
board, which is appointed by the President of the United States,
authority to exercise general supervision over tha Federal reserve bank, we gave the Federal reserve board power and authority
to compel the Federal reserve banks to be impartial in their
dealings with member banks. The same authority empowers the
Federal reserve board to protect the public against wrongs sought
to be perpetrated by the reserve banks. The power conferred is
sufficient to accomplish these ends, and if it be wisely exercired.
there is but slight da~er of discrimination in favor of some
bank and against others; or in favor of one section of the country
and against another; or, I will add, the adoption of a policy by
regional banks which will be oppressive to the public.
Powers of Reserve Board Increased.
"The Federal reserve board, appointed by the President, is, by
the two amendments I have set out, given absolute comr;:and of the
system. It can make the regional directors perform their full
duty with fairness and impartiality to all.
11 We followed these amendments with others of equal importance.
We gave the reserve board the unrestricted right to reroove a~· of
the directors of a regional bank. Here is the language: 1 The
Federal Reserve Board shall have power to suspend or. remove any
officer or director of any Federal reserve bank, the cause of
such removal to be forthwith communicated in writing by the
Federal Reserve Board to the removed officer or director and to ·
s~id bank.'
The House bill only gave a restricted right of
removal."
* * * * * "'
"Putting together, then, these several provisions to which I
have adyerted, I believe we can say to the country with a clear
consciehce that while we have drawn these banks together into
this gre~t system, while we have given them a common stock ownership, while we have placed the control of the regional barnes in
the hands of the bankers, we have· at the same time so safeguarded
every avenue and so locked every door that the people may be
content. In the last analysis the Federal reserve board, appointed by the President and representing the entire country, has
-20-
complete and absolute !JOWer, and will control the entire
system an<i prevent discriminations, combinations, or other
wrongs.ii
In view of this explanation, it is quite clear that this
para[~raph
/
a1one was hot intended to confer additional power upon the
Federal Reserve Board but was intended to prescribe
a
rule governing
the amninistration of the affairs of the Federai reserve bank by the
board of directors of the Federal reserve barik.
to do two things:
(1)
This rule was intended
To prevent discrimination either in favor of or
against any member bank; and (2) To make it clear that member banks are
entitled as a matter of right to
commodations as
1-:1ay
11
such discounts, advancements and ac-
be safely and reasonably made with due regard for
the clair..1s and demands of other member banks. 11
It was contemplated that, if any Federal reserve bank should
discriri•inate against any member bank or should deny it such discounts,
advancements and accommodations as might be safely and reasonably made
with due regard to the claims and demands of other member banks, the
'
barut so discriminated against could appeal to the Federal Reserve Board
and the Board could order the Federal reserve bank to comply with the
law and. to cease such discrimination.
It was pointed out, however,
that such power was included in the Board's power under Section 11 (j)
to exercise general
~pervision
over the Federal reserve banks and
could be enforced by the exercise of the Board's power under Section
11 (f) to suspend or remove any officer or director of any Federal
reserve bank.
The power to exercise
ge~ral
supervision over the Federal
reserve bariks was inserted in Section 11 at the
sug5~stion
of Senator·
Reed, in or'der to enable the Board to enforce .the above quoted paragraph
-21-
of Section 4; and. this shows clearly that the provision of
Section 4 ···as not intended to confer arl'J independent power
upon the :Board.
}.:ore over I the fact that the Whole purpose of this paragraph was to make it clear that member banks are entitled to reasonable
credit accommodation from the Federal teserve batiks without discrimination is clearly inconsistent with the thought that the same paragraph
might :possibly confer power upon the Federal Reserve :Board to order
a Federal reserve bank to deny credit accommodations to a "9articular
member bank.
Such an order by the Federal Reserve :Board might amount
to the very kind of discrimination against individual banks which
this yaragraph was intended to prevent.
The words "subject to the provisions of law and the orders of
the Federal Reserve :Board" obviously were inserted in this paragraph
as a qualifying or saving clause similar to those found elsewhere in
the Act and must have been intended to have substantially the following
meaning: Subject to the provisions of law and to such orders, regulations,
etc., as the Federal Reserve :Board 1nay lawfully promulgate pursuant to
the power granted the :Board under other provisions of the Federal Reserve
Act.
I run of the opinion, therefore, that this language does not confer
any additional power on the_ Federal Reserve :Board and that any authority
which the :Board may have to issue orders qualifying the right of member
banks to credit accommodations from the Federal reserve banks must be
found elsewhere in the Act.
The clause "subject to the provisions of law and the orders of
---,_'·''
'
-22-
X-6260
the Federal Reserve l3oard11 , however. is important; since it makes the
right of
meJ~ber
banks to credit accommodations from the Federal reserve
banks subject to such rules, regulations and restrictions as the Federal Reserve Board may lawfully prescribe under authority granted elseWhere in the Act.
Thus, it makes this right of the member banks sub-
ject to such ±-estr:i.ctions, limitations and regulations as may be imposed by the Federal Reserve :Board under the paragraph of Section 13
discussed elsewhere in this opinion.
Although the paragraph of Section 4 of the Federal Reserve
Act discussed above does not itself confer ariy such power upon the
F-ederal Reserve Board, it is perfectly obvious that, if the Federal
Reserve Board should-prescribe a regulation forbidding any' Federal reserve bank· to rediscount any paper for, grant any loan to, or purchase any bills of exchange, bankers' acceptances or Government, State,
or municipal securities from, any member bank which at the time has
loans outstanding to brokers or dealers in stocks, bonds or other investment securities, the Board would have power to issue such orders
in specific cases as might be necessary to stop violations of this
regulation.
Thus• if such a regulation w.ere promulgated and the Board
should find that a particular Federal reserve bank is rediscounting
paper for, or making loans to_, a particular member bank which has loans
outstanding to brokers or dealers in stocks, bonds or other investment se-·
curities, the Board could, order the Federal reserve bank to cease re-
'.
X-6260
230
-23--
discounting paper for, or making loans to, such member bank; and, if the
Federal reserve bank should fail or refuse to comply with such
a~
order,
the Eoard could enforc~ its order by suspending or removing from office
the offending officers and directors of the Federal reserve bank •.
VI.
The question has been raised whether the Eoard could, if it so
desires, prescribe a special rate (higher than the rediscount rate on
industrial, cownercial or agricultural paper) for advances to member
banks on their
promissor~
notes secured by bonds or notes of the Government
of the United States,
While this does not have a direct bearing on the main question
discussed in this opinion, it has been suggested that it might have a very
practical and helpful effect on the main problem confronting the Board in
this connection.
Thus, it has been suggested by one member of the Board
that, in practice, most of the credit accormnodations obtained from the
Federal reserve banks by reserve city member banks which are at the same
time lending large sums to brokers and dealers in investment securities
are obtained in the form of advances on the promissory notes of such
member banks secured by bonds and notes of the Government of the United
States; that this practice might be checked if a higher rate of interest
shou~d
be prescribed for borrowings in this form; and that such a higher
'
rate of interest of
int~rest
would not increase the cost of credit to
cormnerce, industry and agriculture.
One mer.:ber of the Eoard, therefore,
requested me to cover this point in this opinion.
The power to make advances to member
baru~s
on their promis-
sory notes is conferred by the following paragraph of Section 13 of the
Federal Reserve Act:
-24-
X-6260
Any Federal reserve bank may make advances
to its men:1bor banks on their :9romissory notes for
a period not exceedine; fifteen days at rates to be
established by such Federal -reserve ba.,1J:cs, subject
to the review and determination of the Fed,lral Reserve Board, lJrovided such prorJissory notes are
secured by such riotes, drafts, bills of exchange,
or bankers' acceptances as are eligible for rediscount or for purchase by Federal reserve ba11ks under
the yrovisions of this Act, or by the deposit or pledge
of bonds or notes of the United States."
11
It ivill be noted that this paragra-ph providec. that such
advances shall be made at rates to be established by such Federal
reserve ba.nks, subject to the review and determination of the
Federal Reserve Board.
It will be noted that the language here
used is very similar to that used in Section 14(d) pertaining to
other rates of discount to be charged by the Fedvral reserve banks
and that the qualifying clause "subject to review and determination
of the Federal Reserve Board" is precisely the same,
word for word,
in both sections.
The Attorney General of the United States has held that under
Section 14(d) the Federal Reserve Board "has the right under the
powers conferred by the Federal Reserve Act, to determine what
rates of discount should be charged from time to time by the Foderal reserve
b~,
to require such
and under their powers of review and supervision,
I'~tes
to be put into effect by such bank."
(32 Op.
Atty. Gen., p. 81.)
It is perfectly obvious that the Board has the same power with
respect to the rates at which Federal reserve banks may make advances
on the promissory notes of member banks under Section 13 as it has
over the rates of discount to be established under Section 14(d?.
It is well recognized that the Federal reserve banks may establish
-25-
X-626G
and the Federal Reserve :Soard may approve, different rediscount
rates for different classes of paper; and it would seem that the
same power could be exercised in
armrovin~.
·or fixing the rates
at which advances will be made to member banks on their promissory
notes under Section 13.
phrase
11
While Section 13 does not contain the
for each class of paperll found in Section 14(d), it iB
significant that Section 13 uses the plural nrates 11 and does
not merely authorize the fixing oflla rate" at which Federal
reserve banks may make advances to member banks.
The fact that the subject is treated separately clearly
indicates that the promissory notes of member banks constitute a
separate class of paper; and it would seem obvious that this
class of pa:,r?er may be further subdivided into other C::basses according to the maturity bf the notea or the
security~
It would seem perfectly
ob~ious
c~acter
of collateral
tl1at member banks•
promincory notes aecured by Government bonds, which are not eligible for rediscount, are clearly in a different class from those
secured by agricultural, industrial and commercial paper, which
is eligible for rediscount.
I am of the opinion, therefore, tm t the :Soard could,
if it so desires, prescribe a special rate (higher than the rate
of discount on industrial, cqnmercial or agricultural paper) for
advances to member banks on their promissory notes secured by
bonds or notes of the Government of the United States.
R,espectfully,
Walter Wyatt
General Counsel.
SAD
\'IW
VD:S
FEDERAL RESERVE BOARD
WASHINGTOr-,1
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAl. RESI!.ftVE BOARD
X-6261
March 11, 1929.
Dear Sir:
There are enclosed herewith copies
of letters addressed to the Board by the
Treasury Department, under date of February
14t4 and March 8th, ~ith regard to arrangements which have been made by the Treasur;y
Department with Mr. George H. Blake for the
preparation of a complete collection of
currency specimens.
The Board requests that your bank
cooperate >7i th the Treasury De)artment in
this matter to the fullest extent.
Very truly yours,
R. A. Young,
Governor•
•
TO GOVERNORS OF ALL F. R. BAln\S.
(En3losures}
TREASURY DEPARTME1TT
Washington
February 14, 1929.
Dear
V~r.
Eddy:
As you know the
De~artment
has accepted the cooperation of
Mr. George H. :Blake for the completion, so far as possible, for
the Treasurer of the United States, of a set of specimens of
paper currency issued by the United States.
procedure
~ractically
Under existing
all currency received from circulation is
canceled at the Federal Reserve Banks and any pieces which otherwise might be ?reserved as
specu~ens
properly to serve the purpose.
are so mutilated as not
The established policy of the
Department to retire certain kinds and certain denominations of
currency, and the pending issue of the small size currency, suggest
the advisability of attempting to secure at this time, and reserve
from cancellation, the specimens needed to complete the collection.
Accordingly, will you please instruct the Federal Reserve Barnes if
in assorting currency received from circulation specimens of uncurrent issues are observed, that such specimens be omitted from
cancellation, and that they be forwarded to the Treasurer of
th~
United States, Redemption Division, uncanceled, by registered mail
insured, as transfers of funds.
In this connection, the directions
given in paragraphs 19 and 20 of the currency instructions of
January 31, 1929, with respect to Treasury notes of 1890, may be
£]1 ~· ;_;.
t~
Nt...~'-
-2-
followed.
X-6261-a
Shipments of such uncurrent currency should be made in-
frequently, yreferably monthly, and'invariably as separate items.
Uncurrent issues may be defined, for United States currency, - aey
series prior to the series now issued or issuable, and for National
bank notes, - any notes prior to the series of 1902.
Federal reserve
notes and Federal reserve bank notes are not included in this request.
Very truly yours,
(S) OGDEN L. MILLS
Undersecretary of the Treasury.
Walter L. Eddy, Esq.,
Secretary, Federal Reserve Eoard.
~~
X-6261-b
TREASURY DEPARTMENT
Washington
March 8, 1929.
])ear },ir. Eddy:
As an aid in completing the DeFartmentts collection
~f
S9ecimens of currehcyj in Department's letter of February
14, 1929, you
we~e
requested to ask Federal Reserve Eanks
to forward uncanceled certain
oh~olete
money if detected in assortment.
issues of paper
It now appears in order
to make the collection complete that certain issues of
Federal reserve notes and Federal reserve bank notes are
required.
Your further courtesy will be appreciated if
you will ask the Federal Reserve Banks concerned to be on
the outlook for the notes in question which are set forth
in the accompanying list.
Very truly yours,
(S) Henry Herrick ]ond
Assistant Secretary of the Treasury.
Walter 1. Eddy, Esq.,
Secretary, Federal Reserve Eoard.
Enclosure.
f) '}t-i
~U)1
X-6261-c
COPY
LIST 0;[ FEDERAL :BESERVE NOTES
NEEDED FOR COLLECTION
RED SEALS
~lli_~_!QQ_t!_QO
:Bostoh
~
$50
Philadelphia
~
$50
$100
....
Cleveland
-
$10
Ric:b.mond
-
$10
$20
-
$100
Atlanta
$5
$10
$20
$50
$100
-
$50
-
Chicago
St. Louis
$5
-
$20
Minneapolis
$5
$10
$20
Kansas City
$5
-
$20
Dallas
$5
$10
$20
$soc $1,000 $5,000 $10,000
$100
$50
:BLUE SEALS
:Boston
$5· $10
New York
$5
$10
$20
$50
Philadelphia
$5
$10
$20
$50
Cleveland
$5
$10
$20
$50
Richmond
$5
-
$50
-
$50
$100
Atlanta
$20 $50
$100
$500
$1,000
$5,000
$10,000
$500
$1,000 $5,000
$10,000
$500
$1,000
$100
-
$10
$20
$50
$100 $500
$1,000
$5, ooo·
St. Louis
$5
$10
-
$50
$100
$500
$1,000
$5,000
Minneapolis
$5
$10
$20
$50
$100
$500 $i,ooo
Kansas City
$5
$10
$20
$50 $100 $500 $1,000
Dallas
$5
$10
-
San Francisco
$5
$10
$20
Chicago
$50 $100 $500
$1,000
$100
$1;000
$50
$500
$10,000
$5,000 $10;000
()Pf.."\
,<;.it.) C)
CoPY
X-6261-d
LIS~ OF FE~
g&ERvE BA}gQTES
NEEDED :roR COLiiCTION
'
ALL BLUE S:Bl.ALS
J;
1:.1
$1
$2
$5 $10
:Soston
$1
$2
$5
Nevr York
$1
$2
$5 $10
Philadelphia
$1
$2 $5
(None above $5)
Cleveland
$1
$2
$5
(None above $5)
Ricbmond
$1
$2
(None above $2)
Atlanta
$1
$2
$5
$10 $20
(None above $20)
Chicago
$1
$2
$5
$10
(None above $20)
St. Louis
$1
$2
$5
$10 $20 $50
Minneapolis
$1
$2
$5
(None above $5)
Kansas City
$1
$2
$5
$10 $20
Dallas
$1 $2 $5 $10 $20 (None above, $20)
San Francisco
$1 $2 $5 (None above $5) ,
$20
$50
(None above $5)
0Tone above $1d)
$20
(None above $50)
(None above $20)
All the above are wanted with signatures of Teehee and
Burke and Elliott and Burke.
.
The higher denominations are contingent upon having
issued.
~
n
•
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6262
March 12, 1929.
$U:BJECT:
Topic for Governors • Conference.
Dear Sir:
There is enclosed herettith
c~y
of
a letter which the Board has today forwarded
to Mr. H.F. Strater, Secretary of the Governors• Conference, advising that it would like
to have discussed at the conference to be held
on .A.pril 1-3, 1929, the question of the advisability of establishing a higher rate of discoqpt on member bank collateral notes secured
by Go'fernment obligations than is maintained
for discounting eligible paper.
As the time is linii ted, advice of
the placing of this topic o-n the :pl"ogram of
the conference is being forwarded to you
direct; and it would be agpraciated by the
Board if you woUld come prepared to present
your views~
Very truly yt)urs_,
R • .A.. Young,
GoTernor.
TO
eovmno:as
Enclosure,
OF .ALL F. R, BANKS.
'·
l
•
X-6252-a
March 12, 1929.
Dear Mr. Strater:
The Governor of one of the Federal reserve
bariks has had some correspondence with the Federal Reserve Board as to the desirability of
establishing a higher rate of discount on member
bank collaterai notes secured by Goverrn~ent
obligations than is maintained for discounting
eligible paper.
If I remember correctly, this question has
been discussed bu th~ Governors, at ieast informally, but the present situation has developed
so many unusual angl~s tbat some very strong
arguments are presented in supCJort of the proposal,
in view of which the Board wishes to place the
topic on the progrwn for the next Governors' Conference.
Inasmuch as the time is limited, I am today
sending a copy of this letter to the Governors of
the various Federal reserve banks.
Yours very truly,
(S) R. A. Young,
Governor.
Mr. H. F. St~ater, Secretary,
Governors' CQnference,
Federal Reserve Barik,
Clevoland, Oh~o.
FEDERAL RESERVE BOARD
WASHINGTON
X-6263
ADDRESS OFFJCIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Ma.rch 14, 1929.
SUBJECT:
Topic for Governors• Conference.
Dear Sir:
The Federal Reserve Board has voted to
place the following topic qn the program for the
forthcoming Governors• Conference:
Policy to be Pursued by Federal
Reserve Banks in Asserting Rights on
Behalf of Depositors of Unremitted
for Transit Items against Receivers
of Insolvent" Member Banks.
The Board is also arranging for a conference of Counsel of all Federal reserve barks to be
held in Washington concurrently with the Governors'
Conference, with a view of having Counsel consider
the above question and make recommendations thereon
to the Governors' Conference. Mr. Wyatt, the :Board's
General Counsel, is address~ng a letter on this subject to Counsel for each of the Federal reserve banks;
and a copy of that letter with attached docume.nts is
enclosed herewith for your information, together with
a copy of certain correspondence between Mr. Wyatt and
~udge Ueland, Counsel to the Federal Reserve Bank of
Minneapolis, which first raised this question.
By order of the Federal Reserve Board.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
Enclosures.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE: BOARD
x-6264
Dear Sir:
As I wired you last night, the Federal Reserve Board has
directed oe to arrange a conference of counsel of all Federal
reserve barik:s to be held in Washington concurrently with the
forthcoming Governors i Conference, which will be held in
"v?ashington commencing on Monday morning, koril 1. For reasons
which will hereinafter be ex:)lained, it is important that our
conference begin as early as possible on 1Eonday morning and I
sugc;est thvt we all try to meet in my office at nine o 1 clock ..
The purpose of this conference is to consider the various
questions dealt with in lvir. Ueland's memorandum of January 8
(X-S226-b), which I sent you under date of January 30, dealing
with the policy to be pursued b;r the Federal reserve banks in
asserting rights on behalf of depositors of unremitted for
transit items against receivers of insolvent ·,11e1::ber banks in
the light of recent court decisions. The feeling here is that
counsel for all of the Federal reserve banks ou~~ht to endeavor
to agree upon a uniform policy to be recommended to the Conference of Governors, with a view of having such recommenda,tions
considered immediately by the Conference of Governors wh~le
counsel for the various banks are still in Washington and
available for consultation either with their respective
governors or with the Governors' Conference as a whole.
There are enclosed for your information in this conne,~tion
copies of letters received from Messrs. Stroud, AE,new, Parl\:er,
Wallace, and 1J~cConkey, commenting upon ~lir. Ueland• s memorandum.
As soon as I receive comments from other counsel, I shall fhrnish you with copies of same.
Vthile it is true, as pointed out by Mr. Wallace, that
certa..in of the cases giving rise to this discussion are stiU
in the process of appeal, it is believed that an early consiLderation of this subject by counsel may lead to the adoption of
~olicies and possibly of amendments to Regulation J, the check
collection circulars of the Federal reserve barucs, and the forms
used by the Federal reserve banks in connection with the piLedge
of collateral which will be calculated to minimize the co:Q.fusion,
X-6264
-21 i tigation, and possible loss to Federal reserve banks which
mi(ht otherwise result from recent court decisions such as
those in the case of Early v. Federal Reserve Earik of Richmond and 1.. idland National :Banlc and Trust Company v. First
State ]ank of Sioux Falls.
In this connection, I believe trat it would be advisable
for each of us to consider in advanco of the conference the
advisability of:
(1) Amending Re~ulation J so as to provide expressly
that the reserve balance either shall, or shall not, be
available for the purpose of collecting unremitted for cash
letters on insolvent member banks;
(2) Inserting similar express provisions in the check
collection circulars of the various ]'ederal reserve banlcs;
(3) Amending the forms used by the Federal reserve
baru<s covering the pledge of collateral so as to provide
e~~ressly either that such collateral shall, or shall not,
be available for use by the Federe..l reserve bank for the
same purpose; and
(4) Amending Subdivision 4 of Section V of Regulation
J so as to eliminate therefrom the words, "Or at the option
of such Federal reserve bank to authorize such Federal reserve bank to charge their reserve accounts or clearing
accounts".
In connection with the last suggestion, it is important
to note that all of the Federal reserve banks are now collectin€; checks on the remittance system, the Federal reserve
banks of Richmond and Philadelphia having recently changed
frolli the system of collecting checks by charging same to the
reserve accounts of the drawee banks as a normal method of
collection.
If any of the counsel believe that amendments such as
~hose outlined above are advisable, it would be very helpful
if, in advance of the conference, they would prepare drafts
of such aruendments as they consider appropriate. It would
also be helpful if any counsel having very definite and well
crystallized views as to the policy which the Federal reserve
banks should adopt in connection with this problem would prepare drafts of resolutions recommending such policies to the
Governors' Conference.
In order to leave as much th4e as possible for the consideration of this subject by the Conference of Governors
before that conference adjourns on April 3, the Conference of
.
'
X-6264
-3-
Counsel should endeavor, if possible, to forrculate its recommendations on the questions raised by llr. Ueland's memorandum
by l,:onday night, .April l, and transmit sa;'ne to the Governors 1
Conference on Tuesday morning. We can then proceed to the
consideration of other matters until such time as the Governors• Conference may call upon us for consultation.
It is quite possible t:b.at sor,le of the counsel will have
other to~ics which they would like to have considered during
the ccnference; and it would be conducive to more thorough
consideration ~f such· topics could be suggested in· advance,
a fonual program arranged, and all of the counsel notified
in tir;;e to enable them to study such additional topics in
ac1vance of the conference. Hence, the last sugcestion contained in my telegram of March 12.
I regret exceedingly that circumstances prevented me
from wiring all of the counsel in advance anJ obtaininf,
sugsestions as to the dates most convenient to all parties
for this conference. The Federal Reserve Eoard had already
fixed the date of the Governors' Conference before I was
able to get them to tru<e this matter up for consideration;
and, Y·hen the subject of a conference of counsel was taken
up, Governor Young felt very strongly that it should be held
concurrently with the Governors' Conference.
I sincerely bope that you can attend our forthcoming
conference and that you will not hesitate to call upon me if
there is anything I can do to be of assistance to you.
Yours very trulyp
Walter 'Nyatt,
General Counsel.
Enclosures
X-G264-a
Law Office Of
LOCKE, LOCKE, ST:?.OUD & RANDOLPH,
American 3xchange Building,
DALLAS, TEXAS .
February 11, 1929.
Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
~ashington,
D. C.
Dear Mr. Wyatt:
We have read with interest the mer;;;orandum of ;,:r~ Sigurd Ueland
to the Federal Reserve ]ank of Minneapolis, dated Januar~r 14:, 1929.
We think that the questions of policy raised in this me~orandum are
of vital importance to the Federal heserve System. In view of the fact that
our ideas with reference to the pro~oer policy of federal reserve banks in
exercising their check clearing and collection functions are different from
those expressed in Mr. Ueland's memorandum, we are giving you hereafter avery
complete state~ent of our views on the questions of policy raised.
FEJERAL RESERV':E ACT AND REGULATIONS
OF FEDERAL RESERVE BOARD.
It seems to us that any question of policy in connection with the
collection of checks by federal reserve banks must be determined in the light
of the Federal Reserve Act and regulations of the Federal Reserve Board made
pursuant tbereto.
Under the terms of Section 13, any federal reserve bank may receive
from any of its !";:embers de-posits of checks and drafts :payable upon presentation
and, also, for collection maturing notes and bills. It may receive from other
federal reserve banks solely for the purpose of exchange or collection, checks
and drafts payable upon :presentation within its district, and it may receive
from non-member banks and trust companies, under certain conditions, solely
for the purposp of exChange and collection, notes and drafts payable upon
presentation or maturing notes and bills.
Section 16 provides that federal reserve banks shall receive certain
checks for deposit from member banks and federal reserve banks and authorizes
the Federal Reserve Board to make and promulgate from time to time regulations
requiring federal reserve banks to exercise the functions of a clearing house
for its member banks.
While Section 13 authorizes federal reserve banks to accept deposits
ef checks from its member banks and Section 16 provides that they shall receive
X-6264-a
;::!,.J ()
certain checks for deposit, it is a fact, which we think cannot be contradicted,
that in no instance has a federal reserve bank, within recent years at least,
accepted checks from merr:ber ban.l.cs in all practical respects for any other purpose
whatsoever than that of collection. We thiru{ no federal reserve batik would wish
to depart from such policy.
The authority for re~ulation J, as we view the law, proceeds from
Section 15 of the Federal Reserve Act. The policy of the Federal Reserve Board,
as it has existed continuously since the institution of the check clearing and
collection functions, is expressed in regulation J as follows:
Tl'1e Federal Reserve Board, desiring· to afford, both to the
public a~d to the various ~anks of the country, a direct, expeditious
and economical system of check collection and settler,:ent of balances,
has arranged to have each federal reserve bank exercise the functions
of a clearing house and collect checks for such of its member banks as
desire to avail themselves of its privileges, etc. 11
11
The functions
is undoubtedly intended
This intention uyon the
in sub-paragraph (1) of
of a clearing house, as comnonly understood, and as
in regulation J, is to present checks ·for payment.
part of the Federal Reserve Board is further emphasized
Section V, in which it is stated:
11 A federal reserve bank will act only as agent of the bank from
which it receives such checks, etc. 11
In other words, as we view the Federal Reserve Act and the regulations
of the Federal Reserve Board made pursuant thereto, in handling cheCks a federal
reserve bank acts purely and simply as a collection agent. To this extent, we
think there is no disagreement.
Thus we think that in determining policies to be followed by a federal
reserve bank we should always have in mind the fact that the federal reserve bank
is discharging the functions of a clearing house and acting purely in the capacity
of an agent for collection.
BE SERVE BALANCE.
In determining the policy which a federal reserve bank should follow
with respect to the uses of the reserve balance of a member bank, it is importc;.,nt
to consider the nature of reserve balances and how the same are treated by the
Federal Reserve Act and the regulations of the Federal Reserve Board.
As we understand, it has for many years been considered
proper that a bank should retain, in cash or its equivalent, such
of all of its liabilities as, in the ordinary course, it could be
need in meeting·the demands that might be made at any one time by
creditors.
prudent a;.1d
a percentage
expected to
all of its
The fund so maintained is designated 11 Eeserves • 11
The amount maintained, insofar as banks that are now members of the
Federal Reserve system is concerned, was formerly very much larger than the amount
required under the terms of the Federal Reserve Act. It was felt at the time
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the Federal Reserve Act \vas passed that the reserves could be materia.lliY reduhed because of the bon6cntratio;l brought about throug4 the establishment
of, federal reser'\1-e banks, The practice upon the part of banks to ca:rry
secondary re~ervl~st coiisisting or-securities that can be readily converted
into money; 1 t9 meet unusual or unexpected demands contributed to the reduction of the amount of :tes,erves. The so-called sec0ndary reserves are
under the full control of the member bank.
Prior to the establishment of federal reserve banks, the commercial
banks of the country were permitted to carry their reserves partly in the form
of cash in their vaults and partly with other banks of their own choosing,
provided such other banks had been designated as proper reserve agents.
Upon the establishment of the Federal Reserve Bank, however, all
reserves were required to be carried with the Federal Reserve Bank of which
a commercial bank was a stockholder, thus making it mandatory that the reserves
be concentrated in the Federal Reserve Batik rather than to be carried in the
vaults of the coroL~ercial banks or with agents of the bank's selection.
If we have the correct understanding of the nature of reserves and
of changes brought about through the enactment of the Federal Reserve A~t.
then it would seem to fo11ow that, reserves being intended as a protect~on
agai;lst all liabilities of a member bank and being by law concentrated in
federal reserve banks, the federal reserve banks are to some extent, insofar
as the reserve is concerned, a trustee for all creditors, rather than fqr
thos~ creditors only who seek to effect collection of their indebtedness through
the ~dium of the federal reserve bank.
That the reserves of a member bank are intended as a protectiqn for
all Uabili ties of a member bank, rather than a fund set up in the federal re-
serv!'l bank to use in effecting collection of checks, is, we think supported by
an ajlalysis of the Federal Reserve Act and regulations of the Federal Reserve
Board. In this connection, we call attention to the following points:
1. Under the terms of the Federal Reserve Act, the amount of
reserves which a bank is required to carry is determined by the amount
of demand and time deposits of the'bank. Had the reserve been con$idered a fund out of whiCh federal reserve banks might collect checks sent
them for collection, it would appear that the amount of this fund ~;~hould
have been calculated in some proportion to the average amount ofch~cks
, which the f~eral reserve bank had outstanding for. collection.
2. We jind the following provision in Section 19 of the Federal
·Reserve Act:
''The required balance carried by a member bank
with a federal reserve bank may, under the regulations and subject to such penal ties as may be prescribed by the Federal Reserve Board, be checked against and withdrawn by such member
barik for t~, purpose of meeting existing liabilities; Provided,
however, ~at no bank shall at any time make new loans or shall
pay anydivfdends unless and until the total balan.;e required by
law is fully restored. 11
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Referring to regulation D of the Federal. Reserve Board, the first
· thing we notice is the provision contained in section 3 (c) which
prohibits checks deposited by a member barut from being counted as a
part of the bank• s reserves until such tir.1e as may be provided in
the ap?ropriate time schedule referred to in section 4 of regulation
J. The effect of this provision, as we understand it, is to prohibit
federal reserve banks from accepting deposits of ehecks for immediate
credit as might b0 conttmplated by sections 13 and 16 of the Federal
Reserve Act, and we believe that this practice has been upheld by the
Federal Courts in the case of( Pascagoula national Bank v. Federal
Reserve Bank of Atlanta, et al, 11 Fed. (2d) 866.
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In section 4 of regulation D, we find the following language:
11 Inasmuch as it is essential. that the lar; with respect to
the l!laintenai.'lce by member banlts of the required minimum reserve
balances be strictly complied with, the Federal Reserve Board,
under authority vested in it by section 19 of the Federal Reserve·
Act, hereby prescribes the following .rules governing penalties for
deficiencies in reserves:"
Then follow some rather drastic penalties for a bank failing to maintain its reserves intact, s-q.ch provisions consisting of (a) Penalties
to be assessed against the bank; (b) Instructions to Federal Reserve
Agents to take matter up with the bank; and {c) Provisions for a :;>regressive penalty.
Section 5 of this regulation calls attention to the fact
that it is unlawful for any member bank to pay dividends or make any
loans while its reserve is deficient.
All of these provisions of the act and regulations point towards an
intention of Congress and the Federal Reserve Board to require banks to maintain
reserves for the very purpose for which reserves were maintained prior to the
enactment of the Federal R~~erve Act and not to cause member banks to create a
fund out of which the federal reserve bank might effect collection of checks
sent it for that purpose. In other words, the collection of checks is incident
to the maintenance of reserves rather than the maintenance of reserves being
incident to the collection of checks.
We think this view is further supported by the discussions in Congress
preceding and le~ding to the enactment of the Federal Reserve Act.
If such is the p~licy of the Federal Reserve Board and of Congress
with respect to reserves, then certainly the policy is, to some extent at least,
defeated by the arbitrary appropriation and use by federal reserve banks of the
reserve balances as a fund charged primarily with the payment ofch:Ocks.
Nor do we think the argument advanced on page seven of ~r. Ueland's
memorandum, with reference to non-member clearing oanks is at all persuasive
against the view hereinabove expressed because of the fact that a non-member
clearing bank is limited by law tom doing any character of business whatsoever with the federal reserve bank except that of clearing checks. The deposit
required of the non-member clearing bank is not, insofar as the Federal Reserve
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q.·'>('>
r:,:,;'::J::.. ~:'
Act is concerned, a reserve of any kind or character, whereas the deposits of
a member bank are purely and wholly reserves.
Sumro.arizing, - it is our opinion that the reserves maintained in the
federal reserve bank by a member bar~ are intended (a) from the origination of
the practice of carrying reserves; (b) the Federal Reserve ~ct; and (c) the
regulations of the Federal Reserve :Board, as a fund intended for use by the
member bank in meeti
demands that mi t be made upon it at a!_l1 one time for
a
o 1 ts liabi i ti , and not a fund which should be used by the federal reserve bank, simply because it might have the power to do so, for the protection
of the particular creditors of the member bank which might see fit to use the
federal reserve bank as their agency for collection.
CAPITAL STOCK SUBSCRIPTIONS.
Section 6 of the Federal Reserve Act gives s~ecific directions as to
what shall be done with the stock of a member bank which shall have been declared
insolvent. The substance of this section is that the cash paid subscri:s>tions on
said stoCk, together with the accumulated dividend, shall be first applied to all
debts of the insolvent member bank to the federal reserve bank and the balance,
if any, shall be paid to the receiver of the insolvent bank. Certainly, in a
broad sense, if not in a narrow and technical one, claims existing against drawee
banks on account of checks which a federal reserve. bank has handled purely as agent for someone else cannot be said to be a debt due the tederal reserve bank.
And, therefore, we think that it clearly was not the intent of the Federal Reserve
Act to use the capital stock subscription of a member bank as a fund from which
checks might be collected.
COLLATERAL.
We find no provision in the Federal Reserve Act for a federal reserve
batik takinG collateral for any,purpose other than as sedurity for member banks'
15-qay promissory notes. We think that undoubtedly, under section 4-Seventh,
as foll·ows:
11 To exercise by its board of directors, or duly authorized officars
or agents, all powers specifically granted by the provisions of this act
and such incidental powers as shall be necessarr to car!Y on the business
of banking within the limitations prescribed by this act, 11
-
i
a federal r~<serve bank has ample power to require collateral from a member bank
to secure bo•th rediscounted notes and member bank promissory notes. We also
think that ~nder special and peculiar circumstances, there would be no doubt
but that Ull~er this provision a federal reserve bank would have the right to
require collateral to secure transit items forwarded for collection. We dm bt,
however, the necessity for collateral generally in order to carry on the business
of banking, within the limitations prescribed by the act governing the check
clearing and cQllection functions of the federal reserve bank, because we believe,
as hereinafter outlined, that the proper course to pursue is to use ordinary
care in collect~ng checks at the time the collection is undertaken, rather than
to set up avenues of protection to be resorted to at a later date.
-
COTJR1' DECISIONS.
We observe, and to some extent are familiar with, the cases referred to
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c~ r·~·
(,'-
l';;j~j{)
in Mr. Ueland's memoran.d:tim. We ¢lo not in the least disagree with the effect of
the decisions in these cases; At the outset! hbwever; we Wish to !MkEi this
observ~ti0!). 1 - ths.t, while these cases are undoubtedly :9recedents, we question
the pr~nciples Whidh they attempt to assert.
_
We make this observation because we wish to ap9roach these questions
from the standpoint of principle, rather than precedent, that is, not what we
can do but what we should do.
It must be borne in mind that the twelve federal reserve banks have
heretofore been, and in the future will be, to a much greater extent required
to litigate cases of this character in many jurisdictions. It is not unlikely
that every appellate court of each state in the Union, as well as of the United
States, may have occasion to pass upon some phase of the questions involved.
It would be practically impossible to present the same questions, under the
different conditions that would necessarily exist, to such a large number of
courts without obtaining conflicting precedents. Therefore, we feel that, due
to the fact that precedents are suCh a guiding factor in court decisions, the
Federal Reserve system as a whole should be highly interes+.ed and guard with the
greatest care the precedents which are established.
Furthennore, with our complex and varied judicial procedure, we think
it fairly easy to establish most any sort of a precedent. To illustrate what
we mean, without intending in the least to be offensive, if we were involved here
in litigation affecting some point set out in ~ft. Ueland's memorandum and in
such case should have opposed to us counsel with no familiarity with check collections and with no ability as a lawyer, we might obtain one precedent; whereas,
in the same case, with competent and well informed opposition an entirely different outcome might easily result.
Therefore, in our opinion, we cannot lean too strongly, in determining
these questions of policy, upon precedents which have heretofore been established,
and for these reasons we will not attempt in this communication to state our
opinions with reference to what should orShould not have been the result of the
particular cases mentioned.
VIEWPOINT.
.
We recall the old geometrical expression, that in order to arrive at
a proper perspective it is first necessary to establish a viewpoint. This is
the ~ortant principle involved here. If we can establish as a policy the
proper vie~oint, then we feel sure that the perspective, that is, the subordizt.ate '!¥-_ es. ions of policy, will necessarily be uniform and correct. At the
present tife t appears to us that there is, generally speaking, two viewpoints
from which; th~se
questions
are approached;
'
.
FIRST: In discharging the check clearing and collection functions
a federal reserve bank shall act as agent only, employing those means
for presenting and collecting checks which are the normal, natural and
accepted means afforded by the commercial structure of the country.
SECOND: In discharging their check clearing and collection functions
a federal reserve bank shall act as agent, employing those means for
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X-6254-a
presenting and collecting checks which are the normal, ~tural and
accepted means afforded by the commercial structure of the country,
and, in _addition, shall t~e ever~ other means available py virtue
of the ryeculiar nature of federal reserve banks andjinvolving unusual, uncomn:on and extraordinary practices not expected, required
nor undertaken by a person act_ing in the ca-;?aci ty of agent only.
Those banks having
checks somewhat as follows;
authorized to send checks to
circular states just how the
briefly may be summarized as
&}·J.::: -·11
~.J••.}JL
the first viewpoint approach the collection of
A circular is sent to every bank or other person
a federal reserve bank for collection. This
federal reserve bank will collect checks and
follows:
(1) We will use ordinary care under all circumstances i-n presenting
your check for payment.
(2) Ordinarily we will present your check direct to the bank on which
it is drawn, because we feel that this is the most direct and expeditious
mann~r of collecting checks.
(3) W.e will take a bank draft from the drawee bank in payment of these
checks because you must realize that under the accepted practices of this
country funds are transferred from one point to another throu@:l the medium
of checks and because we have no me~ns of presenting all of the checks sent
to us, other than those affOrded by the commercial structure of the country,
no·tably the postoffices.
(4) !t would not be practical for us to employ any means of. collection
other than the po!3toffice, except in unusUa.l cases where we will exercise
ordinary care under the special circumstances surrounding the collection.
(5) You do not have to send us your checks for collection. !f our
methods of collecting checks is not suitable to you, you may employ other
age:n.ts.
(6) In the event we have used ordinary care under the circumstances
to collect your check and fail to do so, you must look elsewhere than to
us to recover your loss.
::Sa11ks having the second viewpoint, say by their circulars to member
banks substantially that stated above but, in addition, and contrary to the nor-'mal, ·natural and accepted practices of an agent only, they undertake to resort
to unusual pr~f:tices in the following respects, i f riot others:
(1) ]y appropriating the reserve account of the member bank to which
checks have been sent for·. collection.
(2)
Ey attempting to use capital stock refund due the insolvent member
bank.
(3) ::Sy seeking to apply collateral given by the member bank primarily
to secure loans made to it by the federal reserve bank in the discharge of
an entirely distinct function from that of collecting checks.
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I
1 .;
Banks having tho first viewpoint, in the event the drawee bank
fails before rerr.i t t ing for checks tra.nsi!li t ted to it for collect ion, find
themselves in this situation: The only parties that can complain are the
parties from whom they receive Checks. If such parties do complain, but
one question arises and that is z Did the f'edlral reser\l'e 'l?ank exercise
ordinary care in ptesenting the checks fer :payr;:;.ent? Tl:iiel questioii ca.h ·
alw9¥s be O.e~ided in favor of the federal reserve bru1k. provided that bank
has taken p~ins to exercise ordinary care under the circumstances at the
time the collection is underta1:en.
Ba.nks having the second viewpoint, find themselves involved in
frequently, not only with the persons sendinc the checks for
collection 'but with receivers of insolvent banks. This is but natural
because federal reserve banks following such practice encourage their
endorsers to foel that they should not, under any circumstances, sustain
loss; and likewise they necessarily find themselves in conflict with the
office of the comptroller of the currency and receivers of insolvent banks.
because it is their dutf to see that the funds of the insolvent bank are
applied pro rata to all creditors and are not used to the preference of one
over another.
liti~tion
a
It is not hard to understand how ·a bank with the last mentioned
viewpoint can frequently find itself "to some extent on the horns of a dilennna11
because 11 if the surplus is paid over to your endorser~:~ of the transit items your
bank may be liable to the ,receiver ana if surrendered to the receiver there
might possibly be liability to your endorsers." We cannot help but feel that
~he federal reserve bank makes the dilemma by the course of conduct which it
has chosen to follow and, in this connection, we wish to state that we are in ·
entire accord with the thought expressed in paragraph numbered four on the last
page of Mr. Wyatt• s letter to Mr • .A. Ueland, of date January 26, 1929.
CONSIDERATIPN OF FUNCTIONS AND RESPOlffiiBILITIES OF
FEDm'RAL RESERVE BANKS OTHER THAlT THOSE OF
COLLECTnTG CHECKS.
Every federal reserve barik operating in a district that has exp~rienced
a large number of bank failures (and bank failures are the cause of our considering any of the questions of policy involved)'ha.ve found themselves confronted
with a situation similar, to the following:
A me~ber bank is in a rather strained and extended condition.
This condition has been known by the federal reserve bank for sometime.
It finally works ihelf to more or less of a crisis. The bank's reserve
balance is very pru.ch depleted,. if not exhausted. The bank has sent in,
and the federal jese:rve bank is considering, an offering for rediscount,
sent for the purpose of restoring the bank's reserve. At the same time
and on the very day that this offering is being considered, cash items
have been received drawn against this member, aggregating as much, or
more, than the offering and required reserve balance.
Under such conditions, the reserve bank is confronted generally with
two questions;
I.
Are ,e going to rediscount the offering?
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X-6264-a
rr. What steps are we going to tru(e
l~oking
towards the proper
discharge of our duty in the colledtioh of these checks?
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r::..,'l ..rJc ..1
Those banks having the first viewpoint tnerttioMd above will
decide these questions somewhat along the following lines!
I. Insofar as the rediscount offering is concerned the questions
that will be considered will be-
(a) Are the notes offered for rediscount acceptable from a
credit standpoint?
(b)
credit?
!oes the bank's conditien justify the extension of the
(c) Does the situation of the member bank, as we know it to
be, justify us in expecting, if the loan is made, that the bank
will be assisted in restoring itself to a sound and safe condition?
II,
bank
Insofar as the collection of the cash letter is concerned, this
the question somewhat as follows:
ap~roaches
(a) Does the knowledge which we have of the bank's condition
justify us in sending the checks direct by mail?
(b) What course of collection should we follow in order to
discharge our duty to the holders of these checks to use ordinary
care in their collection?
Thus the two questions are decided upon their merits, having in mind
the distinct functions which a federal reserve bank is discharging.
Banks having the second viewpoint must necessarily, in order to be
logical, approach the two questions somewhat in this manner:
I. Insofar as the rediscount offering is concerned they must take
into consideration:
(a) The matters outlined under I (a); I (b) and
pages 11 and 12 hereof.
I (c) on
(b) And in addition, they must necessarily have in mind
at
the
time the rediscount is made, if it is made, the fact
,,
that the cash letter is to go forward and, therefore, they
must necessarily think of the collateral which they are
taking to secure the advances made the bank in the light of
subsequent indebtedness that might be created by virtue of
the outgoing cash letter and, hence, the member bank is to
this extent penalized in its rediscount operations; and
(c) Th~ offering has been made to restore the reserve
balance and that the reserve balance is treated as a fund
to protect the cash letter. Therefore, assuming that the
-9-
notes are perfectly good but that the member bank's condition
generally would not justify the federal reserve bank in extending the credit, would not the federal reserve bank find
itself again in a dilemma, that is, should it discount the
notes and build up the reserve balance to protect the endorsers of the cheCks or should it refuse to· discount the
notes because such action is to the best interest of the
member bank concerned.
~;~_5.:<~~
II. In as far as the collection of the cash letter is concerned, they must necessarily take into consideration:
(a) The matter referred to under II (a) and II (b) on
page 12 hereof; and
(b) In the event the checks are not actually paid by
the bank to which they are sent, will the reserve balance
of such bank be sufficient to protect our endorsers?
(c) If the reserve balance is not sufficient, will the
sum in it plus the collateral which we are holding, including
the capital stock refund, be sufficient?
If these questions are decided in the affirmative, will such bank use ordinary
care in presenting the checks for collection or will it be prone to rely upon
the protection which it has in the forms above outlined, rather than to use
ordinary care in the presentation of the checks. If it fails to use ordinary
care and thus rer1ders itself 1 iable, what assurance does it have that the reserve
balance will not be withdrawn before it can be used by the federal reserve'bank
and, also, what assurance does the federal reserve bank have that the collateral
in its hands, after the failure of the member bank, will be worth as much as had
been counted on?
DUTY OF THE FEDERAL RESERVE :BANKS TO TB:B: COMMUNITY IN WHICH U"'SOLVENT BAlJKS ARE LOCATED AND
TO THE CREDITORS OF SUCH INSOLVE1!T BA.N.KS.
:Because of the confidential relationship existing between federal
reserve banks and their members and because of the fact that the great
majority of member banks, that is, national banks, are compelled to retain
their membership in the Federal Reserve system in order to keep their charters
and because of the peculiar nature and functions of federal reserve banks, we
feel that each federal reserve bank owes a duty to the community in which an
insolvent bank: is located and to the creditors of such insolvent bank.
·.
·~
'
~
Funl~ermore,
.
if there is anythin~ in our thought that insofar as
reserves are · ;ncerned. federal reserve banks a.re to some extent trustees for
all creditors of any narticular bank maintaining such reserve, then we think
it necessary follows that a federal reserve bank is charged, to some extent
at least, with the same resl)onsibility as that of the comotroller of the
currency in seeing that, in the event of insolvency, these reserves are a'Op),ied pro rata to all creditors rather than tc the select few who might have
happened to choose the federal reserve bank as their agency through which to
effect collection of their indebtedness.
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:X-6264-a
in
by a federal r~serve bank
it$~~[5
dealings with member banks. will put a federal resetV"e bank on
.
ridtice lni tia.l~y that extraordinary steps might be required in order tb
e~~rdtse. or.dihliry care in the collection of checks~
This cannot be helped
a~d., to\ ~h,18 extent, we thi~· it proper for a federal reserve bank to use
it.~ ~pni'idential information. To go further and to set up avenues of
,
ptet'et!me:nt for those creditors selecting the federal reserve bank as the~r
1,
~gen~y for collecting thei: debts would, in our opinion, be a failure to
disc~rge the proper funct1ons of a federal reserve bank.
.
. It is true.that knowledge gained
conf~dential
In the event any question of preference should arise, we would
prefer to let it arise from some voluntary act of the member bank, rather
than from some arbitrary action of the federal reserve bank.
DOES THE FEDERAL RESERVE :BANK BEST SERVE ITS
ENDORSERS ::SY FOLLOWING THE POLICY OF APPLYING
RESERVE :BALANCES, COLLATERAL AND CAPITAL STOCK
REEm"DS TO CLAIMS ARISING ::SY FAILURE OF THE
DRAWEE BAllK TO Rnf.IT FOR TRANSIT SIDTDINGS.
We are familiar with the fact that many decisions hold, in effect,
that Y~here checks are sent to the dra'wee bank and are by that bank received,
stamped paid and charged to the accam.nt of the drawer, the drawer is dis9harged
from liability by such action.
··-
In our opinion, however, these decisions are unsound and while we
1DUSt admit that, at the present time, ·they express generally the law in most
jurisdictions, nevertheless, having the convictions we do, we cannot help but
feel that when properly presented this question will be decided otherwise.
-vre. base this feeling upon the fact that the mere stamping of a check paid and
chaX~ing it to the accotint of a person does not ·in any manner constitute payment
nor does it in anywise conform to the definition of payment which is generally
and ~niformally laid down ~y practically all courts dealing with the question
of p~ent in other cases.
Assuming that a federal reserve bank should follow the policies
in Mr. Ueland's memorandum and the reserve balance, collateral and
capital stock refund is not sufficient to pay the entire amount of the transit
send;lngs involved, then :nedessarily the amount on hand must be pro rated. In
such event, it occurs to us that necessarily the drawer would be ·discharged and
the payee or his endorser would be required to look elsewhere than to the drawer
I
for ~he recovery of the amount unpaid.
su~sted
TO this extent, we feel that to pursue. the policies recoimJlended by
Mr. tfeland would be a detriment rather than a help.
·
In this connection, we feel that the questions which we are now considering lf'Ould become academic ~hould the various states of the Union be prev~iled
upon to pass a proper statutory enactment to the effect that where the payee or
his endorser of a check uses ordinary cate and the usual and customary ~ans of
collection, 'the drawer of the check is not discharged regardless of whether the
checl:t 'ili question has been stamped paid ~d ·charged to his account, unless the
· drawee bank has actually paid the check.
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X-6264-a
CONCLUSION~
For the reasons herein stated, it is our op1n1on that federal reserve
banks should, in discharging their check collection functions, ad..>iere strictly
to the idea that they are acting as Ment only and that in discharging such
duty they will use ordinary care, under .all circumstances, to collect checks
sent them for collection, employing those means for presentation and collection
Which are the normal, natural and accepted means afforded by the commercial
structure of the country, but that they shall not undertake unusual, uncommon
and extraordinary practices not expected, required nor undertaken by a person
acting in the ca~acity of agent only.
We think it very important that uniformity exist throughout the
entire Federal Reserve System as to the policies herein referred to, so that
federal reserve banks in one district shall not establish precedents embarrassing
to federal reserve banks in other districts. We feel this so strongly that we
would be glad to recommend to the Federal Reserve :Bank of :callas that they make
their practices conform to those practices favored by the majority of the federal
reserve banks.
Yours very truly,
(S)
EBS:lm
Locke, Locke, Stroud & Randolph.
X-6264-b
FEDERAL RESERVE :B.ANX
C)p:ri
"'"""-y ,·
OF SAN FRANCISCO
February 5, 1929.
Walter Wyatt, Esq.,
General Counsel,
1ederal Reserve Board,
Washington, D. c.
Dear Mr. Wyatt:
I acknowledge your
draft of memorandum prepared
to be pursued by the Federal
serve balances; also copy of
Ueland's opinion.
-~,
letter of January 30, 1929, transmitting the
by :Mr. Sigurd Ueland with respect to the policy
Reserve Bank of Minneapolis in relation to reyour letter of January 26 corrnnenting on JY.r.
I can say without reserve that I agree entirely with the conclusions
which you have reached and in the expression of policy contained in your letter.
I ha;ve felt from the beginning that the Midland National Eank case was bad law
and would result in the creation of situations embarrassing to the Federal reserve barucs. The adoption in toto of the theory of that case by Mr. Sigurd
Ueland, and presumably by his father, makes the situation still more difficult.
.,While, like you, I have the utmost respect for Judge Uelandts legal ability, as
well as that of his son, I cannot but feel that these gentlemen have accorded
the decisions to which they refer greater weight than that to which they are
entitled and have given the principles announced therein broader application
than is deserved. Personally I feel that if the Federal Reserve Eank of
Minneapolis were to adopt and put into effect the recommendations contained
in Mr. Sig1p.'d Ueland's memorandum, a situation would be created fraught with
·grave danger to all Federal reserve banks. Even though the conclusions reached
Were justified under the decisions of the Supreme Co1,ll't. of Minnesota and tho
United States District Court in the Eureka case ta premise which I do not
at all concede), the adoption of those co~a.lu.sions as a basis of future policy
on the part of the Federal Reserve Bank of Minneapolis would undoubtedly arise
to confront all other Federal reserve bankseven tho~ such other Federal
re,erve banks followed entirely different ~ethods of procedure. In other words,
if 'the Fedsral Reserve Eank of Minneapolis· alone, or perhaps in concert with
th• Federal Reserve Bank of Richmond, is to adopt the policy of treating reserve
balances and funds created from the caneellation of capital stock as trust
funds primarily or secondarily for the payment of obligations arising from unremitted cash letters, all other Federal reserve banks will ultimately have to
adopt the same policy or be confronted with vexatious and expensive litigation
~ngendered by following a different policy.
It has always been the endeavor of the Federal Reserve Bank of San
Francisco, and I believe of most of the other Federal reserve banks, to maintain
a strict agency relationship in the handling of caSh items. Once the theory of
X-6264-b
-2agency is departed from in the slightest degree, there is no way of ~-;telling
to what extent member banks and non ·mGmber cl'earing banks may be able to
hold the Federal reS8t'Y<:; 'o.s.nk r8sponsi'ble for the· fate of unpaid cash items.
t therefore consider a:r..;y- cleparture from such agency relationship or any
affinission, express or lmplied, that such relationship does not continue,
extremely dangerous.
l;:r. Ueland refers to the recent amendment of Regulation J elimina.ting
therefrom that provision to the effect that any Federal reserve bank may reserve
the right to charge checks to the reserve account or clearing acc,JUnt of a bank
at any time when in any particular case the Federal reserve bank deems it
necessary to do .so, and expresses the opinion the.t this amendment does not show
an intention that the reserve balance is not intended to remain available for
the p~Aent of unpaid cash items after notice of suspension. I think this
conclusion is incorrect. Harking back to the discussion which took place at
our last conference in Washington, I am strongly of the opinion that it was for
the purpose of removing any question as to the right of a Federal reserve bank
to treat a reserve balance as a trust fund for the benefit of the owners of
et;LSh items, that we recommended the elimination of this clause, and l am equally
firm in the opinion that this was· the purpose of the Federal Reserve :Board in
causing this elimination.
.. ,'- ·
I believe the entire tmttterof the treatrn.ent of reserve balances and
the rights of forwarding banks in relation thereto should receive early and
'-thcrough treatment and I agree with. you that as a preliminary to any action on
the part of the Fede.ral Reserve :Board, it would be well to hold a conference
of counsel at Washington for the purpose of a thorough discussion.
·
I should be glad to attend such a conference at any time that may
be selected. Personally I should prefer that if a meeting is held i t 'ee set
for the month of April, as engagements here would make it difficult for me
to be present during either March or May.
I have thoroughly discussed tlle matters referred to herein with the
executive officers of this bank. Governor Calkins suggests that if a conference
is held, it might be well to arrange to have ll.r. :Baker pre~ent.
Yours very truly,
(S)
Albert C. A._<2;new,
Counsel.
2 :::-:q
X-6264-c u •.
FED:i!!EU\L RES::JlRVE :BANK
OF ATLANTA
February 5, 1929.
Mr. Walter Wyatt, General Counseli
Federal Reserve :Board,
'v1ashingtori., D. C~
Dear Mr. Wyatt 2
I have tead with interest y0ur letter of January
fi~, with which there was enclosed a
copy of a letter written to you by Judge Ueland ·:.and llir.
Sigurd Ueland, as well as a copy of the memorandum :prepared ·
by Mr~ Sigurd Ueland and a copy of your letter to Judge
Ueland - all having reference to the policy to be :pursued
by the Federal Rese.rve :Bapk of Minneapolis in asserting
rights against receivers of insolvent member banks on behalf of the.owne~s of unremitted for transit items.
26, addressed to my
In obedience to your request, I am·herein expressing my views on the questions discussed in the above
mentioned correspondence and memoranda. In considering
the matter I have, of course, been mindf.ul of the weight
which should be given anY opi~ion representing the matured
judgment of the Messrs. Ueland. I am, however, constrained
to disagree with these Gentlemen in the conclusions which
they have reached. 1q opinion accords with your own.
It seems to me that we should not lose sight of
certain fundamental propositions which, but for the recent
decision in the case of the Federal Reserve :Bank of Richmond
~Earley,. Receiver, might well have been regardedas elementary,· and which are not necessarily foreclosed by that
case:
1.
2.
Whenever a .receiver is appointed, whether
in bankruptcy, by a cour.t of equity or by
other authority, bank balances to the credit
of the insolvent automatically become not
withdrawable :upon his. check, but may be withdrawn only: by such receiver, acting pursuant
to the general or statuto~y authority vested
in him. Whether ~uch result is brought
about by a etatute, such as the :Bankruptcy Act,
or upon gene,~ equitable principles seems
to be immaterial.
The reserve account of a member bank, as well
' as the clea.rixig account of a non...member clear-
260
X-6264-c
Mr. Walter Wyatt,
2/5/29.
ing bank, may, fot the purposes of this discussion, be regarded as nothing more nor less
than a "cheeking account"', subject to the s~e
legal principles as would apply to a deposit
account maintained tinder ordinary banking
usages by a depositor in a commercial bank.
3.
The Federal nes~rve Bank handles cash items
'only as agent for 'banks forwarding the same
to it for colle~tion, or, at least, if such is
not the stattis 6f the FederBl Reserve Banks,
quoad.s~ch checks, Regulation J fails of its
intended pm"pose in this regard.
4.
Fedetal Reserve Banks do :not take such ehecks
and draft·s on general deposit and thereby become the owners thereof. and, unless they
stand in the relation of owners to such checks,
it is difficult to see upon what rule they
would be justified in off-setting checks, for
which remittances have not been received,
against reserve balances or in applying collateral in their hands for the protection of
the same, in the absence, at least, of an
express agreement authorizing a:ny such procedure.
5.
The underlying purpose of Regulation J and of
the cognate collection circulars of the various
Reserve Banks was to relieve the banks of the
duty or obligation to do precisely the things
which it is now suggested should be done.
........... \.
I realize that, since the decision in the Earley
case, any opinion nnist be given dubitante. I cannot, however,
believe that the Earley case will finally stand as the last
word on the subject, and I am, furthermore, hopeful that, in
any event, the holding of that case would not, in subsequent
litigation, be extended beyond the parti.cular facts which were
there involved. In so far as concerns the banks using the
so-called 11 remi tt~nce" system in collecting cash letters, the
·.case would not, necessarily, be conclusive. The Richmond
bank, under its own collection circular, had adopted the practice of charging cash letters to reserve accounts at the expiration of a specified transit Ume, and the Court seems to have
predicated its opinion very largely upon this practice.
The banks using the remittance system customarily
receive returns on cash letters in the shape of checks drawn
X-626~ .~ i
Mr. i7alter Wyatt,
-3-
2/5/29.
upon the reserve balances of the rcmi tting banks or in acceptable and immediately available exehange. It would
clearly seem that after a member b8J'1.k has been closed the
Federal Reserve !3ank could not thereafter pay a draft drawn
upon itself by the closed member, even though the same had
been mailad 1prior to suspension of bus,iness. The banks
using the remittance system sometimes accept in payment of
cash letters express written authorizations to charge reserve
accounts with the amount of the same. I see no difference
in legal affect (in so far as concerrls the questibns now under discussion) between a check drawn upon the re~orve account of a member and its Written authorization to charge its
reserve accdunt With a. specified amom1t; and, if the authorization to cl1arge be not received until after the closing
of the bank, the situation is exactly the same, in my opinion,
as if remittance had been attempted by draft.
Prior to the recent revision of Regulation J, the
Atlanta bank, and perhaps others using the remittance system,
reserved the right in their check collection circulars to
charge cash letters to reserve account whenever returns thereem were not received when, in the light of railway mail schedules and ordinary experience, they should have been in hand.
It was intended, however, by such stipulation ::J.erely to -provide a method for forcing payment as against slow remitting
banks. It was not the intention to provide such method for
enforcing payment after a member bank had been closed; nor do
I believe that a general reservation in the check collection
circular of the tenor indicated would alter or vary the
fundamental propositions outlined above.
It is generally recognized that it is unjust and
inequitable for a drawee bank to pay and discharge tho checks
of its customers and then fail to remit therefor, but I do
not believe that the Federal Reserve Banks should undertake
to correct this injustice by adopting a policy which might,
in effect, force them to protect all checks sent to them for
collection for which remittances had not been received and
which could not be returned to their endorsers.
In the first place, in every instance where a
Federal Reserve Bank might hold a reserve balance or collateral in suf~icient amount, it would almost be compelled
to protect unremitted for items, even at its own expense.
Mr. Ueland, in his memorandum, states that collateral securities and reserve balances could legally be appropriated, first,
in satisfaction of obligations due to the Reserve Bank by
the closed member.
Theoretically, this may be true, although I am not so certain about the proposition as is Mr.
Ueland. Practically.speaking, however, any Reserve Barik
which protected itself primarily and its endorsers of transit items secondarily, would be subjected to criticism which
~b:.:;_
-4Mr. Walter Wyatt,
would certainly prove embarrassing. My own opinion is that,
in uractice, the policy advocated by Judge Ueland, even
i f legally permissible, would result in a prior, or at least
pro rata, pa~nent by the Reserve Banks of such transit items
in any case where payment could be effected out of the reserve balance or general collateral in its hands.
In the second place, it is most important, in my
opinion, that nothing be done to affect the strict agency
telationship touching collections which should be maintained
by the Federal ~eserve Banks. The volume of checks passing through the Federal Reserve system is enormous and will
inevitably increase from year to year. iVhile no one questions the utility of the Federal Reserve Bank collection
system, nor begrUdges the expense entailed ther.eby, the Reserve Banks should not be burdened with responsibilities
beyond those which inhere in the p:roper discharge of their
duties as agen·ts~ For its own negligence, a Federal Reserve :Bank should pa:if, but for the ht:igligence or defaults
of others it shoula not be held iiable• It seems to me
that anything which tends to superimpose upon a pure agency
status an indicia of ownership, with respect to the subject
matter of the agency, is a step in the wrong direction.
The tendency, at least, of the plan proposed for the Minneapolis District would b'e to make a Federal Reserve Bank responsible for items entrusted to it for collection, even
though the failure to secure returns thereon, in actually
collected funds, may not have been due to any negligence
or fault on its part. There is no.more reason to require
a Federal Reserve Bank to pay a check out of a reserve account (or charge the same with the amount thereof) after
the insolvency of the drawer than to expect'an ordinary
commercial bank to make payment under similar circumstances;
and, unless remittance in actually available funds has been
received, a mere collection agent should not be held responsible.
I shall not attempt to discuss at any length the
cases cited in t4r. Ueland's memorandum. I have not read
th, unreported case of Keyes, Receiver, !! Federal Reserve
~ of Minneapolis.
The pertinent holding of Federal
Reserve Bank l l First N§;tional Bank of Eureka, which I have
not read for some time, was, as I recall it, based on the
theory that the reserve account of a member was a clearing
fund through which "balances" in favor of the Reserve Ba."lk
might be extinguished just as such balances are wiped out
in the operation of a clearing house. This theory is certainly incompatible with the rationale of Regulation J.
The recent case of Storing, Receiver
~First
X-6254-c
Mr. Walter Wyatt,
-s-
2/5/29.
National Bank of Minneauolis; which has been the subject
mat-ter of prior correspondence bet~veen us, seems clearly
distinguishable. In the Storing case the Court vras careful to point out that items which were received for collection by the First National Bank from its own custouers 11 vtere
credited to the accounts of the res~ective custo~ers on the
books of defendant", i.e. the Minneapolis Bank. At the
tir:.1e, therefore, when they were forwarded to the North
Dakota Bank (which subsequently became insolvent) the same
had been placed oh general deposit with the Minneapolis bank
and were treated by the Court as being the property of that
bank. The Court also held that the "·accounts of the two
banks with each other constituted mutual accounts", for.
which reason a right of off-set existed. The distingu,ishing elements in the Storing case emphasize the dangers of
undertrucing to apply the doctrine of that case to the check
collection functions of the Reserve :Banlr~s. To make the·
Storing case applicable, the relation between a Reserve Bank
and its members might have to be regarded as that of banks
maintaining 11 mutuc.l accounts" - certainly the Reserve Bank
would necessarily have to be conceded to be (prima facie
at least) the owner of all checks in its hands for collection, despite the contrary declaration of Regulation J.
The legal complications which might ensue readily suggest
themselves.
No specific comment is made upon the case of Midland
National Bank, etc. vs State Bank of Sioux Falls, et al, for
the reason that this letter is written in an attempt to show
the unsoundness of its holdings.
There are one or two other considerations which, in
my opinion, might be urged on the negative side of the questions raised, but I hesitate to burden the deb~te with any
further comment, particularly since your lettE:Jr to Judge Ueland
of January 26 really needs no supplementing.
With
b~st
personal regards, ! am
Sincerely yours,
(S)
RSP/w.
Robt. S. Parker.
FEDZRAL RsSBRVE B.A!JK
X-6264-d
'"
2 ~--~
U'-··
CF !UCHM01"D
February 5, 1929.
Federal Reserve Board,
Washington, D. C.
Attention:
Iv~:r.
Walter Wyatt, General Counsel.
Dear 1vir • Wyatt :
I read with mtlch interest the interesting and helpful
memorandum prepared by Hr. Sigurd Ueland. I am personally much
gratified by the knowledge that I do not stand alone in my view
With respect to the soundness of the decision of the Circuit
Court of Ap-s>eals in Farmers• and Merchants National Bank of Lake
City v. Federal Reserve Bank of Richmond.
The proposition for a conference of Counsel of the
Federal Reserve barucs always carries such pleasant suggestions
that I am never exactly opposed to such a conf~rence, but in
thinking over the matter it appears to me that very little in
the way of definite action could be taken by such a conference
at the present time. The Lake City case cannot be regarded as
a final decision because it may be reviewed by certiorari. The
case of Storing v. First National Bank, 28 Fed. (2nd) 587, is
in the same situation. The case of Midland National Bank and
Trust Company v. First State Bank is a final decision by a State
court but rests upon the terms of e particular contract, which
terms are not identical with the ·terms of the circular or collateral agreement used by any Federal Reserve bank. The decisions
in all of these cases are constructions of contracts except that
part of the Lake City case which deals with the• surrender value of
the stock held by a member bank in a Federal Reserve bank. The
circulars used by the-respective Federal Reserve banks are not
uniform, and therefore if the object of the conference is to
discuss past transac.tions, it seems to me that we should merely
be in the position of attempting to forecast decisions upon our
respective circulars in the light of decided cases which are
still subject to reversal.
If the conference is to concern itself with future
transaptions, it appears to me that we shall be greatly handicap~ed
by the fact that the decisions which at present fonn the last known
statement of the law are subject to reversal and may be modified
or distinguished in the cases which are now pending in ·the Atlanta
and San Francisco Districts. We therefore would meet with no
positive assurance of what the law now is upon the contracts which
are at present in force, and could not even u~e an intelligent
guess at what the courts may decide with respect to contracts which
might hereafter be drawn. It therefore seems to me that a conference
-2-
X-6264-d
held after a fina1 decision in the Lake City case, and perhaps
after a decision in the cases effecting the Federal Reserve
Ba1~cs of Atlanta and stin Francisco, would be much more profitable than one held at the present time.
In addition to the above, it seems to me that the
main source of our difficulties at present lie in a difference
of view with respect to policy. There are three funds whiCh
might ~ossibly be made applicable to the protection of cash
letters. These are: (1) The reserve balance; (2) The
collateral; (3) The surrender value of the stoCk.
I am, of course, persuaded that the decision of
Judge Parker in the Lake City case is the correct interpretation of the contract existing between the Federal Reserve
Bank of Richmond and its member banks, but I believe that all
of us would concede that he is at least correct when he says
that the question depends upon the construction of the .circular.
It should be fairly easy to prepare a circular which wo~d make
it clear that any reserve balance apparently due to a failed
bank at the time of its failure should be applied to any unpaid
cash letters regardless of whether or not the remittance system
or charge system was used by a particular Federal Reserve bank.
It r:ould certainly be easy to provide by express words in the
circular and Regulation that the reserve balance should not be
chargeable with cash letters unless specific authority to make
the charge was received and the charge made against an available
balance sufficient to cover the letters before the failure.
The right of the Federal Reserve bank to hold the
collateral is likewise merelya matter of contract. There can
be no doubt that the Federal Reserve bank might make a contract
under which the collateral was applicable to cash letters even
though the Reserve bank had the right to charge these cash
letters back to the depositors. In other words, the Federal
Reserve bank might, by express contract, take and hold the
collateral for the benefit of its depositors as well as for its
9wn benefit and could provide that its own claims upon rediscounts
and other matters should be preferred over the claims of persons
interested in the caSh letters so far as the collateral was
cOn\.erne d,
The application of the surrender value of the s took
depends upon the construction of the Federal Reserve Act and no
contract which could be made would alter the status of the surrender
value. I am incli.ned to accept the decision in the Lake City Case
as final upon this latter point, even though it appears to be contrary
to Federal Reserve Bank v. First National Ba~, 277 Fed. 300; but,
26()
-3-
X-6264-d
in any event, whether the Lake City case is on this point
sound or not, nothing which could be inserted in the Regulations of the Board or in any circular would change the ultimate
result.
It seems to me, therefore, that inasmuch as the present
situation arises out of the possible differences in the interpretation of the circulars of various Federal Reserve banks, that
there are three possible courses which may be adopted in the future.
All of the Federal Reserve banks may elect or be required
by the Federal Reserve Board to adopt a uniform policy under which
the reserve balances and the collateral will be applicable to cash
letters; or the banks 1nay elect or be required to adopt a policy
under which neither of these funds can be ap?lied to unpaid cash
letters; or each bank may e.dopt one policy or the other as its
own judgment d~termines. It is obvious that the decision upon
these courses of action involves questions ·of policy rather than
questions of law. If the :Board intends to require e.ll banks to
adopt a uniform policy upon the points mentioned, then it should
be fairly easy for you, with such assistance as Counsel for the
Federal Reserve banks could give you, to prepare a regulation
which would clearly and equivocably state the policy adopted. ,
If the Board does not wish to require a uniform policy, then
obviously the officers of each bank must determine for themselves
the course which they will follow•
It therefore appears~to me that very little could be
accomplished by a conference of Counsel until the Board, which
I assume would desire to confer with the Governors of the banks,
had Ir.ade a definite decision with respect to the questions of
policy involved. When this decision was made, it then seems to
me that a conference of Counsel would be most helpful as a means
of embodying the decision in clear .and unambiguous words.
With best personal regards, I remain,
Very truly yours,
(S)
MGW L
M. G. Wallace,
Counsel.
X-526·4-e
F~DERAL.RESERVE
PAHK
OF
S T.
·L 0 U I S
February 20, 1929.
lJr. Walter Wyatt, General Counsel,
Federal Reserve :Soard,
Washington, D. C.
Dear
:.:r. Vlyat t:-
Since writing to you on February 2, 1929, I have gone
more carefully into the cases referred to in the correspondence
passins between you and Judge Ueland relative to the LeP,al Ri~ts
and corresponding obligations of Federal ReGerve :Same~ in their
Cleariztg House operations with }!ational :Bank Receivership~.
In the case of THOS. A.:ElARLY, Reed ver of the FAR1:ERS &
ME:..'tCHA.l!TS NATIONAL BAlJK of LAKE CITY, S. C.
vs. the FEDERAL
RESERV:S :SM'lK OF RI&11Mm!D (hereinafter referred to as. the EARLY
case) the Court/oefore it two separate causes of action- (1) the recovery of the deposit account standing on the books of the
Federal Reserve Bank - (2) - the surrender value of the stock in
the Federal Reserve :Bank and counter claim filed by the Reserve
Batik on the unremitted for cash letters.
The District Court, after referring to the Regulation
and Circular letter, found in favor of EARLY on both counts,
"The charges made on account of the outstanding
cash letters against the insolvent bank, I do not regard
as proper allowances or deductions. The right of the
Reserve Bank to make the charges terminated with the
insolvency of the member. ba1'lk.• " **** "The counter-claim
of defendant is based on items in transit that were being
handled by the Reserve :Sank for collection. They were
received for deferred credit, under regulations and check
collection circulars which provide that the Reserve !Sank
will act only as agent for the batik ~·m which it receives
such checks.. The items cannot be regarled as the property
of the Reserve :Sank. The circumstances shown in respect
to the counter... claim make it clearly apparent that the
claims upon which the suit is brought, and the claim set
out by defendant in its counter-claim, do not arise between
the parties in the same capacity. 11
On appeal, the Circuit Court affirmed the ruling of the District
Court as to the second cause of a.ction:
X-6264-e
"On the second question, we do not think that the 268
Reserve :Bank has the right to set off the balance ci'J.e by
the insolvent bank on the checks against its ~ock liaoility.
The Reserve Bank was not the owner of these checks.· it
was merely a:h agent for collection; and although it
credited thein to the accounts of th~ forWarding banks; · ·
this was upon agreement that they might be charged back
if not collected,· and the second 1ot of checks has bee,n
charged back. The stock: liability is a. liab11i tr er.eated
by statute which provides that i t ilfihall be first ap-;>ii~d
to all debts of the insolvent member bank to the Federal
Reserve Earik, and the balance, if any, shall be paid to
the receiver of the insolvent bank. 11 12 U.S. c. A. 288.
It is ·perfectly clear that the liability of the insolvent
member ba.nlc for these checks is a liability.owing to the
owners of the checks in which the Reserve Bank is not
interest8d except as collection agent, and is not 11 a d.ebt
of the insolvent member bank to the Federal Reserve Bank"
within the meaning of the statute.
Even in the absence of a statutory direction as to
how the liability should be applied, a set off. ·of checks
held for collection ag,ainst such a liability would not be
allowed, for the reason that demands to be set off against
each other w~st be mutual, that is they must be due to
and from the same parties and in the same capacity•"
The Circuit Court reversed the ruling of the District Court
as to the first count:
liThe checks were forwarded by the Reserve Bank to
the insolvent bank under an agreement that they should
be charged against its account at the expiration of
three ~s. unless returned immediately. They were so
sent because the owners for ·Whom the Reserve Bank was
acting as' agent had consented to the arranfement. As a
substitute for the right to have them presented through
another bank and collected in cash, the owners had agreed
that they be sent direct to the drawee unde·r the agreement
that if not promptly returned they be charged against the
drawee.' s reserve balance .. When, therefore, they were
accepted bz the drawee, the owners had the right to demand
that they be cha.r~d against the drawee's account and
that the balance in·th&t account be aP?lied
the Reserve
Bank to their pe,yment. Tr.e only question that can arise
is when does this right of the cwners of the cbecks pecome
fixed so as to constitute it a charge upon the reserve
balance. We think: that it' beco!lles so fixed when the drawee
bank either unequivocally acceits the checks, as in this case,
or.by failing to return them promptlY becomes chargeable
with them under the terms Qf ths agreement. " *****•
And this right, we think •. depends not upon the theory that
the Reserve Bank is the owner of the checks or that it has
tha:right o£ set off 1;1.gainst the insolvent bank; but upon
oy
',·:.1
-3C)"li'
the fact that the· contr3.Ct of the parties has created an ,<.tb~J
equitable charge upon the reserve account of tLe drawee bank
and that such agreement.oper.ates as an equitable assignment
of so much thereof as may be necessary to ~ay the checks when
they are unequivocally accepted by the drawee. Under familiar
principles of equity, such an equitable charge upon a fund
arises in favor of a party when he becomes entitled to have
his claim paid from that fund.n
It is apparent that the Circuit Court in arriving at the
conclusion was governed by the Richmond circular and Reb"Ulations in
force at the'time, and the Richmond bank's method of operating under
the 'Time Schedule Charge Account' exclusively - rather than under the
'remittance method' used irrmost of the other Reserve Eanks. Based on
the ~articular method in use by the Richmond bank the reasoning is logical,
and, I beli.eve the conclusions reached are sound and will be upheld by
the Supreme Court.
Turning our attention now to the cases of KEYES, Receiver of
the FIRST 1-!ATIOfrAL :B.A.l'tK of CIJ\J.1KSFIELD vs. the FEDE!W:. RESERVE BA11K of
Mnr:.1llAPQLIS - not officially reported (hereinafter referred to as the
CLARXSFIELD case)
The FEDERAL RESERVE BAl..lK of MUTh~OLIS vs. KEYES, Receiver
of the FIRST 1-!A.TlOlTAL B.A.BK of EUREKA, 277 Fed. 300, and (hereinafter
referred to as the EUREKA ca~e); and, '
The MIDLUm NATIOliAL BAlm: of MnU'!EAPOLIS vs. the FIRST STATE
BA~~ OF SIOUX FALLS, 222 N.W. 274, and (hereinafter referred to as
the M!D!JUTD :BANK and STA.'l!E BANK.)
In the CLARXSFIELD case the reserve batik had forwarded to the
Clarksfield bank tfor collection and credit' a cash letter containing a
number of items. The items were collected and cre~t given to the
Federal Resex-ve :Bank on the books of the Clarksfield bank on the 18th af
September - the day they were collected - and, before the Clark~field bank
was closed on that date and its affairs were taken over by the Receiver,
Keyes. At the time credit was given on the 18th, the balances of the
Clarksfield batik in the Federal Reserve :Bank were ample to sustain the
credit.. This ba.lance was later augmented by the proceeds from the
cancelled stock in the Federal Reserve Bank. A£ter using so much of the
augmented balances as were necessary to reimburse the Federal Reserve
:Bank for certain forged notes it held under rediscount from the Clarksfield
bank the remaini.Dg aUfP1ented balances were applied on the outstanding
cash letters.
It is apparent from the fact that the Clarksfield barik gave the
Reserve B~~ credit on its books for the ~ds collected on the day the
collections were made, an~, from the underscored lines in Paragraph 3
of the Minneapolis circul~ then in force, that the Minneapolis bank
(like the Richinond b~nk) w~s operating under the "Time Schedule Charge
Account" method exclusively:
"Checks received by the Federal .Reserve :Bank, drawn on its
member banks, will be forwarded direct to such member banks,
'll-"'.1~-.1
,:.,. t '\.}
-4-
X-62b4-e
and will be charged to their accounts on the date which,
under usual conditions, adviqe of payment may be eXpected.
Member banks should credit ail re.mi ttances received froin
the Federal Reserve Bank upo~ day of recei~t, advising .
the Federal Reserve Bank, .an~ should not remit their drafts
in payment. Member banks are. required by the Federal Reserve Board to provide funds ~o cover at par all checks
received from, or for the acc9unt of, their Federal Reserve
Bank. 11
The Court, after quoting the :E\egulations and Reserve Bank
Circular relative to collections, says: ·.
11 It is not ( 1 not' evidently a typographical error)
apparent that upon the clearance being h~d between the
Clarksfield banks, defendant had the r1ght to a credit
with the First llTational· Bank of Clarksfield for this amount
and to cr.arge the same to the a.Acount of said bank, that_
credit was given but the charge' 'Was not made. It seems to
me that Defendant then had a ~1ght of action against that
bank for that amount in its own name and in its own right, 11
and, if this is true it is clea.r ~. has had that right
every since, and, therefore, ha's ~e right of
11 Tf..at the rights, of t:Q.e parties became
setoff." ****
fixed as of the time of the closing of the bank ***
SCOTT vs. ARmTSBURG.
At that t.};ine the Reserve Bank
had a right of action against the Clarksfield insolvent bank
for the amount of the checks whether or not they were only
received by it as an agent for collection and conditional
credit and whether or not the endorsemnts thereon were
restricted or unrestricted.M
If the Minneapolis bank was operating exclusively under the
Time Schedule Charge Account" -as is apparent - the conclusions reached
by the Circuit Court in the EARLY case would apply, and, while District
Judge !~orris arrives at the same conclusion over a different route, it
would ap~ear that if the Minnesota Statutes referred to give the agent
the right to maintain the suit, then the reasoning used is sound and
the reGul t justified.
11
In the EUREKA bank case, the Eureka bank, at the time it closed,
under rediscount with the Reserve Bank a nurnber of notes, and, just
p~ior to closing it had collected a number of items forwarded to it by the
Reserve bank for collect ion, and, attempted to remit by draft, uncollectibl~ 1
because of the faUure of the Eureka bank. Two questions were before
'·
the Court: (1st) - did the Reserve bank have to exhaust all means to
collect from the makers of the notes before it was entitled to prove its
claim against the trUst and receive dividends? - (2nd) - Could the Reserve
bank apply the balances it held as a set-off against the unpaid remitta~ce
draft?
~d
The Court, after commenting upon the purpose of the Federal
Reserve Act, answers the 1st question by holding that the EDr~ bank
.oNe
-5-
pap.
,., . t. 1,
X-6254-e~
.;.!_
was prllnarily liable
redisdounied
and claim could be filed
against the trust just as if .the insolvent bank had been the maker instead
of the end.brseh .Answering the 2nd question, the Court, after quoting
the foliowing from Regulation
•J•
"Member and clearing member banks will be required by the
Federal Reserve Board to provide funds to cover a.t par all
checks received from or for the account of the Federal Reserve :Sank."
Says - at page 304:
"From· the time of .the :promulgation of this rule, the credit
of a member bank with its Federal Reserve bank was rightfully
treated by the' rese~ve bank as a fund to cover all checks
received from or for its account by a member bank" ******
11 Immediately upon the refusal of the drawee bank to pay the
remittance draft, the sum became a primary obligation of
Defendant· to the Plaintiff, whi9h constitutes a valid claim
against the Receiver."
·
In this case, the Federal Reserve :Bank of Minneapolis seems
to have been operating under the •remittance' instead. of the "Time
Schedule Charge Account" pla.p and used in the CLA.RKSFIELD case,
nevertheless, the Court holds that under the terms of the Reserve Act
and the Regulations issued thereunder the Reserve bank had the right to
mi:tke the charge against the balances of the EUREKA. bank.
In the case of the MIDLAND BANK vs. the STATE BANK, the Midland
barik was the correspondent of the State :Bank - loaned. it money and.
rediscounted paper for it.
The State bank had given the Mid.land bank
a pleage agreement whereby it was agreed that all securities deposited.
under the pledge, or, held by the Midland bank in any way, as well as the
balances of the State bank, should be held by the Midland bank as
security for any liability of the State bank to the Midland bank then
existing or the;reafter contracted~ The Midland bank was using the
State bank as' its collection agent to collect all ite~s payable in· the
territory of the State bank.
Under this arranganent, it forwarded to the State bank for rollection and remittance a number of checks payable in the vicinity of the
State bank. The State bank collected the i tems 1 and, attempted to
remit the funds so collected by draft on the Midland bankand in its
favor, and, failed before the draft reached the Midland bank. The
State bank had no funds with the Midland 'bank to pay the drafts and the
drafts were dishonored. The checks in ~estion had been deposited
by the depositors with the understandi.ng that they would be immediately
credited to the depositor's account but the depositors could not withdraw
them until paid, and, if not paid, they would be charged back against
the depositor.
·
..
upon suit to foreclose on the collateral and apply the proceeds
towards the payment of the uncollected ~emittance draft an objection was
made that since the checks had been depo.si ted with the Midland bank,
under an agreement with the deposit.ors that if not paid they could be.
X-6264-.a
'l"""!n
((;, ( (-~',;
charged back to the depositors• account. The Midland.bank was neither
the ow!ler nor under aey legal liability to the owners; consequently,
could not ap;>ly the proceeds derived :from the sale of the collateral to
p~ing the uhcoliected remittance draft.
The Court, in passing upon
this claim, says:
"Whatever the rights between the ,deposi,tors iuld .the Plaintiff
mav be or would be if the plaihtif£ ha~ not charged back the
credits, the right of the plaintiff to foreclose the collateral
and ap~ly on the unpaid collection is clear••••Lmmediately upon
the failure of the Sioux Falls bank to !>BY, the plaintiff had a
cause of action against it for the· amount which it had collected
and did not pay. It had the legal title, so to speak, to dishonored .drafts drawn by the Sioux Falls bank. Whatever right
it had arose upon the failure of the bank to remit what it
received, and its righ~ was protected by the security of the
pledge agreement. 11
11 The contention that the plaintiff, having charged back
the credits against its customers cannot apply the collateral
in discharge of the obligation arising from the default
of the Sioux Falls bank, is without merit."
In the MIDLAND bank·case there was neither circular nor
Regulation governing this transaction. There was no contract between
the MIDLAl'!D bank and the STATE bank similar to the contract between
the RICID.'i:CJ)!D bank and the LAKE CITY bank, of which u:BLY was Receiver,
authorizing the items to be charged against the collecting bank's account,.
and, which contract the Court, in the EARLY case, heln ran to the
benefit of and was enforcible on behalf of the owners of the items
involved.
The Court, however, held that, notwithstanding the
MIDLAND bank had the express right to charge the 1tams back to the
·depositors, the 'S'M.TE bank had actually colle.cted the· funds, .released
the drawers of the separate items, and, had attempted to remit by
uncollectible draft; that the MIDLA.ND bank: had the legal title to the
dishonored draft which draft constituted an indebtedness to the MIDLAliD
bank covered by the pledge agreement and collectible out of the
collateral.
It is hard to follow the reasoning in this case in establishing
the right unless the Court was of the opinion· that the MIJLA11D bank .:..
by accepting the draft instead of money - had become liable to the owners
of the ite~s for the loss occasioned by accepting the draft instead of
money in p~ent, and, being so liable, had the legal right to . the
draft, .~d, right to a set off against the securities held under the
pledge ~greement.
I cannot believe that under the Federal Reserve Banks' clearing
the MIDLA11D bank opinion would apply. The debt is not one,
owing to the Federal Reserve bank.. The agency is made so plain that
no Court· would hold the right to exist unless the express right is.
reserved in the pledge agreement to hold the excess collateral for the
benefit;of the owners.
opera.tiQ~s
What effect will the ruling in these cases have on Regulation, 1J 1
as amended, effective February 1, 1929?
~':<·.''*':_
' ' t''
.' '
,~
C)t--/0
~It)
X-6264-e
.
J
believe that the answer to this- <aU.estion aeperld(.upon whether
Jade±- . Re~erve. Ba'.tllts follow the 11 fime SchedUle- Charge ,AccoUl'lt 11 method
in use br ~d.cr.r~mnd_ when the EARLY case a.t61iej . S.n~; by- :Minfte$.pol:!.~' Whe'
the ctA:eKSFt~t~n M.se arose, or, whether they follbw the •Ooilectlon and
Remittancai pl~n !n use in the other F~deral Reserve~.
~he
The Federal Reserve Bank: of St. Louis has never considered
that the 'at any time f charge account clause affonifld any practical
protecticn. It was only intended as a weapon to enforce prompt remittance and useless for the reason that whenever a member bank re.ached a
condition that the weapon had to be used it was then too late to accomplish tbe intented purpose.
The Federal Reserve Bank of St.Louis·has gone on the theory
that the member bank in the first instance could pay in cash, or,
•
remit by draft acceptable to the reserve bank; t!:'B.t a draft on a corresponq..ent collectable on the day of receipt was acceptable; that a draft ·
against the member bllnk• s balances (if thetba.lances justified the charge)
was acceptable; that a telegraphic order o~.~ ..m~mber bank: to charge
its balances (if sufficient) with the sum cd'rf'le~d in the particular ('·
inst~ice had the _same force and effect as a draft against sufficient
balances; that whether the remittance was made by draft against the member
bank• s balances or by an order directing the charge against member banks
balances, the only option the Reserve bank: had was to reject the draft
or the order when the member banks' balancee were not sufficient to withstand the charge.
If this is the correct interpretation of the amended: Regulation,
it would follow that Federal Reserve :Banks ·will have to d:i,scontinue the
exclusive "Time Schedule Charge Account" method and we will not be bothereq
further by the ruling in the EA.RLY case.
·
If, on the other hand, the tat the option of such Federal Reservf.
:sank: to authorize such Federal Reserve bank: tp. charge their reserve accounj"
- which was left in the amendment, - is susceptillle to an interpretation .,
that the amended Regulation gives to the Federal Reserve bank the option _;
to obtain-from member banks blanket authority to charge the member banks' ;
accounts with the funds collected, and, the Federal Reserve :Bank, exercis- .
ing this option, has obtained the blanket authority, then the Federal Reserve Bank would be in just the same posi t_ion wj_ th reference to its ~ights
and obligations as· the Richmond bank wa.s in, under the rule in tl~.e Jl.A.RLY
case before the amendment was maae; and, further, if the amended aegulatio~
is s~sceptible to this interpretation, might it no~ be plausibly argued
'
With .sufficient force to ·gain the ··ear of .the Court that since the Regula- '
tio~ gives·to the Federal Reserve bank the option to require the ~thoriza"'
tion to charge the member ba.nks t balances wi·th the collections, i t is liabl,e
_to ~e owner if. in a particular in~tance .it could have. protected the owner'"t·y
obta~ning the authority and did not do so:
THEREFORE, woul,d it not be
better for the several F.ederal ·Deserve :Sanks to get together on Br Unifol"!Jl
Methoa, and adopt eit~er the "Time· Schedule ~rge Accou.rit" method arui' reinstate the· or~giil&l Regb.l-.tion ... or, adopt the ncollection and I\emi ttance'l,
meth.od exclusively,: a.ocepting in payment money, draft on its correspondent-.l
(collectible onw of receipt), draft against sufficient bal~ces in the
-8-
X-6264-e
2 ~-1.-'V
1
'::t
Reserve batik, or a telegraphic or written order to charge the account
when the balances justified th& charge.
If the 'Collection and Remittance' method was adopted,
would it not be better to leave the "at the option of such Federal
Reserve :Bank" out of the amendment entirely and have the amendment
read:
"Checks received by a Federal Reserve Bank on its member
or non-member clearing banks will ordinarily be forwarded
or presented direct to such banks, and, such batiks will
be required to remit or pay for them at par in cash
or bank draft acceptable to the collecting Federal
Reserve :Batik." ·
•
Then to have the reserve bank circular provide that a draft
against a correspondent bank is acceptable within the meaning of
Regulation 'J' when it can be collected in money upo~ the day of receipt;
that a draft against the reserve accoun.t of the member bank or the clearing account of the non-member bank is acceptable within the meaning of this
.Regulation when the books of the Federal Reserve Bank show sufficient ·
' funds in the account to jus.tify the payment of the draft; that a
telegraphic order from the member or non-memb~r clearing bank to charge
its account with the collection will be 'treated the same as a draft
on its account.
My personal views are that, in the event the EARLY decision is
affirmed and any of the banks continue to qperate under the 11 Charge Account"
instead of the "Collection and Remittance" method, we will be heading
for trouble. Especially will this be true if the decision in the MIDLAND
bank case is sound law.
:Based on the 14 years' Clearing House operations, our observation
in the 8th District Shows that in practically every member batik failure,
the reserves, stock cancellation proceeds, and all 'We can collect on col- .
lateral held under our Collateral Pledge Agreement, are rately sufficient
to more than take care of the insolvent bank's rediscount liability to the
Federal Reserve :Bank, and,. if the right to c~ge the reserves, stock
cancellation funds, and,. proceeds received from the~sale of the collateral
held under the Collateral. Pledge Agreement, are chargeable with the payment
of unremitted for cash letters, there will not be sufficient funds to pay
·both.
How would"the allocation of such funds be made as between the
debt due to the bank on rediscount operations and the debt due the batik,
as ag~nt, for the owne.rs of the unremitted for collection items?
·
Courts do not look with favor upon the transactionsof an agent
holding a fund as security for a debt due· the agent· indi vidu.ally" and, a
debt due him in his agency relation, preferring himself to the disadvantage
of the. person f.or whom he is acting as agent. ·
It is true that provision might be made in the pledge agreement
to the effect that the proceeds deriTed from tho Collateral Pledge should
-9-
first be applied to the rediscount and over-draft obligations, and, so
much of the remainder (if any) as was necessary be applied towards paying
outstanding unremitted for cash lett~rs. The Pledge Agreement would
probably solve the question of the allocation of the pledge funds, but,
the same question would arise covering the reserve balances and
the stock cancellation funds as between the discount indebtedness and
the indebtedness on unremitted for cash letters.
We are familiar with the different holdings of the Courts
on Commercial Law questions prior to the adoption of the Uniform
Negotiable Instruments Act and the chaotic condition incident thereto,
and, with how much assurance we can now advise a client as to his
rights and corresponding obligations in Commercial Law matters.
We know from practical experience how hard it has been to get
the Courts to recognize that the rights and corresponding obligations of
Federal Reserve Banks operating under the Federal Reserve Board's
Regulations and the Federal Reserve Banks~ circulars, are different
from the rights and corresponding obligations of Commercial bank's
operating under the Negotiable Instrument Act.
Now that we have been able (in a limited degree) to gain
the recogni ti.on of the distinction between a Commercial :Bank's rights
and obligations under the Negotiable Instruments Law and the Federal
Reserve Banks' rights and obligations under the Federal Reserve Board's
Regulations and ba,nk:s circulars, we ought not to confuse the situation
further by having two reserve banks, operating under the same Regulations
and practically the same circular letter, operate under such entirely
different methods as to enable the Courts in one District to rule one
way and the Courts in another District to rule directly to the contrary
on the same Regulations and Circular Letter.
It would therefore seem that a uniformity of action by the
Federal Reserve Banks is highly desirable and you might say necessary
if we would adopt the safest course.
Very truly yours,
(S)
Jas. G. McConkey,
Counsel.
x-622s
JanuB.ry 26, 1929.
Honorable A. Ueland,
401 Uew York Life Bldg.,
Minneapolis, Minnesota.
Dear Jud€;e Ueland:
I have received :,.·our letter of January 14 and have
read vvi th much interest the enclosed mer.:orandum addresr.ed by
Mr. Sigurd Ueland to the Federal Reserve Bank of Minneapolis
with regard to the :policy to be followed by that bank in asserting rights on behalf .of depositors of unremitted for transit
items against receivers of insolvent member banks.
You suggest that this raises a question of :policy
which is of interest not only to the Federal Reserve: Bank of Minneapolis but to the other Federal reserve banks, and request an
informal and entirely unofficial expression of my views!
I agree with you that the questions raised in this
memorandum are of interest to the entire Federal reserve system;
.and, inasmuch as they vi tally affect the understanding arrived
at between counsel for all the Federal reserve banks and the
office of the.Comptroller of the Currency during the conference
of counsel held on July 13, 1925, I telegraphed for your :permission
to send copies of this memorandum to counsel for all Federal reserve banks. Having recei,ved your consent, I am sending copies of
this memorandum to counsel for all Federal reserve banks and
am requesting an expression of their views. I am omitting from
the copy which I am sending them, ·however, subdivicio~s 5 and 6 of
the memorandum, which :pertain solely to the peculiur [ituation of
the Federal Reserve Bank of Minneapolis and which you do not desire
to have circulated. Of course, I shall respect the confidential
nature of this memorandum and not disclose the co~1.tents of the same
to anyone in the office of the Comptroller of the Currency.
In view of the importance o:f the questions raised by
this IDf'morandlun and ·in view of the changed situation re·sul ting from
the covxt decisions discussed therein, I. believe that it would be
well t~ have a conference of counsel of all Federal reserve banks
in Washington some time in the near future to discuss this entire
subject, endeavor to reach an agreement among ourselves, and then
discuss the subject with tha Comptroller of the ·Currency in an
effort. \o reach an agree;nent with that office. I have not yet been
authorizt':d by the Federal R~cerve :Board to call such a conference,
()lA'!!-"' I
X-6226 N ~ i"
-2but expect to take the ~tter up with Governor Young ih the near
future and I shall appreciate an expresM.on, of your vie.ws as to
the adyisability of calling such a conference.
I am so greatly pressed for time that I cannot at this
moment give you a full statement of my views with regar~ to the
matters discussed in your memorandum. EY offhand views, however,
based upon only a hasty consideration of the s•.1bject, may be stated
briefly as follows:·
•
(1) With all due respect, I disagree with all three of the
legal conclusionc stated on page 8 of the memorGllldum. In doing so
I recognize that the decision of the Circuit Court of Appeals in the
Early case ari.d t:. . e decisions in the casetl of Keyes v. Federal Reserve
Bank of Minneapolis and Federal Reserve :Bank of Minneapolis v. First
National :Bank of Eureka apparently sustain your views on the first
point. The Early case, however, will be taken to the Supreme Court
o'f the United States, and I believe the decision of the Circuit Court
of Appeals will be reversed. Even if the Supreme Court does not re~
verse the Circuit Court of Appeals, I think the decision in the Early
case is distinguishable from any case ,arising in a district where
checks are· collected on the re-mi tta.nce basis instead of the charge
basis; because the Circuit Court of. Appeals based its decision so
largely upon the fact that the normal course ofbusiness of the Federal Reserve Bank of Richmond was to collect checks by charging same
to the reserve account of a drawee, and the banks which deposited
such check.s with the Federal Reserve Bank of Richmond did so in reliance upon the belief that they would be collected by charging them
to the reserve accounts of the drawee banks. The Circuit Court of
Appeals sustained the District Court on the question of the ·use of
the proceeds of the canceled Federal reserve bank stock, holding that,
under the specific provisions of the Federal Reserve Act, the proceeds
of this stock could not be used to pay the cash letters. On the
question of the .application of the collateral, I believe the decision
in the Midland National Bank case is clearly wrong and is also dis.:..
tingu.ishable from the case of a Federal reserve ba.nk collecting checks
under Regulation J, which specifically pro·.,.id.es that the Federal
reserve bank shall act only as agent and that, 11 The·Eml()unt of any
check for which payment is actually and finally· collected funds
is not re~eived shall be charged back to the forwardi:ng bank,
regardless of whether or not the check itself can be returned".
'"'\
(2) I agree with you that, in the present state· of the
law, it is unsafe for a Fed.eral reserve bank 'to release to the receiver the reserve acc.ount and probably the collateral, but not
the proceeds of. the c~mce],ed stock, without first obtaining a release of liability from the depositors of its uncollected cash
items drawn· on the insolvent bank or a court order instructing the
Federal reserv.e bank to ·release such assets to the receiver.
(3) I believe that, if your vi~ws of the law as expressed
on page 8 of the memorandum are upheld by the courts, there is
""3grave danger that the eoul·ts will hold that~ having the right to
a:p:9ly the reserve account, the proceeds of the canceled stock and
the collateral to the collection of outstanding unremitted for cash
letters, the Federal res13r.va bank has the duty to do so and cannot,
as an agent have. any interest adver&e to its principal, utilize
these assets to protect itself against.losse3 on rediscounts. I
have no positive view that the courts should reach this conclusion,
but· I feel that there is d.an~r that they may do so.
(4) I believe, therefore, that, in order to avoid placing
the Federal reserve banks on the horns of the dilemma pointed out by
Mr. Sigurd Ueland at the bottom of :page 9, the Federal reserv~ banks
should, as a 1Uc'1tt.er of policy, not insist upon the right to collect
cash letters out of the reserve accounts, the proceeds of the canceled
stock, or the collate~l, put, on the contrary, should do everything
in their power to C:l.ivest themselves of this right and the corresponding
~poasibili ty of :a duty to exercise it'. ·
( 5) I believe this is especialJ,.y important in view of the ·
fact that, if the courts shoald hold tna~ the Federal reserve banks
have such a <iuty and must exercise it, .it would seriously interfere
with the freedom · of the. Federal reserve banks in extending a~d through
rediscounts or loans to e. member _bank in a badly extended condition.
By taking additional collateral they can often extend financial assistance and _sOIDEitimes prevent the insolvency of a member bank; but would
hesitate t~. grant additional credH without taking additional collateral,.
· If the courts hold that the collateral must first ~e applied to the
collection of unremitted for cash letters, the possibility of extending such aid will be greatly curtailed, 'because the additional collateral
will not afford the same protection to the Federal reserve bank as it
has in the past.
( 6) I also disagree with the view expressed at the top of
page 7 that the ~ecent E\I"'lendLlent to Regulation J was not intended to
prevent the reserve balance from being available to pay unremitted for
cash let'ters after notice of suspension. On the contrary, that was
the sole purpose of the amendment.
, I have the· greatest respect fo;r your op~n~ons and those
of Ur. Sigurd Ueland; and it. is with LIU.ch· .regret that I disagree
to ouch a large extent with t~e ·views expressed in the _memorandum.
I could not, however, conscientiously ·refra.in from expressing my
disa.e;reemell\..t when tou requ.ested an informal' expression of my view!?.
Vii th kindest personal teijards and all best wishes for }loth
you and Mr. Si~~rd Veland, I
am
.
C()-rdially
.
you~s.
Walter Wyatt,
General· Counsel.
r-.rw:.vdb
X-6226-a
FEDERAL RESERVE E.fJ.lK .
Mil~TEAPOLIS
OF
• January 14, 1929.
Walter Wyatt, Esq., .
Counsel Federal Reserve Board,
Washington. D. C~
Dear Er • Wyatt :
We are taking the
liber~y
of enclosing copy of a rather
lengthy communication from us to the Federal Reserve Bar.k of
Minneapolis, dealing with a que.stion of policy which it seems to
us is of inte;rest not only to the JJiinnea:polis bank but to the.
other Federal Reserve Eanks.
You are familiar with the questions
discussed in this communication and i f you feel so inclined we
.
would very much appreciate having
an expression of your views •.
.
We
wo~d
understand, of course, that any such expression of views
would be entirely unofficial.
We do not know how the Minneapolis bank will deal with
.this problem.
If the bank should adopt our recom:.endations i t ·
occurs. to us it might be advisable to have a discussion of the
whole subject with representatives of.the Comptroller's office.
If this were don$,, we believe your good o·ff.ices might prove in-
valuable in
bring~ng
We
sho~ld
about an·understanding.
be glad to have you show the enclosed opinion
to Governor Young or any member of the Board, but of course we
would not want it submitted to the Comptroller's office in its
present form.
Yours very truly,
SU;:ME
(S)
A.• Ueland
Sigurd Ue-land
280
X-6226-b
January 8, 1929.
Harry Yaeger,
Deputy Govsrnor.•
The tecent decision of the Supretne Court J-f Minnesota in ihe
case of Mtd;l.and tational :Ba.nl·~ & Trust Cotnpany vs. :First State Bank of
siobx
ralis et ~1. has ~gain bruught
has repeatedly vexed
·~he
to
the fore the question which
Federal Reserve :Sank of Minneapolis.
That
question has various phases, but broadly it may be stated thus:
Vhat is to be the policy of the Federal Reserve Bank
of Minneapolis with respect to asserting rights on behalf
of its depositors of unremitted for transi.t items against
receivers of insolvent member banks?
The failure to answer this question correctly involves·
the possibility of so much future trouble, litigation and liability
that we have deemed it wise to reconsider i t in all its aspects at
the present time.
On account of your interest in and famdliarity
with the subject, .we wilJ. deal with it at some length, without making
much of an attempt at condensation.
1·.·
A mem,er bank closes and your bank has an. unremitted for
transit letter
ad,dreE~sed
to that bank outstanding.
returned .with the items unpaid. and protested.
no problem.
In t:r.at case there is
The items are simply charged back to your endorsers.
such a. case, with rare exceptions, the closed
on the items.
The let tor may be
ba1~
In
never became liable
-2-
X-6226-b
:But S"ll.J;Jooe tl"·,e drar1ee bank hss charged u:· the cht;;lcks to
respective drawers and has attempted to
otbe rwise.
ro:~.it
to y01.:tr
by draft or
In such a case your ba:n.:: has so:n0times ch.::i.rg.:>d up the draft
to the reserve account of
tr...o
member bank, a:ft0r notice of its suspension.
More often the credits t;ivGn for the i terns d.epositGd.
charged back tc thG respective depositors.
bank has
bank
tb~
ro$que~.:ted
\"T.l th
you have been
Where '.,hi,._, has been done, y0ur
authority from each clepcsitor to file a P,;oneral claim
in the receivership of the closei ballk as the depo':;itor 1 s
the understandin:"; 11 that the depositor
11
at~ent 11
and
would not look to" your bank
l1
11
11
wi th
except
for such dividends a's it might recei ve 11 on account of the O.epositor 1 s i terns.
In a typical ce.se some of the depositors of the checks represented by the
dishonored remittance draft have authorized your bank to file a clain on
the.ir behalf and others
have preferred to file their own claims.
Ac~ordingly
the amount of the transit claims filed by your bank has, in most case::;, bflen
less than the
a.e:·.~regate
amount of the unremitted for items.
In some cases the closed bank is liable to your bank on rediscounts
or bills payable.
The closed bank has stock in your bank; i t may have a
reserva ·oalance to its credit, and i t may have de:9osi ted collateral securities
under a collateral a.graement almost identical in terms with the one involved
in the Midland National Ba."'lk case.
Hence, the general question under con-
sideration may "t'e subdivided as follows:.
(1)
Are you entitled to charge reffiittance drafts to the reserve
account after notice of the suspension of the remitting bank?
(2)
Are you evtitled to hold the proc.eeds of the cancelled
Federal Reserve bank stock for the benefit of depositors of
unremitted for transit
items~
--3-
(3)
X-6226-b
.Are you entitled to hold the collateral securities and
the proceeds thereof for the same purpose?
(4)
If the preceding three questions are answered in the
affirmative, is there a conelative duty to your depocitor!:l
to assert these rights in their favor?
2.
In the Midland l{ational 13ank case the court held that collateral
securities heid pursuant to a collater&l agreement in the form used by
your bank cduia bE1 held ~s securi t~ for dishonored rem:l. ttance drafts notwithstanding the fact that the items att&lpted to be rcmi tted for by such
.
drafts had been deposited for conditional credit and subject to the right
to charge back if not collected, and notwithstanding the fact that such
checks had actually been charged back to the depositors after notice of
the suspension.
The view of the court was that the collection of checks
creates a liability on the part of the collecting bank to the forwardiig
bank; that such a liability is within the terms of the collateral agreement,
and that it is no business of the collecting bank or its receiver that the
fo:z:_warding bank may stand in a relation of trust to its depositors, or that
the latter may be the parties beneficially interested.
If the Midland decision is good law, as we think it is, then in
every case where your bank holds a collateral agreement you are entitled
to
ho~d
or foreclose on excess collateral from a closed national bank until
your claim on account of unremitted for transit items has been paid in full.
We limit this conclusion to national banks because there are statutes in
.certain of the states of the ninth district, .notably North Dakota and Minnesota, which
mi&~t
affect the result in the case of member state banks.
; . 2 c~t·_.
x-6226-b
'-."'14")
-4-
As the' decision of the state
c~urt
would not be cvntrolling in
cases in the federal courts, we will considor
bri~fly
the releV&1t decisions
of the latter.
In the case of Eeyes, as Receiver of the First N<1.tinnal Bank of
Clarkfield v. Federal Reserve Bank of Minneapolis, the United States District
Court for this district decided in 1918 that the reserve account was available
by way of setoff to pay Unramitted for tranait items the credits for which
had been charged back to its depositors ·oy the Federal Reserve Bank e.fter
notice of suspension.·
In Federal Reserve Bank of l·':~nnea:_polis v. Fir.st lTe.tional Bank of
Eureka (2?7
Fed~
300) it was held by the United States District Court for
• South DakOta that the
~eserve
account and also the ptoceeds of the cancelled
stock could be applied towards the liquidation of a dishonored draft sent in
attempted remi tta~ce of a tra.imi t iette:r·.
IIi the case of Thos. llai"ly• Receiver oi' the t&·mers and Merchants
Nationai Bank of take ~:i. ~y
v~ l\ldettai Reserve
Bank of Richmond, the United
States District Ct>urt for South Carolina has rendered a decision aga,inst
the Federal .Reserve Bank of Richmond and has held that the latter was not
entitled to use a reserve balance to pay unremitted for cheCks.
we know_ no written opinion was filed by the court.
So far as
The Richmond bank's method
of collecting transit letters .was by charging the reserve account in accordance with a time schedule.
We doubt, however, whether this could distinguiSh
·the case from the Clarkfield e.nd Eureka cases and it seems to us that there
is a conflict.
An appeal to the United States Circuit Court of Appeals for
the Fourth Circuit is pending.
We have read the briGfs on both sides and it
is not unlikely that there will be a reversal.
Federal district courta will usually follow the decision of circuit
-5-
x.:..6226-b
Q~"l/f
courts of appeals for other circuits even though inconsistent with theif""\::1'::.:
own previous holdings.
Foster on Federal Practice, #375.
Ih re Baird, 154 red. 215.
Warren Bros. Co. v. Evans, 234 Fed. 65~.
Vacuum Cleaner Co• v •. Thompson Mnfg. Co• 238 Fed• 239&
However, the decision of tho Circuit Court of
Apput:t~s
in the Richmond case
would not be follovred heb~ i±' ih co:hfU ct with p~iridi:(lles J.aid down by the
Circuit Court of Appeals for this cii'cu:i.t (.the Sth) •
That
coul't in the recent
case of Storing, as Receiver of the Merchants National Bank of Mandan vs.
First National Bank of Minneapolis hGld that the First National J3a.nk of
Minneapolis had the right to hold a deposit bala:nce agai:nst the receiver of
a na.tional batik to reimbUl·se itself for a transit letter where the remittance
draft in attempted payment thereof was received after notice of suspension.
This case was submitted in such a way that the point that the depositors of
the Fir.st National Bank were the beneficial owners of the claim against the
insolvent bank was probably not before the court.
The receiver, howeve-r, is
attempting to make this point in his petition for reargument which is still
pending. On this point Judge Cant, the trial judge, sai4 in his opinion:
11
No matter what the relation of the two banks here in
ques.tion may have been with their
re~pective
patrons on and
prior to December 21, 1923, the banks themselves were dealing
11
,,·,with each other as principals.
In any litigation between your bank and a receiver of a national
bank it ·is probable that the receiver could eith6r bring the action in or
remove it to the federal court.
See Studeoaker Corporation va. First National Bank,
10 Fed. (2nd) 590.
X-E'2~~G-b
-6-
.
o', ,.-.
~t"J~)
.All we can say at •?rEsent about the la1;· in t':e federal c,;ur'cs
is that the decision of the lower court in thE: Richmond. case raises doubt
as to what will be the ultimate answer to qu.:::stions (l) (2) a.nd (3) put above.
3.
The Federal Reserve Boa.rd has rCJCantl;.r a.rnendt:;d paragraph ( 4) of
Section V of Regulation J by eliminating the clause I
"any Fed\:lra.l reserve
bank may resdrve the right in its check-collecticn circular to charge such
items (checks) to the reserve account or rlearing account of any such bank
at any time when in any particular case the Federal reserve bank deems it
necessary to do
so~"·
This amendment becomes ef±'ective February 1, 1929.
tlle ri&;ht indiea.ted has been reRerved by yonr bank in your checkcollection circulars since August 1, 1924.
Such reservation certainly
strengthens the clatm of your nank to apply the reserve balance against
unremitted for transit letters.
The reason for amending Regulation J was doubtless the feeling
that if the Federal reserve barurs had the right to utilize reserve balances
for the payment of check collections, there might be a correlative duty to
the prejudice of their
~wn
claims
banks maintaining the balances.
April ll, 1928.
~n
rediscounts, and notes of the member
See letter of A. Ueland to Gov. Geery dated
The comptroller's office will undoubtedly contend that this
amendment of Regulation J shows an intention that the reserve balance is no
longer to be available to pay unremitted for transit letters after notice of
suspensioti.
In our opinion this was not the purpose or sffect of the amend-
ment.
The pledge agreement form used by your bank provides that your
•
bank "shall also have a lien upon an,y balance of tre deposit account 11 of the
member bank "existing from time to time · *
**
for any liability'' of the
X-622&~ ~
... 7..,
member bank to your bank
construction given in
~he
11
'2bf>
now existing or hereafter contracted."
Under the
Miqland National Bank case this is ari express
agreement that the reserve shall be available to pay unremittet for chelks.
The reser-t.re balance of a member bank is a.lso 1 1n a. sense, a
clearing balance.
As to !ibn-member clead.hg bahks ths Fed.etal lteserve Act,
:fri3i provides that such 'banks ttiust Ina.:l.ntaixi "~ 'ba.iance sufficient to offset
the items in hansh
fbrliie:t counsei
heid. for
its account by the Federal reserve bank."
A
of the Federal Reserve :Board has ruled that this phrase
IIi tems in transi t 11 refers to checks drawn upon the non-member clearing bank
and forwarded to it for collection by the Federal Reserve Bank.
Reserve Bulletin, Vol. 3, p. 617.
Federal
If this view is correct, then there is
clear intention shown on the part of Congress that the credit balance of a
non-J;letnber clearing bank shall stand as security for clearing balances against
it.
While not expressed in the Act itself it is persuasive to us that Cong-
ress intended the same as to reserve balances.
We will summarize our own views upon the questions under consider8"
tion as follows:
1.
Where a member bank or a non-member clearing bank fails-
to return or to remit for transit letters, you are entitled to
charge the amount thereof to the reserve or clearing account even
though the remittance draft be received after notice of suspension.
2.
Where a member bank fails to return or
letters, ypu are entitled to use
thE~
rem~t
for transit
procaeds of the cancelled
Federal Reserve bank ·dock to reimburse your depositors of the
items in such letters even though such items have been charged
back to
3.
s~ch
depositors •
•
Where a member national bank fails to return or remit
X-6226-b
-8for transit letters, and. your ba;'ik: holds collateral securities
pursuant to t"tte usual form of, collateral
agre~-nent
you are
entitled to hold this collateral or its proceeds tc r'"iml:lurse
your depositors of the i t8ms in suet letters,
We reserve our
orlinion as far a::; collateral securi tiGs deposited by 1oomoer
state bariks io cunc0rned.
With the decisions in t'lle scmmvhat muddled COlidi tioil ';JOinted out
abv"te, ·a lef.S;,;,l opinion is o::Uy what the law s:1ould: be; we c£n
what the law will be.
.
onl~~
12,1:·.esc
While we have always been able to maintain the fore-
going views in litigation up to the pi·esent time, decisions in other litigation may prove controlling against them.
However, we do not believe that even though
th~
Circuit Court of
Appeals should af:f'ii'IIl the lower court in the Richw.ond case that woUld
necessarily require us to revise our opinion as to the rights of your barik
in another circuit.
Such an affirmance would only have the effect of !!laking
your rights and obligations more doubtful than they are at present.
4.
The next question to be considered is whether th?- rule in the
Midland National Bank case, the rule we are contending for, has as a corollary
the requirement that the pledgee bank must share pro rata in the collateral
securities with its depositgrs of unremitted for checks.
In our opinion this
does not fo:Uow and we feel confident that .Your collate:.:·al securities may be
appropriated
fi~st
to the promis&ory notes and notes rediscounted by the insol-
vent member barik.
See U. S. Natl. Barik v. Westervelt, 55 Nebr. 424.
Freeman & Shaw v.• Citizens Natl. Bank, ?8 Iowa 150.
;
:~
C":-"~
.....
~-")
,c:~i:.'Jc-'
X-6286-b
-9-
T'i..:.e next question is whether, assuming your 'bank has the rights
herein indicated., there is not also a corresponding a.uty to utilize the
balance in the reserve account, proceeds of cancelled Federal reserve stock,
and excesP collateral for the benefit of your depositors of unremitted for
checks?
In other words is your bank liable1 as for a breach of trust. in
cases whero it has surrender~d reserve balahces or excess collateral to a
reciever of a suspended member bank?
On this point Sigurd Ueland in his
memorandum to you dated June 20, 1928 (First National Bank of Colman) said:
11 In
other words the Federal Reserve Bank
some extent on the horns ef a dilemma.
***
finds itself to
If the surplus is paid over
to your endorsers of the transit items your bank may be liable to
the receiver; if surrendered to the receiver there might possibly
be liability to your endorsers.
11
':i:'b.ere may be a question whether your bank is not under
some moral duty to its depositors to protect ihem as far as possible.
Especially in cases where an attempt was made to remit by draft on
the reserve acoount, it seems unfair that the balance in that account should be returned to the receiver rather than used for the
purpose intended by the officials of the suspended bank."
We are firmly of the opinion that if there is any obligation in this
situation to either the receiver or
Y~ur d.eposit~rs
checks, it is emphatically to the latter.
of unremitted for
In the light of the Midland National
Bank decision it is certain that your bank cannot continue surrendering excess
collateral to receivers without incurring a certain amount of unpopularity
With the better posted among such depositors.
Our recommendations are as follows:
.,_
X-6226-b
-11-
1.
That all settlements alre['dy made or agreed upon between
your barik and the
comptroller•~
office or a receiver, including all of
the so-called 11 0swego agreements" enterAd into, be allowed to stand.
2.
That hereafter no reserve balance, proceeds of cancelled
stock, or excess collateral held under a collateral agreement btJ surrendered
to a receiver until all transit claims filed 'hy
~rou.r
barik have be.en paid or
until a court of last resort has so c.rdereG..
3,
That your form of collat9ral agreement be
amend~d
so as to
state expressly that your barik has a prior lien on the reserve balance
an~
collateral securities for the note, rediscount and overdraft indebtedness
and a secondary lien for liability resulting from unremitted for transit
and collection letters.
(N. B. Some special consideration would have to
be given to the case of member state bariks in this connection.)
4.
That the comptroller be advised of this change of policy and
the reasons therefor, and that negotiations be opened looking toward a
speedy determination of the quostions involved by the Circuit Court of
Appeals of this circuit.
Counsel.
Assistant Counsel.
X-6265
STATE1mNT OF
BUR~U
OF ENGRAVING AND
~RINTING
Cost of preparing Federal Reserve Notes duril:'ig February, 1929.
1929
Feb. l-28
Jan.2·l-31
Federal Reserve NOtes, Series 1914~
..234,000 sheets $6 ) New York
53,000
II
10 )
287,000 sheets G ~35. 50 per M,
• • • • • • • • $10,188.50
Federal Reserve Notes• Series 1928
)&
~o~t
Boston,
l 74,00.0 sheets,
Chicago,
110 1 000
"
San Francisco 30,000 ''
314 1 000 sheets
$15, 573.00
9, 845.00
2,686.00
$28,103.00
@ $89.50 per
Federal Reserve Notes, Series 1928.
Tot~l Sheets
1£
~10
202,000
Boston
44,000
158,000
218,000
New York
218,000
Philadelphial58,000
158,000
Cleveland
266,000
266,000
Richmond
170,000
170,000
182,000
Atlanta
182,000
112,000
St. Louis
112,000
N~nneapolis
70,000
70,000
San Fran98,000
cisco
98,0Dq_
1,318,000
158,000
1,476,000
M, , 28,103.00
Feb. 1-28
-----
1,318 ,ooo sheets
@
$89.50
per
:M, ••
Credit appropriations, 1929, as follows:
Comp. of Emp.,
Bur .Eng. & Prtg.
Plate Printing,
Bur.Eng. & Prtg.
Mtls.& lVlisc.Exp.
Bur.Eng. & Prtg.
Amount
$18, o79:-oo
19,511.00
14,141.00
231807 o 00
15,215.00
16,289.00
10,024.00
6,265.00
8, 771.00
.~132,102. 00
$132,102.00
$89,697.05
38,804.90
41,891.55
Total,
!~170 ,393. 50
Bureau of Engraving and Printing.
Per
C. R. Long,
Assistant Director.
!t!U.i..--'
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
x-6267
March 14, 1929.
SUBJECT:
Classification of Personnel at
Federal Reserve ~anks.
Dear Sir:
upon recei~t of re~lies from the Federal reserve
banks to the ~card's letter X-6102, of July 31, 192S, subject,
"Committee on Classification of Personnel at Federal Reserve
~anks 11 , the ~card designated the following committee on ~er
S.nnel clas?ification:
'Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
w. w.
w. F.
Paddock
1. R. :Rou!'lds
Hutt
*H. J. Fleming
s.
Walden, Jr.
Ta,ylor
Dillard
Attebery
Minnea~olis
Moore
Kansas City
c. A.. Worthington
'Q. D. Coleman
Dallas
San Francisco
c. 'E. Earhart
*Member of sub-committee
*J~
Creed
*J. H.
o. M.
*B. v.
The sub-committee held a meeting in Cleveland on
October 1, 1928, at which \Vere present, in addition to all
members, Mr. Smead of the Federal Reserve ~oard and.Mr. Rounds
of the Federal Reserve Bank of New York. Mr. Fleming was
elect.ed Chairman and after reviewing the whole question in
some detail, a letter was written under date of October 9 to
each member of the committee requesting him to submit certain
detailed information regarding each position in his bank. Re~lies received to this letter were carefully analyzed by the
Chairman of the sub-committee and another meeting was held in
Cleveland on Hal'ch 6, 1929. It was the conclusion of the subcommittee that it was not practicable from the data at hand to
work up h proposed plan for submission to the full committee,
as suggested in the ~oard's letter x-6102. The sub-committee
has recommended, however, that a meeting of the complete com-
•
(? (_.,·~ ,(~0
f·.vrr._."f""'
x-6267
mittee be held at an early date for the purnose of fully
acquainting each member with the progress of the work so
far and of evolving some classification plan or plans which
will be adaptable to the existing organization of each Federal reserve bank and branch. The sub-committee has advised
the Board that those banks which have been operating under .a
classification ~lan of the character under consideration have
found it so beneficial that they are strongly of the oninion
that all Federal reserve banks would benefit materially from
the ado~tion of a similar plan.
The Board has approved the recommendation of the subcommittee that a meeting of the complete committee be held at
an early date and you are advised that the meeting will be held
in Chicago beginning Monday, Anril 8, 1929.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO CHAIRMEN OF ALL F. R. BANKS
X-6268
FE!IERAL RESERVE BJU'IK
OF SAN FRANCISCO
March 1, 1929
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear V.r. Wyatt:
On February 13 and 14 last a general conference of
the directors of this bank covering both the head office and
all the branches was held at San Francisco. The meeting was
a very interesting one and I believe great benefit was derived by all who attended.
One of the subjects placed upon the ~rogram at the
suggestion of some of the directors of our Portland Branch
was the question of stockholders t liability as applied to·
banks owned by holding companies. As you know, .in many states
where branch banking is prohibited by statute attempts have
been and are being made to accomplish approximately the same
object through the formation of holding corporations which,
in turn, purchase all the capital stock of a nmnber of banks.
This is familiarly known as 11 dhain banking," the difference
between this method and branch banking being that each unit
in the chain operates as a separate corporate entity, with
more or less control on matters of policy and procedure coming from those who constitute the hblding company. In the
opinion of many, Chain banking possesses all the weaknesses
and'very fewt if any, of the virtues of branch ba~ing. Some
of the directors present evidenced considerable concern over
the effect of this somewhat recent development in their states.
The question was propounded to me as to what, if any,
legislation had been enacted seeking to impose upon the shareholders of the parent organization liability for the debts of
the separate units constituting the chain. I waswalso asked
what, if any, legislation had been enacted seeking to restrict
the formation of corporations organized for the sole purpose
of holding stock in banks and whether or not any regulation
or control could be exercised through s~te laws or through
amendments to the Federal Reserve Act. I was not able to
give any very positive r~sponse to these inquiries. A suggestion was made that through you we seek information from Counsel
to the other Federal reserve banks as to what '!egislation, if
any, of this character had been enacted tn their respective
districts. I believe that in New Jersey there is a law prohibiting a corporation from holding more than ten per cent~ of the
•'''
X-6268
-2-
cayital stock of any bank. I am also informed that in the
State of Washington a bill is now :;>ending seeking to prohibit the formation of corporations organized for the sole
purpose of holding stocks in banking institutions and
another bill seeking to impose upon the stockholders in
the holding corporation the same liability as that imposed
"U-pon individual holders of bank stocks.
The question is chiefly important in those states
which prohibit branch banking. For instance, in the State
of Oregon branch banking is prohibited but stockholders in
banlcs organized since 1912 are liable for the benefit of
depositors to the extent of 10~ of the par value of stock
held. In other states double liability is imposed upon the
holders of bank stocks and branch banking is now allowed.
Let us suppose that in such a state a corporation organized
under the laws of a foreign state in which no double liability
exists seeks to own a number of state banks through the purchase of the entire capital stock. In the event of the insolvency of one or more of the banks so held what recourse
have the creditors and depositors? Is "it not true that by
such device the double liability sought to be imposed may be·
entirely defeated?
Another problem is presented. in this situation:
A corporation is organized for the sole purpose of
acquiring the entire capital stock of a number of banks. The
stockholders of the holding company are not bankers and under
the existing law in most jurisdictions are not subject to the
restrictions imposed upon banks. Each bank acquired by the
holding corporation is officered by men having no proprietary
interest in the i.nstitution which they operate, being merely
~nployees of the holding company.
If the holding corporation
i~ well managed and exercises close and direct control over the
units composing the system or chain, all may be well, but if ·
the holding corporation is organized solely as a money-making·
proposition and if no well directed efforts are used to con-:trol or supervise the manner in which the unit banks constituting the chain are conducted, it may be seen that a very
serious situation may be created. The elements of local
pride and local identity are lacking, t.he banks scattered
throughout the state becoming merely money-making agencies
of an absentee corporation.
These problems and others which naturally occur to
one in connection with the situation thus created are those
which were disturbing our directors and upon which they desired information as to restrictive or regulatory legislation.
Mr. James, who was present at the conference, stated
that he thought you would be willing to seek information from
X-6268
-3-
Counsel to the other Fed~ral reserve banks as to what, if any,
legislation had beezt eW1cted or proposed seeking to reach these
problems.
I am addressing letters of inquiry to the superinten~
dents of banks in the sJ1.tes comprising the Twelfth Reserve
District, asking for ~he necessary information, and I wonder
if you will ask Counscl,l to the other Federal reserve banks
to do likewise. The information thus acquired could be compiled
either through your office or by me and would, I believe, make
a very interesting study.
Thanking you in advance for your assistance in this
matter, and with kindest personal regards, I am
Yours very truly,
(S) Albert C. Agnew,
Counsel.
X-6269
FEDERAL RESERVE
:B~
1>:•('' .c•
~._;JU
OF CHICAGO
CHICAGO , March 13, 1929.
CHAS. L. POWELL, Counsel
Continental and Commercial Bank Bldg •
• Wyatt
Mr. Walter
General Counsel
Federal Reserve Board
Washington, D. c.
Dear Er. Wyatt:I regret more than I can say that I have not been able
to give -attention to your letter of January 30th which, of course,
came to my office during my absence on vacation. I returned to the
office on the 20th of February but was almost immediately called to
Washington and on my return I have been unable on account of threatened pneumonia to pay any attention to business.
The matter discussed by you and Mr. Ueland is of very
great interest to all of the Federal Reserve Banks. Of course, since
Mr. '\:]eland's original memorandum was written, the Early case has been
decided by the Circuit Court of Appeals.
Frankl~, I am not very much impressed with the argument
of the c.ourt in that case, which resulted in a reversal in part, but
I am not prepared to say that the reasoning is unsound; and I am inclined to agree with you that thmcase is distinguishable from cases
arising in a district ~here checks are collected on the remittance basis.
I am strongly of the view that the owners of these
transit items should .be protected by the Federal Reserve Barut
if such protection can be had without danger to the Federal Reserve
Bank. In one noticeable case in this district I am taking the
position that the Federal Reserve Bank is enti-~led to charge the
dishonored remittance draft to the account of the insolvent bank.
The comptroller is taking the ·contrary position and in a letter
just received from the Receiver of that bank, the Receiver advises
that he will insist on his view that he is entitled to have this
money restored; but in effect he says that he will await the appeal
to the Suprene Court in the Early case.
·
Perhaps you will recall that in one of our conferences
at Washington; ! called to your attention and the attention of the
other counsel pr,sent a form of agreement for deposit of collateral
in use in this b~ in which I said I thought this matter was well
cared for; this matter doubtless escaped your attention at that time
and accordingly I am enclosing herewith a copy of one of oU» agreements
-2-
for deposit of collateral and I call your attention to the last two
paragraphs thereof.
It occurs to me that the solution of this vexing question might be had by an agreement such as is here enclosed.
I am not protected by this agreement in the case above
mentione.d where a controversy is now being had with a Receiver of a
failed barik and this for the reason that that particular batik had
never signed this particular form of agreement, in fact it had never
been called on to put up collateral with the Federal Reserve Bank of
Chicago.
I look forward to the conference on April 1st with
great interest~ and I again·want to express my regret that I was
unable to Live the above referred to matter the attention which
it deserved.
Yours truly,
•
(S)
cpas. L. Powell,
Counsel.
FEDERAL RESERVE BOARD
•
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL RESE;RVE BOARD
JC-6271
March 18, 1929.
SUBJECT: Eolidays during April,.l929.
Dear Sir:
The Federal z:eserve banks and branches listeP, below
will be closed on. datea speeified during the month of April,
on account of holidayst
Mouday
.April 1
l)etroit
Election
:Friday
April 12
Charlotte
Halifax
Saturdat
April 13
:Birmingham
Thomas Jefferson's
birthday
Uonday
April 15
Salt Lake City Arbor Day
Friday
April 19
Boston
Patriots' Day
Monday
April 22
Omaha
Arbor Day
Dallas
El Paso
Houston
San Antonio
San Jacinto DEcy'
Atlanta
Birmingham
Jacksonville
Southern
Memorial Day
Friday
April 26
Day
Day
On the dates indicated, the banks affected will not
participate in either the Gold Fund Clearing or the Federal
Reser·ve Note Clearing.
'
X-6271
• •
()~,. '.~ ~-·'1
f."~"'-/' '
...aPlease include credits for the banks affected on
each of the holidays with your credits for the following
business day in the Gold Fund Clearing, and make no shipments of Federal reserve notes, fit or unfit, for account
of the head offices concerned on the holidays mentioned.
Kindly notify branches.
•
Very truly yours,
J. C. 'Noell,
Assistant Secretary.
TO GOVZRJ:-1CRS OF .ALL F. R. B.A1TKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6272
March 18, 1929.
Dear Sir:
In cohnectioh with the ~oardls letter of Uarch
11th, 1929; X-6261, with regard to the arrangements
Which have been made by the Treasury Department for
the preparation of a complete collection of currency
specimens, a letter has now been received from the
Treasury Department, arising out of an inquiry by
one of the Federal reserve banks, which advises. that
one good specimen of each of the Federal reserve 11otes
and Federal reserve bank notes· indicated in the lists
transmitted with our letter of March 11th, will meet
the requirements of the Department.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNOltS OF ALL F • R • B.A1"KS •
300
FEDERAL RESERVE BOARD
WASHINGTON
ADDRES$ OFFICIAL CORRESPONDENCE TQ
THE FEDERAL. RESERVE BOARD
X-6273
~-~···--·· ··~~-·-····
March : 20, 1929.
StJ.BJ':!JCT:
~pense,
Main Lirte, Leased TI'ire System,
February, 1929.
Dear Sir:
::inclosed herewith you 1'-ill find two
mimeograph statements, X-6273-a and X-6273-b,
covering in detail oper~tions of the main line,
teased 'Cire System. dur:l.ng the JnOnth of February,
1929.
Please bredit:the amount payable by
·your bank in the general ~ccount, Treasurer,·u.s.,
on your books, and issue C/b ro~ 1, National Banks,
for account of 1•SS.iar1e!:l and :ID.xpehses, :Federal Reserve BoArd~ Special :F\lnd'l; teased wire System,
setldin.g dhplicate d/D tel the !'ed.eral Reserve Board.
Yours very truly,
Fiscal Agent.
Enclosures.
TO GOV3RlTORS OF .ALL F. R. :BAl:JKS 3XC3JPT CEIC.A.GO.
ImPORT SHOWING CLASSIFICATION AIID UUMB:ER OF WORDS TRA1i!"SYITT£D OV""..wR HA.IN LINE
OF THE FEDERAL RESERVE L.RASED WIRE SYSTEM FOR THE MONTH OF FEBRUARY • 1929
•
Business
rep9rted
by
banks
From
:Boston
New York
Y.hiladel9hia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
MinneacJolis
Kansas City
Dallas
San Francisco
Total
25~572
133,209
30.965
30,113
51,203
57,429
93,269
72.759
27 .. 526
70,364
63,159
93.610
Words sent by
New York chargeable to other
F. ll. Banks (1)
944
1,292
1,35S
1,604
5.599
1,374
2,143
1,939
1,442
6, 761
3.009
23,520
Jr. 11. Board business • • . .
Treasury Department rosiness - Incoming and Outgoing •
Total words
~ransmi t
ted over main 1 ines . . • . . . . . • . .
x-6273-a
Percent ~f total
bank business{*)
Ne.t Federal
lie serve
Bank
business
3.14
16.39
3-tl3
9-72
6.26
7-47
11.33
3.33
3-50
3.53
3.39
11.46
100.00
26,516
131),209
32,277
g1,971
52,1)07
6},023
100,143
74.907
29.515
72,306
74,920
96,619
843,213
1,061,799
213,5gl
. . .
. • .
..
.
.•
.
.
. . . .
..
.
...
.•. . . . . . . •
(•)
These ~ercentages used in calculating the uro rata share of leased wire exoense as shown
on the accompanying statement (X-6273-b).
(1)
lfumber of words sent by Uew York to other F. R. Banks for their sole benefit charged t-o
banks indicated in accordance with action taken at Governors' Conference
November 2 - 4, 1925.
..
1,143,499
•
· x-6273-b
ID:PORT OF. EXPENSE MAIN LINE
FEDERAL RESERn LEJ\SED .WHill SYSTEM,· FEBRU.ARY ~ 1929 •.
---------------·
Name of :Bank
:Boston
New York
Ph.:i.ladelpbia
Cleveland
Richmond
Atl-anta
Chicago
St. Louis
Operators'
Salaries
$
2Qo.OO
1,204.12
225.00
296 ..66
190.00
270.00
44.1JL.ln ( #)
"205.00
13).-66
Kansas City
23}.50
Ihllas
251.00
}oO.OO
San Francisco
Federal Reserve Board
Total
$7,334.)5
Minnea~olis
0)erat:Jrs 1
Overtime
Wire··
Rental
*-
Total
Expen~es
~
26o.oo
Pro :Rata
Share of
Total
~enses
~
691.09
3,607-30
IS42.95
2,139.29
1,377-77
1,644.09
2,614.69
1,954.41
770·32
1,3615.39
1,956.62
2,522.25
1,204.12
225-00
296.66
230.00(&)
420.00
270.00
4,131.41
205.00
133.66
237-50
251.00
330.00
15,583.31
15,538.31
~15,313.31
-~23, 702.66 *22,009.17
1,623·42(a)
,.
(&)
( #)
(*)
(a)
(b)
?~ain
~22,009.17
Credits
Payable to
Federal
Reserve
:eoard
$ 260.00 $
1,204.12
225.00
296.66
420.00
270.00
4,131.41
205.00
133.66
287.50
251.00
330.00
$3,114.35
.431.09
2,4o3.11S
617-95
1, IS42.63
957.77
1,374.09
1,516.72{*)
1,749.41
536.66
1,6oO.IS9
1,705.62
2,142.25
~15,411.54
1 1 216.I2(b)
~13,394.82
line rental, Richmond~"!ashington.
Includes salaries .of "'tashington onerators.
Credit.
Received ~1,69}.49 from Treasury. De'Jartmerit covering business. for the. month of February, 1929.
Amount reimbursable to Chicago. ·
. ;.·,:
X-6275
(CONFIDENTIAL TENT1TIVE DRAFT)
FEDERAL RESERVE :BOARD
REGULATION M, SERIES OF 1929.
Loans, Discounts or ot~er Credit Accommodations for Member Banks having Speculative Security Loans.
SECTION I.
(a)
Security Broker.
DEFINITIONS.
Within the meaning of.this regulation,
the term 11 security broker" shall include every person, firm, partnership, corporation, company, or association, whose principal business
it is to negotiate purchases or sales of, or to purchase, sell, or
otherwise deal in, stocks, bonds, or other investment securities,
either for his or its own account or for the account of others.
(b)
Speculative Security Loan.
ree;ulation, the
~erm 11
Within the meaning of this
speculative security loan11 shall include every
loan to a security broker and every other loan the procaeds of which
have been or.are to be used for the purpose of purchasing, paying
for, carr,ving, or trading in, stocks, bonds, or other investment
securities, except bonds and notes of the Government of the United
States.
Every loan made, renewed, extended or permitted to run past
due after the effective date of this regulation which is secured
•
by a pledge of stocks, bonds, or other investment securities (except
bonds and notes of the Government of the United States) shall be
deemed to be a speculative security loan within the meaning of this
regulation, unless there is attached to the note, draft, bill of exchange or other evidence of
~ch
the borrower to the effect that:
loan a written statement
sign~
by
X-6275
~p
(1)
~e
( \ ·~-. . _
tY\..)' ,
borrower is not a security broker as de-
fined in this ·re,gulation;
(2)
The stocks, bonds or other investment securities
pledged to secure •. such
l~an
,•
are, and for at least thirty
days have been, the absolute property of the borrower;
(3)
be,
~sed
The proceeds of the loan have not, and will not
for the purpose of purchasing, paying for, trading
in, or carrying stocks, bonds or other investment securities,
except bonds and notes of the Government of the United States;
(4)
The proceeds of the loan have not, and will not be,
loaned to any security broker or to any other person, finn,
partnership, corporation, association or company for the
~ur
pose of purchasing, paying·for, trading in, or carrying, stocks,
bonds, or other investment securities; and
(5)
The proceeds of such loan have been or are to be used
for another purpose, which shall be stated in such affidavit.
SECTION II. RESTRICTIONS.
Except with the permission of the Federal Reserve Board, no
Federal Reserve Barik shall discount or rediscount any note, draft or
bill of e:xcha:q.ge for, or make any loan or advance to, or purchase any
bills of exchange, bankers' acceptances, or government, State or municipal securities (under repurchase agreement or otherwise) from, any
member bank which at the time has any speculative security loans outstanding.
SECTION III •. EVIDENCE OF ELIGIBILITY.
In addition to the evidence of elil~bility required by
Regulation Ar every application made by a member bank to a Federal
-3-
X-6275
ReseTve Barik for anr discount or rediscount or any loan,
ad~ance,
or other credit accommodation, shall be accompanied by
a statement of the applying barik as to the amoUnt of speculative
security loans, which such bank has outstanding at the time of
such application.
SEC'J'ION IV.
PEIDliSSION OF THE FEDERAL RESERVE BOARD.
A Federal Reserve Bank desiring to obtain the permission
of the Federal Reserve Board to discount or rediscount any notes,
drAfts, or bills of exchange for, make any loan or advance to, or
to purchase any bills of exchange, bankers' acceptances, or government, State or municipal securities (under repurchase agreements or
otherwise) from, any member bank within the prohibitions of this
regulation, shall make application therefor in writing or by telegraph
(not by telephone) to the Federal Reserve Board and shall furnish
with·such application a full explanation of the circumstances giving
rise to such application and the reasons why the applying Federal
Reserve Barik thinks it should be granted.
FEDERAL RESERV! :BOARD
STATEMENT FOR THE PRESS
The following is a s'lll1:Jm8.r:r of general
business and financial conditions throughout the several Federal Reserve Districts,
. based upon statistics f.or the months of
Febriliiry and March, as will appear in the
forthcoming issue of the Federal Reserve
~letin and the monthly reports of the
Federal reserve banks.
Jbr release in Morning Papers,
Tuesday, March 26 ; 1929.
Industry and trade continued active in February and; the first part of March
~d there was ~ growth in the volume of bank loans,
:Borrowing aJ7 reserve banks
increased during the period and money rates advanced further.
Production--Production continued at a high rate throU&hout February and the
.first half of March and was substantially .abo_ve a year ago.
Automabile output was
at a record rate in February, and there was· also an unusually high daily average
. production of copper and iron and steel.
Large
out~ut
in the iron and steel indus-
try reflected demands from manufacturers of automobiles, machine tools, and agricultural implements, and from railroad companies.
Preliminary reports for the first
half of. March indicate. further expansion in automobile and iron and steel pl"oduction. ·
During February the daily
aver~e,output
of coal· q,d crude petroleum also
increased·, and production of cotton and. wool textiles continued large, while silk
~ '
output declined somewhat from the unusually high level of January.
There was also
some decline from January in the production of lumber and cement, and in the out...
put of meat packing companies.
The high rate of activity in man~acturing dUring February was reflected in a
.
larger than seasonal increas• in factory employment and payrolls, both of which
we.re considerably above the level of Fe)ruary 1928 •.
:Buil4ing activity declined further in February, an4. the. value of contracts
awarded was over 20 per cent smaller than. a year ago.
lteside~tial
building con-
! '
X-6276
-2-
"')'(< ':(~
t.li\:'l.J
tracts Showed the largest decline in comparison with February 1928, while those for
public works and utilities were only slightly smaller in value, and commercial and
industrial building awards increased.
During the first half of March there was
some seasonal increase in total building awards, but they continued to be substantially below a year ago.
Distribution--In February shipments of commodities by rail increased more than
is usual for the season, reflecting larger loadings of coal and coke and miscellaneoua freight, which includes automobiles.
During the first two weeks of March,
freight-car loadings continued to increase.
Sales of wholesale firms were generally smaller in February than a year ago.
In comparison with January, sales of dry goods, shoes, and furniture increased
seasonally, while sales of groceries and hardware were smaller.
Department stores
reported about the same daily volume of sales in February as in the preceding month,
and larger sales than a year ago.
Prices--The general level of wholesale prices declined slightly in February,
and was approximately the same as a year ago.
The decline from January reflected
primarily decreases in the prices of hides and leather,
livestock~
small declines in the prices of wool, cotton and woolen goods.
and meats, and
The influence of
these declines on the general average was partly offset by increases in the prices
of copper, lead, iron and steel, rubber. and grain.
During the first two weeks of March, prices of wool and petroleum continued to
decline, and rubber prices receded somewhat after a marked rise in February, while
leather prices declined sharply.
Prices of copper rose further and there were
small increases in prices of hides, raw cotton, and certain grades of lumber.
Bank credit--Between the middle of February and the middle of March there was .
a rapid growth of loans at member
b~s
in leading cities.
The increase was in
loans chiefly for commercial purposes, whi.ch on March 13 were more than $200,000,000
larg.er than four weeks earlier.
Investments of the reporting banks declined further
-3-
X-6276
during the period.
Total volume of reserve bank credit declined somewhat between February 20 and
March 20, reflecting for the
~o.st
part some further gold imports from abroad..
Mem-
ber bank borrowing at Federal reserve banks was nearly $80,000,000 larger on Marqh
2o than four weeks earlier, while acceptances showed a further decline of about
$120,000,.000 during the period.
Security holdings showed relatively little change.
Money rates continued to advance.
creaS:~ad
Rates on 90 day bankers 1 acceptances i.n-
£rom 5 to 5 1/4 per cent,. an.d on 4-6 month commercial paper from 5 1/2 -
5 3/4 to 5 3{4 - 6 per cent.
Open market rates for collateral loans also increased.
.
«'·--:~ .A! ["'
t);.l_ii)
X-6277
H! THE DISTRICT COURT OF THE
UN~TED
STATES,
FOR THE MIDDLE DISTRICT OF GEORGIA,
MAcon·n.rvrs.ron.
Federal .Reserve :Bank of Atlanta,
Complainant,
vs
Claude Gilbert, as Receiver of
the Fourth :National :Bank of
Macon, Georgia, et al.
Defendants.
TO
T"'rl]l
)
(
)
(
)
(
)
(
)
(
)
(
)
·(
No. _ __
HJ EQ.UITY.
:BILL OF INTERPLEADER.
HOi:IORA:BLE, THE JUDGE OF SAID COURT :
Federal Reserve :Bank of Atlanta, averring itself to be a body
corporate, organiz&d and existing under and by virtue of the laws of the
United Sta.tes, having its principal office and place of business in the
City of Atlanta, Fulton County, Georgia, brings this its bill of complaint, same being a bill of interpleader, against Claude Gilbert, the
Q.uly
•
ap~qointed
and acting Receiver of the Fourth National :Bank of Macon,
Georgia, a national banking
~ssociation,
having its principal office and
place of business in the City of Macon, Bibb County, Georgia, and in the
Middle District of Georgia; Farmers National
:sank
of Monticello, Georgia,
a national banking associat.ion under the laws of the United States, having
ii•s principal office and place of business in the City of Monticello,
it) ...;_{?
tJI..:t_ _;._
-2-
X-6277
Jasper County, arid in the Middle Distric.t of Georgia; Monroe County Bank,
a corporation under the laws of the· State of Georgia, having its principal office and place of business in the City of Forsyth, Monroe County
and in the !f.iddle District of Georgia; First National Bank of Shellman,
Georgia,
a
national banking association under the laws of the United
States, having its principal office and place of business in the City
of ShellL.an, Randolph County and in the Middle District of Georgia;
First National Bank of Pelham, a national banking Association under the
laws of the United States, having its principal office and place of
business in the City of Pelham, Mitchell County and in the Middle District of Georgia; First National :Sank of Bainbridge, Georgia, a national
Banking Association under the laws of the United States, having its
principal office and place of business in the City of Bainbridge, Deca-.
tur County .and in the Middle District of Georgia; First llational Bank
of Ocilla, Georgia, a national banking association
und~r
the laws of the.
United States, having its principal office and place of business in the
City of
Oci~la,
Irwin County and in the Middle District of Georgia;
l3runswick Ba.nk: & Trust Company, a corporation under the laws of the
State of Georgia, having its principal .office and place of tusiness in
t:p.e City of Bru.nswick, Glynn County and in the Southern District of
Georgia; First National Bank of Reynolds, Georgia, a national banking
assoeiaUon Un.der the laws of the United States, having its Jr incipal
office and place of business
in the Middle District of
in
the Cl ty of Rey.nolds, Teylor County and
·Georgia;· iireit National :Ba.nk of Waycross,
Georgia, a national banking ·assoei·ation under the laws of the United
States, having its principal office and ·place of business in the City of
-3-
x.:.s277
Waycross, Ware County and in the Southern District of Georgia; First
National Bank of Vidalia, Georgia, a national banking association under
the laws of the United States, having its principal office and place of
business in the City of Vidalia, Toombs County, and in the Southern
District of Georgia; . First National "Bank of Milledgeville, a national
banking association under the laws of the United States, having its
principal office and place of business in the City of Milledgeville,
Baldwin County and in the llliddle District of Georgia; City National
~nk
of Knoxville, Tennessee, a national bru'lking association under the
laws of the .United
States,
having its principal
office and place of
.
.
.
business in the City of Knmxville, Knox County, Tennessee and ;in
Eastern Dist~ict of Tenne~s$e; and the tourth
t)l~
& First National Bank of
Na.shville, Tennes.see, a national banking association under the laws of
the United States,
hav.i~g
t ts principal office and place of business in
the City of ·nasl"lville, Davidson County, Tennessee and in the Middle District of Tennessee.
-zSaid parties, that is to say, the said Claude Gilbert, as
Receiver., as aforesaid, and the various banking associations hereinabove
listed, are rna..de parties. d.efenda.nt to this action-
Complainant avers
that all of said defendants can be reached by the processes of this
Court except the City National Bank of Knoxville, Tennessee and said
Fourth & First NatiollAl. Bank of Nashville, Tennessee, which said two
DSmed defendants this complainant is advised and believes will acknowledge or
w~ive
service of subpoena and
~nter
an appearance herein.
-3This cause arises under the Consti tut.ion and laws of the
-JL·~
~.,
t.JI.Ju
>
X.... 6277
-4-
United States for that one of the parties defendant, to-wit, Claude Gil"bert, is Receiver of the. Fourth National Bank of Macon, a national bank-
ing association, as heretofore. stated,. he having been heretofore appointed
as such by the Honorable, the Comptroi1er of the· Currency of the United
'
'
States, acting under ahd pursuant to the Statutes of the United States
for such cases made and provided, and, as such Receiver, ·being an officer
of the United States.
The amount involved, exclusive of interest and
costs, exceeds the sum or value of three thousand dollars.
-4This is a suit in equity. to-'l'lit, a bili of :interplehde:r,
seeking such equitable relief as is hereinafter ptJ!ved.
-5-
Complainant is one of the twelve Federal .Reserve :Banks organ- .
ized and now functioning pursuant to 'that certain Act o:f Co:qgress kno1fd
as the Federal Reserve Act, as from time to time
a.mende·d~.
-6-
All of the banking corporations hereinAbOVe tlar.aed. are member. ·
banks of cpinplainant except that said Fourth National. ~nk of Macon, now
being liquidated as aforesaid,, is not now a member bank, the capital stock
holdings of said Fourth National Bank in complainant: having been heretofore withdrawn by the. Receiver pursuant to law.
-7-
.Among. the functions of complainant as a Federal Reserve Bank
is to take on deposit the reserv:e accounts .or balances of its .member banks,
and each of the abo'Ve mentioned, .defendant banks maintained at all the dates
and times herein named, .a.n.d now .maintains, its reserve. account with coml'l!Una.nt •.
S~~d
FQurth :Na.t;tonal Bank o.f Macon also maj.ntained its reserve
-5-
x.-.6277
bala.nGe with complainant and a portion of the same, to-wit, the fund
herein mentioned, still remains on deposit.
-8The reserve account of a member bank is that balande required
by law to be maintained with the Fe-deral Reserve Bank of the District in
which the member .is located.
Said reserve balance is an account subject
to withdrawal by check of the depositor and is otherwise governed (in so
far
~s
is material for the purposes of this action) by the ordinary rules,
usages and practic.es o.btaining between a bank of deposit and
it~
deposit{)rs ...
-9.Alnong the other functions of this complainant as a• ]!led,.eral :R,eserve
:Ba,~
is the co.llection, for the account of its member banks. other Federal
Reserve Banks, the Uni.ted States, and others entitled to use the collectton
facUlties of the Federal Reserve System, of checks and drafts dn.wn up:en
"bt4.nks in the Sixth federal Reserve District and pqable at par.,
-10-
In pursuance of its functions as a Federal, Reserve
Bank:~
Complain-
aliJ.t received from time to time from the above mentioned d.efen~.t bank~, as
1r•11 as from said Fourth National :Bank of Macon, deposits of fu,nds and
checks and drafts for credit to their respective reser'l(e accounts,
ant also sent to each of said banks, for collection or payment
c~ecks
and drafts drawn upon or collectible by
~stomarily,
;
t:hem~
Complain-
an~ remitt~ce,
Said banks would,.
remit for such items, so sent for payment or collection, by
drafts drawn upon their sai-d ,.reserve accounts qr in acceptable exchange,
or b1 written authorization to complaiD&Ilt to charge such reserve accounts
with the amounts te be remitted.
CJJt.
r:-
0..::.:_"""
X-6277
-6-
-11Checks or draft·s,.. ·'Wl}en forwarded by
complai~t
to other banks
for collection or payment and remittance, are enclosed with what is known
as "cash letters 11 and remittances therefor are made for the
aggrega.~e
amount
f)f the same as reduced by particular items, checks or drafts which are not
paid or collected by the addressee. bank.'
-12Prior to November 26, 1928, and up until about noon on said date,
said Fourth National Bank of Macon wae an active, going institution, ciperat-
..
ing as a. national banking association. · As such,· it maintained, as heretofore
stated, its reserve account with complainant~
· National :Bank, complainant had agreed to
At the instance of said Fourth
receive~
when tendered· by any of the
above named defendant banks, checks drawn. by them or any of· them on said
Fourth National Bank of Macon and sent to complainant either in remittance
for cash letters or for credit to the reserve accounts maintained
~ith
com-
plainant by said defendant banks, under an arrangement calling for what was
termed "immediate debit" to the reserve account of said Fourth National
Bank of Macon: that is to say, when and as any of said defendant banks sent
to complainant a check drawn upon said Fourth National Bank of Macon, whether
the same was sent in remittance for collections or for credit to the reserve
account of the bank sending the check to complainant, the amount thereof
would be immediately eba.r.ge.d against the reserve .account of the Fourth Natio:na,J. Bank; it havillg· be.en understood, however, that payment of any
check should not [)e
Ma.con had had
cons~dered ~s.
time·to:rec~ive
~Puch
final until said Fourth National Bapk of
the same anQ.report thereon.
• •
-13The
a.gre.em~~ts
under which said checks. were. to be received for
-7ltimmedia.te 4ebitn· w&re in writing, each signed by said Fourth National
:Bank of Mac~n, . Geo'rgia; addressed to complainant and drawn in the fol-
lbwing form!
To the· FEDERAL RESERVE BANK OF .ATLANTA,
Date
The
·--~--~--~~~--~~~-----------Name of Bank
Location
·may . have
occas.ion from time to time to remit you, by its
check or checks on the· undersigned, for collections sent
it by.you, or for-credit to its reserve account with you,
or the barik mentioned may desire to remit us for your
credit. and advice. This will be your authori-ty to debit
our account immediately upon receipt, with cheCks drawn
.on us. by the a.pove mentioned bank, given you in payment
of collections, or sent you for credit to its reserve ac...;
count,·. or you ~- cha.+ge our account ilD!iediate:J,y with
.amount of such adviees as you rrJa3' receive from it, that
remittances have been made to us, for your credit and
advice. PROVIDED, however, that p~nt ·shall not be
considered as final on such checks as you charge to· us,
until we have had time to receive the checks and report
on same, ~e· agreeing to ·wire at your expense non-payment
of all checks $250'.00 or over, not good on our books
.
when received,. nor shall payment be considered as final
where ·you charge· our account with amount of advices, re.ceived from the above mentioned barik, thS.t• remittances
.. have been made t;o us for your credit, until sufficient
.time has. elapsed-for you to receive notice :from us as
to whether or not such remittances have reached us and
haV:e. been credited. We agre~ t!> ··maintain on d.eposit
. with the Federal Reserve :Bank of Atlanta sufficient
collected, available fu~ds, over and above the amoUnt of
· ()ur required reserve with you 1 to·· cover such checks or
. advicEls of remittances as described above.
i Sgd) . ·. FOURW NA:riOIAL BANK OF
JWiON; . GEORGIA..
II •
Each of said orig:illal: writi:ggs' shows ·the name of one of the
defendant bariks as being an:.. instj,tution to be accorded the benefits of
!'~t ..
p I"' I
u.L
X-62~7
-8-
the arranger.uent for
11
imL1ed.iate debit."
If required so to do by the Court,
complainant will produce at any hearing of this cause the signed originals
of the said contracts.
-14-
On the morning of November 26, 1928, at the opening of complainant's business for that day and before said Fourth National Batik of Macon
•
had been taken.over by the Comptroller of the Currency, complainant received
from the defendants next hereinafter listed certain checks, all drawn upon
said Fourth National Bank of Macon in the following respective amounts, that
is to say:
.AI,:om!T
Farmers National Bank,
Mcinr oe County Bank,
First National Bank,
First ~rational Bank,
First li!ational Bank,
First National Bank,
Brunswick ~ & Tr Co.
First National Bank,
$1,725.76
1,878.84
Monticello,
Forsyth,
Shellman,
Pelham,
Bainbridge,
Ocilla,
Brunswick,
Reynolds,
836.~60
1, 030.67
6,673.29
3,985~59
10,000.00
1,256.30
As stated, said checks were drawn on accounts llla.intained by the
drawers thereof with said Fourth National Bank of Macon.
Each of the same,
however, was sent to complainant pursuant to the arrangement for
11
immediate
debit" as outlined above, and it. was desired that eaCh thereof should be
charged by complainant against the reserve account of said Fourth National
Ba~
of Macon under the terms and conditions of that arrangement.
checks were sent, respectively, by the drawers
ther~of
Said
to complainant in
payrcent for cash letters theretofore sent to them by complainant;
th~t
is
to say, complainant had, prior to November 26, 1928, sent to each of the
banks next above named, items (checks or drafts) drawn upon or collectible
by said batiks, and said banks had undertaken to remit by said checks for
X-6277
-9-
such of said items as had been paid or, collected by them respectively.
-15=On the same day, that is, November 26, 1928, at the opening
of complainant's business and before said Fourth National Bank of Macon
had been taken in charge as aforesaid, complainant received from certain
banks, next hereinafter listed, cheCks drawn on said Fourth National
Bank of xliacon with instructions to credit the amounts thereof to the
respective reserve accounts of said banks.
Said Checks, like the checks
described in the next preceding paragraph, were sent to complainant. for
immediate debit to the reserve account of said Fourth National· Bank under
the terms of the arrangement hereinbefore described.
The banks so sending
check~•for credit to their respective reserve .accou.nt·s ~d the amounts of
such checks were as follows:
AMOUNT
City National Bank,
Fourth & First Nat'l Ek,
First National Bank,
First National Bank,
First National ]ank,
First National Bank,
Knoxville,
Nashville,
Waycross,
Vidalia,
Millep.geville,
Pelham,
$25,000.00
20,000.00
10,000~00
5,000~00.
2, o.o.o.oo:
1,700.00
-16In the regular routine of complainant's business, all of said
checks would have been, at some time during the business day of November
26, 1928, charged to the reserve account of said Fourth National Bank of
Macon an& thereafter sent to it by mail for examination and report under
the terms and conditions of the said arra.ngement for immediate debit.
This routine was not followed with respect to any of the checks herein
mentioned as having been received by complainant on November 26, 1928, for
3J~-~~
. X-6277
-10-
the reason that, at about noon on said day, complainant was advised that
said Fourth National .Bank of. Macon had been closed and its affairs taken
in charge by the Comptroller.of the CUrrency.
In the regular routine of
complainant 1 s daily business no entries touching said checks had been
made upon complainant •s
books at the time when i t received such advice
of the closing of said Fourth National Bank; nor were said checks, or
aey of them, sent to said Fourth National Bank of Macon for examination
and report, it having been closed before such cheqks, or ·any of th.em,
w~re
ready for mail:t,ng.
Upon .being so advised of the suspension of said
Fqurth National Bank complainant notified the defendant banks listed in
p~agraph
14 that it could not accept the checks which they had sent in
r,mittance for the cash letters in saia paragraph referred to, and that
1r would not
charge the reserve account of said Fourth National Bank
therewith; and complainant, thereupon, charged the reserve account of
e~ch
of said defendant banks with the amount of the check which it had
sent to complainant as aforesaid•
Because of the suspension of said
Fourth National Bank, Complainant refused to charge against the reserve
account of said bank the checks described in paragraph 15 hereof, and,
thereupon, returned the same to the respective banks which had sent
said checks to complainant for
~ore
cre~t
to their reserve accounts, as
fully set out in said paragraph ].5 •
. -17At the opening for business· on November 26, 1928, said Fourth
National Bank ofMacon .had to its •. credit. in collected funds in its
reserve account, only a nomit)al balance of approximately one thousand
dQllars.
Thereafter, however, a.nd.prior to closing, said balance was
built up by the discount of notes made at the instance of said Fourth
. . il-
X-6277
National Bank by complainant 1 by deposits made by said Fourth National
Bank to its reserve account and by transfers of funds thereto; to a
large aggregate amount, complainant hereby a.verr::i.ng ·that, prior to the
time when said Fourth National Bank of Macon suspended; it had fUnds to
its credit in its reserve acco-q.nt of more than enough to have paid said
checks and. each ther'eof.
Complainant is informed, arid U.po:ri. such inforina-
tion and belief avers the fact to be 1 that· each of said named defend.B.nt
banks, fortVard,ing such checks to complainant as stated and. for' the pur.:..
poses afor~,sai9., had to its cred.i t with said Fourth ~Tatioi~;l
:Ba:nk
of'
Macoh.fuzids in amounts sufficient to ha'V'e paid thJ check or checks which
it had so sen~ to comp1al~nt•
-is-Shortly. after said defendant, Claude Gilbert, Receiver, as·sumed
the duties ~f his office, he made demand upon complainant fo'r the transfer
to him, as
R~cei ver.r
of all of the reserve balance of said Fourth National
l3a.nk: of Macon. remaining after the satisfaction of the indebtedness due by
said Fourth National .Bank to complainant.
At the same tim~·, eachof said
defendant baJ.lks was demand.irtg th~t this complainant charge against the
accou~t
reserve
of said Fourth National :Bank the amount of the check which
it had sent to complainant either in rem.ittance for· a cash letter or for
credit to its reserve account, as aforesaid ..> Said Receiver cont·ended,.
and now contends,. that said c,hecks,, ~D;d ·each of themi·While immediately
chargeable to the reserve acpoux,;t of said Fourth National Bank of
.
.
.
,•
Macon,·
.·
cc:nld not,. under the te.l'IIls o.f ~he arrangert1ent aforesaid, be c'Onsidered:
as finally- paiQ; until. the
same·· had
been placed in the hands of said Fourth
National :Bank of Macon and by 1t examined to the end that 1 t might be
X-6277
-12~
determined whether or not such checks were properly payable.
•
cei ver further contended, and now
contends~
Said Re-
that immediately -upon the
suspension of business by said :Fourth National Bank any and all authority
to charge its reserve account with said checks, or aey of them, was automa.Ucally revoked and suspended; arid that, inasmuch as none of said checks
were finally paid, according to his contention, prior to suspension of
business, the same cannot now be paid out of said reserve account.
The
defendant banks, on the other hand, contend that said Fourth National :Bank
of·!»{acon had authorized :Complainant to charge its reserve account with the
amount of any check drawn upon it which said defendant banks, or
'them, mib}lt send
to
a.ey
of
complainant as aforesaid; that said checks ·being in
the hands of Complainant prior to the closing of business, the same
·should have been regarde~ and should now be regarde~ as payabl.e out of
said resarve accoUn.t unless and except t!aid checks., or any of them, were
eli-awn upon •insufficient funds o.n deposit with said Fourth ,National :Bank
of Macon or, for ariy other l'eason, would not have been :p1·operly
p~able
in regu.l;:U' course had said Macon bank not closed as aforesaid.
-19With these conflicting contentions this complainant has no
concern.
Complainant has retained in its hands a sufficient amount of
said reserve balance, to.:.wit, the sum of 'line·ty.:.One Thousand, EightySeven and 05/100 (91, 087.05) Dollat-s, to pay said checks, and all of
them,· should it be determined. that ·the same were.,, and are, properly
chargeable- against said rE:fserve a.ccountL of said FQurth Nation&.l :Bank
Qf ·Macon. 'Said fund c.Omplaina.nt hOlds in trust and as a mere stakeholder.
Compl&.inant is entirely indifferent between the parties and is in collusio.n
X-6277 6."]1
-13-
~ ··.~)
:"; -)
L)r::,.~/·.;
with none of them; it has no interest in the premises except to disburs.e
the fund in its hands as may be legally proper and as this Honorable
Court, being advised, may direct.
-20-
Complainant is advised and believes that all of the above
mentioned defendant banks, being creditors of said Fourth National
Bank of i,Iacon, have filed proofs of claim with the Receiver of said
bank, in which proofs of claim have been included the full amounts of
the deposit accounts maintained by said banks with said Fourth National
Bank of Macon; but complainant is further advised and believes that the
filing of such proofs of claim in such amounts was upon the understanding
with the Receiver of said Fourth National Bank and/or with the Honorable,
the Comptroller of the Currency of the United States that the sama would
be without prejudice to the assertion of any rights to have said checks
satisfied out of the. said reserve account of said Macon bank as contended by said defendant banks •. Complainant is further advised that the
Receiver of said Fourth Natio.nal :Sank of Macon has. paid, or is prepared
to pay, an initial dividend to all creditors of said bank to the extent
of Fifty (50) Per Cent. of all claims allowed.
Complai1~nt
avers, there-
fore, that, by reason of the above and foregoing facts, the actual amount
j,n dispute is one-half of the aggregate of said checks, or the sum of
:forty-Five Thousand, Five Hundred Forty-three and 53/100 (45,543.53)
Dollars.
This defendant hereby offers to pay into the registry of this
Honorable Court the sum of $45, 543.53; being the amoUJ."'lt of the fund now
in its hands actually involved in the controversy between the parties named
herein as defendants, that is, to say, between the Receiver of said Fourth
National Bank of v~con on the one hand, claiming all of said fund, and the
defendant ba."'lks on the other hand, each defendant bank claiming the right
to receive out of said fund and amount squal to one-half of the check, or
checks, sent in by it to complainant for immediate debit, as
aforesaid~
-22Complainant sa.ys that it is without remedy at law; that if it
pays to said Receiver said fund, it will be subjected to the claims, demands and suits of said defendant banks, or some one or more of them;
that i f it pays to said defendant banks the amounts demanded, respectively,
by them. it will have to ans.wer the suit of the Receiver.
Complainant is
advised by its counsel that the conflicting claims and contentions of the
said parties raise questions of law that are doubtful and difficult of
solution and complainant is therefore
be disbursed.
~certain
as to how said fund Should
Whil.e said defendant banks each claim a portion of said
fund and the Receiver is claiming the whole thereof, the legal rights of
the defendant banks,. and each of them, are determinable upon exactly the
same principles and there is no issue which could arise in the determina.tion of the claim of any one of said defendant banks which would not be
involved in the determination of the claims of all.
The bringing of this
bill of interpleader will obviate a multiplicity of suits and will afford
the opportunity of settling in one action the claims of all parties asserting an interest" in and to said fund, or any part thereof.
-23Complainant avers that in the bringing of this bill it has incurred the expense of
counsels~
fees, and asks that such sum as may appear
proper to theCourt be decreed in its favor to cover the cost of the services
of counsel, and that 8JlY sum. so allowed, as wel.l as the. costs of this action,
be charged against the fund whieh is in its hands as a stakeholder, as
heretofore more particularly se,t out..
~ntnm:FOBE, being remediless ex.oep t in a court of equity,
where matters of this sort are ·properly cognizable and relievable, and
to the end that complainant may have the relief herein prayed, it brings
this its bill of interpleader and respectfully prays of the Court;:
1.
That this Honorable Court may enter an order permitting
it to pay into the registry of the Court the sum ·of Forty-five Thousand,
Five ~undred Forty-three and 53/100 (45,543.53) Dollars, being the amount
of the. fund in controversy and now in the hands of complainant as a stakeholder as aforesaid; that the Clerk of this Court be authorized to receive
and recei:pt for said
fund~
and that, upon the payment of the same into
Court, said complainant be discharged from any and.all further liability
to said defenda,nts or any _of them.
2 .. ·· That the defendants may. be decreed to interplead and settle
between themselves their rights or claims to the said fund in the hands
of complainant .•
3.
.
That the defendants, and each of them, be rt;lstrained by a
preliminary ordeT of injunction from commencing or prosecuting any action
or procee.ding against complainant concerning the matters above stated, and
that.. in due course, this injunction may be perpetuated.•
4•
That the Court issue ·a ruJ,e pr o·rd.er nisi, requiring said
dtlfendants, and each of them, to .show ciause at .some time to be ·umi ted by
the Court why the relief herein ·prayed .should .no·t be granted.
5.
That complainant have sueh other and further relief as 'llla¥
be meet and agreeable to equity and as the nature of its c·ase may ·require.
May it please your Honor ··t-o grant
unto .complainant not only a
X-6277
-16-
writ of injunction conforming to the prayers of this bill, but also to
gtant a writ or writs of subpoena, to be issued by and out of this Court,
to be directed to the defendant Claude Gilbert, as Reciever of the Fourth
National :Bank of Macon, and to the defendant banks, Farmers National :Bank
of Monticello, Monroe County :Bank of Forsyth, First National. :Bank of Shellman, First National :Bank of Pelham, First National Bank of :Bainbridge,
First liational :Bank. of Ocilla, :Brunswick :Bank & Trust Company, First
National :Bank of Reynolds, First National Barik·of Waycross, First National
:Sank of Vidal,ia, First National Bank of
~!illed.geville,
City National :Bank
of Knoxville, and Fourth & First National :Bank of Nashville,
co~nding
them at a certain time and under a certain penalty to be therein specified,
to be and appear before thi..s. Court then and there to answer the allegations
hereof, but not under oath (answer under oath baing hereby .expressly waived),,
and to abide by the orders and decrees of the Court herein, and that the
defendants
~
appear herein according to law.,
RANDOLPH, PARKER & FORTSON
Solicitors forComplainant
RO:BT.. S • PARKER
Of Counsel
X-6277
GEORGIA, FULTO£-T COUUTY.
Before me, a notary public in and for said County,
personally appeared Creed Taylor; who• being duly sworn,
deposes and says that he is Deputy Governor of the Federal
Reserve Bank of Atlanta, complainant in the within and
foregoing bill, and that, as such officeri he is authorized
to make this affidavit.
Deponent fu:rther says that the averments set forth
in said bilit where charged positively are true and that such
averments as are therein made upon information and belief are
true to the best of deponent's information, knowledge and belief.
Deponent further says that said bill is not filed
by the complainant in collusion with any or either of the
defendants in said bill named, but that it is filed by
complainant of its own accord for relief in this Honorable
Court.
CREED TAYLOR
Sworn to and subscribed before me,
this the _!§_ day of February, 1929.
Notary Public
X-6277
11'),-~
t..~.-:.:,.,
IN m:i :PISTRICT COURT. OF 'IRE tnTITED STATES,
FO!t M
l•illmLE DISTRICT OF G'EORGIA,
MACON l;>IVISION.
Federal Reserve Bank of Atlanta,
Complainant
vs ~
Olaud.e Gilbez:t, as Receiver of
the Fourth National J3a.nk of
l.~con, Georgia, at al ,_
l)efendants.
)
(
)
(
)
(
)
(
)
{
)
(
)
(
lTo.
U! :EQUITY.
BILL OF n~t.]A.IbR.
1',he within Bill of Interoleader raad and consi'der.ed-::
Let the same. be filed and subpoena-;. ise~ed as is in. accor.da.nee
wi::th su~h cases and. as is required by the equity t:uies of this
C?urt.
lt is, :t)lrthe.r ordered that the d.efend.ant·s, and each
o-f- them, show cause before me on. the 15 _day of :v:ar'Ch. , . 1'929;
at !Q o t·clt>Ck A~-1~: ... why they should nrtbe required by·~rder
o:£ this Co.urt to interplead as prayeQ. in, complainant •·:a bill,.
and wh;J the complainant should not p.ave the relief in and by
said bill s-ought. Let this order and a co-.;y of said 1;)~11 ba
served upon each of said defendants unl-ess the: ack:not.1odge
service of the same"'
·
T,his ~o _.!§. day of February .. 1929.;
._. _BA.SCOli'.i S •.
W.m
JUdge Vni ted States Court •. ;
.... ,
-
X-6279
tf")~
March 30, 1929.
Dear Mr. Strater:
In accordance with your letter a day or two ago requesting that
you be advised in advanc~.,if possible, of any added topics which the
Board may have to su.gg~st :tor discussion at the conference beginning
Monday, the following is herevrith submitted:
"Should $elf-instti"anoe reserves be carried by the
Federal reset've banks an.i · if so when and for what
1?UrPoses should they be used and what effect if any
should they have on the cost of. fidelity or other
insurance ca.rHed by the banks,"
At the 'Present time, five of the Fedez'~.=tl reserve banks are maintaining self-insurance reserves as follows:
New York ............................. $1,443,870.
Cleve land. . . . . . . . . . . . . . . . . . . . . . . . . . . .
541,017.
Richmond.............................
300,000.
St. Louis............................
250,000.
Minne~olis •••..•..• ·:...............
250,000.
The New York and Cleveland banks established the reserves for the
purpose of ultimately carrying a fairly substantial amount of their own
fidelity insurance, thus reducing materially their annue.l insurance
premiums. The New York bank is carrying less fidelity insurance than
it would carry if it were not for its !!Jelf-insurance reserve, and
available information indicates that the same is probably true of
Cleveland. The Federal Reserve Batik of Richmond holds its reserve
primarily as a protection against losses not covered, or only partly
covered by insurance which it carries.
It is understood that the
St. Louis fund, which was established the first of the year, h intended for the same use.
Very truly yours,
(signed)
Mr. H. F. Strater, Secretary,
Governors' Conference.
E. M. McClelland,
Assistant Secretary.
- ....,, (_...
dt-j()
Rl'!PORT OF MAJORITY
COH.~ITT&£.
X-6280
April 2, 1929
WHEREAS there now exists a lack of uniformity amonG the twelve
Federal reserve banks in their construction of Regulation J, as yromuleated
by the Feieral Reserve Board, which lack of unifor:ni ty h'ls given rise to
litigation in the past and holds promise of increased litigation in the
future with conflicting decisions in various judicial districts; and
WHEREAS, \Te deem it of the utmost im;Jort[:;.nce that all of the Fed-
e·ral reserve banks follow
R
uniform -policy in the resoect .:::stated:
:BE IT RE30LVED that the followiug represents the consensus of
opinion of the Conference of Counael to tne various Federal reserYe banks,
assetnbled pursuant to the call of the Genc:ral Counsel to the Federal Reserve
:Soard:
1. We construe Regulation J of the Federal Reserve Board as intended
to provide that the rederal reserve banks shall take for collection checks
sent to them for such purnose by other banks, merely a.s agents of the banks
from which the same are received. We regard this policy as being economicallf sound, legally
2.
~roper
and fair in its operation.
We believe that it would be extremely umTise to take any filtep or
to formulate any policy which would tend to change this relationship and,
specifically, that it would be unwise to attempt to superimpose upon a pure
agency status any indicia of
ownershi~
with respect to the subject matter
of the agency.
3.
We believe that it is incompatible with such agency status for
Federal reserve banks to set-off amounts due to them, as agents for collection.
, against indebtedneas due by them to insolvent member or non-member
clearing banks; hence, we are of the opinion that after a bank haa been closed
the reserve bank of its district being notified of its suspension, should
not thereafter attempt to charge unpaid cash items against the reserve
).-6280
- 2 account of
th~
~·or
closed bank'.
of suspension n. ren;ittance
the im.me r~aso~1 we be1iev~ that af.ter notice
draf~,
draVin 'by the closed. bank, snoula Hot be
charged against its reserve account.•
4. ';ii:len a Feueral reserve bank. ta.K:es front oue o.r its ,-4-embers collateral
for the payment ot indebtedness ciue to it by such men.o-er, such collateral.
ShoulQ. be p.pr:;licab}e only
.t.O
the satisfaction and discharge of the obliga.1t YHmlci be an unwise policy,
fio.ns <iue· to the reserve b4llk 111 its OY;n ri6ht.
in
our
bpbl'io.n, to po;.;rmit such collateral' to be utilized in the liquidation
,·
!
or satisfe:ction of debts pB.J.able to thQ ~·~o..,:bl.l resetvt
bank
as a collection
agent.
The status of. the capital stock :t:ol<iings of a. meruber bank in its
5.;
· Federill reserve: bw.li;;, upon the insolve.ucy or liquio.u.tion of such member, h
fixed by the· ':-aderal H.-e·s.erve. 1\.c_t ami, as r.e cox.strue the l&ue, the proceeds
Of
ihl.Ch: holciint;s· ·COUl<i .only be apJ>lied in or tor.uro. the IID.tisfaction of debtis
· ·· ciue to the: Federal reserve va:u,k. in 1 ts own ri~';ht, as con~radistinguished from
debts which ·might be payable to thi;l
re&erv~ barJc
as
a collection agent.
6. · ln our o_;_)inion., any deviation i'rorr, thc;se policies, .in furtherance
· of tthich Regulation .J was promulba..ted, woula entail grave aal16~r.s to Jec.i.eral re-
serve banks 8.I1d would result
ill
the preferring of a limited number of cre.ditor;a of
an i-nsolveut bauk, contrary to the
let~ter
a.ud spirit of the la\'1 .a. 1-t exists in
the various States a11d as administered in the Courts of the Uni.ted States ..
7.
In v.iel'i of the conflicting interpretation.s
upon Regulation .J by _the Fecieral reserve bauks,
~Vhich
resultill[~
have been placed
in conflicting judi..
cial' deciaion.a in relation thereto, we deem i t of the ·Ut.Jnost i.Inportance that
Regulati-on J be
so
clarified by arnen~rit as ·to result in uniformity in its
interpretation and lipplication.
Such amendwent, we b:e11eve, .should be -cie
.:\...)
'-~' '";~
)l
(}t__L_
X-6i.3d0
( - 3 - )
at the e'1.rliect possible time~
subj~;:ct
!'o
:~.ccor.'Jplish ttliis pur... oae \.Ye
recoll1mend th'1.t
to the approv.1.l of General Co.L.'ls~l to the Fed.Aral Reserve So:u'ti, p.<tra-
e;rapn G of
Sec~ion
V o :·
Re::;~l.tioh
J be arnend<'!d. to read subst:1.:1i iall,;· as
follows:
" ( 5) Tae a.:uount of :.1.y chec~ for Wilich payment in '\Ctuall,y
fin'llly collP.ctet1 funds is n'Jt received snall be Ch'i.r_;ed back
t:) tac f:)r''i'trdi.n,a; b"n.>e. rc;€1.rci.less of rmetiH~r or not tf~e check
itself c:~n be ret:H'~led. 'L1e Ol\'ner or holdP.r of a.r.y such ch<>ck
so ch:us~d i.l·-;c.< shall, in sucn event, i:llwe no ri.~ht of recourse
upon, intAr~st in or ri.~hts of pay.nent from a.n:1 fund, reserve,
col b.teral or other propArty in ttle possession of the ~"'ederal reserve ban<."
~tnd
''ie further recommend
sal to the
J!'ed~--al
Reserve
tn"~.t
"Bo~u·d,
subject to tr:e
a_~orov:\l
of J.en!"ra.l Coun-
paragraph 4 of Section V of
Re~b.tion
J
be amended t1 re"ld subSt!mtially as iollo.,.s:
11 (4) Ohecks received by a Federal res·?rve bank on its r~e.aber or
non·nemoer cle,tring b·1nk:s will ordinarily be for·IJarded or presented
ci re~t t·' such b~n!'8 and sucn b.~nks will be r.,qui red to rerni t or )Jay
t·nerefor at P'l.l'. Sl1C:s1 rernitta.nce or payment may De m.q,de in cash,
b1 -o~n ..( draft .:tcceptable t·:> the collecting ~·ederal reserve bank, by
other fm1ds or trA-nsfers accepta:ble t 1 t~:e coll~et1n5 Federal reserve b~nk, or by autnorizi~~ thP. collecting Federal res~rve bank
to cil.a.r5e thetr reserve accounts or clearing accounts. 11
X-6281
~:.·;: -- ·~ ~: ~~
Ut."'t-~
REPOR~ ·OF
MDTORITY COMMITTEE
We, the undersigned, representing the Federal Reserve Banks of
Chicago, Einneapolis, Philadelphia and Richmond, are unable to concur in
the recommendation of the majority of the Conference of Counsel and in
lieu of the amendment recommended by the majority we recommend that paragraph 4 of Section V of
R~gulation
J be amended to read as follows:
11 (4)
Checks received by a Federal reserve bank on its
or nonmember clearing banks will ordinarily be forwarded
or presented direct to such banks and such banks will be required
to remit or pay therefor at par. Such remittance or payment may
be ~ade in cash, by bank draft acceptable to the collecting Federal
reserve bank, by other funds or transfers acceptable to the collecting Federal reserve bank, or by authorizing the collecting Federal
reserve bank to charge,their reserve accounts or clearing accounts."
me~ber
The object of this amendment is merely to clarify the meaning of
the existing paragraph.
We recommend that paragraph 6 of Section V of Regulation J be
amended so as to have it read as follows:
11 (6)
The amount of any check for which payment in actually
and finally collected funds is not received may be charged back to the
forwarding bank regardless of whether or not the check itself can be
returned, but the Federal reserve bank may charge the amom,:1t . •f any
check not returned unpaid to. the reserve account or clearing account,
as the case may be, of the bank from which such payment was not received, and may hold any other property of such bank in its possession
as security fOl:' payment of such eheck. The right so t.o do shall, however, be subordinate and without prejudice to all other rights of the
Federal reserve bank upon such reserve account and clearing account and
to such other property in its possession."
Our
reasons for recommending the amendment last mentioned are as
follows:.
The Federal Reserve Board in promulgating Regulation J has stated
that it desires to afford to the public and to the various banks of the
country a direct, expeditious, and economical system of check collection
X-6281
,
... .., . '
t_:~~
;," ,;
and settlement of balances .and for that purpose has arranged to have each
Federal reserve bank exercise the function of a clearing house and collect
cheCks for such of its member and non-member clearing banks as desire to
avail themselves of the privilege and the Board'further required in its Regulation that each Federal reserve bank shall exercise the function of a clearing house and collect checks under the
gene~al
terms and conditions therein-
after set forth and that each member bank and non-member clearing bank shall
cooperate fully in the system of check clearance and collecticn for which
provision is made in the
Reg~lati0ns.
When the Federal reserve banks were
made clearing houses for their member banks we think it was not contemplated
that the banks on which checks were drawn should be at liberty to convert
the checks and place the owners of checks presented through the clearing
system in the position of creditors of an insolvent bank.
is suggested from the point of view
tr~t
This amendment
the Federal Reserve Board should
make provision for holding each member of the clearing house as far as
possible to its obligation to the other members of the clearing house.
Whenever a check is cancelled by the drawee bank and charged to
the account of the drawer, the drawer is by the great weight cf authority
released from liability to the
to the drawee bank.
h~lder
and the holder is required to look
The holder seldom knows or has cp!lortuni ty to inves ti-
gate the condition of the bank upon which a check held by him is drawn.
Hence,
w~en
he is forced to release the drawer, his original debtor, ant
to assume the position of a
lll"ss
becaus~
c~ncelled
credit~r
of the drawee bank and sustains any
such bank fails to remit or pay for a check which has been
so that he can neither obtain·the return of the cheCk nor collect
the amount of it, the holder feels tbat he has a just cause of dissatisfac-
-,
,::-
. ,.
3 u'·•·
X-6281
-~
tion \vi th the System which has placei him ia this posi ticn.
Since the check .collection system WQ.s, as we have pc.inted out
above, established primarily for the safety, convenience, and benefit of the
business public, it is highly desirable to avoid lesaes to the public from
such a situation
when~ver
it is possible to do so and such losses
~an
be
avoided in most cases if the Federal reserve bank has the right to resort
to the reserve balance of a failed
~ember
bank and to the
~roceeds
of exist- ·
ing collateral to protect the holders of checks deposited for collection
after the prior dumands of the Fe~ral reserve banks are satisfied.
We consider thttt the primary PU11>Ue o:f the rasl3rve balance is to
enable ·tho member banks to meet withdrawals and the principal way in which
withdrawals ate made is bu· chocks drawn on thu member bank, most cf which
are presented thtough the rud.etal reserve batiks&
H~ncc. tho reserV\3 de:::;>osit
of a menber bank in the ha.nd.s o~ a :Fe~ral roMrve bank may apprc:priately
and
Clonsist~hth·
.within the spirit of tho Federal .Reserve Act "be made
applicable to the pB.ymllnt of: ohe·U:s presented through the Federal r-eserve
banks rather than held as a protection for the genc3ral cre~tcrs of tho member
bank.
We are -informed that ccmnercial banks in the past, while limiting
their liability for failure to cellect
cheCks caposited
with them, have,
.·
I
nevertheless, used any funds or property in t.heir possession belenging t:t
the drawee bank for tli.c benefit of endorser$.
Practically all jU:dic,ial
decisions that have come to our attention are in accord in sustaining the
right o·f the ferwarding bank to do this and we believe that Federal reserve
banks should adopt the positicn so sanctioned by the prior usage of commer··
cial banks in collecting checks and afford to tho depositors complete protaction against the default of the drawee bank when it is practicable to
X-6281
···:~
' ,,
-~
~~\._ ...·,{.... ~
do so •
';;e do not think that this plan, which we recommended, gi vos any
undue preference to persons collecting checks through Federal reserve banks,
for such persons only obtain payment on chocks ('In \;hick the drawers are releasGd and which are, therefore, deemed paid so far as tho drawers, who are
the
do~ositors
cf the failed bank, are concerned.
Federal reserve banks aro frequently under compulsicn tc for\1ard
i toms direct to a member bank known. tC' be in an extended condition.
To
send a E10ssongor to collect in cash in such a caso would often result in
the suspcns ion •f the drawee bank, owing to a mere temporary shortage of
available funds.
constitute
Yet any other method of collection in such a case might
n~gligoncc
and create liability on the
servo bank to depositors of checks.
~f
~rt
of tho Federal rc-
Tho policy we suggest has the advantage
reducing such liability, which we believe is unavoidable in many cases,
to a minimum.
For the Federal Reserve Bank of
Chicago.
--------------For the Federal Reserve Bank of
Minneapolis.
For the Federal Reserve Bank of
Philadelphia.
For the Federal Reserve Bank of
Rier..mond.
!
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE EJOARD
X-6283
April 5, 1929.
S'UroECT:
Expenses of Ron~ Newton rl~ :Baker in appeal
of case of Raichle v. 1ederal Reserve Bank
of lTew Yor~.
Dear Sir:
Referring to ~oard•s telegram of April 2nd
(Trans 1014), you are advised that all Federal reserve
banks have agreed to participate on a pro rata basis
in the fee and expenses of Bon. Newton D. :Baker, who
will represent the Federal Reserve l3ank of New York
in the appeal which has been made by Mr. Frank G.
Raichle from the decision of the United States District
Court for the southern district of New York, granting
the defendant's motion to dismiss the bill of complaint
in the case of Frank G. a&ichle v. the Federal Reserve
Bank of New York.
When Mr. :Baker's se.rvices in the appeal have
been completed and his bill has been approved by the
~oard and the directors of the Federal Reserve ~ of
New York, it will be paid by the !Taw York Bank and the
other Federal reserve banks will be advised of the amounts which they should remit to New York to cover
their shares of the expense.
Very truly yours,
E. M. McClelland,
Assistant Secretar,v.
'1'0 OOVERBOBS OF .ALL F. R. !JBIS UCIPT Dl YOU.
i
336
337
..
X-6284
STATElSENT OF B'tlREAU OF ENGRAVING AND PRINTING
Cost of preparing Federal Reserve Notes during
l~r.
1 to 16, 1929,
\
~al
l~ch,
1929.
Reserve Notes, Series 1914.
572,000 sheets, $10, liew York
~35.50 14,
$20,306.00
Mar. 1 to 30, 1929, Federal Reserve Notes, Series 1928.
Total
sheets
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Si;. Louis
Minneapolis
Kansas City
Dallas
~an Francisco
152,000
68,000
156,000
82,000 174,000 .
38,000 208,000
40,000 98,000
68,000
136,000
13~;000
..
1oo,ooo .. •
l.2d,ooo 138,ooo
120,000
56,000
...
-
1,044,000 842,000
Credit appropriations,
1929, as follows:
Oomp. of Emp.
Bur. Eng.
Plate. Printing,
"
1\ttls. &Misc. Exp., "
"
220,000
156,000
256,000
246,000
138,000
68,000'
136,000
132,000
100,000
258,000
120,000
56,000
$19,690.00
13,962.00
22,912.00
22,017.00
12,351.00
6,086.00
12,172.00
11,814.00
8,950.00
23,091.00
·10, 740.00
5,012.00
1,886,000
$168,797 .oo
C $89.50 per M, $168,797.00
&
Ptg.
"
"
$99,401.00
43,069.88
46,632 •.12
Bureau of Engra.vi:ng and Printing
Per
C•. R. Long
Assistant Director •
.......
'1.'
1
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAl.. CORRESPONDENCJi! TO
THE FEDERAL RESERVE BOARD
X-6285
April 9, 1929.
SUBJECT:
Improper methods in obtaining
confessions of violations of
bankint; laws.
Dear Sir:
There are enclosed for your information copies of two letters addressed
to the Comptroller of the Currency and the
Governor of the Federal Reserve Board, respectively, by the Attorney General of the
United States with reference to the actio~
of a private detective agency investigating
apparent violations of the national banking
laws which obtained a confession 11 by promise
of irmnu.ni ty and with considerable coercion. 11
You are requested to call this
matter to the attention of all of your examiners and to warn them not to use such
methods, since they are likely to interfere
with the due administration of justice and
perhaps to prevent a subsequent successful
investigation by the authorized agencies of
the Department of Justice.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
:Enclosures.
TO AGENTS OF .ALL F. R • :BANKS •
338
! 339
X-628'5-a
DEPARTMENT OF .nJSTIOE
WHR:DOK
WASHINGTON, D. C.
ORL-WHR
March 29, 1929.
29-36-37-
The Governor,
The Federal Reserve Board.
Sir:
.
This Department has received from the Comptroller of
the Currency ~ copy of a report made to the United States District Attorney at Boston, MassaChuse~ts, by Chie£ Natib~l Bank
Examiner F. D• Williams, concerning il.pparent violations of the
national banking laws by one Ralph L. toung, an amployEie of the
Brockton National Bhnk of Brockton, Massachusetts.
The co:py of the report of Chie:t' Examiner Williams is
accompanied by; a co~'Y of a teport dated the 21st instant addressed to the 1i'e'diral R~serve Bank at Boston, "Attention: l4r. WilliWnl, Chief itttt:i.onal Bank Examiner" and signed by G. 0. Breach
as Ct~inal Manager of the William J. Burns International Detective .Agency. The latter report contains certain statements whieh
have attracted the earnest attention of this De~artment and which
are referred to in a letter of this date to the Comptroller of
the Currency, a copy of which I am enclosing herewith for your
attention and such action as you deem proper.
Respectfully,
For the Attorney General,
(S)
O. R. LUHRING,
Assistant Attorney General.
Encl, 110643.
340
X-6285-b
WHR:DCK
031..-
29-36-37-
March 29, 1929.
The Comptroller of the Currency.
Sir:
...
I desire to aCknowledge your letter of the
25th instant, enclosing two copies of a. re'9ort made
to the United States Attorney at Boston, Massachusetts,
by Chief National Bank Examiner F. D. Williarus concerning apparent violations of the national banking
laws by Ralph L. Young, an employee of the Brockton
National Barik of Brockton, Massachusetts.
A copy of the report of Chief Examiner
Williams is accompanied by a copy of a report signed
by G. o. Breach, Criminal Manager for the William J.
Burns International Detective Agency, Inc., in whiCh
the writer states that an effort was made to obtain
an admission from the accused without promising immunity or compro~ising himself in any way, but adds
that this effort was unsuccessful and that 11 seeing
that there was no possibility of obtaining an admission under these circumstances, I socured a full
confession by promise of immu.ni ty and with considerable coercion."
This quotation is presented for your earnest
consideration and for such action or suggestions as
you deem proper, with a view to discouraging and suppressing such methods on the part of this and any other
unofficial organization which are so likely to interfere with the due administration of justice and perhaps
to prevent a subsequent successful investigation by the
authorized agencies of this Department.
Respectfully,
For the Attorney General,
0 • R • LUHRUTG,
Assistant Attorney General.
Copy to;
The Governor, Federal Reserve Board.
341
FEDERAL RESERVE BOARD
WASHINGTON
X-6286
ADDRESS OFFICIAL CQRRE$PONDENC£ '1'9
THE FEDiitRAL RIES.ERVE BOARD
Dear Sir:
Confirming telegram dated April 6, 1929, advising you of
the special assessment levied by the Federal Reserve Board in connection with the preparation of the new issue of Federal reserve
notes, there is enclosed herewith a copy of the statement of the .
Bureau of Engraving a.nd Printing in the amount of $750,000 covering a put of the cost of Federal reserve notes of the snall sfze
{Series of 1928) which are now in process of printing and which
will be delivered during April, May a.nd June.
There is also enclosed a copy of a letter dated April 5,
1929, from the Assistant Secretary of the Treasury, explaining the
. submission of the bill at this t:i,me. Pa.rment of the bill was agreed
to at the recent conference of Governors, and on April 6, 1929; the
Federal Reserve Board
"Voted to direct the Board's Fiscal .Agent to levy the
appropriate assessment upon each Federal reserve bank arid
to remit the aggregate amount of i750,000 to the Bureau
of.Engraving and Printing."
Very truly yours,
Enclosu.res.
(Sent to each Federal Reserve Agent) •
Fiscal Ac,--ent.
342
X-6286a
COPY
TREASURY
DEPARTMENT
WASHINGTON
A p r i l 5, 1929.
% dear Governor:
With r e f e r e n c e to our r e c e n t t a l k , and t o the "bill p r e s e n t e d "by the
Bureau of Engraving and P r i n t i n g f a r *>750,000 i n p a r t payment of the cos$
of producing Federal r e s e r v e notes t h i s f i s c a l y e a r , i t may "be pointed
out t h a t F e d e r a l r e s e r v e notes are produced on a repay "basis, i t "being
t h e u s u a l procedure t o reimburse the Bureau a p p r o p r i a t i o n s a t t h e end of
each month t o cover the n o t e s completed and d e l i v e r e d d u r i n g t h a t month.
However, i n t h e production of some 22,000,000 s h e e t s of r e d u c e d - s i z e Fede r a l r e s e r v e notes t h i s f i s c a l y e a r , i t has not "been p o s s i b l e t o complete
and d e l i v e r t h e new currency on a "basis p r o r a t e d "by months, with t h e r e s u l t t h a t although more t h a n 50 per cent of the production c o s t s f a r t h e
year have "been i n c u r r e d , reimbursement i n t h e usual manner has not "been
made "because the currency has not reached completion.
The account now
submitted "by t h e Bureau i s l e s s i n amount than the expenditures a c t u a l l y
made and charged t o the Bureau a p p r o p r i a t i o n s on account of t h i s p r o d u c t i o n .
The t o t a l production of Federal r e s e r v e notes t h i s f i s c a l y e a r , a l l
t o "be d e l i v e r e d "before June 30 next, w i l l approximate 22,000,000 s h e e t s ,
and the c o s t w i l l exceed $1,800,000.
Very t r u l y yours,
( s ) Henry Herick Bond
A s s i s t a n t S e c r e t a r y of the Treasury.
Hon. B. A. Young,
Governor, Federal Reserve Board.
343
X-6286TD
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING.
For l a t o r performed and m a t e r i a l s purchased f o r F e d e r a l r e s e r v e notes
S e r i e s 1928, now i n process of p r i n t i n g , to "be d e l i v e r e d during A p r i l , May
and June, 1929.
Bost on
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s c o
# 51,600.00
178,500.00
71,100.00
71,100.00
24,800.00
66,500.00
116,000.00
19,800.00
16,300.00
21,000.00
39,100.00
74,200.00
$750,000.00
Credit a p p r o p r i a t i o n s , 1929, as f o l l o w s :
Comp. of Emp.,
Plate Printing,
Mtls.& Misc.EXp.
B.E. & P .
B.E. & P.
B.E. & P.
$374,700.00
161,800.00
215,500.00
Bureau of Engraving and P r i n t i n g
Per
C. R. Long
Assistant Director.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6287
A p r i l 10, 1929.
SUBJ3CT:
Currency Conference.
Dear S i r ;
There Is enclosed herewith copy
of a l e t t e r from the A s s i s t a n t Secretary
of the Treasury, c a l l i n g a conference f o r
May 2, 1929, i n accordance with the unders t a n d i n g had w i t h the Governors l a s t week,
f o r the c o n s i d e r a t i o n of m a t t e r s connected
with the new reduced s i z e currency.
I t is requested^that you advise
t h i s o f f i c e i n advance by whom your bank
w i l l be r e p r e s e n t e d .
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
Enclosure.
TO GOVERNORS OF ALL f . R. BAMS.
X-6287-a
COPY
TREASURY
D2PARTM3HT
WASHINGTON
April 6, 1929.
My dear Governor:
This w i l l confirm the Department's agreement with the
suggestion, made "by the Governors of the Federal Reserve
Banks a t t h e i r recent meeting, t h a t a conference on m a t t e r s
connected with the issue of the new r e d u c e d - s i z e currency
be arranged, to meet a t the Treasury on May 2, 1929, with
r e p r e s e n t a t i v e s from each of the Federal Reserve Banks,
from the Federal Reserve Board, and from the Treasury.
Will you k i n d l y convey t h i s advice t o the s e v e r a l
Governors, and arrange f o r your own Board's r e p r e s e n t a t i o n .
Very t r u l y yours,
(S) Henry Herrick Bond,
A s s i s t a n t S e c r e t a r y of the Treasury.
Hon. R. A. Young,
Governor, Federal Reserve Board.
X-6289
!
346
RECORD OF PROCEEDINGS OF CONFERENCE OF COUNSEL OF A l l FEDERAL
RESERVE BAMS HELD IN WASHINGTON, D. C.,
ON APRIL 1 and 3, 1929.
The conference convened on April 1, s h o r t l y a f t e r 9 a . m. in the
Washington Hotel, Washington, D.C. Those p r e s e n t were:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
LIr.
Hr.
ivir.
Mi-.
Mr.
Mr.
Mr.
A. H. Weed,
K. K. Carritik,
!7. S. Logan,
J . S. S i n c l a i r ,
S.
Newell,
P . L. Hoiden,
M. G. Wallade>
J . 8 . Walden,
R. S. P a r k e r ,
Carl Meyer,
J . 4. iicCoskey,
Ai Ueland,
Sigiifrd tJelAhdj
IB. d. teedy#
3 . B. Stroud, J r . ,
A. C. Agnew,
Bank of
it
"
ii
"
M
"
. II
"
II
"
II
"
n
"
H
"
II
"
II
II
II
It
II
II
11
"
"
"
"
11
Boston,
Boston,
New York,
Philadelphia,
Cleveland,
Cleveland,
Richmond,
Richmond,
Atlanta,
Chicago,
S t . Louist
Minneapolis,
Minneapolis,
Kansas City,
Dallas,
San Francisco.
Mr. Newton D. Baker was p r e s e n t during p a r t of the time on April 1 s t .
Mr. Walter Wyatt, Mr. B.M. Wingfield and k r . George B. Vest, from
the Federal Reserve Board.
A f t e r a "brief i n t r o d u c t o r y statement, Mr. Wyatt, who was a t a previous
conference e l e c t e d permanent chairman of a l l such conferences, explained
t h a t i t would he necessary f o r him to "be absent f o r a few hours to a t t e n d
the argument i n t h e Court of Appeals of the D i s t r i c t of Columbia, of the
case of United S t a t e s ex r e l . Apfel, e t a l . v. Mellon, e t a l . , t o he argued
on "behalf of the Federal Reserve Board "by Honorable Newton D. Baker. Mr.
Wyatt asked lir. Weed to a c t a s temporary chairman during h i s absence. Mr.
Weed took the c h a i r and Mr. Wyatt l e f t the meeting.
The conference t h e n proceeded to the c o n s i d e r a t i o n of the business bef o r e i t : The q u e s t i o n whether reserve balances, c o l l a t e r a l accounts and
the proceeds of c a n c e l l e d Federal r e s e r v e bank stock should be u t i l i z e d by
Federal r e s e r v e banks to pay checks handled by them f o r c o l l e c t i o n which
have been rcarked p a i d by the drawee banks and charged to the accounts of
the drawers, but f o r which no r e m i t t a n c e or r e m i t t a n c e s not f i n a l l y c o l l e c t i b l e have been made, on account of tho insolvency of the drawee banks.
I n c o n s i d e r i n g t h e s e questions the view t h a t the r e s e r v e balances, c o l l a t e r a l accounts and proceeds of Federal r e s e r v e bank stock should be so
used was d e s i g n a t e d f o r convenience as P o l i c y A and the c o n t r a r y view a s
P o l i c y B. I n order to open up the d i s c u s s i o n the temporary chairman c a l l e d
—2—
x-esde
upon Messrs. tJeland and Mn WallSidd to e x p l a i n t h e i r views with regard
to the q u e s t i o n s b e f o r e the conference. Messrs. Ueland and Mr. Wallace,
Who f a v o r e d P o l i c y A, then p r e s e n t e d t h e i r Views i n the m a t t e r , other
members of the conference i n t e t p b l & t i n g comments or asking questions
from time to time. This wds fallowed "by a statement of the views of Mr.
Stroud, who f a v o r e d P o l i c y B, on the questions a t i s s u e , with a continuat i o n of i n t e r r o g a t i o n s and expressions from o t h e r members of the c o n f e r ence.
A f t e r some f u r t h e r d i s c u s s i o n Mr. Weed, the temporary chairman,
asked f o r an e x p r e s s i o n of the views of counsel to each Federal r e s e r v e
tank on the questions which were under c o n s i d e r a t i o n . I t was found t h a t
counsel f o r e i g h t of the Federal r e s e r v e banks f a v o r e d P o l i c y B. Counsel
f o r f o u r of the F e d e r a l r e s e r v e "banks - P h i l a d e l p h i a , Richmond, Chicago
an^L Minneapolis - f a v o r e d P o l i c y A.
the chair.
At t h i s p o i n t Mr. Wyatt r e t u r n e d to the conference and assumed
Honorable Newton D. Baker a l s o came i n a t t h i s time*
A r e s o l u t i o n was then submitted by Mr. Agnew with r e g a r d to the
d e s i r a b i l i t y of a uniform p o l i c y among Federal r e s e r v e banks on the quest i o n s under c o n s i d e r a t i o n . The r e s o l u t i o n a s o r i g i n a l l y submitted was as
follows:
.
"RESOLVED, That i t be the sense of t h i s conference
t h a t u n i f o r m i t y among a l l of the Federal r e s e r v e banks i n the
treatment of r e s e r v e balances, c o l l a t e r a l accounts and the
cash surrender value of c a p i t a l stock i n r e l a t i o n to o u t s t a n d i n g cash items, i s d e s i r a b l e and t h a t whether the
p o l i c y o u t l i n e d by Messrs. tJoland and Wallace on t h e one
hand or t h e p o l i c y o u t l i n e d by Mr. Stroud on the o t h e r hand
be adopted, the a c t i o n of a l l of the Federal r e s e r v e banks
i n r e l a t i o n to the matter under d i s c u s s i o n should be of one
accord."
Mr. Logan moved a s an amendment t h a t t h e p a r t of the p r o posed r e s o l u t i o n f o l l o w i n g the word " d e s i r a b l e " be s t r i c k e n o u t . This
o p t i o n was c a r r i e d and the r e s o l u t i o n i n the f o l l o w i n g form was then
unanimously adopted:
"RESOLVED, That i t be the sense of t h i s conference
t h a t u n i f o r m i t y among a l l of the Federal r e s e r v e banks i n
the t r e a t m e n t of r e s e r v e balances, c o l l a t e r a l accounts and
the cash surrender value of c a p i t a l stock i n r e l a t i o n to
o u t s t a n d i n g cash items, i s d e s i r a b l e . "
Mr. Parker then r e a d the following d r a f t of a r e s o l u t i o n
embodying what he considered t o be the views of the m a j o r i t y of the
conference:
"BE IT RESOLVED t h a t the following r e p r e s e n t s the
consensus of opinion of a m a j o r i t y of Counsel to the various
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Federal Reserve Banks, assembled ill conference pursuant
to t h e c a l l of the General Counsel to the Federal Reserve
Board?
"1, We construe Regulation J of the Federal Reserve Board as p r o v i d i n g t h a t the Federal Reserve Banks
s h a l l t a k e f o r c o l l e c t i o n checks sent to them f o r such p u r pose "by o t h e r "banks, merely as agents of the "banks from
which the same a r e r e c e i v e d . We regard the p o l i c y of the
Board i n t h i s regard as being economically sound, l e g a l l y
proper and e q u i t a b l e i n i t s a p p l i c a t i o n .
"2. We "believe t h a t i t would "be unwise to take
any step or to formulate any p o l i c y which would tend to
change t h i s r e l a t i o n s h i p and, s p e c i f i c a l l y , t h a t i t would
"be unwiee to attempt to superimpose upon a pure agency
s t a t u s any i n d i c i a of ownership with r e s p e c t to the subj e c t m a t t e r of tho agency.
"3, We b e l i e v e t h a t i t i s incompatible with
such agency s t a t u s f o r Federal Reserve Banks t o s e t - o f f
amounts doe to them, as agents f o r c o l l e c t i o n , a g a i n s t
indebtedness due by them to i n s o l v e n t member banks or to
non-member c l e a r i n g banks; hence, we are of the opinion
t h a t a f t e r a bank has been c l o s e d the Reserve Bank of i t s
D i s t r i c t should not t h e r e a f t e r attempt to charge u n r e m i t t e d cash l e t t e r s a g a i n s t the r e s e r v e account of the
c l o s e d bank. For the same reason we b e l i e v e t h a t a f t e r
insolvency a r e m i t t a n c e d r a f t , drawn by the closed bank,
should not be charged a g a i n s t i t s r e s e r v e account.
"4. When a Federal Reserve Bank t a k e s from
one of i t s members c o l l a t e r a l f o r the payment of indebtedness due to i t by such member, such c o l l a t e r a l should be
a p p l i c a b l e only t o the s a t i s f a c t i o n and discharge of the
o b l i g a t i o n s doe to the Reserve Bank i t s e l f . I t would be
an unwise p o l i c y , i n our opinion, to permit such c o l l a t e r a l t o be u t i l i z e d i n the l i q u i d a t i o n or s a t i s f a c t i o n of
debts payable t o the Federal Reserve Bank as a c o l l e c t i o n
agent.
" 5 . The s t a t u s of the c a p i t a l stock holdings
of a member bank i n i t s Federal Reserve Bank, upon the
insolvency or l i q u i d a t i o n of such member, i s f i x e d by the
Federal Reserve Act and, a s we construe the same, the
proceeds of sueh holdings could only be a p p l i e d i n or
toward t h e s a t i s f a c t i o n of debts due to the F e d e r a l Reserve Bank i t s e l f , as c o n t r a d i s t i n g u i s h e d from debts
which might be payable to the Reserve Bank a s a c o l l e c tion agent.
"6.
I n our opinion, any d e v i a t i o n from t h e
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3 4 9
p o l i c i e s , i n f u r t h e r a n c e of which Regulation J (as we cons t r u e i t ) was promulgated, would e n t a i l grave dangers to
Federal He serve Banks and would r e s u l t i n the p r e f e r r i n g
of a l i m i t e d number of c r e d i t o r s of an insolvent bank,
c o n t r a r y to the l e t t e r and s p i r i t of the law as i t e x i s t s
i n the v a r i o u s S t a t e s and a s Administered i n the Courts
of the United S t a t e s . "
Mr. Stroud moved t h a t the chairman of the conference appoint
two committees, one r e p r e s e n t i n g P o l i c y B, the m a j o r i t y view, and one r e p r e s e n t i n g P o l i c y A, the minority view, to d r a f t proposed amendments to the
Federal Reserve Board's Regulation J and to the check c o l l e c t i o n c i r c u l a r s
which would have the e f f e c t of i n c o r p o r a t i n g into the Regulation and the
c i r c u l a r s t h e views of the m a j o r i t y and of the m i n o r i t y , r e s p e c t i v e l y ;
these committees to r e p o r t back to the conference a t 5:00 p . m. The c h a i r man then appointed as the committee t h a t r e p r e s e n t e d the m a j o r i t y view,
Mr. Stroud, Chairman, Mr. P a r k e r , Mr. Agnew and Mr. Newell; and a s the comm i t t e e r e p r e s e n t i n g the m i n o r i t y view, Judge Ueland, Chairman, Mr. Wallace,
Uti Mbyer and Mr. S i n c l a i r .
The conference then r e c e s s e d , to meet a g a i n a t 5:00 p . m.
The conference re-convened a t 5 p.m. Mr. Stroud s t a t e d t h a t
h i s committee had not yet formulated a r e p o r t . Judge Ueland s t a t e d t h a t
h i s committee had p r e p a r e d a r e s o l u t i o n but t h a t i t was not y e t t y p e w r i t ten.
The S e c r e t a r y to the Governors• Conference a t t e n d e d t h i s
s e s s i o n of the Conference of Counsel and r e p o r t e d t h a t the Governors would
be g l a d to confer with the Conference of Counsel and suggested 2:30 p.m.
on Tuesday a s the time f o r such j o i n t conference.
On motion made and duly adopted i t was decided to meet with
the Governors on Tuesday a t 2:30 p . m. The Conference then adjourned to
meet a t 9 a.m. on Tuesday.
X-6289 |
3 5 0
Tuesday Session.
The conference again assembled on Tuesday, April 2, a t 9:00 a. m.
Mr. Stroud then "presented to the conference t h e following r e p o r t
of the committee r e p r e s e n t i n g P o l i c y B, the m a j o r i t y view:
"WHEREAS t h e r e now e x i s t s a lack of u n i f o r m i t y among
the twelve Federal r e s e r v e "banks i n t h e i r c o n s t r u c t i o n of
•Regulation J , as promulgated by t h e Federal Reserve Board,
which l a c k of u n i f o r m i t y has given r i s e to l i t i g a t i o n in
the p a s t and holds promise of increased l i t i g a t i o n i n t h e
f u t u r e with c o n f l i c t i n g d e c i s i o n s in v a r i o u s j u d i c i a l d i s t r i c t s ; and
"WHEREAS, we deem i t of t h e utmost importance t h a t
a l l of the Federal r e s e r v e banks follow a uniform p o l i c y
in the respect stated:
"BE IT RESOLVED that the f o l l o w i n g r e p r e s e n t s t h e
consensus of opinion of the Conference of Counsel to t h e
v a r i o u s Federal r e s e r v e banks, assembled pursuant to t h e
c a l l of t h e General Counsel to t h e Federal Reserve Board:
"1. We construe Regulation J of the Federal Reserve Board as
intended to -nrovide t h a t the Federal r e s e r v e banks s h a l l take
f o r c o l l e c t i o n checks sent t o them f o r such purpose by o t h e r
banks, merely as agents of the banks from which t h e same are
r e c e i v e d . We regard t h i s p o l i c y as being economically sound,
l e g a l l y proper and f a i r i n i t s o p e r a t i o n .
"2. We b e l i e v e t h a t i t would be extremely unwise to take
any s t e p or to formulate any p o l i c y which would tend to
change t h i s r e l a t i o n s h i p and, s p e c i f i c a l l y , t h a t i t would
be unwise t o attentat to superimpose upon a pure agency s t a t u s
any i n d i c i a of ownership with r e s p e c t to the s u b j e c t m a t t e r
of the agency.
"3» We b e l i e v e t h a t i t i s incompatible with such agency
s t a t u s f o r Federal reserve banks t o s e t - o f f pmounts due to
them, as agents f o r c o l l e c t i o n , a g a i n s t indebtedness due by
them to i n s o l v e n t member or non-member c l e a r i n g banks; hence,
we a r e of t h e opinion t h a t a f t e r a bank has been closed the
r e s e r v e bank of i t s d i s t r i c t being n o t i f i e d of i t s suspens i o n , should not t h e r e a f t e r attempt to charge unpaid cash
items a g a i n s t the r e s e r v e account of the closed bank. For
the same reason we b e l i e v e t h a t a f t e r n o t i c e of suspension
a remittance d r a f t , drawn by t h e closed bank, should not be
charged against i t s reserve account.
"U. When a Federal r e s e r v e bank t d r e s from one of i t s
members c o l l a t e r a l f o r t h e payment of indebtedness due to
1
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X-6289
i t "by such member, such c o l l a t e r a l should "be a p p l i c a b l e only
to the s a t i s f a c t i o n and discharge of the o b l i g a t i o n s due to
the r e s e r v e hank i n i t s own r i g h t * I t would he an unwise
p o l i c y , i n our opinion, to permit such c o l l a t e r a l to he
u t i l i z e d i n the l i q u i d a t i o n or s a t i s f a c t i o n of debts payable
to the Federal r e s e r v e bank as a c o l l e c t i o n a g e n t .
"5. The s t a t u s of the c a p i t a l stock holdings of a member
bank i n i t s Federal r e s e r v e bank, upon the insolvency or
l i q u i d a t i o n of such member, i s f i x e d by the Federal Reserve
Act and, as we construe the same, the proceeds Of such holdings could only be a p p l i e d i n or tbwafd the s a t i s f a c t i o n of
debts due to the Federal z'efeerve batik i n i t s o*n r i g h t , as
c o n t r a d i s t i n g u i s h e d from debts which might be payable to
the r e s e r v e bank as a c o l l e c t i o n agent*
" 6 . In our opinion, any d e v i a t i o n from tiieste policites; i n
f u r t h e r a n c e of which Regulation J was promulgated, would en-4
t a i l grave dangers to Federal reserve banks arid would r e s u l t
i n the p r e f e r r i n g of a l i m i t e d number of c r e d i t o r s of an ills o l v e n t bank, c o n t r a r y to the l e t t e r and s p i r i t 6f thfe law as
i t e x i s t s i n the v a r i o u s S t a t e s and as administered i n the
Courts of the United S t a t e s .
"7. In view of the c o n f l i c t i n g i n t e r p r e t a t i o n s which have
been p l a c e d upon Regulation J by the Federal r e s e r v e banks,
r e s u l t i n g i n c o n f l i c t i n g j u d i c i a l decisions i n r e l a t i o n
t h e r e t o , we deem i t of the utmost importance t h a t Regulation
J be so c l a r i f i e d by amendment as t o r e s u l t i n u n i f o r m i t y i n
i t s i n t e r p r e t a t i o n and a p p l i c a t i o n . Such amendment, we b e l i e v e , should be made a t the e a r l i e s t p o s s i b l e time. To
accomplish t h i s purpose we recommend t h a t paragraph 6 of
S e c t i o n V of Regulation "J be amended to r e a d as f o l l o w s ;
1
(6) The amount of any check f o r which payment
i n a c t u a l l y and f i n a l l y c o l l e c t e d funds i s not r e c e i v e d s h a l l be charged back to the forwarding bank,
r e g a r d l e s s of whether or not the check i t s e l f can be
r e t u r n e d . The owner or holder of any such check so
charged back s h a l l , i n such event, have no r i g h t of
r e c o u r s e upon, i n t e r e s t i n or r i g h t s of payment from
any f u n d , r e s e r v e , c o l l a t e r a l or other p r o p e r t y i n
the p o s s e s s i o n of the Federal r e s e r v e bank, 1
V.e f u r t h e r recommend the e l i m i n a t i o n from paragraph 4 of
Section V of Regulation J the following:
'or a t the option of such Federal reserve bank
to a u t h o r i z e such Federal reserve bank to charge
t h e i r r e s e r v e accounts or c l e a r i n g accounts. 1 1 1
The r e p o r t of the committee r e p r e s e n t i n g the m a j o r i t y view was
then made the s u b j e c t of general d i s c u s s i o n . Certain, amendments to the
351
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' -3~
~
.
3 5 2
language of the r e p o r t of the committee r e p r e s e n t i n g the m a j o r i t y view Were
then o f f e r e d and adopted. The report a s thus amended, i s a s f o l l o w s :
"TvHEREAS t h e r e now e x i s t s a l a c k of u n i f o r m i t y among
the twelve Federal r e s e r v e banks i n t h e i r c o n s t r u c t i o n of
Regulation J , a s promulgated "by the Federal Reserve Board,
which l a c k of u n i f o r m i t y has given r i s e to l i t i g a t i o n i n
the p a s t a n d holds promise of increased l i t i g a t i o n i n the
f u t u r e with c o n f l i c t i n g d e c i s i o n s i n v a r i o u s j u d i c i a l d i s t r i c t s | and
I, we deem i t of t h e utmost Importance t h a t
a l l of the Federal r e s e r v e barikd follow a uniform p o l i c y
i n the respec* s t a t e d !
"BE IT RBSQLVBD t h a t the following r e p r e s e n t s the consensus of opinion of the, Conference of Counsel t o the various
F e d e r a l r e s e r v e "banks, agseimhled pursuant to the c a l l of the
General Cduftsel to the Jfeder&l Reserve Board:
" 1 . We construe Regtil&titiivJ of the Federal Reserve Bdftfd
as intended to provide t h a t the f e d e r a l r e s e r v e hanks s h a l l
take f o r c o l l e c t i o n checks sent to them f o r such purpose %
other banks, merely a s agents of the banks from which the
sajze a r e r e c e i v e d . We regard t h i s p o l i c y a s being economica l l y sound, l e g a l l y proper and f a i r i n i t s o p e r a t i o n .
" 2 . We b e l i e v e t h a t i t would be extremely unwise to take
any s t e p or to f o r m u l a t e any p o l i c y which would tend to change
t h i s r e l a t i o n s h i p and* S p e c i f i c a l l y , t h a t i t would be unwise
to attempt t o superimpose upon a pure agency s t a t u s any i n d i c i a of ownership with r e s p e c t to the s u b j e c t m a t t e r of the
agency.
" 3 . We b e l i e v e t h a t i t i s incompatible with such agency
s t a t u s f o r Federal r e s e r v e banks to s e t - o f f amounts due to
them, a s a g e n t s f o r c o l l e c t i o n
, a g a i n s t indebtedness due
by them to i n s o l v e n t member o r non-pember c l e a r i n g banks;
hence, we a r e of the opinion t h a t a f t e r a bank has been
c l o s e d the r e s e r v e bank of i t s d i s t r i c t being n o t i f i e d of
i t s suspension, should not t h e r e a f t e r attempt to charge unp a i d cash items a g a i n s t the r e s e r v e account of the closed
bank. For the same reason we b e l i e v e t h a t a f t e r n o t i c e
of suspension a remittance d r a f t , drawn t>y the closed bank,
should not be charged a g a i n s t i'ts reserve account.
" 4 . When a Federal r e s e r v e bank t a k e s from one of i t s
members c o l l a t e r a l f o r the payment of indebtedness due to
i t by such member, such c o l l a t e r a l should be a p p l i c a b l e only
to the s a t i s f a c t i o n and discharge of the o b l i g a t i o n s due to
t h e r e s e r v e bank i n i t s own r i g h t . I t would be an unwise
p o l i c y , i n our opinion, to permit such c o l l a t e r a l to be
**4-
X-6389
(
u t i l i z e d i n the l i q u i d a t i o n or s a t i s f a c t i o n of debts payable
to the Federal r e s e r v e bank as a c o l l e c t i o n a&ent.
"5. The s t a t u s of the c a p i t a l stock holdings of a member
bank i n i t s Federal r e s e r v e batik,, upon the insolvency or
l i q u i d a t i o n of such member,, i s f i x e d by the Federal Reserve
Act and, a s we construe t h e same, the proceeds of such h o l d ings could only be a p p l i e d i n or toward the s a t i s f a c t i o n of
debts due to t h e Federal reserve bank i n i t s own r i g h t , a s
c o n t r a d i s t i n g u i s h e d from debts which might be payable to
the r e s e r v e bank a s a c o l l e c t i o n a g e n t .
*6. I n our opinion, any d e v i a t i o n from these p o l i c i e s ,
i n f u r t h e r a n c e of which Regulation J was promulgated, would
e n t a i l grave dangers to Federal r e s e r v e banks and would r e s u l t i n the p r e f e r r i n g of a: l i m i t e d number of c r e d i t o r s of
an i n s o l v e n t bank, c o n t r a r y to the l e t t e r and s p i r i t < e f the
law as i t e x i s t s i n the various S t a t e s and a s administered
i n the Courts of the United S t a t e s .
•
" 7 . I n view of the c o n f l i c t i n g i n t e r p r e t a t i o n s which
have been p l a c e d upon Regulation J by the Federal r e s e r v e
banks, . r e s u l t i n g i n c o n f l i c t i n g J u d i c i a l d e c i s i o n s i n r e l a t i o n t h e r e t o , we deem i t of tho utmost importance t h a t
Regulation J be so c l a r i f i e d by amendment a s to r e s u l t i n
u n i f o r m i t y i n i t s i n t e r p r e t a t i o n and a p p l i c a t i o n . Such a mendmeat, we b e l i e v e , should be made a t the e a r l i e s t p o s s i b l e
time- So accomplish t h i s purpose we recommend t h a t s u b j e c t
to the approval of General Counsel t o the Federal Reserve
Board* paragraph 6 of Section 7 of Regulation J be amended
to r e a d s u b s t a n t i a l l y a s follows*
i ( 6 ) The amount of any check f o r which payment
i n a c t u a l l y and f i n a l l y c o l l e c t e d funds i s not r e c e i v e d s h a l l be charged back to the forwarding bank,
r e g a r d l e s s of whether or not the check i t s e l f can
be r e t u r n e d . The owner o r holder of any such check
so charged back s h a l l , i n such event, have no r i g h t
of r e c o u r s e upon, i n t e r e s t i n or r i g h t s of payment
from any fund, r e s e r v e , c o l l a t e r a l or o t h e r p r o p e r t y
i n the p o s s e s s i o n of the Federal r e s e r v e b a n k . '
Tte f u r t h e r - recommend t h a t s u b j e c t to the approval of
General Counsel to the Federal Reserve Board, paragraph 4 of
S e c t i o n V of Regulation J be amended to read s u b s t a n t i a l l y
as f o l l o w s :
• 1(4) Chocks recoivod by a Federal reserve bank on
I t s , member o r nonmember c l e a r i n g banks w i l l o r d i n a r i l y bo
forwarded or p r e s e n t e d d i r e c t to such banks and such
banks w i l l be r e q u i r e d to. remit or pay t h e r e f o r a t p a r .
Such remittance or payment, may be made i n cash, by bank
d r a f t a c c e p t a b l e to the c o l l e c t i n g Federal r e s e r v e bank,
by o t h e r funds or t r a n s f e r s acceptable to the c o l l e c t i n g
3 5 3
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X-6289
354
Federal r e s e r v e "bank, or "by a u t h o r i z i n g the c o l l e c t i n g
Federal r e s e r v e hank to charge t h e i r r e s e r v e accounts
or c l e a r i n g acccu nts. 1 1 1
Mr, Agnew then moved the adoption "by the conference of the
amended r e p o r t of the committee r e p r e s e n t i n g the m a j o r i t y view. Mr. Weed
moved as a s u b s t i t u t e t h a t the r e p o r t he r e t u r n e d to tho committoo with
i n s t r u c t i o n s t h a t a r e s e r v a t i o n clause he d r a f t e d "by the committee to
cover the r i g h t of Federal r e s e r v e hanks i n s p e c i a l or exceptional cases
to charge u n r e m i t t e d f o r cash l e t t e r s to c o l l a t e r a l taken f o r t h i s
s p e c i f i c p u r p o s e . Mr. Weed's s u b s t i t u t e motion was put to a vote and
was l o s t hy a vote of t h r e e to f i v e , counsel f o r the Federal r e s e r v e
hanks of P h i l a d e l p h i a , Richmond, Chicago and Minneapolis not voting on
t h i s motion. Counsel f o r the Federal r e s e r v e hanks of Boston, New York
and Dallas voted i n the a f f i r m a t i v e on the motion.
Mr. Agnew's motion t h a t the conference adopt the r e p o r t of
the m a j o r i t y committee was then voted upon. The motion was adopted hy
a vote of e i g h t to f o u r , counsel f o r the Federal r e s e r v e hanks of Boston,
Hew York, Cleveland, A t l a n t a , S t . Louis, Kansas City, Dallas and San Francisco
•ffoting i n the a f f i r m a t i v e , and counsel f o r the Federal r e s e r v e hanks of P h i l a d e l p h i a , Richmond, Chicago and Minneapolis voting i n the negative*
In connection with the vote on the adoption of the r e p o r t of the
m a j o r i t y committee, Messrs. Weed, Logan and Stroud s t a t e d t h a t they voted
f o r t h i s r e p o r t with the understanding t h a t the r e p o r t of the committee i s
not intended to c a r r y with i t any i m p l i c a t i o n t h a t a Federal r e s e r v e hank may
not make s p e c i a l arrangements to insure the payment of checks i n s p e t i a l cases.
The f o l l o w i n g r e p o r t of the committee r e p r e s e n t i n g P o l i c y A, the
minority view, was r e a l to the conference:
"We, the undersigned, r e p r e s e n t i n g the Federal Reserve Banks
of Chicago, Minneapolis, P h i l a d e l p h i a and Richmond, are unable
to concur i n the recommendation of the m a j o r i t y of the Conference
of Counsel and i n l i e u of the amendment recommended hy tho m a j o r i t y
we recommend t h a t paragraph 4 of S e c t i o n V of Regulation J ho a mended t o r e a d a s f o l l o w s :
•(4)Checks received hy a Federal r e s e r v e hank on i t s
member or no member c l e a r i n g banks w i l l o r d i n a r i l y be forwarded
or p r e s e n t e d d i r e c t to such banks and such banks w i l l be r e q u i r e d
to remit or pay t h e r e f o r a t par* Such r e m i t t a n c e or payment may
be made i n cash, by bank d r a f t acceptable to t h e c o l l e c t i n g Fede r a l r e s e r v e ba$k, by other funds o r t r a n s f e r s acceptable to tho
c o l l e c t i n g Federal reserve bank, or by a u t h o r i z i n g the c o l l e c t i n g
Federal r e s e r v e bank to charge t h e i r r e s e r v e accounts o r cloarii^g
accounts.*
"The o b j e c t <5f t h i s amendment i s merely to c l a r i f y the meaning of the e x i s t i n g paragraph.
-6-
X-6289
.
3 5 5
"We recommend, that? paragraph 6 of Section V of Regulation
J be amended so as to Have i t read as follows:
*(6) The amount of any check f o r which payment i n
a c t u a l l y and f i n a l l y c o l l e c t e d funds i s not r e c e i v e d may "be
charged "back to the forwarding "bank r e g a r d l e s s of whether or
not the check i t s e l f can "be r e t u r n e d , "but the Federal r e s e r v e
"bank nay charge the amount of any chock n o t r e t u r n e d unpaid
to the r e s e r v e account, or c l e a r i n g account, as the caso may
be, of the bank from which such payment was not r e c e i v e d , and.
nay h o l d any othor p r o p e r t y of such bank i n i t s p o s s e s s i o n a s
s e c u r i t y f o r payment of such check. The r i g h t so to do s h a l l ,
however, bo subordinate and without p r e j u d i c e t o a l l o t h e r
r i g h t s of the Federal r e s e r v e bank upon such r e s e r v e account
and c l e a r i n g account and t o such other p r o p e r t y i n i t s p o s s e s s i o n . 1
"Our reasons f o r recommending the amendment l a s t mentioned
are as follows;
"The Federal Reserve Board i n promulgating Regulation J has
s t a t e d t h a t i t d e s i r e s to a f f o r d to the p u b l i c and to the various
banks of the country a d i r e c t , e x p e d i t i o u s , and economical system
of check c o l l e c t i o n and s e t t l e m e n t of balances and f o r t h a t purpose
has arranged to have each Federal r e s e r v e bank e x e r c i s e the f u n c t i o n of a c l e a r i n g house and c o l l e c t checks f o r such of i t s member
and non-member c l e a r i n g banks as d e s i r e to a v a i l themselves of the
p r i v i l e g e and the Board f u r t h e r r e q u i r e d i n it s Regulation t h a t
each Federal 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 of a c l e a r ing house and c o l l e c t chocks under the general terms and c o n d i t i o n s
t h e r e i n a f t e r s o t f o r t h and t h a t each member bank and non-member
c l e a r i n g t a n k s h a l l cooperate f u l l y i n the system of check c l e a r ance and c o l l e c t i o n f o r which p r o v i s i o n i s made i n the R e g u l a t i o n s .
When the Federal r e s e r v e banks were made c l e a r i n g houses f o r t h e i r
member banks we t h i n k i t was not contemplated t h a t the banks on
which chocks wore drawn should be a t l i b e r t y to convert the chocks
and p l a c e the owners of chocks p r e s e n t e d through the c l o a r i r g s y s tem i n the p o s i t i o n of c r e d i t o r s of an i n s o l v e n t bank. This amondrment i s suggested from the p o i n t of view t h a t the Federal Reserve
Board should make p r o v i s i o n f o r h o l d i n g each member of the c l e a r i n g
house a s f a r a s p o s s i b l e to i t s o b l i g a t i o n to the o t h e r members of
the c l e a r i n g house.
"Whenever a check i s c a n c e l l e d by the drawee bank and charged
to the account of the drawer, the drawer i s by the g r e a t weight
of a u t h o r i t y r e l e a s e d from l i a b i l i t y to the holder and the h o l d e r
i s r e q u i r e d t o look to the drawee bank. The h o l d e r seldom knows
or has o p p o r t u n i t y to i n v e s t i g a t e the c o n d i t i o n of the bank upon
which a check h e l d by him i s drawn. Hence, when he i s f o r c e d to
r e l e a s e the drawer, h i s o r i g i n a l debtor, and to assume the p o s i t i o n
of a c r e d i t o r of the drawee bank and s u s t a i n s any l o s s because such
bank f a i l s to remit o r pay f o r a check Which has been c a n c e l l e d so
t h a t he can n e i t h e r o b t a i n the r e t u r n of the check nor c o l l e c t t h e
amount of i t , the h o l d e r f e e l s t h a t he has a j u s t cause of d i s
1 4 8 8 9
j
356
s a t i s f a c t i o n with the System which has p l a c e d him i n t h i s
position.
"Since the check c o l l e c t i o n system was, as we have p o i n t e d
out above, e s t a b l i s h e d p r i m a r i l y f o r the s a f e t y , conveniences,
and "benefit of the "business p u b l i c , i t i s h i g h l y d e s i r a b l e to
avoid l o s s e s to the p u b l i c from such a s i t u a t i o n whenever i t
i s p o s s i b l e to do so and such l o s s e s can be avoided i n most
cases i f the Federal r e s e r v e bank has the r i g h t to r e s o r t t o
the r e s e r v e balance of a f a i l e d member bank and to the proceeds
of e x i s t i n g c o l l a t e r a l to p r o t e c t the h o l d e r s of checks deposited
f o r c o l l e c t i o n a f t e r the p r i o r demands of the Federal r e s e r v e
banks a r e s a t i s f i e d .
"We consider t h a t the primary purpose of the reserve balance
i s to enable the member banks to meet withdrawals and the p r i n c i p a l way i n which withdrawals a r e made i s by checks drawn on the
member bank, most of which a r e p r e s e n t e d through the Federal r e serve banks. Hencfe, the reserve deposit of a member bank i n the
hands of a Federal r e s e r v e bank may a p p r o p r i a t e l y and c o n s i s t e n t l y
w i t h i n the s p i r i t of the Federal Reserve Act be made a p p l i c a b l e
to the payment of checks p r e s e n t e d through the Federal r e s e r v e
banks r a t h e r than h e l d a s a p r o t e c t i o n f o r t h e general c r e d i t o r s
of the member bank,
"We a r e informed t h a t commercial banks i n the p a s t , while
l i m i t i n g t h e i r l i a b i l i t y f o r f a i l u r e to c o l l e c t checks deposited
with them, have, n e v e r t h e l e s s , used any funds or p r o p e r t y i n
t h e i r p o s s e s s i o n belonging to the drawee bank f o r the b e n e f i t of
e n d o r s e r s . P r a c t i c a l l y a l l j u d i c i a l d e c i s i o n s that have come to
our a t t e n t i o n a r e i n accord i n s u s t a i n i n g the r i g h t of the forwardi n g bank t o do t h i s and we b e l i e v e t h a t Federal r e s e r v e banks
should adopt the p o s i t i o n so sanctioned by the p r i o r usage of
commercial banks i n c o l l e c t i n g checks and a f f o r d to the depositors
complete p r o t e c t i o n a g a i n s t the d e f a u l t of the drawee bank when i t
i s ^ p r a c t i c a b l e to do so.
"We do not t h i n k t h a t t h i s p l a n , which we recomnen&d,gives
any undue p r e f e r e n c e to persons c o l l e c t i n g checks through f e d e r a l
r e s e r v e banks, f o r such persons only o b t a i n payment on checks on
which the drawers a r e r e l e a s e d and which a r e , t h e r e f o r e , ' deemed
p a i d so f a r a s the drawers, who a r e the d e p o s i t o r s of the f a i l e d
bank, a r e concerned.
"Federal r e s e r v e banks a r e f r e q u e n t l y under compulsion to
forward items d i r e c t to a member bank known to bo i n an extended
c o n d i t i o n . To send a messenger to c o l l e c t i n cash i n such a case
would o f t e n r e s u l t i n the suspension of the drawee bank, owing to
a mere temporary shortage of a v a i l a b l e f u n d s . Yet any o t h e r method
of c o l l e c t i o n i n such a .case might c o n s t i t u t e negligence and
c r e a t e l i a b i l i t y on the p a r t of the Federal r e s e r v e bank to dep o s i t o r s of checks. The p o l i c y we suggest has t h e advantage of
—8—
X-6289
35*7
reducing such l i a b i l i t y , which we "believe i s unavoidable i n
many c a s e s , to a minimum."
Counsel f o r the Federal r e s e r v e banks of P h i l a d e l p h i a , Richmond,
Chicago and Minneapolis s t a t e d t h a t they favored the adoption of the above
r e p o r t r e p r e s e n t i n g the minority view.
On motion of Mr. Agnew, the conference then adopted the following
r e s o l u t i o n p r e p a r e d by a committee c o n s i s t i n g of Messrs. P a r k e r , McConkey,
and Wallace, i n r e s p e c t t o t h e memory of the l a t e Mr. Charles L. Powell,
who was u n t i l h i s r e c e n t death, counsel f o r the Federal Reserve Bank of
Chicago:
"The Counsel r e p r e s e n t i n g the v a r i o u s Federal
Reserve Banks have l e a r n e d with the deepest
r e g r e t of the death of Mr. Charles L. Powell,
l a t e of the Chicago Bar and f o r many y e a r s
counsel to t h e Federal Reserve Bank of t h a t
City.
*He p a s s e d from the scene of h i s v a r i e d and
u s e f u l e a r t h l y a c t i v i t i e s on the eve of a Conference of h i s c o l l e a g u e s , the counsel of the s e v e r a l
Reserve Banks. In t h a t Conference, now p r e p a r i n g
t o a d j o u r n , h i s g e n i a l presence and h i s sound
c o n s e r v a t i v e advice have been s o r e l y missed, and
i t i s d e s i r e d t h a t a t r i b u t e be p a i d to h i s l i f e
and c h a r a c t e r .
"He was a lawyer of splendid a t t a i n m e n t s and of unu s u a l a b i l i t y , profoundly l e a r n e d i n the law and
p o s s e s s e d of a fund of wholesome common s e n s e .
"As a n advocate he was p e r s u a s i v e and f o r c e f u l ,
and, b e i n g a man who r e s p e c t e d the law and l o v e d
h i s p r o f ease ion, h i s viewpoints were never molded
by c o n s i d e r a t i o n s of mere expediency. Having a
l o g i c a l and j u d i c i a l mind, he was p e c u l i a r l y
f i t t e d to serve a s an a d v i s e r and c o u n s e l l o r .
"He was the soul of honor and i n t e g r i t y - honest
i n thought a s w e l l a s i n h i s a c t a . His p e r s o n a l i t y
a t t r a c t e d a t f i r s t acquaintance and h i s s t e r l i n g
q u a l i t i e s ripened such a t t r a c t i o n s i n t o r e a l a f f e c t i o n and f r i e n d s h i p s .
"Within the r e s t r i c t e d bounds of a r e s o l u t i o n of
sympathy and esteem i t i s impossible t o do j u s t i c e
t o the c h a r a c t e r , a t t a i n m e n t s and r e a l worth .of the
f r i e n d , whose l o s s we so deeply f e e l . I t is f i t t i n g ,
however, t h a t o t h e r s should know something of the
h i g h opinion i n which he was h e l d by those with whom
he came i n c o n t a c t ,
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X-6289
:
3 5 8
"THEREFORE, to the end. t h a t h i s memory may "bo honored.
and. t h a t the sympathy of t h i s "body may "be expressed to
the "bereaved family, EE IT RESOLVED by the Counsel to
the twelve Federal Reserve Banks, i n conference a s sembled, t h a t the above and f o r e g o i n g "be adopted as
e x p r e s s i n g i n some measure our admiration, esteem and
a f f e c t i o n f o r Mr. Powell; t h a t a copy of t h i s r e s o l u t i o n "be spread upon the records of t h i s Conference and
a copy he f u r n i s h e d by the S e c r e t a r y to the members of
h i s family."
The Conference then adjourned, a t 12;30 p . n .
Meeting with Governors.
At 2 : 3 0 p . m. the Conference of Counsel net with the Governors'
Conference to discuss the s u b j e c t s which had been under c o n s i d e r a t i o n by
the Counsel. The Chairman of the Governors' Conference f i r s t c a l l e d upon
Mr, Wyatt, the Chairman of the Conference of Counsel, to make a statement
a s t o the m a t t e r s under d i s c u s s i o n and the recommendations of the Counsel.
Mr. Wyatt stated, the problem and the a c t i o n taken by the Conference of
Counsel4 He read t h e r e s o l u t i o n of the Conference of Counsel e x p r e s s i n g
the d e s i r a b i l i t y of a uniform p o l i c y and then read the r e p o r t of the comm i t t e e r e p r e s e n t i n g the m a j o r i t y view as adopted by the Conference, t o gether with the statement of r e s e r v a t i o n of Messrs. Weed, Logan and Stroud.
He a l s o read the r e p o r t of the committee r e p r e s e n t i n g the m i n o r i t y view.
The Chairman of the Governors' Conference then c a l l e d upon various members
of the Conference of Counsel to express t h e i r views upon the q u e s t i o n s under
c o n s i d e r a t i o n . Questions were addressed by the Governors to the Counsel and
the s u b j e c t g e n e r a l l y d i s c u s s e d between the Governors and the Counsel.
Mo a c t i o n was taken by the Governors while the Counsel were p r e s ent and a t 5:15 the j o i n t conference between the Governors and the Counsel
was concluded.
(Signed)
George B. Vest,
Secretary.
I
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X~5291
April 18, 1929.
SUBJECT:
Holidays during May, 1929.
Dear S i r :
The Federal r e s e r v e banks and branches l i s t e d
below w i l l be closed on account of h o l i d a y s on the dates
s p e c i f i e d , and t h e r e f o r e w i l l not p a r t i c i p a t e i n e i t h e r
the Gold Settlement Fund or the Federal r e s e r v e note
clearing:
Friday
May 10
Charlotte
Confederate
Memorial Day
Monday
May 20
Charlotte
Mecklenburg
independence Day-
Monday
May 20
Havana
Agency
Cuban Independence Day
On Thursday, May 30th, Memorial Day, t h e r e w i l l
be n e i t h e r Gold Settlement Fund nor Federal r e s e r v e note
c l e a r i n g and the books of the Board w i l l be c l o s e d . The
o f f i c e s of the Board and a l l Federal reserve b&hks and
branches, with the exception of the following, t r i l l be
c l o s e d on t h a t day: C h a r l o t t e , A t l a n t a , Ifew Orleans,
Birmingham, L i t t l e Edck and Havana Agency*
C r e d i t s of May 10th and 20th f o r C h a r l o t t e
Branch may be included i n the Gold Fund Clearing with
those of the f o l l o w i n g business days.
P l e a s e 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.
359
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6292
A p r i l 18, 1929.
SUBJECT:
Daylight Saving Schedule, 1929.
Dear S i r :
Beginning Monday, April 29th, and ending
Saturday, September 28th, the following Federal Reserve Banks and Branches w i l l operate under daylight
saving schedule:
Boston
Philadelphia
Hew York
Buffalo
Pittsburgh
Chicago
The Federal Reserve Branch Banks l i s t e d
below w i l l observe s p e c i a l banking hours:
Helena Branch from May 1st to August 31st,
9:30 a.m. to 2:00 p.m., except Saturday, when the hours
w i l l be 9:30 a.m. to 1:00 p.m., mountain time.
S a l t Lake City Branch from April 29th to
September 30th, 9:00 a.m. to 2:00 p.m., except S a t u r day, when banking hours w i l l be 9:00 a.m. to 12:00
noon, mountain time.
P l e a s e n o t i f y branches.
Very t r u l y yours,
J . C. Koell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAEKS.
360
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6293
A p r i l 18, 1929.
SUBJECT:
C l a s s i f i c a t i o n of personnel a t Federal
Reserve Banks.
Dear S i r :
With r e f e r e n c e to the Board's l e t t e r X-6267
of March 14, 1929, on the above s u b j e c t , I "beg to adv i s e t h a t the Committee on Personnel a t Federal Reserve
Banks met i n Chicago on April 8, and submitted a r e p o r t
to the Federal Reserve Board, under date of A p r i l 10,
recommending t h a t a p l a n of job a n a l y s i s and c l a s s i f i c a t i o n of employees s i m i l a r i n scope and purpose to t h a t
o u t l i n e d by the Board and explained i n i t s l e t t e r of
October 9, 1928., be adopted by each Federal r e s e r v e bank.
The Committee's r e p o r t , a copy of which i s enclosed h e r e w i t h , has been approved by the Federal Reserve Board.
I f your d i r e c t o r s concur i n the Committee's
r e p o r t 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 prepare an
a n a l y s i s of each p o s i t i o n or job, except a p p r a i s e d p o s i t i o n s , i n your bank on "form A", a supply of which has
been f u r n i s h e d you by the Chairman of the committee and
forward i t to the Board a t your convenience. The app r a i s e d p o s i t i o n s , i . e . , p o s i t i o n s f o r which i t i s not
p r a c t i c a b l e to e s t a b l i s h s a l a r y ranges, should be kept
a t a minimum. The Board hopes t h a t the personnel r e p o r t s
to be submitted f o r each bank and branch w i l l be prepared
a s promptly a s convenient, i n order t h a t they may be r e viewed by the Board and, i f p r a c t i c a b l e , the p l a n p l a c e d
i n a c t u a l o p e r a t i o n b e f o r e the end o-f the calendar y e a r .
Your r e p o r t on form A should be accompanied by
a %ist of employees i n your bank, showing the c l a s s i f i c a t i o n symbol of each employee as used in the second column
of form A, the t i t l e of the job h e l d , the s a l a r y p a i d to
the employee on the date of the r e p o r t , and except i n the
case of a p p r a i s e d p o s i t i o n s , the maximum and minimum s a l a r y p r o v i d e d f o r the p o s i t i o n or j o b . Experience i n the
p a s t has shown t h a t i n adopting a p l a n of the k i n d under
c o n s i d e r a t i o n i t w i l l be found t h a t some employees a r e
r e c e i v i n g more than the maximum provided f o r t h e i r grade.
X-6293
-2—
While i t i s not expected t h a t such employees w i l l be r e duced in s a l a r y a t the t i n e the p l a n i s adopted i t i s to
be expected t h a t i n course of t i n e the s a l a r i e s of such
employees w i l l he brought w i t h i n the s a l a r y ranges approved f o r the p o s i t i o n s occupied.
While the Board r e a l i z e s t h a t some of the
p o s i t i o n s i n the Federal reserve banks, such as t h a t of
t e l l e r f o r i n s t a n c e , a r e not comparable with s i m i l a r l y
designated p o s i t i o n s i n commercial banks, i t expects
t h a t i n p r e p a r i n g . the s a l a r y ranges f o r the d i f f e r e n t *
p o s i t i o n s i n the bank you w i l l take i n t o c o n s i d e r a t i o n
the s a l a r i e s p a i d by l o c a l member banks f o r corresponding p o s i t i o n s , and t h a t your s a l a r y ranges w i l l be i n
s u b s t a n t i a l accord with s a l a r i e s p a i d f o r s i m i l a r work
by the l o c a l banks. Following t h i s p r i n c i p l e i t i s app a r e n t t h a t i n many cases the s a l a r y ranges f o r p o s i t i o n s
i n a branch may be s u b s t a n t i a l l y d i f f e r e n t from those a t
the head o f f i c e or a t another branch i n the sane, d i s t r i c t .
As s t a t e d i n previous correspondence a f t e r the
c l a s s i f i c a t i o n p l a n submitted by your bank, i n c l u d i n g
s a l a r y ranges, has been approved by the Federal Reserve
Board, you w i l l be a u t h o r i z e d to promote employees w i t h i n
a given grade and from one grade to another without securing the Board*s approval, with the understanding, of course,
t h a t a l l employees w i l l be engaged upon the work c a l l e d f o r
by the c l a s s i f i c a t i o n plan, and t h a t they w i l l not be p a i d
s a l a r i e s i n excess of the maximum s a l a r y provided i n the
p l a n without the Board's approval. A f t e r t h i s new p l a n i s
i n o p e r a t i o n i t w i l l s t i l l be necessary f o r you to submit
r e p o r t s t o the Board f o r approval, annually or perhaps
o f t e n e r , showing a c t u a l s a l a r i e s p a i d to employees and
changes during the r e p o r t p e r i o d . You w i l l be advised of
the d e t a i l s to
covered i n these r e p o r t s a t a l a t e r d a t e .
By o r | e r of the Federal Reserve Board.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
*
Enclosure.
TO
GOVERNORS AND CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
362
COPY
X~6293r«a
A o r i l 10, 1929.
I
Q<
1
REPORT OF COMMITTEE ON CLASSIFICATION 01 PERSONNEL
AT FEDERAL RESERVE BANKS
Federal Reserve Board,
Washington, D. C.
Gentlemen:
Pursuant to the Board's l e t t e r of March 14, 1929, (X-6267),
the Committee on C l a s s i f i c a t i o n of Personnel a t Federal Reserve Banks h e l d
a meeting a t the Federal Reserve Bank of Chicago on Monday, April 8, 1929.
The meeting was c a l l e d to order a t 10:00 A.M., with Mr. ft. J . Fleming a c t ing a s temporary Chairman.
Upon motions, Mr. M. J . Fleming was e l e c t e d Chairman of the
meeting and Mr. J . S. Walden, J r . , was e l e c t e d S e c r e t a r y , The f u l l committee
c o n s i s t i n g of the following r e p r e s e n t a t i v e s of the v a r i o u s r e s e r v e "banks, was
present:
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
W. w.
L. R.
W. H.
M. J .
J . S.
Creed
J . H.
0 . M.
B. V.
C. A.
R. B.
C. E.
Paddock
Rounds
Hutt
Fleming
Walden, J r .
Taylor
Dillard
Attebery
Moore
Worthington
Coleman
Sarhart
Mr. E. L. Smead of the Federal Reserve Board, and Mr. S. F.
Gilmore of the Federal Reserve Bank of S t . Louis were a l s o . p r e s e n t a t the
meeting.
The Chairman c a l l e d upon Mr. Smead to o u t l i n e the p o s i t i o n
<Sf the Federal Reserve Board with respect to the approval "by the Board of
s a l a r i e s proposed "by the v a r i o u s Federal Reserve Banks f o r t h e i r employes
and the purposes which the Board had i n mind when i t asked t h a t the Comm i t t e e he a p p o i n t e d . He s t a t e d t h a t i n order t h a t the Board might be i n
a p o s i t i o n to more adequately and i n t e l l i g e n t l y discharge i t s r e s p o n s i b i l i t y
of p a s s i n g upon the s a l a r i e s of employes a t the Federal Reserve Banks, and
a l s o to f a c i l i t a t e the work of the banks i n making t h e i r p r o p o s a l s f o r
s a l a r y a d j u s t m e n t s , i t would seem d e s i r a b l e to analyze each job i n the banks
and wherever p r a c t i c a b l e , provide a s a l a r y range f o r each j o b .
Mr. Fleming, Chairman of the Sub-Commit t e e , reviewed b r i e f l y
the work of the Sub-Committee and s t a t e d what had been accomplished by the
Sub-Oommittee, l e a d i n g to the n e c e s s i t y f o r c a l l i n g a meeting of the f u l l
Committee.
364
X-6293-a
I t was suggested t h a t the members of the Committee r e p r e s e n t ing those hanks which have a d e f i n i t e plan of job a n a l y s i s and c l a s s i f i c a t i o n
of employes in operation a t the p r e s e n t time, give a "brief o u t l i n e of t h e
p l a n s under which they a r e o p e r a t i n g f o r the b e n e f i t of r e p r e s e n t a t i v e s of
banks which a r e n o t o p e r a t i n g under any such p l a n . Mr. Rounds o u t l i n e d the
p l a n in o p e r a t i o n a t the Federal Reserve Bank of New York, Mr. Fleming the
p l a n proposed by t h e Cleveland reserve bank, and Mr. D i l l a r d the p l a n of t h e
Chicago r e s e r v e bank.
Each member of the Committee was then c a l l e d upon to give a
b r i e f account of the system employed in h i s bank of a d j u s t i n g t h e s a l a r i e s
of employes.
The system i n e f f e c t a t h i s bank was o u t l i n e d by each member
of t h e Committee, and each member was c a l l e d upon t o give an expression of
h i s views and opinion of the proposal f o r a job a n a l y s i s and c l a s s i f i c a t i o n
of employes according to j o b s .
While a few of t h e members, p a r t i c u l a r l y
t h o s e r e p r e s e n t i n g the smaller banks, f e l t t h a t adequate supervision was being given to t h e c o n s i d e r a t i o n of s a l a r i e s in t h e i r banks, i t was agreed by
each member t h a t a plan of job a n a l y s i s and c l a s s i f i c a t i o n of employes
o f f e r e d no a d m i n i s t r a t i v e d i f f i c u l t i e s , and a l l members expressed themselves
as being f a v o r a b l e to t h e adoption of a p l a n . I t was f e l t t h a t experience
might prove t h a t each bank, r e g a r d l e s s of i t s s i z e , might be m a t e r i a l l y
b e n e f i t t e d in i t s work of s a l a r y a d m i n i s t r a t i o n by u s i n g such a p l a n , and
t h e r e f o r e each bank should h e a r t i l y co-operate in i t s a d o p t i o n , looking to
probable b e n e f i t s to be derived, as explained by r e p r e s e n t a t i v e s of those
banks which a r e now o p e r a t i n g under a job a n a l y s i s p l a n .
Upon motions duly seconded and c a r r i e d , i t was voted unanimously(1)
That a plan of job a n a l y s i s and c l a s s i f i c a t i o n of employes
s i m i l a r in scope and purpose to t h a t o u t l i n e d by t h e Boafd and explained in
t h e l e t t e r dated October 9, 1928, addressed to each Federal Reserve Bank by
the Chairman of t h e Sub-Committee, should be adopted by each Federal Reserve
Bank.
(2)
That i t i s impracticable to devise a uniform plan f o r u s e
by a l l Reserve Banks and Branches, and t h e r e f o r e each bank should analyze
the jobs and c l a s s i f y the personnel a s they e x i s t in t h e i n d i v i d u a l bank or
branches and submit i t s own plan to the Federal Reserve Board f o r approval.
(3)
That in a d d i t i o n to t h e d u t i e s of each job, the q u a l i f i c a t i o n s
r e q u i r e d f o r each job should be included i n the p l a n .
(4)
That a minimum and maximum s a l a r y f o r each job (other than
a p p r a i s e d j o b s ) under each group c l a s s i f i c a t i o n should be e s t a b l i s h e d .
(5)
That a l l jobs as f a r as p o s s i b l e should be c l a s s i f i e d under
t h e general scheme of group and grade c l a s s i f i c a t i o n s and a p p r a i s e d j o b s ,
t h a t i s , jobs considered to come under the appraised group, should be kept
to a minimum.
« *
i
-3-
365
X-6293-a
(6)
That each tank i n submitting i t s a n a l y s i s of jobs, as the
jobs e x i s t i n the i n d i v i d u a l "bank or branch should use the form adopted by
the sub-conr^ittee as r e v i s e d , i n r e q u e s t i n g information from each bank*
This f b r n i s designated as "Form A", and inasmuch as i t vras p r i n t e d a t the
p r i n t i n g p l a n t of the Federal Reserve Bank of Cleveland, and the type i s
s t i l l standing, Mr. Fleming agreed to the suggestion t h a t the Cleveland bank
f u r n i s h each o t h e r bank with an a p p r o p r i a t e supply of the form f o r the p u r pose of submitting i t s p l a n .
(7)
That any p l a n adopted by any bank should, f o r the p r e s e n t
time a t l e a s t , p r o v i d e a maximum s a l a r y . f o r each job based on the d u t i e s of
the p a r t i c u l a r job, and no p r o v i s i o n should be made t o pay s a l a r i e s above
the maximum i n r e c o g n i t i o n of the l e n g t h of service of any p a r t i c u l a r em-?
p l o y e e . I t was f e l t t h a t inasmuch as the r e s e r v e banks a r e comparatively
young i n s t i t u t i o n s and the n e c e s s i t y f o r the r e c o g n i t i o n of length of s e r v i c e has not been p r e s s i n g up to t h i s time, t h i s f e a t u r e of any p l a n might
be considered and taken up with the Board a t a l a t e r time.
R e s p e c t f u l l y submitted:
(S)
(S)
J . S. Walden, J r
Secretary.
M. J . Fleming
Chad rman.
366
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6295
April 23, 1929.
\
SUBJ3CT:
Canadian Currency.
Dear S i r :
Under date of September 14, 1928, the Department of. Commerce vzrote
the F e d e r r l Reserve Board c a l l i n g a t t e n t i o n to the s p i r i t e d complaints
by Canadians a g a i n s t the a t t i t u d e of Americans i n c e r t a i n s e c t i o n s of
the United S t a t e s when tendered Canadian currency i n payment of h o t e l
"bills and f o r s u p p l i e s purchased, and asking whether machinery could
not be s e t up to p u t Canadian "bank notes a t or near -oar i n t h i s country.
With the l e t t e r from the Department of Commerce was enclosed a memorandum from the Chief of the Finance and Investment Division commenting
on the charges made on currency "by "banks and merchants i n v a r i o u s sect i o n s of the country. A copy of the l e t t e r and memorandum i s enclosed. '
Following the r e c e i p t of t h i s l e t t e r , the Board l a i d the m a t t e r
"before the Governors a t t h e i r Conference i n Washington i n October, 1928,
and i n accordance with the agreement reached a t the Conference, as you
were a d v i s e d on December 10, 1928, appointed a committee c o n s i s t i n g of
tho Managing D i r e c t o r s of tho B u f f a l o , D e t r o i t and S e a t t l e Branches and
Deputy Governor Eoore of the Federal Reserve Bank of Minneapolis to
study the problem. At the same time the Board s t a t e d t h a t t h e m a t t e r
would be iiade the s u b j e c t of s p e c i a l communications to the Governors of
those Federal r e s e r v e banks having r e p r e s e n t a t i v e s on the committee.
The Board has continued to give t h i s matter c o n s i d e r a t i o n sinc e
the Governors' Conference with e s p e c i a l r e f e r e n c e to the s e r v i c e which
the Federal r e s e r v e banks might render i n t h i s connection; but i t has
not yet r e q u e s t e d the Committee to b e j i n a study of the question. I t
i s c l e a r to the Board t h a t the Federal reserve banks should not absorb
any m a t e r i a l expense i n t h i s undertaking, as i t i s not a matter over
which they have any c o n t r o l or one t h a t i s n e c e s s a r i l y involved i n the
f u n c t i o n i n g of the banks i n accordance with the p r o v i s i o n s of the Fede r a l Reserve Act. The Board i s i n c l i n e d to b e l i e v e , however, t h a t a
s u b s t a n t i a l s e r v i c e would be rendered to American business men i f some
means were provided whereby Canadian currency spent i n t h i s country
could be redeemed a t a minimum of expense and a t a cost which would be
known by the merchants i n advance. The Board understands t h a t expendit u r e s i n t h i s country by Canadian t o u r i s t s amount to about $75,000,000
a year.
One proposal f o r handling the s i t u a t i o n which has been suggested
to the Board seems to have considerable m e r i t and the Board would l i k e
to have your advice a s to whether t h i s p r o p o s a l , as o u t l i n e d below,
would work out s a t i s f a c t o r i l y i n your d i s t r i c t and whether you would
367
X-6295
-2-
be w i l l i n g to cooperate by accepting Canadian currency under, the conditions specified.
The p l a n contemplates t h a t the Federal reserve banks s h a l l accept
Canadian currency from member banks along with other currency shipments
and t h a t they s h a l l pay member banks a t par f o r such currency, l e s s the
expense of e f f e c t i n g i t s redemption, i . e . , a f t e r deduction of shipping
charges and l o s s of i n t e r e s t on the currency i n t r a n s i t and making a l lowance f o r the discount or premium on Canadian exchange. This p l a n
a l s o contemplates t h a t the Federal r e s e r v e banks would n o t i f y member
banks of t h e i r w i l l i n g n e s s to accept Canadian currency along with other
currency and t h a t the Federal r e s e r v e banks would assume shipping c o s t s
the sarao a s they do on United S t a t e s currency, but t h a t c r e d i t would be
given f o r the Canadian currency a t par l e s s a s p e c i f i e d discount i n tended to cover s o l e l y the cost of redemption. If the Federal r e s e r v e
banks could render a s e r v i c e of t h i s kind, it i s the opinion of the
Department of Commerce and a l s o of t h e Federal Reserve Board t h a t they
would not only h e l p to remove t h e wide-spread i r r i t a t i o n and resentment
of Canadian t o u r i s t s over th,e unreasonable discount now sometimes charged
on t h e i r currency but would be rendering a r e a l s e r v i c e to the b u s i n e s s
men i n t h e i r d i s t r i c t s .
I t w i l l be a p p r e c i a t e d , t h e r e f o r e , i f you w i l l advise the Board
whether you would be w i l l i n g to undertake t h i s s e r v i c e , and i f so, how
you would expect to dispose of the currency and what discount you would
expect to have to charge member banks normally i n order to cover your expenses i n connection t h e r e w i t h . If t h i s p l a n should be adopted, would i t
be b e t t e r t o determine the t r a n s p o r t a t i o n expenses and then have a f l u c t u a t i n g r a t e dependent on the Canadian exchange r a t e , or to have a f l a t
r a t e which would apply throughout the year and be so f i x e d a s i n the long
run to approximately o f f s e t your expense?
Whether i t w i l l be necessary f o r the Board to r e q u e s t the committee
t o study t h i s q u e s t i o n w i l l depend somewhat on the r e p l i e s received to
t h i s l e t t e r , but no f u r t h e r a c t i o n w i l l be taken by the Board i n t h i s
connection u n t i l a f t e r the r e p l i e s from a l l Federal r e s e r v e banks a r e r e c e i v e d and a n a l y z e d .
Very t r u l y yours,
Edmund P i a t t ,
Vice Governor*
LETTER TO ALL GOVERNORS
COPY
X-^295-a
DEPABTMSITT OF COMMERCE
Bureau of Foreign and Domestic Commerce
WASHINGTON
September 14, 1928.
In r e p l y r e f e r to 24
The Honorable
Roy A Young, Governor,
Federal Reserve Board,
Washington, D. C.
My dear Governor:
As the enclosed memorandum by our Finance Division
shows, t h e r e i s widespread i r r i t a t i o n and resentment i n
Canada a g a i n s t the a t t i t u d e of Americans when tendered
Canadian currency by our Canadian v i s i t o r s . In many
cases Canadian banknotes are accepted i n t h i s country
a t a discount of f i v e , t e n and even twenty p e r c e n t ;
and i n o t h e r cases they are r e j e c t e d e n t i r e l y as i f
they were "bad money". Quite a p a r t from the embarrassment, inconvenience and pecuniary l o s s to which our
Canadian v i s i t o r s a r e thus p u t , i t appears t h a t t h e i r
n a t i o n a l p r i d e i s involved. Canadians a r e j u s t l y proud
of t h e i r high >nalional t r e d i t and of t h e i r e x c e l l e n t
banking system. They p o i n t out t h a t i n Canada American
money i s n e a r l y everywhere accepted a t p a r , and they
f e e l t h a t our discount upon t h e i r currency i s u n f a i r
and inexcusable. The whole s i t u a t i o n i s s i n g u l a r l y unfortunate.
I n 1927 Canadian t o u r i s t s spent about $51,000,000
i n the United S t a t e s , according to the estimate i n our
"balance of i n t e r n a t i o n a l payments." The o f f i c i a l Cana d i a n e s t i m a t e was considerably h i g h e r , and t h e t r a f f i c
i s i n c r e a s i n g r a p i d l y . I f e e l t h a t our n a t i o n can w e l l
a f f o r d t o encourage t h i s t r a f f i c and t h a t nothing should
be overlooked to make the stay of our Canadian v i s i t o r s
p l e a s a n t . I n t h a t s p i r i t I am asking your he lp i n s o l v ing t h i s extremely unpleasant exchange s i t u a t i o n .
Several of the r e p r e s e n t a t i v e s of t h i s Bureau ( i n
Canada and i n our d i s t r i c t o f f i c e s i n t h i s country) have
suggested t h a t the Reserve Banks might e a s i l y s e t up
machinery t h a t would put Canadian banknotes a t p a r i n
t h i s country and a t the same time speedily withdraw them
i
368
X-6295-a
- 2 -
from c i r c u l a t i o n h e r o . I wonder i f somqthi% of t h i s kind,
cannot ho arranged, ho two on the northern Reserve hanks and
t h e i r Canadian correspondents. As I understand i t , the
expenses of shipping currency between the member hanks and
t h e i r Reserve Bank (both to and from) i s borne by the l a t t e r ;
so the member banks would be put to no expense — and to but
very l i t t l e inconvenience — i n a c c e p t i n g Canadian b i l l s a t
p a r , i f the Reserve Bank would accept them a t p a r . They
would simply include the Canadian b i l l s i n the same packet
with the Federal Reserve Motes they are now r e g u l a r l y s h i p p i n g to the Reserve Bank.
Perhaps t h i s i s much l e s s simple thkh i t appears to ah
o u t s i d e r l i k e .myself, but I should g r e a t l y a p p r e c i a t e h e a r ing from you ifhether something of t h i s k i n d cannot be accomplished; 1 f a t h e r thitik Wo can ignore Canadian coins,
a s they would inVolve very much smaller amounts and as the
machinery f o r h a n d l i n g them Would cost riidre.
Cordially yours,
J u l i u s Klein,
Director,
Enclosure;
COPY
X-6295-b
370
DEPARTLIETT OF COifi.3RCE
Bureau of Foraipn and Domestic Commerce
PISHimsOE
September 11, 1928.
In r e p l y r e f e r to
To:
S e c r e t a r y Whiting,
From:
Finance and Investment Division,
Ee:
Heavy Exchange Charges on Canadian Currency.
24
On August 2, Commercial Attache Meekins, Ottawa, r e p o r t e d to the e f f e c t t h a t he had r e c e i v e d several s p i r i t e d
complaints by Canadians a g a i n s t the a t t i t u d e of Americans
when tendered Canadian currency by v i s i t o r s from Canada.
The Commercial Attache mentioned t h a t a g r e a t deal of i r r i t a t i o n and f r i c t i o n r e s u l t s and t h a t i n many i n s t a n c e s
the expenditures of Canadian t o u r i s t s i n t h i s country are
c u r t a i l e d . He urged a c t i o n to c o r r e c t t h i s s i t u a t i o n .
In order to get information upon which to base a c t i o n , a c i r c u l a r l e t t e r was sent to several of the Dist r i c t and Cooperative O f f i c e s of t h i s Bureau l o c a t e d
n e a r e s t to the Canadian f r o n t i e r , and t o our f o r e i g n o f f i c e s a t Montreal, Toronto, Vancouver and Winnipeg. A
summary of the information thus obtained f o l l o w s :
THE ATTITUDE OF CAM&DIAHS
Ottawa:
AS alderman a t Ottawa complained t h a t a f t e r spendi n g about $150 of American currency i n a department s t o r e
a t P h i l a d e l p h i a , he r e q u e s t e d the s t o r e to exchange a
r e l a t i v e l y small sum i n Canadian banknotes, a t the c u r r e n t
r a t e of exchange. The s t o r e r e f u s e d . Friends of t h e a l d e r man have complained a g a i n s t s i m i l a r experiences a t "Cleveland, B u f f a l o , Rochester, New York and other c e n t e r s " .
What seems to rankle i s t h a t American currency (even
c o i n s ) i s f r e e l y accepted a t p a r throughout Canada. Canadians a r e j u s t l y proud of t h e i r e x c e l l e n t banking system
and of t h e i r h i g h n a t i o n a l c r e d i t . Their n a t i o n a l p r i d e
i s involved. I t i s not wholly a question of p e r s o n a l i n convenience and pecuniary l o s s .
-2-
X-6295-b
|
Winnipeg;
" I t i s quite t r u e t h a t there i s Widespread i r r i t a t i o n
i n Canada on account of the r e f u s a l "by merchants and o t h e r s
i n the United S t a t e s to accept Caaa.div3.n currency a t p a r or
a t a reasonable fcatei" Canadian m o t o r i s t s complain t h a t
i n the smgll^r American c i t i e s they have d i f f i c u l t y i n exchanging Canadian banknotes, even a t the "banks, which exact
a discount of 5 to 10 p e r c e n t . " I t i s s h o r t - s i g h t e d to
take advantage of the e x t r e m i t i e s of v i s i t o r s f o r the sake
of a few d o l l a r s of immediate g a i n . "
The e f f e c t s of the i r r i t a t i o n among Canadians over
t h i s d i f f i c u l t y a r e l a r g e l y i n t a n g i b l e . People who have
taken a t r i p i n the United States* and who have been
charged t e n per cent discount on t h e i r Canadian currency,
come back and, t e l l a l l t h e i r f r i e n d s about i t . The n a r r a t i o n of these i n c i d e n t s provokes i r r i t a t i o n a g a i n s t the
United S t a t e s g e n e r a l l y . (Trade Conmissioner R i c h a r d s ) .
Montreal:
The f a c t t h a t Canadians i n the United S t a t e s a r e una b l e to use t h e i r currency f r e e l y i s without doubt a source
of i r r i t a t i o n . . . . The heavy exchange charged even by f i r s t c l a s s h o t e l s i s annoying to most C a n a d i a n s . . . . O f t e n the
manner of our people i n r e j e c t i n g Canadian money makes the
Canadian f e e l t h a t he i s t r y i n g to pass bad money o f f on
them.. .Canadians a r e proud of t h e i r currency since t h e r e i s
no q u e s t i o n a s to i t s soundness....Any l o s s e s i n exchange
would be more than made up i n p r o f i t s from s a l e s to Canad i a n s . ( A s s i s t a n t Trade Commissioner France).
Vancouver:
The f a c t t h a t Canadian currency i s not acceptable to
American merchants probably h u r t s the p r i d e of some of the
Canadian t o u r i s t s
"but the complaints come mostly from
the lfess i n t e l l i g e n t c l a s s . ( A s s i s t a n t Trade Commissioner
Prohert).
THE PRACTICES IN CERTAIN AMERICAN CITIES
Columbus. Ohio:
"An i n v e s t i g a t i o n shows t h a t busine ss houses and h o t e l s
accept Canadian currency a t e i g h t y cents on the d o l l a r . "
(Columbus Chamber of Commerce).
Keokuk, Iowa:
"Very l i t t l e Canadian money i s seen h e r e . . . I c o n g r a t u l a t e
37j[
-3-
X-6295-1)
you upon having the f o r e s i g h t to take t h i s matter up; f o r
we on t h i s s i d e of the w o r l d ' s l a r g e s t u n p r o t e c t e d boundary
should do everything p o s s i b l e to r e t a i n the f r i e n d s h i p s ,
"business and p e r s o n a l , of our Canadian f r i e n d s . " (Foreign
Trade S e c r e t a r y Holmes, Keokuk Chamber of Commerce).
Chicago:
"The r e p o r t t h a t there i s widespread resentment i n
Canada on t h i s account i s no doubt c o r r e c t . I t i s unf o r t u n a t e t h a t sufeh a s i t u a t i o n e x i s t s , and I "believe i t
would "be very much worthwhile t r y i n g to solve the problem. •
The discount charged by small banks ranges as high
a s 10 per cent on account of the "bother" of h a n d l i n g the
currency. I b e l i e v e i t i s s a f e to say t h a t the l a r g e r
s t o r e s and h o t e l s accept Canadian currency a t a discount
of not l e s s than 5 p e r cent; the small shops and h o t e l s
very o f t e n r e f u s e to accept i t a t a l l , and so f a r as I
know, none »f the railway companies accept i t . The l a r g e r
banks charge from 1 to 2 p e r cent f o r b i l l s and from 3 to
5 p e r cent f o r s i l v e r . " ( D i s t r i c t O f f i c e Manager R o b e r t s ) .
*
S t . Louis:
One of the banks here buys Canadian b i l l s a t 90 c e n t s
and, when an amount has been accumulated, sends them by
messenger to the American Express o f f i c e and r e c e i v e s 96
c e n t s . In the case of good customers, however, the 96 cents
i s p a i d o u t r i g h t by the bank.
One department s t o r e accepts Canadian money a t p a r ,
although sugh t r a n s a c t i o n s a r e few. Another department
s t o r e r e f u s e s i t and advises customers tendering i t to
have i t converted a t a bank. A t h i r d s t o r e a c c e p t s i t a t
the p r e v a i l i n g exchange r a t e . The r a i l r o a d s uniformly
r e j e c t Canadian money. The t h r e e or four p r i n c i p a l h o t e l s
accept Canadian b i l l s d o l l a r f o r d o l l a r and take any exchange l o s s a t the bank. ( D i s t r i c t O f f i c e Manager Gaukel).
Rochester, N. Y.:
I t seems to be the general p r a c t i c e af department
s t o r e s , r a i l r o a d s and h o t e l s to accept Canadian currency
a t pax. Some of the banks do l i k e w i s e , while o t h e r s
charge a discount up to 1 p e r c e n t . All those whom I i n terviewed expressed t h e hope t h a t every Rochester concern
would accept Canadian currency. I b e l i e v e t h a t b e s t r e s u l t s would be obtained i f the Federal Reserve Board
could be induced to s e t up machinery f o r the f r e e exchange
of Canadian currency between the n o r t h e r n Reserve Banks
and t h e i r Canadian correspondents. (Rochester Chamber of
Commerce).
-4*
X-6295~b
Boston?
The l o c a l shaps, h o t e l s , railways, e t c . , e i t h e r r e j e c t
Canadian currency e n t i r e l y or accept i t a t t h e r a t e quoted
"by t h e i r "banks, according to the p o l i c y of the i n d i v i d u a l
organization* The m a j o r i t y of the r a i l r o a d s p r e f e r not to
accept i t . The maximum discount charged by the t a n k s i s
about l / 2 p e r c e n t .
P o s s i b l y some h o t e l s and l o c a l shops could be i n f l u enced by the Chamber of Commerce to s t a n d the l o s s i n exchange; since the charge by the banks would be of no m a t e r i a l
consequence when compared with t h e i r p r o f i t s and would probably be more than o f f s e t by i n c r e a s e d good-will from Canadians.
American t o u r i s t s who t r a v e l through Canada with American
currency have e x a c t l y the same t r o u b l e . The charges made i n
t h a t country o f t e n times run as high as 1 p e r c e n t . ( D i s t r i c t
O f f i c e lianager Sweetzer).
Pes Koines, Iowa:
The Banks take a l l amounts from the merchants s u b j e c t to
the Canadian exchange quotations ( u s u a l l y a discount of about
2 p e r c e n t ) ; they accept coins and small amounts of currency
a t t h e i r f a c e v a l u e . Some of the smaller merchants o b j e c t to
Canadian q u a r t e r s , i n the %elief they contain l e s s s i l v e r .
( D i s t r i c t O f f i c e Manager M a r t i n ) .
Detroit:
Most of us here o r d i n a r i l y have about a s much Canadian
currency, both paper and s i l v e r , i n our pockets a s we have
American; ai^L i t i s accepted by everybody without h e s i t a t i o n .
Most of the time we do not r e a l i z e whether we have r e c e i v e d
American or Canadian money i n change. Large Canadian b i l l s ,
however, a r e accepted by the banks only a t a discount ranging from 20 to 50 c e n t s f o r $100,
A banker here with whom I discussed the s u b j e c t s t a t e d
t h a t he thought i t would be an e x c e l l e n t t h i n g to reach an
agreement between eur northern banks and the banks i n Canada
t h a t Canadian money would be accepted both here and i n Canada
a t p a r and t h a t Canadian banks would give our banks 100 Ameri c a n d o l l a r s f o r 100 Canadian d o l l a r s . ( D i s t r i c t O f f i c e Manager B u t l e r ) .
flew Jtorkx
We b e l i e v e t h a t , i f the Federal Reserve Board w i l l a r range f o r the f r e e exchange of Canadian currency between the
373
-5-
X-6295-b
Reserve "banks and t h e i r Canadian cot*respondents, much of the
cause of the p r e s e n t c r i t i c i s e w i l l c e a s e . Most of the l a r g e
banks here a r e buying Canadian currency a t 99^. Guttag
Brothers make a s p e c i a l t y of exchange i n small amounts and
a r e quoting 9 9 - 3 / 4 . ( D i s t r i c t O f f i c e Manager fiodgson).
Bridgeport, C t . :
Our h o t e l s accept Canadian money a t 2 p e r cent d i s c o u n t .
I b e l i e v e the r a i l r o a d s do not accept i t a t t h e i r t i c k e t o f f i c e s and t h a t a good many of the t r a d e s people f e e l too unf a m i l i a r with i t to accept i t . (Manufacturers' A s s o c i a t i o n ) .
Minneapolis and S t . P a u l :
Canadian s i l v e r i s not welcomed by the Twin City banks,
and we a r e informed t h a t a t one time the discount was as much
as 10 p e r c e n t . There i s now a uniform p r a c t i c e on t h e i r
p a r t to charge 2 p e r cent on s i l v e r and l / 4 p e r c e n t on curr e n c y . ( D i s t r i c t O f f i c e Manager Zwickel)*
P o r t l a n d . Oregon:
Local merchants g e n e r a l l y accept Canadian currency a t
p a r , i f a reasonable purchase i s made. Exchange discounts
axe charged f o r l a r g e Canadian b i l l s . The l o c a l Chamber of
Commerce has had some d i s c u s s i o n of the m a t t e r .
A system of par currency would be very quickly f e l t
by merchants, h o t e l k e e p e r s and o t h e r s . We a r e v e r y g r a t e f u l
f<5r the opportunity of a s s i s t i n g , i n any way we can, the
f r e e r t r a v e l i n t h i s a r e a by Canadian t o u r i s t s .
One of the banks, i n discounting Canadian money, i s s u e s
to the Canadian p a t r o n a small l e a f l e t explaining t h a t the
charge f W u l d not be considered as a discount ( s i n c e Canadian d o l l a r s are sometimes a t a premium) but r a t h e r a s a
s e r v i c e ! charge to cover a c t u a l expenses i n handling and s h i p p i n g Canadian money. This t a c t f u l n e s s doubtless removes
much of the " s t i n g " . ( P o r t l a n d D i s t r i c t O f f i c e ) .
Dayton. Ohio:
We f i n d t h a t i n no case i s Canadian money r e j e c t e d
e n t i r e l y . In almost every case, Canadian b i l l s and coins
a r e a c c e p t e d a t the same discount allowed by the banks, which
averages around 1 p e r cent f o r paper money and 2 p e r cent f o r
s i l v e r . I t was the opinion of r e p r e s e n t a t i v e s of one of the
l e a d i n g banks t h a t s t e p s should be taken t o induce the Federal
Reserve Board to handle the s i t u a t i o n , with the "belief t h a t
t h i s would c r e a t e a b e t t e r f e e l i n g among the Canadians v i s i t i n g
the n o r t h e r n p a r t of the United S t a t e s . (Chamber of Commerce).
(Signed) G-rosvenor M. J o n e s , Chief,
Finance and Investment D i v i s i o n .
X-6296
FEDERAL RESERVE BOARD
^ 5
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESBRVE BOARD
A p r i l 33, 1929,
SUBJECT: Action of Governors' Conference re proposed
amendments to Regulation " J " .
Dear S i r ;
The Board i s advised "by the S e c r e t a r y of the Conf e r e n c e of Governors t h a t , a f t e r considering the r e p o r t of the
r e c e n t Conference of Counsel with regard to the p o l i c y to be
pursued "by Federal r e s e r v e banks in a s s e r t i n g r i g h t s on b e h a l f
of d e p o s i t o r s of unremitted f o r cash l e t t e r s a g a i n s t r e c e i v e r s
of i n s o l v e n t member banks, the Conference of Governors adopted
the following r e s o l u t i o n :
"Resolved, t h a t we approve i n substance the m a j o r i t y
r e p o r t of the Conference of Counsel, with the understanding t h a t , t o a s s i s t the Counsel of the Federal Reserve
Board i n framing the exact language of any amendments t h a t
may be found necessary to make the substance of the r e r o r t
e f f e c t i v e , each Federal Reserve bank s h a l l be a t l i b e r t y to
c a l l h i s a t t e n t i o n t o any l o c a l arrangement t h a t might be
a f f e c t e d by any such amendments."
In order that t h i s matter may be disposed of as soon as
p o s s i b l e , you a r e r e q u e s t e d to advise the Board a t your e a r l i e s t
convenience whether or not there a r e any l o c a l arrangements in your
d i s t r i c t which might be a f f e c t e d by the proposed amendments to Regul a t i o n J and which you d e s i r e to have taken i n t o c o n s i d e r a t i o n b e f o r e
those amendments a r e adopted by the Board.
By order of the Federal Reserve Board.
To Governors
Very t r u l y y o u r s ,
E. M. McClelland,
Assistant Secretary,
of a l l Federal Reserve Banks.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6297
A p r i l 24, 1929.
SUBJECT:
Expense, Main Line, Leased Wire
System, March, 1929.
Dear S i r :
Enclosed herewith you w i l l f i n d
two mimeograph statements X-6297-a and X6297-1), covering i n d e t a i l o p e r a t i o n s of
the main l i n e , Leased Wire System, during
the month of March, 1929.
P l e a s e c r e d i t the amount payable
"by your hank i n the general account, Treasu r e r , U. 5 . , on your books, and i s s u e C/D
Form 1, National 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 Wire System,
sending d u p l i c a t e C/D to the Federal Reserve Board.
Yours very t r u l y ,
F i s c a l Agent.
Enclosures.
TO GO VERMES OF ALL F . R. BAMS EXCEPT CHICAGO.
376
REPORT SHCHitG CLASSIFICATION AND MJKBER OF WORDS TRANSMITTED OVER MAIN LIES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MOUTH OF MARCH, 1929.
X-6297-a
Business
reported
by
banks
From
Boston
New Yoik
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas C i t y
Dallas
San F r a n c i s c o
Total
F.
R.
Net F e d e r a l
Reserve
Bank
business
790
29,777.
168,700
57.898
65,580
118,187
84,436
34,470
81,454
79,250
711
2,185
2,211
35,956
94,827
60,109
6,317
776
2,456
71.697
110.061
9,193
2.216
86,892
37,060
83.567
88,443
112.277
957,700
31.558
589,258
Board business
words
.
transmitted over main l i n e s
6.08
7.27
12.02
8.78
.
.
3.75
8.45
8.94
11.35
100.00
240.512
.
.
.
.
^
(*)
These percentages used in c a l c u l a t i n g the nro rata share of
o n t h e a c c o m p a n y i n g s t a t e m e n t (X-«6297—h).
fl)
Jfamber o f
3.09
17.05
3.63
9.59
118,963
2.590
2,113
Incoming and Outgoing
P e r c e n t of t o t a l
bank b u s i n e s s ( * )
30,567
168,700
-
35,245
92,642
Treasury Deoartment "business Total
Words s e n t by
New York c h a r g e a b l e t o other
F . R. Banks ( l )
.
.
1,229,770
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
leased wire expense as
w o r d s s e n t t o Hew Y o r k b y o t h e r F . R . B a n k s f o r t h e i r s o l e
"banks i n d i c a t e d i n a c c o r d a n c e w i t h a c t i o n t a k e n a t
November 2 - 4 , 1 9 2 5 .
.
.
.
.
.
.
.
.
.
.
173.097
1,402,867
shown
b e n e f i t charged to
Governors' Conference
05
REPORT OF EXPENSE MAIN LINE
lEEERAL EE SERVE LEASED IE BE SYSTEM, MARCH, 1929.
Name of Bank
Operators'
Salaries
$ 260.00
Boston
1,204.12
New Toric
Philadelphia
225.00
296.66
Cleveland
190,00
Richmond
Atlanta
27O.OO
Chicago
3,970.26
20^.00
St. Louis
Minneapolis
183.66
Kansas City
287-50
Dallas
251.00
San Francisco
380.00
Federal Reserve Board —
Total
$7,723.20
Operators'
Overtime
$
-
Wire
Rental
$
Total
Expenses
$
225.00
(#>
270.00
3,970.26
206.00
1.00
Credits
Payable to
Federal
Deserve
Board
637.68
,518.60
749.12
1 ,979-08
$ 260.00
1,204.12
225.00
296.66
1 ,254.73
420.00
834.73
$7,954.20
$14,172.44
260.00 $
1,204.12
3
296.66
420.00
230.00(6)
Pro rata
Share of
Total
Expenses
X-6297-b
1 ,500.31
2 ,480.56
1 ,811.92
183.66
287.50
251.00
1 ,743-82
1,844.94
380.00
2,342.29
773.89
.$
270.00
1,230.31
3,970.26 . 1,489-70 (*)
206.00
1,605.92
183-66
590.23
287-50
1,456.32
251.00
1,593.94
380.00
1,962.29
-15.5S7.51
1.00
$15,317.51
$23,541.71 $20,636.94
2,904.77(a)
1,489.7p(t)
A
(&)
(#)
(*)
(a)
(b)
377.68
2,314.4s
524.12
1,682.42
$20,636.94
$12,682.74
Main Line Rental, Richmond—Washington.
Includes s a l a r i e s of Washington operators.
Credit.
Received $2,904.77 from Treasury Department covering "business f o r the month of March, 1929.
Amount reimbursable to Chicago.
05
FEDERAL
R E S 3 R VE 3 0 AR D
ic-6299
3 ^ 9
STATEMENT FOR THE PEESS
For r e l e a s e i n Morning Papers<
Saturday, A p r i l 27, 1929 i
The following i s a summary of general
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 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
the months of March and A p r i l , as w i l l
appear i n the forthcoming i s s u e of the
Federal Reserve B u l l e t i n and the monthl y r e p o r t s of the Federal Reserve Banks.
*
Volume of i n d u s t r i a l production and of trade i n c r e a s e d i n March and wholes a l e p r i c e s advanced somewhat.
There was a, growth of commercial loans of member
banks i n l e a d i n g c i t i e s i n March and the f i r s t h a l f of A p r i l , while investments
and l o a n s on s e c u r i t i e s of t h e s e banks showed a r e d u c t i o n f o r the p e r i o d .
Production—Output of manufactures reached a new high l e v e l i n March. Automobile p r o d u c t i o n was e x c e p t i o n a l l y l a r g e , and s t e e l ingot output was r e p o r t e d
to be above r a t e d c a p a c i t y .
Output of r e f i n e d copper, lumber, c o t t o n and s i l k
t e x t i l e s , and sugar was a l s o l a r g e f o r the season.
There was some seasonal
r e c e s s i o n from February i n the p r o d u c t i o n of wool t e x t i l e s and l e a t h e r , and a
f a r t h e r d e c l i n e i n p r o d u c t i o n by meat-packing p l a n t s .
The volume of f a c t o r y em-
ployment and p a y r o l l s continued to i n c r e a s e during the month and was s u b s t a n t i a l . l y above the l e v e l of March, 1928.
p r o d u c t i o n of m i n e r a l s a s a group declined sharply, r e f l e c t i n g r e d u c t i o n i n
output of coal by more than the u s u a l S e c o n a l amount.
Output of nonferrous
metals continued l a r g e and petroleum production i n c r e a s e d .
Daring the f i r s t p a r t of April i n d u s t r i a l a c t i v i t y continued a t a h i g h r a t e ,
although p r e l i m i n a r y r e p o r t s i n d i c a t e d a s l i g h t slowing down i n c e r t a i n branches
of the s t e e l i n d u s t r y , and a smaller output of coal and petroleum.
The value of b u i l d i n g c o n t r a c t s awarded Increased seasonally during March
-3-
X-6299
380
and. t h e f i r s t two weeks i n A p r i l , r e f l e c t i n g i n p a r t the award of a few l a r g e
c o n t r a c t s , c h i e f l y commercial and i n d u s t r i a l .
The t o t a l volume of "building, how-
ever, continued smaller i n March than a year ago.
Contracts f o r r e s i d e n t i a l
"building and p u b l i c works and u t i l i t i e s were s u b s t a n t i a l l y "below the l e v e l of
March, 1928, while i n d u s t r i a l and commercial "building was i n l a r g e r volume.
D i s t r i b u t i o n — R a i l r o a d shipments of commodities declined somewhat i n March
"but were l a r g e r than i n the same p e r i o d of the preceding y e a r .
The d e c l i n e from
February r e f l e c t e d smaller shipments of coal and coke, g r a i n products, and l i v e stock, a l l of which were a l s o below March a year ago.
Loadings of ore and mis-
cellaneous f r e i g h t i n c r e a s e d s u b s t a n t i a l l y over February and continued above 1928.
Sales by wholesale f i r m s i n a l l l i n e s of t r a d e r e p o r t i n g to the Federal r e serve system were s e a s o n a l l y l a r g e r tl%an i n February.
In comparison with the
same month a year ago, however, s a l e s i n most l i n e s of t r a d e were smaller, except
i n the case of dry goods, men's c l o t h i n g and hardware.
Department s t o r e s a l e s
showed a l a r g e r i n c r e a s e i n March than i s usual a t t h i s season, and were l a r g e r
than i n the same month i n the preceding y e a r , p a r t l y on account of the f a c t t h a t
E a s t e r came i n March t h i s y e a r .
Prices—Wholesale p r i c e s of commodities during March averaged s l i g h t l y
h i g h e r than i n February, according to the index of the United S t a t e s Bureau of
Labor S t a t i s t i c s .
There were marked i n c r e a s e s i n p r i c e s of copper and l e a d , and
s m a l l e r advances i n p r i c e s of i r o n and s t e e l and c o t t o n goods, a s well a s of
c e r t a i n a g r i c u l t u r a l p r o d u c t s , p a r t i c u l a r l y c o t t o n , l i v e s t o c k , meats, and h i d e s .
P r i c e s of g r a i n and f l o u r were lower during the month and the p r i c e of l e a t h e r
declined, r e f l e c t i n g an e a r l i e r d e c l i n e i n p r i c e s of h i d e s .
S i l k and rayon
t e x t i l e s and raw wool were a l s o somewhat lower i n p r i c e .
I n the middle of A p r i l p r i c e s of l i v e s t o c k and raw s i l k were higher than a t
the end of March, while c o t t o n and wool had declined i n p r i c e .
Among the nonr-
i
-3-
381
X-6299
a g r i c u l t u r a l products t h e r e were marked d e c l i n e s i n the p r i c e s of copper, l e a d ,
t i n and z i n c ; a f u r t h e r decline i n rubber and i n c r e a s e s i n p i g i r o n and f i n i s h e d ,
steal.
Bank Credit—Between March 20 and April 17 t h e r e was a considerable decline
i n the volume of member bank loans to brokers and i n the bank's holdings of i n vestments.
Loans c h i e f l y f o r commercial and a g r i c u l t u r a l purposes showed a
r a p i d i n c r e a s e , and a t the end of the p e r i o d were near the high l e v e l of l a s t
autumn.
During the same p e r i o d the volume of r e s e r v e bank c r e d i t i n use d e c l i n e d
f u r t h e r as a consequence of a d d i t i o n s to the c o u n t r y ' s stock of monetary g o l d .
A continued r a p i d r e d u c t i o n i n holdings of acceptances c a r r i e d the t o t a l to the
lowest p o i n t since the autumn of 1924.
S e c u r i t y h o l d i n g s a l s o decreased some-
what, while discounts f o r member banks i n c r e a s e d .
Open-market r a t e s on bankers' acceptances and commercial paper i n c r e a s e d
further.
Rates on c o l l a t e r a l loans i n c rease d sharply i n the l a t t e r p a r t of
March, but d e c l i n e d i n A p r i l .
X-6303
FEDERAL RESERVE
BOARD
statement for the press
Washingten, D* 0 .
For r e l e a s e a t 2*00 p« m.
May 4, 1929.
The Federal Reserve Board announces t h a t the
Federal Reserve Bank of Kansas City has e s t a b l i s h e d a
r e d i s c o u n t r a t e of 5$ on a l l c l a s s e s of paper of a l l
m a t u r i t i e s , e f f e c t i v e May 6, 1929.
383
X-6304
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING.
A p r i l 26, 1929, Federal Reserve Notes, s e r i e s 1914
30,000 s h e e t s $50, Chicago, s e r i a l numbers
3,868,001 to 3,988,000
§35.50 M,
Credit a p p r o p r i a t i o n s , 1929, as f o l l o w s :
Comp. of Emp.,
B.E. & P.
$544.50
Plate Printing,
B.E. & P.
243.00
Mtls.& Misc.Exp., B.E. & P. . 277.50
Bureau of Engraving and P r i n t i n g ,
(Signed) C. R. Long
Assistant D i r e c t o r .
$1,065.00
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
A—6oub
Kay 7, .1929.
Dear S i r :
Confirming telegram dated April 30, 1929,
a d v i s i n g you of t h e a d d i t i o n a l s p e c i a l assessment l e v i e d
"by t h e Federal Reserve Board i n connection with the new
i s s u e of F e d e r a l Reserve n o t e s , t h e r e i s e n c l c s e d a copy
of the statement of the Bureau of Engraving and P r i n t i n g
i n the amount of $750,000 covering a p a r t of t h e c o s t of
F e d e r a l Reserve notes of the small size ( s e r i e s of 1928)
which a r e now i n process of p r i n t i n g and which w i l l he
d e l i v e r e d during May and June.
Very t r u l y yours,
Enclosure.
SENT TO ALL FEDERAL RESERVE AGENTS.
W. III. I1ILAY
F i s c a l Agent.
385
X-6305-a
STATEMENT OP BUREAU OF ENGRAVING AND HUNTING.
For labor performed and m a t e r i a l purchased f o r Federal Reserve Notes,
S e r i e s 1928, 1 2 - s u b j e c t , now i n process of p r i n t i n g , t o "be d e l i v e r e d during
May and June, 1929.
Boston
New York
Philadelphia
Cleveland'
Richmond
Atlanta
Chicago
S t , Louis
Minneapolis
Kansas CityDallas
San Francisco
•$ 51,600.00
178,500.00
71,100.00
71,100.00
24,800.00
66,500.00
116,000.00
19,800.00
16,300.00
21,000.00
39,100.00
74,200.00
Total
#750,000.00
Credit a p p r o p r i a t i o n s , 1929, as f o l l o w s
Comp. of Emp.,
B.E. & P .
Plate Printing,
B.E. & P .
l i t i s . & Misc. Exp., B.E. & P.
$416,361.45
179,764.25
153,874.30
Bureau of Engraving and P r i n t i n g
Per
C. R. Long
Assistant Director
X-6307
FEDERAL
RESERVE
BOARD
STATEOFT FOR THE PRESS
Washington, D. C.
For r e l e a s e a t 4:00 p.m.
May 13, 1929.
The Federal R6serve Board announces
t h a t the Federal Reserve Bank of Minneapolis has
e s t a b l i s h e d a rediscount r a t e of 5$ on a l l c l a s s e s
of paper of a l l m a t u r i t i e s , e f f e c t i v e May 14, 1929.
387
FEDERAL RESERVE BOARD
~ WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
X~6309
T H E FEDERAL RESERVE BOARD
May 16, 1929.
SUBJECT:
Redemption of l a r g e s i z e Federal Reserve
notes of o t h e r s .
Dear S i r :
In accordance with the a c t i o n taken a t the l a s t Conf e r e n c e of Governors, a r e c e n t meeting h e l d i n Washington of
o f f i c e r s of the Federal reserve "banks in charge of currency
o p e r a t i o n s considered the suggestion t h a t during the p e r i o d
of i s s u e of the new s i z e currency, each. Federal r e s e r v e "bank
cancel and send d i r e c t to Washington f o r redemption, old s i z e
notes of o t h e r Federal r e s e r v e hanks, r e g a r d l e s s of t h e i r condition.
The Currency Conference voted to recommend to the
Federal Reserve Board " t h a t the c a n c e l l a t i o n of Federal r e serve notes of o t h e r Federal reserve "banks t h a t a r e f i t f o r
f u r t h e r c i r c u l a t i o n , on a d e f i n i t e date p r i o r to the date of
i s s u e of the new s i z e , he l e f t to the express wish of each
i s s u i n g hank."
While t h i s recommendation has "been approved by the
Federal Reserve Board, a t t e n t i o n i s c a l l e d to the f a c t t h a t
i t has now boon determined t h a t the new s i z e w i l l not be p a i d
out p r i o r to J u l y 10th. This means t h a t the stocks of o l d
s i z e notes of the Federal r e s e r v e banks must support the currency demand f o r an a d d i t i o n a l ten day p e r i o d , and a s stocks
of some of the banks are comparatively low i n c e r t a i n denominat i o n s , those banks may f a c e the p o s s i b i l i t y of a shortage i f
any g r e a t q u a n t i t y of t h e i r notes, which a r e f i t f o r f u r t h e r
c i r c u l a t i o n , a r e not r e t u r n e d to them f o r r e i s s u e .
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BAMS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6310
May 17, 1929.
SUBJECT:
Holidays during June, 1929.
Dear S i r :
The Federal r e s e r v e banks and branches
l i s t e d "below w i l l "be closed on Monday, June 3rd,
i n observance of the b i r t h d a y of J e f f e r s o n DaVis,
and t h e r e f o r e w i l l not p a r t i c i p a t e i n e i t h e r the
Gold Fund Clearing or the Federal Reserve Bote
Clearing of t h a t d a t e :
Richmond
Memphis
itlaiita,
Dallas
El Paso
Houston
San Antonio
*ftew Ofiea&s
Bir&ing*haA
•Nashville
Jacksonville
* Decoration Day
Please include c r e d i t s of June 3rd i n
the Gold Fund Clearing with your c r e d i t s f o r June
4th f o r the o f f i c e s a f f e c t e d , and make no s h i p ments of Federal iteserve notes, f i t or u n f i t , f o r
account of the head o f f i c e s mentioned, on June 3 r d .
P l e a s e n o t i f y branches.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
-•TO G&YIBEQBS J
Q
Z
J
L
L
L F. R. BAMS.
388
:
X-63U
F E D E R A L R E S E R V E
BOARD
SiATEMUNT FOR THE PRESS
Washington, D* 0.
For r e l e a s e a t 6:00 p.m*
May 17, 1929.
The Federal Reserve Board announces t h a t t h e
Federal Reserve Bank of San Francisco has e s t a b l i s h e d a
rediscount r a t e df 5# on a l l c l a s s e s of paper of a l l
m a t u r i t i e s , e f f e c t i v e May 20, 1929.
389
390
X-6313
FEDERAL
RESERVEBOARD
STATEMENT FOR THE PRESS
For r e l e a s e i n morning papers,
Wednesday, May 22, 1929.
May 21, 1929.
The Federal Advisory Council a t a r e g u l a r meeting with
the Federal Reserve Board on Tuesday, May 2 1 s t , d e l i v e r e d
the following memorandum of i t s views on the c r e d i t s i t u a t i o n , which i t a u t h o r i z e d the Federal Reserve Board to r e 1ease:
"The Federal Advisory Council has reviewed c a r e f u l l y the c r e d i t s i t u a t i o n . I t continues to agree
with the view of the Federal Reserve Board expressed
. i n i t s statement of February 5, 1929, t h a t 'an excess i v e amount of the c o u n t r y ' s c r e d i t has "been absorbed
i n s p e c u l a t i v e s e c u r i t y l o a n s . ' The p o l i c y pursued by
the Federal Reserve Board has had a b e n e f i c i a l e f f e c t
due l a r g e l y to the l o y a l coopesation of the banks of
the country. The e f f o r t s i n t h i s d i r e c t i o n should be
continued. The Council notes, however, t h a t while the
t o t a l amount of Federal Reserve c r e d i t being used has
been reduced, ' t h e amount of the c o u n t r y ' s c r e d i t absorbed i n s p e c u l a t i v e s e c u r i t y l o a n s ' has not been
s u b s t a n t i a l l y lowered.
Therefore, the Council recommends to the Federal
Reserve Board t h a t i t now g r a n t permission t o r a i s e
the rediscount r a t e s to s i x p e r cent to those Federal
r e s e r v e banks r e q u e s t i n g i t , thus b r i n g i n g the r e d i s count r a t e s i n t o c l o s e r r e l a t i o n with g e n e r a l l y p r e v a i l i n g commercial money r a t e s . The Council b e l i e v e s
t h a t improvement i n f i n a n c i a l conditions and a consequent r e d u c t i o n of the r a t e s t r u c t u r e w i l l thereby be
brought about more quickly, thus b e s t safeguarding
commerce, i n d u s t r y , and a g r i c u l t u r e . "
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6316
May 23, 1929,
SUBJECT:
Expense, Main Line, Leased Wire System,
A p r i l , 1929.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph s t a t e m e n t s , X-6316-a and X-6316-"b, covering i n
d e t a i l o p e r a t i o n s of the main l i n e , Leased Wire System, during the month of A p r i l , 1929.
P l e a s e c r e d i t the amount payable by your
bank i n the g e n e r a l account, T r e a s u r e r , U. S . , on
your books, and i s s u e C/D Form 1, Rational Banks,
f o r account of " S a l a r i e s and Expenses, Federal Res e r v e Board, S p e c i a l Fund", Loased Wire System, sending d u p l i c a t e O/D to the Federal Reserve Board.
Very t r u l y y o u r s ,
F i s c a l Agent.
Enclosures,
TO GOVERNORS OF ALL F . R. BAMS EXCEPT CHICAGO.
391
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF APRIL, 1929,
X-63l6-a
From
Business
-reported
by
banks
Boston
New Yoik
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s c o
T o tal
29,991
165,394
36,667
92,387
59.593
63,884
113.491
82,212
31,641
50,242
74,727
106,739
936,968
Words sent by
New York chargeable to o t h e r
F. R. Banks ( l )
F . R. Board b u s i n e s s .
927
-
677
1,694
1,384
5,884
1,096
383
1,993
1,269
8,911
2,303
26,521
. . . . . . . . .
Net Federal
Reserve
Bank
business
30,918
165,394
37,344
94,081
60,977
69,768
114,587
82,595 .
33,634
81,511
83,638
109.042
963,489
3.21
17,17
3.88
9.76
6.33
7.24
11.29
8.57
3.49
8.46
8.6§
11.32
100.00
21+7.562
Treasury Department b u s i n e s s - Incaning and Outgoing . . . . . . . . . .
T o t a l words t r a n s m i t t e d over main l i n e s
P e r c e n t of t o t a l
bark b u s i n e s s ^ * )
1,211,051
. . . .
, . . . . 1,299,254
(*)
These p e r c e n t a g e s u s e d i n c a l c u l a t i n g the pro r a t a share of l e a s e d wire expense as shown
on t h e accompanying statement (X—6316-b)
(l)
Number of words sent by New York t o 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 w i t h a c t i o n taken a t Governors' Conference
November 2 - 4 , 1925.
88,203
03
CO
iO
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, APRIL, 1929.
Name of Bank
Operators'
Salaries
$ 260.00
Boston
1,221.57
New York
225.00
Philadelphia
296.66
Cleveland
190.00
Richmond
270.00
Atlanta
Chicago •
3,969.05 (#)
205.00
S t . Louis
183-66
Minneapolis
Kansas City287.50
251.00
Dallas
380.00
San F r a n c i s c o
F e d e r a l Reserve Board
T o tal
(&)
(#)
(*)
(a)
(b)
$7,739M
Operators'
Overtime
$
5.00
Wire
Rental
$
.
-
-
-
-*
230.00(6)
—
—
-
$
—
.
-
-
—
-
-
—
-
-
—
*—
—
—
5*00
$
—
—
To t a l
:Exoenses
'
-15.543.14
$15,773.14
265.OO
1,221.57
225.00
296.66
420.00
270.00
3,969.05
205.00
183.66
287.50
251.00
380.00
15,543.14
Pro Rata
Share of
Total
Expenses
$
703.67
3,763.84
850.54
2,139.49
1,387-60
1,587.OS
2,6O6.4I
1,878.63
765.04
1,854.52
1,902.75
2,481.46
-
$23,517.58 $21,921.03
1.596.55(a)
$21,921.03
X-6316-b
Credits
$ 265.OO
1,221.57
225.00
296.66
420.00
270.00
3,969.05
205.00
183.66
287.50
251.00
380.00
Payable to
Federal
Reserve
Board
$
-
-
$7,974.44
438.67
2,542.27
625.54
1,842.83
967.60
1,317.08
1 , 3 6 2 . 6 4 (*)
1,673.63
581.38
1,567,02
1,651.75
2,101.46
$15,309.23
1.362.64(1))
$13,9%6.59
Main l i n e r e n t a l , Richmond-Washing t o n ,
I n c l u d e s s a l a r i e s of Washington o p e r a t o r s .
Credit.
Received $ 1 , 5 9 6 . 5 5 from Treasury Department covering b u s i n e s s f o r t h e month of A p r i l , 1929*
Amount reimbursable t o Chicago.
CO
CD
CO
X-6317
FEDERAL
RESERVE
BOARD
STATEMENT TOR THE PRESS
j
3 9 4
For r e l e a s e i n Morning Papers,
Monday, May 27, 1929.
The f o l l e w i n g i s a summary of general
"business and f i n a n c i a l conditions
throughout the s e v e r a l Hederal 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
the months of April and May, as w i l l
appear i n the forthcoming i s s u e of the
Federal Reserve B u l l e t i n and the monthl y r e p o r t s of the Federal r e s e r v e "banks. ,
I n d u s t r i a l a c t i v i t y continued a t a high l e v e l i n A p r i l , and the volume of
f a c t o r y employment and p a y r o l l s increased f u r t h e r .
Loans and investments of
member "banks i n l e a d i n g c i t i e s continued to decline "between the middle of April
and the middle of May, and were a t t h a t time a t approximately the same l e v e l a s
a year ago.
P r o d u c t i o n — I n d u s t r i a l a c t i v i t y increased i n April to the h i g h e s t l e v e l oh
record.
The i r o n and s t e e l and automobile i n d u s t r i e s continued e x c e p t i o n a l l y
a c t i v e during A p r i l .
A c t i v i t y i n copper r e f i n i n g , lumber, c e m e n t , ' s i l k and
wool t e x t i l e s , and the meat-packing i n d u s t r y increased, and production of cotton
t e x t i l e s showed a l e s s than seasonal r e d u c t i o n .
Factory employment and p a y r o l l s
i n c r e a s e d , c o n t r a r y to the seasonal t r e n d .
Output of mines was a l s o l a r g e r i n A p r i l .
Copper and a n t h r a c i t e coal p r o -
duction i n c r e a s e d and the seasonal decline i n output of bituminous coal was
smaller than u s u a l .
Petroleum production declined s l i g h t l y .
P r e l i m i n a r y r e p o r t s f o r the f i r s t h a l f of May i n d i c a t e a continued high
r a t e of o p e r a t i o n i n the i r o n and s t e e l i n d u s t r y .
Output of lumber and bitumi-
nous coal was somewhat l a r g e r during the f i r s t p a r t of May than a t the end of
April.
Building c o n t r a c t s awarded during the month of April i n c r e a s e d sharply and
f o r the f i r s t time i n f i v e months approximated the t o t a l f o r the corresponding
month i n the p r e c e d i n g y e a r .
The i n c r e a s e was not continued, however, i n the
«3-
X-6317
395
f i r s t p a r t of May when awards aver&ged 20 per cent below the same p e r i b d i n
May, 1928.
During April most c l a s s e s of "building showed seasonal i n c r e a s e s
over March, the l a r g e s t "being i n c o n t r a c t s f o r r e s i d e n t i a l "building and p u b l i c
works and u t i l i t i e s .
Distribution-wShipments of commodities "by r a i l i n c r e a s e d during April and
were the l a r g e s t f o r t h i s month i n any r e c e n t y e a r .
The i n c r e a s e from March
r e f l e c t e d l a r g e r loadings of miscellaneous f r e i g h t , lumber, l i v e s t o c k and o r e .
During the f i r s t h a l f of May shipments of f r e i g h t continued to i n c r e a s e .
Sales a t wholesale declined seasonally i n A p r i l , except i n the case of
grocery and hardware f i r m s .
In comparison with A p r i l , 1928 a l l l i n e s of t r a d e
r e p o r t i n g to the Federal r e s e r v e system showed i n c r e a s e s .
Department s t o r e
s a l e s were a l s o smaller i n April than i n March, "but continued above the l e v e l
of a year ago.
Prices—Wholesale commodity p r i c e s averaged s l i g h t l y lower in April than
i n March, according to the index of the United S t a t e s Bureau of Labor S t a t i s t i c s , r e f l e c t i n g p r i m a r i l y d e c l i n e s i n p r i c e s of farm p r o d u c t s and t h e i r manufactures.
P r i c e s of mineral and f o r e s t p r o d u c t s and t h e i r manufactures, on the
average, showed l i t t l e change.
There were i n c r e a s e s i n the p r i c e s of i r o n and
s t e e l , and sharp d e c l i n e s i n copper, lead, and t i n .
Seasonal d e c l i n e s occurred
i n p r i c e s of coal and coke, while gasoline p r i c e s advanced.
P r i c e s of farm products and t h e i r manufactures averaged lower i n April than
i n March.
P r i c e s of g r a i n , e s p e c i a l l y wheat, moved downward more sharply and
wool and c o t t o n continued to d e c l i n e .
Livestock and meat p r i c e s continued the
upward movement of the previous month, but a t a slower r a t e ; h i d e s averaged
s l i g h t l y h i g h e r i n p r i c e , and l e a t h e r somewhat lower.
Among imported raw
m a t e r i a l s , rubber, sugar, and c o f f e e showed marked p r i c e r e c e s s i o n s .
Early i n
May c a t t l e , h i d e s and wheat p r i c e s declined sharply and t h e p r i c e of rubber i n creased.
-3-
396
X-6317
Bank: Credit—Daring the f o u r weeks ending May 15 loans and investments of
member "banks i n l e a d i n g c i t i e s showed a decrease of n e a r l y $200,000,000, l a r g e l y
i n loans on s e c u r i t i e s together with some f u r t h e r decline i n investments.
All
o t h e r loans, c h i e f l y f o r commercial and a g r i c u l t u r a l purposes, remained unchanged a t a r e l a t i v e l y high l e v e l .
There was a f u r t h e r r e d u c t i o n i n the average volume of reserve bank c r e d i t
outstanding between the weeks ending April 24 and May 22, owing l a r g e l y to add i t i o n s to the c o u n t r y ' s monetary stock of gold.
The d e c l i n e was i n discounts
f o r member banks; holdings of acceptances and of United S t a t e s s e c u r i t i e s showed
p r a c t i c a l l y no change.
Open-market r a t e s f o r commercial paper remained unchanged a s did r a t e s on
prime bankers' acceptances, except f o r a temporary decline a t the end of April
and the f i r s t week i n May.
t h r e e weeks i n May.
Bates on c o l l a t e r a l loans advanced i n the f i r s t
397
federal reserve board
WASHINGTON
ODRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6320
Juno 3, 1929.
SUBJECT:
P r e s e r v a t i o n of member bank r e c o r d s .
Dear S i r :
There i s enclosed herewith a copy of a l e t t e r
r e c e i v e d "by the Board from the Department of J u s t i c e ,
s t a t i n g t h a t s p e c i a l accountants of the Department a s signed to i n v e s t i g a t e a l l e g e d v i o l a t i o n s of the Federal
criminal s t a t u t e s a t member banks of the Federal Reserve
System n o t i n f r e q u e n t l y f i n d d i f f i c u l t y i n l o c a t i n g the
records to support the charges and suggesting t h a t t h i s
c o n d i t i o n would be remedied i f such banks were to p r e serve a l l bank records f o r the p e r i o d of the s t a t u t e of
l i m i t a t i o n s , t h a t i s , three y e a r s . There i s a l s o enclosed
a copy of the Board's r e p l y to t h i s l e t t e r .
As s t a t e d in the Board's l e t t e r to the Attorney
General, under the p r o v i s i o n s of the Federal Reserve Act
i t i s not w i t h i n the j u r i s d i c t i o n of the Board or of the
Federal r e s e r v e banks to d i r e c t or to r e q u e s t the member
"banks of the Federal Reserve System to p r e s e r v e t h e i r
r e c o r d s f o r any s t a t e d p e r i o d f o r the purpose mentioned.
The Board suggests, however, t h a t you c a l l to the a t t e n t i o n of the member banks of your d i s t r i c t the communication
r e c e i v e d "by the Federal Reserve Board from the Department
of J u s t i c e with r e f e r e n c e to t h i s m a t t e r .
By order of the Federal Reserve Board.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
Enclosures.
TO F . R. AGENTS OF AIL F . R. BASKS,
398
COPY
X-6320-a
DEPARTMENT OF JUSTICE
WASHINGTON, D, C.
OHL - WHR
WHRjDCK
A p r i l 29, 1929.
The Governor,
The Federal Reserve Board.
Sir:
I t has "been 'brought to my a t t e n t i o n t h a t the
Special Accountants of t h i s Department assigned to i n v e s t i g a t e a l l e g e d v i o l a t i o n s of the Federal criminal
s t a t u t e s a t member banks not i n f r e q u e n t l y f i n d d i f f i c u l t y i n l o c a t i n g the necessary r e c o r d s to support the
criminal charges, and i t has "been suggested t h a t t h i s
c o n d i t i o n would be remedied i f such "banks were to p r e serve a l l bank r e c o r d s , s u b s i d i a r y and otherwise, f o r
the p e r i o d named i n the S t a t u t e of L i m i t a t i o n s , t h a t
i s , the term of t h r e e y e a r s .
The question whether the proposed p r a c t i c e
i s d e s i r a b l e , and, i f so, what s t e p s , i f any, may
p r o p e r l y be taken by your Board to b r i n g i t about, i s
submitted f o r your c o n s i d e r a t i o n .
Respectfully,
For the Attorney General,
(S) 0 . B. LUHRING,
A s s i s t a n t Attorney General.
X-6320-1)
COPY
June 3., 1929.
The Honorable.
The Attorney General,
Washington, D. C.
S I R :
The Federal Re serve Board has given cons i d e r a t i o n to your l e t t e r of April 29 (ORL - WHR),
i n which you s t a t e t h a t i n v e s t i g a t o r s of your Department o f t e n f i n d d i f f i c u l t y i n l o c a t i n g r e c o r d s
a t member banks of the Federal Reserve System t o
support charges of a l l e g e d v i o l a t i o n s of the Federal
c r i m i n a l s t a t u t e s , and suggest t h a t t h i s c o n d i t i o n
would be remedied i f such banks were to p r e s e r v e a l l
bank r e c o r d s f o r t h r e e y e a r s .
I t i s not w i t h i n t h e j u r i s d i c t i o n of the
Federal Reserve Board or of t h e Federal reserve banks
under the p r o v i s i o n s of the Federal Reserve Act to
d i r e c t or to r e q u e s t the member banks of the Federal '
Reserve System to preserve t h e i r records f o r any s t a t e d
p e r i o d f o r the purpose mentioned. The Board, however,
i n order to cooperate with your Department i n t h i s matt e r , w i l l address a l e t t e r to the Federal r e s e r v e agent
a t each of the Federal r e s e r v e banks of the System, sugg e s t i n g t h a t ycur communication to the Board on t h i s
s u b j e c t be c a l l e d to t h e a t t e n t i o n of the member banks
of h i s p a r t i c u l a r Federal reserve d i s t r i c t .
Very t r u l y yours,
R. A. Young,
Governor.
GBVivdb
X-6321
COPY
400
COURT OF APPEALS OF TBB DISTRICT
OF COLUMBIA
Charles L. Apfel, Stephen B. Gibbons,
Bertrand A. Unger, Joseph Sheldon,
Henry Green, Henry M. Susswein,
Edmund J . Horwath, and Milo Ogden Frank,
Appellants,
No. 4837
vs.
Andrew W. Mellon, J . W. Mcintosh,
Roy A. Young, Edmund P i a t t , Adolph C.
M i l l e r , Charles S. Hamlin, Edward H.
Cunningham, and George R. James, a s
Members of the Federal Reserve Board,
Appellees.
Appeal from the Supreme Court of the D i s t r i c t of Columbia.
Before Martin, Chief J u s t i c e , and Robb and Van Orsdel, Associate Justices.
This i s an appeal from a f i n a l order of the lower court d i s missing the a p p e l l a n t s ' p e t i t i o n f o r a w r i t of mandamus upon the a l l e g a t i o n s of the p e t i t i o n and answer.
The case a r i s e s under the Act of Congress of December 24, 1919,
(41 S t a t . 378), commonly known as the "Edge Act", f i r s t enacted as Sect i o n 25(a) of the Federal Reserve Act.
See T i t l e XII, Sections 611 to
631, U.S.C.A.
The Act p r o v i d e s t h a t c o r p o r a t i o n s may be organized f o r the
purpose of engaging i n i n t e r n a t i o n a l or f o r e i g n banking or o t h e r i n t e r n a t i o n a l o r f o r e i g n f i n a n c i a l o p e r a t i o n s , and may be formed by any number
of n a t u r a l persons not l e s s than f i v e ; t h a t such persons s h a l l e n t e r i n t o
a r t i c l e s of a s s o c i a t i o n which s h a l l s p e c i f y i n general terms the o b j e c t s
f o r which the a s s o c i a t i o n i s formed, and s h a l l execute an o r g a n i z a t i o n
c e r t i f i c a t e which s h a l l s e t out the name assumed by the c o r p o r a t i o n ,
X-6321 4 0 1
the p l a c e or p l a c e s where i t s o p e r a t i o n s sure to he c a r r i e d on, the p l a c e
i n the United S t a t e s where i t s home o f f i c e i s to he l o c a t e d , the amount
of i t s c a p i t a l stock and the number of shares i n t o which i t s h a l l he
divided, the names and p l a c e s of business or r e s i d e n c e of the persons
executing the c e r t i f i c a t e and the number of shares to which each has subs c r i b e d , and the f a c t t h a t the c e r t i f i c a t e i s made to enable the subs c r i b e r s and t h e i r successors to a v a i l themselves of the advantages of
the A c t .
I t provides a l s o t h a t no c o r p o r a t i o n s h a l l be organized under
the Act with a c a p i t a l stock of l o s s than $2,000,000, one q u a r t e r of
which s h a l l be p a i d i n b e f o r e the corporation may be organized to begin
b u s i n e s s ; t h a t the persons s i g n i n g the 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
duly acknowledge the execution t h e r e o f , and forward i t to the Federal
Reserve Board, and t h a t a f t e r the a r t i c l e s of a s s o c i a t i o n and an organizat i o n c e r t i f i c a t e a r e duly made and f i l e d , and " a f t e r the Federal Reserve
Board has approved the same and i s s u e d the permit to begin business, the
a s s o c i a t i o n s h a l l become and be a body c o r p o r a t e " , with c e r t a i t i s p e c i f i e d
powers i n c l u d i n g i n general the r i g h t t o engage i n i n t e r n a t i o n a l or f o r e i g n
banking or o t h e r f i n a n c i a l o p e r a t i o n s .
The Act provides " t h a t except such
as i s i n c i d e n t a l and p r e l i m i n a r y to i t s o r g a n i z a t i o n no such c o r p o r a t i o n
s h a l l e x e r c i s e any of the powers c o n f e r r e d by t h i s s e c t i o n u n t i l i t has
been duly a u t h o r i z e d by the Federal Reserve Board to commence business a s
a c o r p o r a t i o n organized under the p r o v i s i o n s of t h i s s e c t i o n " .
I t p i so
provides t h a t such a c o r p o r a t i o n may e s t a b l i s h and m a i n t a i n branches or
agencies i n f o r e i g n c o u n t r i e s a t such p l a c e s a s may be approved by the
Federal Reserve Board and under such r u l e s and r e g u l a t i o n s as the Board
may p r e s c r i b e .
X-6331
In the i n s t a n t case the a p p e l l a n t s , as r e l a t o r s below, f i l e d
t h e i r p e t i t i o n a g a i n s t the a p p e l l e e s a s membere of the Federal Reserve
Board, a l l e g i n g t h a t the r e l a t o r s had duly executed and f i l e d w i t h the
respondents, a c e r t i f i c a t e f o r the o r g a n i z a t i o n of a c o r p o r a t i o n under
the foregoing Act f o r the purpose of engaging i n i n t e r n a t i o n a l or
f o r e i g n "banking under the name "Foreign Financing Corporation", and t h a t
the c e r t i f i c a t e f u l l y conformed with the requirements of the Act; "but
t h a t tho respondents n e v e r t h e l e s s had wrongfully r e f u s e d to approve of
the same o r to itieud a permit to r e l a t o r s to "begin "business a s a "body
corporato under the Act.
The r e l a t o r s prayed f o r a w r i t of mandamus
tb corapol tho respondents a c t i n g as the Federal Reserve Board to approve
the a r t i c l e s of i n c o r p o r a t i o n and the o r g a n i z a t i o n c e r t i f i c a t e a f o r e s a i d , and to permit r e l a t o r s to "begin "business as a "body corporate under
the name "Foreign Financing Corporation", i n accordance with tho p r o v i s i o n s of the Act.
The respondents f i l e d t h e i r answer a d m i t t i n g t h a t the a r t i c l e s
of a s s o c i a t i o n and o r g a n i z a t i o n c e r t i f i c a t e f i l e d with t h e Board by r e l a t o r s were i n proper l e g a l form, but s t a t i n g t h a t the Board had r e f u s e d
to approve the same en the following grounds:
"That the Federal Reserve Board as a board, and
t h e respondents a s members t h e r e o f , deem i t t h e i r duty
c a r e f u l l y to i n q u i r e into the q u a l i f i c a t i o n s of the
o r g a n i z e r s of such proposed corporations and to r e f u s e
to approve t h e a r t i c l e s of a s s o c i a t i o n and o r g a n i z a t i o n
c e r t i f i c a t e s of such proposed corporations and to i s s u e
a permit f o r such proposed c o r p o r a t i o n s to do b u s i n e s s ,
u n l e s s a f t e r i n v e s t i g a t i o n , said Board i s of t h e opinion
t h a t the f i n a n c i a l r e s p o n s i b i l i t y , experience, t r a i n i n g ,
and o t h e r q u a l i f i c a t i o n s of the o r g a n i z e r s of such p r o posed c o r p o r a t i o n s a r e such a s may reasonably be c a l c u l a t e d to h o l d premise of the f i n a n c i a l soundness, r e l i a b l e
and competent management, and proper and s u c c e s s f u l opera t i o n of such proposed c o r p o r a t i o n . "
-3-
402
X-6321
"* * * t h a t r e l a t o r s do not possess the q u a l i f i c a t . i o n s
reasonably necossary to a s s u r e the f i n a n c i a l soundness,
r e l i a b l e and competent management, or the proper or
s u c c e s s f u l operations of a c o r p o r a t i o n organized under
S e c t i o n 25 (a) of the Federal Reserve Act t o engage i n
the h i g h l y t e c h n i c a l a c t i v i t i e s of i n t e r n a t i o n a l or
f o r e i g n "banking or other i n t e r n a t i o n a l or f o r e i g n
f i n a n c i a l o p e r a t i o n s and t h a t i t would be d e t r i m e n t a l
to the p u b l i c i n t e r e s t to approve such a r t i c l e s of
a s s o c i a t i o n or o r g a n i z a t i o n c e r t i f i c a t e and to i s s u e
a p r e l i m i n a r y permit f o r such proposed c o r p o r a t i o n to.
commence b u s i n e s s ; and t h a t , t h e r e f o r e , the s a i d Board
r e f u s e d to approve the a r t i c l e s of a s s o c i a t i o n and the
o r g a n i z a t i o n c e r t i f i c a t e and r e f u s e d to i s s u e a permit
to s a i d proposed corporation t o begin b u s i n e s s . Respondents say t h a t t h i s determination by the Federal
Reserve Board was unanimous; t h a t i t was adopted a f t e r
i m p a r t i a l i n v e s t i g a t i o n and f u l l and i m p a r t i a l cons i d e r a t i o n of a l l the f a c t s ; and t h a t respondents bel i e v e d then and now b e l i e v e t h a t i t would be c o n t r a r y
to p u b l i c p o l i c y and c o n t r a r y to the duty of respondents
as p u b l i c o f f i c e r s to approve s a i d a r t i c l e s of a s s o c i a t i o n and s a i d o r g a n i z a t i o n c e r t i f i c a t e or to i s s u e a
p r e l i m i n a r y permit t o the r e l a t o r s to begin b u s i n e s s
a s a body c o r p o r a t e . "
408
The r e l a t o r s f i l e d a demurrer to the answer of respondents.
The lower court o v e r r u l e d the demurrer, and, r e l a t o r s e l e c t i n g to stand
upon t h e i r demurrer, the court dismissed the p e t i t i o n , and the r e l a t o r s
appealed.
I t i s contended by a p p e l l e e s t h a t the s t a t u t e imposes the duty
upon the Federal Reserve Board of e x e r c i s i n g i t s judgment and d i s c r e t i o n
With r e s p e c t to the approval or disapproval of the a r t i c l e s of a s s o c i a t i o n and o r g a n i z a t i o n c e r t i f i c a t e s made and f i l e d under the Act, and t h a t
the Board's a c t i o n i n t h i s i n s t a n c e i s w i t h i n the l i m i t s of t h a t a u t h o r i t y .
On the o t h e r hand a p p e l l a n t s contend t h a t "Congress has not undertaken to
delegate to the Board t h e d i s c r e t i o n i t has assumed to e x e r c i s e " .
We agree with the contention of the a p p e l l e e s .
The s t a t u t e
provides t h a t an a s s o c i a t i o n formedMinder t h e Act s h a l l not become a body
-4-
X-6321
: 404
corporate u n t i l a f t e r the a r t i c l e s of a s s o c i a t i o n and o r g a n i z a t i o n c e r t i f i c a t e have been duly made and f i l e d , and a f t e r the Federal Reserve
Board has approved the same and issued a permit to i t to "begin b u s i n e s s .
The word "approved" n a t u r a l l y imports the exercise of judgment and d i s c r e t i o n ; and the power to approve o r d i n a r i l y implies a power to disapprove.
To "approve!1 or give "approval" i s i n i t s
e s s e n t i a l and most obvious meaning to confirm,
r a t i f y , s a n c t i o n , or consent to some a c t or
t h i n g done by a n o t h e r . The word "approve" does
not, ex v i t e r m i n i , n e c e s s a r i l y import the exe r c i s e of d i s c r e t i o n , but from the connection
i n which the term i s used i t o f t e n involves the
idea of d i s c r e t i o n and a d j u d i c a t i o n , and i s
seldom construed as r e q u i r i n g a mere m i n i s t e r i a l
act.
4 C. J . 1464.
I n the case of S t a t e ex r e l . Dodd v. B i l l , Banking Commissioner,
84 W. 7 a . , 468, the Supreme Court of West V i r g i n i a d e a l s with a s t a t u t e
which p r o v i d e d t h a t " h e r e a f t e r no c h a r t e r s h a l l be i s s u e d to any bank to
d» business i n t h i s s t a t e u n t i l the a p p l i c a t i o n t h e r e f o r has been approved
i n w r i t i n g by the commissioner of banking".
Acting under t h i s s t a t u t e the
commissioner of banking has r e f u s e d to issue such a c h a r t e r to the a p p e l l a n t s , upon the ground t h a t , f o r the p r o t e c t i o n of the p u b l i c , he had c a r e f u l l y considered the proposed l o c a t i o n of the bank, the t e r r i t o r y c o n t r i butory t h e r e t o , i t s p o s s i b i l i t i e s and p r o b a b i l i t i e s from a banking s t a n d p o i n t , and other questions connected therewith, and t h a t i n the e x e r c i s e
of h i s b e s t judgment as an o f f i c e r he had a r r i v e d a t the conclusion t h a t
the a p p l i c a t i o n should not be approved.
In denying a w r i t ef mandamus
to compel the commissioner to issue a c h a r t e r the court h e l d t h a t the
s t a t u t o r y p r o v i s i o n a f o r e s a i d v e s t e d i n the commissioner d i s c r e t i o n a r y
X-6321
405
power to approve or r e j e c t such an a p p l i c a t i o n , and t h a t the commissioner's
d e c i s i o n was not s u b j e c t to j u d i c i a l review u n l e s s i t c l e a r l y appeared t h a t
he had " v / i l f u l l y and a r b i t r a r i l y disregarded h i s duty, or t h a t h i s d e c i s i o n
was due to c a p r i c e , p a s s i o n , p a r t i a l i t y - o r c o r r u p t i o n " .
I n the People ex r e l . Schweder v. Brady, Auditor of Public Accounts, 268 111. 192, the Supreme Court of I l l i n o i s h e l d i n r e l a t i o n to
s i m i l a r l e g i s l a t i o n t h a t a s t a t u t e a u t h o r i z i n g the S t a t e Auditor to w i t h h o l d the f i n a l c e r t i f i c a t e of o r g a n i z a t i o n of a hank when he i s not s a t i s f i e d as t o the personal c h a r a c t e r and standing of the o f f i c e r s or d i r e c t o r s
or whon he has reason to "believe t h a t the hank i s organized f o r any purpose
other than t h a t contemplated by the Act, i s not u n c o n s t i t u t i o n a l on the
ground t h a t i t c o n f e r s - j u d i c i a l or l e g i s l a t i v e power on the Auditor.
See F i r s t Rational Bank v. Union Trust Company, 244 U. S. 416.
In tho i n s t a n t case it i s c l e a r t h a t Congress was providing a
means f o r c o n f e r r i n g s p e c i a l and important p r i v i l e g e s upon such corporations
a s should "be organized under the Edge Act.
An abuse by any c o r p o r a t i o n of
the powers t h u s granted to i t might involve grave consequences to our p u b l i c
service.
I t i s reasonable to b e l i e v e t h a t Congress intended t h a t a c a r e f u l
i n v e s t i g a t i o n should be made by the Federal Reserve Board concerning the
c h a r a c t o r and competency of tho i n c o r p o r a t o r s of such an e n t e r p r i s e , a s one
of tho ncans of determining whether to grant or withhold t h e i r approval of
the a p p l i c a t i o n f o r i n c o r p o r a t i o n .
Moreover i t should be noted that the Act
r e p e a t e d l y provided, f o r an "approval" by the Board as a p r e r e q u i s i t e to
proceedings a u t h o r i z e d thereunder, and i n a l l such i n s t a n c e s the term p l a i n l y
implies t h e e x e r c i s e of c o n s i d e r a t i o n , judgment, and d i s c r e t i o n by the Board.
The Act provides i n t e r a l i a t h a t any such c o r p o r a t i o n may a t any time -within
the two y e a r s next previous to the date of the e x p i r a t i o n of i t s corporate
-6-
X-6321
e x i s t e n c e , by a vote of the shareholders owning two-thirds of i t s stock ^ . Q 0
apply to t h e Federal Reserve Board f o r i t s approval to
extend the
p e r i o d of i t s corporate e x i s t e n c e f o r a term of not more than twenty
y e a r s , and upon c e r t i f i e d approval of the Board such c o r p o r a t i o n s h a l l
have i t s c o r p o r a t e e x i s t e n c e f o r such extended p e r i o d .
The Board, ac-
cordingly, may e x e r c i s e i t s judgment and d i s c r e t i o n with r e s p e c t to
what i s p r a c t i c a l l y a renewal of the corporate c h a r t e r .
This f a c t i s
s i g n i f i c a n t l y Consistent with the view t h a t the Board p s s s e s s e s a s i m i l a r
power over the g r a n t i n g of the f i r s t c h a r t e r .
An examination of congressional l e g i s l a t i o n with r e g a r d to hanking since 1864 shows t h a t Congress has c o n s i s t e n t l y used v a r i o u s forms of
the word "approve" i n tho sense of c o n f e r r i n g d i s c r e t i o n upon tho Comptroll e r of the Currency, the S e c r e t a r y of the Treasury, or tho Federal Reserve
Board.
Such a c o n s i s t e n t u s e of the term i n s t a t u t e s i n y a r i materia i s
persuasive.
Marks v. United S t a t e s , 161 U. S. 297.
The s t a t u t e s r e l a t i n g to the o r g a n i z a t i o n of n a t i o n a l "banks a r e
analogous to those now i n q u e s t i o n .
I t i s t h e r e f o r e proper to note t h a t
the Comptroller of the Currency has p r e s c r i b e d the following a s one of the
r e g u l a t i o n s governing t h e i n v e s t i g a t i o n s to he made "by the examiners r e l a t i n g to a p p l i c a t i o n s f o r n a t i o n a l bank c h a r t e r s ;
" I n making t h i s i n v e s t i g a t i o n the examiner i s
i n s t r u c t e d to give f u l l const-deration to a l l f a c t o r s
e n t e r i n g i n t o the p r o p o s i t i o n . Among o t h e r m a t t e r s
to he considered a r e ; F i r s t ; the general c h a r a c t e r
and experience of the o r g a n i z e r s and of the proposed
o f f i c e r s of the new hank; second, the adequacy of
e x i s t i n g hanking f a c i l i t i e s and the need of f u r t h e r
hanking c a p i t a l ; t h i r d , the outlook f o r the growth
and development of the town or c i t y i n which the hank
i s t o he l o c a t e d ; f o u r t h , the methods and hanking
p r a c t i c e s of the e x i s t i n g hank or "banks, the i n t e r e s t
r a t e s which they charge to customers, and the c h a r a c t e r
of t h e s e r v i c e which a s q u a s i - p u b l i c i n s t i t u t i o n s they
a r e r e n d e r i n g to t h e i r community; f i f t h , the reasonable
p r o s p e c t s f o r success of the new bank i f e f f i c i e n t l y
managed." I n s t r u c t i o n s Sa. 4 of the Comptroller of
X-6321
the Currency, Regulations Promulgated June 31, 1927,
Digest of Rulings of the Federal Reserve Board with
Appendices (1928) pages 394-395.
:
407
See McCormick v . Market Bank, 165 U. S, 538 , 551-2.
In the present case mandamus w i l l not l i e to c o n t r o l the
e x e r c i s e of the Board's d i s c r e t i o n .
" I t i s a f r e q u e n t l y a s s e r t e d and . u n i v e r s a l l y recogn i z e d r u l e t h a t mandamus only l i e s to onforce a m i n i s t e r i a l
a c t or duty; i n t h i s sense a m i n i s t e r i a l duty may he b r i e f l y
d e f i n e d to "be some duty imposed e x p r e s s l y "by law, not by
c o n t r a c t or a r i s i n g n e c e s s a r i l y as an i n c i d e n t to the o f f i c e ,
i n v o l v i n g no d i s c r e t i o n i n i t s e x e r c i s e , but mandatory and
i m p e r a t i v e . The d i s t i n c t i o n between merely m i n i s t e r i a l and
j u d i c i a l and o t h e r o f f i c i a l a c t s i s t h a t where the l a * p r e s c r i b e s and defifces the duty to be performed with such prerc i s i o n and c e r t a i n l y as to leave nothing to the e x e r c i s e of
d i s c r e t i o n or judgment, the a c t i s m i n i s t e r i a l ; but where
the a c t t o be done involves the e x e r c i s e of d i s c r e t i o n or
judgment, i t i s not to be deemed merely m i n i s t e r i a l
18 R.L.C. 116.
The judgment of the lower court i s a f f i r m e d with c o s t s .
(Signed) George E. Martin,
Chief J u s t i c e , Court of Appeals of
the D i s t r i c t of Columbia.
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6324
Jane 10, 1929.
SUBJECT:
Code word, to cover new i s s u e of Treasury
C e r t i f i c a t e s of Indebtedness, S e r i e s TM-1930, i n t e l e g r a p h i c t r a n s a c t i o n s *
Dear S i r :
In connection with t e l e g r a p h i c t r a n s a c t i o n s
i n Government s e c u r i t i e s "between Federal Reserve
Banks, the code word "HOWHEWN" has been designated
to cover the new issue of Treasury C e r t i f i c a t e s of
Indebtedness, S e r i e s TM-1930, dated June 15, 1929,
due March 15, 1930.
This word should be i n s e r t e d i n the Federal
Reserve Telegraphic Code Book, following the supplemental code word "NOWHEST" on page 172.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BASKS.
408
X-6325
MEMORANDUM RECOMMENDING A REGULATION PROVIDING THAT
NATIONAL BANKS MUST HAVE A MINIMUM CAPITAL OF
$50,000 AS A CONDITION PRECEDENT TO THE
GRANTING OF TRUST POSTERS
409
By Mr. P i a t t .
Subsection k of Section 11 of the Federal Reserve Act - the subsection
r e l a t i n g t o the g r a n t i n g of t r u s t powers to National "banks - was as o r i g i n a l l y enacted very s h o r t - only four l i n e s .
I t a u t h o r i z e d the Federal Reserve
Board "to grant by s p e c i a l permit to National banks applying t h e r e f o r when
not i n c o n t r a v e n t i o n of S t a t e or l o c a l law, the r i g h t to a c t as t r u s t e e ,
executor, a d m i n i s t r a t o r , or r e g i s t r a r of stocks and bonds under such r u l e s
and r e g u l a t i o n s a s t h e s a i d board may p r e s c r i b e . "
I need not go i n t o the d i f f i c u l t i e s of the a d m i n i s t r a t i o n of t h i s broad
power, or i n t o the l i t i g a t i o n which followed.
I t i s s u f f i c i e n t to say t h a t
there was controversy over the meaning of the words "when not i n contravent i o n of S t a t e or l o c a l law."
The Board a t f i r s t i s s u e d p e r m i t s f o r the ex-
e r c i s e of t r u s t powers to banks with a c a p i t a l smaller than t h a t r e q u i r e d by
S t a t e laws i n some S t a t e s , and, as our records show, a few such n a t i o n a l
banks a r e s t i l l e x e r c i s i n g , or a r e a u t h o r i z e d to e x e r c i s e , the powers then
granted.
As a r e s u l t of the o p p o s i t i o n of the S t a t e a u t h o r i t i e s and as a r e s u l t
of the l i t i g a t i o n and the Board's own d i f f i c u l t i e s with r e g u l a t i o n s and
a d m i n i s t r a t i o n , the Act of September 26, 1918 g r e a t l y enlarged subsection k
of S e c t i o n 11 and both c l a r i f i e d and l i m i t e d the B o a r d ' s powers.
The amend-
ment provided among other t h i n g s " t h a t no permit s h a l l be i s s u e d to any
n a t i o n a l banking a s s o c i a t i o n having a c a p i t a l and s u r p l u s l e s s than the
c a p i t a l and s u r p l u s r e q u i r e d by S t a t e law of S t a t e banks, t r u s t companies
and c o r p o r a t i o n s
exercising
each powers," and i n a d d i t i o n provided t h a t " i n
p a s s i n g upon. a p p l i c a t i o n s f o r permission to e x e r c i s e the powers enumerated
n X-6325
"2"
410
i n t h i s s u b s e c t i o n the Federal Reserve Board may take i n t o c o n s i d e r a t i o n
the amount of c a p i t a l and surplus of the -applying bank, whether or not
such c a p i t a l and. s u r p l u s i s s u f f i c i e n t under the circumstances of the
case, the needs of the community to be served, and any other f a c t s and
circumstances t h a t seem to i t p r o p e r . "
The Board was p r o h i b i t e d from g r a n t i n g t r u s t powers to banks with a
smaller c a p i t a l than the S t a t e laws p r e s c r i b e d f o r S t a t e banks or t r u s t
companies competing, and the paragraph d i s t i n c t l y a u t h o r i z e d the Board to
r e q u i r e a l a r g e r c a p i t a l i z a t i o n than S t a t e laws r e q u i r e d i f thought a d v i s able .
This a t once r a i s e s the question whether the l i m i t a t i o n s of S t a t e
laws a r e i n a l l cases adequate, and a l s o r a i s e s the question whether t h e r e
i s good r e a s o n f o r the high c a p i t a l i z a t i o n r e q u i r e d f o r t r u s t powers i n
some s t a t e s , by comparison with o t h e r s .
Twelve s t a t e s r e q u i r e a minimum c a p i t a l i z a t i o n of a t l e a s t $100,000,
t h r e e of them r e q u i r i n g $125,000.
$50,000, one of them $60,000.
Fourteen o t h e r s t a t e s r e q u i r e a t l e a s t
I t should be added t h a t i n a few s t a t e s
where the minimum requirement i s much lower i t i s g e n e r a l l y impossible f o r
banks with the minimum requirement of c a p i t a l to e x e r c i s e t r u s t powers
because of a h i g h requirement of d e p o s i t of s e c u r i t i e s with the S t a t e
Treasurer.
For i n s t a n c e , I l l i n o i s allows banks with a c a p i t a l of $25,000
to e x e r c i s e t r u s t powers i n c i t i e s of l e s s than 5,000 but i t s minimum r e quirement f o r d e p o s i t of s e c u r i t i e s i s $50,000.
We have given t r u s t , powers
to one $25,000 bank i n I l l i n o i s , but i t i s n a t u r a l l y not e x e r c i s i n g them*
The f o l l o w i n g s t a t e s r e q u i r e $100,000 or more as a minimum:
California
...,$125,000
Kansas
100,000
Maryland.
100,000
M i c h i g a n . ( « U . P 9 Y 9 T ? ) . .150,000
Montana.
100,000
Hew J e r s e y
100,000
Hew York,.
$100,000
North D a k o t a . . . . 100,000
Ohio.
125,000
P e n n s y l v a n i a . . . . 125,000
West V i r g i n i a . . . 100,000
X-6325
-3-
411
The f o l l o w i n g r e q u i r e $50,000, or "between $50,000 and $100,000:
$60,000
Arkansas
Colorado
50,000
Connecticut
50,000
Florida....
50,000
Georgia ( t r u s t C o s . ) . . 50,000
50,000
Idaho....
Louisiana
50,000
$50,000
50,000
50,000
50,000
50,000
50,000
50,000
Massachusetts
Mi s s o u r i .
Minnesota
Texas....
Washington
Wisconsin.
Virginia..
I t w i l l "be noted t h a t the s t a t e s with comparitively h i g h requirements
a r e by no means a l l e a s t e r n s t a t e s :
C a l i f o r n i a , Montana, North Dakota and
Kansas a r e amon& the s t a t e s r e q u i r i n g $100,000 or more.
Furthermore some
e a s t e r n s t a t e s have low requirements, and one of them, Ehode I s l a n d , none
at all.
I n s p i t e of the absence of any c a p i t a l requirement f o r t r u s t
companies Ehode I s l a n d has no National "bank with a c a p i t a l l e s s than $200,#00 e x e r c i s i n g t r u s t powers and according t o t h e Bankers' Directory has
only f o u r s t a t e t r u s t companies with a c a p i t a l smaller than $200,000, the
smalleet of which h a s a c a p i t a l of $75,000.
We have g r a n t e d one permit
to a n a t i o n a l hank w i t h a c a p i t a l "between $50,000 and $100,000 "but i t i s
not yet a d m i n i s t e r i n g t r u s t s .
There i s obviously no reason, so f a r as the
p u b l i c convenience i s concerned f o r small t r u s t companies i n Ehode I s l a n d .
New Hampshire and Vermont each aillow $25,000 i n s t i t u t i o n s to administer
t r u s t s "but i n New Hampshire the National hanks a t p r e s e n t a c t i v e l y i n f r u s t
"business have a c a p i t a l l a r g e r t h a n $50,000, with one exception.
I n Vermont
two n a t i o n a l "banks of $50,000 c a p i t a l and one of $25,000 a r e . e x e r c i s i n g
t r u s t powers.
The 16 o t h e r s a r e a l l c a p i t a l i z e d above $50,000.
There i s
obviously l i t t l e demand f o r small t r u s t companies i n e i t h e r of these s t a t e s
and the same i s t r u e of Maine, which has no National banks of $25,000 with
t r u s t powers and only 3 with a c a p i t a l i z a t i o n of $50,000.
view of the high requirements of such western s t a t e s a s Montana,
and North Dakota - $100,000 - s t a t e s which a r e s p a r s e l y s e t t l e d by comparison
X-6325
-4-
with the Hew England. S t a t e s , i t can h a r d l y he maintained, t h a t the s t a; t e s
4:
g e n e r a l l y "believe t h a t p u b l i c convenience r e q u i r e s t h a t every community
should have an i n s t i t u t i o n a u t h o r i z e d to administer t r u s t s , and the f a c t
that" a m a j o r i t y of the s t a t e s r e q u i r e a c a p i t a l of $50,000 or g r e a t e r
i n d i c a t e s t h a t they b e l i e v e small hanks a r e not a s a r u l e so managed o r
o f f i c e r e d a s t o he a b l e to administer t r u s t s s a f e l y and s u c c e s s f u l l y .
I have d e a l t with minimum requirements only and have not included
the s u r p l u s requirements of S t a t e laws, "because they seem as a r u l e unimportant - not adding g r e a t l y to the minimum c a p i t a l requirements»
In
a few s t a t e s they n e v e r t h e l e s s do much towards keeping the small "banks
from t r u s t "business.
Seventeen s t a t e s r e q u i r e hanks e x e r c i s i n g t r u s t
powers to deposit s e c u r i t y with S t a t e a u t h o r i t i e s .
The e f f e c t of the se
requirements might "be given f u r t h e r c o n s i d e r a t i o n , "but i t seems unnecess a r y to devote more space to them i n the p r e s e n t memorandum.
S t a t e hanking s u p e r i n t e n d e n t s , a s i n C a l i f o r n i a , have f r e q u e n t l y
expressed the opinion t h a t small hanks cannot "maintain p r o p e r t r u s t
standards."
There i s of course d i f f e r e n c e of opinion a s t o what c o n s t i -
t u t e "proper t r u s t s t a n d a r d s " and a d i s p o s i t i o n i n some s t a t e s to i n s i s t
t h a t the bank should be l a r g e enough, or t h a t t h e r e should be s u f f i c i e n t
t r u s t "business i n the community to j u s t i f y
experts i n t r u s t b u s i n e s s . "
11
the employment of a s t a f f of
Without s u b s c r i b i n g f u l l y to t h i s view i t
i s evident t h a t the c l e r i c a l f o r c e i n the average small bank r a r e l y cont a i n s men who could q u a l i f y by any s t r e t c h of imagination a s "experts*
e i t h e r i n t r u s t b u s i n e s s or i n banking.
I t i s the view of the d i r e c t o r s
of the F e d e r a l Reserve Bank of Hew'York t h a t a group of men may be well
enough q u a l i f i e d to conduct a l o c a l bank, but ma/ not be q u a l i f i e d to conduct t r u s t "business.
The t e s t they apply i s the question whether they
X-6325
i
413
would, "bo w i l l i n g t o e n t r u s t tho management of an e s t a t e or a t r u s t fund i n
which thoy v/ere i n t e r e s t e d to the group.
C e r t a i n l y something more i n a b i l -
i t y , i n c h a r a c t e r and i n f i n a n c i a l standing should he r e q u i r e d f o r Conducting f i d u c i a r y "business than f o r l o c a l "banking.
That the small "banks a r e ranch more l i a b l e to f a i l u r e than l a r g e hanks
has "been amply demonstrated.
Of the 5,004 hank f a i l u r e s from 1921 - 1928
i n c l u s i v e , 4434, or 90.7 p e r cent were harks with a c a p i t a l of l e s s than
$100,000.
A hank may f a i l without l o s s to the t r u s t s administered by i t ,
and so f a r i t does not appear t h a t t h e r e have been any l o s s e s of t r u s t
funds due to National bank f a i l u r e s , but t h i s may be a t t r i b u t e d i n p a r t to
good, luck and. p a r t to the f a c t t h a t the banks having t r u s t powers which
have so f a r f a i l e d . (61 i n a l l ) have been comparatively few i n number, and
had not y e t accumulated much t r u s t b u s i n e s s .
More than 75 p e r cent of them
were i n f a c t not a d m i n i s t e r i n g any t r u s t s a t t h e time of f a i l u r e .
Back of
a c t u a l l o s s i s furthermore a negative argument and. gives l i t t l e i n d i c a t i o n
a s t o whether the t r u s t s have bo an p r o p e r l y managed.
I have been informed
t h a t not much i s y e t known a s to the s e c u r i t i e s i n which t h e t r u s t f u n d s
of f a i l e d banks were i n v e s t e d , beyond the f a c t t h a t t h e r e have been no
complaints
to the r e c e i v e r s .
funds were not l o s t .
About a l l t h a t i s known i s t h a t u n i n v e s t e d
Such uninvested funds might e a s i l y be l e s t i f they
were not p r o p e r l y s e g r e g a t e d from the general funds of the bank, and small
banks, where t r u s t b u s i n e s s and commercial busine ss must be handled by the
same p e r s o n s a r e l e s s l i k e l y t o be c a r e f u l about s e g r e g a t i o n than banks
l a r g e enough to a f f o r d a s t a f f engaged s o l e l y i n the t r u s t b u s i n e s s .
This
i s one of the chief concerns of our Reserve Board t r u s t department, and
banks a r c c o n s t a n t l y admonished and r e q u i r e d to maintain proper s e g r e g a t i o n ,
«
An Iowa n a t i o n a l bank t h a t f a i l e d i n February was found to havo an uninvested
X-6325
414
unsocurod fund i n i t s t a n k i n g dopartmont only two wetiks b e f o r e i t c l o s e d .
To sum up: a m a j o r i t y of the s t a t e s e v i d e n t l y r e g a r d a c a p i t a l i z a t i o n
h i g h e r than the minimum c a p i t a l i z a t i o n r e q u i r e d f o r commerical "banking
necessary f o r t r u s t corporations "as a guarantee t h a t t r u s t s w i l l be f a i t h f u l l y a d m i n i s t e r e d , " and the s t a t e s which m a i n t a i n t h i s p o s i t i o n a r e a s a
r u l e the s t a t e s with t h e b e s t tanking s t a n d a r d s .
Should n o t the Federal
Reserve Board seek to r a i s e the s t a n d a r d f o r t r u s t powers i n s t a t e s where
i t i s now low, i n s t e a d of g r a n t i n g t r u s t powers s o l e l y with r e f e r e n c e to
the question whether s i m i l a r powers would he g r a n t e d by t h e s t a t e banking
authorities?
By following the l a t t e r course the Board undoubtedly runs
the r i s k of f u r n i s h i n g an argument towards the lowering of s t a t e standards•
The advocates of a lowering of the s t a n d a r d i n a s t a t e where i t i s now high
Can p o i n t to the f a c t t h a t i n an a d j o i n i n g S t a t e the Federal Reserve Board
endorses a lower s t a n d a r d by g r a n t i n g t r u s t powers t o banks with a small
capitalization.
I t would appear t h a t bankers g e n e r a l l y , as well a s many of the S t a t e
s u p e r i n t e n d e n t s of banking, a r e of the opinion t h a t small banks ought not to
^e p e r m i t t e d , o r ought not t o attempt, to a d m i n i s t e r t r u s t s .
By comparison
With the l a r g e number of small banks i n e x i s t e n c e , only a few have a p p l i e d f o r
t r u s t powers and although n e a r l y a l l t h a t have a p p l i e d ha»ve b e f n given p e r mission t o a c t , a l a r g e m a j o r i t y of them remain i n a c t i v e .
Of 76 $25,000
banks w i t h t r u s t power 56 were i n a c t i v e a t l a s t r e p o r t s .
S e c t i o n 3.1-k, a s amended i n 1918 a u t h o r i z e d the Board to consider
" t h e needs of the community to be s e r v e d . "
Without going so f a r &s to say,
a s the Superintendent of Banking i n C a l i f o r n i a says, t h a t p u b l i c o f f i c i a l s
charged with the duty of p a s s i n g upon a p p l i c a t i o n s f o r t r u s t powers "should
s a t i s f y themselves t h a t t h e r e i s s u f f i c i e n t b u s i n e s s i n t h e community to
X-6325
;
415
j u s t i f y t h e employment of a s t a f f of e x p e r t s i n t r u s t "business," the memorandum submitted, "by Governor Young on November 8, 1928 goes much too f a r
i% the other d i r e c t i o n "by saying t h a t " o u t s i d e of a few i s o l a t e d and c r o s s road casaEunities i n the United S t a t e s , the need e x i s t s i n every community."
Evidently a m a j o r i t y of the s t a t e s disagree with t h i s view, as I have i n d i c a t e d above, and i t seems c l e a r t h a t the p u h l i c w i l l be b e t t e r served i f
t r u s t b u s i n e s s can continue to be administered by the l a r g e r , well equipped
i n s t i t u t i o n s i n s t e a d of being s c a t t e r e d among many small i n s t i t u t i o n s . There
i s probably some saving of expense i n the a d m i n i s t r a t i o n of an e s t a t q i f the
a d m i n i s t r a t o r o r executor i s a r e s i d e n t of the county of the decedent, but
t h e r e i s nothing to b e gained by having the a d m i n i s t r a t o r o r executor a small
town bank when t h e r e i s a l a r g e r , b e t t e r equipped bank only a few miles away.
I n the a d m i n i s t r a t i o n of t r u s t funds g e n e r a l l y , a p a r t from c o u r t t r u s t s , and
e s t a t e s i n p r o c e s s of s e t t l e m e n t , the l o c a t i o n of the t r u s t e e bank i s genera l l y unimportant t o the b e n e f i c i a r i e s .
C e r t a i n l y the d i f f i c u l t i e s of super-
v i s i o n w i l l be g r e a t l y i n c r e a s e d i f the small banks g e n e r a l l y a r e p e r m i t t e d
to a d m i n i s t e r t r u s t s .
In the C a l i f o r n i a case submitted, and i n every case where the Board
f i n d s a s u p e r i n t e n d e n t of banks a d m i n i s t e r i n g the law so a s to enforce a
s t a n d a r d h i g h e r than the minimum l e g a l requirements, I b e l i e v e the Board
should adopt t h e same h i g h e r s t a n d a r d s .
To do otherwise i s obviously to
f o r c e the s t a t e banking a u t h o r i t i e s to lower t h e i r standards i n order to
meet the competition of the lower National bank or Federal Eeserve s t a n d a r d s .
F i n a l l y 1 b e l i e v e we should adopt the
p o l i c y of the m a j o r i t y of the
s t a t e s and should provide by r e g u l a t i o n t h a t no n a t i o n a l bank with a c a p i t a l
l e s s than $50,000 be granted permission to a d m i n i s t e r t r u s t s , and f u r t h e r
t h a t no n a t i o n a l bank with a c a p i t a l l e s s than $100,000 be g r a n t e d f u l l t r u s t
powers u n l e s s an e x c e p t i o n a l showing i s made a s t o the bank;*8 c o n d i t i o n and
management, a
nd as to ttensed of an institution exercising trust pesos infibscommunity.
X-6326
COPY
IN THE SUPREME COURT OF THE STATE OF IDAHO
416
(No. 5147)
G. F. KA2TSBR0UGH,
Respondent,
vs.
P o c a t e l l o , April
Term, 1929
D. W. STANDROD & COMPANY, a defunct
t a n k i n g c o r p o r a t i o n of the S t a t e of
Idaho, D. ¥ . STANDROD, D. L. EVANS,
GEORGE F . GAGON and W. F, SORGATZ,
As t r u s t e e s and d i r e c t o r s i n o f f i c e
• f D-. W. STANDROD & COMPANY, a defunct
"banking c o r p o r a t i o n of the S t a t e of
,
Idaho, K. L. SCOTT AND E. P . DUNLAP,
deputies of the Commissioner of Finance
of the S t a t e of Idaho,
F i l e d , May 31, 1939
Clay Koelsch, Clerk
Defendants.
and
E. W. PORTER, Commissioner of Finance
of the S t a t e of Idaho, UNITED STATES
FIDELITY & GUARANTY COMPANY, a c o r p o r a t i o n , and FEDERAL RESERVE BANK OF
SAN FRANCISCO, a c o r p o r a t i o n ,
Appellants.
Appeal from the D i s t r i c t Court of the S i x t h J u d i c i a l D i s t r i c t ,
f o r Bingham County.
Hon. Ralph W. Adair, Judge.
Action to enforce a t t o r n e y ' s l i e n .
Judgment f o r p l a i n t i f f ,
REVERSED.
!
John W. Jones and Guy Stevens, f o r a p p e l l a n t s E. W. P o r t e r ,
Commissioner of Finance, and United S t a t e s F i d e l i t y & Guaranty Co.,
M e r r i l l & M e r r i l l , f o r a p p e l l a n t Federal Reserve Bank of
San Francisco
Thomas & Anderson and G. F. Hanshrough, f o r respondent,
X-632S
- 2 -
BHIHCK, D i s t r i c t Judge.
417
The respondent i s a p r a c t i c i n g a t t o r n e y a t law who, i n November,
1921, was employed "by D. V. Standrod & Company, a banking i n s t i t u t i o n , , to
"bring a s u i t a g a i n s t a f i r m known as Swauger Brothers and o t h e r s .
After
the s u i t was commenced, a s e t t l e m e n t was made "between the p l a i n t i f f and.
defendants t h e r e i n , whereby the bank r e c e i v e d c e r t a i n notes of the de~
fgndants and, as c o l l a t e r a l s e c u r i t y f o r t h e i r payment, r e c e i v e d 81,999
sljares of the c a p i t a l stock of Swauger Land & Livestock Company, a c o r poration.
Upon l e a r n i n g of the s e t t l e m e n t , respondent o b t a i n e d an agree-
ment from t h e Standrod "bank t h a t h i s f e e s should "be c r e d i t e d upon n o t e s
ho had given to the "bank and which were then h e l d "by the a p p e l l a n t Federal
Reserve Bank of San F r a n c i s c o .
In February, 1933, respondent and the law
f i r m of Thomas & Anderson were employed "by the Standrod bank to b r i n g s u i t
upon the Swauger notes which had been obtained i n the previous s e t t l e m e n t .
This s u i t , a f t e r i t was commenced, was l i k e w i s e s e t t l e d b e f o r e t r i a l , t h i s
time with the consent of counsel, and i n t h i s s e t t l e m e n t the Standrod Bank
became the owner of the s h a r e s of stock t h a t had p r e v i o u s l y been pledged to
i t , and r e c e i v e d i n a d d i t i o n notes of the Swaugers aggregating some $22,000.
In t h i s connection i t was again agreed t h a t the a t t o r n e y ' s f e e s earned by
respondent and h i s ' a s s o c i a t e s i n the second s u i t should be c r e d i t e d Tfpon
notes they had given to the Standrod Bank, which notes were a l s o i n #ie
hands of the Federal Reeerve Bank as p l e d g e s .
On November 28, 1923, the
Standrod bank c l o s e d i t s doors, and was taken i n charge by the a p p e l l a n t
Commissioner of Finance of t h e S t a t e of Idaho; and the attorney* s f e e s of
respondent and h i s a s s o c i a t e s were never c r e d i t e d upon t h e i r notes to the
Standrod bank, t h e s e notes having been a t a l l times h e r e i n involved i n the
p o s s e s s i o n of the Federal Reserve Bank as c o l l a t e r a l s e c u r i n g notes to i t
X-6326
-3-
of the Standrod t a n k .
418
A f t e r the Standrod Bank closed, respondent f i l e d with the
Commissioner of Finance a claim f o r h i s a t t o r n e y ' s f e e s and f o r a p r e f erence a s a t r u s t fund, which p r e f e r e n c e was disallowed.
He appealed
from s a i d r u l i n g to the D i s t r i c t Court which denied the p r e f e r e n c e , but
allowed him an a t t o r n e y ' s l i e n upon the massed a s s e t s of the hank.
On
appeal to t h i s court the judgment of the D i s t r i c t Court allowing a l i e n
upon the massed a s s e t s was reversed, "but, the record and "briefs i n d i c a t i n g
t h a t the Swauger notes and c e r t i f i c a t e s of stock were then i n the hands of
the Commissioner, the D i s t r i c t Court was d i r e c t e d to e n t e r a judgment dec l a r i n g an a t t o r n e y 1 s l i e n on t h a t s p e c i f i c p r o p e r t y and ordering i t s s a l e ,
gansbrough v . D. T. Standrod & Co., 43 Idaho 119 , 249 Pac. 897 (decided
September 24, 1926.)
I t now appears, however, t h a t i n October, 1923, the Standrpd
bank had t r a n s f e r r e d the Swauger notes and the stock owned by i t i n the
Swauger Company t o the Federal Reserve Bank as c o l l a t e r a l to secure i t s
own notes to t h a t bank, f o r which i t had been given c r e d i t , and t h a t t h e
potes and stock were never i n the hands of the Commissioner of Finance
as a s s e t s of the Standrod Bank.
I t i s shown t h a t the Federal Reserve
Bank a c c e pt e d t h e s e s e c u r i t i e s without knowledge of the l i e n of p l a i n t i f f
and h i s a s s o c i a t e s , and t h a t i t was f i r s t advised thereof a f t e r i t had in
September, 1924, r e c e i v e d from J . W. Swauger an o f f e r to purchase the
Swauger n o t e s and stock f o r $15,000, and had n o t i f i e d the Commissioner
of Finance t h a t t h e o f f e r would be accepted i n the absence of o b j e c t i o n
w i t h i n a s p e c i f i e d time.
The o f f e r was accepted and the s a l e of the
c o l l a t e r a l made.
A f t e r the d e c i s i o n i n the former case, the respondent, i n h i s
-4-
X-6326
419
own r i g h t and a s assignee of h i s a s s o c i a t e s , "brought t h i s s u i t a g a i n s t
the a p p e l l a n t s Federal Reserve Bank and the Commissioner of Finance and
hi'8 s u r e t y , t o recover the amount of the a t t o r n e y ' s f e e s of himself and
h i 8 a s s i g n o r s a s damages f o r the a l l e g e d conversion of the Swauger notes
d#d stock upon which respondent and h i s a s s i g n o r s had an a t t o r n e y ' s l&en.
The t r i a l court found t h a t the a p p e l l a n t s had, by a s a l e of the p r o p e r t y
t<^ Swauger, converted i t ; t h a t the l i e n s of respondent and h i ? a s s i g n o r s
had not "been a f f e c t e d "by the pledge of the p r o p e r t y to the Federal Reserve Bank; t h a t they were not g u i l t y of l a c h e s fluid had not waived t h e i r
l i e n s upon the p r o p e r t y ; and awarded the respondent judgment a g a i n s t the
a p p e l l a n t s f o r $7,000 and i n t e r e s t , from which judgment t h i s appeal i s
taken.
I t i s urged t h a t i n no event could an a c t i o n f o r conversion "be
maintained, s i n c e p l a i n t i f f had a more l i e n without r i g h t of p o s s e s s i o n .
The complaint may "be t r e a t e d , however, a s s t a t i r g a cause of a c t i o n on
the case f o r the d e s t r u c t i o n of the p r o p e r t y subject to t h e l i e n .
The p r i n c i p a l q u e s t i o n s p r e s e n t e d a r e as to whether the p r o ceeds of the compromised l i t i g a t i o n can be s u b j e c t e d to a l i e n i n the
hands of a t h i r d person who took without knowledge of the claim of l i e n ;
and whether, i f such claim can ever be a s s e r t e d , the respondent and h i s
a s s i g n o r s were g u i l t y of l a c h e s which would preclude than from now a s serting i t .
C. S. s e c . 6576, which governs a t t o r n e y ' s l i e n s , i s a s
follows:
"The measure and mode of compensation of a t t o r n e y s and
counselors a t law i s l e f t t o the agreement, express o r implied,
<?f the p a r t i e s , which i s not r e s t r a i n e d , by law. From the commencement of an a c t i o n , or the s e r v i c e of an answer c o n t a i n i n g
a counterclaim, the a t t o r n e y who appears f o r a p a r t y has a l i e n
upon h i s c l i e n t ' s cause,of a c t i o n or counterclaim, which a t t a c h e s
to a v e r d i c t , report,, d e c i s i o n or judgnent i n h i s c l i e n t ' s f a v o r
and the proceeds thereof i n whosesoever hands they may come; and
cannot bo a f f e c t e d by any settlement between the p a r t i e s b e f o r e
or a f t e r judgment."
X-6326
420
As to whether, under a s t a t u t o r y l i e n where p o s s e s s i o n i s not
d e l i v e r e d , p r o p e r t y may "be followed i n t o the hands of an innocent p u r chaser, the a u t h o r i t i e s a r e not i n harmony •
I t was s a i d i n Be a l l v.
White, 94 U.S. 382 (386), 24 L.Ed. 173, t h a t s t a t u t o r y l i e n s have, w i t h out p o s s e s s i o n , the same o p e r a t i o n and e f f i c a c y t h a t e x i s t e d i n conmonlaw l i e n s where the p o s s e s s i o n was d e l i v e r e d .
This d o c t r i n e i s r e j e c t e d
i n Finney v . Harding, 136 111. 573, 27 N. E. 289.
A statutory landlord's
l i e n i s i n some s t a t e s allowed to be enforced as a g a i n s t an innocent p u r chaser u n l e s s he i s e x p r e s s l y p r o t e c t e d by the s t a t u t e .
Richardson Bros,
v . P e t e r s o n , 58 Iowa 724, 13 N. W. 63; Newman v . Bank of Greenville, 66
Misc. 323, 5 So. 753.
I n o t h e r s t a t e s a bone f i d e purchaser i s p r o t e c t e d
a s a g a i n s t such a l i e n (Finney v . Harding, supra: Thornton v . Carver, 80
Qa. 397, 6 S. E. 915), and a l i k e conclusion was reached a s to a d i f f e r e n t
k i n d of s t a t u t o r y l i e n i n Lanterman v. Ltiby, 96 N. J . Law 255, 114 A$l. 325.
The l a t t e r view i s favored both by weight of a u t h o r i t y and upon reason by
a u t h o r s of some of the t e x t s .
1 Jones on Liens ( 3 r d e d . ) Sec. 1048 ; 2
Underbill on Landlord and Tenant, Sec. 834; 37 C. J . p . 331. Counsel exp r e s s t h e i r i n a b i l i t y t o f i n d d e c i s i o n s d i r e c t l y upon the p o i n t under the
a t t o r n e y ' s l i e n s t a t u t e s , and we have found none.
d e n t i c a l with the s t a t u t e e x i s t i n g i n New York,
C. S. Sec. 6576 i s i The Court of appeals of
t h a t s t a t e s a i d i n F i s c h e r Hansen v . Brooklyn Heights R. Co., 173 N. T.
492, 66 N.E. 395, t h a t the l i e n given by t h e s t a t u t e " c l i n g s to any
p r o p e r t y or money i n t o which the s u b j e c t can be t r a c e d , u n t i l i t reaches
the hands of a bona f i d e p u r c h a s e r ; " and t h i s language i s quoted with
approved i n Corikling v . Austin, 111 Mo. app, 292, 86 S . W. 911, which
d e c i s i o n i n t u r n i s approved by the Supreme Court of Missouri i n Wait v<
f t c h i s o n , T. and S . F . By. Co., 204 Mo. 491, 103 S«W. 60.
In P e t t i b q n e y.
X-6326
—6-
421
tihomson, 72 Misc. Hep. 486, 130 N. Y. S. 284 (289), and Sargent v s . New
York Central & N. R.R.Co. 209 N. Y. 360, 103 N. B. 164 (166), the courts
of New York appear to t r e a t as of consequence the m a t t e r of n o t i c e to a
t h i r d person i n p o s s e s s i o n qf p r o p e r t y upon which an a t t o r n e y ' s l i e n i s
claimed.
Because we deem the question of laches determinative of t h i s
case i n any event, we do not decide the f i r s t question r a i s e d "by a p p e l lants.
Assuming, hut not deciding, t h a t respondent and h i s a s s i g n o r s ,
i f d i l i g e n t i n a s s e r t i n g t h e i r claim, could have followed the p r o p e r t y
h e r e involved i n t o the hands of an innocent p u r c h a s e r , we t h i n k they have
l o s t t h a t r i g h t a s a g a i n s t these a p p e l l a n t s .
I n s t e a d of proceeding to a t -
tach themselves to or to s e q u e s t e r the p r o p e r t y which was t h e f r u i t s of the
l i t i g a t i o n , or to otherwise enforce t h e i r l i e n , they l e f t the p r o p e r t y und i s t u r b e d i n the hands of t h e Standrod hank, notwithstanding i t was the
i;ind of p r o p e r t y t h a t banks f r e e l y deal i n , hypothecate, and t r a n s f e r i n
the o r d i n a r y course of "business.
In Iowa, which of a l l the s t a t e s has perhaps most r i g i d l y e n f o r ced a s t a t u t o r y l a n d l o r d ' s l i e n as a g a i n s t innocent p u r c h a s e r s , an except i o n was c r e a t e d to the l i e n , making i t s u b j e c t to the course of business
of t h e t e n a n t , so a s not to i n t e r f e r e with s a l e s of p r o p e r t y contemplated
by t h e c h a r a c t e r of t h e b u s i n e s s prose cured by the t e n a n t , to which the
l a n d l o r d i s presumed to have a s s e n t e d upon the l e a s i n g of the premises,
pichardson Bros. v . P e t e r s o n , supra.
By f a i l i n g to a s s e t t and enforce t h e i r l i e n when t h e i r r i g h t s
accrued, respondent and h i s a s s i g n o r s made i t p o s s i b l e f o r the Standrod
bank, upon the s t r e n g t h of i t s apparent unincumbered ownership of the
p r o p e r t y , to o b t a i n a c r e d i t from the Federal Reserve Bank, which had no
X-6326
-7knowledge ot n o t i c e of t h e i r s e c r e t l i e n .
£ 2 2
The r i g h t to e n f o r c e an a t t o r n e y ' s l i e n may "be l o s t "by l a c h e s ,
Lee v. Vacuum Oil Co., 126 N« Y. 579, 27 H. B. 1018 Fillmore v.^Wells,
10 Cdlo, 228, 15 Pac. 343; Colorado S t a t e Bank v . Davidson, 7 Colo. App.
:
i
91, 42 Pac. 687. Laches i s delay t h a t works disadvantage to a n o t h e r .
4 Pomeroy's Equity Jurisprudence ( 4 t h e d . ) Sec. 1442.
With r e f e r e n c e to
the l i e n i n t h i s case, i t was s#id i n Hansbrough v . D. W. Standrod & Co.
Supra:
"The l i e n could have been discharged only "by payment, exp r e s s agreement "backed "by a c o n s i d e r a t i o n , or l a c h e s
i t i s urged t h a t r e s p o n d e n t ' s f a i l u r e to a s s e r t h i s l i e n f o r
npre than two y e a r s c o n s t i t u t e d l a c h e s . But, so long as no one
was "being i n j u r e d , he was e n t i t l e d to the f u l l p e r i o d of l i m i t a t i o n s , which had not e x p i r e d when he appealed from the Commissioner's
decision."
I t now appears t h a t to e n f o r c e the l i e n would i n j u r e the Federal Reserve
Bank to which the Standrod Bank s t i l l owes some $300,000.
We think i t
c l e a r t h a t whatever the r i g h t respondent and h i s a s s i g n o r s m i ^ i t have
had when the p r o p e r t y f i r s t came i n t o the hands of t h e i r c l i e n t , they,
"Jjy t h e i r delay i n e n f o r c i n g i t , l o s t the p r i v i l e g e of a s s e r t i n g i t as
a g a i n s t the subsequent innocent pledgee, the Federal Reserve Bank.
The d e c i s i o n i n Hansbrough v . D. W. Standrod & Co. d e c l a r i n g
p l i e n upon the p r o p e r t y , i s not an a d j u d i c a t i o n of the r i g h t s of the
Federal Reserve Bank, which was not a p a r t y t o t h a t a c t i o n .
As to Ifhe
Commissioner of Finance, i t i s shown i n t h i s case t h a t he never had
p o s s e s s i o n of t h e p r o p e r t y , and could not have converted i t .
I t is true
t h a t n e a r l y two y e a r s b e f o r e t h a t d e c i s i o n was rendered, the Federa^. Reserve Bank, d e s i r i n g to h o l d some of the stock i n i t s own name so a# to
have a c c e s s to the corporate books of the Swauger Land & Livestock Company,
with the consent of the Commissioner had the c e r t i f i c a t e s r e w r i t t e n , a p o r t i o n
-8-
X-6326
• .
i
4Z
of tho stock "being roi'f suod in the namo of t h a t "bank and a p o r t i o n i n the
namo of tho Commissioner, who indorsed the c e r t i f i c a t e so made out to him
over to the Federal Rosdrvo Bank. This was a mere change i n form, without
•f
any i n t e n t i o n of r e l e a s i n g the l i e n , and the Commissioner did not thereby
have o r become e n t i t l e d to p o s s e s s i o n of the c e r t i f i c a t e s of stock, which
were a t a l l times s u b j e c t to the pledge agreement under which the Federal
Reserve Bank had r e c e i v e d i t from the Standrod bank.
I t i s unnecessary to consider the other e r r o r s assigned, The
Judgment of the t r i a l court i s reversed, with c o s t s to a p p e l l a n t s .
GIVENS, T. BAILEY LEE, WM. E, LEE AND VARIAN, J J . , Concur.
424
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6329
June 18, 1929
Dear Mr.
Enclosed you w i l l f i n d f o r your information copy of
statement of t h e Bureau of Engraving and P r i n t i n g covering t h e
cost of p r e p a r i n g F e d e r a l r e s e r v e notes of t h e small s i z e
during the months of April and May and to June 15, t e l e g r a p h i c
advice of the "balance due from your "bank having been sent to
you on June 15.
I t i s understood t h a t t h e r e w i l l he a small
amount of a d d i t i o n a l notes d e l i v e r e d p r i o r t o June 30.
Very t r u l y yours
Enclosure
(SENT TO ALL FEDERAL RESERVE AGENTS)
W. M. IMLAY
F i s c a l Agent
425
X—6329a
June 15, 1929.
Federal Reserve Notes, S e r i e s 1S28, d e l i v e r e d A p r i l 1 t o June 15, 1929,
|5
$10
Boston
530,000
474,000
New York
2,454,000 1,386,000
P h i l a d e l p h i a 970,000
460,000
Cleveland
542,000
550,000
Richmond
214,000
190,000
Atlanta
666,000 640,000
Chicago
1,402,000
906,000
S t . Louis
146,000
224,000
Minneapolis
80,000 187,000
Kansas City
334,000
34,000
Dallas
502,000
334,000
San Francisco 810,000
536,000
°tal
Sheets
248,000
520,000
6,000
60,000
54,000
36,000
1,258,000
4,420,000
1,752,000
1,696,000
598,000
Amount
*
48,000 2,854,000
470,000
401,000
490,000
962,000
8,000 1,830,000
112,591.00
395,590.00
156,804.00
151,792.00
53,521.00
144,990.00
255,433.00
42,065.00
35,889.50
43,855.00
86,099.00
163,785.00
214,000 18951,000
1,642,414.50
268,000
566,000
194,000
314,000
498,000
1,620,000
100,000
134,000
122,000
126,000
8, 650,000 5,921,000 3566,000
Bost on
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallag
San Francisco
T
§20
Amount B i l l e d
on account Apr .
3 and 30, 1929
Amount
Due
§103,200.00
357,000.00
142,200.00
142,200.00
49,600.00
133,000.00
232,000.00
39,600.00
32,600.00
42,000.00
78,200.00
148,400.00
#9,391.00
38,590.00
14,604.00
9,592.00
3,921.00
11,990.00
23,433.00
2,465.00
3,289.50
1,855.00
7,899.00
15,385.00
$1,500,000.00
$142,414.50
426
*
X-6329T)
STATEMENT OP BUREAU OF ENGRAVING AND PRINTING.
Federal Reserve Notes, s e r i e s 1928, d e l i v e r e d A p r i l 1 t o June 15, 1929,
a s per a t t a c h e d s t a t e m e n t ,
18,351,000 s h e e t s ,
#89.50 per II, . . .
Apr. 3, B i l l e d on account,
Apr. 3 0 , B i l l e d on account,
. $1,642,414.50
$750,000
750,000
1,500,000.00
Total, . .
$
142,414.50
Credit a p p r o p r i a t i o n s , 1929, as f o l l o w s :
Comp. of Emp., B. E. & P .
$75,105.75
P l a t e P r i n t i n g , B. B. & P .
32,429.13
M t l s . & Misc.EXp.,B. E . & P.
34,879.62
Bureau of Engraving and P r i n t i n g
A. P . Ruth,
Acting A s s i s t a n t D i r e c t o r .
427
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-6330
June 19, 1929.
SUBJECT:
Holidays during J u l y , 1929.
Dear S i r :
On Thursday, J u l y 4 t h , t h e r e w i l l be n e i t h e r Gold.
Settlement Fund, nor Federal Reserve note c l e a r i n g , and.
the hooks of t h e Federal Reserve Board, w i l l "be c l o s e d .
The f o l l o w i n g t r a n c h e s w i l l a l s o be c l o s e d on the
dates i n d i c a t e d :
Saturday
J u l y 13
Nashville
Memphis
Birthday of
General F o r r e s t
Wednesday
J u l y 24
S a l t Lake
Pioneer Day
On t h e dates i n d i c a t e d , the branches a f f e c t e d w i l l
not p a r t i c i p a t e i n e i t h e r the Gold. Fund c l e a r i n g or t h e
Federal Reserve note c l e a r i n g .
P l e a s e include c r e d i t s f o r the branches a f f e c t e d on t h e
h o l i d a y s mentioned, with c r e d i t s of t h e f o l l o w i n g business
day, i n the Gold Fund c l e a r i n g .
P l e a s e 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.
/
X-6334
: 428
ADDRESS OF CBARL25 S. HAMLIN
Maine Bankers 1 A s s o c i a t i o n , Poland Springs, Maine, June 22, 1929.
Mr. Hamlin s a i d i n p a r t : Let me s t a t e a t the o u t s e t t h a t what I have to say t h i s evening
r e p r e s e n t s merely my p e r s o n a l views, and t h a t I am not i n any sense speaking f o r t h e Federal Reserve Board.
Banking developments during the p a s t year have a t t r a c t e d more
general a t t e n t i o n , and caused more d i s c u s s i o n , than a t any time since the
f o u n d a t i o n of t h e Federal Reserve System, excepting only the y e a r s 1920
and 1921.
We h e a r , on the one hand, statements as to uribridled s e c u r i t y
s p e c u l a t i o n and i n f l a t i o n , and on the o t h e r a denial t h e r e o f , coupled with
censure of the Federal Reserve System f o r an a l l e g e d d e s i r e to break down
the stock market.
On the one hand we h e a r , as I have s a i d , the charge of
i n f l a t i o n which must "be c o n t r o l l e d , and on the other the claim t h a t n a t u r a l
courses should "be allowed to take care of the s i t u a t i o n .
The F e d e r a l Reserve System, meanwhile, has confined i t s e l f to a
c r i t i c a l s u p e r v i s i o n and r e g u l a t i o n of the use made by member banks of Fede r a l Reserve c r e d i t , with a r e s u l t which most reasonable men w i l l admit has
been s u c c e s s f u l , and Which h a s c l e a r e d up to a measurable degree a s i t u a t i o n
f r a u g h t w i t h danger i f allowed to continue unchecked.
I s h a l l not attempt
h e r e t o c h a r a c t e r i z e p r e s e n t or p a s t c o n d i t i o n s as d i s c l o s i n g expansion or
i n f l a t i o n , b u t w i l l content myself with s t a t i n g a few f a c t s which, i n my
opinion, j u s t i f y t h e f i r m i n g p o l i c y , including d i r e c t a c t i o n , s o - c a l l e d , of
the Federal Reserve System i n connection with member bank c r e d i t developments.
I wish, however, f i r s t to s t a t e t h a t , speaking g e n e r a l l y , t h e r e
X t 6334
i s no undue expansion or i n f l a t i o n i n commodities.
. 439
I want a l s o to p o i n t
out t h a t i n c o n s i d e r i n g expansion or i n f l a t i o n , i t i s not a c c u r a t e to take
one year a s a t e s t .
In d e a l i n g with t h i s m a t t e r I w i l l take a p e r i o d cover-
ing the y e a r s "beginning with 1932 through 1927 or 1928, and l a t e r consider
present conditions in t h i s year.
"m
Leaving a s i d e t h e question of commodity s p e c u l a t i o n , which, as I
have s a i d , can h a r d l y "be s a i d to e x i s t today, I want to c a l l a t t e n t i o n to
the s t a r t l i n g growth of s e c u r i t y loans, ( i n c l u d i n g s p e c u l a t i v e l o a n s ) , comp a r e d with commercial l o a n s , during the p e r i o d of 1922 t o 1928.
During t h i s p e r i o d , s e c u r i t y loans of r e p o r t i n g member hanks, i n cluding i n t h i s category s o - c a l l e d s p e c u l a t i v e l o a n s , i n c r e a s e d from 3 , 6
b i l l i o n s to 7 . 5 b i l l i o n s , - an i n c r e a s e of 3 . 9 b i l l i o n s or of over 100#; on
the o t h e r hand, commercial loans i n c re ase d from an average.of 7 . 4 b i l l i o n s
to 8 . 7 b i l l i o n s , - an i n c r e a s e of 1 . 3 b i l l i o n s or only 18#.
During the same p e r i o d , the percentage of s e c u r i t y loans to t o t a l
loans and investments i n c r e a s e d from 25# to 34#, while the percentage of
commercial l o a n s to t o t a l loans and investments decreased from 51# t o 39#.
Member bank r e s e r v e s during t h i s p e r i o d inc re ase d from an average
of 1.7 b i l l i o n s to 2 . 4 b i l l i o n s i n January, 1928, - an i n c r e a s e of 700 m i l l i o n s , or 40#.
F e d e r a l Reserve c r e d i t f o r the whole System was, i n December, 1928,
over 1 . 8 b i l l i o n s , t a k i n g d a i l y averages, while the corresponding f i g u r e s
f o r the e a r l i e r y e a r s were:
1922
1923
1924
1925
1926
1927
1928
—
—
1.3 billions
1.2
"
1.2
"
1.5
»
1.4
"
1.5
"
1.8
"
X-6334
-3-
430
P r i c e s of 410 stocks combined were 58.7 i n 1922, and i n January,.
1929, had i n c r e a s e d to 183.6.
Whether or not the above f i g u r e s can be c h a r a c t e r i z e d a s expansion, undue expansion, or i n f l a t i o n , i t mast be evident t h a t they were
made p o s s i b l e by an i n c r e a s e i n the volume of c r e d i t used f o r c e r t a i n p u r poses i n excess of the amount of things a v a i l a b l e i n the se l i n e s , r e s u l t i n g
i n competitive bidding f o r a l i m i t e d supply, thus i n c r e a s i n g p r i c e s i n some
cases, a t l e a s t , t o an abnormal e x t e n t .
I t must be evident t h a t such a c o n d i t i o n of member bank c r e d i t ,
whether caused by s p e c u l a t i v e . l o a n s , whether i n commodities, r e a l e s t a t e ,
or s e c u r i t i e s , was one demanding c a r e f u l a t t e n t i o n by the Federal Reserve
banks, and one which r e q u i r e d c o n t r o l , whether by way of r a t e i n c r e a s e or
by o t h e r a c t i o n .
How f a r Federal Reserve c r e d i t was r e s p o n s i b l e f o r t h i s expansion
i s an i n t e r e s t i n g q u e s t i o n which I s h a l l not attempt t o solve i n t h i s conrn e c t i o n , except to express my opinion t h a t t h e expansion was l a r g e l y gene r a t e d through, gold imports and t h e r e f o r e t h a t Federal Reserve c r e d i t , on
the whole, was not r e s p o n s i b l e f o r i t .
There were, however, t h r e e p e r i o d s
when the purdkase of Government s e c u r i t i e s by Federal Reserve banks p l a c e d
money i n the market, a m a t e r i a l p o f t l d f t 6f which went i n t o the ma&betf banks
r o s e r v e s , and was expanded upon i n t h e r a t i o of almost 15 tti 1*
p e r i o d s were
Theiso
from February to June, '%$22t from A p r i l to December, 1934,
and from February to December, 1927*
If we assume, t h e r e f o r e , t h a t the
Federal Reserve System i s te@po6&ible f o r t h e i n c r e a s e i n Federal Reserve
c r e d i t during t h e s e t h r e e period#, we s t i l l should not f o r g e t t h a t a g r i c u l t u r e and b u s i n e s s r e c e i v e d m a t e r i a l b e n e f i t from t h i s expansion, and t h a t
a t the same time, i t rendered servi&e* to Europe i n a d o p t i n g sound monetary
X-6334
„
p o l i c i e s a l o n g the l i n e s of currency s t a b i l i z a t i o n .
; 431
During the l a t t e r p a r t of 1927 the Federal Reserve System began
a f i r m i n g p o l i c y , and ceased to o f f s e t gold e x p o r t s "by baying Government
s e c u r i t i e s } during 1928 t h e System made t h r e e i n c r e a s e s of discount r a t e s ;
i t a l s o from time to time sold, Government s e c u r i t i e s , thus f u r t h e r t i g h t e n i n g t h e p r e s s u r e upon c r e d i t .
E a r l y i n t h i s y e a r t h e t o t a l amount of Federal Reserve c r e d i t o u t s t a n d i n g was, a s I have b e f o r e s t a t e d , about 1 . 8 b i l l i o n s of d o l l a r s a s
compared with about 1 . 5 b i l l i o n s the year b e f o r e , and many f e a r e d t h a t inr*
s t e a d of the customary l i q u i d a t i o n a f t e r the f i r s t of t h e y e a r t h e r e would
be f u r t h e r expansion, and t h a t member bank c r e d i t developments needed care*
f u l s u p e r v i s i o n and c o n t r o l .
I t h i n k i t w i l l be g e n e r a l l y agreed t h a t , a p a r t from s p e c u l a t i v e
l o a n a c t i v i t i e s , a g r i c u l t u r e and business would be e n t i t l e d to a lower r a t e ,
r a t h e r than t o an i n c r e a s e over the p r e s e n t r a t e of 5$, and t h a t the problem
i s how most s p e e d i l y t o a d j u s t m a t t e r s so t h a t i n t h e near f u t u r e a g r i c u l t u r e
and b u s i n e s s would be g e t t i n g the b e n e f i t of t h i s lower r a t e .
R e p r e s e n t a t i o n s were made t h a t the s p e e d i e s t way to o b t a i n lower
r a t e s f o r a g r i c u l t u r e and b u s i n e s s would be t o adopt a p o l i c y of a f f i r m a t i v e
r a t e i n c r e a s e s beginning a t 6)6 and i n c r e a s i n g u n t i l t h e s p e c u l a t i v e use of
Federal Reserve c r e d i t had subsided, and then r e v e r s i n g the p r o c e s s , graduall y reducing
r a t e s u n t i l they could s a f e l y be p u t below t h e p r e s e n t s a t e
of 556.
Many of t h o s e who advocated t h i s view perhaps unconsciously f e l t
t h a t i t was t h e duty of the Federal Reserve System t o c o r r e c t the s i t u a t i o n
on the stock exchange by a s e r i e s of quick i n c i s i v e i n c r e a s e s of discount
rates*
This f e e l i n g was expressed by t h e E n g l i s h p a p e r , t h e Manchester
X-6334
i
—
432
Guardian Commercial, of March 28, 1929, as f o l l o w s ;
"There appeared a t l e a s t some slender hope t h a t the
Federal Reserve a u t h o r i t i e s were m e d i t a t i n g a c t i o n
d r a s t i c enough to p r e c i p i t a t e the c r i s i s i n Wall S t r e e t
which, i n the opinion of most monetary s t u d e n t s , must
come sooner or l a t e r . "
On the other hand, i t was claimed t h a t the Board had no duty
t o make such a d i r e c t a t t a c k on s p e c u l a t i v e a c t i v i t y on the stock ex-
change i n t h i s d r a s t i c manner, and i t was f u r t h e r p o i n t e d out t h a t these
v i o l e n t s p e c u l a t i v e a c t i v i t i e s i n a m a t e r i a l degree were dependent upon
other f a c t o r s t h a n Federal Reserve c r e d i t .
I t was f i n a l l y decided t h a t
the r e a l problem was t h e p r e v e n t i o n of the d i v e r s i o n of Federal Reserve
funds i n t o t h e s p e c u l a t i v e markets, r e t a i n i n g discount r a t e s a t the exi s t i n g r a t e of 5#.
To t h i s end the Board c a l l e d upon the Federal Reserve banks and
t h e member banks to cooperate i n Stopping the growth of s p e c u l a t i v e c r e d i t ,
thus i n c i d e n t a l l y s e t t i n g f o r c e s i n motion which would probably b r i n g about
some reasonable l i q u i d a t i o n of e x i s t i n g c r e d i t s , but no d r a s t i c r e d u c t i o n
of e x i s t i n g s p e c u l a t i v e c r e d i t s was asked f o r or expected.
I t was p o i n t e d out t h a t many member banks have been f r e q u e n t or
continuous borrowers from t h e Federal Reserve banks, and t h a t they were
i n e f f e c t s e c u r i n g , through r e d i s c o u n t s , c a p i t a l l o a n s taken out of the
common f u n d b u i l t up by our member banks, and intended only f o r use f o r
seasonal or emergency requirements; t h a t c a p i t a l thus a c q u i r e d used i n
competition w i t h the other member banks who were u n f r e q u e n t borrowers, a~
mounted to what i n t r a d e would be c a l l e d " u n f a i r competition."
The Board
p o i n t e d OTlt, however, t h a t t h e r e were many occasions whore banks were i n
a d i f f i c u l t p o s i t i o n because of crop f a i l u r e s , sudden l o s s of d e p o s i t s , or
general economic depression, where the above r u l e a g a i n s t c a p i t a l borrowing
X|6334
6
T"
433
could not "be s t r i c t l y a p p l i e d , a t l e a s t f o r considerable periods., "but the
general p r i n c i p l e was l a i d down.
I t should he remembered t h a t while a t -
t e n t i o n was c a l l e d to t h e growth of s p e c u l a t i v e loans which, i n p a r t ,
depended upon Federal Reserve c r e d i t * t h e r u l e would be the same whether
the expansion was based on commodity or other forms of s p e c u l a t i v e l o a n s .
The banks, speaking g e n e r a l l y , cooperated with the e f f o r t s of
the Federal Reserve Board and the Federal Reserve banks, and i t i s i n t e r e s t i n g to see the p r o g r e s s since the f i r s t of t h i s year which has been made
under the f i r m i n g p o l i c y and s o - c a l l e d " d i r e c t a c t i o n . "
Taking the January,
1939, average and comparing i t with June 12, 1929, we f i n d t h a t s e c u r i t y
loans f o r r e p o r t i n g member banks have decreased from 7 . 5 b i l l i o n s to 7.2
b i l l i o n s , a r e d u c t i o n of 297 m i l l i o n s ; commercial loans, on the o t h e r hand,
f o r the sane p e r i o d , i n c r e a s e d from 8 . 7 b i l l i o n s to 9 . 1 b i l l i o n s , the i n crease being 361 m i l l i o n s .
Member bank r e s e r v e s , f o r the same p e r i o d , decreased from 2,387
m i l l i o n s , the average of January, 1929, to 2,331 m i l l i o n s f o r the week ending
June 15th, a decrease of 56 m i l l i o n s .
The • p e r c e n t a g e of s e c u r i t y loans to t o t a l loans and investments
decreased during t h i s p e r i o d from 33.6$ to 32.6$, while the percentage of
commercial l o a n s i n c r e a s e d from 39.4$ to 41.4$.
Taking the f i g u r e s as t o
Federal Reserve c r e d i t f o r the e n t i r e System, we f i n d t h a t comparing tho
average f o r January and May, 1928, with tho same p e r i o d s i n 1929, t h a t
Federal Reserve c r e d i t had i n c r e a s ed i n May, 1928,by 84 m i l l i o n s , while
taking the same d a t e s i n 1929 we f i n d t h a t Federal Reserve c r e d i t decreased
310 m i l l i o n s .
While the above decline i n Federal Reserve c r e d i t was brought about
c h i e f l y by the seasonal r e t u r n flow of currency and gold imports, i t i s never
i
!
2-6334
-7-
t h e l e s s t r u e t h a t i n the absence of d i r e c t p r e s s u r e , some p a r t of the
434
funds r e l e a s e d through the inflow of gold, would have found i t s way
into member banks r e s e r v e "balances, and would have formed the b a s i s of
f u r t h e r expansion, and t h a t , as shown above, the d i r e c t p r e s s u r e r e duced the member bank r e s e r v e balances by about 50 m i l l i o n d o l l a r s b e tween January 29, 1929 and the week ending on June 15, 1929.
The Federal Reserve S y s t e m , t h e r e f o r e , has taken an e f f e c t i v e
c o n t r o l of the s i t u a t i o n without i n c r e a s i n g discount r a t e s , and i n the
control thus oxorcisod through the modi urn of d i r o c t p r e s s u r e , the System
has e s t a b l i s h e d a now technique, which shows t h a t d i v e r s i o n of Federal
Reserve c r e d i t i n t o s p e c u l a t i v e channels may bo curbed without s e r i o u s
i n j u r y to a g r i c u l t u r e and b u s i n e s s .
While i t i s t r u e t h a t although the Federal Reserve r a t e has
not been i n c r e a s e d during t h i s p e r i o d , customers' r a t e s charged by member
banks have i n c r e a s e d about 1$, i t i s a l s o t r u e i n my opinion t h a t t h i s i n crease i n customers' r a t e s was brought about by the competition of the high
r a t e s o f f e r e d f o r funds in the s p e c u l a t i v e market.
I t is also true that
the f i r m i n g p o l i c y of the Board, including d i r e c t p r e s s u r e , has brought
p r e s s u r e upon s p e c u l a t i v e loans with t h r e e times the f o r c e , thus tending
to r e l i e v e a g r i c u l t u r e and business*
435
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-6335
June 24, 1929.
SUBJECT:
ASSESSMENT FOB GENERAL EXPENSES OF THE FEDERAL RESERVE
BOAST JULY 1, TO DSCSI3ER 31, 19294
Dear S i r :
There i s enclosed herewith copy of a r e s o l u t i o n adopted by
t h e f e d e r a l Reserve Board levying an-assessment upon the s e v e r a l Fede r a l r e s e r v e hanks of an amount equal t o n i n e t y - f i v e thousandths of
one per cent (*00095) of t h e t o t a l p a i d - i n c a p i t a l stock and surplus
of such "banks a t c l o s e Of b u s i n e s s June 30, 1929., t o d e f r a y t h e e s t l *
mated general expenses of t h e Board from J u l y 1 t o December 31, 1929*
Kindly d e p o s i t one-half of t h e amount of your assessment i n
t h e General Acdouiiti i t e i t s t i t e r , p* Sijj dn your books J u l y 1, 1929* and
one-half September 1 , 1929, i h eadh instance i s s u i n g a C/D f o r c r e d i t
of " S a l a r i e s and Expenses, Federal Reserve Board, S p e c i a l Fund'1#
assessment f o r general expenses, and sending d u p l i c a t e c/D t o t h e Fede r a l Reserve Board. Also please f u r n i s h a statement of your c a p i t a l
and s u r p l u s used as a b a s i s f o r the assessment.
Very t r u l y y o u r s ,
W. K. BILAY
F i s c a l Agent.
(Enclosure)
Sent t o F e d e r a l Reserve Agents, All D i s t r i c t s .
436
X-6335-a
RESOLUTION LEVYING ASSESSMENT
WHEREAS, under Section 10 of t h e Act approved
December 25, 1913, and known as the Federal Reserve Act,
the Federal Reserve Board i s empowered t o levy semiannually upon t h e Federal 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 ahd s u r p l u s ah assessment s u f f i c i e n t
t o pay i t s estimated expenses, 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 , attorneys# e x p e r t s And employees
for t h e h a l f - y e a r succeeding t h e l e v y i n g of shich a s s e s s ment, t o g e t h e r with any d e f i c i t c a r r i e d fofw&td from the
preceding h a l f - y e a r ; and
WHEREAS, i t appears from e s t i m a t e s submitted
and considered t h a t i t i s necessary t h a t a fund equal t o
n i n e t y - f i v e thousandths of one per c e n t (.00095) of t h e
t o t a l p a i d - i n c a p i t a l stock and surplus of t h e F e d e r a l
r e s e r v e bc-nks "be c r e a t e d f o r the purpose 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 engraving 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 s ; Now, t h e r e f o r e ,
BE IT RESOLVED, That pursuant t o t h e a u t h o r i t y
vested i n i t "by law, t h e Federal Reserve Board hereby
l e v i e s an assessment upon the s e v e r a l Federal r e s e r v e
banks of an amount equal t o n i n e t y - f i v e thousandths of one
per cent (#00095) of t h e t o t a l p a i d - i n c a p i t a l and s u r p l u s
of such banks a s of June 30, 1929, and t h e F i s c a l Agent of
t h e Board i s hereby a u t h o r i z e d t o c o l l e c t from s a i d banks
such assessment and execute, i n t h e name of t h e Board, r e c e i p t s f o r payments made. Such assessments 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 one-half each; t h e f i r s t i n s t a l l m e n t t o be p a i d on J u l y 1 , 1929, end t h e second h a l f
on September 1, 1929.
X-6336
FEDERAL
RESERVE
BOARD
437
STATEMENT FOR THE PRESS
For release, i n Morning Papers,
Thursday, June 27, 1926.
l!he following i s a summary of general
"business and f i n a n c i a l , conditions
throughout the se'veral 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
the months of May and June, as w i l l
appear i n the forthcoming i s s u e of the
Federal ResefVe B u l l e t i n and the monthl y r e p o r t s of the Federal r e s e r v e banks.
Production and d i s t r i b u t i o n of commodities continued a t a h i g h r a t e i n May.
Wholesale commodity p r i c e s declined f u r t h e r during the month, b u t more r e c e n t l y
showed some advance.
Total loans and investments of member banks i n l e a d i n g
c i t i e s have i n c r e a s e d since the l a t t e r p a r t of May.
P r o d u c t i o n — I n d u s t r i a l production continued l a r g e i n May and was accompanied. by a f u r t h e r i n c r e a s e i n the volume of f a c t o r y employment and p a y r o l l s .
Output of the i r o n and s t e e l i n d u s t r y i n c r e a s e d f u r t h e r , and shipments of i r o n
ore during May were t h e l a r g e s t f o r t h a t month of any r e c e n t y e a r ; production
of p i g i r o n , s t e e l i n g o t s , and coke was a t record l e v e l s ; and s e m i - f i n i s h e d and.
finished, s t e e l was produced i n l a r g e volume.
During the f i r s t h a l f of June
s t e e l o p e r a t i o n s remained close to capacity, although some d e c l i n e from the
high r a t e of May was r e p o r t e d .
Output of automobiles, which has been i n unusual-
l y l a r g e volume since the beginning of the y e a r , showed a s l i g h t r e d u c t i o n i n
May.
Copper p r o d u c t i o n a t mines, smelters, and r e f i n e r i e s decreased during May
but continued l a r g e .
Combined stocks of r e f i n e d and b l i s t e r copper a t the end
of May were the l a r g e s t since 1927.
Zinc, lead, petroleum, and bituminous coal
were produced i n l a r g e r volume than i n A p r i l , while the output of a n t h r a c i t e
coal d e c l i n e d .
Output i n the t e x t i l e i n d u s t r i e s continued l a r g e i n May although
t h e r e was a d e c l i n e i n a c t i v i t y i n s i l k m i l l s .
Meat p r o d u c t i o n , while l a r g e r
X-6336
-2-
than In A p r i l , i n c r e a s e d l e s s than i s u s u a l a t t h i s season.
438
Value bf "building c o n t r a c t 6 awarded d e c l i n e d i n May, and wad "below l a s t
y e a r ' s l e v e l , the decrease i n comparison with 1928 being c h i e f l y i n r e s i d e n t i a l
"building.
During the f i r s t two weeks i n June c o n t r a c t s averaged 15 p e r cent
l e s s than i n the same p e r i o d i n 1928.
The June 1 s t crop summary of the Department of A g r i c u l t u r e i n d i c a t e d an
i n c r e a s e of 43 m i l l i o n "bushels, or more than 7 p e r cent, i n the crop of winter
wheat.
Ihe c o n d i t i o n of spring wheat, "barley, and hay was r e p o r t e d to he b e t t e r
than a y e a r ago.
D i s t r i b u t i o n — I h e volume of f r e i g h t shipments i n c r e a s e d seasonally i n May
and continued s u b s t a n t i a l l y above the t o t a l of a y e a r ago.
Department s t o r e
s a l e s i n c r e a s e d i n May and were 2 p e r cent l a r g e r than i n the same month i n the
preceding yejar.
P r i c e s --^-Wholesale p r i c e s continued i n May t h e downward movement of the p r e vious month, according to the index of the United S t a t e s Bureau of l a b o r s t a t i s tics.
Ihe d e c l i n e of the g e n e r a l l e v e l was c h i e f l y the r e s u l t of p r i c e declines
i n a g r i c u l t u r a l p r o d u c t s and t h e i r manufactures, although p r i c e s of o t h e r products also declined s l i g h t l y .
P r i c e s of c o t t o n and g r a i n s continued s h a r p l y
downward i n May and t h e r e were marked d e c l i n e s i n the p r i c e s of hogs, wool, and
lambs.
P r i c e s of mineral and f o r e s t products and t h e i r manufactures averaged
lower i n May t h a n i n A p r i l , p a r t i c u l a r l y those of copper, l e a d , and t i n ; p e t r o l eum and g a s o l i n e , and i r o n and s t e e l advanced i n p r i c e ; while i n lumber t h e r e
was a s l i g h t d e c l i n e .
Since the l a t t e r p a r t of May p r i c e s of c a t t l e and h i d e s have advanced
sharply and t h e r e have been i n c r e a s e s i n the p r i c e s of g r a i n s , hogs, and c o t t o n ,
Bank C r e d i t — T o t a l loans and investments of member banks i n l e a d i n g c i t i e s ,
which were a t a low p o i n t f o r the year i n the l a t t e r p a r t of May, inc re ase d con
X-6336
-3_
[ 439
s i d e r a b l y during the subsequent 3 weeks and. on June 19 were about $250,000, OCX)
l a r g e r than a y e a r ago.
The r e c e n t i n c r e a s e r e f l e c t e d a l a r g e growth i n the
volume of loans i n s e c u r i t i e s , which had declined during the preceding 2 months,
and a f u r t h e r growth i n loans c h i e f l y f o r commercial and a g r i c u l t u r a l purposes.
Investments d e c l i n e d during most of the p e r i o d and on June 19 were a t a l e v e l
about $450,000,000 below t h a t of the middle of l a s t y e a r .
Volume of r e s e r v e hank c r e d i t o u t s t a n d i n g , a f t e r i n c r e a s i n g i n the l a t t e r
p a r t of May, d e c l i n e d i n June and, following the Treasury f i n a n c i a l operations
around the middle of the month, showed a small i n c r e a s e f o r the 4 weeks ending
June 19.
Discounts f o r member banks increased, while holdings of acceptances
and U. S. s e c u r i t i e s showed a d e c l i n e .
There were some f u r t h e r a d d i t i o n s to
the c o u n t r y ' s stock of monetary g o l d .
Open market r a t e s on c o l l a t e r a l loans d e c l i n e d i n June, while r a t e s on
prime commercial paper and 90-day bankers' acceptances remained unchanged.
440
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
X-6337
June 25, 1929.
C l a s s i f i c a t i o n of C e r t a i n Items i n
Computing Reserves of .Member Ifanks.
Dear S i r :
The Federal Reserve Board has t e e n r e q u e s t e d "by the
Federal Reserve Bank of San Francisco to pa ss upon the quest i o n whether cash items f o r which c r e d i t has "been given "by a
member "bank to i t s d e p o s i t o r and which have been forwarded to
Out-of-town "banks f o r c o l l e c t i o n , "but which have not been
charged to t h e account of such out-of-town correspondent banks,
may bo c l a s s i f i e d i n computing r e s e r v e s a s amounts due from
batiks and a c c o r d i n g l y deducted from amounts due to banks* A t t e n t i o n has been c a l l e d t o the f a c t t h a t the f e d e r a l Reserve Board 1 s
Regulation D p e r m i t s the c l a s s i f i c a t i o n a s amounts dtie from barks
df itetiis p l a c e d ill the mail and charged to the account of c o r r e s pondent banks, whdreas the i n s t r u c t i o n s accompanying the Board's
form of conditio!! r e p o r t of S t a t e member banks. Form 105(a), p r o Vide t h a t amotints " due from banks and t r u s t companies" should
include " u n c o l l e c t e d items payable on p r e s e n t a t i o n which have
boon forwarded to banks f o r c f o d l t or c o l l c c t i b n and remittance"
and no requirement i s made t h a t the items be charged t o the a c count of correspondent banks. The question p r e s e n t e d , t h e r e f o r e ,
i s whether i n order to be c l a s s i f i e d a s amounts due from banks i t
i s s u f f i c i e n t t h a t such items be merely p l a c e d i n the mail or
whether they must a l s o be charged to the account of correspondent
banks.
Under the t e c h n i c a l requirements of Regulation D as
w r i t t e n , items which have not been charged to the account of correspondent banks may not be c l a s s i f i e d a s due from bank b a l a n c e s .
There seems to be no p r a c t i c a l reason, however, f o r the requirement
i n the Regulation t h a t items be charged to the account of c o r r e s pondent bank*. The Regulation p r o v i d e s t h a t items with a Federal
r e s e r v e bank i n p r o c e s s of c o l l e c t i o n may be c l a s s i f i e d a s amounts
due from banks and t h e r e i s no requirement t h a t such items be
charged to the account of any o t h e r bank. (Thoy could not p r o p e r l y
be char god to the account of f e d e r a l r e s e r v e banks because of the
d e f e r r e d c r e d i t arrangement and a l s o because c r e d i t s due from Fede r a l r e s e r v e banks a r e not t o be included a s amounts due from o t h e r
X-6337
441
-2-
banks i n computing r e s e r v e s . ) I t seems n e v e r t h e l e s s somewhat
i n c o n s i s t e n t to r e q u i r e t h a t items be charged to the account
of correspondent hanks where sent d i r e c t to them, whereas no
such charge i s r e q u i r e d when the items a r e routed through a
Federal r e s e r v e "bank.
There a r e two courses open to the Federal Reserve
Board: I t may s t a n d upon the t e c h n i c a l requirement of t h e
Regulation and h o l d t h a t these items which have been forwarded
to o u t - o f - t o w n banks f o r c o l l e c t i o n but which have not been
charged to t h e i r account* may not be c l a s s i f i e d a s amounts due
from banks; or, governed by the p r a c t i c a l s i t u a t i o n , i t may i n
e f f e c t waive t h i s requirement of Regulation D a s to these items
and permit t h e i r c l a s s i f i c a t i o n a s amounts due from banks even
though not charged to the account of the correspondent banks.
The Federal Reserve Board i s disposed to adopt the l a t t e r course,
and a l s o , when the m a t t e r of r e v i s i n g the Board's Regulations i s
next taken up, t o e l i m i n a t e the words "and charged t o the account
of correspondent banks" now appearing i n S e c t i o n 111(b) (2) of
Regulation D. Before t a k i n g any a c t i o n i n t h i s m a t t e r , however,
t h e Board wishes to have the b e n e f i t of your views on t h e questions presented.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BAMS.
442
FSDEEAL RESERVE BOARD
For immediate r e l e a s e
J a n u a r y 3 , 1929
s t . 6033
STATEMENT FOR THE PRESS
Gross e a r n i n g s of the twelve F e d e r a l r e s e r v e banks f o r 1928
amounted to $64,050,000 or about $21,000,000 more than f o r 1927 while
c u r r e n t expenses, $26,900,000, were about one-half m i l l i o n l e s s t h a n
f o r 1927.
A f t e r p r o v i d i n g the n e c e s s a r y r e s e r v e s f o r d e p r e c i a t i o n ,
l o s s e s , e t c . , the F e d e r a l Reserve banks had n e t e a r n i n g s of $32,125,000.
From t h i s amount the banks p a i d $8,460,000 i n d i v i d e n d s to member banks
and $2,584,658.50 to the United S t a t e s Treasury a s a f r a n c h i s e t a x and
t r a n s f e r r e d $21,0SO,000 to t h e i r s u r p l u s accounts.
The F e d e r a l Reserve
Banks of Richmond, A t l a n t a , S t . Louis, Minneapolis, Kansas City and
D a l l a s were the only ones to pay a f r a n c h i s e t a x .
A l l n e t e a r n i n g s of
the s i x o t h e r r e s e r v e tanks remaining a f t e r t h e payment of d i v i d e n d s
were t r a n s f e r r e d t o • t h e i r s u r p l u s a c c o u n t s a s r e q u i r e d by law, t h e
s u r p l u s accounts of none of these banks a t the end of t h e year b e i n g
i n excess of t h e i r s u b s c r i b e d c a p i t a l .
The t o t a l s u b s c r i b e d c a p i t a l
of the twelve F e d e r a l r e s e r v e banks on January 1, 1929, amounted to
$293,870,000, and t o t a l s u r p l u s to $254,398,000.
F u l l d e t a i l s a s to t h e d i s p o s i t i o n of the g r o s s e a r n i n g s of
each F e d e r a l r e s e r v e bank w i l l appear i n the forthcoming annual r e p o r t
of the I n d e r a l Reserve Board.
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
J a n u a r y 4, 1929
s t . 6035
SUBJECT:
Forms f o r use during 1929.
Dear S i r :
There a r e being forwarded to you today under
s e p a r a t e cover a supply of the f o l l o w i n g forms f o r use
d u r i n g 1929:
Form
Form
Form
Form
Form
38,
S,
95,
96,
97,
copies
copies
copies
copies
copies
Reports on form 171, "Aggregate of Daily Holdi n g s of B i l l s and S e c u r i t i e s " , may be d i s c o n t i n u e d a s of
December, 1928.
Very t r u l y yours,
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 THE GOVEMOR OF EACH FEDERAL RESERVE BANK*
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
.
THE FEDERAL RESERVE BOARD
January 7, 1929>
s t . 603s.
SUBJECT:
Corrections i n Weekly Statements.
Dear S i r :
For your information, and i n order t h a t c o r r e c t comparat i v e f i g u r e s may "be published i n the c o n s o l i d a t e d weekly condit i o n statement of the Federal r e s e r v e banks f o r 1929, i f i s s u e d
a t your bank, t h e r e a r e shown "below a l l c o r r e c t i o n s made i n the
weekly Federal r e s e r v e "bank* p r e s s statements i s s u e d during 1928,
which were r e c e i v e d too l a t e to "be shown i n the comparative
column of the f o l l o w i n g week's statement:
CHANGED
From
January 11 - Discounts secured "by U.S.
Government o b l i g a t i o n s
Other b i l l s discounted
Uncollected items
Total resources
Other d e p o s i t s
Total d e p o s i t s
Total l i a b i l i t i e s
January IS - Discounts secured by U.S.
Government o b l i g a t i o n s
Other b i l l s discounted
September 26-Reservesother than gold
Total r e s e r v e s
Hon r e s e r v e cash
TO ALL
To
297.370
l4l,771
670,056
5,181,732
22,126
2,517,443
5,181,732
297,247
l4l,894
670,095
5,181,771
22,165
2,517,482
5,141,771
284,781
127,278
138,082
2,771,084
56,17*4
283,781
128,278
138,060
2,771,062
56,196
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
FEDERAL RESERVE AGENTS*
445
federal reserve board
WASHINGTON
January 9, 1929,
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
st. 6039.
Dear S i r ;
There i s enclosed, herewith a l i s t of member and nonmembar
"banks r e p o r t e d to the Board as having suspended o p e r a t i o n s during
the month of December and of banks p r e v i o u s l y suspended which r e sumed "business during the same month. The statement a l s o includes
any c o r r e c t i o n s made in the l i s t s p r e v i o u s l y sent to you. 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 kindly 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 a g a i n s t your records and advise the Board a s soon as
p r a c t i c a b l e 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 a r e n e c e s sary t h e r e i n .
According to our r e c o r d s , the number of "bank suspensions
and the number of suspended "banks reopened during the year 1928,
in each s t a t e in your d i s t r i c t , was as f o l l o w s :
Banks Suspended
State
National State Mem.
jiTonmember P r i v a t e Total
Banks
Reopened
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 kindly have the above
f i g u r e s checked a g a i n s t your records and advise u s whether or not
they a r e in agreement t h e r e w i t h . In n o t i f y i n g u s of d i f f e r e n c e s ,
kindly give the names and l o c a t i o n s , e t c . , of the banks which should
be added or e l i m i n a t e d . The names of the banks included i n the above
statement may be a s c e r t a i n e d by r e f e r r i n g te the l i s t s of banks s u s pensions f u r n i s h e d to you f o r checking purposes each month, as the
above f i g u r e s a r e based on the monthly statements a f t e r talcing i n t o
c o n s i d e r a t i o n the c o r r e c t i o n s t h e r e i n which are r e g u l a r l y shown on
the l a s t page of the statements.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
LETTER TO
ALL FEDERAL RESERVE AGEITTS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD .
January 9, 1929
S t . 6042
SUBJ3CT:
Average Demand and Time
Deposits of member banks.
Dear S i r :
I t has been i n c r e a s i n g l y evident f o r some time p a s t t h a t
c o n d i t i o n f i g u r e s of member banks f o r a given day, while valuable f o r
c e r t a i n purposes, do not measure changes in condition a s s a t i s f a c t o r i l y
as do average d a i l y f i g u r e s , and t h i s i s p a r t i c u l a r l y t r u e of n e t demand d e p o s i t s , f o r which average d a i l y f i g u r e s may be r e a d i l y compiled
from r e p o r t s now being rendered by member banks f o r r e s e r v e computation
purposes. Will you k i n d l y , t h e r e f o r e , f u r n i s h the Board with average
d a i l y f i g u r e s of n e t demand and time d e p o s i t s beginning with January
1929, on forms St. 6043 and St. 6o44, copies of which a r e a t t a c h e d . At
the sane time the r e p o r t s which have been submitted since A p r i l 1923 on
form St. 3501 may be discontinued.
In order t h a t we may have a v a i l a b l e f i g u r e s of reserve dep o s i t s a c t u a l l y maintained by member banks and of borrowings a t the
Federal reserve banks, f o r comparison with average d a i l y f i g u r e s of
r e q u i r e d r e s e r v e s , which we can r e a d i l y c a l c u l a t e from the average d a i l y
deposit f i g u r e s , the forms a l s o provide f o r r e p o r t i n g average d a i l y f i g u r e s f o r these items. You w i l l a l s o note t h a t one of the forms, St. 6043,
c a l l s f o r average d a i l y f i g u r e s by weeks f o r c e n t r a l reserve c i t y banks
and r e s e r v e c i t y banks, s e p a r a t e l y f o r each of the above f o u r items, v i z . ,
n e t demand d e p o s i t s , time d e p o s i t s , member bank r e s e r v e d e p o s i t s , and
borrowings a t Federal r e s e r v e bank. The other form, St. 6044, c a l l s f o r
d a i l y averages f o r the same items f o r each calendar month, s e p a r a t e l y
f o r c e n t r a l r e s e r v e c i t y banks, reserve c i t y banks, and country banks,
a l s o f o r average d e p o s i t s of country banks located i n c e n t e r s having a
population under 15,000, c l a s s i f i e d by S t a t e s in which the r e p o r t i n g
banks a r e l o c a t e d . This c l a s s i f i c a t i o n w i l l enable us, as h e r e t o f o r e ,
to f o l l o w changes in deposit l i a b i l i t i e s of the banks i n the r u r a l
communities.
The r e p o r t s should be forwarded to Washington a s e a r l y a s
p r a c t i c a b l e a f t e r the c l o s e of each weekly and monthly p e r i o d , in order
t h a t the f i g u r e s may be promptly f u r n i s h e d to the Board and p u b l i s h e d i n
i
— 2
447
—
the Federal Reserve B u l l e t i n . I t i s expected t h a t t h i s may, a s a t
p r e s e n t , n e c e s s i t a t e the use of deposit f i g u r e s r e p o r t e d f o r the p r e vious r e s e r v e computation p e r i o d i n the case o f ' a few of the smaller
member t a n k s whoso r e p o r t s , f o r one reason or another, a r e not r e c e i v e d promptly. Code words have "been provided on the forms f o r each
of the items, "but i t w i l l not bo necessary- to t e l e g r a p h f i g u r e s to the
Board u n l e s s you. a r e s p e c i f i c a l l y requested to de so. The f i r s t
weekly r e p o r t should cover the seven-day p e r i o d ending January 4, 1929,
and the f i r s t monthly r e p o r t the c a l e n d a r month of January 1929;
A supply of forms St. 6o4]-and St. 6044 i s being sent you
under s e p a r a t e cover.
Very t r u l y yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS "'
f 448
Federal Reserve Board
Form St. 604]
Jan.
1929
WEEKLY REPORT OF DEPOSITS. R5SSRV5S AIJD BORROT7INGS
OF MEMBER BAMS
(Averages of d a i l y f i g u r e s .
Federal Rosoi e
District
Sovon day week ending F r i d a y ,
Not
demand
deposits
Central r e s e r v e c i t y "banks.,
Reserve c i t y banks
In thousands of d o l l a r s )
Daily average
Reserves
T irno
with F. R.
deposits
Bank
19.
Borrowings
from
F. R. Bank
DENT
DIKE
DEAR
_DOAK
DOOM
DEEP •
DADE
DRUM
449
Federal Reserve Bo&rd
Form St. 5o44
Jan.
1929
"OUTHLY REPORT OF DEPOSITS. RESERVES AITD BORROWINGS
OF MEMBER BATES
(Averages of d a i l y f i g u r e s .
In thousands of d o l l a r s )
Federal Reserve
District
Month
Net
demand
deposits
Central r e s e r v e c i t y b a n k s . . .
Reserve c i t y "banks
Country "banks
Total, a l l member "banks*...
Country 'banks l o c a t e d i n cent e r s having a p o p u l a t i o n
ujider *15,00C, "by s t a t e s
Total
Da'i ly average
Reserves
Time'
with
deposits
F. R. Bank
19.
Borrowings
from
F. R. Bank
EG-IS
EABS
EATS
' E3RE
EDEH
EDAM
ECHO
ERTH
ELIIT
m?A-
ENDS
,EUUF
wm
ERGO
ETTA
EREY
.
ETOK
, LPES
*Same c i t i e s as included h e r e t o f o r e in the monthly deposit r e p o r t form St.3501,
i n the "under 5,000" and "5,000-1^999" population groups.
federal reserve board
450
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
January 9, 1929.
S t . 604S.
SUBJECT:
Data f o r 1928 Annual Report of
the Federal Reserve Board.
Dear S i r :
Will you k i n d l y f u r n i s h u s with the following d a t a f o r use i n the B o a r d ' s forthcoming annual
report:
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 your bank (1) under repurchase a g r e e ment and (2) in investment account, a s
a t c l o s e of business December 31. 1923,
giving the kind 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 only need be shown f o r s e c u r i t i e s
bought through the Open Market I n v e s t ment Committee and h e l d i n Special I n vestment Account.
2.
Statement showing the number of member
banks i n each S t a t e (or p a r t of S t a t e
i n the d i s t r i c t ) accommodated through
the discount of paper during the c a l e n dar year 1928.
Very t r u l y y o u r s ,
E. L. Smead, Chief,
Division of Bank Operations.
TO GOVERNORS OF ALL FEDERAL RESERVE BAKES EXCEPT HEW YORK*
FEDERAL RESERVE BOARD
451
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
January 15, 1929
s t . 6055
SUBJECT:
Revision of Weekly Member Bsrik
Condition Statement, Form S t .
Dear S i r :
With r e f e r e n c e to the B o a r d ' s l e t t e r S t . 6023 of
December 27, on the above s u b j e c t , you a r c a d v i s e d t h a t the
form e n c l o s e d t h e r e w i t h has been r e v i s e d so a s to c a l l f o r
loans on s e c u r i t i e s made " t o "brokers and d e a l e r s i n s e c u r i t i e s
o u t s i d e of Hew York C i t y , " and i t i s r e q u e s t e d t h a t t h i s change
be made e f f e c t i v e as of January 30, 1929. Code word PILE
should be used i n t e l e g r a p h i n g the new item to the Board. With
t h i s change the weekly r e p o r t w i l l show the same c l a s s i f i c a t i o n
of s e c u r i t y l o a n s a s the q u a r t e r l y c o n d i t i o n r e p o r t , except
t h a t the weekly f i g u r e s w i l l i n c l u d e s e c u r i t y l o a n s made to
o t h e r banks.
As i n the case of loans made to b r o k e r s and d e a l e r s
in s e c u r i t i e s i n New York C i t y , the new item w i l l not be publ i s h e d f o r the p r e s e n t , but only the t o t a l amount of " l o a n s
on s e c u r i t i e s " w i l l be shown i n the B o a r d ' s weekly s t a t e m e n t .
herewith.
A copy of t h e r e v i s e d form S t . 51-a i s e n c l o s e d
Very t r u l y y o u r s ,
Walter L. Eddy,
Secretary.
Enclosure
TO ALL
FEDERAL RESERVE AGENTS*
Form St. 5%-a
Rev. J e n . 1929
WEEKLY CONDITION REPORT OF ISE'Mm ZfllTS III SELECTED CITIES
i 452
TO BE SUBMITTED TO TEE FEDERAL RESERVE EJCZ AS AT CLOSE OF BUSINESS EACH 1EDESSDAT
;
(Same of "bank)
(Location)
__ Wednesday
(Date)
19
IMPORTANT-: - The q u a r t e r l y condition r e p o r t and accompe^ing
i n s t r u c t i o n s should "be used as a guide i n the p r e p a r a t i o n
of t h i s r e p o r t
( i n thousands
of d o l l a r s )
1. LOUTS AMD DISCOUNTS
The t o t a l of the items shown under t h i s head should r e p r e sent the gross amount of the "bank's loans and d i s c o u n t s a s r e p o r t e d a g a i n s t item 1 and i n Schedule E of the q u a r t e r l y condition report.
(a) Secured "by U. S. Government and other s e c u r i t i e s :
(1) To "brokers and d e a l e r s in s e c u r i t i e s i n Hew York City
Item 5(a) in Schedule S of the q u a r t e r l y c o n d i t i o n
report,
(2) To "brokers and d e a l e r s in s e c u r i t i e s o u t s i d e
Hew York City
Item 5("b) i n Schedule E of the q u a r t e r l y c o n d i t i o n
report.
(3) To o t h e r s . . . . . . . . . . . i i 4
.
Item 5(c) i n Schedule E of the q u a r t e r l y c o n d i t i o n
r e p o r t , p l u s t h a t p a r t of item 4 i n Schedule E which
r e p r e s e n t s loans on s e c u r i t i e s made to "banks and
t r u s t companies.
'
(b) All other l o a n s
2.
.
Includes a l l loans and discounts r e q u i r e d to "be r e p o r t e d
a g a i n s t item 1 and i n Schedule E of the q u a r t e r l y c o n d i t i o n
r e p o r t , except loans r e p o r t e d a g a i n s t a - 1 , a - 2 , and a - 3 above.
U. S. GOVERNMENT SECURITIES OWED t
,
Total of Schedule F i n the q u a r t e r l y c o n d i t i o n rettort.
3.
OTHER BONDS, STOCKS AND SECURITIES OWED
'
Total of Schedule G in the q u a r t e r l y c o n d i t i o n r e p o r t .
4.
CASH IN VAULT
Total of items 1, 2 and 3 i n Schedule I of the q u a r t e r l y
condition report.
5.
NET DEMAND DEPOSITS ON WHICH RESERVE IS COMPUTED
Amount r e p o r t e d to the Federal reserve bank f o r r e s e r v e
computation purposes
6.
TIME DEPOSITS . . . . . .
Total of Schedule L i n the q u a r t e r l y c o n d i t i o n r e p o r t
7.
DtJE FROM BANKS IN UNITED STATES
_ _ _ _ _ _
Total of items 5 ( a ) , 5(b) and 6 i n Schedule I of the
quarterly condition report.
8.
DUE TO BANKS IN UNITED STATES
Item 2 i n Schedule J of the q u a r t e r l y condition r e p o r t
http://fraser.stlouisfed.org/
NOTE: This r e p o r t should
Federal Reserve Bank of
Louis weak.
ofSt. each
(Signed)
'
.Cashier.
reach the Federal Reserve Bank on Thursday morning
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
January 15, 1929,
S t . 6057.
SUBJECT:
Branches and Agoncios of
F e d e r a l r e s e r v e banks.
Dear S i r :
There were forwarded t o you with B o a r d ' s l e t t e r
S t . 4578 of J u l y 2, 1925, c o p i e s of a psunphlet r e l a t i n g
to Branches and Agencies of F e d e r a l r e s e r v e "banks, showi n g t h e i r powers and f u n c t i o n s and volume of work h a n d l e d , r e v i s e d as of June,192$.
In order t h a t the o u t l i n e may "be brought up to
d a t e , 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 a d v i s e
the Board a t the e a r l i e s t d a t e p r a c t i c a b l e what changes,
i f any, should be made i n the d a t a r e g a r d i n g powers and
f u n c t i o n s and t e r r i t o r y a s s i g n e d to b r a n c h e s , a s shown
on pages 1 - 8 and 23-26 of t h e o u t l i n e , to c o r r e c t l y r e f l e c t t h e s i t u a t i o n as of January 1, 1929.
I t i s a l s o r e q u e s t e d t h a t you f u r n i s h t h e Board
with a statement showing the number, c a p i t a l , s u r p l u s ,
and t o t a l r e s o u r c e s of n a t i o n a l banks and of o t h e r member
banks i n t h e branch t e r r i t o r i e s on January 1, 1929, inorder t h a t we may p r e p a r e a t a b l e s i m i l a r t o t h a t a p p e a r i n g on pages 19-22 of the o u t l i n e .
Very t r u l y y o u r s ,
E. L. Smead, C h i e f ,
Division of Bank O p e r a t i o n s .
T y p e w r i t t e n l e t t e r # s e n t t o t h o s e banks having b r a n c h e s ,
who have c i t e d changes, t h a t should be made i n t h e o u t l i n e ,
s i n c e t h e B o a r d ' s i s s u e , r e v i s e d a s of June 1925.
LETTER TO FEDERAL RESERVE AGENTS EXCEPT THOSE AT BOSTW,
CHICAGO, KAIlSAS CITY AMD DALLAS.*
PHILADELPHIA,
453
FEDERAL RESERVE B O A R F ^ ^ ^ 1 9 * ^
4 5 4
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENC68$JEC
T H E FEDERAL RESERVE BOARD
T: Deb i t s to I n d i v i d u a l Accounts.
Dear S i r :
In compiling 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 accounts
from weekly r e p o r t s received, i n 1929» i t i s proposed, a s i n r e c e n t y e a r s ,
to p r o r a t e the f i g u r e s f o r each c i t y f o r those weeks which do not f a l l ent i r e l y within a given month, on the b a s i s of a c t u a l b u s i n e s s days. By r e f erence t o d a t a a v a i l a b l e a t t h e Board's o f f i c e s we f i n d t h a t the r e p o r t
weeks i n 1929 which begin i n one month and end i n a n o t h e r , i . e . , the r e p o r t
weeks f o r which the f i g u r e s mast be p r o r a t e d between two months, c o n t a i n
the f o l l o w i n g days observed a s holidays i n the s t a t e s s p e c i f i e d :
J anuary
March
1, 192
2
k
29
April
1
26
27
30
May
June
September
October
November
December
January
2
31
1
5
28
28
1, 193<
A l l s t a t e s and the D i s t r i c t of Columbia
Texas
D i s t r i c t of Columbia
Connecticut, Delaware, F l o r i d a , Louisiana,
Maryland, Minnesota, New J e r s e y , Pennsylvania, Tennessee
Michigan
Alabama, F l o r i d a , Georgia, M i s s i s s i p p i , New
Hampshire
Wyoming
A l l s t a t e s and the D i s t r i c t of Columbia except
the s t a t e s of Alabama, Arkansas, Georgia,
Louisiana, M i s s i s s i p p i , North Carolina,
South Carolina
Alabama, Arkansas, F l o r i d a , Georgia, Louisiana,
M i s s i s s i p p i , South C a r o l i n a , Tennessee,
Texas, V i r g i n i a
A l l s t a t e s and the D i s t r i c t of Columbia
Nevada
Louisiana
New J e r s e y , New York, Pennsylvania, V i r g i n i a
A l l s t a t e s and t h e D i s t r i c t of Columbia
South Carolina
A l l s t a t e s and the D i s t r i c t of Columbia
In case the above l i s t i s not c o r r e c t f o r any of the s t a t e s i n
your 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 observed l o c a l l y by
c i t i e s f o r which debit,., f i g u r e s are published by the Board, 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 the Board with a c o r r e c t e d l i s t a t your
e a r l y convenience.
http://fraser.stlouisfed.org/
LETTER TO ALL
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
E. L. Smead, C h i e f ,
Division of Bank Operations.
FEDERAL RESERVE AGENTS*
%
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
January 21, 192$),
St. 6o64.
SUBJECT:
Revision of Form f o r Computing
Member Bank Reserve Requirements.
Dear S i r :
There i s enclosed herewith a copy of Form
S t . 6059> r e c e n t l y approved by the Board, i n d i c a t i n g
the manner i n which r e s e r v e s r e q u i r e d t o be c a r r i e d
by member banks should be computed. I t i s suggested
t h a t the form f u r n i s h e d by ycrn to member banks, i l l u s t r a t i n g t h e method of computing r e q u i r e d r e s e r v e s ,
be r e v i s e d i n accordance with the form enclosed h e r e with.
In the p a s t i t has been found t h a t some of
the member banks have a p p a r e n t l y c l a s s i f i e d t h e i r d e p o s i t . ' l i a b i l i t i e s i n one way when making out t h e i r
q u a r t e r l y c o n d i t i o n r e p o r t s , and i n another f o r the
purpose of determining deposit l i a b i l i t i e s 08 which
r e s e r v e s a r e c a r r i e d with the Federal r e s e r v e bank.
To overcome t h i s d i f f i c u l t y the enclosed form S t .
0O59 s t a t e s s p e c i f i c a l l y j u s t how the items i n the
c a l l r e p o r t should be used i n determining the amount
of n e t demand and time d e p o s i t s s u b j e c t to r e s e r v e .
I t i s suggested t h a t the d e p o s i t f i g u r e s f u r n i s h e d
the Federal r e s e r v e bank by member banks f o r r e s e r v e
computation purposes be checked a g a i n s t the q u a r t e r l y
c a l l r e p o r t s , to i n s u r e t h a t both r e p o r t s a r e b e i n g
prepared on the same b a s i s .
Very t r u l y yours,
Walter L. Eddy,
Secretary.
TO CHAIRMEN OF AIL F. R. BANKS
I
455
P. R. i B a r d
Form S t . 6059
January 1929.
CCl.iPUTA.TION OF RESERVE TO BE CARRIED WITH THE FEDERAL RESERVE BMK
BY I M A M BANKS
DEMAND DEPOSITS SUBJECT TO RESERVE
1.
2.
DEPOSITS, except bank and U. S. Government, due i n 30
days or l e s s or s u b j e c t t o l e s s than 30 days' n o t i c e
( T o t a l of Schedule K i n the q u a r t e r l y condition r e p o r t )
DUE TO BANKS:
(a) Due to Federal r e s e r v e bank ( d e f e r r e d c r e d i t s ) $
(b) Demand b a l a n c e s due to other banks and t r u s t
companies i n United S t a t e s
( c ) Demand b a l a n c e s due to banks i n f o r e i g n
countries
(d) C e r t i f i e d and c a s h i e r ' s or t r e a s u r e r ' s checks,
i n c l u d i n g dividend checks, outstanding
•
( e ) Letters of c r e d i t and t r a v e l e r s ' checks sold
f o r cash and outstanding
( f ) Total due•to banks (Total of Schedule J i n
the q u a r t e r l y condition r e p o r t )
_________
LESS:
3.
DUE FROM BANKS:
i
(a) Items with Federal r e s e r v e bank i n process of
collection
(b) Due f r o p banks ( o t h e r than Federal r e s e r v e bank)
and t r u s t companies i n United S t a t e s (Do not
include any amounts not s u b j e c t to withdrawal
without n o t i c e )
( c ) Exchanges f o r c l e a r i n g house and other checks
on l o c a l banks
(d) Balances payable i n d o l l a r s due from f o r e i g n
branches of other American banks
( e ) Total due from banks (Total of items 4 to 8 i n
Schedule I of the q u a r t e r l y condition
report)
4.
NET BALANCE DUE TO BANKS (excess of item 2-f over
item 3 - e ; i f "Total due to banks" (item 2 - f ) i s
l e s s than "Total due from banks" (item 3 - e ) , no
amount should be r e p o r t e d a g a i n s t t h i s i t e m ) . . .
5.
NET DEMAND DEPOSITS SUBJECT TO RESERVE (Item 1 p l u s item 4)
TIME DEPOSITS
6.
$
DEPOSITS payable a f t e r 30 days or s u b j e c t to 30 days or more
n o t i c e , a s d e f i n e d i n Federal Reserve Board Regulation D;
and P o s t a l Savings (Total of Schedule L i n the q u a r t e r l y
condition report)
RESERVE REQUIRED
GM NET DEMAND DEPOSITS (item 5 above); Banks i n c e n t r a l r e s e r v e
c i t i e s , 13 per c e n t ; i n r e s e r v e c i t i e s , 10 per c e n t ; e l s e where, 7 per cent
ON TIME DEPOSITS ( i t e m 6 above): 3 X P o r cent
TOTAL RESERVE TO BE MAINTAINED WITH FEDERAL RESERVE BANK . . .
I
4
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
January 22, 1929,
st. 6065.
SUBJECT:
Schedule of Federal Reserve
Bank Personnel.
Dear S i r :
I t . / 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 the Board ? i t h a statement r e l a t i n g to the p e r s o n n e l of your "bank ( i n c l u d i n g "branches, i f any) a s a t
close of "business on December 31-» 1928, and a s of J a n u ary 1, 1929, made out i n accordance with the form a t tached h e r e t o . The f i g u r e s f o r December 1928, which
should not take account of changes i n e i t h e r the number
or s a l a r i e s of o f f i c e r s or employees t h a t a r e put i n t o
e f f e c t a s of January 1, M i l be published in the B o a r d ' s
1928 annual r e p o r t and should be comparable vzith c o r responding f i g u r e s f o r your bank derived from the s t a t e ment submitted l a s t year and published on page
of
the B o a r d ' s 1927 annual r e p o r t . The f i g u r e s f o r J a n uary 1, I929, should r e p r e s e n t annual s a l a r i e s a f t e r
a l l bhanges e f f e c t i v e as of January 1 have been made.
Very t r u l y yours,
Walter L. Eddy,
Secretary.
Enclosure.
LETTER TO ALL CHAIRMEN *
457
»
»
s t . 6065a
I
458
FEDERAL RESERVE BA1IK OF
( i n c l u d i n g branches)
Number
Jan. 1
1929
/
Dec. 31
1928
Annual S a l a r i e s
Jan. 1
1929
Officers:
Chairman and F e d e r a l Reserve Agent
Governor
Other o f f i c e r s
Employees by departments:
Banking department
F e d e r a l Reserve A g e n t ' s department
A u d i t i n g Department
F i s c a l Agency Department
Total
Employees whose s a l a r i e s a r e
reimbursed to bank;
F i s c a l Agency department
Other employees*
Grand T o t a l
Temporary employees ( n o t t o be
i n c l u d e d above)
* Subdivide by f u n c t i o n s and. u n i t s on s e p a r a t e s h e e t * ,
Dec. 31
1928
FEDERAL RESERVE BOARD
459
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
February 5, 1929
St. 6082
Functional Expense Reports.
Dear S i r :
From time to time the Board's a t t e n t i o n has been c a l l e d
to a lack of u n i f o r m i t y in the a l l o c a t i o n of c e r t a i n expenses in
f u n c t i o n a l expense r e p o r t s due mainly to the f a c t t h a t the Manual
of I n s t r u c t i o n s governing the p r e p a r a t i o n of the r e p o r t s does not
make i t c l e a r whore c e r t a i n of the minor o p e r a t i o n s a r e to be
charged. For example,'the Board's a t t e n t i o n was r e c e n t l y c a l l e d
to the f a c t t h a t , although most of the F e d e r a l r e s e r v e banks were
performing the work of p a s t i n g u n f i t currency shipped to Washington
f o r redemption in and charging the cost thereof to the CurrencyReceiving and S o r t i n g u n i t i some of the banks were charging the
c o s t of t h i s work to the Currency-All Other u n i t . We have had
some correspondence with the banks on t h i s s u b j e c t and those which
have h e r e t o f o r e been charging the expense to the Currency-All Other
u n i t have now agreed to charge i t to the Currency-Receiving and
Sorting u n i t .
With a view to e l i m i n a t i n g , so f a r a s p r a c t i c a b l e , any
d o u b t f u l p o i n t s t h a t may s t i l l e x i s t 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 b r i n g to the Board's a t t e n t i o n a s of May and November 1, of
each year, any questions which a r i s e a t your bank during the s i x
months preceding regarding the a l l o c a t i o n of expenses which do not
seem to be adequately covered by the Manual. Such questions w i l l
be reviewed by the Board and a l l Federal r e s e r v e banks a d v i s e d of
the d e c i s i o n a r r i v e d a t in each i n s t a n c e .
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BAWST
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
February 12, 1929,
st. 6093.
SUBJECT:
Reports of Condition of S t a t e
Banks and Trust 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 in a c c o r dance with your usual 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 the Federal Reserve Board, as soon a s a v a i l a b l e ,
with a copy of the a b s t r a c t of r e p o r t s of c o n d i t i o n
of s t a t e banks and t r u s t companies i n your s t a t e on
December 31, 1928. If no c a l l was i s s u e d a s of December 31, w i l l you kindly advise the date of c a l l
n e a r e s t t h e r e t o and f u r n i s h the Board with a copy of
your a b s t r a c t as of t h a t d a t e , i f not a l r e a d y done.
In submitting the above-mentioned d a t a i t
i s requested t h a t the number of banks ( e x c l u s i v e of
branch banks) be s t a t e d , and t h a t separate f i g u r e s
be f u r n i s h e d f o r mutual savings banks providing there
a r e any such banks operating i n your s t a t e .
JL f r a n k e d and addressed envelope, r e q u i r i n g
no p o s t a g e , i s enclosed f o r use in t r a n s m i t t i n g the
data requested.
Very t r u l y yours,
J . C. IToell,
Assistant Secretary.
Enclosure.
460
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
February 12, I929.
S t . 6093a.
Reports of Condition of S t a t e
Banks and Trust Companies.
Do,or S i r :
I t w i l l bo g r e a t l y a p p r e c i a t e d i f in accordance
with your u s u a l p r a c t i c e you w i l l kindly f u r n i s h the Fede r a l Reserve Board, a s sooia a s a v a i l a b l e , with a copy of
the 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 t a n k s and
t r u s t companies i n your s t a t e on December 31. 1928. I f no
c a l l was i s s u e d as of December 31. w i l l you kindly a d v i s e
the d a t e of the c a l l n e a r e s t t h e r e t o and f u r n i s h the Board
with a copy of your a b s t r a c t as of t h a t d a t e , i f not a l ready done.
In submitting the above-mentioned d a t a i t i s r e quested t h a t the number of banks ( e x c l u s i v e of branch banks)
be s t a t e d , and t h a t separate f i g u r e s be f u r n i s h e d f o r mutual
savings bonks p r o v i d i n g there a r e any such banks o p e r a t i n g
i n your s t a t e , a l s o t h a t the f i g u r e s be segregated by Federal
reserve d i s t r i c t s .
A f r a n k e d and addressed envelQ'pe, r e q u i r i n g no
p o s t a g e , i s enclosed f o r use i n t r a n s m i t t i n g the data r e quested.
Very t r u l y y o u r s ,
J . C. N o e l l , .
Assistant Secretary.
Enclosure.
461
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
February l 4 , 1929,
st. 6097.
SUBJECT;
Bank Suspensions.
Dear S i r :
There i s enclosed herewith a l i s t of member
and nonmember banks r e p o r t e d to the Board as having
suspended o p e r a t i o n s during the month of January, and
of banks p r e v i o u s l y suspended -.vhich resumed b u s i n e s s
during the same month. The statement also i n c l u d e s
any c o r r e c t i o n s made in the l i s t s p r e v i o u s l y sent to
you.
I t w i l l bo 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 to your d i s t r i c t a g a i n s t
your r e c o r d s and advise the Board on or b e f o r e Febr u a r y 23, by t e l e g r a p h i f n e c e s s a r y , whether or 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 ,
in order t h a t c o r r e c t summaries by d i s t r i c t s may bo
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 yours,
E. L. Smoad, Chief,
Division of Bank Operations.
#
Enclosure,
LETTER TO ALL FEDERAL RESERVE AGELTTS*
462
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
February 20, 1929
S t . 6103.
SUBJECT:
Condition of Member Banks as
of December 31. 1928.
Dear S i r :
For your information t h e r e i s enclosed
herewith a p r e l i m i n a r y statement regarding the
c o n d i t i o n of a l l member banks combined a s of December 31• 1928.
The B o a r d ' s Member Bank Call
Report (No. 42) showing d e t a i l e d f i g u r e s f o r a l l
member banks and f o r S t a t e bank members w i l l be
ready 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 yours,
E. L. Smead, C h i e f ,
Division of Bank Operations.
Enclosure.
TO ALL FEDERAL RESERVE AGETTS*
FEDERAL RESERVE BOARD
464
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
LferCll
1 3 , 1 9 2 9
st. 6115
SUBJECT:
Functional Expenses
Socond Half, 1923
Dear S i r :
There a r e enclosed herewith
copies
of the c o n s o l i d a t e d Functional Expense e x h i b i t f o r
the h a l f year ending December 31. 1928.
A copy of
the e x h i b i t i s a l s o being mailed to the Governor of
the bank.
Very t r u l y yours,
E. L. Smead,Chief,
Division of Bank Operations.
Enclosure
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BAM*
465
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
.
•.larch 1.4, 1929
St. 6122
SUBJECT: Bank Suspensions
Dear S i r :
There i s enclosed herewith a l i s t of member
and nonmember "banks reported to the Board a s having
suspended operations during the month of F e b r u a r y , and
of banks previously suspended which resumed "business
during the same month. The statement a l s o 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 will kindly
check the data 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 your
records and advise the Board on or before 1 larch 28, 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 , in 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 Reserve B u l l e t i n .
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
LETTER TO ALL F. R. AGBTTS
466
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
MarCll
dO
9
st. 6132
.
l y c y
Condition Reports of S t a t e
Bank Members, form 105.
Dear S i r :
There a r e being forwarded to you today under s e p a r a t e cover
copies of form 105. Please mail three copies of the form to each S t a t e Bank
and Trust Company member i n your d i s t r i c t with the r e q u e s t t h a t the blank
forms be h e l d pending r e c e i p t of a c a l l f o r condition r e p o r t s . I t i s suggested
t h a t in your l e t t e r t r a n s m i t t i n g the blanks you c a l l the banks' a t t e n t i o n to
the i n s t r u c t i o n s p r e v i o u s l y f u r n i s h e d governing the p r e p a r a t i o n of the c o n d i t i o n
r e p o r t s , so t h a t if any bank has m i s l a i d i t s copy of the i n s t r u c t i o n s L*.nocher
copy may be promptly f u r n i s h e d f o r i t s use, Upon r e c e i p t of n o t i c e from the
Board of the 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 the banks thereof by
mail and request them to f i l l out the r e p o r t s 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 . The procedure f o l lowed a t the time of the l a s t c a l l , o u t l i n e d in the Board's l e t t e r S t . 5930
of October 1. 1928, should again be observed i n examining the r e p o r t s and
forwarding them to the Board.
In the B o a r d ' s l e t t e r S t . 6023 of December 27, s u b j e c t "Revision
of Weekly Momber Bank Condition Statement, Form S t . 51" i t was requested t h a t
whenever a c a l l f o r c o n d i t i o n r e p o r t s was i s s u e d , the weekly r e p o r t s , form
St. 5 l - a , be compared with the c a l l r e p o r t s (of both National and S t a t e bank
members) in order to make sure t h a t the f i g u r e s a r e being submitted on the
same b a s i s . A f t e r t h i s comparison has been made, a t the time of the next c a l l ,
i t i s suggested t h a t the Board be advised of any m a t e r i a l d i f f e r e n c e s t h a t are
found, t o g e t h e r with an explanation of the d i f f e r e n c e s and of the a c t i o n taken
to r e c o n c i l e the two r e p o r t s . The Board a l s o requested in i t s l e t t e r St. 6064
of January 21, 1929, t h a t the q u a r t e r l y c a l l r e p o r t s be compared with the
semi-weekly, weekly or semi-monthly r e p o r t s of d e p o s i t s submitted to the Fede r a l r e s e r v e banks f o r reserve computation purposes, i n order to make sure
t h a t the l a t t e r a r e b e i n g prepared c o r r e c t l y . I t w i l l be a p p r e c i a t e d i f the
Board i s advised of o u t s t a n d i n g d i f f e r e n c e s between the two r e p o r t s and of
any a c t i o n taken with r e f e r e n c e t h e r e t o .
DigitizedLETTER
for FRASER
TO ALL F .
Very t r u l y yours,
J . C. N o e l l ,
Assistant Secretary.
R. AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
March 21, 1929,
S t . 6139.
SUBJECT:
Member Bank Call Report Showing
Condition of All Member Banks on
December 31, 1928.
Dear S i r :
We are forwarding to you-- under s e p a r a t e
cover
copies of the Board's Member Bank
Call Report No. 42, showing the c ondition of a l l
member banks on December 31, 1928.
Please forward
a copy to each member bank in your d i s t r i c t t h a t
has expressed a d e s i r e to r e c e i v e copies of c a l l
r e p o r t s as i s s u e d .
Very t r u l y y o u r s ,
J . C. H o e l l ,
Assistant Secretary.
TO ALL FEDERAL RES2RVE AGENTS*
4
467
FEDERAL RESERVE BOARD
468
WASHINGTON
March 25, 1929
St, 6143 •
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
SUBJECT:
Debits to individual accounts,
1927-1928
Dear S i r :
For your use and information, there are a t t a c h e d h e r e t o
copies of statements St, 6lOS and 6113 showing monthly f i g u r e s of
d e b i t s to i n d i v i d u a l accounts f o r each r e p o r t i n g center during
1927 and 1928, a l s o a copy of statement St..'4379 showing weekly
f i g u r e s f o r the l 4 l c i t i e s included in the n a t i o n a l summary.
These statements show d e t a i l e d information s i m i l a r to t h a t publ i s h e d in the Board's annual r e p o r t s p r i o r to 1927.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
LETTER TO ALL FEDERAL RESERVE AGEMTS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESSOMCALc0RRESP0NDENdgV$J2CT:
^
Designation and Termination
T H E FEDERAL RESERVE BOARD
GF
R E SSL'VE
CLTLES
Dear S i r :
As you were a d v i s e d a t
Board has under c o n s i d e r a t i o n a
to terminate the d e s i g n a t i o n of
n e c t i o n therewith the Board had
are e n c l o s e d , showing
the r e c e n t Governors' conference, the
r e q u e s t from member banks in Albany, 1J. Y.,
t h a t c i t y as a r e s e r v e c i t y , and in contwo statements prepared, c o p i e s of which
1. Deposits and r e q u i r e d r e s e r v e s on December 31» 1928 of
member banks i n r e s e r v e c i t i e s in which no Federal r e s e r v e bank
o r branch i s l o c a t e d , and the excess of such r e s e r v e s over those
t h a t would be r e q u i r e d of country banks.
2. Deposits and r e q u i r e d r e s e r v e s on December 31, 1928 of
member banks in 33 non-reserve c i t i e s , and a d d i t i o n a l r e s e r v e s
t h a t would be r e q u i r e d i f they were designated a s r e s e r v e c i t i e s .
You were a l s o advised a t the conference t h a t a member of the Board
has introduced a r e s o l u t i o n which, i f adopted, would r e q u i r e t h a t a l l
c i t i e s i n which the r a t i o of amounts due to banks to t o t a l d e p o s i t s of member banks i s 10 p e r cent or more, be c l a s s i f i e d a s reserve c i t i e s . The
Board h a s t h i s r e s o l u t i o n under c o n s i d e r a t i o n and i s endeavoring to work
out some formula whereby e i t h e r the r a t i o of bank d e p o s i t s to t o t a l dep o s i t s or the aggregate amount of bank d e p o s i t s , or a combination of the
two, might be used a s the b a s i s of determining whether or not a given c i t y
should be designated a s a r e s e r v e c i t y .
The Board would l i k e to have you give c o n s i d e r a t i o n to t h i s
question i n the l i g h t of c o n d i t i o n s e x i s t i n g in your d i s t r i c t , and advise
i t whether or not in your opinion some formula along the l i n e mentioned
can be worked out f o r use a s guide i n d e s i g n a t i n g r e s e r v e c i t i e s , a l s o how
any formula t h a t you may develop would work out f o r each c i t y i n your d i s t r i c t t h a t would be a f f e c t e d . I t i s a l s o requested t h a t you a d v i s e the
Board whether i n youropinion some m o d i f i c a t i o n of the formula might be used
in designating c e n t r a l reserve c i t i e s .
By order of the Federal Reserve Board.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
Enclosure
LETTER TO ALL
GOVERNORS*
;
470
DEPOSITS .MID REQUIRED RESERVES 017 DECEMBER 31, 1928 OF MEMBER BMKS
IN RESERVE CITIES III ;7HICH :T0 FEDER.U, RESORTS BA2TK OR BRANCH IS LOCATED, A17D THE
EXCESS OF SUCH RESERVES OVER RESERVES THAT '.70U1D BE REQUIRED OF C0U2TTRY BMKS
(Amounts i n thousands of d o l l a r s )
Required reserves
Due to "banks **
Excess over
PopulaRatio to
Het
Time
Total
tion in Amount t o t a l
demand deposits deposits
At
countryp
r
e
s
e
n
t
bank-basis
d
e
p
o
s
i
t
s
deposits
1927*
Albany
120,000
13,342 13.1
63., 861
Washington
Hi lvrauke e
Indianapolis
Toledo ~
5^0.000 13,897 io;o
536,000 33,099 15.8
374,000 23,602 20.9
305,000
3,295 8 . 4
76,27s
111,325
64,393
38.309
Columbus
Oakland
St. Paul
Fort Worth
14,127 13.2
5,650 16.7
26,162 20.7
164,000 24,370 27.6
63,502
Grand Rapids
Tulsa
Pes Moines
Kansas City
Kans.
162,000
150,000
14-9,000
118,000
33,749
3,774
7 4
24
. 1
20.4
28.0
Savannah
ITichi t a
Peoria
Sioux City
100,000 16,155
96,000 10,190
84,000
4,512
8,060
79,000
20..5
26..2
13.S
28.5
291,000
267,000
250,000
6,301
26,871
10,830
101,997
7,122
138,365
209,94s
113,145
98,733
8,948
13,151
7,188
5,328
3,340
1,931
1,149
22,523
64,616
28,179 107,387
6,961
33,892
39,627 126,133
7,195
2,461
7,651
5,699
1,905
675
1,939
1,569
m
43,944 85,210
17,790 111,384
10,579 53,077
3,290 13,467
4,693
8,086
3,763
Sol
1,013
2,266
1,034
229
33,731
30,066
16,354
12,588
8,207
78,992
38,941
32,643
28,262
4,275
2,688
2,013
1,580
1,012
744
490
4oo
52.310
7,616
24,790
13,342
24,544
44,006
67,261
24,968
49,89s
15,608
6,975
85,272
1,916
2,289
fit. Joseph
Lincoln
Topeka
Cedar Rapids
791000
70,000
62,000
54,000
9,621
7,276
32.8
31.0
3,644 16.5
10,461 34.1
15,817
13,761
15,912
13,501
7,847
3,485
2,642
11,354
29,345
23,460
22,084
30,646
1,817
1,481
1,670
1,691
475
413
477
405
Galveston
'i7aco
Pueblo
Dubuque
46,000
44,000
42,000
50,000
8,569 27.4
2,541 11.6
5,850 28.1
848 7-0
13,84s
11,695
2:82?
13,994
7,417
5,587
6,911
31,319
21,813
20 , 832
12,116
1,805
1,393
1,0?8
652
4i6
351
273
134
Ogden
Muskogee
38,000
33,000
4,793 40.5
1,949 14.8
7,279
6,209
1,541
4,754
11,831
13,184
774
764
218
18%
908,250 500,023 1,676,47s
105,827
27,249
TOTAL, 27
cities
4,303,000 304,789
18.2
•Census Bureau e s t i m a t e s , except t h a t population marked (*) i s taken from
J u l y 1928 Rand-MtiJally Bankers Directory.
**Does not include amounts due to Federal reserve banks, c e r t i f i e d and
o f f i c e r s ' checks, and cash l e t t e r s of c r e d i t and t r a v e l e r s ' checks.
FEDERAL RESERVE BOARD
DIVISI02I OF BAITK OPERATIONS
MARCH 29, 1929.
C.
( S t . 6l4Sa)
DEPOSITS AH) REQUIRED RESERVES 0:1 DECEMBER 31, 1923, 0F MEMBER EAMS
IH 33 NON-RESERVE CITIES, AND ADDITIONAL RESERVES THAT WOULD BE REQUIRED
IF THEY WERE DESIGNATED AS RESERVE CITIES
(1) C i t i e s with $5,000,000 or more of "bank d e p o s i t s
471
(2) Other c i t i e s with population of 125,000 o r more
(Amounts in
ro**
Due to "banks
PopulaRatio to
tion in
total
Amount
1927*
deposits
thousands of d o l l a r s )
Requirod reserves
' Net
Additional
Total
Time
At
demand
on
re servedeposits deposits present
deposits
c i t y "basis
(1) CITIES WITH $5.000.000 OR MORE OF BANK DEPOSITS
201,770 101,515 322,790 17,169
467,000 9.353
£1 107,924 42,787 156 , 578 8 . 8 B
197,000 5,675
2,346
21,15s 52,036
24,452
115,000 7,261 13.9
1,870
20,227 45,080
18,043
108,000 7,130
15.8
Newark
Syracuse
Duluth
Tampa
Shroveport
78,000
Winston S&lom 77,000
Sacramento
75,000
102,000
Knoxville
9,473
7,468
8,349
21.9
15.6
22.0
9,513
17,712
14.5
25,646
22,227
20,819
14,926
Charleston
Chattanooga
E.St.Louis &
Nat.Stk.Yds.
Joliet
75,000
5.179
11
73,000 6,718
•7
15.4
13,840
18,725
23,494
17,940
73,000
7,918
5,083
29.4
17.0
16,213
15,223
11,172
42,000
5,116
10,743
14,212
7,647
196,000
185,000
181,000
455
179,000 4,344
l.l
S.9
Youngs town
Hartford
Springfield
Scranton
169,000
168,000
147,000
144,000
1,107
2,448
1,800
4,396
1.6
3.1
3.5
4.9
Bridgeport
Paterson
Flint
Miami
*144,000
144,000
143,000
l40,000
1,020
1,345
322
1,243
3.0
Trenton
Camden
F a l l River
Long Beach
610
137,000!
133,000!! 1,24s
133,000' 1,050
*129,000;
582
Wilmington
TOTAL, 21
cities
3,983
859
1:6
2.0
57,011
28,113
25,409
24,651
24,511
70,442
23,666
36,135
16,459
624
448
44,361
43,519
1,674
1,849
415
552
26,974
29,843
1,364
1,401
487
456
47,933
37,919
35,248
14,993
546
2,566
3,723
885
18,696
1,710
843
762
740
42,555
3,869
24,654
47,920
69,120
78,159
51,317
89,948
2,992
5,047
736
2,113
710
1,085
14,455
39,726
34,165
66,804
57,780
24,211
1,586
2,909
2,334
1,194
494
736
472
384
41,370
47,356
18,812
2,168
2,352
1,179
728
72S
13,443
24,247
15,695
5.6
2.3
15,872
14,826
2,273
126,000: 1,084
• i
2.3
40,716
3,734,000| 38,292
2.6
736,684
24,265
667
4,483
2,697
2,182
2,286
41,117
%
769
78,424
5>t. 521
41,506
48,870
l6,4oi
24 ,302
24,533
15,722
12,781
.6
5.1
3,237
734
541
2,081
2,087
1,780
1,471
43,180
TOTAL, 12
499,808 298,120 885,511 43,931
9.6
cities
1,,482,000 84,723
(2) NON-RESERVE CITIES NOT INCLUDED ABOVE. WITH POPULATION OF
125.000 OR MORE
58,887 2,463
39,647
1.3 . 18,194
Rochester
771
325,000
72,162 166,346
8,153
2.1
Jersey City
322,000 3,520
85,539
124,094 175,339 306,181 13,947
281,000 4,588
Providence
1.5
3,436
29,498
*208,000 1,517
45,699
79,193
1.9
Akron
Worcester
New Haven
Dayton
Norfolk
6,053
9,982
21,768
9,895
25,689
5,054
47,905
684,652 1,486,564
2,396
3,967
1,335
476
444
3,002
1,221
72,108" 22,102
•Census Bureau e s t i m a t e s , except t h a t population marked (*) i s taken from
J u l y 192S Bankers D i r e c t o r y ,
**Does not include amounts due to F. R. "banks, c e r t i f i e d and o f f i c e r s ' checks,
and cash l e t t e r s of c r e d i t and t r a v e l e r s ' checks.
FEDERAL RESERVE BOARD
DIVISION OF BANK OPERATIONS
MARCH 29, 1929.
(St. 6l4gh)
FEDERAL RESERVE BOARD
4
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
April 15, 1929»
St. 6l64.
SUBJECT:
Bank Suspensions.
Dear S i r :
There i s enclosed herewith a l i s t of
member and nonmember banks reported to the Board
as having suspended operations during the month
of March, and of banks previously suspended which
resumed business during the same month. The
statement a l s o 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
kindly check the data 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 b e f o r e A p r i l 27, 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 , in order that c o r r e c t summaries by d i s t r i c t s may be published i n the Federal Reserve
Bulletin.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
LBTTER TO ALL JP. R. AGENTS*
7
2
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
ANRIL
-F ^
SUBJECT:
2 3
1QPQ
S L J O
Quarterly r e p o r t of Member Banks "borrowing
from Federal reserve bank.
Dear S i r :
Daring the p a s t several y e a r s , you have been
f u r n i s h i n g the Board with r e p o r t s on Form S t . 3677, coveri n g member "banks "borrowing from the Federal r e s e r v e "bank
continuously i n excess of c a p i t a l and s u r p l u s d u r i n g the
r e p o r t mdnth. The Board would l i k e to expand t h i s report
to include a l l s u b s t a n t i a l l y continuous "borrowers, and
accordingly i t w i l l be a p p r e c i a t e d i f , beginning with the
f i r s t q u a r t e r of t h i s y e a r , you w i l l f u r n i s h the Board
with q u a r t e r l y r e p o r t s on Form S t . 6l%0, a copy of irhich
i s a t t a c h e d , i n l i e u of r e p o r t s on form S t . 3o77» which
may be d i s c o n t i n u e d . The new form, you w i l l n o t e , c a l l s
f o r r e p o r t i n g the c a p i t a l and surplus and average d a i l y
borrowings of inember banks t h a t were s u b s t a n t i a l l y cons t a n t borrowers during the q u a r t e r , i . e . , banks borrowi n g f o u r - f i f t h s of the time (on 73 o r more days of the
q u a r t e r ) , a l s o the number of days on which the member
bank was i n debt to the Federal r e s e r v e bank d u r i n g the
l a s t four quarterly periods.
F i f t y copies of the new form a r e b e i n g f o r *
warded to you today under separate cover.
By -order of t h e Federal Reserve Board.
Very t r u l y y o u r s ,
E. M. McClelland,
Assistant Secretary.
COPY TO ALL GOVERNORS*
F. % Rt Board form S t . GlJO
A p r i l 1929
474
MEMBER BAITKS BORROVJIITG- FROM THE FEDERAL RESERVE BAHlt OF
POUR-FIFTHS OF THE TIME* DURING THE QUARTER ENDING
Location
Name of bank
Average Capital
Number of days t h a t
hank was i n debt
borrowand
to F. R. Bank during .
ings
surplus
the ].ast
during
a t end
quarter
of
6
12
3
9
quarter months months months months
(In thousands)
$
#
*On 73 or more days, i n c l u d i n g Sundays and Holidays.
federal reserve board
WASHINGTON
May 6 ,
1929,
St. 6l?g.
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT*
Reports o f C o n d i t i o n o f S t a t e
Banks and Trust 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 with y o u r u s u a l p r a c t i c e y o u w i l l k i n d l y f u r n i s h the f e d e r a l Reserve Board, as soon a s a v a i l a b l e ,
with a copy of the abstract of reports of condition
o f s t a t e "banks a n d 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 o n
March 2 7 , 1 9 2 9 •
I f no c a l l was i s s u e d a s o f March
27, w i l l you k i n d l y adviso the date of c a l l n e a r e s t
t h e r e t o and f u r n i s h the Board with a copy of your
abstract as of that date, i f not already done.
In submitting the above-mentioned data 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 ( e x c l u s i v e o f
branch banks) be s t a t e d , and that separate f i g u r e s
be f u m i shed f o r mutual savings banks p r o v i d i n g there
aro any such banks operating i n your s t a t e .
Jl f r a n k e d and 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 use i n t r a n s m i t t i n g the
data requested.
Very t r u l y y o u r s ,
J . C. I T o e l l ,
Assistant Secretary.
Enclosure,
4
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
MOJT
6 ,
1 9 2 9 #
St. 6l?8a.
SUBJECT:
Reports of Condition of S t a t e
Banks and Trust Companies.
Dear S i r :
I t w i l l bo g r e a t l y a p p r e c i a t e d i f i n
accordance with your uetjgl 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 the Federal Reserve Board, a s soon a s a v a i l a b l e , with a copy of the a b s t r a c t of r e p o r t s of
c o n d i t i o n of s t a t e banks and t r u s t companies i n
your s t a t e on March 2J, I929. I f no c a l l was i s s u e d
as of March 27, w i l l you k i n d l y advise the d a t e of
the c a l l n e a r e s t t h e r e t o and f u r n i s h the Board with
a copy of your a b s t r a c t as of t h a t d a t e , i f n o t a l ready done.
In submitting the above-mentioned d a t a i t
i s requested t h a t the number of banks ( e x c l u s i v e of
branch banks) bo s t a t e d , and t h a t separate f i g u r e s
be f u r n i s h e d f o r mutual savings banks p r o v i d i n g t h e r e
a r e any such banks operating i n your s t a t e , a l s o
t h a t the f i g u r e s be segregated by Federal r e s e r v e
districts.
A f r a n k e d and addressed envelope, r e q u i r i n g
no p o s t a g e , i s enclosed f o r use i n t r a n s m i t t i n g the
data requested.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
Enclosure.
7
6
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
• THE FEDERAL RESERVE BOARD
May 15, 1929,
St. 6188.
SUBJECT:
Condition of Member banks a s
of March 27, 1929.
Dear S i r :
For your information t h e r e i s enclosed
herewith a p r e l i m i n a r y statement r e g a r d i n g the
condition of a l l member banks combined a s of
March 27, 1929.
The Board's Member Bank Call
.Report (3fo. 43) shoving d e t a i l e d f i g u r e s f o r a l l
member banks and f o r S t a t e bank members Trill be
ready 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 ,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure.
TO ALL FEDERAL EE SERVE AGENTS*
4
7
7
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
May 1 5 , 1 9 2 9
St. 6189
SUBJECT!
Bank Suspensions.
Dear S i r :
There i s enclosed herewith a l i s t of
member and nonmember banks r e p o r t e d to the Board
as having suspended o p e r a t i o n s during the month
of A p r i l , and of banks p r e v i o u s l y suspended which
resumed b u s i n e s s during the same month. The
statement a l s o includes any c o r r e c t i o n s made i n
the l i s t s p r e v i o u s l y sent to you.
I t w i l l be a p p r e c i a t e d if 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 a g a i n s t
your records and advise the Board on or b e f o r e
May 29, by t e l e g r a p h 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 a r e 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 p u b l i s h e d i n the F e d e r a l Reserve B u l l e t i n .
Very t r u l y yours,
E. 1. Smead, Chief,
Division of Bank Operations.
Enclosure
LETTER TO EACH FEDERAL RESERVE AGENT
478
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
May 15, 1929
St. 6189
SUBJECT:
Bank Suspensions.
Dear S i r :
There i s enclosed herewith a l i s t of
member and. nonmember banks r e p o r t e d to the Board
a s having suspended o p e r a t i o n s during the month
of A p r i l , and of banks p r e v i o u s l y suspended which
resumed "business during the same month. The
statement 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 in
the l i s t s p r e v i o u s l y sent to you.
I t w i l l be a p p r e c i a t e d if 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 a g a i n s t
your records and advise the Board on or b e f o r e
May 29, by t e l e g r a p h 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 a r e 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 p u b l i s h e d i n the F e d e r a l Reserve B u l l e t i n .
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
LETTER TO EACH FEDERAL RESERVE AGENT
C 0 HF I DIN H l L
Not f o r nublicall011
4
9
BANK SUSPENSIONS DURIUGt- APRIL 1929
I Date
[closed
DISTRICT NO. 4 - CLEVELAND
Peoples National Bank Adena ~
Ohio 4-13-29
Far. & iier. S t a t e Bk
Chattanooga
Ohio 4-26-29
Union Savings Bank
Youngstown
Ohio 4-13-29
Name of bank
7
St. 6l89a,
Location
DISTRICT NO. 5 - RICHMOND
Commercial Bk & Trust
Gastonia
N.C. 4 - 5-29
Bank of S t a r
Star
N.C. 4-26-29
C a p i t a l Deposits*
$50,000
25.000
50.000
Class of
"bank
$587,000 National
9%,000 Nonmem.
ii
628,000
500.000 2,456,000 Nonmem.
II
15,000
176,000
DISTRICT NO. 6 - ATLANTA
Ga. 4-19-29
Peoples Bank
Sardis
Fla* 4-11-29
Brotherhood S t a t e Bank J a c k s o n v i l l e
Ga. 4-16-29
Bank of Girard
Girard
Ga. 4- 2-29
Parrott
Bank of P a r r o t t
Ga.
Poulan
4-19-29
Bank of Poulan
Bank of Weston
42-29
Ga.
Weston
25,000
25,000
15,000
15,000
15,000
25,000
38,000 St. Mem.
202,000 Nonmem,
II
85,000
II
II
4o,ooo
II
109,000
DISTRICT NO. 7 - CHICAGO
Princeville
111.
Home S t a t e Bank
Ia.
State Bank of Lansing
Lansing
Oxford Junction I a .
F i r s t Tr. & Sav. Bank
Ia.
Barnum
Farmers Exchange Bank
4-25-29
4-26-29
4-30-29
4-13-29
50,000
33,000
25,000
10,000
657,000 Nonmem,
n
290,000
11
178,000
7,000 Nonftem.
DISTRICT NO. 8 - ST. LOUIS
Ark. 4-16-29
Lake City
Bank of Lake City
111. 4-29-29
Sesser
Sesser S t a t e Bank
Mo. 4-22-29
Fanners & C i t i z e n s Bk. De Soto
Mo. 4-22-? 29
Worthington
Chariton Bank
50,000
30,000
50,000
10,000
445,000
144,000
(Pvt.)
150,000
47,000
Nonmem.
11
11
11
DISTRICT NO. 9 - MINNEAPOLIS
F i r s t National Bank
Sanborn
N.D. 4-10-29
Minn.4-18-29
Bferkville
Markville S t a t e Bank
Minn.4-22-29
Spicer
Green Lake S t a t e Bank
N.D. 4-18-29
Bartlett
B a r t l e t t S t a t e Bank
Eckelson S t a t e Bank
Eckelson
N.D. 4 - 9-29
S.D. 4 - 4-29
Astoria
Astoria S t a t e Bank
Big Stone City
Farmers S t a t e Bank
S.D. 4 - 5-29
25,000
10,000
10,000
10,000
10,000
20,000
25,000
101,000 National
69,000 Nonmem.
11
143,000
69,000
77.000
269,000
133,000
DISTRICT NO. 10 - KANSAS CITY
La Cygne
Kans.4-22-29
Madison
Kans.4-30-29
13,000
25,000
160,000
459,000
Nonmem.
»
DISTRICT NO. 11 - DALLAS
F i r s t National Bank
La Grange
Tex. 4-27-29
75.000
14,000
National
DISTRICT NO. 12 - SAN FRANCISCO
Bank of Cottonwood
Cottonwood
Calif.4-15-29
American Security Bank Vancouver
Wash. 4-18-29
25.000
50.000
106,000
339.000
Nonmem.
"
La Cygne S t a t e Bank
Farmers S t a t e Bank
TOTAL FOR ALL DISTRICTS - 31 banks - C a p i t a l $1,316,000 - Deposits $8,372,000
#
4
CONFIDENTIAL
Not f o r p u b l i c a t i o n
8
0
St, 6l89b
SUSPENDED BANKS REOPENED DURING APRIL 1929
F. R.
District
number
Dato
closed
Namo and l o c a t i o n of bank
Class
of
bank
Date
reopened
4
Amherst Savings & Banking Co., Amherst, Ohio
5
Peoples Bank
S t u a r t s D r a f t , Va.
3-13-29
4-16-29. Nonmem.
8
Bernie S t a t e Bank
Bernie
Mo.
3-18-29
4 - 8-29 Nonmem.
8
Farmersburg S t a t e Bank
Farmersburg
Ind. 3-11-29
4— 6—29 Nonmem.
12-20-28
4-1-29
Nonmem.
CORRECTIONS TO BE 2/ADE IN PREVIOUS LISTS SHOWING BANK SUSPENSIONS OR OF
SUSPENDED BANKS REOPENED
March l i s t of "bank suspensions
To "be added to the l i s t :
Holt Banking Company - D i s t r i c t No. 6 - Nonmember ( p r i v a t e ) - C a p i t a l
$105,000 - d e p o s i t s $211,000. Twelve banks l o c a t e d a t the f o l l o w i n g
p o i n t s in Georgia: Alma, Avera, Bartow, Cobbtown, Davisboro, Harrison,
Mansfield, Midville, Ludowici, R e g i s t e r , Rocky Ford, and Warthen.
• L a t e s t a v a i l a b l e f i g u r e s , taken from Form X-4401, i f received, otherwise
from Rand McNally Banker's Directory o r condition r e p o r t s .
FEDERAL RESERVE BOARD
DIVISION OF BANK OPERATIONS
MAY 15, 1929
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
May 21, 1929,
st. 6199.
SUBJECT:
Payment of Dividends on
June 30, 1929.
Dear S i r :
In submitting the u s u a l semi-annual r e s o l u t i o n of your board of d i r e c t o r s with r e f e r e n c e to
the payment of the June 30 dividend, k i n d l y f u r n i s h
the Board with statements showing the following i n formation a s of May 31 f o r (1) suspended banks, and
(2) member banks considered to be in a s e r i o u s l y
overextended c o n d i t i o n :
iTame arid l o c a t i o n of bank.
Unpaid indebtedness to Federal r e s e r v e bank
Estimated l o s s to Federal r e s e r v e bank
Very t r u l y yours,
3 . M. McClelland,
Assistant Secretary.
LETTER TO ALL CHAIRMEN *
481
482
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
June 7, 1929,
S t •
SUBJECT:
6 2 1 8 .
A l l o c a t i o n of c e r t a i n expenses i n
Functional expense r e p o r t s .
Dear S i r :
In accordance with the Board's l e t t e r of February 5, 1929» S t . 6082, the f o l l o w i n g q u e s t i o n s i n connect i o n with t h e Functional Expense Reports have "been brought
t o our a t t e n t i o n :
1. Should the cost of a d v e r t i s i n g f o r a
p a r t i c u l a r a r t i c l e and t e l e g r a p h and telephone charges i n
connection with the d e l i v e r y of supplies purchased be
charged to General Service - Purchasing and Stock Room
Expense Unit or should they be charged to the expense u n i t
f o r which t h e p a r t i c u l a r s u p p l i e s a r e purchased.
2. Inasmuch as i t i s contemplated t h a t
a l l c a f e t e r i a expenses be shown as one item on form 96,
should not h e l p advertisements f o r the c a f e t e r i a and the
cost of p h y s i c a l examinations f o r c a f e t e r i a employees be
charged to Provision of Personnel - C a f e t e r i a Expense
Unit, r a t h e r than t o the H i r i n g Employees and Employee's
Records Expense Unit and the Welfare and Medical Expense
U n i t , r e s p e c t i v e l y , a s provided f o r by t h e Manual of I n structions.
3. Should U. S. s e c u r i t i e s r e c e i v e d f o r
t r a n s f e r t o and d e l i v e r y by other Federal r e s e r v e banks,
and s e c u r i t i e s d e l i v e r e d i n accordance with i n s t r u c t i o n s
from o t h e r Federal r e s e r v e banks be included i n o p e r a t i o n s
of the F i s c a l Agency Function, and i f so how should the
number of and amount of such s e c u r i t i e s handled be r e p o r t e d .
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 advise
u s a s t o how t h e above t r a n s a c t i o n s a r e handled i n your
Functional Expense Reports.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO ALL GOVERNORS*
federal reserve board
4
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
June 7, 1929
S t . 6219
SUBJECT;
Member Sank Call Report f o r
March 27, 1929
Dear S i r :
We a r e forwarding to you under separate
cover
copies of the b o a r d ' s Member Bank C a l l
Report IJo. 43, showing the condition of member
banks on March 27, 1929.
Please forward a copy to
each member bank in your d i s t r i c t t h a t has expressed,
a d e s i r e t o receive copies of c a l l r e p o r t s a s
issued.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
*
TO AIL FEDERAL RESERVE AGENTS*
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federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
4
8
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June 11, 1929
St. 6222
Branch and Chain Banking.
Dear S i r :
In submitting your r e p o r t covering changes in "branches of member and
non-member Tanks during the 12 months ending June 30» 1929> a s r e q u e s t e d i n
the Board's l e t t e r S t . ^120 of October 10, 1926, modified "by l e t t e r S t . $620
of December 23, 192?» i t w i l l he a p p r e c i a t e d i f you w i l l c a l l to the Board's
a t t e n t i o n any e r r o r s t h a t may have been found i n the memorandum on branches of
member and nonmember banks submitted to you with the B o a r d ' s l e t t e r S t . 5999
of December 3, 1928.
P l e a s e accompany your r e p o r t on branch banking with a r e p o r t on chain
banking i n your d i s t r i c t a s of June 30, a s was done l a s t y e a r . For your conf i d e n t i a l information and use in p r e p a r i n g such r e p o r t t h e r e i s enclosed h e r e with a copy of the r e p o r t s on t h i s subject submitted by a l l Federal reserve
agents l a s t y e a r , t o g e t h e r with a memorandum and summary prepared a t the
Board's o f f i c e s . I t w i l l be noted t h a t t h e r e i s a m a t e r i a l d i f f e r e n c e i n the
scope of the r e p o r t s submitted f o r the v a r i o u s d i s t r i c t s , due no doubt l a r g e l y
to the f a c t t h a t no comprehensive d e f i n i t i o n of what c o n s t i t u t e s chain banking
has been f o r m u l a t e d . I t i s f e l t , however, t h a t the use of the data enclosed
herewith i n the p r e p a r a t i o n of the new r e p o r t s w i l l tend to b r i n g about b e t t e r
and more uniform r e p o r t s .
In the p r e p a r a t i o n of the c u r r e n t r e p o r t i t i s suggested t h a t no
attempt be made to include banks t h a t have s u b s t a n t i a l l y i d e n t i c a l ownership
but which o p e r a t e i n d i f f e r e n t f i e l d s in the same community, such a s the
a f f i l i a t i o n s t h a t e x i s t between a l o c a l commercial bank and a l o c a l savings
bank, nor i n g e n e r a l any a f f i l i a t i o n involving only tiro banks.
In forwarding your r e p o r t on chain banking p l e a s e make such general
comments on the development of chain or group banking i n your d i s t r i c t a s you
think w i l l be of i n t e r e s t to the Board, with s p e c i a l r e f e r e n c e to the development i n your d i s t r i c t of investment t r u s t s and o t h e r f i n a n c i a l c o r p o r a t i o n s
organized f o r the purpose of s p e c i a l i z i n g i n bank stoc ks.
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 make a s p e c i a l e f f o r t to submit
your r e p o r t s on branch banking and chain banking i n time f o r them to reach the
Board a s soon a f t e r June 30 a s p o s s i b l e .
TO ALL FEDERAL
Very t r u l y yours,
. E. M. McClelland,
A s s i s t a n t Secretary
RESERVE AGEUTS*
federal reserve board
435
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
June 12, 1929
S t . 6224
Reserve Requirements of Member Banks
Dear S i r :
At the l a s t Conference of Governors i t was understood t h a t
c e r t a i n p r o p o s a l s which were under c o n s i d e r a t i o n "by the Board f o r
r e v i s i o n of the r e s e r v e requirements of member banks would be subm i t t e d to tiie Federal r e s e r v e banks f o r t h e i r c o n s i d e r a t i o n .
There i s enclosed herewith a s e l f - e x p l a n a t o r y memorandum
prepared by the Chief of the Board's Division of Bank Operations which
s e t s f o r t h the v a r i o u s proposals, none of which have been e i t h e r
approved o r disapproved by the Board, I t i s requested t h a t you advise
the Board of your views on the several proposals, p a r t i c u l a r l y a s to
the discontinuance of a lower r e s e r v e on time d e p o s i t s than on n e t demand d e p o s i t s , and the a d v i s a b i l i t y of allowing v a u l t cash to be
counted a s p a r t of the l e g a l l y r e q u i r e d r e s e r v e s , with corresponding
adjustments i n r e q u i r e d reserve percentages. In the event none of the
proposals o u t l i n e d meet your approval, the Board w i l l a p p r e c i a t e advice from you a s to a formula which, i n your opinion, would be
satisfactory.
This l e t t e r i s being addressed to each Governor.and Federal
Reserve Agent, and i t i s hoped t h a t r e p l i e s w i l l be r e c e i v e d by
August 1 s t , a s i t i s the p r e s e n t i n t e n t i o n of the Board to r e q u e s t a
f u l l d i s c u s s i o n of the s u b j e c t of r e s e r v e requirements a t the F a l l
Conference of Governors and Federal Reserve Agents.
Very t r u l y yours,
E. M. IfcClelland,
Assistant Secretary.
Enclosure
TO GOVERNORS AND FEDERAL RESERVE AGENTS
OF ALL FEDERAL RESERVE BAMS*
4
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J12226
1 4 ,
S t . 6228
SUBJECT:
Bank Suspensions
Dear S i r :
There i s enclosed herewith a l i s t of member
and nonmember banks r e p o r t e d to the Board a s having
suspended o p e r a t i o n s during the month of May, and of
banks p r e v i o u s l y suspended which resumed b u s i n e s s
during the same month. The statement a l s o includes
any c o r r e c t i o n s made i n the l i s t s p r e v i o u s l y sent to
you.
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 to your d i s t r i c t a g a i n s t
your r e c o r d s and advise the Board on or b e f o r e June
28, by t e l e g r a p h 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 a r e necessary t h e r e i n j 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 publ i s h e d i n the Federal Beserve B u l l e t i n .
Very t r u l y yours,
E. L. Smead, C h i e f ,
Division of Bank Operations.
Enclosure.
TO ALL FEDERAL RESERVE AGENTS*
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federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
June 21, I929
St. 6230
SUBJECT;
»
Condition Reports of S t a t e
Bank Members, Form 105.
Dear S i r :
There are "being forwarded t o you today under separate cover
copies of form 105. Kindly hold the "blank forms a t your "bank u n t i l r e c e i p t of t e l e g r a p h i c n o t i c e from t h e Board, whereupon t h r e e c o p i e s should
"be mailed t o each s t a t e "bank and t r u s t company member with the r e q u e s t
t h a t the forms "be h e l d pending 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 r e p o r t s .
I t i s suggested t h a t i n your l e t t e r t r a n s m i t t i n g the "blanks you c a l l the
"banks' a t t e n t i o n t o t h e i n s t r u c t i o n s p r e v i o u s l y f u r n i s h e d governing the
p r e p a r a t i o n of the c o n d i t i o n r e p o r t s , so t h a t i f any "bank has m i s l a i d i t s
copy of tho i n s t r u c t i o n s another copy may "be promptly f u r n i s h e d f o r i t s
u s e . Upon r e c e i p t of n o t i c e from the 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 the "banks thereof by mail and request thsm to f i l l
out the r e p o r t s and mail them t o you promptly - i n 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 .
The r e p o r t s should be examined aoQ. checked i n the u s u a l manner,
i n accordance with t h e procedure o u t l i n e d on page 2 of t h e Board 1 s l e t t e r
S t . 5930 of October 1 , 1928, b e f o r e being forwarded to the Board. In
a d d i t i o n to t h e checking s p e c i f i c a l l y o u t l i n e d i n t h a t l e t t e r , i t might
be w e l l , i n some*cases a t l e a s t , to compare some of the items with the
previous r e p o r t , p a r t i c u l a r l y i n Schedules E, F, and G, a s we found a
number of d i s c r e p a n c i e s between the March 2J r e p o r t s and those p r e v i o u s l y
submitted. In t h i s connection i t i s suggested t h a t where a r e p o r t i s
found t o be complete except t h a t t h e word "None" i s not shown a g a i n s t
some of the items i n the body of the r e p o r t or i n the schedules, or the
par value of stock or number of shares i s omitted from Schedule A, i t
w i l l be s u f f i c i e n t t o merely c a l l the b a n k ' s a t t e n t i o n t o t h e omissions
f o r i t s guidance i n p r e p a r i n g f u t u r e r e p o r t s , i n s t e a d of asking the bank
to submit a l e t t e r g i v i n g the information t h a t was omitted. The memorandum items i n Schedules E and L should be answered, however, i n every
case.
TO ALL F . E.
Veiy t r u l y yours,
E. M. McClelland,
Assistant Secretary,
AGENTS*
7
4
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June a , 1929,
st. 6236.
SUBJECT:
Earnings, Expenses and Dividends
Reports of S t a t e Bank Members.
Dear S i r :
There a r e being forwarded t o you today under
s e p a r a t e cover
c o p i e s of form 107 f o r the use
of S t a t e "bank members i n submitting t h e i r r e p o r t s of
e a r n i n g s , expenses and dividend payments f o r the s i x
months ending June 30, 1929*
As i n s t r u c t i o n s governing t h e p r e p a r a t i o n of
r e p o r t s on form 107, r e f e r r e d to i n our l e t t e r S t . 6020
of December 21, have not y e t "been completed, the "banks
should f o l l o w t h e i r u s u a l p r a c t i c e i n p r e p a r i n g r e p o r t s
f o r the s i x months ending June 30, 1929•
In c o n t i n u a t i o n of the p o l i c y h e r e t o f o r e f o l lowed and i n order t h a t a l l r e p o r t s may "be a s complete
and a c c u r a t e a s p o s s i b l e , 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 w r i t e f o r a d d i t i o n a l information to a l l banks
which f a i l to r e p o r t an amount or which w r i t e the word
"none" a g a i n s t any item on t h e r e p o r t , or which w r i t e
the word "none" where t h e r e i s good reason t o b e l i e v e
t h a t a f i g u r e should have been r e p o r t e d , e . g . , i n t e r e s t
r e c e i v e d on investments or on balances with other banks
or i n t e r e s t p a i d on time d e p o s i t s .
Very t r u l y y o u r s ,
E. M. McClelland,
Assistant Secretary.
TO ALL F. E. AGSUTS*
8
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federal reserve board
T
4
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WASHINGTON
*•
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
June 27, 1929
S t . 6248
Dear S i r :
At the l a s t Governors' conference, c o n s i d e r a t i o n was given to
topic I I I - D "Redemption Fund f o r Federal reserve n o t e s . I s there
any need f o r two s e p a r a t e funds?" and the conference voted t h a t the
Chairman appoint a committee to confer with the Treasury o f f i c i a l s
and express the opinion of the conference t h a t an e f f o r t should be
made to do a w # with the Federal reserve a g e n t s ' redemption fund if
agreeable to t h e Treasury, The s e c r e t a r y of the Governors' c o n f e r ence has since a d v i s e d oe t h a t the Chairman appointed Mr. I.R.Rounds
of the Federal Reserve Bank of Hew York and myself a s the committee
to confer with the Treasury o f f i c i a l s .
For your i n f o r m a t i o n , I am enclosing a copy of a memorandum
dated March 28, 1929 with r e f e r e n c e to t h i s s u b j e c t which explains
the h i s t o r y of the two separate redemption f u n d s and the use made
of them by the several Federal reserve banks which, i t w i l l be
noted, i s n o t uniform.
Information now a v a i l a b l e i n d i c a t e s t h a t ten of the Federal r e serve banks make c r o s s e n t r i e s between the a g e n t ' s redemption f u n d
and the b a n k ' s redemption fund in connection with a l l shipments of
m u t i l a t e d Federal reserve n o t e s to the Treasury by them or by other
Federal r e s e r v e banks f o r t h e i r account while two of the banks make
no e n t r i e s tiiatever in t h e i r redemption f u n d s i n connection with such
shipments. These banks merely reduce on t h e i r own books the amount
of Federal r e s e r v e n o t e s outstanding. If the procedure followed by
these two banks i s adopted by the o t h e r ten the only Federal r e s e r v e
notes which w i l l be charged to the redemption f u n d by the t r e a s u r y
w i l l be those r e c e i v e d from sources other than the Federal r e s e r v e
banks and such redemptions can be accomplished through the b a n k ' s
redemption fund a s e a s i l y as through the a g e n t ' s redemption f u n d .
I t would seem from the above t h a t t h e r e i s no occasion f o r the maintenance of the two separate redemption f u n d s and the e l i m i n a t i o n of
one would not only s i m p l i f y somewhat the accounting procedure i n c i dent to the r e t i r e m e n t of Federal reserve n o t e s but would a l s o make i t
"
2
"
s t . Szbs
490
n e c e s s a r y to show only one redemption fund i n p u b l i s h e d r e p o r t s ,
thereby removing a source of confusion to many students of the System,
Since the suggestion f o r the discontinuance of one of the
redemption f u n d s was f i r s t made another very p r a c t i c a l reason has
developed which seems to make the change d e s i r a b l e . Under the p r o cedure followed by a m a j o r i t y of the "banks, t r a n s f e r s a r e made "between
the two f u n d s upon r e c e i p t of n o t i c e from the Treasury t h a t Federal r e serve notes have "been received f o r r e t i r e m e n t . This n e c e s s i t a t e s maint a i n i n g a c l o s e watch on the amounts of the r e s p e c t i v e redemption funds
i n order t h a t t h e r e may "be a t a l l times a s u f f i c i e n t "balance to e f f e c t
the redemptions. In view of the impending change i n the s i z e of the
currency, s e v e r a l of the Federal reserve "banks have thought t h a t some
change of procedure would "be necessary i n order t h a t the more r a p i d r e tirement of Federal r e s e r v e n o t e s which i s a n t i c i p a t e d f o l l o w i n g J u l y
10 can he made without "building up too l a r g e a redemption f u n d and thus
p o s s i b l y d e p l e t i n g the r e s e r v e s a g a i n s t d e p o s i t s . The procedure suggested i s a s f o l l o w s :
1 s t - That with the approval of the Secretary of the Treasury, the a g e n t s ' redemption f u n d s "be closed and a l l
F e d e r a l reserve n o t e s p r e s e n t e d to the Treasury f o r
redemption "be redeemed out of the "banks' gold redempt i o n f u n d . This, of course, would "be done with the
understanding t h a t if a t any f u t u r e time circumstances
should a r i s e making d e s i r a b l e the maintenance of such
f u n d s , the S e c r e t a r y would r e q u e s t the Federal Reserve
Board t o r e q u i r e each agent to r e e s t a b l i s h h i s f u n d .
2nd - That, the procedure i n c i d e n t to the r e t i r e m e n t of Fede r a l r e s e r v e n o t e s he a s f o l l o w s :
a - That each Federal reserve "bank charge to an
account e n t i t l e d " M u t i l i t a t e d Federal r e s e r v e
n o t e s forwarded f o r redemption" a l l notes of
i t s i s s u e forwarded to Washington e i t h e r "by
i t s e l f or "by another Federal reserve "bank f o r
i t s account. (This i s i d e n t i c a l with the p r e sent -procedure).
"b - That upon r e c e i p t of advice from the Treasury
t h a t notes shipped "by the hank or "by another
Federal r e s e r v e hank f o r i t s account have
been received in Washington e n t r i e s be made
d e b i t i n g "Federal reserve notes outstanding"
and c r e d i t i n g " M u t i l i t a t e d Federal reserve
- 3 S t . 6aUg
n o t e s forwarded, f o r redemption" thus accomplishi n g the r e t i r e m e n t of tiae notes with a minimum
amount of "bookkeeping. This procedure would, of
course n e c e s s i t a t e the Federal reserve a g e n t s
reducing on t h e i r books the amount of Federal r e serve notes outstanding. I t would not r e q u i r e
e n t r i e s in the redemption f u n d s on the books of
the Federal r e s e r v e a g e n t s , the Federal r e s e r v e
banks or the Treasury of the United S t a t e s .
The proposed change i n procedure has already been d i s c u s s e d i n f o r m a l l y " n t h the Treasury and our committee would l i k e to have your
advice a s promptly as p o s s i b l e as to whether or not the proposed plan
lias your approval. I f the plan meets with the approval of the a g e n t s ,
the matter w i l l be taken up with the Treasury f o r m a l l y With a view to
having the necessary i n s t r u c t i o n s issued a t the e a r l i e s t p r a c t i c a b l e
date.
Very t r u l y yours,
E. L. Smead, C h i e f ,
Division of Bank Operations.
LETTER TO ALL FEDERAL RESERVE AGENTS*
Enclosure.
4
9
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March 28, 1929
Mr. McClelland
Mr. Smead
SUBJECT:
Redemption funds ^ g a i n s t Federal
reserve notes.
With r e g a r d to topic I I I . - D on the program f o r t h e next Governors'
Conference "Redemption fund f o r Federal r e s e r v e n o t e s . I s t h e r e any need
f o r two s e p a r a t e funds?" I wish to comment a s f o l l o w s ;
Section l 6 of the Federal Reserve Act provides t h a t the Board s h a l l
r e q u i r e each Federal r e s e r v e bank t o maintain on deposit i n the Treasury
of the United S t a t e s a sum i n gold s u f f i c i e n t i n the judgment of the
Secretary of the Treasury f o r the redemption of the Federal r e s e r v e n o t e s
i s s u e d to such "bank, "but i n no event l e s s than 5 per cent of the t o t a l
amount of n o t e s i s s u e d l e s s the amount of gold or gold c e r t i f i c a t e s h e l d by
the Federal r e s e r v e agent a s c o l l a t e r a l s e c u r i t y . The same s e c t i o n a l s o
provides t h a t upon the r e q u e s t of the Secretary of the Treasury the Federal
Reserve Board s h a l l r e q u i r e the Federal r e s e r v e agent to t r a n s m i t t o - t h e
Treasurer of the United S t a t e s so much of the gold h e l d by him a s c o l l a t e r a l
s e c u r i t y f o r Federal r e s e r v e n o t e s a s may be r e q u i r e d f o r the exclusive p u r pose of the redemption of such Federal r e s e r v e n o t e s . I t i s apparent from
the above t h a t t h e Act r e q u i r e s the Federal r e s e r v e banks t o maintain a
gold redemption fund with the United S t a t e s Treasurer f o r the redemption
of Federal r e s e r v e n o t e s but t h a t t h e maintenance of an a g e n t s ' gold r e demption fund i s d i s c r e t i o n a r y with the Secretary of the Treasury.
Under date of January 24, 191b, Mr. McAdoo, then Secretary of t h e
Treasury, requested the Board to r e q u i r e each Federal r e s e r v e agent t o
transmit gold equal t o 5 per cent of the amount of n o t e s a g a i n s t which
gold had been d e p o s i t e d with him, t o the Treasury of the United S t a t e s f o r
the e x c l u s i v e purpose of the redemption of such n o t e s . The establishment of
redemption f u n d s by the a g e n t s was necessary a t t h a t time a s a number of
the Federal r e s e r v e banks had deposited gold with the agents i n an amount
equal to the t o t a l amount of Federal r e s e r v e n o t e s outstanding and t h e r e f o r e were n o t r e q u i r e d t o maintain a gold redemption fund with the United
S t a t e s Treasury. From experience during the p a s t s e v e r a l y e a r s t h e r e does
not seem to be much p r o s p e c t t h a t any Federal r e s e r v e bank w i l l i n t h e
f u t u r e d e p o s i t gold with t h e agent equal to t h e amount of Federal r e s e r v e
notes o u t s t a n d i n g and consequently i t i s worthwhile t o review the use made
of each of t h e redemption f u n d s i n order to a s c e r t a i n whether the two f u n d s
a r e necessary or d e s i r a b l e .
The p r e s e n t method of redeeming Federal r e s e r v e n o t e s I understand
to be a s f o l l o w s : When Federal r e s e r v e n o t e s a r e r e t u r n e d t o the Treasury
f o r redemption by a Federal r e s e r v e bank, other than t h e bank of i s s u e ,
settlement between Federal reserve banks i s made i n t h e gold s e t t l e m e n t
fund c l e a r i n g . Upon r e c e i p t of n o t i c e from the Treasury t h a t such Federal
reserve n o t e s have been received and package counted the Federal r e s e r v e
(St.
6248-a)
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2 -
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3
"banks and agents of Now York and Chicago merely reduce on t h e i r "books the
amount of Federal r e s e r v e n o t e s outstanding. In the case of the other ten
"banks the United S t a t e s Treasurer charges the redemption f u n d of the agent
and c r e d i t s the redemption fund of the "bank with the amount of n o t e s r e ceived, and corresponding e n t r i e s a r e made "by the "bank and agent i n t h e i r
redemption f u n d s , and i n a d d i t i o n they reduce the amount of Federal r e s e r v e
notes o u t s t a n d i n g . When n o t e s are s e n t to the Treasury by t h e "bank of
i s s u e the T r e a s u r e r , i n the case of nine of the "banks, charges the redempt i o n fund of the agent and c r e d i t s the redemption fund, of t h e "bank f o r the
amount of shipment. In t h e case of the New York and Chicago banks the
Treasury merely n o t i f i e s the bank and t h e agent of the r e c e i p t of the shipment and they make the necessary e n t r i e s t o reduce t h e amount of Federal
y reserve n o t e s o u t s t a n d i n g . In the case of the San Francisco bank the
Treasury n o t i f i e s the Federal Reserve Board of the r e c e i p t of the shipment
and the Board charges the agent i n the gold fund and c r e d i t s the bank i n the
gold s e t t l e m e n t fund.
In a l l of the above cases the work would be s i m p l i f i e d m a t e r i a l l y
and a c o n s i d e r a b l e amount of bookkeeping made unnecessary i f a l l banks
handled the e n t r i e s the same a s do the Federal Reserve Banks of New York and
Chicago.
The only o t h e r redemptions of Sederal reserve n o t e s are the
r e l a t i v e l y small amounts which f i n d t h e i r way i n t o the Treasury mostly
through banks i n Washington. I t i s the p r e s e n t p r a c t i c e of the Treasury to
charge t h e s e n o t e s t o the s t e n t s ' gold redemption fund and t h i s i s the only
purpose f o r which t h e redemption fund of the Federal r e s e r v e agent a t New
York i s -used. These redemptions could very w e l l be made out of the b a n k ' s
gold redemption fund.
From the above i t would seem t h a t there i s now no r e a l occasion
f o r the maintenance of two separate redemption f u n d s . I f one of the f u n d s
i s t o be e l i m i n a t e d i t would, under the Federal Reserve Act, have to be
the a g e n t s ' f u n d and a s the e l i m i n a t i o n of such fund would s i m p l i f y m a t e r i a l l y
the number of e n t r i e s r e q u i r e d at t h e Treasury and the Federal r e s e r v e banks
i t s e l i m i n a t i o n would seem to be d e s i r a b l e .
(St.
624g-a)
federal reserve board
4
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
June 27, 1929
S t . 6249
SUBJECT:
Operating E f f i c i e n c y a t the
Federal Reserve Banks.
Dear S i r :
In c o n t i n u a t i o n of the statement, based on f u n c t i o n a l e x j e n s e r e p o r t s , sent you under date of June l 4 , ,1928
we a r e enclosing herewith a statement, St, 6231. r e l a t i n g
to the output p e r employee and u n i t of c o s t i n the d e p a r t ments f o r which a measured service i s a v a i l a b l e a t the
head o f f i c e s of the Federal reserve "banks.
This statement as you w i l l note uses as a base f i g u r e s
f o r 1925 i n s t e a d of 1923 as was done in the statement sent
you. a year ago. This change was made a s i t was thought
th t f i g u r e s f o r 1923. the f i r s t f u l l year f o r which f u n c t i o n a l expense r e p o r t s wore submitted., a r e not as s a t i s f a c tory a base f o r f u t u r e comparisons a s a r e f i g u r e s f o r two
y e a r s l a t e r \shen a l l the banks had become f a m i l i a r with
the now system of r e p o r t i n g and m i s i n t e r p r e t a t i o n s of i n s t r u c t i o n s regarding p r e p a r a t i o n of the r e p o r t s had been
f a i r l y well ironed o u t .
I t v/ill be a p p r e c i a t e d if you w i l l b r i n g to the
Board's a t t e n t i o n any comaients r e t a r d i n g the statement
t h a t you think d e s i r a b l e .
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
Enclosure
TO SOViK'OIiS AH) CEAIRiJEN OF
ALL .rSDEEAL. Hi SERVE BAMS*
9
4
@FedFRASER