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X-1530
FED3RAL RESERVE BOARD ANNOUNCEMENT
W E ENDED JANUARY 1, 1932.
EK
CHANGES IN STATE B N MEMLiRSHTP:
AK
District
Capital
Date
Admitted to Membership:
2
Ogdensburg Trust Co., Ogdensburg, N. Y., . i . . .
v600,000
12-28-31
100,000
30,000
40,000
100,000
35,000
50,000
12-29-31
12-29-31
12-29-31
12-26-31
12-28-31
12-30-51
Closed:
3
4
7
12
12
5
Burlington City Loan & Trust Co., Burlington, N. J .
Farmers Bank, McCutchenvilie, Ohio,
Oceana County Savings Bank, Hart, Mich.,
Bank of Southern Utah, Cedar City, Utah, . . » . .
Bank of I r o n County, Parowan, Utah,
Earners 3&n> of X'sndleton, F r a n k l i n , i . Va., . . .
PERMISSION GRANTED TO EXERCISE TRCJST POWERS:
1
The Thomaston N a t i o n a l Bank, Thomaston, Maine, (Confirmatory)
12-23-31
^'k^JLUOU
F:D:JRA1 R JS :RV3 BOARD iJ3x[0UNCUI2NT
WEEK ENDED JAIIUARY 8, 1932.
Q
CHANGES til £Ta%.BANK
)is-
ttitt
Capital
Date
Admitted to Membership:
6
Georgia Railroad Bank & Trust Co., Abgusta, Ga., . . . .
. : ;1,000,000
1 - 6-32
13,800,000
100,000
10- 6-31
Absorption of National Bank:
4
Cleveland Trust Co., Cleveland, Ohio, member, • • • •
absorbed F i r s t National Bank, Willoughby, Ohio, . . .
Absorption of Fomieiaber;
2
Montclair Trust Co. Montclair, N. J . , member, .
. .
absorbed Mountain Trust Co., Montclair, N. J . , nonmem.
1,250,000
200,000
12*26-31
200,000
200,000
12-23-31
300,000
400,000
150,00.0
12-31-31
Absorbed by National Bank;
2
Rockland County Trust Co., Nyack, N. Y . , member, . . .
absorbed by Nyack National Bank of Nyack
. . . . .
Consolidations:
4
7
Merchants Trust Co, Greensburg, P a . , member,
Union Trust Co., member
F i r s t National Bank, Greensburg, P a . . . . . . . . . .
Consolidated under c h a r t e r of l a t t e r and t i t l e of
F i r s t National Bank & T r u s t - S o . , '•
400,000
Guardian D e t r o i t Bank, D e t r o i t , Mich.,member, . . . .
5,000,000
National Bank of Commerce, D e t r o i t , Mich., . . . . . .
5,000,000
Consolidated under the c h a r t e r of the l a t t e r and t i t l e
of Guardian National Bank of Commerce.
10,000,000
7 Peoples Wayne County Bank, D e t r o i t , Mich., member, . .
F i r s t National Bank i n D e t r o i t , , . . . . . . . . . . . .
Consolidated under c h a r t e r of the l a t t e r and t i t l e of
F i r s t Wayne National Bank
15,000,000
7,500,000
12-31-31
12-31-31
25,000,000
Voluntary Withdrawal:
§ C e n t r a l S t a t e Bank, White Sulphur Springs, Mont. . . .
30,000
12- 5 - 3 1
50,000
400,000
50,000
g.- 7-32
1 - 2-32
2-32
Closed:
8
8
12
Mount Olive S t a t e Bank, Mount Olive, 111.,
C e n t r a l T r u s t Co., Owensboro, Ky.
S t a t e Bank of Payson, Payson, Utah, .
.
PERMISSION GRANTED TO ZEROISE TRUST rVORS;
11 San Angelo National Bank, San Angelo, Texas, ( F u l l powers)
1 Thomaston N a t i o n a l Bank, Thomaston, Maine.
(Limited powers)
1 - 6-32
12-23-31
FEDERAL RESERVE BOARD ANNOUNCEMENT
W E ENDED JANUARY 15, 1932.
EK
«
&.>'
o
°
CHANGES IN STATE BANK MEMBERSHIP
Dlstrict
Cy-'ital
Dat^
Admitted to Membership:
None.
Al:sorption of Nonmember:
3
A t l a n t i c Safe D" r-osit & Trust Co., A t l a n t i c C i t y , N. J .
member
absorbed the f o l l o w i n g ".ifcraembGrs:
Guarantee Trust Co.,
. . . . . . . . . .
Marine Trust Co., . . . .
. . . . . . .
Neptune Trust Co.,
and changed i t s t i t l e to Guarantee Trust Co.
3
Pennsylvania do. f o r Insurance oh Lives &
Granting A n n u i t i e s , P h i l a d e l p h i a , P.;., membei1, . . .
absorbed C o n t i n e n t a l - E q u i t a b l e T i t l e &
Trust Co., nonmember, . .
. . . . . . . .
y.
i
r
12-28-31
600,000
200,000
200,000
1,000,000
Wayne County Savings Bank, Honesdale* Pa*, member, ; *
absorbed Wayiriart S t a t e Bank, Waymart, p a . , nonmember,
3
'
,,>300,000
250,000
50,000
12-12-31
8,400*000
12-28^Sl
1,000,000
3
Wilkes-Barre Deposit & Savings Bank, Wilkes B a r r e , Pa.
member,
absorbed North End S t a t e Bank, nonmember, . . . . . .
499,000
50,000
7
Bunk of Sturgeon Bay, Sturgeon Bay, Wise.,
absorbed S t a t e Bank of Maplewood, nonmember,
. . . .
200,000
30,000
11-18-31
Absorption by National Bank:
Park County Bank, Powell, Wyoming, member, . . . . . .
absorbed by F i r s t N a t i o n a l Bank of Powell, . . . . .
25,000
35,000
1 - 5-32
1,000,000
2,500,000
12-31-31
4,000,000
13,800,000
1-11-32
250,000
100,000
1-15-32
1-12-32
10
'
*
i
1
4
Consolidation
B^nk of Commerce & Trust Co., Boston,
United S t a t e s Trust Co., member, . . .
consolidated under c h a r t e r and t i t l e
of SLate Members:
tt.ss., member,
. .
of l a t t e r
Midland Bank, Cle veland, Ohio, member, . . . . . . . .
Cleveland Trust Co., member,
. . . . .
consolidated under c h a r t e r and t i t l e of l a t t e r
Closed:
2 W..st Orange Trust Co., West Orange, N . J .
12 Farmers & Merchants B^Jik, Provo, Utah,
. . . . . .
1-12-32
PERMISSION GRANTED TO EXERCISE TRUST POWERS
11
Saa Anr_elo N a t i o n a l Bank, San An^elo, Texas. (Full Powers)
1 - 6-32
FEDERAL RESERVE BOARD ANNOONCEt-IENT
YJEEK HIDED JANUARY 22, 1932.
CHANGES IN STATE BANK MEMBERSHIP
District
Capital
Admitted to Membership:
None.
Absorption of Nonmember:
1
Manchester Trust Co., South Manchester, Conn., member, ti>200; 000
absorbed Home Banlc & Trust Co., nonmember, . . . . .
50,000
7 Monti c e l l o S t a t e Bank, Monticello, Iowa, member, . . .
300 1 000
Absorbed Lovell S t a t e Bank of M§nticello, nonmember,
200,000
10 Sundance S t a t e Bank, Sundance, Wyo., member
25,000
absorbed American S t a t e Bank, Moorcroft, Wyo. nonmember, 10,000
12 F i r s t S t a t e Bank, Ore sham, Ore., member,
. „ „ = .
30,000
absorbed Bank of Oresham, Ore., nonmember, . . . . .
15,000
Consolidati ons:
1
Sagamore Trust Co., Lynn, Mass., member, . . . . . .
consolidated with the S e c u r i t y Trust Co., member, .
under c h a r t e r and t i t l e of l a t t e r .
.
200,000
200,000
200,000
7
Story County Trust & Savings Bank, Ames, Iowa, member,
consolidated with Union National Bank of Ames, . . .
under new c h a r t e r and t i t l e , "Union Story Trust &
Savings Bank'.', nonmember.
50,000
100,000
Closed:
6
7
12
Southern Bank & Trust Co., Birmingham, A l a . , . . . . .
Depositors S t a t e Bank, Chicago, 111., . . . .
. . . .
Bank of Southwestern Oregon, M a r s h f i e l d , Ore., . . . .
PERMISSION GRANTED TO EXERCISE TRUST POWERS
4 Union N a t i o n a l Bank, Youngstown, Ohio.
7 N a t i o n a l Bank of Logansport, I n d i a n a .
(Limited powers)
( F u l l powers)
500,000
400,000
100,000
FEDERAL RESERVE BOARD ANIJOUNCZCIENT
WEEK ENDED JANUARY 29, 1932.
CHANGES IN STATE BANK • r5vlB'.:RSHIP
District
Capital
Admitted to Membership
1
7
Somerville Trust Co., Somerville, Mass.,
Glenwood S t a t e Bank, Glenwood, Iowa.,
v 150,000
30,000
Absorbed by Nonmember
8
Bank of La P l a t a , La P l a t a , Mo., member,, <
absorbed by La P l a t a S t a t e Bank, nomuember,
50,000
Closed
6 P a r i s h Bank & Trust Co., Opelousas, L a . , . . . . . . .
7 F i r s t S t a t e Bank, Barrington, 111., . . .
7 T o i l e t Trust & Savings Bank, J o l i e t , 111., . . . . . .
7 Central I l l i n o i s Trust & Savings Bank, Mattoon, 111., .
11 F i r s t S t a t e Bank, S l a t o n , Texas.,
. .
" 50,000
100,000
100,000
100,000
40,000
PERMISSION GRANTED TO EXZRSISE TRUST POWERS
None
G
fe-.v
X-1550
FEDERAL RESERVE BOARD ANtJOUWCEISNT
WEEK EEDED FEBRUARY 5, 1932.
>
District
CHANGES IN STATE BANK imiBERSHIP
Capital
Date
Admitted to Membership
None
Absorption by National Bank
A
3
Dime Bank Lincoln Trust Co., Scranton, P a . , member, . . *
absorbed by the F i r s t National Bank of Scranton, . . * .
^1,500,000
5,000,000
2 - 1-32
50,000
62,500
1-30-3.2
50,000
25,000
1-30-32
75,000
200,000
1-50-3$
25,000
2 - 1-32
Absorption of Nonmember
,
12
Albany S t a t e Bank, Albany, Ore., member,. .
absorbed F i r s t Savings Bank of Albany, nonmember,
. . .
Absorption of National Bank
12
*
12
Bank of Woodburn, Wuodburn, Ore., member,
absorbed F i r s t N a t i o n a l Bank of Woodburn, Ore.,
. . . .
F i r s t SrTings & Trust -'Qa't of Whitman County,
Colfax, Washn., member,. .
absorbedColfai National
of Colfax„ './ash.
Voluntary L i q u i d a t i o n
11
S e c u r i t y S t a t e Bank, Tahoka, "Texas ^, . . . . . . . . . .
.
1
>
Closed
•
7 Polo S t a t e Bank, Polo, 111.,
. . . . .
7 F i r s t Iowa S t a t e T r u s t & Savings Bank, Burlington, Iowa,
12 B u t l e r Banking Co., Hood R i v e r , Ore., . . . . . . . . .
12 Commercial Bank & T r u s t Co., Wenatchee, Washn., . . . .
PERMISSION GRANTED TO EXERCISE TRUST PO'.ERS
None
*
60,000
600,000
125,000
100,000
2222-
3-32
2-32
4-32
2-32
FEDERAL RESERVE BOARD ANNOUNCEMENT
Week ended February 12, 1932.
CHANGES IN STaTE BANK IIEM3ZRSHIP
District
Capital
Admitted t o Membership
9
Farmers S t a t e Bank, F a i t h , So. D&k.,
25,000
Absorption of National Bank
2
Manufacturers Trust Co, New York, N. Y., member, .
absorbed Chatham Phenix National Bank & Trust Co.,
New York, N. Y.
27,500,000
16,200,000
Consolidation with National Bank
2
3
3
Guaranty Trust Co., P l a i n f i e l d , N. J . , member,
. . .
250,000
consolidated with P l a i n f i e l d National Bank,
100,000
P l a i n f i e l d , N. J . , under c h a r t e r and t i t l e o r l a t t e r
175,000
Merchants & Miners S t a t e Bank, Luzerne, P a . , member,
50,000
c o n s o l i d a t e d With Luzerne National Bank, Luzerne,. Pa,
200,000
Union Savings Bank & Trust Co., Wilkes^Barre, Pa*, member 500,00b
consolidated with Wyoming National Batik of Wilkes-Barre
under c h a r t e r and t i t l f e of l a t t e r
500,000
Closed.
8
S e d a l i a Trust Co., S e d a l i a , Mo
100,000
PERMISSION GRANTED TO EXERCISE TRUST POWERS
10
F i r s t National Bank i n Ord, Nebr. (Limited powers)
I-
o
X-1530
FEDERAL RESERVE BOARD ANN0TJNC3MENT
WEEK ENDED FEBRUARY 19, 1932.
CHANGES IN STATE BANK MEMBERSHIP
District
Capital
Date
Admitted t o Membership «
None
Absorption of Nonmember
3
Easton Trust Company, Easton, P a . , member, . . . .
absorbed Easton Dollar Savings & Trust Co.,
nonmember, . . .
$850,000
1-26-32
200,000
PERMISSION GRANTED TO EXERCISE TRUST POSTERS
2
P l a i n f i e l d National Bank, P l a i n f i e l d , N. J . . ( F u l l powers)
2 - 6-32
9
X-1530
FED3KAL RUS3RVE BOARD ANIICUNC3M3NT
W E ENDED FEBRUARY 26, 1938.
EK
District
CHANGES IN STATE BANK MEMBERSHIP
Capital
Date
Admitted to Membership
None
Absorption of National Bank
12
Cofflnan, Dobson Bank & Trust Co., Chehalis, Wash.
member . . 150,000
absorbed F i r s t National Bank i n Chehalis, . . . . . . .
50,000
2-23-32
Absorption of Nonmember
12
Carbon County Bank, P r i c e , Utah, member,
. . . . . . 100,000
absorbed E- ery County Bank, C a s t l e Dale, Utah,
nonmember., . 25,000
2-23-32
Voluntary Withdrawal
7 Ac'ams S t a t e Bank, Chicago, 111., . . . .
7
. .
.
. .
Presque I s l e County Savings Bank, Rogers C i t y , Mich.,
200,000
2-15-32
35,000
2-20-32
.
PERMISSION GRANTED TO EXERCISE TRUST POWERS
4
National Bank of C h a r l e r o i , C h a r l e r o i , P a . , (Full Powers)
4t F i r s t N a t i o n a l Bank, MOnongahela, P a . , (Limited Powers)
2-20-32
2-23-32
I to
X-1530
FEDERAL RESERVE BOARD AMOMCMMNT
WEEK ENDED EL-KRCH 4 , 1 9 3 2 .
CHANGES I N STATE BAM MEMBERSHIP
Dis»
trict
Capital
Date
Admitted t o Membership
None
Absorption of Nonmember
Guardian Trust Company, Cleveland, Ohio, member, . .
absorbed Ohio S t a t e Bank, nonmember,
,000,000
200,000
3 - 1-32
Bank of S t a t e s b o r o , S t a t e s b o r o , Ga., member,
. . .
absorbed Bank of Brooklet, Ga., nonmember., . . . . .
100,000
25,000
1 - 1 - 32
PERMISSION GRANTED TO EXERCISE TRUST POWERS
None
11
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED MARCH 11, 1932
CHANGES IN STATE BANK MEMBERSHIP:
District
Capital
Date
$50,000
3-11-32
25,000
3-11-32
Admitted to Membership:
10
Colorado Bank & Trust Co., D e l t a , Colo.,
11
F i r s t S t a t e Bank, Dodsonville, Texas,
.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
None.
V
&
1 8
X-1530
MD3HA1 R^S3RVE BOARD ATNOUNC ISNT
Week ended March 18, 1932.
CHANGES IN STATE B N MEMBERSHIP
AK
District
Capital
Date
Admitted to Membership
None
Absorption by National Bank
S t a t e Bank of Wisconsin, Madison, Wise., member, . . .
absorbed by F i r s t National Bank, Madison, Wise., . .
01,000,000
2- 2-32
12 Bank of Fountain Green, Fountain Green, Utah, member,.
absorbed by F i r s t National Bank, Nephi, Utah,
. . ,
25,000
50,000
3-16-32
100,000
3-14-32
7
1,000,000
Reopened
8
Peoples Exchange Bank, Runecllatille, "Ask,,
PERMISSION GRiiNTED TO EXERCISE TRUST POWERS
None
13
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
Week ended March 25, 1932.
CHANGES IN STATE BANK MEMBERSHIP
District
Capital
Date
Admitted t o Membership
None
Absorbed by N a t i o n a l Bank
J,2
Jackson County Bank, Medford, O r e . , Member, . . .
absorbed by F i r s t N a t i o n a l Bank of Medford, . .
$100,000
100,000
PERMISSION GRANTED TO EXERCISE TRUST POWERS
None
s
3-19-32
|,
1 4
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED APRIL 3 V 1932.
„
CHANGES IN STATE BANK MEMBERSHIP
District
Capital
DAte
Admitted t o Membership
None
Absorption of Nonmember
8
F i r s t Trust & Savings Bank, H a r r i s b u r g , 111., member,
absorbed E q u a l i t y S t a t e Bank, E q u a l i t y , 111.,
nonmember,
0150,000
2-13-32
25,000
Reopened
7
Central I l l i n o i s T r u s t & Savings Bank, Mattoon, 111.
100,000
PERMISSION GRANTED TO EXERCISE TRUST POWERS
None
V
3-28-32
t
15
X-1530
FliDERi-L RESSH'/B 3CV.RD ANNOUNCEMENT
W E ENDED APRIL 8, 1938.
EK
CHANGES IN STATE BANK MEMBERSHIP
District
Capi t a l
Date
Admitted to Membership
8
Mechanics Bank & Trust Co., Moberly, Mo.,
$200,000
4 - 2-32
Suspended
7
Peoples Savings Bank, C o o p e r s v i l l e , Mich.,
25,000
4 - 4-32
8
Producers S t a t e Bank, Siloam Springs, Ark., . . . . . .
25,000
4 - 2-32
PERMISSION GRANTED TO EXERCISE TRUST POWERS
2
Rockport National Bank, Rockport, Mass. (Limited powers)
4 - 5-32
1
Concord National Bank, Concord, Mass.
4 - 7-32
(Full powers)
k
16
X-1530
FEDERAL RESERVE BOARD MNOUNCTMBNT
WEEK ENDED APRIL 15, 1932
CHANGES IN STiTE BANK MEMBERSHIP:
District
Capital
Date
^25,000
4-11-32
Admitted t o Membership
10
Bank of MoorefieId, Moorefield, Nehr.,
. . . . . . . .
Change in, T i t l e
12
The F i r s t Savings & Trust Bank of Whitman County, Colfax, Wash.,
has changed i t s t i t l e to " F i r s t Savings & Trust Bank".
3-11-32
12
The Carton County Bank, P r i c e , Utah, has changed i t s t i t l e t o
t h e "Carbon Emery Bank".
4 - 1-32
NATIONAL BANKS GRANTED TRUST POWERS:
7
11
F i r s t National Bank at P o n t i a c , Pontiac, Mich.
( F u l l powers)
F i r s t National Bank, Fort Worth, Texas
(Supplemental powers)
4 - 8-32
4-14-32
i.
17
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
W E ENDED APRIL 22, 1952.
EK
CHANGES IN STATE BANK MEMBERSHIP:
District
Capital
Date
Admitted t o Membership
None
Absorbed by Nonmember
11
F i r s t S t a t e Bank, Roby, Texas, member, . .
^40,000
absorbed by Roby S t a t e Bank, nonmember, a new o r g a n i z a t i o n .
4-15-32
Absorbed by National Bank
12
E n t e r p r i s e S t a t e Bank, E n t e r p r i s e , Ore., member, . . . . .
absorbed by Wallowa National Bank of E n t e r p r i s e , . . . .
50,000
50,000
4-18-32
NATIONAL BANKS GRANTED TRUST P0'.7ERS:
v
7
F i r s t Wayne N a t i o n a l Bank, D e t r o i t , Mich. (Full powers)
*
4-22-32
I
k
"X-1530
FEDERAL KBSErWfeOARt)ANNOUNCEMENT
ENDED APRIL 29, 1932.
CHANGES IN STATE BANK MEMBERSHIP:
District
Capital
Date
Admitted to Membership
None
Absorption of Nonmember
7
Monroe County Bank, Dundee, Mich., member, . . . . . .
absorbed Dundee S t a t e Savings Bank, Dundee, nonmember
Voluntary Withdrawal
1
S e c u r i t y Bank of Chicago, Chicago, 111.,
$40,000
20,000
4 - 4-32
i
. . . . . . .
NATIONAL BANKS GRANTED TRUST POWERS:
700,000
4-26-32
I
19
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED M Y 6, 1932.
A
CHANGES IN STATE BANK MEMBERSHIP:
District
Capital
Date
Admitted t o Membership:
7
F i r s t C a p i t a l S t a t e Bank, Iowa City, Iowa, . . . . . .
$100,000
5 - 6-32
25,000
75,000
4 - 2-32
Absorbed by S t a t e Member:
9
L i t t l e Missouri Bank, Camp Crook, S. Dak., member, . .
absorbed by Butte County Bank, Belle Fourche, S. Dak.,
member,
NATIONAL BANKS GRANTED TRUST POWERS:
None.
L
20
X-1530
FEDERAL EESERV3 B A D ANNOUNCEMENT
ORW E ENDED MY 13, 1952
EK
CHANGES IN STATE BANK MEMBERSHIP:
Admitted t o Manners h i p ;
None.
District
3
10
NATIONAL BANKS GBAMfBD IRUST POWEBS:
Date
f a r m e r s & Mechanics-National Bank, Phoenixvillti, Pa*
( F u l l powers - confirmatory) 5 - 6-82
F i r s t National Bank, Windsor, Colo.(Limited powers)
5-10-32
i*
X-1530
FEDERAL RESERVE BOARD AJWOUNCEMENT
WEEK ENDED M Y 20, 1932.
A
CHANGES IN STATE BANK MEMBERSHIP:
District
Capital
Date
$100,000
5-16-32
Admitted to Membership:
None.
Consolidation of S t a t e Members:
12
Carbon Emery Bank, P r i c e , Utah, Member,
consolidated with P r i c e Commercial & Savings Bank,
P r i c e , Utah, Member,
.
under c h a r t e r of l a t t e r and t i t l e of Carbon Emery
Bank, Member
. . .
NATIONAL BANKS GRANTED TRUST POWERS:
None.
50,000
100,000
22
X-1530
FEDERAL EESEEVE BOARD ANNOUNCEMENT
WEEK ENDED M I 27, 1932
CHANGES I N STATE BANK MEMBERSHIP;
District
Capital
Date
Admitted t o Membership?
None.
Absorbed "by National Bank:
11
F i r s t S t a t e Bank, Murchison, Texas,
Deposit l i a b i l i t y only assumed by t h e
F i r s t National Bank, Athens, Texas,
NATIONAL BANKS GRANTED TRUST POWERS:
None.
$25,000
. . 100,000
5-17-32 .
i
S 3
1-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED JUNE 3, 1932.
CHANGES IN STATE BANK MEMBERSHIP
District
Capital
Date
Admitted to Membershipt
4
11
Peoples C i t y Bank, MeKeesport, P a . . . . . . . . . . .
Moore S t a t e Bank, Llano, Texas,
. . . . .
1,000,000
50,000
5-31-32
5-31,32
25,000
25,000
5-31-32
Absorbed by Nonmember:
12
Bank of Myrtle P o i n t , Myrtle P o i n t , O r e . , member, . .
absorbed by S e c u r i t y Bank, % r t l e P o i n t , nonmember, .
NATIONAL BANKS GRANTED TRUST POWERS
3
Cumberland National Bank, Bridge t o n , H. J . , ( F u l l Powers)
6 - 3-32
FEDERAL RESERVE BOM) ANNOUNCaiENP
Y/EBK ENDED JUNE 10, 1932
CHANGES IN STAGE BANK M 1MBE5S H IP:
None.
NATIONAL BANKS GRANTED TRUST POWERS:
None.
i.
2 5
Z-1530
FEDERAL BESEHVE BOARD ANNOUNCEMENT
W E ENDED JUNE 17, 1932
EK
CHANGES IN STATE BANK MEMBERSHIP:
Pis trict
Capital
Date
Admitted t o Mastership:
None,
Voluntary Withdrawal:
11
F i r s t S t a t e Bank,
Bedias, Texas
<*>25,000
6-16-32
NATIONAL BANKS GRANTED TRUST POWERS:
10
F i r s t National Bank,
Holdredge, Netxr.
(Fu.ll powers)
6-15-32
2 6
X-1530
FEDERAL RESERVE BOARD ANNOUNCEIIENT
W E ENDED JUNE 24, 1932
EK
CHANGES IN STATE BiMK MEMBERSHIP:
Diatrict
Date
No changes.
NATIONAL BANKS GRANTED TRUST POSTERS:
3
Miners National Bank, Shenandoah, Pa.
( F u l l powers)
6-15-32
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7055
January 4 , 1932.
SUBJECT:
State Member Banks Hot Examined During 1931
Dear S i r :
I t would be a p p r e c i a t e d i f you would forward to
the Board, as e a r l y in January as p o s s i b l e , a l i s t of
the s t a t e member banks i n your d i s t r i c t which were not
examined e i t h e r by s t a t e a u t h o r i t i e s or Federal r e s e r v e
examiners during 1931.
I t i s also requested t h a t you advise what a r r a n g e ments are being made by you or the s t a t e a u t h o r i t i e s f o r
an e a r l y examination of the banks l i s t e d .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
(Except Boston)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7057
January 7, 1932.
SUBJECT:
Hew Issue Treasury B i l l s .
Dear Sir;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 in
Government s e c u r i t i e s "between Federal r e s e r v e t a n k s , the
code word "NOXDAMAGE" has been designated to cover a new
i s s u e of Treasury B i l l s , dated January 13, 1932, and
maturing April 13, 1932.
This word should "be i n s e r t e d i n the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "HOXDAIS" on Page 172.
Very t r u l y yours,
J . C. Hoell,
Assistant Secretary.
TO GOVERNORS OF ACL F. B. BAMS.
fr
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7059
January 15, 1932.
Dear S i r :
This i s t o advise you t h a t the Federal Reserve Board
has appointed Mr. Leo H. Paulger Chief of t h e D i v i s i o n of
Examinations of t h e Board.
Mr. Paulger, who has "been connected w i t h t h e Federal
Farm Loan Board i n a s i m i l a r c a p a c i t y , w i l l assume h i s new
d u t i e s on January 16, 1932.
Under t h e d i r e c t i o n of t h e Chief of t h e D i v i s i o n of
Examinations, Mr. Frank J . Drinnen w i l l continue i n immediate
charge of t h e examining f o r c e s of t h e Federal Reserve Board.
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
TO GOVERNORS AM) AGENTS OF ALL F. R. BANKS.
2 9
I
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7060
January 16, 1932.
SUBJECT:
Expense, Main Lines, Leased Wire System,
December, 1931.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeographed s t a t e m e n t s , X-7060-a and X-7060-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 s , Leased Wire System,
during the month of December, 1931.
P l e a s e c r e d i t the amount payable by your bank
i n the general, account, Treasurer, U. S . , 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, Special
Fund", Leased Wire System, sending d u p l i c a t e C/D to the
Federal Reserve Board.
Very t r u l y yours,
F i s c a l Agent.
Enclosures.
TO GOVERNORS OF ALL ? . R. BANKS.
80
X-7060-a
REPORT SHOWING CLASSIFICATION AH) NUMBER OF W R S TRANSMITTED OVER MAIN LINES
OD
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE M N H OF DECEMBER, 1931.
OT
Business
reported
by banks
From
Boston
New York
"Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
To t a l
Vfords sent by
New York chargeable to other
F. R. Banks ( l )
32,759
166,733
34,i4l
74,296
68,495
60,720
105,324
77,477
37,499
83,292
75,361
98.553
914,650
5,253
~
3,591
4,567
5,467
lo,44l
5,913
5,085
7,321
4,973
16,527
7.063
76,201
F. R. Board business
Net Federal
reserve
bank
business
38,012
166,733
37,732
78;563
73,962
71,161
111,237
82,562
44,820
88,265
91,888
105.6l6
990,251
Percent of t o t a l
bank business (*)
3.84
16.83
3.81
7.96
7.46
7.18
II.23
8.33
4.52
8.91
9.27
10.66
100.00
290,066
1,280,917
Treasury Department "business Incoming and Outgoing
Total words t r a n s m i t t e d over main l i n e s
235.775
«...
(*)
These percentages used in 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 shewn
on the accompanying statement (X-7060-b).
(l)
Number of words sent "by New York to o t h e r F. R. Banks f o r t h e i r s o l e b e n e f i t charged to
banks i n d i c a t e d in accordance with a c t i o n taken a t Governors 1 Conference
November 2 - 4 , 1925.
1,514,692
x-yoGo-t)
REPORT OF EXPENSE MAIN LINES
FEDERAL HE SERVE LEASED WISE SYSTEM, DECEMBER, 1931.
Name of bank
Boston
New York
Philadelphia
Cleveland
• Richmond
Atlanta
.Chicago
St- Louis
"Minneapolis
Kansas City
Dallas
San Francisco
Federal Reserve Board
Total
(&)
(f)
(*)
(a)
(b)
Operators'
salaries
$260.00
1,134.46
225.00
306.66
190.00
270.00
3,676.51 (#)
195.00
200.82
296.50
251.00
380.00
—
$7,335.95
Operators*
overtime
$2.00
Wire
rental
$
Total
expenses
-
$262.00
—
—
—
—
6.co
3.00
—
230.00
__
—
—
—
—
1.50
—
-
$12.50
—
—
—
15,649.59
$15,879.59
1,134.46
225.CO
306.66
420.00
270.00
3,682.51
198.00
200.82
296.50
252.50
Pre r a t a
share cf
total
expenses
Credits
$755.92
3,313-04
, 750.01
1.566.95
1,468.53
l,4i3.4l
2,210.67
1,639.79
889-78
1.753.96
1,824.83
2,098.46
$262.00
1,134.46
225.00
306.66
420.00
270.00
3,682.51
198.00
200.82
296.50
252.50
380.00
380.00
15,649.59
$23,278.04
$19,685.35
3.592.69(a)
$19,685.35
—
$7,628.45
Main l i n e r e n t a l , Richmond-Washington.
Includes s a l a r i e s of Washington o p e r a t o r s .
Credit.
Received $3,592.69 from Treasury Department covering business f o r the month of December, 1931.
Amount reimbursable to Chicago.
Payable to
Federal
Reserve
Board
$493.92
2,178.58
525.01
1,260.29
1,048.53
1,143.41
1,471.84 (*)
1,441.79
688.96
1,457.46
1,572.33
1,718.46
—
$13,528.74
1.471.84 (b)
$12,056.90
FEDERAL RESERVE BOARD
WASHINGTON
X-7061
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
January 16, 1932
SUBJECT: Holidays during February, 1932
Dear S i r ;
On Tuesday, February 9th, Mardi Gras Day, the Few Orleans and
Birmingham Branches of the Federal Reserve Bank of A t l a n t a w i l l be
closed. Pled.se include c r e d i t s of February 9th f o r Few Orleans
Branch in the Gold Fund c l e a r i n g of February 10th.
On Friday, February 12th, L i n c o l n ' s b i r t h d a y , 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 t h e books of the Board's Gold Settlement Fund w i l l be c l o s e d .
For your information, the o f f i c e s of the Federal Reserve Board
and t h e following Federal r e s e r v e banks and branches w i l l be open
f o r b u s i n e s s on February 12th:
Boston
Richmond
Baltimore
Charlotte
Atlanta
Hew Orleans
Birmingham
Jacksonville
Havana Agency
St. Louis
L i t t l e Rock
Kansas Ci t y
Oklahoma City
On Monday, February 2?nd, Washington's b i r t h d a y , the o f f i c e s
of the Board and a l l Federal r e s e r v e banks and branches w i l l be
closed.
On Wednesday, February 24th, the Havana Agency of t h e Federal
Reserve Bank of A t l a n t a w i l l be closed in observance of t h e Anniversary of the Revolution of S a i r e .
P l e a s e n o t i f y branches.
Very t r u l y yours,
J . C. Hoell,
A s s i s t a n t Secretary,
TO GOVERNORS OF ALL F. R. BAECS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7062
January 18, 1932.
SUBJECT:
Depreciation on S e c u r i t i e s Held by S t a t e
Member Banks.
Dear S i r ;
There i s enclosed herewith, f o r your information and
guidance, copy of a l e t t e r addressed by the Federal Reserve
Board to the Federal Reserve Agent a t Minneapolis in response
to an i n q u i r y received from h i s o f f i c e , copy of which i s a l s o
enclosed, with regard to d e p r e c i a t i o n on s e c u r i t i e s h e l d by
S t a t e member banks.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Enclosure a.
TO ALL FEDERAL RESERVE AGENTS.
(Except Minneapolis)
C
O
P
X-7062-a
Y
January 14, 1932.
Mr. John E. M i t c h e l l ,
Federal Reserve Agent,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Mr. M i t c h e l l ;
This r e f e r s to Mr. B a i l e y ' s l e t t e r of December 23, 1931, i n q u i r ing as to the a t t i t u d e of the Federal Reserve Board toward d e p r e c i a t i o n
on s e c u r i t i e s in S t a t e member banks of the Federal Reserve System, in the
l i g h t of the i n s t r u c t i o n s issued to n a t i o n a l bank examiners by the Compt r o l l e r of t h e Currency, under date of December 18, 1931, t h a t , while
bonds should be r a t e d and appraised as h e r e t o f o r e , no p a r t of the dep r e c i a t i o n , except t h a t upon d e f a u l t e d bonds, should be regarded as a
l o s s and shown as such on page 11 of the form f o r r e p o r t s of examinations
of n a t i o n a l banks.
The Board b e l i e v e s t h a t , in making examinations of S t a t e member
banks and in analyzing r e p o r t s of examinations of these i n s t i t u t i o n s made
by S t a t e a u t h o r i t i e s , i t would be d e s i r a b l e f o r the Federal r e s e r v e banks
to s e t f o r t h the e n t i r e amounts of d e p r e c i a t i o n on s e c u r i t i e s , grouped
according to the r a t i n g s of the i s s u e s .
The amounts of d e p r e c i a t i o n on
stocks and on d e f a u l t e d bonds only should be shown as l o s s e s .
Of course, in n e g o t i a t i o n s with S t a t e member banks and S t a t e
a u t h o r i t i e s r e l a t i v e to c o r r e c t i v e a c t i o n , a l l d e p r e c i a t i o n on stocks
36
X-7062-a
-
2 -
and "bonds should be given c o n s i d e r a t i o n and no f a v o r a b l e o p p o r t u n i t y to
o b t a i n a c t i o n c a l c u l a t e d to strengthen banks whose d e p r e c i a t i o n on stocks
and bonds exceeds or n e a r l y equals the amount of t h e i r s u r p l u s and undivided p r o f i t s should be overlooked.
Such banks a l s o should be impressed
with the a d v i s a b i l i t y of d e f e r r i n g the payment of f u r t h e r dividends u n t i l
a l l l o s s e s and a l l d e p r e c i a t i o n on stocks and bonds and o t h e r doubtful
a s s e t s have been charged o f f or otherwise eliminated or u n t i l adequate
r e s e r v e s have been c r e a t e d .
A h e l p f u l and t o l e r a n t a t t i t u d e should be
preserved a t a l l times, however, and care should be exercised to avoid
doing or saying anything which might n e e d l e s s l y destroy or impair the
morale of bank d i r e c t o r s and o f f i c e r s .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
t
COPY
X-7062-b
FEDERAL RESERVE E M OF MIBTEAPOLlS
December 23, IS21.
Federal Reserve Board,
Washington, D. C.
Gentlemen:
A few months ago the Comptroller of the Currency
adopted a p l a n and i s s u e d i n s t r u c t i o n s to a l l Chief Examiners
r e l a t i v e to s e t t i n g up bond d e p r e c i a t i o n in examination r e p o r t s .
Under t h a t p l a n the d e p r e c i a t i o n on bonds r a t e d B3 or b e t t e r
was d i s r e g a r d e d , d e p r e c i a t i o n on bonds r a t e d under B3 was s e t
up in the r e c a p i t u l a t i o n 75 per cent doubtful and 25 per cent
l o s s , and a l l d e p r e c i a t i o n on d e f a u l t e d bonds was s e t up as a
loss.
In the examination of s t a t e member banks, we have
attempted to follow as c l o s e l y as p o s s i b l e the Comptroller's
plan r e l a t i v e to bond d e p r e c i a t i o n . This, however, appears
to d i f f e r widely from the p o l i c i e s of the various S t a t e Superi n t e n d e n t s , and in f a c t , we f i n d no two Superintendents in agreement on t h i s important s u b j e c t . Recently we have been advised
t h a t the Comptroller has g r e a t l y l i b e r a l i z e d h i s o r i g i n a l bond
d e p r e c i a t i o n p o l i c y , and from now on w i l l c l a s s i f y as a l o s s
only the d e p r e c i a t i o n on the d e f a u l t e d i s s u e s . w e would l i k e
very much to have the Board's idea on t h i s s u b j e c t , with advice
as to how we should handle the bond d e p r e c i a t i o n in f u t u r e in
t h e examination of s t a t e member banks.
Tours very t r u l y ,
(Signed)
F. M. Bailey
F. M. Bailey
Asst. Federal Reserve Agent
FMB: EP
37
i,
30
X-7063
STAT3.TMT OF BUREAU 0? ^GRAVING AND PRINT I17G
Furnishing - Federal Reserve Notes, Series 1928.
December 1 to 31, 1931.
(100
Total
Sheets
42,000
21,000
136,000
(12,580.00
-
-
-
240,000
22,200.00
24,000
18,000
-
-
96,000
8,880,00
38,000
40,000
13,000
-
-
91,000
8,417.50
34,000
18,000
13,000
-
-
65,000
6,012.50
125,000
-
-
9,000
-
134,000
12,395.00
6,000
-
-
6,000
555.00
-
10,000
<:5
#10
i 20
38,000
32,000
3,000
156,000
84,000
Philadelphia....
54,000
Cleveland
Atlanta
Boston,
New York
S t . Louis
Kansas City
Dallas
San F r a n c i s c o . . .
22,000
473,000 208,000
C-50
Amount
-
-
-
10,000
925.00
-
-
-
22,000
2,035.00
47,000
51,000
21,000
800,000
(74,000.00
800,000 sheets © ,' 92.50 per
T
,
74,000.00
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-70S4
January 20, 1932,
SUBJECT:
Hew Issue Treasury B i l l s .
Dear S i r :
In connection w i t h t e l e g r a p h i c t r a n s a c t i o n s in
Government s e c u r i t i e s "between Federal r e s e r v e "banks, the
code word "HOXDAPPER™ has "been designated to cover a new
i s s u e of Treasury B i l l s , dated January 25, 1932, and
maturing April 27, 1932.
This word should "be i n s e r t e d i n the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "NDXDAMAGB" on Page 172.
Very t r u l y yours,
J . 0. Noell,
Assistant Secretary.
TO GOVERNORS OP ALL P. B. BAMS.
X-706S
FEDERAL
RESERVE
&
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e in Morning Papers,
Wednesday, January 27 , 1932.
The following summary of g e n e r a l b u s i ness and f i n a n c i a l conditions i n the
United S t a t e s , 'based uoon s t a t i s t i c s
f o r the months of December and January,
w i l l appear i n t h e forthcoming i s s u e of
t h e Federal Reserve B u l l e t i n and i n the
monthly reviews 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 declined from Nov saber to December "by s l i g h t l y
more than the u s u a l seasonal amount, while the volume of f a c t o r y employment
showed about the u s u a l decrease.
Wholesale p r i c e s d e c l i n e d f u r t h e r .
Production and employment - Volume of i n d u s t r i a l output decreased
somewhat more than i s usual i n December and the Board's s e a s o n a l l y a d j u s t e d
index declined from 72 per cent of the 1923-1925 average i n November to 71
per cent i n December,
A c t i v i t y i n t h e s t e e l i n d u s t r y decreased from 30 to
24 per cent of c a p a c i t y f o r the month, p a r t l y as a r e s u l t of seasonal i n f l u e n c e s ; i n the f i r s t t h r e e weeks of January i t showed a seasonal i n c r e a s e .
Automobile output i n c r e a s e d considerably i n December from t h e extreme low
l e v e l of the preceding month, and d a i l y average output a t shoe f a c t o r i e s ,
which o r d i n a r i l y d e c l i n e s a t t h i s season, showed l i t t l e change.
At
t e x t i l e m i l l s p r o d u c t i o n was c u r t a i l e d "by more than the u s u a l seasonal
amount.
Uumber employed a t f a c t o r i e s decreased seasonally from the middle of
November to the middle of December.
In the automobile and shoe i n d u s t r i e s
t h e r e were l a r g e i n c r e a s e s i n employment, while i n the c l o t h i n g i n d u s t r i e s
employment d e c l i n e d ; i n most l i n e s , however, changes were of a seasonal
char act e r .
For the year 1931 as a whole the average volume of i n d u s t r i a l production
was about 16 p e r cent smaller than i n 1930, r e f l e c t i n g l a r g e de-
X-7068
creases i n output of s t e e l , automobiles, and "building m a t e r i a l s , o f f s e t
i n p a r t "by s l i g h t i n c r e a s e s i n production of t e x t i l e s and shoes.
Value of b u i l d i n g c o n t r a c t s awarded, as r e p o r t e d by the F. W.
Dodge Corporation, d e c l i n e d considerably more than i s u s u a l from t h e
t h i r d to the f o u r t h q u a r t e r ) and f o r the year as a whole was 32 per cent
smaller than i n 1930, r e f l e c t i n g reduced physical volume of c o n s t r u c t i o n ,
as well as lower b u i l d i n g costs *
D i s t r i b u t i o n - D i s t r i b u t i o n of commodities by r a i l declined by
the usual seasonal amount i n December, and department s t o r e s a l e s i n creased by approximately the usual amount.
Foreign t r a d e - Value of f o r e i g n t r a d e continued a t a low l e v e l i n
December and f o r t h e year as a whole exports showed a d e c l i n e of 37 per
cent from 1930 and imports a decline of 32 per cent, r e f l e c t i n g i n p a r t
the r e d u c t i o n i n p r i c e s .
Wholesale p r i c e s - Wholesale p r i c e s of commodities declined from
68 per cent of the 1926 average i n November to 66 per cent i n December,
according to t h e Bureau of Labor S t a t i s t i c s , r e f l e c t i n g decreases i n t h e
p r i c e s of many domestic a g r i c u l t u r a l p r o d u c t s , sugar, s i l k , i r o n and s t e e l ,
and petroleum p r o d u c t s .
During the f i r s t h a l f of January p r i c e s of hogs,
l a r d , and b u t t e r d e c l i n e d f u r t h e r , while p r i c e s of c o t t o n , s i l k , c o f f e e ,
and copper i n c r e a s e d .
Bank c r e d i t -
Reserve bank c r e d i t , which had declined from t h e
middle of October to t h e middle of December and had. increased i n the
l a t t e r p a r t of the month, declined again i n the f i r s t t h r e e weeks i n
January.
The growth i n t h e l a t t e r p a r t of December r e f l e c t e d a somewhat more
X-70&8
^
- 3 than-seasonal i n c r e a s e i n the demand f o r currency, p a r t l y o f f s e t "by
reductions i n member bank reserve balances and in d e p o s i t s of f o r e i g n
c e n t r a l banks.
In January the r e t u r n flow of currency was considerably
smaller than i n o t h e r r e c e n t y e a r s , while member bank r e s e r v e balances
continued to d e c l i n e .
Acceptance holdings of the r e s e r v e banks, which
had reached a t o t a l of $780,000,000 i n October, have d e c l i n e d through
maturing of b i l l s held almost u n i n t e r r u p t e d l y since t h a t time, and on
January 20 t o t a l e d $190,000,000.
The banks' p o r t f o l i o of United S t a t e s
Government s e c u r i t i e s showed some i n c r e a s e over the l e v e l of the e a r l y
p a r t of December, and d i s c o u n t s f o r member banks increased s u b s t a n t i a l l y .
Loans and investments of member banks in l e a d i n g c i t i e s declined
f u r t h e r during December and the f i r s t two weeks of January, r e f l e c t i n g r e ductions i n loans on s e c u r i t i e s , as well as i n o t h e r l o a n s , and in i n v e s t ments.
In the middle of January buying r a t e s f o r b a n k e r s ' acceptances a t the
Federal r e s e r v e banks were reduced and open-market r a t e s on 90-day b i l l s
declined f i r s t from 3 to 2 7/8 per cent and l a t e r to 2 3 / 4 per c e n t .
Yields
of high-grade bonds, a f t e r advancing f o r a period of about four months, dec l i n e d a f t e r the turn of t h e y e a r , r e f l e c t i n g a r i s e i n bond p r i c e s .
L -
X-7069
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e a t 1^:00 o 1 clock noon.
January 25, 1952.
The Federal Reserve Board announces t h a t the Federal
Reserve Bank of Richmond 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
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
January £5, 1352.
4 3
.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X~7070
January 23, 1932.
SUBJECT: P a r L i s t .
Dear S i r :
A f t e r reviewing the r e p l i e s received from the Federal reserve banks
to i t s l e t t e r s of December 3, 1931, the Board approved the changes i n the p a r
l i s t mentioned t h e r e i n and, as s t a t e d in the Board's telegram of December 17,
the January, 1932 p a r l i s t w i l l be issued in the new form.
The Board has
also approved the changes proposed in the form of the supplements to the par
l i s t and he r a f t e r a change i n the s t a t u s of a given town or c i t y w i l l be
recorded t h e r e i n , in e x a c t l y the same way i t would be shown in the p a r l i s t
itself.
I t i s requested t h a t , beginning with the February i s s u e , the gen-
e r a l procedure o u t l i n e d below be observed in submitting changes f o r i n c l u s i o n
in f u t u r e supplements to the p a r l i s t .
1. Mail advice of changes in the par l i s t , f o r i n c l u s i o n in the monthly
supplements, should be sent to the Board in time to reach Washington by the
26th day of each month.
On the second busine ss day of the following month,
the Board should be advised by wire of any changes from the date of the mail
r e p o r t up to, and i n c l u d i n g , the f i r s t calendar day of the month, which i s
the date of issue of the monthly supplement.
I f there are no a d d i t i o n a l
changes, the Board should be so advised.
2. I f a town o r c i t y should be added to the l i s t , due to the f a c t t h a t
4 4
-
X-70
2
i t has changed from a non-par s t a t u s to a p a r s t a t u s , the name of such town
or c i t y should he r e p o r t e d to the Board under the caption "Add to l i s t , " and
i f a town or c i t y shown on the p a r l i s t i s changed from a p a r s t a t u s to a
non-par s t a t u s , the name of the town or c i t y should he r e p o r t e d under the
caption "Eliminate from l i s t . "
3. I f , "by reason of the withdrawal of s t a t e hanks from the l i s t , a
town or c i t y shown on the p a r l i s t i s changed from a f u l l p a r s t a t u s to a
p a r t i a l p a r s t a t u s (or vice v e r s a ) , the change should be r e p o r t e d to the
Board under the caption "Other changes" as f o l l o w s :
Under the caption "Change from" show the name of the s t a t e
and the town or c i t y and any other d a t a i n e x a c t l y the
same way as i t was shown i n the preceding p a r l i s t or
supplement. Under the caption "Change t o " show the name
of the town or c i t y and any o t h e r d a t a i n e x a c t l y the
same way i t would he shown i n the next p a r l i s t . For
example, i f a s t a t e hank, say the A B C Trust Company,
l o c a t e d i n Blank City, Alabama, i n which t h e r e are three
s t a t e banks, a l l of which are on the p a r l i s t , withdraws
from the p a r l i s t , the change should be r e p o r t e d to the
Board as f o l l o w s :
CKAITGE FROM
ALABAMA
Blank City
CHANGE 10 Blank City - All n a t i o n a l banks
X Y Z Trust Company
B C D S t a t e Bank
If a change to be made in one supplement r e v e r s e s a change in a p r i o r
supplement issued since the p u b l i c a t i o n of the p a r l i s t , the r e p o r t of such
change should c a l l a t t e n t i o n to t h a t f a c t .
For example, i f a town or c i t y
eliminated from the p a r l i s t i n one supplement i s subsequently r e s t o r e d b e f o r e the next e d i t i o n of the p a r l i s t , the r e p o r t to the Board covering such
change should be followed by a note reading "Eliminated from p a r l i s t in
supplement, now r e s t o r e d . "
Very t r u l y yours,
TO ALL GOVERNORS.
Chester M o r r i l l ,
Secretary.
I
GLASS,BILL<
Sec. 1, p . 1.
Title.
Sec. 2, p . 2, 3?
Definitions.
Sec. 3, p . 4.
Amends Sec. 4 Federal Heserve Act.
Rediscounts.
Sec. 4, p . 5.
Amfends Sec. 4 Federal Reserve Act.
Voting f o r Federal r e s e r v e d i r e c t o r s .
Sec. 5, p . 6.
Amends Sec. J , Federal Reserve Act.
Federal Liquidating Corporation.
Surplus e a r n i n g s .
Sec. 6, p . 5.
Amends Sec. $, Federal Reserve Act, p a r . 5«
Reports.
Member banks and a f f i l i a t e s .
Sec. 7, p . 9.
Amends Sec. 10, Feder 1 Reserve Act.
Board to c o n s i s t of Comptroller, e x - o f f i c i o ,
and 6 members.
Sec. of Treasury dropped from Board.
At l e a s t 2 members - t e s t e d banking experience.
New terms - 12 y e a r s .
Sec. 8, p . 11.
Amends Sec. 11, Sub-section (c) Federal Reserve Act.
R e c l a s s i f i c a t i o n of r e s e r v e and c e n t r a l r e s e r v e c i t i e s .
Sec. 9, p . 12.
Amends Sec. 11, Sub-section (m) of Federal Reserve Act.
, A f f i r m a t i v e vote of 6 members.
May f i x percentage of member banks c a p i t a l and s u r p l u s
rrhich may be r e p r e s e n t e d by c o l l a t e r a l l o a n s .
Duty of Board to e s t a b l i s h such percentages and
prevent undue use of bank loans f o r s p e c u l a t i v e
c a r r y i n g of s e c u r i t i e s .
X-70J2
4 6
Sec. 9, p . 12 ( t i o n t ' d . )
Amends Sec. 11, Sub-section (m) of F. B. Act ( C o n t ' d . )
Power to d i r e c t member banks to r e f r a i n from
f u r t h e r i n c r e a s e of i t s s e c u r i t y loans f o r
p e r i o d s up to 1 y e a r , under p e n a l t y of
suspension of a l l rediscount p r i v i l e g e s at
Federal r e s e r v e bank.
Sec. 10, p . 13.
New Section of Federal Reserve Act, Sec. 11-A
Unanimous of members.
Advances to groups of banks.
P r o g r e s s i v e r a t e , beginning at ^ above F. B. r a t e .
Not to serve as c o l l a t e r a l f o r F. E. notes*
Sec. 11, p . l 4 .
Loans and investments to a f f i l i a t e s .
To be secured by e l i g i b l e paper, l i s t e d s t o c k s , e t c .
Sec. 12, p . 16.
New Sections to
Sec. 12-A.
Federal
Sec. 12—B.
Federal
Class A
F. B. Act - 12-A, 12-B.
Ooen Market Committee.
Liquidating Corporation.
and Class B s t o c k .
Sec. 13, p . 27.
Amends Sec. 13? F. E. Act, paragraph J.
Advances t o member banks.
15-day c o l l a t e r a l n o t e s .
Collateral:
E l i g i b l e paper and Govt, bonds.
Bate, Vjo over F. E. r a t e .
Such notes to become immediately payable:
I f borrowing bank (a) Increases i t s s e c u r i t y l o a n .
(b) Loans to member of any stock exchange,
investment house, or d e a l e r i n
s e c u r i t i e s , upon any o b l i g a t i o n , note
or b i l l , f o r the purpose of purchasing
and/or c a r r y i n g investment s e c u r i t i e s
(except o b l i g a t i o n s of U. S.)
Such member banks s h a l l be i n e l i g i b l e as
a borrower at the F. B. Bank of D i s t r i c t
upon 15-day p a p e r .
4 8
x-7072
Sec. 13? p . 27 ( C o n t ' d . )
Amends Sec. 13, F. H. Act, paragraph "J,
Unanimous v o t e of Board;
May suspend above i n " h o l e or p a r t when
p u b l i c i n t e r e s t so r e q u i r e s .
Such suspension to be f o r 90 days, renewable
f o r one a d d i t i o n a l p e r i o d of $0 days upon
unanimous v o t e of Board.
Sec. 14, p . 28.
Amends Sec. l 4 F e d e r a l Reserve Act.
In d e f i n i n g power of Board, adds - s u b j e c t to
r e g u l a t i o n , l i m i t a t i o n s and r e s t r i c t i o n s
p r e s c r i b e d by Board.
Board to have s u p e r v i s i o n and c o n t r o l over a l l
r e l a t i o n s h i p s and t r a n s a c t i o n s e n t e r e d i n t o
by any F. 3 . bank w i t h any f o r e i g n bank or
any group.
Subject t o r e g u l a t i o n s , l i m i t a t i o n s and
r e s t r i c t i o n s of Board.
Board to have r i g h t t o be r e p r e s e n t e d a t any
such c o n f e r e n c e .
F u l l r e p o r t t o be f i l e d with Board:
1. S u b j e c t s d i s c u s s e d .
2 . Views e x p r e s s e d .
3. Understandings or agreements r e a c h e d .
Sec. 15, p . 30.
Amends Sec. l 6 , Federal Reserve Act, p a r . 2, 3>
Not to be used as c o l l a t e r a l f o r F. R. n o t e s .
1. 15-day notes secured by Govt, bonds.
2. Acceptances
Revolving or renewal.
Sec. l b , p . 34, 37, 39.
Amends Sec. 19, F e d e r a l Reserve Act.
New r e s e r v e r e q u i r e m e n t s .
No member bank t o a c t a s medium f o r any non-banking
c o r p o r a t i o n a s i n d i v i d u a l i n making c o l l a t e r a l
loans.
:C-7072
Sec. l b , p . 3^j 37> 39 (Gont'di)
Amends Sec. 19, F. B. Act ( C o n t ' d . )
l"o member bank s h a l l make loans or discount paper
f o r any c o r p o r a t i o n or i n d i v i d u a l who, at time
of making or renewing such loan s h a l l have
o u t s t a n d i n g , c o l l a t e r a l loans in favor of any
investment banker, broker, member of any stock
exchange or any dealer in s e c u r i t i e s .
Transfer of excess balances in F. H. banks.
L i a b i l i t y under repurchase agreements to be added
to n e t , - due to and due from.
Sec. I ? , p . 39.
Amends Sec. 24, Federal Reserve Act.
Real e s t a t e loans.
Sec. IS, p . 42.
Amends Sec. 5^3? Revised S t a t u t e s .
Power of n a t i o n a l banks.
Purchase of s e c u r i t i e s .
Investments.
Sec. 19, p . 44.
Adds to Sec. 5I3S, Revised S t a t u t e s .
C a p i t a l , surplus and individual p r o f i t s must
equal 15$ of average d e p o s i t s .
Sec. 20, p . 45.
Mo t r a n s f e r of stock to be conditional on ownership.
Sale or t r a n s f e r of a c e r t i f i c a t e r e p r e s e n t i n g stock
of any other c o r p o r a t i o n .
Sec. 21.
Certain i n t e r l o c k i n g d i r e c t o r a t e s e t c . f o r b i d d e n .
Certain correspondent r e l a t i o n s h i p s f o r b i d d e n .
Sec. 22, p . 46.
Amends Sec.
Bevised S t a t u t e s .
Stockholders v o t i n g , however.
Sec. 23, p . 47.
Stockholders statement.
X-70J2
5
Sec. 24, p . 4g.
Affiliates
Voting p e r m i t s .
Sec. 25, p . 52.
Branches
State limit
Capital.
Sec. 26, p . 53.
Consolidation.
Adds s t a t e .
Branches.
Act Kov. J , 1918.
Sec. 27, p . 53.
Amends Sec. 5^97> Bevised S t a t u t e s .
Discount r a t e s charged by n a t i o n a l banks.
Sec. 28, p . 54.
I n t e r e s t on d e p o s i t s , n a t i o n a l and member banks,
3b i n t e r e s t t o be p a i d on d e p o s i t s s u b j e c t t o check.
Sec. 29, p . 55.
Amends Sec. 5200, Revised S t a t u t e s .
Obligations not e n t i t l e d to exemption from 10$
limitation.
L i m i t a t i o n of o b l i g a t i o n s of a l l a f f i l i a t e s of a
n a t i o n a l bank.
Exceptions.
Method of r a i s i n g c a p i t a l f o r a f f i l i a t e s .
Cash or stock dividends, e t c . by Parent bank f o r b i d d e n .
L i m i t a t i o n on loans on stock of Parent company.
Sec. 30. p . 56.
L i m i t a t i o n on loans of member bank on c o l l a t e r a l s e c u r i t y .
Hot over 10,6 of i t s c a p i t a l , or an amount f i x e d by
Federal Reserve Board under Sec. M, Sec. 13, F. R.
Act, whichever i s s m a l l e r .
Sec. 31, p . 57.
Amends Sec. 5211? Revised S t a t u t e s .
Reports by a f f i l i a t e s .
Sec. 32, p . 59.
Amends Sec. $240, Revised S t a t u t e s .
Examination of a f f i l i a t e s .
X-7072
Sec. 33> pi 60, 61.
Amends Clayton Act.
Ixo person
D i r e c t o r of n a t i o n a l "bank or any tank organized
under U. S.laws
and
A corporation organized f o r any purpose which
makes c o l l a t e r a l loans to any i n d i v i d u a l
a s s o c i a t i o n , p a r t n e r s h i p or c o r p o r a t i o n , other than i t s own s u b s i d i a r i e s .
1'To c o r p o r a t i o n , f o r e i g n or domestic, other than banks
incorporated under U. S. or s t a t e laws o p e r a t i n g
w i t h i n U. S. and engaged in commerce as d e f i n e d in
t h i s Act, s h a l l make c o l l a t e r a l loans to any
i n d i v i d u a l , other corporation (except i t s own
s u b s i d i a r i e s ) , p r i v a t e "banks, or incorporated "banks.
P e n a l t y $5000.
i'To corporation engaged in commerce as d e f i n e d by t h i s
Act s h a l l deposit i t s funds with any i n d i v i d u a l ,
p r i v a t e "banker, or banking a s s o c i a t i o n or t r u s t
company, - except banking a s s o c i a t i o n s incorporated
SSStitf'iiBoK
u
'
s
-
law
-
3To corporation f a i l i n g to deposit i t s funds in banking
a s s o c i a t i o n s incorporated under s t a t e of U. S. laws
s h a l l engage in such commerce.
Sec. 3^> p . 6 l .
Eight to amend Act.
x 7073
~
SECTIONS Al$b PAGSS 0# 3.3215 DEALING WITH THE
FOLLOWING SUBJECTS:
C o l l a t e r a l Loans.
Sec. 9, pp. 12,13;
Sec. 11,pp. 14,15;
Sec. 13, p . 28;
Sec. 16, p . 37;
Sec. 17, pp. 39,40;
Sec. 29, p . 56;
Sec. 30, p . 56;
Sec. 33, p . 60;
Investments of n a t i o n a l "banks.
Sec. 2, p . 2;
Sec. 11, p . 15;
Sec. 12 B ( c ) , pp. 18,19;
Sec. 17, pp. 40,41;
Affiliates.
Sec. 2, pp. 2-3;
Sec. 6, pp. 7 , 8 ;
Sec. 11, pp. 14,15;
Sec. 23, p . 47;
Sec. 24, pp. 48-52;
Sec. 29, pp. 55,56;
Sec. 31, pp. 57,58;
Sec. 32, p . 59;
i
52
-2-
X-7073
i
Federal Reserve Soard
Sec. 3, pp. 4 , 5 ;
Sec. 6, pp. 7 , 8 , 9 ;
Sec. 7, pp. 9-11;
Sec. 8, pp. 11,12;
Sec. 9, pp. 12,13;
Sec. 10, p . 13;
Sec. 12, pp. 16,17,18,21,24;
Sec. 13, pp. 27,28;
Sec. 14, pp. 28,29,30;
Sec. 15, pp. 31,33;
Sec. 16, pp. 35,36,37,38;
Sec. 17, p . 41;
Sec. 30, p . 57;
Emergency Loans.
By Federal Reserve Banks sec. 10, pp. 13,14; sec. 13, p . 27.
By Federal Liquidating Corporation, sec, 12,pp. 25,26.
Federal L i q u i d a t i n g Corporation.
Sec. 5, p . 6;
Sec. 12 B, pp. 18-27,
Federal Reserve Notes.
Sec. 10, p . 14;
Sec. 15, pp. 30-34.
Branch Banking
Sec. 25, p . 52.
Rates on loans of member "banks.
Sec. 27, p p . 53,54.
53
L
-3~
I n t e r e s t on d e p o s i t s .
Sec • 17 , p . 41 j
Sec. 181 pp* 42**44;
Sec. 28, p . 54.
Reserves
Sec. 6, p . 6;
Sec. 8, pp. 11,12;
Sec. 15, pp. 31,33 (Federal Reserve Notes);
Sec. 16, pp. 34-39;
Sec. 17, p . 41•
X-7073
54
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7074
January 26, 1932.
SUBJECT:
New Issues of Treasury C e r t i f i c a t e s of
Indebtedness.
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 "between Fede r a l r e s e r v e "banks covering Government s e c u r i t i e s , the following
code words have "been designated to cover new i s s u e s of Treasury
C e r t i f i c a t e s of Indebtedness;
"NOWHISS"
Treasury C e r t i f i c a t e s of Indebtedness, Series
A-1932, to be dated February 1, 1932, maturing
August 1, 1932.
"NOWHITAL" Treasury C e r t i f i c a t e s of Indebtedness, Series
A-1933, to be dated February 1, 1932, maturing
February 1, 1933.
These code words should be i n s e r t e d in the Federal r e serve t e l e g r a p h code book, following the supplemental code word
"NOWHIRE" on page 172.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F.R.BANKS
X-7075
56
TABLE SHOWING WHERE THE PROVISIONS AMENDING THE FEDERAL
RESkRVE ACT I/iAY BE EOUKD IN THE GLASS BILL (S. 3215)
Section of Federal Reserve Act
Amended by Glass B i l l
Sec. 4 ( 4 t h paragraph a f t e r paragraph
numbered "Eighth" on page 7)
Sec. 3, P» 4, l i n e s 18-25, p . 5, l i n e s
1-18
Sec. 4 (25th paragraph, p . 8)
Sec, 4, P- 5, l i n e s 19-25, p . 6, l i n e s
1-6
Sec. 7 (1st paragraph, p , 13)
Sec. 5, P* 6', l i n e s 7-18
Sec. 9 (5th paragraph, p . 15)
(new paragraph between 5th and
6 t h paragraphs, p . 16)
Sec. 6, P. 6, l i n e s 19-25, p . 7, l i n e s
1-17
Sec. 6, P. 7, l i n e s 18-25, p . 8, l i n e s
1-25, P . 9, l i n e s 1 - 6
Sec. 1 0 ( l s t paragraph, p . 19)
(2nd paragraph, p . 20)
(4th paragraph, p . 20)
Sec. 7 ( a ) , P . 9, l i n e s 7-25, P. 10,
l i n e s 1 -6
Sec. 7 ( b ) , P- 10, l i n e s 7-25, P. 11,
l i n e s 1 -7
Sec. 7(,e). P. 11, l i n e s 8-23
Sec. 11(e), p . 23
Sec. 8, p . 11, l i n e s 24,25, p . 12,
l i n e s 1-16
Sec. l l ( m ) , p . 26
Sec. 9, p . 12, l i n e s 17-25, p . 13,
l i n e s 1-11
Sec. 11A (new sec. between s e e s . 11 and
12, p . 27)
Sec. 10, p . 13, l i n e s 12-25, p . 14,
l i n e s 1-23
Sec. 12A (new sec. "between s e e s . 12 and
13, p . 28)
Sec. 12, p . 16, l i n e s 1-25, p . 17,
l i n e s 1-25
Sec. 12B (new s e c t i o n )
Sec. 12, pp. 18-26, p . 27, l i n e s 1-10
Sec. 13 ( 7 t h paragraph, p . 31)
Sec. 13, p . 27, l i n e s 11-25, p . 28,
l i n e s 1-18
Sec. 14 (2nd paragraph, p . 35)
(new paragraph a t end of sec.
p . 36)
Sec. 1 4 ( a ) , p . 28, l i n e s 19-25
Sec. 16 (2nd paragraph, p . 37)
(3rd paragraph,pp.37 and 38)
Sec. 1 5 , p . 3 0 , l i n e s 8-25, p . 3 1 , l i n e s
1-13, p . 3 1 , l i n e s 14-25,p.32,
l i n e s 1 - 2 5 , p. 33, l i n e s 1 - 3 ,
p . 3 3 , l i n e s 4—25,p. o 4 , l i n e s 1—2
sec. 1 6 , ^ | 4 , J j n e s § - 2 5 ^ 3 5 ^ 3 6 , P .
( 4 t h paragraph, p . 39)
Sec. 19 ( e n t i r e sec. pp. 46-48)
Sec. 24 ( e n t i r e s e c . , pp. 52-53)
Sec. 14(b), p . 29, l i n e s 1-25, p . 30,
l i n e s 1-7
Sec. 17,p. 3 9 , l i n e s 16-25,p. 4 0 , p . 41,
p . 42, l i n e s 1-10 '
X-7076
1 1 2 1 2 1 1
R E S1B i 1
b o a r d
STATEMENT FOR THE PRESS
For r e l e a s e a t 4:00 p.m.
January 27, 1932.
The Federal Reserve Board, announces t h a t the Federal
Reserve Bank of Dallas has e s t a b l i s h e d a rediscount r a t e of
3^r p e r cent 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
January 28, 1932.
FEDSE&L RESERVE BAM
OF BOSTON
F r e d e r i c H. C u r t i s s
Chairman
January 29, 1932
Hon. Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. C.
Dear Governor Meyer:
Following your r e q u e s t "by telegram I am giving herewith my views on the
proposed B i l l (S. 5215) introduced "by Senator Glass. I may say a t the
"beginning t h a t I am wholly i n sympathy with the purposes of t h i s B i l l
and t h a t my suggestions or c r i t i c i s m s a r e to "be accepted from t h a t point
of view.
1.
I have no comment to make on Section 2.
2. I t would appear to me t h a t Section 3 i s too i n e l a s t i c i n i t s p r o v i s i o n .
As long as s e c u r i t i e s and c o l l a t e r a l loans a r e allowed i n t h e National Bank
Act as proper investments f o r National "banks, and a l s o i n S t a t e laws f o r
S t a t e banks, the F e d e r a l Reserve Bank should not "be prevented from giving
a s s i s t a n c e i n reasonable i n s t a n c e s . For i n s t a n c e , when a member bank had
heavy withdrawals of d e p o s i t s , i t i s i n p o r t a n t t h a t i t should be enabled
to borrow pending l i q u i d a t i o n of i t s s e c u r i t i e s or c o l l a t e r a l l o a n s . I
b e l i e v e t h e same purpose could be accomplished i f t h a t s e c t i o n should read
as f o l l o w s :
"The Federal Reserve Board s h a l l p r e s c r i b e r e g u l a t i o n s f u r t h e r d e f i n ing and r e g u l a t i n g t h e use of the c r e d i t f a c i l i t i e s of t h e Federal
Reserve System w i t h i n the l i m i t a t i o n s of t h i s Act, and e s p e c i a l l y
with the view to the improper use of such c r e d i t f a c i l i t i e s extended
to member banks f o r the purpose of making or c a r r y i n g loans covering
the investments or f a c i l i t a t i n g t h e carrying o f , or t r a d i n g i n ,
s t o c k s , bonds, or other investment s e c u r i t i e s other than o b l i g a t i o n s
of the Government of t h e United S t a t e s . "
3. I t would appear to me t h a t t h e danger t h a t Section 4 proposes to cover
i s not only remote but i s provided f o r i n Section 1 1 ( f ) , which provides t h a t
the Federal Reserve Board may remove any d i r e c t o r of any Federal Reserve Bank.
4 . Section 5 as a t present drawn would appear to be an emergency measure to
meet tiie present c o n d i t i o n . As now drawn i t would tend t o weaken t h e Federal
r e s e r v e banks. (The Federal Reserve Bank of Boston has been obliged to draw
on i t s s u r p l u s account to meet dividends the p a s t two y e a r s , and s i m i l a r
conditions e x i s t i n other Federal r e s e r v e banks.) Under t h e proposed p l a n
a Federal r e s e r v e bank could not b u i l d up any s u r p l u s from now on. I would
t
Hon. Eugene Meyer * Governor,
Federal Reserve Board,
Washington, D. 0.
X-7077
a-1
2 -
suggest t h e r e f o r e , i n l i e u of Section 5, The f i r s t paragraph of s e c t i o n
7 of the Federal Reserve Act,
as amended, toe amended t o read as f o l l o w s :
"After a l l necessary expenses of a Federal r e s e r v e bank s h a l l have
been paid or provided f o r , the stockholders s h a l l be e n t i t l e d t o
r e c e i v e an annual dividend of 6 per centum on the p a i d - i n c a p i t a l
s t o c k , which dividend s h a l l be cumulative. A f t e r the a f o r e s a i d
dividend claims have boon f u l l y mot the net e a r n i n g s , beginning
with the net earnings f o r the year ending December 31, 1932, s h a l l
be paid to t h e F e d e r a l L i q u i d a t i n g Corporation provided f o r i n
Section 12B of t h i s Act, and s h a l l be used by t h e said c o r p o r a t i o n
f o r c a r r y i n g out the purposes of such s e c t i o n , except t h a t t h e
whole of such net earnings s h a l l be put i n t o a s u r p l u s fund u n t i l
i t s h a l l amount to 100 per centum of the subscribed c a p i t a l of t h e
bank."
5. Section 6. I would suggest the omission of l i n e s 4 and 5 on page 7,
which reads "They s h a l l a l s o comply with a l l the requirements of t h i s Act".
I t h i n k i f t h e power i s civ en to the. Federal Reserve Board to handle t h i s
p a r t i c u l a r s e c t i o n i t would be an advantage.
On t h i s same page 7, l i n e 22 and 23, I should omit "during the p e r i o d of two
y e a r s " . I see no reason why t h i s p r o v i s i o n should not begin at once and be
continuous.
6. Section 7. I t h i n k i t would be an advantage to have an uneven number
of members of the F e d e r a l Reserve Board. I a l s o wonder i f i t might not
r e l i e v e the burden of the Comptroller of the Currency i f he were not a
member ex o f f i c i o .
7.
Section 8.
I approve i n p r i n c i p l e .
8. Section 9. While I am sympathetic with the purposes which t h i s s e c t i o n
endeavors t o meet, I t h i n k during the past year or so I have come to the
conclusion t h a t i t i s the volume of c r e d i t i n use r a t h e r than t h e c h a r a c t e r ,
not the way i n which c r e d i t i s extended. I do not b e l i e v e t h a t t h i s w i l l
meet the p a r t i c u l a r purpose f o r which i t i s designed. On t h e one hand, i t
would prevent a bank extending c o l l a t e r a l loans f o r use i n commercial
purposes, on t h e o t h e r hand, i t might tend toward the use of single-named
notes to be used f o r s p e c u l a t i v e purposes. The p r o v i s i o n t h a t loans to an
i n d i v i d u a l should not be i n excess of 10 per centum of the unimpaired c a p i t a l
and s u r p l u s of such bank i s i n accord with other s i m i l a r r e s t r i c t i o n s cont a i n e d i n the p r e s e n t Nation?.! Bank Act.
9.
Section 10. I suggest t h a t l i n e s 15 and 16 be changed to read "upon
unanimous consent of members of the. Tederal Reserve Board p r e s e n t and
not l e s s than f i v e (5)"
5 9
Hon, Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. C.
X-707^
a-1
•* S
Page 14# l i n e s 3 and 4. I suggest t h a t the f o l l o w i n g cb&nge be made omit "with a s u i t a b l e t r u s t e e " and s u b s t i t u t e t h e r e f o r "with the Federal
Reserve Bank". Pp. 14Lines 8 , 9 , 1 0 , 1 1 and 12, omit "one-half of 1 per
centum a month f o r t h e f i r s t period of n i n e t y days of t h e l i f e of such
advance, and t h e r e a f t e r the r a t e of i n t e r e s t s h a l l be inc re ase d by
o n e - f o u r t h of 1 per centum a month f o r each succeeding period of
ninety days or f r a c t i o n t h e r e o f . " I n s e r t i n p l a c e thereof "1 per
centum above discount r a t e . "
10.
Section 11. Lines 15 and 16, omit "at the time of making t h e loan
of a t l e a s t 20 per centum more" and i n s e r t "a 20 percent margin s h a l l
be maintained of a t l e a s t 20 percent during t h e l i f e of such l o a n .
11.
Section 12A(a)Lines 6, 7 and 8, omit "of the Governor of the Federal
Reserve Board and as many a d d i t i o n a l members as t h e r e a r e " and i n s e r t
"one r e p r e s e n t a t i v e from each Federal Reserve Bank".
Line 10. I n s e r t a f t e r 9member" "and an a l t e r n a t e " .
Lines 17,18,19 and 20, omit "In t h e absence or i n a b i l i t y of
the Governor of the Federal Reserve Board to act at such meetings the
Board s h a l l d e s i g n a t e t h e v i c e governor or some other member of the
Board t o act i n p l a c e of t h e governor", and i n s e r t "The Federal Open
Market Committee s h a l l e l e c t annually one of i t s members as a Chairman
and one of i t s members as a Vice Chairman."
Section 12A.(b) Line 23 a f t e r "committee" i n s e r t "and t h e approval of
the Federal Reserve Board.
Section 12A ( d ) . I b e l i e v e if the Federal Reserve System i s t o work
as a system, every Federal r e s e r v e bank should be obliged to accept
the conclusions of t h e Federal Open Market Committee. That each
Federal r e s e r v e bank should share i n the gains or l o s s e s on some pro
r a t a b a s i s to be f i x e d by t h e Federal Open Market Committee on every
open market o p e r a t i o n , to include b a n k e r s ' acceptances, Government
s e c u r i t i e s , and advances to other c e n t r a l banks.
12.
Section 12B ( c ) . Line 1, page 19 omit " o n e - f o u r t h of the surplus of
such bank on December 31, 1931", and i n s e r t "any surplus over and
above 100 per centum of i t s c a p i t a l at the d a t e of the passage of t h i s
Act and any a d d i t i o n a l earnings b e f o r e provided f o r i n t h i s A c t . "
13.
Section 13. I recommend t h a t t h i s e n t i r e s e c t i o n be omitted. This i s
l a r g e l y an o p e r a t i n g matter and would work hardship on t h e member banks
and Federal r e s e r v e banks, and would accomplish l i t t l e .
14.
Section 14.
I have no comments.
L
61
f
Hon. Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. C.
X-7077
a-1
- 4 -
15.
Section 15, Page 30, l i n e s 20,21,22 and 23 "(except promissory notes
of member "banks acquired under t h e p r o v i s i o n s of the seventh p a r a graph of such s e c t i o n 13 secured "by t h e deposit or pledge of "bonds
or notes of t h e United States). 1 1 I b e l i e v e t h i s p r o v i s i o n should "be
o n i t t e d as i t would s e r i o u s l y i n t e r f e r e with the Treasury f i n a n c i n g
and dangerously r e s t r i c t the issuance of Federal r e s e r v e notes a t
t h i s t i n e . I t might be advisable i f t h i s s e c t i o n i s continued to
add "except w i t h the permission of the Federal Reserve Board."
16.
Section 16, (1) and (2) I b e l i e v e very s t r o n g l y i n the general
p r i n c i p l e s of d e f i n i t e l y s p e c i f y i n g the types of d e p o s i t s , of demand,
time, savings and t h r i f t , and the segregating of a s s e t s a proper one.
One r e s e r v e f o r demand and time d e p o s i t s would be d e s i r a b l e , as i t i s
l e s s l i a b l e to evasion. On the other hand t h e p r o v i s i o n s f o r i n c r e a s i n g r e s e r v e requirements a r e too v i o l e n t and would t h e r e f o r e
act as a d e f l a t i o n a r y measure f o r t h e years s p e c i f i e d f o r adjustment.
I would p r e f e r t h e formula developed by t h e Committee of t h e Federal
Reserve System, but i n l i e u thereof suggest t h a t the p r i n c i p l e s l a i d
down by t h i s b i l l f o r t h e d e s i g n a t i n g of c e r t a i n c h a r a c t e r s of d e p o s i t s
be adopted without any change i n the r e s e r v e requirements, member banks
being given a reasonable time to make changes i n the c h a r a c t e r of such
d e p o s i t s , p o s s i b l y a y e a r , and t h a t then the Federal Reserve Board be
r e q u i r e d to f i x a percentage of r e s e r v e a g a i n s t such d e p o s i t s , so that
the e n t i r e r e s e r v e r e q u i r e d would be a l e s s burden than immediate
adjustments would e n t a i l .
Sec. 16. (e) page 38, l i n e s 1 0 , 1 1 , 1 2 , 1 3 , 1 4 , 1 5 , 1 6 , 1 7 , 1 8 , 1 9 , omit
"unless the Federal Reserve Board s h a l l have f i r s t a u t h o r i z e d by
general order t h e making of such s a l e s or t r a n s f e r s w i t h i n such
d i s t r i c t or between such d i s t r i c t and another Federal r e s e r v e d i s t r i c t ,
but no such s a l e or t r a n s f e r s h a l l be made by any such bank without
f i r s t charging and r e s e r v i n g a f e e to be f i x e d by the Federal Reserve
Board on t h e b a s i s of the r a t e of discount then charged upon n i n e t y day paper by the Federal r e s e r v e bank of the d i s t r i c t i n which the bank
malting such s a l e or t r a n s f e r i s l o c a t e d , " I n s e r t i n p l a c e thereof
"if said s e l l i n g member bank i s indebted to the Federal r e s e r v e bank."
17.
Section 17.
18.
Section 18. Page 43 Lines 17 to 21, omit "nor s h a l l t h e t o t a l amount
of t h e s e c u r i t i e s so purchased and held f o r i t s own account a t any
time exceed 15 per centum of the amount of the c a p i t a l stock of such
a s s o c i a t i o n a c t u a l l y paid i n and unimpaired and 25 per centum of i t s
unimpaired s u r p l u s f u n d . " This would p l a c e a s e r i o u s handicap on
banks i n t h i s d i s t r i c t ,
19.
Section 19.
Ho comment.-
Ho comment.
X-70
a^-1
Hon. Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. C.
- 5 -
20.
Section 20.
No comment.
21.
Section 21.
Line 8, i n s e r t a f t e r the word " o f f i c e r " "except a d i r e c t o r "
22.
Sections 22, 23, 24, 25, 26, 27, 28, 29, 30 and 31.
23.
Section 32.
Page 59 l i n e 7, omit "That during the p e r i o d of two y e a r s " .
24.
Section 33.
No comment.
No comment.
This B i l l i s very long and complicated, and the time t h a t I have
had t o analyze i t s p r o v i s i o n s has been very l i m i t e d . I t r u s t , however,
t h a t the suggestions that I have made w i l l be h e l p f u l .
I am,
Very t r u l y yours,
(S)
FHC/D
F r e d e r i c H. C u r t i s s
Federal Reserve Agent.
COPY
X-7077^
8t-2
FEDERAL EEdEEVE BANK
& &CST0#
Eoy Ai Yotmg
Governor
January 29, 1932.
Hon. Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. C.
Dear Governor Meyer:
In r e p l y t o your wire of January 26 r e q u e s t i n g me t o study
thoroughly and c a r e f u l l y Senate B i l l No. 3215 introduced "by Senator Glass
on January 21, 1932, I advise t h a t I have attempted t o do so t u t the b i l l
covers so many t h i n g s t h a t I f e e l I should have more time "but inasmuch as
your telegram r e q u e s t s t h a t a reply "be i n your hands not l a t e r than t h r e e
o ' c l o c k Washington time tomorrow, I am o f f e r i n g the f o l l o w i n g :
Pages 1 , 2 , 3 and 4 up to l i n e 7 has to do with t h e d e f i n i t i o n
of a f f i l i a t e s , holding companies and s u b s i d i a r i e s and t h e meaning of the
word "commerce". I have no o b j e c t i o n to o f f e r to t h e s e s e c t i o n s .
Sub-sections f , g and h on page 4, l i n e s 7 to 17 i n c l u s i v e ,
d e f i n e demand, time and t h r i f t d e p o s i t s . If r e s e r v e requirements a r e
going t o be based upon t h e percentages provided f o r i n t h e proposed Glass
b i l l , I have no o b j e c t i o n to o f f e r to t h e s e d e f i n i t i o n s .
Lines 21 t o 24, page 4, suggest the f o l l o w i n g a d d i t i o n t o Section
4 - "but only i f such d i s c o u n t s , accommodations and advancements a r e intended
f o r t h e accommodation of commerce, i n d u s t r y and a g r i c u l t u r e " . From a
p r a c t i c a l standpoint I do not b e l i e v e t h a t t h i s i s p o s s i b l e . From my exp e r i e n c e i n lending c r e d i t f o r a Federal r e s e r v e bank, I have found t h a t i n
p r a c t i c a l l y every case c r e d i t i s advanced to i n d i v i d u a l member banks because
of a r e d u c t i o n i n d e p o s i t s , and f r e q u e n t l y the c r e d i t i s r e t i r e d because of
an i n c r e a s e i n d e p o s i t s . When t h e r e i s a r e d u c t i o n i n d e p o s i t s , temporarily
at l e a s t , the banks borrow. Under the se c o n d i t i o n s , i t i s impossible to
s t a t e whether or not the proceeds a r e used f o r the accommodation of commerce,
i n d u s t r y or a g r i c u l t u r e . I , t h e r e f o r e , would a l s o be opposed to t h e
a d d i t i o n a l p r o v i s i o n s t a r t i n g with l i n e 24, page 4, and ending with t h e word
" S t a t e s " on l i n e 7 page 5.
I have no o b j e c t i o n to the a d d i t i o n a l language s t a r t i n g on l i n e 7
and ending with t h e words "action i n t h e matter" on l i n e 14, page 5.
I am opposed to the d i s c r e t i o n a r y p e n a l t y p e r m i t t e d s t a r t i n g on
l i n e 14 and ending on l i n e 18 on page 5.
Lines 19 t o 25 on page 5, and l i n e s 1 to 6 on page 6, would
p r o h i b i t member banks owned by holding companies or a f f i l i a t e s from v o t i n g
X-707?
"I
Hon. Eugene Meyer
- 2 -
January 29, 1932.
I assume
f o r d i r e c t o r s i n a Federal r e s e r v e "bank. This p r o v i s i o n / i s put i n to
prevent any one holding company or a f f i l i a t e from securing a m a j o r i t y
r e p r e s e n t a t i o n on the1 "board cf d i r e c t o r s of a Federal r e s e r v e bank. I t
seems to me t h a t where the Federal Reserve Board appoints t h r e e of the
d i r e c t o r s of each Federal r e s e r v e "bank, and a small $25,000 "bank has as
much of a v o t e as a t|en m i l l i o n d o l l a r "bank, the chances f o r group control
a r e very remote. I t h e r e f o r e f e e l t h a t t h i s p r o v i s i o n i s unnecessary and
too severe on c e r t a i n member "banks even i f they a r e owned "by a f f i l i a t e s .
Furthermore, i t seems; to me t h a t t h i s p r o v i s i o n would make t h e e l e c t i o n
of d i r e c t o r s cumbersome and f i l l e d with confusion.
Lines 7 t o : 1 8 i n c l u s i v e on page 6 has to do with the payment
of dividends to member banks and, to a degree, provides f o r funds f o r a
Federal L i q u i d a t i n g C6rporation. The language of t h e proposed amendment
e l i m i n a t e s t h a t p a r t of the s e c t i o n of t h e Federal Reserve Act now c r e a t ing a s u r p l u s , and as f a r as I can observe no p r o v i s i o n i s made i n any
other p a r t of t h e proposed b i l l f o r the f u r t h e r accumulation of a s u r p l u s .
I assume t h a t t h i s was an o v e r s i g h t .
For many y e a r s the member banks have f e l t t h a t they were ent i t l e d to a l a r g e r d i v i s i o n of the earnings of t h e Federal r e s e r v e banks
a s , when and i f earned. I have leaned s t r o n g l y t h a t way f o r t h e p a s t
two or t h r e e y e a r s and I t h i n k my views a r e shared by many a s s o c i a t e d
with t h e System and, of course, by the g r e a t m a j o r i t y of our member banks.
I b e l i e v e an amendment to the act p e r m i t t i n g l a r g e r dividends to member
banks a s , when and i f earned, should be recommended.
The c r e a t i o n of a Federal Liquidating Corporation i s o f f e r e d i n
l i e u of payment of a d d i t i o n a l dividends and I do not b e l i e v e t h a t t h i s w i l l
prove an i n c e n t i v e f o r s t a t e banks to j o i n the System or f o r p r e s e n t member
banks t o continue membership. The c r e a t i o n of a Federal L i q u i d a t i n g Corp o r a t i o n may have some merits but a rough estimate convinces me t h a t the
l i q u i d a t i n g value a t t h e present time of the amount involved i n closed
banks i s f a r i n excess of what the System could do under the proposed l e g i s
l a t i o n , and someone would h#ve to go w i t h o u t . T h e r e f o r e , i f a Federal
L i q u i d a t i n g Corporation j . s d e s i r a b l e i t would be f a r b e t t e r t o permit a
l i q u i d a t i n g c o r p o r a t i o n t o purchase t h e claim of a d e p o s i t o r a g a i n s t the
Receiver of a closed bank rjather than attempt t o do i t c o l l e c t i v e l y . A
comparison by s p e c i f i c example of what t h e Glass b i l l proposes and an
a l t e r n a t e proposal w i l l b r i n g out the reasons f o r my suggestion:
(1) Glass p r o p o s a l . A bank closes with a m i l l i o n d o l l a r s of d e p o s i t s . A
committee s e t up by t h e Liquidating Corporation determines t h a t $600,000
can be recovered on t h e a s s e t s of the bank w i t h i n a reasonable l e n g t h cf
time, making due allowance f o r i n t e r e s t on the advances, they would give
the Receiver $500,000 i n cash. The Receiver i n t u r n would d i s t r i b u t e the
funds so r e c e i v e d to t h e d e p o s i t o r s . Commercial d e p o s i t o r s and the needy
could and, of course, would use t h e money so received b u t inasmuch as the
m a j o r i t y of d e p o s i t s i n closed banks r e p r e s e n t savings d e p o s i t s , t h e s e
X-7077
8r- 2
Hon. Eugene Meyer
- 3 -
January 29, 1*32if
persons would have no need f o r the money "because t h a t was why they were
savings d e p o s i t o r s i n t h e f i r s t p l a c e . When they r e c e i v e d t h e money from
the Receiver they would invest i t , deposit i t i n another bank or hoard i t .
I t would be my guess t h a t the m a j o r i t y of them would hoard i t under
conditions t h a t e x i s t a t the present time.
(2) A l t e r n a t e p l a n . The same as above except the L i q u i d a t i n g Corporation
would not advance $500,000 i n cash i n one lump sum t o t h e Receiver but
would say to anyone t h a t had a claim a g a i n s t the Receiver t h a t i t would
advance 50 per cent of t h e claim upon proper assignment, c o l l e c t 6 per
cent during t h e p e r i o d of l i q u i d a t i o n , and agree t o r e t u r n to them everyt h i n g over t h i s amount at time of f i n a l l i q u i d a t i o n . The commercial dep o s i t o r s and t h e needy would of course accept t h e proposal but i t i s my
guess t h a t t h e g r e a t m a j o r i t y of savings d e p o s i t o r s would not because
when they a r e given t h e assurance by a d e f i n i t e o f f e r from a r e l i a b l e
source t h a t t h e i r d e p o s i t i s worth a c e r t a i n amount and probably more, i t
w i l l a l l a y t h e i r f e a r s and they w i l l f e e l t h e i r money i s j u s t as s a f e i n
the R e c e i v e r ' s t r u s t as i t would be anywhere e l s e , and f o r the f u r t h e r
f a c t t h a t they would not care to pay 6 per cent to get a p a r t of i t . To
be c o n c i s e , t h i s a l t e r n a t e proposal would i n my opinion take f a r l e s s
money, r e s u l t i n l e s s hoarding, and everyone would be b e t t e r s a t i s f i e d .
I have no o b j e c t i o n to the language s t a r t i n g w i t h l i n e 19
page 6 and ending on l i n e 18 page 7, except l i n e s 4 and 5 on page 7 which
contain t h e f o l l o w i n g sentence: "They s h a l l a l s o comply with a l l the
requirements of t h i s act a p p l i c a b l e to National Banks". This would r e q u i r e
a more c a r e f u l study w i t h l e g a l a s s i s t a n c e b e f o r e making a commitment.
I have no o b j e c t i o n to the language s t a r t i n g with l i n e 18 page
7, and ending on l i n e 7 page 9, except the following which appears on
l i n e s 22 and 23, page 7s "
during t h e period cf two years a f t e r t h i s
s e c t i o n as amended t a k e s e f f e c t , . . . . " . I t seems to me t h a t t h i s should
be permanent.
I have no o b j e c t i o n to t h e language s t a r t i n g on l i n e 7, page 9
and ending on l i n e 6, page 12. In making t h i s s t a t e m e n t , I am not unmindf u l of t h e f a c t t h a t a t one time I vigorously advocated t h e continuance
of the S e c r e t a r y of the Treasury as a member of the Federal Reserve Board.
My reason f o r now agreeing to h i s e l i m i n a t i o n i s because t h e Secretary of
the Treasury i s an extremely busy man and unable to a t t e n d the Board meetings r e g u l a r l y , and f o r the f u r t h e r reason t h a t f o r a long time I have
f e l t t h a t the Board should be composed of an odd r a t h e r than an even number.
I cannot approve of the language s t a r t i n g on l i n e 6 and ending
on l i n e 16 on page 12, u n t i l the question of r e s e r v e s has been s e t t l e d .
I o b j e c t t o everything s t a r t i n g with l i n e 17 on page 12 and
ending on l i n e 11, page 13, f o r the reasons already f u r n i s h e d .
X-7077
a—2 ^
Hon. Eugene Meyer
'
- 4 -
January 29, 1932.
The amendment suggested between l i n e 15 on page 13 and l i n e
23, page 14, I b e l i e v e to "be a step i n the r i g h t d i r e c t i o n . P e r s o n a l l y ,
as t h e Board already knows, I would p r e f e r t o go f u r t h e r but at t h e same
time t h i s should be h e l p f u l . I do not b e l i e v e t h a t a d e f i n i t e higher
r a t e should be f i x e d by law and, f u r t h e r m o r e , I do not b e l i e v e i n a
p r o g r e s s i v e p r o v i s i o n . Provision f o r a higher r a t e seems to me t o be
s u f f i c i e n t . I a l s o b e l i e v e t h a t i t would be f a r b e t t e r t o change the
language so t h a t a r e s e r v e bank could accept the secured note of a member
bank guaranteed by the group r a t h e r than accept t h e unsecured j o i n t note
of a group.
I do not b e l i e v e t h a t acceptances should be included i n the
ten per cent l i m i t provided f o r i n the amendment s t a r t i n g on l i n e 24,
page 14, and ending on l i n e 25, page 15.
I am opposed t o the suggested amendment s t a r t i n g with l i n e 1
on page 16 and ending w i t h l i n e 25 on page 17, because I b e l i e v e t h a t i f
Section 14 i s amended aa suggested by the Glass b i l l s t a r t i n g with l i n e 39
on page 28 and ending w i t h l i n e 25 on page 28, such an amendment would
c l a r i f y any misunderstandings t h e r e have been i n the p a s t as t o t h e Board's
a u t h o r i t y and veto power over open market o p e r a t i o n s , p a r t i c u l a r l y i n
r e f e r e n c e to U. S. government bonds. The open market p o l i c y committee
could continue as a v o l u n t a r y o r g a n i z a t i o n , the autonomy of the s e v e r a l
r e s e r v e banks would be maintained, and t h e r e would be no question about the
Board's v e to power. Furthermore, d i s c l o s u r e of t r a n s a c t i o n s t h a t a r e
extremely c o n f i d e n t i a l would not by law be made a matter of p u b l i c r e c o r d .
As s t a t e d e a r l i e r i n t h i s l e t t e r , I am not e n t i r e l y i n accord
with t h e c r e a t i o n of a Federal Liquidating Corporation and, t h e r e f o r e , a t
t h i s w r i t i n g can not approve of the proposals contained i n the language
s t a r t i n g with l i n e 1 on page 18 and ending with l i n e 10 on page 27.
I am opposed to t h e proposed amendment to Section 13, s t a r t i n g
with l i n e 14 on page 27 and ending with l i n e 13, page 28, f i r s t because I
o b j e c t to the one per cent highey r a t e and second, because I do not b e l i e v e
t h a t t h e making of c e r t a i n c o l l a t e r a l loans by a member bank should be
dependent upon what t h e member bank owes a Federal r e s e r v e bank on a 15-day
c o l l a t e r a l n o t e . If i t i s d e s i r a b l e t o curb s p e c u l a t i v e l o a n s , i t seems to
me t h a t i t would be much b e t t e r to apply the brakes t o the member bank
r a t h e r than attempt t o do i t i n a c i r c u i t o u s way through t h e Federal r e s e r v e
bank.
As p r e v i o u s l y s t a t e d I approve of the proposal contained i n
l i n e s 19 to 25 on page 28.
I object t o the amendment proposed s t a r t i n g with l i n e 4 on page
29 and ending with l i n e 7 on page 30 because i t takes t h e i n i t i a t i v e power
away from the Federal r e s e r v e bank and provides f o r r e s t r i c t i o n s t h a t f o r
X-7077
Or- £&*•
Hon. Eugene Meyer
5 _
January 29, 1932.
a l l p r a c t i c a l purposes would make n e g o t i a t i o n s impossible. The amendment
suggested "by Senator Glass to Section 14 i t seems to me, gives the Board
a l l t h e supervisory powers t h a t are necessary.
In the amendment proposed s t a r t i n g with l i n e 11 page 30 and
ending on l i n e 2, page 34, I am opposed t o the p r o v i s i o n which excludes
promissory notes of member tanks secured "by U. S. government o b l i g a t i o n s
as e l i g i b l e f o r 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 .
I am a l s o opposed to the change suggested i n l i n e s 18 and 19
on page 31 which reads as f o l l o w s : " . . . n o t o f f s e t by gold or l a w f u l
money deposited with t h e Federal Reserve Agent''.
The amendment suggested s t a r t i n g with l i n e 5 page 34 and ending
with l i n e 22 page 37, has to do with r e s e r v e s . I l i k e the i d e a of eventua l l y having demand d e p o s i t s and time d e p o s i t s c a r r y the same: r e s e r v e s and
I would even go so f a r as t o include t h r i f t d e p o s i t s so t h a t t h e r e woul.d
be a f l a t r e s e r v e f o r a l l d e p o s i t s , with some d i s c r i m i n a t i o n between
Federal r e s e r v e bank c i t i e s , branch bank c i t i e s , other r e s e r v e c i t i e s and
o t h e r s . I a l s o b e l i e v e that f u r t h e r c o n s i d e r a t i o n should be given to the
formula developed by t h e r e s e r v e committee of the Federal Reserve System.
The p r o v i s i o n s s t a r t i n g with l i n e 6 page 38 and ending with
l i n e 5 page 39, have t o do with d e a l i n g s i n Federal r e s e r v e funds and
while I can not agree w i t h the suggested amendments, because I b e l i e v e
them to be too severe i n normal times, n e v e r t h e l e s s I have f e l t t h a t
d e a l i n g s i n Federal r e s e r v e funds might some day become a menace. I
t h e r e f o r e b e l i e v e I would be w i l l i n g to give f u r t h e r c o n s i d e r a t i o n to an
amendment t h a t would give power to t h e Federal Reserve Beard t o deny to
c e r t a i n s p e c i f i c banks t h e r i g h t of d e a l i n g i n Federal r e s e r v e f u n d s .
S t a r t i n g with l i n e 18 on page 39 and ending with l i n e 25 on
page 41, t h e b i l l r e l a t e s to r e a l e s t a t e loans and the s e g r e g a t i o n of
a s s e t s a g a i n s t time or t h r i f t d e p o s i t s . I am not i n agreement with the
sentence - l i n e s 6 t o 10 on page 40 - which reads as f o l l o w s : "Such
v a l u a t i o n s s h a l l be r e v i s e d bjr the Comptroller of t h e Currency a t the time
of each examination of the bank making the loan and he s h a l l have power
t o order changes t h e r e i n and t o r e q u i r e the adjustment of loans to such
r e v i s e d v a l u a t i o n s " . I t seems to me t h a t t h i s i s i m p r a c t i c a l . If a bank
made a farm loan f o r f i v e years i n accordance with t h e terms of t h e act
and two y e a r s l a t e r t h e value of the farm land back of t h e s e c u r i t y dep r e c i a t e d say f o r t y p e r c e n t , I do not see how the bank could a d j u s t t h e
loan because i t i s not due f o r t h r e e y e a r s , and the bank would have no
l e g a l demand on the maker. The only t h i n g the Comptroller could do would
be determine whether or not the loan was good and i f not e n t i r e l y good,
what p r o p o r t i o n of i t was good, and r e q u e s t the bank t o charge off accordi n g l y . Under the p r e s e n t law he now has ample a u t h o r i t y t o follow t h i s
procedure.
X-7077 .
a-2 %
Hon. Sugene Meyer
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January 29, 1932
I am not thoroughly convinced t h a t the segregation of a s s e t s
a g a i n s t c e r t a i n d e p o s i t s i s a good thing where a bank does b o t h a commercial
and savings b u s i n e s s . Obviously i t works to the advantage of those having
time d e p o s i t s and a t t h e same time i s a disadvantage to the commercial
d e p o s i t o r in the event of f a i l u r e of t h e bank. Perhaps t h a t should be
so in so f a r as t h e t h r i f t d e p o s i t o r i s concerned, b u t when a c o r p o r a t i o n
d e p o s i t s a l a r g e amount with a bank t h a t has the customary 60-day c l a u s e ,
I do not b e l i e v e t h a t t h e corporation should r e c e i v e a p r e f e r e n c e over
another c o r p o r a t i o n t h a t possessed a demand d e p o s i t . If $5000 i s to be
the l i m i t on t h r i f t d e p o s i t s i t seems to me t h a t the same l i m i t should
apply on time d e p o s i t s .
The amendment suggested s t a r t i n g with l i n e 1 page 42 and ending
on l i n e 10 page 42, might make i t impossible f o r a s t a t e member bank to
comply a t the same time with the p r o v i s i o n s of i t s S t a t e law and of t h i s
s e c t i o n if t h e r e were a c o n f l i c t between the two laws. For i n s t a n c e ,
in Massachusetts a t r u s t company i s r e q u i r e d to segregate a s s e t s a g a i n s t
savings d e p o s i t s but not a g a i n s t c e r t a i n other time d e p o s i t s .
I have no o b j e c t i o n to t h e wording of t h e proposed amendment
s t a r t i n g on l i n e 14, page 42 and ending with l i n e 15 on page 44, except
t h e following which s t a r t s on l i n e 24 on page 43 and ends on l i n e 4 of
page 44, which r e a d s a s f o l l o w s : "Ho such a s s o c i a t i o n s h a l l purchase or
hold any o b l i g a t i o n of any c o r p o r a t i o n u n l e s s such c o r p o r a t i o n and any
predecessor thereof earned f o r each of the f i v e years preceding such purchase a t l e a s t 4 p e r centum upon t h e o u t s t a n d i n g c a p i t a l stock of the
c o r p o r a t i o n " . If I understand t h i s c o r r e c t l y , i t would mean t h a t a
n a t i o n a l bank would be p r o h i b i t e d from buying bonds of a c o r p o r a t i o n t h a t
was not earning; 4 per cent on a very heavy c a p i t a l i z a t i o n b u t might be
earning i t s i n t e r e s t charges many times over on a very small bonded
indebtedness. This seems too severe and I w i l l recommend t h a t t h i s
c l a u s e be e l i m i n a t e d .
I am in agreement w&th the amendment suggested s t a r t i n g with
l i n e 19 on page 44 and ending vkth l i n e 7 on page 45.
I am somewhat in sympathy with t h e suggestions c o n t a i n e d
i n t h e amendment s t a r t i n g with l i n e 10 on page 45 and ending with l i n e
7 on page 46, but do not b e l i e v e the p r e s e n t t h e opportune time f o r i t s
adoption.
I am somewhat sympathetic with the language which s t a r t s on
l i n e 8 of page 46 and ends with t h e word "business" on l i n e 14 of page
46, but p r e f e r to have more time to consider b e f o r e making a d e f i n i t e
committal. If the succeeding language which reads t h a t . n o n a t i o n a l
bank or member bank s h a l l perform the f u n c t i o n s of a correspondent bank
on behalf of any such i n d i v i d u a l , c o p a r t n e r s h i p , unincorporated a s s o c i a t i o n or corporation" means t h a t they could not even accept d e p o s i t s , I
Hon. Eugene Meyer
-7-
January 29, 1932
X-7077
a-2
am very much opposed to t h i s proVidlodi .$he l a s t clause s t a r t i n g on
l i n e 17 and ending in l i n e 21 I do not understand.
The language of the proposed amendment
s t a r t i n g on l i n e 24 of page 46 and ending with l i n e 8 on page 52 p l a c e s
c e r t a i n l i m i t a t i o n s and r e s t r i c t i o n s on voting p r i v i l e g e s of s h a r e h o l d e r s of n a t i o n a l "banks which, in my opinion, would t e m p o r a r i l y deprive
c e r t a i n i n d i v i d u a l s , a f f i l i a t e s , holding companies and o t h e r c o r p o r a t i o n s from j u s t i f i e d voting p r i v i l e g e s and e v e n t u a l l y make i t i m p r a c t i c a b l e f o r a f f i l i a t e s , c o r p o r a t i o n s and holding companies to continue a s
stockholders in member banks. I t seems to me the enactment of t h i s
amendment would have the e f f e c t of d r i v i n g a vast number of both n a t i o n a l
and s t a t e member banks out of the System and I am opposed to i t .
The amendment suggested s t a r t i n g with l i n e 11 on page 52 and
ending with l i n e 13 on page 53 has to do with the establishment of branches
by n a t i o n a l banks. I b e l i e v e t h i s to be a step in the r i g h t d i r e c t i o n
but i f I understand the language of t h e amendment c o r r e c t l y i t would
only permit n a t i o n a l banks t h e extended p r i v i l e g e s of e s t a b l i s h i n g new
branches o u t s i d e of the c i t y of the p a r e n t o f f i c e where t h e S t a t e law
p e r m i t s i t and inasmuch as t h e r e i s no amendment to Section 9 of the
Federal Reserve Act in the Glass b i l l , S t a t e member banks although p e r m i t t e d by S t a t e law to e s t a b l i s h new branches o u t s i d e of the c i t y in
which the p a r e n t S t a t e member bank was l o c a t e d could not now e s t a b l i s h
them and continue as members under Section 9.
I a l s o want to throw out the suggestion t h a t no branches
should be e s t a b l i s h e d anywhere except with the approval of t h e Federal
Reserve Board in a d d i t i o n to t h a t of t h e Comptroller of t h e Currency.
The amendment suggested s t a r t i n g with l i n e 16 on page 53 and
ending with l i n e 9 on page 54 has to do with i n t e r e s t r a t e s t h a t a
n a t i o n a l bank may charge and I see no o b j e c t i o n .
Lines 10 to 24 i n c l u s i v e on page 54 have to do w i t h the r a t e
of i n t e r e s t which a n a t i o n a l bank may pay d e p o s i t o r s . I am opposed to
a l l of t h e s e r e s t r i c t i o n s because I am convinced t h a t no n a t i o n a l bank
could compete w i t h o t h e r i n s t i t u t i o n s .
I would want more time to study the amendment suggested
s t a r t i n g on l i n e 4 page 55 and ending on l i n e 6, b e f o r e making a
d e f i n i t e commitment, but my impulsive thought i s t h a t i t i s too
severe.
The suggested amendment to Section 52 s t a r t i n g on l i n e 9 of
page 52 and ending with l i n e 20 d i s c r i m i n a t e s in s p e c i f i c c a s e s a s to
t h e amount t h a t may be l e n t by a n a t i o n a l bank under the v a r i o u s except i o n s to Section 5200 and with United S t a t e s Government bonds as
s e c u r i t y , and i f I have i n t e r p r e t e d i t c o r r e c t l y i t d i s c r i m i n a t e s
a g a i n s t c e r t a i n l i v e s t o c k loan companies. I am, t h e r e f o r e , opposed
to t h i s s e c t i o n .
X-7077
a-i;
Hon. Eugene Meyer
-8-
January 29, 1932
The amendment suggested s t a r t i n g with l i n e 24 on page 55
and ending on l i n e 8 on page 56 appears to be to severe.
The proposed amendment s t a r t i n g on l i n e 9, page 55, and
ending with l i n e 19, I do not thoroughly understand and I cannot comment upon i t a t t h i s time.
I am opposed to the language to t h e amendment s t a r t i n g on
l i n e 20 of page 55 and ending with l i n e 4 on page 57, f o r t h e reasons
given p r e v i o u s l y under comments on s u b - s e c t i o n M. I approve of the
language of the proposed amendment s t a r t i n g on l i n e 8, page 57 and
ending on l i n e 15 page 58. I am opposed, however, to the language
s t a r t i n g on l i n e 15 on page 58 and ending on l i n e 3 of page 59 because
I b e l i e v e i t i s j u s t as unreasonable to p u b l i s h the p o r t f o l i o of an
a f f i l i a t e as i t would be to r e q u i r e n a t i o n a l bank to p u b l i s h i t s
portfolio.
The language of t h e proposed amendment s t a r t i n g on l i n e 7
of page 59 and ending with l i n e 2 on page 60 provides f o r examining
a f f i l i a t e s which I favor and I b e l i e v e t h a t c e r t a i n p e n a l t i e s should
be r e s o r t e d to in the event of r e f u s a l to permit such examinations.
I am opposed, however, to a u t h o r i z i n g t h e Comptroller of t h e Currency
to p u b l i s h r e p o r t of h i s examinations of any n a t i o n a l banking a s s o c i a t i o n
or a f f i l i a t e under any c o n d i t i o n .
The proposed amendment s t a r t i n g with t h e language on l i n e 8
of page 60 would, in my opinion, p r o h i b i t many d e s i r a b l e people from
being d i r e c t o r s in n a t i o n a l banks but would apparently permit t h e
same people to be d i r e c t o r s of a S t a t e member bank.
The language in t h e proposed amendment s t a r t i n g on l i n e 16
of page 60 and ending on l i n e 24 on page 60 i s d i f f i c u l t to i n t e r p r e t
b u t i f i t means, f o r example, t h a t t h e Canadian Bank of Commerce cannot lend on a promissory note secured by c o l l a t e r a l payable i n
American d o l l a r s in t h i s country, or i f a corporation cannot lend i t s
own employees, secured by i t s stock, on a p a r t i a l payment p l a n , I bel i e v e the language of the proposed amendment to be too severe.
The language of the proposed amendment s t a r t i n g on l i n e 1
on page 61 and ending with l i n e 12 on page 61, if I i n t e r p r e t i t
c o r r e c t l y , would p r o h i b i t a c o r p o r a t i o n from d e p o s i t i n g with a p r i v a t e
banker, or a country e l e v a t o r company from c a r r y i n g an unsecured c r e d i t
balance with a c i t y e l e v a t o r company, or a corporation or bank from
c a r r y i n g a deposit with a f o r e i g n bank or o t h e r c o r p o r a t i o n , e t c . I ,
t h e r e f o r e , am opposed to the amendment.
X-7071
a-2
Hon. Eagene Mayer
-9-
January 29, 1932
As s t a t e d in the opening paragraph of my l e t t e r , I f e e l t h a t
I should have had more time and a s s i s t a n c e in analyzing t h i s proposed
b i l l or to a p p r a i s e the u l t i m a t e e f f e c t of many of i t s p r o v i s i o n s , and
such views as I have expressed a r e t h e r e f o r e n e c e s s a r i l y s u b j e c t to
such r e v i s i o n as a f u r t h e r study of the b i l l may suggest to me.
Yours r e s p e c t f u l l y ,
(Signed)
R. A. Young
B. A. Young,
Governor.
0 P Y
X-7077
c-1
FEDERAL RESERVE BANK OF MlMDELFHlA
| ,
TELEGRAk
P h i l a d e l p h i a 11:20 A Jan 30
Governor Meyer:
Washington.
In Governor Morris 1 absence I am r e p l y i n g to your i n q u i r y concerning
the Glass B i l l .
The t i l l provides so many r a d i c a l changes a f f e c t i n g c u r r e n t p r a c t i c e s
and r e l a t i o n s of "banks and o t h e r c o r p o r a t i o n s , t h a t I hope a l l of i t s
p r o v i s i o n s can "be s u b j e c t e d to f u r t h e r c a r e f u l study by f i n a n c i a l
experts.
Federal r e s e r v e member banks could h a r d l y compete with nonmember banks
i f the p r o v i s i o n s of the Act were put i n t o e f f e c t .
The r e s t r i c t i o n s on a f f i l i a t e s as d e f i n e d might g r e a t l y d i s t u r b u s e f u l
c o r p o r a t i o n s whose a c t i v i t i e s are beyond c r i t i c i s m .
I t s l i m i t a t i o n s on advances and discounts f o r member banks might bar
many members doing a conservative banking b u s i n e s s from e x e r c i s i n g t h e i r
p r i v i l e g e s i n p r o v i d i n g funds to r e s t o r e t h e i r l e g a l r e s e r v e s .
Many of the powers c o n f e r r e d on the Reserve Board and the Comptroller
of t h e Currency appear t o be extreme and t h r e a t e n i n g .
Many bankers would look upon many of i t s p r o v i s i o n s as unreasonable
r e s t r i c t i o n s to a l e g i t i m a t e banking b u s i n e s s .
The recommendations of t h e Federal Reserve System's committee on l e g a l
r e s e r v e s should be s u b s t i t u t e d f o r the plan in t h e b i l l .
S t a t e bank members would o b j e c t to being s u b j e c t e d to examinations
by the Comptroller.
The p r o v i s i o n of a Federal l i q u i d a t i n g corporation seems admirable, but
would i t not be b e t t e r t o provide funds in some other way than c u t t i n g
i n t o the Federal r e s e r v e surpluses ? The surplus of Federal r e s e r v e banks
should be p r o t e c t e d , and removing a l a r g e s e c t i o n of i t by l e g i s l a t i o n
would r a i s e a question as t o whether i t w i l l not be followed by o t h e r
government a c t i o n s t o use t h e se funds which have been not too l a r g e in
our r e c e n t f i n a n c i a l s t r a i n s .
Questions w i l l a r i s e as t o whether an o f f i c i a l whose appointment i s
g e n e r a l l y looked upon as p o l i t i c a l should head the c o r p o r a t i o n .
The p r o v i s i o n s of the b i l l a g a i n s t making advancements to member banks
on t h e i r f i f t e e n day notes seem to have unnecessary r e s t r i c t i o n s .
The p r e v e n t i o n of t h e f r e e use of member bank balances in r e s e r v e banks
w i l l meet with o b j e c t i o n s .
The p r o v i s i o n f o r the v a l u a t i o n of s e c u r i t i e s a t the market value seems
u n n e c e s s a r i l y s e v e r e , and we do not see how a change i n the s i t u a t i o n
of p r o p e r t i e s securing mortgages, by the Comptroller, can accomplish
any u s e f u l purpose.
Many w i l l q u e s t i o n the d e s i r a b i l i t y or f a i r n e s s of r e q u i r i n g banks to
r e - e s t a b l i s h a one hundred d o l l a r par value f o r t h e i r s t o c k .
The p r o v i s i o n whereby stockholders should be prevented from v o t i n g t h e i r
shares might throw the c o n t r o l of a c o r p o r a t i o n to a m i n o r i t y , and t h i s
p r o v i s i o n might r a i s e s e r i o u s l e g a l q u e s t i o n s .
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Federal Heserve Bank of P h i l a d e l p h i a - Telegram.
Many b e l i e v e t h a t branch banking w i t h i n s t a t e l i n e s i s not l o g i c a l
but t h a t i t would be b e t t e r to make any d i v i s i o n l i n e s on t h e b a s i s
of t r a d e a r e a s or Federal r e s e r v e d i s t r i c t s . Segregation of c a p i t a l
in the s e p a r a t e branches does not appear f e a s i b l e . The p r o v i s i o n
fop a d i f f e r e n t s e t - u p and method of operations of the open market
committee does not appear to r e p r e s e n t the a t t i t u d e of t h e banks
toward t h i s f u n c t i o n . I would e s p e c i a l l y c a l l your a t t e n t i o n to the
p r o v i s i o n t h a t a r e s e r v e bank may have t h i r t y days in which to make
a d e c i s i o n as to p a r t i c i p a t i o n .
The proposed d i s c r i m i n a t i o n a g a i n s t making advances to a member
bank on i t s f i f t e e n day notes secured by Government o b l i g a t i o n s or
e l i g i b l e p a p e r , r r i l l d i s t u r b a convenient and d e s i r a b l e method of
accommodation and the p r o v i s i o n to bar such notes c o l l a t e r a l e d by
bonds or notes of t h e United S t a t e s , as s e c u r i t y f o r Federal r e s e r v e
n o t e s , might be r e g r e t t e d a t some time when t h e r e may not be s u f f i c i e n t commercial paper a v a i l a b l e to support the volume of
Federal r e s e r v e notes t h a t might be needed.
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FEDERAL RESERVE BAiK OF PHILADELPHIA
TELEGRAM
FEDERAL RESERVE SYSTEM
(Leased Wire Service)
Received a t Washington, D. C.
55COT
P h i l a d e l p h i a , Penna.
1210PM
January 30 1932
Governor Meyer,
Washington
In compliance with telegram of 26th, submit r e s u l t of study of Glass B i l l
and our views regarding i t .
In r e Glass B i l l S 3215
Pages 1, 2, 3. and p a r t of 4 generally r e f e r to a f f i l i a t e s . The
problem of a f f i l i a t e s i s a very l a r g e one. As we have had l i t t l e contact
with them, we f e e l t h a t we should make more of a study of them and t h e i r
r e l a t i o n s with member banks b e f o r e c r i t i c i z i n g the provisions of t h i s b i l l .
Some of i t s provisions seem u n f a i r to stockholders of banks and p o s s i b l y
would endanger control of such banks. Would i t not be b e t t e r to t r e a t the
matter of a f f i l i a t e s i n a separate b i l l ?
Section 3> pages 4 and p a r t of 5» c o n t r o l l i n g a p p l i c a t i o n of proceeds
of r e d i s c o u n t s . Borrowings from Federal Reserve Banks l a r g e l y a r e to make
good d e f i c i e n c y in r e s e r v e s , to l i m i t the a p p l i c a t i o n of the proceeds to the
accommodation of commerce, industry and a g r i c u l t u r e and prevent t h e i r use i n
any way f o r the c a r r y i n g of, or f a c i l i t a t i n g the c a r r y i n g of, or t r a d i n g in
s e c u r i t i e s , by i m p l i c a t i o n would prevent any bank, holding any loans coll a t e r a l l y secured by investment or speculative s e c u r i t i e s , from r e di sc ount ing with i t s Federal Reserve Bank. We think t h i s s e c t i o n should be omitted.
Section 7 page 9» This appears to omit the s e c r e t a r y of the Treasury a s a
member of the Federal Reserve Board. For one, I see not the l e a s t objection,
but r a t h e r advantages, i n having the Secretary of t h e Treasury a member of
the Board, so b e l i e v e t h a t t h i s amendment i s u n d e s i r a b l e .
Section 8; page 11. This, and a l l other s e c t i o n s of t h i s b i l l , a f f e c t ing r e s e r v e s , we t h i n k should be omitted. The p r o v i s i o n s of the B i l l p r e pared by t h e Federal Reserve Board, based upon the f i n d i n g s of i t s committee
on r e s e r v e s , are f a r superior to t h e provisions i n the Glass b i l l r e f e r r i n g
to the same s u b j e c t . We would favor s t r i k i n g out a l l r e f e r e n c e to reserves
in the Glass B i l l and s u b s t i t u t i n g the Board's b i l l .
Section 9 page 12. This clause of the B i l l suggests t h a t t h e r e has
been abuses in the p a s t by the banks generally, in t h a t they used t h e proceeds of r e d i s c o u n t s to make loans to stock exchange houses. If the power,
which i s proposed to be given to the Federal Reserve Board by t h i s section,
can prevent in the f u t u r e any improper use of Federal Reserve funds, t h i s
provision i s d e s i r a b l e , but i t so l i m i t s the operations of the banks, t h a t
one f e e l s such a p r o v i s i o n would be vigorously opposed, and if enacted,
probably would d r i v e a great many i n s t i t u t i o n s out of the system.
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S e c t i o n 10. Seems to provide a s a t i s f a c t o r y way f o r e n l a r g i n g the
loaning powers of F e d e r a l Reserve 3an?r.s i n times of emergencies without
a general i n c r e a s e i n t h e kinds of paper or loans e l i g i b l e f o r r e d i s c o u n t .
I t i s u n l i k e l y that groups of banks would be organized to a s s i s t one or
more of t h e i r members except in times of c r i s e s , when unusual measures to
meet such c r i s e s would be J u s t i f i e d , but one f e e l s t h a t t h e bank to be
b e n e f i t e d by the emergency loan should deposit with the group i t s note,
secured by s a t i s f a c t o r y c o l l a t e r a l , which note and c o l l a t e r a l could be
used a s c o l l a t e r a l s e c u r i t y f o r the g r o u p ' s o b l i g a t i o n , which the Federal
Reserve Bank presumably would be authorized to take i n making advances to
the group.
S e c t i o n 12 A. Recognizes the open market committee as s e t up a t
p r e s e n t a s s a t i s f a c t o r y . Proper n o t i c e to the F e d e r a l Reserve Board and
the banks of the d i s c u s s i o n s and a c t i o n s of the committee i s n e c e s s a r y .
The 30 day option t o any Federal Reserve Bank to determine whether or not
i t wanted to p a r t i c i p a t e i n any of t h e committee's o p e r a t i o n s probably
would cause delays t h a t many times would prevent t h e committee's a c t i o n
being e f f e c t i v e .
S e c t i o n 12 B. The Federal L i q u i d a t i n g Corporation, as proposed,
should be a b l e to o p e r a t e e f f i c i e n t l y and accomplish a good purpose, but
we f e e l t h a t , p o s s i b l y , an o r g a n i z a t i o n f o r each Federal Reserve D i s t r i c t
might be b e t t e r than one l a r g e o r g a n i z a t i o n . I t i s a question whether or
not i t i s wise to p u t a l l the s u r p l u s earnings of the Federal Reserve Banks
into the c a p i t a l of t h i s corporation, a s proposed i n Section 5. A reasonable amount of c a p i t a l should be provided f o r i t , and p r o v i s i o n made f o r
c a l l i n g on Federal Reserve Banks f o r a d d i t i o n a l c a p i t a l any time such
a d d i t i o n a l c a p i t a l might be n e c e s s a r y .
S e c t i o n 13; page 27. The reason f o r charging one p e r cent higher
f o r l o a n s on 15 day n o t e s than f o r r e d i s c o u n t i n g paper i s hard to understand. The use of t h e 15 day note i s h e l p f u l to t h e member banks and to
the Reserve Banks, and we see no n e c e s s i t y f o r e s t a b l i s h i n g a h i g h e r r a t e
of d i s c o u n t f o r such o b l i g a t i o n s ; we think i t would be contrary to good
banking p r a c t i c e .
The p r o v i s i o n contained i n l i n e s 1 to 18, page 28, seems to be a
f u r t h e r e f f o r t to c o n t r o l and l i m i t t h e loans of member banks on investment
and o t h e r s e c u r i t i e s , t h e n e c e s s i t y and a d v i s a b i l i t y of which i s not p l a i n to
u s . We f e e l that the member banks would not consent to i t , and i t s enactment would r e s u l t i n t r o u b l e f o r the system.
S e c t i o n 15 page 30, l i n e s 20 to 24. Eliminates member b a n k ' s 15 day
notes, secured by United S t a t e s government bonds or notes, f o r u s e by a
Federal Reserve Bank a s s e c u r i t y f o r Federal Reserve notes issued to i t .
There does not seem to be any good reason f o r t h i s ; the bonds securing such n o t e s a r e i n no way permanently deposited a s s e c u r i t y f o r c i r c u l a t i o n , but c o n s t a n t l y are being r e t i r e d by the banks and so withdrawn
as s e c u r i t y f o r currency. The e l a s t i c i t y of the currency i s i n no way
impaired by t h e i r u s e ; they in no way make Federal Reserve currency l e s s
responsive to the requirements of b u s i n e s s .
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Page 31 l i n e 17, p r o v i d e s f o r gold d e p o s i t e d w i t h t h e F e d e r a l Reserve
Agent a s s e c u r i t y f o r n o t e i s s u e s only "being used a s an o f f s e t a g a i n s t o u t s t a n d i n g n o t e s and not a s a p a r t of t h e Bank's gold r e s e r v e , a s a t p r e s e n t .
This p r o v i s i o n would r e d u c e a v a i l a b l e gold r e s e r v e s i n every F e d e r a l Reserve
hank i n an amount equal to 60 p e r cent of the n o t e s so o f f s e t . If a p p l i e d
to t h i s bank today i t would be below i t s l e g a l r e s e r v e , and i f a p p l i e d to
the whole system, i t would have l i t t l e r e s e r v e i n excess of i t s r e q u i r e m e n t s .
The r e s u l t s of such a p r o v i s i o n would be very d i s a s t r o u s a t t h i s t i m e .
Page 38 l i n e s 6 to 19, f o r b i d d i n g the t r a n s f e r of excess F e d e r a l Reserve Balances, seems most o b j e c t i o n a b l e . What could hamper banking operat i o n s more, o r make f u n d s of F e d e r a l Reserve Banks l e s s d e s i r a b l e , than a
p r o v i s i o n t h a t d e p r i v e s a bank of h a n d l i n g f r e e l y i t s own f u n d s . But t h i s
p r o v i s i o n would not p r e v e n t any F e d e r a l Reserve Bank from t r a n s f e r r i n g a t
any time any of i t s r e q u i r e d r e s e r v e b a l a n c e s . The proposed r e m a r k e t a b l e
p r o v i s i o n only a p p l i e s to excess b a l a n c e s . Section 24 page 40 l i n e 6, would
give t h e c o m p t r o l l e r of t h e Currency t h e r i g h t to a d j u s t mortgage l o a n s to
comply w i t h h i s v a l u a t i o n of p r o p e r t i e s . We t h i n k t h i s would be i m p r a c t i c a b l e .
An amount of . r e a l e s t a t e l o a n s , equal to one h a l f of a b a n k ' s time and t h r i f t
d e p o s i t s , a s proposed i n l i n e s 10 to 22, i n many i n s t a n c e s , e s p e c i a l l y in
country banks, would be too much. Time and savings d e p o s i t s i n many such
banks equal 60 to 70 p e r cent of t h e i r t o t a l d e p o s i t s . A maximum i n v e s t ment a t any one t i n e of a sum n o t more than 25 p e r c e n t of t h e time and t h r i f t
d e p o s i t s would be s a f e r . The i n c l u s i o n of t h e investment i n bank premises
among r e a l e s t a t e l o a n i s a good p r o v i s i o n .
S e c t i o n 19 page 44 l i n e 19. One supposes t h i s i s a p r o p o s a l to l i m i t
the amount of any b a n k ' s d e p o s i t s to a sum equal to about seven t i m e s i t s
c a p i t a l f u n d s . Many t h i n k t h a t t h e amount of d e p o s i t s t h a t a bank could
carry should be l i m i t e d by t h e amount of i t s c a p i t a l and s u r p l u s b u t our
f e e l i n g i s t h a t d e p o s i t s equal to ten times the amount of a b a n k ' s c a p i t a l
and s u r p l u s would be a r e a s o n a b l e p r o v i s i o n . Page 44, l i n e 1 to 5. To f o r b i d
banks to hold any o b l i g a t i o n of any c o r p o r a t i o n , which had not earned f o r
f i v e y e a r s p r e c e d i n g such purchase, a t l e a s t 4 per cent upon t h e o u t s t a n d i n g
c a p i t a l s t o c k of t h e c o r p o r a t i o n , a p p a r e n t l y would p r e v e n t banks f r o m i n v e s t ing i n any s e c u r i t i e s of newly formed c o r p o r a t i o n s .
S e c t i o n 21 page 46, Seems very d r a s t i c and would unduly i n t e r f e r e with
t h e o p e r a t i o n s of many i n s t i t u t i o n s and c o r p o r a t i o n s , the o p e r a t i o n s of which
a r e now p r o p e r l y conducted.
S e c t i o n 25, page 52, Proposing to extend t h e r i g h t of N a t i o n a l Banks
to e s t a b l i s h b r a n c h e s . To r e s t r i c t such branches t o t h e s t a t e i n which the
p a r e n t bank i s l o c a t e d w i l l not enable those banks t o s e r v e p r o p e r l y t h e i r
communities, which very o f t e n extends beyond s t a t e l i n e s . We t h i n k banks
should be a u t h o r i z e d to e s t a b l i s h b r a n c h e s w i t h i n t h e i r t r a d e a r e a , a s p r o posed by t h e c o m p t r o l l e r of the Currency, o r any where w i t h i n i t s own Federal
Reserve D i s t r i c t . I t h a s been suggested t h a t , i n a d d i t i o n to the minimum
c a p i t a l of $1,000,000 which i t i s proposed that a bank mast have to
e s t a b l i s h branches, f o r every branch e s t a b l i s h e d the c a p i t a l of t h e
parent bank should be increased, say $50,000 to $100,000...
Section 25 page 5^» We question t h e wisdom of s p e c i f y i n g a maximum
r a t e of i n t e r e s t t h a t banks may pay on t i n e d e p o s i t s . We think i t wonld
be a very s e r i o u s mistake to f o r b i d t h e payment of any i n t e r e s t on demand
d e p o s i t s t h a t s u c c e s s f u l l y has been done here f o r y e a r s . If such a law
were enacted, we f e e l t h e r e would be a f l i g h t of banks fron t h e system.
S e c t i o n 8-A page 6 0 , We q u e s t i o n the p r o p r i e t y of p r o h i b i t i o n s
contained in paragraphs 1, 2, and 3 under t h i s section.. Thgr improperly
would i n t e r f e r e with t h e r i g h t s of c o r p o r a t i o n s and i n d i v i d u a l s to p u r sue t h e i r b u s in e s s o p e r a t i o n s .
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Federal Heserve Bank
of Cleveland
*
January 29, 1932.
Federal Reserve Board,
Washington, D. C.
Gentlemen;
This l e t t e r s e t s f o r t h the substance of o b j e c t i o n s r a i s e d "by o f f i c e r s
of the Federal Reserve Bank of Cleveland to the proposed amendments to the
Federal Reserve Act i n the Glass B i l l , as requested i n the Board's telegram
of January 26. C r i t i c i s m s have "been l i m i t e d l a r g e l y to p r o p o s a l s with which
we are e n t i r e l y out of sympathy. Where suggestions have "been o f f e r e d , they
may be accepted as i n d i c a t i v e of our approval of the p r o p o s a l s in p r i n c i p l e ,
but not of the s e c t i o n s i n t h e form i n which they are drawn. With r e f e r e n c e
to s e c t i o n s where no comment i s made, i t i s not n e c e s s a r i l y to be assumed
t h a t we accept the proposed amendments i n t o t o .
Sec. 3. Our o b j e c t i o n to t h i s paragraph i s based
p r i m a r i l y upon the f a c t t h a t i t g r a n t s to the Federal
Reserve Board powers which i t should not e x e r c i s e . I t
would tend to make the Reserve Board an o p e r a t i n g r a t h e r
than a supervisory body. We b e l i e v e t h a t d i s c i p l i n i n g
member banks, when necessary, i s c l e a r l y the f u n c t i o n
of each i n d i v i d u a l Federal Reserve "bank. I t would be
next to impossible to carry out the p r o v i s i o n s of the
proposed law, which, i f c a r r i e d o u t , would i n e v i t a b l y
r e s u l t i n withdrawals from the system of s t a t e banks
and the conversion of n a t i o n a l banks to s t a t e banks to
escape t h e i r obnoxious f e a t u r e s . In the p r e s e n t s i t u a t i o n the enforcement of these p r o v i s i o n s would r e s u l t
i n suspending the use of Federal Reserve c r e d i t f a c i l i t i e s to every member bank i n the City of Cleveland.
Sec. 5. I f a l i q u i d a t i n g corporation of t h e kind
provided by S. 3215 i s to be e s t a b l i s h e d , we b e l i e v e
t h a t i t should be accomplished through s p e c i a l l e g i s l a t i o n such as t h a t proposed i n S. 2810. We are not p a r t i c u l a r l y f r i e n d l y to the idea of member bank s u b s c r i p t i o n s to stock i n any such l i q u i d a t i n g corporation a t t h e
p r e s e n t time.
Sec. 6 . To r e q u i r e s t a t e bank members to comply with
a l l the requirements of the National Banking Act would be
to compel them to r e l i n q u i s h c e r t a i n c h a r t e r and s t a t u t o r y
r i g h t s which the law s p e c i f i c a l l y p r o v i d e s t h a t s t a t e bank
members a r e to r e t a i n . In view of the trend of r e c e n t
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y e a r s f o r important n a t i o n a l "banks to surrender t h e i r
c h a r t e r s i n favor of s t a t e c h a r t e r s , to enable them to
take advantage of the more l i b e r a l p r o v i s i o n s of the
l a t t e r , we "believe t h a t the e f f e c t s of adopting t h i s s e c t i o n would "be f a r t h e r to encourage t h i s movement and to
d r i v e s t a t e "banks which now are members out of the r e s e r v e
"bank system. A f u r t h e r o b j e c t i o n i s found i n the f a c t
t h a t the n a t i o n a l "banks normally carry the "burden of commercial c r e d i t s , whereas many s t a t e "banks engage i n "banking o p e r a t i o n s of a n a t u r e which would work h a r d s h i p s upon
them were they compelled to meet a l l the requirements and
r e s t r i c t i o n s of the laws r e l a t i n g to n a t i o n a l banks.
Sec. 8, We do not b e l i e v e i n the a r b i t r a r y d e s i g n a t i o n of r e s e r v e and c e n t r a l reserve c i t i e s . We hold t h a t
r e q u i r e d r e s e r v e s should be measured by other s t a n d a r d s .
We approve the r e p o r t r e c e n t l y made by the Reserve Comm i t t e e of the System, which would render unnecessary the
d e s i g n a t i o n of r e s e r v e or c e n t r a l reserve c i t i e s .
Sec. 9. In our opinion t h i s s e c t i o n i s thoroughly
o b j e c t i o n a b l e and i t s conditions too d r a s t i c . We do not
b e l i e v e t h a t any supervisory body should be clothed with
such power. I t would c o n f l i c t i n c e r t a i n cases w i t h the
loan l i m i t s e s t a b l i s h e d f o r s t a t e - c h a r t e r e d banks. I t
would not be 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 , because a
Board o r d e r aimed a t a l i m i t e d number of banks, or the
banks i n a c e r t a i n c i t y , would apply to a l l o t h e r banks
i n the d i s t r i c t i r r e s p e c t i v e of the f a c t t h a t they were
not o f f e n d i n g . In our judgment, the enactment of t h i s
s e c t i o n would r e s u l t i n the withdrawal of s t a t e banks
and conversion of n a t i o n a l banks to i n s t i t u t i o n s c h a r t e r ed by the s t a t e s .
Sec. 10. We concur i n t h e idea t h a t the Reserve Act
should contain some emergency p r o v i s i o n , b u t we b e l i e v e
t h a t a p l a n s u p e r i o r to t h a t proposed could be developed.
S i t u a t i o n s of the kind obviously contemplated by t h i s
s e c t i o n would probably o r i g i n a t e as a r e s u l t of demands
f o r currency. Since promissory notes of the groups r e c e i v i n g r e s e r v e bank funds would not be e l i g i b l e a s c o l l a t e r a l f o r Federal Reserve n o t e s , i t w?uld p l a c e a
f u r t h e r s t r a i n upon a r e s e r v e b a n k ' s gold; and since
developments making borrowing of the type d e s c r i b e d
seldom occur a t times other than p e r i o d s of unusual c r e d i t
s t r e s s , we b e l i e v e t h a t the r e g i o n a l banks should not have
t h i s added s t r a i n p l a c e d upon t h e i r gold r e s e r v e s .
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Sec 12. We do not b e l i e v e t h a t any n e c e s s i t y exi s t s f o r the c r e a t i o n of a new Open Market Committee,
in view of the f a c t t h a t the proposed committee does
not d i f f e r m a t e r i a l l y from the p r e s e n t setup of t h e
System P o l i c y Committee.
Sec. 13. We are u n a l t e r a b l y opposed to any p r o p o s a l to e s t a b l i s h a h i g h e r r a t e of discount on member bank
c o l l a t e r a l notes than on other e l i g i b l e paper o f f e r e d f o r
r e d i s c o u n t . We do not contemplate a l l c o l l a t e r a l - s e c u r e d
loans as r e p r e s e n t i n g s p e c u l a t i v e t r a n s a c t i o n s . We b e l i e v e t h a t member banks i n d i s c o u n t i n g with t h e i r r e s e r v e
bank should have access to reserve c r e d i t f a c i l i t i e s i n
the manner which i s most convenient f o r the borrowing
bank. I t i s common p r a c t i c e f o r banks to borrow on t h e i r
own c o l l a t e r a l n o t e s f o r short p e r i o d s i n p r e f e r e n c e to
r e d i s c o u n t i n g customers' paper to m a t u r i t y .
Sec. 14-b. We are opposed, i n p r i n c i p l e , to any p r o v i s i o n of law which r e q u i r e d the Federal Reserve Board to
e x e r c i s e CONTROL over t h e a c t i v i t i e s of Federal Reserve
banks. We b e l i e v e t h a t the p r e s e n t law gives the Board
ample power to supervise the r e l a t i o n s h i p s r e f e r r e d to in
t h i s s e c t i o n through the r e g u l a t i o n s which the law a u t h o r i z e s i t to promulgate.
Sec. 15. We know of no more e f f e c t i v e way t o k i l l
the system than to adopt t h i s s e c t i o n .
Sec. 16. In our opinion the r e p o r t of the System's
Committee on Reserves e s t a b l i s h e s r e s e r v e requirements on
a thoroughly s c i e n t i f i c b a s i s , and we strongly urge the
adoption of the committee's r e p o r t as a s u b s t i t u t e f o r
the r e s e r v e requirement proposed by the Glass b i l l .
Sec. 16-a, We b e l i e v e t h a t the Federal Reserve
Board should have a u t h o r i t y to r e g u l a t e d e a l i n g s i n
Federal funds, o t h e r than l e g i t i m a t e t r a n s f e r s , w i t h a
view to p r e v e n t i n g abuses t h a t may develop i n connection
with e i t h e r t r a n s f e r s or s a l e s of excess balances*
Sec. 17. Most of the p r o v i s i o n s of t h i s s e c t i o n i n volve such r a d i c a l d e p a r t u r e s from p r e s e n t banking p r a c t i c e t h a t we b e l i e v e they should be s u b j e c t to f u r t h e r
study b e f o r e enactment. We agree, in p r i n c i p l e , with the
i d e a of s p e c i a l p r o t e c t i o n f o r t h r i f t and savings d e p o s i t s .
We do not b e l i e v e t h a t a l l time d e p o s i t s , i n view of the
known n a t u r e of c e r t a i n s p e c i a l time accounts, should be
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p e r m i t t e d to be i n v e s t e d und®*1 the p r o v i s i o n s of t h i s
s e c t i o n as a t p r e s e n t d r a f t e d |
With r e s p e c t to investments i n bank p r e mises - in our judgment t h i s should "be t r e a t e d as an
e n t i r e l y separate proposal covered "by a separate s e c t i o n , and should s e t up not only the l i m i t a t i o n s w i t h
r e s p e c t to the percentage of a b a n k ' s c a p i t a l and s u r p l u s
r e p r e s e n t e d i n bank b u i l d i n g s or r e a l e s t a t e owned, but
should d i f f e r e n t i a t e between b u i l d i n g s e r e c t e d by banks
f o r t h e i r sole occupancy and b u i l d i n g s e r e c t e d by banks
p a r t s of which a r e to be r e n t e d f o r o f f i c e or commercial
uses.
Sec. 19. Since the requirement of any s p e c i f i e d
percentage of c a p i t a l funds to d e p o s i t l i a b i l i t i e s i s
p u r e l y a r b i t r a r y , we recommend t h a t f a r t h e r study be
given to the problem to determine whether the f i f t e e n p e r
cent requirement of t h i s s e c t i o n i s , on the one hand
necessary, or on the o t h e r hand, adequate. In e i t h e r
event, we suggest t h a t c a p i t a l funds f o r t h i s purpose be
l i m i t e d to c a p i t a l and s u r p l u s only, and t h a t i n the
event any p r o v i s i o n i n c r e a s i n g the c a p i t a l - l i a b i l i t y
r a t i o be enacted, ample time be allowed f o r making the
adjustmai t .
Sec.. 28. We are i n sympathy w i t h the proposal to
e s t a b l i s h l i m i t s to the r a t e of i n t e r e s t p a i d by banks
on d e p o s i t accounts, including d e p o s i t s of p u b l i c f u n d s .
In our opinion the s e c t i o n a s a t p r e s e n t drawn i s too
r e s t r i c t i v e , e s p e c i a l l y with r e s p e c t to payment of i n t e r e s t on demand d e p o s i t s . To p r o h i b i t the payment of i n t e r e s t on d e p o s i t s of t h i s type by member banks would
p l a c e them a t a d i s t i n c t disadvantage in competing w i t h
non-member i n s t i t u t i o n s f o r e i t h e r bank balances or comm e r c i a l accounts.
While t h e r e a r e p o i n t s i n the b i l l which appeal to us as m e r i t o r i o u s ,
much of t h e t e x t i s so vagae and i n d e f i n i t e as to make i t d i f f i c u l t of
i n t e r p r e t a t i o n and a n a l y s i s , or so obviously i m p r a c t i c a l as to render i t
unworkable. I t appeals i n spots as an attempt to deal with e v i l s which we
do not b e l i e v e e x i s t i n f a c t . In the main, we b e l i e v e t h a t the g r e a t bulk
of our membership would oppose i t s r e s t r i c t i o n s and requirements and t h a t
the e f f e c t s of i t s passage would be d i s a s t r o u s to a continuance of System
operations.
Comment upon q u e s t i o n s of the b i l l d e a l i n g with p r o p o s a l s which are more
of a l e g a l c h a r a c t e r a r e being prepared by counsel f o r t h i s bank and w i l l be
communicated to counsel f o r the Board a t the l a t t e r l s r e q u e s t .
Very t r u l y yours,
(S) E. E. Fancher,
Governor.
(S) Geo. DeCanp,
Federal Eeserve Agent.
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FEDERAL RES3RVE BAMK 0 ? RICHMOND
T E L E G R A M
FEDERAL RESERVE SYSTEM
(Leased Wire Service)
Received a t Washington, D. C.
B2KHEA
Richmond, Va.
850am
T
J a n . 30.
Governor Eugene Meyer,
F. R. Board, Washn.
Your wire 26th stop Have studied "bill under handicap of l i m i t e d
time stop Approve some p o i n t s stop Have always b e l i e v e d
i n i t i a t i v e in open market operations and foreigii agreements
should be v e s t e d in Federal Reserve Board stop Endorse h e a r t i l y
p r o p o s a l s r e branches of member banks stop b e l i e v e i n a s s i s t a n c e
to f a i l e d banks but t h i n k i t should be administered o u t s i d e
system stop on l i q u i d a t i n g corporations b i l l i s vague and
c o n t r a d i c t o r y in language stop r e s e r v e banks making loans °
groups of members i s wise emergency measure but I nope any proposal
to l e g a l l y introduce into Federal Reserve Banks paper not
e l i g i b l e f o r note i s s u e w i l l r e c e i v e close s c r u t i n y stop
Approve some of p r o v i s i o n s as to a f f i l i a t e s , p a r t i c u l a r l y as o
t h e i r examination, provided t h e r e i s p r e s e n t e d a reasonable and
understandable conception of an a f f i l i a t e r h i c h i s lacking in
the b i l l stop As t o r e s e r v e s much p r e f e r system committee plan^
to t h a t i n b i l l stop the considerable i n c r e a s e in r e s e r v e r e q u i r e ments would c u r t a i l lending power of member banks and r e a c t
sharply upon borrowers in a g r i c u l t u r a l d i s t r i c t s stop t o W
mind the d e s i r a b l e i n b i l l i s f a r outweighed by the u n d e s i r a b l e
stop the b i l l r e p r e s e n t s oppressive l e g i s l a t i o n in c e r t a i n
p r o v i s i o n s p a r t i c u l a r l y in those r e l a t i n g to c o l l a t e r a l loans
and to d e p o s i t s of c o r p o r a t i o n s engaged i n commerce and to ny
mind i s d e s t r u c t i v e in t h a t our good members w i l l withdraw
l e a v i n g us only those who cannot a f f o r d to withdraw. I ep ore
even the b i l l ' s p u b l i c i t y a t t h i s j u n c t u r e when t h e message
v i t a l l y needed i s one which i n s p i r e s hope and awakens courage.
HOXTOK
905a
X-707?
e-2
COPY
f e d e r a l aesaAvk BABC
OF RICHMOND
January 29, 1932.
SUBJECT:
THE GLASS BILL.
Honorable Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. C.
Dear Governor Meyer;
Answering your Trans. 1434, sent on the 26th, r e l a t i v e to the
Glass B i l l , I have the following comments to make, which I am sending "by
l e t t e r since i t w i l l reach you p r i o r to t h e time f i x e d in your r e q u e s t ,
namely, 3 o ' c l o c k Saturday a f t e r n o o n .
The l e g i s l a t i o n proposed i s of such f a r - r e a c h i n g , experimental,
and r a d i c a l n a t u r e t h a t t h e r e should be no thought whatever of p a s s i n g
the b i l l without g i v i n g h e a r i n g s to the banks in every p a r t of the country.
In saying t h i s , I do not omit to bear in mind the f a c t t h a t the b i l l i t s e l f was framed as a r e s u l t of extensive h e a r i n g s . I t i s one t h i n g , however, to frame a b i l l intending to c o r r e c t e v i l s b e l i e v e d to e x i s t , brought
out a t the h e a r i n g s , and q u i t e another thing to consider the b i l l intending
to c o r r e c t those e v i l s .
In my judgment, t h e r e i s no man l i v i n g who can a p p r a i s e t h e e f f e c t s of t h i s b i l l i f enacted into law. The consequences might be — and
I b e l i e v e they would be — a p p a l l i n g . Moreover, i n my judgment, i t i s exceedingly u n f o r t u n a t e t h a t a b i l l involving as much controversy a s t h i s
b i l l i s bound to r a i s e should come up at the very time when we a r e seeking
to a l l a y u n r e s t by remedial l e g i s l a t i o n without complications which probab l y can^be p u t into immediate e f f e c t . Furthermore, the banks of the count r y a r e too much occupied a t t h i s time over t h e i r d i s t u r b e d a f f a i r s to give
immediate study to the b i l l .
This b i l l should be s p l i t up into several b i l l s . For i n s t a n c e ,
t h a t p r o v i s i o n of the b i l l which provides f o r branch banking might with g r e a t
advantage be taken from t h i s b i l l and passed s e p a r a t e l y . Unless I am g r e a t l y mistaken, i t could be passed without any g r e a t delay. I b e l i e v e t h a t
p r o v i s i o n to be imperatively needed a t the p r e s e n t time. There a r e many
communities a l l over t h e country which a r e p r a c t i c a l l y deprived of banking
f a c i l i t i e s , and a l r e a d y l e g i s l a t i v e minds a r e a t work to supply t h e need
with t o t a l l y inadequate f a c i l i t i e s . Small banks a r e being proposed, which
i n the end w i l l , of course, have to go the way which o t h e r small banks
have gone.
I
C O P T
8 4
X-7077
e-2
Hdn» Eugene Meyer, Governor,
Federal Reserve Board, Page 2.
January 29, 1932.
Without attempting any d e t a i l e d a n a l y s i s of the b i l l , which I do
not b e l i e v e to be wanted, I give i t as my opinion t h a t i t would c r i p p l e the
Federal Reserve System beyond r e p a i r . My b e l i e f i s t h a t i t would r e s u l t
in an exodus from the System of those l a r g e banking i n s t i t u t i o n s in which
the commercial b u s i n e s s does not dominate, and i t w i l l p r e c l u d e g e t t i n g into
the System very many banking i n s t i t u t i o n s which might advantageously be
included. I t w i l l spur t h e competition and antagonism which a l r e a d y e x i s t
between s t a t e banks and n a t i o n a l banks, and i t w i l l give s t a t e banks
immeasurably the advantage in o b t a i n i n g the d e p o s i t s of t h e country. Even
if i t should not be f e l t immediately, when b u s i n e s s q u i e t s down and assumes
i t s customary a s p e c t the d i s i n t e g r a t i o n of the Federal Reserve System w i l l
begin.
The c o n t r o l or censorship over loans on c o l l a t e r a l , by which i t
i s assumed t h a t stocks and bonds a r e meant (although i t i s nowhere s t a t e d
in t h e . . b i l l ) , would be an i n t o l e r a b l e p r o v i s i o n . How would t h e banks
l e n d t h e i r funds? There i s not s u f f i c i e n t commercial p a p e r . I t i s
known to everybody how t h e c o r p o r a t i o n s formerly accustomed to borrow
have provided themselves with working c a p i t a l by the i s s u e of s e c u r i t i e s .
There would remain then f o r t h e investment of banking c a p i t a l s e c u r i t i e s
of a l l c l a s s e s and r e a l e s t a t e , and the b i l l seeks to r e s t r i c t and
diminish loans of t h i s c h a r a c t e r .
The p r o v i s i o n which p e n a l i z e s the 15 day notes upon a l l c l a s s e s
of c o l l a t e r a l , including b i l l s r e c e i v a b l e , would p l a c e a burden on t h e
banks which the banks would not and could not t o l e r a t e .
The p r o v i s i o n which r e n d e r s member bank notes secured by
Government bonds i n e l i g i b l e as c o l l a t e r a l f o r Federal Reserve n o t e s would
inconvenience and r e s t r i c t the o p e r a t i o n s of Federal Reserve Banks i n
supplying currency in a manner which a t times might, and would, prove
d i s a s t r o u s . I f , a t the p r e s e n t time, paper secured by Government bonds
discounted by the Federal Reserve Banks were eliminated, i t would remove
about 450 m i l l i o n d o l l a r s of f r e e gold. The b i l l takes f o r g r a n t e d , of
course, t h a t such n o t e s would be r e p l a c e d by the discount of o r d i n a r y
b i l l s r e c e i v a b l e . This might or might not be the case. There a r e other
p r o v i s i o n s a f f e c t i n g t h e i s s u i n g powers of Reserve Banks a d v e r s e l y .
That p r o v i s i o n of t h e b i l l p r o h i b i t i n g the payment of i n t e r e s t
on demand d e p o s i t s i s one of the p r o v i s i o n s mentioned above which would
give s t a t e banks a tremendous advantage in competition f o r d e p o s i t s ,
which they would not be slow to u s e .
The p r o v i s i o n s of the b i l l f o r r e s e r v e requirements a r e so
r a d i c a l t h a t t h e y could not f a i l to be r e b e l l e d a g a i n s t .
X-7077
e-2
fen* Eugene Meyer * Governor#
Federal Reserve Board, Page 3.
January 29, 1932.
That p r o v i s i o n of the b i l l which aims to form a l i q u i d a t i n g
c o r p o r a t i o n contains in i t the germ of a good idea. But i t i s such an
innovation t h a t i t needs to be thought of from a l l angles, and i t should
not "be h a s t i l y passed u n t i l i t can "be thoroughly d i g e s t e d . The p r o v i s i o n
as drawn has such obvious d e f e c t s t h a t i t shows e i t h e r a l a c k of understanding or too g r e a t h a s t e in p r e p a r a t i o n . The l a t t e r i s b e l i e v e d to
c h a r a c t e r i z e t h e e n t i r e b i l l . The p r o v i s i o n f o r the l i q u i d a t i n g corporat i o n as drawn would leave no excess earnings of Federal Reserve Banks
to i n c r e a s e the s u r p l u s , and does not provide f o r making* £ocd d e p l e t i o n
of s u r p l u s from d e f i c i e n t earnings such as t h a t experienced l a s t year,
Another proposal in the b i l l which contains the germ of a good
idea, in my opinion, i s t h a t which provides f o r the formation of groups
of banks which may act as c l e a r i n g houses have h e r e t o f o r e a c t e d in rendering a i d to a bank in t r o u b l e , and which makes the o b l i g a t i o n s c r e a t e d
thereby e l i g i b l e f o r discount by Federal Reserve Banks but not e l i g i b l e
as s e c u r i t y f o r Federal Reserve n o t e s . This needs to be thoroughly coins i d e r ed by member banks themselves.
The p r o v i s i o n of the b i l l which makes changes in the manner
in which r e a l e s t a t e loans a r e made i s b e l i e v e d to be too complicated f o r
a d m i n i s t r a t i o n by country banks, in which we a r e accustomed to f i n d t h e
g r e a t e s t volume of r e a l e s t a t e loans, according to my experience.
The f i n a l p r o v i s i o n of t h e b i l l , which p r o h i b i t s c o r p o r a t i o n s of
the country from d e p o s i t i n g t h e i r funds with any but incorporated banking
i n s t i t u t i o n s i s probably not enforceable and would not be t o l e r a t e d by
the country I am s"ure.
Those p r o v i s i o n s of the b i l l which tend to c o n c e n t r a t e f a r
g r e a t e r power in the Federal Reserve Board and to make t h e Board in a l l
but d e t a i l s the o p e r a t o r s of Federal Reserve Banks, appear to tend t o wards a g r e a t c e n t r a l banking system, which I b e l i e v e could not be operated
with success in a country of t h i s magnitude and of such d i v e r s e i n t e r e s t s
and such d i v e r s e customs and p r a c t i c e s of banking. Furthermore, i t seems
to r e l i e v e d i r e c t o r s of Federal Reserve banking i n s t i t u t i o n s of a very
g r e a t p a r t of t h e i r i n i t i a t i v e and r e s p o n s i b i l i t y , and would c e r t a i n l y
I b e l i e v e tend in the course of time, i f not immediately, to lower t h e
c a l i b r e of the men who would undertake to occupy p o s i t i o n s of such r e s t r i c t ed r e s p o n s i b i l i t y .
I b e l i e v e t h a t t h i s b i l l w i l l be t o r n to p i e c e s by the banks
of the country, and t h a t i t would be almost a crime to attempt i t s h a s t y
passage.
X-7C*7
6—2
Hon. Eugene Meyer, Governor,
Federal Reserve Board, page 4.
January 29, 1932,
The b i l l if enacted into law w i l l have a s e v e r e l y depressing
e f f e c t upon Government s e c u r i t i e s . The mere o f f e r i n g of the b i l l may
have some adverse e f f e c t .
I t i s , of course, a d r a s t i c d e f l a t i o n a r y b i l l .
Very t r u l y yours,
GJS-CGP
(S)
George J . Seay
GEO. J . SEAY,
Governor.
C
O
P
Y
FEDERAL W&&V& BANK
X-7077
f-1
OF ATLANTA
January 29, 1932.
Mr. Eugene Meyer, Governor,
The Federal Reserve Board,
Washington, D. C.
Dear Governor Meyer;
Reference i s made to your telegram (Trans No. 1434), under
date of January 26th, asking my views with r e s p e c t to the B i l l , S. 3215,
introduced in t h e Senate by Senator Glass on January 21, 1932.
I f i r m l y b e l i e v e in the Federal Reserve Act. I t i s my own
b e l i e f t h a t the p r e s e n t s e s s i o n of Congress i s not an opportune time f o r
a thorough r e v i s i o n of the Federal Reserve Act, because of t h e g r e a t l y
d i s t u r b e d banking c o n d i t i o n s which now e x i s t . While I am e n t i r e l y in
accord with t h e purposes of the B i l l as expressed in the i n t r o d u c t o r y ,
I do not favor e n t i r e l y t h e plans proposed f o r t h e enactment of t h e s e
purposes. Although the importance of t h e measures i n c o r p o r a t e d in t h e
B i l l deserves much more study than I have been a b l e to give them in t h e
l i m i t e d a time a copy of i t has been a v a i l a b l e to me, I s h a l l express my
views on such s e c t i o n s of the B i l l as I deem comment n e c e s s a r y .
SECTION' 3 OF THE BANKING ACT OF 1932, amending paragraph 8
of t h e Federal Reserve Act.
I b e l i e v e t h a t some r e s t r i c t i o n should be p l a c e d on the use
of Federal r e s e r v e c r e d i t f o r s p e c u l a t i v e purposes, but t h a t t h e p r o v i s i o n s of t h i s s e c t i o n a r e e n t i r e l y too d r a s t i c .
SECTION 4 OF THE BANKING ACT OF 1932, amending t h e 25th p a r agraph of Section 4 of t h e Federal Reserve Act, with r e g a r d to t h e e l e c t i o n of Federal r e s e r v e bank d i r e c t o r s .
I am not in favor of t h i s amendment.
SECTION 5 OF THE BANKING ACT OF 1932, amending Section 7 of
t h e Federal Reserve Act, r e l a t i n g to earnings of Federal r e s e r v e banks.
I am opposed to t h i s amendment f o r t h e reason t h a t i t would
g r e a t l y weaken the Federal r e s e r v e banks. I am f i r m l y of t h e opinion
t h a t t h e r e should be no change in the p r o v i s i o n s of t h e p r e s e n t law r e l a t i n g to the d i s t r i b u t i o n of earnings of Federal r e s e r v e banks.
SECTION 6 OF THE BANKING ACT OF 1932, p r o v i d e s f o r a new
paragraph between the 5th and 6th paragraphs of Section 9 of the Federal
Reserve Act, r e q u i r i n g a f f i l i a t e s of a bank admitted to membership under
a u t h o r i t y of Section 9, during a p e r i o d of two years a f t e r the s e c t i o n
a s amended t a k e s e f f e c t , to make and f u r n i s h to t h e p r e s i d e n t of t h e bank
f o r transmission by him to t h e Federal Reserve Board, not l e s s than t h r e e
r e p o r t s during each y e a r , e t c .
8*7
x-7ofe
8 0
FEDERAL RESERVE BANK OF ATLANTA
Federal Reserve Board
Washington, D. C.
-2-
1-29-32
I am in accord with t h i s p r o v i s i o n except t h a t I do not think
the p e r i o d f o r which the r e p o r t s a r e to be rendered should be l i m i t e d .
SECTION 8 OF THE BANKING ACT OF 1932, amending Section 11(e) of
the Federal Reserve Act r e l a t i n g to the r e c l a s s i f i c a t i o n of r e s e r v e c i t i e s .
Inasmuch as I am opposed to Section 16 of t h e B i l l , I see no
j u s t i f i c a t i o n f o r t h i s amendment.
SECTION 9 OF THE BANKING ACT OF 1932. amending Subsection(m) of
Section 11 of t h e Federal Reserve Act.
This amendment gives t h e power to the Federal Reserve Board to
f i x from time to time f o r each Federal r e s e r v e d i s t r i c t the percentage of
i n d i v i d u a l bank c a p i t a l and s u r p l u s which may be r e p r e s e n t e d by c o l l a t e r a l
secured loans by member banks w i t h i n such d i s t r i c t .
I am not in favor of t h i s amendment, but b e l i e v e the c r e d i t
extension and c o l l a t e r a l requirements of member banks should be allowed to
remain with t h e i r managements.
SECTION 10 OF THE BANKING ACT OF 1932, p r o v i d i n g f o r a new
s e c t i o n HA of t h e Federal Reserve Act.
This new s e c t i o n a u t h o r i z e s Federal Reserve Banks, with the
consent of the Federal Reserve Board, to make advances to groups of member
banks within t h e i r d i s t r i c t s , and provides t h a t such loans a r e not to be
e l i g i b l e as c o l l a t e r a l s e c u r i t y to Federal r e s e r v e n o t e s . This apparently
i s designed f o r a r e l i e f measure, and under the conditions the Federal Reserve Bank of A t l a n t a has experienced and i s experiencing, t h e Atlanta r e serve bank, under s i m i l a r c o n d i t i o n s , would not be in a p o s i t i o n to a f f o r d
much, i f any, r e l i e f to any bank under t h i s p r o v i s i o n of law.
SECTION 11 OF THE BANKING ACT OF 1932 r e s t r i c t s member banks in
making loans to t h e i r a f f i l i a t e s , both as to amount and as to kind of
collateral security.
I am in accord with t h i s p r o v i s i o n .
SECTION 12 OF THE BANKING ACT OF 1932, enacting a new s e c t i o n
12A of t h e Federal Reserve Act.
This section c r e a t e s a Federal Open Market Committee.
I am in accord w i t h t h i s p r o v i s i o n in the B i l l as i t r e l a t e s to
System account, except t h a t I do not t h i n k t h a t the members of t h e committee
appointed by the boards of d i r e c t o r s of the Federal r e s e r v e banks should be
s u b j e c t to the confirmation of t h e Federal Reserve Board, but t h a t they
should be s u b j e c t to removal f o r j u s t cause by the Federal Reserve Board.
SECTION 12B OF THE BANKING ACT OF 1932, e s t a b l i s h i n g t h e Federal
Liquidating Corporation.
FEDERAL RESERVE BANK OF ATLANTA
Federal Reserve Board
Washington, D. C.
X-7077
f k
-3-
8 9
1-29-32
I am u n a l t e r a b l y opposed to t h i s p r o v i s i o n in the B i l l f o r t h e
reason t h a t t h e c a p i t a l to be f u r n i s h e d the corporation f o r use i n l i q u i d a t i n g
the a s s e t s of c l o s e d member banks i s to be f u r n i s h e d by the Federal r e s e r v e
banks and t h e i r members. Federal r e s e r v e banks would be weakened by the
amount of t h e c a p i t a l s u b s c r i p t i o n charged to i t s s u r p l u s , and under t h e
p r o v i s i o n s of Section 5 of t h i s B i l l , a l l earnings of Federal r e s e r v e
banks would be p a i d to the Federal L i q u i d a t i n g Corporation. In t h e event
a Federal r e s e r v e bank had an o p e r a t i n g d e f i c i t ( d e p r e c i a t i o n and l o s s e s )
such d e f i c i t would n e c e s s a r i l y f u r t h e r reduce i t s s u r p l u s and would make
necessary the postponement of t h e payment of dividends u n t i l such time
as they were earned. There i s no p r o v i s i o n f o r r e s t o r i n g t h e s u r p l u s of
Federal r e s e r v e banks, e i t h e r by earnings in excess of dividend requirements,
or by any o t h e r method.
I am opposed to t h i s s e c t i o n of the B i l l f o r t h e f u r t h e r reason
t h a t the member banks a r e r e q u i r e d to f u r n i s h c a p i t a l equal to one-half of
one per centum of t h e i r t o t a l outstanding net time and demand d e p o s i t s f o r
which they would r e c e i v e stock in the Federal L i q u i d a t i n g Corporation, The
a s s e t s of t h i s c o r p o r a t i o n would n e c e s s a r i l y be of a slow n a t u r e , and the
member banks would, under t h e law, be f o r c e d to use t h e i r f u n d s f o r a slow
investment. I b e l i e v e t h a t t h i s p r o v i s i o n in t h e B i l l would be very o b j e c t
t i o n a b l e to the member banks, even to the extent t h a t some would be l o s t
to membership in the Federal Reserve System.
SECTION' 13 OF THE BANKING ACT OF 1932, amending the 7th p a r agraph of Section 13 of the Federal Reserve Act, p r o v i d i n g f o r a one per
centum higher r a t e than the r e d i s c o u n t r a t e on a member b a n k ' s 15-day promissory note, and p r o h i b i t i n g a member bank from i n c r e a s i n g i t s c o l l a t e r a l
n o t e s during the term of such 15-day borrowings.
I am not i n f a v o r of t h i s amendment f o r the reason t h a t l e g i t i m a t e b u s i n e s s needs of the customers of the member bank who w i l l be a b l e
to secure t h e i r n o t e s with investment stocks or bonds as c o l l a t e r a l , c o u l d
not be met by t h e bank uqder p r o v i s i o n s of t h i s s e c t i o n . I would favor an
amendment not provided f o r in the B i l l p e r m i t t i n g Federal r e s e r v e banks to
discount d i r e c t n o t e s of member banks secured by e l i g i b l e paper f o r a p e r i o d
of n i n e t y days.
SECTION 14 OF THE BANKING ACT OF 1932, p r o v i d i n g f o r a d d i t i o n a l
subsection of Section 14 of t h e Federal Reserve Act, r e l a t i v e to t h e r e l a t i o n s h i p s and t r a n s a c t i o n s between Federal r e s e r v e banks and f o r e i g n banks.
I am in accord with the purpose of t h i s amendment.
SECTION 15 OF THE BANKING ACT OF 1932 amends the second, t h i r d
and f o u r t h paragraphs of Section 16 of t h e Federal Reserve Act, r e l a t i v e to
t h e issuance of Federal r e s e r v e n o t e s .
I am in accord with the proposed amendments to t h i s s e c t i o n .
I b e l i e v e t h a t e v e n t u a l l y t h e promissory notes of member banks acquired under
the p r o v i s i o n s of Section 13, secured by d e p o s i t s or pledge of bonds of the
FEDERAL RESERVE BANK OF ATLANTA
Federal Reserve Board
Washington, D. C.
90
-4*
1-29-32
United S t a t e s should be declared i n e l i g i b l e as c o l l a t e r a l s e c u r i t y to Federal
r e s e r v e n o t e s . However, in my opinion, t h i s exception i s not d e s i r a b l e a t the
p r e s e n t time because of the unusual demands f o r currency which have r e c e n t l y
been in evidence, and f o r t h e reason t h a t the Government w i l l r e q u i r e t h e f u l l
cooperation of t h e member banks in the f l o t a t i o n of l a r g e i s s u e s of s h o r t
term Government s e c u r i t i e s in the near f u t u r e .
SECTION 16 OF THE BACKING ACT OF 1932, amending Section 19 of the
Federal Reserve Act, with r e s p e c t to member bank r e s e r v e requirements.
The proposed B i l l provides f o r an i n c r e a s e of 10$, 7sb and 4$ in
the r e s e r v e s r e q u i r e d to be maintained with Federal r e s e r v e banks a g a i n s t
time d e p o s i t s ( e x c l u s i v e of t h r i f t d e p o s i t s ) by banks l o c a t e d in c e n t r a l r e serve c i t i e s , r e s e r v e c i t i e s , and other c i t i e s , r e s p e c t i v e l y .
I am of the opinion t h a t any i n c r e a s e in t o t a l r e s e r v e s r e q u i r e d
would be met with opposition from our member banks. I b e l i e v e t h a t r e s e r v e s
a g a i n s t time and demand d e p o s i t s should be c a l c u l a t e d on the same b a s i s ,
but a t a r a t e which would produce a t o t a l volume of r e s e r v e s approximately
equal to our member bank r e s e r v e d e p o s i t s under p r e s e n t requirements.
I am in accord with the p r o v i s i o n s of t h i s s e c t i o n which p r o h i b i t a member bank from a c t i n g as the medium or agent of any non-banking
c o r p o r a t i o n or i n d i v i d u a l in making loans secured by c o l l a t e r a l , and which
provide t h a t no member bank s h a l l make loans and discount paper f o r any
c o r p o r a t i o n or i n d i v i d u a l who s h a l l , a t t h e time of making or renewing any
such loan, have o u t s t a n d i n g such loans secured by c o l l a t e r a l i n favor of any
investment banker, b r o k e r , member of any stock exchange, or d e a l e r in
securities.
I do not favor t h e amendment in t h i s s e c t i o n which r e q u i r e s
t h a t a f e e be charged f o r t h e s a l e or t r a n s f e r of a member b a n k ' s excess
b a l a n c e , and which a l s o r e q u i r e s a u t h o r i t y of t h e Federal Reserve Board f o r
such s a l e or t r a n s f e r .
I am not i n favor of the p r o v i s i o n t h a t r e q u i r e s the a d d i t i o n
of t h e l i a b i l i t y c r e a t e d by repurchase or o t h e r s i m i l a r agreements to the
net d i f f e r e n c e of amounts (hie to and from o t h e r banks, in computing r e s e r v e
requirements.
SECTION 17 OF THE BANKING ACT OF 1932, amending Section 24
of t h e Federal Reserve Act with r e s p e c t to r e a l e s t a t e l o a n s , e t c .
I do not favor t h e p r o v i s i o n in t h i s s e c t i o n r e q u i r i n g the
Comptroller of t h e Cur render a t the time of each examination of a bank to
r e v i s e the v a l u a t i o n s of r e a l e s t a t e securing l o a n s , and to r e q u i r e a d j u s t ments in the amounts of such loans according to the r e v i s e d v a l u a t i o n s .
I am in accord with the p r o v i s i o n l i m i t i n g the aggregate amount
of r e a l e s t a t e loans to 15$ of the amount of the c a p i t a l stock a c t u a l l y
p a i d in and unimpaired, and to 15$ of i t s unimpaired s u r p l u s , or to one-half
of i t s time and t h r i f t d e p o s i t s .
I do not t h i n k investments in bank premises and unsecured
loans whose eventual s a f e t y depends upon the value of r e a l e s t a t e should be
counted as r e a l e s t a t e l o a n s . I do, however, t h i n k t h a t some o t h e r l i m i t a t i o n
should be made on investment in bank premises.
!,
FEDERAL RESERVE SANK OF ATLANTA
Federal Heserve Soar4
Washington, D. Ci
X-707*7
f-1
-5-
91
1-29-32
In the l i m i t e d time I have had to study the B i l l , I am not
prepared to express my views with r e f e r e n c e to t h a t p a r t of t h i s s e c t i o n
a u t h o r i z i n g t h e balance of time and t h r i f t d e p o s i t s to be i n v e s t e d in p r o p e r t y
and s e c u r i t i e s in which savings banks may i n v e s t under the S t a t e law, and
the requirement t h a t t h e r e c e i v e r of an i n s o l v e n t bank apply t h e p r o p e r t y
acquired under t h i s s e c t i o n r a t a b l y and p r o p o r t i o n a t e l y to t h e payment of
time and t h r i f t d e p o s i t s .
SECTION 18 OF THE BANKING ACT OF 1932, amending paragraph 7
of Section 5106 of t h e Revised S t a t u t e s , with r e s p e c t to investment powers
of n a t i o n a l banks.
I do not favor t h e amendment r e q u i r i n g the Comptroller of the
Currency, by r e g u l a t i o n , to p r e s c r i b e the amount of investment s e c u r i t i e s
t h a t a n a t i o n a l bank may purchase f o r i t s own account. I t h i n k t h i s should
be determined by the management of the bank. There does not appear to
me to be any o t h e r p r o v i s i o n in t h i s section t h a t i s s e r i o u s l y o b j e c t i o n a b l e .
SECTION 19 OF THE BANKING ACT OF 1932, amending Section 5138
of t h e Revised S t a t u t e s , by adding a t t h e end a new paragraph r e l a t i n g to
t h e amount of c a p i t a l of n a t i o n a l banks.
I am in favor of t h i s amendment except t h a t I do not favor
the p e n a l t i e s f o r non-compliance, a s , in my opinion, they a r e too d r a s t i c .
SECTION 20 OF THE BANKING- ACT OF 1932 provides for an amendment to Section 5139 of the Revised S t a t u t e s , with regard to the p a r value
of c e r t i f i c a t e s of stock of n a t i o n a l banks, and p r o v i d e s t h a t no c e r t i f i c a t e r e p r e s e n t i n g t h e stock of any banking a s s o c i a t i o n s h a l l r e p r e s e n t the
stock of any o t h e r c o r p o r a t i o n .
A f t e r c a r e f u l study of these p r o v i s i o n s , I am of t h e opinion
t h a t Section 5139 of t h e Revised S t a t u t e s should not be amended a t t h i s
time.
SECTION 21 OF THE BANKING ACT OF 1932, r e l a t i n g to o f f i c e r s
and employees of member ban% serving as o f f i c e r s and employees of any corp o r a t i o n , a s s o c i a t i o n , c o p a r t n e r s h i p , or i n d i v i d u a l , engaged in t h e purchasing, s e l l i n g , or n e g o t i a t i n g s e c u r i t i e s .
In my opinion the abuses a r i s i n g out of such r e l a t i o n s h i p s
a r e not of enough importance to j u s t i f y t h i s p r o v i s i o n .
SECTION 22 OF THE BANKING ACT OF 1932, amending Section 5144
of the Revised S t a t u t e s , with regard to the v o t i n g of stock.
This amendment i s so c l o s e l y connected with Section 24 of
t h e B i l l t h a t my views w i l l be expressed in connection with t h a t s e c t i o n .
SECTION 23 OF THE BANKING ACT OF 1932, with r e g a r d to oaths
of s t o c k h o l d e r s .
FEDERAL RESERVE BANK OF ATLANTA
Federal Reserve Board
Washington, D. C.
X-7077
*-1
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1-29-32
This amendment i s also so c l o s e l y connected with Section 24
of the B i l l t h a t my views w i l l be expressed in connection with t h a t s e c t i o n .
SECT 1017 24 OF THE BACKING ACT OF 1932, r e l a t i v e
r i g h t s of n a t i o n a l banks' stock h e l d by a f f i l i a t e s .
The p r o v i s i o n s of Sections 22-, 23 and 24 would,
opinion, be so o b j e c t i o n a b l e t h a t many n a t i o n a l banks would
non-member S t a t e banks, thereby weakening both the n a t i o n a l
and t h e Federal r e s e r v e system, and s t a t e bank member would
membership, thereby f u r t h e r weakening the System.
to the voting
in my
convert into
bank system
withdraw from
SECTION 25 OF THE BANKING ACT OF 1932, amending paragraph (c)
of Section 5155 of t h e Revised S t a t u t e s with r e s p e c t to branches of
n a t i o n a l banks.
Because of the short time which I have had to study the
p r o v i s i o n s of t h i s s e c t i o n , I am not prepared to express an opinion a t
present.
SECTION 27 OF THE BANKING ACT OF 1932, amending t h e f i r s t two
sentences of Section 5197 of the Revised S t a t u t e s r e l a t i n g to i n t e r e s t
charged by n a t i o n a l banks.
I am in accord with t h i s amendment.
SECTION 28 OF THE BANKING- ACT OF 1932, l i m i t i n g t h e r a t e of
i n t e r e s t which member ban?cs a r e p e r m i t t e d to pay on d e p o s i t s .
I do not favor t h i s amendment f o r t h e reason t h a t member
banks come in competition with non-member S t a t e banks which a r e not subj e c t to such r e s t r i c t i o n s with regard to i n t e r e s t p a i d on d e p o s i t s .
SECTION 29 OF THE BANKING ACT OF 1932, amending Section 5200
of the Revised S t a t u t e s , r e l a t i v e to l i m i t a t i o n s of loans of n a t i o n a l
banks to one p e r s o n .
I have not s t u d i e d t h i s amendment s u f f i c i e n t l y to express an
opinion a t t h i s time.
SECTION 31 OF THE BANKING ACT OF 1932, amending Section 5211
of the Revised S t a t u t e s , by adding a new paragraph r e q u i r i n g r e p o r t s of
a f f i l i a t e s of n a t i o n a l banks.
I am in favor of t h a t p a r t of t h i s amendment which r e q u i r e s
a f f i l i a t e s to render r e p o r t s to t h e Comptroller of the Currency, b u t I
am not in favor of r e q u i r i n g an a f f i l i a t e to p u b l i s h i t s e n t i r e p o r t f o l i o
when indebted to t h e bank in excess of 5$ of i t s c a p i t a l and s u r p l u s .
SECTION 32 OF THE BANKING ACT OF 1932, amending Section 5240
of the Revised S t a t u t e s , by adding a paragraph r e l a t i n g to examination
of a f f i l i a t e s of n a t i o n a l or member banks.
I
FEDERAL RESERVE BAM OF ATLANTA
Federal Reserve Board,
Washington, D. C.
X-7077
f-1
-7-
I am in favor of the amendment a u t h o r i z i n g an examiner
in making an examination of a member hank to make an examination
of the a f f a i r s of a l l a f f i l i a t e s of such banks, but I b e l i e v e the
p e n a l t i e s p r e s c r i b e d f o r non-compliance a r e too severe.
SECTION 33 OF THE BANKING ACT OF 1932 provides f o r add i t i o n of another s e c t i o n 8A to the Clayton Anti Trust Act.
I am not in favor of t h i s a d d i t i o n to the Clayton. Act f o r
the reason t h a t , in my opinion, i t i s e n t i r e l y too severe.
Yours very t r u l y
(Signed)
Oscar Newton
Federal Reserve Agent.
93
ItC O P Y
95:
X-7077
g-1
FEDERAL RESERVE BANK OF CHICAGO
230 SOUTH LA SALLE STREET
January 25, 1932
Federal Reserve Board
Washington, D. C.
Mr. Chester M o r r i l l , Secretary
Gentlemen;
I a p p r e c i a t e your promptness in sending us copies of the
Senate B i l l lio. 3215, introduced by Senator Glass on January 21.
We a r e , of course, d i s t u r b e d by the p r e s e n t a t i o n of t h i s
B i l l a t j u s t t h i s time, p a r t i c u l a r l y with r e f e r e n c e to the r a d i c a l
changes which i t imposes upon the c o n d i t i o n s of membership in the
Federal Reserve System and i t s r e a c t i o n on the i n d i v i d u a l member
banks. The e l i m i n a t i o n from a p r a c t i c a l standpoint of Government
bonds as e l i g i b l e f o r borrowings from the Federal Reserve banks
alone seems very inopportune in connection with the p r e s e n t Treasury
program, a s we a r e convinced t h a t a l a r g e p r o p o r t i o n of the holdings of Government bonds by banks a r e so h e l d because of t h e i r
eligibility.
We t r u s t that a c t i o n on t h i s B i l l may be delayed u n t i l
a more opportune time and t h a t the viewpoint of p r a c t i c a l banking
may be h e a r d .
Very t r u l y yours,
(Signed)
Eugene M. Stevens.
C h ,a i r m a n
EMS HH
k
FEDERAL RESERVE RANK OF CHICAGO
95
TELEGRAM
240gb
X—7077
G-2
Chicago Jan 29 252p
Meyer
Board Washington
Answering your r e q u e s t f o r my views on senate b i l l 5215 my primary r e a c t i o n i s t h a t l e g i s l a t i o n proposing so much of r a d i c a l changes in
conduct of banking s t r u c t u r e i s exceedingly in-opportune during present
disturbed conditions.
Believe i t w i s e r t o d e f e r any a c t i o n whatever than i n s t i t u t e fundamental changes j u s t now. Application of t h e o r i e s proposed are so much at
variance with a c t u a l and necessary p r a c t i c e in operation growing out of
experience of p r a c t i c a l bankers t h a t would expect strong p r o t e s t from
member banks everywhere and g r e a t l y l e s s e n t h e i r d e s i r e to continue memb e r s h i p i n system. Consider proposed b i l l would i n p r a c t i c e l a r g e l y
destroy e f f i c a c y of system in what i t was e s t a b l i s h e d to perform with
s t r o n g p r o b a b i l i t y of d r a s t i c weakening of n a t i o n a l system by conversion
i n t o s t a t e banks and otherwise minimizing i t s e f f i c i e n c y .
Believe passage would r e s u l t i n p r a c t i c e in g r e a t c o n t r a c t i o n in
a v a i l a b l e f e d e r a l r e s e r v e c r e d i t and would be marked d e f l a t i o n a r y measure
a t t h i s time. P r o v i s i o n p r o h i b i t i n g making of c o l l a t e r a l loans while bank
was borrowing on governments would i n p r a c t i c a l l y every case completely
estop them from any use of such c r e d i t in p r a c t i c e . Whatever may be
proper theory of bond secured currency, the f a c t s a r e t h a t p r e s e n t l y and
u s u a l l y , Federal Reserve c r e d i t t o members i s over 50 p e r c e n t based on
government bond borrowings.
Member banks have without q u e s t i o n c a r r i e d the g r e a t e r p o r t i o n of
the government f i n a n c i n g because of i t s e l i g i b i l i t y and i f dependent only
on markets f o r l i q u i d i t y would without doubt g r e a t l y decrease t h e i r
p r e s e n t h o l d i n g s . F u r t h e r , by reason of g r e a t amount of p u b l i c
f i n a n c i n g by c o r p o r a t i o n s s i n c e enactment of Act, percentage of e l i g i b l e
paper o f f e r e d t o member banks and i n t h e i r p o r t f o l i o s has g r e a t l y decreased. The f i v e p r i n c i p a l banks i n City of Chicago on l a s t c a l l showed
about 24% of d e p o s i t s invested i n U S bonds and l e s s than 6<f0 thereof i n
e l i g i b l e paper and acceptances, and i t i s probable t h a t average of a l l
member banks i n t h i s d i s t r i c t would not be over 10$ t o 15% of d e p o s i t s
in e l i g i b l e p a p e r .
In seeking l i q u i d i t y t o r e p l a c e t h e i r government bonds, which
would become in p r a c t i c e i n e l i g i b l e and f o r s u b s t i t u t e employment of t h e i r
d e p o s i t s , of which so small a p r o p o r t i o n i s r e q u i r e d i n commodity
t r a n s a c t i o n s , temptation would be almost i r r e s i s t i b l e t o employ them on
c a l l money markets a g a i n s t s e c u r i t i e s , thus d i r e c t l y d e f e a t i n g purposes
aimed a t i n proposed b i l l .
P r o v i s i o n f o r ten bank j o i n t borrowing on i n e l i g i b l e paper would
only be used in extreme emergency and in very few cases and trould not be
e f f i c a c i o u s excepting t o v e r y l i m i t e d degree i n extending f e d e r a l Reserve
c r e d i t . More p r a c t i c a l extension of such c r e d i t in emergency could be
e f f e c t e d without v i o l a t i o n of p r i n c i p a l of e l i g i b i l i t y and b a s i s of
currency i s s u e by extending m a t u r i t y of e l i g i b l e paper from n i n e t y days
to s i x months, p o s s i b l y with p e n a l t y r a t e , to banks i n d i v i d u a l l y as a t
—
X-7077 !,
G 2
—
£
present.
90
B i l l seems t o be drawn on assumption t h a t a l l s e c u r i t y loans are
s p e c u l a t i v e l o a n s . Truth i s t h a t very g r e a t p r o p o r t i o n thereof are
e n t i r e l y l e g i t i m a t e banking s e r v i c e with no r e l a t i o n whatever t o
s p e c u l a t i v e purposes. In my personal opinion perhaps b e s t index of
s t r i c t l y s p e c u l a t i v e loans are those made t o i n d i v i d u a l s by stock brokers
through t h e i r margin a c c o u n t s , which i s a form of banking b u s i n e s s i n no
way under d i r e c t government r e g u l a t i o n . I f s p e c u l a t o r s had t o make
t h e i r i n d i v i d u a l loans with t h e i r banks d i r e c t i n s t e a d of b r o k e r s ,
s p e c u l a t i v e tendencies would be g r e a t l y checked i n times of i n f l a t i o n .
Do not t h i n k e s s e n t i a l s t r e n g t h of f e d e r a l r e s e r v e hanks should
be impaired by c o n t r i b u t i o n s from s u r p l u s t o l i q u i d a t i n g c o r p o r a t i o n , nor
t h a t t h e i r e f f i c i e n c y i n t h e i r p r e s e n t r e s p o n s i b l e f u n c t i o n s and t h e i r
s t a n d i n g i n communities which they serve be impaired by t h e i r undertaking
management of l i q u i d a t i n g and consequent f o r c i n g c o l l e c t i o n of a s s e t s of
closed banks. Am i n sympathy w i t h some r e g u l a t i o n and examination of
a f f i l i a t e s and curbing t h e i r a c t i v i t i e s i n merchandising of stocks but
consider proposed r e g u l a t i o n s a l t o g e t h e r too d r a s t i c a t t h i s t i m e . This
a l s o a p p l i e s t o c e r t a i n r e g u l a t i o n s imposed on group and chain banking
systems. Consider f a v o r a b l y some r e v i s i o n of l e g a l r e s e r v e s on time
d e p o s i t s upward but should be accompanied by a c a r e f u l c o n s i d e r a t i o n of
e f f e c t of increased aggregate r e s e r v e d e p o s i t s i n f e d e r a l r e s e r v e banks.
Without commenting s p e c i f i c a l l y on other proposed changes from
p r e s e n t r e g u l a t i o n s , recognize some p r o v i s i o n s worth f a v o r a b l e considerat i o n . Also recognize attempt to apply c e r t a i n economic t h e o r i e s but
s t r o n g l y b e l i e v e some of them a r e not only untimely but proposed methods
of a p p l i c a t i o n a r e i m p r a c t i c a l i f not impossible.
Eugene 1,1. Stevens.
427p
FEDERAL RESERVE BJEK OF CHICAGO
TELEGRAM
194gb
I
97
X-7077
G-S
Chicago Jail 29 1255 p
Moyer
Board Washington
In response to the r e q u e s t contained i n your telegram 26th i n s t a n t f o r
an expression of my views concerning Senate b i l l No 3215 upon due cons i d e r a t i o n I submit the f o l l o w i n g :
The p r o v i s i o n s of t h i s b i l l would s t i m u l a t e d i s s a t i s f a c t i o n on
tho p a r t of member banks, would r e s u l t in withdrawals from the system,
and would remove t o a l a r g o extent the i n c e n t i v e f o r o t h e r banks t o become members.
The c a p i t a l s t r u c t u r e of the Federal Reserve System would be
s e r i o u s l y impaired through the a p p l i c a t i o n of 25% of i t s s u r p l u s t o supply
c a p i t a l f o r t h e suggested Federal L i q u i d a t i n g Corporation, and t h a t p r o v i s i o n under which f u t u r e excess earnings of Federal Reserve Banks would
r e v e r t t o the said corporation would leave the Federal Reserve Banks
without any means of r e s t o r i n g t h e i r s u r p l u s accounts: This i n tho f a c e
of p o s s i b l e l o s s e s and o t h e r charges to the s u r p l u s which i n tho n a t u r a l
course of events a r c bound t o occur as time goes on. Without questioning
the n e c e s s i t y or a d v i s a b i l i t y of e s t a b l i s h i n g some o r g a n i z a t i o n of tho
c h a r a c t e r described I f i r m l y b e l i e v e t h a t i t would be a s e r i o u s mistake
t o impose upon the Federal Reserve Banks the o b l i g a t i o n to supply any p a r t
of t h e n e c e s s a r y c a p i t a l or the r e s p o n s i b i l i t y involved i n the management
and o p e r a t i o n of any such c o r p o r a t i o n . The compulsory s u b s c r i p t i o n s f o r
the c a p i t a l of tho proposed c o r p o r a t i o n imposed upon member banks would
n a t u r a l l y be r e s e n t e d .
The r e s t r i c t i o n s imposed on loans made by member banks, b a s i s
c o l l a t e r a l s e c u r i t i e s , impress mo as unduly severe and would impose an
i n j u s t i c e on a c l i e n t e l e which i s m a n i f e s t l y e n t i t l e d t o reasonable c r e d i t
acc ommodat ions•
Tho b i l l e x p r e s s l y p r o h i b i t s the use of member b a n k ' s promissory
notes secured by Government bonds as c o l l a t e r a l f o r Federal Reserve n o t e s ,
and t h i s i n my opinion would s e r i o u s l y impair the a b i l i t y of t h e Federal
Reserve System t o f u n c t i o n i n the m a t t e r of meeting demands f o r currency.
The proposed p e n a l t y r a t e on loans t o member banks supported by government
s e c u r i t i e s would impose an u n j u s t and s e r i o u s hardship upon those member
hanks which, i n the absence of an adequate supply of e l i g i b l e p a p e r , have
purchased government bonds f o r the express purpose of borrowing on them
if necessary.
I b e l i e v e tho Federal Reserve Banks should not be denied the
r i g h t , w i t h i n reasonable l i m i t a t i o n s , to engage i n open market o p e r a t i o n s ,
which would not be p e r m i s s i b l e under the sweeping p r o v i s i o n s embodied i n
the b i l l .
There a r e some o t h e r o b j e c t i o n a b l e f e a t u r e s which would make f o r
d i s s a t i s f i e d membership, and a l s o some f a v o r a b l e p r o v i s i o n s . Viewing the
b i l l as a whole, i f enacted i n t o law, I b e l i e v e the r e s u l t s would bo
d e s t r u c t i v e r a t h e r than c o n s t r u c t i v e . The a b i l i t y of tho Federal
Reserve banks t o f u n c t i o n , even i n normal times, would bo s e r i o u s l y im-
L
%-70?7
G-3
- 2 -
p a i r e d and i t would bo impossible f o r thorn to copo with s e r i o u s
emergencies, as and when they a r i s e .
Under a l l circumstances, I f . o l t h a t i t would bo extremely
u n f o r t u n a t e i f the b i l l as w r i t t e n should become the law.
IicDougal, Governor.
234p
X
"Tl 1
99
f e d e r a l Reserve Bank of St. Louis
S t . Louis Jan 29
Telegram
Meyer - Washington
Experience shows t h a t as a r u l e "bad times make bad laws and i t i s d e s i r a b l e to
make d r a s t i c changes only a f t e r most c a r e f u l and u n h u r r i e d c o n s i d e r a t i o n , except
so f a r as an emergency e x i s t s . Therefore i t i s suggested t h a t only p o r t i o n of
Glass b i l l r e q u i r i n g immediate a t t e n t i o n i s s e c t i o n 12 "B" c r e a t i n g a Federal
l i q u i d a t i n g c o r p o r a t i o n . This should be covered i n a s e p a r a t e b i l l so t h a t unh u r r i e d c o n s i d e r a t i o n can be given to o t h e r p o r t i o n s of b i l l . I t seems unwise
and u n f a i r to weaken Federal Reserve System to r e q u i r e net earnings i n accordance s e c t i o n 5 be p a i d to Federal L i q u i d a t i n g Corporation and have government
f u r n i s h f u n d s to take care non member s t a t e banks. I t would seem b e t t e r to
have government f u r n i s h e n t i r e amount and not c a l l on member banks f o r s u b s c r i p t i o n s . As t h i s s e c t i o n now w r i t t e n , i t i s i n nature of guarantee of bank
d e p o s i t s , p u t t i n g on good banks the burden of c a r r y i n g the bad ones. Section 12
"A" c r e a t i n g f e d e r a l open market committee and section 14 proposing changes to
section 14 of Federal Reserve Act take away independent c h a r a c t e r of twelve Fede r a l Reserve Banks and make a c e n t r a l bank of the System. I t changes c h a r a c t e r
of Federal Reserve Board from advisory and supervisory body and p u t s upon i t the
r e s p o n s i b i l i t y of o p e r a t i n g and in so doing i s l i a b l e to impair i t s j u d i c i a l
balance. Section 17, i n c o r r e c t l y p r i n t e d s e c t i o n 19 i n senate b i l l , would i n crease the amount of r e s e r v e s t h a t p r a c t i c a l l y a l l banks would have to carry and
r e s u l t in c o n t r a c t i o n of c r e d i t . I t would r e s u l t i n a confusion of the reserve
problem r a t h e r than h e l p i n g i t s s o l u t i o n . Section 13, p l a c i n g higher r a t e on
15 day c o l l a t e r a l notes would work g r e a t hardship on many banks, l a r g e and small,
who have found i t more convenient to use t h i s method of borrowing f o r a g r i c u l t u r e ?
and commercial purposes, e s p e c i a l l y in emergencies when under t h i s method of borrowing, they can forward to Federal Reserve Bank and pledge e l i g i b l e c o l l a t e r a l
and then as emergency develops send i n 15 day note f o r such funds as needed,
which we can s h i p by a i r p l a n e or method b e s t s u i t e d to meet emergency. Instead
of p e n a l i z i n g 15 day note would be d e s i r a b l e to a u t h o r i z e c o l l a t e r a l n o t e s of not
to exceed 90 days m a t u r i t y . In t h i s d i s t r i c t 15 day notes have enabled us to
render a s s i s t a n c e i t would have been d i f f i c u l t to render i f l i m i t e d e n t i r e l y to
rediscount o p e r a t i o n . At t h i s time p e n a l t y r a t e on government s e c u r i t i e s and
s e c t i o n 15, p r o h i b i t i n g c o l l a t e r a l notes secured by government bonds as s e c u r i t y
f o r f e d e r a l r e s e r v e n o t e s , u n f o r t u n a t e as i t w i l l discourage purchase of governments, as w e l l as reducing note i s s u i n g power of r e s e r v e bank. Third paragraph
s e c t i o n 15 and f o u r t h paragraph same s e c t i o n would seem to l i m i t use of gold as
r e s e r v e . Section 19 f o r c i n g n a t i o n a l banks to have c a p i t a l setup not l e s s than
15 p e r c e n t of t h e i r d e p o s i t l i a b i l i t i e s i s good p r o v i s i o n . This b i l l as i t stands
might f o r c e so many member banks, n a t i o n a l and s t a t e , out of t h e system t h a t the
system would cease to e x i s t . I t i s a d e f l a t i o n a r y measure.
Martin
203p
100
FEDERAL RESERVE BAtiK OF ST. LOUIS
TELEGRAM
X^-7077
H-2
214&>
S t . Louis Jan 30 1216p
Meyer
Washington
Generally the l o c a l r e a c t i o n t o g l a s s b i l l has been u n f a v o r a b l e . I t i s
believed t h e i n t e n t of the b i l l i s good and t h a t the committee was
prompted by a d e s i r e t o keep the f e d e r a l r e s e r v e banks l i q u i d , improve
the managements of t h e member banks and make funds of d e p o s i t o r s s a f e .
The fundamental e r r o r of committee l i e s i n i t s seeming b e l i e f t h a t a
l e g i s l a t i v e formula w i l l i n i t s e l f produce good bank management# There
must be a s many good bank management as t h e r e a r e banks, otherwise banks
w i l l continue t o close and d e p o s i t o r s w i l l continue t o l o s e money. The
b i l l has not attempted i n a d e f i n i t e way t o provide f o r removal of bad bank
managements, S e c t i o n t h r e e docs charge F e d e r a l Reserve Banks with informing themselves as t o l o a n and investment p o l i c i e s of member banks and empowers F e d e r a l Reserve Board t o suspend o f f e n d i n g members f o r one year from
the use of c r e d i t f a c i l i t i e s of system. This has value but w i l l n o t r e s u l t
i n permanent change of bad p o l i c i e s . The only way t o change bad p o l i c i e s
i s t o change management. Power should bo lodged i n some body, e i t h e r
Federal Reserve Board or some s p e c i a l group t o remove bad management p r o vided bank d i r e c t o r s cannot be persuaded t o remove them s t o p S e c t i o n s f i v e
and twelve B should be eliminated and the o r g a n i z a t i o n of f e d e r a l l i q u i d a t i n g
c o r p o r a t i o n handled s e p a r a t e l y as emergency l e g i s l a t i o n . Any such a i d a s
proposed should be extended by government both a s t o t h e member and nonmember banks s t e p the s e c t i o n s r e l a t i n g t o c o n t r o l of a f f i l i a t e s a r e i n a
number of r e s p e c t s i m p r a c t i c a l . I n some r e s p e c t s they a r e a l l r i g h t . The
comptroller should be given power of s u p e r v i s i o n over n a t i o n a l a f f i l i a t e s
and of c o r r e c t i o n i n t h e same degree a s I n case of N a t i o n a l Banks. Federal
Reserve Board should be given t h e same power i n r e s p e c t t o s t a t e members
except c o r r e c t i o n could only extend t o f o r f e i t u r e of membership i n System.
Investment a f f i l i a t e s have s u f f e r e d such l o s s i n p r e s t i g e t h a t t h e i r value
t o t h e i r banks has been g r e a t l y decreased s t o p Section s i x r e q u i r e s
s t a t e members t o comply with a l l the requirements of the a c t a p p l i c a b l e
t o National Banks. Might t h i s be construed t o include examinations by
National Bank Examiners thereby n u l l i f y i n g exception provided i n paragraph
seven Section n i n e of t h e a c t stop Section e i g h t should be discarded s t o p
Soction nine i n i t s p r e s e n t form would render i t d i f f i c u l t f o r a member bank
t o f u n c t i o n i n a c e n t r a l r e s e r v e c i t y s t o p Section t e n should be discarded
stop S e c t i o n s t h i r t e e n and f i f t e e n d i s c r i m i n a t e u n j u s t l y a g a i n s t a proper
farm of member bank borrowing. P r a c t i c a l l y a l l of the r e s e r v e c i t y banks i n
e i g h t h d i s t r i c t v o l u n t a r i l y use c o l l a t e r a l note f o r borrowing b o t h with
Governments and e l i g i b l e paper as c o l l a t e r a l . Also many country member banks
f i n d i t a more convenient form of borrowing. If p e r m i t t e d f o r
n i n e t y days with e l i g i b l e paper most member banks would p r e f e r i t s t o p
Section f i f t e e n c o n t a i n s r e s e r v e requirements f o r F e d e r a l Reserve n o t e s
t h a t would unduly r e s t r i c t currency o p e r a t i o n s stop Section s i x t e e n i s a
101
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X—7077
H-2
disappointment i n i t s f a i l u r e t o attempt t o s c i e n t i f i c a l l y change r e s e r v e
requirements s t o p Section Seventeen attempts t o make r e a l e s t a t e loans
s a f e r f o r member banks but i t s p r o v i s i o n s a r e so involved as t o render the
s e c t i o n d i f f i c u l t f o r p r a c t i c a l operation i n member banks. I t i s q u e s t i o n able i f commercial banks should be permitted t o make r e a l e s t a t e l o a n s .
I t might be i n the i n t e r e s t of s a f e r banking t o withdraw t h e p r i v i l e g e and
permit banks a p e r i o d of say t h r e e t o f i v e y e a r s t o dispose of such loans
now held stop S e c t i o n n i n e t e e n might i n the i n t e r e s t of l i b e r a l i t y t o
smaller u n i t banks be changed from f i f t e e n pcrcentum t o twelve and one
h a l f percentum.
Wood
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T E L E GRAM
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Minneapolis Jan 29 1230p
Eugene Meyer,
Washington
A f t e r p e r s o n a l l y studying S F 3215 in d e t a i l and analyzing i t
paragraph by paragraph in conference with our o f f i c e r s we a r e of
the opinion t h a t the b i l l would be d e s t r u c t i v e of the membership
of t h i s bank f o r reasons h e r e i n a f t e r c i t e d .
With the c r i t i c i s m s and comments in the a n a l y s i s of Mr. Walter
Wyatt, we unanimously and emphatically agree, b u t d e s i r e to add
the following supplementary comments.
The burdensome c a p i t a l stock and r e s e r v e requirements could
not be met by the r u r a l members of t h i s bank who a r e numerically
in t h e g r e a t m a j o r i t y , without heavy s e l l i n g of governments and
other s e c u r i t i e s to t h e i n j u r y of the bond market.
The p r o v i s i o n s f o r t h e i n c r e a s e of the gold cover f o r f e d e r a l
reserve notes is a f u r t h e r deflationary influence.
Section 3 i s impractical and so r e s t r i c t i v e t h a t i t would
d r i v e our more important member banks out of membership.
Section 4 i s h i g h l y dangerous and u n f a i r . I t s p r a c t i c a l
e f f e c t would be to deprive one t h i r d of the member banks in our
d i s t r i c t h o l d i n g two t h i r d s of the t o t a l member banks d e p o s i t s
from voting in the e l e c t i o n of d i r e c t o r s , while a t the same time
compelling them to remain stockholders.
Section 9 i s ambiguous and unsound and would work hardship on
member banks while p e r m i t t i n g d i s c r i m i n a t i o n between r e s e r v e
districts.
In t h i s and other s e c t i o n s t h e word 11 Collateral 1 1 i s very
l o o s e l y used and should be s p e c i f i c a l l y d e f i n e d . In t h i s d i s t r i c t
c o l l a t e r a l means warehouse r e c e i p t s on a g r i c u l t u r a l and o t h e r
commodities, b i l l s of l a d i n g , c h a t t e l mortgages on l i v e s t o c k and
as w r i t t e n t h i s s e c t i o n would s e r i o u s l y i n j u r e important l i v e s t o c k and a g r i c u l t u r a l i n t e r e s t s .
Section 10 i s unworkable and we doubt the n e c e s s i t y or
d e s i r a b i l i t y of any such group a c t i o n .
In r e g a r d to s e c t i o n 12,. we recommend t h a t t h e r e be no change
in the procedure or o p e r a t i o n s of tho p r e s e n t open market committee.
Section 12 B i s i m p r a c t i c a l , unwieldy, u n f a i r to member banks
and would involve t h e system in the l i q u i d a t i o n of non member banks
over which i t has no j u r i s d i c t i o n . In the l i g h t of our own experience
we doubt t h e a b i l i t y of such an o r g a n i z a t i o n to make a p r o f i t or of
member banks to o b t a i n any r e t u r n on t h e i r stock investment under a
l i q u i d a t i o n charge which i s l i m i t e d to s i x p e r c e n t and if i n t e n t of
the s e c t i o n i s s t r i c t l y followed.
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We "believe a l l the o b j e c t s of t h i s s e c t i o n can h e b e t t e r
a t t a i n e d by the r e c o n s t r u c t i o n corporation a l r e a d y s e t up.
We s t r o n g l y o b j e c t to section 13 which would handicap t h i s
bank in many cases where i t much p r e f e r s to take the promissory note
of a member bank to r e d i s c o u n t i n g i t s p a p e r .
As to s e c t i o n 14 G> we b e l i e v e that a l l agreements, formal
or informal, between any Federal Reserve Bank or banks and any
f o r e i g n bank or bankers, should be under t h e c o n t r o l of t h e Federal
Reserve Board and t h a t t h e r e should b e a p r o v i s i o n of law to t h i s
e f f e c t , but a s w r i t t e n , the s e c t i o n i s r e s t r i c t i v e to the p o i n t of
absurdity.
We disapprove of t h e amendments of s e c t i o n 15 and s e c t i o n 16
of the Federal Reserve Act which would i n c r e a s e the gold cover f o r
Federal Reserve n o t e s , which under p r e s e n t c o n d i t i o n s would be
embarassing.
We a r e s t r o n g l y opposed to p r o v i s i o n s of s e c t i o n 16 r e c l a s s i f y ing member bank d e p o s i t s and i n c r e a s i n g t h e p r o v i s i o n f o r r e s e r v e s
aa unduly burdensome upon member banks, e s p e c i a l l y under p r e s e n t
c o n d i t i o n s , and l i k e l y to f o r c e many of them out of membership.
Section 17 i s very u n f a i r and dangerous to country banks
long on farm r e a l e s t a t e loans and d i s c r i m i n a t e s a g a i n s t them and
in favor of competing non member banks. I t e v i d e n t l y intends to
throw s a f e - g u a r d s around t h e segregation of t h r i f t and time d e p o s i t s ,
but as drawn i s incomplete and ambiguous and would r e s u l t i n great
confusion in case of i n s o l v e n c i e s . This s e c t i o n would l i m i t t h e
investment in l o t and b u i l d i n g of a new bank to 15 p e r c e n t of i t s
c a p i t a l and s u r p l u s .
Section 18 i s very o b j e c t i o n a b l e in t h a t i t b a r s l o a n s , as well
as investments, of a l l new corporations f o r f i v e years of t h e i r
e x i s t e n c e , and to any e x i s t i n g c o r p o r a t i o n which during t h e f i v e
y e a r s p r e v i o u s has not been able to c o n s i s t e n t l y maintain earnings
of f o u r p e r c e n t of i t s c a p i t a l .
I t i s impossible to determine t h e percentage of earnings upon
t h e o u t s t a n d i n g c a p i t a l stock of a c o r p o r a t i o n whose s t o c k has no
par value.
The p r o v i s i o n s of s e c t i o n 19 would r e q u i r e an unnecessary
i n c r e a s e of approximately 35 percent of t h e member bank c a p i t a l in
t h i s d i s t r i c t , an amount impossible f o r them to r a i s e under p r e s e n t
c o n d i t i o n s . This would put many of them out of busine ss or f o r c e
them out of membership and with such increased c a p i t a l l a r g e numbers
of banks now experiencing very u n s a t i s f a c t o r y earnings would be
put in such a p o s i t i o n as to be unable to make an adequate r e t u r n
on t h e i r c a p i t a l .
The p r o v i s i o n s of s e c t i o n 20 a r e unnecessary.
We would be concerned about t h e adoption of s e c t i o n 24 (B)
and {C) because many of our member banks a r e " a f f i l i a t e s " , as t h a t
term i s used in the a c t , and we b e l i e v e t h a t these paragraphs would
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r e s u l t in t h e s e banks l e a v i n g the n a t i o n a l banking system and i% the
case of s t a t e banks, membership in t h e Federal Reserve System.
The b i l l i s very l o o s e l y drawn, c o n t r a d i c t o r y in some r e s p e c t s ,
and as to some of i t s p r o v i s i o n s t h e r e i s s e r i o u s doubt of t h e i r
c o n s t i t u t i o n a l i t y . As to s e c t i o n s r e g a r d i n g which no comment i s
made, we a r e in accord w i t h Mr. Wvatt's comments and c r i t i c i s m s .
M i t c h e l l , and Geery.
333p.
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FEDERAL RESERVE BANK OF KANSAS CITY
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Governor Meyer
Washington
In response t o your telegram of the 26th the following comments on Senate
B i l l 5215 are submitted as our views, formulated a f t e r the n e c e s s a r i l y
h u r r i e d study of the b i l l and a f t e r c o n s u l t a t i o n with o t h e r o f f i c e r s of
the bank and with our counsel. We are not making comments on those p r o v i s i o n s of the proposed b i l l in which we concur or to which we see no p a r t i c u l a r o b j e c t i o n a t t h i s time. Throughout tho a c t i t should be made p l a i n
j u s t what the meaning i s of such terms as " C o l l a t e r a l l o a n s " "Loans on
c o l l a t e r a l " e t c s e c t i o n 3: We b e l i e v e t h a t the making of a normal volume
of loans on stock and bond c o l l a t e r a l i s a p e r f e c t l y l e g i t i m a t e banking
f u n c t i o n , and t h a t t h i s f a c t should be recognized by any law designed t o
curb the improper use of member bank or F e d e r a l Reserve Bank c r e d i t . This
s e c t i o n appears t o unduly r e s t r i c t the e x e r c i s e of such f u n c t i o n . I m p r a c t i c a l
f o r Federal Reserve Bank t o keep c u r r e n t l y informed a s to loan and
investment p r a c t i c e s of member banks.
Section 4 : We a r e i n sympathy w i t h such r e s t r i c t i o n s a s may be
necessary t o prevent s u b s t a n t i a l c o n t r o l of F e d e r a l Reserve Bank
d i r e c t o r s by branch, group or chain bank Systems, but we do not b e l i e v e
t h e r e should be such a broad d e n i a l of r e p r e s e n t a t i o n i n e l e c t i o n s of
Federal Reserve Bank d i r e c t o r s .
Section 5 : Such a d i s p o s i t i o n of Federal Reserve Banks earnings
i s c o n t r a r y t o t h e s p i r i t and i n t e n t , of the F e d e r a l Reserve Act, and
would, i n theory a t l e a s t , c u r t a i l the a b i l i t y of Federal Reserve banks
t o extend c r e d i t i n time of need, and reduce the a b i l i t y t o pay
dividends t o member banks during years when t h e r e a r e no Federal Reserve
Bank p r o f i t s .
Section 8: We t h i n k t h a t our banking system, a s developed with
the Federal Reserve System, has made obsolete the old p l a n of r e s e r v e
c i t y c l a s s i f i c a t i o n s # We b e l i e v e the recommendations by the Committee
on Bank Reserves should bo f o l l o w e d .
Section 9: This p r o v i s i o n p l a c e s too much sjtmer and r e s p o n s i b i l i t y i n the F e d e r a l Reserve Board, and contains elements of danger t o
the system. We think any l e g a l p r o v i s i o n of t h i s kind should make i t p l a i n
t h a t t h e r e w i l l be no i n t e r f e r e n c e with any member bank which i s c a r r y i n g
f o r i t s customers not more than a normal amount of loans secured by
stocks and bonds. I n t h i s connection, we think i t w e l l t o mention t h a t
the proceeds of some loans so secured are used f o r commercial purposes,
and t h a t the proceeds of some l o a n s , unsecured or secured by o t h e r
c o l l a t e r a l than s t o c k s and bonds, may be used f o r s p e c u l a t i n g i n s t o c k s
and bonds.
S e c t i o n 10: We t h i n k i t i s wrong in p r i n c i p l e t o make Federal Reserve c r e d i t a v a i l a b l e f o r i n e l g i b l o purposes and on the b a s i s of f r o z e n
c o l l a t e r a l . In any event such a p r o v i s i o n should be safeguarded by
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l i m i t a t i o n s as t o amount and d u r a t i o n of advances and p r o v i s i o n t h a t the
F e d e r a l Reserve Board s h a l l have f u l l information as t o the purpose of
advance and n a t u r e and value of c o l l a t e r a l to be pledged by i n d i v i d u a l
banks b e f o r e consent i s given. We do not b e l i e v e t h a t operations under
sueh a p r o v i s i o n of law would prove t o be of p r a c t i c a l v a l u e .
Section 11: Wo b e l i e v e the c o l l a t e r a l permitted f o r loans t o
a f f i l i a t e s under t h i s s e c t i o n should be made more i n c l u s i v e and should
s p e c i f i c a l l y include conforming r e a l e s t a t e mortgages. In t h i s connection
some of the s t a t e s do not s p e c i f y t h e c h a r a c t e r of investments which may
be made by savings banks.
S e c t i o n 12: A: I t occurs to us t h a t i n order t o f a c i l i t a t e
emergency a c t i o n , an executive committee or some s m a l l e r body than t h e
whole committee should have power t o a c t . T h i r t y days appears
u n n e c e s s a r i l y long p e r i o d f o r Federal Reserve Banks t o accept p a r t i c i p a t i o n .
S e c t i o n 12: B: As s t a t e d under s e c t i o n 5 , we o b j e c t to t h e
p r i n c i p l e of such an employment of F e d e r a l Reserve Banks r e s o u r c e s . We
b e l i e v e f u r t h e r t h a t the F e d e r a l Reserve Bonks, as managers of t h e
l i q u i d a t i n g c o r p o r a t i o n and as c r e d i t o r s of suspended banks would be placed
i n an anomalous p o s i t i o n , and t h a t i f such a corporation i s e s t a b l i s h e d
i t should be e n t i r e l y s e p a r a t e and a p a r t from the Federal Reserve System.
We f u r t h e r b e l i e v e t h a t compulsory assessment of member banks f o r s t o c k
i n the c o r p o r a t i o n i s improper and w i l l tend t o d r i v e members from
system.
S e c t i o n 15: See no reason f o r any d i f f e r e n c e i n r a t e or o t h e r
d i f f e r e n c e s , i n extending c r e d i t on member bank n o t e s secured by e l i g i b l e
paper and extending c r e d i t flspugh. r e d i s c o u n t of e l i g i b l e p a p e r . As t o
member bank n o t e s secured by governments, we b e l i e v e a higher r a t e p r o v i s i o n i s o b j e c t i o n a b l e a t t h i s p a r t i c u l a r time and so long as banks a r e
encouraged t o a s s i s t i n Treasury f i n a n c i n g . The o t h e r p r o v i s i o n s of t h i s
s e c t i o n , i f taken l i t e r a l l y , would s e r i o u s l y i n t e r f e r e with a member
b a n k ' s normal and proper loaning o p e r a t i o n s , and a r e much more d r a s t i c than
they need be t o prevent abuse of F e d e r a l Rqserve Bank c r e d i t .
Section 15: Beliovo the p r o v i s i o n of t h i s s e c t i o n making member
bank notes secured by Government s e c u r i t i e s i n e l i g i b l e as c o l l a t e r a l t o
Federal Reserve n o t e s i s o b j e c t i o n a b l e a t t h i s p a r t i c u l a r time and so
long a s member banks a r e encouraged t o a s s i s t i n Treasury f i n a n c i n g , and
t h a t the p r o v i s i o n l i m i t i n g acceptances e l i g i b l e as c o l l a t e r a l to Federal
Reserve notes t o those made a g a i n s t shipment of goods a c t u a l l y s o l d i n
the f o r e i g n t r a d e cf the United S t a t e s i s a l s o o b j e c t i o n a b l e .
Section 16: We b e l i e v e t h a t any r e v i s i o n of the r e s e r v e r e q u i r e ments should be a complete r e v i s i o n which i n our judgment should be
based on the p r i n c i p l e s c a l l e d a t t e n t i o n to i n the r e p o r t of the committee
on bank r e s e r v e s . I t i s p a r t i c u l a r l y d e s i r a b l e t h a t the r e s e r v e r e q u i r e ment make proper allowances f o r cash i n v a u l t , to e l i m i n a t e many
i n e q u i t i e s now e x i s t i n g between banks i n Federal Reserve and branch
c i t i e s and banks l o c a t e d elsewhere.
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The p r o v i s i o n s of paragraph C are not r e a d i l y understandable * I f l i n e s 10 to
14, page 37, mean t h a t a member bank s h a l l not loan to a customer who i s a t
the same time borrowing from an investment banker, b r o k e r , e t c , such a r e s t r i c t i o n i s unwarranted from any viewpoint. If t h i s wording means t h a t a
member bank da a l l not loan to a customer who i s a t the same time loaning to
an investment banker, b r o k e r , e t c , the p r o v i s i o n i s too a r b i t r a r y and comprehensive, since not a l l l o a n s to investment bankers, brokers, e t c , are made to
f a c i l i t a t e s p e c u l a t i o n or a r e of such a nature t h a t payment thereof can be
had on demand. C e r t a i n l y a member bank should not be r e q u i r e d to take a
sworn statement every time a loan i s made or renewed, in order to avoid a
v i o l a t i o n of law. Paragraphs E and J are not c l e a r , I h e r e should be no i n t e r f e r e n c e whatever w i t h the t r a n s f e r of member bank balances through the
Federal Beserve Banks, so long as such t r a n s f e r s a r e i n the usual course of
b u s i n e s s . The r e f e r e n c e to purchase of o t h e r s i m i l a r agreements should be
a m p l i f i e d by d e f i n i S i b a #
In t h i s connection, i t might be advisable to i n clude i n the law t h a t a resource item r e p r e s e n t i n g a s a l e of Federal Reserve
exchange s h a l l be c l a s s i f i e d as a l o a n .
Section 17: There should be no f u r t h e r r e s t r i c t i o n of t o t a l amount
of r e a l e s t a t e loans which a member bank may make and such loans should be
confined to conforming r e a l e s t a t e l o a n s . To include bank premises and unsecured l o a n s based on the value of r e a l e s t a t e would p l a c e many banks in a
p o s i t i o n where necessary adjustments could not be made w i t h i n two y e a r s .
The p r e s e n t l i m i t a t i o n s on conforming r e a l e s t a t e l o a n s t o f i v e year terms and
to f i f t y p e r cent of market value are such safeguards t h a t t h e r e should be no
requirement f o r p e r i o d i c r e v a l u a t i o n and a d j u s t m e n t . The p r o v i s i o n f o r segreg a t i n g a s s e t s i n which time and t h r i f t d e p o s i t s are i n v e s t e d i s unsound i n our
opinion. The p r o v i s i o n s of t h i s s e c t i o n would, we b e l i e v e , be d e t r i m e n t a l to
the n a t i o n a l banking system and f o r c e the withdrawal of many member banks.
Section 18: The p r o v i s i o n l i m i t i n g investments i n bonds and s e c u r i t i e s o t h e r than governments and municipals to f i f t e e n p e r c e n t of c a p i t a l and
twenty f i v e p e r cent of s u r p l u s would prove a tremendous hardship on many
member banks, and i s , in our opinion, an u n n e c e s s a r i l y low l i m i t . The p r o v i sion t h a t no member bank s h a l l purchase or hold any o b l i g a t i o n of any corporat i o n f a i l i n g to earn f o u r p e r cent on c a p i t a l stock f o r each of the preceding
f i v e y e a r s i s a r b i t r a r y and unwarranted. The word "Obligation" i n t h i s p r o v i s i o n might be held to include c u r r e n t notes of the c o r p o r a t i o n , under a
s t r i c t i n t e r p r e t a t i o n . F a r t h e r p o s s i b l e e f f e c t of the p r o v i s i o n i s to deny
c r e d i t f a c i l i t i e s of n a t i o n a l banks to new and worthy c o r p o r a t i o n s .
Section 19: There i s such a v a r i a t i o n in the s i z e of banks and the
nature of b u s i n e s s handled, both between i n d i v i d u a l banks and between d i f f e r e n t s e c t i o n s of the country, t h a t we do not b e l i e v e an a r b i t r a r y r a t i o of
c a p i t a l funds to d e p o s i t s can be made a p r a c t i c a l or an e q u i t a b l e p r o v i s i o n
of law. In small and medium s i z e banks o p e r a t i n g expenses, i n c l u d i n g t a x a t i o n on bank s h a r e s , are so high in r e l a t i o n to maximum earning c a p a c i t y t h a t
a high r a t i o of d e p o s i t s to c a p i t a l funds i s necessary to a proper r e t u r n on
the c a p i t a l . A l i m i t a t i o n of t h i s k i n d , c e r t a i n l y one of f i f t e e n p e r c e n t ,
would be a decided hardship on many member banks and would undoubtedly b r i n g
about withdrawals from the n a t i o n a l banking system.
•
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Soction 20: We seo no o b j e c t i o n t o p e r m i t t i n g bank shares t o
r e p r e s e n t a p r o p o r t i o n a t e ownership i n a f f i l i a t e d c o r p o r a t i o n s .
S e c t i o n 21: The p r o v i s i o n t h a t an o f f i c e r of a member bank s h a l l
not bo an o f f i c e r or employee of a s e c u r i t i e s company should be q u a l i f i e d
by excepting a f f i l i a t e d companies. Tho p r o v i s i o n p r o h i b i t i n g a member
bank from performing the f u n c t i o n s of a car respondent bank on behalf
of s e c u r i t i e s companies should not prevent a member bank from a c c e p t i n g
d e p o s i t s and performing ordinary bank s e r v i c e s f o r such companies.
S e c t i o n 22: Depriving a c o r p o r a t i o n or holding company owning more
than t e n percent of the stock of a n a t i o n a l bank of r i g h t to vote such
s h a r e s might d r i v e a number of n a t i o n a l banks out of the system,
p a r t i c u l a r l y where a m a j o r i t y of the stock of such bank i s owned by
holding company. This s e c t i o n i s a l s o objected t o on the ground t h a t i t
would deprive a t r u s t e e or other f i d u c i a r y of tho r i g h t t o vote stock
held i n t r u s t e s t a t e .
S e c t i o n 23: Believe the p r o v i s i o n i s o b j e c t i o n a b l e i n t h a t i t
a p p l i e s only to s h a r e h o l d e r s becoming such a f t e r March 1 , 1934, as s h a r e h o l d e r s p r i o r t o t h a t date may continue ownership of stock of a f f i l i a t e
the d i s c r i m i n a t i o n a s a g a i n s t subsequent shareholders not based on any
rational distinction.
S e c t i o n 24: Our views as to t h i s s e c t i o n a r e r e f l e c t e d i n
comments on S e c t i o n s 22 and 23.
We c o n s i d e r a l l of the conditions s e t f o r t h i n t h i s s e c t i o n , f o r
obtaining a p e r m i t , a r e p r o p e r , with the exception of s u b d i v i s i o n E, which
appears too d r a s t i c .
S e c t i o n 28: P r o h i b i t i n g payment of i n t e r e s t on d e p o s i t s s u b j e c t
to check, which would a p p a r e n t l y include bank b a l a n c e s , would p l a c e
member banks under a tremendous handicap i n comparison with nonmcoiber banks.
Member banks would be prevented from a c t i n g as d e p o s i t a r i e s f o r s t a t e s
and m u n i c i p a l i t i e s where s t a t u t e s provide f o r payment of i n t e r e s t .
Soction 2.9: Paragraph A - Such an a r b i t r a r y p r o v i s i o n does not
p r e s c r i b e a proper t e s t f o r c r e d i t r i s k .
Paragraph B — Tho a c t i v i t i e s of on. i n d i v i d u a l or c o r p o r a t i o n o t h e r than
an a f f i l i a t e should not deprive the i n d i v i d u a l or c o r p o r a t i o n of the
b e n e f i t s of the exceptions t o s o c t i o n 5200, i f they a r e otherwise
e n t i t l e d t o such b e n e f i t s .
Paragraph C - The second paragraph of t h i s subsection i s ambiguous i n i t s
p r e s e n t form. See no reason why cash dividends should not be used f o r
c a p i t a l i z i n g an a f f i l i a t e , with unanimous consent of s t o c k h o l d e r s .
S e c t i o n 30: Our views with r e f e r e n c e t o the l a t t e r p a r t of t h i s
s e c t i o n a r e contained i n comments concerning s e c t i o n 9.
S e c t i o n 31: Wo a r e i n sympathy with having r e p o r t s f i l e d by
a f f i l i a t e s , but b e l i e v e t h a t t h i s p r o v i s i o n would p l a c e n a t i o n a l banks a t
a disadvantage a s compared with s t a t e member banks.
Section 32: We t h i n k examination of a f f i l i a t e s i s d e s i r a b l e , but
question the r e a s o n f o r timing the period to two y e a r s .
S e c t i o n 33: The p r o v i s i o n s of t h i s s e c t i o n appear t o us to be too
f a r reaching and unreasonable i n t h e i r terms. Some l o s s s t r i n g e n t p r o v i s i o n should serve to c o r r e c t the abuses aimed a t .
-4"
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Hamilton and McClure
1 0 9
COPY
FEDERAL HlSHRVH £AJ£ OP DALLAS
X-7077
k-1
T 3 L E G JR A U
FEDERAL RESERVE SYSTEM
(Leased Wire Service)
209gb
Received a t Washington, D. C.
D a l l a s 1201 p J a n . 30
Meyer
Washington
In compliance your w i r e January 26 we have given as c a r e f u l c o n s i d e r a t i o n as time would permit to senate "bill 3215 and submit t h e f o l l o w i n g . We
f a v o r i n p r i n c i p l e some of the purposes sought to be accomplished "by t h i s
M i l , such a s a more e f f e c t i v e c o n t r o l of s p e c u l a t i o n , "better s u p e r v i s i o n
and r e g u l a t i o n of a f f i l i a t e s , f i x i n g the p a r value of member "bank s t o c k a t
one hundred d o l l a r s e t c , b u t t h e b i l l appears to u s to be l o o s e l y drawn and
ambiguous, e n t i r e l y too d r a s t i c in i t s p r o v i s i o n s and c a l c u l a t e d t o d r i v e
member banks from the system, thus j e o p a r d i z i n g both t h e r e s e r v e and n a t i o n a l
bank systems. We b e l i e v e i t should undergo c a r e f u l c o n s i d e r a t i o n and overh a u l i n g b e f o r e i t i s enacted i n t o law.
S e c t i o n 3 : We a r e i n sympathy w i t h the p r i n c i p l e t h a t advances should
be made f o r t h e accommodation of commerce, i n d u s t r y and a g r i c u l t u r e but in
our judgment t h i s s e c t i o n p r o v i d e s f o r an unwarranted i n t e r f e r e n c e and superv i s i o n of t h e a f f a i r s of member banks. The sentence beginning on l i n e 7
page 5 and ending on l i n e 10 c a l l s f o r a procedure t h a t would b e v e r y d i f f i c u l t f o r r e s e r v e banks to s u c c e s s f u l l y f o l l o w .
Section 4; While t h e general purpose of t h i s s e c t i o n racy not be und e s i r a b l e , i t would be v e r y d i f f i c u l t f o r Federal Reserve Banks to p r o p e r l y
construe and a c t under t h e l a s t p h r a s e of t h e s e c t i o n extending from l i n e s
two to s i x on page s i x .
S e c t i o n 5? Under terms of t h i s s e c t i o n no f e d e r a l r e s e r v e ban]: whose
surplus i s now or becomes below the s t a t u t o r y amount through the payment of
expenses and dividends or l o s s e s i n o p e r a t i o n and w r i t e o f f s would e v e r be
able to r e s t o r e i t . The s u r p l u s would become a d i m i n i s h i n g sum and conceivably over a period of time the c a p i t a l stock of a F e d e r a l Reserve Bank
could become impaired not to mention the p a s s i n g of d i v i d e n d s to member
banks,
S e c t i o n 6: Page
In l i n e s 4 and 5 member s t a t e banks a r e r e q u i r e d
to comply w i t h a l l the requirements of t h e f e d e r a l r e s e r v e a c t a p p l i c a b l e
to n a t i o n a l banks. In e f f e c t i t r e p e a l s the p r e s e n t p r o v i s i o n of t h e
Federal Reserve Act t h a t p e r m i t s member s t a t e ornks to r e t a i n t h e i r c h a r t e r
r i g h t s and s t a t u t o r y powers, such a s f i d u c i a r y powers. We doubt i f i t i s
intended to d e p r i v e member s t a t e banks of the concessions which a r e p e r m i t t e d
than under t h e p r e s e n t law, but such appears to be the e f f e c t , n e v e r t h e l e s s .
There a r e o t h e r changes i n t h i s s e c t i o n which we t h i n k should be made b u t
we w i l l not burden t h i s message with them.
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S e c t i o n 9« This i s p a r t i c u l a r l y an unwarranted e f f o r t to c o n t r o l
the o p e r a t i o n of member banks. Reasonable c o r r e c t i v e measures can "be i n augurated and enforced without r e s o r t i n g to t h i s proposed d r a s t i c r e g u l a t i o n s .
There a r e many member "banks y e t throughout the country t h a t a r e ably o f f i c e r e d
and supervised by capable boards of d i r e c t o r s . These i n s t i t u t i o n s would
r e s e n t t h i s e f f o r t to thus r e g u l a t e t h e i r a f f a i r s end probably seek r e l i e f
by withdrawing from t h e system. In t h i s paragraph and o t h e r s e c t i o n s of the
b i l l the word " C o l l a t e r a l " i s used as a synonym f o r investment s e c u r i t i e s .
Inasmuch a s t h e r e a r e many d i f f e r e n t k i n d s of c o l l a t e r a l t h a t form the b a s i s
of bank l o a n s t h a t a r e non s p e c u l a t i v e i n character, such as f o r example, .
b i l l s of l a d i n g , warehouse r e c e i p t s , c h a t t e l mortgages and other instruments
commonly hypothecated with banks to f i n a n c e movements of crops and merchand i s e , we t h i n k the b i l l should be c o r r e c t e d so as to c l e a r l y set out the
p a r t i c u l a r type of c o l l a t e r a l the f r a m a r s of t h e b i l l had in mind.
Section 10: We do not b e l i e v e t h a t any n e c e s s i t y e x i s t s f o r the
enactment of t h i s s e c t i o n of the b i l l , S i t u a t i o n s demanding concert of
a c t i o n on t h e p a r t of banks to save a l o c a l i n s t i t u t i o n can b e s t be handled
by them i n t h e i r own way w i t h such a s s i s t a n c e as may be rendered by the
reserve bank of the d i s t r i c t i n accordance with e x i s t i n g law. The f a c t t h a t
the note of t h e group banks would not be secured and not e l i g i b l e as c o l l a t e r a l f o r Federal r e s e r v e notes i s a f u r t h e r o b j e c t i o n a b l e f e a t u r e because
of the s h o r t a g e of e l i g i b l e paper which r e s e r v e banks now f r e q u e n t l y experience.
Section 12 A:
We see no reason f o r snaking a l e g a l body out of t h e
open market committee and hedging i t about with tho p r o v i s i o n s contained in
t h i s s e c t i o n . We b e l i e v e t h a t the a c t a s now i n f o r c e g r a n t s to t h e Federal
reserve board s u f f i c i e n t supervisory power in t h a t connection, a.t t h e same
time r e s e r v i n g to the s e v e r a l f e d e r a l Reserve Banks s u f f i c i e n t autonomous
powers to p r o t e c t them a g a i n s t any p l a n or p o l i c y inaugurated by the open
market committee which they may f e e l not i n t h e i r own i n t e r e s t or f o r the
w e l f a r e of t h e i r r e s p e c t i v e d i s t r i c t s .
Section 12 B: While we a p p r e c i a t e the motive r e f l e c t e d in t h i s section and o t h e r b i l l s having s u b s t a n t i a l l y the sane purpose, i t i s our f e e l ing t h a t t h e r e i s no j u s t i f i c a t i o n f o r t h e c r e a t i o n of a l i q u i d a t i n g
corporation in any form. The d e p o s i t s of a f a i l e d bank a r e invested i n the
notes and o t h e r a s s e t s of t h a t c o r p o r a t i o n . The l i q u i d a t i o n of t h e s e dep o s i t s i n t h e long run can come only from c o l l e c t i o n of the a s s e t s and only
to the e x t e n t t h a t they may be converted i n t o cash. The a r b i t r a r y a n t i c i pation of t h e c o l l e c t i o n of the a s s e t s by bringing f u n d s from the o u t s i d e
would tend t o c r e a t e an a r t i f i c i a l or i n f l a t i o n a r y s i t u a t i o n l o c a l l y , with
p o s s i b l e i n j u r y to the community when the funds a r e withdrawn a s t h e a s s e t s
a r e reduced to cash. Furthermore, when t h e proposed corporation l e n d s to
the r e c e i v e r what would probably be the maximum c o l l e c t i b l e value of the
a s s e t s , both the r e c e i v e r and the community would r e l a x t h e i r d i l i g e n c e in
enforcing payment of the f a i l e d banks n o t e s .
In many i n s t a n c e s d e p o s i t o r s
committees have been of a s s i s t a n c e to r e c e i v e r s i n c o l l e c t i n g a f a i l e d ban::'s
paper. In a d d i t i o n to t h i s , we do not t h i n k t h a t congress should attempt
to f o r c e member banks to make loans and investments. Member banks a r e
p r i v a t e l y owned and should be supervised but not d i r e c t e d in t h e i r investment
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3
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X-7077
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111
p o l i c i e s . We b e l i e v e , too, t h a t in so f a r as Federal r e s e r v e "banks should
he r e q u i r e d to subscribe to the c a p i t a l stock of the l i q u i d a t i o n corpn
i t would he an u n j u s t if not u n c o n s t i t u t i o n a l c o n f i s c a t i o n of t h e i r
property and a step in the d i r e c t i o n of f r e e z i n g up t h e i r own a s s e t s and
impairing t h e i r u s e f u l n e s s as the r e s e r v o i r s of the. r e s e r v e s of t h e i r d i s t r i c t s . The proposal h e a r s some recemblence to the guaranty of d e p o s i t s .
Again, i t c a r r i e s some of the e v i l s of d e p o s i t s in a going hank, a g a i n s t
surety bonds of outside p u b l i c funds which a r e loaned l o c a l l y and which
when withdrawn o f t e n wreck both bank and community. Moreover, t h e measure
seems to contemplate t h a t we are to continue i n d e f i n i t e l y to have bank
f a i l u r e s as we have experienced them in r e c e n t months: whereas, we hope and
expect t h a t t h e time w i l l f oon come when a suspension i n t h i s country w i l l
be an unusual and r a r e happening. Even i f t h i s s e c t i o n i s sound i n
p r i n c i p l e and should be enacted i n t o law i t should be r e w r i t t e n , c l a r i f i e d
and made more workable.
Section 13: There i s no j u s t i f i c a t i o n , in our opinion, f o r applying
to f i f t e e n day notes a r a t e of i n t e r e s t higher than t h e rediscount r a t e a t
the r e s e r v e bank. The b e s t member banks i n t h i s d i s t r i c t get temporary
accommodation from us under a f i f t e e n day note, and we have regarded t h i s
p r a c t i c e on t h e i r p a r t a s evidence of conservatism and l i q u i d i t y a s well
as close a t t e n t i o n to t h e i r own a f f a i r s . We do not t h i n k t h a t any member
bank should be required to borrow money f o r a longer p e r i o d of time than
i t reasonably needs i t .
Section l 4 B: We recognize t h e f a c t t h a t the f e d e r a l r e s e r v e board
i s the c o u n t e r p a r t i n t h i s country as n e a r l y as may be of a f o r e i g n c e n t r a l
bank, and we agree t h a t a l l r e l a t i o n s and t r a n s a c t i o n s of the system and the
several f e d e r a l r e s e r v e banks with f o r e i g n bancs should be under the superv i s i o n of t h e Board; But we wonder i f t h e amendment proposed does not go
too f a r , with the r e s u l t t h a t f o r e i g n banks would h e s i t a t e to p a r t i c i p a t e
in n e g o t i a t i o n s and conferences with the f r a n k n e s s and thoroughness t h a t i s
desirable.
Section 15: I t would be u n f o r t u n a t e a t t h i s time p a r t i c u l a r l y i f
promissory n o t e s of member banks secured by government o b l i g a t i o n s would
be made i n e l i g i b l e as c o l l a t e r a l to secure- f e d e r a l r e s e r v e n o t e s . In
recent months the Federal reserve banks have been n o t i c e a b l y short on
c o l l a t e r a l which may be pledged w i t h t h e agent, ant1, t h e e l i m i n a t i o n of t h e
o b l i g a t i o n s mentioned would add to t h o i r d i f f i c u l t i e s . The recent expansion
in f e d e r a l r e s e r v e notes, i n c r e a s i n g about $1,200,000,000 over the amount
outstanding a year ago, h a s shown t h a t t h e demand f o r currency i s not
always accompanied by corresponding demands f o r a d d i t i o n a l r e s e r v e c r e d i t .
Section l 6 : For some time we have f e l t t h a t no d i s t i n c t i o n should
be made i n t h e r e s e r v e requirements as between t i n e and demand d e p o s i t s ,
and t h e r e f o r e we do not d i s f a v o r t h a t f e a t u r e of t h i s s e c t i o n : But we do
think t h a t any change in t h e reserve requirements of member banks should be
made only a f t e r thorough c o n s i d e r a t i o n by proper committees i n congress of
the report r e c e n t l y made by the s p e c i a l r e s e r v e committee of the system.
x-7077
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± 1 2
Section l6-C: Member banks are j u s t i f i e d from time to time i n
making stock c o l l a t e r a l l o a n s to some of t h e i r customers, even in talcing
up loans p r e v i o u s l y h e l d "by brokers and o t h e r s end in l i n e with our comment upon o t h e r p r o v i s i o n s of the b i l l we f e e l t h a t t h e i n f l e x i b l e r u l e
s e t f o r t h on page 37» l i n e s 10 to 15, i s an unwarranted l i m i t a t i o n upon
the c o n t r o l of a bank by i t s o f f i c e r s and d i r e c t o r s .
In conclusion, we may say t h a t the b i l l r e p r e s e n t s an e f f o r t to
control member banks through d e t a i l e d s t a t u t o r y r e g u l a t i o n s and e v i d e n t l y
grows out of a chapter i n our f i n a n c i a l and c r e d i t h i s t o r y which may not
be repeated f o r many y e a r s ; Rather than to t r y to cover every f e a t u r e of
banking by s t a t u t e , we t h i n k a much b e t t e r plan i s to c l o t h e the Federal
Reserve Board with a proper measure of general and f l e x i b l e d i s c r e t i o n a r y
powers which w i l l enable i t to meet t h e changing n a t u r e of our economic d i s turbances without imposing undue h a r d s h i p s and unwarranted s u p e r v i s i o n and
l i m i t a t i o n s upon member banks.
McKinncy, and Walsh
237P
C O P Y
X-7077
k-2
FEDERAL RES23VE BAM OF DALLAS
TELEGRAM
65 gb
Dallas
Feb. 2,
1025 a.m.
Meyer
Washington.
Supplementing our message of January t h i r t i e t h regarding Glass b i l l
we recommend t h a t s e c t i o n t h i r t y two page f i f t y nine be amended to
provide f o r examination of a f f i l i a t e s of s t a t e member banks by
examiners appointed or approved by Federal Reserve Board. The b i l l
as i t now stands a p p a r e n t l y l i m i t s the r i g h t of examination of a f f i l i a t e s
to examiners appointed by comptroller of currency whereas i n our
opinion t h e r e would be many cases in which i t would be d e s i r a b l e and
important t h a t a f f i l i a t e s of member s t a t e banks be examined by
Federal Reserve examiners. We t h e r e f o r e suggest t h a t s e c t i o n t h i r t y
two be amended by i n s e r t i n g the following c l a u s e in p a r e n t h e s i s
immediately f o l l o w i n g the word examiner in l i n e ten quote Whether
he be an examiner appointed by the Comptroller of Currency or an
examiner appointed by t h e Federal Reserve Board or a Federal Reserve
Bank unquote. We b e l i e v e t h i s change h i g h l y d e s i r a b l e i n order to
e x p r e s s l y c l o t h e Federal Reserve Banks with the power to examine
a f f i l i a t e s of both n a t i o n a l and member s t a t e banks.
McKinney, and Walsh.
I204p
114
FEDERAL RESERVE BAKE 0? SAN FRMCISGO
TELEGRAM
X-7077
L~1
236gfa
San Francisco Jan 30 1234pm
Governor Meyer
Washington
Pending p r e s e n t a t i o n other comments banking a c t of 1932 I would l i k e to
b r i n g t o your a t t e n t i o n S e c t i o n 17 which if adopted would s e r i o u s l y a f f e c t
c r e d i t of N a t i o n a l Banks, Ostensibly purpose i s t o give p r e f e r e n c e t o
time and t h r i f t d e p o s i t o r s over commercial d e p o s i t o r s and o t h e r c r e d i t o r s
of same bank# Unless d e f i n i t e l i m i t a t i o n s a r e placed on e x t e n t t o which
such d e p o s i t o r s may be p r e f e r r e d commercial d e p o s i t o r s n a t u r a l l y would be
r e l u c t a n t t o p a t r o n i z e bank so organized. I n t e n t i o n i s to secure savings
d e p o s i t o r s with c a p i t a l a s s e t s and commercial d e p o s i t o r s with l i q u i d a s s e t s .
Under C a l i f o r n i a Departmental law t h i s i s c a r r i e d out by c r e a t i n g i n e f f e c t
under one c h a r t e r two banks one engaging i n commercial banking having
s e p a r a t e c a p i t a l and one engaging i n savings banking l i k e w i s e c a p i t a l i z e d
and with r e s t r i c t i o n as t o c h a r a c t e r of a s s e t s which can be c a r r i e d i n
savings department, each department maintaining s e p a r a t e s e t of books. In
event of l i q u i d a t i o n no encroachment by c r e d i t o r s of one department can be
made upon o t h e r department except t h a t r e s i d u e i n one department, a f t e r
c r e d i t o r s claims a r e s a t i s f i e d i s a p p l i e d t o claims a g a i n s t o t h e r d e p a r t ment b e f o r e any r e t u r n i s made t o s t o c k h o l d e r s . C r e d i t o r s of s e p a r a t e
departments a r e on e q u i t a b l e b a s i s with a l l o t h e r c r e d i t o r s of same
department j u s t a s though, one bank only e x i s t e d . Should s e c t i o n 17 become
e f f e c t i v e i t would s e r i o u s l y impair value of a n a t i o n a l bank endorsement
which would r e s u l t i n curtailment of amount of c r e d i t obtainable and more
severe t e s t a p p l i e d t o paper which a n a t i o n a l bank may o f f e r f o r discount
a t r e s e r v e bank of correspondent bank. P r o v i s i o n s of s e c t i o n 17 a l s o
would unfavorably r e a c t upon acceptances of a n a t i o n a l bank.
Calkins
FEDERAL RESERVE BOARD
WASHINGTON
X-7079
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
January 28, 1932.
SUBJECT:
C o l l a t e r a l S e c u r i t y to Government Deposits Treasury Department Circular Ho. 92.
Dear SirThere i s enclosed herewith, f o r your information, copy
of a l e t t e r addressed to the
Governor
of t h e Federal Reserve Board,
under date of January 6, 1932, by A s s i s t a n t Secretary of the
Treasury B a l l a n t i n e , on t h e s u b j e c t of the proper c l a s s i f i c a t i o n
of a g r i c u l t u r a l paper as s e c u r i t y f o r Government d e p o s i t s under
Treasury Department Circular ZTo. 92, as amended.
There i s also enclosed copy of a l e t t e r which the A s s i s t ant Secretary of the Treasury addressed on t h e same d a t e to the
Controller of the Federal Reserve Bank of St. Louis r e l a t i v e to
the acceptance, from a d e p o s i t a r y bank, under sub-paragraph (h)
of the c i r c u l a r , of a note of a correspondent bank secured by mark e t a b l e s e c u r i t i e s other than customers' n o t e s , d r a f t s or b i l l s
of exchange.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Enclosures.
TO THE GOVERNORS OF ALL F. R. BANKS.
X-7079-a
C O P Y
ijLG
TREASURY DEPARTMENT
WASHINGTON
January 6, 1932.
My dear Governor;
Mr. Drinnen has requested the r u l i n g of the Treasury as
to the proper c l a s s i f i c a t i o n of a g r i c u l t u r a l paper as s e c u r i t y f o r
Government d e p o s i t s under Treasury Department Circular Fo. 95, as
amended, a copy of which I enclose.
I t has been g e n e r a l l y considered by the Treasury t h a t
a g r i c u l t u r a l paper p r o p e r l y f a l l s within the p r o v i s i o n s of p a r a graph (g) of t h e c o l l a t e r a l s e c u r i t y p r o v i s i o n s of the c i r c u l a r
which includes customers' notes indorsed by a correspondent i n corporated bank or t r u s t company and rediscounted by the d e p o s i t a r y
bank or t r u s t company, r a t h e r than under paragraph ( f ) p r o v i d i n g
f o r the acceptance of commercial paper and bankers' acceptances,
except in the case of notes of d e a l e r s in mules and c a t t l e and
d e a l e r s in a g r i c u l t u r a l implements, or other s i m i l a r n o t e s , which
have been c l a s s i f i e d by the Federal Reserve Board as commercial
r a t h e r than a g r i c u l t u r a l paper.
As you w i l l note, however, under t h e terms of the c i r c u l a r
the approval and v a l u a t i o n of s e c u r i t i e s i s committed to t h e Federal
Reserve Banks a c t i n g under the d i r e c t i o n of the Secretary of t h e
Treasury and i t has been the p o l i c y of the Treasury to a l a r g e ext e n t to depend upon the d i s c r e t i o n of such banks as to the c l a s s i f i c a t i o n of e l i g i b l e paper r a t h e r than to make an i n f l e x i b l e r u l i n g .
Federal Reserve Banks a r e in a b e t t e r p o s i t i o n to determine the
d e s i r a b i l i t y of the paper and the condition of the i n d o r s i n g and
pledging banks which v;ould appear to be the primary c o n s i d e r a t i o n .
I t i s expected t h a t the Federal Reserve Banks w i l l give t h i s type
of paper tendered as c o l l a t e r a l f o r d e p o s i t s under Circular No. 92
t h e same c a r e f u l s c r u t i n y t h a t i s given paper rediscounted f o r member banks.
By d i r e c t i o n of the Secretary:
Very t r u l y yours,
(Signed) A. A. B a l l a n t i n e
A s s i s t a n t Secretary of the Treasury.
Hon. Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C.
(enclosure)
X-7079-15
COPY
January 6, 1932.
Mr. S. F. Gilmore, C o n t r o l l e r ,
Federal Reserve Bank of St. Louis,
St. Louis, Missouri.
Dear S i r ;
I have your l e t t e r of December 15, 1931, addressed
to the Division of Deposits, r e q u e s t i n g advice as to whether
you should a c c e p t , from a d e p o s i t a r y bank, under sub-paragraph
(h) of the c o l l a t e r a l s e c u r i t y p r o v i s i o n s of Treasury C i r c u l a r
No. 92, a note of a correspondent bank secured by marketable
s e c u r i t i e s o t h e r than customers' n o t e s , d r a f t s , or b i l l s of
exchange.
If the notes to which you r e f e r are otherwise e l i g i b l e
under t h e terms of sub-paragraph ( h ) , the Treasury w i l l not obj e c t to t h e i r acceptance as s e c u r i t y f o r d e p o s i t s under Circular
No. 92, provided the s e c u r i t i e s pledged as c o l l a t e r a l a g a i n s t
such notes a r e a l s o e l i g i b l e under the other c l a s s e s s p e c i f i e d
in the c i r c u l a r , as amended, and provided f u r t h e r t h a t the
s e c u r i t i e s so pledged a r e in amounts a t l e a s t equal to the
n o t e s in each case.
Very t r u l y yours,
(Signed)
A. A. B a l l a n t i n e
A s s i s t a n t Secretary of the Treasury.
118
5/2/32.
DISTRICT NO. 1
X-7081
FEDERAL RESERVE BANK OF BOSTON
OFFICERS A D DIRECTORS, 1932
N
OFFICERS
Roy A. Young, Governor
W, W. Paddock, Deputy Governor
#n. W i l l e t t , Cashier
K. K. Carrick, Secretary
Frederic H. C u r t i s s , Chairman of t h e
Board and Federal Reserve Agent
Allen H o l l i s , Deputy Chairman of the
Board
Charles F. Gettemy, A s s i s t a n t Federal
Reserve Agent
H. F. C u r r i e r , Auditor
E. G. H u l t , Assistant Cashier
E. M. L e a v i t t , A s s i s t a n t Cashier
L. W. Sweetser, Assistant Cashier
Carl B. Pitman, Assistant Cashier
DIRECTORS
Class A:
A l f r e d L. Ripley
Edward S. Kennard
Frederick S. Chamberlain
Term
Expires
Dec. 31
Chrm., The Merchants Nat 1 1. Bank, Boston, Mass.
V. P. & Cash., Romford N a t ' 1 . Bank, Romford, Maine
P r e s . , New B r i t a i n N a t ' 1 . Bank, New B r i t a i n , Conn.
1932
1933
1934
P r e s . , Bird and Son, I n c . , l a s t Walpole, Mass.
Chrm., Bemis Brothers Bag Company# Boetov,, Mass.
P r e s . , Boston and Maine SR., Boston, Mass.
1932
1933
1934
Boston, Mass.
Lawyer, Concord, IT. H.
P r e s . , L i p p i t t Woolen Co., Providence, R* I,
1932
1933
1934
Class B:
P h i l i p R. Allen
Albert Farwell Bemis
Edward S. French
Class C;
Frederic H; C u r t i s s
Allen H o l l i s
Charles H. Merriman
M M E FEDERAL ADVISORY COUNCIL
E BR
Thomas M. Steele
COUNSEL
P h i l l i p s Ketcbvun
DISTRICT NO. 2
X-7081
FBDSRAL B|§EBVE BANK OP N W YORK
E
OFFICERS AND DIRECTORS. 1932
OFFICERS
George L. H a r r i s o n , Governor
Louis F. S a i l e r , Deputy Governor
Edwin R, Kehzel, Deputy Governor
W. Randolph Burgess, Deputy Governor
L e s l i e R. Rounds, Deputy Governor
Arthur W. G i l b a r t , Deputy Governor
Walter S. Logan, Deputy Governor & Gen.Counsel
Jay E. Crane, Deputy Governor
Ray M. Gidriey, A s s t . Deputy Governor
Allan Sproul, Asst . Deputy Governor & Sec'y.
Walter 3 . Matteson, A s s t . Deputy Governor
J . Wilson J o n e s , A s s t . Deputy Governor
L. Werner Knoke, A s s t . Deputy Governor
Chas. H. Coe, A s s t . Deputy Governor
James M. Rice, A s s t . Deputy Governor
Jacques A. M i t c h e l l , Manager
Edwin C. French, Manager
I . Ward Waters, Manager
Dudley H. Barrows, Manager
Harold V. Roelse, Manager & A s s t . S e c ' y .
DIRECTORS
J . Herbert Case, Chairman of the
Board and Federal Reserve Agent
Owen D. Young, Deputy Chairman of
t h e Board
William H. D i l l i s t i n , A s s i s t a n t
Federal Reserve Agent
H. S. Downs, A s s i s t a n t Federal
Reserve Agent
Carl Snyder, General S t a t i s t i c i a n
Edward L. Dodge, General Auditor
George W. Ferguson, A s s t . General
Auditor
Robert F. McMurray, Manager
William A. S c o t t , Manager
Robert M. Morgan, Manager
Wesley W. B u r t , Manager
Edward 6. Douglas, Manager
A. Phelan, Manager
Class A:
Thomas W. Stephens
David C. Warner
A l b e r t H. Wiggin
P r e s . , Bank of Montclair, Montclair, N . J .
P r e s . , Endicott Trust Company, E n d i c o t t , N.Y.
Chrm. , The Chase National B&nk, New York, N.Y.
Term
Expires
Dec. 31
1932
1933
1934
Class B:
Theo. F. Whitmarsh
Sam' 1. W. Reyburn
William H. Woodin
Chrm., Francis H. Leggett & Co., New York, N.Y.
1932
P r e s . , Assoc. Dry Goods Corp. of New York, New York, N.Y. 1933
P r e s . , American Car & Foundry Company, New York, N.Y.
1934
Class C:
Owen D. Young
Clarence M. Woolley
J . Herbert Case
Chrm., General E l e c t r i c Company, New York, N.Y,
1932
Chrm., Amer. Radiator & S t a n d . S a n i . C o r p . , Greenwich,Conn. 1933
New York, N.Y.
1934
MEMBER FEDERAL ADVISORY COUNCIL
Robert H. Treman
ASSISTANT COUNSEL
Theodore M. Crisp
Herbert E. Kimball
120
MSTAlCT NO. 3
X-7081
FEDERAL RESERVE BAH OF PHILADELPHIA
OFFICERS AND DIRECTORS. 1932
OFFICERS
Geo. W. Morris, Governor
William H. Hutt, Deputy Governor
C. A. Mcllhenny, Cashier & S e c r e t a r y
W. J .
James
R. M.
S. R.
Richard L. A u s t i n , Chairman of t h e
Board and Federal Reserve Agent
Alba B. Johnson, Deputy Chairman of
the Board
Arthur E. P o s t , A s s i s t a n t Federal
Reserve Agent
Ernest C. H i l l , A s s i s t a n t Federal
Reserve Agent
Wm. G. McCreedy, Comptroller
Davis, A s s i s t a n t Cashier
M. Toy, A s s i s t a n t Cashier
M i l l e r , J r . , A s s i s t a n t Cashier
E a r l , A s s i s t a n t Cashier
DIRECTORS
Class A:
Joseph Wayne, J r .
George W. Reily
John C. Cosgrove
Term
Expires
Dec. 31
P r e s . , P h i l a . National Bank, P h i l a d e l p h i a , Pa.
P r e s . , Harrisburg National Bank, H a r r i s b u r g , Pa.
Banker and Coal Operator, Johnstown, Pa.
1932
1933
1934
P r e s . , General Asphalt Company, P h i l a d e l p h i a , Pa.
V. P . , Wm. S. Scull Co., Camden, N . J .
John R. Evans & Co., P h i l a d e l p h i a , Pa.
1932
1933
1934
Class B:
Arthur W. Sewall
J . Carl DeLaCour
C. Frederick C. Stout
Class C:
Richard L. Austin
Alba B. Johnson
Harry L. Cannon
P h i l a d e l p h i a , Pa.
1932
Chrm., Southwark Fndry. & Machine Co., P h i l a d e l p h i a , P a . 1933
Farmer and Packer, B r i d g e v i i l e , Del.
1934
MEMBER FEDERAL ADVISORY COUNCIL
Howard A. Loeb
COUNSEL
Williams, B r i t t a i n and S i n c l a i r
121
DISTRICT NO. 4
X-7081
FEDERAL RESERVE BAH OF CLEVELAND
OFFICERS AND DIRECTORS, 1933
OFFICERS
E. R. Fancher, Governor
M. J . Fleming, Deputy Governor
I . J . Zurlinden, Deputy Governor
H. F. S t r a t e r , C a s h i e r - S e c r e t a r y
W.
G.
C.
C.
D.
F.
H.
W.
L.
B.
Geo. DeCeunp, Chairman of t h e Board and
Federal Reserve Agent
L. B. Williams, Deputy Chairman of the
Board
J . B. Anderson, A s s i s t a n t Federal Reserve Agent
W. H. F l e t c h e r , A s s i s t a n t Federal Reserve Agent
F. V. Grayson, Auditor
Taylor, A s s i s t a n t Cashier
Wagner, A s s i s t a n t Cashier
Arnold, A s s i s t a n t Cashier
Bickford, A s s i s t a n t Cashier
Clouser, A s s i s t a n t Cashier
DIRECTORS
Class A:
Robert Wardrop
0. N. Sams
Chess Lamberton
' Term
Expires
Dec. 31
Chrm. , F i r s t National Bank, P i t t s b u r g h , Pa.
P r e s . , Merchants National Bank, H i l l s h o r o , Ohio
V. P. , Lamberton National Bank, F r a n k l i n , Pa.
1932
1933
1934
P r e s . , P h i l i p Carey Mfg. Co., C i n c i n n a t i , Ohio
P r e s . , Ohio S t e e l Foundry Co., Lima, Ohio
S e c ' y - T r e a s . , Reed Manufacturing Co., E r i e , Pa.
1932
1933
1934
Cleveland, Ohio
V. P . , Bostwick-Braun Company, Toledo, Ohio
Hayden, M i l l e r and Company, Cleveland, Ohio
1932
1933
1934
Class B:
George D. CraVbs
J . E. Galvin
R. P. Wright
Class C:
Geo. DeCarap
W. W. Knight
L. B. Williams
MEMBER E3D2RAL ADVISORY COUNCIL
J . A. House
"COUNSEL
S q u i r e , Sanders and Dempsey
122
DiSTBlCT NO. 5
X-7061
FEDERAL RESERVE BAM OF RICHMOND
OFFICERS AND DIRECTORS, 1932
OFFICERS
George J . Seay, Governor
Chas. A. Peple, Deputy Governor
S. H. Broaddus, Deputy Governor
J . S. Walden, J r . , C o n t r o l l e r
George H. Koesee, Cashier
John T. G a r r e t t , Manager
Albert S. Johnstone, Manager
to. W. Hoxton, Chairman of the Board
and Federal Reserve Agent
F r e d e r i c A. Delano, Deputy Chairman
of t h e Board
J . G. Fry, A s s i s t a n t Federal Reserve
Agent
T. F. Epes, Auditor
Edward Waller, J r . , A s s i s t a n t Cashier
W. W. D i l l a r d , A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
Class A:
L. E. Johnson
Charles E. Rieman
James C. Braswell
P r e s . , F i r s t National Sank, Alderson, W. Va.
P r e s . , Western National Bank, Baltimore, Md.
P r e s . , P l a n t e r s Nat 1 1. Bk. & Tr. Co., Rocky Mount, N.C.
1932
1933
1934
Merchant, H a r t s v i l l e , S.C.
P r i n c . A g t . , Mutual Assur. Soc. of Va. , Richmond, Va.
P r e s . , N a t ' 1. E l e c t r i c a l Supply Co., Washington, D.C.
1932
1933
1934
Richmond, Va.
Receiver, Washington, D.C.
T e x t i l e s , C h a r l o t t e , N.C.
1932
1933
1934
Class B:
D. R. Coker
W. M. Addison
Edwin C. Graham
Class C:
Wm. W. Hoxton
F r e d e r i c A- Delano
Robt. L a s s i t e r
MEMBER FEDERAL ADVISORY COUNCIL
Howard Bruce
COUNSEL
Maxwell G. Wallace
123
DISTRICT IvO. 6
X-7081
FEDERAL RESERVE B 1 C 01 ATLANTA
AH
OFFICERS MP DIRECTORS, 1932
OFFICERS
E. R. Black, Governor
W. S. Johns, Deputy Governor
H. F. Conniff, Deputy Governor
W. S. McLarin, J r . . A s s t . Deputy Governor
V..
<7
B e l l , Cashier
R.
V.
C•
P.
S.
L.
A.
K.
R.
L.
P.
M.
Oscar Newton, Chairman of the Board and
Federal Reserve Agent
W. H. K e t t i g , Deputy Chairman of the
Board
Ward Albertson, A s s i s t a n t Federal Reserve
Agent and Secretary
E. P. P a r i s , General Auditor
J . W. Honour, A s s i s t a n t Auditor
Sims, A s s i s t a n t Cashier
Bowman, A s s i s t a n t Cashier
Camp, A s s i s t a n t Cashier
T. Beavers, A s s i s t a n t Cashier
Schuessler, A s s i s t a n t Cashier
Clark, A s s i s t a n t Cashier
DIRECTORS
Class A;
G. G. Ware
H. Lane Young
E. C. Melvin
Term
Expiree
Dec. 31
P r e s . , F i r s t National Bank, Leesburg, F l a .
V. P . , C i t i z e n s & Southern N a t ! 1 . Bank, A t l a n t a , Ga.
P r e s . , Selma National Bank, Selma, Ala.
1932
1933
1934
V. P . , Kohn, Weil & Simon, I n c . , New Orleans, La.
P r e s . , J . B. McCrary Company, Decatur, Ga.
P r e s . .Nashville,Chattanooga & St. Louis Ry., N a s h v i l l e , Tenn.
1932
1933
1934
A t l a n t a , Ga.
Hunter Mfg. & Commission Company of N. Y. , A t l a n t a , Ga.
Southern R e p r e s e n t a t i v e , Crane Company, Birmingham, Ala.
1932
1933
1934
Class B:
Leon C. Simon
J . A. McCrary
J . B. H i l l
Class C:
Oscar Newton
Geo. S. H a r r i s
W. H. K e t t i g
MEMBER FEDERAL ADVISORY COUNCIL
John K. O t t l e y
COUNSEL
Robert S. Parker
1 2 4
DISTRICT HO. 7
X-7081
FEDERAL RESERVE BASK OF CHICAGO
OFFICERS AND DIRECTORS, 1932
OFFICERS
James B. McDougal, Governor.
John H. B l a i r , Deputy Governor
C. R. McKay, Deputy Governor
J . H- D i l l a r d , Deputy Governor
W. C. Bachman, A s s t . Deputy Governor
0. J . Netterstrom, Asst. Deputy Governor
D. A. Jones, Asst. Deputy Governor
E. A. Delaney, A s s t . Deputy Governor
A.
R.
H.
J.
J.
R.
L.
Eugene M. Stevens, Chairman of the
Board and Federal Reserve Agent
James Simpson, Deputy Chairman of
the Board
C l i f f o r d S. Young, A s s i s t a n t Federal
Reserve Agent
Geo. A. Prugh, A s s i s t a n t Federal
Reserve Agent
F. R. Burgess, General Auditor
W. A. Hopkins, A s s i s t a n t Auditor
¥ . Dazey, Manager
J . Hargreaves, Manager
&• P e t t , Manager
G. Roberts, Manager
C. Callahan, Manager
E. Coulter, Manager
G. Meyer, Manager
Irving F i s c h e r , Manager
L. G. Pavey, Manager
F. L. Purrington, Manager
F. Bateman, Manager
F. A. Lindsten, Manager
A. L. Olson, Manager & A s s t .
William W. Turner, Manager
DIRECTORS
Class A:
Geo. J . Schaller
P r e s . , Citizens F i r s t F a t ' l . Bank, Storm Lake, Iowa
Ge*rge M. Reynolds Chrm., Continental I l l i n o i s 3k. & Tr. Co., Chicago, 111.
Edward B. Bstberg P r e s . , Waukesha F a t ' l . Bank, Waukesha, '^is.
Term
Expires
Dec. 31
1939
1933
1934
Class B:
Robert M. F e u s t e l
Max W. Babb
Stanford T. Crapo
P r e s . , Public service Co. of Indiana, Fort Wayne, Ind.
V. P . , All is-Chalmers Mfg. Co., Milwaukee, r i s .
Sec.-Tr'eas., Huron Portland Cement Co., D e t r o i t , Liich.
1932
1933
1934
Chrm., Marshall Field & Company, Chicago, 111.
Chicago, 111.
P r e s . , B a l l Brothers Company, Muncie, Ind.
1932
1933
1934
Class C?
James Simpson
Eugene M. Stevens
Frank C. Ball
M M E FEDERAL ADVISORY COUNCIL
E BR
Melvin A. Traylor
COUNSEL
Carl Meyer
125
DISTRICT "JO. 8
X-7081
FEDERAL RESERVE BANK OF ST. LOUIS
OFFICERS MP DIRECTORS, 1933
OFFICERS
?m. McC. Martin, Governor
0. M. A t t e b e r y , Deputy Governor
J a s . G. McConkey, S e c ' y . & Counsel
A.
S.
F.
G.
0.
H.
F.
N.
0.
C.
Jno. S. Wood, Chairman of t h e Board and
Federal Reserve Agent
Jno. ? . Boehne, Deputy Chairman of the
Board
C. M. Stewart, A s s i s t a n t Federal Reserve
Agent
E. J . Novy, Auditor
A. E- Debrecht, A s s i s t a n t Auditor
Haill, Controller
Gilmore, Controller
H a l l , Controller
Hollocher, C o n t r o l l e r
P h i l l i p s , Controller
DIRECTORS
Term
Expires
Dec. SI
Class A:
John G. Lonsdale
Max 3 . Hahm
John C. Martin
P r e s . , Mercantile-Commerce Bank & Trust Co.,St.Louis,Mo. 1932
V. P . , C i t i z e n s National Bank, Bowling Green, Ky.
1933
V. P. * Cashier, Salem National Bank, Salem, 111.
1934
Class Bi
M. P. Sturdivanb
James W. H a r r i s
W. B. Blanket t
P l a n t e r , Glendora, Miss.
P r e s . , H a r r i s - P o l k Rat Company, St. Louis, Mo.
P r e s . , P l u n k e t t - J a r r e l l Grocer Co., L i t t l e Rock, Ark.
1932
1933
1934
R e t i r e d , E v a n s v i l l e , Ind.
S t . Louis, Mo.
D i l l a r d & C o f f i n Company, Memphis, Tenn.
1932
1933
1934
Class C:
Jno. W. Boehne
Jno. S. food
Paul D i l l a r d
IflEMBER FEDERAL ADVISORY COUNCIL
Walter v7. Smith
COUNSEL
J a s . G. McConkey
126
X-7081
DISTRICT NO. 9
FEDERAL RESERVE BAH OF MINNEAPOLIS
OFFICERS A D DIRECTORS, 1933
N
OFFICERS
William B. Geery, Governor
Harry Yaeger, Deputy Governor
H. I . Ziemer, Deputy Governor & Cashier
F. C. Dunlop, Controller
John R. Mitchell, Chairman of the Board
and Federal Reserve Agent
Homer P. Clark, Deputy Chairman of t h e
Board
Curtis L. Mosher, A s s i s t a n t Federal
Reserve Agent and Secretary
F. M. Bailey, A s s i s t a n t Federal Reserve
Agent
Harold C. Core, A s s i s t a n t Cashier
Arthur R. Larson, Assistant Cashier
Leonard E. Rast, A s s i s t a n t Cashier
A s s i s t a n t Cashier
DIRECTORS
Class A:
H. R. Kibbee
H. C. Hansen
P. J . Leeman
Term
Expires
Dec. 31
P r e s . , Commercial Tr. & Svgs. Bk., M i t c h e l l , S.D.
Pr e s . , F i r s t National Bank, Churchs Ferry, N.D.
Pres.& Gen. Mgr.,First Bk.Stock Corp..Minneapolis,Minn.
1932
1933
1934
Manufacturer of Bakery Products, Helena, Mont.
John S. Owen Lumber Company, Eau C l a i r e , Wis.
P r e s . , A. J . Krank Company, St. Paul, Minn.
1932
1933
1934
Class B:
J . E. O'Connell
J ohn S. Owen
W. 0. Washburn
Class C;
John R. Mitchell
Minneapolis, Minn.
Homer P. Clark
P r e s . , West Publishing Company, St. P a u l , Minn.
George W. McCormick P r e s . , Menominee River Sugar Co., Menominee, Mich.
M M E FEDERAL ADVISORY COUNCIL
E BR
Theodore Wold
COUNSEL
Andreas Ueland
1932
1933
1934
DISTRICT UO. 10
FEDERAL RESERVE BANK OF KANSAS CITY
*
OFFICERS AND DIRECTORS. 1932
X-7081
1
127
OFFICERS
Geo. H. Hamilton, Governor
C. A. Worthington, Deputy Governor
J . W. Helm, Deputy Governor & Cashier
M. 1 . McClure, Chairman of the Board
and Federal Reserve Agent
H. M. Langworthy, Deputy Chairman of
t h e Board
A. M. McAdams, A s s i s t a n t Federal Reserve
Agent and Secretary
S. A. Wardell, Auditor
John P h i l l i p s , J r . , A s s i s t a n t Cashier
E. P. Tyner, A s s i s t a n t Cashier
G. E. Barley, A s s i s t a n t Cashier
M. W. E. Park, A s s i s t a n t Cashier
G. H. P i p k i n , A s s i s t a n t Cashier
N. R. Oberwortmann, A s s i s t a n t Cashier and Examiner
DIRECTORS
Class A:
E. E. Mullaney
C. C. Parks
Frank ff. Sponafele
Term
Expires
Dec. 51
P r e s . , Farmers & Merchants Bank, H i l l C i t y , Kans.
V. P . , F i r s t National Bank, Denver, Colo.
P r e s . , Miami County National Bank, P a o l a , Kans.
1932
1933
1934
V. P . , P h i l l i p s Petroleum Co., B a r t l e s v i l l e , Okla.
John Deere Plow Company, Omaha, Nebr.
P r e s . , Bernardin Timber & Mfg. Co., Kansas City, Mo.
1932
1933
1934
Class B:
L. E. P h i l l i p s
Willard D. Hosford
J . M. Bernardin
Class C;
M. L. McClure
Edward P. Brown
H. M. Langworthy
Kansas City, Mo.
Farmer, Davey, Mebr.
Langworthy,Spencer & T e r r e l l ( A t t ' y s . ) , K a n s a s City,Mo.
MEMBER FEDERAL ADVISORY COUNCIL
Walter S. McLucas
COUNSEL
H. 0. Leedy
1932
1933
,1934
±28
tiiStetlCT NO. 11
X-7081
FEDERAL RESERVE BAH OF DALLAS
OFFICERS A D DIRECTORS, 1932
M
OFFICERS
3 . A. McKinney, Governor
R. R. G i l b e r t , Deputy Governor
R. B. Coleman, Deputy Governor
r r e d H a r r i s , Cashier
W. 0. Ford, A s s i s t a n t Deputy Governor
C. C. Walsh, Chairman of t h e Board and
Federal Reserve Agent
Sam. 3. P e r k i n s , Deputy Chairman of t h e
Board
Charles C. H a l l , A s s i s t a n t Federal Reserve Agent and Secretary
William Joseph Evans, A s s i s t a n t Federal
Reserve Agent
W. P. Clarke,General Auditor
C. C. True, A s s i s t a n t Auditor
E. B. A u s t i n , A s s i s t a n t Cashier
L. G. Pondrom, A s s i s t a n t Cashier
R. 0. Webb, A s s i s t a n t Cashier
DIRECTORS
Class A:
J . P. Williams
R. E. Harding
W. H. P a t r i c k
Term
Expires
Dec. 31
Mineral Wells, Texas
P r e s . , Fort Worth National Bank, Fort Worth, Texas
P r e s . , F i r s t National Bank, Clarendon, Texas
1932
1933
1934
V. P . , Southland Cotton Oil Co., P a r i s , Texas
V. P . , Cooper Grocery Co., Waco, Texas
W. D. Cleveland & Sons, Houston, Texas
1932
1933
1934
P r e s . , Magnolia Petroleum Co., D a l l a s , Texas
P r e s . , Perkins Dry Goods Company, D a l l a s , Texas
D a l l a s , Texas
1932
1933
1934
Class B:
J . J . Culhertson
JY R. Milam
A. S. Cleveland
Class C:
E. R. Brown
Sam. B. Perkins
C. C. Walsh
MEMBER FEDERAL ADVISORY COUNCIL
J . H. F r o s t
COUNSEL
Charles C. Huff
Locke, Locke, Stroud & Randolph
DISTRICT NO. 12
. FEDERAL B||SIV£ BAH OF SAN FRANCISCO
X-7081
•
j[g9
OFF I OSES AND DIRECTORS, 1932
OFFICERS
Jno. U. Calkins, Governor
Wm. A. Day, Deputy Governor
I r a Clerk, Deputy Governor
W. M. Hale, Cashier
Isaac B. Newton, Chairman of the Board
and. Federal Reserve Agent
Walton N. Moore, Deputy Chairman of
the Board
S. G. Sargent, A s s i s t a n t Federal Reserve Agent and S e c r e t a r y
Oliver P. Wheeler, A s s i s t a n t Federal
Reserve Agent
•F. H. Holman, General Auditor
R. T. Hardy, Auditor
C. E. E a r h a r t , A s s i s t a n t Cashier
Chester D. P h i l l i p s , A s s i s t a n t Cashier
H. N» Mangels, A s s i s t a n t Cashier
E. C. M a i l l i a r d , A s s i s t a n t Cashier
J . M. Osmer, A s s i s t a n t Cashier
DIRECTORS
Class A:
T. H. Ramsay
Keith Powell
C. K. Mcintosh
Term
Expires
Dec. 31
P r e s . , P a c i f i c ITat'l.Agri .Credit Corp., San F r a n c i s c o , C a l . 1932
P r e s . , 3anlc of ;7o odour n, Wood burn, Ore.
1933
P r e s . , The Bank of C a l i f o r n i a N.A., San F r a n c i s c o , Cel.
1934
Class B:
A. B. C. Dolnrmann Chrm. , Dohrmann Comm'l. Co., San F r a n c i s c o , Cal.
Malcolm McNaghten P r e s . , Broadway Dept. S t o r e , I n c . , Los Angeles, Cal.
Elmer H. Cox
P r e s . , Madera Sugar Pine Co., Madera, Cal.
1932
1933
1934
Class C:
Isaac B. Newton
Walton N. Moore
Bn. Sproule
San F r a n c i s c o , Cal.
p r e s . , Walton N. Moore Co., San F r a n c i s c o , Cal.
P r e s . , Southern P a c i f i c Railroad Co., San F r a n c i s c o , Cal.
MEMBER FEDERAL ADVISORY COUNCIL
Henry M. Robinson
COUNSEL
Albert C. Agnew
1932
1933
1934
130
DISTRICT NO. 2
X-7081-z
BUFFALO BRANCH of the FEDERAL RESERVE BAH OF NEW YORK
(Established May 15, 1919)
OFFICERS AND DIRECTORS. 1932
OFFICERS
R. M. O'Hara, Managing D i r e c t o r
R. B. Wiltse, A s s i s t a n t Manager
Halsey W. Snow, J r . , Cashier
C l i f f o r d L. B l a k e s l e e , A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
R. M. O'Hara
F. B. Cooley # Chrm.
Lewis G. Harriman
Edward G. Miner #
George F. Rand
Geo. G. K l e i n d i n s t #
Raymond N. Ball
#
B u f f a l o , New York
P r e s . , New York Car Wheel Co., B u f f a l o , N.Y.
P r e s . , M & T Trust Company, B u f f a l o , N.Y.
P r e s . , P f a u d l e r Company, Rochester, N.Y.
P r e s . , Marine Trust Company, B u f f a l o , N.Y.
P r e s . , L i b e r t y Bank of B u f f a l o , B u f f a l o , N.Y.
P r e s . , Lincoln-Alliance Bk. & Tr. Co., Rochester, N.Y.
Appointed by the Board
1932
1922
19S2
1933
1933
1934
1934
A
DISTRICT NO. 4
X-7081-a
CINCINNATI BRANCH of the FEDERAL RESERVE BANK OF CLEVELAND
(Established January 10, 1918)
OFFICERS AM) DIRECTORS, 1932
OFFICERS
C. F. McCombs, Managing Director
J . Lazar, Cashier
H. N. Ott, A s s i s t a n t Cashier
Bruce Kennelly, A s s i s t a n t Cashier
DIRECTORS
C. F. McCombs
John Omwake ft Chrm.
Thomas J . Davis
George M. Verity #
B. H. Kroger
Fred. A. Geier
E. S. Lee
Term
Expires
Dec-. 31
C i n c i n n a t i , 0.
P r e s . , U. S. Playing Card Co., C i n c i n n a t i , 0.
Chrm. F i r s t National Bank, C i n c i n n a t i , 0.
P r e s . American Rolling Mill Co. , Middletown, 0.
Chrm. Provident Savings & Trust Co., C i n c i n n a t i , 0.
P r e s . Cincinnati Milling Machine Co., C i n c i n n a t i , 0 .
Pres. F i r s t National Bank & Trust Co. ,Covington,Ky.
1932
1932
1932
1933
1933
1934
)-934
PITTSBURGH BRANCH of the FEDERAL RESERVE BANK OF CLEVELAND
(Established April 22, 1918)
OFFICERS AND DIRECTORS, 1932
OFFICERS
J . C. Nevin, Managing Director
T. C. Griggs, Cashier
P. A. Brown, A s s i s t a n t Cashier
F. 1. Cobun, Assistant Cashier
DIRECTORS
P i t t s b u r g h , Pa.
J . C. Nevin
A. L. Humphrey ft Chrm. P r e s . , Westinghouse Air Brake Co., P i t t s b u r g h , Pa.
D i r . , A t l a n t i c Crushed Coke Co., Greensburg, Pa.
J . R. Eisaman
S e c ' y . - T r e a s . , Stone & Thomas, Wheeling, W. Va.
J . S. Jones #
P r e s . , Mellon National., Bank, P i t t s b u r g h , Pa.
R. 3 . Mellon
Sec'y.-Treas..Arbuthnot-Stephenson Co..Pittsburgh,Pa»
James Rae #
P r e s . , Farmers Deposit National Bank, P i t t s b u r g h , Pa.
Arthur E. Braun
#
Appointed by the Board
Term
Expires
Dec. 51
1932
1932
1932
1933
1933
1934
1934
132
DISTRICT NO. 5
X-7081-a
BALTIMORE BRANCH of the FEDERAL RESERVE BANK OF RICHMOND
(Established. March 1, 1918)
OFFICERS AND DIRECTORS, 1932
OFFICERS
Hugh Leach, Managing D i r e c t o r
John R. Cupit, Cashier
F. W. Wrightson, A s s i s t a n t Cashier
J . A. Johnston, A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
Hugh Leach.
Edmund. P. Cord 11 # Chria.
L. S. Zimmerman
Norman James =f
j
'd. M. P r e n t i s
William H. Matthai #
Levi B. P h i l l i p s
Baltimore, Md.
P r e s . , Tonoloway Orchard Company, Hancock, Md.
V. P . , Maryland Trust Company, Baltimore, Md.
James Lumber Company, Baltimore, Md.
P r e s . , F i r s t Nat ' 1 . B k . , Baltimore, Md.
P r e s . , Beaver Dam Marble Company, Baltimore, Md.
P r e s . , National Bank of Cambridge, Cambridge.Md.
1932
1932
1932
1933
1933
1934
1934
CHARLOTTE BRANCH of t h e FEDERAL RESERVE BANK OF RICHMOND
(Established December 1, 1927)
OFFICERS AND DIRECTORS. 1932
OFFICERS
W. T. Clements, Managing D i r e c t o r
Robt. L. Cherry, Cashier
DIRECTORS
Term
Expires %
Dec. 31
W. T. Clements
C. A. Cannon # Chrm.
C. L. Cobb
John A. Law #
Robt. Gage
J n o . L. Morehead #
W. H; Wood
#
Appointed by the Board
C h a r l o t t e , N. C.
P r e s . , Cannon Manufacturing Co., Concord, N.C.
Cashier, Peoples National Bank, Rock H i l l , S . C .
Manufacturer - Banker, Spartanburg, S. C.
V. P. & Cashier, Commercial Bank, Chester, S.C.
Manufacturer, C h a r l o t t e , N. C.
P r e s . , American Trust Company, C h a r l o t t e , N. C.
1932
1932
1932
1933
1933
1934
1934
133
bkSlHtci NO. 6.
X-7081-a
NEW ORLEANS BRANCH of t h e FEDERAL RESERVE BANK OF ATLANTA
( E s t a b l i s h e d September 10, 1915)
OFFICERS AND DIRECTORS . 1932
OFFICERS
Marcus Walker, Managing D i r e c t o r
J . A. Walker, A s s i s t a n t Manager
W. H. Black, Cashier
F. C. V a s t e r ] i n g , A s s i s t a n t Cashier
W. E. M i l l e r , A s s i s t a n t Auditor
DIRECTORS
Marcus Walker
Leon C. Simon # Chrm.
F. W. Foote
Albert P. Bush #
J . D. O'Keefe
Paul H. Saunders #
R. S. Hecht
Term
Expires
Dec. 31
New Orleans, La.
V. P . , Kohn, Weil & Simon, I n c . , New Orleans, La.
P r e s . , F i r s t National Bank, H a t t i e s b u r g , Miss.
V. P . , T. G. Bush Grocery Co., Mobile, Ala.
P r e s . , Whitney National Bank, New Orleans, La.
Saunders, Son & Co., I n c . , New Orleans, La.
P r e s . , Hibernia Bank & Trust Co., New Orleans, La.
1932
1932
1932
1933
1933
1934
1934
BIRMINGHAM BRANCH of the FEDERAL RESERVE BANK OF ATLANTA
( E s t a b l i s h e d August 1, 1918)
OFFICERS AND DIRECTORS. 1932
OFFICERS
A. E. Walker, Managing D i r e c t o r
H. J . Urqubart, Cashier
T. N. Knowlton, A s s i s t a n t Cashier
DIRECTORS
A. E. Walker
Oscar Wells #
W. W. Crawford
E. F. A l l i s o n #
W. E. Henley
W. H. K e t t i g # Chrm.
J n o . H. Frye
#
Birmingham, Ala.
Chrm., F i r s t National Bank, Birmingham, Ala.
Vice Chrm., F i r s t National Bank, Birmingham, Ala.
P r e s . , Allison Lumber Company, Bellamy, Ala.
P r e s . , Birmingham Trust & Savings Co., Birmingham,Ala.
Southern R e p r e s e n t a t i v e , Crane Co., Birmingham, Ala.
P r e s . , Central Investment Company, Birmingham, Ala.
Appointed by t h e Board
Term
Expires
Dec. 31
1932
1932
1932
1933
1933
1934
1934
MSTRICT NO. 6
X-7081-a
JACKSONVILLE BRANCH of" the FEDERAL RESERVE 3ANK OP ATLANTA .
( E s t a b l i s h e d August 5, 1918)
'
OFFICERS AND DIRECTORS. 1933
JLS'S
OFFICERS
Hugh F o s t e r , Managing D i r e c t o r
Geo. S. Vardeman, J r . , Cashier
Mary E. Malion, A s s i s t a n t Cashier
DIRECTORS
Hugh Foster
Fulton Saussy # Chrm.
Edward W. Lane
S. 0. Chase #
Arthur F. Perry
John C. Cooper #
Gr. G. Ware
J a c k s o n v i l l e , Fla.
gaussy and Common, J a c k s o n v i l l e , Fla.
Chrm., A t l a n t i c National Bank, J a c k s o n v i l l e , F l a .
Cliase and Company, Sanford, F l a .
V. Chrm. , B a r n e t t National Bank, J a c k s o n v i l l e , F l a .
Attorney a t Law, J a c k s o n v i l l e , Fla.
P r e s . , F i r s t National Bank, Leesburg, F l a .
Term
Expires
Dec. 31
1932
1932
1932
1933
1933
1934
1934
NASHVILLE BRANCH of the FEDERAL RESERVE BANK OF ATLANTA
(Established October 21, 1919)
OFFICERS AND DIRECTORS. 1932
OFFICERS
J o e l B. F o r t , J r . , Managing Director*
E. R. Harrison, Cashier
L. W. S t a r r , A s s i s t a n t Cashier
DIRECTORS
J o e l B. F o r t , J r .
Paul M. Davis #
C. W. Bailey
W. P. Ridley #
C. A. Craig
J . B. H i l l # Chrm.
Frank J . Harle
Term
Expires
Dec. 31
N a s h v i l l e , Tenn.
1932
P r e s . , American National Bank, N a s h v i l l e , Tenn.
1932
P r e s . , F i r s t National Bank, C l a r k s v i l l e , Tenn.
1932
Farmer, Columbia, Tenn.
1933
P r e s . , National L i f e & Accident I n s . C o . , Nashville,Tenn.l933
P r e s . , Nash., Chatt. & S t . Louis Ry., N a s h v i l l e , Tenn. 1934
Cashier, Cleveland National Bank, Cleveland, Tenn.
1934
SAVANNAH AGENCY of the FEDERAL RESERVE BANK OF ATLANTA
( E s t a b l i s h e d February 4 , 1919)
J . H. Bowden, Manager
J a s . A. Goethe, A s s i s t a n t Manager
HAVAHHA AGENCY of the FEDERAL RESERVE BANK OF ATLANTA
( E s t a b l i s h e d September 1, 1923)
H. C. F r a z e r , Manager
A. H. A l s t o n , A s s i s t a n t Manager
#/ Appointed by the Board
135
DISTRICT iTOi 7
X-7081-a
DETROIT BRAHCE of the FEDERAL BE SERVE BAM OF CHICAGO
(Established March 18, 1918)
OFFICERS AMP DIHECT0T5, 1932
OFFICERS
William R. Cation, Managing Director
H. J . Chalfont, Cashier
J . G. Baslcin, A s s i s t a n t Cashier
0. T, J a r v i s , A s s i s t a n t Cashier
F. L. Bowen, A s s i s t a n t Auditor
Isadore Levin, A s s i s t a n t Counsel
DIRECTORS
Term
Expires
Dec. 31
William R, Cation
H, P. Hull # Chrm.
John Ballantyne
David McMorran #
George B. Morley
James Ingli's #
William J. Gray
#
D e t r o i t , Mich.
P r e s . , Mich. Milk Producers Assn. , Lansing, Mich.
Chrm. , F i r s t "Jayne National Bank, D e t r o i t , Mich.
Tr.& Mgr., McMorran Milling Co., Port Huron, Mich.
Chrm., Second national Bank & Trust Co..Saginaw,Mich.
P r e s . , American Blower Company-, D e t r o i t , Mich.
Counsel, F i r s t Wayne n a t i o n a l Bank, D e t r o i t , Mich.
4
Appointed by the Board
1932
1932
1932
1933
1933
1934
1934
138
M8TR1CT 110. 8
X-7081-a
LOUISVILLE BRANCH of t h e FEDERAL RESERVE BAM OF ST. LOUIS
( E s t a b l i s h e d December 3, 1917)
OFFICERS AM) DIRECTORS, 1932
OFFICERS
Jno. T. Moore, Managing D i r e c t o r
C. A. Schacht, Cashier
S. B. J e n k s , A s s i s t a n t Cashier
L. A- Moore, A s s i s t a n t Auditor
DIRECTORS
Jno. T. Moore
57. R. Cole f Chrm.
Eugene E. Hoge
33. H. Woods $
Walter F. Huthsteiner
William W. Crawford #
John T. Reynolds
Term
Expires
Dec. 31
L o u i s v i l l e , Ky.
P r e s . , Louisv i11e-Nashv i11e R.R., L o u i s v i l l e , Ky.
P r e s . , S t a t e National Bank, F r a n k f o r t , Ky.
P l a n t e r , Lucas, Ky.
P r e s . , T e l l City H a t ' l . Bank, T e l l C i t y , Ind.
Humphrey, Crawford & Mi do l e t o n , A t t y s . , Louisvi l i e ,Ky.
P r e s . , F i r s t National Bank, G r e e n v i l l e , Ky.
1932
1932
1932
193b
1933
1934
1934
MEMPHIS BRANCH of the FEDERAL RESERVE BANK OF ST. LOUIS
( E s t a b l i s h e d September 3, 1918)
OFFICERS AND DIRECTORS, 1932
OFFICERS
W. H. Glasgow, Managing D i r e c t o r
S. K. Belcher, Cashier
C. E. Martin, A s s i s t a n t Cashier
DIRECTORS
W. H. Glasgow
Tito. Or g i l l # Chrm.
Jno. M. Tarrant
E. L. Anderson #
R. Brihkley Snowden
S. E. Ragland #
J n o . W. Alder son
#
Memphis, Tenn.
P r e s . , Or g i l l Brothers & Co., Memphis, Tenn.
P r e s . , F i r s t - C i t i z e n s Nat 1 1. Bank, Dy er shurg,Tenn.
P r e s . , King & Anderson, Clarksdale, Miss.
V. P . , Bank of Commerce & Trust Co., Memphis, Tenn.
P r e s . , F i r s t National Bank, Memphis, Tenn.
V. P . , Bank of East Arkansas, F o r r e s t C i t y , Ark.
Appointed "by the Board
j
Term
Expires
Dec. 31
1932
1932
1932
1933
1933
1934
1934
1 3 7
DISTRICT HO. 8
X-7081-a
LITTLE ROCK BRANCH of the FKDEBAL RESERVE BANK OF ST. LOUIS
( E s t a b l i s h e d January S, 1919)
OFFICERS AND DIRECTORS, 1932
OFFICERS
A. F. Bailey, Managing D i r e c t o r
M. H. Long, Cashier
C l i f f o r d Wood, A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
A. F. Bailey
L i t t l e Rock, Ark.
Gordon H. Campbell # Chrm. I n s u r a n c e , L i t t l e Rock, Ark.
S t u a r t Wilson
P r e s . , S t a t e National Bank, Texarkana, Ark.
C. H. Murphy #
P r e s . , Sipsey Valley Lumber Co., 31 Dorado, Ark.
W. A. Hicks
P r e s . , Peoples Trust Co., L i t t l e Rock, Ark.
Moorhead Wright #
Chrm., Union Trust Co., L i t t l e Rock, Ark.
Jo Nichol
P r e s . , Simmons National Bank, Pine B l u f f , Ark.
#
Appointed by t h e Board
1932
1932
1932
1935
1933
1934
1934
DISTRICT HO. 9
X-7081-a
HELENA BRANCH of t h e FEDERAL RESERVE BASK OF MINNEAPOLIS
( E s t a b l i s h e d February 1, 1921) .
OFFICSES AND DIRECTORS, 1932
OFFICERS
R. B. Towle, Managing D i r e c t o r
H. L. Ziramermann, Cashier
A. A« Hoerr, A s s i s t a n t Cashier
T. B. Weir, Counsel
DIRECTORS
Term
Expires
Dec. 71
R. E. Towle
W. R. S t r a i n # Chrm.
S. McKerman
Henry Sieben #
Thomas A. Mar low
#
Helena, Mont.
P r e s . , S t r a i n B r o t h e r s , I n c . , Great F a l l s , Mont.
P r e s . , Union Bank & Trust Co., Helena, Mont.
P r e s . , Si eh en Livestock Co.. Helena. Mont»
P r e s . , F i r s t H a t ' l . Bank & Tr. Co., Helena, Mont.
Appointed "by t h e Board
1932
1932
1932
1933
1933
1 3 9
DISTRICT BO. 10
X-7081-a
O A A BRANCH of the FEDERAL RESERVE BANK OF KANSAS CITY
MH.
(Established September 4 , 1917)
OFFICERS AMP DIRECTORS, 1933
OFFICERS
L. H. E a r h a r t , Managing D i r e c t o r
Gr. A. Gregory, Cashier
.
William P h i l l i p s , A s s i s t a n t Cashier
0. F, CorcLill, A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
L. H. Earhart
Omaha, Nebr.
f . E. Hardy # Chrm.
Hardy F u r n i t u r e Company, Lincoln, Nebr.
Thomas L. Davis
V. P . , F i r s t National
Omaha, Nebr.
Daniel M. Hildebrand # Farmer and Stockman, he 7*.rd, Nebr,
R, 0. Marnell
Cashier, Merchant,-; tv.viio^al Bank, Nebraska City, Nebr.
Wm. Diesing #
Vice P r e s . , Cudahy Packing Company, Omaha, Nebr.
A. H. Marble
P r e s . , Stock Growers n a t i o n a l Bank, Cheyenne, Wyo.
1932
1932
1932
1953
1933
1934
1934
DENVER BRANCH of t h e FEDERAL RESERVE BANK OF KANSAS CITY
( E s t a b l i s h e d January 14, 1918)
OFFICERS A D DIRECTORS. 1933
M
OFFICERS
Joseph E. Olson, Managing D i r e c t o r
Stanley A. Brown, Cashier
John A. Cronan, A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
Joseph E. Olson
Denver, Colo.
jioblin H. Davis # Chrm. Exec. Vice P r e s . , Denver National Bank, Denver, Colo.
Henry Swan
V. P . , U. S. National Bank, Denver, Colo.
M e r r i t t I . Gano #
The Gano-Downs Company, Denver, Colo.
Harold Kountze
Chrm., Colorado National Bank. Denver. Coin.
Murdo Mackenzie #
Mgr., The Matador Land & C a t t l e Co.,Ltd..Denver,Colo.
H. W. Farr
Livestock and Farming, Greeley, Colo.
#
Appointed by the Board
1932
1932
1932
1933
1933
1934
1934
DISTRICT ITO. 10
X-7081-
O L H M CITY BRANCH of the FEDERAL RESERVE BANK OF KANSAS CITY
KA O A
(Established August 2, 1920)
OFFICERS A D DIRECTORS, 1932
M
OFFICERS
C. E. Daniel, Managing D i r e c t o r
R. 0. Wunderlich, Cashier
R. L. Mathes, A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
C. E. Daniel
Oklahoma C i t y , Okla.
Austin M i l l e r # Chrm. P r e s . , Oklahoma Furr.lv/u7e M:fg. Co., Oklahoma City,Okla.
H. H. Ogden
P r e s . , F i r s t Hat 8 1. Bank & Trust Co., Muskogee, Okla.
J . 3 . Doolin #
P r e s . , Schaefer-Doolin Mortgage Co., Alva, Okla.
William Mee
William Mee & Sons, Investments, Oklahoma C i t y , Okla.
Lee Clinton f
Tulsa, Okla.
Ned Holman
P r e s . , L i b e r t y ITat'l. Bank, Oklahoma City, Old a.
#
Appointed by the Board
19%
1922
1952
1953
1933
1934
1934
•
DISTRICT 110. 11
1 4 1
X-7081-a
EL PASO BRANCH of the FEDERAL RESERVE BANK OF DALLAS
(Established June 17, 1918)
OFFICERS. A D DIRECTORS, 1932
M
03TICERS
J . L. Hermann, Managing D i r e c t o r
Allen Sayles, Cashier
DIRECTORS
J . L. Hermann
'
A. P. Coles.# Chrm.
Arthur F. Jones
S. ? . Applewhite #
Geo. D. Flory
C. M. Newman #
S. M. Hurd
31 Paso, Texas
Investments, El Paso, Texas
Cashier, F i r s t National Bank, P o r t a l e s , New Mexico
Investments, Douglas, A r i z .
V. P . , S t a t e National Bank, El Paso, Texas
Investments, El Paso, Texas
Wholesale Grocer, 31 Paso, Texas
Term
Expires
Dec. 31
1932
1932
19c2
1933
1933
1034
1334
HOUSTON BRANCH of t h e FEDERAL RESERVE BANK OF DALLAS
(Established August 4, 1919)
OFFICERS AffP DIRECTORS. 1932
OFFICERS
W. D. Gentry, Managing D i r e c t o r
0. B. Mendel, Cashier
H. R. DeMoss, A s s i s t a n t Cashier
DIRECTORS
W. D. Gentry
J . Cooke Wilson # Chrm.
IT. E. Meador
E. A. Peden #
A. A. Home
R. M. F a r r a r #
John A. Wilkins
#
Houston, Texas
Wilson-Broach Oil Co., Beaumont, Texas
P r e s . , National Bank of Commerce, Houston, Texas
Peden Iron and S t e e l Co., Houston, Texas
V. P . , City National Bank, Galveston, Texas
P r e s . , F a r r a r Lumber Co., Houston, Texas
P r e s . , S t a t e National Bank, Houston, Texas
Appointed "by the Board
Term
Expires
Dec. 31
1932
1932
1932
1933
1933
1934
1934
142
DISTRICT NO* 11
X-7081-a
SAN ANTONIO BRANCH of t h e FEDERAL BESERVE BANK OF DALLAS
(Established. J u l y 5, 1927)
OFFICERS A D DIRECTORS, 1933
M
OFFICERS
M. Crump, Managing D i r e c t o r
W. E. Eagle, Cashier
K. K. Davis, A s s i s t a n t Cashier
DIRECTORS
M. Crump
Frank G. Crow # Chrm.
Franz C. Groos
J . M. Bennett #
Geo. C. Ho11is
Frank M. Lewis #
Walter P. Napier
#
San Antonio, Texas
Investments, McAllen, Texas
P r e s . , Groos National Bank, San Antonio, Texas
P r e s . , Standard Trust Company, San Antonio, Texas
P r e s . , F i r s t National Bank, Eagle Pass, Texas
F. M. Lewis & Company, Brokers, San Antonio, Texas
P r e s . , Alamo National Bank, San Antonio, Texas
Appointed "by the Board
Term
Expires
Dec. 31
1932
1932
1932
1933
1933
1934
1934
DISTRICT NO. 12
X-7081-a
SPOKANE BRANCH of the FEDERAL RESERVE BANK OF SAN FRANCISCO
(Established J u l y 26, 1917)
OFFICERS AND DIRECTORS. 1932
OFFICERS
D. L. Davis, Managing D i r e c t o r
J o s . M. Leisner, A s s i s t a n t Manager
A. J . Dumm, A s s i s t a n t Cashier
DIRECTORS
D. L.
Peter
R. M.
G. I .
D. W.
Davis
McGregor # Chrm.
Hardy
Toevs #
Twoby
Term
Expires
Dec. 31
Spokane, Wash.
Mgr., McGregor Land & Livestock Co., Hooper, Wash.
P r e s . , Yakima F i r s t National Bank, Yakima, Wash.
V. P . , Centennial Mill Co., Spokane, Wash.
Chrm. , Old Nat' 1. Bank & Union Tr. Co., Spokane, Wash.
1932
1932
1932
1933
1933
SEATTLE BRANCH of the FEDERAL RESERVE BANK OF SAN FRANCISCO
( E s t a b l i s h e d September 19, 1917)
OFFICERS AND DIRECTORS. 1932
OFFICERS
C. R. Shaw, Managing D i r e c t o r
B. A. R u s s e l l , A s s i s t a n t Manager
G. W. R e l f , A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
C. R. Shaw
S e a t t l e , Wash.
Henry A. Rhodes # Chrm. Merchant, Tacoma, Wash.
M. F. Backus
Chrm., National Bank of Commerce, S e a t t l e , Wash.
Charles H. Clarke #
T r u s t e e , Kelley Clarke Co., S e a t t l e , Wash.
M. A. Arnold
P r e s . , F i r s t National Bank of S e a t t l e , S e a t t l e , Wash.
#
Appointed by t h e Board
1932
1932
1932
1933
1933
DISTRICT NO. 12
x-708I-a
PORTLAND BRANCH * f the FEDERAL RESERVE BAH OF SAN FRANCISCO
(Established October 1, 1917}
OFFICERS AND DIRECTORS. 1933
OFFICERS
R. B. Test, Managing Director
S. A. MacEachron, Assistant Manager
J . P. Blanchard, Assistant Cashier
DIRECTORS
Term
Expires
Dec. 33
1922
1952
'1952
1933
1933
R. B. West
P o r t l a n d , Ore.
Edward C. Pe&se # Chrms Merchant, The Dalles, Ore.
Richard S. Smith
P r e s . , j ' i r s t National Bank, Eugene, Ore.
Nathan Strauss #
R e t i r e d , P o r t l a n d , Ore.
J . C. Ainsworth
Chrm. , U. S. National Bank, P o r t l a n d , Ore.
SALT LAZE CITY BRANCH of the FEDERAL RESERVE BANK OF SAN FRANCISCO
(Established April 1, 1918)
OFFICERS A D DIRECTORS. 1932
N
OFFICERS
W. L. Partner,.Managing Director
H. M. C r a f t , A s s i s t a n t Manager
F. M. Smoot, A s s i s t a n t Cashier
DIRECTORS
W. L. Partner
G-. G. Wright # Chrm.
E. 0. Howard
L a f a y e t t e Hanchett #
H. E. Hemingway
#
S a l t Lake City, Utah
D i r . , The Utah Idaho Sugar Co., Salt Lake City, Utah
P r e s . , Walker Bank & Trust Co., Salt Lake City, Utah
Chrm., Utah Power & Light Co., Salt Lake City, Utah
Pres. , Commercial Security Bank, Ogden, Utah
Appointed "by the Board
Term
Expires
Dec. 31
1932
1932
1932
1933
1933
145
DISTRICT HO. 12
X-7081-a
LOS ANGELES BRANCH of the F2DERAL RESERVE 2A.~!K 0? S^ti ERAIJCISCO
( E s t a b l i s h e d January 2, 1920)
OFFICERS A D DIRECTORS . 1932
M
OFFICERS
W. N. Ambrose, Managing D i r e c t o r
M. McRitchie, A s s i s t a n t Manager
Fred C. Bold, A s s i s t a n t Cashier
L. C. Meyer, A s s i s t a n t Cashier
DIRECTORS
Term
Expires
Dec. 31
W. N. Ambrose
Los Angeles, Cal.
J e s s e B. Alexander # Chrm. V. P . , Globe Grain & Milling Co., Los Angeles,Cal.
A. J . Cruickshank
P r e s . , F i r s t National Bank, Santa Ana, Cal.
Charles B. Voorhis #
R e t i r e d , Pasadena, Cal.
F. J . Belcher, J r .
P r e s . , The F i r s t N a t ' l . T r . & Sav.Bk.,San Diego,Cal.
#
Appointed by the Board
1932
1932
1932
1933
1933
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7083
February 4, 1932.
SUBJECT:
New Issue Treasury Bills-.
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 in
Government s e c u r i t i e s between Federal reserve banks, the
code word "NOXDASH" has been designated to cover a new
i s s u e of Treasury B i l l s , dated February 8, 1932, and
maturing May 11, 1932.
This word should be i n s e r t e d in the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "HOXDAPPER" on Page 172.
Very t r u l y yours,
J . C. U o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7084
February 10, 1932.
SUBJECT?
New Issue Treasury B i l l 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 in
Government s e c u r i t i e s between Federal reserve banks, the
code word "NOXDATED" has been designated to cover a new
i s s u e of Treasury B i l l s , dated February 15, 1932, and
^
maturing May 18, 1932.
This word should be i n s e r t e d in the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "HOXDASH" on Page 172.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-7085
148
February 10, 1932.
C. S. Hamlin.
Proposed S u b s t i t u t e f o r Section 3 of the g l a s s B i l l : S t r i k e out Sees. 3 and 9, and s u b s t i t u t e the f o l l o w i n g :
Section 3 :
In o r d e r to secure a more e f f e c t i v e supervision of t a n k i n g i n the
i n t e r e s t of "bank d e p o s i t o r s and of the p u b l i c , the Federal Reserve Board
may p r e s c r i b e r e g u l a t i o n s d e f i n i n g and r e g u l a t i n g the use of the c r e d i t
f a c i l i t i e s of the Federal Reserve System within the l i m i t a t i o n s of t h i s
Act as amended.
Each Federal r e s e r v e "bank s h a l l keep i t s e l f informed of the loan
and investment p o l i c i e s of i t s member hanks, and f o r t h i s purpose may
c a l l upon such "banks from time to time f o r r e p o r t s .
The Chairman of the Board of each Federal r e s e r v e bank s h a l l r e p o r t
t o h i s bank and to the Federal Reserve Board any use made by a member
bank of Federal r e s e r v e f a c i l i t i e s , d i r e c t l y or i n d i r e c t l y , in connection
with any loans made by i t , whether commercial, s p e c u l a t i v e , r e a l e s t a t e ,
o r o t h e r w i s e , which i s undue or excessive under t h i s Act a s amended, and
the r e g u l a t i o n s of the Federal Reserve Board.
Each Federal r e s e r v e bank may, i n i t s d i s c r e t i o n , a f t e r due warning,
suspend from the f u r t h e r use of Federal reserve p r i v i l e g e s any member bank
abusing s a i d f a c i l i t i e s , a s above p r o v i d e d .
I f , i n the judgment of the Federal Reserve Board, any Federal r e s e r v e
bank f a i l s to take proper a c t i o n under t h i s p r o v i s i o n , the Board may, by an
a f f i r m a t i v e vote of not l e s s than f i v e of i t s members, enforce t h i s
p r o v i s i o n a g a i n s t any o f f e n d i n g member bank or banks.
-1>
X-7085
February 10, 1932.
C. S. Hamlin.
Proposed .Amendment Giving the f e d e r a l Reserve Banks and the Federal
Reserve Board Power to Suspend Member Banks from Federal Reserve Bank
Privileges:
In reviewing the p e r i o d of s p e c u l a t i v e a c t i v i t y , beginning i n the
f a l l of 1927 and continuing up to the crash of October, 1929, - one f a c t
stands out i n bold r e l i e f , - the complete i n a b i l i t y of t h e member banks,
of t h e i r own accord, to r e s t r a i n the wave of s p e c u l a t i o n which swept over
the country.
As r e g a r d s the Federal Reserve System, even the s a l e of 400 m i l l i o n s
of Government s e c u r i t i e s , coupled with 3 i n c r e a s e s of discount r a t e s up
to J u l y 13, 1928, f a i l e d to stem the t i d e .
Between J u l y , 1928, and January, 1929, a t i d a l wave of loans
,r
for
o t h e r s " swept over t h e country p r o v i d i n g f u e l f o r the s p e c u l a t i v e f i r e .
This wave would have overcome the i n f l u e n c e of any discount r a t e i n c r e a s e ,
u n l e s s of such a d r a s t i c n a t u r e t h a t i t would be impossible to borrow
money on any t e r n s , which, of i t s e l f , would probably have turned s p e c u l a t i v e
confidence i n t o f e a r , and would have p r e c i p i t a t e d i n May or June t h e c r i s i s
which f i n a l l y came i n October.
The Federal Reserve Bank of New York, however, b e l i e v e d t h a t the
whole question was a r a t e q u e s t i o n , and asked the Board to agree upon an
a f f i r m a t i v e r a t e i n c r e a s e p o l i c y which, c a r r i e d to the extreme, a s above
s t a t e d , would probably have brought on i n May o r June the c r i s i s which took
p l a c e i n October, 1929.
The Federal Reserve Board i n s i s t e d on keeping the d i s c o u n t r a t e a t 5$ where i t had been p l a c e d i n J u l y , 1928, - and issued a warning to the banks
X-706§
#3#
to r e s t r a i n the growth of s p e c u l a t i v e a c t i v i t y .
In o t h e r words, the Board
took the p o s i t i o n t h a t the only e f f e c t i v e way to r e s t r a i n s p e c u l a t i o n was
to cut o f f s p e c u l a t i v e c r e d i t , or a t l e a s t to stop i t s growth, l e a v i n g
the discount r a t e where i t was, i n o r d e r to p r o t e c t b u s i n e s s , a g r i c u l t u r e ,
and commerce, which was even then s u f f e r i n g under e x i s t i n g r a t e s , as p o i n t e d
out "by Governor Harrison i n h i s l e t t e r of ^ p r i l 9, 1929, to the Federal
Reserve Board.
That t h e question was not i n essence a r a t e q u e s t i o n , was shown
c l e a r l y by the f a c t t h a t during the period of d i r e c t p r e s s u r e , from
February 7 to about June 1, 1929, the t o t a l earning a s s e t s of the Federal
Reserve Bank of New York s t e a d i l y d e c l i n e d , while i t s r e s e r v e r a t i o , a t
t h e same time, s t e a d i l y i n c r e a s e d .
Under ordinary canons of banking, t h i s
condition would have suggested a reduction r a t h e r than an i n c r e a s e of
discount r a t e s .
The claim i s o f t e n made, however, t h a t the d i r e c t p r e s s u r e e x e r c i s e d
by the Federal Reserve Board under the 5$ r a t e , was a f a i l u r e .
How can t h i s be s a i d , when, during i t s o p e r a t i o n , t o t a l earning a s s e t s
d e c l i n e d , and r e s e r v e r a t i o s i n c r e a s e d , t o t a l Federal r e s e r v e c r e d i t
o u t s t a n d i n g having been reduced 193 m i l l i o n s ?
The f a c t i s , t h a t d i r e c t p r e s s u r e went very f a r i n e l i m i n a t i n g the
seepage of Federal r e s e r v e c r e d i t i n t o s p e c u l a t i v e a c t i v i t i e s .
It certainly
succeeded so f a r as b r o k e r s loans were concerned, which were reduced 649
millions.
On the o t h e r hand, customers' s e c u r i t y l o a n s , as d i s t i n g u i s h e d
from b r o k e r s l o a n s , i n c r e a s e d during t h a t p e r i o d from 4,971 to 5,267
m i l l i o n s , - an i n c r e a s e of 296 m i l l i o n s .
Brokers loans and customers loans
t o g e t h e r , however, showed a n e t decrease of about 361 m i l l i o n s during t h i s
X-7085
•:
-LcJJl
period.
I f the member "banks of the country had r e s t r a i n e d the growth of t h e i r
customers s e c u r i t y l o a n s , a s well a s "brokers loans * the r e s u l t would have
"been f a r b e t t e r .
I t i s o f t e n s t a t e d t h a t i t i s impossible to know whether a customer 1 s
s e c u r i t y loan i s one f o r s p e c u l a t i v e purposes or n o t .
In t h i s connection,
i t i s i n t e r e s t i n g to note t h a t Governor Harrison, in h i s l e t t e r t o t h e
Board of A p r i l 9, 1929, used the following language?
"A r a t e i n c r e a s e w i l l have a d i r e c t e f f e c t upon the p o s s i b l e
use of Federal r e s e r v e c r e d i t f o r s p e c u l a t i v e purposes, because
a l a r g e p a r t of t h e c r e d i t now g r a n t e d on the b a s i s of s e c u r i t i e s
c o n s i s t s of loans by banks d i r e c t l y to t h e i r customers, a s d i s t i n g u i s h e d from loans to brokers on the open c a l l money market.
Recent i n c r e a s e s f o r c r e d i t f o r s e c u r i t y o p e r a t i o n s have been
almost e n t i r e l y i n t h i s form of l o a n . In t h i s d i s t r i c t , many
such loans a r e being made a t r a t e s between £ § and 6 ^ . "
>•
The member banks, however, were not w i l l i n g to impose r e s t r a i n t s on
customers seeking to borrow f o r s p e c u l a t i v e purposes.
On the c o n t r a r y , i t
seems to have been an e s t a b l i s h e d banking p r a c t i c e , t h a t when a customer
m a i n t a i n i n g a good b a l a n c e , and o f f e r i n g good s e c u r i t y , applied f o r accommod a t i o n f o r s p e c u l a t i v e purposes, he was given a l l he wanted, provided only
he was w i l l i n g to pay the discount r a t e f i x e d by t h e bank.
In times of s p e c u l a t i v e c r a z e , however, r a p i d l y i n c r e a s i n g stock
p r i c e s and even i n c r e a s e d discount r a t e s seem to whet, r a t h e r than to reduce,
wild s p e c u l a t i o n .
i
The above p r a c t i c e of bankers i s not i n accord with sound banking
practice.
I t d i s r e g a r d s the r i g h t s of d e p o s i t o r s , and i s a g a i n s t the p u b l i c
interest.
I f the Federal r e s e r v e banks had power, e x p l i c i t l y s t a t e d , to i n s i s t
X-7085 :
•
3L52
on r e d u c t i o n of member "bank customers s p e c u l a t i v e l o a n s , and had used t h a t
power, the r e s u l t would have "been a much "better c o n t r o l of s p e c u l a t i v e
activity.
Even w i t h t h i s l i m i t a t i o n , however, d i r e c t p r e s s u r e was so s u c c e s s f u l
t h a t , as above s t a t e d * during i t s o p e r a t i o n Federal r e s e r v e c r e d i t was
reduced 193 m i l l i o n s , although during t h i s p e r i o d d i s c o u n t s of p a p e r , l a r g e l y commercial, i n c r e a s e d 444 m i l l i o n s , the r e s u l t i n g gain being brought
about l a r g e l y by the r e d u c t i o n of t o t a l s e c u r i t y loans* "brokers and
customers l o a n s , of 361 m i l l i o n s of d o l l a r s .
D i r e c t p r e s s u r e under the 5$ r a t e during t h i s p e r i o d was, i n f a c t , so
s u c c e s s f u l t h a t about June 1, the Federal Reserve Bank of New York s a i d
t h a t the "banks needed c r e d i t f o r commercial purposes, but were a f r a i d to
"borrow, and they "begged the Board to consider a p o l i c y of e a s i e r money.
There seems to "be l i t t l e doubt t h a t , but f o r the loans " f o r o t h e r s "
the d i r e c t p r e s s u r e e x e r c i s e d under the 5$ r a t e , would have brought about
such a m a t e r i a l l i q u i d a t i o n of s p e c u l a t i v e c r e d i t t h a t the c r a s h which
came in October, 1929, might have been a t l e a s t g r e a t l y minimized i n i t s
effect.
Such would a s s u r e d l y
have been the r e s u l t , had t h e Federal r e s e r v e
"banks "been given express power to suspend from the p r i v i l e g e s of the
Federal r e s e r v e bank, member banks making undue use or abuse of i t s
f a c i l i t i e s f o r s p e c u l a t i v e purposes.
The Federal r e s e r v e banks, to be sure, have t h i s power now, a s we
have been advised by Counsel, but i t i s not e x p l i c i t l y s t a t e d , and i t
would be f a r b e t t e r to have t h i s power s t a t e d in express terms, so t h a t
t h e r e can no longer be a doubt a s to i t .
X-7085
153
The f e d e r a l Reserve Bank of Hew York, a t the h e a r i n g s "before the Glass
Sab-committee, denied i t s power to examine i n t o the loan p r a c t i c e s of
member banks, e s p e c i a l l y customers l o a n s , except p o s s i b l y where one bank
might be out of l i n e w i t h o t h e r banks of the sane c l a s s ,
The duty of
knowing the loan p o l i c i e s and p r a c t i c e s of the member banks should be
d i r e c t l y imposed upon the Federal r e s e r v e banks, and they should be e x p l i c i t l y d i r e c t e d , i n case of abuse, to suspend the member bank from Federal
r e s e r v e f a c i l i t i e s , so long a s the abuse c o n t i n u e s .
I t i s i n t e r e s t i n g i n t h i s connection to note t h a t the Federal Advisory
Council, on February 17, 1931, unanimously passed the f o l l o w i n g r e s o l u t i o n :
"There should be imposed upon the Federal r e s e r v e banks
the requirement to keep themselves informed of the q u a l i t y of
the investments and l o a n s , and t h e p o l i c y of t h e management
of a l l member b a n k s . n
In t h i s connection, a l s o , i t i s i n t e r e s t i n g to note t h a t Mr. Owen D.
Young, i n h i s testimony b e f o r e the Glass Sub-committee, a s contained i n the
New York Times of February 5, 1931, s t a t e d unequivocally t h a t the Federal
Reserve System should have c e r t a i n powers to see t h a t banking p r a c t i c e s
i n i m i c a l to the s a f e t y of d e p o s i t o r s should not be indulged in by member
banks; t h a t the Federal Reserve should have power to examine and d i s c i p l i n e
a l l i t s member banks; t h a t the Federal reserve banks should have the power
to l i m i t o r r e f u s e r e d i s c o u n t s even i f the paper i s e l i g i b l e , or suspend
o t h e r p r i v i l e g e s of membership, i f the banking p r a c t i c e s of any p a r t i c u l a r
Bank were, i n i t s judgment, unsound, and t h e r e f o r e s u b j e c t e d i t s d e p o s i t o r s
to unreasonable r i s k , e i t h e r as t o l i q u i d i t y or s e c u r i t y ; t h a t in case t h e
r e s e r v e bank e x e r c i s e s such power u n f a i r l y , an appeal might be taken t o
the Federal Reserve Board; t h a t i f the unsound p r a c t i c e s were p e r s i s t e d i n ,
:
154
X-7085
the Federal Reserve Board, on complaint of any Federal r e s e r v e bank, might
expel the t a n k from membership.
Section 3 of the proposed Glass b i l l , i f l i t e r a l l y construed, would
b a r a member bank from rediscount p r i v i l e g e s i f i t had a t the time a s i n g l e
loan o u t s t a n d i n g based on stock exchange c o l l a t e r a l .
Such was not the i n t e n t of the Federal Reserve Act a s o r i g i n a l l y e n a c t ed.
The i n t e n t of t h a t Act was t h a t banks should confine themselves p r i m a r i -
l y to commercial t r a n s a c t i o n s , but t h e r e was nothing in the Act f o r b i d d i n g
a reasonable use of Federal r e s e r v e r e d i s c o u n t s f o r b u i l d i n g up r e s e r v e s
a g a i n s t d e p o s i t l i a b i l i t i e s growing out in p a r t from l o a n s f o r purposes
o t h e r than those s t r i c t l y commercial or a g r i c u l t u r a l .
The whole question devolved upon a reasonable as opposed to an undue
and unreasonable use of Federal r e s e r v e f a c i l i t i e s f o r s o - c a l l e d s p e c u l a t i v e
purposes.
That r e a s o n a b l e , a s opposed to undue u s e , i s t h e r e a l question, w i l l
c l e a r l y appear from the f o l l o w i n g taken from a r t i c l e s and addresses of
Dr. H. P . W i l l i s , who presumably was the author of t h a t p a r t of Section 3
of the Glass b i l l above r e f e r r e d t o :
A n n a l i s t . Mov. 26. 1926:
We long ago came to t h e conclusion t h a t the amount of funds advanced
f o r stock market use should not be e x c e s s i v e . 28.
The measure of t h a t excess has been found i n the degree to which such
loans i n f r i n g e upon the r e s e r v e f u n d s of the a c t u a l d e p o s i t banks of the
country. 28.
Federal r e s e r v e c r e d i t r e p r e s e n t s the u l t i m a t e r e s e r v o i r of c r e d i t in
the United S t a t e s , the source from which banking c r e d i t must e v e n t u a l l y be
drawn. 31.
-7*
X-7085
11
i5
Magazine of Wall S t r e e t . Mav 7. 1937:
Speculation or margin t r a d i n g should "be recognized, l e g i t i m a t i z e d , by
every p r o p e r means, and l i b e r a l l y provided with f u n d s . 36.
I t i s an e s s e n t i a l a d j u n c t to modern b u s i n e s s , which i s i n i t s e l f
s p e c u l a t i v e in many of i t s branches. 36.
The c e n t r a l "bank f u n c t i o n i s to determine e x a c t l y where the l i n e should
"be drawn in g r a n t i n g of c r e d i t to v a r i o u s types of b u s i n e s s . 37.
Duty of every c e n t r a l banking system to see to i t t h a t i t s p o l i c y
p r e v e n t s an undue amount of the c o u n t r y ' s l i q u i d funds from being absorbed
i n s p e c u l a t i o n . 37.
Federal Reserve System should e x e r c i s e i t s a u t h o r i t y through a s a t i s f a c t o r y c o n t r o l of the money market, 37.
D i s t r i c t of Columbia Bankers A s s o c i a t i o n .
•Address. J a n . 24. 1929. (187-50 scrap book).
Immediate problem i s to b r i n g about a readjustment i n our use of c r e d i t ,
which s h a l l r e s t o r e some p o r t i o n of i t now d i v e r t e d , to the channels where
i t i s needed, a t the same time making a proper p r o v i s i o n f o r the l e g i t i m a t e
requirements of s e c u r i t y o p e r a t i o n s . 51.
ers
!Eh.e p r i n c i p a l bank/ must undertake d e f i n i t e l y t o reduce t h e i r commitments i n p u r e l y s p e c u l a t i v e or t r a d i n g accounts to some f i g u r e taken a s
b a s i c or normal. 51.
New York World.
A r t i c l e . Feb. 17. 1929:
An undue share of the c o u n t r y ' s resources had been involved in supporting s p e c u l a t i v e t r a n s a c t i o n s , which, though b e n e f i c i a l when kept w i t h i n
l i m i t s , may be exaggerated and rendered dangerous, 55.
Necessary to o b t a i n an agreement t h a t no g r e a t e r amount of c r e d i t should
be used f o r s t o c k exchange purposes than i s now employed. 56.
The suggestion t h a t Federal r e s e r v e banks should r e f u s e f u r t h e r c r e d i t
to borrower banks who are lending i n the s t o c k market would merely b r i n g on
a crash which would aggravate e x i s t i n g c o n d i t i o n s . 57.
In t h i s connection i t i s i n t e r e s t i n g to read what Governor Harrison
s t a t e d d u r i n g the h e a r i n g s b e f o r e the Glass Sub-Committee:
*.8*4
X-7085
Testimony of Governor Harrison.
Hearings - 0-1 ass Sub-Cowni
January 20. 1931:
Governor Harrison:
I t h i n k the Committee may wish to consider . . . whether the Federal
Reserve System oan do something s h o r t of e x p e l l i n g a bank from membership
in the System. Of course the a c t u a l expulsion, which becomes p u b l i c
n o t i c e , w i l l , of i t s e l f , p r e c i p i t a t e the very t h i n g you want to avoid c l o s i n g the bank. Page 46.
Query:
Whether i t would be p o s s i b l e and proper - and I throw t h i s out
as a suggestion to the Committee, - to give to the Federal Reserve Board
or to the Federal r e s e r v e banks, the r i g h t to suspend a member bank from
any or a l l of the p r i v i l e g e s of membership during a given p e r i o d i n the
event t h a t the bank has n o t , in our judgment, conducted i t s e l f in the
s a f e s t way f o r the d e p o s i t o r s .
If t h a t could be done i n some f a s h i o n t h a t would not involve p u b l i c i t y , and would not then n e c e s s a r i l y i n v i t e what you a r c t r y i n g to avoid by
e x p e l l i n g the bank from membership, which n e c e s s a r i l y becomes p u b l i c , i t
would give u s a very much s t r o n g e r hand i n d e a l i n g w i t h a r e c a l c i t r a n t
bank than we now have.
The Chairman:
You are speaking of member banks?
Governor H a r r i s o n :
Yes, of c o u r s e , only member banks, - and by r e c a l c i t r a n t banks, I do
not mean a bank v i o l a t i n g the law, which i s i n a category of i t s own, but
one which we b e l i e v e i s g e t t i n g i t s e l f i n t o a p o s i t i o n demanding more and
more, or a b i g g e r and b i g g e r p r o p o r t i o n of our a s s e t s in l o a n s .
I t h a s been a s s e r t e d t h a t we have the a u t h o r i t y of denying borrowing
privileges.
The Chairman:
You have t h a t a u t h o r i t y complete.
Governor H a r r i s o n :
I t h i n k t h a t m y s e l f . I agree with you t h a t l e g a l l y we have. The
only d i f f i c u l t y with the e x e r c i s e of t h a t s o r t of power, i s t h i s , t h a t a
bank borrows from the Federal r e s e r v e bank not f o r the purpose of t a k i n g
the money and applying i t to a p a r t i c u l a r loan, or to a p a r t i c u l a r p u r pose, but r a t h e r to make good an already e x i s t i n g d e f i c i e n c y i n i t s
reserves.
-9-
X-^7085
Governor Harrison then explained the matter of Reserves against,
deposit l i a b i l i t i e s , and s t a t e d the case of a bank which a t the end of the
day f i n d s i t s e l f with a d e f i c i e n c y of 10 m i l l i o n d o l l a r s , and t h a t the
bank comes with p e r f e c t l y e l i g i b l e paper and a sks the Federal r e s e r v e bank
to give them 10 m i l l i o n d o l l a r s .
We have two a l t e r n a t i v e s : - We can say, *Yes, you can have t h a t a t
our discount r a t e because you have e l i g i b l e paper and need i t to r e p a i r
your r e s e r v e s ' o r , i f we e x e r c i s e the a u t h o r i t y to r e f u s e to make t h a t
l o a n , which r i g h t has been questioned by many people, the only t h i n g t h a t
happens i s t h a t they a r e d e f i c i e n t in r e s e r v e s , and they borrow the money
i n a way, by having a shortage in t h e i r r e s e r v e s , r a t h e r than by a s t r a i g h t
loan.
I t i s t r u e t h a t the shortage c a r r i e s with i t a h i g h e r r a t e , because
they have t o pay a p e n a l t y on the d e f i c i e n c y , but t h a t i s not the sound
way of t r y i n g to c o r r e c t the bank in i t s management, even i f we thought i t
was wise, - t h a t i s , f o r c e them to be d e f i c i e n t . 47.
My thought was t h a t i f t h e Committee could consider the p o s s i b i l i t y
and p r o p r i e t y of g i v i n g to the r e s e r v e bank, s u b j e c t to the approval of
the Federal Reserve Board, the r i g h t of suspension from any or a l l of the
p r i v i l e g e s of membership so t h a t we can have the d e c i s i o n , in given circums t a n c e s , of what p r i v i l e g e s we w i l l deprive them, t h e r e would be no
question about t h a t , and i t could be handled with such d e x t e r i t y t h a t i t
would avoid c e r t a i n u n d e s i r a b l e consequences t h a t we might otherwise
p r e c i p i t a t e . 47, 48.
The Chairman:
We c a n ' t conceive why you should say or t h i n k t h a t you have not con>p l e t e a u t h o r i t y to r e f u s e the rediscount p r i v i l e g e .
Governor H a r r i s o n :
When I was Counsel f o r the Federal Reserve Board, I gave an opinion
to the e f f e c t t h a t we had complete a u t h o r i t y , and I have not changed my
mind about i t . 48.
The Chairman:
I understood you to suggest t h a t t h e r e was good reason to oppose t h a t
view.
Governor Harrison:
Ho. I merely meant to suggest t h a t I saw t h e p o i n t s t h a t some on the
opposite s i d e r a i s e d . I do not agree with them. 48.
\ 158
X-7086
STATEMENT OF BUREAU OP EHGRAVI1TG MID PRI1TTIMG
Federal Reserve Notes* S e r i e s 1928.
January 4 to 30, 1952.
$5
$20
JD10_
Total
Sheets
Amount
52,000
-
70,000
$6,475.00
220,000
20,550,00
Hew York
, 156,000
64,000
-
Philadelphia.
.
56,000
24,000
14,000
94,000
6,695.00
Cleveland
.
58,000
40,000
10,000
88,000
8,140.00
Atlanta
,
54,000
18,000
10,000
62,000
5,735.00
S t . Louis
. 211,000
102,000
102,000
415,000
58,387.50
Kansas City
,
-
18,000
1,665.00
-
20,000
1,850.00
-
22,000
2,035.00
1,,009,000
$595,552.50
18,000
20,000
,
San F r a n c i s c o . . . •
-
0 00
573,000
—
300,000
1,009,000 s h e e t s ,
136,000
6
(*92.50 per M, . . .$95, 552.50
1 5 9
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7088
February 12, 1932.
SUBJECT?
Expense, Main Lines, Leased Wire System,
January, 1932.
Bear S i r ;
Enclosed, herewith you w i l l f i n d two mimeographed s t a t e m e n t s , X-7088-a .and X-7088-1), covering in
d e t a i l o p e r a t i o n s of the main l i n e s , Leased Wire System,
d u r i n g the month of January, 1932.
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, Treasurer, TJ. S., 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, Special
Fund", Leased Wire System, sending d u p l i c a t e c/D to the
Federal Reserve Board*
Very t r u l y yours,
F i s c a l Agent,
Enclosures.
TO GOVERNORS OF ALL F. R. BANKS.
X—7088~a
KEPOBT SHOWING- CLASSIFICATION AND NUMBER OF W EDS TRANSMITTED OVER MAIN LINES
D
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JANUARY, 1932.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas C i t y
Dallas
San^cencisco
Uotal
Words sent by
New York chargea b l e to o t h e r
F. R. Banks ( l )
30,315
172,943
36,805
69,222
63,839
59.030
101,740
82,188
38,239
84,886
68,325
103.986
911,518
3,665
-
3,170
2,883
3,416
8,041
3,981
3.285
6,067
3,698
17,076
5.471
60,753
F, "B. Board "business
Net Federal
reserve
bank
business
33,980
172,943
39,975
72,105
67,255
67,071
105,721
85,473
44,306
88,584
85,401
109.457
972,271
Percent of t o t a l
bank b u s i n e s s ( * )
3.49
17.79
4.11
7.42
6.92
6.90
10.87
8.79
4.56
9.11
8.7s
11.26
100.00
278,973
Treasury Department "business Incoming and Outgoing . .
T ot a l words t r a n s m i t t e d over main l i n e s
(•)
These p e r c e n t a g e s used i n c a l c u l a t i n g t h e pro r a t a share of l e a s e d wire expense as shown
on t h e accompanying statements(X-7088-b).
(l)
Number of words s e n t "by New York t o o t h e r F. R. Banks f o r t h e i r s o l e "benefit charged to
banks i n d i c a t e d i n accordance with a c t i o n taken a t Governors' Conference
November 2 - 4 , 1925.
1,251,244
157,99%
1,409,238
X-7088-Ta
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE 7LEASED THEE SYSTEM, JAMJAR?, 1932.
Name of bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
Federal Reserve Board
Total
Operators 1
salaries
$260.00
1,134.46
225.00
306.66
190.00
270.00
3,690.51 (#)
195.00
200.00
287-50
251.00
380.00
Operators ' . Wire
overtime
rental
$2.00
2.00
—
—
—
2.00
1.00
-
-
—
-
—
$7,390.13
$7.00
Total
expenses
Pro r a t a
share of
total
expenses
$262.00
$720.58
1,136.46
3,673.12
—
848.60
225.00
306.66
1,532.02
230.00 (&)
420.00
1,428.78
270.00
1,424.65
2,244.34
3,692.51
1,814.88
196.00
200.00
941.51
1,880.95
287.50
1,812.82
251.00
380.00
2,324.87
—
15,627.09
15.627.09
$20,647.12
$23,254.22
$15,857.09
2.607.10(a)
$20,61+7.12
$
-
-
• • •
Credits
$262.00
'1,136.46
225.00
306.66
420.00
270.00
3,692.51
196.00
200.00
287-50
251.00
380.00
Payable to
Federal
Reserve
Board
$458.58
2,536.66
623.60
1,225.36
1,008.78
1,154.65
1,448.17 (*)
1,618.88
741.51
1,593-45
1,561.82
1,944.87
—
$7,627.13
Main line rental, Richmond-Washington.
Includes salaries of Washington operators.
Credit.
Received $2,507.68 from Treasury Department, $35*69 from Federal F r Lean Bureau and $63-73
am
from Federal Farm Board covering business for the month of January, 1932.
(b) Amount reimbursable to Chicago.
$14,468.16
1.448.17 (b)
$13,019.99
(&)
(#)
(*)
(a)
^
Ci
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7089
February 13, 1932.
Dear S i r :
There i s attached h e r e t o copy of a s e l f explanatory l e t t e r which the Federal Reserve Board
has addressed to the Federal Reserve Agent a t Kansas
City, with regard to f u r n i s h i n g the Federal Farm
Board, f o r i t s c o n f i d e n t i a l u s e , information concerning the c o n d i t i o n of s t a t e member banks.
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
Enclosure.
LETTER TO ALL F. R. AGENTS, EXCEPT KANSAS CITY
COPY
X-7089-a
February 13, 1932.
Mr. M. L. McClure,
Federal Reserve Agent,
Federal Reserve Bank,
Kansas City, Missouri.
Dear Mr. McClure:
Receipt i s acknowledged of your l e t t e r of January 23, 1932, with
regard t o a r e q u e s t which you received from the Treasurer of the
Federal Farm Board f o r such current information as you might f e e l f r e e
to g i v e , f o r t h e c o n f i d e n t i a l use of t h a t Board, concerning the cond i t i o n of one of t h e s t a t e member "banks i n your d i s t r i c t .
It is
noted t h a t i n your r e p l y you suggested t h a t the i n q u i r y be addressed
t o the Federal Reserve Board and t h a t you would l i k e t o be advised
whether, i n t h e opinion of the Board, i t would be d e s i r a b l e f o r you
to r e p l y d i r e c t to any f u t u r e i n q u i r i e s t h a t may be received from
the Federal Farm Board.
The Federal Reserve Board i s i n agreement with the p o s i t i o n taken
i n your l e t t e r t o Mr. Burklin t h a t i n f o r m a t i o n concerning the c o n d i t i o n
of member banks of t h e Federal Reserve System, which i s made a v a i l a b l e
t o the Board and the F e d e r a l Reserve Banks under the F e d e r a l Reserve Act,
i s intended f o r t h e c o n f i d e n t i a l use of t h e Board and the banks i n t h e
discharge of t h e i r o f f i c i a l d u t i e s , and f e e l s t h a t extreme caution
should be e x e r c i s e d i n making any other use of t h i s i n f o r m a t i o n .
In t h e
event of the r e c e i p t of any f u r t h e r i n q u i r i e s of a s i m i l a r n a t u r e from
the Federal Farm Board, i t i s b e l i e v e d t h a t i t would be a proper p r e -
» 164
X-7089-a
— 2 —
caution, i n l i n e with t h e s p i r i t of t h e Act, f o r you t o suggest to the
Federal Farm Board t h a t i t endeavor to secure the consent of t h e member
t a n k i t s e l f , e i t h e r to your f u r n i s h i n g a copy of the l a s t r e p o r t of
v
examination of the "bank or otherwise conveying such i n f o r m a t i o n concerning i t s c o n d i t i o n a s may "be i n your p o s s e s s i o n .
If i n any case i t
does not appear t o be p o s s i b l e to o b t a i n the permission of t h e member
bank, the question should be considered i n the l i g h t of t h e p a r t i c u l a r
circumstances a t the time i t a r i s e s .
In any event, i t i s assumed, of
course, t h a t a t t e n t i o n w i l l be c a l l e d t o the f a c t t h a t your r e p l y i s
s o l e l y f o r the c o n f i d e n t i a l use of the Federal Farm Board, t h a t s p e c i a l
care w i l l be exercised as to the c h a r a c t e r of any comments t h a t may be
made upon the b a n k ' s c o n d i t i o n , and t h a t you w i l l assume no r e s p o n s i b i l i t y f o r any opinions t h a t may be expressed.
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
X-7090
FEDERAL
RESERVE
BOARD
WASHINGTON, D. C.
February 20, 1932.
NOTICE
Delivery by messenger of the Federal Reserve B u l l e t i n
and the monthly Summary of General Business and F i n a n c i a l
Conditions to t h e l o c a l r e p r e s e n t a t i v e s of t h e p r e s s w i l l
be d i s c o n t i n u e d .
H e r e a f t e r advance copies of the Summary and the B u l l e t i n may be obtained by the r e p r e s e n t a t i v e s of the p r e s s from
t h e following p o i n t s :
The National Press Club,
Room 214, Treasury Building,
Press Room, Treasury B u i l d i n g ,
P r e s s t a b l e , 15th S t r e e t entrance to Treasury B u i l d i n g .
i
\ 166
0 0 P Y
X-7091
I E D E H A I
ADVISORY
COUNCIL
Washington, February 15, 1932.
Mr. Eugene Meyer, Governor,
Federal Reserve Board,
Washington, D. 0.
Dear Governor Meyer:
Enclosed p l e a s e f i n d the recommendations of the
Federal Advisory Council in r e f e r e n c e to "bill S. 3616, as
r e p o r t e d to the Senate, with amendments, "by Mr. Glass on
February 12, 1932.
These recommendations were adopted
unanimously "by the eleven members of the Council p r e s e n t .
In view of the e x i s t i n g s i t u a t i o n , we request t h a t
you submit these recommendations to the proper committees
of the Congress f o r t h e i r c o n s i d e r a t i o n .
Very t r u l y y o u r s ,
(signed) Walter W. Smith
president.
(signed) Walter l i c h t e n s t e i n
Secretary.
X-7091-a t
COPY
The Federal Advisory Council has s t u d i e d b i l l
S. 3616 as r e p o r t e d by Mr. Glass, with amendments, to the
Senate on February 12, 1932.
The Federal Advisory Council
approves of the aims designed to be accomplished by t h i s
measure, but i t urges the following changes:
(1)
Wherever in the proposed a c t i t i s s p e c i -
f i e d t h a t an a f f i r m a t i v e vote of "not l e s s than s i x
members of the Federal Reserve Board" be r e q u i r e d to
permit any given a c t i o n , s u b s t i t u t e "not l e s s than a
m a j o r i t y of the members of the Federal Reserve Board
holding o f f i c e a t t h e time, such m a j o r i t y i n no case
to c o n s i s t of l e s s than f o u r members".
(2)
In section 1 on page 2 in l i n e 1, in p l a c e
of the requirement t h a t groups s h a l l c o n s i s t of f i v e
or more banks, s u b s t i t u t e t h r e e or more banks, and i n
l i n e s 10 to 14 i n c l u s i v e , omit the phrase p e r m i t t i n g
loans to groups containing a l e s s e r number of banks
and omit the requirement a s t o the aggregate amount
of t h e i r d e p o s i t l i a b i l i t i e s .
(3)
In s e c t i o n 1 on page 2, omit the language
of the committee amendment beginning on l i n e 3 and
running to the period in l i n e 6, reading as f o l l o w s :
"provided such banks have no adequate amounts of e l i g i b l e and acceptable a s s e t s to obtain s u f f i c i e n t accommodation through r e d i s c o u n t i n g a t the Federal r e s e r v e
bank".
1 6 7
——
2
(4)
X—7091—
In s e c t i o n 1 on page 2, l i n e 17, s u b s t i t u t e
the word " r e q u i r e " f o r the word " r e q u e s t " .
(5)
In sections 2 and 3 the period within which
the a u t h o r i t y granted may he e x e r c i s e d should "be i n creased to two y e a r s .
(6)
In s e c t i o n 2 on page 3, l i n e 18, d e l e t e the
words i n i t a l i c s "having a c a p i t a l of $500,000 or
less".
1 6 9
FEDERAL RESERVE BOARD
X-7092
STATEMENT FOB THE PRESS
For immediate r e l e a s e .
February 16, 1932.
The f i r s t meeting of t h e Federal Advisory Council f o r 1932 was held
on Tuesday, February 16.
The members of the Council a r e :
Federal Reserve D i s t r i c t No. 1;
Thomas M. S t e e l e , of New Haven, Conn.
No. 2.
Robert H. Treman, of I t h a c a , New York.
No. 3 .
Howard A. Loeb, of P h i l a d e l p h i a , Pa.
No. 4.
J . A. House, of Cleveland, Ohio.
No. 5.
Howard Bruce, of Baltimore, Md.
No. 6.
John K. O t t l e y , of A t l a n t a , G-a.
No. 7.
Melvin A. T r a y l o r , of Chicago, 111.
No. 8.
Walter W. Smith, of S t . Louis, Mo.
No. 9.
Theodore Wold, of Minneapolis, Minn.
No. 10. Walter S. McLucas, of Kansas C i t y , Mo.
No, 11. Joseph H. F r o s t , of San Antonio, Texas.
No. 12. Henry M. Robinson, of Los Angeles, C a l i f .
Walter W. Smith was e l e c t e d President and Melvin A. Traylor was
e l e c t e d Vice P r e s i d e n t .
These o f f i c e r s as e x - o f f i c i o members and
Messrs. Treman, Loeb, O t t l e y and McLucas w i l l comprise the Executive
Committee.
Walter L i c h t e n s t e i n was appointed Secretary of the Council,
170
FEDERAL RESERVE BOARD
WASHINGTON
X-7093
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
February 16, 1932,
SUBJECT:
Holidays during March, 1932.
Dear S i r t
On Wednesday, March 2nd, the Federal Reserve Bank of
Dallas and i t s Branches a t El Paso, Houston and San Antonio w i l l be
closed in observance of Texas Independence Day.
On F r i d a y , March 25th, Good Friday, 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:
Philadelphia
Pittsburgh
Baltimore
Hew Orleans
Nashville
Jacksonville
Havana Agency
Memphis
Minneapolis
On the dates i n d i c a t e d , t h e banks a f f e c t e d w i l l not p a r t i c i p a t e in e i t h e r the Gold Settlement Fund or t h e Federal r e s e r v e
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 o f f i c e s a f f e c t e d on
each of t h e h o l i d a y s with your c r e d i t s f o r t h e following b u s i n e s s
day, and make no shipments of Federal r e s e r v e n o t e s , f i t or u n f i t ,
f o r account of t h e head o f f i c e s a f f e c t e d .
Very t r u l y y o u r s ,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAMS.
171
FEDERAL
ADVIS&RY
X-7094
COUNCIL
193S
Executive Committee:
Officers:
Walter W. Smith, P r e s i d e n t
Melvin A. T r a y l o r , Vice P r e s i d e n t
Walter L i c h t e n s t e i n , S e c r e t a r y
Walter W. Smith
Melvin A. Traylor
Robert H. Treman
Howard A. Loeb
John K. Ottley
Walter S. McLucas
EMBERS
District
No.
1
Thomad M. S t e e l e
P r e s . , F i r s t National Bank and Trust Co.,
New Haven, Connecticut.
No.
2
Robert H. Treman
P r e s . , The Tompkins County National Bank,
I t h a c a , New York.
No.
3
Howard A. Loeb
Chrm., Tradesmens National Bank & Tr. Co.,
P h i l a d e l p h i a , Pennsylvania.
No.
4
J . A. House
P r e s . , G-uardian Trust Company,
Cleveland, Ohio.
No.
5
Howard Bruce
Chrm., Baltimore Trust Company,
Baltimore, Maryland.
No.
6
John K. O t t l e y
P r e s . , F i r s t National Bank,
A t l a n t a , Georgia.
No.
7
Melvin A. Traylor
P r e s . , F i r s t National Bank,
Chicago, I l l i n o i s .
No.
8
Walter W. Smith
P r e s . , F i r s t National Bank,
S t . Louis, Missouri.
No.
9
Theodore Wold
V. P . , Northwestern N a t ' l . B k . o f Minneapolis
Minneapolis, Minnesota.
No. 10
Walter S. McLucas
Chrm., Commerce Trust Company,
Kansas C i t y , Missouri.
No. 11
Joseph H. F r o s t
P r e s . , Frost N a t i o n a l Bank,
San Antonio, Texas.
No. 12
Henry M. Robinson
Chrm. , S e c u r i t y - F i r s t National Bank,
Los Angeles, C a l i f o r n i a .
Address of Mr. L i c h t e n s t e i n , 38 South Dearborn S t r e e t , Chicago, I l l i n o i s .
February 16, 1932.
!
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7095
February 17, 1932.
SUBJECT:
Hew I s s u e Treasury B i l l 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 in Government s e c u r i t i e s between Federal r e s e r v e banks, the code word
"NOXDAWDLE" has been designated to cover a new i s s u e of Treasury
B i l l s , dated February 24, 1932, and maturing May 25, 1932.
This word should be i n s e r t e d in the Federal r e s e r v e
t e l e g r a p h code book, following the supplemental code word
"HOXDATED" on page 172.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F. H. BAKES.
1 7 3
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7097
February 18, 1932.
SUBJECT:
Necessity f o r the approval of the Federal
Reserve Board in purchasing municipal warrants.
Dear S i r :
For your information there i s enclosed herewith
a copy of a l e t t e r r e c e n t l y received "by the Federal Reserve Board
from one of the Federal reserve "banks, t o g e t h e r with a copy of the
Board's r e p l y t h e r e t o , with regard to the question whether i t i s
necessary t h a t a Federal reserve bank obtain the s p e c i a l approval
of the Federal Reserve Board b e f o r e purchasing from a member bank
municipal w a r r a n t s , which bear the indorsement of such member bank,
in accordance with the p r o v i s i o n s of Section V (d) of the Board's
Regulation 3 .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Enclosures.
TO GOVERNORS OF ALL F. R. BANKS.
! 173
COPY
X-7097-a
February 18, 1932.
Mr. W. B. Geery, Governor,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Governor Geery:
Reference i s made to your l e t t e r of January 19, 1932,
in which you i n q u i r e whether i t i s necessary to obtain the s p e c i a l
approval of the Federal Reserve Board b e f o r e purchasing the warrants
of m u n i c i p a l i t i e s having a population of l e s s than 10,000 i n h a b i t a n t s ,
when such warrants are purchased from and indorsed by a member bank
i n accordance with the p r o v i s i o n s of Section V (d) of the Board's
Regulation E.
While the language of the r e g u l a t i o n i s not c l e a r , i t
was the i n t e n t i o n t h a t the purchase from a member bank of warrants
which bear the indorsement of such bank and comply in other r e s p e c t s
with the p r o v i s i o n s of Section V (d) should be exempt from the r e q u i r e ments contained in Sections V(a), V(c) and VI, of the r e g u l a t i o n .
You
are advised, t h e r e f e r e , t h a t warrants may be purchased by a Federal
reserve bank in accordance with the p r o v i s i o n s of Section V (d) w i t h out o b t a i n i n g the s p e c i a l approval of the Federal Reserve Board, even
though ( l ) such warrants are issue# by a m u n i c i p a l i t y having a populat i o n of 10,000 i n h a b i t a n t s or l e s s , (2) the amount of warrants of a
s i n g l e m u n i c i p a l i t y so purchased exceeds 25 p e r cent of the t o t a l
i
Mr, W. B. Geery - 2
X-7097-a
amount of warrants i s s u e d and sold "by such m u n i c i p a l i t y or (3) the
amount i n v e s t e d in warrants of a s i n g l e m u n i c i p a l i t y exceeds the p e r centages p r e s c r i b e d in Section V(c).
Your a t t e n t i o n i s i n v i t e d to the f a c t , however, t h a t ,
under the p r o v i s i o n s of Section 5136 of the Revised S t a t u t e s , a
n a t i o n a l bank i s p e r m i t t e d to s e l l investment s e c u r i t i e s only "without recourse" and, t h e r e f o r e , may not s e l l warrants of m u n i c i p a l i t i e s with i t s indorsement.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
175
176
COPT
X-7097~b
FEDERAL RESERVE BANK
OP MINNEAPOLIS
J anuary 19, 1932
Federal Reserve Board,
Washington, D. C.
Gentlemen:
We a r e a t the present time "being examined "by your
examiners, and one question has come up which has never a r i s e n
b e f o r e because i t has so happened t h a t we had never been c a r r y i n g
warrants a t the time the Examiners were h e r e .
Our Northern Michigan and Northern Wisconsin banks use
us every year through the months of November, December and
January f o r the purpose of carrying borrowings of t h e i r c i t i e s ,
counties and school d i s t r i c t s in a n t i c i p a t i o n of the tax payments
which a r e due January 10th in Michigan and February 28 in Wisconsin.
Section V(d) of Regulation E provides t h a t any Federal reserve bank
may purchase from any of i t s member banks warrants of any m u n i c i p a l i t y ,
indorsed by such member bank, with waiver of demand, n o t i c e and p r o t e s t
i f such warrants comply with Sections I I I and V (b) of these r e g u l a t i o n s .
Section VI provides t h a t warrants of a m u n i c i p a l i t y of 10,000 population
or l e s s s h a l l be purchased only with the s p e c i a l approval of the Federal
Reserve Board.
We have considered V(d) as waiving the requirement r e g a r d i n g
the s p e c i a l approval of the Federal Reserve Board. The Examiners quest i o n t h i s , and I would a p p r e c i a t e i t i f you w i l l make a r u l i n g on t h i s
f o r our b e n e f i t .
Yours very t r u l y ,
(S) W. 3 . Geery
Governor
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7098
February 23, 1932.
SUBJECT:
V i s i t of Mr. Luis Mcntes de Oca.
Dear S i r :
There a r e a t t a c h e d h e r e t o , f o r your i n f o r m a t i o n , copies
of l e t t e r s exchanged "by the Governor cf the Federal Reserve
Board with t h e Department of S t a t e , r e l a t i v e to the forthcoming
v i s i t to t h i s country of Mr. Luis Montes de Oca, who has been
commissioned "by the President of Mexico to make a study of the
Federal Reserve System and the f u n c t i o n i n g of the Federal r e serve banks.
In the event cf a v i s i t by Mr. Montes de Oca to
your bank, the Board would a p p r e c i a t e your extending t o him a l l
proper a s s i s t a n c e i n connection with h i s study.
Very t r u l y yours,
Chester M e r r i l l ,
Secretary.
Enclosures.
TO CHAIRMEN OF ALL F. R. BAUKS.
i
tf-7098-a
COPY
February 23, 1932.
The Honorable,
The S e c r e t a r y of S t a t e ,
Washington, D. C.
Sir:
The S e c r e t a r y of t h e Treasury has r e f e r r e d t o t h e
Federal Reserve Board t h e Department's l e t t e r of February
15, 1932, (DP 033.1211 Montes de Oca, Luis / l ) .
The Federal
Reserve Board w i l l g l a d l y be of a l l p o s s i b l e a s s i s t a n c e t o
Mr. Luis Montes de Oca should he c a l l a t i t s o f f i c e s d u r i n g
the v i s i t t o t h i s country which he i s to make f o r t h e p u r pose of studying t h e Federal Reserve System and the f u n c t i o n ing of t h e Federal r e s e r v e banks.
As Mr. Montes de Oca w i l l i n a l l p r o b a b i l i t y wish to
v i s i t some, i f not a l l , of t h e Federal r e s e r v e banks, a copy
of t h e Department's l e t t e r i s being forwarded to t h e Chairman
of t h e Board of D i r e c t o r s of each Federal r e s e r v e bank, w i t h
t h e r e q u e s t t h a t they be as h e l p f u l as p o s s i b l e t o Mr. Montes
de Oca i n t h e conduct of h i s s t u d i e s .
Respectfully,
(Signed) Eugene Meyer
Governor.
EMM/ r k t
±78
1 7 9
COPY
X-7098-b
DEPARTMENT OF STATE
WASHINGTON
In r e p l y r e f e r to
DP 033,1211 Montes de Oca, L u i s / l
February 15, 1932
The Honorable
The S e c r e t a r y of the Treasury.
Sir:
The Department i s i n r e c e i p t of a note from t h e
Mexican Ambassador i n Washington i n which he s t a t e s
t h a t the P r e s i d e n t of Mexico has commissioned Mr. Luis
Montes de Oca, u n t i l very r e c e n t l y Secretary of t h e
Treasury and P u b l i c C r e d i t , to v i s i t t h i s country f o r
the purpose of studying our Federal Reserve System and
t h e f u n c t i o n i n g of our Federal Reserve Banks.
F e e l i n g confident t h a t your Department w i l l extend
every courtesy to Mr. Montes de Oca i n the c a r r y i n g out
of h i s m i s s i o n , I would be obliged i f I might be a b l e
t o a s s u r e the Mexican Ambassador t h a t every f a c i l i t y
w i l l be a f f o r d e d Mr. Montes de Oca by the proper Departments i n h i s study of American banking systems.
It
• 180
•
X-7098-t
—3~
I t may "be remembered t h a t i n 1927 Mr. Montes de
Oca, then Comptroller General of Mexico, v i s i t e d t h e
United S t a t e s as the head of a commission to study a
number of a d m i n i s t r a t i v e departments of the United
S t a t e s of America i n connection with the safeguarding
of t h e funds and p r o p e r t y of the Federal and S t a t e
Governments.
Very t r u l y yours,
For the Secretary of S t a t e :
(S)
James Grafton Rogers
Assistant Secretary.
COPY
•
1 8 1
2-7099
TEXT OF GLA.SS-STEAGALL BILL AS PASSED BY SENATE O FEBRUARY 19th, 1932.
N
72d Congress
1st Session
H. R. 9203
A "bill to improve the f a c i l i t i e s of t h e Federal r e s e r v e system f o r t h e s e r v i c e of commerce, i n d u s t r y , and a g r i c u l t u r e , to provide means f o r meeting the
needs of member "banks i n exceptional circumstances, and f o r other purposes.
Be i t enacted by the Senate and House of R e p r e s e n t a t i v e s of the United
S t a t e s of America i n Congress assembled,
That the Federal Reserve Act, as amended,
i s f u r t h e r amended by i n s e r t i n g , between s e c t i o n s 10 and 11 t h e r e o f , a new s e c t i o n
reading as f o l l o w s :
"SEC. 10. (a)
Upon r e c e i v i n g the consent of not l e s s than s i x members of
the Federal Reserve Board, any Federal r e s e r v e bank may make advances, i n such
amount as the board of d i r e c t o r s of such Federal r e s e r v e bank may determine, to
groups of f i v e or more member banks a m a j o r i t y of them independently owned and
controlled, w i t h i n i t s d i s t r i c t upon t h e i r time or demand promissory n o t e s ,
provided the bank or banks which r e c e i v e the proceeds of such advances as h e r e i n
provided have no adequate amounts of e l i g i b l e or acceptable a s s e t s a v a i l a b l e to
enable such bank or banks to obtain s u f f i c i e n t c r e d i t accommodations from the
Federal r e s e r v e bank through r e d i s c o u n t s or advances other than as provided i n
s e c t i o n 10 ( b ) .
The l i a b i l i t y of the i n d i v i d u a l banks i n each group must be
l i m i t e d to such p r o p o r t i o n of t h e t o t a l amount advanced to such group as the
deposit l i a b i l i t y of t h e r e s p e c t i v e banks b e a r s to the aggregate deposit l i a b i l i t y
v
of a l l banks i n such group, but such advances may be made to a l e s s e r number of
such member banks i f the aggregate amount of t h e i r deposit l i a b i l i t y c o n s t i t u t e s
a t l e a s t 10 per centum of t h e e n t i r e deposit l i a b i l i t y of t h e member banks within
such d i s t r i c t .
Such banks s h a l l be authorized t o d i s t r i b u t e the proceeds of such
loans t o such of t h e i r number and i n such amount as they may agree upon, but
- 2 -
X-7099
± 8 3
"before so doing they s h a l l r e q u i r e such r e c i p i e n t banks to d e p o s i t with a s u i t a b l e
t r u s t e e , r e p r e s e n t i n g the e n t i r e group, t h e i r i n d i v i d u a l n o t e s made i n f a v o r of
the group p r o t e c t e d by such c o l l a t e r a l s e c u r i t y as may be agreed upon.
Any
Federal r e s e r v e bank making such advance s h a l l charge i n t e r e s t thereon a t a r a t e
not l e s s than 1 p e r centum above i t s di ..count r a t e in e f f e c t a t the time of making such advance.
No such note upon which advances are made by a Federal reserve
bank under t h i s s e c t i o n s h a l l be e l i g i b l e under s e c t i o n 16 of t h i s Act as
c o l l a t e r a l s e c u r i t y f o r Federal reserve n o t e s .
"No o b l i g a t i o n s of any f o r e i g n government, i n d i v i d u a l , p a r t n e r s h i p , a s s o c i a t i o n , or c o r p o r a t i o n organized under the laws thereof s h a l l be e l i g i b l e as
c o l l a t e r a l s e c u r i t y f o r advances under t h i s s e c t i o n .
"Member banks a r e a u t h o r i z e d to o b l i g a t e themselves i n accordance with the
p r o v i s i o n s of t h i s s e c t i o n . "
SEC. 2.
The Federal Reserve Act, as amended, i s f u r t h e r amended by adding,
immediately a f t e r such new s e c t i o n 10 ( a ) , an a d d i t i o n a l new s e c t i o n reading as
follows:
"SBC. 10. (b)
x
U n t i l March 3, 1934, and in exceptional and exigent circum-
s t a n c e s , and when any member bank, having a c a p i t a l of $2,000,000 or l e s s , has
no f u r t h e r e l i g i b l e and a c c e p t a b l e a s s e t s a v a i l a b l e to enable i t to obtain
adequate c r e d i t accommodations through r e d i s c o u n t i n g a t the Federal reserve bank
or any o t h e r method provided by t h i s Act o t h e r than t h a t provided by Section 10
( a ) , any Federal r e s e r v e bank, s u b j e c t in each case to a f f i r m a t i v e a c t i o n by not
l e s s than s i x members of t h e Federal Reserve Board may make advances to such
member bank on i t s time or demand promissory n o t e s secured to the s a t i s f a c t i o n of
such Federal r e s e r v e bank; PROVIDED, That ( l ) each such note s h a l l b e a r i n t e r e s t
a t a r a t e not l e s s than 1 p e r centum p e r annum higher than the h i g h e s t discount
r a t e in e f f e c t a t such Federal reserve bank on the date of such n o t e ; (2) the
Federal Reserve Board mgy by r e g u l a t i o n l i m i t and d e f i n e the c l a s s e s of assfets
which may be accepted
as s e c u r i t y f o r advances made under a u t h o r i t y of t h i s
-3-
X-7093
s e c t i o n ; and (3) no note accepted f o r any such advance s h a l l be e l i g i b l e a s
1 8
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 .
«2To o b l i g a t i o n s of any f o r e i g n government, i n d i v i d u a l , p a r t n e r s h i p , a s s o c i a t i o n , or c o r p o r a t i o n organized under the laws thereof s h a l l be e l i g i b l e a s c o l l a t e r a l s e c u r i t y f o r advances under t h i s s e c t i o n . "
SEC. 3.
The second paragraph of s e c t i o n 16 of the Federal 3eserve Act, a s
amended, i s ar. ended to read a s f o l l o w s :
"Any Federal r e s e r v e bank: may make a p p l i c a t i o n to t h e l o c a l Federal r e s e r v e
agent f o r svcli amount of the Federal r e s e r v e notes h e r e i n b e f o r e provided f o r a s
i t may r e q u i r e .
Such a p p l i c a t i o n s h a l l be accompanied with a tender to the
local Federal r e s e r v e agent of c o l l a t e r a l in amount equal to the sum of the
Federal r e s e r v e n o t e s thus a p p l i e d f o r and issued pursuant to such a p p l i c a t i o n .
Ihe c o l l a t e r a l s e c u r i t y thus o f f e r e d s h a l l be n o t e s , d r a f t s , b i l l s of exchange,
or acceptances acquired under the p r o v i s i o n s of s e c t i o n 13 of t h i s Act, or b i l l s
of exchan.-e indorsed by a member bank of any Federal r e s e r v e d i s t r i c t and purchased under t h e p r o v i s i o n s of s e c t i o n 14 of t h i s Act, or "cancers' acceptances
purchased under the o r o v i s i o n s of s a i d s e c t i o n 14, or gold or gold c e r t i f i c a t e s :
PROVIDED, EOTCEVER, That,
u n t i l March 3, 1934, should the Federal Reserve Board
deem i t in the p u b l i c i n t e r e s t , i t may, upon the a f f i r m a t i v e v o t e of not l e s s
than a m a j o r i t y of i t s members, a u t h o r i z e the Federal r e s e r v e banks to o f f e r ,
and t h e Federal r e s e r v e a g e n t s to a c c e p t , as such c o l l a t e r a l s e c u r i t y , d i r e c t
o b l i g a t i o n s of the United S t a t e s .
On March 3, 1934, or sooner should t h e Federal
Reserve Board so decide, such a u t h o r i z a t i o n s h a l l terminate and such o b l i g a t i o n s
of the United S t a t e s be r e t i r e d a s s e c u r i t y f o r Federal r e s e r v e n o t e s .
In no
event s h a l l such c o l l a t e r a l s e c u r i t y be l e s s than the amount of Federal r e s e r v e
notes a p p l i e d f o r .
The Federal r e s e r v e agent s h a l l each day n o t i f y the Federal
Reserve Board of a l l i s s u e s and withdrawals of Federal r e s e r v e n o t e s to and by
the Federal r e s e r v e bank to which he i s a c c r e d i t e d .
The s a i d Federal Reserve
Board .nay a t any time c a l l upon a Federal r e s e r v e bank f o r a d d i t i o n a l s e c u r i t y to
http://fraser.stlouisfed.org/ Federal
p r o t e c t the
Federal Reserve Bank of St. Louis
r e s e r v e notes i s s u e d to i t . "
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7100
February 24, 1932,
SUBJECT:
Change in Monthly Report of Leased
Wire Operations.
Dear S i r ;
Reference i s made to the Board's l e t t e r of March 27,
1928, (X-6005), with regard to the monthly t e l e g r a p h i c r e p o r t
made to the Board "by the Federal reserve "banks of main l i n e
l e a s e d wire o p e r a t i o n s .
For some time p a s t , arrangements have been in e f f e c t
f o r a word count of a l l telegrams received in and dispatched
from Washington f o r account of the Treasury, the Federal Farm
Loan Bureau and the Federal Farm Board.
This has been necessary
in order t o apportion the charge made a g a i n s t the Treasury
Department among the s e v e r a l a p p r o p r i a t i o n s chargeable f o r the
v a r i o u s c l a s s e s of telegrams.
With the a d d i t i o n of the Reconstruction Finance Corporat i o n to the o r g a n i z a t i o n s u s i n g the leased wires, arrangements
have been made to render a monthly statement a g a i n s t t h a t corporation.
A count of incoming, a s well as outgoing, messages f o r
account of the Reconstruction Finance Corporation w i l l also be
made i n Washington.
As a check, however, on the Washington count,
«
-2-
X-7100
i t i s requested t h a t item 3 of the monthly t e l e g r a p h i c r e p o r t be
changed to "Total number of words contained in a l l messages sent
to Washington on reimbursable b u s i n e s s " and t h a t t h e r e be
r e p o r t e d thereunder, beginning %ith the month of February, the
aggregate number of words contained in messages sent t c Washington
f o r account of the Treasury Department, Federal Farm Loan Bureau,
Federal Farm Board and Reconstruction Finance Corporation,
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
i t i a
X-7103
I
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
February 25, 1932.
The Federal Reserve Board announces t h a t the Federal
Reserve Bank of Hew York has e s t a b l i s h e d a rediscount r a t e of
3 per cent 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
February 26, 1932.
X-7104
T i a s i A L
a a s i a i s
1 8 7
i s i n
STATEMENT FOR THE PRESS
For r e l e a s e in Morning Papers,
Monday, February 29, 1932.
The following summary of general business
and f i n a n c i a l conditions in the United
S t a t e s , based upon s t a t i s t i c s f o r the
months of January and February, w i l l appear in the forthcoming issue of the
Federal Reserve B u l l e t i n and in the
monthly reviews of the Federal reserve
banks.
In January production of manufactures increased by about the usual seasonal
amount, while output of minerals and value of building c o n t r a c t s awarded continued to d e c l i n e .
Wholesale p r i c e s declined f u r t h e r during January and e a r l y
February, but more r e c e n t l y p r i c e s of c e r t a i n leading commodities showed an
advance.
Production and employment - Volume of i n d u s t r i a l production, which includes
both manufactures and minerals, increased from December to January by an amount
somewhat smaller than i s usual at t h i s time of year, and the Board's seasonally
a d j u s t e d index declined from 71 per cent of the 1923-1935 average to 70 per c e n t .
In the s t e e l i n d u s t r y there was a seasonal increase in a c t i v i t y during January,
followed by a s l i g h t d e c l i n e during the f i r s t three weeks of February.
Production
of automobiles, which u s u a l l y increases considerably a t t h i s season, showed
l i t t l e change in January, following an increase in December.
Activity at textile
m i l l s increased by more than the usual seasonal amount and a t shoe f a c t o r i e s
there was a seasonal increase in production.
Output of coal and petroleum was
s u b s t a n t i a l l y reduced.
Volume of f a c t o r y employment declined by more than the usual seasonal amount
between the middle of December and tk> middle of January.
Number employed a t
foundries, c a r - b u i l d i n g shops, clothing f a c t o r i e s , and establishments producing
b u i l d i n g m a t e r i a l s declined s u b s t a n t i a l l y , while employment in the tobacco
168
X-7104
- 2 -
i n d u s t r y decreased l e s s than i s u s u a l a t t h i s season, and employment in the
woolen goods i n d u s t r y i n c r e a s e d , contrary to seasonal tendency.
Total value of "building c o n t r a c t s awarded in 37 Eastern S t a t e s , as reported
by the F. W. Dodge Corporation, declined sharply in January, and f o r the t h r e e month p e r i o d ending in t h a t month was about one-half of t h e amount awarded i n the
corresponding p e r i o d a year ago.
Approximately o n e - f o u r t h of the decrease was in
r e s i d e n t i a l "building, and t h r e e - f o u r t h s in other types of c o n s t r u c t i o n .
D i s t r i b u t i o n - Total f r e i g h t - c a r loadings decreased i n January, contrary to
seasonal tendency, r e f l e c t i n g c h i e f l y smaller shipments of merchandise, m i s c e l laneous f r e i g h t , and c o a l .
Department s t o r e s a l e s d e c l i n e d by about the u s u a l
seasonal amount.
Wholesale -prices - The g e n e r a l l e v e l of wholesale commodity p r i c e s , as
measured by the index of the Bureau of Labor S t a t i s t i c s , declined 2 p e r cent
f a r t h e r from December to January, although p r i c e s of some important commodities,
such a s wheat, showed l i t t l e change and the p r i c e of c o t t o n advanced.
During
e a r l y February p r i c e s of c e r t a i n l e a d i n g commodities i n c l u d i n g g r a i n s and c o t t o n
d e c l i n e d , but l a t e r i n the month t h e r e was some advance i n the p r i c e s of these
commodities.
Bank c r e d i t - Volume of reserve bank c r e d i t o u t s t a n d i n g d e c l i n e d in January
and the f i r s t h a l f of February.
This decrease has r e f l e c t e d a r e t u r n flow of
currency from c i r c u l a t i o n , which has been smaller than u s u a l t h i s y e a r , t o g e t h e r
with a continued r e d u c t i o n i n member bank r e s e r v e b a l a n c e s , o f f s e t in p a r t by a
demand f o r r e s e r v e bank c r e d i t caused by an outward movement of gold amounting to
$100,000,000 since the t u r n of the y e a r .
A. d e c l i n e in money i n c i r c u l a t i o n a f t e r
the f i r s t few days i n February r e f l e c t e d some r e t u r n of hoarded currency,
accompanying a decrease i n bank f a i l u r e s .
189
3
M
X-7104
At member banks in leading c i t i e s volume of c r e d i t continued to decline
during January and the f i r s t half of February.
Between January 13 and February
17, t o t a l loans and investments decreased by $550,000,000, r e p r e s e n t i n g d e c l i n e s
in loans on s e c u r i t i e s , in other loans and in investments.
Deposits of these
banks also declined s u b s t a n t i a l l y during t h i s p e r i o d .
Money r a t e s in the open market showed l i t t l e change.
On February 26 the
discount r a t e of the Federal Reserve Bank of New York was reduced from
to 3
per, cent, and buying r a t e s on bankers' acceptances of short m a t u r i t i e s were
reduced from 2 3/4 to 2 5/8 per cent.
FEDERAL RESERVE BOARD
^
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7105
February 27, 1932.
SUBJECT:
New Issue Treasury B i l l 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 r e s e r v e t a n k s , the
code word "HOXDEALER" has "been designated to cover a new
i s s u e of Treasury B i l l s , dated March 2, 1932, and maturing June 1, 1932.
This word should "be i n s e r t e d i n t h e Federal
r e s e r v e t e l e g r a p h code "book, following the supplemental
code word "NOXDAWDLE" on page 172.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
ISO
191
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7107
March 4, 1932.
SUBJECT:
Right of n a t i o n a l Banks to s e l l Municipal
Warrants with t h e i r Indorsement.
Dear S i r :
There a r e inclosed f o r your information copies of
l e t t e r s on the above s u b j e c t addressed t o the Board "by Governor
Young on February 20, 1932, to the Comptroller of the Currency
by the Board on February 29, 1932 and to the Board by the
Comptroller of t h e Currency on March 1, 1932.
The p o s i t i o n taken i n the l a s t paragraph of the Board's
l e t t e r of February 18, 1932, t o Governor Geery (X-7097-a), was
based upon informal advice from title o f f i c e of the Comptroller
of the Currency and should be considered to be modified by the
advice contained i n the Comptroller's l e t t e r of March 1, 1932,
i n so f a x as the two a r e i n c o n f l i c t .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosures.
TO GOVERNORS OF ALL F. E. BAMS EXCEPT BOSTON.
X-7107-a
198
COPY
FEDERAL RESERVE BANK
OF BOSTON
February 20, 1932.
Mr. Chester M o r r i l l
Secretary
Federal Reserve Board
Washington, D. C.
Dear Mr. M o r r i l l
This w i l l acknowledge r e c e i p t of your l e t t e r s of February 18, 1932, Nos.
X-7097 and X-7097-a, i n r e f e r e n c e t o Federal Reserve Banks purchasing
municipal w a r r a n t s . The l a s t paragraph of your l e t t e r t o Governor
Geery, No. X-7097-a, reads as follows
"Your a t t e n t i o n i s i n v i t e d to the f a c t , however, t h a t ,
under the p r o v i s i o n s of Section 5136 of the Revised
S t a t u t e s , a n a t i o n a l bank i s permitted to s e l l i n v e s t ment s e c u r i t i e s only 'without r e c o u r s e ' and, t h e r e f o r e ,
may not s e l l warrants of m u n i c i p a l i t i e s with i t s i n d o r s e ment ".
Are we t o assume from t h i s t h a t the Comptroller of the Currency and the
Federal Reserve Board are c l a s s i f y i n g a s i x months note of a m u n i c i p a l i t y
i s s u e d i n a n t i c i p a t i o n of the c o l l e c t i o n of taxes and conforming to a l l
the r e g u l a t i o n s of t h e Federal Reserve Board i n r e f e r e n c e to such a note
to be an investment s e c u r i t y ? I t appears t o us t h a t t h i s i s a s e l f l i q u i d a t i n g loan and should not by any p o s s i b l e l i n e of reasoning be
c l a s s i f i e d as an investment s e c u r i t y . In any event, we have always cons i d e r e d such an o b l i g a t i o n a loan and not an investment s e c u r i t y and we a r e
prompted to i n q u i r e i f the paragraph quoted i s i n accord with t h e regulations
and i n s t r u c t i o n s of t h e Comptroller.
Very t r u l y yours,
(Signed) R. A. Young
R. A. Young
Governor
X-7107-b
i 193
COPY
February 29, 1932.
Honorable J . W. P o l e ,
Comptroller of t h e Currency,
Washington, D. C.
Dear Mr. Pole :
The Federal Reserve Board r e c e n t l y addressed a l e t t e r to
one of the Federal r e s e r v e banks which contained a statement t h a t
a n a t i o n a l bank i s permitted to s e l l investment s e c u r i t i e s only
"without r e c o u r s e " and, t h e r e f o r e , may not s e l l warrants of munic i p a l i t i e s with i t s indorsement.
A copy of t h i s l e t t e r was sent by
the Board to t h e Governors of a l l Federal r e s e r v e banks, and the Board
has now received a l e t t e r from Governor Young of the Federal Reserve
Bank of Boston i n q u i r i n g whether t h i s statement i s i n accord with the
r e g u l a t i o n s and i n s t r u c t i o n s of t h e Comptroller of t h e Currency.
I n order t h a t the Board may make a proper r e p l y to Governor
Young's i n q u i r y , 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 advise as t o the
p o s i t i o n of your o f f i c e on t h i s p o i n t .
Copies of the l e t t e r s r e -
f e r r e d to a r e i n c l o s e d herewith f o r your i n f o r m a t i o n .
Very t r u l y y o u r s ,
(Signed) Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
Inclosures.
X-7107-rf
1.94
OOPY
TREASURY DEPARTMENT
WASHINGTON
March 1, 1932.
Federal Reserve Board,
Washington, D. C.
Gentlemen:
I have a l e t t e r from your Secretary under d a t e of February 29,
enclosing copies of a l e t t e r addressed t o the Governors of t h e Federal
Reserve Banks and a l e t t e r from Governor Young with r e s p e c t t h e r e t o .
The i n f o r m a t i o n d e s i r e d i s t h e p o s i t i o n of t h i s o f f i c e with
r e s p e c t to whether a n a t i o n a l "bank i s permitted to s e l l warrants of
m u n i c i p a l i t i e s w i t h i t s endorsements. This o f f i c e holds t h a t t h e
discounting or n e g o t i a t i n g of promissory n o t e s , d r a f t s , "bills of exchange and other evidences of debt by a n a t i o n a l bank must e i t h e r i n volve t h e g r a n t i n g of a loan or t h e purchase of an investment s e c u r i t y .
The circumstances surrounding each t r a n s a c t i o n must determine whether
i t r e s u l t s i n t h e making of a loan s u b j e c t to a l l the p r o v i s i o n s of
t h e law with r e s p e c t to loans or the making of an investment which
must conform t o t h e requirements of Section 5136, U . S . R . S . , as amended,
and t o the r e g u l a t i o n s of the Comptroller i n connection t h e r e w i t h .
I f , t h e r e f o r e , a bank holds an o b l i g a t i o n of a m u n i c i p a l i t y
r e p r e s e n t i n g an advance of funds made d i r e c t l y to the m u n i c i p a l i t y ,
the t r a n s a c t i o n would appear to be a loan and not an investment, and
would not be s u b j e c t t o the p r o v i s i o n s of Section 5136., U . S . R . S . ,
which r e q u i r e s purchase and s a l e "without r e c o u r s e " .
I t i s a l s o held t h a t t h e i n t e n t of t h e law p l a c e s municipal
loans on t h e same b a s i s as other government l o a n s . Governments a r e
not h e l d t o be c o r p o r a t i o n s w i t h i n the meaning of Section 5200, U.S.
R . S . , and i n consequence loans t h e r e t o a r e not s u b j e c t t o t h e l i m i t
p r e s c r i b e d by t h i s s e c t i o n .
Very t r u l y y o u r s ,
(Signed)
J . W. Pole
J . W. POLE,
Comptroller,
I 195
FEDERAL RESERVE BOARD
WASHINGTON
X-7108
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
May 27, 1932.
Dear Sir:
Since my l e t t e r of December 14, 1931, I have received
the following additional l e t t e r s from some of the counsel to
the Federal reserve hanks commenting further upon the l e g a l
and practical problems arising under the hank c o l l e c t i o n code,
and copies are inclosed for your information:
1.
Letter of November 9, 1931, from Mr. Robert S.
Parker, Counsel to the Federal Reserve Bank of
Atlanta (X-7108—f)}
2.
Letter of December 30, 1931, and nine inclosures
from Mr. M. G. Wallace, Counsel to the Federal
Reserve Bank of Richmond (X-7108-a and X-7108-ar-l
to X-7108-a-9, i n c l u s i v e ) ;
3.
Letter of December 16, 1931, from Mr. H. G. Leedy,
Counsel to the Federal Reserve Bank of Kansas City
(X-7108-b); and
4.
Three l e t t e r s , one with an inclosure, from Mr.
A. C. Agnew, Counsel to the Federal Reserve Bank
of San Francisco, dated December 22, 1931, January
5, 1932, and January 22, 1932 (X-7108-e, X-7108-d,
X-7108-c and X—7108—c—1).
I regret that the pressure of other and more urgent
matters has been so great that i t has been impossible for me to
reply to these l e t t e r s and I am not yet able to f i n d time to
comment upon them in d e t a i l .
I hope, however, that each of the
counsel who has written to me on t h i s subject w i l l consider t h i s
\
-
%
"10B
-
i 196
circular l e t t e r as an acknowledgment of MB lettter ftbd w i l l pardofa toy failure to reply separately and in d e t a i l .
Seme of the counsel who have written to me and some of
the others with whan I have discussed the subject from time to
time have expressed the view that this subject should be considered at a conference of counsel for a l l Federal reserve "banks,
and I concur i n this view; "but I do not "believe that we can conveniently hold such a conference until some time after Congress
adjourns.
I am writing you a separate l e t t e r with reference to
the p o s s i b i l i t y of holding a conference some time t h i s summer
for the purpose of considering with the Standing Committee on
Collections and the o f f i c i a l s of the Treasury Department certain matters pertaining to the cashing of Government warrants
and checks "by Federal reserve banks under the provisions of
Treasury Department Circular No. 176, as requested by the
CDif-
ference of Governors of a l l Federal reserve banks; and we can
consider the legal and practical problems arising under the
Uniform Bank Collection Code at the same time.
With kindest personal regards and a l l best wishes, I am
Cordially yours,
Walter Wyatt,
General Counsel.
Inclosures.
(FOR ALL COUNSEL - H A OFFICES ONLY)
ED
COPY
X-7108-a
mSRAL RESBRVS liHK
OF RICHMOND
December 30, 1931.
Federal Reserve Board,
Washington, D. C.
A t t e n t i o n : Mr, Walter Wyatt, General Counsel.
Dear Mr. % a t t :
I r e f e r to your l e t t e r of December 14th with r e f e r e n c e to the
handling of checks i n unpaid cash l e t t e r s to n a t i o n a l "banks i n s t a t e s i n
which the Bank C o l l e c t i o n Code i s i n f o r c e .
I enclose you herewith a d r a f t of a l e t t e r which was sent by
Mr. R. H. Broaddus, Deputy Governor of t h i s bank, under d a t e of November
10th to the Federal r e s e r v e banks of a l l d i s t r i c t s i n which t h e Bank Coll e c t i o n Code was i n f o r c e i n some s t a t e s of t h e d i s t r i c t , excepting the
Federal Reserve Bank of Chicago. We had already had some correspondence
with t h e l a t t e r Federal reserve "bank and with h i s Counsel. I a l s o enclose
copies of a l l r e p l i e s which we have r e c e i v e d . Our l e t t e r was w r i t t e n
"before the telegram sent by Mr. G. F. Await, Deputy Comptroller, under
date of December 2nd, so that the enclosed f i l e i s not of great v a l u e .
You w i l l see, however, t h a t p r a c t i c e s and methods of Federal
reserve banks have d i f f e r e d m a t e r i a l l y and the s i t u a t i o n has created so
much d i f f i c u l t y t h a t I have no very c l e a r idea as t o what i s the best
method to f o l l o w . In the correspondence to which I r e f e r r e d the Federal
Reserve Bank of Chicago had. advised t h a t they would prove a claim unless
i n s t r u c t e d to the contrary and proceeded as they had. done b e f o r e t h e s t a t u t e
except they asked f o r the r e t u r n of the check when s p e c i f i c a l l y so requested
by the endorser. They did not give any d e f i n i t e n o t i c e to t h e r e c e i v e r as
to t h e i r e l e c t i o n except by f i l i n g claim.
As you know, we have endeavored to give to our endorsers the
b e n e f i t of the e l e c t i o n . Our experience was t h a t i t was almost impossible
to secure prompt r e p l i e s from the endorsers and many of t h e endorsers r e p l i e d i n s t r u c t i n g us t o t r e a t t h e i r checks as dishonored but f a i l e d to
give the names of the drawers. As you know, when checks are charged t o
the accounts of the drawers they are f i l e d a l p h a b e t i c a l l y under t h e name
of the drawers. I t i s , t h e r e f o r e , extremely d i f f i c u l t to f i n d a check i n
any p a r t i c u l a r cash l e t t e r unless a l l cancelled checks i n the bank a r e
examined and the d a t e s of the endorsements on them i n s p e c t e d . Even then
i t i s d i f f i c u l t because the endorsements a r e made with rubber stamps and
f r e q u e n t l y b l u r r e d or one endorsement i s superimposed upon another so
t h a t they a r e almost i l l e g i b l e .
Since r e c e i v e r s u s u a l l y r e t u r n to d e p o s i t o r s a statement of t h e i r
account with cancelled checks many checks were n a t u r a l l y returned to dep o s i t o r s b e f o r e our demand f o r the r e t u r n of t h e checks was made on t h e
r e c e i v e r . The s t a t u t e expressly provides t h a t the check returned to the
X-7108-a 1 9 0
Federal Reserve Board,
Washington, D. Ci
Page 2
December 30, 1931.
drawer does not r e l e a s e the drawer, "but i t i s extremely d i f f i c u l t t o have
any s a t i s f a c t o r y s e t t l e m e n t i f the check i s not r e t u r n e d t o t h e h o l d e r .
For example: The drawer may know t h a t he i s l i a b l e to someone "but i t does
not f o l l o w t h a t he i s l i a b l e t o the o r i g i n a l payee as t h e payee may not
have reimbursed the subsequent endorser and t h e d r a w e r ' s l i a b i l i t y i s t o
the holder.
Since Mr. Await 1 s telegram was sent we have a l t e r e d our method.
We now n o t i f y endorsing "banks t h a t we w i l l e l e c t to t r e a t t h e i r items as
dishonored u n l e s s d e f i n i t e i n s t r u c t i o n s to the c o n t r a r y to prove a claim
a r e i n our hands on a d a t e mentioned. We w r i t e t o the r e c e i v e r immediately
s t a t i n g t h a t we w i l l advise him of our e l e c t i o n on or "before a p a r t i c u l a r
d a t e and ask him t o withdraw from h i s f i l e s a l l checks i n our unpaid cash
l e t t e r and send them t o us so t h a t we may have p h o t o s t a t i c copies made.
Then on t h e day upon which we have p r e v i o u s l y named we r e t u r n t o endorsing
banks a l l checks except those upon which we have been i n s t r u c t e d t o prove
a claim and r e t u r n t h e l a t t e r t o the r e c e i v e r .
I have had but one a c t u a l case under the l a t t e r system. The
r e c e i v e r was a b l e to i d e n t i f y and r e t u r n to us a l l checks but t h r e e small
ones and so t h i s system has worked very well to d a t e . The one f a i l u r e ,
however, involved only a comparatively small bank. In the case of a l a r g e
bank I am a f r a i d t h e r e c e i v e r w i l l f i n d i t d i f f i c u l t t o l o c a t e and r e t u r n
the checks upon which we a r e unable t o give the names of t h e drawers.
Mr. Walden r e c e n t l y informed me t h a t t h e Conference of Governors
r e f e r r e d to the C o l l e c t i o n Committee and t h e Conference of Counsels c e r t a i n
questions r e l a t i n g t o t h e r e v i s i o n of t r e a s u r e r c i r c u l a r No. 176. If such
a conference i s h e l d I b e l i e v e i t w i l l be advisable to include on t h e agenda
a f u l l d i s c u s s i o n of t h e problems a r i s i n g out of t h e o p e r a t i o n of the Bank
C o l l e c t i o n Code, and i t might be a d v i s a b l e to have the C o l l e c t i o n Committee
and Conference of Counsels consider the problems j o i n t l y and a l s o with
r e p r e s e n t a t i v e s of t h e Comptroller's o f f i c e . I doubt i f i t w i l l be a d v i s able to hold such a conference immediately as I b e l i e v e i t w i l l be b e t t e r
to wait u n t i l we have had more experience i n o p e r a t i o n under the Code, and
I imagine t h a t our f r i e n d s i n the Comptroller's o f f i c e and most of the
C o l l e c t i o n Committee a r e l i k e myself, so swamped with immediate and p r e s s i n g
problems t h a t they w i l l have l i t t l e time to give to a r a t h e r complicated
subject.
Very t r u l y yours,
(Signed) M. G. Wallace,
Counsel.
MGW/gr
COPY
X-7108-a-l^gg
I am informed t h a t the tihiform Batik C o l l e c t i o n Code i s i n f o r c e
i n a t l e a s t one s t a t e ill yotil* d i s t r i c t , and I would l i k e t o have you w r i t e
me g i v i n g me your experience i n handling unpaid cash l e t t e r s i n s t a t e s
where t h i s code i s i n f o r c e .
The code appears t o give us a r i g h t to e l e c t t o t r e a t checks
i n unpaid cash l e t t e r s to drawee banks as dishonored or t o e l e c t to prove
a claim on behalf of the owners a g a i n s t the f a i l e d bank. The code provides
t h a t t h i s l a t t e r claim i s a p r e f e r r e d one, but our counsel has advised us
t h a t i n h i s opinion the s e c t i o n of the code which gives the agent c o l l e c t ing bank the option t o t r e a t t h e checks as dishonored or to f i l e a claim
i s probably a p p l i c a b l e t o n a t i o n a l banks, but t h a t t h e s e c t i o n which dec l a r e s t h a t t h e claim when e s t a b l i s h e d s h a l l be p r e f e r r e d i s probably not
a p p l i c a b l e to n a t i o n a l banks.
In t h e case of s t a t e banks we have exercised the r i g h t of e l e c t i o n v e s t e d i n us and have proceeded as under the former law; t h a t i s to
say, we n o t i f y our endorsing banks t h a t we w i l l prove a claim u n l e s s i n s t r u c t e d to t h e c o n t r a r y , except t h a t i n t h e case of Federal r e s e r v e
banks who have d i r e c t e d us not to prove such claims without express
i n s t r u c t i o n s we a d v i s e them t h a t we w i l l await i n s t r u c t i o n s , but i n no
case do we demand or attempt to secure t h e r e t u r n of checks,
In the case of n a t i o n a l banks, thinking t h a t s i n c e we could not
secure the allowance of t h e claims as p r e f e r r e d , we considered t h a t i t would
be wiser t o consult our endorsing banks b e f o r e making an e l e c t i o n . We
have, t h e r e f o r e , i n a l l such cases immediately n o t i f i e d a l l endorsing banks
and asked f o r i n s t r u c t i o n s as to whether we should e l e c t to f i l e a claim
upon t h e i r items or t r e a t them as dishonored. We f i n d t h a t our endorsing
banks do not give a prompt r e p l y to our r e q u e s t s f o r i n s t r u c t i o n s and i n
many cases i t i s almost impossible t o o b t a i n r e p l i e s .
When i n s t r u c t i o n s to t h a t e f f e c t a r e r e c e i v e d , we demand from t h e
r e c e i v e r s the r e t u r n of the checks which our endorsing banks r e q u e s t us to
t r e a t as dishonored. We understand the Comptroller of t h e Currency lias
i n s t r u c t e d t h e r e c e i v e r s not to r e t u r n t h e checks themselves but t o have
p h o t o s t a t i c copies made i f we a r e w i l l i n g t o bear t h e expense of malting
such copies and to send such copies t o u s .
Our counsel has advised us t h a t under the code f a i l u r e to obtain
p o s s e s s i o n of the check does not impair the r i g h t of t h e holder t o proceed
on the drawer and e n d o r s e r s , but n a t u r a l l y i n p r a c t i c e our f a i l u r e to obtain
the checks causes much confusion among our endorsing banks and the l a r g e
number of i n q u i r i e s r e c e i v e d makes the correspondence exceedingly burdensome.
I would be g r e a t l y obliged i f you would w r i t e me t e l l i n g me how
you proceed i n such c a s e s and what your experience has been. I should
e s p e c i a l l y l i k e to know:
Do you e x e r c i s e t h e r i g h t of e l e c t i o n without c o n s u l t i n g endorsing
banks and, i f s o , do you e l e c t to t r e a t the checks a s dishonored or t o
e s t a b l i s h claims?
t 200
X-7108-a-l
Do you make a d i s t i n c t i o n "between s t a t e and n a t i o n a l "banks i n
making your e l e c t i o n t o e s t a b l i s h a claim or to t r e a t t h e checks as
dishonored?
If you consult your endorsing "banks "before making your e l e c t i o n ,
do you i n your advice s e t any time i n which a r e p l y mast "be r e c e i v e d "by
you, and, i f so, what course do you follow i f no r e p l y i s received w i t h i n
t h a t time?
I f you e l e c t to t r e a t any checks as dishonored, have you "been
able to s e c u r e t h e r e t u r n of the checks; or, i f n o t , do you t a k e any s t e p s
t o r e q u i r e the r e c e i v e r s t o r e t u r n them?
Very t r u l y y o u r s ,
*
X-7l08-a-2
i
5.0 i : i
2Q±
FEDERAL BESMS S A M of PHILADELPHIA
November 14, 1931
MB. B. H. BROADDUS, Deputy Governor,
Federal Reserve Bank,
Richmond, V i r g i n i a .
Dear Mr. Broaddus:
I am extremely sorry t h a t your l e t t e r of
November 10 has not "been acknowledged b e f o r e t h i s , and t r u s t t h a t
you w i l l accept my apology f o r the delay.
The subject of yor.r l e t t e r , the Uniform Bank
Collection Code of 1931, has "been receiving t h e c o n s i d e r a t i o n of
the o f f i c e r s of t h i s bank, and we have been in conference with
our counsel. Your l e t t e r embodies the questions upon which we
have been concentrating our study, and at t h i s stage of the
a n a l y s i s , we would not f e e l j u s t i f i e d i n venturing any decisions
u n t i l we r e c e i v e f u r t h e r word from counsel. There a r e so many
angles to be considered with regards to the p r o v i s i o n of Section 11
(Election to Treat as Dishonored Items Presented by Mail) and our
experience i n t h e c o l l e c t i o n of checks under our p r e s e n t arrangements, t h a t we f e c i any opinions we might o f f e r i n the absence of
s p e c i f i c experience, would be more or l e s s c o n j e c t u r a l .
Assuring you of our w i l l i n g n e s s t o confer with
you as soon as we are i n possession of s u f f i c i e n t d a t a , and a p p r e c i a t i n g your i n q u i r y i n t h i s m a t t e r , I am
Very t r u l y yours,
(Signed) James M. Toy
A s s i s t a n t Cashier.
JMT:G
X-7108-a-3
c o p x."
*
SOS
Federal ftSBerve Bank
of Cleveland
November 19, 1931
Mr. R. E. Broaddus, Deputy Governor,
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
Dear Mr. Broaddus:
I am i n r e c e i p t of your l e t t e r of November 10th with r e s p e c t
to the o p e r a t i o n of t h e Uniform C o l l e c t i o n Code which i s i n f o r c e i n a
number of t h e s t a t e s , and asking f o r our experience i n t h e method of
handling items involved i n hank f a i l u r e s :'n t h i s d i s t r i c t .
The Uniform Bank Collection Code has "been adopted "by Kentucky,
West V i r g i n i a and Pennsylvania i n t h i s d i s t r i c t . I t was "before t h e
L e g i s l a t u r e of Ohio two years ago, "but was not enacted. In the t h r e e
s t a t e s i n which i t has been enacted i n t h i s d i s t r i c t , i t has not "been i n
f o r c e a s u f f i c i e n t time to properly judge i t s m e r i t s or t o permit the
development of a d e f i n i t e scheme of handling items involved i n "bank
f a i l u r e s . I t has been our view from the beginning t h a t Section 13 of the
Uniform Bank C o l l e c t i o n Code providing f o r p r e f e r e n c e s on behalf of the
owners of unremitted f o r c o l l e c t i o n items upon a f a i l e d bank, i s not
a p p l i c a b l e to n a t i o n a l banks and the s t a t e banking o f f i c i a l s of Pennsylv a n i a and Kentucky have not as yet committed themselves t o recognize the
Section i n dealing w i t h insolvent s t a t e banks under t h e i r j u r i s d i c t i o n .
We a r e c o n f i d e n t , however, t h a t i n due course the s t a t e banking o f f i c i a l s
of t h e s e s t a t e s w i l l recognize t h e r i g h t to a p r e f e r e n c e under t h e c i r cumstances r e c i t e d i n Section 13 of the Code.
We have had a very s i m i l a r p r o v i s i o n i n t h e Ohio General Code
f o r a number of y e a r s which has g r e a t l y f a c i l i t a t e d t h e s e t t l e m e n t of
c o l l e c t i o n items i n t h e l i q u i d a t i o n of an insolvent bank*s a s s e t s , and we
b e l i e v e t h a t when Section 13 i s f u l l y recognized by t h e s t a t e banking
o f f i c i a l s of t h e v a r i o u s s t a t e s i n which the Code has been enacted, t h a t
i t w i l l be of c o n s i d e r a b l e b e n e f i t i n s i m p l i f y i n g t h e handling of c o l l e c t i o n
items which have been drawn on a s t a t e bank which becomes i n s o l v e n t b e f o r e
paying t h e items and w i l l be r e s o r t e d t o g e n e r a l l y by the owners of such
items r a t h e r than seeking the remedy p r e s c r i b e d i n Section 11.
Section 11 of the Uniform C o l l e c t i o n Code, which provides an
e l e c t i o n on t h e p a r t of the agent c o l l e c t i n g bank t o t r e a t items as d i s honored which have been sent to a drawee bank f o r c o l l e c t i o n but which
a r e unremitted f o r a t t h e time of f a i l u r e , i s we b e l i e v e , a p p l i c a b l e to
n a t i o n a l as well as s t a t e banks.
Since the adoption of the Uniform Bank C o l l e c t i o n Code i n t h e
X-7108-a-3
Mr. R. H- Broaddus, Deputy Governor - 2 -
November 19, 1931
t h r e e s t a t e s i n t h i s d i s t r i c t r e f e r r e d t o , we have followed the p r a c t i c e
of immediately n o t i f y i n g the r e c e i v e r or examiner i n charge of the f a i l e d
hank t h a t a l l unpaid items received from us f o r c o l l e c t i o n s h a l l he held
"by him and not r e t u r n e d to t h e makers u n t i l we have advised him whether
or not we e l e c t to t r e a t any of s a i d items as dishonored. Upon r e c e i p t
of such i n s t r u c t i o n s on any check we immediately n o t i f y t h e r e c e i v e r or
examiner i n charge of our i n t e n t i o n to t r e a t the item as dishonored and
demand i t s r e t u r n .
At t h e same time we charge t h e items hack to our endorsers and
request t h e i r i n s t r u c t i o n s as to whether we should t r e a t t h e items as
dishonored, or f i l e claim a g a i n s t the insolvent hank.
Upon r e c e i p t of t h e i r r e p l i e s or i n the event no r e p l y i s r e ceived and a s u f f i c i e n t l e n g t h of time has elapsed i n which t h e endorsers
could have n o t i f i e d u s , claim i s prepared against t h e i n s o l v e n t hank f o r
a l l items except t h o s e upon which we have been s p e c i f i c a l l y i n s t r u c t e d to
e l e c t to t r e a t as dishonored. In n o t i f y i n g our endorsers no time l i m i t i s
f i x e d f o r t h e i r r e p l i e s . We do, however, c a l l t h e i r a t t e n t i o n to the
s t a t u t o r y p r o v i s i o n r e q u i r i n g "reasonable d i l i g e n c e " .
Up t o t h e p r e s e n t date we have not had s u f f i c i e n t experience t o
determine t h e exact e f f e c t of the treatment of items as dishonored. The
l e g i s l a t i o n being new, apparently t h e s t a t e hanking o f f i c i a l s , i n c l u d i n g
the r e c e i v e r s of f a i l e d hanks, have no d e f i n i t e p o l i c y with r e s p e c t to the
o p e r a t i o n of Section 11 as i n some cases the Receivers have r e t u r n e d the
dishonored items t o us while i n other i n s t a n c e s they have e i t h e r r e f u s e d t o
r e t u r n the items or have advised us t h a t t h e matter w i l l he taken under consideration.
In the case of f a i l e d n a t i o n a l hanks we have not been able to
secure the r e t u r n of any items nor any evidence t h a t t h e Comptroller of the
Currency or the Receiver or Examiner i n Charge of t h e bank recognized any
c o n t r o l l i n g e f f e c t of t h e Uniform Bank C o l l e c t i o n Code other than an o f f e r
to f u r n i s h us with p h o t o s t a t i c copies of items which we e l e c t e d to t r e a t as
dishonored, provided we w6a?e w i l l i n g to pay f o r such c o p i e s .
P r i o r to t h e adoption of the Uniform Bank C o l l e c t i o n Code, p r a c t i c a l l y a l l of our endorsers were content to f i l e claims a g a i n s t t h e i n solvent bank, but s i n c e the adoption of the Code a very considerable p e r centage of our endorsers have been i n s t r u c t i n g us to t r e a t t h e i r items as
dishonored when t h e bank upon which they a r e drawn f a i l s b e f o r e payment.
We have f e l t t h a t t h e r e was a p o s s i b i l i t y of i n c u r r i n g l i a b i l i t y to t h e
owners of c o l l e c t i o n items where we did not seek i n s t r u c t i o n s from them
b e f o r e p r e s e n t i n g claim, so as to give them an opportunity t o have t h e
items dishonored i f i t were to t h e i r advantage to have t h e items so t r e a t e d .
Consequently, t h e correspondence i n c i d e n t to t h i s procedure has been
immeasurably i n c r e a s e d over the s i t u a t i o n as i t e x i s t e d p r i o r to the enactment of t h e Code.
ono
°
X-7108-a-3
Mr. E. H. BroadduSj Deputy governor - 3 -
November 19, 1931
, 204
With r e s p e c t t o f a i l e d s t a t e banks i n t h i s d i s t r i c t we have f e l t
j u s t i f i e d i n discouraging the p r a c t i c e of dishonoring t h e unpaid items and
have t r i e d t o point out to our endorsers t h e more d e s i r a b l e course of est a b l i s h i n g a p r e f e r e n c e i n the a s s e t s of the f a i l e d bank through t h e f i l i n g
of claim a g a i n s t the bank. As to n a t i o n a l banks, we have l i k e w i s e d i s couraged the dishonoring of unpaid checks, by p o i n t i n g out to the endorsers
t h a t the c o n t r o l l i n g e f f e c t of the Uniform C o l l e c t i o n Code has not been
recognized by the Comptroller of the Currency and t h e i r r i g h t s to proceed
thereunder w i l l very l i k e l y be contested by the Comptroller. The r i g h t t o
t r e a t such items as dishonored appears t o appeal to a g r e a t many of our
endorsers, both as to s t a t e and n a t i o n a l banks and we have no doubt t h a t
b e f o r e many months t h e scope and e f f e c t of Section 11 of the Uniform
C o l l e c t i o n Code w i l l have t o be determined by l i t i g a t i o n , e i t h e r i n t h i s or
some other d i s t r i c t .
Very t r u l y y o u r s ,
(Signed)
MJT:H
M. J . Fleming
Deputy Governor
X-7108-a-4
COPY
,
205
FIDSRAL RESERVE 3A21K OF
ST. LOUIS
November 13, 1931.
Mr. R. H. Broaddus, Deputy Governor,
Federal Reserve Bank of Richmond#
Richmond, V i r g i n i a .
Dear Mr. Broaddus:
The l e g i s l a t u r e s of the S t a t e s of Missouri, I l l i n o i s , Indiana and Kentucky
i n the Eighth D i s t r i c t have passed what i s termed the "Uniform Bank Collection
Code" a s f o s t e r e d by t h e American Bankers A s s o c i a t i o n .
Several questions p r e s e n t themselves f o r i n t e r p r e t a t i o n when the v a r i o u s
phases of t h e code a r e considered. The American Bankers A s s o c i a t i o n explanat i o n of t h e code i n d i c a t e s a l l "banks a r e a f f e c t e d which would include National
hanks. There i s a question i n our opinion, whether i t w i l l be so upheld as
the o b t a i n i n g of p r e f e r e n c e a g a i n s t National banks on claims covering i n volved t r a n s i t checks i s a question which has a l r e a d y been decided by the
Supreme Court and as you know i t has always been denied, except i n those
cases where checks on other them the closed bank a r e involved and the claim
i s divided i n t o two p a r t s , one of which covers checks drawn on the other banks
c o l l e c t e d through t h e defunct National bank which items i t i s t h e custom
f o r t h e Comptroller of t h e Currency to allow as p r e f e r r e d , provided the a s s e t s
of t h e closed bank were augmented by such c o l l e c t i o n . T h e r e f o r e , t h a t p a r t
of Section 13 which d e f i n e s claims under a c e r t a i n s t a t e of f a c t s as p r e f e r r e d
would seem to be i n c o n f l i c t with p a s t d e c i s i o n s i n s o f a r as i t r e l a t e s i n a
general way t o National banks and w i l l no doubt have to be f u r t h e r t e s t e d i n
order t h a t a d e f i n i t e course of procedure may be adopted i n r e s p e c t t o those
s t a t e s t h a t have passed the code.
Another f a c t to be considered i s the blanket a u t h o r i z a t i o n s which were i n t e r changed by the Federal r e s e r v e banks i n 1922. They were founded upon the
then p r e v a i l i n g c o n d i t i o n s , which under the new codes, appear to be changed.
Therefore i t i s p o s s i b l e t h a t the blanket a u t h o r i z a t i o n s may have to be r e d r a f t e d so as t o contemplate the e f f e c t of the new codes.
The Missouri Code does not give the endorsing bank or holder the option of
t r e a t i n g a check as dishonored or the e l e c t i o n to f i l e claim but provides t h a t
(Section 11-Paragraph 2) "When a drawee
or payor bank has p r e s e n t e d to i t f o r
payment an item or items drawn on or
payable by or at such bank and a t the time
has on deposit to the c r e d i t of the maker
or drawer, an amount equal to such item or
items and such drawee or payor s h a l l f a i l
or c l o s e f o r business as above (under c i r cumstances as o u t l i n e d i n paragraph 1, s e c t i o n
11) a f t e r having charged such item or items
to the account of t h e maker or drawer t h e r e o f .
X-7108-a-4
2
Mr. R. H. Broaddus, Deputy Governor,
Federal keserve Bank of Richmond,
Richmondj V i r g i n i a .
, 306
or otherwise discharged h i s l i a b i l i t y thereon,
but without such item or items having been paid
or s e t t l e d f o r by t h e drawee or payor, e i t h e r i n
money or by an unconditional c r e d i t given on i t s
books or on the books of any other bank which
has been requested or accepted so as t o c o n s t i t u t e such drawee or payor, or any other bank
debtor t h e r e f o r , t h e a s s e t s of such drawee
or payor s h a l l be impressed w i t h a t r u s t i n
favor of t h e owner or owners of such item or
items f o r the amount thereof or f o r t h e b a l ance payable upon a number of items which have
been exchanged and such owner or owners s h a l l
be e n t i t l e d t o a p r e f e r r e d claim upon such
a s s e t s , i r r e s p e c t i v e of whether the funds r e p r e s e n t i n g such item or items can be t r a c e d and
i d e n t i f i e d as p a r t of such a s s e t s or has been
intermingled with or converted i n t o other a s s e t s
of such f a i l e d bank." (Underscoring i s o u r s ) .
Since the passage of t h e code some two and one-half years ago, every claim
we have f i l e d a g a i n s t S t a t e banks i n Missouri have been given p r e f e r e n c e .
In the case of the I l l i n o i s Act, Section 11 e s t a b l i s h e s the r i g h t of the
agent c o l l e c t i n g bank t o t r e a t as dishonored checks which a r e p r e s e n t e d by
mail t o t h e drawee or payor and not f i n a l l y s e t t l e d f o r i n any one of four
methods o u t l i n e d i n t h a t s e c t i o n and i n Section 13, i t i s provided t h a t a
p r e f e r r e d claim e x i s t s under c e r t a i n c o n d i t i o n s . Section 11 of the code
i s worded as f o l l o w s :
"Wherean item i s duly p r e s e n t e d by mail to
the drawee or payor whether or not t h e item
has been charged to t h e account of the maker
or drawer thereof or r e t u r n e d to such maker
or drawer, the agent c o l l e c t i n g bank so p r e s e n t i n g may a t i t s e l e c t i o n exercised with
reasonable d i l i g e n c e , t r e a t such item as d i s honored by nonpayment and recourse may be had
upon p r i o r p a r t i e s t h e r e t o i n any of the f o l l o w ing c a s e s :
(1) Where t h e check or d r a f t of t h e drawee or
payor bank upon another bank r e c e i v e d i n payment t h e r e f o r s h a l l not be p a i d i n due course;
(2) Where the drawee or payor bank s h a l l w i t h out r e q u e s t or a u t h o r i t y tender as payment i t s
own check or d r a f t upon i t s e l f or other i n s t r u ment upon which i t i s p r i m a r i l y l i a b l e ;
(3) Where t h e drawee or payor bank s h a l l give
an unrequested or unauthorized c r e d i t t h e r e f o r
on i t s books or the books of another bank; or
X-7108-a-4
3
3 0 ^
Mr. H. H. Broaddus, Deputy Governor*
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
(4) Where the drawee or payor s h a l l r e t a i n such
items without r e m i t t i n g t h e r e f o r on t h e date of
r e c e i p t or on the day of m a t u r i t y i f payable
otherwise than on demand and received by i t
p r i o r t o or on such d a t e of m a t u r i t y .
Provided, however,' t h a t i n any case where
the drawee or payor "bank s h a l l r e t u r n any
such item unpaid not l a t e r than the date of
r e c e i p t or of maturity as a f o r e s a i d i n t h e
e x e r c i s e of i t s r i g h t to make payment only
a t i t s own counter, such items cannot be
t r e a t e d as dishonored by nonpayment and t h e
delay caused thereby s h a l l not r e l i e v e p r i o r
p a r t i e s from l i a b i l i t y .
Provided f u r t h e r t h a t no agent c o l l e c t i n g
bank s h a l l be l i a b l e t o t h e owner of an
item where i n the e x e r c i s e of ordinary care
i n the i n t e r e s t of such owner i t makes or
does not make the e l e c t i o n above provided
or takes such s t e p s as i t may deem necessary
i n cases ( 2 ) , (3) and (4) above."
Our experience s i n c e the passage of t h e code i n I l l i n o i s lias been r a t h e r
l i m i t e d due t o the few number of banks t h a t have closed on which claims
have been f i l e d . We expect to have more experience i n t h a t s t a t e as time
goes on. Section 13 of the I l l i n o i s code provides t h a t :
"Except i n cases where an item or items i s
dishonored by nonpayment, as provided i n
Section 11 **** such owner or owners s h a l l
be e n t i t l e d to a p r e f e r r e d claim upon such
a s s e t s , i r r e s p e c t i v e of whether the funds
r e p r e s e n t i n g such item or items can be t r a c e d
and i d e n t i f i e d as p a r t of such a s s e t s or has
been intermingled with or converted i n t o
other a s s e t s of such f a i l e d bank."
The codes, as passed by the Indiana and Kentucky l e g i s l a t u r e s , a r e p r a c t i c a l l y
s i m i l a r t o t h a t passed i n t h e S t a t e of I l l i n o i s , a s o u t l i n e d above and s e v e r a l
claims f i l e d r e c e n t l y a g a i n s t S t a t e banks i n those s t a t e s have been taken
up by r e c e i v e r s and p a i d promptly.
We have not up t o t h i s time changed our method of procedure i n the charging
back and f i l i n g claim on involved checks, which b r i e f l y i s as f o l l o w s :
When any bank l o c a t e d i n the Eighth D i s t r i c t , S t a t e or N a t i o n a l , c l o s e s the
outstanding checks t h a t a r e not f i n a l l y p a i d , whether d r a f t has been remitted
X-7108-a-4
S O Q
4
Mr. B. H. Brcaddus, Deputy Governor,
Federal Reserve Bank of. Richmond^
Richmond, Virginia*
or n o t , a r e charged back to- the endorsing "banks and they a r e requested to
n o t i f y us whether or not they d e s i r e claim f i l e d . In t h e case of our own
members we f u r n i s h an a u t h o r i z a t i o n t o f i l e claim covering t h e i r r e s p e c t i v e
items and ask t h a t i t be completed f o r such checks as they want included.
A sample of t h e a u t h o r i z a t i o n i s enclosed.
The blanket a u t h o r i z a t i o n s as exchanged by the Federal r e s e r v e banks i n
1922 govern such checks as were deposited by then or t h e i r d i r e c t sending
members.
We hope t h e above i n f o r m a t i o n w i l l be of some value t o you and a r e pleased
to make the f o l l o w i n g comment i n s p e c i f i c answer to the questions mentioned
i n the seventh paragraph of your l e t t e r :
(1) We do not make any e l e c t i o n as to whether
checks a r e to be t r e a t e d as dishonored or
claim f i l e d and merely request the endorsing
bank to n o t i f y us whether or not they d e s i r e
claim f i l e d i n t h e i r b e h a l f .
(2) Answer No. 1 we b e l i e v e w i l l a l s o answer
Question Ho. 2.
(3) We do not e s t a b l i s h a time l i m i t i n which
to r e c e i v e i n s t r u c t i o n s from t h e endorsing banks
u n l e s s the time l i m i t of f i l i n g claims as f u r nished by the Examiners of Receivers i s drawing
n e a r , i n which event we endeavor t o expedite
the r e c e i p t of i n s t r u c t i o n s .
(4) We have not up t o t h i s time made any e f f o r t
to have the Examiners or Receivers r e t u r n checks
which have been stamped or cancelled p a i d and
charged to t h e accounts of t h e drawers with the
exception of banks located i n the S t a t e of Arkansas which operate under a s t a t u t e t h a t r e quires Receivers or Examiners when tairing charge
of a closed bank to r e t u r n to the l a s t endorser
a l l checks which have not been f i n a l l y paid or
s e t t l e d f o r by t h e closed bank, i r r e s p e c t i v e or
whether t h e checks have been charged t o the accounts of the makers, provided they a r e s t i l l on
the bank premises. If they have been cancelled
paid., charged to the accounts of and d e l i v e r e d
to the makers. t h e Receivers or Examiners a r e nc :
r e q u i r e d t o r e v e r s e e n t r y or r e t u r n them.
We s h a l l be very glad t o have the b e n e f i t of your f u r t h e r experience i n the
X—710 8—sl,"'4
. 209
5
Mr. 2 . H. Broaddus, Deputy,
Federal 2eserve Bank of Richmond,
Richmond, V i r g i n i a .
c o l l e c t i o n of your d a t a , assuming t h a t you a r e obtaining i t from the other
Federal r e s e r v e banks a l s o , as i t i s p o s s i b l e t h a t laws as r e c e n t l y passed
i n t h i s d i s t r i c t w i l l r e q u i r e a change i n our procedure.
If we can be of any f u r t h e r s e r v i c e t o you i n s o f a r as the Eighth D i s t r i c t
i s concerned, p l e a s e do not h e s i t a t e to c a l l on u s .
Yours very t r u l y ,
(Signed)
0. M. A t t e b e r y ,
Deputy Governor.
X-7108-a-5
210
COP t
FEDERAL RESERVE B x K OF
AT
MiiWiPOtis
December 2, 1931
Mr. B. H. Broaddus, Deputy Governor,
Federal Reserve Bank,
Richmond, V i r g i n i a .
My dear Mr. Broaddus:
I do not know j u s t why r e p l y t o your l e t t e r of November 10th
has been delayed and I ask you to pardon me f o r not g i v i n g t h e matter
earlier attention.
The only s t a t e i n the Ninth Federal Reserve D i s t r i c t which has
adopted the bank c o l l e c t i o n code i s Michigan. The upper p e n i n s u l a of
Michigan i s w i t h i n our d i s t r i c t . The a c t was adopted t h i s year and i s
found a t #240 Michigan Public Acts 1931.
This bank has had no experience a t a l l i n making claims a g a i n s t
Michigan banks and p a r t i c u l a r l y none since t h i s a c t was adopted May 29, 1931.
When t h i s code was f i r s t prepared by t h e a t t o r n e y f o r t h e American
Bankers A s s o c i a t i o n we presented the same t o our counsel who was of opinion
t h a t numerous embarrassing questions would a r i s e i f adopted. Our counsel
without having gone v e r y deeply i n t o the matter i s of t h e opinion t h a t t h i s
l e g i s l a t i o n would not have the e f f e c t of giving a p r e f e r r e d claim i n the
l i q u i d a t i o n of a n a t i o n a l bank under circumstances where no p r e f e r r e d claim
would be allowed i n t h e absence of such l e g i s l a t i o n .
As to s t a t e banks t h e act gives a p r e f e r e n c e under c e r t a i n circumstances t o the "owner or owners" of items not f i n a l l y r e m i t t e d f o r . In view
of t h i s language t h e r e i s s e r i o u s question i n t h e mind of our counsel whether
our bank should assume t h e burden of attempting to e s t a b l i s h a p r e f e r r e d
claim i n any c a s e . To counsel and to ourselves i t seems more i n accordance
with t h e t h e o r i e s i n d i c a t e # by Regulation J t h a t our bank, where f i n a l
r e m i t t a n c e i s not r e c e i v e d , should t r e a t the items as dishonored i n a l l
cases
except where we a r e
able to r e c e i v e prompt i n s t r u c t i o n s from our
endorsers to t h e c o n t r a r y .
In t h e l i g h t of t h e foregoing I cannot s p e c i f i c a l l y answer any of
your q u e s t i o n s .
I t would seem from your l e t t e r t h a t you have probably w r i t t e n other
Federal Reserve Banks along the same l i n e s . If so, and you have had r e p l i e s
from them, we would much a p p r e c i a t e copies t h e r e o f .
Very t r u l y y o u r s ,
(Signed)
HY:20
Harry Yaeger,
Deputy Governor.
.
t
211
X-7108-a-6
COPY
FEDERAL RESERVE SAUK OF KANSAS CITY
December 1, 1931.
Mr. R. H. Broaddus, Deputy Governor,
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
Dear Mr. Broaddus:
Your l e t t e r of November 10, with r e f e r e n c e t o our p o l i c y
i n connection with the handling of t r a n s i t claims i n s t a t e s where
the Uniform Bank C o l l e c t i o n Code has been adopted, was r e f e r r e d to
our Counsel with the request t h a t he l e t me have a memorandum thereon
and i n some way i t became sidetracked and has j u s t come to l i g h t
Up t o t h i s time, we have not formulated any d e f i n i t e p o l i c y
i n t h i s matter f o r the reason t h a t
have been awaiting the r u l i n g
of the Comptroller of the Currency. There has been c o n s i d e r a b l e
d i s c u s s i o n as to whether or not the p r o v i s i o n s of t h e Uniform Bank
C o l l e c t i o n code apply t o n a t i o n a l banks and the Comptroller, as I
understand i t , has not y e t agreed t h a t they have any a p p l i c a t i o n .
Our l a s t i n f o r m a t i o n was t o t h e e f f e c t t h a t he was g i v i n g thorough
c o n s i d e r a t i o n t o the matter and, i f he concludes t h a t t h e s t a t u t e i s
a p p l i c a b l e , i t i s t h e opinion of our a t t o r n e y t h a t i t w i l l then be
proper f o r us to a s c e r t a i n from the endorsers of items involved i n
r e c e n t n a t i o n a l bank f a i l u r e s i n Nebraska whether or not they d e s i r e
the items t o be t r e a t e d as dishonored. I t i s a l s o our opinion t h a t ,
even though the Comptroller's conclusion may be a d v e r s e , we may, nevert h e l e s s , conclude t h a t we should t r e a t the items as dishonored i f our
endorsers so d e s i r e . U n t i l such time as the Comptroller has d e t e r mined h i s p o s i t i o n , however, we see no n e c e s s i t y f o r t a k i n g the matter
up with our e n d o r s e r s . The code was only r e c e n t l y enacted i n Wyoming
and Hew Mexico, and while i t was enacted a year ago i n Nebraska, t h e r e
have been only t h r e e or four n a t i o n a l bank f a i l u r e s i n t h a t s t a t e
s in c e i t s enactment and a l l of t h e s e have occurred w i t h i n t h e l a s t
couple of months. In t h e s e c a s e s , we have n o t i f i e d t h e r e c e i v e r s
t h a t we may l a t e r determine t o e l e c t t o t r e a t the items as dishonored,
and t h a t we w i l l i n d i c a t e our p o s i t i o n as soon as t h e Comptroller has
reached a d e c i s i o n .
In a l l t h e s t a t e s i n t h i s d i s t r i c t , with the exception of
Oklahoma, t h e s t a t e laws provide t h a t we a r e e n t i t l e d t o p r e f e r r e d
claims on t r a n s i t i t e m s . Our method of procedure i n the f i l i n g of
claims up to t h i s time i s o u t l i n e d i n a memorandum from our T r a n s i t
Manager as f o l l o w s :
212
X-7108-a-6
FEDERAL EESSBVE BAM OF ICAUSAS CITH?i
—2—
"Whenever e i t h e r a s t a t e or a n a t i o n a l "bank c l o s e s ,
items involved i n d r a f t s on which payment has been
r e f u s e d a r e immediately charged "back to endorsers,
the advice of such a c t i o n "being given through the
medium of our form l e t t e r 817, a copy of which i s
a t t a c h e d . This l e t t e r , you w i l l n o t e , i s accompanied "by Form 214, which i s the a u t h o r i t y to "be
signed "by the endorser or owner of the i t an i n t h e
event they wish us to r e p r e s e n t them i n f i l i n g claim.
The endorser i s advised t h a t i f they d e s i r e we v i l l
r e p r e s e n t them i n f i l i n g claim, and t h a t i f they
d e s i r e us t o r e p r e s e n t them t h e enclosed form
of a u t h o r i t y should be signed i n d u p l i c a t e and r e turned t o u s not l a t e r than s i x t y days from t h e d a t e
of the insolvency. Shortly a f t e r t h a t time, while
our l e t t e r s t a t e s t h a t we w i l l not f i l e claim u n l e s s
the a u t h o r i z a t i o n i s received by such time, we t r a c e
any o u t s t a n d i n g items on which we have not r e c e i v e d
a u t h o r i z a t i o n , giving our endorsers a f u r t h e r opport u n i t y t o handle the matter through u s . A f t e r a
l a p s e of a week or ten days from t h e d a t e of t r a c i n g ,
u n l e s s r e p l i e s a r e r e c e i v e d , we proceed t o p r e p a r e
and f i l e our claim, omitting items not a u t h o r i z e d .
"The claim i s i n a l l
although i n the case
have never been able
must accept a common
cases f i l e d f o r p r e f e r e n c e ,
of n a t i o n a l banks we, of course,
a s yet t o obtain p r e f e r e n c e and
claim."
I r e a l i z e t h a t t h i s i s a r a t h e r poor and b e l a t e d answer to
your i n q u i r y , but s i n c e we have not y e t e s t a b l i s h e d a d e f i n i t e p o l i c y ,
based on t h e new c o l l e c t i o n code, i t seems to be the b e s t I can do a t
t h i s time. Our a t t o r n e y advises t h a t he has had some correspondence
with your Mr. Wallace on the s u b j e c t and t h a t i t has been suggested
t h a t t h e r e should be an e f f o r t made to have these m a t t e r s handled i n
a uniform manner i n a l l d i s t r i c t s and i n a l l s t a t e s where the uniform
code has been adopted. I f , a f t e r you have completed your study of t h i s
question, you have any suggestions which you t h i n k would be of value t o
u s , I w i l l a p p r e c i a t e hearing from you a t your convenience.
With kind personal r e g a r d s , I am
Very t r u l y yours,
(Signed)
C. A. Worthington
L.
Deputy Governor.
CAW: I,
X-7108-a
FEDERAL RESERVE BAM OF KANSAS CITY
December 1, 1931.
Mr. R. H. Broaddus,
Deputy Governor,
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
Dear Mr. Broaddus:
Since w r i t i n g t o you on November 17th, r e l a t i v e to
our procedure i n regard t o f i l i n g claims p e r t a i n i n g t o checks on
"banks which have f a i l e d , Deputy Comptroller of the Currency Await
wired t h e General Counsels of a l l Federal Reserve Banks submitting
a proposal under d a t e of November 20th, of which no doubt you
have seen a copy.
On November 23d, the Twin F a l l s National Bank,
Twin F a l l s , Idaho, f a i l e d t o open f o r b u s i n e s s . We wired Deputy
Comptroller Await to request t h e Examiner i n charge t o surrender
to the Federal Reserve Bank of San Francisco checks contained i n
a cash l e t t e r f o r which we held a dishonored r e m i t t a n c e d r a f t .
The Examiner promptly received such i n s t r u c t i o n s , and t h e checks
a r e being r e t u r n e d to endorsers as dishonored.
This procedure we s h a l l follow i n the f u t u r e , i n t h e
case of suspended National banks i n Washington, Oregon and Idaho,
which S t a t e s have adopted the Uniform C o l l e c t i o n Code.
Yours very t r u l y ,
(Signed) N. Clerk
Deputy Governor.
I 814
X-7108-a-8
(C O H )
M e s i a l kESEEvn BANK
OF DALLAS
December 9, 1931
Mr. R. H. Broaddus, Deputy Governor
Federal Reserve Bank
Richmond, V i r g i n i a
Dear Mr. Broaddus:
We have delayed r e p l y i n g to your l e t t e r of November 10 u n t i l t h i s
time f o r t h e reason t h a t i t was handed t o our Counsel f o r a t t e n t i o n and he
has "been away from t h e c i t y u n t i l now.
Our Counsel advises us t h a t t h e S t a t e of New Mexico has adopted
the Uniform Bank C o l l e c t i o n Code. Thus f a r , however, we have had no
experience i n connection with the same except i n t h e case of one f a i l e d
n a t i o n a l hank i n t h e S t a t e of New Mexico, which was subsequently reopened.
As an a c t u a l case has not yet presented i t s e l f to u s , we have
not as yet formulated a d e f i n i t e p o l i c y t o be pursued. I t has always been
our p r a c t i c e i n connection with the f i l i n g of claims a g a i n s t i n s o l v e n t banks
to j u s t n o t i f y our endorser banks and then upon r e c e i p t of a u t h o r i t y to
proceed accordingly t o f i l e claim a g a i n s t the i n s o l v e n t bank.
We a r e i n c l i n e d to the view t h a t i n t h e case of s t a t e banks located
i n the s t a t e s where t h e uniform bank c o l l e c t i o n code has been adopted our
usual p r a c t i c e should be followed, with a d d i t i o n a l advice t o our endorsers of
the f a c t t h a t such s t a t e has adopted the Uniform Bank C o l l e c t i o n Code, with
due r e f e r e n c e t o the p r o v i s i o n s of t h e code i n r e s p e c t t o t h e establishment
of a p r e f e r r e d claim.
In the case of n a t i o n a l banks, we f e e l as you do t h a t t h e claim
could not be e s t a b l i s h e d as a p r e f e r r e d one. While, a s we have s t a t e d , we
have had no experience i n connection with such m a t t e r s , we a n t i c i p a t e the
same t r o u b l e which you have experienced i n the endorsing banks f a i l i n g to
r e p l y promptly t o our r e q u e s t s f o r i n s t r u c t i o n s . In t h i s connection we
a r e considering the a d v i s a b i l i t y of providing i n such n o t i c e t h a t a f a i l u r e
t o r e p l y w i l l c o n s t i t u t e a u t h o r i t y to t r e a t the item as dishonored, and t o
accordingly a u t h o r i z e us to demand the r e t u r n of such checks from t h e
receivers.
While we have received no d e f i n i t e advice , we now understand t h a t
t h e Comptroller of t h e Currency has reversed h i s former r u l i n g concerning t h e
r e t u r n of the checks themselves and now i n s t r u c t s the r e c e i v e r s to make r e t u r n
However, i n any event, a t present we f e e l t h a t i n the case of
n a t i o n a l banks, i n t h e absence of a u t h o r i t y to t h e c o n t r a r y , our a c t i o n should
be to t r e a t the items as dishonored.
Yours very t r u l y ,
(Signed) R. R. G i l b e r t
Deputy Governor
X-7108-a-9^-^
(COPY)
FEDERAL RESERVE BANK OF SA2J FRANCISCO
November 17, 1931.
Mr. B. E. Broaddus,
Deputy Governor,
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
Dear Mr. Broaddus:
In your l e t t e r of November 10th, i n q u i r y was made r e l a t i v e
to t h e s t a t u s of t h e Uniform Bank C o l l e c t i o n Code i n t h e Twelfth D i s t r i c t ,
and a l s o as t o our procedure i n regard t o f i l i n g claims p e r t a i n i n g to checks
sent f o r c o l l e c t i o n t o banks which suspended without making s e t t l e m e n t .
The Uniform Bank C o l l e c t i o n Code i s i n e f f e c t i n t h e S t a t e s
of Washington, Oregon and Idaho, and, i n a d d i t i o n , t h e S t a t e of Utah has a
code g r a n t i n g a p r e f e r e n c e on d r a f t s issued f o r the s e t t l e m e n t of checks
and other c o l l e c t i o n items. We have experienced no d i f f i c u l t y i n Oregon or
Utah i n e s t a b l i s h i n g p r e f e r r e d claims f o r dishonored d r a f t s .
Our f i r s t e f f o r t to f i l e a claim under the amended code i n
the S t a t e of Washington met with some opposition. I t d i d not take long,
however, to convince t h e Bank Commissioner of our r i g h t t o a p r e f e r e n c e . The
Spokane Clearing House and the Washington S t a t e Bankers Association were very
much exercised over t h e d i s p u t e which arose between ourselves and the S t a t e
Banking Department, and were anxious t h a t the Federal Reserve Bank make a
t e s t c a s e . The p o s i t i o n was t a k e n , however, t h a t the Federal Reserve Bank
was not i n t e r e s t e d i n prosecuting any cases excepting those which might b e come necessary t o defend i t s r i g h t s under Regulation J and i t s own c i r c u l a r
governing c h e c k - c o l l e c t i n g o p e r a t i o n s . Our endorsers were n o t i f i e d t h a t a
p r e f e r e n c e would be asked and, i n t h e event of i t s r e f u s a l , our claim would
be assigned t o whomsoever the endorsers might e l e c t , thus g i v i n g t h e S t a t e
Banking Department or t h e Clearing House Association an opportunity f o r
t e s t i n g the law.
We now have i n the course of f i l i n g i n Idaho our f i r s t
claim under the Uniform Bank C o l l e c t i o n Code. I t i s our opinion t h a t we
have a p r e f e r e n c e . However, the question i s b e f o r e t h e Banking Department
and w i l l be decided i n t h e near f u t u r e . Should the p r e f e r e n c e be not granted,
we s h a l l follow t h e same course we suggested i n Washington, t h a t i s , t h e
endorsers w i l l be given an opportunity to arrange among themselves the
appointment of an a s s i g n e e who ^ i l l r e c e i v e our claim and p r o s e c u t e i t t o
a conclusion.
As to National banks, i t i s our opinion t h a t t h e Uniform
Bank C o l l e c t i o n Code does not apply, inasmuch as t h e p r o v i s i o n s of the
National Bank Act s p e c i f i c a l l y s e t f o r t h the manner i n which claims a g a i n s t
i n s o l v e n t National banks s h a l l be f i l e d .
I
2 1 6
X-7108-&-9
Mr. R. E. Broaddus — 2
During the y e a r , a National "bank f a i l e d i n t h e S t a t e of
Washington, and our endorsers were q u i t e i n s i s t e n t t h a t we should f i l e f o r
a p r e f e r e n c e under t h e Uniform Bank C o l l e c t i o n Code. The question was subm i t t e d to t h e Comptroller who r e j e c t e d the idea of a p r e f e r e n c e ; consequently, we again informed our endorsers t h a t i f they d e s i r e d to t e s t the
case our claim would "be assigned to whomsoever they e l e c t e d .
We have taken the p o s i t i o n i n the S t a t e s of Idaho, Oregon
and Washington t h a t we should not demand the r e t u r n of items whenever a
d r a f t has "been i s s u e d , "but should stand on the advantage of a p r e f e r e n c e
"based on t h e unpaid d r a f t . In f o l l o w i n g t h i s course, we assume a minor
r i s k i f i t l a t e r should "be found t h a t t h e suspended "bank had i n s u f f i c i e n t
good a s s e t s out of which to meet the p r e f e r r e d claim. Under such a circums t a n c e , we might have done b e t t e r t o t r e a t the items as dishonored, because
the holder of such check may have had a b e t t e r opportunity to recover from
the makers than from t h e t r u s t . There i s no way of determining t h e s e
m a t t e r s i n advance, so we p l a c e our r e l i a n c e upon the p r e f e r e n c e and assume
the very remote r i s k of having an endorser claim t h a t the R e s e r v e Bank had
s e l e c t e d the course l e a s t b e n e f i c i a l to him.
When charging our endorsers f o r unpaid checks involving
c o l l e c t i o n through S t a t e banks i n Idaho, Utah, Oregon and Washington, we
n o t i f y them t h a t i t i s our opinion a p r e f e r e n c e w i l l be granted (see Form
Mis. 108H e n c l o s e d ) ; and, i n the case of items involving t h e suspension
of National banks and S t a t e banks i n Arizona, C a l i f o r n i a and Nevada, we say
t h a t claims w i l l be f i l e d u n l e s s we a r e n o t i f i e d to t h e c o n t r a r y b e f o r e a
s p e c i f i e d d a t e (not l a t e r than f i f t y days a f t e r suspension). See Form Mis.
108K enclosed. Also, see our l e t t e r t o you dated October 28, 1931.
Answering your questions s e r i a t i m :
We e x e r c i s e the r i g h t of e l e c t i o n without c o n s u l t i n g endorsing banks. Where an option i s given (Washington, Oregon and Idaho) to
f i l e p r e f e r r e d claim on the b a s i s of the dishonored d r a f t , or t o regard the
items covered by the d r a f t as dishonored, the former course i s adopted.
A d i s t i n c t i o n i s made between S t a t e and National banks i n
making e l e c t i o n to e s t a b l i s h claims or t o t r e a t the checks as dishonored.
I n the case of National banks and S t a t e banks i n Arizona, C a l i f o r n i a and
Nevada, where no p r e f e r e n c e f o r a dishonored r e m i t t a n c e d r a f t i s g i v e n , we
make a demand f o r t h e r e t u r n of checks merely t o show t h a t the 'Reserve Bank
has exhausted i t s e f f o r t s on behalf of endorsers. As t h e r e q u e s t i s i n v a r i a b l y denied, our e f f o r t s stop a t t h a t p o i n t , and we do not ask f o r
copies of t h e checks.
I t i s our p r a c t i c e to enclose with cash l e t t e r s sent t o
member and no.i-member c l e a r i n g banks, a form of s e t t l e m e n t d r a f t , which may
or may not be used by the r e m i t t i n g bank. In the event of a suspension of
I
%
X-7108-a-9
Mr. R. H. Broaddus — 3
t h e drawer of such a d r a f t , we charge i t to the h a n k ' s account provided the
hank i s i n funds and the d r a f t i s i n our possession b e f o r e we have o f f i c i a l
n o t i c e of t h e suspension of t h e bank. If the d r a f t comes i n t o our possession
a f t e r we have o f f i c i a l n o t i c e of suspension, i t i s dishonored. We have f e l t
t h a t the p o s i t i o n of the Federal Reserve Bank should "be unequivocal when a
d r a f t drawn a g a i n s t s u f f i c i e n t funds i s presented to i t f o r payment. In
other words, the d r a f t e i t h e r should be paid or dishonored on p r e s e n t a t i o n ,
depending upon the s t a t u s of the drawer. This has t h e same e f f e c t as though
the s e t t l e m e n t d r a f t weye drawn on a correspondent bank.
For your i n f o r m a t i o n , the following i s a l i s t of copies of
correspondence h e r e i n enclosed, which may be of i n t e r e s t to you:
L e t t e r t o Spokane Branch, March 23, 1931.
L e t t e r t o A l l Branches, June 10, 1931.
L e t t e r to Spokane Branch, June 11, 1931.
Telegram t o Comptroller of the Currency, May 27, 1931.
Telegram from Comptroller, May 28, 1931.
Telegram to Comptroller, June 2, 1931.
Telegram from Comptroller, June 4, 1931.
Telegram to Comptroller, June 4, 1931.
Telegram from Comptroller, June 5, 1931.
L e t t e r to Mr. Thomas B. Paton, Oct. 15, 1931.
L e t t e r t o Federal Reserve Bank of Richmond, Oct. 28, 1931.
Yours very t r u l y ,
(signed)
I r a Clerk
Deputy Governor
%
i,
COPY
X-7108-b
FEDERAL RESERVE BANK
OF
KANSAS CITY
December 16, 1931.
Hon. Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
My dear Mr. Wyatt:
I am j u s t i n r e c e i p t of your l e t t e r of December 14, with which you sent me copy of l e t t e r quoting a
telegram which Mr. Await, Deputy Comptroller of t h e
Currency, sent to the Receiver of the Peoples National
Bank of P u l a s k i , New York, on December 3, 1931, which s e t s
f o r t h the a t t i t u d e of h i s Department with r e f e r e n c e t o
the r i g h t of forwarding "banks to e x e r c i s e an e l e c t i o n to
t r e a t items dishonored pursuant to the p r o v i s i o n s of
Section 11 of t h e Uniform C o l l e c t i o n Code i n those i n s t a n c e s
i n which a f i n a l l y c o l l e c t e d remittance has not been made
by the drawee banks.
I t seems to me h i g h l y d e s i r a b l e t h a t a l l of
t h e Federal r e s e r v e banks follow a uniform p r a c t i c e i n
e x e r c i s i n g t h e e l e c t i o n which i s given under t h e Code,
and I consider your suggestion a good one t h a t the check
c o l l e c t i o n c i r c u l a r s of a l l of t h e banks be amended by
adding a r e c i t a l of the kind t h a t you mention.
Yours very t r u l y ,
(Signed)
HG1:FH
H. G. Leedy
218
219.
X-7108-c
C O M
FEDERAL RESERVE %AM OF S 2 FRAUCISCO
AT
January 22, 1932.
Walter Wyatt, Esq. ,
General Counsel,
F e d e r a l Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
As an example of t h e kinds of p r a c t i c e s which a r e
creeping i n t o t h e Federal Reserve System, r e s u l t i n g from t h e
v a r i o u s methods "being pursued under the s o - c a l l e d "Bank
C o l l e c t i o n Code", I hand you herewith copy of a l e t t e r addressed t o t h i s hank "by t h e Federal Reserve Bank of St. Louis
which r e c e n t l y happened to come t o my a t t e n t i o n .
You w i l l note t h a t the check was drawn on a s t a t e
"bank l o c a t e d i n I n d i a n a , which s t a t e has adopted t h e Bank
C o l l e c t i o n Code. You w i l l a l s o observe t h a t t h e S t . Louis
Bank, i n s p i t e of t h e f a c t t h a t a p r e f e r e n c e could undoubtedly
be obtained, r e q u e s t s i n s t r u c t i o n s from us as i t s endorser
whether or not t o f i l e f o r a p r e f e r e n c e or t o t r e a t t h e item
as dishonored pursuant to t h e p r o v i s i o n s of Section 11.
I cannot see any reason f o r t h i s procedure and i t s
p u r s u i t , i t seems to me, w i l l r e s u l t i n g r e a t c o n f u s i o n .
Let u s suppose, i n t h i s i n s t a n c e , t h a t p a r t of the
endorsers on t h e items involved decide t h a t they p r e f e r to
t r e a t the checks as dishonored and pass the r e s p o n s i b i l i t y
back through the chain of e n d o r s e r s , while o t h e r s of the p a r t i e s
i n i n t e r e s t determine t h a t they would p r e f e r t o f i l e f o r a
p r e f e r e n c e . The r e c e i v e r of the i n s o l v e n t bank, i f t h e same
course i s pursued as i n some of the s t a t e s i n t h i s d i s t r i c t ,
would r e f u s e to acknowledge the claim because i t was not
p r e d i c a t e d on t h e d r a f t but only on c e r t a i n items embraced
t h e r e i n . Moreover, t h e r e i s a s e r i o u s r i s k t h a t by t h e delay
necessary i n order to obtain d e f i n i t e i n s t r u c t i o n s from the
endorsers the F e d e r a l Reserve Bank of St. Louis w i l l be unable
t o o b t a i n t h e r e t u r n of the checks, they having been handed
back by the o f f i c e r s i n charge of the i n s o l v e n t bank to t h e
makers t h e r e o f . There i s the f u r t h e r r i s k t h a t a delay of two
or t h r e e weeks, during which i n s t r u c t i o n s a r e b e i n g obtained,
w i l l be t r e a t e d as an unreasonable delay and t h e r e t u r n of t h e
items r e f u s e d .
I cannot f o r the l i f e of me see why,
s t a n c e s such as t h i s , t h e Federal Reserve Bank
without any i n s t r u c t i o n s whatever, t o f i l e f o r
p r e f e r r e d , c l a i m , excepting e x t r a o r d i n a r y cases
p r e f e r r e d claims would not be p a i d i n f u l l .
under circumshould h e s i t a t e ,
and accept a
where even
i 330
X-7108-c
Walter l y & t t , Bsqi
-2-
January 22, 1932.
Of course, i n the i n s t a n c e u n d e r d i s c u s s i o n , t h e Federal
Reserve Bank of S t . Louis asks f o r i n s t r u c t i o n s from i t s endorser
and t h a t endorser probably asks f o r i n s t r u c t i o n s from i t s customer
-and so on ad l i b .
I become more s t r o n g l y convinced a l l t h e time t h a t the
procedure under t h e Check C o l l e c t i o n Code should be uniform
throughout t h e System and t h a t the various courses which w i l l be
pursued by t h e Federal Reserve Banks , under given c o n d i t i o n s , i n
those s t a t e s where the Bank C o l l e c t i o n Code has been adopted,
should be c l e a r l y s e t f o r t h i n a uniform C i r c u l a r . Otherwise,
c o n f u s i o n , delay and l i t i g a t i o n a r e i n e v i t a b l e .
I would l i k e very much t o have your observations i n
regard t o t h i s m a t t e r .
\
Cordially yours,
(Signed) Albert C. Agnew
Counsel.
\
Enclosure.
ACA:MA
\
\
\
c
X-7108-o-l
0
P
Y
FEDERAL RESERVE BAM OF ST. LOUIS
January 12, 1932
Federal Reserve Bank,
San F r a n c i s c o ,
California.
Gentlemen:
On 1-11-32 we sent our advice of no r e t u r n r e g a r d i n g items
on E v a n s v i l l e , Indiana l i s t e d i n cash l e t t e r s as f o l l o w s :
Sending Bank
Yourselves
Date & Total
Cash L e t t e r
1-4-32
$42.32
Amount
17.32
The check was l i s t e d i n r e g u l a r cash l e t t e r to the Central Union
Bank, E v a n s v i l l e , Indiana and d r a f t was r e m i t t e d but remains unpaid
and p r o t e s t e d due to t h e closing of the Central Union Bank, Evansv i l l e , Indiana.
Since a l l checks a r e c r e d i t e d s u b j e c t to f i n a l payment we have
deducted from your c r e d i t s $17.32 t o cover. We a r e informed t h a t
under t h e Bank C o l l e c t i o n Code which i s i n f o r c e i n t h e s t a t e of
I n d i a n a , we have an option t o t r e a t such checks as dishonored or
to f i l e a claim a g a i n s t the f a i l e d hank.
232
X-7108-c-l
— 2
—
January 12, 1932
If you d e s i r e t o t r e a t the checks as dishonored, you should give
n o t i c e of dishonor to a l l p r i o r endorsers and t h e drawers and
look to them f o r payment; and i f you r e q u e s t , we w i l l demand
and endeavor to obtain the r e t u r n of the checks. If claim i s
f i l e d a g a i n s t the f a i l e d hank, you w i l l probably r e l e a s e the
drawers from any f u r t h e r l i a b i l i t y and w i l l r e c e i v e dividends
on t h e amount of t h e checks as declared by the Receiver. If you
e l e c t t o f i l e claim, i t may be p o s s i b l e , according t o Section 13
of the Bank C o l l e c t i o n Code, to obtain a p r e f e r r e d c l a s s i f i c a t i o n
of the claim.
As we must n o t i f y t h e Receiver promptly whether we e l e c t to prove
a claim a g a i n s t the f a i l e d bank or t o t r e a t the checks as dishonored, p l e a s e n o t i f y us as soon as p o s s i b l e , but i n any event not l a t e r
than January 28, 1932, u s i n g the enclosed form and giving t h e
name of the drawers of t h e checks i f o b t a i n a b l e . If you d e s i r e our
s e r v i c e s i n the matter of f i l i n g claim, p l e a s e so i n d i c a t e on the
enclosed form and r e t u r n to us as soon as p o s s i b l e , and claim w i l l
be f i l e d under t h e terms of your General A u t h o r i z a t i o n dated A p r i l ,
12, 1922 as amended October 28, 1931.
I f we do not r e c e i v e your i n s t r u c t i o n s t o the c o n t r a r y on or b e f o r e
t h e d a t e mentioned i n the foregoing paragraph, the checks w i l l be
t r e a t e d as dishonored and a demand made upon the Receiver f o r the
r e t u r n of them. Whether or not the checks a r e subsequently o b t a i n ed, no claim w i l l be f i l e d by us a f t e r the demand f o r the r e t u r n of
t h e checks i s made.
Kindly acknowledge r e c e i p t of t h i s l e t t e r .
Very t r u l y yours
P. N. Hall
F. N. Hall
Controller
223
X-7108-a
COPY
FEDERAL RESERVE BANK OF S0
ERAHCISCO
January 5, 1932.
Walter Wyatt, E s q . ,
General Counsel,
Federal Reserve Board,
Washington, D. C.
SUBJECT:
Legal and P r a c t i c a l Problems
a r i s i n g under the Bank
C o l l e c t i o n Code.
Dear Mr. Wyatt
I have not r e p l i e d e a r l i e r to your l e t t e r of November 6
t r a n s m i t t i n g copies of your correspondence with counsel t o the
Federal Reserve banks and with t h e Comptroller of t h e Currency
r e l a t i v e to t h e above s u b j e c t , f o r t h e reason t h a t I wanted t o
f i r s t thoroughly d i s c u s s the matter with the o f f i c e r s of t h i s
bank. This has been delayed, but I t r u s t t h a t my observations
w i l l be none t h e l e s s of value to you.
I b e l i e v e t h a t the p o s i t i o n taken by t h e Comptroller of
t h e Currency to the e f f e c t t h a t the p r o v i s i o n s of t h e Uniform
Check C o l l e c t i o n Code providing f o r p r e f e r e n c e on dishonored d r a f t s
given i n purported s e t t l e m e n t of cash l e t t e r s do not apply to
National Banks, i s sound. I do not b e l i e v e t h a t Section 13 of the
Uniform Code i s a p p l i c a b l e to National Banks.
I am f u r t h e r of the opinion t h a t the procedure now
adopted by the Comptroller's o f f i c e "hereby, upon demand made
with reasonable promptness, t h e checks involved i n a dishonored
r e m i t t a n c e d r a f t a r e r e t u r n e d to t h e c o l l e c t i n g Federal Reserve
bank so t h a t they may be returned to the i n d o r s e r s of t h e Federal
Reserve bank and t r e a t e d as dishonored, w i l l i n t h e g r e a t m a j o r i t y
of cases work out to t h e b e n e f i t of t h e owners of such items.
I am f i r m l y of the opinion t h a t i t i s h i g h l y expedient
t h a t some uniform procedure be evolved i n connection ™ith t h e
handling of t r a n s a c t i o n s of t h i s c h a r a c t e r by a l l t h e F e d e r a l
Reserve banks. I am informed t h a t i t i s t h e p r e s e n t p r a c t i c e of
some of the Federal r e s e r v e banks, b e f o r e r e q u e s t i n g t h e r e t u r n
of the o r i g i n a l i t e m s , t o communicate with t h e i r i n d o r s e r s and
ask i n s t r u c t i o n s as t o whether or not a general claim s h a l l be
f i l e d or whether the r e t u r n of the item s h a l l be demanded. This
i t seems to me w i l l i n e v i t a b l y r e s u l t i n considerable delay and
i n many i n s t a n c e s i n delay t o a p o i n t where the r e t u r n of t h e
item w i l l not be demanded "with reasonable promptness". I t a l s o
> 8 8 4
,
X-7108-d
Walter Wyatt» Esq*, General Counsel -»-•* !3i
seems t o me t h a t pursuing t h i s p o l i c y w i l l r e s u l t i n confusion i n
t h a t i n a given case some of the i n d o r s e r s of t h e Federal Reserve
bank w i l l d e s i r e the r e t u r n of the items while o t h e r s w i l l p r e f e r
t h a t a general claim "be f i l e d . If such a s i t u a t i o n were p r e s e n t e d
i t might occur t h a t t h e r e c e i v e r of t h e i n s o l v e n t n a t i o n a l bank
would r e f u s e t o accept a claim p r e d i c a t e d upon t h e unpaid r e m i t t a n c e
d r a f t i f p a r t of the items embraced w i t h i n t h a t d r a f t were not t o be
made t h e s u b j e c t of a claim but were t o be r e t u r n e d .
Moreover, i n m a t t e r s of t h i s c h a r a c t e r the p u r s u i t of one
method of operations by some of t h e Federal Reserve banks and the
p u r s u i t of another by other such banks, r e s u l t s i n confusion w i t h i n
t h e system. Items which come to a Federal Reserve bank from another
d i s t r i c t should be t r e a t e d i n the same manner as the treatment accorded
them i n the d i s t r i c t from which they come. Otherwise, d i s s a t i s f a c t i o n ,
misunderstanding and endless confusion i s bound to r e s u l t .
I f e e l very s t r o n g l y t h a t i t may be a d v i s a b l e to consider
an amendment to Regulation "J" i n r e l a t i o n to the manner i n which
items involved i n unpaid remittance d r a f t s drawn upon n a t i o n a l banks
l o c a t e d i n those s t a t e s which have adopted the Uniform Code, w i l l be
t r e a t e d . P e r s o n a l l y , I f e e l t h a t a uniform p r a c t i c e should be e i t h e r
incorporated i n Regulation "J" or i n t h e Uniform Check C o l l e c t i o n
c i r c u l a r s , and I am of the opinion t h a t every Federal Reserve bank
should s t a t e i n i t s check c o l l e c t i o n c i r c u l a r , among the terms and
conditions upon which items w i l l be r e c e i v e d f o r c o l l e c t i o n , t h a t
i n every i n s t a n c e where items drawn on a n a t i o n a l bank i n a s t a t e
which has adopted t h e Uniform Code become involved i n an unpaid
r e m i t t a n c e d r a f t , the Federal Reserve bank w i l l pursue the uniform
p o l i c y of demanding t h e r e t u r n of the items immediately, t r e a t i n g
t h e same as dishonored and charging the amounts thereof back t o t h e
i n d o r s e r s of t h e Federal Reserve bank. In the g r e a t m a j o r i t y of
cases I b e l i e v e t h a t such uniform p r a c t i c e would r e s u l t i n a g r e a t e r
recovery t o t h e owner of t h e item than would r e s u l t through f i l i n g
a claim as a general c r e d i t o r .
As long as t h e r e i s any c o n t r a r i e t y of procedure as between
Federal Reserve banks, or as long as t h e Federal Reserve banks concerned adopt a p o l i c y of asking f o r advice from t h e i r i n d o r s e r s ,
confusion w i l l r e s u l t and I f e a r i n some i n s t a n c e s , l i t i g a t i o n .
To t h e end t h a t t h i s matter be thoroughly discussed and
s e t t l e d both as between the Federal Reserve banks and the Board and
as between the banks and the Comptroller's o f f i c e , I t h i n k t h a t a
conference i s a d v i s a b l e . If no such conference i s h e l d , i t seems t o
me t h a t i t w i l l be a long time b e f o r e the uniform p r a c t i c e w i l l be
adopted.
With k i n d e s t personal r e g a r d s ,
Very t r u l y y o u r s ,
(Signed)
Albert C. Agnew
Counsel
I
COPY
X-7108-e
FEDERAL RESERVE BANK OF SAN FRA2ICISCO
December 22, 1931.
Walter Wjratt, E s q . ,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wjratt:
I have received and discussed with t h e o f f i c e r s
of t h i s bank your l e t t e r of December 14, t r a n s m i t t i n g copy
of a telegram which Mr. Await s e n t t o t h e Receiver of t h e
Peoples National Bank, P u l a s k i , New York, and copy of a
l e t t e r addressed t o you by Mr. Wallace, Counsel to t h e
F e d e r a l Reserve Bank of Richmond, under date of November
21, 1931.
We agree w i t h you t h a t any p r a c t i c e involving
delay i n an e l e c t i o n t o t r e a t checks involved i n unpaid
r e m i t t a n c e d r a f t s as dishonored u n t i l a f t e r the owners
thereof have been consulted as t o t h e i r d e s i r e s w i l l not
only be unduly burdensome to t h e Federal Reserve Banks,
but w i l l lead t o endless d i s p u t e s over the question of
whether Federal Reserve Banks have n o t i f i e d the r e c e i v e r s
of t h e i r e l e c t i o n "within a reasonable time". We a l s o
f e e l t h a t any p r a c t i c e i n handling such checks, under
which the owners thereof a r e given the opportunity of i n s t r u c t i n g the Federal Reserve Banks not to demand t h e r e t u r n of t h e i t e m s , w i l l r e s u l t i n endless c o n f u s i o n .
We t h i n k i t i s e s s e n t i a l t h a t a uniform p r a c t i c e
s i m i l a r to t h a t already e s t a b l i s h e d with r e f e r e n c e t o t h e
p r o t e s t i n g of checks be adopted and incorporated i n the
check c o l l e c t i o n c i r c u l a r s . This could e a s i l y be done by
i n c l u d i n g i n such c i r c u l a r s a statement t o the e f f e c t t h a t
t h e Federal Reserve Bank w i l l e l e c t t o t r e a t as dishonored
a l l checks on i n s o l v e n t n a t i o n a l banks i n s t a t e s which
have adopted Section 11 of t h e Uniform Bank C o l l e c t i o n Code,
and which have been functioned by the drawee banks without
f i n a l payment t h e r e f o r having been made. We have adopted
t h i s p r a c t i c e i n t h i s d i s t r i c t and have so n o t i f i e d a l l
other Federal Reserve Banks.
8 3 5
k
X-7108-e
Walter W^att, Esq.
-2-
December 22, 1931.
I t seems to us t h a t the p o l i c y adopted "by the O f f i c e
of the Comptroller of the Currency, as o u t l i n e d i n Mr. A w a i t ' s
telegram of December 2 (X-7043), i s f a i r and o f f e r s t o t h e
Federal Reserve Banks a c l e a r and expeditious method of handling
such, t r a n s a c t i o n s . I t may a l s o be a d v i s a b l e t o amend Regulation
J i n t h i s r e g a r d , provided a uniform p o l i c y can be agreed upon
as among a l l Federal Reserve Banks. Ho one can claim t h a t h i s
i n t e r e s t has been jeopardized by t r e a t i n g the items as d i s honored, as t h e r i g h t s of a l l p r i o r p a r t i e s a r e p r e s e r v e d .
Uniformity of a c t i o n among a l l the Federal Reserve
Banks seems q u i t e e s s e n t i a l i n order to avoid confusion and
p o s s i b l e d i s p u t e s leading to l i t i g a t i o n . We, t h e r e f o r e , f e e l
t h a t such a uniform p o l i c y involving e i t h e r t h e amendment of
Regulation J or the check c o l l e c t i o n c i r c u l a r s should be adopted
a t t h e e a r l i e s t p r a c t i c a b l e d a t e . I do not agree with Mr.
Wallace t h a t a conference of c o u n s e l , together with t h e o p e r a t i n g
o f f i c e r s of t h e banks involved, t o d i s c u s s and s e t t l e t h i s
matter would be amiss.
Yours very t r u l y ,
(Signed)
ACA:MA
Albert C. Agnew
Counsel.
236
.
X-7109
STATEMENT OP BUREAU OF ENGRAVING AND PRINTING
Federal Reserve Notes, S e r i e s 1928.
February 1 tu 29, 1932.
$5
58 ,000
New York
156 ,000
P h i l a d e l p h i a . . . 56 ,000
58 ,000
Cleveland'
34 ,000
Atlanta
S t . Loui
81 ,000
Kansas C i t y , . . . 10 ,000
Dallas
San F r a n c i s c o . . 258 ,000
#10
$20
52, 000
90. 000
24i 000 14 ,000
40, 000 10 ,000
18, 000 10 ,000
24, 000 24 ,000
83, 000 41 ,000
10, 000
_71 ,000
Jh 000
$50
-
$500
$1000
-
4,200
2,100
$100
-
-
-
-
-
-
-
-
-
-
-
-
9,000
1,700
9,000
-
-
-
850
-
-
-
-
7,000
9,000
-
—
671 ,000 380, 000 170 ,000 16,000
18,000
1,263,850 s h e e t s , @£92.,50 per II
5 r 900
2,950
Total
Sheets
Amount
70 ,000
252 ,300
94 ,000
88 ,000
62 ,000
149 ,550
154 ,000
10 ,000
404 ,000
6, 475,,00
25, 357,.75
8, 695,,00
8, 140.00
5, 755.00
13, 835,,58
12, 595,,00
925 .00
570,.00
_J5_7_,
1,265 ,850
$116, 906 .15
$
#116, 906.13
s
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7110
March 8, 1932.
SUBJECT:
New I s s u e s of Treasury C e r t i f i c a t e s of
Indebtedness.
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 "between
F e d e r a l r e s e r v e banks covering Government s e c u r i t i e s , the
f o l l o w i n g code words have been d e s i g n a t e d t o cover new i s s u e s
of Treasury C e r t i f i c a t e s of Indebtedness:
"NOWHITCH"
Treasury C e r t i f i c a t e s of I n d e b t e d n e s s , S e r i e s
TO-1932 - 3 1/8#, t o be dated March 15, 1932,
maturing October 15, 1932.
"NOWHOARD" Treasury C e r t i f i c a t e s of I n d e b t e d n e s s , S e r i e s
TM-1933 - 3 3/4$, t o be dated March 15, 1932,
maturing March 15, 1933.
These code words should be i n s e r t e d i n t h e Federal r e s e r v e t e l e g r a p h code book, f o l l o w i n g the supplemental code word
"NOWEITAL" on page 172.
http://fraser.stlouisfed.org/ GOVERNORS
TO
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
OF ALL F. R. BANKS.
X-7111
S M A Y OF THE PROVISIONS OF H.R. 10241.
U MR
The p r o v i s i o n s of t h i s "bill d i v i d e themselves conveniently
i n t o t h r e e p o r t i o n s : (a) amendments t o t h e National Banking Laws;
(b) amendments to t h e Federal Reserve Act; and (c) p r o v i s i o n s
e s t a b l i s h i n g a F e d e r a l Guaranty Fund f o r d e p o s i t o r s i n member
banks of the Federal Reserve System.
AMENDMENTS TO NATIONAL BANKING LAWS.
The amendments t o the National Banking Laws, which a r e
contained i n Section 1, 2, 3 and 4 of the b i l l , r e f e r i n a l l
cases only to n a t i o n a l banks' which may be organized h e r e a f t e r .
These amendments c o n t a i n t h r e e important changes i n the law:
(1)
The a u t h o r i t y f o r the o r g a n i z a t i o n of a n a t i o n a l bank with
a minimum c a p i t a l of $25,000 i n p l a c e s of not exceeding 3,000
i n h a b i t a n t s i s eliminated from the law; (2) no n a t i o n a l bank may
be organized u n l e s s i t has a surplus of not l e s s than 10$ of i t s
c a p i t a l s t o c k , and (3) p r o v i s i o n s f o r the double l i a b i l i t y of
shareholders of n a t i o n a l banks a r e e l i m i n a t e d , except as to
banks having b r a n c h e s .
Section 1 of t h e b i l l e l i m i n a t e s from Section 5138 of the
Revised S t a t u t e s t h e p r o v i s i o n t h a t n a t i o n a l banks may be organized
i n p l a c e s of not exceeding 3,000 i n h a b i t a n t s with a minimum c a p i t a l
stock of $25,000.
Section 2 of t h e b i l l amends Section 5138 of the Revised
S t a t u t e s so as t o provide t h a t no n a t i o n a l bank s h a l l be organized
except with an i n i t i a l surplus equal to 10$ of i t s c a p i t a l s t o c k ,
X-7111
—2—
and provides a number of corresponding amendments to other p r o v i s i o n s
of t h e n a t i o n a l "banking laws i n order to make them conform t o t h i s
requirement.
Thus, f o r t h i s purpose:
Section 5168 (erroneously r e f e r r e d to as Section 5618) of
the Revised S t a t u t e s , which r e q u i r e s the Comptroller of t h e
Currency t o examine i n t o the c ondition of a n a t i o n a l hank,
and e s p e c i a l l y whether 50$ of i t s c a p i t a l s t o c k has been
paid i n , i n order to determine whether the bank i s l a w f u l l y
e n t i t l e d t o commence b u s i n e s s , i s amended to r e q u i r e t h e
Comptroller t o a s c e r t a i n a l s o whether 50$ of the r e q u i r e d
i n i t i a l s u r p l u s has been paid i n .
The Act of November 7, 1918, as amended, p r o v i d i n g f o r t h e
c o n s o l i d a t i o n of n a t i o n a l banks, and f o r the c o n s o l i d a t i o n
of a S t a t e bank with a n a t i o n a l bank, i s amended to r e q u i r e
t h a t the c o n s o l i d a t e d i n s t i t u t i o n i n each such case s h a l l
have an i n i t i a l s u r p l u s , as well as a c a p i t a l s t o c k , i n t h e
amount r e q u i r e d f o r the o r g a n i z a t i o n of a n a t i o n a l bank i n
t h e p l a c e i n which i t i s l o c a t e d .
Section 5154 of the Revised S t a t u t e s , providing f o r the conv e r s i o n of a S t a t e bank i n t o a n a t i o n a l bank, i s amended to
r e q u i r e t h a t t h e converted i n s t i t u t i o n have an i n i t i a l s u r p l u s
230
X-7111
6 3 •*
•
not l e s s than t h a t required f o r the o r g a n i z a t i o n of a
n a t i o n a l bank i n the p l a c e i n which i t i s l o c a t e d .
Section 5140 of the Revised S t a t u t e s , r e q u i r i n g a t l e a s t
50$ of t h e c a p i t a l stock of a n a t i o n a l hank t o he paid i n
b e f o r e i t i s authorized to commence business and the remainder to be p a i d i n i n 10$ monthly i n s t a l l m e n t s i s amended t o
make s i m i l a r requirements with regard to the r e q u i r e d i n i t i a l
surplus.
Section 5141 of the Revised S t a t u t e s , which a u t h o r i z e s the
s a l e of t h e s t o c k of any shareholder
who f a i l s t o pay any
i n s t a l l m e n t on h i s stock as r e q u i r e d by law, i s amended so as
to give t h e same a u t h o r i t y i n the case of a f a i l u r e to pay any
i n s t a l l m e n t of t h e i n i t i a l s u r p l u s .
Section 5205 of t h e Revised S t a t u t e s , which provides f o r
assessments upon stockholders of a n a t i o n a l bank i n case i t s
c a p i t a l stock i s not paid up or i n case of an impairment t h e r e i n and f o r the appointment of a r e c e i v e r when the d e f i c i e n c y
i s not made up w i t h i n t h r e e months a f t e r n o t i c e , i s amended to
provide f o r such assessments where the i n i t i a l s u r p l u s i s not
paid up and f o r the appointment of a r e c e i v e r where t h e def i c i e n c y i n i n i t i a l surplus i s not met w i t h i n t h e t h r e e months'
period.
Apparently an impairment i n i n i t i a l surplus would
not be grounds f o r such an assessment.
The p r o v i s i o n of
Section 5205 a u t h o r i z i n g the s a l e of the stock of a s h a r e -
33JL
X-7111
• 232
u 4 —
holder who f a i l s t o pay such assessment a g a i n s t him would
he omitted "by t h i s amendment, apparently "by m i s t a k e .
Section 5143 of the Revised S t a t u t e s , which a u t h o r i z e s r e ductions i n c a p i t a l stock of n a t i o n a l hanks, i s amended so
as to include s u r p l u s i n i t s p r o v i s i o n s .
While not c l e a r ,
a p p a r e n t l y a l l the p r e s e n t requirements f o r a r e d u c t i o n of
c a p i t a l , i n c l u d i n g t w o - t h i r d s ' vote of shareholders and app r o v a l of the Federal Reserve Board and of t h e Comptroller
of t h e Currency, would he a p p l i c a b l e as to every r e d u c t i o n
in surplus.
Section 3 of t h e b i l l amends Section 5151 of t h e Revised S t a t u t e s and Section 23 of the Federal Reserve Act so as to e l i m i n a t e
t h e p r o v i s i o n f o r t h e double l i a b i l i t y of shareholders as t o n a t i o n a l banks h e r e a f t e r organized, except as to any bank which opera t e s or e s t a b l i s h e s a branch.
Section 4 of t h e b i l l provides t h a t the p r o v i s i o n s of Sections
1, 2 and 3 s h a l l apply only t o n a t i o n a l banks organized a f t e r the
d a t e of the enactment of t h i s Act.
x-7111 j
"5AMSlffiMElTTS TO THE FEDERAL RESERVE ACT.
Sections 5, 6 and 7 of the "bill contain amendments to t h e
Federal Reserve Act with regard to the d i s t r i b u t i o n of earnings
of Federal r e s e r v e "banks, the charges which may "be made by member
banks f o r the c o l l e c t i o n or payment of checks and d r a f t s , and the
giving of immediate c r e d i t by Federal r e s e r v e banks f o r items
received f o r c o l l e c t i o n .
Section 5 would amend the f i r s t paragraph of Section 7 of
the Federal Reserve Act so as to provide t h a t the net earnings of
each Federal r e s e r v e bank s h a l l be d i s t r i b u t e d as f o l l o w s :
After
the payment to member banks of the 6$ dividend now provided f o r and
the payment of 10$ of the net earnings t o s u r p l u s , one-half of the
remainder of the net earnings s h a l l be paid to the Federal Guaranty
Fund f o r d e p o s i t o r s of member banks, (provided f o r i n l a t e r s e c t i o n s
of t h i s b i l l ) and the remaining one-half s h a l l be paid to the member
banks i n p r o p o r t i o n t o the amount of t h e i r c a p i t a l s t o c k .
The pay-
ment of the f r a n c h i s e t a x by Federal r e s e r v e banks to t h e United
S t a t e s would thus be e l i m i n a t e d .
with regard to t h e
The second paragraph of Section 7,
manner i n which funds p a i d to t h e United S t a t e s
e i t h e r as a f r a n c h i s e t a x or upon d i s s o l u t i o n of the Federal r e serve bank a r e to be used, i s amended to make the necessary c o r responding changes.
8 3 3
x-7iii i
- 6 *
Section 6 would amend the f i r s t paragraph of Section
13 of the F e d e r a l Reserve Act with regard to the charges which may
be made "by banks f o r c o l l e c t i o n or payment of checks and d r a f t s so
as to e l i m i n a t e the clause "but no such charges s h a l l be made a g a i n s t
t h e F e d e r a l r e s e r v e banks" and the p r o v i s i o n f o r t h e determination
and r e g u l a t i o n of such charges by the Federal Reserve Board; thus
a u t h o r i z i n g a bank t o make a reasonable charge f o r c o l l e c t i o n or payment of checks and d r a f t s , but not exceeding 10^ p e r $100 or f r a c t i o n
thereof on t h e t o t a l of checks and d r a f t s received a t any one time,
whether such checks and d r a f t s are presented by or through a Federal
r e s e r v e bank or otherwise.
Section 7 would a l s o amend Section 13 of t h e F e d e r a l Reserve Act by adding a t the end of t h e f i r s t paragraph a new paragraph
r e q u i r i n g a Federal r e s e r v e bank upon a p p l i c a t i o n of "a sending bank"
t o give immediate c r e d i t f o r checks and d r a f t s received from such
bank f o r c o l l e c t i o n and a u t h o r i z i n g t h e Federal r e s e r v e bank to
charge i n t e r e s t on the amount of the c r e d i t a t the c u r r e n t r e d i s count r a t e pending t h e c o l l e c t i o n of the item o r , w i t h the approval
of the Federal Reserve Board, to e s t a b l i s h a time schedule f o r t h i s
purpose.
334
|
-7-
X-7111
PROVISIONS JOE GUiBiHTY PUlto" &>R DEPOSITORS Of MEMBER BANKS.
The remaining sections of the b i l l , designated Sections 301 to
209, and comprising what i s known as T i t l e I I of the b i l l , provide
f o r the establishment of a Federal Bank L i q u i d a t i n g Board and f o r
the guaranty of the d e p o s i t s of member banks.
Section 201 of the b i l l e s t a b l i s h e s a Federal Bank Liquidat i n g Board c o n s i s t i n g of the Secretary of the Treasury, the Compt r o l l e r of the Currency, and t h r e e c i t i z e n s of the United S t a t e s
appointed by the P r e s i d e n t by and with the advice and consent of
the Senate.
The a p p o i n t i v e members, not more than one of whom
s h a l l be of t h e same p o l i t i c a l p a r t y a s the P r e s i d e n t , a r e to hold
o f f i c e f o r f o u r y e a r s and each i s to r e c e i v e a s a l a r y of $10,000
p e r annum.
The appointive members a r e i n e l i g i b l e during the time
they are in o f f i c e , and f o r one year t h e r e a f t e r , to hold o f f i c e or
employment in any member bank or in or on t h e Federal Reserve Board.
The L i q u i d a t i n g Board s h a l l e l e c t i t s own chairman and o t h e r o f f i c e r s and may employ and f i x the compensation of i t s o f f i c e r s and
employees, but the compensation i s not to exceed $10,000 p e r annum
in any c a s e .
Section 202 e s t a b l i s h e s a Federal guaranty fund f o r deposi t o r s i n member banks of the Federal reserve system.
This fund i s
to be c r e a t e d by payments from t h r e e sources: (a) The e n t i r e amount
h e r e t o f o r e p a i d to the United S t a t e s as a f r a n c h i s e tax by the Fede r a l r e s e r v e banks s h a l l be p a i d , presumably by the United S t a t e s ,
235
X-7111
to the guaranty fund; (b) The Federal reserve 'banks a r e to pay to
the fund $150,000,000, the amount r e q u i r e d of each to be d e t e r mined pro r a t a according to the amount of i t s surplus on December
31, 1931; and (c) The "board s h a l l r e q u i r e the member banks to pay
to the fund (1) such an amount a s i t may f i x , not exceeding $130,
000,000, the amount r e q u i r e d of each member bank to be determined
pro r a t a according to i t s average d e p o s i t s , other than time dep o s i t s , d u r i n g the preceding calendar y e a r , and (2) such an amount
as the board may f i x not to exceed $70,000,000, pro r a t e d among
such banks according to t h e i r average time d e p o s i t s during the
preceding calendar y e a r .
At any time a f t e r one year subsequent
to the payment of the above amounts, the board may, i f in i t s judgment the amount of the fund i s inadequate, r e q u i r e the member
banks t o pay annually to the fund not more than $100,000,000 pro
r a t e d among them according to t h e i r net earnings f o r the preceding
calendar y e a r .
A l l sums payable e i t h e r by a Federal r e s e r v e bank
or by a member bank a r e s u b j e c t to the c a l l of the Liquidating
Board; and, i f in i t s judgment at any time the amount in the fund
i s i n excess of the amount adequate f o r the purposes of the law,
the board s h a l l make a r e f u n d to each Federal reserve bank and to
each n a t i o n a l bank, the amount of the refund to be pro r a t e d
according to the amount of t h e i r c o n t r i b u t i o n s .
Apparently State
member banks would not share i n any r e t u r n of c o n t r i b u t i o n s .
t 237
-9-
X-7111
Sums in the guaranty fund may be investe d by the board i n i n t e r e s t
bearing o b l i g a t i o n s of the United S t a t e s or deposited i n member
banks without i n t e r e s t .
Section 303 provides t h a t whenever a n a t i o n a l bank i s
i n s o l v e n t , the Comptroller of the Currency s h a l l so c e r t i f y to the
L i q u i d a t i n g Board, which s h a l l proceed to wind up the bank in accordance with the law.
Within t h i r t y days a f t e r the r e c e i p t of the c e r -
t i f i c a t e of insolvency by the board, a committee c o n s i s t i n g of one
person appointed by the board, one appointed by the owners of a
m a j o r i t y of the stock of the bank and one appointed by the d e p o s i t o r s
of more than 50 p e r cent of the outstanding d e p o s i t s of the bank s h a l l
estimate the value of the a s s e t s and the amount of the l i a b i l i t i e s
of the bank and make a statement of the amount of the o u t s t a n d i n g
deposit of each d e p o s i t o r .
Section 304 provides t h a t , on the b a s i s of t h i s e s t i m a t e ,
as modified by the board, and not l e s s than s i x t y days a f t e r the c e r t i f i c a t i o n of insolvency, the board s h a l l pay to each d e p o s i t o r whose
outstanding d e p o s i t i s not more than $1,000 not l e s s than f i f t y p e r
cent t h e r e o f , and t o each o t h e r d e p o s i t o r not l e s s than t w e n t y - f i v e
p e r cent of h i s outstanding d e p o s i t , or $500, whichever i s g r e a t e r .
Within s i x months a f t e r such payment the board i s to pay each
d e p o s i t o r of the former c l a s s the remaining amount due him (and i t i s
apparently the i n t e n t i o n to provide t h a t o t h e r d e p o s i t o r s
shall,
-io~
x-7111
3 3 8
within t h i s s i x months' p e r i o d , "be p a i d an a d d i t i o n a l twenty-five
per cent of t h e i r d e p o s i t s , "but no such p r o v i s i o n i s contained in
the b i l l , )
'
Within the next six months p e r i o d an a d d i t i o n a l twenty-
f i v e p e r cent s h a l l be p a i d to a l l d e p o s i t o r s not y e t paid and
within s i x months t h e r e a f t e r f u l l payment s h a l l be made to a l l
depositors.
Section 205 provides t h a t the board, or a l i q u i d a t i n g
agent duly authorized by the board, may borrow money on the s e c u r i t y
of the a s s e t s of any i n s o l v e n t n a t i o n a l bank f o r the purpose of
paying i t s d e p o s i t o r s and c r e d i t o r s .
Section 206 p r o v i d e s t h a t in case of insolvency of a
State member bank, the board s h a l l request i t s r e c e i v e r or l i q u i d a t i n g
agent to submit a r e p o r t and estimate such as t h a t r e q u i r e d of the
Committee i n the case of a n a t i o n a l bank; and the board upon approval
of such r e p o r t and e s t i m a t e s h a l l pay the r e c e i v e r or l i q u i d a t i n g
agent i n t r u s t f o r the d e p o s i t o r s the same amounts, and a t the same
times, as in the case of n a t i o n a l banks.
Section 207 makes i t mandatory upon the Federal Reserve
Board, a f t e r hearing, to f o r f e i t the membership of any member bank
f a i l i n g to comply with the requirements of the b i l l with r e s p e c t
to the Guaranty Fund or any r e g u l a t i o n of the L i q u i d a t i n g Board; and
a n a t i o n a l bank f a i l i n g to comply with such p r o v i s i o n s of the b i l l
s h a l l , in a d d i t i o n , f o r f e i t a l l r i g h t s and f r a n c h i s e s granted to i t
by the law (apparently without any court proceeding, but upon the
b a s i s of t h e hearing conducted by the Federal Reserve Board.)
x-71111
- »i Section 308 a u t h o r i z e s the L i q u i d a t i n g Board, to make
r e g u l a t i o n s necessary t o carry out the p r o v i s i o n s w i t h r e s p e c t
t o the Guaranty Fund.
Section 209 a u t h o r i z e s a p p r o p r i a t i o n s of such sums
as may he necessary to carry out t h e p r o v i s i o n s of t h i s a c t .
#239
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7112
March 9, 1932.
SUBJECT:
Procedure under Section 8 of Recons t r u c t i o n Finance Corporation Act.
Dear S i r :
There i s enclosed herewith, f o r your information,
a copy of the Federal Reserve Board's reply to a l e t t e r
r e c e i v e d from the Federal Reserve .Agent at the Federal Reserve Bank of A t l a n t a , i n q u i r i n g whether the Board has p r e s c r i b e d any r e g u l a t i o n s "under Section 8 of the Reconstruction
Finance Corporation Act, which a u t h o r i z e s the Board, under
such conditions as i t may p r e s c r i b e , to f u r n i s h to the
Reconstruction Finance Corporation c o n f i d e n t i a l information
r e g a r d i n g the c o n d i t i o n of s t a t e member banks.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Enclosure.
TO ALL FEDERAL RESERVE AGENTS.
COPY
X-7112-a
March 5, 1932
Mr. Oscar Newton,
Federal Reserve Agent,
Federal Reserve Bank of A t l a n t a ,
A t l a n t a , Georgia.
Dear Mr. Newton:
As you i n d i c a t e in your l e t t e r of February 25,
s e c t i o n 8 of the Reconstruction Finance Corporation Act
a u t h o r i z e s among o t h e r s the Federal Reserve Board, under
such c o n d i t i o n s as i t may p r e s c r i b e , to make a v a i l a b l e to
the c o r p o r a t i o n , in confidence, such r e p o r t s , records and
o t h e r information as i t may have a v a i l a b l e r e l a t i n g to the
c o n d i t i o n of f i n a n c i a l i n s t i t u t i o n s and o t h e r s with r e s p e c t
to which the corporation has had or contemplates having
t r a n s a c t i o n s under the Act or r e l a t i n g to i n d i v i d u a l s ,
a s s o c i a t i o n s , p a r t n e r s h i p s or corporations whose o b l i g a t i o n s a r e o f f e r e d to or held by the corporation as s e c u r i t y
for loans.
The Federal Reserve Board has not p r e s c r i b e d any
r e g u l a t i o n s f o r the reason t h a t i t i s f e l t t h a t the condit i o n s under which information might be d i s c l o s e d to the
c o r p o r a t i o n would develop only through p r a c t i c a l experience.
I t has been assigned, f o r example, t h a t , in the case of i n formation under your c o n t r o l , the safeguards under which
X-7113-a
Mr. Oscar Newton - (2)
i t might p r o p e r l y be d i s c l o s e d to the corporation would be
worked out from time to time through informal understandings
with the l o c a l managers of the loan agencies of the c o r p o r a t i o n in such a manner as to be h e l p f u l to the c o r p o r a t i o n ,
and a t the same time p r o t e c t the c o n f i d e n t i a l c h a r a c t e r of the
information.
Very t r u l y yours,
v
(Signed) Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7113
March 9, 1932.
SUBJECT: Applications of S t a t e Banks and Trust
Companies f o r Membership.
Dear S i r :
There i s a t t a c h e d h e r e t o , f o r your i n f o r m a t i o n
and guidance, a copy of a l e t t e r to the Federal Reserve
Agent a t the Federal Reserve Bank of Richmond, w i t h r e gard to t h e treatment of d e p r e c i a t i o n i n t h e investment
accounts of s t a t e hanks and t r u s t companies applying f o r
membership i n t h e Federal Reserve System.
Very t r u l y y c u r s ,
Chester M o r r i l l ,
Secretary.
Enclosures.
TO ALL F. R. AGENTS EXCEPT RICHMOND.
8 OF Y
X-7113-a
March 7, 1932.
Mr. W. W. Hoxton,
Federal Reserve Agent,
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
Dear Mr. Hoxton:
Receipt i s acknowledged of your l e t t e r of February 24,
1932, with regard t o the treatment of "bond d e p r e c i a t i o n of a s t a t e
bank i n the F i f t h Federal Reserve D i s t r i c t which contemplates making
an a p p l i c a t i o n f o r membership i n the Federal Reserve System.
You r e f e r t o the Board's l e t t e r of June 19, 1931 (X-6914),
a d v i s i n g of the adoption by the Board of a p o l i c y of r e q u i r i n g t h a t
a t t h e time of admission of a s t a t e bank or t r u s t company to membership i n the Federal Reserve System, i t s h a l l be f r e e from a l l known
l o s s e s and d e p r e c i a t i o n , so t h a t , on t h e date i t s membership becomes
e f f e c t i v e , i t s statement w i l l r e f l e c t as nearly as p o s s i b l e t h e value
of i t s a s s e t s ; and a l s o to the Board's l e t t e r of January 18, 1932
(X-7062), a d v i s i n g t h a t , i n connection with the examination of s t a t e
member banks of the Federal Reserve System, the amounts of d e p r e c i a t i o n on stocks and on d e f a u l t e d bonds only should be shown as l o s s e s .
You i n q u i r e whether the p o l i c y s e t f o r t h i n the l e t t e r of January 18,
1932, r e l a t i v e to s t a t e bank members of the Federal Reserve System i s
a l s o a p p l i c a b l e to banks applying f o r membership i n the Federal Reserve
System.
In t h e opinion of the Federal Reserve Board, t h e r e i s j u s t i f i
I 245"
-•&-
X—7113—a
c a t i o n , under p r e s e n t c o n d i t i o n s , f o r d i f f e r e n t i a t i n g i n t h e
treatment of "bond d e p r e c i a t i o n which may e x i s t i n banlts a l r e a d y
members of the F e d e r a l Reserve System and t h a t which may e x i s t i n
the case of banks which a r e applying f o r admission t o the System.
However, i n some r e c e n t cases t h e Board has not i n s i s t e d upon s t r i c t
observance of t h e p o l i c y o u t l i n e d i n i t s l e t t e r of June 19, 1931,
and has approved a p p l i c a t i o n s f o r membership i n the System made by
banks whose managements were competent and whose a f f a i r s otherwise
were i n g e n e r a l l y s a t i s f a c t o r y shape, upon c ondition t h a t they
should, p r i o r to admission t o the System, charge off a l l known
l o s s e s and a l l d e p r e c i a t i o n on bonds other than those c l a s s i f i e d
i n the f o u r h i g h e s t grades by a recognized investment s e r v i c e organiz a t i o n r e g u l a r l y engaged i n the business of r a t i n g or grading bonds»
T h e r e f o r e , while no d e f i n i t e statement can be made i n advance, i t
i s probable t h a t t h e Board would be disposed to extend s i m i l a r t r e a t ment to the bond d e p r e c i a t i o n of other banks applying f o r membership
i n t h e System i f t h e i r managements and condition were g e n e r a l l y s a t i s f a c t o r y i n a l l other r e s p e c t s .
I t i s suggested t h a t you consider
t h e s e a s p e c t s of the matter c a r e f u l l y and advise the Board f u l l y with
regard to them i n connection with any recommendation t h a t you may
submit i n any case i n which you f e e l t h a t the Board would be j u s t i f i e d
i n making s i m i l a r allowance f o r b o n d ' d e p r e c i a t i o n .
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
246
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7115
March 10, 1933.
SUBJECT:
Advances to member banks under SectionslO(a)
and 10(b) of the Federal Reserve Act, as
amended February 27, 1932.
Dear S i r :
In view of the f a c t that advances to member banks under
the p r o v i s i o n s of Sections 10(a) and 10(b) of the Federal Reserve
Act, as amended by t h e Act of February 27, 1932, w i l l be l i m i t e d
to cases where t h e r e are conditions of an unusual and temporary
c h a r a c t e r , the Federal Reserve Board has not p r e s c r i b e d any regul a t i o n s governing such advances but " i l l consider each case separ a t e l y and w i l l d e c i d e , on the b a s i s of the f a c t s and circumstances
i n each p a r t i c u l a r c a s e , whether or not to permit the Federal r e serve tank to make the advance applied f o r .
However, i n order t h a t the member banks may be informed of
t h e p r o v i s i o n s of t h e s e s e c t i o n s and of the procedure contemplated
thereunder, a committee of o f f i c e r s of Federal r e s e r v e banks
appointed pursuant t o a c t i o n taken by the Conference of Governors
of Federal r e s e r v e banks held i n Washington on February 24 and 25,
1932, has p r e p a r e d , with the a s s i s t a n c e of counsel, a c i r c u l a r
X-7115
(
2 4 7
2
l e t t e r to be seht by the Federal r e s e r v e "banks to a l l member
banks as soon as p o s s i b l e .
While i t would seem t h a t the law would permit the Board
!
t o grant blanket consent f o r Federal r e s e r v e banks to make loans
under the p r o v i s i o n s of Section 1 0 ( a ) , the Board p r e f e r s f o r t h e
p r e s e n t a t l e a s t t o consider each case s e p a r a t e l y ; and the law
r e q u i r e s s e p a r a t e a c t i o n by the Board i n the case of each
s p e c i f i c loan under the terms of Section 10(b).
Before making
any loan or any renewal or extension thereof under t h e p r o v i s i o n s
of e i t h e r s e c t i o n , t h e r e f o r e , t h e Federal r e s e r v e bank should obt a i n the Board's consent.
The Board i s prepared to give prompt c o n s i d e r a t i o n to any
a p p l i c a t i o n r e c e i v e d under these s e c t i o n s .
Each r e q u e s t f o r i t s
permission to make such an advance must include a recommendation
of t h e Federal r e s e r v e bank and should contain t h e f o l l o w i n g i n formation:
A.
Name and l o c a t i o n of borrowing bank.
B.
Capital s t o c k .
C.
Surplus and undivided p r o f i t s .
D. TCiether the bank which i s to r e c e i v e the proceeds
of the loan has an adequate amount of e l i g i b l e
and a c c e p t a b l e a s s e t s to enable i t t o o b t a i n
s u f f i c i e n t c r e d i t accommodations from the
Federal reserve "bank under other p r o v i s i o n s of
t h e Federal Reserve Act.
E.
Amount of t h e loan applied f o r .
F.
Maturity of loan applied f o r .
248
X-7115
b
G.
Proposed r a t e .
H.
Nature and f a c e amount of s e c u r i t y o f f e r e d .
I.
Total d e p o s i t s of borrowing t a n k .
J.
Total amount of r e d i s c o u n t s and other "borrowings
( i n c l u d i n g repurchase agreements) from Federal
reserve "bank, exclusive of t h i s l o a n .
K.
Amount of r e d i s c o u n t s and "borrowings ( i n c l u d i n g
repurchase agreements) from o t h e r s .
L.
Concise statement of exceptional and exigent c i r cumstances which occasioned t h e a p p l i c a t i o n ,
together with any other f a c t s having a t e a r i n g
upon the c a s e .
M.
Whether the a p p l i c a t i o n i s f o r a loan under
Section 10(a) or Section 1 0 ( b ) .
N.
In t h e case of loans a p p l i e d f o r under Section
10(a), name and address of each p a r t i c i p a t i n g
bank and the amount of l i a b i l i t y assumed by i t ,
together with t h e n a t u r e and f a c e amount of
a d d i t i o n a l s e c u r i t y , i f any, r e q u i r e d of i t .
When the information i s t r a n s m i t t e d by t e l e g r a p h , each item
l i s t e d above may be i n d i c a t e d by u s i n g the l e t t e r preceding such
item, i n l i e u of s t a t i n g the t e x t of t h e q u e s t i o n .
The Board has not p r e s c r i b e d any l i m i t a t i o n on t h e aggreg a t e amount of such loans which may be made by any Federal r e s e r v e
bank; b u t , i n a c t i n g upon r e q u e s t s f o r i t s permission t o make such
l o a n s , w i l l give c o n s i d e r a t i o n , among other t h i n g s , to t h e aggreg a t e amount of such loans which t h e Federal r e s e r v e bank has
outstanding.
In making loans to groups of banks under Section 1 0 ( a ) ,
t h e Federal r e s e r v e bank
should r e q u i r e the t r u s t e e r e p r e s e n t -
ing t h e group of banks to pledge with the Federal r e s e r v e bank
x
-7115.
2 4 9
4
the note of each 'bank which i s to r e c e i v e the proceeds of the
loan and the s e c u r i t y t h e r e f o r .
The Federal r e s e r v e "bank
should a s s u r e i t s e l f t h a t the t r u s t e e has been p r o p e r l y aut h o r i z e d to pledge such note and s e c u r i t y t o the Federal r e serve "bank.
In a d d i t i o n to the note of the "borrowing "bank and
such s e c u r i t y as i t may p r o v i d e , the Federal r e s e r v e "bank may,
i f i t deems i t a d v i s a b l e , r e q u i r e the other members of the
group to give such other s e c u r i t y as the Federal r e s e r v e bank
may consider necessary f o r i t s p r o t e c t i o n .
In the absence of r e g u l a t i o n s and i n order to i n s u r e
u n i f o r m i t y of procedure, the Federal Reserve Board has approved
the i n c l o s e d c i r c u l a r f o r use by the Federal r e s e r v e banks.
It
K i l l be observed t h a t the Board has made c e r t a i n m o d i f i c a t i o n s
i n the proposed c i r c u l a r which was t r a n s m i t t e d to the Governors
with t h e Committee's r e p o r t of March 6, 1932.
If any Federal r e -
s e r v e bank d e s i r e s to make any f u r t h e r changes, i n order to conform
t o l o c a l c o n d i t i o n s or p r a c t i c e s , i t should communicate with the
Federal Reserve Board and obtain i t s approval b e f o r e t r a n s m i t t i n g
the c i r c u l a r to member banks.
The Board w i l l give prompt considera-
t i o n to such changes.
This l e t t e r i s s o l e l y f o r t h e information and guidance of
t h e Federal r e s e r v e banks.
Very t r u l y yours,
Inclosure.
TO GOVERNORS OF ALL F. R. BAEKS.
Chester Morri11,
Secretary.
I 250
X- 7X15—a
CIRCULAR LETTER MOM
FEDERAL RESERVE BAMS TO THEIR MEMBER BANKS
Subject:
Amendment to Federal Reserve Apt "by Act of Congress approved
February 27, 1932.
The Act of February 27, 1932, adds two new s e c t i o n s to the
Federal Reserve Act, Section 10(a) and Section 1 0 ( b ) .
Section 10(a)
a u t h o r i z e s the making of loans to groups of member banks and i s a
permanent p r o v i s i o n , whereas Section 10(b) a u t h o r i z e s u n t i l March 3,
1933, advances to i n d i v i d u a l member banks having a c a p i t a l s t o c k not
exceeding $5,000,000 each.
Under both s e c t i o n s , the banks r e c e i v i n g
the proceeds of such advances must be without adequate amounts of e l i g i b l e and acceptable a s s e t s to enable them to obtain s u f f i c i e n t c r e d i t
accommodations from the Federal Reserve Banks under o t h e r p r o v i s i o n s
of the Federal Reserve Act.
The f u l l t e x t of these two s e c t i o n s of the Federal Reserve
Act i s p r i n t e d a t the end of t h i s c i r c u l a r .
In view of the f a c t t h a t i t i s contemplated t h a t a p p l i c a t i o n s
f o r such advances w i l l be made only in -unusual circumstances, the
Federal Reserve Board has not p r e s c r i b e d any r e g u l a t i o n s governing such
advances, b u t , f o r the information of a l l member banks, the p r i n c i p a l
requirements of the law are analyzed and the general procedure contemp l a t e d thereunder i s o u t l i n e d below.
SECTION 10(a)
ADVANCES TO GROUPS OF MEMBER BANKS
This s e c t i o n p r o v i d e s in e f f e c t t h a t , upon r e c e i v i n g the consent of not l e s s than f i v e members of the Federal Reserve Board, any
Federal Reserve Bank may make advances, in such amount a s the board of
»2u
X-7115-a
d i r e c t o r s of such Federal Reserve Sanjc may determine, upon the following
conditions;
(a)
.Advances may "be made on the promissory n o t e s of groups of
f i v e or more member banks within the d i s t r i c t of the
loaning Federal Reserve Bank, a m a j o r i t y of them independ e n t l y owned and c o n t r o l l e d ; except t h a t advances may be
made to a l e s s e r number of such member banks (but not l e s s
than two) i f the aggregate amount of t h e i r deposit
l i a b i l i t y c o n s t i t u t e s at l e a s t 10 p e r centum of the e n t i r e
deposit l i a b i l i t y of the member banks w i t h i n such d i s t r i c t .
(b)
.Advances may be made only i f the bank or banks which
receive the proceeds thereof have no adequate ameunts of
e l i g i b l e and acceptable a s s e t s a v a i l a b l e to enable such
bank or banks to obtain s u f f i c i e n t c r e d i t accommodations
from the Federal Reserve Bank through r e d i s c o u n t s or
advances o t h e r than as provided in Section 10(b) of the
Act.
(c)
The l i a b i l i t y of the i n d i v i d u a l banks in each group mast
be l i m i t e d to such p r o p o r t i o n of the t o t a l amount
advanced to such group as the d e p o s i t l i a b i l i t y of the
r e s p e c t i v e banks b e a r s to the aggregate deposit l i a b i l i t y
of a l l banks in such group. (The l i a b i l i t y of each
i n d i v i d u a l bank on the note of a group under t h i s p r o v i sion of the law should be determined on the b a s i s of i t s
gross deposit l i a b i l i t i e s a t the opening of busine ss on
the date of the w r i t t e n a p p l i c a t i o n by the group to the
Federal r e s e r v e bank f o r the advance, computed by adding
t o g e t h e r , ( l ) in the case of n a t i o n a l banks, the f i g u r e s
corresponding to those c a l l e d f o r by items 21, 22, 23 and
24 on the Comptroller of the Currency 1 s c a l l r e p o r t form
No. 2130, as r e v i s e d in November, 1931, j r , (2) i n the
case of S t a t e member banks, the f i g u r e s corresponding to
those c a l l e d f o r by items 19, 20, 21 and 22 on the Federal
Reserve Board's c a l l r e p o r t form No. 105, a s r e v i s e d in
November, 1931.)
(d)
The proceeds of an advance to a group may be d i s t r i b u t e d
only to banks which a r e members of such group, and b e f o r e
r e c e i v i n g such proceeds such banks must d e p o s i t with a
s u i t a b l e t r u s t e e , designated by and r e p r e s e n t i n g the e n t i r e
group, t h e i r i n d i v i d u a l n o t e s made in f a v o r of the group
p r o t e c t e d by such c o l l a t e r a l s e c u r i t y as may be agreed
upon.
(e)
No o b l i g a t i o n s of any f o r e i g n government, i n d i v i d u a l , p a r t n e r s h i p , a s s o c i a t i o n or c o r p o r a t i o n organized under the
laws thereof s h a l l be e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r
advances under t h i s s e c t i o n .
w3**
(f)
, 253
X—7115—a
No note upon which, such advances are made w i l l be e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r Federal Reserve n o t e s .
The r a t e a t which advances may be made under t h e p r o v i s i o n s of
t h i s s e c t i o n w i l l be f i x e d from time to time, subject to the approval of
the Federal Reserve Board and the condition s p e c i f i e d in the law.
The m a t u r i t i e s of notes accepted under t h i s s e c t i o n must be
s a t i s f a c t o r y to the Federal Reserve Bank.
There must be deposited and
pledged with the Federal Reserve Bank, as s e c u r i t y f o r any advance made
by the Federal Reserve Bank to a group of banks under t h e p r o v i s i o n s of
Section 1 0 ( a ) , the note or notes of the bank or banks to which the p r o ceeds of such advance a r e d i s t r i b u t e d by the group, t o g e t h e r w i t h a l l the
s e c u r i t y f o r such note or n o t e s .
Such s e c u r i t y must, of course, be
acceptable to the Federal Reserve Bank, which may r e q u i r e the group or
any member t h e r e o f to provide such a d d i t i o n a l s e c u r i t y as may be deemed
necessary.
For the convenience rf member banks d e s i r i n g to apply f o r loans
under Section 1 0 ( a ) , the following suggested forms are being p r e p a r e d .
1.
Resolution to be adopted by board of d i r e c t o r s of each of
the banks d e s i r i n g to form a group, a u t h o r i z i n g t h e i r
o f f i c e r s to sign an agreement with o t h e r banks f o r t h i s
purpose.
2.
Agreement to be entered i n t o by banks d e s i r i n g to form a
group. This form of agreement includes the d e s i g n a t i o n
of a t r u s t e e f o r the group.
3.
Resolution to be adopted by board of d i r e c t o r s of i n d i v i dual borrowing bank a u t h o r i z i n g i t to borrow from the
group and to pledge s e c u r i t y t h e r e f o r .
4.
Application to be used by i n d i v i d u a l borrowing bank in
r e q u e s t i n g loan from the grcup. This must include a
c e r t i f i c a t e to the e f f e c t t h a t such bank has no adequate
amount of e l i g i b l e and acceptable a s s e t s a v a i l a b l e to
enable i t to obtain s u f f i c i e n t c r e d i t accommodations from
the Federal Reserve Bank through r e d i s c o u n t s or advances
other than as provided in Section 1 0 ( b ) .
-4-
X~7115^a
253
5.
Note to be used by the i n d i v i d u a l "borrowing "bank in borrowing from the group.
6.
Resolution to be adopted by the board of d i r e c t o r s of each
of the banks in the group, a u t h o r i z i n g the group to borrow
from the Federal Reserve Bank upon the note of the group
and to pledge the note or n o t e s of the i n d i v i d u a l borrowing
bank or banks and the s e c u r i t y t h e r e f o r .
7.
Application to be used by group in r e q u e s t i n g advance from
the Federal Reserve Bank.
8.
Note to be used by the group in borrowing from the Federal
Reserve Bank. This form contemplates t h a t the group s h a l l
give to the Federal Reserve Bank a s i n g l e note f e r the f u l l
amount of the advance, such n o t e , or c o u n t e r p a r t s t h e r e o f ,
being signed by a l l members of the group and s t a t i n g on the
f a c e thereof the d o l l a r amount of the p r o p o r t i o n of the
p r i n c i p a l of such note f o r which each bank i n the group i s
liable.
Banks d e s i r i n g to form groups, or contemplating the p o s s i b i l i t y
of forming groups a t some f u t u r e time, should so advise t h i s bank, which
w i l l be glad to f u r n i s h them with copies of the suggested forms.
suggested t h a t each group be formed under the name
Group No .
of the
It is
"Member Bank Loan
Federal Reserve D i s t r i c t . "
In order to
prevent p o s s i b l e d u p l i c a t i o n of numbers i n the names of groups t h i s bank
w i l l a s s i g n numbers when advised of the d e s i r e to form groups.
The forms used in d i f f e r e n t cases may vary to some extent to
meet the needs and d e s i r e s of the banks forming the p a r t i c u l a r group, but
a l l forms used i n connection with any advance made by t h i s bank must, of
course, be s a t i s f a c t o r y to i t .
SECTION 10(b)
ADVANCES TO INDIVIDUAL MEMBER BANKS
Under the terms of t h i s s e c t i o n Federal Reserve Banks may, u n t i l
March 3, 1933, and i n exceptional and exigent circumstances, and s u b j e c t
in each case to a f f i r m a t i v e a c t i o n by not l e s s than f i v e members of the
Federal Reserve Board, make advances to i n d i v i d u a l member banks upon
the f o l l o w i n g c o n d i t i o n s :
4-5-
i 254
x-Vllfe-a
(a)
Advances may be made only to member "banks having c a p i t a l
stock of not exceeding $5,000,000 each.
(b)
Advances may be made only to banks which have no f u r t h e r
e l i g i b l e and acceptable a s s e t s a v a i l a b l e to enable them
to obtain adequate c r e d i t accommodations through r e d i s count ing a t the Federal Reserve Bank or any other method
provided by the Federal Reserve Act other than t h a t p r o vided by Section 10(a).
(c)
No o b l i g a t i o n s of any f o r e i g n government, i n d i v i d u a l ,
p a r t n e r s h i p , a s s o c i a t i o n , or corporation organized under
the laws thereof s h a l l be e l i g i b l e as c o l l a t e r a l s e c u r i t y
f o r advances under t h i s s e c t i o n .
(a)
Advances under t h i s section may be made only upon the
promissory notes of member banks secured to the s a t i s f a c t i o n of the lending Federal Reserve Bank.
(e)
No note accepted f o r any such advance s h a l l be e l i g i b l e
as c o l l a t e r a l s e c u r i t y f o r Federal r e s e r v e n o t e s .
The r a t e a t which advances may be made under the pr ovisions of
t h i s s e c t i o n w i l l be f i x e d from time to time, s u b j e c t to the approval of
the Federal Reserve Board and the condition s p e c i f i e d in the law,
A s p e c i a l form of a p p l i c a t i o n i s being prepared f o r the use of
member banks d e s i r i n g to apply f o r leans under Section 10(b).
Copies
w i l l be provided upon r e q u e s t .
Each such a p p l i c a t i o n must include a c e r t i f i c a t e to the e f f e c t
that the applying bank has no f u r t h e r e l i g i b l e and acceptable a s s e t s
a v a i l a b l e to enable i t to obtain adequate c r e d i t accommodations through
rediscount ing a t the Federal Reserve Bank or any o t h e r method provided
by the Federal Reserve Act other than t h a t provided by Section 10(a);
and i t must also be supported by a statement of f a c t s s u f f i c i e n t to s a t i s f y the Federal Reserve Bank and the Federal Reserve Board t h a t there are
exceptional and exigent circumstances which would j u s t i f y the making of
such loan under the p r o v i s i o n s of Section 10(b),
i 255
-6-
V
X-7115-a
The r e g u l a r form of member bank promissory note may be used
f o r advances made under t h i s s e c t i o n .
M a t u r i t i e s must be s a t i s f a c t o r y to
the Federal Reserve Bank.
GENERAL
In conformity with the purposes of t h i s l e g i s l a t i o n , advances
under Sections 10(a) and 10(b) of the Federal Reserve Act w i l l be l i m i t e d
to cases where t h e r e are conditions of an unusual and temporary c h a r a c t e r
which appear to j u s t i f y such action and when the member banks r e c e i v i n g
the proceeds lack adequate amounts of e l i g i b l e and a c c e p t a b l e a s s e t s with
which to secure s u f f i c i e n t c r e d i t accommodations from the Federal Reserve
Bank under o t h e r p r o v i s i o n s of the Federal Reserve Act.
When and i f such
circumstances e x i s t i t i s hoped t h a t t h i s bank may be able to render
h e l p f u l s e r v i c e f o r temporary p e r i o d s .
I t i s suggested, however, t h a t
b e f o r e making a p p l i c a t i o n s f o r such advances member banks should communicate with t h i s bank and a s c e r t a i n i t s views as to the c o l l a t e r a l or o t h e r
s e c u r i t y which should be o f f e r e d and as to the o t h e r c o n d i t i o n s upon which
t h i s bank would be disposed to give f a v o r a b l e c o n s i d e r a t i o n to the a p p l i cation.
APPENDIX
(Here p r i n t t i t l e and f i r s t two s e c t i o n s of Act.)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7116
March 16, 1932.
SUBJECT:
Expense, Main Lines, Leased Wire System,
February, 1932»
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeographed
s t a t e m e n t s , X - J l l 6 - a and X-71l6-b, covering in d e t a i l
o p e r a t i o n s of the main l i n e s , Leased Wire System, during
the month of February, 1932.
P l e a s e c r e d i t the amount payable by your bank i n
the general account, Treasurer, U. S . , 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, Special Fund", Leased
Wire System, sending d u p l i c a t e C/D to the Federal Reserve
Board.
Very t r u l y yours,
F i s c a l Agent.
Enclosures.
TO GOVERNORS OF ALL F. R. BAMS.
X-71l6-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF FEBRUARY, 1932.
Business
reported
by banks
From
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t - "Louis
Minneapolis
Kansas City
Dallas
San "Francisco
"Total
Words sent by
New York chargea b l e to o t h e r
F. R. Banks ( l )
26,111
152,56s
29,094
60,326
57,218
53,357
88,6l4
67,639
29,555
67,108
63,836
92,092
787,518
3,601
2,619
2,278
3,932
9,277
4,629
3,546
5,293
3,550
14,311
5.299
58,335
F. R. 3 o a r d b u s i n e s s
T r e a s u r y Department b u s i n e s s Incoming
Net F e d e r a l
reserve
bank
business
29,712
152,568
31,713
62,604
61,150
62,63%
93,243
71,185
34,848
70,658
78,147
97.391
845,853
P e r c e n t of t o t a l
bank b u s i n e s s (*)
3.5I
18.04
3-75
7J4O
7.23
7-4l
11.02
8.42
4.12
8.35
9.24
11.51
100.00
258,384
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
(*)
"These p e r c e n t a g e s used i n c a l c u l a t i n g the pro r a t a share of l e a s e d wire expense a s shown
on the accompanying statement (X-71l6-b).
(1)
Number of words s e n t 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 in accordance with a c t i o n t a k e n a t Governors 1 Conference
November 2 - 4 , 1925.
1,104,237
278.069
.
1,382,306
<
1
-
v
-
-
e
,
»
X-7H6-T3
BEPOBT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIEE SYSTEM, FEBRUARY, 1932.
3 ame of bank
Operators'
salaries
Operators'
overtime
Boston
$260.00
$ New York
1,133 84
Philadelphia
—
225.00
Cleveland
—
306.66
Richmond
190.00
—
Atlanta
270.00
Chicago
3,666.91 (#) 12.00
St.Louis
—
195.00
Minneapolis
200.00
Kansas £ i t y
287.50
Dallas
251.00
.75
San Francisco
380.00
—
Federal Reserve Board
Total
$7,365.91
$12.75
Less reimbursable charges:
-
-
—
—*
Total
(&)
(#)
(*)
(a)
Wire
rent al
Total
expenses
$260.00
1,133.84
—
225.00
306.66
420.00
230.00 (&)
—
270.00
3,678.01
—'
195.00
200.00
287.50
251.75
—
38O.OO
15,581.82
15.581.88
$15,811.88
$23,190.54
Treasury Department
Reconstruction Finance Corporation Federal Farm Loan Board . . . . . . .
Federal Farm Board
. .
Total reimbursable charges
$
-
•
—'
—
-
-
2,452.99
2,106.87
42.48
62.74
$4,665.08
$18.525.46
Pro r a t a
share of
total
expenses
Credits
$650.24
3,341.99
694.71
1,370.88
1,339-39
1,372.74
2,041.51
1,559-84
763.25
1,546.88
1,711.75
2,132.28
$260.00
1,133.84
225.00
306.66
420.00
270.00
3,678.91
195.00
200.00
287.50
251.75
380.00
—
$18,525-46
—
$7,b08.66
Payable to
Federal
Reserve
Board
$390.24
2,202.15
469.71
1,064.22
919.39
1,102.74
1,637.40 (*)
1,364.84
563.25
1,259.38
1,46o.oo
1,752.28
-
$12,554.20
1,637.40 (a)
$10,916.80
Main l i n e r e n t a l , Richmond-Washing ton.
Includes s a l a r i e s of Washington operators.
Credit.
Amount reimbursable to Chicago.
Oi
X-7121
» 859
FEDERAL
ft|
S 3 R VE BOARD
STATEMENT FOR THE PRESS
For r e l e a s e i n Morning Papers,
Monday, March 28, 1932.
The following summary of general b u s i ness and f i n a n c i a l conditions i n the
United S t a t e s , "based upon s t a t i s t i c s
f o r the months of February and March,
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 i n
t h e monthly reviews of t h e Federal r e serve banks •
Volume of i n d u s t r i a l production and f a c t o r y employment increased from
January to February by an amount smaller than i s usual at t h i s season.
Im-
provement in the banking s i t u a t i o n during February and the f i r s t t h r e e weeks
of March "as r e f l e c t e d i n a d e c l i n e in bank suspensions and a r e t u r n flow of
currency from the p u b l i c t o the banks.
Production and employment - Output of i n d u s t r i a l products increased l e s s
than s e a s o n a l l y i n February and the Board's index, which makes allowance f o r
the usual seasonal v a r i a t i o n s , declined from 71 per cent of t h e 1923-1925
average to 70 per c e n t .
A c t i v i t y i n the s t e e l i n d u s t r y during February and
the f i r s t t h r e e weeks of March showed l i t t l e change from t h e January r a t e ,
although o r d i n a r i l y s u b s t a n t i a l i n c r e a s e s a r e reported a t t h i s time of y e a r .
Automobile production continued i n small volume, showing none of the u s u a l
seasonal expansion, and t h e number of cars produced i n the three-month period
ending i n February was about 35 per cent l e s s than i n the corresponding period
a year ago.
In the lumber i n d u s t r y , output declined f u r t h e r , c o n t r a r y to
seasonal tendency.
A c t i v i t y at cotton m i l l s and shoe f a c t o r i e s increased by
more than the seasonal amount and was a t about the same l e v e l as i n t h e corresponding month l a s t y e a r .
Volume of employment at f a c t o r i e s increased i n February by somewhat l e s s
X-71S
3 6 0
——
2
than the u s u a l seasonal amount.
In the i r o n and s t e e l , automobile and
machinery i n d u s t r i e s t h e number employed showed an i n c r e a s e smaller than
i s usual i n t h i s month, and at lumber m i l l s a continued d e c l i n e i n employment was r e p o r t e d .
At establishments producing f a b r i c s , wearing a p p a r e l ,
and shoes volume of employment increased by more than t h e seasonal amount.
Daily average value of t o t a l b u i l d i n g c o n t r a c t s awarded, as r e p o r t e d
by the F. W. Dodge Corporation, showed l i t t l e change i n February and the
f i r s t half of March, and f o r the period between the f i r s t of January and
t h e middle of March the value of c o n t r a c t s was 65 per cent l e s s than a year
ago, r e f l e c t i n g continued d e c l i n e s i n r e s i d e n t i a l b u i l d i n g as well as i n
other types of c o n s t r u c t i o n ; p a r t of t h e decrease i n the value of awards r e f l e c t s
reductions i n b u i l d i n g c o s t s .
D i s t r i b u t i o n - Carloadings of merchandise and of miscellaneous f r e i g h t
showed none of the u s u a l seasonal i n c r e a s e i n February, while s a l e s a t department s t o r e s remained unchanged, as i s u s u a l a t t h i s season.
Wholesale p r i c e s - Wholesale commodity p r i c e s , as measured by t h e index
of the Bureau of Labor S t a t i s t i c s , declined f u r t h e r from 67 per cent of the
1926 average f o r January t o 66 per cent f o r February.
Between the f i r s t week
of February and the t h i r d week of March, t h e r e were i n c r e a s e s i n the p r i c e s
of cotton, l i v e s t o c k , and meats, while p r i c e s of g r a i n s , nonferrous metals
and imported raw m a t e r i a l s including s i l k , sugar, and rubber declined considerably.
Bank c r e d i t - In t h e banking s i t u a t i o n the important developments i n
February and the f i r s t h a l f of March were a considerable r e d u c t i o n i n the
number of bank suspensions and a r e t u r n flow of currency from the p u b l i c to
X-7121
S
6
i
*-3™
the baiilcs.
The c o u n t r y ' s stock of monetary gold declined i n February hut i n -
creased somewhat i n the f i r s t h a l f of March.
Member "bank r e s e r v e "balances,
a f t e r decreasing almost continuously since l a s t summer, showed a s l i g h t i n crease f o r the f i r s t two weeks i n March.
Purchases of United S t a t e s Govern-
ment o b l i g a t i o n s by the Federal r e s e r v e banks beginning i n March were accompanied by a considerable d e c l i n e i n member bank indebtedness t o the r e s e r v e
banks.
Loans and investments of member banks i n leading c i t i e s continued to dec l i n e u n t i l the middle of March when t h e r e was a s u b s t a n t i a l i n c r e a s e , owing
l a r g e l y to the banks 1 purchases of United S t a t e s Government s e c u r i t i e s , issued
on March 15.
Demand and time d e p o s i t s of the se banks decreased f u r t h e r during
February but showed l i t t l e change i n the f i r s t h a l f of March.
Open market r a t e s on acceptances and commercial paper declined during
e
February and the f i r s t h a l f of March.
During t h i s p e r i o d y i e l d s on Treasury
and other high grade bonds decreased to the lowest p o i n t s i n c e e a r l y December,
but a f t e r the middle of t h e month y i e l d s on high grade corporate bonds increased
s omewhat.
262
FEDERAL RESERVE BOARD
WASHINGTON
March 28, 1932.
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE B O A R D
SUBJECT:
X-7123
Holidays during A p r i l , 1932,
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 the d a t e s s p e c i f i e d , during .April, 1932, account h o l i d a y s :
Tuesday
April 12
Charlotte
H a l i f a x Day
Wednesday
April 13
Birmingham
Birthday of
Thomas J e f f e r s o n
Tuesday
April 19
Salt Lake City
Arbor Day
Tuesday
April 19
Boston
P a t r i o t s ' Day
Thursday
April 21
Dallas
El Paso
Houston
San Antonio
Friday
April 22
Omaha
Arbor Day
Tuesday
April 26
Atlanta
Birmingham
Jacksonville
Southern Memorial
Day
San J a c i n t o Day
On the d a t e s i n d i c a t e d , the o f f i c e s a f f e c t e d w i l l not p a r t i c i p a t e in e i t h e r the Gold Fund or the Federal r e s e r v e note c l e a r i n g .
P l e a s e i n c l u d e c r e d i t s f o r the banks a f f e c t e d on each holiday
with your c r e d i t s f o r the following business day, and make no shipments
of Federal r e s e r v e n o t e s , f i t or u n f i t , f o r account of the head o f f i c e s
a f f e c t e d on the h o l i d a y s mentioned.
GOVERNORS
TO
Very t r u l y yours,
J . C. Noell,
Assistant Secretary
OF ALL F. B. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7124
March 28, 1932.
SUBJECT:
Hew Issue Treasury B i l l 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 in
Government s e c u r i t i e s "between Federal reserve banks, the
code word "UOXDEBABK" has been designated to cover a new
i s s u e of Treasury B i l l s , dated March 30, 1932, and maturing June 29, 1932.
This word should be i n s e r t e d in the Federal
reserve t e l e g r a p h code book, following the supplemental
code word "HOXDEAESE." on page 172.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. E. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7126
April 4, 1932.
SUBJECT:
Change i n I n t e r - D i s t r i c t Time Schedule.
Dear Sir:*
In accordance with a request of the Federal
Reserve Bank cf S t . Louis, the Federal Reserve Bank
of A t l a n t a having agreed t h e r e t o , the Federal Reserve
Board has approved a change i n the i n t e r - d i s t r i c t time
schedule of a v a i l a b i l i t y items from L o u i s v i l l e to
Birmingham, from two days to one day.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
265
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7128
A p r i l 8, 1932.
SUBJECT:
New Issue Treasury g i l l 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 r e s e r v e "banks, t h e
code word "NOXDECREE" has "been designated to cover a new
i s s u e of Treasury B i l l s , dated A p r i l 13, 1932, and maturing J u l y 13, 1932.
This word should "be i n s e r t e d i n the Federal r e s e r v e
t e l e g r a p h code book, following the supplemental code word
"NOXDEBARK" on page 172.
Very t r u l y y o u r s ,
J . C. H o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
t 266
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7129
A p r i l 13, 1932.
SUBJECT:
Daylight Saving Schedule, 1932.
, Dear S i r :
Beginning Monday» April 25th, and ending Saturday,
September 24th, the following Federal r e s e r v e t a n k s and
t r a n c h e s w i l l operate iandeir d a y l i g h t saving schedule*
Bos toil
New York
Buffalo
Philadelphia
Pittsburgh
Chicago
The Federal r e s e r v e "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 2nd to Augiist 3 1 s t , i n c l u s i v e , 9:30 a.m. to 2:00 p.m. , except; Saturday, when the hours
w i l l be 9:00 a.m. to 12:00 noon, mountain time.
Salt Lake City Branch from May 2nd t o September 30th,
i n c l u s i v e , 9:00 a.m. to 2:00 p . m . , except Saturday, when
banking hours w i l l be 9:00 a.m. to 12:00 noon, mountain time.
Please n o t i f y branches.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAMS.
I 267
X-7130
O17 TH3A.U Q ? ENfilAVIMG AITI) PRINTING
T
Federal 'Reserve Motes, Series 1928.
March 1 to 24, 1932.
$5
Boston
New York
Philadelphia
Cleveland
Atlanta
Kansas City
Dallas
fan Francisco
38,000
156,000
56,000
38,000
34,000
3,000
-
48,000
#10
32,000
90,000
24,000
40,000
18,000
23,000
10,000
#20
—
-
14,000
10,000
10,000
Ill m w-W*W-- --W-W
373,000
237,002
644,000
sheets, @
34i000_
$92.50 per M,
Total
Sheets
Amount
70,000
246,000
94,000
88,000
62,000
26,000
10,000
48,000
$6,475.00
22,755.00
8,695.00
8,140.00
5,735.00
8,405.00
925.00
4,440.00
644,000
$59,570.00
$59,570.00
£-7133.
# 6 8
A p r i l 14, 1932.
C.S. Hamlin.
THE GLASS BILL.
Reply t o the Memorandum of Governor Harrison, and l e t t e r s of
February 6, and A p r i l 7, 1932.
On A p r i l 7, 1932, Governor Harrison sent to the Banking and Currency
Committee of t h e Senate, a memorandum commenting on each s e c t i o n of t h e
o r i g i n a l Glass b i l l , - Senate 4115 - and on the amendments suggested by the
Federal Reserve Board.
He a l s o enclosed a copy of a l e t t e r sent by him to Senator Glass dated
February 6, 1932.
In the l e t t e r of February 6, Governor Harrison s t a t e d t h a t he would
withhold d e t a i l e d comments on t h e b i l l pending the r e p o r t thereon of
Dr. Goldenweiser and Dr. Burgess.
He d i d , however, d i s c u s s the p r o v i s i o n s as t o open market o p e r a t i o n s
and some o t h e r s , and s t r o n g l y a t t a c k e d t h e increased power given to the
Federal Reserve Board, r e f e r r i n g to i t as a p o l i t i c a l l y appointed body.
He s t r e s s e d the n e c e s s i t y f o r autonomy i n the Federal r e s e r v e banks
and made t h r e e suggestions as to the amendments t o t h e Federal Reserve Act.
These suggestions were:
1.
To reduce the number of d i r e c t o r s of each bank so as
t p c o n c e n t r a t e r e s p o n s i b i l i t y and t o encourage
s u p e r v i s i o n and management through t h e experienced
d i r e c t o r s . ( I t a l i c s mine).
2.
A grant of power f o r removal of incompetent bank
officers.
3.
R e s t r i c t i o n upon borrowing by bank o f f i c e r s except
with approval of a cemmittee of d i r e c t o r s .
X-7131
\
-
2 -
1 369
The f i r s t suggestion w i l l tie taken up l a t e r .
As t o the second suggestion, i t w i l l s u f f i c e now t o s t a t e t h a t i n t h e
memorandum, Governor Harrison s t a t e s t h a t t h i s should not "be done a t t h e
p r e s e n t time.
IIIn t h e l e t t e r of A p r i l 7, 1932, accompanying t h e memorandum, Governor
Harrison admits " c e r t a i n past d e f e c t s , and t h e need f o r p r o v i s i o n f o r p o s s i b l e
f u t u r e a b u s e s , " "but i n another p a r t of the l e t t e r s t a t e s t h a t " t h e r e do not
appear to he any p a r t s of t h e Glass b i l l f o r which t h e r e i s an imperative need
f o r immediate p a s s a g e . "
The only exceptions made t o t h i s sweeping condemnation a r e the Federal
L i q u i d a t i n g Corporation and the "branch "banking p r o v i s i o n ; t h e former, he
s t a t e s , might he h e l p f u l and the l a t t e r he s t a t e s would be h e l p f u l .
He r e a f f i r m s t h e p o s i t i o n taken by the Federal Reserve Bank i n 1929 t h a t
only t h e discount r a t e and open market o p e r a t i o n s can e f f e c t i v e l y r e g u l a t e
t h e p r i c e and t o t a l volume of c r e d i t .
He s e v e r e l y c r i t i c i s e s t h e attempt of the Federal Reserve Board t o
c o n t r o l through d i r e c t a c t i o n t h e loan or investment p o l i c i e s of i n d i v i d u a l
banks.
He admits, however, t h a t d i r e c t a c t i o n has i t s u s e s i n d e a l i n g with
i n d i v i d u a l banks u s i n g more than t h e i r s h a r e of Federal r e s e r v e c r e d i t , but
he a s s e r t s t h a t i t i s n e i t h e r an e f f e c t i v e nor s u i t a b l e method f o r general
c o n t r o l of c r e d i t or t h e u s e s t o which c r e d i t may be p u t , i n v o l v i n g as i t
does an assumption of r e s p o n s i b i l i t y f o r the management of i n d i v i d u a l banks
which could not be e f f e c t i v e l y f u l f i l l e d .
I s h a l l not undertake i n t h i s connection t o go over t h e arguments f o r
X-7131
or a g a i n s t d i r e c t presButei
w i l l "be s u f f i c i e n t t o point out t h a t the
f e d e r a l Reserve Bank of Hew York, i n 1929, wished to i n c r e a s e discount
r a t e s to prevent a runaway market which i t believed was imminent; t h a t the
Board r e f u s e d t o i n c r e a s e t h e discount r a t e but kept i n t h e 5$ r a t e ,
e x e r c i s i n g d i r e c t p r e s s u r e upon the member banks to c o n t r o l t h e i r s p e c u l a t i v e
l o a n s , thus t a k i n g back p a r t of the Federal r e s e r v e c r e d i t which had seeped
i n t o s p e c u l a t i v e markets; t h a t the runaway market f e a r e d by t h e Federal
Reserve Bank did not eventuate; t h a t on the c o n t r a r y , during the p e r i o d of
d i r e c t p r e s s u r e , - from e a r l y i n February t o e a r l y i n June, 1929, - the t o t a l
b i l l s and s e c u r i t y holdings of the Federal Reserve Bank of Hew York s t e a d i l y
d e c l i n e d , while i t s r e s e r v e r a t i o s t e a d i l y i n c r e a s e d ; t h a t f o r the rfaole
System, Federal r e s e r v e c r e d i t declined 193 m i l l i o n s during t h i s p e r i o d ; t h a t
the l a r g e gold imports were kept by t h i s d i r e c t p r e s s u r e from s w e l l i n g the
member bank r e s e r v e s and were used t o t a k e down acceptances, thus avoiding a
tremendous f u r t h e r expansion of member bank c r e d i t ; t h a t member bank reserves
i n f a c t declined 68 m i l l i o n s during t h i s p e r i o d .
The f a c t i s t h a t d i r e c t p r e s s u r e under the 5$ r a t e was so s u c c e s s f u l
t h a t about t h e f i r s t of June, 1929, t h e Federal Reserve Bank informed t h e
Federal Reserve Board t h a t t h e r e was s h o r t l y t o be expected a commercial need
f o r expansion of Federal r e s e r v e c r e d i t ; t h a t the member banks were a f r a i d
to i n c r e a s e t h e i r borrowings, and t h a t an easing p o l i c y "rould soon be essential.
Governor H a r r i s o n , i n h i s l e t t e r , c r i t i c i s e s Section 3 of t h e Glass
b i l l , as amended by t h e Federal Reserve Board, perhaps more s e v e r e l y than
any o t h e r Section of t h e b i l l .
He a b s o l u t e l y opposes t h e grant of po^er i n
> 271
X-7131
— 4 —
t h i s Section to c l o s e the discount window to banks abusing t h e discount
p r i v i l e g e s and to suspend such banks from f u r t h e r use of Federal r e s e r v e
facilities.
He a l s o o b j e c t s t o the duty imposed by t h i s Section on f e d e r a l r e s e r v e
banks to keep themselves informed as t o the loan and investment p o l i c i e s of
the member banks, ( t h e imposition of which duty i t may be p a r e n t h e t i c a l l y
s t a t e d was s t r o n g l y recommended by the Federal Advisory Council i n February,
1931.)
He s t a t e s t h a t t h e powers granted and the d u t i e s imposed by t h i s Section
would be i n e f f e c t i v e , would involve r e s p o n s i b i l i t i e s which n e i t h e r t h e Fede r a l r e s e r v e bank nor t h e Federal Reserve Board could f u l f i l l , and t h a t the
assumption of such powers would be harmful to the member banks and to the
Federal Reserve System as a whole.
In t h i s connection, I would p o i n t out t h a t both Governor Harrison and
Mr. Owen D. Young, who signed the memorandum s t a t i n g t h e above o b j e c t i o n s ,
took a very d i f f e r e n t view of t h e m a t t e r i n t h e i r testimony b e f o r e the
Sub-committee of the Senate.
On January 20, 1931, Governor Harrison suggested t o t h e Sub-committee
t h a t power should be given to the Federal r e s e r v e banks, or t h e Federal Reserve Board, to suspend a member bank from any or a l l of the p r i v i l e g e s of
membership, during a given p e r i o d , i n the event t h a t the bank has not
conducted i t s e l f i n t h e s a f e s t way f o r the d e p o s i t o r s .
(Testimony, p . 4 6 ) .
On February 4, 1931, Mr. Owen D. Young s t a t e d to the Sub-committee that
the Federal r e s e r v e bank should have the power to l i m i t or r e f u s e rediscount
even of e l i g i b l e p a p e r , and to suspend other p r i v i l e g e s of membership, i f t h e
banking p r a c t i c e s of any p a r t i c u l a r bank were, i n i t s judgment, unsound, and
X-7131
272
- 5 t h e r e f o r e subjected i t s depositors id tinresLsoiiable r i s k , e i t h e r as t o
l i q u i d i t y or s e c u r i t y , with a r i g h t of appeal on the p a r t of the member
bank i n case the Federal Reserve Bank exercised i t s power u n f a i r l y , and
t h a t i f the unsound p r a c t i c e s were p e r s i s t e d i n , the Federal Reserve Board,
on complaint of any Federal r e s e r v e bank, might expel t h e bank from membership.
(Testimony, p . 356).
Both Governor Harrison and Mr. Young were asked by the Chairman of the
Sub-committee whether under e x i s t i n g law t h e Federal r e s e r v e banks had not
the r i g h t to r e f u s e t o discount e l i g i b l e paper.
Governor Harrison r e p l i e d t h a t t h a t had always been h i s opinion, and
t h a t he had so advised t h e Federal Reserve Board when he was i t s Counsel,
but t h a t t h i s r i g h t had been denied.
(Testimony, p p s . 47, 4 8 . )
Mr. Young t o l d t h e Sub-committee t h a t t h e d i r e c t o r s had never been
able to agree t h a t the power was c l e a r l y enough expressed to warrant such
a c t i o n by the Board of D i r e c t o r s ; t h a t he believed t h e power now e x i s t e d
but t h a t such an e x t r a o r d i n a r y power and the o b l i g a t i o n t o execute i t , should
be made c l e a r .
(Testimony, p . 363).
The Glass b i l l , a s amended, makes e x p l i c i t t h e s e g r a n t s of powers, and
yet the memorandum, signed by both Governor Harrison and by Mr. Young,
p o s i t i v e l y o b j e c t s t o such power as harmful both to the member banks and to
the Federal Reserve System!
I t i s p o s s i b l e t h a t the Federal r e s e r v e bank may claim t h a t i t desired
t h i s power only over i n d i v i d u a l banks borrowing more than other banks of
their class.
This, however, would be tantamount t o saying t h a t i f any one
6
- -
X-7131
273
"bank l o s e s i t s head in t h e way df s p e c u l a t i v e l o a n s , they want power to
c o r r e c t i t , hut i f a l l banks a r e i n f e c t e d with the s p e c u l a t i v e mania, they
d e s i r e no power except t h e i r e x i s t i n g powers over t h e discount r a t e s on
commercial p a p e r .
The power vested in the Federal Reserve Board by Section 3 of the
Glass b i l l , would, of course, be exercised only on i n d i v i d u a l banks, but
i t i s a power which could not be d e f e a t e d by proof t h a t not one but a l l
banks a r e possessed by t h e s p e c u l a t i v e mania.
III.
Analysis of Memorandum.
The memorandum comments on each s e c t i o n of the b i l l in d e t a i l .
I t opposes every s e c t i o n of the o r i g i n a l b i l l except Section 16,
r e l a t i n g to a l a r g e r c a p i t a l f o r f u t u r e n a t i o n a l banks, which i t s t a t e s
i t p r e f e r s to the d r a f t submitted by t h e Federal Reserve Board.
I t approves in general the Federal Reserve Board's recommendations
as to 22 s e c t i o n s of the o r i g i n a l b i l l , but s t a t e s t h a t of the se 22, 13
a r e not now necessary, and should be postponed f o r f u t u r e c o n s i d e r a t i o n .
Among these l a t t e r were;
Most of the recommendations as to a f f i l i a t e s , and
e s p e c i a l l y the divorce of a f f i l i a t e s .
The 90-day clause f o r member bank c o l l a t e r a l n o t e s
secured by e l i g i b l e paper.
Supervision of holding companies.
Removal of o f f i c e r s and d i r e c t o r s of member banks.
X-7131
- 7 -
,
274
The memorandum opposes t h e f a l l o w i n g recommendations of t h e Boards
The power to suspend member banks f o r abuse of Federal
reserve f a c i l i t i e s .
The Board's b i l l covering new r e s e r v e p r o v i s i o n s .
The s e p a r a t i o n of bank and a f f i l i a t e stock.
The divorce of a f f i l i a t e s , " t h e d e s i r a b i l i t y of which a t
any time i s d o u b t f u l " .
IV.
The Glass b i l l , with the amendments of the Federal Reserve Board, i s
designed to give some assurance to d e p o s i t o r s and t h e p u b l i c t h a t the
s p e c u l a t i v e excesses culminating in the crash of 1929 w i l l not be repeated.
The s p e c u l a t i v e craze which swept over the c o r n t r y w i l l take i t s
p l a c e in h i s t o r y along with t h e t u l i p mania and the South Sea bubble.
The crash of 1929 was probably one of t h e worst i n the w o r l d ' s
history.
I t r e p r e s e n t e d a s u c c e s s f u l r a i d of t h e s p e c u l a t i n g p u b l i c upon
the banks of t h e country.
The banks were unable to stem t h i s r a i d .
On the c o n t r a r y , they
p e r m i t t e d i t to increase by undue and excessive loans to t h e i r customers.
The f i n a l crash brought r u i n to thousands and thousands of our
people and was f e l t over t h e whole world.
The Glass b i l l o f f e r s a remedy by giving the Federal Reserve
Board t h e r i g h t and duty to p r o t e c t the p u b l i c i n t e r e s t a g a i n s t any
such f u t u r e mania .of s p e c u l a t i o n .
The Federal Reserve Bank of Uew York admits p a s t d e f e c t s and the
need f o r some p r o v i s i o n f o r f u t u r e p o s s i b l e abuses.
I t s u g g e s t s , as
X-7131
.
s t a t e d b e f o r e , t h a t the d i r e c t o r s of each bank be reduced in numbers
11
so
as to .concentrate the r e s p o n s i b i l i t y and to encourage s u p e r v i s i o n and
management through the experienced d i r e c t o r s " .
"Through the experienced directors 1 *!
To what d i r e c t o r s does t h i s
refer?
At f i r s t b l u s h i t would seem to r e f e r to the Federal r e s e r v e bank
directors.
Such a change, however, would d i s r u p t the Federal Reserve
System by removing a l l d i r e c t o r s r e p r e s e n t i n g t h e p u b l i c i n t e r e s t , as
d i s t i n c t from t h e member banks.
I assume, however, t h a t t h e r e f e r e n c e i s to the d i r e c t o r s of the
member banks.
Coupled with t h i s recommendation i s a recommendation l i m i t i n g
borrowings by bank o f f i c e r s , and also giving power of removal of i n competent bank o f f i c e r s .
The memorandum, however, s t a t e s t h a t the l a t t e r suggestion should
not be considered a t the p r e s e n t time and, presumably, t h e same sugg e s t i o n would ap-oly to t h e other recommendations.
V.
To sum up; The Federal r e s e r v e bank admits abuses in the p a s t , and admits the
n e c e s s i t y f o r p r o v i s i o n a g a i n s t p o s s i b l e f u t u r e abuses, but i t opposes
the present b i l l , and in e f f e c t takes the p o s i t i o n t h a t p r a c t i c a l l y no
l e g i s l a t i o n i s imperatively demanded a t the p r e s e n t time.
3 7 5
X-7131
- 9 -
2 7 6
The correspondence contaitiB "the statement t h a t the b u s i n e s s in the
United S t a t e s i s more dependent noon the s e c u r i t i e s market ( c a l l e d in the
correspondence the
11
c a p i t a l market") than upon the banks, and t h a t business
recovery i s dependent upon t h e proper f u n c t i o n i n g of the c a p i t a l market.
There may be an element of t r u t h in t h i s statement as r e g a r d s what i s
p o p u l a r l y known as "Big Business", but i t i s c e r t a i n l y not t r u e a s to t h a t
l a r g e volume of b u s i n e s s which i s a b s o l u t e l y dependent unon s h o r t term
c r e d i t extended by banks under t h e auspices of t h e Federal Reserve System.
I t should not be f o r g o t t e n t h a t i t was the secession of "Big Business"
from the banks, and the i s s u e of t h e i r own s e c u r i t i e s on s p e c i a l l y f a v o r a b l e
terms beginning in 1927 , and l a t e r t h e i r a c t i o n in pouring t h e funds thus
obtained into t h e maelstrom of s p e c u l a t i o n , t h a t was a major cause in the
f i n a l c o l l a p s e of 1929.
Yet the attempt of t h e Glass b i l l to prevent a
r e c u r r e n c e of t h e s e p r a c t i c e s , i s condemned as being i n j u r i o u s to the
c a p i t a l market, upon t h e p r o s p e r i t y of which t h e r e v i v a l of b u s i n e s s
a c t i v i t y i s s t a t e d to depend.
The conclusion i r r e s i s t i b l y to be drawn from the correspondence and
memorandum i s t h a t the need f o r changes in the Federal Heserve System must
y i e l d and give precedence to t h e needs of t h e c a p i t a l market, and t h a t any
changes in the Federal "Reserve System which might a f f e c t the c a p i t a l
market would be most u n f o r t u n a t e .
The Glass b i l l as amended by the Board by p l a c i n g r e s t r a i n t upon
f u t u r e mad s p e c u l a t i o n , w i l l u l t i m a t e l y p l a c e the s e c u r i t i e s market upon
a much sounder foundation than e x i s t s today, and the argument t h a t
X-7131
i 277
' - 1 0 -
l e g i s l a t i o n "cringing about thiri Ultimkte r e s u l t should be postponed, seems to
be not sound.
I t i s a customary o b j e c t i o n to a l l remedial l e g i s l a t i o n
t h a t i t should be postponed, and t h e time w i l l never come when a l l w i l l
agree t h a t the t a s k should be then undertaken.
The Federal Reserve Bank, a s b e f o r e s t a t e d , denies t h a t t h e r e i s
a n e c e s s i t y f o r l e g i s l a t i o n on Smy s u b j e c t l a t h e Glass b i l l , except
p o s s i b l y the l i q u i d a t i n g Corporation and branch banks.
I t t a k e s the
p o s i t i o n squarely t h a t when l e g i s l a t i o n i s enacted, i t should give the
Federal r e s e r v e banks more complete autonomy, f r e e from a l l but very
general supervision by the Federal Reserve Board, b u t i t makes c l e a r
t h a t i f given t h i s autonomy, i t w i l l use i t in meeting another s p e c u l a t i v e
mania s o l e l y by t h e e x e r c i s e of the discount r a t e and open market operat i o n s , and t h a t too even though a l l of the member banks a r e f e e d i n g t h e
f i r e of u n b r i d l e d speculation by undue and excessive loans to t h e i r
customers on stock exchange c o l l a t e r a l .
I venture to express t h e view t h a t the p u b l i c demands something
more than t h i s , and t h a t i f such a wave of s p e c u l a t i o n should sweep over
the country again, i t w i l l f i n d the Federal "Reserve Board charged with
such power t h a t i t s f u t u r e warnings in the rmblic i n t e r e s t w i l l be
r e c e i v e d with r e s p e c t and c a r r i e d out with promptness.
i 278
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7133
A p r i l 15, 1932.
SUBJECT:
New Issue Treasury B i l l 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 r e s e r v e "banks, the
code word "NOXDECUR" has t e e n designated to cover a new
i s s u e of Treasury B i l l s , dated A p r i l 20, 1932, and maturing J u l y 20, 1932.
This word should be i n s e r t e d i n the F e d e r a l r e s e r v e
t e l e g r a p h code book, following the supplemental code word
"HOXDECREE" on page 172.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F. B. BAMS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7134
A p r i l 16, 1932.
SUBJECT:
Expense, Main Lines, Leased Wire System,
March, 1932.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeographed
s t a t e m e n t s , X-7134-a and X-7134-h, covering i n d e t a i l
operations of t h e main l i n e s , Leased Wire System, during
the month of March, 1932.
P l e a s e c r e d i t t h e amount payable "by your "bank i n
the general 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, n a t i o n a l Banks, f o r account of " S a l a r i e s
and Expenses, Federal Reserve Board, Special Fund", Leased
Wire System, sending d u p l i c a t e c/D to t h e F e d e r a l 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.
X-7134-a
REPORT SHOWING- CLASSIFICATION AND N M E OF WORDS TRANSMITTED OVER MAIN LINES
U BR
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR TEE MONTH OF MARCH, 1932.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
.Atlanta
Chicago
St..-Louis
Minneapolis
Kansas City
Dallas
San J'rancisco
JTotal
Words sent by
New York chargea b l e to other
F. R. Banks (1)
30,090
170,072
31,219
65,622
60,084
56,477
99,314
74,286
31,498
73>79
64,936
110.748
867,825
1,212
-
2,155
2,010
2,217
7,216
3,378
2,400
2,232
2,507
8,536
3,381
37,844
F„ R. Board business
Net Federal
reserve
bank
business
31,902
170,072
33,374
67,632
62,301
63,693
102,692
76,686
33,730
75,986
73,472
114.129
905,669
Percent of t o t a l
bank bus ines s (*)
3.52
18.78
3.69
7.47
6.88
7.03
11.34
8.47
3.72
8.39
8.11
12.60
100.00
310,323
Treasury Department t u s i n e s s Incoming and Outgoing
Total words t r a n s m i t t e d over main l i n e s
(*)
These percentages used i n c a l c u l a t i n g the t>ro r a t a share of l e a s e d wire exnense as shown
on the accompanying statement (X-7134-b).
(1)
Number of words sent by New York to other F. R. Banks f o r t h e i r sole b e n e f i t charged t o
banks i n d i c a t e d in accordance with a c t i o n taken a t Governors' Conference
November 2-4, 1925-
1,215,992
524,167
1,740,159
X-7Ij>4-D
RLPOH'i' OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, MARCH, 1932.
Name of bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Miruaeapol i s
Kansas City
Dallas
San F r a n c i s c o
Federal Reserve Board
Total
Operators'
salaries
$260.00
1,134.15
225.00
306.66
190.00
270.00
3,792.52 (#)
195.00
203.75
287.50
251.00
380.00
—•
557,495.52
Operators 1
overtime
-
2.00
Main l i n e r e n t a l , Richmond-Washington.
I n c lu d e s s a l a r i e s of Washington o p e r a t o r s .
Credit.
Amount reimbursable to Chicago.
Total
expenses
$260.00
1,136.15
—
225.00
306.66
230.00 (&)
420.00
—
—
270.00
14.00
3,806.52
2.00
—
197.00
203.75
287-50
251.00
380.00
—
15.723.79
15.723.79
$18.00 $15,953.79
'>23,467.37
$
• v.
vn
v
Less reimbursable charges:
Treasury Department . .
Reconstruction Finance Corporation
Federal Farm Loan Board....
Federal Farm Board
Total reimbursable charges
Total
(&)
(#)
(*)
(a)
Wire
rental
$
-
-
Pro r a t a
share of
total
exoenses
Credits
$577.23
3,079.65
605.ll
1,224.97
1.128.22
1,152.82
1,859.60
1,388.96
610.03
1,375.84
1,329.93
2,066.22
$260.00
1,136.15
225.00
306.66
420.00
270.00
3,806.52
197.00
203.75
237.50
251.00
380.00
$317.23
1,943.50
380.11
918.31
708.22
882.82
1,946.92 ( * \
1,191.96
406.28
1,088.34
1,078.93
1,686.22
$7,743.58
$10,601.92
1,946.92 ( a )
$ 8,655.00
—
—
$16,398.58
Payable to
Federal
Reserve
Board
3,119*49
3,881.93
27-90
39. 47
$7.068.79
$16.398.58
'JQ
g
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7135
A p r i l 18, 1932.
SUBJECT:
Addresses on Banking and C r e d i t .
Dear S i r :
In order t h a t the Federal Reserve Board may "be
advised c u r r e n t l y with regard t o addresses on hanking
and c r e d i t made by persons connected with the Federal
Reserve System, i t w i l l he appreciated i f you w i l l f u r n i s h the Board with copies of a l l addresses on t h e s e
s u b j e c t s d e l i v e r e d by o f f i c e r s and employees of your
bank.
Copies of such addresses need not be f u r n i s h e d
the Board i n advance of t h e i r d e l i v e r y but i t w i l l be
a p p r e c i a t e d i f they a r e sent to the Board promptly.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO CHAIRMEN OF ALL F. R. BANKS.
283
X-7136
FBIHClPiLt D t l l ^ ^ C t e S KBfWEEN H.5. 11362 and H.R. 10841.
On March 7, 1932, Mr. S t e a g a l l introduced H.R. 10241, a b i l l "to
amend t h e National Banking Act and the Federal Reserve Act, and to p r o v i d e a guaranty fund f o r d e p o s i t o r s i n n a t i o n a l "banks."
On A p r i l 14,
1932, he introduced H.R. 11362, a b i l l having g e n e r a l l y t h e same p u r poses .
In the following paragraphs, t h e r e a r e s e t f o r t h the more import-
ant d i f f e r e n c e s between the two b i l l s , (H.R. 10241 being r e f e r r e d to as
t h e old b i l l and H.R. 11362 as the new b i l l . )
The old b i l l contained a p r o v i s i o n e l i m i n a t i n g t h e e x i s t i n g a u t h o r i t y f o r the o r g a n i z a t i o n of a n a t i o n a l bank with a minimum c a p i t a l of
$25,000 i n a c i t y of l e s s than 3,000 i n h a b i t a n t s .
The p r o v i s i o n e l i m i n a t -
ing t h i s a u t h o r i t y i s r e t a i n e d i n the new b i l l which p r o v i d e s , however,
t h a t a n a t i o n a l bank may be organized with a c a p i t a l of not l e s s than
$25,000 f o r t h e purpose of succeeding t o t h e business of an e x i s t i n g bank.
Whereas the old b i l l would have eliminated the double l i a b i l i t y
of shareholders of n a t i o n a l banks h e r e a f t e r organized except those banks
which have 'branches, t h e new b i l l omits t h e exception as t o n a t i o n a l
banks having branches, thus making the exemption from double l i a b i l i t y
apply i n the case of a l l n a t i o n a l banks h e r e a f t e r organized.
The old b i l l contained a p r o v i s i o n e l i m i n a t i n g from the Federal
Reserve Act the p r o h i b i t i o n upon making c o l l e c t i o n or exchange charges
a g a i n s t Federal r e s e r v e banks, but the new b i l l would not change t h e
law on t h i s s u b j e c t .
The new b i l l c o n t a i n s c e r t a i n a d d i t i o n a l p r o v i s i o n s r e g a r d i n g
n a t i o n a l and member banks: (a) a l i m i t upon the r a t e of i n t e r e s t which
may be p a i d upon d e p o s i t s , (b) p r o v i s i o n s making t h e r a t e of dividend
X-71S6
-
2
-
which nay be paid, by a member ban 1 ; dependent upon the amount of i t s
s u r p l u s , and (c) p r o v i s i o n s f o r t h e removal of an o f f i c e r or d i r e c t o r
of a n a t i o n a l bank where h i s s e r v i c e i s detrimental to i t s o p e r a t i o n .
The p r o v i s i o n s of the old b i l l with r e f e r e n c e to the Federal
Banking L i q u i d a t i n g Board and the Guaranty Fund a r e a l s o amended
in certain p a r t i c u l a r s .
The old b i l l provided f o r a t o t a l i n i t i a l
payment by member banks of $200,000,000 ( i n a d d i t i o n to t h e payments by t h e United S t a t e s and the Federal Reserve Banks) based
p a r t l y upon demand d e p o s i t s and p a r t l y upon time d e p o s i t s , wherea s the new b i l l provides f o r an i n i t i a l payment by member banks
of only $100,000,000, based on a l l d e p o s i t s .
The new b i l l a l s o
p e r m i t s nonmember banks to become c o n t r i b u t o r s to the guaranty
fund and to share in i t s b e n e f i t s under c e r t a i n c o n d i t i o n s , one
of which i s t h a t t h e c o n t r i b u t i o n of a nonmember bank s h a l l be
*
twice t h e amount r e q u i r e d of a member bank having t h e same amount
of d e p o s i t s .
Authority i s a l s o given by the new b i l l f o r borrow-
ing by t h e L i q u i d a t i n g Board from the 'Reconstruction Finance
Corporation u n t i l January 22, 1934, up to t h e maximum of $500,000,000.
2841
i 285
X-7136-a
S M A Y OF THE PROVISIONS OF H.R. 11362.
U MR
The p r o v i s i o n s of t h i s b i l l d i v i d e themselves conveniently
into four portions:
(a) amendments t o t h e National Banking Laws; (t>)
amendments to the F e d e r a l Reserve Act; (c) p r o v i s i o n s a f f e c t i n g member
banks but not amending any s p e c i f i c p r o v i s i o n s of law; and (d) p r o v i s i o n s
e s t a b l i s h i n g a Federal Guaranty Fund f o r d e p o s i t o r s i n member banks of the
Federal Reserve System.
AMENDMENTS TO NATIONAL BAM DIG LAWS.
The amendments to t h e National Banking Laws, which a r e cont a i n e d i n Sections 1, 2, 3 and 4 of the b i l l , r e f e r i n a l l cases only to
n a t i o n a l banks which may be organized h e r e a f t e r .
t h r e e important changes i n the law:
(1)
These amendments contain
The e x i s t i n g a u t h o r i t y f o r the
o r g a n i z a t i o n of a n a t i o n a l bank with a minimum c a p i t a l of $25,000 i n p l a c e s
of not exceeding 3,000 i n h a b i t a n t s would be replaced by a p r o v i s i o n aut h o r i z i n g the f o r m a t i o n of a n a t i o n a l bank with a minimum c a p i t a l of $25,000
f o r the purpose of succeeding to the business of an e x i s t i n g bank, (2) no
n a t i o n a l bank may be organized u n l e s s i t has a s u r p l u s of not l e s s than
10# of i t s c a p i t a l s t o c k , and (3) p r o v i s i o n s f o r the double l i a b i l i t y of
shareholders of n a t i o n a l banks a r e e l i m i n a t e d .
Section 1 of t h e b i l l e l i m i n a t e s from Section 5138 of the
Revised S t a t u t e s the p r o v i s i o n t h a t n a t i o n a l banks may be organized i n
p l a c e s of not exceeding 3,000 i n h a b i t a n t s with a minimum c a p i t a l of
$25,000, and i n s e r t s a p r o v i s i o n i n l i e u thereof which would permit the
•
•
X-7136-a
-2-
t 286
formation of a n a t i o n a l tank f o r the purpose of succeeding to the "business of an e x i s t i n g hank, i n the d i s c r e t i o n of the Comptroller of the
Currency, with a minimum c a p i t a l of $25,000.
Section 3 of t h e b i l l amends Section 5138 of t h e Revised S t a t u t e s so as to provide t h a t no n a t i o n a l bank s h a l l be organized except
with an i n i t i a l surplus equal to 10% of i t s c a p i t a l s t o c k , and provides
a number of corresponding amendments to other p r o v i s i o n s of t h e n a t i o n a l
banking laws i n order t o make them conform to t h i s requirement.
Thus, f o r
t h i s purpose:
Section 5168 of the Revised S t a t u t e s , which r e q u i r e s t h e
Comptroller of the Currency to examine i n t o the condition
of a n a t i o n a l bank, and e s p e c i a l l y whether 50$ of i t s c a p i t a l
s t o c k has been paid i n , i n order to determine whether the bank
i s l a w f u l l y e n t i t l e d to commence b u s i n e s s , i s amended to r e q u i r e the Comptroller t o a s c e r t a i n a l s o whether 50$ of the
r e q u i r e d i n i t i a l surplus has been p a i d i n .
The Act of November 7, 1918, as amended, p r o v i d i n g f o r t h e
c o n s o l i d a t i o n of n a t i o n a l banks, and f o r t h e c o n s o l i d a t i o n of
a S t a t e bank with a n a t i o n a l bank, i s amended to r e q u i r e
t h a t the consolidated i n s t i t u t i o n i n each such case s h a l l
have an i n i t i a l s u r p l u s , as well as a c a p i t a l s t o c k , i n the
amount r e q u i r e d f o r the o r g a n i z a t i o n of a n a t i o n a l bank i n
the p l a c e i n which i t i s l o c a t e d .
*
Section 5154 of the Revised S t a t u t e s , providing f o r the conv e r s i o n of a S t a t e bank i n t o a n a t i o n a l bank, i s amended to
r e q u i r e t h a t the converted i n s t i t u t i o n have an i n i t i a l s u r p l u s
k 287
X-7136-a
— 3 —
not l e s s than t h a t r e q u i r e d f o r the o r g a n i z a t i o n of a
n a t i o n a l "bank i n the p l a c e i n which i t i s l o c a t e d .
Section 5140 of the Revised S t a t u t e s , r e q u i r i n g a t l e a s t
50$ of the c a p i t a l stock of a n a t i o n a l hank t o be p a i d i n
b e f o r e i t i s authorized to commence b u s i n e s s and t h e remainder to be p a i d i n i n 10$ monthly i n s t a l l m e n t s i s amended to
make s i m i l a r requirements with regard to t h e r e q u i r e d i n i t i a l
surplus.
Section 5141 of the Revised S t a t u t e s , which a u t h o r i z e s t h e
s a l e of t h e stock of any shareholder who f a i l s t o pay any
i n s t a l l m e n t on h i s stock as r e q u i r e d by law, i s amended so as
t o give t h e same a u t h o r i t y i n t h e case of a f a i l u r e to pay any
i n s t a l l m e n t of the i n i t i a l s u r p l u s .
Section 5205 of the Revised S t a t u t e s , which provides f o r
assessments upon stockholders of a n a t i o n a l bank i n case i t s
c a p i t a l s t o c k i s not paid up or i n case of an impairment t h e r e i n and f o r the appointment of a r e c e i v e r when the d e f i c i e n c y
i s not made up within t h r e e months a f t e r n o t i c e , i s amended to
provide f o r such assessments where t h e i n i t i a l s u r p l u s i s not
p a i d up and f o r the appointment of a r e c e i v e r where t h e def i c i e n c y i n i n i t i a l surplus i s not met w i t h i n the t h r e e months'
period.
Apparently an impairment i n i n i t i a l s u r p l u s would
not be grpunds f o r such an assessment.
The p r o v i s i o n of
Section 5)305 a u t h o r i z i n g the s a l e of the stock of a s h a r e -
X-7136-a
288
- 4 holder who f a i l s to pay such assessment a g a i n s t him would
be omitted "by t h i s amendment, apparently by mistake.
Section 5143 of t h e Revised S t a t u t e s , which a u t h o r i z e s r e ductions in c a p i t a l s t o c k of n a t i o n a l banks, i s amended so
as to include s u r p l u s in i t s p r o v i s i o n s .
The amendment i s
ambiguous, but a p p a r e n t l y a l l the p r e s e n t requirements f o r a
r e d u c t i o n of c a p i t a l , including t w o - t h i r d s ' vote of s h a r e h o l d e r s and approval of the Federal Reserve Board and of
the Comptroller-of the Currency, would be a p p l i c a b l e as to
every r e d u c t i o n in s u r p l u s .
Section 3 of the b i l l amends Section 5151 of the Revised
S t a t u t e s and Section 23 of t h e Federal Reserve Act so as to e l i m i n a t e
the p r o v i s i o n f o r the double l i a b i l i t y of shareholders as to n a t i o n a l
banks h e r e a f t e r organized.
Section 4
of t h e b i l l provides t h a t the p r o v i s i o n s of Sections
1, 2 and 3 s h a l l apply only to n a t i o n a l banks organized a f t e r the date
of the enactment of t h i s Act, s t i p u l a t i n g , however, t h a t the p r o v i s i o n s
of law amended by such s e c t i o n s s h a l l apply, in t h e i r now e x i s t i n g form,
to a l l n a t i o n a l banks organized p r i o r to t h e enactment of t h i s a c t .
X-7136-a
289
— 5 —
AMEREMENTS TO THE FSDERAL
zysvzve ACT.
S e c t i o n s 5 and 6 of t h e b i l l c o n t a i n amendments to the Federal
Reserve Act w i t h r e g a r d to the d i s t r i b u t i o n of earnings of Federal r e s e r v e banks, and t h e g i v i n g of immediate c r e d i t by Federal r e s e r v e banks
f o r items r e c e i v e d f o r c o l l e c t i o n .
S e c t i o n 5 would amend the f i r s t paragraph of Section 7 of the Fede r a l Reserve Act so a s to p r o v i d e t h a t the net e a r n i n g s of each Federal
r e s e r v e bank s h a l l be d i s t r i b u t e d as f o l l o w s :
A f t e r the nayment to member
banks of t h e 6$ dividend now provided f o r and t h e payment of 10$ of t h e
n e t e a r n i n g s to s u r p l u s , one-half of t h e remainder of t h e n e t e a r n i n g s
s h a l l be p a i d to t h e Federal Guaranty Fund f o r d e p o s i t o r s of member banks,
(provided f o r i n l a t e r s e c t i o n s of t h i s b i l l ) and t h e remaining one-half
s h a l l b e p a i d to t h e member banks in p r o p o r t i o n to the amount of t h e i r
c a p i t a l stock.
The payment of the f r a n c h i s e t a x by Federal r e s e r v e banks
to t h e United S t a t e s would thus be e l i m i n a t e d .
The second paragraph of
Section 7, with r e g a r d to t h e manner in which funds p a i d to t h e United
S t a t e s e i t h e r a s a f r a n c h i s e t a x or upon d i s s o l u t i o n of t h e Federal r e serve bank a r e to b e used, i s amended to make t h e n e c e s s a r y corresponding
changes.
Section 6 would amend Section 13 of t h e Federal Reserve Act by
adding a t t h e end of the f i r s t paragraph a new paragraph r e q u i r i n g a Fede r a l r e s e r v e bank upon a p p l i c a t i o n of " a sending bank" to g i v e immediate
c r e d i t f o r checks and d r a f t s r e c e i v e d from such bank f o r c o l l e c t i o n and
a u t h o r i z i n g the Federal r e s e r v e bank to charge I n t e r e s t on t h e amount of the
X-7136»a
— 6 ™
•
c r e d i t a t the c u r r e n t rediscount r a t e pending the c o l l e c t i o n of the
item or, with the approval of the Federal Reserve Board, to e s t a b l i s h
a time schedule f o r t h i s purpose.
i
391
X-7136-a
- 7 MISCELLANEOUS PROVISIONS NOT AMENDING ANY SPECIFIC
PROVISION OF LAW.
Sections 7, 8 and 9 of the b i l l contain c e r t a i n p r o v i s i o n s which
a f f e c t n a t i o n a l banks and member banks of the Federal Reserve System
but which do not in terms amend any s p e c i f i c p r o v i s i o n of the National
Banking Act, the Federal Reserve Act or any o t h e r s t a t u t e .
Section 7 would p r o h i b i t the payment of i n t e r e s t a t a r a t e in
excess of 4$ p e r annum by any member bank of the Federal Reserve System
upon any d e p o s i t made a f t e r the enactment of the a c t .
Section 8 would p r o h i b i t a member bank (a) to pay any d i v i d end u n l e s s i t s s u r p l u s i s more than 25$ of i t s p a i d - i n c a p i t a l stock,
(b) to pay any dividend a t a r a t e in excess of 6$ p e r annum u n l e s s
i t s surplus i s more than 50$ of i t s p a i d - i n c a p i t a l stock, or (c) to
pay any dividend i n excess of 8$, u n l e s s i t s surplus i s more than 100$
of i t s p a i d - i n c a p i t a l s t o c k .
Where i t s s u r p l u s i s more than 100$
of i t s p a i d - i n c a p i t a l s t o c k , the r a t e of dividend would not be l i m i t e d .
Section 9 would r e q u i r e the Comptroller of the Currency, whenever
he f i n d s t h a t the continued s e r v i c e of any o f f i c e r or d i r e c t o r of a n a t i o n a l bank i s d e t r i m e n t a l to i t s s a f e operation, to c e r t i f y t h i s f a c t to the
Federal Bank L i q u i d a t i n g Board (provided f o r in a l a t e r s e c t i o n of the
bill).
Within t h i r t y days t h e r e a f t e r the board would be r e q u i r e d to ho%d
a hearing a t which such o f f i c e r or d i r e c t o r would have the r i g h t to be
heard and be r e p r e s e n t e d by counsel.
If the board a f f i r m s the f i n d i n g
X-7136-a
-
8
k
*
-
of the Comptroller, i t would "be required to order the removal of the
o f f i c e r or d i r e c t o r and to n o t i f y the "bank involved, which must t h e r e upon take such a c t i o n as may be necessary to remove the o f f i c e r or
director.
I
2 9 2
*
2 9 3
X-7136-a
a 9 -
PROVISIONS FOB GUARANTY FUND FOE DEPOSITORS OF MEMBER BAMS.
The remaining s e c t i o n s of the b i l l , designated Sections 201 to 211,
and comprising what i s known a s T i t l e I I of the b i l l , provide f o r the
establishment of a Federal Bank Liquidating Board and f o r the guaranty
cf the d e p o s i t s of member banks.
Section 201 of the b i l l e s t a b l i s h e s a Federal Bank Liquidating
Board c o n s i s t i n g cf the Secretary of the Treasury, the Comptroller of the
Currency, and t h r e e c i t i z e n s of the United S t a t e s appointed by the P r e s i d e n t
by and with the advice and consent of the Senate.
The a p p o i n t i v e members,
not mere than one of whom s h a l l be of the same p o l i t i c a l p a r t y a s the
P r e s i d e n t , a r e to hold o f f i c e f o r four years and each i s to receive a
s a l a r y of $10,000 p e r annum.
The appointive members a r e i n e l i g i b l e during
the time they a r e in o f f i c e , and f o r one year t h e r e a f t e r , to hold o f f i c e
or employment in any member bank or in or on the Federal Reserve Board.
The L i q u i d a t i n g Board s h a l l e l e c t i t s own chairman and o t h e r o f f i c e r s
and may employ and f i x the compensation of i t s o f f i c e r s , a t t o r n e y s ,
a g e n t s , examiners and employees, but the compensation s h a l l not be a t
a r a t e in excess of $10,000 p e r annum in any c a s e .
Expenses a r e to be
p a i d out of the guaranty fund h e r e i n provided f o r .
Section 202 e s t a b l i s h e s a Federal guaranty fund f o r d e p o s i t o r s
in member banks of the Federal reserve system.
This fund i s to be
c r e a t e d by payments from t h r e e sources; (a) The e n t i r e amount h e r e t o f o r e p a i d to the United S t a t e s a s a f r a n c h i s e tax by the Federal reserve
X-7136-a
-
10 -
"banks s h a l l be p a i d by the United S t a t e s to th6 guaranty fond; (t>) She
Federal reserve "banks a r e to pay to the fund $150,000,000, the amount
r e q u i r e d of each to "be determined pro r a t a according to the amount
of i t s surplus on December 31, 1931; and (c) The board s h a l l r e q u i r e
the member banks to pay to the fund such an amount as i t may f i x , not
exceeding $100,000,000, the amount required of each member bank to be
determined pro r a t a according to i t s average d e p o s i t s during the precoding calendar y e a r .
At any tine a f t e r one year subsequent to the pay-
ment of the above amounts, the board -nay, i f in i t s judgment the amount
of the fund i s inadequate, r e q u i r e the member banks to pay annually to
the fund not more than $100,000,000 pro r a t e d among them according to
t h e i r average d e p o s i t s f o r the preceding calendar y e a r .
A l l sums pay-
a b l e e i t h e r by a Federal r e s e r v e bank or by a member "bank a r c s u b j e c t to
the c a l l of the L i q u i d a t i n g Board, except t h a t amounts a s s e s s e d a g a i n s t
member banks s h a l l be payable in i n s t a l l m e n t s of not more than 25$ of the
assessment.
I f a t any time the amount of the fund exceeds $500,000,000,
and in the judgment of the Board i s in excess of the amount r e q u i r e d f o r
the purposes of the law, the Board s h a l l make a refund of the excess
amount to the c o n t r i b u t i n g banks, the amount of the refund to any bank
being pro r a t e d according to i t s c o n t r i b u t i o n to the l a s t annual cont r i b u t i o n of a l l banks.
Sums in the guaranty fund may be investe d by the
board in i n t e r e s t bearing o b l i g a t i o n s of the United S t a t e s or deposited
in member banks without i n t e r e s t .
j 295
X-7136-a
— ll —
Section 203 provides t h a t whenever a n a t i o n a l bank which has
c o n t r i b u t e d to the fund has been closed by i t s d i r e c t o r s or by the Compt r o l l e r of the Currency, or has become insolvent in the judgment of the
Comptroller, he s h a l l so c e r t i f y to the l i q u i d a t i n g board, which s h a l l
proceed to take over and wind up the bank in accordance with the lav;.
The Board i s to have the same powers and d u t i e s and i s to be s u b j e c t to
the same l i m i t a t i o n s as the Comptroller in winding up such a n a t i o n a l
bank.
Within t h i r t y days a f t e r the r e c e i p t of the c e r t i f i c a t e of i n -
solvency by the board, a committee c o n s i s t i n g of one person appointed
by the board, one appointed by the owners of a m a j o r i t y of the stock
of the bank and one appointed by the d e p o s i t o r s of more than 50 per
cent of the o u t s t a n d i n g d e p o s i t s of the bank s h a l l e s t i m a t e the value
of the a s s e t s and t h e amount of the l i a b i l i t i e s of t h e bank and make
a statement of the amount of the outstanding deposit of each d e p o s i t o r .
Section 204 provides that* on t h e b a s i s of t h i s e s t i m a t e ,
as modified by the board, and not l e s s than n i n e t y days a f t e r t h e
c e r t i f i c a t i o n of insolvency, the board s h a l l pay to each d e p o s i t o r
whose o u t s t a n d i n g deposit i s not more than $1,000 not l e s s than f i f t y
per cent t h e r e o f , and to each other depositor not l e s s than twentyf i v e per cent of h i s o u t s t a n d i n g d e p o s i t , or $500, whichever i s
greater.
Within s i x months a f t e r such payment the board i s to pay
each depositor of the former c l a s s the remaining amount due him (and
i t would seem to b e the i n t e n t i o n to provide t h a t other d e p o s i t o r s
s h a l l , w i t h i n t h i s s i x months 1 p e r i o d , be p a i d an a d d i t i o n a l twentyf i v e per cent of t h e i r d e p o s i t s , but no such p r o v i s i o n i s contained
X-713S-^i
— 12
in t h e b i l l . )
3 9 6
—
7 i t h i n the next s i x months p e r i o d an a d d i t i o n a l twenty-
f i v e per cent s h a l l he p a i d to a l l d e p o s i t o r s not yet p a i d and w i t h i n
s i x months t h e r e a f t e r f u l l payment s h a l l be made to a l l d e p o s i t o r s .
Section 205 provides t h a t the board, or a l i q u i d a t i n g agent
duly a u t h o r i z e d by t h e board, may borrow money on t h e s e c u r i t y of t h e
a s s e t s of any i n s o l v e n t n a t i o n a l bank f o r t h e purpose of paying i t s
d e p o s i t o r s and c r e d i t o r s .
Section 206
provides t h a t in case of insolvency of a S t a t e
member bank, t h e board s h a l l request i t s r e c e i v e r or l i q u i d a t i n g agent to
submit a r e p o r t and estimate such as t h a t r e q u i r e d of the Committee in
the case of a n a t i o n a l bank; and the board upon approval of such r e p o r t
and estimate s h a l l >ay the r e c e i v e r or l i q u i d a t i n g agent in t r u s t f o r the
d e p o s i t o r s the same amounts, and a t the same times, as in the case of
n a t i o n a l banks.
For t h i s purpose, the board i s given the power of
examination of such an insolvent S t a t e member bank.
Section 207
makes i t mandatory upon the Federal Reserve Board,
a f t e r h e a r i n g , to f o r f e i t the membership of any member bank f a i l i n g to comp l y with the requirements of the b i l l with r e s p e c t to the Guaranty Fund or
any r e g u l a t i o n of the Liquidating Board; and a n a t i o n a l bank f a i l i n g to comp l y with such p r o v i s i o n s of the b i l l s h a l l , in a d d i t i o n , f o r f e i t a l l r i g h t s
and f r a n c h i s e s granted to i t by the law ( a p p a r e n t l y without any court p r o ceeding, but upon the b a s i s of the h e a r i n g conducted by t h e Federal Reserve
Board.)
4
»
X-7136-a
. 297
- 13 Section 308 provides t h a t any bank, vhich i s not a member of the
Federal Reserve System, with a c a p i t a l and surplus of not l e s s than
$25,000, may with the approval of the Liquidating Board, c o n t r i b u t e
to the guaranty fund and upon insolvency the d e p o s i t o r s of such bank
s h a l l be e n t i t l e d to t h e same b e n e f i t s as those of an i n s o l v e n t S t a t e
member bank under s e c t i o n 206 above.
No nonmember bank may c o n t r i b u t e
to the guaranty f u n d , however, u n t i l a f t e r examination of the bank and
determination by the L i q u i d a t i n g Board t h a t t h e bank i s i n sound
f i n a n c i a l c o n d i t i o n and, as a condition to the p r i v i l e g e of c o n t r i b u t i n g
to t h e f u n d , the bank must submit t o examination by t h e Board a t any
time; with a p r o v i s o , however, t h a t f o r a period of not exceeding t h r e e
years a f t e r the passage of the Act, a nonmember bank may share i n the
b e n e f i t s of the guaranty fund upon c e r t i f i c a t e of the S t a t e examining
a u t h o r i t i e s t h a t such bank i s i n sound f i n a n c i a l c o n d i t i o n .
The amount
of the i n i t i a l c o n t r i b u t i o n s and annual c o n t r i b u t i o n s of nonmember banks
s h a l l be twice t h e amount of those r e q u i r e d of member banks.
Sums
payable by nonmember banks s h a l l be s u b j e c t to c a l l of the L i q u i d a t i n g
Board but the amount of any assessment s h a l l be payable i n i n s t a l l m e n t s
of not more than 25$ each.
The L i q u i d a t i n g Board may r e q u i r e a
nonmember bank to withdraw from p a r t i c i p a t i o n i n the b e n e f i t s of the
guaranty fund or r e q u i r e i t "to go i n t o l i q u i d a t i o n and r e c e i v e the
b e n e f i t s of such p a r t i c i p a t i o n " .
Upon withdrawal from p a r t i c i p a t i o n ,
t h e bank s h a l l be p a i d a p a r t of i t s l a s t annual c o n t r i b u t i o n , the
amount to be r e p a i d decreasing p r o p o r t i o n a t e l y according t o the
X-7136-a
,
- 14 number of months which have elapsed s i n c e such l a s t c o n t r i b u t i o n .
Section 309 a u t h o r i z e s the Liquidating Board, u n t i l January
22, 1934, to borrow from the Reconstruction Finance Corporation
such sums as may be deemed necessary to carry out the purposes of
the law, but not i n excess of $500,000,000 at any one time.
The
Reconstruction Finance Corporation " s h a l l make such loans" as a r e
applied f o r by the L i q u i d a t i n g Board and a p p l i c a t i o n s by t h e board
s h a l l be p r e f e r r e d above other a p p l i c a t i o n s and expedited i n every
way p o s s i b l e .
No s e c u r i t y s h a l l be r e q u i r e d f o r such loans and they
s h a l l bear i n t e r e s t a t a r a t e agreed upon by t h e board and the corporation.
Such a loan s h a l l be repaid i n i n s t a l l m e n t payments out of
the guaranty fund and a l l such leans s h a l l be payable i n f u l l not
l a t e r than January 22, 1942.
The Reconstruction Finance Corporation
i s r e q u i r e d to i s s u e , i n accordance with the p r o v i s i o n s of the Recons t r u c t i o n Finance Corporation Act, such n o t e s , debentures, bonds and
other o b l i g a t i o n s as may be necessary t o carry out t h e purposes of
t h i s law.
Section 210 a u t h o r i z e s t h e Liquidating Board t o make r e g u l a t i o n s
^ e c e s s a r y to carry out the provisions with r e s p e c t to t h e Guaranty
Fund.
Section 211 a u t h o r i z e s a p p r o p r i a t i o n s of such sums as may be
necessary to carry out the provisions of t h i s a c t .
2 9 8
899
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE VO
THE FEDERAL RESERVE BOARD
X-7137
A p r i l 20, 1932.
SUBJECT:
Holidays during May, 1932.
Dear Sir;
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 holidays on the dates s p e c i f i e d , and theref 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 c l e a r i n g :
Tuesday
May 3
San Francisco
Los Angeles
Primary E l e c t i o n
Day
Tuesday
May 10
Charlotte
Confederate M ^ o r i a l Day
Friday
May 20
Charlotte
Mecklenburg
Independence Day
Friday
May 20
Havana Agency
Cuban Independence
Day
Friday
May 20
Portland
Primary E l e c t i o n
Day
On Monday, 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 t h e Board w i l l be c l o s e d . The o f f i c e s of t h e Board and
of a l l Federal r e s e r v e banks and branches with t h e exception of
the f o l l o w i n g , w i l l be closed on t h a t day:
Charlotte
Nashville
Atlanta
Memphis
Hew Orleans
L i t t l e Bock
Birmingham
Havana Agency
P l e a s e i n c l u d e Gold Fund c r e d i t s f o r t h e o f f i c e s a f f e c t e d on
each of th es e h o l i d a y s with those f o r the f o l l o w i n g b u s i n e s s day, and
make no shipments of Federal r e s e r v e n o t e s , f i t or u n f i t , f o r account
of the Federal Reserve Bank of San Francisco on May 3 r d .
P l e a s e n o t i f y Branches.
ipn rmnnprrrvR.ci
Very t r u l y y o u r s ,
m? ATT. V ™
J . C. N o e l l ,
/
I
S. 4413, INTRODUCED APRIL 18, 1932.
3 0 0
X-7139
PROVISIONS OP THIS BILL COiTARED WITH S. 4115
WITH CHANGES EECOi£,TENDED BY FEDERAL RESERVE BOARD.
There i s s e t f o r t h "below a comparison of t h e more important
f e a t u r e s of S. 4412, which was introduced i n the Senate and r e p o r t e d
"by the Committee on Banking and Currency on April 18, 1932, and S. 4115
with the changes recommended by the Federal Reserve Board i n i t s l e t t e r
t o Senator Norbeck of March 29, 1932.
S. 4115 i s r e f e r r e d to h e r e i n as the "old b i l l " and S. 4412
as the "new b i l l " .
Section numbers and page numbers r e f e r t o t h e s e c -
t i o n s and pages of the new b i l l , u n l e s s otherwise i n d i c a t e d .
Certain
s e c t i o n s of the old b i l l which have been omitted e n t i r e l y from the new
b i l l a r e t r e a t e d a t the end of t h i s memorandum.
SECTION 1.
T i t l e . - (p. 1)
This s e c t i o n merely provides t h a t t h e short t i t l e of t h e a c t
s h a l l be the "Banking Act of 1932."
SECTION 2.
D e f i n i t i o n s . - (pp. 1, 2 and 3)
The d e f i n i t i o n s contained i n s e c t i o n 2, including those of an
a f f i l i a t e and of a holding company a f f i l i a t e , a r e , i n t h e new b i l l ,
made a p p l i c a b l e not only t o the p r o v i s i o n s of t h i s a c t but t o any p r o -
1
— 2
3
0
1
—
v i s i o n s of law amended by t h i s a c t .
The s e v e r a l c l a s s e s of i n s t i t u t i o n s d e f i n e d as a f f i l i a t e s i n t h e
old "bill axe subdivided i n the new b i l l so as to make a d i s t i n c t i o n between " a f f i l i a t e s " g e n e r a l l y and "holding company a f f i l i a t e s " .
With t h e s e exceptions, the d e f i n i t i o n s contained i n t h e new b i l l
a r e s u b s t a n t i a l l y i n the same form as i n the old b i l l with t h e changes
recommended by t h e Board.
SECTION S.
(a) Control of Federal r e s e r v e bank c r e d i t by Federal Reserve Board.(pp.3,4)
On t h i s s u b j e c t t h e recommendation of the Federal Reserve Board
i s adopted i n Section 3 (a) of the new b i l l .
(b) Voting by groups or chains i n e l e c t i o n s of Federal r e s e r v e bank
directors,
(p. 5)
Section 4 of the old b i l l p r o h i b i t e d banks t h a t belong to a
group or chain from v o t i n g f o r Federal r e s e r v e bank d i r e c t o r s , and the
Board recommended the omission of the p r o v i s i o n .
The new b i l l provides
( i n Section 3(b) t h a t when two or more member banks a r e a f f i l i a t e d with
t h e same holding company a f f i l i a t e only one of such banks may p a r t i c i p a t e
i n the nomination or e l e c t i o n of Federal r e s e r v e bank d i r e c t o r s .
83CTI0N 4 .
D i s t r i b u t i o n of earnings of Federal r e s e r v e banks, (p. 5)
The old b i l l provided ( i n Section 5) t h a t net earnings of Fede r a l r e s e r v e banks a f t e r payment of dividends and expenses should be p a i d
t o the Federal L i q u i d a t i n g Corporation.
The Board recommendedthat no
303
X-7139
- 3 changes be made in the p r e s e n t method of the d i s t r i b u t i o n of earnings of
Federal r e s e r v e banks but t h a t the Secretary of t h e Treasury be a u t h o r ized in h i s d i s c r e t i o n to use the f r a n c h i s e tax received from Federal r e serve banks f o r investment in o b l i g a t i o n s of the L i q u i d a t i n g Corporation.
The new b i l l p r o v i d e s ( i n Section 4) t h a t a l l net earnings of a Federal
r e s e r v e bank, a f t e r payment of dividend claims and expenses, s h a l l be p a i d
into t h e surplus fund of the Federal r e s e r v e bank.
SECTION 5.
(a) Branches of S t a t e member banks,
(pp. 5, 6)
In connection with Section 21 of the o l d b i l l , t h e Board recommended a new p r o v i s i o n to the e f f e c t t h a t nothing contained in the b i l l s h a l l
prevent S t a t e member banks from e s t a b l i s h i n g branches e i t h e r in the United
S t a t e s or elsewhere upon t h e same terms and conditions as those a p p l i c a b l e
to branches of n a t i o n a l banks.
This p r o v i s i o n as recommended i s contained
in Section 5(a) of t h e new b i l l .
(The p r o v i s i o n s of t h e new b i l l with r e f e r e n c e to branches of
n a t i o n a l banks a r e contained in Section 19.)
(b)
Reports of a f f i l i a t e s of S t a t e member banks,
(pp. 6, 7)
The o l d b i l l ( i n s e c t i o n 6) r e q u i r e d each a f f i l i a t e of a S t a t e
member bank to make t h r e e complete r e p o r t s of condition annually through
the p r e s i d e n t of the bank to t h e Federal Reserve Board.
The Board's recom-
mendation was t h a t such r e p o r t s be r e q u i r e d only when deemed necessary by
the Federal Reserve Board.
The new b i l l provides in Section 5(b) t h a t a
S t a t e member bank s h a l l o b t a i n from each of i t s a f f i l i a t e s and f u r n i s h to
the Federal r e s e r v e bank and to the Federal Reserve Board not l e s s than
I 303
X-7139 *
- 4 -
t h r e e r e p o r t s of condition each year and such a d d i t i o n a l r e p o r t s as the r e serve bank or the Board may deem necessary..
The provision r e q u i r i n g such r e -
p o r t s to be made i s mandatory; b u t they a r e r e q u i r e d t o c o n t a i n only such
information a s , in the judgment of the Federal Reserve Board, s h a l l be necess a r y to d i s c l o s e f u l l y the r e l a t i o n s between such a f f i l i a t e and such bank
and to enable t h e Board to inform i t s e l f as to the e f f e c t of such r e l a t i o n s upon the a f f a i r s of such bank.
( S u b s t a n t i a l l y the same p r o v i s i o n s a r e contained in Section 23 of
the new b i l l with r e f e r e n c e to r e p o r t s of a f f i l i a t e s of n a t i o n a l banks.)
Dealings in stocks and investment s e c u r i t i e s by S t a t e member banks, (p. 8)
Section 5(b) of the new b i l l contains a p r o v i s i o n to t h e e f f e c t
t h a t S t a t e member banks s h a l l be s u b j e c t to the same l i m i t a t i o n s and cond i t i o n s as a r e n a t i o n a l banks with r e s p e c t to t h e purchase, s a l e , underwriting and holding of investment s e c u r i t i e s and stock.
There was no such p r o -
v i s i o n in theold b i l l ; and t h e Board recommended t h a t Section 15 of the o l d
b i l l , which r e s t r i c t e d d e a l i n g s in investment s e c u r i t i e s by n a t i o n a l banks,
be omitted e n t i r e l y .
(The p r o v i s i o n s on t h i s s u b j e c t regarding n a t i o n a l banks are i n
Section 14 of the new b i l l . )
Divorce of stock of S t a t e member banks from stock of other c o r p o r a t i o n s , (p. 8)
Section 5(b) of the new b i l l contains a p r o v i s i o n to t h e e f f e c t
t h a t , a f t e r t h r e e years from the passage of t h e a c t , no c e r t i f i c a t e of stock
of a S t a t e member bank s h a l l r e p r e s e n t the stock of any o t h e r c o r p o r a t i o n ,
except a member bank, nor s h a l l the ownership or t r a n s f e r of a stock c e r -
X-7139
,
304
- 5 t i f i c a t e of such a bank "be conditioned, upon the ownership or t r a n s f e r of
a c e r t i f i c a t e of stock of a n o t h e r c o r p o r a t i o n , except a member bank.
A s i m i l a r p r o v i s i o n regarding stock of n a t i o n a l banks i s found
i n Section 16 of the new b i l l .
The old b i l l contained no such p r o v i s i o n regarding the stock of
S t a t e member banks; but Section 17 contained a s i m i l a r p r o v i s i o n r e g a r d ing the s t o c k of n a t i o n a l banks, which would have become e f f e c t i v e immediately, and the Board recommended t h a t i t be r e t a i n e d but t h a t i t be
made e f f e c t i v e a f t e r t h r e e y e a r s .
Eight of an a f f i l i a t e of a S t a t e member bank to vote s t o c k held by i t
in such bank.
8 and 9)
Section 5(b) of the new b i l l provides t h a t the holding contpany a f f i l i a t e s of S t a t e member banks s h a l l be s u b j e c t to the p r o v i s i o n s
of Section SL44 of the Revised S t a t u t e s (which contains the conditions
under which a f f i l i a t e s may vote stock held in n a t i o n a l banks) and a l s o
provides f o r the f o r f e i t u r e of the membership of a State member bank,
i n the d i s c r e t i o n of the Federal Reserve Board, where a v o t i n g permit of
a holding company a f f i l i a t e of such a bank i s revoked.
Under the new
b i l l , t h e r e f o r e , s u b s t a n t i a l l y the same p r o v i s i o n s a r e a p p l i c a b l e to h o l d ing company a f f i l i a t e s of n a t i o n a l banks and holding company a f f i l i a t e s
of State member banks.
The Board recommended t h a t the p r o v i s i o n s of the old b i l l with
r e f e r e n c e to the c o n d i t i o n s under which holding company a f f i l i a t e s of
n a t i o n a l banks might obtain permits to vote s t o c k owned by them i n such
„
3 0 5
X-7139
6 "
banks be r e v i s e d in a number of p a r t i c u l a r s and a l s o recommended t h a t subs t a n t i a l l y the same p r o v i s i o n s a s those suggested f o r n a t i o n a l banks be
made a p p l i c a b l e to a f f i l i a t e s of State member banks, suggesting a new s e c t i o n of the b i l l f o r t h i s purpose.
Hie p r o v i s i o n s a p p l i c a b l e to a f f i l i -
a t e s of n a t i o n a l banks in t h i s connection are contained in Section 17 of
the new b i l l and a r e discussed h e r e a f t e r with r e f e r e n c e to t h a t s e c t i o n ;
but i t may be s t a t e d b r i e f l y a t t h i s p o i n t t h a t the recommendations of the
Board regarding a f f i l i a t e s of n a t i o n a l banks have not been adopted i n the
new b i l l .
Tjiramination of a f f i l i a t e s of S t a t e member banks, ( p . 9)
The new b i l l in Section 5(b) r e q u i r e s such examinations of a f f i l i a t e s of S t a t e member banks a s s h a l l be necessary to d i s c l o s e f u l l y the
r e l a t i o n s between such banks and t h e i r a f f i l i a t e s and the e f f e c t of such
r e l a t i o n s upon the a f f a i r s of the bank; the expense of such examinations
may, in the d i s c r e t i o n of the Federal Reserve Board, be a s s e s s e d a g a i n s t
the bank examined, ( i n s t e a d of a g a i n s t the a f f i l i a t e s as recommended by the
Board); and, in the event of the r e f u s a l of the a f f i l i a t e to give informat i o n requested or to permit such an examination, or in the event of the
f a i l u r e of the bank to pay the expenses of such an examination, the membership of any S t a t e member bank a f f i l i a t e d with such an a f f i l i a t e may be f o r f e i t e d in the d i s c r e t i o n of the Federal Reserve Board.
The old b i l l contained a p r o v i s i o n ( i n Section 28) r e q u i r i n g exami n a t i o n s of a f f i l i a t e s of a S t a t e member bank.
The Federal Reserve Board
recommended t h a t such examinations be a u t h o r i z e d to be made only when deemed
necessary.
( P r o v i s i o n s of a somewhat s i m i l a r c h a r a c t e r a r e contained i n Section
- 7 M
24 of the new "bill with refevened to examinations of a f f i l i a t e s of n a t i o n a l
"banks.)
SECTION 6.
Membership of the Federal Reserve Board.
(pp. 10-12)
The o l d b i l l (in Section 7) contained a p r o v i s i o n o m i t t i n g t h e Secret a r y of the Treasury from the membership of the Federal Reserve Board and omit
t i n g the p r o v i s i o n of the Federal "Reserve Act a u t h o r i z i n g the S e c r e t a r y to
a s s i g n q u a r t e r s to the Federal "Reserve Board.
The Board recommended c e r t a i n
minor amendments to t h i s s e c t i o n and suggested t h a t a u t h o r i t y be given the
Board to purchase or e r e c t a b u i l d i n g f o r i t s o f f i c e s .
In Section 6 of the
new b i l l the p r o v i s i o n s of the old b i l l a r e repeated with the minor changes
recommended by the Board; b u t t h e a u t h o r i t y f o r t h e Federal "Reserve Board to
purchase or e r e c t a b u i l d i n g i s omitted.
SSCTION 7.
Open Market •Committee, (pp. 13, 14)
Section 7 of the new b i l l adds a new Section 12A to t h e Federal Reserve Act, which provides f o r a Federal Open Market Committee along the l i n e s
of t h e e x i s t i n g Open Market P o l i c y Conference.
The Board recommended t h a t the s i m i l a r p r o v i s i o n s of t h e o l d b i l l
(Section 10) on t h i s s u b j e c t be s t r i c k e n out, and t h a t t h e r e be s u b s t i t u t e d
c e r t a i n amendments to Section 14 of the Federal Reserve Act c l a r i f y i n g t h e
Board's powers over open market o p e r a t i o n s and containing in r e v i s e d form
one of the p r o v i s i o n s of t h e o l d b i l l .
The Board's recommendations were
not adopted in t h e new b i l l .
The chief d i f f e r e n c e s between t h e new b i l l and the o l d b i l l are;
In l i e u of the statement in the old b i l l t h a t no Federal r e s e r v e bank may
engage
in open
market o p e r a t i o n s "except a f t e r approval and a u t h o r i z a t i o n
X-7139
8
- "
L 307
by the Committee", t h e r e id a p#6vlbion in the nieto t i l l t h a t no Federal r e serve bank s h a l l engage in such o p e r a t i o n s "except in accordance with r e s o l u t i o n s adopted by the Committee and approved by the Federal Reserve Board".
This a p p l i e s to a l l purchases and s a l e s on the open market under Section 14
of the Federal Reserve Act, whether f o r system account or f o r the account
of an i n d i v i d u a l Federal r e s e r v e bank.
The old b i l l provided t h a t the
Governor of the Federal Reserve Board should be a member of t h e committee in
a d d i t i o n to t h e twelve members appointed by t h e d i r e c t o r s of t h e Federal r e serve banks, b u t in the new b i l l the Governor i s not made a member of the
committee.
The new b i l l a l s o omits the p r o v i s i o n of the o l d b i l l t h a t the
Board*s annual r e p o r t to Congress should include a review of t h e decisions
of t h e committee with an explanation t h e r e o f .
Federal L i q u i d a t i n g Corporation, (pp. 14-27).
Section 7 of the new b i l l a l s o c o n t a i n s t h e proposed new Section 12B
of the Federal Reserve Act p r o v i d i n g f o r a Federal L i q u i d a t i n g Corporation
to expedite t h e payment of dividends to d e p o s i t o r s and c r e d i t o r s of closed
member banks.
The p r o v i s i o n s of t h e new b i l l on t h i s s u b j e c t a r e a compro-
mise between t h e p r o v i s i o n s of the old b i l l and the B o a r d ' s proposed
substitute.
The o l d b i l l provided ( i n Section 10) f o r the c r e a t i o n of a Fede r a l L i q u i d a t i n g Corporation f o r t h e purpose of purchasing and 1 i q u i d a t ing t h e a s s e t s of closed member banks.
The Board recommended a number of
changes in the p r o v i s i o n s w i t h r e f e r e n c e to t h i s proposed c o r p o r a t i o n , and
in t h e new b i l l some of t h e s e changes have been adopted and sdme have
been omitted.
Without s e t t i n g f o r t h a l l of t h e d e t a i l e d d i f f e r e n c e s b e -
*
tween the old b i l l , the recommendations of t h e Board, and t h e new b i l l ,
X-7139 3 0 5
9 —
t h e r e a r e s t a t e d below t h e moffc important of t h e s e d i f f e r e n c e s .
In accordance with the recommendation of the Federal Reserve Board,
the new b i l l p r o v i d e s f o r a board of d i r e c t o r s of f i v e members, ( t h e Compt r o l l e r of the Currency, a member of the Federal Reserve Board, and t h r e e
members s e l e c t e d a n n u a l l y by t h e Governors of the Federal r e s e r v e banks),
i n s t e a d of a b o a r d of f o u r t e e n members ( t h e Comptroller of t h e Currency and
t h e 13 members of the Federal Open Market Committee) as p r o v i d e d in t h e old
bill.
The o l d b i l l provided f o r two c l a s s e s of c a p i t a l s t o c k of the
corporation;
c l a s s A s t o c k , to be subscribed by member banks i n an amount
equal to one-half of one p e r cent of t h e i r d e p o s i t s , and c l a s s B s t o c k , to
be subscribed by Federal r e s e r v e banks in an amount &qual to o n e - f o u r t h of
t h e i r s u r p l u s ; w i t h an a d d i t i o n a l p r o v i s i o n f o r annual s u b s c r i p t i o n s by
Federal r e s e r v e banks in amounts equal to o n e - f o u r t h of t h e annual i n c r e a s e
in t h e i r surplus accounts.
The Board recommended t h a t the c a p i t a l stock com—
s i s t of $100,000,000 to be subscribed by the United S t a t e s .
The new b i l l
p r o v i d e s f o r t h e a p p r o p r i a t i o n by the United S t a t e s to t h e c o r p o r a t i o n of
t h e sum of $125,000,000, b u t a l s o p r o v i d e s f o r two c l a s s e s of stock; c l a s s
A stock, to be s u b s c r i b e d by member banks in an amount equal to o n e - f o u r t h
of one p e r cent of t h e i r d e p o s i t s , and c l a s s B stock to be s u b s c r i b e d by
Federal r e s e r v e banks in an amount equal to o n e - f o u r t h of t h e i r s u r p l u s .
One-half of each c l a s s of s t o c k i s a p p a r e n t l y to be p a i d in upon t h e o r g a n i z a t i o n of t h e c o r p o r a t i o n , and the remainder i s s u b j e c t to c a l l .
The
new b i l l , however, omits t h e p r o v i s i o n f o r a d d i t i o n a l annual s u b s c r i p t i o n s
by t h e Federal r e s e r v e banks.
The o l d b i l l a u t h o r i z e d the l i q u i d a t i n g Corporation to purchase
X-7139
10
309
and l i q u i d a t e the a s s e t s of closed nonmember B t a t e "banks and to make loans
to such "banks, f o r a l i m i t e d number of y e a r s ; and a l s o a u t h o r i z e d an a p p r o p r i a t i o n of $200,000,000 from the United S t a t e s Treasury f o r t h i s purpose.
In
accordance w i t h the recommendation of the Board, t h i s p r o v i s i o n i s omitted
from the new t i l l and i t s p r o v i s i o n s a r e l i m i t e d to member "banks.
The old "bill provided f o r the issuance of debentures by the L i q u i d a t ing Corporation i n amounts aggregating not more than f o u r times i t s c a p i t a l .
The Federal Reserve Board recommended t h a t debentures be a u t h o r i z e d up to
twice the amount of c a p i t a l and t h a t Federal reserve banks be given a u t h o r i t y
to purchase these debentures up to o n e - f o u r t h of t h e i r s u r p l u s .
The new b i l l
a u t h o r i z e s the issuance of debentures in an amount aggregating not more than
twice the amount of the c a p i t a l of the c o r p o r a t i o n and the $125,000,000
a p p r o p r i a t i o n from the Treasury of the United S t a t e s .
The p r o v i s i o n recom-
mended by the Board, however, t h a t such debentures be guaranteed by the
United S t a t e s i s omitted from the new b i l l .
The new b i l l ( p . 20, l i n e s 24 , 25; p . 21, l i n e s 1 - 4 ) c o n t a i n s
in a
d i f f e r e n t form the p r o v i s i o n f o r a v a l u a t i o n committee, t h e e l i m i n a t i o n of
which was recommended by the Board,
Loans on and purchases o f , a s s e t s of
closed member banks a r e to be made "on the b a s i s o f " v a l u a t i o n s of such
a s s e t s made by t h i s committee, which includes the r e c e i v e r , a r e p r e s e n t a t i v e
of the i n s o l v e n t bank, and a t h i r d member s e l e c t e d by those two, but does not
include any r e p r e s e n t a t i v e of the c o r p o r a t i o n ,
A number of p r o v i s i o n s recommended by the Federal Reserve Board of a
p r o h i b i t i v e or p e n a l c h a r a c t e r in connection with the proposed Federal Liquida t i n g Corporation and i t s o p e r a t i o n s have been adopted i n the new b i l l and c e r t a i n unnecessary s t e p s regarding the o r g a n i z a t i o n of the c o r p o r a t i o n and i n c r e a s e s and d e c r e a s e s in i t s c a p i t a l have been e l i m i n a t e d .
,-m, < 3 1 0
•illSECTION 8 •
Loans on member banks 1 c o l l a t e r a l notes (up. 37-28)
The old b i l l (Section 11) provided t h a t the r a t e a t which a
Federal Reserve Bank might make advances to i t s member banks on t h e i r
15-day promissory notes should be a t a r a t e 1$ higher than the
r e d i s c o u n t r a t e , and a l s o provided t h a t i f a member bank, while
indebted t o a Federal r e s e r v e bank on such a 15-day note and d e s p i t e
a warning of the Federal r e s e r v e bank or the Federal Reserve Board,
should i n c r e a s e i t s loans made f o r the purpose of purchasing or
c a r r y i n g investment s e c u r i t i e s (except o b l i g a t i o n s of the United S t a t e s ) ,
the note should be immediately due and payable and the member bank
should be i n e l i g i b l e to borrow on such 15-day n o t e s f o r such p e r i o d s
a s the F e d e r a l Reserve Board might determine.
The old b i l l a l s o p r o -
vided t h a t the Federal Reserve Board might suspend the p r o v i s i o n s of
law with r e f e r e n c e to loans to member banks on t h e i r 15-day n o t e s f o r
p e r i o d s of 90 d a y s .
In l i e u of t h e s e p r o v i s i o n s of the old b i l l , the Federal Reserve
Board recommended an amendment i n c r e a s i n g the maximum m a t u r i t y of
advances to member banks on t h e i r promissory n o t e s secured by e l i g i b l e
paper from 15 to 90 days.
Section 8 of the new b i l l (pp. 37,28) does not adopt the recommendation of the Board on t h i s p o i n t and c o n t a i n s s u b s t a n t i a l l y the same
p r o v i s i o n s a s those in the old b i l l , except t h a t t h e r e have been omitted
the d i s c r i m i n a t o r y r a t e of 1$ on such 15-day advances to member banks and
the p r o v i s i o n s f o r the suspension by the Board of the p r o v i s i o n s of law
on t h i s s u b j e c t .
ui2~
X-7139
311'
SECTION 9 •
Foreign t r a n s a c t i o n s of Federal reserve banks ( p , 29)
The Federal Reserve Board suggested c e r t a i n changes in the
p r o v i s i o n s of Section 12 of the old t i l l with r e f e r e n c e to the
supervision of the Board over f o r e i g n t r a n s a c t i o n s of Federal
r e s e r v e banks, and the more important of these changes have been
adopted i n the corresponding p r o v i s i o n s contained i n Section 9 of
the new b i l l .
The p r o v i s i o n s of the new b i l l on t h i s s u b j e c t , idiich
a r e s u b s t a n t i a l l y those of the old b i l l with the Board's suggested
changes, provide t h a t a l l r e l a t i o n s h i p s and t r a n s a c t i o n s by Federal
r e s e r v e banks w i t h f o r e i g n bankers s h a l l be s u b j e c t to s p e c i a l
s u p e r v i s i o n and r e g u l a t i o n by the Federal Reserve Board; t h a t negot i a t i o n s w i t h f o r e i g n bankers s h a l l not be conducted without the
permission of t h e Board; t h a t the Board may be r e p r e s e n t e d in
any such n e g o t i a t i o n s ; and t h a t a f u l l r e p o r t of a l l such n e g o t i a t i o n s s h a l l be made to the Board i n w r i t i n g .
SECTION 10 •
Reserves of member banks and r e s t r i c t i o n s on d e a l i n g s in "Federal Funds"
(x>. 3 0 ) .
Section 13 of the old b i l l contained a complete r e v i s i o n of
Section 19 of the Federal Reserve Act with r e f e r e n c e t o the r e s e r v e s
r e q u i r e d of member banks.
Chief among i t s p r o v i s i o n s was the r e q u i r e -
ment t h a t the percentages of r e s e r v e a g a i n s t time d e p o s i t s be increased
over a p e r i o d of y e a r s to the same percentages as those r e q u i r e d a g a i n s t
demand d e p o s i t s .
Another important p r o v i s i o n of the old b i l l p r o h i b i t e d
the t r a n s f e r of b a l a n c e s with a Federal r e s e r v e bank from one bank to
,
I, 3 1 3
X-7139
-
IB
-
another without the a u t h o r i t y of the f e d e r a l Reserve Board and except
upon payment of a f e e f o r the p r i v i l e g e .
The Board was a l s o authorized
to suspend a l l d e a l i n g s in reserve "balances f o r such p e r i o d s a s i t might
deem b e s t .
The Federal Reserve Board recommended, in lieu, of the p r o v i s i o n s of
the old b i l l on t h i s s u b j e c t , a r e v i s i o n of s e c t i o n 19 of the Federal Reserve Act in accordance with the recommendations of the System Committee
on Reserves w i t h some m o d i f i c a t i o n s ; and recommended the omission of the
l i m i t a t i o n s on the use of balances standing to t h e c r e d i t of member banks
on the books of t h e Federal Reserve Banks.
The new b i l l ( i n Section 10) omits e n t i r e l y any r e v i s i o n or amendment
of the r e s e r v e requirements of member banks, and a l s o omits the r e s t r i c t i o n s
of the old b i l l on the t r a n s f e r of balances in Federal reserve banks.
MemBer banks as mediums i n making loans on c o l l a t e r a l , ("p. 30)
In accordance with a recommendation of the Federal Reserve Board,
Section 10 of the new b i l l adds a new paragraph to Section 19 of the Federal
Reserve Act f o r b i d d i n g a member bank to a c t a s the medium or agent of any
non-banking c o r p o r a t i o n or i n d i v i d u a l in making loans on the s e c u r i t y of
s t o c k s , bonds and o t h e r investment s e c u r i t i e s to brokers or d e a l e r s in such
s e c u r i t i e s , and providing a f i n e f o r v i o l a t i o n t h e r e o f .
The old b i l l contained a p r o v i s i o n f o r a s i m i l a r purpose but in
d i f f e r e n t form.
SECTION 11.
Loans to or investments i n stock of a f f i l i a t e s . (*pp. 30-32)
On t h i s s u b j e c t the new b i l l ( i n Section 11) adopts s u b s t a n t i a l l y
the recommendations of the Federal Reserve Board and provides t h a t no
member banks s h a l l make any loan or extension of c r e d i t t o , or purchase
3 1 3
X-7139
-14s e c u r i t i e s under repurchase agreements from, any of i t s a f f i l i a t e s ,
or i n v e s t i n the s t o c k or o b l i g a t i o n s of such a f f i l i a t e s , or accept
such stock or o b l i g a t i o n s as s e c u r i t y f o r advances, i f t h e aggregate
amount t h e r e o f , i n t h e case of any one a f f i l i a t e , w i l l exceed t e n
per cent of the c a p i t a l s t o c k and s u r p l u s of the member bank, or
i f , i n the case of a l l such a f f i l i a t e s , the aggregate amount t h e r e o f w i l l
exceed twenty per cent of the c a p i t a l stock and surplus of such member
bank.
Each loan or extension of c r e d i t to an a f f i l i a t e s h a l l be
secured by c o l l a t e r a l , i n the form of s t o c k s , bonds, debentures or other
such o b l i g a t i o n s , having a market value of a t l e a s t twenty p e r cent
more than the amount of the loan
or extension of c r e d i t or a t l e a s t
t e n per cent more than the amount thereof i f secured by S t a t e or municipal obligations.
Loans or extensions of c r e d i t secured by o b l i g a t i o n s
of the United S t a t e s , Federal i n t e r m e d i a t e c r e d i t banks, Federal land
banks or paper e l i g i b l e f o r rediscount by Federal r e s e r v e banks a r e
excepted from the requirement as to marginal c o l l a t e r a l (but t h e suggestions
of the Federal Reserve Board t h a t those secured by o b l i g a t i o n s of t h e
Reconstruction Finance Corporation be a l s o excepted was not adopted).
The p r o v i s i o n s of t h i s s e c t i o n do not apply to an a f f i l i a t e engaged
s o l e l y i n holding t h e bank premises of the a f f i l i a t e d member bank or
conducting a s a f e - d e p o s i t business or t h e business of an a g r i c u l t u r a l
c r e d i t c o r p o r a t i o n or l i v e stock loan company, or t o an a f f i l i a t e i n the
c a p i t a l stock of which a n a t i o n a l bank i s authorized to i n v e s t under
Section 25 of t h e F e d e r a l Reserve Act, or an a f f i l i a t e organized under
Section 25(a) of t h e Federal Reserve Act.
i
3 1 4
X-7139
uisThe old b i l l ( i n Section 9) contained, some of t h e p r o v i s i o n s
of the new "bill on t h i s s u b j e c t , but the l i m i t a t i o n s p r e s c r i b e d
were a p p l i c a b l e only a s t o a f f i l i a t e s engaged i n buying and s e l l i n g
s t o c k s , bonds, r e a l e s t a t e or r e a l e s t a t e mortgages or organized t o
hold t i t l e to any such p r o p e r t y .
The old b i l l did not include
the twenty percent l i m i t i n the case of a l l a f f i l i a t e s , on t h e
aggregate of l o a n s , investments and advances, nor did i t i n c l u d e any
of the above-mentioned exceptions t o the l i m i t a t i o n s p r e s c r i b e d .
The old b i l l r e q u i r e d marginal c o l l a t e r a l of twenty per cent i n a l l
cases except where t h e s e c u r i t y f o r the loan c o n s i s t e d of paper
e l i g i b l e f o r r e d i s c o u n t or o b l i g a t i o n s e l i g i b l e f o r investment by
savings banks.
SECTION 12.
Real e s t a t e loans and investments i n bank premises (pp. 33, 33)
The old b i l l ( i n Section 14) contained a number of p r o v i s i o n s
with r e f e r e n c e to r e a l e s t a t e loans and investments of member banks.
I t would have r e q u i r e d a bank t o r e v i s e the v a l u a t i o n s on which
such loans were based a t the time of each examination and a l s o , i n
e f f e c t , at the time of each r e p o r t of i t s c o n d i t i o n .
The l i m i t a t i o n s
on the amount of such loans would have been changed, and a l l unsecured loans whose eventual s a f e t y depends upon the value of r e a l
e s t a t e would have been c l a s s i f i e d as r e a l e s t a t e l o a n s .
Time d e p o s i t o r s
would have been given a p r e f e r r e d claim on a l l r e a l e s t a t e loans and
other a s s e t s acquired under t h i s s e c t i o n of the old b i l l .
315
X-7139
-16-
The Federal Reserve Board recommended t h a t these p r o v i s i o n s
of the old M i l be omitted and t h a t t h e r e "be s u b s t i t u t e d t h e r e f o r a
p r o v i s i o n t h a t no n a t i o n a l t a n k , without the permission of t h e
Comptroller of the Currency, and no S t a t e member "bank, without the
permission of the Board, s h a l l i n v e s t i n hank premises, or i n the stock
or o b l i g a t i o n s o f , or i n loans t o , any corporation owning or holding
i t s hank premises a sum exceeding the amount of the c a p i t a l stock of
such hank.
The new b i l l omits the p r o v i s i o n s of the old b i l l i n accordance
with the recommendation, of t h e Board, and adopts i n substance the
p r o v i s i o n suggested by the Board, although the language of t h e
p r o v i s i o n i s somewhat changed, and loans upon t h e s e c u r i t y of the stock
of any such c o r p o r a t i o n holding bank premises a r e included w i t h i n the
investments t o which t h e l i m i t a t i o n a p p l i e s .
SECTION 13 .
J u r i s d i c t i o n of F e d e r a l Courts over cases involving f o r e i g n banking
transactions,
(pp. 33.34)
This p r o v i s i o n , wtyich was not contained i n t h e old b i l l and which
was not t h e s u b j e c t of a recommendation by the Federal Reserve Board,
c o n f e r s upon t h e d i s t r i c t courts of t h e United S t a t e s j u r i s d i c t i o n over
any case to which a c o r p o r a t i o n organized under t h e laws of the United
S t a t e s i s a p a r t y and which a r i s e s out of t r a n s a c t i o n s involving i n t e r n a t i o n a l or f o r e i g n banking, e i t h e r d i r e c t l y or through t h e agency, ownership or c o n t r o l of branches or of l o c a l i n s t i t u t i o n s i n f o r e i g n
countries.
X-7139
*1?I t i s understood t h a t t h e r u l e i n t h e Federal c o u r t s with r e f e r e n c e
to the v a l u a t i o n of f o r e i g n currency i n t r a n s a c t i o n s of t h i s kind i s
more f a v o r a b l e t o banks than i n the S t a t e c o u r t s ,
and i t i s a p p a r e n t l y
f o r t h i s reason t h a t t h e b i l l contains the above p r o v i s i o n .
SECTION 14.
National banks granted a l l powers of S t a t e banks, (p. 34)
In the old b i l l (Section 15) n a t i o n a l banks were granted power to
engage i n a l l forms of banking business p e r m i t t e d by t h e laws of the
S t a t e i n which they axe l o c a t e d to "banks of deposit and discount" o r ganized under such S t a t e laws, except to the extent t h a t the e x e r c i s e
of such powers i s f o r b i d d e n by t h e laws of the United S t a t e s .
The Board recommended t h a t t h i s p r o v i s i o n be omitted; but i t i s
contained i n t h e new b i l l i n s u b s t a n t i a l l y the same form i n which i t
appeared i n the old b i l l .
Dealings i n investment s e c u r i t i e s (pp. 34-36)
The old b i l l ( i n s e c t i o n 15) contained a number of p r o v i s i o n s w i t h
r e f e r e n c e to d e a l i n g s i n investment s e c u r i t i e s by n a t i o n a l banks and
the Board recommended t h a t a l l t h e s e p r o v i s i o n s be omitted.
They a r e ,
however, r e p e a t e d i n t h e new b i l l , with c e r t a i n changes and a d d i t i o n s ,
and with the p r o v i s i o n ( i n Section 4) t h a t the same p r o v i s i o n s s h a l l
be a p p l i c a b l e t o S t a t e member banks.
The new b i l l provides i n e f f e c t
that:
Dealings i n investment s e c u r i t i e s are l i m i t e d t o the purchase and
s a l e of such s e c u r i t i e s , without r e c o u r s e , s o l e l y upon the order
316
31?
X-7139
-18-
and. f o r the account of customers, except t h a t member "banks may purchase
and hold f o r t h e i r own account investment s e c u r i t i e s under l i m i t a t i o n s
and r e s t r i c t i o n s p r e s c r i b e d by r e g u l a t i o n of the Comptroller of the
Currency.
No member bank s h a l l underwrite any i s s u e of s e c u r i t i e s .
The t o t a l amount of any one i s s u e of investment s e c u r i t i e s of any one
obligor h e r e a f t e r purchased and held by a member bank f o r i t s own
account s h a l l not exceed 10 per cent of the t o t a l amount of such
i s s u e o u t s t a n d i n g , but t h i s l i m i t a t i o n does not apply to any i s s u e not
i n excess of $100,000 and not i n excess of 50 per cent of t h e c a p i t a l
of the bank; and the t o t a l amount of investment s e c u r i t i e s of any one
obligor h e r e a f t e r purchased and held s h a l l not exceed 15$ of the
c a p i t a l of the bank and 25 per cent of i t s s u r p l u s .
(The l a t t e r
l i m i t a t i o n i n t h e old b i l l was s t a t e d i n ambiguous terms and might
have been construed to apply to the aggregate amount of a l l i n v e s t ment s e c u r i t i e s h e l d by the bank.)
No member bank may purchase or hold the stock of any c o r p o r a t i o n , except
as otherwise p e r m i t t e d by law, and except t h a t a bank may i n v e s t
not more than 15 per cent of i t s c a p i t a l and surplus i n the stock
of s a f e deposit companies.
These l i m i t a t i o n s do not apply t o o b l i g a t i o n s of the United S t a t e s ,
to g e n e r a l o b l i g a t i o n s of any S t a t e or any s u b d i v i s i o n t h e r e o f , or t o
o b l i g a t i o n s issued under the a u t h o r i t y of t h e Federal Farm Loan Act.
X-713$,
- 19 The d e f i n i t i o n of investment s e c u r i t i e s contained in e x i s t i n g
law would a p p a r e n t l y have t e e n s t r i c k e n out "by the old b i l l and
the Comptroller of the Currency given unlimited powers to p r e s c r i b e
h i s own d e f i n i t i o n , except t h a t stocks could not be included.
The
new b i l l , however, in e f f e c t r e s t o r e s t h e d e f i n i t i o n contained i n the
e x i s t i n g lav/.
SECT 10 IT 15
(a)
Capital r e q u i r e d f o r o r g a n i z a t i o n of n a t i o n a l banks,
(pp. 35, 37)
The o l d b i l l ( i n s e c t i o n 16) contained an amendment to Section
5138 of t h e "Revised S t a t u t e s to provide t h a t no n a t i o n a l bank may be
organized with a c a p i t a l of l e s s than $50,000, except t h a t a n a t i o n a l
bank may be formed, in the d i s c r e t i o n of the Comptroller of the Currency,
f o r the purpose of succeeding to the busine ss of an e x i s t i n g bank
with a c a p i t a l of not l e s s than $25,000.
The old b i l l a l s o eliminated
t h e e x i s t i n g requirement t h a t the o r g a n i z a t i o n of n a t i o n a l banks with
a c a p i t a l of l e s s than $100,000 s h a l l be s u b j e c t to t h e approval of the
S e c r e t a r y of the Treasury.
The Board recommended the elimination of the exception in the
o l d b i l l which p e r m i t t e d the formation of n a t i o n a l banks with a c a p i t a l
of l e s s than $50,000 to take over the busine ss of an e x i s t i n g bank.
This recommendation was adopted and with t h i s change the p r o v i s i o n s
of the o l d b i l l on t h i s s u b j e c t a r e repeated in the new b i l l .
31.8
. 319
X-7139
- 20 -
(b) Capital requirements of S t a t e member banks, (p. 37)
Section 15(b) of the new t i l l c o n t a i n s a p r o v i s i o n ,
not appearing in the old b i l l and. not recommended "by the Federal
Reserve Board, which amends Section 9 of the Federal "Reserve Act
so as to e l i m i n a t e the provision of e x i s t i n g law under which a
S t a t e "bank i s p e r m i t t e d to become a member of the Federal Reserve
System with a c a p i t a l equal to only 60$ of the amount r e q u i r e d f o r
t h e o r g a n i z a t i o n of a n a t i o n a l bank in the p l a c e in which i t i s
situated.
The c a p i t a l r e q u i r e d of S t a t e member banks h e r e a f t e r
admitted to the System, t h e r e f o r e , would be r e q u i r e d in a l l
cases to be equal to t h a t r e q u i r e d of n a t i o n a l banks l o c a t e d in
p l a c e s of l i k e s i z e .
SECTION 16.
Shares of stock of $100 each.
The o l d b i l l ( i n Section 17) would have amended s e c t i o n 5139
of the Revised S t a t u t e s so a s to provide t h a t the c a p i t a l stock of
n a t i o n a l banks should be divided into shares of $100 each, thus
r e p e a l i n g t h e p r o v i s i o n of the p r e s e n t law f o r shares of a l e s s e r
amount.
In accordance with the recommendation of t h e Federal Reserve
Board, however, t h i s p r o v i s i o n i s omitted in the new b i l l .
Divorce of stock of n a t i o n a l bank from stock of o t h e r c o r p o r a t i o n s , (p. 37)
The new b i l l provides ( i n Section 16) t h a t , a f t e r t h r e e years
from the date of i t s passage, no c e r t i f i c a t e of stock of a n a t i o n a l
X-7133
- 21 -
bank s h a l l r e p r e s e n t the stock of any other corporation except a
member bank, nor s h a l l the ownership or t r a n s f e r of a stock c e r t i f i c a t e of a n a t i o n a l bank be conditioned noon the ownership or
t r a n s f e r of a c e r t i f i c a t e of stock of another corporation except a
member bank.
S u b s t a n t i a l l y the same p r o v i s i o n was included in t h e o l d b i l l
( i n Section 17), except t h a t the p r o h i b i t i o n apparently was to take
e f f e c t immediately and no exception was made as to t h e stock of another
member bank.
The Board recommended t h a t t h i s p r o v i s i o n be made
e f f e c t i v e t h r e e years a f t e r enactment and, as s t a t e d , the new b i l l
includes t h i s change.
Similar p r o v i s i o n s r e g a r d i n g c e r t i f i c a t e s of stock of S t a t e
member banks a r e included in s e c t i o n 5(b)
of the new b i l l .
SUCTION 17.
Shares of i t s own stock held by a n a t i o n a l bank as t r u s t e e ,
(p. 38)
The o l d b i l l ( i n Section 19) provided t h a t no shareholders
of n a t i o n a l banks who s h a l l become such through nominal t r a n s f e r
or ownership on behalf of another s h a l l vote a t meetings of s h a r e h o l d e r s of such banks.
The Board recommended t h a t shares of i t s
own stock h e l d by any n a t i o n a l bank as t r u s t e e s h a l l not be voted.
The Board's recommendation was adopted in the new b i l l , and t h e
p r o v i s i o n of t h e o l d b i l l was not r e t a i n e d .
320
X-7139
S8 -
Right of an a f f i l i a t e of a n a t i o n a l bank to vote stock h e l d by i t in
such bank.
(pp. 38-43)
The o l d b i l l ( i n Sections 19 and 20) contained p r o v i sions r e q u i r i n g an a f f i l i a t e of a n a t i o n a l bank to obtain a v o t i n g
permit from t h e Federal Reserve Board b e f o r e voting any stock h e l d
by i t in such n a t i o n a l bank.
Such a voting permit might be issued only
upon compliance by the holding company a f f i l i a t e with a number of
detailed provisions.
The Federal Reserve Board recommended a number
of changes in t h e s e p r o v i s i o n s of the old b i l l , but the B o a r d ' s recomrmendations on t h i s s u b j e c t have not been adopted i n the new b i l l .
The s a l i e n t f e a t u r e s of t h e Board's recommendations on t h i s
s u b j e c t were a s follows;
Shares owned or c o n t r o l l e d by an a f f i l i a t e
s h a l l not be voted u n l e s s such a f f i l i a t e has f i l e d an agreement with
the Comptroller of the Currency to comply with the p r o v i s i o n s of t h i s
section.
Within one year from the date of any such agreement each
nonmember S t a t e bank owned or c o n t r o l l e d by such a f f i l i a t e s h a l l apply
f o r membership in t h e Federal Reserve System and i f not admitted such
a f f i l i a t e s h a l l d i v e s t i t s e l f of a l l i n t e r e s t in such bank.
Each such
a f f i l i a t e s h a l l hold r e a d i l y marketable a s s e t s , other than bank s t o c k s ,
equal to 15 per cent of bank stocks held by i t and s h a l l r e i n v e s t i t s
net earnings above 6 p e r cent in such a s s e t s u n t i l they amount to
25 per cent of bank shares h e l d by i t ; with a proviso t h a t c r e d i t
s h a l l be given f o r c o n t r i b u t i o n s made during t h e preceding t h r e e
years to banks owned or c o n t r o l l e d by the a f f i l i a t e .
F a i l u r e to
comply with t h e agreement i s ground f o r termination thereof by
t h e Comptroller.
No n a t i o n a l bank s h a l l make any loan t o , or on
X-7139
«3Es«»
333
the s e c u r i t y of the stock o f , or be the purchaser of the s t o c k o f ,
any a f f i l i a t e which owns or c o n t r o l s such bank, u n l e s s necessary to
prevent l o s s upon a debt p r e v i o u s l y contracted i n good f a i t h , and
stock so a c q u i r e d s h a l l be disposed of w i t h i n two y e a r s .
O f f i c e r s and
employees of a f f i l i a t e s which have entered i n t o an agreement w i t h the
Comptroller of the Currency, a r e made s u b j e c t to c e r t a i n c r i m i n a l p r o v i s i o n s , and a p e n a l t y i s provided f o r voting the s t o c k h e l d by a f f i l i a t e s , u n l e s s such an agreement i s in e f f e c t .
The p r o v i s i o n s of the new b i l l on t h i s s u b j e c t , which follow
along the l i n e s of the old b i l l with c e r t a i n changes and a d d i t i o n s and
which do not contain the p r o v i s i o n s a s recommended by the Board, a r e in
b r i e f form s e t f o r t h in the following p a r a g r a p h s .
(As h e r e i n b e f o r e
explained under Section 5, the p r o v i s i o n s of the new b i l l on t h i s s u b j e c t
a r e a p p l i c a b l e a l s o to holding company a f f i l i a t e s of S t a t e member banks.)
Shares of a n a t i o n a l bank c o n t r o l l e d by a holding company a f f i l i a t e , i n c l u d i n g those h e l d by a t r u s t e e f o r the b e n e f i t of the s h a r e h o l d e r s of such a f f i l i a t e , s h a l l not be voted u n l e s s such a f f i l i a t e s h a l l
have obtained a v o t i n g permit from the Federal Reserve Board; and in
a c t i n g upon an a p p l i c a t i o n f o r such permit, the Board s h a l l consider the
f i n a n c i a l c o n d i t i o n of the a p p l i c a n t , the general c h a r a c t e r of i t s management and the probable e f f e c t of the g r a n t i n g of the permit upon the
a f f a i r s of such bank.
No permit s h a l l be granted except upon the f o l -
lowing c o n d i t i o n s :
(a) Each such holding company a f f i l i a t e s h a l l a g r e e ; to submit
to examinations, a t i t s own expense, d i s c l o s i n g f u l l y the r e l a t i o n s h i p
ujg4ti
between such a f f i l i a t e
X-7139
and such bank, t h a t such examinations may be
made of each bank owned or c o n t r o l l e d by the a f f i l i a t e , and t h a t
p u b l i c a t i o n of statements of condition of such banks may be r e q u i r e d .
(b)
A f t e r January 1, 1935, every such holding company a f -
f i l i a t e s h a l l p o s s e s s unpledged r e a d i l y marketable a s s e t s o t h e r than
bank stock i n an amount not l e s s than 12$ of the p a r value of a l l
bank stocks c o n t r o l l e d by such a f f i l i a t e , which amount s h a l l be i n creased by not l e s s than 2$ annually up to 25$ thereof and by r e i n v e s t i n g in such r e a d i l y marketable a s s e t s n e t earnings i n excess of
6$ annually u n t i l the 25$ requirement i s reached,
(The l a s t of the
requirements of t h i s paragraph was recommended by the Board*)
(c)
However, where the shareholders of the a f f i l i a t e
a r e themselves l i a b l e under the double l i a b i l i t y p r o v i s i o n s on the
bank stock h e l d by the a f f i l i a t e , the l a t t e r s h a l l be r e q u i r e d only
to e s t a b l i s h , out of i t s n e t earnings in excess of 6$, a r e s e r v e of
r e a d i l y marketable a s s e t s equal to 12$ of the p a r value of bank
stocks c o n t r o l l e d by i t , and r e a d i l y marketable a s s e t s r e q u i r e d
of such a f f i l i a t e may be used f o r replacement of c a p i t a l in banks
a f f i l i a t e d w i t h i t ; but any d e f i c i e n c y so i n c u r r e d s h a l l be made
up within such p e r i o d a s the Federal Reserve Board may p r e s c r i b e .
(d)
That o f f i c e r s , d i r e c t o r s , agents and employees of such
a holding company a f f i l i a t e s h a l l be s u b j e c t to the same p e n a l t i e s f o r
f a l s e e n t r i e s a s o f f i c e r s and employees of member banks a r e s u b j e c t
to under Section 5209 of the Revised S t a t u t e s .
-25-
JC-7139 '
3 2
(e) That every such holding company a f f i l i a t e s h a l l show t h a t i t
does not have any i n t e r e s t in and i s not p a r t i c i p a t i n g in the management
of any s e c u r i t i e s company; t h a t , i f i t has such an i n t e r e s t or p a r t i c i p a t i o n i t w i l l , w i t h i n three y e a r s , d i v e s t i t s e l f t h e r e o f ; and t h a t i t
w i l l d e c l a r e dividends only out of a c t u a l net e a r n i n g s .
If any holding company a f f i l i a t e v i o l a t e s any of the p r o v i s i o n s
of t h i s a c t , the Federal Reserve Board may revoke i t s v o t i n g permit
a f t e r n o t i c e , and t h e r e a f t e r no n a t i o n a l bank whose stock i s c o n t r o l l e d
by such a f f i l i a t e s h a l l receive Government d e p o s i t s or pay any dividend
to such a f f i l i a t e .
Where such a voting permit of an a f f i l i a t e has been revoked, the
f r a n c h i s e of any n a t i o n a l bank c o n t r o l l e d by such an a f f i l i a t e s h a l l be
s u b j e c t to f o r f e i t u r e .
SECTION 18.
R e l a t i o n s h i p s between Member Banks and S e c u r i t i e s Dealers or Corporat i o n s making c o l l a t e r a l l o a n s , (-pp. 43. 44.)
The old b i l l ( i n s e c t i o n 18) provided t h a t , a f t e r January 1,
1933, no d i r e c t o r , o f f i c e r or employee of a member bank should be an
o f f i c e r or employee of a c o r p o r a t i o n or a s s o c i a t i o n engaged p r i m a r i l y in
^ the s e c u r i t i e s b u s i n e s s and no such o f f i c e r , d i r e c t o r or employee of
a member bank should be a d i r e c t o r , o f f i c e r or employee of a corporation
making loans secured by c o l l a t e r a l to any one except i t s own s u b s i d i a r i e s .
The old b i l l also provided t h a t no member bank should have correspondent
r e l a t i o n s h i p s w i t h a s s o c i a t i o n s or c o r p o r a t i o n s of the kind mentioned.
^
I 335
»* 2$
X-7139
The Board recommendedthat these p r o v i s i o n s "be omitted and suggested s u b s t i t u t e provisions.
The new b i l l p r o v i d e s , in s u b s t a n t i a l ' accordance with the s u b s t i t u t e p r o v i s i o n s recommended by the Board, t h a t , a f t e r t h r e e y e a r s , no member
bank s h a l l be a f f i l i a t e d with a s e c u r i t i e s corporation in the manner
described in Section 2(b) of the b i l l (where t h e word " a f f i l i a t e " i s d e f i n e d
so a s not to include holding company a f f i l i a t e s ) .
Violations of t h i s p r o v i -
sion s u b j e c t s the member bank to a p e n a l t y of $1,000 a day, i n the d i s c r e t i o n
of the Federal Reserve Board, and, i f the v i o l a t i o n s continue f o r s i x months
a f t e r warning from the Board, the b a n k ' s f r a n c h i s e may be f o r f e i t e d , i f a
n a t i o n a l bank, or i t s membership i n the Federal Reserve System may be
f o r f e i t e d , i f a S t a t e bank.
SECTION 19.
Branches of National banks, (tro. 4 4 . 4 5 ) .
The old b i l l ( i n Section 21) provided f o r State-wide branches of
n a t i o n a l banks i n S t a t e s where the State law p e r m i t s S t a t e banks to have
branches, with a proviso t h a t , i f the usual b u s i n e s s of the "bank extends
i n t o an a d j a c e n t S t a t e , the Federal Reserve Board may permit the e s t a b l i s h ment of a branch by the bank i n such S t a t e not more than f i f t y miles from
i t s head o f f i c e .
In order to have branches o u t s i d e of the c i t y of i t s
head o f f i c e , a c a p i t a l of $500,000 was r e q u i r e d .
Furthermore, the a g g r e -
g a t e c a p i t a l of a bank and i t s branches was r e q u i r e d to equal the c a p i t a l
r e q u i r e d f o r an equal number of n a t i o n a l banks s i t u a t e d where the bank and
i t s branches a r e r e s p e c t i v e l y l o c a t e d .
x 7139
"
32G
-27The Federal Reserve Board suggested t h a t , i f t h e s e p r o v i s i o n s
were t o he r e t a i n e d , a change be made which would e l i m i n a t e t h e l i m i t a t i o n s of t h e p r e s e n t law on the number of branches which may be e s t a b l i s h e d i n c i t i e s of l e s s than 100,000 i n h a b i t a n t s , and t h e l i m i t a t i o n
providing t h a t no branch may be e s t a b l i s h e d i n a c i t y of l e s s than
25,000 i n h a b i t a n t s .
This recommendation of the Board was adopted i n
t h e new b i l l .
The p r o v i s i o n s of t h e new b i l l on t h i s s u b j e c t a r e s u b s t a n t i a l l y t h e sane as t h o s e contained i n the old b i l l , with t h e change
recommended by the Board; except t h a t the establishment of State-wide
branches i s not l i m i t e d to those S t a t e s i n which the S t a t e law permits
S t a t e "banks to have branches.
(The p r o v i s i o n s of the new b i l l with r e f e r e n c e to branches of
S t a t e member banks a r e contained i n Section 5 ( a ) . )
S3CTI0N 20.
Consolidations of n a t i o n a l banks with other banks i n t h e same S t a t e . ( p . 45)
The p r o v i s i o n s of the Act providing f o r the consolidation, of two
or more n a t i o n a l banks or f o r the c o n s o l i d a t i o n of S t a t e banks with n a t i o n a l banks would be amended by the new b i l l so as t o permit such consolidat i o n s to take p l a c e between banks located anywhere i n t h e same S t a t e .
s e c t i o n was contained i n the same form i n the old b i l l ( i n Section 22).
suggestion was made by the Board on t h i s p o i n t .
This
Ho
X-7139
-ask
327
SECTION 21.
Rate of i n t e r e s t on l o a n s , (pp. 45,46)
The new b i l l would amend Section 5197 of the Revised S t a t u t e s so
t h a t n a t i o n a l banks could charge on loans and d i s c o u n t s , (1) the r a t e
of i n t e r e s t allowed by the S t a t e law (or 7$ where the S t a t e law f i x e s
no l i m i t ) , or (2) a r a t e 1$ i n excess of the Federal r e s e r v e bank
discount r a t e , which ever
may be the g r e a t e r .
The p r o v i s i o n of the new b i l l on t h i s subject i s the same as t h a t
contained i n t h e old b i l l (Section 23) with a minor change suggested
by the Board.
SECTION 22.
Limitations on loans t o a f f i l i a t e d c o r p o r a t i o n s , (pp.46,47)
The new b i l l provides an amendment to the f i r s t paragraph of Section
5200 of t h e Revised S t a t u t e s , ^hich provides t h a t i n computing the amount
which a c o r p o r a t i o n can borrow from a n a t i o n a l bank, t h e c o r p o r a t i o n and
a l l of i t s s u b s i d i a r i e s i n which such corporation owns or c o n t r o l s a
m a j o r i t y i n t e r e s t would be t r e a t e d as a s i n g l e borrower.
This p r o v i s i o n has been adopted from the old b i l l (Section 25(a))
with a c l a r i f y i n g amendment suggested by the Board.
In accordance w i t h t h e Board's recommendations, t h e following p r o v i s i o n s of s e c t i o n 25 of the old b i l l a r e omitted from the new b i l l :
(1)
That the amount which any n a t i o n a l bank might lend to any broker
or member of any stock exchange or s i m i l a r c o r p o r a t i o n or any f i n a n c e
company, s e c u r i t i e s company, investment t r u s t or other s i m i l a r o r g a n i z a t i o n
would be l i m i t e d t o 10$ of the c a p i t a l and surplus of such n a t i o n a l bank.
(2)
t h a t no n a t i o n a l bank would be p e r m i t t e d t o lend t o "an a f f i l i a t e "
an amount exceeding
10$ of the c a p i t a l and surplus of such
X-7139
3 2 0
n a t i o n a l bank or exceeding the capital, stock of such, a f f i l i a t e , whichever
may be the s m a l l e r .
(3) t h a t the aggregate amount which a l l a f f i l i a t e s of a n a t i o n a l "bank
could borrow from such n a t i o n a l bank ( i n c l u d i n g repurchase agreements)
would be l i m i t e d t o 10$ of the n a t i o n a l bank's c a p i t a l and surplus except
t h a t loans secured by Government bonds or by bonds i s s u e d by the S t a t e i n
which such bank i s s i t u a t e d or by any p o l i t i c a l s u b d i v i s i o n of such
S t a t e would be excluded a l t o g e t h e r from the l i m i t a t i o n s of Section 5200
of the Revised S t a t u t e s , i f a c t u a l l y "owned by t h e borrower.
(4)
t h a t no n a t i o n a l bank might e s t a b l i s h or c a p i t a l i z e an a f f i l i a t e
through cash or stock dividend d e c l a r a t i o n s made from i t s s u r p l u s
or from undivided p r o f i t s ; and "within t h r e e years a f t e r t h i s s e c t i o n
as amended takes e f f e c t " , every a f f i l i a t e should be c a p i t a l i z e d through
t h e s a l e of i t s own s t o c k which should be paid f o r i n cash i n the same
manner as r e q u i r e d i n t h e case of a n a t i o n a l bank.
(5)
t h a t f o r a p e r i o d of t h r e e y e a r s , no a f f i l i a t e of a n a t i o n a l
bank might h o l d , or lend upon, more than 10$ of the s h a r e s of
the c a p i t a l s t o c k of the parent i n s t i t u t i o n .
3 2 9
X-7139
*30SECTIOIT 33.
Reports of a f f i l i a t e s of n a t i o n a l "banks (pp. 47, 4 8 ) .
The old "bill ( i n Section 27) required, each a f f i l i a t e of a n a t i o n a l "bank t o make t h r e e complete r e p o r t s of condition annually through
the p r e s i d e n t of tlie bank to t h e Comptroller of the Currency, and a l s o
to make such s p e c i a l r e p o r t s as the Comptroller n i g h t r e q u i r e .
The
Board's recommendation was t h a t such r e p o r t s "be r e q u i r e d only when deemed
necessary.
The new "bill provides t h a t every n a t i o n a l "bank s h a l l obtain f r o n
each of i t s a f f i l i a t e s , other than member banks, and f u r n i s h t o t h e
Comptroller of the Currency not l e s s than t h r e e r e p o r t s of c o n d i t i o n
each year and such a d d i t i o n a l r e p o r t s as t h e Comptroller may deem necessary.
The p r o v i s i o n r e q u i r i n g such r e p o r t s i s s t i l l mandatory; but they
a r e r e q u i r e d t o c o n t a i n only such information as i n t h e judgment of the
Comptroller s h a l l be necessary to d i s c l o s e f u l l y the r e l a t i o n s between
such a f f i l i a t e and such bank and to enable the Comptroller t o inform
himself as to the e f f e c t of such r e l a t i o n s upon the a f f a i r s of such bank.
The bank i s s u b j e c t to a penalty f o r f a i l u r e to render such r e p o r t s .
P r o v i s i o n s of t h e old b i l l r e q u i r i n g an a f f i l i a t e under c e r t a i n
s t a t e d conditions to p u b l i s h i t s e n t i r e p o r t f o l i o a r e omitted from
the new b i l l .
( S u b s t a n t i a l l y t h e same p r o v i s i o n s a r e contained i n Section
5(b) of the new b i l l w i t h r e f e r e n c e to r e p o r t s of a f f i l i a t e s of S t a t e
member b a n k s ) .
X-7139
330
-31"
SECTION 2 4 ,
Examinations of a f f i l i a t e s of n a t i o n a l "banks. (pp. 48-50)
The new b i l l r e q u i r e s such examinations of a f f i l i a t e s ( o t h e r
than netiber banks) of a n a t i o n a l bank as s h a l l be n e c e s s a r y to d i s c l o s e
f u l l y t h e r e l a t i o n s between such bank and such a f f i l i a t e s and t h e e f f e c t
of such r e l a t i o n s upon t h e a f f a i r s of such bank, and a u t h o r i z e s t h e
f o r f e i t u r e of t h e f r a n c h i s e of the bank i n t h e event of r e f u s a l of t h e
a f f i l i a t e to give information, or t o permit such examination.
P u b l i c a t i o n of t h e examination r e p o r t of a n a t i o n a l bank or of an a f f i l i a t e i s a u t h o r i z e d i f the bank or a f f i l i a t e f a i l s t o comply w i t h
recommendations of t h e Comptroller of t h e Currency based on such examinations.
The old b i l l contained a p r o v i s i o n ( i n Section 28) r e q u i r i n g
examinations of a f f i l i a t e s of n a t i o n a l banks and member banks.
The Feder-
a l Reserve Board recommended t h a t t h i s s e c t i o n p r o v i d e f o r examination o f
a f f i l i a t e s of n a t i o n a l banks only (as examinations of a f f i l i a t e s of S t a t e
member banks a r e provided f o r elsewhere i n t h e b i l l ) and t h a t such examinations be a u t h o r i z e d to be made only when deemed n e c e s s a r y .
In accordance w i t h c e r t a i n other suggestions of t h e F e d e r a l Res e r v e Board on t h i s s u b j e c t , t h e new b i l l has added c e r t a i n p r o v i s i o n s
t o a u t h o r i z e examiners making an examination of an a f f i l i a t e of a n a t i o n a l bank t o a d m i n i s t e r oaths and to examine o f f i c e r s and employees under
o a t h ; t o p r o v i d e t h a t t h e expenses of such examination
may be a s s e s s e d
a g a i n s t t h e a f f i l i a t e and, i f not p a i d by the a f f i l i a t e , then a g a i n s t
. 331
X-7139
* 32 —
*
the bank; and to provide a p e n a l t y of $100 p e r day to be paid "by the
bank f o r r e f u s a l of the a f f i l i a t e to give information r e q u i r e d or to
permit such an examination.
While examinations of a f f i l i a t e s of n a t i o n a l banks i n the old
b i l l were l i m i t e d to a p e r i o d of three y e a r s a f t e r i t s p a s s a g e , the new
b i l l , in accordance with the Board's stiggestion on t h i s p o i n t , contains
no l i m i t of t h i s k i n d .
( P r o v i s i o n s of a somewhat s i m i l a r c h a r a c t e r with r e f e r e n c e to
examinations of a f f i l i a t e s of S t a t e member banks a r e contained i n Sect i o n 5(b) of the new b i l l . )
SECTION 35.
Removal of bank d i r e c t o r s or o f f i c e r s from o f f i c e . ( p p . 5 0 - 5 2 )
On t h i s s u b j e c t , the new b i l l follows s u b s t a n t i a l l y the recommendation of the Board and p r o v i d e s a procedure f o r the removal of a
d i r e c t o r or o f f i c e r of a member bank who has continued t o v i o l a t e the
law or has continued unsafe or unsound p r a c t i c e s i n conducting the
business of the bank with which he i s connected, a f t e r b e i n g warned by
the Comptroller of t h e Currency (as to a n a t i o n a l bank) or t h e Federal
Reserve Agent of h i s d i s t r i c t (as to a S t a t e member bank) to d i s continue such v i o l a t i o n s or such p r a c t i c e s .
A f t e r a h e a r i n g by the
Federal Reserve Board e s t a b l i s h i n g such f a c t s , the Board may order
the removal of such d i r e c t o r or o f f i c e r and a copy of such order s h a l l
be served upon him and upon the bank with which he i s connected.
Such
order and f i n d i n g s of f a c t may not be made p u b l i c or d i s c l o s e d except
X-7139
** 33
-
. 332
to such d i r e c t o r or o f f i c e r and the d i r e c t o r s of h i s bank, " o t h e r wise than i n connection w i t h proceedings f o r a v i o l a t i o n of t h i s
section."
P a r t i c i p a t i o n "by such o f f i c e r or d i r e c t o r i n the manage-
ment of such bank a f t e r having been removed i s punishable by f i n e or
imprisonment.
The old b i l l p l a c e d the power of removal in a committee
c o n s i s t i n g of the Governor of the Federal Reserve Board, the Comptroller
of the Currency and the Federal Reserve Agent, i n s t e a d of i n the Fede r a l Reserve Board a s provided i n the new b i l l .
The old b i l l did not
c o n t a i n the p r o v i s i o n p r o h i b i t i n g the making p u b l i c or d i s c l o s i n g the
o r d e r of removal or f i n d i n g s of f a c t .
SECTION 2 6 .
Saving c l a u s e and r e s e r v a t i o n of r i g h t to amend, ( n . 5 2 ) .
Section 26 contains the u s u a l p r o v i s i o n s (which were a l s o
in the old b i l l ) r e s e r v i n g the r i g h t to a l t e r , amend or r e p e a l the
a c t and l i m i t i n g d e c i s i o n s holding p a r t s of the a c t to be i n v a l i d ,
to the s p e c i f i c s e c t i o n s d e a l t w i t h in such d e c i s i o n s .
A
X-7139
- 34 SECTIONS OF OLD BILL ffittliiStY OMIT96I)
3 3 3
TR6U
HEW B I L L .
In a d d i t i o n to a number of o t h e r p r o v i s i o n s of t h e o l d b i l l
which have "been o m i t t e d from t h e new b i l l but which have been t r e a t e d
above in connection with c e r t a i n r e l a t e d t o p i c s contained in t h e c o r responding s e c t i o n s of t h e new b i l l , (such as the p r o v i s i o n s r e g a r d i n g
r e s e r v e s and r e g a r d i n g r e a l e s t a t e loans and investments of member
b a n k s ) , t h e r e have a l s o been omitted from t h e new b i l l t h e f o l l o w i n g
p r o v i s i o n s , each of which c o n s t i t u t e d an e n t i r e s e p a r a t e s e c t i o n of
the old b i l l .
L i m i t a t i o n . u p o n amount of l o a n s on c o l l a t e r a l s e c u r i t y by member banks.
Section 8 of the o l d b i l l a u t h o r i z e d t h e Federal Reserve Board
to f i x t h e p e r c e n t a g e of the c a p i t a l and s u r p l u s of a member bank which
might be r e p r e s e n t e d by l o a n s on c o l l a t e r a l s e c u r i t y .
The purpose of
t h i s s e c t i o n a p p a r e n t l y was t o prevent t h e undue u s e of bank l o a n s f o r
s p e c u l a t i o n i n s e c u r i t i e s , which i s f u l l y covered in Section 3.
In
accordance with t h e recommendation of t h e Board, t h e r e f o r e , t h e p r o v i s i o n s of Section 8 of the o l d b i l l have been omitted from t h e new b i l l .
I n t e r e s t on d e p o s i t s .
Section 24 of the o l d b i l l would have l i m i t e d the r a t e of
i n t e r e s t which n a t i o n a l and S t a t e member banks would be p e r m i t t e d to
pay on d e p o s i t s as f o l l o w s : (1)
i n t e r e s t on b a l a n c e s due to banks would
have been l i m i t e d to 2 1/2$ or " t h e c u r r e n t r a t e of discount of t h e
Federal r e s e r v e bank", whichever i s the s m a l l e r ;
(2) on a l l o t h e r
d e p o s i t b a l a n c e s , the r a t e would have been l i m i t e d to one-half the
r a t e of i n t e r e s t which n a t i o n a l banks a r e p e r m i t t e d to charge on l o a n s .
X-7139
- 85 In accordance with a recommendation of the Federal Reserve
Board t h i s s e c t i o n i s omitted from the new t i l l .
L i m i t a t i o n s on c o l l a t e r a l loans to s i n g l e borrowers.
Section 26 of t h e old t i l l provided t h a t no member bank
s h a l l lend to any individual or corporation "upon c o l l a t e r a l s e c u r i t y "
an amount exceeding 10$ of i t s own c a p i t a l and s u r p l u s , or an amount
exceeding the percentage f i x e d by the Federal Reserve Board, whichever i s the s m a l l e r .
In accordance with the recommendation of the Federal Reserve Board t h i s s e c t i o n i s omitted from t h e new b i l l (as was a l s o
Section 8 of t h e o l d b i l l which a l s o provided f o r l i m i t i n g c o l l a t e r a l
loans.)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7140
A p r i l 22, 1932.
SUBJECT!
Hew Issue Treasury B i l l 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 r e s e r v e "banks, the
code word "UOXBETKAY" has been designated to cover a new
issue of Treasury B i l l s , dated April 27, 1932, and maturing J u l y 27, 1932.
This word should "be i n s e r t e d in the Federal r e s e r v e
t e l e g r a p h code book, following the supplemental code word
"NOXDECUR" on page 172.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL Ft R. BANKS
I
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X~7143
A p r i l 26, 1932.
SUBJECT:
New Issues of Treasury C e r t i f i c a t e s
of Indebtedness and Treasury Notes.
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 b e tween Federal r e s e r v e banks covering Government s e c u r i t i e s , t h e following code words have been designated t o
cover new i s s u e s of Treasury C e r t i f i c a t e s of Indebtedness
and Treasury Notes:
"NOWHOAX" Treasury C e r t i f i c a t e s of Indebtedness,
S e r i e s B-1933, 2$, t o be dated May 2,
1932 due May 2, 1933;
"NOWHUGE" Three percent Treasury Notes, S e r i e s
A-1934, to be dated May 2, 1932, due
May 2, 1934.
These code words should be i n s e r t e d i n the Federal Reserve
Telegraph Code book, on Page 172.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BANKS.
3 3 6
i
X-7144
FEDERAL
RESERVE
3 3 7 .
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e i n Morning Papers,
Thursday, A p r i l 28, 1932.
The following summary of g e n e r a l b u s i ness and f i n a n c i a l conditions i n the
United S t a t e 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 , 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 i n the
monthly reviews of t h e F e d e r a l r e s e r v e
hanks.
I n d u s t r i a l a c t i v i t y was i n smaller volume i n March than i n February,
although u s u a l l y l i t t l e change i s r e p o r t e d a t t h i s season, and the number
of employees a t f a c t o r i e s was a l s o reduced, contrary to seasonal tendency.
Volume of r e s e r v e hank c r e d i t decreased i n March, but showed a considerable
growth i n t h e f i r s t t h r e e weeks of A p r i l .
Money r a t e s continued to d e c l i n e .
Production and employment - Output of i n d u s t r i a l p r o d u c t s , as measured
by the Board's s e a s o n a l l y a d j u s t e d index, declined from 70 per cent of the
1923-1925 average i n February to 68 per cent i n March.
Daily output a t
s t e e l m i l l s and automobile f a c t o r i e s decreased, c o n t r a r y to seasonal t e n dency, and a c t i v i t y a t woolen m i l l s declined sharply to t h e lowest l e v e l
i n recent years.
Cotton consumption by domestic m i l l s continued a t the
February r a t e , although s a l e s of c o t t o n c l o t h d e c l i n e d , and output of shoes
inc r e a s e d c o n s i d e r a b l y ; i n both t h ese i n d u s t r i e s production was a t about
the same r a t e as a year ago.
A c t i v i t y i n t h e lumber i n d u s t r y , which r e -
cently has been a t a l e v e l about 45 per cent lower than l a s t y e a r , i n creased by more than the usual seasonal amount.
Output of coal a l e o i n -
creased considerably during March but declined i n e a r l y A p r i l .
Volume of f a c t o r y employment and p a y r o l l s decreased from February to
March, although an i n c r e a s e i s u s u a l a t t h i s season.
There were s u b s t a n t i a l
X 7M4
'
——
S
r e d u c t i o n s i n working f o r c e s i n t h e s t e e l , automobile, machinery, and
f u r n i t u r e i n d u s t r i e s , as well as a t woolen and s i l k m i l l s , while c l o t h i n g
and shoe f a c t o r i e s showed a d d i t i o n s t o t h e i r working f o r c e s .
Value of b u i l d i n g c o n t r a c t s awarded, as r e p o r t e d by the F . W. Dodge
Corporation, showed some i n c r e a s e of a seasonal c h a r a c t e r during March
and the f i r s t h a l f of A p r i l and was approximately o n e - t h i r d as l a r g e as
last year.
D i s t r i b u t i o n - R a i l shipments of merchandise, which o r d i n a r i l y i n cr e a s e i n March, showed l i t t l e change, and s a l e s at department s t o r e s i n
leading c i t i e s i n c r e a s e d by l e s s than the estimated seasonal amount.
Wholesale p r i c e s - The general l e v e l of wholesale commodity p r i c e s
showed l i t t l e change between February and March, according to the Bureau
of Labor S t a t i s t i c s .
In the f i r s t two weeks i n March p r i c e s of many com-
m o d i t i e s , i n c l u d i n g l i v e s t o c k and meats, advanced; between the middle of
March and the t h i r d week i n A p r i l , p r i c e s of c o t t o n , s i l k , wool, h i d e s ,
sugar, s i l v e r , and t i n declined considerably, while p r i c e s of c o f f e e and
petroleum i n c r e a s e d .
Wheat p r i c e s showed wide f l u c t u a t i o n s but were a t
about the same l e v e l i n the week ending A p r i l 23 as i n t h e f i r s t h a l f of
March.
Bank c r e d i t - The Federal r e s e r v e system's holdings of United S t a t e s
Government s e c u r i t i e s , a f t e r i n c r e a s i n g continuously from e a r l y i n March,
t o t a l e d $1,078,000,000 on April 20, an i n c r e a s e of $338,000,000 sinc e the
end of February.
This i n c r e a s e has been accompanied by some f u r t h e r de-
c l i n e i n t h e r e s e r v e banks' holdings of acceptances and a r e d u c t i o n of
$264,000,000 i n d i s c o u n t s .
Member bank indebtedness t o the r e s e r v e banks
showed a c o n s i d e r a b l e r e d u c t i o n i n a l l of the Federal r e s e r v e d i s t r i c t s .
Total volume of r e s e r v e bank c r e d i t o u t s t a n d i n g , which had declined i n
330
m
339
X-7144
——
3
March r e f l e c t i n g a continued, r e t u r n of money from c i r c u l a t i o n and an i n crease i n the c o u n t r y ' s stock of monetary gold, increased "by $115,000,000
during the f i r s t t h r e e weeks of A p r i l .
This i n c r e a s e was accompanied "by
a s u b s t a n t i a l growth i n member bank r e s e r v e b a l a n c e s .
Total loans and investments of r e p o r t i n g member banks i n l e a d i n g
c i t i e s continued to d e c l i n e during the f i v e weeks ending A p r i l 13.
At
banks i n New York C i t y , however, t h e r e was an i n c r e a s e i n investment holdings both of United S t a t e s Government s e c u r i t i e s and other s e c u r i t i e s ,
o f f s e t t i n g the d e c l i n e i n l o a n s , which continued u n t i l t h e middle of A p r i l .
Open-market r a t e s f o r bankers acceptances showed s u c c e s s i v e reductions
and on A p r i l 21 the o f f e r i n g r a t e f o r 90-day b i l l s was 7/8 of one per c e n t ,
the same r a t e as p r e v a i l e d between May and September, 1931.
commercial paper a l s o d e c l i n e d .
Rates on
i.
3 4 0
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7146
A p r i l 29, 1932.
SUBJECT:
Procedure f o r pledging United S t a t e s
Government S e c u r i t i e s as C o l l a t e r a l
f o r Federal Reserve Notes.
Dear S i r ;
a
Inclosed herewith i s a copy of a l e t t e r addressed to the
Governor ijf your Bank, i n regard to the pledging of United S t a t e s
g ^ p m e n t J k p u r i t i e s as 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
guch a c t i o n i s authorized by the Federal Reserve Board.
/'
In order t h a t your "bank may "be a b l e , when a u t h o r i z e d to
eto so/by the F e d e r a l Reserve Board, to pledge United S t a t e s Government s e c u r i t i e s h e l d i n t h e s p e c i a l investment account as c o l l a t e r a l
•S
s e c u r i t y f o r F e d e r a l reserve n o t e s , i t i s suggested t h a t you give
to t h e Federal Reserve Agent at New York a power of a t t o r n e y i n the
form a t t a c h e d , a u t h o r i z i n g him to r e c e i v e and hold d i r e c t o b l i g a t i o n s of the United S t a t e s f o r your account.
You w i l l note from the l e t t e r to the Governor of your bank
t h a t you w i l l r e c e i v e t e l e g r a p h i c advice, followed by mail confirmat i o n , of a l l United S t a t e s Government s e c u r i t i e s deposited with or
withdrawn fr»m t h e Federal Reserve Agent a t New York f o r your account.
The mail confirmation of such wire advice w i l l be signed by the
X-7146
— 2
I 341
—
Federal Reserve Agent a t New York, or "by h i s a s s i s t a n t , and w i l l "be
i n t h e form of the schedule r e f e r r e d to i n the i n c l o s e d l e t t e r to
the Governor of your Bank.
I t w i l l be noted t h a t t h e power of
a t t o r n e y which i s t o "be given t o the Federal Reserve Agent a t Now
York by you a u t h o r i z e s the Federal Reserve Agent a t Pvw York to
r e l e a s e d i r e c t o b l i g a t i o n s of the United S t a t e s h e l d f o r your a c count upon the s u b s t i t u t i o n t h e r e f o r of other such o b l i g a t i o n s .
However, a u t h o r i t y to make any r e l e a s e other than f o r purposes of
s u b s t i t u t i o n must, i n each i n s t a n c e , be given by you t o the Federal
Reserve Agent a t New York.
A copy of each schedule l i s t i n g s e c u r i t i e s pledged with you
as c o l l a t e r a l s e c u r i t y f o r outstanding Federal r e s e r v e n o t e s , from
t h e p o r t f o l i o of your bank, should be f u r n i s h e d t o t h e Federal Reserve Board and should bear a statement signed by you, or by your
a s s i s t a n t , r e a d i n g as f o l l o w s :
"Receipt i s acknowledged of t h e United S t a t e s Government s e c u r i t i e s l i s t e d above, amounting to
$
, t o be held as c o l l a t e r a l s e c u r i t y
f o r outstanding Federal r e s e r v e notes of the Federal Reserve Bank of
Federal Reserve Agent a t
».
Each schedule covering t h e r e l e a s e of s e c u r i t i e s pledged
w i t h you from the p o r t f o l i o of your bank should bear a statement
signed by you, or by your a s s i s t a n t , reading as f o l l o w s :
X 7146
~ . 343
- 3 -
"The United S t a t e s Government s e c u r i t i e s l i s t e d
above, amounting to $
h e l d as c o l -
l a t e r a l s e c u r i t y f o r outstanding Federal r e s e r v e notes
of the Federal Reserve Bank of
have t h i s
day "been r e t u r n e d t o the Federal Reserve Bank of
Federal Reserve Agent a t
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
I n c l o s u r e s : X-7146-a and X-7147.
TO ALL F. R. AGENTS EXCEPT N W YORK.
E
, 343
X - 7146-a
FEDERAL RESERVE BAH
OF
K O ALL M N BY THESE PRESENTS That I ,
NW
E
,
Federal Reserve Agent of Federal Reserve Bank of
,
have c o n s t i t u t e d and appointed, and by t h e s e p r e s e n t s do c o n s t i t u t e
and appoint J . Herbert Case, Federal Reserve Agent a t Federal Reserve
Bank of Hew York, my t r u e and lawful a t t o r n e y i n f a c t , t o r e c e i v e
or
from Federal Reserve Bank of
from Federal
Reserve Bank of Hew York or other duly authorized agent of Federal
Reserve Bank of
and t o hold f o r me and i n my name
and s u b j e c t t o my order d i r e c t o b l i g a t i o n s of the United S t a t e s
e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r Federal r e s e r v e notes under the
p r o v i s i o n s of the Federal Reserve Act, with power to my s a i d a t t o r n e y
without f u r t h e r order or i n s t r u c t i o n s from me to r e l e a s e and d e l i v e r
to Federal Reserve Bank of New York as agent of Federal Reserve Bank
of
any of t h e said o b l i g a t i o n s of t h e United S t a t e s
so held upon r e c e i p t of other d i r e c t o b l i g a t i o n s of t h e United S t a t e s
e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r Federal r e s e r v e notes under the
p r o v i s i o n s of t h e Federal Reserve Act of a f a c e amount not l e s s than
the o b l i g a t i o n s so r e l e a s e d and d e l i v e r e d .
Witness my hand and s e a l t h i s
day of
A. D., 1932.
(SEAL)
Signed, sealed end d e l i v e r e d
i n the presence o f ;
3 4 4
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7147
April 29, 1932.
SUBJECT:
Procedure f o r pledging United S t a t e s
Government S e c u r i t i e s as C o l l a t e r a l
f o r Federal Reserve Botes.
Dear S i r ;
As you know, the Act of February 27, 1932, amending the second
paragraph of Section 16 of t h e Federal Reserve Act, p r o v i d e s t h a t unt i l March 3, 1933, should the Federal Reserve Board deem i t in the publ i c i n t e r e s t , i t may, upon t h e a f f i r m a t i v e vote of not l e s s than a
m a j o r i t y of i t s members, a u t h o r i z e the Federal r e s e r v e banks to o f f e r ,
and the Federal r e s e r v e agents to accept, as 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 , d i r e c t o b l i g a t i o n s of the United S t a t e s .
The Federal Reserve Board has not authorized any Federal r e s e r v e
bank to pledge with i t s Federal r e s e r v e agent d i r e c t o b l i g a t i o n s of the
United S t a t e s Government as 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
notes.
There a r e c e r t a i n d e t a i l s which should be worked out a t t h i s
time, however, and t h e f o l l o w i n g procedure i s suggested in order t h a t
the accounting which would be involved in the pledging of United S t a t e s
Government s e c u r i t i e s held in the s p e c i a l investment account may be
s i m p l i f i e d as much as p r a c t i c a b l e .
If your Federal r e s e r v e bank i s authorized to pledge with i t s Fed-
x
-
2
~7147345
-
e r a l r e s e r v e agent United S t a t e s Government s e c u r i t i e s and d e s i r e s to
pledge such s e c u r i t i e s h e l d in the s p e c i a l investment account, i t should
n o t i f y the Federal Reserve Sank of Hew York by wire of t h e amount to he
pledged, l e a v i n g to t h a t t a n k the d i s c r e t i o n t o determine the s p e c i f i c
s e c u r i t i e s to be pledged.
Upon depositing such s e c u r i t i e s with i t s
Federal r e s e r v e agent f o r t h e account of the Federal r e s e r v e agent of
your bank, the Federal Reserve Bank of New York w i l l n o t i f y your bank
by wire of the amount of each issue of s e c u r i t i e s so deposited and
confirm the advice by mail.
At the same time, the Federal "Reserve
Agent a t New York w i l l wire the Federal r e s e r v e agent a t your bank
t h a t he has r e c e i v e d the s e c u r i t i e s and w i l l confirm such wire advice
by mail.
A s i m i l a r procedure w i l l be followed in the event your bank should
d e s i r e the r e l e a s e of any s e c u r i t i e s deposited by the Federal Reserve
Bank of Hew York with i t s Federal r e s e r v e agent f o r your account.
It
w i l l be noted t h a t t h e power of a t t o r n e y which i s to be given to t h e
Federal Reserve Agent a t New York by the Federal Reserve Agent a t your
bank a u t h o r i z e s the Federal 'Reserve Agent a t New York to r e l e a s e d i r e c t
o b l i g a t i o n s of the United S t a t e s held f o r the account of the Federal Reserve Agent a t your bank upon r e c e i p t of other d i r e c t o b l i g a t i o n s of the
United S t a t e s , without o b t a i n i n g s p e c i f i c a u t h o r i t y t h e r e f o r from the
Federal Reserve Agent a t your bank.
However, i t w i l l be ne cessary f o r
the Federal Reserve Agent a t your bank to a u t h o r i z e the Federal Reserve
Agent a t New York, in each i n s t a n c e , to make r e l e a s e s of d i r e c t o b l i g a t i o n s of the United S t a t e s , held f o r h i s account, other than f o r purposes
346
X-7147
— 3 —
of s u b s t i t u t i o n s .
In case your bank should pledge with i t s Federal r e s e r v e agent
United S t a t e s Government s e c u r i t i e s h e l d in i t s own p o r t f o l i o , a
schedule l i s t i n g the amount of s e c u r i t i e s of each i s s u e should accompany the s e c u r i t i e s pledged with or withdrawn from the a g e n t .
There i s i n c l o s e d h e r e w i t h a copy of a l e t t e r which i s being
addressed today to the Federal Reserve Agent at your bank.
Very t r u l y yours,
Chester M o r r i l l ,
Socretary.
i
To t h e Governors of a l l F. E. Banks except Hew York
^Enclosures X-7146 and X-7146a.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7149
May 6, 1932.
SUBJECT:
Hew Issue Treasury B i l l 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 r e s e r v e banks, the
code r o r d "NOXDEFT" has been designated to cover a new
i s s u e of Treasury B i l l s , dated May 11, 1932, and maturing
August 10, 1932.
This word should be i n s e r t e d i n the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "UOXDEFRAY" on page 172.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL E. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7150
May 6, 1932.
SUBJECT:
Changes i n I n t e r - D i s t r i c t Time
Schedule.
Dear S i r :
In accordance with a request of the Federal
Reserve Bank of Minneapolis, the Federal Reserve
Bank of New York having agreed t h e r e t o , the Federal
Reserve Board has approved changes i n the i n t e r d i s t r i c t time schedule of a v a i l a b i l i t y items from
Minneapolis t o New York, from t h r e e days to two days,
and from Minneapolis to Helena, from two days to
t h r e e days.
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
L
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X— 7 1 5 1
May 6, 1932.
SUBJECT z
Code words i n connection with the pledge of Government
s e c u r i t i e s as c o l l a t e r a l f o r Federal r e s e r v e n o t e s .
Dear S i r :
The Federal Reserve Board has designated the f o l l o w i n g code words
>
to cover suggested form telegrams f o r use "by the Federal r e s e r v e "banks
and Federal r e s e r v e agents i n connection with the pledging and r e l e a s e
of United S t a t e s Government s e c u r i t i e s as c o l l a t e r a l f o r Federal r e -
1
serve n o t e s :
1.
To Federal Reserve Bank of New York, signed "by t r a n s m i t t i n g
Federal Reserve Bank:
MOCKLER
Please deliver $
f a c e amount of our p a r t i c i p a t i o n
i n United S t a t e s Government s e c u r i t i e s held i n system s p e c i a l
investment account to Federal Reserve Agent a t New York to "be
h e l d "by him under power of a t t o r n e y f o r account of Federal
Reserve Agent a t t h i s "bank as c o l l a t e r a l s e c u r i t y f o r Federal
reserve notes.
k
2.
To Federal Reserve Bank addressed, signed "by Federal Reserve
Bank of New York:
MOCKLOVE
»
In accordance with your telegram of
(Date)
we have
delivered $
f a c e amount of your p a r t i c i p a t i o n i n United
S t a t e s Government s e c u r i t i e s h e l d i n system s p e c i a l i n v e s t ment account t o Federal Reserve Agent a t New York to "be held
"by him under power of a t t o r n e y f o r account of Federal Reserve
Agent a t your "bank as 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
notes.
3 4 9
X-7151
-
3.
2
-
I
To Federal Reserve Agent addressed, signed by Federal Reserve
Agent a t New York:
MOCKLUST
Upon your "bank's i n s t r u c t i o n s Federal Reserve Bank of New
York has d e l i v e r e d to me $
f a c e amount of United S t a t e s
Government s e c u r i t i e s t o be held by me under power of a t t o r n e y
f o r your account as 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
notes.
4.
To Federal Reserve Agent a t New York, signed by Federal Reserve
Agent a t other bank:
MCMD
OK A
Release t o Federal Reserve Bank of New York f o r account of
t h i s bank $
f a c e amount of United S t a t e s Government s e c u r i t i e s now h e l d by you under power of a t t o r n e y f o r my account as
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 .
5.
To Federal Reserve Agent addressed, signed by Federal Reserve
Agent a t New York:
MOCKMIST
In accordance with your telegram of
(Date)
I have r e l e a s e d to Federal Reserve Bank of New York f o r account of your
bank $
f a c e amount of United S t a t e s Government s e c u r i t i e s
h e l d by me under power of a t t o r n e y f o r your account as 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 .
6.
To Federal Reserve Bank addressed, signed Federal Reserve Bank
of New York:
MCMN
OK OY
Upon your Federal Reserve Agent's i n s t r u c t i o n s Federal Res e r v e Agent a t New York has r e l e a s e d t o Federal Reserve Bank of
New York f o r your account $
f a c e amount of United S t a t e s
Government s e c u r i t i e s which he held under power of a t t o r n e y f o r
account of your Agent as 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
notes.
These words should be i n s e r t e d i n the Federal r e s e r v e t e l e g r a p h code
book f o l l o w i n g t h e code word "Mockjest" on page 160.
Very t r u l y y o u r s ,
TO ALL GOVERNORS AND F . R. AGENTS.
E. M. McClelland,
Assistant Secretary.
3 5 0
I
X-7152
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING
Federal Reserve Notes, Series 1928,
A p r i l 1 t o 28, 1932,
#20
Total
Sheets
32,000
-
70,000
$ 6,475,00-
156,000
86,000
-
242,000
22,385,00-
Philadelphia,
53,000
25,000
22,000
100,000
9,250.00-
Cleveland,
38,000
40,000
10,00.0
88,00.0
8,140,00.
Atlanta,
34,000
15,000
10,000
59,000
5,457,50.
Kansas City,
—
20,000
14,000
34,000
3,14.5,00
Dallas,
—
10,000
10,000
925,00,
603,000
#55,777,50.
15
Boston,
New York,
#10
38,000
319,000
228,000
603,000 s h e e t s ,
—
56,000
Amount
$92,50- per 11, . . ,$55, 777,50
351
i 352
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7154
May 13, 1932.
SUBJECT:
Expense, Main Lines, Leased Wire System,
A p r i l , 1932.
Dear S i r ;
Enclosed herewith you w i l l f i n d two mimeographed
s t a t e m e n t s , X-7154-a and X-7154-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 s , Leased Wire System, during
t h e month of A p r i l , 1932.
P l e a s e c r e d i t the amount payable by your bank i n
t h e general 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, National Banks, f o r account of " S a l a r i e s
and Expenses, F e d e r a l Reserve Board, Special Fund", Leased
Wire System, sending d u p l i c a t e c/D to the Federal Reserve
Board.
Very t r u l y yours,
F i s c a l Agent.
Enclosures.
TO GOVERNORS OF ALL F. R. BANKS.
X-715U-a
REPORT SHOWING CLASSIFICATION AH) NUMBER OF W R S TRANSMITTED OVER MAIN LINES
OD
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF APRIL, 1932.
Business
reoorted
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas.
San Francisco
Total
Words sent by
New York chargea b l e to other
F. R. Banks (1)
28,360
141,631
28,906
62,984
58,097
52,176
91,175
68,711
31,469
69,793
62,162
110.592
806,056
2,527
—
3,o4l
2,859
2,424
7,520
4,158
2,350
2,264
2,401
7,510
4.372
41,426
F. R. Board business
Net F e d e r a l
reserve
bank
business
30,887
141,631
31,947
65,843
60,521
59,696
95,333
71,061
33,733
72,194
69,672
114.964
847,482
Percent of t o t a l
back bus ines s (*)
3.64
16.71
3.77
7.77
7.14
7.04
11.25
8.39
3.98
8.52
8.22
13.57
100.00
257,598
Reimbursable business Incoming 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
(*)
These percentages used 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 the accompanying statement (X-7154-b).
(1)
Number of words sent by New York to o t h e r F. R. Banks f o r t h e i r sole b e n e f i t charged to
banks i n d i c a t e d in accordance with a c t i o n taken a t Governors' Conference
November 2-4, 1925.
1,135,080
382.767
1,517,847
x-7154-b
REPORT OF EXPENSE MAIN LIKES
FEDERAL RESERVE LEASED WIRE SYSTEM, APRIL, 1932.
Name of bank
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
F e d e r a l Reserve Board
Total
Operators'
salaries
$260.00
1,134.15
225.00
306.66
190.00
270.00
3,772.42 (#)
195.00
243.49
287-50
251.00
380.00
-
$7,515.22
Operators
overtime
$ 5.00
3.00
Wire
rental
$
$265.00
1,137.15
—
225.00
306.66
—
230.00 (&)
420.00
—
270.00
2.00
3,774.42
195.00
—
243.49
—
287.50
—
251.00
—
380.00
15,653.20
15.653.20
$10.00 $15,883.20
$23,408.42
~
—
**
Reimbursable charges:
Treasury Department.
$2,753.65
Reconstruction Finance Corporation . 3.067.26
Federal Farm Loan Board. . . . . . .
30.43
Federal Farm Board
46.71
Less reimbursable charges
Total
(&)
(#)
(*)
(a)
Total
exoenses
Payable t o
Federal
Reserve
Board
Pro r a t a
s h a r e of
total
expenses
Credits
$637.19
2,925.14
659.95
1,360.17
1,249.88
1,232.3S
1,969.35
1,468.70
696.71
1,491.46
1,438.94
2,375.47
$265.00
1,137.15
225.00
306.66
420.00
270.00
3,774.42
195.00
243.49
287-50
251.00
380.00
$372.19
1,737.99
434.95
1,053.51
829.88
962.38
1,805.07 (*)
1,273.70
453.22
1,203.96
1,187-94
1,995.47
$17,505.34
$7,755.22
$11,555.19
1,505.07 (a)
$ 9,750.12
5,903.08
$17,505.3%
M a i n l i n e r e n t a l , Richmond-Washington.
Includes s a l a r i e s of Washington o p e r a t o r s .
Credit.
.Amount reimbursable to Chicago.
CO
Q\
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7155
May 13, 1932.
SUBJECT:
New Issue Treasury B i l l 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 r e s e r v e "banks, the
code word "UOXDEFUSS" has been designated to cover a new
i s s u e of Treasury B i l l s , dated May 18, 1932, and maturing
August 17, 1932.
This word should "be i n s e r t e d i n t h e Federal r e serve t e l e g r a p h code book, following the supplemental code
word "UOXDEFT" on page 172.
Very t r u l y y o u r s ,
J . C. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
X-7156
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May 17, 1932
SUBJECT:
Holidays d u r i n g June, 1932.
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 F r i d a y , June 3 r d , 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 c l e a r i n g or the Federal r e s e r v e
note c l e a r i n g of t h a t d a t e :
•Memphis
Richmond
Atlanta
•New Orleans
Birmingham
•Nashville
Jacksonville
•Confederate Memorial Day
Dallas
El Paso
Houston
San Antonio
Please i n c l u d e c r e d i t s of June 3rd i n the Gold Fund
c l e a r i n g with your c r e d i t s f o r June 4 t h f o r the o f f i c e s a f f e c t e d , and make no shipments of Federal r e s e r v e n o t e s , f i t
or u n f i t , f o r account of t h e head o f f i c e s mentioned, on June
3rd.
Please n o t i f y branches
Very t r u l y yours
J , C. Noell,
A s s i s t a n t Secretary
TO GOVERNORS OF ALL F. R. BANKS.
I
£-715?
FEDERAL RESERVE BOARD ST/LTSMENT FOR THE PRESS
May 17, 1952
For immediate r e l e a s e
The Governors of t h e Federal Reserve Banks met
today with t h e Federal Reserve Board and i t was decided t o
.continue open market operations by the purchase of government s e c u r i t i e s , the extent and amount to be determined
from time to time a s eonditions j u s t i f y .
3 5 7
[
3 5 8
FEDERAL RESERVE BOARD
WASHINGTON
X-7159
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
May 19, 1932.
SUBJECT:
Procedure in e l e c t i o n s of Class A and.
Class 3 d i r e c t o r s .
Dear SirA f t e r a c a r e f u l consideration of t h e r e p l i e s r e c e i v e d from
the chairmen of the several Federal r e s e r v e banks to the Board's l e t t e r
of November 27, 1531, X-7036, with regard to the date of c l o s i n g the
p o l l s and of m a i l i n g of the l i s t s of candidates in e l e c t i o n s of Class
A and Class B d i r e c t o r s , the Federal Heserve Board wishes to suggest
t h a t the f o l l o w i n g procedure be adopted in a l l e l e c t i o n s of Federal
r e s e r v e bank d i r e c t o r s commencing with the next r e g u l a r annual e l e c t i o n .
Copies of the l i s t of candidates nominated in accordance with
the e x i s t i n g procedure should be mailed by the chairman of each Federal
r e s e r v e bank on such days and a t such times t h a t , in the normal course
of the m a i l s , every voting member bank in the d i s t r i c t w i l l r e c e i v e a
copy on the d a t e f i x e d f o r the opening of the p o l l s .
The p o l l s should
be closed on t h e f i f t e e n t h calendar day a f t e r the date of t h e i r opening,
t h a t i s , i f t h e p o l l s a r e opened on November 1, they should be closed
on November 16; and no b a l l o t should be counted as v a l i d u n l e s s i t
has been r e c e i v e d by the chairman on or b e f o r e the date thus f i x e d f o r
the c l o s i n g of the p o l l s .
As under e x i s t i n g p r a c t i c e , t h e requirement
359
- 2 -
X-7159
t h a t a b a l l o t tie received by the chairman w i t h i n the p e r i o d s t a t e d i n
order to be counted as v a l i d should be c a l l e d to the a t t e n t i o n of the
member banks in the i n s t r u c t i o n s sent them r e g a r d i n g the e l e c t i o n .
Inasmuch as the law p l a c e s t h e conduct of e l e c t i o n s of Class
A and Class B d i r e c t o r s of each Federal r e s e r v e bank under the d i r e c t i o n
of the Chairman of t h e Board of D i r e c t o r s of such bank, the Federal Reserve Board w i l l not h e r e a f t e r f i x or approve dates f o r the opening or
c l o s i n g of t h e p o l l s in e i t h e r annual or s p e c i a l e l e c t i o n s .
I t i s sug-
gested, however, t h a t some convenient date in the e a r l y p a r t of November
be s e l e c t e d each year f o r the opening of the p o l l s in annual e l e c t i o n s ;
and i t would seem a d v i s a b l e in every case t h a t the time of t h e e l e c t i o n
should be so arranged t h a t n e i t h e r the date f o r the opening nor the date
f o r the c l o s i n g of the p o l l s w i l l f a l l upon a Sunday or l e g a l holiday in
any of the S t a t e s of t h e d i s t r i c t in which the e l e c t i o n i s being h e l d .
In view of the requirement of the s t a t u t e as to the time w i t h i n which
the chairman s h a l l f u r n i s h a copy of the l i s t of c a n d i d a t e s to each member
bank, the date f i x e d f o r t h e opening of the p o l l s should not in any case
be more than f i f t e e n days a f t e r completion of t h i s l i s t .
This l e t t e r i s not intended to suggest any changes in the e x i s t ing e l e c t i o n procedure o t h e r than those s p e c i f i c a l l y mentioned.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7160
May 20, 1932.
SUBJECT:
New Issue Treasury B i l l 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 r e s e r v e "banks, the
code word "NOXDEGAEB" has "been designated to cover a new
i s s u e of Treasury B i l l s , dated May 25, 1932, and maturing
August 24, 1932.
This word should "be i n s e r t e d i n the Federal r e s e r v e
t e l e g r a p h code book, following the supplemental code word
"NOXDEFUSS" on page 172.
Very t r u l y yours,
J . C. U o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BAMS.
x-7162
FEDERAL
RESERVE
3 6 1
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e i n Morning P a p e r s ,
Thursday, May 26, 1932.
The f o l l o w i n g summary of g e n e r a l b u s i ness and f i n a n c i a l c o n d i t i o n s i n t h e
United S t a t e s , "based upon s t a t i s t i c s
f o r the months of A p r i l and May, w i l l
appear i n the forthcoming i s s u e of the
F e d e r a l Reserve B u l l e t i n and i n t h e
monthly reviews of the F e d e r a l 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 and f a c t o r y employment d e c l i n e d s u b s t a n t i a l l y from
March t o A p r i l , a l t h o u g h u s u a l l y l i t t l e change occurs a t t h i s season.
Pur-
chases of Government s e c u r i t i e s "by t h e Federal r e s e r v e banks have continued
during A p r i l and t h e f i r s t t h r e e weeks of May and t h e r e has been a c o n s i d e r a b l e growth i n t h e r e s e r v e s of member banks.
Production and employment - Volume of i n d u s t r i a l p r o d u c t i o n , as measured
by the B o a r d ' s s e a s o n a l l y a d j u s t e d i n d e x , decreased from 67 per cent of the
1923-1925 average i n March to 64 per cent i n A p r i l .
Reductions i n a c t i v i t y
were r e p o r t e d f o r many l e a d i n g i n d u s t r i e s , with sharp d e c l i n e s a t c o t t o n and
woolen m i l l s and a t bituminous coal mines; i n t h e automobile i n d u s t r y output
i n c r e a s e d from t h e low l e v e l of March by more than the u s u a l seasonal p e r c e n t a g e , and i n t h e s t e e l i n d u s t r y , where a c t i v i t y had d e c l i n e d from e a r l y
February t o t h e middle of A p r i l , p r o d u c t i o n i n c r e a s e d somewhat between t h e
middle of A p r i l and t h e t h i r d week of May.
The number of wage e a r n e r s employed a t manufacturing e s t a b l i s h m e n t s
d e c l i n e d f u r t h e r between the middle of March and t h e middle of A p r i l and
t h e r e was a s u b s t a n t i a l r e d u c t i o n i n f a c t o r y p a y r o l l s .
Large d e c r e a s e s i n
employment were r e p o r t e d f o r t h e i r o n and s t e e l , machinery, and t e x t i l e
i n d u s t r i e s , while t h e volume of employment i n the food and l e a t h e r i n d u s t r i e s
showed t h e u s u a l s e a s o n a l changes.
X-7162
-2—
I 362
Daily average v a l u e of "building c o n t r a c t s awarded during A p r i l and
the f i r s t h a l f of May, as reported by the F. W. Dodge Corporation, showed
a seasonal i n c r e a s e over the f i r s t q u a r t e r .
A s u b s t a n t i a l i n c r e a s e was
reported f o r p u b l i c works and p u b l i c u t i l i t i e s , while r e s i d e n t i a l b u i l d ing continued a t t h e low l e v e l of the f i r s t q u a r t e r , showing none of the
usual seasonal expansion.
D i s t r i b u t i o n - F r e i g h t - c a r loadings of merchandise showed l i t t l e
change i n volume from March t o A p r i l , continuing a t the l e v e l p r e v a i l i n g
since January, although i n c r e a s e s a r e u s u a l during t h i s p e r i o d .
Sales by
department s t o r e s i n c r e a s e d considerably i n A p r i l .
Wholesale p r i c e s - Wholesale p r i c e s of commodities d e c l i n e d from 66
per cent of the 1926 average i n March to 65.5 per cent i n A p r i l , according
to the Bureau of Labor S t a t i s t i c s , and i n the f i r s t t h r e e weeks of May
f u r t h e r decreases i n t h e p r i c e s of many l e a d i n g commodities were r e p o r t e d .
Downward movements i n t e x t i l e s , nonferrous metals, and imported raw m a t e r i a l s ,
as well as i n most domestic a g r i c u l t u r a l products except wheat, were o f f s e t
i n p a r t by i n c r e a s e s i n the p r i c e s of c o f f e e , petroleum, and petroleum products .
Bank c r e d i t - F u r t h e r purchases of U. S. Government s e c u r i t i e s by the
Federal r e s e r v e banks were made during April and the f i r s t t h r e e weeks i n
May, and on May 18 t o t a l holdings were $1,466,000,000.
The funds placed
i n the market through these purchases between A p r i l 6 and May 18 were used
t o t h e extent of $170,000,000 i n a f u r t h e r r e d u c t i o n of member bank i n debtedness to the r e s e r v e banks; and to the extent of $122,000,000 i n
meeting a demand f o r gold from abroad; a t the same time member banks accumul a t e d r e s e r v e balances considerably i n excess of l e g a l r e q u i r e m e n t s .
During
-3May t h e demand f o r currency, which had declined i n A p r i l , inc re ase d somewhat, contrary to u s u a l seasonal movement.
Loans and investments of r e p o r t i n g member tanks i n l e a d i n g c i t i e s ,
which has declined continuously u n t i l the middle of A p r i l , showed l i t t l e
net change between A p r i l 13 and May 18.
The banks' investments increased
by n e a r l y $300,000,000, c h i e f l y i n New York City; while loans declined by
about an equal amount.
There was a l s o a growth i n net demand d e p o s i t s ,
which r e f l e c t e d i n p a r t an i n c r e a s e i n b a n k e r s ' balances deposited i n New
York City banks,
Money r a t e s i n the open market continued easy.
Bates on commercial
paper were reduced about one-half per cent to a range of 2 3 / 4 - 3 per
cent f o r prime names, and the o f f e r i n g r a t e on 90-day b a n k e r s ' acceptances,
which had advanced to 1 l / 8 per cent i n the f i r s t week of May, declined on
May 11 to t h e p r e v i o u s l y p r e v a i l i n g r a t e of 7/8 of one per c e n t .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7163
May 26, 1932.
SUBJECT:
New Issue Treasury B i l l 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 r e s e r v e banks, the
code word "NOXDEGEHD11 has been designated t o cover a new
i s s u e of Treasury B i l l s , dated June 1, 1932, and maturing
August 31, 1932,
This word should be i n s e r t e d i n the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "NOXDEGAHB" on page 172.
Very t r u l y yours,
J . C, N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALI F . R, BANKS,
X-716§
COPY
IN THE SUPREME COURT Of TBS STATS OF WASHINGTON
THE STATE OF WASHINGTON, ex r e l .
KERN Aim KIBBE, a c o r p o r a t i o n ,
Plaintiff, Petitioner,
v.
)
)
)
)
)
)
No. 23725
Department One
)
CHARLES W. HINTON, as S t a t e
Treasurer of t h e S t a t e of
Washington,
Defendant, Respondent.
)
)
)
)
)
F i l e d May 11, 1932.
PER CURIAM: This i s an o r i g i n a l a c t i o n i n t h i s court "by which
Kern & Kibbe, a c o r p o r a t i o n , by p e t i t i o n seeks a w r i t of mandate d i r e c t i n g t h e s t a t e t r e a s u r e r t o pay t o t h e p l a i n t i f f out of moneys i n
t h e s t a t e t r e a s u r y t o t h e c r e d i t of t h e motor v e h i c l e fund $20,587.48
i n s a t i s f a c t i o n of warrants issued t o p l a i n t i f f by the s t a t e a u d i t o r
drawn and d i r e c t e d t o t h e s t a t e t r e a s u r e r .
The f a c t s i n t h e case a r e presented "by t h e pleadings and a w r i t t e n
s t i p u l a t i o n signed by the p a r t i e s and f i l e d i n the cause, s u b s t a n t i a l l y
as f o l l o w s :
The p l a i n t i f f i s a c o r p o r a t i o n .
Hinton, was and i s t r e a s u r e r of the s t a t e .
Respondent, Charles W.
During J a n u a r y , 1932, t o and
i n c l u d i n g the t w e n t y - f i r s t day of the month, t h e Olympia National Bank
was a n a t i o n a l banking a s s o c i a t i o n , doing business i n Olympia, Washington.
That a t the c l o s e of business on January 21, 1932, the Olympia
National Bank closed i t s doors and discontinued t h e doing of b u s i n e s s ,
and t h e next morning t h e bank and i t s a s s e t s were taken over f o r l i q u i d a t i o n by t h e comptroller of the currency of t h e United S t a t e s .
That
on January 13, 1932, on account of the completion by p l a i n t i f f of two
c o n t r a c t s f o r the c o n s t r u c t i o n and improvement of c e r t a i n highways, the
s t a t e became indebted to p l a i n t i f f i n the sum of $20,578.48 f o r which,
3 6 5
23725
X*7165
3 6 6
upon claims and vouchers cldly ptb&ehted* t h e s t a t e a u d i t o r a f t e r s e t t l i n g
and allowing t h e same signed and d e l i v e r e d , as such a u d i t o r , two s t a t e
warrants on t h e s t a t e t r e a s u r y t o pay t h e r e s p e c t i v e amounts of $8043.48
and $12,535.00 out of any moneys i n the motor v e h i c l e f i n d i n t h e s t a t e
t r e a s u r y not otherwise a p p r o p r i a t e d .
On January 15, 1932, t h e p l a i n t i f f
endorsed and d e l i v e r e d "both warrants t o t h e F i r s t National Bank of P o r t land, Oregon, f o r c o l l e c t i o n and on the same day t h a t hank forwarded t h e
w a r r a n t s , w i t h o t h e r s "belonging t o other persons, t o the respondent as
s t a t e t r e a s u r e r f o r payment, a l l of which were accepted "by t h e s t a t e
t r e a s u r e r and f o r which he issued checks to cover t h e r e s p e c t i v e amounts
and forwarded the checks to t h e Portland "bank, t h e checks "being drawn "by
the s t a t e t r e a s u r e r on the Olympia National Bank payable to t h e F i r s t
National Bank of P o r t l a n d , or o r d e r .
The Portland "bank, upon r e c e i p t of
the checks on January 19, 1932, forwarded them by mail t o the S e a t t l e
"branch of the Federal Reserve Bank of San Francisco f o r c o l l e c t i o n and,
on January 20, 1932, t h a t "bank forwarded the checks "by mail t o t h e Olympia
National Bank f o r c o l l e c t i o n , and the l a t t e r named "bank r e c e i v e d t h e checks
on January 21, 1932.
At the time t h e checks were forwarded f o r c o l l e c t i o n
and a t the time they were received "by t h e Olympia National Bank, i t was
a designated d e p o s i t o r y f o r the funds of t h e s t a t e and the s t a t e t r e a s u r e r
had t h e r e i n t o h i s c r e d i t , subject t o check, an amount i n excess of t h e
checks involved.
Upon r e c e i p t of t h e checks, the Olympia National Bank
charged them to t h e account of the s t a t e t r e a s u r e r on t h e "bank's "books
and marked the checks "Paid", "but the "bank i n no way s e t a p a r t or s e g r e gated any of i t s money f o r transmission t o e i t h e r the S e a t t l e "branch of
the Federal Reserve Bank of San Francisco or to the P o r t l a n d "bank i n
s e t t l e m e n t or payment of the checks, "but on January 21, 1932, drew i t s
2
23725
X-7165
d r a f t i n t h e sum of $29 *659*19 t o o.0\ffer t h e checks involved, and other
itemd* on t h e F i r s t National Bank of S e a t t l e , payable t o t h e S e a t t l e
branch of the Federal Reserve Bank of San F r a n c i s c o , and forwarded t h e
d r a f t by mail on t h a t day to the S e a t t l e branch of t h e Federal Reserve
Bank.
The amount of cash i n t h e Olympia National Bank a v a i l a b l e f o r the
payment of checks a t the c l o s e of b u s i n e s s the l a s t f o u r days the bank
was open amounted t o t h e following sums:
January 18, $45,098,43; January
19, $42,620.76; January 20, $40,172.42, January 21, $27,255.24.
At t h e
close of b u s i n e s s on January 21, t h e bank had to i t s c r e d i t with banks
other than t h e F i r s t National Bank of S e a t t l e , $44,679.00, based i n
p a r t on items t r a n s m i t t e d t o such banks f o r c o l l e c t i o n , over and above
the amount of a l l d r a f t s drawn a g a i n s t such other banks, but t h e r e was
no i n f o r m a t i o n a v a i l a b l e on January 21, or a t t h e d a t e of t h e s t i p u l a t i o n of f a c t s i n t h e a c t i o n , t o show the amount of such c o l l e c t i o n items
t r a n s m i t t e d or the amount thereof not c o l l e c t e d a t t h a t d a t e .
I t appears t h a t on January 21, a f t e r the s t a t e t r e a s u r e r gave a
check on the Olympia National Bank, f o r which t h a t bank i s s u e d i t s d r a f t
on t h e F i r s t National Bark of S e a t t l e , the s t a t e t r e a s u r e r gave t o t h e
Capital National Bank of Olympia a check on the Olympia National Bank i n
the sum of $52,981.58 f o r t h e purpose of paying s t a t e warrants being
c o l l e c t e d through t h e agency of the Capital National Bank, which check
was p a i d by means of t e l e g r a p h i c t r a n s f e r of funds from t h e account of
t h e Olympia National Bank with the S e a t t l e branch of t h e Federal Reserve
Bank t o t h e account of the C a p i t a l National Bank.
At t h a t time t h e
Federal Reserve Bank r e q u i r e d a r e s e r v e t o be kept w i t h i t by the Olympia
National Bank i n t h e sum of approximately $120,000.00, and the payment of
3
23725
X-7165
3 6 8
the check j u s t mentioned "by telegitB,phic t r a n s f e r reduced t h e balance of
c r e d i t of the Olympia n a t i o n a l Bank with the S e a t t l e branch of t h e Fede r a l Reserve Bank t o the sum of $29,090.00.
At the time t h e d r a f t i n question was forwarded to t h e "bank i n
S e a t t l e , the Olympia National Bank did not have, nor did i t t h e r e a f t e r
have, money or c r e d i t with the F i r s t National Bank of S e a t t l e s u f f i c i e n t
to meet i t .
The F i r s t National Bank of S e a t t l e r e f u s e d t o honor the
d r a f t when p r e s e n t e d and i t has a t a l l t i n e s s i n c e been dishonored.
I t had been a p r a c t i c e between t h e Olympia National Bank and the
F i r s t National Bank of S e a t t l e t o g i v e c r e d i t f o r c a s h l e t t e r s when
received and to charge back items not c o l l e c t e d , b u t on January 20. 1932.
and a t a l l times t h e r e a f t e r the F i r s t National Bank of S e a t t l e r e f u s e d
to give t h e Olympia National Bank c r e d i t f o r such cash l e t t e r s u n t i l and
as t h e items were a c t u a l l y c o l l e c t e d , but notwithstanding such r e f u s a l
t h e Olympia National Bank, upon i s s u i n g the d r a f t on January 21, 1932 and
a t the c l o s e of b u s i n e s s t h a t day, had outstanding d r a f t s on t h e F i r s t
National Bank of S e a t t l e i n the t o t a l sum of $98,647.29-, which was
$5,054.72 i n excess of a l l cash items t r a n s m i t t e d by the Olympia National
Bank t o t h e F i r s t National Bank of S e a t t l e f o r c o l l e c t i o n , whether c o l l e c t e d or not a t the time, as was known to t h e Olympia National Bank,
as t h a t amount, i n t h a t account, was entered as an o v e r d r a f t i n t h e books
of t h e Olympia National Bank t h a t day.
Upon dishonor of the d r a f t and n o t i c e thereof t o i n t e r e s t e d p a r t i e s ,
the S e a t t l e branch of the Federal Reserve Bank, upon demand, received
from the r e c e i v e r of the Olympia National Bank the checks i n question
which were r e t u r n e d t o the F i r s t National Bank of P o r t l a n d and by t h a t
bank r e t u r n e d t o t h e s t a t e t r e a s u r e r upon h i s r e q u e s t and demand.
4
X-VIGSL
23725
3 6 9
At a l l times mentioned and tidW t h e r e was and i s i n the motor v e h i c l e
fund i n the s t a t e t r e a s u r y s u f f i c i e n t a v a i l a b l e f u n d s , not otherwise
a p p r o p r i a t e d , f o r the payment of the warrants i n f a v o r of p l a i n t i f f .
The defendant r e s t s h i s case on the general Tirell s e t t l e d r u l e t h a t
a c o l l e c t i n g agent i s without a u t h o r i t y t o accept f o r t h e debt of h i s
p r i n c i p a l anything "but
•
t h a t which the law d e c l a r e s t o be l e g a l t e n d e r ,
or as s t a t e d by the defendant to be the r u l e so f a r as t h i s case i s concerned i f the payee of a check, or h i s a g e n t , a c c e p t s from t h e drawee
bank something e l s e i n p l a c e of cash, as a d r a f t on another bank, or a
deposit s l i p or c r e d i t , where the drawee bank holds funds of the drawer
s u f f i c i e n t t o pay t h e check and would pay i t i n cash i f demand t h e r e f o r e
were made, the t r a n s a c t i o n w i l l be regarded as a payment of the check
and t h e drawer d i s c h a r g e d .
Counsel r e l y on F i r s t National Bank v .
Commercial Bank & Trust Co., 137 Wash, 335, and cases c i t e d , and a l s o
t h e cases l i s t e d , commencing on page 994, i n the a n n o t a t i o n to the case
of Berg v . F e d e r a l Reserve Bank, 52 A.L.R. 980.
The p l a i n t i f f , while c o n t e s t i n g the common law r u l e , r e l i e d on by
the defendant and hence i t s a p p l i c a b i l i t y as such t o t h i s c a s e , contends
t h a t the case i s c o n t r o l l e d i n favor of p l a i n t i f f by c e r t a i n p r o v i s i o n s
of Chapter 203, Laws of 1929, declared t o be "The Bank C o l l e c t i o n Code",
the t i t l e of the a c t being "An a c t t o expedite and s i m p l i f y the c o l l e c t i o n
and payment by banks of checks and other instruments f o r the payment of
money."
I t contains a number of i n t e r r e l a t e d p r o v i s i o n s as i s usual i n such
a code, r e g u l a t i n g c o l l e c t i o n s by mail and d e f i n i n g the r e l a t i o n and
powers of each bank t a k i n g p a r t i n c o l l e c t i o n s as agent or sub-agent of
the o r i g i n a l d e p o s i t o r .
The p a r t i c u l a r p o r t i o n of the a c t upon which t h e
5
23725
X-7165
p l a i n t i f f r e l i e s , as c o n t r o l l i n g the pi'esetit case, i s a p a r t of s e c t i o n
11, as f o l l o w s :
^Where an item i s duly presented "by mail to the drawee or payor,
whether or not t h e same has been charged to the account of t h e maker
or drawer thereof or r e t u r n e d to such maker or drawer, the agent
c o l l e c t i n g hank so p r e s e n t i n g may, a t i t s e l e c t i o n , e x e r c i s e d with
reasonable d i l i g e n c e , t r e a t such item a s dishonored by non-payment-and
recourse may he had upon p r i o r p a r t i e s t h e r e t o i n any of t h e f o l l o w i n g
cases:
" ( l ) Where t h e check or d r a f t of t h e drawee or payor hank upon
another hank r e c e i v e d i n payment t h e r e f o r s h a l l not he paid i n due
course;"
On the other hand, the defendant contends t h a t i f i t he admitted
t h a t the hank c o l l e c t i o n code would otherwise apply or c o n t r o l , i t
a f f o r d s no r e l i e f t o the p l a i n t i f f i n t h i s case because of s e c t i o n 7,
which p r o v i d e s ;
"Where the item i s received by mail by a solvent drawee or
payor bank, i t s h a l l be deemed paid when the amount i s f i n a l l y
charged to the account of t h e maker or drawer."
The c o n d i t i o n , however, upon which t h e item r e c e i v e d by mail by
the drawee or payor bank s h a l l be deemed paid when f i n a l l y charged to
the account of the maker or drawer i s t h a t such bank s h a l l be s o l v e n t .
In t h i s r e s p e c t , on account of the f a c t s h e r e i n b e f o r e s t a t e d , to which
t h e p a r t i e s have agreed by t h e i r pleadings and w r i t t e n s t i p u l a t i o n f i l e d
i n t h e a c t i o n , we t h i n k i t must be h e l d , f o r t h e purposes of t h i s c a s e ,
t h a t the drawee or payor bank on which the d e f e n d a n t ' s checks were drawn
was not solvent a t t h e time t h e bank received t h e checks and
stamped
them
"Paid", w i t h i n t h e purview of s e c t i o n 7 of t h e bank c o l l e c t i o n code.
S t i l l f u r t h e r we a r e of the opinion, upon the f a c t s a s t h e p a r t i e s have
s t i p u l a t e d them t o b e , t h a t the p o r t i o n of s e c t i o n 11 of the bank c o l l e c t i o n code above mentioned, on which t h e p l a i n t i f f r e l i e s , i s a p p l i c a b l e
and c o n t r o l l i n g i n t h i s case, from which the conclusion f o l l o w s t h a t t h e
6
370
23725
X-7165
p l a i n t i f f i s e n t i t l e d to the r e l i e f jjfajred f o r i
IT IS OBDERED AM) ADJUDGED t h a t a w r i t of mandate i s s u e
d i r e c t i n g the defendant Charles W. Hinton, a s s t a t e t r e a s u r e r ,
to pay to t h e p l a i n t i f f , Kern & Kihbe , a c o r p o r a t i o n , out of
moneys i n t h e s t a t e t r e a s u r y to t h e c r e d i t of the motor v e h i c l e
fund, the sum of $20,587.48 i n s a t i s f a c t i o n of the two warrants
issued t o the p l a i n t i f f "by t h e s t a t e a u d i t o r .
7
X-7165-a
COPY
IN dH SUPRSvIE C U T OffrHSSTATfi Of W S I G O
?S
OR
A HN T N
THE STATS OF WASHINGTON, ex r e l
UNION IRON WORKS, a corporation
[
No. 23726
Department One
Plaintiff
v.
CHARLES W. HINTON, as S t a t e
Treasurer of t h e S t a t e of
Washington
F i l e d May 11, 1932
Defendant
P3R CURIAM:
This i s an o r i g i n a l a p p l i c a t i o n in t h i s court
f o r a w r i t of mandate d i r e c t i n g Charles W. Hinton, as s t a t e t r e a s u r e r , to pay to t h e p l a i n t i f f out of moneys in the s t a t e t r e a s u r y
to the c r e d i t of the motor v e h i c l e fund No. 15 the sum of $325.00
i n payment of a warrant dated January 15, 1932, issued to the
p l a i n t i f f by t h e s t a t e a u d i t o r f o r m a t e r i a l and s u p p l i e s f u r n i s h e d
and d e l i v e r e d by the p l a i n t i f f to and f o r the use of the department
of highways of t h e s t a t e between the second and t e n t h days of
December, 1931.
The case i s a companion of the case of S t a t e , ex r e l . Kern &
ICibbe v. Hinton, a n t e , p .
, the two cases being p r e s e n t e d in
the same b r i e f s and argued t o g e t h e r by r e s p e c t i v e counsel.
The
f a c t s a r e agreed to by t h e p l e a d i n g s and a signed s t i p u l a t i o n of
f a c t s , the l a t t e r being included in and a p a r t of t h e s t i p u l a t i o n
covering t h e f a c t s in the other case.
Here, too, t h e Olympia
National Bank, through which c o l l e c t i o n was attempted by m a i l ,
issued a d r a f t on January 21, 1932, the l a s t day t h e bank was
open f o r b u s i n e s s , drawn on the F i r s t National Bank of S e a t t l e ,
which d r a f t was dishonored and never p a i d .
v
372
— 2
—
23726
X-7165-a
i
The case i s , i n a l l m a t e r i a l r e s p e c t s , l i k e t h a t of t h e
companion one j u s t r e f e r r e d to and upon the a u t h o r i t y of t h a t
case and t h e f a c t s i n t h i s one;
IT IS ORDERED AND ADJUDGED t h a t a w r i t of mandate i s s u e
d i r e c t i n g the defendant Charles T. Hinton, a s s t a t e t r e a s u r e r ,
to pay to the p l a i n t i f f Union Iron Works, a c o r p o r a t i o n , out
of moneys i n the s t a t e t r e a s u r y to the c r e d i t of t h e motor
v e h i c l e fund Uo. 15, the sum of $325.00 i n s a t i s f a c t i o n of the
warrant issued to t h e p l a i n t i f f by t h e s t a t e a u d i t o r .
373
374
X-7165-b
COPY
IK THE SUPRBtS
o r TH$ STATE OF WASHINGTON
THE STATE OF WASHINGTON, ex r e l .
UNION IRON WORKS, a c o r p o r a t i o n ,
No. 23726
Plaintiff
PETITION FOE REHEARING
v.
CHARLES W. HINTON, a s S t a t e
Treasurer of the S t a t e of
Washington,
Defendant
Comes now the defendant, Chas. W. Hinton, and r e s p e c t f u l l y
p e t i t i o n s t h e c o u r t f o r a r e h e a r i n g in the above e n t i t l e d matter
f o r t h e f o l l o w i n g reasons;
t h e PER CURIAM opinion f i l e d May 11, 1932, does not s t a t e
t h e f a c t s involved in t h i s case but the conclusion reached i s
based e n t i r e l y upon the a u t h o r i t y of the case of S t a t e ex r e l .
Kern and Kibbe v. Hinton, No. 23725.
a s a t e s t case.
This case was i n s t i t u t e d
While the amount involved in t h i s p a r t i c u l a r
case i s small, t h e t o t a l amount of warrants in the same p o s i t i o n
a s the warrant in t h i s case i s approximately $100,000.00.
Under the f a c t s as c l e a r l y appear in the pleadings and s t i p u l a t i o n , these warrants were p r e s e n t e d by the Olympia National Bank
to the s t a t e t r e a s u r e r , the s t a t e t r e a s u r e r gave the Olympia National
Bank h i s check drawn a g a i n s t h i s account in the Olympia National
Bank, which check was charged to the t r e a s u r e r ' s account, marked
"paid" and cancelled and h i s account thereby reduced by t h e t o t a l
amount of such checks.
The s t a t e t r e a s u r e r i s now compelled
under t h i s d e c i s i o n to pay a l l of these warrants again.
The
. 375
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X-7165-b
r e c e i v e r of t h e oiympia National Baiilt has intimated t h a t he w i l l
not allow t h e s t a t e t r e a s u r e r ' s claim f o r these items f o r the
reason t h a t , i f claims on these warrants a r e allowed to the
t r e a s u r e r , he can hold h i s s e c u r i t y f o r the same, while, i f they
a r e allowed to t h e persons forwarding the warrants f o r c o l l e c t i o n ,
they would be unsecured and t h e r e f o r e the amount a v a i l a b l e to
unsecured c r e d i t o r s i n c r e a s e d .
I t probably w i l l be n e c e s s a r y
f o r the s t a t e t r e a s u r e r to b r i n g an a c t i o n a g a i n s t the r e c e i v e r i n
order to e s t a b l i s h a claim f o r the amount of the se w a r r a n t s ,
approximately $100,000.00, s i n c e , of course, t h i s decision i s not
binding upon t h e r e c e i v e r of the Oiympia National Bank.
This s u i t
would have to be i n s t i t u t e d in Federal c o u r t , s i n c e the bank i s a
n a t i o n a l bank and the r e c e i v e r a Federal o f f i c e r , l i q u i d a t i n g the
bank under the a u t h o r i t y of t h e comptroller of the currency.
Federal c o u r t i s not bound by t h i s d e c i s i o n .
The
The r u l e , i s , however,
t h a t t h e c o n s t r u c t i o n of a s t a t e s t a t u t e by a s t a t e court i s binding
on a Federal c o u r t .
Counsel and the c o u r t , knowing the f a c t s
in t h i s c a s e , understand, of course, t h a t t h e court has h e l d t h a t
s e c t i o n 11 of the c o l l e c t i o n code (chap. 203, L. 1929) c o n t r o l s
i n t h i s case t h e same a s i n the Kern and Kibbe case.
However,
t h e f a c t s not being s t a t e d in the opinion, t h e opinion i s of
l i t t l e value a s a u t h o r i t y f o r use in the Federal c o u r t .
Any
person r e a d i n g t h e two opinions would n a t u r a l l y assume t h a t the
f a c t s were t h e same in both cases; however, t h e r e i s a v i t a l
d i s t i n c t i o n i n the f a c t s .
In the g e m and Kibbe case, the s t a t e
t r e a s u r e r ' s check was payable to t h e F i r s t National Bank of P o r t l a n d
and by t h a t bank sent f o r c o l l e c t i o n to the Oiympia n a t i o n a l
t
- 3 -
376
X-7165-b
Bank and. by t h e Olytipia National Sank charged td t h e t r e a s u r e r ' s
account and marked " p a i d . "
In t h i s case, the s t a t e t r e a s u r e r ' s
check was payable to the Olymoia National Bank and accepted by
t h a t bank in payment of w a r r a n t s , which warrants were d e l i v e r e d
to t h e s t a t e t r e a s u r e r and cancelled.
In c i t i n g t h i s case a s
a u t h o r i t y i n the Federal c o u r t , the court would not know from the
opinion th e s e f a c t s .
The c o u r t can r e a d i l y a p p r e c i a t e the p r e c a r i o u s p o s i t i o n of
the s t a t e t r e a s u r e r .
I t i s e n t i r e l y p o s s i b l e t h a t t h e Federal court
would, not follow t h i s court on the m e r i t s .
However, the c o n s t r u c t i o n
p l a c e d by t h i s court on s e c t i o n 11, chapter 203, Laws of 1929, would be
binding on the Federal c o u r t .
I t i s t h e r e f o r e e s s e n t i a l from t h e stand-
p o i n t of the s t a t e t r e a s u r e r t h a t the f a c t s be s t a t e d i n t h e opinion in
t h i s case, so t h a t i t w i l l c l e a r l y appear t h a t s e c t i o n 11 of the c o l l e c t i o n code c o n t r o l s .
If the court has construed the f a c t s in t h i s case to be s i m i l a r
i n a l l e s s e n t i a l s to the f a c t s in the Kern and Kibbe case, then we
r e s p e c t f u l l y submit t h a t t h e court has misconstrued the p l e a d i n g s and
t h e s t i p u l a t i o n , f o r i t c l e a r l y appears t h a t the check involved i n t h i s
case was not r e c e i v e d by mail by the Olympia National Bank but was delivered, d i r e c t l y to the Olympia National Bank payable to t h e Olyrnpia
n a t i o n a l Bank and by i t accepted and charged to the t r e a s u r e r ' s account.
These f a c t s a r e m a t e r i a l l y d i f f e r e n t from the f a c t s in t h e Kern and Kibbe
c a s e , and, as we p o i n t e d out in our b r i e f s , the p r o v i s i o n s of the c o l l e c t i o n code do not apply under t h i s s t a t e of f a c t s , and i t i s r e s p e c t f u l l y
requested, t h a t a r e h e a r i n g be granted in t h i s case b e f o r e t h e court
en banc.
I 377
- 4 -
X-7165-t
I f , however, t h e court should o v e r r u l e our p e t i t i o n f o r
r e h e a r i n g , i t i s r e s p e c t f u l l y requested t h a t the opinion f i l e d
h e r e i n he modified to c l e a r l y s t a t e the f a c t s .
If t h i s i s done,
then the opinion can he used aa a u t h o r i t y in an a c t i o n by t h e
s t a t e t r e a s u r e r a g a i n s t t h e r e c e i v e r of the Olympia National Bank
i n the Federal c o u r t .
R e s p e c t f u l l y submitted,
JOHIT H. D J B R
TK A
Attorney General
LESTER T. PARKER
A s s i s t a n t Attorney General
Attorneys f o r Defendant
Chas. W. Hinton, as S t a t e
Treasurer.
X-7165-c
3 7 8
COPY
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
THE STATE OF WASHINGTON, ex r e l .
UNION IRON WORKS, a c o r p o r a t i o n ,
Plaintiff,
)
)
)
v.
No. 23726
Department One
CHARLES W. HINTON, a s s t a t e
Treasurer of the S t a t e of
Washington,
Defendant.
F i l e d May 20, 1932
PUR CURIAM! Upon f u r t h e r c o n s i d e r a t i o n of t h i s case we a r e of the opinion
t h a t the second paragraph of the opinion f i l e d in t h i s case on May 11, 1932,
which second paragraph commences with the words "The case i s a companion of the
case of S t a t e , ex r e l . Kern & Kibbe v . Hinton", and ending with the words
"which d r a f t was dishonored and never p a i d " should "be s t r i c k e n and in i t s stead
the following should be and i s d i r e c t e d to be i n s e r t e d , t o - w i t :
"The case i s a companion of
•p.
S t a t e ex, r e l . Kern & Kibbe v . Hinton, a n t e ,
. . the two cases being p r e s e n t e d in the same b r i e f s and argued t o g e t h e r .
The f a c t s a r e a g r e e d to by the pleadings and a signed s t i p u l a t i o n of f a c t s
f i l e d i n the c a s e , the l a t t e r being included in and a p a r t of the s t i p u l a t i o n
covering the f a c t s in the o t h e r c a s e .
In t h i s c a s e , on account of m a t e r i a l and
s u p p l i e s f u r n i s h e d the s t a t e f o r i t s department of highways, the warrant r e f e r red to in the sum of $325.00 payable to the p l a i n t i f f ' o r order* was, on
January 15, 1932, i s s u e d by the s t a t e a u d i t o r and d e l i v e r e d to the p l a i n t i f f .
On January 19, 1932, p l a i n t i f f endorsed and d e l i v e r e d the warrant to the Old
National Bank & Union Trust Company of Spokane f o r c o l l e c t i o n .
That bank on
t h a t day forwarded the w a r r a n t , with other items, by United S t a t e s mail to the
t 379
-a-
X-7165-C
Olympia National Bank a t Olympia to c o l l e c t and remit the proceeds to the F i r s t
National Bank of S e a t t l e f o r the c r e d i t of the Old National Bank & U&ion Trust
Company.
The items, including the warrant, were received "by the Olympia
National Bank through the mail on January 20, 1932, and, on January 21, 1932,
with d i v e r s o t h e r s t a t e warrants received by the Olympia National Bank through
the mail from o t h e r p e r s o n s , aggregating a l t o g e t h e r $33,118.69, were p r e s e n t e d
by the Olympia National Bank t o the s t a t e - t r e a s u r e r f o r acceptance and payment.
The defendant, a s s t a t e t r e a s u r e r , accepted and r e c e i v e d a l l such items,
including the p a r t i c u l a r warrant involved i n t h i s a c t i o n , and i s s u e d and
d e l i v e r e d t h e r e f o r h i s check i n the sum of $33,118.69 drawn on the Olympia
National Bank, a d e p o s i t o r y f o r s t a t e f u n d s , and in which bank t h e r e was a t t h a t
time on i t s books to the c r e d i t of the respondent an amount in excess of the
amount of the check, t o g e t h e r with a l l o t h e r outstanding checks drawn thereon by
the s t a t e t r e a s u r e r .
The Olympia National Bank on t h a t day charged the check
to the respondent on i t s books and marked the check ' p a i d ' , but withdrew or s e t
a p a r t no money whatever to pay the same or to remit to the Old National Tfonir &
Union Trust Company of Spokane or to the F i r s t National Bank of S e a t t l e f o r the
c r e d i t of the Spokane bank or t h e p l a i n t i f f , nor did i t make any purported
payment o t h e r than on January 21, 1932, the Olympia National Bank drew and
forwarded by mail to the F i r s t National Bank of S e a t t l e i t s d r a f t on and payable
to the F i r s t National Bank of S e a t t l e , f o r the c r e d i t of the Old National Bank
& Union Trust Company i n an amount s u f f i c i e n t to cover the items forwarded f o r
c o l l e c t i o n by the Old National Bank & Union Trust Company, i n c l u d i n g the
p a r t i c u l a r warrant involved i n t h i s s u i t .
The Olympia N a t i o n a l Bank d i d not a t
t h a t time, nor t h e r e a f t e r , have c r e d i t with the F i r s t National Bank of S e a t t l e
nor funds i n t h a t bank upon which i t bad a r i g h t to draw s u f f i c i e n t to meet the
? 380
~3~
X-7165-c
d r a f t whereupon the F i r s t N a t i o n a l Bank of S e a t t l e r e f u s e d to accept and pay
the d r a f t or to give the Old National Bank & Union Trust Company c r e d i t on
account t h e r e o f , which d r a f t has a t a l l times since been dishonored according
to n o t i c e thereof given "by the "bank upon which i t was drawn.
National Bank ceased to do b u s i n e s s on January 21, 1932,
The Olympia
At a l l times
mentioned h e r e i n and now t h e r e were and a r e in the motor v e h i c l e fund No, 15 in
the s t a t e t r e a s u r y s u f f i c i e n t a v a i l a b l e f u n d s , not otherwise a p p r o p r i a t e d , f o r
tHe payment of the warrant in f a v o r of p l a i n t i f f , t h a t i s involved i n t h i s
action.
Other p e r t i n e n t f a c t s a p p l i c a b l e to the c a s e , according to the p l e a d -
ings and according to the s t i p u l a t e d f a c t s f i l e d h e r e i n a r e r e f e r r e d to in the
opinion in the companion case of Kern & Kibbe j u s t f i l e d .
In our opinion, on
a l l the f a c t s , a s between these p a r t i e s and f o r the purposes of t h i s case the.
Olympia National Bank was i n s o l v e n t a t a l l times on January 21, 1932, and t h a t
the f i r s t p a r t of and t h e f i r s t subdivision of s e c t i o n - e l e v e n of the bank
c o l l e c t i o n code a r e a p p l i c a b l e to and governing in t h i s case. 1 1
And t h a t the opinion, a s thus changed and amended, c o n s t i t u t e s the
d e c i s i o n of the c o u r t and a s such i s t o be recorded in the permanent records
and r e p o r t s of the c o u r t .
t
3 8 1
FEDERAL RESERVE BOARD
WASHINGTON
X-7166
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
M a y
2 8 ,
1 9 3 2 .
Par L i s t .
Dear S i r :
In view of the f a c t t h a t the monthly supplements t o the Par l i s t now
d e f i n i t e l y show a l l changes i n the par s t a t u s of towhs or c i t i e s sinc e p u b l i c a t i o n of the January l i s t , i t does not appear neces&afy f o r your hank to
f u r n i s h the Board with a complete t y p e w r i t t e n manuscript f o r t h e J u l y l i s t
as has been the p r a c t i c e h e r e t o f o r e .
In l i e u t h e r e o f , the Board, on or about June 10, w i l l forward to you
two copies of the g a l l e y proof of the J u l y Par L i s t , to f a r as i t r e l a t e s to
your d i s t r i c t , i n which a l l changes to June 1 w i l l be i n c o r p o r a t e d ,
She d a t a
contained i n the g a l l e y proof should be c a r e f u l l y checked and one copy of the
c o r r e c t e d proof r e t u r n e d t o the Board i n time to reach tfashiAgton by June 30,
with changes between June 1 and the d a t e of mailing i n d i c a t e d t h e r e o n .
The
other copy should be r e t a i n e d i n your f i l e s .
The Board should be advised by wire on J u l y 2 of any f u r t h e r changes
to be made i n the g a l l e y proof up t o , and i n c l u d i n g , J u l y 1, which i s t h e
date of i s s u e of t h e Par L i s t .
should be so a d v i s e d .
TO ALL GOVERNORS.
If t h e r e a r e no f u r t h e r changes, the Board
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary-.
t 38
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7168
June 1, 1932.
Dear S i r :
Through t h e courtesy of Counsel t o t h e Comptroller of t h e
Currency, I i n c l o s e f o r your information copies of opinions rendered
May 11, 1932, by the Supreme Court of Washington i n two cases a r i s ing under t h e Bank C o l l e c t i o n Code, S t a t e of Washington ex r e l . Kern
and Kibbe v . Binton and S t a t e of Washington ex r e l . Union Iron Works
v . Hinton, and a l s o a copy of d e f e n d a n t ' s p e t i t i o n f o r r e h e a r i n g i n
the l a t t e r c a s e .
I am informed t h a t t h e Attorney General of the
S t a t e of Washington does not intend t o p e t i t i o n f o r a r e h e a r i n g i n
the Kern and Kibbe c a s e .
I t h i n k t h a t you w i l l be e s p e c i a l l y i n t e r e s t e d i n the p o s i t i o n taken by t h e Receiver of the National Bank i n t h e Union I r o n
Works c a s e , a s s e t f o r t h i n the p e t i t i o n f o r r e h e a r i n g i n t h a t c a s e .
I understand t h a t the Counsel f o r the Comptroller of t h e
Currency has copies of t h e pleadings and b r i e f s i n b o t h of t h e s e
cases and I probably can have copies made f o r you i f you need them.
Cordially yours,
Inclosures.
(LETTER TO
Walter Wyatt,
General Counsel.
COUNSEL FOR ALL F. R. BANKS AH) ALL ASSOCIATE C0UHS3L)
t 383
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7169
June 6, 1932.
Dear S i r :
This r e f e r s to my l e t t e r s of May 7 and August 14, 1931,
with t h e i r r e s p e c t i v e i n c l o s u r e s , on the s u b j e c t of "cashing"
Government checks and w a r r a n t s "by Federal reserve "banks.
As you w i l l remember, I addressed a memorandum to the
Federal Reserve Board under d a t e of A p r i l 17, 1931, d i s c u s s i n g
t h i s s u b j e c t in d e t a i l and recommending t h a t i t be r e f e r r e d to the
Governors' Conference; the Governors' Conference i n A p r i l , 1931,
r e f e r r e d the s u b j e c t to the Standing Committee on C o l l e c t i o n s f o r
study and r e p o r t to the F a l l Conference of Governors; the Standing
Committee on C o l l e c t i o n s rendered a r e p o r t under d a t e of August 10,
1931; and the Governors' Conference in December, 1931, r e f e r r e d the
s u b j e c t to the Conference of Counsel of Federal reserve banks f o r
c o n s i d e r a t i o n and c o n s u l t a t i o n with the Standing Committee on
C o l l e c t i o n s and o f f i c i a l s of the Treasury Department, with a view
to o b t a i n i n g a c l a r i f i c a t i o n of the a p p l i c a b l e p r o v i s i o n s of Treasury
Department C i r c u l a r Ho. 176.
For your f u r t h e r information in t h i s connection, I i n c l o s e
copies of the f o l l o w i n g :
1.
L e t t e r of August 19, 1931, from Mr, Robert S.
X-7169
t
P a r k e r , Counsel to the Federal He serve Bank of A t l a n t a , d i s c u s s i n g my l e t t e r of August 14, 1931,
above r e f e r r e d t o ;
2.
L e t t e r of September 11, 1931, from Mr. A, 0 .
Agnew, Counsel to t h e Federal Reserve Bank of San
F r a n c i s c o , a l s o d i s c u s s i n g my l e t t e r of August 14,
1931;
3.
L e t t e r of November 28, 1931, from Mr, James 6,
McConkey, Counsel to the Federal Reserve Bank of
S t . Louis, i n c l o s i n g a memorandum which he had p r e pared d i s c u s s i n g the r e p o r t rendered by the Standing
Committee on C o l l e c t i o n s and my l e t t e r of August 14, 1931;
4.
L e t t e r of December 14, 1931, which I addressed to
Mr. McConkey i n response to h i s l e t t e r of November 28, 1931;
5.
L e t t e r of January 6, 1932, from Mr. J . P . D r e i b e l b i s
of the f i r m of Locke, Locke, Stroud and Randolph, Counsel
to the Federal Reserve Bank of D a l l a s , i n c l o s i n g a f i l e
of correspondence concerning Treasury checks which were i n volved in the f a i l u r e of a n a t i o n a l bank i n Texas;
6.
L e t t e r of Juno 1, 1932, from Mr. J . S. Walden, J r . ,
Chairman of the Standing Committee on C o l l e c t i o n s , d i s cussing the p o s s i b i l i t y of holding a conference on t h i s
s u b j e c t ; and
7.
My r e p l y of June 2, 1932,
38#
I 385
X-7169
The p r e s s u r e of more urgent m a t t e r s has rendered i t
impossible f o r me t o give c o n s i d e r a t i o n h e r e t o f o r e to the question
of a r r a n g i n g a conference on t h i s s u b j e c t , and I b e l i e v e i t w i l l be
impossible f o r t h i s o f f i c e or the o f f i c i a l s of the Treasury Department to p a r t i c i p a t e i n such a conference u n t i l sometime a f t e r
Congress a d j o u r n s ; b u t I t h i n k we ought to have i t a t the e a r l i e s t
date convenient to a l l concerned.
We cannot make any d e f i n i t e
plans u n t i l we know when Congress w i l l a d j o u r n , but I s h a l l a p p r e c i a t e an expression of your views a s to the time most s u i t a b l e and
convenient f o r such a conference.
Cordially yours,
Walter Wyatt,
General Counsel.
Enclosures*
TO COUNSEL OF ALL FEDERAL OBSERVE BANKS.
3 8 6
COPY
X-7169-a
COLQUITT, PARKER, TROUT MM & AEKWRIGHT
Attorneys a t Law
S u i t e 1607 William-Oliver Bldg.
A t l a n t a , Ga.
August 19, 1931.
PERSOML.
Mr. Walter % a t t , General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Walter:
I have received your l e t t e r of August 14th, sent f o r
my p e r s o n a l and c o n f i d e n t i a l information and e n c l o s i n g a copy
of a l e t t e r which you have w r i t t e n t o the Chairman of t h e
Standing Committee on C o l l e c t i o n s concerning t h e Committee's
r e p o r t on the s u b j e c t of "cashing" Government checks arid
warrants by F e d e r a l r e s e r v e "banks.
I approve most h e a r t i l y the views s e t out i n your
l e t t e r , I have always f e l t t h a t i f t h e matter were put up
t o t h e Treasury Department i n a vigorous way by t h e Federal
r e s e r v e banks a c t i n g i n c o n c e r t , t h e present c o n f l u s i o n would
be e l i m i n a t e d . As the s i t u a t i o n now i s , no Federal r e s e r v e
bank knows whether a Government item i s a c t u a l l y "cashed" or
p a i d when p r e s e n t e d to t h e bank f o r t h a t purpose and charged
t o the Treasury account, and, i n f a c t , i t seems t o me t h a t t h e
Treasury has no f i x e d p o l i c y about t h e m a t t e r . Sometimes
t h e p o s i t i o n i s taken t h a t a check i s p a i d when cashed by
i t s f i s c a l agent and charged t o i t s account. Sometimes
t h e opposite p o s i t i o n i s assumed.
I b e l i e v e t h e matter i s of s u f f i c i e n t importance t o
j u s t i f y a conference of counsel, p a r t i c u l a r l y s i n c e t h e r e
a r e d o u b t l e s s o t h e r questions which could be p r o f i t a b l y cons i d e r e d a t such a conference.
As r e g a r d s the payment or cashing of Government
checks or w a r r a n t s , the p o s i t i o n of the Federal r e s e r v e banks
i s rendered even more u n c e r t a i n by the doubt which e x i s t s
a s t o whether or not such warrants a r e n e g o t i a b l e i n s t r u m e n t s .
There a r e many other i n t e r e s t i n g angles which ought t o have
t
X-7169-a
COLQUITT, PARKER, TROUTMA2T & AEKWRIGHT
Continuation Sheet
Mr. Walter Wyatt - #2.
8-19-31.
c o n s i d e r a t i o n . My own view i s t h a t when a Federal r e s e r v e
bank takes one of these warrants i n r e g u l a r course of b u s i n e s s ,
pays or cashes the same and charges the item to tfce Treasury
account, the payment ought to be regarded as f i n a l u n l e s s , of
course, t h e i n s t r u m e n t , upon r e c e i p t a t the Treasury, should
be found to be forged or to have been paid upon a gorged
endorsement or u n l e s s t h e r e e x i s t s some other reason why t h e
warrant was not p r o p e r l y payable upon p r e s e n t a t i o n a t t h e
o f f i c e of t h e F e d e r a l r e s e r v e bank;
I t r u s t t h a t you w i l l have a p l e a s a n t v a c a t i o n and
know t h a t you have earned very much more r e s t than you can
o b t a i n i n two or t h r e e weeks. I have not been away t h i s
summer and do not expect to get away. That f a c t does n o t ,
however, prevent me from preaching to others t h e n e c e s s i t y
for vacations.
With s i n c e r e personal r e g a r d s , I am
Cordially y o u r s ,
(S)
RSP/w.
Robt. S. P a r k e r .
3 8 7 .
r 388
COPY
X-7169-b
FEDERAL RESERVE MM. OF SAN FRANCISCO
September 11, 1931.
(CONFIDENTIAL)
Walter Wyatt, E s q . ,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Hfy-att:
Reference i s made to your l e t t e r dated August 14,
t r a n s m i t t i n g f o r my "personal and c o n f i d e n t i a l i n f o r m a t i o n "
copy of your l e t t e r w r i t t e n t o t h e Chairman of the Standing
Committee on C o l l e c t i o n s with regard to t h e Committee's
r e p o r t on the s u b j e c t of "Cashing" Government checks and
warrants by Federal Reserve Banks.
I have only r e c e n t l y had the opportunity of
examining t h e Committee's r e p o r t . This I have done i n conf e r e n c e w i t h t h e o f f i c e r s of t h i s bank. I agree w i t h t h e
major p o r t i o n of what you have t o say i n your l e t t e r of
August 13 (X-6944).
C e r t a i n l y , the Treasury c i r c u l a r should contain
a c l e a r statement with regard t o the r e s p o n s i b i l i t y of
Federal Reserve Banks i n cases where payment i s stopped on
checks f o r which immediate c r e d i t has been given. I b e l i e v e
t h a t t h e Treasurer should not recognize any stop-payment
order u n t i l f i r s t communicating with the Federal Reserve
Bank a f f e c t e d to a s c e r t a i n whether or not c r e d i t has been
passed and i f s o , whether reimbursement can be o b t a i n e d .
I a l s o b e l i e v e t h a t a g r e a t deal of the d i f f i c u l t y h e r e t o f o r e encountered could be obviated by e l i m i n a t ing e n t i r e l y from paragraph 32 of t h e Treasury c i r c u l a r
a l l r e f e r e n c e to what the Federal Reserve Banks w i l l do
under given circumstances. I t seems to me t h a t such
r e f e r e n c e merely confuses the s i t u a t i o n and leaves i n doubt
t h e c a p a c i t y i n which such banks a r e a c t i n g . I a l s o
b e l i e v e t h a t t h e Treasury Department should i n c o r p o r a t e
i n i t s c i r c u l a r a c l e a r statement to the e f f e c t t h a t Fede r a l Reserve Banks, i n handling Government checks and
w a r r a n t s , a r e a c t i n g s o l e l y as agents of the banks from
which such checks a r e r e c e i v e d , and I cannot see why t h e
Treasurer should have any o b j e c t i o n to making such a s t a t e ment.
/
3 8 9
X-7169-b
Walter %ratt, Esq.
-2-
September 11, 1931.
Mr. Clerk, the Deputy Governor of t h i s bank, who
i s probably as conversant with operating procedure as any
man i n the system and whose ideas on s u b j e c t s of t h i s chara c t e r a r e extremely c l e a r c u t , i s of the opinion t h a t a l l
r e f e r e n c e to payment of Government checks through c l e a r i n g
houses should be e l i m i n a t e d , i n order t h a t i t may be
a d d i t i o n a l l y c l e a r t h a t such items w i l l not be handled f o r nonmember banks, d i r e c t l y or i n d i r e c t l y . I t h i n k t h a t t h e word
"Cashing" Government checks and warrants should be eliminated
e n t i r e l y . Such items a r e not "cashed" i n f a c t except i n
the case of items drawn by d i s b u r s i n g o f f i c e r s of t h e Government . I do not b e l i e v e t h a t i t i s necessary or a d v i s a b l e
t h a t i n t h e Treasury c i r c u l a r Federal Reserve Banks be
denominated e i t h e r as f i s c a l agents or d e p o s i t a r i e s of t h e
United S t a t e s , and t h a t t h i s dilemma, which has p r e v i o u s l y
e x i s t e d , could be obviated by making i t c l e a r t h a t i n handl i n g Government checks and warrants Federal Reserve Banks
a c t only as a g e n t s of t h e i r d e p o s i t o r s and not i n any agent
c a p a c i t y f o r t h e Government.
C e r t a i n l y , t h e c i r c u l a r should be c l a r i f i e d and
can be c l a r i f i e d , but I do not b e l i e v e t h a t t h i s w i l l be
accomplished u n t i l we have an a b s o l u t e "show-down" with the
Treasury Department, i n which we make i t p l a i n t h a t t h e i r
c i r c u l a r must be prepared i n such form as t o o f f e r adequate
p r o t e c t i o n t o the Federal Reserve Banks and t h a t u n l e s s
t h i s i s done t h e banks w i l l accept Government items only f o r
d e f e r r e d c r e d i t . This can be b e s t accomplished, i n my
opinion, through a conference with the Treasury o f f i c i a l s
a t which counsel f o r t h e Reserve Banks and the o p e r a t i n g
o f f i c e r s of such banks a r e p r e s e n t . Of course, no such
conference should be held u n t i l a preliminary conference
between Federal Reserve Bank o f f i c e r s and counsel has been
h e l d i n order t h a t when we meet ' n t h the Treasury Department
we may be agreed as t o what we want.
P l e a s e understand t h a t the foregoing a r e only my
p e r s o n a l views. I f e e l c e r t a i n t h a t i f determined a c t i o n i s
taken, something d e f i n i t e and s a t i s f a c t o r y can be accomplished.
Very t r u l y yours ,
(S)
ACA:MA
Albert C. Agnew
Counsel.
COPY
X-7169-c
3 9 0
FEDERAL RESERVE BAH
OF
ST. LOUIS
November 28, 1931
Mr. Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Ifyatt:
Enclosed you w i l l f i n d copy of a memorandum I handed
Governor Martin on the subject of t h e r e p o r t of t h e Standing
Committee on_Col1ections_on "Cashing Government Checks and
Warrants." I am not i n a p o s i t i o n to know t h e d i f f i c u l t i e s the
o p e r a t i n g Committee had to contend with i n meeting t h e l e g a l
requirements suggested by the Counsel's Committee, n e v e r t h e l e s s ,
I do not "believe the Governors' Conference should a c t on the
r e p o r t u n t i l t h e s e d i f f e r e n c e s have been ironed out - and I so
advised Governor Martin.
I r e g r e t t e d t h a t I could not be h e r e when t h e Committee
met i n S t . Louis. Upon Mr, Walden's i n v i t a t i o n , I had made my
arrangements t o be h e r e , but was suddenly c a l l e d upon to go with
one of the N a t i o n a l Bank Examiners t o Corinth, Miss, t o pass on
t h e l e g a l i t y of an arrangement whereby the City of Corinth was
loaning one of t h e member banks i n the town c e r t a i n bonds owned
by t h e c i t y to be used as c o l l a t e r a l t o the b a n k ' s borrowings from
t h e Federal Reserve Bank.
When we a r r i v e d a t 9:00 a . m . , t h e City Council were a l l
assembled ready t o pass any ordinance I found necessary f o r them
to p a s s , i n order to give t h e bank the r i g h t t o use t h e bonds a s
c o l l a t e r a l with the Reserve Bank. They signed on t h e d o t t e d l i n e .
I then prepared and had the Board of D i r e c t o r s of t h e
bank sign t h e necessary Resolution a u t h o r i z i n g t h e pledging of
the bonds to t h e Reserve Bank. We f i n i s h e d i n time f o r t h e member
bank t o t a k e t h e s e bonds 150 miles by automobile t o Memphis, arrange
f o r the loan, and secure t h e necessary funds t o continue business the
next day as u s u a l , - otherwise, they would not have been a b l e to
remain open.
With k i n d e s t r e g a r d s ,
Very t r u l y y o u r s ,
(S)
J a s . G. Mc Conkey,
Counsel.
391
COPT
'
X-7169-c-l
Itovember 27, 1931
Mr. to. Mc C. Martin, Governor,
F e d e r a l Reserve Bank of St. Louis,
S t . Louis, Mo.
Dear itr. Martin:
R e f e r r i n g to the l e t t e r s u b j e c t "Cashing of Government
Checks and Warrants by Federal Reserve Banks" signed by Mr. Walden,
Chairman of t h e Standing Committee on C o l l e c t i o n s , dated August
12, 1931, and t h e suggestions contained t h e r e i n t h a t , i f i n the
opinion of t h e s e v e r a l Counsel, no s e r i o u s l e g a l o b j e c t i o n s be
found t h e r e i n the r e p o r t submitted by the Committee under d a t e of
t h e 10th, i t would be submitted t o t h e next Governors' Conference.
The s u b j e c t of Cashing Government' Checks and Warrants has
been the source of a g r e a t deal of correspondence p a s s i n g between
t h e Reserve Banks of Richmond, A t l a n t a and Hew York, t h e Federal
Reserve Board and the Treasury Department, s i n c e 1922.
The s u b j e c t was discussed a t a Conference of Counsel f o r
t h e Federal Reserve Banks with r e p r e s e n t a t i v e from t h e Treasury
Department, under d a t e of June 10, 1930, a t which time a l l t h e
members of the Standing Committee on Collections (except Mr. A t t e bery) were p r e s e n t . Ho d e f i n i t e agreement was reached a t t h i s
Conference, but the following Resolution was adopted:
"RESOLVED, That the Chairman of t h e Governor's
Conference be requested to i n s t r u c t t h e Standing Committee
on C o l l e c t i o n s t o p r e p a r e a t e n t a t i v e d r a f t of a uniform
check c o l l e c t i o n c i r c u l a r embodying t h e r e i n t h e suggested
amendments t o Regulation J , the p r e p a r a t i o n of such
t e n t a t i v e d r a f t to be made i n c o l l a b o r a t i o n with a
sub-committee of Counsel t o the F e d e r a l r e s e r v e banks
(such sub-committee t o be appointed by Counsel to t h e
F e d e r a l Reserve Board and of which sub-committee Counsel
to the Federal Reserve Board s h a l l be a member ex o f f i c i o ) ,
with t h e understanding t h a t such t e n t a t i v e d r a f t , when
p r e p a r e d , s h a l l be submitted to the Federal r e s e r v e banks
f o r c r i t i c i s m and/or approval pending the adoption by the
Federal Reserve Board of t h e suggested amendments t o
Regulation J . "
Under d a t e of A p r i l 17, 1931, Mr. Hyatt advised the Federal
Reserve Board t h a t s i n c e t h i s s u b j e c t was so c l o s e l y i d e n t i f i e d with
b o t h the p r a c t i c a l operations of the Reserve banks and t h e i r l e g a l
l i a b i l i t i e s t h a t i t would be a d v i s a b l e f o r t h e Conference of Governors,
which was t o convene on A p r i l 27, 1931, t o r e f e r t h e m a t t e r back t o a
s p e c i a l Committee of Counsel and operating off! c i a l s f o r study and
report.
392
X-7169-c-l
2
Governor Martin.
Mr. Wyatt advised me under d a t e of J u l y 22, 1930 t h a t ,
a f t e r a t a l k w i t h Governor Calkins, Chairman of the Governor's
Conference, and Mr. Walden, he had named the Counsel f o r t h e
A t l a n t a , Richmond and Hew York "banks sinc e they had developed the
most of the d i s p u t e "between the "banks and the Treasury Department
on the s u b j e c t . Mr. Wyatt was an ex o f f i c i o member of t h e
committee.
The Standing Committee on Collections met i n S t . Louis
i n June 1931. Hone of t h e members of the Counsel's Committee were
h e r e . I had intended a t t e n d i n g the Conference, hut had "been c a l l e d
out of t h e City on l e g a l m a t t e r s and was not here when the Committee
met.
Under d a t e of August 14, 1931, Mr. Iftratt forwarded to me
copy of l e t t e r he had w r i t t e n Mr. Walden, i n which strenuous object i o n s were i n t e r p o s e d t o c e r t a i n p a r t s of the r e p o r t . Some of the
o b j e c t i o n s I t h i n k a r e well taken. I t would, t h e r e f o r e , appear to
me t h a t t h e questions i s not ready to be acted upon by t h e Governor's
Conference i n t h e f a c e of the o b j e c t i o n s o f f e r e d by Mr. Htyatt - but
r a t h e r t h a t the matter be r e f e r r e d back to the j o i n t Committee of
Counsel and o p e r a t i n g o f f i c i a l s , so t h a t the se d i f f i c u l t i e s could be
ironed out b e f o r e any f i n a l a c t i o n i s taken by the Governor's Conference .
R e s p e c t f u l l y submitted
J a s . G. Mc Conkey,
General Counsel.
, 393
COPT
X-7169-4
December 14, 1931.
Mr. James G. McConkey,
Federal Reserve Bank of S t . Louis,
St. Louis, Missouri.
My dear Mr. McConkey:
I have read with much i n t e r e s t your l e t t e r of November
28, 1931, i n c l o s i n g f o r my information a copy of the memorandum
which you had given to Governor Martin on November 27, 1931, with
r e f e r e n c e t o t h e r e p o r t of the Standing Committee on C o l l e c t i o n s on
"cashing Government checks and w a r r a n t s " .
I am v e r y glad t h a t you t h i n k t h a t some of my o b j e c t i o n s
to the r e p o r t of t h e Standing Committee on C o l l e c t i o n s a r e well
taken, and I am very g r a t e f u l f o r your suggestion t h a t the matter
should be r e f e r r e d t o a j o i n t committee of counsel and o p e r a t i v e
o f f i c i a l s , so t h a t t h e s e d i f f i c u l t i e s could be ironed out b e f o r e
any f i n a l a c t i o n i s taken by t h e Governors' Conference.
I am a f r a i d , however, t h a t you a r e under the impression
t h a t t h e Sub-committee of Counsel appointed pursuant to the r e s o l u t i o n adopted by the Conference of Counsel f o r t h e Federal r e s e r v e
banks on June 10, 1930, was expected to a s s i s t the Standing Comm i t t e e on C o l l e c t i o n s i n d e a l i n g w i t h t h i s s u b j e c t and t h a t
t h e f a i l u r e of t h e Sub-committee of Counsel t o a t t e n d t h e meeti n g of t h e Standing Committee on Collections which was held
i n S t . Louis on June 23, 1931, and the consequent f a i l u r e of the
r e p o r t of the Standing Committee on Collections to conform to
X-7169-a
r2-
my views and those of Counsel f o r some of the Federal r e s e r v e
"banks, may have r e s u l t e d from some neglect or omission on my
p a r t , which i s not the c a s e .
The r e s o l u t i o n adopted by the Conference of Counsel
of the Federal r e s e r v e tanks on June 10, 1930, which i s quoted
i n your memorandum to Governor Martin, p e r t a i n e d s o l e l y t o t h e
r e v i s i o n of t h e uniform p r o v i s i o n s of the check c o l l e c t i o n c i r c u l a r s of t h e Federal r e s e r v e "banks so as to conform t o the
amendments t o Regulation J which had "been recommended "by the
Conference of Counsel.
I t had nothing whatever t o do with
the "cashing" of government checks and w a r r a n t s .
The Committee
of Counsel which I appointed pursuant to t h a t r e s o l u t i o n f u l l y
discharged i t s f u n c t i o n s when i t met with the Standing Committee
on Collections i n New York on or about August 1, 1930, and a s s i s t e d
i n the r e v i s i o n of the uniform p r o v i s i o n s of t h e check c o l l e c t i o n
c i r c u l a r s of t h e Federal r e s e r v e banks which were adopted and
promulgated by t h e Federal r e s e r v e banks, on September 1, 1930,
t h e d a t e on which the Board's amendment t o Regulation J became
effective.
Having f u l l y performed i t s f u n c t i o n s , t h a t committee
went out of e x i s t e n c e , s i n c e i t was not c r e a t e d as a s t a n d i n g
committee but only as a committee f o r a s p e c i f i c purpose.
I t i s t r u e t h a t , during the Conference of Counsel which
was h e l d h e r e i n June, 1930, we discussed with the Treasury
Department t h e p r o v i s i o n s of Treasury Circular No. 176 and
succeeded i n inducing t h e Treasury Department t o amend those
p o r t i o n s of i t s c i r c u l a r which d e a l t with the c o l l e c t i o n of
. 3 9 5
t3—
X-7169-d
bank checks "by the Federal r e s e r v e banks f o r t h e Treasury Department; but you w i l l remember t h a t we could not reach any a g r e e ment e i t h e r among ourselves or with o f f i c i a l s of t h e Treasury
Department r e g a r d i n g the r e v i s i o n of those p r o v i s i o n s of the
Treasury c i r c u l a r which p e r t a i n t o the "cashing" of government
checks and w a r r a n t s by the Federal r e s e r v e banks, and i t was
agreed to l e t t h a t matter remain i n abeyance i n d e f i n i t e l y .
My memorandum of A p r i l 17, 1931, which r e s u l t e d i n the
a c t i o n of t h e Governors' Conference of A p r i l 27 - 2 9 , 1931, r e f e r r i n g t o the Standing Committee on C o l l e c t i o n s the s u b j e c t of
the "cashing" of Government checks and w a r r a n t s , s t a r t e d an e n t i r e l y new chapter and an e n t i r e l y new e f f o r t to o b t a i n amendments to
the p r o v i s i o n s of the Treasury c i r c u l a r r e l a t i n g to the "cashing"
of Government checks and warrants; and the Sub-committee of Couns e l which had been appointed pursuant to the r e s o l u t i o n of June
10, 1930, had no a u t h o r i t y to d e a l with t h i s s u b j e c t , and was
not requested or i n v i t e d to a t t e n d the meeting of t h e Standirg
Committee on C o l l e c t i o n s or to a s s i s t t h a t Committee i n any way.
In my memorandum of A p r i l 17, 1931, suggesting t h a t
t h i s s u b j e c t be c a l l e d to the a t t e n t i o n of the Governors' Conf e r e n c e , i n order t h a t a f u r t h e r e f f o r t might be made t o p u r suadc the Treasury Department t o r e v i s e
and q u a l i f y t h e p r o -
v i s i o n s of Sections 32 and 34 of t h e Treasury Department
C i r c u l a r No. 176, as amended September 2, 1930, so as t o
d e f i n e c l e a r l y t h e s t a t u s of t h e Federal r e s e r v e banks i n
"cashing" government warrants and checks and so as to c l a r i f y
;*
3 9 6
X-7169-d
t h e i r d u t i e s and r e s p o n s i b i l i t i e s i n doing so, I suggested t h a t
i t would be a p p r o p r i a t e f o r the Governors' Conference t o r e f e r
the matter to t h e "Standing Committee on C o l l e c t i o n s , t o the
Conference of Counsel or to some other a p p r o p r i a t e committee f o r
f o r study and r e p o r t " .
The Board presented my memorandum to the
Governors' Conferonce, which r e f e r r e d t h e s u b j e c t t o t h e
Standing Committee on C o l l e c t i o n s f o r c o n s i d e r a t i o n and r e p o r t
without suggesting t h a t a Committee of Counsel should be appointed
to a s s i s t the Standing Cor.xd.ttee on C o l l e c t i o n s i n i t s c o n s i d e r a t i o n of t h e m a t t e r .
A f t e r the conference, both Governor Francher
and Mr. S t r a t e r t o l d me t h a t they thought t h e Governors' Conference
ought t o have arranged f o r a Committee of Counsel t o c o l l a b o r a t e
with t h e Standing Committee on Collections and said t h a t they would
suggest i t t o Mr. Walden, Chairman of the Standing Committee on
Collections» but I understand they f a i l e d to convey t h i s suggestion
t o Mr. Walden.
In f a c t , I was not consulted about t h e meeting of t h e
Standing Committee on C o l l e c t i o n s and did not know i t had been c a l l e d
u n t i l June 15, 1931, when I received a l e t t e r from Mr. Attobcry
which i n c i d e n t a l l y mentioned t h e f a c t t h a t a meeting of the
Committee had been c a l l e d to consider t h a t s u b j e c t on June 23,
1931.
I immediately c a l l e d Mr. Walden on the telephone and
suggested t h a t Counsel f o r some of the Federal r e s e r v e banks should
be i n v i t e d t o a t t e n d the meeting; but he said t h a t he did not f e e l
f r e e t o do so without the consent of the Committee, and t h a t the
time was too s h o r t f o r him to o b t a i n the Committee's consent and
a r r a n g e f o r the Counsel to a t t e n d .
He seemed to f e e l t h a t i t was
3 9 7 .
X-7169-d
-5not necessary f o r any of the Counsel t o a t t e n d the meeting and
s a i d t h a t the r e p o r t could "be submitted t o them f o r comment a f t e r
a t e n t a t i v e d r a f t had "been prepared.
I t o l d him t h a t I did not
b e l i e v e t h a t t h i s would produce s a t i s f a c t o r y r e s u l t s and he r e p l i e d t h a t , inasmuch a s t h e meeting would "be held a t the Federal
r e s e r v e hank of S t . Louis, the Committee could c a l l upon you f o r
any l e g a l advice which i t d e s i r e d .
A few days l a t e r he i n v i t e d
me to a t t e n d the meeting, "but t h e time was so s h o r t and I was so
busy t h a t I was unable t o a r r a n g e to do s o .
On J u l y 22, 1931, Mr. Walden sent me a copy of the
t e n t a t i v e d r a f t of the Committee's r e p o r t and i n v i t e d my comments;
but I was extremely busy a t the time and had not had an opportuni t y to send him ray comments when I received a f i n a l copy of the
r e p o r t on August 12, 1931.
On August 13, 1931, I wrote Mr. Walden a l e t t e r expressing my disagreement with c e r t a i n p o r t i o n s of t h e Committee's
r e p o r t , a f t e r a very h u r r i e d c o n s i d e r a t i o n t h e r e o f , and subsequently I sent copies t o Counsel f o r a l l F e d e r a l r e s e r v e banks
for t h e i r information.
I t h i n k t h a t , i n p r e p a r i n g i t s r e p o r t , t h e Committee
f a i l e d to a p p r e c i a t e c e r t a i n of the l e g a l d i f f i c u l t i e s and dangers
growing out of the ambiguity of the p r o v i s i o n s of Sections32 and
34 of the Treasury C i r c u l a r and a l s o
misunderstood t h e l e g a l e f f e c t
of t h e i r suggestion t h a t the Treasury Circular should show t h a t
i n "cashing" Government warrants and checks, t h e Federal r e s e r v e
banks a c t as a g e n t s f o r the banks from which they have r e c e i v e d
3 9 0
X-7169-a
-6-
such checks pursuant t o the terms of Regulation J .
The Committee
a p p a r e n t l y thought t h a t the p r o v i s i o n s of Regulation J would
give the F e d e r a l r e s e r v e banks a l l of the p r o t e c t i o n which they
need; "but I t h i n k t h i s i s a mistake.
Regulation J i s designed
t o p r o t e c t the Federal r e s e r v e hanks a g a i n s t l i a b i l i t y t o t h e
h o l d e r s of checks f o r f a i l u r e t o c o l l e c t them; whereas what we
need to o b t a i n through an amendment of the Treasury C i r c u l a r i s
a c l a r i f i c a t i o n of t h e legal r i g h t s , d u t i e s and r e s p o n s i b i l i t i e s
of the Federal r e s e r v e banks i n r e l a t i o n to t h e Treasury Department
when they "cash" Government checks and warrants drawn on the
Treasurer of the United S t a t e s .
In other words, Regulation J de-
f i n e s the d u t i e s of t h e Federal r e s e r v e banks as c o l l e c t i o n agents
but i t does not undertake to d e f i n e t h e i r d u t i e s as agents to pay
or "cash" checks f o r the Treasurer of the United S t a t e s .
In my
*
opinion, t h e l a t t e r subject i s d e a l t with very u n s a t i s f a c t o r i l y
i n t h e Treasury Circular and I d e s i r e to see i t c l a r i f i e d and
improved.
I would l i k e to see t h e Treasury C i r c u l a r amended so as
to provide t h a t , i n "cashing" government checks and w a r r a n t s , the
Federal r e s e r v e banks act as f i s c a l a g e n t s , thereby r e l i e v i n g
them of a l l l i a b i l i t y when they a c t w i t h i n the scope of t h e i r
a u t h o r i t y and w i t h ordinary c a r e .
I would a l s o l i k e to see a
p r o v i s i o n I n s e r t e d f i x i n g the time when a Government check
s h a l l be considered t o be f i n a l l y p a i d ; since I understand t h a t
-7-
x-7i69~a
399
the Treasurer assumes the r i g h t to stop payment on such
checks even a f t e r he has examined them, p e r f o r a t e d them,
and entered them on h i s hooks a s p a i d .
I also believe that
the p r o v i s i o n s of Section 34 of t h e Circular should he amended
so a s t o be e n t i r e l y c o n s i s t e n t with the t h e o r y t h a t Federal
r e s e r v e "banks a c t only a s agents i n "cashing" such checks and
t h a t they assume no l i a b i l i t y except f o r l o s s e s r e s u l t i n g from
a f a i l u r e t o e x e r c i s e ordinary care or to a c t w i t h i n the scope
of t h e i r a u t h o r i t y .
I r e a l i z e , however, t h a t I may not appre-
c i a t e some of t h a p r a c t i c a l d i f f i c u l t i e s involved i n t h e accomplishment of t h e s e o b j e c t s , and I am not w i l l i n g to commit
myself d e f i n i t e l y to any s p e c i f i c proposal u n t i l t h e s u b j e c t has
been thoroughly threshed out i n a j o i n t meeting between the
Standing Committee on C o l l e c t i o n s and the Conference of Counsel
or a Committee t h e r e o f .
While I have not yet received o f f i c i a l n o t i f i c a t i o n
of the a c t i o n t a k e n a t the r e c e n t Conference of Governors, I
understand t h a t the r e p o r t of t h e Standing Committee on Collect i o n s was r e f e r r e d t o t h e Conference of Counsel f o r c o n s i d e r a t i o n
and c o n s u l t a t i o n with the Standing Committee on C o l l e c t i o n s and
o f f i c i a l s of t h e Treasury Department, with a view of o b t a i n i n g
a c l a r i f i c a t i o n of the a p p l i c a b l e p r o v i s i o n s of t h e Treasury
Department C i r c u l a r No. 176 with r e s p e c t to t h e d u t i e s and
r e s p o n s i b i l i t i e s of t h e Federal r e s e r v e banks i n cashing Government checks and w a r r a n t s .
I b e l i e v e t h a t t h i s should load to a
s a t i s f a c t o r y s o l u t i o n of t h i s d i f f i c u l t y ; but I am a f r a i d i t would
400
X-7169-4
-8-
be d i f f i c u l t t o arrange a j o i n t meeting of t h e Conference of
Counsel f o r a l l Federal r e s e r v e banks and of t h e Standing
Committee on C o l l e c t i o n s a t which t h i s s u b j e c t could be considered with s u f f i c i e n t thoroughness t o produce s a t i s f a c t o r y r e s u l t s ,
b e f o r e some time next summer.
With apologies f o r the l e n g t h of t h i s l e t t e r and with
b e s t personal r e g a r d s , I am
C o r d i a l l y yours,
(S)
Walter Wyatt,
General Counsel.
W gc
W
-4
COPY
X-7169-e
LOCKE, LOCKE, STROUD & SAUDOLPH,
F i r s t National Bank Building
DALLAS, TEXAS.
January 6, 1932.
Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:As requested in your telegram I am enclosing
herewith f i l e of correspondence concerning t r e a s u r y
checks involved in the f a i l u r e of the Citizens
National Bank of Brownwood, Texas.
S i n c e r e l y yours,
(Signed)
JPD: g
J . P. D r e i b e l b i s .
I
COPY
4 0 2
X-7169-e-l
December 29, 1931
Honorable G-. 0. Barnes
A s s i s t a n t Treasurer of t h e United S t a t e s
Treasury Department
Washington, D. C.
Sirs
Reference i s made to your l e t t e r of November 21, 1931, concerning
the following described checks:
Check jTo.
Date
Amount
2595778
108170
9-30-31
9-30-31
$160.83
100.00
1150388
9-28-31
617.40
Payee
Drawer
Joseph Hamilton
Clara Parr Achor as
guardian of e s t a t e
of Noah A. J . Achor
Charles $. Bennett
Symbol
A. Zaponne
70-001
H. E. Waters
J . B. Shommer
11-519
99-220
We a r e informed t h a t p l a n s a r e well under way whereby t h e C i t i z e n s
National Bank of Brownwood w i l l reopen or a new bank w i l l be organized which w i l l
succeed to i t s a f f a i r s .
E i t h e r p l a n , of course, w i l l s a t i s f a c t o r i l y dispose of
t h e s e p a r t i c u l a r items.
Notwithstanding the foregoing, we t h i n k t h a t i t i s not i n a p p r o p r i a t e a t
t h i s time to d i s c u s s the s u b j e c t g e n e r a l l y with you and express to you our views
in regard to the problems which p r e s e n t themselves to us in connection with the
general s u b j e c t .
A f u l l understanding of the p o s i t i o n of t h i s bank in the handling of
t h e s e items can b e s t be conveyed to you by p l a c i n g b e f o r e you the f u l l d e t a i l s
of t h e handling of t h e p a r t i c u l a r items l i s t e d .
Our information a s to how the
items were handled by t h e o r i g i n a l d e p o s i t a r y bank and a l s o by your o f f i c e i s
l i m i t e d to such f a c t s as a r e made known by the correspondence between t h i s bank
and the o r i g i n a l d e p o s i t a r y bank and between t h i s bank and your o f f i c e .
ever, most of t h e p e r t i n e n t f a c t s a r e d i s c l o s e d by t h a t correspondence.
How-
t
403
X-7169-e-l
Page 2
The f i r s t two of those items were a p p a r e n t l y deposited in the
C i t i z e n s n a t i o n a l Bank of Brownwood not l a t e r than October 1, 1931.
d a t e v/e f i x by the endorsement on the back of the items in question.
This
They
were r e c e i v e d by t h i s bank on October 2, 1931, in the cash l e t t e r of t h e
C i t i z e n s National Bank dated October 1, 1931, the l e t t e r t o t a l i n g $804.48.
In accordance with our usual p r a c t i c e , immediate c r e d i t was given
upon these two items.
That i s to say, t h e funds became s u b j e c t to immediate
withdrawal, and i n t h i s r e s p e c t you a r e advised t h a t a t the c l o s e of t h a t
d a y ' s b u s in e s s t h e C i t i z e n s National Bank had drawn i t s balance with us down
to t h e sum of $43.02.
The l a s t one of t h e t h r e e items mentioned above was a p p a r e n t l y dep o s i t e d in t h e C i t i z e n s n a t i o n a l Bank on October 3, 1931, such date being the
date of the b a n k ' s endorsement.
October 4 f e l l on a Sunday, and on October 5
the item was r e c e i v e d in the cash l e t t e r of t h e Citizens National Bank dated
October 3, t h a t l e t t e r t o t a l i n g $813.90.
This item was l i k e w i s e passed to the
c r e d i t of the C i t i z e n s National Bank, and the funds r e p r e s e n t e d thereby became
immediately a v a i l a b l e f o r withdrawal.
We have no knowledge as to the circumstances under which t h e items
were deposited with the C i t i z e n s National Bank other than i s r e f l e c t e d by the
correspondence with the examiner in charge.
We were advised, however, on
October 16, 1931, by Ernest Lamb, t h e examiner in charge, t h a t t h e r e c o r d s of
t h a t bank showed t h a t t h e p a r t i e s mentioned deposited the se checks f o r c r e d i t
and t h a t in each i n s t a n c e they had checked a g a i n s t t h e i r balances b e f o r e the
suspension of the ba-ik.
We assume, t h e r e f o r e , t h a t the Brownwood bank gave
immediate c r e d i t f o r the items and p e r m i t t e d the d e p o s i t o r s to withdraw funds
a g a i n s t the items, in so f a r as they d e s i r e d to do so.
Xr-7169-e-l
The f i r s t two of t h e s e items were forwarded to your o f f i c e with our
t r a n s c r i p t of October 2, and the l a s t was forwarded to your o f f i c e with our
t r a n s c r i p t of October 5.
your o f f i c e .
We havo no knowledge as to when t h e s e items reached
Our experience i s t h a t items mailed here on a given day reach
•Washington upon t h e t h i r d day t h e r e a f t e r .
At any r a t e , we assume t h a t the
f i r s t two items reached your o f f i c e not l a t e r than October 6 and t h a t the l a s t
item reached your o f f i c e not l a t e r than October 9.
These d a t e s a r e f i x e d by the
p e r f o r a t i o n s placed on t h e items in your o f f i c e .
The C i t i z e n s n a t i o n a l Bank f a i l e d to open on October 6, 1931, and we
assume t h a t i t was with knowledge of t h i s f a i l u r e t h a t the v a r i o u s payees,
themselves or through the drawers of the various items, r e q u e s t e d your o f f i c e
to d e c l i n e payment.
Under d a t e of October 7, 1931, the f i r s t two items were r e t u r n e d to
us by your o f f i c e with advice t h a t payment of t h e items was being declined
in compliance with t h e r e q u e s t s dated October 6 from the drawer and payee,
r e s p e c t i v e l y ; under d a t e of October 9, 1931, the t h i r d item was r e t u r n e d to us
by your o f f i c e with advice t h a t payment of the same was being d e c l i n e d in comp l i a n c e with the r e q u e s t dated October 7, 1931, from t h e drawer.
Being unable
to e f f e c t c o l l e c t i o n of these items from t h e examiner in charge, we r e t u r n e d
them to your o f f i c e under date of October 17, 1931.
On October 28, 1931, the items were again r e t u r n e d to us by your
office.
In t h i s l e t t e r we were advised t h a t i n the case of checks which a r e
deposited f o r c o l l e c t i o n i t i s t h e p r a c t i c e of the Comptroller of t h e Currency
to charge the d e p o s i t o r ' s account and r e t u r n the checks to him i f h i s balance
w i l l _iermit such a c t i o n , and t h a t i f the d e p o s i t o r ' s balance i s l e s s than the
amount of the check, the bank i s t h e owner of the check to t h a t e x t e n t and the
Digitizedcheck i s r e t u r n e d
for FRASER
to the d e p o s i t o r upon repayment of t h e d i f f e r e n c e between h i s
*
Page 4
4 0 5
X—7169—e—1
balance and the amount of the check.
I t was suggested, a l s o , t h a t our c o r -
respondents should be advised t h a t checks received in your o f f i c e a r e p e r f o r a t e d
with the date and assembled f o r i d e n t i f i c a t i o n purposes b e f o r e c l e a r a n c e or
examination, and such p e r f o r a t i o n does not s i g n i f y t h a t a chock has been p a i d .
Following the r e c e i p t of t h e items from you, we forwarded them to
the examiner in charge, together with a copy of your l e t t e r to u s .
The examiner
again r e t u r n e d them to u s , and we wrote you under d a t e of November 9, 1931, quoting in i t s e n t i r e t y the l e t t e r of the examiner which accompanied the items.
You now suggest to us t h a t as the f a i l e d b a n k ' s deposit t i c k e t
s t a t e d d e f i n i t e l y t h a t i t was a c t i n g as agent f o r the d e p o s i t o r in the c o l l e c t i o n of checks, i t i s your understanding t h a t , u n l e s s the Federal Reserve
Bank has a l t e r e d i t s p o s i t i o n or extended a d d i t i o n a l c r e d i t in r e l i a n c e or
f a i t h upon t h e supposition t h a t the deposit in f a c t belonged to t h e bank,
i t now has no r i g h t to o f f s e t proceeds of these items a g a i n s t the indebtedness owing to i t by t h e f a i l e d bank.
Leaving f o r the p r e s e n t the l e g a l , as well as the e q u i t a b l e f e a t u r e s
of the case, i t seems to us t h a t a g r e a t deal of the d i f f i c u l t y in these cases
i s brought about by a l a c k of understanding upon the p a r t of t h i s bank, as well
as i t s correspondents, a s to the circumstances under which a Government check
or warrant may be considered p a i d .
We have c a r e f u l l y considered the p r o v i s i o n s of Circular % . 176 of
the Treasury Department, p a r t i c u l a r l y with r e s p e c t to t h e payment of Government checks and w a r r a n t s , and while i t i s c l e a r therefrom t h a t such items
£ .406
Page 5
X-7169-e-l
s h a l l bo considered, p a i d only a f t e r examination by the Treasury Department,
t h e question of what a c t i o n on t h e p a r t of t h e Treasurer s h a l l amount t o
payment i s l e f t unanswered.
I t seems to us obvious t h a t a t some p o i n t i n
t h e h a n d l i n g of a p a r t i c u l a r item some s p e c i f i c or d e f i n i t e a c t on t h e p a r t
of t h e T r e a s u r e r should c o n s t i t u t e payment, b u t t h e c i r c u l a r i s e n t i r e l y
s i l e n t on t h a t p o i n t , so f a r a s we a r e a b l e to d i s c e r n .
In o t h e r 7,'ords, i t
appears to us t h a t t h e r e a l and f i n a l question i s approached from a n e g a t i v e
r a t h e r than a p o s i t i v e viewpoint.
While we a r e advised a s to what w i l l n o t
c o n s t i t u t e payment, we a r e not informed aa to what w i l l .
We do observe from t h e c i r c u l a r t h a t t h e T r e a s u r e r r e s e r v e s only the
u s u a l r i g h t of t h e drawee to examine, when r e c e i v e d , a l l Government checks and
w a r r a n t s cashed by F e d e r a l r e s e r v e banks.
We assume t h a t the p u r p o s e of the
word " u s u a l " i s to r e s e r v e to t h e T r e a s u r e r t h e same r i g h t t h a t a commercial
i n s t i t u t i o n doing, t h e same c h a r a c t e r of b u s i n e s s would have.
We a l s o note
t h a t t h e c i r c u l a r p r o v i d e s t h a t t h e T r e a s u r e r r e s e r v e s t h e r i g h t to examine
t h e items when r e c e i v e d .
From t h e language of t h e c i r c u l a r i t i s our u n d e r -
s t a n d i n g t h a t t h e T r e a s u r y Department intended t h e r e b y to r e p r e s e n t t h a t upon
r e c e i p t of a check or warrant i t would examine i t and a c t in r e g a r d to i t w i t h i n t h e same time r e q u i r e d of a commercial i n s t i t u t i o n > doing t h e same c h a r a c t e r
of b u s i n e s s , or c e r t a i n l y w i t h i n a r e a s o n a b l e and d e f i n i t e time.
We, of c o u r s e , r e a l i z e t h a t t h e p e r f o r a t i o n of t h e i t e m s , in i t s e l f ,
does not c o n s t i t u t e payment in t h e absence of o t h e r f a c t s and c i r c u m s t a n c e s .
On t h e o t h e r ha©d, i t i s a circumstance which can be taken i n t o c o n s i d e r a t i o n
with o t h e r circumstances in d e t e r m i n i n g whether or not payment h a s been made,
because, a f t e r a l l , t h e u l t i m a t e q u e s t i o n i s one of f a c t .
( 407
X-7169-e-l
Page 6
Without r e f e r e n c e to the handling of the p a r t i c u l a r items described
in t h i s l e t t e r , we do f e e l t h a t if a commercial bank had r e c e i v e d an item, c r e d i t
f o r which had a l r e a d y been passed to t h e d e p o s i t o r , held i t f o r over twenty-four
hours, and p e r f o r a t e d i t with i t s c a n c e l l a t i o n stamp, t h e r e a r e few c o u r t s t h a t
would not hold t h a t t h e item was p a i d or accepted.
Returning to the l e g a l a s p e c t s of the p a r t i c u l a r c a s e s , as evidenced
by the a v a i l a b l e f a c t s , we recognize, of course, t h e general p r o p o s i t i o n s a s s e r t e d by you in your l e t t e r of November 21, 1931, and while we agree t h a t the
r i g h t s of t h e p a r t i e s may be f i x e d by c o n t r a c t evidenced by p r o v i s i o n s incorp o r a t e d in the d e p o s i t a r y b a n k ' s deposit s l i p , we f e e l t h a t , by t h e same token,
the bank may, by i t s a c t i o n or by s p e c i a l c o n t r a c t , c r e a t e a d i f f e r e n t r e l a t i o n ship.
In th e s e p a r t i c u l a r c a s e s , so we a r e advised, the d e p o s i t a r y bank
gave immediate c r e d i t f o r the items and p e r m i t t e d the various d e p o s i t o r s to
withdraw a g a i n s t them.
That they did not withdraw a l l of the funds evidenced
by thes e items was probably because they did not d e s i r e to do so.
At any r a t e ,
i t i s our opinion t h a t the C i t i z e n s National Bank of Brownwood, by giving
immediate c r e d i t without r e s t r i c t i o n , bought the items in question and c r e a t e d
the r e l a t i o n s h i p of debtor and c r e d i t o r , r a t h e r than t h a t of p r i n c i p a l
and agent.
In t h i s connection, your a t t e n t i o n i s d i r e c t e d to the case of City
of Douglas v. Federal Heserve Bank of D a l l a s , 271 U. S. 489.
As to t h i s b a n k ' s p o s i t i o n in the t r a n s a c t i o n being a l t e r e d , i t
seems to us t h a t every time i t r e c e i v e s a Government check or warrant and
p a s s e s immediate c r e d i t to the forwarding bank, i t changes i t s p o s i t i o n .
a matter of
feet,
i t i s because we a r e c o n s t a n t l y changing our p o s i t i o n by
paying out funds and c r e a t i n g c r e d i t s s u b j e c t to immediate withdrawal t h a t
As
»
Page 7
4 0 0
X-7169-e-l
the question gives us so much concern.
In conclusion, we a r e hoping t h a t under the circumstances you
w i l l conclude t h a t the various payees have no claims except a s a g a i n s t the
d e p o s i t a r y bank in which they chose to deposit t h e i r f u n d s , and, accordi n g l y , we a r e herewith r e t u r n i n g the items.
Yours very t r u l y ,
Governor
409
COPY
X-7169~e-2
COPY
LETTERHEAD OF THE TREASURY DEPARTMENT, WASHINGTON
O f f i c e of the Treasurer of the United S t a t e s
In r e p l y i n g quote i n i t i a l s AWS: C
Mr. L. G. Pondrom,
A s s i s t a n t Cashier,
Federal Reserve Bank,
D a l l a s , Tex.
November 21, 1931.
REGISTERED MAIL
Sir;
Receipt of your l e t t e r of November 9 i s acknowledged, forwarding
t h r e e checks, described below, drawn on t h i s o f f i c e and r e t u r n e d when p r e sented f o r payment because of drawers' and payees' r e q u e s t s due to the f a i l ure of The C i t i z e n s National Bank of 2rov/nwood, Texas, a f t e r t h e deposit of
the checks t h e r e and b e f o r e they were p r e s e n t e d to t h i s o f f i c e f o r payment:
Check No.
Date
Amount
1,150 ,388
2,595 ,778
108 ,170
9 2 — 31
—8
9-30-31
9-30-31
$617.40
160.83
100.00
Payee
Charles E. Bennett
Joseph Hamilton
Clara Earr Achor
as Gdn. of Est.
of Noah A. J . Achor
Drawer
J . B. Schommer
A. Zappone
B. E. Waters
Symbol
99220
70001
11519
I t appears t h a t when the checks were r e t u r n e d you acknowledged r e c e i p t of them under d a t e s of October 10 and 13 and wrote t h a t you ? e r e return^ing the checks to your endorser and a s soon as you received any information
regarding them you would advise t h i s o f f i c e .
The payee of the f i r s t check above, Mr. Bennett, telegraphed and
wrote to t h i s o f f i c e on November 3, t h a t h i s check had been r e t u r n e d to him
and he r e q u e s t e d t h a t stoppage be l i f t e d . In h i s l e t t e r he s t a t e d t h a t he
had r e d e p o s i t e d the check in The F i r s t National Bank of Brownwood. On November S, he telegraphed t h a t complications had a r i s e n and r e q u e s t e d renewal
of stoppage.
The payee of the second check, Mr. Hamilton, wrote on October 16,
t h a t the examiner in charge of the f a i l e d bank r e f u s e d to r e t u r n h i s check
although t h e payee had tendered to the examiner the amount of t h e d i f f e r e n c e
between h i s bapk balance and the amount of t h i s check.
The f a i l e d b a n k ' s deposit t i c k e t s t a t e d d e f i n i t e l y t h a t i t was a c t ing a s agent f o r d e p o s i t o r s in the c o l l e c t i o n of checks.
4 1 0
Page 2
X-7169-e-S
Under d a t e of October 17, yctu r e t u r n e d the three checks to t h i s
o f f i c e with a. cooy of a l e t t e r from the examiner of the f a i l e d bank dated
October 15, in which he r e t u r n e d the checks to you and s t a t e d in -oart:
ii
we a r e not in p o s i t i o n to give you a u t h o r i t y to charge t h e account of
The Citizens National Bank of Brownwood with the checks."
On October 28, the checks were again sent to you f o r r e t u r n to the
r e c e i v e r of t h e f a i l e d bank with information as to the practice approved
by t h e Comptroller of the Currency f o r handling such checks when deposited
for collection.
With your l e t t e r of November 9, you again forwarded t h e checks and
quoted a l e t t e r from the Receiver in p a r t as follows: 11 'At the time these
checks were r e t u r n e d to me with your l e t t e r of November 2nd, i t was my thought
t h a t I could have the payees reimburse me the d i f f e r e n c e between the amount
of the checks and t h e amount standing to t h e i r c r e d i t on t h e i n d i v i d u a l
l e d g e r , which would enable me to make a debit a g a i n s t the account, which
would close each of the accounts, and you in turn d e b i t the c r e d i t balance
of The C i t i z e n s National Bank of Brownwood, Texas. Upon i n v e s t i g a t i o n , I
f i n d t h a t you have closed t h e account of The Citizens National Bank on your
books, and i t i s presumed t h e amount was a p p l i e d as a c r e d i t on the r e d i s counts of s u b j e c t bank with you, although I have never been advised to t h a t
e f f e c t . As you a r e aware, I am not in a p o s i t i o n to draw d r a f t s a g a i n s t
c r e d i t balances with o t h e r banks in order to reimburse you the amount of the
checks involved, t h e r e f o r e , I am r e t u r n i n g the checks herewith and ask t h a t
you p l e a s e acknowledge r e c e i p t of same. 1 " You also s t a t e d ; "Regarding the
balance standing to the c r e d i t of The C i t i z e n s National Bank of Brownwood
on our books, r e f e r r e d to in Mr. Lamb's l e t t e r , we advise t h a t t h i s balance
has been a p p l i e d on the indebtedness of The C i t i z e n s National Bank cf Brownwood and the s u b j e c t bank does not show any balance to i t s c r e d i t a t the
p r e s e n t time."
As understood by t h i s o f f i c e the f a i l e d bank acted as agent f o r
c o l l e c t i o n of out of town items deposited u n t i l c o l l e c t i o n was e f f e c t e d .
The agency r e l a t i o n s h i p continued u n t i l the f a i l e d bank r e c e i v e d the proceeds from i t s subagent. Where an agent makes a d e p o s i t , even in h i s own
name, of funds belonging to h i s p r i n c i p a l , the bank, although unaware of the
b e n e f i c i a l ownership of such deposit cannot o f f s e t such deposit a g a i n s t an,
indebtedness owing by such agent to the bank, where the bank has not a l t e r e d
i t s p o s i t i o n or extended any a d d i t i o n a l c r e d i t , in r e l i a n c e or f a i t h upon
the supposition t h a t the deposit in f a c t belonged to the agent, numerous
decisions s u s t a i n t h i s view.
I t thus appears t h a t the payees of these checks own t h e proceeds
except to the extent t h a t the f a i l e d bank p e r m i t t e d withdrawals a g a i n s t
the d e p o s i t s , u n l e s s the Federal Reserve Bank a f t e r the r e c e i p t of t h e s e
items changed i t s p o s i t i o n to i t s detriment. No information a s to t h i s
f e a t u r e i s contained i n the f i l e .
i
4 1 :
A
X-7169-e-2
Page 3
The checks a r e again ruturned to you herewith and u n l e s s your
bank can he shown to have changed p o s i t i o n to i t s detriment a f t e r r e c e i p t
of the checks, i t would appear t h a t your o f f s e t t i n g them a g a i n s t an i n debtedness owing to you by the f a i l e d bank may not be upheld upon your
further consideration.
Respectfully,
G. 0. Barnes (Signed)
A s s i s t a n t Treasurer.
Inclosures.
4 1 2
X-7169-0-3
COPY
C O P Y
LETTERHEAD OF THE FEDERAL RESERVE BANK OF DALLAS
November 23, 1931
Mr. G. 0. Barnes
A s s i s t a n t Treasurer of th:> United S t a t e s
Treasury Department
Washington, D. C.
SirUnder date of November 9, we forwarded you t h e
f o l l o w i n g described Treasury warrants:
number
Amount
Drawn to t h e order o f :
1,150,388
108,170
2,595,778
$617.40
100.00
160.83
Charles F. Bennett
Clara F a r r Achor
Joseph Hamilton.
We do not appear to have r e c e i v e d an acknowledgment covering these items and s h a l l a p p r e c i a t e i t if you
w i l l advise us whether they have reached your o f f i c e .
Respectfully
L. G. Pondrom
A s s i s t a n t Cashier
LGP:HH
If
4 1 3
X-7169*>e-4
COPY
C O P
Y
LETTTEH3AD OP THE FEDERAL RESERVE 3AH OF DALLAS
November 9, 1931
Mr. G-. 0. Barnes
A s s i s t a n t Treasurer of the United S t a t e s
Treasury Department
Washington, D. C.
SirIn r e p l y to your l e t t e r of November 4, i n i t i a l e d "AWS-C,"
we r e t u r n T r e a s u r e r ' s check Mo. 1,150,383, f o r $617.40, drawn to
the order of Charles F. Bennett, r e f e r r e d to t h e r e i n , t o g e t h e r with
warrant f o r $100, No. 108,170, drawn to t h e order of Clara Farr Achor,
Guardian of the E s t a t e of IToah A. J . Achor, and warrant No. 2,595,778,
f o r $160,83, drawn to the order of Joseph Hamilton, which checks were
mentioned in T r e a s u r e r ' s l e t t e r of October 28.
Our a c t i o n becomes n e c e s s ary i n view of l e t t e r today r e ceived from Mr. Ernest Lamb, n a t i o n a l Bank Examiner in charge of the
C i t i z e n s National Bank of Brownwood, r e t u r n i n g these warrants to u s ,
which we quote below;
"With f u r t h e r r e f e r e n c e to the t h r e e checks drawn on the
Treasurer of the United S t a t e s f o r $100, $160.83, and $617.40,
payable to Clara Pharr Achor, Joseph Hamilton, and Charles F.
Bennett, r e s p e c t i v e l y , about which t h e r e has been so much cont r o v e r s y , I am r e t u r n i n g the checks herewith.
"As you were p r e v i o u s l y advised the payees of these checks
deposited the items in The Citizens National Bank p r i o r to i t s
suspension, r e c e i v e d immediate c r e d i t f o r the items a g a i n s t which
c r e d i t each payee had checked p r i o r to t h e suspension of b u s i n e s s .
At the time t h e s e checks were returned to me with your l e t t e r of
November 2nd, i t was my thought t h a t I could have the payees re?imburse me t h e d i f f e r e n c e between the amount of the checks and
the amount standing to t h e i r c r e d i t on the individual l e d g e r ,
which would enable me to make a d e b i t a g a i n s t the account, which
would close each of the accounts, and you in t u r n d e b i t t h e c r e d i t
balance of The C i t i z e n s National 3ank of Brownwood, Texas.
"Upon i n v e s t i g a t i o n , I f i n d that you have closed t h e account
of The C i t i z e n s National Bank on your books, and i t i s presumed
the amount was a p p l i e d a s a c r e d i t on the r e d i s c o u n t s of s u b j e c t
bank with you, although I have never been advised to t h a t e f f e c t .
Xs7169»e=4
Page 2
i'Afc you ard atfare, 1 am not iti i p o s i t i o n tb diraw d r a f t s
a g a i n s t c r e d i t "balances w i t h other banks in order to reimburse
you t h e amount of t h e checks involved, t h e r e f o r e , I am r e t u r n i n g the checks herewith and a s k . t h a t you p l e a s e acknowledge
r e c e i p t of same."
Regarding the balance standing to the c r e d i t of t h e C i t i z e n s
National Bank of Brottnwood on our books, r e f e r r e d to i n Mr. Lamb's
l e t t e r , we advise t h a t t h i s balance has been a p p l i e d on the indebtedness of the C i t i z e n s National Bank of Brownwood and the s u b j e c t bank
does not show any balance to i t s c r e d i t a t the p r e s e n t time.
We s h a l l await your f u r t h e r advice in connection with t h e s e
warrants and w i l l thank you to acknowledge t h e i r r e c e i p t .
Respectfully
L. G. Pondrom
A s s i s t a n t Cashier
LGP:HH
Attachments
fr
X-7169-e-5
COP
C
.6 ^
Y
LBTI5REEAD OF THE TREASURY UBPASTCTfS, fASHIKGTOK
November 4, 1931
O f f i c e of Treasurer of the United S t a t e s
In r e p l y i n g quote i n i t i a l s A7S-C
, Cashier,
Federal Reserve Bank,
D a l l a s , Texas.
Sir;
Reference i s made to o f f i c e l e t t e r dated October 9,
1931, r e l a t i v e to check ITo. 115,388, dated September 28, 1931,
drawn on t h i s o f f i c e to the order of Charles F. Bennett f o r
$617.40 by J . B. Schommer, symbol 99-220, payment of which
check was d e c l i n e d when p r e s e n t e d f o r the reason t h a t the C i t i z e n s
Hational Bank of Brownwood, Texas, in which the item had 'been dep o s i t e d , subsequently closed.
Inasmuch as the check was r e t u r n e d by the r e c e i v e r of
t h e f a i l e d bank to t h e payee and as you do not appear to have
entered c r e d i t in the T r e a s u r e r ' s account f o r t h i s item, 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 you w i l l communicate with your i n d o r s e r with
a view of o b t a i n i n g t h e amount involved.
4 1 5
Respectfully,
G. 0 . Barnes (Signed)
Assistant Treasurer.
f
4 1 6
X-7169-8-6
COPY
C
0
E
Y
LSttSRHklAD Of TS6 FEDEELAL RESERVE BANK OP DALLAS
November 9, 1931
Mr. Ernest Lamb
National Bank Examiner
C i t i z e n s National Bank
Brownwood, Texas.
Dear Mr. Lamb;
This w i l l acknowledge r e c e i p t of your l e t t e r of November 6, enclosing to us the following described Treasury
warrants:
Number
1,150,388
2,595,778
108,170
Name of Payee
Amount
Charles F. Bennett
Joseph Hamilton
Clara Farr Achor a s Guardian of
the E s t a t e of Noah A. J . Achor
$617.40
160.83
100.00
We a r e quoting your l e t t e r to t h e Treasurer of the
United S t a t e s today and s h a l l be p l e a s e d to advise you of any
f u r t h e r developments t h a t might occur i n connection with t h e s e
checks.
Yours very t r u l y
L. G-. Pondrom
A s s i s t a n t Cashier
LOP: EE
C O P
? 417
Y
X-7169~e~7
t , 0 ' P
Y
LETTERHEAD OF THE CITIZENS HATIOMAL BAlS Of BEOlOTOOD
November 6, 1931,
Federal Reserve Bank,
D a l l a s , Texas.
Gentlemen;
With f u r t h e r r e f e r e n c e to the t h r e e checks drawn on t h e Treasurer
of the United S t a t e s f o r $100.00, $160,83 and $617.40, payable to Clara Pharr
Achor, Joseph Hamilton and Charles F. Bennett r e s p e c t i v e l y , about which t h e r e
has been so much controversy, I am r e t u r n i n g the checks h e r e w i t h .
As you were p r e v i o u s l y advised the payees of these checks deposited
the items in The C i t i z e n s n a t i o n a l Bank p r i o r to i t s suspension, received
immediate c r e d i t f o r the items a g a i n s t which c r e d i t each payee had checked
p r i o r to t h e suspension of b u s i n e s s . At the time the se checks were r e t u r n e d
to me with your l e t t e r of November 2nd, i t was my thought t h a t I could have
the payees reimburse me the d i f f e r e n c e between the amount of the ,checks and
the amount standing to t h e i r c r e d i t on the individual ledger which would
enable me to make a d e b i t a g a i n s t the account, which would c l o s e each of
t h e accounts, and you in turn d e b i t the c r e d i t balance of The C i t i z e n s
National Bank of Brownwood, Texas.
Upon i n v e s t i g a t i o n , I f i n d t h a t you have closed t h e account of
The Citizens National Bank on your books and i t i s presumed the amount
was a p p l i e d a s a c r e d i t on the r e d i s c o u n t s of subject bank with you,
although I have never been advised to t h a t e f f e c t .
As you a r e aware, I am not in a p o s i t i o n to draw d r a f t s a g a i n s t
c r e d i t balances with o t h e r banks in order to reimburse you the amount of
the checks involved, t h e r e f o r e , I am r e t u r n i n g the checks herewith and
ask t h a t you p l e a s e acknowledge r e c e i p t of same.
R e s p e c t f u l l y yours,
Ernest Lamb, (Signed)
National Bank Examiner.
4 1 8
X-7169-©r,§
C 0
P
Y
LETTERHEAD OF THE FEDERAL RESERVE 3AM OF DALLAS
November 2, 1931
Mr. Ernest Lamb,
National Bank Examiner,
C i t i z e n s National Bank,
Brownwood, Texas.
Dear Mr. Lamb:
We a r e e n c l o s i n g the three checks drawn on the Treasurer
of the United S t a t e s f o r $100,00. $160.83 and $617.40, which you f o r warded to us i n your l e t t e r of October 16th a f t e r having r e f u s e d to
accept t h e i r r e t u r n . We a r e a l s o enclosing copy of a l e t t e r from the
Treasurer regarding the checks t h a t i s s e l f - e x p l a n a t o r y .
The check drawn to the order of Clara F a r r Achor ag. Gdn. of
E s t . of Noah A. J . Achor should "be endorsed e x a c t l y a s drawn "before
i t i s a g a i n p r e s e n t e d f o r payment.
P l e a s e acknowledge r e c e i p t of the check and advise us r e garding the m a t t e r .
Yours very t r u l y ,
L. 6. Pondrom,
A s s i s t a n t Cashier.
LGP/S
s
t 419
X-7169-e-9
C O P Y
LETTERHEAD OF THE EEEER&L KBSBBVB BANK Of nAT.TAR
November 5, 1931
Mr. Joseph Hamilton
P , 0 . Box 813
Brownwood, Texas
Dear S i r :
This w i l l acknowledge r e c e i p t of your l e t t e r of
November 4, e n c l o s i n g United S t a t e s Treasury check Mo.
2595778, d a t e d September 30, d r a m to your order f o r $160.83.
We observe t h a t you would have us cancel our e n dorsement in order t h a t f u r t h e r n e g o t i a t i o n of the check may
be accomplished. This i s t o advise t h a t c e r t a i n m a t t e r s i n
connection w i t h t h i s p a r t i c u l a r warrant a r e s t i l l under a d j u s t ment w i t h Mr. Ernest Iamb, Examiner i n Charge of t h e C i t i z e n s
n a t i o n a l Bank of Brownwood, and we a r e not a t the p r e s e n t time
a t l i b e r t y to cancel our endorsement. We have r e t u r n e d the
warrant today t o Mr. Lamb and suggest t h a t you c a l l upon him,
and he w i l l be g l a d t o f u l l y explain the m a t t e r .
Yours very t r u l y
I . 0 . Pondrom
A s s i s t a n t Cashier
LGP:HH
t
4 2 0
X-7169-e-10
C O P Y
LETTERHEAD OF THE FEDERAL RESERVE BANK OF TIAT.T.AR
November 5, 1931
t
Mr. Ernest Lamb
Examiner in Charge
C i t i z e n s National Bank
Brownwood, Texas
Dear Mr. Lamb:
F u r t h e r i n g our telephone conversation r e g a r d i n g c e r t a i n Government w a r r a n t s , one of these checks f o r $160.83 was
received by u s today d i r e c t from the payee, Joseph Hamilton.
We a r e w r i t i n g Mr. Hamilton t h a t the warrant has been r e t u r n e d
to you and t h a t he should g e t i n touch with you with f u r t h e r
r e f e r e n c e t o i t s payment.
We might s t a t e t h a t he has asked us to cancel our endorsement i n order t h a t the warrant may "be n e g o t i a t e d . This,
of course, we cannot do u n t i l the question now in controversy
is settled.
P l e a s e acknowledge r e c e i p t of the e n c l o s u r e .
Yours very t r u l y
L. G. Pondrom
A s s i s t a n t Cashier
LGSPsHH
Attachment
421
X-.7169-.eall
C O P Y
Post O f f i c e Box 813,
Brownwood, Texas,
November 4, 1931.
Federal Reserve Bank of D a l l a s ,
D a l l a s , Texas.
Gentlemen:
I am enclosing check No. 3,595,778 dated September
30, 1931, f o r $160.83, drawn on the Treasurer of the United
S t a t e s to the order of the undersigned by A. Zappone, symbol
70-001.
Payment on t h i s check has been suspended.
In accordance with i n s t r u c t i o n s from the Treasurer
of the United S t a t e s to have a l l endorsements cancelled b e f o r e
r e d e p o s i t i n g t h i s item you a r e kindly requested t o cancel your
endorsement thereon and r e t u r n to undersigned.
Yours very t r u l y
Joseph Hamilton
(Signed)
4 2 2
X-7169-Q-12
C O P Y
IJCTTERHEAD 0 1 THE FEDERAL RESERVE BANK OF DALLAS
November 4 , 1931
Mr. Dean Bippetoe, A s s i s t a n t Cashier
F i r s t N a t i o n a l Bank
Brownwood, Texas
Dear Mr. Bippetoe:
We r e f e r to your l e t t e r of November 3, e n c l o s i n g Treasu r y warrant No. 1150388, drawn to the order of Charles F. Bennett
f o r $617,40, r e q u e s t i n g t h a t , i f i n o r d e r , the amount be c r e d i t e d
to your a c c o u n t .
As advised you over the telephone today, t h i s w a r r a n t
i s i n c o n t r o v e r s y , having "been returned to us "by the Treasurer of
the United S t a t e s f o r reclamation through the Examiner i n Charge
of the C i t i z e n s National Bank of Brownwood on account of the f a c t
t h a t the payeee had requested t h a t payment he stopped on i t .
We r e t u r n e d the warrant to Mr. Lamb, Examiner i n Charge
of the C i t i z e n s National Bank a t Brownwood f o r reimbursement, and
t h i s m a t t e r i s s t i l l r e c e i v i n g Mr. Lamb's c o n s i d e r a t i o n . Theref o r e we r e t u r n the warrant to you and a s k t h a t you g e t i n touch
with Mr. Tm h so t h a t he may he p r e s e n t when you d i s c u s s the matjW
t e r w i t h your d e p o s i t o r , who we understand i s the payee, Charles
F. B e n n e t t .
Kindly f a v o r us "by acknowledging r e c e i p t of the e n c l o s u r e .
Yours very t r u l y
L. G-. Pondrom
A s s i s t a n t Cashier
LGPjHH
Attachment
cc to Mr. Ernest Lamb
N a t i o n a l Bank Examiner
c/o C i t i z e n s National Bank
Brownwood, Texas
4 2 3
X-7169-e-13
0
6 P
Y
IS1TBEHELAD OF THE FIRST NATIONAL BASK, BROWNWOOD, TEXAS
November 3, 1931.
Federal Reserve Bank i n D a l l a s ,
Dallas, Texas.
Gentlemen:
We enclose h e r e i n Adjusted Service C e r t i f i c a t e loan check
by J . 3 . Schommer, Disbursing Clerk on the Treasurer of t h e United
S t a t e s , d a t e d September 28, 1931, and b e i n g numbered 1,150,388, i n
the sum of $617.40, payable to the order of Charles F . Bennett, 109
E. Chandler, Brownwood, Texas.
P r i o r endorsements on t h i s item i n d i c a t e s t h a t i t was d e p o s i t e d i n the C i t i z e n s National Bank of t h i s c i t y on October 3rd,
by payee, b u t on account of the closing of t h a t bank, payment was
requested to be stopped, and the item has consequently been returned
to the payee, who has today wired the Treasurer of the United S t a t e s
a t Washington, a s f o l l o w s :
" L i f t stop payment a g a i n s t check #1150388 J . B. Schooner
d i s b u r s i n g c l e r k to Charles F. Bennett $617.40, a d j u s t e d
s e r v i c e c e r t i f i c a t e loan and confix® your a c t i o n to
F i r s t National Bank, Brownwood, since check has now
been r e t u r n e d to me by o t h e r bank. 11
*
I f i t i s now in order to pay t h i s check, we w i l l thank
you to c r e d i t our account and advise us when f i n a l l y p a i d , i n order
t h a t we may pay the funds over to the endorser of the check only when
we have r e c e i v e d f i n a l payment.
Yours very t r u l y ,
Dean Bippetoe
(Signed)
A s s i s t a n t Cashier.
Y-r
X-7169-S-14
6
0
F
Y
EBTTBEHEib Off THE TBEASUBY DEPARTMENT, WASHINGTON
O f f i c e of
Treasurer of the United S t a t e s
In r e p l y i n g quote i n i t i a l s AWS:C
Cashier,
Federal Reserve Bank,
Dallas, lex.
October 28, 1931.
#
REGISTERED MAIL
Sir:
Herewith a r e r e t u r n e d checks received with your l e t t e r of
October 17, wi vh inclosure from Ernest Iamb, n a t i o n a l Bank Examiner,
Brownwood, Texas, a s f o l l o w s :
Check Ho.
Symbol
Amoint
108,170
11519
$100.00
1,150,388
2,595,778
99230
70001
617.40
160.83
Payee
Clara l a r r Achor a s Gdn. of
E s t . of IToah A . J . Achor
Charles F. Bennett
Joseph Hamilton
In case of checks which were deposited f o r c o l l e c t i o n i t
i s the p r a c t i c e of the Comptroller of the Currency to charge the d e p o s i t o r ' s account and r e t u r n the checks to him i f h i s balance w i l l
permit such a c t i o n . I f t h e d e p o s i t o r ' s balance i s l e s s than the
amount of the check the bank i s owner of t h e check to t h a t e x t e n t ,
and the check i s r e t u r n e d to the d e p o s i t o r upon repayment of the d i f ference between h i s balance and the amount of the check.
P l e a s e r e t u r n the checks to the r e p r e s e n t a t i v e of the
Citizens N a t i o n a l Bank, Brownwood, Texas, and advise t h i s o f f i c e in
d e t a i l a s to h i s p o s i t i o n i f you a r e not reimbursed w i t h i n a reasonable time.
Your correspondent should be advised t h a t checks received
i n t h i s o f f i c e a r e p e r f o r a t e d with a d a t e and symbols f o r i d e n t i f i c a t i o n purposes b e f o r e clearance or examination and such p e r f o r a t i o n
does not s i g n i f y t h a t a check has been p a i d .
Respectfully,
W. 0 . Woods
Treasurer.
Inclosures.
(Signed)
4 2 5
X-7169-e~15
O O P
Y
LETTERHEAD OF THE PEBERAL RESERVE BANK OP DALLAS
October 17, 1931.
Hon. W. 0 . Woods,
Treasurer of the United S t a t e s ,
Washington, 3D. C.
Sirs
Reference i s made to your l e t t e r s of October 7 t h and
October 9th enclosing checks a s described below:
Check No.
108,170
1,150,388
2,595,778
Payee
Clara P a r r Achor, a s Guardian
of E s t a t e of Noah A. J . Achor
Charles P. Bennett
Joseph Hamilton
Amount
• $100.00
617.40
160.83
The m a t t e r of o b t a i n i n g refund to cover the checks was
r e f e r r e d to the N a t i o n a l Bank Examiner in charge of the C i t i z e n s
National Bank, Brownwood, Texas, and we a r e today i n r e c e i p t of
a l e t t e r from him, copy of which i s a t t a c h e d .
The checks a r e enclosed f o r your d i s p o s i t i o n and we ask
t h a t you p l e a s e advise us i f we can be of f u r t h e r a s s i s t a n c e .
Respectfully,
L. G>. Pondrom,
A s s i s t a n t Cashier,
LGP/S
8
4 2 6
X-7169~e~16
C O P Y
LETTEHHEJU) Of THE FEDERAL RESERVE BANK OF DALLAS
October 13, 1931.
Hon, W. 0 . Woods,
Treasurer of the United S t a t e s ,
Washington, D. C.
Sir:
Receipt i s acknowledged of your l e t t e r of October
9th, 1931, i n i t i a l s AWS-C, enclosing check No. 1,150,388, drawn
to the o r d e r of Charles F, Bennett f o r $617,40, on which payment
has been stopped because the bank in which i t was d e p o s i t e d has
closed*
We a r e r e t u r n i n g the check to our endorser and a s
soon a s we r e c e i v e any information regarding i t you w i l l be a d vised.
Respectfully,
L. 0. Fondrom,
A s s i s t a n t Cashier.
LGP/S
s
X-7169-e-l?
0
0
P
Y
LETTERHEAD OP THE TREASURY DEPARTMENT, WASHINGTON
O f f i c e of
Treasurer of the United S t a t e s
In r e p l y i n g quote i n i t i a l s AWS-C
October 9, 1931
Cashier,
Federal Reserve Bank,
D a l l a s , Tex.
REGISTERED MAIL
Sir:
There i s r e t u r n e d herewith check No. 1,150,388 dated
September 28, 1931, drawn on t h i s o f f i c e to the order of Charles
3P. Bennett, f o r $617.40, by J . B. Schommer, symbol No, 99230,
which was l i s t b d i n your t r a n s c r i p t of the T r e a s u r e r ' s account
dated October 5, 1931. Payment i s declined a t t h i s time i n comp l i a n c e w i t h r e q u e s t dated October 7, 1931, from drawer, who asked
t h a t payment be stopped because the bank i n which the check was
deposited had become i n s o l v e n t .
P l e a s e r e t u r n the check through the i n d o r s e r s to the
r e c e i v e r of the f a i l e d bank f o r d e l i v e r y to t h e payee i f the c i r cumstances warrant t h i s a c t i o n . Returned Check Credit Ticket No.
72194 i s i n c l o s e d , with which to e n t e r c r e d i t i n the T r e a s u r e r ' s
account.
Respectfully,
W. 0 . W O S
OD
Treasurer.
(Signed)
Countersigned:
A s s t . Chief, Accounting D i v i s i o n .
REBiNR
AC-152
4
4 2 7
X-7169-e-18
d6f i
LETTEBHEAD OF THE FEDERAL HE SERVE BANK OF DALLAS
October 10, 1931.
Hon. W. 0 . Woods,
Treasurer of the United S t a t e s ,
Washington, E. C.
Sir:
Receipt i s acknowledged of your l e t t e r of October
7th, i n i t i a l s AWS-C, e n c l o s i n g check No. 2,595,778, drawn to the
order of Joseph Hamilton f o r $360.83, on which payment has been
stopped "because the bank in which i t was deposited has c l o s e d .
We a r e r e t u r n i n g the check to our endorser and a s soon
a s we r e c e i v e any information regarding i t you w i l l be a d v i s e d .
Respectfully,
L. G-. Pondrom,
A s s i s t a n t Cashier.
LGEP/S
s
C O P Y
EETIEEHEAD OF THE ZEDBEAL RESERVE BAM 07 DALLAS
October 10, 1931.
Hon. W. 0 . Woods,
Treasurer of the United S t a t e s ,
Washington, T. C.
Sir:
Receipt i s acknowledged of your l e t t e r of October
7th, i n i t i a l s AWS-C, enclosing check lio, 108,170, drawn to t h e
order of Clara P a r r Achor a s Gdn. of E s t . of Noah A. J . Achor
f o r $100.00, on which payment has been stopped because the bank
i n which i t was deposited has closed*
We a r e r e t u r n i n g the check to our endorser and a s
soon a s we r e c e i v e any information regarding i t you w i l l be a d vised.
Respectfully,.
1 . 6 . Pondrom,
A s s i s t a n t Cashier,
LGP S
s
4 3 0
X-7169-e-20
0
0
F
Y
LEiTEBEEAD OP TREASURY DEPARTMENT, WASHINGTON
October 7, 1931
O f f i c e of
Treasurer of t h e United S t a t e s
In r e p l y i n g quote i n i t i a l s AWS-C
Cashier,
Federal Reserva Bank,
D a l l a s , Texas,
REGISTERED MAIL
Sir:
There i s r e t u r n e d herewith check No. 2,595.778, dated
September 30, 1931, drawn on t h i s o f f i c e t o the order of Joseph
Hamilton, f o r $160#83, "by A. Zappone, symbol No. 70001, which was
l i s t e d i n your t r a n s c r i p t of the T r e a s u r e r ' s account dated October
2, 1931. Payment i s d e c l i n e d a t t h i s time in compliance w i t h r e quest dated October 6, 1931, from the payee, who asked t h a t payment he stopped because the bank in which the check was d e p o s i t e d
had become i n s o l v e n t .
P l e a s e r e t u r n the check through the i n d o r s e r s to the
r e c e i v e r of the f a i l e d bank f o r d e l i v e r y to the payee i f the c i r cumstances warrant t h i s a c t i o n . Heturned Check Credit Ticket No.
47030 i s i n c l o s e d , with which to e n t e r c r e d i t in the T r e a s u r e r ' s
account.
Respectfully,
W. 0 . W O S
OD
Treasurer.
Countersigned}
A s s t . C h i e f , Accounting D i v i s i o n .
F:BB
A0-152
4 3 1
X-7169~e^21
C .0
P
Y
LETTERHEAD t)f THE TREASURY DEPARTMENT, WASHINGTON
O f f i c e of
Treasurer of the United S t a t e s
In r e p l y i n g quote i n i t i a l s AWS-C
October 7, 1931.
Cashier,
Federal Reserve Bank,
Dallas, Tex.
REGISTERED MAIL
Sir:
There i s r e t u r n e d herewith check No. 108,170, d a t e d
September' 30, 1931, drawn on t h i s o f f i c e to the order of Clara
Earr Achor a s Gdn. of E s t . of Noah A. J . Achor, f o r $100.00,
by R. E. Waters, symbol No. 11-519, which was l i s t e n i n your
t r a n s c r i p t of the Treasurer 1 s account dated October 2, 1931.
Payment i s d e c l i n e d a t t h i s time in compliance with r e q u e s t dated
October 6, from the drawer, who asked t h a t payment be stopped b e cause the bank i n which the check was deposited had become i n s o l vent.
P l e a s e r e t u r n the check through the i n d o r s e r s to the
r e c e i v e r of the f a i l e d bank f o r d e l i v e r y to the payee i f the
circumstances warrant t h i s a c t i o n . Returned Check Credit Ticket
No. 47029 i s i n c l o s e d , w i t h which t o e n t e r c r e d i t i n t h e T r e a s u r e r ' s
account.
Respectfully,
W. 0 . W O S
OD
Treasurer.
Countersigned:
A s s t . Chief, Accounting D i v i s i o n .
AC-152
KMD:REL
The check should be indorsed e x a c t l y a s drawnClara Earr Achor a s Gdn. of E s t . of Noah A. J .
Achor, b e f o r e i t i s again p r e s e n t e d f o r payment.
X-7169-S-22
4 3 2
C..P.
*
1
LETTERHEAD o r THE IBERAl BEE3RVE BANK 07 DALLAS
October 10, 1931.
Examiner i n Charge,
Citizens N a t i o n a l Bank,
Brownwood, Texas,
Dear S i r :
There i s r e t u r n e d herewith check No, 108,170, drawn
to the order of Clara Farr Achor a s Gdn. of E s t . of Ivoah, A. J .
Achor, f o r $100.00, which h e a r s the endorsement of -he C i t i z e n s
National Bank, Brownwood, Texas, of October 1, 1931,,
This check has been returned to u s "by the Treasury Department with a l e t t e r which, i n p a r t , reads a s f o l l o w s ;
"Payment i s d e c l i n e d a t t h i s time i n compliance w i t h
r e q u e s t d a t e d October 6, from the drawer, who asked t h a t
payment be stopped because the bank i n which the check was
d e p o s i t e d had become i n s o l v e n t .
"Please r e t u r n the check through the i n d o r s e r s to the
r e c e i v e r of the f a i l e d bank f o r d e l i v e r y to the payee i f the
circumstances warrant t h i s a c t i o n . "
Under the circumstances p l e a s e a d v i s e us i f i t w i l l be i n
order f o r u s to charge the account of the C i t i z e n s National Bank,
Brownwood, Texas, to c o v e r .
Yours very t r u l y ,
L., Q-. Pondrom,
A s s i s t a n t Cashier.
LGP/S
s
X-7169~e«23
U
p
i
LStlEfiHEAD OT THE FEUEEAL RESERVE BAIJK OF DALLAS
October 13, 1931*
Examiner i n -Charge,
Citizens N a t i o n a l Bank,
Brownwood, Texas.
Dear S i r :
There i s r e t u r n e d herewith check No. 1,150,388, drawn
to the o r d e r of Charles I . Bennett f o r $617,40, which b e a r s the
endorsement of the C i t i z e n s National Bank, Brownwood, Texas, of
October 3, 1931.
This check has been returned to u s by the Treasury Department with a l e t t e r which, in p a r t , reads as f o l l o w s :
"Payment i s d e c l i n e d a t t h i s time in compliance w i t h
r e q u e s t dated October 7, 1931, from drawer, who asked t h a t
payment be stopped because the bank i n which the check was
d e p o s i t e d had become i n s o l v e n t ,
'•Please r e t u r n the check through the i n d o r s e r s to t h e
r e c e i v e r of the f a i l e d bank f o r d e l i v e r y to the payee i f the
circumstances warrant t h i s a c t i o n , "
Under the circumstances p l e a s e a d v i s e us i f i t w i l l be i n
order f o r us to charge the account of the C i t i z e n s N a t i o n a l Bank,
Brownwood, Texas, to cover.
Yours very t r u l y ,
L, Gr. Pondrom,
A s s i s t a n t Cashier.
LGP/S
s
4.33
4 3 4
X-7169-e~24
6- 6
F
Y
LETTERHEAD Of THE INDERAL RESERVE BANK OF DALLAS
October 10, 1931.
Examiner i n Charge,
C i t i z e n s N a t i o n a l Bank,
Brownwood, Texas.
Dear S i r s
There i s r e t u r n e d herewith check No. 2,595,778, drawn
to t h e o r d e r of Joseph Hamilton f o r $160.83, which b e a r s the
endorsement of the C i t i z e n s National Bank, Brownwood, Texas,
of October 1, 1931.
This check has been r e t u r n e d to u s by the Treasury Department w i t h a l e t t e r which, i n p a r t , reads a s f o l l o w s :
"Payment i s d e c l i n e d a t t h i s time i n compliance w i t h
r e q u e s t d a t e d October 6, 1931, from the payee, who asked
t h a t payment be stopped because the bank i n tzhich the check
was d e p o s i t e d had become i n s o l v e n t ,
"Please r e t u r n the check through the i n d o r s e r s to the
r e c e i v e r of the f a i l e d bank f o r d e l i v e r y to t h e payee i f the
circumstances warrant t h i s a c t i o n . 1 1
Under the circumstances p l e a s e a d v i s e u s i f i t w i l l be i n
order f o r u s t o charge the account of the C i t i z e n s N a t i o n a l Bank,
Brownwood, Texas, to cover.
Yours very t r u l y ,
L. G> Pondrom,
Assistant Cashier.
LGPJS
s
X-7169-e-25
4 3 5
A.,,JO P . I
LETTERHEAD OP teE CITIZENS NATIONAL BANK OP BBOWOTOOD, BBGWNWOOD, TEXAS
October 16* 1931.
Pederal Reserve Bank,
Dallas, Texas.
Gentlemen:
Receipt i s acknowledged of your l e t t e r s enclosing Government
checks payable t o :
Clara Parr Achor, as Guardian of E s t a t e of
Noah A* J . Achor, f o r ——————————
Charles P. Bennett - - - - - - - Joseph Hamilton - - - - - - - - - - - - -
$100,00
617,40
160.83
which appear to have been returned to you on account of payment being d e c l i n e d in compliance with request dated October 6th from the drawers, who
asked t h a t payment be stopped because the bank in which the checks were dep o s i t e d had become i n s o l v e n t .
The records of t h i s bank show t h a t the p a r t i e s mentioned d e p o s i t e d these checks f o r c r e d i t and had checked a g a i n s t t h e i r balances
before the bank suspended. In a d d i t i o n t h e r e t o each and a l l of the
checks show to be punctured p a i d by the Treasury Department and, r e p l y i n g
to your question in the l a s t paragraph of your l e t t e r s , you are advised
t h a t we take the p o s i t i o n t h a t , based upon a l l the circumstances in the
case, we a r e not in p o s i t i o n to give you a u t h o r i t y to charge the account
of The C i t i z e n s National Bank of Brownwood with the checks. Therefore,
we a r e r e t u r n i n g the checks to you r e q u e s t i n g t h a t they be r e t u r n e d through
the r e g u l a r order with any n o t a t i o n you may deem proper to make.
R e s p e c t f u l l y yours,
Ernest Lamb
(Signed)
National Bank Examiner.
436
Copy
X-7169-f
June 2, 1932.
Mr, J . S. Walden, J r . , Chairman,
Standing Committee on C o l l e c t i o n s ,
Federal Reserve Bank of Richmond,
Richmond, V i r g i n i a .
Dear Mr. Walden:
I have received and g r e a t l y a p p r e c i a t e your kind
l e t t e r of June 1, 1932, regarding the m a t t e r of c a l l i n g a
meeting of Counsel f o r the Federal Reserve Banks with t h e
Standing Committee on C o l l e c t i o n s to consider the m a t t e r of
"cashing" government checks and warrants by Federal Reserve
Banks under the terms of Treasury Department C i r c u l a r No. 176.
I a p p r e c i a t e the d i f f i c u l t i e s of o b t a i n i n g f u l l a t t e n d ance a t a conference of t h i s kind during the summer months, and
I p e r s o n a l l y would p r e f e r to hold the conference in the l a t e
summer or e a r l y f a l l ; but Counsel f o r one of the Federal Reserve
"RariVp has a l r e a d y c a l l e d my a t t e n t i o n to the f a c t t h a t many of the
c o u r t s which take r e c e s s e s during the summer resume t h e i r terms
during the month of September, and t h i s makes the months of
September and October u n u s u a l l y busy months f o r some of t h e
Counsel.
I t Lay be n e c e s s a r y , t h e r e f o r e , t o hold the c o n f e r -
ence not l a t e r than August, in order t o enable Counsel to r e t u r n
home i n time to a t t e n d to t h e i r l i t i g a t i o n .
In the circum-
s t a n c e s , I s h a l l ask Counsel f o r each of the Federal Reserve
Banks to a d v i s e me when i t would be most convenient to him to
X-7169-f
Mr, J . S» Walden, J r .
437
2
a t t e n d such a conference and 1 suggest t h a t you make s i m i l a r
i n q u i r i e s of the members of your Committee and advise me of the
results.
This i s the only way t h a t I know of whereby we can
a r r i v e a t a d a t e convenient to a m a j o r i t y of a l l those concerned.
I wish you would a l s o be giving some thought t o the
question of procedure.
Undoubtedly, i t would be a d v i s a b l e f o r the
Counsel and t h e members of the Standing Committee on C o l l e c t i o n s
to agree upon a d e f i n i t e p o s i t i o n b e f o r e t a k i n g the m a t t e r up with
the o f f i c i a l s of the Treasury Department; but the o f f i c i a l s of
the Treasury Department may d e s i r e to have some time to study the
recommendations of the Counsel and the Standing Committee on
c o l l e c t i o n s b e f o r e they p a r t i c i p a t e in a c o n f e r e n c e .
I t may be
necessary to hold two conferences on the s u b j e c t ; but I t h i n k t h i s
should be avoided i f p o s s i b l e .
I f a second conference i s found to
be a b s o l u t e l y n e c e s s a r y , i t would seem to me t h a t i t need not be
a t t e n d e d by a l l of the Counsel and a l l of the members of the Standing
Committee on C o l l e c t i o n s , but t h a t the views of the Federal Reserve
Banks could be p r e s e n t e d by a small committee appointed f o r t h a t
purpose.
Apparently the Governors' Conference does not d e s i r e
f u r t h e r recommendations to be submitted to them b u t expects the
Counsel and the Standing Committee on C o l l e c t i o n s to take the m a t t e r
up with the o f f i c i a l s of the Treasury Department, agree upon the
necessary changes i n Treasury Department C i r c u l a r 176, and r e p o r t
X-7169-f
Mr. J . S. Walddn,
the r e s u l t s .
tfrs
3
I have no f i x e d views about the m a t t e r , however,
and I s h a l l be very g l a d to receive any suggestions which you or
any of the o t h e r i n t e r e s t e d p a r t i e s may have to o f f e r .
I have received t h e e i g h t copies of the r e p o r t of the
Standing Committee on C o l l e c t i o n s which you sent me and have
obtained one a d d i t i o n a l copy from a member of the Board.
I am,
t h e r e f o r e , sending copies t o Counsel f o r a l l the Federal Reserve
Banks except Chicago and D a l l a s , who I understand from your
l e t t e r a l r e a d y have c o p i e s , and Mr, Wallace, who can o b t a i n a
copy from you.
With k i n d e s t p e r s o n a l regards and a l l b e s t wishes,
I am
Very t r u l y yours,
WW/gc
Walter Wyatt,
General Counsel.
438
4 3 9
.QoftV
X-7169-g
Jede 1-4,1fieserve Bank
Of Richmond,
June 1, 1932.
Uti Walter Wyatt, General Counsel,
f e d e r a l Reserve Board,
Washington, D. C.
Dear Mr. Ifyatt:
Your l e t t e r of May 36th, which was acknowledged by Mr.
Broaddus, was r e c e i v e d during my absence from the bank which accounts
x
f o r my delay in r e p l y i n g .
I can f u l l y a p p r e c i a t e the f a c t t h a t you have been burdened
with important m a t t e r s and t h a t i t has been impossible f o r you to c a l l a
meeting of the counsel f o r the Federal r e s e r v e banks with t h e Standing
Committee on C o l l e c t i o n s to consider the m a t t e r of "cashing" Government
checks and w a r r a n t s by Federal r e s e r v e banks, which was r e f e r r e d to the
counsel by the Governors' Conference of December, 1931. I am sure t h a t the
o f f i c e r s of the Federal r e s e r v e banks a l s o have been burdened with work r e s u l t i n g p r i n c i p a l l y from the o p e r a t i o n s of the Reconstruction Finance Corpor a t i o n , as I know t h i s has been t r u e i n my c a s e .
I t w i l l be agreeable with me to hold a meeting of the counsel
and Standing Committee on C o l l e c t i o n s during the summer a f t e r Congress a d j o u r n s , and I presume t h a t one time w i l l s u i t about a s w e l l a s a n o t h e r . We
a r e almost c e r t a i n , however, to run into v a c a t i o n s and i t i s more than l i k e l y
t h a t some of the members of the Committee, a s w e l l a s c e r t a i n counsel, may
not be able to a t t e n d the meeting u n l e s s they know of i t f a r enough in advance
to arrange t h e i r v a c a t i o n a c c o r d i n g l y . You w i l l r e c a l l t h a t i n the summer of
1930 when the Standing Committee on Collections was c o n s i d e r i n g the s u b j e c t
of a uniform cash c o l l e c t i o n c i r c u l a r in c o n s u l t a t i o n with a s p e c i a l committee
of counsel we experienced a g r e a t d e a l of d i f f i c u l t y i n reaching an agreement
on the f i n a l r e p o r t and I was considerably delayed and inconvenienced because
c e r t a i n of the members p r e s e n t a t our f i r s t meeting s t a r t e d on v a c a t i o n s and
could not be r e a c h e d . While p e r s o n a l l y I am p e r f e c t l y agreeable to holding
the meeting t h i s summer, a s long a s the m a t t e r has a l r e a d y been delayed f o r
q u i t e a while i t might be a d v i a a l k to arrange a meeting during the e a r l y f a l l
a f t e r a l l of the counsel and members of the C o l l e c t i o n Committee have r e t u r n e d
from v a c a t i o n .
I t occurs to me t h a t your work w i l l be made very much e a s i e r
and you w i l l not be s u b j e c t e d to the s t r a i n t h a t w i l l almost c e r t a i n l y r e s u l t
i f you attempt to have a n agreement reached b e f o r e the summer i s o v e r . I
w i l l be very glad to communicate with the o t h e r members of the Standing Committee
on C o l l e c t i o n s a s soon a s you l e t me know i f you d e s i r e to have the meeting
during the summer months.
I am sending you under separate cover e i g h t copies of the r e p o r t
of the Standing Committee on C o l l e c t i o n s to the f a l l 1931 Conference of Governor?,,
The t o p i c under c o n s i d e r a t i o n i s t r e a t e d a t the beginning of the r e p o r t . Ifor
4 4 0
X-7169-g
Mr, Walter Wyatt> Geharal Cotinsdi»
Federal Heserve BoArd,
Washington; Dt Ci
« &
4
June 1, 1932
supply of e x t r a copies has been e n t i r e l y exhausted.and I am sorry t h a t I
am not able to send you the number r e queste d. When the r e p o r t was f i n i s h e d
i n August, 1931, I sent a copy to the Governor of each Federal Reserve Bank
with a l e t t e r d a t e d August 13th, and I a l s o sent an e x t r a copy to the
Federal Be serve Banks of Chicago, and Dallas f o r the use of t h e i r c o u n s e l .
I a l s o sent a s e p a r a t e copy to each member of the Standing Committee on
C o l l e c t i o n s , r e p r e s e n t i n g the Federal Reserve Banks of New York, P h i l a d e l p h i a , Cleveland, Richmond and S t . Louis. There a r e , t h e r e f o r e , seven
banks which should have a t l e a s t two copies of the r e p o r t in t h e i r f i l e s .
I t does not seem to me t h a t i t w i l l be necessary f o r you to send a copy to
those banks r e p r e s e n t e d on the c o l l e c t i o n committee since I am sure t h a t
the committee members can l e t t h e i r counsel have t h e i r c o p i e s . I a l s o sent
on August 12th seven copies to Mr* McClelland f o r the use of members of the
Federal Reserve Board and i t i s probable t h a t you w i l l f i n d some of these
in the f i l e s of the Board. When the conference met the f i r s t of December,
1931, I sent to Mr. S t r a t e r , c/o Federal Reserve Board, twelve copies f o r
the use of the Governors a t t e n d i n g the Governors' Conference. I t i s probable
t h a t some of these were l e f t i n the conference room and no doubt you w i l l
be able to g e t t o g e t h e r a s u f f i c i e n t number of copies to supply the counsel.
Awaiting your f u r t h e r a d v i c e s , I am with h i g h e s t p e r s o n a l
regards,
Cordially yours,
(Signed) J . S. Walden, J r . ,
Controller.
JSW:D
*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7171
June 2, 1932.
SUBJECT: Administration of Section 17(b) of
Regulation D.
Dear S i r ;
There i s a t t a c h e d h e r e t o , f o r your i n f o r m a t i o n , copy
of a l e t t e r addressed to the Federal Reserve Agent a t P h i l a d e l p h i a i n response to an i n q u i r y received from him with r e gard to t h e a d m i n i s t r a t i o n of Section IV(h) of Regulation D
which provides t h a t , whenever i t appears t h a t a member "bank
i s not paying due regard t o t h e maintenance of i t s r e s e r v e s ,
t h e Federal r e s e r v e agent w i l l address a l e t t e r to each
d i r e c t o r of the hank c a l l i n g h i s a t t e n t i o n to the s i t u a t i o n .
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
In.ilo"»ure.
TO ALL F. R. AGENTS EXCEPT PHILADELPHIA AND CLEVELAND.
4 4 2
X-7171-a
May 31, 1932.
Mr. R.
Austin,
Federal Reserve Agent,
Federal Reserve Bank of P h i l a d e l p h i a ,
P h i l a d e l p h i a , Pennsylvania.
Dear Mr. Austin:
The Federal Reserve Board has received your l e t t e r of May
17, 1932, s t a t i n g t h a t a number of member banks in your d i s t r i c t ,
because of an u n l i q u i d c o n d i t i o n and continued l o s s of d e p o s i t s ,
have been unable to maintain t h e i r r e s e r v e s , and i n q u i r i n g whether,
in view of the circumstances involved, the Federal Reserve Board
w i l l r e q u i r e a s t r i c t compliance by you with s e c t i o n IV(b) of
Regulation D with regard to addressing l e t t e r s to the d i r e c t o r s
of banks with d e f i c i e n t r e s e r v e s .
The purpose sought t o be accomplished by the subsection r e f e r r e d to i s to b r i n g to the a t t e n t i o n of the i n d i v i d u a l d i r e c t o r s
t h e f a c t t h a t the member bank i s not maintaining i t s r e s e r v e s , in
order t h a t the d i r e c t o r s may take the proper steps to see t h a t the
bank meets the requirements of the law in the f u t u r e .
It is
r e a l i z e d , however, t h a t there may be i n s t a n c e s in which i t i s
apparent from the Federal r e s e r v e a g e n t ' s contact with the bank,
or from o t h e r a v a i l a b l e information, t h a t the f a i l u r e of t h e member
bank to maintain i t s r e s e r v e s i s due to i t s u n s a t i s f a c t o r y c ondition
r a t h e r than any d i s r e g a r d on the p a r t of the management f o r t h e r e quirements of t h e law, or t h a t other reasons e x i s t which would make
4 4 3
X-7171-a
-2-
i t u n d e s i r a b l e t o w r i t e the d i r e c t o r s concerning the m a t t e r , and t h a t in
these cases such l e t t e r s , r a t h e r than accomplishing the d e s i r e d purpose,
might have an adverse e f f e c t .
I t was f o r t h i s reason t h a t , as s t a t e d in the Board's l e t t e r of
January 18, 1928, (X-5039). the subsection was purposely phrased in such
a way a s to permit some f l e x i b i l i t y and to a f f o r d t h e Federal r e s e r v e
agent an o p p o r t u n i t y , a f t e r d i s c u s s i o n with the chief n a t i o n a l bank examiner i n the c a s e of a n a t i o n a l bank and with t h e S t a t e bank supervisor
in the case of a S t a t e member bank, to e x e r c i s e a reasonable d i s c r e t i o n
in i t s a d m i n i s t r a t i o n .
Therefore, in each case where there a r e i n d i -
c a t i o n s t h a t t h e bank i s not paying due regard to the maintenance of
i t s r e s e r v e s , you should give c a r e f u l c o n s i d e r a t i o n to a l l the circumstances involved and consult with the chief n a t i o n a l bank examiner or
the S t a t e bank s u p e r v i s o r i n order to determine, in the e x e r c i s e of a
reasonable d i s c r e t i o n , whether i t i s advisable to w r i t e to the d i r e c t o r s .
In those cases where i t becomes necessary f o r you to report to
t h e Board, in accordance with s e c t i o n 17(d) of Regulation D, d e f i c i e n c i e s in r e s e r v e s f o r a period of s i x consecutive months, i t i s requested
t h a t you include in your r e p o r t f u l l information as to the c o n s i d e r a t i o n
which has been given to the matter of w r i t i n g the d i r e c t o r s of the
4 4 4
X-7171-a
-3-
member bank, and, where such l e t t e r s have not been s e n t , the reasons
therefor.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
>
4 4 5
COPY
X-7172
IN THE ETIRA&D
COURT OF APPEALS.
OCTOBER TEEM, 1931.
Massey-Harris Harvester Company, I n c . , a C o r p o r a t i o n ,
Respondent,
vs.
Wo. 1 7 X 3 4 ,
Federal Reserve Bank of
Kansas C i t y ,
Appellant,
Appeal from Jackson C i r c u i t Court
P l a i n t i f f "brought s u i t seeking damages f o r l o s s a l l e g e d
t o have "been s u s t a i n e d through the a c t of the defendant i n t h e m a t t e r of
c o l l e c t i n g a c a s h i e r ' s check f o r $3180 payable t o p l a i n t i f f and i s s u e d
"by the F i r s t S t a t e Bank of Cunningham, Kansas.
A j u r y was waived, and
t h e cause was t r i e d "by t h e c o u r t , r e s u l t i n g i n t h e c o u r t ' s f i n d i n g i n
f a v o r of t h e Union Avenue Bank of Commerce and a g a i n s t the p l a i n t i f f ,
and i n f a v o r of t h e p l a i n t i f f a g a i n s t t h e d e f e n d a n t , F e d e r a l Reserve
Bank of Kansas C i t y .
From t h i s judgment t h e s a i d defendant F e d e r a l
Reserve Bank has a p p e a l e d .
The p e t i t i o n a l l e g e d , among other t h i n g s , t h a t on or about
August 22nd, 1925, p l a i n t i f f was t h e owner of a c o l l e c t i o n account with
t h e d e f e n d a n t , Union Avenue Bank of Commerce, and on s a i d d a t e p l a i n t i f f
d e p o s i t e d w i t h s a i d "bank f o r c o l l e c t i o n a c a s h i e r ' s check f o r $3180
i s s u e d "by t h e F i r s t S t a t e Bank of Cunningham, Kansas, drawn on i t s e l f ,
dated August 21, 1925, and payable t o p l a i n t i f f ; t h a t a t t h e time of
X-7172
M 6
-ksuch d e p o s i t , p l a i n t i f f endorsed said check "Pay t o the order of Union
Avenue Bank of Commerce, Kansas City, Missouri"; t h a t the amount of s a i d
check was thereupon c r e d i t e d to p l a i n t i f f ' s account; t h a t on or about
t h e 22nd day of August, 1925, t h e Union Avenue Bank endorsed and d e l i v e r e d
s a i d check t o Commerce Trust Cotopany f o r transmission through the Kansas
City Clearing House and t o "be d e l i v e r e d t o t h e defendant f o r c o l l e c t i o n ;
t h a t on August 22nd, 1925, t h e Commerce Trust Company endorsed and del i v e r e d s a i d c a s h i e r ' s check to the defendant Federal Reserve Bank of
Kansas City, f o r c o l l e c t i o n ; t h a t on or about August; 25, 1925, defendant
endorsed s a i d c a s h i e r 1 s check tin the hack as f o l l o w s :
"Pay t o t h e order
of any hank or hanker or t r u s t company, p r i o r endorsement guaranteed,
August 25, 1925, Federal Reserve Bank of Kansas ", and"thereupon c a r e l e s s l y and n e g l i g e n t l y forwarded the same
d i r e c t to t h e F i r s t S t a t e Bank of Cunningham, Kansas
f o r c o l l e c t i o n and payment, upon r e c e i p t of which s a i d
hank stamped s a i d check p a i d and issued i t s d r a f t i n
payment t h e r e f o r drawn on the Federal Trust Company of
Kansas C i t y , Missouri, and forwarded the same t o the
defendant Federal Reserve Bank of Kansas C i t y , Missouri.
"That t h e r e a f t e r , and on or ah out August 30, 1925,
t h e defendant Federal Reserve Bank of Kansas City c a r e l e s s l y and n e g l i g e n t l y accepted said d r a f t from t h e F i r s t
S t a t e Bank of Cunningham, Kansas, i n payment of s a i d cashi e r ' s check, s a i d d r a f t "being i n the sum of $8262.28 and
included o t h e r items; t h a t s a i d d r a f t on t h e F e d e r a l Trust
Company was p r o t e s t e d f o r non-payment, as t h i s p l a i n t i f f
i s advised and informed, on or ahout August 31, 1925.
"That i n the c o l l e c t i o n of s a i d c a s h i e r ' s check
the defendant Union Avenue Bank of Commerce, through i t s
agent t h e Commerce Trust Company of Kansas C i t y , appointed
defendant F e d e r a l Reserve Bank of Kansas City a s agent f o r
the c o l l e c t i o n of s a i d c a s h i e r ' s check; t h a t said defenda n t s had no a u t h o r i t y from t h i s p l a i n t i f f t o send s a i d check
d i r e c t t o t h e F i r s t S t a t e Bank of Cunningham f o r
c o l l e c t i o n or t o accept from the F i r s t S t a t e Bank of Cunningham* t h e drawer t h e r e o f , a d r a f t on t h e Federal Trust
Company of Kansas City or anything e l s e except l a w f u l
money of t h e United S t a t e s l a payment t h e r e o f } t h a t i t
was t h e duty of s a i d defendants i n c o l l e c t i n g s a i d cash-
X-7172447
i e r ' s check t o r e c e i v e and accept from the Firfeti itatei
Bank of Cunningham, Kansas, only l a w f u l money of t h e
United S t a t e s i n payment thereof and i n sending s a i d cashi e r ' s check d i r e c t to s a i d F i r s t S t a t e Bank of Cunningham
f o r c o l l e c t i o n and i n a c c e p t i n g s a i d d r a f t i n payment
thereof defendants acted i n a c a r e l e s s and negligent manner and f a i l e d t o use due d i l i g e n c e i n the c o l l e c t i o n of
s a i d check. That s a i d check was not r e t u r n e d to t h i s
p l a i n t i f f "by t h e d e f e n d a n t s .
"That on or about the 8th day of September, 1925, t h e
F i r s t S t a t e Bank of Cunningham, Kansas, f a i l e d and the "banking
commissioner of Kansas took charge of s a i d bank.
"That a t a l l times from August 21, 1925, t o September
3 r d , 1925, s a i d F i r s t S t a t e Bank of Cunningham, Kansas, had
money and a v a i l a b l e cash items on hand s u f f i c i e n t ' t o pay
s a i d c a s h i e r 1 s check of $3180.007 and t h e defendants by t h e
e x e r c i s e of due d i l i g e n c e could have c o l l e c t e d the same i n
cash.
"That on or about t h e 8th day of September, 1925,
the defendant Union Avenue Bank of Commerce n o t i f i e d t h i s p l a i n t i f f t h a t s a i d c a s h i e r ' s check had been dishonored and t h a t
the amount thereof had been charged back on t h i s p l a i n t i f f ' s
account.
"That on August 3 1 s t , 1925, p l a i n t i f f demanded from the
defendants the payment of s a i d $3180.00.
"That by reason of the premises the p l a i n t i f f has
been damaged i n t h e sum of $3180.00.
"Wherefore, the p l a i n t i f f prays judgment, e t c . "
To t h i s p e t i t i o n , the defendant o f f e r e d a g e n e r a l demurrer,
i . e . , t h a t "the p e t i t i o n does not s t a t e f a c t s s u f f i c i e n t to c o n s t i t u t e
a cause of a c t i o n . "
The demurrer being overruled, t h e defendant f i l e d
answer which, among o t h e r t h i n g s , s e t up "2. This defendant admits and a v e r s t h a t upon or
about August 25, 1925, i t r e c e i v e d from t h e Commerce
Trust Company of Kansas City the check mentioned i n
p l a i n t i f f ' s p e t i t i o n , and t h a t thereupon i t forwarded
t h e same t o t h e F i r s t S t a t e Bank of Cunningham, Kansas,
f o r c o l l e c t i o n and r e m i t t a n c e ; t h a t on or about August
30, 1925, t h i s defendant r e c e i v e d from t h e s a i d F i r s t
S t a t e Bank of Cunningham, Kansas, i t s d r a f t f o r t h e sum
of eight thousand two hundred sixty-two d o l l a r s and
X-7172
twenty-eight cents ($8*262*28)i dz'avm on the Federal
Trust Company of Kansas C i t y , which s a i d d r a f t was not
p a i d by s a i d f e d e r a l Trust Company and was p r o t e s t e d f o r
non-payment.
"3. This defendant denies each and every o t h e r
a l l e g a t i o n i n s a i d p e t i t i o n contained.
"4. For f u r t h e r answer defendant s t a t e s t h a t the
n a t u r e and conduct of i t s b u s i n e s s , and the extent of
i t s powers and l i a b i l i t i e s , are f i x e d , determined and
l i m i t e d by an Act of Congress, known as the Federal Reserve Act, and t h a t i t s business i s conducted under the
c o n t r o l and supervision of the Federal Reserve Board, and
t h a t i t o p e r a t e s under r u l e s and r e g u l a t i o n s adopted by
s a i d Federal Reserve Board pursuant to a u t h o r i t y v e s t e d in
s a i d Board by s a i d Act of Congress, and under r u l e s and
r e g u l a t i o n s adopted by i t s e l f pursuant to a u t h o r i t y v e s t e d
i n i t by s a i d Federal Reserve Act a f o r e s a i d , and the
a f o r e s a i d r u l e s and r e g u l a t i o n s of s a i d Federal Reserve Board.
"5. That i n r e c e i v i n g s a i d check a s a f o r e s a i d from s a i d
Commerce Trust Company of Kansas City, a s a l l e g e d i n
p l a i n t i f f ' s p e t i t i o n , t h i s defendant did so, and accepted
s a i d check a s the agent of s a i d Commerce Trust Company
pursuant to the p r o v i s i o n s of the a f o r e s a i d r e g u l a t i o n s
of t h e Federal Reserve Board and i t s own r u l e s and r e g u l a t i o n s ; t h a t i n due course of busine ss and without any
negligence or d e f a u l t on i t s p a r t , but i n accordance w i t h
the a f o r e s a i d r u l e s and r e g u l a t i o n s a u t h o r i z e d by law,
i t promptly forwarded s a i d c a s h i e r ' s check to the s a i d F i r s t
S,tate Bank of Cunningham f o r c o l l e c t i o n and r e m i t t a n c e ; t h a t
s a i d F i r s t S t a t e Bank of Cunningham thereupon became,
and ever t h e r e a f t e r continued an agent to c o l l e c t s a i d check
from i t s e l f and remit the proceeds thereof to t h i s defendant,
and i f s a i d F i r s t S t a t e Bank of Cunningham f a i l e d so to do,
i t was not due to the f a u l t or negligence of t h i s answering
d e f e n d a n t , b u t to i t s own f a u l t and negligence a s an agent
f o r c o l l e c t i o n and r e s p o n s i b l e f o r i t s own d e f a u l t s and negligence.
"6. That pursuant to a u t h o r i t y c o n f e r r e d on i t
by s a i d Federal Reserve Act a s a f o r e s a i d , said Federal Reserve Board on or about August 15, 1924, promulgated and made
e f f e c t i v e Regulation J , S e r i e s of 1924, which was i n f u l l f o r c e
and e f f e c t a t the time of the t r a n s a c t i o n s and the happening of
the events a l l e g e d in p l a i n t i f f ' s p e t i t i o n , the p e r t i n e n t p r o v i s i o n s of which s a i d r e g u l a t i o n a r e a s f o l l o w s ,
to-wit:
" * ( l ) A Federal reserve bank w i l l a c t only a s
agent of the bank from which i t r e c e i v e s such checks
X-7172
4 4 9
a M W i l l aisume ho l i a b i l i t y except f o r i t s own negl i g e n c e arid i t s guaranty of p r i o r indorsements.
" ' ( 2 ) A Federal r e s e r v e t a n k may p r e s e n t such
checks f o r payment or send such checks f o r c o l l e c t i o n
d i r e c t t o t h e bank on which they a r e drawn or a t which
they a r e p a y a b l e , or i n i t s d i s c r e t i o n may forward
them to another agent with a u t h o r i t y to p r e s e n t them
f o r payment or send them f o r c o l l e c t i o n d i r e c t t o the
bank on which they a r e drawn or a t which they a r e
payable.
11
' ( 3 ) A Federal r e s e r v e bank may i n i t s d i s c r e t i o n and a t i t s o p t i o n , e i t h e r d i r e c t l y or through
an a g e n t , accept e i t h e r cash or bank d r a f t s i n payment
of or i n r e m i t t a n c e f o r such checks and s h a l l not be
held l i a b l e f o r any l o s s r e s u l t i n g from the acceptance
of bank d r a f t s i n l i e u of cash, nor f o r the f a i l u r e of
t h e drawee bank or any agent t o remit f o r such checks,
nor f o r the non-payment of any bank d r a f t accepted i n
payment or a s a remittance from the drawee bank or any
agent.
" ' ( 4 ) Checks received by a Federal r e s e r v e bank
on i t s member or non-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 t o such banks,
and such banks w i l l be r e q u i r e d t o remit or pay t h e r e f o r
a t par i n cash or bank d r a f t s acceptable to t h e c o l l e c t i n g F e d e r a l r e s e r v e bank, or a t the option of such
Federal r e s e r v e bank t o a u t h o r i z e such Federal r e s e r v e
bank t o charge t h e i r r e s e r v e accounts or c l e a r i n g a c counts; p r o v i d e d , however, t h a t any Federal r e s e r v e bank
may r e s e r v e the r i g h t i n i t s check c o l l e c t i o n c i r c u l a r
t o charge such items t o the r e s e r v e account or c l e a r i n g
account of any such bank a t any time when i n any p a r t i c u l a r case t h e Federal r e s e r v e bank deems i t necessary
t o do s o . ' "
The f u r t h e r a l l e g a t i o n s i n d e f e n d a n t ' s answer need not be
s t a t e d , s i n c e they r e l a t e t o m a t t e r s of estoppel which axe not re^
f e r r e d t o i n the b r i e f s and hence need not be n o t i c e d .
P l a i n t i f f ' s reply denied -
" a l l and s i n g u l a r t h e a l l e g a t i o n s contained i n p a r a graphs 4 , 5, 6, 7 and 8 of s a i d answer and amendment,
and f u r t h e r answering t h i s p l a i n t i f f a l l e g e s t h a t t h e
a l l e g a t i o n s contained i n s a i d paragraphs of s a i d answer
and amendment do not s e t out f a c t s s u f f i c i e n t t'o cons t i t u t e any defense t o p l a i n t i f f ' s cause of a c t i o n . "
X-7172
^6-
At
the t r i a l
,
a s t i p u l a t i o n or an agreed statement of
f a c t s was introduced "by p l a i n t i f f as f o l l o w s :
" I t i s hereby s t i p u l a t e d and agreed "by and
between t h e p l a i n t i f f and defendants t h a t the f o l l o w i n g a r e f a c t s i n t h i s case, but the i n t r o d u c t i o n
of the same or amy p a r t thereof s h a l l be s u b j e c t to
such a b j e c t i o n s t h a t may be o f f e r e d t h a t the same or
any p a r t thereof a r e not competent, r e l e v a n t or
m a t e r i a l , . a n d i t i s a l s o understood t h a t e i t h e r p a r t y
may i n t r o d u c e evidence to e s t a b l i s h a d d i t i o n a l f a c t s
i n t h e c a s e . This s t i p u l a t i o n i s not to be construed
a s i n c l u d i n g a l l the f a c t s i n the c a s e :
"1. The p l a i n t i f f , Massey-Harris Harvester Company, i s a c o r p o r a t i o n incorporated under t h e laws of
Hew York w i t h i t s p r i n c i p a l p l a c e of b u s i n e s s a t
B a t a v i a i n s a i d s t a t e and a branch house i n Kansas
C i t y , Missouri.
"2. The defendant Union Avenue Bank of Commerce
i s a banking corporation incorporated under the laws
of Missouri with i t s p l a c e of business i n Kansas City,
Missouri.
"3. The defendant Federal Reserve Bank of Kansas
City i s a banking c o r p o r a t i o n organized and e x i s t i n g
under t h e Act of Congress, known as Federal Reserve Act,
w i t h i t s p r i n c i p a l p l a c e of business i n Kansas C i t y ,
Missouri.
"4. At the times h e r e i n a f t e r mentioned t h e p l a i n t i f f was t h e owner of an account with the defendant Union
Avenue Bank of Commerce.
«5. That on or about the 22nd day of August, 1925,
p l a i n t i f f deposited with s a i d defendant Union Avenue Bank
of Commerce f o r c o l l e c t i o n a c e r t a i n c a s h i e r ' s check f o r
$3180.00, i s s u e d by the F i r s t S t a t e Bank of Cunningham,
Kansas, drawn on i t s e l f , dated August 2 1 s t , 1925, and paya b l e t o t h e p l a i n t i f f , which check was i n words and f i g u r e s
as follows:
•The F i r s t S t a t e Bank
Cunningham, Kansas
Pay t o Massey-Harris Harv.
Thirty-One Hundred
C a s h i e r ' s check
83-1415
No. 839
8-21-1925
Co.
$3180.00
EightyDollars
H. D. Doty, C a s h i e r . '
"6. That a t t h e time of t h e deposit of s a i d cashi e r ' s check with s a i d defendant Union Avenue Bank of
Commerce p l a i n t i f f endorsed the same on the back thereof
4 5 0
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"
as follows > "Pay to th6 birder of Union Avenue Bank of
Contaefrce, K&nsas C i t y , Missouri.
Massey-Harris Harvester Co., I n c . ,
John Sugg, Manager 1 .
and. a t t h e t i n e used a deposit s l i p which had p r i n t e d
thereon the following a f t e r t h e name of the d e p o s i t o r
and d a t e of d e p o s i t . 'Depositor by u s i n g t h i s s l i p a g r e e s :
That a l l items nay "be handled under e x i s t i n g or f u t u r e
r e g u l a t i o n s of Kansas City Clearing House A s s o c i a t i o n
and/or Federal Reserve Bank of Kansas C i t y ; t h a t items on
t h i s bank may be charged back on d a t e of d e p o s i t and
items r e t u r n e d ; t h a t items not on t h i s bank r e c e i v e d f o r
c o l l e c t i o n or c r e d i t a r e a t d e p o s i t o r ' s r i s k and not subj e c t t o check u n t i l a c t u a l payment t h e r e f o r i s r e c e i v e d ;
t h a t t h i s bank as agent or owner i s not l i a b l e f o r n e g l e c t ,
d e f a u l t or f a i l u r e of banks s e l e c t e d as agents or subagents,
or f o r l o s s e s i n t r a n s i t ; t h a t should any item be not p a i d ,
or any bank f a i l to remit proceeds or i s s u e paper t h e r e f o r
which i s dishonored, any c r e d i t given may be c a n c e l l e d and
t h i s bank have no f u r t h e r duty a s t o such item or p a p e r ;
t h a t items on other banks i n t h i s c i t y or Kansas C i t y ,
Kansas, may be c a r r i e d over f o r p r e s e n t a t i o n through c l e a r ing house or otherwise on b u s i n e s s day f o l l o w i n g d a t e of
d e p o s i t ; and t h a t items may be sent d i r e c t t o banks on
which drawn without waiving any of t h e above c o n d i t i o n s . •
That the defendant Federal Reserve Bank of Kansas C i t y had
no n o t i c e or knowledge of t h e a f o r e s a i d terms under which
s a i d c a s h i e r ' s check was so deposited with defendant Union
Avenue Bank of Commerce and no n o t i c e t h a t i t was deposited
f o r c o l l e c t i o n except such n o t i c e , i f any, as may h a r e been
imparted by t h e endorsements on said check or s a i d check
itself.
"7. That the amount of s a i d c a s h i e r ' s check on the
d a t e of d e p o s i t was c r e d i t e d t o p l a i n t i f f ' s s a i d account.
"8. That on or about the 22nd day of August, 1925,
defendant Union Avenue Bank of Commerce endorsed said
c a s h i e r ' s check on t h e back thereof as f o l l o w s : "Pay any
bank or banker, previous endorsements guaranteed, August
22, 1925, Union Avenue Bank of Commerce, Kansas C i t y ,
M i s s o u r i , ' and deposited t h e same to i t s c r e d i t i n t h e
Commerce Trust Company of Kansas City, Missouri f o r c o l lection.
"9. The Commerce Trust Company on August 22nd, 1925,
endorsed s a i d c a s h i e r ' s check a s f o l l o w s : 'Pay any bank
or banker or o r d e r , Commerce Trust Company, a l l p r e v i o u s
endorsements guaranteed, August 22, 1925, Kansas C i t y , Miss o u r i , E. P. Wheat, Cashier, Cash C o l l . ' , and d e l i v e r e d t h e
same to defendant Federal Reserve Bank of Kansas C i t y , f o r
collection.
"10. That on August 25, 1925, defendant Federal
Reserve Bank of Kansas City endorsed s a i d c a s h i e r ' s check
451
X-7172
-
4
5
t
a s f o l l o w s : 'Pay tb
d r o e r . o i any b a n t , banker or t r u s t
company p r i o r endorsements guaranteed, August 25, 1925,
Federal Reserve Bank of Kansas C i t y ' , and thereupon i t
forwarded t h e same t o t h e F i r s t S t a t e Bank of Cunningham,
Kansas, f o r c o l l e c t i o n and r e m i t t a n c e .
*11. That on r e c e i p t of said c a s h i e r ' s check s a i d
F i r s t S t a t e Bank of Cunningham, Kansas, and on August 28,
1925, stamped the same paid and issued i t s d r a f t f o r e i g h t
thousand two hundred sixty-two d o l l a r s and twenty-eight
cents ($8,262.28) drawn on Federal Trust Company of Kansas
C i t y , Missouri, which included t h e amount thereof and f o r
other items and sent the same to defendant F e d e r a l Reserve
Bank of Kansas City, which was received by s a i d l a s t named
defendant on or about August 3 1 s t , 1925. That on or about
s a i d August 3 1 s t , 1925, defendant Federal Reserve Bank of
Kansas City p r e s e n t e d s a i d d r a f t to Federal Trust Company
and demanded payment, and payment thereof was r e f u s e d by
F e d e r a l Trust Company and t h e same was p r o t e s t e d f o r nonpayment and t h e same has never been p a i d . The c a s h i e r ' s check
was never returned by t h e defendants to the p l a i n t i f f .
"12. That the F i r s t S t a t e Bank of Cunningham, Kansas,
continued to carry on i t s banking busine ss i n t h e u s u a l and
r e g u l a r way u n t i l i t f a i l e d on September 8 t h , 1925, and
the S t a t e Banking Commissioner took charge thereof and t h a t
p l a i n t i f f has received nothing on account of s a i d c a s h i e r ' s
check, except two dividends received from t h e r e c e i v e r , v i z . :
March 2nd, 1928, nine hundred and f i f t y - f o u r d o l l a r s ($954.00)
and September 10th, 1928, t h r e e hundred e i g h t y - n i n e d o l l a r s
and f i f t y - f i v e cents ($389.55).
"13. That on or about August 1, 1924, the Federal
Reserve Board pursuant t o t h e a f o r e s a i d Federal Reserve Act,
adopted and promulgated r e g u l a t i o n s known a s 'Regulations
S e r i e s 1924' a copy of which i s h e r e t o a t t a c h e d , marked Exh i b i t ' A ' , and hereby made a p a r t hereof with l i k e e f f e c t
a s i f a l l of the terms of t h e same were f u l l y w r i t t e n out
h e r e i n ; t h a t e i t h e r p a r t y t o t h i s s t i p u l a t i o n may, s u b j e c t
to o b j e c t i o n s as h e r e t o f o r e s t a t e d , read such p o r t i o n s of
s a i d r e g u l a t i o n s as they may determine and the p o r t i o n s so
r e a d b e f o r e t h e court s h a l l c o n s t i t u t e the record of t h e
contents of s a i d r e g u l a t i o n s f o r purpose of t h e t r i a l of
t h i s case without the remaining p o r t i o n s thereof being cons i d e r e d as a p a r t of t h e testimony t h e r e i n ; t h a t on or about
J u l y 21, 1924, t h e Federal Reserve Bank of Kansas City i s sued i t s 'General L e t t e r D1' a s of t h a t d a t e , addressed, t o
the member banks of d i s t r i c t t e n and headed 'Check C o l l e c t i o n
O p e r a t i o n s ' , which s a i d l e t t e r was so i s s u e d with t h e consent
and approval of the Federal Reserve Board and was mailed t o
t h e member banks of d i s t r i c t t e n and heaided 'Check C o l l e c t i o n
O p e r a t i o n s ' , which s a i d l e t t e r was so i s s u e d w i t h t h e consent
and approval of t h e Federal Reserve Board and was mailed t o
3
»9-
X-7172
the member "banks of the Jediipal Reserve Bank of Kansas City
i n c l u d i n g the Cbmmerce Ti*dst -Conrpany of Kansas City, from
which the chedk i n question was received by s a i d Federal
Reserve Sank, copy of which said g e n e r a l l e t t e r i s h e r e t o a t tached marked Exhibit 'B' and i s hereby made a p a r t hereof
with l i k e e f f e c t a s i f i t s terms were f u l l y s e t out herewith,
"14. The f o l l o w i n g i s a copy of the cash l e t t e r dated
A u g . ,
1925, from Federal Reserve Bank, t r a n s m i t t i n g
s a i d c a s h i e r ' s check to the F i r s t S t a t e Bank of Cunningham
f o r c o l l e c t i o n , marked Exhibit ' C ' .
"15*
T r i a l by j u r y i s hereby waived."
The evidence, a s d i s c l o s e d by the record, shows t h a t from
August 21, 1925, to September 23, 1925, the F i r s t S t a t e Bank of Cunningham, Kansas, bad i n cash, and due to i t from other banks, a sum
i n excess of the amount of the d r a f t which i t s e n t to the defendant
about August 30, 1925, but d i d not a t any of s a i d times have on deposit
w i t h the Federal Trust Company an amount s u f f i c i e n t to pay ths I r a f t .
The d e f e n d a n t ' s evidence was t h a t when the c a s h i e r ' s
check was dishonored the Commerce Trust Company immediately cal led
the r e p r e s e n t a t i v e of the Union Avenue Bank of Commerce and a d v i s e d him
of the s i t u a t i o n ; t h a t said r e p r e s e n t a t i v e looked i n t o the m a t t e r , t r a c e d the
item to p l a i n t i f f and immediately c a l l e d p l a i n t i f f ; t h a t the form of
d e p o s i t s l i p was the one r e g u l a r l y in use a t s a i d Union Avenue Bank of
Commerce; t h a t t h e r e was no agreement w i t h customers except the r e c i t a t i o n s contained on the d e p o s i t s l i p ; t h a t the Union Avenue Bank of
Commerce i s a member of the Kansas City Clearing House A s s o c i a t i o n , but
i s not a member of the Federal Reserve System.
Defendant introduced Regulation J of the Rules and Regulat i o n s adopted f o r , and used by, Federal Reserve Banks, and a g e n e r a l
l e t t e r from the F e d e r a l Reserve Bank showing the manner and method of
454
-liN
X-7173
handling items f o r c o l l e c t i o n , the p e r t i n e n t p a r t s of which, i f necessary,
w i l l be mentioned i n the course of the opinion.
The d e f e n d a n t ' s a s s i s t a n t c a s h i e r t e s t i f i e d t h a t the
general l e t t e r and Regulation J were in f o r c e throughout the y e a r 1925;
t h a t the F i r s t S t a t e Bank of Cunningham was not a member of the Federal
He serve Bank of Kansas City but was a bank from which defendant c o l l e c t e d checks; t h a t i t has been the custom f o r many years when checks
of any nature were received f o r c o l l e c t i o n to send the same to the
bank on which they a r e drawn or another agent in the same town, and
accept in payment a d r a f t e i t h e r on Kansas City or some o t h e r reserve
c i t y ; t h a t r e m i t t a n c e s were seldom made in cash; t h a t the c a s h i e r ' s
ohedk f o r $3180.00 was received by defendant f o r c o l l e c t i o n on August
25; t h a t defendant did not receive the item from the Commerce Trust
Company but d i d receive i t from d e f e n d a n t ' s Oklahoma City branch; t h a t
f o u r days are r e q u i r e d t o c o l l e c t items a t Cunningham, which i s the
s h o r t e s t p o s s i b l e schedule; t h a t defendant received a d r a f t from the
Cunningham Bank which included the item in question and endeavored to
c o l l e c t the d r a f t from August 31 u n t i l about the 2nd or 3rd of Septemb e r , when the Cunningham Bank closed; t h a t when the d r a f t was dishonored defendant n o t i f i e d the Cunningham Bank and requested t h a t i t
deposit s u f f i c i e n t funds with the Federal Trust Company to cover the
d r a f t ; t h a t such request was by 'phone and by wire; t h a t the d r a f t was
presented d a i l y , sometimes two or three times a day, to the Federal
Trust Company; t h a t he never made demand of the Cunningham Bank f o r
the cash; t h a t a t the time the $3180,00 check was sent to Cunningham,
Kansas, o t h e r items were included, the t o t a l of which i s $8564.78, a l l
4 5 5
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X-7172
of which were drawn upon or payable by the Cunningham Bank; t h a t a
record of the s a i d o t h e r items was not kept by defendant; t h a t i t was
the custom t o send an item f o r c o l l e c t i o n d i r e c t to the d e b t o r ; t h a t
he considered the r e g u l a t i o n covered t h a t s u b j e c t .
Several o t h e r w i t -
n e s s e s t e s t i f i e d t h a t i t was the custom in banking c i r c l e s to send
checks d i r e c t to a bank owing the same and to not demand a remittance
i n cash.
The f i r s t question to be decided i s whether the court erred
in o v e r r u l i n g d e f e n d a n t ' s demurrer the ground of which was, and i s ,
t h a t the p e t i t i o n wholly f a i l s to s t a t e any cause of a c t i o n .
I f the p e t i -
t i o n i s j u s t l y open to t h a t charge, then the d e f e c t i s not one which
i s waived by answering over, a s p l a i n t i f f so e a r n e s t l y contends.
Such
d e f e c t i n a p e t i t i o n i s one t h a t follows i t throughout the c a s e , even
a f t e r v e r d i c t and on up i n t o the a p p e l l a t e court where i t can s t i l l be
a s s e r t e d with f o r c e and e f f e c t , and t h a t too even though no demurrer
has been f i l e d .
Hoffman v . McCracken, 158 Mo. 337; Welch v . Diehle
E s t a t e , 278 S.W. 1057.
I f n e i t h e r p a r t y r a i s e s the p o i n t , i t i s the
duty of the a p p e l l a t e court to r a i s e i t sua Bronte.
Greer, Admr. v*
S t . Louis I r o n Mountain e t c . B. Co., 173 Mo. App, 276,
And i f the
p e t i t i o n i s i n such c o n d i t i o n , the court cannot look to averments in
the answer to determine i t s s u f f i c i e n c y ; the p e t i t i o n must stand on
i t s own f o o t , and i t s s u f f i c i e n c y be determined by i t s own averments.
Linn County Bank v . Mary L, C l i f t o n , 263 Mo. 200.
I t may, p e r h a p s ,
not be s t r i c t l y a c c u r a t e to say t h a t where the p e t i t i o n s t a t e s no
cause of a c t i o n the demurrer t h e r e t o i s not waived by answering over.
What i s meant i s t h a t the f a t a l d e f e c t and the p o i n t made t h e r e i n are
4 5 6
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.
X-7172
not waived by the answer, "but i f the p o i n t i s made and r e l i e d on in
the a p p e l l a t e c o u r t such p o i n t i s s t i l l e f f e c t u a l .
Let us see, t h e r e f o r e , whether the p e t i t i o n i s so f a t a l l y
d e f e c t i v e as to s t a t e no cause of a c t i o n .
The charge or charges of negligence t h e r e i n a r e s t a t e d as
follows:
1.
That defendant " c a r e l e s s l y and n e g l i g e n t l y forwarded
the same ( s a i d c a s h i e r ' s check) d i r e c t to the F i r s t S t a t e Bank of Cunningham. Kansas. f o r c o l l e c t i o n and payment", on r e c e i p t of which, said
"bank stamped s a i d check p a i d and issued i t s d r a f t in payment t h e r e f o r
drawn on the F e d e r a l Trust Company of Kansas City, Missouri, and forwarded
same to the d e f e n d a n t ;
2,
That t h e r e a f t e r defendant " c a r e l e s s l y and n e g l i g e n t l y
accepted s a i d d r a f t from the F i r s t S t a t e Bank of Cunningham, Kansas, in
payment of s a i d c a s h i e r ' s c h e c k , "
We have searched t h e p e t i t i o n c a r e f u l l y , and f a i l to f i n d
any other a l l e g a t i o n s wherein a r e a l l e g e d any o t h e r a c t or a c t s of
negligence which, even "by the most l i b e r a l c o n s t r u c t i o n a u t h o r i z e d by
Section 801, B„S, Mo, 1919, can be t o r t u r e d into an a l l e g a t i o n or a l l e g a t i o n s of any o t h e r grounds of negligence a s a cause of a c t i o n .
The f i r s t ground of negligence above s t a t e d ,
namely, the
sending of the check d i r e c t to the bank on which i t was drawn, was an
e f f e c t i v e charge of negligence up to a c e r t a i n time,
American Exchange
e t c . Bank v . Metropolitan N a t l . Bank, 71 Mo. App. 451; Maronde v .
Vollenweider, 279 S.W. 774.
But ever since the enactment, on May
30, 1919, of Sec. 10159d, Laws 1919, p . 606, now Sec. 2821, B.S. Mo,
4 5 7
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X-7172
1929, a u t h o r i z i n g "any t a n k r e c e i v i n g any check drawn upon or payable
a t any o t h e r bank i n another c i t y or town whether w i t h i n or without
t h i s s t a t e , to forward such instrument f o r c o l l e c t i o n d i r e c t l y to the
bank on which i t i s drawn, and the f a i l u r e of such payer bank because
of i t s insolvency or other d e f a u l t to account f o r the proceeds thereof
s h a l l not render the forwarding bank l i a b l e t h e r e f o r , provided such
forwarding bank s h a l l have used due d i l i g e n c e i n o t h e r r e s p e c t s " , e t c . ,
removes a l l t a i n t of negligence from s a i d a c t i o n in sending the check
d i r e c t , except where due d i l i g e n c e has not been u s e d .
Said s e c t i o n
i s not mentioned i n Maronde v . Vollenweider, supra, and presumably the
c o u r t ' s a t t e n t i o n was not c a l l e d to said Section, f o r i t was i n f o r c e
a t the time of the a c t s involved t h e r e i n , t o - w i t , 1921.
The necessary
e f f e c t of t h i s s t a t u t e i s to a u t h o r i z e the forwarding bank to accept
a d r a f t of the drawee or paying bank in r e m i t t a n c e .
The s t a t u t e not
only a u t h o r i z e s d i r e c t sending, but i t exempts the forwarding bank
from l i a b i l i t y , i f the drawee or paying bank f a i l s to account f o r the
proceeds on account of insolvency or o t h e r d e f a u l t .
We have not been
a b l e to f i n d any case in t h i s s t a t e where s a i d s e c t i o n has been cons t r u e d or given e f f e c t , but s i m i l a r s t a t u t e s have been b e f o r e the
c o u r t s of o t h e r s t a t e s and have been given c o n t r o l l i n g e f f e c t .
See
Dudley v . Phenix-Gerard Bank, 114 So. 118; Federal Land Bank v . Barrow, 127 S.E. 3; Quails v . Farmers e t c . Bank, 149 S.E. 546; Hicks Co.
Lrd. v . Federal Reserve Bank, 296 S.W. 46; Adams. County v . Meadow
Valley Bank, 277 P a c . 575, 578.
Since the p e t i t i o n charges no n e g l i -
gence o t h e r than the two grounds above s t a t e d , i t i s c l e a r t h a t i t
s t a t e s no cause of a c t i o n .
4 5 8
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X-7172
But p l a i n t i f f says t h a t the p e t i t i o n charges t h a t defendant
"had no a u t h o r i t y from t h i s p l a i n t i f f to * * * accept from the F i r s t
State Bank of Cunningham, the drawer t h e r e o f , a d r a f t on the Federal
Trust Company of Kansas City or anything e l s e except l a w f u l money of
the United S t a t e s i,n payment t h e r e o f ; t h a t i t was the duty of s a i d
defendant in c o l l e c t i n g s a i d c a s h i e r ' s check to receive and accept from
the F i r s t S t a t e Bank of Cunningham, Kansas, only lawful money of
the United S t a t e s i n payment thereof and in sending said c a s h i e r * s
check d i r e c t * * * and in a c c e p t i n g said d r a f t * * ^defendant a c t e d
i n a c a r e l e s s and n e g l i g e n t manner and f a i l e d to use due d i l i g e n c e i n
the c o l l e c t i o n of s a i d check", and t h a t the Cunningham Bank, a t a l l
times from August 21, 1925, to September 3, 1925, had money and a v a i l a b l e cash items s u f f i c i e n t to pay said c a s h i e r ' s check, and the d e fendant "by the e x e r c i s e of due d i l i g e n c e could have c o l l e c t e d the same
in c a s h . "
And from t h e s e , p l a i n t i f f argues t h a t they a r e a l s o grounds
of negligence on which recovery i s sought and i n which the negligence
c o n s i s t s of delay i n sending the check.
But i t i s m a n i f e s t t h a t these
s o - c a l l e d o t h e r grounds do not extend f u r t h e r , nor include any negligence
o t h e r , than t h a t contained in the two grounds h e r e t o f o r e considered and
found to "be i n s u f f i c i e n t under the S t a t u t e , Sec. 2821.
The charge t h a t
the defendant " f a i l e d t o use due d i l i g e n c e in the c o l l e c t i o n of s a i d
check" i s connected with and r e l a t e s to the preceding words "in sending
s a i d c a s h i e r ' s check d i r e c t to s a i d * * * F i r s t S t a t e Bank of Cunningham
* * * and a c c e p t i n g s a i d d r a f t i n payment t h e r e o f . "
The charge t h a t
the "defendant by the e x e r c i s e of due d i l i g e n c e " could have c o l l e c t e d
the same i n cash should "be read in connection with the charge t h a t
4 5 9
-15-
X-7172
defendant was r e q u i r e d to c o l l e c t in cash and in connection w i t h the
immediately preceding a l l e g a t i o n t h a t the Cunningham Bank had s u f f i c i e n t
cash on hand to pay the c a s h i e r ' s check in cash, and the whole means, i f
i t means a n y t h i n g , t h a t the check could have been c o l l e c t e d i n cash, and
the reason i t was not so c o l l e c t e d was because defendant accepted a
draft
i n s t e a d and made no demand f o r c a s h .
Or i n other words, the
a l l e g a t i o n i s t h a t the Cunningham Bank had cash to pay the check, and then
i t i s attempted to be said t h a t i f cash had been demanded in p r e s e n t i n g
i t , as p l a i n t i f f
been p a i d i n c a s h .
says was r e q u i r e d , the c a s h i e r ' s check would have
There i s nothing said in the p e t i t i o n about delay
i n sending the check, and hence the negligence and lack of due d i l i g e n c e
can r e f e r only to what the p l a i n t i f f s p e c i f i e d a s negligence, namely, the
sending of the check d i r e c t and the acceptance of a d r a f t i n s t e a d of cash.
I f these s o - c a l l e d other a l l e g a t i o n s were intended to r e f e r to o t h e r a c t s
of negligence such o t h e r n e g l i g e n t a c t s a r e nowhere s t a t e d and, t h e r e f o r e ,
the said o t h e r a l l e g a t i o n s a r e mere l e g a l conclusions only, w i t h no
statement of i s s u a b l e f a c t s , e i t h e r t r a v e r s a b l e or demurrable, and a r e
to be t r e a t e d a s no statement a t a l l .
Memnich, 169 Mo. 388, 397.
on the
Mallinckrodt Chemical Works v .
This w i l l i n s t a n t l y and c l e a r l y appear, i f ,
theory t h a t these s o - c a l l e d other a l l e g a t i o n s r e f e r to o t h e r
a c t s of n e g l i g e n c e , we a s k the questions, "In what way d i d the defendant
' a c t in a c a r e l e s s and n e g l i g e n t manner'?", and "In what way d i d the
defendant ' f a i l to use due d i l i g e n c e in the c o l l e c t i o n of s a i d check'?"
There i s no answer to t h e s e , except those already s t a t e d , namely, t h a t
the check was sent d i r e c t and a d r a f t was accepted i n s t e a d of c a s h . The
m a t t e r now being considered f i n d s ample support in the f o l l o w i n g a u t h o r
4 6 0
« 16 m
X-7172
i t i e s , in a d d i t i o n to t h e Mallinckrodt case, supra, t o - w i t : Sidway v.
Missouri Land e t c . Co., 163 Mo. 342, 373-4; Lewis v. James McMahon Co.,
307 Mo. 552, 567; S t a t e ex r e l . v. Burney, 23 S. W.
(2nd) 117; Gibson v.
Chicago Great Western R. Co., 225 Mo. 473; S t a t e ex r e l . v. Lee, 288
Mo. 679; S t a t e ex r e l . v. Dick Bros. e t c . Co., 270 Mo. 100.
Moreover, i f t h e s e s o - c a l l e d other a l l e g a t i o n s could he
regarded as a l l e g i n g other grounds of negligence they would he only general
charges and would not he allowed to supersede the two s p e c i f i c charges,
f o r the l a t t e r must p r e v a i l over the former, and t h e p l a i n t i f f can r e cover, if a t a l l , only on the s p e c i f i c charges.
Weldhier v. Hannibal
e t c . R. Co., 71 Mo. 514; Orcutt v. Century 3ldg. Co., 201 Mo. 424, 443;
McCullough v. Powell Lumber Co., 205 Mo. App. 15, 23.
2Tor was p l a i n t i f f ' s p e t i t i o n aided "by d e f e n d a n t ' s answer.
Indeed, t h i s i s not a case wherein the d e f e c t of the n e t i t i o n can be
aided by the answer, any more than i t could be aided by a r e p l y .
The case
of P r i e s s v. St. Louis Co., 231 Mo. 332, 339, c i t e d by p l a i n t i f f to
support i t s claim of a i d e r by answer, was where the p e t i t i o n was d e f e c t i v e
in not s t a t i n g t h a t t h e c o n t r a c t sued on was in w r i t i n g , b u t t h e answer
a l l e g e d t h a t i t was, so of course the p e t i t i o n was r e l i e v e d of t h e consequences of t h a t omission.
The same i s t r u e of Rickets v. Hurt, 150 Mo.
34, f o r t h e r e the p e t i t i o n , in s u i t on a bond guaranteeing performance of a c o n t r a c t by defendant, f a i l e d to a l l e g e performance or an
o f f e r to perform on p l a i n t i f f ' s p a r t , which t h e answer s u p p l i e d .
As v:e
understand the d o c t r i n e of a i d e r by answer, i t a p p l i e s only i n those
c a s e s
e r y
is
where
t h e
Based
i e s ; but
suppl
p l a i n t i f f has s t a t e d f a c t s upon which
a
r i g h t of recov-
and some m a t e r i a l a l l e g a t i o n i s omitted which t h e answer
the answer can never
s u p p l y
the statement of the cause of
- 17 action i t s e l f .
X-7172
49 C. J . , p . 863, Sec. 1273 (4); Spurdie v. Hyde, 247
Mo. 32; Coulter v. Coulter, 124 Mo. Apn. 149.
But in the case a t b a r ,
the ' o e t i t i o n , o u t s i d e of the s o - c a l l e d cause of a c t i o n based on the two
a l l e g e d grounds of negligence which Sec. 2821 has i n v a l i d a t e d , f a i l e d
to a l l e g e any cause of a c t i o n whatever based on negligent delay, and t h i s
the answer did not a i d , nor i s i t seen how i t could do so.
The p a r t
of the answer, r e l i e d upon by p l a i n t i f f as a i d i n g the p e t i t i o n i n s t a t i n g
a cause of a c t i o n on any a d d i t i o n a l ground of negligence, i s the c l a u s e
saying t h a t " i n due course of b u s i ne ss and without any negligence or
d e f a u l t on i t s p a r t , b u t in accordance with the a f o r e s a i d r u l e s and
r e g u l a t i o n s a u t h o r i z e d by law, i t promptly forwarded s a i d c a s h i e r ' s check
to the s a i d F i r s t S t a t e Bank of Cunningham f o r c o l l e c t i o n and remittance"
etc.
The above quoted p a r t of t h e answer shows on i t s f a c e t h a t i t was
d e a l i n g with the a l l e g e d negligence in sending the check d i r e c t and i n
accepting a d r a f t i n s t e a d of demanding cash.
The answer quoted i s not
. made in defense of any ground or grounds of negligence other than t h e two
charged in the p e t i t i o n .
Moreover, i f by any s t r a i n e d or h a r s h c o n s t r u c -
t i o n , i t should be deemed to be in answer to any such other ground of
negligence, i t does not s e t out nor contain any of the " c o n s t i t u t i v e "
i n d i s p e n s a b l e elements of a cause of a c t i o n based on delay.
Hence, i f
the answer be r e l i e f on as a i d i n g the p e t i t i o n , we have a p e t i t i o n a l l e g i n g
in support of such cause of a c t i o n , mere conclusions of law, and an answer,
a i d i n g the p e t i t i o n in t h a t r e g a r d , by a s s e r t i n g other mere conclusions
of law, a remarkable s i t u a t i o n indeed;
For, in t h a t s i t u a t i o n , we would
have a case in which, although t h e r e was a p e t i t i o n and an answer, no
i s s u e of f a c t could p o s s i b l y a r i s e .
In a d d i t i o n to a l l t h a t i s s a i d i n
4 6 2
- 18 -
X-7172
t h e foregoing, t h e judgment h e r e i n cannot be allowed to stand f o r the
following r e a s o n s : 1.
No issue as to delay, e i t h e r n e g l i g e n t or otherwise,
in forwarding the c a s h i e r ' s check was r a i s e d by the p l e a d i n g s .
The p e t i -
t i o n did not a l l e g e any as a ground of recovery, and the answer of
defendant, so f a r from admitting any delay, a s s e r t e d t h a t "2. This defendant admits and avers t h a t upon or
about August 25, 1925, i t received from the Commerce
Trust Company of Kansas City t h e check mentioned in p l a i n t i f f ' s p e t i t i o n , and t h a t thereupon i t forwarded the same
to the F i r s t S t a t e Bank of Cunningham, Kansas, f o r c o l l e c t i o n and remittance; e t c . "
The r e p l y did not t r a v e r s e any of these a l l e g a t i o n s of
the answer.
Indeed t h e r e p l y did not t r a v e r s e anything in paragraphs 1,
2 and 3, and as w i l l be seen by an inspection of the r e p l y shown h e r e i n above.
P l a i n l y the above a l l e g a t i o n s of the answer were not considered
m a t e r i a l a l l e g a t i o n s , otherwise they would have been denied.
But, if
they were m a t e r i a l , then the matter i s governed by the r u l e s t a t e d
in S t a t e ex r e l . v. Montgomery, 291 S. W. 472, 1. c. 474, where i t i s
said "every p l e a d i n g i s taken to confess such t r a v e r s a b l e
m a t t e r s a l l e g e d on the o t h e r s i d e as i t does not
t r a v e r s e . P e r r y on Common-Law Pleading, 281; Carl & Hardwicke
v. Mann, 4 Mo. 273; Section 2059 R. S. Mo. 1919."
(Mow Sec. 1611 E. S. Mo. 1929 )
The a f o r e s a i d Section 2059 in t h e above q u o t a t i o n r e f e r s ,
of course, to proceedings in p r o h i b i t i o n , and provides t h a t t h e proceedings t h e r e i n " s h a l l conform to t h e code of c i v i l p r a c t i c e " .
And, in
t h a t code, Sec. 932 B. S. Mo. 1929, provides t h a t "An i s s u e of f a c t a r i s e s : F i r s t , upon a m a t e r i a l
a l l e g a t i o n in t h e p e t i t i o n c o n t r o v e r t e d by the answer; or
second, upon new matter in the answer controverted by the
reply;" etc.
463
- 19 *
X-7172
So t h a t , c l e a r l y , "negligence on account of delay in f o r warding the check1' was hot in i s s u e a t the t r i a l ;
And; even though i t
could be s a i d t h a t the evidence showed delay in sending the check yet the
judgment h e r e i n cannot stand or be preserved on t h a t ground f o r p l a i n t i f f ' s r i g h t of recovery h e r e i n i s l i m i t e d to the i s s u e s p r e s e n t e d and
must be determined thereby, and not from such evidence.
Daniel v.
P r y o r , 227 S. W. 102, 105; Mark v. Williams Cooperage Co., 204 Mo. 242;
S t a t e ex r e l . v. S l l i s o n , 176 S. W. 11, 13; Zasemourich v. American
Mfg. Co., 213 S. rr. 799, 802-3.
Again, the p e t i t i o n , showing on i t s f a c e by i t s own a f f i r mative a l l e g a t i o n s t h a t no charge i s made of negligence i n delay in f o r warding s a i d check, or t h a t delay in forwarding i t caused the l o s s , and
s a i d p e t i t i o n f a i l i n g to s e t out any c o n s t i t u t i v e f a c t s to support a
v a l i d judgment based on t h a t ground, i t ( t h e p e t i t i o n ) cannot be aided
i n t h a t r e s p e c t by v e r d i c t .
Shaver v. Mercantile e t c . Ins. Co., 79 Mo.
App. 420, 425; ? a l r a t h v. Crary, 222 S. W., 895, 896; Hart v. Harrison
Wire Co., 91 Mo. 414, 420.
The s t i p u l a t i o n or agreed statement of f a c t s cannot be
regarded a s admitting negligence not charged in the p e t i t i o n , but as
being drawn in view of t h e two charges of negligence, namely, forwarding the check d i r e c t to t h e debtor and accepting a d r a f t i n s t e a d of cash.
While the s t i p u l a t i o n may be s u b j e c t to the c o n s t r u c t i o n t h a t defendant
admits r e c e i v i n g the check on t h e 22nd but did not forward i t u n t i l the
25th, thereby c r e a t i n g a delay of t h r e e days, yet i t w i l l be seen, from
the s t i p u l a t i o n i t s e l f , t h a t i t does not a f f i r m a t i v e l y so s t a t e .
Para-
graph 9 of the agreed s t i p u l a t i o n , or agreed statement of f a c t s , says
464
* 130 -
Xrflfg
t h a t on August 22iid, the Commerce Trust Company endorsed t h e check ( i n the
manner t h e r e i n s e t out) and then concludes by saying "and d e l i v e r e d t h e
same to the Federal Reserve Bank of Kansas City f o r c o l l e c t i o n . "
Para-
graph 10, immediately f o l l o w i n g , says "That on August 25, 1925, defendant
Federal Reserve Bank of Kansas City endorsed s a i d check as f o l l o w s ( s e t t i n g
out the manner of so endorsing i t )
and thereupon i t forwarded t h e same to
t h e F i r s t S t a t e Bank of Cunningham, Kansas, f o r c o l l e c t i o n and r e m i t t a n c e . "
So t h a t paragraph 10 says t h a t the endorsement was made August 25 and
thereupon the check was forwarded; but no such statement i s contained in
paragraph 9 showing when the Commerce Trust Company d e l i v e r e d t h e check to
the defendant.
The s t i p u l a t i o n also provided t h a t " e i t h e r p a r t y may i n t r o -
duce a d d i t i o n a l f a c t s in t h e case".
And i t was doubtless in pursuance
of t h i s t h a t w i t n e s s , Tyner, t e s t i f i e d , without o b j e c t i o n , t h a t the Federal
Reserve Bank r e c e i v e d the check from an Oklahoma Bank, and i n d i r e c t l y
from the Commerce Trust Company, on August 25th, 1925; and then when
p l a i n t i f f ' s counsel, cross-examining, r e f e r r e d to t h e s t i p u l a t i o n as
saying t h e defendant r e c e i v e d t h e check d i r e c t from the Commerce Trust
Company, d e f e n d a n t ' s counsel remarked "On the 25th", which statement
was not c o n t r o v e r t e d or o b j e c t e d to in any way; and l a t e r , t h e witness
went on to s t a t e t h a t i t took a t l e a s t 4 days f o r the check to go from
Kansas City to Cunningham.
or accepted on August 3 0 t h . )
(The d r a f t in payment of s a i d check was sent
There was no testimony of any witness contro-
v e r t i n g t h a t of Tyner t h a t t h e check was r e c e i v e d by defendant on the
25th, and no evidence to c o n t r o v e r t i t , u n l e s s the s t i p u l a t i o n as to
agreed f a c t s be construed as saying i t was on the 22nd.
So t h a t t h e r e
i s no evidence to support the judgment based on negligent delay from the
22nd to t h e 25th i n forwarding t h e check to the Cunningham Bank.
4 6 5
X-7172
-21-
I t i s manifest on t h e f a c e of t h e record t h a t the case
was not t r i e d on any theory of negligent delay i n forwarding s a i d check,
but only on the two s p e c i f i c a c t s of negligence h e r e i n b e f o r e s e t out and
discussed.
In other words, negligent delay was not l i t i g a t e d , and hence
we a r e not i n a p o s i t i o n t o pass on t h e question whether such d e l a y , i f
any be e s t a b l i s h e d , was t h e cause, or t h e proximate cause, of t h e l o s s .
I t would seem t h a t Section 2821 R.S. Mo. 1929, not only
e x p r e s s l y a u t h o r i z e d defendant to send t h e c a s h i e r ' s check d i r e c t to t h e
Cunningham Bank, b u t , by exempting defendant from a l l damage caused by
t h e f a i l u r e of t h e l a t t e r to account f o r the proceeds, n e c e s s a r i l y a u t h o r ized defendant t o accept a d r a f t i n s t e a d of cash without l i a b i l i t y f o r so
doing.
B e s i d e s , t h e check was d e l i v e r e d to and accepted by defendant f o r
forwarding and c o l l e c t i o n under and pursuant t o the r u l e s and r e g u l a t i o n s
governing Federal Reserve. Banks, and t h e s e not only a u t h o r i z e s a i d defendant
bank to r e c e i v e checks t o be forwarded f o r c o l l e c t i o n and t o send them t o t h e
payer bank d i r e c t , but a l s o t o accept d r a f t s i n payment t h e r e o f .
These
Rules and R e g u l a t i o n s , made by t h e Federal Reserve Board and by Federal
Reserve Banks, a r e a u t h o r i z e d by law, i . e . , by Acts of Congress, and,
i n a c t i n g as c l e a r i n g houses, a s i n t h i s c a s e , they ( s a i d Rules and
Regulations) f i x the terms which determine t h e r i g h t s of Federal Reserve
B»nks; and a l l p a r t i e s a r e t o be considered a s having d e a l t with each
other i n such m a t t e r s under and pursuant t o such terms.
E a r l y v . Federal
Reserve Bank of Richmond, 261 U.S. 84) 50 Sup. Ct. 235.
In t h e discharge
of t h e i r " d u t i e s with r e s p e c t t o c o l l e c t i o n of checks deposited with them
and with r e s p e c t to performing t h e f u n c t i o n s of a c l e a r i n g house t h e
seve
r a l r e s e r v e
banks a r e empowered t o adopt any reasonable measure de~
c
4 6 6
X-7172
-22-
sjgned t o accomplish t h e s e purposes.
To t h a t end a F e d e r a l r e s e r v e "bank
may send checks t o the drawee bank d i r e c t l y f o r r e m i t t a n c e through t h e
mails of c o l l e c t i o n s without cost of exchange.
I f the drawee hank r e f u s e s
t o remit without deduction of the cost of exchange, i t i s i n t h e power of
the s e v e r a l Federal r e s e r v e "banks t o employ any proper i n s t r u m e n t a l i t y
or agency to' c o l l e c t the checks from the drawee bank and i t may l e g i t i m a t e l y pay t h e necessary cost of t h i s s e r v i c e . ! '
American Bank & T r . Co. v .
Federal Reserve Bank of A t l a n t a , 280 Fed. 940, I . e . 941-2.
( I t a l i c s ours)
I n Hirning v . Federal Reserve Bank, 42 Fed. (2d) 925, I . e . 926, i t was
held t h a t t h e Reserve Bank was a mere agent i n forwarding t h e checks,
and "under the r u l e s which governed i t s operations , i t had the a u t h o r i t y
t o send the checks t o t h e Brookings ( d e b t o r ) Bank f o r c o l l e c t i o n and
take d r a f t s which were sent i n payment t h e r e f o r . "
( i t a l i c s ours.)
See
a l s o Chicago, M. & S t . P. By. Co. v . Federal Reserve Bank of San F r a n c i s c o , 260 Pac. 262; Fergus County v . Federal Reserve Bank of Minneapolis,
244 Pac. 883; T r a n s c o n t i n e n t a l Oil Co. v . Federal Reserve Bank, 214. N.W.
918.
A l l t h e evidence i n the case a t bar shows t h a t such was, and i s ,
t h e p r a c t i c e of t h e F e d e r a l Reserve Banks i n performing t h e i r f u n c t i o n s
i n such m a t t e r s a s those involved i n t h i s case.
The r e s e r v e bank a c t e d
only as the agent of t h e p l a i n t i f f i n r e c e i v i n g s a i d c a s h i e r ' s check and
i n forwarding i t f o r c o l l e c t i o n .
And p l a i n t i f f , i n p u t t i n g i t s check i n
such channels, did so under t h e c o n t r a c t , or terms and c o n d i t i o n s , governing t h e s e banks.
I t i s only on the theory of such agency t h a t an a c t i o n
of t h i s kind can be maintained.
Since t h e agency c o n t r a c t i s the founda-
t i o n of any cause of a c t i o n p l a i n t i f f may have, i t must accept such cont r a c t a s i t e x i s t s and i n t o t o .
I t cannot accept p a r t s thereof and r e j e c t
467
X-7172
—3
2—
other p a r t s as not w i t h i n the a u t h o r i t y of the a g e n t .
Harrington Mule Co., 109 Mo. App. 557.
Shinn v . Guy ton &
P l a i n t i f f i s bound t o know the
terms upon which defendant could or would accept such employment or
agency, and t h e r e f o r e must he held t o have consented and agreed t h a t not
only the check might be sent d i r e c t l y to the Cunningham Bank f o r c o l l e c t i o n
but a l s o t h a t t h e s a i d Bank might remit by d r a f t .
T r a n s c o n t i n e n t a l Oil
Co. v . Federal Reserve Bank of Minneapolis, supra.
I t f o l l o w s from what has been s a i d h e r e i n t h a t t h e p e t i t i o n
s t a t e s no cause of a c t i o n .
cause remanded.
Hence the judgment must be r e v e r s e d and the
I t i s so ordered.
A l l concur.
While i t i s t r u e , t h e
holding h e r e i n t h a t i t i s not negligence to send a check f o r c o l l e c t i o n
d i r e c t t o t h e debtor because of Sec. 2821, U.S. Mo. 1929, i s not t h e
holding i n t h e d e c i s i o n of the S p r i n g f i e l d Court of Appeals i n Maronde v .
Vollenweider, 279 S.W. 774, s t i l l we do not deem our d e c i s i o n h e r e i n to
be s t r i c t l y i n c o n f l i c t with the S p r i n g f i e l d Court, f o r t h a t d e c i s i o n
was
w r i t t e n without r e f e r e n c e to s a i d s t a t u t e as i t was not c a l l e d to
the a t t e n t i o n o f , or considered by, s a i d c o u r t .
Since t h e s t a t u t e
necessarily controls in the matter, i t i s certain that the Springfield
Court would not have r u l e d contrary to i t , had the s t a t u t e been invoked
or n o t i c e d .
T h e r e f o r e , we see no reason f o r c e r t i f y i n g and t r a n s f e r r i n g
t h i s cause t o t h e Supreme Court.
F r a n c i s H. Trimble, P . J .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7173
June 7, 1932.
SUBJECT:
New Issues of Treasury C e r t i f i c a t e s
of Indebtedness and Treasury Notes.
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 "between
Federal r e s e r v e banks covering Government s e c u r i t i e s , t h e
f o l l o w i n g code words have been designated to cover new i s s u e s
of Treasury C e r t i f i c a t e s of Indebtedness and Treasury Notes:
"NOWHCB" Treasury C e r t i f i c a t e s of Indebtedness,
S e r i e s T-J 1933, l j $ , dated June 15,
1932, due June 15, 1933;
"NOW&JLK" Three percent Treasury Notes, S e r i e s
A-1935, to be dated June 15, 1932, due
June 15, 1935.
These code words should be i n s e r t e d i n the Federal Reserve
Telegraph Code book, on page 172.
Very t r u l y yours,
J • C• N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F . R. BANKS.
X-7175
BANKING AND INDUSTRIAL COMMITTEE
of the
F i r s t Federal Reserve D i s t r i c t
Boston
Chai rmanCarl P. Dennett, Vice P r e s i d e n t , Boston Chamber of Commerce,
80 Federal S t r e e t ,
Boston, Mass.
Thomas Eelson P e r k i n s , Attorney a t Law,
50 Federal S t r e e t ,
Boston, Mass.
Louis B. K i r s t e i n ,
Wm. F i l e n e ' s Sons Company,
Boston, Mass.
Dr. Arthur W. G i l b e r t ,
Commissioner of A g r i c u l t u r e ,
S t a t e House, Boston, Mass.
George 3. Clough,
The Bus s e l l Company,
50 S t a t e S t . , Boston, Mass.
P . A. O'Connell,
E. T. S l a t t e r y Company,
165 Tremont S t . , Boston, Mass.
Nathaniel F. Ayer, T r e a s u r e r , Cabot Manufacturing Company,
77 Franklin S t r e e t ,
Boston, Mass.
Frank D. Comerford,
New England Power Association,
89 Broad S t r e e t , Boston, Mass.
Harry K. Hdyes,
Noyes-Buick Company,
857 Commonwealth Ave., Boston, Mass.
P h i l i p Stockton,
F i r s t National Bank, Boston, Mass.
Walter S. Bucklin,
National Sharaiut Bank, Boston, Mass.
Wilmot H. Evans,
Boston Five Cents Savings Bank, Boston, Mass.
4QQ
BANKING AND INDUSTRIAL COMMITTEE
of the
Second Federal Beserve D i s t r i c t
New York
Chairman:
Owen D. Young,
Chairman, General E l e c t r i c Company,
Hew York, New York.
Mortimer N. Buckner,
Chairman, New York Trust Company, New York, New York.
Floyd L. C a r l i s l e ,
F. L. C a r l i s l e & Company, Investment Bankers,
New York, Mew York.
Walter S. G i f f o r d ,
P r e s i d e n t , American Telephone & Telegraph Company,
New York, New York.
Charles E. M i t c h e l l ,
Chairman, National City Bank, New York, New York.
William C. P o t t e r ,
P r e s i d e n t , Guaranty Trust Company, New York, New York.
Jackson E. Reynolds,
P r e s i d e n t , F i r s t National Bank, New York, New York.
A l f r e d P. Sloan, J r . ,
P r e s i d e n t , General Motors Company, New York,
New York.
Walter C. Teagle,
P r e s i d e n t , Standard Oil Company, New York,
New York.
A. A. Tilney,
Chairman, Bankers Trust Company, New York,
New York.
Albert H. Wiggin,
Chairman, Chase National Bank,
New York,
New York.
C. M. Woolley,
Chairman, American Radiator and Standard S a n i t a r y Corp.,
New York, New York.
BAMKING Ai:D imTSTHlAL COMMITTEE
of the
Third Federal 'Reserve D i s t r i c t
Philadelphia
Chairman*
George H. Houston,
President,Baldwin Locomotive Works,
P h i l a d e l p h i a , Pennsylvania.
W. W. Atterbury,
P r e s i d e n t , Penn. 'Railroad Co., P h i l a d e l p h i a , Pa.
Arthur C. Dorrance,
P r e s i d e n t , Campbell Soup Co., P h i l a d e l p h i a , Pa.
I r e n e e du Pont,
E. I . du Pont de Nemours & Co., Wilmington, Del.
Edward Hopkinson,
Drexel & Company, P h i l a d e l p h i a , Pennsylvania.
William A. Law,
P r e s i d e n t , Penn Mutual L i f e Insurance Co.,
P h i l a d e l p h i a , Pennsylvania.
Howard A. Loeb,
Chairman, Tradesmens National Bank & Trust Co.,
P h i l a d e l p h i a , Pennsylvania.
George H. Lorimer,
E d i t o r , Saturday Evening P o s t , P h i l a d e l p h i a , Pa.
Benjamin Hush,
P r e s i d e n t , Insurance Company of North America,
P h i l a d e l p h i a , Pennsylvania.
Burton C. Simon,
Operative B u i l d e r , P h i l a d e l p h i a , Pennsylvania.
Herbert J . T i l y ,
Strawbridge & C l o t h i e r , P h i l a d e l p h i a , Pennsylvania.
John E. Zimmermann,
P r e s i d e n t , United Gas Improvement Company,
P h i l a d e l p h i a , Pennsylvania.
472
,
BAHlM MD INDUSTRIAL COMMITTEE
of the
Fourth Federal Reserve D i s t r i c t
Cleveland
Chairman:
L. B. Williams,
Hayden, M i l l e r and Company, Cleveland, Ohio.
H . Gr. Dal ton,
Pickands Mather and Company, Cleveland, Ohio.
J . J . Bernet,
P r e s i d e n t , Chesapeake & Ohio B. R . , Cleveland, Ohio.
H a r r i s Creech,
P r e s i d e n t , Cleveland Trust Company, Cleveland, Ohio.
W. M. Baldwin,
P r e s i d e n t , Union T r u s t Company, Cleveland, Ohio.
H. McELdowney,
P r e s i d e n t , Union T r u s t Company, P i t t s b u r g h , Pa.
A. W. Robertson,
Chairman, Tfestinghouse ELec. & Mfg. Co., P i t t s b u r g h , Pa.
Howard Heinz,
P r e s i d e n t , H. J . Heinz Co., P i t t s b u r g h , Pa.
S. T. Weir,
Chairman, National S t e e l Company, P i t t s b u r g h , Pa.
William Cooper P r o c t o r ,
• Chairman, P r o c t o r & Gamble Company, C i n c i n n a t i , Ohio.
George D. Crabbs,
P r e s i d e n t , P h i l i p Carey Mfg. Company, C i n c i n n a t i , Ohio.
E. W. Edwards,
P r e s i d e n t , F i f t h Third Union Trust Co., C i n c i n n a t i , Ohio.
T. J . Davis,
Chairman, F i r s t National Bank, C i n c i n n a t i , Ohio.
H. S. F i r e s t o n e ,
Chairman, F i r e s t o n e T i r e & Rubber Company, Akron, Ohio.
George M. V e r i t y ,
Chairman, American R o l l i n g Mill Co., Middletown, Ohio.
3C-72.75.6
BA2TKING MD DinjSTRIAL COMilTTEE
I5f the
F i f t h Federal Reserve D i s t r i c t
Richmond
Chairman;
Edwin C. Graham,
P r e s i d e n t , National E l e c t r i c a l Supply Company,
Washington, D. C.
Vice Chairman:
C. A* Cannon,
P r e s i d e n t , Cannon M i l l s Co., Kannapolis, IT. C.
Robert V. Fleming,
P r e s i d e n t , Riggs n a t i o n a l Bank, Washington, D. C.
A*
S. P o s t ,
P r e s i d e n t , Mercantile Trust Co., Baltimore, Md.
Charles M. Cohn,
Vice P r e s i d e n t , Cons. Gas E l e c t r i c Light & Power Co.
Baltimore, Md.
Robert P. Beaman,
P r e s i d e n t , Norfolk National Bank, Norfolk, Va.
J . M. M i l l e r , J r . ,
P r e s i d e n t , F i r s t & Merchants National Bank,
Richmond, Va.
J . S. Bryan,
P u b l i s h e r , The News Leader, Richmond, Va.
C. Edwin Michael,
P r e s i d e n t , V i r g i n i a Bridge & Iron Co., Roanoke, Va.
H. B. Lewis,
Vice P r e s i d e n t , Kanawha Banking & Trust Co.,
Charleston,
Va.
John M. Crawford,
Parkersburg Rig & Reel Co., Parkersburg, W. Va.
H. M. V i c t o r ,
P r e s i d e n t , Union National Bank, C h a r l o t t e , N. C.
A. L. M. Wiggins,
Vice P r e s i d e n t , Bank of H a r t s v i l l e , H a r t s v i l l e , S. C
James C. S e l f ,
P r e s i d e n t , Greenwood Cotton M i l l s , Greenwood, S. C.
474
\
BAiTKlNG Mti bftiUSTRlAL COMMITTEE
of the
S i x t h Federal Reserve D i s t r i c t
Atlanta
X-7175-e
Chairman:
George S. H a r r i s ,
Cotton I n d u s t r y , A t l a n t a , Georgia.
Robert E. Maddox,
Chairman, Executive Committee, F i r s t National Bank,
A t l a n t a , Georgia.
Thomas B. P r e s t o n ,
P r e s i d e n t , Hamilton National Bank, Chattanooga, Tenn.
Paul H. Davis,
P r e s i d e n t , American National Bank, N a s h v i l l e , Tenn.
R. S. Hecht,
p r e s i d e n t , Hibernia Bank & Trust Co., New Orleans, La.
Crawford Johnson,
P r e s i d e n t , Coca-Cola B o t t l i n g Co., Birmingham, Ala.
Ben S- Head,
P r e s i d e n t , Southern S e l l Telephone & Telegraph Co.,
A t l a n t a , Ga.
M i l l s B. Lane,
Chairman of Board, C i t i z e n s & Southern National Bank,
Savannah, Ga.
W. R. McQuaid,
P r e s i d e n t , Barnett National Bank, J a c k s o n v i l l e , F l o r i d a .
Edgar S t e r n ,
Cotton merchant, New Orleans, Louisiana.
Wallace Rodgers,
Lumber, Laurel, M i s s i s s i p p i .
J . C. Persons,
P r e s i d e n t , F i r s t r a t i o n a l Bank, Birmingham, Alabama.
475
BAHtfrti Afti tifBUSTRlAL COMMUTES
of the
Seventh Federal "Reserve D i s t r i c t
Chicago
Chairman:
Sewell L. Avery,
P r e s i d e n t , Montgomery Ward & Co., Chicago, 111.
George A. Hanney,
Vice P r e s i d e n t & Treasurer, I n t e r n a t i o n a l Harvester
Company, Chicago, I l l i n o i s .
General Robert E. Wood,
P r e s i d e n t , Sears Roebuck & Company, Chicago, 111.
John S t u a r t ,
,
P r e s i d e n t , Quaker Oats Co., Chicago, I l l i n o i s .
Daniel F. Kelley,
P r e s i d e n t , The F a i r , Chicago, I l l i n o i s .
Fred W. Sargent,
P r e s i d e n t , The Chicago & Northwestern Railway Co.,
Chicago, I l l i n o i s .
George M. Reynolds,
Chairman of Board, Continental I l l i n o i s Bank & T r u s t
Company, Chicago, I l l i n o i s .
M. A. T r a y l o r ,
P r e s i d e n t , F i r s t National Bank of Chicago, I l l i n o i s .
Albert W. H a r r i s ,
Chairman of Board, H a r r i s Trust and Savings Bank,
Chicago, I l l i n o i s .
P h i l i p R. Clarke,
P r e s i d e n t , Central Republic Bank & Trust Co.,
Chicago, I l l i n o i s .
Solomon A. Smith,
P r e s i d e n t , Northern Trust Company, Chicago, I l l i n o i s .
X-7175-f
476
BAMKIMa AH) IlffltJSfSlAl COMMITTEE
of the
Eighth Federal Reserve D i s t r i c t
St. Louis
Chairman:
J . W. H a r r i s ,
P r e s i d e n t , H a r r i s - P o l k Hat Company, S t . Louis, Mo.
A. L. Shapleigh,
Shapleigh Hardware Company, St. Louis, Mo.
F. C. Hand,
I n t e r n a t i o n a l Shoe Company, St. Louis, Mo;
E. D. Uims,
Southwestern B e l l Telephone Co., St. Louis, Mo.
Ernest W. S t i x ,
P r e s i d e n t , Bice S t i x D. G-. Co., St. Louis, Mo.
J . G. Lonsdale,
P r e s i d e n t , Mercantile-Commerce Bank & Trust Co.,
S t . Louis, Mo.
Frank 0. Watts,
Chairman of Board, F i r s t n a t i o n a l Bank,
St. Louis, Mo.
Sidney Maestre,
P r e s i d e n t , M i s s i s s i p p i Valley Trust Company,
S t . Louis, Mo.
Tom K. Smith,
P r e s i d e n t , Boatmen's National Bank, St. Louis, Mo.
W. 3 . Cole,
P r e s i d e n t , L o u i s v i l l e & Kashville 3 . H.,
L o u i s v i l l e , Ky.
Paul D i l l a r d ,
D i l l a r d and Coffin Company, Memphis, Tenn»
W. B. P l u n k e t t ,
P l u n k e t t - J a r r e l l Grocer Company, L i t t l e Hock, Ark.
X-7175-g
477
X-7175-h
BANKING Aim INDUSTHlAi COMMITTEE
of the
Ninth Federal Reserve D i s t r i c t
Minneapolis
Chairman:
George D. Dayton,
P r e s i d e n t , The Dayton Co.,
Minneapolis, Minn.
E. L. Carpenter,
P r e s . , Shevlin Carpenter & Clarke Co.,
Minneapolis, Minn.
Charles Donnelly,
P r e s . , Northern P a c i f i c Railway Co.,
S t . P a u l , Minn.
P. B. Wells,
Vice P r e s . , P. H. Peavey and Co.,
Minneapolis, Minn.
W. P. Kenney,
P r e s . , Great Northern Railway Co.,
S t . P a u l , Minn.
W. A. Eggleston,
Vice P r e s . , David C. B e l l Investment
Co.,
Minneapolis, Minn.
B. W. Decker,
P r e s . , northwestern National Bank,
Minneapolis, Minn.
A. P. P i l l s b u r y ,
T r e a s u r e r , P i l l s b u r y Flour M i l l s Co.,
Minneapolis, Minn.
H. P. Clark,
P r e s . , West P u b l i s h i n g Co.,
S t . P a u l , Minn.
F. B. Bigelow,
P r e s . , S t . Paul F i r e & Marine Ins. Co.,
St. P a u l , Minn.
F. E. Weyerhaeuser,
P r e s . , Weyerhaeuser Sales Co.,
S t . P a u l , Minn.
S. W. D i t t e n h o f e r ,
Vice P r e s . , Hahn Department S t o r e s , I n c . ,
S t . P a u l , Minn.
C. T. J a f f r a y ,
P r e s . , Minneapolis St. Paul and Sault
Ste. Marie By. Co.,
Minneapolis, Minn.
L. E. Wakefield,
P r e s . , F i r s t National Bank,
Minneapolis, Minn.
B. C. L i l l y ,
P r e s . , F i r s t National Bank,
S t . P a u l , Minn.
Otto Bremer,
Chairman of Board, American National
Bank,
S t . P a u l , Minn.
T. F. Wallace,
P r e s . , Farmers & Mechanics Savings
Bank,
Minneapolis. Minn.
W. C. MacFarlano,
P r e s . , Minneapolis Moline Power
Impl ement Co.,
Minneapolis, Minn.
478
BANKING AND INDUSTRIAL COMMITTEE
of the
Tenth Federal Reserve D i s t r i c t
Kansas City
X-7175-i
Chairman;
Joseph F. P o r t e r ,
P r e s . , Kansas City Power & Light Co.,
Kansas City, Mo.
Carl R. Gray,
P r e s i d e n t , Union P a c i f i c Railroad Co.,
Omaha, Nebr.,
Mike J . Healey,
Vice P r e s . , John Deere Plow Co.,
Kansas City, Mo.
W. T. Kemper, Banker and i n v e s t o r ,
Kansas City, Mo.
W. S. McLucas,
Chairman of Board, Commerce Trust
Co., Kansas City, Mo.
Wm. L. P e t r i k i n ,
Chairman, Great Western Sugar Co.,
Denver, Colo.
Waite P h i l l i p s ,
Chairman of Board, F i r s t National Bank
& Trust Co., Tulsa, Okla.
J . C. Nichols,
J . C. Nichols Companies,
Kansas City, Mo.
H. K. Lindsley,
P r e s i d e n t , Farmers & Bankers L i f e I n s .
Co., Wichita, Kans.
Conrad Mann,
P r e s i d e n t , Chairiber of Commerce,
Kansas City, Mo.
Thad. L. Hoffman,
P r e s i d e n t , Kansas Flour M i l l s Co.,
Kansas City, Mo.
Herbert F. H a l l , Grain man and i n v e s t o r ,
Kansas City, Mo.
Geo. R. C o l l e t t ,
P r e s i d e n t , Kansas City Stock Yards Co.
Kansas City, Mo.
E. F. Swinney,
Chairman of Board, F i r s t National
Bank, Kansas City, Mo.
Geo. R. Hovey,
P r e s i d e n t , I n t e r s t a t e National Bank,
Kansas City, Mo.
Frank P . Johnson,
P r e s i d e n t , F i r s t National Bank &
T r u s t Co., Oklahoma City, Okla.
Milton Tootle, J r . ,
P r e s i d e n t , Tootle-Lacy National Bank^
S t . Joseph, Mo.
Dr. F. D. F a r r e l l ,
P r e s i d e n t , Kansas State- A g r i c u l t u r a l
College, Manhattan, Kans.
C. Q. Chandler,
Chairman, F i r s t National Bank,
Wichita, Kansas.
BARKING- AITS HM8TRIA1 COMMITTEE
of the
Eleventh Federal Reserve D i s t r i c t
Dallas
Chairman:
Frank K e l l ,
Wichita j a i l s , Texas.
Nathan Adams,
P r e s i d e n t , F i r s t National Bank in D a l l a s , Texas.
F. F. Florence,
P r e s i d e n t , Republic National Bank & Trust Co.,
D a l l a s , Texas.
R. L. Thornton,
P r e s i d e n t , Mercantile Bank & Trust Co., D a l l a s ,
Texas.
J . G. Wilkinson,
Chairman of Board, Cont. National Bank,Fort Worth,
Texas.
F. M. Law,
P r e s i d e n t , F i r s t National Bank, Houston, Texas.
Walter P. Napier,
P r e s i d e n t , Alamo National Bank, San Antonio, Texas.
Arthur L. Kramer,
P r e s i d e n t , A. H a r r i s & Co., D a l l a s , Texas.
B. L. Anderson,
Neil ? . Anderson & Co., Cotton Merchants,
Fort Worth, Texas.
H. o. "ooten,
P r e s i d e n t , H. 0. Wooten Grocery Co., Abilene,Texas.
H. L. Kokernot,
Livestock, San Antonio, Texas.
W. S. F a r r i s h ,
P r e s i d e n t , Humble Oil & R e f i n i n g Co., Houston,Texas.
X-7175-J
479
480
X-7175-k
BAIIXII'G- AITD INDUSTRIAL COMMITTEE
of the
Twelfth Federal Reserve D i s t r i c t
San Francisco
Chairman;
K. B. Kingsbury,
p r e s i d e n t , Standard Oil Company of C a l i f o r n i a ,
San F r a n c i s c o , C a l i f o r n i a .
A. F. Ho ckenb earner,
P r e s i d e n t , P a c i f i c Gas & E l e c t r i c Co.,
San F r a n c i s c o , California,.
Paxil Shoup,
P r e s i d e n t , Southern P a c i f i c Co., San F r a n c i s c o , C a l i f .
Frank B. Anderson,
Chairman of Board, Bank of C a l i f o r n i a , IT. A.,
San F r a n c i s c o , C a l i f o r n i a .
F. L. Lipman,
P r e s i d e n t , Wells Fargo Bank & Union T r u s t Co.,
San F r a n c i s c o , C a l i f o r n i a .
C. C. Teague,
P r e s i d e n t , C a l i f o r n i a F r u i t Growers Exchange,
Los Angeles, C a l i f o r n i a .
John G-. Bullock,
P r e s i d e n t , B u l l o c k ' s I n c . , Los Angeles, C a l i f .
Frank Ransome,
P r e s i d e n t , E a s t e r n & Western Lumber Co.,
P o r t l a n d , Oregon.
Downie D. Muir, J r . ,
Vice P r e s i d e n t & General Manager, U. S. Smelting R e f i n i n g & Mining Co., S a l t Lake City, Utah.
0 . D. F i s h e r ,
P r e s i d e n t , F i s h e r F l o u r i n g M i l l s Co., S e a t t l e ,
Washington.
481
X-7176
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING
Federal Reserve Notes, Series 1928.
May 2 t o 27, 1932.
$5
$10
32,000
86,000
-
Total
Sheets
Amount
70,000
$20
#6,475.00
242,000
22,385.00
.. •
-
# » .
•*
320,000
20,000
98,000
9,065.00
20,000
98,000
9,065.00
15,000
Kansas C i t y , .
25,000
40,000
P h i l a d e l p h i a , . . . 53,000
20,000
70,000
6,475.00
20,000
28,000
48,000
4,440.00
10,000
925.00
636,000
$58,830,00
10,000
228,000
88,000
636,000 s h e e t s , @ ( 92.50 per M, • • • $58,830.00
;
X-7177
A p r i l 7, 1932
Mr. I). R. Bounds, Deputy Governor,
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Hounds;
I have examined t h e forms prepared "by Mr. Logan f o r use
i n connection with loans under Sections 10(a) and 10(b) of t h e
Federal Reserve Act and have c e r t a i n suggestions t o o f f e r i n conn e c t i o n with those prepared f o r use under Section 1 0 ( a ) .
I inclose
herewith one s e t of those forms on which I have noted a number of
s u g g e s t i o n s , and I wish t o o f f e r the following a d d i t i o n a l comments.
In our d i s c u s s i o n s of t h i s s u b j e c t , I t h i n k a l l of us
agreed t h a t , i f t h e p r o v i s i o n s of Section 10(a) a r e a v a i l e d of to
any m a t e r i a l e x t e n t , t h e r e a r e two d i f f e r e n t types of groups which
might be organized, (1) groups organized f o r the s p e c i f i c purpose
of a f f o r d i n g a s s i s t a n c e t o p a r t i c u l a r banks which a r e i n d i f f i c u l t i e s ,
and (2) more or l e s s permanent groups organized f o r t h e mutual benef i t of a l l t h e i r members without r e f e r e n c e to any p a r t i c u l a r a p p l i cation for a loan.
I think we a l l agreed t h a t the f i r s t type probably
w i l l be the one most f r e q u e n t l y organized and t h a t t h e forms should
be prepared with a view to being used by such groups.
I t h i n k we
a l s o agreed t h a t i t i s u n l i k e l y t h a t any groups of t h e second type
w i l l be organized and t h a t , i f any groups of t h i s type a r e organized,
the a t t o r n e y s f o r the banks involved w i l l have t h e i r own ideas as t o
t h e p r o v i s i o n s which should be incorporated i n the r e s o l u t i o n s of
d i r e c t o r s , o r g a n i z a t i o n agreements and other forms and t h a t i t would
not be worth while t o endeavor to p r e p a r e i n advance any forms f o r
use by such groups.
4 8 2
X-™
4 8 3
-0-
I t seems t o me, however, t h a t a middle course has been adopted
i n the p r e p a r a t i o n of the forms and t h a t they would not he e n t i r e l y
s u i t a b l e f o r use by groups of e i t h e r c l a s s .
If permanent groups a r e
organized, i t would seem t h a t p r o v i s i o n should be made f o r a loan conw
m i t t e e or some o t h e r machinery f o r a c t i o n on behalf of the group as
a whole i n applying f o r and obtaining loans from the F e d e r a l Reserve
Bank and t h a t i t would be p o s s i b l e t o avoid having s e p a r a t e a c t i o n
by the d i r e c t o r s of every bank i n the group on each a p p l i c a t i o n f o r a
loan.
On the other hand, i f groups a r e organized f o r the s p e c i f i c p u r -
pose of a s s i s t i n g p a r t i c u l a r banks which a r e i n d i f f i c u l t i e s , the s i t u a t i o n probably would r e q u i r e prompt a c t i o n and i t would be a p p r o p r i a t e
and d e s i r a b l e t o have each bank adopt only one r e s o l u t i o n covering
the e n t i r e c a s e .
Under the procedure proposed i n the forms t h a t have been
p r e p a r e d , the board of d i r e c t o r s of each bank j o i n i n g a loan group
would f i r s t meet and adopt a r e s o l u t i o n a u t h o r i z i n g t h e bank t o j o i n
the group and, subsequently, a t t h e time of the a p p l i c a t i o n f o r a group
l o a n , i t would be necessary f o r t h e board of d i r e c t o r s of each such
bank to meet again and adopt a r e s o l u t i o n a u t h o r i z i n g t h e a p p l i c a t i o n
f o r the loan from t h e Federal r e s e r v e bank and approving t h e applicapt i o n of the borrowing bank f o r a loan from the group.
The n e c e s s i t y
f o r t h i s second meeting would r e s u l t i n much delay i n o b t a i n i n g advances from t h e Federal r e s e r v e bank under Section 10(a) and might f r e quently make i t impossible t o obtain t h e necessary c r e d i t i n time
to meet t h e
emergency c o n f r o n t i n g the borrowing bank.
In order t o elim-
i n a t e the n e c e s s i t y f o r t h i s second meeting, i t i s suggested t h a t
*-3"*
the two proposed r e s o l u t i o n s "be consolidated, i n t o one arid adopted a t the
time of the formation of the group•
i n a d d i t i o n t o a u t h o r i z i n g the "bank
to "become a member of the group such a r e s o l u t i o n could a l s o a u t h o r i z e
/
c e r t a i n o f f i c e r s of t h e bank t o approve an a p p l i c a t i o n of the borrowing
bank f o r a loan from the group, t o j o i n i n making an a p p l i c a t i o n to
the Reserve Bank f o r a group loan and to execute on behalf of the bank
a group note evidencing such loan.
I do not understand the theory underlying t h e p r o v i s i o n s i n
the f i r s t p a r t of paragraph 6 on page 6 of the agreement covering the
o r g a n i z a t i o n of the loan group and e s p e c i a l l y the r e f e r e n c e to funds
under the c o n t r o l of t h e t r u s t e e which a r e s e c u r i t y , or r e p r e s e n t the
proceeds of any s e c u r i t y , f o r a note of the "borrowing bank.
I thought
t h a t i t was contemplated t h a t a l l s e c u r i t y f o r t h e note of t h e borrowing
bank would be pledged and d e l i v e r e d t o the Federal r e s e r v e bank and t h a t
no s e c u r i t y would be l e f t i n the hands of the t r u s t e e .
If t h i s i s the
c a s e , then i t would seem t h a t t h e Federal r e s e r v e bank would be e n t i t l e d
to a f i r s t claim on the proceeds of the note and should apply such p r o ceeds t o t h e indebtedness r e p r e s e n t e d by the note of t h e borrowing bank
and a l s o to the r e d u c t i o n of the pro r a t a l i a b i l i t y of a l l banks on t h e
group n o t e .
I f , however, the t r u s t e e holds any funds or s e c u r i t y other
than t h a t d e l i v e r e d t o the Federal r e s e r v e bank a s s e c u r i t y f o r the note
of the borrowing bank, i t would seem t h a t t h e proceeds should be a p p l i e d
f i r s t to t h e payment or reimbursement of the t r u s t e e f o r any expenses
i n c u r r e d by him i n connection with t h e performance of any of h i s d u t i e s
and t h a t anything remaining should be paid t o t h e Federal r e s e r v e bank
and a p p l i e d i n the manner suggested above.
X 7177
"
-4Both the note of the "borrowing bank and. t h e note of t h e
group provide f o r the payment of i n t e r e s t a t m a t u r i t y a t a c e r t a i n
r a t e per annum from the date of t h e note*
I t seems p r o b a b l e , how-
e v e r , t h a t i n a g r e a t m a j o r i t y of c a s e s , advances under Section 10(a)
would be handled on a discount b a s i s and i n t e r e s t deducted i n advance; and i t would seem d e s i r a b l e f o r these note forms to be
changed so t h a t they w i l l be a p p r o p r i a t e f o r use i n cases where
the notes a r e discounted as well as i n cases where i n t e r e s t i s p a i d
at maturity.
These forms seem t o contemplate t h a t t h e note of the group
and the s e c u r i t y t h e r e f o r w i l l not be forwarded t o t h e Federal r e serve bank u n t i l a f t e r the r e s e r v e bank has considered t h e a p p l i c a t i o n and has a c t u a l l y made the l o a n .
I t would seen a d v i s a b l e t o
have t h e note and t h e c o l l a t e r a l s e c u r i n g i t accompany the a p p l i c a t i o n to t h e F e d e r a l reserve bank, i n order t h a t t h e l a t t e r may
i n s p e c t t h e c o l l a t e r a l b e f o r e approving the loan and i n order t h a t t h e
proceeds of t h e l o a n may be made a v a i l a b l e a s soon as i t i s
approved.
I understand t h a t t h i s i s t h e e s t a b l i s h e d procedure r e -
garding discounts and advances t o member banks under Section 13
and i t seems to me t h a t i t should p r o p e r l y be followed i n thi-s
case a l s o .
The form of note of the borrowing bank, which has been
r e v i s e d so a s to omit many of the p r o v i s i o n s which were included
i n the note a s f i r s t d r a f t e d , s t i l l contains a number of p r o v i sions which do not appear t o me t o be e s s e n t i a l .
As I have p r e -
v i o u s l y w r i t t e n Mr. Logan, I f e e l t h a t i t would be a d v i s a b l e t o
485
486
X-7177
-5use a simple, s t r a i g h t n o t e , i n c o r p o r a t i n g i n t h e a p p l i c a t i o n a l l
necessary p r o v i s i o n s a s to the r i g h t s of the h o l d e r , e f f e c t of i n solvency, e t c .
The second paragraph of the note e s p e c i a l l y seems
to me to "be unnecessary.
The r e f e r e n c e to the group agreement i n
the f i r s t sentence of t h a t paragraph might a f f e c t t h e n e g o t i a b i l i t y
of t h e note i n some j u r i s d i c t i o n s , and t h e c e r t i f i c a t i o n contained
i n t h e second sentence of t h e paragraph as t o the amount of e l i g i b l e
and a c c e p t a b l e a s s e t s of t h e borrowing bank seems unnecessary i n
view of t h e f a c t t h a t such a c e r t i f i c a t i o n i s contained i n t h e a p p l i c a t i o n of the borrowing bank.
The f i r s t paragraph of the note s t a t e s
t h a t copies of the a p p l i c a t i o n f o r the loan and of t h e schedule of
c o l l a t e r a l s e c u r i t y a r e attached t o the note and made a p a r t t h e r e o f .
This would appear t o have the same e f f e c t upon the n e g o t i a b i l i t y of
the note a s the s p e c i f i c i n c l u s i o n of each of the p r o v i s i o n s of the
a p p l i c a t i o n and, as t h i s p r o v i s i o n does not seem n e c e s s a r y , I t h i n k
i t might wisely be omitted.
The note of the Member Bank Loan Group provides t h a t any
member except a borrowing bank may pay the amount of i t s l i a b i l i t y a t
any time and s h a l l not t h e r e a f t e r be l i a b l e .
I see no reason why a
borrowing bank should not be permitted to a n t i c i p a t e and discharge
a l l or any p a r t of i t s l i a b i l i t y to t h e Federal r e s e r v e bank.
I t might be p r o v i d e d , however, t h a t any payment made by the
borrowing bank s h a l l be a p p l i e d on i t s i n d i v i d u a l note t o t h e
X-7177 4 8 7
group r a t h e r than on i t s pro r a t a share of the l i a b i l i t y on t h e group
note and s h a l l a l s o be a p p l i e d i n reducing pro r a t a the l i a b i l i t i e s of
a l l banks on the group n o t e .
I t might a l s o be well t o add t h a t , i n t h e
event of such a n t i c i p a t i o n of l i a b i l i t y by any member of the group, the
note and other agreements s h a l l remain i n f u l l f o r c e and e f f e c t as t o
a l l other members of the group and t h a t any r i g h t s of t h e bank which
has a n t i c i p a t e d i t s l i a b i l i t y i n t h e c o l l a t e r a l s e c u r i t y pledged with
the Federal r e s e r v e bank s h a l l be subordinated to the r i g h t s of the
latter.
These suggestions a r e submitted f o r your c o n s i d e r a t i o n , and
I t h i n k they deserve c a r e f u l a t t e n t i o n ; b u t , i n order to avoid f u r t h e r
delay, I suggest t h a t you transmit d i r e c t l y t o t h e other Federal r e serve banks any f u r t h e r m o d i f i c a t i o n s or r e v i s i o n s of t h e s e forms
which you or your committee may decide upon and t h a t they not be held
f o r f u r t h e r c o n s i d e r a t i o n by t h i s o f f i c e .
For t h e Board's i n f o r m a t i o n ,
however, we would l i k e t o have copies of any f u r t h e r conraonications on
t h i s s u b j e c t which you or your committee may t r a n s m i t t o t h e other
banks.
With k i n d e s t personal r e g a r d s , I am,
C o r d i a l l y yours,
(Signed*) Walter Ttyatt
General Counsel
WW/gc/4/7/32
35-7177-a
488
March 9, 1932.
Mr. Walter S. Logan, Counseli
Federal Reserve Bank of Mew York,
Mew York, Mew York.
Dear Walter;
Confirming the conversations you and I had y e s t e r d a y
and today, r e g a r d i n g the forms f o r use in connection with loans
under Sections 10(a) and 10 (b) of t h e Federal Reserve Act as
amended by the Act of February 27, 1932, I have not y e t f i n i s h e d
my study of t h e s e forms; b u t , in order to expedite m a t t e r s , I
am sending you herewith such suggestions as I have ready a t the
p r e s e n t moment.
There i s inclased a memorandum making d e t a i l e d
suggestions r e g a r d i n g c e r t a i n of the forms, and I s h a l l incorpora t e in t h i s l e t t e r more general suggestions r e g a r d i n g o t h e r forms.
In view of the f a c t t h a t these forms a r e b e i n g prepared
f o r u s e throughout the United S t a t e s , i t would seem t h a t , as suggested by Governor Calkins, t h e form of note to be used by a bank
borrowing from a group should be a simple, s t r a i g h t n o t e , in order
t h a t t h e r e might not be any question about i t s n e g o t i a b i l i t y , and
t h a t the p r o v i s i o n s regarding t h e pledge of c o l l a t e r a l and t h e
o t h e r d e t a i l s of t h e c o n t r a c t of t h e borrowing bank should be
incorporated in a s e p a r a t e agreement.
Inasmuch a s i t i s probable
t h a t t h e s e n o t e s w i l l be discounted, l i k e member bank 15-day
489
X-7177-a
Mr. W. S. Logan - 2
n o t e s under Section 13, i t would seem that they should provide f o r
t h e "payment of i n t e r e s t a f t e r m a t u r i t y r a t h e r than i n t e r e s t from the
d a t e of t h e n o t e .
Assuming t h a t the p r o v i s i o n s regarding the pledge of
c o l l a t e r a l and other s i m i l a r p r o v i s i o n s w i l l be t r a n s f e r r e d to a
s e p a r a t e document (which might be t h e a p p l i c a t i o n of t h e borrowing
bank to t h e group), I would suggest t h a t , wherever the payee i s r e f e r r e d to i n t h e p r o v i s i o n s which a r e now incorporated i n t h e body
of the n o t e , the holder of the note r a t h e r than t h e payee be r e ferred to.
In view of the p r o v i s i o n s of the s t a t u t e r e g a r d i n g the
pledge of s e c u r i t y f o r t h e p r o t e c t i o n of the group of banks, i t
would a l s o seem a d v i s a b l e to make i t c l e a r t h a t such s e c u r i t y may
not be a p p l i e d on o t h e r indebtedness to t h e Federal r e s e r v e bank
u n t i l a f t e r t h e borrowing b a n k ' s o b l i g a t i o n to the group has been
s a t i s f i e d in f u l l .
I t would a l s o seem t h a t the borrowing bank
should s p e c i f i c a l l y a u t h o r i z e t h e group or t h e t r u s t e e r e p r e s e n t i n g
t h e group to pledge to t h e Federal r e s e r v e bank a l l c o l l a t e r a l or
o t h e r s e c u r i t y pledged by the borrowing bank to the group, in order
t h a t the borrowing bank might be estopped from claiming t h a t such
s e c u r i t y was intended only f o r t h e p r o t e c t i o n of the group and not
f o r the p r o t e c t i o n of the Federal r e s e r v e bank.
Since the g r o u p ' s note w i l l be made payable d i r e c t l y
to t h e Federal r e s e r v e bank and presumably w i l l not be t r a n s f e r r e d
X-7177-a
Mr. Wt S< Logan - 3
49
to any o t h e r h o l d e r , i t would not seem important f o r i t to be negotiable.
Therefore, t h e r e would seem to be no o b j e c t i o n to incor-
p o r a t i n g in the n o t e of t h e group the various p r o v i s i o n s regarding
t h e pledge of c o l l a t e r a l and c e r t a i n a d d i t i o n a l p r o v i s i o n s which a r e
discussed below; but I t h i n k t h a t c a r e f u l c o n s i d e r a t i o n should be
given to t h e question whether i t would not be more a d v i s a b l e t o
i n c o r p o r a t e such p r o v i s i o n s in the a p p l i c a t i o n of t h e group to
t h e Federal r e s e r v e bank f o r a loan.
On t h i s question, however,
I havo no d e f i n i t e o p i n i o n .
During our d i s c u s s i o n s with t h e Committee on Sunday,
March 7 t h , i t was t e n t a t i v e l y agreed t h a t the n o t e , a p p l i c a t i o n
or some o t h e r agreement of the group of banks with the Federal
r e s e r v e bank should c o n t a i n p r o v i s i o n s along the f o l l o w i n g l i n e s ;
1.
That, with r e s p e c t to the note of t h e borrowing bank and
the s e c u r i t y t h e r e f o r t h e Federal r e s e r v e bank may e x e r c i s e a l l of
the powers of ownership without f o r e c l o s u r e .
2.
That t h e group a s s i g n s to the Federal r e s e r v e bank a l l
o t h e r r i g h t s and claims a g a i n s t the borrower a r i s i n g out of such
borrowing.
3.
That, in t h e case of the insolvency of t h e borrowing
bank, the Federal r e s e r v e bank i s authorized to f i l e a claim a g a i n s t
the borrowing bank i n i t s own name and f o r i t s own b e n e f i t f o r the
f u l l amount of t h e p r i n c i p a l and i n t e r e s t of the group note and
t h a t f o r t h i s purpose, t h e group a s s i g n s to the Federal r e s e r v e bank a l l
X-7177-a
4 9 1
Mr. W. S. Logan - 4
of i t s r i g h t s a g a i n s t the borrowing bank; Provided, however, That the
Federal r e s e r v e bank s h a l l hold t h e note of t h e borrowing bank as a
holder in due course and not as assignee.
( I have not attempted to
s t a t e t h i s i n proper l e g a l form b u t have simply d i c t a t e d i t from t h e
rough notes which I made a t our meeting on Sunday.
The -ouroose of the
p r o v i s i o n , of course, i s to enable t h e Federal r e s e r v e bank to f i l e with
the r e c e i v e r of the borrowing bank a claim f o r t h e f u l l amount of the
borrowing, s i n c e otherwise t h e claim of the Federal r e s e r v e bank a g a i n s t
the borrowing bank on t h e note of the grdtap would only be f o r t h e borrowing b a n k ' s pro r a t a share of t h e amount of the group n o t e .
Of course,
the Federal r e s e r v e bank, a f t e r f o r e c l o s i n g on the c o l l a t e r a l , and
taking over the n o t e of the borrowing bank in i t s own r i g h t , could
f i l e a claim on t h a t n o t e with the r e c e i v e r of the borrowing bank; but
in some S t a t e s and under some circumstances t h i s might be u n d e s i r a b l e .
I t might a l s o be claimed t h a t the Federal r e s e r v e bank would have to
c r e d i t the amount r e a l i z e d in t h i s manner a g a i n s t the pro r a t a l i a b i l i t y
of the o t h e r banks in the group.)
4.
The above p r o v i s i o n s , however, s h a l l not a f f e c t t h e
r i g h t of the Federal r e s e r v e bank to enforce t h e l i a b i l i t y of the
other banks in the group on the group note without f i r s t proceeding
against the borrowing bank.
5.
The Federal r e s e r v e bank may grant renewals, extensions
and other indulgences to any member of t h e group without a f f e c t i n g i t s
r i g h t s a g a i n s t any o t h e r member of t h e group.
X- 71?7-a
4 9 2
Mr. W. S. Lbgan - 5
I t would, seem also t h a t the c o n t r a c t of both t h e "borrowing bank
and the c o n t r a c t of the group with the Federal r e s e r v e bank should
provide t h a t , a f t e r the b o r r o w e r ' s o b l i g a t i o n and the o b l i g a t i o n of
the group have been s a t i s f i e d in f u l l , any remaining c o l l a t e r a l h e l d
by t h e Federal r e s e r v e bank may be u t i l i z e d by i t to s a t i s f y any other
o b l i g a t i o n of t h e borrowing bank.
In both agreements, i t would a l s o
seem a d v i s a b l e to provide t h a t any other s e c u r i t y held by the Federal
r e s e r v e bank f o r other o b l i g a t i o n s of t h e borrowing bank may f i r s t be
a p p l i e d on other indebtedness of t h e borrowing bank to t h e Federal
r e s e r v e bank, but t h a t any s u r p l u s remaining a f t e r a l l such o t h e r i n debtedness has been s a t i s f i e d in f u l l may, in t h e d i s c r e t i o n of the Fede r a l r e s e r v e bank, be u t i l i z e d to s a t i s f y the o b l i g a t i o n of the group
or the o b l i g a t i o n of t h e borrowing bank.
I t would a l s o seem a d v i s a b l e , in t h s c o n t r a c t of t h e group,
to provide s p e c i f i c a l l y f o r the r i g h t of any bank to a n t i c i p a t e
and discharge i t s l i a b i l i t y to the Federal r e s e r v e bank; but with a
proviso t h a t , in such event, the note and other agreements s h a l l remain
in f u l l f o r c e and e f f e c t as to a l l other members of t h e group and
t h a t any r i g h t s of such bank ( i . e . , t h e bank which a n t i c i p a t e s and
discharges i t s l i a b i l i t y ) in t h e c o l l a t e r a l or other s e c u r i t y pledged
with the Federal r e s e r v e bank s h a l l be subordinated to the r i g h t s of
the Federal r e s e r v e bank.
X-7177-a
Mr. W. S. iQgan - 6
In t h e n o t e of the loan group i t would seem a d v i s a b l e
to provide f o r t h e payment of i n t e r e s t a f t e r m a t u r i t y , i n s t e a d of
i n t e r e s t from t h e date of the note, fdt
the reasons i n d i c a t e d
above in connection with t h e n o t e of the borrowing bank*
In the note or o t h e r c o n t r a c t of the group, the p r o v i s i o n s
regarding t h e method of determining the pro r a t a l i a b i l i t y of each
member of t h e group should be changed in accordance with t h e change
recommended i n t h e inclosed memorandum with regard to the agreement
to form the loan group.
In t h e a p p l i c a t i o n of the loan group to the Federal r e s e r v e
bank f o r a loan (paragraph I I ) you a p p a r e n t l y contemplate t h a t the
n o t e of the group and the s e c u r i t y t h e r e f o r would not be forwarded
to the Federal r e s e r v e bank u n t i l a f t e r the Federal r e s e r v e bank has
considered t h e a p p l i c a t i o n and approved the loan.
In accordance with
the e s t a b l i s h e d procedure regarding r e d i s c o u n t s and advances to member
banks under Section 13, would i t not be b e t t e r to have t h e note and
c o l l a t e r a l accompany the a p p l i c a t i o n to the Federal r e s e r v e bank, in
order t h a t t h e Federal r e s e r v e bank may inspect the c o l l a t e r a l b e f o r e approving the loan and in order t h a t the proceeds may be made
immediately a v a i l a b l e as soon as the loan i s approved?
In t h e a p p l i c a t i o n f o r a loan under Section 10(b), i t would
seem t h a t , in view of t h e f a c t t h a t the Federal Reserve Board probably
w i l l not p r e s c r i b e any r e g u l a t i o n s d e f i n i n g t h e c l a s s e s of a s s e t s which
may be pledged a s c o l l a t e r a l , i t would be a d v i s a b l e to s t r i k e out the
4 9 3
. 494
X-7177-a
Mr. W. S. Logan - 7
c e r t i f i c a t e to t h e e f f e c t t h a t the c o l l a t e r a l l i s t e d i n Schedule A i s
e l i g i b l e And to s u b s t i t u t e t h e r e f o r a statement to t h e e f f e c t t h a t
none of t h e c o l l a t e r a l l i s t e d in Schedule A i s t h e o b l i g a t i o n of any
f o r e i g n government, i n d i v i d u a l , p a r t n e r s h i p , a s s o c i a t i o n , or corporat i o n organized under the laws t h e r e o f .
I t would also seem a d v i s a b l e
to i n s e r t in t h i s form a c e r t i f i c a t e to t h e e f f e c t t h a t t h e statement
of the exceptional and exigent circumstances which i s i n c o r p o r a t e d in
the a p p l i c a t i o n or a t t a c h e d t h e r e t o i s a t r u e statement and i s b e l i e v e d
to be s u f f i c i e n t to j u s t i f y the g r a n t i n g of the advances a p p l i e d f o r .
As soon a s I can complete my study of your t e n t a t i v e d r a f t s
of the forms, I s h a l l forward such a d d i t i o n a l suggestions a s m^y occur
to me; and I would l i k e to have you consider them b e f o r e you d e l i v e r
your f i n a l d r a f t of the forms to the Committee.
I t i s a l s o understood,
of course, t h a t the Committee w i l l submit a l l of t h e forms to the Fede r a l Reserve Board f o r i t s c o n s i d e r a t i o n b e f o r e t r a n s m i t t i n g them to
the Federal r e s e r v e banks.
R e g r e t t i n g t h a t we were unable to see more of you during
our r e c e n t v i s i t to New York and with k i n d e s t personal r e g a r d s , I
am
C o r d i a l l y yours,
Walter Wyatt,
General Counsel.
In c l o s u r e .
X-717?-b
March 9, 1932*
(Mr. W y a t t ' s Tentative Suggestions re forms f o r
use in making Advances under Sections 10(a) and
10(b).)
RESOHJTION AUTHORIZING BANK OB TRUST
COMPANY TO BECOME MEMBER OF LOAN GROUP.
Last l i n e of f i r s t paragraph, omit word "unanimously",
since the r e s o l u t i o n may not be adopted unanimously.
AGREEMENT TO FORM LOAN GROUP
Suggest amission of f i r s t two "Whereas" c l a u s e s ,
a s being unnecessary and unduly lengthening the agreement.
Suggest t h a t l a t t e r p a r t of f i r s t paragraph on page 2
be changed to read a s f o l l o w s ;
"deem i t advisable to fonn
themselves i n t o a group of member banks f o r the purpose of
a v a i l i n g themselves of the b e n e f i t s of Section 10(a) of the
Federal Reserve Act*"
Page 2, paragraph numbered 1$
read a s f o l l o w s :
Change l a t t e r p a r t to
"When t h i s agreement has been p r o p e r l y execu-
ted by a l l members named in the next succeeding paragraph
hereof".
I t would seem inadvisable to r e q u i r e the approval
of such agreement by the Federal reserve bank; since such
approval might be considered to carry with i t an implied
commitment t o make loans to the group organized t h e r e u n d e r .
Page 3, paragraph numbered 3s
Commencing w i t h the
word "unless" change to read "unless there i s a n o t a t i o n to
the c o n t r a r y f o l l o w i n g i t s name in paragraph 2 h e r e o f . "
Paragraph numbered 4 on page 3:
follows;
change to read a s
495
4 9 6
X-7177-1
"4.
The l i a b i l i t y of each member of the loan group fof
advances made by the r e s e r v e bank to the loan group s h a l l be
l i m i t e d , i n accordance w i t h the p r o v i s i o n s of Section 10(a)
of the Federal Reserve Act, * to such p r o p o r t i o n of the t o t a l
amount advanced to such group as the d e p o s i t l i a b i l i t y of the
r e s p e c t i v e banks b e a r s to the aggregate d e p o s i t l i a b i l i t y of
a l l banks in such g r o u p ' ; and the l i a b i l i t y of each member on
each note of the Loan Group s h a l l be determined on the b a s i s of
i t s g r o s s d e p o s i t l i a b i l i t i e s a t the opening of b u s i n e s s on the
date of the w r i t t e n a p p l i c a t i o n by the Loan Group to t h e Federal
Reserve Bank f o r the advance evidenced by such n o t e , which s h a l l
be computed by adding t o g e t h e r , ( l ) i n the case of a n a t i o n a l
bank, the f i g u r e s corresponding to those c a l l e d f o r by items
21, 22, 23 and 24 on the Comptroller of the Currency's Call Report
Form No. 2130, a s r e v i s e d i n November, 1931, or (2) in the case of
a State member bank, the f i g u r e s corresponding to those c a l l e d f o r
by items 19, 20, 21 and 22 on the Federal Reserve Board's Call
Report Form No. 105, a s r e v i s e d in November, 1931."
Page 3, paragraph numbered 5:
S t r i k e out the words "and
agent" in two p l a c e s .
Page 3, paragraph numbered ( a ) :
S t r i k e out the words " c o l l a t e r -
a l " and p l a c e quotation marks b e f o r e and a f t e r the words "Borrowing
Bank".
Page 4, l i n e s 1 and 2:
S t r i k e out the words " c o l l a t e r a l "
and s u b s t i t u t e t h e r e f o r the word " s e c u r i t i e s " .
words "as s e c u r i t y " .
S t r i k e out the
-3Page 4, l i n e 3:
X-7177-&
S t f i k d gtit the words ''not tin'1 and sub-
s t i t u t e the word "no".
Page 4 , paragraph (b) l i n e 2:
insert
Ir
A f t e r word " a p p l i c a t i o n s "
by or on b e h a l f " .
Page 4, paragraph (b) l i n e 7;
A f t e r word "aggregate"
i n s e r t word "amount".
Page 4, paragraph (b) l i n e 9:
Change word "are" to " s h a l l
be".
Page 4, paragraph (b) l i n e 14: S t r i k e out words "secured
by the c o l l a t e r a l " and s u b s t i t u t e "and the s e c u r i t y " .
Page 4 , paragraph (b) l i n e 15: S t r i k e out words "as
security".
S t r i k e out word " c o l l a t e r a l " and s u b s t i t u t e t h e r e f o r
the word " s e c u r i t y " .
Page 4 , paragraph (b) l i n e 18: S t r i k e out words "Loan
Group" and s u b s t i t u t e "Federal reserve bank".
Page 4, paragraph ( b ) , f i v e l i n e s from the bottom:
S t r i k e out word " c o l l a t e r a l " .
Page 4 , paragraph ( b ) : At end of paragraph, add the
following:
"When a member has signed and d e l i v e r e d to the t r u s t e e
a note of the Loan Group, such members s h a l l , by such a c t i o n ,
be deemed to have a u t h o r i z e d or r a t i f i e d , ( l ) the making of a loan
or loans by the loan group to the member or members named in the
a p p l i c a t i o n of such Loan Group to the Federal r e s e r v e bank, and
(2) the s i g n i n g and d e l i v e r i n g to the Federal r e s e r v e bank on
behalf of the Loan Group of the a p p l i c a t i o n of such Loan Group f o r
the loan d e s c r i b e d i n such a p p l i c a t i o n on the terms and c o n d i t i o n s
stated therein."
~4~
X-7177*-b
Page 5, paragraph (ti) lifted 5, 6 and 7}
S t r i k e out
the words " c o l l a t e r a l o f f e r e d a s s e c u r i t y f o r said note oi* notea
of the "borrowing bank or "banks and" and s u b s t i t u t e t h e r e f o r the
word " s e c u r i t y " .
Page 5, paragraph (c) l i n e 12: S t r i k e out the words "without r e c o u r s e " .
Page 5, paragraph (c) l i n e s 16 and 17: S t r i k e out words
"with c o l l a t e r a l s e c u r i t y f o r s a i d loan or l o a n s " and s u b s t i t u t e
t h e r e f o r t h e words " s e c u r i t y t h e r e f o r " .
Page 5, paragraph ( d ) : S t r i k e out the word " c o l l a t e r a l "
in four places.
Also a f t e r the word " r e t u r n " in the f i f t h l i n e
of the paragraph, i n s e r t the words "or r e l e a s e " .
Page 6:
Immediately b e f o r e paragraph 6, i n s e r t a new
paragraph a b s o l v i n g the t r u s t e e from a l l personal l i a b i l i t y
f o r any and a l l a c t s done by him on behalf of the Loan Group
pursuant to the terms of t h i s agreement and w i t h i n the scope of
his authority.
RESOLUTION OF BORROWING BANKS.
Immediately a f t e r the words "NOW, THEREFORE, BE IT
RESOLVED," i n s e r t the f o l l o w i n g "that
"(name and t i t l e of o f f i c e r
________________________
i s authorized
other than the one signing a t t a c h e d c e r t i f i c a t e . ) "
and d i r e c t e d : "
At end of paragraph 2, s t r i k e out the word "and".
At end of paragraph 3, i n s e r t the word "and".
Add a new paragraph as f o l l o w s , immediately a f t e r paragraph 3:
-5-
X-7177-b
4 9 9
"4.
To give such othei?
a M i M f i l a i s e c u r i t y as may "be
necessary f o r the purpose of obtaining such advance."
t
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-717S
June 14,
SUBJECT:
Expense, Main l i n e s ,
May, 1 9 3 2 .
1932.
Leased Wire System,
Dear S i r :
E n c l o s e d h e r e w i t h y o u w i l l f i n d two m i m e o g r a p h e d
s t a t e m e n t s , X - 7 1 ? 8 - a and X - y i y g - b , c o v e r i n g i n d e t a i l
o p e r a t i o n s o f t h e m a i n l i n e s , Leased Wire System, d a r i n g
t h e m o n t h o f May, 1 9 3 2 .
P l e a s e c r e d i t t h e amount p a y a b l e "by y o u r b a n k i n
t h e g e n e r a l a c c o u n t , T r e a s u r e r , U. S . , on y o u r books, and
i s s u e C/D Form 1 , N a t i o n a l Banks, f o r a c c o u n t o f " S a l a r i e s
and Expenses, F e d e r a l Reserve Board, S p e c i a l Fund", Leased
W i r e System, s e n d i n g d u p l i c a t e C/D t o t h e F e d e r a l R e s e r v e
Board.
Very t r u l y y o u r s ,
Fiscal Agent.
Enclosures.
TO GOVERNORS OF A L L F .
R. B A M S .
s
x-7178-a
REPORT SHOWING- CLASSIFICATION AMD NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF MAT, 1 9 3 2 .
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
^Dallas
33&n Francisco
Total
F.
Words sent by
New York chargea b l e to o t h e r
F. R. Banks ( l )
28,468
145,645
28,722
61,165
63,530
53,759
86,760
69,080
32,630
67,640
58.379
98,921
794.699
Net Federal
reserve
bank
business
30.366
-
3.66
145,645
1,898
17.54
3.81
7.65
7.93
7.36
31.630
2,908
2,323
2,298
7.377
2,842
2,321
2,108
2,199
5,354
4.039
35.667
Percent of t o t a l
bank b u s i n e s s (*)
63,488
65,828
61,136
89.602
71,401
.
R. B o a r d b u s i n e s s
10.79
8.60
34,738
4.18
69,839
8.41
7.67
63.733
102.960
830,366
12.40
100.00
283.717
332.690
R e i m b u r s a b l e b u s i n e s s I n c o m i n g and. O u t g o i n g
T o t a l words t r a n s m i t t e d o v e r m a i n l i n e s
1.446,773
(*)
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 t h e p r o r a t a s h a r e o f
on t h e accompanying statement ( X - 7 1 7 8 - b ) .
(l)
Number o f w o r d s s e n t b y New Y o r k t o o t h e r F . R . B a n k s f o r t h e i r s o l e b e n e f i t c h a r g e d t o
banks i n d i c a t e d i n accordance w i t h a c t i o n t a k e n a t Governors* Conference
November 2 - 4 , 1 9 2 5 .
1,114,083
l e a s e d w i r e e x p e n s e a s shown
g
• H-
X-7178-b
REPORT OF EXPENSE MAIN L I N E S
FEDERAL RESERVE LEASED WIRE SYSTEM, MAY, 1 9 3 2 .
Name o f
bank
Boston
New Y o r k
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
•Kansas C i t y
;Pal l a s
SOB? F r a n c i s c o
F e d e r a l Reserve Board
Total
Operators'
salaries
$260.00
1,134.15
225.00
306.66
190.00
270.00
3,776.75 (#)
195.00
263.33
287-50
251.00
380.00
Operators
overtime
$
Wire
rental
-
$
Total
expenses
-
$260.00
1,134.15
225.00
306.66
420.00
-
—
-
-
—
230.00 (&)
-
-
13.00
-
270.00
3,789-75
-
-
-
—
195.00
263.33
287-50
-
-
—
—
-
—
$7,539.39
1
—
—
15.580.29
$ 13.00 $15,810.29
251.00
380.00
15.580.29
$23,362.68
Pro r a t a
share of
total
expenses
$658.45
3,155.51
685.43
1,376.26
1,426.64
1,324.09
1,941.16
1,547.17
752.00
1.512-99
1,379.86
2,230.80
—
$17,990.36
Credits
$260.00
1,134.15
225.00
306.66
420.00
270.00
3,789.75
195.00
263.33
287-50
251.00
380.00
Payable to
Federal
Reserve
Board
$398.45
2,021.36
460.43
1,069.60
1,006.64
1,054.09
1,848.59 ( *
1,352.17
488.67
1,225.49
1,128.86
1,850.80
—
$7,782.39
$12,056.56
1,8kg.59
(a)
$10,207.97
Reimbursable charges:
Treasury Department. . . . . . . . .
Reconstruction Finance Corporation .
F e d e r a l Farm Loan B o a r d
F e d e r a l Farm B o a r d
Lees r e i m b u r s a b l e c h a r g e s
$2,294.70
2,989.41
29.82
58.39
5.372.32
$17,990.36
(&)
(#)
(*)
(a)
Main l i n e r e n t a l , Richmond-Washington.
Includes s a l a r i e s of Washington operators.
Credit.
Amount r e i m b u r s a b l e t o C h i c a g o .
'jjJJ
5 0 3
X-7180
June 11, 1932
Board's r u l i n g s regarding
Dr. Miller
Bankers' Acceptances
Mr. Vest - A s s i s t a n t Counsel.
In accordance with your r e q u e s t , I have prepared t h e
following memorandum showing t h e more important changes which t h e
Board has made from time to time i n the p r i n c i p l e s i n c o r p o r a t e d i n
i t s r e g u l a t i o n s and r u l i n g s with r e s p e c t to "bankers' a c c e p t a n c e s .
The memorandum i s not intended t o cover the l e s s e r important r u l ings or r e g u l a t i o n s of the Board on t h i s s u b j e c t "but i t s purpose
i s to give the f a c t s with r e f e r e n c e t o t h o s e r u l i n g s of primary
importance which r e p r e s e n t changes i n p o l i c y with regard to b a n k e r s '
acceptances, and p a r t i c u l a r l y as to those cases where such changes
have involved a l i b e r a l i z a t i o n of the requirements.
ORIGINAL FEDERAL RESERVE ACT AND EARLY
REGULATIONS AND RULINGS.
Under the p r o v i s i o n s of t h e o r i g i n a l Federal Reserve Act,
Federal r e s e r v e "banks were authorized "by s e c t i o n 13 t o discount a c c e p t ances based on t h e importation or e x p o r t a t i o n of goods w i t h m a t u r i t i e s
of not more than t h r e e months, when indorsed by a member bank; and
member banks were a u t h o r i z e d to accept d r a f t s or b i l l s of exchange
a r i s i n g out of import and export t r a n s a c t i o n s having not more than
s i x months' s i g h t t o r u n .
Federal r e s e r v e banks were a l s o authorized
by s e c t i o n 14 t o purchase bankers' acceptances, with or without t h e
indorsement of a member bank.
5 0 4
X-7180
—2-*
The Federal Reserve Board i n 1915 issued s e v e r a l d i f f e r e n t
r e g u l a t i o n s r e g a r d i n g "bankers' acceptances, gradually expanding and
enlarging the p r o v i s i o n s w i t h r e s p e c t to t h e i r e l i g i b i l i t y f o r r e discount.
As a r e q u i s i t e of e l i g i b i l i t y , i t was r e q u i r e d by t h e
Board's r u l i n g s t h a t t h e r e be a d e f i n i t e bona f i d e c o n t r a c t f o r t h e
shipment of the goods involved i n the import or export t r a n s a c t i o n
w i t h i n a s p e c i f i e d and reasonable time a f t e r t h e making of t h e
acceptance, and a l s o t h a t the t r a n s a c t i o n on account of which the
acceptance i s drawn must i t s e l f involve the importation or exportat i o n of the goods i n question.
One of the p r o v i s i o n s contained i n t h e Board's e a r l y
r e g u l a t i o n s was t h a t an acceptance must have been made "by a member
bank, nonmember bank, t r u s t company or by some p r i v a t e banking f i r m ,
person, company or c o r p o r a t i o n engaged i n the b u s i n e s s of a c c e p t i n g
or d i s c o u n t i n g " .
This p r o v i s i o n recognized as e l i g i b l e f o r discount
acceptances made, not only by banks and bankers, but a l s o by others
engaged i n t h e acceptance b u s i n e s s .
A s i m i l a r p r o v i s i o n , though
i n d i f f e r e n t language, i s contained i n the p r e s e n t r e g u l a t i o n s r e garding acceptances.
One of t h e most important of the e a r l y r u l i n g s on acceptances
was one published i n t h e 1915 B u l l e t i n a t page 91, i n the form of
an opinion of t h e Board's counsel, which held t h a t Federal r e s e r v e
banks were a u t h o r i z e d t o discount acceptances, as a r i s i n g out of t h e
5 0 5
X-7180
-3importation and e x p o r t a t i o n of goods, which were based on the shipment
of goods "between any two or more f o r e i g n countries and "between the
United S t a t e s and c e r t a i n of i t s dependencies and p o s s e s s i o n s , as well
as between the United S t a t e s and f o r e i g n c o u n t r i e s .
The Board's
records do not i n d i c a t e the circumstances under which t h i s r u l i n g was
made.
The substance of t h i s r u l i n g was subsequently incorporated
i n the Board's r e g u l a t i o n s and has "been contained i n t h e r e g u l a t i o n s
s in c e t h a t time.
AUTHORITY FOR THE PURCHASE CR DISCOUNT Off
ACCEPTANCES ARISING OUT Off DOMESTIC TRANSACTIONS.
In a r e g u l a t i o n promulgated i n November 1915, the Board
authorized Federal r e s e r v e banks t o purchase b a n k e r s ' a c c e p t a n c e s ,
when p r o p e r l y secured, covering the domestic shipment of goods or
covering the warehouse s t o r a g e of r e a d i l y marketable s t a p l e s .
In
t r a n s m i t t i n g t h i s r e g u l a t i o n , the Board s t a t e d t h a t i t had not f e l t
j u s t i f i e d , upon a d m i t t i n g S t a t e banks and t r u s t companies to the
Federal Reserve System, i n r e q u i r i n g t h a t they d i s c o n t i n u e making
acceptances a r i s i n g out of domestic t r a n s a c t i o n s i f kept w i t h i n r e a s o n a b l e l i m i t a t i o n s ; and t h a t t h e Board considered such acceptances as
of a c h a r a c t e r t o make d e s i r a b l e investments f o r Federal r e s e r v e banks.
As uniformly construed by the Board, t h e a u t h o r i t y of F e d e r a l r e s e r v e
banks t o purchase b a n k e r s ' acceptances under s e c t i o n 14 of t h e Feddral
Reserve Act i s not s u b j e c t t o the l i m i t a t i o n s a p p l i c a b l e i n t h e case of
r e d i s c o u n t s of a c c e p t a n c e s , and accordingly i t was l e g a l l y p o s s i b l e
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to a u t h o r i z e Federal r e s e r v e "banks by r e g u l a t i o n to purchase
domestic acceptances although no s p e c i f i c mention of domestic
acceptances was made i n the law.
The Board's records do not
d i s c l o s e a t whose i n s t a n c e or suggestion t h i s a u t h o r i z a t i o n f o r
the purchase of domestic acceptances was given.
Subsequently i n the Act of September 7 , 1916, t h e law
was amended so as to a u t h o r i z e member banks to accept d r a f t s
or b i l l s growing out of t r a n s a c t i o n s involving the domestic
shipment of goods provided shipping documents conveying or securing
t i t l e a r e attached a t the time of acceptance, or which a r e secured
a t the time of acceptance by a warehouse r e c e i p t or other such document
conveying or securing t i t l e covering r e a d i l y marketable s t a p l e s ;
and Federal r e s e r v e banks were authorized t o discount such a c c e p t ances.
This amendment was recommended by the Federal Reserve
Board i n i t s annual r e p o r t covering the year 1915, i n which i t
was s a i d , "There can be but l i t t l e question of the s a f e t y of
such acceptances, and t h e i r use w i l l tend to equalize i n t e r e s t
r a t e s the country over and help to broaden t h e discount market 11.
507
X-7180
-5Among the p r i n c i p a l requirements which the Board has made i n
i t s r e g u l a t i o n s and r u l i n g s with r e s p e c t to acceptances drawn a g a i n s t
the s t o r a g e of r e a d i l y marketable s t a p l e s i s t h a t the warehouse r e c e i p t
covering such s t a p l e s be issued by a p a r t y independent of the customer and
t h a t such acceptances should not have a m a t u r i t y i n excess of t h e
time o r d i n a r i l y necessary to e f f e c t a reasonably prompt s a l e , shipment
or d i s t r i b u t i o n i n t o t h e process of manufacture or consumption.
In con-
n e c t i o n with acceptances drawn to f i n a n c e t h e domestic shipment of goods,
the Board has held t h a t t h e r e should be some a c t u a l connection between
the acceptance of t h e d r a f t and the t r a n s a c t i o n involving the shipment
of the goods; t h a t i s , the d r a f t should be drawn to f i n a n c e t h e shipment.
The Board has a l s o s a i d t h a t a Federal r e s e r v e bank may p r o p e r l y d e c l i n e
to discount any acceptance t h e maturity of which i s i n excess of the
usual or customary p e r i o d of c r e d i t r e q u i r e d t o f i n a n c e t h e underlying
t r a n s a c t i o n or which i s i n excess of t h a t period reasonably necessary
to f i n a n c e such t r a n s a c t i o n .
ACCEPTANCES TO FURNISH DOLLAR EXCHANGE.
The amendment of September 7, 1916, a l s o a u t h o r i z e d member
banks t o make, and F e d e r a l r e s e r v e banks t o a c q u i r e , acceptances having
not more than t h r e e months s i g h t to r u n , drawn by banks or bankers
i n f o r e i g n c o u n t r i e s or dependencies or i n s u l a r p o s s e s s i o n s of t h e
United S t a t e s f o r t h e purpose of f u r n i s h i n g d o l l a r exchange as r e quired by the usages of t r a d e .
508
X-7180
—
The Federal Reserve Board adopted r e g u l a t i o n s r e q u i r i n g member "banks which d e s i r e t o accept d r a f t s drawn "by banks or "bankers i n
c e r t a i n c o u n t r i e s f o r the purpose of f u r n i s h i n g d o l l a r exchange t o
obtain t h e permission of the Board.
Such permission i s granted when
the usages of t r a d e i n such c o u n t r i e s appear to r e q u i r e such a c c e p t ance f a c i l i t i e s .
There have been no important changes i n t h e r e g u l a -
t i o n s or i n the law w i t h respect to t h i s subject s i n c e 1916.
ACCEPTANCES DRAW UNDER CREDITS EXTENDING OVER A
PERIOD OF ONE OR T O YEARS.
W
Under d a t e of February 7, 1918, t h e Board addressed a l e t t e r
to the Governor of t h e Federal Reserve Bank of New York (published i n
the 1918 B u l l e t i n a t page 257), s t a t i n g i t s p o l i c y i n d e a l i n g with acceptances drawn under c r e d i t s extending over a period of one or two
years.
The expression of the Board's p o l i c y on t h i s s u b j e c t was con-
t a i n e d i n a memorandum accompanying the l e t t e r .
T h i s l e t t e r and memo-
randum were prepared a f t e r correspondence with t h e Federal Reserve Bank
of New York and a f t e r conferences between Governor Strong and a number
of New York b a n k e r s .
The p r i n c i p l e s o u t l i n e d i n the memorandum
were
summariBed i n the l e t t e r as f o l l o w s :
(1) Acceptance c r e d i t s opened f o r p e r i o d s i n excess of n i n e t y days should only, i n exceptional c a s e s , extend
over a p e r i o d of more than one y e a r , and i n no case f o r a time
exceeding two y e a r s .
(2) Banks which a r e members of groups opening t h e s e
c r e d i t s , should not buy t h e i r own a c c e p t a n c e s , and where an
agreement i s made with the drawer f o r purchase of acceptances
f o r f u t u r e d e l i v e r y , the r a t e should not be a f i x e d one, but
5 0 9
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should be based upon the r a t e r u l i n g a t t h e time of t h e s a l e .
(3) Transactions covered by t h e s e c r e d i t s should be of a
l e g i t i m a t e commercial n a t u r e , and acceptances must be e l i g i b l e
according t o the r u l e s and r e g u l a t i o n s of t h e Board.
(4) Whenever syndicates a r e formed f o r t h e purpose of
g r a n t i n g acceptance c r e d i t s f o r more than moderate amounts,
Federal r e s e r v e banks should be consulted with regard to
t h e t r a n s a c t i o n . The question of e l i g i b i l i t y , both from
t h e standpoint of the c h a r a c t e r of the b i l l and of the
amount involved, w i l l be passed upon by t h e Federal r e serve bank s u b j e c t to the approval i n each case of the
F e d e r a l Reserve Board.
The i n t r o d u c t o r y paragraph of t h e memorandum s e t t i n g f o r t h t h e p r i n c i p l e s above summarized i s a s f o l l o w s :
"In d e a l i n g with t h e question of a c c e p t a n c e s , i t i s
d e s i r a b l e t h a t the Board should not be obliged t o adopt
i n f l e x i b l e regulations unless absolutely necessary. I t
should be borne i n mind t h a t we a r e competing i n t h e a c ceptance f i e l d with other c o u n t r i e s which have no l e g a l r e s t r i c t i o n s i n which sound b u s i n e s s judgment, guided from
time t o time by t h e c e n t r a l banks of t h e s e c o u n t r i e s , const!*t u t e s t h e u n w r i t t e n , but none t h e l e s s r i g i d law. The banks
of t h e United S t a t e s would g r e a t l y a s s i s t t h e Board i n i t s
work of developing a modern and e f f i c i e n t system of American
bankers 1 acceptances - and they would b e s t s e r v e t h e i r own
purposes - i f they would study and a s s i m i l a t e the underlying
p r i n c i p l e s which must guide t h e Board, and observe t h e s e p r i n c i p l e s v o l u n t a r i l y without r e q u i r i n g i n f l e x i b l e r u l e s . Unless
the bankers cooperate with the Board i n t h i s manner, many
t r a n s a c t i o n s - unobjectionable as long as they a r e engaged i n
f o r l e g i t i m a t e purposes and w i t h i n reasonable l i m i t s - w i l l
have t o be b a r r e d because s t r i c t r e g u l a t i o n s do not admit of
d i s c r i m i n a t ion. 11
A f t e r a f u l l d i s c u s s i o n of the p r i n c i p l e s which a r e summarized above,
the Board's memorandum concluded as f o l l o w s :
"These a r e the p r i n c i p l e s which t h e Federal Reserve
System must apply. I t would be inexpedient t o attempt more than
t o e s t a b l i s h the p r i n c i p l e s . I t would be d e t r i m e n t a l t o formul a t e d e f i n i t e r e g u l a t i o n s d e a l i n g i n minute d e t a i l w i t h t h e
v a r i o u s phases of the problem. I t would be f a r b e t t e r t o give
some l a t i t u d e to t h e banks i n d e a l i n g w i t h t h e s e m a t t e r s . But
t h i s w i l l depend e n t i r e l y upon the wisdom and d i s c r e t i o n of the
member banks.
The banks w i l l b e s t serve t h e i r own i n t e r e s t s i f ,
f o l l o w i n g t h e example of European i n s t i t u t i o n s , they w i l l adopt
t h e s e p r i n c i p l e s as s e l f - i m p o s e d , well t r i e d r u l e s of business
X-7130
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prudence r a t h e r than "by abusing t h e i r freedom of a c t i o n t o f o r c e
the Board t o t i e t h e i r hands "by r i g i d r e g u l a t i o n s . "
ACCEPTANCES AGAINST READILY MARKETABLE STAPLES STORED IN
A WAREHOUSE IN A FOREIGN COUNTRY.
In 1919, t h e response to an i n q u i r y from the Federal Reserve Agent
a t t h e Federal Reserve Bank of Boston t h e Board h e l d t h a t a member hank
might p r o p e r l y accept a d r a f t drawn i n Canada, payable i n t h e United
S t a t e s i n d o l l a r s and secured "by r i c e stored i n a p u b l i c warehouse i n
Canada, and t h a t such an acceptance might properly "be rediscounted by
a Federal r e s e r v e bank.
The Board's r u l i n g on t h i s question was pub-
l i s h e d i n t h e 1919 B u l l e t i n a t page 740.
PURCHASE OF EXPORT ACCEPTANCES WITH SIX
MONTHS MATURITIES.
Under d a t e of May 6, 1921, the Federal Reserve Board amended i t s
Regulation B so as t o a u t h o r i z e t h e purchase by Federal r e s e r v e banks
of bankers 1 acceptances growing out of t r a n s a c t i o n s i n v o l v i n g t h e imp o r t a t i o n or e x p o r t a t i o n of goods w i t h m a t u r i t i e s up t o s i x months. This
, i n c r e a s e i n t h e m a t u r i t i e s of such acceptances e l i g i b l e f o r purchase
was suggested i n a l e t t e r t o t h e Board from Deputy Governor Harrison
of t h e Federal Reserve Bank of New York.
The s u g g e s t i o n was a l s o made
i n l e t t e r s from Mr. Paul M. Warburg, i n connection w i t h the f i n a n c i n g of
s o - c a l l e d " f i n i s h i n g c r e d i t s " , a term used t o d e s i g n a t e a c r e d i t t o
f i n a n c e both (1) the shipment from the United S t a t e s of raw m a t e r i a l s
to be manufactured i n t o f i n i s h e d products and (2) the subsequent process
of manufacture i n t h e f o r e i g n country and t h e e x p o r t a t i o n therefrom of
http://fraser.stlouisfed.org/ f i n i s h e d
the
Federal Reserve Bank of St. Louis
product.
This amendment to Regulation s was recommended by
X-718511
——
9
the f e d e r a l Advisory Council and a l s o "by the Governors of t h e Federal
Reserve Banks.
In i t s l e t t e r t r a n s m i t t i n g the amended r e g u l a t i o n , t h e
Board s a i d :
Two considerations have led the Board t o take
t h i s a c t i o n : (1) The d e s i r e t o widen the acceptance
market "by meeting the wants of savings "banks and s i m i l a r
purchasers of b a n k e r s ' acceptances who a r e now d e t e r r e d
from i n v e s t i n g i n acceptances of longer than t h r e e months'
m a t u r i t y , because of the lack of a u t h o r i t y of Federal
Reserve Banks to purchase longer m a t u r i t i e s up t o s i x months;
(2) to provide more ample f a c i l i t i e s f o r f i n a n c i n g import
and export t r a d e with c o u n t r i e s where e i t h e r normal cond i t i o n s or p r e s e n t abnormal conditions i n d i c a t e t h e d e s i r a b i l i t y of r e n d e r i n g a s s i s t a n c e by making acceptances of
m a t u r i t i e s not exceeding s i x months e l i g i b l e f o r purchase
by Federal Reserve Banks.
The Board a l s o s t a t e d t h a t i t looked to the good banking
judgment and d i s c r e t i o n of t h e a c c e p t i n g banks and of t h e Federal
Reserve Banks t o avoid any untoward r e s u l t s ; and t h a t the e f f e c t
of t h i s widening of t h e investment powers of t h e Federal r e s e r v e
banks would be followed c l o s e l y with a view t o such m o d i f i c a t i o n of
the r e g u l a t i o n s as might be necessary.
Under the Board's present r e g u l a t i o n , F e d e r a l r e s e r v e banks
may purchase b a n k e r s ' acceptances growing out of t r a n s a c t i o n s i n volving the i m p o r t a t i o n or e x p o r t a t i o n of goods with m a t u r i t i e s not
i n excess of s i x months.
PURCHASE OF ACCEPTANCES DRAW BY COOPERATIVE
MARKETING ASSOCIATIONS WITH SIX MONTHS' MATURITIES.
Under d a t e of December 19, 1922, t h e Federal Reserve Board
promulgated an amendment to i t s Regulation B a u t h o r i z i n g F e d e r a l r e s e r v e
banks to purchase b a n k e r s ' acceptances, with m a t u r i t i e s not i n excess of
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-10-
s i x months, which a r e drawn "by growers or by cooperative marketing
a s s o c i a t i o n s composed e x c l u s i v e l y of growers of nonperishable,
r e a d i l y marketable, s t a p l e a g r i c u l t u r a l p r o d u c t s , t o f i n a n c e the
o r d e r l y marketing of such products grown by such growers and secured
a t the time of acceptance by warehouse, terminal or other s i m i l a r
r e c e i p t s i s s u e d by p a r t i e s independent of the borrowers and conveying s e c u r i t y t i t l e to such p r o d u c t s .
The Board's records do not i n d i c a t e upon whose suggestion
or recommendation t h i s change i n i t s r e g u l a t i o n was made; but the
Board s t a t e d i n i t s l e t t e r of t r a n s m i t t a l :
"The Board was moved to take t h i s a c t i o n by a
d e s i r e to provide more anple f a c i l i t i e s f o r f i n a n c i n g
t h e o r d e r l y marketing of s t a p l e a g r i c u l t u r a l p r o d u c t s ,
e s p e c i a l l y by cooperative marketing a s s o c i a t i o n s . This
i s i n accordance with the p r i n c i p l e h e r e t o f o r e recognized
by t h e Board t h a t the carrying of a g r i c u l t u r a l products f o r
such p e r i o d s as a r e reasonably necessary i n order to a s s i s t
t h e o r d e r l y marketing thereof i s a proper s t e p i n t h e process
of d i s t r i b u t i o n . "
By t h e Act of March 4, 1923, Federal .Reserve Banks were
authorized to discount acceptances with m a t u r i t i e s up t o s i x
months when drawn f o r an a g r i c u l t u r a l purpose and secured a t t h e
time of acceptance by documents of t i t l e covering r e a d i l y marketable
staples.
ELIMINATION OF DOCUMENTARY REQUIREMENTS AS TO
ACCEPTANCES GROWING OUT OF IMPORT AND EXPORT
TRANSACTIONS.
Under d a t e of March 29, 1922, t h e Board promulgated an
amendment to i t s Regulation A, e l i m i n a t i n g the requirements f o r
t h e attachment or f u r n i s h i n g of documents i n connection with a c c e p t ances a r i s i n g
out of import and export t r a n s a c t i o n s , and leaving
* -
-11-
e l i g i b i l i t y to be determined by t h e Federal r e s e r v e banks as a
question of f a c t .
S i m p l i f i c a t i o n of t h e Board's r e g u l a t i o n s r e g a r d i n g
b a n k e r s ' acceptances had been recommended i n May, 1921 by the
Federal Advisory Council i n a statement a s f o l l o w s :
* * * * "Moreover, i t i s impossible f o r t h e American
bankers 1 acceptance to e s t a b l i s h i t s e l f i n competition
with t h e B r i t i s h s t e r l i n g acceptance i n world markets
i f t h e f o r e i g n drawer i s . bewildered by a mass of
r e g u l a t i o n s which he has t o understand f u l l y i f he
i s t o be c e r t a i n t h a t he i s i s s u i n g an e l i g i b l e b i l l
which w i l l f i n d a ready market i n the United S t a t e s .
The simpler t h e r e g u l a t i o n s t h e b e t t e r the opportunity
f o r the American bankers' acceptance to become a
c r e d i t instrument i n world markets. If t h e r e a r e
competent men whose d i s c r e t i o n may be r e l i e d upon i n
charge of t h e supervision of American a c c e p t o r s , t h e r e
i s no need f o r attempting t o control by d e t a i l e d regul a t i o n s t h e p r a c t i c e of American accepting banks and
bankers. "
I t was presumably on the b a s i s of t h i s recommendation
t h a t the matter was given c o n s i d e r a t i o n by t h e Board i n March,
1922, but t h e r e c o r d does not show whether t h i s i s a f a c t .
S h o r t l y b e f o r e the adoption of the amended r e g u l a t i o n
by t h e
Board, t h e proposed change e l i m i n a t i n g the documentary r e quirements was
d i s c u s s e d a t an informal conference i n New York
by Governor Harding and Mr. Logan with Messrs. Warburg, Kent,
Broderick, Kenzel and Harrison.
There was a p p a r e n t l y another
d i s c u s s i o n of t h e m a t t e r a few days l a t e r by Mr. Kenzel and
c e r t a i n Mew York bankers with the F e d e r a l Reserve Board.
Before
t h e change i n t h e r e g u l a t i o n was adopted a number of t h e Federal
r e s e r v e banks, a s w e l l a s t h e P r e s i d e n t of the Advisory Council,
7 1 6 (
S l 3
X-7180 5 ^ 4
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were aslced f o r t h e i r views with r e s p e c t t o t h e m a t t e r .
The Board's l e t t e r of t r a n s m i t t a l of t h i s amendment
to Regulation A s t a t e d t h a t t h e r e had been a r a p i d growth of t h e
acceptance "business during t h e war and i t had been necessary
accordingly f o r the: Board t o make f r e q u e n t r u l i n g s and to amend
i t s r e g u l a t i o n s r e g a r d i n g b a n k e r s ' acceptances p e r i o d i c a l l y ; the
Regulation of 1920 on t h i s s u b j e c t was the l a s t s t e p i n t h e
development of such r e g u l a t i o n s and i t contained t h e substance
of the more important r u l i n g s p r e v i o u s l y i s s u e d by t h e Board
r e g a r d i n g acceptances a r i s i n g out of import and export t r a n s actions.
In view of the experience which the American banks
had obtained, t h e Board considered t h a t d e t a i l e d r e g u l a t i o n s on t h i s
s u b j e c t were no longer necessary and a l s o t h a t the g e n e r a l advancement of f o r e i g n t r a d e could be f u r t h e r e d most e f f e c t u a l l y by
the s u b s t i t u t i o n of a simpler r e g u l a t i o n .
Accordingly,
the Board eliminated the following sentences from i t s
r e g u l a t i o n with r e s p e c t t o acceptances a r i s i n g out of import
and export t r a n s a c t i o n s :
* * * "While i t i s not necessary t h a t shipping
documents covering goods i n t h e process of shipment
be a t t a c h e d to d r a f t s drawn f o r the purpose of
f i n a n c i n g t h e e x p o r t a t i o n or importation of goods,
and while i t i s not e s s e n t i a l , t h e r e f o r e , t h a t each
such d r a f t cover s p e c i f i c goods a c t u a l l y i n e x i s t e n c e
a t t h e time of acceptance, n e v e r t h e l e s s i t i s
e s s e n t i a l a s a p r e r e q u i s i t e t o e l i g i b i l i t y e i t h e r (a)
t h a t shipping documents or a documentary export d r a f t
be a t t a c h e d a t the time the d r a f t i s p r e s e n t e d f o r
-13-
acceptance, or (b) i f the goods covered "by the c r e d i t
have not been a c t u a l l y shipped, t h a t t h e r e be i n
e x i s t e n c e a s p e c i f i c and bona f i d e c o n t r a c t p r o v i d i n g
f o r t h e e x p o r t a t i o n or importation of such goods
a t or w i t h i n a s p e c i f i e d and reasonable time and
t h a t the customer agree t h a t t h e accepting bank
w i l l be f u r n i s h e d i n due course with shipping documents covering such goods or with exchange a r i s i n g
out of * the t r a n s a c t i o n being financed by t h e c r e d i t .
A c o n t r a c t between p r i n c i p a l and agent w i l l not be cons i d e r e d a bona f i d e c o n t r a c t of t h e kind r e q u i r e d above,
nor i s i t enough t h a t t h e r e be a c o n t r a c t providing
merely t h a t t h e proceeds of t h e acceptance w i l l be
used only to f i n a n c e the purchase or shipment of
goods t o be exported or imported.
In making t h i s amendment, t h e Board s t a t e d t h a t i t was
not r e v e r s i n g or modifying i t s former r u l i n g s , which were r e garded a s e s s e n t i a l t o the proper conduct of t h e acceptance b u s i n e s s , but t h a t i t s a c t i o n was intended merely to allow g r e a t e r
l a t i t u d e to Federal r e s e r v e banks f o r t h e e x e r c i s e of t h e i r
d i s c r e t i o n and judgment, observing always t h e l i m i t a t i o n s of
t h e law.
The Board a l s o s t a t e d t h a t the r e s p o n s i b i l i t y f o r
p a s s i n g upon t h e e l i g i b i l i t y of bankers 1 acceptances r e s t s
upon t h e Federal r e s e r v e banks themselves and each bank should
s a t i s f y i t s e l f t h a t t h e acceptances conform to the r e q u i r e ments.
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ACCEPTANCES BY NATIONAL BAMS AGAINST
IMPORT AND EXPORT BILLS.
In r u l i n g s p u b l i s h e d i n the 1917 B u l l e t i n a t page 28 and in the
1920 B u l l e t i n a t page 610, the Board took the p o s i t i o n t h a t no "bank
which has purchased a f o r e i g n documentary d r a f t may r e f i n a n c e i t s e l f
by drawing a d r a f t on a member hank secured by the documentary d r a f t .
The theory u n d e r l y i n g these r u l i n g s was t h a t such a d r a f t i s not drawn
f o r the purpose of f i n a n c i n g the importation or e x p o r t a t i o n of goods "but
f o r the purpose of f i n a n c i n g the "business, of the hank which purchased
the f o r e i g n documentary d r a f t .
During the y e a r 1923, the Board had correspondence with Mr. J . H.
Fulton, P r e s i d e n t of the National Park Bank of New York w i t h r e f e r e n c e
to the r i g h t of a n a t i o n a l hank t o accept d r a f t s a g a i n s t the s e c u r i t y
of import or export b i l l s , and a l s o had correspondence w i t h the Federa l Reserve Bank of New York on t h i s q u e s t i o n .
The Federal Reserve Bank
considered t h a t acceptances of t h i s kind under proper c o n d i t i o n s would
be l a w f u l , but i t was the Board's p o s i t i o n a t t h a t time t h a t such
acceptances were not proper under the r u l i n g s above r e f e r r e d t o .
In
1924, l e t t e r s were addressed to the Board by the Governors of the Fede r a l Reserve Banks of New York and San Francisco r e q u e s t i n g a f i n a l
r u l i n g of the Board with r e s p e c t to t h i s q u e s t i o n .
The Board gave
f u r t h e r c o n s i d e r a t i o n to the s u b j e c t , but f o r some reason no a c t i o n
was taken a t t h a t t i m e .
In 1926, however, acceptances of t h i s kind
were questioned by a n a t i o n a l bank examiner i n an examination of the
F i r s t National Bank of Boston and the Comptroller of the Currency asked
517
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the Federal Reserve Board f o r a r u l i n g in the m a t t e r .
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The Board again
gave c o n s i d e r a t i o n to the question and reached the conclusion t h a t
i t s former r u l i n g s on the s u b j e c t contained an u n n e c e s s a r i l y s t r i c t
i n t e r p r e t a t i o n of the law.
Accordingly, the Board r u l e d t h a t n a t i o n a l
banks may l e g a l l y accept d r a f t s drawn upon them "by o t h e r banks
a g a i n s t the s e c u r i t y of import or export "bills of exchange p r e v i o u s l y
discounted by such o t h e r "banks; provided t h a t such d r a f t s a r e drawn
b e f o r e the u n d e r l y i n g import or export t r a n s a c t i o n s a r e completed
and comply a s to m a t u r i t y and in a l l other r e s p e c t s with the p r o v i sions of the law and the Board's r e g u l a t i o n s . (1926 B u l l e t i n 854).
ACCEPTANCES AFTER IMPORT OH EXPORT TRANSACTION COMPLETED.
At a meeting of the Subcommittee of the General Acceptance
Committee h e l d i n New York i n October, 1927, i t was decided to recommend to the F e d e r a l Reserve Board t h a t the Board revoke i t s previous
r u l i n g s to the e f f e c t t h a t a b i l l cannot be e l i g i b l e f o r acceptance
by a member bank, or f o r r e d i s c o u n t or purchase by a Federal r e s e r v e
bank, a s a b i l l growing out of the importation or e x p o r t a t i o n of goods,
i f i t i s accepted a f t e r the goods have reached t h e i r d e s t i n a t i o n ; and
to r u l e in l i e u t h e r e o f t h a t b a n k e r s ' acceptances may p r o p e r l y be cons i d e r e d a s growing out of t r a n s a c t i o n s involving the importation or
e x p o r t a t i o n of goods when given f o r the purpose of f i n a n c i n g the s a l e
or d i s t r i b u t i o n on u s u a l c r e d i t terms of imported or exported goods
i n t o the channels of t r a d e , whether or not the b i l l s a r e a ccepted
a f t e r the p h y s i c a l importation or e x p o r t a t i o n has been completed.
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Shortly b e f o r e the meeting r e f e r r e d t o , Mr. Kenzel,
Chairman of the Sub-committee, had appeared b e f o r e the Federal Reserve
Board, in response to an i n v i t a t i o n from the Board, to d i s c u s s p o s s i b l e amendments to the Board's r e g u l a t i o n s and r u l i n g s r e g a r d i n g bankers'
acceptances, and had pointed out the d e s i r a b i l i t y of
a
r u l i n g of
t h i s kind in order t h a t American acceptances might compete with those
of o t h e r c o u n t r i e s i n f i n a n c i n g f o r e i g n t r a d e .
Subsequent to h i s appearance b e f o r e the Board in t h i s conn e c t i o n , Mr. Kenzel conferred with a number of prominent liew York
bankers engaged i n the acceptance b u s i n e s s ; and the following i s an
excerpt from h i s statement on t h i s s u b j e c t submitted in connection
with the recommendation of the sub-comnitteei
"They ( t h e bankers consulted) f e l t t h a t they
would not wish to extend c r e d i t s i n Europe f o r p u r e l y
domestic purposes, e x p l a i n i n g t h a t by t h a t they meant
the purchase of goods of domestic o r i g i n , the f a b r i c a t i o n of such goods and i t s sale f o r domestic consumption
w i t h i n any European country, but t h a t they d i d f e e l t h a t
they should be p e r m i t t e d to finance through acceptance c r e d i t s the s a l e w i t h i n European c o u n t r i e s of goods of o r i g i n f o r e i g n
to those c o u n t r i e s , and the f a b r i c a t i o n and sale of goods
f o r e x p o r t . Many of them c i t e d the f a m i l i a r problem of
American c o t t o n which i s now sent so l a r g e l y to European
c o u n t r i e s on consignment by American shippers and
i s sold to European spinners out of warehouses in
Europe. Spinners r e q u i r e c r e d i t of n i n e t y days or more.
Under the p r e s e n t r u l e s , American banks can give
such c r e d i t s where the cotton crosses a f r o n t i e r in
Europe, t h a t i s , where i t i s exported from one European
country to a n o t h e r , but they cannot give such c r e d i t s
i f the c o t t o n i s sold to spinners l o c a t e d i n the same
European country i n which i t i s s t o r e d pending s a l e .
-.17*
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"A s i m i l a r negative p o s i t i o n a r i s e s w i t h r e s p e c t to
c o t t o n which i s sold and shipped from America on terms
t h a t have "become q u i t e u s u a l , i . e . , t h a t a t the buyer 1 s
option he may pay cash on a r r i v a l or give n i n e t y days
"bankers c r e d i t . I t f r e q u e n t l y happens t h a t the cotton
has a r r i v e d and so the p h y s i c a l export completed b e f o r e
the "buyer e l e c t s how he s h a l l pay. I f he e l e c t s to give
n i n e t y days "bankers c r e d i t the "banker may not accept the
b i l l i f the cotton has a r r i v e d a t the f o r e i g n d e s t i n a t i o n
named i n the shipping documents."
"The American bankers consulted f e l t t h a t the time has
c e r t a i n l y a r r i v e d in the development of American a c c e p t ance b u s i n e s s when American a c c e p t i n g bankers should be
p e r m i t t e d the f r e e e x e r c i s e of t h e i r d i s c r e t i o n w i t h i n
the law and r e g u l a t i o n s and t h a t , w i t h i n those l i m i t s ,
f u l l l a t i t u d e should be granted them i n the accommodat i o n of b u s i n e s s a s i t i s done in f o r e i g n c o u n t r i e s .
They s t r e s s e d p a r t i c u l a r l y the p o i n t t h a t they regarded
i t a s p r e f e r a b l e to give a three months c r e d i t with a
renewal f o r a f u r t h e r p e r i o d , i f i t were found t h a t a
renewal were r e q u i r e d a t the e x p i r a t i o n of the o r i g i n a l
p e r i o d , than to g r a n t the c r e d i t o r i g i n a l l y f o r a p e r i o d
of s i x months, and t h a t i f the r u l e a g a i n s t a c c e p t i n g
a b i l l a f t e r the goods had a r r i v e d were r e s c i n d e d , the end
sought would be p r a c t i c a l l y accomplished without a
s p e c i f i c r u l i n g in f a v o r of renewal b i l l s . I t was
p o i n t e d out t h a t from the bankers' p o i n t of view i t was
p r e f e r a b l e t o be a b l e to review c r e d i t s a t more f r e quent i n t e r v a l s than i s the case when c r e d i t s up to
s i x months a r e being i n s i i t a d upon by the borrower
a s a p r e c a u t i o n a g a i n s t being unable to redraw a t
the end of a s h o r t e r p e r i o d in case of need even f o r
a small p a r t of the c r e d i t " .
The recommendation made by the subcommittee was considered
by the f e d e r a l Advisory Council and, with one suggested change, was
-18approved.
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O20
A f t e r c o n s i d e r a t i o n of the matter* the Board reached
the conclusion t h a t i t s previous r u l i n g s on t h i s s u b j e c t contained
an u n n e c e s s a r i l y s t r i c t i n t e r p r e t a t i o n of the law; and, i n order
to f a c i l i t a t e the f i n a n c i n g of f o f e i g n trade and the s a l e of
.American goods abroad, the Board r u l e d , on November 28, 1927, (1927
B u l l e t i n , p . 860) t h a t "bankers' acceptances may p r o p e r l y be cons i d e r e d a s growing out of t r a n s a c t i o n s involving the importation
or e x p o r t a t i o n of goods when drawn f o r the purpose of f i n a n c i n g the
s a l e and d i s t r i b u t i o n on u s u a l c r e d i t terms of imported or exported
goods i n t o the channels of t r a d e , whether or not the b i l l s a r e a c c e p t ed a f t e r the p h y s i c a l importation or e x p o r t a t i o n has been completed.
The Board p o i n t e d out t h a t due care should be observed to prevent a
d u p l i c a t i o n of f i n a n c i n g and t h a t there should not be o u t s t a n d i n g a t
any time more than one acceptance a g a i n s t the same goods.
of the Board r e v e r s e d a l l p r e v i o u s
This r u l i n g
conflicting rulings.
ACCEPTANCES D A N BY WAREHOUSE OB ELEVATOR COMPANY AGAINST
RW
WAREHOUSE RECEIPTS ISRmm *v ttstst.TP.
In 1924, Governor Young of the Federal Reserve Bank of Minneapolis
suggested to the Federal Be serve Board t h a t i t give approval to a c c e p t ances drawn by a t e r m i n a l e l e v a t o r company a g a i n s t the s e c u r i t y of warehouse r e c e i p t s i s s u e d by the company which draws the a c c e p t a n c e s .
He p o i n t -
ed out t h a t i n Minnesota such a company i s under the s t r i c t supervision
and c o n t r o l of a S t a t e commission, a r e p r e s e n t a t i v e of which checks a l l
g r a i n t h a t i s s t o r e d i n the e l e v a t o r and a l l g r a i n t h a t i s removed t h e r e from; and t h a t i t i s p r a c t i c a l l y impossible to remove g r a i n from such
terminal e l e v a t o r s without the knowledge and permission of t h e r e p r e s e n t a
521
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t i v e of the S t a t e commission.
The m a t t e r was considered, "by the Federal Reserve Board from time
to time over a p e r i o d of s e v e r a l y e a r s and was twice r e f e r r e d to the
Governors' Conference, which recommended t h a t the Board approve a c c e p t ances of t h i s c h a r a c t e r .
A f t e r c o n s i d e r a t i o n of the m a t t e r , the Board
i n .April, 1927, voted to disapprove the recommendation of the Governors'
Conference and not t o amend i t s r e g u l a t i o n s so a s to make such a c c e p t ances e l i g i b l e f o r rediscount or purchase by the Federal r e s e r v e banks.
The Board considered t h a t the p r i n c i p l e l a i d down i n i t s r e g u l a t i o n s , t h a t
warehouse r e c e i p t s used as s e c u r i t y f o r acceptances must be i s s u e d by a
p a r t y independent of the customer, was e s s e n t i a l to the maintenance of
the high standard of bankers' acceptances and t h a t any a c t i o n s e t t i n g
a s i d e t h i s p r i n c i p l e might e s t a b l i s h a precedent f o r f u t u r e a c t i o n
which would r e s u l t in the lowering of the s t a n d a r d .
The m a t t e r was again considered by the Federal Reserve Board
i n October 1928, however, a t which time Governor Young was Governor
of the Federal Reserve Board, and the Board decided to adopt an amendment to i t s r e g u l a t i o n s making e l i g i b l e f o r rediscount or purchase
acceptances a g a i n s t warehouse r e c e i p t s conveying s e c u r i t y t i t l e to
r e a d i l y marketable s t a p l e s when such r e c e i p t s a r e "issued by a g r a i n
e l e v a t o r or warehouse company duly bonded and l i c e n s e d and r e g u l a r s
l y inspected by S t a t e or Federal a u t h o r i t i e s with whom a l l r e c e i p t s f o r
such s t a p l e s and a l l t r a n s f e r s thereof a r e r e g i s t e r e d and without whose
consent no s t a p l e s may bo withdrawn."
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LIBEBALIZATION Off HOLIITGS EEGABDING- DOMESTIC
BANKERS' ACCEPTANCES.
The General Committee on Bankers' Acceptances a t i t s meeting i n March, 1926, adopted a r e p o r t containing a statement of
broad g e n e r a l p r i n c i p l e s regarding c o r r e c t p r a c t i c e s in the g r a n t ing of domestic b a n k e r s ' acceptance c r e d i t s and recommending spec i f i c a l l y t h a t t h e use of domestic acceptances be broadened, p a r t i c u l a r l y i n two r e s p e c t s :
(1)
To permit the purchaser of goods under bankers' a c c e p t -
ance c r e d i t s to draw b i l l s having a m a t u r i t y c o n s i s t e n t w i t h t h e
u s u a l and customary c r e d i t time t h a t obtains in the r e l a t i v e t r a d e ,
i n s t e a d of r e q u i r i n g the shipper to draw the b i l l i f i t has a mat u r i t y in excess of the a c t u a l t r a n s i t time of the goods, ( t h e
Board's r u l i n g s had been understood as making a d i s t i n c t i o n between
the p e r i o d f o r which acceptances may be drawn by the s e l l e r and the
p e r i o d f o r which they may be drawn by the purchaser)$
(2)
To permit the use of bankers' acceptances secured by
r e c e i p t s covering r e a d i l y marketable s t a p l e s to f i n a n c e the c a r r y i n g
of c e r t a i n s t a p l e s during the time they a r e being converted i n t o
o t h e r forms of r e a d i l y marketable s t a p l e s through a converter i n dependent of the drawer, provided t h a t the i d e n t i t y of the goods i s
not l o s t and the a c c e p t i n g bank remains secured by the independent
converter's receipt.
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This r e p o r t of the General Committee on Bankers' Acceptances was considered "by the Governors' Conference in March, 1926, which
approved the r e p o r t and r e q u e s t e d the Federal Reserve Board t o adopt
the r u l i n g s contained t h e r e i n .
The Federal Reserve Board a c t e d
upon the m a t t e r i n June, 1928, a t which time i t approved the r e p o r t
in so f a r a s i t contained a statement of the broad general p r i n c i p l e s regarding c o r r e c t practices- i n the g r a n t i n g of domestic banke r s ' acceptance c r e d i t s , but w i t h the understanding t h a t such a p p r o v a l should not be construed a s revoking or q u a l i f y i n g any of
the Board's e x i s t i n g r u l i n g s .
The Board s t a t e d t h a t i f the b r o a d -
ened use of domestic bankers' acceptances was found to be hampered
by the e x i s t i n g r u l i n g s of the Board, i t would consider the question
of revoking o r modifying such r u l i n g s provided a statement of s p e c i f i c
f a c t s a r i s i n g i n a c t u a l cases was submitted to the Board.
The Governors' Conference in November 1928, upon
c o n s i d e r a t i o n of a r e p o r t of the subcommittee of the General
Committee on Bankers' Acceptances, requested the subcommittee to
submit to the Board s p e c i f i c examples of t r a n s a c t i o n s exemplifying
the need f o r a m o d i f i c a t i o n of the Board's r u l i n g s i n the r e s p e c t s
above mentioned.
This was done and the f o l l o w i n g i s an example
of the f a c t s submitted with regard to the Committee's f i r s t recom-
5 2 4
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mediations
"A f i r m in New York City purchases c e r t a i n
s t a p l e s from a s e l l e r i n a western c i t y who s h i p s
the same and draws a s i g h t d r a f t on the purchaser
in New York with b i l l of lading a t t a c h e d . This
d r a f t and b i l l of l a d i n g a t t a c h e d a r e sent i n
the customary way to a bank i n Hew York, Bank A,
d e s i g n a t e d by the p u r c h a s e r . The l a t t e r then
draws a 90 day b i l l on Bank A, which i s accepted
by the bank, having a t the time i n i t s p o s s e s s i o n
the b i l l of l a d i n g covering the s t a p l e s in process of
shipment, The acceptance i s then discounted by the
p u r c h a s e r and the proceeds used to pay the s i g h t
d r a f t and to o b t a i n the r e l e a s e of the b i l l of
l a d i n g . I t does not r e q u i r e 90 days f o r the
completion of the shipment of goods, only a
r e l a t i v e l y short time being necessary f o r t h i s
purpose."
A f t e r c o n s i d e r a t i o n , the Board r u l e d i n November 1929
t h a t a d r a f t drawn by the purchaser of goods i n accordance
with the f a c t s above s t a t e d i s e l i g i b l e f o r acceptance by a
member bank when i t has a m a t u r i t y c o n s i s t e n t w i t h the u s u a l
and customary c r e d i t time p r e v a i l i n g in the p a r t i c u l a r b u s i n e s s , provided t h a t a l l o t h e r r e l e v a n t requirements of the
law and of the B o a r d ' s r e g u l a t i o n s a r e complied w i t h , (1929
B u l l e t i n , page 811),
5 2 5
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(This r u l i n g was i n some r e s p e c t s i n c o n s i s t e n t w i t h c e r t a i n
previous r u l i n g s of the Federal Reserve Board to the e f f e c t t h a t am
acceptance should not "be drawn f o r the purpose of f u r n i s h i n g working
c a p i t a l to the borrower or to the purchaser d u r i n g the p r o c e s s of
the manufacture of goods; and the Board s t a t e d t h a t such p r e v i o u s
r u l i n g s with regard t o working c a p i t a l might "be regarded a s superseded by t h i s r u l i n g to the e x t e n t of any such i n c o n s i s t e n c i e s .
The subcommittee a l s o submitted an example of a s p e c i f i c case
designed to show the d e s i r a b i l i t y of p e r m i t t i n g the use of b a n k e r s '
acceptances, secured by r e c e i p t s covering r e a d i l y marketable s t a p l e s ,
to finance the c a r r y i n g of these s t a p l e s during the time they a r e b e ing converted i n t o o t h e r forms through a c o n v e r t e r or p r o c e s s o r who
i s independent of the drawer of the acceptance, provided t h a t the
i d e n t i t y of the goods i s not l o s t and the a c c e p t i n g bank remains s e cured by the independent c o n v e r t e r ' s r e c e i p t .
After consideration,
however, the Board voted i n March 1930, to disapprove the recommenda*
t i o n made on t h i s p o i n t and s t a t e d i t s opinion t h a t b i l l s drawn
under such circumstances a r e not to be considered as e l i g i b l e f o r
acceptance by member banks.
BOARD'S POLICY OF RPLINS ON ACCEPTANCE QUESTIONS ONLY AF2ER CONglBERATION OF FEDERAL
RESERVE BANKS.
I t has been the p o l i c y of the Federal Reserve Board f o r a numb e r of years not to consider and pa ss upon q u e s t i o n s w i t h regard to
X-7180
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bankers' acceptances u n t i l such questions have been f i r s t submitted
to and considered by the Federal reserve bank of the d i s t r i c t in which
the question a r i s e s .
I t i s not c l e a r when t h i s p o l i c y was f i r s t adopted
but i t was d e f i n i t e l y i n f o r c e a s e a r l y a s 1922 and probably, a t
l e a s t in some c a s e s , f o r some time b e f o r e t h a t .
Many acceptance q u e s t i o n s , of course, have a r i s e n i n the
New York D i s t r i c t and accordingly the Federal Beserve Bank of New
York has been f r e q u e n t l y c a l l e d upon t o - consider such q u e s t i o n s ; and
much of the Board's correspondence regarding acceptance m a t t e r s has
been with t h i s F e d e r a l reserve bank.
In a number of cases where a c -
ceptance q u e s t i o n s have a r i s e n in other d i s t r i c t s , the Federal Reserve Board i n c o n s i d e r i n g such questions has taken them up e i t h e r
formally or i n f o r m a l l y with Mr. Kenzel, the Chairman of t h e Comm i t t e e on Bankers' Acceptances.
SM AY
U MR
For convenient r e f e r e n c e t h e r e i s given below a b r i e f summary
of the changes i n the law, r e g u l a t i o n s and r u l i n g s regarding a c c e p t ances, which have been discussed above.
P r o v i s i o n s of the Federal Reserve Act.
Under the o r i g i n a l Federal Reserve Act, member banks were
a u t h o r i z e d to accept d r a f t s a r i s i n g out of import and export t r a n s a c t i o n s having not more than s i x months' s i g h t to run and Federal
reserve banks were a u t h o r i z e d to discount such a c c e p t a n c e s , indorsed
by a member bank, w i t h m a t u r i t i e s of not more t h a i t h r e e months. Fede r a l reserve banks were a l s o a u t h o r i z e d to purchase b a n k e r s ' a c c e p t ances with or without the indorsement of a member bank.
By the Act of September 7, 1916, member banks were a u t h o r ized to make, and Federal r e s e r v e banks to d i s c o u n t , acceptances
a r i s i n g out of t h e domestic shipment of goods or out of the s t o r a g e of
527
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X-7180
r e a d i l y marketable s t a p l e s ; and "by t h i s Act, a l s o , member banks were
authorized to make, and Federal reserve "banks to a c q u i r e , acceptances
drawn f o r , the purpose of f u r n i s h i n g d o l l a r exchange.
By the Act of March 4, 1923, Federal reserve banks were authf
o r i z e d to d i s c o u n t acceptances with m a t u r i t i e s up to s i x months when
drawn f o r an a g r i c u l t u r a l purpose and secured a t the time of a c c e p t ance by documents of t i t l e covering r e a d i l y marketable s t a p l e s .
Rulings and Regulations of the Federal Reserve Board.
In i t s r e g u l a t i o n of February 8, 1915, the Board recognized a s
e l i g i b l e f o r r e d i s c o u n t acceptances made, not only by banks and bankers,
"but a l s o by o t h e r s engaged i n the acceptance b u s i n e s s .
In a r u l i n g published in the 1915 B u l l e t i n a t page 91, the Board
gave approval to acceptances based on the shipment of goods between two
or more f o r e i g n c o u n t r i e s and between the United S t a t e s and c e r t a i n of
i t s dependencies and p o s s e s s i o n s , a s well a s between the United S t a t e s
and f o r e i g n c o u n t r i e s .
By r e g u l a t i o n dated November 29, 1915, the Board a u t h o r i z e d Fede r a l reserve banks to purchase "bankers 1 acceptances, when p r o p e r l y
secured, covering the domestic shipment of goods or covering the warehouse storage of r e a d i l y marketable s t a p l e s . (This was p r i o r t o the
amendment to the law p e r m i t t i n g the discount of domestic a c c e p t a n c e s , )
A f t e r the amendment to the law of September 7, 1916, the Board
included in i t s r e g u l a t i o n s p r o v i s i o n s regarding the acceptance by
member banks of d r a f t s drawn to f u r n i s h d o l l a r exchange.
Under d a t e of February 7, 1918, the Board addressed a l e t t e r
to the Governor of the Federal Reserve Bank of Hew York s t a t i n g i t s
p o l i c y i n d e a l i n g w i t h acceptances drawn under c r e d i t s extending over
a p e r i o d of one o r two y e a r s .
In a r u l i n g published in the 1919 B u l l e t i n a t page 740, the
Board approved acceptances drawn in a f o r e i g n country payable in the
United S t a t e s i n d o l l a r s and secured by s t a p l e s s t o r e d i n a f o r e i g n
warehouse.
Under d a t e of May 6, 1921, the Board amended i t s r e g u l a t i o n s
so as t o a u t h o r i z e the -purchase by Federal r e s e r v e banks of b a n k e r s '
acceptances growing out of t r a n s a c t i o n s involving the importation or
e x p o r t a t i o n of goods with m a t u r i t i e s up to s i x months.
528
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X-7180
Under d a t e of December 19, 1922, the Board amended i t s regul a t i o n s so a s to a u t h o r i z e Federal Be serve Banks t o -purchase "bankers'
acceptances w i t h m a t u r i t i e s not in excess of s i x months which a r e
drawn "by a g r i c u l t u r a l growers or by cooperative marketing a s s o c i a t i o n s
and a r e p r o p e r l y secured*
On March 29, 1922, the Board amended i t s r e g u l a t i o n s so a s
to e limin a te the requirements f o r the attachment or f u r n i s h i n g
of documents i n connection with acceptances a r i s i n g out of import
and export t r a n s a c t i o n s .
By r u l i n g published i n the 1926 B u l l e t i n a t page 854,
the Board held t h a t n a t i o n a l hanks may l e g a l l y accept d r a f t s drawn
upon them "by o t h e r "banks a g a i n s t the s e c u r i t y of import or export
b i l l s of exchange p r e v i o u s l y discounted by such o t h e r banks p r o vided t h a t such d r a f t s are drawn b e f o r e the underlying import o r
export t r a n s a c t i o n s a r e completed.
The Board r u l e d on November 28, 1927, t h a t bankers' a c c e p t ances may p r o p e r l y be considered a s growing out of import or export
t r a n s a c t i o n s when drawn f o r t h e purpose of f i n a n c i n g the s a l e and
d i s t r i b u t i o n on u s u a l c r e d i t terms of imported or exported goods
i n t o the channels of t r a d e , whether or not the b i l l s a r e accepted
a f t e r the p h y s i c a l importation or e x p o r t a t i o n has been completed.
On October 9, 1928, the Board amended i t s r e g u l a t i o n s so
a s to make e l i g i b l e f o r rediscount or purchase acceptances a g a i n s t
warehouse r e c e i p t s issued by g r a i n e l e v a t o r or warehouse companies
duly bonded and l i c e n s e d and r e g u l a r l y inspected by S t a t e o r
Federal a u t h o r i t i e s with whom a l l r e c e i p t s f o r such s t a p l e s and a l l
t r a n s f e r s thereof a r e r e g i s t e r e d and without whose consent no s t a p l e s
may be withdrawn.
By a r u l i n g published i n the 1929 B u l l e t i n a t page 811,
the Board r u l e d t h a t a d r a f t drawn by the p u r c h a s e r of s t a p l e s to
f i n a n c e the shipment of such s t a p l e s i s e l i g i b l e f o r acceptance when
i t has a m a t u r i t y c o n s i s t e n t with the u s u a l and customary c r e d i t
time p r e v a i l i n g i n the p a r t i c u l a r b u s i n e s s .
On March 19, 1930, the Board s t a t e d i t s opinion t h a t b i l l s
drawn f o r the purpose of f i n a n c i n g ' t h e c a r r y i n g of s t a p l e s d u r i n g
the time they a r e b e i n g processed or converted a r e not e l i g i b l e f o r
acceptance.
I t has been the p o l i c y of the Board f o r a number of y e a r s
to consider and p a s s upon acceptance questions only a f t e r they have
f i r s t been considered by a Federal reserve bank.
Respectfully,
George B. Vest,
A s s i s t a n t Counsel.
FEDERAL RESERVE BOARD
5 3 9
WASHINGTON
X-7181
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
June 17, 1932.
SUBJECT:
Holidays during J u l y , 1932.
Dear S i r :
On Monday, J u l y 4 t h , Independence Day, there 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 Federal Reserve Board w i l l be c l o s e d .
The following o f f i c e s a l s o w i l l be closed on the d a t e s
indicated:
Tuesday, J u l y 5
Oklahoma City
Primary E l e c t i o n Day
Wednesday, J u l y 13 Nashville
Memphis
Birthday of General
Bedford F o r r e s t
Saturday, J u l y 23
Dallas
El Paso
Houston
San Antonio
Primary E l e c t i o n Day
Monday, J u l y 25
S a l t Lake City
Pioneer Day
Tuesday, J u l y 26
Oklahoma City
Primary E l e c t i o n Run-off
On the d a t e s i n d i c a t e d the o f f i c e s mentioned 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 or the Federal reserve note
clearing.
P l e a s e include c r e d i t s f o r the o f f i c e s a f f e c t e d on each
of the h o l i d a y s with your c r e d i t s f o r the following b u s i n e s s day in
2-
X-7181
the Gold Fumd c l e a r i n g and make no shipment of Federal r e s e r v e
n o t e s f o r account of the Federal Reserve Bank of Dallas on
Saturday, J u l y 23rd.
P l e a s e n o t i f y Branches4
Very t r u l y yours,
J . C. Foe11,
Assistant Secretary.
TO GOVERNORS OF ALL J*.R.BASKS.
X-7182
Treasury Regulations Regarding Taxes
on Checks and Leases of Safe Deposit Boxes
Chapter I I I
TAX ON LEASES 01 SAFE DEPOSIT BOXES
Section 741 (a) of The Revenue Act of 1932
(a) There i s hereby imposed a t a x equivalent t o 10
per centum of t h e amount c o l l e c t e d on or a f t e r t h e f i f t e e n t h day a f t e r the d a t e of t h e enactment of t h i s Act,
f o r the u s e a f t e r such d a t e of any s a f e d e p o s i t "box,
such t a x to be p a i d by the person paying f o r the use of
the s a f e d e p o s i t box.
ART. 30. E f f e c t i v e d a t e . - The ^ a x a t t a c h e s to any amount
paid on or a f t e r June 21, 1932, foS* the use a f t e r such date of
any s a f e deposit box d e f i n e d i n a r t i c l e 31.
SAFE DEPOSIT BOX
Section 741 (b) of The Revenue Act of 1932
(b) For t h e purposes of t h i s s e c t i o n any v a u l t , s a f e ,
box, or other r e c e p t a c l e , of not more than 40 cubic f e e t
c a p a c i t y , used f o r the safekeeping or storage of j e w e l r y ,
p l a t e , money, s p e c i e , b u l l i o n , s t o c k s , bonds, s e c u r i t i e s ,
v a l u a b l e papers of any k i n d , or other v a l u a b l e p e r s o n a l
p r o p e r t y , s h a l l be regarded as a s a f e deposit box.
ART. 31. D e f i n i t i o n of s a f e deposit box. - For t h e purpose of
the t a x , a s a f e deposit box i s any v a u l t , s a f e , box, or other
r e c e p t a c l e such as i s customarily leased by a bank, t r u s t company,
s e c u r i t y d e a l e r , investment company, or s t o r a g e company to any
person to be used f o r the safe-keeping or s t o r a g e of j e w e l r y ,
p l a t e , money, s p e c i e , b u l l i o n , stocks „ bonds, s e c u r i t i e s , v a l u a b l e
papers of any k i n d , or other forms of v a l u a b l e p e r s o n a l p r o p e r t y .
By the terms of the s t a t u t e the t a x w i l l not a t t a c h t o t h e l e a s e
of any v a u l t , s a f e deposit box, or s i m i l a r r e c e p t a c l e i f of a
c a p a c i t y i n excess of 40 cubic f e e t .
ART. 32. Rate and b a s i s of t a x . - The t a x imposed i s a t t h e
r a t e of 10 per cent of the amount p a i d f o r the use of a s a f e dep o s i t box and i s t o be paid by the person paying such amount.
ART. 33. Adjustment. - Where during t h e period of a l e a s e of a
s a f e deposit box t h e l e s s o r e n t e r s i n t o a new l e a s e f o r another s a f e
5 3 1
X-7182
-2-
deposit "box a t a higher r a t e and i s given c r e d i t f o r the amount
p a i d on the f i r s t l e a s e , t h e a d d i t i o n a l tax i s t o "be computed
upon the a d d i t i o n a l amount paid under the new l e a s e .
CHAPTER IV
TAX O CHECKS, ETC.
N
Section 751 (a) of The Revenue Act of 1932
(a) There i s hereby imposed a t a x of 2 c e n t s upon
each of the following i n s t r u m e n t s , presented f o r payment on or a f t e r the 15th day a f t e r the d a t e of t h e
enactment of t h i s Act and b e f o r e J u l y 1, 1934: Checks,
d r a f t s , or o r d e r s f o r the payment of money, drawn upon
any bank, banker, or t r u s t company; such t a x t o be p a i d
by t h e maker or drawer.
ART. 34. E f f e c t i v e p e r i o d . - The t a x a t t a c h e s t o a l l i n s t r u ments s p e c i f i e d i n s e c t i o n 751 when p r e s e n t e d f o r payment to a
bank, banker, or t r u s t company on or a f t e r June 21, 1932, and
b e f o r e J u l y 1, 1934.
ART. 35. Use of Terms. - Checks, d r a f t s , and o r d e r s f o r the
payment of money i n c l u d e any order i n w r i t i n g , drawn upon a bank,
banker, or t r u s t company, r e q u i r i n g t h e person upon whom drawn
t o pay a sum c e r t a i n i n mpney, to order or t o b e a r e r , whether
on demand, a t s i g h t , or a t a f i x e d or determinable f u t u r e time.
The term "bank, banker, or t r u s t company" includes any person
or i n s t i t u t i o n c a r r y i n g on t h e business o f , or m a i n t a i n i n g an e s tablishment f o r , the custody, loan, exchange, or i s s u e of money,
the t r a n s m i s s i o n of funds by checks, or the acceptance or payment of d r a f t s or orders f o r the payment of money. The f a c t t h a t
t h e banking f a c i l i t i e s a f f o r d e d a r e i n c i d e n t a l t o any other
b u s in e s s c a r r i e d oh w i l l not avoid l i a b i l i t y to the t a x .
ART. 36. Scope of t a x . - The t a x imposed under s e c t i o n 751
a t t a c h e s t o a l l instruments of the kind described i n a r t i c l e 35
p r e s e n t e d f o r payment w i t h i n the e f f e c t i v e p e r i o d of t h e s e c t i o n .
I t i s immaterial whether t h e instrument i s made or drawn i n t h i s
country or abroad, but i n order t o be s u b j e c t to t h e t a x i t must
be drawn on, payable by, and presented t o , a bank, banker, or
t r u s t company i n t h e United S t a t e s .
An order f o r the payment of money, i n form drawn upon t h e drawer
and made payable a t a bank, i s s u b j e c t t o t h e t a x i f such i n s t r u ment, without more, c o n s t i t u t e s an order t o the bank t o pay t h e
instrument and charge the amount thereof a g a i n s t t h e account of the
drawer.
532
X-7182
-3Travel or t r a v e l e r ' s checks a r e s u b j e c t to t h e t a x .
A check drawn by a cashier or other o f f i c e r of a "bank upon
t h e hank of which he i s such o f f i c e r , i s s u b j e c t t o t h e t a x .
Coupons r e l a t i n g to "bearer "bonds, although payable a t a
designated bank i n t h e United S t a t e s , a r e not "checks, d r a f t s ,
or orders f o r t h e payment of money11 w i t h i n the meaning of
s e c t i o n 751.
The t a x does not a t t a c h i n t h e case of t h e withdrawal of
money i n savings accounts where t h e item i s r e f l e c t e d as an
entry on a pass book held by the d e p o s i t o r and where the w i t h drawal i s merely evidenced by a r e c e i p t p e r s o n a l l y tendered to
t h e bank by t h e d e p o s i t o r .
The checks, d r a f t s , or orders drawn by o f f i c e r s of the United
S t a t e s or of a S t a t e , county, or m u n i c i p a l i t y , or of a f o r e i g n
government, i n t h e i r o f f i c i a l c a p a c i t i e s , a g a i n s t p u b l i c funds
standing t o t h e i r o f f i c i a l c r e d i t and i n f u r t h e r a n c e of d u t i e s
imposed upon them by law, a r e not s u b j e c t to t h e t a x .
If an instrument i s not honored by the bank, banker, or t r u s t
company upon whom or which i t i s drawn, the t a x does not a t t a c h .
LIABILITY TO TAX
Section 751 of The Revenue Act of 1932
(a) There i s hereby imposed a t a x of 2 c e n t s upon
each of the following instruments * * * such t a x to be
p a i d by the maker or drawer.
(b) Every person paying any of the instruments mentioned i n subsection (a) as drawee of such instrument
s h a l l c o l l e c t t h e amount of t h e t a x imposed under such
subsection by charging such amount a g a i n s t any d e p o s i t s
to the c r e d i t of the maker or drawer of such i n s t r u m e n t ,
and s h a l l on or b e f o r e tlje l a s t day of each month make
a r e t u r n , under oath, f o r the preceding month, and pay
such taxes to t h e c o l l e c t o r of the d i s t r i c t * * *. Every
person r e q u i r e d to c o l l e c t any t a x under t h i s s e c t i o n i s
hereby indemnified against t h e claims and demands of any
person f o r the amount of any payments made i n accordance
with the p r o v i s i o n s of t h i s s e c t i o n .
AST. 37. L i a b i l i t y . - Under t h e terms of t h e Act t h e t a x i s
payable by the maker or drawer of t h e instrume nt. Every person
who pays the instrument as drawee s h a l l c o l l e c t the amount of the
t a x by charging the amount of the t a x a g a i n s t any d e p o s i t s to the
5 3 3
X-7182
5 3 4
-4crcd.it of the maker or drawer of t h e instrument.
(See a r t . 4 4 . )
ART. 38. Rate of t a x . - The t a x a t t a c h e s a t t h e r a t e of 2
cents to every check, d r a f t , or order f o r the payment of money,
p r e s e n t e d f o r payment and honored "by a bank, "banker, or t r u s t
company w i t h i n the e f f e c t i v e period of s e c t i o n 751.
Jf
»
»
>
5 3 5
2-7183
1 1 1 BRAL
HE S E R V E
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e in Morning Papers,
Friday, June 24, 1932.
The following summary of general trusiness and f i n a n c i a l c o n d i t i o n s in the
United S t a t e s , based upon s t a t i s t i c s
f o r the months of May and June, w i l l
appear i n the forthcoming issue of the
Federal Reserve B u l l e t i n and in the
monthly reviews of the Federal reserve
"banks.
Volume of production i n "basic i n d u s t r i e s and employment a t f a c t o r i e s
decreased f u r t h e r in May, and wholesale p r i c e s d e c l i n e d .
Foreign withdrawals
of gold, which had "been in l a r g e volume in May and the f i r s t h a l f of June,
p r a c t i c a l l y stopped a f t e r the middle of the month.
Production and employment - Production a t mines and f a c t o r i e s declined
f u r t h e r in May, and the Board's seasonally a d j u s t e d index of i n d u s t r i a l
production showed a reduction from 64 p e r cent of the 1923-1925 average i n
April to 61 p e r cent i n May*
Output of coal was s u b s t a n t i a l l y reduced,
p a r t i c u l a r l y i n the a n t h r a c i t e f i e l d s ; shipments of iron ore showed l e s s
than the u s u a l seasonal i n c r e a s e , production of i r o n and s t e e l d e c l i n e d , and
a c t i v i t y a t t e x t i l e m i l l s and shoe f a c t o r i e s was f u r t h e r c u r t a i l e d .
In the
automobile i n d u s t r y output i n c r e ased c o n s i d e r a b l y .
In the f i r s t jpart of June a c t i v i t y in the s t e e l and c o t t o n i n d u s t r i e s
was r e p o r t e d to have d e c l i n e d f u r t h e r , while output of automobiles continued
a t about the same r a t e as i n the l a t t e r p a r t of May.
Further r e d u c t i o n s in employment and e a r n i n g s of f a c t o r y workers accompanied the smaller volume of manufacturing output in May, p a r t i c u l a r l y in
the s t e e l and machinery i n d u s t r i e s , and i n the t e x t i l e and c l o t h i n g t r a d e s .
Employment a t automobile p l a n t s and in the s e a s o n a l l y a c t i v e food i n d u s t r i e s
showed an i n c r e a s e .
X-7183
-2-
Value of "building c o n t r a c t s awarded, according to r e p o r t s t o the P. IT,
Dodge Corporation, a f t e r i n c r e a s i n g somewhat in A p r i l and May, declined
s l i g h t l y i n the f i r s t h a l f of June, r e f l e c t i n g c h i e f l y smaller awards f o r
p u b l i c works and o t h e r n o n - r e s i d e n t i a l b u i l d i n g .
D i s t r i b u t i o n - Railroad f r e i g h t t r a f f i c decreased f u r t h e r i n May, the
l a r g e s t r e d u c t i o n being in shipments of coal and miscellaneous f r e i g h t .
Sales
of department s t o r e s i n leading c i t i e s , which had increased s u b s t a n t i a l l y
during .April, were smaller in May.
Wholesale p r i c e s - P r i c e s of commodities a t wholesale were 1 . 7 p e r cent
lower in May than in A p r i l , according to the Bureau of Labor S t a t i s t i c s .
There were l a r g e decreases in p r i c e s of many domestic a g r i c u l t u r a l products
and of hides and t e x t i l e s .
P r i c e s of petroleum products advanced.
Daring the f i r s t three weeks of June, market quotations f o r a number of
n o n - a g r i c u l t u r a l commodities were r e l a t i v e l y steady, and p r i c e s of sugar,
meats, and l i v e s t o c k i n c r e a s e d .
P r i c e s of wheat, a f t e r considerable f l u c t u -
a t i o n s , were a t unusually low l e v e l s a t the beginning of the t h i r d week i n
June.
Bank c r e d i t - Withdrawals of gold from the United S t a t e s continued
through May and the f i r s t h a l f of June, and the c o u n t r y ' s s t o c k of monetary
gold declined by $435,000,000 between May 4 and June 15.
A f t e r t h a t date
there was no f u r t h e r d e c l i n e in the t o t a l stock of monetary gold, continued
gold exports r e p r e s e n t i n g gold p r e v i o u s l y earmarked by f o r e i g n c e n t r a l banks.
During the f i r s t p a r t of May continued purchases of United S t a t e s Government
s e c u r i t i e s by the r e s e r v e banks enabled member banks f u r t h e r to reduce t h e i r
d i s c o u n t s ; in l a t e r weeks, however, funds r e l e a s e d through these purchases
5 3 7
X-7183
-3were absorbed "by the demand f o r gold f o r e x p o r t , and t h e r e was a l s o a
decrease in member bank reserve b a l a n c e s .
Loans and investments of r e p o r t i n g member banks i n l e a d i n g c i t i e s , which
had declined sharply e a r l i e r in the y e a r , showed wide f l u c t u a t i o n s a f t e r the
middle of May.
In the middle of June t o t a l loans and investments were l a r g e r
than a month e a r l i e r , the i n c r e a s e in holdings of United S t a t e s s e c u r i t i e s
being more than s u f f i c i e n t to o f f s e t d e c l i n e s in o t h e r investments and in
loans.
Money r a t e s i n the open market remained a t low l e v e l s .
Bates on prime
commercial paper were reduced to a range of 2 1 / 2 - 2 3/4 p e r cent in the
second week of J u n e .
X-7186
'
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
June 23, 1932.
The Federal Reserve Board announces t h a t t h e Federal
Reserve Bank of Hew York has e s t a b l i s h e d a rediscount r a t e of
p e r cent 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
June 24, 1932.
X-7187
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING
f e d e r a l Reserve Notes, S e r i e s 1928.
June 3 to 14, 1932.
$5
$10
Total
Sheets
Amount
66,000
J2Q_
$6,105.00
236,000
21,830.00
98,000
9,065.00
. 36,000
30,000
.150,000
86,000
. 53,000
25,000
. 37,000
39,000
-
76,000
7,030.00
. 30,000
14,000
-
44,000
4,070.00
*
20.000
20.000
1.850.00
540,000
$49,950.00
—
306,000
214,000
-
20,000
20,000
540,000 s h e e t s , @ $92.50 p e r M, . . •
$49,950.00
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7188
June 24, 1932.
SUBJECT:
Hew Issue Treasury B i l l 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 in
Government s e c u r i t i e s between Federal reserve banks, the
code word "KOXDEGEAD11 has been designated to cover a new
i s s u e of Treasury B i l l s , dated June 29, 1932, and maturing
September 28, 1932.
This word should be i n s e r t e d in the Federal r e serve t e l e g r a p h code book, following the supplemental code
word "NOXDEGMD" on page 172.
Very t r u l y yours,
J . 0. N o e l l ,
Assistant Secretary.
TO GOVERNORS OF ILL F. R. BANKS.
X-7189
FEDERAL
RESERVE
BOARD
STATEMEM1 FOR THE PRESS
For r e l e a s e a t 3*00 p.m.
June 24, 1932.
The Federal Reserve Board announces t h a t the Federal
Reserve Bank of Chicago has e s t a b l i s h e d a rediscount r a t e of
2 1/2 per cent 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 June 25, 1932.
5 4 2
FEDERAL RESERVE BO?ARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7190
June 24, 1932.
SUBJECT:
Assessment f o r General Expenses of t h e
Federal Reserve Board J u l y 1 t o December 31, 1932.
Dear S i r :
Confirming t e l e g r a p h i c advice, t h e r e i s enclosed
herewith copy of a r e s o l u t i o n adopted by t h e Federal Reserve Board l e v y i n g an assessment upon the s e v e r a l Federal
r e s e r v e banks of an amount equal to nine hundred twentys i x t e n thousandths of one per cent (.000926) 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 as of the
c l o s e of b u s i n e s s June 30, 1932, to d e f r a y t h e estimated
general expenses of t h e Board from J u l y 1 to December 31,
1932, and s p e c i f y i n g how such assessment s h a l l be p a i d .
Very t r u l y y o u r s ,
J . C• N o e l l ,
F i s c a l Agent.
Enclosure.
TO CHAIRMEN OF ALL F . R. BAMS.
5 4 3
X-7190-a
RESOLUTION LEVYING ASSESSMENT.
WHEREAS, under Section 10 of the a c t approved December 23, 1913,
and known as t h e F e d e r a l Reserve Act , the Federal Reserve Board i s empowered t o levy semi-annually upon t h e Federal r e s e r v e "banks, i n proport i o n to t h e i r c a p i t a l stock and s u r p l u s , an 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 the s a l a r i e s of i t s members, a s s i s t a n t s ,
a t t o r n e y s , experts and employees, f o r t h e h a l f year succeeding t h e levying of such assessment, together with any d e f i c i t c a r r i e d forward 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 t o and considered "by
the Federal Reserve Board t h a t i t i s necessary t h a t a fund equal t o nine
hundred t w e n t y - s i x t e n thousandths of one per cent (.000926) of t h e t o t a l
p a i d - i n c a p i t a l s t o c k and surplus of t h e Federal r e s e r v e "banks "be c r e a t e d
f o r t h e purpose h e r e i n b e f o r e d e s c r i b e d , exclusive of the cost of engraving
and p r i n t i n g of Federal r e s e r v e n o t e s ;
NOW, THEREFORE, BE IT RESOLVED BY THE FEDERAL RESERVE BOARD, That:
(1) There i s hereby l e v i e d upon the s e v e r a l Federal r e s e r v e
"banks an assessment i n an amount equal to nine hundred t w e n t y - s i x t e n
thousandths of one p e r cent (.000926) of the t o t a l p a i d - i n c a p i t a l and
surplus of each such t a n k a t the c l o s e of "business on June 30, 1932;
(2) Such assessment s h a l l be p a i d by each Federal r e s e r v e bank
i n two equal i n s t a l l m e n t s on J u l y 1, 1932, and September 1, 1932, r e s p e c t i v e l y ; by c r e d i t i n g t h e amount thereof on the books of t h e Federal r e serve bank i n t h e General Account of the Treasurer of t h e United S t a t e s ,
f o r c r e d i t to the Federal Reserve Board i n an account designated and known
a s " S a l a r i e s and Expenses, Federal Reserve Board, Special Fund;™
t
(3) For each such i n s t a l l m e n t of sueh assessment, each Federal
r e s e r v e bank s h a l l i s s u e and send to the Treasurer of t h e United S t a t e s a
c e r t i f i c a t e of d e p o s i t evidencing s a i d deposit and t h e f a c t t h a t i t i s i n
payment of the assessment l e v i e d by t h e Federal Reserve Board f o r i t s gene r a l expenses and i s t o be c r e d i t e d t o the Federal Reserve Board i n an a c count designated and known as " S a l a r i e s and Expenses, F e d e r a l Reserve
Board, Special Fund;" and
(4) A d u p l i c a t e copy of each such c e r t i f i c a t e of d e p o s i t , t o g e t h e r
with a statement showing the amount of the c a p i t a l and s u r p l u s of t h e Fede r a l r e s e r v e bank a t t h e c l o s e of b u s i n e s s on June 30, 1932, s h a l l be sent
to the Federal Reserve Board on the d a t e of the payment of each i n s t a l l m e n t .
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7192
June 27, 1932.
Dear S i r :
This w i l l confirm the telegram of t h i s d a t e quoted below
a d v i s i n g you t h a t the Board has a u t h o r i z e d the payment "by your
bank of the r e g u l a r semi-annual dividend on June 30:
"This i s to advise you t h a t the Board has a u t h o r i z e d
the payment of the r e g u l a r semi-annual dividend by
your bank on June 30, 1932."
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO ALL CHAIBMM.
5 4 5
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7193
June 30, 1932.
SUBJECT:
P r o t e s t of Checks i n Event of Closing of
Drawee Bank.
Dear S i r ;
I i n c l o s e herewith a copy of a l e t t e r r e c e i v e d "by
the Federal Reserve Board from Mr. George DeCamp, Chairman
of the Board of D i r e c t o r s of the Federal Reserve Bank of
Cleveland, a d v i s i n g t h a t h i s "bank has decided t o d i s c o n t i n u e
t h e p r a c t i c e of r e q u i r i n g the p r o t e s t of checks f o r which
a c t u a l payment has not "been received due to t h e c l o s i n g of
t h e drawee "bank and which have been t r e a t e d as dishonored a t
t h e request of the i n d o r s e r s under the p r o v i s i o n s of t h e
Uniform Bank C o l l e c t i o n Code, together with a copy of the
l e t t e r of advice used "by the Federal r e s e r v e hank i n such
cases.
This i s submitted f o r the information and c o n s i d e r a -
t i o n of your hank.
Yours very t r u l y ,
Chester M o r r i l l ,
Secretary.
Inclosures.
TO CHAIRMEN OF ALL F. R. BANKS EXCEPT CLEVELAND.
546
COPY
X-7193-a
FEDERAL RESERVE BAM
OF CLEVELAND
June 25, 1932.
Mr. Chester M o r r i l l , S e c r e t a r y ,
Federal Reserve Board,
Washington, D. C.
Dear Mr, M o r r i l l j
I have your l e t t e r of June 22, with r e f e r e n c e t o your
l e t t e r of A p r i l 4 and my r e p l y of A p r i l 11, regarding t h e p r o t e s t
of a check f o r $28.00 drawn on the C i t i z e n s National Bank, Harlan,
Kentucky, which was t r e a t e d as dishonored under the Uniform Bank
C o l l e c t i o n Code i n e f f e c t i n the Commonwealth of Kentucky.
I advised you i n my l e t t e r of A p r i l 11, t h a t we had under c o n s i d e r a t i o n and would undoubtedly adopt a change i n our i n s t r u c t i o n s r e g a r d i n g t h e p r o t e s t of checks dishonored a s a r e s u l t
of t h e c l o s i n g of the drawee bank. Wa have now d e f i n i t e l y d e c i d ed upon a p o l i c y which w i l l make i t unnecessary to change the p r o v i s i o n s of our c i r c u l a r l e t t e r .
You w i l l n o t e from the enclosed c u r r e n t c i r c u l a r l e t t e r
No. 7 on t h e s u b j e c t "Collection of Cash Items" t h a t t h e r i g h t i s
reserved t o r e t u r n without p r e s e n t a t i o n any items drawn on "banks
which may have withdrawn, or may have been removed, from the par
l i s t , or which may have been reported c l o s e d . I t has long been
our p r a c t i c e t o waive p r o t e s t on checks which a r e r e t u r n e d a s a
r e s u l t of the c l o s i n g of the drawee bank; t h i s disposes of t h e
matter of p r o t e s t i n so f a r a s i t a p p l i e s t o checks which a r e a c t u a l l y r e t u r n e d b e f o r e they a r e charged t o t h e maker's account.
With r e s p e c t t o checks which have been charged t o the
drawer's account p r i o r t o suspension but f o r which a c t u a l payment
has not been r e c e i v e d , i t was our p r a c t i c e as i n d i c a t e d i n my l e t t e r of A p r i l 11 t o r e q u i r e t h e p r o t e s t of such checks a s may have
been t r e a t e d as dishonored a t the request of t h e endorsers under
the p r o v i s i o n s of the Uniform Bank C o l l e c t i o n Code adopted i n seve r a l of t h e s t a t e s i n t h i s d i s t r i c t . We have now d e f i n i t e l y
changed our p r a c t i c e i n t h i s r e g a r d , and s h a l l h e r e a f t e r when such
checks a r e charged back t o t h e endorsers under the p r o v i s i o n s of
Regulation J and our c i r c u l a r , n o t i f y the endorsers t h a t t h e r i g h t
to t r e a t as dishonored may be e x e r c i s e d , but t h a t i n t h e event t h e
X-?193-a
FEDERAL EE SERVE BAH
OF CLEVELAND
Mr. Chester M o r r i l l , Secretary
- 2 -
June 25, 1932.
endorsers e l e c t to t r e a t such checks as dishonored, p r o t e s t w i l l
be waived u n l e s s we a r e i n s t r u c t e d t o t h e c o n t r a r y . A specimen
copy of our l e t t e r of advice i n such cases i s a l s o enclosed.
Our counsel a r e of the opinion t h a t t h i s p r a c t i c e i s
sound and w i l l avoid t h e r e p e t i t i o n of complaints such a s t h a t
which was t h e s u b j e c t of your l e t t e r of A p r i l 4 .
Very t r u l y y o u r s ,
(S) Geo. DeCamp
Chairman of t h e Board.
547,
COPY
. Wl93-b
FEDERAL EBSERVE BAH
OF CLEVELAND
Date
N a t i o n a l Bank
Gentlemen:
We have charged your account t o cover t h e
items l i s t e d below forwarded t o t h e
f o r c o l l e c t i o n and r e m i t t a n c e , hut t h a t hank was placed
i n t h e hands of t h e National Bank Examiner b e f o r e a c t u a l
payment was r e c e i v e d .
Unless you n o t i f y us t o do otherwise, we w i l l
i n c l u d e t h e s e items i n the claim which we w i l l f i l e a~
g a i n s t t h e a s s e t s of the f a i l e d bank.
Under t h e law now i n e f f e c t we a s the agent
c o l l e c t i n g bank a r e a l s o permitted by giving n o t i c e t o
t h e Receiver or Examiner i n charge t o e l e c t to t r e a t
checks drawn on a closed bank as dishonored and s e c u r e
t h e i r r e t u r n . I n t h e event such checks a r e t r e a t e d a s
dishonored t h e h o l d e r s w i l l have recourse a g a i n s t p r i o r
p a r t i e s but they cannot be included i n our claim.
The s t a t u t e r e q u i r e s t h i s e l e c t i o n to be
" e x e r c i s e d with reasonable d i l i g e n c e " . T h e r e f o r e , i n
the event you d e s i r e t h a t we e l e c t t o t r e a t any of t h e
checks as dishonored, you must forward your i n s t r u c t i o n s
t o g e t h e r with t h e name of the Drawer and Payee t o us a s
soon as p o s s i b l e . P r o t e s t w i l l be waived on a l l items
so r e t u r n e d u n l e s s we a r e s p e c i f i c a l l y i n s t r u c t e d t o t h e
contrary.
Very t r u l y y o u r s ,
Date and t o t a l of your cash l e t t e r
Assistant Cashier.
Amount of items
5 4 9
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
January 11, 1932.
B-636.
SUBJECT:
Bank suspensions during 1931•
Dear S i r :
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 number of banks,
as shown f o r your d i s t r i c t i n the a t t a c h e d p r e l i m i n a r y statements of
bank suspensions and reopenings during 1931, checked a g a i n s t your
records, and advise us whether or not they are i n agreement t h e r e w i t h .
In n o t i f y i n g us of d i f f e r e n c e s , i f any, k i n d l y give the name, l o c a t i o n ,
c a p i t a l and d e p o s i t s of each bank t h a t should be added to or eliminated
from the s t a t e m e n t s .
The names of the banks included i n the enclosed
summary t a b l e s may be a s c e r t a i n e d by r e f e r r i n g to the l i s t s of banks
suspended and reopened, f u r n i s h e d you each month f o r checking purposes,
as the summary i s based on such monthly statements, a f t e r taking i n t o
account the c o r r e c t i o n s t h a t are r e g u l a r l y shown on the l a s t page of
the s t a t e m e n t s .
The deposit f i g u r e s given i n the t a b l e s include p r e l i m i n a r y d a t a
f o r December in the case of most banks, and accordingly w i l l be r e vised upon r e c e i p t of a d d i t i o n a l r e p o r t s on form S t . 6386-b.
If,
however, the p r e l i m i n a r y f i g u r e s shown f o r any s t a t e i n your d i s t r i c t
Bank suspensions during 1931 - #2
d i f f e r m a t e r i a l l y from corresponding f i g u r e s compiled by your bank, i t
w i l l tie a p p r e c i a t e d i f y6il w i l l ceLll a t t e n t i o n to the d i f f e r e n c e s and
f u r n i s h a statement showing the d e p o s i t s of each suspended bank i n the
State a,s given by your r e c o r d s .
As i t i s proposed to p u b l i s h f i n a l f i g u r e s on bank suspensions,
f o r the year 1931» i n the forthcoming February i s s u e of the Federal
Heserve B u l l e t i n , 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 c a l l our a t t e n t i o n ,
as e a r l y as convenient, to any necessary changes i n the f i g u r e s shown
i n the a t t a c h e d s t a t e m e n t s .
Very t r u l y yours,
B. L. Smead, Chief,
Division of Bank Operations.
Enclosure
TO ALL FEDERAL RESERVE AGENTS*
551
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
T q w i i q w
ucu»uclr /
17.
1 q 7 O
B-639.
SUBJECT:
Debits 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 to i n d i v i d u a l accounts
from weekly r e p o r t s received in 1932, the f i g u r e s f o r each c i t y f o r
those weeks t h a t do not f a l l e n t i r e l y within a given month w i l l , as
in the p a s t , be p r o r a t e d on the b a s i s of a c t u a l b u s i n e s s days.
From
data a v a i l a b l e a t the Board's o f f i c e s we have prepared the enclosed
l i s t of h o l i d a y s included i n those r e p o r t weeks of 1932 which begin
i n one month and end i n another, i . e . ,
the r e p o r t weeks f o r which
the f i g u r e s w i l l be p r o r a t e d between two months.
If there 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 i n c i t i e s i n your d i s t r i c t
which should be included i n the a t t a c h e d l i s t , or i f t h e r e a r e any
other changes to be made t h e r e i n , so f a r as i t p e r t a i n s to your d i s t r i c 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 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.
Very t r u l y yours,
E. I,. Smead, Chief,
Division of Bank Operations,
Enclosure
TO ALL FEDERAL RESERVE AC-EFTS*
1
5 5 2
DATES THAT WILL BE OBSERVED AS HOLIDAYS I F 1932, INCLUDED IN THOSE REPORT
WEEKS (ENDING WEDNESDAY) THAT BEGIN III ONE MONTH AND END IN ANOTHER
JANUARY 1, 1932 - A l l s t a t e s and t h e D i s t r i c t of Columbia,
MARCH
2
- Texas
MY
A
3
- C a l i f o r n i a , South Dakota
MY
A
30
JULY
4
- A l l s t a t e s and t h e D i s t r i c t of Columbia
JULY
5
- Oklahoma
JULY
30
- D i s t r i c t of Columbia and a l l s t a t e s e x c e p t Alabama,
Georgia, Louisiana, M i s s i s s i p p i , North Carolina,
South C a r o l i n a .
- Texas
AUGUST
1
- Colorado
AUGUST
2
- Missouri
OCTOBER 31
- Nevada
NOVEMBER 1
- Louisiana
JANUARY 2, 1933 - A l l s t a t e s and t h e D i s t r i c t of Columbia
B-639&
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
January 29, 1932.
B-554.
SUBJECT:
Preliminary c l a s s i f i c a t i o n of loans
and investments of member "banks a s
of December 31, 1931*
Dear S i r :
There i s enclosed f o r your information and
c o n f i d e n t i a l u s e , a copy of a memorandum and s t a t e ment p r e p a r e d f o r the Board with r e s p e c t to changes
i n the loans and investments of member banks during
the f o u r t h q u a r t e r of i 9 3 i and the l a s t two y e a r s ,
as d i s c l o s e d by the December 31 condition r e p o r t s .
Figures f o r the December 1931 c a l l a r e based on the
p r e l i m i n a r y d a t a f u r n i s h e d by the Federal r e s e r v e
agents and w i l l be published in the forthcoming
February i s s u e of the Federal Reserve B u l l e t i n .
Very t r u l y yours,
E. L. Smead, Chief,
Division of Ba.nk Operations.
Enclosure.
TO ALL GOVERNORS AFD FEDERAL RESERVE AGENTS*
5 5 4
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
February 3, 1932.
B-651.
SUBJECT:
Corrections in Weekly Statements.
Dear S i r :
For your information, and in order t h a t
c o r r e c t comparative f i g u r e s may be published i n
the consolidated weekly condition statement of the
Federal reserve banks f o r 1932, i f issued a t your
bank, there are shown in the attached statement
c o r r e c t i o n s made in the weekly Federal reserve
bank p r e s s statements issued during 1931, which
were received too l a t e to be shown in the compara t i v e column of the following week's statement
and of which you have not h e r e t o f o r e been advised.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO ALL FEDERAL HESEBVE AG-EM'S*
#
5 5 5
CORRECTIONS ITT CONSOLIDATED 'T2EXLY STATEMENT 0? COMDITIOH
OF FSHEHAL R^SITO BASICS I?T 1931, IJOT SHOW III THE COMPARATIVE COLUMT 0? THE POLLO^ITO WEIK'S STATEMENT
CHANGE FROM
CHANGE TO
(Iri thousands of d o l l a r s )
•February 11 - B i l l s discounted - Secured by
U.S. Govt. o b l i g a t i o n s
Other b i l l s discounted
All other resources
Total resources
All other l i a b i l i t i e s
Total l i a b i l i t i e s
79,396
142,793
19,243
4,790,502
12,741
4,790,502
79,362
142,821
19,293
4,790,552
12,791
4,790,552
February IS - B i l l s discounted - Secured by
U.S. Govt, o b l i g a t i o n s
Other b i l l s discounted
66,101
133,722
66,067
133,756
February 25 - B i l l s discounted - Secured by
U.S. Govt, o b l i g a t i o n s
Other b i l l s discounted
60,507
129,340
60,473
129,374
84.2$
84.3%
428,S6l
164,650
428,863
164,64s
429,300
1,024,133
30,830
429,050
1,023,883
31,130
June
3
October
- Ratio of t o t a l r e s e r v e s to deposit
and F. R. note l i a b i l i t i e s
combined
28 - Deferred a v a i l a b i l i t y items
Capital p a i d in
December 30 - Other b i l l s discounted
Total b i l l s discounted
Other s e c u r i t i e s
B-651a
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
February 11, 1932
B-676.
SUBJECT:
Earnings and Exoenses of F e d e r a l
Reserve Banks - 1931
Dear S i r :
There i s enclosed h e r e w i t h f o r your conf i d e n t i a l u s e , pending i t s p u b l i c a t i o n in the
February F e d e r a l Reserve B u l l e t i n , a copy of a
s t a t e m e n t , B-6G3, showing the e a r n i n g s , expenses,
e t c . , of each Federal r e s e r v e bank during the
c a l e n d a r year 1931.
Very t r u l y y o u r s ,
E. L. Smead, C h i e f ,
D i v i s i o n of Bazik O p e r a t i o n s .
Enclosure.
TO ALL GOVERNORS & F . R. ABETS.*
557
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
February IS, 1932.
B-60I+,
SUBJECT:
Condition of member banks
as of December 31. 1931.
Dear S i r :
For your information t h e r e i s enclosed a statement
showing the r e s o u r c e s and l i a b i l i t i e s of a l l member banks i n
each Federal r e s e r v e d i s t r i c t as of December 31, 1931• a l s o
a statement giving a c l a s s i f i c a t i o n of loans, investments,
d e p o s i t s and borrowings of member banks in each d i s t r i c t on
the same d a t e .
The Board's Member Bank Call Report (Fo. 5^) giving
d e t a i l e d f i g u r e s by s t a t e s , c i t i e s and c l a s s e s of banks,
which w i l l include the d a t a shown in the enclosed s t a t e m e n t s ,
w i l l be ready f o r d i s t r i b u t i o n about the middle of March.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank O p e r a t i o n s .
Enclosure.
TO ALL GOVERNORS
A D FEDERAL RESERVE AGENTS*
M
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
February 23, 1932.
B-6s6.
SUBJECT:
Description of Federal r e s e r v e d i s t r i c t s .
Dear S i r :
The 1930 Annual Report of the Federal Reserve
Board, beginning on page 3^1« contains a d e s c r i p t i o n
of the t e r r i t o r y c o n s t i t u t i n g each Federal r e s e r v e d i s t r i c t and each branch zone.
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 have the d a t a shown f o r your d i s t r i c t ,
except t h a t r e l a t i n g to land area and p o p u l a t i o n ,
checked as of December 31, 1931» a-nd advise the Board
of any necessary changes t h e r e i n .
Very t r u l y yours,
,
F. Tj. Smead, Chief,
Division of Bank O p e r a t i o n s .
TO ALL FEDERAL R^SXRVE AGSFTS*
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
March 2, 1932
B-695.
SUBJECT:
A b s t r a c t s of Condition Reports
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 f u r n i s h the
F e d e r a l Reserve Board with a copy of the a b s t r a c t
of c o n d i t i o n r e p o r t s of s t a t e banks and t r u s t comp a n i e s i n your s t a t e on December 31, 1931, or on the
c a l l date n e a r e s t t h e r e t o .
A franked 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.,
E., L,. Smead, Chiefs
Division of Bank Operations,
Enclosure,
TQ SELECTED STATE BAMIITG DEPARTMENTS*
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
March 4, 1932.
B-701.
SUBJECT:
Bank Suspensions*
Dear S i r :
There i s t r a n s m i t t e d herewith f o r V e r i f i c a t i o n a copy of the p r e l i m i n a r y l i s t of 'banks t h a t
suspended 0? reopened during the month of February.
The Comptroller of the Currency now f u r n i s h e s us c u r r e n t l y with deposit f i g u r e s of suspended n a t i o n a l banks, as of the d a t e s of suspension,
and such f i g u r e s are being used in our compilations
i n s t e a d of deposit f i g u r e s as of the l a s t c a l l d a t e
or as r e p o r t e d on form S t . 6386-b.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO ALL FEDERAL RESERVE AGENTS*.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
April 9, 1932.
B-712.
SUBJECT:
Functional Expenses,
Second H a l f , 1931.
Dear S i r :
There are enclosed herewith
copies of the consolidated Functional Expense
Exhibit f o r the h a l f year ending December y i , 1931
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 CHAIRIIAF' OF EACH FEDERAL RESERVE BAITS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T d
THE FEDERAL RESERVE BOARD
March 18, 1932
B-720
SUBJECT:
Member Baril: C a l l R e p o r t
f o r December 31, 1931
Dear S i r :
We a r e f o r w a r d i n g to you u n d e r s e p a r a t e
cover
c o p i e s of t h e B o a r d ' s Member Bank
C a l l R e p o r t No.
showing t h e c o n d i t i o n of a l l
member banks on December 31, 1931 •
Please f o r -
ward a copy to each member bank i n your d i s t r i c t
t h a t h a s e x p r e s s e d a d e s i r e to r e c e i v e c o p i e s of
c a l l reports as issued.
Very t r u l y y o u r s ,
E. L. Smead, C h i e f ,
D i v i s i o n of Bank O p e r a t i o n s .
TO ALL FEDERAL RESERVE AGENTS*
5 6 3
FEDERAL RESERVE BOARD
WASHINGTON
March 21, 1932.
B-721.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Advances to member t a n k s under
Section 10-a and 10-b of the
Federal Heserve Act,
Dear S i r :
In order t h a t the Board may be kept c u r r e n t l y advised of the
amount, i f any, of advances made by your bank under Sections 10-a
and 10-b of the Federal Reserve Act, 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 include the following information in your d a i l y Condition
telegram, Form B - l , i f and when any such advances are made:
Holdings of paper acquired under Section 10-a
Few loans made under Section 10-a
Payments of loans made under Section 10-a
Code MAFE
Code MARL
Code MAST
Holdings of paper acquired under Section 10-b
Few loans made under Section 10-b
Payments of loans made under Section 10-b
Code MIFD
Code MIRE
Code MIST
Paper acquired under Sections 10-a and 10-b should be included
on the f a c e of the r e p o r t , Form 3^» in item "Other b i l l s discounted"
and should be shown s e p a r a t e l y on the r e v e r s e side of the form as
follows:
Paper acquired under Section 10-a of the Federal Reserve
Act, Code MANE, Paper acquired under Section 10-b of the Federal
Reserve Act, Code MINE.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO GOTEHFOHS 0.7 ALL F . R. BAHCS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May
1 4 , 1932.
B-77S.
SUBJECT:
Payment of Dividends on
June 30, 1932.
Dear S i r :
In accordance with e s t a b l i s h e d p r a c t i c e , p l e a s e submit to the Federal Reserve Board,
a t your e a r l y convenience, a c e r t i f i e d copy of
the 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 semi-annual d i v i dend to member banks on June 30.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO CHAIEMET OF ALL BAMS EXCEPT MI'^IEAPOLIS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
May 28, 1932.
3-792.
SUBJECT:
Form E - Functional Expense
Report.
Dear S i r :
In accordance with the r e q u e s t cont a i n e d i n the r e p l y to our l e t t e r B-515 of
October 5> 1931, t h e r e are "being forwarded to
you today under s e p a r a t e cover
copies
of Form E f o r use during the c u r r e n t y e a r .
Pages 1, 2, 13, 16 and 18 have been r e v i s e d .
Very t r u l y yours,
E , L. Smead, Chief,
Division of Bank Operations.
TO GOVERiTORS OF ALL F. R. BANKS.*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June 10, 1932.
3-826.
SUBJECT:
Earnings, Expenses and Dividends
Reports of S t a t e Bank Members.
Dear S i r :
There are being forwarded to you today
under s e p a r a t e cover
copies of form 10%
to be used by S t a t e bank members i n submitting
t h e i r r e p o r t s of earnings, expenses and d i v i dend payments f o r the s i x months ending June
30, 1932.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO ALL FEDERAL RESERVE AGENTS*
567
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
June 14, 1932.
B-327.
SUBJECT:
Call Condition Reports of Member Banks,
Dear S i r :
There have "been forwarded to you -under separate cover
copies of Form 105 to "be used by S t a t e "bank members in submitting t h e i r
condition r e p o r t s as of the next c a l l d a t e .
Kindly hold the blanks a t
your bank u n t i l you are advised by the Board to forward them to the S t a t e
bank members, whereupon p l e a s e mail t h r e e copies to each such bank with
the request t h a t they be held pending r e c e i p t of a c a l l f o r condition
reports.
A new schedule (AA) has been added to Form 105 in which S t a t e bank
members should r e p o r t the amount of a s s e t s pledged, rediscounted, loaned,
or sold under repurchase agreement.
In Schedule H, new items have been
added to provide f o r the r e p o r t i n g s e p a r a t e l y of b i l l s payable and r e d i s counts, r e s p e c t i v e l y , with the Reconstruction Finance Corporation.
Corresponding r e v i s i o n s have been made in the Comptroller's form 2130,
used by n a t i o n a l banks.
If any S t a t e bank member belongs to a group formed under Section
10(a) of the Federal Reserve Act, i t should be i n s t r u c t e d to r e p o r t i t s p r o -
- 2-
568
p o r t i o n a t e l i a b i l i t y , based, on gross d e p o s i t s , on any advance made to the
group by the Federal r e s e r v e bank as advances "from Federal r e s e r v e bank,"
item 1(a) of Schedule H of the q u a r t e r l y condition r e p o r t form 105, and,
u n l e s s i t has r e c e i v e d the proceeds of such advance, should a l s o r e p o r t the
same anount a s "loans to banks and t r u s t companies, " item 4 of Schedule E.
A bank which has r e c e i v e d the proceeds of an advance made to the group by
the Federal r e s e r v e bank should r e p o r t the excess i n the amount of i t s i n debtedness to the group over the amount of i t s p r o p o r t i o n a t e l i a b i l i t y on
such advance as advances "from other banks and t r u s t companies," item 1(b)
of Schedule H#
The books of a bank that o b t a i n s an advance from the group
should, of course, show t h a t the note given by i t to the group covers the
f u l l amount of such advance.
We a r e informed by the Comptroller of the
Currency t h a t r a t i o n a l banks also w i l l be i n s t r u c t e d to r e p o r t l i a b i l i t i e s
under Section 10(a) i n the manner d e s c r i b 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 arrange to have the u s u a l
p r e l i m i n a r y c l a s s i f i c a t i o n of loans and investments of r e s e r v e c i t y and of
country banks i n your d i s t r i c t wired to the Board w i t h i n t h r e e weeks, i f
p r a c t i c a b l e , from the date of the next c a l l r e p o r t .
I t i s suggested t h a t
the f i g u r e s be compared with corresponding data f o r the preceding c a l l b e f o r e they a r e telegraphed to the Board, in order t h a t any obvious d i s crepancies may be d e t e c t e d and promptly r e c o n c i l e d .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO ALL FEDERAL RESERVE AGEFTS*
5 6 9
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
JUHG
1 3 >
B—328,
SUBJECT:
1 9 3 2 .
J u l y 1, 1932 Par L i s t .
Dear S i r :
In accordance with the p l a n o u t l i n e d i n the Board's l e t t e r
X-?l66 of May 28, 1932, there are enclosed herewith two copies
of the g a l l e y proof of the J u l y Par L i s t , so f a r as i t r e l a t e s
to your d i s t r i c t , i n which a l l changes to June 1 have "been i n corporated.
The d a t a contained i n the g a l l e y proof should be c a r e f u l l y
checked and one copy of the c o r r e c t e d proof r e t u r n e d to the Board
in time to reach Washington by June 30, with changes between
June 1 and the d a t e of mailing i n d i c a t e d thereon.
The other copy
may be r e t a i n e d f o r your f i l e s .
The Board should be advised by wire on J u l y 2 of any f u r t h e r
changes to be made i n the g a l l e y proof up t o , and i n c l u d i n g , J u l y 1,
which i s the d a t e of i s s u e of the Par L i s t .
ther
If t h e r e a r e no f u r -
changes, the Board should be so advised.
TO ALL GOVERNORS*
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
@FedFRASER