Full text of Mimeograph Letters and Statements of the Board : July - December 1922, [Volume 17]

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..
FEDERAL RESERVE BOARD
WASHINGTON

X-15:.;Q
FE.DEJ.1A.L RESERVE BOARD ANNOUNCEMENT

iOR THE WEEK :ENDING JULY 7, 1922.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Total
Resources

Capital

SUrplus

$100,000

$50,000

$544,317

2.5,000

5,000

129,722.

DISTRICT NO. 6 ..
Farmers :Sank of Crawford,

Crawford, Georgia

Bank of Locust Grove,
Locust Grove, Georgia

CONVERTED INTO NATIONAL BANKS:

NortbNestern State Bank, . Bellingham, Wash.
First State Bank,
Garfield,
Wash.
INSOLVENT:

Stoekm.ens State Bank,

Browning,

Mont.

AUTHORIZED TO ACCEPT DRAFTS .a.ND BILLS OF EXCHANGE
Ul> TO 100 PER CENT OF CAPITAL AND SURPLUS:

The Republic National Bank of Dallas, Texas.
PERMISSION GRANTED TO EXERCISE TRUST POWEBS:
The Merchants' National Bank, Aurora, Ill ..
The Second National Bank,
Freeport, Ill..
The .Burna National .Bank,
Durango, Colo ..

X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDING JULY 14, 1922.
AIJ4ITTED TO THE FEDERAL BESERVE SYSTEU:

None admitted.
WITHDBAWJ.L:

The Battery Park Bank,

Asheville, North Carolina.

CHANGES OF NAMES:

'Jenkintown Trust Company, Jenkintown, Pennsylvania.,
to Jenkintown Bank & Trust Company.
Old Dominion Trust Company, Richmond, Virginia.,
to State & City Bank and Trust Company.
AUTHORIZED 1Q ACCE.PT DRAFTS AND BILLS OF
EXCHANGE UP TO 100 PER CENT OF CAPITAL AND SURPWS:
. The Central National .Bank of Richmond, Virginia. •

.P!BJISSION GRANTED TO EXERCISE TRUST POOERS:

Lincoln National Bank of New York., New York, N. Y.
Southwestern National Bank ot Philadelphia, Penna.
Stroudsbal"g National Bank, Stroudsburg, Penna..
Fhoenix & Third National Bank, Lexington, Ky.
Ci tizens• National .Bank of Raleigh, North Carolina.
Pirst National Bank of Okanogan, Washington.
Whitman County National Ballk of Rosalia, Washington.

X-1530

FEDEFAL RESERVE BOAR!) ANNOUNCEMENT
FOR TBE WEEK EN'D!"NG ;iULY 21, 1922.

ADMITTED TO THE F.Eg8RAJ-:_]?ESE..11VE SYSTEn1:
~rl!.t§:J
Rei:l n1.'.r.ces
...

Capital:_

--·~·-~--~·-

DISTRICT NO. 3.

Hightstown Trust Co.,
Hightstown, N. J.

$100,000

$16,000

$319,853

25,000

. 3,000

92,732

DISTRICT NO. 6.

Planters Bank,
Carlton, Ga..

WITH.l)RAWAL:

Midwest Reserve Trust Co. , Kansas City, Mo.
BIRMISSION

GRANTED

TO EXERQISE

The Cir..naminson Natlonal :Bar.J.t c:':

TRUST PaVERS:

B.5.v-::~·ton,

The First National Bank of Corning, Ark.
The First National Bank of Col\<I;l~Jj.a, Ky.

N. J.

C' -("".}
c:D

X-1530
F.EllERAL RESERVE BOARD ANNOUNCEMENT
FOR THE VBEK EN::l:':N·~~· ;rti'LY 28, 1922.
ADMITTED TO THE FAl):E};v\JJ RESERVE SYSTEM:

None admitted.
CHANGE ')F NAME :

The Lincoln Savings Bank & Trust Co .. , Louisville 9 Ky.
to the Lincoln Bank & Trust Co.
CONVERSION:

The Citizens Bank of Emporia, Virginia, has converted
into a na tiona]. bank.
GRANTED PERMISSIQ.N TO EXERCISE TRUST

POV~RS:

The Larcbmont National Bank, J1archmont 9 N. Y.
The Third National Ba:nk 9 Sedalia 9 ~.[o.
The First Natiol1B.l Bank, Bismarck, N. Da.k.

X-1530
l'EDERAL RESERVE BOLRD ANNOUNCE:r/iENT
FOR THE \-lEEK E:NDI1TG AUGUST 4, 1922.
Allill TTED TO THE FELERAL RE§&EYE SYST:EM :

None admitted.
:MERGER:

The following ban.1ts have mergeC: with the Los Angeles Trust
California~ a member bank:

and Savings Bank. Los Angelos,

Fidelity Trust & Savings Bank~ Fresno, Ealif.
Commercial Trust & Savings Bank, Santa Barbara, Calif.
Bank of Santa Maria, Santa Maria~ Calif.
GBAN'IED :PERHISSlON TO EXERCISE TRUST POflERS:

The First National Bank of Bloomington~ Bloomington. Ind.
The Madison National Bank. :Madison, Nebr.
The Anglo & London-Paris Natioll31 Bank. San Francisco9 Calif.

s,.:r.;n
'--

X-1530
FE.IlERA.L RBSER i.!E BO.I:iRD A~-rt~o·rn:-TC:F.:MENT
FOR T.HE i'Jl~EK ENDING .A"JGUST 1J., 1922.

Tot~!

P.escu:rces

Capital
DISTRICT

NO. 2.

The Bank of New York,

New York, N. Y.

$2,000,000 $6,000,000

$72,730,995

VOLUNTARY LIQUIDATION:

Briscoe County State Bank, Silverton, Texas.
AUTHORIZED TO ACCE.!?T DRAFTS AND BILLS OF

E~p_HPNGE

UP TO 100 PER CENT UF C.A?..f.T.AL AND ST..'RPl,lJS:
The Bank of New York, New Yor.k, N.Y.
The Enid National Bank, Enid, Oklahoma.
GRAl~TED PER~USSIOii

The
The
The
The
The

First National Bank,

TO EXERCISE TRUST .POVJERS:

Clifton, New Jersey.
Natior..a.l Ba.r:..k, Newton, New Je:o:c:ey.
First Nat iC'na.l Bank., DolgeviUe, N>-.:;w Yor.~:.
Mount Kisco Na.t :i.onal Bank, Mount Kisco, New York.
Pub:Uc National Bank, New Yurk, N. Y.
The Cltizens National Bank, l~.por.i.a, Vlrgini.a.
The A:mertcan National Bonk, Frankfort, Inoi.'l:na.
~.lerc:ba.nts•

l'!____r"

,-c.:.'

~>.._

X-1530

Hm'ERAL RESERVE BOARD ANNOUNCEMENT

FOR THE VJ.EEK ENDING AUGUST 18, 1922.
AUJIIT'IED TO THE

FE:118PJ.~L

RESERVE SYSTDII:

Total
crapi tel

DISTRICT

NO. 6.

Union Banking Co.i
Monroe; Georgia

Surulus

$60,000

$20,000

Resources

>-::n

"··r . .,

X-1530
FEDERAL RESERVE BOARD .A.NNOTJI~CEI1ENT
FOR TEE YvEEK ENDING AUGUST 25, 1922.
AnJIITT.BD TO TEE EE:mFAJ, RESERVE SYSml:

Capital

Surplus

Total
Resources

$300,000

$165,000

$2,901,010

DISTRICT NO. 3.

York Trust Co. ,
York, Penna.

GRA.l'TTED .P.ERM:ISSION TO

The First National Bank of
The First National Bank of

E~RCISE_

TRUST P0-\7ERS:

Louisville~ Ga~
Shelb~ille, Ind.

~r ·-·

X-1530
FEDERAL P.ESF.RV.E BOARD AJ\1NOUNCEJI/IENT
FOR TEE WEEK DN.DING· SEPTELIBER 1, 1922.

AIMITTED TO THE FEDEPAL P.E3ERVE SYSTNJI:

SurpJus

Total
Resources

$57000

$85,383

DISTRICT NO. 6 •

.Dacula Banking Co. ,
Dacula , Georgia.

$25,000

GRA111J:'ED PERJUS SI ON TO EXERCISE TRUST POV..ERS:

The Lebanon National Bank~
The First National Bank,

Lebanon 9 Penna.
Mason City, I a.

r::-

i_• I \

X-1530
F.E)Ji:R\I. RE:SY\"E E·)AFD ANNOUNCEMENT
FOR TFB Wfi~l{ J~f:-1IHC' S~~PTEM.f5ER 8 ~ 1922.

Total
Ce.pi tal

Res9.::1r.~

DISTRICT NO. 2,
Perth Amboy Trust Co.~
Perth Amboy~ N. J.

$zoo.ooo

$200,000

DISTRICT 1-.TQ. 5.
The Peoples Bank~
Bishopville,

Bank o:f Harper's Forry 1
Rar,pcr' s Ferry, W.Va.

25,000

75,000

332,377

6,000

165~163

WITH:DEA.WAL:
Tho Ba:nk of Tomossoa ~

Nashville, Tonnossco.

INSOLVENT:
The Hyton State Bank,

Myton,

Utah.

GBA.NTED :PEruUSSION TO EXERCISE TRUST POI'JERS:
The Ua:rtin County National Bank, Fairmont, Minnesota,

X-1530
FEIF..RAL RESERVE BO.Aim ANNOUNCEivJEl~T
FOR THE WE.'EK :ENDING b'EPTEMEER 15,1922.
AIMI TTED TO THE FEJ:m:Rl:..L RES:SRVE SYSmli:

Total
Capital

Surplus

Resources

DISTRICT NO. 12.

Bank of Prineville,
Prineville, Ore.

$509000

$184,126

WI THDRA.Yl.ALS:

The Stratford State Bank 9 Stratford; Wisconsin.
Tho Farmers State Bank 9
Waconia,_ Minnesota.
GRQTED PERMISSION TO Ei:ERCI$ TRUST POWERS:

The City National Bank of .Atchison, Atchison, Kansas.

X-1530
FEDERt\. 1 P.Ef.f.F~R\"'8 B0.~ Pn AN1:JOU:.·'C:F.J\~NT
FOI-i 9.'m~ '7.1l;::r;:r.: EinJD~(+ S1~I'rt:EM5:•!R ?2.7 1922.

_92ptfl:!.
Ro -sou:rces

DISTRICT NO. 2.
New York Life InS'V.rnnce and
Trust Co., New York 9 N. Y. $1,000,000

$2~080,000

$31,757,906

DISTIUCT NO. 9.
Minnetonka State Bank,
Excelsior, Minn.

25,000

507,721

The Los Angeles T-rust & ~::cvln,;;::> B.s.:nk~ Los Angeles, California,
has changed its title to pacif5.c Southwest Trust & Savings Bank.

The Marlmt Trust CorniJEmy, B.:ighton, 11ass., a member, hM
been taken over by the Intormtional T:r·ust Cor:.pany of Boston, a
member institution.
CONVEHSION:
The State Bnnk of Kenbridge, Kenbridge, Vo.., hcs converted
into a national bank.
ABSORBED BY NATIONAL BANK:
The Security Bank & Trust Co. , El Paso, Texas, hus been
taken over by The Border Nationnl Bc.nl{ of El Paso.
AUlliORlZEDl TO A..9~:?_'r_JJ.l1~'F_rr_,_S__J..]IJ2_j':I~J.S _CR..J.~:.

CHANGL UP TO 100 FER c'E]i'1 1 OF

CA_F.l 1 i',s\L.1~·'IJ..J:itffi.l?J.lJfl.;_

New York Life Insur:mce & Trust Co., New Yorl{, N. Y.

The ]/lerchcnts' :Nation:U BnnJc of Plnttsburgh, Plattsburg, N. Y.

,. .... c.
\.

:~-1530

:!"£LCRAL B.:Sm:i:Tn:E .BC: 'l.hD
FOR IBE

A.~DTOWJCEIIENT

YJ_L.·~J': =~rDI~: ~iJ ~~)~}:Yl'E~.~:·,:::-{E""R ;~'J

1 '0 22.,

None ad1:1i t ted.
'.'lFL'HDB...ll..r!AL :

Spencer State Banlc:::, Spmwor, Ohio.
VOLUI~TARY

LIQ.UirLTION:

The Bmlli: of Ne\7 York; Nev1 Yorlr: ~ N. Y. , he:=; no rgocl i:nt o
the: 1::-ov1 Yorl{ IJfc Insurance c-~ T:rust Co. 9 J'Jm·; Yo:rl-c, 1T. Y.,
under tl1c nano of Bank of :Nm7 York & Trust Co.

?lL~RIISSIOl\r

GRANTED TO EXERCISE TRUST P0\7ERS:

The JJ:borty National Banl:.
T:"..o F.i:r::;t National Banl'::,
The Trtmar: Hatio:r.al Da!ll-c,

S3:racuse, 1J. "I.
Savanna, IlL
Tru;Jan,
II inn.

•

X-15;50

FEDERA.L RESERVE BOAPD ANi'T(\JliJC'EirtE'N'r
FOR THE VJEEK ENDING OCT0.\:3J R G9 1922 .
.'l.JMI Tm TO THE l!EDEBAL RESElfv'E SYt3TBM:

Sunlus
===-

Total
Resources

$100,000

$20,000

$138,008

450,000

225,000

7,866. 302

300,000

350,000

3,513,735

DISTRICT NO. 2.

Westwood Trtlst Co.,
Westwood, N. J.
Bank of :Europe 1
New

York, N. Y,

DISTRICT NO. 6.

Liberty Bank & Trust Co.,
Savannah, Ga.

ABSORPTION:

The Metropolitan Trust Co. and the Back Bay National Bank,
both of Boston, Mass., have bean absorbed by The Federal Trust
Co. of Boston.
FERIUSSION

GRANTED

~'0

EXERCISE TRUST POWERS:

The Citizens' National Bank, Ilariotta, Ohio.
Tho Citizens' National Bank, I:elphi,
lndie.na..
The Gate City National Bank, Knnsns Cit;]J I.1issouri.

--··
Xl530
FEDERAL BESERVE JJOAS.:;; A.lJNOUNCThi8liJ'T
FOR THE 'WEEK ENDING OCTOPER 13, 1922:
ADMITTED TO THE FEDERAL BESEFVE SYSTEM:
Total

DISTRICT NO. l.

Federal Trust

Cam~any,

Boston, Mass.

s-lll'plus

Capital

$1,500,000

. :BANl{S

...

Resources

$20 J 300 992

CLOSED:

State Bank -of Belt, Belt, Montana.
PE~liSSION GRANTED TO

EXERCISE TRUST POWERS:

The Ma.dRiver National Bank, Springfield, 0:1io.
The Security National Bank, East St. Louis, Illinois.

,
t

.. ,.

~-:_ r~"t '"~

••

Xl530
FEDERAL RESERVE BOAJID M"N'OUNCEMENT
FOR T}iE i'£8:~ ElTrEJG OCTOBER 20, 1922.
ADMITT.SD TO THE FEDERAL FESERVE _SYS~

None adr.1itted.

Gandy State Bank, South W.r.i tley, Indiana,

to
Mayer State Bank, South Wh.i tley, Indiana.
PERMISSION GRANTED TO EXERCISE TRUST PQ1,1TERS:
The Second National Bank of Washington, D. C.
The Con tine ntal National Bank & Trust Company,
Kansas City, Missouri.
The Frost National Bank of San Antonio, Texas.

_;~.

••

X 1530
FliDERAL RESB.RVE BO.)I\D i~.N~JOUNCEl.lEN'l;
FOR 'rHE WEEK EliDING OC'IOBER 27, 1922.
~MI~'IED

TO THE FED:I!iliAL RESERVE

DISTRICT N0.8.
Greenwood Bank & Trust Co.,
Greenwood, I!Iississippi.
DISTRICT NO. 12.
Cewlitz Valley Bank,
Kelso, .Iashington

~200

,00()

SYS~EM:

Sur Jlus

Total
Resour&es

~50

,000

;jj,955,669

10,000

207,582

~:.::w::u:c::::c:::z::;::-.-ll\L::2::i.W

Farmers

30,000

& Merchants Bank, :Rupert, Idaho.

The Planters Nativna.l Bank ()f Rocky1lount, Rocky Mount, N. C.•
The Merchants National Bank of Lawr.:mce, Lawrence, Kansas.

X-1530

FED:::: A::.. ffi:.5ERVE BO.\Iw .>..FNOU?-JL'E:1XT
I:liDJ:NG NOVfJ\iilBR J;, 1922.

FOR 'i'HE '\$EK

~al

Capit.e.J.
DISTRICT NO.

llii.§.Q_UJ' ce s

Springfield Avenue
Nev1ark, N. J.

~~1st

Co.,
0200 ~ 000

~1009000

Q4,959,464

DISTRICT NO. 11.
The Guaranty State Bank,
Tahoka, Tsxas.

25 7 vGO

105,154.

VOLUNTARY LIQU!U.TION:
Garden City Bank & Tn1st Co., San Jose, Calif.
PEFdliSSION GBLNTrn TO Et:EBCISE TRUST po·.£RS:

ArJerican National Dank of Portsnouth, Portsnouth, Va.
The First National .Da:nk of Dalton,
Dalton, Ga.
Tho Long Beach National Bank,
Long Beach, Calif.

~
...

X--1530

.!!"'ZDERAL RESERVE BOAJ.j) J..l~'N0UNSEJ'JENT
FOn THE '\JEEK El'JDilJG NOVEJ:IBER 10, 1S22.
,.I

;Ali:UTTED TO THE FEDERAL RESERVE SYSTEM:.

None admitted..

First

Americ~n

State

E~k,

Golden Valley, N. Dak.

PERMISSION GR.w:JTED TO EXERCISE TRUST ?O'JERS:

The Batavia National Bank, Batavia, Illinois.

r--*'

: '

.l-13:30

RESERVE BO.P.Jm .AN·-rr.·,~tWEME.WT
FOF. THE WEEK ENDING NOVB'1fSI:R ~.7 , 19.22.
FEDT~RAL

Total
Resources
DISTRICT NO, 8.

Trust
St. Louis, Mo.

Eastmn-Taylo~

Co~,

~200

;jpl,574,513

,OGC•

PERMISSION GRANTED TO EXERCISE ThUt:>T r0W£RS:

The
The
The
The

Collingswood National Ba~k,
Hazleton National Bank,
First National Bank,
Lawndale National Bank,

Collingswood,
Hazle";on,
Lock Haven,
Chicago,

:N. J.

Ea.
Pa.
Ill.

X-15~

FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDING l!OVEl.1BER 24, 1922.
ADtHTTED TO THE FEDERAL RESERVE SYSTEM:

· None admitted.

B&"m: CLOSED:
St. anthony Bank

& Trust Co., St. Anthony, Idaho.

CONVERTED INTO a NATIONAL

B.&~K:

Farmer.s Book& Trust Co •. , Winston ..Salem, N.c.
WITHDRAWAL:
The Thompson Satt'ings Bank,

Hudson,

Mich.

PEIU.USSION GRANTED TO EXERCISE TRUtiT POWERS:
The
The
The
The

Athens National Bank, Athens, Ohio.
First National Bank,
St. Clairsville, Ohio.
Farmers National Bank & Trust Co., Winston-Salem, N.c.
Union National Bonk,
Knoxville, Tenn.

x1sro

F"..::DEfu.J.. Illi3~EVi: BO.~~RD A:~I:m.mc.;;;::::;.N~
FOR 'IHE '.'!t~:SK EliDING DECEr:lBER 1, 1922.
ADI.IITTED TO THE ·FEDERAL RESERVE 3YSr.n.1'.1:

1 ota.l
Resources

CapitJ.l
DISTRICT UO. 5.

Farm0rs Commercial Bank,

Benson, Horth Carolina.

i,rlOO ,000

Huntley 5tu.te Bank,
VO.LU~;~.tiliY
Centr~l B~nk

PEELl::lSIOlJ

',-25 ,OOu

i;t465,224

Hunth:y • .Liontana.
LI:i/.UID.I".'? ION:

& Trust Corporation, Atlanta, Ga.

GP~JTED

TO J:..i:ERCltiE TRUo;;;T ...-\J.'JERJ:

The manufacturers National Bank of Ilion, Ilion, Ne\v York.
The First National Bank of l.~ooresville, ~:oortJsville, N. Carolina.
The First National Bank of Gre~nevillo, Greeneville, Tennessee.

X-1530
FEDERAL RESERVE B01L11.D ANlTOUNC.EMEHT
FOR THE. ·:l.EEK ENDIHG D:b;CEI:IBER 8, 1922 •
.A.Ill·.1ITTED TO THB FEDERAL RESERVE SYST.E;/I:

None admitted.
B.Allli: CLOSED:

The Ballantine State Bank, Ballantine, Montana.
VOLUNTARY LIQUIDATION:

·The Farmers & Merchants Bank,

Rupert,

Idaho.

PE.,tt.tifJSSION GRANTEt TO EXERCISE TRUST POr1ERS:

The Citizens National Bank of riaynesboro, Pa.
The First national Bank: of J..lexandria, l.1inn.
The First National Bank of \7enatchee, Wash.

X-1530

FEDERAL RESERVE; l30ARD A.NNOUNCF;MF::NT
FOR •.r BE \JEi.K ENDING DECEMBER 15 , 19 22.
AD~UTTED

TO TES FEDE&L RES:cRVE

SiSTEI~:

·.rot.::.l
Resourc&s

surplus

B:::.nkers Trust Co.,
Denver, Oaler:cn.o.

~1,000,000

Q250,000

~4,265,518

Morg::-.n County Bo.nk, illo.dison, Georgie..

The
The
The
The
~he

First No.tionr~l Bc:.nit of \"ic.shington, N. J.
Chc.rlotte N::.tionr.l B-::.llk, Ch~rlotte, N. C.
\"foods ide N::-.t ion.r;.l Bc..nk of Greenville, S. C.
lJinrni BeD.ch First N2.tion2..l Bank:, ~1io..'lli Be:::.ch, Fla.
Joplin Nr'.tion2-l Bc.nk, Joplin, Missour:L.

•
X·-1530

FEDERAL RESERVE BOARD A}lNOUN0FATimT.
FOR '.J:HE ·~~r.~ ~:DIUG D£CEiffiEB. 2;:;, 1922.

None admitted.
WITHDRl'l.VllU.S:

Mercpants and Planters Bank, W'hitecastle, La.
Little Horn State Bank, \'Tyola, Mont.
PERMISSION GRANTED TO

W~RCISE

TRUST POWERS:

The City Fational Bank, Salem, N.J.
The First National Bank, Mount Carmel, Pa.
The Farmers National Bank, Hutchinson, lHnn.

X-1530

FEDEBAL RESt:RVE BO;JID Ai:Jl~Oln7CEl1ENT
FOR THE "lEEK ENDING DECEI.iK::R 2 9 , 1 9 22 •

.ADMITTED TO THE F.EDERAL
DISTRICT HO. 6.

Farmers & Merchants Bank,
Eatonton, Ga.

F.:Z~ERVE

SYSTEM:

Total -

Capital

R~sources

~25,00v

:;;; 26,257

DISTRICT NO. Q.

City Trust CJJmpany,
St. Louis, Mo.

200,000

45,000

1,820,518

Laclede 'l'rust Company,
St. Louis, 11o.

200,000

35,000

1,690,849

B.AlJK
The Bank -Of Hansen,

CLOSED~

Hansen, Idaho.

....

...
COPY

X-3464a

FEDERAL RESERVE :BANK OF ATLANTA
Office of
Governor

June 15, 1922.

To the President of the Senate,
Washington, D. c.
Sir:In response to Senate Resolution No. 304, I enclose regular
monthly mailing list of names and addresses in the State of Alabama~·
The speech of Senator Glass and our accorrpanying letter were sent
to each member of said list.
The questions asked in the Resolution, I answer as follows:
1.

The speech of Senator Glass was sent ~nto the State of Alabama
by the Federal Reserve Bank of Atlanta, upon its ovvn initiative
and responsibility.

There is attached hereto copy of circular letter written by the
Federal Reserve Bank of Atlanta, and sent, together with the
speech of Senator Glass, to member banks, non-member banks,
corporations, and individuals on the regular mailing list for
our monthly review of business conditions. We distributed the
speech for its value as bearing upon an important economic
question of the day. Sucn distribution was to all states in
our District, and did not specialize on the State of Alabama.
We were actuated by no political motive, nor did we send the
documents to these correspondents in their capacities as
"voters".
Had we done so, we should have been obliged to
send out many more than the 856 copies which we actually distributed in Alabama.
We regard Senator Glass' address as being
public property, inasmuch as it was delivered on the floor of
the United States Senate and printed in the CONGRESSIONAL RECORD.
The particular letter which went out with the speech<Ss was written
by the Federal Reserve Bank of Atlanta, and was sent out without
the knowledge, suggestion, or ~proval of the Federal Reserve
It was however approved by the
Board or any member thereof.
Executive Committee of this Bank, the undersigned (Governor)
being absent from the city.

3·

The expense of having the speech printed and circulated as above '
indicated was borne by the Federal Reserve Bank of Atlanta.

The funds for such expense were provided out of our current earnings and the amount expended in the printing and distribution of tr.e
speech in Alabama was $27.13

.. "
~~--~ -~--· ~

X-3464a

- 2-

5·

The speech of Senator Glass was sent to
of our bank in Alabama.

We did not send the speech of Senator Glass or the letter
which accompanied it into the State of Alabama at the
instance of the Federal Reserve Board. The Board informed
us that copies of the speech were available, but neither the
Board nor any member thereof made any suggestion as to the
number we should send out or as to whom they should be sent.
There were 6500 c~ies of Senator Glassr address ordered by
us. The total cost of printing was $108.69.

856 correspondents

Respectfully,
(Signed) M. B. Wellborn,
Governor.

. "

r
.-.-

...
r·· ,.". ~~
.

FEDERAL RESERVE BOARD
WASHINGTON

X-3465
July 1, 1922·.

SUBJECT:

Res. 308·.-

Dear Sir:
I transmit herewith copy of a resolution of the
Senate of the United States {S. Res. 308), requesting the ..
Federal Reserve Board to call upon th~ Federal Reserv~
Banks, with the exception of the Federal Reserve Bank of
Atlanta, to furnish to the Senate certain information therein specified.
As this resolution was sent to the Federal
Reserve Board, it ~;vould seem that your .,response, vvhich should
be addressed to the President of the S3nate, should be sent
to the Federal Reserve Board for transmittal to the Senate.

Very truly yours,

Go v e r n o r.

(Enclosure)

GOVEBNORS OF fJ.,L F. R. BANKS EXCEPT ATLi\NTA
COPIES TO .\GENTS.
n
n

COPY

S. RES.· 308.
In the Senate of the United States,
April 20 (calendar day June 30), 1922.

Whereas it has been charged upon the floor of the Senate that each
and every one of the regional Federal reserve banks of the
United States has had printed and.distributed at its own expense a speech delivered in the Senate by Senator Glass, of
Virginia, in which the position of Senator Heflin on the deflation policy of the Federal Reserve Board was assailed and
cri tized: Therefore be ~it
RESOLVED, That th~- Federal Reserve Board is hereby requested to call on all of said Federal reserve banks, except
the Federal Reserve Bank of Atlanta, which has already reported
to the Senate, to 'furnish to tha Senate in '''riting all infonna.tion in their posgession, respectively, called for in the following questions:
(1) Lt whose instance was the speech in question of Senator
Glass sent out 7 (2) At whose expense was said speech printed
and distributed? (3) Ho'N was the fund provided, and how many
copies of said speech were sant out, and how much money was expended in printing and distributing said speech? (4) Did any
member of the Federal Reserve Board suggest tha printing or
distribution of the said speech?
Attest:
(Signed) George A. Sanderson
Secretary.

FEDERAL RESERVE BOARD
WASHINGTON

X-3466
July

6, 1922.

Dear Sir:
There is enclosed herewith, for your information •
copy of the decision rendered June 26, 1922, by Judge
Wolverton'of the United States District Court for the
District of Oregon, in the case of the Brookings State
Batik (Brookings, Oregon) vs. the Federal Reserve Eank
of San Francisco.
Very truly yours,

Go v e r n o r.

(Enclosure)

GOVERNORS OF ALL F. R. E.ANKS (except San Francisco)
Copies to Agents.

X-3466a
DECISION OF DISTRICT JUDGE WOL~RTON,
UNITED STATES DISTRICT COURT FOR THE DIS1_HICT OF OREGON,
IN THE MATTER OF ~·ROQ!{INGS STATE JL'l1T.K, AN OREGON BANKING CORPORATION 1
VS. FEDERAL P..ESEB.VE B~UiJK 0]' SAN FRt\.NCISCO.
D~C IS I.DN FTnl~1i;]I3ll. JUNE ?~_19:2.2:~
The Brookings State Bank, the plaintiff herein, is an Oregon corporation, with a capital stock of $15,000, and is engaged in the

banki~g

business

a.t 'B~ookings, a. small town in the extreme southwestern part of the state, in

Curry County.

The to·wn is without a:;cpress facili tias.

The bank has

correspondents at San Francisco, California, and Portland, Oregon.

making remittances, it has heretofore exacted an exchange charge of onetenth of one per cent.

The defendant, Federal Reserve Bank of San Francisco,

exercising its functions as a collecting and clearing house agency, and desiring to make collGction from the Brookings Bank, requested payment at par,
as it is prohibited by the Federal Reserve Act from paying exchange.
was refused by the Brookings Bank.

This

With the view, therefore, of making

such collGctions without the necessity of paying exchange, the Reserve Bank
maintai~ed

an agent at Brookings for making collection over the counter, of

such paper as might be transmitted to him through cash lettGrs from the
Reserva Bank and its branch bank at Port).and.

The agent was so maintainad

for the space of about a yaar, and he collected over the counter during the
time something above $108,000, at an expense 'to the Reserve Bank of $3,542,
which includes the expense of transmitting the currency to point of destbc·tion.

The method caused the Brookings Bank much annoyance, and required it

to maintain a materially larger raserve than ordinarily would have been
necessary in the usual conduct of its business.
The agent was finally withdrawn, and the Brookings Bank was notified
that thereafter checks

wo~d

be forwarded for collection by mail direct

to~e

~-:'!~

><.

- 2 ba:r-2~,

'vith request that they be paid at par and the proceeds terDitt3d. by

e:whange on Portland or San Francisco.
11

Checks were so forwarded, indorsed

Pay to Brookings Stata Bank for collection only and.r·.errd ttance in full without

mant, on the ground that the bank was not called upon to act as agent
the Reserve

Bank to make such collections under the terms imposed.

fo~

The

Reserve Bank, upon the return of the chacks, return,;d them to its correspondents, advising them, in effect, that the Brookings Bank refused to pay
and had not protested the paper 1 and that they must look to tlb.e Brookings
A preliminary injUO;ction issued after hear l:..lg,
'
restraining the R;serva Bank from sending letters to its clients advising

Bank for their protection.

them that they must look to the Brookinss Bank for their protection through
failure to protest such pap0r as demand for payment was made upon it on
condition that it rami t at par.
Wolverton, District Judge:
The Federal Reserve Bank is empo·.vered by the Federal Reserve Act, by
authority of which i t is permitted to incorporate and transact business 1 to
exercise all powers specifically granted by the provisions of the act, and
such

incideatcJ. powers as shdll be necesDc.ry l~::> carry on the business of

banking within the limitations prescribed by th·3 act (Subd. 7, Sec. 4) •
Section

13,

as amended by the act of June 21, 1917,

(40

Stat.

235),

:.w

it is

provided that any Reserve Bank may receive from any of its member baru:s
deposits of current funds in lanful money, or chacks and drafts payable upon
presentation, and also, for collection, maturing notes and bills; or, solely
for the purpose of exchange or of collection, may receive deposits of checks
and drafts, payable upon presentation within its district, and maturing notes
and bills payabl~ tharein; or, solely for the purposes of exchange or of

X-3466a
1. -:' ii
·F
"· . ·-' ..

- 3 -

·~

collection may receive from any non-member bank or trust company, deposits
of current funds in lawful money, National ba;.1k notes, Federal Reserve notes,
checks, drafts payable upon presentdtion, or maturing notes and bills; prov ided, however, that such non-member bank or ttus t company maintains ·r.ri th
the Federal Reserve Bank of its district a balance-sufficient to offset the
items in transit 4eld for its account by the Federal Reserve Bank; and,
"Provided, further, that nothing in this or any other section oftbis act
shall be construed as prohibiting a member or non-member bank from making
reasonable charges, to be determined and regulated by the Federal Reserve
:Soard, but in no case to exceed 10 cants per $100 or fraction thereof, ·oased
on the total of checks and drafts presented at any one time, for collection
or payment of checks and drafts

a,;ll.l

remission therefor by exchange or other-

wise; but no such charges shall be made against the Federal Reserve Banks."
By Section 16, the Federal Reserve Board is empowered at its discretion to exercise the functions of a clearing house for Federal Reserve
Banks, or it

may

designate a Federal Reserve Bank to exercise such functions,

and may also require such bank to exercise the
for its member banks.

fu.~ctions

of a clearing house

By a previous clause of this secUon, it is provided

that every Federal Reserve Bank shall receive on deposit at par from member
banks or from Federal Reserve Banks cheCks and drafts drawn upon any of its
depositors, and when remitted by a Federal

Reserve Bank, checks and drafts

drawn by any depositor in any other Federal Reserve Bank or member bank upon
funds to the credit of said depositor in ·said Reserve Bank or member bar.U: •
•
The language of the statute is that the R3serve Banks may rec~ive
from non-member banks checks and drafts payable upon presentation, and this·
solely for the purpose of exchange or of collection; but this is on condition
that the non...member bank shall, of its own volition, maintain with the :aeserve

'~ ~;

:'l.

: , .~: JL

X-3466a

- 4Bank the appropriate balance as prescribed.

In this way, non-member banks

can avail themselves of the clearing house privileges afforded by the Reserve
:Sank.

Othe~vise,

it would seem that non-member banks are not affected by

the act. (31 Opinions of Attorneys General, 245>"·

But the preceding clause

gives broader scope to the powers of the Reserve Bank.
deposit, for the purpose of exchange or of collection,
payable upon presentation within its district".

It may receive on
11

checks and drafts,

This would seem to comprise

all checks and drafts upon whatsoever bank dra·,.,n, within its district,
without discrimination as to Whether member or non-member.

Th~

use of the

word "may" is indicative of a legislative intendment to concade an optional
function only.
be construed

There .is no particular reason assignable why the word should

StS

"shall 11 or

ma:1da.~Ol'Y

in its.

si~ific"'"tion.

The clause of Section 16, requiring Rese.ve Banks to receive at par
on deposit from member balli{S or from Federal Reserve Banks, checks and drafts
drawn Upon their depOSitOrS 1 Carri:3S With it no SpecifiC power for making
94Change or collections.
Section 13.

The function, so to be exercised, is treated of in

The Reserve :Sank having such paper on deposit, however, may be

treated as the holder or owner of such paper.
The Federal Reserve Boar·d, :1pp.:.rantly recognizing

banks, unless they voluntarily maintained with the
balance, ward not otherwise affected by the

~at,

Resarv~

issued a

th:~.t

nonmember

Bank the
regul~tion

~PPfOpriate

under

title "Check Clearing and Collection", n.s follows:
11 Each l'eder:1l Reserve :B:1:nk 'Nill receiva at pur from its member
banks :md from nonmember banks in its district which h.J.ve becon:e
clearing members, ch3cks dr~wn on all member and clearing member
banks and on all other nonmember bunks Which-agree to remit at
par through the Federal Reserve :S'-lllk of their district. 11

"•

This is in pursuance of a policy inaugurated by the :Soard to induce

X-3466a

(. :·

... ·.··..,_,;

- 5nonmember banks, which are without the pale of the act, to remit at par, and
thus to unify bank clearances and collections throughoat the country.
The questions presented here are: First, Whether the Reserve Bank
has the authority to make collections from nonmember banks; and, Second,
wha ther it

coerce such bDnks to a e:ree to remit at par.

c~m

As to the fir3t, it is already apparent that the
at its option, receive
power, it

may

pape~

Reserve Ba~ may,

against such bapJrs for collection.

Having that

collect it, if it can find a way of doing so without the pay-

ment of exchange which it is prohibited from paying by the act.
It is a banking custom, as •vell as a legal right which· a holder of
a check has at all times, to present paper at the counter of the payee bam[
and demand payment, and, if denied, the paper is subject to dishonor. Paper
so presented and paid over the counter is not subject to exchange.

It is

also a custom among banks, in making collections from other banks where there
is not more than one bank in a place, to send checks to the drawee bank with
request for remittance, and the request is honored unless there is some
special reason why the bank should not pay.

These bcmking rules and regulations

are conceded.
As to the second question, the nonmember banks, being ·Nithout the
pale of the Fed-3ral R'::serve

l~ct,

h::.ve the right, if they sse fit, to· charge

reasonable e.;;:change on remitt~'"lces.

This

is.

a right 'the bank may relinquish

at its option, but it ought not to be coerced into doing so, or agreeing to
do so, and any strategy which has for its purpose the coercion of suCh nonmember bank to yield its legal right in this raspect is unlawful, and will
not be approved by the courts.

The Supreme Court, speakin:::; through Mr.

Justice Holmes, has putthe stamp of its disapproval upon the act of a party

X-3466a
- 6massing a number of checks again$t a bank and presenting them in bulk at
the counter for payment, although the l1older of paper has the legal right
to demand payment, on the ground that it evidences an ulterior purpose
of compelling the bank to yield against its will to a
par.

demar~

for,payment at

(.American .Bank and Trust Company, et al, vs. Fede.ral Reserve Bank,

41 Sup. Ct. Rep. 399).

I;.

the opinion, the distinguished jurist has

this to say:.:.
"If this were a C3.se of CC'rr.pet:5. tio-..1 in private business, it
would be hard to admit the justification of self-interest .considering the naN current opinion as to public policy expressed
in statutes and decisionsi but this is not a private busir'ss.
The policy of the Federal Reserve Banks is governed by the policy
of the United States with regard to them and to these relatively
feeble competitors. Wd do not need aid from the debates upon
the statute under which the Reserve Bunks exist to asffiXme that
the United States did not intend by that statute to sanction
this sort of warfare upon legitimata creations of the states. 11
The testimony here impels me to the conclusion that the Federal
Reserve :Bank has gone to the len<i;th of endeavoring to coerce the Brookin:;s
:;;,3.nk to acced.a to its derra11d that the lc.tt:;r bank agree to r3mit at par.

Its purpose is obvious, from the fact th&t it maintained an agent at
Brookings for practically a year, at an expense to it of $3,542, for collecting over the counter checks and drafts dravvn upon the Brookings Bank, knowing at the time that the procedure _was embarras.sing to the bank, and required it to maintain a much larger reserve in its coffers to take care of
its current
earnings.

busines~,

thus depriving the -bank of·

portion of its or9-inary

Such a purpose is furth~r manifest from correspondence found in

the record.

One letter to which I refer is defendant's exhibit "q", from

the manager of the Portland Branch to an officer of the Reserve Bank at
San Francisco.

It relates to an incident of the acceptance by the agent

at Brookings of the bank's draft at par in payment of checks presented

X-3466a
- 7 -

are, of course, extracting th_j sting from our direct collections."

Another

is plaintiff's exhibit 20, a letter from the mana&Sr at Portland to the
Scio State Bank, advising that "Shortly, after all the banks in the country
have had time to consider becoming par volur.tarily, it will be necessary
to use more forcible methods with the f.aw ba:n.k:s that refuse to pay their
checks at par."

Corroboration is found in other correspondence and. evi-

dence adduced at the trial, but the record is too voluminous to attempt
to particularize.
But with all this, it appears that the Brookings State Bank
·,vas advised by letter of September 20, 1921, that the agent at Brookings
would be 'Nithdrawn on September 30, and the agent was so withdrawn, and
has not since been maintained there, and as this suit was instituted on
September 29, 1921, t}1ere would seem to be no necessity for enjoining the
defendant from maintaining an agent at Brookings for r.-.aking collections over
the counter of the bank, whether absolutdy or in modified te:rms; nor ,,vould
it have been necessary to go into these matters to the extent we have, but
for the earnest insistence that it was the defendant 1 s absolute duty, imposed upon i t by the act, and as to which it had no volition, to make such
collections.

The Federal Reserv3 Bank, however, has recognized the optional

character of its function in this regard by notifying its correspondents that
it will accept no more paper on the Brookings State Bank for collection.
As it relates to the method adopted by the defendant for making
collections, through the mail by sending checks and drafts drawn upon the
Brookings Bank direct to the bank, indorsed "Pay to Brookings State Bank,
for collection only and remittance in full without deduction for exchange
or collection chargas, 11 it is plain tha.t the b.1nk was not called upon so to

X-3466a
- 8 remit, and its return of the checks without payment as aemanded 1vas not
tantamount to dishonor.

I repeat 'Vhat was s:.:.dd in decidint, the matter

at the preliminary hearing:
"While, under the prevlilil ing cu.stom, the defendant ban?.: could rightfully remit its checks 8Ild drafts dra1m .:::.gainst the plaintiff b::.nk direct to the l::1tter for collection and could th2raby exc1ct p~yment of
them, it could not impose conditions upon which such payment should be
made; much less could it m~~e the plaintiff b~ru: its agent for causing
protast to be made for non-paym~nt. The idea of requiring that a mlker
or drawee shall h:1ve protested his own paper is so inconsistent with the
functions of an ugent that it cc.n harc.ly recaive the s-,netion of law.
No man can have two ma.sters, especL:..lly ::imself and another. 11
The defendant ·.vas, therefore, not .:tuthorized to ndvise its clients
that they must look to the plaintiff

b~·.n~::

fo1· protect ion through failure to

protest.
The preliminary injunction heretofore decreed will be made perrrument,
but no injunction will issue respecting title maintenance of

-~gent

at Brookings,

as such agent h,.J,d been wi thdr;;,wn pmcticully at the time of the :institution
of the suit, n.nd there
to replace him.

~ppears

to be no intention upon the part of defendant

FEDERAL RESERVE BOARD
WASHINGTON

X-3468
July 7, 1922".

SUBJECT:

Change in Proposed Method of Reimbursement
of Fiscal Agency Expenses and New Estimate.

Dear Sir:

There is transmitted herewith, for your information
and guidance, copy of a letter received from the Under
Secretary of the Treasury, which is self-explanatory.
You
are requested to forward to the Board, for transmission to
the Treasury, a new estimate of re'imbursable fiscru. agency
expenses to be incurred during the six months' period beginning July 1, 1922, under the two titles specified in Mr.•
Gilbert's letter.
Very truly yours,

G o v e r n o r.

(Enclosure)

GOVERNORS OF .ALL F. R. BANKS

COPIES TO AGENTS.

X-3463o.

COPY
Treasury Department
Washington

July 5, 1922.
N,W dear Governor:

I nm enclosing with this a copy of a communication from Mr.
George L. Harrison, Deputy Governor of the Federal Reserve Bank of
New York, dated June 30, 1922, on the question of reimbursement by
the Treasury Department of fiscal agency expenses to the Federal
Reserve Banks.

Mr. Harrison encloses a copy of Governor Strong's

letter on this subject to all Governors, a copy of which I understand
has been sent to you.
From this correspondence

from various conversations on

the subject, I judge thc..t the situ::,tion which prompted me to make
the offer

CtS

eral Reserve

set forth in my letter of May 1, 1922, to reimburse FedB~nks

for

fisc~l

agency expenses, no longer exists, and

that, as a matter of fact, it is thought that all or

practic~ly

all

of the Federal Reserve B::mks now expect to a:.1rn enough to pey expenses
and dividends during the fiscal year now

st~ting,

or at least until

the close of the current calendur year, even without

m~ing

special

investments in Government securities for the purpose of revenue.
my offer was tentative

was as a matter of fact presented for dis-

cussion, and as it now appears

th~t

in the judgment of the majority

of the Feder:.1l Reserve Bdtiks it need not, forthe present

be availed of, I am constrained to withdraw the suggestion

least,
~d,

least until the close of the current calendar year, to proceed on the

X-3468a

COPY
2 -

basis followed during the fiscal
to

ye~r

anded June 30, 1922, that is

upon submission of claims therefor Federal Reserve Banks will

s~,

be reimbursed

necess~ry

and uctunl expenses incurred in connection with

new issues of public debt securities, including particularly as one
i tern Treasury savings eecuri ties, J.nd ns tha second i tern Treasury certific~tas

of indebtedness und Treasury notes.

In connection with the

propos~l

to reimburse the Federal Reserve

Banks for fiscal agency expenses, various estimates of expenses to be
incurred for the

fisc~

yeur n<PJ beginning h:1ve been submitted by most

but not ull of the Federcl Reserve
satisf.:1ctory.
to the

B~s.

The estimutes are not very

I sh.:1ll be very glad indeed i f you •rvill call the matter

~ttention

of ull the banks and ask that they resubmit estimates

of reimbursable fiscal ugency expenses to be incurred during the sixmonths period be ginning July l , 1922 , under the ·m

m..1.j or

titles in-

dicated above, :1nd subdivided us requested in my letter of June 12th
t~

accord to the clnssific:1tion of the objects of expenditure as pre-

scribed by the Comptroller General of the United States.
Very truly yours,
(Signed) S. P. Gilbert, Jr.
Under Secretary.
Ron.

P .. G. Harding

Governor, Federal Reserve Board,
1 enclosure.

FEDERAL RESERVE BOARD
WASHINGTON

July g, 1922·.

X-3469
SUBJECT:

Letter to Senate re Senate Resolution 308·.

Dear Sir:
There is enclosed herewith, for your
information, copy of a letter addressed by the
Federal Reserve BoaTd today to the President of
the Senate, transmittu1g replies of three of the
Fedqral Reserve Banks to Senate Resolution 308".
Very truly yours,

G o v e r n o r.
(Enclosure)

GOVEBNORS OF ALL F. R. BANK
COPlES TO AGENTS

COPY
,..
-j'

July 8, 1922.
Sir:
The Federc..l Reserve Bo::trd tr:msmits herewith letters from the
Federal Reserva B~ks of Philc..delphic.., Richmond c..nd St. Louis, in
reply to Senate Resolution 308. Replies from the other bc..nks will
be forwarded as soon as received.
In transmitting this correspondence the Boc..rd trusts thc..t it may,
without ~propriety, avail itself of the opportunity to invite the at' tention of the Senate to certn.in mtters which h:we a direct bearing
'upon the subject ·of the inquiry.
The corporate powers of the Federal Reserve Banks are defined in
Section 4· of the Federal Reserve Act, which provides, inter alia, that
"Every Federal Reserve bank shall be conducted under the supervision and
control of a bo.:1rd of directors" :mo. th~;,t such directors 11 shall perfonn
the duties usually appertaining to the office of directors of banking
associations and all such duties as nre prescribed by law".
The banking business is one which rests peculiarly upon the foundation of confidence. While true in the case of any bcmk, this is p:lrticularly true with respect to .:1 Feder ~,1 Reserve Bank which is the sole custodian of the leg::tl reser~es of its member b.:lriks and the inst~entality
through Which is issued the co~try's fiduciary currency. Anything which
tends to undermine public confidence in a b:mk, and in a Reserve :Bank
particularly, impairs its ability to perform its functions and unless
counteracted may defeat entirely the purposes of its org~nization. Therefore, those Charged with the administration of a bank h:1ve the right and
are impressed with the duty of using :111 legi ti:rmte me::tns, when necessary,
to protect its good n::tme ~nd to prevent any impairment cf public confidence.
Criticisms of policy cannot be objected to ~d h~ve always been welcomed by the Federal Reserve :Bo.::.rd, "lhich has never imputed to itself
infallibility of judgment. The :Board h..::.s been cho.rged with the administration of a new and untried lo.w and h~s from the beginning been confronted
with a series of difficult and unprecedented situations. When criticism
is based upon the solid foundation of fact, and underst~nding of the
Federal Reserve Act and of banking principles, it is usefulj it is helpful
to those ch~rged with the duties of administration. To the Federal Reserve
Board it bas appeared, however, th::tt for the past two years much that has
been said underthe guise of criticism of policy has not been intended to
help, but to discredit the management of the Federal Reserve System through
attacks upon the integrity and purpose of members of the Federal Reserve
Board and of officers and directors of Federal Reserve Banks.
These attacks h::tve been so repeatedly made :md have had such publicity
::ts to justify tbe suspicion that they are part of a concerted movement

~~\

- 2 -

against the Federal Reserve System. The patience and forbaarance with
which members of the :b"'ederal Reserve Board cmd officers :md directors of
Federal Reserve Banks have borne these repeated att~cks, many of them
personally abusive~ have been cited as an admission of the truth of char@ZS
made and have tended to raise in the minds of some v.rho endorse the principles
of the Federal Reserve Act but who had no means of informing themselves as
to facts, a question as to whether there may not h~ve been some foundation
for the charge that members of the Federal Reserve Board and officers and
directors of Feder~ Reserve B~s hQve been incapable and corrupt.
Beginning last s~r insin~tions nnd charges which had been made on
the outside were repeated ~d amplified on the floor of the Senate of the
United States, not merely once or twice but at frequent intervals up to
the present time. This circumst-~ce h~s caused a great ~ount of correspondence with persons asking~ inforrn::.tion and Board members, as well as
officers and directors of Federal Reserve Banks,have had occasion frequently
to consider whether there were any means which might appropriately be employed to inform the public as to the op~ration of the Federal Reserve Banks
and the character of their managament.
Respecting the constitutional prerogatives of the members of the Senate,
care has been tiken to mike no criticism of ~ny member thereof in any reply
to letters of inquiry. This c1rcumst~ce also has been construed as an admission of the truth of charges so frequently made on the floor of the Senate,
some of which would hQVe been resented as libelous but for the constitutional
immunity above referred to.
Many quotations could be made from st~tements which have been printed in
the Congressional Record during the p::1st twelve months, which are misleading
and untrue, but their insertion ·.vould. unduly extend this comnrunic:1tion. Tha
Board has seen nothing to indicate th~t those who made these statements have
ever corrected them.
Last January the junior Senator from Virginia, who was Chairman of the
Banking and Currency Committee of the House of Representatives which reported the bill creating the ffeder~l Reserve System and who was afterwards
Secretary of the Treasury :md ex-officio Chairman of the Federal Reserve
Board, made a speech on the floor of the Sen.J.te, in '.Vhich he discussed at
length the operation ofthe Federal Reserve Banks and the attitude of the
Federal Reserve Board during the recent period of economic reaction and
financial stres~.
The speech w.:.1s delivered during parts of two days· A
brief report of it appeared in the daily papers ~d requests followed for
complete copies of the sreech. Officers of Federal Reserve Banks, who for
several months had felt themselves obliged to maintain silence while their
motives and integrity were being assailed, deemed it not improper to avail
themselves of the opportunity then presented to give to their correspondents
and to others in their respective communities '.vho had evinced an interest
or who were supposed to be interested in the economic questions dealt ·ui th,
information which would enable them to draw their own conclusions.

~;\

•

- 3The S)!eech was a public docUII13nt. Hav i:-:lg been delive.ced on the
floor of the Senate and having been published in the Congressional
Record, the Federal Reserve Board felt that there could be no impropriety
in the distribution of copiei by the Federal Reserve Banks. Thtl speecr...
dealt. so comprehensively with charges and statements which had been maJP.
in the same place and printed in the same publication that the Board
believed it silould be given wide publicity. Having been informed tha·~
copies might be obtained from the Public Printer if ordered promptly, it
was decided that the Governor should send to each Federal Reserve Bank
the following telegram:
"January 18, 1922.
"Think Senator Glass' great speech defending Federal
Reserve System should be widely and promptly circulated.
Government printing office will print special copies of it
Frid~ 20th and additional orders should be given tomorrow.
Printing Office estimates cost of copies at from five to seven
cents eaCh. Please wire promptly how many copies your bank wishes.
Harding. It
(Note: This estimate of cost was too high. In view of the
great demand for the speech and the large number of copies
printed, the cost per copy to each Federal Reserve Bank was
approximately l! cents.)
The Federal Reserve Board assumes responsibility for commendi~g
this speech to the Federal Reserve Banks for circulation. Neither the
Board nor the Federal Reserve Banks regarded the speech as being an
attack upon any Senator and were not interested in it from that point
of view. This speech was end is regarded by the Board as a fair
presentation of facts. It was commended to the ba:nks for circulation
because it was an answer made 1n the Senate Chamber to charges which had
been made on ~he floor of the Senate. It is a clear exposition of the
policies, functions and operations of the Federal Reserve System during
a critical period and is an i~ortant contribution to current economic
discussion.
Respectfully •
(Signed)

W. P. G. HARDING
G o v e r n o r.

The President of the Senate.

FEDERAL RESERVE BOARD
WASHINGTON

X-3470
oluly 8, 1922.
SUBJECT:

Code Words to be Used in
Currency Telegrams.

Dear Sir:
Beginning August 1, 1922, the Federal Reserve Board will
use the following code word in advising the Federal Reserve Banks by
wire of shipments to them of new United St~tes currency:
CLAVICLE:

Treasurer, U. S., requested to ship immediately to
(name of bank or branch) (~mount) (denomination)
against your estimate of ~mount of new currency
required during the current month. Please credit
Treasurer, U. S., as tr~sfer of funds upon receipt.

The Board will continue to use the code word "C.ANARDER"
which appears on page 40 of the code book in advising Federal Reserve
Banks of shipments of Feder~l Reserve Bank notes.
The Board will continue to use the code word given below
in making requests of Federal Reserve Banks for issue of Federal Reserve notes to the Treasurer of the United States for making disbursements in Washington:
CLAYBANK:

Treasurer, U. S. desires to obtain your Federal
Reserve notes (amount)(denomin~tion). If you can
accommodate him please arrange 'Ni th .Agent your bank
to wire Board today instructions to ieliver your
Federal Reserve notes to Treasurer on (date) ,taking
credit in Treasurer's general account same date.

The Federal Reserve Agents in wiring authority to the
Board to deliver Federal Reserve notes to the Treasurer, U. S.,will
continue using the·following code word:
CLAYKILN:

Collateral having been deposited with me to cover
issue, please request Comptroller to deliver to
Treasurer, U. S., (date) (amount) (denomination)
Federal Reserve notes of this bank. General account
of Treasurer, U.S., will be Charged same date.

;: ..... --"-'\

"".. ..

~,.... ~

- 2 Federal Reserve Agents will continue using the code word
given below in making requests of the Board for shipments of Federal
Reserve notes:
CLAYMORE:

Please request Comptroller of Curl.~ency t.o ship
(Assistant) Federal Reserve Agent (bank or
branch) Federal Reserve notes as follows:
(amount) (denomination). Confirmation is being
forwarded by mail today.

This letter supersedes the Board's letters of November
5, 1921, X-3239 <md 324o.
Please amend all code books (page 49)
accordingly·.·
Very truly yours,

Walter L. Eddy,
Assistant Secretary.

TO ALL CHAIRMEN OF ALL FEDERAL RESERVE BANKS.

. .
FEDERAL RESERVE BOARD
WASHINGTON

X-3471
July 101 1922.

SUBJECT:

Amendment to Check Collection Circulars
Suggested by Treasury Department

Dear Sir:
I enclose for your information ~d guidance
copy of .J. letter received today from the Secretary of
the Treasury, together with copy of letter addressed by
·him on July 8, 1922, to the Governor.of one of the
Federal Reserve Banks. The Federal Reserve Board suggests that those Federal Reserve Banks which have not
already done so take steps to amend their check collection circulars so as to conform, on the point mentioned,
to the provisions of Treasury Department Circular No.
176, as amended and supplemented M~ 15, 1922 •.
Very truly yours,

G ov e r n o r •
. (Enclosures)

GOVEBNORS OF ALL F.R.B.ANKS

COPIES TO AGENTS

'!HE SECRETARY OF THE TREASURY

WASHINGTON
July 8, 1922.
X347la
Dear Governor Harding:

On a number of occasions within the past six months the
Treasury has had brought to its attention notices circulated by banks,
purporting to be based upon circulars of various Federal Reserve
Banks, stating that the Government of the United States has for many
years reserved the right to char~ back unconditionally, at any time,
checks and warr~ts which for any cause have not been considered
good.
This statement is incorrect and misleading, and calculated
to cause the Treasury and the holders of Government warrants and
checks considerable difficulty. Difficulty has been experienced
on this account in connection with the cashing of Gpvernment warrants and checks abroad, and complaints have been received from
various correspondent banks in this country. The notice has been
so widely circulated and there is so much of a coincidence in the
time of the circulation of the notice that it would appear that
some bank, or group of banks, is responsible for the circulation
of the notice~,
The Federal Reserve Bank of New York has revised
its check collection circular so as to avoid any statements-which
would afford a basis for the circulation of the objectionable
notice, and the Federal Reserve Bank of Chicago is undertaking a
revision of its check ~ollection circular with the same end in
view.
I have just taken the matter up with the Federal Reserve
Bank of ·
in a letter, dated July g, 1922, a copy of
which is inclosed for your informn.tion. In view of the apparent
tendency to spread the circulation of the objectionable notices
from one part of the country to anotper, I would suggest for your
consideration that it might be advisable for the Federal Reserve
Board to tike up with e~ch Federal Reserve Bank the matter of
possible amendment of their check collection circulars so as to
conform with the provisions of Treasury Department Circular No.
176, amended and supp~emented May 15, 1922, {copy inclosed) on
this point.
Very truly yours,
{Signed) A.

Hon.

w. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. c.

Mellon,
Seer e tn.ry.

X-347lb
July B, 1922.

Dear ~overnor --------I enclose a copy of a letter, dated June 23, 1922; addressed
by the ----- Trust Company, ·-------- to Senator --------- with regard
to a circular apparently sent to its correspondents by the ---·-~-National Banko! --------- which states that:
"The Federal Reserve Bank of Cleveland reserves the
right to charge the account of the last endorsing bank,
unconditionally, at a:ny time, with the amount of such
returned items deposited with, endorsed to, or otherwise
paid by this bank"
in case of all Government warrants and checks received by it from member
banks. This misrepresents the Treasury's present practice in its
further statement that:
'~e United States Treasury has for years exercised the
right to return at any time checks and warrants which for
any cause have not been considered good."

and is calculated to cause the Treasury considerable difficulty.
A
notice somewhat similar to the statement just quoted as to the alleged
practice of the Treasury with regard to later cY,.a:rging back of checks and
warrants previously paid, issued some years ago by the Federal Reserve
Bank of New York, was taken by certain New York banks doing a foreign
business as a basis for a notice stanPed upon foreign advices covering
Government items, and, as a result of the circulation of that statement,
considerable difficulty has recently been experienced by holders of
Government checks in cashing them in certain foreign countries. The
Federal Reserve Bank of New York has recently issued a revised circular
regarding collection of checks which eliminates the objectionable statement. Because of a similar statement circulated by a certain one of its
member banks, which has caused the Treasury considerable trouble, the
Federal Reserve Bank of Chicago is also undertaking the revision of its
check collection circular so as to make its circular conform strictly
with the present practice of the Treasury Department, as outlined in
Treasury Department Circular No. 176, amended and supplemented May 15,
1922, (copy enclosed).
The member bank of the Federal Reserve Bank of
Chicago is also withdrawing its circular.
The notice circulated by the ---------- National Bank of --------of which the ---- Trust Company of ----------- complained in its letter
of June 23, 1922, is incorrect and misleading as the Government of the
United States does not reserve the right to charge back at any later time
all warrants or checks Which for any reason are not considered good, and
the wide circulation of the statement is obviously calculated to put

-2...

•

Government warrants and checks at a disadvantage as conpared
with commercial items. The Treasury's practice with respect to
the p~ment of Government warrants and checks is stated in
paragraphs 35-38 of Treasury Department Circular No. 176, amended
and supplemented May 15, 1922, and conforms generally to commercial practice. I should, therefore, appreciate it if you
would, if necessary, take up the revising of your regulations on
this point along the lines followed by the F'ederal Reserve Bank
of Chicago, or those followed by the Federal Reserve Bank of New
Yq;rk in revising their check collection circulars, and i f you
would at the same time take the matter up with the --------National Bank of -------- with a view to preventing further
circulation of this notice.
Very truly yours,
{Signed) A. W. Mellon,
Secretary.

',_·

FEDERAL RESERVE BOARD
WASHINGTON

X-3472
July 101 1922.

SUBJECT:

Reimbursement of Certain Specified
Fiscal Agency Expenses.

Dear Sir:
Referring

X-3468, there

t(')

13oard 1 s letter of July 7th,

is enclosed herewith for your informa-

tion copies of correspondence between the Under Secretary
of the Treasury md the Governor of one of th.e Federal

Reserve Banks, relating to the reimbursement of certain
fiscal agency expenses therein specified.
Very truly yoursr

G o v e r n o r.
(Enclosures}

TO GOVERNORS OF .ALL F. R. BANKS

COPIES TO F. R. AGENTS

cOPY

X-3472a
July 7, 1922.

My dear Governor:

I received the letter cf June 14, 1922 ------- regarding
reimbursement for fiscal agency expenses, and have delayed reply
pending further consideration of the whole matter with the Federal
Reserve

~oard.

To some extent at least the situation is now covered

by my letter of July

5, 1922, to Governor Harding, a copy of Which is

enclosed for your information.
On

the specific questions presented in the letter from your

bank, it is clear that even under the plan outlined in the letter of
July 5th, the expenses of handling accounts with special depositaries,
in connection with the sale of new securities, will be reimbursed
upon application as an expehse of new issues.

Expenses involved in

the receipt and redemption of Victory 4~% notes in payment of
allotted subscriptions to Treasury notes are likewise held to be
expenses of new issues and properly reimbursable.
redemption of Victory

3i% notes

Expenses of the

will not, however, be an item for

the fiscal year beginning July 1, 1922, though expenses incurred
in this connection during the fiscal year 1922 will be reimbursed
as previously stated.

4i• s

Expenses related to the purch.::.se of Victory

this year are likely to be small in amount and the Treasury

regards them also as non-reimbursable, there being now but little
connection between them and new issues of notes.
Very truly yours,
(Signed) S. P. Gilbert, Jr.,
L

Under Secretary.

COPY

X-3472'b
Q;'_\.~
"-"' ·~. ' ",•, -

June 14, 1922.

Dear Mr. Gilbert:
~oard

We are in receipt of a letter from the Federal Reserve

(X·3432), dated June 8, 1922, quoting from your letter

received on that day on the m.::t.tter of 11 Claims for Fiscal Agency
:Reimbursements". lt is noted that i 1fiscal agency expenses for
which reimbursement may be claimed • . • will not include expenses incident to the paying of Government warrants or cheCks
or interest coupons or the redemption of matured securities for
the account of the ~reasurer of the United States, nor will it
include any expenses ~rising in connection with the handling of
depesi tary accounts ... ,. .."
May we inquire if this letter reverses the ruling of
the Department embodied in your telegr~ of MarCh 16, 1922,
wherein
(1) the redemption of Victory 3i% Motes,
(2) the purchase of Vlctory 4i5b Notes, and
{3) the receipt and redemption of Victory 4!%
Notes in payment of allotted subscriptions
to Treasury Notes
are a part of the operations of Treasury Notes and expenses are
properly chargeable to the appropriation "Expenses of Loans, Act
September 24, 1917, as Amended and Extended, 11 J.nd that reimbursement for euch expenses 'Nill be rrnde upon applic::ttion in regular
course?
We also wish to make in~ui*y as to the exclusion of any
expenses arising in connection with the handling of depositary
accounts, if such term covers War Loan Accounts, which accounts
arise now only thro~ the s8le of Certificates of Indebtedness
or Treasury Notes and would seem to be properly reimbursable as
a part of the cost of operation in connection with the floating
of these issues.
Yours truly,

Governor.
Honorables. P. Gilbert, Jr.,
Under Secretary of the Treasury,
Washington, D. c.

t~
'u..i

FEDERAL RESERVE BOARD
WASHINGTON

July ll, 1922.
SUBJECT:

Advice. to Board of Date of Refund on Capital Stock
to Banks discontinuing Membership.

Dear Sir:
The Federal Reserve Bo~rd does not appear to be
getting prompt i~ice from a number of Federal Reserve
Banks of the date of refund on account of capital stock
where member b~nks go ir;to voluntary li~aidation or otherwise discontinue rr.embership, ::1s requested in circular letter
X-3093 of April 9, 19?.l. In order that the Board rno,y keep
its records more nearljr up to d::1te, it is requested that
information of this character be sent to it by wire at the
time refund is made.
In advising the Federal R~serve Board
the Federal Reserve Banks are requested to use the following
code word, which should be added to the bottom of page 159
of the new code book, following the code word MUTTER.
t

MUTTON Refund of capital stock payment has today
been made on account of the (n::liDe and location of bank).
Very truly yours,

W. W. HOXTON,

Secretary.

TO ALL F.· R. AGENTS.

"'" ~~~
"'--

,.;

,1·,
,,

~~\

;.. ..•

'->·

FEDERAL RESERVE BOARD
WASHINGTON

July 13, 1922.

SUBJECT:

Eligibility of paper of cooperative nurketing associations·,

Dear Sir:
For your information, there is enclosed herewith a copy ·

of a letter Which the Eoard has just approved and sent to the
Governor of the Federal Reserve J3ank of Richmond, and \Wlich constitutes a ruling by the Board with regard to the eligibility of
certain classes of paper of cooperative marketing associations.
There is also enclosed a copy of s. merr~randum prepared by
the :Board's Counsel explaining this ruling in the light of certain
previous rulings.
Federal Reserve J3~:s are at liberty, of course, to
circulate copies of the J3oard 1 s letter ·in :.st.ccordance with whatever
policy may have been established with regard to the circulation of
rulings, but the Board does not believe it is advisable or necessary
to give any ·.vide or general circulation: to the mEimorandum of counssl.

Yours very truly,

(Enclosw:es)

.ALL FEDERAL RESERVE AGENTS !MD GOVERNORS~

o v e r n o r.

r·
'

n.''··"
~·~
"·.~~
\.-

COPY

X·~";(~f}l.;.a.
.-'
.

July 10 1
Georg~ J. Seay,
Governor, Federal Reserve Bank,
Richmond, Virginia.

M:r.

Dear Governor Seay:
The Federal Reserve Board has given careftu consideration
to your letter of June 1, 1922, with refer~:mce tc t.he eligibility
of paper created by a Tobacco Growers 1 Cooperative .As'Jc.·ciation which
has been formed recently embracing the States of Virginia, North
Carolina and South Carolina.
It appears that this association, like that described in
the ruling ~blished on page 1199 of the Federal Reserve BuJ.letin for
October, 1921. is a non-stock and non-profit corporation, and its
members consist exclusiv$ly of growers of ·tc·bacco who have ag::eed
to sell and deliver to the association all the tobacco grown by or
for them, or acquired by them as landlords or lessors. The agreements
between the growers and the association provide for the distribution
of the proceeds of each pool pro rata among the growers who have
contributed to that pool. The association is given power to sell
the tobacco in such form and upon such terms as may be deemed most
advantageons to the growers, it being conteaplated that a part of
the tobacco will be sold without being redried and that such of the
tobacco as cannot be sold at a reasonable price in that form will
be redried and stored by the association and sold as there is a demand for redried tobaeco. The association is also specifically given
the right to "borrow money in its name on the tobacco, through
drafts, acceptances, notes or otherwise, or on any warehouse receipts
or bills of lading or upon any accounts for the sale of tobacco or
on any conmercial paper delivered therefor"; and it is agreed that
the association 11 shall pro-rate the money so received among the
growers equitably, as it ~ determine, for each district and period
of deli very. ''
The first question is as to the eligibility for rediscount at Federal Reserve Banks of notes made by the association
and discounted at banks for the purpose of obtaining f~c.s with which
to In9lte payments to the growers for tobacco delivered by them. This
question depends upon whether the payments are to be regarded as
payments on account of the purchase price of goods bl:n.lt,ht by the
association, in Which case the proceeds of the association!s notes
may be said to be used for a conmercial purpose which woltld. make
the notes eligible, or are to be regarded as advances or loa~s,
in which case the proceeds mnst be said to be used for a finance purpose which vc.-ould make the notes ineligible.

1~22

.,·

('!''!:::'
,_,,

- 2-

The agreement between the association and the growers :puts the
transaction in the form of a sale and transfers title in the tobacco
to the association and gives the association full control over the
tobacco and over the :t"esale thereof, so that unless the form of the
transaction is to be disregarded the :proceeds of the association's
notes may be said to be used for the com"!lercial purpose of buying the
tobacco from the growers and the association's notes may be considered
eligible for rediscount When they have maturities not in excess of 90
days and when they otherwise comrly with the :provisions of the law and
the Board's regulations. It is tru.e tr...at the sales of tobacco by the
growers to the association have the unusual feature that the :purchase
price is not fixed at ·the time of delivery, but is dependent upon the
:price at which the tobacco is resold by the association, so that the
risks incident to resale by the association are borne by the gl~owersj
and for this re~son the Board has held that for some :purposes the
transactions between
growe:t.~s and such associations should be regarded
in substance as consignments rath8r than sales-- Considering, however,
that a cooperative marketing asso:::iat~.on is a nonv·rrofit corporation
and in the last analysis the partici9ating members rather than the
association itself must assume the ultimate risk of loss and must
benefit directly from any gain resulting from the operation of the
association, these transactions between the association and its
members conform to the usual type of sale as closely as they can
consistently with the nature and purposes of an association of this
character. In other words, there is no material difference between
these transactions and ordL~ary sales except that the sellers, the
growers, have the ultimate hope of gain and risk of loss resulting
from resale by the :purchaser, the association, and this difference
exists by reason of the relation that necessarily exists between
the association and its rr~mbers; so that to conclude that the transactions are not sales when considered from the :point of view of the
association would be in effect to say that it is impossible for the
association and its members to engage in purchase and sale transactions between themselves~
The Board is of the opinion, therefore, that the notes of the
association, the :proceeds of which have been or are to be used to
make payments to the growers for tobacco delivered to the association,
may be.considered eligible for discount by Federal Reserve Banks with
maturities not in excess of 90 days, provided, of course, that the
notes con:ply in other respects with relevant provisions of law and
the regulations of the Federal Reserve 5oard.
The se·cond question relates to tlle eligibility of drafts drawn
upon the association by the growers, accepted by the association, and
discounted by the growers at thej_r banks. As was held in the ruling
published in the October 1921, Bulletin such drafts are eligible for

'1,..: f.

0, ,, .':'·

:.,..· ;,..~ :t \

- 3 rediscount as agricultural paper i f the proceeds are used by the growers
for an agricultural purpose. You state. however, that it appears to you
that practically the only use which the growers are likely to make of
the proceeds of such drafts men discounted is to pay debts previously
incurred by them in growing and harvesting the crop, and that, unless
this can be held. to be using such funds for an agricultural purpose,
little or no agricultural paper can be created in this way.
In defining the c~racter of notes, drafts and bills of
exchange eligible for rediscount, in Section II of its Regulation A,
_the Board has datermined that, n(a) It rr.ust be a note, draft, or
bil~ of exchango which has been issued or drawn, or the proceeds of
which have been used or are to be used in the first instance, in producing1 purchasing, carrying, or mc,rketing goods in one or more of the
steps of the process ; of production,manufacture, or distribution,
or for the purpose of ~rying or trading i~ bonds or notes of the
United States." The Board has held heretofore that for all practical
purposes any note which is secured by Goverr.unaat bonds usually may be
considered to be drawn eithar for the purpose of carrying or trading
in those bonds within the meaning of the Federal Reserve Act, and
it should not be incumb<Snt upon a Federal Reserve Bank to look further
than that fact in ord~r to determine tha technical eligibility of such
a note. That holding was based on the theory that if the owner of
bonds has obliga~ions which he cannot meet without either selling
his bonds or borrowing money on them, the borrowing of money on such
bonds with vfu.ich to meet his obligations enables him to 11 carry 11 the
bonds. Similarly, money borrowed by a·grower to enable him to meet
his obligations wimhout selling his crop immediately enables him to
"c.tu-ry 11 the crop. The Board 1 s ansv,er to your specific inquiry is,
therefore, that when a grower delivers his crop to a cooperative
marketing association which is actually engaged in orderly marketing,
and when the grower is obliged to borrow money for ordinary genaral
purposes, such as the payment of obligations previously incurred in
growing or harvesting the same crop 1 a draft drawn by the grower
on the association for a part of the market value of the crop may
properly be considered to be drawn for an agricultural purpose.
It is well recognized that agricultural products should
not be dUJI!Ped upon the market as soon as grown, but on the contrary
should be marketed gradually as and when there is a normal demand.
Consequently, the carrying of tobacco and other agricultural products
for such periods af. are reasonably necessary in order to accocrplish
the orderly marketing thereof is a legitimate and necessary step
incident to normal distribution, and the Board has held heretofore
that a farmer's note which is drawn, or the proceeds of which are
used, to finance the carrying of the farmer's products for such
rea&enable period is a note which has been issued or drawn for an

:...;

- 4agricultural purpose within the meaning of Section 13 of the Federal Reserve Act and which may, therefore, be eligible for discount
by Federal Reserve Banks. It is hard to imagine how a grower could
use the proceeds of a loan to finance the carrying of a crop except
by using them to meet obligations or make necessary expenditures
which would necessitate the immediate sale of his crop if he did not
obtain a loan.
It must be recognized, however, that there is a distinction
between carrying agricultural products for such periods as are
reasonably necessary to effect orderly marketing and mere speculative withholding from the market, at a time when there is a normal
demand, in the hope ultimately of ob tainj.ng a higher price. Such withholding is not an agricultural purpose vdthin the meaning of Section
13, and if a marketing association should engage in such a speculative holding of a crop instead of marketing it in an orderly manner,
drafts drawn to finance the growers of such a crop during the holding of it for speculation should not be considered to be drawn for
an agricultural purpose. The exac:t di vid.ing line between legitimate
carrying and speculative withholding is, of course, very difficult
to determine. The question of whether a doubtful case falls on ·
one side or the other of this line is a question.of fact which it
is not for the Federal Reserve Board to determine b·u.t which should
be determined rather by the local bank whose customer desires the
loan and by the Federal Reserve Bank if the paper representing
the loan is offered for rediscount.
The third question raised in your letter relates to the
eligibility of ·paper creatad by tha association and secured by
warehouse receipts for tobacco stored in warehouses v.hich, although they
may be owned by the association or by corporations organiZed and
controlled by the association, yet have independent management
and organization. Inasrr.uch as the eligibility of paper other than
bankers' acceptances is not dependent upon the existence of char- .
acter of collateral security, the question whether such paper of
the association is technically eligible for rediscount is not dependent upon whether the warehouse issuing the receipt offered as
collateral security is independent of the borrower. The character
of a warehouse receipt or other security offered as collateral
for paper other than banksrs 1 acceptances is material only as bearing upon the acceptability of the pa:rer as distinguished from
its eligibility, and t~e question of the acceptability is for the
determination of the Federal Reserve Banks rather than the Federal
Reserve Board.
The subject of the eligibility of bankers' acceptances
drawn by cooperative marketing associations against warehouse
receipts covering agricultural commodities was discussed in a
ruling issued by the Board under date of July 20,192l,copies of

·~··

~-~. ,~

.......

- 5which were sent to the Governors and FederalReserve Agents of all
Federal Reserve Banks ~ndez date of July 27, 1921 (X-3175) and acceptances
drawn by the associaticn now undex- c.o~1sicler.a.tic.n against .warehouse receipts
issued by warehouse corpor-aticn.s o:x·ganizet'l. by it would come within the
principles set forth in that rtlli:cg. Inasm:tch as this association takes
title to the tobacco and is given full control thereof and is, moreover,
specifically given the right to bo:rrow ro.':lney in its own name on warehouse
receipts issued. against the tobacc•.,, it is cJ.ear. that i t can store the
tobacco and obtain negotiable warehouse receipts conveying security title.
The Board has in<iicat.ad already t."le gen.ex-al principles to be a,:;phed by
Feder~n Resex-ve Ea>ks in dete:rm.j.ning unde.z· wbat ci1·cumstances warehouses
are to be con~iderecl ir.depenc.ent; of the "Sor:rowers in passing upon bankers'
acceptances, and the appHcation of those principles to specific cases
involves questions of fact which are prirn?...rily for the determination of the
Federal Reserve B~~s. See rulings on pages 31, 634 and 862, respectively
of the 1918 Bulletin.
·
Yours very truly,

(Signed)

W. P. G. HARDING
Governor.

'"'

;-~~.
-;...,~

(COPY)

OFFICE CORRESPONDENCE.

X-3474b

June 10 , 1922
Sub,)ect: Notes of Cooperative
To - The Federal Reserve Board
Marketing Associations-Reply to
From- WalterS. Logan-General Counsel Letter of June 1st from Governor
Seay.
There is subrni tted herewith a dr::Ut of reply to Governor Seay 1 s
letter of June 1, 1922, in M1ich he raises three questions as to
the eligibility of paper arising out of the operations of the Tobacco
Growers Cooperative Association formed recently nnd embracing the
States of Virginia, North Carolina and South Carolina. The answer
to the second and third questions do not, in~ opinio~, involve
any new principle, although the answer to the second question contains a more precise definition than the Board has given before of
the circumstances under which paper m~y be said to be drawn for the
purpose of carrying agriGultural products pending orderly marketing.
The first quest:ton, however, raises an important point never passed
upon in any published. ruling, and the suggested answer to vmich is
contrary to opinions expressed in two informal letters which were
approved by the Board but not published, and may be thought to be
inconsistent also with previous published rulings of the Board upon
several other related points. I wish to submit to the Board,
therefore, in connection with the answar to this first question, a
full discussion of the subject so that the Board may fully understand
the effect of the proposed ruling and so that if the ruling is approved the Board may be prepar3d to answer any future inquiries calling
for a reconciliation of the ruling with certain former rulings.
Governor Seay's first question is as to the eligibility of notes
made by the cooperative ITarketing association for the purpose of
raising funds with which to pay the growers for tobacco delivered to
the association. The transactions betw~een the association and the
growers are in the form of sales, the association taking title to the
tobacco delivered and having full control over and power to sell and
hypothecate the tobacco. The final purchase price to be paid by the
association is not, however, fixed at the time of delivery, but is
dependent upon the average price at which all the tobacco of the same
kind and quality is resold, so that the growers, rather than the
association, assume the risks incident to the resale. In the draft
of letter whiCh I have prepared I have suggested that this first
question be answered by stating that the Board is of the opinion that
the notes of the association, the proceeds of which al:'e to be used
to make payments to the growers for tobacco delivered by them, may
be considered eligible for rediscount, with maturities not in excess
of 90 days, provided, of course, that the notes comply in other respects with the provisions of the law and the regulations of the
Board.
There are three published rulings in regard to cooperative marketing association paper which might possibly be thought to be inconsistent with the ruling now proposed. The first is the ruling in which

_, '- r:-:
....__

... _ t'

(~ ,f! (~~

·J ... '·

-2the Board stated that drafts drawn by growers and accepted by cooperative
marketing associations should not be considered trade acceptances, because the transactions between the growers and the associations are in
substance consi~~ents rather than sales.
This ruling was made in a
letter, dated October 22, 1920, to Mr. Aaron Sapiro, and was referred to
in a ruling published in the October, 1921, ~~lletin, pages 1199 and 1200.
I do not believe, however, that there is any difficulty in reconciling the
proposed ruling with the ruling just mentioned, because the law does not
in any way define trade acceptances and the Board may decide upon any
basis it deems reasonable whether or not a certain instrument should or
should not be included within this special class of eligible paper.
In
o'ther words. there is no real inconsistency in saying that the transactions
between the association and the growers are in form sales and will be so
regarded in determining the eligibility of the notes of the association
and in saying at the same time that the transactions are not sales of a
kind that can be made the basis of trade acceptances which are supposed to
be a particularly desirable kind of paper and which may be accorded-a preferential rate.
The second of the former published rulings that I have in mind,
and the one which is most difficult to reconcile with the ruling now proposed, is the main part of the ruling on p&ge 1199 of the October, 1921,
Bulletin, to the effect that drafts dra>vn by growers and accepted by a
cooperative marketing association, simila~ to the one now under consideration, may be eligible for rediscount with maturities up to six months,
because they may be considered agricultural rather than commercial paper.
This ruling was made also on the ground that the transactions between the
growers and the association were in substance consignments rather than
sales, so that in accepting the drafts the association was in effect leAding its credit to the growers, rather than making payment for goods purchased, thereby constituting the growers the real borrowers and making the
classification of the drafts dependent upon the use of the proceeds made
by the growers. I believe that the Board was justified in regarding these
transactions in substance as consignments rather than as sales in considering the classification of the draftsj for from the point of view of
the growers, the transactions c0nstitute something in the nature of ir. revocable consignments with transfers of title, th·3 grower r s right against
the association being cond.itior.el,both as to the maturity and amount, upon
the resale by the associa~ion. From the point of view of hl1e association,
however, which is the important angle in considering the eligibility of the
notes of the associat10n itself, the t.ras.actionc between the association
and the gro-wers are as much saies as they can be consistently with the
nature and purposes of an association of this character. I have tried to
make this point clear in the dr<:tft of letter to Go·1ernor Seay. T.he only
difference between these transa0tions and sales between ordinary persons
and corporations is that the u.ltimate risk of loss is borne by the sellers,
the growers, rather than the purchaser, the asscc:.e.t:'.c·1, and this difference is inherent in the relation of the associ"Ltion to its members, the
association being a non-profit corporation which has no capj.tal out of
·which to pay losses and which must distribute all of its profits among its
members.

- 3 -

X-3474b

· There is7turther ground upon which the ruling now proposed can be
reconciled with ~e former ruling with regard to the classification of
drafts drawn by growers and accepted by cooperative marketing associations.. There would have been no question but ~at these drafts mi@lt
be classified as agriculttu·al paper had it not been for the rulings of
the Board to the effect that paper given by a dealer to a f~r in
payment for agricultural products should be regarded as commercial rather
than agricultural paper. In these rulings it was recognized that in such
cases the purChaser is the real taker of credit and since he is engaged in
a commercial business his paper should be regarded as commercial paper
rather than agricultural paper. On the other hand, however, the Board
has recognized that the eligibility of pape't' given in payment for articles
purchased~ in some cases be detennined by looking at the transactions
from the point of view of the seller instead of the purchaser. For example,
a note given by the purchaser of a pleasure automobile to an automobile
dealer would be eligible as commercial paper, although from the p~~uot of
view of the purchaser the automobile would be a permanent or fixed investment·. From the point of view of the dealer the sale of the automobile is
a commercial transaction regardless of the p~rpose for Which it is to be
used by the purchaser, and the purchaser's paper in the handS of the dealer
would be commercial or business paper actually owned by him. Simila't'ly,
a. sale of agricultural products by a farmer to a dealer or a cooperative
marketing association is an agricultural transaction from the point of
view of the farmer; and the paper which he receives from the purchaser as
a result of such sale is agricultural. paper in his hands.
I do not mean to suggest that the Board should have ruled otherwise
·with respect to paper given by a dealer to a farmer. A dealer's normal
turnover would not seem to reQ:uire in excess of 90 days and as a general
. rule., therefore, it would not be proper for the dealer to purchase commodi ties on credit terms in excess of 90 days·. I am suggesting merely
that it would have been legally possible for 'the Board to regard the
transaction between the dealer and the farmet from the standpoir~t of the
seller, and to rule that paper ghen by the purchasing dealer to the selling farmer might be considered agricultural paper, and that by analogy the
Board's rul~ng in regard to the classification of drafts drawn by g:rowers
upon cooperative marketing associations can be justified on the tb.eory that
in considering such drafts, which represent the direct obligations of the
growers, it is proper to regard the transactions betwefm such associations _
and the growers :from the point of view of the lattez·. If this be t·ecogr:izso.
as the correct basi.s for the nlling in regard to farmers 1 drafts accepted
by cooperative marketing associations, there clearly is no co:d'lict in
principle between that ruling and the ruling now propos~d, for the
recognition that the transaction between the growel$ and the association is
a sale could not then be used as an argument against the classific.:ttion of
·the drafts as agricultural paper ..
AlthoUfP. it is not necessary to consider this point at the present
time, I am inclined to the opinion that the line of reasoning I rjave j1 l5 ~
suggested is the true ground u:pon which to base the Iloard.is previous ruli.ng
as to the classification of growers t drafts accepted by cooperative rra:::-l:eting associations. I£ this is so, it follows that technically as a LJ;),t~e!'.

- 4of the law the drafts would be eligible irrespective of tlle use by the
growers of the proceeds from subsequent discounts, and irrespective also
of Whether the associations were engaged in sp•culative holdings or
orderly ma.rketing4 It seems to me, however, that eligibility should as
a matter of regulation be conditioned upon some further requirement, for
the liquidity of the drafts is dependent, to a larger degree than is the
case with drafts growing out of ordinary sales, upon the rate of resale.
by the purChaser. In the former ruling it was stated that eligibility
was conditioned upon the use by the growers of the proceeds of the drafts
for agricultural purposes·. .As explained in the proposed answer to
Governor Seay's second question, this requirement is complied with if toe
association is actually engaged in orderly marketing and if the grower
borrows money for ordinary general purposes such as the payment of obligations previously incurred in growing or harvesting the sa.rxs crop-.
The third ruling that may be thought to be inconsistent with the
ruling now proposed 1a that published on page 1312 of the November, 1921
:Bulletin, in which the l3oard held that notes of packing and marketing
associations .should, When eligible at all, be classified as commercial
rather than as agricultural paper. I do not think, however, that there
is even an apparent conflict between these rulings. The ruling in regard
to the classification of notes of packing and~ marketing associations
was based upon the principle that the business of selling agricultural
products by persons or corporations other than growers of such products
must be regarded as a . comnercial business rather than as an agricultural
business, and in the proposed ruling this principle is recognized by
stating that the eligibility of the notes of the tobacco growers cooperative marketing association is conditional upon the notes having a maturity
at the time of discount of not in excess of 90 days·.
While, as this memo:tandum indicates, the logic of the Board's former
rulings and the technical arguments that rna::y readily b~ adduced therefrom
point somewhat to the opposite result, I feel nevertheless that the more
liberal ruling suggested in the annexed draft of letter to Governor Seay
is sound when the question be viewed from its broader aspect and does not
contravene any principle which the Board has heretofore announced in its
published ~ings.
The proposed ruling is intended to have application only to cases
where the facts correspond to those presented in Governor Seay's letter.
That is, it is intended to apply only to associations which are strictly
non-stock and non-profit, and which under their agreements with their
members take full legal title to the commodities and have full control
thereof.
The ruling is not intended to apply to associations which
operate on the consignment basis.

· Respectfully,

WSL
OMC

(Signed) Walter S. Logan
General Counsel.

913
;
i

HIASOBJ~

Offloe of the ~._.W)'

WASHDTC'l'OI
Jul)' 14, 1922.

fte

GOYefta81'

Jacletal lleaern Boarcl..

Sir:
You are he:tel7 advtaecl that the J)epanment baa referred. to the GeDeral
·.&Coountmg Office. ~ Department Division, tor aett18MJ1t _ the ~count;
6t the B1iu'eau ot JircraviDg and Pl'intinc tor ptepariDS Pedeta1 Reserve notea
4W1Dc the period. JW1e 19, 1922, to JW18 31), 1922, 8Dl0Wltilig to $34,011.88,
aa follOWa:
F!4!ral Beaerve Nqty, 1914
total
!!2.
!!?.
i§2.
Boston ...... ..
4,000
4,000
1,000''
lew Yol."k ••••• 172,000 50,000 36,000
260,000
1,000
Philadelphia.. .21,000
11,000 4,000
S6,000
8,000 .18,000
Clevela1ld ..... so,ooo
76,000
10,000
5,000
JUc!Jmor:td ••••• 41,000
56,000
14,000 4,000
64,000
Atlaata •••••• 46"000
15,000
Chicap ... .. .. 15.000
st. Louie •••• 2,000 12,000
14,000
6,000
M:Umeapolia.,. 18,000
24,000
9,000 5,000
Xauas ChJ... 9,000
2~,000
2,000 .
Dallal • • • • • • • 2,000
112,000
Sa:A Przoiaco. Zi,QOO
19,000 1g~ooo
-1,000 .
.o:so.ooo 145,000 91,000 1,000
686,000
686,000 aheeta at $49.58 per U •••••• $54,011.88
the obarpa againat the ae'f'eral l'e~al Beaer'f'e B8Dlt8 ee aa follows, ...
speeta ~f1ate
Ipg.Oo.maatlon
P£1nt1Qs
peMat1op
Wot§1
Boston •• •• • •
4,000 ~ 66.60
$ 6:3.88 " 48.84 $ 19 .. 00 $ 198.32
New l'ol"k •••• 260,000 4,329.00
4.,162.20
~,174 .. 60
l,2Z5.00 12,890.80
~hila4elplda.c 36~000
599.40
574.~2
459.56
l!ll.OO 1,'184.88
1,215.12
927.96
361.00
8,768.08
C1evelan4 ... 76.000 1,265.40
11c:bmon4 •• •• 56,000
932 .. 40
894.32
68:3.76
~66.00
2/176.,48
Atllmta • •••• . 64,000 1 1065.60
1,022.08
?81.44
3>4.00
5,175.12
Chicago ••••• 15,000 249.75
239.55
183.15
71.25
743.70
St. liGUla • •• 14.000
233.10
,223.58
170.94
66.60
694.12
Mtaneapolla.. 24,000
399.60
388.28
293.04
114.00
1,189.92
Itanaae City.. 23,000
~2.95
:.6'1.11
280.83
109.26 1,140.M
DaUas • •• •• •
2,000
33.~
Sl.Jt
84,42
9.S>
~9.16
San J'ranc1~eo ll&.QQO 1.8§4.8Q
l, 1'1Q!.§t J.;&7,g
IM•QO Ji.&fi2,2§.
686,000 U.421.90
·10,955.42 8,376.06
3,258.50 84,011.88

---

&tuw.a

!he Bvea11 approprlattou wlU be relmb'QrMcl 1n 'the abow ~OU11t from the
in4eti.B1te approprlatloa f~Pl"ep&l'&tlcm 8DAl Ia.- Of .fH:era.l Beaerve Notes, Re-:iJD'bUrsable", aD4 -it 11 Jtet'Qaft&f. that ;rour bOarcl oauae each ld.etlnite appropriatlOZL to be rei.ID'IIQrae4 1D ltD aiiOa'At.
·
·
Beapeottull;r,
Jl.

Jlal*'r

Jecoba,
Of.lllaiealQQel'.

·.·.···1

914

FEDERAL RESERVE BOARD
WASHINGTON

X,..3478

,···..."

Dear .Sir:
Enclosed herewith ·you will find. two mimeograph
,
statn8nts, X-3477a.,aJJd. .I-)417b, cOvetins in d.atail ope~tions
of \be .nain 1~, Leased Win Sptem, durin& the DIOilth of
JUDe, 1922•..

Please cre4U. ~ aD;JO:unt pqable by

'1'0'Qr

l»ank in

the ~ral acccnmt. Tre...-ate1", u. s., on Jour boob, an4
isaue C/D :roa ·1 .. latioaal iaDks • for account of "Salatiee
and
hderal- :Rttaerve »oard., Specis.l ~·. Lerl.le4 •
\fi•e . 87&U., •endirla dupl1oak O/D to Federal Beaer.e :Board.

Elleri••• •

(

Veq truly .tours,

Fiscal Agent.

Enclosures.

....

915
X-34'i'8a.

BEFORT SHOWING CLASS IF! CATION AND NUMBER OF WORDS
TRANSMITTED OVER Mi:UN LI:·lE OF THE FEDERAL :RESERVE
LEAS:ED WIRE SYSTEM FOR THE M:>NTH OF JUNE, 1922•

Per

c~nt

Total Ba.nk
From

Bank Business

:Business

Treasury

War

Dept.
Business

Finance Corp.
Business

i!'otal

---~--------------------------------------------------~-----------~----------------

Boston
New York

36,259
212,847
55,829
81,780
70,272
59.978
142,884
86,959
43,771
88,259.
14<>,945

3·35
19-64
5·15
T·55
6".48
5·53
1J.18
8".02
4.. 04
8.14
5- • o·
..,.L.
!\.3".01

Total F. R.
BankS
.washington

1,083,847
320,459

1oo·.oo

Grand Total

. 1,4o>+,3o6

Philadelphia

C1we1and
lUcbloond

Atlanta
Chica.go

t
'J

St. Louis

Minneapolis

Xansa.s City

Dallas
San

64,o64

Fr81lcisco

Per cent
of Total
\

79·94%

Bank Business
Treasury Business

l ,4o4, 306 words or 80 .. 12%
348,393 " " 19'.. 88
100.00
1,752,699'

281

46,553
229,384
68,018
93,793
80,414
73,512
157,263
100,102
52,166
101,095
72,080
16o,67l

149,222
199,171

1,982
1,989

1,235,051
521,619

348,393

3.971

1,756,670

10,013
16,537
12,189
l l ,942
9,620
13,293
114-,379
13,143
8,193
12,635
7,857
19,421

19·83~

71
522
241
202
201
159

-.231'

F.IDERAL RESERVE BOARD,
WASHINGTON I D.
JULY 20, 1922!1'

t!:Jj'' .
.

';A..

·:::

X-3418b

REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SY6TEM, JUNE, 1922·.

-----------------------·---. ----------.-------------------------------------------------------------------------..--------Payable. to
-

Operators'
Salaries

·Name of Bank

Operators•
Overtime

Wire
Rental

Pro rata
Share of
Total
Expense

Total
Expense

Credits

•

-·

! •

Federal
Reserve
Board

-------------~---------------·---------------------------------------------------------------------~----------------~-----

$ 250·00

:Boston
llew York

789~98

225 .. 00
366·.oo
305... 00
24o.• oo

Philade1ptl~a

Cleveland
Ridunond
Atlanta

<ll.i.cago
st·~

{#)5~094~89

Louis

Minneapoli$
Kansas City
Dallas
San Francisco

15.00
.

225·00
366.00
305·00
240.00
5,102.89
290-00
293.• 25
326.• 64
232"·35
395·00

-.
8.00

290.00
29g·~
326·.
232·35
395·.oo

Fed·.nee· .. Eoa.rd.

25<).00

3o4· .. 98

17 ,5oo'.o4

756.11
4,432.85
1,162.38
1,7o4.o7
1,462.57
l,24s.l5
2,974·79
1,810.15

$ 250.00

911-.8~

29g·25
326-.64
232"·35
395>00

506".11
3,627".87
937"·38
· 1 ,33g.o7
1,157"·57•
. 1_,oog.. 15
2,12g.l0(*)
1,520.15
61}.60
1 ,.510.60
1,101.57
2,54l-42

804.98
225.00
J66 .. oo
305·00
24o.oo
5,102"·89

290·00

l ,837"·2

1,33J·92
2,936-.42

17,500·04

------------------------------------------------------------------~-------------------------------~---------------------

Total

(f) Includes salaries of Washington
(&:)

(*)
(~)

$15,862... 49
(&)2,12!.10
$13,734·39

$23·00

~rators.

Amount reimbursable to Chicago·.
Ored!t-4

Received $3,676· .. 58 from Treasury Dept. and $89-,07 from W~ Finance Corpor~tion cove.ring
busine.ss for months of December, 1921 and May·~.. 1922,. res~ctively •..· ).. .- :
·:
.

FEDERAL RESERVE BOARD

:WASHINGroN I D.'

c.'

.·

J'f!LY .20., 1922•

917
FEDERAL RESERVE BOARD
WASHINGTON

X-3480
July 21, 1922.

SUBJECT:

Act of July 1, 1922 amending Section 9 of the
Federal Reserve Act.

Dear Sir:
Foil' yau:r information, there is enclosed berewi th a copy
of a memorand.uttl which has been approved by the Board and which

~11

be published in the Law Department of the Ft¥1eral Reserve Bulletin

for August, 1922, explaintng the effect of
approved July 1, 1922, amending SectioiJ

Act of Congress

9 ot the Federal Reserve Act.

The memorandum contains also alt• .tmalysis of the provisions
of Section

5200 of the Revised Statutes and a brief discussion of the

limitation on the amount of paper of any one borrower that a Federal
Reserve Bank may discount for any one member bank.
Yours very truly,

G o v e r n o r.

TO .ALL FEDERAL RESERVE AGl!N'.l'S
AND GOVERNORS.

UNDER THE ACT APPROVED JULY 1, 1922 , THE
REDISCOUNT PRIVILEGE 0]' ~1EMBER STATE B..~-\NKS
IS CONDITION.,.'\!, ONLY o~~ c:;;.;;.~:-:.-\?JCE WIT:-:r TID:£
TERMS OF SECTI~r 5200 REVISED STATUTES.

The Act approved July 1, 1922, the text of Which was published
in the Law Department of the Federal Reserve Bulletin for July, 1922,

amended Section

9 of the Federal Reserve Act by striking out the

follo~

ing proviso in the lOth paragraph:
"That no Federal reserve bank shall be permitted to discount for any State bank or trust company notes, drafts, or bills
of excnr~~ge of any .one borrower who is lia&le for borrowed money
to such State bank or trust company in an amount greater than ten
per centum of the capital and surplus of such State bank or trust
company, but the discount of.bills of exchange drawn against actually existing value and the discount of commercial or business
paper actually omed by the person negotiating the same shall not
··be considered as borrowed money within the meaning of this section".
and substituting in lieu thereof .the following:
"That no Federal reserve bank shall be permitted to discount
for aey State bank or trust company notes, drafts; or
bills of exchange of any one borrower who is liable for borrowed
money to such State bank or trust company in an amount greater
than that which could be borrowed lawfully from such State bank
or trust COri)pany were it a natio:.:1.:..l banking assocb.tion".
The provisions of Section 5200 of the Revised Statutes determine
the amount which a single castomer may legally borrow from a national bank
and the effect of the amendment to Section 9 of the Federal Reserve Act is,
therefore, to permit a Federal Reserve Bank to rediscount for a member
State bank the eligible paper of a customer of

th~t

State bank whenever the

total loans of the State bank to that customer are not in excess of the
limits prescribed by Section 5200 of the Revised Statutes.

This section

excludes from consideration as mo1·,ey borrowed, as did the old provision of
Section

9 of the Federal Reserve Act, the discount of bills of exchange

9.19
X-34803.
- 2-

drawn in good faith against actually

ex~.st~.-:1g

values,

and

the discount

of commercial or business paper actually owned by the person negotiating the same, and provides al_so that certain other kinds of paper, which

were not referred to in Section

9, may be, discounted

excess of the

normal limit of ten per cent of the bank's capital and surplus.

The ef-

fect of "the amendment is, therefore, to broaden the rediscount privilege of member State banks and to place these banks on an equality with
national banks in this respect.

The amendment does not, of course,

affect any part of Section 9 except the proviso which is specifically
referred to, and under the

terms of the sentence that immediately

follows this proviso .it is still necessary that

The Federal reserve

bank:. as a condition of the discount of notes, drafts, and bills of
exchange for such State bank or trust conpany, shall require a certificate or guaranty to the effect that the borrower is not liable to such
bank in excess of the amount provided by this section, and will not be

permitted to become liable in excess of this amount while sach notes,
drafts, or bills of exchange are under discount with the Federal reserve
bank."
Analysis of Section 5200 R. S.
In view of this amendment, and for the information of member
State banks particularly, the Federal

R~serv~

Board deems it appropriate

at this time to re-publish the analysis of the provisions of Section
5200 of the Revised Statutes which was previously published on page 1055
of the Federal Reserve Bulletin for November.

1919.

X-348oa
- 3-

920

The analysis states the amount which may be loaned to any
person, conpany, firm or corporation (including in the liability of a
co~any

or firm_the liability of the several members thereof) under

the various clauses o:f Section 5200, as last amended by the Act approved
)

October 22, 1922.

These amounts are .stated in terms of tbe percentage
·,

of the paid-in and uninpaired capital and surplus of the lending bank.

...ch..ar=-ac;;;;;..;t;.;:e-.r .2£ Loans
(A)

Acconmodation or straight loans, '
whether or not single name,

(B) "Bills of exchange drawn in good
faith against actually existing
values•.
The law expressly provi4es that
this phrase shall also include:
{a) Drafts and bills of exchange
secured by shipping do~
ment s conveying or securing
title to goods shipped.
{b) Demand obligations, when secured by documents covering
commodities in actual process of shipment.
(c) Bankers 1 acceptances of .~the
kinds described in Section
13 of the Federal Reserve
Act.•

{C)

(D)

Co~ercial or business paper (of t
other makers) actually owned by
thei person, conpany,corporation '
or firm negotiating· the same

Amotmt Loanable •

Maximum 1 imi t, 10% of bank 1 s

paid-up and unimpaired capital
and surplus. ·
No limit impc;>sed by law.

No limit iaposed by law.

Notes secured by shipping docu15% of bank: 1 s capital and surplus
ments, warehouse receipts or·
in addition to the amount allowed
other such documents., conveying
' ml'der (A): o;-if the full amount
or securing title cov~ring read- ' allowed under (A) is·not loaned
ily marketable non-perishable
'then the amount which may be loaned
1 · in the manner described under (D)
staples,including live stock.
No bank~ rDake any loan under
is increased by the loanable amount
(D), however,
' not used under (A). In other
(a) Unless the actual JJIU'ket val- 1 · words, the amount loaned under (.A)
1
ue of the pr,opert.y
securing
lDlSt never be more than 10% but the
...

- 4-

Character of

Amounts Loanable.

the obligation is not at any
time less than 115% of the
face amount of the note, and
(b) Unless the property is fully
covered by ingurance, and in
no event shall the privilege ar~
forded by (D) be exercised for any '
one customer for more than six
~onths in any consecutive twelve
months.
(E) Notes secured by not less than a

face amount of bonds or
notes of the United States issued''
since April 24,1917, or by certificates of indebtedness of the
United States.
~

(F) Notes secured by U.S.Government
obligations of the kinds d~scribed under (E) th0 face amount of
which is at least equal to 105%
of the amount of the customer's
notes.

aggregate of (A) and (D) may equal,
but not exceed, 25%·

10% of bank's capital and surplus,

in addition to the arrount allowed
under (A), or-rf the full amount
allowed under (A) is not loaned,
then the amount which may be loaned
in the manner described under (E)
is increased by the loanable amount
not used under (A).
In other
words, the amount loaned under (A)
r;iUst nover be more than 10%, but
the aggregate of (A) and (E) may
equal, but not exceed, 20%
No limit, but this privilege, under
regulations of the Comptroller of
the Currency, expires December
31' 1922.

X-3480a

- 5Some c::x::unpl::-s of ''Jh'.lt_ may 1:0 los;pd to any one
customer under Section 5200 of the Revised
.~ta~\1-tes, <.:;xpressed in terms of pc:rcenta ~e of tha lending bank's capi tc.l
and surplus •
~

Illustration Illustrs.tion Illustration
l

(A) Accommodation or straight loans,
(D) Notes secured by warehouse re-

ceipts, etc.· . . . . .
(E) Notes secured by a like face

amount of Government obl iga107~

tions . . . . . . . . ., ...

T.otal
(B) Bills of exchange drawn against
actually existing values • • •.
(C) Comnercial or business paper ,• •

{F) Notes secured by at least 105%
of U. S. Government oblig::ctions,

357~

35%

No limit imposed by law.
II

•'

b -

What a Federal Reserve Bank ~ay re-=
discount for its mer.J.be"-' _h~l~.::O:.:.
A Federal Reserve Bank rna:' not, 0f CO'J.rse, nnder any circum-

stances, rediscount paper other than that which is eligible under the terms of
the Federal Reserve Act. So also the limitations imposed upon the amounts of
rediscounts which Federal Reserve :Banks may rr.ak;; for member banks, 'whether
State or national, are determined by the provisions of the Federal Reserve
,,

Act and are not in any way affect<.ld by the amendment to Section 5200.
Under the provisions of Section

of the Federal Reserve Act

any Federal Reserve Bank may r..;;discount for any member bank, whether

State or national, eligible paper of any one borrower to the extent of
ten per cent of the member bank's cap,ital and surplus but it is expressly provided that "this restriction shall not apply to the discount of
bills of exchange drawn against actually existing values".
In the opinion of the Federal Reserve Board this pbl'ase
of exchange drawn against

actuall~

existing values" includes

bills of exchange secured by shipping
title to goods shipped" and

do~ents

bills

dr2.fts or

conveying or securing

b.s.nke:cs 1 acceptances of the kinds described

in Section 13 of the Federal Reserve Act" even though Section 13 (unlik~
the amendment to Section 5200) does not expressly state: thc.t those two
classes of paper are bills of exchange drawn against 1ctually existing
values.

In the opinion of the Board, however, accepted demand bills on

which the drawer is released from liability are not "bills of exchange"
within the meaning of Section

t;
~

.and must, therefore 1 be included in de-

termining the limits on the amount of paper of any one borrower which a
Federal Reserve-Bank may rediscount for any member bank.

FEDERAL RESERVE BOARD
WASHINGTON

X-3481.
July 22, 1922.

SUBJECT: Redenption of Ourrency Fit for Circula.tion.

Dear Sir:
I enclose herewith ca,py of a letter from the Secretary

of the Treasur.y, to which your attention is invited.
I enclose also tables l;lhowing the results of test exami-

nations of each kind of paper currency presented for redemption
during the month of June, 1922, by your bank and its branches.

discuss~

this matter with Treasury officials, I am convinced

that unl.ess the percentage of fit notes sent in for redeq>tton
is very ma.t.erially reduced there is danger that the existing
methods ma.~. be cbanied. so as to transfer to the Tre,asury all the

details of redenption. and distribution now handled. by the ·Staffs
of the banks and the Board.
Very tru.ly yours,

Go v e r
(linclosures)

GOvmNOBS OF .ALL F. B. BANKS
COPIES TO AGENTS.

o r ..

. COPY

X-343la
TREASURY DEPARTMENT
WASHINGTON.
July 18, 1922.

.,J

My dear Governor:
I have just bad brought to my attention by the Currency Committee the Treasurer's report for June of test examinations of paper
currency received during that month from .Federal Reserve Banks for
redemption. I am transmitting copies herewith. If these tests reflect the actual situation, I confess to great astonishment and I
think the matter is one to receive the serious consideration of the
Board and the several Federal Reserve Banks.

You will note very satisfactory assortment is being zzade by all
the banks with respect to Federal reserve b&'"lk notes and National bank
notes. With respect to United States currency, the only creditable
showing appears to have been made by the Federal Reserve Banks of Ric~
mond and Minneapolis; all other banks show an an:ount of notes fit for
further circulation having been cancelled far in excess of any reasonable standards. The Treasury is directly and particularly concerned
in the situation, and must insist that United States currency be more
. carefully assorted before it is cancelled and forwarded .to the Treasurer.for redemption. It would seem entirely feasible to assort United
States currency notas to the same standard as apparently is applied to
Fe~eral reserve and National bank notes.
As regards the assortment of Federal reserve notes, the percentage of fit forwarded by each of the banks is so excessive that I
am sure there must b·e some axceptional circumstances to account for
the matter.
The most cursory examination of the Treasurer's reports
indicates the situation, for it appears that approximately seventyfive per cent of Federal reserve notes fit for further circulation are
being forwarded for rede!Iption.
Very truly yours,
(Signed) A.

Ron. W. P. G. Harding,
Governor, Federal Reserve Board.

Mellon,
Secretary.

c.o

C'l
. c.>

BESULTS OF TEST EXAMINATION OF EACH KIND OF PAPEl~ 8U.;:L EtJCi FOHWARDED :BY F.E:DETI.AL R..;:8:mVE .BJ',. _ .
FOR REDEMPTION
DURING
'rFiE MONTH
OF JUNE,
1922...
.
.
.
.
.
...

Number of Notes examined
lo•·s 20 1 s Total
21s
l's
5's
Boston
38,900 3.500 3,100 800
. 46,300
119,000 7,i00 10,200 1,000
New Yo:t'k
137.300
Buffalo
4oo
4oo
6,1oo
5,300
44,000
Phi1ade'lpb.ia 38,100 2,600 3,300
16,800 l,lOO 1,6oQ
19,500
Cleveland
l6,200
Cincinnati
14 1 000
900 1,200 100
18,100
Pittsburgh
15,500 1,000_ 1,')00 .}002,4o0
2,100
300
Richmond
14,200
800 1,000 200
12,200
Baltimore
14,800
'4oo
Atlanta
900
13,500
100
Nashville·
300
3,500
- 3.900
4,100
4,100
Birmingham
ll,lWO
4oo
New Orleans 10,000
900 100
Jacksonville
5,6oo
5,000 '100
500
66,700
Chicago
56,100 5.300 5.300
10,800
12~800
Detroit
700 4oO
900
21,400
St. Louis
18,200 1,400 1,600 200
2,000
Memphis
100
100
1,800
6,000
100
Louisville
500
- 5t100
3o0
200
Little Rock
200
2,900
2,500
4,800
Minneapolis
4,000
4oo 100
300
100
Helena
'":"
6oo
500
600
600 100
Kansas City
8,300
7,000
100
Denver
1..,200
1,300
1,000
100
Omaha
900
Oklahoma. Cy.
100
1,200
1,000
100
17,000
Pallas
16,500
500
6oo
El Paso
600
2,100
100
San Francisco 1,900
100
Los Angeles
200
200
3,100
2,700
1,100
Seattle
1,000 . 100
1,100
J.OO
Spokane
1,000
1,000
100
Portland
900
100
1,100
Salt Lake Cy. 1,000

http://fraser.stlouisfed.org/
Federal ReserverBank of St. Louis

- u. s·. . ·
l's

13,843
'29,276
707
14,982
6,014
.1, 731
'; 4,o42
54
3,255
2,698
477
471

Number
2's
2,249
2,529

984
265
179
238

..
I

3~
55

3.~11

120

4o4
14,214
859
8,621
521
1,719

28~

52
2,324
l.l-96
116
211+
3,369
205
1,013
1,275
532
245
555
273

1,434'
103
918

99
26

12
155
25

of-Fit Notes
-5-.s lO•s
166
~,92.7.
. 3.593 577
46
1,204
596
82
355
41
564
41
671 ·90
63
13

509
93
2,170
107
1,122
36
325
107
18

52
72

87
18

250

44
165

X--:)'~c~.L b

CUF.Bm1CY.

58
118
23
48

20•s

Total
18,185
35.975
'
802
17,170
6,875
2,347
4,S85
95
4,370
2,827
545
471
1+,085
525
17,868
1,119
10,741
557
2,230
495

4Sl:

64
2,761
521
118
258
3,534
205
1,133
1,462

584

268
627
321

l's
36
25
13
39
35
12
26
03
27
20
.14
11

34
08
25
08
47
29
34
14
11
10
37
41
13
21
20
34
53
47
53
25
62
27

Percen_1 £! ID. Notes
21 s
20's
5'S
lO's
64
62
21
36
58
35.
12
11
38
36
24
37
32
19
30
41
24
38
14
44
67
45
:.
17
07
-o4
55
30
2S
28
11
66
33
13
08
12
26
25

57
19
41
15
70
36
65
53
05
42
02

114

13
4o

87
18
32

4o
11

22 .•

21'
34

33
62
35
52

1+5

Total
39
26
13
39
35
14
27
04
31
19
14
11
36
09
27
09
50
28
37
17
10
11
33

58
59
23
....
4g

47
53
24
63

•

f-.

- 2-

Boston
Ne-:: York
Bu;f.fa.lo
Philadelphia
ClJvelru:ld
Ci;,cinna.ti
Pi ,.ts1)1.;.rgh
Ri,~hrnvnd.

Ba1. ti..r.1ore
Atlanta

Na.-3h>Tille
.,_:Si ~mir..gh.am

New· Cr:eans
Je::k.i: onvi11e
Cl '~c:::.z:G
De~rcl~

St ... J,cuis
Me:;::[:'his

Lc·ais-ville
Little Rock
Mi:meapolis
Hel.ena
Kansas City
De:;:1ver
Orr,:-ilia
Oklahoma City
·Dallas
Houston
E1 Paso
San Francisco
Los Angeles
Seattle
Spokane
Portland
Salt Lak~ City

NUmber
2's
19,700
20,000
8,000
12,6oo
14,700
3,000
9,800
1,500
10,4oo
~,700
,300 2,050
12,900
300
16,000 1,000
18,801 11.700
15,000 2,000
19,900 14,000
15,900 6,000
20,100 3,000
7;900 1,.000
16,coo 1,000
600
13,600
.....
18,800

l 1s
14,700
23,300
6,000
18,900
33,500
12,000
6,000
12,500

26,aoo

11,~00

9,900
12,000
22,500
4,400

7,500
1,300
2,000
1,000
2,500
1,000

29,700 16,900
12,600 6,100
3,800
11,200
6,800

FEDERAL RESERVE BANK NOTES
£! Notes examined
Number 2f Fit F2..~~
l's
21s
5's 10 1 s 20's Total
5'8"' 10 1 s 20's
1,418
200
34,6oo
496
31
54,200 1,061 3,266 1,155
10,900
46
- 14,000
335
31,500 2,268 l,04o
411
2.,4oo
5Q,6oo
919
330
141
18,000
3,000
619
69
ql
228 3,877
7,100
22,900
14,000
70
'583
24,100
767
7c#
411
201
4,450
31,000
200
71
50
1
186
13,200
4
8
100
288
17,100
30,501 1,959
556
66
62 34
200 100 19,600
412
1,300
337
2,000
544
856
35,900
57
618
1~100
23,000
252
100
2,500
119
25,700 1,038
343
25
8 .. 900
78
656
100
18
4oo
100 - . 17,500 1,970
50
4
1
100 2, 800 18, 6oo
2
1,500
56
25
46
12
1,6oo
100
708
20,500

1,800
7,900
6,900
3,4oo
2,200
100
1,900
lc~300

4oo

300

1,055
1,162
294
218
1,236
37

1,595
2
62
3
371
8

ao,ooo

5,682
1,451&.

2,330
972

3,.800
12,6Qo
9,100

1,568
2,592
111

35.500
20,600
100 18,~
-. 16,
.... 27,200
5,4oo
100
48,500
,...

1,4oo
1,6oo

-.130
190

381
3,308
1,66o
829
4,586
653
1t491
733187
300
2,515
911
1,457
870
1,52a
73
2,138
88
766

2's
7.1
16.3
4.1
8.2

5's
15-5
10.5

2.7

5-l

2-3
2.3
4.6
7-3
3·"

13.7
4•. 7
54.6

8 .. 0
4.6
5·2
1.2
1:.4
1.8
10.4
2.. 5
2·2
3·8
5·1
8.3
12.3

o.4

o.,
o•

4.7
3·3
6.1
4.2
3-9
7.8
s.o
4.1

3·2

8,168
2,745

19.1
11.5

13.7
15·9

41.2
23.1
1.6

9-2

1,568
2,722
395

2,795
~.712

470
327
1,707

...
41

1,~

l's
3·3
4.5
0.7
12.0
2.1

548

114
106
100
156
319

Total

4.. 0
10.. 1
2-9
1.7
5·4
0.8

145

Percent of

4 .. 5
8.0

25 ..9

2.. 8

18.0

5-0
8.2
24.5

10.2

25-0
0.1
2.2

5~6.

10.1
2.7
10.5
3-2
4.6
20.0
4.6
5.1
25.0
2•3
1.4
1 .. 7
8.2
31.0 34.0 4.6
4.0
25-0

8.. 0
6.9
1.6
3•1
4.5

11.8

10 1 s 20's Total

13·7

21.2
0.1
3-1
0.3
14.8

o.s

it Notes

l.J.o

12.0

3·1
5·9
8.2
12.2
0.0 o.4
3·7
7.8

o.. o

-17.6

s.~

2.
1.9
6.2
0.8
5·0
16.8
13·7
41.2
21.6
4.3

. -3-

FE.DERAL RESERVE KOTES (Half ~1otes)

of
lO's
19,000
20,000
16,000
20,000
7,500
16, OOQ
16,100

~~ber

~·s

Boston
15,800
19,600
New York
Buffalo
15,900
Philadelphia20, 100
Cleveland 10,900
Cincinnati 16, 000
Pittsburgh 6, 000
Ricbmond
Baltimore
Atlanta
4,000 3,000
Nashville
Birmingham
New Orleans 15,000 14,600
Jacksonville
Chicago
21,600 24,000
Detroit.
16,000 15,900
·St. Louis 15,900 12,000
Memphis
4,000 4,000
Louisville 8,000 5,600
Little Rock
Minneapolis 8,000 7,600
Helena
4,000 2,000
Kansas City 15,000 16,000
Denver
4,100 2,000
Omaha
7,900 7,000
Oklahoma Cy.
Dallas
8,000 2,500
Houston
El Paso
San Francisco20,000 20,000
Los .Ang~les 12,000 11,800
Seattle
16,000 12,000
Spokane
4,000 1,900
Portland
8,000 10,000
Salt La.keCy.

Notes examined
Percent
·f~rnber of Fit Notes
lO's~
20's
50's 100 1 s total 5's 10•s
20's
50 1 s 100 1 s total 5's
18,900
53,700 11.617 14,306 13,474
39.397 73·5 75-2
19,900
44,835 78.3 71.7
59,500 15,447 14,342 15,046
15,4ob
47,300 11.,718 11,980 12,798
36,4961 73·6 74.3
56,625 l5tl63 16,.000 13,704
16,52544.867 75·4 80.0
6ooo
9,014
4,432
25,300
5,-533
JJ
18,0291 73•5 74.4
44,000 l1,6Sl 11;538 3,156
12,000
31,375 73.0 72.1
4o, 100 5.750 11,536 11,174
16,000
26,460 71.6 71.6

s,ooo

1,000

2,479

1. 757

~10

5,o46 61.9 5S·5

of :Fi-::.

::-::;_~-

71.2
75.6
83 .. 1
82.9
64.2
67.9
69.8

50's 100 1 s total
73-3
75·3
77.1
79 .. 2
71.2
71.3
70-9

81.0

63.0

20's

•

6,600
2~;100

16,000
12,000
2,300
5,600
1,100
2,000

16,000
1,600
3.500
1,900
19~700

11,900
13,000
1,500
10,500

64.0

67-3
65.8
75.1
77.0
67.8

71.8
59-2
77 .. 4
85.1

so.s

81.5
65.6
87.7
56 .. 1
84.4

54.0
27.2
54.6
46.7
26.2

6g.4
67.1
71.0
50 .. 5
5?·9

81.4
77-.6
70·5
83·5
77·6.

49.8
65.6
55·3.
47·3

57.8 5S.9

64.6

!B .. l

49,798 80.4 79-9
27,585 69-5 74-7
31,9~5 71.2 79.1
5,557 67 .. 3 62.1
23,137 76.6. Sl.l.

59.9
87·5

77-2

5,715

17,253
9,216
9,297
3,407
4,52S

1S,033
10,501
10,528
1,291
. 4,729

49,975
30,246
31,7,66
7,781
14,686

4,326 5.~78 ..::.~
8,000 1,091 1,342 1.552
47,000 6.194 11,375 11,295
7,700 l~i16 1,011 1,336
18,400 2,071+ 3,916 2,719

10,500
3,985
30,S64
4,263
8,7C13

67,900 14,639
37,900
39.900
10,300
19,200

10,529
11,941
3,033
5:429

l6,ioo

12,400 4,629
59,700
35,700
41,000
7,400
26,500

1,473

83-7

73·6
79.8
79.6
75-5
76.4

62 ..8

1,229

16,091 15.990 17,T.J.7
8,349 8,821 10,415
11,399 9,494 11,032
2,694 1,561 1,302
6,130 S,ll2 8,895

30,658 81.7 s~.6

36,600 12,268 12,675

7,331

.a.s

· s6.s
84.7

6).4

77.6
75-0
Sl.l

)

(~
c~

•

"Boston

5' s

11'~000

22,700
4 ,000
Buffalo
Philadelphia. 16,250
26 J 900
Cleveland
16,000
Cincinnati
20,000
Pittsburgn
Richmond
~,300
Ba1 tim-:>re
,100
20,500
Atlanta
6 ,000
Nashville
14)800
Birmingham
New Orleans
10.900
Jacksonville 1i ,Goo
21,900
Chicago
f,OOO
Detroit
st· .. LOuis
20,500

New

__
-

of Notes Examined
20's so•s lOO's
lO' s
13,400 4,JOO
30
50
23,40017,000 2,200 2)250
3 ,800 3 ,000 100
18,750 5.025 200
65
25,900 21,100
6o
17,000 },000
100
12,000
10
20
500 200
20
30
3.500 1,200
10 ,Goo 1 ,175
50
50
4,000 1 ,600
-:
10,500 },4o0
30
5
11 ,200 3 ~ 750 100
50
13,300 21200
5
30
21,6oo 9,600 300 100
7,000 4,000 200
17,600 4,400 21()
70

No.

Yo~k

Total.
32,830
6l.550

l()' .900

30,290

73.960

36,000
}2,100
4,030

8,850
32.375
11,6oo
28,735
26 ..000
27,145
53.500
19,200
42,780

Louisville
Little Rock
Minneapolis

Helena

Kansas City
Denver
~

17,500 14,000 4,900
7,6oo 9.9001.500
2,700 51700 goo

5ta
lOts
20*s
710
709
339
2,997 . l .532
885
0
186
73
1,411
2411.
779
959
657 2,197
106
1,028:<- 752
2,889·
729
118.
7
5
266- . 231
35
l-,02;t
100
597
8$ ~
45 146
1·,541
6o9 104
839·.
263
945
244
1,458 1,221
-881 1~071
651
48
. 179
152
184
1,308 3,053

4,164
107
168

914
28
15

~~:~~ ~~~j:f:~·-.~A~~~ :~ttci:: . 509 . 1,571

286
192
37

5,100
Oklahoma. City 7. 700
Dallas
. 12 ,200
Houston
9,200
·n Paso
6,300
San Francisco 28,200
Los Angeles 11,900
Seattle·
3.800
Spokane
800
Portla:nd
7,500
Salt Lake ey. 10,000

l6o
105

9,6oo 4,000
10·,800 3 ;400
13
4,300
2,.. 1.200
3,400 6oo
35.60024,400
7,000 8,200
5,.900 1,100
2.200 Goo
1, 700
8,100 1,20Q

u.soo

.32 36,592
30 19,135
9,200

56 : 20 ~#776
100
,000
100. 4o 29,91W
12,700
20
20 lO,}lio
898 356 89.454·
4oO 300 27 ,SOO
49' 10,972
121

J,6oo

20;700
8 19,344

1.;.

X-

NATIONAL BANK NOl'ES
......,...
No. of Fit Notes

M3mphis

CJ'j

'" ~.

--..

2,713

2i}03. ... 3,458
:·~ ~_.;~--:-

·~

... 3

'670

96-

121

1~171:
~7·

118

634
. 1,~1
41
27
841
1144 / . l
2,366 10,018 3·t510
3.035 1,077 ~
184
474
812
16
IK>·
7
'2,530 1,956
6so
~7
374
52

so~s

1
203
5

1
0
0

6
3

lOO•s

1,771

338

5.~,

-6
0
0
0

4
0

1
3
1

10
2

...

7,801

6,071
2,288

355
3,319

710

·-0

190

6S
g
0

144
257

.h...;

;13

3$2

65
90
1
0

2~
1,2
16,14-9
6,332
1,11.79
. 63
5,166
913

3·a
6.
14.4
3·5
6.4
4.7
1.4
10.....

].6

12'·5

b£CtDt ot Fit Notes

ao•a

1-8

2.5

10.4

4.4

6.0

SOi•

-100 t s

9-·2
5--0

15-0

1'·5

9·2

U ... ·.. t.:tL~ J.i..;Q."

'2.2·2 ,.

·5

8.6 4.1

1,728
276
2,257.
2,077
2,924
2,6o4

lJ.2
0

53~

4.553

.· ~.,. . -a..

2,"477
J,Sl3
1,886
3,619
130

5'-a lOts

Total

4-.;g

3·5

1..0

o.o

0
S.5 · 12..0

5·8

10.0
14.0

8'.4
f,~.l

4.o ·q .. g

2-9.

9·1
J.O
1·0

11.0

6.7

g.o
0
32'·0

6.6

21'·3

u.6
1.8
1•8

6.2

o..o

l-9

12.6 18~0
2:.9 9.6
o.o 6'•9
1·.2 1.1
9'·5 11 .. 2
2.4 1.7.
13·3 13·0
8.3 28.1
25'·5 15·3
12.. 4 13·7
o.s 1 .. 8
33·1 17.0

5'·1
2 ..8
0.9.
3-:4
14.7.
2.2

1.7

3·5
1·0

l-7

6..()

0'.1

2g.l
1 ·7
2.6

l.Jo.o.
4:..3

21 ..1.
17.0

6.5

.o·.o
0
0

18.1
30·0
2.0

o.o

1·8
1·9

1.9
10.6

15-5 29·0
o.o 1·0
2 ..7 2-9

1~-3

3·2
6.0
5·3
2 .. 3

1.4

1.2
4.1

0
0

11.2

10.7
4-.. g

2.2 2.1
6.. 3 17·3

7·5
o.o
20.0
13.0

5·1

o·.3
1·5
3·3

5'·3
8-8
2.4
S.l
5·2

1.4
6.6
5·6
1.1

2'-5

Total

o.o

0-7

2.7

1J.6
5·5
J·7
1.6
11.0
2.}

12'.4

18.•0
. 22.7
13 ...4
1.7
24:.9
4.2

930

.FEDERAL RESERVE BOARD
WASHINGTON

X-3484
July 27, 1922.

SUl3JECT:

Extension of Maturity Dat~s on 2% CartificatQs
of Indebtedness Pledgad to s~cure Federal.
Reserve 13a.nk Note Circulation.

Dear Sir:
As you have been advised by the Secretary of the
Treasury, the maturity date of all 2~ certificate.s of indebtednass deposited by the Federal Raserve Banks with the
Treasurer of the United Stat;;Js to secura FOO.era.l Raserve
Bank note circulation maturin0 on or after August 20, 1922,
and prior to August 20, 1923, has been extended one year.
extension
States on
the :Board
deposited

F.or your information, propar notation of this
has been made by the Treasurer of the United
thd receipts given by that officer and held by
in trust for your bal¥t covering certificates
to secure your bank·note circulation.
Very truly yours,

Walter L. Eddy,
Assistant Secretary.

TO THE GOVERNORS OF .ALL FE!)];.tt.AL RESERVE BANKS.

''931
X-3485
F E DE R AL

R E S E R V E :S 0 A R D.

STATEM:HB'r FOR '1'B.E PRESS

For release in afternoon papars,
.A.u.gns t 2, 1922.

W~dnesdcq.

CONJ)ITION Oi i'HE ACCEPTANCE ~. JU'NE 15 TO -nJLY 15, 1922.

According to reports rgceiv~d. 1»1 '\he Federal. Raserva Board

from thit Federal Bssarva Ba.nks of the various districts • the
acceptBftce ma.rltet was i:rragul:;r throughout the entire period under raYiew and .allowed 'Rt slit#lt -.ips ot activity.

1'ha supply

-«'bills in most 41•tric\a ws.s lim1~~. bu.\ was adequate to •et
the smll. 44JalQ4.

In :District Jfo .. 1. (Boston)

tb~ IJ8.PPl.Y

ot bills showed.

8Z'l

up-

wa.rd tende1cy fl.t tha baginnin"' of· the :r.portiJli period, but fell

ott at 'the olosa..

DeJa~

tor bill• was very small, badkers and

C.Orporatioa.a ._o had idle f\md.$ pr.ete;rring ~ i.J:wast th$1'l in certitt.-ca.t,es ot

iDleb~aa

.-ather than

a=eptanoea.

At · the close of

the period• the bUl aerket ii4aloved aQJIBViha,t and bills of

30 tmd 60

<lqa• maturity moved trei:)lJ'•

In District No. 2 (New York}

~ q~

of bills in most ca.ses

was

su.Uic~ant to JlliMt the

was largely

intl~ced.

d...a..

the 'bill Jllal'ket in this District

by the pfeVa.iling mmer situo.tion.

Ban'k:ers

•old their b1Ua llfban mousy rat9s tandad. to fl,dvanee and increased

their hol41n-.

wtte11 110lle7 was

Pl~llti~.

'.lhe d.amond for bills for

torei&D ac~oUDt ocati$1.0. to bet a. atroa.g factor in this Distl"ict. ~

932
X-3485

- 2 is responsible for the continuance of thQ prevailing

rat~s

for bills of

longer maturities.
Districts No.7 (Chicago), No. t (St. Louis) and No. 12 (San Francisco) report a dull market throughout the entire
mantio~d District,

~:>eriod.

In the last

35 dealers report a decraase of $3,424,817, or 38%,

in the volume of acceptances bought and $998,772, or 19.4%, in the

amount of bills accepted during June as compared With the previous
month.

In District No. 7, howaver, a slight improvem!lnt was noticeable

at the close of the period, when gro.in bills were in fairly active demand and moved freely.

fluenced mainly by the

In this District, too, the bill market was inprav~iling

money situation.

In District No. 3

(P.hiladelPhia)'tha supply of bills was fair.
A slight iaprovement in tho acceptance market is noticeable in
Districts No. 4 {Cleveland), Uo. 10, {Kunsas City) and No·. 11 (Dallas).
In the last mentiondd District, the demand for bills was strong and
e.lceedad the available supply, 31 though theN was on inCrl3ased Volume
of acceptances arising out of domestic shipments and
goods in

war~houses.

creased.

th~

stora80 of

The volume of foreign acceptances, however, de-

T.ha opposite sit~tion prevail~d in District No.6 (Atlanta),

where the volume of bills arising in connection with

~orts ~d

ex-

ports increased about 31% over tha previous period.
The bulk of acceptances executed in the various districts were
based upon the exportation of cotton, wheat, :md rubber goo.:l.s, the importation of sugar and coffee and. the war.ahousing of crude oil

corp.

In Dis~ricts No.2 (New York), No.4 (Cleveland) and No. 12 (San FranciseoJ
'J

933.
X-3485

- 3-

maturities of 60 to 90 dqs were preferred. In the other Districts, the
best demand was for 30 to 60 day bills. District No. 12 reports the distribution of maturities as follows:

Ma.turitl
30-da_vs
60-days
90-da.ys
120-da.ys

June 15 to Jull
10.4%

34.6%
49.0%
6.0%

The rates throughout the poriod wer'e as follows:

Bange du.ring period _ _....:C;.::l~os;:.;:e--.,__

iates on prime bills

No. 1

(:Boston)

30 cia¥ maturity

60 •

No. ·2

90 "
120

150 "

130

n
n

30 da.y maturity
No.3

. {P'niladelphia)

6o n
90 "

120

150 "
1SO R

30
No.7
(Chicago) .

3- 3t
3-1/6-Jt

~maturity
-~
n

90 "
120 •

(New York)

:Si<l.

If'

3-1/8- 3'i!.
~t- 3-3 8

·R

120
150

- n

n - 3i
3-1/s - Ji
n

3-1/8 •

3t- 3-3

3-l/8-

180

"
7-3/8
8

31'-3-3/8

3
3- 3-l/S

3 - 3-1/8

2-7/S -3

3-1/8

-3-l/8

- 3!

3-l/3 - 3-3/8
3

3-3/S
It

"
II

2-7/c - 3

3-l/8

"
" "

2-7/S - 3-1/8

•

da.y maturity

2-7/8-3-1/S

·=•'. "

- 3i

3-1/S

Offered

Bid

3in - 3i
n

~3-3/8

n
n

Z•7/8 • 3-1/S
3
- 3-1/a

" "
3-l/c,; -3i
" •"
"
3-1/S

Offered

It
It

3-1/3
3 - 3-1/8
3-l/S-3-3/8 3- 3-1/6
n

3 - 3-1/8

3
II

3-1/o - }~'"
II
3-1/o-3-378 3 - 3-1/s
It·

...
FEDERAL RESERVE
STAT~~~JT

BOARJ)

FOR THE PRESS

X-3486
For release in Morning Papers,
Tuesday, August J. 1922.

The following is a summary of general business and
financial condi tfons throughout the several Federal
Reserve Districts during the month of July, as
contain0d in the forthcoming issue of th~ F8deral
Reserve Jullotin.
The outstanding feature of the greater part of the month has
been the continuance of business and industrial activity at the relatively high rate recently attained.

In fact, production has shown furth0r

incnases in soma lines, while in those which nonnally would be noticeably affectaci by seasonal influences,
relativdy slight.

decr0as~s

on the whole have been

Reflecting this movement, de.bits to individual

account, which are a fair index of volume of business, were considerably
higher in June them in May, althout,h they showed some decrease in July.
At th8 same time, prices have continued their upward tendency, the
index number of the Federal Reserve Board for June being 162, an increase of

points over the May figure, further increases being indi-

cated for July.
coal and

railro~

As the current month progressed, theeffacts of the
strikes began to make thamselves felt.

This in-

fluence has served recently to restrain productive activities in
various 1 ines, noticeably iron and steal.

The plans recently announc-

ed by the Administration are expactad to relieve tha situation.
The output in various lin2s of manufacture, showed furthar
improvement in June.

This was particularly noticeable in the

c~se

- 2 iron and steel, copper, automobiles and tanning.

In the textile

industries, incraased output of both cotton and woolen goods was reported during June,

althou~

soma seasonal recessions have been ex-

perienced since the opening of July.

Construction activit1 has

been well sustained, only slight recessions occurrin6 in June, and
the production of lumber and other buildin3

mat~rials

accordingly

The amount of bituminous coal mined

has continued at a hi6h level.

in June showed a considerable increase, but since the opening of the
present month has fallen off greatly.
been further drawn upon.

Coal stocks have consequently

Anthracite production has been negligible,

and stocks, with the exception of pea sizes, are practically exhausted.
Petroleum output continues larc:;e; stocks are, in fact, accumulating.
A further reduction in the number of persons out of work
was reported during June, and scarcity of labor continued to be noted,
especially in the building trades.
scarcity of agricultural labor.

Cert:-:tin districts also reported a
Unemployment remained a factor. only

in those lines, such as textiles, coal and transportation, in which
labor difficulties exist.
Agricultural prospects are still very satisfactory for the
country as a
tion in the

whole, although

th~re

has been a considerable

condition of wheat and oats.

to be above the average, and the

tob~cco

deterior~-

Fruit crops are reported
outlook in general excellent.

Tne cotton crop shows some improvement during June, but it is 3till too
early to estimate the amount of damage from the boll weevil.
In wholesale trade there was a general improvement in most

·.

936
I

X-3486

- 3 lines during June.
showed

incre~ses

Groceries sales in particular were large, and

in all districts over last year.

The majority of

the districts likewise reported an increase in dry goods sales- Boot
and shoe sales declined slightly during the month

June, and the

,.,..

situation in respect to hardware was not so satisfactory as in recent
rronths, nl though better than a year ago.

The volume of retail trade

was well sustained during June, although slightly less than in May.
Financially there have been few new developments noted for
the month.

The Federal Reserve Banks of Dallas and

Francisco

reduced the discount rate to 4-1/2 and 4 per cent respectively.
much interest has been the announcement by the Treasury on July

calling for redemption on December 15, 1922, of approximately
. $~,000,000,000 of the 4-3/4 per cent Victory notes.

Federal Il.e-

serve Bank portfolios show little change, while member bank loans,
other than those secured by stoCks and bonds, show a downward tendency.
Foreign exchange rates have remained steady, except for the mark, which
reached the lowest figure to date.

The foreign trade figures for

June show a substantial increase over r&ay, both for imports

ant

exports.

FEDERAL RESERVE BOARD
WASHINGTON

August 1, 1922-

X-3490
Subject:

Econorrw and Efficiency in Federal Reserve Banks.

dear Mr.

I am enclosing herewith copy of a letter on the subject
of economy and efficiency addressed to the Governor of your Bank.
An identical letter is being sent to the Governors of all other
Reserve Banks, and copies to the respective Chairmen.
~7ill you
please bring this letter to the attention of your Board of
Directors at its next meeting, with a supplementary statement
by yourself regarding the interest of the Federal Reserve Board
in this subject and the desire of the Board to have the cooperation, not only of the officers, but of the directors of the
Federal Reserve Banks, in bringin3 the operating efficiency of
their respective banks to the hi$hest level.
Believe me,
Very sincerely yours,

Chairman of the Committee
on Economy and Efficiency.
(Enclosure)

To the Chairmen of 311 Federal Reserve Banks.

X-3409
August 1, 1922.
Subject:

Economy and Efficiency in Feder3.l Reserve Banks.

My dear
In connection with the matter of improving the operating
rhethods of the Federal Reserve Banks with a view to securing greater
economy and efficiency, I am writing to say that it is the opinion of
the Board's committee, after a further and thorough consideration of
the problem with the Auxiliary committee of the b;mks on economy and
efficiency, that the largest and speediest results in promoting
economy and efficiency within each of the Fed8r.ll P.eserve :Banks cw at
this stage still be obt::tined through continuous and active work by the
committees on procedure, or on economy and efficiency, that have been
s.;:t up in each of the banks.
In order that the :Board 1 s committee m:::ty be l::ept fully informed
of the work being done by the committees of the baru~s, you are requested
to Lu.ke a ra_c)ort on behalf of the corrr::li ttee of your bank showing the
lines along which it is proceeding, and stating the results which have
been accomplished to date.
In this connection, we also wish to be informed whether your procedure committee is making a thorou6h review of
eacl: department based upon a predetermined program, or whether it is dealing only with '-'lfhat appear to be the more obvious problems and matters requiring attention.
It is our expectation that in prosecutin 6 ita '.vork, your committee will develop some improvements or ~odifications of operating
methods which should be of value to oth9l' Federo.l Reserve Ib.n:::s.
Any
such improvements should be promptly reported to the Committee on Economy
and Efficiency of tha Federal Reserve Bo,::crd in order that they may be
passed on to the other banks.
The Board 1 s committee will o.lso welcome
any suggestions that may be offered ~vith raspect to improvement or modification of operating organization or rr.ethods affecting the Eeserve
Banl:s as a whole.
The comrrdttee would like to be advised of the policy your bank
is pursuing with respect to reducing the number of your employees as the
volume of business of your bank declines.
Specifically, it would like
to be informed whether you are retaining employees now in excess of your
operating requirements in the expecto.tion that their services ·.vill be
needed in the future, or whether you are releasing them, and if so, on
what principle you are proceeding.

-2-

X-3439

The committee desires for its information a list of the members
of your committee on economy and efficiency, specifying the chairman of
the committee and the position in your bank occupied by each rrember of
the committee.
The Board's committee, in cooperation with the Auxiliary committee of the banks, is devoting continuous and systematic study, not
only to the comparative operating costs of the several Reserve Janks,
but to methods of oper~ting organization and detail affecting the banks
in 6eneral.
These matters will be made the subject of special letters
at a later date.
Believe me,
Yours very truly,

Chair~~ of the Committee
on Economy and Efficiency.

To the Governors of cll F .R.:JanJ:s
Copies to all Chairmen.

'"·

X-349la

)

IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE EASIJ.!ERN DISTRICT OF NORTH CAROLINA.

AT Rg.EIGH.
(

D. J. Malloy and J. H. Malloy,

)
(

Trading as !dalloy Brothers

)
(
)
(

vs.
Federal Reserve Bank of Richmond and

)
(

Napier H. G. Balfou.r.

---

No. 923.

....

of Fayetteville, N.

Sinclair & Dye

For Plaint iff

M. G. Wallace,

of RiChmond, Va.

Little & Barnes,

of Raleigh, N.

For Defendant Federal
Rese.t"V'e ]ank.

MCCormick

& Clark,

of Fayettevil!e, N.

For defendant Tialfour.

CONNOR, DISTRICT

JO'l)GE •

Action for recova:ey of amount of check alleged to
by neJligenoe of
~e

l~ova

been lost

defendant, in course of collection.

parties waived trial by jury and submitted the ease to the

Court to find the facts and render judgment thereon.

The evidence disclosad the following facts:
Def enda.nt Napier H. G. !lalf our, on November 30, 1920, drew and sent

to plaintiffs by mail at Quitman, Georgia, his check for Nine Thousand Dollars
($9,000-00) on the Lumber nrid6e ~ank, a duly chartered and organized

co~oration

X-349la

2 -

authorized to carry on the business of banking at Lumber

nridee, North

carolina, to be applied to the credit of his indebtedness to

plaintiffs, evidenced by his note, secured by mortgage on real estate
situa.t'W in North, Carolina.
Plaintiffs received the check on the morning of December lst, 1920,
credited the amount on J3a.lfour's note, and sent the check properly endorsed,
with a deposit slip, on same day, to Perry

~ing

Company at Perry, F.l.orida,

at which place Scl.id Eanl.ting Compa.ny was engaged in the banking business.
The Perry Ba:nkine:; Cornp:.J.V, on Deoember Jrd, received the check
for collection and credit, and, on the next day, sent to plaintiff a credit
cc.rd on which was printed, "Checks, drafts, etc. received for collection or
deposit, are taken at the risk of the endorser untU a.ct'U3l peyment is
received."

The Perry

ll:.'~Xlking

Cotr;pany, on the same dey', endorsed a:nd sent the

check to the .l..tlantic National .Bank of Jacksonville, Florida., and on Decem..
bar 6, 1920, said :Bcmk endorsed and sent it to the branch of Citizens and
Southern Ila.nl:. at Atlanta, Georgia.
The S:lid Dan::, December Sth, 1920, endorsed the

~;heck

with the

double endorsezrent st~ of itself and thJ Fe..ieral r~:,ane 3::'l.nk of Atlnnta,
and sent it to the Federal Reserve Bank of .Ricbn:ond for collection and

credit

the Federal Reserve 13a.nk: of Atlanta, Georgia, the Citizens and

Southern Dank of .Atl:mta being a member of the Reserve Dank of .Atlanta,

Georgia..
On December 10, 1920, the Federal Reserve Bank of RiChmond, sent

to the Bank of Lumber Dridge a letter containing the Balfour, and several
other checks drawn upon said bank, a;:;e:;regating $9,356.44, for collection and
remittance.

'Ihis letter, by due course of mail between Riclunond and Lumber

X-.349la

- 3-

Bridge, should have been received by the Dank of Lumber Bridge on Saturday,
December 11th, 1920..

'l'uesday, December 14th, the Cashier of the Lualber

Bridge :Sank stamped the Balfour check "Paid 11 and cba.rgad it to the account
of Balfour on which there was to his credit,

subject to chack, $9,2o4 .. 9Q.

On the same da.,v the L\.unber :Bridge Bank drew and mailed to the

Federal Reserve Bank of Il.icbmond, its check on the Atlant i.e Banking and.

Trust Company of Greensboro, North Cc.rolina, for the sum of $.9 ,204 .. 90, the
aggregate amount of the checks sent to said bank by the Federal Raserve
Bank of Richmond, in its letter of December lOth, less the amount of checks

on said Bank for which the drawers did not

h~ve

balances sufficient to pay.

The Federal Reserve Bank of llichlr.ond received s3.id letter, containing the check, Decel!lber 15th 7 1920,

on same

forwarded the

ch~ck

the drawee, .Atlantic .Bankin3 & Trust Company, of Greensboro ,Nortb Carolina,
for peyment.

On December 17, 1920, the Atlantic B.:-nki.ng & Trust Company,

wired the Federal Reserve Bank of Richrnond that t..lj_e !.umber Bridge Bank did
not have sufficient funds to its credit to pa:y saicl che..::k.

The defendant, Richmoni Bonk, on the a!'U'ne d.=>:y, .,,,irc,J. the Lumber
Bridge
.

Bank notice of the dishonor of its ch3ck.

cnl::.ir:r~ :~,,,_;n

s.u.id B3llk to

make the check good, .Wlich wire the Lumber :B.;ridg..3 Bank an:;wcreJ. promissing
-

to do

so.
Upon its failure to make the check good, the

d~fendant

Richmond

:Bank sent a reprasent3.tive to Imnber Bridge who reached there on the morning

of December 20th, 1920, being Monday, saw the Cashier of the Lumber Bridge

Bank and demanded payment of the Check on the Greensboro Bank.
stated that the Bank did not have sufficient funds
dishonored chack on tbe Greensbo.ro Bank."

to.~

The Cashier

the amount of its

That the Directors of the Ballk

I
-4'!"'
would meet that night and make an effort, by ell(iors.ing a note of the Bank
to the Bank of Lumberton. North Carolina, upon which the :Bank would be able
to secure funds with V\hich it could pay the amount of the dishonored check.
On To.esdq morning, December 21, 1920, the Cashier of the liumber

Bridge Bank informed the representatiire of defendant Richmond bank that the
Directors refused to endorse the note with which to secure funds and that he
could not Pal', or take up, the check.

Defendant, the Federal Reserve Bank of

Richmond, on the same dey, wired the Citizens and Southern B;.;l.nk of Atlanta,
that the :Ba.lfour-Ma.lloy check was unpaid and on same dey sent a letter to
said Bank, stating the facts in connection therewith, and. that the amount of
the check, Nine Thousand Dollars ($9 ,ooo·.oo), would be charged to the account
of sa.id Bank if the Check of the Lumber Bridge B31lk was not u1 timately paid·.
Malloy Brothers were promptly notified of the situation.
MBl:loy,

Upon betng notified

Balfour was informed by the Cashier of the Lumber Bridge

could not make· the check on Greensboro good.

b.Y

l3a.nk that he

Upon appropriate proceedings

under the North c'arolina. statutes, on December 24, 1920, the Lumber :Bridge Bank

•
wa.s closed and its assets placed in the custody of ·a

Receive:~-·

The defendant, Richmond :Bank, charged the amoun"t cf the check to
the Federal Reserve
and Southern Bank·

Bank of Atlanta, -which charged same to the Citizens
The several l3anks handling the check charged the amount

to their several correspondents until it was charled back to Malloy Brothers
by the Perry Banking Comp~.

At the date of the institution of this ~ction

no dividends had been paid by the
Bank of

Receive~.

The defendant Federal Reserve

RiChmond retained the cheCk on Greensboro.

upon the trial it was

stated that there was reasonable cause to believe that a dividend of 75~
would be paid.

X-3491a

- 5j

The Bank of Lumber Bridge was not a member of the Reserve :Bank
system. but had, prior to the date of this transaction, pursuant to the
Regulations of the Federal Bsserve Board (October, 1920, Regulation J)
entered into an arrangement with said bank for the collection of cheCks
drawn upon it, at par.

The Regulation (l) providfils that, "Each Federal

Reserve Bank will receiTe at par from its member banks and from non-member
clearing banks, in its district, checks drawn on all member and non-member
clearing banks, and on

~11

other non-member banks Which agree to remit at

par through the Federal Reserve Bank of this District.

The same privilege

is extended to (2) "Federal Reserve B~s to receive checks for colleotion
from other Federal Reserve .Banks and from· all member and non-member clearing banks regardldSS of their location ·• ·• ·• ·•

• • • • •

Che ck:s drawn

upon all member and non-member clearing banks of its district and upon
all other non-member banks of its district whose checks are collected at
par by the Federal Be serve

Dank."

This action was brou@:lt in the Superior Court of Cumberland
County, North Carolina., and upon petition of defendant :Bank, removed into
this Court.

Plaintiffs, followin6 the alleg:~tions covered

the fore-

. going facts, allege:
11 1'hat

as plaintiffs are informed and. believe, the defondant

Reserve :Bank of Richmond, negligently mailed said check to the said Bank
Bridge, and negligently accepted in p~nt thereof the latter's

of Lumber
draft •
~~

lank. in

Greensboro, North carolina, which check the '.drawee bank on

December l4, 1920, marked "Paid" and charged to the account of the drawer • and
subsequently cbarged to the defendant ,Napier H. G. Balfcur •"
•That Balfour had, at the time said check was charged against hi& ac•
count,to-wit:Dece~r

l4,1920,on deposit with said Bank of Lumber Bridge an

amount sufficient to pa:y said check of Nine Thousand Dollars ($9,000,00),"

- 6
j

"That the defendant Federal Reserve Bank of Richmond, carelessly

and negligently failed to notify plaintiffs that it had not received the
money for said check until December 21, 1920 • • • • • ·.and that, as plaintiffs
are informed and believe, had the defendant bank notified them of the non-payment of said check promptly, as it was its duty to do, they and the defendant
B3lfour could and would.have collected the said check."
"'lhat, as plaintiffs are informed and believe the defendant Fede.fal
Reserve

of RiChmond, actad as their agent, and

th~t

it was careless and

negl. igent in sending said check direct to the draNee b3r...k:; i.n accepting its
draft on the Greensboro Bank, in surrendering said check to the Bank of
Iiumber Bridge, North carolina, without having collected the money therefor;
and in failing to noti;fy plaintiffs until December 21, 1920, that it had not

collected said check.''
In the light of these

alleg~tions

several of the questions discussed

by counsel become immaterial.
Defendant's counsel insist that plaintiffs

c811

not m;:.t.intain the

action because there is no contractual relation, or J:r5vity of contract,
between plaintiffs and.defendant, the Federal Reserve 1Lmk :,'. J.dchmond. This
argwoont is based upon the theory that the check bec3me the p'roperty of the
Perry Banking Company upon its d?posit, or that said Eariking Company was not
authorized, by the deposit of the chJCk for collection, to

appoint sub-agents

for that purpose and tha.t such other banks as it transrnittad the check to,
became its agents and not the agants of the owgers of the check.
was,

upo~

This view

the facts in that case, adoptad by the Supreme Court of ]'lorida

in Brown vs. Peoples Bank, 59 Florida, 163; 5<2 So. 719; 52 L.R.A.N .. S.

6os.

It is not necessary to do more than refer to the very interesting and learned

X- 349la

- 7discussion by Chief Justice ~fuitfield in that case because he ~tates, at the
.conclusion of his opinion, that since the transaction out of which that

case arose, but before the decision, the legislature of F.l.orida enactdd a
statute by Which it is
tiWhen

pro~ided

that:

a check is de:posi ted in a bank for ccllection, it shall be

considered due diligence on the :part of the batik in the collection of any
cheCk, etc. so deposited to

fo~~ard,

en route 1 the same, without delay, in

the usual commercial way in use according to the regQtar course of business
of banks, and that the m:er,etc.
p~nt

shall be liable to the bankuntila.ctua.l

is received."
For the purpose of

Perry Banking Company to employ

discussion the
sub-~gents

st~tute

authorized the

in making collection of the check,

with the result that such sub-c:t,gents became the agents of the ovvner of
the- check.

This statute crystallizes into positive law of the State, the

rule which bas been adopted in other jurisdictions as the proper method
to be pursued and the extent of liability of collecting banks in such cases·.
This principle has been clearly stuted by Judge l3ynum, upo11 the authority

of .Fabens vs. Mercantile Bank,

23 Pick. 330, Bank vs·. :Ban}:, 75

ll.

c. 534,

that:
"It is well settled that, when a note is deposited with a bank for
t

coilection, which is payable at another place, the whole duty o£ the bank
so receiving the note in the first instance. is seasonably to trro1smit the
same to a suitable bank or other agent a.t the place of

p~ment·.

And

as a part

of the same doctrine, it is well settled that if the acceptor of a bill
or promissor of a note has his residence in another place, i t shall be presumed to have been intended .:md un.ierstood between the depositor for collrc-

tion and the bank that it was to be transmitted to the place of residence of

the promissor'r.

The rule is stated, with citation of authorities pro and con,

in 2 Michie on Banks and Banking, Section 162(2).

This rule is usually re-

ferred to as the "Massachusetts Rule" •. In Exchange National lbnk
Third National l3ank, 112 U.

vs.

276, Justice Blatchford said:

""
"The authorities which suppqrt
this rule rest · on the proposition

that, since What is to be done by a batik employed to collect a draft,
at another place, can not be done by

~able

of its ordinary officers or servants,

'but must be entrusted to a subagent, the risk of the

negle~t

of the sub-

agent is upon the party employing the bank, on the view that he has implied
ap.thority to employ the sub-agent, 11 citing Dorchester Bank vs. New England
Bank, l Cush. (55 Mass.); Milling co·•.~e.Kuester, 158 Ill• and many other
decisions.
The result of this rule is that the sub ...agent selected by the bank
undertaking to collect the check, becomes the agent of the owner of
cheCk, thus establiShing the contractual relation between the

o~r

and such

sub-agent and entitling the owner to sue either of the sub-agents for breach
of duty.
225; 111

Bank vs. Floyd, 142 N.

d•

163;

~1inchester

vs. Milling Co., 120 Tenn.

24o.

It is in recognition of this
defendant Federal Reserve Bank of

p~inciple

r~dhmond,

that plaintiffs sue the

alleging the relation of principal

ana, agent and breach of duty, in that the defendant Federal Reserve :Bank
negligently sent the Balfour check for collection to the drawee Barik of
Lumber Bridge, thus eliminating several questions discussed

counsel and

narrOWing the controversy to two questions:
1st·. Was the defendant Richmond Bunk negligent in sending the check
to the drawee batik for collection?
2nd.

~as

the defendant guilty of negligence in accepting the check

X-349la

-9-

948

of the Bank of Lumber :Bridge on the Greensboro :Sank in pccyrnent of the
:Balfour check?
From this view point no q'\l,estion raspecting the manner or time
in which the Perry :&nking Company and its sub-agents, forwarded the check
to the several banks and presented it to the draNee for payment.

It will

tend to simplification of the issues raised by the pleadings and the facts,
in respect to which there is no controversy, to ascertain the extent of the
liability of defendant bank, by regarding the relations between the parties
to this action, as principal and agent, as alleged by plaintiffs·.
Approached from this view point, the first question for deeision
is, mather the defendant Federal Reserve Bank was negligent in the discharge of 1 ts duty by sending the check to the drawee :Bank of Lumber :Bridge·.
This question has been the subject of mch discussion, resulting in differing
conclusions·.

The general principle is stated in Michie on :Sanks and Banking,

2 Vol. Section 162 (i b) with citation of
of North Carolina in :Sank: vs .. Floyd, 142 N.

authorities. · The SU~eme Court

c. 163,

held that i t wa.s negligent

in a bank., having a draft for collection to send it directly to the dra:neej that
the fact that the drawee was the only bank at the place of payment did not
affect the principle, and that no Cllstom to the contrary would excuse the sending bank.

The writer of this opinion, writing for the Court, in that case,

gave the subject careful investigation and cited the controlling authorities·.
The legislature of North Carolina, however, at its Session of 1919, Public

Laws, Ch. 11. now Section 233, Consolidated Statutes, changed the law in
that respect, by enacting a

st~tute

providing that "Any banking corporation

or banking or trnst company, doing a fiduciary business in this State receiving for collection or deposit any check • ·•

•

• • • • •

drawn upon,

..
X-349la

919

- 10-

or p83'able at, any other bank 1 locat.ed in another city or town, within or
without this State,

forward suCh instrument for collection directly to

the bank on which it is drawn or at which i t is made payable, and such
method of forwardi..D& direct to the payer ·shall be deemed due diligence;
and the failure of such payer bank, because of its insolvency or other
default, to account for the

proceed~

thereof, shall not render the forward-

ing balik liable therefor, provided such forwarding bank shall have used
due diligence
instrument.

other respects in connection with the collection of such

The provisions of this .Act shall not aPP,lY where there is

more than one bank in a town".
Plaintiffs insist that the defendant Federal Beserve Bank of
Richmond, is not within the terms of"this statute, and can claim no imnunity
under its provisions, because it is not a

b~ns

corporation or banking

or trust company "doing a fiduciary business in this

Stata·."

I incline to an agreement with plaintiffs• contention that the

statute was intended, and its terms apply only to banks organized and doing
businass in the sense of having its principal office in this State. It
is a well settled principle adopted in the construction of statutes,

that their provision$ in respect to persons coming within their scope,
are confined to citizens or corporations resident in the State, unless
otherwise clearly expressed.
This question, however, becomes immaterial in this
because

R~gulation

J(8) made by

Federal

c~se,

Reserve Board provides

that:
8

ln handling items for member and non-member clearing banks,

950
X-3~9la.

-11 ..
a Fedaral Reserve J3aD1t will act a.a agent onl7 •

!he

:SO~

wUl ·

require tbat each mEJI'Jiber and non-member clearing bade autho:til&

ita Federal. Ilea•"e Bank to send cbecka for collection to banks
on which checks are dx'awn and except tor Deali&ence, such Federal
Resel'Ye l3an1t will assume no 1 iabUit:y. •

fbis reSP!ation, to the extent df its permissive pro•
via ions • lillst be taken to have been known to the Citizens and

Southam :Bazl1t at Atlanta and the i'aderal Reserve &nk at Atlanta.
The cbeCk was se.nt b,y them and received for collection b7 the defezldant IieBerYe Bank of Richmond, subject to the regulation wbicb
permitted the Ricbmoad .Bank to send the
check to the ciraweo· • l3cmk
.
.
of Illmber !ridge.

at .A.tlaDta, Decerrber

Dlia was dcine prouptlf • the check wu mailed
~th,

mailed b)" the defendant J'ederal lleserve

Bank, December lOth, 1920, and received by the Wmber Bridge
Bank, December 11th, 1926, being. Saturdai•

1be Imlber :Bridge Bank was the only :Bnnk in the to·m
of I,ud,er :Bridge·.

There is no sugsestion that, at that time,

it was not in good standing a.Dd creciit, or that defendant

Federal

Reserre l3atik of RichmoDd bad a:tr¥ cause to' questiOn

its solvency or mannfr at conducting. its business·,

It had made

"a par collection'' agreement with defendant Bank.
I am led to the conclusion that the defendant Federal

Beserve Bank ot RichnDld. was not negligent in sending the check

951
·x-349la.
to the Lumber

Bridg~

Bank for collection, and that it acted

in that respect pro+y and in accordance with the terms upon

which it accepted and undertooa to act as agent in oollecting
the check.
We are thus brought to the last and determinative
a.vement of negligence:

the acceptance by the defelldant

Federal :ReserYe Bank of Richmond of' the Check of the Lumber
:Bridge :Bank on the GreenaboJ'O Bank.

Preliminary to the
J

ctecia.ion of this question, it becoues material to

ascert~in

what effect the conduct of the L'Umber :Bridge :Sank had upon
the

a~a.tua

of the j3alfour check and his liability thereon

as drawer.
In ~ank vs.
by cha.raing the check

Floyd, s;g.pra, it was conceded that

tf? the- account of the drawer,

its depositor,

who had to his credit a balance ~fficient to pay it and can-celling it, by the nmn :Bank, occupying in that case,

J2!.2

vice the poai tion of the Lumber :Bridge :Bank, the check ·vas
paid and the drawer released.

,..

-13-

...., ,·-,

X-349la
184

In Bank vs. South Weymouth Bank,

Mass.

49,

the note of a

customer of the defendant bank, payable at that bank, and due, was
sent by the holder, endorsed "for collection and remittance" to the
defendant bank.

The makers of the note had to their credit and subject

to cheek in the defendant bank, an a.rrount sufficient to pay the note.
Describing the conduct of the oasnier of the defendant bank, Hammond,

J. says:
"He intends as agant of the makers to pay this note to his own
bank6 the indorsee and holder, and as such entitled to receive payment
and discharge the

note~

He intends as cashier of his own bank to

cancel and discharge the note when paid, and then as agent of the
makers to hold the paid note for them.

After the note has been paid

he intende to send the proceeds to the plaintiff.
he begins.

The note is before him.

With these intentions

He first draws on a bank in Boston

his check as Cashier of the defendant, peyable to the order of the plain...
tiff, for the amount of the procedds of the note.
that this is not the check of the makers, nor is it

It is to be observed
!TJCLd.~' by

the Cashier

as their agent, but in his capacity a.s agent of the defendant, and in
the performance, not of a duty owed by the makers, but of a duty owed
by the defendant to the plaint iff.

It is not the check by which the

note was paid, because nme was needed, but was the check by which the
proceeds were to be transmitted by the defendant to the plaintiff.
He thtm makes a memorandum of this check upon a block, stamps upon the
face of the note, •'Paid Oct. - 1901 11 and perforates it in three places
and puts the note, thus stamped and mutilated, in the file with his
checks so that a proper record of the transaction ma.y be entered at the

end of the day upon the permanent books.

The Cashier, at this time wa.s

called to the 'Phone and notified that the makers of the note have made

an assignment for the benefit of creditors and is requested by the
assignee to hold the account.

He withheld the check which he bad

dravvn and undertook to rstra.ce his steps."
In an action by the :Bank7 owning and sending the note to the
defendant Bank, for the proceeds of

th~

note, "in asswxpsit for money

ha.d and received"• the Court held that "prior to the call to the telephone, the note had been paid by the makers to the defendant and that
the only remaining duty resting upon the defendant wa.s to ran1t the
proceeds to the plaintiff • •
a check • • •

...

The note was itself eqo.ivalent to

When the Bank, through 1 ts cashier 1 1'4'ote upon the face

of the note, in its own name, as the incorsee and holder, that it was
paid, and perforated i t a.nd put it in .the files as a thing paid, no,L11ng
more wa.a to be done a.s to the

p~ent.

By thoee acts there had been

set apart and appropriated, to the payment of the note, so unch of the
deposit then atanding to the credit of the tnakers as was sufficient fox-

thAt purpose, just as though the makers had presented
check in

p~t of

a note due it from them."

the bank

With appropriate

t~iJr

cbang~s

and arrangement of the parties, the case is. in all essential respects,

on aall fours" with the instant case and the conclusion irresistable the
same to which the Ma.ssaclnsetts Court came.
The same conclusion was reached by the Suprement Court of Tennessee

in Milling Con:pany vs. :Slack, 120 Tenn. 225, in which it was held that:

•

954

•

X-J49la

"When a check given by a debtor on a certain bank in pa;yment

ot his debt was bT another bank acting

aa collector

tor the creditor

and payee forwarded tor collection or payment to the drawee bank, in
which there wa.a

~re

than

money on deposit to the credit of

the drawer-.a.t the time the check arrived there to pay the same,
whereupon the drawee bank drew its draft upon another bank for the
amount of the check and £orwarded the same to the collecting bank and
charged, cancelled and surrendered the check to the drawer. he was
thereby .discharged from liability on the debt".

In that caae it was

held that the owner of the original check, by receiving the worthless
check, ratified its acceptance by the collecting
Co~ssion vs.

Bank, 137

Cor;poration

N. C. 697•

is well settled by these and other authorities, as well as

upon principle

that when the Cashier of the Lumber Bridge Bank

stamped the dleck "Paid", charged it to his account and delivered it
to Balfour, who had to his credit, subject to his check, an amount.
more than sufficient to pay his check, that the' check was :paid and his
liability aa ~r or drawer discharged.

1'he Lumber Bridge Bank on December 14th, 1920 1 had credit
balances a.s follows:

Atlantic Banlcing & Trust Company, ·Greensboro,

$6,225,01; American National Bank, $8,157 .00; Merchants National Bank,
$3,000.00; the National Bank, $2,549.96; Caab, $4,574.69, Merchants
National Bank, Raleigh, $379.75, aggregating $16,olO.gs.
The dealings between the Wmber Bridge Bank and the Atlantic
l!anldng & Trust CoJII)any between December 14th and December 18th, did
not materially change the state of i t.s accounts, nor does it appear
t~at the available a.saeta of the Lumber Bridge Bank were reduced prior

. :.. .,.·

• •

-16December 24th, 1920.
The question is presented - what, upon this state of the case,
was the measure or standard of duty owed by the defentant Federal
Reserve Bank of Richmond to the plaintiffs, owners of the cheCk, in
respect to the receipt from the Lumber Bridge Bank of its check on
the Greensboro Bank.
The authorities

appe~

to be practically uniform in holding that,

in the absence of any instruction or permission from the owner of the
check, or any custom brought to the notice of such owner to the contrary
the bank h.a.d no authority to accept or receive in payment of the check
entrusted to it for collection anything other than money.
Among many other decided cases the following are cited as sustaining this proposition.
In Ward vs. Smith, 74 U. S. 447, Justice Field says:
"When the instrument is lodged with the bank for collection, the
bank becomes the agent of the payee or obligee to receive payment.
The agency extends no further and wi t:1out special authority an agent
can only. receive payment of the debt due his principal ::.n the legal
currency of the country or in bills which pass as money at their par
value, by the common consent of the community."
vs. Brightwell, 146 MO. 35G; 71 Am. St. Rep.

6os.

Midland National Bank
In Fifth National

Bank vs. Ashworth, 123 Penn. 212; 2 L. R. A. 402, Paxson, J. says:
11

It is safe to say, as a general rule, that when a bank receives

a check from one of its depositors for collection, it must return him the
check or the money.

It is also equally clear that if the collecting bank

surrenders the check to the bank upon which it is drawn and accepts the

• •
-17-

X-349la

cashier's check or other obligation, in lieu thereof, its liability
to its depositor is fixed - as much so as if it had received the cash.
It has no right, unless it is specially authorized to do so, to accept
anything in lieu of money.n
In that case,

gave to A. his check on the Penn Bank.

On the

same day A. endorsed the check to the Fifth National Bank, with whom
he was a depositor, which Sdnt the check to the Penn Bank and received
in return therefor a cashier 1 s check, delivering to A. his check.

The

cashier's check was protested for non-peyment and the Penn Bank went
into liquidation.
The Judge Said:
"The plaintiff (Ashworth) has neither his check nor hiS money.
Watson's account with the Pt:mn :Bank was good when the account was
charged up to him.

I am unable to

se~,

therefore, that the plaintiff

has any remedy against ei thsr Watson or the Penn Bank. n
In National Bank vs. Am. Exch. Bank, 155 Mo. 320; 74 Am.St. Rep.

527, the Court quotes with approval 2 Daniel on N8gotiable Instruments
(4th Ed.) Section

1625.

In the United States it is quite certain that a b:::.nker, or other
agent • holding a bill or note for collec.tion, would act a.t his peril
in delivering up a receipt or a check for the amount; and that if the
debtor did not

the amount in ffiOney, and the drawer, or endorser,

were not duly notified, they would· be discharged and t:1e loss would fall
on the collecting agent

....

~~is

seems to us the correct doctrine,

for the agent exceeds authority in taking the check, and, therefore, acts
at his peril,

And while it may be, and as a general rule undoubtedly is,

.. - .

• •
·--18-

X-349la
...

'·

the practice of creditors, in mercantile comnunities, to take checks in
the collection of debts, and frequently to surrender other instruments
on receivtng them, such a practice on the part of a principal, falls
far short of a usage which
Bank vs, Cumnings,

~ould

permit the agent to do likewise. •

89 Tenn .. 6o9; 24

Am. St; Rep. 618.

There is no

evidence of any custom existing eithtir in Virginia or North Carolina.,
by which collecting banks are authorized to accept from their agents
or sub-agents,

from the drawee banks in settlement of collections

sent them, anything

oth~r

Plaintiff J. H. Malloy

than money in settlement of such collections.

t~stified

that he was engaged in the lumber

business and knew "very little al:out the workings of a bank- did not
instruct the Perry Banking Co_. - just sent the check down there for
credit during the course of business."
I am of the opinion that the defendant Federal Reserve Ja.nk of

Richmond wa.s not authorized to accept in payment of the proceeds of
the check from the Lulnber Bridge Bank, its c:tecl:: or draft on the
Greensboro Bank, and that, in doing it, was negligent,

probably to

state the sitQation more clearly, it exceeded its authority and is
liable to plaintiffs for the amount of the :Balfour check, unless it

•
may reduce the amount by showing that on the date of its acceptance,

December 15, 1920, it was inpossib1e for the Inmber .Bridge Bank to PLW
the amount in money or ita equivalent.
The Lumber :Bridge Bank had, on December 14th. $16,810.00 and, so
far as appear•, on December

24, 1920, when it went into the hands of a

Receiver, cash $4,574.00, and which, with balances in other banks, ag-

....

. , r-

-19gregated about $11,000.00.

It held also bills and notes to an

amount not statod in the avidence.

It waa not until the last named da1 that a Receiver was
appointed.

During this time, the

plaintit'~s

were without an:! remedy

against Balfour, whose check wa.s paid on December 14th, or the
IAw'ber :Bridge :Bank, whos13 check was held, a.nd is now held, for the

proceeds of the Balfour check by defendant

I am of the opinion that, upon the undisputed facts, the
defendant Reserve Ba.nlt of Richmond is liable to the plaintiffs

the amount of

t~e

tor

Balfour check.

Judgment will be signed that defen4ant Balfour is not liable
aa ma.Ur or dra.wtir of the check, and that plaintiffs recover of

defendant Federal Reserve Bank of Richmond.

Nine IJ.f.aousand Dollars,

with interest from December 14, 1920, and the cost te be taxed b7
the Clerk.
Raleigh, North Carolina,

United States District Judge.

FEDERAL RESERVE BOARD
WASHINGTON

SUBJECT:

August 1, 1922.
X-3492

Franchise Taxes, Surplus funds, and depreciation charges·

Dear Sir:
·\11th reference to tb..; ~oard's letter X-34&2 of June .29, 1922,
enclosin8 a copy of Ccm~se1's opinion dated June 5, 1~22, rcg3Xdtng the
prope1• m..,;t~.1o.l of buil.iing up sury..lu::. :funds by Federal Reserve li~:.s and
of d·Jt...,rminin1·: t:1~ :.ur.cunt of franc~liae tcx.:Js .Pa.va.ble to t;l..: U. S,
GovurllUlCnt, y-Ou art~ advised that in accordance thorowi th., tbOII.lc.t bur~
w~icb tr:u.taf-:rr;..~ .::.1r.cunts· to· ~ul;er->urplus account on D~ci!~tber )1, l;1C:C
s~oulJ. rvcalcula.te the runount of franchise taxes pcy:.iblt. to the Gov Jrnment and the :::wx>unt .transft3r~hle to surplus account.
In vl.ew or ·tbe ru1·1ng that tl1e super surplus. account is a
bookkeeping entry only and that the law contenplates only ontt su'l'plus
fund, all charges heretofore made against · supersurplus account to
cover d3preciation on bank pr~mis~s or for r~scrvas for undetermined
liabilitios, should.be reversed. No charges against the normal surplus
"'· or supersurplus will be authorized in the future to cover dt:tpreciation
on bank pr<:lmises or for t~e; purpose of setting up special rttsarves, as
such charges if mads might affect a.lJX)unts subsequE.:ntly peyRbltt to the:}
Government as franchise tax~s.
·
For your information there is enclosed hurewi th a stat~ent
which shows the necessary adjustmants to be JDE¥ie by ~ch Federal Reserve
Bank in order tba.t the correct amount may be paid to the Government as
a fra.nchisd tax and proper crddit made 'to surplus account. It will be
4!-ppreciated if you will kindly have. tn~ figures checked so far as they
relator$ to your :Bank, and advise t:1e Board at your early convenience a.s
to wbetho$r or not you find thdm corrc~ct.
The amounts p~ablo to the
Government on account of franchise taxe' due for forn:er years should be
cilarged to surplus account on DacembQr 31, 1922 before closing of books,
and paid to the U. S. Govel'nnlent in accordance with instructions to be
issued at a later date.

In view of the fact tbat no do:1praciat1on charges will be nede
against suporsurplus, tbe Board will review before the end of this year
the policy which has been pursued heretofore wi~h reference to depreciation cilarges on bank premises.
It is accordingly di:}Sir~d tha.t your
requc.sts for authority to charge off d.;.preciation on bank premises, or
to set up ~ reserve for d~reciation, be accompanied with a statement
in a form similar to that indicated below, showing separately for the
head office and e~ branch, the cost, estimated market value, and
book value (less reserves) of land owned, and the cost to date, estimated replacement .cost, and book value (less reserves) of new buildings,
either coupleted or in course of constructioll, or of remodeled buildings.

,
X-3492

-2LAND

Cost
Estimated market value
Book value (net)

------

BUILDINGS INCLUDING
VAULTS
$
_
_ __
$_ _ __
TOTAL

BANKJ:NG BOUSE
Cost to date
Estimated replacement cost
Book value (net)

FIXED MACHINERY

.AND EQUIPMENT
$_ _ _ __

In passing upon requests to set up depreciation reserves or to
charge off depreciation allowances, the Board will in general parmit a
charge against current net earnings of not exceeding 2 per cent of the
estimated replacement cost of bank buildings, includit~g vaults but
excluding fixed machinery and equipment.
In case, however, the estimated replacement cost is considerably below the book value, the Board
will consider requests from Federal Reserve Banks for permission to
write off a depreciation charge in excess of 2 per cent.
The esti.m.ated rr::placement cost, less residual value, of fixed
machinery and equipment, such as boilers, engines, dynamos, motors,
power puaps, elevators, heating, plumbing, lighting and v~ntilating
systems, pneumatic tubes, refrigeration plants, automatic fire sprinkler
equipment, and vacuum cleaners, should be determined and a reserve set
aside uach year out of current net earnings to cover replacements.
Annual additions to this reserve should be based on the estimated life
of t:.:0 machinery and equipment, with a view to the ultimate r(fplacement
of the machinery and equipment, but s:hall in no case eJCCeed 10 per cent
of t2~ cost thereof.
No charges against current net earnings will be a.ut;Q.orized by tb•
Federal Reserve Board to cover de,preciation on land where the ~stimated
market value o! the land is eq.ua.l to or in oxceas of it• net boo~ val1J.e,
The estimate of the market value of land and of the replacement
cost of· buildings either coupleted or in course of construction and o~
fixed machinery and equipment, should be obtained from the best available authorities and a copy of the estimates thus obtained enclosed
with your request for authority to charge current net earnings with
depreciation on bank premises. The estimated replacement cost of
buildings incl~ding vaults, but excluding fixed machinery and equipment,
may be arrived at by determining the mean of two amounts, namely; (l)
the total actnal cost of canstruetion, and (2) the estimated cost of
construction based on the lowest prices that have existed dUring the
last fifteen years.

-3iVhere properties have been purchased with the intention of
razing existing buildings and of erecting new banking quarters the
Board will consider requests for permission to deduct from current
net earnings an amount equal to the difference between the cost of
the property and the market value of the building site exclusive of
improvements.
Advance approval of trB Federal Reserve Board shall be obtained
for all depreciation and oth.:;r c!1arges against currant net earnings
whether in connection with bank premises as outlined above or for
other purposes.
Very truly yours,

G o v e r n o r.

LETTER TO .ALLCHAIRMEN.

ADJUSTMENTS TO BE MADE IN SURPLUS ACCOUNTS AT END OF 1922 AND ADDITIONAL AMOUNTS
PAY.A.J3LE TO UNITED STATES GOVERNMENT AS FRANCHISE TAXES FOR .J.WRMER YEARS.

Federal
Reserve
:Bank

Amounts previously charged to supersurplus to be
credited to surplus fund and debited to account
origir::e.lly~credited as follows .Bank
Depreciation Reserve for
Total
premises
undetermined
reserve on
account
bank _premises liabilities

Boston

New York

1,000,000

Philade1 phia
Cleveland

Richmond

125,000

$ 16,235,807.79

1,604,549·37

59,592,577.77

36,366.25

17,908, 779· 79
22,634,279.19

225,276.50 Z25,276.50

2,030,000

Total
surplus fund
(revised) on
Dec, 31, 1922
before closing
of books

247,349.91

125,000

Atlanta
Chicago

.Amount to be
charged to surplus
fund and paid to
u. s. Govermn~~Jnt as
franchise tax for
former years

2,030,000

20,459.01

11,234,665.60

213,628.77

8.899,942.22

710,189·99

30,345,275.43

St. Louis

9,3B8,223.25

Minneapolis

52,423.36

7,416,054.44

Kansas City

208,169·99

9,437,561.82

Dallas
San Fra.ncisco
TOTAL

7 J 394, C/97 .}0
250,000

250,000

$ 3,630,276.50 $350,2]6.50 $ 2,280,000

$ 1,000,000

306,925.46

15,142,126.72

$ 3,4oo,o62.ll

$215,629.391.32.

X-3493
COMPARISON OF NUMBER AND SALARIES OF EMPU>YEES IN THE FEDERAL RESERVE AGENT'S DEPARTMENT WITH THOSE
IN THE OPERATING DEPARTMENT OF EACH FEDERAL RESERVE BANK AS OF JUNE 30, 1921, and JUNE 30, 1922.
Name of Bank

Federal Reserve
Agent's DeBartment
No.of
employees
'21 '22

Boston
New York

Philadelphia
Cleveland
Richmond

31 33
23 22
11

Chicago

71 83

Minneapolis

10 11

201,38o l74,s6o 2969

2595

Sol

77<3

12 12

71,500 105,406
71,272

76,776 1017

911

6o,l40

49,900

638

726

23,520

483

436

137,240 156,030 1666

1521

I
I

20,820

23,76o

25,520

778

Salaries

1922
717

1921
687

561

Atlanta

S.t. Louis

1922

33 1$ 57,000 $ 66,030

106 86
36

Number of
employees

Salaries
1921

0Eerating DeEartment

666

1921

1922

Proportion
Average salary paid
of salaries
to each employee
in Fed.Res.
Agent's Dept.
Operating
Fed. Res.
to total
Dept· ..
Agent's
salaries
Dept.
1921 1922 1q21 1022 1'321 1922

I .

$ 950,160 $ 1,010,520 5.66% ,"6 .1J% $1965 $2002 $1383 $1409

I
4,292,723
I

I
I

3,832,963 4.48

4.36

1900 2033

1446

1477

1,015,350 6.07

g.4o

1986 1883 1254

1305

1,543,227

l,466,o6o 4.41

4,97

2299 2326 1517

1609

819,220

868,720 6.84

5'·43

2615 2268

1197

1,104,910

I
I

I .

1191

I
1960 1234
11

596.590

548,140 3·37

4.11

1892

2,288,580

2,185,610 5-66

6.66

1932 1879 1374

1437

890,630 2.31

2-7£5

2376

2320 1291

I
1863
I

1337

I
1,004,675
I
579,336
I
1,232,602
I
856,270
I

1257

570,568 3·07

3·11

1497

1212

1306

1,234,284 2·37

2.66

1996 1687 1414

1473

822,357 6.38

5·92

2430 2587 14o8

1440

1,855.34o

1,700,480 13.82

4.49

2106 2501

1459

1543

SYSTEM
403 420 823,032 865.993 12,399 11,298 17,123,633
{Officers not included)

16,145,682 4.59

5·09

2042

2062 1381

1429

Kansas City

15 20

~11as

24 20

San Francisco

35 32

I
I
I

17,960

22,360

478

437

29,940

33.742

872

838

58.320

51,759

6os

571

73,700

80,040 1272

1102

I
I

FEDERAL RESERVE BOARD
WASHINGTON

August 2, 1922
CONFIDENTIAL
SUBJECT:

Spacial Rates on Commodity Paper •

Dear Sir:

It has been proposed that the Board revive tha special
rates on commodity pa~J?Br 'illhich were first esto.blished during the
year 1915.
Before taking action, however, the Board is desirous
of obtaining the opinion of the officers anti executive committees
of all Federal Reserve Bonks as to the advisability of reestablishing special rates on commodity paper. There is enclosed herewith
a tentative draft of a lettar which it is proposed to send to all
Federal Reserve Banks in case the Board should decide to authorize
special rates on commodity paper; and your comments, criticisms
and suggestions are invited.
You are requested also to advise
the Board whether your bank would feel disposed to establish a
special rate on this class of paper and, if it should, whether in
your opinion your member banks generally would be inclined to avail
themselves of it.
Very truly yours,

Go v e r n o r.
{Enclosure)
TO ALL FEDERAL RESERVE AGENTS
COPIES TO GOVERNORS.

•

CONFIDENTIAL TENTATIVE DRAFT.

SUBJECT: Revival of Special Rates on Commodity Papsr •

•
Dear Sir:
Prior to 1913 there were in effect at some of the Federal
Reserve Banks special rates on so-called commodity paper.
VII of

Reg~lation

Section

A, Series of 1917, and earlier regulations, de-

finei commodity paper and prescribed

t~e

conditions under which such

paper would be eligible for rediscount by Federal Reserve Banks.
All such special rates

w~re

suspended during November and December

1917 and the regulations issued since ti1at time have not contained
any special provisions regarding commodity paper.
The Board

r~s

considered the matter and

decided that

r~s

it will, at the request of any Federal R6serve Bank 1 approve the
establishment by the applying bank of a special rat:.: of not less than
3~%

on commodity paper on n1icn

th~

rate of

inter~st

or discount -

including comnission - charged the borrower does ::1ot exceEJd,.

per

annum.
The Board's definition of corr.modity

pap~r,

and the conditions

of eligibility applicable to such paper are as follows:
D0finition.- Commodity paper is dclfined as a note,
draft 1 bill of exchm1gs, or trade acc0ptancJ accompanied
and secured by shipping doc<unents or by a warehouse, terminal, or oth.;r similar rcc:Jipt covering approved and
readily marketabla, nonp8risnabl3 staples proparly insured.

. "'
'

-2Eligibili ty.-To be .;ligibla for rediscount at the
special rat~s, authorizad to b0 establis~ed for commodity paper, sue~ a note, draft, bill of exchange, or
trade acceptance must also comply with the respective
sections of this Regulation A, Series of 1922, applicable to it, must co-nform to t}le roq,uirements of the
Federal Reserve Bank relating to shipping documants,
receipts, insur&1.C0 1 etc., and must be a note, draft,
bill of excha:<$c, or trade acceptanc0 on whic~'l the
rate of interest or discount - including comnission charged the borrower, does not exce0d 6 per cent per
annum. Paper vJ::ich is issued or drawn, or the proceeds of which ~~va besn or ar0 to be used, for the
speculative holding of commodities, as distinguished
from the carrying of commoditi~s pending the orderly
marketing thereof, is not· e ligibla for rediscount.•
~~e

foregoing dafinition and conditions of eligibility

ara substAntially

t.:.ta sruns .::t.s

Regulation A, Series of lS17.
to this letter it should

t:1oso prescribad in the Board's former
In approving any special rate pursuant

b~ ~~derstood

reserves the rigat, whicn it alwnys

that the Federal Reserve Board

res~rved

when it approved similar

rates in the past, to suspend auc::1 rat:::: •V.1enever such a course seems
desirable.

Vory truly yours,

G o v e r n o r.

FEDERAL RESERVE BOARD
WASHINGTON

X-3495
August 2, 1922.

Memorandum for the Staff of the Federal Reserve Board.
The Federal Reserve :Bank of Chicago is now occupying
its new building, and mail for that bank, or officers thereof,
should be addrassed as follows:
First Class Mail:

Post Office :Box 834, Chicago •

.All other classes of mail, including mail in sacks:
160 West Jackson Boulavard, Chicago~

John De LaMa. ter ,

Chief Cloark.

FEDERAL RESERVE BOARD
WASHINGTON

August 2, 1922.

SUBJECT:

Victory Notes Payable December 15t 1922.

·Dear Sir:
The Under Secr2k.ry of the Treasury has requested
the Faderal Reserva Board to secure from tho Federal Reserve
Baru;:.s the following information:
1.
How many 4-3/4 per ~ent Victory notes are now held
by the Federal Rc;serve Banks for their O'iffi account, and
2.
How many of these notes will become payable on
December 15, 1922, pursuant to the call for redemption issued
under date of July 26, 1922.

The Board. woulci requast thc:,t you furnish it 'Ni th
this information ~t your early convenience, in order that reply
may be rnuae to the letter of the Under Secretary.
Very truly you:· s ,

G o v e r n o r.

GOVEF.NORS OF ILL F. R.

COPIES TO CHAIRMEN.

BANI~S

...

- 1 '

FEDERAL RESERVE BOARD
WASHINGTON

X-34-98
August 7, 1922.

SUBJECT:

Reduction in Hate on Spaci:ll Certificate's.

Daar Sir:
There is enclosed her.;r;vith for your inform:::ction copy
of a letter received from the Under Secretary of the Treasury
which is self-expl,anatory.

You are requested to advise the .

Board of your attitude toward the proposed reduction from 3
to 2~ per cvnt in the interest rate on special certific~t~s
of indebtedness issued by the

Tre~sury

from time to

the Federal Reserve Banks •
. Very truly yours,

G o v e r n o r.

(Enclosure)

TO TitS GOVEBNOES OF l,LL F.
COPIES TO THE CELU1~'IE.I."r •

n. B!JCS

tL~e

... ·

COPY

X.-3498a.

THE UNDERSECRETJJtY OF THE

TR:~.ASURY

WASHINGTON.

August 5, 1922.

dear Governor:
I received your letter of August l, 1922, with resp-ect

to the proposed reduction in the interest rQte on special certificates of indebtedness issued by the Treasury from time to time
to the Federal Reserve

B~nks.

I note from ycur letter

the

th~t

lowest rate which no-N prevails :1t o.ny of the Federal Reserve Banks
is a minimum of

per cent on open market purchases of prime

bankers' acceptances, o.na

~cept

your suggestion

th~t

in these

_circumstances it Nould be more logical to consider o. reduction in
the r:tte on specb.l certific:ttes to 2~ :per cent, rather than to

2 per cent.

I assume tho.t the Federcl Reserve Bo:trd will take the

matter up '>Vi th the Federal :Fi.aserve Banl-:s on this basis, ::md see
no good reason why the Federal Reserve Batiks should obJect to suCh
a reduction, since a one or two day specLl certific2te of the
Government ought to be entitled to .:tt

least as

~:;ood

prime banker's acceptance.
Very truly yours,
(S~gned)

S. P. Gilbert, Jr.
Under Secretary.

Hon. '?. P.. G. Harding,
Governor, Federal Reserv,e BoJid.

a rlte

'-l.S

e1.

X-Z4~9

TREASURY DEPABTMENT

t!:'

Office of the Secretary.
WASHINGTON

August 7, 1922.
The Governor
Federal Reserve Board.
Sir:
You are advised that the Department has referred to the General Accounting
Office, Treasury Department Division, for settlement, the account of the Bureau
of Engraving and Printing for preparing Federal Reserve Notes during the period
July 1 to July 31, 1922·, amounting to $75,559 .. 92, as follows:
Federal Reserve Notes 1 1'{14
Total
$10
$20
§t100
~50
~
Boston •••.••••
2,000
$2,000
New York •••••• 118,000
157,000 110,000 17,000
3,000
405,000
Philadelphia ••
13,000
41,000
2,000
56,000
Cleveland ••••• 100,000
22,000
210,000
70,000
18,000
Richmond ••••••
75,000
9,000
20,000
104,000
Atlanta. ••••.••
129,000
90,000
ZO,OOO
7,000
1,000
1,000
Chicago •••.•••
74,000
74,000
St. Louis •••••
41,000
16,000
8,000
66,000
1,000
Minneapolis •••
35,000
15,000
50,000
Kansas City •••
7,000
27,000
18,000
2,000
1,000
55,000
Dallas ••••••••
4,000
41,000
47 ,ooo
1,000
1,000
San Francisco,. 1,81.000
2,000
631000
771000
3262000
31000
795,000
398,000
278,000
44,000
9,000 1,524,000
1,524,000 sheets at $49.58 •.•••••••••••• $75,559.92
The charges against the several Federal Reserve Banks are a.s follows:
CampenSheets sation
l3oston • • •••
2,000
33.30
New York •••• 405,000 6,743.25
Philadelphia 56,000
932.40
Cleveland••• 210,000 3,496.50
• Richmond •••• 104,000 l,73l.60
Atlanta •••• 129,000 2,l47.85
Chicago.....
74,000 l,232.10
St. Louis...
66,000 1,098.90
Minneapolis.
50,000
832.50
55,000
915.75
Kansas City.
Dallas •••••
47,000
782.55
San Francisco 326,000 5,427.90
1,524,00026,374.60

Pla~e

Printing
31.94
6,467.85
894.32
3,353.70
l,660.88
2,060.13
1,lSl.78
1,054.02
798.50
878.35
750.59
5,206.22
24,3~.28

Materials
24.42
4,945.05
683.76
2,564.10
1,269.84
1,575.09
903.54
805.86
610.50
671.55
573.87
3,980.46
18,608.04

Inc.Compensation
9.50

1,923.75
266.00
997.50
494.00
612.75
35l.50
3l3.50
237.50
261.25
223.25
1,548.50
7,239.00

Total
99.16
20,079.90
2,776.48
10,411.80
5,156.32
6,395.82
3,668.92
3,272.28
2,479.00
2,726.90
2,3Z0.26
16,163.08
$75,559.92

. The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation •'Preparation and Issue ot Federal Reserve Notes, Reimbursable", and it is requested that your Board cause such indefinite appropriation to be reimbursed in like amount.
RespectfUlly,
R. W. Barr,
Acting Deputy Commissioner.

....

,......
'

X-3499a

TBEASURY DEPARTMF.NT
Office of the Secretary
WASHINGTC'l'T
Augt.lS t; 7 , 19 22 •

The Governor
Federal Reserve Board.
Sir:
You are advised that the Department has referred to the General Accounting
Office, Treasury Department Division_, for settlement, the account of the Bureau
of Engraving and Printing for preparing Federal Reserve notes during the period
July 1 to July 31, 1922, amounting to $54.54, as follows:

Atlanta •••••••••••••
K*nsas City •••••••••
San Francisco •••••••

Federal Reserve Notes, 1918
i2QQ.
~1000
$5000
200
100
100
500
100
100
700
100
300

Total

:roo
600
200

1,100

1,100 sheets at $49.58 ••••••••••• $54.54.

The charges against the several Federal Reserve Banks are as follows:
Compen- Plate
Inc.ComSheets
sa.tion Printi~ Materials
Eensation Total
Atlanta. •••••
300
$14.87
$1.42
$4.79
~3.66
~5.00
Kansas City ••
29.75
600
7.33
2.85
9.99
9.58
9.92
Ban Francisco
.95
200
2.44
3.20
3.33
$54.54
$13.43
$5.22
$18.32 ~17.57
1,100
The Bureau appropriations will be reimbursed in the above amount from
the indefinite appropriation "Preparation and Issue of Federal Reserve Notes,
Reimbursable", and it is requested tha.t your Board cause such indefinite appropriation to be reimbursed in like amount.
Bespectf'tllly,
R. w. Barr,
Acting Deputy commissioner.

'(~

t'"

FEDERAL RESERVE BOARD
WASHINGTON

August 9, 1922.
X-3500

SUBJECT:

Banl: Salaries.

Dear Sir:
The Board desires to adopt a uniform policy with
respect to considering salary recommendations submitted by
t.he Federal Reserve Banks. .Accordingly, until further notice 1
a,t th1:3 close of each year the .Board will consider and revier1
all salary recommendations for officers and employees for the
ensuing year.
Departrr~ntal schedules should be prepared
containing the names of all officers and employees showing the
presjnt salaries and proposed adJUJtments and forwarded to the
Board on or before December lJtj_J of each year.
T.he Board is of the opinion that the management of
the Federal Reserve Banl:s should determine all salary increases
which do not bring the annual salary to more than $2,500 and
adJustments affecting such salaries need not be submitted to
the Board before becoming effective.
The salaries of all employees, however 1 will be reviewed annually by the Board as
provided above.
It is expected by the Board thdt salaries approved
for more than $2,500 ·Nill obtain throughout the yea.r, except
in exceptional cases where adJustment rr.ay be necessary.
VJhile it is recognized that it is necessary for a Federal Reserve Bank to meet the scale of salaries p~id by the
commercial banks located in the same city, it is most necessary
that the strictest economy and efficiency be exercised. bJr the
management in the operation of tr.e Federal Reserve Banks.
Very truly yours,

G o v e r n o r.

l~L

FEDERAL RESERVE AGflJTS·

FEDERAL RESERVE BOARD
WASHINGTON

August 10, 1922 •. '
X-3501

SUBJECT:

Methods used in Collecting Items Drawn upon
·Non-par Banks
·

Dear Sir:
It has come to the attention of this office
that one or more of the Federal Reserve Banks have some'Ahat modified their procedure and methods in the matter
of collecting items drawn upon non-member banks which
decline to remit at par.
In order to make an analysis
of the situation obta.ini1:1g in this respect as of this
.date, this letter is sent to all Federal Reserve :Banks,
with the request that they furnish a statement in detail,
showing the banks in each District which dec~ine to remit
at par and information as to the methods used by the
Federal Reserve :Banks in making these collections. Vie
are particularly in~erestea in ascertaining at.this time
to What extent items are collected. by messengers or agents
of a Federal .Reserve :Bank throtlgh presentation at the
cOQ.i:l ter •
)
Very truly yours,·

Wm· VT. HOXTON,
Secretary.

TO. THE GOVEBNORS OF .ALL FEDERAL RESERVE BANKS.

X-3503

THE F.A.RM3R AND THJ: FED.ER.;:J, RESERVE SYSTEM

1919 - 1921.

E. L. Sherman:.

' r
...

•,'

X-3)03

(

••

"Tha F'..rmar :md the Fed.arnl Tiasarvcl
System" w_,s vvrittan

~"s

his Hctrve<rd

thasis by Llr. ::!.:. L, Sherman, o. re-

...

cent

H~crv _:_rd

(:Sr:~du::.te

of ::. Ilion tani:t b::1nkar •

~~nd

th.0 son

l·

BIBLIOGii.i'.PHY.

OFFICIAL PUBLICATIONS.
(

1.
2.

3·

5·

The Fedaral B~serve Act.
The Federal R~serva Bullatin, 1919-1922.
Th~ Annual Raport of the F.3daral Rasarva Board, 1919-1920 •
(Tha 1921 R~port was not available.)
The Congressional Record, 1919-1922 :'
The Report of the Comptroller of th~ Currancy, 1~20.

PERI ODI C..\LS.

1 • .A:tnsrican Economic Review, 1921.
2. .Annals of tha }.rnericzn .~cad.am.y of Political and Social
Science, January, 1922.
3· Commercial and Financial Chronicle, 1919-1922.
4. Corr1IIlCrcial w·est, 12 Novamb.:.r, 1921.
5· Literary Digest, 1920-1921.
6. ~.'hnufCJ.Cturer's RJcord, 1~19-1922.
1· Nation, 1920.
8. New Rapub1ic, 1919~~S22.
9· New York Timas Index, 1919-1921.
10. Non-Partisan Leader, (TI1c National Leader), 1920-1922.
11. Review of Economic Statistics, 1919-1922.
MISCELLANEOUS.

1. Hearings· of the Joint Commission of ligricul tural Inquiry
as report-ad in the NZ',7 YOIU: TIMES. Unfortun.:..tdy tha
Conmnssion 1 s rdport was unavailable as a who1a, but the
COMMERCIAL .iNn FINANCL'L CHRONICLE of 7 January, 1922,
contains a summary.
2. Letters.
3· Minneapolis Pamphlet; speech of Governor Harding ~t Charlotte, N. c., 22 Septamber 1921.
Published by Federal
Raserve B:mk of Minnaapolis.
4. Moulton, H. G. Financial Organization of Sociaty,
Chicago, 1921.

'~~

· .•. :'

X-3503

"Vl.hether justified or not, there is a belief
on the part of tha farmer th~t he is not
receiving a square deal at the hands of the
Federal Reserve System." 1
"The farmers feel that they have been subject
to discrimination in the matter of credit." 2

(

The above quotations, one setting forth a general feeling,
the other voicing a definite and specific criticism, state most
succinctly the sentirrent that a great many farmers hold today
toward the Federal RePerve System

espdcially toward the

This thesis is nn attempt to find out so

Feder3l Reserve Eoard.

far as it is possible wh..::.t is back of this feeling; and to assess
this criticism (and other minor ones) for their justice and truth.
In the far-a·vcy :md, fror..1 this point of vantage, halcyon
days before the w:J.r, the United Sts-.tes adopted a new b8llking
system~

This

n~n

Federal Reserve System was a direct outgrowth

of the panic of 1907, 4

and was designed, as the title of the act

indicates, 5 primarily to improve the conditions of commercial
banking.

Perforce, from our

b~ing

organization, it had to

Senator Kenyon,Congressional ffficord, 16 Jan. 1922, p.l455
H. R. 1-fu.ssey, 11 The Farmers and Congress", Nation, 5 Jan. 1921,
p. 12
3· Act of 23 Dec. 1913.
4. W. P. G. Harding, "The Fedaral Reserve System - What It Is and
What It Is Not." }. .ddress at Charlotte, N. c. 22 Sept. 1921,
published by Federal Reserve Bank, Minneapolis, p. 3·
5· ".An .Act ••• to afford means of rediscounting commercial paper"
Index-Digest of the F8deral Reserve Act and t~ndments.
published by Federal Res3rve Board 1915. P• 1.

1.
2.

X-3503

- 2 -

have a

~eat

~ith

deal to do

financing abriculture; and

consequently the Act provtded, as an exception to the general
rule that paper to be rediscounted. "must have a maturity at
the time of discount of not more than ninety days" that "notes,
drafts, and bills drawn or issued for agricul turul purposes
or based on live stock and havin 6 a maturity not exceeding six
.t

months may be

disc~t~d

in an amount to be limited to a percentage

of the assets of the Federal Resarve Bank, to be ascertained and
fixed by the Federal Reserve Boarci.n 1

And, in addition, to

meet another and quite different agricultural credit need, the
Act 2 gave permission to national banks to
by improved and unencumberad form land."

make loans secured
Thu~

to the farmer the

new system appeared as a distinct gain, and the passage of the
Federal Reserve Act was tantamount to opening the gates of the
t•Promis~d Land. 11

•

th~ users of cr;;3dit, .aspacially the

agriculturalists calling themsJlves the p0ople, said: "The
Federal Reserve System shall make the country barik;;3r-panic proof.
•• • Never again shall an honest man with th3 earth's

produc~

for

security_be unable to borrow at tha bank on th;;3 spacious ground

•

that there is no mor-3 crJdit. 11 3

The Federal Reserv 3 Bank )\ystem,

S~ction 13 of the Federal R..Jservi;l Act. Index-Digest of the
Federal Reserve Act and.Amend.ments , publish0d by Federal
Reserve Board 1915 p. 15 In 1915 th.:: Board set th3 percentage
named at 99%, and has never changed it, proof of the Board's
wish to help agriculture. Gov.Harding in ~ letter to Senator
Str..oot, Federal R.::lserv;;; BulL:: tin. Aug. 1921., p.899·
2. Section 24, Ibid p. 25.
3· Garet Garrett, in Naw Rapublic. 3 Nov. 1920. p. 233-5

•

X-3503

{

- 3 -

which controls the issue of currency and dispanses credit to
the bankers, was created to dominate; th.:; nationts b3!1king policy;
and the Federal Reserve :Board, which gov .;;rns the systtJm, was to
see that credit should bacome a people's commodity, subject to the
people's intarest." 1
(

Eut, unhappily for the farmer and unfortunately for the
peace of mind of the rest of us, the millenium which the Federal
Reserve Act was popularly supposed to
(and has not yet) come.

h~ve

inaugurated had not

Tho war and its afterm:J.th for a time

concealed this, but at last the truth

CiJ..'l:;e

out.

As a result we find

the farmer today as loud in his denunciation of the
ever was in the old days.

bar~s

as he

Hard times" are the words most often

upon his tongu.e, and with thE::m are excoriations of the Federal
Reserve Board and appeals to Congress for help.

In these complaints

is an added bitterness, coming from disappointed hopes.
banking system, of "lhich so much had been

exp~cted,

The new

se.::ms only to

have made matters worse, to be simply another and more efficient
and powerful instrument in the ruthless hands of "the money trust".
Consequently the attack is directed principally - almost exclusively
in fact - upon the Federal Reserve System and especially upon the
heart of the system, the Federal Reserve :Board.
J

Indeed, it is

not too much to say that the attack is solely upon the Board;2

1..
2.

Garet Garrett, in New Republic, 3 Nov. 1920. P· 233-5
Gov. Harding recognizes this clearly. In an address at
Charlotte, N. c. 22 Sept.l921 he said~This Act is admitted
to be a great constructive piece of legislation and is applauded
both by friends and critics of the Federal Reserve System."
The speech has been published a~ a pamphlet by the Federal
Reserve Eank of Minnaapolis.

X-3503

- 4the attackers frequently and commonly bke scrupulous pains

to make clear that they criticize not the system, but the Board
and its administration.
of Alabama saying:

As an example

':'/e

find SenCttor Heflin

We created the greatest banking system that

ever was devised by the genius of man; a system under which no
· power can produce a panic if the system is honestly administered. • •
v

The system was intended to be a panic proof banking system,
and it is such when honestly and intelligantly administered.nl

Likewise another critic writes:2 "It (the Federal Reserve .Act)
is one of the greatest pieces of legislation ever

pl~ced

upon

the statute books ••• "And the Manufacturerts Record of Baltimore,
Md., bitterest and most

uncompro~isin5

of critics, scarcely ever

mentions the sys tern; 1 t is always 11 the act ion of the Federal

-·~

Reserve Board", or, "the Bo:Jrd' s defl:..tion policy. 11 3
There is in the nttack a vast amount of eii!PtY vaporing
and spouting - much big tiJ.lk with but little meaning; but there

are at the same time certain very definite criticisms.4 The chief,
of course, is that the Board hiJ.s discriminated against agriculture
in granting of credit.

l.
2.

Then, there is tha charge that the Board

Congressional Record, 23 F 0b. 1. 922, ?P. 3275-Z:C:. Sonfl. tor E..dl in
Ibid 20 Fcib. lS2.::, :._;.,. 31C.:.--6.
Pres· l'J:.ik:JimJn of th<.> City Na tion~:l K:ak of 7t. Sr,:i L, .~rk. in
M~uf~ctur~r's Rdcora 1 July 1920 p. 131.
Sa~_ ::1lso Scm.a.tor Ibrris, Congr<JStJion~-:.1 R.::cord, 16 J.;..n. 1'3:22. P•

13u); ~u Note 2 on pr~c0din6 p~ga.
4. For somo typic::tl expr ,s;;;ions of tha criticismo s-.:::>:

fot· tl":e fir-"t

X-3503
- 5ba$ exacted usurious rates of discount, leading to enormous

earnings and "profi tearing.''

.And as a corollary to this • it

is charged that the Board has been unduly extravagant in both
its building and salary policias.

This, then, is the farmeria case, end these are his
criticisms, the specific expressions of the general feeling
voiced by Judge (then Senator) Zenyon: n:.7hether justified or not,
there is a belief on the part of the fanner that he is not receiving a square d.e:Jl. ::-,t tha h:md.s of the Federal Reserve System." 1
,\dequately to d.eal 'Yith these criticisms, to pass upon them
asses'~

and

them for their NOrt:h, i t is necessary to go back into the

dim past - "dim 11 advisedly, for t·vo or three years ago is more
..
.
t o t h em •
remote than fifty - ::nd fino. out, i f possible what gave
r1se

Tihistles and bells announced on 11 November 1910 the end
of the war, and for:;tolC. also the end of the war-time period of
bankin~.

The essence of that banking lay in making the needs of the

Treasury instead of generally accepted banking theory and practise the

Cont.
Senator Heflin in CongressionDJ Record, 20 Feb. 1922.
Manufacturer's Record, 20 Nov. 1919; for the second: "Heflin,
Congrass.ional Record, 6 Jan. 23 Feb. 1922, and Manufacturer's
Record, 13 May 1920; for the third: Heflin, Congressional
Record, 6 Jan. 1922 and ~7atson, Ibid, 7 March. In each case
the charge is laid against the Bo3Xd, displaying an incredible
ignorance of the provisions and operations of the Act.
Reference ~s before. This statement is the exception proving
the rule that it is the Boarii :md not the system that is
under fire.

(

}

X-3503

.,. 6 determining factor in all oper.:1.tions .1

The consideration con-

trolling the system's discount policy was not the condition of the
money market, but the absolute necessity of a.id::..ng the Government
. Treasury to float great issues of

long-ter~

bends and short-term

certificates .2 The discount policy of the Fclderal Rsserve System .
became to all intents Cl.l'ld

:pn>-poses .:1.

p::trt of the

~:reasury'

s loan

policy, and the system temporarily yielded up its normal function of
regulating credi t .. 3

Obviously such a policy was dictat.'Jd by expediency,

and as to its il'.risdom there is a divided opinion. Governor Harding himself has said; "The

Feder~_,l

Reserve Board adopted a policy in order

to assist in the war financing :,vhich was economically unsound. n4
Discount rates Nere held artificially low,5 and in addition preferential
rates were given paper secured by
.l

Gover~~nt

as against purely commercial paper.6
for Janu.:1.ry

1919

(p.

96)

bonds and certificates

Thus the Federal Reserve Bulletin

gives the following table of discount rates

in effect at the end of 1918:

3·

Federal Reserve :Bulletin, Oct. 1919, p. 10 said, "Their (the
Federal Raserve Banks) discount policy, in particular,has been
shaped first with the view of facilitating the placement of the
great issues of both long-term and short-term obligations brought
out by the Treasury and secondly with the view of stabilizing the
market for Liberty Bonds."
A. C. Miller. "Federal Reserve Policy" .American Economic Review
June 1921 p. 105. See also the above note.
Ibid P• 105.
At Joint Hearings of Senate House Comni ttees on Agriculture, 3 Dec·
1920. Quoted by Miller, as above, P• 185· For a defense of the policy
see Federal Reserve Bulletin, Oct. 1919. p. 910.
"The discount rates of th:J Federal Reserve Banks during the year
1919 were below the market rates ••• 11 Gov. Harding - Minneapolis
Pamphlet, P• 13
Miller, Ibid. p. 186. See also Federal Reserve Bulletin Oct.l919·
PP·943-4 for a short review, "Discount Rn.tes of the Federal Reserve
Banks during the War Period, nin which this is well brought out.

X-3503

- 7DISCOUNT RATES OF EACH J?EDER.,\L RESERVE .B""'\.Nf.:
.APPROVED UP TO

31 DECEMBER 1918

MATURITIES

Trade Acceptances

Discounts
Within 15
.Agr i cul tur'!"
days , inclual & Liveding mem- 16-60 61-90 stock pa.per
bez' ;banks 1 days
days over 90
notes
da;lS

F. R.
::Sailk:

Secured by Govern- 1.-60
days
ment ':lar Pa}2er
within
12 dals

16-;zo

61-90
days

d~s

4!-

4i-

4-t

4!-

Richmond

Atlanta

4!-

4i
4i

4!4!-

Chicago

4Q.4

St .. Louis

Minneapolis

4!
4i

4i
4i

:Boston

New York

Philadelphia

Cleveland

•3

~
4~

4!-

4!
4i

4-a

4i-

4!-

4i
4i

4!-

Dallas

:.14

San Francisco

4!-

5:'2

4i-

City

4!4

Kansas

X-3503
- 8 -

Given the policy illustrated and indicated by the

~oregoing

table, and the inevitable result is currency and credit inflation, l especially since these low discount rates were contemporaneous with market rates centering around 6%. 2

Und•r

such circumstances member banks could engage in rediscount
operations at a profit, directly contrary to the orthodox
theory of rediscounting. 3

Consequently we find that the sys-

tem as a whole, on 29 November 1918 held total gold reserves
of $2,065,213,000, total discounts of $1,815,195,000 (5/7 of
them secured by government war obligations), total bills
bought in the open market of $375,341,000. and enough other
items to bring the total of earning assets up to $2,312,359,000;
while Federal Reserve
$2,56S,76G,OOO.

not~s

in actual circulation amounted to

The armistice might very naturally be expected to have
put an end to this anomalous s:j.tuation.

But it did not.

Fi-

nancially speaking, the war did not end with the armistice, nor
even with tha n<:rN yaar, but 'Nent on for six or eight months

r.
2.

3·

J. S. Davis 11V.forld. Banking and Currency: A Review of Recent
Develo:pments. 11 Review Economic Sta.ti1it.ics, Aug.l920,p. 213·
For ms.rkat rata see Federal Rasarve Bulletin, Jan. 1919, P• 76.
Harding, W. P. 11 The principle is well esto.blished that in
theory the Federal Reserve 13~ discpunt rate should ba slightly in excess of currant rates • 11 Lnnals of American Academy of
Politicsl & Social Sciences. J~U1· 1922, p. 134. See him to the
S31Ile effect in hearings of Joint Commission of Agricultural
Inquiry~
New York Times. 5 Aug. 1921, p. 12.
~al Reserve Bulletin. Jan. 1919. p. 87-S·

·.

..--

X-3503
,. 9 ':"
longer. l

.And as long as it continued tha hands of the Federal

Reserve Board wera shackled, with the result that the discount
market ran wild.

In place of the expected business recession -

the Federal Re~erva Bulletin for February 19192 had declared
•

confidently: "Business recession, indeed, is the primary economic phenomenon of the moment •• ~1.hat the process of liquidation
has begun is not to be doubted by any close observer of existing
b~

conditions". - WhiCh proved to
breathing spell, a tremendous

but a temporary slump• a mere

boom11

develop~d.

The war-time

price and credit controls, such as the War Industries Board,
War

Trad~ Bo~rd, &c,

took rise..

were removed and a seller's market speedily

"Inflation was becoming cumulative and systamic in

its effect, and P?rvading th.a whole body aconomic.'' 3

The Bo:1rd

saw tha dangers of the situation, but could tike no positive
action, ,as Treasury needs continued to domin~te affiars. 4
ever, it could,

How-

did, issue warnings, -a vain tasting of the

theory that tha credit situation could be

controll~d ~ithout

advancing the.Fedaral Reserve B~nks' discount rates.

Then,

to·v;;:ro. tha enii of 1919 th.:J Traasury' s war financing was com-

3·

l:t..

5·

Gov .IIardine;. Minneapolis Pamphlet, p. 13. GoY.• Strong of New
York Feder.::.J. Reserve Ibnk, 11V;-a could not le'W j the Treasury
out of cons iderc.tion in 1919, for tho w:lr ·:vas not over from a
fin:.nci2.l point of view. 11 Ha.::trings, Joint Cor::mission 1\.gricultural Inquiry, N. Y. Times, 9 Aug. 1921, P• 15.
P. 103
Miller. As bafora, p. 187
Ibid. p. lC9
W. P. Harding. Address to Ch::::mb.:lr of Cor.w.1c>rca, Cleveland, OhiO•
16 Sept. 1920. Publish.3d ::;.s p::rr.aphlet. J?• 5·

--;

.. · , ......... ;

X-3503
- 10-

~Uld. .B~nks were

pleted1 :md the Fed.Br-:tl Rc>serve Bo::_rd.
to d.eol with tha

situ~tion.

S:.:.iQ

<::.t

l:.:.st free

Reserve Bulletin at

t~e Fader~

the time, 2 ". • . th<:: dis,;.ppeo..r:mce of the Tre::.sury from the long
term lo.:.n rrurket

.:..nli.

the r:J..pici re;:;.uction in its r;;;q_uiremants for

short term o..ccommodo..tion

foresh~d.ows

the approach of the time when

.the financial operations of the Government will cease to be the
import.mt factor in shc..ping Fad.erol Reserve Kmk policies o.nd
rates which they have been.

~\.

raview of all the conditions in

the banking situation has confirrrBd the Bo:J..rd in the view that
in the applic:J..tion of its discount policy an advance of rates
should no longer be d.cferrcJd... 11

Accor~ingly

"early in November

the Federal Reserve Banks aivo..ncei their rates to the extent of
c.bout one-half of l per cent. n3

~1us

did the system signalize its

rea.ssumption of control over the .iiscount ma.rk.:::t.
Indeed, it was high time.
readjustment from war to peace were
on every hani.

foun~

ord..er of the day

3·
4.

~ked

abnor~al

conditions

Prices c.re very high.; therd ho..s been gre::.t ex-

po.nsion of b:.:nk craJ.i t; extravo..go.n t
privo..taJ is

The preceding ten months of

expen~i ture,

on every huni •••• Economy

h~s

both public o..n.i
not been the

~~ inflation h~s been the r~sult." 4

such

w~s

J. s. Davis - as befor3, p .. 225. "In consequence of this improv~
mant the first incr<:::l;:).Ses in tha u.iscount rc.;.te war'" w..aie, ani followad. gradually by others."
Nov. 1919, vol. 5, p. 1011.
Federal Reserve Bullatin, Dec. 1919, p. 1106.
C. J. Bullock, "Economic Cond.i tions Since tha Armistice·" Review
of Economic Statistics. Dac~mber (1919) Supplement.

X-3503
- 11 the record of the yaar.

A few figuras will bring this out most

clearly:·
Index Numbers of ',11J:wlesn.le I'r:ces . 1
(Lverage 1913 = 100)
Year Month

Farm
Products

Animal
Products

Consumaras
Goods

Producer's
G<lods

All
Commodities

1916

October

240

211

214

204

205

1919

January

234

203

216

196

203

April

246

224

214

203

July

261

233

230

219

October

253

212

22.;

223

December

2o0

209

244

229

233

Holdings of Discountad Paper by F. R. Banks
on last Friday of each Month, 1919 2
Month

Month

Amount

Amount
$1,867,602,000

January

$1,601,128,000

February

1,879,020,000

August

l,J15,G34,ooo

March

l,c.c;6,24o,ooo

September

1,502,282,000

April

1,950,412,000

October

2,12S,547,000

May

1,9G9,392,000

November

2,214,139,000

June

1,313,o4o.ooo

December

2,194,873,000

Federal Reserve Bulletin.

July

Decembar 1919, p. 1159; January 1920.

P• 109.

Federal R.lserveBulletin, for 1919.

989

X-3503
.. 12 -

Federal Reserve Notes in Actual Circulation.
Last Friday in each Month, 1919· 1
Mor.th

Amount

Month

Junount

Januar;y-

$2,450,729,000

Jl.lly

$2,504,497.000

Februar,v

2; l.~·72. 307,000

August

2,530,629,000

March

2,521 '776 ,000

Septaniber

2,655,354.000

April

2,549,552,000

October

2,752,376,000

2,519,292,000

November

2,852,277,000 .

June

2,499,130;000

December

3,057,646,000

Before reaching this point it will doubtless have been observed
that in the precedine outline of the great inflationary movement following upon the Armistice, continuing through the year, and receiving its
first slight check only in November, the farmer has not been mentioned
at all.

Tl1is is not to be .wondered at, for tha farmer had at that

ttme but little to

s~,

and thut little hud still less to do with the

Federal Reserve Board.

The Department of Agrieul ture sent out a

questionnaire to farmers in the :g"st end

NorthV~~est

asking them what

their big~ast problem was, and received the following answers: 2
Labor

632

Improved Farm Pructises

637

Marketing

309

Better Ofganization for Farmers

Financial Assistance

Roads

Repeal of Daylight Saving

S~ools

1. Federal Reserve Bullatin&or 1919.
2. Literar• Digest 21, Feb. 1920, P• 19.

X-3503

... 13-

Evidently, the Federal Reserve Board and its credit policy '¥ere no10
weii).ling heavily upon the farmer in 1919.

Indeed, why should the7?

The wheat .md corn crops were larger than those of 1918; and.
while the cotton crop was a million bales less,
was hi~.l

~ ts

money value

~e value of all crops was $15.873,000,090 - 10%

greater than the corrssponding fi 6 w:., in 19lS· 2

The following

short ta)le will give a further idea of the condition of agriculture during this year:
Prices of Laoding Farm Products ,1919 3
Conmodity
11inter ?lheat.
Corn
Cotton
Wool
Cattle

Low
$2. 3o per bu.

1·37 n

.2G5 " 1!.
1 .. 07

15.46 " cwt • .

High

Month

G.• (,)

.. 7'"'

May

1.92

August

December
2.~5

1·~5

~40

December

.14<)

1.25

November

1·25

1~·51

17.07

March

·And to throw somewhat more light upon matters, individual deposits

in national, banks
stood at $13,314,015,000
on 17 November
.
.
.

1919~

increase or over 2 1/2 millions over th~ corrosponding fiFe for
the previous year. 4

There were 5 1/2 million automobiles in use,

1. C. J. Bullock a :lS before.
2. W. Berridge, "Statisticcl Sutrmary of 1919" in Dec. (1~19) supplement to Review ~CqeQ~ic St~tistics.
3· Federal Reserve Bulletin, Feb~ 1920, .P .. 169-70.
4. Report of CoJ!!Ptroller of Currencx, 1919, vol. 1. P• 20

...

X-3503

- 14ss ago.in&t 4 1/2 million in 1918. 1

.And farm land. vo.lues vtera in-

creasing, the a.verag~ for average gro.de plowed land being $74-31
per acre, as ag~inst $6o.3c'5 a. y~ar bafor~ :mel ,~62.17 in 1917. 2
Th~

farmer had no corrplaint against the Federal Reserve

System in 1919; or, it if he did. have one, he hugged it to himself

and. did not voice i t - but.~t 1~ not th~ f~r 1 s w~.
proof conclusiva that in 1919 tba wcrd was

11.,\ll

•s right with the

world 11 let u.s quota Setlll:tor Heflin, a faithful ·spokesm:m in the
agricultural intarast.

When

deliv~ring ~a

upon the Federal R~serve Bo::trd, a~wly in

of his daily attacks

1922, he said: "'Dle

banking system under· this reserv.a board, ••• enables! us to fieJlt
end win the fight in

1919:"3 the system W!l.S working "like a Cor-

liss engins 113 (the Senator's sir.ile)
to H at ell;

and there was no objection

we did not need xooney in the South, for cotton was

brin.;tns a good price, business w.;;.s moving alont; smoothly, the
Federal Reserve

Bo~d

was functioning properly, and W!lll Street

stood afar off and did not control it. 11 3
But the Eden pictured by Senat'or Heflin was drawing to a

close..

The slight changes in

di~count ro.t~s

1919 had been merely a fore-tasta of what
brin[S·

th~

m:....e in November of
new

ye~

The Board. and ·the ~ ware coming book into their own,

and January of 1920 saw ~ sweeping change in rates.

1. World Almanac, 1920, P• 266.
2. Naw Yor~_j'imes, 23 A.pril 1919, .P• 27.
3· Oong. R~c. 23 Feb, 1922, P· 3275-o2

Nas to

Those upon

)

X-3503

- 15.discounts secured by war obligations ~dvanced to
on acceptances to

and

4 3/4

and

5 1/2

7~ and on discounts unsecured or secured

otherwise than by war obligations (incluJ.ing 90-130 day agricultural
and livestock paper) to

6%;1

The increases Wdre published by

tha Federal Reserve :S:mlcs, starting 21 January; there could be no
reasonable doubt as to their object, for the FederGl Reserve B\llletin
said in speaking of them:

"They are, in brief, an effort to

restrict the rapid growth of cradit to which attention has been
called in :r:ece~t weeks. n 2

In addition, in April 7 the Fedaral

Raserve Act was amended at th:- :So.::,rd's request so as to permit
bas~c

the Banks to establish

lines of credit for members and

impose progressive rates for discounts in excess of the basic line
amotm ts.• c:.nd four
of
the Bank3
•
"? •
of the
it

ne~ po~ers.3

speeci.:~ ly

entered upon an exercise

.And, as a final touch, to leave no stone u:ntutned,

the B6sxd urgad the bs.nks, region::W. and member alike, to discrimin.J.te,
when·:;:toaning, between speculative ::md comrr.arcial lo3Ils $ and between
loans for essential commercial purposes and those for other uses ..
The net, and

~ndeed

tha intended, result of thase activities

, w:::cs first a check, and then a halt to inflation.

Priee indexes reached

thdr climax irl .April and M3¥, ani in the seconct quarter of the year

~';;;dc.;.r:i.L Resarvc B1llletl.n, Fob. 192.0 1 :p. 21L
F;d:r2.l Eo.>s<.,rve 13ulletin 1 Feb. 1920, p. 118.
:r:--s~ D:tv·is: nwor1d. Banking & Curr0ncy; A Revi~w of Rece.nt
Dcv;;;loprr:antsn 1 Review of Economic Statistics, Aug. 1920, P· 217.
~c;l R'-1port, Fedorn.l Rc§erve BoarJ., 1920, P· 5~·.
Da.vi5, ~~s before, p. 219. Also his references: :Fea.<;;:ra.t B.sso,rv@".
~1lc:U.r~, Feb. 1290, p. 116, llo; Ju..'"la, 1920, .P· 5G0,5G).

X-3503

- 16 liquidation began, 1 to be reflected in the Federal Reserve Bariks'
accounts in the fall, as tha total of bills discounted reached a
paak in October of $2,301,297,000, 2

and then fell off gradually.

Then it was, when prices began to fall and business began
to slacken rmder the consumer 1 s strike and consumer's speculation,
then it was, whan the long delayec; liquidation m.J.terialized, that
the farmer gs.ve tont;:-18 to his grievances and mad:3 the welkin ring
with his denunciations and outcries
Board.

~-.gainst

the Fed..:lral Reserve

From th.;.t day to this there hc:.s been scarcely a pause in

ths clsunor.
The rise and progress of tha fealing which developed

into something not far differant from implSJ.cable hatred is

an exceedingly interesting and instrQctive study.

The first

trace of discontent is to be seen L'..ta in 1919 when the cotton
interests complained th::1t th.o

Bo~rci

wc:.s using its vast nuthori-

ty to hold down the price of c:otton.3

The root of the trouble

at ·thi;3 tim::: was a circular ·issu.;d by tha Federal naserve
Bank of Richmond, stating that no loans would be made on
warehouse r3c2ipt colL1teral, unles;o tha receipts cont:J.ined
:'1

st::tement of

th~

gr-:1-:;.e of cotton representad:

this bec:J.usa

cotton grc..des ve.ry considerably, 8.tld becau.se with n fluctu.a-

·1.2..

3·

Bullock: 11l1evi37J of Second Q:u::t.rter of 1920 11 , R~viow Economic
Statistics, June 1920 1 P• 17;:; ..
Sa e chart , p • 20 ..:, .
Mfrs. Record, 20 Nov. 1919, p. 93-4

X-3503

- 17 in~

market - such as then existed

was necessary.

a larger margin for safety

All this is brought out in a letter1 from

ernor Harding of tha Reserve Board to SGnator

Gov-

Smith of South

Carolina - a letter which contained in addition to this info:crna.tion the entirely pro.per dBclaration that
Reserve

Bo~rd

th~

Federal

was not to be used to allow the withholding

of cotton from the market in order to force prices to an
unreasonable level.

From this apparently trivial

inno-

cent circumstance the feeling against the Board took rise though reference to the table given on page 13 discloses that
cotton was still rising and re2..ch..;d its high figure for the
year a month later.
Two weeks lat,;r, after t. e first slight increase in
discount rates. the Manufacturer's Record struck a somewhat
different note, when it said

e~itorially:

nwe do not know

that inflation is such a dreadful thing as to require arbitrary deflation as a cure. 11 2
Then, whan the more considerable changas of 2.1 January were ine..ugurat.::d, the pack p.va full tongue and tha hunt
w·;J..s on•

The first cry was over the slump in the prices of

Liberty Bonds ::md Victory 'Jt,otes which followed. 3

This was

the origind grievCJ.nce, one, i t may be said in p:::tssing,

-·---------1.
2.

3·

Given in Mfrs. Record, 20 Nov. 1919, P•

~ Dec. 1919 ,-p-:120.

113·

Starting January & continuing through tha spring. See
Federal Reserve Bulletin, vol. 6. May, 1920, P• 446.
June 1920, P• 555·

X-3503
-- 18 -

which is not yet forgotten by any means. 1

According to one

very earnest critic popular confidence in Government securities was shaken, and the spirit of thrift and saving dealt
a hard blow -

the people do not say anything, but it is

deep in their hearts. 11

That last is not exactly accurate,

for 11 the people" said plenty - week after week the Manufacturers Record pounded away along the line of

T.he Action of

the Federal Reserve Board in Deflation and in Getting Government
Bonds out of the Banks Endangers National Honor."

Meantime the repercussion was felt in the halls of
Congress.

On 29 January, Representative Luce of Massachu-

setts delivered a short warning against the dangers of inflation and overissue of Federal Reserve Notes.

It is the

swan song of another and earlier phase of criticism of the
Board.

Alread;r forr;es were i.lt work preparing a new and im-

measurably rr.ore formidable assault upon the System, and on

9 February the opening gun was fired - Senator Gronna

North Dakota introducing, and th.;; Senate pas.3ing unanimously,
a resolution to investigate allegad withdrawals of grain
credit, leadmg to a depression in

th~ grain market. 5

But the principal criticism remained that relatine; to

3·
4.
5·

In a private letter written in the Wast in March 1922 this
was brouf#lt up as "the bitterest criticism11 •
Pres. Nakdimen of City Natl. B:m'-(, Ft. Smith, Ark. In Mfrs.
Rec. 1 July 1920, ~- 131.
An editorial, 12 Feb. 1920, P· 93·
Cong. Record, 29 Jan. 1920, pp. 2199-2201.
SeeN. Y. Timas, 10 Feb. 1920, P· 25.

X-3503

... 19 the increased

r~tes

and consequent fall in Liberty :Bonds and

Victory Notes - a criticism by small country bankers, r~ther
than by farmers proper.
held firm - when they

This remained true as long as prices

beg~m

to tend downward louder and ever

louder "howls 11 went ";llJ from a growing circle of u:nfortuna.tas.
A few figures will aid. materis.lly in fixing the tima of the
new outcry:
Index Numberl:. of Wholesale Prices, 1920 1

C"ver.:.ge 1913 - 100)
Month

Farm

~mimal

Products

Consumer•s
Goods

Producerrs
Goods

.All
Commodities

242

January

246

213

24o

236

April

246

,- 9~b

257

274

JW.y

236

164

250

251

250

October

102

l "12

203

2C9

203

December

141~

171

263

The br-:lak, it will be sa en, c::<me ih the quarter be tween

.April ana. July.

Corn wz-.s at

pe<.Jc of

:~1

. 98 per bushel in May -

in October it -.,,...J.s only' 07 /:,; cotton fell off from 41¢ per pound
in April to 20/:. in October;

winter wheat~ $2.97 a bushel in May,

brought but ;f~.20 in Octobo;;>r; wool, which was $1.23 per pound
in March, by October had declinac.. to 72~, and. so on throu.gh the

list. 2

Tha indign2-tion :J.nd

tural in tar:; st

W'.lS

sor.~nass ::1t

ho:J.rt of the agricul-

a bit slow in attaining adequa.t:J and organized

Federal Raserve Bulletin,Dc.cemb--~r, 1920,p.1326;Fab.l921, P· 210-11
Federal Reserve Bullati~, Dec. 1920, vol. 6, P· 1327.

•

X-3503
-20expression, but by late sumner it had bagun to be heard .. 1

drop in wool was perhaps ~he first to bring results (June). 2
the wheat interest was next in line (September)3, and then {in
Ootober)) the South and cotton let go with a terrific bang.4

The lid was off,

tht~

sky ws.s the limit, and in good old hamner-·

a.1•ld-tongs, free-for-all style the critics bent to their work.

Snoh items ss the following

c~ to be seeri in the papers:5

"Fiery threats of a general agricul tur£.1. strike unless the
Federal Reserv; Board is more generous in allQWing e:x.tansion
of credits to farmars were made here this .afternoon at a meeting
'.

of farmers fran Southern ?.nd 7ieatern Stn.tes.

vigorous tn expressing indignation over
. . the

The farmers were
Bo~'s

ptesent

policy ••• The Federal Reserva Bo.aro. was h!'.rrmerad right and
laft.

Alfred Tumlin of Cove Springs,

G~.,

said it

w~s

'an

'
"Ctopus 1 and. was irobbing tha people'
••• •~u3l'\!. is a panic
here right now 1 ~nd it w:.t.s ;,e.~Jie by tha F~d.er:ll
::;;tated
so /ex-Senator Ma.1'ior1 .Bt1tl(;;r o:f North Ca.Tolino..

~serve

:SO!U'd • 11 -

In December

it was said, in rega.rd to farmers 1 conll'lail1 ts a.s to discinn.nation
and restriction, "these cha.rgeb h.::.ve been m:::de ~ timas· ''lithin

the l:.t.st three months: beginniUg ••. in Octobern.
tion would. only lengthen out unduly a famili3.1'
it to s3y that, tha

pebbl.~

6 Furth•n quota-

story~

Suffice

having bC'en dropped into the pool,

1 .. The Commercial & Financi..ll Chronicle, recording thJ principal
a.tts.cks on th.a F'adere.l Raserve ,shows tbt tha trll.ll"Jmll'ing started
only in tha third quarter of 1920 !lnd rea.ch..:d full size only in
the fourth. See Index !or 1920.
2. N. Y. Times 4 June 1920, p. lS; &c.
3• Ibid; 26 Sept• 1920, pwl6.
4. Ibid, 13 Oct. 1920, P• 15.
5· N.Y.Times, 13 Oct. 1920,p. 15· Refer~nce is to a meeting iP
W:l.shington, D. C. on 12 Oct.
6 .. N.Y. T~s, 26 Dac 1920, P· 3·

X-3503
- 21 -

the waves it
shores.

cre~t~d

were not slow in spreading to the farthest

During tha r3st of 1920, througbout the whole of 1921,

and even into 1922 th3 chorus
however, it has
pric~

in tha

b~an

continu~d

undiminished.

Of late,

to soma dagraa allayed by the racent incraases

of farm products.

For our purpose it is

unn~cassary

to f.ollow through to tha very and tha attacks :md criticisms; the
conditions producing them, as :.r::Jll as their rise and early prograss h:wa been set forth, ;md the later attacks mar ely continued
along the road that wa have seen begQn.
The agitation was nothing if not productive of tangible
results.

Tnesa were, in the main, threefold, and all had, to a

greater or lesser degree, soma connsction with tha Federal Reserve

Syst~m.

Corporation.

T.he first was a

raviv~l

of the War Finance

This cama about in December of 1920, 1 when the

murmurs and outcriGs against the Board had had time to sprJad
throughout the country md then

r~aet

in the form of demands

upon senators and resprasentatives in Congress.

Tna second was

the e•tablishing of a Joint Commission of Agr icul tura1 Inquiry,
in the early sumner of 1921 to inv3stiga.te and report within
ninety days upon agricultural condition in genar8.l, and upon
11

the banking and financial rdsources of the country, especially

as affecting agricultural credits 11 , among other special topics. 2

1.
2.

C. & F.Chron. 25 Dec. 1920, p. 2469. The measure passed the
Senate 13 Dec • .:md the House 18 Dec.
Gong. Record, 31 May 1921, p. 1399-1901. 7 June 1921, P• 2207-3•

r .•

Y.-3503

....

-22!lhe

hea.ringt:~

of this comnittee proved to be an opportunity for

the disgruntlad to leunch attacks u;>on the Federal Reserve Board
as well a.s the occasion for the Board and System to defend themselves~

And finally, the third. result was not:hing less than an

attempt to amend. the Federal. Reserve Act, whereby the tndmbership
of the Board wou.l·i be

in~caased

to e5.ght and in selecting the

six appoint.ivn members, the preside1;1t would ''have due regard to a
fair representation of the different coumercial, industrial,
cultural, and gE'Ogra.phicnl d.ivisaonl3 of the country.n l

agr~

tn addi-

tion "No F;ecler:U. neserva bank sha:.l h.::1.ve authority hereafter to
entar into any contract or con1;raeh for the erection of any
building of any kint~. or eho.r.lcter. or to a11tborize tha erection
of aey, building, i.n excesa o! $25(·,000 withOttt th.; consent of
.
. .

~~ass

having

pr:;v.~.ously

bean given therafor in exprdsS

terms~"

This amendmant bas r.assed the Senate 2 and tha House is soon to
take action upon it.
resu1 ts...of the

Tllese, than, are the tbrea most direct

~ita.tion

against the Board - in addition of

course~ to tha :farmer's feelings· of wrt~th, anger, anci bit.tarness,

of which thll

w~le

agitation is at once a symptom and a cause.

They do no1; .gre'-tly concern us here, but in pas sine; it is inter-

·.

esttng'to·note ·tna.t·~a third- the attempted amendment to tha
Federal Rese~~. Act ...

at though
.

it bears ~s1; dirdctly upon the

--:---------

1. · Colllll8rcial and Financi3.1 <r.aro~1ic1a.
2. Ibid. P• 248.
-·

21 January 1922, P• ~47 •

•

- 23 -

#f f1; '";·";,

.,._4'"..,..*J'-t•\....

System will probably least affect. it (if it is finally passed);.
While the othdr two, and p~rticularly the investigation of the
Joint Comnission, are likely

have an impOrtant bearing upon

tha System, both in the way of sup:plementing it in the present
and lead,ing to futura changes in our· ~icul
tural credit struc...
ture.

Bllt, however. significant this· triple development mq

be in the general !ield of agricultural credit it is not essentially gel'mf'.ne to the matter in hand.•

iJr

t() this point; everythin~ has been directed

to creat-

in6 and shaping the background necass!.'U'y to the attack upon
the rual problem of the thard.s.

Tlie farmer's case has been

..
examine the justice of

th~ far~me=•~

criticisms.

At ths very outset of s·.tch. an examination it is to be

noted that a considerahla number' of the Charges against the
Board and even against the Sys tam c.m be fully dealt with by
a simple exposition of tha tarms of

Federal Reserve Act,

th~

so largely do they rest upon ignorance or misconception.
~ese

may be disposed of easily ond in short order.

"~ere

are seven men on the Federal .Raserve Board, and there they
sit, with the approval of the President, and smiling blandly
up into his face while they rea.ch their arms up to the arm
1.

aoV. Harding has aptlY s·:.id, "!t is because so JDan7 have no r,al
conception of filie pu.rposes or me:ming of the Act that there has
been so mcb criticism of its &.d!Dinistration." p.J, Mpls. Paqillet. Also J. K. Rich, ~ederal Reserve Agt. Mpls. foreword to
S31De: "Some of the recent cri tici.sms of the Federal Reserve Banks
and of • • • the Faderal R3serve Boord migbt aasUy hn.ve been avoided if there had been a bettar public knowledge of the fact that
the ·Federal Reserve Banks operata in diract accordance wi ~ a.
comprehensive Federal 1~ which anyo~e can read. ar.d understand."
'

""~· ~"'-""'.

- 24 pits into the earnings of the Federal Reserve

b~ing

systam and

dish it out, $26,000,000 at one time, for a bank building in
Wall Street 111 - thus it is that Senator Heflin of .Alabama expresses one misapprehansion in

r~gard

to tha Board, namely

that it is ro:sponsibla for the buildings,
Federal Reserve Banks.
alter
saying:

·~go,
11 The

In this

instance~

owned by the

Senator Heflin's

Senator !fats on of Goorgi::1, :mswered the charge in
FedercQ E.es grve B::ml::s h::1ve

~1ppropriatad

to tham-

selves ov0r and above the 6% profits (allowed by law) $67,000,000
.

of th2 net earnings of th0se b:..nks, 11

the :rr..ethod used being ex-

pendituras for land and buildings - the point is that it is the
regional b:mks themselves, through their boards of directors,
who control their building operations.

Another, and indeed,

a very common, misconception h':ls to do with the manner in vmich
discount rates are establishGd.

On6 could assemble an almost

infinite number of quotations which put the responsibility for
this upon the Bo~rd.3 quot2tions which entirely overlook tha
fact th3.t it is tht:J rc;;gional

b~;.nks

·who do so, ::1lthough it Jmst

be admitted th~t thair action is subject to the approval of the
4
Board.
Again, the board h::1s bean rated (or should one more
properly s.1.y env iad ?) because it is "the only body of men on

1. Cong. Rec. 6 Jan. 1922, p. 1602-03
2.· Cong- Rec. 7 March 1922, P· 3919-21. It::1lics mine.
3· fer a few see: Heflin, Con,-s. I\.3C. 6 Jan. 1922. Philadel;:;hia
North .American, quoted in Mfrs. Rec. 22 Jan. 1920j Mfrs. Rec.
5 Feb. 1920; 11 S. C. St::J..te F.:J.rmer 1 s Union 11 resolutions in ibid.
19 Feb. 1920.
4. Federal Reserve Act. Sec. 13 ..

,, ·-~ ·,..- ...

X-3503
- 25earth that exercise (sic) the function of fixing their own salaries." 1

Perusal of the Federal Reserve Act 2

would have shown

that the salaries of the Board are fixed by law, and not by
the Board ..

A fourth of thase rather picayune refutations pre-

sents itself in the relation of the Board to loans - some critics think or at least would have us think, that the Board
itself makes loansj 3

it does not, and

is merely a supervisory body with

>'lC

mor~over, cannot, for it

lo;;~nn.bla

fun •. s of it.:> o;,vn .

.And as a last exall!Ple of the ignorance of sorn( :.;ritics stand
assertions that the Board "contracted the currency 11 ;5

the

this

is obviously the result of either dire ignorance or gross mis-

.
represantation, for the terms of the

section and of the Act

daaling with the issue and retirement of Federal Reserve notes
cut off the Board from any power of initiative as to either
expansion or contraction of the currency.

Then, as regards

the system there is the complaint, one might alrr.ost say the
classic complaint, that whereas dealers in raw materials and
finished products

allowed to use the System as a means of

withholding their goods from the market in order to bring about

1.
2.

3·
4.
5·
6.

Sen. Watson. Cong. Rec. 7 March 1922, 67 Cong. 2 Sess. p.
3919-21
Section 10 ..
Mfrs. Record 20 Nov. 1919; also Sen. ·watson's charge that
Board lent itself money with which to speculate, given in
Sen. Glass's speech of 16-17 Jan. 1922, which appeared in the Cong.
Record 24 Jan. 1922, p. 7370-84.
Sen. Glass in his speech - reference as above, P.• 7G70.
See Mfrs. Rec. 5 Feb. 1920; and ibid. 19 Feb. 1920, the S. C.
State Farmer's Union Resolutions.
Section 16. Federal Reserve Act.

X-3503
- 26-

·,

higher prices, this privilego is denied to the farmer.

In answer to

this it may be said, first, that extension of credit by Fede:r.al
Reserve Banks for ths purpose of carrying on spe•ruative opera.tiona is prohibited by law, and socond, that the period of maturity allowed agricultural rediscounts is twice that allowed comner-

cia.l discounts. 2

More fundaments::., how over, is tb.e answer to the

theory underlying the crtticism. 3

That. theory

as~,unes that

the

asS"'.:mption of such a speculative ri$k is an integral part of
Such is not the case, for, althou.g..'l farming is a. busi-

farming.

ness and consequer.tt:ly S\lbject to certain risks and hazards, this
matter o£

"f~eding"

procbtcts onto

th~

market, or withdrawing them

for better prices is rather a part of tho function of distribution,
C'r1ll

as such is withou.t th.;

fm~r's

province.

And back of all

·the position of the Federal Reserve banks is to be considered.
They are not banks for the farmers alone, any more

than they are

banks for manufacturers or dealers alone; it is thel.r function to

serve the whole business of the country; consequent1y

:.t

is of the

highest ~rtance •hat they be always in a highly liquid
condition.

This means that they cannot, in the in.t6rests of

Mfrs .. Rec. 20 Nov. 1919 p. 93-A, 113. Sen. Smith of S. C.,
N. Y. Times, 13 Oct. 1920. p. 15. Senator Heflin in almost any
of his attacks, notably 20 Feb. 1922, Cong. Rec ..
2. Federal Reserve Act. Sec. 13
3· Following is a pithy statement of the the~ry~ "The farmers are
obsessed with the idea that the purpose of ban1t credits is to
sustain prices, rather than to move crops iilto· conS'Uiqption or
e~ort.• N, Y. Times, editorial, 15 July 1921, p. 10.
4. See Gov. Harding on this, pp. 5-6, Minneapolis Panphlet.

....~

X-·3503
- 27safety, (for they hold the ultimate banking reserves of the
Country) 1 afford to become loaded do"lm with frozen credits, issued
to perrrdt farmer, dealer o~-manufacturer to keep his goods ~~d
products off the market in order to force up

pric~s.

It will be

remembered that the begi:ro..nings of the farrr.ers 1 co!Jl)laints centered
around. this pcint, 1

nnd all along it has been in more ways than.

one the root of the whole tro11ble; probably it will continue to
be so in the future, for it is next to impossible to convince
the farmer that speculation is, to
business.

The

repor~-

it baldly, none of his

of the Joint Commission of Agricultural

Inquiry outlines a plan which
speculate - in the corm:con
OVIiTl risl~,

p~t

s~nsG

virtually allows the farmer to
of the word - at pretty nuch his

\Vi th the minimum of harm to his banker.

If it is

carri8d out we may hear less of the iniquities of fue Federal
Reserve System in this respect.
So much for the minutiae of the farmer's

c~so..

The long

road to the heart of the problem has been traversed, anJ. we are
at length ready to examtne the facts of agricultural credit in
the period under survey, 1919-21.
Tackling the unfailing cry that agriculture was
inated against

1.
2.

. ·3·

in the matter of credit" ,3

discri~

the question - .-;-ere

See p. 16 above.
See a summary in the Commercial & Financial Chronicle, 7 Jan.
1922, P• 19-20 •
See quotation at start.

,'!'~. ~,,

..,

.L _, ·.. ·.

X-3503
- 28-

the agricultural districts disc•iminated against? - may be set
up as a guidepost.

Of the twelve Federal Reserve districts,

four - B9ston, New York, Philadelphia, and Clevaland - are be-yond question primarily non-agricultural in character.

Seven

are equally beyond question essentially agricultural - Richmond,
Atlanta, St. Louis, Minneapolis, Kansas City, Dallas, and San
Francisco.
SOj

The remaining one - Chicago - is less unquestionably

but, as it contains the whole of the agricultural state of

Iowa, together with

Northe~

Illinois and Southern Wisconsin,

it may be grouped vvith the agricultural districts without too
great a str:.oin.

The question to be answered, then, comes down

to this: How does contraction and expansion in the eight
agricultural districts compare with contraction and expansion
in tha four non-agricultural districts?

But first some idea of

conditions in the system as a whole is necessary:

......

X-3503
-

2Se~.

IIOLDINGS OF

r~ISCOUNT

FEDEfv\L lmSEllv~

BANKS

1919 - 1921

Billions
of

nil1icns
of
Dollo.rs

Dollars

2.75-

-2-75

2.50-

..2.50

~ 00 c:...

1.75-/ --,
.-·-----

,//

-2.00

-1·75

1.50-

. -1.50

1.25-

-1-25

1.00-

-1.00

00.

j:'!

~
1

Feder~l

J-1

+.:>
0

g
t-:1

R0serve Lu11etin, 1919 -

jf
1

1~20

2 0

- 1921

+"
0

t-:1

1 :3 2 1

+"
0

•lt....,.... *.,.., . . . .
\~

X-3503

...

- 29-

.
~~ec.ticn

of this char~ discloses that rediscount holdings

reached a. peak of $2,&00,000,000 in October of 1920 (the very
time at which the fru·u:ar t s O'ttcry was achieving organized

expression)

in thre., great "ste:t>r.u of apprcximtoly 250

million dollars each.

A closer 3Cl".\tin1

the ccnf'orma.-

tion of each nstep~ shows that the lift.tt caatEr in the f1+'st

and third quarters. '! the year.
first quarter of tho

!1'9llr

Now,

spe~ng

pneral.ly, the

is t.."'-.e period in which manufacturing

and t.t"ad.e does i.tJ bor.L·o.-ing, vhe:rea.s the third quarter is

chara.cteristica.ll.y tlw ·oo~rowing period of agriculture - the
crop moving period.

that in the expansion ·n·
witil indt:.stry and trade.

increased by

351

. ?rime. facie evidence thus tends to show
cr<~dit

agriculture fared equally well

From January to April

1919 rediscounts

millions; July to Octpber the j1lnp

was 261

millions;3 January to April 1920 saw a lift of 361 million ..
prices still tending up- J\tly to Or;tober, (agriculture's
p·eriod), the lift was 310 million, ~bout 50 million less; it
is true, bUt an increase made in the face of swiftly receding
prices.,_

The latter month saw tha start of an amasing .toboggan-

ning of rediscounts; without cheelt' or halt they fell month by

month dur1ng all of
year at

1.
2.

3·.
4

1921,

standing on the last Friday of the

$1,1144,347 ,OOO...half a

billion less than when the cl!Jd)

See p. 20 above.
See Moulton, H. G., l!nsncial Organization t:4 Soci~!fJ: pp. 495-7,
"Se8$onal variations in the demand for Funds•.
A smaller jump, to be sU.re; but see Senator Heflin, P. 14 above.
See table p. 19.

<:;;

...-1(. ,-.. "., ..,.•'
- 30began.

In the race for the valley neither agriculture nor

trade and industry lagged behind the other - the latter part
of the gr.aph is one continu.ous, synmetrical decline.

The farmer would point to the downward slope as proof
positive of the justice of his contention.
ever, bs fully warranted in doing so.

He would not, how-

It is plain that during

the second and third quarters of 1920, when prices were tumbling, a great exter.elon of credit was forthcoming.

But,

when

;it was seen that the fall was no mere passing flurry the procas~

of indiscriminate loaning was ended.

Tha Federal Reserve

banks lend only upon paper arising from actual comnercial .l.:a.
transactions, or upon agricultural paper; with business becoming
stagnant the former class of rediscounts would naturally shrink,
and with prices of farm products naa.ded for the bottom of the
hill agricultural loans would also tend to contract, if only
because of the wasting away of collateral values.

The Federal

Reserve banks helped business - agricttlture included- as much
as they could; but thoy could not achieve the itrpossible
and fend off a fa.ll in prices a.J.m:>st daily aggravated and
accelerated by consumer • s speculation. With the fall in prices
and the inevitable check to business, rediscounts declined 'it could not bo otherwise, for th.; Federal Reserve System
cannot be used to hold goods and products off the market for
speculative purposes.

See Gov. Harding on this point in a letter to Sen. Smith of
C. Given in Mfrs. Rec. 20 Nov. 1919, p. 113.

...·~

~·~~.

, . .... -.,

X- 3503

- 31 As to what happen-3d in the individual districts, agricultural
and non-agricultural alike, the following short table will give some idea.
.

SUMMARY OF FEDERAL RESERVE BA.l'iiK REDISCOUNT OPERATIONS
1919 - 1921.

F. R. Bank
Boston

(660 1 s omit ted)
Per cent
January
Peak of Rediscounts
of
Date Increase
1919
.Amount

(OOO's
omitted)
December
1921

Per cent of
Decrease
from Peak

$ 125,356

$195,865

N'.ar.l920

56.0

$59,171

59.0

New York

633,701

93? ,223

Oct. 1920

48.0

209,080

77.6

Philadelphia

171,3}3

213,9/'J

Ivhy 1920

25.1

3&,552

53.3

Cleveland

95,679

221,667

Sep. 1920 132.6

114,594

48.4

Richmond

33,074

115,499

Nov .. 1920

39·7

94,668

13.0

Atlanta

71,206

140 , 6T)

Oct. 1920

97.1

90,327

35·7

.Chicago

153,865

475 ,&6S

Dec. 1920. 210.4

185,520

61.0

St. Louis

53,594

120,654

Oct. 1920 126.4

63,053

47-5

Minneapolis

21,733

84,670

Oct. 1920 300.0

51,212

39-2

Kansas City

63,536

115,777

Oct. 1920

32.5

69,960

39·1

Dallas

50,348

77,63G

::.ct. 1920

54.0

50,597

35-0

San Francisco

77,03G

170,156

S.:;;t. 1920 125.9

67,093

6o.5

1,601,128

2,&01,237

74.9 1,144,347

59·1

Total
l.

Oct. 1920

Federal Reserve Bulletin, 1919-20-21
A glance serves to show that expansion and contraction alike were
considerable.

The agricultural districts made by :.far the larger

percentage expansion, and also made smaller contractions; in the
non-agricultural districts the average expansion for each Federal

I--- ', ..':3
-· )2 R-=:s~rvc :Dsnk 'N::ts

64.1%, nnci. zncn bnnk contractdd on an a78rage

the agricul turc,l bonks, on tha ot;har h:md, while
there

3.lmost twice as great a.n axpansi.on, 129.4%, there

WaD

w:;,s only a 46 ·7~ contretction.

In other words, while the

contr:1.ction of the :Boston, New York, Philadelphi::l. districts,
in every case brought the radiscount item down far lower th:m.
it h::td stood in J::1nu:.:1.ry

1919, the ::l.griculturetl districts,

(all axcept:'San Francisco) 1 held at the end of 1921 ::tppreciahly
larger rediscounts than in J:.muary

1919 ~

Contr::tction, there-

fe>re, was less thoro-going, lass drastic, less far-reaching
in agricultural than in non-:.1.gricul tural regions.

There was

no discrimination - the farming district received relatively
gJ~aatdr

aid than the industrial section, and they were accorded

a nuch more leniant treatment whan th,J "dies irae" of contrn.ction
Ct:ml3•

This conclusion is pow8rfully

strength~n8d

by introduc-

illg into the analysis the factor of inter-resarv.:J bank accommodation•

"During thG p3riod of gr;;..::.t::st demand for interbank

n.ecomnodn.tion, in fact from April 1920, until January 1921, thG
principal banks granting accormnodn.tion werG thosa of Boston,
Cleveland, :::.nd N0w York. fha th!';;c South.Jrn banks, Richmond,

Atlanta, ond Jc.lliJ.s ,owing to the d.;clina in the price of
c,:;,tton,

D.S

well .c.s tha middl2 west.:'!rn banks of Chicago, St.

San Francisco figure w~s 10 million lowar; it is baln.nced, howaver, by a 10 million higher figure in Cleveland.

x-~r

- 33 .
Louis, Minneapolis, and Knns3.s C·Lty, vvhere d.ccreases ::n the
prices of othar ::tgricul t1Jr::1l

t ,plas wera felt, were receiving

accommodatl.on from oth<Jr reserva b:ml':s throug.'Iout the period of
greatest stress in 1920". 1 • The case :Ls understated, if anything,
for during 1921 the same three b~nks2

continu~d to lend largely

to the banks of Richmond, .i'ctlanta, Minneapolis, and Dallas ..
Chicago was a minor borrower, r;md

apparentl;~r

got wh3-t little

help i t needed, from th3 neij:1boring bcmk of St. Louis)

The

inference is pl3.in: the agricultural districts needed help the industrial districts suppli.oi it
nation.

- there was no discimi-

''That is a pretty good. ::.1libi 11 5 for the Board. for it

is the medium through which inter-b31'lk accommodation is arranged.

'l1le Act6

authorizes the Board "to permit, or ••• to re-

quire Federal Reserve Banks to r2discount the discount3d p).per
of other F.;;deral Res0rve banks

•. "

Governor Harding has said

that in the str.;;ss:ful timas in the fall of 1920 the Board was
11

delugad 11 with telegrams from rasarve banl:::s seeking help in

•

this way,

an~,

although "it was pretty close figuring trying

to keep the reservas", not once was a requ.:;st refuseli~

7 .rust

how low the reserves got may bd seen from the following table.

1.
2.

3.
4.

5·

7·

Feder:..l R2s0rv:J Bulletin, p. 26, J~m. 1922
New Yorl: w;;..s Jorrowing J::u-. to Tv'i;.1rch.
Ibid. I p. 27C- 9.
11 Those (d.istricts) Nhich lLViic received accommodation from othsrs
hav~ bean prim.::.ril;l ~lgricu1turol districts," ~1nd help c::me from
nthe distinctly industrLl districts:!. Feder::1l Reserve Bulla tin
vol. 7, p. 1032. Sept. 1921.
SeeN. Y. Timo~, in ~n editoric,l, p. 14. 21 July 19.21.
Sec. 11.
In ~t2stirr~nr befo~e Joint Corrmission of Agri~ultural Inquiry,
4 ;~ug. 1921, N. Y. Times, 5 J~ug. 1921, p. 17.

·'"'

•'

- ]l-t -

Reserve Ratio

of Federal Reserve Syst..'lm, 1919-1921.1

Month

1919

1920

1921

January

51.2

44.5

4g.o

April

52.2

42.1~

54.8

July

50.s

44.2

63-7

October

49-7

43.1

70.6

Of the individual banks Dallas rnn lowest;

from April of 1920 to

November of 1921 the adjusted ratio Nas never over 37%, and at
thr~e times (Sep. 1921, Aug., Sept.,l920), it was as far down as

105;. Richniond and Atlanta, Minne:tpolis and Kansas City also
showed low reserves; while Boston, Philadelphia, and Cleveland
ran higher, with Naw York hovaring about the 407b mark during
a large pc..rt of 1920.

One finnl buttress to this section C?f tha argum9nt:
New York occupies a peculiar place in a discussion such as the
present one.

Thougn not in a positionmrectly to extend aid to

farming regions the reservo

there 1n1doubtedly affords no

:\,ittle help in a roundabout W:tY, for its member banks loan
largely to correspondent banks;
~ssumption

surely it is a reasonable

that some of the credit so extended ultimately

reaches the farmer.3

3·

For 1919, W. M. Persons. "The Basis for Credit Expansion under
the Federal Raserve System. 11 Review of Economic Statistics,
Jan. 1920, p. 24. For 1920-21, Federal Reserva Bulletin, Jan.
1922, P• 30-1 ..
Federal Reserve Bulletin, p. 30-1, Jan. 1922.
Annual Report of Federal Reserve Board 1920, p. 15-18. The
same ho~ds true of member b~s in other centers - Minneapolis,
Chicago, Kansas City, & 31.

"'l

X--J503

- 35 It has been provad conclusively that the agricultural
regions of

th~

country were, far from being discriminated against

in the expansion
ly favored.

~nd

contraction of cradit, on tha contrary, high-

The S3ma conclusion, that agricultura was not ill

treated, but rathar

gre~tly

pampered can be reached by a slightly

different road, following another guidepost -was agriculture as
such discriminated

ag~:.inst?

Here, as before, the first

well be a survey of the system ::::.s a whole:

(See chart on page 35a)

ste~

may

t -~""!

·~ ....

X-3503

- 35a-

FED"21LL R -:s~~Hv--: J_'JCS 1 EOLDINGS

of
:,GIU CTJLTtn:,-:.t 3.l:1d u~.rc-:?'TOC-~ P !·P~TI

1919 - 1')21

-250

250 -

200 '

-100

100 -

.-.

200

-150

150 -

-... -................ ... '

- 50

§
~

•

1-1

§
!-;)

+>
0

!-;)

1-1

..At
·~

+>
CJ

1 9 2 0

1 9 l 9
Fader::1l B::s8rvc; Bull din,

1919

- 1920 - 1921-

§
~

1 9 2 l

+>
0

X-3503
- 3€) -

If, in scrutinizing this chart, the general contour of th2 graph
of Tctal Rediscount Holdings (p. 31) is kept in mind, only a
mininum of explanation will be necess::1.ry.

It will bs racallod

th::J.t th-> earlier chart consisted of Etrce "steps" and a toboggan
slide; the prasent one, on the othar hand, has but one great
"step" ond no Slide - in its place

ther,~

is an extensive plateau.

During 1919 there was no expansion of agricultural and livestock
paper comparable to that in rediscounts as a Whole.

The reason

is not far to seek- crops were large, prices were high, nwe
did not need money in the South, for
price, (and) busin..>ss

W,l-S

cotton was bringing a good

moving along szooothly. nl

when there was ne3d, cr3dit

w~s

In 1920,

forthcoming in large amounts;

in January thJ twelve banks held a total of ~56,905,000. of
agricultural and livestock discounts, by January of 1921 the
figur.3 had quadrupled, ~tanding at $229,048,000 (it had reached
a peak of $246,940,000 in th~ pr2ceding month).

And it stayed

at practically that same figure during a large part of 1921.
By December of that year it had receded to $173,706,000, a iecline of 27.6% from th.a pe.ik figure, while at the same time
total rediscounts were contr3.cting 59-17~ from their high markDiscrimination against AGRICULTURE,

indaed~

Tho story is tha same in the various districts, as tha
following table will show:

Senator Heflin, citation on p. 14, not.a

3·

- 37

X-3503

"'I'

...

Smillv1ARY OJ<' FEDERAL RESERVE BAN4S 1 HOTJDINGS OF AGRICULTURAL ..
JJID LIVESTOCI~ P !.J'ER 2
1919 - lr:2J...
{OOO's omitted)
January
Maximum :IoldJp:.c;?_
./\mount
1~1~
Dat2

F. R. Bank
Boston

1 1

$ 5,091

Jul 1920

(000 1 S

owitted)
December
hlcr,::lase
1221

Par C"nt

509,000.0 $

Per Cent of
Decrease
from Peak

556

53.1

New York

153

363

Dec 1)21

446.2

363

Phil adelphia

173

713

Dec 1921

315.0

715

Cleveland

117

1,777

Dec 1921

1,413.0

1 '777

o.o
o.o
o.o

Richmond

2~344

12,466

Aug 1921

432.2

9,173

26.4

Atlanta

2,229

19,233

Oct 1920

762.0

13 ,51G

29-7

Chicago

9,367

53,103

Apr 1921

520.2

46,025

20.8

155

11,593

J.ug 1921

6,169.1

0,4CO

26.9

Minneapolis

1,870

67,&31

Nov 1920

3,527.3

27,711

59-1

:leans as City

19,564

46,840

Dec 1920

139·1

29,200

37·6

Dallas

15.373

35.966

Jun 1921

133·9

26,602

26.0

San Francisco 7,601

35,476

Aus 1920

~60.2

13,773

64.3

246,940

Dec 1920

310-5

176,706

27.6

St. Louis

Total

59,001

Mar. 1919- Boston held no such paper in Jan., Feb., Apr., M:.w, June, .l.ug., or
Sep. 1919; ~by, Sep., Oct., Dec. 1920.

Federal Resartre

Hu.lJ&~i:z:l",

1g1g-20-21.

Before a condition of aff:l.irs such ~'.S the above te,ble disclos.;;s the
farmer's cry of nniscrimin::-~tion ::md Injustice!" must fade ::lW:::ty ::lS mist
before the rising sun.
\mile tot._-,.1 discounts were expanding 74-9%,
agricultur~1 and live stock discounts grew by 310-5%; while tot~l discounts CO:t:ltrn.cted 59.17&; agricul tur::;.l and live stock discotmts contracted ~nly 27.6%Wonder that thd farmer should co~l~in of such
~ condition of afL:drs is riv--Ued only by wonder ~t the absence of a
thunderous outcry from the non-n.gricul tura.l population.
If there is
any complaining to be done, (and th~ is not admitted) surely those
people h::lve the greater right to do so.

.-1 ,_-"'

- 3C -

.~' L-> ......

To prove the proof the following short taoles from the Federal Reserve Bulletin
may

be put forward:

ESTIMATED AMOUNTS OF REDISCOUNTS OJ'

P~'\PER

BASED ON PRODUCTION AND SALE

OF FARM PRODUC:::'S, 1919 - 20.

:F. R. Bank
Boston

1919

1920

2,642,000

4,979,000

REMARKS

Farm and dairy loans onlY·
Add adv<J.nces on cotton :md

wool, etc.

New York

(1)

Philadelphia

(l)

Add paper of wool dealers, cotton
merchants, implement rnen 7 & al.

3,5GO,OOO
2

Cleveland

612,000

1,753,000

in addition many members borrow
on u. 5. Securwties and use pro ceeds to aid agriculture.

Richmond

102,000,000

325,000,000

Exclusive of commercial paper
discounts proceeds
of which went to ai~ agr1euiture.

Atlanta

91,300,000

230,000,000

As above.

Chicago

47,263,000

l28,4oC,OOO

As above.
2

Sf, Louis

• 220,000,000

665,000,000

Minneapolis

75,000,000

225,000,000

I'">.ansas City

123,4<11,000

229;431,000

Dallas

28,297,000

44,911,000

San Francisco

35.0007000

122,000,000

729,26611000

1,980,063,000

Total

Exclusive of member banks I
collateral borrowing to aid
agriculture ..

1. No data.
2·. 11 months.

J . .Annual Report, Federal Reserve Board,

1920,

17.

- 39

X-3503

INCREASE OR DECREASE IN LOANS, BORROWINGS AND
DEPOSITS OF MEMBER BANKS, 1920-1. (1)
(Amounts in millions of dollars)
Total
Serni-Agri.Counties Non-Agri. Countie-s
Arnt
••
:
:
Amt.
:Percent
Amt. :Percent Amt.
Parcent
Percent

Agri. Counties

Loans and
:
Discounts
-36.5: -1.2
Borrowings from
:
F. R. Banks
+127 6: +56·5
Borrowings from
:
other BankS
+45. 2: +65- 7
Total Deposits -411.8: -11.1

-13.7:

.
-0-3:.

+6.1:
-87-7:

(1) Federal Reserve Bulletin. Sep.

1921,

-1.3

-5.6

-882.): -4 .. 5

-629.1: -28·5

-501 .. 8: -19·5
..

+0.6
-4.4

+51.8: +27·3
-1165.2: -5·T

-827.1:

-0.2
+19 .. 0
-0.2
p.

+0.5:
-665.7:

104J ..

BORROWINGS FROM FEDERAL RESERVE BANKS COMPARED
WITH BASIC LINE ON 28 APRIL, 1921. (1).

(Amounts in millions of dollars)

R. Banks

Agricultural Counties
Semi-.Agri. Counties
Non-!.gri. Counties
Darrow-: Basic :Ratio :Borrow-: :Basic :Ratio Borrow-: Basic : Ratio
ings : Line :of (1) ings ~ Line :of (1) irtgs : Line ! of (1)
: ".Amt.
Amt.
:to (2) .Amt., ~ .Amt. :to (2) .Amt. : .Amt • : to (2)
(1)
! (2)
(1)
: (2)
: Per
: Per
(1) : (2)
: Per
..
;
:
:cent
:cent
cent
:

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis.
Minneapolis
Kansas City
Dallas
Sa.n Francisco
Total

.
..
..

.
!

(1) Federal Reserve Bulletin, Sep .. 1921, p. 1050.

4.6 : 53-5
2.9 : 50.0
l.a :: 10.7
8.8 : 24.6
6.
: 59.!+
35·7
8.6 : 15.7 . 54.8 . 3.6 : 6.3 .. 56-7
6.4 : 21.6 : 29.4 19·3 : 57.6.: 33·5t
24.3 . 19.9 ! 122.3 22.1 : 12.7 :17).9
29 .. 7 : 15·9 : 186 .. 8 19.4 : 12 .. 4 :156.9
83 .. 4 : 72-2 : 115·5 33·1 : 31.6 :104.7
2.0 : 4.2 : 48 .. 1
23.0 .. 22·2 : 103-7
36.1 .. 33·3 : 108.6
4.7: 7. 7 ! 61.7
74.0
5·8 .: 11.0 :. 53·0
a3·3 :. 45.1:. 116.4
·11.2
.
5-.8
15.7 . 71.6
39-3
51 .. 2 . 41.4 : 123.6
8.5 : 18.6 : 45.7
.
..
:
• .
;
:
:
191.4
137.6
71.9
99 .. 2
353·1 : 355·8
Z-5 :

95.1 : 1G4.l
574.1 :1053.0
136.2 . 171 .. 0
114.5 r 180.7
78-2 . 68.8
63 .. 6 : 55-0
250·3 .: 300.1
ss.s
55·7
34-5 : 39-6
56.1 : 72.. 9
15-7 : 28.7
103.8 : 145.4

1.577. 8
•.

.
..

51.7
.. 53-0
79.0
: 63·3
.. 113-7
..: 115.6
83.4
: 62.7
.:. S7.0
77.0
... 54.7
. 71-3
:
:

:2418~1 :

65.2

l ,·-. '
- ,f~

.. 4o A study uf i;l"Jc; above t.a'JL.:;:

very little

vhile it may fill in the chinks, adds

v:11at h2.s r,lrcady been proved.

borne home '1o forcibly

<:tt

The simple truth,

every step along the two roads we have

followed, is that the farmer has not a leg to stand on when he
seeks to put himself forward and cry

have not been given fair

treatment!"
In delving into tha logomachy between the attackers and
defenders of the Federal Reserve System one encounters the most
amazing charges as to the part played by the System in the col-

Mr. Benjamin Marsh, director of the Farmer's

lapse of prices.

National Council, in December 1920 told the Chicago Federation
of Labor that ttpredatory financial interests" control the Federal Reserve System, and that a conspiracy existed to drive
the prices of farm products below the cost of production. 1
Maurice

McAuliff~,

Mr.

president of the Kansas Farmer's Union, told the

Joint Qommission of Agricultural Inquiry" 'that the deflation
of agricultural products was 'artificially and criminally precipitated' n. 2

.And so on.

The charge is a persistent note in

the farmerts hymn of hate; it is not a new strain, merely an
old and familiar chord in

new setting.

It is inconceivable

that those who advance it do so seriously, the idea is too
grotesque.

But it remains and enC:::.·r2s,a veritable jack..:.in-

________

---··_;...__

1.
2.

N. Y. Times, 7 Dec. 1920, p. 12.
Ibid. 15 July 1921, p. 10.

r•.

X-3503
- 41the-box, al ~ernably subsiding anci :reappearing..

In the present

instance we are fortunately able to dismiss it with ease.

All

that is necessary is l'ecour:>e to the table of price indexes given
above (p .. 19) and to the graphs of total rediscounts (p. 2G) and
agricultural and live-stock rediscounts (p. 35).
it was precisely during
t~at

~he

There we see that

period of falling agricultural prices

the Federal Reserve banks gave their greatest aid to agricul-

ture.

That they did so to the farmer's disadvantage is now

recog~

nized: "if their credits had been reduced when prices were higher,
and were seen to be destined for a

fall~

the farmers would have

had in their pockets millions which they lost by following the
advice of those who now are proposing to heckle the Federal Reserve."

Thus the charge that the Federal Reserve Board and

Banks, bewitched by

the Delila..'-! of Wall Street, u

exertod a

malign influence upon the course of prices bears the light no
better than the charge of unfavorable credit discimination ..
It will be remembered that the second main complaint,
or group of complaints, centered around the earnings of the
Federal Reserve banks. and their usurious rates of discount. 3
A detailed discussion of the rates is not necessary for our
purpose.

Suffice it to repeat that m1ring 1919 they were held

at artificially low levels due to the exigencies of the war

1.
2.

3·

N. Y. Times in an editorial, 15 July 1921, p. 10.
See Sen. Heflin in Cong. Rec. 19 Dec. 1921, p. 610.
See above p. 5·

X-3503

- 42 -financing

opErr.~.~io.1s (Jf

of 1920 th""'y

~h-:;

i7ei..'2- p~t up

Go-:ar::una:nt; that starting in January

6 and 75;, remaining thar::l to ths

spring of 1921, w.b·::m they bag3.:n to drop, reaching the 4~ and

57o lev8l

in Novembar.

90 to 160 day paper (typically agricultural

and live-stock) recc; ived the same treatment as the typically cornmercial and industrial

day paper.

The level of rates

was on the whole the sarni'l the country over, with slightly higher
figures in those districts .twhich had low reserves.l
the

In regard to

magnitude of the rates there is this to be said - borrowers

are never, and will never be, quite satisfied with them, no
matter how low they may go; 2
did go as high as

and

7%,

and if, during these years, they
it must be remembered they were put

there with a purposa, - a purposci that was not a profi t-rnaking
one. 3
The

usurious 11 rates of so many of the attacks upon the

Federal Reserve are the

progressive 11 rates in affect in four of

the districts during parts of 1920 and 1921.

These rates derive

their sanction from an amendment to the Federal Reserve Act,
passed in April of 1920, at the request of the Board.

The

amend.mant authorized, "Federal Reserve B.::mks, subject to the
approval, review, and determination of the Federal Reserve Board
to astablish discount rates graduated or progressed on the

1. ·: $ee P• 34 above.
The influence of the artific:ially low rates of 1919 in leading
borrowers to expect more than they should hnve in the way of
'iediseount rates is not to ba overlooked.
3-' See p. 10 above.

. ,

:. ..• ·:..

::t..

X-3503
- 43basis of the

a.~1our-..r,

of the a.dw:..nces aYJ.d disco,mt accomnod"ltions

extended by the :Fc:deral B.eserve Bank t::> the borrowing bank. n
The P'.ll'pose cf

-~hi~

amendmen ~;

fr.:m Federal Reserve J3c:nks
possible :·or

th'~

·b;:'

"/3.S

to c'c ~ck Bxcc:ssiv-e borrowing

ca:.y nne n;e::mtcr bank by making it

F3ueral :t:.eservs Bcxr..k., to charge higher tatas

against a member baJ1.'k whir.L is

o~,,::;rborrowing

than against one

which limits its borrowings to a reasonable an:.ount.

l•

Soon

after they were authorized pr0grcssive rates were established
by the banks of Kansas City, St. l.o'"-is, Atlanta and Dallas.For
the first three banks the basic line was a sum two and one hall"
times 65% of the reserve balance required to be kept by the
member bank, plus its paid up subscription to capital stock in
the Federal Reserve Bank; for

Dallas~

the basic line was the

eq_Uivalent to the member bank's combin;;;d. capital and surplus.
Discounts in excess of th..;;sG amounts werE c:ta.rged the normal
rate plus ~% for each excess accoLrnoda.tion of 25~ a'Jove the
base line.

Inasmuch as the progressive ra.te applie<> only to

excess borrowings a oank vvi th acconrnodations equal to r.nice its
baric line would be subject to a maximum penalty of only 2).~;
and as the 2% applies only to tb.s last increment of 25:,Q of the
basic line the average penalty on the entire borrowing would
be only 0.625~'•

In actual application the surcha.rge was gener-

ally from~ to ~%; excessively high rates were necessary
only in isolated cases, particularly whar0 the member bank

Annual Report, Federal Reserve Board,

1920

97·

,.._, ,.,....,.

X-3503

- 44 ...

-~-

allowed its resarve ba19..Ilc.e w.i.ch tr.t;; Federal Reserve BanL to
sin~

b·c::low thu h,g,:..l minimum, LHs reducing

ts basic line.

Pr::>gr es.::iv\:.. r2.tes ,-,t:rc in fo."Cc in At].anta from May to
Nover:.be::- 1920 1 in Detllas, MJ.j' 1920 tc :..··cb:n13.::y 1921; in St. Louis
Ma;r l920 to Ji.lne 1921; 2nd in K'lnsas C5 iy, .A9ri l 1920 to August

1921.

Mr. Jc:m Skcl ton V.'illiarr;s in particular has made much
ado about these rates, a..'Yld in his entJ:msi'lsrn has rather overreached himself.

A charge of a 200% rate appears to have been, in

r;:;ality, something like this - a mar.ber bank, borrowing from the
Federal Reserve Bank at
about 2009~. 3

chargBQ

2 customer the equivalent of

This proves nothing, for the Federal Reserve has no

concern with or control over rates charged by menbers to their
clients.

nMr. Williams alono is informed about his special

cases, but the .Agric..-..ltural :Department is equal or better authority on the rates of interest paid by

farm.~rs

in gen.sral";

a...'1d in 1920 the rate was 7·95%,witr 9.06~., tha highest average for any
district.
;:7~%

It was shown that one small southern

ba~k

was charged

a bank that was below its legal reserve for eleven out

of twelve months, which had exceaded its basic

1.
2.

Annual Report. Federal Reserve Board, 1920, pp. 53-9.
J .. S. Davis, ''World Banking, Currency & Prices, 1920-1".
Review Economic Statistics, Sept. 1921, p. 306.
Hearings,: Joint Comnission Agricultural Inquiry, LX·

3.
4. ~'Tf~e~~ 1 ~dl~~iia£; ~~·July,

5·

· .·

1921, p. 14.
·
Hearings, Joint Com~ission of Agricultural Inauiry; seG. D
Friday, 11 Federal Reserve & th_; Farmer", New Ra:p;:1blic, 15. f.sb.
1922.
,.·

•,

.~~.,

-r

~·JIIj

X-3503

.....

- 45 line nearly tenfold, which h::td loaned. 90% of i.ts capital upon
not2s endorsed ·by its presidentl - but the Board. ordered the
excess over 12% raturn3d.2
Progr.;;ssiva r?..tas, th"-'n, w:..;rd usurious neither in purp-ose nor 1n

opc;r~ction;

they were

m.;r.~ly

a part of th2 BoarJ. 1 s

policy of getting crP-clit conditions .under control, and. were
aband.onc:J. as the n.:;ac.i for th-2m p:.:ssed.
No one u.enies th::tt tha F Jier,1l Reserve banks mad.e in
the period under discussion, incrad.jbly lnrge profits.
that was to be

expect~J..

But

Vfu2ther rediscount rates are high or

low profits may be expcct0d to be high if a large use is m::tde
of r2discount facilities.3
in 1919-21.

.Anu. th~tt is precisely what happened

One can harJ.ly blQffie the critics for objecting to

the earnings of the Fe..ier::1l Reserv.:; banks, for they ar..; fatal to
the .critics' c::1se in regard to d.iscrit:1in::J.tion: The whole m'1.tter
is absurdly simple- the $101,000,000 gross

eral aeserve System during 1920

eC~.rnings

of the Fad-

are tha best possible proof that

the banks did help business, ..1gricul ture includ.e:i.
ings been small, the charge th:c1.t hdp

W::J.S

H:..d the e::rn-

not givan, thc-::.t ugricul-

ture wus discriminated .:1-gainst would have been just so much strong-

1.
2.
3.

Sen. Glass, Con6· Rec. 24 Jan. 1922 (speech delivered 16-17 Jan.
1922), p. 7G70-04.
David Friday, "Federal Reserve & the Farmer", New Republic, 15
Feb. 1922.
"During a period of credit strain it is natural :.:;.nd inevitable that
the volume of business of the Fe,i::Jral RJserve Eanks will be large.
With a large vollL~e of business their earnings will naturally be
large. 11 Letter, J. H. Rich, Faderal Reserve Agent, 9th District
(Mpls.) to Editor, Pioneer Pr.:;ss, St. Paul, Minn., 12 Nov. 1921.
.Annual Report of F..:Jdeol Reserve Board, 1920, p. 87.

~-~

.~,

X-3j03
- 1+6 er; tha gre2tor th~ earnings - and thosa of the banks in th0
eight non-agric\.11 tural distr1cts w~r e relat ivdy qui ta as la.rge
as thosa of th.:; four bi.(:ger bc.nksl - the weak2r from the outset
is tha critics' casa.

It would have been far wiser for tham to

•

drop this particular chc1rga, for it h::ld (and has) very much of
the nature of a boome,rang.

It n.3dds no further proof, and de-

fenders of tha Syst;m shoulci l)a quit; content to ace apt any
figur."s in this regard that the attackers may o.dvance.

The

bigger tha earninii,S the bigger tha outcry - and the harder the
repercussion upon the complainants.
And yet wet:;; the earnings so large?

Upon capit~.l ::-.J.one

in 1920 they wars 153 .• 4)~, i t is tru0~ and upon capital and surplus combinad th:.;y wen 62.95·~.

But tha Federc.cl Reserva :Banks

have deposits of a billion and a h.:tlf {the reserves of member
banks) upon which they pay no inter..;st; includ13 thc:se and the
earnings shrink to a

conser'.rative

·77o.

Tn_m, too, there

,lX,]

Federal Reserve notes, ::mother larg.;; sourc0 0f earnings.

they are included with r.;;serve deposits, capital, and surpl;:..s
n

the 1920 earnings of the System dwindle to a nominal 2 ·9]6 . .c::
1:he following diagram brings :::.11 this out most affactively:

1.
2.

1\nnual Report 9f Feder.:1l R;;sery.-:::__:Bo~1rd 1920, P· 113-9.
Summn.ry of Gov. Harding's spe-ach whila on tour in West,
1921. Federal Raserv~ Eullotin, Jun~ 1921, p. 673·

the

X-3503
- 47 -

(See chart on page 47a)

The profits of the Fc:ciaral Raserve

R:~.nks

were enormous

and. th2 BoQ,rci grew dizzy with so much waa1 th :tt thejr commQ,nd,
and proce,aded ·to raise sal:tries ::.nd plan 3xpansiv0 buildings. nl

So may the .thir.:i of tha princip1.l charges :::gainst tha Federal
Reserve

formulatad.

It is tl13 irony of circurnst:..nce, that,

of the three charg..::s we ar-:> herd mainly concerned with, this one,
anJ the last in order of importance ani the l3aSt

From a private latt2r, March 1922.

signific~nt,

shoulj

X-3503
- 47a -

Net Earnings of Federal Reserve Barlks in 1920
Related to Daily Average Paid-in Capital,
Surplus, Members' .Reserve Deposits
and
Federal Reserve Note Circulation.

Billions
of
Dollars

5
4

- 4

- 3

0
El
nnttlluj.
ll t! II 1111

t~u:~~ I

l. . .

~/i1L'1,
_''II" t: ''

F·. R. Not<J Circulation

Surflus
Capital
Net 3arnings

I
'

(FrQm F3-detal R:: sarve Bulletin Juru, 1921, })·

673)

48 ..
be the one containing the most t:ruth.

X-3503

ttT.he salaries paid by the Federal

Reserve Banks need very little comment.

They are not excessive and are

maintained at a level which is lower ••

. . . . than

the conpensation for

equal and similar services in commercial banks. n In the year 1920 the
twenty-two banks in the United States with net resources of $100,000,000 or
more spent in salaries to officers from $85,000

to~E09,000,

only four

spending less than $200,000.

During the same time the officers salaries

accounts of the Federal Reserve Banks were as follows:

SALARIES OF OFFICERS AND DfilLOYEES OF FEDERAL RESERVE BANES, 1920.
Average Salary
Total amTotal am- Average Sal arx
mount of Officers Employees
mount of Officers En:;ployees
F. R. Banks officers
F. R. Banks officers
salaries
salaries
Boston

116,600

9,269

1,271

Chicago

216,541

6,304

1,310

New York

383,760 11,275

1,460

St. Louis

126,916

6,486

1,209

Philadelphia

123,338

10,182

1,259

Minneapolis

77,637

7,24o

1,262

Cleveland

143,171

7,738

1,360

Kansas City 116,274

5,158

1,209

Richmond

105,945

7,014

1,189

Dallas

117,768

5,895

1,271

Atlanta

156,996

5,426

1,149

San Fran ..

188,017

5,581

1,366

1. Annual Report, Federal Reserve Board, 1920, P• 115.
1. Letter J. H. Rich, Federal Reserve Agt., 9th Dist. to Editor, Pioneer
Press, St. Paul, Minn. 12 Nov. 1921, also in Commercial ~. 19 Nov.
1921, p. 20-1.
2. Report Co~tro1ler Currency for 1920, vol. 1, p. 58.
3· Annual Report, Federal Reserve Board, 1920, p. 115.

X-3503

- 49 Naod more ba said?
sal~ies th~
Fi~

So far from having paid unduly

l~rge

tendency has bean rather in the othar direction.

governors of Federal

Reserve

b~nks

have been

t~ken

away by

commercb.l b;mks at increased sal:lries, and "3.11 Federal R.oserve
:Banks have experienced the same drain on their official st:::..ffs ••• 11
As regards building exp:mdi tuns the opposition has a
better cas.;;.
nate.

To s.c.y tho L:J.:::.s.t some of the estim.J.tes are unfortu-

In New York, 5~ millions have already been spent, and the

estimated final cost is 17~ mill ions;

in Chicago, 5~ millions

have been spent, with 102 the final goal; in Cleveland,
are to be spent, in Minneapolis t 3:2; and so on. 2
believe that suitablG

buil~inbs

6 millions

It is hard to

could not have been had for

somewhat less thon th.3se appear to be costing.

However, besid.e·

the larger issues involved in the farmer's fe2ling toward the
Federal Reserve, this

m_~tter

of th:; build.ings is infini tesinnl.

in importance; nor is it a subj.;;ct psrt::dning to the farmers
alona.

In happier days, in mor2 prospsrous times, it would

probnbly have been ov8rlool:ed.

In any

amendment to the Federal Resarv0 Lct3

C:lSe,

if th:j proposc·i

passes th2 future will be

guarded against a repetition of the charge.
And now th0 w.;;b is spun, the structura complet2d.

1.
2.

3·

The

J. H. Rich :1.s above.
Fadaral R2aerve Bo::wd figur Js, q_uoLd in V\3.11 St. Journ:.U.
6 Feb. 1922, 3l10. from i t in !vifrs. :aecord, 2 I,lch. 1922, P• .34.
See P• 22 above.

X-3503
- 50
farmar's case has baen st~taQ, tha circumstances leading to it
outlinad, it-> risa ani prograss tracad, :1nd. the case itself tried
for its ju3tice and truth.

It has been shown that, whila there

may be some ground for censuring the building expendi tur 3S of the
System, there is certainly no Nasonable cause for finding fault
with the salaries it h:1s paid.

~xcessively

large earnings and

usurious rates of di6count have been demonstrated to ba, the one
a misconception

~d.

a boomerang, th3 other a rrwth.

the main count in the

f~rmar's

And as for

inQictmant, the point upon which

his whole case must stand. or fall, it has ba3n proved conclusivaly

end

beyond doubt that the cry

11 Discimination1 11

was true only

in the opposite sense from th.:1t in which the critics used it.
11 The

real discimin::::.tion was in tl:.e farmer's favor.

The point

is worth establishing because it is of the first import:1nce to
the country that the fanners should. not have just causa for
complaint. 111
Of the Nsul ts of the farmers'
be ventured.

The first anQ most

War Finance Corporation -

-~ns

att:.:~cks

imm~di~te

- the

a brief word. may
reviv~l

of the

p:::tc:ntly but a btop-g::::.p, c:m expe-

ci.ient which conceivably may basr to :lgricul tural credit thcl
ralation borne by tho; Alcl.rich-Vre<3Lmd Act to b2.nking as a
whole.

Tha third (in point of time) was the attempt to add

another member to tha Federal R0s0rvc: :BoarJ., with tha idea of
insuring tha farmars a repr:::sant,ttiva in that body.

N. Y. Times editorial 4 Aug. 1921, p. 14.

If the

X-3503

- 51 amend.m;;!nt passes it c::m have no

very e;re:oct parnnnent affect;

it will stand simply a sigr. of the times,

will it be irrportant.

,~gricultural

Inquiry, its h;:;arings,

outwaighs in significanca for the future both of

the others compinad.
and careful

only as such

The second rasu.l t - tha ast8-bl ishing

of the Joint Commission of
and report

~md.

It has served to direct serious thought

con~ideration

to tha Neak spot in our banking

fabric - provision for agricultural crecii ts.

VJh:tt further

steps, what permanent measures will be adopted the future
must reveal.

At a.'ly -r::tta, the pario.:i of sharpest attack

upon the Feder::tl
hav~ng

Reserve i

over, the return of higher pricas

acted as a soothing ointment to haal the farmars

ness and animus.

bitter-

1032.
FEDERAL RESERVE BOARD
WASHINGTON

X-3504
August 16, 1922.
SUBJECT:

Charging Back of Gover~nt Warrants and Checks
Previously Paid by Treasurer of United States.

Dear Sir:
On July 10, 1)22, the Bo~rd sent to a+l Federal Reserve
Banks a latt~r (X-3471), subj~ct "Amendment to Check Collection
Circulars Suggastad by Tre2l.sury Dep:1rtment 11 , dealing with the
Treasury's practice with regara. to the b.ter ch:lrging back of
Governmant warrants o.nd checks previously paid by tha Treasurer
of the Unit~d States.
In thi~ connection ther~ is enclosed
hareNith, for your information, co;y of a letter received today
from the Sacret;;.ry of the Treasury tr:msmitting copies of
correspondence betw~en the,Trea~ury Dep~rtment ~d the National
City Bank of New York, setting for~~ 1n f~l the Treasury's
position with regard to the charging back of ·Government items,
the method of h:t.nd.ling such it;ms 'Qy the Federal Reserve Banks
· upon charging back :.md the respective functions of the Fadernl.
Il.eserva Ea.nks and the Treas;ury with regard to reclamation on
such items.

Very truly yours ,

Vice Governor.
(Enclosure)

TO THE GOV3BNORS OF .ALL 11'.
COPIES TO AG3NTS~

BLlGS

0 p

y
...
THE SECI&'"TARY OF THE TREASURY

X-3504a

Washington

fit' dear

Mr~

August 12, 1922.

Platt:

Referring ,to previous correspondence relative
to the Treasury's practice with regard to the later
charging back of Government warrants and checks previously paid by the Treasurer of the United States, I
enclose copies of recent correspondence between the
Treasury and the National City Bank, consisting of the
Bank's letters of July S, 1922, July 27, 1922, and August
7, 1922, and my letters of July 19, 1922 and July 29;
1922.
These letters set forth in full the Treasury's
position with regard to tha later charging back of
Government items, the method of handling such items by
the Federal Reserve Banks upon chargi?;lg back, and the
respective functions of the Federal Reserve Banks and
the Treasury with regard to reclamation on such items.
As there has recently been considerable misunderstanding
and difficulty regarding this matter, mu.ch of which has
been traceable to the action of the National City Bank,
I would suggest the advisability of sending copies of
the correspondence to all the Federal Reserve Banks in
connection with your previous circular lettar on this
subject dated July 10, 1922.
Very truly yours,
(Signed) A.

•

Bon. Edmmd Platt,
Vice-tJovernor, Federal Reserve £oard,
Washington, D. C.

5 enclosures.

Mellon,
Secretary •

THE NATIONAL CITY BJJ[[
of New York
New York,. August 7, 1922

Office of tha
President

My dear Mr. Mellon:

I have received your letter of July 29th regarding the form of credit advice used by us with respect
to w2.I'rants and checks dravvn on the Treasury of the
United St:;~.tes, o.nd I delayed a reply until, for the
~pose of our record, a confi~tion of your definition of the capacity in which the Federal Reserve Danl:
acted in such matters was obtained through Mr. Strong,
who advised me that a copy of your letter had been
sent to him.
That confirmation has now been received,
s.nd I am plea5.,d. to write that. with a full concurrence
of counsel we have dete~ined to discontinue the form
of credit advice whieh was obj actionable to you.
This matter sto.nds in a much clearer light
tho.n heretofore, and I want to expr~ss my personal
appreciation for your cooperation in closing it thus
satisfactorily.
Yours very truly,
(Signed)

E. Mitchell
President •

.'
Hon. .Andrew W.. Mellon
Secret~ry of the Tre~sury,
Washington, D. c.
J

(Copy)
THE SECRETARY OF THE TREASURY
Washington

29 , 1922.
X-3504a

July

Dear Mr. Mi tchall:
I

I received your letters of July 24 and July 27, 1922 regarding the form of credit advice used by the National City Bank of
New York with respect to warrants and checks drawn on the Treasurer
of t~e United States. I note that your counsel are not satisfied on
the question as to whether the Federal Reserve Bank acts in a private
or governmental capacity in handling ~ch items, and that this question is in their opinion relevant, for the reason that the Federal
Government would not be barred by the statute of limitations and in
case of a forged endorsement ~ght bring action for recovery years
after the discovery of the forgery when an ordinary i:ndividual would
be barred by the lapse of time. The Federal Reserve Banks do not
pay Government warrants and checks, but cash them under Treasury
regUlations. The ~ea~rer of the United States, as the drawee of
Government warrants and checks, makes payment thereof, and the
Government, rather than the Federal Reserve Bank, is the real party
at interest when the question arises of recovery on warrants and
checks paid on forged endorsements. I take it to be clear that in
the absence of a statute expressly providing otherwise, the United
States Government would not be barred by the statute of limitations,
or by laches, and that there might therefore be cases where it could
bring suit for recovery in respect to Government warrants and checks
which had been paid on a forged endorsement, evan though enough time
might have elapsed to bar recovery by private parties similarly situated. I do not see that there is any escape from this situation. The
Government is the sovereign, and from time immemorial this has been
the rule. I do not understand, however, how this contingency justifies the form of credit advice used by t:'le National City Bank of New
York. The letter of October 3, 1921, from the Cashier of the bank
states that this clause reads as follows: -,:"All instruments against
the Government of the United States are credited'subjact to final payment by the Treasury Department. Therefore, any item which subsequently
may be returned unpaid to us by the Department will be charged back
against your account"· As the Treasury has previously pointed out, the
fact that warra:J:l,ts and checks drawn on the Treasurer of the United
States must be credited "subject to final payment by the Treasury Department" is not unusual and does not warrant any discrimination as
between commercial items and Government items. In the nature of the
case, warrants and checks must be subject to final payment by the
drawee, and the terms and conditions on~ich the Treasurer of the
United States makes examination and payment are set forth in paragraphs
35 to 38 of Treasury Department Circular No. 176, dated May 15, 1922.
The second sentence of the credit advice refers to returned items, and
the. Treasury 1 s practice in· this regard has already bean.. fully explained
in previous correspondence. Under this practice, as outlined in subdivision 2 of paragraph 37 of Trea~ry Department Circular No. 176,

.·

1036
July 29,1922.

X-3504a

-2-

warrants and checks paid by the Treasurer. which are subsequently found
to bear a forged endors~ment, or to bear any other material alteration
or defect not discoverable upon first examination, will be returned to
the Federal Reserve Bank or national bank depositary which cashed the
item, but the Federal Reserve Bank or other depositary will not be ex~
pected to give credit therefor to the Treasurer until it has actually
received reimbursement therefor from the person liable on the forger~
or alteration. The term "remitting ba."lk 11 as· used in this paragraph
applies to the Federal Res~rve B~Ylk, rather than to the bank presenting the i tern to the Federal Reserve :BBnk, as has already been explained
in mw letter of July 19, but even as between the Federal Reserve Bank
and the bank which presented the item the practice would be, as I
understand it, to call upon the presenting bank for reimbursement, and
not to charge its account with the item under any arbitrary procedure.
In other words, the 1 terns would not be "charged back" by the Federal
Reserve Bank, but would be ~reated in substance like collection items.
In the event that recovery. could not be made in this manner it would,
of course, be necessary to ,bring suit, and in ordinary course wit
would be brought by the United States, rather than by the Federal Reserve Bank, since the Federal Reserve Banks act in such matters for
account of the United States a~d the United States is the real party
· at interest. Under the procefrare thus established the items cannot
properly be said to be 11 charged back", ~d the credit advice used by
the National City Bank of New York is therefore incorrect and misle~ing. As a matter of fact, sava for the one question as to the effect
of lapse of time the procedure would be the same as with commercial
items, and on the question of the lapse of time it would, of course, be
the policy of the Treasury to rrDve at the earliest possible moment after
discovery of the forgery or alteration. The Treasury cannot undertake
that the Government in these matters will be barred by lapse of time,
but even assuming a casa where there might be a sufficient lapse of
time to bar private parties, the result would be a suit brought in
regular marm.er by the Government of the Unittid States, and not an arbitrary charging back of the item through the channels from which it was
received.
I wish that you would consider the matter further in the light
of the considerations suggested by this letter and advise me if it is
not possible under the prevailing conditions to discontinue the use of
the credit advice in question. In this connection I shQu.ld like to
refer to your Cashier's letter of December 1~, 1921, from which the
Treasury upderstood that notwi thsta.nding the point raised by counsel
the N'ation~l City Bank wou,ld change its forms as soon as the Federal
Reserve :B~ changed its circular •.
Yours very truly,
(Signed) A.W. Mellon,
Secretary.
C. E. Mitchell, Esq.,
President, The 1Nat1onal City Bank of New York,
New York, N. Y.

1037
X-3504C!.

THE NATIONAL CITY BANK
of New York
Office of
the President

New York, July 27, 1922·.

Hon • ..1\ndrew W. Mellon,
Secretary of the Treasury,
Washington, D. c.
My dear Mr. Mellon:
Referring further to your letter of July 19, regarding the
form of advice whioh we use when remitting the proceeds of Government
warrants and checks paid by· the Treasury of the United States,· I
have conferred with our counsel, upon whose de~inite advice you will
realize that we mu.st rely.
I had hoped that your letter would
definitely close the matter in their minds, but it appears that
While it did dispose of the first qu~stion raised in our letter of
July 3, it does not seem to have satisfied them on the question as
to whether the Federal Reserve :Bank acts in a private or Governmental
capacity when it pays these items.
:
This question in their opinion is relevant for the reason
that by;dacision of ·the Supreme Court, the Federal Government is not
barred ~Y the StA-tute of LimHations, and in case of a forged prior
endorse~ent might, if it saw fit, bring :m action for r::covery
several :years after it otherwise would be b_\.rred.
Consequently,
if the federal Reserve Ea~ acts as a Governmental agent in this
r~spect,: it would have the san1e po~ver, ::.nC. we ~\re ::..dvised that it
probably is not possibl~ for tha Government to depl·ive itself of
this power without express law to that effect.
~'.

''·

i feel sure you understand the difficulty of our position.
We do not want you to interpret us as doubting ~ither th3 good intentions. ot )our Department or of the Federal Reserve Ba11k, :md we
would be only too glad to acquiesce and discontinue the use of this
stamp, -but we do not wish to assume any unnecessary risk with. respect to collection items •

•. . If you have at hand any decisions or opinions showing thJ.t
the Fdderal' Reserve :Sank in receiving this type of paper for collection is acting in a private ~d not a Governmental capacityt"
so that the usual commercial laws will apply between this Barik
and it, I will be very glad to recaive them.

1038
X-3504a
New

Yorl~-,

.:;·uly 27, 1922.

.. 2 .On

raceipt of your reply to this letter, I can assure

you the nutter will be definitely closed.

Yours very truly,
(SigntJd) C. E. Mitchell

President ..

X-3504a
·THE SECRETARY OF THE TBEASURY

Washington
July 19, 1922.

PERSONAL.. ·
My dear'

JK:r. ·Mitchell:
I have received from your cashier a letter dated July

1922, with.further reference to a form of credit advice used by

....

'~··

'..

the National City ~atik of New York which contains an objectionable
statement ng. rding the charging back of Government warrants and
checks previously paid by the Treasurer of the United States. 'Ihis
credit advice has result3d in many difficulties with foreign banks,
and has been tha cause of some embarrassment to the Government of
the United States.
I had supposed that its use was discontinued
some time ago by your bank, but it noV'T appears that it is still in
use and that the bank does not yet regard the question as settled ..
The correspondence has been going on since early las·i; fall, and
thera have been several letters from yc1u· cashier, particularly
letters d::::.ted December 15, 1921, March 16, 1922, and June 21, 1922,
indicating that the National City Ecnk would discontinue the usa
of its stamp as soon as the Federal Rese~v~ 3~nk of New York revised its check collsction circ1:,J. .-.r.
Thi:3 revision was made a
couple of months ago, gnd thd F Jci;;r :.1 R;;serve , -~ank at th2.t time advi sad the Treasury thJ..t tho Ns..tion::J. City BDnk had ::>.ctually given
up the obj sction::1.'tle form of ad.vic<3. 1ipp;;..rently this J:u.s not been
done.
In these circtunstancas I should ap:praciate it if you would
give the m:~tter your personal ::~.t<o.:mtion, in order that it T!JE'.::f be
settled once ~d for all.
The 1Treasuryrs procedure in rasp~ct to returned items has
been many t±mes explained in lettars to the N~tionnl City Eank, and
the regulations of the Treasury ~nd of the Federal FBaerve Bank of
New York have been revisad in order to stata th.3 si tu2.tion in as
clear and ddfini te terms as possible.
As to the spacific qu.,;·stions
raisad in your Cashier's letter of July 6, the tarm "remitting bank''
USdd in Section 37 (2) of Treasury Department Circular No. 1{6,
as amended and supplemented May 15, 1922, means the Federal Reserve
B:mk rather than the bank which has transmitted the paper to the
Federal Reserva Bank. On the second question, as to w~ether the
"Reserve Banks in dealing with this type of paper are acting in a
Governmental or privat.:l capacity", I do not quite understand. what
is me.mt nor wh::.t rel:.:.tion the inquiry has to the matter under
discussion.
It is clear, of course, that under Section 15 of
the Federal Reserve Act, the Federal Reserve B~s act as depos~~
taries and fiscal agents of the United States, ~d their duties as
depositaries and fiscal agents in respect to the payment of Gove~ent w~rants and chacks are set forth in the provisions of.the

1010
X-3504a

July 19, 1922.

- 2 aforesaid Treasury Department Circular No. 176. '
Tha Federal
R~serve Banks also act for thair member b::mks in connaction with
the collection of checks and simil:::Lr items, ;;1nd thair responsibilities
in this re&~rd are usually set forth in their own c~rculars.
Very truly yours,
(Signed) A. W. Mellon,
Secratary.

C. E. Mitchell, Esq.,
President, The N:::Ltional City Batik of New York,
New York, N. Y•

•

...

10lt

{Copy)

THE NATIONAL. CITY BANK OF NEWYORK
New York, July S, 1922.
In

~eplying

please quote initials
C:BL-T

· X-3504a
BOn, A. w. Mellon,
Secretary of the Treasury,
Washington, D. C.
Dear Sir:

RE:-Checks and warrants drawn on the
Trea~rar of the United States.

We are glad to acknowledge your letter of June ~3, 1922,
g1v1ng assurance that it is your intention to treat checks and
warrants drawn on the Government in accordance with the usual
commercial practice, and referring us to Sections 35 to 38 of
Treasury Department Circular 176, dated May 15, 1922.

•

It is gratifying to tl'lis Ban:: to note your stand with
respect to the p9.ymant of Government checks and warrants. However,
under present banking pract-ice, as .you know, a great proportion
of this paper is collected through tue Federal Reserve Banks,
which in certain respects act as an agency of the Gover~~ent.
This has raised two~questions: first, w~1ether the 11remi tting bank"
referred to in Section 37(2) is to be interpr0ted as the Federal
Reserve Bank~ or the bank which has transmitted the paper to the
Reserve Bank, and second, whether the Reserve Banks in dealing
with tnis type of paper are acting in a sovernmental or private
capacity?
V"Te would like very much to conform to your desire and
discontinue at once the use of the stamp referred to in former
correspondence, which is subject to so much criticism from our
foreign correspondents. Our counsel. however, do not feel free
to advise that coursa until they know the attitude of the Department of the Treasury on the points mentioned.
Yours vQry truly,
(Signad) N.

Lenfestey,
Cashier.

.
FEDERAL RESERVE BOARD
WASHINGTON

X-3506
August 19, 1922.

SUBJECT:

Expense Main Line, Leased Wire System, July 1922•

Dear Sir:
Enclosed herewith yoa will find two mimeograph statements, X-3506a and X-3506b, covering in detail operations of
the main line, Leased Wire System, during the month of July,
1922.
Please credit the amount payable by your bank in the
general account, Treasurer U.S., on your books, and issue
C/D Form 1, National.Banks, for account of nsalaries and Expenses,
Federal Reserve Board, Special Fund", Leased Wire System, sanding
duplicate C/D to Federal Reserva Board.
Very truly yours,

Fiscal Agent.
(Enclosure)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.

10·13
t

X-3506a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM JroR THE K>NTH OF JULY, 1922.

From

l3ank Business

Per cent of
Total Bank
Business(*)

Treasury
Dept·.
:8\lsiness

War
Finance Corp.
Du.siness

Total

------------~~-~---~--~---------------------------~----~-----------~----~--~-------

Boston
New York
Philadelphia
Cleveland
Richmond·
.Atlanta
Chicago
st·. Louis
Minneapolis
Kansas City
Dallas
San Fraz;LCisco
\.

33,66o
177,271
57,081
75,210
63,278
56,753
1)0,792
79,612
40,)97
81,734
58,031.

J .. 42
18'.01
5.SO
. 7·64
6'.43
-s·. 77
lJ.. 29
s·.o9
4.10
8'.. 30

5·90

1~0zl6o

1,.25

Total F. :a.
l3a.nks
Washington

984,179
l00a228

1oo·.oo

Grand Total

1,284,737

Per cent of Total

TOTAL

(*)

FEDERAL RESERVE BOJJID

13~,146

84,497
1161462

451
743

1,069,127
411z166

260,962

1,194

1,546,893

lOC .. Co%

These percentagas used in calculating the
pro rata shara of 1aasdd wire expenses as shown
on the accompanying statement (X-3506b)

WASHINGTON, D. C.
August 19, 1922.

217

39.481
186,024
63,020
80,626
68,613
.64,099

16
168

1,284,737 words or 83.12%
26o,262 " u 16·.s~
1,545,699

8 ,943
47,290
90,285
62,562.
141&028

16.87%

SJ.05%

Ballk Business
·Treasury Bu.siness

5,.821
8,753
5,939
5,199
5,335
7,346
S,3o4
7,331
6,893
8,535
4,364
10!671

.os%

•

l' .•

REPORT OF UPENSE
MAIN LINE
JEDERAL RESERVE LEASED WIRE SYSTEM JULY,

1922·.

X-35()6b

-------------------------~-------------------------~-----------------------------------------------------------~--------

Operators•
Salaries

Name of Bank

Operators'
Overtime

Wire
Rental

Total
Expense

Pro rata
Share of
Total
Expe~se

Payable to
Federal

Reserve
Credits

Board

-------------------~-----------------------~-----------~---------------~-------------------------------~--------------~$
$ 25Ch00
$ 695·01
$ 25<).00
$
$ ~5.01
$ 25().00

:Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago

st·.

Louie

Minneapolis
Kansas City
Dallas
San Francisco

954·98
225·00
366-.oo

;o;·.oo
~.oo

(f)4,947 ·38
290"·00
288.35

326-.6~

170·00
395·00

Feci • Rea·. :Board

1,127·98
225"·00
366-.oo
305·00

173·00

2~.00

12·00

4.959·38
290·00
288.35
394·38
170.00
395.•00

67.711-

16,952·22

3.659·96
1 ,178".67
1,552·59
1,306.6g
1,172·57
2,70Ch77
l.~.o4

83l·20
1,686·. 71
1,198·99
2,692-.64

1,127·98
225"·00

2,531·98
95l·67
1,186-.59
1,001·69
932"•57
2,258-.61(*)

366·00
305-·00

2)K)·.oo-

4,959·38 .
29().00 .
288·35

l,=.o4
~.8;

394·38

1,292"·33
1.028"·99
21297.611-

17o·.oo
395"·00

16,952".22

--------~-----~--------------------~--------------------------------~----------------------~----------------------------

$9,0U.Q9

Total

(f) Includes s-.laries Washington Operators·.
(&:) .AmoUnt reimbursable to Chicago.
(*) Credit.
.
(a) Received $5,561.•97 from Treasury Department and $79•50 from War Finance Corporation covering
business for months of Ja:n .. tmd FabrtlLlry, 8nd June,

1922, respectivel7•

F.EDER.AL RESERVE EOA:RD,
W.ASHINOO'ON, D• ,C. ,
AUGUSf 19, 1921•

.·
.,

FEDERAL RESERVE BOARD
WASHINGTON

X-3507
August 19, 1922.
SUBJECT:

Discounts for Member :Banks at
Progressive Ratas.

Dear Sir:
Thare is enclosed. hara'vith copy of a resolution (S-335) submitted to tha Senat0 undar date of August 10 rrnd r~ferred to the Committee
on Agriculture and Forestry.
Vlhile the rasolution, which relates to graduat"d or progressive
discount rates charged member banks under the provision of Section 14 of
the Federal Reserve Act as amended April 13, 1920 has not been reported
out by the Committee, the :Board feels that it should be in a position
to answer the inquiry as promptly as possible in case it is adopted by
the Senate, and therefore requests that a report be rendered covering
each member bank in your district which was charged progressive or
graduated rates of discount of 10 per cent or more (including the normal:
basic rate) during any part of the time that such rates were in effect
in the district.
No report need be submitted covering any bank where
the maximum rate charged including the normal rate did not at any time
progress beyond ~ per cent. In order that the information may be co~
piled on as uniform a basis as practic~ble, we are enclosing a form to
be used in those cases where prograssive rates were applied to average
excess borrowings over a reserve computation period.
~here the
graduated rates .were applied to currant offerings, it will be necessary
to modify the a~tached. form by ch::mging i tam 1 to r aad 11 Tot.3.l borrowings, including currant offering, 11 and to substitute tho d:t.te on which
the paper was discounted in lieu of the reserve computation period.
In acknowledging receipt of this letter, it is raquested th:.:tt
the :Board be n.dvisad whethdr or not thera will be any difficulty in
supplying the information dasired, :.:tlso approxim~t3ly when complete
reports may be expacted. Kindly forward the raports in duplicate.
Very truly yours,

Vice Governor.
(Enclosure)
TO THE GOVERNOl~S AT
ATLANTA, ST. LOUIS, Yu\NSAS CITY .AND D.ALLA5.

•

X-3507a
DISCOUNTS FOR MEMBER BANKS l'i'HERE PROGRESSIVE RATES
(INCLUDING NORMAL BASIC RATE) REACHED 10 PER CENT AND OVER.

Name of member bank_ _ _ _ _ _ _ _ _ _ _ _ _c.apital and Surplus $.______
Location _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _.Federal Reserve District No. _ __

2·

3·
4.
5·

6.
7·

Daily average borrowings - total .•.................• $_____ $______
Basic discount line . . . . . . . . . . . . . . . . . . ............. .
Borrowings in excess of basic line-total (1-2) ..•...
Excess borrowings not subject to progressive rates ..
Excess borrowings subjact to pro~ressive rates:
(a) Amount ....................................... . _ __..,\,;;(S;;..:e=e no.x.te:::..lr....-_ __
(b) Additional discount charged at supr~rates* .... .
(c) Average superrate (eAcess over normal rate)
as per formula below •......................
(d) Range of rates (From
to
) ....... .
(e) Discount charged at superratas, ·after
deduction of amounts subsequently rebated ..
(f) Rangr;; of rates 3fter rebate (From
to
) ..
Average superrate (excess over normal rate) i~- ·
plied to total borrowir.gs ,as per formula below ....
Basic discount line as it would have been if reserve balances required had been used in the calculations, instead of reserve balances maintained
by the member bank . • . . . . . • . . . . . . . . . . . . . . . . . . ..... .

FORMULAE
Item 5-c should be calculated by multiplying item 5-b by the number of days in
the year, and dividing the product by item 5-a multiplied by the n~~ber of days
in the reserve c Otrpl.ltation period.

Item 6 should be calculat~d by multiplying item 5-b by th0 numb.::r of days in
year, and dividing the product by item 1 rrnltiplied by the n~'1lber of days in
tha reserve computation pBriod.
*Exclusive of discount charged at the normal rate.
NOTE: No report should be submitted cov.Jring borrowings of any bank unless the
rate of progression (including noriTAl basic rate) during some reserve
computation period reached 10 per cent or more. In thQ case of banks
covered by the report, figures should be submittsd only for those reserv.e COir!PUtation pe:!'iod.s during which the rate of progression (including
normal basic rate) reached 10 per cent or more.

., ..
r

X-3507b

1017

COPY OF SENATE RESOLUTION 335·
to Ee::ate ..U.ug,1tst lJ, 19::.:::•

Submitt~·i

.. Whereas it has been charged on the fioor of the Senate that the
amendment to the Federal reserve act authorizing the charging of
progressive interest rates had been obtainad largely as a result of
express and definite assurances givt:n to W'.embers of Congress by
W. P. G. Barding, governor of the F~deral Reserve Board, that the
object and purpose of.said legislation was to secure a fairer and more
equitable distribution of the funds of the Faderal reserve system and
was expressly designed to prevent the und.ue absorption of Federal
reserve funis in certain large cities at the expense of the great farming interests in th0 West and South, and at the expense of the smaller
business man throughout th.::. countryj and
Wher~as the official records show that the said "progressive rates"
after the passagd of the law were put into effect only in the agricultural sactions of thz West, South, and Southwest, including the four
Federal reserve districts of J.tlanta., St. Louis, Kansas City, and
Dallas, and were not put into effect in N~w York and other big money
centers, where the funis of the F~der-al reserve system were principally loaned; and
Whereas the official records show that its country banks were charged
unconscionable and wholly indefensible interest rates, and that these
inhuman rates were c~acted from many banks in the States of Alabama, Colorado, Nebraska, Kansas, Oklahoma,· Te~as, Louisiana, Mississippi, and ot~ers; and
~hereas the reserve board defeated two resolutions offered by the
former Gor.tptroller of the Currency, one designed to limit interest
rates to 6 per cent per annum, and when that was defeated another
limiting interest rates charged by Federal reserve banks to 10 per cent
per annum; and
Whereas the undue concentration of Federal re$erve funds to the
big cities is illustrated in thJ fact that in th~ autumn of 1920 the
official records show that the national banks in New York City, in proportion to thei~ total loans and discounts, wer~ being accommodated
with three tim~s as large an amount of Federal reservo funds as were
the 7 ,6oo "country" national banks throughout the entira United
States; Therefore be it
RESOLVED, .That the Federal Rdserve Board be requcst~d to obtain
from the . ~•..ideral Reserve Banks of Atlanta, St. Louis, Dallas, and
Ka!·1sas City statements showing all cases where int erE.st ranging
betwe~n 10 per cent and 87! per cent per annwm, both· inclusive, was
exacted from member banks, giving names of the banks. their c.-apital and
surplus, and location, wher~ 10 por cent per annUIIl or more was
charged on loans and. rediscounts, the rate a.n:i amount of interest
charg8d in each instance as expr~ssed in dollars and cents; also let
th;; stat~ment show. whether the Federal reserve banks. have refunded
to each member bank from which such exactions were.made the
amount of such interest .collect~d in exc~ss of 10 per cent per annum
upon each loan upon which such interest was charged.

FEDERAL RESERVE BOARD
WASHINGTON

X-3508
August 21 • 1922.

SUBJECT:

Discounts for Member Banks at
Progressive Rates.

Dear Sir:
There is enclosed herewith copy of a resolution (S. 335)
submitted to tho Senate under date of August 10 and referred to
the Committee on Agriculture and Forestry. You will note that
the first paragraph of the resolution states that the progressiverate amendment to Section 14 of the Federal Reserve Act 11 ••• was
expressly designed to prevent the undue absorption of Federal
Reserve funds in certain large cities at the e:::pense of the great
farming interests in the West and South, and at the
expense. of the smaller business man throughout the country."
In this connection we have examined the 10-day and 15day reports of loans in excess of basic line granted to member
banks, submitted since May 1920 in re~ponse to the Board's
letter St. 1133 dated May 5, 1920, and find that they apparently
indicate that no member bank in your Federal Raserve Bank city
had daily average borrowings at th2 Reserve Bank during any of
such periods equal to 2-1/2 times its basic discount line.
This being the case, it appears that had your bank adopted
graduated rates (with a normal rate of 6 per cent) progressing
at the rate of 1/2 of l per cent for each 25 per cent by which
the amount of accommodation extended to the rr.ember bank exceeded
its basic line, in lieu of the flat 7 per cent rStte which was
actually put into effect, that the average rate chargeable on
total accommodation extended to an;r member bank in your Federal
Reserve Bank city would not have reached 7 per cent during any
report period. Your attention is invited in this COlmGction to
the discussion of the relative effect of progressive rates with
a normal rate of 6 per cent and the 7 per cent rate, appearing
on pages 58 and 59 of the Board's annual report for 1920.
In order to avoid possibility of error in replying to the
Senate resolution in case it is a.dopted, it vvill be appreciated
if you will have the Stbove conclusions checked and advise the
Board whether or not you find them correct.
Very truly yours,
(Enclosure)
Vice Governor.
TO BE SENT TO
GOVERNORS AT NEW YORK ,CHICAGO .AND BOSTON.

1019
FEDERAL

RESERVE

STAT~~ FOR THE

:BOARD

PRESS

X-3510
For release in MOrning Papers,
Friday, September 1, 1922.
The following is a summary of general business and
financial conditions throubhout the several Federal
Reserve Districts during the month of Augi.:St, as
contained in the forthcoming issue of th3 Federal
Reserve Dulletin.
The outstanding feature of the month has been the inherent
soundness which the general business situation has manifested in the
face of the difficulties whiCh have been encountered.

~his

has been

shown by the continuance of activity at a relatively high level despite
labor disturbances, in particular those in the coal and transportation
industries, and despite the fact

th~t

some recession 9f activity is

nonnally to be expected at this season of the year.
po~tant

Prices of im-

commodities continued their upward tendency during July, the

index number of the Federal Reserve Board for that

month being 165,

J}tn· ing .",ugu;::; t ,

or 4 points greater than the June figure.

conflicting tendencies in price movements were apparent.

however,

The

ex-

cellent agricultural prospects provide an encouraging outlook for the
fall trade.

Furthermore, increase of

dem~d

for certain commodities

to compensate for restricted output or delay in placing orders owing
to uncertainty, is also in prO$f&ct.

Even so, business must nee-

essarily proceed under q.andicaps for some time to come, as a result of
fuel shortage and transportation difficulties.
Manufacturing activity in general
high level during both July and August.

ha~

been maintained at a

In those industries, such

X-3510

- '2 -

as automobiles o.nd building construction, in •;vhich seasonal -recession is shown, activity is still far in

exce~s

of a year ago,

Cotton manufacturing likewise shows some decre:ase, but .vool machinery
on August 1 showed greater activity than on July 1.

The output

of the nonferrous metals other than copper has also increased, and
prices have advanced, in particular in the case cf zinc.

The fuel

shortage and traffic congestion, however, have resulted in some decrease of activity in the iron and steel industry, particularly since
the opening of August.

Bituminous coal production has incraased

steadily during the present montr., and, with the resuoption of
operations, output may shortly attain ma.:dnmm levels.

Pending the

settlement of labor difficulties, anthracite production continues
almost negligible.

Patroleum output increased somewhat in July,

and stocks show further accumulation.
The labor situation showed considerable improvement during
August.

The bituminous coal strike has been settled in

~any

fields

and the majority of the New England. cotton mill workers have returned
to the factories.

Shortages are reported in

in particular in the western copper mines.
w~ge incre~ses h~ve

v~wious

ind"t..1.strios,

Reflecting

thi~ sit~~tion,

been gr8nted for certain classes of labor.

only ir:;portant disturbances still existing are those in

The

tr~msportation

and the anthracite coal industry,in both of which :negotiD. tions for
settlement

h~ve

been actively proceeding.

Agricultural
factory.

prospect~

on the whole continue very

s~tis

T'nere was a nota.ble improvement in the condition of the

•

X-35:0

- 3-

corn crop during July, and the Spring wheat crop promises to be
unusually large.

It is irrpossible

as yet to

estL~~te

definitely

ths final yielJ of the cotton crop, but the weevil damage has been
less than anticipated.

The prospects for th0 tobacco crop are ex-

ceptionally good, and most of the other crops are considerabl;>' above
the average.
Wholesale

trad~

suffered a decline during July as com-

pared with June in all lines except dry goods, vvhici.1 was more active
because of fall buying in all districts except those most affected
by labor difficulties.

Recessions in groceries, hardware, boots

and shoes, and drugs were largely seasonal.

Most

lines were in

a better position than a year ago, especially hardware.

Retail

trade, however, was slig.'-ltly smaller than last year, although
larger in New England and on the Pacific Coast.
Financially few new developments occurred during the
month.

The Federal Reserve Banks of Kans.:1s City s.nd Minneapolis

each reduced their discount rate to 4~5o·

None of tr.e Federal Re-

serve Banks now have rates in excess of that

fi~~re.

Reserve and Memb:lr Bank portfolios show little change.

The rapid

decline of the mark has been tha outstanding feature of the foreign
exch911ges, francs and lire remaining pr::wtically constant :md
sterling showing some increase until recently.

In foreign trade,

the value of both irqports and e1<."})orts showed a decline from the June
figures to approximD,tely tne snme level as in May.

X-3511

.--,,.

F E DE R AL

RE S E RVE

STATEM.dl!T FuR THE

J3. 0 A R D.

p:qESS~

For release in afternoon p~pers,
Saturd~, September 2, 1922.
CONDITION OF THE .ACCEPT.ANCE MART{ET, JULY

According to

r~ports

TO AUGUST 15, 1922.

received by the Federal Reserve :Board

from the Federal Reserve Banks of the various Districts, the
acceptance market during the

per~od

under review, for the most

part, continued dull with a disinclination on the

par~

of banks

t6 build Up their portfolios at the present le"'·el of rates.

The

supply of bills, While limited, was sufficient to meet the small
demand, except in the

case of District No. 12 (San F:t<ancisco)

towards the close of the period.
In District No. 2 (New York) both the supply and demand were
irregular.

During the first part of the period, they were approxi-

mately equal, but towards the close, hills carne in

some~hat

faster

than they could be distributed, inasmuch as New York City banks were
practically out of the market for their own account and there was
but a fair demand from banks in the interior.

Bates for call money

and Treasury certificatas, together with the foreign demand, continued to be the dominant factors in the market.

In District No. 3

(Philadelphia) a condition very similar to that in the New York
District existed.

~nat

is to say, thore ·N.as still a pronounced

tendency on the part of banks to seek the higher returns which
could be obtained from Government and other securities.In District

X-3511
- 2 -

No. l (Boston), the market for the greater part of the period was
slow and featuraless.

Supply of bills at first was limited, but

later became ample to meet the demand.
In District No.

7 (Chicago), the volume of bills accepted by

reporting banks during July showed a large increase over the preceding month, but the bills bought decreased approximately 80 per
cent.

The volume of bills held at the close of July, however,

Changed only sli6htly from that at the close of June.

Ten of the

twentyseven banks reporting showed no transactions in bankers•
acceptances.

Districts No. 11 (Dallas) and No. 12 (San

both report a considerable
business.

incre~se

Fr~~cisco)

in the volume of the acceptance

In the former, the acceptances outstanding July 31,

amounted to $879,783.08 as compared to $516,610.50 on June 30,
While in the latter District the total bills accepted during July
increased 97•4 per cent over the June figures; those bou~t, ll4·5j
and

th~

acceptance portfolios of reporting banks at the close of

the month, 39.4 per cent.

In tllis District the markat

fro~

the

middle of July to the middle of August was featured by a short
period of activity, followed by a relapse to the previous state
of dullness.

The bulk of the demand was still from city banks.

District No. 4 (Cleveland) reports the market very quiet whiJ.e the
same is true in Districts No.6 (Atlanta) and No. S (St. Louis).
The bulk of acceptances executed in the various districts
was

based upon the irrportation of

r~N

sugar, coffeee, and silks; the

exportation of cotton, grain, and automobile tires;

th~

storage of

X-·3511

- 3crude oil, canned goods, and wheat; and transactions in meats,
canned or dried fruits, wool

and

30-~ay accept&~ces

In District No. 1 (Boston)
and in Districts No. 3

hi~es.

(Philadel~~ia)

moved best,

and No. 4 (Cleveland)

there was a preference for 30 and Go day maturi'tiles.

District No. 2 (New York) l.ocal buyers showed a preference for
Short maturities, while longer bills found a readier market among
countr,y batiks.
t~e

In District No. 7 (Chicago) 75·1 per cent of

billa purchased by_ reporting banks had 90-day maturities;

7 •7 per cent, 30-day; 7 .. o per cent, GO-day; and 10.,2 per cent,
180-da.y.

District No. 12 (San Francisco) reports the distri-

bution of maturities as follows:
Maturity

July 15 to
August 15

Jl.ll'le 15 to
July 15

30 days

3·B%

10 .. 4%

Go days

27 .s7~

34.G%

90 days

67.8%

49.0%

120 days

o.65~

6.0~~

X-3511

- 4-

"!'

....

•

Rates on prime bills in the var:i.ous d).st:r.icts were as follows:

Range during period
Maturtty

Bid

30-day
District 60-day
No.1
90-day
(Boston) 120-day
150-day
180-day

3 - 3-1/S

30-day
. District 60-day
No. 2
90-day
(New
120-day
York)
15G-day
11:m-day

3 - 3-1/4

30-day
District
60-day
No.3
90-day
(Phila120-day
delphia) 150-day
180-day

3-1/S - 3-1/4

District
No. 4
. (Cleve~
~ land)

30-d.ay
60-day
90-day
120-day
150-day
180-day

30-day
District 60-day
90-day
N~. 7
(Chieago) 120-day
150-day
um-day

Offered
3-7/S - 3

Bid

Offered

3 - 1/3

3-1/s -

3
r\'·'

2-7/8 - 3

3-l./8 - 3-1/4
3-1/8 - 3-1/2

3
3 - 3-1/4

3 - 3-1/8
(1

3-1/8.II - 3-1/4

3-3/S - 3-1/2

3-1/4

3
II

3 - 3-1/8
3 - 3-1/4

3 - 3-1/S
3 - 3-1/4

3-1/4 - 3-3/S .
3-1/4 - 3-1/2

3 -1/4 - 3-)/S
3-1/4 - 3-l/2

3-1/3

3-1/4 - 3-1/S
II

3-3/8 - 3-1/4
II

3 - 3-1/4

3-1/8
II

2-~/2 - 3

3-1/4

3-1/8

II
II

2-7/3 - 3-1/8
3 - 3-1/8

3-1/S

3-1/3 - 3-3/3

3-1/8 - 3-3/8
II

II
II

3 -5-1/8

"
II

.. ....

FEDERAL RESERVE BOARD
WASHINGTON

X-3512
August 2S,l922.
SUBJECT:

Joint Conference of Federal Reserve Agents
ana. Governors.

Dear Sir:
The Board has designated Tu.esday, October lOth, as the
opening date for the annual joint conference of Federal Reserve
Agents ana. Governors of Federal Reserve Banks.
It is the Board's
desire that this conference be conducted in the S,mJe manner as last
year and that both JOint and separate sessions be held. It is
suggested that the presiding officer of each body be constituted
a comr:dttee of one to arrange a list of topics for separate discussion and that they act together in arranging the program for
the joint meeting.
The Board in due course will prepare a list
of topics ·uhich it desires to havil consid.erad and it is hoped
that the program can be completed and a copy placed in the hands
of each Federal Reserve Agent ana. Governor not later than October
1st.
Very truly yours,

Vice Gc vern or.

TO FEDERAL RESERVE AGENTS
lJID GOVERNORS.

1057
COPY

X-3513

A
FEDERAL RESERvE BANK OF BOSTON
30 Pearl St. ,
Aug11st

10, 1922.

Federal Reserve Board,
Washington, D. C•
Gentlemen-:
I beg to acknowledge recaipt of. the Federal Reserve :Board's
lettar (X-3491.1.) dated August 2, 1922, on the subject of "Special Rates
on Commodity Paper".
Althangh I have discussed ~his matter with our officers, I
have delB¥ed replying to the letter until I could discuss it with OUI'
Executive Comittee and with our Board of Directors, v.bo have met tod.ay.
Our Executive Commdttee today passed the following vote:
11

'l'ha.t in the opinion of this Committee there is no demand
in this district for a special rate on commodity paper" •

.Although onr member banks were duly notified of the appointment
of these rates on commodity paper, we had no notes· presented to this bank:
during the time that the rates were in effect which complied with the
'
terms of commodity paper and would. carry preferential rate and we have ·
never had ~ inquiry since as far as we can remember for such a demand.
We have • therefore, come to the conclusion that there is no demand for
~ such rate or any silch kind of a. note in this district.
As a matter
of fact' from the defin1 tion of conmodi ty paper all of the transactions .
\\hich would· require comrr.odi ty paper can easily be carried out just as
well under a bill of exchange, and anybody wishing to obtain the lowest
rates for that kind of a loan would naturally pu.t it under a bill of ·
exchange which we would buy at 3 1/S% discount to 3 31'?1'/o discount for
all matur1 ties up to 90 days, and at 45b for ma.turi ties between 91 and
180 d~ys.
~e question of a. special commodity rate in this district,
therefore, has nothing but an academic interest to Us.
Very truly yours,
(Signed) Frederic H. Curtiss
Federal Reserve Agent.
FHc/D

COPY

X-3513

B
FEDERAL RESERVE BANK

OF NEW YORK.

August 10, 1922.
Dear Governor Platt:
I have raceived the Board's letter of A~t 2, X-3494, enclosing tentative draft of letter which it is proposed to send to all
Federal Reserve Banks in case the Federal Reserve Board should decide
to autho~ize special rates on commodity paper. ·
It appears from examination of the proposed definition that
commodity paper to be entitled to a special rate would have two main
characteristics: first, it would necessarily be accompanied and secured
by shipping documents, warehouse, terminal or other similar receipts
covering readily marketable non-perishable staples; and second, it
would have to be paper on which the rate of interest of discount charged
the borrower by the member bank does not exceed 6% per annum •
.The question for consideration now is whether there is any
need or justification for the establishment of a preferential rate on
eligible notes, drafts, bills of exchan~, or trade acceptances which
possess these two characteristics.
·
CLASS OF SECURITY NOT RECOGNIZED IN THE LAW. While the proposed regulation would not deviate from the principles set forth in the
law as to the requirements of eligibility, and while the notes, drafts,
bills or acceptances. as the case may be, would of themselves have to be
eligible in accordance with those principles even under the proposed
regu.lation, nevertheless to give a preferential rate for eligible paper
merely because it is secured by a certain kind of collate•f1 superimposes
upon the law a principle which never could have been contemJ?la.ted and
Which, indeed, is contrary to the spirit of the Act itself, for it
recognizes in a material way, and prefers in a material way, ~ certain
class of securitz Which in fact h~s no substantial relation either to
the eligibility of the paper or to its desirability as an investment.
NOT FEASIBLE TO VARY DISCOUNT RATES IN PROPORTION TO CREDIT
RISK INVOLVED.
Of course the credit risk to a Reserve :Sank is fixed
in part by the character of the paper discounted, and in part by the
· collateral, if any, by which it is secured.
:Bu:~ those factors might
well be left out of consideration in the determination of the rediscount
rate, as distinguished f~om an open market rate, since in all cases of
rediscount the accommodation is secured by the indorsement of the
borrowing member bank, and it would be futile, if not impossible, to
attempt to vary the discount rate in accordance with the risk invol~ed,
aside from the indorsement of the borrowing bank.
If·once we admit

......

F.R.Bank of New York.

-2-

·...

.....

~-....

....

,..,.

X-3513

the principle that the rediscount rate should be lower merely because
the credit of the maker is better or the security of the collateral is
stronger_than the credit or security involved in other discounts, we
would be confronted with a refinement of r~tes that would be impossible
of administration.
PBEFEBENTIAL RATES ON ACCEPTANCES ABOLISHED.
There is far
more reason that a preferential rate should be given to bankers
acceptances, or even to trade acceptances, than there is to paper
secured by warehouse receipts if the only question involved is one
of goodness of the paper.
In the early days of the System it was
thought wise to encourage and develop the use of bankers acceptances ,
an entirely new kind of credit instrument in this country, by a preferential rate, but as soon as an opportunity offered itself in a broad
open market for th~1.t kind of paper the preferential rate was abandoned
and one rate was established for "money", regardless of the character
of the obligation upen which it wa& procured.
Only a few months ago the Federal Advisory Council and the
Conference of Governors unanimously opposed the reestablishment of a
preferential rate for trade acceptances when that question wa.s presented. for consideration.
The same reasons prompting that opposition
a.re applicable to the present case.
A return to the preferential
or differential rate vuo'Uld, in our opinion, be a most unfortunate step
backwards.
MO!IVE OF A PREFERENTIAL RATE .AND ITS EFFECT. The only
apparent reason for the establishment of a preferential rate on socalled commodity paper at this time would be a desire to induce member
banks to borrow on this kind of paper and thus indirectly to force
more money into credits of this kind.
Bu.t even if it be that that
purpose would be accomplished, it would be unwise as a. matter of principle,
Since it would only tend to create an artificial demand for one particular
kind of credit arbitrarily ~elected by the Federal Reserve Board.
It
:might well lead to pleas for other special rates on elilible paper When
secured in other particular ways.
CHARACTER OF PAPER ITSELF HAS NO DIRECT RELATION TO PURPOSE OF
REDISCOUNT, - THAT IS, TO BUILD UP RESERVES. There is another practical
reason that makes the proposed action unwise. When a member bank borrows
from a Federal Reserve Bank it is for the pllrpose of restoring its
general credit reservoir.
It is because the aggregate of its d~'s
operations has impaired its reserve balance and because the law requires
that that balance be made good before. further loans lila¥ be made. The
money or credit obtained by the mem t:er bank from the Federal Reserve
Bank b~ virtue of the discount of its paper does not of itself go
~directly to the original maker of the note discounted, but rather goes
into the credit pool of the member bank for dissipation in the usual
course of another day's business.
The accommodation to the member

,•·.

F. R. Bank of New York

- 3-

....

1060
X-3513

:B
~ is, therefore, always for one purpose, - the restoring of its
reserve balance which has become irqpaired because of _the net result
·of all of 1 ts transactions during the day.
That being the purpose;
the rate charged the member bank should not be varied merely because
the vehicle by whiCh it obtains its funds differs slightly in the form
of its security from any other paper qy which it may accomplish the
same purpose, - that is the restoring of its reserVe balance.

COWJI!ODITI PA.fEI! SERVES NO MOBE DESIRAJY PURPOSE THAN OTHER

ELIGIBLE P.AJ?D. Fr()lll a credit standpoint conmodi ty paper woUld certainly
be no better than other eligible paper secured by such collateral a.s
Government bonds, for instance. and from the point of view of commerce,
industry and agriculture the so-co.lled commodity paper would ho.Ye performed no greater service than the unsecured note of the farmer in the
planting season or any other kind of paper the proceeds of whiCh were
used for a comnercial, industrial or agricultural purpose.
In fact,
if there is ~ difference at all, it would be against the commodity
paper, which, because of its very nature, might induce withholding
goods from consumption rather tbzn moving them in the process of distribution.
It would be one step toward, and an encouragement of, the socalled "Edison plan"- chef!:p money for loans secured by agricultural
col'IIIlOdities, instead of l!:!!. money a.s is contemplated by that plan.
T.he difference is only one of degree.

NOT FEASIBLE TO YJ.RY DISCOUNT RATES ON SOLE :BASIS OF RATE
CHARGED ON A PAR'l'ICUMR·PIECE OF PAm BY mE MEMBp BANK• So far _as
tne second factor in the proposed commodity paper rate is concerned,
there is, of course* no more rep,son to prefer cotmlOdity paper merely
because the member bo.nk has not Charged the original borrower in excess
of 6%, than there 1s to prefer ~ othar class of paper upon which the
borrower may have obtained funds from the member bank at that rate or
less.
It is, of course, obvious that, as a matter of principle, independently of the questions of law involved, it would be i11possible
to establish discount rates in this co~try by ~ such direct relation
to rates of interest ~barged by /banks upon customers• paper~ To do so
on one particular kind of customerst paper would seem to be even less
justified as a. matter of principle. While Federal Reserve Bank rates
might properly be related in a general wa¥ to market rates for money in
the district in whiCh the batik is located, it is a decidedly different
matter to charge a. member bank a. special rate on a particular note of a.
customer of the member bank merely on the basis of ·~e amount of interest
paid by that customr on that particular note.
To follow su_ch a
principle. logically, and to apply it in all cases, a.s would be the
logical sequence, would result in a. confused rate policy that would
laCk all of .the necessary elements of control.and purpose.
SER10US LEGAL CONSIDERATIONS INVOLVED. In conclusion. while
it is presumed that tha Board will give due consideration to. its legal

•,,!:

...

....

~-.

1061
F. R. Bank of New York
B

- 4-

X-3513

right under the terms of Section 13 to make a "class" of paper with a special
·rate out of paper which differs from other eligible paper not in the use
of its proceeds but solely in the degree of its securit~, it bas always
been our understanding that except in the case of Government obligations,
specially dealt with in the law, the character of the collateral to
eligible paper could not be considered alone as a ground for defining
a "c:;lass" of paper. Otherwise it would be perfectly proper legally for
the Board to define ~ eligible paper secured by railraod bands as one
class of paper, entitled to one rate, and other eligible paper, the proceeds Of Which had been used for precisely the same purpose, secured in
another way, as a different class, entitled to another rate. fo do this
would, in our opinion, ignore every fundamental principle of the Federal
Reserve Act, which, except in the case of obligations secured by Governmant securities, looks not to the collateral to discounts bu.t to the purpose to which the proceeds have been applied by the original borrower.

On questions of principle, questions of polior and questions
of practical operation, we are unanimOU.sly opposed to the establishment
of a preferential rate to the member b~ solely upon the ground of the
particular kind of collateral by which the paper discounted i's secured,
or upon the basis of the rate charged a particular borrower on that
particular paper.
This letter and. its conclusions has the Unanimous approval of
our executive comni ttee, for whose opinions the Boa.i"d-~asked in its letter
of August 2.
·
Very truly yours,
.

(Signed) Benj. Strong,
Governor.
Honorable Edmund Platt,
Vice Governor, Federal Reserve Board,
Washington, D. c.

..·

X•3513

COPY
FEDERAL RESERVE :BANK OF PHILADELPHIA

August 9th, 1922.

My dear Governor Harding:

Your letter of the 2nd instant, in reference to the
advisability of re-establishing special rates on commodity paper,
was ~resented at a meting of oUr- Executive Committee this morning,; and the subject was fully discussed.
The officers and Commi ttee are unanitnously of opinion that there are no interests in
this District Which would be served by the establishment of suCh
a ro.te; and that the only possible effect of its establishment
would be an effort to convert other paper into what might be represented as "oonmodity paper".
We can imagine that in some other
Districts sane useful purpose mi"ght be served by the establishment
of this specbl. rate, but. if it were to be authorized by the :Board
i t would not be established by this :Bank, nor would it be generally
availed of even if it were esto.blished.
I am,
Very truly yours,
(Signed) Geo.

Governor.

Hon.

P. G. Harding, Governor,
Reserve :Soard,
Washington, D. C·

Feder~l

Norris,

1062

..'

1063

X-3513

OOPY
FEDERAL RESERVE BANK OF CLEVELAND

Bon·. Edmmd Platt, Vice Governor,
Federal Reserve Board,
Washington, D.

Dea.r Sir:

With further reference to the Board's letter X-3494,
da.tad August 2, 1922, subjec~- Special Rates on Comnodity Paper, I wish to actvise that the Board's letter, together
with the reply of this bank datad August 4, 1922, was read to
our Board of Director~ yeste~, a.nd. by a unanimous vote they
approved the reply, stating the present position of the Board.
with respect to fixing 1 ts comnodity rate, and wished me to
advise you t\,l.~ther that they are opposed to legi t:lmatizing a
spread of 2-l/2~ be.tween the rea.iscount rate of the Federal
Reserve Bank and the ·rate cbo.rged by member banks to their
customers.

Very truly

yo~s

(Signed) D. C. Wills,
Chairman of the Board..

X-3513

D·

1064

COPY

August 4, 1922.

Bon.

P .. G•. lia.rd.ing, GOvernor,

Fede~al

Reserve Board,
Washington, D. c.

Dear Sir:
YOlli' letter X-3~4, dated August 2, 1922, in respect
to the subject of special rates on ccmnodity paper, has been
received.
The Federal Raserve :Board is aware that this bank has
never est~blished a preferential rate on commodity paper, nor'has
it asked permission from the Federol Reserve :Board to do so.·
Our :Board discussed the matter thorou.gbl.y when these
rates were being est~blished by a few of the other Federal Reserve Banks,
and we:re '\Ulanimous in ~ir opinion against their establisb.Jmntt lst:
because the volume of that kind of paper in this district is inconsequential , and 2nd: because 1 t W:l.S regarded as unsound to quote a
rate that might be regarded as subsidizing a. singl.e industry.
Our directors also regarded it as unwise to set a precedent
tbat might be construed as dictating to bllllks what rates they should
charge their borrowers.

Your letter. Will be brought to the attention of our Board
of Directors at its next meeting.
Very truly yours,

(Signed) D. C. Wills
~

Chairman of the :Board·

.·

1065
X-3513

COPY
FEDERAL RESERVE BANK
OF RICBMOND.

August 9, 1922.
SUBJECT:

Specia,l Rates on Conmodity Pa.Jaer.

Edmund Platt , Esq. , Vice Governor 1
Federal Reserve :Board,
Washington, D. C.
Dear Sir:
Governor Harding's lattar of .August 2nd, X-3494, on
the above subject, with confidantinl tentative draft of letter
whic~: the Board is considering sending out on this subject, was
presented to our Board of Director~ at their meeting tod~, together with capy of my reply of August 3rd.
After discussion and consideration of the matter, our
Board passed the following rasolution:

"RESOLVED, !~hat we a.rd opposed to a:n:y special
conmodity rate."
I am fozwarding this for the information of tlle Board.
Very truly yours,

(Signed) Caldwell Hardy
Chairman of the :Board.

::_,

.......·

.·
E

X-3513

COPY
FEDERAL :RESERVE BANK
OF 'RICHMOND.

August 3, 1922.
SUBJECT:

§pecial Rates on Commodity Paper

Bon. w. P. G. Harding, Governor,
Federal Reserve Board,
Washington, D. c.
~

dear Governor:

Your favor of the 2nd, X-3494, to hand on the above subject.
The question was discussed confidentially at our officers conference
this morning, Governor Seay being absent on his usual annual holiday.
When we had a special commodity rate before we found that
South Carolina members preferred to pay our full commercial rate,
because they made ~re money by doing this and charging their borroNers
B%· At the same time, our North carolina members availed of our
special rate more often.
There were very few comrrDdity loans from
the balance of the district.
We are inclined to think that the granting of a special rate, on condition that our member is to charge not
more than a given rate, is somewhat questionable in principle, although
we realize that such a policy is doubtless necessary in order to protect
the original borrower.
We f&al sure that little, if any, of the
benefit. of any special rate we might make is passed to the original
borrower.
Conditions are quiet in our district, irritating discussions
are much less frequent, and we feel that any new changes, the results
of which would be at best of minimum advantage ~o original borrowers,
would not be desirable.
We think a special corrJittodity rate would naturally encourage
speculative holding and unneces~arily delay orderly marketing. We have
had some friction in handling regular loans against cotton three or
four years old, which ought to have been sold long ago, and if a new
commodity rate is to be established we think we should have a certificate
that the commodity 'Oroduced is not more than 12 months old. On the ·JVbole
we are not impressedwith the desirability of a special commodity rate at
the present time.
Yours very truly,
(Signed) Caldwell Hardy
'I

Chairtnar• of the Board.

.·

. 1.067
FE D E R A.-L

l3 A. N X

RE SE R VE

X-3513·

COPY
F

August 14, 1922•

SUBJECT:

Commodity rate; letter X-3494.

Dear M':r. Platt:
I am in receipt of your letter of August
11th on the above subject, answering Ttl¥ letter of the

7th·
In reply beg to sar that I submdtted to
our Board of Directors on Frida¥, A.ugus t 11th, capy of
th~ Board's letter X-3494, and xqy reply of the 7tb· Also
Governor Wellborn, 1n making his report to our Board concurred in Ttl¥ views, as expressed in his report and my letter of the 7th•
Our Directors thereuppn voted that they were
in thorough accord with the views expressed bt the Chairman ·
and the Governor, 1. a·. , they did mt believe tba.t a conmodity rate would be of full value to the producers of comnodities for the reasons stated in said comnunications·.
Very truly yours,
(Signed)

JOS. A. MCCORD.
Chainmn·

Hon.

Edmund Platt,
Vice Governor, Federal Reserve Board,
Washington, D. C.

•

X-3513
FEDERAL

RESERVE

COPY
11
SUBJECT:

BANK

ATLANTA

August

7, 1922..

Special Rates on Comn:odi ty Paper·.

Dear Governor Harding:

Your letter X-3491+, August 2, 1922.
In reply beg to Sa¥ that I am doubtfUl as to ~ether the
co~dity rate would be of any special benefit to the producers of
commodities that coild be stored in warehouses in this district. You
no doubt know that the farmers in the interior deal with the smaller
banks. We haven1t the large plantations or ranges in this district
that they have in some of the western states·. The large plantation
idea has been gradually eliminated in this district·.
The landlords owning vast tracts of land have tenants on
·their property, and these tenants largely deal with the smaller banks
in the interior towns, and the smaller banks have a. flat rate of s5b,
per aml1l1ll, and in some instances charge more than that.
When we had our commodity rates in 1915 only a. few banks
availed themselves of the rate. They preferred to charge s% and pay
us our regular corml1arcial and a.gricul tural discount rate, rather than
··to take the lower rate of 3% When they would be COJll)elled to loan to
their customers at
per annum. Some few banks in the district availed themsel'lles of the privilege at that time. Others endeavored to
handle it purely for land owners, me lived in the smaller towns and
who hoped to speculate in cotton, as that is the principal product; but
When we advised them tnat cotton could not be held for speculative purposes under the commodity rate, they would then relieve it from that
rate and put it on another basis·.
If we could get all the banks to make a preferential rate
to the planter, I would be heartUy in favor of the eomnodi ty rate, but
the larger city banks Charge practically only 6 or 7~ interest, and cotton that is shipped in from country towns to large cities like Atlanta,
Savanruah, Montgomery, Mobile, New Orleans, and Jackson, Miss., the loans
are usually made by the larger city banks at a 6% rate where the cotton
is pled3ed as co~lateral thereto.
The subject of the comnodity rate is of so vital importance
that I shall read your letter to our :Soard. of Directors on Friday next,
and ask their opinion 'Whether a commodity rate would be appreciated and
used, and whether our member banks would take advantage of the law rate
provided they would have to loan to their customers at not over 6% including all comnissions. I shall endeavor to obtain a coneensus of opinion from our Directors on Friday and will then write you relative thereto.

Very truly yours,
(Signed)
Hon. w. P. G. Barding,
Governor, Federal Reserve :Board,
Washington, D. C.

JOS. A. MCCORD.
Chairman.

••

X-3513
FEDERAL

~~~ERVE

BANK

ATL.ANr.A.

August 5, 1922·.

COPY
F

w. P .. G. Harding,
Governor,
Federal Reserve Board,
Washington, D. c..
Mr.

Dear SiJ!';
Replying to your circular letter X-3494 of August
2, 1922, I wish to advise that our Executive Committee has considered the matter of establishing a special rate of 3t% on
commodity paper, on which the rate of interest or disco-unt including commission- charged the borrower does not exceed
6% per a.nnurri.
Our Committee is not inclined to favor this special
rate, as, in our earnest opinion, member ba.Dks generally would
not be disposed to avail themselves of it. OUr reasons for
reaChing this conclusion are:
In the larger cities of our District, the prevailing
rate is now 6%. T.he banks in the smaller communities have an
established rate of S% which, it is believed, they would not
care to abrogate. For them to give a preferential rate on co~
modities would ass~~edly create confusion among their customers.
In the smaller batiks, it is really necessary to charge 8~ in order to make a reasonable profit; and we believe that they would
prefer a continuance of the present rate of 4~% on our part,
thus permitting them to maintain their charge of S7L This
would yield them a greater profit on their borrowin~ than they
would receive if they discounted paper with us at 3t%, but were
themselves restricted to a charge of 6%. This being the attitude of the member banks, the borrowers would derive very little
benefit from our establishing the preferential rate.
Vary truly yours,
(Signed)

M. B.. WELLBOBN

Governor·..

•

(

...,

.·
FEDERAL

RESERVE

X-3513

BANK

CHICAGO

c 0p y
G

August

5, 1922.

Sub.iect:
Special Rates on
Commoditi Paper.
Dear Governor Harding!
Answering your letter of August second (~3494)
I will state that I laid your letter before our Executive
Commdttee at its regular session yesterday. I regret
that only a bare quorwn of the corrmi ttee were presant and
that so many of the members of our board are, at the moment,
beyond reach. One is in Europe; another is up in the
wilds of Canada; and so on.
The Federal Reserve Bank of Chicago never established a special rate on commodity paper, if my remembrance is
correct. When a number of the other Federal Reserve Banks
established such special rates a numbBr of years agQ the
sentiment of our board was always against it. At that
time, if I remember rightly, none of the members of our
board favored it. While the corrplexion of our board has
changed somewhat since that time a n:ajority of the old members are still serving, and I have no reasons to believe
that any of them have changed their minds in regard to this
matter.
!lhe sentiment of our Executive Committee yesterday
was, that on the basis of information thus far before us,
t:Oe Chicago bank would not care to establish such special
rates on comnodity paper, and that probably no considerable
number of our member banks would avail themselves of it.
Very truly yours,
(Signed)

W• .A. HEATH
Chairman.

Mr. W. P. G. Harding, Governor,

Federal Reserve Board,
Washington, D. c.

COPY

X-3513.
FEDERAL RESERVE BANK

OF
ST. LOUIS.
August 7, 1922.
Dear Governor:
In the absence of Mr. lVIartin I am replying to your
letter X-3494, bearing date of the 2nd, after having discussed
the subject thereof with other officers of this bank, but cannot
at this time convey the opinion of our Executive Committee relative thereto because, due to vacations, the Committee is not
meeting regularly.

The establishment of a S?ecial rate on commodity
paper would be of benefit to a certain class of borrowers, provided the member batiks reduced their interest rate to such borrowers to 6%.
In this district, with the exception of one state
and the larger centers in the others, the austomary interest
rate is above 6%. For this reason it is unlikely that, if a
special rate on comrr.odity paper is established, aey benefit w·ill
accrue therefrom to the borrovvers, although member banks would
no doubt take advantage thereof on any paper held by them or acquired on which the rate charged was 6% or less.
In other words, it is not likely that the establishnsnt of such a rate would result in any chan@6 in the rates
of the member banks to their customers, although the member
banks would benefit whenever they happened to hold and rediscount any paper which would come within the definition of commodity paper and on Which the rate of interest charged was within the 1 imit •
In the rural communities of this district, with the
exception of the cotton and tobacco sections, little paper is
found that would come within the Board's definition of commodity
paper. It therefore follows that the rate would be of advantage
primarily to the member ban}:s financing the grower or buyer of
cotton and tobacco and the middle man handling other commodities
in this district.
Generally speaking, we are not in favor of special
rates on certain classes of paper. As we see it, the principal,
if not the sole advantage in the establishment of suCh a rate
would be its possible psychological effect in that it would indicate that the commodities of the farmer coulQ be marketed with
Cheap money whereas in practical operation such would probably

F. R. Bank of St. Louis

- 2-

X-3513

not be the case •
Since in our juci.gment the establishment of such a
rate would,general.ly speaking, benefit only certain member
banks and then only in a limited way, it is doubtful whether our
Board would feel disposed to establish a special rate on the
class of paper in question should the Federal Reserve Board
permit same.
Yours very truly,
(Signed) D. C. Biggs.
Governor.

Honorable w. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. c.

.·
I

COPY

X-3513
:F1£DERAL RESERVE BANK
OF MUT.NEAPOLIS

August 17, 1922.

Mr. Edmund Platt, Vice Governor,
Federal Reserve Board,
Tiashington, D. c.
Dear Governor Platt:
The Boardls letter of J.ugu.st 2, (X-3494) was received
when I was in Northern Michigan. Commodity rates and others were
discussed by cmr Directors at their meeting Monday, and I enclose
herewith exce~ts from our minute book which will be self-explanatory of the views of our Directors,
You will note in the e:::cerpts of the minutes that our
Directors believe that if a 4~ rate was established on commodity
paper, a similar rate should be established on notes secured by
U. S. Government bonds.
The Board also makes inquiry whether, in our opinion,
our member banks generally will be inclined to avail themselves
of the commodity rate.
It is our opinion that the banks in the
larger centers will no doubt take advantage of it, but we doubt
very much whether the banks in the smaller communities will attempt
to use it.
Banks in the smaller centers generally secure much
better than a six per cent rate from their customers, and we do not
believe that such small banks would make a 6% rate to their customers
on commodity paper even though the same could be rediscounted with
us one half or one per cent less.
Yours very truly,
(Signed) R. A. Young
Governor.

.·
I

COPY

- 2-

X-3513

Federal Reserve Bank
of Minneapoli~.
Copy of excerpts from minute book.

Chairman Rich brought up for discussion the existing discount
rates of this bank, which were thoroughly considered. He stated that
while the Federal Reserve Board has offered no suggestion, some of its
members have the i~ression that the spread between the rates of this
bank and those of the other Federal Reserve Banks is greater than it
should be, Minneapolis and Kansas City being the only institutions'
still maintaining the 5 per cent rediscount rate.
The subject was
thoroughly discussed and the Chairman asked for the individual opinions
of the members of the Board, following which Director Bigelow, .supported by Director Bassett, moved that the rediscount rate of this bank
on all paper and all maturities with the exception of bankers acceptances, should l:e reduced to 4~ per cent, subject to the approval of ·
the Federal Reserve Board.
The resolution was adopted, Director
Hixon voting no.
Governor Xoung then presented the Board's general letter

X-3494 of the 2nd inst., upon the revival of ·special rates on commodity
paper.
After thorough discussion, Director Hixon, supported by
Director Bigelow, moved that the Executive Committee be authorized
to establish a commodity rate at not less than 4 per cent, if the
action of other Federal Reserv~ Banks and conditions in this district
should, in their judgment, warrant such action.
After a discussion as to the advisability of establishing
special rates on notes secured by Government bonds, Director Bassett.
supported by Director McDowell, moved that the Execntive Committee
be authorized to establish a special rate on PaPer secured by
Government securities, the rate to be the same rate agra~d on for
commodity paper should a commodity rate be established, and l ! sucn
special rates are established by other reserve banks on the same
class of paper.

,·

X-3513

COPY

Telegram from
Federal Reserve Bank of Minneapolis
.August 17, 1922

Hoxton,
Washington
Letter

X-3494 discussed at our Directors• meeting Monday.

Our Directors approve of establishment of commodity rate and

have authorized executive committee to establish such rate
at not less than four per cent i f action of other Federal
Reserve Banks and conditions in this district should in their
judgment warrant such acti.on.

Letter follows giving details.

(Signed) Young.

.·
J

CO?Y

X-3513
FEDERAL RESERVE BANK

OF
KANSAS CITY.
.August 10, 1922.

Federal Reserve
Washington, D. C.
Gentlemen:
****~*******************************~*********

Rego.~'t..4.Lng tha Board's letter (X-3494) on special rates
for commodity paper, our board requests me to say that it hasitates to
request a speci~l rate on this class of paper an~ is of the opinion
that member bar¥rn generally would not be inclined to avail themselves
of it.
At this time there is ample credit available for the purpose of carryi~g the commodities of this District, pending the orderly marketing th:;reof and at rate~ that are entiraly satisfactory.

***********************************************~

Yours \•ery truly,
(Signed)'.A.sa E. Ramsay
Chairrr.a.n of the Board.

.•
F E D E R A L

R E S E R V E

DALLAS

c 0p y

BANK

X-3513
August 7, 1922.

K
Mr. W. P. G. Barding, Governor,

Federa 1 Reserve Board,
Washington, D. C.
Dear Governor Barding:
Referring to your X-3494, on the subject, "Special Rates on
Commodity Paper, 11 I am writing to sa:y that in advance of our meeting thls
morning I sounded out some of our leading bankers on the subject of the
effect of putting in these comnodity rates, to what extent, in their opinion,
they would be availed of, and what effect the adoption of such rates would
have on the general financial situation.
With only one exception the b~kers were inclined to think that the
effect of the adoption of the 3~% co:nmodi ty rate would be good. One of the
bankers, Mr. Pondrom, thought a better plan would be to reduce our discount
rates to 4% on all classes of paper. I found pretty ret;l.dy interest, among
all the bankers present at the meeting, in this view, and some of our ownn
directors were inc lined to the same view. However, Governor McKinney and
nwself both took a pretty firm position that the financial conditions and the
current interest rates in this district would not justify cmy further reduction
of our discount rate, n.nd further we felt sure the Board would not approve
the reduction , calling their attention to your telegram inquiring whether
our Board had consHered the effect when fixing rate of ~%, and the small
earning percentage on our assets.
The matter was discussed at length by our Board and they unanimously
agreed and asked that the ~% r:1te be :ulopt-"':>-li 1 subject, of course, to all
of the provisions contained in your confide:3tial, tentative draft~ It was
thought that the psychologic:1l effect of this rate would be good, that it
would be an assurance of the willingness and ability of the Federal Reserve
Banks to do their part in marketing the present crop at a preferential rate,
and that the announcement of this rate would tend to stablize conditions and
help put.generally. It was further believed that if a rata of this kind were
put ' in over the south generally it would have a good effect abroad, and
among domestic consumers of cotton, as notice of the willingness and ability
of the System to function and do its part in the ~arketing of the crop.
As you will doubtless recall, when this rate was enforced in 1915
and 1916, it was not availed of much in this section, however, interest rates
have decreased somewhat in this state since then, and a great many, perhaps
hundreds of wa~ehouses, scattered over the District have been built, making it
easier to meet the conditions in respect to this sort of paper. I am inclined
to believe that the banks will be ~re inclined to avail themselves of this
facility than heretofore, and on the whole the adoption of this·rate will
have a good effect.

•'

c 0 p y
K

X-3513

- 2-

If the rate is adopted at all it should be done so
speedily. Cotton is moving to some extent in the extreme southern
and southwest Texas, and in a few weeks will be moving in substantial
volume in central Texas. I notice that cities less than fift7 miles
south of us have been receiving their first bale.
If and when the Board has fully determined the course of
the matter I shall be glad to receive advice by wire so announcement
can be made.
Very truly yours,
(Signed)

U. F. RAMSEY

Chairman.

X-3513
TELEGRAM
from
FEDERAL RESERVE BANK
DALLAS
c 0 py
K

.August

7, 1922.

Harding,
Washington.

Our board of directors tod~ after fully canvassing the matter
are inclined to believe the special commodity rate suggested, your
X-3494~ WQuld have good effect in many ways and would probably be
pretty well availed of not only by the smaller banks of the District
but the large ones and that it would tend to somewhat increase
efficie~y in our marketing system and they instruct me to advise the
Board tl'li:i.t they had at this meeting requested the Federal Reserve
Board to approve the establishment of a special rate of }~%_.on
COID!llOdi ty paper on which the interest of the discounting bank would
not exceed 6%. If this can be done at all it would seem to me that
it would be wise to take this step imnediately and I would be glad
to be advised of the approval of this rate fixed by our board of
directors at the earliest practicable moment.

X-3513
FEDERAL

RESERVE

BANK

S.AN FRANCISCO

C0P Y

August 21, 1922 ..

SUBJECT:

Special Rate on ·commodity Paper.

dear Governor:
Receipt is acknowledged of your letter of 14th

instant.
The Board 1 s suggestion regarding a special rate
on

commodi~

paper was presented to our directors at their

meeting after discussion in the. Executive Comni ttee.

.After

going over the matter the Board voted that it approve the
view expressed to yea in

letter o£ 8th

inst~t.

Yours very truly,

(signed)

Jobn Perrin.
Chairman of the Board.

The Honorable Edmund Platt,
Viae Gover nor, Federal Reserve Board,
Washington, D. c.

X-3513
FEDERAL

RESERVE :BANK

S.AN FRllNCISCO
COPY
L

SUBJECT:

August 8, 1922.
Special Rates on Comnodity Paper.

lq dear Governor:

Receipt is acknowledged of your letter of August 2nd,
a confidential tentative draft,
discussed somewhat at our
Executive Committee meeting this morning, and I have had
a further discussion with Governor Calkins. It seems
to be the consensus of our opinions that this bank would
n~t be disposed to establish a special rate for commodity
paper at this time, and also, that if we did establish such
a rate that there would be no general disposition on the
part of member banks to avail themselves of it.

X-3494, enclosing copy of
X- 3494a. ~is matter was

I shall present the matter again next week at the
meetings, both of our Executive Committee and of our Directors,
and shall write yoa fUrther thereafter.
In response to your invitation to comment, criticise
or suggest, I may say that we are disposed to raise a
questio.n as to the desirability of fixing a Federal Reserve
bank discount rate conditioned upon the rate charged by a
member bank. :Beyond this we have no suggestion to make.

Yours very truly,
(Signed)

JOim PERRIN

Chairman of the :Board.
The Honorable W. P. G. Harding,
Governor, Federal Reserve :Board,
Washington, D. C.

FEDERAL RESERVE BOARD
WASHINGTON

August 31, 1922·.

X-3514.
SUBJECT: Leave of absence, officers of Federal Reserve Banks·.

Dear Sir:
For the ~nformation of your Board of Directors, you
are advised that the following resolution was adopted at
a meeting of the Federal Reserve Board held today:
RESOLVED: That in all cases where officers of
Federal Reserve Banks are granted, by ~~eir
:Boards of Directors, absences for a longer
period than thirty days, whether for vacation
or on account of illness, the amount of salary
that they shall receive during such absence shall
be submitted to the Federal Reserve Board for its
approval.
Very truly yours •

Vice Governor·..
TO THE CHAIRMAN OF ALL FEDERAL RESERVE :BANKS ..

..
' : , ·,_

FEDERAL RESERVE BOARD

' :', ·

WASHINGTON

September S, 1922.
CONFIDENTIAL

SUBJECT:

X-3517.

Functional Expense Reports, July, 1922.

Dear Sir:
As Chairman of the Boardas Committee on Econo~ and
Efficiency, I take pleasure in enclosing herewith Functional
Expense EXhibit No. 2 for July, 1922, based on the first complete
expense reports by functions received from the Federal Reserve
Banks, and showing for each Federal Reserve Bank and Branch the
cost of operating each function and expense unit, together with
the number of employees and units handled. These data are being
furnished to all Federal Reserve Banks not for the purpose of
disclosing operating costs in one batik to the officials in another
bank, but to enable the senior officers and the Econo~ and Efficien~
Committee in each bank more intelligently to examine into their own .
operating costs in the light of what is being done at other Reserve
Banks.

The Committee has kept in mind that conditions vary in
each bank, and is aware that discrepancies still exist in the figures
due to lack of full understanding of the instruction manual. The
Committee believes, however, that this exhibit of costs will indicate
to the senior officers and to the Econo~ and Efficiency Committees at
the banks, as it has to the Board and its Committee on Econonw and
Efficieney, which functions or expense units are out· Of line, and it is
expected that through the use of this exhibit the Committee in each bank
will be able to determine where operating costs are too high or where
the figures they have reported need revision.
It will be noted that separate sheets have been used for
eaCh function in the preparation of the exhibit in order that data
pertaining to a particular department may be given to that department
without disclosing the figures of any other department, as it is the

..
- 2-

X-3517.

desire of the Board's Committee that this information be kept for the
cpnfidential use of the bank?s senior officers, the bank's Committee
oh Economy and Efficiency, and department maragers directly concerned.
The Secretary of the Committee, Mr. Cramer, will continue to answer
any questions concerning the application of instructions in the manual.
It is suggested that in certain instances you may find
it desirable, after examining in detail the exhibit enclosed herewith,
to communicate with some of the other Federal Reserve Banks for the
purpose of determining whether or not the operating costs of a given
department in your bank have been compiled on a basis comparable with
that followed by such other banlts, and if so, to obtain a general
outline of the operating methods at those banks with a view to
improving conditions in your own bank.
The Cornndttee appreciates the promptness with which the
reports for the month of July have been prepared and submitted, ~nd
the cooperative efforts manifested by all Federal Reserve Banks ~n an
endeavor to obtain comparable operating costs for each function.
Very truly yours,

Chairman, Committee on
Economy and Efficiency.

-.
FEDERAL RESERVE BOARD
WASHINGTON

X-3518

September 9, 1922.

SUBJECT:

Discussion of Federal Reserve Credit Policy at the
Joint Conference of Governors and Chairmen.

Dear Sir:
It has been suggested to tDe Federal Reserve Board that
one or more sessions of the forthcoming conference (called for
October lOth) of the Governors and Chairmen with the Board should be
devoted to a comprehensive discussion of FEDERAL RESERVE CBEDIT POLICY.
The Board share.s this

vie·~·,

and follo·-·ing is the list of

topics which it has been decided should form the basis of this discuss ion:
1. Vlliat object should Federal Reserve credit policy seek to

accomplish and by what test may we know that it is sound?
Discussion to be led by Messrs. Norris and Wills.
2. vnruat relative importance should be given to the following
factors in determining such policy?
a. Federal Reserve reserves.
b. Interest rates in the open ~arket.
c. Interest charged by member banks.
d. Interest rates paid on time deposits.
e. Balance of trade and inward or outward movement of gold.
f. Credit conditions in, and exchanges with, leading foreign
countries.
g. Volume of bank loans and deposits.
h. Business and industrial activity, present or prospective.
i. Commodity price levels.
j. Condition of security ~arkets.
Discussion to be led by Messrs. Jay and Seay.

X-3518

-2-

3. What light does the experience of the Federal Reserve Banks
throw on the value of different methods of making their
credit and discount policy effective?a. Discount rates.
b. Open market operations.
c. Discretion in rediscounting.
d. Credit examination of merrber banks.
e. Credit ratings of co:nnercial borrowers.
Discussion to be led by Messrs. Strong and Perrin.

What is the most practicable n~thod of brin%ing about timely
and coropetent co~siJeration of ~atters of credit policy by
all of the Federal Reserve Banks and effective action to
obtain the results aimed at?
Discussion to be led by I'Tessrs. McDougal and Curt iss.

In order that the discussion of the gensral subject of credit
policy at the forthcoming conference may be thoroughgoing, productive,
and pointed, it is desired by the Board that careful preparation and
study of the topics to be considered be

~ade

in advance of the confer-

ence, and also that there should be a preliminary exchange of views in
written form.

Assignments have therefore been

~ade

in connection with

the program to those who are to start the discussion.
Each Governor and Chairroan to whom an assignment has been wade as
above, is requested to prepare a written statement on the assigned
subject, not to exceed 1200 words in length.
should bear a title and a brief introductory

Each statement or paper
paragra~h

setting forth

the proposition or conclusion it is intended to establish.

These papers

should be mimeographed and copies shculd be mailed to all other members
of the conference (Governors and Chairmen of Federal Reserve Banks)

\'I
I

-3-

X-3518

and to member9 of the Federal Reserve Board not later than Thursday,
September 28th.
Each Governor and Chairwan other than those listed in the
above program is requested to select one of the four main topics
on the program and to prepare a memorandum of his views upon it,
considering in this connection the discussion of the topic by those
to whom the preparation of leading papers has been assigned.

These

memoranda should not exceed 600 words in length, and should bear a
title and a brief introductory paragraph setting forth the proposition or conclusion the writer has intended to establish.

These

memoranda should be mimeographed and mailed out to all members of
the conference and to members of the Federal Reserve Board not later
than Friday, October 6th.
should be

~ailed

In adiition,

25 copies of each memorandum

to the Secretary of the Federal Reserve Board.

The preliminary exchange of papers and
to lay the foundation for the oral
Federal Reserve credit policy.

merro::.~anda

dis~ussion

is intended

at the session on

Each of the topics listed in the

above program will be taken up, and those to whom assignrrents have
been

~ade

in connection with the program will present their revised

views and oonclusions in oral statements not exceeding fifteen minutes each, after which there will be a general discussion by the
conference.

)

-4-

X-3518

Following the afternoon session devoted to the above
program, it is proposed to devote an evening session to the
question \7.hat does the present businass and credit situation indicate
with reference to the prospective demand for credit and the
need or advisability of any action at the present time by
Federal Reserve Eanl:s with respect to matters of credit
and discount policy?

General discussion.
Very truly yours,

vr.

Vl. Eoxton,
~ecretary.

TREASURY :DEPAllTr,!ENT
OFFICE OF ~1iE SECRETARY
WASHINGTON

September 12, 1922.
The Governor
Federal Reserve Board.
Sir:
You are advised that tbe Iepartment has referred to the General Accounting
Office, Treasury ~artment Division, for settlement, the account of the Bureau
of Engraving and Printing for preparing Federal Reserve notes during the period
August 1 to August 31, 1922, amounting to $111,187.60, as follows:
Federa~

j§_

New York ••••••••••••• 144,000
Philadelphia ••••••••• 35,000
Cleveland •••••••••••• 104,000
Richmond ••••••••••••• 115,000
Atlanta •••••••••••••• 80,000
Chicago •••••••••••••• 86,000
St. Louis •••••••••••• 41,000
Minneapolis •••••••••• 40,000
Kansas City •••••••••• 31,000
Dallas ••••••••••••••• 61,000
San Francisco ••••••••• 217,000
954,000

Rese1ve Notes 1914

$10
235,000
59,000
28,000
20,000
38,000
2,000
25,000
26,000
39,000

j20
96,000

$£0
20,000

73,000

20,000

125,000
597,000

95,000
264,000

1,000

§.000
46,000

Total
495,000
94,000
225,000
135,000
119,000
88,000
66,000
66,000
70,000
61,000
3,000
445,000
3,000 1,864,000

$100

1,864,000 sheets at $59.66 ••••••••••• $111,187.60
The charges against the several Federal Reserve Banks are as follows:
:tnc.ComTotal
ComoenPlate
pensall.Qn
Sheets
sation fAinting Materials
$6,707.25 .. $ 2,574.00 $29,526.75
. New York •••••••• 495,000 9,825.75 10,419.75
Philadelphia •••• 94,000 1,865.90 1,978.70
488.80
5,607.10
1,273.70
1,1?0.00 13,421.25
Cleveland ••••••• 226,000 4,466.25 4,736.26
3,048.75
702.00
8,052.75
Richmond •••••••• 135,000 2,679.75 2,841.75
1,829.25
6~.8.80
7,098.35
Atlanta. ••••••••• 119,000 2,362.15 2,504.95
1,612.45
457.60
5,249.20
Chicago ••••••••• 88,000 1,746.80 1,852.40
1,192.40
343.20
3~936.90
894.30
St~ Louis •••••••
66.000 1,310.10 1,389.30
343.20
3,936.90
Minneapolis ••••• 66,000 1,310.10 1,389.30
894.30
364.00
4,175.50
Kansas City..... '10,000 1,389.50 1,473.50
948.50
317.20
3,638.65
Dallas •••••••••• 6l,ooo 1,21o.e5 1,2e4.o5
826.55
2.314.00 26.544.25
San Franoisoo ••• ~5.000 8,833.25 9,367,25
6.029.75
1,864,000 37,000,40 39,237.20 $25,257.20 $ 9,692.80 111,187.60

The Dunau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparc.tion and Issue of Federal Reserve Notes, Reimbursable", and 1t is request~d that your Board cause suoh indefinite appropriation to be reimbursed in like omount.
Respectfully,
VYm.. s. Broughton,
·Commissioner.

.....
FEDERAL RESERVE BOARD
WASHINGTON

X-3522
September 20,1922.

SUBJECT:

Expense Main Line, Leased

~ire

System, August, 1922.

Dear Sir:
Enclosed herewith you will find two mimeograph statements, X-3522a and X-3522b, covering in detail operations of
the main line, Lease~ ""'ire S~,rs tern, during the month of August,
19221
Please credit the amount payable by your bank in the
general account, Treasurer U. S. , on your books, and issue
C/D Form 1, National Bc:tnks, for account of "Salaries and Expenses, Fed·etal Reserve Board, Special Fund", Leased Wire
System, sending duplicate C/D to Federal Reserve Board.
Very truly yours,

Fiscal Agent.
(Enclosure)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.

X-3522a
REPORT SHOWING CLASS IFIC.ATION AND NtJMBER OF 1·:oRDS
TRANSM!T'rED OVER MAIN LINE OF THF FE9l£FAG RESERVE
LEASED WIRE SYSTEM FOR THE MON.i:'H OF .AUGUST, 1922.

From

Bank Business

Per cent of
Total Bank
Business(*)

Treasury
Dept.
Business

War
Finance Corp.
Business

Total

---------------------------------------------------------------------------------Boston
New York
Philadelphia.
Cleveland
Richmond
Atlanta.
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

85
240
179

40,915
219,596
69,622
88,458
73.923
71,350
143,197
90,575
43,755
94,932.
70,346
153.651

113,871
117.589

827
1.330

1,160,320
440.900

236,460

2,157

1,601,220

32,553
2o6, 254
60,422
79.554
65,669
60,152
131,837
80,769
35,395
84,743
6),692
139.582

19.32
5.31
7·65
6.31
5·78
12.67
7.76
3.40
8.14
6.12
13.41

3,362
13,342
9,200
8,754
8,254
11,076
11,309
9,806
8,360
10,104
6,414
13,390

Total F. R.
Banks
Washington

1,040,622
321.981

100.00

Grand Total

1,362,603

Per cent of Total

3·13

85.10~

Bank Business
Treasury Business

14.77%
1,362,603 words or
n
II
236.460

TOTAL

1,599,063

{*)

122
51

.13%

85.21~

14.z9~

100.00%

These percentages used in calculating the
Pro rata share of leased wire expenses as
shown on the accompanying statement {X-3522b).

FEDERAL RESERVE BOARD
WASHINGTON, D. C.
SEPTEMBER 20, 1922.

150

;

.01

REPORT OF EXPENSE

·~

MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM AUGUST,

:·
192~:

X- 3522b

--~----------------------------------------------------------------~----------·---------------------------------

·Pro rata

Name

of Bank

Operators'
Salaries

Operators'
Overtime

Wire
. Rental

Total
Expense

Share of
Tptal
Expense

Credits

Payable to
Federal
Reserve
Board

-----------------------------------------------------------------------------T--------------------------------Boston
$ 250.00
$
$ 250.00 $ 584.98
$ 250.00
$ 334.98
$
New York
147.00
1,416.98
1,269.98
1,416.98
3,704.27
2,287·29
P'nilad.elphia
s6o.86
225.00
1,085.86
225.00
225.00
Cleveland
366.00
366.00
366.oo
l,o6J.75
1,429.75
Richmond
874.31
305.00
1,179·31
305-00
305·00
Atlanta
240.00
1,080.26
. 840.26
240.00
240.00 '
,. . Chicago
(4/=)5,091.32
5,0C)l.32
~.723·35(*)
5,091.32
2,367·97
St. Louis
290.00
290.00
290.00
1,450.~1
1,160.~
Mi!llleapol is
6}5. 4
360.
275·00
275·00
215·00
• "11.90
Kansas City
326.64
1,521.33
328.54
328.54
1,192·79
Dallas
1,143.80
170.00
170.00
170.00
973.80
...
San Francisco
2,111.27
2,5o6.27
395.00
395.00
395-00
Fed.. Res. Board

16,876.98 16,876.98

--------------------------------------------------------------------------------------------------------------TOTAL

$9 ,203!94

$148.90

$16,876.98$26,~.82. $18,689.55

(#) Includes salaries of Washington Operators

$9,352.84

(al7.g40,27
$18, 89.55

(&) .Amount reimbursable to Chicago.

(*) Credit
.
{a) Received $7,517.36 from Treasury Department and $22.91 from Wal" Finan~
.'Corporation covering busines.s for months of March and April, and July, 1922, respectively.
FEDERAL RESERVE :BOARD,

WASHINGTON, D, C.
SEPTEMBER 20, 1922.

$12,o60.o6
(&)2,72g·35
$ 9.33 ·71

~"'""'

l ....,: . ;;~r:>

FEDERAL RESERVE BOARD
WASHINGTON

Se~tember ~5.

X-3524

Subject:

.Appointment of Mr. W. W. Stewart

Dear Sir:
You are advi'sed that Mr. YT. \7. Stewart
has been appointed by the Board to succeed Dr. H.
Parker VTillis as Director of the Division of
Analysis and

Researc~

t~e

Federal Reserve Board.

Mr. Stewart ass1.·..rned his duties on September 15,
1922.
Very truly yours,

\'1alter L. Eddy,
.Assistant Secrstary.

To all F.R . .Agents.
Copies to Govercors.

1922.

FEDERAL RESERVE BOARD
WASHINGTON

September 25, 1922.
X--~~525

SUTJECT:

Reinve3tment of Proceeds of

~~turing

Government Securities.

Dear Sir:
For your ir~f Jrrm.tion, there is quoted below the text of
a letter received t~is morning from the Under Secretary of the
Treasury whicl1 is self-explanc1.tory:
I gat~1er from the statement of the Federal Reserve
Board as to the condition of the Federal Reserve.Bants at the
close of business Ssptember 2C, 19~2, that up to t.:1at date the
Federal Reserve J3ants generally hc;_d not rr.ade c.,ny reinvestments
of the proceeds of their Sepi~er:.ber 15th maturities. It seems to
me that it \·;ould be hellJful to the e;eneral si tua.tion i f the
Federal Reserve Ban1:s concerned '.·roulJ continue to follow this
policy. I notice in L1is connect ion t:1at the Federal Reserve
Baill:s 1 basic holdings of bi'l.ls pu..rc!."lased in t"ne open market has
increased '.vithin the past fe·"' months from a relatively insignificant amount to about $2CC, oo:;, C:::J.
This, I assune, should reduce t:1.e pressure to invest in Governr.:ent securities for the
purpose of rraking ex:;enses a.nd. dividend.s.n
11

Yours very truly,

Vice Governor.

GCVERFOHS OF !"I,L F. R. PA?WS
COPIESTO CI{;' IRl'/tE:.T.

FEDERAL RESERVE BOARD
. WASHINGTON

i:- 3~2r)
Septe~~er

SU13JECT:

27,1922.

Election of Class ".A 11 and "B 11 Directors.

Dear Sir:
This will confirm rrw telegram to you of this
date advising

tl~t

the electoral groups of member banks

for the election of Class "AI' and "B 11 directors this
year will be on the same basis as prescribed by the
:Board in its letter of October 3, 1918, X-1240, and
that the Board has designated Thursday, November 16,
1922, as the date for opening the polls.
Very truly yours,

Wm. "T. Roxton,
Secretary.

TO THE CHAIRMEN OF ALL FEDERAL RESERVE :BANKS.

__!""'6
,. ...... ;:¥ .J

FEDERAL·RESERVE DOARD
STATEMEllT FOR 'l'HE PRESS

X-3528
For release in Morning Papers,
Sunday, October 1, 1922.
The following is a summary of general business and
financial conditions throughout the several Federal
Reserve Districts during the month of September, as
contained in the forthcoming issue of the Federal
Reserve Bulletin.
·The chief development of the current month has been the
improvement in the labor situation.

The amount of voluntary un-

employment has been greatly reduced, and wages have shown a
distinct upward tendency.

Mining output increased about 3 per

cent during August and has shown a tremendous expansion during
September, due to the reopening of most of the bituminous and anthracite coal

mir~s.

Manufacturing is also being

~aintained

relatively high levels, increased production being reported in
most important industries.

The crop prospects are somewhat less

encouraging than a month ago, as there has been a rather general
deterioration of the growing crops.

Doth wholesale and retail

trade showed marked expansion during August.

Financial conditions

continue to be very sound, while domestic money rates show a slight
upward tendency.

The 7eneral level of prices has remained

constant during the past month; the August index number of the
Federal Reserve Doard being the same as that for July.

•••

X-3528

-2-

1097

Manufacturing was slightly curtailed in August, but has recovered during September.

Iron furnaces and steel mills are increas-

ing their rate of production to satisfy the continued large demand of
railroads and automobile companies.

The

~arket

for nonferrous metals

continues reasonably strong and reflects a further increase in mine
output of copper and lead.

Cotton mills and knit goods factories have

increased their output and woolen machinery is slightly more active,
while August silk consumption was the largest for any month since 1919.
The continued building acLivity has resulted in an improved demand
for lumber, cement, and other building materials.

Petroleun1 consump-

tion has increased due to the shortage of other fuel, but stocks
continue to accumulate.
The volume of employment has increased during September in
consequence of the return to work of several hundred thousand coal
miners, railroad shopmen and textile workers.

T'ne period from

August.l5 to September 15, moreover, contained 0y far the largest
number of wage increases reported in any month since the decline of
business activity in 1920.

The most important increases occurred at

copper mines, steel mills, cotton mills

ar~

in the building industry.

Unskilled or semi-skilled workers received most of these advances.
The average condition of farm crops declined somewhat during
August.

The cotton crop has suffered severe damage from boll weevils

and from drought.

Ginnings prior to September 1 were much larger than

in either 1920 or 1921.

The estimates of the corn crop have been much

reduced, but the prospects for spring wheat have considerably improved.
The grain crops a.re being ma.rketed more slowly than last year except
in the case of rye.

...
-3-

X-3528

VJholesale trade improved substantially during August in all
reporting lines.

Every District reported increases in dry goods

sales, which averaged almost

per cent higher than in July.

Sales of furniture and shoes were also much larger.

Comparisons

with a year ago indicate improvement for all lines except groceries
and shoes.

Retail trade improved considerably during August,

and the volume of business was larger in most sections than in
August, 1921.
The banks are in a strong position and are meeting the
seasonal demand for credit 1vith ease.

This seasonal demand has

led to increases in both call and time money rates at New York.
Federal Reserve

Danl~s

have somewhat increased their bill holdings.

European exchange rates have generally declined during September,
and there has also been a slight decline in Asiatic exchanges.
The value of exports was practically the same in August as in July,
but there was a moderate increase in the value of imports.

•

F E D E RAL

R E S E R VE

B 0 A R D.

STATEME:NT FOR THE PRESS.
X-3529

For release in afternoon papers,
Tuesday, October 3, 1922.

CONDITION OF THE ACCEPTANCE MARKET, AUGUST

l-5 TO SEPTEMBER 15 ,1922.

According to the reports received by the Federal Reserve Board from the Federal Reserve Banks, the acceptance market
during the period under review, for the

~~st

part, continued dull

with a disinclination on the part of buyers to purchase bills at
the present level of rates.

Tne supply of bills in most centers

was limited but ample to meet the slight demand.
In Distrj_ct No. 2 (New York) both the supply and demand
were light.

The market was very quiet although at times during

the p8riou dealers reported very good business.

Rates for call

money and Treasury Certificates, together with the foreign
continued to be the dominant factors.
their commitments and conducted

~ainly

de~and,

Dealers were cautious in
day to day trading opera-

tions while there was a continued tendency towards decreasing outside distribution of bills.

Similar conditions are noted in

District No. 1 (Boston) in Which it is stated the supply of bills
was larger than the market would absorb at the offered rates.
District No. 3 (Philadelphia) likewise reports more or less

., /-''

• '

1100
-2-

X-3529

apathetic conditions, with inland and local banks displaying
no inclination to buy.
District No. 7 (Chicago) reports a considerable decrease
in acceptance transactions during 11ugust as compared with July.
Bills accepted decreased 25 per cent and bills bought continued
the decrease noted in the last report.

The volume of bills

sold declined for the third consecutive month, the decrease during the current month being 11.6 per cent, while bills held, after
shoWing a gradual increase for the two preceding months, showed
a decrease of 60 per. cent at the and of August.

Twelve of the

27 reporting banks in the District show no transactions in
bankers• acceptances-during the month.
In District No. 12 (San Francisco), Which the latter
part of the previous period experienced a shortage of bills, reports that new bills are being offe:r;-ed in good volume and this
in conjunction with'the offerings in other parts of the country
has created a supply at least equivalent to the present demand.
Acceptances executed in District No. 11 (Dallas) on August 31
amounted to $476,241.06 as compared with $879.783-08 on July 31
and $516,610.50 on June 30.

District No. 4 (Cleveland) reports

the market continues to be very quiet and the same is true of
Districts No.6 (Atlanta) and No.8 (St. Louis).

ii01.
-3-

X-3529

The bulk of the acceptances executed in the various
Districts were based upon exportation of cotton, grain and
meat; importation of sugar, coffee, silk, coal and rubber;
warehousing of sugar and tobacco; transactions in wool and
oil; and dollar exchange.
In District No. l (Boston) no bills movad easily,
but the best demand was for short bills, especially those with
maturities under 30 days.

In District No. 4 (Cleveland) pre-

ference was for the shorter bills of 30 and 60 days, although
there was soue demand for 90-d.a.y bills.

Maturity of purchases

in District No. 7 (Chicago) were 30-day, 24.8 per cent; 60-day,
17·9 per cent; and 90-day, 57•3 per cent.
(San Francisco). also reports the

~st

District No. 12

demand for short bills

and gi-ves the distribution of maturities as folloWS':

Ma.turi ties
30 days
6odays

90 days
120 days

August 15 to
September 15

July 15 to
Augqst 15

22.8%

3·8%
27.8%
67.8%
0-6%

55·3~~

19-4%
2.5%

Rates on prime bills in the various Districts were as
follows:

•

-4-

" .f! "'"'~

·"- :.. V.<,·

X-3529

Rates on Prime Bills
Range during period
Ivlaturi ty

District
No. 1
(Boston)

30-day
60-day
90-day
120-day
150-day
180-day

30-day
60-day
District
90-day
No. 2
120-day
(New York) 150-day
130-day

Offered

Bid

Offered

3-i/8 - 3-l/4

3 - 3-1/8

3-1/4

3-1/8

"11

Bid

"
"
I

ll
II

3-1/4

3-1/3

"
"
3-1/4
"

"
"

3-1/4 - 3-1/2

"
"

3-1/8 3-3/8

3-1/8 - 3-3/8

3 ._ 3-1/8

District
No.3
(Phil adelphia)

3-1/4 - 3-1/8

District
No.4
(Cleveland)

30-day
60-day
90-day
120-day
150-day
130-day

30-day
60-day
90-day
120-day
150-day
lSO-day

3-1/8 - 3-3/3

3-1/8 - 3-1/4 3- 3-1/8

30-day
60-day
90-day
120-day
150-day
130-day

District
No.7
(Chicago)

II
3-1/8 - 3-1/2
3-1/4 - 3-1/2 3-1/8- 3:1n
3-1/8 - 3-3/4

"
n

3-3/8 - 3-1/4

"
"
"
3-1/3

3 - 3-1/3

3-3/8 - 3-l/2
II

3-1/8 - 3-3/8
3-1/4 - 3-3/8

3- 3-1/8
3-1/8

"
II

3-1/4 - 3-1/2
3-1/4 - 3-3/4
3-l/8

3-1/8 - 3~

"
3

3-1/4

3-1/3

3-1/3 - J~·

3 - 3~1/3

3-1/8 - 3~

3 - 3-1/4

3-1/3
It

312

3 - 3-1/4

C.····~

X-35}1:).

(PreliminarY praft)

STATUS OF BRANCH BANKIFG UNDER THE LAWS OF THE SEVERAL STATES.

"JM.tes Pr.ohibi ting Branch Banking :B;y La.w:
*Alabama
*Indiana
· Colorado
Missour.i
Connecticut
New Hampshire
*Florida
*New Jersey
New. Mexico
Idaho
No SJ2AAifiS provision but branches not permitted:
Illinois
Mbntana
Iowa
Nebraska
Kansas
Navada.

Minnesota

North Dakota

States Prohibiting Branch Banks but Permitting
Branch Offices or,J£eneies:
Kentudcy'
·
Michigan
*Mississippi

Oregon
Texas

Utah

*Washington
*Wisconsin
Oklahoma.

South Dakota
Vermont
West Virginia

*Pennsylvania

States Permitting Branc;lJ :Banking with no Geographical LW;itations:
1
Arizona.
Georgia
!bode Island
·
Delaware
North Carolina
. Virginia
California
South Carolina.
States fermi tting Branches within Geo&ra:ehiell LinutaU,ons:
Louisiana
Massachusetts
Ohio
Maine
New York

States Permitting Branches withoU,t kpress Ay.thorization of Law:
Arkansas
Maryland
Tennessee

\Vyoming permits branches by implication but no branches are in opera- 1

tion.

*In these states banks are parmi tted
to maintain and are operating branches
which were in existence before the
establishment of branches was
prohibited.

-r;g

.·~· : '.

.·.

1104
-2-

As given in reports from

th~

twelve Federal Reserve Agents.

BranCh banking prohibita~, except in the case of those
banks having branches in operation prior to March 2, 1911.
Six banks.are thus operating twenty branches.
Subject to the approval of the Superintendent of Banks,
a bank my establish branches, provid<3d it has not less than
$50,000 capital and surplus, plus $15,000 of additional capital
and surplus for each and e:very branch.
Seven banks are operating twenty branChes.
There are only twenty-three banks in the State with a
capital and surplus of $65,000 or over.
No specific provision in the statute&, but there are
banks operating 4 branches in ti'.e State.

CALIPQRNIA

Subject to the approval of the Superintendent of Banks to
be granted when "public convenience and advantage will be promoted
by such a branch", a bank may establish any number of branches in any
part of the State.
The capital requirements for brar~h offices are:

1- For each branch office located in the place of
principal business of the parent bank. the paid.-l:r. capital,
in cash must exceed by $25,000 the capital required for a
bank in that place.
2. For each branch office of a bank other than an exclusive trust COl'r!P8llY located 1n any place in the State other
than the plac~ of principal business of the parent bankt the
amount of the paid-in capital, in cash, of ·the parent bank
must exceed the amount required by law in the sum required
for an independent bank organized in that locality, exclusive
of the oa.pi tal required for a trust department.
3· For each branch of an exclusive trust company establiShed or maintained in a place other than the place of
principal business of the parent bank, the paid-in capital,
in cash of t'he parent bank must exceed the ::;um other·,visa required by law in the sum of $25,000·

. -.

1105
x-3530
On June 30, 1922 • there were 429 a tate banks, of which
82 were operating a total of 281 branches.

The Bank of Italy with
·banking business.

59 branches conducts a statewide

The Los .Angeles Trust & Savings Bank has 44 branches located
either within the city or in the territory economically tributary.
The California. Bank of Los Angeles has 28 branches, all
located within the city or suburbs.
The Secu.ri t-y Trust & Savings Bank of Los Angeles has
branches within the city and the near vicinity.
·

COLQIW)Q

:Branch banking prohibited and no branches in operation.

CONNECTICUT
Branch banking prohibited and no branches in opera.t1cm.
DELAWAB];

Branches Jlla\V be established with the consent of the State
Bank Comnissioner.
'!he applying bank must have a.t least $25,000
capital for each office or place of business then established and
for the branch to be establishe.d and a surplus of at least $25,000
for each office or place of business then established.
'lhree banks, each with two branches, have allocated
capital ·s took to each of the branches.
Two banks , one wi tb 1 branch in the same city, and one with
11 branches throughout the State have not allocated any stock to
the separate branches.
Total for the State, five banks with llfbra.nches.
FLORIDA

Branch banking prOhibited.
bank is operating two branches.

Under a previQUS statute one

GEORQIA

The establishment of branch banks is permitted subject to
the approval of the Superintendent of Banks, and with a proviso
that each branch is to have allocat.;d to it separate capital in
an amount prescribed by the Superintendent of Banks.
Eighteen banks are operating 34 branches.

ff,

-4-

X-353:>

Branch banking prohibited and no branches in operation.

IIJ.IHOIS
No provision for branch banks

none being

op~rated.

IND!ANA
Branch banks are prohibited by a statulie of l92:i...
Banks having branches prior thereto _and still being operated are:
~ineoln Trust Qo., Ft~ W~e.
1 branch
11
hrmers & Merchants Bank of Cltq City,
1
Union Trust Co., Ind.ianapoli&,
Fl~tCQer Savings & Trust Co., India.napiJlis
Banks with

11
l
__5. _ n
8 branches ·
.~

No provision for branch banks a.nd nona being operated.
No provision for branch banks and none being operated.
l!ra.nches are prohibited by law but recent17 one state
bank ha.s been authorized to open six agencies and one national

bank four agencies.

An7 state bank which has a capital of $50,000 or mot"e
1D81' have as many as two branches in the aame parigh (co1u1ty),
and trust companies may have as many a.s they pl~c.se. (In
towns of more than 30,000 po~)ulation the minimur.~ capital

•

requirement for any bank is $100,000.)
32 banks are operating

MAINE

branches.

Trust Companies are permitted to nave branches in the same
or adjoining counties.

,~'I_,.. -16 Trust Companies are at present operating {271).-~ches:
Total
branches
~-,-~·--__../
ll have l branch ;
·
"
1.1
'/t2.
4 It 3
It
,,
n
,/' 4
../
..... ..._.
1 has 4
"
/
:~1: branches
Total - i6 Trust Companies
/"/

.·~

110'7.
-5-

X-3530

No specific provisioc in law, but the statutes a.re
eons trued to parmi t branches.
ll banks are operating 41 branches •

.141AAQUHSjiTTS
Subject to the approval of the Board of Bank Incorporation, Trust Companies are permitted to have branches in the
same ei t:v or town as the parent bank.
At present 34 Trust
Companies are operating 51 branches:
24 have 1 branch
·
Total branches 24
7 " 2 branChes
n
n
14

2 n ~
n
_l_h&S 7
II
'l'ot;U... ~4 Trust Companies

_]_
51 branches

Tne present tendency in Boston is for th~ lar~er Trust
Companies to acqUire the small banks and continue their offices
as branches • In "the rest of the State branches show a t;andency
to increase •
"IndU.Strial. n banks are permittea. to establish branches
within the limits of. the m:micipality desiana.ted in the parent
bank charter. There is no specific autbori ty for other banks to
~stablish br~hes to carey on a general banking business, but
such branches are prohibited by a xuling of the Attorney General.
Banks are permitted, however, to establish agencies in the same
ci t:v or v-illage desisnated in the charter of the parent bank.
These agencies Jl'l8.y recfive and pay out deposits and. ,9-eal. in exchange·
47 banks are operating 257 branches or agencies.
The greatest dslopment is in Detroit, where 14 banks a.r_ Jpera.ting 189 branches.
'l'wo national banks, converted from state banks, continue to operate branches, and the National Bank of Corrmerce of
Detroit has been permitted to open an additional office.
No specific provision in law, but Attorney General holds
that banks cannot establish branches without legislative authority.
Thrae national banks are
operating six branches.

JlSSISSIPPI

:,:\

'Dle law prohibits 'branch banks but parmits banks in citia&
of 10,000 or over to establish, with the permission of the ~tate
:Bank Examiner, branc::h offices within the city~ :Branch banks in operation prior to 1906 are permitted to continue.
The State :Bauk Examiner r~orts,9 banks operate 21 br~es~
(This appareJltlY has reterenee only to the branches established
prior t() 1906) •

.g'

1;108
-6MIS§OQJ.U
Branch banking J>robibited. and no branches in operation.
No sp$cific provision but two opinions of Attorney
General hold that state banks b,ave not the power to .establish
branches.. No branches in operation.

,Npi.ASKA
No proVision for branch banks and none being operated.
No provision for branch banks and none being operated..

~ranch

banking prohibited and no branches in o;pera.tion.

Brandl 1Jai:Jk1ng pr-ohibited.

Prior to 1899 branches could

be established.. In 1,913 ·an act was passed a.u:th.o.rizing branches
of Trust CO~~pmies in the same ~ty where the principal office
was l~ca.ted. 'lhts was repealed in 1915·
·
There arc at present 11 Trust Conpanies operating 18
branches and one State Bank operating l branch.

!fl\! MEXIQQ.

•

Branch bailke pi"ohibite.d, except that any mercantile
corpora.tio~ which JDa.intains a banking department in accordance
with the provisions of the laws may receive deposits and nuy
and sell e~e;e at any of its l)ranch stores.

Subject to 'tbe approval of tll.e Su.perintend.ent of :Sanks •
state banks and. trust compa;1;ie$ are permitted to have .branches
in the same city as the par:ent bank under the following cond.iti.ons:
~~ of @ta.je Bps
The bank must be in a city of n:cre than 50,000 popu.la.tion.
2. For ea.qh .branch opened since .April 27.. 1908, the actual
paid.;,. in capital ot the parent bank tmist q.ceed $100 ,OOv ,
the minimum capital r4'tqUii'ement' by $100,000' and for
each branch opened befonf April 27, 1908; and thereafter
· maintained, the actual paid-il'l capital ttllSt exceed
$100,000, the minil'llbn requirement, by $50,000 ..

l·

- 1 ..

SubJect to the approTal of tthe State Super.intendent of
D8llka, a Trust Compa.nr J1A7 establish branches iD tb.e same
c1tJ" as the parent bank, proviUcl tbat the actual. paid-in
capital of such Trust CompanJ exceeds b7 $100,000 for each

branch opened the amOu.nt otherwise required by law.
9f~ita,l tegsiremen~s:

PoPillation not exceeding 25,000
" 25,000
to 100, 000
" 100,000
to· 250.000
" 250,000 and over
§tM,e

Capital required $100,000
"
It
'
150,000
n
200,000
"
tl

:ea.np IJld Trusi Oompa.ni§s havipg :Bran9hes:
In li'aw York City:
1 has

51 branches

5QO,OOO

Total branches :

S
3 have 7
3 II Q

"
"

8 "

_ll.

ij.

3
2

"
11

In New York State:
1 bas 18 bra.Jlchas
1 ..
7
If
l
tr
6
"
1

5 have

_.5,

Total :

16
..ll.

1Sl

31
.-!

1 branch

52 banks operating 234 branches.

lS
7
6
4
3
10

_5.

Outside of New York Cit;r the greatest development is in Buffalo,.
where banks are opeaat~ 39 b;ancbes:
Na~ iOMl Banks l@ving .l3ran~he§:

In New York Citt:

2 have 12 branches
l has
8
"
1 If
7
II
1 If
5 "
1

*l.
g

1 branch

Total branQhes:

24
g

7
5
3
2

...-1.
50

1110

., '
X-353C'- r-

- g-

In New York State:

.Ubu.Y ... 1
*Buffalo-..l
2

has 1 branch ·

" ..l.
2

*Off~iees opened reeent}.t under the rulilig of the Comptroller
that Nat~onal :Banks might establish oftic~s but not branches.

NQR'l'B QAROLINA:

.A.rtt bank ~ establish. branches sUbject to the &Pl)rOVaJ. Qf
Corporation Cormniasion. The banks DllBt bave capital of $15.000 for
the home office and $20, 000 for aac:h branch in a _place of leas than
3,000 inhabitants, $30,000 for each branch in a place ba.viug from
3,000 to 10,000 inhabitants, $50,000 for each branch in a place baving
between 10,000 a.."ld 25,000 inhabitants, and $100,000 for each branch
in a. place of more than 25,000 inhabitants.

banks are operating

1fo provision

f~r

branches.

branch banks and n0111 being operated.

Subject to the consent of the· ~perintendent of ~ a
bank IJ~q establish branches in the place ot ita pri.Mipal business
and in a. citJ or village conti~OQs thereto.
.
(f.Contiguous• has not always been construed as adjacent.)
At present 44 banks a.re operating 156 branches.
Distributed b7 cities th.q are:
No. of banks
No. of
operating branches
bra.n•a
Altron

Cincinnati
Clevelan4
'l'oledo
Elsewhere in the State

6 (1,2,6,S,l0,49) 76

No provision for 'branch banks and none baing operated.

OREGON.
Branch banking prohibited but the law provides that ·
·-menever • in the future, national 'b~s are authorized to·
maintain ora.n~as in Oregon, the Superintendent of Banks
ma.Y authori~e State :Banks to _maintain branches on similar
terms.-

.
-9-

X-3530

PENNSYLVANIA

Certain banks operating und9r old charters have branch
banking privileges.
With those exceptions ~ranch offices ~rc
prohibited, but banks and trust companies may establish subagencies in the city or borough or township in which its principal place of business is located, providing a full report of
the operations is made to the principal place of business at
the close of the day, the assets transferred thereto, and the
liabilities reported.
This developmant is confined principally to Philadelphia,
in which city 13 state banks, trust companies, and savings banks
maintain 1 branch, 13 branches;
5 state banks, trust companies, and savings banks
maintain 2 branches,lO branches
2 state banks, trust companies, and savings banks
_
maintain 3 branches, 6 branches
Total - 20
Total branches - 29
(rt is not reported which of the above, listed as
branch<;ls 11 , ara true branches and which are offices.)
Two national banks in C~den maintain offices in
Philadelphia.
11

One national bank in Philadelphia maintains 1 branch.
RHODE

ISL~

Subject to the approval of the Board of Bank Incorporation, Trust Companies are permitted to have branCLlRS.
Seven Trust ('.bmpanies are at present operating
5 have 1 branch .
Total branches ?
n
n
2
l has 2 branches
_1_

17 branches:

.J,Q_

There ia a tendency for the larger Trust Companies to
absorb the smaller banks and to continue the offices as branches.
SCUTH CAROLINA

Any bank may establish branches.
7 banks are operating 15 branches.
SOUTH DAKOTA

No provision for branch banks and none being operated.

- 10-

X-3531"'·

TENNESSEE
Though not specifically authorized, the law is
construed to permit branch banking, and 15 banlts are
operating 29 branches.
TEXAS

Branch banking prohibited and no branches in operation.
Branch banking prohibited and no branches in operation.
No specific provision for branch banking in the Act
but branches are not penni tted.

VEOONT

::·c

VJRGINJA

Subject to the approval of State Corporation Commission, banks having capital of $25,000 or over may establish branches.
23 banks are operating 41 branches. Several national
banks have recently opened branch offices in Richmond·.

WASHINGTON
Branch banking prohibited since January, 1915· 4
banks are operating 5 branches established prior thereto ..

!fEST VIRGINIA
No provision for branch banks and none being operated.
WISCONSIN

An Act passed in 1903 prohibited branch banking except
in the case of banks operating branches before the enactment
of that law. Under this exception 7 banks are operating 9
branches.
WYOMING
Branch banking p.3rmitted by implication.
The law
provides that banks may be organizad to carry on "a general
banking, savings bank, loan and t.rust company business at
such place or places in this state as shall be designated in
their .Articles of Associa.tion." While this provision seems
to indicate that branches are penni tted, there is no other
reference in the statut~directly applicable to them, and no
branches are in operation.

.f f ....
1'

_,.,

FEDERAL RESERVE BOARD
WASHINGTON

X-3531
October 3, 1922.

CONFIDENTIAL.

SUBJECT~

Functional Expense Reports
August 1922.

Dear Sir:
There is enclosed herewith one copy of Functional
Expense Exhibit No. 2 for the month of August 1922, show~
ing for each Federal Reserve Bank and branch the cost of
operating each function and expense unit together with the
number of employees and of units handled.
As stated inrny letter X-3517 of September 8, 1922,·
forwarding the July exhibit, these reports are furnished to
all Federal Reserve Banks for the confidential use of the
senior officers, the bank's Conmi t tee on Economy and Efficiency, and the department managers directly concerned in
order that they way more intelligently examine into their
own operating costs in the light of what is being done at
other Reserve Banks.
For the present it has been thought bett not to
distribute more than one oopy of the exhibit to each Federal
Reserve Bank.
Very truly yours,

Chairman, Committee on
Economy and Efficiency.

f "'\

"·

FEDERAL RESERVE BOARD
WASHINGTON

X-3532
October 5, 1922.

SUBJECT: Bank Salaries.

Dear Sir:
Eeferring to the Board's letter of August 9, 1922,
~ank salaries", in which the Federal
Reserve Banks are requested to prepare and forward to the Board
each year, on or before December 15th, departmental schedules
containing the names of all officers and employees and showing
the present and proposed salaries for each, you are advised that
the :Board desires separate lists for head office and each branch.
Specimens of the forms on ·which the :Board desires the lists to
be submitted are enclosed herewith.

X-3500, on the subject of

From time to time in the past the Board has had occasion
to note that reports relating to personnel received from the several Federal Reserve :Banks and branches have not been compiled on
a strictly_comparable basis for the ·feason that persons pe~forming
similar work have ooen listed by some banks as officers and by
others as:employeas.
In order to insure uniformity of classification at all Reserve Banks, there is given below a list o:f' the various
titles w~_ich, for comparative purposes, the :Soard will consider as
designating official positions.
Any changes in this list will be
promptly.brougnt to the attention of each Federal Reserve Bank. In
submitting reports to the Board, persons holding such positions
(including those d~signated to act in that capacity pending the filling of the position with a permanent appointee} should be classified
as officers, While all others should be included with employees of
the Banking, Federal Reserve .Agent's, Auditing, or Fiscal Agency
Departments:
AT BEAD OFFI CZS
Chairman and Federal Reserve Agent
Assistant Federal Reserve Agent
Governor
Deputy Governor
As·:>istant to Governor
Assistant Deputy Governor
Cashier or Controller
Assistant Cashier or Mana~r
Comptroller, or Controller of Accounts .
Auditor

AT BRANCHES
Manager
Assistant Manager
Cashier
Assistant Cashier
Assistant Federal Reserve
Agent
Assistant Auditor

X-3532

- 2 -

Assistant Audito~
Secretary
Assistant Secretary
Counsel (full time - not including
Consulting Counsel, Whose only
regular cotrpensa.tion from bank is
a retainer fee)
Assistant Counsel (full time - not
including Consulting Counsel,whose
only compensation from bank is a.
retainer fee)
·

In order that the

keep its personnel records
up to date, it should be advised by letter at the end of each ·
month of the termination of the employment of ~ officer or employee receiving $2501, or lilOre per annum. New appointments of
officers and employees at a salary of $2501, or more per annum
should be rtade subject to the approval of the Federal Reserve :Board,
and.the ~oa.rd's approval had before suoh officer or employee begins
service with the bank.
~oard may

This letter supersedes all previous requests for statements relating to personnel, and accordingly, it will not be necessary
to submit statements other than those provided for herein unless
specifically called for by the Board.
Ve:ry truly yours,

Vice Governor.

X-3532a
NUMBER .t.ND SALARIES OF OFFICERS ON DECEMBER 1,192_.

Federal Reserve Bank - Branch -------------Date of
Original

Name

~loyment

NOTE:

Title

_ _ _ _ _192_.

Present
annual
salary

Proposed
annual
salary

Functions
supervised

Separate report as of December 1 should be prepared for each Federal
Reserve bank and branch and forwarded to the Federal Reserve Board
not later than December 15 of each year.

X.o.3532b

NUMBER AND SALARIES OF EMPLOYEES RECEIVING MORE THAN $2500 PER .ANNUM
(Employees recommended for salaries in excess of
$2500 should also be included in this report)
Federal Reserve Bank - Branch
Date of
Original
Employment

Name

---------------Title

-----~192_.

Present
annual
Salary

Proposed
annual
salary

Function
to which
assigned

______________Department*

*Employees should be grouped under the following 4 departments Banking - Federal Reserve Agent - Auditing - Fiscal Agency
NOTE:

Separate report as of December 1 should be prepared for eaCh Federal
Reserve bank and branch and forwarded to the Federal Reserve Board not
later than December 15 of eaCh year.

~-- ~:. ~
(

' ..

X-3532c

NUMBER AND SALARIES OF EMPLOYEES RECEIVING $2500 OR LESS PER ANNUM.

(Employees recommended for salaries in excess of
$2500 should not be included in this report)
Federal Reserve Bank - Branch
Date of
Original
])pplo;yment

Name

---------------Title

_ _ _ _ ___,192_.

Total of salary
increases during
the current year

Salary as
of January

1, 1923

--------------~Department*

*~loyees

Banking NOTE:

should be grouped under the followi11g 4 departments Federal Reserve Agent - Auditing - Fiscal Agency.

Separate report as of December 1 should be prepared for each Federal
Reserve bank and branch and forwarded to the Federal Reserve Board not
later than December 15 of each year.

FEDERAL RESERVE BOARD
WASHINGTON

X-3533

To Officers and Employees of the Federal Reserve Board:Annual Leave of Absence.
Employees of the Federal Reserve Board will be granted annual
leave, exclusive of Sundays and holidays, under the following conditions:
Permanent employees in the service of the Board at the beginning of the year who have served two years or more may be granted
leave during any calendar year not to exceed thirty days, such leave
to be allowed at the discretion of the head of the division or office
when the work of the division or office will permit.
Permanent employees in the service of the Board at the beginning
of the year who have served six months or more and less than two years
may be granted leave of absence not to exceed fifteen days before
July 1, such leave to be allowed at the discretion of the head of the
division or office; and the full period of thirty days or any unused
portion thereof may be granted at any time after June 30th. Application for leave in excess of fifteen days before July 1st will be considered by the Board when recommended by the proper administrative officer thereof.
Temporary employees will not be allowed leave with pay during the
first month of service. Beginning with the second l'!lOnth, leave with
pay will accrue at the rate of two and one-half days for each successive month of service.
Such leave will not be granted, however, until
it has been earned.
Employees leaving the service may be allowed accrued leave.
Annual leave is not cumulative.
calendar year lapses.

All leave not taken within the ...

Absence under all classes of leave must be reported daily to the
Secretary's office by the chiefs of divisions.

-2-

X-3533

Extension of Leave of Absence on Account of Sickness.
Slight illness or indisposition will not be accepted &$ sufficient
cause for allowing sick leave. Mere dental work wnere there are no
complications does not constitute sick leave. Such ~sence should be
cnarged as annual leave.
Sick leave will not be granted in advance, neither will it be
granted for a period of less th~i one day. Cases of personal illness
or exposure to conta.;:?,ious dise::ases nust be reported promptly to the
division or office to which the employee is attached. and the head of
such division or office must in turn immediately report all cases of
contagious diseases to the office of the Secretary of the Board.
Absence on accou."lt of sickness on Saturday during the sumner months
in which Saturday is a four-hour da;y by Executive order will be charged
as one day •
.Applicatious for sick leave must be submitted for the consideration
of t~le apj?rovint:; officer on t.ae form prescribed t-1erefor within three
days after t":e applicant's return to duty. If t.1.e application is for
two days or less, it need :1ot be accomp:mied by a certificate of an
attending physicia..i, but specific reasons for not having ~1ad a. pbysician
in attendance must be stated. If t-1e applic::~.tion is for a period of
absence in excess of two days, a physician's certificate will be required.
Enforced absence of ru1. employee on account of exposure to contagious
disease will be approved as sick leave when a proper certificate is furnisbed by the public nealth officer.
Leave Without Pn.y.
Applications for leave s~ould be submitted on the form provided
therefor. If leave without pay on ~ccount of sickness is applied for, a
certificate of an attending physici~ should be attac~ed. If leave
without pay is applied for, for ~y other reason, ap~licant must state
reason for requesting such leave.

1121
X-3533

- 3 ...
Absence Without Leave.
An employee detained by causes beyond control, and
.
unable to report for duty at the opening hour, must notify the
division or office in which he is employed not later than 10:30
.A. M. on the first day of absence. .Absence from duty for any
cause, without prior permission, must be satisfactorily explained.
Synda..ys, Legal HoJ,idaYS, Etc.

Sundays and legal holidays, and holidays by Executive Order,
whether tor the whole or part of a day, will not be counted as
annual leave ..
EDMUND PLAT'l'

Vice Governor.

VlM. W. HOXTON
secretary

October

5. 1922.

• f ,
\

X-3535
FEDERAL RESERVE CREDIT POLICY.

Program:
1.

\IIJhat ob,ject should Federal Reserve credit policy seek to
~mplish and by what test ~ay we know that it is sound?
Discussion to be led by Messrs. ltorris and Wills.

What relative importance should be given to the following
factors in determining,3uch policy?
a. Federal Reserve reserves.
b. Interest rates in the oper: market.
c. Interest charged by member banks.
d. ;J;nterest rates paid on time deposits.
e. Balance of trade and inward or outward movement of gold.
f. Credit conditions in, and exchanges with, leading foreign
countries.
g. Volume of bank loans and deposits.
h. Business and industrial activity, present or prospective.
i. Comrr~dity price levels.
j. Condition of security ~~rkets.
Discussion to be led by Messrs. Jay and Seay.

17lhat light does. the experience of the Federal Reserve Banks
throw on the·value of different methods of ~~king their
credit and dis count policy et'fective?
a. Discount rates.
b. Open roarket operations.
c. Discretion in rediscounting.
d. Credit examination of member banks,
e. Credit ratings of commercial borrowers.
Discussion to be led by Messrs. Strong and Perrin.

Vlliat is the most practicable method of bringing about timely
and competent cons ide rat ion of rr.at ters of creii t policy by
all of the Federal Reserve Banks and effective action to
obtain the results aimed at?
Discussion to be led by Messrs. McDougal and Curtiss.

"j
i ..

•

f""!,..,
·<~ ~-~ l

X-3535

- 2Summary of Selected Topics:

The following SU!Il!"'..ary is a selection and condensation of statements
ro.ade in the papers and memoranda prepared by Governors and Chairmen,
with special reference to those points on which opinion is apparently
divergent. The topics considered do not follow the orler of the
program.
1.

Relation of credit policy to corrmodity price levels.
"Federal Reserve credit policy should be directed to effectb.g

steadier credit and. price cond.itions". This object ;.;hould not be
confused

·~·ith

stabilization of prices at present lavels.

"No one

can nO''-' predict or control the level at which prices will ul tiro.ately
become stabilized.

·-·e should merely direct our policy (1) so as to

prevent any serious inflation, and (2) in times of deflation e:md
depression, so as not to impede tD.ose who wish to move forward by
using more credit".
~ffecting

·Credit volume, of course, is not the only fa<tor

price levels, but ,-rithcut :nore credit prices

not rise

very far, and with less credit prices almost invariably fall.
agreement with this position is the statem<Snt:

Regulation of the

volurne of credit (which r<:>.ay 0reat1·· affect prices) therefore beco~es

our greatest responsibility".

Another paper states thc:,t "very little consiieration should be
given to comrr.odity price levels.

It is no :;;e..rt of tha business of

a Re;;;erve Bank to seet to advance or dopress the price of co::::r.odities 11 • Furthermore,

11 the

infh'.ence of changes in Federal Reserve

Bank rates has been greatly exaggerated, and their po·-,er ·to affect

the price-level or control the amount of credit is not only very
limited, but very slow in producing effects".

No policy, however,

should be adopted that is lil-ely to accentuate price fluctuations,

X-3535

- 3 -

and one· test of the :?.oundness of policy is whether it "tends. indirectly to stabilize prices by stabilizing credit conditions, and
stabilizes credit conditions by checking inflation and deflation
before disaster comes".

Another p2.per points to the limited con-

trol exercised by Federal Rese::-va policy over the moven:ents and
volume of credit and urges that

it is l!'.anifestly impossible in a

country so large and so governed as ours to assume that the Federal
Reserve Banks initiate or stop credit movements because of high or
low prices, active or inactive busines::o, etc.

11 •

The conclusion of

another writer is that "the inflation which started in 1919 and broke
in 1920 was not controll'ed, and in

rrw

opinion could not have been

controlled, by any policy which the Federal Reserve Banks could
have adopted 11 •
II.

Value and meaning of "discretion in rediscounting 11 as a method
of making credit policy effective.
Two papers reach similar conclusions on this question.

One

concludes: "Based on the experien r.e of this ban?, and giving due
consideration to conditions prevailing, 'discretion' in rediscounting is more effective in controlling the credit ·situation than
changes in discount rates".

The otl1.er says that Federal Reserve

Bank "credit and dis count policy will be !T'.ade effective through the
exercise of discretion in granting rediscounts, and not through
regulation by the discount rate".

Among the considerations on

which discretion in granting or refu6ing rediscounts must be based
are: (1) occasion for redisco\unting, (2) soundness of member bank's
condition, (3) integrity and skill of its w.anagement, (4) its seasor~

X-3535

- 4-

al rediscount program,

(5)

general business, banking, and credit

outlook.
Another paper concludes that· 11 discretion 11 in granting discounts should be used merely to supplement regulation by rate,
and then chiefly in sections where interest rates· are high.
special cases and districts personal

1 discret:i.on 1

will be in-

escapable, but its employment shouli be resisted and moderately
used".

business.

'Discretion' implies J..rnowledge of details of member banks
Such discretion extended to all member banks would

necessitate passing upon every loan and investment of every member, causing annoyance, criticism of the system, and possibly
radical legislation. 'Discretion' when required should be exercised more as to the total borrowings of a

member, rather

than as to nny specific use of the proceeds. 'Discretionary' control over borrowings by members, except to a limited extent
when rate control is ineffective, will develop the desire to
exercise still :;reater power. 11

-5III·

X-3535

Effectiveness of rate policy in controlling flow of credit.
The op~osing points of view are indicated by the following

s ta terr.en ts :
(l)"The effective method of regulation demonstrated by long experience abroad is by the discount rate . 11
(2) "The discount rate cannot be the major influence making the
credit policy effective. 11
In support of the first statement:
"The rates established by the Federal Reserve Banks have been
maasurably effective in influencing the loaning policy of member banks. 11
And: "The rate of discount of a r3serve bank regulates in general how
much member banks borrow, and. consequently influences increases or decreases in tha totel volume of credit."
In agreement with the second. statement:

The exparience of this bank

has demonstrated t.nat while incr;:;asing the ciiscount rate may have an indirect influence in developing an attitude of caution, it will not be
wholly effective in curbing a tendency tovvard excessive borrowing at
Ban~:s.

Federal Reserve
It is

reco~nized

that the control exercised by regulation depends

partly upon the condition of member banks.

"It is only when the banks

generally are compelled to call upon Federal Reserve Banks that the power
of the Reserve

Banl'~s

to exercise any control over credit begins, and it

is at ·such times that the ratJs and the rate policy assume greatest importance . 11

And:

Particularly is the influence of the discount rate slit:,ht

during a period of liquidation such as bagan in 1920."

....

v~·

X-3)35
IV.

Relation of discount policy to re:erve position.
There is a marked diversity of opinion regarding the relative

portance of Federal Reserve resarves in determining discount policy.
The extremes are indicated by two statements:

(1) "Too much emphasis cannot be placed upon the Federal Reserve
reserves in fixing discount rates.

(2) "The reserve ratio of a bank or of tha system is a very easy but
a very bad guide to discount policy."
In accord with the first staterr.ent: "T11e rate to be charged. for this
assistance (to member banks and the opan market) shall be determined by
the percentage of gold reserve at the Federal Reserve Banks, as well as
its trend."

The paper most insistent upon establishing a close relation

between discount policy and reserves suggests a plan by mich a series
of rate advances are definitely related to declines in reserve ratios.
This paper says:

!f, when their reserves were declining, it was the

plain duty of Federal Reserve Balli:s to protect them by raising discount
rates, which resulted in a curtailment of business, why then, when reserves
have become exceedingly large, is it not likewise their duty to lower
their rates and thus give a stimulus to business?"
In contrast to this is the staterr.ent that

11 i

t seems probable that a

Federal Rasolrve Bank could render to its rr:ember banks substantially its
full rediscount service by establishing a moderate rate of say ) per cent
or

6 per cent, and maintaining such a rate without change" .
.Another paper states that "At the present tirr.e, when Federal Reserve

Bank reserves are at a high ratio, and the reserves of member banks of the
country are in excess of commercial deiTand and seeking investment in

-7-

X-3535

securities, it is obvious that the protection of Federal Reserve Bank
reserves cannot be the priwary reason for fixing rates, and that other
reasons will and must naturally come to the fore.

Yet, when other

factors "combine to effect a dra.in upon the reserves, present or prospective, then the protection of Reserve Bank reserves would become the
primary consideration."
V.• Relation of discount rates to rates charged by rrember banks.
Opposing statements:

(1)

1 must express the conviction that no obJect can be accomplished,

and no po+icy can be effective, unless the discount rates of the Reserve
Banks are generally

rr~intained

at or above rates charged to the public,

particularly during periods of expansion."
{2) "Our experience thus far confirms the contention that Federal Reserve
discount rates w1ll normally not be above and usually below the lending
rates for the paper rediscounted."
'

.Another paper supports the first statement:

"Federal Reserve Bank

rates to their members must as a governing principle be based upon and
bear a close relation to the prevailin5 rates for bank runds on line of
credit paper current in any particular part of the country".
In general accord with the second statement: "Discount rates have
ordinarily a very limited erfect upon the rate made by such members to
~

their custon.ers and were not intanded to control the rate to tlle custorr.er,
and do not, in fact, exercise such an influence 11 •
11

.Another writer says:

1 believe member banks should get accommodation for the necessary re-

quirements of their custorr.ers at Reserve Banl: rates; and that the rates
they charge custorr.ers are of minor importance 11 •

.,.sVI.

Timeliness of rate

X-3535

ch~nges,

and rrethod of consideration.

The opinion is expressed that "the real power of the Federal
Reserve Bank would seem to oe

tr~t

which results from the wisdom it

has exercised in taking the leadership of its members".

.An object

which credit polic;v should seek to accomplish is "to give timely no tic a
of any distinct c:hange which is anticipated in credit conditions''·
Changes in rat.:;s should be of a character which would indicate "what
way the current was running, how strongly it was running, and wnether
there was likely to be a change in its direction 11 •

In agreement with

this, another paper states that "an advance in the discount rate,
simply recording the accomplished fact of increased credit demand,
could serve no important purpose, but an advance made as a cautionary
warning of an expected trend of increased demand, should serve as
steadying

~nfluence

to those engaged in inuustry and commerce.

it be urged that those guidin5 a Federal Reserve Bank's policies cannot
infallibly forecast the trend of credit

de~~1c,

it may be said, in the

first place, that rrathematical precision is not necessary, and further,
that the control of the ultimate bar..king reserves lays upon them

t~1e

responsibility to be informed of the real trend of bUsiness and inuustry.
Tb.e discount rata would be

t~1::J

natural meci.ium of expressing their

judegnent of the cradi t outlook".

Two papers present plans for bringing about timely and competent
consideration of rratters of credit

~olicy:

(1) "Fr8quent conferences of the Governors and Chairmen of the

Federal Reserve Baru:.s with

t~1e

Federal Reserve Board, or a small

-9-

X-3535

committee rapresentative of the Board and the Ba."lk:s, for the e.>..1?ress
purpose of considering credit conditions."
(2)

Local credit policies should be dictated, except so far as cer-

tain general principles of credit policy are concerned, by the Board
of Directors of each J.i'ederal Reserve Bs.rik.
should

Open market operations

handled by one or possibly two committees of Governors of

certain of the Federal Reserve :SarJ:s within convenient reach.

Tr.,e gen-

eral principles of credit policy in both casas to be laid down by the
Federal Reserve Board."

TREa~URY

DE?ARTMENT
WaSHINGTON

X3536
October 6, 1922.

The Governor,
Federal Reserve Board.
Dear Sir:
You are adviQed that the Department has referred to .the General
Accounting Office,,Treasury Department Division, for settlement, the account
of the Bureau of Engraving and Erinting ftr .t-'repa.ring .:b'ederal Reserve notes
during the ~eriod September 1 to September~. 1922, amounting to ~106,475.
25, as follofs:
Federal Reserve Notes

3&.

Boston ••••••
New York •••• 18~,000
.Philadel?hia
36,000
Cleveland •••
59,000
Richmond ••••
72,000
Atlanta •••••
83,000
Chicago •.•••
8l,OUO
St. Louis .••
78,000
Minneapolis.
33,000
Kansas City.
58,000
Dallas ••••••
98,000
San Francisco 2002000
981,000

ftlJ
.Jt:20
'\jO,OOO
150,001) 86,000
9.000
9.000
58,vu0 31,000
12,000 22,000
57,000 40,000
6,000
22,00U 22,000
10,000
6,000
al ,000 2 3 ,()00
9,000
642000 751000
446,000 323,000

1914

w50
18,000
15,000
Z,O\JO

Total
ju,OJO
4~7,000

54,JOO
163,000
106,000
182,000
87,000
'122,000
57,000
101,000
107'~000

339~000

35,000

1,785,000

1.785.000 sheets at ~59.65 .......... ~.106,475.25
The charges against the several Federu.l Reserve Bc...:lks are

~~s

follows:
Sheets

Compensat ion

Boston •••••••••

~.ooo

Rev• York •••••••
Phila.d.:::1_phi~ •• ,
Cleveland ••.•••
Richmond •••••••
Atlanta ••••••••
Chicago ••••••••
St. Louis ••••••
Minneapolis ••••
Kansas City ••••
Dallas •••••••••
San Francisco ••

~ 595.50

437,000
54,000
163,000
106,000
182,000
87,000
122,000
57,000
101,000
107 ,ooo

8,674.45
1,071.90
3,.235. 55
2,104.10
3,61~.70

1,726.95
2,421. 70
1,131.45
2,004.85
2,123.95
6.729.15
;2~~.000
1,785.000 35,432.25

Inc. ComPlate
?rinting MatE<ric;..1s pensation

Total

156 ,uu
1.78:!.50
406.50
631.50
9,198.85 5,921.35 2,272.~0 ;., .2~,cs7·~ot:
3,221.lu
280,8U
731.70
1,136. 70
9,722.93
847.60
2,208.65
3,431.15
6, :_:,zz. p
551.::::0
2,2~1.30 l ,436. zo
l'J,85<.i.w
946.40
3,831.10 2,466.10
4J~ .4U
5,189.55
1,831.35 1,178.85
6~)~ ~40
7,277. '30
2,568.10 1,652.10
2%,40
3,400.05
772.35
1,199.85
525.20
6,024.65
2,126.05 1,368.55
556.40
6,382.55
2,252.35 1,44~.85
7.135.95 4,593.45 1,762.80 20 2221.35
37 ,57,4.25 ~196. 75 9,282.00 106,475.25

The Bureau appro)riations will be rai;.·,bursed in the above amount
the indefinite a.~;;ro.t'riation ".i?rc..,:>;;;,N,tio:'l and Issue of Federal Reserve
Notes, Reimbursab1e 11 , and it is rec~ueste<.i. th~t your Board ca.use such inQefi~ite appro~ria.tion to be reimbursed in like ~1ount.
fro;11

Respectfull;>',
S. L • .;_c.CvB..,,

T _.,.....,. ' ..~
)'~

FEDERAL RESERVE BOARD
WASHINGTON

X-3539
Oatobe r

SUBJECT:

16, 1922·

Alteration of Warehouse Receipts for Cotton
issued by Memphis Tenninal Corporation.

Dear Sir:

For your infonnation there is enclosea herewith a.
copy of a telegram addressed to the Federal Beserve Board by Mr ..
W. G. Turner; Vice President of the Memphis Terminal Corporation,
~is, Tennessee, stating that a gr?at numbar of warehouse receipts issued by thl?-t Company, which is licensed llXldar the United
States Warahouse Act, have been al terea. so as to lower or raise
the grade of cotton call~d for by such racaipts.
It is fearad that such al. tl3rations will seriously
hanper the financing by member banks of tha stor~ and band.ling
ot cotton, and it is hopad that ~a.ch Fcd~ral Raso:rve Bank will
cooperate to such extent as is practicable in all efforts made
to detect such alterations and to devise :r;ndans of preventing
similar alterations in the futu.rEh
Yours very truly.

Vioe-Gotrarnor.
{Enclosure)

. ...
~

X-3539a
Memphis. Tenn.

Oct- 12 1922

Vice Governor, Federal Reserve Bank
Washington, D. c.
Following telegram JUSt sant to Mr. H. S. Yohe in charge administration
United States Warehouse Act, United. States Departnent of Agriculture
Washington, D. c.
"We have a United States 'bonded warehouse license to operate
under the United States Bonded Warehouse Act two of our warehouses.
We have one United States bonded classer properly licensed. We
have .two bonded United Statas weighers properly licensed.
In
checking up the negotiable United States bonded warehouse receipts
is;;;ued by this company as a United States boncied warehouse last
season we find the following:
A very great number of the warehouse receipts issued by
ourselves showing the grades Nhich grades were declared to be
the true graci.e of this cotton by our United States bonded classer
have be~n changed over our signature and been lowered and raised
by ~oiT.e one presumably the party to whom the original warehouse
receipts were is~uad and a carbon copy kept of same.
How many
hundreds or thousands of these receipts have been so changed and
raised. or loweraci at vvill we have not yet determined accurately but
know 'Nithin the next few days. These receipts are now in our
possession properly cancelled and the cotton has been delivered.
Ev8ry rec.::ipt is plainly stampdd in red ink not stapled according
to your directions·.a:n<i permission the length of staple has been
insert2d over our signat1.rre on these receipts by someone.
The alteration of the grades after the grades have been
carefully determined by a United States bonded warehouse classer
either by the owner of the receipts, his representative, or any
one else is, the v~iter believes, a forgery; in fact, just as rruch
a forgery if the gracie has been raised as it would be to raise a
United States bank note of any denomination.
We do not know how far the United States Department of
Agriculture feels themselves responsible for an act of this kind ..
't'TiJ do not. r':e. think· that the intent and purpose of the Warehouse
Act was for the protection of all banks in the United States who
nac:;otiat3d tbese Ur:,ited States bonded warehouse receipts and
particularly the Fed.eral Reserve Banks.
Lefore instituting,prosecution on our own initiative we
would b:J glad to be informed.as to whether the prosecution or
prosecutions for these acts should take place through your department or through the Department of Justice under your auspices or
'.vhether ·.-.re ..1re e::p0cted to take charge of this matter ourselves.
In a matter of th1s l:ind i t is the opinion of the undersigned that
if tne Unit~d States Bonded Warehouse Act is intended to safeguard
the int.::r-:;;;:,t of bcm~'~S and. such alteration or alterations by the
owners of the cotton deposited be allowed which,of course, changes
the repra~ent~tion of the values represented on the face of the ware~

•

- 2 -

X-3539a

house receipt then this co~any are very much disappointed in theiJ.·
view of the intention of the Warehouse Act.
All of the receipts
in question are available for your inspection or tha inspection of
any one who may be interested.
Please advise as soon as possible
whether your departmant is intera~teQ enou&h to see thase receipts
or whether the Departrrent of Ju9tice if it is under their jurisdiction desires to inspect them.
Copy of this message has been sent to Senator K. D. McKellar,
representing Western Tennessee, Hubert Fisher, Congressman from this
district, and Vice Governor of tha Federal Reserve :Ba.nk at washington .
.W. G. TURNER
Vice President, Memphis Terminal Corporation.

FEDERAL RESERVE BOARD
WASHINGTON

October 17, 1922.

X-354o

SUBJECT:

Manual of Leased Wire Service.

Dear Sir:
The .Board has revised the Manual issued
by it in October, 1919, outlining briefly the plan
of operating the Federal Reserve Main Line Leased
Telegraph Wires, and there have been sent you today,
under separate cover, a number of copies of the
Manual as revised for the guidance of the officers
and employees of your .Bank.
Very truly yours,

Vice Governor.

',_'

FEDERAL RESERVE BOARD
WASHINGTON

X-3542
October 21, 1922.

SUBJECT: Expense Main Line, Leased Wire System, September, 1922.

Dear Sir:
Enclosed harewith you will find two mimeograph statements, X-3542a and X-3542b, covering in detail operations of
the main line, Leased Wire System, during the month of September,
1922.
Please credit tha amount pay..1.ble by your bank in the
general account, Treasurer U.S., on your books, and issue
C/D Form 1, National :Banks, for account of "Salaries and Expenses, FeQeral Reserve Board, Spacial Fund", Leased Wire
System, sending duplicate C/D to Feueral Reserve Board.

Vary truly yours,

Fiscal Agent.

REPORT SHOWING CLASSIFICATION P~D NUMBER OF WORDS
TRANSMITTED OVER MAUT LIN'".ti; OF THE :B'EDERAL RESERVE
LEASED WIRE SYSTEJ.1 FOR THE MONTH OF SEPTEMBER, 1922 •

3ank Business

From

32,761
212,057
53.937
76,075
60,825
60,807
124,100
Chica~o
St. Louis
83,260
M:inneapol is
42,267
Kansas City
83,908
Dallas
67,404
San Francisco 135.288
Boston
New York
Philadelphia
Clave land
Richmond
Atlanta

Per cent of
Total :tlank
Business (*)

Treasury
Dept ..
:Business

3·17
20-53
5-22
7-37
5-89
5-89
12.02
8-06
4-09
g.l3
6-53
13.10

8,335
18,148
8,514
10,054
7,866
10,585
11,457
9.375
8,281
9.395
7,613
17,409

914
96
.317
1.380

230,205
62,470
86,332
63,727
71,455
135,756
92,635
:>1,462
93.399
75,834
154,077

100.00

127,032
118,831

3,787
2,041

1,163,508
424,681

24),';.123

5,828

1,588,195

War
Finance Corp.
Business

20
F'.I

203
36
103
199

-·

Total
La .~.16

Total F. R.
Washington

1,032,689
303.75.5.

Grand Total

1,3}6,444

Lanks

Per cent of Total

84.15>

Bank Business
Treasury Business

15.43?~

1,336,444 words or g4 .. 465o
245,923 11 " 15.54~"

TOT.AL

(*)

These j)ercentages used in calculating the
pro r·a·~a. s..:;are of leaseil wire expenses as
sho~n on the accompanying statement (X3542b)

FEDERAL RESERVE :BOARD
WASHINGTON, D. C.
OCTOBER 21, 1922.

0.377~

•
,,-

REPORT OF EXPENSE
MAIN LINE
FEDERAL RES ..:RVE LEASED VIIRE SYSTEivl SEPTEMBER, 1922.

X-3542b

------------------------- -------------------------------------------------------------------------------------------Name o.f Bank

Operators'
Salaries

Wire
Rental

Operators'
Overtime

Total
Expense

---~--------------------------------------------------

Boston
$ 250.00
1,269·98
New York
225.00
Philadelphia
366.00
Cleveland
305.00
Richmond
240.00
.Atlanta
(-#-) (l.r ~648 ·29
Chicago
205.00
St. Louis
Minnaapolis
275·00
326.64
Kansas City
170.00
Dallas
San Francisco
395·00

$
180.00

<!•

~25.oo

Credits

Payable to
Federal
Reserve
Board

---------·-----------------------------------------------------250.00
1,449·98

2.00
·'

Pro rata
Share of
Total
Expense

366.oo
305.00
240.00
4,65Q.29
205.00
275.00
326.64
170.00
395·00

if.89-73

$ 250.00

3,171.69
806.44
1,138.60
909·95
909·95
1,856·98
1,245.19
631.87
1,256.01
1,008.82
2,023·83

1,449·98
225.00
366.00
305.00
240.00
4,650.29
205.00
275-00
326.64
170-00
395·00

~39-73
1 '721. 71
581.44
772-60
6o4.95
669·95
2,793·31
1 ,040.19
356·87
929·37
838-82
l.G28.83

16,984.92 16,984.92

Fea.Res.Board

(*)

. ..

~- • •

---------------------------------------------------- ------------------------·-----------------------------------------$16,984.92 ~25,842.83 $15,449.06
$ g ,857 ·91
$ 9,384.46
(a)l0,393·77
(&) 2,793.31
$15,449.06
$ 6,591.15
Includes salaries of Washington operators.
Amount reimbursable to Chicago
Credit
RecJtf.;d $10,347.15 from Treasury Department and $46.62 from War Finance
Corporation covering business for months of May, June and July, and August, 1922, respectively.

TOTAL

(#=)

(&)
(*)
(a)

$ 8 ,675·91

FEDERAL RESERVE BOARD ,
WASHINGTON, D. C.
OCTOBER 21, 1922.

$ 182.00

;.·•.

FEDERAL RESERVE

BOARD

STATEMENT FOR THE PRESS

For release in Morning Papers,
Wednesday, November l, 1922.
Tt.e following is a sunmary of general business and
financial conditions throughout the several Federal
Reserve Districts during the month of October, as
contained in the forthcoming issue of the Federal
Reserve Bulletin.
Difficulties in handling the increased freight traffic
due to car shortage have becoce an important factor in the current
industrial situation.

The total number of cars loaded increased

during September chiefly because of heavy loadings of coal and
live stock, and during the last week oi' the month the car loadings
were greater than for any week since October, 1920.

The pro-

duction of bituminous and anthracite coal was cheCked in the
latter part of September by the general shortage of coal cars,
a shorta 6 e of over 40,000 coal cars Qeveloping in less than a
month after the settlement of the strike.

A shortage of box

cars appeared in the first week in August, and by October
amounted to 71,063 cars.

The difficulty in securin5 cars for

shipment has led to some curtailment of production in lumber and
finished steel products.

The output of pi~ iron and steel in6ots,

however, has expanded steadily since Au 0ust.

Cotton and woolen mills

continue to operate at close to capacity and shoe factories have a
large volume of business.

Agricultural receipts, particularly

those of live stock, continue to be heavy.

- 2 The chief reporting lines of wholesale trade showed improYement during September. Increases in sales of hardware and ~urniture
1S22
·
as co~ared with August/and September, 1921, ref~ect the large volume
of residential building during recent months.

Seasonal declines

occurred in sales of farm irr:plements and autor.:obile supplies, but sales
were much-larger than a year ago.

Retail trade continued to improve

during September and department store sales were larger in all Districts
than in

September~1921.

The wholesale price index of

th~

Bureau of Labor Statistics

declined from 155 in August to 153 in Sep,tember.

This drop was cniefly

due to the decline in coal priczs after the opening of the mines. Prices
of b_uilding materials and metais continued to rise as a result of the
prolonged building activity and the scarcity caused by traffic embargoes
and the car shortage.
Bank debits to individual accounts in 140 cities excluding New
York, were 4 per cent larger in September than in August, 1922, and 9 per
cent larger than in September, lS21.

In New Ycrk City debits in

September were 5 per cent larger than a month earlier and 19 per cent
larger than in 1921.
Loans of reporting banks in leading cities show an increase
of $366,000,000 for the four v•-eeLs ended October lS, and their demand
deposits show an advance of $24f>,OOO,OOO.

Investments of these banks,

in United. States securitias, Nhicl: showed sorr.e decline during the early
part of the period, increased by

~:144,000

,000 during the last week when

the Government floated its first post-war long-term bond issue.

Federal

•. , .

,.
- 3 -

X-3545

Reserve Bank discounts· for the four weaks ended 0ctober 25 show

a.'Yl

increase of $49,0CO,OOO,their holdings of acceptances increasea. by
$20,000,000, while
by $43,000,000.

Government ssc-..uities hdd by th::Jse b;;;:nks aeclined
Federal reserve note cj_rculation expanded by

$55,00o;ooo during the period.
from 78.4 to 77.6 per cent.

The reserve ratio shows a decrease
This change in the ratio resulted from

the increase in note liabilities, only partially offset by an increase
of $9,000,000 in cash reserves.

.•

F E DE R AL

R E S E I\ V E

13 0 A R D.

STATK1ENT FOR THE PEESS.
X-3~46

For release in afternoon papers,
Thursday, November 2, 1922.

CONDITION OF THE ACCEPTANCE MARKET
SE:E-''rET-ffiER

15 to OCTOBER 15, 1922.

According to tne reports received by the Federal Reserve
l.iari::~s

:Joard frorr1 the various Federal Reserve

the acceptance

mar~~et

was for the most part irregular and slug6ish during the first part
of the period under review but later becar;:e active and sho;:ed. a
considerable improvement.
nearly in line with

t~'lat

The advance in rates to a level more
of other

s~ort

term in•;estments of equal

security has caused bills to move more fr-3ely and has ·Nidened the
market to some extent.
In District No. 2 (New Yorx. . ) a.urin5 the first part of the
period under review the SU}J.JlY of bills was too large for the
rnar~:et

to absorb at the offered rates, and dealers were reluctant

to take a position in vie·N of tne t3,eneral feeling that rates were
out of line.

As rates advanced from

bid and

5/3 at

3 7/B

bid to

l/3 offered to

offered a better demand developed.

tmrket widened and a.urin;,;, the current

l~'ario.:.

bills were sold to

various investors including savings banl<S which
the market for some tirrB past.

Tne

~ave

been out of

Di~trict No. 1 (Boston) re~orts

that bills were limited but became abundant to.7ards tl:e close of the

<,I_

X-3546

-2period.

With the advance in rates the demand increased considerably
District No. 3

but not sufficient to take care of all offerings.

(Philadelphia) also reports a steadily improved ~arket as money
became firmer.
Districts No. 4 (Cleveiand) and No. 7 (Chicago) both report
a slight demand and limited supply.

In the latter District (Chicago)

there has been a continuation of the decrease in the volume of
bills accepted and bills sold, noted in the last report, although
bills bought have increased over 200 per cent and bills held at the
close of September, over 90 per cent.
In District No. 12 (San Francisco) the
s~ficient

su~ply

to meet a slightly increased demand.

remains

In this District

a widening of the rnarket has been manifest with more numerous inquiries from country banks.

District No. 10 (Kansas City) reports

a scant supply and strong demand for bills, with the result that
paper has ~~ved freely.

In District No. 6 (Atlanta) the market has

continued very quiet, twenty-one of the twenty-five reporting banks
showing no transactions in acceptances for the period.

District

No. 8 (St. Louis) also reports that the market has continued dull
and featureless.

In District No. 11 (Dallas) there was increased

activity, the volume of acceptances executed and outstanding increasing from $476,241 on August 31, to $1,403,7;0 on September 30.
In District No. 2 (Naw York) the bulk of acceptances
executed were based upon the following commodities, in order of their

X-3)46

importance, cotton, grain, sugar, silk, meat products,
Coffee and dollar exchange.

In addition bills were ex-

ecuted in other Districts against agricultural implements,
hides and skins, wool. wheat, oils, iron, the

im~ortation

of shellaC, woolen rags and tea, the exportation of paint
and varnish, and the storage of canned goods.
In Districts No. 1 (Doston), No.2 (New York), and No.

4 (Cleveland) , the increased derrand has caused bills to move
more freely while District No.

(Philadelphia) and No. 7

(Chicago} report they aN not yet movin~ freely at the
offered rates.

The best derr.and has been for 30 to 60 day

maturities, with a slight demand for 90 day maturities·
District No. 12 (San Francisco) reports a 5rowing preference
for longer term bills and gives the distribution of maturities for the period under review as fol:i..o-,vs:
Maturities
30
60
go
120
150

days
days
days
days
days

September 15
to October 11

25·5

21.6

35-9
15.0
2.0

to
September 1).

AUt:.USt 1')

22.8

55·3
19.4
2.5

Rates on prime bills in the various Districts were as
follows:

•

,., r··

,i'

X-3546

·4E2tes on Prime Dills

Range during period
Maturity

District
No.1
(Boston)

30 day
60 day
90 day
120 day
15Qd.ay
180 day
30

District
No.2
(New York)

day

6o day

90 day
120 day
150 day
180 day

30 day
60 day
District
90 day
lZO day
No.3
(Philadelphia) 150 day
180 day

District
No.4
(Cleveland)

30
60
90
120
150
180

day

day
day
day
day
day

30 day

District
· No. 7
(Chicago)

60 day
90·

day

120 day
150 day
180 day

:Bid

Offered

3-1/8 - 3·5/8 3 - 3:a
11
ft
tt

"
"

3:a - 4t
1f

3-1/8 - 3-7/8 3 - J;;
II

3i- 4
3-3/8 - 4-a
3-3/8 - 4t

3; -II 4

3-5/8

"n
It

" 3~
3f34 - 4

Offered

Bid

3-l/4 - 3-7/B 3-1/8 - 3!
11

"
"
3-3/8 - 4

3-5/8 - 3~7/8 3~
II

f "

3
2 - 343
344
3-7/s - 44 3·57s-4

3i- 4

3-l/s - 3-7/s
"
3-7/8 -4!
II
4 - 4~
3 - n 3-7/8

-n 3~

3-1/8 - 3~

3i -

3-7/8
3i - 4
3-3/8 - 4

3~ - 3~

"
"
"
"
3-1/s~-1/s 3~·3-7/s

3-5/8 ... 3t
ft

3~ - 4
3~-4-1/S

"
,.
"

3i
n

3-5/8-3-7/s 3~ -3-5/8
3-5/8 - 4 3~ -3!
"
If
3-l/8 - 3-5/8 3i - 4
II

, , :r
FEDERAL RESERVE BOARD
WASHINGTON

SUBJECT:

X-3547
October 30, 1922.

Monthly Report of Leased Wire Operations.

Dear Sir:
The Federal Reserve Board has decided to discontinue,
effective November 1, 1922, the use of Form X-3006a, Monthly
Report by the Federal Reserve :i3anks of Expenses chargeable to
and business transmitted over the Main Line Federal Reserve
Leased Wire System, and in lieu thereof requests each Federal
Reserve Bank to telegraph the following information to the Board
during the first week of each month: (l) .Amount of salaries paid
Main Line operators during the preceding month; (2) Amount paid
said operators for over-time; (3) Total number of words contained
in ill messages (including messages on Treasury and War Finance
Corporation business) sent over Main Line Leased Wires during the
preceding month by head office and branches.
The information above requested is all that is necessary
to enable the :i3oard to prorate among the Federal Reserve Banks the
expense of operating the Main Line Leased Wire System.
In order to expedite settlement of the monthly b!l1s
rendered the Treasury Department covering telegraph ser\l'ide af"forded the several ~ureaus of that Department, the Board has
entered into an arrangement effective dctober l, 1922, whereby
the Treasury will pay a flat monthly rate of $3100 for the remainder of the present fiscal year.
This figure($3100)
represents the average monthly charge ~ade on the Treasury
Department for telegraph service rendered during the fiscal year
ending June 30, 1922.
At the close of the present fiscal year,
the Board vvill quote the Treasury a new flat monthly rate for
the forthcoming fiscal year, which will be approximately onetwelfth of the cost of handling Treasury business during the
present fiscal year figured on the basis of the actual cost per
word.
Very truly yours,

Vice Governor.

FEDERAL RESERVE BOARD
WASHINGTON

October 31, 1922.

SUBJECT:

Biographical Sketches.

Dear Sir:

An examination of the ~oard's files shows them
to contain 1i ttle or no information of a biographical
nature concerning the directors of the Federal Reserve
:Janks and branches, the governors, deputy governors,
assistant tederal reserve agents anQ branch bank managers.
The Iloard. would like to have such information
on file available for ready reference whenever occasion
requires and, therefore, requests you to obtain and forward to it a biobraphical sketch, reciting fully the past
and present principal business connections of each director
of your bank and branch and of each officer above named.

Very truly yours,

Vice Governor.

FEDERAL RESERVE BOARD
WASHINGTON

October 31, 1922.

SUBJECT:

:Branch Bank Development.

Dear Sir:
For the information of the Board and to enable it
to check its records, you are requested to furnish at as
early a date as possible the following inforwation, supplemental
'
to that furnished in response to

r.rr.

Mitchell's letter of

August 13, 1922, relative to the development of

bran~h

banking

in your district:
(l) Name and location of all banks (member
and non-memb2r) in your district
operating branch offices;
(2) Location of each branCh office and title
thereof.

OJ Dates on whlch openea;

(4) Vfuether branch offices

a~e full-power
branches or .merely so-.called service
station branches.

The Board would also·like information with respect
to any so-called "chain-bank systemstt in operation in your
district.
Very truly you . .·s,

Vice Governor.

('
(

·-

FEDERAL RESERVE BOARD
WASHINGTON

X-3550
November 2 , 1922

SUBJECT:

:Sank Debits - Inclusion of Debits by Banks in
Non-claaring House Centars in Board's Published
Statement.

Dear Sir:

r·

Babson's Statistical Organization, Ine., has recently
sent lett~rs to a numb~r of Faderal Reserve Banks, stating that
several manufacturers have written to it asking which sections
of the country offer the most advantageous location for the
establishment of a factory, warehouse, branch office, or other
expansion in their business. In replying to such inquiries,
Babson's Statistical Organization calls attention to statistics
of debits to individual account published weey~y by the Federal
Reserve Eoard.
It is our understanding that this organization
has also written lett3rs to banl:ers, Chambers of Commerce, etc. ,
in a number of cities in various Federal Reserve Districts advisine; them of th~ statament of bank debits isaued by the Board
and suggestine that they take up with tha local Federal Reserve
Bank the question of having figures for their city included in
the weakly statemBnt.
It will be recalled that early in January (See letter

X-3294, dated January 6, 1922) the Federal Reserve Board authorized
tha addition to the list of practically all cities which had clearinb-house associations.
It now appears, however, that there is a
demand for the inclusion in the list of a number of cities which
do not have clearing house associations.
It will be appreciate~,
therefore, if you will kindly advise the Board whether or not you
have received communications in this regard from babson's Statistical Or6anization or from local business organizations, and also which
cities, if any, you feel should be added to tha list of reporting
centars in your district baginnin5 with January 1923.

- 2 -

X-3550

In submit tine?; the nwnas of such ci tias will you kindly
furnish the :3oard with a statement givin6 the banking resources of
each city and a brief mamorand~~ as to why weakly figures of debits
tc ind:.,·idual ac.count for such cities would 'uG of value to tha
public.
There are at the present time a few cities on the list
of reporting centers which have no clearing housa ass0ciations,
and the :Board feels that i f thera are ar.y citi0s in your district
which are of sufficient importance to war!'ant their ac\di ~ion to
the prasent ljst they should not be exclucted simply because there
is no clearing house, provided a local bank, tha chamber of
comnerce, or some other commercial organization is willing to
collect and furnish the figures to your bank promptly each week.
Very truly yours,

Wal t-Jr L. Eddy,
Assistant Secretary.

- ' ...
,

FEDERAL RESERVE BOARD
WASHINGTON

X-3551
November 2; 1922.

SUBJECT:

Decision in Cleveland Par Clearance Case.

Dear Sir:
There is enclosed herewith for your information
a copy of the opinion rendered October 14, 1922, by the
Uni~ed States District Court for the Eastern District of
Kentucky in the case of Farmers & Merchants Bank of Catlettsburg v. Federal Reserve Bank of Cleveland.
It will be noted that this was merely a decision
on a motion for a preliminary injunction, and the case has not
yet been thoroughly tried on its merits. Before it decides
whether or not to issue a permanent injunction the court will
have to try the case on its merits, and on such a trial the
evidence will be much more thoroughly presented. Furthermore,
on the motion for a preliminary injunction the witnesses were
not subjected to cross examination, while they will be subjected to cross examination during the trial on the merits.
Very truly yours,

Vice-Governor.
(Enclosure)

.....

-·

,.
X-355la

•
SN-RMc

10-19-22 5 car.

October 14, 1922.
UNITED STATES DISTRICT COTJRT
E.!'.cSTERN DISTRICT OF J:;:ENTUCJ:-:1
FARI\ffiRS & f',ffiRCHJ ]1111'S B! J:'!J:=
oF cATLETTSBURG, I\ENTucru

)
)

)

)
)

THE FEDERLL RESFRVF B"' J:-t:\. OF
CLEVEL'11D, OP.'IO, and f'IJ',RY
B. 1\TcCall,

)
)
)

DEFEliD.A!JTS

This cause is before rr.e en plaintiff's rr.otion for a
preliminary injunction.
The plaintii'f is a 1\.entucky corporation doing banking
business at Catlettsburg, a city •·cith a population of about 4,500
in this district.

It has a q:tpi tal stock of ~:::.o, 000, surplus of

about $40,000 and ieposits of about ~~00,000.

The defendant

bar~

is a national corporation and is the Federal RJserve Ba::ll: for the
Fourth District of the Federal Reserve System of the United States.
It has a Branch Ban£ in Cincinnati, Ohio, and plaintiff is in the
Cincinnati Division of such district.
is a

r~si:;.ent

The individU£tl defendant

of Cutlettsburf! and, at the tirr.e this s-c:.i t was b:-ou;-ht,

to-wit: July 15th, 1921, wa<> acting a;;; the defendsnt Ba.YJ1.: 1 s

a~ent

the daily collect ion in· cash over Plaint iff 1 s counter of checks
drawn on it by its depositors, ·payable to person;; 2t a :listance
from Catlettsbur",, ·-:hich had cor:,e into such defendant 1 s hendr. and
had been .:>ent to her by the Branch Bank at Cincinnati for th£->.t

_,
,.

......

X-3551a

- 2 -

purpose, and in the transmission of such cash to such Branch Bank
by express or

re~istered

since March 23rd, 1920.

mail, and she had been so acting continuously
The suit was originally brought in the

State Court, in 'Nhose territorial jurisdiction Catlettsburgh is
situated, and it was removed thence to this Court upon the joint
petition of the two defendants upon the ground that it arose under
the constitution and laws of the United States.

It is the plaintiff's

practice where such cheds are sent to it through the mail for payment by other than one of its correspondent banks to remit exchange
on one of such

ba~'lks

and to charge not exceeding one tenth of one

per cent of the amounts of tho checks for so doing.

By sending

such checks as come into its hands for collection by an agent in
cash over the: counter the d,;:fondant. :Bank though it incurs the expense of so doing avoids havinry to pay such charees.
advertising for a

year and half that it woull

checks on plaintiff free of charge.

colL~ct

It had been
all such

ii1lat plaintiff seeks to have

enjoined is such conduct,i. e., the collection of such checks by
defendants in this way and the advertisement by defendant Bank that it
will collect such checks free of charge.

It claims that it is in-

jurious to it in that it deprives it of suCh charges, requires it to
keep a gree..ter reserve in cash than it would otherwise have to do,
scandalizes it, affects its credit and humiliates it.

A temporary

restraining order was granteci by the Clerk of the State Court when
the suit was brought and has been in force ever since.

The case is

of the same §';eneral character a;; that in the Northern District of

.... ,

(.,

X-3551a

- 3Georgia covered by the decisions in
Federal
American Bank & Trust Co~ v.fResarve Bank of Atlanta,
same
v.
same
same
same

269 Fed. 4
256 U. S. 450
280 Fed. 940

and that in the District of Oregon covered by the decision in
Brooking's

430.

St,~te

Bank v. Federal Reserve Bank of San Francisco, 277 Fed.

Reference to these decisions relieves me in presenting the case

here of doing more than calling attention to its particular facts and
then proceeding to dispose of the question which it calls for decision.
I will first state tha f.icts as they. appear from Plaintiffls affidavit.

As early as January, 1918', t:'le defendant Bank began by

letter to solicit the plaintiff to enter into a written agreement
with it to remit 2xchan;e in payment of checks of the character
stated at par, i. e., free of such charges.
to do at intervals until D2cambe:r 1919.

This it continued
The plaintiff not yield-

ing to such solicitations, at that time, it sent it=> traveling
representative, E • .A. Ma;ee, who had in charge the matter of personally soliciting non-member banl:s, i. e., state banking institutions, to enter into suCh agreements, to Catlettsburg to inter-

view plaintiff on the subject.
that purpose.

He made four separate visits for

Ee fircit attempted persuasion and, this failing, he

insisted and demanded that plaintiff agree and finally threatened it
with the consequences of a refus•l to do so.

He said that the

American Express Company would be employed to collect the checks in
cash, which would be very embarrassing to plaintiff, that, though
this would be expensive to the defendant Bank, it did not matter, as

X-355la

-· 4-

there was a principle im•olved, and plaintiff would be mightYe;lad
to sign up before long as no bank could exist thc;t did not - that
the Federal Reserve System was like a mighty battleship coming up as
it were from a smooth sea and all banks that did not affiliate with
it could not stand its swells and must get in its wake for safety,
and that in the next five years there would be no small banks.
The plaintiff remainin~ recalcitrant, on January 6th,
1920, the defendant Bank employed the

~~erican

collect such checks as came into its hands,
at C'atlettsburg.

The

checl~s

Express Company to

throu~h

its local

a~ent

would be d.elivered to tha Company at

Cincinnati by the Branch I·ank, carried to Catlettsburg and there
presented and payment in cash d.ernan:led by such agent and upon receipt of same would carry it back to Cincinnati.
continued so to a·ct until February 26th, 1920,
so any further.

The Express

~rhen

Compa~

it refused to do

During this time Mage~ was in Catlettsburgh from

time to time looking after the m:.tter and frequently visitin.!, the
Bank.

As the exprass agent would coll3ct lare;e sums in cash he

would, shortly aftenve.rds, come in the bank and see '.:vhether or not
the method usad had broken the spirit of those in charge and suggest
that they submit to the desird of his principal that plaintiff go on
the par list.

About the middle of January 1920 he asked the

plaintiff's assistant ce.shier to use his influence '!llith the cashier
who was handling the matter on behalf of plaintiff, in an effort to
have him agree to the par clearance method.

He stated that if they

did not consent to it the FedHal Reserve Bank would continue its

.. r
\.

X-355la

- 5method of collection by the Express Company

de~anding

cash at the

counter and that it would be annoying and expensive to both banks
and that plaintiff could not stand that method of paying items in
cash.

The reason for the Express

Compa~'s

refusal to act further

was that the task was too burdensome.
Thereupon Yagee went to Catlettsburg and for several
days, possibly until March 3, 1920, made the collections himself.
Each day during this time he went to a drug store on the corner
opposite plaintiff's bank, where there was a soda fountain, the most
prominent place in the city, and

re~ained

there from

three to five

hours walking up and do;vn in the store room and looking across the
street at the bank as thou;.:;h he were on the watch for what was being
done there.

On that date he employed Frank K. Barbee, a resident

of the city and night chrk in a hotel to act as agent.
tinued so to act untii

r~arch

and the defendant

McCall was employed.

~Uss

He con-

23rd, 1920, when he surrendered the job
Vbilst Barbee was

acting as agent Magee was in Catlettsburg the most of the time
instructing him and overseeing the performance of his duties.

The

place of instruction was the corner drug store heretofore referred
to.
~

Magee spread the checks upon a refreshment table in front

part of the store in a conspicuous plac2 where those coming in and
out of the .;;tore oould readily see and hear what was going on 1
assor~~d

and listed and endorsed them and explained to Barbee the

details of presenting ths checks at ths counter and deroanding
payment in cash.

Frequently he accompanied Barbee to the bank.

X-355la

- 6-

He stated to Barbee that the reaso.n and necessity for such method of
collection was thr-Lt the defendant Bank insisted that the checks be
cleared at par and such was the only method whereby plaintiff would
be forced to an agreem::mt so to do and that though the method of
collection was far wors <ZXpensive to the-defendant Bank than the
payment of the clearance fees it was not the expense they cared
about but '.vas simply the principle of the matter and that sooner or
later the plainti_ff would be forced to sign an agrc::ement to clear
all checks at par or that it would be forced out of business.

gave Barbee a number of pamphlets containing an exposition of the
merits of universal par clearance and instructed him to call upon
as ~aqy of plaintiff's depositors as he could see from time to time
and leave one of those pamphL~ts with them.
After Miss Magee's (ticCall's?) employment McCall (Magee?)
re~ained

in Catlettsburg for some time, possibly until April lOth,

instructing her and overseeing the perforrranc2 of her duties.
place of instruction and the ranner thereof
as in the case of Barbee.
frequently.

wa~

The

exactly the same

He also accompanied her to the Bank

It should be said that both Barbee and Hiss McCall,

at Magee's instance, inquired of plaintiff whether it was agreeable for them to act as such agent and vvere told that if any one
was to be employed to render the services they mic-ht as "'ell secure
the position.

Miss McCall was a maiden lady who had the r2spect of

the people of Catlettsburg.

Magee's manner whilst in and about plaintiffls

bank,as heretofore set forth, was domineering, dictatorial and

boist~rous.

He sought opportunity to attract attention of those who might be in

··-· ('"
(

- 7-

X-3J5la

or near the bank by loud and quarrelsome conversation.

He took

occasion to create scenes and distruoances at timss, when there
At the time

would be many custorr,:;rs in the lobby of th:: bank.

when he undertook to colLet ch-ecks after th2 Express Company quit
plaintiff suggested that it had not r<;ceived any letter dEsignating
him as ae;ent.

He made

ro".' P.bout this, intimatinG that it was

refusing to recognize his authority.

.!Vlu~h

disturbance was

caused in the bank by ths colloquy over this rne.tter.

During

Barbee 1 s agcmcy he brou'2;ht on a h"'ated yr,nx::>:m.f:. "'i th plaint iff t s
assistant cashier over a certain checY..
\'ihilst the Express Comparw was acting as agent plaintiff
'
countered by sta:rr::pin;o: upon a ;:::reat rrany of i tsb.lank
checks furnished

·its depositors an endorsement in th2se words:
11

Payable in cash or exchan15e J.raft at the option of the Farmer's

& Merchant r ::; Bank of Catlsttsburgh, Eentucky."

19, 1920, the defendant Bank accepted

checl~s

Up to February

so endorsed an'i when

presented for payment c;xchancG drafts wer2 acc3pted.

From

February 13th, to Fobruary 2:::th, 1920, it refused. to accGpt them.
From February 20th, 1920, to Me_rch 9th, 1920, it again accepted them.
Since then it has refused to do so.
was acting as agent.
endorsed amountino: to

On February 28th, 1920, VJagee

He presJnted on that date fourteen checks so
~573.80

and :iernanded an:i received fourteen

separate drafts, one for each check in payment thereof.

-s-

X-355la

On !'/larch lOth, 1920, during :0arbaa•s agency Magee visited
C. C. Magann Vliho had the excl"L1S iva agency to handle and sell Ford cars
at Ashland, Kentucky, a

nei&~boring

city, in the same county, and who

was one of plaintiffts depositors at his place of business, introducing
himself as a representative of defendant Jank and stated that he wanted
to discuss some business with him.

M3.~ann

took him into his private

office and he then statad that his check to the Ford Motor Company of
date March 8th, 1920, for $3,756.72 on plaintiff had been prasantad and
pa~ent

thereof refused and

8Y~ibited

a letter to him from the Cin-

cinnati ::ranch corroborating his statement.

Magan.YJ. immediataly went to

Catlettwburg in his automobile and ascertained that his check had been
paid that day and that it had not been presented for payment before then
and payment thereof had nevar been refused.
On March 26th, 192G, during Miss McCall's agency, Iv1a.e:;ee visited
0. H. Salyern, another of plaintiff's depositors, who owned and oporatad
a store in Catlettsburg.

Ha stated in the presence of Salyer's

custorr~rs

in an abrupt, high-handed and loud manner that he represented defendant
Jank and, presentin 6 a check drawn by him on plaintiff for $108.29 in

favor of a Cincinnati party which possibly cont:J.ined the endorsement
to payment heretofore referred to,

dem~ded

to know of

S~lyer

why he had

not filled the check out in the proper nunner, and stated tbut he had
presented it for

pa~ent

and could not get any money on it.

On the same day he visited F. H.
D. H. Cn:rpentar & co., <:mgag,;d. in wholesi.lle

c~rpantar,

~nd

::1S

Secretary of

retail dry goods ::md

-9-

X-355la
notions business in Catlettsburg and a depositor of plaintiff, introduced
himself as a Federal Reserve man, presented a check drawn by his company
on plaintiff containing the endorsement referred to, inquired as to why
his Company permitted the bank to put such an endorsement upon the check
and stated that it was injurious to the credit· of his Company and that to

save its credit it should do business with some other bank.
Magee whilst in Catlettsburg made .inquiries of Clerks in the
drug store, post office
plaintiff was

g~tting

express eomp3ny office as to where the

its cash from.

He also made inquiries as to the

worth and standing of plaintiff and the man in charge of its business.
As stated

M:~gee

left Catlettsburg about April lOth, 1920.

The

reason for his leaving was that an indictment was re.turned against him
by the state grand jury in which that city is situated charging him with
making and circulating statements

derog~tory

to the plaintiff contrary to

the Kantucky Statutes and he has never been back since.
the defendant Bank's employ until Jul,.y 17th, 1920,

He continued in

Whilst he was in

Catlettsburg he made reports of progress to the Ass.istant ·Cashier of defendant nank who was overseeing the matter.
For a while after Miss McCall was employed it was her custom
to go to the bank with a go cart in Which to carry away from it the

mon~y

received.

Seemingly the plaintiff purposely

could otharwise carry.
pounds in silver.

g~ve

her more coin than she

One day shQ was given as much as

nin~ty fo~r

And at timas it would wad the bills •. · Later on the go

cart seems to have been abandoned, possibly because not needed.

It took

much tirr.e to wait upon her in countin[; the r.:cn0y and after she was wa.itoci

·" ...r

-10-

X-355la

upon she took much time in recounting it, in separating it into the
separate denomin:t tions and in rmiling a list thereof, which she was required to do.

bearin~

She carried an instrument

defendant Jank' s seal

which was used in sealing with lead a. c.:1nvass sack in which the monay was
ship)ed.

Sha ::1lways c:.:trried openly a pistol to rnotact herself from

robbery and often was :.1ccompaniad by one or two dogs.
After defendant Jank refused to 3.ccept checks drawn on plaintiff
bearing the endorsement as to payment in cash or exchxnge at plaintiffls
option it did not content

its~lf

with returning the checks to the batiks

from whom they came, but took pains to write to the payees of the checks
giving its reason for not accepting them.

That was that the cheaks by

reason of the endorsement were non-negotiabla.

.,'lhe concluding paragraph

of each letter was:
"Vle ar.;; writing this let tar in order that you may be advised
that items bearing notation similar to that set forth on the check
mantioned above are uncollacti bL; through a Fadaral Reserve :·ank and. for
that reason as a medi~~ of pa~ment the usefulness of such checks are impaired. 11
·

About two weeks 1:efore IVIa.y 18th, 1920, defendant Jank 1 s ::ranch
=ank at Cincinnati wrote plaintiff 1 s main Cincinnati correspondent, a

national bank and member of tho Federal Reserve System, a letter in which
it said:
"We are instructed by the he::l.d office to refuse to handle checks
bearing the endorsement of the Kumars & Merchants ::::,ank of Catlettsburg.
Accordingly in case any checks with their endorsemznt are deposited with
us, by you, we shall return them. Please so instruct your Transit Department. This is effective at once and until further notice."
\Vhile the American Express Company W3.S
January and February, 1920, its

~neral

~cting

as agent in

agent at Cincinnati, and local

agent at Ashland, ihich had supervision of the Catlettsburg office, cilled

1162

-11-

upon the manager of the defend:mt

~ank' s

X-355la ·
Lranch ::an1:

Cincinn..l.ti to ex.pl::l.in

delay in two or three shipments of proceeds of checks collected by the Express Company.

They inquired of the Manager how long such method of col-

lection would be kept up and according to the General Agent, he replied:
"I do not know how long it. will be continued, but i t will be continued until the Farmers & Merchants tank agrees to handle our collections
without charge to us. n
According to the local agent he replied that they would continue
their method of

collectin~

chJcks over the counter until they had forced

the plaintiff to handle them at par

~d i~timated

that it would not be long

until it would be forced to clear at par.
Such is the showing on substance made by the :U'fidavits introduced on behalf of plaintiff.

As against it, so far as Magae 1 s conduct is

concerned, defendants have introduced the affidavit of'Magee
testimony of Miss McCall.

~nd

the &ral

In his o.ffid:1vit M;,1gee states that in his various

conferences with plaintiff's cashier he nev3r endeavored to coerce the
plaintiff into agreein6 to clear check drawn on it at par, but at all times
sought to point out to him that the par collection system was a great.progressive rnovemant in banking practice and that plaintiff as a representative
banking institution in Catlettsburg shonld give its sanction to this
practice and that he never uttered to any person any
to the reputation or solvency of plaintiff.

Oth~r

state~nt

dQrogatory

than these general stat3-

llldnts he makes no denial of the stateiYJ<;nts in plaintiff 1 s affidavits as to
his conduct.

Possibly his affidavit is to be understood as stating that he

was not in Catlettsburg any time Whilst the Express
agent.

If so, this stat;;;mmt

may ba

Compa~

was acting as

said to amount to an indiroct denial

of what is stated in plaintiff's affidavit as to his· conduct in Ca.tldttsbl.:-u:""'

-12-

X-3551a
at that tirr:e,

Miss McCall testified that Mr. Magee was never boisterou.&. or

ungentlemanly in any way and was always quiet and gentlemanly when she was
thrown with i1im.
true.

There is no reason for not accepting this testimony as

Possibly i t can be reconciled Nit,h statements in plaintiff•s affi-

davit by the f::.tct tlu t her presence had a res t:"air. . il:g influance upon hirr •
It is to be noted, howevar, that seemingly the indictment was not returned
against him until over two weeks after Miss McCall began to act as agent.
In the light of the shaNing made on both sides I am constrained to accept
that rra.de by plaintiff as to Mage0ts conciuct as being substantially true.
It is hard to believe some of it, that as to his conduct in relation to

Magann for insta.nce.
tiff's affidavits.

.And a tendency to exaggeratE: seems to pervade plainYet with this said, in view of the number of themand

the persons w.aking tharr:, all. of '!\hom are in good standing I have not other
recourse than that sta tt:Jd.
The defendar.t banl;:-'s .Assistant Cast"idr who has represented it in
this matter· testified that the conduct of Magee complained of was never
authorized by the defendant bank and if he was guilty of any such conduct i t
vva.s a·bsolutely
anything at

unkrl01JIJU

to it and that h;;; never

Catl~ttsburg

intimat~d

that he was doing

axcept to carry out instructions which was to en-

deavor to porsuade plaintiff to agree to remit at par and to treat it po~
1 it ely.

.At one time

however, a complaint of !Vlagee was conveyed to defendant

bank through the president of plaintiff's principal Cinci~~ati correspondent.
•·
Ma.gee was ins true ted to see. such president about it. He did so and explained
the matter to his satisfaction.

The defendant bank learnad of !~gee's in-

d.ictrr:ent and ina.,uired of him about the rratter.

He gave an outlin_e of his

actions >Vhilst in Catlettsburg and according to U.at outline there was nothing

-13-

X-355la

in his conduct which would indicate that the indictment was based upon wall
established facts.

But it made no independent investigation in regard to the

matter, ·sent no one to Catlettsburg to inquire into Magee's conduct, made no
effort to have the indictment against him brought to trial, expressed no regret to plaintiff for his conduct if possibly he did go too far and continued
to keep him in its employ until July 17th, 1920, the ryason for his then
quitting not

ap~earing.

Seemingly the defendant Dank would have the Court, in disposing of
this motion, turn its back on Magee 1 s conduct as a thing long of the past
when this suit was brought and view it in the light of the fact that at that
time all it had to apprahend was Miss McCall's daily visits, vvith her
pistol by her side, accompaniad at times with one or

t'NO

dogs. But that

conduct is relevant, notwithstanding that such is all that plaintiff
has reason to apprehend in the future.

It gives color to defendant 1 s

Bank 1 s purposa in initiating and continuing this procedure directed
against plaintiff.

Possibly it may be true that it was not aware of

Magee's con::tuct, at least to the full extent to which he went.
is such con,:;.uct on McGee r s part to 1:e accounted for.

:Jut how

It ca::mot b.;;

accounted for on any othar basis than knowleuga on his part of what
'

defandant Bank's purposa was in setting on foot the movemant against
It 'vas bagotten by such purpose and henca gives color to

plaint iff.
it.

Thoa showing made by plaintiff's affidavits as to the oth2r
particulars than Magaers conduct and as to his conduct except as
stated ara uncontradictad.

-14-

X-3'55la

The facts as to twc other matters should be stated.

One

of them is as to the accumulation of plaintiff's cheds by defendant
There was no other accumu:ation than such as was caused by

Bank.

its advertisement that it would collect plaintiff's checks at par.

This necessarily resulted in an accumulation to some extent.

It can

be ac.cepted that this undertaldng was availc::d of by all in whose hands
C9ame)
plaintiff 1 s checks; who othervcise would have been compelled to pay for
remittances in payment thereof.

And because of this plaintiff was

obliged to keep a greater reserve than would have been the case had
the chec1s been allowed to straggle in one at a time as they did before
defendant bank set on foot the movement against it.

The ,other is as to

the effect on plaintiff of defendant Bank's course of procedure.

deprived it of income from remittance to the extent of from $800 to
\

do
•
'~1,000 a

year.

It required it to lreep a greater cash reserve and,

therefore. affected its income from loans to a certain extent.
caused it to lose depositors.
the time

There was a shrinkage in deposits in

between the initiation of the movement and just before the

bringing of this suit of nearly $100 1 000.

But it cannot be said from

this mere fact alone that·this shrinkage was caused by that movement.
There was a greater shriril~age in the same time of the deposits of
another banking institution of Catlettsburg.

But the Cashier's

affidavit gives the names of seven depositors which plaintiff lost for
this reason and this statement is uncontradicted.

Ana the movement.

especially whilst Magee was at Catlettsburg, was calculated to cause
plaintiff to lose depositors.

The movement scandalized plaintiff in

Catlettsburg and was calculated in injure its reputation and credit.

.1166
X-355la

- 15What was going on was a matter of public notoriety.
made to keep it from the public.

No attempt was

And the procedure could not help being

humiliating to plaintiff.
Yet still another fact should be stated in order to a full
presentation

01 ~n1s

case.

This is that when this suit was brought

the checks which came into defendant bankl s hands for collection and
which were presented by it for payment over the counter were dwindling
At the time the move~ent was begun plaintiff had reason

in number.

to expect that checks amounting to as much as
sented for payment at any time.

$8,000 might be pre-

At the time suit was brought the

reasonable expectation did not exceed

$3,700.

This shrinkage was

due to the endorsement on its checks, which were increasingly being
.put there, to the effect that payment might be made in cash or exchange
which checks the defendant Bank refused to handle.
It remains to determine the law of this case.

As to

this there can be no question as it has been settled by the decision
of the Supreme Court in the Atlanta case.

It all depends on

defendant Bank's purprse in adopting this unusual

ana

heretofore

unheard of procedure of seeking out plaintiff's checks for collection
•
and presenting them in a body for payment over the counter, i. ?t,
what was its immediate purpose in so doing.

Was it for the purpose

of breaking down the plaintiff's business as then conducted?

If so,

it was unlawful and subject to be restrained by a court of equity.
It does not follow that because the holder of a check has a right to
present it to the bank upon wh.ich it is drawn for payment over the

- 16-

X- 355la.

if 67

counter that one has the right to seek to become the holder of all
the checks drawn on a bank as they are drawn and then present them
in a body for payment in cash over the counter.

If such was

defendant Bank's immediate purpose in so doing it was not· justified
by the ulterior purpose which it has in view, to-wit of freeing commerce
from the burden of such charges.

Here, as never, did the end justify

the means. Such a course of procedure is a kind of refined highwaymanship.

It is aholdup.

It is one of the inalienable rights of

a person to be unprogressive, selfish and mean.

This is said

intending to so characterize plaintiff's position.
has the right to coerce him into being otherwise.

wit~out

No other person
The idea that

there is such a right was at the bottom of the night rider troubles in
Kentucky some years ago.

Those who were in the ppol thought that

those who were out were selfish.

And they undertook to coerce them

into joining the pool by shooting them into their homes.
~bat

thenwas the defendant Bank's purpose in initiating

this movement against plaintiff and

~eeping

it up for over a year

and a half, i. e. until stopped from further doing so by the temporary
restraining order?

There is but one answer to this question and

that was to break down plaintiff's business as it was being conducted
not to put it out of business, but to compel it to do business in
this particular as it would have it do e.nl :not as plaintiff desired.
Notwithstanding it was having its way in conducting its business it
was not willing that plaintiff should have its way in conducting its
business.

It desired to impose its will on plaintiff.

That such

-17 -

X-355la

1168

was defendant Bank's purpose is the meaning of the course of procedure
adopted.

It can be accounted for on no other basis.

•. Such a}

,.•

purpose was avowed by those acting on its behalf, and it was
ad.mi tted on the witness stand by its assistant cashier that i f the
plaintiff at any time had signed an agrement to remit at par the
agency would have been withdrawn.

Each side appeal to the decision

in the Oregon case as favoring its contention.
to favor that of plaintiff.

It seems to me

In that case the Reserve Bank had

been maintaining an agent at Brookings but at the time of the
application for preliminary injunction that agent had been withdrawn and the Reserve J3ank had been forwarding to the State Bank
checks drawn on it endorsing them for collection only and remittance
in full without deduction for exchange, and, upon the State Bank
returning them unpaid, had been returning them its correspondents
advising them that the State Bank refused to pay and had not protested same and they must look to the State Bank for their protection

w~iCh

was in effect that the checks had been dishonored.

A preliminary injunction was granted restraining the Reserve Bank
from so advising its customers.

That in the decision of Judge'

~olverton on which the defendant bank relies is his statement that

the Reserve Bank was acting within its authority in maintaining an
agent Brookings for making collections over the counter of
plaintiff's bank and paying the·expenses thereof.

But in

ma~ing

this statement he was merely referring to the corporate power of the
.Reserve Bank and he based this on the decision in the Atlanta case.

X-355la

- 18 considerin~

He was not

1.169

the right of the Reserve Bank to so act as

against the State Bank.

On the contrary he seemingly condemns the

action of the Reserve Bank in this particular as well as in the
particular as to which the injunction was granted.

He said:

, "The question remains for determination as it respects
the motive that induced the defendant bank to pursue the course
it did in attempting to ~ake collection from the plaintiff bank.
It appears by defenda~t's answer that it expended $1,915.32 in
making collections over the counter of pla.intiffls bank of
$102,850-33 during the year from October l, 1920 to October 1,
1921. The method employed, considering the occasion for it, or
rather the lack of reasonable necsssity, was to say the least
extraordinar7 , extr::-vagant and unbusinesslike."
Again he said: _
"I am persuaded, however, that the action of the
defendant bank in adopting the methods pursued by it toward the
plaintiffls bank, Emd in persi::;tently adhering to them indicates
most convircingly that it was for the purpose of coercing the
latter bank into adopting the policy cf the Reserve Bank to remit
at par- Although the policy may be commercially sound, the
plaintiff was entitled to pursue its own method, without-being
harrassed and annoyed because it pe;rsisted in so doing."
It is not unlikely that the withdrawal of the agent
from Brookings was dus to the decision of the Supreme Court in the
Atlanta case and was an interpretation of that decision as condemning
such action.
The d&cision of Judge Evans in the Atlanta case after
its return

con~isted

of certain t:inding;s in that case, based upon

its particular facts.

In so far as such findings may conflict

with what I have held herein I am unable to follow it.
The only thing
ca~e

th~t

hc,s siven me any concern in this

is plaintiff's delay in asserting its right.

No explanation

-·19-

X- 355la

1170

is given of this~ Possibly it thought that it would be able to wear
out the defendant

B~nk

in the long run.

But it is not unlikely

that under the influence of the decision of the lower courts in the
Atlanta case it thought that the defendant Bank had the right to make
collections as i t did and wa3 not advised to the contr.ary until the
Supreme Court reversed those decisions.
reversal that this suit was brought.

It was shortly after such

I cannot, however, rrake out

from this delay any reason why defendant bank should be permitted to
continue to make' collections in this unlawful manner.
therefore, is sustained.
restraining defendants

The motion,

A prelimin&.ry injunction is granted

fro~;'l

continuinq- so to make collections of checks

dra\1\1!1 on plaintiff and the defendant Bank from advertisin:; that i t will
collect such checks free of charga o.nd from doing anytl,ling else for
the purpose of coercing plaintiff to remit at par.

• ~~1·
·._
-

,.'

FEDERAL RESERVE BOARD
WASHINGTON

X-3553

Novamber

SUBJECT:

1922.

Government Securiti~s Owned by
Reporting Member Janks.
·

Dear Sir:
The Treasury Dapartment is desirous of obtaining
each week, if ppssible, from reporting member banks information as to the amounts of the differl3nt. kinds of government
securities held and owned by them.
In a letter to me dated
October 9th, Mr. Gilbert requested that the Federal Reserve
:Banks and the member l)anks in their reports to the Board
itemize their holdings of such securities as follows: (1)
13onds to secure circulation; (2) Liberty bonds; (3) Treasury
bonds; (4•) Victory notes; (5) Treasury notes and (6) Treasury
certificates of indebtedn'dss.
In~· reply to his letter, I stated in effect that
the Board could arrange to furnish him once a. month with the
detailed information he ~sires with respect to the Federal
Reserve Danks' holdings of government securitias, but was
reluctant to call upon the member banks for too detailed a
weekly report of their assets and liabilities. He has replied stating that the Treasury particularly wants information with respect to the governroent security holdings of the
reporting member banks, so as to be able to get some .line upon·
the distribution of the new Treasury bonds among inv~stors on
a current basis~ To get the information desired would require
the substitution of three new items for the item "United States
:to11ds" now appearing on the form (St. 5l).furnishad to reporting mamber banks ..

The :Board would like to have you advise it whelil:lor
•
1n your opinion it would seem advisable to call upon your reporting member banks to furnish the detailed information requested by the Treasury Department.
Very- truly yours,

Vice G6verp.or.

'•

FEDERAL RESERVE BOARD
WASHINGTON

November 6, 1922.

X-3554
SUBJECT:

Federal Reserve Bulletin: Special Subscription
Rate for Examiners of State Banking Departments.

Dear Sir:

In accordance with the practice prevailing in
the past, whereby the Federal Reserve Banks have undertaken to supply the Federal Reserve Bulletin to examiners
of State banking departments located in their Districts,
the Board believes that it vmuld be well to cent inue the
same policy d~ring the year 1923, and has accordingly
fixed a special rate for such subscriptions by Federal
Reserve Banks at $2.00 per annum.
In order that the subscriptions may begin with
the ~~nuary issue, please send us, not later than December lOth) a list of State bank examiners to whom you
desire the B-uJ.letin sent during the ensuing yea:r.
The Board furnishes a complimentary copy to the
Banking Commissioner of each State, and therefore, the
names of these Commissioners should be omitted from your
list.
Very truly yours,

'!'alter L. Eddy,
}ssistant Secretary.

...
.

-....

FEDERAL RESERVE BOARD
WASHINGTON

X-3555
November 6, 1922.

SUBJECT: Closter National :ank v. Federal
Reserve Bank of New York~

Dear Sir:
There is enclosed herewith for your information
a copy of the opinion of the United States

Circui~

Court

of Appeals for the Second Circuit rendered October 31,1922,
in the case of Closter National Bank of Clos.ter; New Jersey,
v. the Federal Reserve Barik of New York, as received from

Mr. L. R. Mason, General Counsel to the Federal Reserve Bank
of New York.
Very truly yours,

Vice Governor.
(Enclosure)

X-3555a
UNITED STATES CIRCUIT COURT OF APPEALS
FOR THE SECOND CIRCUIT.

- - - - - - -x
CI.OSTER NATIQ}T.AL B.ANY,
Plaintiff-inError,
-againstFEDERAL RESERVE BANK OF

NE17

YORK,

Defendant-in,$
Error.

-- -·-

- - - - - - - - X

BEFORE:
ROGERS, MANTON and MiWER,
Circuit Judges.
Writ of error from the United States District Court for the
Southern District of New York.

.Act ion by plaintiff'- against the

defendant to recover the amour.t of a check dra\vn on the Treasurer of
the United States.
Judgment for defendant;

plaintiff appeals.

.Affirmed.

DAVID D. ACr'ERfv'1.M.T, Esq.,

.Attorney for Plaintiff-in-Error.
L. R. I·ff.ASON, Esq.,

Attorney for Defendant-in-error.
MANTON, Circuit Judge.
On March 31, 1919, a check was drawn on the Treasurer of the
United States purporting to be for Four thousand dollars.

It was pre-

sented to the plaintiff-in- error by one representing himself to be

X-3555a

-2-

the payee therein named, and it was endorsed "Pay to the order of any
bank or trust company.

March 31, 1919. Endorsements Guaranteed.

Closter National Bank, Closter, N. J."

T~is

The

paper was sent on April

3, 1919 to the defendant-in-error for collection. The plaintiff-in-error
was a member of the Second Federal Reserve District located outside of
the State of New York, and elected to collect the check in question through
the defendant-in-error, but did so under the terms and conditions. of a
circular letter knovm as No. 37 dated December 29, 1915, and which reads
as follows:
" Member banks.of this d.istrict located outside of the
City of New York are notified that on and after January 1,
1916, they ~ay include in their remittances to the Federal
Reserve Bank of New York for irnr"uediate credit at par, but
subject to final payment by the Treasurer of the United
States, all govern~ent warrants and checks drawn on the
Treasurer of the United States. Member banks situated in
New York City for the present and until further notified
by us are requested to collect such items through the
Assistant Treasurer of the United States in New York in
accordance with the present practice. Yfhen the facilities
of the Federal Reserve Bank for handling government
deposits have been further developed, member banks in
New York City will be notified that P;Overnment warrants
and checks may be sent to this banl· through the Clearing
House subject to final payment by the Treasurer of the
United States.
The Government has for many years exercised the right
of returning at any time warrants and checks, which for
any cause have not been considered good; and we have been
advised that this practice will be continued.
11

New
and
ber
and
any
New
n

In view of this situation the Federal Reserve Bank of
York 1 as a condition of receiving g;overnment 'varrants
checks on the Treasurer of the United States from me~
banks for credit, reserves the right to charge back
return to the depositor at any time and unconditionc.:11y
such item deposited with the Federal Reserve Bank of
York.

Your attention is specially invited to the above condition."

X-3555a

-3-

The check was entered to the credit of the account of the
plaintiff-in-error, in defendant-in-errorls bank.

It was thereupon

forwarded to the Treasurer of the United States for payment.

The

check passed through in ordinary course and after bore a sigrature
and symbol number, and then the check was perforated as follows:
"Paid 4-4-l9-M<j 11 •

The signature of the drawer was compared and in

due course and in accordance with the usual custom, it was audited
by the disbursing officer who issued it, and it was examined by the
Inspector General of the army.

Upon this audit and examination,

the Treasurer of the United States notified the defendant-in-error
by letter of May 19, 1920, over a year after the deposit of the
check by the plaintiff-in-error with the defendant-in-error for
collect ion, that the check had been altered and the endors.ement of
the payee forged.

This letter sent to the defendant-in-error, was

accompanied by a photostatic copy of the check in question and a request was ITade that the Treasurer of the United States be credited
vvith the amount of the item.

In accordance with the practice pre-

va1ling in the bank of the defendant-in-error the

Treas~rer wa~

credited with the item of Four thousand dollars and within thirty days
thereafter he was paid this amount.
by the defendant-in-error of the

The plaintiff-in-error was notified

Treas~rer 1 s

statement that the check

was forged and altered, and t:1ere was forwarded to the plaint iff-inerror, with its photostatic copy of the check, a notice of the charge
of the amount to the plaintiff-in-c:rror 1 ;; 2-ccount.

Tht;reupon the

plaintiff-in-error ob.jected to the char<se and denied liability for
the forgery.

It resulted in the present action.

- 4-

X-3555a

The contract between the parties embraces the contents and
obligations imposed by the circular letter No. 37•

The defendant-in-

error was appointed depository and fiscal agent of the United States'
and it offered to
District~

certain member banks of the Second Federal Reserve

the option of presenting for payment

ch~cks

and warrants

on the Treasurer of the United States through it, but it made the
terms as set forth in the circular above.

The plaintiff-in-error

was free to accept or refuse to accept the services of the defendantin-error as it saw fit.
collecting

governm~nt

immediately

c~editing

It might have used other available means fer

checks and warrants if it so desired.

\¥hile

the account of the plaintiff-in-error with the

defendant-in-error, it was always subjected to final payment by the
Treasurer •. Crediting the account, accorded an advantage to the
member banks in affording means for making funJ.s promptly available.
In undertaking this service, th3 defendant-in-error became a collecting agent.

Under

~he

terms of the circular, defenaant-in-error had

the right should the United States at any time not pay to return
such check for any reason which the government might consider good, and
the defendantin-error could at any time and unconditionally charge back
th~

amount credited to the plaintiff-in-error, at tha sama tima re-

turning the item so charged back.

The right to do so was indefinite

as to time; it might be don2 at any time and unconditionally. ·It was
with this understanding and

agra~ment

that the defendant-in-error gave

credit and accepted the obligation to perform this service for the
plaintiff-in-error.

- 5-

1178
X-3555a

nut it is contended that thQ defendant-in-errorts right to

charge back the item is dependent upon its showing that the item was
in fact a

for~ry

and alteration as claimed by the Treasurer.

Dy the

terms of the collection agreement under which the defendant-in-error
performed the service, the collection agent had the right, if it acted
in good faith, to charge back the item to the plaintiff..;.in-errort s
account without the necessity of establishing a forgery or alteration
of the warrant.

'The memorandum credit accorded by the agreement of

which the circular letter is a part, was always qualified by the clause
11 subject

to final payment."

many years

ex~rcised

And by that clause the government has for

the right of returning at any time, warrants and

checks which, for any cause, have not been considered good and the
plaintiff-in-error was notified that this practice would be continued
as a condition of receiving governmdnt warrants and checks on the
Treasurer of the United States from member banks for credit, with "the
· right to charga back at any time and return to the depositor at any
time and unconditionally any such item depositad with the Federal
Resarve Jank. n

To place any other construction upon the terms of the

circular would be to treat the phrase quoted as surplusage.

Under the

law, the Treasurer might recover if he paid the warrant because of the
forg~ry

and tberafore, as a matter of law, the itam was not finally

paid.
In United S.tatgs vs. Exchange Natl. :Dank (214 U. S. 302)
the United States was held not to be chargeable with knowledge of tha
· signatures of persons entitled to pension Cheeks and that it could re-

1.179
-6cover from a bank receiving

p~nt

X-3555&

from a

sub·t~asury

on ch~cks to

which the namas of payees had been forged.
In CoOke vs. United States

(91

U.S.

389)

the court laid down

the rule governing the right of the Treasurer to repudiate payments of
counterfeitin~ items and said that if presentation is made at the time

when a complete examination cannot bQ had. such pa.ytl'llint is tentative
and does not amount to an adoption. and that further inquiry may be
made and if the paper is fo'Wld -to be a counterfeit, it may be returned

within a reasonable time and. that a reasonable time is depandent upon
the

circumstanc~s

of each particular case; but that until a reasonable

time has in fact elapsed, the law will not impute negligence ort account
of dela¥•
And in the instant case, this warrant was presented at a time
• when the war department was in a great rush of business owing to an
accumulation incident to the conduct of the war.
In Onondaga Dank vs. United States (64 Fed. 703) the
~overnment

was allowad to recover after two years had elapsed between

payment and discovery of the forgery.

We think the plaintiff-in-error

may not re·cover under aey of the terms of the contract under which the

$ervice of collection was perfoTIIldd, nor may it racover against _the
defendant-in-error by reason of any neglact or unreasonable delay on
the part of the defendant-in-error.
Judgment affirmed.

FEDERAL RESERVE BOARD
WASHINGTON

X-3556
November

SUBJECT:

Branch Bank Directors.

Dear Sir:
During the week of December lOth, the Board
will I!'ake its appointments of branch bank directors to
serve during the calen:'lar year 1923.
Th-:· Federal Reserve Banks having; branches are, therefore, requested
to make their appointments of branch bank directors
and advise the Board thereof prior to December lOth.
In Taking its appointments, the Board will
give consideration to the ne.mes of any individuals sug-.
gested by the Boards of Directors of the several Federal
Reserve Banks.
Very truly yours,

Vice Governor.

7, 1922.

FEDERAL RESERVE BOARD
WASHINGTON

November 7, 1922.

X-3557

SUBJECT~

Comment of Federal Reserve Board with reference to
pror:ositions agreed to at recent Governors' Conference.

Dear Sir:
The Federal Reserve Board has considered the
stenographic report and the Secretary's Minutes of the Conference of Federal Reserve Bank Governors which was held in
this city October lOth to 11th.
It appears from the recoris that no action was taken
by the Conference which,under the law and the printed regulations, require the approval of the Federal Reserve Board,
with the exception of 'l'opic l B. This topic appears as,
11 Interpretation of 'Borrower' Section 13 Federal Reserve Act
limiting amount which Federal T-:.eserve Banks may rediscount
for any one bank 11 •
It was voted that the Federal Reserve
Board should be requested to withhold any form.al ruling on
this subject until the counsel of the several Federal Reserve
Banks rray have the opportunity to study the question and submit their views to the Federal Reserve Board. To this request
the Board accedes, All other action recorded had reference
exclusively to m.atters of procedure and routine operation and
the Board desires herewith to advise the Federal Reserve Banks
that it interposes no objection to their putting into execution those changes in existing practice wh.i.ch are contemplated
by the various agreements reached at the Governors' Conference.
Very truly yours,
Federal Reserve Board
rym. W. Roxton,
Secretary.

r·. ("'
·,;:;~-

FEDERAL RESERVE BOARD
WASHINGTON

November 8, 1922.
X-3558

SUBJECT:

Preparation of Federal Reserve Agents' 1nnual Reports.

Dear Sir.:·
. Since 1915 the Federal-Reserve Board has been publishing
the Annual Reports of the Federal Reserve Agents, or Digests of
them, as an appendix to its own Annual Report. It has always been
the Board's policy in printing these Reports• however, to eliminate
recommendations for changes in la'N and, to a large extent, comments upon economic questions in general.
This has resulted,
especially in recent years, in that portion of the text of the
Agent's Report which is incorporated in the Board's Annual Report
being a mere ~atter of fact recita1 of the bank's operations, and
it has added ver~ little, if any, to the value of the statistical
tables incorporated in the Report.
It has been decided, therefore, not to include acy part
of the te~t of the Annual Reports of the Federal Reserve Agents in
the Boardts Report for the year 1922. Part II of the Board's
Report will, however, contain several tables with appropriate
charts, similar to those appearing in the 1921 Report, which will
be prepared by the Board and submitte~ to yvQr Bar~ for verification as soon after January 1, 1923, as possible. All tables relating to a given Federal Reserve Ban¥ will be placed together so
that a general idea may readily be obtained of Federal Reserve
banking developments in a given District by reference to this section of the Report. The tables will be prefaced by a statement to
the effect that copies of the Annual Reports of Federal Reserve
Agents, which are devoted largely to·a discussion of intra-district
watters, may be obtained-direct from the Federal Reserve Agents of
the respective Districts.
In view of the foregoing, it is suggested that your
annual report to the Federal Reserve Board, which will be printed
and distributed locally, be devoted to a discussion of the bank's
operations, changes in its condition, its relations with member
banks, its earnings and expenses, etc., and to the commercial, in"dustrial, agricultural, and financial conditions in your own district with perhaps a brief reference to the relationship between
such developments and conditions and the situation prevailing in
the country generally.

X-355S

- 2 -

In order to expedite the completion of the annual reports
of both the Boari and the Federal Reserve Agents, i t is req_uested
that the text of ·your annual report be fo:rvvarded to the Board early
in January and that the statistical tables to be published in connection there•.vi th be forwarded as soon thereafter as completed.
Both the text of the report and the statistical tables will be
handled by the Board as expeditiou~ly as possible in order that
the necessary release for publication rnay be given to you at the
earliest' practic~ble date.
By order of the Federal Reserve Board,

vrm.

\7. Roxton,
Secretary.

FEDERAL RESERVE BOARD
WASHINGTON

X-3559
Nov~mbar

StTJJECT:

3, 1922.

D~cision

of Circuit Court of Appeals
in Atlanta Par Clearance Case.

Dear Sir:
Th~ra is enclosed h:~rc;with for your information
a copy of the opinion randand Novemb,;r 2, 1922, by the
Unit0d States Circuit Court of Lppuals for tha Fifth Circuit
in the case; of Arnerican :Ja~'lk & Trust Company, at al. v. Faderal
I-i.esarva Ilank of Atlanta, at al., as received from Mr. Hollins
N. Ii.andolph, Counsal to the Federal Rasarve ::::.ank of Atlanta.

It will be no tad that the Circuit Court of Appeals
affirmed in toto th~ decision of the Unitad States District
Court randared March ll, 1922, vvhich vvas published on page
436 of the Faderal Raserve Ilulletin for April. 1922.

Vary truly yours,

Vice; Governor.
(Enclosura)

COPY

X-3559a
IN THE UNITED ST! TES CIRCUIT COURT OF APPE..I\LS
FOR THE FIFTH CIRCUIT.

No, 3906.
AH:SR!CAN BANY 8 TRUST COMPANY, ET IL.
Lppellants,
Versus
FEDERAL RESERVE BAl'TK OF J:TLfNTL, ET AL.
Appellees.

)
)
)
)
)
)
)

Appeal from the District Court of the United States for the
Northern District of Georgia,

Alex m. Smith, (Llexander ~. Smith, Orville A. Park,
Smith, Hammond & Smith, and Theodore II. Smith on the brief),
for Appellants.
Hollins

1_.r.

Randolph, TI. S. Parker, John

v:.

Davis and

M. B •.'n~ell for }ppellecs.

Before ,..ALIITR

and

BnYAN, Circuit Jud,:;es, and STIEPPAJ'J),

District Judge.
·.··ALI::ER, Circuit Judge:Except as to a feature of the
bill mentioned belmv, nothin::z has occurred. to require a revision of
or departure from the conclusions stated in the opinion delivered
by this Court in this case when it was

here on a former appeal.

X-3559a·

- 2-

.American Bank & Trust Co., v. Federal Heserve Ba11Jc of Atlanta,

269 Fed. 4. \?hat was held by the Supreme Court to show the
existence of a right to relief

14~der

the general prayer for

relief was the part of the bill containing alle><;e.tions to the
effect, that, in pursuance of the aller,ed policy of the Federal
Reserve Board to bring about the collectibility by banks of
bank checks at par. the appellee Reserve Bank and its officers
intended to accumulate,

until they reach a large amount, checks

upon banks of the class to which the appellant banks belon?;, and
then to cause them to be presented for :payr:1ent in cash over the
counter, or by other devices ::1.et:.ilsd to require payrr.ent in cash
in such wise as to drive the dra··rees out of business or force
them, i f able, to subrr.it to the schece of :::-:alc:inc: bar:k checks
collectible at par.
serve Bank,

.American

256 U. S. 350.

decided to be

wrongful and

Banl~ ~Trust

Co. v. Federal Re-

The conduct which the Supreme Court
subj~ct

to be enjoined was the

alleged threatened accumulation of checks for the purpose of using
them in the
the appellee

~anner alle~ed.

banl~

It was not decided or intimated that

would be r:uil ty of any actionable wron": by

merely presenting or

causin~

to be presented bank checks held by

it to the drawees for payment in cash over the counter.
all~P;ed

The

accumulation of ch:cks for the purpose charged was an

essential feature of the alleged conduct which
be wrongful.

"~e

are not of opinion that a

WC1s

b~.nk

decided to

in receipt for

collection of checks on other banks is .o;uil ty of e..n abuse of its

X-3559a

- 3-

right as such holder when, in due course, with reasonable promptness, without desip;ned delay or accurrrJ.lation, and in proper manner,
it presents, or causes to
for payment in cash.

be presented, those checks to the draw8es

In so doing th3 collecting bank would be

exercising its rip;ht as

the holder of checks received by it for

collection, and would not be guilty of an abuse
unlawful purpose.

If the holder of the

ch~cks

that right for an

is guilty of no

wrong the fact·that the payee is inconvenienced by havinp; to pay
in cash would ·not •;ive the latter a vr.lid r.:round of complaint.
Inconvenience

resultin~

to one party from another's exercise of

a right in a lawful way does not -::::ive the former a ri:<::ht of action.
The most that the evidence relied on

the appellants tended

to prove was that at. and pr::.or to the tirr.e of filing the bill
the appellee bank intended or proposed to deal in the just stated
manner with chscks received

it for collection, when the drawees

did not consent to remit -at par, and that it was after this suit
was brought that appellee bank manifested its willingness to allow
payment of such checks to
exchan_g;e.

b~ ~ade

either in cash or in acceptable

The trial judge specifically found that nthe charge

that the Fedaral Raserve Bank at Atlanta would
count~

~ccumulatG

checks upon

or non-member banys until they reach a large amount, and then

cause them to be presented for payment over the counter, so as to
compel the plaintiffs to

~aintain

so much cash in their vaults as

to drive them out of business, or an alternative agreement to remit
at par, is not sustained by the evidence".

He further found "the

evidence insufficient to sustain any charge in the bill that the

X-3559a

- 4-

Federal Reserve Bank was acting illegally or exercising any right
it had so as to oppress or injure the plaintiff banks".

The record

before us does not warrant the setting aside of either of those findings.

VTe do not think that the evidence adduced justified the grant-

ing of any of the prayed for relief which was denied by the decree
appealed from.

By that decree the appellee Bank was "enjoined and

restrained from publishing, upon any par list issued by the said
defendant, The Federal Reserve rank of Atlanta, the name of any nonmember bank being a plaintiff in this case unless such non-member
bank consents or has consented to remit at par".
Our attention has been called to an opinion rendered, after
this case was argued and submitted, upon the granting of a
injunction in the case of Farmers and Merchants Bank of

preliminary

.Cattlettsburg,

Kentucky, vs. The Federal Reserve 13e.nk of Cleveland, Ohio,· and Mary JJ.
McCall,

pendin~

in the District Court of the United States for the

Eastern District of Kentucky.

That opi::1ion sho·.vs tr..at the granting

of a preliminary injunction in that
in~

case was influenced by the show-

made that the defendant bank, by its authorized agents, adopted

what well might be deemed to be
on the plaintiff banl'..

un\varranted methods in collectins Checks

ifhat case is plainly differentiated from the

instant one by the above quoted explicit finding in the latter to
the effect that the evidence did not sustain any charge in the bill
as to improper

conduct by the appellee bank or its agents.

not think that

that opinion shows that our above indicated con-

elusions in

the instant case are incorrect.

TI3 do

;

X-3J59a

t:; -

In the absence of any shoNin 0 that tha appsllee Bank consented to or approved of the usG of any unlawful means of enforcing
or promotine; the adoption or carryin,s 01-1t of tha policy or plan of
making bank checks collectible at par, the fact that the appellee bank
was in accord with other Federal :aeserve Danl:s in adopting that J?Olicy
and attempting to bring about the genaral acceptance and adOJ?tion of
it cannot prop;;rly be given the .effect of rr.a.king the appellee bank
responsible for unlawful acts done, in the effort to enforce that
policy, by or at the instance of other Federal heserve

~anks.

express or implied agreament between tha several Hesarve ]anks to promote the adoption of the policy mentioned does not import a common
cons·ent to the use by any party to such agreement of unlawful means
to effectuate the comnon lawful p.1rposes.

Assent by one party to

concert of action with others to accomplish a la-vful purpose does not
involve or amount to tha forrr.er consenting to or approving the unlawful
conduct of any ona.

Tr.. ere was no evidence tending to prove that the

appallea bank authorized, consented to or ratified the use by or in
behalf of otLsr 1:aserve
about the

~anks

of illat;;ally coerciva method;;; to bring

aneral adoption of tha above mcJntioned policy.

It follows

that the evid.ence offarad to prove t1H:J use by or in behalf of other
Reserve Danks of unlawful means to accomplish the alleged common purpose was properly excluded.
Th0 court disallowed a prOJ?OSed arr.and.ment of th.:: bill having t:t1e
effect of adding as parties plaintiffs thereto banks located in Faderal

X-3559a

- 6Raserva Districts other than the Sixth.
ronaous.

That ruling was not ar-

The complaints mada by tha bill are basad upon what it al-

lQged the appellees did or proposed to do in transactions between the
appellee Federal Reserve Dank of the Sixth Federal Reserve District and
the appellant banks,

wh~h

ara located in that District.

The banks un-

successfully sought to be aQded as parties plaintiff are so far
strangers to tha transactions mQntioned as to keep the alleged conduct
complained of from

ivin 6 to those

ban~s

a rieht of action based on

that conduct, with the rasult t:nat those banks are not entitled to be
joined as parties plaintiff in this suit.
The same interrogatories were propounded by the appellants to
several of the appellees.

those interrogatories,

person interro 6 ated makin 6 such answer his

o~vn.

~ach

separate answer was made to each of

Tne court overruled ObJeCtions to such answers on the eTound

that answers so mado to interrogatories were violative of the provision
of Eq'9-i ty Ii.ule 58 that "each intarro 5 atory shall be answered saparat0ly 11 •
Vfuat tha quoted provision for-bids is the making of one answer a
to more than one interrogatory.

It does not forbid several persons to

whom an interrogatory is propounded joininti in the
separate answer thereto.

ra~ponsa

~aking

of ona

The provision does not require tha duplication

or multiplication of answers to an interrogatory when the parties intarrogated desire to make the same answar thereto.

The answers made to

interrogatories were not subJect to objection on th.s grouna. rr.entioned.
The conclusion is that the record does not show any raversible error.

The d8cree is
AFFIRMED·

(ORIGINAL FILED NOVIDm3ER 2nd, 1922.)

X-2'5CO

TREASURY
Office of

DEP.A.::.~'D-~T
t~.o
secretary

'.7.ASH IHGTO }:

Ths Govornor
Federal Reserve Board.
Sir:
You c:;rG advisee.. that the I:epartment has r•)fe:"'r0ri to the Gc.ncra1 Accounting
Office, Tr6asury IB:partment Division. for sett:.ement '1 the 0-ccount of the Bureau
of :Cngreving and Printing for pl'e:paring Fedcre.l Rt;se::ve notes du:ring the :._Jeriod
October 1 to October 31, 1922 9 amounting to $90,856.04, as follovrs:
Federal Reserve Hotesi 1914

Boston ••••••...
New York •.•••.•
Philadelphia •• ,
Cleveland •••...
Richmond. •.•...•
Atlanta •••••. , .
Chicsgo. , .. , , , •
St. Louis ••••.•
Minneapolis •. ,.
Kansas City •••.
Dallas ••... , ••.
San Francisco .•

i§_

$10

252~000

57,000
144,000

52'1000
26,000
30,000
99,000
31,000
93,000
80.000
?8,000
142,000
185 2000
1,068,000

359000
3.000
27,000
9,000
18.000
20,000
13,000
75~000

401,000

~Q.

$20
108,000

Total
57,000
511 ~000
52'1000
74.000
42,000
156,000
40,000
124,000
113,000
112,000
194,000
3271000
1,802,000

7,000

139000
9,000
30,000
13,000
13.000
209000
52,000
652000
323,000

1,000
2,000
10,000

1,802,000 sheets at $50.42 ......... ~90,856.84
The charges against the several Feeoral Reserve B2nks are as follows:
Inc.ComCampenPlate
Total
Sheets sat ion
Printing t:ateriaJ.s pensatlon
Boston ••••••••
New York ••••••
Philadelphia ••
Cleveland •••••
Richmond ••••••
Atlanta •••••••
Chicago ••• _. •••
St. Louis ••.••
Minneapolis •••
Kansas City •••
Dallas ••••••••
San Francisco.

57,000
511~000

962.16

e ,625. 68

52,000
877.76
74,000 1,24~.12
42,000
708.96
156,000 2,~~Z5.20
40,000
675.20
124,000 2,093.12
ll3i000 1,907.44
112,000 1,890.56
194,000 3,274.72
32? 1 000 52§19.76
1,802,000 30p417.76

909.15
8,150.45
829.40
1,180.30
669.90
2,488.20
638.00
1,977.80
1,802.35
1,786.40
3,09"4. 30
s.gl5.65
28,741.90

724.47
6,494.81
6o0. 92
940.54
533.82
1,982.76
508.40
1,576.04
1,436.23
1,423.52
2,465. 74
4.15§.17
22,903.42

278.16
2,493.68
253.76
361.12
204.96
761.28
195.20
605.12
551.44
546.56
946.72
1 2 595.76
8,793.76

2,873.94
25,764.62
2,621.84
3,731.08
2,117.64
7,865.52
2,016.80
6, 252.08
5,697.46
5,647.04
9, 781.48
16.4§7.34
90,856.84

The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparation and issue of Federal Res~rve Notes, Reimbursable", and it is requested that your Board cause such indefinite appropriation to be reimbursed in like amount.•
Respectfully.
(Signed) s. R. Jacobs.

Acting Commissioner.

FEDERAL RESERVE BOARD
WASHINGTON

X-3561

Federal Reserve

Batik~

Dear Sirs:
Enclosec here\vi th you will find sta tt:lment of
the Treasury ]epartment covering the cost of

p~eparing

Federal Reserve notes for the month of

1922,

The duplicate C/D covering the amount charged aeainst
your bank has been received.
Very truly yours,

Enclos'Ul'e.

Fiscal Agent.

,....

',,

. '·

EFFICIEl\TT COOPEF..ATION BET"':'EEN
THE BUSI1'ESS NfAN A11D THE FARMER

Rerr.arks by J. R. Mitchell, Member of the Federal
Reserve Board, at meetings of the Civic and Cormert:;e
Association, of Minneapolis, and the St. Paul .Association,
of St. Paul, November. 14th and 15th, called to consider
the future of agriculture in the Ninth Federal Reserve
District.
These rerr.arks followed an address by Dr .. '"!. J.
Spillman, Consulting Specialist of the Department of
Agriculture, who spoke ·an nA Perrranent Policy for Agriculture in the Northwest 11 •

X-3562
Since I have been a member of the Federal Reserve
Board, now some eighteen months, I have .often been asked just
'vhat

the Board does, and my reply has been that no inconsiderable

part of its time has been spent in answering criticisms of its
policy, and in explaining the scope of its activities, what it
can do and what it cannot do.
withstanding the

But, in addition to that, not-

fact that the Federal Reserve Let was not

created as a panacea for

all financial and economic ills,

since its work reaches to every part

of the country, it is,

nevertheless, the recipient of tales of trouble coming from
every part of the United States.
If the boll weevil has

~otten

in his deadly work in

the cotton belt, we are about the first to be advised of the
fact- and tha boll weevil has been active, with the result
that there is

a short crop of cotton, by reason of which the

growers of the ten million bales are obtaining a

~ood

price,

But the ravae;es of tho boll 'Neevil have not been al togethc:r
without profit., for it i:;; that acourgs \Vhich has made diversification necess2>ry in th0 South and

mac:l.·:;

possible a greater

prosperity.
If there is a drou'?-ht in th: Pe.nhandle section of

Texas , or in New Mexico, "'e kno1·,, of it , and ar J asked how
cattle covered by chattel mortga::c_;s can be:: rr.ov"'d across the
border to Me:x:i co -,rhers thsrc.. is feed.

- 2 -

X-3562

that if I were the banker hol.dinr; those mortgal?es, I would be
tempted to waive some of the legal tschnicali ties,. p:r:eferring
...

to have mortgages on live cattle anywhera, even in Mexico, than
mortgages on dead ones in Texas.
Again, if the prune and raisin

crop in California is

not in as r;ood a condition as it should be,

w.;;;

know it, and if

there has been an overproduction of potatoes in Arostook County,
Maine, we are told of that.
r'hen one considers the present busin-:;33 situation as
it affects the business rr.an and farmers of thJ Northwest, the
outstanding fact

is that

th~

business recovery which for several

rr:onths has been under way in the industrial East has not been

•

felt to the same extent in the agricultural '"'est.
has been a substantial improvsment in the
business can not be questioned.

~~neral

That there
trend of

The recov2ry began over a

year ago in the textile industry of Now England and has extended to include build in::;, automobil :.:;s, iron and stecl, railroad equipment, and related industries.
nishing

buildin~

of residences

Those industries fur-

rr.aterials have benefittsd by th.;; construction

throu~hout

the country

Thus far the revival has been chiefly industrial in
character, but its

continuanc~

depends upon its 0xtension to

all sections of the country, and
inclusion of

th~

agricultural

particul~rly

com~nities.

ths more complete

There can be no

complete national prosperity unless th-'3 buyinP" power of the

;

"'·

,....,

··.·I(_

.X-3562

.,. 3 farmer. is restored.

In the long run, factories can sej.l their

output at profitable prices only when the farmers in turn are
sellin~

their crops at a profit.
How fal' the prices he nceives are out of

the prices
•..

takin~

the

lin~

with

he is compell8d to pay is shm•m by the fact that,
purchasin~

power of the farmer's dollar in

1913

100f, at· the present time it is approxi~ately 65 t, only 3t
more than in December,

1921, when

was '''Orth but

62f;, the

lowest sines 1313iand a reduction in the pr.;;sent cost of life
necessities to the farmer is at this time far from being in
sight.
and

This can only be

brou~ht

about by a reduction in

wa~es,

ths tendency today is towards hi<;:her rather than towarJs

lower •Na£?-eS.
There is a scarcity of labor today in the citi2s. and
that at a tim0 when industry is
norrral conditions.

ope~atin~

at considerably under

\:hat will be the r csul t wh2n the requirements

of the country restore industry to its full capacity?

It is

X-3562

- 4possible that

the familiar slogan,

supplanted with

Back to the

city~· 11

...

13ack to the farm:•, will be

Such a movement \'IOuld have

the effect o'f p;rea tly reduc im; fe:trm product ion and thereby crea t inf!
higher prices.
Tiere this

meetin~

in some citi,s, it mivht be necessary

to dwell on the importance of ag;riculture; to call attention to
the fact that

45.6( of the population is classed by the

1!3-st

census as rural population; that the valu·a of all farm property
in 1920 was almost $78,000,000,000.; that the farmer provides
a large portion of all

frei~ht

traffic; that the

far~er

and his

family purchase about one-third of all wanufactures; that the
value of the farm production is astirrated to

be in each year

almost exactly equal to the value created in the

factories, i.e.,

to the value that the factories have added to the raw rna.terials
in the process of conversion into finished articles,
Twin Cities it· is unnecessary to argue the point.
the importance of agriculture is.

f'e know that

But in the
"e

'~'hen

knO'N

what

the farmer

prospers the cities prosper, that the welfare of each is closely
interwoven .,1ith that of the other.
'-ith the exception of th.:: iron regions in the northern
.part of the State, and the copper districts in the upper peninsula
of Michiqan, and in Montana, the 2ntir0 Ninth Federal Reserve
trict is depcndent.for its pro:sperity wholly upon the products
of the farm, the dairy, and the raisinP.: of live stock.

~is-

X-3562

- 5 -

That a condition can long continue where the farmer sells,
his

crops for less than it costs to produce is patently impossible.

Either he must receive a larger return for products, must learn n~w
and improved methods enabling him to reduce his costs of production,
or he must give way to someone who can farm more intelligently.
Eventually, however, he is bound to

~et

his proportionate share,

for the world must be fed and will have to pay the price.

But

we, I take it, are not so much interested in that millenium when
each will

~et

The problems

his share apportioned
facin~

''~ith

us are present ones,

scientific accuracy,.
~nd

some measure of

relief is immediately necessary.
~hny

find the

have been ths solutions advanced.

answer

throu~h

political action.

can never repeal economic laws.

Some would

But

politic~l

~ay

place obstacles

Politicians

laws

to the free play of economic forces and statesmen, remove them,
but those who seek to reach the root of the farmer's difficulty
through

ls~islative

action are, I fear, doomad to disappointment.

Others see in cooperative
salvation of the farmer.

~ark~ting

The history of

associations the

coop0r~.tive

movanents

in the United States is full of the story of their failures#
.the other hand, where there

has been good wanagement and sound

policy there have been brilliant successes.

It seems probable

that the development of the cooperative movement will continue
with increasing succ2ss.

But, even the complete success·of

the

coopera-tive warketinq: associations will not, I venture, be the

.....

(

X-3562

... 6 complete remedy.

The Capper-TinCher Bill is evidence of the fact that the
farmers are not satisfied with the present marketing processes, and
if there be any injustices or inefficiencies in our present system,
I hope that they may be rapidly eliminated.

~ut

men in the De-

partment of Agriculture, men who understand th;;; plip;ht of the
farmer, and whose

sympathies are 1vith him, tell me that the

farmer can gain more by diversifyinp; his farminP-" and standardizing
his grades than he can by

controllin? the !Tll?rketing of his product.

There are others who assert that the answer to the whole
question is greater and more liberal credits.

Perhaps the need

is not for more credits, but for credits bett2r adapted to the
needs of the farmer.

ThrouP;h the local banks ,and the Federal

Reserve Eanks, his short-term credits up to six rr.onths rraturity
are taken care of.

ThrouP"h th<J Federal Land :.:anks, Joint Stock

Land :.='anks. Farm Mortgage =anks and :Dankers, and Life Insurance
lon~-term

Companies, his

credits are providvd; but, there is, in

the opinion of some, a lack of intermediats credits adapted to
his needs, a lack which the Joint Commission of Agricultural
Inquiry points out in its report.
The

"'~ar

Finance Corporation, which has done such

splendid service in this field is an emergency creation, and
Mr. Meyer, its Managing Director, predicts that there will be
no need to extend its a.ctivities. which by law will end this
coming spring.

X-3562

- 7 I~on.

Sidney Anderson, Chairrr:an of the Joint Commission of At;riin Congress
cul tur2,l Inquiry, has introduced a Bill/which would provide this
intermediate credit by amendine; the Federal Farm Loan Act.

Inci-

dentally, the Federal I\sserve Board has endorsed this Bill.

:Sut

more credit is not the final answer to ths situation.

l\'1any of

the farmers themselves recorrnize the,t they have had not insufficient,
but too much credit,
Undoubtedly, improvements can be effected all along: thase
lines, and no efforts to effect

th~se

but even wer2 the wishes of the

~ost arie~t

irnprovem;;nts should be abated,
advoc&tes of these re-

forms met, still the root of the problerr 'vouli rerrain untouched.
In th,e final analysis, the farrr:ers
of a

problem is as much

business problem as is that of the manufacturer.

To be

successful each must producs articles for which there is a demand,
and sell them for

mora than it costs to producs.

survey his resources and

Each must

produce th: t for which he is best

equipped, and c.ach must plan ahead to

us2 his plant most effi-

ciently at all times.
Js I see it, thers are only three ways by which the
farmer can attempt to obtain a larger income.
secure for

He can try to

himself a larger share of the value of his crop, and

aJS the processes of

distribution become more efficient it is

a1 to9:ether likely th9..t the

farmsr will rsceivc:o rr.on: for what

he sells, and the consumer pay less for wh2,t he buys.

•
X-3562

- 8 -

The farmer can attempt to reap a larger harvest, but he
has

someti~es

done so only to receive less in return than he had

for a srraller crop.
Or, he can analyze his situation, survey his resources,
produce that for which his farm is best suited) abil.ndon his
efforts along lines which have proved unprofitat.le, and so
diversify his crops and activities that he may reduce his
chances of failure and increase his

chances of success.

To some, this proposal that the farmer e,djust his
production to his market may not seem revolutionary

enough~

Tie

have become so accustomed to the burdens of agriculture that
sometimes

'W?;

think only some complete revolution can remedy

rratters.
T''lis solution, to be sure, is not new or startling.
The Department of Agriculture and the Agricultural Colleges have
be en urgin'<': it.

Only r,;;cantly some

of your leading ne'vspapers

.have 'been conducting a campai8"n for diversific:::tion.

Last month

your Jairy 6hovc was a crreat success in demonstrc::t ins?: the
of farm

dairyin~.

advanta~es

Dr. Spillrr.an has just sho,.vn you what can be

done, what has been done in certain localities, to increase the
farmers' return.
'.':hat is necessary is that the farm,;r be able to see
clearly just what he ought to do in the way of diversification
ani to

understand the limits beyond which .he must not

~jO

this direction, and when he understands these things I have

•

,·

, .....

,.,

.._.. ,-.:.

X-3562
sufficient confidence in his intelligence to believe

tha~

will act wisely.
Something must be done,as to tha.t we are all agreed.
But what to do and how to do it is the question.
Can we not consider this gathering a meeting of stock·
holders. all interested in making a success out of agriculture,
upon which our

success is solely dependent?

I feel that I am

a large stockholder in this basic industry, and I am just as much
interested in getting the

farmer back on a profitable basis as

anyone.
Now, the best 0xperts in the
remedy -

country point out the

diversification, and proper planning of crops and

efforts - a scientific survey of each farmer's resources, and
the determination of what his farm is best fitted for.
How to translate that knowledge into actuality is the
problem.

1"e have the county agents, cooperatively employed by

the Department of Lgriculture, the AgricUltural Colleges and the
counties, who are doing a renarkabl.;; wotk; we have the agricultural
colleges, which have contributad greatly to tha upbuilding of our
section; there is the United States Department of

}.~:;riculture,

studying the problems and ever ready to help; there are the bankers
and merchants in the
~pon

smaller towns, whose prosp6rity is dependent

that of the farmer, no less and no more than is that of the

bankers and merchants

in the

which traverse the territory.

lar6er

citi~s,

and the railroads

·,-

....

X-3562

- 10 -

All thase, with
in common.

Is it not

th~ir div~rs~

possibl~

intarasts, have one interest

that all of

th~m

should cooperate,

poolin6 their facilities and·their abilities for the common good?
It seams to

l1kl

that thara is only one answer, and th:::.t is that

it is possible.

It has occurrad to me that what tha Ninth

Federal Raserve District naads, or What we, as stockholders
need, is a Dapartmant of A0 riculture of our own, which not only
will be informed on what is

nacess~ry

to be done in this dis-

trict, but which will ba in a position to see that what should
be.dona is dona, and in a position to cooperate with these other
agencies - a

dap~rtmant
.,

which could serve as a ciearin6 house for

all the information, which could coordinate all activities; which
could interpret agricultural needs and conditions to the city
interests, and

~:a

effactive their intarast in and the aid they

are ready to extend the farmer; which could brin 6 together the
farmers and the business man of all

cl~ssas

in tha study of their

common int;;,rasts, which NOuld lead to a batter
In tha workin 6 out of such a

pro~ram,

the country banker not only a most willine:,
effective one.

understanding~

you will find

worb~r,

but a most

In touch with tha whole of his community he

can aid hera, help

th~ra,

make a sugc;,estion to

~lds

farmer !lnd

above all, finance in an understandine, manner tha chance into
diversification.

...

X-3562

- ll -

SuCh a pro 6 ram is not theoretical - it is practical.
has bean provod.

In certain sections of the South, for example,

the cooperation of the bankers and business men, Nith thase
a6encies, and with the farmer, has bean largely instrumental in
brin6in~

about the 6raater prosperity due to diversification

and the proper balancin 6 of efforts and activities.
What has been dona alsevVhera, can be dona hare.
various a6encies are eager to

cooperate~

leadership and I am sure that is hera.
can be

The

All that is laCkin6 is
vfuathar that leadership

supplied or not, determines the aifference, in my opinion,

between a discontented rural population with its attendant disastrous results and a prosperous a 6 riculture.
which only you can answer.
Let me assure

It is a question

Vfuat shall it be?

you,~n

conclu6ion, that

th~

Federal

Reserve Bank of Minneapolis, and the Federal Rase.rvo Board as
well, will gladly

cooper~te,

in every way possible, in any sound

constructive pro 6 ram aecid.ed upon to relieve the situation now
confrontin5 you.

The initiative must come from you.

FEDERAL RESERVE BOARD
WASHINGTON

X-3564
November 15, 1922.
SUIJJECT-! Reserve Stocks, Federal Reserve Notes.

Dear Sir:
In order that provision ~ay be roade at the Bureau
of Engraving and Printinrs for the production of a sufficient
quantity of Federal reserve notes durin~ the first six
months of 1923, you are requested to advise the Federal
Reserve Board before December 15th of the amounts (estirr.uted)
of each denomination of Federal reserve notes that you will
requisition from r·ashimcton during that period.
As requested in the Zoard 1 s letter of

~ay

G, 1922

(X-3397) your bank advised the Ioard of the amounts of Federal
reserve rtotes of each 1enomination it was desired to have in
the reserve stock of unissued notes and the amount of each
denomination it desired be held in "'.!ashin~<ton. You are requested to review the figures given by th3 bank and advise
the Tioard before December 15th of any changes you rray desire
to make.
The LOard is.of the op1n1on that there should be
carried at all times in the reserve stock of unissued Federal
reserve notes at least a six-months' supply of each denomination and that one-half of the reserve stock of each denomination should be held by the Federal Reserve Agent and one-half
in '!Jashington.
Very truly yours,

Vice Governor.

FEDERAL RESERVE BOARD
WASHINGTON

X-3566
Novam bar 17, 1'-)22.

SUBJECT:

Employment of Hon. John W. Davis in all
Par Clearance Litibation.

D3ar Sir: .

In view of certain recant devalopments in the so-called
par clearance liti5ation, the Board has decided to su~ast that all
of the Federal Reserve Banks employ Mr. John ·F. Davis, of New York,
former Solicitor General of tha United Statas,.and former ambassador
to Great Britain, to direct tha conduct of ~11 such liti5ation Which
may now be pandin6 a 5 ainst any of them or which may arise in the near
future.
As you know, the Federal Reserve Bank of Atlanta, at the
sue;e!;eStion of the Federal Resarve Board., atn:ployed Mr. Davis as its
principal counsel to conduct the trial of the case of the American
Bank and Trust Company v. Federal Resarve Bank of Atlanta, which at
that time had ju.st bean remanded by the Suprema Court of the United
States for trial on its merits before the United States District
Court for the Northern District of Geor5ia•
In viaw of the fact
that tha questions at issue in that case had ass~d a nation-wide
scope and vitally affected all of the Federal Reserve Banks, the
expenses of Mr. Davis' emptoyment in that liti 5 ation were borne
at the Board's su5e;estion by all of the Federal Reserve Banks pro
rata.
While Mr. Da.vis has actea. in an advisory capacity in the
other par clearance cases, he has not participated actively in the trial
of any but the Atlanta case.
The Board feels that, from the standpoint of th.; Federal Reserve System as a mole, the Richmond, San
Francisco, and Cleveland cases, as well as others vVhich rnay arise, are
just as important as the Atlanta case, and if it was to the interest
of all of the Federal Reserve Banks to employ Mr. Davis to conduct
the litibation in the Atlanta case, it is equally to the interest of
all of the Federal Reserve Banks to employ him in all other cases
involving sbnilar liti6ation.
Furthermore, it seems unJUSt for tha
Federal Reserve Banks of Cleveland, San Francisco and Richmond to
be called upon to contribute to the ezpenses of Mr. Davis' emplo~nt
in the Atlanta case ana. not have the benefit of his active participation
in the trial of their o'W%1 casas.

X-3566

- 2 -

All casas 6rowin 0 out of this par clearance liti 0 ation are
naturally inter-dap,ma.ent, and tha decision in aach ca::;c necessarily
has its affect on the liti5ation in every oth3r case.
This is well
,illustrated by what happened in tha hichmond case. That casa was
handled admirably by local counsal and a decision was won by the
Federal Reserve Bank of J:lichmond in the Supreme Court of North Carolina.
Quite recently. however, that ccurt 0 ranted a petition to re-hear the
case, and it appears that this action was influenced to so~ extant at
least by the decision in the San Fr~~Ci3co or Brookin5s case. The
Boar~ und0rstands also that the brief filad by Mr. Srrath, counsel for
tha Stat.:; bani:s, on the rc-hearinc;; of the Richmond case lays much
strJs~ on th~ ~ecisions in thd San Francisco and Cleveland cases.
It
is obvious that t:1e aaciaion in cha Cla•reland case also vvas influencdd
to a lar 6 e extent by tha lan 6 uae;;a of th3 opinion rendered in thJ San
Francisco casa.
It appears that all the State banks involved in these cases
have retained the same chief counsel, Mr • ..1\lexander ','/. Smith, a very
able laWYer, and thereby have acnieved a uniform policy and a coordination of tactics in tho:: saveral casas.
By this me~'1S they hava c;ained
also a distinct advanta 0 6 in beinb represantad in each of these cases
by counsel vV.ho is thorouc)lly familiar 'JVi th avery asp-;;c t of each of the
other cases.
The Board believes, thjr~fore, that it is of first importance
to the successful conduct of all of the par clearance liti 6 ation that
the Federal Reserve Bat~s employ the same principal counsel to take charge
of all euch litibation, and in view of his eAc~ptional lec;;al ability, in
addition to tha experience which he has already had in the Atlanta case
and his splendid success in the trial of that case, the Boara stronelY
recornmands that all of the Federal Reserve 3anks employ Mr. Davis in
such capacity.
In makin5 this su6gestion, of co~rse, it is not the
Board's ida a that the Federal H;;:;s,erve Banks should dispense with the
services of their re 6 ular counsel or any of the special counsel whom
they have retained or desire to retain in such casas. The Board realizds
that the services of local counsel will ba required for much of the
actual conduct of such liti 6 ation, but believes that it is to the
inter<>st of all concerned that Mr. Davis be plac<:hl in a position to
direct the trial of all such cases and to participate actively in the
trial of each case to suCh extent as he deems advisable.
The Board will be pleasad to laarn at your early convenience
of the attitude of your directors in this r.aatter and vmether or not
your bank will be willin0 to ratain Mr. Davis, jointly with the othor
Federal Raserve Banks, in the capacity indicated abova, tha e~anses of
such .:lmployrnent to be borne pro rata by all of the Faderal Reserva Banks.
By order of the Federal neserve Board.

WM. W. HOXTON

Secratary.

,.., f.'

FEDERAL RESERVE BOARD
WASHINGTON

November 23; 1922.

SUBJECT:

Expense Main Line, Leased Wir<J Systam, October, 1922.

Dear Sir:
Enclosad here'Ji th you will find tNO mimeograph statements, X-356Sa and X-3,68b, covering in detail operations of
the main line, Leased Wire System, during the month of October,

1922·
Please credit the amount payabla by your bank in the
general account, Treasurer, U. S., ori your booksi and issue
C/D Form 1. National Banks • for account of liSalaries and Expenses, Fedet'al Reserve Boa:rd, Special Jrund" t L~ased Wire
System, sending duplicate C/D to Federal Reserve noard.
Very truly yours1

Fiscal Agent.
(Enclosura)

REPORT SHOWING CLASSIFICATION AND ~1lMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF OCTOBER,l922.

From

Ba.l'lk Business

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

Per cent of
Total Bank
Business (*)

Treasury
Dept.
:Businass

3·07
20.05
4.81
7·59
6.14
6.23

------

Vvar
Finance Corp.
Business

Total

- - - - ------

35,346
230,574
5?,2;5
37,323
70,580
72,172
136,880
91,306
47,923
90,532
88,594
143.568

12.48

11,076
22,423
9,724
9,860
10,504
12,449
12,686
11,426
9,124
12,188
7,402
15.291

Total F.R.
Banks
1,150,056
Washington
309.320

100.00

144,153
248,726

_ _].55_

1,002

1,295,211
558,801

392,879

1,757

1,854,012

u.go

7·94
4.17
7 ·87

1·70

Grand Total 1,459,376
Per cent of Total · 78. 715o
Bank Business
Treasury
TOTAL
(*)

1,459,37~

21.197;

392,879

words or 78.79%
11
. "
21.2l%

1,8:)2,255

l00.007o

These percentages used in calculating tha
pro rata share of leased wire expen~es as
shown on the accompanying statement (3:)68b)

FEDERAL RESERVE BOARD
WASHINGTON, D. C.
. NOVEMBER 23 , 1922 •

986

O.l07o

46,422
252,997
64,932
97,183
31,084
84,621
149,566
102,732
57,063
102,720
96,982
l58 .859

•
REPORT OF EXPENSE
MAIN LINE

FEDERAL RESERVE LEA$ED W!Rll; SYST»d OCTO:BER , 1922 •

- ----------------------------------------------------------------------------------------------------------Pro rata
Payable to
Name of Bank

Operators •
Salarias

Operators•

Wire
Rental

Overtime

Total
Expense

Share of
Total
Expense

Federal

Reserve
:Board

Cr0di ts

------------------------------------------------------------------------------------------------------------------------Boston
New York
P'niladelphia
Cleveland

Richmond

Atlanta
Chicago
(#)
St.; Louis
ltU.nneapolis
Xa.nsas City
Dallas
San Francisco
F~d. R~s. Board

250.00
1,279-66
225.00
366.00
305.00
24o.oo
~.712.26

20J.l2
275·00
326.64
17o·.oo
395·00

$
15.00
11.94
29.00
6;12
18.59

17 ,o61.17

25().00
1,294.66
225.00
377·94
305·00
240.00
4, 741.26

53T·53
).,510.57
342.19
1,}28.94
1,075·06
1,099-·57
2~08} .. 58

203~12-

1,3~·22

281 .. 12
345.23
170.00
395·00
17,061.17

730.13
1,371·97
1,348.20
2,185·13

$ 25(>.00

1,294.66

225.00
377·'?).1.
305·00
240.00
4,741.26
203.12
281.12
345.23
170.00·
395·00

2e7 ,53
2,215·91
617.19
951-00

(*)

no.o6
859·57
2 ,.657 .6g
1,187.10
449.01
1,032.74
1,178.20
1,790·13

-----------------------------------------------------------------------------------------------------------------------(I}
(&)
(*)
(a)

$ so.G,

$ 17,o61.17 $ 2:),889·50 $ 17 ·~·09
(a)8.3e0.41
$ 17,509·09
Includes salaries of Washington operators.
Amount reimbursable to Chicago
Credit
Received $8,264.65 from Tr.easury Dept. and $115.76 from War Finance
_CPJ:poratlon ~ove_ring_ pu~iness for months of ..August, Saptamber and October, 1922.

TOTAL

FEDERAL RESERVE :OOARD

WASHINGTON, D. c.
NOVEMBER 23, 1922.

$ 11,338.44

(&) 2,657-68
$ 8,680.76

FEDERAL RESERVE BOARD
WASHINGTON

November 23, 1922.

X-3So9

SUBJECT:

Addressing Communications to Lc: Fed-.:;ral
Reserve Board .

Dear Sir:
The Federal Reserve Board has today directed
that the official letterhead of the Board shall hereafter bear the legend, ''Address official correspondence
to the 'Federal Reserve Board""·
It was further voted
that all Chairmen and Governors be advised of the
matter with the explanation that i f it is desired that
a communication shall have the attention of a particular·
member of the Board, a notation to that effect nay be
made upon the letter.
This action has been tru~en in
order to facilitate the routing of w.ail at this office.
By ord0r of tl:e Federal Reserve Board,
Very truly yours,

Wm. W. Haxton,

Secretary.

ALL CHAIRMEN AND GOVERNORS OF ALL FEDE&\L RESERVE BANKS.

..
F E DE R

L R

S BRVE B0

. X-3')70

For release in Mornin6 Papers,
1, 1922.

Frid"'Y. fl,>G•)mb<'r

The fo1lovving h a sumr:ar,y of t,cmeral bus 1ness
am. f1nanci:.J.l conditions tl1rouc)lout the s.;::ver'll
Fecier..tl R:::drva Di,-;trict<> durm5 tha month of
November, a-> contained i.n th,o forthcoming issue
of the F~Qercu Reserve Bulletin.

Subst::mtial

incr.:Ja~eo

of p.rOQuctiva activity were ra-

ported by basic indu'3tries Cfl}_rin0 Gctober.

Due principally to in-

craaseci ciCtivity a.t antl1rac1ta co-11 rr:inc?s, mineral output was

19 per cant larger than in Se:?tember.

ThurJ wa:.> also a larger

production of all oth0r important minerals.

Production of

pig iron wa"' t;,reat,.n· tnan in ar:y mont!1 since Cctober 1920, and
tha blo,-vin 0 in of aJ.J.itional blast furnct.cas during November
indic,,ctes a further increase of actlvity.

''hll consumption

of cotton hets continw.ed to incraEtSJ c+nJ. the vctober total is
the largest in over t:w yoaxs, :hile opercJ.tions of woole:1
and sill: mills ::tre approachin 6 cc:.paci ty.
of railroJ.d cars lo.1den.

r~as

'f::._, total n1.1ITd.l3r

n-:;arly at a ma;cirr;Lm:, yet th.;; car

:->hortag0 on Novar;;bar 1 wa;;, the largest ever recoraed.

The

large movement of rnanufacturoli goods is i.r:.dic..:.ted by thJ fact
that loadings of miscellaneous frej.ght by railroads were lar 6 cr
in Jctober than in any month since 1920.

•

Live-stoct receipts

X-3570

... 2 -

continue to be exceptionally large, as drought conditions on the
ranges during October necessitat8d unusually heavy marketing.
During the first two weeks of November there was a decline in
car loadings and some reduction in the estimated car shortage.
Incr~ased

production in October has been accompanied

by a continued increase in the volume of employment at industrial
establishments.

The average pay per worker vvas larger in many

industries, due in most cases to increases in hours of work, rather
than to increases in rates of pay.

Railroad repair shops and

equipment factories made the largest additions to their forces.
Steel mills, metal mines, and building contractors still report
shortages of skilled labor.

.Anthracite coal mines , on the

other hand, report a small surplus.
Wholesale trade showed comparatively little change during
October.

Sales of furniture, hardware, groceries, and drugs

showed a general upward tendency.

Seasonal declines occurred

in sales of dry goods, shoes, and automobile supplies.
trade continued to be greater than a year
country was larger than last month.

a~o

Retail

and throughout the

The volume of payments by

checks also increased in every Federal Reserve District conpared
to last month.

The total for 140 cities, not including New

York, was 11 per cent

~arger

in October than in September and

13 per cent larger than in October, 1921.
last October

The increase over

is partly due to the increase in wholesale prices

•

X-3570

- 3during tha current year.
The wholesale price index of the Bureau of Labor
Statistics was

154 in October, as compared with 153 in September

and 142 in October, 1921.

Prices of farm products and clothing

showed particularly large increases during October and reached
the highest level for the year.
cline sharply and were about

Fuel pr1ces continued ·to de-

17 per cent lower than in August.

The increased business activity

ha~

not been reflected

in the movement of total loans of member banks in leading cities.
In fact, during the period between October 18 and Novamber 15 the
loans and discounts of member ·uanks in leading cities showed a
decline of over $70,000,000, of which about $32,000,000 represented
a contraction occurring in the last

week.

The contraction· for the

four weeks 1 pariod, however, has been much less t.han the expansion
of $366,000,000 occurr~ng in the four weeks 1 period ending .October
13.

Slight loan increases were registered in the southern and

western districts and also in New England, but these increases wera
rrore than offset by
New York

~~d

redu~ions

Chicago.

in other districts, especially in

Rates on various classes of leans have

remained fin or have shown a slight upward tandency.

Demand

and time deposits both increased during the four weeks, though
again western and southern districts recorded slight increases.
Little change occurred in the position of the Federal
Reserve Banks during the period from October

25 to November 22.

..
- 4-

X-3570

Earning assets and nota circulation ramainad at substantially
tha sama point as a month ago.

.Thz:Jr0 has bean. howavar, a

change in the character of thase assets, as investments fell
off and bills incr0ased by $144,000,000.

F E D E R A L R E S E R V E B 0 A R D.

X-3571

STATEMENT FOR THE PRESS.

For release in afternoon papers,
Saturday, Decembar 2, 1~22.

CONDITION OF THE ACCEPTANCE MARKET
OCTOBER 15 to NOYEMBER 15, 1922.
According to the reports received by the Federal
Reserve Board from the various Federal Reserve Banks the
acceptance ITarket showed little change in the larger markets
over the preceding period,

althou~1

improvement is noted in

some of the Districts wl1ich have a ·smaller volume of acceptance
business.

The further general advanca of rates, nevertheless,

has tended, on the whole, to broaden the market, increase purchases of bills, and bring the return on bills to a more attractive level.
The supply of bills in D1strict No. 2 (New York) showed
a substantial increase during the early part of the period
under review but subsequently fell off to such an extent that
the aggregate approximated that of the
were gradually advanced from

prece~ing

period.

Rates

3-5/8 at 3-7/8 bid and 3z offered

to 4-1/8 at 4! bid and 4.c: offered.

This aa.vanca led·to a some-

what broader demand and outside distribution increased about
per cent over that of the preceding month.

In District No. l

X-3571
(Boston) rates

were also advanced and both the su~ply of and demand

for bills increased.

In this District country banks are now buying

to a limited extent.

In District No. 3 (Philadelphia) rates were

advanced during the first part of the period and both the supply
and demand increased.

Later the narket became apathetic and the

supply exceedad the demand.
District No.

4 (Cleveland) after increasing the rates exper-

ienced only limited improvement.

In District No.

7 (Chicago) the

demand is reported to be poor and the supply of bills remains small,
due in some measure to the shortage of transportation facilities
for grain.

In District No. 12 (San Francisco) the volume of ac-

ceptances executed during October shows little change from that
for September, but the gradual increase in rates has tended to
widen the L;arket and include n:ore country banks.

Districts No. b

(Atlanta), No.8 (St. Louis), No. 10. (Kansas City) and No. 11 (D~llas),
all report an improved market.

In District No. 8 (St. Louis)

the betterment is accredited to the increase in rates, while in
District No. 10 (Kansas City), where the rate remains unchanged,
it is reported to be due to an increase in the movement of cotton,

wheat and f1 our.
In District No. 2 (New York) the bulk of acce)tances issued
were based upon the following comrr1odities, in order of their irnportance; cotton, grain, sugar, dollar exchange, metals and coffee.

(

(._

X-3571
-3Those against cotton and grain were in the lead by a
substantial margin.

In addition bills were executed in

other Districts against wheat, hides and skins, wool, raisins,
oil, silk, hemp, burlap and JUte, exportation of agricultural
impJ;ements, twine, paint and varnish, and the storage of
canned goods, crude rubber and fabric.
District No. 10 (Kansas City) reports bills moved
freely at offered rates, while

D~stricts

No. 2 (New York),

No.3 (Philadelphia), No. 7 (Chicago) and No.8 (St. Louis)
report the movement was not free.
Preference continues for 30 and 60 day maturities.
District No. 1 (Boston) reports a shortage of 30-day bills.
In District No.8; (St. Louis), however, tr1e best demand was
for 60 to 90 day bills, and in District No. 12 (San Francisco)
there was a contirued interest in the longer maturities.

the latter District the distribution of rraturities for the
past two periods was as follows:

Maturities
30-day
60-day
90-day
120-day
150-day
Rate~

October 15 to
November 15.
1L37o
14.2~~
63. 87~

6. 57o

4.27~

September 15
to October 1525 · 55o
21.67o
35· 97b
15- 07&
2.07o

on prime bills in various Districts were as follows:

·"'

X-3571

-4Rates on Prime Bills
Range during period
Bid
(lffercd

Maturity
District
No.1
(Boston)

30-day
60-day
90-day
120-day
150-day
180-day

District
No.3
' (Philadelphia)

30-day
District
60-day
No. 4
90-day
(Cleveland) 120-day
150-d.ay
180-d.ay

Offered

3-5/8 - 4

4-l/8

"
"

3i - 4-1/8
II

30-day 3-5/8 - 4!
11
District
60-day
II
No.2
90-da,y
(New York) 120-day 4 !' 4-3/8
II
150-day
180-day 4~ - 4-'J/8
30-day
60-day
90-day
120-day
150-d.ay
180-day

Close
Bid

32 - 4

4-1/8 - 4~
II

3-7/8 - 4

4-!- - 4-3/8

4 - 4~

4~
II

3i-n 4

4 - 4-1/3
II

32 - 4
3i - 4
II
3~ - 4
3-?/8 - 4-3/8 3-3/8 - 4-1/8
3t - 4;a
32 - 4-1/8
34 - 4-5-; 8
3z' - 44l

4~ - 4-5/8

4-1/S - 4~

3;l4 - 4).-'"" l
3-5/8 - 44

"
4-1/3 -

4-3/8
4-3/8 - 4-')/ 8

"
II

4-l/8
II

4!11

•
District
No.7
(Chicago)

30-day
60-day
90-day
120-day
150-d.ay
180-d.ay

3-5/8 - 4~
11

3i -

3i - 4-3/8

}4 - 47-5/8

3} - 4t

4-l/8 - 4t

1111

4-l/8 - 4-3/8
4-1/8 - 4~
4-l/8 - 4-5/8

4 - 4-l/8
4 - 4-!4 - 4-3/8

In the

X-3572

SUPERIOR COURT OF PENNSYLVANIA

) Nos. 232, 233, 2}4, Octob9r Term
( 1922 Appeals of Corn Exchange National
) Bank of Philadelphia, individually
( and as Guardian of Estates of Dudley
) B. Turner, Jr., and Edna Frisbie
( Turner, minors, from decree of
) Orphans' Court of Philadelphia County.

Estate of
EDNA FRISBIE TURNER

Nos. 99 and 100
Filed Nov. 23, 1922.
Opinion by LINN,

J.;

This appeal challenges the refusal to approve a national
bank as a fiduciary.

Approval was denied on the single ground that

the federal legislation
is

conferrin~

fiduciary powers on national banks

in contravention of ti:e law and established pract.ice of this

Commonwealth .. "
The question arose in distributing the estate of Edna
Frisbie Turner, deceased, letters testamentary having been granted in

1920.

Her minor children ware beneficiaries under her will.

1921 the court below appointed the Rittenhouse

~rust

Company, a cor-

poration of Pennsylvania, guardian of the estates of th<3 minors.
May

3, 1922 the account of the executors came on for adJudication.

It showed a balance for the minors.
tribution stated that since

it~

The executors• petition for dis-

appointment as guardian the Rittenhouse

Trust Company was conl'qrted into a national bank, and, thereafter was
consolidate~

into the Corn Exchange National Bank.

bank, as guardian, was therefore asked.

Distribution to the

X-3572

'"'2-

In referring to the subject, the; auditing judge said:

the rratter of the National Bank of Germantown, 30 District Rep. 603,
it appears that this court has rafused to recognize or approve national
banks for appointment as fiduciaries by this court.

It does not appear

that the merged corporation Corn Exchange National Bank - has been
approved by this court for appointment as a fiduciary.

~ne

award to

the Turner minors will therefore re made subJect to the mergad corpora"':'
tion being approved, and in the event of their failing to obtain the
approval of this court, the award will be payable to a succeeding
guardian when duly appointed and

qualified.,~

Accordingly the bank then filed a petition drawn pursuant
to the proper rule of court, setting forth its incorporation under the
national banking law, various facts concerning its management and assets,
and the consolidation with tile Rittenhouse National Bank, formerly the
Rittenhouse Trust Company; that it was authorized by the Federal Reserve
Board to transact a general fiduciary business; had complied with the
law of Pennsylvania. governing the transaction of such business; had
accepted the provisions of the Act of May 9, 1889, P. L. 159, and also
of the Act of May 20, 1921, P. L. 991, making itself subJect to supervision and examination by the Banking Departrr.ent of Pennsylvania the
same as corporations of Pennsylvania.

A number of evidential exhibits

were attached to the petition, among them a stipulation under rule 21,
by which the applicant "hereby stipulates and undertakes irrevocably
that securities and other property received by the corporation both in
a fiduciary capacity and from the person or persons for whom it is

-3-

X-3572

surety shall not be taken out of the jurisdiction of the Court and
shall be kept separate and apart from all money, securities and
property of the said Bank so that the same can at all times be easily
identified as belonging to the estate of the person or persons for
whose account the same has been received, and that the trust funds
received by said Ban1: either as fiduciary or for the person or persons
for whom it is surety shall be deposited in a separate account in a
Bank or Banks or Trust Company or Trust Companies other than said
Corn Exchange National Bank of Philadelphia, of good standing in
Philadelphia County. 11
On the same day the petition was refused for reasons previously given in the case of ti.1e National Bank of GermantoJVn (supra).
From that refusal this appeal, to No. 232, October Term 1922, was
taken.
Three days later, the ban}., as guardian of the estates of
the childr<Om, filed anot.ner petition setting forth that pursuant to
11

the adJudication of the executors 1 account, its petition for approval

as fiduciary under rule 21 had been filed and dismissed; that it was
advised by counsel that by specified acts of Congress with the approval
of the Federal Reserve Board, it was authorized to trar.. sact a fiduciary
business, and having accepted the provisions of applicable state law
specified, it was "fully quahfied and a'.1thorized to continue to act
as

~ardiah

of the

estate~

of Dualey B. Turner, Jr., and Edna Frisbie

Turner, minors, and in all ot:her fiduciary capacities, and that the
dismissal of the petition for approval under Rule 21 ·.. was without

-4legal justification or authority. 11

X-3572
Petitioner asked. for an order

t1irecting the executors ,.to pay to it as guardian of the estate of the
ndnors, the money awarded to them by the adjudication.

supplemen-

tal adJUdication, this petition was dismissed for the reasons previously
given.

Exceptions to these adJudications were then filed; after they

were dismissed, two appeals were taken, one by the bank as guardian,
the other individually (Nos. 233 and 234, October Term 1922).
appeals were

ar~ued

The

together and shall be so disposed of.

As no particular or special obJeCtion to

petitione~

is made,

we need consiQ.er in the· light of tile record the problem as thus stated
by the court below:

"The question is, therefore, raised as to whether

this court should approve them (national bar.Ucs) for appointment in
fiduciary capacities and accept

t~3m

as surety.

We should approve

them unless the federal acts are in contravention of the law and established practice of this Comnonwealth 11 :

In re National

~ank

Germantown, 30 District Reports, b03·
The Act of Congress approved December 13, 1913 enacted that
"T'ne Federal Reserve

~oard

shall be authorized and empowered • • .

(k) to grant by special permit to national banks applying therefor
when not in contravention of State or local law, the right to act as
trustee, executor, administrator, or registrar of stocks and bonds
under such rules and regulations as the said Board may prescribe. 11
(c. 6, sec. 11, par. k. 3g Stats. 211; U. S. Comp. Stats. 1918, s.

9794)..

Later some definition of the words "In contravention of state

X-3572

-5-

or local law" became desirable, and wa.s supplied lly an d.I!lendment of

967, U. S. Comp. Stats. 1913 Suppl.

SJptember 26, 1918 (4J Stats.

9497 k).

It was as follov•s:

(k) To grant by special permit to

national barks applying therefor, when not in contravention of
State or local law, the right to act as trustee, executor, administrator. registrar of stocl:s and bonds, guardians of estat:ls,
assignee, recaiver, committee ·of estat2s of lunatics, or in any
other fiduc1ary capacity in wh1ch State banks. trust com_panies
or other corporations which coroo into

com~etition

with national

banks are permi tt<Jd to act under tue laws of trw State in which the
national bank is located.
11

VV:'1anever the laws of

~uch

State authorize or parmi t the

exercise of any or all of the foregoing powers by State banks,
trust companies, or other corporations w:1ich compete with national
banks, the granting to and the exercise of such powers by national
banks shall not be deemed to be in contravention of State or local
law within the meaning of this Act.
~ational

banks exercising any or all of the powers enumerated

in this subsection shall segregate all assets neld in any fiduciary
capacity from the general assets of tha bank and shall keep a separate
set of books and records showing in proper detail all transactions
engaged in under authority of this subsection.

Such books and records

shall ba open to inspection by the State authorities to th-e same extent
as tha books and records of corporations organized under State law which
e~ercise fiduciary powers, but nothing in t1.is Act shall oe construed as
authorizing the State authorities to examine the books, records and assets
of the national banl.-'. which are not held in trust under authcri ty of this
subsection.

- G-

X-3572

"No national bank shall receive in its Trust Department
deposits of current funds subject to Check or the deposit of checks,
drafts, bills of exchange or other items for collection or exchange
purposes.

Funds deposited or held in trust by thB bank awaiting

investment shall be carried in a separate account and shall not be
used by the bank in the conduct of its business unless it shall first
set aside in the trust department United States bonds or other
securities approved by the

Federal Reserve Board.

"In the event of the failure of such bank the owners of
the funds held in trust for investment shall ha.ve a lien on the
bonds or other securities so set apart in addition to their claim
against the estate of the bank.
"Whenever the laws of a State require corporations acting
in a fiduciary capacity to deposit securities with the State authorities, for the protection of private or court trusts, national banks
so acting shall be required to make similar deposits and securities
so deposited shall be held for the protection of private or court
trusts, as provided by the State law.
11 ~Tational

banks in such cases shall not be required to

execute the coni usually required of individuals if State corporations
under similar circurr.stances are exempt from this requirement.
11

National banks sP.all have the power to execute such bond

when so required by the laws of the State.
"In any case in which the laws of a State require that a
corporation

actin~

as trustee, executor, administrator, or in any

••
- 7-

.X-357~

capacity sepecified in this sectiqn, shall take an oath or make
an affidavit, the president, vice-prebident, cashier or trust
officer of such national bank may ta.k.e the necessary oath or
execute the ne oossary affidavit.
"It shall be unlawful for any national banking association to lend any officer, director or employee any funds held in
trust under the powers conferred by this section.

Any officer,

director, or employee making such loan, or to whom such loan is
made, may be fined not. more than $5,000 or imprisoned not more.than
five years, or may be both fined and imprisoned, in the discretion
of the Court.
"In passing upon applications for permission to exercise
the powers enumerated in this subsection, the Federal Reserve Board
my take into consideration the ar;;ount of capital and surplus of the
applying bank, whether or not such capital and surplus is sufficient
under the circumstances of the case, the needs of the community to
be served and any other facts and circumstances that seem to 1t proper,
and rmy grant or refuse the applic?..tion according}.y; Provided, that
..

no permit shall be issued by aqy national banking association having
a capital and surplus les(3 than the capital and surplus required by
State law of State banks, trust companies and corporations exercising
f

such powers."
Since

Con~ress

has provided that if the state

la~

authorize

or permit the exercise of •.••. (guardianship) by state banks, trust
companies or

othe~ c~rporations w~ich

compete with national banks"

.# C?f)~

.k··~·-N

X-3572

·8-

the granting to and the exercise of such powers by national ba."lks
shall not be deemed to be in contravention of State or local law
within the meaning of this actn, the decision of these appeals rrust
depend on whether Pennsylvania permits such competing

co~porations

to act in that capacity; if the state law so provides, the national
bank must be per-mitted to enjoy fiduciary powers.

As f arnil iar

state laws confer that power on such corporations, the learned
court below misinterpr3ted the acts of Congress in holding them
to be in contravantion of the state law.
The federal legislation is constitutional, First National
:Bank v. Fellows, 244

S. 416, and the congressional power is plenary.

Except as Congress permits, a state cannot stand in t!.e way of corporate
activjty so authorized by Congress; such auti1ority

confer~

imraxnity

from state interference legislative or judicial; N.P.R. Co. vs. North
Dakota, 250

u. S. 135

and Telephone Co. v- South Dakota,

250 U. S.

163; Second Employers' Liability Cases, 223 U. S. l; P. & R. Rwy.
Co. v. Polk, 256 U. S. 332, 335·
The effect of the

amen~nt

of 1918 on the act of 1913,

as a mere rearrangement of the words will show, was to authorize the
Federal Reserve :Board to grant by special permit to national banks
applying therefor, (having the required
the right to act in

11 capi tal

and surplus" supra) ,

fiduciary capacity in which state banks or

other corporations which come into competition with national banka
are permit ted to act unde 1' tha laws of the s ta. te in which the
national bank is located, whenever the laws of such state authorize

(

- 9-

X-3572

or permit the exercise of any or all sucp powers by_state banks
or other corporations competing with
gtessional definition or

natio~Al ba~~s.

determinatio~

The con-

of what shall not be con-

sidered in contravention of state law, for the purposes of the
enactment, takes no account of the fact that details of adminis ·
tration in the federal system may or may not differ from administrative matters prescribed in the state system.
the aole

,iud~e

Con~ress

was

of the means appropriate to the end to be accomplish-

ed by the exercise of tbis additional power conferred on national
banks; Congress knew that

throughout the states, widely divergent

systems of fiduciary law prevailEd.

The administrative differences

in which the court below found decisive conflict between state and
federal law ~ay be important elements in the competition for business and in the market may or may not operate in favor of the state
corporations, but these differences in themselves, are not sufficient to deprive a national bank of the enjoym&nt of fiduciary
powers, and :particularly is that so in the circumstances disclosed
by this record.

See First National Bank v. Fellows, (supra);

People v. Russell,

283 Ill. 520 compared with the prior decision

of the srune court in People v. Brady,

271 Ill. 100; Woodbury's

Appeal, 73 N. H.

50; Hamilton v. State, 94 Conn. 643; Stanchfield's

Estate, 171 VTis.

553; In re Mollineaux, 179 N. Y. Supp. 90; Fidelity,

etc. Trust Company v. Enrig;ht,
The first reason

264 Fed. 236.

~iven

to support its conclusion that the

federal statute was in contravention of the state law, was based on

- 10compa~ison

X-3572

of provisions of the two systems concerning the_ deposit

of trust funds.

The federal provision has been quoted.

state, the Acts of May 9, 1839, P. L. 159 and June

For the

27, 1895 P. L.

402, provide that such "companies shall keep all trust funds and
investments separate and apart from the assets of the companies
and all investments made by the said companies as fiduciaries

shall be so designated as that the trust to which such investments
shall belong shall be clearly kno,v.n."

In addition, we_ are ad-

vised, the state banking department requires trust funds to be
deposited in a separtl.te

bank~

The Acts

Congress and the

state laws are not alike but a difference in permitted corporate
ma.naQ:ement does not establish that the federal statute is in contravention of the state law, in the light of the explicit congressional
definition of those words, and the difference is further unimportant
in the decision of this case, because the record shows; that petition-,
'er .has agreed to comply with the state law on the subje ct.

The

petition also contains a stipulation whereby petitioner irrevocably
covenants with the court below pursuant to rule 21, that it \vill
not remove securities or other property by it held in a fi.duciary
capacity out of the jurisdiction of the court and that it will
deposit trust funds in a separate account with another bank or
tru.st company ..
The second point of alleged conflict the court found by
comparing the part of section 11 k, (supra) authorizing examination
by state examiners of the affairs of a national bank, with the state

••

•
.Jt__.·

X-3572

- 11 -

law of May 21, 1919, P. L. 209, provi:lin~ in section 14 (a) for
by state exeminers; but th_; record sho"'·s that petitioner

ex~ination

has stipulated both with the court and with th·s state bankinp; department that the state banking dep,">rtment shall make like examination of all its property and assets as

is made in ths case of

The record also sho;rvs that petitionar has filed a

state banks.

stipulation with the banking department to be and remain subject
to supervision by the.t cl.epartment to the same e:-:tent as state corporations pursuant to the Act of May 20, 1921, ?. L.

~Jl,

entitled

"Restricting the appointmant of corporate fiduciaries by testators
or by any court or register of wills to corporations fully subject
to supervision and examination by the

bankin~

department. 11

The learned court belo•·r found its third conflict "in the
case of insolvency or suspension of a national bank".
law provides

tho~t

The federal

in such cases the Comptroller of the Currency

appoint a receiver who, under the dj,rection of the Comptroller shall
take possession, administer, etc. pursuant to appropriate jildicial
action.

The practice has

lon~

prevailed and is well understood.

The court remar¥-s that such receiver ••rill not be under the control
of th.:; state courts.
the federal court

But, <:>,s to

supervisin~

th"~

court below, it would seem that

a receivership under the national

bankinP: la,v, is neithEor mor<: nor less foreign than a state court
supervising a receiver appointed by the bankinP: commissioner administering the affairs of a state bank pursuant to state law.
It

\VoaS

for

Con~ress

to deterrrine whether the details of

Ct30··..
--~

- 12 -

X-3572

corporate management prescribed by it were better adapted for the
exercise of the plenary federal power it desired exerted, tr..an other
methods of corporate administration

effecti~e

in the states, but

its provisions for the conduct of business or the administration
in insolvency, though different from the state system, cannot be
regarded as in contravention of state law

~'Jithin th~

terms of the

amendment of 1918.
The oriers appealed from are reversed and the record remitted with instructions to entar an order consistent with this
opinion.

Porter, J. dissents.
Gawthrop J. , did not hear the argument and did not
participate in the decision.

FEDERAL RESERVE BOARD
WASHINGTON

X-3573
December l, 1922.
SUBJECT:

Payment of Gold Coin.

Dear Sir:
The Federal Reserve Board desires to ascertain
what policy the Federal Reserve Banks ara followin~ this
year with reference to payment of e:;old coins for holiday
purposes.
A letter receivao. from the Undersecretary of
the Tr0asury states that in so far as the Treasury is concerned, there is no objection whatever to such payments
and expresses the opinion that it would be the best policy
to make such payments freely without question. The Undersecretary furthar states that the Treasurer of the United
States has been ~iven instructions to this effect, and that
the Treasury Department feels that it is highly desirable
that the policy in this respect be uniform.
T'ne Board
concurs in the views of the Undersecretary of the Treasury
as outlined above.
By oro.er of the Federal Reserve Boaru.
Very truly your3,

Wm. W. Roxton,
. Secretary.

To all Governors of Federal Reserve Banks.

FEDERAL RESERVE BOARD
WASHINGTON

7,
X-3,77.-

December

SUBJECT: Bank Debits - Inclusion of Debits by :Banks in
Non-clearing Bouse Centers in Board 1 s PubliShed
Statement ..

Dear Sir:
The Federal Reserve Board bas given oonsideration

to the replies received in response to its letter X•3550
of November 2 on the abO\te subjeet, and has concluded that
the si tua.tion for the country as a Vlhole should be carefully studied before any material changes are made in the
present list of reporting centers. .Accordingly a careful
survey will be made of this statement with the object of
determining which sa ctions of the country should be more
adequately represented and which cities in those sections
are the most important from an industrial or agricultural
standpoint, and as soon as it is completed you will be
advised of the conclusions reached by the :Board.

In the meantime 1 in case you have a:ny information
in your possession, in add.i tion to that given in your
reply to the :Board's letter X-}550, which would be of
assistance in determining what adaitional cities, if any,
should be added to the list in order to make it representative of conditions in your district, we shall be very
glad. to hear from you.
Very truly yours,

Walter L • Eddy,
Assistant Secretary.
"'e.tter to be sent to
All Federal Reserve Agents.

1922.

FEDERAL RESERVE BOARD
WASHINGTON

December B, 1922.

X-3578 ·
SUBJECT: "Reserve Ratio Questwnnaire 11 from the New York

University.
Dear.Sir:
The Federal Reserve Board has received from one of the
Federal Reserve

:Bar~:s

a copy of a letter from the Bureau of

Business Research of the New
Ratio Q.uestionr.aire 11 •

Yorl~

University enclosing a "Reserve

This letter ap.i:'ears to be a circular letter

and presuwably sent to all Federal Reserve Bacl:s.

In case you

have received or shall receive this letter and questionnaire asking
for a.n expression of opinion with reference to reserve ratios I
am directed by the Board to advise you that the Board deems that
a discussion for publication of the kind indicated by the question-

naire, on the part of officers of the Federal Reserve Banks, is
inadvisable.
This is written without any assumption, of course, that
you, or anyone in your bank, would undertake to answer the questions
propounded by the New York University in the form in which they
appear, .
By order of the Federal Reserve Board.
Very truly yours,

vvM. w. HOXTON ,
Secretary .
.i.'V

.ALL FEDERAL R!:Sl:RVE AGENTS OF J..LL FEDERAL RESERVE BANKS .

•

FEDERAL RESERVE BOARD
WASHINGTON

•

December 8, 1922.

X-3579·
SUBJECT: Penalti::ls for Deficiencies in Reserves of Member :Banks.
Dear Sir:

· An examination of the files of the Federal Reserve :Board
indicate.s that there is lack of uniformity in the manner in which
penalties are assessed on deficiencies in reserves of member banks
by ,the eight Federal Reserve .Danks which have adopted progressive
penal·ty rates. With a view of bringing about uniformity of practice in the ap_.lication of penalty rates, the Board has approved
the rules indicated below, which will become effective as of
January i, 1923 •
·Vfuile the Federal Reserve noard is not disposed to rule
that progressive penalty rates shall be applied in all districts,
preferring, for the time being at least, to leave the matter to
the judgment of ·the board of directors of each bank, it believes
that unless i t can be shown that the application of a flat penalty
rate of 2% above the discount rate on ninety-day commercial paper
is as effective as would be the applicati·on of progressive penalty
rates, the progressive penalty rate plan should be adopted.
RULES QOVERNING APPLICATION .OF PENALTY RATES

1. Deficiencies in reserve balances of memb~r· banks in
reserve and reserve cities will be computed on the basis
of average daily net deposit balances covering a weekly period of
7 days. 'Deficiencies in reserve balances of country banks will be
computed on the basis of average daily net deposit balances
covering a semi-monthly period.
centr~l

2, Penal ties for deficiencies in reserves will be assessed
monthly on the basis of average daily deficiencies during each of
·the reserve computation periods ending in the preceding month.

3. A basic rate pf 2 par c..;nt par annum above the Federal

-2R<3serve Bank diBcount r.tta on 90-a.ay con:mercial pa.}ler will be
assessad as a penalty on deflciencigs in reserves. of member ban:.s.

4. YJben a member bank in a central reserve or reserve
city·has had an a.verage deficiancy in r;;serves for six consecutive
weekly periods, a progressive penalty, .increasinb at the rate of
1/4 ofl per cent for each week thoreafter during which the average r0serve ba'i..ance is deficient, will be assessed on weekly deficiencies until the requirea. reserve has been restored and maintained for four consecutj.ve we.skly periods, prcvided that the
rnaxirnum penalty churged will not exceed 10 per cent.

5. 1 ~1l1en a member bank outs ide of a central reserve or
reserve city has llaa. an avarage def~ciency in reserves for three
consecutive semi-monthly periods, a progressive penalty, increasing at the rate of 1/2 of l per cent for each half-month
thereafter during which the average reserve balance is deficient,
will be :tssessed on semi-rr:onthly d.efici . mcies until the required
reserve has been restored and. maintained for two consecutive semimonthly pariods, provia.ed th..:.tt the maximum penalty charged will
not exceed 10 per cent.
Member banLs in central reserve OT reserve cities which
have beendeficient in ref:.ierves for six consecutive weeks, and
member banl;_s outside of central reserve or reserve cities which
have been deficient in reserves for three consecutive semi-monthly
periods, should be promptly advised that their reserves have been
continuously below rGquirements for an undue period. Federal Reserve Banks which apply progressive penalty rates should also call
the attention of such banLs to the fact th.::i.t unless reserves are
restored and rr.aintained as required b~r law i,rogressive penalty
rates will be assessed.
The Bo~rd's letter St. 30?7 of September 26, 1922,
authorized the discontinuance of detailed reports cc.~.lled for in
its letter X-3040 of February 4, 1921. In order, however, that
the Board may ba advised in regard to any member banl: that persistently fails to maintain 1ts legally required reserve> it is requested that a quarterly report be submitted by each Federal Reserva
:bank covering only those banks again.>t which the maximum p:rogressive rate of 10 per cent has been assessed or would be assessed

-3tmder tha above rules if progressive penalty rates were in force.
The reports subm tted to the Comptroller of the Currency and the
Chief National 3ank ,Examiner should relate only to National Banks,
while the report to the Federal Reserve ~oard should cover· all
member banks. A copy of that vart of the report relating to State
banks a~d trust companies should be submitted to the appropriate
State nanking Department callin6 attention to the fact that the
State banks and trust companies in question have been persistantly
deficient in their legally required reserves.
By ordar of the Federal Reserve 3oard.
Vary truly yours,

WM. 'V. ROXTON,

Sacretary.
Letter to be sent to
Chairman ·at each Federal Resdrve

Bar~.

FEDERAL RESERVE 30AP~
FOR THE PRESS.

STAT~~T

December 11, 1922.
~or

X-3580.

Immediate Release,

The following named gentlerr~n have been appointed by the Federal
Reserve :Board to serve as Class "C" Directors, for a tarm of three
years each, beginning January 1, 1923, on the :Board of Directors of
the Federal Reserve Banl:s indicatad:
Jesse H. Metcalf, Providence, R. I.,
Federal R~sarve :Bank of Boston.
Pierre Jay, New York City,
Federal Reserve Bank of New York.
H. B. Thompson, Wilmington, Delaware,
Federal Reserve Bank of Philadelphia.
L. B. Williams, Cleveland, Ohio,
Federal Reserve 2ank of Cleveland.

H. Kettig, :Birmingham, Alabama,·
Federal Reserve Bank of Atlanta. ·

F. c. Ball, Muncie, Indiana,
Federal Reserve Bapk of

Chica~;;o.

c. P. J, Mooney, Memphis, Tenn.,
Federal Reserve Bank of St. Louis.
George W. McCormick, Menominea, Mich.
Federal Reserve Bank of Minneapo:is.

Fred 0. Roof, Denver, Colorado,
Federal Reserve :Bank of Kansas_City.
William Sproule, s~ Francisco, Calif.
Federal Reserve Bank of San Francisco.

At a later date the Board will announce the name of its appointee
to serve for a three year term as Class 11 C11 Director on the Board of
Directors of the Federal Reserve ~nk of Dallas, Texas. The unexpired

f .• ('

-2term of the late w. F. Ramsey as Class ncn Director of the Federal
Reserve Bank of Dallas has been filled by appointment of Mr. Clarence
E. Linz, of Dallas. Mr. Linz 1 term expires Decerr.ber 31, 1923. ·
The Board, at a later date, will .also announce the name of its
appointee to serve for a term of three yaars as Class 11 C" Director
of the Federal Reserve l:ian1:.. of Richmond.
The Federal Reserve Board has designated the following named
Class "C" Directors to succeed t:t.emsel ves for a term of one year as
Federal Reserve Agent and Chairman of the Eoard of Directors of the
Federal Reserve Ba!ll:s indicated:
F. H. Curtiss, Federal Reserve Hank of :Gaston
Pierre Jay,

New York

R. L. Austin,

Philadelphia

Cl8veland

Caldwell Hardy,

Richmond

J. A. McCord,

II •

Atlanta

Wm. A. Heath,

Chicago

Wm. McC. Ilflartin,

St. Louis

John H. Rich,

Minneapolis

Asa E. Ramsay,

"
"

Kansas City

John Perrin,

San Francisco

Wills,

·-

T.he Federal Reserve Board will, at a later date, announce the
name of the Class "C" Director desi 6nated as Federal Reserve Agent
and Chairman •f the Board of Directors of the Federal Reserve Bank
of Dallas, Texas.

...

FEDERAL RESERVE BOARD
WASHINGTON

X-3581
Dece::nbe r 12, 1922.

SU~JECT:

ScheQule of Federal Reserve Lank Personnel for 1922
Annual Report.

Dear Sir:
For use in the forthcominG 1922 annual report of the
Federal Reserve Eoard, it is requested that as so~n after January
1, 1923 as practicable you furnish the Loard with a statement
relating to the personnel of your bank (includin6 branches, if any),
corresponding in form to the tables printed on paGes 334 - 336 of
the Board 1 s report for 1921, showin0 fi 6 ures as at close of business
on December 31, 1921 and Decer:1ber 30, 1922.
Tne statement should
not take account of chan~es in either the.nurnber or salarie~ of
officers or employees that are to be rra.de on January 1, 1923. In
determinin 6 'hhether or not a (.;.iven individual should be 1istad as
an officer or as an employee the Loard 1 s letter X-3532 of October
5, 1922 Ghould be used as a 6 uide.
It is assumed that the fiGures for December 30, 1922,
will ~mount practically to a recapitulation of the statement as of
December 1, 1922, which will b9 prepared in response to the Board's
letter X-3532, except in so far as changes in personnel may be
made between December 1 and December 30.
In this connection i t is requested that after the statement has been compiled the figures for 1921 be compand with those
printed on pa6 es 334- 336 of tLe Loardls annual raport for 1921
in order that differences, if any, may be reconciled before the
statement is for'Narded to the Board.
Very truly yours,

Walter L. Eddy,
Assistant Secretary.

T.aetter to all Chairmen.

FEDERAL RESERVE BOARD
WASHINGTON

X-3582

December 12, 1922·.
SUJ3JECT:

Econotey and Efficiency in Federal Reserve Banks.

Dear Sir:
The ~oard 1 s Committee on Economy and Efficiency has forwarded to you, as ~nairman of tne ~oard of Directors of your Bank,
regularly each month since July la~t a copy of the exhibit (based on
Schedule E) showing costs of operating each function and expense unit
at each Federal Reserve Bank and branch, together with the number of
officers and employeas in each e~pense unit and the number of units
handled wherever i t has been found practica.bla t9 maasure the volume
of work.
It has also kept the Banks inforrr~d. by letter and otherwise. of the general progress and program of ti1e Corrmittee t s work.
In pursuance of this practice 1 this letter is being sent to inform
the officers of your Bank of the present status of the Comnittee 1 s
work and of the Committee's further plans for prQmOting the development of economical and efficient methods of operating the Federal
Reserve l3anks.

I.
Schedule E was set up as a preliminary fact finding survey
of costs of bperation in the different Federal Reserve Banks, and as
the surest meth~ of providin~ a secure foundation for such further
and detailed studies of oparating effici~ncy as the Committee, in the
pursuit of this work, mig..'-lt have to make. It was also the belief of
the Comrndttee that Schedule E would aupply the best starting-point for
the gradual working out of improved methods of Federal Eeserve Bank
organization and operation.
It is realized by the Committee that Schedule E does not
yet :present figures for the various baru:s on Q.n absolutely comparable
basis.
This is mainly due to so~e misunderstandings of the Manual
of Instructions which are in :process of being cleared up. It is the
Committee•s belief that when the Manual of Instructions is revised in
accordance with what has been learned in the last five months of the
•perating organization and practices of the Reserve Banks, Schedule E
Will be so nearly accurate that the figures thenceforth given by the
various banks will "be fairly comparable when considered in connection
with modifying local factors. and wiU be of the greatest value in
assisting the work of t~e Comnittee.

-2-

X-3552

that
The Board's Corrmitt~a understandsjthe Procedure Committees
in the s2veral Federal Reserve Banks have been giving careful thought
to the operating methods of ea.ch of the departments of the Banks, and
judging from reports received from them, the :Banks have been greatly
aidad in thair work by the exhibits showing comparative costs; and it
appears that considerabl~ economies already have been effected in costs
of operation in sorr:e of the 3anr~s.

.......,,_,

The figures already assewbled under Schedule E indicate
differences in the unit cost ( tl1ese differences being considerable in
some cases) with which t~e same function is being performed in the
different .Banks,
The figures do not, however, disclose to what these
differences way be due; - whetner to (1) different degrees of operating
efflciency, or (2) to differences in the amount and character of services rendered, or (3) to peculiar local conditions. To this aspect
of the work the Committee now proposas to direct systeiTatic attention.

Il.
With a view to further improving the qomparability of the
reports novv being receivad, so that each :Ban}: shall be enabled to
make more conclusive comparisons betwean operating costs in its Bank
and corresr~onding costs in ot~1er l1sserve Eani:~s, and. also for the purpose of otherwise carrying forward the work of econornw and efficiency
in the Federal Reserve System, Lee Com-:.ittee nas called a conference
of representatives from the Reserve :Banks to be held at the Federal
Reserve Bank of Cbicago on December l}t:-:. and the following days.
It 1s expected that the representatives of the Banks at this
conference will correprepared to givo detailed stat~ffients with regard
to the work performed fn each expense unit of their respective 3anks,
and that with such data before it, the conference will be in a position
to perfect the system of r-:;porting under Schedule E so tta,t in the
future the expenses reported in any er_t)ense unit in a e,iven Bank will
represent the cost of performing the same character of work ti:-J.at like
costs represent in other Banks.
The Committee has, however, never expected that Schedule E, even
in its perfacted form, would of itself accomplish all that was aimed at
in promoting operating organization and economy in the Banks. Schodule E
represents only the first step in the Com-:.ittee 1 s program. It i3 therefore intended at the forthcoraing Chicago conference, without waiting
until the work of perfecting Schedule E is completed and perfected data
have become available, to proceed to the develol:'ment of plans for the
detailed and intensive study of the more important functions in the operation of t£-.e Ban:ks, with a view of finding the best methods of performing
those functions. It is the belief of the Committee that thero is prob3hly
no one n:ethod of performing any one of the major functions of tha :Bar.ks
whicr. could in a practicable sense be regarded as 11best 11 for a.ll of the,
twalve Banks. The preliminary surveys already made show that opera tin,;
organization and rr.ethods must be modified in accordance with the volnrr?·

'
X-3582

-3-

and character of the business, ·the area and transportation conditions in
each District, the number of member and non-member Banks, and other factors.
With these considerations in mind, the Committee proposes that the
Banks shall be grouped and that in each group shall be placed t:1ose which
are most nearly comparable with raspect to each of the major functions performed by the Banks. In order to expedite the solution of this problem of
grouping, the Committee has made a tentative plan of grouping the Banks,
copy of which is herewith enclosed. The criticisms and suggestions of
yourself and of the Governor of your ]ank.~ as to this Il'.atter of grouping
are invited, and it is hoped that they rn9¥ be ex~ressed through the representative of your Lank at the forthcoming Chicago conference•
III.

When the grouping is completed, it is proposed that each group of
Danks shall have a committee on each of the four major functions of the
Eanks, and that each Eank shall be represented on its respective functional
group comrr~ttees. The Committee therefore requests that the representative
of your ]ank at the Chicago conference shall be instructed or authorized by
the Governor to na.n:e the Npresentative of your :Baru;: on each one of these
functional group committees.
Prom the membership of each of the committees thus constitutad, the
Board's Committee will name a chairman, with whom it will advise and to
whom it will look for the prorr;;>t and thorough performance of the work of
his committee. In order that such detailed investigaticn as will be necessary for these committees to make may be made promptly and go forward
without delay, it is requested that the Chairman of the Procedure or
Economy Committee in eaCh Bank keep in close touch with the work of the
representative of his Eank on eac:·. . committee.
The method of proceeding with the work of econorr.w and efficiency thus
outlined has been adopted only after very full consideration and in the
belief that everything considered, it will prove a satisfactory method and
produce rasults with a minimum of friction and suspicion.
~ne Comrr~ttee
gladly acknowledges its indeotedness to the officers of the Baru~s for the
cooperation whiCh has been extended, and is glad tr~t a point has been
reached vklere the tedious process of assembling figures will soon be translated into important results.
Very truly yours 1

(Enclosure)

Chairman, Committee an
Economy and Efficiency.

To· Chairmen of all Federal Reserve Banks .
Copies to Governors.

.. ,

X- 3532a

SUGGESTED Gli.CUPIHGS OF B..UJi\:S FOR DET;\ILED STUDY
OF FUNCTIOlT.\L OP~.:<:R:iTIONS r.'I TH .;, VIEi'! TO DEr:L'EK1INING
BES'I' !1E1'YIODS OF CONDUCTING S.~T'lE.

.ACCOUHrHTG FUNCTION.

New Yorl:, Philadalphia, Cleveland.
Bo~tcn, Richmond, .Atlanta, St. Louis, Dall~s.
Chicac:c, Minneapolis, Kmsas City, San J:<'r::mcisco.

The basis for this grouping is prirrarily the number of
rr,err.b er banks ,

2•

CURRENCY x'\ND CO IN •
1.
2.

3·

Boston, New York, Philadelphia, Chicago.
Cleveland, Richmond, St. Louis, Ivlinneapolis.
Atlanta, ~~ansas City, Dallas, San FrancL;co.

The basis on ·which t:1e.oe banks are grouped is volume of
bills received or deposited.

3·

LOANS, REDISCOUl\TTS AND INVEST!·.1ENTS.
1.

3·

Boston, NeN York, Philadelphia, Cleveland.
Richmond, Atlanta, Dallas, St. Louis.
Chicago, Minneapolis, Kansas City, San F'rctncisco.

The basis on which these banks are t;rouped is ci:12LlCt::lr
and kind of business within district.

TRANSIT PJJD COLLECTIONS

1.
2.

Boston, New York, Philadelphia, Cleveland.
Chicac;o, St. Louis, Minneapolis, "2\:omsas City.
Richmond, Atlanta, Dallas, San Francisco •

This groupinc:; is based upon the similarity of conditions
and the total number of banks in district.

X-3583

TREl.!.SURY .D"£?4RT11ENT
Office of the SEcretary.
W4SHINGTON
December 9, 1922,
The Governor
Federal Reserve Board.
Sir:
You are hereby advised that the Department has referred to the
Generul

~ccounting

0ffice, Treasury

Dep~tment

Division, for settle-

ment, the account of the Bureau of Engraving and ?rinting for preparing Federal Reserve notes during the period November 1 to November 30,
1922, amounting to $95,798.00, as follows:

Federal Reserve Notes, 1914

.iQ

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Llinneapolis
Kansas City
Dallas
San Francisco

173,000
248,000
71:,000
26,000
55,000
138,000
l :3 '0()()
107,000
90,000
50,000
95 '000
153,0LJO
1,219,000

~10

146,000

taa,ooo

7,000
25,000
4,000
42,000

20,000
25,000

Total
319,000
456,000
78,000
76,000
59'~000

13,000
18,000
5,000
8,000
56,000

19,000
13,000
13,000
19,000
.36 ,00{)

204,000
13,000
J.39 ,000
121,000
68,000
122,00()
245,000

512,000

169,000

1,900,000

1,900,000 sheets at 050.42 per 1i.

k20

24,000

. . . . . . . . . . . Ill

4;;95,798.00

.....

X-3583

- 2 -

The charges against the several Federal Reserve Banks are as follows:
SHeets
Boston
319,000
Hew York
456,000
Philadelphia 78,000
C1e~e1and.
76 ,ooo
Richmond
59,0C(.J
atlanta
204,000
Chicago
13,000
St. Louis
139,000
Minneapolis 121,000
Kansas City
68,000
Dallas
122,000
San Francisco24§;000

Com,Eensat ion

Plate
Printing
l;p5, 088 .o 5
7,273.20
1,244.10
1,212.20
941.05
3,253,80
207.35

Materials

Inc.Compensation

Total

1,929.95
1,084.60
1,945.90
3,907.75

5,795.76
991.38
965.96
749.89
2,592.84
165.23
1,766.69
1,537.91
864.28
l' 550.62
3,113.95

$1,556.72
2,225.28
380.64
370.88
287.92
995.52
63.44
678.32
590.48
331.84
595.36
;!_,195.60

$16,083.98
22,991.52
3,932.76
3,831.92
2,974.78
10,285.68
655.46
7,008.38
6,100.82
3,428.56
6,151.24
12,352.90

1,900,000 $32,072.00 $ 30,305.00

i24,149,0U

~9,272.00

$95,798.00

~5,384.72

7,697.28
1,316.64
1,282.88
995.92
3,443.52
219.44
2,346.32
2,042.48
1,147.84
2,059.36
4,1.35.6~

2,217~05

The Bureau appropriations will be
indefinite appropriation

.~?reparation

~4,054.49

re~bursed

in the above amount from the

and Issue of Federal Reserve Notes, Re-

imbursable", and it is r~quested that your Board cause such indefinite appropriation to be reimbursed in like amount.
RespectfUlly,
(Signed)

J~cobs,

Deputy Commissioner.

(

FEDERAL RESERVE BOARD
WASHINGTON

December 13, 1922.

X-3584

SUBJECT:

.Annual :Judgets

Dear Sir:
vy order of the Federal Reserve :Joard,
I am directed to advise you that, beginning with the

year 1923, all Federal Reserve Agents will be required
to submit to the Federal Reserve :iJoard an annual
budget covering all the estirrated expenses of those
d.epartrr,ents in t:oe Federal Reserve .Banks vvnich are
under t~e jurisdiction of tr. e Federal Reserve Agents.
You are requested to accompany this budget with full
information as to the basis upon which the estimates
are made.
Very truly yours,

Wm. W. Ho;~ton,
Secretary.

Letter to all Agants.

FEDERAL RESERVE BOARD
WASHINGTON

X-3585
December 14, 1922.
SUBJECT:

Expense Main Line, Leased Wire System, November, 1922.

Dear Sir:
Enclosed herewith you will fin4 two mimeograph statements, X-3585a and X-3585b, covering in d.eta.il operations of
the main line, Leased Wire System, during the month of November,
1922.
Please credit the amount peya.ble by your bank in the
account, Treasurer, u. s., ori your books, and issue
C/D Form 1, National :3ank~, for account of "Salaries and Expenses, Feciera.l Reserve :i3oa.rd., Special Fund 11 , Leased Wire
System, sending duplicate C/D ·to Fe;...ora.l Reserve Board~
~neral

Very truly yours,

Fis ea.1 Agent.
(Enclosure)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.

... ..
• f

REPORT SHOWING CLASSIFICATION .AND NUMI>ER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE

LEASED WIRE SYSTEM FOR THE MONTH OF NOVEr..1BER, 1922·.

From

:6a.nk

Business

Per cent of
Tota.l Bank
:Ousiness (*)

Treasury
Dept.
Business

Wa.r

Finance Corp·.
Business

Total

-----------------------------------------------------------------------------------:Boston
New York
Philadelphia.
Cleveland
Richmond
At1a.nti3Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

32,647
203,554
50,640
81,187
68,237
55,491
143,408
84,4oo
46,313
79,695
77.766
136,186

Total F. R.
Banks
Washington

1,059,524
289,493

Grand Tota.l

1.,3~,017

10,167
16-545
7,437
11,696
9,118
8,818
10,894
10,2313
7.553
11,190
6,595
18,254

34
103
120

100.00

128,505
165,051

1,087
609

l ,189,116
4,55,153

293,556

1,696

1,644,269

Percent of T9tal 82.05%
j3ank :Business
Treasury

TOTAL

17.85%

170
356

304

0.10%

1,349,017 words or 82.13293.556 n " 17.87'/o
1,642,573
(*)

FEDERAL RESERVE ~ARD I
WASHINGTON, D.. C.
NOVEMBER 14, 1922.

42,984
220,455
58,077
92,883
77,389
64,412
154,422
94,638
53,866
90,885
84,665
154,440

3·0S
19.21
4.7S
7.66
6.44
5·24
13-54
7-97
4.37
7·52
7-34
12·85

100.00% .

These percentag~s used in calculating the
pro ra.ta. share of 1eas~d wire e+penses as
'shown on the accompa.cying statexmnt (X-3585b)

,
REPORT OF EXPENSE
II'IA.IN LINE'
FEDERAL RESERVE LEASED WIRE SYSTEM NOVEMBER 1

1922 .

X-3585b

-----------------------~-------------------------------------------------------------------------------------------------

Pro rata
Share of

Name of Bank

Operators'

Salaries

Overtime

Wire

Total

Rental

Expense

Total

Expanse

Credits

Payable to
Federal
Reserve
Board

------------------------------------------------------------------------------------------------------------------------$ 20.00
$
$ 270.00
$ 42).15
25().00
$ 270.00
$ 69).1)
$
1,292.48
225·00
366.00
305.00

Boston
New York

Philadelphia
Cleveland
Richmond

Atlanta

2.~0.00

Chicago

(#)4,688·87
202.90
275·00
326.64
170.00
395·00

St. Louis
Minneapolis
K..wSi.lS City
Da;.las
San Francisco

1,40}.48
225.00
366.00
30).00
240.00
4,69Q,fH
202·90
275·00
326.64170.00
395·00

111.00

2.00

16,841·53

Fed. Res • Board

4,335·66
1,078·34
1,728.85
1,453·50
1,182.66
3,055·9:>
1,798·82
986·30
1,697·25
1,656.63
2,900.22

1,403.48
225·00
366.00
30).00

z4o.oo

4,690.87
202.90
275·00
326.64
170.00
395·00

2,9)2.18
853·S4
1,362.85
1,148.50
942.66
(*)1,634-92
1,595·92
711·30
1,370.61
1 ,4g6.6l':
2,505·22

16 ,841. 53

------------------------------------------------------------------------------------------------------------------------$133·00

roTAL

$16,841.53

$25,711.42

$22,569.83

C..t)},li+L59
$22 ,)69.8}

( #) Incl udoJs S<.1l:1ries of Wash. Oper:J.tors •
(&)Arwunt reimburs.:..ble to. Chic:J.go.

(*)Credit.
(a.)RC!ceived

$41.59 from WD.r Fina.nce Corp.

clUO.

$3,100.00 from Treasury Dclpt.
1922, raspcctivuly.

cc~ering business for months of October D.nd November,

FEDEP..AL RESERVE IlOARD,
WASH!NGTOU, D. C.
~ECE' ·SER 14 , 1922 •

$15,334.86
(&)1,634.92
$13,699·94

FEDERAL RESERVE BOARD
WASHINGTON

X-3?86

December 14, 1922.

SUBJ.SCT:

Ame~dment

to Regulation :0.

Dear Sir:
The J:karc. has voted to amend Regulation :B by a.d.ding
at the end of Part II of said Regulation a new paragraph reading
as follows:
11 ( c) A bankers 1 acceptance drawn by a grower, or
by a covperative marketing association composed exclusively of growers, of non-perishable, readily
marketaole, staple agrioul tural products, to finance
the orderly warketing of such products grown by such
grower or growers and secured at the time of acceptance by a warehouse, terminal, or other similar receipt, issued by a party independent of the borrower
and conveying security title to such products, may be
purchased if- it has a maturity at the ~irr,a of purchase
not in excess of six months, exclusive of days of
grace; provided, that the acceptor remains secured
throughout the life of the acceptance, and that the
acceptance conforms in other respects to the releV"ant
requirements of Regulation A".

It is believed that this arrBndment is self-explanatory,
but ita purpose and effect will be further explained in a letter
of transmittal to be issued along with the printed copies of
Regulation :Bas amended, a supply of which will be sent to allFederal Reserve ~anks as soon as it can be printed.

Dy order of the Federal Reserve Board.
Very truly yours,

Wm. w. Haxton,
Secretary.

To Governors and Chairmen of all
Federal Reserve :Oanks.

FEDERAL RESERVE BOARD
WASHINGTON

X-3537

December 14, 1922.

SUBJECT:

Co-operation with State Banking Departments.

Dear Sit:
The Federal Reserve ~oard desires a report from
Federal Reserve Agents as to 'cLe extent and manner of theil'
co-operation with State banking dej_Jartraants in the examination
of State r:rembe r barL::;_s.
The voard aesires to b1ow specifically whether the
Federal Reserve Bank ever furnishes for examinations under the
supervision of the State authorities a larger number of men
than is furnished by the State banking uepartment at any examination?
If you furnish men for co-operatic n with the State
banking department in examinations of State member banks, what
is the usual proportion of State examiners to Federal Reserve
examiners 1 (a) in large banLs and (b) in small banks?
Could you definitely say whether any fixed proportion
of Federal Reserve e.L3.nnner.;:; is necessary in a. State 8Xamination
for purposes of furn1s~ing the Federal Reserve Eank with such
credit information as it U3sires or with such information as it
may need with regard to the sufficiency of the State examination?
For instance, would it be possible to s~ that 25 per cent, or
one man in four, should be furnished by the Federal Reserve Bank
for the purpose of obtaining the credit information which it requires for its own use,
Do you ever examine banh.s without the presence of
State examiners, the State accepting as its own, the examination
made by the Federal Reserve examiners?
By order of the

F~deral

Reserve Board.

Yours very truly,

Wm. VI. Haxton,
Secretary.

:.att

to all Federal RL.serve Agents.

.. '
FEDERAL RESERVE BOARD
WASHINGTON

X-3589
December 15, 1922.

SU:UJECT:

Decision of Suprerr.e ~ourt of North Carolina
on rehearing of Richmond Par Clearance Case.

Dear Sir:
The Federal Reserve Bo~rd has JUSt been advised by
Counsel to the Fedaral Reserve :Oa:rk': of Richmond that the
Supreme Court of North Carolina has dismissed the petition
of the plaintiffs to rehear the case of Farmers & Merchants
~ank, et al. v. Federal Reserve Bank of Richmond, 112 S.E.
252, and has re-affirrrBd its former decision di ::>missing the
inJunction-issued by the lower court against the Federal
Reserve Eanl:z: of Richmona., and declaring unconstitutional
the act of the Legislature of North Carol1na ratified February
5, 1921, which sought to authorize State bam:s to impose
exchange charges on, and remit by exchange drafts for, checl:s
forwa~~ed through Federal Reserve Baru~s.
The Board is advisad that the court dismissed the
petition by a mare memorandum decision and did not modify or
supplement its former opinion wllich was published. in the
Federal Reserve Bulletin for June, 1922 (page 175 of the
short edition and page 701 of the final edition) •
Very truly yours,

Vice Governor.

Chairmen of all
;!federal Rel:ierve :oan:;.s.

.... ...
X-3590 .

~fEMORANDUM

.of the
PRI~~CIPAL

WLINGS OF TH::

showin6

~bat

F11'D~

R.15EAVE BOArD

kinds of paper of

COOPERATIVE MARKETING ASSOCIATIONS
are e1i6ib1a for rediscount or purChase by

Submitted a.t the Fourth General Session,

D~cambar

15,

1922, of the National Council of Farmers Cooperative
Marketing Aosociations at Was'hington, D.

c.,

in· con':'

nection with the rama.rks of Mr. A. C. Mi1+er on the
topic -aow

Fedaral Reserve System Can Help Cooperation."

X-3590

- 1 -

In connection with the rapid d 7dlopment of the coopQrativa

mar-

keting movement during the past e~ghtaen months, the Federal Reserve
Board has bean called upon from time· to time tp ruld as to the eligibility for rediscount or purChase by Federal Reservd Danks of certain
classes:of paper growina out of tha o~rations of ~uCh as~oci~tion~.
.

· Eaoh

su~

to the

ruli.ng was based upon a J?articula.r state of facts. submitted

~ar~

for. a rulin6 , .md. a ruling. to the effact tbo.t

kind of paper is eligible
inelie;ible.

~O>S

not

m~an

that any

o~r

kind of papar is'

There are many kinds of papdr #lhich have nevar

cov~r

~e~n

rulin&~

to the- .»oar.:l for· a ruling, .md, thdrefore, the Boa.r<:L•s
subjact'tio not

particular

every kind of paper of cooperative

submitted

on tbb

~ka~ing

asso-

Ci.l.ti.ons
. which may
. be purchased or re<liscounte<i by Federal Reserve »a.nks •·
interest~,

·For. the information of tho.sa
brief non-teChnical

s~y

however, thare is given below a.

indicating in a.

gene~al w~

the classes of

paper which the Federal
ReQdrve jjoard has already ruleo. maJ be
.
. rediscounted or purChased by Federal Re$erve ]anks.
CLASSES Ql ASSOCIATIONS UNDER CONSIDEF.ATION.

In each· case passed on by the ·j)oara. tha coopard.tive marketing
association inVOlved Wa$

organiz~d ~ithout

.capital and itb

member~

Sisted exclusively of.gro*ers of the particular crop whicn the

COn-

as~ocia-

tion was organized to market.

The iSI"ONars agretl<i to sell ana. deliver

their entire c~ops to the association, title pa~sing at the time of daliver.y, and' the association
and their re-sale.

a.s~uming

Generally

absolutd control

spdakin~,

o~er

the cammoditias

the comr.:odi ties were pooleo. accord-

X-3590

- 2 -

. ,., ..

~c·

ing to grad~S and after all of a p~rticular·pool had b?en sold the proCOddS
were

distribute~·

pool.

pro rata among

tb.~r~foro,

T'nese rUli.ng&,

opor~ta

a3sociations Which

th~

growers who had

i>ro~er

on any plan

substant1al~y ~iffarent

marketing Of 8.bl"iCUl tural products;
.
~6e

from that

kSSOCil.TIOi~.

~uch a.s~ociationb

function of

would not necasbarily apply to the paper of

:roliCTIOll Q! SUCH

The

contribute~

is to aooist in tha oro.erly

anti.· if. :n\CA. all

MtiOCiation s.houJ.d en-

in the spaculc:S.tive holding of a c;-op for hit;h.3r J.)rice$, 'mu.ch of its

paper :thich normally .7oula. be eli6ible for purchase or red.iocount by Feder&J. ~serve Da.n:.rs would be_come ineligible; beco:msa Federal Reserve I.anks

cannot purchase or redibcount

p.:~.per

NOT~
~JDING

Gi:tO-:r::sS'

c..ra.·11n to finance speculation.

TO fl!I;J:1~ C/,l\...1\YllfG OF CROPS
OP.DEF.LY l.f.tU(:ETINg..

Ina.smu.ch a.s ae;ricul tur~ prod.ucts
mar~et a~

soon a..s

harv~ .. te.l,

~eces~:oa.ry

not b3 dumped upon the

but ohoul\1 ba marketeci gradually, the carrying

of agricultural proO.uct$ by tha
rea.i:onably

~houli

ero~~rs th~reof

in or..ter to a.a;nst

·~ue

orderly marketirtel> thartJof is a

prOj;•Sr step in th.3 proces-s Of distribution, and
dra.wn, or tha
far~r•s

~rocea.:L&

for :.;uch perioo.s as are

a fanner's

O"lll note which is

of .vlnch are used, to finance tha carrying of the

produCt$ for·such reasonable

par.io~ i~

a. note which has been issued.

or drawn·for an a.!Sl'icultural purposa .A.nd which nay, therefore, be rediscount·ed by Federal Reoerva »anks with a maturity up to

. .

@.0'·-:SF.S t DRA.'Ii'TS

Whera, at tiu
kating

as~o?iation,

•.

ti~ growdr~

;.c~.£PT3D

si.~t

months.

JY J.SGOCIATIONS •

Clelivar their crO!)l to

the association accept.:)

dr.l.ft~

..t

coop.;,ra.tive ma:r-

draNn upon it by the growerto.,

X-3590

- 3-

such drafts when discounted by the growers at their local banks with

~eir

own iridorsl3mants, ar~ eli&il)le for rediscount by Fed.eral Reserve i)anka as agrtoultural paper With ma.turitidS up to six months provided the proceeds are
used by the growers for agricultural purposes.
IJhJ following is· an eJC<).mpla of wh:l.t ma.y be considered
a.l purpose:

:ui

a&rioultur-

When a grower delivers his crop to a cooperative mar.tteting associ-

ation Which is actually engaged in

or~erly

marketing, and the grower id oblised

to bo~row money for ordiru:..ry gunarcll. purposes' such as tlia payment of obliga.-

;

tions previously·incurred in

growin~

or harvebtin6 tho same·crop, a draft

drawn by the grower on the a.s::.ociation for
crop may properly be considered to be
. because such a borrowing enables the

~rawn

part of the market value of the

for an agricultural purpose,

~o•var

to meet

~is

obligations Without

selling hi a crop inrnedia.tely and thus "carry" the crop, which is one

the

steps in tha process of distribution.
NOTES Ql .Q.SSOCIATIONS E!t JUNDS m_ FIN:.NCE PAC:ONG
'
AND MA.BKETING.
~ot~s

'
of an association
tha proceeds of

whi~h

are used to

the cur-

. rent expenses of such associat~on, such as the p~nt of w~s ~d the

pur-

chase of supplies in connection with its bus ina sa of pa.clti.ng and marketing agrioul tural products grown by others, are aligibl-3 for reciiscowt as

conmercial paper with maturities not in excess of 90 dqs •
NOTES OF ASSOCI~TIO!fS roi\ WNDS TO PAY ron
ca.tfODITIES PURCHASED.- -

Likewise, the notes of associations representing direct borrowings by such associations, the proceeds of which have bean or a.re to be used

tO make ~nts to the ~ower& for commoditi~S delivered to the as~oci~tion

X-3590

-4-

are eligible for rediscount by Federal Rdserve Bonks if thay have maturities not in excese of 90 days, because the procaeds ara used for the conmercial pbrpose of

b~ing

the

commoditi~s

from the growers.

BANKEI!St !Q..CEPTANCES DRAWN

R SUCH ASSOCIATIONS.

Bankers• acceptances dra.vn by ouch a.t)Sociations to finance the

· douestic storage of com:.odi ti3s pand.ing ora.erly ma.rkating are eligible both
for rediscount

b~Federal Rds~rve

j)a.nks 1n the open market..

aanks and for purChase by Federal Reserve

In creating such acceptances the association

arranges tor a credit with s.ome national or .State b:mk which accepts its
drafts to the amount arranged. for, thd drafts being secured by warehouse recaipts cove1·1ng non-perishabla, $ta.ple agricultural products stored 1n independent warehouses, and after :1cceptance such drafts are eligible tor rediscount
or for purchase in

o~n

market by Federal

~eserve ~s.

Under axis ting law,

they are eligible for redbcount only when they·hava not more than three
months to run. Heretofore, they have been eligible for purchase by Federal Reserve Banks only when their maturities at tha tima of purchaSe did
not exceed three m>nths; '?Ut a recent amepdment to the Boa.rd•s ra~ations
pel'D)its them to be purchased with maturities up to six months.

acceptances. are recognized as the JOOs't desirable form of
,.

»anloars•

cr~di t, d.8

they

sell on tha credit of the accepting baDk a.s "fell a.s on their backin.g of
sta,ple
comnodities, :md they usually t•e the lowest r.l.tes of interest, if
I
properly drun a.nd safeguarded.
qROVIER'S DRAn' Q!i ASSOCIJ..TIO!T

~XCEPTED

FliOM LIMITATIOlm.

One of the most recant, and. also one of th<d most liber.a'J:.,rulings

.. ....
- 5of the Board on this SUbJect·.wa$ t.o the effect that where a. member of a oo-·
oporative ao$OCiation.delivers hi$ crop to the association and

substan-

tially the S.lme tinia draws a ·dr3.f't on the as.;ociatlon Nhich is accepted by
. it and <liscountad. by tha drawer ..lt.hil$ own bank, such
. a dr.d't is a
e~Change dr~Nn

bill of

in good faith against actually existing values 11 and, therefore,

is exceptdO. t'rom the lC)o limit.:1.tion prascribed in thJ Faq.ara.l Reserve Act on
the aggrecjata amount of po.per ot: any one borrower whi'ch .a Federal Bdserve Bank
may ~ediscount for any ona. member bank.

Tnis sho'Uld be very beneficial to

. ·the fa.rmdrs and their coop::trc:~.tive mar~:ating association, because it permits
the rediscount of such

p.1p~r

in unllmitad

a~n9un ts.

Q'l'HEB CLASSES OF ELIGI:..,LE PAPER.
The above are not all· of tl1e
aoard on

t~is

subject, and, of

rulin;.~s

m.:..<ie by the Federal Bdse\'Ve

cour~a, ~ldrJ

are other cla$ses of eligible

paper'that can be used in borrowi~6 by coopdrati~e marketing associations,.
but these are probably thd ruoat important.rulin~o Which have bean issued so
far.

It should be understood. also th<:..t thu above l$tatewnts are not intended

.as precise technical statemantc..
subject ..axcept tha

All of t~.a 1>oarct:• s v..l.l'iouo ruline;S on this

last mentiondd

we~e

brought

to 6eth.:~r

and sunr.arized

in the Faderal Ra~:Jerva »ulletin for Saptambar, 1'322 (pa.gd 1041.f. of th~ final
~

edition and page 269 of tha first Jdition) to ~hiCh reference shoUld be made
by mana6ar& of

associ~tions,

bank3rs

and in th<3 lagal points involved.

an~

otberb inter.astad. tn exact statements

X-3591
.

STATEMENT FOR THE PRESS

For releasd in Morning Pa1~rs,
Wednesday, December 20, 1922.

.
Eligibility of Paper of Cooperative Marketing As::.ocia.tion:; for purchase or red.iscount by
FaJ.aral Re serv~ :>am:s.
The Federal

Ra~erve ~odrd announc~~

today an amandrnent

to its Regulation D which makes eligible for purchase by Federal
Reserva :Banks on the open market

baru..:er~ 1

acceptancas with matwi-

ties up to six. montha which are dravm by growers or by cooperative
marketine, as.:.ocL.tions to finance tha orderly markdtinc; of nonperishable, readily marl:ata ble, stuple .l<:bricu.ltural
when

secure~

by warehouse raceipt$ covJring

~uch

proliucts

products.

Thiil am~ndment. to th~ ~oa.rd 1 s ReguL.tion shouid be of

material assistdnce to

cooper~tive m~rket1ng a~~oci~tions

agricultur~l product~,

financing tha ordarly marketing of such
and it b"in line with

th~ ~card's

policy of bein5 as liberdl

possible under the tarms of axis tine,
ali 6ibility of the paper of

lcl.w

coop~rativo

a,;;;

and. in rul in<1 on the

martating

as~oci~tions

for purchase or. rediscount by Fed.aral lleserva nanks.
That the Feder,;l RCJserve

~oari.i

gre::ltly interested

in tha cooperative mark.ating movament and. has sougnt e;;vJry opportunity to

asoi~t

the orgru1izers and managers of

~uch association~

X-3591

- 2 -

to work out the best means of arranginb

th~ir financing so

that it

should not only be sounu but should also enable thsm to obtain
the lowest interast rates for nacas;:;:.u-y cracl.i t is ind.ica.tad. by
the numbe'r of very liberal rulipg:> on tl1i.:> ::.utiJsct which the
1oard. has issuad.

durin~

tt0 paat

;ight~an

months.

T:ne&a rulin,,-. havin6 raferenca to what

cdlled the

"aligibility" of notes ;::nJ. a.rafts for rdcniicount, ilare made from
time to tima as

qua~tions

tha country.

They involved. farm produce differing as widely

were submitted from various sections of

as fruit from California., wha:1t from the middla we.ot and tobacco

' and cotton from

t~!e

South 1 out tha S3Ir;~ principlas of sound. fi-

nancirig were involv3d. in all, and in each ca..;e tha cooperative
association was a

non-~tock,

non-profit corporation, the members

of ·111hich consist<ild. exclusiv~ly of growers of the partiCular crop
which the associj,tion ··:a;;, organized to market.

to sail

Th~

growdrs agreed

and daliv~r their entir~ crops to the associ~tion, title

passing at tha

tim~

of deliv;ry, and the

a.:.~ociation

:.lS&uming

absolute con-.:rol over the cornm<Xiitias and. their re-sala.
speakin6, the commod1ties were pooled

accordin~

G:marally

to gradao and.

aft~r

all of a particular pool had 'been $Old. tl·.a proceed.;; wera distri'bu.t;c.l

pro ra.ta.
this

It :.hould ba un\ierstoo- th<lt tha lJoarci. 1 s ruling on

~ubject

would not

naca&s~rily

apply to

rJ.~soci.J.tions

op.;rating

on a materially different plan.
Several kinds of borra~ings ara involvad.

If the

grower desires to do the borro.-line; himself he can draw a draft
I

]

X-3591

- 3~t

on tha coop8rative association

the time he aalivers his
Ha than discounts the

crop, tha association .'l.ccept in~ it.

•

draft at his local bank, wh1ch under the
~t

rediscount it

a Faderal

R~serva ~~nk

~o~ru 1 s

If tha

with a maturity up to si:t months.

ruling may

~gricultur'll

papar

;il.~nociation

itself

wi.Shds to barroN directly from a balli:. in oN.3r ·to ma.lre payments

to tha

gro>~~er~

;-.rho are its

memb~r$,

it.:>notes ara eligible for

for rediscount but th.'l :Poara. h.21.s helo. th..;.t unaer existing law
such not as ara comri.arcial not as tha rnc.turi ty of which must not

exceed ninaty. .lays 1 bec.lti.SQ

t~la

for the commercial purpose of
grower.s.

proceads of such notes :..re used

buyin~

A bill now penJ.ine in

th..; COT.IiDOditias from the

Congr~s:.> ~vould

make such notas

eligible as agricu.l t1..tral paper with m..:.turi tics up to nine
~nths.

Thera

wa~

considerable

di~cussion

over th;

fir~t

men-

tioned ca!lle, where thG e,roN·ar draws his ovvn cira.ft on the ussociation 1 as to wh;;thar tha draft should be considered a.gricul tural
. .md h ..1.V0 a. six months' maturity.
must b3

usa~

made that the
obtain~d

d~ricultural

for an
c;rON~r

in payin6

T11c

law says

purpose, and

th~

proceacis

tha point uas

in all prob::.1.bili ty would use the money so

aebt~ previou~ly

incurred.

that unless this could. ba held. to be :m o.grict:.ltu.ral purpose,
little agricultural, or ;.L' months, credit coulJ. be obtainad in

this way.

In raplyin~ to tl•is ~ue6 'i:lsti.on, tha Faderal Reserva

Zoard ruL'ld tb:J.t when a. farmer t:lr 6ro'Ner Clelivers hh crop to
i

·I

- 4 ...
a cooperative mark3tin6

X-3591

~~sociation

actually angaged in orderly

marketing and whan he is oblig0d to borrow monay for ordinary
genaral purposes, such as the payment of obligations previously
incurred in growing or harve:;.ting tha s,o.me crop, a draft drawn
by him on th3 markatin6 a;-osociation for a part of the market
valua of the crop may proparly be con::.idared as dra,·m for an
agricultural purpose.

lib;ral one, and will grea.tly facili t:1.te th.;; op2rations of
cooperative

a~soci~tions

- in fact

ha~

already done so.

is basad upon the principle. long reCObUized by the
the

carryin~

~oard,

that

of agricultural products for such periods aa are

reasonably nacassary in order to accomplish orderly marketing
is a legitimat2 and necessary

but ion.

The Board pointed out,

tinction
sonably

step~

bet·:v~en

nacess~ry

incident to norwal distri-

how~var,

carrying products for such periods as are reaand mer.:l

spacul3.tiv~

-,.i thhQldin 6 from the

markat in tha· hope of obtaining hig,har prices.

Federal Reserve Act paper
r

eli6ibl.;) for rediscount.
pointed

ou~

there is a dis-

th~t

dra~

financ~

Und.:lr tha

speculation is in-

The Federal Ra-oarva Joard also ·

that in aetcrmining ·Nhetrur or not J.n associa.tion

is 0ngaga<i.. in or-.1arly m:i.rY.etin 6

ra.t! •.::r than 5p3cula.tive hol\iing •

it is not improper to tal:e into consiaard.tion

th~

fact that aach

crop must ordinarily su...-·port th:3 m3.rke t until the naxt crop is
harvastad.

X-3591

.. 5 -

A fur-ch:H ana mat~ria.l aid to cooperative marketing
as::;ociations is the ruling that bank..:Jrs' accQpt:m-::cs dr;;.wn to
finance tha domestic storago of corrrooditi~s pendine orierly roarkatIn creating

in6 by such associations are eligible for rediscount.

such acceptanc.:3s tha asl>ociation arranges for a craai t with some
national or State banL: wt1ich accept:> its drafts to the amount
arranged for whan covarad by ':iarehou&a receipts, and after a.c-

ceptance such drafts

~ra

0ligible for rediscount or ior purchase

in open market by Faderal Rasarvo

llaru~s.

they are eligible for rad.is count only 'Nhen they have not more
than thrae months to run.

Heretofore, they ha.ve been eligible

:for purchase by Federal R:3sarve Banks only vvhen their maturities

at the tirM of purchase did not axcead three monthsi but the

new amendment to the

Board'~ regul~tion permit~

chased with rnaturi ties up to si;·~ months,
ara recognized a.s th,;: most

.J.iJSi~able

them to be pur-

IiarJ::ars t acceptances

:form of credit, as they

sell on the cradi t of the accepting bank a3 well as on their
backin6 of staple collateral cmd they usually tak.s th;; low2st rata
of intera.;;t, if proj>3rly drawn and s..'!Jeguardad.
One of tlB mo;,t rac,mt, and al::>o one of the moat lib2ral,
rulings of th.:; :>o . :vrd. on thiS subJ~Ct w.:..u to th:: affect that W>.l;re

a meiDbar of a

coop~rat1ve as~oci~tion daliv~rs

association a.no. at ;;ubstantially th.,

so.rr~

his crop to the

tima draNS

tha as::;ocLl.tion whicr. is a..cce 1Jted by it an\i discounted
dr-::.wer at his own bank, such a dr,1ft is a

d.r..;,ft on
by

the

bill o:f exchange

- 6 ...
dra.vn in c,ood faith against .l.Ctua.:Lly axisting valu.;:s" 3l'ld,

ther..::fore, is not su'ojdct to tL.e
t~:;,l;;l

·the Fadaral RasJrva .Act on

lO~o

1 imitation pr.;;;.;cnbad in

ilf.lt:.r.;e,ate -..roo1.mt of papt!r of any

ona borrowar which a. Federal Re~~rvQ ~an1:: w::q r:;di.;;count for
any one mdmbar bank.

T:Uis

:>hould be very. bendicial to the

farroars and th~ir ~~ oci~tion~ becaus~

it parmits th~ radiscount

of such papi:<l r in unl ir.lit ::d amounts •
Tn,;:, abova cw<; not
R~se:rva :.oar~

of tho ruling" nu.ie by th.:: Faderal

on thi.;. :;;ubj.;ct, <1nd, of cour::..:l, there are othar

classes· of eligib·L~ pn.p.c:r tl:tat can

usaa. in borrOII'!ine, by

coop;ratiVJ ma.rk3ting assocl-lti9n..;, but th;:;y .::.:.r-3 prob3.Qly tha
most· iniport:mt rulin;;,a.

It ;;;hould' be under ~too.::.. .Usc that

.the above sta.temcmts .:J.ra not
st'ltam;;nts.

·:>f

1n~andaci

pracis.c technic<ll

th<il ~o....ra.•s v.::.rious :rulings on this ~ub-

Joct· except th2: on~ last r:;antionad. ·:ar~ brought toc,athar and

S'Uil1l'llarizad in the

F::3d<Jral Ra::,ervt:

::.~111tin

t'nr

5~_t.>tai.:6:;Jr,

1922 (p~ge 104-4 of :th.:l lc"l.r~~ ;;:Q.ition ...'.:.:1d .l.J.c~.6a 269 o:f th3 f:lt<st
edition) to W.:li ch ref dr .:m~0 should. be wa.d~ by m:mega r::; of

J.::> so-

. ci~tion..>. banJ:;2r-:;. and othar::) intarast~d 1n -:lA:l.Ct ::>tJ.t.:r·,.mt~

i.lnli

X-3593
EXTRACT FROM MONTHLY REVIE;;r OF ST.AND.A:r.ID

BJ.N?.: OF SOUTH

AFRICA.1-

OCTOBER 31, 1922.
THE AGRICULTU11AL POSITION

\Vhile a considerable improvement in the

a~ricultural

pacts of the country generally has taken plac0 during recent

pros-

montn~,

it would. be idle to d any th.;;L t th a po s it ion of rna.ny mamba rs of the
farming community in the Union and Rhodesia iv still
difficult, and, ina.eed, in some cases critical •
this h not far to

seel~,

~xtremely

.And the cause of

for probably no section of the industrial

community has suffered more sever,ely from the unstable conditions
that have ootained during the

l~st

two or three years than the

farming interest.
Vfuen considering the position today, however, it is neeessary to bear in mind tha fact that this industry was the first to
profit by the new

economic

situ~tion

called into being as a result

of the outbreat of war in 1914, for, owing to t.ne witr_drawdl for
war service of large numbers from the work of production, raw mat->rials
of almost every descril)tion vary soon apprecLted in v 1lue, the .;;ff .:>ct
of -.vhich was in due course .reflected 1n incraaseci. wages of those en-

cost of living.
sequent

...;_fter tha conclusion of th2 .Armistice and. the sub-

~rrangemant

of terms of paaca, th.Jrd cJmz

~bout,

as the.

result 6f many causas--chiaf of -Jhich N<3ra th.J curtailment of Govarnment ·oxpendi tura and the restnction of credit--a marke..l diminution

.X-3593

in the purchasing powar of the worlu., one effect of vhich is seen
in the return of most raw materials to

approxim~te

While wages in other industries continua
'highast

war~tim3 rato~,

pre-war values.

today, if not at .the

at least at levels which exhibit considerable

inflation when compared with the pre-war basis, it follows that the
farmer is at pros ant Lc.borine; under a considerable

disadv~,ntage,

inasmuch as he is compelled to pay, for necessary goods and materials,
prices inflated by high wages paid for their manufacture, whereas
he is receiving a return for his own produce on a basis of pre-war value.
The problem is not pectlliar to South Africa, but is of
wor~~-wici.e

application at the prcsant day.

A recent pres;.;. cable

states tha.t in Great Britain farmers of all classes and in all districts are in serioua financial straits, anQ that failin6 rnaans of
adJusting outlay to revenue, lart;Se numbers ovill be driven out of
bus il:1a sa •

In the United Statas of Arr1erica, also, the matt8r has

been undor invest1gation by a Government Commission.
be g.anerally recognizad, ho'Never, that the si tu..1tion is not one calling
for Govarnment intarvantion, unlas;;;, indecid, ;:;oma alleviation w.a.y ·oe
afforded by way of furthar

reduction of railway

portJ.tion of :1e;ricul tur~•l produce, or

r~tas

for tha trans-

in some oth . ~r similar rrB.nn:or.

Ad;,ustrr.ant will ul timataly coma ..1uout through tha ngular operation
of econorrdc fore as, 'N1nch ara not d.t pr..:;sant functioning in a normal
mannar owinb to t113 continu2d worl.:l--Nl·J.a financial disorganization.

of agricultural servic3s. will assume t:1air _b)ropar reL:.tionship in

. ,.
X-)595

- 3-

the l'!'.arkets of tho world to th.3 value of ina.ustria:l servi.ces, and
abnormalities such as noN exist will disappear.
hasten :::;Uch

c,d~ustrr;:mt

'py legislative measuras will, it is thought,

probably have tho opposit2 effect to that

.Any attempts to

desired~

... It·,

FEDERAL RESERVE BOARD

WASHINGTON

December 21, 1922.

SUBJECT:

Sendte Resolution 3jl.

Daar Sir;
Bela~ follo~s a copy of Senata Rasolution 351 requesting the Fedaral Resarvc Boa,rd to o"btain from Federal
Reserve Bank officials ti.1e lbt of names, Nith post office
addresses, of th.:;; citizens to ,:vhom the speacl:: refarred to
was sent.

"S, Res .

351 ·

·;lfERE1\S, the officials of the tNelve Federal Reserve banks
have adrrdtte'J. that t£1ey had printed and circulat8d, out
of the funds of the banks, thousanas of copies of~
speech made in tha Sen.o1te, touching a. controvertaci subject, and in :.rhich the position of one Senator is assailed
and criticized by another Senator; and
1;VHERSAS, tha Senata feels t:t,at t:12 Senator who spol~c~ on the
other side of the: subJact involved in the Senator's speBch
which was printed and circulataJ. by said Federal Heserve
bank officials is entitL~d, in fair play and justice 1 to
have the opportunity of sending copi3s of his speech to
the citizens who lJ.aVa racaiv::d tlw syeecn which assailed
and criticized him; and
':'!IlEREAS, the S-:mata, by r;;solution, raquastl:'?d anu received
from officials of the Federal Ra~erve Bam: of Atlanta, a
certain list of citizens to who:n thay have sent the s 1Jeech
in question; and
1.:.rHEREi',S, tJ.:ce Senate feels that the officials of the other
eleven Faderal Raser•'e banl:s should furnish to the Senate
a list of the name;, anci post-office addr.:;s ,es of citizens
to whom they ;;;ent co 1Jii.Js. of said speechj TLerefore be
it
RESOLVED That the Federal Reserve Board be, and it
is :1ereby, requested to obtain from said Federal Raserve
bank officials, dnd hav..:l ;,ent to the Senate, the list of

X-3594

- 2 ..

names with post office addres3es of .tha citizens to whom
said spaech wa~ ~ant.
Attest:
(Signed) George A. Sanderson
SacretJ.ry."

.
One of the F~deral Reserve Banks has sug~estad that
tha purpose of tha resolution as expressed in th~ preamble
could be carried out by offering to mail to the same list of
names, Senator Hefli:1 1 s ans\ver to Send.tor Glass's speech,
i f furnished. to tn.:.: b.;.J..Ii;.:.s.
:Sy 0riier of thd FeJ.aral Re ::urva :Soard:
~

Very truly yours,

Wm. :;r. Hoxton,
Secretary.

TO ALL F. R.

CHtiill~ffiN.

F E DE R AL D : S E

VE B 0 A

X-}J97

For relaase in Afternoon Pap:.'lr,,
Friday, D." cember 29, 1922.
The follorvin 0 L "' surrrrr:ury of ger.. 2ral business
con~i tic:n., throu~;:out th2 several
Federal IL;;serve Dis~ricts 11urmg the month of
Dec,m;b:n, c.~."' cont<olllic;d 1n tn-:0 forthcoming is sua
of the F2J.ero.l I\d,Jn·::J Bull0tin.
anCl financial

Prouuction, employment anu trade contlnued to
upward trend. in Novem·oer and.

pri~..;s

1'::)21, Nhan production

<VclS

lo;:ar

~till

tlL.m

...Lt

:.;e~~;on

increu31ng.
cl11Y

of tho: yd.J.r 1
S inc:; July,

time: ln recent years,

there has been an almost tmint.o:rrUiJt..:l.l rbe month by month.
inde~(

in which allo'iv<:.mca ha"' b2;:;n

rrLJ.Qd

1922.

wa~

per cent

p:r c::nc hiJur than in October,

The chief ao.vances from OctoDar to Hovcmbar \18ra in mill

con.:;umption of cotton 11hich raaclBd
onca

The

for s-'3a6onal chunge"', sho·:s

that production in b..1;;;1c ino.us1:.r1as J.unne; iJovember
hi 0 her thm in July, 1':!21, and

rogi ~tareu. a furthar advance.

Cont,rary to tha usual ',;rami :1t this
production in basic inaustri.js i,

o.l~O'N

~inc.c

r;,ont~ily

total axceaeie,l only

1917, and in the pro-:1uction of pic; iron Nhich wa.s largar

than at any time in th-: past two yaar;,.

Construct1on operations

ware maintained on a large uCa1a :iaspi to: tha dl)proach of winter I
dua to a subst.;mtLll J:cpun,;;ion in res1etant Bl lluiLllng.

X-3597

... 2 -

The. total farm v ~•1 u.::: of crops grovm in 19:22, basad on
prices paid to farmers on

Dac~rnbc:r

cant mor.::: than in 1921j but

1920.

·vail a;.;tirn.1tei to be

25 per

Jtill 17 p.2r c2nt less than in

NJ.s

The value of all imporLmt crops, excapt potatoe;;;, ;vas

larger this year than last y0ar,

,,~.n..;.

tna farm value of tha cotton

crop was much eoraater ·than in l':;J2l or in 1920.
Incraased proJ.uction
freight movem:;Jnt,

\Na:;;

~,ccompanied

by continued heavy

Th2 total numbar of railroad cars loaded during

November J.ras only ) par cent le.s"' than in Octob..;r, :;.nd was substa:1tially lare:.er than in the

correspon~in 6

month of previous

years.
in the proportion of car;:; out of repair have resul L:d in a considerabl.::: reduction in the frai&lt car shortae,e.
Demand for labor oontinuad to incr c:;cJ.sa, a_, shown by
the velum,:; of employment

~~t

in;.lustrial 3Sta.blishrn,mts.

Local

6hort.:l.,S2S of labor were: rcport,_;u.,by -.L;c:d mills, tc.;xtile mills,
"md builu.ing contractors in aa"t8rn districts, but thara w:::.s a

srrjall :;;urplu.; of corr.non labor in tr.a c:t 6 riculturc.tl distr1cts.
·.;'holasd.la Prices:

. tha high,:;st laval "ince Maron, lCj2l.
the Bura.J.u of

L~bor

The rL.,,3 of t:vo points in

Statisti.:s ind,;:c to 15.:1

N ..l.-

ciuc::; chidly to ad-

vancas in the prices of L.irrr, prodc:ict:o, food::. _,nci clothln 0

ros2 to the highest points of the year.
than offset the u.eclin2s in th2 prices of fuels and matals.

nhich

- 3-

X-3597

Volums of Trade:
The volume of payn1-.mt.; by .:h.>c.%, ordinarily a measure
of business turnover,

Qecre~sea.

District except Atlanta.
Naw York, was
Nd.S

5lightly in avery

Fader~l R~serve

T~a total for 140 cities, not including

7 par c::mt _,rrJd.llar ir. Nov2mb;:Jr than in October, but

per cent larger than in Novembar, 1921.
Wholesale tra.:.e vas smaller in Novembar in almost all

lines ana all sections, but the trend is usually dovvnwara
season of the year.

S<:1loG mara

~ubstantially

November, for all raporting lin.->s

e~(Cept

showaa. a small iJ:Tq?rovement in Novem·oer,

this

larger than in last

.o.1oes,
...iHJ.

d.t

Hstail trade

the Christmas busines::>

is raporteu to have been larc,er than in any previous yaar.
Bank Credit:
Larger demand for .bJ.nk crai.ii t in the interior during
rec,:mt weeks was accornpaniea. by liquidat'ion of both loans and
investment~:)

in New York and. Bo.;ton.

Tha uero.anci. for bank funds

was most pronouncad in tha Cleveland, hicl.1mona., St. Louis, and
San Francisco

~istrict~.

L:')ading citi~s .sho·N for the .!?;;rioa batN~.m November 15 ana.
Dacamb~r

13 an incrca.;;e of $25,000,000 in loans and. a reauction

of $9,0C0,000 in invastm:nts.
During tha p2rioa betwaan Novembar 22 and D:3cember 20
Federal Re;;arv a

~anks

hava baen call ad u._,on to sup.t-lY th: .;xtra

currency needs of hol id.ay trade,
an incr2.1se of

~:157

~n4.

this daro.dnct is reflacted.. in

,000,000 in Fadaral :i:i:3sarv2 not3 circulation,

i..

\ •.

}

- 4-

X-3597

bringing the total to the highest point for the year.

A decline

of $43,000.000 in gold reserve was also largely:due to increased
use of gold for currency purposes.

The total earning assets of

the Federal Reserve Banks rose during the period $145,000,000
partly in response to the demand for currency, and partly in
consequence o£ the heavy government operations on December 15 •
In the four weeks prior to December 13, the loans
and investments of member banks in leading cities were little
changed, though in the latter part of the period a renewed demand
was manifested for commercial loans, offset to some extent by a
decline in investments.

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO

X-3GOO

. THE FEDERAL RESERVE BOARD

. Dce;e:nber 28, 1922.,

SUBJEC~l':

ASSESoi:l~hT

FOR GE.NERAJ, EZ?.r;J':'S"SS 03i' THE FED::~RAL
J..:ll'JU.,;ili.Y 1 TO ,TD:·•L '30, 1923.

:m::;s:.~VE B\I.P..RD~

Dear Sir:
Confirming telegraphic ~dvice of this date
there is enclosed herewith copy of a r<:Osolution ~dopted
by the Feder~l Reserve Board at a meeting held on December
28. 1922, levying an assessment upon the several Federal
Reserve Banks of an :;.mount equal to one-tenth of one per
cent ( .001) of the total J?.:lid-in co.pik.:.l stock and surplus
of s1.<eh b:mks to defr3.y the estimated generecl expenses of
th~ Feder3.l Reserve Board from J~nu~y l to June 30, 1923.
There is also enclosed a statement shov;ing the
ba3is 1lpon which tho D.ssessment is levied.

Kindly send duplicate C/D to the Federal Reserve Board.
Ver~

truly yours,

Enclosures,

(Sent to Chairman of e3Ch

Fiscal Agent.

Feder~l

Reserve Bank)

X-3600-a
EST!11A.TE FOR J.i:J:IUARY 1923 ASSESSMENT

Average monthly encumbrance for period
July 1, 1922, to December 31, 1922:
Personal services • • • • • • •
Non-personal services •••

45,118.22
. . . . . itl;bl2,454.
78

57,573.00

E.stimated monthly requirements,
January to June, 1923:
Personal services • •
Uon-personal services •

. .. .. . . . . •

•

50,000.00
14,500,00

64,500.00

6,427.00

Total esttmated requirements,
January l, 1923, to June 30, 1923, inclusive
Estimated unencumbered baJ.gnoe, Dec. 31, 1922

387,000.00
62,000.00

Estimated monthly increase • • • • • •

amount to be raised by assessment,

...

325,0{)0.00

Estimated paid-in capital and surplus ot
Federal Reserve Banks as of December Sl, 1922,

325,000,000.00

An assessment ot one-tenth ot one per cent (.001)
will produce , • • , • • • , • • • • • • • •

325,000 .oo

X-3600-b
:RESOLUTION LEVYING ASSESSMENT

Whereas, under Section 10 of the aet approved
December 23, 1913, and known as the Federal Reserve Act, the
Federal Reserve Board is empowered to levy semi-annually upon
the Federal Reserve Banks in proportion to their capital stock
and surplus an assessment sufficient to p~ its estimated ex·
penses. including the salaries of its members, assistants,
attorneys, experts and employees for the hali-year succeeding
the levying of such assessment, together with any deficit
carried forward from the preceding halt-year; and
Whereas, it appears tram estimates submitted and
considered that it is necessary that a fund equal to one~tenth
of one per cent of the total paid-in capital stock and surplus
of the Federal Reserve Banks be created for the purpose hereinbefore described, exclusive of the cost of engraving and
printing of Federal Reserve notes; Uow, thereforet
Be ·it resolved, That pur~uant to the authority
vested in 1t by law, the Federal Reserve Board hereby levies
an assessment upon the several Federal Reserve BankS of an
amount equal to one-tenth of one per cent of the total.paid-in
capital and surplus of such bankS as Of December 31, 1922, and
the Fiscal Agent of the Board is hereby authorized to collect
from said banks such assessment and execute, in the name of
the Board, receipts tor payments made. Such assessments will
be collected in two installments of one-half each; the first
installment to be paid on January l, 1923, and the second half
on March l, 1923.

••

FEDERAL RESERVE BOARD
WASHINGTON

December 29, 1922.
SUBJECT~

Addressing Communications to the Federal
Reserve Board.

Dear Sir!
Under date of November 23, 1922, the Board sent
a circular letter (X-3569) to all Chairmen and Governors,
requesting that official communications to the Federal
Reserve Board be addressed to the Federal Reserve Board
and marked, if so desired, for the attention of any particular member or officer.
All Federal n2serve Danks are not complying with
this request, nor is ths :oard 1 s request complied with by
all officers and employees at any Federal Rsserve Bank.
It is, therefore, ~equested that the Board's letter,X-3569,
be aQain brought to the attention of all officers and department heads of your bank.
By order of the Federal Reserve Board.
Very truly yours,

Vlm. 1fJ. Roxton,

Secretaty.

TO THE CHAIRMEN fND GOVERNORS OF
THE FEDERtL RESERVE JANYS.

<,.·

FEDERAL RESERVE BOARD
WASHINGTON

X-3602

...
t

Decemb.ar 29 • 1922.
SUBJECT:

Economy and Efficiency - Groupings of Banks for
Detailed Study of Functional Oparations.

Dear Sir:
There is enclosed i:lerewith a list, approved by the recent
conference on economlf and efficiency halQ in Chicago. showing
the grouping of

th~

sever:Jl

F~iiera.l

R.a3erva Banks under the four

main functions of the banks for the purpose of a

detail~d

study

of the opara.tions of th3sa functions with a viaw to determining
the bast method.:; of conductinc:, tha same.
The list also shows th::: names of
chosen in each 6roup

u~ar a~ch

th~

rapresent-1tives

four functions.

One re-

presentative in each of the t·,-velve groups has been desi 6nated
Chairman of his group by the Boar0. 1 s Corrmittee on Economy and
Ef fi c i ancy.
Very truly yours,

(Enclosure)

Chairman. Comrd ttee on
Econornw and Efficiency.

X-3602a

•

GB:OuPIFGS OF BJ'.FKS FOR LET:.ILED STUDY OF
FUNCTIONAL OPERi..TIONS 1!fiTH A VIEW TO DETER\1INING BEST 1·ISTHODS OF CONDUCTING SAME.

----------1.

.ACCOUNTING
l.

,-l
2.

3·

FUlJCTIO~J

Ne."f York

L. R. Rou:na.:o, Cr. . airman

Phila;:ial:phia
Cleveland
Boston

St. Louis
Richmond
J.tlanta
Dallas
Kan:.2:.s City
Chicago
Minneapolis
San Francisco

•-r
.-:

.. Lwold

E. G. Davis
r·'

L::Jav1tt

l:i:.

'.T

Hall, Chairman

IJ•

Grady

..:..!.~•

-·i •

F.
.,
J!J.

B. Roper
R. T. Fraeman
•,r •

A•

A..
F.
J,

.. ·l·

:-:.
c.
T

..W•

:1c1~dams,

Chairman

Vogt
D1Jnlop
Rae a.

"
-<

CURRENCY .AND COIN
1.

3·

Boston
New York
Philad.el!Jhia
Chicago
Richmond
Clev3land
St. Louis
Minneapolis
Atlanta
Kansas City
Dallas
San Francisco

,.,

Chase, C'.nairrnan
Gilb:ll't
R. Earl
J. Hettarstrom
1'!,.

;•>

.r:••

,...,
V•

G. H. Keesee, Cna.irman
L. Bickfora.
].;
H. Ifu.ill
B.
Moore

R.
!11.

v.
i ••

\I •

Sir;.~;.

, Cha.irman

E. Park

~·/.

0. Ford

i7.

N. Ambrose

...... .,

••

- ..
- 2-

3 • LOANS; REDISCOUNTS AND INVESTMENTS
1.

3·

Cleveland
Boston

J. Zurlinden, ·.Chairman

New York

W. V!. Paddock
G. E. Chapin

Philadelphia

C. A. Mcilhenny

Dallas
Richmond
Atlanta
St. Louis

Fred Harris, Chairman
G. S. Sloan

Chicago
Minneapolis
Kansas City
San Francisco

R. H. Buss, Chairman
w. B. Geery
G. H. Pipkin

V. K. Bowman
W. H. Glasgow

W. M. Hale

..... .
,

4. . 'l'BANSIT ,AND COL!.ECTIONS
1.

Cleveland
Boston
New York

Philadelph.1a
2.

3·

·..

H. F. Strater, Chairman
E. H. Hult
c. H. Coe
J. a. Toy

Kansas City

E. P. Tyner, Chairman

Chicago

1IJ. C • Bachman

St. Louis

S. F. Gilmore

Minneapolis

Gray W:.1I'ren

San Francisco
Richmond
Atlanta
Dallas

'/!. N. Ambrose , Chairman

Ed.va.ra. Waller, Jr.
W. R. Patterson
R. B. Coleman

FEDERAL RESERVE BOARD
WASHINGTON

July l' 1922.
st.2876.

SUBJECT:

Statistics relating to State
Banks and Trust Companies
eligible for memb8rship in
Federal Reserve System.

Dear Sir:
With a view to bringing up to date data in the
Board 1 s files regarding the nunber, capital. surplus and
total resources of non-member banks eligible for membership,
may we ask that you kindly furnish the

Boar~

at your con-

venience with a statement showing the number, capital, surplus, and total resources of State banksand Trust companies
in your district having capital stock sufficient to meet
capital requirements for membership in the Federal Reserve
System as of June 30, 1922, or the nearest date thereto
for which data are available.
The statement should be compiled in the manner indicated in the Board 1 s letter St. 1299, dated July 20, 1920,
requesting similar data as of June 30, 1920, a copy of which
is enclosed herewith.
Very truly yours,

Walter L. Eddy,
Assistant Secretary.

Enclosure.
Letter sent to each Federal Reserve Agent.

•
July 20, 1920.

st. 1299

Subject:

Dear

Statistics relating to State
banks and Trust companies el-.
igible for membership in F.R~
System.

Sir~

With the view of enabling the :Board to continue the preparation of tables
smilar to those appearing on pages 29 and 30 of the 1919 annual report, it is requested that you have the following data regarding State banks and Trust companies
in

your district compiled from the latest available reports, and forwarded to the

Board at your earliest convenience:
State Banks and Trust Companies with Capital Stock
sufficient to meet capital requirements for membership in Federal Reserve System.
(In thousands of dollars,~i.e., 000 omitted.)

.
.; Non-members of F. R. System
-----------------------------------------------------------------------------------·
Members of F. R. Systec
: ______on__J_un
__e_3_o_,__l_92_o_.___________~:~--~----on__J_un
__e_3_o_,___19_2_o_.__________~--

: Surplus :
• Date :
; Surplus :
:exclusive; Total
of
:exclusive: Total
:Nun-:Capital:
of
re.:..:'·:condi-;Nu:n-:Capi-:
of
.
re:ber
:undivided:sources: tion :ber
tal ;undivided:sources
: profits :
---~---- ; report:
profits:
State o f _
with a combined capital
and surplus ofLess than

Banks

$1,000,000 - -

Over $1, 000,000
but less than
$5,000,000 - - - $5,000,000 and. ._.o~:c,-

In addition to furnishing separate data for eaCh State, it will be appreciated
if you will give the name and loo.a.tion of each non-we1-aber State Bank and Trust

St ·. 1299

... 2-

company in your district which has a combined capital and surplus of $1,000,000
.
.
or over, with
separate
figures of capital,
surplus and total resources.
.
.
.

While i·t is recognized that figures as of June 30, 1920, ~11 not be available

for all banks and that consequently the latest available data will ha~e to be
utilized,. it is desired t~t banks be classified as members and non-members on
~he basis of their status on
be

on a uniform basis.

June 30 in order

that reports for all districts ~

It will be· appreeiated if you will give the necessary

instructi.ons that care be exercised to exc.lud.e all insiii$utions which, on the
basis of capital requirements, are not eligible for membership in. the Federal
Reserve System.
Yours very truly,

Secretary.

Copy of this letter sent to Chairman of each F. R. Bank.

FEDERAL RESERVE BOARD
WASHINGTON

July 27' 1922.
St.2C)23.

SUBJECT:

MOnthly Report of Fiscal Agency
Expenses absorbed by F. R~ Banks,
Form 96-a.

Dear Sir:

The telegram quoted below, which was sent to
you on July 26, authorizing the discontinuance as of June 30
of reports on form 96-a showing Fiscal Agency expenses absorbed by Federal reserve banks, is hereby confirmed!
"TRANS 220. Inasmuch as functional expense
reports to be submitted beginning with July
will show total cost of operating Fiscal
Agenqy functions, submission of reports on
form 96-a, tiscal Agency expenses absorbed
by Federal reserve banks, may be discontittlled as of June 30. 11

Very

t~uly

yours,

Governor

LETTER SENT TO EA.CB F. R. Agent.

FEDERAL RESERVE BOARD
WASHINGTON

September 22, 1922.
St. 3o49.
SUBJECT:

Abstra0t of Condition Reports
of State Bank and Trust Company
Members ani of all Member Banks
as of June 30, 1922.

Dear Sir:
We are forwarding to you under separate cover

copies of the Board's Abstract No. 18 showing the
condition of State Bank and Trust Canpany members ani of
all member banks as at close of business on June 30;
1922.

Consolidatei figures for all member banks, both

National and State, are shown on pages l and 12.
Please forward one copy of the abstract to. each
State Bank and Trust Company mewber in your district that
has expressed a desire to receive copies of abstracts as
issued.
Very truly yours,

E. L. Smead 1 Chief,
Division of Bank Operations.

Letter to all F. R. Agent3.

FEDERAL RESERVE BOARD
WASHINGTON

September 26, 1922.
St.3057 •
SUBJECT:
De<:~.r

Discontinu•nce or modifi-.
cation of reports.

Sir:

With a view to reducing wherever pr~cticable the work
of the Feder~ reserve b~ in connection with reports submitted to the Federal Reserve Board, the Auxili~ry Committee
on Econonzy and Efficiency has recommended that certllin reports
be discontinued and others modified so as to elindnate All
data, the current value of which is not suffici~nt to warrant
continued submission.
The Board :tlas given careful consideration
to these recommendati~ns, und you
authorized to disco~tinua
the snbadssion of the following reports as of the dates indicated:

ar·e

1.. Working sheet showin~ pr.iricipol assets and liabilities

for each member bank subrni ttint; weekly reports to your
bmlk, the consolidn.ted f;i.gures· of which are .. reported
on fonn St. 51 and include~ in the Board's weakly press
statement showing ''Principal resource and ·Habili ty
items of reporting member bc:mks .. in leading cities"
to be discontinued immediately.
2. Forms 172 and 172a, Interdistrict movement of Federal
reserve notes, to be d-iscontinued as of December·· 31,
1922.
3· Detaileli lists prepared monthly in accordance with
BoZII'd 1 s letter X-304o date4. February 4, 1921, showing
each·member bankpena~ized on ~count of deficient
reserves.
To be discontinued as of Becemoer 31, 1922
(including lists prep...red for Coirjp~Coller of the ,
Currency .md the Chief N.:A.tionil B.::.nk Ex;:aoincr.) .

4. Form X-1252a,Currency and Coin received from and paid
to member and non,member banks, to be discontinued as
of December 31, 1922.

5·

Form x-1053, Gold Receipts and Payments, to be discontinued immediately. · ··

- 2-

7•

••·

St.3057.

Detailed reports now being furnished in accordwnce with
Board's letter St.l949 dated April 30, 1921, covering e~ch
member bank borrowing in excess of its basic line may be
discontinued as of September 30, and in lieu thereof reports should be submitted coverinc only those member b~s
whose avera6e borrowings are equal to or in excess of
3 times the basic line.
Det~iled

reports now furnished on Form A ffiay be discontinued
as of September 30, 1922 and in lieu thereof only total figures as provided on the attached revised Form A need be
furnished.

In order to a.void so far as practic ..•ble any d}lplication of work
between the Federal Reserve Bo~d and the Feder~l reserve b~, the
Committee also recommended th~t the det~iled corr~ilations rel~ting to
character of paper discounted or purchased by the Federal reserve
bcmks be zrode by the Federal Reserve Board.
'At the present time the Bozxd is compilL~g statistics corresponding to those shoVvn in tables 39 - 66 .:.ppearing on pages 130 - 220
of its 1921 Annual Report, all of which with the exception of d~ta
shown in tables 43, 44, 45, 63, Wld 64 are published monthly in the
Bulletin.The Board also compiles each rr:onth tables showing the
amount of paper discounted for member bi.lnks in 13.X;e, medium size,
and small cities and towns in e~ch st~te, ~copy of which t~ble for
the month of June is enclosed herewith.
Copies of these tables
will be furnished to the Federal ~eserve banks e~ch month upon request.
A statement showing the character of data now being co~
piled by the Bourd is enclosed herewith.
The Board uses mechanical tabulators for the purpose of co~
piling data regarding discount and open market operations, ~d as
these machines can be so adjusted to obtain a variety of classifications without any material a.ddi tion to the volu..'ne of work required, it will be practiC<lble to rearr.:mga or enlar,:;e somewhat
the tables referred to above.
It will be appreciated, therefore,
i f you will kindly advise us at your early convenience of :my
changes you may h~va to SU5gest in the enclosed schedule, or of
any additional data which you think should be co~iled regularly
by the Bo.:...rd.
In order to obviate the necessity of shOiving any unnecessary
data on schedules covering bills discounted ~d bought, and U.S.
securities, and MUnicipal warrants purchased, there is given below
a statement of the minimum inform~tion Which the Board desires to

....

St.}057•

have shown on these schedules. It should be understood of course
that there is no objection to any Federal reserve bank's showing
such additional infonnation on the schedules as will be of value
to it in its work:
SCHEDULE OF BILLS DISCOUNTED FOR MEMBER BANKS - BD-4
1.
2.

Schedule nunber and d.?.te.
Name and location of rediscounting member bank.
3. Item number.
4. Symbol indicating class of paper • i.e. , whether commercial,
agricultural, etc.
5. Maturity date or number of days for which discount is
charged.
6. · .Amount.
1. Federal reserve bar~ discount rate.
8. Member bank rate.
9. Unearned discount.
(NOTE:

If t~~en under repurchase agreement, the schedule
should show the maturity date of the agreement)

SCHEDULE OF BILLS BOUGHT IN OPEN J.VlARKET - BD- 7

1.
2.

3.
4.
5.
6.
7.
8.

Schedule number and date.
Item number.
Name and location of acceptor.
Character of acceptance, i.e., whether based on imports
or exports, or domestic transactions, and dollar
exchange.·
Maturity date or number of days for which discount is
charged.
.Amount.
Federal reserve bank rate.
Unearned discount.
From whom purchased.
(NOTE:

If taken under repurchase agreerr.ent, the schedule
should show the maturity date of the agreement)

SCHEDULE OF U. S. SECURITIES PURCHASED - S-2

1.
2.

3.
4.
5.
6.

Schedule nunber and date.
Description of securities, including maturity date.
Interest or coupon rate.
Par value (amount chargeu investments)
Accrued interest.
Premium or discount.

St. 3057.

- 4 SCHEDULE OF U. S. SECURITIES PURCHASED- S-2 (Cont 1 d)

1.
8.

Total cost.
Name and address of institution or person from wham
purchased.

•

SCHEDULE OF MUNICIPAL WARRANTS PURCHASED
1.
2.

3.
4.
5.
6.

Schedule number and date.
Description of warrants, including maturity date.
Maturity value ( amount charged investmants)
Rate at which purchased by Federal reserve bank.
Unearned discount.
Name and address of institution or per son from whom
purchased.
Very truly yours,

3 Enclosures.

LETTER SENT TO CHAlEMAN AT
EACH FEDERAL RESERVE BANK.

Vice Governor.

'•.

STATE!'IIENT SHOWING CHARACTER OF DATA REGARDING DISCOtn-JT .AND OPEN
Ivl.ARKET OP.C:RATIONS COMPILED M.01i'THLY BY T:-IE FEDERAL RESERVE
BOARD FOR EACH FEDERAL RESERVE DISTRICT.
BILLS DISCOUNTED FOR MEMBER BANKS:
l.

Distribution by classes of paper a - Member banks 1 collateral notes:
(1) Secured by U. S. Govern~ent obligations
(2) Otherwise secured - - - - - - - - b - Agricultural and livestock paper
- - - - c - Bankers 1 acceptances:
(l) Domestic trade (2) Foreign trade - - - - - - - (3) Dollar exchan6 e
d - Trade acceptances:
(1) Domestic - - - - - - - - - - - - - - - (2) Foreign
- - - - - - - - - - - - - - e- Rediscounted paper, n.e.s.:
(1) Secured by U. S. C~vernment obliQations (2) Othervlise secured and unsecured
f Total
- - - - - - - - - -

Distribution by maturities a - From l to 15 days - - - - b - From 16 to 30 days - - - c - From 31 to 60 deys - - d - From 61 to 90 deys - - - e - From 91 days to 6 rronths
f - Average maturity - - - -

3· Distribution by rates - Total amount discounted at each
rate, also average rate charged - - -

- - - - -

Distribution by classes of member banks a - National banks - - - - - - - - - - b - State bank and trust company members - - - - -

5· Distribution by states and cities a b c For

Total amount discounted,
Total amount reduced to a common maturity basis*,
Average maturity of bills discounted,
member banks in
(1) Large cities (100,000 population or over) - (2) Medium size cities (15,000 to 99,999 population)(3) Small cities and towns (less than 15,000
population) - - - - - - - - -

6. NUmber of member banks accommodated in each district
*Amount discounted for all member b~.s in each district, state
or city, multiplied by the average maturity of bills discounted
for such banks, and divided by the average maturity for the
System ••

(St. 3057a)

BILLS IDUGHT IN OPEN MABKET:

Distribution by classes a - Banker·s 1 acceptances:
(1) Foreign trade - (2) Dorr.estic trade
(~) Dollar exchange
b - Trade acceptances:
(l) Foreign - (2) Domestic - - - - - - Total
c -

Distribution by maturities a - From l to 15 days b - From 16 to 30 days
c - From 31 to 60 days
d - From 61 to 90 days
e - From 91 to 130 days
f - Average maturity - - - - - -

Distribution by rates - total arr1ount purchased at
each rate, also average .rate charged - - - -.- ---------

Distribution by classes of institutions froxn which
purchased:·
a - National banks - - - - - - - - - - b - State bank and trust company members
c - Non-meuber barucs, etc. - - - - - - - -

(St. 3057a)

...

•

Form A
(Rev. Sept. 1922)
DISCOUNT .AND OPEN IvL\RKET OPERATIONS DURING THE MONTH OF - - - - -

FEDERAL RESERVE BANK OF - - - - - - - -

------

Bills discounted for member banks - - - - - - - - - - - - - - - - $

Discounted paper acquired from other Federal Reserve Banks

.,.

Acceptances bought in open market - - - - - - - - -

Acceptances bought from other Federal Reserve Banks

5· U. S. bonds, notes, and certificates

b~t

6. Municipal warrants boUbht - - - - - - - - 7.

Total. discount and open marl:et operations -

MEMORANDA

Number of member banks accommodated through the discount of
paper during month - - - - - - - - - - - - - - -

.
Federal Reserve Agent.

To be mailed to the Federal Reserve Board (Division of Bank
than the 7th of each month.

O~erations)

not later

(St.321)

..
C 0 N F

l DE N

1' I A___!._

VOLUME OF BILLS DISCOUNTED

DUR..NG JUNE 1922, DISTJ.UBU'I:ED-:BY S'I'ATES AND AVERAGE MATURITIES,
AND ACCORDING TO THE SIZE OF THE CITIES IN WHICH THE DISCOUNTING BANKS ARE LOCATED.

]'or use of Faderal Reserve
Board only

Sunmarx_ bIY Fe d era1 Re serve Di s t

Boston

ric t s
Average
maturity
of paper
Amount discounted for banks in
discounted for banks in
Entire Large Medium
Snal1
Medium
Snall
Large
Entire
cities and
size
dis- cities size . cities and
ci_ties
district
towns
trict
cities
cities
towns
Days Days Days
Days
$11,827,066 $8,084,915 11.96 9.85 17.57
20.17
$82,738,512 $62,826.531

New York

345,164,080

299.531,293

21,9}8,803

23,693.984

7.58

6.17

17.83

15.95

167 ,652,073 118.394 ,JI.t2

25,051,970

24,?05, 761

Philadelphia

186,639,246

138,177,689

17,110,267

3l,351,290

8.89

6.34

16.62

15.93

1o6,270,285

56,067,651

18,209,839

31)992, 795

Cleveland

121,959,918

92,291,892

11,992,909

17,675,117

11.85

8.. 90

16.55

19.28

92,559,279

52.598,150

18,132,698

21,828,431

Rtcbnond

71,671,628

34,488,703

14,766,000

22,416,925

17.66

7.50

21.75

30.6o

81.058,354

16,561,861

20.570,808

43.925,685

Atlanta

21,845,215

4,329,431

6,079,, 759

11,4}6,025

49.27 32.62

36.00

62~64

68,936,}46

9,o44,911

14,016,199

45,875,236

Chicago

93,238,347

53,444,282

15,300,3o6

24,493,759

31.81 24.57

28.31

49.79

189,941,009

84,097,197

27,742,538

78,101,274

Federal
Reserve
Bank

St.2939.
Amounts discounted adjusted to average
...
maturit~ for S~stem
Banks in
-·
Entire
large
!Medium size Small cities
district
cities
cities
an~ towns

$63,397,823 $39,643,217 $13,310,247 $10,444.359

'\..

4,102,813

8,833,675

9.74 48.07

18.73

49.15

56.733.350

24,009,404

4,920,631

27,803.315

21,288,029

77.986,207
•·
10,190,752

1,289,232

9,808,045

51,44 16.17

65.88

85.57

70.134,762

10,946,942

5,439.575

53,748,245

Kansas City

14,393,268

5,327,646

152,746

8,912,876

53.73 36.37

55.68

84.07

49,526,554

12,4o7.936

544.-659-

}6,573,959

Dallas

16,825,424

2,737.351

3,105,322

10,982,751

70.66 29.05

62.30

83.39

76,137,698

5.093,612

12,389,236

58,654,850

San Francisco
92,632,354
TOTAL
1,159.318,716
Percentage distribution
June
100
May
100
April
100

53.312,383
834,644,160

8,667,199 30,652,772
116,332,422 208,}42,134

23.09 10.05
15.61 9.03

37-91
24.34.

31.68
37.12

St. Louis

90,922,695

Minneapolis

•
FEDERAL RtSERVE BOARD

DIVISION OF BANK OPERATIONS
AUGUST 25, 1922 •

....

7~.0

67.5
70.5

10.0
11.8
11.3

18.0
20.7
18.2

136.971,183 53 J 731,882 21,045,33'8 62,193.963
1,159,318,716 482,597,105. 181,373,738 495.347,873
100
100
100

41.6
39.0
42.0

15.1
16.0
16.6

42.7
45.. 0
41.4

' .J

'r 0:

..
·•.·::

CONFl DENT I AL
For U:se of Federal Reserve
'Board only

state

Alabama
..4.rizona
Arkansas
California
Colorado
Connecticut
Delaware
Dist. of Col.
Florida
Georgia
Idaho

Illinois
Indiana
Iowa

Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska.
Neva.d.a
New Hampshire
New Jersey

Entire
state

$4,690,371
1,47},496
},831,273
57,099,216
. 3 ,310,24o
6,507,634
1,174,853
20,473,930
1,310,039
1,949,661
19,376,757
44,652,4-65
8,695,371
11,421,359
1,837,929
66,256,049
4,7SS,631
3,177,301
5,361,375
67,118,588
27,241,772
12,622,212
1,229,033
16,717,252
3,207,177
3,906,900
3,337,053
35,804,536

VOLUME OF BILLS DISCOUNTED DURING JUNE 1922, DISTRIBUTED BY STATES AND AVERAGE MATVRITIES,
AND ACCORDING TO THE SIZE OF THE CITIES IN WHICH THE DISCOUNTING B.Mi'KS 1illE LOCATED
Detailed figures bY states and classes of cities.
St.2989a
Average maturity of paper
Amounts discounted adjusted to average
Amount discounted for banks in
discounted for banks in
maturit~ for Slstem
Small
Medium
in
-Banks
Small
Medium
Entire l:.arge
Large
'
cities
and
size
cities
and'
Entire
Large
size
Medium
size !Small citie s
state cities
cities
towns
cities
state
towns.
cities
and towns
cities
l cities
Days
'
Days
Days
D<;~-ys
44.41 6.00 25.15
$13,341,~06
$115,313 $3,387,170 $9,838,923
$2,287,541
67.16
$300,000 $2,102,830
2,424,083 1,479,696
44.2?
618,098
37.38
41.37
3,903,779
855,398
56.201,809,296 11,980,157
65.08
13,789,453
2,874,513
29.53
956,760
82,313,615
49,227,343 13,922,696 19,163,576
22.51 ~6.17 53.. 27
5.,477,000
4,081,279
54.63
lq ,540,937
7,6o4,l86
1,687,741
9,291,927
2,218,557
43.83 24.14
53-52
1,091,683
8,146,.507
4,156,238 2,663,550 1.126,719
14.03
1,253,690
19.55 21.19 20.41
2,190,944
},063,000
15Q,:i.20
1,328,266
1,478,386
20.36
1,018,853
19.65 -15.03
156,000
4,.84 4.84
6,351,237
6,351,237
20,473,930
2,961,729
752,705 2,209,024
653,891
17.91
656,148
35.29
52.75
26,704,647
11344,115 7,580,810 17,779.722
57.45
52.45 25.25 51.77
4,832,365
2,286,296
831,000
25,462,087
20.43
21.23
3,349 '769 22,132,318
l6 ,913,482
20.53
2,463,275
58,622,124
42.69
15,278,499
81,504,809
'
1,604,186
19.66
27.72
28.50
5,588,662
6,039,786
33.,024,017
8,824,408
4,181,951
14,738,514
1,732,155
28.00
30.60
14.54
26.47
4,503,051
2,331,870
1,860,450
44.48
598,423
42;506,
49,157,215
767
6:.052,025
76,10
16.25
67.20
8,
721,678
2,124,681
575,000
4,911,280
4,163,251
46.92
350,639
41,72
71.01
397.390
15.00
1,385,543
87,386
365,000
8,377,929 2,120,196 3,022,5o6
13,520,631
19.58
2,409.760
3.19 2.10 20.58
1,608,304
62,237,985
11,524,327
7,129,655
18,653,982
1,847,
700.
38.,24
61.20
97.39
2,910,931
4,202,990
1,675,391
2,524,599
15 .. 64
26.33
1,502,301
20.65
1,675,000
3',298,342
2,833,161
348,301
6,479.804
3,112,124
16.. 55
18.87 12.42 19.69
276,139
1,973,112
34,196,628
43,116,877
18.23
6,930,959 1,989,290
10.03 9.02 17.41
1,703,73'6
6,215,231
59,199,621
14,719,815
35.342,048
9.499,972 11,122,261
20.26 16.25 23.16
25.95
6,691,399
6,405,858
14,144,515
10,946,942
1,428,269 10 ,24o ,989
22,616,200
82.43
27.98 16.77 45.37
1,939~$66
491,594
10,190,752
378,690 5,367,110
5,745,800
82.6o
1,014,-548
27.57
73.00
214,485
11,320,956
51,427 4,235.716 '
14.82
.
·15
,6o8,099
14.58
11.74
41.33
1.600,236
54,200
15,062,816
21,889,208
2,122,533 19, 766,675'
122 .. 09 105.13
106.57
271,465
2,935.712
6,199,293
6,954,335
13,153,628
70.26
1,545,400
52-57 4o.99
2,361,500
1.453,982 2,463,822
3,917,804
18.33
15.56
20.49
1,877.753
1,4,9,300
11,498,613 7,901,060 12,515,466 ,• 't'
31,915,139
13.92 13.24 13.95
14.59
13,397,361
8,8 2,613
13,564.562

C 0 N F I DE N T I AL

VOLUME OF BILLS DISCOUHTED DURING JUNE 1922, DISTRIBUTED BY SIJ. k!.'ES AND AVERAGE MATURITIES,
1

For use of Federal Reserve
:Board only

AND ACCOBDING '.ID TBE SIZE OF TID.: CITIES IN WHICH THE DISCOUNTING :BAljKS ARE LOCATED

Detailed figures b states and classes of cities. ( Cont 1 d)
St,2989b.
Average
maturity
of
papar
.Amounts
discounted
adjusted
to average
.Amount discounted for banks in
discounted for banks in
maturity for System
Medium
Small
Snall
Banks
in
State
Entire Large Mediun
Large
Entire
size
cities
and
size
cities
and
Entire
Large
'Mediun
size Small cities
cities
state cities
state
cities
towns
cities
to~
state
cities
cities
and towns
!)._q,J•s
Days Days
Days
$5,100 $1,176,084 88.44
$6,690,187
$1,181,184
28.63
88.70
$9.350 $6,680,837
New Mexico
16,568,668
148,042,017
$111,030,928
$289
,344,341
14,903,190
18,151,399
7.21
17.11
18,859,690
19,75
320,316,199
5.99
New York
•
18,518,401
22.42
12,732,86a
4,029,558
4,207,313
47.25
35.10
8,236,871
5,785,539
North Carolina
126,563
1,662,554 84.28
84.11
701,278
9,656,592
86.52
8,955.314
1,789,117
North Dakota
34,582,443
,422'
36,279
3,518,833
18.
70
16.38
22.38
6,850,379
53,834,736
7,735,091
9,820.~?3
34.32
44,95J. ,655
Ohio
. 65,360
147,268 l9,002,2S3
19,149,551
3,159,600 92.72
35.18
93.91
3,224,960
Oklahoma
8,861,811
282,849
6oo,ooo
20,000
3
,142,196
14.60
18,701
42.54
8,56o,.z61
36.78 7.36
3 J 762,196
Oregon
24,6oo,814.
126,674,091
8.02
16.15
17.74
21,659,039
246,654,120 191,953,528
33,041,553
34,17,3,.252
5.52
67,~00,025
Pennsylvania
402,066
1,893,449
l, 91,383
21.89 24.16 16.24
963,910
386,591
Rhode Island
1,350 '501
20,75
42.27
3,764,916 33.29
13,770,753
3.578,853 10 .l~;t,-900
6,458,471
2,693.555
South Carolina
12,396,24S
14.96
100,000
95,841 12.3,¢(5_..!-107
2,018,051
95.17
2,118,051
91.39
South Dakota
42,97
1,954,227
866,000
8,936,613
16,257,950
56.21
2,482,369
1,950,211
47.91
35.24
5i!!d,110
5,298,580
Tennessee
2,786,141
5,093,612
10,967,980
64.62
61.47
59,667,027
8,894,919
14,413,411
29.05
76.55
2,737,351
43t~at435
Texas
2,882,250
46.02
869,584
6,.., 52 ~~218
10,276,052
462,278
2)213 ,673 31.64 18.79 29.37
2,395,446
Utah
5,071,~97
20.82
20.82
2,363-.}05
~,.. 363 ,305
1, 772,435
1,772, 35
Vermont
7.377,463 7,045,501 ~,o~,,o11
6,847,290 18,35 9. 57 29.98
12,041,661
3,669,086
27.55
26,505.9l5
22,553,037
Virginia
l;,_339,44o 1,872,411
2,422,600 20.47. 7. 53 26.. 6o
8,2%,.}14
32.51
1,099,050
s.o44;,523
2,776,000
6,297,650
Washington
;·5,974,884
4,212 ,34o
4,881,282
14.18
l9.11
16.71
4.,637,662
10, lo1
9,518,944
West Virginia
g,424,680 4,277,793 . 8.,487,. 795
21,190,26g.
43.04
3,079,238 38.78 34.25 41.4o
1,613, 574
3,840,300
8,533,112
Wisconsin
. ,..4,887 ,,904
4,887,904
99.85
764,352 99.85
764,352
Wyoming
37.12 1;159,313,716\ 482,.597,105 1s1,373.738 ,f49s~J47;m
TOTAL: June 1,159,318,716 834,644,160 116,332,422 . 208,"}42 ,134 15.61 9.03 24.34
10,
..
07
131,812,268
17.44
230,573,958
23.57
37.93 1,113,931,285 \ ~4~154,337 178,216,730 ''501,56o,218
May 1,113,931,285 751,545,059
1,308,055,478 \ 9,785,921 217,633,467 Sil0~636,090
36.01
23.22
238,166,130
148,239,212
9.46
15.86
April l ,308,055,478 921,650 ,-os6
Classification of cities:
FEDERAL RESERVE BOARD
Large cities - Population 100 1 000 and over.
DIVISION OF BANK OPERATIONS
Medium size c~ties- Population 15,000 to 100,000.
AUGUST 25, 1922.
Small cities and towns - Population under 15,000.

t,~

•'2'if.

-$, ..

_.._,'

FEDERAL RESERVE BOARD
WASHINGTON

October 16, 1922.
St.3105.

SUBJECT;

Revised Form A, Monthly
Report of Discount _and
pPen Market Operations.

Dear Sir:

In accordance·with the Board's letter
St. 3057, da:ted September 26, there is enclosed
herewith a supply of Form A, to be used in submitti.ng the monthly report of discount and open
market operations beginning with October 1922.
Very truly yours,

E. L. Smead, Chief,
Division of Bank Operations.
Enclosure

(Letter to.-all F. R. Agents)

FEDERAL RESERVE BOARD
WASHINGTON

November
SUBJECT:

6, 1922.
St. 3146.

Closing of Books on
December 31, 1922.

Dear Sir:
On. June 29, 1922, the .Joard advised you in ~ ts letter X-}462
of an opinion of Counsel wherein it was held that the practice of the
Federal reserve banks of setting up two surplus accounts wa.s not authorized by the Federal Reserve Act, and that when the total surplus
of a. bank equals or exceeds its eu.bacribed capital, 90 per cent of
net earnings, after the payment of dividends, JW.st be pa.~d to the
United States as a franchise tax.
In accordance with this opinion,
you were advised in the Board's letter X-3492 of ~u~t l, 1922, a.
'COPY of which is enclosed .herewith, that those banks Which transf~rred
~unts to ·super-surplus account on December 31, 1920, should recalculate the amount of franchise taxes payable to the Government and
the amount transferrable to surplus account.
In this same letter the
Board also stated the general principles by which it would be boverned
in the future in autb:::>rizin~ depreciation charc;;es on bank premises.
.
In order that the Board m9if have ample time to pass upon all
proposed charges against curre:'lt earnings in connection with deprecia.t~n allowances or reserves to take care of probable losses, it is' requested that the di:vidend. resolution of your Board of Directors, together
with your l;'equest for authority to close the books on December 31, 1922,
and to make certain chare;es a.;:;a.inst current earnine;s on account of depreciation and for other extraordinary purposes, be mailed in time to reach
the Board'a offices not later than December l, 1922.
The dividend resolution should be accompanied with statements
showing 'the following information:
~

Estimated gross

Unpaid indebtedness of closed banks to Fe,deral reserve bank, ·
givil'lg the ~es of banks, inde'btedness;.ef each, character
of security, if any, and estUnated losses.

Indebtedness to Federal reserve bank of membdr banks which
are co~nsidered. to be in a.n unsafe condition, giving the
names of the banks, indebtedness of each. character of
securi cy, if a:rq, and probable lo s.se s.

net

earni~s

for the calendar year lSI22.

•

..'··

;

- 2

St.3146.

The following rules have been approved by the Federal Reserve
Board for the guidance of the Federal reserve banks in submitting requests
for permission to make special charges ~ainst current ne.t earnings
and in closing their bocks on December 31, 1922:
1.
Land~buildin.;s (including VruJlts and vault equipmerri2.,.,_~
fixed machinery and equipment.
Requests for permission to charge current earnings with depreciation allowances on lar:d or buildings (including
vaults and vault equipment). s:b.ould be submitted in the form outlined in
the Board's letter X-3492 of .Au6ust 1, 19-2, ani should be accorq;>anied with
a complete stat·ement of the facts and conditions considered by the Board
of Directors in arriving at its recom>1endations.
With regard to fixed
machinery and equipment, it is requested that each class of machinery and
equipment be listed separately, and that the rate of depreciation and the
amount of reserve which t}le bank proposes to set up be shown separately
for each class.

2. . Furniture and equiJ2L1cnt.
The balance remaln~ng in this
account on December 31st .should be charged to profit and loss •.

J. ~ent depreciation on United States securities ... Full provision should be made for apparent depreciation (based on mar·ket value) on
United States securities before any amount i& transferred to surplus acr~unt.
In case the present reserve for apparent depreciation is· in excess of :the
actual depreciation as determined by market quotations as of December .29,
which the Joard will tel~ 6 raph to your bank on the mornirJb of December )0,
such excess should be credited to profit and loss~
4.
Surplus and franchise taxes.
After the surplus account has
been charged with franchise taxes pcyable to the Government for prior years,
in accordance with the Board 1 s letter X-3492 of Au6 ust l, 1~22, and after
·all. current expenses, dividends, depreciation allowances and other extraordinary charge-offs authorized by the Federal Reserve Boct'd. have been
provided for out of earnings the remaining net earnin....,s shall be dis.;.
tributed as follows:
·
(a)
Transfer to surplus account all availabl0 net earni%S
providin6 t:1e to:tal surplus will not as a result exceed the ..
bank's subscribed capital, in which case only such ~~unt should
be transferred as is necessary to increase the surplus account
to an arr.ount equal to t::te bank 1 s subscribed capital.

j'l\ ' ,

- 3-

St.}l4o.

(b) Of the balance of net earnin6s, if a~, 10 per cent
should be tr~sferred to surplus account, and 90 per cent
paid to the U. S. Governme~t as a francnise tax.
FUrther instructions as to the time and method of payment of
the franchise tax. due for former years, whic:l will be charged to
surplus account, and for the current y;:;ar will 'Je issued at a later
date.
Very truly yours,

Vice Governor.

'
Enclosure.

(Letter to all
L

Chairrr~n)

- .

FEDERAL RESERVE BOARD
.
.
WASHINGTON

SUBJECT:

August 1, 1922.
X-3492

Franchise Ta;xes • Surplus funds, and depreciation charges·

Dear Sir·
f •
vrith reference to th<J Loa.rdl::.~ lettel' X-34G2 of June 29, 1922,
tJnclosing a copy of Counsel's opinio11 dated June 51 1S:22 1 roga.z:ding the
proper mdi1oJ of ouil..iing u,;:; sur.r:lu::;; funds, by Federal Res_erve · Bont.s and
of dot..:rminini: t::1~ amount of frcmc:CJ.iae ta:.-cr2:s _p2.yable to t.:.1,; U• S •
Government, you atrJ advised that in accordanoo thorowi th, t!!Pi~ bw'll.~
w.:ich tr.).i:J.Sf~rre;;d .:~rr:ounts to ~ur,erJurplus accoUL""lt. on Do.:;c~:r:iber jl, l:.;c:.C
shoulJ r0calculate the amount of franchise taxes pcyo.bl<.::: to the GovGrnmant and the amount transferable to· surplus account.

·In

•

view of the ruling that the supersurplus account is a
bookkeeping entry only and that the law contemplates 2nly one surplus
fund, all charges heretofore made against :
supersurplus account to
cover depreciation on bank premises or for reserves for undeterminBd
liabili tiss, should be reversed. No charges against the normal surplus
or supersurplus will be authorized in the future to cover' depreciation
on bank premises or for th<:1 purpose of setting up special reserves, as
such charges if made might a.f;f'ect amounts ~-ubsequE:ntly payable to the
Government as franchise tax:~s.
For your information t~rd is enclosed h<::rowi th a stat.ament
which shows the necessary adjustments tc be made by each Federal Reserve
Bank in order trat the correct amount may be paid to the Government as
a franchise tax and proper credit made to surp~Qs ~ccount. It will be
appreciated .if you will kindly have th~ figures ch&cb;•i so far as they
relate to your Bank, and advise the Board at your ~arl;; convenience as
to whether or not you find them correct.
The amounts payable to the
Government on account of franchist;; taxes due for forn-.er years should be
charged to surplus account on December 31, 1922 before. closing of l;>ooks,
and paid to the U. S. Governm~t in acco~dance with instructions to be
issued at a later 'date.
·
In view of the fact that no deprecia~ion charges will be rmde
against supersurplus, the Board will review before the end of this year
the policy which has been pursued heretofore with reference to depreciation charges on bank premises.
lt is accordingly desired that your
requests for authority to. charge off depreciation -on bank,pramises, or
to set up a' reserve for djpreciation, be accOlllpanied with a statement
in a form similar to that indicated below,· showing separately for the
head office and each branch, the cost, estimated rnarlmt value·, and
book value (less reserves) of land owned, and the cost to date, estimated replacement cost, and book value (less reserves) of new buildings,
elther conpleted or in cou~se of. constructi,o!t, or of remodeled buildings.

-2-

Cost
Estimated market value
Book value (net)

$_ _ _ __

TOTAL

BANKING HOUSE
Cost to date
Estimated replacement cost
Book value (net)

$_ __

BUILDINGS INCLUDING
VAULTS
$_ _ __

FIXED MACHINERY
ii.ND EQUIPMENT
$_ _ _ _ __

In passing upon requests to set up depraciation reserves or to
charge off depreciation allowances, ~~e Board will in general permit a
charge against current net earnings of not exceeding 2 per cant of the
estimated replacement cost of bank buildings, including vaults bu.t
excluding fixed machinery and equipment.
In case, however, the estimated replacement cost is considerably below the book value, the Board
will consider requ~sts from Federal Reserve Banks for permission to
write off a depreciation charge in excess of 2 per cent.
The estitnA.ted replact:ment cost, less residual value, of fixed
machinery and equipment, such as boilers, engines, dyna"!1os, rr.otors,
power pumps, elevators, hdating, pl~"'lbing, lig~ting and V8ntilating
systems, pneumatic tubes, refrigeration plants, autorratic fir-:: sprinkL;r
equipment, ru1d vacuum clBaners, snould b0 d8tarmined and a reserve set
aside ~~ch year out of current net earnings to cover re9lac~ments.
Annual o.ddi tions to this reserve should be bas0d on the estimated. life
of t ~"' machinery and eq_uipment, with a view to th,;,: ulti.T.a.ta replacement
of tt·2 machinery a."l.d equipment, but shall in no case exc(>_,d 10 per cent
of t~e cost thereof.
No charges against current net earninss will be authorized by th~
Federal Reserve Board to covsr depreciation on land where the estimated ·
market value of the land is equal to or in excess of its n0t book value.

The estimatt:l of the rr.arket value of land and of the r eplacernent
cost of· buildings either corrpleted or in course of construction and of
fixed machinery and equipment, should be obtained from the best available authorities and a copy of the estimates thus obtained enclosed
with your request for authority to charge current net earnings vvith
depreciation on bank premis.:;s. The estimated replacement cost of
buildings including vaults, but excluding fixed m:.1chinery and t;;quipmont,
may be arriv~d at by determining the m8an of two am~xnts, namely; (1)
the total actual cost of construction, and (2) tLa estimated cost of
construction based on the lowest prices that have existed during the
last fifteen years.

-3Where properties have been purchased with the intt:mtion of
razing existing buildings and of erecting new banking quarters the
Board will consider requests for permission to deduct from current
net earnings an amount equal to the difference between tne cost of
the property and the market valuo of the building site exclusive of
improvements.
Advance approval of t:b.e Federal ResGrve Board shall be obtained
for all depreciation and other cnarges against curr.;nt net ;J.arnings
whether in connection With ba,nk premises as outlinad above or for
otner purposes.
Very truly yours,

G o v e r n o r.

'
LETTER TO .ALLCH.AIRMJW.

.ADJUSTMENTS TO BE MADE IN SUBPLUS ACCOUNTS AT END OF 1922 AND ADDITIONAL AMOUNTS
PAYABLE TO UNITED STATES GOVERNMENT AS FRANCHISE TAXES FOR J'ORMER YEARS.
Amounts previously charged to supersurplus to be
credited to surplus fund and debited to account
origir~c.llv 'Credited as follows Bank
Depreciation Reserve for
Total
premises
reserve on
undetermined
account
bank premises liabilities

Federal
Reserve
Bank

Amount to be
charged to surplus
fund and paid to
U. s. Gover~~nt as
franchise tax for
former_years

To~l

surplus fund
(revised) on
Dec. 31, 1922
before closing
of books

Boston

New York

1,000,000

Philadelphia
Cleveland

Richmond

125,000

1,604,549·37

59 I 592,577 ° 77

36,366.25

17.908, 779 • 79
22,634,279·19

225 ~- 276.50 ~25,276.50

2.030,000

$ 16' 235,807.79

125,000

ll,234,66s.6o

213,623.77

3,899,942.22

710,189·99

30,345,275·43

20,4

Atlanta
Chicago

247,349-91

2,030,000

St. Louis

9,388,223.25

Minneapolis

52,423.36

7,416,054.44

Kansas City

208,169-99

9,437,561.62

...

Dallas
San Francisco
TOTAL

•

250,000

$ 3,630,276.50 $350,276.50 $ 2,280,000

$ 1,000,000

7, 394, c~n .30
306,925.46

15,142,126.72

'· ...
$ 3,400,06e-.H

$215,629,391-32.

FEDERAL RESERVE BOARD
WASHINGTON

November 17, 1922.
St. 3170.
SUBJECT:

Revision of Feder~l Reserve
Bank Balance Sheet, For;m 34.

Dear Sir:
There is enclosed herewith an unruled proof copy of the
daily bal::mce sheet Fonn 34 to be used by the Federal reserve
banks during 1523. The year's supply of the form requested in
your recent telegram will be mailed to you ::1s soon as received
from the printer 1 which sl'wuld be .::.bout the midd.le of December.
From an examination of the enclosed proof copy you will
note that a number of changes have been made in the form now
in use, all of Which it is thought are self-explanatory. The
following changes will be made in the Board's weekly press
statements beginning with J::muary 3, 1923 1 und the same procedure should be followed by the Feder·;.l reserve banks in preparing stater:1ents for rele.::..se to the local press:

1. The caption "Legal tender notes, silver, etc.
be changed to "Reserves other than gold."

will

2. A new item "Non-reserve cash" will appear immediately
following "Total resarves" and the cu:nount of the item vvill be
wired to the Federal reserve bam~s in the weekly COND telegram
against code TUBA. No comparative fi~rures for d::~.tes prior to
1923 will be shown opposite this c::.ption in weekly press statements, but in lieu thereof an asterisk (*) will appear in the
appropriate column referring to the following footnote:

(*)

Not shovvn separately prior to J::mue;.ry 1923.

Published statements will show "Bank premises 111 net,
i.e. , as reported ag~inst code TOUR on Form 34. The same code
word will also be used to indicate consolidated figures of bank
premises in the Board's weekly COND telegram.
In showing figures for comparative dates in 1922 against
the captions "Reserves other than gold, 11 "Uncollected i terns,"

'
St.3170.

- 2 -

and "Bank premises," no changes \vill be made in the figures
originally published in the weekly press statements.
It may
also be stated that reserves for probable losses, self insurance, etc. , will continue to be .included among "All other liabili ties 11 as is the present practice.
Very truly yours,

Vice Governor.

Enclosure,

(Letter to Governors of all F. R. Banks)

•

.•

FEDERAL RESERVE BOARD
WASHINGTON

November 21, 1922.
St. 3178.

SUBJECT:

1923 Edition of F.R. Agent,•~
Daily Statement, For.m F.R.A.5.

'··

Dear Sir:
There are being forwarded to you today 1lllder .

separate cover

copies of Federal Reserve

daily statement For.m F.R.A. 5 fot use during

Agent~~

1923~

The new edition of the forrr, is the same as that now
in use.
Kindly acknowledge receipt

the forms,

Very truly yours,

E. L. Smead, Chief,
Division of Bank Operations.

Letter to be sent to
all Federal Reserve Agents.

FEDERAL RESERVE BOARD
WASHINGTON

Nov. 28, 1922.
St. j1';)1.

SUBJECT:

Revision of v·eekly Condition
Reports from l.lemoer Ba:nks,
Form St. 51.

Dear Sir:
WiL:. referance to the Board's letter X-3553 of November),
1';)22, I beg to advise that it has been deciiai to ask reportin~ member banks to subdivide their :!.1oldi.ngs of U. S. stlcurities into the
followin~: classifications in their waddy reports on Form St.5la:

1.
2.

3·

(

U.
U.
U.
U.
U.

S. pre-war bonds
S. Liberty bonds
S. Treasury bonds
s. Victory notes a•rl Treasury notes
S. Treasury certificates of indebtedness.

In view of the fact that tl1e Comptroller of the Currancy
now requires National banks to report their loans and discounts, brass,
in condition reports submitted to his office, and as t~1e Board requires
State bank and trust company members to report their loans and discounts gross on Form 105, it has also been decided to modify Form St.51
so as to have member banks raport t:leir loans and discounts gross in
we-:;1-ly stateme:'lts on Form St.Sl.
This will make the method of reporting loans and discounts uniform in all statements submitted· either to
the Comptroller or to L1e Board.
The figures which will be reJ_:orted by member banl~s vdll, of
course, include all rediscounts, v,::.et~'1er Vvi t~1 the Federal reserve bank
or with other banks, and to tile extent that reporting member banks
have rediscounts other than witl1 the Federal reserve banks, tl1e fi?,ures will not be COIIJt.'arable wit:n t~-"ose rublis!1ed in the reoe~1t I ast.
It is not thought, however, t.hat t:1e volume of such rediscounts is
sufficient to affect in any material way the comparability of the
figures.
As in the 1=ast, it is e.x:rected that the Reserve banlc will
continue to report the amounts of Reserve balances with F. R. B~'1k,
Government de~osits 1 and Bills :cayable and rediscounts with the F. R.
Bank.
There does not seem to be ar-;,y good reason, however, for contiming to segregate bills payable from rediscounts in publis~ie•i
statements, and accordingly, the two items have been combined o1·· the
attached Form St.51.

•

1!1 •
I

St.3191.

- 2 -

Enclosed herewith is a supply of Form St.5l for your use
in submittirlf:': reports to the .Board beginning with January

1923,

and a sample form showing the captions .of the items as they will
. appear in the press statements issued by the .Board beginning with
the statament for January 3, 1923, w~1ich Vvill be released for
puolication on Friday, January 12, 1923.
It is requested that Form St.51a, whic:1 is surllied by
your bank to re~: orting member b&iks ,be revised in accordance with
the attached Sa!ni-le, in so far as the cat.tions and. their definition
are concerned, and that the Nport ing banlr.s be instructed to submit
their figures on the nev, forms beginning with Jxru.a.ry 3, 1923 .
.By order of tha Federal Reserve :Soard.

Very truly yours, ·

'.,
Wm.

Hoxton,

Secretary;

Enclosures.

.'r

(Letter to all .Agents)
L

Form St. 51 a
(Rev. Nov. 1922)
FEDERAL RESERVE BANK OF - - - - ·
WEEKLY REPORT OF MEMBER B.Al\J'"KS IN SELECTED CITIES TO BE SUBI/IITTED TO TilE FEDERAL
RESERVE BANK AS AT CLOSE OF BUSINESS EACH VI'EDNESDAY .

•
(State)
V' edne sday, - - - - - - - - - - ' 192
l.

Loans and discounts gross, inc1udin:-; rediscounts, atld acceptances of
other banks ar4 foreign bills of exchange or drafts sold with
indorsement of this bank (a) Secured by U. S. Government obli:;ations ..•..........
(b) Secured by stocks and bonds other than U~ S. securities _ _ _ _ _ __
(c) All other loans and discounts ...................... .
(d)
Total loans and. discounts (sum of items a, b, and c)

U.S. Government securities actually owned, including bonds deposited
with the U. S. Treasurer to secure circulation, and securities
pledged as collateral, but excludin~ securities borrowed (a) U. S. pre-war bends ................................ .
(b) U. s. Liberty bonds ..•..............................
(c) u. s. Treasury bonds ............................... .
(d) U. S. Victory notes and Treasury notes •.............
(e) o. S. Certificates of Indebtedness ................. .

------

3·

Other bonds, stocks, and securities ....................... .
All stocks, bonds (other t~:an U.S.Bo:nd.s), a."ld mortgages
actually owned by the bank whether pledged or unpledged
(exclusive of Federal Reserve Bank stock).

Total loans and discounts, and investments (Sum of items ltc))
Total loans a..1d discounts, and investments, exclusive
of real estate, banking house, furniture and fixtures
and Federal Reserve batik stock.

Cash in vault .......................................· ....... .
Total of gold, silver, and paper currency on hand
and in vault.

,.
Form St.5la
(Rev. Nov. 1922)

- 2 -

6. · Net demand deposits on w:hich reserve is conputed ....•......•.•
Individual deposits subject to cl1eck, certificates of
deposit due in less than 30 days, dividenis unpaid,
State and municipal deposits, and other deposits subject to notice of less than 30 d~s.
PLUS. Excess of total of (a) :Balances due to all ba.r.ks other than
Federal Reserve Bank.
(b) Amount due to Federal Reserve Bar.k ...
deferred credits.
(c) Cashier's, secretary's, or Treasurer's
checks on own bank outstanii~.
(d) Certified checks outsta.ndi~..g.
Over the total of (e) Balances due from banks other than Federal Reserve Bank a.<"ld foreign banks.
(f) Items with Federal Reserve .Bank in
process of collection.
(g) Exch~es for clearing house.
(h) Checks on other banks in same place.
NOTE: . In case the sum of i tams (e) to (h) incluSive is
in excess of the~ of items (a) to (d), disregard items
(a) to (h) in maldtl!'-" up total net deir.and deposits.

1·

Time ·deposits ................................................ .
All deposits raya.ble after 30 ~s, all savings deposit
~counts and certificates of de~osit subject to not less
than 30 day~ notice, and all postal savi~s deposits.

___________________ ,Cashier,

___________________ ,Bank.
Note:

This report should be mailed to the Federal Reserve Bank on Thursday morning
of each week.
·

FEDERAL RESERVE BOARD
WASHINGTON

December 4, 1922.
St.3193-k

•

SUBJECT:

Prapa.ration of Federal Reserve
Agents Annual Raports.

Dear Sir:
There is attached hereto a copy of the Board's
letter St.3193 dated December 4, 1922, on the above
subJect •

With the exception of Schedule 8- Principal
Assets and Liabilities of Reporting Member Banks in Leading Cities as of the Last Report Date in the Month - the
Board will prepare schedules for your district in the
same fonn as those attached to the above mentioned letter.
Schedule 8 will be modified, so far as your district is
concerned, so as to show separate figures of Loans and
Discounts secured by stocks and bonds, in addition to the
other items; also separate figures, by months, for reporting member banz:s in the Federal reserve bank city, in addition to the figures for the district as a whole.
Kindly advise the Board whe tner or not you desire a plate of the chart referred to in the last paragraph of the attached letter.
Very truly yours,

;

Vm.

Vi. Hoxton,
Secretary.

Enclosure
Letter to F. R. Agents at New York and Chicago.'.

•

FEDERAL RESERVE. BOARD
WASHINGTON

December 4. 1922.
St.3193.
StJ:B.JECT:

Preparation of Federal Reserve
Agents t~nual Reports.

With reference to the Board's letter X-3558 dated November
8, 1922 on the above subJect, there are enclosed herewith outlines
of nine schedules which are to be published for each district in
Part II of the forthcoming 1922 annual report of the Federal Reserve
Board. Copies of these schedules will be forwarded to your bank as
soon after January l, 1923, as practicable, for comparison with similar data that may have been compiled by your bank.
Only one chart for each district will be printed in this
section of the report. This chart will be in substantially the ·same
fonn as those printed in the 1921 annual report and \.;,rill reflect ...
changes from week to week during 1920, 1921 and 1922. in the followo-ing i terns:
(a) Bills discounted for own member banks.
(b) Purchased bills.
(c) United States securities.
(d) F. R. note circulation.
Heretofore it has been the Board's policy to have two plates made of
each chart, one for its own use and one for the use of the Reserve
Ba~
It will be appreciated, therefore, if you will kindly advise
us at your early .convenience whether you desire the Board to have an
additional plate made for use in tlns year's annual repor~ of your bank •
. By order of the Federal Reserve Board,
Yours very truly,

\m. ':.'. Haxton,
Secretary.

Enclosure. · ·
Letter to be sent to all Federal Reserve Agents
York and Chicago.

except New

FEDERAL RESERVE BOARD
WASHINGTON

December 11,1922.
St.3216.
SUBJECT:

Reports of Earnings, b;~enses,
Dividends, and Franchise Tax
Payments for 1922 ..

I:ear Sir:

In order that the Eoardmay lmve information regarding the financial r2sults of operations of Federal
reserve ban~s during the present calendar year as soon as
practicable after January 1, it is requested that a state~
ment be telegraphed the Eoard on Tuesday morning. January
2, 1923, sho~;•ing the follovving information:
(Code)
Gross earnings .••..................• $ _
EACH
Current e;Qenses .................... ____
EAbs
Current net earnings .•...............•. $_____
EARN
Add.i
tions to Cu:crent Net Earnings •..•
EL13A ENID - Deductions from Current Net earnings. _ _
Net additions to or deductions
fror.1 current net earnings •.•.........••
EAST

EYRE

EMET
EVEN

Ne: earnints available for dividends,
franc::ise
tax,
'
' and surplus ......•••.•••. ==Di vi dend..s paid • . . . . . . . . . . . . . . . . . . . ......•
Paid to Government as a franchise ta.x
(for 19c..::.: only) •.............-.......... .
Transferrei to surplus accotmt ••.........

Total (to agree \o.i th item EAST) .•......
CAPE
CEDE

Subscribed capital Jan'L<.ary 1, 1923 ......••
Surglus January 1, 1923 .................. .

- 2 The cost of Furnitura and ~quipment during 1922
should be inclucied \'Ji th deductions frcm current earnings (code
ENID) in accord.ance with the general instructions governing the
preparation of earnin5s and expense reports issu~d by the Federal Reserve Board under date of June 20t 1921, instead of being
charged to current expenses as has been the custom in prior years.
It is also requested that the regular monthly reports
of earnings and expenses on forrns 95, 96, 97, and 97-a be
::o.ccompanied with an itemizeci st:cct.err.e:rn; shm·.ing in cietail all
additions to and deductions fron; cur:cent net earnings (Profit and
Loss account) during the year, ~nd that in addition to the regular
balance sheet fonu 34 for the last day of the year representing
the condition of the baru:. after final closing of the books, a·
form 34 be submitted sho,ving the condition of the bcmk at close
of business but prior to the ma~:bg of a-ny profit and loss
account entries.
Very truly yours,

E. L. Smead, Chief,
Division of Bank Operations.

LETTER TO BE SENT TO ':C~E GOVERl\OR
AT EACH FEDERAL BESEF.V2 BAN},:, .

FEDERAL RESERVE BOARD
WASHINGTON

December 15, 1922.
St.3232.
SUBJECT:

Condit ion Reports' of State Bank
and Trust Corrpany Members, Fonn 105.

Dear Sir:
There are being forwarded to you today under separate cover
by registered mail
copies of Form 105 te~ised as of December
5, 1922. Please mail t:1ree copies of the form to each state bank
and trust company member in your district with instructions to hold
the blame forms pending receipt of a call for condition reports,
when they should be pro~tly filled out and two copies mailed to
you - in no case later than 10 days after receipt of the call.
It will be noted that the revisad form shows a new sChedule
on the reverse side calling for rates of interest paid or credited
on deposits. The schedule of U. S. securities has been revised to
snow three classes of U. S. bonds, viz., pre-war bonds, Liberty
bonds, and Treasury bonds.
In order that the compilation of the Board's abstract showing the condition of all state bahk and trust company members combined as of the_date of the next call may not be unduly ielayed,
it will be ap~ reciated i f the re}:o:rts are forwaried to the Board
as soon as practicable after they are recei~ed by the F. R. bank.
Special effort should be made to see that all the teports reach
the Board within 20 days after date of call.
Very truly yours,

Walter L. Eddy,
Assistant Secretary.

To all F. R. Agents ..

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD

December 20, 1922.
St. 3241.
SUBJECT:

Revised Forms 44-a and St. 92-a
for use during 1923.

Dear Sir:
There are enclosed herevli th 50 copies of Form 44-a 11

Classification of money held by the Federal reserve bank••.• 1 n

and 50 copies of revised Form St. 92-a -

Cond.ensed statement

of condition of the Federal reserve barik,n which have been
revised in order to conforrr, to the 1923 edition of Federal

reserve bank balance sheet
It is requested

FOrtrJ

tr~t

34.

the first report an revised Forrr,

44-a be submitted as of January 31, 1923, and that the first
TEND telegram in the form outlined on revised forrr1 St .. 92 .. a
be dispatched as at close of businSss on January 21 1923.

Very truly yours*

E. L. Smead, Chief,
Division of Bank Operations.
)

Enclosure.

Letter to Governors at all F. R. Banks.

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

Decanber 21, 1922.

St.3242.
St;IEJECT:

Earnings and Dividends reports
of Sta~e :Bank and Trust Company
members as of December 31, 1922.

Dear Sir:
There are being forwarded to you today under sepa.ra.te
cover by registeredmail
copies of form 107 for use of
State bank a.nd Trust company members in sUbmitting their
semi-annual reports of 64t'ninp and dividends.
Please advise the banks that the report is to cover
the six-month period ending December 31, 1922, irresp~ctive
of whether or not they may have closed their books on that
date, or whether any dividends that may have been declared
cover that particular period.
The report shoW.d be su:tmi t ted to you in duplicate
vvi. thin te.n days after receipt of the blank forms by reporting

banks.
Kindly acknowledge receipt.

Very truly yours,

t'alter L. Eddy,
Assistant Secretary •

•
\

•
Letter sent

to all F. E. Agents.

FEDERAL RESERVE BOARD
WASHINGTON

December 23,

1~22.

St. 3249.

SUBJECT:

Volume of Work ha•dled by
Federal Reserve Batiks.

Dear Sir:
There seems to be a uore or less general impression
the amount of work hand:led by the Fecieral reserVe banks
is measured. to a l&rge extant by the volume of bills discounted
for member ba.nl:s and oy tne amount of Fiscal Agency ·Nork handled for the U. S. Tr0asury. As tl1ere has 'Jeen a decided drop
in the amount of oil::..s discounted for member banks, and as the
work of the Fiscal .Af~ency Departments has also fallen off
somewhat, it has been assumed that the operating expenses of
the bariks should have shown a very material decrease.
t~'lat

With the view of presenting in the forthcoming annual
rer:ort a clear picture of the growth ).n the work connected
with the services 1erformed for member banks not only in the
discount derartmants but also in the other :r;rincipal departtnents of the bank, and of Showing the volume of U. S. securities handled in the Fiscal .Agency der. artment s, may we request
that you furnish the Board with a statement at the earliest
practicable dt;1,te after January 1 showing the following information for the caleniar years 192.0, 1921, and 1922:
Humber of
1. Discounted 2.Xld Purchased Bills:
pieces
.Amount
(a) Notes discounted or rediscounted for member banka ..... .
(b) Eills bought in open market .. .

'·

CUrrency and Coin:
(a) :Bills r~ceived ani counted ....
(b) Coin received and counted ...•.

Checks ha.ndlad ....•................

Collection items haniled .......... .

5• Transfers of funds including transfers for account 5 per cent funi
of National banks ...•..............

U. S. Government coUpons paid ..... .

- 2 -

Number of
pieces

1·

Amount

Fiscal Agency:
{a) U. S. securities issued, redeemed, canceled or exchanged ..
(b) U. S. securities received from
U. S. Treasury ...............•
(c) U. S. securities returned to
U. S. Treasury ...•............

In the preparation of the report, it is ;.·equested that
the manual of instructions : overning t~.1e preparation of functional expense reports oe followed in determining the number
of pieces or units ?:landled.
\

Very truly yours,

Walter L. :Etldy,
Assistant Secretary.

LETTER T0 BE SENT TO ALL CHAIRMEN.
}

FEDERAL .R,ESERVE BOARD
WASHINGTON
ADDRESS OI"PICIAl. CORRESPONDENCE TO

THE FEDERAL. RESERVE BOARD

December 2o, 1922.
St.3250.

SUBJECT:

Data for 1922 A:J.nUal Report
of the Federal Reserv~ Board.

Dear Sir:
For use in the forthccming annua.J. raport of the
Federal Reserve Board, it is req_uested that you kindly
furnish the Board as soon after Ja:::1uary 1, 1923 as practicable with the following data:

1. Detailed statement relating to U. S.
securities held by your bank as at close of
business December 30, 1922, showing character
of securities, interest rate, maturity date,
and paf value.

Statement showing the number of member

~anks in each State (or part of State in the

district) accornnodated throu;;h the discount
of paper during the calendar year 1922.
Very truly yours,

E. L. Smead, Chief,
Division of Bank Operations.

Letter to Governor
at each Federal Reserve Bank.

Full text of Mimeograph Letters and Statements of the Board : July - December 1922, [Volume 17]

FRASER